Aces high

Bermuda-based ACE Ltd., listed on the NYSE, has acquired the global property and casualty insurance operations of CIGNA Corporation for US$3.45 billion. Subject to regulatory approval by the end of June this year, the deal will be cash financed which Ace says will be raised through the issue of new stocks and debts.

The purchase includes the accidental and health insurance interests held by CIGNA through its life companies. In a media statement, Brian Duperreault, president of ACE, describes the deal as “a quantum leap” for the company.

The ACE group, with US$8.8 billion in assets, has primarily focused on serving the large corporate risk market, providing specialist programs. The group is also one of the lead Lloyd’s of London underwriting agencies. “This transaction significantly strengthens ACE’s position as a premier player in each of the world’s major insurance markets…with a business that is diversified by industry, market and client type,” Duperreault says.

The deal with CIGNA will provide ACE with an international platform (with offices in 47 countries, including Canada) writing business across the lines. Specifically, more than 70% of CIGNA’s p&c premium income is derived from its specialty division serving Fortune 1000 companies – an ideal fit with ACE’s specialty product approach. This will be ACE’s first entry to the Canadian market with offices located in Toronto, Montreal and Vancouver, employing around 110 staff. CIGNA’s Canadian p&c operation is ranked 49 in size based on annual net premiums written.

The global CIGNA operations acquired by ACE generated approximately US$4.3 billion in gross premiums for 1997, producing operating income of US$198 million. The deal will boost the total assets of the ACE group to more than US$30 billion.

The CIGNA p&c operations worldwide will most likely trade under the banner of “ACE International”, although no firm decisions have been taken as yet, says Sam Cupp, senior vice president of North American region at CIGNA. Cupp will be joining the ACE management team once the deal is completed. The U.S. and Canadian leaderships have not been named by ACE as yet. “It is still very early in the process, further details will be made in coming months,” Cupp notes.

Broker/agent feedback in the U.S. and Canada to the deal has been very positive, Cupp says. “The market is viewing the deal as opening up new opportunities.”

CIGNA CEO Wilson Taylor says the deal will enable the company to focus on its global employee benefits business. “Over the past several years we have been reshaping our company to achieve our strategic goal of becoming the premier, and consistently most profitable, employee benefits company in the U.S. and internationally.”