Chubb’s bid for The Hartford makes strategic sense but could be ‘disruptive’
Industry experts have said that Chubb’s bid to acquire The Hartford makes strategic sense.
Chubb’s proposal to combine the two companies, submitted on March 11, is still in the early stages. It would value The Hartford at $65.00 per share.
Reacting to the news, Moody’s Investors Service vice president – senior credit officer, Bruce Ballentine said: “Chubb’s potential acquisition of the Hartford would boost Chubb’s market presence in US small commercial and personal lines while adding integration risk and potentially higher financial leverage. Hartford would benefit from becoming part of a large global P&C insurer, although such a merger could disrupt relationships with its customers, agents and employees.”
KBW’s Meyer Shields agreed that this acquisition would make solid strategic sense for Chubb. He thinks The Hartford would provide Chubb “with significant scale and demonstrated expertise” within small commercial, improving underwriting profit (reflecting both higher rates and The Hartford’s recent efforts) within middle market and global specialty, along with “scale in both standard personal lines and group benefits.”
Shields does not believe that this deal is a cyclical play; he sees it as Chubb permanently establishing or expanding its presence in several key strategic product lines. Shields’ best guess is that the timing mostly reflects the fading macroeconomic risk associated with COVID, along with Chubb’s materially bolstered capital levels.
Chubb said last week in a statement: “On March 11, Chubb Limited presented The Hartford with a proposal for a combination of our two companies that we believe would be strategically and financially compelling for both sets of shareholders and other constituencies. This proposal would value The Hartford at $65.00 per share and represents a premium of 26 percent based on its unaffected 20-day volume weighted average share price of $51.70 as of March 10, 2021. The consideration represents a mix of stock with the majority in cash.
“We have not yet received a response to our proposal but are looking forward to constructive, private discussions in order to expeditiously consummate a fair transaction that benefits all of our respective stakeholders.
“No agreement has been reached, and there can be no assurance any transaction will result from these discussions, and even if a transaction is agreed upon, there can be no assurances as to its terms, structure or timing.”
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