20 OCT 2021 (NewsRx) – By a Journalist-Staff News Editor at Mergers & Acquisitions Daily News – Chubb Limited (NYSE: CB) announced a definitive agreement to acquire the life and non-life insurance companies that house the personal accident, supplementary health and life insurance businesses of Cigna (NYSE: CI) in seven Asia Pacific markets for $ 5.75 billion in liquid.
The activities to be acquired include the A&H and life activities of Cigna at Korea, Taiwan, New Zealand, Thailand, Hong Kong and Indonesia and its participation in a joint venture Turkey. These operations generated approximately $ 3 billion net premiums written in 2020.
This highly complementary transaction advances Chubb’s strategy to expand its presence in the Asia-Pacific region, an area of long-term growth for the company, and adds to an already significant A&H activity while expanding the capabilities of the company Asia-presence in life insurance. Once the transaction is completed, Asia-Pacific’s share of Chubb’s global portfolio will increase from approximately $ 4 billion To $ 7 billion as a bonus and represent around 20% of the company (excluding China). Over 80% of the company’s premiums to be acquired come from additional A&H products, further strengthening Chubb’s leadership in global additional A&H, with premiums rising from $ 3.7 billion To $ 6.1 billion. Together, A&H and life will represent 21% of the company’s overall revenue, up from 14% today.
“The addition of Cigna’s business, which is majority A&H, will further balance our global portfolio towards this important region,” said Evan G. Greenberg, President and CEO of Chubb. “We have long admired and respected Cigna’s activities in Asia including its talented staff, innovative products, technical and analytical capabilities, distribution and management. We know these companies well because we already have a significant operation in the region and around the world. These companies produce very stable and quality income. The digital opportunity in the region is vast and untapped and fits our direct-market A&H products and our consumer and straight-line life insurance products. We are looking to the future. Across the region, Chubb will be better able to take advantage of market and product opportunities through a strong brand, complementary direct marketing skills and cross-selling of Chubb’s non-life products to life customers.
“Our agreement with Chubb is another step forward in advancing our strategic direction on our global healthcare services portfolio,” said David M. Cordani, President and CEO, Cigna Company. “We are proud of our success in creating these accident, supplementary and life insurance activities in Asia Pacific and improve the well-being and sense of security of our customers across the region.
Attractive returns for shareholders
The underlying economics and value creation of the transaction are very attractive. At closing, the transaction is expected to immediately accretive to Chubb’s operating earnings per share and return on equity (ROE) for full 2023 by 6% and approximately 55 basis points, respectively. . Deal ROE drops from 11% to 14% over five years after PGAAP adjustments. The company also expects a strong return on investment (ROI), with a three-year ROI of 15% and an IRR of around 20%. The tangible book value by dilution of the share is expected to be recovered within six months. There is a strong and regular cash generation with a high dividend distribution capacity of around 70% of operating income. The company will maintain its strong balance sheet and does not expect the transaction to impact its current investment grade AA rating or its capital management commitments, including its current share buyback program and its annual dividend.
Funding, efficiency, closure and approvals
The $ 5.75 billion the cash consideration is not contingent on funding. Chubb estimates that she will achieve more than $ 80 million expense savings. The transaction is expected to close in 2022 and is subject to required regulatory approvals and customary closing conditions.
Please refer to the presentation titled “Chubb to Acquire Cigna’s Additional Personal Accident, Health and Life Insurance Business in Seven Asia-Pacific Markets”, which is posted on the Corporate Relations website. company investors, Investors.chubb.com, in the Events and Presentations section. for more information on the transaction.
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