Wednesday, February 10, 2016

Ace seeks merger targets: report

CEO Evan Greenberg wants to insure more rich people and their stuff

Ace seeks merger targets: report

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Ace Ltd., the multinational insurer whose U.S. operations (including the old Insurance Co. of North America) are run from Philadelphia, plans rapid expansion that may include buying life and health insurers, says Paul Newsom, insurance analyst at Sandler O'Neill & Co. in New York.

Citing remarks to investors by Evan Greenberg (son of ex-American International Group boss Maurice Greenberg), Newsom tells clients in a report today that Greenberg "would like to see Ace's business mix change to include more personal lines,  accident and health and life insurance. In particular, he would like to see the proportion of personal lines rise from 2% to 20% over the next five to seven years. That suggests very rapid growth of Ace's current businesses and/or an acquisition...

"In the past several years Ace has been building a U.S.-based high net worth-focused personal lines operation. This operation competes with companies such as Chubb, AIG and Fireman's Fund which have well established operations that cater to insuring expensive homes and automobiles...

"Many investors were disappointed that Ace continues to resist repurchasing its shares despite the low price of the shares currently. The company doesn't rule out stock repurchases, but it is clear from their comments in the recent past
and at the analyst day that senior management would much rather hold onto the capital.

"In the long term, holding onto (an estimated $2 to $4 billion in) excess capital might be the right thing to do... There will come a day when Ace will want more capital to grow." Though, he also warns, "there is a long history in the property-casualty insurance industry of insurance company management investing excess capital in unprofitable growth, poor acquisitions and bad investments...

"Ace management said they were interested in both property-casualty and life insurance acquisitions... The company is generally more interested in international business."

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About this blog

PhillyDeals posts interviews, drafts and updates that Joseph N. DiStefano writes alongside his Sunday and Monday columns and ongoing articles about Philadelphia-area business.

DiStefano studied economics, history and a little engineering at Penn. He taught writing and research at St. Joe’s. He has written for the Inquirer since 1989, except when he left a few times to work at Bloomberg and elsewhere. He wrote the book Comcasted, and raised six kids with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com, 215.854.5194, @PhillyJoeD. Read his blog posts at http://www.philly.com/PhillyDeals and his Inquirer columns at http://www.philly.com/philly/columnists/joseph-distefano/. Bloomberg posts his items at NH BLG_PHILLYDEAL.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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