Ace Ltd. to merge with Chubb Corp.

In a merger brought on by sluggish sales, cheap financing, and cost-cutting opportunities,

Ace Ltd.

, the Zurich- and New York-based global property-insurance giant built around Philadelphia's old

Insurance Co. of North America

(INA), says it will pay $28 billion, or $124.13 a share in cash and stock, for

Chubb Corp.

, the Warren, N.J.-based insurance group.

"Ace will continue to maintain a significant presence in Philadelphia" - home to the company's U.S. property and casualty business - but "a substantial portion of the headquarters function" for North America will now be at Chubb's office complex in Warren," the companies said Wednesday in a statement.

"We're in a world of low growth," so a big merger is the best way to get bigger," Ace president and CEO Evan Greenberg told investors in a conference call. Greenberg, son of longtime American International Group boss Maurice "Hank" Greenberg, will run the combined companies, which will use Chubb's name.

"The simple fact is, there is tremendous redundancy between the two," Evan Greenberg said. The companies plan to cut $650 million of "overlap" expenses. They spent about $4 billion, combined, on operations last year. They also hope to boost sales. Ace approached Chubb about a deal "a few weeks ago," Greenberg said.

Ace employs about 2,500 at the former Penn Mutual office center near Independence Mall and in South Jersey, Delaware, and suburban Philadelphia. Ace also operates INA's former golf course and conference center in Lafayette Hill.

About 1,500 employees work in the city. A statement later Wednesday said the companies "will grow and create opportunity for staff in Philadelphia and elsewhere."

Chubb shares closed at $119.99, up $24.85, approaching the sale price. What's more surprising is that Ace shares traded higher for much of the day, a sign that investors think the buyer got a good deal. The stock closed at $102.49, up 81 cents.

Chubb boss John Finnegan will get the title "executive vice chairman for external affairs of North America" and hang around at least a while to help with the merger. He also stands to collect more than $90 million in stock and severance.

Both companies face competition that has made it harder to raise premiums in recent years, analyst Paul Newsome told clients of Sandler O'Neill + Partners in a report.

Ace is one of the few remaining large insurance employers in Center City. Health insurer Cigna Inc., which also traces part of its heritage to INA, is the subject of takeover speculation that could result in office cutbacks. Cigna moved its headquarters out of Center City to Connecticut in 2011.

In their joint statement, the merger partners said their businesses fit well: Ace has larger corporate clients, while Chubb targets mid-sized companies. Chubb also sells insurance for rich people's homes and vehicles, a market Ace has been trying to enter. Ace and Chubb compete as business insurers abroad: Ace is in 54 countries, Chubb in 25.

The companies hope to close the merger early next year, if regulators approve.