A.M. Best Places Ratings of ACE Limited and Its Subsidiaries Under Review With Negative Implications
July 02 2015 - 12:50PM
Business Wire
A.M. Best has placed under review with negative
implications the financial strength rating (FSR) and the issuer
credit ratings (ICR) of the insurance subsidiaries of ACE
Limited (ACE) (Zurich, Switzerland) [NYSE: ACE], as well as the
ICR and senior debt ratings of “a+” of ACE. (Please see link below
for a detailed listing of the companies and ratings.)
The rating actions follow the recent announcement that ACE
entered into a definitive agreement to acquire The Chubb
Corporation (Chubb Corp) (headquartered in Warren, NJ) [NYSE:
CB] and its subsidiaries. Under the terms of the transaction, Chubb
shareholders will receive $62.93 per share in cash and 0.6019
shares of ACE stock. Based on the closing price of ACE stock on
June 30, 2015, the total value is approximately $124.13 per Chubb
share, or $28.3 billion in the aggregate. This is the equivalent of
$125.87 per Chubb share using ACE’s 20-day volume weighted average
share price for the period ending June 30, 2015. Upon closing of
the transaction, ACE shareholders will own 70% of the combined
company, and Chubb shareholders will own 30%. The consideration
represents an approximately 30% premium to Chubb’s closing price of
$95.14 on June 30, 2015. The close of the transaction is expected
during the first quarter of 2016, pending approval of ACE and Chubb
Corp shareholders, and regulators, as well as the expiration or
termination of the applicable waiting period required under U.S.
anti-trust regulation.
The rating actions reflect the uncertainty regarding ACE’s
ability to execute on its plan given the complexity, size and scope
of this acquisition. Furthermore, in order to achieve the greatest
efficiencies and long-term gains, a successful integration must be
achieved within a reasonable time period. This execution risk is
partially mitigated by the collaborative nature of this
transaction.
The proposed transaction combines two high quality insurance
organizations with experienced management teams, complementary
business scopes, global capabilities and adequate risk-adjusted
capital positions. To this point, following the close of the
transaction, the level of debt and goodwill created serve to limit
the consolidated group’s risk-adjusted capital position and
increase its debt leverage on a total and tangible capital basis.
These measures, as well as the balance sheet quality, are expected
to improve over time given the consolidated entity’s planned
increase in shareholders’ equity driven by strong earnings and
limitations on share repurchases.
The under review status will be removed shortly after the
transaction has closed and A.M. Best reviews the final integration
plan and financial position. Factors that could lead to a negative
outlook or rating downgrade include A.M. Best's view that the
transaction, integration plan and resulting capital structure
represent a potentially material risk to the organization. Factors
that could lead to a stabilization of the ratings include a sound
integration plan, retention of key personnel and moderate debt and
leverage measures.
For a complete listing of ACE Limited and its subsidiaries'
FSRs, ICRs and debt ratings, please visit ACE
Limited.
This press release relates to rating(s) that have been
published on A.M. Best's website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please visit A.M.
Best’s Ratings & Criteria Center.
A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2015 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150702005714/en/
A.M. BestDarian Ryan, CPA, 908-439-2200, ext.
5449Senior Financial
Analystdarian.ryan@ambest.comorDavid Drummond, +(44) 20 7397
0327Senior Financial
Analystdavid.drummond@ambest.comorChristopher Sharkey,
908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
908-439-2200, ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com
DBA Chubb (NYSE:CB)
Historical Stock Chart
From Mar 2024 to Apr 2024
DBA Chubb (NYSE:CB)
Historical Stock Chart
From Apr 2023 to Apr 2024