“Substantial in size and strength by any measure.”

That’s how Evan G. Greenberg, chairman & CEO of ACE Limited, described the new insurance carrier that will result once ACE completes its purchase of Chubb.

During an investor conference call yesterday, Greenberg said the combination of the two carriers offers a compelling story for clients and the distribution force. “Upon closing of this transaction, we have will created a global p-c leader,” he said.

The new company will operate under the Chubb brand name. “We are pleased that the combined company will adopt the Chubb brand and view this as an affirmation that both companies share a commitment to the attributes of quality and service the brand represents,” said John D. Finnegan, chairman, president and CEO of Chubb.

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. Upon closing of the transaction, ACE shareholders will own 70% of the combined company, and Chubb shareholders will own 30%. The transaction is expected to close in the first quarter of 2016.

Strengths

During the investor call, Greenberg focused on the many ways the two companies will complement each other. First, he noted Chubb will enhance ACE’s product and underwriting expertise in the upper middle market. Second, ACE will provide more products, specifically specialties, to serve middle-market clients. Third, he said the combined entity will be positioned to pursue micro markets around the world.

“Another reason why this combination is so attractive is our shared commitment to profitability,” Greenberg said. “Both of our companies’ combined ratio has exceeded our global and North American peer set over the past 10 years. This is a testament to a common, relentless disciplined approach to underwriting.”

Size and Industry Positioning

That shared philosophy of underwriting profit, combined with market penetration, will enable the combined company to hold a number leadership positions in the industry, according to Greenberg:

• No. 1 global p-c insurance company by p-c underwriting income
• No. 2 U.S. publicly traded p-c insurer
• No. 4 global insurer by book value and operating income
• No. 2 U.S. commercial lines insurer
• Leader in high net-worth personal lines coverages

Analysts asked Greenberg if he was concerned that the sheer size of the new company would inhibit innovation and product customization, creating an opening for smaller niche players. Greenberg disagreed.

“As ACE got bigger, I’ve heard that question over and over,” he said. “How do you continue to manage underwriting excellence and quality? We have demonstrated we have the management talent and organizational structure. We behave like a small company even though we’re large. We’re going to cover more of the marketplace, but we’re going to be nimble and entrepreneurial and maintain that hallmark of [the ACE culture].”

High Net-Worth Market

In the high net-worth market, analysts asked why ACE had spent the better part of the last two years building a carrier to compete with Chubb—and is now joining forces with it. Greenberg agreed Chubb is a leading provider of personal lines coverage to high net-worth customers in the U.S. while ACE has been increasingly focused on these customers as well. 70% of the combined company’s net premium in the affluent market comes from Chubb’s high net-worth business.

“We build a good personal lines business in high net worth—it’s dynamic, open area,” Greenberg said. “The combination will be compelling. We’ve been good competitors.”

Greenberg sizes the high net-worth market in excess of $40 billion, and says there is plenty of opportunity to grow in the market. And with ACE’s recent acquisition of Fireman’s Fund, significant consolidation has marked the top carriers in the high net-worth space.

The Wall Street Journal interviewed Big “I” executive committee member Spencer Houldin yesterday on this angle of the story. Houldin, president of Ericson Insurance Advisors in Washington Depot, Connecticut, told the paper his phone was “ringing off the hook” with concerned clients. But he told them, “these are very aggressive companies and they’re going to do everything they can to retain the business.”

Why Now?

Many analysts on the investor call questioned why the two companies thought now was the right time to join together. Greenberg said ACE approached Chubb a few weeks ago. “These things happen when moment is right,” Greenberg said. “We put the deal together rapidly but thoughtfully because it made so much sense to both sides.”

Finnegan said Chubb wasn’t driven by timing. “We weren’t out shopping [Chubb],” he said. “It was the nature of the proposal, the economics of the deal and the strategy going forward.”

In terms of the broader backdrop, Greenberg noted that insurers are not operating in the same world that they were a decade ago. “The playbook is not the same,” he said. “It’s a world of low growth and low inflation. The economic realities of counties are interconnected. All of that is part of the backdrop when I think about the compelling strategic nature of this transaction.”

Another important factor in the company’s future success? Data. “If we manage the data right, it’s going to give us so much more insight into dissecting risk,” Greenberg said. “[We have the] skills and insights—the ability to use that data. And combine that with the distribution power? There you go.”

Katie Butler is IA editor in chief.