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Jul. 1, 2015, 3:47 PM
- "The management teams of virtually every large property-casualty company will be having a conversation today about whether they should be more active acquirers,” says Sandler O'Neill's Paul Newsome.
- Before sellers get too excited, they should note the price Ace is paying for Chubb is just 1.7x book value - a discount to what high-quality insurance businesses typically sell for. "“I probably need to reassess what I’m holding out for because I’m never going to get that big price-to-book multiple now," says Newsome. "If a much-vaunted, well-regarded shop gets 1.7x book value, what should the mid-cap company that lacks scale and is kind of struggling get?”
- Possible buyers would include AIG, Allstate, and Travelers. With each having less than a $15B market cap, maybe on the block: W.R. Berkley (WRB +5.2%), Arch Capital (ACGL +2.7%), XL Group (XL +2%), and Cincinnati Financial (CINF +4.5%). Sporting just an $18B market cap and thus also maybe a target is Hartford Financial (HIG +6%).
- "There is now literally no deal that cannot be contemplated in P&C," says Citi's Todd Bault.
- Source: Bloomberg
- Previously: Ace builds more scale with Chubb purchase (July 1)
- Previously: P&C stocks on the move after Chubb sale (July 1)
- Previously: ACE buying Chubb in cash and stock deal for $28.3B (July 1)
Jan. 26, 2015, 12:25 PM
- Lack of scale has never been the problem at Axis Capital (AXS +5.4%), say Citigroup's Todd Bault and James Kaklick. The current issue is low demand, they say, and a merger with PartnerRe (PRE +1%) won't solve that.
- Noting the merger is being done at "no premium" (presumably to book value), the two say this deal and others in the industry are acts of necessity, rather than strategic opportunities. "The pressure to cut even more costs will be enormous given the lack of significant deal premiums."
- The team reiterates its Sell rating and $46 price target on Axis.
- More on the terms: PartnerRe owners will receive 2.18 shares in the combined company for each share they own, and Axis shares will convert on a one-to-one basis.
- A check of others in the industry: ACE Limited (ACE +0.1%), XL Group (XL +0.4%), Everest Re (RE +0.7%), RenaissanceRe (RNR +0.9%), Aspen Insurance (AHL +0.9%), Arch Capital (ACGL +0.2%), Reinsurance Group of America (RGA -0.6%), Montpelier Re (MRH +0.3%), Unum Group (UNM +0.1%).
- Previously: Axis Capital to merge with PartnerRe (Jan. 26)
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