Chubb Strikes Deal to Acquire Cigna’s Asia Business for $5.75B

Chubb Limited (CB) has signed an all-cash deal worth $5.75 billion to acquire Cigna’s (CI) personal accident, supplemental health and life insurance business. Chubb provides cover life insurance, property and casualty (P&C), accident and health, and reinsurance on a global level.

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The deal includes Cigna’s A&H and life business in Korea, Taiwan, New Zealand, Thailand, Hong Kong and Indonesia, and its interest in a joint venture in Turkey. The company said that these operations generated net premiums written of about $3 billion in 2020.

The deal is in sync with Chubb’s target to strengthen its hold in the Asia-Pacific region. Following the deal, Asia-Pacific’s share of Chubb’s global portfolio is expected to soar from approximately $4 billion to $7 billion in premium and represent approximately 20% of the company (excluding China).

Furthermore, the deal is expected to be immediately accretive to Chubb’s core operating EPS and return on equity for full-year 2023 by 6% and about 0.55%, respectively. Also, Chubb anticipated the acquisition to result in a three-year ROI of 15% and an IRR of approximately 20%. (See Insiders’ Hot Stocks on TipRanks)

The company expects to realize more than $80 million of expense savings. The transaction is expected to close in 2022, subject to required regulatory approvals and customary closing conditions.

The Chairman and CEO of Chubb, Evan G. Greenberg, said, “The digital opportunity across the region is large and untapped and suitable for our direct-marketed A&H products and our consumer P&C and simple life insurance products.”

“Broadly across the region, Chubb will be better able to capitalize on market and product opportunities with strong brand, complementary direct marketing skills and the cross-selling of Chubb’s non-life product to life customers,” he added.

Following the news, Wells Fargo analyst Elyse Greenspan maintained a Buy rating on the stock with a price target of $196 (9.9% upside potential from current level).

Greenspan said, “Our sense was always that CB would look to do a transaction either in small commercial (which was shown by their bid for The Hartford earlier this year) or in international life/A&H. This transaction gives them greater scale in the latter.”

“We believe the shares of CB should get a lift tomorrow owing to the accretive transaction that does not impact its buyback program,” analyst also added.

Based on 9 Buys, 1 Hold and 1 Sell, the stock has a Moderate Buy consensus rating. The average Chubb price target of $190.90 implies 7.1% upside potential from current levels. Shares have gained 22.6% over the past year.

TipRanks data shows that financial blogger opinions are 100% Bullish on CB, compared to a sector average of 72%.