Chubb exploring buy of The Hartford

(Bloomberg) -- Chubb Ltd., the global insurer led by Evan Greenberg, is exploring an acquisition of Hartford Financial Services Group Inc. in what could be one of the industry’s biggest deals in years, people familiar with the matter said.

The New York-listed insurer has made a preliminary takeover approach for Hartford, said the people, who asked not to be identified because the discussions are private. Deliberations are at an early stage and may not lead to a transaction, they said.

A representative for Hartford wasn’t able to immediately comment. A representative for Chubb couldn’t be immediately reached for comment.

Shares of Hartford have more than doubled over the past year, giving it a market capitalization of $23 billion as of Thursday. The stock jumped as much as 15% on the Bloomberg report, and was trading up 10% to $63.43 at 2:35 p.m. in New York.

Chubb shares have gained 72% in the past 12 months, hitting all-time highs recently and valuing the business at $77 billion. Shares were down 1.1% Thursday afternoon.

Greenberg, 66, built the business into a mammoth insurer by combining Ace Ltd., the company he ran, with Chubb Corp. in an almost $30 billion deal in 2016. The son of former American International Group Inc. Chief Executive Officer Maurice “Hank” Greenberg, he has transformed Chubb into a firm with huge footholds in both personal and commercial lines. The company calls itself the world’s largest publicly traded property and casualty insurer, with operations in 54 countries and more than 30,000 employees, according to its website.

Hartford has long been considered a potential takeover candidate for the biggest insurers in the U.S., including Chubb, which could reap sizable cost savings, as well as major players in Europe, such as Allianz SE and Zurich Insurance Group AG. The Swiss insurer agreed in December to buy MetLife Inc.’s U.S. property and casualty business for $3.94 billion.

A representative for Allianz didn’t immediately respond to a request for comment. A spokesperson for Zurich declined to comment.

The property-casualty insurance sector has been an active area for mergers and acquisitions in recent years. Allstate Corp. struck a deal last year to buy National General Holdings Corp. for $4 billion in the insurer’s largest purchase on record, and Axa SA bought XL Group Ltd. for more than $15 billion in a 2018 transaction.

Hartford, led by CEO Chris Swift, traces its roots back more than 200 years. It offers a range of property and casualty insurance, including automobile policies, homeowners’ coverage and small-business insurance. Hartford reported last month that fourth-quarter core earnings rose 22% to $636 million, beating estimates.

Hartford would help Chubb expand further in sectors including auto and home, as well as small-business insurance and employee benefits. The company is a much more streamlined version of the business that took a bailout in the financial crisis. The insurer drastically reduced its exposure to annuities, a product that hit the operations hard during the credit crisis, through a series of sales of a business later called Talcott Resolution Life Insurance Co.

The deal makes sense, David Havens, a credit analyst at Imperial Capital LLC, said in a note to clients. “Hartford is a bit sub-scale, and Chubb could benefit from beefing up U.S. scale.”

RBC Capital Markets analyst Mark Dwelle said in a note to clients that Hartford’s auto and home business that targets mass-market AARP customers differs greatly from Chubb’s high-net-worth focus.

“Hartford has an attractive small-business insurance franchise which would be additive to Chubb’s platform, but their specialty and middle-market businesses are considerably less profitable than Chubb’s and likely would require substantial re-underwriting,” Dwelle wrote.

The Hartford, Connecticut-based company ranks as the second-biggest provider of workers’ compensation insurance in the U.S., according to A.M. Best Co. It also has amutual fund arm with about $139 billion under management, its website shows.