(Bloomberg) -- Ace Ltd. agreed to buy Allianz SE’s Fireman’s Fund unit serving wealthy clients to expand insurance of luxury homes, yachts and art collections as the seller narrows its focus in the U.S.
Ace will pay $365 million in the deal, which is expected to be completed in the second quarter of 2015, the Zurich-based company said today in a statement.
Chief Executive Officer Evan Greenberg takes over a brand that was established in San Francisco more than 150 years ago and survived the city’s 1906 earthquake. Insurance for the wealthy has wider profit margins than other types of personal coverage, according to Paul Newsome, an analyst at Sandler O’Neill & Partners LP.
This is “a business where service matters a lot,” Newsome said in an interview before the deal was announced. “And the customer base is willing to pay for that.”
Chubb Corp., American International Group Inc. and Ace are among insurers that have been investing in coverage for the rich. Allianz, Europe’s largest insurer, has been losing market share in the U.S. residential market, with policy sales falling about 17 percent from 2008 to 2013, according to data from A.M. Best compiled by Bloomberg.
Greenberg has been expanding Ace through acquisitions around the world. The insurer has bought businesses in Brazil, Thailand and Mexico in recent years.
“The addition of the personal lines business of Fireman’s Fund will reinforce and advance Ace’s position as a premier provider of insurance to the high net worth market,” Greenberg said in the statement.
The benefit in taking over Fireman’s Fund is “buying the customer base and the opportunity to put them onto your platform and add a little bit of scale,” Mark Dwelle, an analyst at RBC Capital Markets, said before the deal was announced.
Allianz has been focusing its U.S. insurance operations on business clients. On Sept. 17, the same day the company announced it was considering “strategic options” for Fireman’s Fund, the firm said it was transferring the unit’s commercial property-casualty operations into the Allianz brand. Five years earlier, the insurer moved its marine lines under the Allianz name.
Oliver Baete was named in October to succeed Chief Executive Officer Michael Diekmann at Munich-based Allianz. The announcement came less than a week after the departure of bond king Bill Gross from the insurer’s Pacific Investment Management Co. in Newport Beach, California.
Allianz bought Novato, California-based Fireman’s Fund in 1991 for more than $3 billion in cash in a push to expand sales in the U.S. The German insurer had to inject $750 million into the unit in September 2002 to cover asbestos-related claims, the third time in two years it had to shore up the subsidiary.
--With assistance from Jing Cao in New York and Oliver Suess in Munich.
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