Aon Sells Combined to ACE for $2.4 Billion; Sterling to Munich Re

December 17, 2007

Bermuda-based ACE Limited and Germany’s Munich Re have both signed deals with Aon to purchase part of the international broker’s insurance activities. ACE is buying accident and health provider Combined Insurance Corp. for $2.4 billion in cash. Munich Re is buying Sterling Life for $352 million (See following article).

ACE said it has signed a definitive agreement to acquire 100 percent of the outstanding stock of Combined Insurance Company of America, along with certain of its subsidiaries from Aon for $2.4 billion in cash. Combined, founded in 1919, is headquartered in Glenview, Ill. The Company is an underwriter and distributor of specialty individual accident and supplemental health insurance products, targeted to middle income consumers in the U.S., Europe, Canada and Asia Pacific. It currently “serves more than four million policyholders worldwide,” said ACE’s announcement.

“The acquisition of Combined is a significant milestone for ACE and represents both an opportunity for considerable growth and expense-related efficiencies,” noted CEO Evan G. Greenberg. “The acquisition essentially doubles our already significant personal accident and supplemental health insurance franchise, which has been and remains an area of focus for our company.”

Greenberg went on to explain that “Combined’s sales force of nearly 7,000 agents will diversify our distribution for this class of business. ACE has relied predominantly on direct response and brokerage, while Combined is a leader in captive agency distribution.”

He indicated that ACE plans to “export Combined’s franchise to the developing markets of Latin America, Asia Pacific and other promising regions of the world where we already have an established presence and where a growing middle class presents favorable conditions.”

Greenberg was also upbeat on the future for the Combined operations, indicating that they are “financially attractive to our shareholders and will produce results that are accretive to our earnings, return on equity and book value per share. Moreover, we project a very attractive return on equity deployed.”

The transaction is subject to regulatory approvals and customary closing conditions. Aon and ACE expect that the deal will be completed by the end of the second quarter of 2008.

The bulletin also indicated that the “purchase price is subject to adjustment to reflect certain changes to Combined’s net worth through the closing of the transaction. ACE expects that the purchase price for the transaction will be financed by a combination of available cash and a modest amount of new debt.”

ACE will host a special conference call and web cast later today, Monday, December 17, 2007, beginning at 11 a.m. Eastern Time [5:00 PM in Europe] to discuss the transaction and the expected future of the companies’ businesses following closing. The conference call will be available via live and archived web cast at or by dialing 888-259-8724 (within the United States) or 913-312-0709 (international); passcode 9045180. Please refer to the ACE Limited web site in the Investor Information section under Calendar of Events for details.

A replay of the call will be available for approximately one month. To listen to the replay, dial: 888-203-1112 (in the United States) or 719-457-0820 (international); passcode 9045180. A presentation to accompany the conference call is posted on the Company’s web site in the Investor Information section.

Source: ACE Limited

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