Ace to Buy Allianz’s Fireman’s Fund Luxury Unit

By Zachary Tracer, Noah Buhayar and Jing Cao | December 19, 2014

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 clients and staff of a business 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. Munich-based 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.

‘Premier Provider’

The deal will help the buyer expand in U.S. locations including San Diego and Chicago, Juan Andrade, chief operating officer of Ace Overseas General, said in a phone interview. He said Ace intends to retain a majority of employees from the acquired unit, without providing specifics. His company won’t be taking over the Fireman’s Fund name, he said.

“Ace has a great name,” Andrade said. “We’re already very well established, and it makes logical sense to integrate.”

The benefit in taking over the unit 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.

Ace rose 0.9 percent to $113.65 at 2:03 p.m. in New York, extending its gain for the year to about 9.8 percent. Allianz climbed 2.5 percent in Frankfurt, and is up 5.8 percent since Dec. 31.

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.

Commercial Integration

Allianz will use proceeds from the sale to help restructure the Fireman’s Fund’s commercial property-and-casualty business, the company said today in a statement. The insurer previously said that it would wind down some lines of environmental, workers’ compensation and construction-defect coverage through an operation called San Francisco Re.

“These measures enable Allianz to focus its energies even more strongly on successfully integrating the Fireman’s Fund commercial business” into Allianz Global Corporate & Specialty group, said Axel Theis, the outgoing head of AGCS. Theis has been named to join Allianz’s management board next year with responsibility for global industrial insurance, credit insurance and the insurance business in Ireland and Great Britain.

Pimco, Gross

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 Oliver Suess in Munich and David De Jong in New York.)

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