ACE To Buy CIGNA's International And Domestic Property & Casualty Operations For $3.45 Billion.HAMILTON Hamilton, city, Bermuda Hamilton, city (1990 est. pop. 3,100), capital of Bermuda, on Bermuda Island. It is a port at the head of Great Sound, a huge lagoon and deepwater harbor protected by coral reefs. , Bermuda Bermuda (bûrmy  `də), British dependency (2005 est. pop. 65,400), 21 sq mi (53 sq km), comprising some 150 coral rocks, islets, and islands (of which some 20 are inhabited), in the , and PHILADELPHIA Philadelphia, ancient citiesPhiladelphia, name of several ancient cities. One was in Lydia, W Asia Minor (now W Turkey). At the foot of Mt. Tmolus and near the location of modern Alaşehir, it was founded in the 2d cent. B.C. , Pa.--(BUSINESS WIRE)--Jan. 12, 1999--ACE Limited (NYSE NYSE See: New York Stock Exchange : ACL See access control list. 1. ACL - Access Control List. 2. ACL - Association for Computational Linguistics. 3. ACL - A Coroutine Language. A Pascal-based implementation of coroutines. ["Coroutines", C.D. ) has agreed to acquire the international and domestic property and casualty insurance businesses of CIGNA CIGNA CG (Connecticut General Life Insurance Company) INA (Insurance Company of North America) Corporation (NYSE: CI) for $3.45 billion in cash, under an agreement announced today by both companies. The transaction, which is subject to receipt of necessary regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approvals and other customary closing conditions, is expected to be completed by the end of the second quarter of calendar 1999. "The acquisition of one of the very few truly global franchises in our core business of property and casualty insurance represents a quantum leap quantum leap n. An abrupt change or step, especially in method, information, or knowledge: "War was going to take a quantum leap; it would never be the same" Garry Wills. for ACE," said Brian The name Brian (sometimes spelled Bryan) comes from an Irish backround. It is of Celtic origin and its meaning may be "hill" or "strong, noble, and high"[1]. Duperreault, chairman, president and chief executive officer of ACE. "This transaction significantly strengthens ACE's position as a premier player in each of the world's major insurance markets, including the U.S., with a business that is diversified diversified (di·verˑ·s by industry, market and client type. This is an historic event, one that transforms ACE into one of only a handful of truly international property and casualty insurance concerns, and provides a tremendous platform for future growth," he added. Under the agreement, ACE will acquire CIGNA's domestic property and casualty insurance operations, including its run-off run-off n (in contest, election) → desempate m (= extra race); carrera de desempate run-off n (in contest, election) → business. ACE will also purchase CIGNA's international property and casualty insurance companies and branches, including most of the accident and health business written through those companies. "This transaction further positions CIGNA to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. its strengths in the global employee benefits business. Over the past several years we have been reshaping our company to achieve our strategic goal of becoming the premier, and consistently most profitable, employee benefits company in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and internationally," said Wilson Wilson, city (1990 pop. 36,930), seat of Wilson co., E N.C., in a rich agricultural region; inc. 1849. It is a commercial and industrial center with a large tobacco market. Manufactures include textile goods (especially clothing), metal products, and processed foods. H. Taylor Taylor, city (1990 pop. 70,811), Wayne co., SE Mich., a suburb of Detroit adjacent to Dearborn; founded 1847 as a township, inc. as a city 1968. A small rural village until World War II, it developed significantly in the second half of the 20th cent. , chief executive officer of CIGNA. "We currently expect that there will be in place at the closing of the acquisition significant third-party protection against adverse development with respect to the loss and loss adjustment expense reserves of the run-off operations to be acquired, as well as certain other asbestos asbestos, mineral asbestos, common name for any of a variety of silicate minerals within the amphibole and serpentine groups that are fibrous in structure and more or less resistant to acid and fire. and environmental exposures," Mr. Duperreault said. ACE expects that the transaction will be financed with a combination of available cash and newly issued equity, debt, preferred and mandatorily convertible securities. Gross written premiums of the businesses being acquired were $4.3 billion in 1997 with operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the same period of $198 million. Upon completion of the transaction, ACE will be a company with approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $30 billion in assets and will employ more than 9,000 people in 47 countries worldwide. "There are significant benefits and efficiencies to be derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from being a global organization whose primary focus is property and casualty insurance. As we assume CIGNA's business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets , we will seek to capitalize on ACE's strength and focus in property and casualty underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. to enhance our profitability and growth potential," said Mr. Duperreault. ACE's financial advisor in this transaction is Merrill Lynch Merrill Lynch & Co., Inc. (NYSE: MER TYO: 8675 ), through its subsidiaries and affiliates, provides capital markets services, investment banking and advisory services, wealth management, asset management, insurance, banking and related products and services on a global basis. & Co. The ACE Group of Companies provides insurance and reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. for a diverse group of international clients. Operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. are based in Bermuda, the United States, the United Kingdom (Lloyd's Lloyd's, London insurance underwriting corporation of many separate syndicates; often called Lloyd's of London. Founded in the late 17th cent. by a group of merchants, shipowners, and insurance brokers at the coffeehouse of Edward Lloyd, the association is now ), and the Republic of Ireland Ireland, Irish Eire (âr`ə) [to it are related the poetic Erin and perhaps the Latin Hibernia], island, 32,598 sq mi (84,429 sq km), second largest of the British Isles. . At September September: see month. 30, 1998, ACE Limited had approximately $8.8 billion in assets and approximately $3.7 billion in shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. . CIGNA's businesses rank among the largest employee benefits organizations in the United States and include a full range of health care, life, disability and retirement and investment services, both in the U.S. and internationally. Revenues for the first nine months of 1998 (includes all businesses) were $16 billion and operating income was $772 million (excludes $202 million of gains from the sale of life and annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. businesses). As of September 30, 1998 CIGNA had consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: assets of $109 billion and shareholders' equity of approximately $8.2 billion. Editor's Note Editor's Note (foaled in 1993 in Kentucky) is an American thoroughbred Stallion racehorse. He was sired by 1992 U.S. Champion 2 YO Colt Forty Niner, who in turn was a son of Champion sire Mr. Prospector and out of the mare, Beware Of The Cat. Trained by D. : ACE Limited's press releases are available at no charge through News on Demand Plus by dialing 888-329-8941. -0-
Supplemental Financial Information
Net Written Premiums By Product Line
(in $ millions)
Year ended Year ended
Sept. 30, 1998 Dec. 31, 1997
CIGNA's P&C ops. ACE & CIGNA's P&C ops.
ACE Domestic Int'l Combined Combined%
Property $181 $354 $471 $1,006 25.4%
Casualty 147 308 279 734 18.6%
Accident & Health - - 482 482 12.2%
Marine & Aviation
(including satellite) 77 271 123 471 11.9%
Workers' Compensation - 342 - 342 8.7%
Lloyd's Syndicates 314 - - 314 7.9%
Automobile - - 194 194 4.9%
Commercial Packages - 161 - 161 4.1%
Financial Lines 142 - - 142 3.6%
Other 22 60 27 109 2.7%
Total $883 $1,496 $1,576 $3,955 100.0%
-0-
Net Written Premiums by Geographic Region
(in $ millions)
Year ended Year ended
Sept. 30, 1998 Dec. 31, 1997
CIGNA's P&C ops. ACE & CIGNA's P&C ops.
ACE Domestic Int'l Combined Combined%
North America $503 $1,496 $- $1,999 50.6%
UK & Europe 129 - 644 773 19.5%
Japan 21 - 420 441 11.2%
Other Pacific 16 - 213 229 5.8%
Latin America 5 - 171 176 4.4%
Other 209 - 128 337 8.5%
Total $883 $1,496 $1,576 $3,955 100.0%
-0-
Supplemental Financial Information
Balance Sheet Information
(in $ millions)
CIGNA's P&C
Operations to be Acquired
Dec. 31, 1997 Dec. 31, 1997 Sept. 30, 1998
As reported
by CIGNA (Unaudited) (Unaudited)
Investments & Cash $12,457 $10,051 $9,907
Premium accounts and
notes receivable 2,735 2,423 2,690
Reinsurance
recoverables 6,211 6,181 6,013
Goodwill 411 392 378
Other assets 2,881 2,384 2,418
Total assets $24,695 $21,431 $21,406
Unpaid claims and
claim expenses 15,252 14,929 14,738
Future policy benefits 1,889 - -
Unearned premiums 1,543 1,318 1,389
Accounts payable 3,050 2,396 2,333
Other liabilities 419 438 495
Total liabilities 22,153 19,081 18,955
Net Assets $2,542 $2,350 $2,451
-0-
Supplemental Financial Information
Income Statement Information
(in $ millions)
Year ended Nine months ended
December 31, 1997 September 30, 1998
As reported Operations As reported Operations
by CIGNA to be acquired by CIGNA to be acquired
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Domestic Ongoing
Gross premiums written $2,301 $2,301 $1,901 $1,901
Net premiums written 1,496 1,496 1,149 1,149
Net premiums earned 1,593 1,593 1,133 1,133
Losses and loss
adjustment expenses (1,165) (1,165) (826) (826)
Policy acquisition
expenses (367) (367) (274) (274)
Operating Expenses (141) (154) (101) (101)
Underwriting gain
(loss) (80) (93) (68) (68)
Net investment income 239 239 172 172
Other revenues and
expenses, net (16) (6) (8) (9)
Operating income before
tax 143 140 96 95
Income taxes (45) (44) (24) (25)
Net operating income $98 $96 $72 $70
Loss & LAE ratio 73.1% 73.1% 72.9% 72.9%
Expense ratio 31.9% 32.7% 33.1% 33.1%
Combined ratio 105.0% 105.8% 106.0% 106.0%
International Ongoing
Gross premiums written 2,265 1,999 1,690 1,418
Net premiums written 1,834 1,576 1,348 1,104
Net premiums earned 1,784 1,539 1,294 1,062
Losses and loss
adjustment expenses (953) (823) (780) (649)
Policy acquisition expenses (453) (410) (323) (291)
Operating expenses (289) (269) (205) (177)
Underwriting gain (loss) 89 37 (14) (55)
Net investment income 126 121 83 79
Other revenues and
expenses, net (14) 13 8 9
Operating income before
tax 201 171 77 33
Income taxes (74) (62) (31) (14)
Net operating income $127 $109 $46 $19
Loss & LAE ratio 53.4% 53.5% 60.3% 61.1%
Expense ratio 41.6% 44.1% 40.8% 44.1%
Combined ratio 95.0% 97.6% 101.1% 105.2%
-0-
Supplemental Financial Information
Income Statement Information
(in $ millions)
Year ended Nine months ended
December 31, 1997 September 30, 1998
As reported Operations As reported Operations
by CIGNA to be acquired by CIGNA to be acquired
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Total Ongoing
Gross premiums written $4,566 $4,300 $3,591 $3,319
Net premiums written 3,330 3,072 2,497 2,253
Net premiums earned 3,377 3,132 2,427 2,195
Losses and loss
adjustment expenses (2,118) (1,988) (1,606) (1,475)
Policy acquisition
expenses (820) (777) (597) (565)
Operating expenses (430) (423) (306) (278)
Underwriting gain (loss) 9 (56) (82) (123)
Net investment income 365 360 255 251
Other revenues and
expenses, net (30) 7 - -
Operating income before
tax 344 311 173 128
Income taxes (119) (106) (55) (39)
Net operating income $225 $205 $118 $89
Loss & LAE ratio 62.7% 63.5% 66.2% 67.2%
Expense ratio 37.0% 38.3% 37.2% 38.4%
Combined ratio 99.7% 101.8% 103.4% 105.6%
Net catastrophe losses,
pre-tax $17 $97
% of net earned premiums 0.5% 4.0%
Run-off
Gross premiums written 19 19 2 2
Net premiums written 11 11 (2) (2)
Net premiums earned 22 22 (1) (1)
Losses and loss
adjustment expenses (232) (232) (143) (143)
Policy acquisition
expenses (14) (14) (6) (6)
Operating expenses (81) (82) (61) (61)
Underwriting gain
(loss) (305) (306) (211) (211)
Net investment income 282 282 191 191
Other revenues and
expenses, net 20 5 15 6
Operating income
(loss) before tax (3) (19) (5) (14)
Income tax recovery 5 12 5 8
Net operating income
(loss) $2 $(7) $- $(6)
-0-
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