This summer upstart ACE engineered one of the largest
insurance takeovers in history, agreeing to acquire venerable
Chubb Corp. for more than $28 billion. A few weeks after
the deal was announced, ACE chairman and CEO Evan Greenberg was
in Warren, New Jersey, standing in the four-story atrium lobby
at Chubbs headquarters, looking up at unsmiling employees
who leaned over the railings to hear from their new boss.
This is like giving a speech in the Roman
Colosseum, the sinewy, shaven-skulled, 60-year-old
executive told his audience. I hope theres no lions
and that you dont choose to throw anything at me.
Nervous giggles cascaded down. Greenberg then enumerated the
many synergies and lucrative future he foresaw for the merged
company, which he pointed out would be named Chubb, not ACE.
I dont know any other way to show respect to
somebody to begin with than to say were going to take
your name, said the insurance industrys reigning
Months later, back at his midtown Manhattan headquarters, 45
stories above the theater district, Greenberg sounds less
self-effacing. Were still ACE, he tells
Institutional Investor in a two-hour interview that
displays his passion, brashness and edgy humor. We will
be ACE in Chubb clothing, he quips.
It has been an extraordinary journey for the son of fabled
insurance giant Maurice (Hank) Greenberg. For a quarter century
Evan worked for his father at
American International Group, expecting to take over what
was then the planets leading insurer. When that
didnt happen, he quit AIG in 2000 and sulked for more
than a year.
He plunged back into the industry after the 9/11 terrorist
attacks, joining ACE, a midsize, Bermuda-based reinsurer. Over
the next 14 years, he led ACE into 16 acquisitions, culminating
with the Chubb deal, which will create the sixth-largest U.S.
property/ casualty insurer by premiums. That would place the
new entity behind State Farm Insurance, Liberty Mutual Group,
Allstate Corp., Berkshire Hathaway and Travelers Cos.
Even more remarkable, this buying spree has taken place in
the aftermath of the global financial crisis, when most
insurers have been more intent on returning capital to
shareholders than spending it on acquisitions.
Youre never going to shrink your way to
greatness, Greenberg says of his firms more
The Chubb deal may, in fact, accelerate consolidation. Over
the past year or so, there has been a spike in mergers,
especially in reinsurance, though nothing on the scale of the
Chubb acquisition. Some of ACEs rivals have stumbled.
Zurich Insurance Group failed in its takeover bid for the
U.K.s RSA Insurance Group. Meanwhile, AIG is facing a
shareholder revolt, led by activist investor Carl Icahn,
demanding that the firm sharply reduce its size and costs.
Because of Greenbergs success at simultaneously
bulking up ACE and delivering eye-catching profits, investors
give him more leeway than almost any other insurance chief.
Evan obviously has deep roots in the insurance industry,
but hes been able to apply that knowledge and experience
in uncommon ways, says Laurence Fink, chairman and CEO of
one of ACEs biggest shareholders. Hes also
been smart about the risks ACE is willing to underwrite and the
companys strategic direction.
For all the attention focused on ACEs pre-Chubb buying
splurge, Greenberg points out that two thirds of his
companys growth has been organic, with acquisitions made
to complement existing businesses. That meant buying a Mexican
insurer to accelerate the growth of ACEs own commercial
p/c and accident and health (A&H) businesses south of the
border and building up ACEs U.S. agricultural clientele
by purchasing a multiperil crop insurer.
Throughout this breakneck expansion ACE has demonstrated an
obsession with underwriting. Over the past dozen years, the
firms combined ratio, which measures costs and claims as
a proportion of premiums in the p/c business, has averaged 7
percentage points lower than that of any major insurer in the
We are underwriters first of all, says
Greenberg. That has certainly helped ACEs bottom line in
this prolonged era of low interest rates and paltry returns
from insurance investment portfolios. In the first nine months
of 2015, ACEs $1.5 billion in underwriting income almost
equaled its $1.7 billion in net investment earnings. Overall,
net income for the period was $2.15 billion, down 6.5 percent
from $2.3 billion for the first three quarters of 2014. In the
five years from 2010 through 2014, ACE delivered a 124 percent
total return to shareholders, compared with 113 percent for
Chubb and 123 percent for Travelers.
A key strategy behind acquisitions has been ACEs
resolve to expand into emerging markets, where younger,
upwardly mobile societies offer higher profits than the mature,
lower-margin markets of the developed world. Evan
recognized the importance of the rise in the middle class in
emerging markets like Thailand, Mexico and Brazil as a driver
of growth, Fink says.
But all these previous acquisitions amount to only a
fraction of the Chubb deal, announced on July 1. In one fell
swoop, ACE raised its gross premiums written from $23.4 billion
to $37 billion. The merged companies are complementary in many
of their business lines. ACE has a much larger footprint
abroad; in the U.S. the firm is more focused on large corporate
accounts and high-net-worth individuals. Chubb also is known
for catering to affluent clients but is stronger than ACE in
the middle-market companies and personal lines businesses. Both
insurers are known for their conservative investment
portfolios. Their combined ratios 87.2 percent for ACE
and 87.5 percent for Chubb for the first three quarters of 2015
place them among the industry leaders. We both put
underwriting on a pedestal, Greenberg says. By contrast,
AIGs combined ratio for the first nine months of 2015 was
But for a merger this large, execution risks are high.
Its going to be intense, with a lot of heavy
lifting, says Joshua Stirling, a New Yorkbased
insurance analyst at Sanford C. Bernstein & Co. This
is a merger of two big companies that will have to work through
their differences in culture, systems, duplicative operations
In the months following the announcement of the deal,
theres already been at least one high-profile case of a
senior Chubb executive jumping ship rather than accepting a
different position in the merged entity. Still on the minds of
many analysts is the $70 billion 1998 merger of Citicorp and
Travelers, which broke apart four years later.
Greenberg readily acknowledges the risks. Its
one thing to buy Chubb; its another thing to integrate
them well, he says. One of the real questions for
me was, Is my company ready for this, and can we as a
management team handle this? And I feel very confident we
Evan Greenberg was born confident. With his father, Hank,
perhaps the most iconic figure in the insurance world and his
older brother, Jeffrey, in the business as well, Evans
destiny was set. He did have youthful detours: After finishing
high school at 17, he traveled around the U.S. for three years
doing odd jobs, the longest as a cook in a Colorado nursing
home. He never received a posthigh school degree, though
he briefly attended New York University and the College of
In 1975, Greenberg, then only 20, accepted a $7,800 annual
salary to rate automobile policies for New Hampshire Insurance
Co. (later acquired by AIG). A few months later he joined AIG
as an underwriter in its A&H business; he spent the next 25
years there, working his way up to president and chief
operating officer, and heir apparent to his father.
Im a product of that upbringing at AIG,
Greenberg says. Underwriting was everything. There was
never a greater insurance company.
Former colleagues remember him as driven. If you
dont like high-performance, high-expectation, relentless
pursuit, then you probably wouldnt want to work for
Evan, says Daniel Glaser, CEO of Marsh & McLennan
Cos. and an AIG executive during Greenbergs last year at
the firm. You cannot outwork him.
But when it became clear that Hank Greenberg had no
intention of retiring any time soon, Evan stunned the insurance
world by abruptly resigning from AIG. For 15 months he moped.
Other insurers hesitated to contact him, fearing they could not
offer him anything comparable to the lofty post he had vacated.
The exception was ACE, whose chief executive at the time, Brian
Duperreault, was another AIG alumnus; he pursued Greenberg
relentlessly for more than a year.
The September 11, 2001, attacks persuaded Greenberg to
finally accept Duperreaults invitation to join ACE as
vice chairman. The terrorist assault led to a huge withdrawal
of global insurance capacity. But ACE, incorporated in the
Cayman Islands with headquarters in Bermuda, had just raised
more than $1 billion to deploy. So when 9/11 happened, I
called Evan again and said, We have a once-in-a-lifetime
opportunity, and Id hate to have you miss it,
recalls Duperreault, now CEO of Bermuda-based Hamilton