Chubb–AIG Combination Doesn’t Guarantee Better Earnings

Some investors are weighing the possibility of a combination between insurers Chubb and American International Group — a deal that would bring a member of the Greenberg family back to the helm of AIG.

Given Chubb’s higher price-to-book ratio, acquiring AIG might be more attractive than share buybacks. (Photo: AIG Facebook)

The idea remains speculative after an industry publication reported last week that Chubb had made an “informal takeover approach,” Andrew Bary wrote for Barron’s.

Chubb said it “emphatically denies that any offer was made,” while AIG said it “is not for sale.” Still, a merger of the two property-and-casualty insurers could eliminate overlapping costs and give Evan Greenberg, Chubb’s well-regarded CEO, another major platform.

Chubb generates about $56 billion in annual premium revenue — more than double AIG’s — and has a market value of roughly $121 billion, compared with $45 billion for AIG.

AIG, which was built into an industry giant by Evan Greenberg’s father, Maurice Greenberg, has undergone a successful turnaround under CEO Peter Zaffino.

Chubb, known for its high-end Masterpiece homeowners insurance franchise, trades at about 1.7 times third-quarter book value and 13 times projected 2025 earnings.

AIG trades closer to 1.1 times book value. A deal would also give Chubb access to AIG’s $89 billion investment portfolio, adding to its own $166 billion portfolio.

CFRA analyst Cathy Siefert said insurance mergers and acquisitions are likely to pick up as revenue growth slows and pricing weakens after several strong years.

BofA Securities analyst Joshua Shanker cautioned that a merger could risk revenue shortfalls if customers seek to diversify away from a single large carrier and could also raise antitrust concerns. Still, he wrote that given Chubb’s higher price-to-book ratio, acquiring AIG might be more attractive than share buybacks.