Ace Ltd. Secures $1.25 Billion in Protection Against Unexpected Losses

Strategic Insights -

Ace Ltd., a leading insurer, has obtained $1.25 billion in protection against unexpected losses from Cigna Corp.'s run-off business. The reinsurance is provided by National Indemnity Co., a subsidiary of Berkshire Hathaway, which carries an A++ rating from A.M. Best Co. This deal is part of Ace's plan to buy Cigna's property/casualty businesses, pending regulatory approval. The restructuring remains in litigation, with challenges from competitors such as American International Group Inc., the St. Paul Cos., and Chubb.

Key Takeaways:

  • Ace Ltd. has obtained $1.25 billion in protection against unexpected losses from Cigna Corp.'s run-off business.
  • National Indemnity Co., a subsidiary of Berkshire Hathaway, will provide the reinsurance to protect against loss and loss-adjustment expenses.
  • The run-off company, Brandywine Holdings, was created by Cigna for asbestos and other environmental claims and has been challenged in court by competitors.
  • Ace Ltd. plans to buy Cigna's U.S. and international property/casualty businesses, pending regulatory approval.
  • The deal has implications on the A.M. Best ratings for Ace, Cigna, and Brandywine, which are under review.
  • Cigna's property/casualty businesses had net premiums written of $1.24 billion through Sept. 30, 1998, and policyholders' surplus of $1.72 billion, according to A.M. Best Co. data.

Statistics:

  • $1.25 billion: The amount of protection against unexpected losses obtained by Ace Ltd. from Cigna Corp.'s run-off business.
  • $1.24 billion: The net premiums written by Cigna's property/casuality businesses through Sept. 30, 1998.
  • $1.72 billion: The policyholders' surplus of Cigna's property/casualty businesses as of Sept. 30, 1998.
  • A++: The rating given to National Indemnity Co. by A.M. Best Co.
  • A+: The rating given to Ace Ltd. by A.M. Best Co.
  • A-: The rating given to Cigna's active businesses by A.M. Best Co.
  • B+: The rating given to Brandywine Holdings by A.M. Best Co.

Sources:

  • BestWeek, Jan. 18.
  • COMTEX (http://www.comtexnews.com)
  • A.M. Best Co. data.
  • Cigna Corp. news release.