SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 12, 1999
ACE LIMITED
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(Exact Name of Registrant as Specified in Charter)
Cayman Islands 1-11778 Not Applicable
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(State or Other Jurisdiction (Commission I.R.S. Employer
(of Incorporation File Number) Identification No.)
The ACE Building
30 Woodbourne Avenue
Hamilton, Bermuda HM 08
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (441) 295-5200
--------------
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 5. Other Events.
On January 12, 1999, ACE Limited ("ACE") announced that it had
agreed to acquire the international and domestic property and casualty
insurance businesses of CIGNA Corporation ("CIGNA") for $3.45 billion in
cash.
Included as Exhibit 99.1 to this Current Report on Form 8-K is a
copy of the press release.
Item 7. Exhibits.
99.1 Press Release, dated January 12, 1999.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated: January 14, 1999 ACE LIMITED
By: /s/ Christopher Z. Marshall
-------------------------------
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description
- ----------
99.1 Press Release, dated January 12, 1999
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FOR IMMEDIATE RELEASE
ACE Limited: CIGNA Corporation:
Investor Contact: Helen M. Wilson Edwin J. Detrick
441-299-9283 215-761-6130
Media Contact: Wendy Davis Johnson Michael J. Monroe
441-299-9347 215-761-6133
ACE TO BUY CIGNA'S INTERNATIONAL AND DOMESTIC
PROPERTY & CASUALTY OPERATIONS FOR $3.45 BILLION
HAMILTON, Bermuda, and PHILADELPHIA, PA, January 12, 1999 - ACE Limited
(NYSE: ACL) has agreed to acquire the international and domestic property
and casualty insurance businesses of CIGNA 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
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 for
ACE," said Brian 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 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.
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<PAGE>
Under the agreement, ACE will acquire CIGNA's domestic property and
casualty insurance operations, including its run-off 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 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 and internationally," said Wilson H. Taylor, 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 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 for the same period of $198 million. Upon
completion of the transaction, ACE will be a company with approximately $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 from being a
global organization whose primary focus is property and casualty insurance.
As we assume CIGNA's business operations, we will seek to capitalize on
ACE's strength and focus in property and casualty underwriting to enhance
our profitability and growth potential," said Mr. Duperreault.
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<PAGE>
ACE's financial advisor in this transaction is Merrill Lynch & Co.
The ACE Group of Companies provides insurance and reinsurance for a diverse
group of international clients. Operating subsidiaries are based in
Bermuda, the United States, the United Kingdom (Lloyd's), and the Republic
of Ireland. At September 30, 1998, ACE Limited had approximately $8.8
billion in assets and approximately $3.7 billion in shareholders' equity.
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
businesses). As of September 30, 1998 CIGNA had consolidated assets of $109
billion and shareholders' equity of approximately $8.2 billion.
Editor's Note: ACE Limited's press releases are available at no charge
through News on Demand Plus by dialing 888-329-8941.
(tables to follow)
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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%
=== ===== ===== ===== =====
===============================================================================
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===============================================================================
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%
===== ===== ===== ===== =====
===============================================================================
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<PAGE>
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
======= ======= ======
===============================================================================
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<PAGE>
Supplemental Financial Information
===============================================================================
Income Statement Information
(in $ millions)
===============================================================================
Year ended Nine months ended
December 31, 1997 September 30, 1998
-------------------------- ------------------------
Operations Operations
As reported to be As reported to be
by CIGNA acquired by CIGNA 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 (16) (6) (8) (9)
expenses, net ------- ------- -------- --------
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 (14) 13 8 9
expenses, net ------- ------- ------- --------
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%
===== ===== ====== ======
===============================================================================
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<PAGE>
Supplemental Financial Information
===============================================================================
Income Statement Information
(in $ millions)
===============================================================================
Year ended Nine months ended
December 31, 1997 September 30, 1998
----------------------- ----------------------
Operations Operations
As reported to be As reported to be
by CIGNA acquired by CIGNA 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)
======= ======= ======== =======
===============================================================================
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