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March 24, 2021

Analysts: Chubb could increase offer to purchase The Hartford

Photo | CoStar The Hartford's Asylum Hill headquarters in Hartford.

Chubb Ltd. may have seen its first bid for property and casualty insurer The Hartford shot down this week, but that doesn’t necessarily mean the Swiss insurance giant will simply walk away from the negotiating table.

Analysts say Chubb has the resources to pull off a successful acquisition and could eventually counter with a new offer.

“We think there is room for Chubb to increase its proposed purchase price and still make the transaction attractive on an earnings accretion basis,” wrote Paul Newsome, managing director at Piper Sandler & Co., in an industry note.

According to Newsome, The Hartford’s management will likely take its time hearing and evaluating potential offers from other would-be buyers and could start negotiating with Chubb based on its first proposal, which valued the company at $65 per share.

David Havens, an analyst at Imperial Capital, wrote that while The Hartford was “obviously underwhelmed” by Chubb’s offer, Chubb could “certainly come back with sweetened deal terms.”

Overall, Havens said a linkup between the two companies would be “sensible” because Chubb could benefit from a larger and more diverse U.S. platform, and the two businesses have multiple complementary aspects.

“We believe transactions like this make sense as the U.S. insurance markets remain fragmented with literally thousands of individual insurance companies and hundreds of insurance groups,” he said.

Gov. Ned Lamont also suggested that last week’s bid, and The Hartford’s subsequent rejection, could mark the beginning of much longer discussions between the two companies.

“This is the first step in a long dance,” Lamont said during an online news conference Tuesday. “The Hartford belongs in Hartford. Just wait and see, you’re going to see a variety of different dance steps in the coming weeks and months.”

The Hartford confirmed it was in receipt of an unsolicited acquisition offer from Chubb on Thursday. The proposal valued the 211-year-old company at approximately $23 billion.

The Hartford’s board of directors unanimously rejected the bid on Tuesday.

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