How do foreign insurance bosses play mergers and acquisitions?

The upsurge of buying Chubo happened after the global financial crisis. At this time, most insurance companies prefer to return their capital to shareholders rather than use it for mergers and acquisitions. When talking about cautious competitors, Greenberg said, "Never be timid on the road to greatness."

Source: Financial Guest Magazine, June 20 16.

Author: Jonathan Kandell

The century-old shop has a new boss.

In the summer of 20 15, the insurance upstart Anda Company (ACE) launched the largest acquisition transaction in its history. The company said that it will acquire Chubb Corp, a well-known insurance company in the industry, for more than 28 billion US dollars. A few weeks after the news was released, Evan Greenberg, the former CEO and chairman of Anda Insurance Company, stood in the atrium lobby on the fourth floor of Chubo's headquarters in Warren, New Jersey and announced the deal to all the staff. The employees of Chubo Company have a serious face. They have just officially learned the sudden and explosive news from their new boss.

The 60-year-old CEO is a burly man with a clean beard. He told his audience: "Speaking here is a bit like speaking at the Colosseum in Rome. However, I hope there will never be anything like lions and beasts here, and you must never throw anything at me. " Laughter broke out in the tense atmosphere. Greenberg described in detail his expectations and development blueprint for the future of this enterprise. Not only that, he also pointed out that the merged enterprise will continue to use the name of Chubo instead of Anda. The powerful tycoon in the insurance field added: "I don't know how to show our respect to those future colleagues." But in my opinion, continuing to use Chubo's company name may be the best way to show respect. "

A few months later, the ambitious Greenberg was interviewed by Institutional Investor in the 45th floor office building in downtown Manhattan. His arrogance, passion and avant-garde humor were revealed in the two-hour interview. "We are still the past Anda insurance company. But in the future, we will continue to develop under the protection of Chubo coat. " He said jokingly.

For the son of insurance legend Maurice Hank Greenberg, this may be an extraordinary journey. He worked for his father at American International Group (AIG) for 25 years and thought he could take over the world-famous insurance group. However, his wishful thinking failed to come true. Ivan Greenberg left AIG angrily in 2000 and remained dormant in the market for more than a year.

After the "9. 1 1" terrorist attack, he once again joined the insurance industry and joined Anda Insurance Company, a medium-sized reinsurance institution in Bermuda. In the next fourteen years, under the leadership of Ivan, Anda Insurance Company successively completed 16 M&A transactions including Chubo Company, and successfully became the sixth largest property accident insurance company in the United States. In terms of total insurance income, only Allstate Corp Insurance, Liberty Mutual Group, Ohrstedt Corp, Berkshire Hathaway and Travelers Cos. rank ahead of the new rich in this insurance industry.

In particular, Chubo's buying spree occurred after the global financial crisis. At this time, most insurance companies prefer to return their capital to shareholders rather than use it for mergers and acquisitions. When talking about cautious competitors, Greenberg said, "Never be timid on the road to greatness."

In fact, the acquisition of Chubo is likely to accelerate the restructuring of the whole industry. In the past year, M&A emerged one after another, especially in the field of reinsurance, although other acquisitions were not as large as Chubo's. In this process, some competitors of Anda Insurance Company have failed. For example, Zurich Insurance Group's acquisition of British RSA Insurance Group ended in failure. At the same time, American International Group (AIG) also faces shareholder defection caused by radical investor Carl Icahn, who demands to reduce the scale and cost of the enterprise.

Because Greenberg not only successfully expanded the scale of Anda Insurance Company, but also brought rich operating profits to the company, investors naturally gave them full trust. Laurence Fink, CEO and Chairman of BlackRock, one of the largest shareholders of Anda Insurance Company, said: "Although Ivan is very familiar with the insurance industry, he never plays cards according to common sense; Not only that, but he also took the risk strategic decision of Anda Insurance Company just right. "

When everyone was concerned about the acquisition of Chubo by Anda Insurance Company, Greenberg pointed out that two-thirds of his company's growth came from the internal operation of the organization, and the acquisition of Chubo would greatly make up for the shortcomings of the company's original transaction. The acquisition of this Mexican insurance company will accelerate the business of Anda Insurance Company on the southern border. Moreover, by acquiring this crop insurance institution with multiple risks, Anda Insurance Company can also take the opportunity to consolidate its agricultural customer market in the United States.

Behind the high-risk expansion, Anda has been addicted to underwriting. In the past 12 years, the company's average comprehensive cost ratio (the ratio of premium to cost used to measure property accident insurance) was about 7% lower than that of any major insurance institution in the world.

In this regard, Greenberg said: "We are an insurance insurer first." In this era of low interest rates, this ratio will greatly enhance Anda's operating bottom line and increase the income of insurance portfolio business to a certain extent. In the first nine months of 20 15, the underwriting income of Anda Insurance Company was almost equal to its1700 million net investment income. At the same time, the company's net income was $265,438+$50 million, which was 6.5% lower than $2.3 billion in the first three quarters of 20 14. During the five years from 20 10 to 20 14, the total return on investment brought by Anda Insurance Company was 124%, while that of Chubo Insurance Company was 1 13% and that of Traveler Insurance Company was 123%.

At the same time as the above M&A transaction, Anda began to implement another key strategy-entering emerging markets. Compared with developed markets with relatively mature and low returns, emerging markets are not only full of vitality, but also active societies can create higher returns on investment. "There is no doubt that Ivan has realized the fact that the middle class in emerging markets such as Thailand, Mexico and Brazil has risen. As the growth engine of the future, their importance is self-evident. " Fink said. However, according to the data released in July 2005 1, 2065438, the total amount of this previous acquisition transaction is only a small part of Chubo's acquisition transaction.

The total operating premium of Anda Insurance Company suddenly increased from $23.4 billion to $37 billion, because the business of the acquired company and Anda's previous business have formed a good complementarity. Anda insurance company is mainly engaged in large enterprise accounts and high net worth group business in the United States. Chubo Insurance Company is also named because of its large customer base, but it is obviously superior to Anda Company in terms of mid-market enterprises and individual customers. Both the two major insurance companies insist on relatively conservative portfolio business, and their comprehensive cost ratio is in the forefront of the whole industry. In the first three quarters of 20 15, the comprehensive cost ratio of Anda Insurance Company was 87.2%, and that of Chubo Insurance Company was 87.5%. Greenberg said: "We are all companies that are good at insurance underwriting." In contrast, the comprehensive cost ratio of AIG in the first nine months of 2065438+05 reached 99.6%.

On the whole, this acquisition is still full of risks. Joshua Stirling, an insurance analyst in Sanford Bernstein, new york, said, "There is still a lot of hard work to be done to finalize this acquisition. These two large enterprises must overcome their different cultures, organizational structures and dual business operations and personnel systems. " Within a few months after the announcement of the transaction, there were more than one case in which senior managers of Chubo Insurance Company jumped ship. These senior managers chose to leave rather than accept and adapt to the new positions of the merged enterprise.

Today, many analysts still clearly remember the 1998 $70 billion M&A transaction between Citigroup and Traveler Insurance Company. Four years later, they split into two independent entities again.

Greenberg did not avoid the existence of risk. He said: "The acquisition of Chubo Company and the integration of Anda and Chubo are completely different and cannot be compared. A realistic question before me is, is my enterprise ready? Can our management team cope with all possible situations in the future? I believe that we can do all this well. "

Self-confidence is an innate trait of Ivan Greenberg. Like his father Hank and his brother Jeffrey, Ivan seems destined to be closely related to the insurance industry. His father, Maurice Hank Greenberg, is a hot figure in the insurance industry. Ivan took many detours when he was young. He finished high school at the age of seventeen and began to travel in the United States for three years. During this period, Ivan did many short-term jobs, the longest of which was as a cook in a nursing home in Colorado. He has never received higher education, although he also attended short-term studies at new york University and Insurance College.

From 65438 to 0975, Ivan Greenberg, who was only 20 years old, got a job with an annual salary of $7,800 in New Hampshire Insurance Company, which was later acquired by American International Group. His duty is to evaluate the automobile policy. A few months later, he joined American International Group and became an accident and health insurance salesman. In the next twenty-five years, Ivan was promoted to the group president and chief operating officer step by step, and then he is likely to become his father's successor.

"I am a product manufactured by American International Group, and the distribution insurance business is all the work. This is true of any insurance company. " Greenberg said.

Ivan's former colleagues still remember that dusty past. marsh & amp； Daniel Glazer, CEO of Maclennan Company. He used to be an executive of American International Group. He said: "If you can't adapt to the atmosphere of high performance, high expectations and high competition, then you can't work for Ivan at all. You can never surpass him. "

But when Hank Greenberg announced that he had no intention of retiring in the near future, everything became clear. Ivan was so angry that he simply resigned from AIG and started his1May trip. Other insurance companies are hesitant to send an invitation to join the senior experts in this insurance industry. They are worried that they can't provide jobs and positions that Ivan used to work for. However, Anda Insurance Company is an exception, and its CEO Bryan Doo Du Perot once worked for American International Group. He spent more than a year inviting Ivan Greenberg to join Anda Insurance Company.

Start your own adventure

The terrorist attacks on September 1 10, 2006 finally made Greenberg accept Dupro's invitation and formally joined Anda Insurance Company as the company's vice chairman. Terrorist attacks have greatly reduced the underwriting capacity of many insurance institutions around the world. However, Anda Insurance Company reorganized its headquarters in Cayman Islands and Bermuda, and raised more than $654,380 billion for market operation. Dupro, who is now the CEO of Hamilton Insurance Group in Bermuda, recalled: "So when the' 9.11'incident happened, I called Ivan again and told him,' We now have a golden opportunity. I don't want you to miss it. "

Greenberg quickly reassured the outside world with practical actions, because many people thought that he was going downhill after leaving AIG to join Anda Insurance Company. Dupro said: "What he did was nothing like the second person who used to be the world's largest insurance institution. He works hard, which is exactly what I expected. Because I hope that Anda Insurance Company can by going up one flight of stairs under his leadership. "

Established in 1985, this insurance and reinsurance company is composed of 34 companies, with many directors and senior managers, and has been committed to expanding the market underwriting capacity. When Greenberg 200 1 came to the company, Anda Insurance Company was still trying to digest the property and accident insurance business acquired from Cigna Corp for $3.45 billion two years ago. This M&A transaction involves more than 50 overseas branches, which also enables Anda Insurance Company to break through the traditional boundaries of reinsurance business. Duplo and Greenberg are very excited about the possibility of the company establishing a global insurance business system. When talking about the development after "9. 1 1", Greenberg said: "We are entering an increasingly difficult insurance market, which was rarely seen before. Fortunately, we have dodged a bullet at present, and we are actively establishing new business, sharing personal risks and expanding business scope. This move is of great significance. "

With the arrival of Greenberg, Anda Insurance Company entered the era of large-scale merger and expansion. Of course, some acquisitions have also caused legal disputes. In 2004, Ivan became the CEO of the company. In the same year, Anda Insurance Company was investigated by Eliot Spitzer, Attorney-General of New York State, on suspicion of participating in bid rigging and price monopoly with other insurance institutions, including Weidaxin Company and American International Group. The case caused legal controversy because the CEO of Weidaxin Company at that time was Ivan's brother Jeffrey, and AIG was also under the control of Hank Greenberg. In 2006, another liquidation transaction with a total amount of 80 million dollars was also investigated by the procuratorate. Anda Insurance Company admitted that this transaction was its priority decision and agreed to change the previous business operation mode. Although a grass-roots employee of Anda Company who participated in the transaction admitted the criminal charges, Ivan Greenberg denied the prosecution's fraud charges. Shortly after Spitzer's investigation began, Jeffrey Greenberg, chairman and CEO of Weidaxin Company, announced his resignation in 2004. A year later, Hank Greenberg, chairman and CEO of American International Group, officially retired, leaving his post where he had worked for 27 years. Subsequently, scandals such as AIG's exaggeration of total premiums and accounting fraud followed.

Spitzer's investigation of Ivan Greenberg shows that the above allegations are not groundless. In the twelve years before the acquisition of Chubo Insurance Company, Anda Insurance Company completed 15 M&A transactions under his leadership. These transactions show great differences in business model and geographical distribution, including property accident insurance companies in Asia, auto insurance in Latin America and high-net-worth life insurance business in the United States.

The tax status of Anda Insurance Company in overseas markets has accelerated its expansion. Due to frequent business restructuring in overseas markets, Anda Insurance Company has more obvious tax advantages than American insurance companies, so it began to invest more capital in overseas markets. But not long after, the company found itself too big to continue to integrate the insurance business in Cayman Islands. Greenberg explained: "As a global insurance company, we must fully consider the issues of performance, rationality and stability, and the Cayman Islands is not prominent in these aspects."

Therefore, in 2008, Anda Insurance Company began to reorganize its Zurich market business while retaining its headquarters in new york. Zurich is not only a global insurance center, but also the corporate tax rate is much lower than that of the United States, which is only 7.83%, while the nominal tax rate in the United States is as high as 35%. Because its income accounting needs to adopt different tax rate ranges, the actual business tax may be lower.

When talking about the recent economic debate in the United States, Greenberg said: "We are not a swing. We have never been an American enterprise. If Anda integrates its business in the US market, it may face tax risks of asset income. " Greenberg, who has been attacking American corporate tax policy, said: "I must be responsible to the shareholders of the company, because this is my unshirkable responsibility." Therefore, the discussion about the birthplace of the company is meaningless. "

Whether there is tax advantage or not, the CEO decided to start building a brand-new international market business, thus making the enterprise a global insurance company. During the financial crisis, when other insurance companies cut their balance sheets or sought government debt assistance, Anda Insurance Company continued its market expansion by adopting acquisition strategy. Greenberg's former employer, American International Group, survived from 2008 to 2009 because it received a record $6,543.8+$082.5 billion in taxpayer assistance. (These debt assistance funds will eventually be repaid, which is estimated to cost more than $20 billion in profit income, so AIG needs to sell billions of dollars of assets to fill this hole. )

At that time, even insurance companies such as travelers and Chubo were trying to control the scale of acquisition transactions, preferring to return excess capital to investors. Since 2009, these two insurance companies have repurchased more than 30% of the shares, while the share repurchase ratio of Anda Insurance Company is only 5%. Sterling of Bernstein said: "After 2008, most insurance companies were overcompensating shareholders."

M&A feat

In 20 13 and 20 14 years, Anda Insurance Company repurchased 3 billion US dollars of shares, which was only a quarter of the total acquisition expenditure in the previous ten years. Moreover, the company also took out $6 billion in cash for the acquisition of Chubo Insurance Company. KBW Company (Keefe, Bruyette &；; Meyer Shields, an analyst at Woods, said: "Greenberg had a frank exchange with shareholders on the issue of ensuring the funds for the acquisition transaction."

Miller tabak Company in Lake Placid, new york (Miller Tabak &; Thomas Mitchell, an analyst at Co., said: "Ivan observes potential acquisitions in the same way as he does in the insurance underwriting business. If he feels that the risk-return ratio is acceptable (the return on investment in the expected time is guaranteed), he will definitely start the acquisition transaction. "

Emerging markets have always been the focus of Ivan's overseas expansion. From 199 1 to 1994, Ivan served as CEO of American International Group Far East Company. After joining Anda Insurance Company, he acquired Malaysian comprehensive insurance company Jerneh Insurance, Korean and Hongkong branches of new york Life Insurance Company and Indonesian insurance agency AJP on 20 10 and 20 12 respectively.

John Keogh Keogh will continue to be the global head and chief operating officer of property and accident insurance of the new Chubo insurance company. He said: "All our acquisitions outside the US market have a clear historical growth strategy, and every acquisition can find opportunities to improve the organization's operational capabilities."

For example, although Anda Insurance Company has established its own insurance business in many large commercial enterprises in Malaysia, it cannot quickly and comprehensively extend to middle-class customers and small commercial enterprises, which are the main driving forces for the rapid economic development in Malaysia. After gradually getting rid of poverty, Malaysians expect to protect their wealth and family through property and health insurance. Entering this middle-class market requires a huge agency and marketing network, and it may take decades to establish a sales system. Therefore, when the opportunity to acquire Zener Insurance Company appeared, Anda Insurance Company seized the opportunity decisively without hesitation. George, 50, once worked with Ivan in American International Group, which left a deep impression on him. After leaving American International Group (AIG) for 20 years, Giorgio joined Anda Insurance Company in 2006, and was promoted to vice chairman of the company on 20 10, and became the chief operating officer of Anda one year later. He is currently the second person in the New Chubo Insurance Company. "We need an insurance institution with a complete marketing network and agency system in Malaysia. It may take decades for us to establish these operating networks ourselves. " He said.

Although Anda Insurance Company is often regarded as an international insurance company, its premium income in the North American market in 20 15 years accounts for more than half of its total premium. Anda mainly deals in accident insurance and health insurance products in the American market, while property insurance and accident insurance products are less involved. Sterling of Bernstein said: "Before the acquisition of Chubo, Ivan was always looking for opportunities to enter the high-yield diversified market through small and medium-sized commercial organizations. For a long time, he has spared no effort to build the operating platform of Anda Insurance Company. "

In 2008, Anda bought Combined Insurance Co from Aon Insurance Group for US$ 2.56 billion, which almost doubled its accident insurance and health insurance business, including independent self-employed households and small catering service organizations. These groups are very concerned about their health and work, otherwise their livelihood will be affected. In 2008, Anda formed Atlantic Company. High net worth personal insurance business, but did not disclose the purchase price. Two years later, Anda Insurance Company invested 1 1 billion dollars to acquire Rain &；; Hail) 80% of the shares.

Anda has made great achievements in avoiding or cutting those low-profit businesses. John Rue Lupica, vice president in charge of the North American market of New Chubo Company, said: "Once we find signs of profit decline in the market, we will definitely take immediate measures." Today, he still retains the position of vice chairman of professional insurance account in North America market in the merged New Chubo Insurance Company.