Evan Greenberg addressed Chubb employees at a meeting called by the insurer, offering his view on the $28.3bn cash and stock merger deal by which his firm Ace would acquire the insurer.
After what he described as a “high school mixer” between the senior officers of the two insurers’ upper management teams, the July 20 “employee town meeting”, the transcript of which is published by US regulator the Securities and Exchange Commission (SEC), offered a chance to address Chubb’s assembled troops.
“I have given speeches in a lot of venues in a lot of parts of the world,” Greenberg said. “This is like giving a speech in the Roman Colosseum. I hope there’s no lions, and I hope, as they did in ancient Rome, you don’t choose to throw anything at me.”
Shareholders are expected to vote on Ace's proposed acquisition of Chubb by the end of October. The two firms' management teams want the merger to complete early next year.
Much in Greenberg’s tone was conciliatory. He spoke of uniting “two great underwriting companies”, and the merger as “game changing for our industry”, although there were warnings, too.
He was keen where possible to sooth the nerves of those present, that their jobs, employee benefits and corporate culture would not be ravaged by the acquirer.
“Moments like this create tremendous uncertainty,” he said. “They make people uneasy, and the one promise I can give you is to the extent I am in control of it, we will make decisions rapidly and that we’ll communicate and provide answers and clarity as we know it and as we’re allowed to provide it.”
John Finnegan, Chubb’s chairman, president and CEO, provided supporting words. “When we complete the integration, I think we will have the makings of a great enterprise. However, we recognize that a transaction of this type creates a substantial amount of employee concern,” he said.
Among Greenberg’s pledges, before taking the helm at the merged group when the deal completes early in 2016, were a simple “yes” to a question of whether Ace will maintain Chubb’s extensive branch network.
It wasn’t all soft soap, as Greenberg told Chubb staff to master their negative emotions and help build the company’s future with Ace.
“I know there’s all kinds of emotion flying. I know there’s resentment. I know there’s anger. I know there’s uneasiness. In some, there’s even fear, but at some point, you guys have to make a decision about your company, and you’ve got to make it soon,” he said.
“Don’t wallow. Be a part of this journey,” Greenberg warned. “Take what we are creating and help build it. Improve upon and preserve it. Be a part of the history and the future of this.”
Greenberg’s sense of insurance history is probably greater than most leaders in the sector, coming as he does from probably the greatest dynasty in the industry. “The opportunity in front of us is simply historic. There is no other way to say it,” he said.
Evan is the brother of Jeffrey Greenberg, former CEO of Marsh & McLennan Companies broking group. His father Maurice “Hank” Greenberg is the former chairman and CEO of American International Group (AIG), who led the pre-crisis AIG to become the world’s biggest insurer, and currently leads CV Starr as chairman and CEO in his 90th year.
Anger at Ace
Ace’s taking Chubb’s name, unsurprisingly, also came up in the speech; Greenberg saying it “represents quality” and “a sign of respect and appreciation” for Chubb’s historic brand. “I don’t know any other way to show respect to somebody to begin with than to say we’re going to take your name,” he said.
Interestingly, Greenberg also took the opportunity to acknowledge that – for those staff on his side of the merger deal – the unusual decision to ditch the Ace brand and take the acquired Chubb name has caused widespread anger within Ace.
“Do you think for a minute that that idea goes down well inside Ace? Do you think they all are uplifted by that? No, they’re offended by it. They wonder if I have lost my mind in the first instance. Ace is a highly successful company,” Greenberg said.
“That has made it difficult for people, and I’ve had to have a long conversation and an ongoing conversation about name versus your culture and versus who you are and that it’s best we separate it, because I think taking the Chubb name, the brand represents quality, and it represents a culture which I myself will be proud to be associated with,” he added.
High school mixer
On completion of the merger next year, the combined Ace-Chubb entity – by then just named Chubb – will be led by Greenberg as its chairman and CEO. John Finnegan, present-day Chubb’s chairman, president and CEO, introduced Greenberg to the stage.
Under the terms of the transaction, he has agreed to serve on into 2016 as the post-merged group’s executive vice chairman, responsible for “external affairs” in North America, and will assist with integration.
Finnegan provided new insight into the initial negotiations between the two firms, particularly two points: that initial contact only began six weeks earlier; and that he had not flirted with selling the firm until approached by Greenberg.
“While we were flattered, we certainly were not thinking about selling the company, so Evan faced an extremely high hurdle in terms of convincing us that there was any point in further discussions about a Chubb/Ace affiliation. But convincing he was,” said Finnegan.
“The Ace proposal included a substantial premium to our shareholders in a transaction that has a strong business and strategic logic. It would also keep the Chubb name and envisioned significant growth opportunities. In our discussions, it also became clear that Chubb and Ace strengths in many areas complement each other, providing opportunities to grow in ways that would not be available to either as stand-alone companies,” he continued.
Finnegan said the two firms’ senior management teams were now in the process of working to complete the transaction by the first quarter of 2016, with bilateral exec-level integration committees formed to determine the best structures and talent mix for the new organisation.
To that end, the two management teams broke the ice, accompanied by spirits and mixers, and “jump-started this process last week with an intensive three-day offsite session”, he revealed.
Greenberg provided further detail, claiming the two teams overcame some initial shyness and were jointly enthusiastic about the possibilities of their coupling.
“A number of our senior leaders, as John said, got together for two days of planning and discovery last week. On one hand, it’s the kickoff, the whole process of integration and creating a common vision. On the other hand, it’s like a high school mixer,” said Greenberg.
“Everyone gets together. One stands in one corner and one stands in the other corner. It always starts that way. The difference between the high school mixer though is we could hand out alcohol, and so within a reasonable period of time, everybody came out of their own corner,” he continued.
“What you got, and to me it was extremely energizing to see, I came and did just the introduction and then did what I knew I had to do, leave. And I left for two days and came back. The energy in the room, the excitement in the room, the optimism, the forward looking was palpable to me. They all got a deeper taste of the vision and what’s possible, and again, the energy, the excitement, the good will and natural respect was there. I don’t overstate it. People are still strangers, but it’s a beginning,” added Greenberg.
Evan the builder
Discussing how the two would get along in matrimony, Greenberg spoke of “tremendous balance” between the two parties, which “ought to be energizing… to be soothing to everybody”, he suggested.
“Where one is very strong, the other one may or may not be present and vice versa,” said Greenberg. “Customer focused: Just look at North America where Ace is more focused on large account and upper middle market and, yes, high net worth, whereas Chubb is more of a middle-market company…We each add, in so many dimensions, what the other doesn’t have or, as I said, where both do it, one does it better.”
Describing Chubb’s culture as “deliberate and buttoned up”, and “quietly proud”, Greenberg added: “I admire those traits.”
“Ace, first and foremost, we are builders,” he said. “Twelve years ago, my company was number 23 in the multi-line global P&C ranks. Today, we’re ranked number 7 in the world. Two-thirds of our growth has come organically. Only one-third is through acquisition, and we made about 15 acquisitions over the last 12 years.”
He emphasised the non-US portions to Ace’s business, particularly across Asia. Greenberg noted the firm has 25 offices just in Malaysia, 15 in Thailand, 26 in Brazil, and 63 in Mexico.
“Management is close to the action. We’re not remote. We work at 10,000 feet and we work at ground zero every single day, and I’ll tell you what, to win an account, if it’s $50,000 or more, I’ll throw myself out the window myself to win that account,” ventured Greenberg.
“We’re not afraid to invest. That’s how we build,” he said. We’re very entrepreneurial, and were not political. We have a broad risk appetite, and not only are we not afraid to invest, we try a lot of things, and we’re also not afraid to kill what doesn’t work. It’s not working? Okay, we tried it…I say we’re builders. Our income 12 years ago was $500m a year. Last year, it was $3.8bn.”
As a “small vignette”, he brought up the example of Cigna, which Ace bought as “a broken company” in 1999, before turning around the loss-making entity into profit. While quick to contrast Cigna’s broken state in 199 with Chubb’s position of success, the point was that Ace was ambitious to build its acquisitions into successes, nor is it afraid to take on big challenges as “500 people bought 5,000” with the Cigna deal.
Greenberg drew comparisons between different strengths of both Ace and Chubb, revealing where he thought one firm had the edge over the other, whether by culture, skills or type of business. Chubb is better at training its staff, he noted. Ace is better at handling larger and more complex claims, he suggested. In management and leadership he was keen to stress equality.
“Agency and brokerage – Ace is better at brokerage. Chubb is better at agency,” said Greenberg. “We’re going to get the great strengths of both companies in that. We’re going to go with our strengths of each company. In North America, this is like a merger of equals. That’s the way we’re viewing this, and again, Ace is more brokerage.”