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Acquisitions | 12 Months Ended
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Dec. 31, 2017
Business Combinations [Abstract] |
Acquisitions | Acquisitions The Chubb Corporation (Chubb Corp) On January 14, 2016, we completed the acquisition of Chubb Corp, a leading provider of middle-market commercial, specialty, surety, and personal insurance for $29.5 billion, comprising $14.3 billion in cash and $15.2 billion in newly-issued stock. In addition, we assumed outstanding equity awards to employees and directors with an attributed value of $323 million. The total consideration, including the assumption of equity awards, was $29.8 billion. We recognized goodwill of $10.5 billion, attributable to expected growth and profitability, none of which is expected to be deductible for income tax purposes. We financed the cash portion of the transaction through a combination of $9.0 billion sourced from various Chubb Limited and Chubb Corp companies plus $5.3 billion of senior notes, which were issued in November 2015. Refer to Note 9 for additional information on the senior notes. Upon completion of the merger, each Chubb Corp common share (other than shares held by certain legacy Chubb Corp employee benefit plans) was canceled and converted, in accordance with the procedures set forth in the merger agreement, into the right to receive (i) 0.6019 of a Chubb Limited common share and (ii) $62.93 in cash. In addition, replacement equity awards were issued by Chubb Limited to the holders of Chubb Corp's outstanding equity awards (stock options, restricted stock units, deferred stock units, deferred unit obligations, and performance units). We believe the Chubb Corp acquisition is highly complementary to our existing business lines, distribution channels, customer segments, and underwriting skills. Chubb Corp has a substantial presence in the U.S. with a broad variety of coverages serving large corporate and upper middle market accounts, middle market and small commercial accounts, and personal lines. Together we are one of the largest commercial insurers in the U.S. Internationally, where legacy ACE is a truly global insurer with extensive presence in 54 countries and territories, Chubb Corp's operations in 25 markets added to our presence and capabilities and positioned us to better pursue important market opportunities globally. The combined company is a leader in a number of global specialty and traditional products such as professional lines, risk management, workers' compensation, accident and health (A&H), and other property and general casualty lines. The table below details the purchase consideration and allocation of assets acquired and liabilities assumed:
(in millions of U.S. dollars, except per share data) |
Purchase consideration |
Chubb Limited common shares |
Chubb Corp common shares outstanding | 228 |
Per share exchange ratio | 0.6019 |
Common shares issued by Chubb Limited | 137 |
Common share price of Chubb Limited at January 14, 2016 | $ | 111.02 |
Fair value of common shares issued by Chubb Limited to common shareholders of Chubb Corp | $ | 15,204 |
Cash consideration |
Chubb Corp common shares outstanding | 228 |
Agreed cash price per share paid to common shareholders of Chubb Corp | $ | 62.93 |
Cash consideration paid by Chubb Limited to common shareholders of Chubb Corp | $ | 14,319 |
Stock-based awards |
Fair value of equity awards issued (1) | $ | 323 |
Fair value of purchase consideration | $ | 29,846 |
Assets acquired and (liabilities) assumed |
Cash | $ | 71 |
Investments | 42,967 |
Accrued investment income | 359 |
Insurance and reinsurance balances receivable | 3,095 |
Reinsurance recoverable on losses and loss expenses | 1,676 |
Indefinite lived intangible assets | 2,860 |
Finite lived intangible assets | 4,795 |
Prepaid reinsurance premiums | 280 |
Other assets | 853 |
Unpaid losses and loss expenses | (22,923 | )
Unearned premiums | (7,011 | )
Insurance and reinsurance balances payable | (603 | )
Accounts payable, accrued expenses, and other liabilities | (2,030 | )
Deferred tax liabilities | (1,292 | )
Long-term debt | (3,765 | )
Total identifiable net assets acquired | 19,332 |
Goodwill | 10,514 |
Purchase price | $ | 29,846 |
(1) The fair value of the replacement equity awards was $525 million, of which $323 million was attributed to service periods prior to the acquisition and was included in the purchase consideration. Refer to Note 12 for further information on these replacement equity awards. The purchase price allocation to intangible assets recorded in connection with the Chubb Corp acquisition and their related useful lives are as follows:
(in millions of U.S. dollars) | Purchase price Allocation at January 14, 2016 |  | Estimated useful life
Definite life |  |
Unearned premium reserves (UPR) intangible asset | $ | 1,550 |  | 1 year
Agency distribution relationships and renewal rights | 3,150 |  | 24 years
Internally developed technology | 95 |  | 3 years
Indefinite life |  |
Trademarks | 2,800 |  | Indefinite
Licenses | 50 |  | Indefinite
Syndicate capacity | 10 |  | Indefinite
Total identified intangible assets | $ | 7,655 |  |
Refer to Note 6 for additional information on goodwill and intangible assets acquired. The following table summarizes the results of the acquired Chubb Corp operations since the acquisition date that have been included within our Consolidated statement of operations:
(in millions of U.S. dollars) | January 14, 2016 to December 31, 2016 |
Total revenues | $ | 12,376 |
Net income | $ | 1,756 |
The following table provides supplemental unaudited pro forma consolidated information for the years ended December 31, 2016 and 2015, as if Chubb Corp had been acquired as of January 1, 2015. The unaudited pro forma consolidated financial statements are presented solely for informational purposes and are not necessarily indicative of the consolidated results of operations that might have been achieved had the transaction been completed as of the date indicated, nor are they meant to be indicative of any anticipated consolidated future results of operations that the combined company will experience after the transaction.
| Year Ended December 31 |
(in millions of U.S. dollars, except per share data) | 2016 |  |  | 2015 |
Total revenues | $ | 31,937 |  |  | $ | 32,622 |
Net income | $ | 4,183 |  |  | $ | 4,478 |
Earnings per share |  |  |
Basic earnings per share | $ | 8.95 |  |  | $ | 9.61 |
Diluted earnings per share | $ | 8.88 |  |  | $ | 9.52 |
Total revenues and net income were lower for the year ended December 31, 2016, compared to the prior year, primarily reflecting merger-related actions in 2016, which lowered net premiums earned. Fireman's Fund Insurance Company High Net Worth Personal Lines Insurance Business in the U.S. (Fireman's Fund) On April 1, 2015, we acquired the Fireman's Fund Insurance Company high net worth personal lines insurance business in the U.S., which included the renewal rights for new and existing business and reinsurance of all existing reserves for $365 million in cash. We acquired assets with a fair value of $753 million, consisting primarily of cash of $629 million and insurance and reinsurance balances receivable of $124 million. We assumed liabilities with a fair value of $863 million, consisting primarily of unpaid losses and loss expenses of $417 million and unearned premiums of $428 million. This acquisition generated $196 million of goodwill, attributable to expected growth and profitability, all of which is expected to be deductible for income tax purposes, and other intangible assets of $278 million, primarily related to renewal rights, based on Chubb’s purchase price allocation. The acquisition expanded our position in the high net worth personal lines insurers in the U.S. The Fireman’s Fund business was integrated into our existing high net worth personal lines business, offering a broad range of coverage including homeowners, automobile, umbrella and excess liability, collectibles, and yachts. Goodwill and other intangible assets arising from this acquisition are included in our North America Personal P&C Insurance segment. The Consolidated financial statements include results of acquired businesses from the acquisition dates.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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