“Everyone Is Wondering When the Volcano Will Erupt”

Saturday, July 4, 2015
By Paul Martin

by Wolf Richter
WolfStreet.com
July 3, 2015

It’s a deafening drumbeat of mergers and acquisitions, involving enormous amounts of money, dazzling premiums, blinding hype, and some consternation too, as competitors are coagulating into oligopolies.

On Wednesday, property-and-casualty insurance giant ACE, after gobbling up a number of smaller insurers around the world, announced that it would buy its competitor Chubb for $28.3 billion. ACE shares initially jumped over 7% on the announcement, rather than getting hammered for overpaying, though the market later lost some of its early enthusiasm. Chubb initially soared 36% then too gave up some of it. Fun times!

The deal inspired everyone. Drooling investors pumped up the share prices of other insurers: Hartford Financial by 5%; American Financial, Cincinnati Financial, Progressive, and Travelers by over 2%. Party time.

“A deal of this scope tells us that something big has changed, and that is the push for growth,” Citigroup analyst Todd Bault wrote in a note, duly reported as part of the M&A hype.

Health insurers too have been at it with a vengeance in a five-way-takeover kerfuffle between mega-insurers Humana, UnitedHealth, Aetna, Anthem, and Cigna. The latter rejected Anthem’s $47 billion offer as “woefully skewed in favor of Anthem shareholders.” So the price isn’t right yet. And just today, Medicaid-focused Centene announced that it would buy Health Net for $6.3 billion.

The Rest…HERE

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