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Chubb ticks up after deal; Allstate down as California pushes for more rebates

Chubb Ltd. shares moved up after the company announced plans to buy Cigna Corp.'s personal accident, supplemental health and life insurance business across six markets in the Asia-Pacific region and Turkey for $5.75 billion in cash.

Broader markets fared decently for the week ending Oct. 8, with the S&P 500 increasing 0.79% to 4,391.34. The S&P 500 Insurance index climbed 2.60% to 535.19.

Chubb said the proposed deal, which is expected to close sometime in 2022, will expand its presence in tne Asia-Pacific region, an area the company is targeting for long-term growth.

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Piper Sandler analyst Paul Newsome in an interview said the deal looks to be a positive for Chubb, as the Cigna business fits with what Chubb already does.

"You never know until they give you all the details, but it looks like it's a good transaction at a reasonably good price," Newsome said, adding that the insurer had a lot of excess capital it needed to put to use.

Once the deal closes, Chubb's global portfolio is expected to increase to roughly $7 billion in premiums from approximately $4 billion.

Chubb's shares rose 2.50% during the Oct. 8 session and closed up 4.20% for the week. Cigna logged a 1.27% gain on the week.

Earlier this week, the California Department of Insurance called three auto insurers into question over how they handled premium rebates related to the COVID-19 pandemic.

Insurance Commissioner Ricardo Lara told Allstate Northbrook Indemnity Co., Mercury Insurance Co. and CSAA Insurance Exchange to provide additional reimbursements to drivers he said were charged excessive premiums in the early stages of the pandemic.

Newsome views the situation as a short-term problem for the three companies in question. Over the longer term, auto insurers will have to wrestle with frequency trends returning to pre-pandemic levels "rather quickly" and accelerating inflation, which may ultimately mean many insurers will need to raise rates again.

Although much of the debate on premium rebates has been focused on auto insurance, Newsome pointed out that the personal lines business overall did not make much money due to wildfires and other natural catastrophes.

"You should expect the insurance companies to come back and say, 'Yes, we may have had a windfall in auto, but the rest of our insurance business has suffered quite a bit,'" Newsome said.

Allstate's stock ticked down 0.66% for the week, while Mercury experienced a 0.70% gain.

A couple of property and casualty insurers also released third-quarter catastrophe estimates this week.

Horace Mann Educators Corp., which climbed 2.19%, said it expects third-quarter catastrophe losses will fall between $35 million and $40 million, before tax, mainly due to the impacts of Hurricane Ida. RLI Corp. also released third-quarter catastrophe estimates this week, projecting pretax losses between $30 million and $35 million, net of reinsurance.

In the life insurance space, Sun Life Financial Inc. saw its shares steadily rise throughout the week after it agreed to acquire Boston-based dental benefits provider DentaQuest for $2.48 billion.

According to a top Sun Life executive, the planned acquisition is meant to help scale up the insurer's U.S. business and allow it to be more aggressive on pricing. The transaction is expected to close sometime during the first half of 2022.

Sun Life was among the week's biggest winners as its stock added 7.02% for the week.

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