Chubb Buys Insurer For $850M

Shares of Executive Risk gained nearly 50 percent Monday after The Chubb Corp. said it's paying a 63 percent premium to buy the insurance company in a deal worth $850 million.

Chubb (CB) and Executive Risk (ER) boards of directors agreed that Executive Risk shareholders will receive 1.235 shares of Chubb common stock for each outstanding common share of Executive Risk.

The deal represents an Executive Risk per share purchase price of $71.71, a 63 percent premium over Friday's closing price of 44, and a 44 percent premium over Executive Risk's average trading price for the last month.

Shares of Simsbury, Conn.-based Executive Risk gained 22 to 66 while Chubb dipped 1 7/16 to 56 5/8 in early trading Monday.

Executive Risk is a specialty insurance holding company that underwrites liability insurance primarily for directors and officers of corporations, according to Hoover's.

"Our partnership with Executive Risk will enable Chubb to solidify leading market positions in numerous, profitable executive protection lines and move to top positions in others," Chubb Chairman and CEO Dean R. O'Hare said in a statement.

"By further strengthening our position in specialty lines that offer attractive opportunities for profitable growth, we achieve one of our key strategic acquisition criteria."

Chubb expects the transaction to result in "modest earnings dilution" in 1999 of less than 2 percent.

Written By Steve Gelsi, CBS MarketWatch