HAMILTON, Bermuda -- October 11, 1999 -- ACE Limited (NYSE: ACL) today announced that ACE USA has sold the renewal rights to its Commercial Insurance Services (CIS) business to Wausau Commercial Insurance, a unit of Liberty Mutual Group. This agreement permits ACE USA to discontinue the middle market commercial business in the current year.
Not included in the Wausau agreement is the California workers' compensation business, which accounts for approximately 10% of the total CIS business. ACE is exploring other options for this business.
Under the agreement Wausau will pay ACE a minimum of $12.5 million. This consists of $6 million cash payment, with the balance due as a 5% ceding fee payable each year for 3 years. The agreement is subject to regulatory approvals.
The CIS business generated some $365.1 million in gross written premiums in 1998, or about 13.2% of the total ACE USA business on a pro forma basis. When ACE acquired the property-casualty operations from CIGNA Corporation in July, the middle-market CIS business was identified as a non-strategic fit with ACE's long-term strategy. At that time, ACE USA announced it would review all options for CIS.
"We are pleased to reach this agreement with Wausau, an "A+" rated insurer that is very interested in serving the middle market," said Dennis Reding, president and chief executive officer of ACE USA. "Wausau will work with us to make this transition a smooth one for our producers, customers and employees."
As part of the agreement, Wausau will acquire certain operations and systems supporting the CIS business, including a processing center in Charlotte, N.C. Wausau also agreed to offer employment to approximately 80 CIS employees nationwide, including approximately 40 in the Charlotte facility.
Since Wausau will provide renewals for the book of business, ACE USA will retain a small staff to manage its run-off business.
The agreement with Wausau will not affect ACE USA's other commercial packages or workers' compensation business offered by other business units. "We intend to continue offering a full complement of commercial insurance products and services in our ten business units as part of our strategy for these businesses," said Mr. Reding.
ACE USA's financial advisor in this transaction is the Banc of America Securities LLC.
Wausau Insurance, which employs 5,100 people in the U.S., including 3,200 in Wisconsin, has been a member of the Liberty Mutual Group since January 1, 1999.
The ACE Group of Companies provides insurance and reinsurance for a diverse group of clients. The company conducts its business on a global basis with operating subsidiaries in nearly 50 countries. Additional information can be found at: www.acelimited.com.