Catalina Holdings, the Bermuda-headquartered non-life run-off and legacy insurance and reinsurance specialist, is set to acquire Asia Capital Reinsurance Group in a strategic move aiming for growth in Asia.
The acquisition marks the first time Catalina has entered the Asian run-off market and the company aims to leverage the acquisition of Asia Capital Re and its headquarters location of Singapore to develop a market in the region.
Catalina Holdings (Bermuda) Ltd. said it has reached an agreement in principle to acquire Singapore headquartered reinsurer Asia Capital Reinsurance Group Pte. Ltd.
The deal is expected to close in 2020, one all necessary regulatory approvals are received.
Catalina said the deal and its entry into Asia “marks a strategic move to increase its exposure to the significant run-off market across the continent.”
The company said that it intends to leverage the acquisition of Asia Capital Re and Singapore as a hub to create an Asian run-off platform to expand into the region.
Chris Fagan, Chief Executive, Catalina Holdings, commented, “This is a strategically important transaction for Catalina, as it gives us a platform from which to build an Asian portfolio and to complete our geographic footprint. There are significant opportunities for further acquisitions in Asia, in what is a developing and growing run off market.”
Asia Capital Re will cease all underwriting activities with immediate effect and all in-force policies will continue to be serviced until they expire.
Any valid reinsurance quotes issued to date by Asia Capital Re will be honoured, as well as liabilities related to any commitments that are outstanding with its business partners.
Asia Capital Re, which had US $835 million of shareholder equity, US $1.3 billion of gross liabilities including Unearned Premium Reserve, and total assets of US $2.1 billion as of 30th September 2019, underwrote business across the Asian region and some international contracts.
Its reinsurance portfolio includes business lines such as property, motor, marine, agriculture, engineering and aviation.
The company was founded in 2006 and its offices were located across Asia, including Singapore, Japan, South Korea, Malaysia and Hong Kong.
This run-off acquisition provides an exit opportunity for Asia Captial Re’s existing major shareholders, which include 3i Group plc (and affiliates), Khazanah Nasional Berhad, Temasek Holdings (Private) Limited and Marubeni Corporation.
Hsieh Fu Hua, Chairman of ACR, commented on the deal, “This was a shareholder-led process, which has culminated in a successful exit. Catalina, as the buyer, has the experience and expertise to deliver on ACR’s outstanding commitments to clients and take the business into a new direction. On behalf of the Board, I would also like to formally express my appreciation to ACR’s business partners, management, staff and all other stakeholders for their support over the last 13 years.”
Asia Capital Re was the largest privately held reinsurer headquartered in Singapore.
The reasons for the sale of the company are said to be many, with shareholder disappointment in its prospects to grow into a significant player among them.
As a result, finding a buyer in Catalina that was willing to pay an attractive price for the run-off rights to the existing book of Asia Capital Re business and had the expertise to profit from that, but could also leverage the platform it had built for its own expansion in the Asia region, is likely seen as a good result by the backers of the firm.
The disappearance of Asia Capital Re from the market underlines the challenges that Asia reinsurance specialists face, coming up against the global giants for whom the region is a valuable diversifier.
It makes it particularly challenging to achieve scale and deliver returns, when the primary focus is on Asian underwriting business which on its own is not always going to deliver the returns necessary to fund growing globally, from Asia outwards.