China Re has successfully completed its previously announced acquisition of the holding company of Chaucer, the London-based and Lloyd’s focused specialty re/insurance business of The Hanover.
The transaction was valued at around $950 million, made up of a cash consideration of $865 million paid by Hong Kong listed China Re, as well as a pre-signing dividend from Chaucer of $85 million.
That’s an attractive profit for The Hanover, which acquired Chaucer back in 2011.
The Hanover had been exploring strategic alternatives for its Chaucer businesses in London and in Lloyd’s, while China Reinsurance (Group) Corporation (China Re) had been looking for diversifying add-ons that could enhance its global footprint and provide it greater access to the London specialty re/insurance marketplace.
Now, after gaining approval from European regulators earlier this month, China Re has concluded the 100% equity acquisition of Hanover Insurance International Holdings Ltd., the holding company of Chaucer Holdings Ltd., from The Hanover Insurance Group, Inc.
Two other parts of the acquisition, the Dublin based Chaucer Insurance Company DAC and Hanover Australia Hold Co Pty Ltd (SLE) are still subject to local regulatory approval, but expected to close by the end of first quarter in 2019.
China Re calls the acquisition significant, saying it delivers on its “One Core, Three Breakthroughs and Five Cross-overs” Strategy, marking a new milestone in the expansion of its global footprint.
China Re expects to benefit from synergies between its existing entities and Chaucer, in terms of business platforms, products and technical expertise.
The firm also aims to strengthen its core reinsurance business, enhance global market position and better serve the Belt & Road Initiative, taking advantage of opportunities its access to mainland Chinese projects will provide.
China Re also plans to transfer its Syndicate 2088 at Lloyd’s into Chaucer’s Managing Agency, subject to regulatory approval. The syndicate had previously been managed by Catlin Managing Agency.
Mr. Yuan Linjiang, Chairman of China Re, said: “This is an exciting time for China Re. We are very pleased to have gained the regulatory approvals to complete the acquisition of Chaucer Holdings Limited. This deal fits China Re’s strategic positioning of ‘reinsurance as the core business’ and the pursuit of international development in our ‘One Core, Three Breakthroughs and Five Cross-overs’ corporate strategy. We expect to take advantage of Chaucer’s business platforms across the world to maximize the opportunities for mutually beneficial growth.”
Mr. He Chunlei, Vice Chairman and President of China Re, commented: “Chaucer is an outstanding performer in the Lloyd’s market run by a well-respected management team with business access to more than 200 countries and regions across the world. The acquisition of Chaucer will expand China Re’s global reach and raise our profile in the international markets.”
“This is an auspicious day for Chaucer, our clients and for China Re as this significantly enhances the strength of our market offering and creates new global opportunities to explore, including those from the Belt and Road initiative,” said John Fowle, Chief Executive Officer at Chaucer. “The completion of this transaction marks a significant milestone in our history and we are ready to accelerate our business development and growth with the support of China Re.”
Aon Securities, the capital markets and M&A unit of the broker, and law firm Sidley Austin both provided advice to China Re during the acquisition process.