Chaucer snapped up by China Re after ‘strategic review’ by Hanover

China Re, China’s biggest reinsurer, will acquire speciality insurer Chaucer from its parent The Hanover Insurance Group for $950 million in a deal that gives the buyer a solid foothold in both the speciality markets and in Lloyd’s.

The deal also represents yet another big merger or acquisition in the industry in an apparent flight to size and scale among reinsurers. It follows XL being acquired by AXA, Validus being acquired by AIG and ILS fund Nephila being bought by Markel – all this year.

The deal includes a cash consideration from China Re of $865 million and a pre-signing dividend from Chaucer of $85 million, received in the second quarter of this year.

Following the deal, which is anticipated to close late this year or in the first quarter of 2019, Chaucer’s senior management team will continue to lead the business under the Chaucer brand through its Lloyd’s Syndicates 1084 and 1176, international network, and underwriting agencies, and Chaucer Insurance Company DAC, its insurance company in Dublin.

For China Re, the eighth biggest reinsurer premium income topping $16 billion, the deal will increase its global diversification and give it access to the Lloyd’s market; for Chaucer, the partnership could also open up opportunities for growth and diversification in Asia.

John Fowle, the CEO of Chaucer, said: “We are very honoured to have China Re as our new partner. We have been extremely impressed by the experience, commitment, and professionalism of China Re since our first meetings and we are excited about the future together.

“At Chaucer, we are fully committed to delivering a first class underwriting and claims service to our brokers, coverholders and clients, and believe that the support of China Re will enable us to build on our success to date, and accelerate our strategy which has profitable growth at its core.”

Yuan Linjiang, chairman of China Re, added: “We are deeply impressed by Chaucer’s long history, outstanding management and corporate team, robust profitability and strong risk management capabilities. With Chaucer’s established market leading position in specialty insurance, we are convinced that with this acquisition, our Group’s core competitiveness will be greatly strengthened. Together, we will secure greater and more diversified business and a higher status in international markets.”

The Hanover said this transaction allow it to continue to grow its domestic business.

"Our decision to sell Chaucer followed an extensive strategic review and careful consideration," said John Roche, president and chief executive officer at The Hanover. "This transaction will enable us to build on the growing momentum in our domestic property and casualty businesses, as we continue to advance our long-term strategy and deliver even stronger shareholder returns."

Roche added: "We will continue to invest in and execute our strategy to be the carrier of choice for our agent partners and their customers. This includes accelerated expansion of our specialized capabilities in commercial lines businesses as well as continued growth and penetration in the personal lines and small commercial sectors.

"The acquisition will also enable Chaucer to continue to thrive and prosper by joining forces with China Re Group, as China Re is actively enhancing its international presence and exploring business opportunities in the global market. Furthermore, this transaction is an attractive outcome for our shareholders, recognizing the value created through our ownership of Chaucer since its acquisition in 2011."