Asia Capital Re boss says it will not seek new buyers after sale talks fall through

The acting chief executive of Asia Capital Re (ACR) has confirmed that the company has made a joint decision with Shenzhen Qianhai Financial Holdings and Shenzhen Investment Holdings to terminate its $1 billion sale—but he stressed that it is business as normal for the reinsurer.

Bobby Heerasing, the acting chief executive at ACR since July 2017, told SIRC Today that the termination of the deal will not affect its business plan for 2018 and beyond.

“From where we sit, we already had put together a business plan for 2018, which is predicated on no change of ownership,” said Heerasing, who was previously the chief underwriting officer of Catlin.

“It was predicated upon how we grow the business using our existing resources and the capital at our disposal,” he added.

Heerasing took over the chief executive reins in acting capacity from predecessor Hans-Peter Gerhardt, who remains on the company board.

He said the focus over the last 18 months for ACR has been to improve its underwriting performance, adding this process will continue over the next two years, as the firm aims to improve its margins and its return on capital and construct a solid, robust control framework.

From a strategic perspective, ACR is also looking to build more international business with international exposures in 2018 and beyond, Heerasing said. The reinsurer historically has been predominantly focused on Asian businesses and exposures across its pan-Asian network.

ACR’s current shareholders are Japanese conglomerate Marubeni Corporation, Singapore’s Temasek Holdings, Khazanah Nasional Berhad, the sovereign wealth fund of the government of Malaysia, and 3i Group, which have been with the reinsurer since its inception.

Heerasing said its existing shareholders are happy to continue to back the business. With the current shareholding structure, he said its balance sheet remains strong and the company is “extremely” well capitalised.

Heerasing admitted there have been questions from clients and brokers—and the market in general—on the implications of the non-completion of the sale. They are asking mainly whether ACR will seek another sale, he said, but he confirmed that ACR would not be seeking another transaction.

“We always planned on business as usual, and it is not contingent on any transaction, and was not dependant on the purchase going through,” he said.

“The deal was a corporate transaction; we have to divorce the business from that. It was essentially an exchange of shares; it was never going to change the business materially in any fundamental way.”

In terms of why the sale was terminated, ACR had fulfilled all the obligations that were expected of it, Heerasing said.

But Shenzhen Qianhai and Shenzhen Investment still had to obtain some approvals to close the deal. It is thought approval was required from the Chinese government and this was slowing the process down.

While Heerasing believes the new investors were committed to buying ACR, the length of time it was taking didn’t fit in with what ACR thought was good for the business, Heerasing said. This prompted the joint decision to walk away from the deal.

Heerasing continued: “The feedback we heard from clients and brokers was that it was a long time for this uncertainty of a sale, and who our owners are going to be, hanging over our collective heads.

“We gave ourselves the deadline of completing this deal by October or November. The protracted delay prompted all parties to collectively decide on termination, rather than create any more uncertainty.”

In ACR’s most recent financial snapshot, published October 31, close to 100 percent of the reinsurer’s GWP is sourced from repeat renewals, with almost 95 percent from cedants who have been with ACR for five years or more.

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