The Hanover Profits As Chaucer’s Sale to China Re Completes

China Re has completed its $950mn acquisition of Lloyd’s insurer Chaucer Holdings after receiving UK regulatory approval, the state-controlled reinsurer announced today.

Source: The Insurer | Published on December 31, 2018

The Hong Kong listed reinsurer welcomed the move as marking a “milestone in the expansion of its global footprint” in a statement.

“The acquisition of Chaucer will expand China Re’s global reach and raise our profile in the international markets” explained Mr. He Chunlei, Vice Chairman and President of China Re.

But the sale also represents a handsome profit for Chaucer’s seller, the US specialty group The Hanover, which acquired the Lloyd’s insurer in 2011.

After acquiring Chaucer for £292mn - or $470mn at the then exchange rate - it has made $500mn in pre-tax profits alone since 2014 alone.

China Re has paid $865mn in cash while The Hanover will also receive an $85mn 2018 dividend. The US specialty insurer said in September that the deal value represents a multiple of 1.66x price-to-book, a relatively high valuation for Lloyd’s businesses.

China Re already had a Lloyd’s platform, Syndicate 2088, which is currently managed by Catlin Managing Agency. According to the Chinese reinsurer, it will now apply to Lloyd’s to transfer management of the syndicate to Chaucer.

The reinsurer, which is owned by the Ministry of Finance of the People’s Republic of China and Central Huijin Investment Co., Ltd, said it is still waiting on regulatory approval for the transfer of Chaucer’s overseas subsidiaries in Ireland and Australia and expects completion by the end of the first quarter 2019.

John Fowle, who remains as the Chaucer CEO post-sale, welcomed the completion as providing new opportunities for his firm.

“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,” he explained.