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Darag-Hanseatica first legacy deal since EUR60mn capital boost

German run-off (re)insurer Darag has confirmed the acquisition of legacy carrier Hanseatica Rückversicherungs-AG in the first deal since its EUR60mn capital injection last month.

Hamburg-based Hanseatica had a balance sheet size of EUR38mn as of the end of 2012 and stopped writing new business in 2004.

Although the terms of the sale were not disclosed, a senior legacy executive who had also looked at the deal indicated that a reasonable price for the book would stand at around EUR10mn.

The Portuguese group José de Mello is the sole shareholder in Hanseatica, which has a run-off portfolio comprising third-party liability lines, motor, marine and aviation insurance, as well as engineering and fire insurance.

Darag will take Hanseatica's insurance portfolio onto its own balance sheet through the transfer, which is still subject to regulatory approval.

The firm's chief executive Arndt Gossman said: "It is the first deal following our capital raise in April 2013 and proves us right that run-off business in Europe is experiencing rapid growth.

"Also, this deal has shown that safeguarding the contractual partner's reputation is a crucial aspect within the scope of run-off transactions."

Last month, Gossman told The Insurance Insider that Darag was evaluating 10 portfolios containing about EUR219mn in technical liabilities and expected about six of these deals to close this year.

Darag raised EUR60mn from London-based private equity firm Keyhaven Capital Partners in April, taking its capital base to around EUR83mn and providing new firepower for acquisitions.

The firm focuses on non-life run-off (re)insurance in continental Europe, targeting more volatile, longer-tail books of business with a European focus.

Although it is the firm's first acquisition in 2013, Hanseatica brings the total number of acquisitions to 11.

Run-off acquisition companies typically try to buy legacy companies at a discount to book value and then carefully manage down the liabilities to achieve a gain on the purchase.

Last year, Darag acquired Finnish insurer IngoNord, which went into run-off in 2010 and had a balance sheet total of EUR10.5mn at the time. In 2011, Darag bought run-off portfolios with a combined size of EUR44mn, swelling the size of its portfolio by 75 percent.

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