China Re has signed a deal to acquire Chaucer that values the business at around $950mn, or roughly 1.6x book value, The Insurance Insider understands.
As reported late last month, the deal has been agreed in principle for some time but was awaiting an informal indication from regulatory authorities in China that it would be given the greenlight.
China Re will pay around $860mn, with seller The Hanover taking a pre-close dividend of roughly $90mn. In addition, it is understood that there is an adjustment mechanism in case a reserve deterioration is suffered.
Following Syndicate 2088 is likely to me migrated from XL Catlin's managing agency to Chaucer's.
The Hanover appointed Goldman Sachs to run an auction process for the business earlier this year, as revealed by The Insurance Insider in March.
Private equity house Blackstone was the under-bidder in the sale process.
Chaucer is one of a number of Lloyd’s and London market businesses that have been placed up for sale and represents the first to test how valuations are responding to highly challenging market and regulatory conditions.
Munich Re’s Beaufort is also in the midst of a sale process.
Pembroke is set to be brought to market in September by Liberty Specialty Markets, with the ownership of connected Lloyd’s business Acappella also likely to change.
Neon is also in the midst of a process as its owner American Financial Group looks for a financial sponsor to back a management buyout.
Enstar and Stone Point-owned StarStone and Atrium were available to acquire earlier this year, but it looks likely now that they will remain with their current owners.
Chaucer is the 11th-largest syndicate and its acquisition represents a major international expansion by state-owned China Re. The bidder is among the world’s largest reinsurers, almost entirely due to its dominant position in its domestic market.
The overseas expansion already attempted by China Re has included the creation of a Lloyd’s syndicate, as well as establishing a presence in Singapore and Zurich.
China Re is 12.7 percent owned by China’s Finance Ministry, with 71.6 percent held by a state-owned investment company.
Net profit in 2017 totalled almost 5.3bn yuan ($778.3mn) and premiums were 105.3bn yuan.