On 13 September 2018, China Reinsurance (Group) Corporation (“China Re”) entered into an equity acquisition agreement with The Hanover Insurance Group, Inc. (“The Hanover”) to purchase 100% equity interest of Chaucer1, a global specialty insurance and reinsurance company, at a consideration of US$865 million. The acquisition will further enhance China Re’s competitiveness in reinsurance business, strengthen its position and influence in the international market and promote its capabilities of serving the “Belt and Road Initiative”.
Headquartered in London and rooted in the Lloyd’s market, Chaucer is a leading global specialty insurance and reinsurance company in terms of underwriting capacity and profitability. Chaucer operates 45 product lines globally with written premiums of US $1.2 billion in 2017 and an average ROE of 12.1% from 2015 to 2017. Chaucer manages Syndicate 1084 (the 11th largest syndicate at Lloyd’s) and Syndicate 1176 (a leading nuclear insurance syndicate), in which its economic interest is 100% and 57% respectively. In addition, Chaucer engages in international (re)insurance business outside the Lloyd’s market through its company platform in Ireland.
Yuan Linjiang, Chairman of China Re stated, the acquisition of Chaucer is a major strategic step taken by China Re in response to the nation’s call to “build China Re into a world-class modern reinsurance group”. It is also a milestone in China Re’s international development which is an integral part of its “One-Three-Five” Strategy. We are deeply impressed by Chaucer’s long history, outstanding management and corporate teams, 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 and capacity to serve “the Belt and Road Initiative” will be greatly strengthened. Together, we will secure greater and more diversified business and a higher status in international markets.
Since the launching of its “One-Three-Five” Strategy since 2016, China Re has been committed to the strategic orientation of “reinsurance as the core business” and proactively serving the nation’s strategy. Chaucer is a quality company that perfectly fits into China Re’s strategy. The business portfolios of both parties are highly complementary in terms of territories and lines of business. Leveraging on Chaucer’s diverse business portfolio across the globe, its leading position in specialty lines, advanced technical know-how and a high-quality talent pool, China Re will gain a larger footprint in the overseas market and secure more business opportunities arising from markets including the “Belt and Road” countries, while achieving an optimal business structure, a strengthened lead position in the domestic market and a balanced portfolio in terms of geographic spread.
He Chunlei, Vice Chairman & President of China Re said, “As Asia’s leading reinsurance group pursuing international development, China Re regards Chaucer as its ideal partner. We are delighted to be acquiring a top quartile performer in the Lloyd’s market and respect its senior management’s achievements to date in growing the business to this point. We look forward to working closely with John Fowle, Chaucer CEO, and the management team.”
John Fowle, Chief Executive Officer of Chaucer commented，“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.”
After the completion of the transaction, China Re will leverage on its strengths and synergies of both domestic and international business segments in Beijing, London and Singapore so as to realize its vision of becoming “a world-class international reinsurance group”. The transaction is subject to the approvals from the general meeting of China Re and domestic regulatory authorities including the CBIRC as well as foreign regulators including Prudential Regulatory Authority in the U.K. The transaction is expected to be completed in late 2018 or the first quarter of 2019.
Aon Securities acted as the financial advisor and Sidley Austin LLP provided legal advice to China Re in this transaction.
About China Re
China Re is the only state-owned reinsurance group established by the Ministry of Finance of the People’s Republic of China and Central Huijin Investment Co., Ltd. China Re ranked first in Asia and eighth globally in terms of reinsurance premium. On 26 October 2015, China Re was listed on the main board of the Stock Exchange of Hong Kong Limited. Its stock code is 1508.HK.
China Re mainly engages in four business segments, namely property and casualty reinsurance, life and health reinsurance, primary property and casualty insurance, and asset management. It has three international business platforms, i.e. the International Business Department of China Re P&C in Beijing, China Re Syndicate 2088 at Lloyd’s of London and Singapore Branch. China Re maintains a leading position in China’s reinsurance market, and has a vast client base with long-term business relationships with most insurance companies in China. It has been assigned “A” (Excellent) rating by A.M. Best for eight consecutive years since 2010, and had been assigned “A” and above rating by Standard & Poor’s for four consecutive years since 2014. In addition, China Re is the chairman member of China Nuclear Insurance Pool, the management office of China Agricultural Reinsurance Pool, and a council member and lead reinsurer of China Residential Earthquake Insurance Pool.
1 Include 100% equity interest of three companies, namely The Hanover Insurance International Holdings Ltd, Chaucer Insurance Company DAC and Hanover Australia HoldCo Pty Ltd