Chaucer manages syndicates 1084 and 1176 and, together, they underwrite a diversified book of specialty insurance and reinsurance including global marine, energy, non-marine and aviation risks as well as UK motor and nuclear. The offer values Chaucer at approximately 1.26 times estimated tangible book value per share as of Dec. 31, 2010, after adjusting for the effects of Chaucer's recently announced estimated catastrophe activity.
The Hanover says it plans to fund the acquisition with a combination of cash on hand, as well as $250 million of new senior debt.
"We are excited to welcome Chaucer's management and associates to our organization," says Frederick Eppinger, CEO, The Hanover. "This acquisition would represent a significant step forward in our journey to build a world class property/casualty company. The combined organization would provide both companies with the benefits of greater scale, earnings diversification, and expanded market presence. Chaucer would enable us to further advance our specialty strategy, given its recognized expertise in underwriting energy, marine, aviation and other risks.
"In addition," he continues, "access to the Lloyd's market would enable us to further strengthen our capabilities, provide many of our larger winning agents with a valued market for complex, cross-border risks, and strengthen our market position as the best partner for winning agents in the U.S.”
Chaucer's board of directors unanimously approved the terms of the acquisition, and resolved to recommend that Chaucer's shareholders vote to accept the offer.
"We are very excited about the prospects of joining The Hanover," says Chaucer CEO Bob Stuchbery. "As part of The Hanover, we will remain fully focused on delivering our corporate strategy with the aim of further positioning us as the Lloyd's specialist insurer of choice in our areas of expertise. Furthermore, under the ownership of The Hanover, we expect to build on The Hanover's market position, and access attractive specialty business through its strong U.S. retail distribution."
After the announcement,
Moody's analyst Pano Karambelas said, "The affirmation of the ratings reflects our view that the acquisition, though meaningfully sized, is manageable for Hanover, and provides additional geographic and line of business diversification to Hanover's existing U.S. platform along with enhanced product and underwriting capabilities."
Over the medium term, Moody's expects the transaction may enhance Hanover's brand with its largest agents, particularly related to larger, more complex accounts.
