Worcester’s The Hanover Insurance Group Inc. has agreed to buy Lloyd’s of London insurer Chaucer Holdings PLC for $510 million.
Chaucer underwrites business in all the major insurance classes, encompassing global marine, energy, non-marine and aviation, as well as UK motor and nuclear. In 2010, Chaucer reported gross written premium of 849 million pounds Sterling ($1.333 million), net earned premium of 589 million pounds ($925 million) and total assets of 2.3 billion pounds ($3.7 billion). Headquartered in London, the company has regional operations in Whitstable, England and international operations in Houston, Singapore, Buenos Aires and Copenhagen.
Subject to satisfaction of the conditions set forth in its offer, The Hanover will acquire 100 percent of Chaucer. Chaucer shareholders would receive 56 pence per share in cash, including the 2.7 pence per share dividend announced by Chaucer on March 7, for an aggregate transaction value of approximately 313 million pounds ($510 million). 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 plans to fund the acquisition with a combination of cash on hand, as well as $250 million of new senior debt, expected to be issued prior to closing.
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.
The transaction is subject to customary conditions, including approval by Chaucer’s shareholders and regulatory approvals in the UK, U.S. and other jurisdictions, and certain court approvals in the UK. It is expected that the transaction will close during the third quarter of this year.
"We are excited to welcome Chaucer’s management and associates to our organization," said Frederick H. Eppinger, chief executive officer at The Hanover. "This acquisition would represent a significant step forward in our journey to build a world class property and 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."
He added: "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. Increasingly, many of our partners are seeking carriers that can deliver product solutions and risk placement capabilities in highly specialized markets with growing international exposures."
Bob Stuchbery, chief executive officer of Chaucer, said the transaction would support and accelerate Chaucer’s new business strategy.
"We are very excited about the prospects of joining The Hanover," said 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."
