Hanover Insurance To Sell Chaucer For Total Proceeds Of $950 Mln

(RTTNews) - The Hanover Insurance Group Inc. (THG) said that it agreed to sell the entities comprising Chaucer, its Lloyd's-focused international specialty business, to China Reinsurance (Group) Corporation or "China Re", for total proceeds of $950 million, including cash consideration from China Re of $865 million and a pre-signing dividend from Chaucer of $85 million, received in the second quarter of this year.

The transaction is anticipated to close late this year or in the first quarter of next year, subject to regulatory approvals and other customary closing conditions. Tangible equity of Chaucer as of June 30, 2018, was $520.0 million, net of $73.2 million of goodwill and intangible assets.

The total consideration, adjusted for the pre-signing dividend, represents a multiple of 1.66 times Chaucer's tangible equity as of June 30, 2018.

The transaction is structured so that, subject to certain exceptions, the risks and rewards of Chaucer's business from April 1, 2018 until closing, are transferred to China Re.

Cash consideration of $865 million, excluding the pre-signing dividend of $85 million, consists of initial consideration of $820 million payable at closing and contingent consideration of $45 million to be held in escrow, which may be adjusted downwards if catastrophe losses incurred in 2018 are above a certain threshold.

The Hanover estimates the sale will result in a net GAAP after-tax gain which will be recorded in discontinued operations at sale execution. Beginning in the third quarter of 2018, the earnings results for Chaucer operations will be reported as part of The Hanover's discontinued operations for all periods presented in The Hanover's financial statements.

The closing is subject to regulatory approvals, including the Prudential Regulation Authority, Lloyd's of London and required approvals from the regulatory entities of the People's Republic of China, in addition to approval from China Re's shareholders.