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The Hanover to Sell Chaucer, Focuses on Domestic Operations
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The Hanover Insurance Group, Inc. (THG - Free Report) has agreed to divest its three wholly owned subsidiaries to China Reinsurance (Group) Corporation for $950 million. The divestment is intended to intensify the company’s focus on domestic expansion. Shares of the company have lost 4% in the last couple of trading sessions.
The Hanover’s three subsidiaries, namely The Hanover’s Insurance International Holdings Ltd., The Hanover Australia Holding Company Pty Ltd and Chaucer Insurance Company Designated Activity Company are collectively called Chaucer. The sell-off is expected to culminate late in 2018 or the first quarter of 2019, subject to closing conditions.
The Consideration
The purchase consideration consists of $865 million cash from China Re (includes contingent consideration of up to $45 million) and a pre-signing dividend of $85 million from Chaucer. The dividend amount has already been received in the second quarter. The total amount, adjusted for the pre-signing dividend, translates into a multiple of 1.66 times Chaucer's tangible equity of $520 million as of Jun 30, 2018. Also, risks and rewards of Chaucer's business from Apr 1, 2018 till closing are transferred to China Re.
China Re will have to pay a break fee of $57 million if the transaction falls apart.
Rationale Behind the Divestiture
The divestiture follows The Hanover’s strategic review and its focus on widening the domestic property and casualty business portfolio. The divestiture will allow the company to continue pursuing its objectives of rapid extension of specific abilities in commercial lines businesses as well as consistent progress and penetration into the personal lines and small commercial sectors. Also, the company should be able to lower catastrophe exposure to extreme global events as well as enhance its financial flexibility.
The divestiture will help The Hanover enhance its shareholder value through dividends, stock buybacks, debt management and special dividends plus boost the company’s return on equity capabilities too. The company expects a 13% return on equity.
Excluding Chaucer, The Hanover estimates $4.3 billion in annualized net premiums written in 2018 from Core Commercial, Specialty and Personal Lines businesses.
Chaucer — a Lloyd's-focused international specialty business — will stand to benefit from China Re’s initiatives for global expansion.
Chaucer’s operations will be reported as discontinued from the third quarter of 2018 onward and the GAAP gain on sale is set to be recorded under discontinued operations at closing.
Shares of this insurer have rallied 19.3% in a year, outperforming the industry’s growth of 15.4%. The company’s steady focus on investing in profitable and accretive business growth opportunities as well as an effective capital deployment should continue to drive the shares.
Rating Actions by Credit Rating Giants
A.M. Best has retained the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb”. Concurrently, the Long-Term Issue Credit Ratings (Long-Term IR) and the indicative Long-Term IRs of The Hanover and the Financial Strength Rating of A (Excellent) and the Long-Term ICRs of “a” of its operating insurance subsidiaries remain unchanged. The outlook is stable.
Moody's Investors Service has reiterated the Baa3 senior debt rating of The Hanover and the A3 insurance financial strength (IFS) rating of its operating unit. The outlook has been upgraded to positive from stable.
Another Company Following Suit
Recently, Maiden Holdings, Ltd. (MHLD - Free Report) has made a definitive agreement to divest Maiden Reinsurance North America, Inc. to Enstar Holdings (US) LLC, a wholly owned subsidiary of Enstar Group Limited for $307.5 million.
Zacks Rank and Other Stocks to Consider
The Hanover carries a Zacks Rank #2 (Buy). Investors interested in property and casualty insurance space can also look at other top-ranked like Alleghany Corporation and The Progressive Corporation (PGR - Free Report) .
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. It came up with an average four-quarter beat of 17.61%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Progressive provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance and related services, primarily in the United States. It pulled off an average four-quarter positive surprise of 9.19%. The stock carries a Zacks Rank of 2.
5 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2018 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs. A bonus Zacks Special Report names this breakthrough and the 5 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains.
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The Hanover to Sell Chaucer, Focuses on Domestic Operations
The Hanover Insurance Group, Inc. (THG - Free Report) has agreed to divest its three wholly owned subsidiaries to China Reinsurance (Group) Corporation for $950 million. The divestment is intended to intensify the company’s focus on domestic expansion. Shares of the company have lost 4% in the last couple of trading sessions.
The Hanover’s three subsidiaries, namely The Hanover’s Insurance International Holdings Ltd., The Hanover Australia Holding Company Pty Ltd and Chaucer Insurance Company Designated Activity Company are collectively called Chaucer. The sell-off is expected to culminate late in 2018 or the first quarter of 2019, subject to closing conditions.
The Consideration
The purchase consideration consists of $865 million cash from China Re (includes contingent consideration of up to $45 million) and a pre-signing dividend of $85 million from Chaucer. The dividend amount has already been received in the second quarter. The total amount, adjusted for the pre-signing dividend, translates into a multiple of 1.66 times Chaucer's tangible equity of $520 million as of Jun 30, 2018. Also, risks and rewards of Chaucer's business from Apr 1, 2018 till closing are transferred to China Re.
China Re will have to pay a break fee of $57 million if the transaction falls apart.
Rationale Behind the Divestiture
The divestiture follows The Hanover’s strategic review and its focus on widening the domestic property and casualty business portfolio. The divestiture will allow the company to continue pursuing its objectives of rapid extension of specific abilities in commercial lines businesses as well as consistent progress and penetration into the personal lines and small commercial sectors. Also, the company should be able to lower catastrophe exposure to extreme global events as well as enhance its financial flexibility.
The divestiture will help The Hanover enhance its shareholder value through dividends, stock buybacks, debt management and special dividends plus boost the company’s return on equity capabilities too. The company expects a 13% return on equity.
Excluding Chaucer, The Hanover estimates $4.3 billion in annualized net premiums written in 2018 from Core Commercial, Specialty and Personal Lines businesses.
Chaucer — a Lloyd's-focused international specialty business — will stand to benefit from China Re’s initiatives for global expansion.
Chaucer’s operations will be reported as discontinued from the third quarter of 2018 onward and the GAAP gain on sale is set to be recorded under discontinued operations at closing.
Shares of this insurer have rallied 19.3% in a year, outperforming the industry’s growth of 15.4%. The company’s steady focus on investing in profitable and accretive business growth opportunities as well as an effective capital deployment should continue to drive the shares.
Rating Actions by Credit Rating Giants
A.M. Best has retained the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb”. Concurrently, the Long-Term Issue Credit Ratings (Long-Term IR) and the indicative Long-Term IRs of The Hanover and the Financial Strength Rating of A (Excellent) and the Long-Term ICRs of “a” of its operating insurance subsidiaries remain unchanged. The outlook is stable.
Moody's Investors Service has reiterated the Baa3 senior debt rating of The Hanover and the A3 insurance financial strength (IFS) rating of its operating unit. The outlook has been upgraded to positive from stable.
Another Company Following Suit
Recently, Maiden Holdings, Ltd. (MHLD - Free Report) has made a definitive agreement to divest Maiden Reinsurance North America, Inc. to Enstar Holdings (US) LLC, a wholly owned subsidiary of Enstar Group Limited for $307.5 million.
Zacks Rank and Other Stocks to Consider
The Hanover carries a Zacks Rank #2 (Buy). Investors interested in property and casualty insurance space can also look at other top-ranked like Alleghany Corporation and The Progressive Corporation (PGR - Free Report) .
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. It came up with an average four-quarter beat of 17.61%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Progressive provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance and related services, primarily in the United States. It pulled off an average four-quarter positive surprise of 9.19%. The stock carries a Zacks Rank of 2.
5 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2018 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs. A bonus Zacks Special Report names this breakthrough and the 5 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains.
Click to see them right now >>