WORCESTER, Mass., April 20, 2011 /PRNewswire/ -- The Hanover
Insurance Group, Inc. (NYSE: THG) today announced the terms of an
offer to acquire Chaucer Holdings PLC (LSE: CHU).
Chaucer is a leading specialist Lloyd's insurance group. Through
its in-house syndicates 1084 and 1176, 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(1)), 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,
2011, for an aggregate transaction value of approximately
313 million pounds ($510 million(2)).
The offer values Chaucer at approximately 1.26 times estimated
tangible book value per share(3) as of December 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.
"In addition," Eppinger said, "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,"
Eppinger said. "In addition to earnings and risk diversification,
we would benefit from Chaucer's strong market position as one of
the lead insurers and managing agents at Lloyd's. Chaucer is a
well-managed and disciplined underwriter, which combines leading
enterprise risk management practices and the financial strength of
Lloyd's. We expect this transaction would be accretive to our
earnings."
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."
"Overall, this is a great cultural fit that brings together two
businesses with the same ambition and complementary strengths, and
creates an excellent platform for future profitable growth,"
Stuchbery added.
(1) British pound sterling
converted to USD at year end 2010 exchange rate of 1.57 unless
noted otherwise.
(2) British pound sterling
converted to USD at April 19, 2011
exchange rate of 1.63.
(3) Equivalent to net tangible assets ("NTA") per share.
Conference Call
The Hanover will host a
conference call to discuss the strategic benefits of the proposed
acquisition of Chaucer on April 20 at
9:00 a.m. Eastern Time. The
teleconference can be accessed by dialing (866) 843-0890 (U.S.
callers) or (412) 317-9250 (international callers) and referencing
code 3886727 approximately ten minutes in advance of the call. A
PowerPoint slide presentation will accompany prepared remarks and
will be posted on the company's Web site 15 minutes before the
conference call. Interested investors of The Hanover and others can access the call in
listen-only mode and can view the presentation through The
Hanover's Web site, located at
www.hanover.com. A re-broadcast of the conference call will be
available on the company's Web site approximately two hours after
the call.
Forward-Looking Statements
The proposed acquisition of Chaucer Holdings PLC ("Chaucer") by
440 Tessera Limited, a wholly-owned subsidiary of The Hanover
Insurance Group, Inc. ("The Hanover" or "the company"), is subject to a
number of conditions, including approval by resolution passed at a
Court-convened meeting of Chaucer shareholders by a majority in
number of shareholders representing 75% in value of shareholders
present and voting either in person or by proxy at the meeting.
The proposed acquisition is also subject to receipt of
certain antitrust clearances and certain regulatory approvals and
requires the sanction of the High Court in England. There can be no assurances that
the proposed acquisition will be consummated or if it is, that The
Hanover will realize the potential
benefits of such acquisition.
The proposed acquisition will be effected in accordance with the
UK Takeover Code and the terms and conduct of the proposed
acquisition will be subject to the jurisdiction of the UK Takeover
Panel. The proposed acquisition will be recommended to
Chaucer shareholders by the Board of Directors of Chaucer, although
such recommendation may in certain circumstances be withdrawn.
This announcement is not intended to and does not constitute, or
form part of, the solicitation of any vote or approval in any
jurisdiction. This announcement summarizes certain information
contained in the formal announcement relating to the proposed
acquisition, and is qualified in its entirety by the contents of
that announcement.
Certain statements in this press release constitute, and certain
statements in the above referenced conference call will constitute,
forward-looking statements for purposes of the safe harbor
provisions of the United States Private Securities Litigation
Reform Act of 1995. These forward looking statements include
statements about the expected benefits of such acquisition to both
The Hanover and Chaucer, future
expected accretion to earnings, the availability of products to The
Hanover distribution channel,
product- geographic- and account- based mix changes, and the
ability to raise senior debt to fund the proposed transaction. In
addition, use of the words "would," "anticipates," "expects,"
"should," "could," "plan," and similar expressions is
intended to identify forward-looking statements.
Forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from those expressed in or suggested by such statements. Any
forward-looking statements are based on The Hanover's and Chaucer's current plans,
estimates, forecasts, projections and expectations. The
company cautions investors that forward-looking statements are not
guarantees of future performance, and actual results could differ
materially. Investors are directed to consider the risks and
uncertainties in our business and in Chaucer's business that may
affect future performance and that are discussed in readily
available documents, including, with respect to The Hanover, the company's Annual Report to
Shareholders on Form 10-K and other documents filed by The
Hanover with the Securities and
Exchange Commission, which are available at www.hanover.com under
"Investors", and with respect to Chaucer, the documents available
at www.chaucerplc.com under "Investors" and the documents regarding
Chaucer which are available for public inspection via the UK
National Storage Mechanism.
Risks and uncertainties relating to the proposed acquisition
include risks that the parties will not obtain the requisite
shareholder, court, regulatory and other approvals for the
transaction or that other conditions to which the transaction is
subject may not be satisfied, or that the parties will otherwise
fail to consummate the transaction; The Hanover is unable to obtain financing for the
transaction or on the terms expected; the anticipated benefits of
the transaction will not be realized; financial strength or debt
credit rating services will reduce their outlooks or ratings for
The Hanover or Chaucer; The
Hanover will not be able to retain
key personnel from Chaucer; unknown liabilities at the company or
Chaucer; significant transaction costs; the uncertainties in
estimating property and casualty losses and therefore the
difficulty of ensuring adequacy of reserves for past periods;
investment impairments; heightened competition (including rate
pressure); adverse and evolving state, federal and, with
respect to Chaucer or the proposed combined companies, foreign,
legislation or regulation; adverse regulatory or litigation
actions; exchange rate fluctuations which could affect the cost of
the proposed purchase to The Hanover or the reported results of the
proposed combined company, as measured in United States dollars; interest rate, credit
market and other investment-related fluctuations; the impact on
Chaucer of capital requirements under European Union Solvency II
regulations; and general macro risks of the uncertain economic
environment and various other factors.
Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date on
which they are made.
As a specialist Lloyd's insurance group, Chaucer is subject to a
number of specific risk factors and uncertainties, including
without limitation: its reliance on insurance and reinsurance
brokers and distribution channels to distribute and market its
products; its exposure to currency risks and fluctuations since a
significant proportion of Chaucer's business is conducted in
various currencies; its obligations to maintain funds at Lloyd's to
support its underwriting activities; its riskbased capital
requirement being assessed periodically by Lloyd's and being
subject to variation; its reliance on ongoing approvals from
Lloyd's, the Financial Services Authority and other regulators to
conduct its business; its obligations to contribute to the Lloyd's
New Central Fund and pay levies to Lloyd's; its ongoing ability to
benefit from the overall Lloyd's credit rating; its ongoing ability
to utilize Lloyd's trading licenses in order to underwrite business
outside the United Kingdom; its
ongoing exposure to levies and charges in order to underwrite at
Lloyd's; and the requirement for it to maintain deposits in
the United States for US site
risks it underwrites.
This press release does not constitute a solicitation or an
offer to sell any debt or other securities of The Hanover or of Chaucer.
Responsibility Statement under United Kingdom Rules of the
Takeover Panel
The Hanover Directors and the
440 Tessera Limited Directors (all of whose names will be set out
in the Scheme Circular filed under rules of the UK Takeover Panel)
accept responsibility for the information contained in this
announcement relating to Hanover,
The Hanover Group and themselves and their immediate families,
related trusts and connected persons. To the best of the
knowledge and belief of The Hanover Directors and the 440 Tessera Limited
Directors (who have taken all reasonable care to ensure that such
is the case), such information for which they are responsible is in
accordance with the facts and does not omit anything likely to
affect the import of such information.
About The Hanover
The Hanover Insurance Group, Inc., based in Worcester, Mass., is the holding company for a
group of insurers that includes The Hanover Insurance Company, also
based in Worcester, Citizens
Insurance Company of America, headquartered in Howell, Michigan, and their affiliates. The
Hanover offers a wide range of
property and casualty products and services to individuals,
families and businesses through an extensive network of independent
agents, and has been meeting its obligations to its agent partners
and their customers for more than 150 years. Taken as a
group, The Hanover ranks among the
top 25 property and casualty insurers in the United States.
Contacts:
Investors:
Oksana Lukasheva
(508) 855-2063
Email: olukasheva@hanover.com
Media:
Michael F. Buckley
(508) 855-3099
Email: mibuckley@hanover.com
Amy Banek
508-855-4486
Email: abanek@hanover.com
SOURCE The Hanover Insurance Group, Inc.