Reinsurer sells subsidary to run-off specialist
Hannover Re has sold its US subsidiary Clarendon Insurance Group, Inc. to the Bermuda-based Enstar Group Ltd for $200m.
The purchase price is is equivalent to roughly 80% of the statutory equity of Clarendon.
Hannover Re said the moved would free up money on its balance sheet, while Enstar will run-off the portfolio profitably.
Chief executive Ulrich Wallin said: "With the sale of Clarendon we are parting with a subsidiary that has been in run-off since 2005 and thereby freeing up resources that can be used to further grow our core business"
Hannover Re had already parted with its active US primary insurance business in 2006 through the sale of Praetorian, sealing the deal for $800m.
Hannover Re said by selling Clarendon it was able to free itself from the operational risks associated with the run-off of a US insurer and from the considerable administrative expenses that would have been incurred in subsequent years.
A statement said: “These future savings explain the mark-down on the company's book value. Also for this reason, in particular, the sale of Clarendon will cause a strain on the result in the current year – in an amount probably running into the mid-double-digit million euro range. The company nevertheless expects to be able to offset this from the profit on ordinary activities.
“In terms of Group net income, it remains Hannover Re's expectation that a post-tax profit of more than EUR 700 million can be generated for 2010.
“The transaction is still subject to customary regulatory approvals. The closing is anticipated in the second quarter of 2011.
“J.P. Morgan Securities acted as exclusive financial advisor to Hannover Re on this transaction.”
