SOURCE: Hannover Ruck

December 22, 2010 08:09 ET

Hannover Re sells Clarendon

HANNOVER, GERMANY--(Marketwire - December 22, 2010) -

Hannover Rück /

Hannover Re sells Clarendon

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Hannover Re reached agreement on the sale of all operational companies of its US subsidiary Clarendon Insurance Group, Inc., New York, to the Bermuda-based Enstar Group Ltd., Hamilton. The purchase price is in the order of USD 200 million. This is equivalent to roughly 80% of the statutory equity of Clarendon.

The sale of Clarendon offers clear benefits for both contracting parties: the transaction affords relief to Hannover Re's balance sheet and frees up cash. What is more, the sale reduces the level of reinsurance recoverables. The Enstar Group, which specialises in the run-off of insurance and reinsurance companies, will for its part have the opportunity to run this portfolio off profitably through economies of scale.

"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", Chief Executive Officer Ulrich Wallin explained. Hannover Re had already parted with its active US primary insurance business in 2006 through the sale of Praetorian, for which it obtained a purchase price of USD 800 million at that time.

By disposing of Clarendon Hannover Re is also able, most significantly, 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. 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.

Hannover Re, with a gross premium of around EUR 10 billion, is the third-largest reinsurer in the world. It transacts all lines of non-life and life and health reinsurance. It maintains business relations with more than 5,000 insurance companies in about 150 countries. Its worldwide network consists of more than 100 subsidiaries, branch and representative offices on all five continents with a total staff of roughly 2,100. The rating agencies most relevant to the insurance industry have awarded Hannover Re very strong insurer financial strength ratings (Standard & Poor's AA- "Very Strong" and A.M. Best A "Excellent").

Disclaimer: Some of the statements in this press release may be forward-looking statements or statements of future expectations based on currently available information. Such statements are naturally subject to risks and uncertainties. Factors such as the development of general economic conditions, future market conditions, unusual catastrophic loss events, changes in the capital markets and other circumstances may cause the actual events or results to be materially different from those anticipated by such statements. Hannover Re does not make any representation or warranty, express or implied, as to the accuracy, completeness or updated status of such statements. Therefore, in no case whatsoever will Hannover Re and its affiliate companies be liable to anyone for any decision made or action taken in conjunction with the information and/or statements in this press release or for any related damages.

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Hannover Rück

Karl-Wiechert-Allee 50 Hannover Germany

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Source: Hannover Rück via Thomson Reuters ONE


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