ICBC contributes to a $550 million USD syndicated loan to finance China Reinsurance Group's acquisition of the Chaucer Group

Project narrative

On September 13, 2018, China Reinsurance (Group) Corporation (also known as ‘China Re’) entered into an equity acquisition agreement with The Hanover Insurance Group, Inc. (also known as ‘The Hanover’) to acquire 100% of the equity interest in three entities, collectively known as the Chaucer Group (also known as ‘Chaucer’), for $865 million USD (excluding the pre-signing dividend of $85 million USD; including the dividend, the total acquisition cost was $950 million USD). To facilitate this acquisition, in 2018, Industrial and Commercial Bank of China (ICBC) and Standard Chartered Bank (Hong Kong) Limited issued a $550 million USD syndicated loan to China Re Hong Kong Company Limited (China Re HK) — a special purpose vehicle legally incorporated in the United Kingdom. The London Branch of ICBC served as the agent for the loan, but its borrowing terms are unknown. The remainder of the funds needed for the acquisition ($400 million USD) came from China Re's equity investment (foreign currency funds). The cash consideration of $865 million USD consisted of an initial consideration of $820 million USD payable at closing and a contingent consideration of $45 million USD held in escrow, which could be adjusted downwards if catastrophe losses incurred in 2018 above a certain threshold. Chaucer Group, doing business with property and casualty reinsurance and direct insurance, was made up of three companies: The Hanover Insurance International Holdings Ltd., Chaucer Insurance Company Designated Activity Company and The Hanover Australia Holdings Company Pty Ltd. Headquartered in London and rooted in the Lloyd's market, Chaucer was a leading global specialty insurance and reinsurance company, operating 45 product lines with written premiums of $1.2 billion USD in 2017 and an average return on equity (ROE) of 12.1% from 2015 to 2017. It managed Syndicate 1084, Lloyd's 11th largest syndicate and Syndicate 1176, a nuclear insurance syndicate); it also held a 100% interest and 57% interest in each of these syndicates. Chaucer also participated in the international (re)insurance business outside the Lloyd's market. The acquisition of Chaucer was expected to intensify China Re's overseas international reinsurance business overseas and create a space for cooperation and the sharing of intellectual property and technical expertise. The acquisition of three Chaucer companies were completed separately in December 2018, February 2019, and then ending in April 2019 with the acquisition of The Hanover Australia Holdings Company Pty Ltd.