The Hanover Insurance Group Inc. has agreed to sell its Chaucer international specialty business to China Re Group for $950 million, representing a big change of course for the Massachusetts-based carrier.

“Our decision to sell Chaucer followed an extensive strategic review and careful consideration,” John C. Roche, president and chief executive officer at The Hanover, said in prepared remarks. “This transaction will enable us to build on the growing momentum in our domestic property and casualty businesses, as we continue to advance our long-term strategy and deliver even stronger shareholder returns.”

Plans call for selling Chaucer, The Hanover’s Lloyd’s-focused international specialty business, to China Reinsurance Group for $865 million in cash and a pre-signing dividend from Chaucer of $85 million, received in the 2018 second quarter. The transaction should close later in 2018, pending regulatory approvals and other closing conditions.

That $865 million cash payment includes $45 million to be held in escrow, which could be adjusted downward if 2018 catastrophe losses are above a certain threshold, the insurer said.

Roche said the sale will enable it to focus on the continued successful expansion of its domestic business.

“We will continue to invest in and execute our strategy to be the carrier of choice for our agent partners and their customers,” Roche said. “This includes accelerated expansion of our specialized capabilities in commercial lines businesses as well as continued growth and penetration in the personal lines and small commercial sectors.”

Additionally, Roche noted, Chaucer will have continued growth potential by joining China Re Group because the acquirer is actively expanding internationally.

The Hanover estimates the sale will result in a net GAAP after-tax gain that will be recorded in discontinued operations at sale execution. Beginning in the third quarter of 2018, the earnings results for Chaucer operations will be reported as part of The Hanover’s discontinued operations for all periods presented in The Hanover’s financial statements.

The Hanover booked $99.3 million in net income during the 2018 second quarter versus $78.4 million over the same period the year before. The insurer said its net premiums written grew nearly 7 percent, with gains strongest in personal lines, small commercial and target specialty businesses. Also, The Hanover’s combined ratio of 95.5 was a tick better than the 95.6 reported in Q2 2017.

Source: The Hanover Insurance Group