Quanta 4000, a Lloyd’s corporate member with £58.4m capacity in 2008, bought for £1
Chaucer, the Lloyd’s managing agent, has bought Quanta 4000, the Lloyd’s corporate member.
The transaction will see Chaucer take control of Quanta 4000’s £58.4m underwriting capacity for 2008, as well as open years 2005, 2006 and 2007.
In exchange for the £1 purchase price, Chaucer will pay off £700,000 debts owed by Quanta 4000 to parent company Quanta.
Chaucer also announced the purchase of Quanta’s 15% shareholding in Pembroke JV Limited. Pembroke JV is the parent company of Lloyd’s managing agent Pembroke Managing Agency, which manages Syndicate 4000 – in which Chaucer currently has open year participations of £7.3m for 2007 and £14.6m for 2008.
A stock exchange announcement read as follows:
“Chaucer Holdings PLC ("Chaucer") has reached the following agreements with its joint-venture partner Quanta Capital Holdings Ltd ("Quanta"):
Pembroke JV Limited
Chaucer has agreed to purchase Quanta's 15% shareholding in Pembroke JV Limited ("Pembroke JV") for a consideration of £1.
Pembroke Managing Agency Limited ("Pembroke"), the wholly owned subsidiary of Pembroke JV, is the managing agent of Lloyd's Syndicate 4000 (the "Syndicate"), in which Chaucer currently has open year participations of £7.3m for 2007 and £14.6m for 2008.
Pursuant to the transaction, Chaucer has agreed to cede a 4% shareholding in Pembroke JV to Pembroke's management in exchange for waiving their rights to future performance-related share increases under the current shareholders' agreement. Following the transaction and a management subscription for an additional 2%, Chaucer and Pembroke's management will own 74% and 26% of Pembroke JV respectively.
Pembroke JV reported an unaudited pre-tax profit of £1.1m for the year ended 31 December 2007 and gross assets of £1.6m at 31 December 2007.
Quanta 4000 Limited
Chaucer has also agreed to purchase the entire issued share capital of Lloyd's corporate member, Quanta 4000 Limited ("Quanta 4000"), in exchange for a consideration of £1. Chaucer will also discharge, on behalf of Quanta 4000, £0.7m of inter-group debt currently owed to Quanta by Quanta 4000. Quanta will also receive the return of its Funds at Lloyd's as described below.
Quanta 4000 owns the right to Quanta's underwriting participation in the Syndicate. Under the terms of the transaction, Chaucer will assume the economic interest of Quanta 4000's open year underwriting participations on the Syndicate, comprising £80.0m for the 2005 year of account, £82.0m for 2006, £65.7m for 2007 and £58.4m for 2008.
At 31 December 2007, the unaudited aggregate deficit on the open year participations was £10.0m, representing the actuarial best estimate of claims reserves plus prudential loadings for Quanta 4000's participations on the 2005, 2006 and 2007 open years. The deficit excludes any credit for future investment income earned on assets that Quanta 4000 holds to support claims reserves before settlement. The 2005 year of account will close shortly.
Quanta 4000 reported an unaudited loss of £1.4m for the year ended 31 December 2007 and gross assets of £112.8m at 31 December 2007.
On completion of the transaction, Chaucer will own 100% (£73.0m) of the underwriting capacity on Syndicate 4000 for the 2008 year of account and for each prior open year of account.
Funds at Lloyd's
Chaucer will provide £57.9m from internal resources to replace the Funds at Lloyd's currently provided by Quanta 4000 to support underwriting for open years of account on the Syndicate.
Key individuals
Further to the acquisitions outlined above, Mark Wheeler will remain as Active Underwriter and continue to lead development of both the Syndicate and Pembroke.
Ewen Gilmour, Chaucer Chief Executive Officer, said: "This transaction supports Chaucer's strategy of developing additional income from syndicate investment and management activities, and underpins the future of the Pembroke Managing Agency and Syndicate 4000.
“By securing the capacity of the Syndicate and simplifying the ownership structure of the managing agency, we are now in an excellent position to realise the significant development potential of the Pembroke business."
Mark Wheeler, Active Underwriter of Pembroke Syndicate 4000 said: "Our relationship with Chaucer has proven successful and their managing agency expertise has been invaluable. As a team, we are very pleased that the relationship is now strengthened even further.""
