Chubb Corp. said it has completed its deal with a private equity firm, Stone Point Capital LLC, to launch a Bermuda-based reinsurer, investing $1.5 billion in the deal.
The Warren, N.J.-based insurer said Harbor Point has provided $200 million in 6 percent convertible notes and warrants, representing approximately 16 percent of the total equity of the new company.
Chubb said it expects the transaction to result in a pre-tax gain of approximately $200 million, of which $168 million would be recognized in the fourth quarter of 2005 and $32 million would be deferred.
Under arrangements entered into with Harbor Point as part of the transaction, Chubb said it will also receive cash payments over the next two years. The amounts will be based on the amount of reinsurance business placed through Chubb by Harbor Point during this transition period and the amount of Chubb business renewed by Harbor Point.
Chubb expects to recognize this income in 2006 and 2007.
Chubb's plan calls for the transfer of its ongoing business from its reinsurance arm, Chubb Re, to the new venture, along with certain related assets, including renewal rights effective Jan. 1, 2006.
Chubb Re will no longer engage directly in the assumed reinsurance business. Harbor Point, however, will have the right--for a transition period--to have Chubb front certain reinsurance business in cases where Harbor Point is unable to underwrite that business because of the absence of necessary regulatory licenses or approvals.
Oldwick, N.J.-based A.M. Best Co., has assigned a financial strength rating of "A-(Excellent)" and an issuer credit rating of "a" to Harbor Point, with a stable outlook.
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