On 10 May 2016 Hannover Re acquired all the shares in the company The Congregational & General Insurance Public Limited Company (CGI), Bradford, UK, through its subsidiary International Insurance Company of Hannover SE, Hannover. The purchase price of the shares amounted to EUR 11.3 million. Along with the company, Hannover Re also acquired its 25% stake in Integra Insurance Solutions Limited, Bradford, UK. In total, therefore, Hannover Re holds all the shares through various subsidiaries.
The business was included in the consolidated financial statement for the first time as at 1 May 2016. For the purposes of initial consolidation and in accordance with appropriate measurement methods, the fair values of the acquired assets and assumed liabilities were to some extent established on the basis of assumptions and estimations. The assumptions and estimates that had been made were put into concrete terms as at the balance sheet date, and initial consolidation was therefore finalised within the measurement period.
The assets and liabilities of the acquired business as at the date of initial consolidation are as follows:
|Assets and liabilities of the acquired business|
|in EUR thousand||1.5.2016|
|Fixed-income securities – available for sale||4,845|
|Equity securities – available for sale||1,116|
|Investments in associated companies||13,699|
|Cash and cash equivalents||2,629|
|Reinsurance recoverables on unpaid claims||2,733|
|Prepaid reinsurance premium||3,313|
|Deferred acquisition costs||1,395|
|Deferred tax assets||440|
|Accrued interest and rent||112|
|Loss and loss adjustment expense reserve||4,408|
|Unearned premium reserve||4,926|
|Provisions for pensions||1,353|
In view of the fact that the fair values of the recognised, identifiable assets, liabilities and contingent commitments exceed the acquisition costs associated with the transaction, the capital consolidation gave rise to negative goodwill of EUR 10.5 million which was recognised immediately in income in accordance with the requirements of IFRS 3.34.
This non-recurring item from the transaction is accounted for in the consolidated statement of income under other operating income. The negative goodwill resulted primarily from the limitation of the revaluation of the assumed pension provisions to the amount that was to be recognised in accordance with IAS 19 as required by IFRS 3.26.
The gross written premium of the assumed business from the date of initial consolidation until the balance sheet date amounted to EUR 1.7 million. For the same period net income of EUR 0.8 million was booked from the assumed business. This does not include the other operating income resulting from reversal of the negative goodwill.
Effective 8 January 2016 Funis GmbH & Co. KG (“Funis”), a wholly owned subsidiary of Hannover Rück SE, increased its interest in the share capital of Glencar Underwriting Managers Inc. (“Glencar”), Chicago, USA, from 49% to 100% and thereby acquired control of the company. Glencar, which had previously been included at equity in the consolidated financial statements, was therefore consolidated as a subsidiary from the first quarter of 2016 onwards. Derecognition of the assets and liabilities and measurement of the previous shares at fair value gave rise to an expense of EUR 0.7 million that was recognised in investment income. In addition, cumulative other comprehensive income from currency translation amounting to EUR 1.2 million was realised. A purchase price of EUR 5.6 million was paid for the acquisition of the remaining shares. In the context of the purchase price allocation, the calculation of the fair values of acquired assets and assumed liabilities undertaken for the purposes of initial consolidation gave rise to goodwill of EUR 5.4 million.
Within the 95.1%-owned US subgroup Hannover Re Real Estate Holdings, Inc., the special purpose property companies 101BOS LLC and 3290ATL LLC, both of which have their registered office in Wilmington, were established via the subsidiary GLL HRE Core Properties, LP, for the purpose of real estate acquisition. Altogether, an amount of roughly EUR 114.0 million was invested in this connection.