S&P cuts Hanover to stable

Standard & Poor's said that it revised the outlook on Hanover Insurance Group Inc. and its operating subsidiaries to stable from positive and affirmed the BBB- counterparty credit rating and A- counterparty credit and financial strength ratings on Hanover's operating insurance companies.

The revised outlook follows the company's announcement of an offer to acquire Chaucer Holdings plc for 56 pence/share in cash. The offer values Chaucer at about 1.2 times estimated tangible book value per share as of Dec. 31, after adjusting for the company's recent catastrophe losses, as reported by the company, the agency said.

The outlook revision is based on the potential execution and integration risks of the proposed acquisition in near to medium term, the agency added.

The acquisition will likely increase the volatility of the combined entity's capital adequacy and operating performance, S&P said. Although the acquisition might create longer-term value to the company's competitive position, the near-term and integration risks offset potential benefits.

The affirmation reflects the expectation that capitalization and financial flexibility will be temporarily diminished after the transaction, the agency said.

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