Acquisition

12 Months Ended

Dec. 31, 2019

On February 28, 2019 (closing date or acquisition date), pursuant to the agreement (the SPA) for the sale and purchase of the entire issued share capital of MSP Underwriting Limited (MSP), dated October 11, 2018, by and between the company and Münchener Rückversicherungs Gesellschaft AG (Munich Re), the company acquired from Munich Re all of the issued and outstanding share capital of MSP and its subsidiaries, including the Lloyd's managing agent, Beaufort Underwriting Agency Limited for Syndicate 318 (the acquisition). MSP was rebranded as Cincinnati Global effective May 1, 2019, reflecting its new identity as a subsidiary of the company. The acquisition of Cincinnati Global reflects progress toward our long-term objective of diversifying revenue and profitability by expanding our operations geographically and by line of business.

As aggregate consideration for the purchase of the share capital of Cincinnati Global and its subsidiaries, the company paid £48 million, or $64 million, in cash to Munich Re at the closing of the acquisition. The amount paid at closing was calculated as the difference between the target net asset value (NAV) set forth in the SPA and the estimated NAV of Cincinnati Global and its subsidiaries at the closing date. On August 1, 2019, the company and Munich Re agreed to an adjusted purchase price of £47 million, or $63 million, reflecting a £1 million decrease in the NAV of Cincinnati Global. This agreement represented the final purchase price with no further adjustments to the assets acquired and liabilities assumed.

The fair value of the assets acquired, liabilities assumed and the allocation of the final purchase price on the acquisition date have been summarized in the following table:



(Dollars in millions)
Assets
Investments and other invested assets	$	198
Cash and cash equivalents	64
Premiums receivable	45
Reinsurance recoverable	42
Other assets	23
Total assets acquired	$	372

Liabilities
Loss and loss expense reserves	$	277
Unearned premiums	88
Other liabilities	24
Total liabilities assumed	$	389

Fair value of identifiable intangible assets:
Syndicate capacity - indefinite lived	$	31
Syndicate broker relationships - definite lived	12
Value of business acquired - definite lived	4
Internally developed technology - definite lived	3
Total fair value of identifiable intangible assets	$	50

Total purchase price paid	$	63

Total assets acquired (including fair value of identifiable intangible assets)	422
Total liabilities assumed	389
Fair value of net assets acquired prior to allocation of goodwill	33

Excess of purchase price paid over fair value of net assets acquired assigned to goodwill	$	30

In connection with the acquisition, the company incurred immaterial transaction related expenses.