RenaissanceRe buys Validus Re from AIG to become fifth largest reinsurer

RenaissanceRe said buying Validus Re from AIG in a $3bn deal will grow its business by 30% at a time of favourable market conditions for reinsurance. President and CEO of RenaissanceRe Kevin O’Donnell said the “one-of-a-kind opportunity” will see the company leapfrog Everest Re and Scor to become the fifth largest P&C reinsurer on the global stage. AIG said the sale – which includes Validus Re, AlphaCat and Talbot’s treaty reinsurance business – is in line with its strategy to reposition portfolios to focus more on insurance business and reduce underwriting volatility. AIG will retain Talbot Underwriting and Western World, which were part of its 2018 acquisition of Validus Holdings. Earlier this month, AIG agreed to sell Crop Risk Services, also part of the original Validus purchase. Renaissance Re will pay $2.74bn in cash and $250m in shares for the reinsurance units. AIG will retain all capital above $2.1bn of Validus Re’s shareholders’ equity and expects to book $400m from recapturing reserves. AIG said the transaction is estimated to be worth more than $4.5bn. Validus Re has $2.7bn in gross written premiums, adding to RenaissanceRe’s $9.2bn. O’Donnell said in a conference call that this creates an “attractive book in a perfect time in the cycle”, with strong demand expected to continue into 2024. Following completion of the sale, AIG said it would invest in RenaissanceRe’s DaVinci Reinsurance and Fontana Re Managed Funds. AIG chairman and CEO Peter Zaffino said the company is committed to maintaining a strong relationship with RenaissanceRe through the investments and share stake. Zaffino said this will allow AIG to “continue to participate in the growth of the reinsurance market with less risk and capital requirements”. O’Donnell also emphasised the importance of the relationship between the two companies. “We are enhancing our relationship with AIG and demonstrating how our consistent, highly differentiated strategy provides us with unique access to large, one-of-a-kind opportunities that create shareholder value,” he said. Zaffino said the sale of Validus Re is a “key milestone”. “It further simplifies our business model and reduces volatility in our portfolio, while generating significant cash liquidity and capital efficiencies that enable us to accelerate our capital management strategy,” he said. “We have spent the last several years transforming Validus Re by re-underwriting the portfolio and driving operating leverage, leading to improved outcomes. As part of RenaissanceRe, Validus Re will benefit from global scale that will allow the business to continue to grow, expand its capabilities and drive value for clients,” he added. O’Donnell said: “This acquisition advances our strategy as a leading global property and casualty reinsurer, providing additional scale, and increasing our importance to customers. Furthermore, by gaining access to a large, attractive book of reinsurance business in a favourable market environment, we expect to accelerate our three drivers of profit – underwriting, fee, and investment income.”

RenaissanceRe buys Validus Re from AIG to become fifth largest reinsurer

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