AIG confirms Validus Re sale

AIG confirms Validus Re sale | Insurance Business Australia

Mergers & Acquisitions

AIG confirms Validus Re sale

Transaction to reduce volatility and further simplify business model

Mergers & Acquisitions

By
Terry Gangcuangco

American International Group (AIG) is selling Validus Re, including AlphaCat and the Talbot Treaty reinsurance business, to RenaissanceRe Holdings.

Expected to close in the fourth quarter, the transaction has a total estimated value of more than US$4.5 billion. This includes the sale’s US$2.985 billion price tag.

Explaining what makes up the rest of the abovementioned value approximation, AIG said in a release: “In addition, AIG will receive all capital in excess of US$2.1 billion of shareholders’ equity of Validus Re and achieve future capital synergies of approximately US$400 million from the recapture of reserves as a result of transferring the Validus Re balance sheet to RenaissanceRe, which together, as of December 31, 2022, was over US$1.5 billion.”

Meanwhile, the nearly US$3 billion payment consists of US$2.735 billion in cash and US$250 million in RenaissanceRe common shares.

Key milestone

“[This] announcement represents another key milestone for AIG and is strategically significant for both AIG and Validus Re,” declared AIG chair and chief executive Peter Zaffino. “For AIG, 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.

“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 and other stakeholders.”

When the sale is finalised, AIG expects to invest in RenaissanceRe’s DaVinci Reinsurance and Fontana Re managed funds through AIG’s investment portfolio.

“Our investment in RenaissanceRe’s common shares demonstrates our commitment to the strong relationship we have with RenaissanceRe and, coupled with our investment in DaVinci Reinsurance and Fontana Re, will allow us to continue to participate in the growth of the reinsurance market with less risk and capital requirements,” added Zaffino.

“I have enormous respect for [CEO] Kevin [O’Donnell] and RenaissanceRe and look forward to continuing our longstanding and successful partnership.”

Meanwhile Talbot Underwriting and Western World, which were purchased as part of AIG’s acquisition of Validus Holdings in 2018, will remain under AIG ownership. Crop Risk Services, which was also part of Validus Holdings, was recently sold to American Financial Group.

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