AIG to acquire Validus for $5.56bn

American International Group (AIG) has entered into a definitive agreement to acquire all outstanding common shares of Bermuda-based Validus Holdings.

Validus offers reinsurance, primary insurance, and asset management services.

The transaction enhances AIG’s general insurance business, adding a reinsurance platform, an insurance-linked securities (ILS) asset manager, a presence at Lloyd’s and complementary capabilities in the US crop and excess and surplus (E&S) markets.

The aggregate transaction value is $5.56 billion, funded by cash on hand.

“Validus is an excellent strategic fit for AIG, bringing new businesses and capabilities to our General Insurance operation, expanding the bench of our management team and deepening our underwriting expertise,” said AIG CEO Brian Duperreault. “With our global scale and the strength of our balance sheet, I am confident that Validus will thrive within AIG and strengthen our ability to deliver profitable growth for our shareholders as we strategically position AIG for the future.”

Ed Noonan, Validus’ CEO, added: “We believe this transaction offers compelling value for our shareholders and reflects the strength of the business we’ve built together with our talented global team. Joining AIG and becoming part of a larger, more diversified organization immediately opens new opportunities for our people and our franchise. Validus will be able to serve clients and brokers in new and exciting ways, which will enhance our ability to grow profitably.”

The acquisition of Validus represents a significant step forward in AIG’s strategy to deliver profitable growth, according to the Jan. 22 press release, bringing a diverse and complementary set of attractive franchises across specialized products and regions.

The transaction includes Validus Re, a treaty reinsurer with a focus on property catastrophe, marine and specialty, bringing deep relationships with brokers and clients.

AlphaCat manages $3.2 billion on behalf of clients by investing in ILS products. Talbot is a Lloyd’s of London syndicate focused on short-tail specialty lines. The addition will broaden AIG’s technical underwriting expertise and provide access to distribution in the largest specialty insurance market in the world, according to the company. Talbot’s brokers and clients will benefit from the complete suite of capabilities that has made AIG a global leader, along with access to solutions both within and outside of the Lloyd’s market.

Western World is a US specialty property/casualty underwriter focused on the small commercial E&S and admitted markets, will add technical expertise in binding authority. In addition, AIG gains Crop Risk Services, which provides access to the North American crop insurance market.

The transaction has been unanimously recommended by the boards of directors of AIG and Validus. The deal is expected to close mid-2018, subject to approval by Validus shareholders and other customary closing conditions, including regulatory approvals in relevant jurisdictions.