RenRe buys TMR for $1.5bn

Bermuda-based RenaissanceRe Holdings has agreed to acquire its competitor Tokio Millennium Re (TMR) for approximately $1.5 billion from its parent company Tokio Marine Holdings.

The purchase consists of approximately $1.22 billion of cash and $250 million of RenaissanceRe common shares. The cash consideration will be funded through RenaissanceRe available funds and a potential pre-closing dividend from TMR.

The agreement has been unanimously approved by the boards of directors of both companies. The transaction is expected to close in the first half of 2019. No shareholder approval is required.

“This transaction will increase our scale, broaden our reach and extend our ability to apply our core strengths to a deeper customer base,” said Kevin O’Donnell, CEO of RenaissanceRe.

“Our unique ability to capitalize on large, one-of-a-kind opportunities underscores our global reinsurance leadership, including in casualty and specialty lines, and our ability to execute on our successful, highly differentiated strategy.”

Stephan Ruoff, CEO of TMR, added: “We believe that the transaction opens new opportunities as we integrate TMR into a much larger global reinsurance organization, ready to meet the challenges of a dynamic reinsurance market”.

In connection with the transaction, Tokio Marine has agreed to provide RenaissanceRe a $500 million adverse development cover that will protect TMR’s stated reserves at closing, including unearned premium reserves. In addition, Tokio Marine and RenaissanceRe will enter a business cooperation agreement, which will enhance their business relationship and facilitate cooperation on a portion of the international reinsurance purchases of Tokio Marine and its affiliates.

In addition, State Farm Mutual Automobile Insurance Company (State Farm) has agreed to invest $250 million in RenaissanceRe through its purchase of RenaissanceRe’s common shares in a private placement.

Following the completion of its investment, State Farm will own approximately 4.8 percent of RenaissanceRe’s total common shares outstanding, reflecting a broader relationship with RenaissanceRe that includes State Farm’s investments in RenaissanceRe-managed vehicles Top Layer Reinsurance and DaVinciRe Holdings.

“We are also honoured that State Farm has agreed to broaden its relationship with RenaissanceRe by investing in our common shares and extending a long-standing partnership between our two firms,” O’Donnell added. “Our acquisition of TMR and State Farm’s investment further enhance the relationship between our respective companies, which I am confident will prove equally beneficial to our shareholders. After these transactions close, we anticipate that we will continue to have the very strong capital and liquidity position you have come to expect from RenaissanceRe.”

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