RenRe could wield the axe on Validus staff for quick synergies

Staff at Validus Re could head for the chopping block on the pending sale of the business to  RenaissanceRe as the latter pursues “significant synergies” early after purchase of what it considers to be a closely aligned business to its own, officials at RenaissanceRe suggested  following announcement of the major acquisition.

“We are expecting significant synergies and we expect to action those relatively soon, just like we have done in past acquisitions, within the first year,” RenaissanceRe CEO Kevin O’Donnell told investors when asked about synergies, including via staffing.

The RenaissanceRe CEO did make exceptions for talent picking.

“There is quality talent over there that we will look at,” O’Donnell said, further noting some existing open positions within his own organisation. “We think there is a lot of opportunity there.”

“But we will be driving first the synergies,” he said.

Comments follow news that RenaissanceRe will buy AIG’s reinsurance operations for nearly $3 billion in mostly cash plus a slice of new equity. RenaissanceRe takes Validus Re, exclusive of 95% of existing reserve development, plus the ILS manager AlphaCat and renewal rights to the treaty reinsurance book at unit Talbots.

RenaissanceRe doesn’t seem to feel it is buying any new competencies. The purchase is defined as an “acceleration of our strategy, not a change,” O’Donnell said. RenaissanceRe likes the near-perfect overlap in the two books by business line and geography.

“The Validus Re underwriting portfolio is very similar to our existing book” O’Donnell said. “We have deep familiarity with the lines of business that they write and the geographies they write them in.”

“We have all the tools, expertise and platforms necessary to support the business,” O’Donnell said.

Likewise the pending integration doesn’t sound like a process burdened by the need to actually integrate. “In effect, this is the equivalent of assuming a 30% quota share on our existing underwriting portfolio,” O’Donnell said of the acquisition.

“We expect we can fully deploy Validus Re into our portfolio on day one and fully integrate into our risk management system soon afterwards, diminishing execution risk.”

CFO Bob Qutub chipped in on a similar tone. “Significant,” Qutub said when asked of the scope of pending synergies. “Validus Re is almost the same [as us],” Qutub said. “Same business and same locations.”

“Similar to our last acquisition where we actioned most items within the first year, we expect that to be about the same time frame,” he said of outlook.

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