RenRe to acquire AIG’s Validus Re for $3bn, create top-tier global P&C reinsurer

Bermuda-based  RenaissanceRe Holdings is to acquire  Validus Re from  American International Group (AIG) for $2.985 billion, creating a leading global property and casualty reinsurer with a “large, attractive book” of business in a favourable market.

RenRe has entered into a definitive agreement with AIG to acquire its treaty reinsurance business, which includes Validus Reinsurance and its consolidated subsidiaries, AlphaCat Managers and its managed funds, and all renewal rights to the Assumed Reinsurance Treaty Unit of Talbot (collectively Validus Re).

The combination will create a “top 5” global property and casualty reinsurer and accelerate RenRe’s growth strategy with increased profit, underwriting, fee and investment income, the company said in a statement.

AIG has committed to deliver at closing $2.1 billion in unlevered shareholder’s equity to RenaissanceRe with any excess to be retained by AIG.

RenaissanceRe will pay approximately $2.985 billion in total consideration, including $2.735 billion of cash and $250 million of RenaissanceRe common shares. The cash consideration is expected to be funded through RenaissanceRe's available funds and proceeds from the issuance of common equity and debt. The shares received by AIG will be valued at the lower of the public offer price for an expected underwritten public offering by RenaissanceRe or the closing price on May 22, 2023.

RenRe has commenced an underwritten public offering of 6,300,000 of its common shares to fund a portion of the cash consideration for the Validus Re acquisition, related to costs and expenses, and for general corporate purposes.

The agreement has been approved by RenaissanceRe’s board of directors. The transaction is expected to close in the fourth quarter of 2023 and is subject to customary closing conditions and regulatory approvals. No shareholder approval is required.

As part of the transaction, AIG will retain 95% of the development on net reserves at closing. In addition, following the closing of the transaction, AIG expects to make substantial investments in RenaissanceRe’s Capital Partners business.

Kevin O’Donnell, president and chief executive officer of RenaissanceRe, 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.

“Additionally, 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. I have deep respect for Peter and AIG and look forward to extending our partnership.”