American International Group today announced that it has entered into a definitive agreement to sell Validus Re, including AlphaCat and the Talbot Treaty reinsurance business, to RenaissanceRe Holdings Ltd. for $2.985 billion, consisting of $2.735 billion in cash and $250 million in RenaissanceRe common shares.
In addition, AIG will receive all capital in excess of $2.1 billion of shareholders’ equity of Validus Re and achieve future capital synergies of approximately $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 $1.5 billion. The total estimated transaction value is expected to exceed $4.5 billion.
“Today’s announcement represents another key milestone for AIG and is strategically significant for both AIG and Validus Re. 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.”
AIG will retain Talbot Underwriting and Western World, which were purchased as part of its 2018 acquisition of Validus Holdings Ltd. and which currently represent approximately $1.6 billion of AIG’s total gross premiums written. On May 2, 2023, AIG announced that it reached an agreement to sell Crop Risk Services, also purchased as part of the 2018 acquisition of Validus Holdings Ltd. in 2018, to American Financial Group, Inc. for $240 million; this transaction is expected to close in the third quarter of 2023.
The sale of Validus Re is expected to close in the fourth quarter of 2023, subject to regulatory approvals and other customary closing conditions. Following the closing, AIG expects to make significant investments in RenaissanceRe’s DaVinci Reinsurance and Fontana Re managed funds through AIG’s Investment portfolio.
Peter Zaffino, Chairman and Chief Executive Officer of AIG, commented: “Today’s announcement represents another key milestone for AIG and is strategically significant for both AIG and Validus Re. 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.
“At the same time, 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. I have enormous respect for Kevin and RenaissanceRe and look forward to continuing our longstanding and successful partnership.”
Evercore Group L.L.C. and J.P. Morgan Securities LLC acted as financial advisors, and Wachtell, Lipton, Rosen & Katz and Debevoise & Plimpton LLP acted as legal counsel for AIG.
About AIG
American International Group, Inc. (AIG) is a leading global insurance organization. AIG member companies offer insurance solutions that help businesses and individuals in approximately 70 countries and jurisdictions protect their assets and manage risks. AIG common stock is listed on the New York Stock Exchange.