Leading global insurer American International Group (AIG) yesterday announced it has entered into a definitive agreement to acquire all outstanding common shares of Validus Holdings, a leading provider of reinsurance, primary insurance, and asset management services.
Under the deal, worth approximately US$5.56 billion, holders of Validus common shares will receive cash consideration of $68.00 per share.
The transaction enhances AIG’s General Insurance business, adding a leading reinsurance platform, an insurance-linked securities asset manager, a meaningful presence at Lloyd’s and complementary capabilities in the US crop and excess and surplus (E&S) markets, the two parties said in a statement.
“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 Mr Brian Duperreault, President and CEO of AIG. “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.”
Mr Ed Noonan, Validus’ Chairman and CEO, said: “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 organisation 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. The acquisition brings a diverse and complementary set of attractive franchises across specialised products and regions:
- Validus Re, a leading treaty reinsurer with a focus on property catastrophe, marine and specialty, brings deep relationships with brokers and clients and will benefit from being part of a more diversified business, along with the additional size and strength of AIG’s balance sheet.
- AlphaCat, which manages $3.2 billion on behalf of clients by investing in insurance-linked securities products, will leverage the underwriting expertise within Validus Re and provide greater risk management flexibility.
- Talbot, a Lloyd’s of London syndicate focused on short-tail specialty lines, will broaden AIG’s technical underwriting expertise and provide access to distribution in the largest specialty insurance market in the world. 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, a US specialty property and 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.
Validus also adds to AIG’s talent and underwriting capabilities with the addition of well-respected management and underwriting teams with a consistent record of strong underwriting results.
Compelling financial benefits for AIG and Validus
The transaction is expected to be immediately accretive to AIG’s earnings per share and return on equity (ROE). Validus brings complementary, market-leading capabilities to AIG, enhancing AIG’s platform and long-term growth opportunities for both companies. The diversification benefits of the transaction also provide significant additional capital efficiencies over time, the joint statement said.
The transaction has been unanimously recommended by the boards of directors of AIG and Validus. The transaction is expected to close mid-2018, subject to approval by Validus shareholders and other customary closing conditions, including regulatory approvals in relevant jurisdictions and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.