Integration execution takes centre stage following Bermudian reinsurer RenaissanceRe’s (RenRe) $1.5 billion takeover of Tokio Millennium Re (TMR), which completed on March 22nd, 2019.
Speaking during the firm’s Q1 2019 earnings call, RenRe executives discussed its recently completed acquisition of TMR, underlining a shift from planning to execution.
“From my perspective, TMR is already integrated, and we have moved from planning to execution,” said Kevin O’Donnell, RenRe President and Chief Executive Officer (CEO).
The Bermuda-based reinsurer has modelled and captured TMR’s risks and is subsequently operating on a single integrated underwriting risk and capital management system. According to O’Donnell, this was a critical part of the integration, and means that the firm can now construct its portfolios based on a comprehensive view of risks, which reflects the full impact of the TMR integration.
“We have identified customers where we can grow and improve our portfolios and are positioned to begin managing the TMR portfolio and renewing TMR deals across our various platforms, moving business to where it is most efficient,” said O’Donnell.
The firm’s President and CEO explained that it expects to retain a significant portion of TMR’s casualty portfolio, adding that it has completed the work required to align this with its risk appetite.
“For example, we will be re-underwriting U.S. non-standard auto and U.K. motor and expect to exit this business and other business that does not meet our underwriting criteria upon renewal,” he said.
Bob Qutub, Executive Vice President (EVP) and Chief Financial Officer (CFO) at RenRe, said during the call that thanks to extensive preparation, day one went smoothly, and the firm is “optimistic” that the integration will be both quick and successful.
“To date, we have reduced the TMR expense base by approximately 40% and have identified continued synergies, the majority of which, we will action in the first year. The TMR transaction was immediately accretive, and I remain confident that it will make a significant contribution to shareholder value this year.
“We continue to estimate retaining over $700 million of TMR’s gross premiums written and anticipate that TMR will contribute $100 million to net income,” said Qutub.
This acquisition provides RenRe with an expanded platform, offering synergies and a broader footprint in global reinsurance markets.
At the same time, the integration of TMR offers RenRe with enhanced access to risk from a key Japanese trading partner and a key investor, that also provides the firm with efficient access to risk.