Bermuda-based RenaissanceRe’s acquisition of Validus Re is expected to expand the reinsurer’s gross premiums written (GPW) by around 30%, resulting in a combined portfolio of almost $12 billion, creating a top-5 global property and casualty (P&C) reinsurer
As we wrote previously, RenRe has agreed to acquire Validus and all its subsidiaries from global player AIG for around $3 billion, furthering its strategy in a favourable market and boosting underwriting, fee, and investment income.
As of the end of 2022, RenRe’s GPW amounted to $9.2 billion, with the portfolio split 41% property, 36% casualty, 12% surety, and 12% credit.
According to RenRe, Validus Re’s targeted GPW, which reflects the portfolio expected to renew, is around $2.7 billion, roughly split 35% property, 36% casualty, 19% specialty, and 11% credit.
When added to RenRe’s existing portfolio, GPW increases to around $11.9 billion, split 39% property, 36% casualty, 14% specialty, and 11% credit.
“Adding Validus Re to our existing portfolio provides significant growth in desirable lines of business, under favorable market conditions,” says RenRe.
At $11.9 billion, it positions the combined company fifth in terms of the largest P&C reinsurers, ahead of SCOR at $10.6 billion, and behind Berkshire Hathaway ($17bn), Swiss Re ($23.8bn), Hannover Re ($25.5bn), and Munich Re ($36.2bn).
The expected property GPW of the company will be approximately $900 million. For casualty and specialty, GPW is expected to be roughly $1.8 billion, with RenRe stating that the combined ratio will be in line with the existing portfolio, at around 95%.
The Bermudian is acquiring the treaty reinsurance business of AIG, which includes Validus and all of its consolidated subsidiaries, including AlphaCat Managers Ltd. and its managed insurance-linked securities (ILS) funds, and all renewal rights to the assumed reinsurance treaty unit of Talbot.
The Validus Re portfolio stands to benefit from what RenRe describes as the “most efficient capital platform in the industry,” with total managed capital in 2022 of around $17 billion. Of this, some 38% comes from the total capital on RenRe’s balance sheet, 48% from its rated managed joint ventures (Top Layer, DaVinci, Vermeer, and Fontana), 7% via Medici, its managed catastrophe fund, and 8% from Upsilon, RenRe’s managed collateralized fund.
All in all, RenaissanceRe Capital Partners boasts roughly $10 billion in third party capital across both highly-rated balance sheets and collateralized vehicles, producing consistent management fee income for the firm.
According to RenRe, the acquisition creates opportunities to enhance its portfolio through ceded, capital partners, and its integrated system.
Additionally, AIG has the option to make a “substantial investment” in RenaissanceRe Capital Partners vehicles, which, if exercised, will increase overall third-party managed capital.
On the asset side of the balance sheet, the acquisition is expected to add roughly $4.5 billion of investible assets, anticipated to be reinvested at prevailing new-money market yields, ultimately growing the firm’s net investment income.
