RenaissanceRe’s (RenRe) acquisition of Validus Re and all its subsidiaries from global player AIG is on track, according to Bob Qutub, Chief Financial Officer (CFO) of the Bermuda headquartered re/insurer.
With this move, “We are advancing our strategy through the acquisition of Validus Re, which we announced in May. I am pleased to say that integration planning is progressing well, and that we are on track to close in the fourth quarter,” said Qutub.
“We have established a dedicated integration team that is reviewing Validus’ operating model, processes and systems so that we can bring together our two great companies. Our work today supports our initial acquisition thesis and we are very excited about the transaction. Validus is a great business with great people and this deal will accelerate our strategy,” he added.
This transaction, according to Kevin O’Donnell, RenRe’s Chief Executive Officer (CEO), will be immediately accretive to each of RenRe’s three drivers of profit, as well as book value per share, earnings per share and return on equity.
“Of course, there are always risks in any transaction but we believe we can manage them effectively to begin with. We are a proven acquirer and have substantial institutional knowledge managing execution and integration risk. The fact that Validus Re’s underwriting portfolio is similar to our existing book also reduces our execution risk,” he noted.
Adding: “We have deep familiarity with the lines of business that they write and have the tools necessary to support the business. As a result, we expect that we can fully deploy Validus Re into our portfolio on day one and fully integrate it into our risk management system soon afterwards, diminishing execution rates.”
“Validus Re will also benefit from a reserve development agreement. Validus is a strong underwriting platform, and AIG should continue to profit from the attractive risk that they have under it. As such AIG will retain 95% of any reserve development whether favourable or adverse.”
RenRe expects the acquisition to close in this year’s fourth quarter, subject to regulatory approval. The re/insurer has also already begun comprehensive integration planning.
Additionally, since the acquisition of Validus Re was announced – as well as the completion of RenRe’s debt and equity raises – the rating agencies have affirmed RenRes “A+” financial strength ratings.
This is a good result, O’Donnell highlighted, as it is typical for potential acquisitions to be placed on negative watch due to execution and integration risk.
