Brian Duperreault was clear after becoming American International Group’s new leader in May 2017 that he’d be looking for acquisitions. He’s now made good on this promise, with news that the insurer wants to snatch up Validus Holdings for more than $5.56 billion in an all-cash deal.

Both AIG and Validus said their boards of directors unanimously recommended the M&A agreement, worth about $68 per share. AIG wants to close its acquisition of the Bermuda-based reinsurer, insurer and asset manager by the middle of 2018, pending regulatory approvals, federal antitrust provisions and other closing conditions.

For more deal rationale and Duperreault’s comments on potential future deals and strategy, see related article,”After Validus, AIG CEO Duperreault Envisions Select, Strategic Acquisitions.”
“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,” Duperreault, AIG’s president and CEO, said in prepared remarks.

Ed Noonan, Validus’ chairman and CEO, said agreeing to be sold to AIG will help his company grow in new ways.

“Joining AIG and becoming part of a larger, more diversified organization immediately opens new opportunities for our people and our franchise,” Noonan said in prepared remarks. “Validus will be able to serve clients and brokers in new and exciting ways, which will enhance our ability to grow profitably.”

Validus Deal Designed to Bring New Growth

AIG, which has struggled in recent years, argued that the acquisition represented “a significant step forward” in terms of its strategy to produce profitable growth.

In buying Validus, AIG will get:

  • Validus Re, a treaty reinsurer focused on property-catastrophe, marine and specialty. AIG said it also has “deep relationships with brokers and clients” and that the reinsurer will gain from being part of a more diversified business, along with AIG’s bigger and more diverse balance sheet.
  • AlphaCat, which manages $3.2 billion for clients by investing in insurance-linked securities products. AIG said this division will give it more risk management flexibility and help leverage Validus Re’s underwriting expertise.
  • Talbot, a Lloyd’s of London syndicate focused on short-tail specialty lines. AIG said this division will broaden its underwriting expertise and give it access to distribution in the world’s largest specialty market. AIG said Talbot’s brokers and clients will benefit from AIG’s vast global resources.
  • Western World, a U.S. specialty property and casualty underwriter focused on the small commercial E&S and admitted markets. Validus bought this company in 2014. AIG said that it will bring technical expertise in binding authority. In addition, AIG gains Crop Risk Services, which provides access to the North American crop insurance market.

AIG said the acquisition will be immediately accretive to earnings per share and return on equity and that it also brings “significant additional capital efficiencies over time.”

Source: AIG, Validus

Topics Mergers & Acquisitions Excess Surplus AIG