AM Best puts RenaissanceRe ratings under review after TMR announcement

05-11-2018

AM Best has placed under review with developing implications the financial strength rating (FSR) of A+ (Superior) and the long term issuer credit ratings of “aa-” of Renaissance Reinsurance, Renaissance Reinsurance US, RenaissanceRe Specialty US, and Renaissance Reinsurance of Europe.

AM Best has also placed under review with developing implications the long-term ICR of “a-” and all long-term issuer credit ratings of RenaissanceRe Holdings. AM Best also has placed under review with developing implications the FSR of A (Excellent) and the long-term ICR of “a+” of DaVinci Reinsurance and the Long-Term ICR of “bbb+” of DaVinci Re Holdings.

The rating actions follow the recent announcement that RenaissanceRe has entered into a definitive agreement with Tokio Marine Holdings, under which it will acquire Tokio Marine’s reinsurance platforms, which includes Tokio Millennium Re and Tokio Millennium Re. If closing tangible book value is unchanged from June 30, 2018, Tokio Marine would receive $1.5 billion in a combination of cash and stock. The agreement has been approved by each side’s board of directors and the transaction, subject to customary closing conditions and regulatory approval, is expected to close in the first half of 2019.

The transaction is being financed with RenaissanceRe’s cash on hand and equity. As part of the acquisition, Tokio Marine will receive $250 million worth of RenaissanceRe shares. Additionally, Tokio Marine has agreed to provide RenRe with a $500 million adverse development cover that will protect TMR’s book of reserves for five years.

In addition, RenaissanceRe announced that State Farm will acquire $250 million in RenaissanceRe’s stock and become a 4.8 percent owner of the company, in an investment transaction which is not conditioned on the closing of the Tokio Marine reinsurance platforms acquisition.

The ratings will remain under review pending completion of the transaction and AM Best will continue to hold discussions with RenaissanceRe management and monitor the company’s risk-adjusted capitalisation, operating performance, business profile and enterprise risk management.

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