The long-term implications of the Platinum/RenRe deal should be positive despite no immediate increase in share price largely due to the wider competitive conditions in the reinsurance market, according to one analyst.
The $1.9 billion acquisition was originally announced on November 24, 2014 but the deal closed this week.
Kevin O’Donnell, chief executive of RenaissanceRe, said: “The combination of RenaissanceRe and Platinum marks an important milestone for our company, benefiting our expanded client base by providing additional products and underwriting expertise, two strong underwriting platforms in the United States, and increased scope and market presence.
“We expect the transaction to be accretive to book value per share and earnings per share, as well as increase the long-term value of our business for shareholders. With the acquisition successfully completed, we are a stronger, broader-reaching RenaissanceRe, offering more underwriting, product and capital solutions to both existing clients and new clients.”
The share price of the company barely moved following the deal being closed but the fundamental logic of the deal will still be a positive one, one analyst at Zachs Equity Research noted.
“As for the financial benefits, management of RenaissanceRe expects the deal to enhance book value per share and earnings per share, and boost the long-term value of the business for its stakeholders. On the operational front, the closing of the deal has not only made its portfolio lucrative to its existing and potential clients through the expansion of its underwriting, product and capital solutions capabilities but also bolstered the market presence of the company,” the analyst said.
“Since Platinum Underwriters is a well-run company, we believe its integration with RenaissanceRe will form an entity that will create a vast product portfolio and broker relationships, thereby benefiting the existing clients of both companies. Moreover, being a leading name in casualty reinsurance, the acquisition is expected to help RenaissanceRe strengthen its U.S. specialty and casualty reinsurance platform. Particularly the strong underwriting and risk management business of Platinum Underwriters should complement the risk management framework of RenaissanceRe.”
Platinum, RenRe, RenaissanceRe, M&A, Kevin O'Donnell, Zachs Equity Research