30 May 2023News

Validus ratings placed under review after buyout news

AM Best has placed its credit ratings of Bermuda-based Validus Reinsurance's under review following news that it will be sold by American International Group to RenaissanceRe.

AM Best also placed the financial strength rating and long term issuer credit ratings of Validus Reinsurance (Switzerland) under review. The companies are rated "A".

AM Best said the credit ratings of the remaining members of AIG remain unchanged.

AIG announced last week that it will sell Validus Re and Validus, including AlphaCat Managers and the Talbot Treaty reinsurance business, to RenaissanceRe for $2.99 billion, consisting of $2.74 billion in cash and $250 million in RenaissanceRe common shares.

AM Best said AIG is also expected to receive all capital in excess of $2.1 billion of shareholders’ equity of Validus Re and achieve future capital synergies of approximately $400 million from the recapture of reserves due to transferring the Validus Re balance sheet to RenaissanceRe, which together, as of Dec. 31, 2022, was over $1.5 billion. This brings the total estimated transaction value to more than $4.5 billion.

The transaction is expected to close by the end of 2023, subject to regulatory approvals and other customary closing conditions. Subsequent to the closing, AIG expects to make significant investments in RenaissanceRe’s DaVinci Reinsurance and Fontana Reinsurance managed funds through AIG’s investment portfolio.

AM Best said last week that RenaissanceRe's ratings were unchanged and it did not expect the amalgamation of Validus' "relatively lean operating platform" to cause an integration risk and noted that RenaissanceRe was assumes "just a small share of any future unfavourable (or favourable) reserve development" on the business being acquired.