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AIG reaches deal to acquire Bermudian insurer for $5.56bn
Global insurance company American International Group (AIG) has inked a deal to acquire Bermuda-based insurer and reinsurer Validus Holdings for $5.56bn, as the group's new chief executive looked to reverse nearly ten years' worth of asset declines as a result of its near collapse in 2008.
AIG announced the all-cash deal on Monday, saying the acquisition would offer an immediate boost to its earnings.
Validus, which primarily sells reinsurance products in addition to its Lloyd's syndicate, crop insurance offerings and an insurance unit for US small businesses, was purchased by AIG for $68 a share, marking a 46% premium to its closing price on Friday.
Before the global financial crisis of 2008, AIG was one of the world's largest financial services firms, holding roughly $1trn in assets, but after divesting many businesses and assets to repay a US government bailout of $185bn, the firm watched as its asset value was cut in half.
Brian Duperreault, who joined AIG as its new chief executive in May 2017, had stated he would be on the lookout for moves that held the potential to reverse the shrinkage experienced over the last decade, including the reduction of a stock-buyback programme aimed at helping the company boost its earnings per share.
Duperreault had also said he would look for acquisitions in several areas, citing AIG's life-insurance and retirement-services business, especially overseas; its auto- and homeowners-insurance business, which is known for insuring the affluent, and its core business-insurance unit, by adding a focus on small and midsize companies.
Duperreault's deal meant the consolidation of several reinsurers based in the islands, a well-established centre for property-catastrophe reinsurance.
After hurricanes Harvey, Irma and Maria hit in 2017, Validus looked poised to strengthen profits as a result of sharply rising premiums, but as of 1 January rates renewals had fallen short of expectations.
"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 said.
Ed Noonan, Validus's chairman and chief executive officer, said the deal was beneficial for the company as it would help it in "becoming part of a larger, more diversified organization immediately opens new opportunities for our people and our franchise."
As of 1400 GMT, shares had lost 0.57% in pre-market trading and were trading at $61.55 each.