AIG will sell reinsurance business Validus Re to Renaissance Re in a $US2.985 billion ($4.5 billion) cash and shares transaction. 

The divestment further simplifies AIG’s business model and reduces volatility in the portfolio, while generating cash liquidity and capital efficiencies, Chairman and CEO Peter Zaffino said. 

AIG will retain Talbot Underwriting and Western World, which were purchased as part of its 2018 Validus Holdings acquisition, and which represent about $US1.6 billion ($2.4 billion) of AIG total gross written premium. 

Mr Zaffino says AIG has transformed Validus Re by re-underwriting the portfolio and driving improvements and the business will benefit from global scale as part of Renaissance Re. 

“At the same time, our investment in Renaissance Re’s common shares demonstrates our commitment to the strong relationship we have with Renaissance Re and, coupled with our investment in DaVinci Reinsurance and Fontana Re, will allow us to continue to participate in the growth of the reinsurance market with less risk and capital requirements,” he said. 

The deal, comprising $US2.735 billion ($4.126 billion) in cash and $US250 million ($377 million) in shares, is expected to close in the fourth quarter subject to regulatory approvals and other conditions. 

“This acquisition advances our strategy as a leading global property and casualty reinsurer, providing additional scale, and increasing our importance to customers,” Renaissance Re CEO Kevin O’Donnell said. 

“Furthermore, by gaining access to a large, attractive book of reinsurance business in a favourable market environment, we expect to accelerate our three drivers of profit - underwriting, fee, and investment income.”

Renaissance Re has offices in Bermuda, Australia, Ireland, Singapore, Switzerland, the UK and the US.