US insurance giant says deal brings reinsurance and Lloyd’s operations to group

AIG said it has agreed to acquire Bermudan reinsurer Validus Holdings for $5.6bn in cash.

The insurance giant said the acquisition is “a significant step forward in AIG’s strategy for profitable growth and brings a diverse and complementary set of attractive franchises across specialized products and regions.”

It said the deal significantly enhances AIG’s general insurance capabilities, adding an insurance underwriter, a Lloyd’s operation, US operations and an insurance-linked securities asset manager.

AIG will pay $68.00 cash per share for Validus stock, with the deal funded through cash on hand.

“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,” said AIG president and chief executive Brian Duperreault.

“With our global scale and the strength of our balance sheet, I am confident that Validus will thrive within AIG and strengthen our ability to deliver profitable growth for our shareholders as we strategically position AIG for the future.”

Validus chairman and chief executive Ed Noonan said: “We believe this transaction offers compelling value for our shareholders and reflects the strength of the business we’ve built together with our talented global team. Joining AIG and becoming part of a larger, more diversified organization immediately opens new opportunities for our people and our franchise.”

AIG’s general insurance chief executive Peter Zaffino said: “I have worked with and admired Validus since its formation and have the utmost respect for what the management team has achieved. They have built a business that is highly compatible with AIG’s general insurance business.

“Brokers and customers of both companies will benefit from this acquisition, and I look forward to all that we will be able to accomplish by bringing Validus into AIG.”

The acquisition includes Validus unit AlphaCat, which manages $3.2bn on behalf of clients by investing in insurance-linked securities products; Lloyd’s syndicate Talbot, which is focused on short tail specialty lines; Western World, a US specialty property and casualty underwriter and US crop insurer Crop Risk Services.