AIG to Divest Reinsurance Biz to RenaissanceRe for Nearly $3B

American International Group (AIG) has decided to sell its reinsurance business to RenaissanceRe for nearly $3 billion in a cash and equity deal.

RenaissanceRe will pay $2.74 billion in cash and $250 million in stock. The transaction involves AIG’s Validus Re unit, along with AlphaCat and the Talbot Treaty reinsurance businesses.

CEO Peter Zaffino said the deal “further simplifies our business model and reduces volatility in our portfolio, while generating significant cash liquidity and capital efficiencies that enable us to accelerate our capital management strategy.”

The overall deal value is projected to surpass $4.5 billion with AIG getting all capital above $2.1 billion of shareholders’ equity of Validus Re.

The firm will also secure nearly $400 million in future capital synergies from the recapture of reserves by moving the Validus Re balance sheet to RenaissanceRe, which together was more than $1.5 billion as of the end of 2022.

AIG will retain Talbot Underwriting and Western World – purchased as part of its 2018 acquisition of Validus Holdings Ltd. The businesses currently represent about $1.6 billion of AIG’s total gross premiums written.

Post-deal completion, AIG plans to make investments in RenaissanceRe’s DaVinci Reinsurance and Fontana Re-managed funds through its investment portfolio.

Earlier this month, AIG agreed to sell Crop Risk Services, which was also bought as part of the firm’s acquisition of Validus in 2018, to American Financial Group in a $240 million transaction.