RenaissanceRe, a Bermuda-based re/insurance provider, has signed an agreement to acquire rival Tokio Millennium Re (TMR) in a cash-stock deal worth about $1.5bn.
As per the terms of the agreement, an affiliate of RenaissanceRe will acquire Tokio Marine’s reinsurance platform including Tokio Millennium Re AG and Tokio Millennium Re (UK) (TMR) from its parent company Tokio Marine Holdings.
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The deal comprises $1.22bn of cash and $250m of RenaissanceRe common shares. The acquirer said that the cash part of the transaction will be funded through available funds and a potential pre-closing dividend from TMR.
The boards of directors of both companies have approved the deal, which is scheduled to conclude during the first half of 2019.
In connection with the transaction, RenaissanceRe will be offered a $500m adverse development cover by Tokio Marine that will protect TMR’s stated reserves at closing, including unearned premium reserves.
Further, Tokio Marine and RenaissanceRe will sign a business cooperation agreement to improve their business relationship.
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By GlobalDataThe agreement will also extend support to buy a portion of the international reinsurance of Tokio Marine and its affiliates.
RenaissanceRe CEO Kevin O’Donnell said: “This transaction will increase our scale, broaden our reach and extend our ability to apply our core strengths to a deeper customer base.
“Our unique ability to capitalise on large, one-of-a-kind opportunities underscores our global reinsurance leadership, including in casualty and specialty lines, and our ability to execute on our successful, highly differentiated strategy.”
Separately, State Farm Mutual Automobile Insurance Company will invest $250m in RenaissanceRe through its purchase of RenaissanceRe’s common shares in a private placement.
As a result of its investment, State Farm will own almost 4.8% of RenaissanceRe’s total common shares outstanding.
O’Donnell further stated: “We are also honoured that State Farm has agreed to broaden its relationship with RenaissanceRe by investing in our common shares and extending a long-standing partnership between our two firms.”
