Validus Acquisition: A Major Growth Opportunity for AIG



Validus acquisition

On January 22, 2018, American International Group (AIG) made an announcement regarding the acquisition of Validus Holdings (VR). VR is in the business of primary insurance, reinsurance, and asset management. This acquisition could help position AIG for long-term growth, as VR’s franchises are complementary to AIG’s business.

With the help of the Validus acquisition, AIG’s General Insurance segment is expected to witness positive momentum. AIG’s return on equity and earnings per share (or EPS) are also expected to provide some momentum.

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AIG’s enterprise-value-to-sales ratio is ~1.6x on an LTM (last-12-months) basis. Among its peers (XLF), RenaissanceRe Holdings (RNR), Aspen Insurance Holdings (AHL), and Hartford Financial Services (HIG) posted enterprise-value-to-sales ratios of ~3.1x, 0.66x, and 1.3x, respectively, on an LTM basis.

Management’s views

AIG’s management believes that the Validus (VR) acquisition would add to the quality of the company and improve its underwriting performance. Because AIG already has a global presence and a strong balance sheet, the addition of Validus is expected to create further opportunities for long-term growth.

Validus’s management noted that this acquisition would be beneficial for its shareholders and its business. The acquisition involves ~$5.6 billion in cash and is expected to be wrapped up by mid-2018.


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