RenaissanceRe to acquire Tokio Millennium Re in $1.5 billion deal
Kevin O’Donnell, president and CEO of RenaissanceRe, said the deal will increase his company’s scale, broaden its reach and provide a deeper customer base. O’Donnell thanked State Farm for agreeing to broaden its relationship with RenaissanceRe. Tokio Marine Holdings President and Group CEO Tsuyoshi Nagano said selling TMR will allow Tokio Marine Group to “focus on its primary insurance businesses globally, whilst strengthening its relationship” with RenaissanceRe.
Bermuda-based RenaissanceRe Holdings has agreed to pay about $1.5 billion to acquire Tokio Marine’s reinsurance platform (TMR), which includes Tokio Millennium Re AG and Tokio Millennium Re (UK).
If closing tangible book value is unchanged from June 30, 2018, Tokio Marine would receive approximately $1.5 billion in cash and RenaissanceRe common shares.
RenaissanceRe said it expects that the transaction will be immediately accretive to book value per share, tangible book value per share, operating earnings per share and operating return on equity.
RenaissanceRe’s planned $1.5 billion purchase of Tokio Millennium Re (TMR) reinforces its strategy of being an independent reinsurer, according to Kevin O’Donnell, president and CEO of RenRe.
“The TMR transaction will accelerate our strategy by providing us greater penetration into the reinsurance market at a time when desirable risks remain scarce,” O’Donnell said
Kevin O’Donnell, president and CEO of RenaissanceRe, said the deal will increase his company’s scale, broaden its reach and provide a deeper customer base. O’Donnell thanked State Farm for agreeing to broaden its relationship with RenaissanceRe.
Tokio Marine Holdings President and Group CEO Tsuyoshi Nagano said selling TMR will allow Tokio Marine Group to “focus on its primary insurance businesses globally, whilst strengthening its relationship” with RenaissanceRe.
“Through the divestment of the reinsurance activities of TMR and TMR(UK), the Group will reduce volatility in its results and also unlock the capital that was held to support these operations. Our strategic focus will continue to be on primary insurance business in developed countries as well as emerging market,” Nagano said.
About two-thirds of TMR’s business—$1.1 billion of the $1.6 billion total —comes from North America. At RenRe, North American business was roughly one-third of the 2017 property book and 20 percent of the casualty and specialty segment.
According to TMR’s 2017 annual report, natural and manmade catastrophe losses last year resulted in the biggest bottom-line net loss in TMR’s history—$158.9 million. RenRe also took a hit from last year’s record-breaking insured catastrophe losses for the industry, recording a net loss of $244.8 million for the year.
According to an analysis by Carrier Management, property-cat premiums of $1.1 billion represented 39.5 percent of RenRe’s $2.8 billion of total premiums written last year, and more than three-quarter of the total property reinsurance book. For TMR, property-cat premiums of $390 million represented on 24.3 percent of total assumed premiums of $1.6 billion and just over 60 percent of the total TMR property reinsurance book.
Tokio Marine Group established TMR in 2000 as a subsidiary to write overseas reinsurance risks. Since that time, the insurer said TMR and TMR(UK) have contributed to profits. However, during the continuing soft market in the global reinsurance market TMT’s contribution to overall profit has fallen significantly from approximately 50 percent to below 10 percent in a decade.
Today Tokio Marine consists of 245 subsidiaries and 32 affiliates worldwide. Tokio Marine’s non-life domestic businesses include Nichido Fire, Nishin Fire, E.design and Millea SAST. Starting in 2007, the insurer began making significant acquisitions including Kiln Group, Philadelphia Insurance, Delphi Financial, HCC, Seguradora and Mellennium Re, building a diversified global portfolio focusing primarily on specialty insurance classes of business.