2023-05-25 10:50:27 ET
Jefferies upgraded RenaissanceRe ( NYSE: RNR ) to Buy from Hold as its ~$3B deal to buy Validus Reinsurance from American International Group ( AIG ) it is a "win-win-win for AIG, RNR and reinsurers".
Shares of RenaissanceRe ( RNR ) rose 1.3% in morning trade.
"We view this acquisition as both strategic and financial, accretive to AIG, to RNR starting in year 2, and with possible value add of supporting the hard property reinsurance market by removing a large competitor and associated capital," said analyst Yaron Kinar. "RNR becomes a top 5 reinsurer and AIG reduces CAT load and uses proceeds for accretive buyback."
Jefferies expects the deal will add ~$225M to RenaissanceRe's ( RNR ) underwriting income, $225M to net interest income and $15M-$30M in fee income (depending on whether or not AIG exercises its investment option in Capital Partners).
Price target was raised to $238 from $234, implying 24% potential upside to RNR's last close.
Jefferies assumes an incremental $2B of buybacks in 2024 for AIG ( AIG ), as well as $1B in debt reduction. It rates the stock Buy, with a $71 PT (30.1% potential upside to last close).
More on Validus Re deal
- AIG up 5% on Validus Re sale, Citi says deal furthers simplification
- RenaissanceRe prices 6.3M share offering
- RenaissanceRe to acquire Validus Re from AIG for $3B
For further details see:
Jefferies upgrades RenaissanceRe to Buy, calls Validus Re deal a 'win-win-win'