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RenaissanceRe Holding to acquire Tokio Millennium Re

Share Source By

Dion Global

31 Oct 2018

RenaissanceRe Holdings Ltd. announced that it has entered into a definitive agreement with Tokio Marine Holdings, Inc. pursuant to which an affiliate of RenaissanceRe will acquire Tokio Marine’s reinsurance platform, which includes Tokio Millennium Re AG and Tokio Millennium Re (UK) Limited.

Under the terms of the transaction, Tokio Marine will receive 1.02x the tangible book value of TMR delivered to RenaissanceRe at closing. If closing tangible book value is unchanged from June 30, 2018, Tokio Marine would receive approximately USD 1.5 billion in total consideration, consisting of cash and RenaissanceRe common shares.

RenaissanceRe expects that upon closing 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.

The agreement has been unanimously approved by the Boards of Directors of both companies. The transaction is expected to close in the first half of 2019 and is subject to customary closing conditions and regulatory approvals. No shareholder approval is required.

Under the terms of the agreement, if closing tangible book value is unchanged from June 30, 2018, the transaction consideration would consist of approximately $1.22 billion of cash and $250 million of RenaissanceRe common shares. The shares received by Tokio Marine will be valued at today’s closing price of $128.37 per common share, subject to adjustment at closing and a one-year holding period commencing at closing. The cash consideration will be funded through RenaissanceRe available funds and a potential pre-closing dividend from TMR, subject to regulatory approval.

In connection with the transaction, Tokio Marine has agreed to provide RenaissanceRe a $500 million adverse development cover that will protect TMR’s stated reserves at closing, including unearned premium reserves. In addition, Tokio Marine and RenaissanceRe will enter a business cooperation agreement, which will enhance their business relationship and facilitate cooperation on a portion of the international reinsurance purchases of Tokio Marine and its affiliates.

In addition, State Farm Mutual Automobile Insurance Company (“State Farm”) has agreed to invest $250 million in RenaissanceRe through its purchase of RenaissanceRe’s common shares in a private placement, following termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The shares purchased by State Farm will be valued at today’s closing price of $128.37 per common share. Following the completion of its investment, State Farm will own approximately 4.8% of RenaissanceRe’s total common shares outstanding, reflecting a broader relationship with RenaissanceRe that includes State Farm’s investments in RenaissanceRe-managed vehicles Top Layer Reinsurance Ltd. and DaVinciRe Holdings Ltd.