Bloomberg News

Validus Chief Noonan Says ‘Size Does Matter’ for Reinsurers

July 13, 2011

(Updates shares in the last paragraph.)

July 13 (Bloomberg) -- Validus Holdings Ltd. Chief Executive Officer Ed Noonan, who bid $3.5 billion for Transatlantic Holdings Inc., said increased scale benefits reinsurers as they seek to attract clients.

“Size does matter in terms of your ability to take on risk and manage risk,” Noonan said in an interview today. “Size and scale is an asset to the reinsurance business and it seems like increasingly more so with the passage of time.”

Validus offered $55.95 a share to buy Transatlantic and derail a planned $3.2 billion merger with Allied World Assurance Company Holdings AG. Bermuda-based Validus said its offer would create the world’s sixth-largest reinsurer and the second- biggest in North America, behind Warren Buffett’s Berkshire Hathaway Inc. Reinsurers back primary carriers against some of the costliest risks, including natural disasters.

Transatlantic, which was previously owned by American International Group Inc., is among reinsurers that have sought mergers to gain scale. Validus acquired IPC Holdings Ltd. in 2009 after it broke up a merger agreement with Max Capital Ltd. Bermuda-based Max Capital joined with Harbor Point Ltd. last year to form Alterra Capital Holdings Ltd.

Validus was formed in 2005 amid demand for catastrophe reinsurance after hurricanes Katrina and Rita. The company was backed by Aquiline Capital Partners LLC, run by Jeffrey Greenberg, the former Marsh & McLennan Cos. CEO who is on the Validus board.

Breakup Fee

Transatlantic would have to pay a breakup fee of $115 million if it backs out of the Allied deal, it said last month in a conference call. Transatlantic’s biggest shareholder, Davis Selected Advisers LP, said in June it may oppose the Allied deal and approach other companies about alternatives.

“A lot of Transatlantic shareholders feel the same way,” Noonan said, without naming investors. “We’re getting calls from lots of them today. You have a general awareness that the Allied World bid perhaps undervalued the company.”

Transatlantic’s board will “consider and evaluate the Validus proposal in due course and will inform Transatlantic stockholders of its position,” the New York-based company said in a statement today. “Transatlantic advises stockholders to not take any action at this time and to await the board’s recommendation.”

A spokeswoman for Allied had no immediate comment.

Transatlantic gained $2.52, or 5.1 percent, to $51.54 at 4:15 p.m. in New York Stock Exchange composite trading. Zug, Switzerland-based Allied climbed 51 cents, or 0.9 percent, to $57.23. Validus dropped $2.79, or 9.1 percent, to $28.02.

--Editors: Dan Kraut, Peter Eichenbaum

To contact the reporter on this story: Brooke Sutherland in New York at bsutherland5@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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