Validus to Acquire Talbot Holdings; Best Puts Ratings under Review

Bermuda-based Validus Holdings, Ltd. has entered into a share sale agreement to acquire all of the outstanding shares of Talbot Holdings Ltd. from the institutional investors, employees and management who currently own them.

Talbot is a privately owned Bermuda-based company, which underwrites marine, property, financial institutions, contingency insurance and treaty reinsurance through Lloyd’s Syndicate 1183.

Further details of the transaction were not announced. The sale is conditioned on regulatory approvals from the Financial Services Authority, the Corporation of Lloyd’s and the Bermuda Monetary Authority.

Validus Holdings, Ltd. specializes in providing reinsurance coverage through its wholly owned subsidiary Validus Reinsurance, Ltd. The Company was established at the end of 2005 and is led by ex-Marsh CEO Jeffrey Greenberg.

A.M. Best reacted to the news by placing Validus Re’s “A-” (Excellent) financial strength ratings, and the issuer credit ratings of “a-” “under review with negative implications.” Best also placed the ICR of “bbb-” of Validus Holdings, Ltd. under review with negative implications.

Best said the under review status “is attributable to the execution risk inherent with financing this transaction, which hinges upon the successful completion of the initial public offering (IPO). Should the IPO be unsuccessful in raising sufficient funds, it could cause Validus’ risk-adjusted capital to fall below A.M. Best’s expectations.”

Best also indicated that it’s concerned about the “current market dynamics of softening property catastrophe rates,” which, it said “places additional pressure on Validus to meet its targeted goals.”

There’s also an upside, as Best recognized that acquiring Syndicate 1183 “would bring a seasoned book of business as well as broader market access to Validus,” and would “enhance Validus’ market profile.”

Best said the ratings would remain under review pending its “review of the transaction, Validus Holdings, Ltd.’s integration plan and its risk-adjusted capital position upon completion of the deal.”