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Validus Buys Western World, Expands Specialty Insurance

Shares of Validus Holdings, Ltd. (VR) gained 1.7% to close at $39.87 following the closure of Western World Insurance Group, Inc. acquisition.

The acquisition was announced this June. Validus Holdings acquired Western World for $690 million in an all-cash transaction. This bears testimony to the solid liquidity of the acquirer.

New Jersey-based Western World is a provider of specialty lines insurance boasting a track record of five decades of profitability. It also is a forerunner in the binding authority business model. Hence, adding Western World to Validus’ portfolio will boost the global specialty insurance business. Western World will operate as a standalone business steered by its present management team.

While Western World will complement Validus’ short-tail operations in Bermuda and London, the company stands to gain form the acquirer’s capital and proficiency in short tail classes of business that will help it to edge out competition.

In addition, the combination of Western World with its excellent U.S. distribution platform plus industry leading technology and Validus, a leader in the short-tail insurance and reinsurance market, will benefit customers with superior products and services.

Validus Holdings had earlier undertaken strategic acquisitions that drove its operational results and beefed up its inorganic growth profile. The recent acquisition came after a hiatus of almost two years. Back in Nov 2012, Validus acquired Flagstone Reinsurance Holdings, S.A. The acquisition had fortified Validus’ property catastrophe reinsurance and short-tail specialty insurance platform.

With optimism over its compelling inorganic growth we expect the analysts to pull up their estimates. The Zacks Consensus Estimate is currently pegged at $4.98 for both 2014 and 2015.

As insurance brokers choose the inorganic route for growth, the takeover saga rages the space. Last month, Arthur J. Gallagher & Co. (AJG) acquired The Benfield Group to ramp up its employee benefit business.

Willis Re Inc., the North American reinsurance business of Willis Group Holdings plc (WSH), inked a deal to buy SurePoint Reinsurance Advisors, LLC in its efforts to ramp up its accident and health (A&H) insurance business. Marsh Inc., the insurance brokerage wing of Marsh & McLennan Companies Inc. (MMC), acquired Montreal-based commercial insurance brokerage, Kocisko Insurance Brokers Inc.

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