Copyright Fortune
The terms of the Convex deal, those privy to the negotiations told Fortune, include an initial $2.2 billion commitment to acquire a 35% in Convex Group, the specialty insurer known for underwriting complex risks. In parallel, AIG will further invest about $640 million for a 9.9% stake in Onex, Convex’s majority shareholder. Post-transactions, Onex will own 63% of Convex, and AIG will hold minority interests in both entities. Convex, which was started in 2019, has emerged as a force in specialty insurance, growing rapidly to more than $5 billion in premiums. Convex’s combined ratio— a key profitability metric that shows how efficiently an insurer is running its core underwriting business—is 87.6%, nine percentage points better than the overall U.S. property and casualty (P&C) industry. Convex is also in the top quartile of global reinsurers and significantly above traditional insurance peers in terms of return on equity with an ROE of 17%. Shareholder equity (Convex’s net worth) at the company sits at $3.67 billion, up more than 16% year-over-year from $1.76 billion in 2022. Aside from its performance, the firm has raised upwards of $3 billion from investors, including an initial $1.8 billion commitment by Onex. Beyond passive equity, AIG is negotiating a “whole-account quota share reinsurance agreement” with Convex, which promises additional returns by providing AIG with a share of Convex’s underwriting profits. Over the next three years, AIG will also deploy $2 billion into Onex’s investment funds, with preferred access to Onex’s high-return platforms. For Zaffino, who has spent the past half-decade reshaping AIG—from shedding non-core operations to reducing its risk exposure by over $1 trillion, to doubling down on underwriting discipline—the Convex deal is the latest in his campaign to revitalize the once ailing company.
