(Bloomberg) -- American International Group Inc. said it will sell virtually its entire reinsurance business to RenaissanceRe Holdings Ltd. in a deal worth roughly $3 billion as Chief Executive Officer Peter Zaffino continues his effort to streamline the New York-based firm.

RenaissanceRe will pay $2.74 billion in cash and $250 million of common shares for AIG’s Validus Re unit as well as the AlphaCat and the Talbot Treaty reinsurance business, AIG said Monday in a statement.

The insurer said the transaction will free up $400 million in capital. AIG will hold onto Talbot Underwriting Ltd. as well as Western World. Earlier this month, it sold Crop Risk Services, which it acquired as part of its original deal for Validus in 2018.

“Today’s announcement represents another key milestone for AIG and is strategically significant for both AIG and Validus Re,” Zaffino said in the statement. “For AIG, it further simplifies our business model and reduces volatility in our portfolio, while generating significant cash liquidity and capital efficiencies that enable us to accelerate our capital management strategy.”

RenaissanceRe said that it expects AIG to make “substantial investments” in its Capital Partners business, which includes the DaVinci Reinsurance and Fontana Re managed funds.

“This acquisition advances our strategy as a leading global property and casualty reinsurer, providing additional scale, and increasing our importance to customers,” RenaissanceRe CEO Kevin O’Donnell said in a statement. “By gaining access to a large, attractive book of reinsurance business in a favorable market environment, we expect to accelerate our three drivers of profit – underwriting, fee, and investment income.”

(Updates with RenaissanceRe statement starting in fifth paragraph.)

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