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AIG Close to Selling Mortgage Unit to Arch (ACGL) for $3.4 Billion
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American International Group (AIG - Free Report) is close to reaching a deal to sell its mortgage-guaranty unit to Arch Capital Group (ACGL - Free Report) for around $3.4 billion, as reported by WSJ. Arch is a financial services firm with significant exposure to insurance, and the company seeks to expand its mortgage-insurance business by acquiring AIG’s mortgage business known as United Guaranty. People close to the matter suggest that a deal could be finalized as early as this week, although they do acknowledge that there is still a possibility of failing to reach an agreement.
United Guaranty was scheduled to spin off from AIG in its own IPO later this year. The business is bullish on the housing market in the long run, and it believes this in part because of a rise in millennials interested in buying homes. AIG hopes to get the business off of its books so that it can slim down its balance sheet.
AIG, and activist investor Carl Icahn in particular wanted to reduce the insurer’s balance sheet so that it could shake off its label as a systematically important financial institution (SIFI). Under this designation, companies must adhere to strict liquidity and capital requirements because of the notion that they are “too big to fail”. AIG got this label after being bailed out for $85 billion in the aftermath of the 2008 financial crisis. AIG CEO Peter Hancock downplayed any strive towards shaking off the SIFI label, saying that getting rid of it was not even in the top 10 strategic issues that AIG currently faces.
The insurer now has the possibility of selling United Guaranty for $3.4 billion, and this will help the company get closer to reaching its goal of delivering $25 billion back to shareholders by the end of 2017. The insurer recently released its second quarter earnings report, where AIG disclosed that it had returned about $7.9 billion to shareholders (mostly in the form of buybacks) so far year-to-date.
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AIG Close to Selling Mortgage Unit to Arch (ACGL) for $3.4 Billion
American International Group (AIG - Free Report) is close to reaching a deal to sell its mortgage-guaranty unit to Arch Capital Group (ACGL - Free Report) for around $3.4 billion, as reported by WSJ. Arch is a financial services firm with significant exposure to insurance, and the company seeks to expand its mortgage-insurance business by acquiring AIG’s mortgage business known as United Guaranty. People close to the matter suggest that a deal could be finalized as early as this week, although they do acknowledge that there is still a possibility of failing to reach an agreement.
United Guaranty was scheduled to spin off from AIG in its own IPO later this year. The business is bullish on the housing market in the long run, and it believes this in part because of a rise in millennials interested in buying homes. AIG hopes to get the business off of its books so that it can slim down its balance sheet.
AIG, and activist investor Carl Icahn in particular wanted to reduce the insurer’s balance sheet so that it could shake off its label as a systematically important financial institution (SIFI). Under this designation, companies must adhere to strict liquidity and capital requirements because of the notion that they are “too big to fail”. AIG got this label after being bailed out for $85 billion in the aftermath of the 2008 financial crisis. AIG CEO Peter Hancock downplayed any strive towards shaking off the SIFI label, saying that getting rid of it was not even in the top 10 strategic issues that AIG currently faces.
The insurer now has the possibility of selling United Guaranty for $3.4 billion, and this will help the company get closer to reaching its goal of delivering $25 billion back to shareholders by the end of 2017. The insurer recently released its second quarter earnings report, where AIG disclosed that it had returned about $7.9 billion to shareholders (mostly in the form of buybacks) so far year-to-date.