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Arch Capital to Expand Private Mortgage Insurance Business
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Arch Capital Group Ltd. (ACGL - Free Report) is set to acquire United Guaranty Corporation and AIG United Guaranty Insurance Limited from the parent company, American International Group, Inc. (AIG - Free Report) . The buyout will enable the acquirer to expand its private mortgage insurance business.
The transaction value of approximately $3.4 billion will be paid by Arch Capital in a combination of cash and securities. Further, upon completion, the acquirer or its subsidiaries will assume American International’s quota share of the acquired company’s mortgage insurance on a prospective basis. However, subject to regulatory approvals, United Guaranty might pay a special dividend of up to $250 million to American International to reduce the transaction cost before the completion of the deal.
The transaction is likely to be completed by late fourth-quarter 2016 or early first-quarter 2017. The completion will be subject to regulatory approvals and government-sponsored enterprises (GSEs) as well as the fulfillment of customary closing conditions.
Arch Capital expects to maintain a strong position in North Carolina, while retaining its mortgage insurance operations in California. It also intends to combine its global operations with those of the acquired company in Europe, Hong Kong and Australia.
The combination of the acquired property and casualty insurer’s mortgage insurance business with United Guaranty’s already strong business will result in the formation of the largest private mortgage insurer in the world. The combination will further help the private mortgage insurer extend globally in terms of insurance in-force.
This apart, Arch Capital’s mortgage insurance segment supports its specialty insurance and reinsurance businesses, which will remain critical to the company’s globally diversified operations. Moreover, the transaction will result in the acceleration of innovation in the market through risk-based pricing models and focused data analytics of both Arch Capital and United Guaranty. In addition, the robust risk management cultures of both the companies will lead to the maximization of the best-in-class processes in the specialty insurance space.
Arch Capital intends to expedite the integration process. At the same time, the insurer hopes that despite the combination of its California-based mortgage insurance operations with the North Carolina-based operations of United Guaranty, it will be able to maintain a strong presence in both the locations. This will enhance the acquirer’s outstanding customary service with nationwide and worldwide coverage.
The company has sought inorganic route to build up its mortgage insurance business as evident from the acquisition of CMG Mortgage Insurance Company and the mortgage insurance operating platform of PMI Mortgage Insurance Co in Jan 2014. The acquisition broadened Arch Capital’s existing global mortgage insurance and reinsurance capabilities.
The expansion of Arch Capital's Mortgage segment is likely to build a better balanced company, which will continue the tradition of creating long-term value for shareholders by generating solid underwriting returns.
Currently, Arch Capital holds a Zacks Rank #2 (Buy). Investors interested in other stocks can also consider Argo Group International Holdings, Ltd. and National Interstate Corporation (NATL) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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Arch Capital to Expand Private Mortgage Insurance Business
Arch Capital Group Ltd. (ACGL - Free Report) is set to acquire United Guaranty Corporation and AIG United Guaranty Insurance Limited from the parent company, American International Group, Inc. (AIG - Free Report) . The buyout will enable the acquirer to expand its private mortgage insurance business.
The transaction value of approximately $3.4 billion will be paid by Arch Capital in a combination of cash and securities. Further, upon completion, the acquirer or its subsidiaries will assume American International’s quota share of the acquired company’s mortgage insurance on a prospective basis. However, subject to regulatory approvals, United Guaranty might pay a special dividend of up to $250 million to American International to reduce the transaction cost before the completion of the deal.
The transaction is likely to be completed by late fourth-quarter 2016 or early first-quarter 2017. The completion will be subject to regulatory approvals and government-sponsored enterprises (GSEs) as well as the fulfillment of customary closing conditions.
Arch Capital expects to maintain a strong position in North Carolina, while retaining its mortgage insurance operations in California. It also intends to combine its global operations with those of the acquired company in Europe, Hong Kong and Australia.
The combination of the acquired property and casualty insurer’s mortgage insurance business with United Guaranty’s already strong business will result in the formation of the largest private mortgage insurer in the world. The combination will further help the private mortgage insurer extend globally in terms of insurance in-force.
This apart, Arch Capital’s mortgage insurance segment supports its specialty insurance and reinsurance businesses, which will remain critical to the company’s globally diversified operations. Moreover, the transaction will result in the acceleration of innovation in the market through risk-based pricing models and focused data analytics of both Arch Capital and United Guaranty. In addition, the robust risk management cultures of both the companies will lead to the maximization of the best-in-class processes in the specialty insurance space.
Arch Capital intends to expedite the integration process. At the same time, the insurer hopes that despite the combination of its California-based mortgage insurance operations with the North Carolina-based operations of United Guaranty, it will be able to maintain a strong presence in both the locations. This will enhance the acquirer’s outstanding customary service with nationwide and worldwide coverage.
The company has sought inorganic route to build up its mortgage insurance business as evident from the acquisition of CMG Mortgage Insurance Company and the mortgage insurance operating platform of PMI Mortgage Insurance Co in Jan 2014. The acquisition broadened Arch Capital’s existing global mortgage insurance and reinsurance capabilities.
The expansion of Arch Capital's Mortgage segment is likely to build a better balanced company, which will continue the tradition of creating long-term value for shareholders by generating solid underwriting returns.
ARCH CAP GP LTD Price
ARCH CAP GP LTD Price | ARCH CAP GP LTD Quote
Zacks Rank and Stocks to Consider
Currently, Arch Capital holds a Zacks Rank #2 (Buy). Investors interested in other stocks can also consider Argo Group International Holdings, Ltd. and National Interstate Corporation (NATL) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>