AIG Nears Deal to Sell Mortgage-Insurance Unit to Arch Capital for About $3.4 Billion
16 August 2016 - 3:27AM
Dow Jones News
By Leslie Scism and Joann S. Lublin
American International Group Inc. is nearing a deal to sell its
mortgage-guaranty unit to Arch Capital Group Ltd. for about $3.4
billion, according to people familiar with the matter, as the
insurance giant has been speeding up the return of cash to restive
shareholders.
An agreement between the companies could be reached as soon as
early this week, some of the people said, cautioning that the talks
could still fall apart.
AIG had announced plans early this year to stage an initial
public offering of the mortgage business, known as United Guaranty,
while retaining a majority stake. Selling the unit outright would
help it more quickly meet a goal of returning $25 billion to
shareholders. Indeed, there have been a number of instances lately
in which companies have opted for sales instead of initial public
offerings as the new-issue market languishes. The Wall Street
Journal reported in early August that AIG was open to an outright
sale of the mortgage-insurance unit.
Home buyers who put down less than 20% of the purchase price are
required to obtain mortgage insurance to protect the lender from
losses. Since the housing-bubble burst, mortgage insurers have
posted better results due to the increasing quality of underlying
loans and fewer defaults as the U.S. economy gradually
improved.
AIG's mortgage-insurance operation, with about 20% market share
in the U.S., has been one of the company's star performers of late.
But it's considerably smaller than AIG's other businesses and has
long operated as a separate entity. That makes it easier to divest
than other parts of the company -- one of the world's biggest
property-casualty businesses with a leading U.S. life-insurance
operation -- as it seeks to slim down and make good on the
ambitious capital-return pledge.
Write to Leslie Scism at leslie.scism@wsj.com and Joann S.
Lublin at joann.lublin@wsj.com
(END) Dow Jones Newswires
August 15, 2016 13:12 ET (17:12 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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