American International Group, Inc. (NYSE:AIG) today announced
that it has entered into an agreement to sell its 100 percent
interest in United Guaranty Corporation (UGC) to Arch Capital Group
Ltd. (Arch; NASDAQ:ACGL), a Bermuda-based writer of specialty lines
of property and casualty insurance and reinsurance, as well as
mortgage insurance and reinsurance, on a worldwide basis.
Total consideration for the transaction is $3.4 billion,
consisting of $2.2 billion of cash, $250 million of newly issued
Arch perpetual preferred stock, and $975 million of newly issued
Arch convertible non-voting common-equivalent preferred stock.
In lieu of receiving the perpetual preferred stock, AIG may
elect to receive up to $250 million in pre-closing dividends,
subject to regulatory approval, or Arch may provide additional cash
consideration. In addition to the $3.4 billion of total
consideration, AIG will retain all mortgage insurance business
ceded under an existing 50% quota share agreement between UGC and
AIG subsidiaries for business originated from 2014 through
2016.
“Today we have reached an important milestone in a strategy we
committed to in March 2015, when I stated in my first shareholder
letter as AIG CEO that we would ‘sculpt the future AIG’ into a more
focused company and that selective divestitures would be an
important part of reaching that goal,” said Peter Hancock,
President and Chief Executive Officer of AIG. “We restated that
objective earlier this year when we made the IPO and eventual sale
of UGC a key part of an updated overall strategic framework for
AIG.”
“We believe this transaction maximizes UGC’s value while further
streamlining our organization. It puts us in a stronger position to
invest in the talent and technology essential to being our clients’
most valued insurer, while we continue to deliver on the promise
made by AIG’s Board and management to return $25 billion to our
shareholders by the end of 2017. The deal also maintains our
affiliation with the mortgage insurance market and its leading
company, through retention of recent business written by UGC and
our stake in Arch.”
Closing of this transaction is subject to required regulatory
approvals.
Each share of convertible non-voting common-equivalent preferred
stock automatically converts to ten Arch common shares upon
transfer to a third-party in a widely dispersed offering or certain
other transfers. Based on the closing stock price of Arch on August
12, 2016, the convertible non-voting common-equivalent preferred
stock would convert into approximately 9% of the Arch common stock
(based on the number of shares outstanding that day). AIG has
agreed to enter into an investor rights agreement with Arch, which
will provide, among other things, customary registration rights
following a lock-up period.
“We are excited about the combination of ACGL and United
Guaranty because these companies have led the market in innovation
through their risk based pricing models and focus on data
analytics,” said Dinos Iordanou, Chairman and CEO of Arch Capital
Group Ltd. “We believe that the companies’ complementary risk
management cultures will further accelerate innovation and sound
risk management and help us to maximize our best-in-class processes
in the specialty insurance space.”
Mr. Hancock added, “We believe UGC and the outstanding
professionals who work there have gained a strong partner in Arch
to continue to grow and facilitate home ownership for consumers and
provide valuable and necessary protection to mortgage lenders.”
J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC
served as financial advisors to AIG, and Sullivan & Cromwell
LLP served as legal advisor to AIG on the transaction.
UGC is the leading private mortgage insurance company in the
United States with $186.4 billion of first-lien primary mortgage
insurance in force as of June 30, 2016. UGC has active
relationships with over 1,800 customers and approximately 1,050
employees including a national sales force of approximately 100
professionals. UGC is headquartered in Greensboro, North Carolina
and is a wholly owned subsidiary of AIG.
Arch Capital Group Ltd. is a Bermuda public limited liability
company with approximately $7.60 billion in capital at June 30,
2016, and, through operations in Bermuda, the United States, Europe
and Canada, writes specialty lines of property and casualty
insurance and reinsurance, as well as mortgage insurance and
reinsurance, on a worldwide basis.
This press release contains “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements, including the closing of
the transaction described herein, are not historical facts but
instead represent only AIG’s belief regarding future events, many
of which, by their nature, are inherently uncertain and outside
AIG’s control. Except for AIG’s ongoing obligation to disclose
material information as required by federal securities laws, AIG is
not under any obligation (and expressly disclaims any obligation)
to update or alter any forward-looking statements, whether written
or oral, that may be made from time to time, whether as a result of
new information, future events or otherwise. Factors that could
cause AIG’s actual results to differ, possibly materially, from any
forward-looking statements include the factors set forth in AIG’s
filings with the United States Securities and Exchange
Commission.
American International Group, Inc. (AIG) is a leading global
insurance organization. Founded in 1919, today we provide a wide
range of property casualty insurance, life insurance, retirement
products, mortgage insurance and other financial services to
customers in more than 100 countries and jurisdictions. Our diverse
offerings include products and services that help businesses and
individuals protect their assets, manage risks and provide for
retirement security. AIG common stock is listed on the New York
Stock Exchange and the Tokyo Stock Exchange.
Additional information about AIG can be found at www.aig.com and
www.aig.com/strategyupdate | YouTube: www.youtube.com/aig |
Twitter: @AIGinsurance | LinkedIn:
http://www.linkedin.com/company/aig. These references with
additional information about AIG have been provided as a
convenience, and the information contained on such websites is not
incorporated by reference into this press release.
AIG is the marketing name for the worldwide property-casualty,
life and retirement, and general insurance operations of American
International Group, Inc. For additional information, please visit
our website at www.aig.com. All products and services are written
or provided by subsidiaries or affiliates of American International
Group, Inc. Products or services may not be available in all
countries, and coverage is subject to actual policy language.
Non-insurance products and services may be provided by independent
third parties. Certain property-casualty coverages may be provided
by a surplus lines insurer. Surplus lines insurers do not generally
participate in state guaranty funds, and insureds are therefore not
protected by such funds.
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version on businesswire.com: http://www.businesswire.com/news/home/20160815006157/en/
American International Group, Inc.Media:Matt Gallagher,
212-458-3247matthew.gallagher2@aig.comorInvestors:Liz Werner,
212-770-7074elizabeth.werner@aig.com
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