8-KRegulation FDOther EventsExhibits & Filings

ARCH CAPITAL GROUP LTD. 8-K Report, Regulation FD Disclosure (Jan 30, 2014)

Filed January 30, 2014For Securities:ACGLACGLNACGLO

Summary

Arch Capital Group Ltd. (ACGL) announced on January 30, 2014, the successful closing of a significant acquisition by its U.S.-based subsidiaries (Arch U.S. MI). This transaction involved the acquisition of CMG Mortgage Insurance Company (CMG MI) and the mortgage insurance platform of PMI Mortgage Insurance Co. (PMI). The acquisition of CMG MI, which will be renamed Arch Mortgage Insurance Company, is particularly noteworthy as it has been approved by Fannie Mae and Freddie Mac (GSEs), subject to ongoing capital and risk-ratio requirements. This approval is crucial for its operations in the mortgage insurance market. The deal also included the acquisition of PMI's mortgage insurance operating platform and related assets. In conjunction with the acquisition, Arch U.S. MI entered into a 100% quota share reinsurance agreement with PMI to cover PMI's legacy certificates issued between January 1, 2009, and December 31, 2011. Arch U.S. MI paid $253.0 million at closing, with potential for additional payments based on the performance of CMG MI's pre-closing portfolio. A services agreement was also established for Arch to administer PMI's legacy business.

Key Highlights

  • 1Arch Capital Group Ltd. acquired CMG Mortgage Insurance Company (CMG MI) and the mortgage insurance platform of PMI Mortgage Insurance Co. (PMI) through its U.S. subsidiaries.
  • 2The acquired entity, CMG MI, will be rebranded as Arch Mortgage Insurance Company.
  • 3CMG MI has received approval from Fannie Mae and Freddie Mac to operate as an eligible mortgage insurer, subject to maintaining specific financial requirements.
  • 4Arch U.S. MI entered into a 100% quota share reinsurance agreement to cover PMI's legacy mortgage insurance policies issued between January 1, 2009, and December 31, 2011.
  • 5The total consideration paid at closing for these acquisitions was $253.0 million, with potential for future performance-based adjustments.
  • 6Arch will provide services to manage the run-off of PMI's legacy business.
  • 7The GSE approvals for CMG MI come with conditions, including maintaining minimum capital and risk-to-capital ratios, and restrictions on capital returns and certain transactions without GSE consent.

Frequently Asked Questions

The primary purpose of this 8-K filing was to disclose the closing of Arch Capital Group Ltd.'s acquisition of CMG Mortgage Insurance Company and the mortgage insurance platform of PMI Mortgage Insurance Co. by its U.S. subsidiaries, along with key details of the transaction.

The approvals from Fannie Mae and Freddie Mac (GSEs) are critical because they allow the acquired entity, to be renamed Arch Mortgage Insurance Company, to operate as an eligible mortgage insurer. This eligibility is fundamental for its business operations and ability to insure mortgages that are eligible for purchase by the GSEs.

Arch Capital Group Ltd. paid an aggregate consideration of $253.0 million at closing. The company may also be required to pay additional amounts based on the actual performance of CMG MI's pre-closing portfolio over an agreed-upon period.

Arch U.S. MI has entered into a 100% quota share reinsurance agreement to cover PMI's legacy certificates issued between January 1, 2009, and December 31, 2011. Additionally, Arch will provide services to administer the run-off of PMI's legacy business under an agreement with PMI.