Summary
AMERICAN INTERNATIONAL GROUP, INC. (AIG) has announced a significant strategic divestiture through a definitive agreement to sell its wholly-owned subsidiary, United Guaranty Corporation (UGC), to Arch Capital Group Ltd. (Arch). The transaction is valued at $3.4 billion, comprising $2.2 billion in cash, $250 million in Arch perpetual preferred stock, and $975 million in Arch convertible non-voting common-equivalent preferred stock. This sale represents AIG's exit from the mortgage guaranty insurance business, allowing the company to focus on its core operations. The deal is subject to customary closing conditions, including regulatory and antitrust approvals, with a target closing date initially set for March 31, 2017, extendable to June 30, 2017. AIG will retain mortgage insurance business originated from 2014 through 2016 under an existing quota share agreement. Additionally, AIG will receive registration rights for the Arch preferred stock, providing potential future liquidity. A termination fee of $150 million is payable by Arch under specific circumstances, primarily related to the failure to obtain regulatory approvals.
Key Highlights
- 1AIG to sell its United Guaranty Corporation (UGC) subsidiary to Arch Capital Group Ltd. for $3.4 billion.
- 2Transaction consideration includes $2.2 billion cash, $250 million Arch perpetual preferred stock, and $975 million Arch convertible preferred stock.
- 3Sale marks AIG's exit from the mortgage guaranty insurance sector.
- 4AIG will retain mortgage insurance business from 2014-2016 originated under a quota share agreement.
- 5Closing is subject to regulatory approvals and other customary conditions, with an outside date of June 30, 2017.
- 6AIG receives registration rights for Arch securities, facilitating future monetization.
- 7Arch Capital Group is obligated to pay AIG a $150 million fee if the deal terminates due to specific regulatory failures.