Arch Capital Group Ltd. to Acquire United Guaranty Corporation
August 15 2016 - 04:46PM
Business Wire
Arch Capital Group Ltd. (Nasdaq:ACGL) (Arch) today announced
that it has entered into a definitive agreement to acquire United
Guaranty Corporation (UGC) and AIG United Guaranty Insurance (Asia)
Limited from their current owner, American International Group,
Inc. (AIG). The combination of Arch’s existing mortgage insurance
business with UGC’s established business will create the largest
private mortgage insurer in the world, based on insurance in-force,
with a global footprint. At closing, Arch will pay to AIG aggregate
consideration of approximately $3.4 billion, payable in a
combination of cash and securities. Upon closing, Arch or its
subsidiaries will assume AIG’s quota share of UGC’s mortgage
insurance on a prospective basis. Subject to regulatory approvals,
the purchase price could be reduced by a special dividend of up to
$250 million from UGC to AIG prior to closing. It is anticipated
that the transaction will close late Fourth Quarter 2016 or early
First Quarter 2017, subject to approvals of the applicable
regulators and government-sponsored enterprises (GSEs), including
the North Carolina Department of Insurance, the Federal National
Mortgage Association (Fannie Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac), and the satisfaction of
customary closing conditions.
Constantine (Dinos) Iordanou, Chairman and CEO of Arch,
commented, “We are extremely pleased to be able to expand our
private mortgage insurance business through the acquisition of
United Guaranty. Our mortgage insurance segment expands and
complements our strengths in the specialty insurance and
reinsurance businesses, which continue to be central to our global,
diversified operations.”
“We are excited about the combination of Arch and United
Guaranty because these companies have led the market in innovation
through their risk based pricing models and focus on data
analytics. 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.”
Arch expects to retain a significant presence in North Carolina
while maintaining its existing mortgage insurance operations based
in California, and to combine the companies’ global operations in
Europe, Hong Kong and Australia.
“We are excited about this deal and what it means to AIG and the
talented professionals at UGC. It further streamlines AIG into a
more focused insurer and enhances our capital position, in keeping
with commitments AIG made to the market in early 2015 and restated
earlier this year,” said Peter Hancock, President and Chief
Executive Officer of AIG. “The transaction also maintains AIG’s
presence in a profitable market through a stake in a market leader
that shares our focus on risk-based pricing and analytics as the
foundation for our industry’s future. We are leaving UGC in the
good hands of a forward looking management team.”
“We expect to quickly integrate Arch’s existing California-based
mortgage insurance operations and the North Carolina-based
operations of United Guaranty while maintaining a strong presence
in both locations, thereby further developing our superior customer
service with nationwide and worldwide coverage,” said Mr. Iordanou.
“We believe that the expansion of our Mortgage Segment creates a
better balanced company that continues our history of creating long
term value for shareholders by producing strong underwriting
returns.”
Credit Suisse is acting as sole financial advisor and Cahill
Gordon & Reindel LLP and Clyde & Co are acting as legal
counsel to Arch.
Conference Call
Arch will hold a conference call for investors and analysts at
8:30 a.m. Eastern Time on August 16, 2016. A live webcast of this
call will be available via the Investors section of Arch’s website
at http://www.archcapgroup.com. A telephone replay of the
conference call also will be available beginning on August 16, 2016
at 11:30 a.m. Eastern Time until August 23, 2016 at midnight
Eastern Time. To access the replay, domestic callers should dial
1-404-537-3406 (passcode 66809275), and international callers
should dial 1-855-859-2056 (passcode 66809275).
About Arch Capital Group Ltd.
Arch Capital Group Ltd., a Bermuda-based company with
approximately $7.60 billion in capital at June 30, 2016, provides
insurance and reinsurance on a worldwide basis through its wholly
owned subsidiaries.
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward−looking statements. This release or any
other written or oral statements made by or on behalf of Arch
Capital Group Ltd. and its subsidiaries may include forward−looking
statements, which reflect our current views with respect to future
events and financial performance. All statements other than
statements of historical fact included in or incorporated by
reference in this release are forward−looking statements.
Forward−looking statements can generally be identified by the
use of forward−looking terminology such as "may," "will," "expect,"
"intend," "estimate," "anticipate," "believe" or "continue" or
their negative or variations or similar terminology.
Forward−looking statements involve our current assessment of risks
and uncertainties. Actual events and results may differ materially
from those expressed or implied in these statements. A
non-exclusive list of the important factors that could cause actual
results to differ materially from those in such forward-looking
statements includes the following: the risk Arch may be unable to
obtain governmental and regulatory approvals required for the
proposed transaction, or required governmental and regulatory
approvals may delay the proposed transaction, the occurrence of any
event, change or other circumstances that could give rise to the
termination of the acquisition agreement; or could otherwise cause
the failure of the acquisition to close, the risk that a condition
to the closing of the proposed transaction may not be satisfied,
the failure to obtain any financing necessary to complete the
acquisition, the outcome of any legal proceedings, regulatory
proceedings or enforcement matters that may be instituted against
Arch and others relating to the acquisition agreement, the timing
to consummate the proposed transaction, the diversion of management
time and attention on the transaction; adverse general economic and
market conditions; increased competition; pricing and policy term
trends; fluctuations in the actions of rating agencies and our
ability to maintain and improve our ratings; investment
performance; the loss of key personnel; the adequacy of our loss
reserves, severity and/or frequency of losses, greater than
expected loss ratios and adverse development on claim and/or claim
expense liabilities; greater frequency or severity of unpredictable
natural and man-made catastrophic events; the impact of acts
of terrorism and acts of war; changes in regulations and/or tax
laws in the United States or elsewhere; our ability to successfully
integrate, establish and maintain operating procedures as well as
integrate the businesses we have acquired or may acquire into the
existing operations; changes in accounting principles or policies;
material differences between actual and expected assessments for
guaranty funds and mandatory pooling arrangements; availability and
cost to us of reinsurance to manage our gross and net exposures;
the failure of others to meet their obligations to us; and other
factors identified in our filings with the U.S. Securities and
Exchange Commission.
The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with
other cautionary statements that are included herein or elsewhere.
All subsequent written and oral forward−looking statements
attributable to us or persons acting on our behalf are expressly
qualified in their entirety by these cautionary statements. We
undertake no obligation to publicly update or revise any
forward−looking statement, whether as a result of new information,
future events or otherwise.
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version on businesswire.com: http://www.businesswire.com/news/home/20160815006164/en/
Arch Capital Group Ltd.Mark D. Lyons, (441) 278-9250
Arch Capital (NASDAQ:ACGL)
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