Arch Capital hits bull’s-eye with deal for AIG unit
NEW YORK (Bloomberg) — Like an archer at the Olympics, Arch Capital has landed its target: AIG’s mortgage insurance business.
The Bermudian-based insurer said late on Monday that it would buy United Guaranty for $3.4 billion in cash and stock. The deal is set to be more than 35 per cent accretive to both its earnings per share on a run-rate basis and will also immediately lift the company’s book value per share. Investors applauded Arch’s biggest deal on record — the shares climbed as much as 5 per cent yesterday to the highest level since its initial public offering some 21 years ago.
The transaction isn’t a complete surprise. Arch has been scaling back its property-and-casualty operations and recently made a notable stride in mortgage insurance. In the second quarter, that culminated in the latter posting an 81 per cent jump in new premiums written, a figure that was driven by its reinsurance of Australian mortgages.
For AIG, the price tag is lower than the $4 billion United Guaranty was said to be valued at in a planned IPO, but the sale allows for a cleaner exit. The insurance giant will receive at least $2.2 billion up front, and can begin selling its Arch Capital shares after an initial six-month lock-up.
The proceeds will come in handy for AIG, considering it hopes to return $25 billion to shareholders by the end of next year through dividends and buy-backs. On that basis, one can assume AIG’s newest board members — John Paulson and Samuel Merksamer of Icahn Capital — were quick to give this deal the green light. Every dollar counts.
Warning over mobile phone charges
Premier targeted by fake news website
MarketPlace acts to stop carts straying
OBA had chance to discuss race when in power
Hunt for new Cabinet Secretary
Hotel evacuated after water pipe bursts
Bermuda pays tribute to Regis
Sugar taxes come not as advertised
Azura hotel will welcome guests in 2019
Abandoned boat is a blot on the landscape
Outlet for Bermudian-made products
Internet danger is ‘uncharted territory’
Minors cheered on by his biggest supporters
What will change under the new US tax law
So much more than just horseplay
Take Our Poll