Maiden buys reinsurance operations from GMAC
By Erik Holm
NEW YORK (Bloomberg) — Bermuda reinsurer Maiden Holdings yesterday acquired the reinsurance business of GMAC.
Maiden, which was founded in May last year, also bought two insurance units from GMAC, the auto and home lender, which is striving to avoid a cash squeeze.
Maiden plans to raise $260 million through a rights offering in connection with the deal, the reinsurer said in a statement. Terms of the acquisitions weren't disclosed.
GMAC, partly owned by General Motors Corp., is selling profitable insurance units as it searches for new sources of capital after $5.4 billion of losses in the past year. The Detroit-based lender has said it has limited access to funding for home and auto lending and has tightened standards, making auto loans only to borrowers with excellent credit scores.
"From GMAC Insurance's perspective, given the current historic market turmoil, this addresses some of our current concerns in terms of providing liquidity and shoring up capital," said Sarah Comstock, a spokeswoman for GMAC's underwriting operations, in an interview yesterday.
The reinsurance unit earned $65 million pretax last year on policy sales of $525 million, providing protection to small and regional insurance companies, the statement said. About 120 GMAC employees will join Maiden, which will rename the unit Maiden Re.
GMACI Holdings LLC, known as GMAC Insurance Group, includes more than a dozen operating units, with about $4 billion in sales last year, according to the National Association of Insurance Commissioners. The company provides coverage for vehicles and homes, warranties and roadside assistance plans, and commercial insurance for auto dealers as well as reinsurance.
In April, control of the insurance group was transferred to Cerberus Capital Management LP, the majority owner of GMAC, in an effort to insulate the company from mortgage losses and corporate credit problems. GMAC Insurance Group earned $459 million last year.
Asked whether GMAC would consider the sale of larger insurance units, Comstock said, "we have nothing further to announce at this time". The sale of the insurance units to Maiden is expected to be completed within 90 days, she said.
