Arch Capital Group Ltd. to Enter U.S. Mortgage Insurance Market Through Acquisition of CMG Mortgage Insurance Company & the O...
08 Février 2013 - 12:00PM
Business Wire
Arch Capital Group Ltd. [Nasdaq: ACGL] today announced that its
U.S.-based subsidiaries (Arch U.S. MI) have entered into a
definitive agreement to acquire CMG Mortgage Insurance Company (CMG
MI) from its current owners, PMI Mortgage Insurance Co. (PMI),
which has been in rehabilitation under the receivership of the
Arizona Department of Insurance since 2011, and CMFG Life Insurance
Company (CUNA Mutual). Arch U.S. MI also agreed to acquire PMI’s
mortgage insurance operating platform and related assets from PMI.
This transaction will allow ACGL to enter the rapidly improving
U.S. mortgage insurance marketplace and will broaden its existing
mortgage insurance and reinsurance capabilities. Arch U.S. MI
expects to hire the current experienced senior management team and
staff of PMI. ACGL’s global mortgage insurance and reinsurance
operations will report to Marc Grandisson, Chairman and CEO of Arch
Worldwide Reinsurance Group.
The transaction will provide Arch U.S. MI with nationwide
mortgage insurance licenses and a comprehensive mortgage insurance
operating platform. Additionally, Arch U.S. MI expects to enter
into distribution and reinsurance agreements with CUNA Mutual,
which will continue to serve credit union customers on behalf of
Arch U.S. MI. With these proposed arrangements, Arch U.S. MI will
gain significant access to the credit union marketplace immediately
upon closing.
It is anticipated that the transaction will close within 12
months, subject to approvals of the Arizona receivership court,
applicable regulators and government-sponsored enterprises (GSEs),
including the Federal National Mortgage Association (Fannie Mae)
and the Federal Home Loan Mortgage Corporation (Freddie Mac), and
the satisfaction of customary closing conditions. Additional
transaction highlights are included below.
Constantine (Dinos) Iordanou, Chairman and CEO of ACGL,
commented, “We are extremely pleased to be able to provide a strong
source of private capital to a U.S. mortgage insurance market in
great need of capacity, subject to obtaining all required
approvals. We believe that this transaction, which is consistent
with our strategy of moving into new specialty lines of business
where we can hire experienced teams that fit our corporate culture,
will allow us to capitalize on significant opportunities in the
U.S. mortgage insurance marketplace. The new operation will
complement our existing European Union-based mortgage insurance and
global reinsurance operations, providing us with a platform to
participate in mortgage insurance and reinsurance business on a
worldwide basis.”
Marc Grandisson commented, “We are very gratified that PMI’s
exceptionally strong management team and staff will be joining
Arch. Together with our senior executives, they will form an
industry leading team with broad capabilities to meet our clients’
needs over the long term. We are also extremely pleased to partner
with CUNA Mutual on an ongoing basis. Their access to the credit
union marketplace and brand reputation should allow us to secure a
strong flow of credit union business.”
“The petition being filed for court approval of this agreement
is a significant milestone and positive step in the PMI
receivership,” said Germaine L. Marks, Director of the Arizona
Department of Insurance. “The successful negotiation of this
transaction clearly evidences Arch's commitment to the private
mortgage insurance market, and the PMI receivership team looks
forward to building on that commitment and our relationship with
Arch as we move forward.”
Additional Transaction Highlights
Outlined below are some of the key components of the
transaction, all of which are subject to the terms and conditions
included in the related agreements:
- At closing, it is currently estimated
that Arch U.S. MI and its affiliates will pay to the sellers
aggregate consideration of approximately $300 million. Additional
amounts may be paid based on the actual results of CMG MI’s
pre-closing portfolio over an agreed upon period.
- Arch U.S. MI will acquire all of the
capital stock of CMG MI and its affiliates.
- Arch U.S. MI will acquire PMI’s
mortgage insurance operating platform and related assets.
- An affiliate of Arch U.S. MI will
reinsure the run-off of in-force insurance on current,
non-delinquent loans included in the primary mortgage insurance
originated by PMI for book years 2009-2011. Other than for the
risks assumed by Arch U.S. MI’s affiliate under this reinsurance
agreement, the Arch group will not assume any obligation for risks
insured under PMI’s existing insurance contracts.
- Arch U.S. MI will also enter into a
services agreement with PMI to provide for necessary services to
administer the run-off of PMI’s legacy business at the direction of
PMI.
- Subject to applicable regulatory and
GSE approvals, an affiliate of Arch U.S. MI will provide quota
share reinsurance to CMG MI through a reinsurance agreement that
will become effective prior to the closing.
About Arch Capital Group Ltd.
Arch Capital Group Ltd., a Bermuda-based company with
approximately $5.75 billion in capital at September 30, 2012,
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: 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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