AIG to sell unit to Arch Capital for $3.4 billion

Tue Aug 16, 2016 8:39pm EDT
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By Mike Stone

(Reuters) - American International Group Inc said on Monday it would sell its mortgage-guaranty unit to Arch Capital Group Ltd for about $3.4 billion.

AIG, the largest commercial insurer in the United States and Canada, said it would get $2.2 billion in cash, $250 million in Arch Capital's perpetual preferred stock and $975 million in non-voting common-equivalent preferred stock from the sale of United Guaranty Corp.

The Wall Street Journal first reported AIG's deal with Bermuda-based Arch Capital earlier on Monday, citing sources.

AIG said in January it would spin off the mortgage insurance unit, cut jobs and sell its broker-dealer network as part of a sweeping overhaul promised to shareholders to fend off activist investor Carl Icahn.

Later in March, United Guaranty filed for an initial public offering of up to $100 million with U.S. regulators.

Icahn, whose representative secured a board seat at AIG earlier this year, has been pushing the insurer to split itself into three smaller companies.

The billionaire saw it as a way for the company to shed its designation as a systemically important financial institution, which would free the company from having to comply with stricter capital requirements.

The insurer reported a bigger-than-expected quarterly operating profit earlier this month, driven by lower costs and strong underwriting.   Continued...

The AIG logo is seen at its building in New York's financial district March 19, 2015.  REUTERS/Brendan McDermid