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AIG to sell unit to Arch Capital for $3.4 bn

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.

By: Reuters | New York | Published: August 16, 2016 5:44:04 am
American international group, aig selling arch capital, arch capital, aig to sell arch capital, aig sells arch capital, aig sells arch capital for .4 billion, aig news, business news AIG, the largest commercial insurer in the United States and Canada, said it would get .2 billion in cash, 0 million in Arch Capital’s perpetual preferred stock and 5 million in non-voting common-equivalent preferred stock from the sale of United Guaranty Corp.

American International Group Inc said on August 15 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.

Shares of Arch Capital and AIG were unchanged in after-market trading on Monday.

J.P. Morgan Securities LLC and Morgan Stanley & Co LLC advised AIG on the deal. Sullivan & Cromwell LLP was its legal adviser. Arch’s financial adviser was Credit Suisse Group AG, with Cahill Gordon & Reindel LLP and Clyde & Co acting as legal counsel.

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