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AIG Agrees to Sell United Guaranty Corporation to Arch Capital Group for $3.4 Billion

NEW YORK--(BUSINESS WIRE)--American International Group, Inc. (NYSE:AIG) today announced that it has entered into an agreement to sell its 100 percent interest in United Guaranty Corporation (UGC) to Arch Capital Group Ltd. (Arch; NASDAQ:ACGL), a Bermuda-based writer of specialty lines of property and casualty insurance and reinsurance, as well as mortgage insurance and reinsurance, on a worldwide basis.

“We are excited about the combination of ACGL and United Guaranty because these companies have led the market in innovation through their risk based pricing models and focus on data analytics”

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Total consideration for the transaction is $3.4 billion, consisting of $2.2 billion of cash, $250 million of newly issued Arch perpetual preferred stock, and $975 million of newly issued Arch convertible non-voting common-equivalent preferred stock.

In lieu of receiving the perpetual preferred stock, AIG may elect to receive up to $250 million in pre-closing dividends, subject to regulatory approval, or Arch may provide additional cash consideration. In addition to the $3.4 billion of total consideration, AIG will retain all mortgage insurance business ceded under an existing 50% quota share agreement between UGC and AIG subsidiaries for business originated from 2014 through 2016.

“Today we have reached an important milestone in a strategy we committed to in March 2015, when I stated in my first shareholder letter as AIG CEO that we would ‘sculpt the future AIG’ into a more focused company and that selective divestitures would be an important part of reaching that goal,” said Peter Hancock, President and Chief Executive Officer of AIG. “We restated that objective earlier this year when we made the IPO and eventual sale of UGC a key part of an updated overall strategic framework for AIG.”

“We believe this transaction maximizes UGC’s value while further streamlining our organization. It puts us in a stronger position to invest in the talent and technology essential to being our clients’ most valued insurer, while we continue to deliver on the promise made by AIG’s Board and management to return $25 billion to our shareholders by the end of 2017. The deal also maintains our affiliation with the mortgage insurance market and its leading company, through retention of recent business...


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