CUNA Mutual Group sells mortgage insurance arm.
The proposed deal would see CMG and the ADI sell CMG MI to the U.S. subsidiary of the Arch Capital Group Ltd, a financial firm based in Bermuda. CMG MI is the largest private provider of mortgage insurance for credit unions.
Arch Capital will pay about $300 million for the company.
CMG and PMI jointly owned CMG MI since its founding in 1993 until the Arizona Department of Insurance took it into receivership in October 2011. The overall firm subsequently went into bankruptcy, though the branch of the firm that owned CMG MI remained in receivership and was not part of the overall company's bankruptcy.
That bankruptcy will complicate the Arch Capital deal, however, because the transaction is only one part of a broader set of PMI bankruptcy resolution transactions that are not directly related to the Arch deal but still need to be approved by the courts and by regulators for the deal to go forward.
Jim Buchheim, vice president for corporate communications at CUNA Mutual, explained that while the firm was enthusiastic about its part of the overall deal, the other parts needed to be settled were effectively out of its hands. "We don't control any of those," he said and added that those additional elements were part of the reason the deal may take up to a year to clear the regulators and the courts.
Once the deal is approved, CMG employees will still provide the point of contact and sales to credit unions, and the company will still have a 15% reinsurance stake in every mortgage insurance policy that the new CMG MI writes, Buchheim explained, adding that CMG had decided to add its part of CMG MI to the sales deal in order to attract a strong financial partner like Arch Capital.
Buchheim and other CMG executives stressed that the company's sale of CMG MI will not signal the end of the company at all and explained how, as envisioned now, the transaction will be almost seamless to the average credit union client.
First, the company's focus will remain on credit unions and the CMG MI sales staff, which have been CMG employees, will remain in place. PMI's underwriting staff will also remain in place and Arch's U.S. subsidiary has purchased PMI's underwriting platform and other technologies which were among the biggest things that PMI brought to the partnership with CMG in CMG PI.
Constantine Iordanou, chairman/CEO of Arch, 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.
Arch's Chairman Marc Grandisson said, "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."
RELATED ARTICLE: The Rundown
* CUNA Mutual Group sells interest in CUNA Mutual Mortgage.
* Company remains in mortgage insurance business.
* As part of larger PMI settlement, transaction may take 12 months to clear.
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|Publication:||Credit Union Times|
|Date:||Feb 20, 2013|
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