MADISON, Wis. CUNA Mutual Group announced this morning that it and its partner PMI Mortgage Insurance have agreed to sell their joint venture, CMG Mortgage Insurance Co., the biggest provider of private mortgage insurance to credit unions, to Bermuda-based Arch Capital Group Ltd. and its U.S. subsidiary, Arch U.S. MI, for $300 million.
Arch U.S. MI also agreed to acquire PMI's mortgage insurance operating platform and related assets from PMI. This transaction will allow Arch Capital to enter the rapidly improving U.S. mortgage insurance marketplace and will broaden its existing mortgage insurance and reinsurance capabilities.
The deal calls for CUNA Mutual Group to enter into distribution and reinsurance agreements with CMG MI, continuing CMG MI’s private mortgage insurance offerings to credit unions. “Our goals have been consistent from the start of this process: Protect policyholders, deliver strong service to customers, and aim for a long-term, viable solution for credit unions to have a private mortgage insurer that is sensitive to and understands their unique mission,” said Jeff Post, president of CUNA Mutual Group.
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.
PMI, which jointly owns CMG Mortgage Insurance with CUNA Mutual, has been in rehabilitation under the receivership of the Arizona Department of Insurance since 2011, harmed by the exploding number of mortgage foreclosures caused by the financial crisis. CMG Mortgage Insurance holds about half the market share for credit unions private mortgage insurance in the U.S.
The Arch Group deal is expected to close within 12 months, subject to approvals of the Arizona receivership court, applicable regulators and Fannie Mae and Freddie Mac.
Terms of the deal call for 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 and 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.
