In selling its remaining mortgage insurance business to Arch Capital Group, Old Republic International eliminated the possibility of: This zombie business may be resurrected.
On at least three separate occasions, most recently in 2017, the Old Republic considered once again starting to develop new policies from the department, which had previously Runoff status since September 2011.
During this period, it remains possible for the company to restore physical production capacity by obtaining any state licenses it still holds through entities that are not currently engaged in the mortgage insurance business.
But “with Arch Capital purchasing the platform, this risk is removed, so we view this as a modest positive for the MI industry,” Bose George, Keefe, Bruyette & Woods analysts wrote about the sale. written in the briefing.
Arch will pay approximately $140 million to purchase the entire capital stock of RMIC Cos. and its wholly-owned subsidiaries, which make up the runoff business.
The deal is expected to close in the first half of next year. In the fourth quarter, the mortgage insurer expects to pay a $25 million dividend to its soon-to-be former parent, Upstream. A similar quarter was paid in the third quarter.
“We have been able to retain significant value for shareholders since placing the business to runoff in 2011, and we thank RMIC employees for their hard work and dedication over the years,” said Craig Smiddy, President and CEO of Old Republic. At mid-year, our runoff reserves developed well, allowing us to receive more than $398 million in dividends from these subsidiaries, including an expected $25 million in dividends for the fourth quarter.”
Republic Mortgage Insurance Company is the last of three legacy platforms still available to underwriters that were forced to halt new business due to losses during the financial crisis.
In November 2009, Denovo Essent Guaranty Acquisition of Sanlian Guarantee Operation PlatformArch Capital has previously underwritten mortgage insurance overseas and has also been involved in reinsurance business. Adopted PMI platform in February 2013 At that time it acquired CMG Mortgage Insurance, a joint venture between the bankrupt company and CUNA Mutual.
Arch will get the original stuff United Guaranty Corp., the largest MI underwriter at the time 2017 from AIG.
RMIC said in its own press release that as of the end of the third quarter, RMIC’s effective venture portfolio had fallen to $1 billion, a fraction of the $75.9 billion currently held by Arch US MI.
“Our ability to leverage the scale of our platform to capture significant fee and capital synergies makes this an attractive financial transaction for Arch,” said David Gansberg, CEO of its global mortgage group. Our team is experienced and knowledgeable in acquiring and integrating mortgages and insurance companies, which we expect will help us quickly maximize the value of this acquisition.”
In the third quarter, Old Republic’s RFIG tap division, which is primarily a mortgage insurance unit, reported operating income of $4.5 million, compared with $9.2 million a year ago.
The decline reflects the continued contraction in net premium income in the third quarter, which fell to $3.8 million from $5.5 million in the same period in 2022.