Arch Capital makes US mortgage insurance acquisition

Arch Capital announced that its US subsidiary Arch US MI has entered into a definitive agreement to acquire CMG Mortgage Insurance Company from PMI Mortgage Insurance for an estimated $300 million.

The transaction will provide Arch US MI with nationwide mortgage insurance licenses and a comprehensive mortgage insurance operating platform. Arch estimates the deal will close within 12 months, subject to approval from the Arizona receivership court.

Bermuda Re spoke to Brian Schneider, senior director on Fitch’s insurance team, about the acquisition.

How will this acquisition fit with Arch's wider business? Will it be fully digested by the company?
The acquisition should somewhat compliment the company’s current European Union-based mortgage insurance business.  Fitch expects that Arch’s approach to developing this business will be controlled and prudently managed to the company’s conservative underwriting and risk-management standards.
Is this part of a trend in which Bermuda players are acquiring smaller niche players to complement their existing portfolios?
Given the level of excess capital and limited organic growth options for Bermuda re/insurers, companies have been looking for areas to deploy capital. One of these options has been the purchase of particular operations or business lines that are no longer a strategic fit for other companies.  However, a generally more attractive option has been share repurchases, given the low market-to-book value ratios for most Bermuda re/insurers.