AIG Mortgage Unit Files for IPO With JPMorgan, Morgan Stanley

  • United Guaranty won't receive proceeds of share sale
  • U.S. market for public offerings has been hit by volatility

American International Group Inc.’s mortgage insurer, United Guaranty Corp., filed for an initial public offering as the parent company faces sustained pressure from activists to split up.

United Guaranty filed for an offering of $100 million, a placeholder figure that is used to calculate fees and will probably change. United Guaranty won’t receive any of the proceeds of the share sale, according to its IPO filing. JPMorgan Chase & Co. and Morgan Stanley are underwriting the deal.

AIG Chief Executive Officer Peter Hancock has faced continued calls from activist investors Carl Icahn and John Paulson to pursue a more drastic breakup of the company. Hancock has already said he’s planning to fully exit United Guaranty. In January, a plan was announced to sell up to 19.9 percent of the United Guaranty business in an IPO, the first step to a full separation.

The move comes at a quiet time for U.S. IPOs. The number of public offerings has languished of late as stock markets have been hit by volatility. Only nine companies -- all in the health-care industry -- have gone public this year, while others across industries have postponed their offerings.

AIG’s mortgage guarantor is the largest of its U.S. peers. Radian Group Inc., the No. 2 business by market share according to Bloomberg Intelligence, has dropped 8 percent this year amid stricter capital rules and heightened competition. Paulson, whom AIG agreed in February to nominate to its board, has invested in Radian.

United Guaranty reported net income of $359.8 million last year, down 8.6 percent from 2014. Revenue declined 11 percent to $922.6 million in the 12 months through December.

Since the separation plan was announced, United Guaranty has been deemed more risky by Standard & Poor’s. The rating agency downgraded the company this month on the view that the company would not benefit from implicit ongoing support from its parent after the spin off.

United Guaranty plans to list on the New York Stock Exchange.

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