GMAC Insurance to sell reinsurance operations
GMAC, the beleaguered financing arm of General Motors Corp., said Monday it will sell its reinsurance operations to Bermuda-based reinsurer Maiden Holdings Ltd. for an undisclosed sum.
GMAC RE will be acquired by Maiden Holdings’ U.S. subsidiary, forming a dedicated U.S. reinsurance group — Maiden Re — that will be based in Mount Laurel, N.J. GMAC RE’s 120-person team will join Maiden, continuing to provide reinsurance to small and regional insurance firms.
As part of the deal, two U.S. licensed and domiciled insurance companies will be transferred to Maiden Holdings following regulatory approval. Until approval is obtained, a GMAC Insurance company will continue to write reinsurance and collateralize obligations which Maiden will reinsure on a 100 percent basis, the companies said.
Maiden Insurance assumed GMAC RE’s outstanding loss reserves, totaling $750 million as of Sept. 30, and unearned premium of roughly $200 million. Maiden also said it plans to raise about $260 million in additional equity through a rights offering to existing shareholders.
In 2007, GMAC RE produced about $525 million in gross written premium and $65 million in pretax earnings. The transaction will make Maiden a specialty reinsurance company with more than $1 billion in annual written premium.
In morning trading, Maiden Holdings shares rose 36 cents, or 8 percent, to $4.88.
GMAC has been struggling with refinancing its debt amid continued downgrades by credit ratings agencies, and has been selling off assets to shore up its cash position. It has been in talks with the Treasury Department, the Federal Deposit Insurance Corp. and other federal regulators about changing its status to that of a bank holding company, a move that could help it access government funding and be part of a potential acquisition of Chrysler LLC by GM.
Cerberus Capital Management LP owns 51 percent of GMAC, and General Motors owns the rest. Cerberus also is the majority owner of Chrysler, which has been in talks with GM about a possible merger aimed at helping the automakers survive the downturn in the auto industry.
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Tags: Insurance