AIG Sells Canadian Mortgage Business to Canadian Pension Fund

A private investor group led by Ontario Teachers' Pension Plan has agreed to acquire American International Group Inc.'s Canadian mortgage insurance business.

Toronto-based AIG United Guaranty Mortgage Insurance Company Canada is the second-largest private mortgage insurance provider in Canada with assets of C$274 million (US$263.7 million) and total equity of C$127 million as of Sept. 30, 2009, the pension plan said. Terms of the transaction were not disclosed.

Canada, unlike the United States, has not been severely impacted by the subprime mortgage market, said Deborah Allen, director of communications for the pension plan. "It's a whole different landscape up here," she said. "We have very conservative lending practices, it's a very different system than south of the border. Our housing market is quite healthy."

Also, while it might seem a little unusual for a pension fund to buy a mortgage insurer, Teachers' "is not your average bear," Allen said.

The pension plan, which had C$87.4 billion at year-end 2008, has a private investment arm called Teachers' Private Capital, that directly invests in individual companies. For example, Teacher's Private Capital owns 66% of the Maple Leaf Sports & Entertainment, Canada's largest sports enterprise that owns and operates four professional sports franchises (including pro hockey's Toronto Maple Leafs of the NHL and NBA basketball team, the Raptors); owns 20% of CTVglobemedia Inc., Canada's largest multimedia company, which owns and operates 27 conventional and 35 specialty television channels, as well as publishes Canada's national newspaper, the Globe and Mail; and owns 100% of Glenstone Capital, which writes commercial insurance through its subsidiary, GCAN Insurance, which has a current Best's Financial Strength Rating of A (Excellent).

Lauren Day, a spokeswoman for AIG, confirmed the sale, but said the company generally does not comment on proceeds for specific transactions.

Asked if the proceeds would be used to pay back the U.S. government loans, Day said, "As always, AIG remains committed to repaying its obligations and maximizing the value of its assets."

AIG was saved from failing last fall by a government bailout of up to $182.3 billion, and has been selling assets in an effort to repay government loans.

The Ontario Teachers' Pension Plan is an independent corporation responsible for investing the fund and administering the pensions of Ontario's 284,000 active and retired teachers.

AIG (NYSE: AIG) stock was trading at $29.04 a share in late morning trading on Jan. 6, down 0.99% from the previous close.

Last month, A.M. Best Co. affirmed the A (Excellent) rating of most of AIG's property/casualty subsidiaries (BestWire, Dec. 16, 2009).

(By Meg Green, senior associate editor, BestWeek: [email protected])