Old Republic International Corp., Chicago, has taken the next step in separating out its private mortgage insurance and consumer credit indemnity insurance units by selling 20.6% of Republic Financial Indemnity Group to an investor group headed by ORI president Christopher Nard.
In addition, the remaining shares of RFIG will be distributed to existing shareholders of ORI and that common stock is expected to become publicly traded. The aim is to have the spin-off occur in the middle of July.
Nard will resign as ORI president to become president and chief executive of a publicly traded RFIG. Joining Nard is Kevin Henry, RFIG's chief operating officer and president of ORI's mortgage insurance subsidiaries.
While not getting into specific numbers, A.C. Zucaro, chairman and CEO, said the LBO pricing was based on the current shareholders deficit in equity of $17.5 million. But the terms also call for the opportunity for pricing adjustments to share in any upside which might occur in RFIG.
RFIG lost $53 million in the first quarter.
Nard said RFIG would have three priorities, the first being managing the run-off of Republic Mortgage Insurance Co., and the other RFIG subsidiaries in the most efficient manner.
Next is to use the "low-cost infrastructure" which is in place to support other run-off activities, including possibly providing these services to unaffiliated parties.
Finally, Nard repeated a statement made by Zucaro of the goal of recapitalizing and reentering the private mortgage insurance business through an existing unit.
Mortgage insurance is "an important business to the economy" and high loan-to-value lending is needed to get the housing market moving, he said.
Zucaro added that to re-enter the private mortgage insurance business there needs to be some protection from the "fiasco" of the housing crisis. Some needs to be place to protect from that exposure.
