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Mortgage companies unite
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November 23, 1998: 10:29 a.m. ET
Amerin and CMAC to create nation's 2nd largest mortgage insurance firm
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NEW YORK (CNNfn) - Amerin Corp. said it will team with CMAC Investment Corp. to create the nation's second-largest mortgage insurance company behind MGIC Investment Corp.
Under terms of the deal, expected to close in the first quarter of 1999, Amerin shareholders will receive 0.5333 share of CMAC common stock in a tax-free swap.
The combined company will have assets of $1.3 billion, a market capitalization of $1.6 billion, and insurance in force of $78 billion.
The deal also is expected to result in annual operating savings of about $15 million in 1999.
"Over the past few years, Amerin and CMAC have redefined mortgage insurance, pioneering new risk and revenue sharing arrangements to create profits for lenders and new products that make mortgage insurance a better deal for borrowers," said Roy J. Kasmar, Amerin's president and chief operating officer, who will retain his positions in the new company.
He added, "Our new company will lead the way in delivering the types of breakthrough products and services that lenders need, through its extensive branch network and field organization."
Following the merger, CMAC president and Chief Executive Officer Frank P. Filipps will become chairman and CEO of the new company. Amerin's Chairman and CEO Gerald L. Friedman will become chairman emeritus, and Herbert Wender, CMAC's chairman, will become chairman of the executive committee.
"We believe this is a very exciting combination," said Sanford C. Bernstein analyst Jonathan Gray. "The companies both have earnings per share growth rates that exceed 20 percent currently and long term growth rates in the teens. We regard CMAC's management as really excellent for what was then a relatively small company."
Milwaukee-based MGIC, he said, writes about 23 percent of all new low-down payment mortgage insurance written in the United States. That compares with CMAC's 11 percent market share, and Amerin's 8 percent.
Moreover, MGIC has twice the volume of existing business that Amerin and CMAC have combined. But Gray said the two smaller companies together have nearly as large a market share, indicating they will have a "much faster growth rate than the number one company."
CMAC's stock price, he added, would be fairly valued in the mid-60 per share range, and said it's current trading price of around $44 per share is 40 percent to 50 percent undervalued.
Amerin and CMAC will operate under their own names until the merger is complete, at which time a new name for the company will be announced.
Amerin Corp. is the parent of Amerin Guaranty Corp., while CMAC Investment Corp. owns Commonwealth Mortgage Assurance Company.
Shares of Amerin (AMRN) closed up 1-1/16 at 20-7/8 last week on the Nasdaq.
CMAC Investment Corp. shares (CMT) ended up 1-1/8 at 43-15/16 Friday on the New York Stock Exchange. 
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