The non-cash portion of the Arch deal includes $975 million in non-voting preferred equity that is convertible into about 9 percent of Arch’s common stock, according to the statement. Also, Arch agreed to turn over $250 million in perpetual preferred stock, though AIG has the option to receive up to that sum in pre-closing dividends instead.

AIG’s mortgage-guaranty business, led by CEO Donna DeMaio, contributed $350 million of pretax operating income this year through June 30, compared with $302 million in the first six months of 2015. Separate AIG units accrued commissions of $113 million last year from United Guaranty in the risk-transfer deal, according to a prospectus.

Iordanou’s view

“AIG will continue to be a participant in the residential real estate market” through direct ownership of mortgage loans, a portfolio of structured securities, the holding of Arch stock and continued ties to United Guaranty, Hancock said in a note to employees Monday, calling the deal a “milestone.” Arch CEO Dinos Iordanou said in a statement that his company and United Guaranty have “led the market” with pricing models and data analytics.

Related: AIG chairman: Property & Casualty business fits with Life unit

“We believe that the companies’ complementary risk-management cultures will further accelerate innovation and sound risk management and help us to maximize our best-in-class processes in the specialty insurance space,” Iordanou said.

United Guaranty has about 1,050 employees and is based in Greensboro, North Carolina. Arch will maintain a significant presence in that state while retaining mortgage-insurance operations in California, Iordanou’s company said in a separate statement. International business will be combined in Europe, Hong Kong and Australia.

Whitney, JPMorgan

Arch hired former star banking analyst Meredith Whitney last year to oversee a group of outside managers who invest in equities. Iordanou, who previously worked at AIG, expanded his Bermuda-based commercial insurer by pushing into the business of backing home loans in 2013 with an agreement to add assets from PMI Group Inc. Mortgage insurers cover losses for lenders when homeowners default and foreclosure fails to recoup costs.

Arch also is a reinsurer, which provides coverage for primary carriers, and is known for a venture it started in 2014 with JPMorgan Chase & Co.’s Highbridge operation. That business is considering an eventual IPO, people familiar with the matter said in April.

Arch advanced 3.1 percent to $77.09 at 4:02 p.m. in New York before the announcement, extending its gain this year to 11 percent. AIG climbed 0.6 percent, narrowing its decline since Dec. 31 to 4.4 percent. The Wall Street Journal reported earlier Monday on the possibility of a deal with Arch.

JPMorgan and Morgan Stanley were bankers for AIG, which got legal advice from Sullivan & Cromwell LLP. Arch used Credit Suisse Group AG and the law firms Cahill Gordon & Reindel LLP and Clyde & Co.

United Guaranty was founded in 1963 and sold to AIG in 1981. The unit has rebounded from the housing crash, when AIG was required to tap a Treasury Department line within its rescue package to help restructure the operation.