AIG United Guaranty Canada (AIGUG) has been purchased by Ontario Teachers' Pension Plan (OTPP).

AIGUG is the 3rd biggest mortgage default insurer in Canada, behind CMHC and Genworth.

In its statement today, OTPP’s Erol Uzumeri, said: “We believe the mortgage insurance industry in Canada to be an attractive market, and that United Guaranty Canada is well positioned to grow its market position. The company has a strong management team, and Teachers’ is prepared to support the growth of the business.”

OTPP stated AIG’s assets as $274 million as of September 30, 2009.  The deal is pending regulatory approval and “customary closing conditions.”  If all goes well, it should be completed by the end of this quarter says an OTPP spokesperson. No price was announced.

OTPP is one of the world’s largest private equity investors, and the largest single-profession pension plan in Canada.  In buying AIGUG, it's getting a subsidiary of U.S. insurer, AIG. As most remember, AIG (the parent company) was bailed out by the U.S. government last fall when it almost became insolvent. 

AIG United Guaranty has always been insulated from those U.S. problems financially, but lender and investor perception have nonetheless hurt its Canadian default insurance business.

Under new branding and Canadian ownership, that should change. We wish all the folks at AIG the best during the transition.