Baldwin-United Corp.'s $1.2 billion acquisition of MGIC Investment Corp. cleared its biggest regulatory hurdles yesterday when the Justice Department formally agreed to the merger and the Arkansas insurance commission accepted the financing plans of three Baldwin subsidiaries.

The complex deal caps the spectacular transformation of Baldwin-United from a small maker of pianos into a financial services conglomerate, with interests in insurance, trading stamps, real estate and mortgage banking, and with assets of $5.6 billion.

MGIC is the nation's largest mortgage insurer, with about $47 billion in policies currently in force. The Justice Department had questioned the antitrust implications of its acquisition by Baldwin because Baldwin already owns the sixth-largest mortgage insurer, AMIC Corp.

In a consent decree filed yesterday in U.S. District Court in Cincinnati, where Baldwin is based, Baldwin agreed to divest itself of AMIC by Feb. 8, 1983, and to operate it under independent management in the meantime.

Assistant Attorney General William F. Baxter, head of the antitrust division, said the Baldwin-MGIC deal "represented an exceptional situation warranting departure from the Department of Justice's usual policy of insisting upon the elimination of competitive overlaps before an acquisition is consummated," according to a Justice Department statement. He said AMIC could operate as "an independent and effective competitor" until Baldwin sells it.

"There is no reason to think this is a problem for Baldwin," said Paul MacKey, an analyst at Bache Halsey Stuart Shields. "They had already planned to get rid of AMIC."

Arkansas' approval was required because of the unusual way Baldwin is financing the acquisition of MGIC. Baldwin's insurance subsidiaries are flush with cash from a banner year in the sales of tax-deferred annuities. To tap that resource, Baldwin is selling some of its noninsurance businesses, such as the piano firm, to the insurance companies.

Joe Musgrove, chief actuary for the Arkansas Insurance Department, said three companies based in that state have already bought $206 million worth of assets from other Baldwin subsidiaries. Arkansas, he said, requires that insurance premium funds be invested in secure, low-risk assets, and before granting Baldwin permission to take an additional $100 million, he said, the state demanded evidence that policyholders' interests would be protected.