Radian Announces Commutation of $9.8 Billion Ambac Portfolio
21 Juillet 2009 - 7:00PM
PR Newswire (US)
Reduces financial guaranty exposure by 10 percent; Provides capital
support for MI business PHILADELPHIA, July 21
/PRNewswire-FirstCall/ -- Radian Group Inc. (NYSE: RDN) today
reported that, on July 20, 2009, its financial guaranty insurance
subsidiary, Radian Asset Assurance Inc. (Radian Asset), entered
into a Commutation and Release Agreement, effective as of July 1,
2009, with Ambac Assurance Corporation and Ambac Assurance UK
Limited (Ambac), to commute $9.8 billion of Radian Asset's
reinsurance portfolio assumed from Ambac. "A key component of our
capital plan is to provide capital support and cash infusions over
time to our core mortgage insurance business," noted Chief
Executive Officer S.A. Ibrahim. "We continue to utilize Radian
Asset as an important source of capital support for Radian
Guaranty, our principal mortgage insurance subsidiary, and, by
reducing our overall financial guaranty risk through this
commutation, we have increased our ability to access that capital."
The Commutation Agreement provides, among other things, for Radian
Asset to make a $100 million settlement payment to Ambac, including
a refund of unearned premium reserves and payment of statutory loss
reserves. The commutation, which represents 99.7 percent of the
insured portfolio previously assumed from Ambac, decreases Radian
Asset's total insured portfolio by 10 percent, including a decrease
of 42 percent in Radian Asset's exposure to mortgage-backed
securities. The statutory surplus of Radian Asset (and Radian
Guaranty) will be positively impacted in the third quarter 2009 by
approximately $40 million as a result of the Ambac commutation.
About Radian Radian Group Inc. (NYSE:RDN), headquartered in
Philadelphia, provides private mortgage insurance and related risk
management products and services to mortgage lenders nationwide
through its principal operating subsidiary, Radian Guaranty Inc.
These services help promote and preserve homeownership
opportunities for homebuyers, while protecting lenders from
default-related losses on residential first mortgages and
facilitating the sale of low-downpayment mortgages in the secondary
market. Additional information may be found at
http://www.radian.biz/. Forward-Looking Statements Some of the
statements in this release constitute "forward-looking statements"
within the meaning of the United States Private Securities
Litigation Reform Act of 1995. Generally, words such as "may,"
"will," "should," "could," "would," "anticipate," "expect,"
"intend," "estimate," "plan," "project," "continue," "goal" and
"believe," or other variations on these and other similar
expressions identify forward-looking statements. Forward-looking
statements are only predictions and, as such, are not guarantees of
future performance and involve risks, uncertainties and assumptions
that are difficult to predict. Forward-looking statements are based
upon assumptions as to future events or our future financial
performance that may not prove to be accurate. These statements
speak only as of the date they were made, and we undertake no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. Actual outcomes and results may differ materially
from what is expressed or implied in these forward-looking
statements. Factors that could cause actual results to differ from
those projected in such forward-looking statements include, without
limitation, the following: -- changes in general financial and
political conditions, such as a deepening of the existing national
economic recession, further decreases in housing demand, mortgage
originations or housing values (in particular, further
deterioration in the housing, mortgage and related credit markets,
which would harm our future consolidated results of operations and
could cause losses for our businesses to be worse than expected), a
further reduction in the liquidity in the capital markets and
further contraction of credit markets, further increases in
unemployment rates, changes or volatility in interest rates or
consumer confidence, changes in credit spreads, changes in the way
investors perceive the strength of private mortgage insurers or
financial guaranty providers, investor concern over the credit
quality and specific risks faced by the particular businesses,
municipalities or pools of assets covered by our insurance; --
catastrophic events or further economic changes in geographic
regions where our mortgage insurance or financial guaranty
insurance in force is more concentrated; -- our ability to
successfully execute upon our internally sourced capital plan
(which depends, in part, on the performance of our financial
guaranty portfolio), and if necessary, to obtain additional capital
to support new business writings in our mortgage insurance business
and the long-term liquidity needs of our holding company (including
significant payment obligations in 2010 and 2011); and to protect
our credit ratings and the financial strength ratings of Radian
Guaranty Inc., our principal mortgage insurance subsidiary, from
further downgrades; -- a further decrease in the volume of home
mortgage originations due to reduced liquidity in the lending
market, tighter underwriting standards and the ongoing
deterioration in housing markets throughout the U.S.; -- our
ability to maintain adequate risk-to-capital ratios and surplus
requirements in our mortgage insurance business in light of
on-going losses in this business and in our financial guaranty
portfolio; -- our ability to continue to mitigate losses through
increased levels of rescissions and denials, which have positively
impacted our provision for losses; -- the concentration of our
mortgage insurance business among a relatively small number of
large customers; -- disruption in the servicing of mortgages
covered by our insurance policies; -- the aging of our mortgage
insurance portfolio and changes in severity or frequency of losses
associated with certain of our products that are riskier than
traditional mortgage insurance or financial guaranty insurance
policies; -- the performance of our insured portfolio of higher
risk loans, such as Alternative-A ("Alt-A") and subprime loans, and
of adjustable rate products, such as adjustable rate mortgages and
interest-only mortgages, which have resulted in increased losses
and are expected to result in further losses; -- reduced
opportunities for loss mitigation in markets where housing values
fail to appreciate or continue to decline; -- changes in
persistency rates of our mortgage insurance policies; -- an
increase in the risk profile of our existing mortgage insurance
portfolio due to mortgage refinancing in the current housing
market; -- further downgrades or threatened downgrades of, or other
ratings actions with respect to, our credit ratings or the ratings
assigned by the major rating agencies to any of our rated insurance
subsidiaries at any time (in particular, the credit rating of
Radian Group Inc. and the financial strength ratings assigned to
Radian Guaranty Inc.); -- heightened competition for our mortgage
insurance business from others such as the Federal Housing
Administration and the Veterans' Administration or other private
mortgage insurers (in particular those that have been assigned
higher ratings from the major rating agencies); -- changes in the
charters or business practices of Federal National Mortgage
Association ("Fannie Mae") and Freddie Mac, the largest purchasers
of mortgage loans that we insure, and our ability to remain an
eligible provider to both Freddie Mac and Fannie Mae; -- the
application of existing federal or state consumer, lending,
insurance, securities and other applicable laws and regulations, or
changes in these laws and regulations or the way they are
interpreted; including, without limitation: (i) the outcome of
existing investigations or the possibility of private lawsuits or
other formal investigations by state insurance departments and
state attorneys general alleging that services offered by the
mortgage insurance industry, such as captive reinsurance, pool
insurance and contract underwriting, are violative of the Real
Estate Settlement Procedures Act and/or similar state regulations,
(ii) legislative and regulatory changes affecting demand for
private mortgage insurance, or (iii) legislation and regulatory
changes limiting or restricting our use of (or requirements for)
additional capital, the products we may offer, the form in which we
may execute the credit protection we provide or the aggregate
notional amount of any product we may offer for any one transaction
or in the aggregate; -- the possibility that we may fail to
estimate accurately the likelihood, magnitude and timing of losses
in connection with establishing loss reserves for our mortgage
insurance or financial guaranty businesses or premium deficiencies
for our mortgage insurance businesses, or to estimate accurately
the fair value amounts of derivative contracts in our mortgage
insurance and financial guaranty businesses in determining gains
and losses on these contracts; -- the ability of our primary
insurance customers in our financial guaranty reinsurance business
to provide appropriate surveillance and to mitigate losses
adequately with respect to our assumed insurance portfolio; --
volatility in our earnings caused by changes in the fair value of
our derivative instruments and our need to reevaluate the premium
deficiency in our mortgage insurance business on a quarterly basis;
-- changes in accounting guidance from the Securities and Exchange
Commission or the Financial Accounting Standards Board; -- legal
and other limitations on amounts we may receive from our
subsidiaries as dividends or through our tax -- and expense-sharing
arrangements with our subsidiaries; and -- our investment in
Sherman Financial Group LLC, which could be negatively affected in
the current credit environment if Sherman is unable to maintain
sufficient sources of funding for its business activities or remain
in compliance with its credit facilities. For more information
regarding these risks and uncertainties as well as certain
additional risks that we face, you should review the risks
described under Item 1A, "Risk Factors" under our Annual Report on
Form 10-K for the year ended December 31, 2008 and subsequent
reports and registration statements filed from time to time with
the Securities and Exchange Commission. DATASOURCE: Radian Group
Inc. CONTACT: For investors, Terri Williams-Perry, +1-215-231-1486,
; or For the media, Rick Gillespie, +1-215-231-1061, , both of
Radian Group Inc. Web Site: http://www.radian.biz/
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