Radian Commutes $12.9 Billion Reinsurance Portfolio and Cedes $1.8 Billion of Public Finance Risk to Assured Guaranty
24 Janvier 2012 - 11:00PM
Business Wire
Radian Group Inc. today announced that on January 24, 2012, its
financial guaranty insurance subsidiary, Radian Asset Assurance
Inc., entered into a three-part transaction with subsidiaries of
Assured Guaranty Ltd. (NYSE: AGO) that included the following:
- The commutation of a $12.9 billion
portfolio reinsured by Radian Asset
- The ceding of $1.8 billion of public
finance business
- An agreement to sell Municipal and
Infrastructure Assurance Corporation (MIAC) for $91 million,
subject to regulatory approval
“This deal is expected to increase Radian Asset’s statutory
capital by $100 million in the first quarter of 2012,” stated
Radian’s Chief Executive Officer S.A. Ibrahim. “With this one
transaction, we made great strides toward improving our capital
position and further preserving our holding company liquidity.”
Ibrahim added, “By reducing our financial guaranty net par
outstanding by 21 percent, we are strengthening Radian Asset’s
statutory capital position. This transaction with Assured Guaranty
is the product of a strong relationship that continues to provide
mutual benefit.”
The transaction is expected to positively impact Radian Asset’s,
and thus the primary mortgage insurance subsidiary Radian
Guaranty’s, statutory capital in the first quarter of 2012 by $100
million, including approximately $6 million in statutory capital to
be generated from the sale of MIAC.
Radian Asset will receive $91 million for the sale of MIAC,
which is expected to close in the first quarter of 2012. Radian
purchased the company in June 2011 for $82 million.
In addition, as part of the commutation and reinsurance
transactions, Radian Asset will transfer to Assured Guaranty net
unearned premium of $108 million, which will have no impact on
Radian’s holding company cash. Goldman, Sachs & Co. served as
an advisor to Radian on the transaction.
Radian will provide details on this transaction as well as other
capital management initiatives that strengthen Radian Guaranty’s
risk-to-capital position during its conference call to report
fourth quarter and year-end 2011 financial results on Thursday,
February 23, 2012. Additional details on the conference call and
webcast may be found on the Investors section of Radian’s website
at www.radian.biz.
About Radian
Radian Group Inc. (NYSE: RDN), headquartered in Philadelphia,
provides private mortgage insurance and related risk mitigation
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.
Forward-looking Statements
All statements in this press release that address events,
developments or results that we expect or anticipate may occur in
the future are “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934 and the United States (“U.S.”)
Private Securities Litigation Reform Act of 1995. In most cases,
forward-looking statements may be identified by words such as
“anticipate,” “may,” “will,” “could,” “should,” “would,” “expect,”
“intend,” “plan,” “goal,” “contemplate,” “believe,” “estimate,”
“predict,” “project,” “potential,” “continue,” or the negative or
other variations on these words and other similar expressions.
These statements, which may include, without limitation,
projections regarding our future performance and financial
condition, are made on the basis of management’s current views and
assumptions with respect to future events. Any forward-looking
statement is not a guarantee of future performance and actual
results could differ materially from those contained in the
forward-looking information. The forward-looking statements, as
well as our prospects as a whole, are subject to risks and
uncertainties, including the following:
- changes in general economic and
political conditions, including high unemployment and continued
weakness in the U.S. housing and mortgage credit markets, the U.S.
economy reentering a recessionary period, a lack of meaningful
liquidity in the capital markets or in the credit markets, changes
or volatility in interest rates or consumer confidence, and changes
in credit spreads, each of which may be accelerated or intensified
by, among other things, further actual or threatened downgrades of
U.S. credit ratings;
- our ability to successfully execute
upon our capital plan, including our capital management
initiatives, for our mortgage insurance business (which depends, in
part, on the performance of our financial guaranty portfolio), and
if necessary, to obtain additional capital to support our mortgage
insurance business and the long-term liquidity needs of our holding
company;
- our ability to maintain an adequate
risk-to-capital position and surplus requirements in our mortgage
insurance business in light of ongoing losses in this business and
potential further deterioration in our financial guaranty
portfolio, which, in the absence of new capital, could depend on
our ability to execute strategies for which regulatory and other
approvals or waivers are required and may not be obtained;
- our ability to successfully complete
the sale of MIAC which depends on, among other things, obtaining
necessary regulatory approvals;
- the application of existing federal or
state consumer, lending, insurance, tax, securities and other
applicable laws and regulations, or changes in these laws and
regulations or the way they are applied or interpreted, including,
without limitation, legislative and regulatory changes limiting or
restricting our use of (or increasing requirements for) additional
capital and the products we may offer and requirements,
restrictions or limitations resulting from audits or examinations
conducted by state and federal regulators; and
- 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 business, or to estimate accurately the
fair value amounts of derivative instruments in determining gains
and losses on these contracts.
For more information regarding these risks and uncertainties as
well as certain additional risks that we face, you should refer to
the Risk Factors detailed in Item 1A of Part I of our Annual Report
on Form 10-K for the year ended December 31, 2010 and in Item 1A of
Part II of our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2011, and subsequent reports and registration
statements filed from time to time with the Securities and Exchange
Commission.
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