Radian Announces Agreement to Sell Financial Guaranty Subsidiary to Assured Guaranty
23 Décembre 2014 - 2:00PM
Business Wire
Confirms ability to comply with proposed
PMIERs
Radian Guaranty Inc., the mortgage insurance subsidiary of
Radian Group Inc. (NYSE: RDN), announced today that it has entered
into a Stock Purchase Agreement to sell 100% of the issued and
outstanding shares of Radian Asset Assurance Inc., Radian’s
financial guaranty insurance subsidiary, to Assured Guaranty Corp.,
a subsidiary of Assured Guaranty Ltd. (NYSE: AGO), for a purchase
price of approximately $810 million. The purchase price is payable
in cash consideration on the closing date. The Stock Purchase
Agreement allows for a complete transfer of Radian Asset’s $19.4
billion in net par outstanding to Assured Guaranty Corp. as of
September 30, 2014. The company expects to complete the sale of
Radian Asset in the first half of 2015, subject to satisfaction of
customary closing conditions including regulatory approvals.
Radian Chief Executive Officer S.A. Ibrahim said, “While Radian
Asset has been an important part of our history and our success, we
are committed to streamlining our business and aligning our
strategy toward the mortgage and real estate markets. This
agreement marks an important milestone as we prepare for
finalization of the proposed PMIERs in 2015. While we expect to
fully comply, the sale of Radian Asset will help to accelerate our
ability to do so.”
Ibrahim added, “We look forward to simplifying Radian’s focus on
our core strengths, which we believe will pave the way for future
top-line growth.”
Goldman Sachs & Co. is acting as financial advisor on the
sale of Radian Asset.
Ability to Comply with Proposed PMIERs
As previously disclosed, the Federal Housing Finance Agency
issued proposed new Private Mortgage Insurer Eligibility
Requirements (PMIERs) in July 2014. The public comment period for
the proposed PMIERs ended in September 2014, and Radian expects the
final PMIERs to be published sometime in the first half of 2015,
with an effective date 180 days after publication. The proposed
PMIERs state that, subject to the approval of Fannie Mae and
Freddie Mac, private mortgage insurers may be granted a transition
period of up to two years from the publication date to comply with
the PMIERs’ financial requirements.
The financial requirements included in the proposed PMIERs
exclude from Available Assets (as defined in the PMIERs) certain
subsidiary capital, including Radian Guaranty’s capital that is
attributable to its ownership of Radian Asset. As a result, Radian
has been pursuing a plan to monetize Radian Asset, including a sale
of the company, in order to increase Radian Guaranty’s Available
Assets and better position Radian Guaranty to comply with the
PMIERs’ financial requirements. While the sale of Radian Asset is
expected to result in a GAAP and statutory loss in the fourth
quarter of 2014 (the GAAP carrying value of Radian Asset was $1.25
billion and statutory surplus was $1.03 billion as of September 30,
2014), the consummation of the transactions is expected to increase
Radian Guaranty’s Available Assets by approximately $790 million.
Radian’s book value per share at September 30, 2014, was $9.08 and
the valuation allowance against the company’s deferred tax asset
(DTA) per share was $4.37. The loss related to the sale of Radian
Asset is not expected to negatively impact the company’s previously
disclosed expectations regarding the future reversal of its DTA
valuation allowance.
Assuming that the final PMIERs are published on June 30, 2015,
with an effective date of December 31, 2015, the company currently
estimates that, after giving effect to the net proceeds from the
transactions contemplated by the Stock Purchase Agreement and
Radian’s available holding company cash balances of approximately
$770 million, Radian Guaranty’s projected net shortfall in
Available Assets would be approximately $400 million as of December
31, 2015. Additionally, the company further projects that Radian
Guaranty would have no net shortfall in Available Assets by June
30, 2017, which is the assumed end of the two-year transition
period.
Radian Guaranty expects to fully comply with the PMIERs within
the applicable transition period, without a need to raise
additional capital. While the proposed PMIERs have been the subject
of significant comment from private mortgage insurers, other
industry participants and regulators, Radian’s projections are
based on the proposed PMIERs in their current form, without giving
effect to any potential changes to the financial requirements. In
addition, these projections do not take into consideration the
company’s expected ability to leverage other options, such as pool
insurance commutations and additional reinsurance to achieve
compliance earlier than June 30, 2017.
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. Additional
information may be found at www.radian.biz.
Forward-Looking Statements
Some of the statements in this press release may constitute
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, Section 21E of the Securities and
Exchange Act of 1934 and the United States Private Securities
Litigation Reform Act of 1995. Words such as “will,” “expects,”
“believes,” “projects,” “estimates,” “anticipates” and similar
expressions are used to identify these forward-looking statements.
These forward-looking statements, which may include without
limitation, estimates and 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 statement. The forward-looking
statements, as well as our prospects as a whole, are subject to
risks and uncertainties that could cause actual results to differ
materially from those set forth in the forward-looking statement,
including:
- our ability to consummate the
transactions contemplated by the Stock Purchase Agreement which
depends on, among other things, obtaining regulatory approval;
- the possibility that we have not
accurately projected our net shortfall under the PMIERs which may
be impacted by, among other things: our understanding and
interpretation of the PMIERs financial requirements which may
differ from the interpretation that the Government Sponsored
Enterprises (GSEs) apply; and the performance of our mortgage
insurance business, including our level of defaults, the losses we
incur on new and existing defaults, the projected roll-off of our
existing risk in force, and the amount and credit characteristics
of new business we write; and
- Radian Guaranty’s ability to comply
with the financial requirements of the PMIERs (once adopted) within
the applicable transition period which, based on the proposed
PMIERs, may require us to contribute a substantial portion of our
holding company cash and investments to Radian Guaranty, and could
depend on our ability to, among other things: (1) successfully
consummate the transactions contemplated by the Stock Purchase
Agreement; and (2) successfully leverage other options such as
commutations or external reinsurance for a portion of our mortgage
insurance risk in force in a manner that provides capital relief
compliant with the PMIERs. Contributing a substantial portion of
our holding company cash and investments to Radian Guaranty would
leave Radian Group with less liquidity to satisfy its obligations,
and we may be required or we may decide to seek additional capital
by incurring additional debt, by issuing additional equity, or by
selling assets, which we may not be able to do on favorable terms,
if at all. The ultimate form of the PMIERs and the timeframe for
their implementation remain uncertain.
The forward-looking 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. We operate in a changing
environment. New risks emerge from time to time and it is not
possible for us to predict all risks that may affect us. 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 the Company’s Annual
Report on Form 10-K for the year ended December 31, 2013, Item 1A
of Part I of the Company’s Quarterly Reports on Form 10-Q filed in
2014 and subsequent reports and registration statements filed from
time to time with the Securities and Exchange Commission.
Radian Group Inc.Emily Riley,
215-231-1035emily.riley@radian.biz
Radian (NYSE:RDN)
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