Radian Group Inc., Philadelphia, has entered into a series of transactions with Assured Guaranty Ltd., Hamilton, Bermuda, which will eventually add $100 million to its mortgage insurance subsidiary's statutory capital.
The deal includes Radian Asset Assurance ceding back nearly $13 million of risk to Assured Guaranty, for which Radian will pay Assured $86 million.
Assured will also reinsure for RAA almost $2 billion of public finance business for a payment of $22 million.
Finally, the parties entered into an agreement for Radian Group to sell Municipal and Infrastructure Assurance Corp. to Assured for $91 million. MIAC is a financial guaranty shell that Radian purchased in June 2011 for $82 million.
Back when Radian announced it was purchasing MIAC, it said RAA was considering using MIAC to pursue strategic alternatives in the public finance market, including possibly partnering with third-party investors to write new public finance insurance and/or reinsuring all or a portion of RAA's existing public finance business.
Radian chief executive S.A. Ibrahim explained, “With this one transaction, we made great strides toward improving our capital position and further preserving our holding company liquidity. By reducing our financial guaranty net par outstanding by 21%, we are strengthening Radian Asset's statutory capital position."
The transactions are expected to increase RAA's, and thus Radian Guaranty's, statutory capital by $100 million; this includes $6 million in statutory capital from the sale of MIAC. Radian Group utilizes RAA for capital support to Radian Guaranty.
