News

01/24/2012

Radian Commutes $12.9 Billion Reinsurance Portfolio and Cedes $1.8 Billion of Public Finance Risk to Assured Guaranty

Expected to increase statutory capital by $100 million

Reduces financial guaranty net par outstanding by approximately 21 percent

Includes agreement to sell MIAC for $91 million

PHILADELPHIA--(BUSINESS WIRE)--Jan. 24, 2012-- 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.com.

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.

Source: Radian Group Inc.

Radian
Emily Riley, 215-231-1035
emily.riley@radian.com