Radian Group Inc. today announced that on November 09, 2012, its financial guaranty insurance subsidiary, Radian Asset Assurance Inc., entered into an agreement (the “Agreement”) with Financial Guaranty Insurance Company (“FGIC”) which, if consummated, would commute the remaining $827 million of outstanding par reinsured by Radian Asset from FGIC (the “Commutation”). This portfolio represents 13 percent of Radian Asset’s total reinsurance exposure as of September 30, 2012, and includes $196 million of Radian Asset’s $225 million in net par outstanding as of September 30, 2012, related to Jefferson County, Alabama sewer warrants.
“Entering into this agreement is another example of our efforts to actively reduce our financial guaranty exposure, which is an important component of our capital management strategy,” stated Chief Executive Officer S.A. Ibrahim.
A rehabilitation proceeding for FGIC pursuant to Article 74 of the New York Insurance Law is currently pending before the Supreme Court of the State of New York (the “Court”), and the effectuation of the Commutation is subject to approval by the Court of the Agreement and certain related matters. Such approval is within the Court’s sole discretion, and no assurance can be given that the Court will grant such approval or when it will be granted. If the Court grants such approval, Radian Asset will be required to make a commutation payment to FGIC in the approximate amount of $52.4 million once that approval becomes final in accordance with the Agreement, and the Commutation will become effective upon FGIC’s receipt of such payment. The amount of this payment was determined primarily based on existing loss reserves and unearned premium reserves, and therefore is not expected to have a material impact on Radian’s consolidated financial statements or Radian Asset’s statutory capital position.
About RadianRadian 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.