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Radian Merger Unraveling

Partner MGIC says it may want out.

Radian Group

(RDN) - Get Radian Group Inc. Report

plunged 11% late Tuesday after merger partner

MGIC Investment

(MTG) - Get MGIC Investment Corporation Report

said it is "not obligated" to complete the deal.

Radian has informed MGIC that it disagrees with its preliminary assessment, MGIC Investment says. The news sent MGIC shares up 5%.

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MGIC Investment said it has advised the New York Insurance Department of a preliminary assessment it did "in light of the C-BASS impairment announced last week."

The mortgage insurance firms said last week that they may have to write off their investments in subprime mortgage investor Credit Based Asset Servicing and Securitization.

The investment vehicle, known as C-Bass, saw "unprecedented losses" in its investment in securities related to borrowers with questionable credit, according to a public statement from the companies.

MGIC said its management is also reviewing other developments that may affect its obligation to close and "is requesting additional information from Radian." It anticipates its analysis will be completed next week.

MGIC and Radian agreed in February to a merger. The deal is supposed to close in the third quarter.

A spokesman for Radian did not immediately return calls seeking comment.

Shares of Radian fell $2.38 to $20.85, while MGIC rose $1.60 to $34.88.