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06 May 2010
New York, May 06, 2010 -- Moody's Investors Service has affirmed the Ba3 insurance financial strength
(IFS) rating of Radian Guaranty Inc and Amerin Guaranty Corporation (collectively
"Radian Guaranty"), the B1 IFS rating of Radian Insurance
Inc., and the Caa1 senior debt rating of the holding company,
Radian Group and changed the rating outlook to positive from negative.
Moody's has also affirmed the Ba1 IFS rating, stable outlook,
of Radian Asset Assurance Inc. and, its wholly owned subsidiary,
Radian Asset Assurance Limited (collectively "Radian Asset").
Today's rating action was prompted by Radian Group's announced public
offering and pricing of approximately $550 million of common stock.
Radian intends to use the net proceeds from this offering to fund working
capital requirements and for general corporate purposes, which may
include additional capital support for the mortgage insurance business
and repurchases of, or payments on, outstanding debt securities.
The offering proceeds will improve the holding company's liquidity
and enhance Radian's capital and business prospects, said
The positive outlook on the mortgage insurance operations reflect Radian's
improved business prospects, in an attractive new production market,
as a result of the recapitalization. Although Radian has not been
specific about plans to downstream capital, the credit profile of
the mortgage insurance platform benefits from improved holding company
liquidity, Radian has $660 million of debt maturing between
now and 2015, and some flexibility to downstream capital to the
operating company as needed to expand new insurance capacity or fund unanticipated
losses. Moody's notes that Radian Guaranty's regulatory
risk to capital ratio of 16.9:1 at March 31, 2010 is
one of the strongest in the industry, benefiting from its ownership
of Radian Asset. Unlike some of its peers, Radian has not
had to seek waivers of regulatory minimums or accelerated licensing of
subsidiaries in order to continue to write new business. Consistent
with the rest of the industry, Radian's new business volume
has declined as the opportunity for private mortgage insurers have narrowed,
but the company has written an increasing proportion of the industry's
new insurance policies. Additionally, Moody's commented,
uncertain future demand for mortgage insurance and capital positions that
have substantially weakened from the housing crisis continue to weigh
heavily on the firm and the industry's overall credit profile.
Radian's 1Q2010 results showed a slight decline in delinquent inventory.
This trend is broadly consistent with assumptions incorporated into Moody's
February 2010 estimate of $5.6 billion in future claims
which incorporated recent observations that delinquencies may have peaked.
Moody's noted that Radian also reported an increase to loss reserves
due to higher severity assumptions and the aging of the delinquent inventory.
This highlights that while delinquency trends have improved loss emergence
patterns remain somewhat unpredictable.
The positive outlook for the B1 rating of Radian Insurance, reflects
the explicit support from Radian Guaranty.
The affirmation of Radian Asset's Ba1 rating, stable outlook,
reflects Radian Group's stated intent to utilize Radian Asset's available
capital, subject to regulatory limitations, to support its
mortgage insurance operations. The rating agency said that,
Radian Asset's insured portfolio has experienced credit deterioration
and its capital position has weakened in light of continued deteriorating
performance of the underlying collateral of its corporate CDO exposure,
particularly its $2.1 billion in TRuPs securities.
However, Radian Asset's capital profile remains strong currently,
with significant capital cushion relative to expected and stress loss
Moody's added that the positive rating outlook on the holding company's
debt securities reflects it demonstrated access to capital and improved
liquidity profile. With the recapitalization, Radian Group
is better positioned to meet holding company's obligations beyond
its upcoming 2011 debt maturity. Radian has $160 million
of notes maturing in 2011, $250 million of debt which matures
in 2013, and an additional $250 million of debt which comes
due in 2015.
TREATMENT OF WRAPPED TRANSACTIONS
Moody's ratings on securities that are guaranteed or "wrapped" by a financial
guarantor are generally maintained at a level equal to the higher of the
following: a) the rating of the guarantor (if rated at the investment
grade level); or b) the published underlying rating (and for structured
securities, the published or unpublished underlying rating).
Moody's approach to rating wrapped transactions is outlined in Moody's
special comment entitled "Assignment of Wrapped Ratings When Financial
Guarantor Falls Below Investment Grade" (May, 2008); and Moody's
November 10, 2008 announcement entitled "Moody's Modifies Approach
to Rating Structured Finance Securities Wrapped by Financial Guarantors".
A list of the securities wrapped by Radian Asset are available under "Ratings
Lists" at www.moodys.com/guarantors
LIST OF RATING ACTIONS
The following ratings have been affirmed, and the outlook changed
to positive, from negative:
Radian Guaranty Inc. -- insurance financial strength
Amerin Guaranty Corporation -- insurance financial strength
Radian Insurance Inc. -- insurance financial strength
Radian Group, Inc. -- senior unsecured debt
The following rating has been affirmed, with a stable outlook:
Radian Asset Assurance Inc. -- insurance financial
strength at Ba1;
Radian Asset Assurance Limited -- insurance financial strength
Moody's also announced today that it will withdraw the ratings of Radian
Asset Assurance Limited for business reasons. Please refer to Moody's
Withdrawal Policy on moodys.com.
The last rating action on Radian Guaranty occurred on March February 4,
2010, when its ratings were affirmed and its outlook changed to
negative from developing. The last rating action for Radian Asset
occurred on March 12. 2009 when its ratings were downgraded and
its outlook changed to stable.
The principal methodologies used in rating Radian were "Moody's Global
Rating Methodology for the Mortgage Insurance Industry" published in February
2007 and "Moody's Rating Methodology for the Financial Guaranty Insurance
Industry" published in September 2006. Both methodologies are available
on www.moodys.com in the Rating Methodologies sub-directory,
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found in the Rating Methodologies sub-directory on Moody's
Radian Group, Inc. is a US based holding company which owns
a mortgage insurance platform comprised of Radian Guaranty, Radian
Insurance and Amerin Guaranty, as well as a financial guaranty insurance
company, Radian Asset. The group also has investments in
other financial services entities. As of March 31, 2010,
Radian Group had total assets of $8.3 billion and $1.7
billion in shareholder's equity.
Senior Vice President
Financial Institutions Group
Moody's Investors Service
Moody's changes Radian's outlook to positive, from negative
Senior Vice President
Financial Institutions Group
Moody's Investors Service
No Related Data.
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