Bond insurer Assured Guaranty has reached a three-part deal with Radian Asset that expands Assured Guaranty’s portfolio and business.
First, Assured Guaranty’s subsidiary Assured Guaranty Municipal Corp. has agreed to reassume insuring $12.9 billion of securities that it had earlier transferred to Radian.
Radian is paying Assured $86 million for insuring these bonds. The securities are 4% structured finance credits and 96% public finance exposure. Assured Guaranty expects it will receive an incremental $1.9 million present value from future installment premiums.
Second, Assured Guaranty Corp. will reinsure approximately $1.8 billion of Radian Asset public finance bonds. Radian is paying Assured $22 million for reinsuring this sum.
Both the reassumed and reinsured portfolios are composed of selected credits that meet Assured Guaranty’s underwriting standards, Assured Guaranty reports.
Third, Assured Guaranty will acquire Municipal and Infrastructure Assurance Corp. (MIAC). Assured will pay Radian $91 million for MIAC. MIAC is licensed to provide financial guaranty insurance and reinsurance in 38 U.S. jurisdictions including the District of Columbia.
The companies expect the first two steps to be completed this week. The purchase of MIAC is subject to regulatory approval and is expected to close by the end of March.
“This transaction helps us achieve success on several strategic fronts, including increasing our adjusted book value per share by approximately $0.37, based on expected inter-company reinsurance amounts, and increasing the size of our insured portfolio by approximately $15 billion,” said Dominic Frederico, president and CEO of Assured Guaranty. “The acquisition of MIAC enhances our flexibility to respond to changes in the financial guaranty industry.”
“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.”