Radian Asset Assurance announced the successful acquisition of Municipal and Infrastructure Assurance Corp. (MIAC) on Thursday, following the approval of its regulator, the New York Insurance Department.
Radian’s purchase agreement was originally announced Feb. 1. MIAC is a New York-based shell company that Macquarie Group, an Australian investment firm, struggled to launch as a municipal bond insurer from late 2008 until earlier this year. It has not written any business but obtained licenses to do so in 36 states and the District of Columbia.
The purchase price of $82 million is $7 million above the value of MIAC’s statutory capital base, which consists of about $75 million of cash, cash equivalents and Treasury securities.
The acquisition is consistent with Radian’s goal of reducing its non-core risk in order to eliminate uncertainty, while maximizing the ultimate capital available to its mortgage insurance business.
“This acquisition provides Radian with the flexibility to pursue strategic alternatives in the public finance market,” Bob Quint, chief executive of Philadelphia-based parent company Radian Group Inc., said in a press release.
Quint said the shell company could be used to partner with third-party investors to write new public finance insurance, or reinsure “all or a portion of Radian Asset’s existing public finance business.”
Radian Asset was compelled to stop writing public finance guarantees in fall 2008 so it could prop up sister company Radian Guaranty.
It still maintains a public finance portfolio with a net par of $37.63 billion, as of year-end 2010, including $15.73 billion of direct policies and $21.9 billion of reinsurance. It also insures $39.3 billion of structured finance products and $1.8 billion of structured reinsurance.
Radian Asset Assurance is rated 'Ba1' by Moody’s Investors Service. Standard & Poor’s rates it two notches lower at 'BB-minus'. It listed $1 billion in statutory surplus with an additional $1.4 billion in claims-paying resources at the end of 2010.
Radian spokeswoman Emily Riley called the purchase “a rare opportunity” in February, noting that MIAC is a “well-developed, clean platform with no outstanding liabilities.”
Riley was not available for additional comment Thursday.