Radian Group Inc., a leading mortgage insurance player, is diving deeper into the asset-backed marketplace with the creation of Radian Insurance Inc., a new credit enhancement subsidiary. Moving further down the credit spectrum, the new company will be dipping into subprime markets, expanding the company's product line to non-traditional offerings.
"The subprime market has been a very vibrant market for many, many years, and it's going to continue to be vibrant for many years," said Frank P. Filipps, chairman and chief executive officer. "Radian is not going to be targeting the subprime market per se, it is more product-oriented rather than borrower credit-quality oriented."
According to Filipps, the company is not expecting the risk profile for Radian Insurance to be any different from that of Radian Guaranty. "We think the market is pretty broad and the risk that we will have in our new products will be very accessible to our corporate standards," said Filipps.
While Moody's Investor Service has rated the new company Aa3, Filipps believes Radian Insurance will compete with triple-A-rated companies like Ambac and MBIA, as well as other double-A-rated insurance companies including MGIC and United Guaranty. "We will offer new products and we will bring a new level of competition to many of these products, and we think that by doing that, new competition will lower securitization costs. It's just natural evolution," said Filipps.
Formed only a year ago as a result of a merger between Commonwealth Mortgage Insurance and Amerin Guaranty, Radian Guaranty is a monoline, first-mortgage insurer, only licensed for traditional A-paper products.
