Radian Group today announced it plans on using excess capital in bond insurer subsidiary Radian Asset Assurance to prop up its mortgage insurance business, Radian Guaranty.
While releasing its second quarter earnings, Radian Group said Radian Asset has $960 million in statutory surplus, and it will contribute its investment in the bond insurer to Radian Guaranty. Radian Asset recently declared an ordinary dividend of $107.5 million to Radian Group, which then contributed $100 million to Radian Guaranty.
The second-quarter earnings highlighted Radians trouble in the mortgage market, with the company reporting a net loss of $392.5 million, while creating a pre-tax first-lien premium deficiency reserve of $421.8 million.The book of business in Radian Asset has significantly less exposure to mortgage and mortgage related assets compared to other financial guaranty insurers and new business production across all financial guaranty product lines has been significantly reduced in 2008 and is likely to remain at minimal levels, Radian Group said in a statement. These combined factors have created an opportunity unique to Radian that will allow Radian Groups investment in Radian Asset to be contributed to Radian Guaranty.