Radian Guaranty Inc. is in compliance with the government-sponsored enterprises capital standards after receiving $325 million in cash and securities from parent company Radian Group Inc. of Philadelphia.
All seven private mortgage insurers need to be in compliance with the
The $325 million is being given in exchange for a surplus note with a 0% interest rate that matures on Dec. 31, 2025. However, Radian Guaranty said in a press release it expects to redeem a portion of the note during 2016, if not the entire note. If there is any remaining amount owed, it should be paid during 2017.
In addition, Radian Group gave $50 million to an affiliated reinsurer of Radian Guaranty. The press release said Radian Guaranty is not expected to need any additional capital to remain in compliance.
"While we could have satisfied the PMIERs financial requirements through a permanent capital contribution, the surplus note is an effective way to optimize our capital and liquidity positions given our positive future outlook,” said Radian Group Chief Executive Officer S.A. Ibrahim in the press release.
In July, Radian Group
The moves will leave Radian Group with $300 million of current available liquidity as of Dec. 31.
In a related decision, Radian Guaranty declined to recapture some of the risk it ceded in a quota share reinsurance transaction. Instead, the company received an $8 million commission based on loan performance to date. This will increase the company's fourth-quarter net premiums earned by $1.5 million.
In addition, the mortgage insurer received an $8.5 million prepaid supplemental ceding commission. For accounting purposes, its recognition is being deferred and amortized as a reduction to Radian Guaranty's policy acquisition costs over the next five years.
