Triad Guaranty Inc. has reached a definitive agreement to sell its information technology and operating platform to Essent Guaranty Inc., a new mortgage insurer that counts JPMorgan Chase and Goldman Sachs among its investors.
Under the terms of the asset purchase agreement, Essent will acquire all of Triad's proprietary mortgage insurance software and substantially all of the supporting hardware, as well as certain other assets, in exchange for up to $30 million in cash and the assumption by Essent of certain software contractual obligations.
Approximately $15 million of the consideration is fixed, and up to an additional $15 million is contingent on Essent's writing a certain minimum amount of insurance in future years. Triad will retain the obligation for all risks insured under its existing insurance contracts and will continue to pursue the voluntary runoff of its existing in-force book of business.
Essent, which is headquartered in Radnor, Pa., will establish its operations and technology center in Winston-Salem, N.C., where Triad is based, and a number of Triad's information technology and operations employees are expected to join Essent upon closing of the transaction.
As part of a services agreement between the two companies, Essent will provide ongoing information systems maintenance and services, customer service and policy administration support to Triad after the closing.
Triad will continue to directly manage loss mitigation and claims activity during its runoff and will retain its personnel in the loss management, quality assurance and corporate areas to perform these functions.
"While preserving our control over loss mitigation and claims processing to protect our policyholders during run-off, Triad stakeholders benefit from the proceeds generated by the sale of the platform and reduced costs to service our run-off book of business going forward," comments Ken Jones, president and CEO of Triad. "The platform, which we believe will benefit from Essent's ongoing maintenance and investment, provides Essent with the opportunity to enter the market utilizing an established operating platform and a seasoned team of mortgage insurance technology and operations professionals."
The transaction will enable Essent to begin providing mortgage insurance in the near future on a "proven operating platform in which our clients and regulators can have utmost confidence," adds Mark Casale, Essent's president and CEO.
The transaction is expected to close by the end of this year.
SOURCE: Triad Guaranty