Radian, Ambac Sign Commutation Agreement

Posted by Orb Staff on July 22, 2009 No Comments
Categories : Residential Mortgage

Group Inc.'s guaranty insurance subsidiary, Radian Asset Assurance Inc., has entered into a commutation-and-release agreement with Ambac Assurance Corp. and Ambac Assurance UK Ltd. to commute $9.8 billion of Radian Asset's reinsurance portfolio assumed from Ambac. ‘A key component of our capital plan is to provide capital support and cash infusions over time to our core mortgage insurance business,’ said Radian Group CEO S.A. Ibrahim in a company statement. By reducing the company's guraranty risk through the agreement, Radian Guaranty increases its ability to access capital from Radian Asset, Ibrahim said. The commutation agreement provides, among other things, for Radian Asset to make a $100 million settlement payment to Ambac, including a refund of unearned premium reserves and payment of statutory loss reserves. The commutation, which represents 99.7% of the insured portfolio previously assumed from Ambac, decreases Radian Asset's total insured portfolio by 10%, including a decrease of 42% in Radian Asset's exposure to mortgage-backed securities. The statutory surplus of Radian Asset (and Radian Guaranty) will be positively impacted in the third quarter of 2009 by approximately $40 million as a result of the Ambac commutation, the company adds. SOURCE: Radia

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