Insurance company Radian Group Inc. (RDN), said Tuesday that its mortgage insurance subsidiary, Radian Guaranty Inc., has entered a quota share reinsurance agreement, effective April 1, with an external reinsurance provider in order to proactively manage its mortgage insurance risk-to-capital position.
This represents the completion of the reinsurance agreement described in the fourth quarter 2011 earnings conference call by the company and is a continuation of its ongoing capital management activities designed to increase financial flexibility.
The company also released data for new insurance written and primary mortgage insurance delinquencies for March 2012.
Ibrahim. ceo of the company, "The external reinsurance agreement provides us with additional capital flexibility. We are off to a strong start in 2012 with $6.5 billion of high-quality, new business written in the first quarter, along with another decline in delinquent loans."
According to the quota share reinsurance agreement, Radian is ceding 20 percent of its new insurance written beginning with the fourth quarter of 2011. As of April 1, 2012, this represents $532 million of the company's risk in force. The total amount of risk that may be ceded through this arrangement is limited and is expected to be between $1.25 billion and $1.6 billion.
At a 25 to 1 risk-to-capital ratio, the equivalent capital benefit associated with ceding this amount of risk would be between $50 million and $62.5 million. Radian has the ability, at its option, to commute two-thirds of the reinsurance on December 31, 2014.
by RTT Staff Writer
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