Radian Group Inc. has announced a series of capital actions that were completed as of year-end 2022, which it says will enhance its financial flexibility.
Firstly, in December 2022, Radian Reinsurance Inc., a wholly owned insurance subsidiary of Radian Group, completed the novation to an unrelated third-party reinsurer of its entire insured portfolio, which consists solely of credit risk transfer (CRT) transactions with Fannie Mae and Freddie Mac (the GSEs).
Under the terms of the novation agreements, which were approved by the GSEs, the third-party reinsurer has assumed all rights, interests, liabilities and obligations under the CRT transactions originally insured by Radian Reinsurance, which totalled to $276 million of risk in force
Secondly, following the novation of Radian Reinsurance’s entire insured portfolio, effective December 28, 2022, Radian Group successfully completed the merger of Radian Reinsurance into Radian Guaranty, an approved insurer under the GSEs’ Private Mortgage Insurer Eligibility Requirements (PMIERs).
The merger also included $325 million of statutory admitted assets.
Additionally, following the completion of the merger of Radian Reinsurance into Radian Guaranty, the Pennsylvania Insurance Department approved a $282 million return of capital from Radian Guaranty to Radian Group. The return was paid from Radian Guaranty’s gross paid in and contributed statutory surplus on December 30, 2022.
In a press release, it notes that as a result of the favourable impact of these actions, as well as Radians financial outlook, the company expects Radian Guaranty Inc., the company’s flagship mortgage insurance subsidiary, to begin paying recurring ordinary dividends to Radian Group with 2023 ordinary dividends projected to be between $300 to $400 million.
At the same time, ordinary dividends in future years are expected to approximate Radian Guaranty’s ongoing statutory earnings.
Chief Executive Officer Rick Thornberry commented: “We are delighted to start the new year in an even stronger position, as these capital actions underscore Radian’s financial strength and flexibility. This is a significant milestone for our company, as the combination of these actions along with the expectation for recurring ordinary dividends from Radian Guaranty to Radian Group better position us to deliver even greater value for all of our stakeholders.”
Furthermore, Radians Board of Directors also approved a new share repurchase program that enables the company to repurchase its common stock.
The new authorisation provides Radian the flexibility to repurchase shares opportunistically from time to time and spend up to $300 million, based on market and business conditions, stock price and other factors.
