PHILADELPHIA, Sept. 5 /PRNewswire-FirstCall/ -- Radian Group Inc.
(NYSE: RDN) ("the Company"), in response to the negative ratings actions
taken today by Fitch Ratings with regard to Radian Asset Assurance, the
Company's principal financial guaranty subsidiary, has formally requested
that Fitch immediately withdraw all of its ratings for the Company and its
subsidiaries. The Company made the following statement regarding its
decision:
"Fitch's action is inconsistent with Radian Asset's strong capital and
liquidity position, highly rated and diversified insured portfolio,
business platform and prospects, and creates unmerited uncertainty
concerning its capital strength. As a result, we believe the action taken
today by Fitch is unwarranted."
Radian noted that Fitch's recently implemented financial guaranty
capital model, "Matrix," significantly diverges from other rating agency
and industry models, as well as Radian Asset's own internal capital model.
Contrary to Fitch's assertions, the Company believes Radian Asset's
direct business niche is strong. Radian Asset has enjoyed meaningful
compound annual growth rate increases in its global structured products and
public finance sectors. In addition, Radian Asset's total significant
unearned premium reserves and future installment premiums provide a
meaningful, ongoing embedded earnings stream.
Fitch also cited a "seasoned $100 million collateralized debt
obligation of asset-backed securities that is subject to market value risk"
as a concern. Radian does not foresee making a payment on this transaction
since no event has occurred that would trigger a liquidation of the high
investment grade quality assets in the underlying pool. Approximately 65%
of the total pool is rated AAA, with the remaining 35% rated AA. Subprime
RMBS accounts for 25% of the pool; however, there are no subprime assets
from the 2006 or 2007 vintages.
In light of the recent mortgage market and merger-related developments,
Radian's focus is to efficiently and prudently run its core insurance
businesses. The Company is confident that it can effectively execute its
business plan with ratings from Moody's and S&P.
The Company is pleased with the actions taken today by Moody's and S&P
with respect to Radian Asset. The Company is working diligently to address
the concerns of Moody's and S&P with respect to Radian Group and its
mortgage insurance subsidiaries, with the goal of stabilizing their
ratings.
Radian Group Inc. is a global credit risk management company
headquartered in Philadelphia with significant operations in New York and
London. Radian develops innovative financial solutions by applying its core
mortgage credit risk expertise and structured finance capabilities to the
credit enhancement needs of the capital markets worldwide, primarily
through credit insurance products. The company also provides credit
enhancement for public finance and other corporate and consumer assets on
both a direct and reinsurance basis and holds strategic interests in
credit-based consumer asset businesses. Additional information may be found
at http://www.radian.biz.
All statements made in this news release that address events or
developments that we expect or anticipate may occur in the future are
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934
and the U.S. Private Securities Litigation Reform Act of 1995. These
statements, which include projections regarding revenues and losses as well
as other statements regarding our future financial condition, are made on
the basis of management's current views and assumptions with respect to
future events. These forward-looking statements, as well as our prospects
as a whole, are subject to risks and uncertainties, including the
following: changes in general financial and political conditions such as
extended national or regional economic recessions (or expansions), changes
in housing demand or mortgage originations, changes in housing values,
population trends and changes in household formation patterns, changes in
unemployment rates, changes or volatility in interest rates, consumer
confidence, or changes in credit spreads; changes in investor perception of
the strength of private mortgage insurers or financial guaranty providers;
risks faced by the businesses, municipalities or pools of assets covered by
our insurance; the loss of a customer with whom we have a concentration of
our insurance in force or the influence of large customers; increased
severity or frequency of losses associated with certain of our products
that are riskier than traditional mortgage insurance and financial guaranty
insurance policies; material changes in the persistency rates of our
mortgage insurance policies; losses associated with the aging of our
mortgage insurance portfolio; ratings actions with respect to our credit
ratings or the insurance financial-strength ratings assigned by the major
ratings agencies to our operating subsidiaries; heightened competition from
other insurance providers and from alternative products to private mortgage
insurance and financial guaranty insurance; changes in the charters or
business practices of Fannie Mae and Freddie Mac; the application of
federal or state consumer, lending, insurance and other applicable laws and
regulations, or changes in these laws and regulations or the way they are
interpreted; the possibility that we may fail to estimate accurately the
likelihood, magnitude and timing of losses in connection with establishing
loss reserves for our mortgage insurance or financial guaranty businesses
or to estimate accurately the fair value amounts of derivative financial
guaranty contracts in determining gains and losses on these contracts;
changes in accounting guidance from the SEC or the Financial Accounting
Standards Board regarding income recognition and the treatment of loss
reserves in the mortgage insurance or financial guaranty industries;
vulnerability to the performance of our strategic investments and the
amount of the impairment charge related to our interest in Credit Based
Asset Servicing and Securitization LLC ("C-BASS"), which has not yet been
determined and may be influenced by: (i) changes in the market for subprime
mortgages and the amount, timing and severity of market dislocations
occurring in the subprime market; (ii) the amount, timing and severity of
any future margin calls that C-BASS may receive; (iii) C-BASS's ability to
obtain sufficient and timely financing to support its liquidity position;
and (iv) our ability to sell part or all of our interest in C-BASS and the
amount that may be received in connection with any such sale; legal and
other limitations on the amount of dividends that we may receive from our
insurance subsidiaries; international expansion of our mortgage insurance
and financial guaranty businesses into new markets and risks associated
with our international business activities; and risks and uncertainties
associated with the termination of our merger with MGIC Investment
Corporation, including, without limitation: possible customer attrition and
disruption from the transaction making it more difficult to maintain
relationships with customers, employees or other business relationships,
which may have a materially adverse impact on our financial results and
prospects. For more information regarding these risks and uncertainties, as
well as certain additional risks that we face, investors should refer to
the risk factors detailed in Part I, Item 1A of our annual report on Form
10-K for the year ended December 31, 2006. We caution you not to place
undue reliance on these forward-looking statements, which are current only
as of the date of this news release. We do not intend to, and disclaim any
duty or obligation to, update or revise any forward-looking statements made
in this news release to reflect new information, future events or for any
other reason.
SOURCE Radian Group Inc.
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Related links:
http://www.radian.biz
CONTACT:
Investors, Mona Zeehandelaar of Radian Group
Inc., +1-215-231-1674, mona.zeehandelaar@radian.biz; Media, Steve
Frankel or Jeremy Jacobs of Joele Frank, Wilkinson Brimmer
Katcher, +1-212-355-4449, both for Radian Group Inc.
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