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 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.
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.
