Federal Guaranty Insurance, Radian unit agree to commute $827 million

By Caroline Salls

Pittsburgh, Nov. 13 - Financial Guaranty Insurance Co. has entered into an agreement with Radian Group Inc. financial guaranty insurance subsidiary Radian Asset Assurance Inc., which would commute the remaining $827 million of outstanding par reinsured by Radian Asset from FGIC, according to a Radian news release.

Radian said this portfolio represents 13% of Radian Asset's total reinsurance exposure as of Sept. 30 and includes $196 million of Radian Asset's $225 million in net par outstanding as of Sept. 30 in connection with Jefferson County, Ala., sewer warrants.

The agreement is subject to approval by the Supreme Court of the State of New York, where FGIC's rehabilitation proceeding is pending.

If the court approves the agreement, Radian Asset will be required to make a $52.4 million commutation payment to FGIC. Commutation will take effect upon FGIC's receipt of that payment.

"Entering into this agreement is another example of our efforts to actively reduce our financial guaranty exposure, which is an important component of our capital management strategy," Radian chief executive officer S.A. Ibrahim said in the release.

FGIC is a direct, wholly owned subsidiary of FGIC Corp., a New York-based privately held insurance company. The parent company filed for bankruptcy on Aug. 3, 2010 in the U.S. Bankruptcy Court for the Southern District of New York. The Chapter 11 case number is 10-14215.

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