Radian Group and MGIC Investment Corp. have announced plans to merge, which would create the mortgage insurance industry’s largest player with assets close to $15 billion.
Holders of Radian-insured bonds should view the merger as a strong vote of confidence in Radian Asset and its future.
Radian Group is the parent of Radian Asset Assurance. MGIC previously founded Ambac, the industry’s first bond insurer, in 1971. Through MGIC’s support and vision, Ambac, which is now independent, was the first bond insurer to achieve a “AAA” rating and has grown to become a market leader in the financial guaranty business.
Like Ambac, Radian has been a pioneer. Founded in 1985, Radian has intentionally sought to insure municipal bonds at the “AA” level, allowing it to provide credit enhancement to smaller, occasional issuers in the tax-exempt market. Radian has dominated this niche, and at December 31, 2006, had insured municipal bonds outstanding totaling $54 billion.
The merger, announced last week, is positive for Radian in another way. MGIC, through its history with Ambac, understands Radian’s business and can be expected to provide capital and management resources to Radian, if necessary.
Standard & Poor’s has affirmed Radian’s “AA” rating following the merger, and sees a good strategic fit between the two companies.
Pending regulatory approval, the merger is expected to be completed in the fourth quarter of 2007.
