Wednesday, January 25, 2012

Radian: A Capital Answer

“This deal is expected to increase Radian Asset’s statutory capital by $100 million in the first quarter of 2012,” stated Radian’s dreamy Chief Executive Officer S.A. Ibrahim. 

And so our love affair with S.A. and Dominic continues.  S.A. in particular has now stepped beyond just being a great executive - he has shown that The Dragon truly has been focusing on quality rather than quantity lately. In our very last post, we discussed why Radian and Assured would make such great bed-fellows in just this type of transaction. 

The deal is accretive to Assured's economic and rating agency capital. The implications are greater for Radian, which we speculate will be able to apply to NYID for contingency reserve releases to accrete statutory surplus in addition to the $100 million statutory capital mentioned above (which we believe is actually a reference to RAA's policyholder's surplus and RG's capital base.) It's also worth remembering that another $18B of just corporate CDO's will be rolling off the books by year end 2012, opening the door for more contingency reserve releases. 

Now let's hope Radian management finds the opportunity to buy back it deeply discounted 2013 and 2015 bonds. S.A. has performed masterstrokes, and this would be so easy.

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