Moody's Investors Service gave a thumbs up to mortgage insurer Radian Guaranty's plan to enter into a quota-share-reinsurance agreement, but the ratings agency still downgraded Radian Group's senior-debt rating due to constrained liquidity.
In its Weekly Credit Outlook, Moody's says Radian is ceding a 20 percent quota share of new production—including $532 million of its risk written since the 2011 fourth quarter and up to $1.25 to $1.6 billion of risk in-force—to an unnamed reinsurer.
“The deal improves Radian's regulatory risk-to-capital ratio, an important financial metric for mortgage insurers that has been under pressure owing to losses on its legacy book,” Moody's says.
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