Housing market slides, but deals continue
MGIC Investment, a US-based provider of insurance on high-risk mortgages announced it would buy rival Radian Group, a credit-risk company. The deal, in the form of stock swap, is for around $4.9 billion. The new company will be called MGIC Radian Financial Group.
Milwaukee-based MGIC owns the Mortgage Guaranty Trust Company, which provides mortgage insurance for around 5,000 banks and lending institutions in the US, with about $178 billion in home mortgagers insured, It is #1 in that field, while Radian is #3.
Philadelphia-based Radian insures high risk mortgages, as well as individual loans. It also reinsures municipal bond offers. That, some consider, was the big selling point, giving MGIC entry into a new, but closely related business. It has around $120 billion in insurance coverage.
The two companies already work together in two joint ventures: Sherman Financial Group, which collects delinquent consumer assets and C-BASS, which handles seller-financed mortgages.
The new company will control over one-third of the US's mortgage insurance. That's a major percentage, concentrating so much risk in one insurer in a time when a bump in defaults is likely.
The big competitors are PMI (#2), Genworth (spun off from GE's financial wing) and United Guaranty (a division of insurance giant AIG). PMI already is in the municipal bond insurance company.
The whole sector is active, just in the first 40 days of this year. ABN Anro sold its mortgage arm in the US to Citigroup. Barclays bought EquiFirst. Genworth recently sold off one of its insurance units. It follows the announced acquisition of IFS by State Street Bank among many other deals. The reshuffling the financial industry proceeds at full speed.
7:40:46 PM 
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