Radian Group Inc., parent of Radian Asset Assurance, submitted paperwork to the Securities and Exchange Commission Friday that said it would delay filing its annual report because of trouble valuing the collateralized debt obligations that the company insures through its financial guaranty business.
Radian insures CDOs by selling credit default swaps and the lack of a market for these derivatives in recent months is making it difficult for Radian to mark them to market, the company said in SEC filings. The delay was due to a confluence of factors, including difficulty evaluating certain assumptions underpinning the transactions, the limited market for the CDS, and a lack of any observable market data that could be used to provide reasonable estimates.
Also, Radian said the delay in filing was the result of losing experienced personnel with enough accounting experience to do the analysis needed for the report. In 2007, Radian Group lost both its controller and its assistant controller, according to Steve Stelmach of Friedman, Billings, Ramsey & Co.
"As a result of the company's failed merger with MGIC Investment Corp., we believe Radian may have suffered from higher than normal employee attrition," Stelmach wrote in a Feb. 19 report. "To be sure, Radian lost both its controller and assistant controller in 2007."
Radian said it was working with its auditor to complete the analysis and will file the annual report as soon as possible.
Radian Asset is one of only three stable financial guarantors in today's market. Radian is rated Aa3 by Moody's Investors Service, AA by Standard & Poor's, and A by Fitch Ratings.
In other bond insurance news, the Financial Times reported yesterday that Ambac Financial Group, parent of Ambac Assurance Corp., has decided not to split into two companies. Spokesman Paul Burke would not confirm the report.
A group of at least eight banks are seeking an agreement to help contribute capital to the ailing bond insurer, and an announcement is expected soon. The company said last week that it would concentrate on writing municipal guarantees and cease writing any structured finance business for the next six months.
"We've always said that we are always exploring all options," Burke said. "The important thing to take away is that we are consolidating the business, focusing on where we have the strongest franchise and expertise, and building capital."