Triad Guaranty Inc. has announced that it has reached a definitive agreement to sell its information technology and operating platform to Essent Guaranty Inc., a new mortgage insurer founded to provide private capital to America's housing finance system. Under the terms of the asset purchase agreement, Essent will acquire all of Triad's proprietary mortgage insurance software and substantially all of the supporting hardware, as well as certain other assets, in exchange for up to $30 million in cash and the assumption by Essent of certain software contractual obligations. Approximately $15 million of the consideration is fixed and up to an additional $15 million is contingent on Essent writing a certain minimum amount of insurance in future years. Triad will retain the obligation for all risks insured under its existing insurance contracts and will continue to pursue the voluntary run-off of its existing in-force book of business.
Essent, which is headquartered in Radnor, Penn., will establish its operations and technology center in Winston-Salem, N.C., where Triad is based, and a number of Triad's information technology and operations employees are expected to join Essent upon closing of the transaction. As part of a services agreement between the two companies, Essent will provide ongoing information systems maintenance and services, customer service and policy administration support to Triad after the closing. Triad will continue to directly manage loss mitigation and claim activity during its run-off and will retain its personnel in the loss management, quality assurance and corporate areas to perform these functions.
"We believe that this is a very beneficial transaction for both Triad and Essent," said Ken Jones, president and chief executive officer of Triad. "While preserving our control over loss mitigation and claims processing to protect our policyholders during run-off, Triad stakeholders benefit from the proceeds generated by the sale of the platform and reduced costs to service our run-off book of business going forward. The platform, which we believe will benefit from Essent's ongoing maintenance and investment, provides Essent with the opportunity to enter the market utilizing an established operating platform and a seasoned team of mortgage insurance technology and operations professionals."
"The acquisition of Triad's operating platform is the next major step in the formation of Essent's mortgage insurance business, which is being created to support qualified borrowers who can afford a home, but may not have the funds for a large down payment," said Mark Casale, president and chief executive officer of Essent. "With this transaction, we can begin to provide mortgage insurance in the near future on a proven technology and operating platform in which our clients and regulators can have utmost confidence. We're also pleased to be making excellent progress in the National Association of Insurance Commissioners' expedited licensing pilot program, and have received approvals from 20 states to date. With the benefit of a strong capital base, we are building a new company that we believe can meet our clients' mortgage insurance and risk management needs today, and for years to come."
The transaction is expected to close in the fourth calendar quarter of 2009.
For more information, visit Tgic.com or Essent.us.