Triad Guaranty has reached an agreement to sell its information technology and operating platform to Essent Guaranty (Essent), a new mortgage insurer founded to provide private capital to America’s housing finance system.
As per 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, Pennsylvania, will establish its operations and technology centre in Winston-Salem, North Carolina, 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.
The transaction is expected to close in the fourth quarter of 2009.
