Triad Guaranty to go into run-off

Run-off is a situation where an insurer no longer books new business, but instead generates revenue only on existing policies.

Shares of Triad plunged 46 percent to $1.10 in morning trading.

Triad Guaranty decided to go into run-off after negotiations with private equity firm Lightyear Capital LLC to create a new mortgage insurer fell apart and mortgage financier Freddie Mac rejected Triad Guaranty's appeal of its suspension as an approved mortgage insurer.

"We are continuing to work with our financial adviser, Goldman Sachs, to explore whether other strategic alternatives are available, but we are not optimistic that any opportunities will surface," Mark Tonnesen, Triad Guaranty's president and chief executive, said in a statement.

In early May, Triad Guaranty and Lightyear discussed the parameters of creating a new mortgage insurance company.

An investor group led by Lightyear Capital would have provided up to $400 million for the creation of the new company, with Lightyear Capital providing $200 million. Triad would not have initially held an ownership stake in the new company.

Members of Triad's current management and many of its employees would have joined the new company, which would also have purchased some of Triad's current assets.

Triad Guaranty did not disclose what went wrong in negotiations to close the deal with Lightyear, saying only "certain hurdles arose that prevented the transaction from being feasible."

Triad Guaranty also lost its appeal asking Freddie Mac to overturn its suspension as an approved mortgage insurer. In May, the government-sponsored entities Freddie Mac and Fannie Mae suspended Triad Guaranty as an approved mortgage insurer.