UPDATE 2-Radian returns $12.9 bln portfolio to Assured Guaranty

* To cede $1.8 bln of public finance business

* To sell MIAC for $91 mln

* Assured Guaranty to get $86 mln payment for reassuming the risk

Jan 24 (Reuters) - Mortgage insurer Radian Group Inc will transfer back a $12.9 billion reinsurance portfolio to subsidiaries of Assured Guaranty Ltd, in a three-part transaction expected to increase Radian Asset's statutory capital.

The deal also involves the sale of Radian Asset's Municipal and Infrastructure Assurance Corporation (MIAC) to bond insurer Assured Guaranty for $91 million.

Assured Guaranty will receive a payment of $86 million from Radian Asset for the re-assumption of the $12.9 billion of ceded risk.

Radian had bought MIAC, the dormant bond insurance operations of Macquarie Group, in February last year for $82 million.

Macquarie formed MIAC to fill a gap in the market. However, MIAC never actually wrote any business, despite having licenses in 36 states and Washington, D.C.

In September, Radian had announced plans to form a new public finance mutual bond insurance company with the National League of Cities (NLC) in the hope of re-igniting a sector that burned out during the financial crisis.

Assured Guaranty will also reinsure about $1.8 billion of Radian Asset public finance business.

Radian said the deal will benefit Radian Asset, and hence its primary mortgage insurance subsdiary Radian Guaranty's statutory capital in the first quarter of 2012 by $100 million.

Mortgage insurers in the United States have been struggling to meet capital adequacy benchmarks and have sought waivers to continue writing business in many states.

Radian's competitor MGIC Investment Corp, which reported results earlier in the day, said it expects its capital levels to fall further in 2012.

Last week, Radian had said its unit Radian Guaranty wrote new business worth $6.5 billion in the fourth quarter.

As of Dec. 31, Radian Guaranty is expected to maintain its risk-to-capital ratio below the allowed limit of 25 to 1, with about $500 million of holding company liquidity.

Radian also got waivers to write new business from Arizona, Illinois, Kentucky and Wisconsin, and has applications pending in 10 other states.

Radian shares closed at $2.95 while Assured Guaranty shares closed at $15.56 on Tuesday on the New York Stock Exchange.