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02/24/2009
Radian Reports Fourth Quarter and Full Year 2008 Financial Results
"The private mortgage insurance industry remains a vital component of the
U.S. housing finance system. While Radian and our industry experienced a
difficult year, we believe that we have sufficient capital and liquidity to
pay all anticipated claims, maintain a strong market position and continue to
write new mortgage insurance business throughout 2009," said
FOURTH QUARTER HIGHLIGHTS
-- Radian Asset Assurance Inc. (Radian Asset), the Company's principal
financial guaranty subsidiary, continues to serve as an important source
of capital support for Radian Guaranty Inc. (Radian Guaranty), the
Company's principal mortgage insurance subsidiary, and is expected to
continue to provide our core mortgage insurance business with cash
infusions over time. Radian Asset had claims-paying resources of
$2.8 billion including $965 million in statutory capital as of December
31, 2008 .
-- Radian continues to reduce credit risk exposure in the Financial
Guaranty (FG) portfolio and to decrease non-traditional mortgage insurance
risk in force.
-- Net par outstanding at FG was reduced to $100.7 billion from
$116.0 billion a year ago.
-- In the fourth quarter, the Company eliminated approximately $4.0
billion of mortgage insurance exposure on a large, international
mortgage credit default swap transaction.
-- The Company reduced its second lien mortgage insurance exposure
by $209 million in January 2009 , bringing its risk in force down
to a current level of approximately $400 million , through a
commutation agreement with a large second lien counterparty.
-- Radian has a 29 percent ownership interest in Sherman Financial and
received $35.5 million in dividends from Sherman during 2008 and
$6 million in January 2009 . Sherman continues to be a source of
additional liquidity and a potential source of additional capital.
-- Fourth quarter and full year first and second-lien MI claims paid came
in below expectations at $240 million and $916 million , respectively.
First quarter MI claims paid are expected to be approximately
$270 million .
-- The fourth-quarter first-lien primary MI delinquency rate was
12 percent.
-- The delinquency rate for prime flow insurance was approximately
7.1 percent during the fourth quarter of 2008 and it is expected
to continue to rise in the short-term.
-- Positive trends are occurring in certain vintages with indications
of improved performance in 2008 business written.
-- As a result of reduced mortgage origination volume and the Company's
move to a more traditional high quality focus, total primary new MI
insurance written during the fourth quarter was $5 billion , approximately
99.6 percent of which was prime. In addition, the average LTV was
90 percent and the average FICO score was 742 on business written in the
fourth quarter.
-- Radian's loss management initiatives remain a critical priority to its
capital preservation.
CONFERENCE CALL
Radian will discuss each of these items in its conference call today,
A replay of the webcast will be available at the Radian Web site approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available two and a half hours after the call ends for one week, using the following dial-in numbers and passcode: 800-475-6701 inside the U.S., or 320-365-3844 for international callers, passcode 986186.
About Radian
Financial Results and Supplemental Information Contents (Unaudited)
For trend information on all schedules, refer to Radian's quarterly financial statistics at http://www.radian.biz/investors/financial/corporate.aspx.
Exhibit A: Condensed Consolidated Statements of Income
Exhibit B: Condensed Consolidated Balance Sheets
Exhibit C: Segment Information Quarter Ended December 31, 2008
Exhibit D: Segment Information Quarter Ended December 31, 2007
Exhibit E: Segment Information Year Ended December 31, 2008
Exhibit F: Segment Information Year Ended December 31, 2007
Exhibit G: Financial Guaranty Supplemental Information - For the Quarter
and Year Ended and as of December 31, 2008
Exhibit H: Financial Guaranty Supplemental Information -
For the Quarter and Year Ended and as of December 31, 2008
Exhibit I: Mortgage Insurance Supplemental Information -
For the Quarter and Year Ended and as of December 31, 2008
New Insurance Written and Risk Written
Exhibit J: Mortgage Insurance Supplemental Information -
For the Quarter and Year Ended and as of December 31, 2008
Insurance in Force and Risk in Force
Exhibit K: Mortgage Insurance Supplemental Information -
For the Quarter and Year Ended and as of December 31, 2008
Risk in Force by LTV and Policy Year and other Risk in Force
Exhibit L: Mortgage Insurance Supplemental Information -
For the Quarter and Year Ended and as of December 31, 2008
Claims and Reserves
Exhibit M: Mortgage Insurance Supplemental Information -
For the Quarter and Year Ended and as of December 31, 2008
Defaults
Exhibit N: Mortgage Insurance Supplemental Information -
For the Quarter and Year Ended and as of December 31, 2008
Net Premiums Written and Earned, Smart Home, Captives and
Persistency
Exhibit O: Mortgage Insurance Supplemental Information -
For the Quarter and Year Ended and as of December 31, 2008
Reinsurance Progression Toward Attachment - Summary by Book
Year
Exhibit P: Mortgage Insurance Supplemental Information -
For the Quarter and Year Ended and as of December 31, 2008
Modified Pool Risk in Force
Exhibit Q: Mortgage Insurance Supplemental Information -
For the Quarter and Year Ended and as of December 31, 2008
Alt-A
Exhibit R: Financial Services Supplemental Information -
For the Quarter and Year Ended and as of December 31, 2008
Schedule 1: Supplemental Schedule
Radian Group Inc. and Subsidiaries-Consolidated
Schedule 2: Supplemental Schedule - Segment Information-Financial
Guaranty
Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Income
Exhibit A
Quarter Ended Year Ended
December 31 December 31
---------------- -----------------
2008 2007 2008 2007
---- ---- ---- ----
(In thousands, except
per-share data)
Revenues:
Net premiums written
- insurance $147,467 $286,372 $816,869 $1,085,232
======== ======== ======== ==========
Net premiums earned
- insurance 231,044 $234,368 $971,820 $912,281
Net investment income 66,711 67,493 263,033 256,098
Change in fair value of
derivative instruments (1) (217,879) (580,614) 710,913 (1,214,379)
Net (losses) gains on other
financial instruments (22,594) (673) (149,466) 53,606
Gain on sale of affiliate - - - 181,734
Other income 2,145 192 11,736 11,711
----- --- ------ ------
Total revenues 59,427 (279,234) 1,808,036 201,051
------ -------- --------- -------
Expenses:
Provision for losses 618,835 689,903 2,205,340 1,308,090
Provision for premium
deficiency (2) (244,512) 40,470 (108,785) 195,646
Policy acquisition costs 15,768 24,981 136,396 113,176
Other operating expenses 55,726 38,652 255,497 169,444
Merger expenses - - - 14,001
Interest expense 13,337 14,258 53,514 53,068
------ ------ ------ ------
Total expenses 459,154 808,264 2,541,962 1,853,425
------- ------- --------- ---------
Equity in net income
(loss) of affiliates 15,769 (39,896) 59,797 (416,541)
------ ------- ------ --------
Pretax loss (383,958) (1,127,394) (674,129) (2,068,915)
Income tax benefit (133,566) (406,409) (263,550) (778,616)
-------- -------- -------- --------
Net loss $(250,392) $(720,985) $(410,579) $(1,290,299)
========= ========= ========= ===========
Diluted net loss
per share (4) $(3.11) $(9.03) $(5.12) $(16.22)
====== ====== ====== =======
(1) Includes premiums earned on derivative contracts.
(2) Includes $(150.1) million for first-lien mortgages and $(94.4)
million for second-lien mortgages in the fourth quarter of 2008 and
$(108.8) million for second-lien mortgages for the year ended
December 31, 2008 .
(3) Includes the acceleration of $50.8 million of deferred policy
acquisition cost amortization for the year ended December 31,
2008 , as a result of the establishment of a first-lien premium
deficiency reserve in the second quarter of 2008.
(4) Weighted average shares outstanding (in thousands)
Average common shares
outstanding 80,642 79,850 80,258 79,556
Increase in shares-potential
exercise of options-diluted
basis - - - -
-- -- -- --
Weighted average shares
outstanding (in thousands) 80,642 79,850 80,258 79,556
For Trend Information, refer to our Quarterly Financial Statistics on
Radian's (RDN) website.
Radian Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Exhibit B
December 31 December 31
(In thousands, except share and per-share data) 2008 2007
---- ----
Assets:
Cash and investments $6,060,601 $6,611,836
Investments in affiliates 99,712 104,354
Deferred policy acquisition costs 160,526 234,955
Prepaid federal income taxes 248,828 793,486
Deferred income taxes, net 446,102 -
Reinsurance recoverables 492,359 33,960
Other assets 607,991 431,598
------- -------
Total assets $8,116,119 $8,210,189
========== ==========
Liabilities and stockholders' equity:
Unearned premiums $916,724 $1,094,710
Reserve for losses and loss adjustment expenses 3,224,542 1,598,756
Reserve for premium deficiency 86,861 195,646
Long-term debt and other borrowings 857,802 953,524
Variable interest entity debt 160,035 -
Deferred income taxes, net - 26,705
Derivative liabilities 519,260 1,305,665
Other liabilities 320,185 314,447
------- -------
Total liabilities 6,085,409 5,489,453
--------- ---------
Common stock 98 98
Additional paid-in capital 462,647 442,312
Retained earnings 1,766,946 2,181,191
Accumulated other comprehensive income (198,981) 97,135
-------- ------
Total common stockholders' equity 2,030,710 2,720,736
--------- ---------
Total liabilities and stockholders' equity $8,116,119 $8,210,189
========== ==========
Book value per share $25.06 $33.83
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended December 31, 2008
Exhibit C
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
-------------- --------- -------- -------- -----
Revenues:
Net premiums written
- insurance $188,368 $(40,901)(1) $- $147,467
======== ======== ===== ========
Net premiums earned
- insurance $203,213 $27,831 $- $231,044
Net investment income 38,804 27,907 - 66,711
Change in fair value of
derivative instruments (3,391) (214,488) - (217,879)
Net (losses) gains on
other financial
instruments (16,922) (5,702) 30 (22,594)
Other income 2,082 63 - 2,145
----- -- -- -----
Total revenues 223,786 (164,389) 30 59,427
------- -------- -- ------
Expenses:
Provision for losses 551,284 67,551 - 618,835
Provision for premium
deficiency (244,512) - - (244,512)
Policy acquisition costs 6,630 9,138 - 15,768
Other operating expenses 28,731 26,867 128 55,726
Interest expense 6,482 6,855 - 13,337
----- ----- -- ------
Total expenses 348,615 110,411 128 459,154
------- ------- --- -------
Equity in net income of
affiliates - 16 15,753 15,769
-- -- ------ ------
Pretax (loss) income (124,829) (274,784) 15,655 (383,958)
Income tax (benefit)
provision (47,784) (91,572) 5,790 (133,566)
------- ------- ----- --------
Net (loss) income $(77,045) $(183,212) $9,865 $(250,392)
======== ========= ====== =========
Cash and investments $3,508,018 $2,552,583 $- $6,060,601
Deferred policy
acquisition costs 21,286 139,240 - 160,526
Total assets 4,800,708 3,151,695 163,716 8,116,119
Unearned premiums 336,126 580,598 - 916,724
Reserve for losses
and loss adjustment
expenses 2,989,994 234,548 - 3,224,542
Derivative liabilities 161,839 357,421 - 519,260
(1) See Schedule 1
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended December 31, 2007
Exhibit D
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
-------------- --------- -------- -------- -----
Revenues:
Net premiums written
- insurance $245,064 $41,308 $- $286,372
======== ======= == ========
Net premiums earned
- insurance $200,430 $33,938 $- $234,368
Net investment income 38,970 28,505 18 67,493
Change in fair value of
derivative instruments (48,483) (532,131) - (580,614)
Net gains (losses) on
other financial
instruments 131 (1,468) 664 (673)
Other income 1,980 (434) (1,354) 192
----- ---- ------ ---
Total revenues 193,028 (471,590) (672) (279,234)
------- -------- ---- --------
Expenses:
Provision for losses 631,630 58,273 - 689,903
Provision for premium
deficiency 40,470 - - 40,470
Policy acquisition costs 13,806 11,175 - 24,981
Other operating expenses 32,606 12,053 (6,007) 38,652
Interest expense 7,942 5,974 342 14,258
----- ----- --- ------
Total expenses 726,454 87,475 (5,665) 808,264
------- ------ ------ -------
Equity in net income
(loss) of affiliates - 5 (39,901) (39,896)
-- -- ------- -------
Pretax loss (533,426) (559,060) (34,908) (1,127,394)
Income tax benefit (196,800) (193,055) (16,554) (406,409)
-------- -------- ------- --------
Net loss $(336,626) $(366,005) $(18,354) $(720,985)
========= ========= ======== =========
Cash and investments $4,005,046 $2,606,790 $- $6,611,836
Deferred policy
acquisition costs 62,266 172,689 - 234,955
Total assets 5,077,001 3,027,098 106,090 8,210,189
Unearned premiums 364,775 729,935 - 1,094,710
Reserve for losses
and loss adjustment
expenses 1,345,452 253,304 - 1,598,756
Derivative liabilities 520,161 785,504 - 1,305,665
Radian Group Inc. and Subsidiaries
Segment Information
Year Ended December 31, 2008
Exhibit E
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
-------------- --------- -------- -------- -----
Revenues:
Net premiums written
- insurance $787,232 $29,637(2) $- $816,869
======== ======= ===== ========
Net premiums earned
- insurance $808,781 $163,039 $- $971,820
Net investment income 154,607 108,412 14 263,033
Change in fair value of
derivative instruments 102,157 608,756 - 710,913
Net (losses) gains on
other financial
instruments (83,136) (66,480) 150 (149,466)
Other income 11,133 300 303 11,736
------ --- --- ------
Total revenues 993,542 814,027 467 1,808,036
------- ------- --- ---------
Expenses:
Provision for losses 2,090,845 114,495 - 2,205,340
Provision for premium
deficiency (108,785) - - (108,785)
Policy acquisition costs 89,103 47,293 - 136,396
Other operating expenses 155,375 99,509 613 255,497
Interest expense 27,622 25,643 249 53,514
------ ------ --- ------
Total expenses 2,254,160 286,940 862 2,541,962
--------- ------- --- ---------
Equity in net income
of affiliates - 16 59,781 59,797
-- -- ------ ------
Pretax (loss) income (1,260,618) 527,103 59,386 (674,129)
Income tax (benefit)
provision (475,970) 187,965 24,455 (263,550)
-------- ------- ------ --------
Net (loss) income $(784,648) $339,138 $34,931 $(410,579)
========= ======== ======= =========
(2) See Schedule 2
Radian Group Inc. and Subsidiaries
Segment Information
Year Ended December 31, 2007
Exhibit F
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
-------------- --------- -------- -------- -----
Revenues:
Net premiums written
- insurance $898,503 $186,729 $- $1,085,232
======== ======== == ==========
Net premiums earned
- insurance $779,259 $133,022 $- $912,281
Net investment income 148,253 107,665 180 256,098
Change in fair value of
derivative instruments (467,579) (746,800) - (1,214,379)
Net gains on other
financial instruments 39,922 12,525 1,159 53,606
Gain on sale of affiliate - - 181,734 181,734
Other income 11,337 349 25 11,711
------ --- -- ------
Total revenues 511,192 (493,239) 183,098 201,051
------- -------- ------- -------
Expenses:
Provision for losses 1,210,100 97,990 - 1,308,090
Provision for premium
deficiency 195,646 - - 195,646
Policy acquisition costs 67,750 45,426 - 113,176
Other operating expenses 121,696 48,683 (935) 169,444
Merger expenses 13,434 567 - 14,001
Interest expense 27,901 19,840 5,327 53,068
------ ------ ----- ------
Total expenses 1,636,527 212,506 4,392 1,853,425
--------- ------- ----- ---------
Equity in net income
(loss) of affiliates - 5 (416,546) (416,541)
-- -- -------- --------
Pretax loss (1,125,335) (705,740) (237,840) (2,068,915)
Income tax benefit (429,921) (265,559) (83,136) (778,616)
-------- -------- ------- --------
Net loss $(695,414) $(440,181) $(154,704) $(1,290,299)
========= ========= ========= ===========
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter and Year Ended and as of December 31, 2008
Exhibit G
Quarter Ended Year Ended
($ in thousands, except ratios) December 31 December 31
------------- -----------------
2008 2007 2008 2007
---- ---- ---- ----
Net Premiums Written: (1)
Public finance direct $20 $11,461 $15,558 $60,117
Public finance reinsurance 3,258 19,739 34,066 86,821
Structured direct 1,605 4,567 12,151 16,594
Structured reinsurance 5,134 5,327 18,735 21,933
Trade credit reinsurance 132 214 177 1,264
--- --- --- -----
10,149 41,308 80,687 186,729
Impact of recapture (5) (51,050) - (51,050) -
------- -- ------- --
Total Net Premiums Written
- insurance $(40,901) $41,308 $29,637 $186,729
======== ======= ======= ========
Net Premiums Earned: (2)
Public finance direct $12,997 $13,459 $56,191 $45,770
Public finance reinsurance 24,082 10,770 89,227 44,667
Structured direct 3,207 3,878 14,418 17,325
Structured reinsurance 4,527 5,461 19,690 22,957
Trade credit reinsurance 162 370 657 2,303
--- --- --- -----
44,975 33,938 180,183 133,022
Impact of recaptures (5) (17,144) - (17,144) -
------- -- ------- --
Total Net Premiums Earned
- insurance $27,831 $33,938 $163,039 $133,022
======= ======= ======== ========
Refundings included in
earned premium $19,443 $7,492 $75,090 $23,309
======= ====== ======= =======
Claims paid:
Trade credit reinsurance $2,008 $1,557 $3,440 $8,579
Financial guaranty 14,932 13,269 128,972 (3)24,263
------ ------ ------- ---------
Total $16,940 $14,826 $132,412 $32,842
======= ======= ======== =======
Incurred losses:
Trade credit reinsurance $(2,509) $(2,967) $(9,808) $(16,511)
Financial guaranty 74,060 61,240 128,303 114,501
------ ------ ------- -------
Subtotal 71,551 58,273 118,495 97,990
Impact of recaptures (5) (4,000) - (4,000) -
------ -- ------ --
Total $67,551 $58,273 $114,495 $97,990
======= ======= ======== =======
Loss ratio - GAAP Basis 165.0% 123.0% 52.7% 50.2%
Expense ratio - GAAP Basis (4) 88.0% 49.0% 67.6% 48.2%
---- ---- ---- ----
253.0% 172.0% 120.3% 98.4%
===== ===== ===== ====
Net payments (receipts) under
derivative contracts (6) $55 $(255) $9,383 $(31,188)
=== ===== ====== ========
(1) Premiums written on credit derivatives for the quarter and year ended
December 31, 2008 were $12.1 million and $50.1 million , respectively,
compared to $13.0 million and $43.0 million , respectively, for the
quarter and year ended December 31, 2007 .
(2) Premiums earned on credit derivatives for the quarter and year ended
December 31, 2008 were $13.1 million and $54.1 million , respectively,
compared to $13.4 million and $62.0 million , respectively, for the
quarter and year ended December 31, 2007 . Premiums earned on credit
derivatives are included in change of fair value of derivative
instruments.
(3) Includes a $100 million payment related to one credit that is a CDO
of an ABS that was fully reserved for in 2007.
(4) Excludes merger expenses.
(5) Amounts recorded related to the recaptures of previously ceded
business by primary insurer customers of the financial guaranty
insurance business in the fourth quarter of 2008.
(6) Comprised of loss payments, premium payments or negotiated settlement
receipts.
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter and Year Ended and as of December 31, 2008
Exhibit H
($ in thousands, except ratios) December 31 December 31
2008 2007
---- ----
Capital and surplus $968,197 $1,158,537
Contingency reserve 515,023 433,296
------- -------
Qualified statutory capital 1,483,220 1,591,833
Unearned premium reserve 729,274 886,024
Loss and loss expense reserve 82,340 61,038
------ ------
Total statutory policyholders'
reserves 2,294,834 2,538,895
Present value of installment premiums 380,666 461,806
Soft capital facilities 150,000 150,000
------- -------
Total statutory claims paying
resources $2,825,500 $3,150,701
========== ==========
Net debt service outstanding $138,430,925 $164,346,659
------------ ------------
Capital leverage ratio (1) 93 103
Claims paying leverage ratio (2) 49 52
Net par outstanding by product:
Public finance direct $17,836,221 $18,228,946
Public finance reinsurance 31,578,163 43,822,781
Structured direct 46,001,355 47,878,168
Structured reinsurance 5,310,004 6,091,717
--------- ---------
Total $100,725,743 $116,021,612
============ ============
Reserve for losses and LAE
Allocated $76,689 $49,317
Non-specific 157,859 203,987
------- -------
Total $234,548 $253,304
======== ========
(1) Net debt service outstanding divided by qualified statutory capital
(2) Net debt service outstanding divided by total statutory claims paying
resources
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Year Ended and as of December 31, 2008
Exhibit I
Quarter Ended
($ in millions) December 31
---------------------------------------
2008 % 2007 %
---- --- ---- ---
Primary New Insurance Written
-----------------------------
Flow $5,025 99.7% $10,422 76.7%
Structured 14 0.3% 3,174 23.3%
-- --- ----- ----
Total Primary $5,039 100.0% $13,596 100.0%
====== ===== ======= =====
Flow
Prime $5,003 99.6% $8,629 82.8%
Alt-A 16 0.3% 832 8.0%
A minus and below 6 0.1% 961 9.2%
-- --- --- ---
Total Flow $5,025 100.0% $10,422 100.0%
====== ===== ======= =====
Structured
Prime $13 92.9% $1,795 56.6%
Alt-A 1 7.1% 1,378 43.4%
A minus and below - - 1 0.0%
-- -- -- ---
Total Structured $14 100.0% $3,174 100.0%
=== ===== ====== =====
Total
Prime $5,016 99.6% $10,424 76.6%
Alt-A 17 0.3% 2,210 16.3%
A minus and below 6 0.1% 962 7.1%
-- --- --- ---
Total Primary $5,039 100.0% $13,596 100.0%
====== ===== ======= =====
Total Primary New Insurance
Written by FICO Score
---------------------------
Flow
<=619 $1 - $518 5.0%
620-679 419 8.4% 2,830 27.1%
680-739 1,725 34.3% 3,914 37.6%
>=740 2,880 57.3% 3,160 30.3%
----- ---- ----- ----
Total Flow $5,025 100.0% $10,422 100.0%
====== ===== ======= =====
Structured
<=619 $- - $- -
620-679 - - 185 5.8%
680-739 4 28.6% 963 30.3%
>=740 10 71.4% 2,026 63.9%
-- ---- ----- ----
Total Structured $14 100.0% $3,174 100.0%
=== ===== ====== =====
Total
------
<=619 $1 - $518 3.8%
620-679 419 8.3% 3,015 22.2%
680-739 1,729 34.3% 4,877 35.9%
>=740 2,890 57.4% 5,186 38.1%
----- ---- ----- ----
Total Primary $5,039 100.0% $13,596 100.0%
====== ===== ======= =====
Percentage of primary new
insurance written
-------------------------
Refinances 17% 27%
95.01% LTV and above 1% 32%
ARMs
Less than 5 years 1% 1%
5 years and longer 3% 14%
Primary risk written
--------------------
Flow $1,177 99.8% $2,684 77.9%
Structured 2 0.2% 763 22.1%
-- --- --- ----
Total Primary $1,179 100.0% $3,447 100.0%
====== ===== ====== =====
Pool risk written $- $34
----------------- == ===
Other risk written
------------------
Second-lien
1st loss $- $-
2nd loss - -
NIMs - -
International
1st loss-Hong Kong primary
mortgage insurance - 34
Reinsurance 18 18
-- --
Total other risk written $18 $52
=== ===
Year Ended
($ in millions) December 31
---------------------------------------
2008 % 2007 %
---- --- ---- ---
Primary New Insurance Written
-----------------------------
Flow $31,265 96.2% $40,335 70.6%
Structured 1,248 3.8% 16,797 29.4%
----- --- ------ ----
Total Primary $32,513 100.0% $57,132 100.0%
======= ===== ======= =====
Flow
Prime $29,359 93.9% $29,800 73.9%
Alt-A 1,170 3.7% 6,847 17.0%
A minus and below 736 2.4% 3,688 9.1%
--- --- ----- ---
Total Flow $31,265 100.0% $40,335 100.0%
======= ===== ======= =====
Structured
Prime $1,245 99.8% $3,436 20.5%
Alt-A 3 0.2% 12,515 74.5%
A minus and below - - 846 5.0%
-- -- --- ---
Total Structured $1,248 100.0% $16,797 100.0%
====== ===== ======= =====
Total
Prime $30,604 94.1% $33,236 58.2%
Alt-A 1,173 3.6% 19,362 33.9%
A minus and below 736 2.3% 4,534 7.9%
--- --- ----- ---
Total Primary $32,513 100.0% $57,132 100.0%
======= ===== ======= =====
Total Primary New Insurance
Written by FICO Score
---------------------------
Flow
<=619 $377 1.2% $2,348 5.8%
620-679 4,642 14.9% 11,988 29.7%
680-739 11,454 36.6% 14,891 36.9%
>=740 14,792 47.3% 11,108 27.6%
------ ---- ------ ----
Total Flow $31,265 100.0% $40,335 100.0%
======= ===== ======= =====
Structured
<=619 $- - $538 3.2%
620-679 17 1.4% 3,947 23.5%
680-739 441 35.3% 7,123 42.4%
>=740 790 63.3% 5,189 30.9%
--- ---- ----- ----
Total Structured $1,248 100.0% $16,797 100.0%
====== ===== ======= =====
Total
------
<=619 $377 1.2% $2,886 5.1%
620-679 4,659 14.3% 15,935 27.9%
680-739 11,895 36.6% 22,014 38.5%
>=740 15,582 47.9% 16,297 28.5%
------ ---- ------ ----
Total Primary $32,513 100.0% $57,132 100.0%
======= ===== ======= =====
Percentage of primary new
insurance written
-------------------------
Refinances 30% 37%
95.01% LTV and above 11% 25%
ARMs
Less than 5 years 1% 13%
5 years and longer 8% 11%
Primary risk written
--------------------
Flow $7,494 95.9% $10,325 85.3%
Structured 318 4.1% 1,785 14.7%
--- --- ----- ----
Total Primary $7,812 100.0% $12,110 100.0%
====== ===== ======= =====
Pool risk written $60 $261
----------------- === ====
Other risk written
------------------
Second-lien
1st loss $- $9
2nd loss - 21
NIMs - 377
International
1st loss-Hong Kong primary
mortgage insurance 51 130
Reinsurance 62 67
-- --
Total other risk written $113 $604
==== ====
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Year Ended and as of December 31, 2008
Exhibit J
($ in millions) December 31 December 31
--------------------------------------
2008 % 2007 %
---- --- ---- ---
Primary insurance in force
--------------------------
Flow $121,439 78.2% $105,246 73.6%
Structured 33,800 21.8% 37,820 26.4%
------ ---- ------ ----
Total Primary $155,239 100.0% $143,066 100.0%
======== ===== ======== =====
Prime $111,558 71.9% $93,577 65.4%
Alt-A 32,623 21.0% 37,031 25.9%
A minus and below 11,058 7.1% 12,458 8.7%
------ --- ------ ---
Total Primary $155,239 100.0% $143,066 100.0%
======== ===== ======== =====
Primary risk in force
---------------------
Flow $30,388 86.9% $26,531 83.9%
Structured 4,563 13.1% 5,091 16.1%
----- ---- ----- ----
Total Primary $34,951 100.0% $31,622 100.0%
======= ===== ======= =====
Flow
Prime $24,815 81.7% $20,616 77.7%
Alt-A 3,584 11.8% 3,810 14.4%
A minus and below 1,989 6.5% 2,105 7.9%
----- --- ----- ---
Total Flow $30,388 100.0% $26,531 100.0%
======= ===== ======= =====
Structured
Prime $2,390 52.4% $2,116 41.5%
Alt-A 1,412 30.9% 1,978 38.9%
A minus and below 761 16.7% 997 19.6%
--- ---- --- ----
Total Structured $4,563 100.0% $5,091 100.0%
====== ===== ====== =====
Total
Prime $27,205 77.8% $22,732 71.9%
Alt-A 4,996 14.3% 5,788 18.3%
A minus and below 2,750 7.9% 3,102 9.8%
----- --- ----- ---
Total Primary $34,951 100.0% $31,622 100.0%
======= ===== ======= =====
Total Primary Risk in Force by
FICO Score
------------------------------
Flow
<=619 $1,504 4.9% $1,639 6.2%
620-679 8,195 27.0% 8,059 30.4%
680-739 11,253 37.0% 9,773 36.8%
>=740 9,436 31.1% 7,060 26.6%
----- ---- ----- ----
Total Flow $30,388 100.0% $26,531 100.0%
======= ===== ======= =====
Structured
<=619 $703 15.4% $936 18.4%
620-679 1,205 26.4% 1,490 29.3%
680-739 1,422 31.2% 1,488 29.2%
>=740 1,233 27.0% 1,177 23.1%
----- ---- ----- ----
Total Structured $4,563 100.0% $5,091 100.0%
====== ===== ====== =====
Total
<=619 $2,207 6.3% $2,575 8.1%
620-679 9,400 26.9% 9,549 30.2%
680-739 12,675 36.3% 11,261 35.6%
>=740 10,669 30.5% 8,237 26.1%
------ ---- ----- ----
Total Primary $34,951 100.0% $31,622 100.0%
======= ===== ======= =====
Percentage of primary risk
in force
--------------------------
Refinances 30% 31%
95.01% LTV and above 22% 24%
ARMs
Less than 5 years 9% 12%
5 years and longer 9% 10%
Pool risk in force
------------------
Prime $2,090 70.8% $2,111 70.3%
Alt-A 291 9.9% 293 9.7%
A minus and below 569 19.3% 600 20.0%
--- ---- --- ----
Total $2,950 100.0% $3,004 100.0%
====== ===== ====== =====
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Year Ended and as of December 31, 2008
Exhibit K
($ in millions) December 31 December 31
------------------------------------
2008 % 2007 %
---- --- ---- ---
Total Primary Risk in
Force by LTV
----------------------
95.01% and above $7,805 22.3% $7,529 23.8%
90.01% to 95.00% 11,217 32.1% 9,674 30.6%
85.01% to 90.00% 12,331 35.3% 10,600 33.5%
85.00% and below 3,598 10.3% 3,819 12.1%
----- ---- ----- ----
Total $34,951 100.0% $31,622 100.0%
======= ===== ======= =====
Total Primary Risk in Force
by Policy Year
----------------------------
2004 and prior $7,297 20.9% $8,871 28.0%
2005 4,229 12.1% 5,112 16.2%
2006 5,196 14.9% 6,016 19.0%
2007 10,711 30.6% 11,623 36.8%
2008 7,518 21.5% - -
----- ---- -- --
Total $34,951 100.0% $31,622 100.0%
======= ===== ======= =====
Total Pool Risk in Force by
Policy Year
----------------------------
2004 and prior $1,818 61.6% $1,889 62.9%
2005 584 19.8% 595 19.8%
2006 252 8.6% 265 8.8%
2007 237 8.0% 255 8.5%
2008 59 2.0% - -
-- --- -- --
Total Pool risk in Force $2,950 100.0% $3,004 100.0%
====== ===== ====== =====
Other risk in force
-------------------
Second-lien
1st loss $267 $377
2nd loss 355 548
NIMs 438 604
International
1st loss-Hong Kong primary
mortgage insurance 413 465
Reinsurance 153 103
Credit default swaps 3,361 8,202
Other
Domestic credit default swaps 132 212
--- ---
Total other risk in force $5,119 $10,511
====== =======
Risk to capital ratio-Radian
Guaranty only 16.0:1 14.9:1
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Year Ended and as of December 31, 2008
Exhibit L
Quarter Ended Year Ended
($ in thousands) December 31 December 31
--------------------------------------
2008 2007 2008 2007
---- ---- ---- ----
Direct claims paid
Prime $87,990 $56,015 $310,965 $166,967
Alt-A 58,262 37,017 210,700 107,672
A minus and below 48,701 49,538 211,612 152,670
Second-lien and other 44,778 30,825 182,872 90,799
------ ------ ------- ------
Total $239,731 $173,395 $916,149 $518,108
======== ======== ======== ========
Average claim paid
Prime $43.4 $36.8 $40.9 $31.8
Alt-A 57.3 51.6 54.8 45.4
A minus and below 40.4 38.5 39.0 33.8
Second-lien and other 36.8 40.7 35.5 32.4
Total $43.9 $40.5 $41.6 $34.7
Loss ratio - GAAP Basis 268.4% 295.4% 250.4% 143.5%
Expense ratio - GAAP Basis (1) 17.2% 21.7% 29.3% 22.4%
---- ---- ---- ----
285.6% 317.1% 279.7% 165.9%
===== ===== ===== =====
Reserve for losses by category
Prime $829,097 $343,705
Alt-A 977,177 450,106
A minus and below 446,193 361,240
Pool insurance 107,441 54,394
Second-lien 136,591 112,751
Other 1,659 1,268
----- -----
Reserve for losses, net 2,498,158 1,323,464
Reinsurance recoverable 491,836(2) 21,988
------- ---------
Total $2,989,994 $1,345,452
========== ==========
(1) Includes the acceleration of $50.8 million of deferred policy
acquisition cost amortization for the year ended December 31, 2008 ,
as a result of the establishment of a first-lien premium deficiency
reserve in the second quarter of 2008 and excludes merger expenses.
(2) Reinsurance recoverable on ceded losses related to captives
($400.7 million ) and Smart Home ($91.1 million ).
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Year Ended and as of December 31, 2008
Exhibit M
December 31 December 31
2008 2007
----------- -----------
Default Statistics
------------------
Primary insurance:
Flow
Prime
-----
Number of insured loans 624,970 565,563
Number of loans in default 44,575 20,632
Percentage of loans in default 7.13% 3.65%
Alt-A
-----
Number of insured loans 68,948 74,559
Number of loans in default 16,959 7,980
Percentage of loans in default 24.60% 10.70%
A minus and below
-----------------
Number of insured loans 59,189 63,853
Number of loans in default 15,768 10,087
Percentage of loans in default 26.64% 15.80%
Total Flow
Number of insured loans 753,107 703,975
Number of loans in default 77,302 38,699
Percentage of loans in default 10.26% 5.50%
Structured
Prime
-----
Number of insured loans 67,165 64,789
Number of loans in default 6,692 4,707
Percentage of loans in default 9.96% 7.27%
Alt-A
-----
Number of insured loans 80,491 97,526
Number of loans in default 18,747 8,783
Percentage of loans in default 23.29% 9.01%
A minus and below
-----------------
Number of insured loans 22,315 28,747
Number of loans in default 7,812 8,659
Percentage of loans in default 35.01% 30.12%
Total Structured
Number of insured loans 169,971 191,062
Number of loans in default 33,251 22,149
Percentage of loans in default 19.56% 11.59%
Total Primary Insurance
Prime
-----
Number of insured loans 692,135 630,352
Number of loans in default 51,267 25,339
Percentage of loans in default 7.41% 4.02%
Alt-A
-----
Number of insured loans 149,439 172,085
Number of loans in default 35,706 16,763
Percentage of loans in default 23.89% 9.74%
A minus and below
-----------------
Number of insured loans 81,504 92,600
Number of loans in default 23,580 18,746
Percentage of loans in default 28.93% 20.24%
Total Primary Insurance
Number of insured loans 923,078 895,037
Number of loans in default 110,553(1) 60,848(1)
Percentage of loans in default 11.98% 6.80%
Pool insurance:
Number of loans in default 32,677(2) 26,526(2)
(1) Includes approximately 539 and 2,595 defaults at December 31, 2008
and December 31, 2007 , respectively, where reserves have not been
established because no claim payment is currently anticipated.
(2) Includes approximately 21,719 and 20,193 defaults at December 31,
2008 and December 31, 2007 , respectively, where reserves have not
been established because no claim payment is currently anticipated.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Year Ended and as of December 31, 2008
Exhibit N
Quarter Ended Year Ended
December 31 December 31
-------------------------------------
2008 2007 2008 2007
---- ---- ---- ----
Net Premiums Written
(In thousands) (1)
------------------
Primary and Pool
Insurance $181,173 $223,372 $759,943 $835,961
Second-lien 3,028 4,896 11,458 27,236
International 4,167 16,796 15,831 35,306
----- ------ ------ ------
Total Net Premiums
Written - insurance $188,368 $245,064 $787,232 $898,503
======== ======== ======== ========
Net Premiums Earned
(In thousands) (2)
------------------
Primary and Pool
Insurance $193,706 $189,170 $768,723 $730,966
Second-lien 4,349 7,579 18,727 32,744
International 5,158 3,681 21,331 15,549
----- ----- ------ ------
Total Net Premiums
Earned - insurance $203,213 $200,430 $808,781 $779,259
======== ======== ======== ========
SMART HOME
(In millions)
-------------
Ceded Premiums Written $3.0 $1.3 $13.0 $11.0
Ceded Premiums Earned $3.0 $2.1 $13.0 $11.4
1st Lien Captives
-----------------
Premiums ceded to
captives (In millions) $33.9 $33.2 $138.3 $121.6
% of total premiums 14.7% 14.8% 15.0% 14.1%
NIW subject to captives
(In millions) $1,557 $6,776 $11,825 $23,322
% of primary NIW 30.9% 49.8% 36.4% 40.8%
IIF included in
captives (3) 34.8% 36.5%
RIF included in
captives (3) 43.8% 41.6%
Persistency (twelve
months ended
December 31) 85.8% 75.4%
December 31 December 31
----------- -----------
2008 2007
---- ----
SMART HOME
% of Primary RIF
included in Smart
Home Transactions (3) 3.7% 5.3%
(1) Premiums written on credit derivatives for the quarter and year ended
December 31, 2008 were $1.8 million and $18.7 million , respectively,
compared to $10.2 million and $56.6 million , respectively, for the
quarter and year ended December 31, 2007 .
(2) Premiums earned on credit derivatives for the quarter and year ended
December 31, 2008 were $2.2 million and $26.1 million , respectively,
compared to $13.4 million and $64.3 million , respectively, for the
quarter and year ended December 31, 2007 . Premiums earned on credit
derivatives are included in change of fair value of derivative
instruments.
(3) Radian reinsures the middle layer risk positions, while retaining a
significant portion of the total risk comprising the first loss and
most remote risk positions.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of December 31, 2008
Exhibit O
Reinsurance Progression Toward Attachment - Summary by Book Year (1)
December 31
($ in millions) 2008
---------------------------------
Original Book
RIF as of Progression to Ever-to-Date
December 31 Attachment Current Incurred Captive
Book Year(2): 2008 Point RIF Losses Benefit(3)
------------- ---------- --------------- -------- ------------- ----------
Pre-2005 0-50% $1,046 $236
Pre-2005 50-75% 844 137
Pre-2005 75-99% 775 143
Pre-2005 Attached 59 9 $1
-- -- --
Pre-2005
Total $25,517 $2,724 $525 $1
====== ==== ==
2005 0-50% $74 $3
2005 50-75% 98 5
2005 75-99% 309 18
2005 Attached 1,296 175 $74
----- --- ---
2005 Total $3,309 $1,777 $201 $74
====== ==== ===
2006 0-50% $32 $1
2006 50-75% 62 3
2006 75-99% 310 17
2006 Attached 2,074 291 $161
----- --- ----
2006 Total $3,532 $2,478 $312 $161
====== ==== ====
2007 0-50% $31 $-
2007 50-75% 225 8
2007 75-99% 71 3
2007 Attached 4,329 350 $147
----- --- ----
2007 Total $5,251 $4,656 $361 $147
====== ==== ====
2008 0-50% $2,167 $25
2008 50-75% 42 1
2008 75-99% - -
2008 Attached 190 16 $9
--- -- --
2008 Total $2,494 $2,399 $42 $9
====== === ==
Quota Share 0-50% $- $-
Quota Share 50-75% - -
Quota Share 75-99% - -
Quota Share Attached 116 27 $12
--- -- ---
Quota Share
Total $313 $116 $27 $12
==== === ===
------- ------ ----
Total Captive
(Including
Quota Share) $40,416 $14,150 $1,468 $404
======= ====== ====
SmartHome 0-50% $117 $27
SmartHome 50-75% - -
SmartHome 75-99% - -
SmartHome Attached 1,188 346 $91
----- --- ---
Total
SmartHome $3,900 $1,305 $373 $91
====== ==== ===
Reinsurance Progression Toward Attachment - Summary by Book Year (1)
December 31
($ in millions) 2007
---------------------------------
Original Book
RIF as of Progression to Ever-to-Date
December 31 Attachment Current Incurred Captive
Book Year(2): 2008 Point RIF Losses Benefit(3)
------------- ---------- --------------- -------- ------------- ----------
Pre-2005 0-50% $2,209 $279
Pre-2005 50-75% 1,145 144
Pre-2005 75-99% 32 19
Pre-2005 Attached 12 3 $1
-- -- --
Pre-2005
Total $25,517 $3,398 $445 $1
====== ==== ==
2005 0-50% $697 $13
2005 50-75% 429 15
2005 75-99% 945 53
2005 Attached 11 2 $-
-- -- --
2005 Total $3,309 $2,082 $83 $-
====== === ==
2006 0-50% $851 $12
2006 50-75% 332 10
2006 75-99% 1,470 71
2006 Attached 210 10 $1
--- -- --
2006 Total $3,532 $2,863 $103 $1
====== ==== ==
2007 0-50% $4,058 $36
2007 50-75% 580 12
2007 75-99% 4 -
2007 Attached 1 - $-
-- -- --
2007 Total $5,251 $4,643 $48 $-
====== === ==
2008 0-50% $- $-
2008 50-75% - -
2008 75-99% - -
2008 Attached - - $-
-- -- --
2008 Total $2,494 $- $- $-
== == ==
Quota Share 0-50% $20 $-
Quota Share 50-75% 7 1
Quota Share 75-99% - -
Quota Share Attached 90 9 $4
-- -- --
Quota Share
Total $313 $117 $10 $4
==== === ==
------- ---- --
Total Captive
(Including
Quota
Share) $40,416 $13,103 $689 $6
======= ==== ==
SmartHome 0-50% $142 $23
SmartHome 50-75% 693 92
SmartHome 75-99% - -
SmartHome Attached 833 112 $10
--- --- ---
Total
SmartHome $3,900 $1,668 $227 $10
====== ==== ===
(1) Data presented in aggregate for all trusts for captives active at
each period end only. Actual trust attachment and exit points vary
by individual contract. Attachment is calculated at the contract/
deal level and is based on Total Incurred Losses which are defined as
claims paid ever-to-date plus loss reserves.
(2) Book year figures may include loans from additional periods pursuant
to reinsurance agreement terms and conditions.
(3) Captive Benefit is defined as ceded reserves at period end plus
ever-to-date claims paid by the trust.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Year Ended and as of December 31, 2008
Exhibit P
($ in millions) December 31 December 31
---------------------------------------
2008 % 2007 %
---- --- ---- ---
Modified Pool Risk in Force
---------------------------
Prime
-----
2004 and prior $45 29.2% $47 28.8%
2005 39 25.3% 47 28.8%
2006 44 28.6% 44 27.0%
2007 22 14.3% 25 15.4%
2008 4 2.6% - -
-- --- -- --
Total $154 100.0% $163 100.0%
==== ===== ==== =====
Alt-A
-----
2004 and prior $97 14.5% $103 15.0%
2005 99 14.8% 116 16.9%
2006 164 24.6% 165 24.0%
2007 304 45.5% 304 44.1%
2008 4 0.6% - -
-- --- -- --
Total $668 100.0% $688 100.0%
==== ===== ==== =====
A minus and below
-----------------
2004 and prior $9 36.0% $10 37.1%
2005 6 24.0% 7 25.9%
2006 3 12.0% 3 11.1%
2007 7 28.0% 7 25.9%
2008 - - - -
-- -- -- --
Total $25 100.0% $27 100.0%
=== ===== === =====
Total
-----
2004 and prior $151 17.8% $160 18.2%
2005 144 17.0% 170 19.4%
2006 211 24.9% 212 24.1%
2007 333 39.3% 336 38.3%
2008 8 1.0% - -
-- --- -- --
Total Modified Pool Risk in
Force $847 100.0% $878 100.0%
==== ===== ==== =====
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Year Ended and as of December 31, 2008
ALT-A
Exhibit Q
Quarter Ended
($ in millions) December 31
---------------------------------------
2008 % 2007 %
---- --- ---- ---
Primary New Insurance Written
by FICO Score
-----------------------------
<=619 $- - $3 0.1%
620-659 - - 43 1.9%
660-679 1 5.9% 94 4.3%
680-739 10 58.8% 785 35.5%
>=740 6 35.3% 1,285 58.2%
-- ---- ----- ----
Total $17 100.0% $2,210 100.0%
=== ===== ====== =====
Primary Risk in Force by
FICO Score
------------------------
<=619 $33 0.6% $38 0.7%
620-659 603 12.1% 725 12.5%
660-679 734 14.7% 826 14.3%
680-739 2,399 48.0% 2,653 45.8%
>=740 1,227 24.6% 1,546 26.7%
----- ---- ----- ----
Total $4,996 100.0% $5,788 100.0%
====== ===== ====== =====
Primary Risk in Force by LTV
-----------------------------
95.01% and above $349 7.0% $379 6.6%
90.01% to 95.00% 1,295 25.9% 1,668 28.8%
85.01% to 90.00% 2,077 41.6% 2,317 40.0%
85.00% and below 1,275 25.5% 1,424 24.6%
----- ---- ----- ----
Total $4,996 100.0% $5,788 100.0%
====== ===== ====== =====
Primary Risk in Force by
Policy Year
------------------------
2004 and prior $907 18.1% $1,102 19.0%
2005 676 13.5% 846 14.6%
2006 1,109 22.2% 1,273 22.0%
2007 2,051 41.1% 2,567 44.4%
2008 253 5.1% - -
--- --- -- --
Total $4,996 100.0% $5,788 100.0%
====== ===== ====== =====
Year Ended
($ in millions) December 31
---------------------------------------
2008 % 2007 %
---- --- ---- ---
Primary New Insurance
Written by FICO Score
----------------------
<=619 $3 0.3% $110 0.6%
620-659 26 2.2% 1,889 9.7%
660-679 64 5.4% 2,783 14.4%
680-739 571 48.7% 9,158 47.3%
>=740 509 43.4% 5,422 28.0%
--- ---- ----- ----
Total $1,173 100.0% $19,362 100.0%
====== ===== ======= =====
Radian Group Inc.
Financial Services Supplemental Information
For the Quarter and Year Ended and as of December 31, 2008
Exhibit R
Quarter Ended Year Ended
December 31 December 31
---------------------------------------
(In thousands ) 2008 2007 2008 2007
---- ---- ---- ----
Investment in Affiliates -
Selected Information
C-BASS
----------------
Balance, beginning of period $- $- $- $451,395
Net income for period - - - (451,395)
-- -- -- --------
Balance, end of period $- $- $- $-
== == == ==
Sherman
-----------------
Balance, beginning of
period $87,217 $94,110 $104,315 $167,412
Net income for period 15,754 10,098 59,782 84,848
Dividends received - - 35,460 51,512
Other comprehensive
(loss) income (3,315) 107 (3,195) (567)
Sale of ownership interest - - - (95,866)
Adjustment to investment
related to buyback of MGIC
interest - - (25,786) -
-- -- ------- --
Balance, end of period $99,656 $104,315 $99,656 $104,315
======= ======== ======= ========
Portfolio Information:
Sherman
-----------------
Total assets $2,355,660 $2,242,087
Total revenues $325,354 $364,635 $1,504,368 $1,245,248
Radian owns a 46% interest in C-BASS and a 28.7% interest in Sherman.
Prior to August 2008 , we owned a 21.8% interest in Sherman. Prior to
September 2007 , we owned an interest in Sherman consisting of 40.96% of
the Class A Common Units of Sherman (Class A Common Units represent 94%
of the total equity in Sherman) and 50% of the Preferred Units of
Sherman.
Supplemental Schedule Schedule 1
Radian Group Inc. and Subsidiaries-Consolidated
The following schedules show selected lines from the Consolidated Income
Statement as reported (Column 1) and adjustments (Column 2) to reflect
the income statement impact of the recaptures of business previously
ceded to the Company by primary insurer customers of the financial
guaranty segment. The adjusted numbers are shown in Column 3.
The impact of the recaptures (Column 2) reflects the recapture of
business ceded to the Company in prior periods. These recaptures only
affected the fourth quarter (and, as a result, the year-to-date period)
of 2008. Accordingly, management believes that Column 3 provides useful
information to investors by presenting a more meaningful basis of
comparison for the Company's past and future results.
As Adjusted
Quarter Ended
(Thousands As Reported December 31,
of dollars, Quarter Ended Impact 2008 Quarter Ended
except per December 31 of Excluding December 31
share data) 2008 Recaptures Recaptures 2007
------------ -------- ---------- ---------- --------
Net premiums written
- insurance $147,467 $(51,050) $198,517 $286,372
Net premiums earned
- insurance 231,044 (17,144) 248,188 234,368
Total revenues 59,427 (17,144) 76,571 (279,234)
Provision for losses 618,835 (4,000) 622,835 689,903
Policy acquisition
costs 15,768 (2,395) 18,163 24,981
Total expenses 459,154 (6,395) 465,549 808,264
Pretax loss (383,958) (10,749) (373,209) (1,127,394)
Income tax benefit (133,566) (3,762) (129,804) (406,409)
Net loss $(250,392) $(6,987) $(243,405) $(720,985)
Diluted net loss
per share $(3.11) $(0.09) $(3.02) $(9.03)
As Adjusted
Year Ended
(Thousands As Reported December 31,
of dollars, Year Ended Impact 2008 Year Ended
except per December 31 of Excluding December 31
share data) 2008 Recaptures Recaptures 2007
------------ ----------- ---------- ---------- -----------
Net premiums written
- insurance $816,869 $(51,050) $867,919 $1,085,232
Net premiums earned
- insurance 971,820 (17,144) 988,964 912,281
Total revenues 1,808,036 (17,144) 1,825,180 201,051
Provision for losses 2,205,340 (4,000) 2,209,340 1,308,090
Policy acquisition
costs 136,396 (2,395) 138,791 113,176
Total expenses 2,541,962 (6,395) 2,548,357 1,853,425
Pretax loss (674,129) (10,749) (663,380) (2,068,915)
Income tax benefit (263,550) (3,762) (259,788) (778,616)
Net loss $(410,579) $(6,987) $(403,592) $(1,290,299)
Diluted net loss
per share $(5.12) $(0.09) $(5.03) $(16.22)
Supplemental Schedule Schedule 2
Segment Information-Financial Guaranty
Radian Group Inc. and Subsidiaries
The following schedules show selected lines from the Financial Guaranty
Segment Income Statement as reported (Column 1) and adjustments (Column
2) to reflect the income statement impact of the recaptures of business
previously ceded to the Company by primary insurer customers of the
financial guaranty segment. The adjusted numbers are shown in Column 3.
The impact of the recaptures (Column 2) reflects the recapture of
business ceded to the Company in prior periods.
These recaptures only affected the fourth quarter (and, as a result, the
year-to-date period) of 2008. Accordingly, management believes that
Column 3 provides useful information to investors by presenting a more
meaningful basis of comparison for the Company's past and future results.
As Adjusted
Quarter Ended
As Reported December 31,
Quarter Ended Impact 2008 Quarter Ended
(Thousands of December 31 of Excluding December 31
dollars) 2008 Recaptures Recaptures 2007
-------------- --------- ---------- ---------- --------
Net premiums written
- insurance $(40,901) $(51,050) $10,149 $41,308
Net premiums earned
- insurance $27,831 $(17,144) $44,975 $33,938
Total revenues (164,389) (17,144) (147,245) (471,590)
Provision for losses 67,551 (4,000) 71,551 58,273
Policy acquisition
costs 9,138 (2,395) 11,533 11,175
Total expenses 110,411 (6,395) 116,806 87,475
Pretax loss (274,784) (10,749) (264,035) (559,060)
Income tax benefit (91,572) (3,762) (87,810) (193,055)
Net loss $(183,212) $(6,987) $(176,225) $(366,005)
Loss ratio - excluding
Recaptures 123.2% 123.0%
Expense ratio -
excluding Recaptures 66.1% 49.0%
---- ----
189.3% 172.0%
===== =====
As Adjusted
Year Ended
As Reported December 31,
Year Ended Impact 2008 Year Ended
(Thousands of December 31 of Excluding December 31
dollars) 2008 Recaptures Recaptures 2007
-------------- --------- ---------- ---------- ---------
Net premiums written
- insurance $29,637 $(51,050) $80,687 $186,729
Net premiums earned
- insurance $163,039 $(17,144) $180,183 $133,022
Total revenues 814,027 (17,144) 831,171 (493,239)
Provision for losses 114,495 (4,000) 118,495 97,990
Policy acquisition
costs 47,293 (2,395) 49,688 45,426
Total expenses 286,940 (6,395) 293,335 212,507
Pretax income (loss) 527,103 (10,749) 537,852 (705,741)
Income tax provision
(benefit) 187,965 (3,762) 191,727 (265,559)
Net income
(loss) $339,138 $(6,987) $346,125 $(440,182)
Loss ratio - excluding
Recaptures 50.6% 50.2%
Expense ratio -
excluding Recaptures 63.7% 48.2%
---- ----
114.3% 98.4%
===== ====
Forward Looking Statement
All statements in this news release that address events, developments or results that we expect or anticipate may occur in the future are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. These statements, which include, without limitation, projections regarding our future performance and financial condition are made on the basis of management's current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking information. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties, including the following:
-- changes in general financial and political conditions, such as a
deepening of the existing national economic recession, further
decreases in housing demand, mortgage originations or housing values
(in particular, further deterioration in the housing, mortgage and
related credit markets, which would harm our future consolidated
results of operations and could cause losses for our businesses to be
worse than expected), a further reduction in the liquidity in the
capital markets and further contraction of credit markets, further
increases in unemployment rates, changes or volatility in interest
rates or consumer confidence, changes in credit spreads, changes in
the way investors perceive the strength of private mortgage insurers
or financial guaranty providers, investor concern over the credit
quality and specific risks faced by the particular businesses,
municipalities or pools of assets covered by our insurance;
-- Further economic changes or catastrophic events in geographic regions
where our mortgage insurance or financial guaranty insurance in force
is more concentrated;
-- our ability to successfully execute upon our internally sourced
capital plan (which depends, in part, on the performance of our
financial guaranty portfolio), and if necessary, to obtain additional
capital to support new business writings in our mortgage insurance
business and our long-term liquidity needs and to protect our credit
ratings and the financial strength ratings of Radian Guaranty Inc. ,
our primary mortgage insurance subsidiary, from further downgrades;
-- a further decrease in the volume of home mortgage originations due to
reduced liquidity in the lending market, tighter underwriting
standards and the on-going deterioration in housing markets throughout
the U.S.;
-- our ability to maintain adequate risk-to-capital ratios and surplus
requirements in our mortgage insurance business in light of on-going
losses in this business;
-- the concentration of our mortgage insurance business among a
relatively small number of large customers;
-- disruption in the servicing of mortgages covered by our insurance
policies;
-- the aging of our mortgage insurance portfolio and changes in severity
or frequency of losses associated with certain of our products that
are riskier than traditional mortgage insurance or financial guaranty
insurance policies;
-- the performance of our insured portfolio of higher risk loans, such as
Alternative-A ("Alt-A") and subprime loans, and adjustable rate
products, such as adjustable rate mortgages and interest-only
mortgages, which have resulted in increased losses in 2007 and 2008
and are expected to result in further losses;
-- reduced opportunities for loss mitigation in markets where housing
values fail to appreciate or continue to decline;
-- changes in persistency rates of our mortgage insurance policies caused
by changes in refinancing activity, in the rate of appreciation or
depreciation of home values and changes in the mortgage insurance
cancellation requirements of mortgage lenders and investors;
-- further downgrades or threatened downgrades of, or other ratings
actions with respect to, our credit ratings or the ratings assigned by
the major rating agencies to any of our rated insurance subsidiaries
at any time (in particular, the credit rating of Radian Group Inc. and
the financial strength ratings assigned to Radian Guaranty Inc. );
-- heightened competition for our mortgage insurance business from others
such as the Federal Housing Administration and the Veterans'
Administration or other private mortgage insurers (in particular those
that have been assigned higher ratings from the major rating
agencies);
-- changes in the charters or business practices of Federal National
Mortgage Association ("Fannie Mae ") and Freddie Mac , the largest
purchasers of mortgage loans that we insure, and our ability to remain
an eligible provider to both Freddie Mac and Fannie Mae ;
-- the application of existing federal or state consumer, lending,
insurance, securities and other applicable laws and regulations, or
changes in these laws and regulations or the way they are interpreted,
including without limitation: (i) the outcome of existing
investigations or the possibility of private lawsuits or other formal
investigations by state insurance departments and state attorneys
general alleging that services offered by the mortgage insurance
industry, such as captive reinsurance, pool insurance and contract
underwriting, are violative of the Real Estate Settlement Procedures
Act and/or similar state regulations, (ii) legislative and regulatory
changes affecting demand for private mortgage insurance, or (iii)
legislation and regulatory changes limiting or restricting our use of
(or requirements for) additional capital, the products we may offer,
the form in which we may execute the credit protection we provide or
the aggregate notional amount of any product we may offer for any one
transaction or in the aggregate;
-- the possibility that we may fail to estimate accurately the
likelihood, magnitude and timing of losses in connection with
establishing loss reserves for our mortgage insurance or financial
guaranty businesses, or the premium deficiencies for our first- and
second-lien mortgage insurance business, or to estimate accurately the
fair value amounts of derivative contracts in our mortgage insurance
and financial guaranty businesses in determining gains and losses on
these contracts;
-- volatility in our earnings caused by changes in the fair value of our
derivative instruments and our need to reevaluate the premium
deficiencies in our mortgage insurance business on a quarterly basis;
-- changes in accounting guidance from the Securities and Exchange
Commission ("SEC") or the Financial Accounting Standards Board;
-- legal and other limitations on amounts we may receive from our
subsidiaries as dividends or through tax and expense sharing
arrangements with our subsidiaries; and
-- the performance of our investment in Sherman Financial Group LLC .
We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which we issued this news release. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements made in this news release to reflect new information or future events or for any other reason.
SOURCE:
SOURCE
CONTACT:
Investors -
terri.williams-perry@radian.com
Media -
rick.gillespie@radian.com
/Web Site: http://www.radian.biz/