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05/05/2009
Radian Reports First Quarter Financial Results
PHILADELPHIA, May 5, 2009 /PRNewswire-FirstCall via COMTEX/ -- Radian Group Inc. (NYSE: RDN) today reported a net loss for the quarter ended March 31, 2009, of $217.4 million, or $2.69 per diluted share. This compares to net income of $195.6 million, or $2.44 per diluted share, for the prior year quarter. Book value per share at March 31, 2009, was $22.12.
"Our net loss in the first quarter was primarily attributable to unrealized mark to market losses on derivatives and the continued increase in mortgage insurance defaults. Despite facing difficult operating conditions, we believe that our mortgage insurance franchise remains strong with sufficient capital to continue writing quality new business throughout 2009," said S. A. Ibrahim, Chief Executive Officer of Radian. "The private mortgage insurance industry continues to play a vital role in the recovery of the U.S. housing market. While we continue to see disruption and uncertainty in the marketplace, Radian is prudently managing through the present downturn and positioning for the future, while working diligently to support homeowners and provide liquidity to the mortgage marketplace."
FIRST QUARTER HIGHLIGHTS
-- The unrealized loss on derivatives represented $284.4 million of the total pre-tax loss of $334.4 million.
-- The mortgage insurance provision for losses of $322 million reflects the continued increase in the primary first lien default rate, which rose to 13.2% at the end of the first quarter.
-- First quarter mortgage insurance claims paid were below expectations at $152 million for first liens and $88 million for second liens. The Company anticipates an increase in claims paid for first liens throughout 2009 as new and existing defaults move to claim and certain foreclosure moratoriums expire. Second quarter MI claims paid are expected to be approximately $300 million and the Company is reducing its full year estimated range to $1.2 to $1.4 billion.
-- As a result of reduced mortgage origination volume and the Company's move to a more traditional high quality focus, total primary new mortgage insurance written during the first quarter was $5.6 billion, 99.8 percent of which was prime credit quality.
-- Radian's loss management initiatives remain a critical priority to its capital preservation.
-- The GSE charter remains unchanged and Radian Guaranty retains its eligibility status with the GSEs through frequent and proactive collaboration and demonstration of its capital position.
-- 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 $1 billion in statutory capital and total claims-paying resources of $2.8 billion as of March 31, 2009.
-- Radian has a 29 percent ownership interest in Sherman Financial and received $6.4 million in dividends from Sherman during the first quarter.
CONFERENCE CALL
Radian will discuss each of these items in its conference call today, Tuesday, May 5 at 10:00 a.m. Eastern time. The conference call will be broadcast live over the internet at http://www.ir.radian.biz/phoenix.zhtml?c=112301&p=irol-audioarchives or at www.radian.com. The call may also be accessed by dialing 800-230-1096 inside the U.S., or 612-288-0337 for international callers, using passcode 997299 or by referencing Radian.
A replay of the webcast will be available at the Radian website 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 997299.
About Radian
Radian Group Inc. (NYSE: RDN), headquartered in Philadelphia, provides private mortgage insurance and related risk management products and services to mortgage lenders nationwide through its principal operating subsidiary, Radian Guaranty Inc. These services help promote and preserve homeownership opportunities for homebuyers, while protecting lenders from default-related losses on residential first mortgages and facilitating the sale of low-downpayment mortgages in the secondary market. Additional information may be found at www.radian.com.
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 March 31, 2009
Exhibit D: Segment Information Quarter Ended March 31, 2008
Exhibit E: Financial Guaranty Supplemental Information -
For the Quarter Ended and as of March 31, 2009
Exhibit F: Financial Guaranty Supplemental Information -
For the Quarter Ended and as of March 31, 2009
Exhibit G: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2009
New Insurance Written and Risk Written
Exhibit H: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2009
Insurance in Force and Risk in Force
Exhibit I: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2009
Risk in Force by LTV and Policy Year and other
Risk in Force
Exhibit J: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2009
Claims and Reserves
Exhibit K: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2009
Default Statistics
Exhibit L: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2009
Net Premiums Written and Earned, Smart Home,
Captives and Persistency
Exhibit M: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2009
Reinsurance Progression Toward Attachment -
Summary by Book Year
Exhibit N: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2009
Modified Pool Risk in Force
Exhibit O: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2009
Alt-A Risk in Force
Exhibit P: Financial Services Supplemental Information -
For the Quarter Ended and as of March 31, 2009
Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Income
Exhibit A
Quarter Ended
March 31
--------
2009 2008
---- ----
(In thousands, except per-share data)
Revenues:
Net premiums written - insurance $156,756 $244,306
======== ========
Net premiums earned - insurance $211,215 $241,921
Net investment income 56,283 65,979
Change in fair value of derivative instruments (284,416) 707,809
Net gains (losses) on other financial instruments 24,246 (54,884)
Other income 4,132 3,614
----- -----
Total revenues 11,460 964,439
------ -------
Expenses:
Provision for losses 326,754 582,711
Provision for premium deficiency (48,184) 18,090
Policy acquisition costs 13,954 23,906
Other operating expenses 51,602 55,141
Interest expense 12,299 12,493
------ ------
Total expenses 356,425 692,341
------- -------
Equity in net income of affiliates 10,552 12,526
------ ------
Pretax (loss) income (334,413) 284,624
Income tax (benefit) provision (116,976) 88,986
-------- ------
Net (loss) income $(217,437) $195,638
========= ========
Diluted net (loss) income per share (1) $(2.69) $2.44
====== =====
(1) Weighted average shares outstanding (in thousands)
Average common shares outstanding 80,902 79,930
Increase in shares-common stock equivalents-diluted
basis - 110
--- ---
Weighted average shares outstanding 80,902 80,040
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
March 31 December 31
(In thousands, except per-share data) 2009 2008
---- ----
Assets:
Cash and investments $6,498,215 $6,060,601
Investments in affiliates 103,291 99,712
Deferred policy acquisition costs 222,269 160,526
Prepaid federal income taxes 13,475 248,828
Derivative assets 169,993 179,515
Deferred income taxes, net 492,663 446,102
Reinsurance recoverables 537,359 492,359
Other assets 666,345 428,476
------- -------
Total assets $8,703,610 $8,116,119
========== ==========
Liabilities and stockholders' equity:
Unearned premiums $1,152,552 $916,724
Reserve for losses and loss adjustment expenses 3,332,642 3,224,542
Reserve for premium deficiency 38,677 86,861
Long-term debt and other borrowings 857,324 857,802
Variable interest entity debt 206,505 160,035
Derivative liabilities 741,638 519,260
Other liabilities 573,366 320,185
------- -------
Total liabilities 6,902,704 6,085,409
--------- ---------
Common stock 99 98
Additional paid-in capital 464,705 462,647
Retained earnings 1,511,719 1,766,946
Accumulated other comprehensive loss (175,617) (198,981)
-------- --------
Total common stockholders' equity 1,800,906 2,030,710
--------- ---------
Total liabilities and stockholders' equity $8,703,610 $8,116,119
========== ==========
Book value per share $22.12 $25.06
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended March 31, 2009
Exhibit C
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
---------------- ----------- ---------- ---------- -------
Revenues:
Net premiums written -
insurance $161,959 $(5,203) $- $156,756
======== ======= == ========
Net premiums earned -
insurance $177,883 $33,332 $- $211,215
Net investment income 31,345 24,938 - 56,283
Change in fair value
of derivative
instruments (28,576) (255,840) - (284,416)
Net gains on other
financial instruments 12,276 11,970 - 24,246
Other income 3,818 153 161 4,132
----- --- --- -----
Total revenues 196,746 (185,447) 161 11,460
------- -------- --- ------
Expenses:
Provision for losses 321,684 5,070 - 326,754
Provision for premium
deficiency (48,184) - - (48,184)
Policy acquisition costs 5,739 8,215 - 13,954
Other operating expenses 35,694 15,833 75 51,602
Interest expense 5,694 6,605 - 12,299
----- ----- --- ------
Total expenses 320,627 35,723 75 356,425
------- ------ --- -------
Equity in net income
of affiliates - - 10,552 10,552
--- --- ------ ------
Pretax (loss) income (123,881) (221,170) 10,638 (334,413)
Income tax (benefit)
provision (35,084) (85,770) 3,878 (116,976)
-------- --------- ------ ---------
Net (loss) income $(88,797) $(135,400) $6,760 $(217,437)
======== ========= ====== =========
Cash and investments $4,141,601 $2,356,614 $- $6,498,215
Deferred policy
acquisition costs 26,391 195,878 - 222,269
Total assets 5,241,881 3,344,269 117,460 8,703,610
Unearned premiums 319,785 832,767 - 1,152,552
Reserve for losses and
loss adjustment
expenses 3,116,553 216,089 - 3,332,642
Derivative liabilities 127,472 614,166 - 741,638
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended March 31, 2008
Exhibit D
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
---------------- ----------- ---------- ---------- -------
Revenues:
Net premiums written -
insurance $211,251 $33,055 $- $244,306
======== ======= == ========
Net premiums earned -
insurance $204,265 $37,656 $- $241,921
Net investment income 38,845 27,120 14 65,979
Change in fair value
of derivative instruments 71,769 636,040 - 707,809
Net losses on other
financial instruments (36,733) (18,149) (2) (54,884)
Other income 3,491 121 2 3,614
----- --- - -----
Total revenues 281,637 682,788 14 964,439
------- ------- -- -------
Expenses:
Provision for losses 571,008 11,703 - 582,711
Provision for premium
deficiency 18,090 - - 18,090
Policy acquisition costs 13,460 10,446 - 23,906
Other operating expenses 34,170 20,738 233 55,141
Interest expense 7,090 5,154 249 12,493
----- ----- --- ------
Total expenses 643,818 48,041 482 692,341
------- ------ --- -------
Equity in net income
of affiliates - - 12,526 12,526
--- --- ------ ------
Pretax (loss) income (362,181) 634,747 12,058 284,624
Income tax (benefit)
provision (135,725) 219,219 5,492 88,986
--------- -------- ------ --------
Net (loss) income $(226,456) $415,528 $6,566 $195,638
========= ======== ====== ========
Cash and
investments $4,224,913 $2,516,072 $- $6,740,985
Deferred policy
acquisition costs 62,860 176,540 - 239,400
Total assets 5,001,689 3,133,958 118,378 8,254,025
Unearned premiums 365,161 709,428 - 1,074,589
Reserve for losses and
loss adjustment
expenses 1,741,169 160,959 - 1,902,128
Derivative liabilities 353,559 349,846 - 703,405
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter Ended and as of March 31, 2009
Exhibit E
Quarter Ended
($ in thousands, except ratios) March 31
---------
2009 2008
---- ----
Net Premiums Earned:
Public finance direct $14,452 $17,810
Public finance reinsurance 8,366 9,870
Structured direct 1,777 3,882
Structured reinsurance 8,641 5,599
Trade credit reinsurance 96 495
-- ---
Total Net Premiums Earned - insurance $33,332 $37,656
======= =======
Refundings included in earned premium $13,044 $11,657
======= =======
Claims paid:
Trade credit reinsurance $178 $586
Financial Guaranty 14,909 103,524
------ -------
Total $15,087 $104,110(2)
======= ========
Loss ratio - GAAP Basis (1) 12.5% 22.8%
Expense ratio - GAAP Basis (1) 51.1% 60.7%
---- ----
63.6% 83.5%
==== ====
Balance Sheet impact of initial adoption of SFAS No. 163 on January 1,
2009:
----------------------------------------------------------------------
Increase in unearned premiums $(292,816)
Increase in premiums receivable 161,422
Increase in deferred acquisition costs 66,006
Decrease in reserves for losses 8,163
Decrease in deferred taxes, net 20,239
Increase in premium taxes payable (602)
----
Decrease in equity $(37,588)
========
(1) Ratios include premiums earned on credit derivatives which are
included in change in fair value of derivative instruments in the amount
of $13.7 million in each of the three month periods ended March 31, 2009
and 2008. Loss ratio includes loss on credit derivatives included in
change in fair value of derivative instruments in the amount of $0.8
million for the period ended March 31, 2009.
(2) Includes a $100 million payment related to one credit that is a CDO of
ABS that was fully reserved for in 2007.
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter Ended and as of March 31, 2009
Exhibit F
($ in thousands, except ratios) March 31 December 31 March 31
2009 2008 2008
---- ---- ----
Capital and surplus $1,000,387 $968,197 $1,097,250
Contingency reserve 484,899 515,023 464,655
------- ------- -------
Qualified statutory capital 1,485,286 1,483,220 1,561,905
Unearned premium reserve 702,190 729,274 882,627
Loss and loss expense reserve 104,220 82,340 58,207
------- ------ ------
Total statutory policyholders'
reserves 2,291,696 2,294,834 2,502,739
Present value of installment
premiums 385,514 380,666 443,408
Soft capital facilities 150,000 150,000 150,000
------- ------- -------
Total statutory claims
paying resources $2,827,210 $2,825,500 $3,096,147
========== ========== ==========
Net debt service outstanding $134,341,161 $138,430,925 $165,931,040
------------ ------------ ------------
Capital leverage ratio (1) 90 93 106
Claims paying leverage ratio (2) 48 49 54
Net par outstanding by product:
Public finance direct $18,455,372 $17,836,221 $18,460,669
Public finance reinsurance 33,494,951 31,578,163 44,404,128
Structured direct 45,699,943 46,001,355 47,634,388
Structured reinsurance 5,147,861 5,310,004 6,284,246
--------- --------- ---------
Total $102,798,127(3) $100,725,743 $116,783,431
============ ============ ============
Reserve for losses and LAE
Financial Guaranty $203,561 $219,671 $133,710
Trade Credit 12,528 14,877 27,249
------ ------ ------
$216,089 $234,548 $160,959
======== ======== ========
(1) Net debt service outstanding divided by qualified statutory capital
(2) Net debt service outstanding divided by total statutory claims paying
resources
(3) Included in public finance net par outstanding is $3.6 billion for
legally defeased bond issues where our financial guaranty policy has not
been extinguished but cash or securities have been deposited in an escrow
account for the benefit of bond holders. SFAS No. 163 requires that these
contracts continue to be accounted for as outstanding contracts despite
the elimination of substantially all risk.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2009
Exhibit G
Quarter Ended
($ in millions) March 31
--------
2009 % 2008 %
---- --- ---- ---
Primary New Insurance Written
-----------------------------
Flow $5,587 99.6% $9,284 90.2%
Structured 23 0.4% 1,013 9.8%
-- --- ----- ---
Total Primary $5,610 100.0% $10,297 100.0%
====== ===== ======= =====
Flow
Prime $5,574 99.8% $8,208 88.4%
Alt-A 9 0.1% 583 6.3%
A minus and below 4 0.1% 493 5.3%
- --- --- ---
Total Flow $5,587 100.0% $9,284 100.0%
====== ===== ====== =====
Structured
Prime $23 100.0% $1,012 99.9%
Alt-A - - 1 0.1%
--- --- - ---
Total Structured $23 100.0% $1,013 100.0%
=== ===== ====== =====
Total
Prime $5,597 99.8% $9,220 89.5%
Alt-A 9 0.1% 584 5.7%
A minus and below 4 0.1% 493 4.8%
- --- --- ---
Total Primary $5,610 100.0% $10,297 100.0%
====== ===== ======= =====
Total Primary New Insurance Written by FICO Score
-------------------------------------------------
Flow
>=740 $3,868 69.3% $3,466 37.3%
680-739 1,583 28.3% 3,615 38.9%
620-679 136 2.4% 1,938 20.9%
<=619 - - 265 2.9%
--- --- --- ---
Total Flow $5,587 100.0% $9,284 100.0%
====== ===== ====== =====
Structured
>=740 $17 73.9% $634 62.6%
680-739 6 26.1% 369 36.4%
620-679 - - 10 1.0%
--- --- -- ---
Total Structured $23 100.0% $1,013 100.0%
=== ===== ====== =====
Total
------
>=740 $3,885 69.3% $4,100 39.8%
680-739 1,589 28.3% 3,984 38.7%
620-679 136 2.4% 1,948 18.9%
<=619 - - 265 2.6%
--- --- --- ---
Total Primary $5,610 100.0% $10,297 100.0%
====== ===== ======= =====
Percentage of primary new insurance written
-------------------------------------------
Refinances 48% 40%
95.01% LTV and above 0.1% 20%
ARMs
Less than 5 years 0.2% 1%
5 years and longer 0.4% 6%
Primary risk written
--------------------
Flow $1,193 99.7% $2,316 89.7%
Structured 3 0.3% 266 10.3%
- --- --- ----
Total Primary $1,196 100.0% $2,582 100.0%
====== ===== ====== =====
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2009
Exhibit H
($ in millions) March 31 March 31
-------- --------
2009 % 2008 %
---- --- ---- ---
Primary insurance in force
--------------------------
Flow $122,656 78.8% $110,020 74.9%
Structured 33,012 21.2% 36,929 25.1%
------ ---- ------ ----
Total Primary $155,668 100.0% $146,949 100.0%
======== ===== ======== =====
Prime $113,117 72.7% $99,721 67.9%
Alt-A 31,826 20.4% 34,949 23.8%
A minus and below 10,725 6.9% 12,279 8.3%
------ --- ------ ---
Total Primary $155,668 100.0% $146,949 100.0%
======== ===== ======== =====
Primary risk in force
---------------------
Flow $30,537 87.3% $27,751 84.6%
Structured 4,443 12.7% 5,041 15.4%
----- ---- ----- ----
Total Primary $34,980 100.0% $32,792 100.0%
======= ===== ======= =====
Flow
Prime $25,129 82.3% $21,810 78.6%
Alt-A 3,475 11.4% 3,788 13.6%
A minus and below 1,933 6.3% 2,153 7.8%
----- --- ----- ---
Total Flow $30,537 100.0% $27,751 100.0%
======= ===== ======= =====
Structured
Prime $2,331 52.5% $2,577 51.1%
Alt-A 1,378 31.0% 1,554 30.8%
A minus and below 734 16.5% 910 18.1%
--- ---- --- ----
Total Structured $4,443 100.0% $5,041 100.0%
====== ===== ====== =====
Total
Prime $27,460 78.5% $24,387 74.4%
Alt-A 4,853 13.9% 5,342 16.3%
A minus and below 2,667 7.6% 3,063 9.3%
----- --- ----- ---
Total Primary $34,980 100.0% $32,792 100.0%
======= ===== ======= =====
Total Primary Risk in Force by FICO Score
-----------------------------------------
Flow
>=740 $9,839 32.2% $7,570 27.3%
680-739 11,234 36.8% 10,269 37.0%
620-679 8,002 26.2% 8,262 29.8%
<=619 1,462 4.8% 1,650 5.9%
----- --- ----- ---
Total Flow $30,537 100.0% $27,751 100.0%
======= ===== ======= =====
Structured
>=740 $1,205 27.1% $1,293 25.6%
680-739 1,394 31.4% 1,517 30.1%
620-679 1,167 26.3% 1,380 27.4%
<=619 677 15.2% 851 16.9%
--- ---- --- ----
Total Structured $4,443 100.0% $5,041 100.0%
====== ===== ====== =====
Total
>=740 $11,044 31.6% $8,863 27.0%
680-739 12,628 36.1% 11,786 36.0%
620-679 9,169 26.2% 9,642 29.4%
<=619 2,139 6.1% 2,501 7.6%
----- --- ----- ---
Total Primary $34,980 100.0% $32,792 100.0%
======= ===== ======= =====
Percentage of primary risk in force
-----------------------------------
Refinances 31% 31%
95.01% LTV and above 22% 24%
ARMs
Less than 5 years 8% 11%
5 years and longer 9% 9%
Pool risk in force
------------------
Prime $2,058 70.7% $2,113 70.6%
Alt-A 289 9.9% 292 9.7%
A minus and below 564 19.4% 590 19.7%
--- ---- --- ----
Total $2,911 100.0% $2,995 100.0%
====== ===== ====== =====
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2009
Exhibit I
($ in millions) March 31 March 31
-------- --------
2009 % 2008 %
---- --- ---- ---
Total Primary Risk in Force by LTV
----------------------------------
85.00% and below $ 3,613 10.3% $ 3,685 11.2%
85.01% to 90.00% 12,571 35.9% 11,102 33.9%
90.01% to 95.00% 11,213 32.1% 10,079 30.7%
95.01% and above 7,583 21.7% 7,926 24.2%
----- ---- ----- ----
Total $34,980 100.0% $32,792 100.0%
======= ===== ======= =====
Total Primary Risk in Force by Policy Year
------------------------------------------
2005 and prior $11,083 31.7% $13,213 40.2%
2006 5,015 14.3% 5,728 17.5%
2007 10,410 29.8% 11,300 34.5%
2008 7,298 20.9% 2,551 7.8%
2009 1,174 3.3% - -
----- --- --- ---
Total $34,980 100.0% $32,792 100.0%
======= ===== ======= =====
Total Pool Risk in Force by Policy Year
---------------------------------------
2005 and prior $2,367 81.3% $2,456 82.0%
2006 250 8.6% 261 8.7%
2007 235 8.1% 250 8.4%
2008 59 2.0% 28 0.9%
2009 - - - -
--- --- --- ---
Total Pool risk in Force $2,911 100.0% $2,995 100.0%
====== ===== ====== =====
Other risk in force
-------------------
Second-lien
1st loss $244 $336
2nd loss 140 507
NIMS 431 522
International
1st loss-Hong Kong primary
mortgage insurance 389 517
Reinsurance 170 125
Credit default swaps 3,072 8,872
Other
Domestic credit default swaps 123 212
--- ---
Total other risk in force $4,569 $11,091
====== =======
Risk to capital ratio-Radian Guaranty
only 17.6:1 11.4:1
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2009
Exhibit J
Quarter Ended
($ in thousands) March 31
--------
2009 2008
---- ----
Direct claims paid
Prime $69,459 $60,658
Alt-A 46,270 35,732
A minus and below 36,730 48,361
Second-lien and other 87,607 (1) 45,437
------ ------
Total $240,066 $190,188
======== ========
Average claim paid
Prime $41.9 $36.8
Alt-A 53.5 49.6
A minus and below 38.1 37.2
Second-lien and other 41.3 (2) 34.6
Total $43.4 (2) $38.2
Loss ratio - GAAP Basis 179.8% 264.7%
Expense ratio - GAAP Basis 23.2% 22.1%
---- ----
203.0% 286.8%
===== =====
Reserve for losses by category
Prime $921,050 $479,653
Alt-A 951,932 598,706
A minus and below 452,837 391,426
Pool insurance 140,192 56,893
Second-lien 111,985 176,121
Other 1,780 1,485
----- -----
Reserve for losses, net 2,579,776 1,704,284
Reinsurance recoverable 536,777 (3) 36,885
------- ------
Total $3,116,553 $1,741,169
========== ==========
(1) Includes a $65 million payment in Q1 '09 related to the settlement of
certain second-lien transactions, which were fully reserved for at
December 31, 2008.
(2) Excludes $65 million payment noted in (1) above.
(3) Reinsurance recoverable on ceded losses related to captives ($447
million) and Smart Home ($90 million).
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2009
Exhibit K
March 31 December 31 March 31
2009 2008 2008
---- ---- ----
Default Statistics
------------------
Primary insurance:
Flow
Prime
-----
Number of insured loans 627,386 624,970 582,261
Number of loans in default 50,217 44,575 22,806
Percentage of loans in default 8.00% 7.13% 3.92%
Alt-A
-----
Number of insured loans 66,952 68,948 73,672
Number of loans in default 18,628 16,959 10,014
Percentage of loans in default 27.82% 24.60% 13.59%
A minus and below
-----------------
Number of insured loans 57,576 59,189 64,193
Number of loans in default 15,999 15,768 10,411
Percentage of loans in default 27.79% 26.64% 16.22%
Total Flow
Number of insured loans 751,914 753,107 720,126
Number of loans in default 84,844 77,302 43,231
Percentage of loans in default 11.28% 10.26% 6.00%
Structured
Prime
-----
Number of insured loans 65,727 67,165 72,264
Number of loans in default 7,331 6,692 5,434
Percentage of loans in default 11.15% 9.96% 7.52%
Alt-A
-----
Number of insured loans 78,901 80,491 87,325
Number of loans in default 21,600 18,747 12,056
Percentage of loans in default 27.38% 23.29% 13.81%
A minus and below
-----------------
Number of insured loans 21,449 22,315 26,342
Number of loans in default 7,542 7,812 8,404
Percentage of loans in default 35.16% 35.01% 31.90%
Total Structured
Number of insured loans 166,077 169,971 185,931
Number of loans in default 36,473 33,251 25,894
Percentage of loans in default 21.96% 19.56% 13.93%
Total Primary Insurance
Prime
-----
Number of insured loans 693,113 692,135 654,525
Number of loans in default 57,548 51,267 28,240
Percentage of loans in default 8.30% 7.41% 4.31%
Alt-A
-----
Number of insured loans 145,853 149,439 160,997
Number of loans in default 40,228 35,706 22,070
Percentage of loans in default 27.58% 23.89% 13.71%
A minus and below
-----------------
Number of insured loans 79,025 81,504 90,535
Number of loans in default 23,541 23,580 18,815
Percentage of loans in default 29.79% 28.93% 20.78%
Total Primary Insurance
Number of insured loans 917,991 923,078 906,057
Number of loans in default 121,317 110,553 69,125
Percentage of loans in default (1) 13.22% 11.98% 7.63%
Pool insurance:
Number of loans in default (2) 33,267 32,677 26,983
(1) Includes 627, 539 and 1,504 defaults at March 31, 2009, December 31,
2008 and March 31, 2008, respectively, where reserves have not been
established because no claim payment is currently anticipated.
(2) Includes 20,454, 21,719 and 20,417 defaults at March 31, 2009,
December 31, 2008 and March 31, 2008, respectively, where reserves have
not been established because no claim payment is currently anticipated.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2009
Exhibit L
Quarter Ended
March 31
--------
2009 2008
---- ----
Net Premiums Written (In thousands)
-----------------------------------
Primary and Pool Insurance $161,414 $200,477
Second-lien (86) 3,481
International 631 7,293
--- -----
Total Net Premiums Written - insurance $161,959 $211,251
======== ========
Net Premiums Earned (In thousands)
-----------------------------------
Primary and Pool Insurance $170,547 $193,483
Second-lien 1,236 6,164
International 6,100 4,618
----- -----
Total Net Premiums Earned - insurance $177,883 $204,265
======== ========
SMART HOME (In millions)
------------------------
Ceded Premiums Written $2.7 $3.2
Ceded Premiums Earned $2.7 $3.2
1st Lien Captives
-----------------
Premiums ceded to captives (In millions) $34.5 $35.7
% of total premiums 16.6% 15.4%
NIW subject to captives (In millions) $1,041 $3,986
% of primary NIW 18.6% 38.7%
IIF included in captives (1) 35.7% 37.4%
RIF included in captives (1) 43.4% 42.2%
Persistency (twelve months ended March 31) 87.0% 77.5%
March 31 March 31
2009 2008
---- ----
SMART HOME
% of Primary RIF included in Smart Home
Transactions (1) 3.6% 5.0%
(1) Radian reinsures the middle layer risk positions, while retaining a
significant portion of the total risk comprising the first loss and most
remote risk positions.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2009
Exhibit M
Reinsurance Progression Toward Attachment - Summary by Book Year (1)
($ in millions)
Progression
to
Original Attachment
Book Year (2): Book RIF Point
-------------- ----------- -----------
Pre-2006 0-50%
Pre-2006 50-75%
Pre-2006 75-99%
Pre-2006 Attached
Pre-2006 Total $25,849
2006 0-50%
2006 50-75%
2006 75-99%
2006 Attached
2006 Total $3,527
2007 0-50%
2007 50-75%
2007 75-99%
2007 Attached
2007 Total $5,241
2008 0-50%
2008 50-75%
2008 75-99%
2008 Attached
2008 Total $2,564
2009 0-50%
2009 50-75%
2009 75-99%
2009 Attached
2009 Total $160
Quota Share 0-50%
Quota Share 50-75%
Quota Share 75-99%
Quota Share Attached
Quota Share Total $313
Total Captive (Including Quota
Share) $37,654
SmartHome 0-50%
SmartHome 50-75%
SmartHome 75-99%
SmartHome Attached
Total SmartHome $3,900
March 31
($ in millions) 2009
----
Ever-to-
Gross Ceded Net Date
Current Current Current Incurred Reinsurance
Book Year (2): RIF RIF(3) RIF Losses Benefit (4)
------------- --- ----- --- ------ ----------
Pre-2006 $837 $454 $383 $183
Pre-2006 970 395 575 154
Pre-2006 1,117 388 729 162
Pre-2006 1,327 239 1,088 197 $79
----- --- ----- --- ---
Pre-2006 Total $4,251 $1,476 $2,775 $696 $79
====== ====== ====== ==== ===
2006 $10 $1 $9 $-
2006 26 2 24 1
2006 57 4 53 4
2006 2,296 312 1,984 326 $167
----- --- ----- --- ----
2006 Total $2,389 $319 $2,070 $331 $167
====== ==== ====== ==== ====
2007 $20 $1 $19 $-
2007 11 1 10 -
2007 267 18 249 14
2007 4,227 454 3,773 403 $180
----- --- ----- --- ----
2007 Total $4,525 $474 $4,051 $417 $180
====== ==== ====== ==== ====
2008 $1,855 $167 $1,688 $31
2008 322 36 286 8
2008 42 4 38 2
2008 186 15 171 19 $12
--- -- --- -- ---
2008 Total $2,405 $222 $2,183 $60 $12
====== ==== ====== === ===
2009 $159 $7 $152 $-
2009 - - - -
2009 - - - -
2009 - - - - $-
--- --- --- --- --
2009 Total $159 $7 $152 $- $-
==== == ==== == ==
Quota Share $- $- $- $-
Quota Share - - - -
Quota Share - - - -
Quota Share 113 36 77 29 $13
--- -- -- -- ---
Quota Share Total $113 $36 $77 $29 $13
==== === === === ===
Total Captive
(Including Quota
Share) $13,842 $2,534 $11,308 $1,533 $451
======= ====== ======= ====== ====
SmartHome $115 $49 $66 $29
SmartHome - - - -
SmartHome - - - -
SmartHome 1,146 516 630 361 $90
----- --- --- --- ---
Total SmartHome $1,261 $565 $696 $390 $90
====== ==== ==== ==== ===
Reinsurance Progression Toward Attachment - Summary by Book Year (1)
December 31
($ in millions) 2008 (5)
--------
Ever-to-
Ceded Net Date
Gross Current Current Incurred Reinsurance
Book Year (2): Current RIF RIF(3) RIF Losses Benefit (4)
Pre-2006 $1,120 $558 $562 $239
Pre-2006 942 349 593 142
Pre-2006 1,084 397 687 160
Pre-2006 1,355 237 1,118 184 $75
----- --- ----- --- ---
Pre-2006 Total $4,501 $1,541 $2,960 $725 $75
====== ====== ====== ==== ===
2006 $32 $2 $30 $1
2006 62 4 58 3
2006 310 42 268 18
2006 2,074 270 1,804 290 $161
----- --- ----- --- ----
2006 Total $2,478 $318 $2,160 $312 $161
====== ==== ====== ==== ====
2007 $31 $2 $29 $-
2007 225 12 213 8
2007 71 7 64 3
2007 4,329 454 3,875 350 $147
----- --- ----- --- ----
2007 Total $4,656 $475 $4,181 $361 $147
====== ==== ====== ==== ====
2008 $2,167 $197 $1,970 $25
2008 42 4 38 1
2008 - - - -
2008 190 15 175 16 $9
--- -- --- -- --
2008 Total $2,399 $216 $2,183 $42 $9
====== ==== ====== === ==
2009 $- $- $- $-
2009 - - - -
2009 - - - -
2009 - - - - $-
--- --- --- --- --
2009 Total $- $- $- $- $-
== == == == ==
Quota Share $- $- $- $-
Quota Share - - - -
Quota Share - - - -
Quota Share 116 37 79 27 $12
--- -- -- -- ---
Quota Share Total $116 $37 $79 $27 $12
==== === === === ===
Total Captive
(Including
Quota Share) $14,150 $2,587 $11,563 $1,467 $404
======= ====== ======= ===== ====
SmartHome $117 $51 $66 $27
SmartHome - - - -
SmartHome - - - -
SmartHome 1,188 521 667 346 $91
----- --- --- --- ---
Total SmartHome $1,305 $572 $733 $373 $91
====== ==== ==== ==== ===
(1) Data presented in aggregate for all trusts for captives active at each
period end only. Actual trust attachment and exit points vary by
individual contract. Attachment is calculated at the contract/deal level
and is based on Total Incurred Losses which are defined as claims paid
ever-to-date plus loss reserves.
(2) Book year figures may include loans from additional periods pursuant
to reinsurance agreement terms and conditions.
(3) Risk ceded to reinsurers based on individual contract terms.
(4) Captive Benefit is defined as ceded reserves at period end plus ever
to-date claims paid by the trust.
(5) Revised from December 31, 2008 originally presented.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2009
Exhibit N
($ in millions) March 31 March 31
-------- --------
2009 % 2008 %
---- --- ---- ---
Modified Pool Risk in Force
---------------------------
Prime
-----
2005 and prior $84 53.5% $90 57.0%
2006 47 29.9% 44 27.8%
2007 22 14.0% 23 14.6%
2008 4 2.6% 1 0.6%
- --- - ---
Total $157 100.0% $158 100.0%
==== ===== ==== =====
Alt-A
-----
2005 and prior $194 29.3% $212 31.0%
2006 161 24.3% 165 24.1%
2007 304 45.8% 304 44.5%
2008 4 0.6% 3 0.4%
- --- - ---
Total $663 100.0% $684 100.0%
==== ===== ==== =====
A minus and below
-----------------
2005 and prior $14 58.3% $16 61.6%
2006 3 12.5% 3 11.5%
2007 7 29.2% 7 26.9%
- ---- - ----
Total $24 100.0% $26 100.0%
=== ===== === =====
Total
-----
2005 and prior $292 34.6% $318 36.6%
2006 211 25.0% 212 24.4%
2007 333 39.5% 334 38.5%
2008 8 0.9% 4 0.5%
- --- - ---
Total Modified Pool Risk in Force $844 100.0% $868 100.0%
==== ===== ==== =====
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2009
ALT-A
Exhibit O
Quarter Ended
($ in millions) March 31
--------
2009 % 2008 %
---- --- ---- ---
Primary Risk in Force by FICO Score
------------------------------------
>=740 $1,192 24.5% $1,286 24.1%
680-739 2,335 48.1% 2,540 47.6%
660-679 712 14.7% 793 14.8%
620-659 582 12.0% 686 12.8%
<=619 32 0.7% 37 0.7%
-- --- -- ---
Total $4,853 100.0% $5,342 100.0%
====== ===== ====== =====
Primary Risk in Force by LTV
-----------------------------
85.00% and below $1,249 25.7% $1,373 25.7%
85.01% to 90.00% 2,015 41.5% 2,199 41.2%
90.01% to 95.00% 1,256 25.9% 1,398 26.2%
95.01% and above 333 6.9% 372 6.9%
--- --- --- ---
Total $4,853 100.0% $5,342 100.0%
====== ===== ====== =====
Primary Risk in Force by Policy Year
-------------------------------------
2005 and prior $1,532 31.6% $1,834 34.3%
2006 1,076 22.2% 1,225 22.9%
2007 1,997 41.1% 2,146 40.2%
2008 246 5.1% 137 2.6%
2009 2 - - -
- --- --- ---
Total $4,853 100.0% $5,342 100.0%
====== ===== ====== =====
Radian Group Inc.
Financial Services Supplemental Information
For the Quarter Ended and as of March 31, 2009
Exhibit P
Quarter Ended
March 31
--------
(In thousands) 2009 2008
---- ----
Investment in Affiliates-Selected Information
Sherman
-------------------------------------------
Balance, beginning of period $99,656 $104,315
Net income for period 10,552 12,526
Dividends received 6,441 -
Other comprehensive (loss) income (531) 88
---- --
Balance, end of period $103,236 $116,929
======== ========
Portfolio Information:
Sherman
-------------------------------------------
Total assets $2,149,767 $2,383,119
Net revenues $348,034 $391,968
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 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;
-- the ability of our primary insurance customers in our financial guaranty
reinsurance business to provide appropriate surveillance and to mitigate
losses adequately with respect to our assumed insurance portfolio;
-- 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, which
could be negatively impacted if Sherman is unable to maintain sufficient
sources of funding in the current credit environment.
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. For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in Part I of Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008. 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 Radian Group Inc.