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11/04/2009
Radian Reports Third Quarter Financial Results
- Pays fewer than expected claims; lowers 2009 claims guidance -
- Risk-to-capital ratio of 16.1:1 -
"There were several positive trends in the quarter, despite the economic challenges our industry continues to face. We are encouraged by Radian's lower-than-expected claims activity again this quarter, and the consistently high-quality, lower-risk mortgage insurance business we added to our book," said Chief Executive Officer
Ibrahim added, "Our risk to capital ratio increased slightly from the second quarter to 16.1 to 1, which we believe will allow Radian to comfortably write new, high-quality mortgage insurance business into 2010. We are actively working on strategies to continue writing new business well into the future."
THIRD QUARTER HIGHLIGHTS
-- Radian Guaranty Inc.'s risk-to-capital ratio was 16.1:1 at September 30,
2009 , compared to a ratio of 15.9:1 at June 30, 2009 . The company
expects to have sufficient capital to write high-quality mortgage
insurance business into 2010.
-- The mortgage insurance provision for losses of $376.5 million reflects
higher delinquency counts and the continued aging of delinquencies.
Radian expects delinquencies to continue to rise during the fourth
quarter.
-- Mortgage insurance paid claims were $243.2 million , which again were
lower than the company's forecast, and consisted of $210.1 million of
first liens and $33.1 million of second liens. Net claims paid reported
of $135.5 million is net of proceeds received from captive terminations
of $107.7 million . In the fourth quarter, total first- and second-lien
claims paid are expected to be approximately $290 million . For the
full-year 2009, Radian has reduced its claims-paid expectations from the
$1.1 billion range, to a current estimate of $940 million , which
includes $87 million of second-lien termination payments.
-- New mortgage insurance written (NIW) of $3.4 billion in the quarter
continued to consist of loans with excellent risk characteristics,
including 99.9 percent prime credit quality and 74.6 percent with FICO
scores of 740 or above. Market share for the quarter was consistent
with levels during the second half of 2008 and the first half of 2009.
Separately, approximately $300 million of insurance in the quarter is
included in the Home Affordable Refinance Program (HARP); these loans
are treated as a modification of existing coverage, therefore HARP
volume is not included in Radian's NIW total.
-- The company sold a non-core subsidiary at its approximate book value,
and received $19 million in cash for the sale. Radian also repurchased
nearly $58 million of its 2011 debt at an average price of approximately
$0.79 on the dollar, further contributing to its liquidity position.
Radian had $380 million in cash immediately available at September 30,
2009 .
-- Radian Asset Assurance Inc. , the company's principal financial guaranty
subsidiary, continues to serve as an important source of capital support
for Radian Guaranty, the company's mortgage insurance subsidiary, and is
expected to continue to provide Radian Guaranty with cash infusions over
time.
-- As of September 30, 2009 , Radian Asset had approximately $935
million in statutory surplus with an additional $1.6 billion in
total claims-paying resources.
RECENT EVENTS
-- The company fully satisfied its 2009 tax obligation to Radian Guaranty
through the transfer of its equity interest in Sherman Financial Group
LLC to Radian Guaranty. As previously announced, this obligation of
approximately $98 million was required under Radian Group's tax-sharing
agreement with its subsidiaries.
-- Radian Asset has experienced continued deterioration in its Trust
Preferred Securities (TruPs) CDO portfolio, including the default of one
TruPs CDO that is expected to require a statutory loss reserve in the
fourth quarter.
-- Radian Asset received approval to release approximately $143 million in
contingency reserves in its financial guaranty portfolio, which will
also strengthen Radian Guaranty's statutory capital position. The
reserve release was based on a reduction in the company's net par
outstanding, resulting from the maturing of exposures and other
terminations of coverage.
CONFERENCE CALL
Radian will discuss each of these items in its conference call today,
A replay of the webcast will be available on 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 119984.
In addition to the information provided in the company's earnings news release, other statistical and financial information, which is expected to be referred to during the conference call, will be available on Radian's Web site under Investors >Quarterly Results, or by clicking on http://www.ir.radian.biz/phoenix.zhtml?c=112301&p=irol-earnings.
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 September 30, 2009
Exhibit D: Segment Information Quarter Ended September 30, 2008
Exhibit E: Segment Information Nine Months Ended September 30, 2009
Exhibit F: Segment Information Nine Months Ended September 30, 2008
Exhibit G: Financial Guaranty Supplemental Information -
For the Quarter and Nine Months Ended and as of September
30, 2009
Exhibit H: Financial Guaranty Supplemental Information -
For the Quarter and Nine Months Ended and as of September
30, 2009
Exhibit I: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended and as of September
30, 2009
New Insurance Written and Risk Written
Exhibit J: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended and as of September
30, 2009
Insurance in Force and Risk in Force
Exhibit K: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended and as of September
30, 2009
Risk in Force by LTV and Policy Year and other Risk in Force
Exhibit L: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended and as of September
30, 2009
Claims and Reserves
Exhibit M: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended and as of September
30, 2009
Default Statistics
Exhibit N: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended and as of September
30, 2009
Net Premiums Written and Earned, Smart Home, Captives and
Persistency
Exhibit O: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of September 30, 2009
Reinsurance Progression Toward Attachment - Summary by
Book Year
Exhibit P: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of September 30, 2009
Modified Pool Risk in Force
Exhibit Q: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended and as of September
30, 2009
Alt-A Risk in Force
Exhibit R: Financial Services Supplemental Information -
For the Quarter and Nine Months Ended and as of September
30, 2009
Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Income
Exhibit A
Quarter Ended Nine Months Ended
September 30 September 30
------------------ -------------------
2009 2008 2009 2008
---- ---- ---- ----
(In thousands, except
per-share data)
Revenues:
Net premiums written
- insurance $(38,060)(1) $202,451 $280,597(1) $669,402
======== ======== ======== ========
Net premiums earned
- insurance $209,487 $249,718 $614,331 $740,776
Net investment
income 54,032 65,215 163,566 196,322
Change in fair
value of derivative
instruments (30,857) 164,757 (42,955) 928,792
Net gains (losses)
on other financial
instruments 96,508 (48,602) 175,962 (74,642)
Total other-than-
temporary
impairment losses (3) (15,135) (873) (52,230)
Losses recognized in
other comprehensive
loss - - - -
--- --- --- ---
Net impairment
losses recognized
in earnings (3) (15,135) (873) (52,230)
Other income 2,467 2,756 10,487 9,591
----- ----- ------ -----
Total revenues 331,634 418,709 920,518 1,748,609
------- ------- ------- ---------
Expenses:
Provision for
losses 404,904 544,915 864,408 1,586,505
Provision for
premium deficiency (31,569) (252,170)(2) (77,569) 135,727(2)
Policy acquisition
costs 14,193 20,770 54,114 120,628(3)
Other operating
expenses 54,034 80,781 161,271 199,771
Interest expense 11,296 13,852 35,890 40,177
------ ------ ------ ------
Total expenses 452,858 408,148 1,038,114 2,082,808
------- ------- --------- ---------
Equity in net income
of affiliates 7,946 15,798 23,608 44,028
----- ------ ------ ------
Pretax (loss)
income (113,278) 26,359 (93,988) (290,171)
Income tax benefit (42,828) (10,340) (37,976) (129,984)
------- ------- ------- --------
Net (loss) income $(70,450) $36,699 $(56,012) $(160,187)
======== ======= ======== =========
Diluted net
(loss) income
per share (4) $(0.86) $0.46 $(0.69) $(2.01)
====== ===== ====== ======
(1) Includes the reversal of $185.6 million of premiums written related
to the Ambac commutation in our Financial Guaranty segment.
(2) Includes $(271.8) million for first-lien and $19.6 million for
second-lien in the third quarter of 2008, and $150.1 million for
first-lien and $(14.4) million for second-lien for the nine months
of 2008.
(3) Includes the acceleration of $50.8 million of deferred policy
acquisition cost amortization in the nine months ended September 30,
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 81,749 79,960 81,761 79,603
Increase in
shares-potential
exercise of
options-diluted
basis - 511 - -
--- --- --- ---
Weighted average
shares outstanding 81,749 80,471 81,761 79,603
====== ====== ====== ======
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
(In thousands, except September 30 December 31 September 30
per-share data) 2009 2008 2008
---- ---- ----
Assets:
Cash and investments $6,466,527 $6,060,601 $6,330,214
Investments in affiliates 112,034 99,712 87,256
Deferred policy
acquisition costs 158,813 160,526 178,581
Prepaid federal income taxes - 248,828 248,828
Derivative assets 153,136 179,515 171,116
Deferred income taxes, net 351,575 446,102 268,808
Reinsurance recoverables 597,067 492,359 310,984
Other assets 525,260 428,476 450,449
------- ------- -------
Total assets $8,364,412 $8,116,119 $8,046,236
========== ========== ==========
Liabilities and
stockholders' equity:
Unearned premiums $872,375 $916,724 $1,000,725
Reserve for losses and loss
adjustment expenses 3,512,999 3,224,542 2,680,381
Reserve for premium deficiency 9,291 86,861 331,373
Long-term debt and other
borrowings 698,703 857,802 908,282
Variable interest entity debt 328,986 160,035 127,624
Derivative liabilities 394,386 519,260 343,296
Other liabilities 406,802 320,185 322,229
------- ------- -------
Total liabilities 6,223,542 6,085,409 5,713,910
--------- --------- ---------
Common stock 100 98 98
Additional paid-in capital 477,503 462,647 453,836
Retained earnings 1,694,219 1,766,946 2,017,542
Accumulated other
comprehensive income (30,952) (198,981) (139,150)
------- -------- --------
Total common
stockholders' equity 2,140,870 2,030,710 2,332,326
--------- --------- ---------
Total liabilities and
stockholders' equity $8,364,412 $8,116,119 $8,046,236
========== ========== ==========
Book value per share $25.91 $25.06 $28.90
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended September 30, 2009
Exhibit C
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
---------------- ----------- ---------- ---------- -------
Revenues:
Net premiums
written -insurance $149,000 $(187,060) $- $(38,060)
======== ========= === ========
Net premiums
earned -insurance $186,859 $22,628 $- $209,487
Net investment income 33,822 20,209 1 54,032
Change in fair value of
derivative instruments 6,678 (37,535) - (30,857)
Net gains on other
financial instruments 38,583 57,925 - 96,508
Net impairment
losses recognized
in earnings (3) - - (3)
Other income 2,299 97 71 2,467
----- --- --- -----
Total revenues 268,238 63,324 72 331,634
------- ------ --- -------
Expenses:
Provision for losses 376,488 28,416 - 404,904
Provision for
premium deficiency (31,569) - - (31,569)
Policy acquisition costs 8,672 5,521 - 14,193
Other operating expenses 39,440 18,877 (4,283) 54,034
Interest expense 3,739 7,557 - 11,296
----- ----- --- ------
Total expenses 396,770 60,371 (4,283) 452,858
------- ------ ------ -------
Equity in net income of
affiliates - - 7,946 7,946
--- --- ----- -----
Pretax (loss) income (128,532) 2,953 12,301 (113,278)
Income tax (benefit)
provision (45,912) (1,245) 4,329 (42,828)
------- ------ ----- -------
Net (loss) income $(82,620) $4,198 $7,972 $(70,450)
======== ====== ====== ========
Cash and investments $4,093,265 $2,373,262 $- $6,466,527
Deferred policy
acquisition costs 30,528 128,285 - 158,813
Total assets 5,231,755 3,015,532 117,125 8,364,412
Unearned premiums 266,122 606,253 - 872,375
Reserve for losses and
loss adjustment
expenses 3,387,740 125,259 - 3,512,999
Derivative liabilities 17,018 377,368 - 394,386
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended September 30, 2008
Exhibit D
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
---------------- ----------- ---------- ---------- -------
Revenues:
Net premiums
written - insurance $188,583 $13,868 $- $202,451
======== ======= === ========
Net premiums
earned - insurance $196,207 $53,511 $- $249,718
Net investment income 38,017 27,198 - 65,215
Change in fair value
of derivative instruments 8,606 156,151 - 164,757
Net (losses) gains on
other financial
instruments (36,579) (12,106) 83 (48,602)
Net impairment
losses recognized
in earnings (3,346) (11,789) - (15,135)
Other income 2,561 58 137 2,756
----- --- --- -----
Total revenues 205,466 213,023 220 418,709
------- ------- --- -------
Expenses:
Provision for losses 519,257 25,658 - 544,915
Provision for
premium deficiency (252,170) - - (252,170)
Policy acquisition costs 5,327 15,443 - 20,770
Other operating expenses 43,771 36,885 125 80,781
Interest expense 6,718 7,134 - 13,852
----- ----- - ------
Total expenses 322,903 85,120 125 408,148
------- ------ --- -------
Equity in net
income of affiliates - - 15,798 15,798
--- --- ------ ------
Pretax (loss) income (117,437) 127,903 15,893 26,359
Income tax (benefit)
provision (70,473) 53,550 6,583 (10,340)
------- ------ ----- -------
Net (loss) income $(46,964) $74,353 $9,310 $36,699
======== ======= ====== =======
Cash and investments $3,899,815 $2,430,399 $- $6,330,214
Deferred policy
acquisition costs 17,997 160,584 - 178,581
Total assets 4,928,234 2,934,032 183,970 8,046,236
Unearned premiums 351,200 649,525 - 1,000,725
Reserve for losses
and loss adjustment
expenses 2,496,412 183,969 - 2,680,381
Derivative liabilities 220,363 122,933 - 343,296
Radian Group Inc. and Subsidiaries
Segment Information
Nine Months Ended September 30, 2009
Exhibit E
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
---------------- ----------- ---------- ---------- -------
Revenues:
Net premiums
written - insurance $465,878 $(185,281) $- $280,597
======== ========= === ========
Net premiums
earned - insurance $534,789 $79,542 $- $614,331
Net investment income 97,465 66,098 3 163,566
Change in fair value of
derivative instruments (28,455) (14,500) - (42,955)
Net gains on other
financial instruments 64,250 111,712 - 175,962
Net impairment losses
recognized in earnings (850) (23) - (873)
Other income 9,865 316 306 10,487
----- --- --- ------
Total revenues 677,064 243,145 309 920,518
------- ------- --- -------
Expenses:
Provision for losses 840,974 23,434 - 864,408
Provision for
premium deficiency (77,569) - - (77,569)
Policy acquisition costs 22,332 31,782 - 54,114
Other operating expenses 110,724 54,619 (4,072) 161,271
Interest expense 12,052 23,838 - 35,890
------ ------ --- ------
Total expenses 908,513 133,673 (4,072) 1,038,114
------- ------- ------ ---------
Equity in net
income of affiliates - - 23,608 23,608
--- --- ------ ------
Pretax (loss) income (231,449) 109,472 27,989 (93,988)
Income tax (benefit)
provision (73,048) 25,004 10,068 (37,976)
------- ------ ------ -------
Net (loss) income $(158,401) $84,468 $17,921 $(56,012)
========= ======= ======= ========
Radian Group Inc. and Subsidiaries
Segment Information
Nine Months Ended September 30, 2008
Exhibit F
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
---------------- ----------- ---------- ---------- -------
Revenues:
Net premiums
written - insurance $598,864 $70,538 $- $669,402
======== ======= === ========
Net premiums
earned - insurance $605,568 $135,208 $- $740,776
Net investment income 115,803 80,505 14 196,322
Change in fair value of
derivative instruments 105,548 823,244 - 928,792
Net (losses) gains on
other financial
instruments (47,983) (26,779) 120 (74,642)
Net impairment losses
recognized in earnings (18,231) (33,999) - (52,230)
Other income 9,051 237 303 9,591
----- --- --- -----
Total revenues 769,756 978,416 437 1,748,609
------- ------- --- ---------
Expenses:
Provision for losses 1,539,561 46,944 - 1,586,505
Provision for premium
deficiency 135,727 - - 135,727
Policy acquisition costs 82,473 38,155 - 120,628
Other operating expenses 126,644 72,642 485 199,771
Interest expense 21,140 18,788 249 40,177
------ ------ --- ------
Total expenses 1,905,545 176,529 734 2,082,808
--------- ------- --- ---------
Equity in net
income of affiliates - - 44,028 44,028
--- --- ------ ------
Pretax (loss) income (1,135,789) 801,887 43,731 (290,171)
Income tax (benefit)
provision (428,186) 279,537 18,665 (129,984)
-------- ------- ------ --------
Net (loss) income $(707,603) $522,350 $25,066 $(160,187)
========= ======== ======= =========
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2009
Exhibit G
Quarter Ended Nine Months Ended
(In thousands) September 30 September 30
---------------- ------------------
2009 2008 2009 2008
---- ---- ---- ----
Net Premiums Earned:
Public finance direct $9,363 $13,380 $35,750 $43,194
Public finance
reinsurance 11,071 32,310 38,297 65,145
Structured direct 1,321 3,569 5,156 11,211
Structured reinsurance 834 4,472 15,130 15,163
Trade credit
reinsurance 39 (220) 174 495
--- ---- --- ---
Net Premiums Earned -
insurance 22,628 53,511 94,507 135,208
Impact of
commutations - - (14,965) -
--- --- ------- ---
Total Net Premiums
Earned - insurance $22,628 $53,511 $79,542 $135,208
======= ======= ======= ========
Refundings included in
earned premium $8,553 $27,326 $32,076 $55,647
====== ======= ======= =======
Claims paid:
Trade credit
reinsurance $41 $449 $912 $1,432
Financial
Guaranty 84,976(1) 6,450 123,761(1) 114,040(2)
------ ----- ------- -------
Total $85,017 $6,899 $124,673 $115,472
======= ====== ======== ========
Balance Sheet impact of
initial adoption of the accounting
standard for financial guarantee
insurance contracts on
January 1, 2009 :
-----------------------------------
($ in millions)
Increase in unearned premiums $(292.8)
Increase in premiums receivable 161.4
Increase in deferred policy
acquisition costs 66.0
Decrease in reserve for
losses and LAE 8.2
Decrease in deferred taxes, net 20.2
Increase in premium taxes payable (0.6)
----
Decrease in equity $(37.6)
======
Pre-tax Income Statement impact of
Ambac Commutation in Q2 2009:
----------------------------------
($ in millions)
Decrease in premiums earned $(15.3)
Decrease in provision for losses 38.6
Increase in amortization of
policy acquisition costs (8.9)
----
Increase in pre-tax income $14.4
=====
Balance Sheet impact of Ambac
Commutation in Q3 2009:
-----------------------------
($ in millions)
Decrease in:
Cash and investments $100.0
Premiums receivable 93.2
Unearned premiums 185.6
Reserve for losses and LAE 53.9
Deferred policy acquisition costs 46.3
(1) Includes $53.9 million related to Ambac commutation.
(2) Includes a $100 million payment related to one CDO of an ABS
transaction that was fully reserved for in 2007.
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2009
Exhibit H
($ in thousands, except ratios)
September 30 December 31 September 30
2009 2008 2008
---- ---- ----
Statutory Information:
----------------------
Capital and surplus $939,880 $968,197 $957,177
Contingency reserve 494,058 515,023 510,195
------- ------- -------
Qualified
statutory capital 1,433,938 1,483,220 1,467,372
Unearned premium reserve 616,788 729,274 818,365
Loss and loss expense reserve 57,259 82,340 70,621
------ ------ ------
Total statutory
policyholders' reserves 2,107,985 2,294,834 2,356,358
Present value of
installment premiums 274,655 380,666 402,223
Soft capital facilities 150,000 150,000 150,000
------- ------- -------
Total statutory claims
paying resources $2,532,640 $2,825,500 $2,908,581
========== ========== ==========
Net debt service outstanding $112,780,855 $138,430,925 $156,928,647
------------ ------------ ------------
Capital leverage ratio (1) 79 93 107
Claims paying leverage ratio (2) 45 49 54
Net par outstanding
by product:
Public finance direct $18,081,562 $17,836,221 $18,344,046
Public finance
reinsurance 24,664,615 31,578,163 40,420,433
Structured direct 44,258,529 46,001,355 46,695,176
Structured reinsurance 2,324,867 5,310,004 5,567,853
--------- --------- ---------
Total $89,329,573(3) $100,725,743 $111,027,508
=========== ============ ============
Reserve for losses and
LAE-GAAP Basis:
----------------------
Financial Guaranty $117,585 $219,671 $163,070
Trade Credit 7,674 14,877 20,899
----- ------ ------
Total $125,259 $234,548 $183,969
======== ======== ========
(1) The capital leverage ratio is derived by dividing net debt service
outstanding by qualified statutory capital.
(2) The claims paying leverage ratio is derived by dividing net debt
service outstanding by total statutory claims paying resources.
(3) Reduction due to $9.8 billion of par that was commuted in connection
with the Ambac commutation in July 2009 . Also included in public
finance net par outstanding is $2.4 billion for legally defeased bond
issues where our financial guaranty policy has not been extinguished
but cash or securities have been deposited in an escrow account for
the benefit of bondholders. The accounting standard for financial
guarantee insurance contracts requires that these
contracts continue to be accounted for as outstanding contracts
despite the elimination of substantially all risk.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2009
Exhibit I
Quarter Ended
September 30
($ in millions) 2009 2008
----------- -----------
$ % $ %
--- --- --- ---
Primary new insurance written
-----------------------------
Flow $3,446 100.0% $7,524 99.8%
Structured - - 16 0.2%
--- --- --- ---
Total Primary $3,446 100.0% $7,540 100.0%
====== ===== ====== =====
Flow
Prime $3,441 99.9% $7,405 98.4%
Alt-A 1 - 96 1.3%
A minus and below 4 0.1% 23 0.3%
--- --- --- ---
Total Flow $3,446 100.0% $7,524 100.0%
====== ===== ====== =====
Structured
Prime $- - $16 100.0%
Alt-A - - - 0.0%
--- --- --- ---
Total Structured $- - $16 100.0%
=== === === =====
Total
Prime $3,441 99.9% $7,421 98.4%
Alt-A 1 - 96 1.3%
A minus and below 4 0.1% 23 0.3%
--- --- --- ---
Total Primary $3,446 100.0% $7,540 100.0%
====== ===== ====== =====
Total primary new
insurance written by
FICO score
---------------------
Flow
>=740 $2,570 74.6% $4,082 54.2%
680-739 831 24.1% 2,662 35.4%
620-679 45 1.3% 773 10.3%
<=619 - - 7 0.1%
--- --- --- ---
Total Flow $3,446 100.0% $7,524 100.0%
====== ===== ====== =====
Structured
>=740 $- - $12 75.0%
680-739 - - 4 25.0%
620-679 - - - 0.0%
--- --- --- ---
Total Structured $- - $16 100.0%
=== === === =====
Total
------
>=740 $2,570 74.6% $4,094 54.3%
680-739 831 24.1% 2,666 35.3%
620-679 45 1.3% 773 10.3%
<=619 - - 7 0.1%
--- --- --- ---
Total Primary $3,446 100.0% $7,540 100.0%
====== ===== ====== =====
Percentage of primary new
insurance written
-------------------------
Refinances 30% 20%
95.01% LTV and above 0.3% 3%
ARMs
Less than 5 years 0.1% 1%
5 years and longer 2.3% 10%
Primary risk written
--------------------
Flow $756 100.0% $1,170 99.9%
Structured - - 2 0.1%
--- --- --- ---
Total Primary $756 100.0% $1,172 100.0%
==== ===== ====== =====
Nine Months Ended
September 30
($ in millions) 2009 2008
----------- -----------
$ % $ %
--- --- --- ---
Primary new insurance written
-----------------------------
Flow $14,555 100.0% $26,240 95.5%
Structured - - 1,234 4.5%
--- --- ----- ---
Total Primary $14,555 100.0% $27,474 100.0%
======= ===== ======= =====
Flow
Prime $14,530 99.8% $24,356 92.8%
Alt-A 11 0.1% 1,154 4.4%
A minus and below 14 0.1% 730 2.8%
--- --- --- ---
Total Flow $14,555 100.0% $26,240 100.0%
======= ===== ======= =====
Structured
Prime $- - $1,232 99.8%
Alt-A - - 2 0.2%
--- --- --- ---
Total Structured $- - $1,234 100.0%
=== === ====== =====
Total
Prime $14,530 99.8% $25,588 93.1%
Alt-A 11 0.1% 1,156 4.2%
A minus and below 14 0.1% 730 2.7%
--- --- --- ---
Total Primary $14,555 100.0% $27,474 100.0%
======= ===== ======= =====
Total primary new
insurance written by
FICO score
---------------------
Flow
>=740 $10,464 71.9% $11,912 45.4%
680-739 3,822 26.3% 9,729 37.1%
620-679 268 1.8% 4,223 16.1%
<=619 1 - 376 1.4%
--- --- --- ---
Total Flow $14,555 100.0% $26,240 100.0%
======= ===== ======= =====
Structured
>=740 $- - $780 63.2%
680-739 - - 437 35.4%
620-679 - - 17 1.4%
--- --- --- ---
Total Structured $- - $1,234 100.0%
=== === ====== =====
Total
------
>=740 $10,464 71.9% $12,692 46.2%
680-739 3,822 26.3% 10,166 37.0%
620-679 268 1.8% 4,240 15.4%
<=619 1 - 376 1.4%
--- --- --- ---
Total Primary $14,555 100.0% $27,474 100.0%
======= ===== ======= =====
Percentage of primary new
insurance written
-------------------------
Refinances 43% 33%
95.01% LTV and above 0.1% 13%
ARMs
Less than 5 years 0.1% 1%
5 years and longer 0.9% 9%
Primary risk written
--------------------
Flow $3,130 100.0% $6,317 95.2%
Structured - - 316 4.8%
--- --- --- ---
Total Primary $3,130 100.0% $6,633 100.0%
====== ===== ====== =====
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2009
Exhibit J
September 30 September 30
($ in millions) 2009 2008
------------ -----------
$ % $ %
--- --- --- ---
Primary insurance in force
--------------------------
Flow $122,912 79.9% $119,593 77.5%
Structured 30,876 20.1% 34,699 22.5%
------ ---- ------ ----
Total Primary $153,788 100.0% $154,292 100.0%
======== ===== ======== =====
Prime $113,518 73.8% $109,432 70.9%
Alt-A 30,012 19.5% 33,404 21.7%
A minus and below 10,258 6.7% 11,456 7.4%
------ --- ------ ---
Total Primary $153,788 100.0% $154,292 100.0%
======== ===== ======== =====
Primary risk in force
---------------------
Flow $30,388 88.0% $29,968 86.4%
Structured 4,131 12.0% 4,701 13.6%
----- ---- ----- ----
Total Primary $34,519 100.0% $34,669 100.0%
======= ===== ======= =====
Flow
Prime $25,253 83.1% $24,242 80.9%
Alt-A 3,257 10.7% 3,674 12.3%
A minus and below 1,878 6.2% 2,052 6.8%
----- --- ----- ---
Total Flow $30,388 100.0% $29,968 100.0%
======= ===== ======= =====
Structured
Prime $2,152 52.1% $2,451 52.1%
Alt-A 1,305 31.6% 1,451 30.9%
A minus and below 674 16.3% 799 17.0%
--- ---- --- ----
Total Structured $4,131 100.0% $4,701 100.0%
====== ===== ====== =====
Total
Prime $27,405 79.4% $26,693 77.0%
Alt-A 4,562 13.2% 5,125 14.8%
A minus and below 2,552 7.4% 2,851 8.2%
----- --- ----- ---
Total Primary $34,519 100.0% $34,669 100.0%
======= ===== ======= =====
Total primary risk in force
by FICO score
---------------------------
Flow
>=740 $10,449 34.4% $8,999 30.0%
680-739 11,002 36.2% 11,101 37.0%
620-679 7,561 24.9% 8,318 27.8%
<=619 1,376 4.5% 1,550 5.2%
----- --- ----- ---
Total Flow $30,388 100.0% $29,968 100.0%
======= ===== ======= =====
Structured
>=740 $1,114 27.0% $1,254 26.7%
680-739 1,314 31.8% 1,452 30.9%
620-679 1,083 26.2% 1,255 26.7%
<=619 620 15.0% 740 15.7%
--- ---- --- ----
Total Structured $4,131 100.0% $4,701 100.0%
====== ===== ====== =====
Total
>=740 $11,563 33.5% $10,253 29.6%
680-739 12,316 35.7% 12,553 36.2%
620-679 8,644 25.0% 9,573 27.6%
<=619 1,996 5.8% 2,290 6.6%
----- --- ----- ---
Total Primary $34,519 100.0% $34,669 100.0%
======= ===== ======= =====
Percentage of primary risk in force
-----------------------------------
Refinances 31% 31%
95.01% LTV and above 21% 23%
ARMs
Less than 5 years 8% 9%
5 years and longer 8% 9%
Pool risk in force
------------------
Prime $1,973 70.3% $2,096 70.7%
Alt-A 284 10.1% 290 9.8%
A minus and below 549 19.6% 577 19.5%
--- ---- --- ----
Total $2,806 100.0% $2,963 100.0%
====== ===== ====== =====
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2009
Exhibit K
September 30 September 30
($ in millions) 2009 2008
---------- ----------
$ % $ %
--- --- --- ---
Total primary risk in force
by LTV
----------------------------
85.00% and below $3,556 10.3% $3,659 10.6%
85.01% to 90.00% 12,690 36.7% 12,045 34.7%
90.01% to 95.00% 11,142 32.3% 11,003 31.7%
95.01% and above 7,131 20.7% 7,962 23.0%
----- ---- ----- ----
Total $34,519 100.0% $34,669 100.0%
======= ===== ======= =====
Total primary risk in
force by policy year
----------------------
2005 and prior $10,140 29.4% $11,983 34.6%
2006 4,650 13.4% 5,342 15.4%
2007 9,823 28.4% 10,896 31.4%
2008 6,887 20.0% 6,448 18.6%
2009 3,019 8.8% - -
----- --- --- ---
Total $34,519 100.0% $34,669 100.0%
======= ===== ======= =====
Total pool risk in force by
policy year
----------------------------
2005 and prior $2,280 81.2% $2,407 81.3%
2006 241 8.6% 255 8.6%
2007 227 8.1% 241 8.1%
2008 58 2.1% 60 2.0%
--- --- --- ---
Total pool risk in force $2,806 100.0% $2,963 100.0%
====== ===== ====== =====
Other risk in force
-------------------
Second-lien
1st loss $184 $289
2nd loss 100 407
NIMs 418 456
International
1st loss-Hong Kong primary
mortgage insurance 316 442
Reinsurance - 139
Credit default swaps 3,132 7,567
Other
Domestic credit default swaps - 162
--- ---
Total other risk in force $4,150 $9,462
====== ======
Risk to capital ratio-Radian
Guaranty only (1) 16.1:1 14.5:1
(1) Starting June 30, 2009, risk in force on policies currently in
default and for which loss reserves have been established
are deducted from total risk in force used for our risk to capital
calculations. Risk to capital ratios for the prior periods have
not been restated to conform with this presentation.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2009
Exhibit L
Quarter Ended Nine Months Ended
($ in thousands) September 30 September 30
-------------------- --------------
2009 2008 2009 2008
---- ---- ---- ----
Direct claims paid
Prime $104,605 $98,269 $246,816 $222,975
Alt-A 61,538 68,960 149,249 152,438
A minus and below 43,989 65,280 115,873 162,911
Second-lien and other 10,790 44,882 51,735 138,094
------ ------ ------ -------
Subtotal 220,922 277,391 563,673 676,418
Impact of captive
terminations (107,747) - (107,747) -
Impact of second-
lien terminations 22,323 - 87,323 -
------ --- ------ ---
Total $135,498 $277,391 $543,249 $676,418
======== ======== ======== ========
Average claim paid (1)
Prime $43.2 $45.0 $42.2 $40.0
Alt-A 55.4 58.7 54.0 53.9
A minus and below 39.6 42.6 38.8 38.6
Second-lien and other 42.5 36.9 42.2 35.1
Total $45.1 $45.4 $44.0 $40.8
Loss ratio - GAAP Basis 201.2% 258.1% 156.7% 244.6%
Expense ratio -
GAAP Basis 25.7% 24.4% 24.8% 33.2%(2)
---- ---- ---- ----
226.9% 282.5% 181.5% 277.8%
===== ===== ===== =====
Reserve for losses by
category
Prime $1,125,684 $667,349
Alt-A 922,420 844,551
A minus and below 454,844 432,001
Pool insurance 211,399 87,429
Second-lien 81,462 153,839
Other 74 1,436
--- -----
Reserve for losses, net 2,795,883 2,186,605
Reinsurance
recoverable 591,857(3) 309,807
------- -------
Total $3,387,740 $2,496,412
========== ==========
(1) Calculated prior to the impact of captive and second-lien
terminations.
(2) Includes the acceleration of $50.8 million of deferred policy
acquisition cost amortization, as a result of the establishment of
a first-lien premium deficiency reserve in the second quarter of 2008.
(3) Reinsurance recoverable on ceded losses related to captives ($483
million ) and Smart Home ($109 million ).
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2009
Exhibit M
September 30 December 31 September 30
2009 2008 2008
---- ---- ----
Default Statistics
------------------
Primary insurance:
Flow
Prime
-----
Number of insured loans 621,794 624,970 619,035
Number of loans in default 69,287 44,575 33,330
Percentage of loans in default 11.14% 7.13% 5.38%
Alt-A
-----
Number of insured loans 62,860 68,948 70,814
Number of loans in default 21,563 16,959 13,853
Percentage of loans in default 34.30% 24.60% 19.56%
A minus and below
-----------------
Number of insured loans 55,657 59,189 60,946
Number of loans in default 19,885 15,768 13,436
Percentage of loans in default 35.73% 26.64% 22.05%
Total Flow
Number of insured loans 740,311 753,107 750,795
Number of loans in default 110,735 77,302 60,619
Percentage of loans in default 14.96% 10.26% 8.07%
Structured
Prime
-----
Number of insured loans 60,931 67,165 68,744
Number of loans in default 8,496 6,692 5,900
Percentage of loans in default 13.94% 9.96% 8.58%
Alt-A
-----
Number of insured loans 74,911 80,491 82,187
Number of loans in default 25,098 18,747 15,499
Percentage of loans in default 33.50% 23.29% 18.86%
A minus and below
-----------------
Number of insured loans 19,861 22,315 23,337
Number of loans in default 7,669 7,812 7,784
Percentage of loans in default 38.61% 35.01% 33.35%
Total Structured
Number of insured loans 155,703 169,971 174,268
Number of loans in default 41,263 33,251 29,183
Percentage of loans in default 26.50% 19.56% 16.75%
Total Primary Insurance
Prime
-----
Number of insured loans 682,725 692,135 687,779
Number of loans in default 77,783 51,267 39,230
Percentage of loans in default 11.39% 7.41% 5.70%
Alt-A
-----
Number of insured loans 137,771 149,439 153,001
Number of loans in default 46,661 35,706 29,352
Percentage of loans in default 33.87% 23.89% 19.18%
A minus and below
-----------------
Number of insured loans 75,518 81,504 84,283
Number of loans in default 27,554 23,580 21,220
Percentage of loans in default 36.49% 28.93% 25.18%
Total Primary Insurance
Number of insured loans 896,014 923,078 925,063
Number of loans in default (1) 151,998 110,553 89,802
Percentage of loans in default 16.96% 11.98% 9.71%
Pool insurance:
Number of loans in default (2) 36,889 32,677 29,487
(1) Includes approximately 385, 539 and 483 defaults at September 30,
2009, December 31, 2008 and September 30, 2008, respectively, where
reserves have not been established because no claim payment is
currently anticipated.
(2) Includes approximately 17,859, 21,719 and 20,965 defaults at September
30, 2009, December 31, 2008 and September 30, 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 and Nine Months Ended and as of September 30, 2009
Exhibit N
Quarter Ended Nine Months Ended
September 30 September 30
-------------------- -------------------
2009 2008 2009 2008
---- ---- ---- ----
Net Premiums Written
(In thousands)
--------------------
Primary and
Pool Insurance $169,180 $186,524 $483,872 $578,770
Second-lien (1,493)(1) 2,044 (750)(1) 8,430
International (18,687)(1) 15 (17,244)(1) 11,664
------- --- ------- ------
Total Net Premiums
Written - Insurance $149,000 $188,583 $465,878 $598,864
======== ======== ======== ========
Net Premiums Earned
(In thousands)
-------------------
Primary and
Pool Insurance $182,582 $187,596 $517,770 $575,017
Second-lien 1,264 3,250 4,649 14,378
International 3,013 5,361 12,370 16,173
----- ----- ------ ------
Total Net Premiums
Earned - Insurance $186,859 $196,207 $534,789 $605,568
======== ======== ======== ========
SMART HOME
(In millions)
--------------
Ceded Premiums Written $2.4 $3.1 $8.0 $10.0
Ceded Premiums Earned $2.4 $3.1 $8.0 $10.0
1st Lien Captives
-----------------
Premiums ceded
to captives
(In millions) $31.0 $34.6 $103.0 $104.4
% of total premiums 14.3% 15.4% 16.4% 15.2%
NIW subject to captives
(In millions) $144.3 $2,103.6 $1,615.7 $10,268.1
% of primary NIW 4.2% 27.9% 11.1% 37.4%
IIF included in
captives (2) 34.2% 36.6%
RIF included in
captives (2) 47.6% 41.0%
Persistency (twelve
months ended
September 30) 87.0% 83.9%
September 30 September 30
2009 2008
---- ----
SMART HOME
% of Primary RIF
included in Smart
Home Transactions (2) 3.4% 3.9%
(1) Reflects the impact of second-lien and international terminations.
(2) Radian reinsures the middle layer risk positions, while retaining a
significant portion of the total risk comprising the first loss and
most remote risk positions.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of September 30, 2009
Exhibit O
Reinsurance Progression Toward Attachment - Summary by Book Year (1)
September 30
($ in millions) 2009
-----------------------------------------
Progression Ever-to- Reinsur-
Original to Gross Ceded Net Date ance
Book Attachment Current Current Current Incurred Benefit
Book Year (2): RIF Point RIF RIF(3) RIF Losses (4)
-------------- --- ----- --- ------ --- ------ ---
Pre-2006 0-50% $445 $79 $366 $152
Pre-2006 50-75% 423 221 202 99
Pre-2006 75-99% 580 239 341 131
Pre-2006 Attached 1,792 466 1,326 356 $123
----- --- ----- --- ----
Pre-2006
Total $22,732 $3,240 $1,005 $2,235 $738 $123
====== ====== ====== ==== ====
2006 0-50% $2 $- $2 $-
2006 50-75% 21 2 19 1
2006 75-99% 8 1 7 1
2006 Attached 1,855 264 1,591 342 $179
----- --- ----- --- ----
2006 Total $2,954 $1,886 $267 $1,619 $344 $179
====== ==== ====== ==== ====
2007 0-50% $13 $1 $12 $-
2007 50-75% 15 1 14 1
2007 75-99% 1 - 1 -
2007 Attached 3,720 406 3,314 389 $171
----- --- ----- --- ----
2007 Total $4,545 $3,749 $408 $3,341 $390 $171
====== ==== ====== ==== ====
2008 0-50% $548 $36 $512 $10
2008 50-75% 1,489 166 1,323 42
2008 75-99% - - - -
2008 Attached 225 19 206 20 $11
--- --- --- --- ---
2008 Total $2,553 $2,262 $221 $2,041 $72 $11
====== ==== ====== === ===
2009 0-50% $282 $12 $270 $-
2009 50-75% - - - -
2009 75-99% - - - -
2009 Attached - - - - $-
--- --- --- --- ---
2009 Total $290 $282 $12 $270 $- $-
==== === ==== === ===
Quota Share 0-50% $- $- $- $-
Quota Share 50-75% - - - -
Quota Share 75-99% - - - -
Quota Share Attached 105 34 71 32 $14
--- --- --- --- ---
Quota Share
Total $313 $105 $34 $71 $32 $14
==== === === === ===
Total Captive
(Including
Quota
Share) $33,387 $11,524 $1,947 $9,577 $1,576 $498
======= ====== ====== ====== ====
SmartHome 0-50% $33 $15 $18 $11
SmartHome 50-75% 74 29 45 22
SmartHome 75-99% - - - -
SmartHome Attached 1,061 504 557 407 $111
----- --- --- --- ----
Total
SmartHome $3,900 $1,168 $548 $620 $440 $111
====== ==== ==== ==== ====
December 31
($ in millions) 2008 (5)
------------------------------------------
Progression Ever-to- Reinsur-
Original to Gross Ceded Net Date ance
Book Attachment Current Current Current Incurred Benefit
Book Year (2): RIF Point RIF RIF(3) RIF Losses (4)
-------------- --- ----- --- ------ --- ------ ---
Pre-2006 0-50% $1,120 $558 $562 $239
Pre-2006 50-75% 942 349 593 142
Pre-2006 75-99% 1,084 397 687 160
Pre-2006 Attached 1,355 237 1,118 184 $75
----- --- ----- --- ---
Pre-2006
Total $22,732 $4,501 $1,541 $2,960 $725 $75
====== ====== ====== ==== ===
2006 0-50% $32 $2 $30 $1
2006 50-75% 62 4 58 3
2006 75-99% 310 42 268 18
2006 Attached 2,074 270 1,804 290 $161
----- --- ----- --- ----
2006 Total $2,954 $2,478 $318 $2,160 $312 $161
====== ==== ====== ==== ====
2007 0-50% $31 $2 $29 $-
2007 50-75% 225 12 213 8
2007 75-99% 71 7 64 3
2007 Attached 4,329 454 3,875 350 $147
----- --- ----- --- ----
2007 Total $4,545 $4,656 $475 $4,181 $361 $147
====== ==== ====== ==== ====
2008 0-50% $2,167 $197 $1,970 $25
2008 50-75% 42 4 38 1
2008 75-99% - - - -
2008 Attached 190 15 175 16 $9
--- --- --- --- ---
2008 Total $2,553 $2,399 $216 $2,183 $42 $9
====== ==== ====== === ===
2009 0-50% $- $- $- $-
2009 50-75% - - - -
2009 75-99% - - - -
2009 Attached - - - - $-
--- --- --- --- ---
2009 Total $290 $- $- $- $- $-
=== === === === ===
Quota Share 0-50% $- $- $- $-
Quota Share 50-75% - - - -
Quota Share 75-99% - - - -
Quota Share Attached 116 37 79 27 $12
--- --- --- --- ---
Quota Share
Total $313 $116 $37 $79 $27 $12
==== === === === ===
Total Captive
(Including
Quota
Share) $33,387 $14,150 $2,587 $11,563 $1,467 $404
======= ====== ======= ====== ====
SmartHome 0-50% $117 $51 $66 $27
SmartHome 50-75% - - - -
SmartHome 75-99% - - - -
SmartHome Attached 1,188 521 667 346 $91
----- --- --- --- ---
Total
SmartHome $3,900 $1,305 $572 $733 $373 $91
====== ==== ==== ==== ===
(1) Data is presented in the aggregate for all trusts for captives active
at each period end only. Actual trust attachment points and exit
points vary by individual contract. The attachment point is
calculated at the contract/deal level and is based on Total Incurred
Losses which are defined as claims paid ever-to-date plus loss
reserves.
(2) Book year figures may include loans from additional periods pursuant
to reinsurance agreement terms and conditions.
(3) Risk ceded to reinsurers based on individual contract terms.
(4) Captive Benefit is defined as ceded reserves at period end plus
ever-to-date claims paid by the trust.
(5) Revised from December 31, 2008 originally presented.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of September 30, 2009
Exhibit P
September 30 September 30
($ in millions) 2009 2008
---------- ----------
$ % $ %
--- --- --- ---
Modified Pool Risk in Force
----------------------------
Prime
-----
2005 and prior $81 54.0% $86 55.1%
2006 45 30.0% 44 28.2%
2007 20 13.3% 22 14.1%
2008 4 2.7% 4 2.6%
--- --- --- ---
Total $150 100.0% $156 100.0%
==== ===== ==== =====
Alt-A
-----
2005 and prior $186 28.5% $200 29.8%
2006 160 24.5% 165 24.5%
2007 303 46.4% 304 45.2%
2008 4 0.6% 4 0.5%
--- --- --- ---
Total $653 100.0% $673 100.0%
==== ===== ==== =====
A minus and below
-----------------
2005 and prior $13 56.5% $15 60.0%
2006 3 13.0% 3 12.0%
2007 7 30.5% 7 28.0%
--- ---- --- ----
Total $23 100.0% $25 100.0%
=== ===== === =====
Total
-----
2005 and prior $280 33.9% $301 35.2%
2006 208 25.2% 212 24.8%
2007 330 39.9% 333 39.0%
2008 8 1.0% 8 1.0%
--- --- --- ---
Total Modified Pool Risk in Force $826 100.0% $854 100.0%
==== ===== ==== =====
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2009
ALT-A
Exhibit Q
September 30
($ in millions) 2009 2008
---------- ---------
$ % $ %
--- --- --- ---
Primary risk in force by FICO score
------------------------------------
>=740 $1,121 24.6% $1,256 24.5%
680-739 2,202 48.2% 2,452 47.8%
660-679 666 14.6% 755 14.7%
620-659 543 11.9% 628 12.3%
<=619 30 0.7% 34 0.7%
--- --- --- ---
Total $4,562 100.0% $5,125 100.0%
====== ===== ====== =====
Primary risk in force by LTV
-----------------------------
85.00% and below $1,195 26.2% $1,308 25.5%
85.01% to 90.00% 1,880 41.2% 2,131 41.6%
90.01% to 95.00% 1,175 25.8% 1,330 26.0%
95.01% and above 312 6.8% 356 6.9%
--- --- --- ---
Total $4,562 100.0% $5,125 100.0%
====== ===== ====== =====
Primary risk in force by policy year
-------------------------------------
2005 and prior $1,428 31.3% $1,647 32.1%
2006 1,010 22.1% 1,141 22.3%
2007 1,886 41.4% 2,083 40.6%
2008 237 5.2% 254 5.0%
2009 1 - - -
--- --- --- ---
Total $4,562 100.0% $5,125 100.0%
====== ===== ====== =====
Radian Group Inc.
Financial Services Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2009
Exhibit R
Quarter Ended Nine Months Ended
September 30 September 30
---------------- ----------------
(In thousands) 2009 2008 2009 2008
---- ---- ---- ----
Investment in Affiliates-
Selected Information
Sherman
-----------------
Balance, beginning of
period $108,719 $112,644 $99,656 $104,315
Net income for period 7,946 15,798 23,608 44,028
Dividends received (4,599) (15,961) (11,040) (35,460)
Other comprehensive (loss)
income (87) 522 (245) 120
Adjustment to investment
related to buyback of MGIC
interest - (25,786) - (25,786)
--- ------- --- -------
Balance, end of period $111,979 $87,217 $111,979 $87,217
======== ======= ======== =======
Portfolio Information:
Sherman
-----------------
Total assets $1,951,458 $2,433,666
Net revenues $299,592 $368,112 $968,075 $1,158,454
Forward-Looking Statements
Some of the statements in this release constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. Generally, words such as "may," "will," "should," "could," "would," "anticipate," "expect," "intend," "estimate," "plan," "project," "continue," "goal" and "believe," or other variations on these and other similar expressions identify forward-looking statements. Forward-looking statements are only predictions and, as such, are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events or our future financial performance that may not prove to be accurate. These statements speak only as of the date of this news release, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Actual outcomes and results may differ materially from what is expressed or implied in these forward-looking statements. Factors that could cause actual results to differ from those projected in such forward-looking statements include, without limitation, the following:
-- changes in general financial and political conditions, such as the
failure of the U.S. economy to recover robustly from the current
recession or the U.S. economy reentering a recessionary period following
a brief period of stabilization or even growth, a further reduction in
the liquidity in the capital markets and further contraction of credit
markets, a prolonged period of high unemployment rates and limited home
price appreciation, 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;
-- catastrophic events or further economic changes in geographic regions
where our mortgage insurance or financial guaranty insurance in force is
more concentrated;
-- our ability to successfully execute upon our capital plan for our
mortgage insurance business (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 the long-term liquidity needs of our holding
company (including significant payment obligations in 2010 and 2011);
-- a further decrease in the volume of home mortgage originations due to
reduced liquidity in the lending market, tighter underwriting standards
and the ongoing 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 ongoing
losses in this business and continued deterioration in our financial
guaranty portfolio which, in the absence of new capital, may depend on
our ability to execute strategies for which regulatory and other
approvals are required and may not be obtained;
-- our ability to continue to effectively mitigate our mortgage insurance
losses, which have positively impacted our provisions for losses;
-- the negative impact our increased levels of insurance rescissions and
claim denials may have on our relationships with customers;
-- 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 of 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 do not appreciate or continue to decline;
-- changes in persistency rates of our mortgage insurance policies;
-- an increase in the risk profile of our existing mortgage insurance
portfolio due to mortgage refinancing in the current housing market;
-- 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 or 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
premium deficiencies for our mortgage insurance businesses, 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; and
the significant concentration of our financial guaranty reinsurance
business in customers under common control;
-- volatility in our earnings caused by changes in the fair value of our
derivative instruments and our need to reevaluate the premium deficiency
in our mortgage insurance business on a quarterly basis;
-- changes in accounting guidance from the Securities and Exchange
Commission or the Financial Accounting Standards Board ;
-- legal and other limitations on amounts we may receive from our
subsidiaries as dividends or through our tax- and expense-sharing
arrangements with our subsidiaries; and
-- our investment in, and other arrangements with, Sherman Financial Group
LLC , which could be negatively affected in the current credit
environment if Sherman is unable to maintain sufficient sources of
funding for its business activities or remain in compliance with its
credit facilities.
For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should review the risks described under Item 1A, "Risk Factors" under our Annual Report on Form 10-K for the year ended
SOURCE
Emily Riley, +1-215-231-1035, emily.riley@radian.com