News

04/12/2016

Radian Announces New Quota Share Reinsurance Program for Single-Premium MI Business and Sets First Quarter Conference Call Date

-- Improves return on capital; manages MI business mix and PMIERs position–

-- Webcast of first quarter call set for April 27, 2016–

PHILADELPHIA--(BUSINESS WIRE)--Apr. 12, 2016-- Radian Guaranty Inc., the mortgage insurance (MI) subsidiary of Radian Group Inc., announced today that it has entered into a quota share reinsurance agreement for single-premium MI business (Single Premium QSR) with a panel of third-party reinsurance providers. Fannie Mae and Freddie Mac have approved the Single Premium QSR and allowed full credit under the PMIERs for the risk ceded under the agreement. The objective of this agreement is to improve the company’s return on capital, proactively manage the mix of single-premium business in Radian’s total MI portfolio, and effectively manage the company’s PMIERs position in a cost-efficient manner.

“This first-of-its-kind reinsurance program focused exclusively on single-premium business allows us to improve our return on capital, increase financial flexibility and proactively manage our MI business mix,” said Radian’s Chief Executive Officer S.A. Ibrahim. “Importantly, the extremely low cost of capital for this program is expected to generate meaningful value for our shareholders.”

Effective January 1, 2016, the agreement covers the following single-premium business, subject to certain conditions:

• 20 percent of existing performing policies written between January 1, 2012, and March 31, 2013
• 35 percent of existing performing policies written between April 1, 2013, and December 31, 2015
• 35 percent of new insurance written (NIW) between January 1, 2016, and December 31, 2017

Radian will receive a 25 percent ceding commission for ceded premiums related to this transaction, as well as a profit commission provided that the loss ratio on the loans covered under the agreement generally remains below 55 percent. For risk ceded under the Single Premium QSR, the after-tax implied cost of capital over the term of the transaction is expected to be less than two percent.

The Single Premium QSR is expected to improve the company’s return on capital, significantly improve its PMIERs position, and better position the company to redeem its $325 million surplus note as early as June 30, 2016. Redemption of the surplus note is subject to approval by the Pennsylvania Insurance Department. The redemption of the surplus note is expected to increase holding company liquidity by the corresponding amount of the redemption.

In the first quarter of 2016, the Single Premium QSR is expected to decrease the percentage of Radian’s single-premium risk in force, net of reinsurance ceded, from 31 to 25 percent. The Single Premium QSR is expected to have a negligible impact on operating earnings per share, including the following for the first quarter 2016:

• A decrease to net premiums earned of approximately $6 million, net of accrued profit commission
• A decrease to operating expenses of approximately $3 million, related to the ceding commission
• A decrease to provision for losses and amortization of deferred acquisition costs of approximately $0.6 million
• A net decrease to pretax income from continuing operations (and to adjusted pretax operating income*) of approximately $2.4 million

In any given quarter, the impact of the Single Premium QSR will vary depending on the level of ceded risk in force and prepayments and incurred losses on the reinsured portfolio, among other factors.

* Adjusted pretax operating income is the company’s key indicator to evaluate its fundamental financial performance. On a consolidated basis, it is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measure” in Radian’s 2015 Form 10-K for further information.

Radian maintains the right to discontinue ceding NIW under the agreement at the end of any calendar quarter. The scheduled termination of the contract is December 31, 2027, however Radian reserves the right to terminate the agreement as of January 1, 2020, or at the end of any calendar quarter thereafter, based on certain conditions and subject to a termination fee.

FIRST QUARTER CONFERENCE CALL

Radian will discuss the company’s first quarter 2016 results in a conference call on Wednesday, April 27, 2016, at 10:00 a.m. Eastern time. The financial results will be announced prior to the market open on the same day.

The conference call will be broadcast live over the Internet at http://www.radian.biz/page?name=Webcasts or at www.radian.com. The call may also be accessed by dialing 800.288.8967 inside the U.S., or 612.332.0345 for international callers, using passcode 391331 or by referencing Radian.

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 approximately two and a half hours after the call ends for a period of two weeks, using the following dial-in numbers and passcode: 800.475.6701 inside the U.S., or 320.365.3844 for international callers, passcode 391331.

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 website under Investors >Quarterly Results, or by clicking on http://www.radian.biz/page?name=QuarterlyResults.

ABOUT RADIAN

Radian Group Inc. (NYSE:RDN), headquartered in Philadelphia, provides private mortgage insurance, risk management products and real estate services to financial institutions. Radian offers products and services through two business segments:

• Mortgage Insurance, through its principal mortgage insurance subsidiary Radian Guaranty Inc. This private mortgage insurance protects lenders from default-related losses, facilitates the sale of low-downpayment mortgages in the secondary market and enables homebuyers to purchase homes more quickly with downpayments less than 20%.
• Mortgage and Real Estate Services, through its principal services subsidiary Clayton, as well as Green River Capital, Red Bell Real Estate and ValuAmerica. These solutions include information and services that financial institutions, investors and government entities use to evaluate, acquire, securitize, service and monitor loans and asset-backed securities.

Additional information may be found at www.radian.com.

FORWARD-LOOKING STATEMENTS

All statements in this press 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 Exchange Act and the U.S. Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as "anticipate," "may," "will," "could," "should," "would," "expect," "intend," "plan," "goal," "contemplate," "believe," "estimate," "predict," "project," "potential," "continue," "seek," "strategy," "future," "likely" or the negative or other variations on these words and other similar expressions. These statements, which may 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 statement. These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment. New risks emerge from time to time and it is not possible for us to predict all risks that may affect us. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. These risks and uncertainties include, with limitation:

• The credit that we receive under the PMIERs’ financial requirements for our Single Premium QSR, which is subject under the PMIERs to review by the GSEs periodically;
• Our calculations regarding our compliance with the PMIERs’ financial requirements, which could differ from the calculations performed by the GSEs;
• Radian Guaranty’s ability to redeem its surplus note with Radian Group, which remains subject to (1) our ability to satisfy criteria established by the GSEs (as previously disclosed) for early redemption and (2) approval by the Pennsylvania Insurance Department; and
• The possibility that our estimates regarding the impact of the Single Premium QSR on our cost of capital and our financial results and position may prove to be inaccurate.

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 Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2015, and subsequent reports and registration statements filed from time to time with the U.S. Securities and Exchange Commission. 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 presentation. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements to reflect new information or future events or for any other reason.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160412005368/en/

Source: Radian Group Inc.

For Radian Group Inc.:
Emily Riley, 215-231-1035
emily.riley@radian.com