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05/12/2008
Radian Reports First Quarter Net Income of $195.6 Million
Results Reflect After-Tax Net Unrealized Mark-To-Market Gains of $410.9 Million
PHILADELPHIA, May 12, 2008 /PRNewswire-FirstCall/ -- Radian Group Inc. (NYSE: RDN) (the "Company") today reported net income of $195.6 million and diluted earnings per share of $2.44 for the quarter ended March 31, 2008. Book value per share at March 31, 2008 was $35.64. Excluding the impact of net unrealized gains on derivatives and hybrid securities, the Company's net operating loss was $215.2 million and the net operating loss per share was $2.69 for the quarter. "Net operating loss" and "net operating loss per share" are non-GAAP financial measures. A discussion of these measures, including a reconciliation to pretax income, is included below.
Radian's financial results for the first quarter of 2008 were significantly impacted by unrealized gains and losses on the Company's hybrid securities and derivative assets and liabilities. Credit spreads on underlying collateral, both corporate credit spreads and asset-backed spreads, widened significantly during the quarter, which resulted in large unrealized losses on these positions. Offsetting these losses, however, is the impact of a change to the Company's valuation methodology, which is adopted prospectively, that incorporates the market's perception of Radian's non- performance risk. This change in methodology is required under the provisions of SFAS No. 157. Given the significant widening of Radian's credit default swap spread over the past year, the reduction in the valuation of the Company's derivative liabilities related to non-performance risk more than offset the credit spread widening on underlying collateral for the current quarter. Below is a table with the detail of the impact on Radian's quarterly results of underlying collateral credit spread widening and the aggregate impact of incorporation of Radian's non-performance risk on our derivative instrument fair values.
1Q08 1Q07
Pretax Income $284.6 $158.2
Removal of effect of unrealized
(gains) and losses:
Hybrid Securities 55.9 3.6
Financial Guaranty credit derivatives 1,330.0 (25.1)
Mortgage Insurance domestic and intl. 32.3 12.7
credit default swaps
NIMS 50.8 (1.4)
Soft capital put options on committed (42.8) -
preferred securities
Isolated impact of SFAS No. 157 fair
value methodology change related (2,058.3) -
specifically to Radian's non-
performance risk
Pretax operating (loss) income (347.5) 148.0
Income tax (benefit) provision (132.3) 41.1
Net operating (loss) income $(215.2) $106.9
Net operating (loss) income per share $(2.69) $1.34
"We have seen the continuation of weak housing and credit markets and these conditions have impacted results in our mortgage insurance and financial guaranty businesses," said S.A. Ibrahim, Chief Executive Officer of Radian. "As previously announced, we are considering a range of alternatives to strengthen our capital position, while at the same time considering the alternatives for our financial guaranty business which offer the best long term value. Our liquidity and claims paying capabilities remain strong across both business units."
In the mortgage insurance business, paid claims during the first quarter were in line with the Company's guidance. As of March 31, 2008, Radian had $1.7 billion in mortgage insurance loss reserves. Newly written product mix in the mortgage insurance business continued to shift significantly to prime loans, with 90% of production during the first quarter made up of prime business, up from 77% during the fourth quarter.
Mr. Ibrahim continued, "By focusing on prime loans, working closely with the Government Sponsored Enterprises and managing our existing Risk-In-Force exposure, Radian will continue to address the significant challenges in the housing markets and overall economic environment."
Radian's financial guaranty business continues to maintain a strong capital position with limited exposure to vulnerable asset classes. Although new written premiums declined approximately 21% from the first quarter of 2007, reinsurance business remained strong.
Radian will discuss each of these items in its conference call today, Monday, May 12, 2008, 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 http://www.radian.com >News. The call may also be accessed by dialing 800- 230-1085 inside the U.S., or 612-288-0337 for international callers, using passcode 921836 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 921836.
Non-GAAP Measures
The table set forth above reconciles "net operating loss" and "net operating loss per share" to pretax income. In order to assist investors in understanding our quarterly operating results, which recently have been impacted significantly by changes in market values of our derivative and hybrid securities portfolios, we define our net operating earnings to be our GAAP pretax income, adjusted to exclude unrealized gains and losses on these portfolios that relate to market risk, as tax-affected. Net operating earnings is not a substitute for pretax income computed in accordance with GAAP, but is a useful measure of performance used by management, equity analysts and investors because it allows a more consistent period-to-period comparison of our earnings without the effects of unrealized gains and losses on derivatives and hybrid securities. The definition of operating earnings used by us may differ from definitions of operating earnings used by other companies.
Radian Group Inc. is a global credit risk management company headquartered in Philadelphia with significant operations in New York and London. Radian develops innovative financial solutions by applying its core mortgage credit risk expertise and structured finance capabilities to the credit enhancement needs of the capital markets worldwide, primarily through credit insurance products. The company also provides credit enhancement for public finance and other corporate and consumer assets on both a direct and reinsurance basis and holds strategic interests in credit-based consumer asset businesses. Additional information may be found at www.radian.com.
For trend information on all schedules, refer to Radian's quarterly financial statistics at http://www.radian.biz/investors/financial/corporate.aspx.
Financial Results and Supplemental Information Contents (Unaudited)
Exhibit A: Condensed Consolidated Statements of Income
Exhibit B: Condensed Consolidated Balance Sheets
Exhibit C: Segment Information Quarter Ended March 31, 2008
Exhibit D: Segment Information Quarter Ended March 31, 2007
Exhibit E: Financial Guaranty Insurance Supplemental Information -
Quarter Ended and as of March 31, 2008
Exhibit F: Financial Guaranty Insurance Supplemental Information -
Quarter Ended and as of March 31, 2008
Exhibit G: Mortgage Insurance Supplemental Information: New Insurance
Written and Risk Written
Exhibit H: Mortgage Insurance Supplemental Information: Insurance in
Force and Risk in Force
Exhibit I: Mortgage Insurance Supplemental Information: Risk in Force by
LTV and Policy Year and Other Risk in Force
Exhibit J: Mortgage Insurance Supplemental Information: Claims and
Reserves
Exhibit K: Mortgage Insurance Supplemental Information: Defaults
Exhibit L: Mortgage Insurance Supplemental Information: Net Premiums
Written and Earned, Smart Home, Captives and Persistency
Exhibit M: Mortgage Insurance Supplemental Information: ALT A
Exhibit N: Financial Services Supplemental Information
Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Income
Exhibit A
Quarter Ended
March 31
2008 2007
(In thousands, except per-share data)
Revenues:
Net premiums written - insurance $244,306 $248,430
Net premiums earned - insurance $241,921 $214,507
Net investment income 65,979 60,996
Net (losses) gains on securities (54,884) 13,745
Change in fair value of derivative
instruments (1) 707,809 48,417
Other income 3,614 3,818
Total revenues 964,439 341,483
Expenses:
Provision for losses 582,711 107,042
Provision for second-lien premium
deficiency 18,090 -
Policy acquisition costs 23,906 28,254
Other operating expenses 55,141 54,367
Merger expenses - 3,328
Interest expense 12,493 13,056
Total expenses 692,341 206,047
Equity in net income of affiliates 12,526 22,772
Pretax income 284,624 158,208
Income tax provision 88,986 44,741
Net income $195,638 $113,467
Diluted net income per share (2) $2.44 $1.42
(1) Includes premiums earned on derivative contracts
(2) Weighted average shares outstanding (in thousands)
Average common shares outstanding 79,930 79,428
Increase in shares-common stock
equivalents-diluted basis 110 652
Weighted average shares outstanding
(in thousands) 80,040 80,080
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 share and per- March 31 December 31
share data) 2008 2007
Assets:
Cash and investments $6,740,985 $6,611,836
Investments in affiliates 116,969 104,354
Deferred policy acquisition costs 239,400 234,955
Prepaid federal income taxes 536,343 793,486
Other assets 620,328 465,558
Total assets $8,254,025 $8,210,189
Liabilities and stockholders' equity:
Unearned premiums $1,074,589 $1,094,710
Reserve for losses and loss
adjustment expenses 1,902,128 1,598,756
Reserve for second-lien premium
deficiency 213,736 195,646
Long-term debt and other borrowings 959,244 953,524
Variable interest entity debt 100,219 -
Deferred income taxes 52,360 26,705
Derivative liabilities 703,405 1,305,665
Other liabilities 380,988 314,447
Total liabilities 5,386,669 5,489,453
Common stock 98 98
Additional paid-in capital 446,211 442,312
Retained earnings 2,375,189 2,181,191
Accumulated other comprehensive income 45,858 97,135
Total common stockholders' equity 2,867,356 2,720,736
Total liabilities and
stockholders' equity $8,254,025 $8,210,189
Book value per share $35.64 $33.83
Treasury Stock Repurchases
(Year-to-Date for Periods Presented)
Total number of shares repurchased - 398,645
Average price paid per share - $57.25
Total cost of repurchased shares - $22,822,537
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended March 31, 2008
Exhibit C
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
Net losses on
securities (36,733) (18,149) (2) (54,884)
Change in fair value
of derivative
instruments 71,769 636,040 - 707,809
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 second-
lien 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
Assets $5,001,689 $3,133,958 $118,378 $8,254,025
Total investments 4,051,596 2,508,351 - 6,559,947
Deferred policy
acquisition costs 62,860 176,540 - 239,400
Reserve for losses
and loss adjustment
expenses 1,741,169 160,959 - 1,902,128
Derivative
liabilities 353,559 349,846 - 703,405
Unearned premiums 365,161 709,428 - 1,074,589
Stockholders' equity 1,328,594 1,412,429 126,333 2,867,356
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended March 31, 2007
Exhibit D
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written -
insurance $206,411 $42,019 $- $248,430
Net premiums earned -
insurance $180,243 $34,264 $- $214,507
Net investment income 35,559 25,437 - 60,996
Net gains (losses) on
securities 11,123 2,824 (202) 13,745
Change in fair value of
derivative instruments 4,338 44,079 - 48,417
Other income 2,849 140 829 3,818
Total revenues 234,112 106,744 627 341,483
Expenses:
Provision for losses 112,854 (5,812) - 107,042
Policy acquisition costs 16,523 11,731 - 28,254
Other operating expenses 36,272 14,235 3,860 54,367
Merger expenses 3,328 - - 3,328
Interest expense 6,854 4,596 1,606 13,056
Total expenses 175,831 24,750 5,466 206,047
Equity in net income of
affiliates - - 22,772 22,772
Pretax income 58,281 81,994 17,933 158,208
Income tax provision 13,579 24,078 7,084 44,741
Net income $44,702 $57,916 $10,849 $113,467
Assets $4,774,210 $2,757,800 $592,898 $8,124,908
Total investments 3,567,581 2,378,387 - 5,945,968
Deferred policy
acquisition costs 67,835 157,762 - 225,597
Reserve for losses and
loss adjustment expenses 676,691 175,771 - 852,462
Unearned premiums 277,135 697,633 - 974,768
Stockholders' equity 2,322,374 1,457,712 394,690 4,174,776
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter Ended and as of March 31, 2008
Exhibit E
Quarter Ended
($ in thousands, except ratios) March 31
2008 2007
Net Premiums Written: (1)
Public finance direct $5,603 $12,780
Public finance reinsurance 17,541 18,154
Structured direct 4,182 5,247
Structured reinsurance 5,442 5,912
Trade credit reinsurance 287 (74)
Total Net Premiums Written -
insurance $33,055 $42,019
Net Premiums Earned: (1)
Public finance direct $17,810 $11,585
Public finance reinsurance 9,870 11,100
Structured direct 3,882 4,691
Structured reinsurance 5,599 6,194
Trade credit reinsurance 495 694
Total Net Premiums Earned -
insurance $37,656 $34,264
Refundings included in earned premium $11,657 $6,586
Claims paid:
Trade credit reinsurance $586 $2,646
Other 101,456 (2) (69)
Conseco 2,068 3,108
Total $104,110 $5,685
Incurred losses:
Trade credit reinsurance $(1,655) $(3,136)
Other 13,358 (2,676)
Total $11,703 $(5,812)
Loss ratio - GAAP Basis 22.8% (10.9%)
Expense ratio - GAAP Basis (3) 60.7% 48.8%
83.5% 37.9%
Net payments (receipts) under
derivatives contracts $- $(11,228)
(1) Premiums written and earned on credit derivatives for the quarter
ended March 31, 2008 were $12.9 million and $13.7 million,
respectively, compared to $13.3 million and $18.9 million,
respectively, for the quarter ended March 31, 2007. Premiums earned
on credit derivatives are included in change of fair value of
derivative instruments.
(2) Includes a $100 million payment related to one credit that is a CDO of
an ABS that was fully reserved for in 2007.
(3) Excludes merger expenses in 2007.
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter Ended and as of March 31, 2008
Exhibit F
($ in thousands, except ratios) March 31 December 31 March 31
2008 2007 2007
Capital and surplus $1,097,250 $1,158,537 $1,042,548
Contingency reserve 464,655 433,296 357,176
Qualified statutory
capital 1,561,905 1,591,833 1,399,724
Unearned premium reserve 882,627 886,024 837,024
Loss and loss expense reserve 58,207 61,038 88,253
Total statutory
policyholders' reserves 2,502,739 2,538,895 2,325,001
Present value of installment
premiums 443,408 461,806 377,105
Reinsurance and soft capital
facilities 150,000 150,000 150,000
Total statutory claims
paying resources $3,096,147 $3,150,701 $2,852,106
Net debt service outstanding $165,931,040 $164,346,659 $155,568,589
Capital leverage ratio (1) 106 103 111
Claims paying leverage ratio (2) 54 52 55
Net par outstanding by product:
Public finance direct $18,460,669 $18,228,946 $16,590,493
Public finance reinsurance 44,404,128 43,822,781 39,311,697
Structured direct 47,634,388 47,878,168 52,945,169
Structured reinsurance 6,284,246 6,091,717 5,261,220
Total $116,783,431 $116,021,612 $114,108,579
Reinsurance business net par
outstanding:
Treaty 60% 59% 59%
Facultative 40% 41% 41%
Reserve for losses and LAE
Specific $27,056 $26,791 $33,011
Conseco 20,457 22,526 30,866
Non-specific 113,446 203,987 111,894
Total $160,959 $253,304 $175,771
(1) Net debt service outstanding divided by qualified statutory capital
(2) Net debt service outstanding divided by total statutory claims paying
resources
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2008
Exhibit G
Quarter Ended
($ in millions) March 31
2008 % 2007 %
Primary New Insurance Written
Flow $9,284 90.2% $7,049 53.3%
Structured 1,013 9.8% 6,178 46.7%
Total Primary $10,297 100.0% $13,227 100.0%
Flow
Prime $8,208 88.4% $5,050 71.6%
Alt-A 583 6.3% 1,401 19.9%
A minus and below 493 5.3% 598 8.5%
Total Flow $9,284 100.0% $7,049 100.0%
Structured
Prime $1,012 99.9% $93 1.5%
Alt-A 1 0.1% 5,905 95.6%
A minus and below - - 180 2.9%
Total Structured $1,013 100.0% $6,178 100.0%
Total
Prime $9,220 89.5% $5,143 38.9%
Alt-A 584 5.7% 7,306 55.2%
A minus and below 493 4.8% 778 5.9%
Total Primary $10,297 100.0% $13,227 100.0%
Total Primary New Insurance Written
by FICO Score
Flow
<=619 $265 2.9% $486 6.9%
620-679 1,938 20.9% 2,255 32.0%
680-739 3,615 38.9% 2,479 35.2%
>=740 3,466 37.3% 1,829 25.9%
Total Flow $9,284 100.0% $7,049 100.0%
Structured
<=619 $- $- $126 2.0%
620-679 10 1.0% 1,376 22.3%
680-739 369 36.4% 3,068 49.7%
>=740 634 62.6% 1,608 26.0%
Total Structured $1,013 100.0% $6,178 100.0%
Total
<=619 $265 2.6% $612 4.6%
620-679 1,948 18.9% 3,631 27.5%
680-739 3,984 38.7% 5,547 41.9%
>=740 4,100 39.8% 3,437 26.0%
Total Primary $10,297 100.0% $13,227 100.0%
Percentage of primary new insurance
written
Refinances 40% 51%
95.01% LTV and above 20% 16%
ARMs
Less than 5 years 1% 42%
5 years and longer 6% 5%
Primary risk written
Flow $2,316 89.7% $1,746 90.0%
Structured 266 10.3% 194 10.0%
Total Primary $2,582 100.0% $1,940 100.0%
Pool risk written $31 $89
Other risk written
Seconds
1st loss $- $3
2nd loss - 21
NIMs - 268
International
1st loss-Hong Kong primary
mortgage insurance 51 19
Reinsurance 19 17
Total other risk written $70 $328
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2008
Exhibit H
($ in millions) March 31 March 31
2008 % 2007 %
Primary insurance in force
Flow $110,020 74.9% $85,649 71.5%
Structured 36,929 25.1% 34,063 28.5%
Total Primary $146,949 100.0% $119,712 100.0%
Prime $99,721 67.9% $77,414 64.7%
Alt-A 34,949 23.8% 31,023 25.9%
A minus and below 12,279 8.3% 11,275 9.4%
Total Primary $146,949 100.0% $119,712 100.0%
Primary risk in force
Flow $27,751 84.6% $21,267 82.7%
Structured 5,041 15.4% 4,446 17.3%
Total Primary $32,792 100.0% $25,713 100.0%
Flow
Prime $21,810 78.6% $16,653 78.3%
Alt-A 3,788 13.6% 3,015 14.2%
A minus and below 2,153 7.8% 1,599 7.5%
Total Flow $27,751 100.0% $21,267 100.0%
Structured
Prime $2,577 51.1% $1,797 40.4%
Alt-A 1,554 30.8% 1,442 32.4%
A minus and below 910 18.1% 1,207 27.2%
Total Structured $5,041 100.0% $4,446 100.0%
Total
Prime $24,387 74.4% $18,450 71.8%
Alt-A 5,342 16.3% 4,457 17.3%
A minus and below 3,063 9.3% 2,806 10.9%
Total Primary $32,792 100.0% $25,713 100.0%
Total Primary Risk in Force by FICO
Score
Flow
<=619 $1,650 5.9% $1,381 6.5%
620-679 8,262 29.8% 6,574 30.9%
680-739 10,269 37.0% 7,733 36.4%
>=740 7,570 27.3% 5,579 26.2%
Total Flow $27,751 100.0% $21,267 100.0%
Structured
<=619 $851 16.9% $1,205 27.1%
620-679 1,380 27.4% 1,539 34.6%
680-739 1,517 30.1% 1,130 25.4%
>=740 1,293 25.6% 572 12.9%
Total Structured $5,041 100.0% $4,446 100.0%
Total
<=619 $2,501 7.6% $2,586 10.0%
620-679 9,642 29.4% 8,113 31.6%
680-739 11,786 36.0% 8,863 34.5%
>=740 8,863 27.0% 6,151 23.9%
Total Primary $32,792 100.0% $25,713 100.0%
Percentage of primary risk in force
Refinances 31% 33%
95.01% LTV and above 24% 19%
ARMs
Less than 5 years 11% 18%
5 years and longer 9% 9%
Pool risk in force
Prime $2,113 70.6% $2,207 72.0%
Alt-A 292 9.7% 301 9.8%
A minus and below 590 19.7% 558 18.2%
Total $2,995 100.0% $3,066 100.0%
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2008
Exhibit I
($ in millions) March 31 March 31
2008 % 2007 %
Total Primary Risk in Force by LTV
95.01% and above $7,926 24.2% $4,795 18.6%
90.01% to 95.00% 10,079 30.7% 7,965 31.0%
85.01% to 90.00% 11,102 33.9% 9,157 35.6%
85.00% and below 3,685 11.2% 3,796 14.8%
Total $32,792 100.0% $25,713 100.0%
Total Primary Risk in Force by
Policy Year
2004 and prior $8,408 25.6% $10,851 42.2%
2005 4,805 14.6% 6,137 23.9%
2006 5,728 17.5% 6,815 26.5%
2007 11,300 34.5% 1,910 7.4%
2008 2,551 7.8% - -
Total $32,792 100.0% $25,713 100.0%
Total Pool Risk in Force by Policy
Year
2004 and prior $1,864 62.2% $2,039 66.5%
2005 592 19.8% 650 21.2%
2006 261 8.7% 285 9.3%
2007 250 8.4% 92 3.0%
2008 28 0.9% - -
Total Pool risk in Force $2,995 100.0% $3,066 100.0%
Other risk in force
Seconds
1st loss $336 $555
2nd loss 507 605
NIMS 522 783
International
1st loss-Hong Kong primary
mortgage insurance 517 353
Reinsurance 125 61
Credit default swaps 8,872 (1) 7,875
Other
Domestic credit default swaps 212 212
Total other risk in force $11,091 $10,444
Risk to capital ratio-STAT Basis 17.7:1 10.4:1
Risk to capital ratio-STAT Basis
excluding AAA-rated CDS 14.1:1 8.4:1
(1) Due to foreign currency changes since we underwrote such risk, the
current U.S. dollar-denominated risk has increased.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2008
Exhibit J
Quarter Ended
($ in thousands) March 31
2008 2007
Direct claims paid
Prime $60,658 $33,125
Alt-A 35,732 19,998
A minus and below 48,361 29,080
Seconds and other 45,437 13,621
Total $190,188 $95,824
Average claim paid
Prime $36.8 $28.1
Alt-A 49.6 39.7
A minus and below 37.2 29.6
Seconds 34.6 28.8
Total $38.2 $30.6
Loss ratio - GAAP Basis 264.7% 57.6%
Expense ratio - GAAP Basis (2) 22.1% 26.9%
286.8% 84.5%
Reserve for losses by category
Prime $479,653 $200,262
Alt-A 598,706 146,329
A minus and below 391,426 228,066
Pool insurance 56,893 34,599
Seconds 176,121 38,347
Other 1,485 900
Reserve for losses, net 1,704,284 648,503
Reinsurance recoverable 36,885 (1) 28,188 (1)
Total $1,741,169 $676,691
(1) Reinsurance recoverable on ceded losses.
(2) Excludes merger expenses.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2008
Exhibit K
March 31 December 31 March 31
2008 2007 2007
Default Statistics
Primary insurance:
Flow
Prime
Number of insured loans 582,261 565,563 504,941
Number of loans in default 22,806 20,632 14,013
Percentage of loans in default 3.92% 3.65% 2.78%
Alt-A
Number of insured loans 73,672 74,559 65,075
Number of loans in default 10,014 7,980 4,513
Percentage of loans in default 13.59% 10.70% 6.94%
A minus and below
Number of insured loans 64,193 63,853 53,379
Number of loans in default 10,411 10,087 6,704
Percentage of loans in default 16.22% 15.80% 12.56%
Total Flow
Number of insured loans 720,126 703,975 623,395
Number of loans in default 43,231 38,699 25,230
Percentage of loans in default 6.00% 5.50% 4.05%
Structured
Prime
Number of insured loans 72,264 64,789 59,194
Number of loans in default 5,434 4,707 3,231
Percentage of loans in default 7.52% 7.27% 5.46%
Alt-A
Number of insured loans 87,325 97,526 84,050
Number of loans in default 12,056 8,783 3,922
Percentage of loans in default 13.81% 9.01% 4.67%
A minus and below
Number of insured loans 26,342 28,747 34,429
Number of loans in default 8,404 8,659 7,971
Percentage of loans in default 31.90% 30.12% 23.15%
Total Structured
Number of insured loans 185,931 191,062 177,673
Number of loans in default 25,894 22,149 15,124
Percentage of loans in default 13.93% 11.59% 8.51%
Total Primary Insurance
Prime
Number of insured loans 654,525 630,352 564,135
Number of loans in default 28,240 25,339 17,244
Percentage of loans in default 4.31% 4.02% 3.06%
Alt-A
Number of insured loans 160,997 172,085 149,125
Number of loans in default 22,070 16,763 8,435
Percentage of loans in default 13.71% 9.74% 5.66%
A minus and below
Number of insured loans 90,535 92,600 87,808
Number of loans in default 18,815 18,746 14,675
Percentage of loans in default 20.78% 20.24% 16.71%
Total Primary Insurance
Number of insured loans 906,057 895,037 801,068
Number of loans in default 69,125 (1) 60,848 (1) 40,354 (1)
Percentage of loans in default 7.63% 6.80% 5.04%
Pool insurance:
Number of loans in default 26,983 (2) 26,526 (2) 17,989 (2)
(1) Includes 1,504, 2,595 and 1,541 defaults at March 31, 2008, December
31, 2007 and March 31, 2007, respectively, where reserves have not
been established because no claim payment is currently anticipated.
(2) Includes 20,417, 20,193 and 13,036 defaults at March 31, 2008,
December 31, 2007 and March 31, 2007, respectively, where reserves
have not been established because no claim payment is currently
anticipated.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2008
Exhibit L
Quarter Ended
March 31
2008 2007
Net Premiums Written (In thousands)(1)
Primary and Pool Insurance $200,477 $192,108
Seconds 3,481 11,179
International 7,293 3,124
Total Net Premiums Written - insurance $211,251 $206,411
Net Premiums Earned (In thousands)(1)
Primary and Pool Insurance $193,483 $167,155
Seconds 6,164 9,172
International 4,618 3,916
Total Net Premiums Earned - insurance $204,265 $180,243
SMART HOME (In millions)
Ceded Premiums Written $3.2 $3.2
Ceded Premiums Earned $3.2 $2.9
Captives
Premiums ceded to captives (In millions) $35.7 $28.1
% of total premiums 15.4% 14.2%
NIW subject to captives (In millions) $3,986 $4,994
% of primary NIW 38.7% 37.8%
IIF included in captives (2) 37.4% 34.3%
RIF included in captives (2) 42.2% 39.7%
Persistency (twelve months ended March 31) 77.5% 69.5%
March 31 March 31
2008 2007
SMART HOME
% of Primary RIF included in Smart
Home Transactions (2) 5.0% 9.0%
(1) Premiums written and earned on credit derivatives for the quarter
ended March 31, 2008, were $8.9 million and $11.5 million,
respectively, compared to $15.9 million and $15.7 million,
respectively, for the quarter ended March 31, 2007. Premiums earned
on credit derivatives are included in change of fair value of
derivative instruments.
(2) Radian reinsures the middle layer risk positions, while retaining a
significant portion of the total risk comprising the first loss and
most remote risk positions.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2008
ALT-A
Exhibit M
Quarter Ended
($ in millions) March 31
2008 % 2007 %
Primary New Insurance Written by FICO
Score
<=619 $1 0.2% $8 0.1%
620-659 9 1.5% 589 8.1%
660-679 31 5.3% 1,165 15.9%
680-739 301 51.6% 3,640 49.8%
>=740 242 41.4% 1,904 26.1%
Total $584 100.0% $7,306 100.0%
Primary Risk in Force by FICO Score
<=619 $37 0.7% $22 0.5%
620-659 686 12.8% 708 15.9%
660-679 793 14.8% 723 16.2%
680-739 2,540 47.6% 2,019 45.3%
>=740 1,286 24.1% 985 22.1%
Total $5,342 100.0% $4,457 100.0%
Primary Risk in Force by LTV
95.01% and above $372 6.9% $150 3.4%
90.01% to 95.00% 1,398 26.2% 1,225 27.5%
85.01% to 90.00% 2,199 41.2% 1,916 43.0%
85.00% and below 1,373 25.7% 1,166 26.1%
Total $5,342 100.0% $4,457 100.0%
Primary Risk in Force by Policy Year
2004 and prior $1,044 19.5% $1,401 31.4%
2005 790 14.8% 1,056 23.7%
2006 1,225 22.9% 1,478 33.2%
2007 2,146 40.2% 522 11.7%
2008 137 2.6% - -
Total $5,342 100.0% $4,457 100.0%
Radian Group Inc.
Financial Services Supplemental Information
For the Quarter Ended and as of March 31, 2008
Exhibit N
Quarter Ended
March 31
(In thousands) 2008 2007
Investment in Affiliates-Selected
Information
C-BASS
Balance, beginning of period $- $451,395
Net income (loss) for period - (6,804)
Dividends received - -
Balance, end of period $- $444,591
Sherman
Balance, beginning of period $104,315 $167,412
Net income for period 12,526 29,576
Dividends received - 51,512
Other comprehensive income (loss) 88 (1,778)
Balance, end of period $116,929 $143,698
Portfolio Information:
C-BASS
Servicing portfolio N/A $59,600,000
Total assets N/A 6,867,894
Servicing income N/A 43,126
Net interest income N/A 78,852
Total revenues N/A 38,981
Sherman
Total assets $2,383,119 $1,234,046
Net revenues $285,965 $283,788
Radian owns a 46% interest in C-BASS and a 21.8% interest in Sherman.
Prior to September 2007, we owned an interest in Sherman consisting of
40.96% of the Class A Common Units of Sherman (Class A Common Units
represent 94% of the total equity in Sherman) and 50% of the Preferred
Units of Sherman.
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:
- actual or perceived changes in general financial and political conditions, such as extended national or regional economic recessions, changes in housing demand or mortgage originations, changes in 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 mortgage insurance business to be worse than expected), changes in the liquidity in the capital markets and the further contraction of credit markets, population trends and changes in household formation patterns, changes 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;
- actual or perceived economic changes or catastrophic events in geographic regions (both domestic and international) where our mortgage insurance or financial guaranty insurance in force is more concentrated;
- our ability to successfully obtain additional capital to support our long-term liquidity needs and to protect our credit and financial strength ratings;
- a decrease in the volume of home mortgage originations due to reduced liquidity in the lending market, tighter underwriting standards and a deterioration in housing markets throughout the U.S.;
- a decrease in the volume of the municipal bonds, and other public finance and structured finance transactions that we insure, or a decrease in the volume of such transactions for which issuers or investors seek or demand financial guaranty insurance;
- the loss of a customer for whom we write a significant amount of mortgage insurance or financial guaranty insurance or the influence of large customers;
- reduction in the volume of reinsurance business available to us from one or more of our primary financial guaranty insurer customers due to adverse changes in their ability to generate new profitable direct financial guaranty insurance or their need for us to reinsure their risk;
- disruption in the servicing of mortgages covered by our insurance policies;
- the aging of our mortgage insurance portfolio and changes in severity or frequency of losses associated with certain of our products that are riskier than traditional mortgage insurance or financial guaranty insurance policies;
- the performance of our insured portfolio of higher risk loans, such as Alternative-A ("Alt-A") and subprime loans, and adjustable rate products, such as adjustable rate mortgages and interest-only mortgages, which have resulted in increased losses in 2007 and 2008 and may result in further losses;
- reduced opportunities for loss mitigation in markets where housing values fail to appreciate or begin 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;
- downgrades or threatened downgrades of, or other ratings actions with respect to, our credit ratings or the insurance financial strength ratings assigned by the major rating agencies to any of our rated insurance subsidiaries at any time (in particular, our credit rating and the financial strength ratings of our mortgage insurance subsidiaries that are currently under review for possible downgrade);
- 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 ratings agencies), from alternative products such as "80-10-10" loans or other forms of simultaneous second loan structures used by mortgage lenders, from investors using forms of credit enhancement other than mortgage insurance as a partial or complete substitution for private mortgage insurance and from mortgage lenders that demand increased participation in revenue sharing arrangements such as captive reinsurance arrangements;
- changes in the charters or business practices of Federal National Mortgage Association and Freddie Mac, the largest purchasers of mortgage loans that we insure, and our ability to retain our "Top Tier" eligibility requirement from both Freddie Mac and Fannie Mae;
- failure to bring the amendment to our credit facility, dated April 30, 2008, effective by May 15, 2008, which would result in a reinstatement of the ratings covenant under our credit facility;
- heightened competition for financial guaranty business from other financial guaranty insurers, including those recently downgraded to ratings equal to or lower than our ratings, from other forms of credit enhancement such as letters of credit, guaranties and credit default swaps provided by foreign and domestic banks and other financial institutions and from alternative structures that may permit insurers to securitize assets more cost-effectively without the need for the types of credit enhancement we offer, or result in our having to reduce the premium we charge for our products;
- 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 possibility of private lawsuits or 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 financial guaranty 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 deficiency for our 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;
- changes in accounting guidance from the Securities and Exchange Commission ("SEC") or the Financial Accounting Standards Board;
- our ability to profitably grow our insurance businesses in international markets, which depends on a number of factors such as foreign governments' monetary policies and regulatory requirements, foreign currency exchange rate fluctuations, and our ability to develop and market products appropriate to foreign markets;
- legal and other limitations on the amount of dividends we may receive from our subsidiaries; and
- vulnerability to the performance of our strategic investments, including in particular, our investment in Sherman Financial Group LLC.
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, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2007. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on this news release. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements made in this news release to reflect new information or future events or for any other reason.
Contact:
For investors: Terri Williams-Perry - phone: 215 231.1486
Email: terri.williams-perry@radian.com
For the media: Rick Gillespie - phone: 215 231.1061
Email: rick.gillespie@radian.com
Steve Frankel / Tim Lynch
Joele Frank, Wilkinson Brimmer Katcher
212 355 4449
SOURCE Radian Group Inc.