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05/04/2010

Radian Reports First Quarter 2010 Financial Results

Reports First Decrease in Delinquency Count in Nearly Four Years; Announces Sale of Sherman Investment for $172 Million in Cash

PHILADELPHIA, May 04, 2010 (BUSINESS WIRE) --Radian Group Inc. (NYSE: RDN) today reported a net loss for the quarter ended March 31, 2010, of $310.4 million, or $3.77 per diluted share. This compares to a net loss of $217.4 million, or $2.69 per diluted share, for the prior-year quarter. Book value per share at March 31, 2010, was $20.65.

On May 3, 2010, Radian Guaranty sold its remaining equity interest in Sherman Financial, a consumer asset and servicing firm, for approximately $172 million in cash. The impact of the sale, which is expected to result in a pre-tax gain of approximately $70 million, will be reflected in the company's second quarter results. Prior to the sale, Radian had received a $28 million dividend from Sherman in early April.

"The strength of our core mortgage insurance business remains the top priority at Radian," said Chief Executive Officer S.A. Ibrahim. "We are encouraged by the decline in our delinquency count this quarter, the first in nearly four years."

FIRST QUARTER HIGHLIGHTS

  • Radian Guaranty Inc.'s risk-to-capital ratio was 16.9:1 at March 31, 2010, compared to a ratio of 15.4:1 at December 31, 2009, and 17.6:1 at March 31, 2009.
  • The mortgage insurance provision for losses was $529.1 million in the first quarter, which includes an increase in mortgage insurance reserves of $146.5 million since December 31, 2009, to $3.6 billion. This increase in reserves, when coupled with the decline in delinquent loans, strengthens Radian's reserve per delinquency for both primary and pool loans. The reserve increase primarily resulted from an increase in our severity estimates and the continued aging of our default inventory.
  • The number of primary and pool delinquent loans decreased by 5.3 percent and 6.8 percent, respectively, from the fourth quarter of 2009. This included mortgage insurance terminations that reduced Radian's primary delinquency count by 4,429 loans. Excluding this termination, the number of primary delinquent loans decreased by 2.4 percent from the fourth quarter of 2009, the first decline in nearly four years. In addition, the number of Radian's primary delinquent loans declined slightly in April. Radian continues to expect a lower number of delinquent loans at the end of 2010 compared to year-end 2009.
  • The company continues to project sufficient holding company liquidity through 2012. As a result of losses generated in the quarter and in order to maintain the minimum surplus requirements for two subsidiaries that reinsure risk from Radian Guaranty, Radian Group contributed $56 million and Radian Guaranty contributed $30 million of capital to these subsidiaries.
  • Consistent with Radian's strategy of actively managing the legacy portfolio and reducing non-core risk, the company terminated a set of structured transactions in the quarter that eliminated $102 million of its modified pool risk in force.
  • Total mortgage insurance claims paid were $357.3 million for the first quarter. Excluding the $80.1 million impact from first-lien terminations, the $10.8 million impact from second-lien terminations and net of proceeds received from captive terminations of $0.4 million, claims paid were $266.8 million, which consisted of $258.8 million of first-liens and $8.0 million of second-liens. For 2010, the company continues to expect mortgage insurance claims paid to be approximately $1.5 billion.
  • As a result of reduced mortgage industry origination volume and mortgage insurance penetration, new mortgage insurance written (NIW) was $1.9 billion in the quarter. NIW in the quarter continued to consist of loans with excellent risk characteristics, and the company maintained market share of more than 21 percent.
  • Combined losses recognized on derivatives and other financial instruments totaled $121.6 million in the quarter. This was primarily attributable to unrealized losses resulting from the significant tightening of Radian's credit default swap spread, partially offset by investment portfolio gains.
  • Since the launch of the Home Affordable Modification Program (HAMP) last year, nearly 6,000 Radian-insured loans have been completed, including 1,769 loans in 2009 and 4,159 in the first quarter of 2010. As of March 31, 2010, more than 28,000 Radian-insured primary loans were pending completion of a modification program, including HAMP, which represents nearly 20 percent of Radian's primary delinquencies. This compares to more than 22,000, or approximately 15 percent of primary delinquencies, as of December 31, 2009.
  • Radian Asset Assurance Inc. 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 March 31, 2010, Radian Asset had approximately $1.0 billion in statutory surplus with an additional $1.5 billion in claims-paying resources.
    • In June, Radian Asset is expected to pay another ordinary dividend of approximately $70 million to Radian Guaranty.

CONFERENCE CALL

Radian will discuss each of these items in its conference call today, Tuesday, May 4, 2010, at 8:30 a.m. Eastern time. 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 800-230-1766 inside the U.S., or 612-234-9959 for international callers, using passcode 153957 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 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 153957.

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 and related risk mitigation products and services to mortgage lenders nationwide through its principal operating subsidiary, Radian Guaranty Inc. These services help promote and preserve homeownership opportunities for homebuyers, while protecting lenders from default-related losses on residential first mortgages and facilitating the sale of low-downpayment mortgages in the secondary market. Additional information may be found at www.radian.com.

Financial Results and Supplemental Information Contents (Unaudited)

For trend information on all schedules, refer to Radian's quarterly financial statistics at http://www.radian.biz/page?name=FinancialReportsCorporate.

Exhibit A: Condensed Consolidated Statements of Income
Exhibit B: Condensed Consolidated Balance Sheets
Exhibit C: Segment Information Quarter Ended March 31, 2010
Exhibit D: Segment Information Quarter Ended March 31, 2009
Exhibit E: Financial Guaranty Supplemental Information -
For the Quarter Ended and as of March 31, 2010
Exhibit F: Financial Guaranty Supplemental Information -
For the Quarter Ended and as of March 31, 2009
Exhibit G: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2010
New Insurance Written and Risk Written
Exhibit H: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2010
Insurance in Force and Risk in Force
Exhibit I: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2010
Risk in Force by LTV and Policy Year and other Risk in Force
Exhibit J: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2010
Claims and Reserves
Exhibit K: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2010
Default Statistics
Exhibit L: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2010
Net Premiums Written and Earned, Smart Home, Captives and Persistency
Exhibit M: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2010
Reinsurance Progression Toward Attachment - Summary by Book Year
Exhibit N: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2010
Modified Pool
Exhibit O: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of March 31, 2010
Alt-A Risk in Force
Exhibit P: Financial Services Supplemental Information -
For the Quarter Ended and as of March 31, 2010
Exhibit Q: Impact of Mortgage Insurance Terminations -
For the Quarter Ended and as of March 31, 2010

Radian Group Inc. and Subsidiaries

Condensed Consolidated Statements of Income

Exhibit A

Quarter Ended
March 31
2010 2009
(In thousands, except per-share data)
Revenues:
Net premiums written - insurance $ 155,501 $ 156,756
Net premiums earned - insurance $ 198,268 $ 211,215
Net investment income 45,358 56,283
Change in fair value of derivative instruments (77,954 ) (284,416 )
Net (losses) gains on other financial instruments (43,616 ) 25,070
Net impairment losses recognized in earnings (18 ) (824 )
Other income 5,775 4,132
Total revenues 127,813 11,460
Expenses:
Provision for losses 543,880 326,754
Provision for premium deficiency (1,231 ) (48,184 )
Policy acquisition costs 14,868 13,954
Other operating expenses 65,056

(1)

51,602
Interest expense 10,804 12,299
Total expenses 633,377 356,425
Equity in net income of affiliates 8,098 10,552
Pretax loss (497,466 ) (334,413 )
Income tax benefit (187,111 ) (116,976 )
Net loss $ (310,355 ) $ (217,437 )
Diluted net loss per share (2) $ (3.77 ) $ (2.69 )
(1) Includes $17.5 million of compensation expense related to incentive plans which are correlated to our stock price.
(2) Weighted average shares outstanding (in thousands)
Average common shares outstanding 82,341 80,902
Increase in shares-common stock equivalents-diluted basis - -
Weighted average shares outstanding 82,341 80,902
For Trend Information, refer to our Quarterly Financial Statistics on Radian's (RDN) website.

Radian Group Inc. and Subsidiaries

Condensed Consolidated Balance Sheets
Exhibit B
March 31 December 31
(In thousands, except per-share data) 2010 2009
Assets:
Cash and investments $ 6,070,388 $ 6,214,376
Investments in affiliates 127,535 121,480
Deferred policy acquisition costs 156,931 160,281
Deferred income taxes, net 621,589 440,948
Reinsurance recoverables 606,089 628,572
Derivative assets 66,766 68,534
Other assets 582,028 442,115
Total assets $ 8,231,326 $ 8,076,306
Liabilities and stockholders' equity:
Unearned premiums $ 780,561 $ 823,621
Reserve for losses and loss adjustment expenses 3,735,824 3,578,982
Reserve for premium deficiency 24,126 25,357
Long-term debt 665,863 698,222
VIE debt 596,061 296,080
Derivative liabilities 234,504 238,697
Other liabilities 482,026 410,353
Total liabilities 6,518,965 6,071,312
Common stock 100 100
Additional paid-in capital 477,354 473,759
Retained earnings 1,291,583 1,602,143
Accumulated other comprehensive loss (56,676 ) (71,008 )
Total common stockholders' equity 1,712,361 2,004,994
Total liabilities and stockholders' equity $ 8,231,326 $ 8,076,306
Book value per share $ 20.65 $ 24.22
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended March 31, 2010
Exhibit C
Mortgage Financial Financial

(In thousands)

 Insurance Guaranty Services Total
Revenues:
Net premiums written - insurance $ 157,032 $ (1,531 ) $ - $ 155,501
Net premiums earned - insurance $ 177,339 $ 20,929 $ - $ 198,268
Net investment income 26,359 18,999 - 45,358
Change in fair value of derivative instruments 277 (78,231 ) - (77,954 )
Net losses on other financial instruments (1,419 ) (42,197 ) - (43,616 )
Net impairment losses recognized in earnings (18 ) - - (18 )
Other income 1,799 3,913 63 5,775
Total revenues 204,337 (76,587 ) 63 127,813
Expenses:
Provision for losses 529,091 14,789 - 543,880
Provision for premium deficiency (1,231 ) - - (1,231 )
Policy acquisition costs 10,504 4,364 - 14,868
Other operating expenses 46,233 18,673 150 65,056
Interest expense 2,120 8,684 - 10,804
Total expenses 586,717 46,510 150 633,377
Equity in net income of affiliates - 78 8,020 8,098
Pretax (loss) income (382,380 ) (123,019 ) 7,933 (497,466 )
Income tax (benefit) provision (145,847 ) (44,041 ) 2,777 (187,111 )
Net (loss) income $ (236,533 ) $ (78,978 ) $ 5,156 $ (310,355 )
Cash and investments $ 3,546,637 $ 2,523,751 $ - $ 6,070,388
Deferred policy acquisition costs 36,762 120,169 - 156,931
Total assets 4,942,261 3,161,663 127,402 8,231,326
Unearned premiums 219,753 560,808 - 780,561
Reserve for losses and loss adjustment expenses 3,597,035 138,789 - 3,735,824
Derivative liabilities - 234,504 - 234,504
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended March 31, 2009
Exhibit D
Mortgage Financial Financial

(In thousands)

 Insurance Guaranty Services Total
Revenues:
Net premiums written - insurance $ 161,959 $ (5,203 ) $ - $ 156,756
Net premiums earned - insurance $ 177,883 $ 33,332 $ - $ 211,215
Net investment income 31,345 24,938 - 56,283
Change in fair value of derivative instruments (28,576 ) (255,840 ) - (284,416 )
Net gains on other financial instruments 13,077 11,993 - 25,070
Net impairment losses recognized in earnings (801 ) (23 ) - (824 )
Other income 3,818 153 161 4,132
Total revenues 196,746 (185,447 ) 161 11,460
Expenses:
Provision for losses 321,684 5,070 - 326,754
Provision for premium deficiency (48,184 ) - - (48,184 )
Policy acquisition costs 5,739 8,215 - 13,954
Other operating expenses 35,694 15,833 75 51,602
Interest expense 5,694 6,605 - 12,299
Total expenses 320,627 35,723 75 356,425
Equity in net income of affiliates - - 10,552 10,552
Pretax (loss) income (123,881 ) (221,170 ) 10,638 (334,413 )
Income tax (benefit) provision (35,084 ) (85,770 ) 3,878 (116,976 )
Net (loss) income $ (88,797 ) $ (135,400 ) $ 6,760 $ (217,437 )
Cash and investments $ 4,141,601 $ 2,356,614 $ - $ 6,498,215
Deferred policy acquisition costs 26,391 195,878 - 222,269
Total assets 5,241,881 3,344,269 117,460 8,703,610
Unearned premiums 319,785 832,767 - 1,152,552

Reserve for losses and loss adjustment expenses 3,116,553 216,089 - 3,332,642

Derivative liabilities 127,472 614,166 - 741,638
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter Ended and as of March 31, 2010
Exhibit E
Quarter Ended
(In thousands) March 31
2010 2009
Net Premiums Earned:
Public finance direct $ 12,336 $ 14,452
Public finance reinsurance 6,913 8,366
Structured direct 717 1,777
Structured reinsurance 915 8,641
Trade credit reinsurance 48 96
Total Net Premiums Earned - insurance $ 20,929 $ 33,332
Refundings included in earned premium $ 9,533 $ 13,044
Claims paid:
Trade credit reinsurance $ 1,086 $ 178
Financial Guaranty 3,357 14,909
Total $ 4,443 $ 15,087

Impact of adoption of amendment to accounting standard regarding VIEs:
(In millions)
Balance Sheet Increase (Decrease):
Investments $ 89.4
Other assets 121.0
VIE debt 321.0
Derivative liabilities (128.6 )
Derivative liabilities-VIE 17.4
Other liabilities 0.6
Income Statement Increase (Decrease):
Net investment income $ 2.7
Net (losses) gains on other financial instruments (60.9 )
Change in fair value of derivative instruments 57.5
Other income 3.9
Other operating expenses 2.0
Interest expense 1.2
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter Ended and as of March 31, 2010
Exhibit F
($ in thousands, except ratios) March 31 December 31 March 31
2010 2009 2009

Statutory Information:
Capital and surplus $ 1,048,763 $ 1,062,637 $ 1,000,387
Contingency reserve 383,435 366,108 484,899
Qualified statutory capital 1,432,198 1,428,745 1,485,286
Unearned premium reserve 576,412 595,819 702,190
Loss and loss expense reserve 109,370 128,754 104,220
Total statutory policyholders' reserves 2,117,980 2,153,318 2,291,696
Present value of installment premiums 243,721 260,662 385,514
Soft capital facilities 150,000 150,000 150,000
Total statutory claims paying resources $ 2,511,701 $ 2,563,980 $ 2,827,210
Net debt service outstanding $ 107,465,994 $ 110,207,923 $ 134,341,161
Capital leverage ratio (1) 75 77 90
Claims paying leverage ratio (2) 43 43 48
Net par outstanding by product:
Public finance direct $ 17,213,124 $ 17,536,616 $ 18,455,372
Public finance reinsurance 23,542,687 24,180,588 33,494,951
Structured direct 42,347,436 43,528,366 45,699,943
Structured reinsurance 2,063,475 2,174,433 5,147,861
Total (3) $ 85,166,722 $ 87,420,003 $ 102,798,127

Reserve for losses and LAE-GAAP Basis:
Financial Guaranty $ 133,425 $ 121,833 $ 203,561
Trade Credit 5,364 6,611 12,528
Total $ 138,789 $ 128,444 $ 216,089
(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) Included in public finance net par outstanding is $2.0 billion, $2.2 billion and $3.6 billion at March 31, 2010, December 31, 2009 and March 31, 2009, respectively, for legally defeased bond issues where our financial guaranty policy has not been extinguished but cash or securities have been deposited in an escrow account for the benefit of bondholders. The accounting standard for financial guarantee insurance contracts requires that these contracts continue to be accounted for as outstanding contracts despite the elimination of substantially all risk.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2010
Exhibit G
Quarter Ended
($ in millions) March 31
2010 % 2009 %

Primary new insurance written
Flow $ 1,897 100.0% $ 5,610 100.0%
Total Primary $ 1,897 100.0% $ 5,610 100.0%
Total
Prime $ 1,896 99.9% $ 5,597 99.8%
Alt-A - - 9 0.1%
A minus and below 1 0.1% 4 0.1%
Total Primary $ 1,897 100.0% $ 5,610 100.0%

Total primary new insurance written by FICO score

Total
>=740 $ 1,461 77.0% $ 3,885 69.3%
680-739 435 22.9% 1,589 28.3%
620-679 1 0.1% 136 2.4%
Total Primary $ 1,897 100.0% $ 5,610 100.0%

Percentage of primary new insurance written
Refinances 35% 48%
95.01% LTV and above 0.5% 0.1%
ARMs
Less than 5 years 0.1% 0.2%
5 years and longer 5.1% 0.4%

Primary risk written
Flow $ 429 100.0% $ 1,196 100.0%
Total Primary $ 429 100.0% $ 1,196 100.0%
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2010
Exhibit H
($ in millions) March 31 March 31
2010 % 2009 %

Primary insurance in force
Flow $ 119,943 86.1% $ 122,656 78.8%
Structured 19,419 13.9% 33,012 21.2%
Total Primary $ 139,362 100.0% $ 155,668 100.0%
Prime $ 109,404 78.5% $ 113,117 72.7%
Alt-A 20,396 14.6% 31,826 20.4%
A minus and below 9,562 6.9% 10,725 6.9%
Total Primary $ 139,362 100.0% $ 155,668 100.0%

Primary risk in force
Flow $ 29,542 89.2% $ 30,537 87.3%
Structured 3,586 10.8% 4,443 12.7%
Total Primary $ 33,128 100.0% $ 34,980 100.0%
Flow
Prime $ 24,783 83.9% $ 25,129 82.3%
Alt-A 2,996 10.1% 3,475 11.4%
A minus and below 1,763 6.0% 1,933 6.3%
Total Flow $ 29,542 100.0% $ 30,537 100.0%
Structured
Prime $ 1,977 55.1% $ 2,331 52.5%
Alt-A 981 27.4% 1,378 31.0%
A minus and below 628 17.5% 734 16.5%
Total Structured $ 3,586 100.0% $ 4,443 100.0%
Total
Prime $ 26,760 80.8% $ 27,460 78.5%
Alt-A 3,977 12.0% 4,853 13.9%
A minus and below 2,391 7.2% 2,667 7.6%
Total Primary $ 33,128 100.0% $ 34,980 100.0%

Total primary risk in force by FICO score
Flow
>=740 $ 10,561 35.7% $ 9,839 32.2%
680-739 10,572 35.8% 11,234 36.8%
620-679 7,119 24.1% 8,002 26.2%
<=619 1,290 4.4% 1,462 4.8%
Total Flow $ 29,542 100.0% $ 30,537 100.0%
Structured
>=740 $ 982 27.4% $ 1,205 27.1%
680-739 1,091 30.4% 1,394 31.4%
620-679 934 26.1% 1,167 26.3%
<=619 579 16.1% 677 15.2%
Total Structured $ 3,586 100.0% $ 4,443 100.0%
Total
>=740 $ 11,543 34.9% $ 11,044 31.6%
680-739 11,663 35.2% 12,628 36.1%
620-679 8,053 24.3% 9,169 26.2%
<=619 1,869 5.6% 2,139 6.1%
Total Primary $ 33,128 100.0% $ 34,980 100.0%

Percentage of primary risk in force
Refinances 31% 31%
95.01% LTV and above 20% 22%
ARMs
Less than 5 years 7% 8%
5 years and longer 8% 9%

Pool risk in force
Prime $ 1,882 72.7% $ 2,058 70.7%
Alt-A 192 7.4% 289 9.9%
A minus and below 515 19.9% 564 19.4%
Total $ 2,589 100.0% $ 2,911 100.0%
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2010
Exhibit I
($ in millions) March 31 March 31
2010 % 2009 %

Total primary risk in force by LTV
85.00% and below $ 3,117 9.4% $ 3,613 10.3%
85.01% to 90.00% 12,440 37.6% 12,571 35.9%
90.01% to 95.00% 10,829 32.7% 11,213 32.1%
95.01% and above 6,742 20.3% 7,583 21.7%
Total $ 33,128 100.0% $ 34,980 100.0%

Total primary risk in force by policy year
2005 and prior $ 9,325 28.1% $ 11,083 31.7%
2006 4,209 12.7% 5,015 14.3%
2007 9,160 27.7% 10,410 29.8%
2008 6,576 19.8% 7,298 20.9%
2009 3,436 10.4% 1,174 3.3%
2010 422 1.3% - -
Total $ 33,128 100.0% $ 34,980 100.0%

Total pool risk in force by policy year
2005 and prior $ 2,096 81.0% $ 2,367 81.3%
2006 227 8.7% 250 8.6%
2007 214 8.3% 235 8.1%
2008 52 2.0% 59 2.0%
Total Pool risk in Force $ 2,589 100.0% $ 2,911 100.0%

Other risk in force
Second-lien
1st loss $ 138 $ 244
2nd loss 89 140
NIMs 292 431
International
1st loss-Hong Kong primary mortgage insurance 222 389
Reinsurance - 170
Credit default swaps 120 3,072
Other
Domestic credit default swaps - 123
Total other risk in force $ 861 $ 4,569
Risk to capital ratio-Radian Guaranty only (1) 16.9:1 17.6:1

(1) Starting June 30, 2009, risk in force on policies currently in default and for which loss reserves have been establishedare deducted from total risk in force used for our risk to capital calculations. Risk to capital ratios for the prior periodshave not been restated to conform with this presentation.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2010
Exhibit J
Quarter Ended
($ in thousands) March 31
2010 2009
Direct claims paid
Prime $ 139,499 $ 69,459
Alt-A 70,512 46,270
A minus and below 48,777 36,730
Second-lien and other 7,979 22,607
Subtotal 266,767 175,066
Impact of first-lien terminations 80,110 -
Impact of captive terminations (436) -
Impact of second-lien terminations 10,834 65,000
Total $ 357,275 $ 240,066
Average claim paid (1)
Prime $ 46.3 $ 41.9
Alt-A 60.6 53.5
A minus and below 46.1 38.1
Second-lien and other 33.0 41.3
Total $ 48.7 $ 43.4
Loss ratio - GAAP Basis 298.4% 179.8%
Expense ratio - GAAP Basis 32.0% 23.2%
330.4% 203.0%
Reserve for losses by category
Prime $ 1,347,003 $ 921,050
Alt-A 821,551 951,932
A minus and below 421,748 452,837
Pool insurance 379,794 140,192
Second-lien 30,490 111,985
Other 124 1,780
Reserve for losses, net 3,000,710 2,579,776
Reinsurance recoverable 596,325 (2) 536,777
Total $ 3,597,035 $ 3,116,553
(1) Calculated without giving effect to the impact of first-lien, second-lien and captive terminations.
(2) Reinsurance recoverable on ceded losses related to captives ($488 million) and Smart Home ($108 million).
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2010
Exhibit K
March 31 December 31 March 31
2010 2009 2009

Default Statistics
Primary insurance:
Flow
Prime
Number of insured loans 607,552 614,590 627,386
Number of loans in default 77,423 78,130 50,217
Percentage of loans in default 12.74% 12.71% 8.00%

Alt-A
Number of insured loans 58,588 60,616 66,952
Number of loans in default 21,533 22,177 18,628
Percentage of loans in default 36.75% 36.59% 27.82%

A minus and below
Number of insured loans 52,547 53,932 57,576
Number of loans in default 19,264 20,911 15,999
Percentage of loans in default 36.66% 38.77% 27.79%
Total Flow
Number of insured loans 718,687 729,138 751,914
Number of loans in default 118,220 121,218 84,844
Percentage of loans in default 16.45% 16.62% 11.28%

Structured

Prime
Number of insured loans 46,234 52,629 65,727
Number of loans in default 6,565 7,520 7,331
Percentage of loans in default 14.20% 14.29% 11.15%

Alt-A
Number of insured loans 32,960 43,615 78,901
Number of loans in default 11,949 15,295 21,600
Percentage of loans in default 36.25% 35.07% 27.38%

A minus and below
Number of insured loans 18,161 19,287 21,449
Number of loans in default 7,180 7,965 7,542
Percentage of loans in default 39.54% 41.30% 35.16%
Total Structured
Number of insured loans 97,355 115,531 166,077
Number of loans in default 25,694 30,780 36,473
Percentage of loans in default 26.39% 26.64% 21.96%
Total Primary Insurance

Prime
Number of insured loans 653,786 667,219 693,113
Number of loans in default 83,988 85,650 57,548
Percentage of loans in default 12.85% 12.84% 8.30%

Alt-A
Number of insured loans 91,548 104,231 145,853
Number of loans in default 33,482 37,472 40,228
Percentage of loans in default 36.57% 35.95% 27.58%

A minus and below
Number of insured loans 70,708 73,219 79,025
Number of loans in default 26,444 28,876 23,541
Percentage of loans in default 37.40% 39.44% 29.79%
Total Primary Insurance
Number of insured loans 816,042 844,669 917,991
Number of loans in default 143,914 151,998 121,317
Percentage of loans in default (1) 17.64% 17.99% 13.22%
Pool insurance:
Number of loans in default (2) 33,934 36,397 33,267

(1) Includes an estimated 1,517, 3,302 and 6,568 defaults at March 31, 2010, December 31, 2009 and March 31, 2009, respectively,for which reserves have not been established because they were associated with transactions whereno claim payment was anticipated primarily due to deductibles or where a partial reservehas been recorded that is less than the gross calculated reserve due to the presence of a deductible.

(2) Includes an estimated 15,230, 18,033 and 22,782 defaults at March 31, 2010, December 31, 2009 and March 31, 2009, respectively,for which reserves have not been established because they were associated with transactions whereno claim payment was anticipated primarily due to deductibles or where a partial reservehas been recorded that is less than the gross calculated reserve due to the presence of a deductible.

Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2010
Exhibit L
Quarter Ended
March 31
2010 2009

Net Premiums Written (In thousands)
Primary and Pool Insurance $ 157,413 $ 161,414
Second-lien (455 ) (1 ) (86 )
International 74 631
Total Net Premiums Written - Insurance $ 157,032 $ 161,959

Net Premiums Earned (In thousands)
Primary and Pool Insurance $ 174,112 $ 170,547
Second-lien 511 1,236
International 2,716 6,100
Total Net Premiums Earned - Insurance $ 177,339 $ 177,883

SMART HOME (In millions)
Ceded Premiums Written $ 2.3 $ 2.7
Ceded Premiums Earned $ 2.3 $ 2.7

1st Lien Captives
Premiums ceded to captives (In thousands) $ 25,474 $ 34,500
% of total premiums 12.6 % 16.6 %
NIW subject to captives (In thousands) $ 333 $ 1,040,733
% of primary NIW < 1% 18.6 %
IIF included in captives (2) 29.5 % 35.5 %
RIF included in captives (2) 31.1 % 39.7 %
Persistency (twelve months ended March 31) 81.0 % 87.0 %
March 31 March 31
2010 2009
SMART HOME
% of Primary RIF included in Smart Home Transactions (2) 3.3 % 3.6 %
(1) Reflects the impact of second-lien 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 March 31, 2010
Exhibit M
Reinsurance Progression Toward Attachment - Summary by Book Year (1)
March 31 December 31
($ in millions) 2010 2009

Book Year (2):

Original Book
RIF

Progression
to
Attachment
Point

 Gross Current RIF Ceded Current RIF(3) Net Current RIF

Ever-to-Date
Incurred
Losses

Reinsurance
Benefit (4)

Gross Current
RIF

Ceded Current RIF(3)

Net Current
RIF

Ever-to-Date
Incurred
Losses

Reinsurance
Benefit (4)

Pre-2006 0-50 % $ 336 $ 55 $ 281 $ 138 $ - $ 375 $ 62 $ 313 $ 142
Pre-2006 50-75 % 267 161 106 79 - 325 185 140 86
Pre-2006 75-99 % 579 249 330 131 - 557 231 326 127
Pre-2006 Attached 1,629 445 1,184 409 $ 154 1,673 452 1,221 381 $ 139
Pre-2006 Total $ 20,430 $ 2,811 $ 910 $ 1,901 $ 757 $ 154 $ 2,930 $ 930 $ 2,000 $ 736 $ 139
2006 0-50 % $ 1 $ - $ 1 $ - $ - $ 1 $ - $ 1 $ -
2006 50-75 % - - - - - 16 1 15 1
2006 75-99 % 19 2 17 2 - 13 1 12 1
2006 Attached 1,650 229 1,421 386 $ 159 1,695 242 1,453 355 $ 163
2006 Total $ 2,761 $ 1,670 $ 231 $ 1,439 $ 388 $ 159 $ 1,725 $ 244 $ 1,481 $ 357 $ 163
2007 0-50 % $ 1 $ - $ 1 $ - $ - $ 1 $ - $ 1 $ -
2007 50-75 % 11 1 10 - - 12 1 11 -
2007 75-99 % 9 1 8 1 - 15 1 14 1
2007 Attached 3,376 390 2,986 489 $ 207 3,446 391 3,055 437 $ 191
2007 Total $ 4,307 $ 3,397 $ 392 $ 3,005 $ 490 $ 207 $ 3,474 $ 393 $ 3,081 $ 438 $ 191
2008 0-50 % $ 186 $ 10 $ 176 $ 3 $ - $ 298 $ 22 $ 276 $ 6
2008 50-75 % 248 20 228 9 - 149 8 141 6
2008 75-99 % 121 14 107 6 - 1,454 166 1,288 56
2008 Attached 1,461 164 1,297 82 $ 12 159 14 145 19 $ 11
2008 Total $ 2,386 $ 2,016 $ 208 $ 1,808 $ 100 $ 12 $ 2,060 $ 210 $ 1,850 $ 87 $ 11
2009 0-50 % $ 279 $ 12 $ 267 $ 1 $ - $ 284 $ 12 $ 272 $ -
2009 50-75 % - - - - - - - - -
2009 75-99 % - - - - - - - - -
2009 Attached - - - - $ - - - - - $ -
2009 Total $ 298 $ 279 $ 12 $ 267 $ 1 $ - $ 284 $ 12 $ 272 $ - $ -
Quota Share 0-50 % $ - $ - $ - $ - $ - $ - $ - $ - $ -
Quota Share 50-75 % - - - - - - - - -
Quota Share 75-99 % - - - - - - - - -
Quota Share Attached 100 32 68 21 $ 8 102 33 69 37 $ 17
Quota Share Total $ 313 $ 100 $ 32 $ 68 $ 21 $ 8 $ 102 $ 33 $ 69 $ 37 $ 17
Total Captive (Including Quota Share) $ 30,495 $ 10,273 $ 1,785 $ 8,488 $ 1,757 $ 540 $ 10,575 $ 1,822 $ 8,753 $ 1,655 $ 521
SmartHome 0-50 % $ 31 $ 14 $ 17 $ 11 $ - $ 32 $ 14 $ 18 $ 12
SmartHome 50-75 % - - - - - 71 29 42 23
SmartHome 75-99 % 69 29 40 25 - - - - -
SmartHome Attached 997 482 515 439 $ 127 1,029 492 537 435 $ 143
Total SmartHome $ 3,900 $ 1,097 $ 525 $ 572 $ 475 $ 127 $ 1,132 $ 535 $ 597 $ 470 $ 143
(1) Data is presented in the aggregate for all trusts for captives with risk in force 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 for captives with risk in force at period end only. Reinsurance benefit at March 31, 2010 and December 31, 2009 excludes $0.4 million and $71 million of recoveries recognized from the terminations of certain captive reinsurance agreements during the first quarter of 2010 and for the year ended December 31, 2009, respectively.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2010
Modified Pool
Exhibit N
($ in millions) March 31 March 31
2010 2009
$ % $ %

Primary risk in force by policy year

2005 and prior

 $ 201 42.6 % $ 292 34.6 %

2006

 49 10.4 % 211 25.0 %

2007

 214 45.3 % 333 39.5 %

2008

 8 1.7 % 8 0.9 %
Total $ 472 100.0 % $ 844 100.0 %

Primary risk in force by product
Prime $ 76 16.1 % $ 157 18.6 %
Alt-A 377 79.9 % 663 78.6 %
A minus and below 19 4.0 % 24 2.8 %
Total $ 472 100.0 % $ 844 100.0 %

Primary insurance in force by product
Prime $ 705 10.8 % $ 3,072 16.9 %
Alt-A 5,681 86.7 % 14,767 81.5 %
A minus and below 164 2.5 % 289 1.6 %
Total $ 6,550 100.0 % $ 18,128 100.0 %

Default Statistics:
Primary Insurance:

Total modified pool
Number of insured loans 26,122 84,900
Number of loans in default 8,111 19,812
Percentage of loans in default 31.05 % 23.34 %
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of March 31, 2010
ALT-A
Exhibit O
March 31 March 31
($ in millions) 2010 2009
$ % $ %

Primary Risk in Force by FICO Score
>=740 $ 981 24.7 % $ 1,192 24.5 %

680-739

 1,916 48.2 % 2,335 48.1 %

660-679

 577 14.5 % 712 14.7 %

620-659

 475 11.9 % 582 12.0 %
<=619 28 0.7 % 32 0.7 %
Total $ 3,977 100.0 % $ 4,853 100.0 %

Primary Risk in Force by LTV
85.00% and below $ 885 22.3 % $ 1,249 25.7 %
85.01% to 90.00% 1,734 43.6 % 2,015 41.5 %
90.01% to 95.00% 1,078 27.1 % 1,256 25.9 %
95.01% and above 280 7.0 % 333 6.9 %
Total $ 3,977 100.0 % $ 4,853 100.0 %

Primary Risk in Force by Policy Year
2005 and prior $ 1,286 32.3 % $ 1,532 31.6 %

2006

 825 20.8 % 1,076 22.2 %

2007

 1,642 41.3 % 1,997 41.1 %

2008

 223 5.6 % 246 5.1 %

2009

 1 - 2 -
Total $ 3,977 100.0 % $ 4,853 100.0 %
Radian Group Inc.
Financial Services Supplemental Information
For the Quarter Ended and as of March 31, 2010
Exhibit P
Quarter Ended
March 31
(In thousands) 2010 2009
Investment in Affiliates-Selected Information
Sherman
Balance, beginning of period $ 121,424 $ 99,656
Net income for period 8,020 10,552
Dividends received (1,515 ) (6,441 )
Other comprehensive loss (527 ) (531 )
Balance, end of period $ 127,402 $ 103,236
Portfolio Information:
Sherman
Total assets $ 1,720,430 $ 2,149,767
Net revenues $ 291,601 $ 343,834
Radian Group Inc.
Impact of Mortgage Insurance Terminations
For the Quarter Ended as of March 31, 2010
Exhibit Q
($ in millions)
As Reported Impact of Prior to
March 31 Mortgage Insurance Mortgage Insurance
2010 Terminations Terminations

Primary insurance in force
Prime $ 109,404 $ 759 $ 110,163
Alt-A 20,396 1,746 22,142
A minus and below 9,562 90 9,652
Total Primary $ 139,362 $ 2,595 $ 141,957

Primary risk in force
Prime $ 26,760 $ 27 $ 26,787
Alt-A 3,977 71 4,048
A minus and below 2,391 4 2,395
Total Primary $ 33,128 $ 102 $ 33,230

Primary insurance in force-modified pool (1)
Prime $ 705 $ 759 $ 1,464
Alt-A 5,681 1,746 7,427
A minus and below 164 90 254
Total Primary $ 6,550 $ 2,595 $ 9,145

Primary risk in force-modified pool (1)
Prime $ 76 $ 27 $ 103
Alt-A 377 71 448
A minus and below 19 4 23
Total Primary $ 472 $ 102 $ 574

Default Statistics:
Total Primary Insurance

Prime
Number of insured loans 653,786 5,222 659,008
Number of loans in default 83,988 1,035 85,023
Percentage of loans in default 12.85 % 19.82 % 12.90 %

Alt-A
Number of insured loans 91,548 9,598 101,146
Number of loans in default 33,482 3,161 36,643
Percentage of loans in default 36.57 % 32.93 % 36.23 %

A minus and below
Number of insured loans 70,708 674 71,382
Number of loans in default 26,444 233 26,677
Percentage of loans in default 37.40 % 34.57 % 37.37 %
Total Primary Insurance
Number of insured loans 816,042 15,494 831,536
Number of loans in default 143,914 4,429 148,343
Percentage of loans in default 17.64 % 28.59 % 17.84 %
Total modified pool insurance (1)
Number of insured loans 26,122 15,494 41,616
Number of loans in default 8,111 4,429 12,540
Percentage of loans in default 31.05 % 28.59 % 30.13 %
(1) Included in primary insurance.

Forward-Looking Statements

All statements in this report 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 United States 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," or the negative or other variations on these words and other similar expressions. 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. 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. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties, including the following:

  • changes in general financial and political conditions, such as the failure of the U.S. economy to recover from the most recent recession or the U.S. economy reentering a recessionary period following a brief period of stabilization or even growth, the lack of meaningful liquidity in the capital markets or in the credit markets, a prolonged period of high unemployment rates and limited home price appreciation or further depreciation (which has resulted in some borrowers voluntarily defaulting on their mortgages when their mortgage balances exceed the value of their homes), 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 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;
  • a further decrease in the volume of home mortgage originations due to reduced liquidity in the lending market, tighter underwriting standards and the decrease in housing demand 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 and financial guaranty losses;
  • reduced opportunities for loss mitigation in markets where housing values do not appreciate or continue to decline;
  • the negative impact our increased levels of insurance rescissions and claim denials may have on our relationships with customers, including the heightened risk of potential disputes and litigation;
  • 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;
  • a decrease 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) or new entrants to the industry;
  • 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;
  • changes to the current system of housing finance, including the possibility of a new system in which private mortgage insurers are not required or their services are significantly limited in scope;
  • the application of existing federal or state consumer, lending, insurance, tax, 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, or the possibility of additional, lawsuits or investigations, and (ii) legislative and regulatory changes (a) affecting demand for private mortgage insurance, (b) limiting or restricting our use of (or requirements for) additional capital and the products we may offer, or (c) affecting the form in which we execute credit protection or affecting our existing financial guaranty portfolio;
  • 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 business, or to estimate accurately the fair value amounts of derivative instruments in our mortgage insurance and financial guaranty businesses in determining gains and losses on these contracts;
  • the ability of our primary insurance customers in our financial guaranty reinsurance business to provide appropriate surveillance and to mitigate losses adequately with respect to our assumed insurance portfolio;
  • volatility in our earnings caused by changes in the fair value of our derivative instruments and our need to reevaluate the possibility of a 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; and
  • 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.

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 December 31, 2009 and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.

SOURCE: Radian Group Inc. 

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