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08/02/2011

Radian Reports Second Quarter 2011 Financial Results

-Diluted net income per share of $1.03 in the quarter includes impact of fair value gains -
- Sixth consecutive quarterly decline in MI delinquencies -

PHILADELPHIA, Aug 02, 2011 (BUSINESS WIRE) --

Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended June 30, 2011, of $137.1 million, or $1.03 per diluted share, which included combined gains from the change in fair value of derivatives and other financial instruments of $193.8 million. This compares to a net loss of $475.1 million, or $4.31 per diluted share, for the prior-year quarter, which included combined net losses from the change in fair value of derivatives and other financial instruments of $587.8 million. Book value per share at June 30, 2011, was $8.48.

"As we face an uncertain U.S. economy and housing market, we believe that Radian's risk-to-capital ratio of 19.8 to 1 and the financial flexibility of our holding company cash position provide a competitive advantage for our mortgage insurance business," said Chief Executive Officer S.A. Ibrahim. "We were pleased with the continued drop in mortgage insurance delinquencies in the quarter and another period of operating profitability for our financial guaranty business."

SECOND QUARTER HIGHLIGHTS

  • The mortgage insurance provision for losses was $270.0 million in the second quarter, compared to $414.0 million in the first quarter of 2011 and $427.6 million in the prior-year period, which reflected the relative improvement in the aging and composition of Radian's delinquent loans. Mortgage insurance loss reserves were approximately $3.3 billion as of June 30, 2011, a decrease from $3.5 billion in the first quarter of 2011, and $3.7 billion a year ago. First-lien reserves were $25,334 per primary default as of June 30, 2011, compared to $25,535 as of March 31, 2011, and $22,957 a year ago.
  • The total number of primary delinquent loans decreased by 5 percent from the first quarter of 2011, which was the sixth consecutive quarterly decline in delinquent loans. In addition, new delinquencies declined slightly in July.
  • Consistent with Radian's strategy of actively managing its legacy portfolio and reducing non-core risk, the company terminated four structured mortgage insurance transactions in the quarter that eliminated more than 2,200 loans from its delinquent inventory and reduced pool risk in force by $45 million.
  • The risk-to-capital ratio for Radian Guaranty Inc., the company's primary mortgage insurance subsidiary, declined to 19.8:1 at June 30, 2011, compared to a ratio of 20.3:1 at March 31, 2011, and 17.9:1 at June 30, 2010.
  • New mortgage insurance written (NIW) was $2.3 billion in the second quarter, compared to $2.6 billion in the first quarter of 2011, and continued to consist of loans with excellent risk characteristics. The company estimates market share of 18-19 percent in the second quarter.
  • Total mortgage insurance claims paid were $512.6 million for the second quarter, compared to $365.2 million in the first quarter of 2011 and $337.3 million a year ago. Excluding the $53.6 million impact from terminations, claims paid were $459.0 million. For 2011, the company continues to expect mortgage insurance claims paid to be approximately $1.7 billion. The company believes that claims paid have peaked and will generally trend down slowly over time.
  • Radian Asset Assurance Inc. continues to serve as an important source of capital support for Radian Guaranty and is expected to continue to provide Radian Guaranty with cash infusions over time.

-- Excluding gains and losses on derivatives and other financial instruments, the financial guaranty segment was again profitable on an operating basis in the second quarter of 2011.
-- As of June 30, 2011, Radian Asset had approximately $1.0 billion in statutory surplus with an additional $1.2 billion in claims-paying resources.
-- In June, Radian Asset paid an ordinary dividend of $53.4 million to Radian Guaranty and expects to pay another dividend in 2012.
-- On June 16, 2011, Radian Asset successfully completed the acquisition of Municipal and Infrastructure Assurance Corporation (MIAC), following approval from the New York State Insurance Department.

CONFERENCE CALL

Radian will discuss each of these items in its conference call today, Tuesday, August 2, 2011, at 10:00 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 800-230-1093 inside the U.S., or 612-288-0337 for international callers, using passcode 210097 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 210097.

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 June 30, 2011
Exhibit D: Segment Information Quarter Ended June 30, 2010
Exhibit E: Segment Information Six Months Ended June 30, 2011
Exhibit F: Segment Information Six Months Ended June 30, 2010
Exhibit G: Financial Guaranty Supplemental Information
Exhibit H: Financial Guaranty Supplemental Information
Exhibit I: Mortgage Insurance Supplemental Information
New Insurance Written
Exhibit J: Mortgage Insurance Supplemental Information
Insurance in Force and Risk in Force
Exhibit K: Mortgage Insurance Supplemental Information
Risk in Force by LTV and Policy Year and Other Risk in Force
Exhibit L: Mortgage Insurance Supplemental Information
Claims, Reserves and Reserve Per Default
Exhibit M: Mortgage Insurance Supplemental Information
Default Statistics
Exhibit N: Mortgage Insurance Supplemental Information
Net Premiums Written and Earned, Smart Home, Captives and Persistency
Exhibit O: Mortgage Insurance Supplemental Information
Modified Pool

Radian Group Inc. and Subsidiaries

Condensed Consolidated Statements of Income
Exhibit A
Quarter Ended Six Months Ended
June 30 June 30
2011 2010 2011 2010
(In thousands, except per-share data)
Revenues:
Net premiums written - insurance $ 152,778 $ 159,901 $ 335,527 $ 315,402
Net premiums earned - insurance $ 188,934 $ 203,446 $ 391,957 $ 401,714
Net investment income 43,823 48,619 86,063 93,977
Net gains on investments 44,236 57,262 81,671 115,210
Net impairment losses recognized in earnings (11 ) (38 ) (11 ) (56 )
Change in fair value of derivative instruments 188,726 (524,606 ) 432,618 (602,560 )
Net gains (losses) on other financial instruments 5,047 (63,200 ) 80,298 (164,764 )
Gain on sale of affiliate - 34,815 - 34,815
Other income 1,196 (2,072 ) 2,644 3,703
Total revenues 471,951 (245,774 ) 1,075,240 (117,961 )
Expenses:
Provision for losses 263,566 435,166 690,939 979,046
Change in reserve for premium deficiency (3,102 ) (7,354 ) (4,485 ) (8,585 )
Policy acquisition costs 14,387 16,797 28,518 31,665
Other operating expenses 45,954 35,165 92,173 100,221
Interest expense 16,079 8,245 33,103 19,049
Total expenses 336,884 488,019 840,248 1,121,396
Equity in net income of affiliates - 6,570 65 14,668
Pretax income (loss) 135,067 (727,223 ) 235,057 (1,224,689 )
Income tax benefit (2,048 ) (252,143 ) (5,064 ) (439,254 )
Net income (loss) $ 137,115 $ (475,080 ) $ 240,121 $ (785,435 )
Diluted net income (loss) per share (1) $ 1.03 $ (4.31 ) $ 1.80 $ (8.15 )
(1) Weighted average shares outstanding (In thousands)
Weighted average common shares outstanding 132,185 110,282 132,185 96,420
Increase in weighted average shares-common stock equivalents-diluted basis 1,429 - 1,539 -
Weighted average shares outstanding 133,614 110,282 133,724 96,420
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
June 30 December 31 June 30
(In thousands, except per-share data) 2011 2010 2010
Assets:
Cash and investments $ 6,038,529 $ 6,680,630 $ 7,277,607
Deferred policy acquisition costs 138,926 148,326 148,623
Deferred income taxes, net 27,531 27,531 815,674
Reinsurance recoverables 179,573 244,894 585,938
Derivative assets 27,266 26,212 21,977
Other assets 516,971 493,294 498,669
Total assets $ 6,928,796 $ 7,620,887 $ 9,348,488
Liabilities and stockholders' equity:
Unearned premiums $ 629,813 $ 686,364 $ 736,675
Reserve for losses and loss adjustment expenses 3,343,624 3,596,735 3,781,240
Reserve for premium deficiency 6,251 10,736 16,772
Long-term debt 811,319 964,788 665,381
VIE debt 393,740 520,114 627,638
Derivative liabilities 313,708 723,579 748,094
Payable for securities purchased 48,707 9,112 660,805
Other liabilities 252,324 249,679 332,254
Total liabilities 5,799,486 6,761,107 7,568,859
Common stock 151 150 150
Additional paid-in capital 1,073,703 1,071,080 1,002,501
Retained earnings (deficit) 34,861 (204,926 ) 816,172
Accumulated other comprehensive income (loss) 20,595 (6,524 ) (39,194 )
Total common stockholders' equity 1,129,310 859,780 1,779,629
Total liabilities and stockholders' equity $ 6,928,796 $ 7,620,887 $ 9,348,488
Book value per share $ 8.48 $ 6.46 $ 13.40

Radian Group Inc. and Subsidiaries

Segment Information

Quarter Ended June 30, 2011
Exhibit C
Mortgage Financial
(In thousands) Insurance Guaranty Total
Revenues:
Net premiums written - insurance $ 164,194 $ (11,416 ) $ 152,778
Net premiums earned - insurance $ 164,325 $ 24,609 $ 188,934
Net investment income 24,853 18,970 43,823
Net gains on investments 27,425 16,811 44,236
Net impairment losses recognized in earnings (11 ) - (11 )
Change in fair value of derivative instruments 258 188,468 188,726
Net gains (losses) on other financial instruments (631 ) 5,678 5,047
Other income 1,124 72 1,196
Total revenues 217,343 254,608 471,951
Expenses:
Provision for losses 269,992 (6,426 ) 263,566
Change in reserve for premium deficiency (3,102 ) - (3,102 )
Policy acquisition costs 8,601 5,786 14,387
Other operating expenses 33,913 12,041 45,954
Interest expense 146 15,933 16,079
Total expenses 309,550 27,334 336,884
Equity in net income of affiliates - - -
Pretax income (loss) (92,207 ) 227,274 135,067
Income tax (benefit) provision 5,374 (7,422 ) (2,048 )
Net income (loss) $ (97,581 ) $ 234,696 $ 137,115
Cash and investments $ 3,334,789 $ 2,703,740 $ 6,038,529
Deferred policy acquisition costs 44,509 94,417 138,926
Total assets 3,688,720 3,240,076 6,928,796
Unearned premiums 191,737 438,076 629,813
Reserve for losses and loss adjustment expenses 3,268,582 75,042 3,343,624
VIE debt 56,239 337,501 393,740
Derivative liabilities - 313,708 313,708

Radian Group Inc. and Subsidiaries

Segment Information

Quarter Ended June 30, 2010
Exhibit D
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written - insurance $ 167,909 $ (8,008 ) $ - $ 159,901
Net premiums earned - insurance $ 179,992 $ 23,454 $ - $ 203,446
Net investment income 28,544 20,075 - 48,619
Net gains on investments 34,441 22,821 - 57,262
Net impairment losses recognized in earnings (38 ) - - (38 )
Change in fair value of derivative instruments (1,310 ) (523,296 ) - (524,606 )
Net losses on other financial instruments (7,973 ) (55,227 ) - (63,200 )
Gain on sale of affiliate - - 34,815 34,815
Other income 1,623 (3,695 ) - (2,072 )
Total revenues 235,279 (515,868 ) 34,815 (245,774 )
Expenses:
Provision for losses 427,622 7,544 - 435,166
Change in reserve for premium deficiency (7,354 ) - - (7,354 )
Policy acquisition costs 12,113 4,684 - 16,797
Other operating expenses 25,639 9,476 50 35,165
Interest expense 1,549 6,696 - 8,245
Total expenses 459,569 28,400 50 488,019
Equity in net income of affiliates - - 6,570 6,570
Pretax (loss) income (224,290 ) (544,268 ) 41,335 (727,223 )
Income tax (benefit) provision (71,763 ) (194,848 ) 14,468 (252,143 )
Net (loss) income $ (152,527 ) $ (349,420 ) $ 26,867 $ (475,080 )
Cash and investments $ 3,886,819 $ 3,390,788 $ - $ 7,277,607
Deferred policy acquisition costs 35,220 113,403 - 148,623
Total assets 5,367,065 3,981,423 - 9,348,488
Unearned premiums 207,354 529,321 - 736,675
Reserve for losses and loss adjustment expenses 3,656,746 124,494 - 3,781,240
VIE debt 253,178 374,460 - 627,638
Derivative liabilities 358 747,736 - 748,094

Radian Group Inc. and Subsidiaries

Segment Information

Six Months Ended June 30, 2011
Exhibit E
Mortgage Financial
(In thousands) Insurance Guaranty Total
Revenues:
Net premiums written - insurance $ 345,040 $ (9,513 ) $ 335,527
Net premiums earned - insurance $ 350,459 $ 41,498 $ 391,957
Net investment income 51,686 34,377 86,063
Net gains on investments 45,187 36,484 81,671
Net impairment losses recognized in earnings (11 ) - (11 )
Change in fair value of derivative instruments (136 ) 432,754 432,618
Net gains on other financial instruments 1,835 78,463 80,298
Other income 2,524 120 2,644
Total revenues 451,544 623,696 1,075,240
Expenses:
Provision for losses 683,965 6,974 690,939
Change in reserve for premium deficiency (4,485 ) - (4,485 )
Policy acquisition costs 18,817 9,701 28,518
Other operating expenses 68,050 24,123 92,173
Interest expense 9,935 23,168 33,103
Total expenses 776,282 63,966 840,248
Equity in net income of affiliates - 65 65
Pretax income (loss) (324,738 ) 559,795 235,057
Income tax (benefit) provision 8,875 (13,939 ) (5,064 )
Net income (loss) $ (333,613 ) $ 573,734 $ 240,121

Radian Group Inc. and Subsidiaries

Segment Information

Six Months Ended June 30, 2010
Exhibit F
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written - insurance $ 324,941 $ (9,539 ) $ - $ 315,402
Net premiums earned - insurance $ 357,331 $ 44,383 $ - $ 401,714
Net investment income 54,903 39,074 - 93,977
Net gains on investments 63,222 51,988 - 115,210
Net impairment losses recognized in earnings (56 ) - - (56 )
Change in fair value of derivative instruments (1,033 ) (601,527 ) - (602,560 )
Net losses on other financial instruments (38,173 ) (126,591 ) - (164,764 )
Gain on sale of affiliate - - 34,815 34,815
Other income 3,422 218 63 3,703
Total revenues 439,616 (592,455 ) 34,878 (117,961 )
Expenses:
Provision for losses 956,713 22,333 - 979,046
Change in reserve for premium deficiency (8,585 ) - - (8,585 )
Policy acquisition costs 22,617 9,048 - 31,665
Other operating expenses 71,872 28,149 200 100,221
Interest expense 3,669 15,380 - 19,049
Total expenses 1,046,286 74,910 200 1,121,396
Equity in net income of affiliates - 78 14,590 14,668
Pretax (loss) income (606,670 ) (667,287 ) 49,268 (1,224,689 )
Income tax (benefit) provision (217,610 ) (238,889 ) 17,245 (439,254 )
Net (loss) income $ (389,060 ) $ (428,398 ) $ 32,023 $ (785,435 )

Radian Group Inc.

Financial Guaranty Supplemental Information
Exhibit G
Quarter Ended Six Months Ended
(In thousands) June 30 June 30
2011 2010 2011 2010
Net Premiums Earned:
Public finance direct $ 11,580 $ 15,897 $ 19,416 $ 28,233
Public finance reinsurance 8,262 6,196 16,066 13,109
Structured direct 941 443 1,382 1,160
Structured reinsurance 955 932 1,764 1,847
Trade credit reinsurance 42 3 41 51
Net Premiums Earned - insurance 21,780 23,471 38,669 44,400
Impact of commutations 2,829 (17 ) 2,829 (17 )
Total Net Premiums Earned - insurance $ 24,609 $ 23,454 $ 41,498 $ 44,383
Refundings included in earned premium $ 9,300 $ 10,205 $ 14,131 $ 19,738
Net premiums earned - derivatives (1) $ 10,473 $ 11,814 $ 21,356 $ 23,837
Claims paid:
Trade credit reinsurance $ 285 $ (2 ) $ 261 $ 1,084
Financial Guaranty 3,145 21,841 3,435 25,198
Total $ 3,430 $ 21,839 $ 3,696 $ 26,282
(1) Included in change in fair value of derivative instruments.

Radian Group Inc.

Financial Guaranty Supplemental Information
Exhibit H
($ in thousands, except ratios) June 30 December 31 June 30
2011 2010 2010
Statutory Information:
Capital and surplus $ 1,002,337 $ 1,049,664 $ 974,174
Contingency reserve 414,462 392,589 400,615
Qualified statutory capital 1,416,799 1,442,253 1,374,789
Unearned premium reserve 486,589 517,516 550,952
Loss and loss expense reserve 80,378 70,129 102,831
Total statutory policyholders' reserves 1,983,766 2,029,898 2,028,572
Present value of installment premiums 171,397 202,386 227,634
Soft capital facilities - - 150,000
Total statutory claims paying resources $ 2,155,163 $ 2,232,284 $ 2,406,206
Net debt service outstanding $ 95,107,674 $ 101,168,759 $ 102,502,428
Capital leverage ratio (1) 67 70 75
Claims paying leverage ratio (2) 44 45 43
Net par outstanding by product:
Public finance direct $ 15,084,460 $ 15,727,252 $ 16,718,347
Public finance reinsurance 20,548,760 21,907,290 22,774,238
Structured direct 37,351,096 39,315,801 39,902,271
Structured reinsurance 1,703,261 1,805,295 1,872,802
Total (3) $ 74,687,577 $ 78,755,638 $ 81,267,658
(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 $1.8 billion, $1.9 billion and $2.0 billion at June 30, 2011, December 31, 2010 and June 30, 2010, 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
Exhibit I
Quarter Ended Six Months Ended
($ in millions) June 30 June 30
2011 % 2010 % 2011 % 2010 %

Primary new insurance written
Prime $ 2,280 100.0% $ 2,653 100.0% $ 4,863 99.9% $ 4,549 100.0%
A minus and below -

-

 1 - 3 0.1% 2 -
Total Flow $ 2,280 100.0% $ 2,654 100.0% $ 4,866 100.0% $ 4,551 100.0%

Total primary new insurance written by FICO score
>=740 $ 1,846 81.0% $ 2,100 79.1% $ 3,927 80.7% $ 3,561 78.2%

680-739

 434 19.0% 552 20.8% 936 19.2% 987 21.7%
620-679 -

-

 2 0.1% 3 0.1% 3 0.1%
Total Flow $ 2,280 100.0% $ 2,654 100.0% $ 4,866 100.0% $ 4,551 100.0%

Percentage of primary new insurance written
Refinances 23% 22% 38% 27%
95.01% LTV and above 1.4% 0.2% 1.3% 0.4%
ARMs
Less than 5 years 0.1% 0.2% 0.1% 0.1%
5 years and longer 6.9% 7.0% 5.8% 6.2%

Radian Group Inc.

Mortgage Insurance Supplemental Information
Exhibit J
($ in millions) June 30 June 30
2011 % 2010 %

Primary insurance in force
Flow $ 111,510 89.1 % $ 118,486 86.3 %
Structured 13,600 10.9 % 18,799 13.7 %
Total Primary $ 125,110 100.0 % $ 137,285 100.0 %
Prime $ 103,860 83.0 % $ 108,488 79.0 %
Alt-A 13,318 10.7 % 19,580 14.3 %
A minus and below 7,932 6.3 % 9,217 6.7 %
Total Primary $ 125,110 100.0 % $ 137,285 100.0 %

Primary risk in force
Flow
Prime $ 23,637 86.1 % $ 24,615 84.3 %
Alt-A 2,374 8.7 % 2,873 9.9 %
A minus and below 1,437 5.2 % 1,700 5.8 %
Total Flow $ 27,448 100.0 % $ 29,188 100.0 %
Structured
Prime $ 1,702 58.4 % $ 1,926 55.4 %
Alt-A 665 22.8 % 945 27.2 %
A minus and below 546 18.8 % 606 17.4 %
Total Structured $ 2,913 100.0 % $ 3,477 100.0 %
Total
Prime $ 25,339 83.5 % $ 26,541 81.2 %
Alt-A 3,039 10.0 % 3,818 11.7 %
A minus and below 1,983 6.5 % 2,306 7.1 %
Total Primary $ 30,361 100.0 % $ 32,665 100.0 %

Total primary risk in force by FICO score
Flow
>=740 $ 11,196 40.8 % $ 10,712 36.7 %
680-739 9,327 34.0 % 10,354 35.5 %
620-679 5,865 21.4 % 6,878 23.6 %
<=619 1,060 3.8 % 1,244 4.2 %
Total Flow $ 27,448 100.0 % $ 29,188 100.0 %
Structured
>=740 $ 776 26.6 % $ 956 27.5 %
680-739 848 29.1 % 1,061 30.5 %
620-679 781 26.8 % 901 25.9 %
<=619 508 17.5 % 559 16.1 %
Total Structured $ 2,913 100.0 % $ 3,477 100.0 %
Total
>=740 $ 11,972 39.4 % $ 11,668 35.7 %
680-739 10,175 33.5 % 11,415 35.0 %
620-679 6,646 21.9 % 7,779 23.8 %
<=619 1,568 5.2 % 1,803 5.5 %
Total Primary $ 30,361 100.0 % $ 32,665 100.0 %

Percentage of primary risk in force
Refinances 31 % 31 %
95.01% LTV and above 19 % 20 %
ARMs
Less than 5 years 5 % 7 %
5 years and longer 7 % 8 %

Pool risk in force
Prime $ 1,676 75.6 % $ 1,867 73.5 %
Alt-A 132 6.0 % 179 7.0 %
A minus and below 408 18.4 % 495 19.5 %
Total $ 2,216 100.0 % $ 2,541 100.0 %

Radian Group Inc.

Mortgage Insurance Supplemental Information
Exhibit K
($ in millions) June 30 June 30
2011 % 2010 %

Total primary risk in force by LTV
85.00% and below $ 2,753 9.1 % $ 3,051 9.3 %
85.01% to 90.00% 11,722 38.6 % 12,355 37.8 %
90.01% to 95.00% 10,268 33.8 % 10,737 32.9 %
95.01% and above 5,618 18.5 % 6,522 20.0 %
Total $ 30,361 100.0 % $ 32,665 100.0 %

Total primary risk in force by policy year
2005 and prior $ 7,519 24.7 % $ 8,936 27.4 %
2006 3,396 11.2 % 4,055 12.4 %
2007 7,435 24.5 % 8,867 27.1 %
2008 5,549 18.3 % 6,398 19.6 %
2009 2,915 9.6 % 3,363 10.3 %
2010 2,419 8.0 % 1,046 3.2 %
2011 1,128 3.7 % - -
Total $ 30,361 100.0 % $ 32,665 100.0 %

Total pool risk in force by policy year
2005 and prior $ 1,894 85.5 % $ 2,075 81.6 %
2006 131 5.9 % 210 8.3 %
2007 154 6.9 % 206 8.1 %
2008 37 1.7 % 50 2.0 %
Total pool risk in force $ 2,216 100.0 % $ 2,541 100.0 %

Other risk in force
Second-lien
1st loss $ 109 $ 129
2nd loss 33 86
NIMs 59 268
International
1st loss-Hong Kong primary mortgage insurance 89 185
Credit default swaps - 109
Total other risk in force $ 290 $ 777
Risk to capital ratio-Radian Guaranty only 19.8:1

(1)

17.9:1
(1) Preliminary

Radian Group Inc.

Mortgage Insurance Supplemental Information

For the Quarter and Six Months Ended and as of June 30, 2011
Exhibit L
Quarter Ended Six Months Ended
($ in thousands) June 30 June 30
2011 2010 2011 2010
Net claims paid
Prime $ 256,020 $ 164,043 $ 464,215 $ 290,007
Alt-A 88,140 81,030 163,270 146,061
A minus and below 52,794 48,645 97,379 85,029
Total primary claims paid 396,954 293,718 724,864 521,097
Pool 58,341 39,063 92,699 70,472
Second-lien and other 3,736 4,494 6,619 12,473
Subtotal 459,031 337,275 824,182 604,042
Impact of first-lien terminations 38,198 239 38,198 80,349
Impact of captive terminations (1,166 ) (191 ) (1,166 ) (627 )
Impact of second-lien terminations 16,550 - 16,550 10,834
Total net claims paid $ 512,613 $ 337,323 $ 877,764 $ 694,598
Average net claim paid (1)
Prime $ 49.9 $ 44.2 $ 49.0 $ 44.9
Alt-A 62.0 56.9 60.9 58.1
A minus and below 40.8 36.9 39.0 38.1
Total average net primary claim paid 50.6 45.5 49.5 46.5
Pool 80.2 74.3 75.7 69.8
Second-lien and other 27.7 32.3 28.9 33.9
Total average net claim paid $ 52.7 $ 47.4 $ 51.2 $ 47.9
Average direct primary claim paid (2) (3) $ 55.3 $ 53.3 $ 54.8 $ 53.5
Average total direct claim paid (2) (3) $ 56.9 $ 54.4 $ 56.0 $ 54.2
Loss ratio - GAAP Basis 164.3 % 237.6 % 195.2 % 267.7 %
Expense ratio - GAAP Basis 25.9 % 21.0 % 24.8 % 26.4 %
190.2 % 258.6 % 220.0 % 294.1 %
Reserve for losses by category
Prime $ 1,635,206 $ 1,386,271
Alt-A 652,577 815,055
A minus and below 374,647 400,679
Reinsurance recoverable (4) 160,664 565,737
Total primary reserves 2,823,094 3,167,742
Pool insurance 436,948 457,129
Total 1st lien reserves 3,260,042 3,624,871
Second-lien 8,522 31,795
Other 18 80
Total reserves $ 3,268,582 $ 3,656,746
1st lien reserve per default (5)
Primary reserve per primary default $ 25,334 $ 22,957
Pool reserve per pool default (6) 16,795 14,072
Total 1st lien reserve per default 23,718 21,264

(1)

Calculated net of reinsurance recoveries.

(2)

Calculated without giving effect to the impact of terminations of captive reinsurance transactions and first- and second-lien transactions.

(3)

Before reinsurance recoveries.

(4)

Represents ceded losses on captive transactions and Smart Home.

(5)

Calculated as total reserves divided by total defaults.

(6)

If calculated before giving effect to deductibles and stop losses in pool transactions, the pool reserve per default at June 30, 2011 and June 30, 2010 would be $28,277 and $24,082, respectively.

Radian Group Inc.

Mortgage Insurance Supplemental Information
Exhibit M
June 30 December 31 June 30
2011 2010 2010

Default Statistics
Primary insurance:
Flow

Prime
Number of insured loans 564,839 584,213 599,909
Number of loans in default 64,143 71,196 74,800
Percentage of loans in default 11.36 % 12.19 % 12.47 %

Alt-A
Number of insured loans 47,491 51,765 56,323
Number of loans in default 15,329 17,934 20,289
Percentage of loans in default 32.28 % 34.65 % 36.02 %

A minus and below
Number of insured loans 43,597 47,044 50,719
Number of loans in default 14,098 16,401 18,100
Percentage of loans in default 32.34 % 34.86 % 35.69 %
Total Flow
Number of insured loans 655,927 683,022 706,951
Number of loans in default 93,570 105,531 113,189
Percentage of loans in default 14.27 % 15.45 % 16.01 %
Structured

Prime
Number of insured loans 43,429 42,131 45,201
Number of loans in default 6,248 6,735 6,548
Percentage of loans in default 14.39 % 15.99 % 14.49 %

Alt-A
Number of insured loans 19,600 20,234 31,852
Number of loans in default 5,930 6,635 11,485
Percentage of loans in default 30.26 % 32.79 % 36.06 %

A minus and below
Number of insured loans 16,159 16,716 17,593
Number of loans in default 5,686 6,569 6,793
Percentage of loans in default 35.19 % 39.30 % 38.61 %
Total Structured
Number of insured loans 79,188 79,081 94,646
Number of loans in default 17,864 19,939 24,826
Percentage of loans in default 22.56 % 25.21 % 26.23 %
Total Primary Insurance

Prime
Number of insured loans 608,268 626,344 645,110
Number of loans in default 70,391 77,931 81,348
Percentage of loans in default 11.57 % 12.44 % 12.61 %

Alt-A
Number of insured loans 67,091 71,999 88,175
Number of loans in default 21,259 24,569 31,774
Percentage of loans in default 31.69 % 34.12 % 36.04 %

A minus and below
Number of insured loans 59,756 63,760 68,312
Number of loans in default 19,784 22,970 24,893
Percentage of loans in default 33.11 % 36.03 % 36.44 %
Total Primary Insurance
Number of insured loans 735,115 762,103 801,597
Number of loans in default 111,434 125,470 138,015
Percentage of loans in default 15.16 % 16.46 % 17.22 %
Pool insurance:
Number of loans in default 26,016 32,456 32,486

Radian Group Inc.

Mortgage Insurance Supplemental Information

For the Quarter and Six Months Ended and as of June 30, 2011
Exhibit N
Quarter Ended Six Months Ended
June 30 June 30
2011 2010 2011 2010

Net Premiums Written (In thousands)
Primary and Pool Insurance $ 163,556 $ 167,250 $ 343,813 $ 324,663
Second-lien (1) 592 734 1,212 279
International 46 (75 ) 15 (1 )
Total Net Premiums Written - Insurance $ 164,194 $ 167,909 $ 345,040 $ 324,941

Net Premiums Earned (In thousands)
Primary and Pool Insurance $ 162,388 $ 176,622 $ 345,857 $ 350,734
Second-lien 592 734 1,212 1,245
International 1,345 2,636 3,390 5,352
Total Net Premiums Earned - Insurance $ 164,325 $ 179,992 $ 350,459 $ 357,331

SMART HOME (In millions)
Ceded Premiums Written and Earned $ 2.2 $ 2.6 $ 4.4 $ 4.9
Net premiums earned - derivatives (In thousands) (2) $ - $ 140 $ - $ 279

1st Lien Captives
Premiums ceded to captives (In thousands) $ 7,266 $ 24,684 $ 14,853 $ 50,158
% of total premiums 4.2 % 12.1 % 4.1 % 12.4 %
NIW subject to captives (In thousands) $ - $ (204 ) $ - $ 129
% of primary NIW -

(< 1%

)

-

< 1

%

IIF included in captives (3) 9.9 % 28.8 %
RIF included in captives (3) 9.7 % 30.5 %
Persistency (twelve months ended June 30) 82.5 % 81.7 %
June 30 June 30
2011 2010
SMART HOME
% of Primary RIF included in Smart Home Transactions (3) 2.8 % 3.3 %

(1)

Reflects the impact of second-lien terminations.

(2)

Included in change in fair value of derivative instruments.

(3)

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

Modified Pool (1)
Exhibit O
($ in millions) June 30 June 30
2011 % 2010 %

Modified pool risk in force by policy year

2005 and prior

 $ 200 69.4 % $ 195 42.7 %

2006

 35 12.2 % 45 9.8 %

2007

 46 16.0 % 210 46.0 %

2008

 7 2.4 % 7 1.5 %
Total $ 288 100.0 % $ 457 100.0 %

Modified pool risk in force by product
Prime $ 85 29.5 % $ 77 16.8 %
Alt-A 185 64.2 % 362 79.2 %
A minus and below 18 6.3 % 18 4.0 %
Total $ 288 100.0 % $ 457 100.0 %

Modified pool insurance in force by product
Prime $ 1,021 31.6 % $ 722 11.4 %
Alt-A 2,060 63.7 % 5,441 86.2 %
A minus and below 151 4.7 % 152 2.4 %
Total $ 3,232 100.0 % $ 6,315 100.0 %
Reserve for losses - modified pool (in thousands) $ 73,187 $ 244,628

Default Statistics:
Modified pool:

Total modified pool
Number of insured loans 18,725 25,325
Number of loans in default 3,714 7,759
Percentage of loans in default 19.83 % 30.64 %
(1) Included in primary insurance amounts.

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 Securities Exchange Act of 1934 and the United States ("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," 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 information. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties, including the following:

  • changes in general financial and political conditions, such as a failure of the U.S. economy to fully recover from the most recent recession or the U.S. economy reentering a recessionary period, a 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, and changes in credit spreads, each of which may be accelerated or intensified by the actual or threatened downgrade of U.S. credit ratings or other consequences of a failure of the U.S. Congress to increase the U.S. debt ceiling or as a result of any legislation resulting from such Congressional debates.
  • changes in the way customers, investors or regulators perceive the strength of private mortgage insurers or financial guaranty providers, or 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 exposure 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 our mortgage insurance business and the long-term liquidity needs of our holding company;
  • a further reduction in, or prolonged period of depressed levels of, home mortgage originations due to reduced liquidity in the lending market, tighter underwriting standards, the risk retention requirements established under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") 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 further deterioration in our financial guaranty portfolio which, in the absence of new capital, could 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;
  • a more rapid than expected decrease in the level of insurance rescissions and claim denials from the current elevated levels (including as a result of successful challenges to previously rescinded policies or claim denials), which rescissions and denials have materially mitigated our paid losses and resulted in a significant reduction in our loss reserves;
  • the negative impact our insurance rescissions and claim denials may have on our relationships with customers and potential customers, including the potential loss of business and the heightened risk of disputes and litigation; the need, in the event that we are unsuccessful in defending our rescissions or denials, to reestablish loss reserves for, and reassume risk on, rescinded loans and pay additional claims;
  • the concentration of our mortgage insurance business among a relatively small number of large customers;
  • the 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 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 the availability of mortgage refinancing to only the most qualified borrowers in the current mortgage and 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 rating assigned to Radian Guaranty Inc.);
  • heightened competition for our mortgage insurance business from others such as the Federal Housing Administration (the "FHA"), the Veterans' Administration and private mortgage insurers (in particular, the FHA and those private mortgage insurers that have been assigned higher ratings from the major rating agencies or new entrants to the industry that are not burdened by legacy obligations);
  • changes in the charters or business practices of, or rules or regulations applicable to, 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 products are significantly limited in scope;
  • the effect of the Dodd-Frank Act on the financial services industry in general, and on our mortgage insurance and financial guaranty businesses in particular, including whether and to what extent loans with mortgage insurance are considered "qualified residential mortgages" for purposes of the Dodd-Frank Act securitization provisions or "qualified mortgages" for purposes of the ability to repay provisions and potential obligations to post collateral on our existing insured derivatives portfolio;
  • 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 increasing 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;
  • our ability to realize the tax benefits associated with our deferred tax assets, which will depend on our ability to generate sufficient sustainable taxable income in future periods;
  • our ability to obtain the necessary regulatory approval to consummate our purchase of Municipal and Infrastructure Assurance Corporation (the "FG Insurance Shell") and to successfully develop and implement a strategy to utilize the FG Insurance Shell in the public finance financial guaranty market, which strategy may depend on, among other items, our ability to obtain further necessary regulatory or other approvals, to attract third-party capital and to obtain ratings sufficient to support such a strategy;
  • 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 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, 2010 and in Item 1A of Part II of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which we filed this press release. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements made in this press release to reflect new information or future events or for any other reason.

SOURCE: Radian Group Inc. 

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