News
Read about the progress we’re making across the mortgage and real estate services industry.
11/01/2012
Radian Reports Third Quarter 2012 Financial Results
– Writes
– Improved risk-to-capital ratio of 20.1:1 –
“I am pleased with the strong progress we have made against our top
priorities at Radian by writing new, high-quality mortgage insurance
business and diligently managing our legacy risk,” said
Ibrahim continued, “Our new business volume coupled with the continued decline in our delinquent loan inventory has improved the credit composition of our mortgage insurance book and better positions Radian for a future return to profitability.”
CAPITAL AND LIQUIDITY UPDATE
-
Radian Guaranty’s risk-to-capital ratio improved to 20.1:1 as of
September 30, 2012 , compared to 21.0:1 as ofJune 30, 2012 , and 20.6:1 as ofMarch 31, 2012 .-
The improvement in the risk-to-capital ratio from
June 30, 2012 , was primarily driven by investment gains partially offset by a small level of operating losses. - Radian expects to remain below a 25:1 risk-to-capital ratio for the remainder of 2012. Based on this and existing waivers of other risk-based capital requirements in certain states, Radian expects to continue to write all of its mortgage insurance business in Radian Guaranty, its principal mortgage insurance subsidiary, during this period.
-
In order to proactively manage its risk-to-capital position,
Radian Guaranty entered into a quota share reinsurance agreement
earlier this year with a third-party reinsurance provider. Radian
agreed to cede 20 percent of new insurance written beginning with
the business written in the fourth quarter of 2011, which
represented
$1.4 billion of ceded risk in force as ofSeptember 30, 2012 . In August, Radian and the reinsurer mutually agreed to increase the amount of mortgage insurance risk ceded under the agreement to approximately$1.6 billion and last week agreed to the terms of a new quota share arrangement with incremental ceded risk expected to range between$750 million and $2 billion . This new arrangement remains subject toFreddie Mac approval, as was the case with the previous agreement. -
As of
September 30, 2012 , Radian Guaranty’s statutory capital increased to$1.0 billion , compared to$923.5 million in the second quarter of 2012 and$919.9 million in the first quarter of 2012.
-
The improvement in the risk-to-capital ratio from
-
Radian Group maintains approximately$330 million of currently available liquidity. There is approximately$80 million of the company’s outstanding debt due inFebruary 2013 .
THIRD QUARTER HIGHLIGHTS
-
New mortgage insurance written (NIW) was
$10.6 billion for the quarter, compared to$8.3 billion in the second quarter of 2012 and$4.1 billion in the prior-year quarter.-
The product mix of Radian’s NIW has continued the recent shift to
an increased level of monthly premium business. Of the
$25.4 billion in new business written in the first nine months of 2012, 66 percent was written with monthly premiums and 34 percent with single premiums. This compares to a mix of 61 percent monthly premiums and 39 percent single premiums in the first nine months of 2011. -
The Home Affordable Refinance Program (HARP) accounted for
$2.7 billion of insurance not included in Radian Guaranty’s NIW total for the quarter. This compares to$2.4 billion in the second quarter of 2012 and$762.0 million in the prior-year quarter. As ofSeptember 30, 2012 , approximately eight percent of the company’s total primary mortgage insurance risk in force had successfully completed a HARP refinance. - NIW continued to consist of loans with excellent risk characteristics.
-
The product mix of Radian’s NIW has continued the recent shift to
an increased level of monthly premium business. Of the
-
The mortgage insurance provision for losses was
$171.8 million in the third quarter of 2012, compared to$208.1 million in the second quarter and$276.6 million in the prior-year period. Mortgage insurance loss reserves were approximately$3.0 billion as ofSeptember 30, 2012 , which was down from$3.2 billion as ofJune 30, 2012 , and also as ofSeptember 30, 2011 . First-lien reserves per primary default were$28,561 as ofSeptember 30, 2012 , compared to$28,410 as ofJune 30, 2012 , and$25,346 as ofSeptember 30, 2011 .
-
The total number of primary delinquent loans decreased by 4 percent in
the third quarter from the second quarter of 2012, and by 14 percent
from the third quarter of 2011. The primary mortgage insurance
delinquency rate decreased to 12.6 percent in the third quarter of
2012, compared to 13.3 percent in the second quarter and 15.2 percent
in the third quarter of 2011. The company’s primary risk in force on
defaulted loans was
$4.4 billion in the third quarter, compared to$4.6 billion in the second quarter and$5.2 billion in the third quarter of 2011.
-
Total mortgage insurance claims paid were
$272.4 million in the third quarter, compared to$263.4 million in the second quarter and$329.9 million in the third quarter of 2011. The company expects mortgage insurance net claims paid of approximately$250 million in the fourth quarter and$1.0 billion for the full-year 2012.
-
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 dividends over time.-
As of
September 30, 2012 , Radian Asset had approximately$1.1 billion in statutory surplus with an additional$700 million in claims-paying resources. -
Radian Asset has paid a total of
$384 million in dividends to Radian Guaranty since 2008, and expects to pay another dividend of approximately$40 million in 2013. -
Since
June 30, 2008 , Radian Asset has successfully reduced its total net par exposure by 66 percent to$39 billion as ofSeptember 30, 2012 , including large declines in the riskier segments of the portfolio.
-
As of
CONFERENCE CALL
Radian will discuss these items in its conference call today,
A replay of the webcast will be available on the Radian website approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available 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 267306.
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
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 September 30, 2012 | |||
Exhibit D: | Segment Information Quarter Ended September 30, 2011 | |||
Exhibit E: | Segment Information Nine Months Ended September 30, 2012 | |||
Exhibit F: | Segment Information Nine Months Ended September 30, 2011 | |||
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 by Product | ||||
Exhibit K: | Mortgage Insurance Supplemental Information | |||
Risk in Force by FICO, LTV and Policy Year | ||||
Exhibit L: | Mortgage Insurance Supplemental Information | |||
Primary, Pool and Other Risk in Force | ||||
Exhibit M: | Mortgage Insurance Supplemental Information | |||
Claims, Reserves and Reserves per Default | ||||
Exhibit N: | Mortgage Insurance Supplemental Information | |||
Default Statistics | ||||
Exhibit O: | Mortgage Insurance Supplemental Information | |||
Net Premiums Written and Earned, Captives, QSR and Persistency |
||||
Radian Group Inc. and Subsidiaries Condensed Consolidated Statements of Income Exhibit A |
|||||||||||||||||
Quarter Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||
(In thousands, except per-share data) |
2012 | 2011 | 2012 | 2011 | |||||||||||||
Revenues: | |||||||||||||||||
Net premiums written - insurance | $ | 209,277 | $ | 178,287 | $ | 468,887 | $ | 513,814 | |||||||||
Net premiums earned - insurance | $ | 190,963 | $ | 179,655 | $ | 545,107 | $ | 571,612 | |||||||||
Net investment income | 25,635 | 38,763 | 91,225 | 124,826 | |||||||||||||
Net gains on investments | 84,659 | 81,640 | 178,537 | 163,311 | |||||||||||||
Net impairment losses recognized in earnings | — | (20 | ) | — | (31 | ) | |||||||||||
Change in fair value of derivative instruments | (41,056 | ) | 126,008 | (146,937 | ) | 558,626 | |||||||||||
Net (losses) gains on other financial instruments | (740 | ) | 80,602 | (80,454 | ) | 160,900 | |||||||||||
Gain on sale of affiliate | — | — | 7,708 | — | |||||||||||||
Other income | 1,328 | 1,404 | 4,163 | 4,048 | |||||||||||||
Total revenues | 260,789 | 508,052 | 599,349 | 1,583,292 | |||||||||||||
Expenses: | |||||||||||||||||
Provision for losses | 176,352 | 249,598 | 653,374 | 940,537 | |||||||||||||
Change in reserve for premium deficiency | 966 | (1,942 | ) | 1,505 | (6,427 | ) | |||||||||||
Policy acquisition costs | 12,927 | 11,449 | 51,778 | 39,967 | |||||||||||||
Other operating expenses | 50,429 | 45,240 | 140,776 | 137,413 | |||||||||||||
Interest expense | 12,520 | 14,094 | 39,249 | 47,197 | |||||||||||||
Total expenses | 253,194 | 318,439 | 886,682 | 1,158,687 | |||||||||||||
Equity in net (loss) income of affiliates | — | — | (13 | ) | 65 | ||||||||||||
Pretax income (loss) | 7,595 | 189,613 | (287,346 | ) | 424,670 | ||||||||||||
Income tax (benefit) provision | (6,730 | ) | 6,045 | (13,180 | ) | 981 | |||||||||||
Net income (loss) | $ | 14,325 | $ | 183,568 | $ | (274,166 | ) | $ | 423,689 | ||||||||
Diluted net income (loss) per share (1) | $ | 0.11 | $ | 1.37 | $ | (2.07 | ) | $ | 3.16 | ||||||||
(1) Weighted average shares outstanding (in thousands) |
|
||||||||||||||||
Weighted average common shares outstanding | 132,521 | 132,364 | 132,530 | 132,366 | |||||||||||||
Increase in weighted average shares-common stock equivalents-diluted basis | 1,512 | 1,149 | — | 1,501 | |||||||||||||
Weighted average shares outstanding | 134,033 | 133,513 | 132,530 | 133,867 | |||||||||||||
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 |
|||||||||||||||||
September 30 | December 31 | September 30 | |||||||||||||||
(In thousands, except per-share data) |
2012 | 2011 | 2011 | ||||||||||||||
Assets: | |||||||||||||||||
Cash and investments | $ | 5,291,795 | $ | 5,846,168 | $ | 5,936,586 | |||||||||||
Deferred policy acquisition costs | 91,271 | 139,906 | 138,962 | ||||||||||||||
Deferred income taxes, net | 15,975 | 15,975 | 19,244 | ||||||||||||||
Reinsurance recoverables | 94,584 | 157,985 | 166,483 | ||||||||||||||
Derivative assets | 14,857 | 17,212 | 20,315 | ||||||||||||||
Receivable for securities sold | 52,438 | 18,702 | 504,584 | ||||||||||||||
Other assets | 480,437 | 460,817 | 460,111 | ||||||||||||||
Total assets | $ | 6,041,357 | $ | 6,656,765 | $ | 7,246,285 | |||||||||||
Liabilities and stockholders’ equity: | |||||||||||||||||
Unearned premiums | $ | 614,455 | $ | 637,372 | $ | 628,400 | |||||||||||
Reserve for losses and loss adjustment expenses | 3,119,597 | 3,310,902 | 3,260,556 | ||||||||||||||
Reserve for premium deficiency | 5,149 | 3,644 | 4,309 | ||||||||||||||
Long-term debt | 659,119 | 818,584 | 814,901 | ||||||||||||||
VIE debt | 109,651 | 228,240 | 273,379 | ||||||||||||||
Derivative liabilities | 267,323 | 126,006 | 188,921 | ||||||||||||||
Payable for securities purchased |
45,583 |
46,368 | 532,451 | ||||||||||||||
Other liabilities |
305,227 |
303,358 | 254,932 | ||||||||||||||
Total liabilities | 5,126,104 | 5,474,474 | 5,957,849 | ||||||||||||||
Common stock | 151 | 151 | 151 | ||||||||||||||
Additional paid-in capital | 1,075,151 | 1,074,513 | 1,074,201 | ||||||||||||||
Retained (deficit) earnings | (177,939 | ) | 96,227 | 218,095 | |||||||||||||
Accumulated other comprehensive income (loss) | 17,890 | 11,400 | (4,011 | ) | |||||||||||||
Total common stockholders’ equity | 915,253 | 1,182,291 | 1,288,436 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 6,041,357 | $ | 6,656,765 | $ | 7,246,285 | |||||||||||
Book value per share | $ | 6.85 | $ | 8.88 | $ | 9.67 | |||||||||||
Radian Group Inc. and Subsidiaries Segment Information Quarter Ended September 30, 2012 Exhibit C |
|||||||||||||||||
Mortgage | Financial | ||||||||||||||||
(In thousands) |
Insurance | Guaranty | Total | ||||||||||||||
Revenues: | |||||||||||||||||
Net premiums written - insurance | $ | 209,890 | $ | (613 | ) | $ | 209,277 | ||||||||||
Net premiums earned - insurance | $ | 178,685 | $ | 12,278 | $ | 190,963 | |||||||||||
Net investment income | 14,758 | 10,877 | 25,635 | ||||||||||||||
Net gains on investments | 43,379 | 41,280 | 84,659 | ||||||||||||||
Net impairment losses recognized in earnings | — | — | — | ||||||||||||||
Change in fair value of derivative instruments | (1 | ) | (41,055 | ) | (41,056 | ) | |||||||||||
Net (losses) gains on other financial instruments | (1,960 | ) | 1,220 | (740 | ) | ||||||||||||
Other income | 1,280 | 48 | 1,328 | ||||||||||||||
Total revenues | 236,141 | 24,648 | 260,789 | ||||||||||||||
Expenses: | |||||||||||||||||
Provision for losses | 171,805 | 4,547 | 176,352 | ||||||||||||||
Change in reserve for premium deficiency | 966 | — | 966 | ||||||||||||||
Policy acquisition costs | 10,126 | 2,801 | 12,927 | ||||||||||||||
Other operating expenses | 40,250 | 10,179 | 50,429 | ||||||||||||||
Interest expense | 1,910 | 10,610 | 12,520 | ||||||||||||||
Total expenses | 225,057 | 28,137 | 253,194 | ||||||||||||||
Equity in net loss of affiliates | — | — | — | ||||||||||||||
Pretax income (loss) | 11,084 | (3,489 | ) | 7,595 | |||||||||||||
Income tax (benefit) provision | (20,316 | ) | 13,586 | (6,730 | ) | ||||||||||||
Net income (loss) | $ | 31,400 | $ | (17,075 | ) | $ | 14,325 | ||||||||||
Cash and investments | $ | 3,192,341 | $ | 2,099,454 | $ | 5,291,795 | |||||||||||
Deferred policy acquisition costs | 39,148 | 52,123 | 91,271 | ||||||||||||||
Total assets | 3,651,849 | 2,389,508 | 6,041,357 | ||||||||||||||
Unearned premiums | 333,144 | 281,311 | 614,455 | ||||||||||||||
Reserve for losses and loss adjustment expenses | 3,046,706 | 72,891 | 3,119,597 | ||||||||||||||
VIE debt | 9,448 | 100,203 | 109,651 | ||||||||||||||
Derivative liabilities | — | 267,323 | 267,323 | ||||||||||||||
Radian Group Inc. and Subsidiaries Segment Information Quarter Ended September 30, 2011 Exhibit D |
|||||||||||||||||
Mortgage | Financial | ||||||||||||||||
(In thousands) |
Insurance | Guaranty | Total | ||||||||||||||
Revenues: | |||||||||||||||||
Net premiums written - insurance | $ | 178,215 | $ | 72 | $ | 178,287 | |||||||||||
Net premiums earned - insurance | $ | 163,436 | $ | 16,219 | $ | 179,655 | |||||||||||
Net investment income | 21,642 | 17,121 | 38,763 | ||||||||||||||
Net gains on investments | 53,263 | 28,377 | 81,640 | ||||||||||||||
Net impairment losses recognized in earnings | (20 | ) | — | (20 | ) | ||||||||||||
Change in fair value of derivative instruments | 200 | 125,808 | 126,008 | ||||||||||||||
Net gains on other financial instruments | 2,486 | 78,116 | 80,602 | ||||||||||||||
Other income | 1,357 | 47 | 1,404 | ||||||||||||||
Total revenues | 242,364 | 265,688 | 508,052 | ||||||||||||||
Expenses: | |||||||||||||||||
Provision for losses | 276,599 | (27,001 | ) | 249,598 | |||||||||||||
Change in reserve for premium deficiency | (1,942 | ) | — | (1,942 | ) | ||||||||||||
Policy acquisition costs | 7,834 | 3,615 | 11,449 | ||||||||||||||
Other operating expenses | 36,082 | 9,158 | 45,240 | ||||||||||||||
Interest expense | 2,015 | 12,079 | 14,094 | ||||||||||||||
Total expenses | 320,588 | (2,149 | ) | 318,439 | |||||||||||||
Equity in net income of affiliates | — | — | — | ||||||||||||||
Pretax (loss) income | (78,224 | ) | 267,837 | 189,613 | |||||||||||||
Income tax (benefit) provision | (36,033 | ) | 42,078 | 6,045 | |||||||||||||
Net (loss) income | $ | (42,191 | ) | $ | 225,759 | $ | 183,568 | ||||||||||
Cash and investments | $ | 3,176,860 | $ | 2,759,726 | $ | 5,936,586 | |||||||||||
Deferred policy acquisition costs | 47,863 | 91,099 | 138,962 | ||||||||||||||
Total assets | 3,731,978 | 3,514,307 | 7,246,285 | ||||||||||||||
Unearned premiums | 206,477 | 421,923 | 628,400 | ||||||||||||||
Reserve for losses and loss adjustment expenses | 3,214,854 | 45,702 | 3,260,556 | ||||||||||||||
VIE debt | 31,164 | 242,215 | 273,379 | ||||||||||||||
Derivative liabilities | — | 188,921 | 188,921 | ||||||||||||||
Radian Group Inc. and Subsidiaries Segment Information Nine Months Ended September 30, 2012 Exhibit E |
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Mortgage | Financial | ||||||||||||||||
(In thousands) |
Insurance | Guaranty | Total | ||||||||||||||
Revenues: | |||||||||||||||||
Net premiums written - insurance | $ | 589,261 | $ | (120,374 | ) | $ | 468,887 | ||||||||||
Net premiums earned - insurance | $ | 522,899 | $ | 22,208 | $ | 545,107 | |||||||||||
Net investment income | 50,377 | 40,848 | 91,225 | ||||||||||||||
Net gains on investments | 102,219 | 76,318 | 178,537 | ||||||||||||||
Net impairment losses recognized in earnings | — | — | — | ||||||||||||||
Change in fair value of derivative instruments | (32 | ) | (146,905 | ) | (146,937 | ) | |||||||||||
Net losses on other financial instruments | (2,627 | ) | (77,827 | ) | (80,454 | ) | |||||||||||
Gain on sale of affiliate | — | 7,708 | 7,708 | ||||||||||||||
Other income | 3,928 | 235 | 4,163 | ||||||||||||||
Total revenues | 676,764 | (77,415 | ) | 599,349 | |||||||||||||
Expenses: | |||||||||||||||||
Provision for losses | 614,612 | 38,762 | 653,374 | ||||||||||||||
Change in reserve for premium deficiency | 1,505 | — | 1,505 | ||||||||||||||
Policy acquisition costs | 26,662 | 25,116 | 51,778 | ||||||||||||||
Other operating expenses | 107,787 | 32,989 | 140,776 | ||||||||||||||
Interest expense | 5,355 | 33,894 | 39,249 | ||||||||||||||
Total expenses | 755,921 | 130,761 | 886,682 | ||||||||||||||
Equity in net loss of affiliates | — | (13 | ) | (13 | ) | ||||||||||||
Pretax loss | (79,157 | ) | (208,189 | ) | (287,346 | ) | |||||||||||
Income tax (benefit) provision | (42,324 | ) | 29,144 | (13,180 | ) | ||||||||||||
Net loss | $ | (36,833 | ) | $ | (237,333 | ) | $ | (274,166 | ) | ||||||||
Radian Group Inc. and Subsidiaries Segment Information Nine Months Ended September 30, 2011 Exhibit F |
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Mortgage | Financial | ||||||||||||||||
(In thousands) |
Insurance | Guaranty | Total | ||||||||||||||
Revenues: | |||||||||||||||||
Net premiums written - insurance | $ | 523,255 | $ | (9,441 | ) | $ | 513,814 | ||||||||||
Net premiums earned - insurance | $ | 513,895 | $ | 57,717 | $ | 571,612 | |||||||||||
Net investment income | 73,328 | 51,498 | 124,826 | ||||||||||||||
Net gains on investments | 98,450 | 64,861 | 163,311 | ||||||||||||||
Net impairment losses recognized in earnings | (31 | ) | — | (31 | ) | ||||||||||||
Change in fair value of derivative instruments | 64 | 558,562 | 558,626 | ||||||||||||||
Net gains on other financial instruments | 4,321 | 156,579 | 160,900 | ||||||||||||||
Other income | 3,881 | 167 | 4,048 | ||||||||||||||
Total revenues | 693,908 | 889,384 | 1,583,292 | ||||||||||||||
Expenses: | |||||||||||||||||
Provision for losses | 960,564 | (20,027 | ) | 940,537 | |||||||||||||
Change in reserve for premium deficiency | (6,427 | ) | — | (6,427 | ) | ||||||||||||
Policy acquisition costs | 26,651 | 13,316 | 39,967 | ||||||||||||||
Other operating expenses | 104,132 | 33,281 | 137,413 | ||||||||||||||
Interest expense | 11,950 | 35,247 | 47,197 | ||||||||||||||
Total expenses | 1,096,870 | 61,817 | 1,158,687 | ||||||||||||||
Equity in net income of affiliates | — | 65 | 65 | ||||||||||||||
Pretax (loss) income | (402,962 | ) | 827,632 | 424,670 | |||||||||||||
Income tax (benefit) provision | (27,158 | ) | 28,139 | 981 | |||||||||||||
Net (loss) income | $ | (375,804 | ) | $ | 799,493 | $ | 423,689 | ||||||||||
Radian Group Inc. and Subsidiaries Financial Guaranty Supplemental Information Exhibit G |
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Quarter Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||
(In thousands) |
2012 | 2011 | 2012 | 2011 | |||||||||||||||
Net Premiums Earned: | |||||||||||||||||||
Public finance direct | $ | 8,644 | $ | 9,708 | $ | 33,004 | $ | 29,124 | |||||||||||
Public finance reinsurance | 5,350 | 5,238 | 10,942 | 21,304 | |||||||||||||||
Structured direct | 242 | 399 | 870 | 1,781 | |||||||||||||||
Structured reinsurance | (1,958 | ) | 875 | (342 | ) | 2,639 | |||||||||||||
Trade credit reinsurance | — | (1 | ) | (2 | ) | 40 | |||||||||||||
Net Premiums Earned - insurance | 12,278 | 16,219 | 44,472 | 54,888 | |||||||||||||||
Impact of commutations and reinsurance | — | — | (22,264 | ) | 2,829 | ||||||||||||||
Total Net Premiums Earned - insurance | $ | 12,278 | $ | 16,219 | $ | 22,208 | $ | 57,717 | |||||||||||
Refundings included in earned premium | $ | 7,322 | $ | 4,597 | $ | 26,029 | $ | 18,728 | |||||||||||
Net premiums earned - derivatives (1) | $ | 7,169 | $ | 10,343 | $ | 23,041 | $ | 31,699 | |||||||||||
Claims paid | $ | 26,593 | (2) | $ | 2,339 | $ | 28,873 | $ | 6,035 | ||||||||||
(1) Included in change in fair value of derivative instruments. |
(2) Primarily represents the settlement of obligations related to our insured sovereign indebtedness to Greece. |
The impact of the Assured Transaction for the
Nine Months Ended
(In millions) | |||||||
Statement of Operations |
|||||||
Decrease in premiums written | $ | (119.8 | ) | ||||
Decrease in premiums earned | $ | (22.2 | ) | ||||
Increase in change in fair value of derivative instruments—gain | 1.4 | ||||||
Gain on sale of affiliate | 7.7 | ||||||
Increase in amortization of policy acquisition costs | (15.7 | ) | |||||
Decrease in pre-tax income | $ | (28.8 | ) | ||||
Balance Sheet |
|||||||
Decrease in: | |||||||
Cash | $ | 93.6 | |||||
Deferred policy acquisition costs | 26.2 | ||||||
Accounts and notes receivable | 1.1 | ||||||
Derivative assets | 0.6 | ||||||
Unearned premiums | 71.6 | ||||||
Derivative liabilities | 2.1 | ||||||
Increase in other assets | 19.1 | ||||||
Radian Group Inc. and Subsidiaries Financial Guaranty Supplemental Information Exhibit H |
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September 30 | December 31 | September 30 | ||||||||||||||
($ in thousands, except ratios) |
2012 | 2011 | 2011 | |||||||||||||
Statutory Information: |
||||||||||||||||
Capital and surplus | $ | 1,139,842 | $ | 974,874 | $ | 1,038,290 | ||||||||||
Contingency reserve | 290,877 | 421,406 | 431,715 | |||||||||||||
Qualified statutory capital | 1,430,719 | 1,396,280 | 1,470,005 | |||||||||||||
Unearned premium reserve | 275,172 | 448,669 | 469,956 | |||||||||||||
Loss and loss expense reserve | (50,089 | ) | 161,287 | 13,026 | ||||||||||||
Total statutory policyholders’ reserves | 1,655,802 | 2,006,236 | 1,952,987 | |||||||||||||
Present value of installment premiums | 107,046 | 148,641 | 162,766 | |||||||||||||
Total statutory claims paying resources | $ | 1,762,848 | $ | 2,154,877 | $ | 2,115,753 | ||||||||||
Net debt service outstanding | $ | 48,302,271 | $ | 88,202,630 | $ | 91,717,192 | ||||||||||
Capital leverage ratio (1) | 34 | 63 | 62 | |||||||||||||
Claims paying leverage ratio (2) | 27 | 41 | 43 | |||||||||||||
Net par outstanding by product: | ||||||||||||||||
Public finance direct | $ | 10,288,776 | $ | 13,838,427 | $ | 14,530,364 | ||||||||||
Public finance reinsurance | 5,590,189 | 19,097,057 | 19,789,862 | |||||||||||||
Structured direct | 22,360,606 | 34,760,869 | 35,939,194 | |||||||||||||
Structured reinsurance | 800,936 | 1,492,859 | 1,630,317 | |||||||||||||
Total (3) | $ | 39,040,507 | (4) | $ | 69,189,212 | $ | 71,889,737 | |||||||||
(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 $0.9 billion, $1.4 billion and $1.6 billion at September 30, 2012, |
|
December 31, 2011, and September 30, 2011, 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. |
||
(4) |
Reductions in par caused by the following: $15.6 billion in connection with the Assured Transaction, $10.2 billion in connection |
|
with the CDO terminations, and $1.2 billion in connection with the Commutation Transactions. |
||
Radian Group Inc. and Subsidiaries Mortgage Insurance Supplemental Information Exhibit I |
||||||||||||||||||||||||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||
September 30 | September 30 | |||||||||||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||||||||||||||||
($ in millions) |
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||
Primary new insurance written |
||||||||||||||||||||||||||||||||||||||
Prime | $ | 10,594 | 100.0 | % | $ | 4,104 | 99.9 | % | $ | 25,384 | 99.9 | % | $ | 8,967 | 99.9 | % | ||||||||||||||||||||||
Alt-A | 1 | — | — | — | 2 | — | — | — | ||||||||||||||||||||||||||||||
A minus and below | 3 | — | 3 | 0.1 | 12 | 0.1 | 6 | 0.1 | ||||||||||||||||||||||||||||||
Total Flow | $ | 10,598 | 100.0 | % | $ | 4,107 | 100.0 | % | $ | 25,398 | 100.0 | % | $ | 8,973 | 100.0 | % | ||||||||||||||||||||||
Total primary new insurance written by FICO score |
||||||||||||||||||||||||||||||||||||||
>=740 | $ | 8,067 | 76.1 | % | $ | 3,164 | 77.0 | % | $ | 19,313 | 76.0 | % | $ | 7,091 | 79.0 | % | ||||||||||||||||||||||
680-739 | 2,259 | 21.3 | 892 | 21.7 | 5,475 | 21.6 | 1,828 | 20.4 | ||||||||||||||||||||||||||||||
620-679 | 272 | 2.6 | 51 | 1.3 | 610 | 2.4 | 54 | 0.6 | ||||||||||||||||||||||||||||||
Total Flow | $ | 10,598 | 100.0 | % | $ | 4,107 | 100.0 | % | $ | 25,398 | 100.0 | % | $ | 8,973 | 100.0 | % | ||||||||||||||||||||||
Percentage of primary new insurance written |
||||||||||||||||||||||||||||||||||||||
Monthly premiums | 66 | % | 56 | % | 66 | % | 61 | % | ||||||||||||||||||||||||||||||
Single premiums | 34 | % | 44 | % | 34 | % | 39 | % | ||||||||||||||||||||||||||||||
Refinances | 35 | % | 28 | % | 38 | % | 34 | % | ||||||||||||||||||||||||||||||
LTV | ||||||||||||||||||||||||||||||||||||||
95.01% and above | 1.3 | % | 2.2 | % | 1.4 | % | 1.7 | % | ||||||||||||||||||||||||||||||
90.01% to 95.00% | 42.5 | % | 38.0 | % | 41.5 | % | 35.3 | % | ||||||||||||||||||||||||||||||
ARMS | ||||||||||||||||||||||||||||||||||||||
Less than 5 years |
<1% |
<1 |
% |
<1 |
% |
<1 |
% | |||||||||||||||||||||||||||||||
5 years and longer | 1.7 | % | 6.0 | % | 2.2 | % | 5.9 | % | ||||||||||||||||||||||||||||||
Radian Group Inc. and Subsidiaries Mortgage Insurance Supplemental Information Exhibit J |
|||||||||||||||||||||
September 30 | September 30 | ||||||||||||||||||||
2012 | 2011 | ||||||||||||||||||||
($ in millions) |
$ | % | $ | % | |||||||||||||||||
Primary insurance in force |
|||||||||||||||||||||
Flow | $ | 123,438 | 91.4 | % | $ | 111,493 | 89.5 | % | |||||||||||||
Structured | 11,622 | 8.6 | 13,143 | 10.5 | |||||||||||||||||
Total Primary | $ | 135,060 | 100.0 | % | $ | 124,636 | 100.0 | % | |||||||||||||
Prime | $ | 117,509 | 87.0 | % | $ | 104,185 | 83.6 | % | |||||||||||||
Alt-A | 10,883 | 8.1 | 12,775 | 10.2 | |||||||||||||||||
A minus and below | 6,668 | 4.9 | 7,676 | 6.2 | |||||||||||||||||
Total Primary | $ | 135,060 | 100.0 | % | $ | 124,636 | 100.0 | % | |||||||||||||
Primary risk in force |
|||||||||||||||||||||
Flow | $ | 30,480 | 92.3 | % | $ | 27,473 | 90.7 | % | |||||||||||||
Structured | 2,540 | 7.7 | 2,825 | 9.3 | |||||||||||||||||
Total Primary | $ | 33,020 | 100.0 | % | $ | 30,298 | 100.0 | % | |||||||||||||
Flow | |||||||||||||||||||||
Prime | $ | 27,372 | 89.8 | % | $ | 23,813 | 86.7 | % | |||||||||||||
Alt-A | 1,928 | 6.3 | 2,275 | 8.3 | |||||||||||||||||
A minus and below | 1,180 | 3.9 | 1,385 | 5.0 | |||||||||||||||||
Total Flow | $ | 30,480 | 100.0 | % | $ | 27,473 | 100.0 | % | |||||||||||||
Structured | |||||||||||||||||||||
Prime | $ | 1,482 | 58.3 | % | $ | 1,651 | 58.4 | % | |||||||||||||
Alt-A | 571 | 22.5 | 641 | 22.7 | |||||||||||||||||
A minus and below | 487 | 19.2 | 533 | 18.9 | |||||||||||||||||
Total Structured | $ | 2,540 | 100.0 | % | $ | 2,825 | 100.0 | % | |||||||||||||
Total | |||||||||||||||||||||
Prime | $ | 28,854 | 87.4 | % | $ | 25,464 | 84.1 | % | |||||||||||||
Alt-A | 2,499 | 7.6 | 2,916 | 9.6 | |||||||||||||||||
A minus and below | 1,667 | 5.0 | 1,918 | 6.3 | |||||||||||||||||
Total Primary | $ | 33,020 | 100.0 | % | $ | 30,298 | 100.0 | % | |||||||||||||
Radian Group Inc. and Subsidiaries Mortgage Insurance Supplemental Information Exhibit K |
||||||||||||||||||||
September 30 | September 30 | |||||||||||||||||||
2012 | 2011 | |||||||||||||||||||
($ in millions) |
$ | % | $ | % | ||||||||||||||||
Total primary risk in force by FICO score |
||||||||||||||||||||
Flow | ||||||||||||||||||||
>=740 | $ | 15,141 | 49.7 | % | $ | 11,566 | 42.1 | % | ||||||||||||
680-739 | 9,449 | 31.0 | 9,213 | 33.5 | ||||||||||||||||
620-679 | 5,022 | 16.5 | 5,671 | 20.7 | ||||||||||||||||
<=619 | 868 | 2.8 | 1,023 | 3.7 | ||||||||||||||||
Total Flow | $ | 30,480 | 100.0 | % | $ | 27,473 | 100.0 | % | ||||||||||||
Structured | ||||||||||||||||||||
>=740 | $ | 674 | 26.5 | % | $ | 752 | 26.6 | % | ||||||||||||
680-739 | 736 | 29.0 | 822 | 29.1 | ||||||||||||||||
620-679 | 678 | 26.7 | 756 | 26.8 | ||||||||||||||||
<=619 | 452 | 17.8 | 495 | 17.5 | ||||||||||||||||
Total Structured | $ | 2,540 | 100.0 | % | $ | 2,825 | 100.0 | % | ||||||||||||
Total | ||||||||||||||||||||
>=740 | $ | 15,815 | 47.9 | % | $ | 12,318 | 40.7 | % | ||||||||||||
680-739 | 10,185 | 30.8 | 10,035 | 33.1 | ||||||||||||||||
620-679 | 5,700 | 17.3 | 6,427 | 21.2 | ||||||||||||||||
<=619 | 1,320 | 4.0 | 1,518 | 5.0 | ||||||||||||||||
Total Primary | $ | 33,020 | 100.0 | % | $ | 30,298 | 100.0 | % | ||||||||||||
Total primary risk in force by LTV |
||||||||||||||||||||
85.00% and below | $ | 3,092 | 9.3 | % | $ | 2,731 | 9.0 | % | ||||||||||||
85.01% to 90.00% | 12,679 | 38.4 | 11,717 | 38.7 | ||||||||||||||||
90.01% to 95.00% | 12,473 | 37.8 | 10,390 | 34.3 | ||||||||||||||||
95.01% and above | 4,776 | 14.5 | 5,460 | 18.0 | ||||||||||||||||
Total | $ | 33,020 | 100.0 | % | $ | 30,298 | 100.0 | % | ||||||||||||
Total primary risk in force by policy year |
||||||||||||||||||||
2005 and prior | $ | 5,947 | 18.0 | % | $ | 7,207 | 23.8 | % | ||||||||||||
2006 | 2,827 | 8.6 | 3,276 | 10.8 | ||||||||||||||||
2007 | 6,239 | 18.9 | 7,175 | 23.7 | ||||||||||||||||
2008 | 4,715 | 14.3 | 5,376 | 17.7 | ||||||||||||||||
2009 | 2,200 | 6.7 | 2,812 | 9.3 | ||||||||||||||||
2010 | 1,887 | 5.7 | 2,354 | 7.8 | ||||||||||||||||
2011 | 3,181 | 9.6 | 2,098 | 6.9 | ||||||||||||||||
2012 | 6,024 | 18.2 | — | — | ||||||||||||||||
Total | $ | 33,020 | 100.0 | % | $ | 30,298 | 100.0 | % | ||||||||||||
Primary risk in force on defaulted loans | $ | 4,417 | $ | 5,210 | ||||||||||||||||
Radian Group Inc. and Subsidiaries Mortgage Insurance Supplemental Information Exhibit L |
||||||||||||||||||||
September 30 | September 30 | |||||||||||||||||||
2012 | 2011 | |||||||||||||||||||
($ in millions) |
$ | % | $ | % | ||||||||||||||||
Percentage of primary risk in force |
||||||||||||||||||||
Refinances | 31 | % | 31 | % | ||||||||||||||||
ARMS | ||||||||||||||||||||
Less than 5 years | 4 | % | 5 | % | ||||||||||||||||
5 years and longer | 5 | % | 7 | % | ||||||||||||||||
Pool risk in force |
||||||||||||||||||||
Prime | $ | 1,432 | 76.8 | % | $ | 1,652 | 76.6 | % | ||||||||||||
Alt-A | 108 | 5.8 | 126 | 5.9 | ||||||||||||||||
A minus and below | 324 | 17.4 | 378 | 17.5 | ||||||||||||||||
Total | $ | 1,864 | 100.0 | % | $ | 2,156 | 100.0 | % | ||||||||||||
Total pool risk in force by policy year |
||||||||||||||||||||
2005 and prior | $ | 1,684 | 90.3 | % | $ | 1,877 | 87.1 | % | ||||||||||||
2006 |
79 | 4.2 | 113 | 5.2 | ||||||||||||||||
2007 |
89 | 4.8 | 134 | 6.2 | ||||||||||||||||
2008 |
12 | 0.7 | 32 | 1.5 | ||||||||||||||||
Total pool risk in force | $ | 1,864 | 100.0 | % | $ | 2,156 | 100.0 | % | ||||||||||||
Other risk in force |
||||||||||||||||||||
Second-lien | ||||||||||||||||||||
1st loss | $ | 85 | $ | 107 | ||||||||||||||||
2nd loss | 23 | 31 | ||||||||||||||||||
NIMS | 14 | 38 | ||||||||||||||||||
1st loss-Hong Kong primary mortgage insurance | 45 | 72 | ||||||||||||||||||
Total other risk in force | $ | 167 | $ | 248 | ||||||||||||||||
Risk to capital ratio-Radian Guaranty only | 20.1:1 |
(1) |
|
21.4:1 | ||||||||||||||||
(1) Preliminary |
Radian Group Inc. and Subsidiaries Mortgage Insurance Supplemental Information Exhibit M |
||||||||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||||||
September 30 | September 30 | |||||||||||||||||||||
($ in thousands) |
2012 | 2011 | 2012 | 2011 | ||||||||||||||||||
Net claims paid | ||||||||||||||||||||||
Prime | $ | 169,641 | $ | 180,523 | $ | 467,093 | $ | 644,738 | ||||||||||||||
Alt-A | 45,058 | 57,244 | 121,970 | 220,514 | ||||||||||||||||||
A minus and below | 28,042 | 37,015 | 85,234 | 134,394 | ||||||||||||||||||
Total primary claims paid | 242,741 | 274,782 | 674,297 | 999,646 | ||||||||||||||||||
Pool | 26,546 | 52,771 | 71,846 | 145,470 | ||||||||||||||||||
Second-lien and other | 3,111 | 2,342 | 8,043 | 8,961 | ||||||||||||||||||
Subtotal | 272,398 | 329,895 | 754,186 | 1,154,077 | ||||||||||||||||||
Impact of first-lien terminations | — | — | — | 38,198 | ||||||||||||||||||
Impact of captive terminations | — | — | (148 | ) | (1,166 | ) | ||||||||||||||||
Impact of second-lien terminations | — | — | — | 16,550 | ||||||||||||||||||
Total | $ | 272,398 | $ | 329,895 | $ | 754,038 | $ | 1,207,659 | ||||||||||||||
Average claim paid (1) | ||||||||||||||||||||||
Prime | $ | 48.0 | $ | 51.3 | $ | 48.6 | $ | 49.6 | ||||||||||||||
Alt-A | 59.9 | 61.8 | 58.6 | 61.1 | ||||||||||||||||||
A minus and below | 38.1 | 43.1 | 38.0 | 40.1 | ||||||||||||||||||
Total primary average claims paid | 48.4 | 51.8 | 47.9 | 50.1 | ||||||||||||||||||
Pool | 66.2 | 79.8 | 66.6 | 77.1 | ||||||||||||||||||
Second-lien and other | 29.6 | 25.7 | 27.5 | 28.0 | ||||||||||||||||||
Total | $ | 49.3 | $ | 54.4 | $ | 48.8 | $ | 52.1 | ||||||||||||||
Average primary claim paid (2) (3) | $ | 50.8 | $ | 55.8 | $ | 50.5 | $ | 55.1 | ||||||||||||||
Average total claim paid (2) (3) | $ | 51.5 | $ | 57.9 | $ | 51.2 | $ | 56.5 | ||||||||||||||
Loss ratio - GAAP basis | 96.1 | % | 169.2 | % | 117.5 | % | 186.9 | % | ||||||||||||||
Expense ratio - GAAP basis | 28.2 | % | 26.9 | % | 25.7 | % | 25.4 | % | ||||||||||||||
124.3 | % | 196.1 | % | 143.2 | % | 212.3 | % | |||||||||||||||
Reserve for losses by category | ||||||||||||||||||||||
Prime | $ | 1,693,579 | $ | 1,655,992 | ||||||||||||||||||
Alt-A | 570,055 | 622,568 | ||||||||||||||||||||
A minus and below | 355,018 | 368,034 | ||||||||||||||||||||
Reinsurance recoverable (4) | 89,801 | 160,233 | ||||||||||||||||||||
Total primary reserves | 2,708,453 | 2,806,827 | ||||||||||||||||||||
Pool insurance | 327,020 | 397,919 | ||||||||||||||||||||
Total 1st lien reserves | 3,035,473 | 3,204,746 | ||||||||||||||||||||
Second lien | 8,203 | 10,074 | ||||||||||||||||||||
Other | 3,030 | 34 | ||||||||||||||||||||
Total reserves | $ | 3,046,706 | $ | 3,214,854 | ||||||||||||||||||
1st lien reserve per default (5) | ||||||||||||||||||||||
Primary reserve per primary default | $ | 28,561 | $ | 25,346 | ||||||||||||||||||
Primary reserve per default excluding IBNR | 26,100 | 24,436 | ||||||||||||||||||||
Pool reserve per pool default (6) | 17,538 | 15,325 | ||||||||||||||||||||
Total 1st lien reserve per default | 26,750 | 23,443 | ||||||||||||||||||||
(1) |
Calculated net of reinsurance recoveries and without giving effect to the impact of first-lien, second-lien and captive terminations. |
|
(2) |
Calculated without giving effect to the impact of terminations of captive reinsurance 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 September 30, |
|
2012 and 2011, would be $27,842 and $26,513, respectively. |
||
Radian Group Inc. and Subsidiaries Mortgage Insurance Supplemental Information Exhibit N |
|||||||||
September 30 | December 31 | September 30 | |||||||
2012 | 2011 | 2011 | |||||||
Default Statistics |
|||||||||
Primary Insurance: |
|||||||||
Flow | |||||||||
Prime |
|||||||||
Number of insured loans | 608,765 | 569,190 | 563,226 | ||||||
Number of loans in default | 55,859 | 65,238 | 64,426 | ||||||
Percentage of loans in default | 9.18 | % | 11.46 | % | 11.44 | % | |||
Alt-A |
|||||||||
Number of insured loans | 39,274 | 44,355 | 45,818 | ||||||
Number of loans in default | 12,254 | 14,481 | 14,832 | ||||||
Percentage of loans in default | 31.20 | % | 32.65 | % | 32.37 | % | |||
A minus and below |
|||||||||
Number of insured loans | 36,347 | 40,884 | 42,246 | ||||||
Number of loans in default | 11,273 | 13,560 | 13,749 | ||||||
Percentage of loans in default | 31.01 | % | 33.17 | % | 32.55 | % | |||
Total Flow | |||||||||
Number of insured loans | 684,386 | 654,429 | 651,290 | ||||||
Number of loans in default | 79,386 | 93,279 | 93,007 | ||||||
Percentage of loans in default | 11.60 | % | 14.25 | % | 14.28 | % | |||
Structured | |||||||||
Prime |
|||||||||
Number of insured loans | 38,427 | 41,248 | 42,249 | ||||||
Number of loans in default | 5,510 | 6,308 | 6,229 | ||||||
Percentage of loans in default | 14.34 | % | 15.29 | % | 14.74 | % | |||
Alt-A |
|||||||||
Number of insured loans | 16,893 | 18,484 | 18,990 | ||||||
Number of loans in default | 4,809 | 5,563 | 5,745 | ||||||
Percentage of loans in default | 28.47 | % | 30.10 | % | 30.25 | % | |||
A minus and below |
|||||||||
Number of insured loans | 14,505 | 15,477 | 15,807 | ||||||
Number of loans in default | 5,126 | 5,711 | 5,759 | ||||||
Percentage of loans in default | 35.34 | % | 36.90 | % | 36.43 | % | |||
Total Structured | |||||||||
Number of insured loans | 69,825 | 75,209 | 77,046 | ||||||
Number of loans in default | 15,445 | 17,582 | 17,733 | ||||||
Percentage of loans in default | 22.12 | % | 23.38 | % | 23.02 | % | |||
Total Primary Insurance | |||||||||
Prime |
|||||||||
Number of insured loans | 647,192 | 610,438 | 605,475 | ||||||
Number of loans in default | 61,369 | 71,546 | 70,655 | ||||||
Percentage of loans in default | 9.48 | % | 11.72 | % | 11.67 | % | |||
Alt-A |
|||||||||
Number of insured loans | 56,167 | 62,839 | 64,808 | ||||||
Number of loans in default | 17,063 | 20,044 | 20,577 | ||||||
Percentage of loans in default | 30.38 | % | 31.90 | % | 31.75 | % | |||
A minus and below |
|||||||||
Number of insured loans | 50,852 | 56,361 | 58,053 | ||||||
Number of loans in default | 16,399 | 19,271 | 19,508 | ||||||
Percentage of loans in default | 32.25 | % | 34.19 | % | 33.60 | % | |||
Total Primary | |||||||||
Number of insured loans | 754,211 | 729,638 | 728,336 | ||||||
Number of loans in default | 94,831 | 110,861 | 110,740 | ||||||
Percentage of loans in default | 12.57 | % | 15.19 | % | 15.20 | % | |||
Pool insurance | |||||||||
Number of loans in default | 18,646 | 21,685 | 25,966 | ||||||
Radian Group Inc. and Subsidiaries Mortgage Insurance Supplemental Information Exhibit O |
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|
Quarter Ended | Nine Months Ended | ||||||||||||||||||||
September 30 | September 30 | |||||||||||||||||||||
($ in thousands) |
2012 | 2011 | 2012 | 2011 | ||||||||||||||||||
Net Premiums Written |
||||||||||||||||||||||
Primary and Pool Insurance | $ | 209,445 | $ | 177,642 | $ | 587,762 | $ | 521,455 | ||||||||||||||
Second-lien | 452 | 565 | 1,445 | 1,777 | ||||||||||||||||||
International | (7 | ) | 8 | 54 | 23 | |||||||||||||||||
Total Net Premiums Written - Insurance | $ | 209,890 | $ | 178,215 | $ | 589,261 | $ | 523,255 | ||||||||||||||
Net Premiums Earned |
||||||||||||||||||||||
Primary and Pool Insurance | $ | 177,929 | $ | 161,779 | $ | 520,308 | $ | 507,636 | ||||||||||||||
Second-lien | 452 | 565 | 1,445 | 1,777 | ||||||||||||||||||
International | 304 | 1,092 | 1,146 | 4,482 | ||||||||||||||||||
Total Net Premiums Earned - Insurance | $ | 178,685 | $ | 163,436 | $ | 522,899 | $ | 513,895 | ||||||||||||||
1st Lien Captives |
||||||||||||||||||||||
Premiums ceded to captives | $ | 5,327 | $ | 7,068 | $ | 18,045 | $ | 21,921 | ||||||||||||||
% of total premiums | 2.8 | % | 4.1 | % | 3.3 | % | 4.1 | % | ||||||||||||||
IIF included in captives (1) | 7.1 | % | 9.5 | % | ||||||||||||||||||
RIF included in captives (1) | 6.9 | % | 9.3 | % | ||||||||||||||||||
Quota Share Reinsurance ("QSR") |
||||||||||||||||||||||
QSR ceded premiums written | $ | 16,378 | $ | 41,855 | ||||||||||||||||||
% of premiums written | 7.1 | % | 6.5 | % | ||||||||||||||||||
QSR ceded premiums earned | $ | 5,291 | $ | 8,389 | ||||||||||||||||||
% of premiums earned | 2.8 | % | 1.5 | % | ||||||||||||||||||
Ceding commissions | $ | 4,095 | $ | 10,464 | ||||||||||||||||||
RIF included in QSR (2) | $ | 1,408,078 | ||||||||||||||||||||
Persistency (twelve months ended September 30) | 82.7 | % | 85.0 | % |
(1) |
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. |
|
(2) |
Included in primary risk in force. |
|
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
- Losses in our mortgage insurance and financial guaranty businesses have reduced Radian Guaranty’s statutory surplus and increased Radian Guaranty’s risk-to-capital ratio; additional losses in these businesses, without a corresponding increase in new capital or capital relief, would further negatively impact this ratio, which could limit Radian Guaranty’s ability to write new insurance and increase restrictions and requirements placed on Radian Guaranty.
We and our insurance subsidiaries are subject to comprehensive, detailed regulation by the insurance departments in the states where our insurance subsidiaries are licensed to transact business. These regulations are principally designed for the protection of our insured policyholders rather than for the benefit of investors. Insurance laws vary from state to state, but generally grant broad supervisory powers to state agencies or officials to examine insurance companies and enforce rules or exercise discretion affecting almost every significant aspect of the insurance business, including the power to revoke or restrict an insurance company’s ability to write new business.
The GSEs and state insurance regulators impose various capital requirements on our insurance subsidiaries. These include risk-to-capital ratios, risk-based capital measures and surplus requirements that potentially limit the amount of insurance that each of our insurance subsidiaries may write. The GSEs and our state insurance regulators also possess significant discretion with respect to our insurance subsidiaries. Our failure to maintain adequate levels of capital, among other things, could lead to intervention by the various insurance regulatory authorities or the GSEs, which could materially and adversely affect our business, business prospects and financial condition.
Under state insurance regulations, Radian Guaranty is required to
maintain minimum surplus levels and, in certain states, a minimum amount
of statutory capital relative to the level of risk in force, or
“risk-to-capital.” Sixteen states (the risk-based capital or “RBC
States”) currently impose a statutory risk-based capital requirement
(the “Statutory RBC Requirement”), the most common of which requires
that a mortgage insurer’s risk-to-capital ratio not exceed 25 to 1. In
some of the RBC States (the “MPP States”), Radian Guaranty is required
to maintain a minimum policyholder position (the “MPP Requirement”).
Unless an RBC State grants a waiver or other form of relief, if a
mortgage insurer is not in compliance with the Statutory RBC Requirement
of an RBC State, it may be prohibited from writing new mortgage
insurance business in that state. Radian Guaranty’s domiciliary state,
As a result of ongoing losses, Radian Guaranty’s risk-to-capital ratio
has increased to 20.1 to 1 as of
Our mortgage insurance incurred losses are driven primarily by new
mortgage insurance defaults and adverse development in the assumptions
used to determine our loss reserves. Establishing loss reserves in our
businesses requires significant judgment by management with respect to
the likelihood, magnitude and timing of anticipated losses. This
judgment has been made more difficult in the current period of prolonged
economic uncertainty. Our estimate of the percentage of defaults that
ultimately will result in a paid claim (the “default to claim rate”) is
a significant assumption in our reserving methodology. Our assumed
aggregate weighted average default to claim rate (which incorporates the
expected impact of rescissions and denials) was approximately 43% for
2011 and 46% as of
If Radian Guaranty is not in compliance with a state’s applicable Statutory RBC Requirement, it may be prohibited from writing new business in that state until it is back in compliance or it receives a waiver of or similar relief from the requirement from the applicable state insurance regulator, as discussed in more detail below. In those states that do not have a Statutory RBC Requirement, it is not clear what actions the applicable state regulators would take if a mortgage insurer fails to meet the Statutory RBC Requirement established by another state. Accordingly, if Radian Guaranty fails to meet the Statutory RBC Requirement in one or more states, it could be required to suspend writing business in some or all of the states in which it does business. In addition, the GSEs and our mortgage lending customers may decide not to conduct new business with Radian Guaranty (or may reduce current business levels) or impose restrictions on Radian Guaranty while its risk-to-capital ratio remained at elevated levels. The franchise value of our mortgage insurance business would likely be significantly diminished if we were prohibited from writing new business or restricted in the amount of new business we could write in one or more states.
Radian Guaranty’s risk-to-capital position also is dependent on the performance of our financial guaranty portfolio. During the third quarter of 2008, we contributed our ownership interest in Radian Asset Assurance to Radian Guaranty. While this reorganization provided Radian Guaranty with substantial regulatory capital and dividends, it also makes the capital adequacy of our mortgage insurance business dependent, to a significant degree, on the successful run-off of our financial guaranty business. Any decrease in the capital support from our financial guaranty business would therefore have a negative impact on Radian Guaranty’s risk-to-capital position and its ability to remain in compliance with the Statutory RBC Requirements. If our financial guaranty portfolio performs worse than anticipated, including if we are required to establish (or increase) statutory reserves on defaulted obligations that we have insured, or if we make net commutation payments to terminate insured financial guaranty obligations in excess of the then established statutory reserves for such obligations, the statutory capital of Radian Guaranty also would be negatively impacted.
We actively manage Radian Guaranty’s risk-to-capital position in various
ways, including: (1) through internal and external reinsurance
arrangements; (2) by seeking opportunities to reduce our risk exposure
through commutations or other negotiated transactions; (3) by
contributing additional capital from
Our ability to continue to reduce Radian Guaranty’s risk through
affiliated reinsurance arrangements may be limited. These arrangements
are subject to regulation by state insurance regulators who could decide
to limit, or require the termination of, such arrangements. In addition,
certain of these affiliated reinsurance companies currently are
operating at or near minimum capital levels and have required, and may
continue to require, additional capital contributions from
In order to maximize our financial flexibility, we have applied for
waivers or similar relief for Radian Guaranty in each of the RBC States.
Of the 16
In addition to filing for waivers in the RBC States, we intend to write
new first-lien mortgage insurance business in
These approvals are temporary (the Fannie Mae Approval expires on
The GSE Approvals are limited to the RBC States. It is possible that if Radian Guaranty were not able to comply with the Statutory RBC Requirements of one or more states, the insurance regulatory authorities in states other than the RBC States could prevent Radian Guaranty from continuing to write new business in such states. If this were to occur, we would need to seek approval from the GSEs to expand the scope of their approvals to allow RMAI to write business in states other than the RBC States.
Our existing capital resources may not be sufficient to successfully
manage Radian Guaranty’s risk-to-capital ratio. Our ability to utilize
waivers and RMAI to continue to write business if our risk to capital
position is not in compliance with Statutory RBC Requirements is subject
to conditions that we may be unable to satisfy. As a result, even if we
are successful in implementing this strategy, additional capital
contributions or other risk-to-capital support or relief could be
necessary, which we may not have the ability to provide. Further,
regardless of the waivers and the GSEs’ approval of RMAI, we may choose
to use our existing capital at
Other risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements include the following:
- changes in general economic and political conditions, including high unemployment rates and continued weakness in the U.S. housing and mortgage credit markets, the U.S. economy reentering a recessionary period, a significant downturn in the global economy, a lack of meaningful liquidity in the capital or credit markets, changes or volatility in interest rates or consumer confidence and changes in credit spreads, each of which may be accelerated or intensified by, among other things, legislative activity or inactivity or further actual or threatened downgrades of U.S. credit ratings;
- changes in the way customers, investors, regulators or legislators perceive the strength of private mortgage insurers or financial guaranty providers, in particular in light of developments in the private mortgage insurance and financial guaranty industries in which certain of our former competitors have ceased writing new insurance business and have been placed under supervision or receivership by insurance regulators;
- catastrophic events or economic changes in geographic regions, including governments and municipalities, where our mortgage insurance exposure is more concentrated or where we have financial guaranty exposure;
- our ability to maintain sufficient holding company liquidity to meet our short- and long-term liquidity needs, including in particular, the repayment of our long-term debt and additional capital contributions that may be required to support our mortgage insurance business;
- 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, and general reduced housing demand in the U.S., which may be further exacerbated by regulations impacting home mortgage originations, including the risk retention requirements established under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”);
-
the potential adverse impact on the mortgage origination market and
private mortgage insurers due to increases in capital requirements for
banks and bank holding companies for mortgage loans under proposed
interagency rules to implement the third Basel Capital Accord (“Basel
III”), including in particular, the possibility that loans insured by
the
Federal Housing Administration (“FHA”) will receive a more advantageous capital treatment than loans with private mortgage insurance;
-
our ability to maintain an adequate risk-to-capital position and
surplus requirements in our mortgage insurance business, including if
necessary, our ability to write new mortgage insurance while
maintaining a capital position that is in excess of risk-based capital
limitations imposed in certain states, either through waivers of these
limitations or through use of another mortgage insurance subsidiary,
and the possibility that state regulators could pursue regulatory
actions or proceedings, including possible supervisory or receivership
actions, against
Radian Guaranty Inc. (“Radian Guaranty”), in the event Radian Guaranty’s risk-to-capital position exceeds levels that are acceptable to such regulators; - our ability to continue to effectively mitigate our mortgage insurance and financial guaranty losses;
- 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;
- a more rapid than expected decrease in the level of insurance rescissions and claim denials from the current elevated levels, which have reduced our paid losses and resulted in a significant reduction in our loss reserves, including a decrease in rescissions or denials resulting from an increase in the number of successful challenges to previously rescinded policies or claim denials, or caused by the government-sponsored entities (“GSEs”) intervening in mortgage insurers’ loss mitigation practices, including settlements of disputes;
- the negative impact our insurance rescissions and claim denials or claim curtailments 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, denials or claim curtailments, to increase our loss reserves for, and reassume risk on, rescinded or denied loans, and to pay additional claims, including amounts previously curtailed;
- any disruption in the servicing of mortgages covered by our insurance policies and poor servicer performance;
- adverse changes in the severity or frequency of losses associated with certain products that we formerly offered (and which remain in our insured portfolio) that are riskier than traditional mortgage insurance or financial guaranty insurance policies;
- a decrease in persistency rates of our mortgage insurance policies, which has the effect of reducing our premium income without a corresponding decrease in incurred losses;
- an increase in the risk profile of our existing mortgage insurance portfolio due to the refinancing of existing mortgage loans for only the most qualified borrowers in the current mortgage and housing market;
-
changes in the criteria for assigning credit or similar ratings,
further downgrades or threatened downgrades of, or other ratings
actions with respect to, our credit ratings or the ratings assigned to
any of our rated insurance subsidiaries at any time, including in
particular, the credit ratings of
Radian Group Inc. (“Radian Group”) and the financial strength ratings assigned to Radian Guaranty; -
heightened competition for our mortgage insurance business from others
such as the FHA, the
Department of Veterans Affairs (“VA”) and other private mortgage insurers (in particular, the FHA and those private mortgage insurers that have been assigned higher ratings than we have, that may have access to greater amounts of capital than we do, or that are new entrants to the industry and are therefore 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”) andFreddie Mac , the largest purchasers of mortgage loans that we insure, and our ability to remain an eligible provider to bothFannie Mae andFreddie Mac ; - 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 effect or 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 of the Dodd-Frank Act, and the possibility that the ultimate definitions of “qualified residential mortgages” and “qualified mortgages” could reduce the size of the mortgage market and potentially reduce the number of insurable loans;
- the application of existing federal or state laws and regulations, or changes in these laws and regulations or the way they are interpreted, including, without limitation: (i) the resolution of existing, or the possibility of additional, lawsuits or investigations; and (ii) legislative and regulatory changes (a) impacting the demand for private mortgage insurance, (b) limiting or restricting the products we may offer or increasing the amount of capital we are required to hold, (c) affecting the form in which we execute credit protection, or (d) impacting our existing financial guaranty portfolio;
- the amount and timing of potential payments or adjustments associated with federal or other tax examinations;
- 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 determining gains and losses on these instruments;
- volatility in our earnings caused by changes in the fair value of our assets and liabilities carried at fair value, including our derivative instruments;
- our ability to realize the tax benefits associated with our gross deferred tax assets, which will depend on our ability to generate sufficient sustainable taxable income in future periods;
- changes in accounting principles, rules and guidance, or their interpretation; 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
Source:
Radian Group Inc.
Emily Riley, 215-231-1035
emily.riley@radian.com