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11/05/2008
Radian Reports Third Quarter Financial Results
PHILADELPHIA, Nov. 5 /PRNewswire-FirstCall/ -- Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended September 30, 2008 of $36.7 million, or $0.46 per share. This compares to a net loss of $703.9 million, or $8.82 per share, for the prior year quarter. Book value per share at September 30, 2008 was $28.90.
"Radian's third quarter results were impacted by a continuation of elevated mortgage insurance losses, which were offset by a reduction in our first-lien premium deficiency reserve," said S. A. Ibrahim, Chief Executive Officer of Radian. "During the third quarter, we significantly strengthened the statutory capital of our mortgage insurance business through the contribution of our financial guaranty business. This non-dilutive action is expected to provide the MI business with cash infusions over time. We are focused on growing our core MI business and taking advantage of opportunities to write profitable, new business that will better position us as we move through and beyond these uncertain economic times."
THIRD QUARTER HIGHLIGHTS
-- As announced on September 18, Radian contributed its ownership interest in Radian Asset Assurance Inc. (Radian Asset), its principal financial guaranty subsidiary, to Radian Guaranty Inc. (Radian Guaranty), the Company's principal mortgage insurance subsidiary, providing capital support to its mortgage insurance (MI) business.
-- Radian Asset has $2.9 billion in claims-paying resources including, $935 million in statutory surplus.
-- Radian has a 29 percent ownership interest in Sherman Financial and received $35.5 million in dividends from Sherman during the first three quarters of 2008, including $16 million in the third quarter. Sherman remains a solid contributor of earnings and quarterly dividends, and Radian has the flexibility to pursue a sale of its stake in Sherman.
-- First and second-lien MI claims paid were in line with expectations at $277 million. Fourth quarter MI claims paid are expected to be similar to third quarter, with total claims paid for 2008 expected to be approximately $950 million, lower than previously guided.
-- First-lien primary MI defaults were 9.71 percent, a 16 percent increase over the prior quarter.
-- As a result of reduced mortgage origination volume, total primary new MI insurance written was $7.5 billion, a 22 percent decrease from the prior quarter. Radian Guaranty continues to maintain a strong market position.
-- Representing a dramatic shift during the past year, approximately 98.4 percent of new MI business production in the third quarter of 2008 was prime, a trend that is expected to continue into 2009.
-- Radian Guaranty's strong efforts in loss mitigation remain a critical priority to its capital preservation. Radian Guaranty is involved in a number of initiatives to increase effective loss management, which include placing staff on-site with major mortgage servicers to expedite solutions, creating the Fast Advance program, launching a number of direct outreach programs including a borrower web site, partnering with the Consumer Credit Counseling Service of Delaware Valley to offer borrower counseling services and joining the Hope Now initiative.
-- Radian has sustained relatively minimal credit losses through its high quality, diversified investment portfolio that has limited exposure to vulnerable asset classes.
-- Compared to other financial guaranty insurers, Radian Asset has significantly less exposure to the weakening housing markets, further contributing to its strong capital position. Premiums written this quarter were much lower due to the Company's decision to cease writing new business in light of current market conditions. Premiums earned were very strong reflecting heavy refunding activity.
-- The GSE charter remains unchanged and Radian Guaranty remains a Top Tier provider to the GSEs through frequent and proactive collaboration and demonstration of its strong capital position.
UPDATE on RESERVES
Radian had total reserves of $3 billion as of September 30, 2008, including updated first-lien and second-lien premium deficiency reserves of $150.1 million and $181.3 million, respectively. As of September 30, 2008, the present value of Radian's current projected aggregate future losses and expenses exceeded future premiums and current loss reserves for the domestic first-lien mortgage insurance book by $150.1 million. This projected net loss reflects the remaining life of the June 30, 2008 and prior book of business. The third quarter new production is expected to be profitable and therefore, its projected profitability is excluded from the premium deficiency reserve balance.
CONFERENCE CALL
Radian will discuss each of these items in its conference call today, Wednesday, November 5 at 10:00 a.m. Eastern time. The conference call will be broadcast live over the internet at http://www.ir.radian.biz/phoenix.zhtml?c=112301&p=irol-audioarchives or at http://www.radian.com >News. The call may also be accessed by dialing 800-398- 9397 inside the U.S., or 612-332-1213 for international callers, using passcode 965834 or by referencing Radian.
A replay of the webcast will be available at the Radian Web site approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available two and a half hours after the call ends for one week, using the following dial-in numbers and passcode: 800-475-6701 inside the U.S., or 320-365-3844 for international callers, passcode 965834.
About Radian
Radian Group Inc. is a global credit risk management company headquartered in Philadelphia. Radian develops innovative financial solutions by applying its core mortgage credit risk expertise and structured finance capabilities to the credit enhancement needs of the capital markets worldwide, primarily through credit insurance products. The company also provides credit enhancement for public finance and other corporate and consumer assets on both a direct and reinsurance basis and holds strategic interests in credit-based consumer asset businesses. Additional information may be found at www.radian.com.
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/investors/financial/corporate.aspx.
Exhibit A: Condensed Consolidated Statements of Income
Exhibit B: Condensed Consolidated Balance Sheets
Exhibit C: Segment Information Quarter Ended September 30, 2008
Exhibit D: Segment Information Quarter Ended September 30, 2007
Exhibit E: Segment Information Nine Months Ended September 30, 2008
Exhibit F: Segment Information Nine Months Ended September 30, 2007
Exhibit G: Financial Guaranty Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Exhibit H: Financial Guaranty Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Exhibit I: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
New Insurance Written and Risk Written
Exhibit J: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Insurance in Force and Risk in Force
Exhibit K: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Risk in Force by LTV and Policy Year and other Risk in Force
Exhibit L: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Claims and Reserves
Exhibit M: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Defaults
Exhibit N: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Net Premiums Written and Earned, Smart Home, Captives and
Persistency
Exhibit O: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Reinsurance Progression Toward Attachment - Summary by Book
Year
Exhibit P: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Modified Pool Risk in Force
Exhibit Q: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Alt-A
Exhibit R: Financial Services Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Income
Exhibit A
Quarter Ended Nine Months Ended
September 30 September 30
2008 2007 2008 2007
(In thousands, except
per-share data)
Revenues:
Net premiums written -
insurance $202,451 $308,011 $669,402 $798,860
Net premiums earned -
insurance $249,718 $245,396 $740,776 $677,913
Net investment income 65,215 64,959 196,322 188,605
Change in fair value
of derivative
instruments (1) 164,757 (615,936) 928,792 (633,765)
Net (losses) gains on
other financial
instruments (63,737) 14,840 (126,872) 54,279
Gain on sale of
affiliate - 181,734 - 181,734
Other income 2,756 4,599 9,591 11,519
Total revenues 418,709 (104,408) 1,748,609 480,285
Expenses:
Provision for losses 544,915 330,504 1,586,505 611,508
Provision for premium
deficiency (2) (252,170) 155,176 135,727 155,176
Policy acquisition costs 20,770 35,743 120,628 (3) 88,195
Other operating expenses 80,781 34,891 199,771 137,471
Merger expenses - 1,278 - 14,001
Interest expense 13,852 13,394 40,177 38,810
Total expenses 408,148 570,986 2,082,808 1,045,161
Equity in net income
(loss) of affiliates 15,798 (448,924) 44,028 (376,645)
Pretax income (loss) 26,359 (1,124,318) (290,171) (941,521)
Income tax (benefit)
provision (10,340) (420,454) (129,984) (372,207)
Net income (loss) $36,699 $(703,864) $(160,187) $(569,314)
Diluted net income
(loss) per share (4) $0.46 $(8.82) $(2.01) $(7.16)
(1) Includes premiums earned on derivative contracts.
(2) Includes $(271.7) million for first-lien and $19.6 million for
second-lien in the third quarter of 2008, and $150.1 million for
first-lien and $(14.3) million for second-lien for the first nine
months of 2008.
(3) Includes the acceleration of $50.8 million of deferred policy
acquisition cost amortization in the nine months ended September 30,
2008, as a result of the establishment of a first-lien premium
deficiency reserve in the second quarter of 2008.
(4) Weighted average shares outstanding (in thousands)
Average common shares
outstanding 79,960 79,800 79,603 79,467
Increase in shares-
potential exercise
of options -
diluted basis 433 - - -
Weighted average shares
outstanding
(in thousands) 80,393 79,800 79,603 79,467
For Trend Information, refer to our Quarterly Financial Statistics on
Radian's (RDN) website.
Radian Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Exhibit B
(In thousands, except share and September 30 December 31 September 30
per-share data) 2008 2007 2007
Assets:
Cash and investments $6,330,214 $6,611,836 $6,575,797
Investments in affiliates 87,256 104,354 94,144
Deferred policy acquisition costs 178,581 234,955 233,582
Prepaid federal income taxes 248,828 793,486 861,809
Tax recoverables 462,694 1,816 2,043
Reinsurance recoverables 310,984 33,960 37,674
Other assets 619,597 429,782 409,811
Total assets $8,238,154 $8,210,189 $8,214,860
Liabilities and stockholders' equity:
Unearned premiums $1,000,725 $1,094,710 $1,045,267
Reserve for losses and loss
adjustment expenses 2,680,381 1,598,756 1,094,704
Reserve for premium deficiency 331,373 195,646 155,176
Long-term debt and other borrowings 908,282 953,524 948,010
Variable interest entity debt 127,624 - -
Deferred income taxes - 26,705 383,172
Derivative liabilities 343,296 1,305,665 675,432
Other liabilities 514,147 314,447 465,607
Total liabilities 5,905,828 5,489,453 4,767,368
Common stock 98 98 97
Additional paid-in capital 453,836 442,312 436,828
Retained earnings 2,017,542 2,181,191 2,903,798
Accumulated other comprehensive income (139,150) 97,135 106,769
Total common stockholders' equity 2,332,326 2,720,736 3,447,492
Total liabilities and
stockholders' equity $8,238,154 $8,210,189 $8,214,860
Book value per share $28.90 $33.83 $42.86
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended September 30, 2008
Exhibit C
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written -
insurance $188,583 $13,868 $- $202,451
Net premiums earned -
insurance $196,207 $53,511 $- $249,718
Net investment income 38,017 27,198 - 65,215
Change in fair value of
derivative instruments 8,606 156,151 - 164,757
Net gains (losses) on
other financial
instruments (39,925) (23,895) 83 (63,737)
Other income 2,561 58 137 2,756
Total revenues 205,466 213,023 220 418,709
Expenses:
Provision for losses 519,257 25,658 - 544,915
Provision for premium
deficiency (252,170) - - (252,170)
Policy acquisition costs 5,327 15,443 - 20,770
Other operating expenses 43,771 36,885 125 80,781
Interest expense 6,718 7,134 - 13,852
Total expenses 322,903 85,120 125 408,148
Equity in net income of
affiliates - - 15,798 15,798
Pretax (loss) income (117,437) 127,903 15,893 26,359
Income tax (benefit)
provision (70,473) 53,550 6,583 (10,340)
Net (loss) income $(46,964) $74,353 $9,310 $36,699
Assets $5,120,152 $2,934,032 $183,970 $8,238,154
Total investments 3,816,513 2,406,739 - 6,223,252
Deferred policy
acquisition costs 17,997 160,584 - 178,581
Reserve for losses and
loss adjustment expenses 2,496,412 183,969 - 2,680,381
Derivative liabilities 220,363 122,933 - 343,296
Unearned premiums 351,200 649,525 - 1,000,725
Stockholders' equity 838,474 1,349,016 144,836 2,332,326
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended September 30, 2007
Exhibit D
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written
- insurance $249,521 $58,490 $- $308,011
Net premiums earned -
insurance $212,998 $32,398 $- $245,396
Net investment income 37,437 27,403 119 64,959
Change in fair value
of derivative
instruments (374,024) (241,912) - (615,936)
Net gains (losses) on
other financial
instruments 9,312 5,560 (32) 14,840
Gain on sale of
affiliate - - 181,734 181,734
Other income 3,782 517 300 4,599
Total revenues (110,495) (176,034) 182,121 (104,408)
Expenses:
Provision for losses 278,785 51,719 - 330,504
Provision for premium
deficiency 155,176 - - 155,176
Policy acquisition
costs 24,865 10,878 - 35,743
Other operating
expenses 25,460 9,863 (432) 34,891
Merger expenses 1,116 162 - 1,278
Interest expense 6,764 4,808 1,822 13,394
Total expenses 492,166 77,430 1,390 570,986
Equity in net loss of
affiliates - - (448,924) (448,924)
Pretax loss (602,661) (253,464) (268,193) (1,124,318)
Income tax benefit (227,374) (99,350) (93,730) (420,454)
Net loss $(375,287) $(154,114) $(174,463) $(703,864)
Assets $5,232,832 $2,833,748 $148,280 $8,214,860
Total investments 3,956,943 2,556,054 - 6,512,997
Deferred policy
acquisition costs 62,371 171,211 - 233,582
Reserve for losses
and loss adjustment
expenses 884,985 209,719 - 1,094,704
Unearned premiums 322,109 723,158 - 1,045,267
Stockholders' equity 1,894,959 1,409,168 143,365 3,447,492
Radian Group Inc. and Subsidiaries
Segment Information
Nine Months Ended September 30, 2008
Exhibit E
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written -
insurance $598,864 $70,538 $- $669,402
Net premiums earned - insurance $605,568 $135,208 $- $740,776
Net investment income 115,803 80,505 14 196,322
Change in fair value of
derivative instruments 105,548 823,244 - 928,792
Net (losses) gains on other
financial instruments (66,214) (60,778) 120 (126,872)
Other income 9,051 237 303 9,591
Total revenues 769,756 978,416 437 1,748,609
Expenses:
Provision for losses 1,539,561 46,944 - 1,586,505
Provision for premium
deficiency 135,727 - - 135,727
Policy acquisition costs 82,473 38,155 - 120,628
Other operating expenses 126,644 72,642 485 199,771
Interest expense 21,140 18,788 249 40,177
Total expenses 1,905,545 176,529 734 2,082,808
Equity in net income of
affiliates - - 44,028 44,028
Pretax (loss) income (1,135,789) 801,887 43,731 (290,171)
Income tax (benefit) provision (428,186) 279,537 18,665 (129,984)
Net (loss) income $(707,603) $522,350 $25,066 $(160,187)
Radian Group Inc. and Subsidiaries
Segment Information
Nine Months Ended September 30, 2007
Exhibit F
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written -
insurance $653,439 $145,421 $- $798,860
Net premiums earned -
insurance $578,829 $99,084 $- $677,913
Net investment income 109,283 79,160 162 188,605
Change in fair value of
derivative instruments (419,096) (214,669) - (633,765)
Net gains on other financial
instruments 39,791 13,993 495 54,279
Gain on sale of affiliate - - 181,734 181,734
Other income 9,357 783 1,379 11,519
Total revenues 318,164 (21,649) 183,770 480,285
Expenses:
Provision for losses 571,791 39,717 - 611,508
Provision for premium
deficiency 155,176 - - 155,176
Policy acquisition costs 53,944 34,251 - 88,195
Other operating expenses 95,769 36,630 5,072 137,471
Merger expenses 13,434 567 - 14,001
Interest expense 19,959 13,866 4,985 38,810
Total expenses 910,073 125,031 10,057 1,045,161
Equity in net loss of
affiliates - - (376,645) (376,645)
Pretax loss (591,909) (146,680) (202,932) (941,521)
Income tax benefit (233,121) (72,504) (66,582) (372,207)
Net loss $(358,788) $(74,176) $(136,350) $(569,314)
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2008
Exhibit G
Quarter Ended Nine Months Ended
($ in thousands, except ratios) September 30 September 30
2008 2007 2008 2007
Net Premiums Written: (1)
Public finance direct $2,059 $17,746 $15,538 $48,656
Public finance reinsurance 6,046 31,433 30,808 67,082
Structured direct 3,358 3,991 10,546 12,027
Structured reinsurance 2,748 5,001 13,601 16,606
Trade credit reinsurance (343) 319 45 1,050
Total Net Premiums Written -
insurance $13,868 $58,490 $70,538 $145,421
Net Premiums Earned: (2)
Public finance direct $13,380 $10,765 $43,194 $32,311
Public finance reinsurance 32,310 11,105 65,145 33,897
Structured direct 3,569 4,367 11,211 13,447
Structured reinsurance 4,472 5,560 15,163 17,496
Trade credit reinsurance (220) 601 495 1,933
Total Net Premiums Earned -
insurance $53,511 $32,398 $135,208 $99,084
Refundings included in earned
premium $27,326 $4,054 $55,647 $15,817
Claims paid:
Trade credit reinsurance $449 $1,751 $1,432 $7,022
Other 4,232 1,478 107,449 (3) 2,212
Conseco 2,218 2,663 6,591 8,782
Total $6,899 $5,892 $115,472 $18,016
Incurred losses:
Trade credit reinsurance $(1,825) $(1,928) $(7,299) $(13,544)
Other 27,483 53,647 54,915 53,261
Conseco - - (672) -
Total $25,658 $51,719 $46,944 $39,717
Loss ratio- GAAP Basis 38.1% 111.7% 26.6% 26.9%
Expense ratio- GAAP Basis (4) 77.8% 44.8% 62.9% 48.0%
115.9% 156.5% 89.5% 74.9%
Net payments (receipts) under
derivatives contracts $3,750 $(3,558) $9,328 $(30,933)
(1) Premiums written on credit derivatives for the quarter and nine months
ended September 30, 2008 were $12.1 million and $38.0 million,
respectively, compared to $11.1 million and $30.0 million,
respectively, for the quarter and nine months ended September 30,
2007.
(2) Premiums earned on credit derivatives for the quarter and nine months
ended September 30, 2008 were $13.8 million and $41.0 million,
respectively, compared to $13.9 million and $48.6 million,
respectively, for the quarter and nine months ended September 30,
2007. Premiums earned on credit derivatives are included in change of
fair value of derivative instruments.
(3) Includes a $100 million payment related to one credit that is a CDO of
an ABS that was fully reserved for in 2007.
(4) Excludes merger expenses.
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2008
Exhibit H
($ in thousands, except ratios) September 30 December 31 September 30
2008 2007 2007
Capital and surplus $957,177 $1,158,537 $1,172,141
Contingency reserve 510,195 433,296 407,542
Qualified statutory
capital 1,467,372 1,591,833 1,579,683
Unearned premium reserve 818,365 886,024 874,380
Loss and loss expense reserve 70,621 61,038 67,127
Total statutory
policyholders' reserves 2,356,358 2,538,895 2,521,190
Present value of installment
premiums 402,223 461,806 433,428
Reinsurance and soft capital
facilities 150,000 150,000 150,000
Total statutory claims
paying resources $2,908,581 $3,150,701 $3,104,618
Net debt service outstanding $156,928,647 $164,346,659 $156,743,014
Capital leverage ratio (1) 107 103 99
Claims paying leverage ratio (2) 54 52 50
Net par outstanding by product:
Public finance direct $18,344,046 $18,228,946 $18,168,866
Public finance reinsurance 40,420,433 43,822,781 41,592,621
Structured direct 46,695,176 47,878,168 47,704,089
Structured reinsurance 5,567,853 6,091,717 5,300,388
Total $111,027,508 $116,021,612 $112,765,964
Reinsurance business net par
outstanding:
Treaty 63% 59% 58%
Facultative 37% 41% 42%
Reserve for losses and LAE
Specific $47,495 $26,791 $27,979
Conseco 15,263 22,526 25,193
Non-specific 121,211 203,987 156,547
Total $183,969 $253,304 $209,719
(1) Net debt service outstanding divided by qualified statutory capital
(2) Net debt service outstanding divided by total statutory claims paying
resources
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2008
Exhibit I
Quarter Ended
($ in millions) September 30
2008 % 2007 %
Primary New Insurance Written
Flow $7,524 99.8% $12,225 90.8%
Structured 16 0.2% 1,234 9.2%
Total Primary $7,540 100.0% $13,459 100.0%
Flow
Prime $7,405 98.4% $8,448 69.1%
Alt-A 96 1.3% 2,588 21.2%
A minus and below 23 0.3% 1,189 9.7%
Total Flow $7,524 100.0% $12,225 100.0%
Structured
Prime $16 100.0% $967 78.4%
Alt-A - - 32 2.6%
A minus and below - - 235 19.0%
Total Structured $16 100.0% $1,234 100.0%
Total
Prime $7,421 98.4% $9,415 69.9%
Alt-A 96 1.3% 2,620 19.5%
A minus and below 23 0.3% 1,424 10.6%
Total Primary $7,540 100.0% $13,459 100.0%
Total Primary New Insurance Written
by FICO Score
Flow
<=619 $7 0.1% $703 5.7%
620-679 773 10.3% 3,506 28.7%
680-739 2,662 35.4% 4,644 38.0%
>=740 4,082 54.2% 3,372 27.6%
Total Flow $7,524 100.0% $12,225 100.0%
Structured
<=619 $- - $129 10.5%
620-679 - - 296 24.0%
680-739 4 25.0% 331 26.8%
>=740 12 75.0% 478 38.7%
Total Structured $16 100.0% $1,234 100.0%
Total
<=619 $7 0.1% $832 6.2%
620-679 773 10.3% 3,802 28.2%
680-739 2,666 35.3% 4,975 37.0%
>=740 4,094 54.3% 3,850 28.6%
Total Primary $7,540 100.0% $13,459 100.0%
Percentage of primary new
insurance written
Refinances 20% 27%
95.01% LTV and above 3% 31%
ARMs
Less than 5 years 1% 4%
5 years and longer 10% 13%
Primary risk written
Flow $1,770 99.9% $3,196 91.7%
Structured 2 0.1% 291 8.3%
Total Primary $1,772 100.0% $3,487 100.0%
Pool risk written $1 $42
Other risk written
Seconds
1st loss $- $3
2nd loss - -
NIMs - -
International
1st loss-Hong Kong primary
mortgage insurance - 46
Reinsurance 2 15
Total other risk written $2 $64
Nine Months Ended
($ in millions) September 30
2008 % 2007 %
Primary New Insurance Written
Flow $26,240 95.5% $29,913 68.7%
Structured 1,234 4.5% 13,623 31.3%
Total Primary $27,474 100.0% $43,536 100.0%
Flow
Prime $24,356 92.8% $21,171 70.8%
Alt-A 1,154 4.4% 6,015 20.1%
A minus and below 730 2.8% 2,727 9.1%
Total Flow $26,240 100.0% $29,913 100.0%
Structured
Prime $1,232 99.8% $1,641 12.0%
Alt-A 2 0.2% 11,137 81.8%
A minus and below - - 845 6.2%
Total Structured $1,234 100.0% $13,623 100.0%
Total
Prime $25,588 93.1% $22,812 52.4%
Alt-A 1,156 4.2% 17,152 39.4%
A minus and below 730 2.7% 3,572 8.2%
Total Primary $27,474 100.0% $43,536 100.0%
Total Primary New Insurance Written
by FICO Score
Flow
<=619 $376 1.4% $1,830 6.1%
620-679 4,223 16.1% 9,158 30.6%
680-739 9,729 37.1% 10,977 36.7%
>=740 11,912 45.4% 7,948 26.6%
Total Flow $26,240 100.0% $29,913 100.0%
Structured
<=619 $- - $538 4.0%
620-679 17 1.4% 3,762 27.6%
680-739 437 35.4% 6,160 45.2%
>=740 780 63.2% 3,163 23.2%
Total Structured $1,234 100.0% $13,623 100.0%
Total
<=619 $376 1.4% $2,368 5.4%
620-679 4,240 15.4% 12,920 29.7%
680-739 10,166 37.0% 17,137 39.4%
>=740 12,692 46.2% 11,111 25.5%
Total Primary $27,474 100.0% $43,536 100.0%
Percentage of primary new insurance
written
Refinances 33% 40%
95.01% LTV and above 13% 22%
ARMs
Less than 5 years 1% 17%
5 years and longer 9% 9%
Primary risk written
Flow $6,317 95.2% $7,641 88.2%
Structured 316 4.8% 1,022 11.8%
Total Primary $6,633 100.0% $8,663 100.0%
Pool risk written $60 $227
Other risk written
Seconds
1st loss $- $9
2nd loss - 21
NIMs - 377
International
1st loss-Hong Kong primary
mortgage insurance 51 96
Reinsurance 44 49
Total other risk written $95 $552
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2008
Exhibit J
($ in millions) September 30 September 30
2008 % 2007 %
Primary insurance in force
Flow $119,593 77.5% $98,985 73.3%
Structured 34,699 22.5% 36,030 26.7%
Total Primary $154,292 100.0% $135,015 100.0%
Prime $109,432 70.9% $86,530 64.1%
Alt-A 33,404 21.7% 36,266 26.9%
A minus and below 11,456 7.4% 12,219 9.0%
Total Primary $154,292 100.0% $135,015 100.0%
Primary risk in force
Flow $29,968 86.4% $24,856 84.5%
Structured 4,701 13.6% 4,545 15.5%
Total Primary $34,669 100.0% $29,401 100.0%
Flow
Prime $24,242 80.9% $19,117 76.9%
Alt-A 3,674 12.3% 3,799 15.3%
A minus and below 2,052 6.8% 1,940 7.8%
Total Flow $29,968 100.0% $24,856 100.0%
Structured
Prime $2,451 52.1% $1,791 39.4%
Alt-A 1,451 30.9% 1,668 36.7%
A minus and below 799 17.0% 1,086 23.9%
Total Structured $4,701 100.0% $4,545 100.0%
Total
Prime $26,693 77.0% $20,908 71.1%
Alt-A 5,125 14.8% 5,467 18.6%
A minus and below 2,851 8.2% 3,026 10.3%
Total Primary $34,669 100.0% $29,401 100.0%
Total Primary Risk in Force by FICO
Score
Flow
<=619 $1,550 5.2% $1,573 6.3%
620-679 8,318 27.8% 7,632 30.7%
680-739 11,101 37.0% 9,122 36.7%
>=740 8,999 30.0% 6,529 26.3%
Total Flow $29,968 100.0% $24,856 100.0%
Structured
<=619 $740 15.7% $1,025 22.6%
620-679 1,255 26.7% 1,515 33.3%
680-739 1,452 30.9% 1,282 28.2%
>=740 1,254 26.7% 723 15.9%
Total Structured $4,701 100.0% $4,545 100.0%
Total
<=619 $2,290 6.6% $2,598 8.8%
620-679 9,573 27.6% 9,147 31.1%
680-739 12,553 36.2% 10,404 35.4%
>=740 10,253 29.6% 7,252 24.7%
Total Primary $34,669 100.0% $29,401 100.0%
Percentage of primary risk in force
Refinances 31% 32%
95.01% LTV and above 23% 22%
ARMs
Less than 5 years 9% 14%
5 years and longer 9% 9%
Pool risk in force
Prime $2,096 70.7% $2,088 69.9%
Alt-A 290 9.8% 294 9.8%
A minus and below 577 19.5% 605 20.3%
Total $2,963 100.0% $2,987 100.0%
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2008
Exhibit K
($ in millions) September 30 September 30
2008 % 2007 %
Total Primary Risk in Force by LTV
95.01% and above $7,962 23.0% $6,543 22.3%
90.01% to 95.00% 11,003 31.7% 8,929 30.4%
85.01% to 90.00% 12,045 34.7% 10,040 34.1%
85.00% and below 3,659 10.6% 3,889 13.2%
Total $34,669 100.0% $29,401 100.0%
Total Primary Risk in Force by
Policy Year
2004 and prior $7,598 22.0% $9,399 31.9%
2005 4,385 12.6% 5,364 18.3%
2006 5,342 15.4% 6,246 21.3%
2007 10,896 31.4% 8,392 28.5%
2008 6,448 18.6% - -
Total $34,669 100.0% $29,401 100.0%
Total Pool Risk in Force by Policy
Year
2004 and prior $1,821 61.5% $1,893 63.4%
2005 586 19.8% 598 20.0%
2006 255 8.6% 269 9.0%
2007 241 8.1% 227 7.6%
2008 60 2.0% - -
Total Pool risk in Force $2,963 100.0% $2,987 100.0%
Other risk in force
Seconds
1st loss $289 $436
2nd loss 407 571
NIMs 456 712
International
1st loss-Hong Kong primary
mortgage insurance 442 432
Reinsurance 139 85
Credit default swaps 7,567 8,108
Other
Domestic credit default swaps 162 212
Total other risk in force $9,462 $10,556
Risk to capital ratio-STAT Basis 19.7:1 11.9:1
Risk to capital ratio-STAT Basis
excluding AAA-rated CDS 16.2:1 9.7:1
Risk to capital ratio-Radian
Guaranty only 14.5:1 11.9:1
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2008
Exhibit L
Quarter Ended Nine Months Ended
($ in thousands) September 30 September 30
2008 2007 2008 2007
Direct claims paid
Prime $98,269 $43,601 $222,975 $110,952
Alt-A 68,960 28,902 152,438 70,655
A minus and below 65,280 39,025 162,911 103,132
Seconds and other 44,882 25,282 138,094 59,974
Total $277,391 $136,810 $676,418 $344,713
Average claim paid
Prime $45.0 $32.3 $40.0 $29.7
Alt-A 58.7 46.8 53.9 42.7
A minus and below 42.6 34.7 38.6 31.9
Seconds 36.9 31.2 35.1 29.4
Total $45.4 $35.1 $40.8 $32.3
Loss ratio -GAAP Basis 258.1% 122.8% 244.6% 90.8%
Expense ratio -
GAAP Basis (2) 24.4% 22.1% 33.2% 23.8%
282.5% 144.9% 277.8% 114.6%
Reserve for losses by
category
Prime $667,349 $246,531
Alt-A 844,551 246,792
A minus and below 432,001 279,320
Pool insurance 87,429 42,582
Seconds 153,839 41,985
Other 1,436 1,341
Reserve for losses, net 2,186,605 858,551
Reinsurance
recoverable 309,807 (1) 26,434
Total $2,496,412 $884,985
(1) Reinsurance recoverable on ceded losses related to captives ($240.4
million) and Smart Home ($69.4 million).
(2) Includes the acceleration of $50.8 million of deferred policy
acquisition cost amortization in the nine months ended September 30,
2008, as a result of the establishment of a first-lien premium
deficiency reserve in the second quarter of 2008 and excludes merger
expenses.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2008
Exhibit M
September 30 December 31 September 30
2008 2007 2007
Default Statistics
Primary insurance:
Flow
Prime
Number of insured loans 619,035 565,563 542,819
Number of loans in default 33,330 20,632 16,908
Percentage of loans in default 5.38% 3.65% 3.11%
Alt-A
Number of insured loans 70,814 74,559 74,927
Number of loans in default 13,853 7,980 6,029
Percentage of loans in default 19.56% 10.70% 8.05%
A minus and below
Number of insured loans 60,946 63,853 60,826
Number of loans in default 13,436 10,087 8,638
Percentage of loans in default 22.05% 15.80% 14.20%
Total Flow
Number of insured loans 750,795 703,975 678,572
Number of loans in default 60,619 38,699 31,575
Percentage of loans in default 8.07% 5.50% 4.65%
Structured
Prime
Number of insured loans 68,744 64,789 59,163
Number of loans in default 5,900 4,707 4,072
Percentage of loans in default 8.58% 7.27% 6.88%
Alt-A
Number of insured loans 82,187 97,526 93,494
Number of loans in default 15,499 8,783 6,512
Percentage of loans in default 18.86% 9.01% 6.97%
A minus and below
Number of insured loans 23,337 28,747 31,034
Number of loans in default 7,784 8,659 8,496
Percentage of loans in default 33.35% 30.12% 27.38%
Total Structured
Number of insured loans 174,268 191,062 183,691
Number of loans in default 29,183 22,149 19,080
Percentage of loans in default 16.75% 11.59% 10.39%
Total Primary Insurance
Prime
Number of insured loans 687,779 630,352 601,982
Number of loans in default 39,230 25,339 20,980
Percentage of loans in default 5.70% 4.02% 3.49%
Alt-A
Number of insured loans 153,001 172,085 168,421
Number of loans in default 29,352 16,763 12,541
Percentage of loans in default 19.18% 9.74% 7.45%
A minus and below
Number of insured loans 84,283 92,600 91,860
Number of loans in default 21,220 18,746 17,134
Percentage of loans in default 25.18% 20.24% 18.65%
Total Primary Insurance
Number of insured loans 925,063 895,037 862,263
Number of loans in default 89,802 (1) 60,848 (1) 50,655 (1)
Percentage of loans in default 9.71% 6.80% 5.87%
Pool insurance:
Number of loans in default 29,487 (2) 26,526 (2) 23,810 (2)
(1) Includes approximately 483, 2,595 and 2,796 defaults at September 30,
2008, December 31, 2007 and September 30, 2007, respectively, where
reserves have not been established because no claim payment is
currently anticipated.
(2) Includes approximately 20,965, 20,193 and 18,124 defaults at September
30, 2008, December 31, 2007 and September 30, 2007, respectively,
where reserves have not been established because no claim payment is
currently anticipated.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2008
Exhibit N
Quarter Ended Nine Months Ended
September 30 September 30
2008 2007 2008 2007
Net Premiums Written
(In thousands) (1)
Primary and Pool Insurance $186,524 $235,989 $578,770 $612,589
Seconds 2,044 4,711 8,430 22,340
International 15 8,821 11,664 18,510
Total Net Premiums Written -
insurance $188,583 $249,521 $598,864 $653,439
Net Premiums Earned
(In thousands) (2)
Primary and Pool Insurance $187,596 $200,467 $575,017 $541,796
Seconds 3,250 7,270 14,378 25,165
International 5,361 5,261 16,173 11,868
Total Net Premiums Earned -
insurance $196,207 $212,998 $605,568 $578,829
SMART HOME (In millions)
Ceded Premiums Written $3.1 $3.3 $10.0 $9.7
Ceded Premiums Earned $3.1 $3.3 $10.0 $9.3
Captives
Premiums ceded to captives
(In millions) $34.6 $30.3 $104.4 $88.4
% of total premiums 15.4% 13.0% 15.2% 13.8%
NIW subject to captives
(In millions) $2,104 $5,406 $10,268 $16,546
% of primary NIW 27.9% 40.2% 37.4% 38.0%
IIF included in captives (3) 36.6% 35.3%
RIF included in captives (3) 41.0% 40.6%
Persistency (twelve months ended
September 30) 83.9% 72.8%
September 30 September 30
2008 2007
SMART HOME
% of Primary RIF included in Smart
Home Transactions (3) 3.9% 6.2%
(1) Premiums written on credit derivatives for the quarter and nine months
ended September 30, 2008 were $2.4 million and $16.9 million,
respectively, compared to $11.0 million and $46.4 million,
respectively, for the quarter and nine months ended September 30,
2007.
(2) Premiums earned on credit derivatives for the quarter and nine months
ended September 30, 2008 were $5.0 million and $23.9 million,
respectively, compared to $14.1 million and $50.9 million,
respectively, for the quarter and nine months ended September 30,
2007. Premiums earned on credit derivatives are included in change of
fair value of derivative instruments.
(3) Radian reinsures the middle layer risk positions, while retaining a
significant portion of the total risk comprising the first loss and
most remote risk positions.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of September 30, 2008
Exhibit O
Reinsurance Progression Toward Attachment - Summary by Book Year (1)
($ in millions) September 30, 2008
Original
Book RIF Progression
as of to Ever-to-Date Captive
September 30 Attachment Current Incurred Benefit
Book Year(2): 2008 Point RIF Losses (3)
Pre-2005 0-50% $1,215 $236
Pre-2005 50-75% 959 148
Pre-2005 75-99% 618 106
Pre-2005 Attached 58 8 $1
Pre-2005 Total $25,546 $2,850 $498 $1
2005 0-50% $121 $4
2005 50-75% 375 17
2005 75-99% 158 10
2005 Attached 1,176 135 $50
2005 Total $3,316 $1,830 $166 $50
2006 0-50% $36 $1
2006 50-75% 430 17
2006 75-99% 142 8
2006 Attached 1,937 224 $118
2006 Total $3,537 $2,545 $250 $118
2007 0-50% $262 $5
2007 50-75% 62 2
2007 75-99% 841 31
2007 Attached 3,586 214 $60
2007 Total $5,270 $4,751 $252 $60
2008 0-50% $1,882 $12
2008 50-75% - -
2008 75-99% 2 -
2008 Attached 169 8 $2
2008 Total $2,111 $2,053 $20 $2
Quota Share 0-50% $- $-
Quota Share 50-75% - -
Quota Share 75-99% - -
Quota Share Attached 117 22 $10
Quota Share Total $311 $117 $22 $10
Total Captive
(Including Quota Share) $40,091 $14,146 $1,208 $241
SmartHome 0-50% $122 $25
SmartHome 50-75% - -
SmartHome 75-99% - -
SmartHome Attached 1,234 304 $67
Total SmartHome $3,900 $1,356 $329 $67
(1) Data presented in aggregate for all trusts for captives active at each
period end only. Actual trust attachment and exit points vary by
individual contract. Attachment is calculated at the contract/deal
level and is based on Total Incurred Losses which are defined as
claims paid ever-to-date plus loss reserves.
(2) Book year figures may include loans from additional periods pursuant
to reinsurance agreement terms and conditions.
(3) Captive Benefit is defined as ceded reserves at period end plus ever-
to-date claims paid by the trust.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of September 30, 2008
Exhibit O
Reinsurance Progression Toward Attachment - Summary by Book Year (1)
($ in millions) June 30, 2008
Original
Book RIF Progression
as of to Ever-to-Date Captive
September 30 Attachment Current Incurred Benefit
Book Year(2): 2008 Point RIF Losses (3)
Pre-2005 0-50% $1,337 $240
Pre-2005 50-75% 1,155 158
Pre-2005 75-99% 514 81
Pre-2005 Attached 17 5 $1
Pre-2005 Total $25,546 $3,023 $484 $1
2005 0-50% $187 $4
2005 50-75% 430 17
2005 75-99% 392 21
2005 Attached 896 95 $29
2005 Total $3,316 $1,905 $137 $29
2006 0-50% $146 $3
2006 50-75% 524 18
2006 75-99% 153 7
2006 Attached 1,800 169 $74
2006 Total $3,537 $2,623 $197 $74
2007 0-50% $913 $15
2007 50-75% 2,876 91
2007 75-99% - -
2007 Attached 1,055 63 $21
2007 Total $5,270 $4,844 $169 $21
2008 0-50% $1,483 $3
2008 50-75% 90 2
2008 75-99% - -
2008 Attached - - $-
2008 Total $2,111 $1,573 $5 $-
Quota Share 0-50% $27 $-
Quota Share 50-75% - -
Quota Share 75-99% 6 1
Quota Share Attached 85 17 $8
Quota Share Total $311 $118 $18 $8
Total Captive
(Including Quota Share) $40,091 $14,086 $1,010 $133
SmartHome 0-50% $127 $24
SmartHome 50-75% - -
SmartHome 75-99% 622 115
SmartHome Attached 703 154 $45
Total SmartHome $3,900 $1,452 $293 $45
(1) Data presented in aggregate for all trusts for captives active at each
period end only. Actual trust attachment and exit points vary by
individual contract. Attachment is calculated at the contract/deal
level and is based on Total Incurred Losses which are defined as
claims paid ever-to-date plus loss reserves.
(2) Book year figures may include loans from additional periods pursuant
to reinsurance agreement terms and conditions.
(3) Captive Benefit is defined as ceded reserves at period end plus ever-
to-date claims paid by the trust.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of September 30, 2008
Exhibit O
Reinsurance Progression Toward Attachment - Summary by Book Year (1)
($ in millions) December 31, 2007
Original
Book RIF Progression
as of to Ever-to-Date Captive
September 30 Attachment Current Incurred Benefit
Book Year(2): 2008 Point RIF Losses (3)
Pre-2005 0-50% $2,209 $279
Pre-2005 50-75% 1,145 144
Pre-2005 75-99% 32 19
Pre-2005 Attached 12 3 $1
Pre-2005 Total $25,546 $3,398 $445 $1
2005 0-50% $697 $13
2005 50-75% 429 15
2005 75-99% 945 53
2005 Attached 11 2 $-
2005 Total $3,316 $2,082 $83 $-
2006 0-50% $851 $12
2006 50-75% 332 10
2006 75-99% 1,470 71
2006 Attached 210 10 $1
2006 Total $3,537 $2,863 $103 $1
2007 0-50% $4,058 $36
2007 50-75% 580 12
2007 75-99% 4 -
2007 Attached 1 - $-
2007 Total $5,270 $4,643 $48 $-
2008 0-50% $- $-
2008 50-75% - -
2008 75-99% - -
2008 Attached - - $-
2008 Total $2,111 $- $- $-
Quota Share 0-50% $20 $-
Quota Share 50-75% 7 1
Quota Share 75-99% - -
Quota Share Attached 90 9 $4
Quota Share Total $311 $117 $10 $4
Total Captive
(Including Quota Share) $40,091 $13,103 $689 $6
SmartHome 0-50% $142 $23
SmartHome 50-75% 693 92
SmartHome 75-99% - -
SmartHome Attached 833 112 $10
Total SmartHome $3,900 $1,668 $227 $10
(1) Data presented in aggregate for all trusts for captives active at each
period end only. Actual trust attachment and exit points vary by
individual contract. Attachment is calculated at the contract/deal
level and is based on Total Incurred Losses which are defined as
claims paid ever-to-date plus loss reserves.
(2) Book year figures may include loans from additional periods pursuant
to reinsurance agreement terms and conditions.
(3) Captive Benefit is defined as ceded reserves at period end plus ever-
to-date claims paid by the trust.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2008
Exhibit P
($ in millions) September 30 September 30
2008 % 2007 %
Modified Pool Risk in Force
Prime
2004 and prior $46 29.5% $47 30.1%
2005 40 25.6% 48 30.8%
2006 44 28.2% 44 28.2%
2007 22 14.1% 17 10.9%
2008 4 2.6% - -
Total $156 100.0% $156 100.0%
Alt-A
2004 and prior $98 14.6% $105 15.4%
2005 102 15.2% 118 17.4%
2006 165 24.5% 165 24.3%
2007 304 45.2% 292 42.9%
2008 4 0.5% - -
Total $673 100.0% $680 100.0%
A minus and below
2004 and prior $9 36.0% $10 35.7%
2005 6 24.0% 8 28.6%
2006 3 12.0% 3 10.7%
2007 7 28.0% 7 25.0%
2008 - - - -
Total $25 100.0% $28 100.0%
Total
2004 and prior $153 17.9% $162 18.8%
2005 148 17.3% 174 20.1%
2006 212 24.8% 212 24.5%
2007 333 39.0% 316 36.6%
2008 8 1.0% - -
Total Modified Pool Risk in Force $854 100.0% $864 100.0%
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of September 30, 2008
ALT-A
Exhibit Q
($ in Quarter Ended Nine Months Ended
millions) September 30 September 30
2008 % 2007 % 2008 % 2007 %
Primary New
Insurance
Written by
FICO Score
<=619 $- - $15 0.6% $3 0.3% $107 0.6%
620-659 9 9.4% 167 6.4% 26 2.2% 1,846 10.8%
660-679 10 10.4% 303 11.5% 63 5.4% 2,689 15.7%
680-739 30 31.2% 1,350 51.5% 561 48.6% 8,373 48.8%
>=740 47 49.0% 785 30.0% 503 43.5% 4,137 24.1%
Total $96 100.0% $2,620 100.0% $1,156 100.0% $17,152 100.0%
Primary Risk
in Force by
FICO Score
<=619 $34 0.7% $39 0.7%
620-659 628 12.3% 756 13.8%
660-679 755 14.7% 839 15.4%
680-739 2,452 47.8% 2,558 46.8%
>=740 1,256 24.5% 1,275 23.3%
Total $5,125 100.0% $5,467 100.0%
Primary Risk
in Force by
LTV
95.01% and
above $356 6.9% $382 7.0%
90.01% to
95.00% 1,330 26.0% 1,424 26.0%
85.01% to
90.00% 2,131 41.6% 2,216 40.6%
85.00% and
below 1,308 25.5% 1,445 26.4%
Total $5,125 100.0% $5,467 100.0%
Primary Risk
in Force by
Policy Year
2004 and
prior $940 18.3% $1,182 21.6%
2005 707 13.8% 897 16.4%
2006 1,141 22.3% 1,325 24.2%
2007 2,083 40.6% 2,063 37.8%
2008 254 5.0% - -
Total $5,125 100.0% $5,467 100.0%
Radian Group Inc.
Financial Services Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2008
Exhibit R
Quarter Ended Nine Months Ended
September 30 September 30
(In thousands ) 2008 2007 2008 2007
Investment in Affiliates-
Selected Information
C-BASS
Balance, beginning of
period $- $467,800 $- $451,395
Net income for period - (467,800) - (451,395)
Balance, end of period $- $- $- $-
Sherman
Balance, beginning of
period $112,644 $171,737 $104,315 $167,412
Net income for period 15,798 18,876 44,028 74,750
Dividends received 15,961 - 35,460 51,512
Other comprehensive (loss)
income 522 (637) 120 (674)
Sale of ownership interest - (95,866) - (95,866)
Adjustment to investment
related to buyback of
MGIC interest (25,786) - (25,786) -
Balance, end of period $87,217 $94,110 $87,217 $94,110
Portfolio Information:
C-BASS
Servicing portfolio N/A $57,700,000
Total assets N/A N/A
Servicing income N/A N/A N/A N/A
Net interest income N/A N/A N/A N/A
Total revenues N/A N/A N/A N/A
Sherman
Total assets $2,433,666 $2,093,168
Total revenues $381,047 $311,386 $1,179,014 $880,613
Radian owns a 46% interest in C-BASS and a 28.7% interest in Sherman.
Prior to August 2008, we owned a 21.8% interest in Sherman. Prior to
September 2007, we owned an interest in Sherman consisting of 40.96% of
the Class A Common Units of Sherman (Class A Common Units represent 94% of
the total equity in Sherman) and 50% of the Preferred Units of Sherman.
Forward Looking Statements
All statements in this news release that address events, developments or results that we expect or anticipate may occur in the future are "forward- looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. These statements, which include, without limitation, projections regarding our future performance and financial condition are made on the basis of management's current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward looking information. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties, including the following:
-- changes in general financial and political conditions, such as extended national or regional economic recessions, changes in housing demand or mortgage originations, changes in housing values (in particular, further deterioration in the housing, mortgage and related credit markets, which would harm our future consolidated results of operations and could cause losses for our businesses to be worse than expected), changes in the liquidity in the capital markets and the further contraction of credit markets, population trends and changes in household formation patterns, changes in unemployment rates, changes or volatility in interest rates or consumer confidence, changes in credit spreads, changes in the way investors perceive the strength of private mortgage insurers or financial guaranty providers, investor concern over the credit quality and specific risks faced by the particular businesses, municipalities or pools of assets covered by our insurance;
-- economic changes or catastrophic events in geographic regions where our mortgage insurance or financial guaranty insurance in force is more concentrated;
-- our ability to successfully execute upon our capital plan, and if necessary, to obtain additional capital to support our long-term liquidity needs and to protect our credit ratings and the financial strength ratings of Radian Guaranty Inc., our primary mortgage insurance subsidiary;
-- a further decrease in the volume of home mortgage originations due to reduced liquidity in the lending market, tighter underwriting standards and the on-going deterioration in housing markets throughout the U.S.;
-- our ability to maintain adequate risk-to-capital ratios, leverage ratios and surplus requirements in our mortgage insurance business in light of on-going losses in this business;
-- the loss of a customer for whom we write a significant amount of mortgage insurance or the influence of large customers;
-- disruption in the servicing of mortgages covered by our insurance policies;
-- the aging of our mortgage insurance portfolio and changes in severity or frequency of losses associated with certain of our products that are riskier than traditional mortgage insurance or financial guaranty insurance policies;
-- the performance of our insured portfolio of higher risk loans, such as Alternative-A ("Alt-A") and subprime loans, and adjustable rate products, such as adjustable rate mortgages and interest-only mortgages, which have resulted in increased losses in 2007 and 2008 and are expected to result in further losses;
-- reduced opportunities for loss mitigation in markets where housing values fail to appreciate or begin to decline;
-- changes in persistency rates of our mortgage insurance policies caused by changes in refinancing activity, in the rate of appreciation or depreciation of home values and changes in the mortgage insurance cancellation requirements of mortgage lenders and investors;
-- downgrades or threatened downgrades of, or other ratings actions with respect to, our credit ratings or the ratings assigned by the major rating agencies to any of our rated insurance subsidiaries at any time (in particular, the credit rating of Radian Group Inc. and the financial strength ratings assigned to Radian Guaranty Inc., which are currently on Negative outlook);
-- heightened competition for our mortgage insurance business from others such as the Federal Housing Administration and the Veterans' Administration or other private mortgage insurers (in particular those that have been assigned higher ratings from the major ratings agencies);
-- changes in the charters or business practices of Federal National Mortgage Association ("Fannie Mae") and Freddie Mac, the largest purchasers of mortgage loans that we insure, and our ability to retain our "Top Tier" eligibility requirement from both Freddie Mac and Fannie Mae;
-- the application of existing federal or state consumer, lending, insurance, securities and other applicable laws and regulations, or changes in these laws and regulations or the way they are interpreted; including, without limitation: (i) the outcome of existing investigations or the possibility of private lawsuits or other formal investigations by state insurance departments and state attorneys general alleging that services offered by the mortgage insurance industry, such as captive reinsurance, pool insurance and contract underwriting, are violative of the Real Estate Settlement Procedures Act and/or similar state regulations, (ii) legislative and regulatory changes affecting demand for private mortgage insurance or financial guaranty insurance, or (iii) legislation and regulatory changes limiting or restricting our use of (or requirements for) additional capital, the products we may offer, the form in which we may execute the credit protection we provide or the aggregate notional amount of any product we may offer for any one transaction or in the aggregate;
-- the possibility that we may fail to estimate accurately the likelihood, magnitude and timing of losses in connection with establishing loss reserves for our mortgage insurance or financial guaranty businesses, or the premium deficiencies for our first- and second-lien mortgage insurance business, or to estimate accurately the fair value amounts of derivative contracts in our mortgage insurance and financial guaranty businesses in determining gains and losses on these contracts;
-- volatility in our earnings caused by changes in the fair value of our derivative instruments and our need to reevaluate the premium deficiencies in our mortgage insurance business on a quarterly basis;
-- changes in accounting guidance from the Securities and Exchange Commission ("SEC") or the Financial Accounting Standards Board;
-- legal and other limitations on amounts we may receive from our subsidiaries as dividends or through tax and expense sharing arrangements with our subsidiaries; and
-- vulnerability to the performance of our strategic investments, including in particular, our investment in Sherman Financial Group LLC.
For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2007 as well as the material changes to these risks discussed in Item 1A of Part II of our quarterly reports on Form 10-Q. 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 news release. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements made in this news release to reflect new information or future events or for any other reason.
SOURCE Radian Group Inc.
11/05/2008
CONTACT: Investors, Terri Williams-Perry, +1-215-231-1486, terri.williams-perry@radian.com; or Media, Rick Gillespie, +1-215-231-1061, rick.gillespie@radian.com
Web site: http://www.radian.com
(RDN)