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05/01/2012
Radian Reports First Quarter 2012 Financial Results
-Writes $6.5 billion of new MI business in the first quarter-
PHILADELPHIA, May 01, 2012 (BUSINESS WIRE) --Radian Group Inc. (NYSE: RDN) today reported a net loss for the quarter ended March 31, 2012, of $169.2 million, or $1.28 per diluted share, which included combined losses from the change in fair value of derivatives and other financial instruments of $90.6 million. This compares to net income of $103.0 million, or $0.77 per diluted share, which included combined gains from the change in fair value of derivatives and other financial instruments of $319.1 million, for the prior-year quarter. Book value per share at March 31, 2012, was $7.65.
"While our financial results for the quarter continue to reflect the challenges of the macroeconomic environment and our legacy portfolio, we are pleased with another quarter of strong volume in new mortgage insurance business and a continued decline in the number of delinquent loans," said Chief Executive Officer S.A. Ibrahim.
Ibrahim continued, "We remain focused on managing our capital and increasing our new business volume. We improved our risk-to-capital position in the first quarter and opportunistically reduced our outstanding debt. We continued to write a strong share of high-quality business that improves the mix and credit profile of our mortgage insurance portfolio and we believe further strengthens Radian for the future. And we continued our momentum in April by writing approximately $2.6 billion in new business."
CAPITAL AND LIQUIDITY UPDATE
- Radian Guaranty's risk-to-capital ratio improved to 20.6:1 as of March 31, 2012, compared to 21.5:1 at December 31, 2011. Its risk-to-capital ratio was 20.3:1 at March 31, 2011. The improved risk-to-capital ratio was primarily driven by an increase in Radian Asset's statutory capital, primarily resulting from the Assured Guaranty transaction described below, partially offset by operating losses for the mortgage insurance segment. As of March 31, 2012, Radian Guaranty had $920 million of statutory capital.
- Radian Group maintains approximately $350 million of currently available liquidity. The company completed a tender offer in the first quarter for a significant portion of its $250 million of debt maturing in February 2013 at a discount to face value. The tender offer reduced the amount of debt outstanding by $146 million, at a cost of $133 million.
- Radian Guaranty has received state-specific waivers or similar relief in many of the sixteen states that impose risk-based capital requirements. In addition, the company received approval from Fannie Mae and Freddie Mac in the first quarter to write new business through Radian Mortgage Assurance Inc. (RMAI) in those risk-based capital states where waivers have not been obtained at such time that Radian Guaranty exceeds the risk-based capital requirements in those states. As previously disclosed, in addition to the $17 million of existing capital in RMAI, Radian Group will contribute $50 million of additional capital to RMAI at such time that Radian Guaranty were to exceed a 25:1 risk-to-capital level.
FIRST QUARTER HIGHLIGHTS
- New mortgage insurance written (NIW) was $6.5 billion, compared to $6.5 billion in the fourth quarter of 2011 and $2.6 billion in the prior-year period. In addition, the Home Affordable Refinance Program (HARP) accounted for $929.9 million of insurance not included in Radian Guaranty's NIW total for the quarter. NIW continued to consist of loans with excellent risk characteristics. In addition, Radian wrote approximately $2.6 billion in NIW in April 2012.
- The mortgage insurance provision for losses was $234.7 million in the first quarter of 2012, compared to $333.3 million in the fourth quarter of 2011 and $414.0 million in the prior-year period. Mortgage insurance loss reserves were approximately $3.2 billion as of March 31, 2012, which was flat to the fourth quarter of 2011 and down from $3.5 billion a year ago. First-lien reserves per primary default increased to $27,833 as of March 31, 2012, compared to $26,007 as of December 31, 2011 and $25,535 as of March 31, 2011.
- The total number of primary delinquent loans decreased by 7 percent in the first quarter from the fourth quarter of 2011, and by 12 percent from the first quarter of 2011. The primary mortgage insurance delinquency rate decreased to 14 percent in the first quarter.
- Total mortgage insurance claims paid were $218.2 million, compared to $365.2 million in the first quarter of 2011. The company expects mortgage insurance net claims paid of approximately $1.1 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 March 31, 2012, Radian Asset had approximately $1.1 billion in statutory surplus with an additional $900 million in claims-paying resources.
- Radian Asset is expected to pay an ordinary dividend of approximately $50 million to Radian Guaranty in July 2012.
- As previously disclosed, Radian Asset entered into a transaction with Assured Guaranty Ltd. in the first quarter that positively impacted its statutory capital by $94 million. An additional $6 million related to this transaction is expected to positively impact statutory capital in 2012.
- Since June 30, 2008, Radian Asset has successfully reduced its total net par exposure by 61 percent to $44.6 billion as of March 31, 2012, including large declines in the riskier segments of the portfolio.
RECENT EVENTS
- On April 1, 2012, Radian entered a quota share reinsurance agreement with an external reinsurance provider in order to proactively manage its mortgage insurance risk-to-capital position. Through the agreement, as previously disclosed, Radian cedes 20 percent of its NIW beginning with the fourth quarter of 2011, which represents $532 million of the company's risk in force as of April 1, 2012. The total amount of risk that may be ceded through this arrangement is limited and is expected to be between $1.25 billion and $1.6 billion. At a 25 to 1 risk-to-capital ratio, the equivalent capital benefit associated with ceding this amount of risk would be between $50 million and $62.5 million. Radian has the ability, at its option, to commute two-thirds of the reinsurance on December 31, 2014.
- On April 11, 2012, as previously disclosed, Radian Asset agreed with one of its derivative counterparties to commute its CDO of ABS transaction and certain TruPs CDO exposures with par outstanding as of March 31, 2012, of $450.2 million and $699.0 million, respectively. Radian Asset paid $210 million in consideration, of which a portion was deposited with a limited purpose vehicle to cover potential future losses on the commuted TruPs bonds. The company currently expects a salvage recovery of approximately $75 million related to this transaction. As a result of the commutations, the company expects to book a pre-tax statutory gain of approximately $7 million in the second quarter of 2012, which will have a direct, positive impact on Radian Asset's statutory capital position. Given that the commutation payment significantly exceeded the aggregate fair value liability of these transactions held as of March 31, 2012, the company expects to report a GAAP loss on these transactions during the second quarter.
CONFERENCE CALL
Radian will discuss these items in its conference call today, Tuesday, May 1, 2012, at 10:00 a.m. Eastern time. The conference call will be broadcast live over the Internet at http://www.radian.biz/page?name=Webcasts or at www.radian.com. The call may also be accessed by dialing 800-230-1951 inside the U.S., or 612-332-1213 for international callers, using passcode 243244 or by referencing Radian.
A replay of the webcast will be available on the Radian website approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available approximately two and a half hours after the call ends for a period of two weeks, using the following dial-in numbers and passcode: 800-475-6701 inside the U.S., or 320-365-3844 for international callers, passcode 243244.
In addition to the information provided in the company's earnings news release, other statistical and financial information, which is expected to be referred to during the conference call, will be available on Radian's website under Investors >Quarterly Results, or by clicking on http://www.radian.biz/page?name=QuarterlyResults.
ABOUT RADIAN
Radian Group Inc. (NYSE: RDN), headquartered in Philadelphia, provides private mortgage insurance and related risk mitigation products and services to mortgage lenders nationwide through its principal operating subsidiary, Radian Guaranty Inc. These services help promote and preserve homeownership opportunities for homebuyers, while protecting lenders from default-related losses on residential first mortgages and facilitating the sale of low-downpayment mortgages in the secondary market. Additional information may be found at www.radian.com.
Financial Results and Supplemental Information Contents (Unaudited)
For trend information on all schedules, refer to Radian's quarterly financial statistics at http://www.radian.biz/page?name=FinancialReportsCorporate.
| Exhibit A: | Condensed Consolidated Statements of Income | |
| Exhibit B: | Condensed Consolidated Balance Sheets | |
| Exhibit C: | Segment Information Quarter Ended March 31, 2012 | |
| Exhibit D: | Segment Information Quarter Ended March 31, 2011 | |
| Exhibit E: | Financial Guaranty Supplemental Information | |
| Exhibit F: | Financial Guaranty Supplemental Information | |
| Exhibit G: | Mortgage Insurance Supplemental Information | |
| New Insurance Written | ||
| Exhibit H: | Mortgage Insurance Supplemental Information | |
| Insurance in Force and Risk in Force | ||
| Exhibit I: | Mortgage Insurance Supplemental Information | |
| Risk in Force by FICO, LTV and Policy Year | ||
| Exhibit J: | Mortgage Insurance Supplemental Information | |
| Primary, Pool and Other Risk in Force | ||
| Exhibit K: | Mortgage Insurance Supplemental Information | |
| Claims, Reserves and Reserves per Default | ||
| Exhibit L: | Mortgage Insurance Supplemental Information | |
| Default Statistics | ||
| Exhibit M: | Mortgage Insurance Supplemental Information | |
| Net Premiums Written and Earned, Captives and Persistency | ||
| Exhibit N: | Mortgage Insurance Supplemental Information | |
| Modified Pool |
| Radian Group Inc. and Subsidiaries | ||||||||||||
| Condensed Consolidated Statements of Income | ||||||||||||
| Exhibit A | ||||||||||||
| Quarter Ended | ||||||||||||
| March 31 | ||||||||||||
|
(In thousands, except per-share data) |
2012 | 2011 | ||||||||||
| Revenues: | ||||||||||||
| Net premiums written - insurance | $ | 77,678 | $ | 182,749 | ||||||||
| Net premiums earned - insurance | $ | 167,365 | $ | 203,023 | ||||||||
| Net investment income | 34,713 | 42,240 | ||||||||||
| Net gains on investments | 67,459 | 37,435 | ||||||||||
| Net impairment losses recognized in earnings | -- | -- | ||||||||||
| Change in fair value of derivative instruments | (72,757 | ) | 243,892 | |||||||||
| Net (losses) gains on other financial instruments | (17,852 | ) | 75,251 | |||||||||
| Other income | 1,440 | 1,448 | ||||||||||
| Total revenues | 180,368 | 603,289 | ||||||||||
| Expenses: | ||||||||||||
| Provision for losses | 266,154 | 427,373 | ||||||||||
| Change in reserve for premium deficiency | (20 | ) | (1,383 | ) | ||||||||
| Policy acquisition costs | 28,046 | 14,131 | ||||||||||
| Other operating expenses | 50,154 | 46,219 | ||||||||||
| Interest expense | 14,148 | 17,024 | ||||||||||
| Total expenses | 358,482 | 503,364 | ||||||||||
| Equity in net (loss) income of affiliates | (11 | ) | 65 | |||||||||
| Pretax (loss) income | (178,125 | ) | 99,990 | |||||||||
| Income tax benefit | (8,893 | ) | (3,016 | ) | ||||||||
| Net (loss) income | $ | (169,232 | ) | $ | 103,006 | |||||||
| Diluted net (loss) income per share (1) | $ | (1.28 | ) | $ | 0.77 | |||||||
| (1) Weighted average shares outstanding (in thousands) | |||||||||
| Weighted average common shares outstanding | 132,465 | 132,427 | |||||||
| Increase in weighted average shares-common stock equivalents-diluted basis | -- | 1,276 | |||||||
| Weighted average shares outstanding | 132,465 | 133,703 | |||||||
|
For Trend Information, refer to our Quarterly Financial Statistics on Radian's (RDN) website. |
|||||||||
| Radian Group Inc. and Subsidiaries | |||||||||||
| Condensed Consolidated Balance Sheets | |||||||||||
| Exhibit B | |||||||||||
| March 31 | December 31 | ||||||||||
|
(In thousands, except per-share data) |
2012 | 2011 | |||||||||
| Assets: | |||||||||||
| Cash and investments | $ | 5,651,824 | $ | 5,846,168 | |||||||
| Deferred policy acquisition costs | 107,941 | 139,906 | |||||||||
| Deferred income taxes, net | 15,975 | 15,975 | |||||||||
| Reinsurance recoverables | 122,512 | 157,985 | |||||||||
| Derivative assets | 16,202 | 17,212 | |||||||||
| Receivable for securities sold | 54,417 | 18,702 | |||||||||
| Other assets | 479,650 | 460,817 | |||||||||
| Total assets | $ | 6,448,521 | $ | 6,656,765 | |||||||
| Liabilities and stockholders' equity: | |||||||||||
| Unearned premiums | $ | 572,565 | $ | 637,372 | |||||||
| Reserve for losses and loss adjustment expenses | 3,316,364 | 3,310,902 | |||||||||
| Reserve for premium deficiency | 3,624 | 3,644 | |||||||||
| Long-term debt | 674,857 | 818,584 | |||||||||
| VIE debt | 255,234 | 228,240 | |||||||||
| Derivative liabilities | 202,100 | 126,006 | |||||||||
| Payable for securities purchased | 105,321 | 46,368 | |||||||||
| Other liabilities | 299,028 | 303,358 | |||||||||
| Total liabilities | 5,429,093 | 5,474,474 | |||||||||
| Common stock | 151 | 151 | |||||||||
| Additional paid-in capital | 1,073,278 | 1,074,513 | |||||||||
| Retained (deficit) earnings | (73,005 | ) | 96,227 | ||||||||
| Accumulated other comprehensive income | 19,004 | 11,400 | |||||||||
| Total common stockholders' equity | 1,019,428 | 1,182,291 | |||||||||
| Total liabilities and stockholders' equity | $ | 6,448,521 | $ | 6,656,765 | |||||||
| Book value per share | $ | 7.65 | $ | 8.88 | |||||||
| Radian Group Inc. and Subsidiaries | ||||||||||||||||||
| Segment Information | ||||||||||||||||||
| Quarter Ended March 31, 2012 | ||||||||||||||||||
| Exhibit C | ||||||||||||||||||
| Mortgage | Financial | |||||||||||||||||
|
(In thousands) |
Insurance | Guaranty | Total | |||||||||||||||
| Revenues: | ||||||||||||||||||
| Net premiums written - insurance | $ | 196,853 | $ | (119,175 | ) | $ | 77,678 | |||||||||||
| Net premiums earned - insurance | 173,451 | (6,086 | ) | 167,365 | ||||||||||||||
| Net investment income | 18,011 | 16,702 | 34,713 | |||||||||||||||
| Net gains on investments | 32,178 | 35,281 | 67,459 | |||||||||||||||
| Net impairment losses recognized in earnings | -- | -- | -- | |||||||||||||||
| Change in fair value of derivative instruments | 21 | (72,778 | ) | (72,757 | ) | |||||||||||||
| Net losses on other financial instruments | (709 | ) | (17,143 | ) | (17,852 | ) | ||||||||||||
| Other income | 1,344 | 96 | 1,440 | |||||||||||||||
| Total revenues | 224,296 | (43,928 | ) | 180,368 | ||||||||||||||
| Expenses: | ||||||||||||||||||
| Provision for losses | 234,729 | 31,425 | 266,154 | |||||||||||||||
| Change in reserve for premium deficiency | (20 | ) | -- | (20 | ) | |||||||||||||
| Policy acquisition costs | 8,646 | 19,400 | 28,046 | |||||||||||||||
| Other operating expenses | 36,265 | 13,889 | 50,154 | |||||||||||||||
| Interest expense | 1,722 | 12,426 | 14,148 | |||||||||||||||
| Total expenses | 281,342 | 77,140 | 358,482 | |||||||||||||||
| Equity in net loss of affiliates | -- | (11 | ) | (11 | ) | |||||||||||||
| Pretax loss | (57,046 | ) | (121,079 | ) | (178,125 | ) | ||||||||||||
| Income tax (benefit) provision | (11,799 | ) | 2,906 | (8,893 | ) | |||||||||||||
| Net loss | $ | (45,247 | ) | $ | (123,985 | ) | $ | (169,232 | ) | |||||||||
| Cash and investments | $ | 3,259,204 | $ | 2,392,620 | $ | 5,651,824 | ||||||||||||
| Deferred policy acquisition costs | 49,786 | 58,155 | 107,941 | |||||||||||||||
| Total assets | 3,476,732 | 2,971,789 | 6,448,521 | |||||||||||||||
| Unearned premiums | 256,809 | 315,756 | 572,565 | |||||||||||||||
| Reserve for losses and loss adjustment expenses | 3,230,938 | 85,426 | 3,316,364 | |||||||||||||||
| VIE debt | 8,625 | 246,609 | 255,234 | |||||||||||||||
| Derivative liabilities | -- | 202,100 | 202,100 | |||||||||||||||
| Radian Group Inc. and Subsidiaries | ||||||||||||||||||
| Segment Information | ||||||||||||||||||
| Quarter Ended March 31, 2011 | ||||||||||||||||||
| Exhibit D | ||||||||||||||||||
| Mortgage | Financial | |||||||||||||||||
|
(In thousands) |
Insurance | Guaranty | Total | |||||||||||||||
| Revenues: | ||||||||||||||||||
| Net premiums written - insurance | $ | 180,846 | $ | 1,903 | $ | 182,749 | ||||||||||||
| Net premiums earned - insurance | 186,134 | 16,889 | 203,023 | |||||||||||||||
| Net investment income | 26,833 | 15,407 | 42,240 | |||||||||||||||
| Net gains on investments | 17,762 | 19,673 | 37,435 | |||||||||||||||
| Change in fair value of derivative instruments | (394 | ) | 244,286 | 243,892 | ||||||||||||||
| Net gains on other financial instruments | 2,466 | 72,785 | 75,251 | |||||||||||||||
| Other income | 1,400 | 48 | 1,448 | |||||||||||||||
| Total revenues | 234,201 | 369,088 | 603,289 | |||||||||||||||
| Expenses: | ||||||||||||||||||
| Provision for losses | 413,973 | 13,400 | 427,373 | |||||||||||||||
| Change in reserve for premium deficiency | (1,383 | ) | -- | (1,383 | ) | |||||||||||||
| Policy acquisition costs | 10,216 | 3,915 | 14,131 | |||||||||||||||
| Other operating expenses | 34,137 | 12,082 | 46,219 | |||||||||||||||
| Interest expense | 9,789 | 7,235 | 17,024 | |||||||||||||||
| Total expenses | 466,732 | 36,632 | 503,364 | |||||||||||||||
| Equity in net income of affiliates | -- | 65 | 65 | |||||||||||||||
| Pretax (loss) income | (232,531 | ) | 332,521 | 99,990 | ||||||||||||||
| Income tax provision (benefit) | 3,501 | (6,517 | ) | (3,016 | ) | |||||||||||||
| Net (loss) income | $ | (236,032 | ) | $ | 339,038 | $ | 103,006 | |||||||||||
| Cash and investments | $ | 3,977,445 | $ | 2,464,819 | $ | 6,442,264 | ||||||||||||
| Deferred policy acquisition costs | 42,322 | 103,399 | 145,721 | |||||||||||||||
| Total assets | 4,471,425 | 2,880,138 | 7,351,563 | |||||||||||||||
| Unearned premiums | 191,910 | 474,109 | 666,019 | |||||||||||||||
| Reserve for losses and loss adjustment expenses | 3,542,797 | 84,898 | 3,627,695 | |||||||||||||||
| VIE debt | 72,369 | 300,638 | 373,007 | |||||||||||||||
| Derivative liabilities | -- | 487,345 | 487,345 | |||||||||||||||
| Radian Group Inc. and Subsidiaries | ||||||||||||
| Financial Guaranty Supplemental Information | ||||||||||||
| Exhibit E | ||||||||||||
|
Quarter Ended |
||||||||||||
|
March 31 |
||||||||||||
|
(In thousands) |
2012 | 2011 | ||||||||||
| Net Premiums Earned: | ||||||||||||
| Public finance direct | $ | 10,213 | $ | 7,836 | ||||||||
| Public finance reinsurance | 4,770 | 7,804 | ||||||||||
| Structured direct | 382 | 441 | ||||||||||
| Structured reinsurance | 813 | 809 | ||||||||||
| Trade credit reinsurance | -- | (1 | ) | |||||||||
| Net Premiums Earned - insurance | 16,178 | 16,889 | ||||||||||
| Impact of commutations and reinsurance | (22,264 | ) | -- | |||||||||
| Total Net Premiums Earned - insurance | $ | (6,086 | ) | $ | 16,889 | |||||||
| Refundings included in earned premium | $ | 8,224 | $ | 4,831 | ||||||||
| Net premiums earned - derivatives (1) | $ | 8,648 | $ | 10,883 | ||||||||
| Claims paid: | ||||||||||||
| Trade credit reinsurance | $ | 111 | $ | (24 | ) | |||||||
| Financial Guaranty | 8,889 | 290 | ||||||||||
| Total | $ | 9,000 | $ | 266 | ||||||||
|
(1) Included in change in fair value of derivative instruments. |
||||||||||||
|
The impact of the Assured Transaction in Q1 2012 was as follows: |
||||||
| (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 | |||||
| Increase in amortization of policy acquisition costs | (15.7 | ) | ||||
| Decrease in pre-tax income | $ | (36.5 | ) | |||
|
|
||||||
|
Balance Sheet |
||||||
| Decrease in: | ||||||
| Cash | $ | 108.3 | ||||
| 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 | 26.0 | |||||
| Radian Group Inc. and Subsidiaries | ||||||||||||||||||
| Financial Guaranty Supplemental Information | ||||||||||||||||||
| Exhibit F | ||||||||||||||||||
| March 31 | December 31 | March 31 | ||||||||||||||||
|
($ in thousands, except ratios) |
2012 | 2011 | 2011 | |||||||||||||||
|
Statutory Information: |
||||||||||||||||||
| Capital and surplus | $ | 1,099,955 | $ | 974,874 | $ | 1,050,208 | ||||||||||||
| Contingency reserve | 323,418 | 421,406 | 397,930 | |||||||||||||||
| Qualified statutory capital | 1,423,373 | 1,396,280 | 1,448,138 | |||||||||||||||
| Unearned premium reserve | 314,289 | 448,669 | 506,566 | |||||||||||||||
| Loss and loss expense reserve | 158,985 | 161,287 | 81,743 | |||||||||||||||
| Total statutory policyholders' reserves | 1,896,647 | 2,006,236 | 2,036,447 | |||||||||||||||
| Present value of installment premiums | 133,035 | 148,641 | 193,424 | |||||||||||||||
| Total statutory claims paying resources | $ | 2,029,682 | $ | 2,154,877 | $ | 2,229,871 | ||||||||||||
| Net debt service outstanding | $ | 55,762,116 | $ | 88,202,630 | $ | 98,976,819 | ||||||||||||
| Capital leverage ratio (1) | 39 | 63 | 68 | |||||||||||||||
| Claims paying leverage ratio (2) | 27 | 41 | 44 | |||||||||||||||
| Net par outstanding by product: | ||||||||||||||||||
| Public finance direct | $ | 11,563,195 | $ | 13,838,427 | $ | 15,324,283 | ||||||||||||
| Public finance reinsurance | 5,811,922 | 19,097,057 | 21,349,837 | |||||||||||||||
| Structured direct | 26,370,156 | 34,760,869 | 39,078,572 | |||||||||||||||
| Structured reinsurance | 856,594 | 1,492,859 | 1,760,573 | |||||||||||||||
| Total (3) | $ | 44,601,867 | (4 | ) | $ | 69,189,212 | $ | 77,513,265 | ||||||||||
| (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 $0.7 billion, $1.4 billion and $2.0 billion at March 31, 2012, December 31, 2011, and March 31, 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) | $15.6 billion reduction in par in connection with the Assured Transaction and $8.3 billion reduction in par in connection with CDO terminations. | |
| Radian Group Inc. and Subsidiaries | ||||||||||||||||||||||
| Mortgage Insurance Supplemental Information | ||||||||||||||||||||||
| Exhibit G | ||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||
| March 31 | ||||||||||||||||||||||
| 2012 | 2011 | |||||||||||||||||||||
|
($ in millions) |
$ | % | $ | % | ||||||||||||||||||
|
Primary new insurance written |
||||||||||||||||||||||
| Prime | $ | 6,460 | 99.9 | % | $ | 2,583 | 99.9 | % | ||||||||||||||
| Alt-A | -- | -- | 1 | -- | ||||||||||||||||||
| A minus and below | 5 | 0.1 | % | 2 | 0.1 | % | ||||||||||||||||
| Total Flow | $ | 6,465 | 100.0 | % | $ | 2,586 | 100.0 | % | ||||||||||||||
|
Total primary new insurance written by FICO score |
||||||||||||||||||||||
| >=740 | $ | 4,920 | 76.1 | % | $ | 2,081 | 80.5 | % | ||||||||||||||
| 680-739 | 1,400 | 21.7 | % | 502 | 19.4 | % | ||||||||||||||||
| 620-679 | 145 | 2.2 | % | 3 | 0.1 | % | ||||||||||||||||
| Total Flow | $ | 6,465 | 100.0 | % | $ | 2,586 | 100.0 | % | ||||||||||||||
|
Percentage of primary new insurance written |
||||||||||||||||||||||
| Refinances | 47 | % | 51 | % | ||||||||||||||||||
| LTV | ||||||||||||||||||||||
| 95.01% and above | 1.8 | % | 1.2 | % | ||||||||||||||||||
| 90.01% to 95.00% | 38.7 | % | 30.9 | % | ||||||||||||||||||
| ARMS | ||||||||||||||||||||||
| Less than 5 years | <1% | <1% | ||||||||||||||||||||
| 5 years and longer | 2.6 | % | 4.9 | % | ||||||||||||||||||
| Radian Group Inc. and Subsidiaries | ||||||||||||||||||||||
| Mortgage Insurance Supplemental Information | ||||||||||||||||||||||
| Exhibit H | ||||||||||||||||||||||
| March 31 | March 31 | |||||||||||||||||||||
| 2012 | 2011 | |||||||||||||||||||||
|
($ in millions) |
$ | % | $ | % | ||||||||||||||||||
|
Primary insurance in force |
||||||||||||||||||||||
| Flow | $ | 115,127 | 90.3 | % | $ | 113,853 | 89.0 | % | ||||||||||||||
| Structured | 12,399 | 9.7 | % | 14,100 | 11.0 | % | ||||||||||||||||
| Total Primary | $ | 127,526 | 100.0 | % | $ | 127,953 | 100.0 | % | ||||||||||||||
| Prime | $ | 108,507 | 85.1 | % | $ | 105,645 | 82.6 | % | ||||||||||||||
| Alt-A | 11,828 | 9.3 | % | 14,023 | 10.9 | % | ||||||||||||||||
| A minus and below | 7,191 | 5.6 | % | 8,285 | 6.5 | % | ||||||||||||||||
| Total Primary | $ | 127,526 | 100.0 | % | $ | 127,953 | 100.0 | % | ||||||||||||||
|
Primary risk in force |
||||||||||||||||||||||
| Flow | $ | 28,348 | 91.3 | % | $ | 27,981 | 90.3 | % | ||||||||||||||
| Structured | 2,691 | 8.7 | % | 3,008 | 9.7 | % | ||||||||||||||||
| Total Primary | $ | 31,039 | 100.0 | % | $ | 30,989 | 100.0 | % | ||||||||||||||
| Flow | ||||||||||||||||||||||
| Prime | $ | 24,962 | 88.1 | % | $ | 23,963 | 85.6 | % | ||||||||||||||
| Alt-A | 2,104 | 7.4 | % | 2,510 | 9.0 | % | ||||||||||||||||
| A minus and below | 1,282 | 4.5 | % | 1,508 | 5.4 | % | ||||||||||||||||
| Total Flow | $ | 28,348 | 100.0 | % | $ | 27,981 | 100.0 | % | ||||||||||||||
| Structured | ||||||||||||||||||||||
| Prime | $ | 1,570 | 58.3 | % | $ | 1,753 | 58.3 | % | ||||||||||||||
| Alt-A | 608 | 22.6 | % | 692 | 23.0 | % | ||||||||||||||||
| A minus and below | 513 | 19.1 | % | 563 | 18.7 | % | ||||||||||||||||
| Total Structured | $ | 2,691 | 100.0 | % | $ | 3,008 | 100.0 | % | ||||||||||||||
| Total | ||||||||||||||||||||||
| Prime | $ | 26,532 | 85.5 | % | $ | 25,716 | 83.0 | % | ||||||||||||||
| Alt-A | 2,712 | 8.7 | % | 3,202 | 10.3 | % | ||||||||||||||||
| A minus and below | 1,795 | 5.8 | % | 2,071 | 6.7 | % | ||||||||||||||||
| Total Primary | $ | 31,039 | 100.0 | % | $ | 30,989 | 100.0 | % | ||||||||||||||
| Radian Group Inc. and Subsidiaries | ||||||||||||||||||||||
| Mortgage Insurance Supplemental Information | ||||||||||||||||||||||
| Exhibit I | ||||||||||||||||||||||
| March 31 | March 31 | |||||||||||||||||||||
| 2012 | 2011 | |||||||||||||||||||||
|
($ in millions) |
$ | % | $ | % | ||||||||||||||||||
|
Total primary risk in force by FICO score |
||||||||||||||||||||||
| Flow | ||||||||||||||||||||||
| >=740 | $ | 12,889 | 45.5 | % | $ | 11,128 | 39.8 | % | ||||||||||||||
| 680-739 | 9,184 | 32.4 | % | 9,611 | 34.3 | % | ||||||||||||||||
| 620-679 | 5,328 | 18.8 | % | 6,131 | 21.9 | % | ||||||||||||||||
| <=619 | 947 | 3.3 | % | 1,111 | 4.0 | % | ||||||||||||||||
| Total Flow | $ | 28,348 | 100.0 | % | $ | 27,981 | 100.0 | % | ||||||||||||||
| Structured | ||||||||||||||||||||||
| >=740 | $ | 712 | 26.5 | % | $ | 803 | 26.7 | % | ||||||||||||||
| 680-739 | 781 | 29.0 | % | 874 | 29.1 | % | ||||||||||||||||
| 620-679 | 721 | 26.8 | % | 807 | 26.8 | % | ||||||||||||||||
| <=619 | 477 | 17.7 | % | 524 | 17.4 | % | ||||||||||||||||
| Total Structured | $ | 2,691 | 100.0 | % | $ | 3,008 | 100.0 | % | ||||||||||||||
| Total | ||||||||||||||||||||||
| >=740 | $ | 13,601 | 43.8 | % | $ | 11,931 | 38.5 | % | ||||||||||||||
| 680-739 | 9,965 | 32.1 | % | 10,485 | 33.8 | % | ||||||||||||||||
| 620-679 | 6,049 | 19.5 | % | 6,938 | 22.4 | % | ||||||||||||||||
| <=619 | 1,424 | 4.6 | % | 1,635 | 5.3 | % | ||||||||||||||||
| Total Primary | $ | 31,039 | 100.0 | % | $ | 30,989 | 100.0 | % | ||||||||||||||
|
Total primary risk in force by LTV |
||||||||||||||||||||||
| 85.00% and below | $ | 2,819 | 9.1 | % | $ | 2,819 | 9.1 | % | ||||||||||||||
| 85.01% to 90.00% | 11,983 | 38.6 | % | 11,942 | 38.6 | % | ||||||||||||||||
| 90.01% to 95.00% | 11,072 | 35.7 | % | 10,391 | 33.5 | % | ||||||||||||||||
| 95.01% and above | 5,165 | 16.6 | % | 5,837 | 18.8 | % | ||||||||||||||||
| Total | $ | 31,039 | 100.0 | % | $ | 30,989 | 100.0 | % | ||||||||||||||
|
Total primary risk in force by policy year |
||||||||||||||||||||||
| 2005 and prior | $ | 6,574 | 21.2 | % | $ | 7,874 | 25.4 | % | ||||||||||||||
| 2006 | 3,057 | 9.8 | % | 3,549 | 11.5 | % | ||||||||||||||||
| 2007 | 6,722 | 21.7 | % | 7,772 | 25.1 | % | ||||||||||||||||
| 2008 | 5,042 | 16.2 | % | 5,740 | 18.5 | % | ||||||||||||||||
| 2009 | 2,511 | 8.1 | % | 3,004 | 9.6 | % | ||||||||||||||||
| 2010 | 2,147 | 6.9 | % | 2,469 | 8.0 | % | ||||||||||||||||
| 2011 | 3,463 | 11.2 | % | 581 | 1.9 | % | ||||||||||||||||
| 2012 | 1,523 | 4.9 | % | -- | -- | |||||||||||||||||
| Total | $ | 31,039 | 100.0 | % | $ | 30,989 | 100.0 | % | ||||||||||||||
| Radian Group Inc. and Subsidiaries | |||||||||||||||||||||||
| Mortgage Insurance Supplemental Information | |||||||||||||||||||||||
| Exhibit J | |||||||||||||||||||||||
| March 31 | March 31 | ||||||||||||||||||||||
| 2012 | 2011 | ||||||||||||||||||||||
|
($ in millions) |
$ | % | $ | % | |||||||||||||||||||
|
Percentage of primary risk in force |
|||||||||||||||||||||||
| Refinances | 32 | % | 32 | % | |||||||||||||||||||
| ARMS | |||||||||||||||||||||||
| Less than 5 years | 5 | % | 6 | % | |||||||||||||||||||
| 5 years and longer | 6 | % | 7 | % | |||||||||||||||||||
|
Pool risk in force |
|||||||||||||||||||||||
| Prime | $ | 1,505 | 76.8 | % | $ | 1,753 | 75.3 | % | |||||||||||||||
| Alt-A | 117 | 6.0 | % | 139 | 6.0 | % | |||||||||||||||||
| A minus and below | 338 | 17.2 | % | 437 | 18.7 | % | |||||||||||||||||
| Total | $ | 1,960 | 100.0 | % | $ | 2,329 | 100.0 | % | |||||||||||||||
|
Total pool risk in force by policy year |
|||||||||||||||||||||||
| 2005 and prior | $ | 1,757 | 89.6 | % | $ | 1,943 | 83.4 | % | |||||||||||||||
| 2006 | 87 | 4.4 | % | 165 | 7.1 | % | |||||||||||||||||
| 2007 | 99 | 5.1 | % | 179 | 7.7 | % | |||||||||||||||||
| 2008 | 17 | 0.9 | % | 42 | 1.8 | % | |||||||||||||||||
| Total pool risk in force | $ | 1,960 | 100.0 | % | $ | 2,329 | 100.0 | % | |||||||||||||||
|
Other risk in force |
|||||||||||||||||||||||
| Second-lien | |||||||||||||||||||||||
| 1st loss | $ | 96 | $ | 108 | |||||||||||||||||||
| 2nd loss | 27 | 76 | |||||||||||||||||||||
| NIMS | 15 | 69 | |||||||||||||||||||||
| 1st loss-Hong Kong primary mortgage insurance | 55 | 104 | |||||||||||||||||||||
| Total other risk in force | $ | 193 | $ | 357 | |||||||||||||||||||
| Risk to capital ratio-Radian Guaranty only | 20.6:1 | (1 | ) | 20.3:1 | |||||||||||||||||||
| (1) Preliminary | |||||||||||||||||||||||
| Radian Group Inc. and Subsidiaries | ||||||||||||
| Mortgage Insurance Supplemental Information | ||||||||||||
| Exhibit K | ||||||||||||
|
Quarter Ended |
||||||||||||
| March 31 | ||||||||||||
|
($ in thousands) |
2012 | 2011 | ||||||||||
| Net claims paid | ||||||||||||
| Prime | $ | 127,101 | $ | 208,195 | ||||||||
| Alt-A | 36,651 | 75,130 | ||||||||||
| A minus and below | 26,080 | 44,585 | ||||||||||
| Total primary claims paid | 189,832 | 327,910 | ||||||||||
| Pool | 24,926 | 34,358 | ||||||||||
| Second-lien and other | 3,583 | 2,883 | ||||||||||
| Subtotal | 218,341 | 365,151 | ||||||||||
| Impact of captive terminations | (148 | ) | -- | |||||||||
| Total | $ | 218,193 | $ | 365,151 | ||||||||
| Average claim paid (1) | ||||||||||||
| Prime | $ | 48.6 | $ | 47.8 | ||||||||
| Alt-A | 59.4 | 59.6 | ||||||||||
| A minus and below | 40.6 | 37.1 | ||||||||||
| Total primary average claims paid | 49.0 | 48.1 | ||||||||||
| Pool | 67.7 | 69.0 | ||||||||||
| Second-lien and other | 26.9 | 30.7 | ||||||||||
| Total | $ | 49.9 | $ | 49.3 | ||||||||
| Average primary claim paid (2) (3) | $ | 52.0 | $ | 54.3 | ||||||||
| Average total claim paid (2) (3) | $ | 52.5 | $ | 55.0 | ||||||||
| Loss ratio - GAAP basis | 135.3 | % | 222.4 | % | ||||||||
| Expense ratio - GAAP basis | 25.9 | % | 23.8 | % | ||||||||
| 161.2 | % | 246.2 | % | |||||||||
| Reserve for losses by category | ||||||||||||
| Prime | $ | 1,776,426 | $ | 1,684,039 | ||||||||
| Alt-A | 603,998 | 704,751 | ||||||||||
| A minus and below | 369,006 | 403,248 | ||||||||||
| Reinsurance recoverable (4) | 118,071 | 192,258 | ||||||||||
| Total primary reserves | 2,867,501 | 2,984,296 | ||||||||||
| Pool insurance | 354,133 | 531,903 | ||||||||||
| Total 1st lien reserves | 3,221,634 | 3,516,199 | ||||||||||
| Second lien | 9,243 | 26,470 | ||||||||||
| Other | 61 | 128 | ||||||||||
| Total reserves | $ | 3,230,938 | $ | 3,542,797 | ||||||||
| 1st lien reserve per default (5) | ||||||||||||
| Primary reserve per primary default | $ | 27,833 | $ | 25,535 | ||||||||
| Pool reserve per pool default (6) | 17,580 | 18,314 | ||||||||||
| Total 1st lien reserve per default | 26,156 | 24,098 | ||||||||||
| (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 March 31, 2012 and 2011, would be $27,299 and $29,745, respectively. | |
| Radian Group Inc. and Subsidiaries | |||||||||||||||
| Mortgage Insurance Supplemental Information | |||||||||||||||
| Exhibit L | |||||||||||||||
| March 31 | December 31 | March 31 | |||||||||||||
| 2012 | 2011 | 2011 | |||||||||||||
| Default Statistics | |||||||||||||||
| Primary Insurance: | |||||||||||||||
| Flow | |||||||||||||||
|
Prime |
|||||||||||||||
| Number of insured loans | 575,769 | 569,190 | 576,388 | ||||||||||||
| Number of loans in default | 60,785 | 65,238 | 66,615 | ||||||||||||
| Percentage of loans in default | 10.56 | % | 11.46 | % | 11.56 | % | |||||||||
|
Alt-A |
|||||||||||||||
| Number of insured loans | 42,591 | 44,355 | 49,866 | ||||||||||||
| Number of loans in default | 13,642 | 14,481 | 16,720 | ||||||||||||
| Percentage of loans in default | 32.03 | % | 32.65 | % | 33.53 | % | |||||||||
|
A minus and below |
|||||||||||||||
| Number of insured loans | 39,461 | 40,884 | 45,522 | ||||||||||||
| Number of loans in default | 12,241 | 13,560 | 14,713 | ||||||||||||
| Percentage of loans in default | 31.02 | % | 33.17 | % | 32.32 | % | |||||||||
| Total Flow | |||||||||||||||
| Number of insured loans | 657,821 | 654,429 | 671,776 | ||||||||||||
| Number of loans in default | 86,668 | 93,279 | 98,048 | ||||||||||||
| Percentage of loans in default | 13.18 | % | 14.25 | % | 14.60 | % | |||||||||
| Structured | |||||||||||||||
|
Prime |
|||||||||||||||
|
Number of insured loans |
40,367 | 41,248 | 44,700 | ||||||||||||
| Number of loans in default | 5,856 | 6,308 | 6,519 | ||||||||||||
| Percentage of loans in default | 14.51 | % | 15.29 | % | 14.58 | % | |||||||||
|
Alt-A |
|||||||||||||||
| Number of insured loans | 17,977 | 18,484 | 20,315 | ||||||||||||
| Number of loans in default | 5,251 | 5,563 | 6,380 | ||||||||||||
| Percentage of loans in default | 29.21 | % | 30.10 | % | 31.41 | % | |||||||||
|
A minus and below |
|||||||||||||||
| Number of insured loans | 15,171 | 15,477 | 16,589 | ||||||||||||
| Number of loans in default | 5,252 | 5,711 | 5,949 | ||||||||||||
| Percentage of loans in default | 34.62 | % | 36.90 | % | 35.86 | % | |||||||||
| Total Structured | |||||||||||||||
| Number of insured loans | 73,515 | 75,209 | 81,604 | ||||||||||||
| Number of loans in default | 16,359 | 17,582 | 18,848 | ||||||||||||
| Percentage of loans in default | 22.25 | % | 23.38 | % | 23.10 | % | |||||||||
|
Total Primary Insurance |
|||||||||||||||
|
Prime |
|||||||||||||||
| Number of insured loans | 616,136 | 610,438 | 621,088 | ||||||||||||
| Number of loans in default | 66,641 | 71,546 | 73,134 | ||||||||||||
| Percentage of loans in default | 10.82 | % | 11.72 | % | 11.78 | % | |||||||||
|
Alt-A |
|||||||||||||||
| Number of insured loans | 60,568 | 62,839 | 70,181 | ||||||||||||
| Number of loans in default | 18,893 | 20,044 | 23,100 | ||||||||||||
| Percentage of loans in default | 31.19 | % | 31.90 | % | 32.91 | % | |||||||||
|
A minus and below |
|||||||||||||||
| Number of insured loans | 54,632 | 56,361 | 62,111 | ||||||||||||
| Number of loans in default | 17,493 | 19,271 | 20,662 | ||||||||||||
| Percentage of loans in default | 32.02 | % | 34.19 | % | 33.27 | % | |||||||||
| Total Primary | |||||||||||||||
| Number of insured loans | 731,336 | 729,638 | 753,380 | ||||||||||||
| Number of loans in default | 103,027 | 110,861 | 116,896 | ||||||||||||
| Percentage of loans in default | 14.09 | % | 15.19 | % | 15.52 | % | |||||||||
| Pool insurance | |||||||||||||||
| Number of loans in default | 20,144 | 21,685 | 29,044 | ||||||||||||
| Radian Group Inc. and Subsidiaries | ||||||||||||
| Mortgage Insurance Supplemental Information | ||||||||||||
| Exhibit M | ||||||||||||
| Quarter Ended | ||||||||||||
| March 31 | ||||||||||||
|
($ in thousands) |
2012 | 2011 | ||||||||||
|
Net Premiums Written |
||||||||||||
| Primary and Pool Insurance | $ | 196,321 | $ | 180,257 | ||||||||
| Second-lien | 511 | 620 | ||||||||||
| International | 21 | (31 | ) | |||||||||
| Total Net Premiums Written - Insurance | $ | 196,853 | $ | 180,846 | ||||||||
|
Net Premiums Earned |
||||||||||||
| Primary and Pool Insurance | $ | 172,481 | $ | 183,469 | ||||||||
| Second-lien | 511 | 620 | ||||||||||
| International | 459 | 2,045 | ||||||||||
| Total Net Premiums Earned - Insurance | $ | 173,451 | $ | 186,134 | ||||||||
|
1st Lien Captives |
||||||||||||
| Premiums ceded to captives | $ | 6,429 | $ | 7,587 | ||||||||
| % of total premiums | 3.6 | % | 3.9 | % | ||||||||
| IIF included in captives (1) | 8.4 | % | 10.2 | % | ||||||||
| RIF included in captives (1) | 8.2 | % | 10.1 | % | ||||||||
| Persistency (twelve months ended March 31) | 84.5 | % | 83.0 | % | ||||||||
| (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. | |
| Radian Group Inc. and Subsidiaries | ||||||||||||||||||||||
| Mortgage Insurance Supplemental Information | ||||||||||||||||||||||
| Modified Pool (1) | ||||||||||||||||||||||
| Exhibit N | ||||||||||||||||||||||
| March 31 | March 31 | |||||||||||||||||||||
| 2012 | 2011 | |||||||||||||||||||||
|
($ in millions) |
$ | % | $ | % | ||||||||||||||||||
|
Modified pool risk in force by policy year |
||||||||||||||||||||||
| 2005 and prior | $ | 192 | 72.4 | % | $ | 203 | 68.1 | % | ||||||||||||||
|
2006 |
30 | 11.3 | % | 37 | 12.4 | % | ||||||||||||||||
| 2007 | 37 | 14.0 | % | 51 | 17.1 | % | ||||||||||||||||
| 2008 | 6 | 2.3 | % | 7 | 2.4 | % | ||||||||||||||||
| Total | $ | 265 | 100.0 | % | $ | 298 | 100.0 | % | ||||||||||||||
|
Modified pool risk in force by product |
||||||||||||||||||||||
| Prime | $ | 80 | 30.2 | % | $ | 87 | 29.2 | % | ||||||||||||||
| Alt-A | 168 | 63.4 | % | 192 | 64.4 | % | ||||||||||||||||
| A minus and below | 17 | 6.4 | % | 19 | 6.4 | % | ||||||||||||||||
| Total | $ | 265 | 100.0 | % | $ | 298 | 100.0 | % | ||||||||||||||
|
Modified pool insurance in force by product |
||||||||||||||||||||||
| Prime | $ | 883 | 31.3 | % | $ | 1,065 | 31.5 | % | ||||||||||||||
| Alt-A | 1,804 | 63.8 | % | 2,163 | 63.9 | % | ||||||||||||||||
| A minus and below | 139 | 4.9 | % | 157 | 4.6 | % | ||||||||||||||||
| Total | $ | 2,826 | 100.0 | % | $ | 3,385 | 100.0 | % | ||||||||||||||
| Reserve for losses - modified pool (in thousands) | $ | 59,360 | $ | 79,571 | ||||||||||||||||||
|
Default Statistics: |
||||||||||||||||||||||
| Modified pool: | ||||||||||||||||||||||
|
Total modified pool |
||||||||||||||||||||||
| Number of insured loans | 16,930 | 19,424 | ||||||||||||||||||||
| Number of loans in default | 3,287 | 3,963 | ||||||||||||||||||||
| Percentage of loans in default | 19.42 | % | 20.40 | % | ||||||||||||||||||
|
(1) Included in primary insurance amounts. |
||||||||||||||||||||||
FORWARD-LOOKING STATEMENTS
All statements in this press release that address events, developments or results that we expect or anticipate may occur in the future are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the United States ("U.S.") Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as "anticipate," "may," "will," "could," "should," "would," "expect," "intend," "plan," "goal," "contemplate," "believe," "estimate," "predict," "project," "potential," "continue," or the negative or other variations on these words and other similar expressions. These statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management's current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking information. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties, including the following:
- changes in general 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, 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 or financial guaranty insurance exposure is more concentrated;
- our ability to maintain sufficient holding company liquidity to meet our short- and long-term liquidity needs, including in particular, repayment of our debt due in February 2013 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, general reduced housing demand in the U.S., and potential risk retention requirements established under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act");
- our ability to maintain an adequate risk-to-capital position and surplus requirements in our mortgage insurance business in light of ongoing losses in this business and potential further deterioration and losses in our financial guaranty portfolio, including, if necessary, our ability write new mortgage insurance in excess of risk-based capital limitations imposed in certain states through waivers of these limitations or through use of another approved mortgage insurance subsidiary;
- 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 resulting from successful challenges to previously rescinded policies or claim denials, or caused by the GSEs intervening in mortgage insurers' rescission practices or rescission settlement practices;
- the negative impact our insurance rescissions and claim denials may have on our relationships with customers and potential customers, including the potential loss of business and the heightened risk of disputes and litigation;
- the need, in the event that we are unsuccessful in defending our rescissions or denials, to increase our loss reserves for, and reassume risk on, rescinded or denied loans, and to pay additional claims;
- any disruption in the servicing of mortgages covered by our insurance policies and poor servicer performance;
- adverse changes in severity or frequency of losses associated with certain products that we formerly offered 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 by the major rating agencies 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 Inc. ("Radian Guaranty");
- heightened competition for our mortgage insurance business from others such as the Federal Housing Administration (the "FHA"), the Veteran's Administration and other private mortgage insurers (in particular, the FHA and those private mortgage insurers that have been assigned higher ratings from the major rating agencies, that may have access to greater amounts of capital than we do, or new entrants to the industry that are not burdened by legacy obligations);
- changes in the charters or business practices of, or rules or regulations applicable to, Federal National Mortgage Association ("Fannie Mae") and Freddie Mac, the largest purchasers of mortgage loans that we insure, and our ability to remain an eligible provider to both Fannie Mae and Freddie 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 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 potential obligations to post collateral on our existing insured derivatives portfolio;
- the application of existing federal or state consumer, lending, insurance, tax, securities and other applicable laws and regulations, or changes in these laws and regulations or the way they are interpreted, including, without limitation: (i) the outcome of existing, or the possibility of additional, lawsuits or investigations; and (ii) legislative and regulatory changes (a) impacting the demand for private mortgage insurance, (b) limiting or restricting our use of (or increasing requirements for) additional capital and the products we may offer, (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 IRS tax audits or due to changes in interpretations of applicable tax laws, regulations and policies;
- 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, and our need to reevaluate the possibility of a premium deficiency in our mortgage insurance business on a quarterly basis;
- our ability to realize the tax benefits associated with our 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, from the Securities and Exchange Commission or the Financial Accounting Standards Board; and
- legal and other limitations on amounts we may receive from our subsidiaries as dividends or through our tax- and expense-sharing arrangements with our subsidiaries.
For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2011, and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.
SOURCE: Radian Group Inc.
Radian Group Inc.
Emily Riley, 215-231-1035
emily.riley@radian.com