Radian Comments on Fundamental Strength of Business
03 Juillet 2008 - 6:47PM
PR Newswire (US)
PHILADELPHIA, July 3 /PRNewswire-FirstCall/ -- Radian Group Inc.
(NYSE:RDN) commented today on the recent decline in its stock price
and noted several indications of the fundamental strength of its
business and improvement in key performance indicators. The Company
today issued the following statement: Radian is insuring mostly
prime loans which we believe will generate profitability and
long-term financial strength. Our liquidity and claims paying
resources remain strong and we are focused on meeting the present
challenges in the housing market and overall economy by working
closely with the Government Sponsored Enterprises ("GSEs") and
managing our existing Risk-In-Force exposure. We believe that the
recent decline of Radian's stock price is disproportionate to the
fundamentals of our business. Despite the decline in Radian's stock
price, the organization remains focused on improving business
processes and making operational improvements. We will continue to
communicate the business and financial fundamentals of our company
to the market in the most transparent way possible. Radian noted
the following preliminary second quarter business indicators: --
First and second lien claims paid during 2Q08 will be less than
$230 million, compared to our previous guidance of $240 million.
This is due in part to the strong partnerships we have established
with our residential servicing clients and external counseling
organizations. -- Total first lien defaults increased during 2Q08
by 8.9%. This compares favorably with the quarterly increases
reported during 1Q08 of 10% and 4Q07 of 17.3%. -- Radian's
percentage of prime business written during 2Q08 was approximately
92% up from 90% during 1Q08. -- Radian continues to maintain strong
relationships with its clients and the GSEs. We estimate current
mortgage insurance market share of 16%, up from 14% at the
beginning of 2008. -- Multiple guideline tightening and pricing
increases have been put in place during 2008. The latest changes go
into effect on July 14, 2008 and are intended to improve risk
adjusted returns. -- This quarter will be positively impacted by
significant recovery of ceded losses from captive reinsurance and
SMARTHOME reinsurance, which reduces Radian's net losses and loss
ratio. -- There has been no material credit deterioration in the
portfolio of our Financial Guaranty segment. -- There is no
principal required to be repaid on any of Radian's debt until 2011.
About Radian Radian Group Inc. is a global credit risk management
company headquartered in Philadelphia with significant operations
in New York and London. 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
http://www.radian.biz/. Forward Looking Statements All statements
made 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 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: -- As a result of recent
downgrades, up to $50.5 billion of Radian Asset's total net assumed
par outstanding is subject to recapture by Radian Asset's primary
reinsurance customers. If all of this business was recaptured, we
estimate that Radian Asset would experience a reduction in written
and earned premiums of approximately $440.7 million and $82.3
million, respectively, a reduction in the net present value of
expected future installment premiums of $177.5 million and a
reduction in incurred losses of approximately $48.8 million. Any
recapture of business would correspondingly reduce the amount of
capital required to be held in support of such obligations. --
actual or perceived 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 mortgage insurance business to be worse than
expected), changes in 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; -- actual or perceived
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 obtain additional
capital, if necessary, to support our long-term liquidity needs and
to protect our credit ratings and the financial strength ratings of
our subsidiaries; -- our ability to satisfy the covenants contained
in our credit agreement (including, but not limited to, financial
covenants), which, if we are unable to satisfy, could lead to a
default on the terms of that loan, upon which the lenders
representing a majority of the debt under our credit agreement
would have the right to terminate all commitments under the credit
agreement and declare the outstanding debt due and payable; --
risks faced by the businesses, municipalities or pools of assets
covered by our insurance; -- a decrease in the volume of home
mortgage originations due to reduced liquidity in the lending
market, tighter underwriting standards and a deterioration in
housing markets throughout the U.S.; -- 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
("ARMs") and interest-only mortgages, which have resulted in
increased losses in 2007 and 2008 and may 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 insurance financial
strength ratings assigned by the major rating agencies to any of
our rated insurance subsidiaries at any time (in particular, our
credit rating and the financial strength ratings of our insurance
subsidiaries that are currently under review for possible
downgrade); -- 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), from alternative products such as
"80-10-10" loans or other forms of simultaneous second loan
structures used by mortgage lenders, from investors using forms of
credit enhancement other than mortgage insurance as a partial or
complete substitution for private mortgage insurance and from
mortgage lenders that demand increased participation in revenue
sharing arrangements such as captive reinsurance arrangements; --
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 status 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 private lawsuits or investigations (or the possibility
of additional private lawsuits or 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 ("RESPA")
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
deficiency for our 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; -- changes in
accounting guidance from the Securities and Exchange Commission
("SEC") or the Financial Accounting Standards Board ("FASB"); --
the possibility that we may not be able to achieve and maintain
effective internal control over our financial reporting; -- legal
and other limitations on the amount of dividends or other
distributions we may receive from our subsidiaries; and --
vulnerability to the performance of our strategic investments,
including in particular, our investment in Sherman. For more
information regarding these risks as well as additional risks that
we face, you should refer to the Risk Factors detailed in our
filings with the SEC. We caution you not to place undue reliance on
these forward-looking statements, which are current only as of the
date of 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. Contact: For investors:
Terri Williams-Perry - phone: 215 231.1486 Email: For the media:
Rick Gillespie - phone: 215 231.1061 Email: Tim Lynch / Eric Bonach
Joele Frank, Wilkinson Brimmer Katcher 212 355.4449 DATASOURCE:
Radian Group Inc. CONTACT: Investors, Terri Williams-Perry of
Radian Group Inc., +1-215-231-1486, ; or Media, Rick Gillespie of
Radian Group Inc., +1-215-231-1061, ; or Tim Lynch, or Eric Bonach,
both of Joele Frank, Wilkinson Brimmer Katcher, +1-212-355-4449,
for Radian Group Inc. Web site: http://www.radian.biz/
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