RDN Radian Group Inc

Radian Group Inc. (NYSE: RDN) today reported a net loss for the quarter ended December 31, 2010, of $1.1 billion, or $8.55 per diluted share. This compares to a net loss of $91.9 million, or $1.12 per diluted share, for the prior-year fourth quarter. The net loss for the full year 2010 was $1.8 billion, or $15.74 per diluted share. This compares to a net loss of $147.9 million, or $1.80 per diluted share, for the prior year. The results for 2010 included the impact of a non-cash, GAAP accounting charge of $841.5 million, or $6.35 per share in the fourth quarter of 2010, related to establishing a valuation allowance against substantially all of the company’s net deferred tax asset (DTA) and also includes a pre-tax loss from the change in fair value of derivatives of $185.9 million for the quarter and $558.7 million for the year. Book value per share at December 31, 2010, was $6.46.

“We were encouraged by the fourth straight quarter of declining mortgage insurance delinquencies, continued signs of credit trend stabilization in our businesses, and a steady 21 percent market share in an environment where private mortgage insurance continues to regain business from the FHA,” said Chief Executive Officer S.A. Ibrahim.

Ibrahim added, “It is important to note that the establishment of a valuation allowance in the quarter does not have any impact on statutory capital, risk-to-capital ratio, liquidity or business operations, and it does not reflect a change in our view of Radian’s long-term financial outlook. We are confident that our capital, financial flexibility and solid customer base position Radian for future success.”

FOURTH QUARTER HIGHLIGHTS

• The risk-to-capital ratio for Radian Guaranty Inc., the company’s primary mortgage insurance subsidiary, was 16.8:1 at December 31, 2010, compared to 17.2:1 at September 30, 2010, and 15.4:1 at December 31, 2009. Radian Group contributed $200 million to Radian Guaranty during the fourth quarter and the company has sufficient liquidity to contribute additional capital to its mortgage insurance subsidiaries in 2011, if needed.
• New mortgage insurance written (NIW) increased for the fourth consecutive quarter to $3.8 billion, compared to $3.2 billion in the third quarter. NIW continued to consist of loans with excellent risk characteristics, and the company maintained a market share of 21 percent.
• The total number of primary delinquent loans decreased by 4 percent in the fourth quarter, which represented the fourth consecutive quarterly decline. In addition, the number of primary delinquencies declined slightly in January.
• The mortgage insurance provision for losses was $426.3 million in the fourth quarter of 2010, compared to $459.9 million in the prior-year period. Mortgage insurance loss reserves were approximately $3.5 billion as of December 31, 2010, which was flat to the third quarter of 2010, and up slightly from a year ago. As of December 31, 2010, total first-lien reserves increased to $23,467 per primary default, compared to $20,921 for the prior year-end, and increased to $24,911 per pool default, compared to $16,118 for the prior year-end. The reserve per default totals exclude defaults for which reserves have not been established due to the presence of a deductible.
• Mortgage insurance claims paid were $392.9 million, which consisted of $389.3 million of first-liens and $3.6 million of second-liens. Net claims paid of $69.2 million were net of recoveries received from captive terminations of $323.7 million. For the full-year 2010, mortgage insurance claims paid were $1.3 billion. The company continues to expect mortgage insurance claims paid of approximately $1.7 billion for the full-year 2011.
• Radian Asset Assurance Inc. continues to serve as an important source of capital support for Radian Guaranty and is expected to continue to provide Radian Guaranty with cash infusions over time.
  • Excluding gains and losses on derivatives and other financial instruments, the financial guaranty segment was profitable on a pre-tax basis in the fourth quarter and for the full-year 2010.
  • As of December 31, 2010, Radian Asset had approximately $1.0 billion in statutory surplus with an additional $1.4 billion in claims-paying resources.
  • Radian Asset is expected to pay an ordinary dividend of approximately $60 million to Radian Guaranty in June 2011.
  • On February 1, 2011, Radian Asset signed an agreement to purchase Municipal and Infrastructure Assurance Corporation (MIAC), a New York domiciled financial guaranty insurance company shell that has not written any business, but has obtained licenses in 36 states and the District of Columbia. The acquisition, which remains subject to regulatory approval, provides Radian Asset with the flexibility to consider using MIAC to pursue strategic alternatives in the public finance market, including possibly partnering with third-party investors to write new public finance insurance and/or reinsuring all or a portion of Radian Asset’s existing public finance business. The company is in early stages of exploring these potential uses, and expects that any new initiative for MIAC would be consistent with its ultimate goal of reducing financial guaranty exposure. The expected purchase price of approximately $82 million is $7 million above the value of the capital base of MIAC, consisting of approximately $75 million of cash, cash equivalents and treasury securities.
• The valuation allowance of $841.5 million recorded in the quarter represents substantially all of the company’s deferred tax asset. The valuation allowance is primarily a result of the company’s continued history of losses, including the significant loss in the fourth quarter, and the continued uncertainty of future results. While Radian continues to expect a return to profitability in the long-term, this remains uncertain based on macroeconomic factors such as the slower-than-expected pace of the economic recovery as well as the ultimate timing and magnitude of losses. If the company returns to a period of sustained profitability, as it currently expects, all or a portion of this valuation allowance would be reversed.

CONFERENCE CALL

The company will discuss each of these items in its conference call today, Thursday, February 3, 2011, at 10:00 a.m. Eastern time. The conference call will be broadcast live over the Internet at http://www.radian.biz/page?name=Webcasts or at www.radian.biz. The call may also be accessed by dialing 800-230-1096 inside the U.S., or 612-332-0342 for international callers, using passcode 190970 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 190970.

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.biz.

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 December 31, 2010 Exhibit D: Segment Information Quarter Ended December 31, 2009 Exhibit E: Segment Information Year Ended December 31, 2010 Exhibit F: Segment Information Year Ended December 31, 2009 Exhibit G: Financial Guaranty Supplemental Information – For the Quarter and Year Ended and as of December 31, 2010 Exhibit H: Financial Guaranty Supplemental Information – For the Quarter and Year Ended and as of December 31, 2010 Exhibit I: Mortgage Insurance Supplemental Information – For the Quarter and Year Ended and as of December 31, 2010 New Insurance Written and Risk Written Exhibit J: Mortgage Insurance Supplemental Information – For the Quarter and Year Ended and as of December 31, 2010 Insurance in Force and Risk in Force Exhibit K: Mortgage Insurance Supplemental Information – For the Quarter and Year Ended and as of December 31, 2010 Risk in Force by LTV and Policy Year and other Risk in Force Exhibit L: Mortgage Insurance Supplemental Information – For the Quarter and Year Ended and as of December 31, 2010 Claims Paid, Reserves and Reserve per Default Exhibit M: Mortgage Insurance Supplemental Information – For the Quarter and Year Ended and as of December 31, 2010 Default Statistics Exhibit N: Mortgage Insurance Supplemental Information – For the Quarter and Year Ended and as of December 31, 2010

Net Premiums Written and Earned, SmartHome, Captives and Persistency

Exhibit O: Mortgage Insurance Supplemental Information – For the Quarter and Year Ended and as of December 31, 2010 Reinsurance Progression Toward Attachment – Summary by Book Year Exhibit P: Mortgage Insurance Supplemental Information – For the Quarter and Year Ended and as of December 31, 2010 Modified Pool     Radian Group Inc. and Subsidiaries Condensed Consolidated Statements of Income Exhibit A       Quarter Ended   Year Ended December 31 December 31 2010   2009 2010   2009 (In thousands, except per-share data)   Revenues: Net premiums written - insurance $ 201,672   $ 163,251   $ 691,881   $ 443,848   (1)   Net premiums earned - insurance $ 220,082 $ 211,570 $ 825,733 $ 825,901 Net investment income 38,229 50,624 178,760 214,190 Change in fair value of derivative instruments (185,935 ) 142,913 (558,712 ) 99,958 Net (losses) gains on other financial instruments (121,323 ) (7,390 ) (71,737 ) 168,572 Net impairment losses recognized in earnings - (8,396 ) (90 ) (9,269 ) Gain on sale of affiliate - - 34,815 - Other income   3,042     3,539     8,696     14,026   Total revenues   (45,905 )   392,860     417,465     1,313,378       Expenses: Provision for losses 415,809 473,166 1,739,244 1,337,574 Provision for premium deficiency (14,664 ) 16,065 (14,621 ) (61,504 ) Policy acquisition costs 10,750 8,920 53,469 63,034 Other operating expenses 48,669 42,499 191,942 203,770 Interest expense   13,226     10,120     41,777     46,010   Total expenses   473,790     550,770     2,011,811     1,588,884     Equity in net income of affiliates   -     9,618     14,668     33,226     Pretax loss (519,695 ) (148,292 ) (1,579,678 ) (242,280 ) Income tax provision (benefit)   612,922     (56,425 )   226,189     (94,401 )   Net loss $ (1,132,617 ) $ (91,867 ) $ (1,805,867 ) $ (147,879 )   Diluted net loss per share (2) $ (8.55 ) $ (1.12 ) $ (15.74 ) $ (1.80 )   (1) Includes the reversal of $185.6 million of premiums written related to commutation of $9.8 billion Financial Guaranty net par outstanding in July 2009.                                   (2) Weighted average shares outstanding (In thousands)   Weighted average common shares outstanding 82,434 81,926 82,505 81,937 Increase in weighted average shares-common stock offering   50,000     -     32,192     -   Weighted average shares outstanding   132,434     81,926     114,697     81,937                                       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         December 31     December 31 (In thousands, except per-share data) 2010 2009   Assets: Cash and investments $ 6,680,630 $ 6,214,376 Investments in affiliates 133 121,480 Deferred policy acquisition costs 148,326 160,281 Deferred income taxes, net 27,531 440,948 Reinsurance recoverables 244,894 628,572 Derivative assets 26,212 68,534 Other assets   493,161     442,115     Total assets $ 7,620,887   $ 8,076,306       Liabilities and stockholders' equity: Unearned premiums $ 686,364 $ 823,621 Reserve for losses and loss adjustment expenses 3,596,735 3,578,982 Reserve for premium deficiency 10,736 25,357 Long-term debt 964,788 698,222 VIE debt 520,114 296,080 Derivative liabilities

723,579

238,697 Other liabilities  

258,791

    410,353     Total liabilities   6,761,107     6,071,312     Common stock 150 100 Additional paid-in capital 1,071,080 473,759 Retained earnings (204,926 ) 1,602,143 Accumulated other comprehensive loss   (6,524 )   (71,008 )   Total common stockholders' equity   859,780     2,004,994     Total liabilities and stockholders' equity $ 7,620,887   $ 8,076,306     Book value per share $ 6.46 $ 24.22     Radian Group Inc. and Subsidiaries Segment Information Quarter Ended December 31, 2010 Exhibit C       Mortgage   Financial   Financial   (In thousands) Insurance Guaranty Services Total Revenues: Net premiums written - insurance $ 200,549   $ 1,123   $ - $ 201,672     Net premiums earned - insurance $ 200,569 $ 19,513 $ - $ 220,082 Net investment income 22,469 15,760 - 38,229 Change in fair value of derivative instruments 26,642 (212,577 ) - (185,935 ) Net losses on other financial instruments (44,917 ) (76,406 ) - (121,323 ) Net impairment losses recognized in earnings - - - - Other income   1,916     65     1,061   3,042   Total revenues   206,679     (253,645 )   1,061   (45,905 )   Expenses: Provision for losses 426,288 (10,479 ) - 415,809 Provision for premium deficiency (14,664 ) - - (14,664 ) Policy acquisition costs 7,041 3,709 - 10,750 Other operating expenses 37,610 11,009 50 48,669 Interest expense   4,748     8,478     -   13,226   Total expenses   461,023     12,717     50   473,790     Pretax (loss) income (254,344 ) (266,362 ) 1,011 (519,695 )   Income tax provision   424,782     187,787     353   612,922     Net (loss) income $ (679,126 ) $ (454,149 ) $ 658 $ (1,132,617 )   Cash and investments $ 4,037,578 $ 2,643,052 $ - $ 6,680,630 Deferred policy acquisition costs 41,939 106,387 - 148,326 Total assets 4,801,953 2,818,934 - 7,620,887 Unearned premiums 197,260 489,104 - 686,364 Reserve for losses and loss adjustment expenses 3,524,971 71,764 - 3,596,735 VIE debt 141,006 379,108 - 520,114     Radian Group Inc. and Subsidiaries Segment Information Quarter Ended December 31, 2009 Exhibit D       Mortgage   Financial   Financial   (In thousands) Insurance Guaranty Services Total Revenues: Net premiums written - insurance $ 164,198   $ (947 ) $ - $ 163,251     Net premiums earned - insurance $ 189,634 $ 21,936 $ - $ 211,570 Net investment income 32,406 18,217 1 50,624 Change in fair value of derivative instruments 14,027 128,886 - 142,913 Net (losses) gains on other financial instruments 1,365 (8,755 ) - (7,390 ) Net impairment losses recognized in earnings (8,396 ) - - (8,396 ) Other income   2,393     1,078     68   3,539   Total revenues   231,429     161,362     69   392,860     Expenses: Provision for losses 459,853 13,313 - 473,166 Provision for premium deficiency 16,065 - - 16,065 Policy acquisition costs 5,231 3,689 - 8,920 Other operating expenses 29,763 12,604 132 42,499 Interest expense   3,320     6,800     -   10,120   Total expenses   514,232     36,406     132   550,770     Equity in net income of affiliates   -     -     9,618   9,618     Pretax (loss) income (282,803 ) 124,956 9,555 (148,292 )   Income tax (benefit) provision   (103,408 )   43,637     3,346   (56,425 )   Net (loss) income $ (179,395 ) $ 81,319   $ 6,209 $ (91,867 )   Cash and investments $ 3,775,682 $ 2,438,694 $ - $ 6,214,376 Deferred policy acquisition costs 35,854 124,427 - 160,281 Total assets 4,968,963 2,985,919 121,424 8,076,306 Unearned premiums 240,346 583,275 - 823,621 Reserve for losses and loss adjustment expenses 3,450,538 128,444 - 3,578,982 VIE debt 287,995 8,085 - 296,080     Radian Group Inc. and Subsidiaries Segment Information Year Ended December 31, 2010 Exhibit E       Mortgage   Financial   Financial   (In thousands) Insurance Guaranty Services Total Revenues: Net premiums written - insurance $ 699,909   $ (8,028 ) $ - $ 691,881     Net premiums earned - insurance $ 739,631 $ 86,102 $ - $ 825,733 Net investment income 104,030 74,730 - 178,760 Change in fair value of derivative instruments 32,381 (591,093 ) - (558,712 ) Net (losses) gains on other financial instruments 35,867 (107,604 ) - (71,737 ) Net impairment losses recognized in earnings (90 ) - - (90 ) Gain on sale of affiliate - - 34,815 34,815 Other income   7,208     364     1,124   8,696   Total revenues   919,027     (537,501 )   35,939   417,465     Expenses: Provision for losses 1,730,801 8,443 - 1,739,244 Provision for premium deficiency (14,621 ) - - (14,621 ) Policy acquisition costs 36,102 17,367 - 53,469 Other operating expenses 141,172 50,520 250 191,942 Interest expense   11,668     30,109     -   41,777   Total expenses   1,905,122     106,439     250   2,011,811     Equity in net income of affiliates   -     78     14,590   14,668     Pretax (loss) income (986,095 ) (643,862 ) 50,279 (1,579,678 )   Income tax provision   157,082     51,509     17,598   226,189     Net (loss) income $ (1,143,177 ) $ (695,371 ) $ 32,681 $ (1,805,867 )     Radian Group Inc. and Subsidiaries Segment Information Year Ended December 31, 2009 Exhibit F       Mortgage   Financial   Financial   (In thousands) Insurance Guaranty Services Total Revenues: Net premiums written - insurance $ 630,076   $ (186,228 ) $ -   $ 443,848     Net premiums earned - insurance $ 724,423 $ 101,478 $ - $ 825,901 Net investment income 129,871 84,315 4 214,190 Change in fair value of derivative instruments (14,428 ) 114,386 - 99,958 Net gains on other financial instruments 65,615 102,957 - 168,572 Net impairment losses recognized in earnings (9,246 ) (23 ) - (9,269 ) Other income   12,258     1,394     374     14,026   Total revenues   908,493     404,507     378     1,313,378     Expenses: Provision for losses 1,300,827 36,747 - 1,337,574 Provision for premium deficiency (61,504 ) - - (61,504 ) Policy acquisition costs 27,563 35,471 - 63,034 Other operating expenses 140,487 67,223 (3,940 ) 203,770 Interest expense   15,372     30,638     -     46,010   Total expenses   1,422,745     170,079     (3,940 )   1,588,884     Equity in net income of affiliates   -     -     33,226     33,226     Pretax (loss) income (514,252 ) 234,428 37,544 (242,280 )   Income tax (benefit) provision   (176,456 )   68,641     13,414     (94,401 )   Net (loss) income $ (337,796 ) $ 165,787   $ 24,130   $ (147,879 )     Radian Group Inc. Financial Guaranty Supplemental Information For the Quarter and Year Ended and as of December 31, 2010 Exhibit G       Quarter Ended   Year Ended (In thousands) December 31 December 31 2010   2009 2010   2009   Net Premiums Earned: Public finance direct $ 13,898 $ 14,215 $ 54,734 $ 49,965 Public finance reinsurance 4,362 5,935 25,297 44,232 Structured direct 443 1,208 2,498 6,364 Structured reinsurance 815 584 3,544 15,714 Trade credit reinsurance   (5 )   17     46     191   Net Premiums Earned - insurance 19,513 21,959 86,119 116,466 Impact of commutations   0     (23 )   (17 )   (14,988 ) Total Net Premiums Earned - insurance $ 19,513   $ 21,936   $ 86,102   $ 101,478       Refundings included in earned premium $ 7,442   $ 8,913   $ 35,782   $ 40,989     Net premiums earned - derivatives (1) $ 11,259   $ 12,633   $ 46,431   $ 53,423     Claims paid: Trade credit reinsurance $ 13 $ (136 ) $ 1,091 $ 776 Financial Guaranty   6,536     10,258     64,032     134,019   Total $ 6,549   $ 10,122   $ 65,123   $ 134,795    

Impact of adoption of amendment to accounting standard regarding VIEs on January 1, 2010:

(In millions) Balance Sheet Increase (Decrease): Investments $ 89.4 Other assets 121.0 VIE debt 321.0 Derivative liabilities (128.6 ) Derivative liabilities-VIE 17.4 Other liabilities 0.6   Income Statement Increase (Decrease): Net investment income $ 2.7 Net (losses) gains on other financial instruments (58.2 ) Change in fair value of derivative instruments 57.5 Other operating expenses 2.0   (1) Included in change in fair value of derivative instruments.     Radian Group Inc. Financial Guaranty Supplemental Information For the Quarter and Year Ended and as of December 31, 2010 Exhibit H     ($ in thousands, except ratios)     December 31     December 31 2010 2009 Statutory Information:   Capital and surplus $ 1,040,679 $ 1,062,637 Contingency reserve   392,589   366,108 Qualified statutory capital 1,433,268 1,428,745   Unearned premium reserve 517,516 595,819 Loss and loss expense reserve   70,129   128,754 Total statutory policyholders' reserves 2,020,913 2,153,318   Present value of installment premiums 202,386 260,662 Soft capital facilities   150,000   150,000 Total statutory claims paying resources $ 2,373,299 $ 2,563,980   Net debt service outstanding $ 101,168,759 $ 110,207,923   Capital leverage ratio (1) 71 77 Claims paying leverage ratio (2) 43 43   Net par outstanding by product: Public finance direct $ 15,727,252 $ 17,536,616 Public finance reinsurance 21,907,290 24,180,588 Structured direct 39,315,801 43,528,366 Structured reinsurance   1,805,295   2,174,433 Total (3) $ 78,755,638 $ 87,420,003     (1) The capital leverage ratio is derived by dividing net debt service outstanding by qualified statutory capital. (2) The claims paying leverage ratio is derived by dividing net debt service outstanding by total statutory claims paying resources. (3) Included in public finance net par outstanding is $1.9 billion and $2.2 billion at December 31, 2010 and December 31, 2009, respectively, for legally defeased bond issues where our financial guaranty policy has not been extinguished but cash or securities have been deposited in an escrow account for the benefit of bondholders. The accounting standard for financial guarantee insurance contracts requires that these contracts continue to be accounted for as outstanding contracts despite the elimination of substantially all risk.     Radian Group Inc. Mortgage Insurance Supplemental Information For the Quarter and Year Ended and as of December 31, 2010 Exhibit I       Quarter Ended   Year Ended December 31 December 31 ($ in millions) 2010   2009 2010   2009 $   %   $   % $   %   $   %            

Primary new insurance written

    Flow $ 3,781     100.0 %   $ 2,414     100.0 % $ 11,558     100.0 %   $ 16,969     100.0 % Total Primary $ 3,781     100.0 %   $ 2,414     100.0 % $ 11,558     100.0 %   $ 16,969     100.0 %   Total Prime $ 3,779 99.9 % $ 2,412 99.9 % $ 11,553 100.0 % $ 16,942 99.8 % Alt-A - - - - - - 11 0.1 % A minus and below   2     0.1 %     2     0.1 %   5     -       16     0.1 % Total Flow $ 3,781     100.0 %   $ 2,414     100.0 % $ 11,558     100.0 %   $ 16,969     100.0 %  

Total primary new insurance written by FICO score

  Total >=740 $ 3,112 82.3 % $ 1,829 75.8 % $ 9,294 80.4 % $ 12,293 72.5 %

680-739

669 17.7 % 581 24.1 % 2,261 19.6 % 4,403 25.9 %

620-679

- - 4 0.1 % 3 - 272 1.6 % =740 $ 11,039 38.9 % $ 10,526 35.1 %

680-739

9,849 34.7 % 10,790 36.0 %

620-679

6,359 22.4 % 7,329 24.5 % =740 $ 825 26.9 % $ 1,036 27.3 %

680-739

892 29.1 % 1,168 30.8 % 620-679 815 26.6 % 990 26.1 % =740 $ 11,864 37.7 % $ 11,562 34.3 %

680-739

10,741 34.1 % 11,958 35.4 %

620-679

7,174 22.8 % 8,319 24.6 %