Radian Group Inc. (NYSE: RDN) today reported a net loss for the
quarter ended June 30, 2013, of $33.2 million, or $0.19 per diluted
share, which included net losses on investments of $130.3 million
and combined net gains from the change in fair value of derivatives
and other financial instruments of $87.7 million. This compares to
a net loss for the quarter ended June 30, 2012, of $119.3 million,
or $0.90 per diluted share, which included net gains on investments
of $26.4 million and combined net losses from the change in fair
value of derivatives and other financial instruments of $95.0
million. Book value per share at June 30, 2013, was $5.22.
“We are pleased with our improved financial results in the
quarter and the first half of the year,” said Chief Executive
Officer S.A. Ibrahim. “Compared to the second quarter of last year,
our new mortgage insurance business written grew 60% and we reduced
our inventory of primary delinquent loans by 21%. The loss ratio
for our mortgage insurance business was approximately 70% for the
second consecutive quarter, and the mortgage insurance loss
provision for the first half of 2013 reached its lowest level since
the first half of 2007.”
Ibrahim continued, “Also in the second quarter, we achieved an
important milestone with our high quality, profitable new business
written after 2008 now representing 53% of our primary risk in
force, outweighing our legacy mortgage insurance book. This
improved composition has helped our mortgage insurance business
achieve profitability, absent the impact of fair value gains and
losses, for the quarter and six months.”
CAPITAL AND LIQUIDITY UPDATE
- Radian Guaranty’s risk-to-capital ratio
was 19.7:1 as of June 30, 2013.
- The increase in the risk-to-capital
ratio from March 31, 2013, was primarily driven by the increase to
the company’s net risk in force resulting from strong volume of
new, high-quality mortgage insurance business.
- In 2012, Radian Guaranty entered into
two quota share reinsurance agreements with the same third-party
reinsurance provider, in order to proactively manage its
risk-to-capital position. On April 1, 2013, Radian reduced the
amount of new business ceded to the reinsurer on a prospective
basis from 20 percent to 5 percent. As of June 30, 2013, a total of
$2.5 billion of risk in force had been ceded under those
agreements. On December 31, 2014, and on December 31, 2015, Radian
will have the option to recapture a portion of the business that
has been reinsured.
- As of June, 2013, Radian Guaranty’s
statutory capital was $1.2 billion compared to $1.1 billion at
March 31, 2013, and $0.9 billion a year ago.
- Radian Group maintains approximately
$816 million of currently available liquidity.
SECOND QUARTER HIGHLIGHTS
- New mortgage insurance written (NIW)
grew to $13.4 billion during the quarter, compared to $10.9 billion
in the first quarter of 2013 and $8.3 billion in the second quarter
of 2012.
- The Home Affordable Refinance Program
(HARP) accounted for $2.4 billion of insurance not included in
Radian Guaranty’s NIW total for the quarter. This compares to $2.5
billion in the first quarter of 2013, and $2.4 billion in the
second quarter of 2012.
- NIW continued to consist of loans with
excellent risk characteristics.
- The net loss for the second quarter was
$33.2 million which included net losses on investments of $130.3
million and combined net gains from the change in fair value of
derivatives and other financial instruments of $87.7 million.
Included in the net losses on investments were net unrealized
losses of $139.1 million, driven by rising interest rates, which
reduced the market value of the company’s fixed-income
portfolio.
- The mortgage insurance provision for
losses was $136.4 million in the second quarter of 2013, compared
to $132.0 million in the first quarter of 2013, and $208.1 million
in the second quarter of 2012. The loss ratio in the second quarter
for Radian Guaranty was 68.9 percent, compared to 72.1 percent in
the first quarter of 2013, and 121.9 percent in the second quarter
of 2012. Mortgage insurance loss reserves were approximately $2.7
billion as of June 30, 2013, which decreased from $2.9 billion in
the first quarter of 2013, and from $3.2 billion a year ago.
First-lien reserves per primary default were $30,932 as of June 30,
2013, compared to $30,426 as of March 31, 2013, and $28,410 as of
June 30, 2012.
- The total number of primary delinquent
loans decreased by 8 percent in the second quarter from the first
quarter of 2013, and by 21 percent from the second quarter of 2012.
The primary mortgage insurance delinquency rate decreased to 9.7
percent in the second quarter of 2013, compared to 10.9 percent in
the first quarter of 2013, and 13.3 percent in the second quarter
of 2012.
- Total mortgage insurance claims paid
were $326.4 million, compared to $309.9 million in the first
quarter of 2013, and $263.4 million in the second quarter of 2012.
The company continues to expect mortgage insurance net claims paid
of approximately $1.4 billion for the full-year 2013.
- $19.0 million of other operating
expenses in the second quarter represented long-term incentive
compensation, compared to $38.0 million in the first quarter of
2013. The expense in both periods was impacted by an increase in
the liability for cash-settled awards, which was driven primarily
by an increase in the company’s stock price and represented $7.0
million in the second quarter, compared to $32.3 million in the
first quarter of 2013.
- Radian Asset Assurance Inc. serves 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 June 30, 2013, Radian Asset had
approximately $1.2 billion in statutory surplus with an additional
$0.4 billion in claims-paying resources.
- In July 2013, Radian Asset paid a
dividend of $36 million to Radian Guaranty. Since 2008, Radian
Asset has paid a total of $420 million in dividends to Radian
Guaranty.
- Since June 30, 2008, Radian Asset has
successfully reduced its total net par exposure by 76 percent to
$27.3 billion as of June 30, 2013, including large declines in the
riskier segments of the portfolio.
CONFERENCE CALL
Radian will discuss these items in its conference call today,
Wednesday, July 24, 2013, 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 800-230-1074 inside the U.S.,
or 612-234-9959 for international callers, using passcode 297533 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 297533.
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 June 30, 2013 Exhibit D: Segment
Information Quarter Ended June 30, 2012 Exhibit E: Segment
Information Six Months Ended June 30, 2013 Exhibit F: Segment
Information Six Months Ended June 30, 2012 Exhibit G: Financial
Guaranty Supplemental Information Exhibit H: Mortgage Insurance
Supplemental Information New Insurance Written Exhibit I: Mortgage
Insurance Supplemental Information Insurance in Force and Risk in
Force by Product Exhibit J: Mortgage Insurance Supplemental
Information Risk in Force by FICO, LTV and Policy Year Exhibit K:
Mortgage Insurance Supplemental Information Pool and Other Risk in
Force, Risk-to-Capital Exhibit L: Mortgage Insurance Supplemental
Information Claims, Reserves and Reserve per Default Exhibit M:
Mortgage Insurance Supplemental Information Default Statistics
Exhibit N: Mortgage Insurance Supplemental Information Captives,
QSR and Persistency
Radian Group Inc. and
Subsidiaries Condensed Consolidated Statements of Income
Exhibit A Quarter Ended Six Months
Ended June 30, June 30,
(In thousands,
except per-share data)
2013 2012
2013 2012
Revenues: Net premiums written - insurance $
251,229 $ 181,932
$ 458,414
$ 259,610
Net premiums earned -
insurance $ 213,124 $ 186,779
$
405,712 $ 354,144
Net investment income 27,615
30,877
54,488 65,590
Net (losses) gains on
investments (130,254 ) 26,419
(135,759
) 93,878
Change in fair value of derivative
instruments 86,535 (33,124 )
(81,135 )
(105,881 )
Net gains (losses) on other financial instruments
1,188 (61,862 )
(4,487 ) (79,714 )
Gain on
sale of affiliate — 7,708
— 7,708
Other
income 2,234 1,395
4,005
2,835
Total revenues 200,442 158,192
242,824 338,560
Expenses:
Provision for losses 140,291 210,868
272,350
477,022
Change in reserve for premium deficiency
1,251 559
622 539
Policy acquisition costs
10,006 10,805
27,201 38,851
Other operating
expenses 60,981 40,193
141,081 90,347
Interest
expense 19,420 12,581
35,301
26,729
Total expenses 231,949 275,006
476,555 633,488
Equity in net
(loss) income of affiliates — (2 )
1
(13 )
Pretax loss (31,507 )
(116,816 )
(233,730 ) (294,941 )
Income tax
provision (benefit) 1,665 2,443
(13,058 ) (6,450 )
Net loss $
(33,172 ) $ (119,259 )
$ (220,672
) $ (288,491 )
Diluted net loss per share
$ (0.19 ) $ (0.90 )
$ (1.40
) $ (2.18 )
Weighted average shares outstanding (in
thousands)
171,783 132,346
158,180 132,350
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
June 30, December 31,
(In thousands,
except per-share data)
2013 2012
Assets: Cash and investments
$ 5,366,633 $ 5,208,199
Deferred policy
acquisition costs 70,427 88,202
Deferred income
taxes, net 17,902 —
Reinsurance recoverables
65,750 89,204
Derivative assets 9,379 13,609
Other assets 523,909 503,986
Total
assets $ 6,054,000 $ 5,903,200
Liabilities and stockholders’ equity: Unearned
premiums $ 712,706 $ 648,682
Reserve for
losses and loss adjustment expenses 2,716,490 3,149,936
Reserve for premium deficiency 4,308 3,685
Long-term debt 913,952 663,571
VIE debt
106,767 108,858
Derivative liabilities 350,576
266,873
Other liabilities 346,335 325,270
Total liabilities 5,151,134 5,166,875
Common stock 191 151
Additional
paid-in capital 1,454,122 1,075,320
Retained
deficit (575,913 ) (355,241 )
Accumulated
other comprehensive income 24,466 16,095
Total common stockholders’ equity 902,866
736,325
Total liabilities and stockholders’ equity
$ 6,054,000 $ 5,903,200
Book
value per share $ 5.22 $ 5.51
Radian Group Inc. and Subsidiaries Segment
Information Quarter Ended June 30, 2013 Exhibit C
Mortgage Financial
(In
thousands)
Insurance Guaranty Total Revenues:
Net premiums written - insurance $ 251,159
$ 70 $ 251,229
Net premiums earned - insurance $
197,952 $ 15,172 $ 213,124
Net investment income 15,266 12,349
27,615 Net losses on investments (83,386
) (46,868 ) (130,254 ) Change
in fair value of derivative instruments — 86,535
86,535 Net gains on other financial instruments
74 1,114 1,188 Other income
2,159 75 2,234 Total
revenues 132,065 68,377
200,442 Expenses: Provision for
losses 136,410 3,881 140,291 Change in
reserve for premium deficiency 1,251 —
1,251 Policy acquisition costs 6,501
3,505 10,006 Other operating expenses
51,295 9,686 60,981 Interest expense
3,704 15,716 19,420
Total expenses 199,161 32,788
231,949 Pretax (loss) income $
(67,096 ) $ 35,589 $
(31,507 ) Income tax provision 1,665
Net loss $ (33,172 )
Cash and investments $ 2,962,997
$ 2,403,636 $ 5,366,633 Deferred
policy acquisition costs 29,138 41,289
70,427 Total assets 3,431,444 2,622,556
6,054,000 Unearned premiums 483,303
229,403 712,706 Reserve for losses and loss
adjustment expenses 2,690,861 25,629
2,716,490 VIE debt 10,963 95,804
106,767 Derivative liabilities —
350,576 350,576 Radian Group
Inc. and Subsidiaries Segment Information Quarter
Ended June 30, 2012 Exhibit D Mortgage
Financial
(In
thousands)
Insurance Guaranty Total Revenues:
Net premiums written - insurance $ 182,518 $ (586 )
(1) $ 181,932
Net premiums earned - insurance
$ 170,763 $ 16,016 (1) $ 186,779
Net investment income
17,608 13,269 30,877
Net gains (losses) on investments
26,662 (243 ) 26,419
Change in fair value of derivative
instruments (52 ) (33,072 ) (33,124 )
Net gains (losses) on
other financial instruments 42 (61,904 ) (61,862 )
Gain on
sale of affiliate — 7,708 7,708
Other income 1,304
91 1,395
Total revenues 216,327
(58,135 ) 158,192
Expenses: Provision for
losses 208,078 2,790 210,868
Change in reserve for premium
deficiency 559 — 559
Policy acquisition costs 7,890
2,915 10,805
Other operating expenses 31,272 8,921 40,193
Interest expense 1,723 10,858 12,581
Total expenses 249,522 25,484 275,006
Equity in net loss of affiliates — (2 ) (2 )
Pretax loss (33,195 ) (83,621 ) (116,816 )
Income
tax (benefit) provision (10,209 ) 12,652 2,443
Net loss $ (22,986 ) $ (96,273 ) $ (119,259 )
Cash and investments $ 3,176,027 $ 2,137,956 $ 5,313,983
Deferred policy acquisition costs 44,240 55,146 99,386
Total assets 3,388,524 2,643,006 6,031,530
Unearned
premiums 290,880 297,551 588,431
Reserve for losses and loss
adjustment expenses 3,155,343 94,937 3,250,280
VIE debt
7,500 100,333 107,833
Derivative liabilities — 219,960
219,960
(1) Reflects the impact of the commutation of reinsurance
business.
Radian Group Inc. and Subsidiaries
Segment Information Six Months Ended June 30, 2013
Exhibit E Mortgage Financial
(In
thousands)
Insurance Guaranty Total Revenues:
Net premiums written - insurance $ 468,445
$ (10,031 ) (1) $
458,414 Net premiums earned - insurance
$ 380,944 $ 24,768 (1) $
405,712 Net investment income 30,368
24,120 54,488 Net losses on investments
(86,623 ) (49,136 ) (135,759
) Change in fair value of derivative instruments
— (81,135 ) (81,135 ) Net
losses on other financial instruments (1,803 )
(2,684 ) (4,487 ) Other income
3,871 134 4,005 Total
revenues 326,757 (83,933 )
242,824 Expenses: Provision for
losses 268,366 3,984 272,350 Change in
reserve for premium deficiency 622 — 622
Policy acquisition costs 18,233 8,968
27,201 Other operating expenses 117,075
24,006 141,081 Interest expense 6,373
28,928 35,301 Total
expenses 410,669 65,886
476,555 Equity in net income of
affiliates — 1 1
Pretax loss $ (83,912 ) $
(149,818 ) $ (233,730 )
Income tax benefit (13,058 ) Net
loss $ (220,672 )
(1) Reflects the impact of the commutation of reinsurance
business.
Radian Group Inc. and Subsidiaries
Segment Information Six Months Ended June 30, 2012
Exhibit F Mortgage Financial
(In
thousands)
Insurance Guaranty Total Revenues:
Net premiums written - insurance $ 379,371 $ (119,761
) (1) $ 259,610
Net premiums earned -
insurance $ 344,214 $ 9,930 (1) $ 354,144
Net investment
income 35,619 29,971 65,590
Net gains on investments
58,840 35,038 93,878
Change in fair value of derivative
instruments (31 ) (105,850 ) (105,881 )
Net losses on other
financial instruments (667 ) (79,047 ) (79,714 )
Gain on
sale of affiliate — 7,708 7,708
Other income 2,648
187 2,835
Total revenues 440,623
(102,063 ) 338,560
Expenses: Provision for
losses 442,807 34,215 477,022
Change in reserve for premium
deficiency 539 — 539
Policy acquisition costs 16,536
22,315 38,851
Other operating expenses 67,537 22,810 90,347
Interest expense 3,445 23,284 26,729
Total expenses 530,864 102,624 633,488
Equity in net loss of affiliates — (13 ) (13 )
Pretax loss (90,241 ) (204,700 ) (294,941 )
Income
tax (benefit) provision (22,008 ) 15,558 (6,450 )
Net loss $ (68,233 ) $ (220,258 ) $ (288,491 )
(1) Reflects the impact of the commutation of reinsurance
business.
Radian Group Inc. and
Subsidiaries
Financial Guaranty Supplemental
Information
Exhibit G
Quarter Ended Six Months Ended June 30,
June 30,
(In
thousands)
2013 2012
2013 2012
Net
Premiums Earned: Total Premiums Earned - insurance
$ 15,172 $ 16,016
$ 27,215 $ 32,194
Impact of commutations and reinsurance — —
(2,447 ) (22,264 )
Net Premiums Earned -
insurance $ 15,172 $ 16,016
$ 24,768 $ 9,930
Refundings
included in earned premium $ 10,288 $
10,483
$ 15,041 $ 18,707
Net premiums earned - derivatives (1) $ 4,857
$ 7,224
$ 9,849 $ 15,872
Claims paid $ 2,825 $ (6,720 )
(3)
$ 44,683 (2) $ 2,280
June 30, December 31,
($ in thousands,
except ratios)
2013 2012
Statutory
Information:
Capital and surplus $ 1,241,146 $
1,144,112
Contingency reserve 247,988 300,138
Qualified statutory capital 1,489,134
1,444,250
Unearned premium reserve 216,582
256,920
Loss and loss expense reserve (170,538
) (53,441 )
Total statutory policyholders’ reserves
1,535,178 1,647,729
Present value of installment
premiums 101,481 114,292
Total
statutory claims paying resources $ 1,636,659
$ 1,762,021
Net debt service
outstanding $ 34,603,058 $ 42,526,289
Capital leverage ratio (4) 23 29
Claims paying leverage ratio (5) 21 24
Net
par outstanding by product: Public finance direct
$ 9,066,976 $ 9,796,131
Public finance
reinsurance 4,352,058 5,542,217
Structured direct
13,249,796 17,615,383
Structured reinsurance
600,810 787,758
Total (6) $
27,269,640 $ 33,741,489
(1)
Included in change in fair value of
derivative instruments.
(2)
Primarily related to commutation of
reinsurance business.
(3)
Reduction primarily due to salvage
recovery on a prior claim.
(4)
The capital leverage ratio is derived
by dividing net debt service outstanding by qualified statutory
capital.
(5)
The claims paying leverage ratio is
derived by dividing net debt service outstanding by total statutory
claims paying resources.
(6)
Included in public finance net par
outstanding is $1.0 billion at both June 30, 2013 and December 31,
2012, for legally defeased bond issues where our financial guaranty
policy has not been extinguished but cash or securities have been
deposited in an escrow account for the benefit of
bondholders.
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information Exhibit H
Quarter Ended Six Months Ended June 30,
June 30, 2013 2012
2013 2012
($ in
millions)
$ % $ %
$ % $
%
Primary new
insurance written
Prime $ 13,376
100.0 % $ 8,330 99.9 %
$ 24,281
100.0 % $ 14,790 99.9 %
Alt-A and A minus and
below 1 — 5
0.1
2 — 10
0.1
Total Flow $ 13,377
100.0 % $ 8,335 100.0 %
$
24,283 100.0 % $ 14,800
100.0 %
Total primary new
insurance written by FICO score
>=740 $ 9,666 72.3 % $ 6,326
75.9 %
$ 17,876 73.6 % $ 11,246 76.0 %
680-739 3,256 24.3 1,816 21.8
5,654
23.3 3,216 21.7
620-679 455
3.4 193 2.3
753
3.1 338 2.3
Total
Flow $ 13,377 100.0 %
$ 8,335 100.0 %
$ 24,283
100.0 % $ 14,800 100.0 %
Percentage of
primary new insurance written
Monthly premiums 67 % 67 %
66 %
66 %
Single premiums 33 % 33 %
34
% 34 %
Refinances
34 % 34 %
40 % 39 %
LTV
95.01% and above 2.3 % 1.3 %
2.1
% 1.5 %
90.01% to 95.00% 44.8 % 42.6 %
42.5 % 40.9 %
85.01% to 90.00% 37.5
% 41.4 %
38.3 % 41.5 %
85.00% and below
15.4 % 14.7 %
17.1 % 16.1 %
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information Exhibit I
June 30, June 30,
2013 2012
($ in
millions)
$ % $ %
Primary insurance
in force
Flow $ 140,776 93.0
% $ 118,420 90.8 %
Structured 10,596
7.0 11,991 9.2
Total
Primary $ 151,372 100.0
% $ 130,411 100.0 %
Prime
$ 135,818 89.7 % $ 112,112 86.0 %
Alt-A 9,557 6.3 11,383 8.7
A minus and
below 5,997 4.0 6,916
5.3
Total Primary $ 151,372
100.0 % $ 130,411 100.0 %
Primary risk in
force
Flow $ 34,842 93.7 % $ 29,200
91.8 %
Structured 2,355 6.3
2,609 8.2
Total Primary $
37,197 100.0 % $ 31,809
100.0 %
Flow Prime $
32,099 92.1 % $ 25,951 88.9 %
Alt-A
1,696 4.9 2,022 6.9
A minus and below
1,047 3.0 1,227
4.2
Total Flow $ 34,842
100.0 % $ 29,200 100.0 %
Structured Prime $ 1,385 58.8
% $ 1,520 58.2 %
Alt-A 515 21.9 589
22.6
A minus and below 455 19.3
500 19.2
Total Structured
$ 2,355 100.0 % $ 2,609
100.0 %
Total Prime $
33,484 90.0 % $ 27,471 86.4 %
Alt-A
2,211 6.0 2,611 8.2
A minus and below
1,502 4.0 1,727
5.4
Total Primary $ 37,197
100.0 % $ 31,809 100.0 %
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information Exhibit J
June 30, June 30,
2013 2012
($ in
millions)
$ % $ %
Total primary
risk in force by FICO score
Flow >=740 $ 19,120
54.9 % $ 13,868 47.5 %
680-739 10,258
29.4 9,265 31.7
620-679 4,700 13.5
5,162 17.7
<=619 764 2.2
905 3.1
Total Flow $
34,842 100.0 % $ 29,200
100.0 %
Structured >=740 $
632 26.8 % $ 690 26.4 %
680-739
678 28.8 757 29.0
620-679 623
26.5 698 26.8
<=619 422
17.9 464 17.8
Total
Structured $ 2,355 100.0
% $ 2,609 100.0 %
Total
>=740 $ 19,752 53.1 % $
14,558 45.8 %
680-739 10,936 29.4 10,022 31.5
620-679 5,323 14.3 5,860 18.4
<=619
1,186 3.2 1,369
4.3
Total Primary $ 37,197
100.0 % $ 31,809 100.0 %
Total primary
risk in force by LTV
95.01% and above $ 4,349 11.7 %
$ 4,960 15.6 %
90.01% to 95.00% 15,154 40.8
11,648 36.6
85.01% to 90.00% 13,996 37.6
12,265 38.6
85.00% and below 3,698
9.9 2,936 9.2
Total
$ 37,197 100.0 % $ 31,809
100.0 %
Total primary
risk in force by policy year
2005 and prior $ 5,073 13.6 % $
6,250 19.7 %
2006 2,526 6.8 2,944 9.3
2007 5,650 15.2 6,471 20.3
2008
4,277 11.5 4,870 15.3
2009 1,706
4.6 2,362 7.4
2010 1,433 3.8 2,035 6.4
2011 2,549 6.9 3,352 10.5
2012
8,157 21.9 3,525 11.1
2013 5,826
15.7 — —
Total
$ 37,197 100.0 % $ 31,809
100.0 %
Primary risk in force on defaulted
loans $ 3,624 $ 4,628
Radian Group Inc. and
Subsidiaries
Mortgage Insurance Supplemental
Information
Exhibit K
June 30, June 30,
2013 2012
($ in
millions)
$ % $ %
Pool risk in
force
Prime $ 1,346 77.5 % $ 1,471
76.8 %
Alt-A 90 5.2 113 5.9
A minus and
below 301 17.3 331
17.3
Total $ 1,737
100.0 % $ 1,915 100.0 %
Total pool risk
in force by policy year
2005 and prior $ 1,599 92.1 % $
1,722 89.9 %
2006
58 3.3 85 4.4
2007
75 4.3 93 4.9
2008
5 0.3 15 0.8
Total pool risk in force $ 1,737
100.0 % $ 1,915 100.0 %
Other risk in
force
Second-lien 1st loss $ 71 $ 91
2nd
loss 11 25
NIMS 14 14
1st loss-Hong
Kong primary mortgage insurance 29 49
Total other risk in force $ 125 $ 179
Risk to capital ratio-Radian Guaranty only
19.7:1
(1)
21.0:1
Risk to capital ratio-Mortgage Insurance combined
25.9:1
(1)
28.4:1
(1) Preliminary
Radian Group Inc. and Subsidiaries Mortgage Insurance
Supplemental Information Exhibit L Quarter
Ended Six Months Ended June 30, June 30,
($ in
thousands)
2013 2012
2013 2012
Net
claims paid Prime $ 217,878 $ 170,351
$ 418,395 $ 297,452
Alt-A 46,059 40,261
95,150 76,912
A minus and below 33,213
31,112
60,699 57,192
Total primary
claims paid 297,150 241,724
574,244 431,556
Pool 28,610 20,374
59,559 45,300
Second-lien and other 614 1,349
2,498 4,932
Subtotal 326,374
263,447
636,301 481,788
Impact of captive
terminations — —
— (148 )
Total $ 326,374 $ 263,447
$ 636,301 $ 481,640
Average
claim paid (1) Prime $ 46.0 $ 47.1
$ 47.4 $ 48.6
Alt-A 52.5 56.4
56.1 57.8
A minus and below 34.1 36.0
35.6 38.0
Total primary average claims paid
45.1 46.6
46.9 47.6
Pool 74.9 65.9
74.2 66.9
Second-lien and other 11.8 24.5
18.2 26.2
Total $ 46.5 $ 47.4
$
48.3 $ 48.5
Average primary claim paid (2) (3)
$ 47.2 $ 49.2
$ 49.2 $ 50.4
Average
total claim paid (2) (3) $ 48.5 $ 49.9
$
50.4 $ 51.0
Loss ratio - GAAP basis
68.9 % 121.9 %
70.4 % 128.6 %
Expense ratio - GAAP basis 29.2 % 22.9 %
35.5 % 24.4 %
98.1 % 144.8 %
105.9 % 153.0 %
Reserve for losses by
category Prime $ 1,521,888 $ 1,740,492
Alt-A 522,396 597,570
A minus and below
317,964 361,104
Reinsurance recoverable (4)
58,427 97,845
Total primary reserves
2,420,675 2,797,011
Pool insurance 265,114
348,288
Total 1st lien reserves
2,685,789 3,145,299
Second lien and other
5,072 10,044
Total reserves $
2,690,861 $ 3,155,343
1st lien reserve per default
(5)
Primary reserve per primary default $ 30,932 $
28,410
Primary reserve per default excluding IBNR
27,293 26,157
Pool reserve per pool default
(6)
17,428
18,012
Total 1st lien reserve per default
28,735
26,704
(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, Smart Home and quota share reinsurance
transactions.
(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 June 30, 2013 and 2012, would be $29,846 and
$27,949, respectively.
Radian Group
Inc. and Subsidiaries Mortgage Insurance Supplemental
Information Exhibit M June 30, December
31, June 30,
2013 2012 2012
Default
Statistics
Primary Insurance: Flow
Prime
Number of insured loans 675,246 630,094 588,335
Number of loans in default 45,899 55,483 57,961
Percentage of loans in default 6.80 % 8.81 %
9.85 %
Alt-A
Number of insured loans 34,589 37,754 40,976
Number of loans in default 10,024 11,798 13,001
Percentage of loans in default 28.98 % 31.25 %
31.73 %
A minus and
below
Number of insured loans 32,204 35,150 37,755
Number of loans in default 9,240 11,211 11,688
Percentage of loans in default 28.69 % 31.89 %
30.96 %
Total Flow Number of insured loans
742,039 702,998 667,066
Number of loans in default
65,163 78,492 82,650
Percentage of loans in default
8.78 % 11.17 % 12.39 %
Structured
Prime
Number of insured loans 35,796 37,528 39,278
Number of loans in default 4,676 5,371 5,608
Percentage of loans in default 13.06 % 14.31 %
14.28 %
Alt-A
Number of insured loans 15,156 16,315 17,435
Number of loans in default 3,707 4,207 5,053
Percentage of loans in default 24.46 % 25.79 %
28.98 %
A minus and
below
Number of insured loans 13,476 14,157 14,816
Number of loans in default 4,711 5,099 5,139
Percentage of loans in default 34.96 % 36.02 %
34.69 %
Total Structured Number of insured
loans 64,428 68,000 71,529
Number of loans in
default 13,094 14,677 15,800
Percentage of loans in
default 20.32 % 21.58 % 22.09 %
Total
Primary Insurance
Prime
Number of insured loans 711,042 667,622 627,613
Number of loans in default 50,575 60,854 63,569
Percentage of loans in default 7.11 % 9.12 %
10.13 %
Alt-A
Number of insured loans 49,745 54,069 58,411
Number of loans in default 13,731 16,005 18,054
Percentage of loans in default 27.60 % 29.60 %
30.91 %
A minus and
below
Number of insured loans 45,680 49,307 52,571
Number of loans in default 13,951 16,310 16,827
Percentage of loans in default 30.54 % 33.08 %
32.01 %
Total Primary Number of insured loans
806,467 770,998 738,595
Number of loans in default
78,257 93,169 98,450
Percentage of loans in default
9.70 % 12.08 % 13.33 %
Pool insurance
Number of loans in default
15,212
18,147 19,336
Radian Group Inc. and
Subsidiaries Mortgage Insurance Supplemental Information
Exhibit N Quarter Ended Six Months
Ended June 30, June 30,
($ in
thousands)
2013 2012
2013 2012
1st Lien
Captives
Premiums ceded to captives $ 4,787 $ 6,289
$ 9,939 $ 12,718
% of total premiums
2.2 % 3.5 %
2.4 % 3.6 %
IIF included
in captives (1) 5.2 % 8.9 %
RIF included in
captives (1) 5.0 % 7.7 %
Initial Quota
Share Reinsurance ("QSR") Transaction
QSR ceded premiums written $ 5,900 $ 25,477
$ 12,022 $ 25,477
% of premiums written
2.2 % 12.0 %
2.3 % 12.0 %
QSR ceded
premiums earned $ 7,662 $ 3,098
$
15,495 $ 3,098
% of premiums earned 3.6
% 1.7 %
3.8 % 1.7 %
Ceding commissions
$ 1,475 $ 6,369
$ 3,005 $ 6,369
RIF
included in QSR (2) $ 1,421,096 $ 922,497
Second QSR
Transaction
QSR ceded premiums written $ 7,580 $
24,020 % of premiums written 2.8 %
4.7 % QSR ceded premiums earned $
4,283 $ 7,121 % of premiums earned
2.0 % 1.7 % Ceding commissions
$ 2,653 $ 8,407 RIF included in QSR
(2) $ 1,046,041 Persistency (twelve
months ended June 30) 80.3 % 83.9 %
(1)
Radian reinsures the middle layer risk
positions, while retaining a significant portion of the total risk
comprising the first loss and most remote risk positions.
(2)
Included in primary risk in
force.
FORWARD-LOOKING STATEMENTS
All statements in this press release that address events,
developments or results that we expect or anticipate may occur in
the future are “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934 and 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 statement. These statements speak only as of the
date they were made, and we undertake no obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. We operate
in a changing environment. New risks emerge from time to time and
it is not possible for us to predict all risks that may affect us.
The forward-looking statements, as well as our prospects as a
whole, are subject to risks and uncertainties that could cause
actual results to differ materially from those set forth in the
forward-looking statements including:
- changes in general economic and
political conditions, including high unemployment rates and
weakness in the U.S. housing and mortgage credit markets, a
significant downturn in the U.S. or global economies, a lack of
meaningful liquidity in the capital or credit markets, changes or
volatility in interest rates or consumer confidence and changes in
credit spreads, each of which may be accelerated or intensified by,
among other things, legislative activity or inactivity or 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 the fact that 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 where our mortgage insurance exposure is more
concentrated or where we have financial guaranty exposure;
- our ability to maintain sufficient
holding company liquidity to meet our short- and long-term
liquidity needs;
- a reduction in, or prolonged period of
depressed levels of, home mortgage originations due to reduced
liquidity in the lending market, tighter underwriting standards,
and general reduced housing demand in the U.S., which may be
exacerbated by regulations impacting home mortgage originations,
including 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, minimum policyholder position and other
surplus requirements for Radian Guaranty Inc. (“Radian Guaranty”),
our principal mortgage insurance subsidiary, and an adequate
minimum policyholder position and surplus for those insurance
subsidiaries that provide reinsurance to Radian Guaranty;
- our ability to continue to effectively
mitigate our mortgage insurance and financial guaranty losses;
- a more rapid than expected decrease in
the current elevated levels of mortgage insurance rescissions and
claim denials, which have reduced our paid losses and resulted in a
significant reduction in our loss reserves, including a decrease in
net rescissions or denials resulting from an increase in the number
of successful challenges to previously rescinded policies or claim
denials, or by the government-sponsored entities (“GSEs”)
intervening in or otherwise limiting our loss mitigation practices,
including settlements of disputes regarding loss mitigation
activities;
- the negative impact that our loss
mitigation activities may have on our relationships with our
customers and potential customers, including the potential loss of
current or future business and the heightened risk of disputes and
litigation;
- the need, in the event that we are
unsuccessful in defending our loss mitigation activities, to
increase our loss reserves for, and reassume risk on, rescinded or
cancelled loans or denied claims, and to pay additional claims,
including amounts previously curtailed;
- any disruption in the servicing of
mortgages covered by our insurance policies, as well as poor
servicer performance;
- adverse changes in the severity or
frequency of losses associated with certain products that we
formerly offered (and which remain in our insured portfolio) that
are riskier than traditional mortgage insurance or financial
guaranty insurance policies;
- a decrease in the persistency rates of
our mortgage insurance policies, which has the effect of reducing
our premium income on our monthly premium policies and could
decrease the profitability of our mortgage insurance business;
- heightened competition for our mortgage
insurance business from others such as the FHA, the U.S. Department
of Veterans Affairs and other private mortgage insurers, including
in particular, those that have been assigned higher ratings than we
have, that may have access to greater amounts of capital than we
do, that are less dependent on capital support from their
subsidiaries than we are or that are new entrants to the industry,
and therefore, are not burdened by legacy obligations;
- changes in requirements to remain an
eligible insurer to the GSEs (expected to be released by the end of
2013 and implemented following a transition period), which may
include more stringent risk-to-capital ratio requirements, higher
capital requirements for loans insured prior to 2009 and a
limitation on the amount of capital credit available for
subsidiaries, including capital attributable to our financial
guaranty business;
- changes in the charters or business
practices of, or rules or regulations applicable to, the GSEs;
- changes to the current system of
housing finance, including the possibility of a new system in which
private mortgage insurers are not required or their products are
significantly limited in effect or scope;
- the effect of the Dodd-Frank Act on the
financial services industry in general, and on our mortgage
insurance and financial guaranty businesses in particular,
including whether and to what extent loans with private mortgage
insurance may be considered “qualified residential mortgages” for
purposes of the Dodd-Frank Act securitization provisions;
- the application of existing federal or
state laws and regulations, or changes in these laws and
regulations or the way they are interpreted, including, without
limitation: (i) the resolution of existing, or the possibility of
additional, lawsuits or investigations (including in particular
investigations and litigation relating to captive reinsurance
arrangements under the Real Estate Settlement Practices Act of
1974); and (ii) legislative and regulatory changes (a) impacting
the demand for private mortgage insurance, (b) limiting or
restricting the products we may offer or increasing the amount of
capital we are required to hold, (c) affecting the form in which we
execute credit protection, or (d) otherwise impacting our existing
businesses;
- the amount and timing of potential
payments or adjustments associated with federal or other tax
examinations, including adjustments proposed by the IRS resulting
from the examination of our 2000 through 2007 tax years;
- 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 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 by variable
accounting for certain of our performance-based long-term
compensation awards;
- our ability to realize some or all of
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
generally accepted in the United States of America or statutory
accounting principles, rules and guidance, or their interpretation;
and
- legal and other limitations on amounts
we may receive from our subsidiaries as dividends or through our
tax- and expense-sharing arrangements with our subsidiaries.
For more information regarding these risks and uncertainties as
well as certain additional risks that we face, you should refer to
the Risk Factors detailed in Item 1A of Part I of our Annual Report
on Form 10-K for the year ended December 31, 2012, and subsequent
reports and registration statements filed from time to time with
the U.S. Securities and Exchange Commission. 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 report. We do
not intend to, and we disclaim any duty or obligation to, update or
revise any forward-looking statements made in this report to
reflect new information or future events or for any other
reason.
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