– Wrote second largest quarterly volume of flow
business in company history –– Total number of primary delinquent
loans declined by 31% from third quarter of 2012 –
Radian Group Inc. (NYSE: RDN) today reported a net loss for the
quarter ended September 30, 2013, of $12.7 million, or $0.07 per
diluted share, which included minimal combined net gains from the
change in fair value of derivatives and other financial instruments
and minimal net losses on investments. Results for the quarter also
included a $22.0 million incurred loss initially booked for the
Freddie Mac Agreement announced in August and approximately $16.8
million of variable compensation expense directly related to the
company’s stock price increase during the quarter. The results for
the quarter compare to net income for the quarter ended September
30, 2012, of $14.3 million, or $0.11 per diluted share, which
included combined net losses from the change in fair value of
derivatives and other financial instruments of $41.8 million and
net gains on investments of $84.7 million. Book value per share at
September 30, 2013, was $5.17.
“We are pleased with Radian’s improved financial performance
this year and the continued stability in the macroeconomic and
business environment,” said Chief Executive Officer S.A. Ibrahim.
“The $13.7 billion of new flow mortgage insurance business in the
third quarter was the second largest amount ever written in
Radian’s more than 35 year history. The high-quality business
written after 2008, which represents 57% of our primary risk in
force, is expected to generate attractive returns and position
Radian for a return to sustained profitability.”
CAPITAL AND LIQUIDITY UPDATE
As previously announced in September, Radian Group contributed
$115 million of capital to Radian Guaranty in the third quarter, in
order to support the company’s risk-to-capital position. Radian
Guaranty’s risk-to-capital ratio was 19.8:1 as of September 30,
2013. After the above-mentioned contribution of $115 million to
Radian Guaranty, Radian Group maintains approximately $700 million
of currently available liquidity.
- As of September, 2013, Radian
Guaranty’s statutory capital was $1.3 billion compared to $1.2
billion at June 30, 2013, and $1.0 billion a year ago.
- 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 under the reinsurance agreements on a
prospective basis from 20 percent to 5 percent. As of September 30,
2013, a total of $2.6 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.
THIRD QUARTER HIGHLIGHTS
- New mortgage insurance written (NIW)
reached $13.7 billion during the quarter, compared to $13.4 billion
in the second quarter of 2013 and $10.6 billion in the third
quarter of 2012. Radian wrote $3.5 billion in NIW in October 2013,
compared to $4.0 billion in October 2012.
- The Home Affordable Refinance Program
(HARP) accounted for $1.8 billion of insurance not included in
Radian Guaranty’s NIW total for the quarter. This compares to $2.4
billion in the second quarter of 2013, and $2.7 billion in the
third quarter of 2012.
- Of the $13.7 billion of new business
written in the third quarter of 2013, 71 percent was written with
monthly premiums and 29 percent with single premiums.
- NIW continued to consist of loans with
excellent risk characteristics.
- Primary mortgage insurance
risk-in-force at the end of the third quarter consisted of 57
percent of business written after 2008 and, including HARP volume,
was 68 percent of the total portfolio.
- As previously announced, Radian
Guaranty entered into a Master Transaction Agreement with Freddie
Mac on August 29, 2013. The Agreement relates to a group of 25,760
first-lien mortgage loans held by Freddie Mac that were insured by
Radian Guaranty, and were delinquent as of December 31, 2011.
- The Agreement provides for the future
treatment of these loans including claim payments, loss mitigation
activity and insurance coverage, and eliminates Radian Guaranty’s
claim exposure on 9,756 loans that were delinquent and 4,586 loans
that were re-performing as of July 31, 2013. The Agreement caps
Radian Guaranty’s total exposure on this group of loans, including
loans that are currently re-performing, to $840 million. The
maximum exposure of $840 million is comprised of $625 million of
claim payments (consisting of $370 million claims paid on this
population as of July 12, 2013, and $255 million paid at closing)
and $215 million related to loss mitigation activity on the
loans.
- On August 29, 2013, Radian Guaranty
paid $255 million to Freddie Mac to cover claim exposure on these
loans, and had previously paid $370 million of claims on these
loans. Radian Guaranty also deposited $205 million in a collateral
account to cover future loss mitigation activity on these loans.
The amount deposited in the collateral account represents $215
million, less $10 million of loss mitigation activity that had
become final before the collateral account was established. Amounts
in the collateral account will be released to Radian Guaranty to
the extent that Radian Guaranty rescinds, denies, curtails, or
cancels these loans and such amounts become final under the
Agreement. If the loss mitigation activity that becomes final after
the collateral account was established does not accumulate to $205
million, any remaining funds will be paid to Freddie Mac. Radian
Guaranty will continue to administer all claims submitted with
respect to these loans in accordance with its insurance policy for
these loans and in a manner consistent with its normal claims
handling practices.
- As of September 30, 2013, $137.3
million of submitted claims had been rescinded, denied or curtailed
but were not considered final under the Agreement. As of September
30, 2013, the amount of insurance rescissions, claim denials or
claim curtailments that had become final in accordance with the
Agreement was $12.4 million, which includes $2.4 million finalized
after the collateral account was established.
- The mortgage insurance provision for
losses was $152.0 million in the third quarter of 2013, compared to
$136.4 million in the second quarter of 2013, and $171.8 million in
the third quarter of 2012.
- The $152.0 million provision for losses
includes approximately $22.0 million initially recorded in
connection with the Freddie Mac Agreement. This is expected to be
fully offset by a reduction of incurred losses in future periods.
This future reduction of incurred losses will result from the
elimination of exposure to re-performing loans covered by the
transaction that we expect to re-default in the future and
ultimately become claims.
- The loss ratio in the third quarter for
Radian Guaranty was 76.0 percent, compared to 68.9 percent in the
second quarter of 2013, and 96.1 percent in the third quarter of
2012.
- Mortgage insurance loss reserves were
approximately $2.3 billion as of September 30, 2013, which
decreased from $2.7 billion in the second quarter of 2013, and from
$3.0 billion a year ago.
- Primary reserves (excluding IBNR and
other reserves) per default were $27,202 as of September 30, 2013.
This compares to primary reserves per default of $27,293 as of June
30, 2013, and $26,100 as of September 30, 2012.
- The total number of primary delinquent
loans decreased by 17 percent in the third quarter from the second
quarter of 2013, and by 31 percent from the third quarter of 2012.
The total number of primary delinquent loans at September 30, 2013,
excludes loans related to the Freddie Mac Agreement described
above. In addition, the total number of primary delinquent loans
decreased by 2 percent in October. The primary mortgage insurance
delinquency rate decreased to 7.8 percent in the third quarter of
2013, compared to 9.7 percent in the second quarter of 2013, and
12.6 percent in the third quarter of 2012.
- Total mortgage insurance claims paid of
$519.3 million consisted of $254.6 million related to the Freddie
Mac Agreement and $264.7 million of other claims paid in the
quarter, compared to $326.4 million in the second quarter of 2013,
and $272.4 million in the third quarter of 2012. The company
expects mortgage insurance net claims paid of $1.5 billion for the
full-year 2013.
- $28.1 million of other operating
expenses in the third quarter represented long-term incentive
compensation, compared to $19.0 million in the second quarter of
2013. The expense in both periods was impacted by an increase in
the fair value of cash-settled awards, which was driven primarily
by an increase in the company’s stock price. The component of the
fair value change that resulted from the stock price increase was
$16.8 million in the third quarter of 2013, compared to $7.0
million in the second 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 September 30, 2013, Radian Asset
had approximately $1.2 billion in statutory surplus with an
additional $0.4 billion in claims-paying resources.
- Since June 30, 2008, Radian Asset has
successfully reduced its total net par exposure by 77 percent to
$26.2 billion as of September 30, 2013, including large declines in
the riskier segments of the portfolio.
- In response to recent questions
regarding Radian’s exposure to the Commonwealth of Puerto Rico, the
company has posted an overview of its Puerto Rico exposures, which
totals $453.4 million as of September 30, 2013, under Company
Statements in the Investors section of Radian’s website:
http://www.radian.biz/page?name=CompanyStatements.
CONFERENCE CALL
Radian will discuss these items in its conference call today,
Thursday, November 7, 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 877-531-2988 inside the U.S.,
or 612-332-1020 for international callers, using passcode 304797 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 304797.
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 September 30, 2013 Exhibit D: Segment
Information Quarter Ended September 30, 2012 Exhibit E: Segment
Information Nine Months Ended September 30, 2013 Exhibit F: Segment
Information Nine Months Ended September 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 EndedSeptember
30,
Nine Months EndedSeptember
30,
(In thousands,
except per-share data)
2013 2012
2013 2012
Revenues: Net premiums written - insurance $
250,842 $ 209,277
$ 709,256
$ 468,887
Net premiums earned -
insurance $ 211,984 $ 190,963
$
617,696 $ 545,107
Net investment income 26,732
25,635
81,220 91,225
Net (losses) gains on
investments (7,132 ) 84,659
(142,891
) 178,537
Change in fair value of derivative
instruments 10,778 (41,056 )
(70,357 )
(146,937 )
Net gains (losses) on other financial instruments
902 (740 )
(3,585 ) (80,454 )
Gain on sale
of affiliate — —
— 7,708
Other income
1,314 1,328
5,319 4,163
Total revenues 244,578 260,789
487,402 599,349
Expenses:
Provision for losses 157,174 176,352
429,524
653,374
Change in reserve for premium deficiency
(2,325 ) 966
(1,703 ) 1,505
Policy
acquisition costs 7,958 12,927
35,159 51,778
Other operating expenses 70,974 50,429
212,055
140,776
Interest expense 19,570 12,520
54,871 39,249
Total expenses
253,351 253,194
729,906 886,682
Equity in net income (loss) of affiliates
— —
1 (13 )
Pretax
(loss) income (8,773 ) 7,595
(242,503
) (287,346 )
Income tax provision (benefit)
3,909 (6,730 )
(9,149 ) (13,180 )
Net (loss) income $ (12,682 ) $
14,325
$ (233,354 ) $ (274,166 )
Diluted net (loss) income per share $ (0.07
) $ 0.11
$ (1.43 ) $ (2.07 )
(1) Weighted average shares outstanding (in
thousands) Weighted average common shares
outstanding 171,830 132,521
162,828 132,530
Increase in weighted average shares - common stock
equivalents-diluted basis — 1,512
—
—
Weighted average shares outstanding (in
thousands) 171,830 134,033
162,828
132,530
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
September 30, December 31,
(In thousands,
except per-share data)
2013 2012
Assets: Cash and investments
$ 5,083,636 $ 5,208,199
Deferred policy
acquisition costs 68,461 88,202
Deferred income
taxes, net 17,902 —
Reinsurance recoverables
57,260 89,204
Derivative assets 20,844 13,609
Other assets 510,470 503,986
Total
assets $ 5,758,573 $ 5,903,200
Liabilities and stockholders’ equity: Unearned
premiums $ 751,587 $ 648,682
Reserve for
losses and loss adjustment expenses 2,346,879 3,149,936
Reserve for premium deficiency 1,983 3,685
Long-term debt 921,927 663,571
VIE debt
104,218 108,858
Derivative liabilities 344,870
266,873
Other liabilities 392,589 325,270
Total liabilities 4,864,053 5,166,875
Common stock 191 151
Additional
paid-in capital 1,453,784 1,075,320
Retained
deficit (588,595 ) (355,241 )
Accumulated
other comprehensive income 29,140 16,095
Total common stockholders’ equity 894,520
736,325
Total liabilities and stockholders’ equity
$ 5,758,573 $ 5,903,200
Book
value per share $ 5.17 $ 5.51
Radian Group Inc. and Subsidiaries Segment
Information Quarter Ended September 30, 2013 Exhibit
C Mortgage Financial
(In
thousands)
Insurance Guaranty Total Revenues:
Net premiums written - insurance $ 250,799
$ 43 $ 250,842
Net premiums earned - insurance $
200,120 $ 11,864 $ 211,984
Net investment income 14,868 11,864
26,732 Net losses on investments (4,380
) (2,752 ) (7,132 ) Change in
fair value of derivative instruments — 10,778
10,778 Net (losses) gains on other financial
instruments (168 ) 1,070 902
Other income 1,250 64
1,314 Total revenues 211,690
32,888 244,578 Expenses:
Provision for losses 152,012 5,162
157,174 Change in reserve for premium deficiency
(2,325 ) — (2,325 ) Policy
acquisition costs 5,839 2,119 7,958
Other operating expenses 59,590 11,384
70,974 Interest expense 4,447
15,123 19,570 Total expenses
219,563 33,788 253,351
Pretax loss $ (7,873 ) $
(900 ) $ (8,773 ) Income tax
provision 3,909 Net loss $
(12,682 ) Cash and investments $
2,790,050 $ 2,293,586 $
5,083,636 Deferred policy acquisition costs
29,158 39,303 68,461 Total assets
3,238,224 2,520,349 5,758,573 Unearned
premiums 535,420 216,167 751,587
Reserve for losses and loss adjustment expenses
2,314,785 32,094 2,346,879 VIE debt
11,109 93,109 104,218 Derivative
liabilities — 344,870 344,870
Radian Group Inc. and Subsidiaries
Segment Information Quarter Ended September 30, 2012
Exhibit D Mortgage Financial
(In
thousands)
Insurance Guaranty Total Revenues:
Net premiums written - insurance $ 209,890 $ (613 ) $
209,277
Net premiums earned - insurance $
178,685 $ 12,278 $ 190,963
Net investment income 14,758
10,877 25,635
Net gains on investments 43,379 41,280 84,659
Change in fair value of derivative instruments (1 ) (41,055
) (41,056 )
Net (losses) gains on other financial
instruments (1,960 ) 1,220 (740 )
Other income 1,280
48 1,328
Total revenues 236,141
24,648 260,789
Expenses: Provision
for losses 171,805 4,547 176,352
Change in reserve for
premium deficiency 966 — 966
Policy acquisition costs
10,126 2,801 12,927
Other operating expenses 40,250 10,179
50,429
Interest expense 1,910 10,610 12,520
Total expenses 225,057 28,137 253,194
Equity in net income of affiliates — —
—
Pretax income (loss) 11,084 (3,489 )
7,595
Income tax (benefit) provision (20,316 ) 13,586
(6,730 )
Net income (loss) $ 31,400 $ (17,075
) $ 14,325
Cash and investments $ 3,192,341 $
2,099,454 $ 5,291,795
Deferred policy acquisition costs
39,148 52,123 91,271
Total assets 3,651,849 2,389,508
6,041,357
Unearned premiums 333,144 281,311 614,455
Reserve for losses and loss adjustment expenses 3,046,706
72,891 3,119,597
VIE debt 9,448 100,203 109,651
Derivative liabilities — 267,323 267,323
Radian Group Inc. and Subsidiaries Segment
Information Nine Months Ended September 30, 2013
Exhibit E Mortgage Financial
(In
thousands)
Insurance Guaranty Total Revenues:
Net premiums written - insurance $ 719,244
$ (9,988 ) (1) $
709,256 Net premiums earned - insurance
$ 581,064 $ 36,632 (1) $
617,696 Net investment income 45,236
35,984 81,220 Net losses on investments
(91,003 ) (51,888 ) (142,891
) Change in fair value of derivative instruments
— (70,357 ) (70,357 ) Net
losses on other financial instruments (1,971 )
(1,614 ) (3,585 ) Other income
5,121 198 5,319 Total
revenues 538,447 (51,045 )
487,402 Expenses: Provision for
losses 420,378 9,146 429,524 Change in
reserve for premium deficiency (1,703 ) —
(1,703 ) Policy acquisition costs
24,072 11,087 35,159 Other operating
expenses 176,665 35,390 212,055
Interest expense 10,820 44,051
54,871 Total expenses 630,232
99,674 729,906 Equity in net
income of affiliates — 1 1
Pretax loss $ (91,785 )
$ (150,718 ) $ (242,503 )
Income tax benefit (9,149 ) Net
loss $ (233,354 )
(1) Reflects the impact of the commutation of reinsurance
business.
Radian Group Inc. and Subsidiaries Segment
Information Nine Months Ended September 30, 2012
Exhibit F Mortgage
Financial
(In
thousands)
Insurance Guaranty Total Revenues:
Net premiums written - insurance $ 589,261 $ (120,374
) (1) $ 468,887
Net premiums earned -
insurance $ 522,899 $ 22,208 (1) $ 545,107
Net investment
income 50,377 40,848 91,225
Net gains on investments
102,219 76,318 178,537
Change in fair value of derivative
instruments (32 ) (146,905 ) (146,937 )
Net losses on other
financial instruments (2,627 ) (77,827 ) (80,454 )
Gain on
sale of affiliate — 7,708 7,708
Other income 3,928
235 4,163
Total revenues 676,764
(77,415 ) 599,349
Expenses: Provision for
losses 614,612 38,762 653,374
Change in reserve for premium
deficiency 1,505 — 1,505
Policy acquisition costs 26,662
25,116 51,778
Other operating expenses 107,787 32,989
140,776
Interest expense 5,355 33,894 39,249
Total expenses 755,921 130,761 886,682
Equity in net loss of affiliates — (13
) (13 )
Pretax loss (79,157 ) (208,189 ) (287,346 )
Income tax (benefit) provision (42,324 ) 29,144
(13,180 )
Net loss $ (36,833 ) $ (237,333 ) $
(274,166 )
(1) Reflects the impact of the commutation of reinsurance
business.
Radian Group Inc. and Subsidiaries
Financial Guaranty Supplemental Information Exhibit G
Quarter EndedSeptember
30,
Nine Months EndedSeptember
30,
(In
thousands)
2013 2012
2013 2012
Total Premiums
Earned - insurance $ 11,864 $ 12,278
$
39,079 $ 44,472
Impact of commutations and
reinsurance — —
(2,447 )
(22,264 )
Net Premiums Earned - insurance $
11,864 $ 12,278
$ 36,632
$ 22,208
Refundings included in earned premium
$ 6,979 $ 7,322
$ 22,020
$ 26,029
Net premiums earned - derivatives
(1) $ 4,170 $ 7,169
$
14,019 $ 23,041
Claims paid
$ (1,303 ) $ 26,593
(2) $
43,380 (3) $ 28,873
September
30, December 31,
($ in thousands,
except ratios)
2013 2012
Statutory
Information:
Capital and surplus $ 1,203,237 $
1,144,112
Contingency reserve 255,549 300,138
Qualified statutory capital 1,458,786
1,444,250
Unearned premium reserve 205,587
256,920
Loss and loss expense reserve (176,220
) (53,441 )
Total statutory policyholders’ reserves
1,488,153 1,647,729
Present value of installment
premiums 95,078 114,292
Total statutory
claims paying resources $ 1,583,231 $
1,762,021
Net debt service outstanding
$ 33,360,859 $ 42,526,289
Capital leverage ratio (4) 23 29
Claims paying
leverage ratio (5) 21 24
Net par outstanding
by product: Public finance direct $
8,608,860 $ 9,796,131
Public finance reinsurance
4,296,792 5,542,217
Structured direct
12,756,147 17,615,383
Structured reinsurance
559,887 787,758
Total (6) $
26,221,686 $ 33,741,489
(1)
Included in change in fair value of
derivative instruments.
(2)
Primarily represents the settlement of
obligations related to our insured sovereign indebtedness of
Greece.
(3)
Primarily related to commutation of
reinsurance business.
(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 $0.9 billion and $1.0 billion at September 30, 2013
and December 31, 2012, respectively, for legally defeased bond
issues where our financial guaranty policy has not been
extinguished but cash or securities have been deposited in an
escrow account for the benefit of bondholders.
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information Exhibit H
Quarter Ended September
30,
Nine Months Ended September
30,
2013 2012
2013 2012
($ in
millions)
$ % $ %
$ % $
%
Primary new
insurance written
Prime $ 13,718
100.0 % $ 10,594 100.0 %
$ 37,999
100.0 % $ 25,384 99.9 %
Alt-A and A minus and
below 2 — 4 —
4 — 14 0.1
Total Flow $ 13,720
100.0 % $ 10,598 100.0 %
$
38,003 100.0 % $ 25,398
100.0 %
Total primary new
insurance written by FICO score
>=740 $ 9,508 69.3 % $ 8,067
76.1 %
$ 27,384
72.0
% $ 19,313 76.0 %
680-739 3,642 26.5
2,259 21.3
9,296 24.5 5,475 21.6
620-679
570 4.2 272 2.6
1,323 3.5 610
2.4
Total Flow $ 13,720
100.0 % $ 10,598 100.0 %
$ 38,003 100.0 % $ 25,398
100.0 %
Percentage of
primary new insurance written
Monthly premiums 71 % 66 %
68 %
66 %
Single premiums 29 % 34 %
32
% 34 %
Refinances 21 % 35 %
33 % 38 %
LTV
95.01% and above 3.1 % 1.3 %
2.4
% 1.4 %
90.01% to 95.00% 48.3 % 42.5 %
44.6 % 41.5 %
85.01% to 90.00% 36.4
% 40.8 %
37.6 % 41.3 %
85.00% and below
12.2 % 15.4 %
15.4 % 15.8 %
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information Exhibit I
September 30, September 30,
2013 2012
($ in
millions)
$ % $ %
Primary insurance
in force (1)
Flow $ 148,342 93.5
% $ 123,438 91.4 %
Structured 10,268
6.5 11,622 8.6
Total Primary
$ 158,610 100.0 % $ 135,060
100.0 %
Prime $ 143,723
90.6 % $ 117,509 87.0 %
Alt-A 9,101
5.7 10,883 8.1
A minus and below 5,786
3.7
6,668 4.9
Total Primary $
158,610 100.0 % $ 135,060 100.0
%
Primary risk in
force (1)
Flow $ 36,881 94.1 % $ 30,480
92.3 %
Structured 2,303 5.9
2,540 7.7
Total Primary $ 39,184
100.0 % $ 33,020 100.0 %
Flow Prime $ 34,255 92.9
% $ 27,372 89.8 %
Alt-A 1,621 4.4 1,928
6.3
A minus and below 1,005 2.7
1,180 3.9
Total Flow $ 36,881
100.0 % $ 30,480 100.0 %
Structured Prime $ 1,359 59.0
% $ 1,482 58.3 %
Alt-A 499 21.7 571
22.5
A minus and below 445 19.3
487 19.2
Total Structured $
2,303 100.0 % $ 2,540 100.0 %
Total Prime $ 35,614 90.9
% $ 28,854 87.4 %
Alt-A 2,120 5.4 2,499
7.6
A minus and below 1,450 3.7
1,667 5.0
Total Primary
$ 39,184 100.0 % $ 33,020
100.0 %
(1) Includes amounts related to the
Freddie Mac Agreement.
Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information Exhibit J
September 30, September 30,
2013 2012
($ in
millions)
$ % $ %
Total primary
risk in force by FICO score
Flow >=740 $ 20,732
56.2 % $ 15,141 49.7 %
680-739 10,769
29.2 9,449 31.0
620-679 4,649 12.6
5,022 16.5
<=619 731 2.0 868
2.8
Total Flow $ 36,881
100.0 % $ 30,480 100.0 %
Structured >=740 $ 619 26.9
% $ 674 26.5 %
680-739 661 28.7 736
29.0
620-679 609 26.4 678 26.7
<=619
414 18.0 452 17.8
Total Structured $ 2,303 100.0
% $ 2,540 100.0 %
Total >=740
$ 21,351 54.5 % $ 15,815 47.9 %
680-739 11,430 29.2 10,185 30.8
620-679
5,258 13.4 5,700 17.3
<=619 1,145
2.9 1,320 4.0
Total
Primary $ 39,184 100.0 % $
33,020 100.0 %
Total primary
risk in force by LTV
95.01% and above $ 4,273 10.9 %
$ 4,776 14.5 %
90.01% to 95.00% 16,508 42.1
12,473 37.8
85.01% to 90.00% 14,563 37.2
12,679 38.4
85.00% and below 3,840 9.8
3,092
9.3
Total $ 39,184 100.0
% $ 33,020 100.0 %
Total primary
risk in force by policy year
2005 and prior
$ 4,786 12.2 % $ 5,947 18.0 %
2006
2,433 6.2 2,827 8.6
2007
5,452 13.9 6,239 18.9
2008
4,119 10.5 4,715 14.3
2009
1,564 4.0 2,200 6.7
2010
1,301 3.3 1,887 5.7
2011
2,393 6.1 3,181 9.6
2012
7,940 20.3 6,024 18.2
2013
9,196 23.5 — —
Total $ 39,184 100.0 % $
33,020 100.0 %
Primary risk in force on defaulted
loans $
3,400
(1)
$ 4,417
(1) Includes $389 of risk related to
loans subject to the Freddie Mac Agreement.
Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information Exhibit K
September 30, September 30,
2013 2012
($ in
millions)
$ % $ %
Pool risk in
force
Prime $ 1,292 77.8 % $ 1,432
76.8 %
Alt-A 82 4.9 108 5.8
A minus and
below 287 17.3 324 17.4
Total $ 1,661 100.0
% $ 1,864 100.0 %
Total pool risk
in force by policy year
2005 and prior
$ 1,546 93.1 % $ 1,684 90.3 %
2006
43 2.6 79 4.2
2007
71 4.3 89 4.8
2008
1
-
12
0.7
Total pool risk in force $ 1,661
100.0 % $ 1,864 100.0 %
Other risk in
force
Second-lien
1st loss
$ 66 $ 85
2nd loss 11 23
NIMS
14 14
1st loss-Hong Kong primary mortgage insurance
24 45
Total other risk in force
$ 115 $ 167
Risk to capital
ratio-Radian Guaranty only 19.8
:1(1)
20.1 :1
Risk to capital ratio-Mortgage Insurance combined
25.0
:1(1)
26.3 :1
(1) Preliminary Radian Group Inc.
and Subsidiaries Mortgage Insurance Supplemental
Information Exhibit L
Quarter Ended September
30,
Nine Months Ended September
30,
($ in
thousands)
2013 2012
2013 2012
Net
claims paid Prime $ 160,091 $ 169,641
$ 578,486 $ 467,093
Alt-A 46,474 45,058
141,624 121,970
A minus and below 24,843
28,042
85,542 85,234
Total
primary claims paid 231,408 242,741
805,652
674,297
Pool 33,181 26,546
92,741 71,846
Second-lien and other 80 3,111
2,578 8,043
Subtotal 264,669
272,398
900,971 754,186
Impact of Freddie Mac
Agreement 254,667 —
254,667 —
Impact of
captive terminations — —
—
(148 )
Total $ 519,336 $ 272,398
$ 1,155,638 $ 754,038
Average
claim paid (1) Prime $ 47.2 $ 48.0
$ 47.3 $ 48.6
Alt-A 56.7 59.9
56.3 58.6
A minus and below 38.0 38.1
36.8 38.0
Total primary average claims paid
47.5 48.4
47.2 47.9
Pool 61.7 66.2
69.2 66.6
Second-lien and other 4.2 29.6
16.5 27.5
Total $ 48.8 $ 49.3
$
48.5 $ 48.8
Average primary claim paid (2) (3)
$ 49.8 $ 50.8
$ 49.4 $ 50.5
Average
total claim paid (2) (3) $ 50.8 $ 51.5
$
50.6 $ 51.2
Loss ratio - GAAP basis
76.0 % 96.1 %
72.3 % 117.5 %
Expense
ratio - GAAP basis 32.7 % 28.2 %
34.5
% 25.7 %
108.7 % 124.3 %
106.8 %
143.2 %
Reserve for losses by category Prime
$ 1,038,673 $ 1,499,268
Alt-A 406,904
505,654
A minus and below 228,854 314,759
IBNR and
other 313,244 233,376
LAE 50,505 65,595
Reinsurance recoverable (4) 49,675 89,801
Total primary reserves 2,087,855
2,708,453
Pool insurance 189,994 291,013
IBNR and other 26,624 28,181
LAE 5,480
7,826
Total pool reserves 222,098
327,020
Total 1st lien reserves
2,309,953 3,035,473
Second lien and
other 4,832 11,233
Total reserves
$ 2,314,785 $ 3,046,706
1st
lien reserve per default Primary reserve per default
excluding IBNR and other 27,202 26,100
Pool reserve
per pool default excluding IBNR and other (5) 13,711
16,027
(1)
Calculated net of reinsurance
recoveries and without giving effect to the impact of the Freddie
Mac Agreement and captive terminations.
(2)
Calculated without giving effect to the
impact of the Freddie Mac Agreement and captive
terminations.
(3)
Before reinsurance recoveries.
(4)
Represents ceded losses on captive
transactions, Smart Home and quota share reinsurance
transactions.
(5)
If calculated before giving effect to
deductibles and stop losses in pool transactions, this would be
$26,767 and $27,842 at September 30, 2013 and 2012,
respectively.
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information Exhibit M
September 30, December 31, September 30,
2013 2012 2012
Default
Statistics
Primary Insurance:
Prime
Number of insured loans 729,822 667,622 647,192
Number of loans in default 40,951 60,854 61,369
Percentage of loans in default 5.61 % 9.12 %
9.48 %
Alt-A
Number of insured loans 47,014 54,069 56,167
Number of loans in default 12,107 16,005 17,063
Percentage of loans in default 25.75 % 29.60 %
30.38 %
A minus and
below
Number of insured loans 42,470 49,307 50,852
Number of loans in default 12,181 16,310 16,399
Percentage of loans in default 28.68 % 33.08 %
32.25 %
Total Primary Number of insured loans
832,469
(1)
770,998 754,211
Number of loans in default 65,239
(2)
93,169 94,831
Percentage of loans in default 7.84
% 12.08 % 12.57 %
Pool insurance Number of
loans in default 14,257 18,147 18,646
(1)
Includes 13,163 insured loans subject
to the Freddie Mac Agreement.
(2)
Excludes 8,509 loans subject to the
Freddie Mac Agreement that are in default at September 30,
2013.
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information Exhibit N
Quarter Ended September
30,
Nine Months Ended September
30,
($ in
thousands)
2013 2012
2013 2012
1st Lien
Captives
Premiums ceded to captives $ 4,161 $ 5,327
$ 14,100 $ 18,045
% of total premiums
1.9 % 2.8 %
2.2 % 3.3 %
IIF included
in captives (1) 4.3 % 7.1 %
RIF included in
captives (1) 4.2 % 6.9 %
Initial Quota
Share Reinsurance ("QSR") Transaction
QSR ceded premiums written $ 5,551 $ 16,378
$ 17,573 $ 41,855
% of premiums written
2.1 % 7.1 %
2.3 % 6.5 %
QSR ceded
premiums earned $ 7,216 $ 5,291
$
22,711 $ 8,389
% of premiums earned 3.3
% 2.8 %
3.6 % 1.5 %
Ceding commissions
$ 1,388 $ 4,095
$ 4,393 $ 10,464
RIF
included in QSR (2) $ 1,376,416 $ 1,408,078
Second QSR
Transaction
QSR ceded premiums written $ 8,233 $
32,253 % of premiums written 3.1 %
4.1 % QSR ceded premiums earned $
5,099 $ 12,220 % of premiums earned
2.4 % 1.9 % Ceding commissions
$ 2,882 $ 11,289 RIF included in QSR
(2) $ 1,201,235 Persistency (twelve
months ended September 30) 80.5 % 82.7 %
(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, actual or
threatened downgrades of U.S. government credit ratings, or actual
or threatened defaults on U.S. government obligations;
- 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, municipal and
sovereign bankruptcy filings or other 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 our 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 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 (which are 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 our 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, substantially all
of our investment portfolio and certain of our long-term incentive
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, Item 1A of
Part II of our Quarterly Reports on Form 10-Q filed in 2013 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
issued this press release. We do not intend to, and we disclaim any
duty or obligation to, update or revise any forward-looking
statements to reflect new information or future events or for any
other reason.
Radian Group Inc.Emily Riley,
215-231-1035emily.riley@radian.biz
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