-- Net income of $83 million or $0.37 per
diluted share –
-- Adjusted diluted net operating income per
share of $0.41–
-- Writes $15.7 billion in new MI business;
sets company record for highest quarterly volume of flow MI –
-- Book value per share increases 14%
year-over-year to $13.47 –
Radian Group Inc. (NYSE: RDN) today reported net income for the
quarter ended September 30, 2016, of $82.8 million, or $0.37 per
diluted share. This compares to net income for the quarter ended
September 30, 2015, of $70.1 million, or $0.29 per diluted share.
Pretax income for the quarter ended September 30, 2016, was $126.9
million, compared to $115.7 million for the quarter ended September
30, 2015.
Key Financial Highlights (dollars
in millions, except per share data)
Quarter Ended Quarter Ended Percent September 30, September 30,
Change 2016 2015 Net income
$82.8 $70.1 18% Diluted net income per share
$0.37 $0.29 28% Pretax income $126.9
$115.7 10% Adjusted pretax operating income
$139.9 $115.6 21% Adjusted diluted net operating
income per share * $0.41 $0.31 32% Net
premiums earned - insurance $238.1 $227.4 5%
New Mortgage Insurance Written (NIW) $15,656 $11,176
40% Book value per share $13.47 $11.77
14%
* Adjusted diluted net operating income per share is calculated
using the company’s statutory tax rate of 35 percent.
Adjusted pretax operating income for the quarter ended September
30, 2016, was $139.9 million, compared to $115.6 million for the
quarter ended September 30, 2015. Adjusted diluted net operating
income per share for the quarter ended September 30, 2016, was
$0.41, compared to $0.31 for the quarter ended September 30, 2015.
See “Non-GAAP Financial Measures” below.
Book value per share at September 30, 2016 was $13.47, an
increase of 3 percent from $13.09 at June 30, 2016, and an increase
of 14 percent from $11.77 at September 30, 2015.
“We set a record for Radian in the third quarter, writing the
highest volume of new flow mortgage insurance business ever in our
40-year history, adding to our existing high-quality insurance
in-force book,” said Radian’s Chief Executive Officer S.A. Ibrahim.
“Our company continued to benefit from positive credit trends,
including another decline in our total number of delinquent loans,
high quarterly cure rates and continued outstanding performance
from our newest books of mortgage insurance business.”
THIRD QUARTER HIGHLIGHTS
Mortgage Insurance
- New mortgage insurance written (NIW)
grew to $15.7 billion for the quarter, representing record volume
of NIW written on a flow basis for the company, and an increase of
40 percent compared to $11.2 billion in the prior-year quarter.
- Of the $15.7 billion in new business
written in the third quarter of 2016, 27 percent was written with
single premiums. Net single premiums written, after consideration
of the 35 percent ceded under the company’s Single Premium Quota
Share Reinsurance Agreement, was 17 percent in the third quarter of
2016.
- Refinances accounted for 22 percent of
total NIW in the third quarter of 2016, compared to 18 percent in
the second quarter of 2016, and 13 percent a year ago.
- NIW continued to consist of loans with
excellent risk and return characteristics.
- Total primary mortgage insurance in
force as of September 30, 2016, grew to $181.2 billion, compared to
$177.7 billion as of June 30, 2016, and $174.9 billion as of
September 30, 2015.
- The composition of Radian’s mortgage
insurance portfolio has significantly improved over the past
several years:
- 87 percent of primary mortgage
insurance risk in force consisted of new business written after
2008, including those loans that successfully completed the Home
Affordable Refinance Program (HARP).
- 57 percent of primary mortgage
insurance risk in force at September 30, 2016, consisted of loans
with FICO scores greater than or equal to 740, compared to 26
percent of loans at December 31, 2007.
- 7 percent of primary mortgage insurance
risk in force at September 30, 2016, consisted of loans with a
loan-to-value (LTV) greater than 95 percent, compared to 24 percent
of loans at December 31, 2007.
- Persistency, which is the percentage of
mortgage insurance in force that remains on the company’s books
after a twelve-month period, was 78.4 percent as of September 30,
2016, compared to 79.9 percent as of June 30, 2016, and 79.2
percent as of September 30, 2015.
- Annualized persistency for the
three-months ended September 30, 2016, was 75.3 percent, compared
to 78.0 percent for the three-months ended June 30, 2016, and 80.5
percent for the three-months ended September 30, 2015.
- Total net premiums earned were $238.1
million for the quarter ended September 30, 2016, compared to
$229.1 million for the quarter ended June 30, 2016, and $227.4
million for the quarter ended September 30, 2015. Notable variable
items impacting net premiums earned include:
- Acceleration of premiums related to
Single Premium Policy cancellations, which are net of reinsurance,
were $18.4 million in the third quarter, compared to $14.8 million
in the second quarter of 2016, and $12.8 million in the third
quarter of 2015.
- Ceded premiums of $19.9 million, $19.9
million and $14.8 million for the quarters ended September 30,
2016, June 30, 2016, and September 30, 2015, respectively, are net
of accrued profit commission on reinsurance transactions of $8.9
million in the third quarter, compared to $7.9 million in the
second quarter of 2016, and $0.7 million in the third quarter of
2015.
- Additional details may be found in
Exhibit D.
- The mortgage insurance provision for
losses was $56.1 million in the third quarter of 2016, compared to
$50.1 million in the second quarter of 2016, and $64.1 million in
the third quarter of 2015.
- The loss ratio in the third quarter was
23.6 percent, compared to 21.9 percent in the second quarter of
2016 and 28.2 percent in the third quarter of 2015.
- Mortgage insurance loss reserves were
$821.9 million as of September 30, 2016, compared to $848.4 million
as of June 30, 2016, and $1,098.6 million as of September 30,
2015.
- Primary reserve per primary default
(excluding IBNR and other reserves) was $24,049 as of September 30,
2016. This compares to primary reserve per primary default of
$24,609 as of June 30, 2016, and $26,237 as of September 30,
2015.
- The total number of primary delinquent
loans decreased by 1 percent in the third quarter from the second
quarter of 2016, and by 18 percent from the third quarter of 2015.
The primary mortgage insurance delinquency rate decreased to 3.3
percent in the third quarter of 2016, compared to 3.4 percent in
the second quarter of 2016, and 4.1 percent in the third quarter of
2015.
- Total mortgage insurance claims paid
were $82.7 million in the third quarter, compared to $90.7 million
in the second quarter of 2016, and $169.1 million in the third
quarter of 2015. The company expects claims paid for the full-year
2016 of approximately $375 million.
Mortgage and Real Estate Services
- The Services segment provides
outsourced services, information-based analytics, residential loan
due diligence, valuations, surveillance and specialty consulting
for buyers and sellers of, and investors in, mortgage- and real
estate-related loans and securities. These services and solutions
are provided primarily through Clayton and its subsidiaries,
including Green River Capital, Red Bell Real Estate and
ValuAmerica.
- Total revenues for the third quarter
were $43.8 million, compared to $39.0 million for the second
quarter of 2016, and $43.1 million for the third quarter of
2015.
- The adjusted pretax operating loss for
the quarter ended September 30, 2016, was $2.5 million, compared to
$6.0 million for the quarter ended June 30, 2016, and $0.3 million
for the quarter ended September 30, 2015. Services adjusted
earnings before interest, income taxes, depreciation and
amortization (Services adjusted EBITDA) for the quarter ended
September 30, 2016, was $5.0 million, compared to $2.0 million for
the quarter ended June 30, 2016, and $6.3 million for the quarter
ended September 30, 2015. Additional details regarding the non-GAAP
measure Services adjusted EBITDA may be found in Exhibits F and
G.
Consolidated Expenses
Other operating expenses were $64.9 million in the third
quarter, compared to $65.7 million in the second quarter of 2016,
and $65.1 million in the third quarter of last year.
- Notable variable items impacting other
operating expenses include:
- The company’s investment to
significantly upgrade its technology systems, which represented
$2.4 million in the third quarter, compared to $2.4 million in the
second quarter of 2016, and $1.8 million in the third quarter of
2015.
- Severance charges of $1.1 million in
the third quarter, compared to $0.3 million in the second quarter,
and $0.3 million in the third quarter of 2015.
- Total incentive compensation expense of
$12.8 million in the third quarter, compared to $14.2 million in
the second quarter of 2016, and $11.9 million in the third quarter
of 2015. The expense in the third quarter of 2016 was impacted by
an increase to accrued short-term incentive compensation. The
expense in the second quarter of 2016 and the third quarter of 2015
included expense related to the annual grants of new equity-settled
long-term incentive awards. The expense in these periods was
significantly elevated primarily due to the required acceleration
of expense recognition for retirement-eligible employees.
- Additional details may be found in
Exhibit D.
- Operating expenses before corporate
allocations for the third quarter of 2016 were comprised of $38.1
million for the Mortgage Insurance segment, compared to $36.1
million in the second quarter of 2016, and $36.6 million in the
third quarter of last year.
- Operating expenses before corporate
allocations for the third quarter of 2016 were comprised of $12.7
million for the Services segment, compared to $12.5 million in the
second quarter of 2016, and $11.5 million in the third quarter of
last year.
CAPITAL AND LIQUIDITY UPDATE
Radian Group maintained approximately $480 million of available
liquidity as of September 30, 2016. The company continues to
utilize a portion of its liquidity in order to accelerate its
capital plan, with the objective of better positioning Radian Group
for a return to investment grade ratings in the future.
During the third quarter, the company took the following
actions:
- Radian purchased approximately $21.2
million face value of its outstanding 2.25% Convertible Senior
Notes due 2019. This decreased the company’s fully diluted share
count by approximately 2 million shares.
- The company adopted a Rule 10b5-1 plan
to implement the previously authorized $125 million share
repurchase program through its June 2017 expiration. As a result of
the timing of implementation and the initial parameters of the
10b5-1 plan, Radian did not repurchase any shares of its common
stock during the third quarter.
- Radian redeemed the remaining $196
million aggregate principal amount outstanding of its 9.000% Senior
Notes due 2017. Radian Group paid an aggregate redemption amount of
$211 million, including accrued interest through the redemption
date.
The combination of these capital actions, along with the actions
taken in the first and second quarters of 2016, decreased the
company’s total number of diluted shares by 23.1 million.
CONFERENCE CALL
Radian will discuss third quarter financial results in a
conference call today, Thursday, October 27, 2016, 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 612.332.0107 for international
callers, using passcode 404490 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 404490.
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.
NON-GAAP FINANCIAL MEASURES
Radian believes that adjusted pretax operating income and
adjusted diluted net operating income per share (non-GAAP measures)
facilitate evaluation of the company’s fundamental financial
performance and provide relevant and meaningful information to
investors about the ongoing operating results of the company. On a
consolidated basis, these measures are not recognized in accordance
with accounting principles generally accepted in the United States
of America (GAAP) and should not be viewed as alternatives to GAAP
measures of performance. The measures described below have been
established in order to increase transparency for the purpose of
evaluating the company’s core operating trends and enabling more
meaningful comparisons with Radian’s competitors.
Adjusted pretax operating income is defined as earnings
excluding the impact of certain items that are not viewed as part
of the operating performance of the company’s primary activities,
or not expected to result in an economic impact equal to the amount
reflected in pretax income (loss). Adjusted pretax operating income
adjusts GAAP pretax income to remove the effects of: (i) net gains
(losses) on investments and other financial instruments; (ii) loss
on induced conversion and debt extinguishment; (iii)
acquisition-related expenses; (iv) amortization and impairment of
intangible assets; and (v) net impairment losses recognized in
earnings. Adjusted diluted net operating income per share
represents a diluted net income per share calculation using as its
basis adjusted pretax operating income, net of taxes at the
company’s statutory tax rate for the period.
In addition to the above non-GAAP measures for the consolidated
company, the company also presents as supplemental information a
non-GAAP measure for the Services segment, representing earnings
before interest, income taxes, depreciation and amortization
(EBITDA). Services adjusted EBITDA is calculated by using the
Services segment’s adjusted pretax operating income as described
above, further adjusted to remove the impact of depreciation and
corporate allocations for interest and operating expenses. Services
adjusted EBITDA is presented to facilitate comparisons with other
services companies, since it is a widely accepted measure of
performance in the services industry.
See Exhibit F or Radian’s website for a description of these
items, as well as Exhibit G for reconciliations to the most
comparable consolidated GAAP measures.
ABOUT RADIAN
Radian Group Inc. (NYSE: RDN), headquartered in Philadelphia,
provides private mortgage insurance, risk management products and
real estate services to financial institutions. Radian offers
products and services through two business segments:
- Mortgage Insurance, through its
principal mortgage insurance subsidiary Radian Guaranty Inc. This
private mortgage insurance protects lenders from default-related
losses, facilitates the sale of low-downpayment mortgages in the
secondary market and enables homebuyers to purchase homes more
quickly with downpayments less than 20%.
- Mortgage and Real Estate
Services, through its principal services subsidiary Clayton, as
well as Green River Capital, Red Bell Real Estate and ValuAmerica.
These solutions include information and services that financial
institutions, investors and government entities use to evaluate,
acquire, securitize, service and monitor loans and asset-backed
securities.
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 Operations
Trend Schedule Exhibit B: Net Income Per Share Trend Schedule
Exhibit C: Condensed Consolidated Balance Sheets Exhibit D: Net
Premiums – Insurance Earned and Other Operating Expenses Exhibit E:
Segment Information Exhibit F: Definition of Consolidated Non-GAAP
Financial Measures Exhibit G: Consolidated Non-GAAP Financial
Measure Reconciliations Exhibit H: Mortgage Insurance Supplemental
Information New Insurance Written Exhibit I: Mortgage Insurance
Supplemental Information Primary Insurance in Force and Risk in
Force Exhibit J: Mortgage Insurance Supplemental Information Claims
and Reserves Exhibit K: Mortgage Insurance Supplemental Information
Default Statistics Exhibit L: Mortgage Insurance Supplemental
Information QSR, Captives and Persistency
Radian Group Inc. and Subsidiaries Condensed Consolidated
Statements of Operations Exhibit A 2016
2015
(In thousands,
except per share amounts)
Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3
Revenues: Net premiums earned - insurance $
238,149 $ 229,085 $ 220,950 $ 226,443 $ 227,433
Services
revenue 43,096 38,294 31,600 37,493 42,189
Net
investment income 28,430 28,839 27,201 22,833 22,091
Net gains (losses) on investments and other financial
instruments 7,711 30,527 31,286 (13,402 ) 3,868
Other
income 3,497 3,423 1,915 1,515
1,711
Total revenues 320,883
330,168 312,952 274,882 297,292
Expenses: Provision for losses 55,785 49,725
42,991 56,805 64,192
Policy acquisition costs 6,119
5,393 6,389 4,831 2,880
Direct cost of services
26,704 24,858 21,749 22,241 24,949
Other operating
expenses 64,862 65,680 58,989 59,570 65,082
Interest
expense 19,783 22,546 21,534 20,996 21,220
Loss on
induced conversion and debt extinguishment 17,397 2,108
55,570 2,320 11
Amortization and impairment of intangible
assets 3,292 3,311 3,328 3,409
3,273
Total expenses 193,942
173,621 210,550 170,172 181,607
Pretax income 126,941 156,547 102,402 104,710 115,685
Income tax provision 44,138 58,435
36,153 30,182 45,594
Net income
$ 82,803 $ 98,112 $ 66,249 $
74,528 $ 70,091
Diluted net income per
share: $ 0.37 $ 0.44 $ 0.29 $ 0.32 $ 0.29
Selected Mortgage Insurance Key Ratios Loss ratio (1)
23.6 % 21.9 % 19.6 % 25.1 % 28.2 %
Expense ratio
(1) 23.6 % 24.4 % 22.4 % 22.7 % 23.9 %
(1)
Calculated on a GAAP basis using net
premiums earned.
Radian Group Inc. and Subsidiaries Net
Income Per Share Exhibit B
The calculation of basic and diluted
net income per share was as follows:
2016 2015
(In thousands,
except per share amounts)
Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3
Net income: Net income—basic $ 82,803 $
98,112 $ 66,249 $ 74,528 $ 70,091
Adjustment for dilutive
Convertible Senior Notes due 2019, net of tax (1) 848
913 3,390 3,664 3,714
Net
income—diluted $ 83,651 $ 99,025 $
69,639 $ 78,192 $ 73,805
Average common
shares outstanding—basic 214,387 214,274 203,706 206,872
207,938
Dilutive effect of Convertible Senior Notes due 2017
(2) 178 12 — 1,057 1,798
Dilutive effect of
Convertible Senior Notes due 2019 8,274 8,928 33,583
37,736 37,736
Dilutive effect of stock-based compensation
arrangements (2) 3,129 2,989 2,418
2,316 3,323
Adjusted average common shares
outstanding—diluted 225,968 226,203
239,707 247,981 250,795
Basic net income
per share: $ 0.39 $ 0.46 $ 0.33
$ 0.36 $ 0.34
Diluted net income per
share: $ 0.37 $ 0.44 $ 0.29
$ 0.32 $ 0.29
(1)
As applicable, includes coupon
interest, amortization of discount and fees, and other changes in
income or loss that would result from the assumed
conversion.
(2)
The following number of shares of our
common stock equivalents issued under our stock-based compensation
arrangements and convertible debt were not included in the
calculation of diluted net income per share because they were
anti-dilutive:
2016 2015
(In
thousands)
Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3
Shares
of common stock equivalents 1,045 1,042 709 728 469
Shares of Convertible Senior Notes due 2017 — — 1,902
— —
Radian Group Inc. and
Subsidiaries Condensed Consolidated Balance Sheets
Exhibit C September 30, June 30, March 31,
December 31, September 30,
(In thousands,
except per share data)
2016 2016 2016 2015 2015
Assets:
Investments $ 4,565,748 $ 4,636,914 $
4,470,172 $ 4,298,686 $ 4,376,771
Cash 46,356 55,062
64,844 46,898 69,030
Restricted cash 10,312 9,298
10,060 13,000 10,280
Accounts and notes receivable
94,692 77,170 66,340 61,734 65,951
Deferred income taxes,
net 401,442 444,513 518,059 577,945 601,893
Goodwill
and other intangible assets, net 279,400 282,703 286,069
289,417 287,334
Prepaid reinsurance premium 229,754
229,231 228,718 40,491 44,091
Other assets 422,123
332,372 325,129 313,929 305,566
Total assets $ 6,049,827 $ 6,067,263
$ 5,969,391 $ 5,642,100 $ 5,760,916
Liabilities and stockholders’ equity: Unearned
premiums $ 680,973 $ 677,599 $ 673,887 $ 680,300
$ 676,938
Reserve for losses and loss adjustment expense
821,934 848,379 891,348 976,399 1,098,570
Long-term
debt 1,067,666 1,278,051 1,286,466 1,219,454 1,230,246
Reinsurance funds withheld 177,147 163,360 151,104 —
—
Other liabilities 413,401 294,507
306,188 269,016 311,855
Total
liabilities 3,161,121 3,261,896 3,308,993
3,145,169 3,317,609
Equity component
of currently redeemable convertible senior notes — — — —
7,737
Common stock 232 232 232 224 224
Treasury stock (893,197 ) (893,176 ) (893,176
) (893,176 ) (893,176 )
Additional paid-in capital
2,778,860 2,781,136 2,773,349 2,716,618 2,718,210
Retained earnings 937,338 855,070 757,202 691,742
617,731
Accumulated other comprehensive income (loss)
65,473 62,105 22,791 (18,477 ) (7,419 )
Total stockholders’ equity 2,888,706 2,805,367
2,660,398 2,496,931 2,435,570
Total
liabilities and stockholders’ equity $ 6,049,827
$ 6,067,263 $ 5,969,391 $ 5,642,100 $
5,760,916
Shares outstanding 214,405
214,284 214,265 206,872 206,870
Book value per share
$ 13.47 $ 13.09 $ 12.42 $ 12.07 $ 11.77
Statutory Capital Ratios Risk to capital ratio-Radian
Guaranty only 13.7 :1
(1)
14.0 :1 12.5 :1 14.3 :1 16.5 :1
Risk to capital ratio-Mortgage
Insurance combined 13.9 :1
(1)
14.2 :1 12.9 :1 14.6 :1 17.9 :1
(1)
Preliminary.
Radian Group Inc. and Subsidiaries Net
Premiums Earned - Insurance and Other Operating Expenses
Exhibit D 2016 2015
(In
thousands)
Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3
Premiums earned - insurance: Direct $
258,074 $ 248,938 $ 240,330 $ 239,424 $ 242,260
Assumed 9 9 9 10 10
Ceded (19,934
) (19,862 ) (19,389 ) (12,991 ) (14,837 )
Net premiums
earned - insurance $ 238,149 $ 229,085
$ 220,950 $ 226,443 $ 227,433
Notable variable items: (1) Single Premium Policy
cancellations, net of reinsurance $ 18,448 $
14,841 $ 9,783 $ 13,520 $ 12,771
Profit commission - reinsurance
(2) 8,922 7,891 6,134 1,559
678
Total $ 27,370 $ 22,732
$ 15,917 $ 15,079 $ 13,449
Other operating expenses $ 64,862 $
65,680 $ 58,989 $ 59,570 $ 65,082
Notable variable items: (3) Technology upgrade
project (4) $ 2,440 $ 2,443 $ 2,271 $ 1,558 $
1,818
Severance costs 1,137 277 3,040 116 327
Incentive compensation (5) (6) 12,771 14,248 6,196
4,037 11,916
Ceding commissions (7) (5,460 )
(5,006 ) (4,413 ) (1,229 ) (1,318 )
Total $
10,888 $ 11,962 $ 7,094 $ 4,482
$ 12,743
(1)
Affecting net premiums
earned-insurance.
(2)
For 2016, the amounts represent the
profit commission on the Single Premium QSR Transaction. For 2015,
the amount represents an accrual for the profit commission on the
Second QSR Transaction.
(3)
Affecting other operating
expenses.
(4)
Represents the expense impact of
certain costs incurred in our initiative to significantly upgrade
our technology systems.
(5)
The expense relates to short- and
long-term incentive compensation programs. For our equity-settled
long-term incentive awards the annual grants for 2015 were made in
the third quarter of 2015, whereas the annual grants for 2016 were
made in the second quarter of 2016. The expense is elevated in
these two quarters primarily due to the required acceleration of
expense recognition for retirement-eligible employees, who are
considered effectively vested immediately in these grants that
would otherwise vest over a period of 3 or 4 years. The expense in
the third quarter of 2016 remained elevated, primarily due to an
adjustment to accrued short-term incentives based on year-to-date
performance.
(6)
Incentive compensation expense is shown
net of deferred policy acquisition costs.
(7)
Ceding commissions are shown net of
deferred policy acquisition costs.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 1 of 2)
Summarized financial information concerning our operating
segments as of and for the periods indicated is as follows. For a
definition of adjusted pretax operating income and Services
adjusted EBITDA, along with reconciliations to consolidated GAAP
measures, see Exhibits F and G.
Mortgage Insurance
2016 2015
(In
thousands)
Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3
Net
premiums written - insurance $ 240,999 $ 232,353
$ 26,310
(1) $ 233,347 $ 242,168
Decrease (increase) in
unearned premiums (2,850 ) (3,268 ) 194,640
(6,904 ) (14,735
)
Net premiums earned - insurance 238,149 229,085
220,950 226,443 227,433
Net investment income 28,430
28,839 27,201 22,833 22,091
Other income 3,511
3,424 1,915 1,515 1,711
Total
270,090 261,348 250,066 250,791
251,235
Provision for losses 56,151
50,074 43,275 56,817 64,128
Policy acquisition costs
6,119 5,393 6,389 4,831 2,880
Other operating expenses
before corporate allocations 38,081 36,126
33,829 37,406 36,632
Total (2)
100,351 91,593 83,493 99,054
103,640
Adjusted pretax operating income before corporate
allocations 169,739 169,755 166,573 151,737 147,595
Allocation of corporate operating expenses 11,911
14,286 9,329 9,251 14,893
Allocation of interest expense
15,360 18,124 17,112 16,582
16,797
Adjusted pretax operating income $
142,468 $ 137,345 $ 140,132 $ 125,904
$ 115,905
Services 2016 2015
(In
thousands)
Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3
Services revenue (2)
$ 43,800 $ 39,002 $ 32,196 $
38,175 $ 43,114
Direct cost of services
26,911 25,224 22,053 22,880 25,870
Other operating
expenses before corporate allocations 12,740
12,537 13,883 11,710 11,533
Total 39,651 37,761 35,936
34,590 37,403
Adjusted pretax operating income
(loss) before corporate allocations (3) 4,149 1,241
(3,740 ) 3,585 5,711
Allocation of corporate operating
expenses 2,265 2,779 1,751 968 1,567
Allocation of
interest expense 4,423 4,422 4,422
4,414 4,423
Adjusted pretax operating income
(loss) $ (2,539 ) $ (5,960 ) $ (9,913 ) $
(1,797 ) $ (279
)
(1)
Net of ceded premiums written under the
Single Premium QSR transaction of $197.6 million.
(2)
Inter-segment information:
2016 2015
Qtr 3
Qtr 2 Qtr 1 Qtr 4 Qtr 3
Inter-segment
expense included in Mortgage Insurance segment $
718 $ 709 $ 596 $ 682 $ 1,092
Inter-segment
revenue included in Services segment 718 709 596 682
1,092
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 2 of 2)
(3)
Supplemental information for Services
adjusted EBITDA (see definition in Exhibit F):
2016 2015
Qtr 3
Qtr 2 Qtr 1 Qtr 4 Qtr 3
Adjusted pretax
operating income (loss) before corporate allocations $
4,149 $ 1,241 $ (3,740 ) $ 3,585 $ 5,711
Depreciation and
amortization 882 747 661 612
555
Services adjusted EBITDA $ 5,031 $
1,988 $ (3,079 ) $ 4,197 $ 6,266
Selected balance sheet information for our segments, as of
the periods indicated, is as follows:
At September 30, 2016
(In
thousands)
MortgageInsurance
Services Total Total assets
$ 5,686,726 $ 363,101 $
6,049,827 At December 31, 2015
(In
thousands)
MortgageInsurance
Services Total
Total assets $ 5,281,597 $ 360,503 $
5,642,100
Radian Group Inc. and
Subsidiaries
Definition of Consolidated Non-GAAP
Financial Measures
Exhibit F (page 1 of 2)
Use of Non-GAAP Financial Measures
In addition to the traditional GAAP financial measures, we have
presented “adjusted pretax operating income (loss)” and “adjusted
diluted net operating income (loss) per share,” non-GAAP financial
measures for the consolidated company, among our key performance
indicators to evaluate our fundamental financial performance. These
non-GAAP financial measures align with the way the Company’s
business performance is evaluated by both management and the board
of directors. These measures have been established in order to
increase transparency for the purposes of evaluating our operating
trends and enabling more meaningful comparisons with our peers.
Although on a consolidated basis “adjusted pretax operating income
(loss)” and “adjusted diluted net operating income (loss) per
share” are non-GAAP financial measures, we believe these measures
aid in understanding the underlying performance of our operations.
Our senior management, including our Chief Executive Officer (the
Company’s chief operating decision maker), uses adjusted pretax
operating income (loss) as our primary measure to evaluate the
fundamental financial performance of the Company’s business
segments and to allocate resources to the segments.
Adjusted pretax operating income (loss) is defined as GAAP
pretax income (loss) excluding the effects of net gains (losses) on
investments and other financial instruments, loss on induced
conversion and debt extinguishment, acquisition-related expenses,
amortization and impairment of intangible assets and net impairment
losses recognized in earnings. Adjusted diluted net operating
income (loss) per share is calculated by dividing (i) adjusted
pretax operating income (loss) attributable to common shareholders,
net of taxes computed using the company’s statutory tax rate, by
(ii) the sum of the weighted average number of common shares
outstanding and all dilutive potential common shares outstanding.
Interest expense on convertible debt, share dilution from
convertible debt and the impact of stock-based compensation
arrangements have been reflected in the per share calculations
consistent with the accounting standard regarding earnings per
share, whenever the impact is dilutive.
Although adjusted pretax operating income (loss) excludes
certain items that have occurred in the past and are expected to
occur in the future, the excluded items represent those that are:
(1) not viewed as part of the operating performance of our primary
activities; or (2) not expected to result in an economic impact
equal to the amount reflected in pretax income (loss). These
adjustments, along with the reasons for their treatment, are
described below.
(1)
Net gains (losses) on investments and
other financial instruments. The recognition of realized investment
gains or losses can vary significantly across periods as the
activity is highly discretionary based on the timing of individual
securities sales due to such factors as market opportunities, our
tax and capital profile and overall market cycles. Unrealized
investment gains and losses arise primarily from changes in the
market value of our investments that are classified as trading.
These valuation adjustments may not necessarily result in economic
gains or losses.
Trends in the profitability of our fundamental operating
activities can be more clearly identified without the fluctuations
of these realized and unrealized gains or losses. We do not view
them to be indicative of our fundamental operating activities.
Therefore, these items are excluded from our calculation of
adjusted pretax operating income (loss). However, we include the
change in expected economic loss or recovery associated with our
consolidated VIEs, if any, in the calculation of adjusted pretax
operating income (loss). (2)
Loss on induced conversion and debt
extinguishment. Gains or losses on early extinguishment of debt and
losses incurred to purchase our convertible debt prior to maturity
are discretionary activities that are undertaken in order to take
advantage of market opportunities to strengthen our financial and
capital positions; therefore, we do not view these activities as
part of our operating performance. Such transactions do not reflect
expected future operations and do not provide meaningful insight
regarding our current or past operating trends. Therefore, these
items are excluded from our calculation of adjusted pretax
operating income (loss).
(3)
Acquisition-related expenses.
Acquisition-related expenses represent the costs incurred to effect
an acquisition of a business (i.e., a business combination).
Because we pursue acquisitions on a strategic and selective basis
and not in the ordinary course of our business, we do not view
acquisition-related expenses as a consequence of a primary business
activity. Therefore, we do not consider these expenses to be part
of our operating performance and they are excluded from our
calculation of adjusted pretax operating income (loss).
Radian Group Inc. and
Subsidiaries
Definition of Consolidated Non-GAAP
Financial Measures
Exhibit F (page 2 of 2)
(4)
Amortization and impairment of intangible
assets. Amortization of intangible assets represents the periodic
expense required to amortize the cost of intangible assets over
their estimated useful lives. Intangible assets with an indefinite
useful life are also periodically reviewed for potential
impairment, and impairment adjustments are made whenever
appropriate. These charges are not viewed as part of the operating
performance of our primary activities and therefore are excluded
from our calculation of adjusted pretax operating income
(loss).
(5)
Net impairment losses recognized in
earnings. The recognition of net impairment losses on investments
can vary significantly in both size and timing, depending on market
credit cycles. We do not view these impairment losses to be
indicative of our fundamental operating activities. Therefore,
whenever these losses occur, we exclude them from our calculation
of adjusted pretax operating income (loss).
In addition to the above non-GAAP measures for the consolidated
company, we also have presented as supplemental information a
non-GAAP measure for our Services segment, representing a measure
of earnings before interest, income taxes, depreciation and
amortization (“EBITDA”). We calculate Services adjusted EBITDA by
using adjusted pretax operating income as described above, further
adjusted to remove the impact of depreciation and corporate
allocations for interest and operating expenses. We have presented
Services adjusted EBITDA to facilitate comparisons with other
services companies, since it is a widely accepted measure of
performance in the services industry.
See Exhibit G for the reconciliation of our non-GAAP financial
measures for the consolidated company, adjusted pretax operating
income and adjusted diluted net operating income per share, to the
most comparable GAAP measures, pretax income and diluted net income
per share, respectively. Exhibit G also contains the reconciliation
of Services adjusted EBITDA to the most comparable GAAP measure,
net income.
Total adjusted pretax operating income (loss), adjusted diluted
net operating income (loss) per share and Services adjusted EBITDA
are not measures of total profitability, and therefore should not
be viewed as substitutes for GAAP pretax income (loss), diluted net
income (loss) per share or net income. Our definitions of adjusted
pretax operating income (loss), adjusted diluted net operating
income (loss) per share or Services adjusted EBITDA may not be
comparable to similarly-named measures reported by other
companies.
Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit G (page 1 of 2) Reconciliation of
Adjusted Pretax Operating Income (Loss) to Consolidated Pretax
Income 2016 2015
(In
thousands)
Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3
Adjusted pretax operating income (loss): Mortgage
Insurance $ 142,468 $ 137,345 $ 140,132 $ 125,904
$ 115,905
Services (2,539 ) (5,960 ) (9,913 )
(1,797 ) (279 )
Total adjusted pretax operating income
139,929 131,385 130,219 124,107 115,626
Net gains
(losses) on investments and other financial instruments
7,711 30,527 31,286 (13,402 ) 3,868
Loss on induced
conversion and debt extinguishment (17,397 )
(2,108 ) (55,570 ) (2,320 ) (11 )
Acquisition-related expenses
(1) (10 ) 54 (205 ) (266 ) (525 )
Amortization
and impairment of intangible assets (1) (3,292 )
(3,311 ) (3,328 ) (3,409 ) (3,273 )
Consolidated pretax
income $ 126,941 $ 156,547 $
102,402 $ 104,710 $ 115,685
(1)
Please see Exhibit F for the definition
of this line item.
Reconciliation of Adjusted Diluted Net
Operating Income Per Share to Diluted Net Income Per Share
2016 2015
Qtr 3 Qtr 2 Qtr 1 Qtr
4 Qtr 3
Adjusted diluted net operating income per share
(1) $ 0.41 $ 0.38 $ 0.37 $
0.34 $ 0.31
Per share impact of debt
items: Loss on induced conversion and debt
extinguishment (0.08 ) (0.01 ) (0.23 ) (0.01 ) —
Income tax provision (benefit) (2) (0.03 ) —
(0.03 ) (0.04 ) —
Per share impact of debt
items (0.05 ) (0.01 ) (0.20 ) 0.03 —
Per share impact of other reconciling items:
Net gains (losses) on investments and other financial
instruments 0.03 0.13 0.13 (0.05 ) 0.01
Acquisition-related expenses — — — — —
Amortization and impairment of intangible assets
(0.01 ) (0.01 ) (0.01 ) (0.01 ) (0.01 )
Income tax
provision (benefit) on other reconciling items (1) 0.01
0.04 0.04 (0.02 ) —
Difference between statutory and effective
tax rate — (0.01 ) 0.04 (0.01 ) (0.02 )
Per share impact of other reconciling
items
0.01 0.07 0.12 (0.05 ) (0.02 )
Diluted net income per share $ 0.37 $
0.44 $ 0.29 $ 0.32 $ 0.29
(1)
Calculated using the company’s federal
statutory tax rate. Any permanent tax adjustments and state income
taxes on these items have been deemed immaterial and are not
included.
(2)
A portion of the loss on induced
conversion and debt extinguishment is non-deductible for tax
purposes. The income tax benefit is based on the tax deductible
loss using the company's federal statutory tax rate.
Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit G (page 2 of 2) Reconciliation of Services
Adjusted EBITDA to Net Income 2016 2015
(In
thousands)
Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3
Services adjusted EBITDA $ 5,031 $ 1,988 $
(3,079 ) $ 4,197 $ 6,266
Allocation of corporate operating
expenses to Services (2,265 ) (2,779 ) (1,751 )
(968 ) (1,567 )
Allocation of corporate interest expenses to
Services (4,423 ) (4,422 ) (4,422 ) (4,414 )
(4,423 )
Services depreciation and amortization (882
) (747 ) (661 ) (612 ) (555 )
Services adjusted pretax
operating income (loss) (2,539 ) (5,960 ) (9,913
) (1,797 ) (279 )
Mortgage Insurance adjusted pretax operating
income 142,468 137,345 140,132
125,904 115,905
Total adjusted pretax operating
income 139,929 131,385 130,219 124,107 115,626
Net gains (losses) on investments and other financial
instruments 7,711 30,527 31,286 (13,402 ) 3,868
Loss
on induced conversion and debt extinguishment (17,397
) (2,108 ) (55,570 ) (2,320 ) (11 )
Acquisition-related
expenses (10 ) 54 (205 ) (266 ) (525 )
Amortization and impairment of intangible assets
(3,292 ) (3,311 ) (3,328 ) (3,409 ) (3,273 )
Consolidated pretax income 126,941 156,547 102,402
104,710 115,685
Income tax provision 44,138
58,435 36,153 30,182 45,594
Net
income $ 82,803 $ 98,112 $ 66,249
$ 74,528 $ 70,091
On a consolidated basis, “adjusted pretax operating income” and
“adjusted diluted net operating income per share” are measures not
determined in accordance with GAAP. “Services adjusted EBITDA” is
also a non-GAAP measure. These measures are not representative of
total profitability, and therefore should not be viewed as
substitutes for GAAP pretax income or diluted net income per share.
Our definitions of adjusted pretax operating income, adjusted
diluted net operating income per share or Services adjusted EBITDA
may not be comparable to similarly-named measures reported by other
companies. See Exhibit F for additional information on our
consolidated non-GAAP financial measures.
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information - New Insurance Written
Exhibit H 2016 2015
($ in
millions)
Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3
Total primary new insurance written $ 15,656
$ 12,921 $ 8,071 $ 9,099 $ 11,176
Percentage of
primary new insurance written by FICO score
>=740 64.2 % 60.9 % 58.4 % 60.3 % 61.0 %
680-739
30.4 32.2 33.7 32.2 31.9
620-679
5.4 6.9 7.9 7.5 7.1
Total Primary 100.0 % 100.0 % 100.0 % 100.0 %
100.0 %
Percentage of
primary new insurance written
Direct monthly and other premiums 73 % 74 % 71
% 71 % 73 %
Direct single premiums 27 % 26 %
29 % 29 % 27 %
Net single premiums (1) 17
% 17 % 19 % 29 % 27 %
Refinances 22
% 18 % 19 % 17 % 13 %
LTV 95.01% and
above 6.0 % 4.8 % 3.7 % 3.6 % 3.5 %
90.01% to
95.00% 47.1 % 50.2 % 50.5 % 49.5 % 51.5 %
85.01% to 90.00% 31.4 % 31.8 % 33.1 % 34.4 %
34.1 %
85.00% and below 15.5 % 13.2 % 12.7 %
12.5 % 10.9 %
(1)
In 2016, represents the percentage of
direct single premiums written, after consideration of the 35%
single premium NIW ceded under the Single Premium QSR
Transaction.
Radian Group Inc. and
Subsidiaries Mortgage Insurance Supplemental Information -
Primary Insurance in Force and Risk in Force Exhibit I
September 30, June 30, March 31, December 31,
September 30,
($ in millions) 2016 2016 2016 2015
2015
Primary insurance
in force (1)
Prime $ 172,178 $ 168,259 $ 165,526 $ 165,291
$ 164,060
Alt-A 5,363 5,627 5,907 6,176 6,531
A
minus and below 3,624 3,786 3,953
4,117 4,275
Total Primary $
181,165 $ 177,672 $ 175,386 $ 175,584
$ 174,866
Primary risk in
force (1) (2)
Prime $ 44,075 $ 43,076 $ 42,312 $ 42,170 $
41,784
Alt-A 1,241 1,302 1,366 1,427 1,510
A minus
and below 906 946 988 1,030
1,070
Total Primary $ 46,222 $
45,324 $ 44,666 $ 44,627 $ 44,364
Percentage of
primary risk in force
Direct monthly and other premiums 69 % 69 % 69
% 69 % 70 %
Direct single premiums 31 % 31 %
31 % 31 % 30 %
Net single premiums (3) 25
% 25 % 25 % 30 % 30 %
Percentage of
primary risk in force by FICO score
>=740 57.4 % 57.1 % 57.0 % 57.1 % 57.0 %
680-739 30.9 30.8 30.6 30.3 30.2
620-679
10.2 10.5 10.7 10.8 10.9
<=619 1.5
1.6 1.7 1.8 1.9
Total Primary
100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Percentage of
primary risk in force by LTV
95.01% and above 7.2 % 7.1 % 7.2 % 7.3 % 7.4 %
90.01% to 95.00% 52.1 51.6 50.9 50.4 49.8
85.01%
to 90.00% 32.8 33.3 33.7 34.0 34.3
85.00% and
below 7.9 8.0 8.2 8.3 8.5
Total 100.0 % 100.0 % 100.0 % 100.0 %
100.0 %
Percentage of
primary risk in force by policy year
2005 and prior
5.1 % 5.5 % 6.0 % 6.3 % 6.8 %
2006
3.1 3.4 3.6 3.7 3.9
2007
7.4 7.9 8.4 8.7 9.1
2008
5.2 5.6 6.0 6.3 6.6
2009
1.2 1.3 1.5 1.7 1.8
2010
1.0 1.2 1.3 1.4 1.5
2011
2.2 2.5 2.7 2.9 3.1
2012
8.8 9.7 10.6 11.2 12.0
2013
13.9 15.5 17.0 18.1 19.2
2014
13.4 14.9 16.3 17.1 18.0
2015
19.4 21.0 22.0 22.6 18.0
2016
19.3 11.5 4.6 — —
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Primary risk in force on defaulted loans (4) $
1,381 $ 1,398 $ 1,562 $ 1,625 $ 1,666
(1)
Includes amounts ceded under our
reinsurance agreements, as well as amounts related to the Freddie
Mac Agreement.
(2)
Does not include pool risk in force or
other risk in force, which combined represent less than 3.0% of our
total risk in force for all periods presented.
(3)
Represents the percentage of Single
Premium RIF, after giving effect to all reinsurance ceded.
(4)
Excludes risk related to loans subject
to the Freddie Mac Agreement.
Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information - Claims and
Reserves Exhibit J 2016 2015
($ in
thousands)
Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3
Net claims paid: (1) Prime $ 51,964 $
56,036 $ 74,432 $ 56,900 $ 65,396
Alt-A 16,334 18,349
28,929 21,343 18,966
A minus and below 9,615
12,315 13,196 11,530 14,028
Total
primary claims paid 77,913 86,700 116,557 89,773 98,390
Pool 4,492 5,451 7,389 6,477 8,721
Second-lien and
other (234 ) (231 ) 345 (143 ) (16 )
Subtotal 82,171 91,920 124,291 96,107 107,095
Impact of captive terminations (171 ) (2,619 )
(120 ) (65 ) —
Impact of settlements (2) 705
1,400 3,500 80,426 61,994
Total net
claims paid $ 82,705 $ 90,701 $
127,671 $ 176,468 $ 169,089
Average
net claim paid: (3) Prime $ 48.3 $ 48.6 $
47.7 $ 46.9 $ 46.2
Alt-A 65.3 63.5
63.0
61.7 60.2
A minus and below 41.3 39.9 36.8 40.6 42.5
Total average net primary claim paid 50.0 49.5 49.0
48.7 47.8
Pool 51.0 58.0 53.2 56.3 51.3
Total
average net claim paid $ 49.7 $ 49.6 $ 48.9 $
48.9 $ 47.8
Average direct primary claim paid (3) (4)
$ 50.3 $ 49.9 $ 49.6 $ 50.5 $ 48.5
Average total
direct claim paid (3) (4) $ 50.0 $ 50.0 $ 49.5 $
50.6 $ 48.5
($ in thousands,
except primary reserve per primary default amounts)
September 30,2016 June 30,2016 March 31,2016 December
31,2015 September 30,2015
Reserve for losses by category Prime $
409,438 $ 420,281 $ 438,598 $ 480,481 $ 519,572
Alt-A
166,349 173,284 183,189 203,706 234,772
A minus and
below 106,678 112,001 116,835 129,352 137,441
IBNR
and other 73,057 74,639 79,051 83,066 107,179
LAE
21,255 22,389 23,600 26,108 41,464
Reinsurance
recoverable (5) 6,448 6,044 8,239
8,286 11,071
Total primary reserves
783,225 808,638 849,512 930,999
1,051,499
Pool insurance 36,065 36,982 38,843
42,084 43,234
IBNR and other 823 897 1,050 1,118 949
LAE 1,112 1,163 1,227 1,335 1,983
Reinsurance
recoverable (5) 36 33 — — —
Total pool reserves 38,036 39,075
41,120 44,537 46,166
Total 1st lien
reserves 821,261 847,713 890,632 975,536 1,097,665
Second-lien and other 673 666 716
863 905
Total reserves $
821,934 $ 848,379 $ 891,348 $ 976,399
$ 1,098,570
1st lien reserve per
default Primary reserve per primary default excluding IBNR
and other $ 24,049 $ 24,609 $ 24,959 $ 24,019 $
26,237
(1)
Net of reinsurance recoveries.
(2)
For 2015, includes the impact of the
BofA Settlement Agreement.
(3)
Calculated without giving effect to the
impact of the termination of captive transactions and
settlements.
(4)
Before reinsurance recoveries.
(5)
Represents ceded losses on captive
transactions and quota share reinsurance transactions.
Radian Group Inc. and
Subsidiaries Mortgage Insurance Supplemental Information -
Default Statistics Exhibit K September 30,
June 30, March 31, December 31, September 30,
2016 2016 2016
2015 2015
Default
Statistics
Primary Insurance:
Prime
Number of insured loans 840,534 826,511 817,236
816,797 812,657
Number of loans in default 19,100
19,025 19,510 22,223 22,328
Percentage of loans in default
2.27 % 2.30 % 2.39 % 2.72 % 2.75 %
Alt-A
Number of insured loans 28,080 29,445 30,990 32,411
34,166
Number of loans in default 4,545 4,820 5,138
5,813 6,318
Percentage of loans in default 16.19
% 16.37 % 16.58 % 17.94 % 18.49 %
A minus and
below
Number of insured loans 28,313 29,450 30,681 31,902
33,018
Number of loans in default 5,885 5,982 6,221
7,267 7,229
Percentage of loans in default 20.79
% 20.31 % 20.28 % 22.78 % 21.89 %
Total
Primary Number of insured loans 896,927 885,406
878,907 881,110 879,841
Number of loans in default (1)
29,530 29,827 30,869 35,303 35,875
Percentage of loans in
default 3.29 % 3.37 % 3.51 % 4.01 % 4.08 %
(1)
Excludes the following number of loans
subject to the Freddie Mac Agreement that are in default as we no
longer have claims exposure on these loans:
September 30, June 30,
March 31, December 31, September 30,
2016 2016 2016 2015 2015
Number of loans in default
1,888 2,180 2,339 2,821 2,993
Radian
Group Inc. and Subsidiaries Mortgage Insurance Supplemental
Information - QSR, Captives and Persistency Exhibit L
2016 2015
($ in
thousands)
Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3
Initial and
Second Quota Share Reinsurance (“QSR”) Transactions
QSR ceded premiums written (1) $ 6,730 $ 7,356
$ 7,962 $ 6,934 $ 8,466
% of premiums written 2.6
% 2.9 % 3.4 % 2.9 % 3.4 %
QSR ceded premiums earned
(1) $ 10,597 $ 11,172 $ 11,325 $ 10,523 $ 12,203
% of premiums earned 4.1 % 4.5 % 4.7 % 4.4 %
5.1 %
Ceding commissions written $ 1,922 $
2,099 $ 2,270 $ 2,553 $ 2,743
Ceding commissions earned (2)
$ 3,974 $ 3,779 $ 4,446 $ 3,466 $ 2,463
Profit
commission $ — $ — $ — $ 1,559 $ 678
Risk in
force included in QSR (3) $ 1,718,031 $ 1,872,017
$ 2,018,468 $ 2,131,030 $ 2,253,913
Single Premium
QSR Transaction
QSR ceded premiums written (1) $ 13,004 $
11,488 $ 197,593 N/A N/A
% of premiums written 5.0
% 4.6 % 84.7 % N/A N/A
QSR ceded premiums earned (1)
$ 8,608 $ 7,146 $ 5,994 N/A N/A
% of premiums
earned 3.3 % 2.9 % 2.5 % N/A N/A
Ceding
commissions written $ 5,482 $ 4,844 $ 50,932 N/A
N/A
Ceding commissions earned (2) $ 4,382 $
3,759 $ 3,032 N/A N/A
Profit commission $
8,922 $ 7,891 $ 6,134 N/A N/A
Risk in force included in
QSR (3) $ 3,621,993 $ 3,461,464 $ 3,308,057 N/A
N/A
Total risk in force included in QSRs $
5,340,024 $ 5,333,481 $ 5,326,525 $ 2,131,030 $ 2,253,913
1st Lien
Captives
Premiums earned ceded to captives $ 537 $
1,346 $ 1,869 $ 2,268 $ 2,434
% of total premiums earned
0.2 % 0.5 % 0.8 % 1.0 % 1.0 %
Persistency
Rate (twelve months ended) 78.4 % 79.9 % 79.4 %
78.8 % 79.2 %
Persistency Rate (quarterly, annualized) (4)
75.3 % 78.0 % 82.3 % 81.8 % 80.5 %
(1)
Net of profit commission.
(2)
Includes amounts reported in policy
acquisition costs and other operating expenses.
(3)
Included in primary risk in
force.
(4)
The Persistency Rate on a quarterly,
annualized basis may be impacted by seasonality or other factors,
and may not be indicative of full-year trends.
FORWARD-LOOKING STATEMENTS
All statements in this report 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 Exchange Act and the
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," "seek,"
"strategy," "future," "likely" 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 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 in particular but without
limitation, unemployment rates, interest rates and changes in
housing and mortgage credit markets that could impact the size of
the insurable market and the credit performance of our insured
portfolio;
- changes in the way customers,
investors, regulators or legislators perceive the performance and
financial strength of private mortgage insurers;
- Radian Guaranty’s ability to remain
eligible under the PMIERs and other applicable requirements imposed
by the Federal Housing Finance Agency and by the GSEs to insure
loans purchased by the GSEs;
- our ability to successfully execute and
implement our capital plans and to maintain sufficient holding
company liquidity to meet our short- and long-term liquidity
needs;
- our ability to successfully execute and
implement our business plans and strategies, including in
particular but without limitation, plans and strategies that
require GSE and/or regulatory approvals;
- our ability to maintain an adequate
level of capital in our insurance subsidiaries to satisfy existing
and future state regulatory requirements;
- changes in the charters or business
practices of, or rules or regulations imposed by or applicable to,
the GSEs, including the GSEs’ interpretation and application of the
PMIERs to Radian Guaranty;
- changes in the current housing finance
system in the U.S., including in particular but without limitation,
the role of the FHA, the GSEs and private mortgage insurers in this
system;
- any disruption in the servicing of
mortgages covered by our insurance policies, as well as poor
servicer performance;
- a significant decrease in the
Persistency Rates of our Monthly Premium Policies;
- competition in our mortgage insurance
business, including in particular but without limitation, price
competition (in particular from those mortgage insurers with
advantageous tax positions) and competition from the FHA, VA and
other forms of credit enhancement;
- the effect of the Dodd-Frank Wall
Street Reform and Consumer Protection Act on the financial services
industry in general, and on our businesses in particular;
- the adoption of new laws and
regulations, or changes in existing laws and regulations, or the
way they are interpreted;
- the outcome of legal and regulatory
actions, reviews, audits, inquiries and investigations that could
result in adverse judgments, settlements, fines, injunctions,
restitutions or other relief that could require significant
expenditures or have other effects on our business;
- the amount and timing of potential
payments or adjustments associated with federal or other tax
examinations, including deficiencies assessed by the IRS resulting
from its examination of our 2000 through 2007 tax years, which we
are currently contesting;
- 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 business;
- volatility in our results of operations
caused by changes in the fair value of our assets and liabilities,
including a significant portion of our investment portfolio;
- changes in GAAP or SAP rules and
guidance, or their interpretation;
- legal and other limitations on
dividends and other amounts we may receive from our subsidiaries;
and
- the possibility that we may need to
impair the carrying value of goodwill established in connection
with our acquisition of Clayton.
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 our 2015 Form 10-K, and in
our subsequent quarterly and other reports filed from time to time
with the SEC. 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 report. 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161027005327/en/
Radian Group Inc.Emily Riley,
215-231-1035emily.riley@radian.biz
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