UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
The
Securities Exchange Act of 1934
Date
of report (Date of earliest event reported) July
22, 2015
Radian Group Inc.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
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1-11356
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23-2691170
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(State or Other Jurisdiction of Incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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1601
Market Street, Philadelphia, Pennsylvania
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19103
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(215) 231 - 1000
(Registrant’s
Telephone Number, Including Area Code)
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions (see General Instruction
A.2. below):
⃞
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
⃞
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
⃞
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
⃞
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On July 22, 2015, Radian Group Inc. issued a news release announcing its
financial results for the quarter ended June 30, 2015. A copy of this
news release is furnished as Exhibit 99.1 to this report.
The information included in, or furnished with, this report shall not be
deemed "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934 (the "Exchange Act"), nor shall it be deemed incorporated by
reference in any filing under the Securities Act of 1933 or the Exchange
Act, except as shall be expressly set forth by specific reference in
such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
99.1* Radian
Group Inc. News Release dated July 22, 2015.
_____________________
* Furnished herewith.
SIGNATURES
Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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RADIAN GROUP INC.
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(Registrant)
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Date:
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July 22, 2015
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By:
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/s/ J. Franklin Hall
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J. Franklin Hall
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Chief Financial Officer
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EXHIBIT INDEX
Exhibit
No.
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Description
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99.1*
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Radian Group Inc. News Release dated July 22, 2015.
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* Furnished herewith.
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Exhibit 99.1
Radian
Announces Second Quarter 2015 Financial Results
--
Reports net income of $50 million or $0.22 per diluted share --
-- Net
income from continuing operations of $45 million or $0.20 per diluted
share --
--
Adjusted diluted net operating income of $0.40 per share, up 74% from
prior-year period --
PHILADELPHIA--(BUSINESS WIRE)--July 22, 2015--Radian Group Inc. (NYSE:
RDN) today reported net income for the quarter ended June 30, 2015, of
$50.0 million, or $0.22 per diluted share, which included the following
pre-tax items: a loss of $91.9 million on induced conversion and debt
extinguishment from recent actions to strengthen the company’s capital
structure, and net gains of $28.4 million on investments and other
financial instruments. This compares to net income for the quarter ended
June 30, 2014, of $174.8 million, or $0.78 per diluted share, which
included pre-tax net gains of $25.3 million on investments and other
financial instruments, and $71.3 million of net income from discontinued
operations. The company also reported an income tax provision of $34.8
million for the quarter ended June 30, 2015, compared to an income tax
benefit of $10.7 million for the quarter ended June 30, 2014.
Adjusted pretax operating income for the quarter ended June 30, 2015,
was $147.3 million, compared to adjusted pretax operating income for the
quarter ended June 30, 2014, of $74.1 million. Adjusted diluted net
operating income per share for the quarter ended June 30, 2015, was
$0.40. See “Non-GAAP Financial Measures” below.
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Key Financial Highlights (dollars in millions, except per share
data)
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Quarter Ended
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Quarter Ended
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Percent
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June 30, 2015
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June 30, 2014
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Change
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Net income from continuing operations
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$45.2
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$103.5
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(56%)
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Diluted net income per share from continuing operations
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$0.20
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$0.47
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(57%)
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Adjusted pretax operating income
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$147.3
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$74.1
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99%
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Adjusted diluted net operating income per share *
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$0.40
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$0.23
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74%
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Revenues
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$330.4
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$247.4
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34%
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Book value per share
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$11.28
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$8.29
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36%
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* Adjusted diluted net operating income per share is
calculated using the company’s statutory tax rate.
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“Radian delivered strong financial results in the second quarter, driven
by positive trends and solid performance for our two business segments,”
said Radian’s Chief Executive Officer S.A. Ibrahim. “We also took
actions in the quarter to simplify and strengthen Radian’s capital
structure in a way that will reduce our overall cost of capital, improve
the maturity profile of our debt and focus on long-term growth.”
SECOND QUARTER HIGHLIGHTS AND RECENT EVENTS
Mortgage Insurance
-
New mortgage insurance written (NIW) was $11.8 billion for the
quarter, compared to $9.4 billion in the first quarter of 2015 and
$9.3 billion in the prior-year quarter.
-
Of the $11.8 billion in new business written in the second quarter
of 2015, 68 percent was written with monthly premiums and 32
percent with single premiums. This compares to a mix of 63 percent
monthly premiums and 37 percent single premiums in the first
quarter of 2015.
-
Refinances accounted for 23 percent of total NIW in the second
quarter of 2015, compared to 33 percent in the first quarter of
2015, and 13 percent a year ago.
-
NIW continued to consist of loans with excellent risk
characteristics.
-
Total primary mortgage insurance in force was $172.7 billion, compared
to $172.1 billion as of March 31, 2015, and $165.0 billion as of June
30, 2014. Persistency, which is the percentage of mortgage insurance
in force that remains on the company’s books after a twelve-month
period, was 80.1 percent as of June 30, 2015, compared to 82.6 percent
as of March 31, 2015, and 83.9 percent as of June 30, 2014.
-
Total net premiums earned was $237.4 million, compared to $224.6
million for the quarter ended March 31, 2015, and $203.6 million for
the quarter ended June 30, 2014. Net premiums earned in the second
quarter included
-
$9.8 million of incremental premiums earned from single premiums
compared to the first quarter of 2015, the majority of which
related to prepayments that servicers had not previously reported
to Radian, and
-
an accrual for a $5.8 million profit commission based on
experience to date for the company’s Second Quota Share
Reinsurance Transaction, where Radian expects to exercise its
option to recapture 50 percent of the ceded risk on December 31,
2015. See press release Exhibit M for additional details.
-
The mortgage insurance provision for losses was $31.6 million in the
second quarter of 2015, compared to $45.9 million in the first quarter
of 2015, and $64.6 million in the prior-year period.
-
The loss ratio in the second quarter was 13.3 percent, compared to
20.4 percent in the first quarter of 2015 and 31.7 percent in the
second quarter of 2014.
-
Mortgage insurance loss reserves were $1.2 billion as of June 30,
2015, compared to $1.4 billion as of March 31, 2015, and $1.7
billion as of June 30, 2014.
-
Primary reserve per primary default (excluding IBNR and other
reserves) was $27,279 as of June 30, 2015. This compares to
primary reserve per primary default of $28,423 as of March 31,
2015, and $26,024 as of June 30, 2014.
-
The total number of primary delinquent loans decreased by 7 percent in
the second quarter from the first quarter of 2015, and by 23 percent
from the second quarter of 2014. The primary mortgage insurance
delinquency rate decreased to 4.3 percent in the second quarter of
2015, compared to 4.6 percent in the first quarter of 2015, and 5.8
percent in the second quarter of 2014.
-
Total mortgage insurance claims paid were $212.0 million in the second
quarter, compared to $207.1 million in the first quarter, and $240.3
million in the second quarter of 2014. Claims paid in the second
quarter of 2015 include $75.6 million of claims paid relating to the
September 2014 BofA Settlement Agreement. The company continues to
expect mortgage insurance net claims paid for the full-year 2015 of
approximately $600 – $700 million. This includes a total of
approximately $250 million of claims related to the BofA Settlement
Agreement, of which $174.6 million have already been paid.
-
As of June 30, 2015, Radian Guaranty would be able to immediately
comply with the financial requirements of the Private Mortgage Insurer
Eligibility Requirements (PMIERs) developed by Fannie Mae and Freddie
Mac as adopted on April 17, 2015, and that come into effect on
December 31, 2015, by utilizing approximately $330 million of existing
holding company liquidity. This assumes that the company converts
approximately $80 million of existing liquid assets, which represent
the cash surrender value of Radian’s company-owned life insurance
policies, into PMIERs-compliant Available Assets (as defined in the
PMIERs) and receives, as expected, full PMIERs benefit of
approximately $145 million for its outstanding quota-share reinsurance
arrangements.
Mortgage and Real Estate Services
-
On June 30, 2014, Radian completed the acquisition of Clayton Holdings
LLC, a leading provider of risk-based analytics, residential loan due
diligence, consulting, surveillance and staffing solutions. The
company also provides customized Real Estate Owned (REO) asset
management and single-family rental services through its Green River
Capital subsidiary; advanced Automated Valuation Models, Broker Price
Opinions and technology solutions to monitor loan portfolio
performance, acquire and track non-performing loans, and value and
sell residential real estate through its Red Bell Real Estate
subsidiary; and a global reach through its Clayton EuroRisk subsidiary.
-
Total revenues for the Services segment were $44.6 million and gross
profit was $19.1 million in the second quarter of 2015. This compares
to total revenues of $31.5 million and gross profit of $12.3 million
in the first quarter of 2015.
-
In July, Clayton introduced an Asset Representations Reviewer service
to help issuers of asset-backed securities, including auto finance,
credit card, student loan and equipment-leasing issuers, comply with
the requirements of the Securities and Exchange Commission’s
amendments to Regulation AB. Clayton plans to leverage its knowledge
of underwriting, loan document review and surveillance, and the
company’s proprietary technology to provide consulting services on
testing procedure design, help clients specify the role of the asset
reviewer, and perform asset review pilot testing.
Expenses and Discontinued Operations
-
Other operating expenses were $67.7 million in the second quarter,
compared to $53.8 million in the first quarter of 2015, and $60.8
million in the second quarter of last year. Operating expenses in the
second quarter of 2015 were primarily driven by variable compensation
expenses related to long-term incentive awards that matured in June
2015; compensation expenses related to the acquisition by Clayton of
Red Bell Real Estate; and an increase in mortgage insurance-related
expenses due to higher volume.
-
Income from discontinued operations, net of tax, for the quarter ended
June 30, 2015, was $4.9 million, compared to $0.5 million for the
quarter ended March 31, 2015. Results from discontinued operations for
the quarter were driven by the recognition of investment gains that
were deferred in other comprehensive income and recognized as a result
of the sale of Radian Asset to Assured Guaranty Corp., a subsidiary of
Assured Guaranty Ltd., on April 1, 2015. Details regarding the assets
and liabilities associated with discontinued operations may be found
on press release Exhibit D.
CAPITAL AND LIQUIDITY UPDATE
Radian Group maintains approximately $735 million of currently available
liquidity.
-
Radian completed a series of actions in the second quarter to
strengthen the company’s capital structure, including to reduce its
overall cost of capital, improve its maturity profile and facilitate
improved credit ratings. The capital actions had four components:
-
Radian paid $127 million in cash and delivered 28.4 million shares
for a total consideration value of $657 million to purchase an
aggregate face value of $389 million of Radian’s 2017 Convertible
Notes.
-
In connection with the purchase of the convertible notes, Radian
terminated a corresponding portion of the Capped Call it had
entered into in 2010 in connection with the initial issuance of
its 2017 Convertible Notes, for proceeds to Radian of $12 million
in cash and 2.3 million shares of Radian common stock.
-
The purchase of the convertible notes was funded by the issuance
of Senior Notes with a coupon of 5.25% and a maturity date of
2020, resulting in net proceeds of $343 million.
-
A portion of the proceeds generated from the issuance of the
Senior Notes was used to enter into an Accelerated Share
Repurchase Program (ASR), in order to reduce the dilutive impact
of the shares issued in connection with the purchase of the
convertible notes. The ASR was executed for a cash payment of $202
million in exchange for 9.2 million intial shares and an estimated
additional 1.6 million shares upon completion of the ASR, assuming
an average stock price of $18.68.
As noted above, these actions resulted in a loss on induced conversion
and debt extinguishment of $91.9 million, an expected reduction in the
company’s annual interest expense of approximately $16 million, and an
expected increase in fully diluted share count of approximately 2.8
million shares. Additional details related to these capital actions may
be found on Slide 11 of the second quarter presentation slides.
-
Book value per share at June 30, 2015, was $11.28, compared to $11.53
at March 31, 2015. The decrease in book value from the first quarter
of 2015 was related to the issuance of shares resulting from the
capital actions noted above.
-
As of June 30, 2015, Radian Guaranty’s risk-to-capital ratio was
16.5:1 and statutory capital was $2.0 billion.
-
As of June 30, 2015, a total of $2.7 billion of risk in force
outstanding had been ceded under quota share reinsurance agreements in
order to proactively manage Radian Guaranty’s risk-to-capital
position. Radian has ceded the maximum amount of NIW under these
agreements and has not ceded any premium on new business in 2015. As
discussed above, net premiums earned in the second quarter included an
accrual for a $5.8 million profit commission based on experience to
date for the company’s Second Quota Share Reinsurance Transaction,
where Radian expects to exercise its option to recapture 50 percent of
the ceded risk on December 31, 2015.
CONFERENCE CALL
Radian will discuss second quarter financial results in a conference
call today, Wednesday, July 22, 2015, 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
800.230.1951 inside the U.S., or 612.332.0107 for international callers,
using passcode 364879 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 364879.
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) from continuing operations. 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. See press release Exhibit F
or Radian’s website for a description of these items, as well as Exhibit
G for reconciliations to 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 and Red Bell Real
Estate. 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.
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Exhibit A:
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Condensed Consolidated Statements of Operations Trend Schedule
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Exhibit B:
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Net Income Per Share Trend Schedule
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Exhibit C:
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Condensed Consolidated Balance Sheets
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Exhibit D:
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Discontinued Operations
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Exhibit E:
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Segment Information
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Exhibit F:
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Definition of Consolidated Non-GAAP Financial Measure
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Exhibit G:
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Consolidated Non-GAAP Financial Measure Reconciliations
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Exhibit H:
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Mortgage Insurance Supplemental Information New Insurance Written
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Exhibit I:
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Mortgage Insurance Supplemental Information Insurance in Force and
Risk in Force by Product, Statutory Capital Ratios
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Exhibit J:
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Mortgage Insurance Supplemental Information Risk in Force by FICO,
LTV and Policy Year
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Exhibit K:
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Mortgage Insurance Supplemental Information Claims and Reserves
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Exhibit L:
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Mortgage Insurance Supplemental Information Default Statistics
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Exhibit M:
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Mortgage Insurance Supplemental Information Captives, QSR and
Persistency
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Exhibit N:
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Mortgage and Real Estate Services Supplemental Information
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Radian Group Inc. and Subsidiaries
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Condensed Consolidated Statements of Operations Trend Schedule
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Exhibit A
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2015
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2014
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(In thousands, except per share amounts)
|
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Qtr 2
|
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Qtr 1
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Qtr 4
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Qtr 3
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Qtr 2
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Revenues:
|
|
|
|
|
|
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|
|
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Net premiums earned - insurance
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$
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237,437
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$
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224,595
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$
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224,293
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$
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217,827
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$
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203,646
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Services revenue
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43,503
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30,630
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|
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34,450
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|
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42,243
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|
|
—
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Net investment income
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19,285
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17,328
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|
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16,531
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|
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17,143
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|
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16,663
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Net gains (losses) on investments and other financial instruments
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28,448
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16,779
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|
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17,983
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(6,294
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)
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25,332
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Other income
|
|
1,743
|
|
|
1,331
|
|
|
1,793
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|
|
1,162
|
|
|
1,739
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Total revenues
|
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330,416
|
|
|
290,663
|
|
|
295,050
|
|
|
272,081
|
|
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247,380
|
|
|
|
|
|
|
|
|
|
|
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Expenses:
|
|
|
|
|
|
|
|
|
|
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Provision for losses
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32,560
|
|
|
45,028
|
|
|
82,867
|
|
|
48,942
|
|
|
64,648
|
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Policy acquisition costs
|
|
6,963
|
|
|
7,750
|
|
|
6,443
|
|
|
4,240
|
|
|
6,746
|
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Direct cost of services
|
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23,520
|
|
|
19,253
|
|
|
19,709
|
|
|
23,896
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|
|
—
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Other operating expenses
|
|
67,731
|
|
|
53,774
|
|
|
85,800
|
|
|
51,225
|
|
|
60,751
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Interest expense
|
|
24,501
|
|
|
24,385
|
|
|
24,200
|
|
|
23,989
|
|
|
22,348
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Loss on induced conversion and debt extinguishment
|
|
91,876
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
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Amortization and impairment of intangible assets
|
|
3,281
|
|
|
3,023
|
|
|
5,354
|
|
|
3,294
|
|
|
—
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Total expenses
|
|
250,432
|
|
|
153,213
|
|
|
224,373
|
|
|
155,586
|
|
|
154,493
|
|
|
|
|
|
|
|
|
|
|
|
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Pretax income from continuing operations
|
|
79,984
|
|
|
137,450
|
|
|
70,677
|
|
|
116,495
|
|
|
92,887
|
|
Income tax provision (benefit)
|
|
34,791
|
|
|
45,723
|
|
|
(807,349
|
)
|
|
(15,536
|
)
|
|
(10,650
|
)
|
Net income from continuing operations
|
|
45,193
|
|
|
91,727
|
|
|
878,026
|
|
|
132,031
|
|
|
103,537
|
|
Income (loss) from discontinued operations, net of tax
|
|
4,855
|
|
|
530
|
|
|
(449,691
|
)
|
|
21,559
|
|
|
71,296
|
|
Net income
|
|
$
|
50,048
|
|
|
$
|
92,257
|
|
|
$
|
428,335
|
|
|
$
|
153,590
|
|
|
$
|
174,833
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share:
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
$
|
0.20
|
|
|
$
|
0.39
|
|
|
$
|
3.63
|
|
|
$
|
0.58
|
|
|
$
|
0.47
|
|
Income (loss) from discontinued operations, net of tax
|
|
0.02
|
|
|
—
|
|
|
(1.85
|
)
|
|
0.09
|
|
|
0.31
|
|
Net income
|
|
$
|
0.22
|
|
|
$
|
0.39
|
|
|
$
|
1.78
|
|
|
$
|
0.67
|
|
|
$
|
0.78
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Mortgage Insurance Key Ratios
|
|
|
|
|
|
|
|
|
|
|
Loss ratio (1)
|
|
13.3
|
%
|
|
20.4
|
%
|
|
36.9
|
%
|
|
22.5
|
%
|
|
31.7
|
%
|
Expense ratio - NPE basis (1)
|
|
25.8
|
%
|
|
23.0
|
%
|
|
36.9
|
%
|
|
21.3
|
%
|
|
29.5
|
%
|
Expense ratio - NPW basis (2)
|
|
24.4
|
%
|
|
21.3
|
%
|
|
33.8
|
%
|
|
18.9
|
%
|
|
27.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Calculated on a GAAP basis using net premiums earned (“NPE”).
|
(2) Calculated on a GAAP basis using net premiums written (“NPW”).
|
|
On April 1, 2015, Radian Guaranty completed the previously disclosed
sale of 100% of the issued and outstanding shares of Radian Asset
Assurance to Assured, pursuant to the Radian Asset Assurance Stock
Purchase Agreement dated as of December 22, 2014. As a result, the
operating results of Radian Asset Assurance are classified as
discontinued operations for all periods presented in our condensed
consolidated statements of operations. See Exhibit D for additional
information on discontinued operations.
|
Radian Group Inc. and Subsidiaries
|
Net Income Per Share Trend Schedule
|
Exhibit B
|
|
The calculation of basic and diluted net income per share was as
follows:
|
|
|
2015
|
|
2014
|
(In thousands, except per share amounts)
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Qtr 2
|
Net income from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations—basic
|
|
$
|
45,193
|
|
|
$
|
91,727
|
|
|
$
|
878,026
|
|
|
$
|
132,031
|
|
|
$
|
103,537
|
Adjustment for dilutive Convertible Senior Notes due 2019, net of
tax (1)
|
|
3,707
|
|
|
3,673
|
|
|
3,641
|
|
|
5,552
|
|
|
5,503
|
Net income from continuing operations—diluted
|
|
$
|
48,900
|
|
|
$
|
95,400
|
|
|
$
|
881,667
|
|
|
$
|
137,583
|
|
|
$
|
109,040
|
|
|
|
|
|
|
|
|
|
|
|
Net income:
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations—basic
|
|
$
|
45,193
|
|
|
$
|
91,727
|
|
|
$
|
878,026
|
|
|
$
|
132,031
|
|
|
$
|
103,537
|
Income (loss) from discontinued operations, net of tax
|
|
4,855
|
|
|
530
|
|
|
(449,691
|
)
|
|
21,559
|
|
|
71,296
|
Net income—basic
|
|
50,048
|
|
|
92,257
|
|
|
428,335
|
|
|
153,590
|
|
|
174,833
|
Adjustment for dilutive Convertible Senior Notes due 2019, net of
tax (1)
|
|
3,707
|
|
|
3,673
|
|
|
3,641
|
|
|
5,552
|
|
|
5,503
|
Net income—diluted
|
|
$
|
53,755
|
|
|
$
|
95,930
|
|
|
$
|
431,976
|
|
|
$
|
159,142
|
|
|
$
|
180,336
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding—basic
|
|
193,112
|
|
|
191,224
|
|
|
191,053
|
|
|
191,050
|
|
|
182,583
|
Dilutive effect of Convertible Senior Notes due 2017
|
|
12,438
|
|
|
10,886
|
|
|
10,590
|
|
|
6,342
|
|
|
7,599
|
Dilutive effect of Convertible Senior Notes due 2019
|
|
37,736
|
|
|
37,736
|
|
|
37,736
|
|
|
37,736
|
|
|
37,736
|
Dilutive effect of stock-based compensation arrangements (2)
|
|
3,364
|
|
|
3,202
|
|
|
3,422
|
|
|
2,939
|
|
|
2,861
|
Adjusted average common shares outstanding—diluted
|
|
246,650
|
|
|
243,048
|
|
|
242,801
|
|
|
238,067
|
|
|
230,779
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
$
|
0.23
|
|
|
$
|
0.48
|
|
|
$
|
4.60
|
|
|
$
|
0.69
|
|
|
$
|
0.57
|
Income (loss) from discontinued operations, net of tax
|
|
0.03
|
|
|
—
|
|
|
(2.36
|
)
|
|
0.11
|
|
|
0.39
|
Net income
|
|
$
|
0.26
|
|
|
$
|
0.48
|
|
|
$
|
2.24
|
|
|
$
|
0.80
|
|
|
$
|
0.96
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
$
|
0.20
|
|
|
$
|
0.39
|
|
|
$
|
3.63
|
|
|
$
|
0.58
|
|
|
$
|
0.47
|
Income (loss) from discontinued operations, net of tax
|
|
0.02
|
|
|
—
|
|
|
(1.85
|
)
|
|
0.09
|
|
|
0.31
|
Net income
|
|
$
|
0.22
|
|
|
$
|
0.39
|
|
|
$
|
1.78
|
|
|
$
|
0.67
|
|
|
$
|
0.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 were not
included in the calculation of diluted net income per share
because they were anti-dilutive:
|
|
|
|
|
|
|
|
2015
|
|
2014
|
(In thousands)
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Qtr 2
|
Shares of common stock equivalents
|
|
264
|
|
|
540
|
|
|
542
|
|
|
557
|
|
|
1,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
Exhibit C
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
(In thousands, except per share data)
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
$
|
4,309,148
|
|
|
$
|
3,621,646
|
|
|
$
|
3,629,299
|
|
|
$
|
3,529,310
|
|
|
$
|
3,351,792
|
|
Cash
|
|
51,381
|
|
|
57,204
|
|
|
30,465
|
|
|
30,491
|
|
|
42,379
|
|
Restricted cash
|
|
12,633
|
|
|
14,220
|
|
|
14,031
|
|
|
16,509
|
|
|
13,361
|
|
Accounts and notes receivable
|
|
72,093
|
|
|
64,405
|
|
|
85,792
|
|
|
69,029
|
|
|
52,090
|
|
Deferred income taxes, net
|
|
651,238
|
|
|
649,996
|
|
|
700,201
|
|
|
—
|
|
|
—
|
|
Goodwill and other intangible assets, net
|
|
290,640
|
|
|
293,798
|
|
|
288,240
|
|
|
293,632
|
|
|
296,948
|
|
Other assets
|
|
349,371
|
|
|
340,276
|
|
|
357,864
|
|
|
364,665
|
|
|
366,752
|
|
Assets held for sale
|
|
—
|
|
|
1,755,873
|
|
|
1,736,444
|
|
|
1,637,233
|
|
|
1,789,401
|
|
Total assets
|
|
$
|
5,736,504
|
|
|
$
|
6,797,418
|
|
|
$
|
6,842,336
|
|
|
$
|
5,940,869
|
|
|
$
|
5,912,723
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
Unearned premiums
|
|
$
|
665,947
|
|
|
$
|
657,555
|
|
|
$
|
644,504
|
|
|
$
|
625,269
|
|
|
$
|
597,860
|
|
Reserve for losses and loss adjustment expenses
|
|
1,204,792
|
|
|
1,384,714
|
|
|
1,560,032
|
|
|
1,591,150
|
|
|
1,717,314
|
|
Long-term debt
|
|
1,224,892
|
|
|
1,202,535
|
|
|
1,192,299
|
|
|
1,182,247
|
|
|
1,172,569
|
|
Other liabilities
|
|
278,929
|
|
|
310,642
|
|
|
326,743
|
|
|
314,395
|
|
|
316,796
|
|
Liabilities held for sale
|
|
—
|
|
|
966,078
|
|
|
947,008
|
|
|
493,407
|
|
|
523,937
|
|
Total liabilities
|
|
3,374,560
|
|
|
4,521,524
|
|
|
4,670,586
|
|
|
4,206,468
|
|
|
4,328,476
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity component of currently redeemable convertible senior notes
|
|
8,546
|
|
|
68,982
|
|
|
74,690
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
226
|
|
|
209
|
|
|
209
|
|
|
209
|
|
|
209
|
|
Additional paid-in capital
|
|
1,816,545
|
|
|
1,648,436
|
|
|
1,638,552
|
|
|
1,706,222
|
|
|
1,707,655
|
|
Retained earnings (deficit)
|
|
548,161
|
|
|
498,593
|
|
|
406,814
|
|
|
(21,044
|
)
|
|
(174,634
|
)
|
Accumulated other comprehensive (loss) income
|
|
(11,534
|
)
|
|
59,674
|
|
|
51,485
|
|
|
49,014
|
|
|
51,017
|
|
Total common stockholders’ equity
|
|
2,353,398
|
|
|
2,206,912
|
|
|
2,097,060
|
|
|
1,734,401
|
|
|
1,584,247
|
|
Total liabilities and stockholders’ equity
|
|
$
|
5,736,504
|
|
|
$
|
6,797,418
|
|
|
$
|
6,842,336
|
|
|
$
|
5,940,869
|
|
|
$
|
5,912,723
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding
|
|
208,587
|
|
|
191,416
|
|
|
191,054
|
|
|
191,050
|
|
|
191,014
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share
|
|
$
|
11.28
|
|
|
$
|
11.53
|
|
|
$
|
10.98
|
|
|
$
|
9.08
|
|
|
$
|
8.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Discontinued Operations
|
Exhibit D
|
|
The income from discontinued operations, net of tax consisted of the
following components for the periods indicated:
|
|
2015
|
(In thousands)
|
|
Qtr 2
|
|
Qtr 1
|
Net premiums earned
|
|
$
|
—
|
|
|
$
|
1,007
|
|
Net investment income
|
|
—
|
|
|
9,153
|
|
Net gains on investments and other financial instruments
|
|
7,818
|
|
|
13,668
|
|
Change in fair value of derivative instruments
|
|
—
|
|
|
2,625
|
|
Total revenues
|
|
7,818
|
|
|
26,453
|
|
|
|
|
|
|
Provision for losses
|
|
—
|
|
|
502
|
|
Policy acquisition costs
|
|
—
|
|
|
(191
|
)
|
Other operating expense
|
|
—
|
|
|
4,107
|
|
Total expenses
|
|
—
|
|
|
4,418
|
|
|
|
|
|
|
Equity in net loss of affiliates
|
|
—
|
|
|
(13
|
)
|
Income from operations of businesses held for sale
|
|
7,818
|
|
|
22,022
|
|
Loss on sale
|
|
(350
|
)
|
|
(13,930
|
)
|
Income tax provision
|
|
2,613
|
|
|
7,562
|
|
Income from discontinued operations, net of tax
|
|
$
|
4,855
|
|
|
$
|
530
|
|
|
|
|
|
|
|
|
|
|
|
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 reconciliations to consolidated
GAAP measures, see Exhibits F and G.
|
|
|
|
|
Mortgage Insurance
|
|
|
2015
|
|
2014
|
(In thousands)
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Qtr 2
|
Net premiums written - insurance
|
|
$
|
251,082
|
|
|
$
|
241,908
|
|
|
$
|
244,506
|
|
|
$
|
245,775
|
|
|
$
|
221,947
|
|
Increase in unearned premiums
|
|
(13,645
|
)
|
|
(17,313
|
)
|
|
(20,213
|
)
|
|
(27,948
|
)
|
|
(18,301
|
)
|
Net premiums earned - insurance
|
|
237,437
|
|
|
224,595
|
|
|
224,293
|
|
|
217,827
|
|
|
203,646
|
|
Net investment income (1)
|
|
19,285
|
|
|
17,328
|
|
|
16,531
|
|
|
17,143
|
|
|
16,663
|
|
Other income (1)
|
|
1,743
|
|
|
1,331
|
|
|
1,668
|
|
|
1,037
|
|
|
1,620
|
|
Total
|
|
258,465
|
|
|
243,254
|
|
|
242,492
|
|
|
236,007
|
|
|
221,929
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for losses
|
|
31,637
|
|
|
45,851
|
|
|
83,649
|
|
|
48,942
|
|
|
64,648
|
|
Change in expected economic loss or recovery for consolidated VIEs
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
|
(190
|
)
|
|
180
|
|
Policy acquisition costs
|
|
6,963
|
|
|
7,750
|
|
|
6,443
|
|
|
4,240
|
|
|
6,746
|
|
Other operating expenses before corporate allocations
|
|
41,853
|
|
|
34,050
|
|
|
62,591
|
|
|
33,679
|
|
|
36,356
|
|
Total (2)
|
|
80,453
|
|
|
87,651
|
|
|
152,667
|
|
|
86,671
|
|
|
107,930
|
|
Adjusted pretax operating income before corporate allocations
|
|
178,012
|
|
|
155,603
|
|
|
89,825
|
|
|
149,336
|
|
|
113,999
|
|
Allocation of corporate operating expenses (1)
|
|
12,516
|
|
|
9,758
|
|
|
13,729
|
|
|
8,520
|
|
|
17,021
|
|
Allocation of interest expense (1)
|
|
20,070
|
|
|
19,953
|
|
|
19,760
|
|
|
19,565
|
|
|
22,348
|
|
Adjusted pretax operating income
|
|
$
|
145,426
|
|
|
$
|
125,892
|
|
|
$
|
56,336
|
|
|
$
|
121,251
|
|
|
$
|
74,630
|
|
|
|
|
|
|
Services
|
|
|
2015
|
|
2014
|
(In thousands)
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Qtr 2
|
Services revenue
|
|
$
|
44,595
|
|
|
$
|
31,532
|
|
|
$
|
34,466
|
|
|
$
|
42,243
|
|
|
$
|
—
|
|
Other income
|
|
—
|
|
|
—
|
|
|
891
|
|
|
125
|
|
|
119
|
|
Total (2)
|
|
44,595
|
|
|
31,532
|
|
|
35,357
|
|
|
42,368
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost of services
|
|
25,501
|
|
|
19,253
|
|
|
19,709
|
|
|
23,896
|
|
|
—
|
|
Other operating expenses before corporate allocations
|
|
11,522
|
|
|
8,857
|
|
|
8,360
|
|
|
9,054
|
|
|
642
|
|
Total
|
|
37,023
|
|
|
28,110
|
|
|
28,069
|
|
|
32,950
|
|
|
642
|
|
Adjusted pretax operating income (loss) before corporate
allocations
|
|
7,572
|
|
|
3,422
|
|
|
7,288
|
|
|
9,418
|
|
|
(523
|
)
|
Allocation of corporate operating expenses
|
|
1,307
|
|
|
981
|
|
|
740
|
|
|
404
|
|
|
—
|
|
Allocation of interest expense
|
|
4,431
|
|
|
4,432
|
|
|
4,440
|
|
|
4,424
|
|
|
—
|
|
Adjusted pretax operating income (loss)
|
|
$
|
1,834
|
|
|
$
|
(1,991
|
)
|
|
$
|
2,108
|
|
|
$
|
4,590
|
|
|
$
|
(523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
For periods prior to the quarter ended June 30, 2015, includes
certain corporate income and expenses that have been reallocated
from our prior financial guaranty segment to the Mortgage
Insurance segment and that were not reclassified to discontinued
operations.
|
(2)
|
|
Inter-segment information:
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Qtr 2
|
Inter-segment expense included in Mortgage Insurance segment
|
|
$
|
1,092
|
|
|
$
|
902
|
|
|
$
|
782
|
|
|
$
|
—
|
|
|
$
|
—
|
Inter-segment revenue included in Services segment
|
|
1,092
|
|
|
902
|
|
|
782
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
|
|
Segment Information
|
|
|
Exhibit E (page 2 of 2)
|
|
|
|
|
|
|
|
At June 30, 2015
|
|
|
Mortgage
|
|
|
|
|
(In thousands)
|
|
Insurance
|
|
Services
|
|
Total
|
Total assets
|
|
$
|
5,384,224
|
|
|
$
|
352,280
|
|
|
$
|
5,736,504
|
|
|
|
|
|
At December 31, 2014
|
|
|
Mortgage
|
|
|
|
|
(In thousands)
|
|
Insurance
|
|
Services
|
|
Total
|
Assets held for sale (1)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,736,444
|
Total assets
|
|
4,769,014
|
|
|
336,878
|
|
|
6,842,336
|
|
|
|
|
|
|
|
|
|
(1) Assets held for sale are not part of the Mortgage
Insurance or Services segments.
|
|
|
Radian Group Inc. and Subsidiaries
|
Definition of Consolidated Non-GAAP Financial Measure
|
Exhibit F (page 1 of 2)
|
|
Use of Non-GAAP Financial Measure
In addition to the traditional GAAP financial measures, we have
presented non-GAAP financial measures for the consolidated company,
“adjusted pretax operating income (loss)” and “adjusted diluted net
operating income (loss) per share,” 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 core 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) from continuing operations 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) from continuing operations. 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 or losses incurred to induce
conversion of convertible debt prior to maturity are discretionary
activities that are undertaken in order to take advantage of market
opportunities to strengthen our financial position; therefore, these
activities are not viewed 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 Measure
|
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).
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 from continuing operations and net income
per share from continuing operations, respectively.
Total adjusted pretax operating income (loss) and adjusted diluted net
operating income (loss) per share are not measures of total
profitability, and therefore should not be viewed as substitutes for
GAAP pretax income (loss) from continuing operations or net income
(loss) per share from continuing operations. Our definitions of adjusted
pretax operating income (loss) and adjusted diluted net operating income
(loss) per share 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 from Continuing Operations
|
|
|
|
|
|
|
|
2015
|
|
2014
|
(In thousands)
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Qtr 2
|
Adjusted pretax operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
Mortgage Insurance (1)
|
|
$
|
145,426
|
|
|
$
|
125,892
|
|
|
$
|
56,336
|
|
|
$
|
121,251
|
|
|
$
|
74,630
|
|
Services (2)
|
|
1,834
|
|
|
(1,991
|
)
|
|
2,108
|
|
|
4,590
|
|
|
(523
|
)
|
Total adjusted pretax operating income
|
|
147,260
|
|
|
123,901
|
|
|
58,444
|
|
|
125,841
|
|
|
74,107
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on investments and other financial instruments
(3)
|
|
28,448
|
|
|
16,779
|
|
|
17,967
|
|
|
(6,484
|
)
|
|
25,512
|
|
Loss on induced conversion and debt extinguishment
|
|
(91,876
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Acquisition-related expenses (4)
|
|
(567
|
)
|
|
(207
|
)
|
|
(380
|
)
|
|
432
|
|
|
(6,732
|
)
|
Amortization and impairment of intangible assets (4)
|
|
(3,281
|
)
|
|
(3,023
|
)
|
|
(5,354
|
)
|
|
(3,294
|
)
|
|
—
|
|
Consolidated pretax income from continuing operations
|
|
$
|
79,984
|
|
|
$
|
137,450
|
|
|
$
|
70,677
|
|
|
$
|
116,495
|
|
|
$
|
92,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes certain corporate income and expenses that have been
reallocated from our prior financial guaranty segment to the
Mortgage Insurance segment and that were not reclassified to
discontinued operations.
|
(2)
|
|
Includes the acquisition of Clayton Holdings, effective June
30, 2014. Also, effective with the fourth quarter of 2014, the
Services segment undertook the management responsibilities of
certain additional loan servicer surveillance functions previously
considered part of the Mortgage Insurance segment. As a result,
these activities are now reported in the Services segment for all
periods presented.
|
(3)
|
|
This line item includes a de minimis amount of expected
economic loss or recovery associated with our previously
consolidated VIEs that is included in adjusted pretax operating
income above.
|
(4)
|
|
Please see Exhibit F for the definition of this line item.
|
|
Radian Group Inc. and Subsidiaries
|
Consolidated Non-GAAP Financial Measure Reconciliations
|
Exhibit G (page 2 of 2)
|
|
Reconciliation of Adjusted Diluted Net Operating Income Per
Share (1) to Net Income Per Share from Continuing
Operations
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Qtr 2
|
Adjusted diluted net operating income per share
|
|
$
|
0.40
|
|
|
$
|
0.35
|
|
|
$
|
0.17
|
|
|
$
|
0.37
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
After tax per share impact:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on investments and other financial instruments
|
|
0.07
|
|
|
0.04
|
|
|
0.05
|
|
|
(0.02
|
)
|
|
0.08
|
|
Loss on induced conversion and debt extinguishment
|
|
(0.28
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
Acquisition-related expenses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.02
|
)
|
Amortization and impairment of intangible assets
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
—
|
|
Difference between statutory and effective tax rate
|
|
0.02
|
|
|
0.01
|
|
|
3.42
|
|
|
0.24
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share from continuing operations
|
|
$
|
0.20
|
|
|
$
|
0.39
|
|
|
$
|
3.63
|
|
|
$
|
0.58
|
|
|
$
|
0.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Calculated using the company’s statutory tax rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On a consolidated basis, “adjusted pretax operating income” and
“adjusted diluted net operating income per share” are measures not
determined in accordance with GAAP. These measures are not
representative of total profitability, and therefore should not be
viewed as substitutes for GAAP pretax income from continuing operations
or net income per share from continuing operations. Our definitions of
adjusted pretax operating income and adjusted diluted net operating
income per share 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
|
|
|
|
|
|
|
|
2015
|
|
2014
|
($ in millions)
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Qtr 2
|
|
|
|
|
|
|
|
|
|
|
|
Total primary new insurance written
|
|
$
|
11,751
|
|
|
$
|
9,385
|
|
|
$
|
10,009
|
|
|
$
|
11,210
|
|
|
$
|
9,322
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of primary new insurance written by FICO score
|
|
|
|
|
|
|
|
|
|
|
>=740
|
|
63.0
|
%
|
|
63.6
|
%
|
|
60.2
|
%
|
|
61.6
|
%
|
|
61.9
|
%
|
680-739
|
|
30.8
|
|
|
30.3
|
|
|
32.6
|
|
|
31.2
|
|
|
31.4
|
|
620-679
|
|
6.2
|
|
|
6.1
|
|
|
7.2
|
|
|
7.2
|
|
|
6.7
|
|
Total Primary
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of primary new insurance written
|
|
|
|
|
|
|
|
|
|
|
Monthly premiums
|
|
68
|
%
|
|
63
|
%
|
|
69
|
%
|
|
72
|
%
|
|
76
|
%
|
Single premiums
|
|
32
|
%
|
|
37
|
%
|
|
31
|
%
|
|
28
|
%
|
|
24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Refinances
|
|
23
|
%
|
|
33
|
%
|
|
22
|
%
|
|
16
|
%
|
|
13
|
%
|
LTV
|
|
|
|
|
|
|
|
|
|
|
95.01% and above
|
|
3.2
|
%
|
|
1.8
|
%
|
|
0.5
|
%
|
|
0.3
|
%
|
|
0.2
|
%
|
90.01% to 95.00%
|
|
49.4
|
%
|
|
48.4
|
%
|
|
51.7
|
%
|
|
53.7
|
%
|
|
53.9
|
%
|
85.01% to 90.00%
|
|
34.0
|
%
|
|
33.3
|
%
|
|
33.2
|
%
|
|
33.5
|
%
|
|
34.5
|
%
|
85.00% and below
|
|
13.4
|
%
|
|
16.5
|
%
|
|
14.6
|
%
|
|
12.5
|
%
|
|
11.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Mortgage Insurance Supplemental Information - Primary Insurance
in Force and Risk in Force by Product, Statutory Capital
Ratios
|
Exhibit I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
($ in millions)
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
|
2014
|
Primary insurance in force (1)
|
|
|
|
|
|
|
|
|
|
|
Flow
|
|
$
|
164,137
|
|
|
$
|
162,832
|
|
|
$
|
162,302
|
|
|
$
|
159,770
|
|
|
$
|
155,604
|
|
Structured
|
|
8,555
|
|
|
9,309
|
|
|
9,508
|
|
|
9,452
|
|
|
9,385
|
|
Total Primary
|
|
$
|
172,692
|
|
|
$
|
172,141
|
|
|
$
|
171,810
|
|
|
$
|
169,222
|
|
|
$
|
164,989
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
161,397
|
|
|
$
|
160,452
|
|
|
$
|
159,647
|
|
|
$
|
156,581
|
|
|
$
|
151,865
|
|
Alt-A
|
|
6,857
|
|
|
7,122
|
|
|
7,412
|
|
|
7,709
|
|
|
8,014
|
|
A minus and below
|
|
4,438
|
|
|
4,567
|
|
|
4,751
|
|
|
4,932
|
|
|
5,110
|
|
Total Primary
|
|
$
|
172,692
|
|
|
$
|
172,141
|
|
|
$
|
171,810
|
|
|
$
|
169,222
|
|
|
$
|
164,989
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary risk in force (1) (2)
|
|
|
|
|
|
|
|
|
|
|
Flow
|
|
$
|
41,706
|
|
|
$
|
41,256
|
|
|
$
|
41,071
|
|
|
$
|
40,337
|
|
|
$
|
39,139
|
|
Structured
|
|
1,957
|
|
|
2,133
|
|
|
2,168
|
|
|
2,150
|
|
|
2,131
|
|
Total Primary
|
|
$
|
43,663
|
|
|
$
|
43,389
|
|
|
$
|
43,239
|
|
|
$
|
42,487
|
|
|
$
|
41,270
|
|
|
|
|
|
|
|
|
|
|
|
|
Flow
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
39,781
|
|
|
$
|
39,251
|
|
|
$
|
38,977
|
|
|
$
|
38,156
|
|
|
$
|
36,861
|
|
Alt-A
|
|
1,191
|
|
|
1,243
|
|
|
1,295
|
|
|
1,350
|
|
|
1,411
|
|
A minus and below
|
|
734
|
|
|
762
|
|
|
799
|
|
|
831
|
|
|
867
|
|
Total Flow
|
|
$
|
41,706
|
|
|
$
|
41,256
|
|
|
$
|
41,071
|
|
|
$
|
40,337
|
|
|
$
|
39,139
|
|
|
|
|
|
|
|
|
|
|
|
|
Structured
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
1,182
|
|
|
$
|
1,341
|
|
|
$
|
1,349
|
|
|
$
|
1,302
|
|
|
$
|
1,263
|
|
Alt-A
|
|
397
|
|
|
410
|
|
|
425
|
|
|
441
|
|
|
452
|
|
A minus and below
|
|
378
|
|
|
382
|
|
|
394
|
|
|
407
|
|
|
416
|
|
Total Structured
|
|
$
|
1,957
|
|
|
$
|
2,133
|
|
|
$
|
2,168
|
|
|
$
|
2,150
|
|
|
$
|
2,131
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
40,963
|
|
|
$
|
40,592
|
|
|
$
|
40,326
|
|
|
$
|
39,458
|
|
|
$
|
38,124
|
|
Alt-A
|
|
1,588
|
|
|
1,653
|
|
|
1,720
|
|
|
1,791
|
|
|
1,863
|
|
A minus and below
|
|
1,112
|
|
|
1,144
|
|
|
1,193
|
|
|
1,238
|
|
|
1,283
|
|
Total Primary
|
|
$
|
43,663
|
|
|
$
|
43,389
|
|
|
$
|
43,239
|
|
|
$
|
42,487
|
|
|
$
|
41,270
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory Capital Ratios
|
|
|
|
|
|
|
|
|
|
|
Risk to capital ratio-Radian Guaranty only
|
|
16.5
|
:1
|
(3)
|
17.1
|
:1
|
|
17.9
|
:1
|
|
18.4
|
:1
|
|
18.7
|
:1
|
Risk to capital ratio-Mortgage Insurance combined
|
|
18.0
|
:1
|
(3)
|
19.1
|
:1
|
|
20.3
|
:1
|
|
21.2
|
:1
|
|
22.1
|
:1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 4.0% of our total risk in force
for all periods presented.
|
(3)
|
|
Preliminary.
|
|
Radian Group Inc. and Subsidiaries
|
Mortgage Insurance Supplemental Information - Percentage of
Primary Risk in Force by FICO, LTV and Policy Year
|
Exhibit J
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
($ in millions)
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
|
2014
|
Percentage of primary risk in force by FICO score
|
|
|
|
|
|
|
|
|
|
|
Flow
|
|
|
|
|
|
|
|
|
|
|
>=740
|
|
58.1
|
%
|
|
58.1
|
%
|
|
58.1
|
%
|
|
58.0
|
%
|
|
57.8
|
%
|
680-739
|
|
30.2
|
|
|
30.0
|
|
|
29.7
|
|
|
29.5
|
|
|
29.3
|
|
620-679
|
|
10.5
|
|
|
10.6
|
|
|
10.8
|
|
|
11.0
|
|
|
11.3
|
|
<=619
|
|
1.2
|
|
|
1.3
|
|
|
1.4
|
|
|
1.5
|
|
|
1.6
|
|
Total Flow
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Structured
|
|
|
|
|
|
|
|
|
|
|
>=740
|
|
28.7
|
%
|
|
31.1
|
|
|
30.3
|
%
|
|
28.7
|
%
|
|
27.0
|
%
|
680-739
|
|
27.9
|
|
|
28.1
|
|
|
28.5
|
|
|
28.3
|
|
|
28.6
|
|
620-679
|
|
25.4
|
|
|
24.1
|
|
|
24.3
|
|
|
25.4
|
|
|
26.3
|
|
<=619
|
|
18.0
|
|
|
16.7
|
|
|
16.9
|
|
|
17.6
|
|
|
18.1
|
|
Total Structured
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
>=740
|
|
56.7
|
%
|
|
56.8
|
%
|
|
56.7
|
%
|
|
56.6
|
%
|
|
56.2
|
%
|
680-739
|
|
30.1
|
|
|
29.8
|
|
|
29.6
|
|
|
29.4
|
|
|
29.3
|
|
620-679
|
|
11.2
|
|
|
11.3
|
|
|
11.6
|
|
|
11.7
|
|
|
12.1
|
|
<=619
|
|
2.0
|
|
|
2.1
|
|
|
2.1
|
|
|
2.3
|
|
|
2.4
|
|
Total Primary
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of primary risk in force by LTV
|
|
|
|
|
|
|
|
|
|
|
95.01% and above
|
|
7.6
|
%
|
|
7.9
|
%
|
|
8.2
|
%
|
|
8.6
|
%
|
|
9.3
|
%
|
90.01% to 95.00%
|
|
49.0
|
|
|
48.2
|
|
|
47.5
|
|
|
46.5
|
|
|
45.1
|
|
85.01% to 90.00%
|
|
34.6
|
|
|
35.0
|
|
|
35.4
|
|
|
35.8
|
|
|
36.3
|
|
85.00% and below
|
|
8.8
|
|
|
8.9
|
|
|
8.9
|
|
|
9.1
|
|
|
9.3
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of primary risk in force by policy year
|
|
|
|
|
|
|
|
|
|
|
2005 and prior
|
|
7.3
|
%
|
|
7.8
|
%
|
|
8.2
|
%
|
|
8.8
|
%
|
|
9.5
|
%
|
2006
|
|
4.2
|
|
|
4.4
|
|
|
4.6
|
|
|
4.9
|
|
|
5.2
|
|
2007
|
|
9.6
|
|
|
10.2
|
|
|
10.6
|
|
|
11.1
|
|
|
11.8
|
|
2008
|
|
7.0
|
|
|
7.5
|
|
|
7.9
|
|
|
8.3
|
|
|
8.9
|
|
2009
|
|
2.0
|
|
|
2.3
|
|
|
2.5
|
|
|
2.8
|
|
|
3.1
|
|
2010
|
|
1.7
|
|
|
2.0
|
|
|
2.1
|
|
|
2.3
|
|
|
2.6
|
|
2011
|
|
3.5
|
|
|
3.9
|
|
|
4.2
|
|
|
4.5
|
|
|
5.0
|
|
2012
|
|
13.0
|
|
|
14.2
|
|
|
15.1
|
|
|
16.2
|
|
|
17.5
|
|
2013
|
|
20.8
|
|
|
22.4
|
|
|
23.8
|
|
|
25.1
|
|
|
26.6
|
|
2014
|
|
19.0
|
|
|
20.0
|
|
|
21.0
|
|
|
16.0
|
|
|
9.8
|
|
2015
|
|
11.9
|
|
|
5.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Primary risk in force on defaulted loans (1)
|
|
$
|
1,753
|
|
|
$
|
1,883
|
|
|
$
|
2,089
|
|
|
$
|
2,168
|
|
|
$
|
2,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes risk related to loans subject to the
Freddie Mac Agreement.
|
|
|
Radian Group Inc. and Subsidiaries
|
Mortgage Insurance Supplemental Information - Claims and Reserves
|
Exhibit K
|
|
|
|
|
|
|
|
2015
|
|
2014
|
($ in thousands)
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Qtr 2
|
|
|
|
|
|
|
|
|
|
|
|
Net claims paid
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
83,489
|
|
|
$
|
76,186
|
|
|
$
|
74,342
|
|
|
$
|
104,440
|
|
$
|
159,335
|
Alt-A
|
|
23,260
|
|
|
19,999
|
|
|
21,909
|
|
|
26,882
|
|
37,368
|
A minus and below
|
|
14,965
|
|
|
15,141
|
|
|
12,600
|
|
|
19,658
|
|
26,675
|
Total primary claims paid
|
|
121,714
|
|
|
111,326
|
|
|
108,851
|
|
|
150,980
|
|
223,378
|
Pool
|
|
10,798
|
|
|
8,874
|
|
|
8,086
|
|
|
8,880
|
|
16,362
|
Second-lien and other
|
|
(53
|
)
|
|
(111
|
)
|
|
283
|
|
|
490
|
|
511
|
Subtotal
|
|
132,459
|
|
|
120,089
|
|
|
117,220
|
|
|
160,350
|
|
240,251
|
Impact of captive terminations
|
|
—
|
|
|
(12,000
|
)
|
|
—
|
|
|
—
|
|
—
|
Impact of settlements
|
|
79,557
|
|
|
99,006
|
|
|
—
|
|
|
13,500
|
|
—
|
Total
|
|
$
|
212,016
|
|
|
$
|
207,095
|
|
|
$
|
117,220
|
|
|
$
|
173,850
|
|
$
|
240,251
|
|
|
|
|
|
|
|
|
|
|
|
Average claim paid (1)
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
48.1
|
|
|
$
|
44.0
|
|
|
$
|
48.7
|
|
|
$
|
49.2
|
|
$
|
46.3
|
Alt-A
|
|
59.5
|
|
|
54.6
|
|
|
58.7
|
|
|
56.7
|
|
55.9
|
A minus and below
|
|
40.1
|
|
|
35.9
|
|
|
39.3
|
|
|
40.3
|
|
37.8
|
Total primary average claims paid
|
|
48.7
|
|
|
44.2
|
|
|
49.0
|
|
|
49.0
|
|
46.4
|
Pool
|
|
69.7
|
|
|
51.5
|
|
|
46.5
|
|
|
48.0
|
|
63.4
|
Second-lien and other
|
|
(3.5
|
)
|
|
(12.3
|
)
|
|
7.6
|
|
|
18.9
|
|
16.5
|
Total
|
|
$
|
49.6
|
|
|
$
|
44.5
|
|
|
$
|
48.2
|
|
|
$
|
48.7
|
|
$
|
47.0
|
|
|
|
|
|
|
|
|
|
|
|
Average primary claim paid (2)
|
|
$
|
49.6
|
|
|
$
|
45.3
|
|
|
$
|
50.4
|
|
|
$
|
50.0
|
|
$
|
47.4
|
Average total claim paid (2)
|
|
$
|
50.4
|
|
|
$
|
45.5
|
|
|
$
|
49.4
|
|
|
$
|
49.6
|
|
$
|
48.0
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands, except primary reserve per
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
primary default amounts)
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for losses by category
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
562,918
|
|
|
$
|
640,919
|
|
|
$
|
700,174
|
|
|
$
|
721,811
|
|
|
$
|
701,718
|
Alt-A
|
|
256,854
|
|
|
278,350
|
|
|
292,293
|
|
|
308,283
|
|
|
323,490
|
A minus and below
|
|
148,043
|
|
|
163,390
|
|
|
179,103
|
|
|
182,885
|
|
|
174,922
|
IBNR and other
|
|
125,038
|
|
|
167,204
|
|
|
223,114
|
|
|
212,908
|
|
|
326,821
|
LAE
|
|
48,141
|
|
|
53,210
|
|
|
56,164
|
|
|
52,690
|
|
|
50,071
|
Reinsurance recoverable (3)
|
|
11,677
|
|
|
13,365
|
|
|
26,665
|
|
|
21,201
|
|
|
22,458
|
Total primary reserves
|
|
1,152,671
|
|
|
1,316,438
|
|
|
1,477,513
|
|
|
1,499,778
|
|
|
1,599,480
|
Pool insurance
|
|
47,902
|
|
|
62,943
|
|
|
75,785
|
|
|
80,664
|
|
|
104,424
|
IBNR and other
|
|
891
|
|
|
1,227
|
|
|
1,775
|
|
|
2,468
|
|
|
4,621
|
LAE
|
|
2,353
|
|
|
3,051
|
|
|
3,542
|
|
|
3,434
|
|
|
4,180
|
Total pool reserves
|
|
51,146
|
|
|
67,221
|
|
|
81,102
|
|
|
86,566
|
|
|
113,225
|
Total 1st lien reserves
|
|
1,203,817
|
|
|
1,383,659
|
|
|
1,558,615
|
|
|
1,586,344
|
|
|
1,712,705
|
Second-lien and other
|
|
975
|
|
|
1,055
|
|
|
1,417
|
|
|
1,787
|
|
|
1,976
|
Total reserves
|
|
$
|
1,204,792
|
|
|
$
|
1,384,714
|
|
|
$
|
1,560,032
|
|
|
$
|
1,588,131
|
|
|
$
|
1,714,681
|
|
|
|
|
|
|
|
|
|
|
|
1st lien reserve per default
|
|
|
|
|
|
|
|
|
|
|
Primary reserve per primary default excluding IBNR and other
|
|
$
|
27,279
|
|
|
$
|
28,423
|
|
|
$
|
27,683
|
|
|
$
|
27,477
|
|
|
$
|
26,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Net of reinsurance recoveries and without giving effect to the
impact of captive terminations and settlements.
|
(2)
|
|
Before reinsurance recoveries and without giving effect to the
impact of captive terminations and settlements.
|
(3)
|
|
Primarily represents ceded losses on captive transactions and
quota share reinsurance transactions.
|
|
Radian Group Inc. and Subsidiaries
|
Mortgage Insurance Supplemental Information - Default Statistics
|
Exhibit L
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
|
2014
|
Default Statistics
|
|
|
|
|
|
|
|
|
|
|
Primary Insurance:
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
|
|
|
|
|
|
|
|
|
Number of insured loans
|
|
802,719
|
|
|
801,332
|
|
|
797,436
|
|
|
783,414
|
|
|
764,508
|
|
Number of loans in default
|
|
23,237
|
|
|
25,114
|
|
|
28,246
|
|
|
28,963
|
|
|
30,012
|
|
Percentage of loans in default
|
|
2.89
|
%
|
|
3.13
|
%
|
|
3.54
|
%
|
|
3.70
|
%
|
|
3.93
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A
|
|
|
|
|
|
|
|
|
|
|
Number of insured loans
|
|
35,927
|
|
|
37,468
|
|
|
38,953
|
|
|
40,319
|
|
|
41,846
|
|
Number of loans in default
|
|
6,949
|
|
|
7,480
|
|
|
8,136
|
|
|
8,629
|
|
|
9,299
|
|
Percentage of loans in default
|
|
19.34
|
%
|
|
19.96
|
%
|
|
20.89
|
%
|
|
21.40
|
%
|
|
22.22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
A minus and below
|
|
|
|
|
|
|
|
|
|
|
Number of insured loans
|
|
34,224
|
|
|
35,425
|
|
|
36,688
|
|
|
37,843
|
|
|
39,180
|
|
Number of loans in default
|
|
7,490
|
|
|
7,846
|
|
|
8,937
|
|
|
9,251
|
|
|
9,593
|
|
Percentage of loans in default
|
|
21.89
|
%
|
|
22.15
|
%
|
|
24.36
|
%
|
|
24.45
|
%
|
|
24.48
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total Primary
|
|
|
|
|
|
|
|
|
|
|
Number of insured loans
|
|
872,870
|
|
|
874,225
|
|
|
873,077
|
|
|
861,576
|
|
|
845,534
|
|
Number of loans in default (1)
|
|
37,676
|
|
|
40,440
|
|
|
45,319
|
|
|
46,843
|
|
|
48,904
|
|
Percentage of loans in default
|
|
4.32
|
%
|
|
4.63
|
%
|
|
5.19
|
%
|
|
5.44
|
%
|
|
5.78
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
|
2014
|
Number of loans in default
|
|
3,246
|
|
|
3,715
|
|
|
4,467
|
|
|
4,824
|
|
|
5,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Mortgage Insurance Supplemental Information - Captives, QSR and
Persistency
|
Exhibit M
|
|
|
|
|
|
|
|
2015
|
|
2014
|
($ in thousands)
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Qtr 2
|
|
|
|
|
|
|
|
|
|
|
|
1st Lien Captives
|
|
|
|
|
|
|
|
|
|
|
Premiums ceded to captives
|
|
$
|
2,700
|
|
|
$
|
2,585
|
|
|
$
|
3,078
|
|
|
$
|
3,096
|
|
|
$
|
3,314
|
|
% of total premiums
|
|
1.1
|
%
|
|
1.1
|
%
|
|
1.3
|
%
|
|
1.3
|
%
|
|
1.5
|
%
|
Insurance in force included in captives (1)
|
|
2.4
|
%
|
|
2.5
|
%
|
|
2.8
|
%
|
|
3.0
|
%
|
|
3.3
|
%
|
Risk in force included in captives (1)
|
|
2.2
|
%
|
|
2.4
|
%
|
|
2.7
|
%
|
|
2.9
|
%
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Initial Quota Share Reinsurance (“QSR”) Transaction
|
|
|
|
|
|
|
|
|
|
|
QSR ceded premiums written
|
|
$
|
3,822
|
|
|
$
|
4,067
|
|
|
$
|
(4,801
|
)
|
|
$
|
4,668
|
|
|
$
|
5,046
|
|
% of premiums written
|
|
1.5
|
%
|
|
1.6
|
%
|
|
(1.9
|
)%
|
|
1.8
|
%
|
|
2.1
|
%
|
QSR ceded premiums earned
|
|
$
|
6,424
|
|
|
$
|
6,018
|
|
|
$
|
(2,869
|
)
|
|
$
|
6,578
|
|
|
$
|
6,803
|
|
% of premiums earned
|
|
2.6
|
%
|
|
2.5
|
%
|
|
(1.2
|
)%
|
|
2.8
|
%
|
|
3.1
|
%
|
Ceding commissions
|
|
$
|
828
|
|
|
$
|
880
|
|
|
$
|
1,108
|
|
|
$
|
1,166
|
|
|
$
|
1,262
|
|
Risk in force included in QSR (2)
|
|
$
|
954,673
|
|
|
$
|
1,041,383
|
|
|
$
|
1,105,545
|
|
|
$
|
1,170,496
|
|
|
$
|
1,234,975
|
|
|
|
|
|
|
|
|
|
|
|
|
Second QSR Transaction
|
|
|
|
|
|
|
|
|
|
|
QSR ceded premiums written
|
|
$
|
395
|
|
|
$
|
6,529
|
|
|
$
|
9,303
|
|
|
$
|
9,082
|
|
|
$
|
8,072
|
|
% of premiums written
|
|
0.2
|
%
|
|
2.6
|
%
|
|
3.7
|
%
|
|
3.5
|
%
|
|
3.4
|
%
|
QSR ceded premiums earned
|
|
$
|
3,039
|
|
|
$
|
8,768
|
|
|
$
|
8,339
|
|
|
$
|
7,699
|
|
|
$
|
7,197
|
|
% of premiums earned
|
|
1.2
|
%
|
|
3.6
|
%
|
|
3.6
|
%
|
|
3.3
|
%
|
|
3.3
|
%
|
Ceding commissions
|
|
$
|
2,154
|
|
|
$
|
2,285
|
|
|
$
|
3,256
|
|
|
$
|
3,179
|
|
|
$
|
2,825
|
|
Risk in force included in QSR (2)
|
|
$
|
1,440,312
|
|
|
$
|
1,533,677
|
|
|
$
|
1,615,554
|
|
|
$
|
1,546,311
|
|
|
$
|
1,447,088
|
|
|
|
|
|
|
|
|
|
|
|
|
Persistency (twelve months ended) (3)
|
|
80.1
|
%
|
|
82.6
|
%
|
|
84.2
|
%
|
|
84.3
|
%
|
|
83.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Radian reinsures the middle layer risk positions, while
retaining a significant portion of the total risk comprising the
first loss and most remote risk positions.
|
(2)
|
|
Included in primary risk in force.
|
(3)
|
|
Effective March 31, 2015, we refined our persistency
calculation to incorporate loan level detail rather than
aggregated portfolio data. Prior periods have been recalculated
and reflect the current calculation methodology.
|
|
Radian Group Inc. and Subsidiaries
|
Services Supplemental Information - Gross Profit on Services
|
Exhibit N
|
|
The following table shows additional trend information for the Services
segment:
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
2014
|
(In thousands)
|
|
Qtr 2
|
|
|
|
Qtr 1
|
|
|
|
Qtr 4
|
|
|
|
Qtr 3
|
Services revenue
|
|
$
|
44,595
|
|
|
|
|
$
|
31,532
|
|
|
|
|
$
|
34,466
|
|
|
|
|
$
|
42,243
|
Direct cost of services
|
|
25,501
|
|
|
|
|
19,253
|
|
|
|
|
19,709
|
|
|
|
|
23,896
|
Gross profit on services
|
|
$
|
19,094
|
|
|
|
|
$
|
12,279
|
|
|
|
|
$
|
14,757
|
|
|
|
|
$
|
18,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The selected unaudited financial information presented below represents
unaudited quarterly historical information for the businesses of Clayton
Holdings LLC (“Clayton”) for periods prior to our acquisition on June
30, 2014. Financial information for periods after the acquisition is
included in the table above and in Exhibit E as part of our Services
segment.
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
2014
|
(In thousands)
|
|
Qtr 1
|
|
|
|
Qtr 2
|
|
|
|
Qtr 3
|
|
|
|
Qtr 4
|
|
|
|
Qtr 1
|
|
|
|
Qtr 2
|
Services revenue
|
|
$
|
37,041
|
|
|
|
|
$
|
39,115
|
|
|
|
|
$
|
32,718
|
|
|
|
|
$
|
25,593
|
|
|
|
|
$
|
28,043
|
|
|
|
|
$
|
36,347
|
Direct cost of services
|
|
20,173
|
|
|
|
|
22,028
|
|
|
|
|
18,015
|
|
|
|
|
14,957
|
|
|
|
|
15,469
|
|
|
|
|
19,956
|
Gross profit on services
|
|
$
|
16,868
|
|
|
|
|
$
|
17,087
|
|
|
|
|
$
|
14,703
|
|
|
|
|
$
|
10,636
|
|
|
|
|
$
|
12,574
|
|
|
|
|
$
|
16,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
unemployment rates, changes in the U.S. housing and mortgage credit
markets, declines in home prices and property values, the performance of
the U.S. or global economies, the amount of liquidity in the capital or
credit markets, changes or volatility in interest rates or consumer
confidence and changes in credit spreads, all of which may be impacted
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;
• catastrophic events, increased unemployment, home price depreciation
or other negative economic changes generally or in geographic regions
where our mortgage insurance exposure is more concentrated;
• Radian Guaranty Inc.’s ability to remain eligible under applicable
requirements imposed by the Federal Housing Finance Agency (“FHFA”) and
by Fannie Mae and Freddie Mac (collectively, the “GSEs”) to insure loans
purchased by the GSEs;
• our ability to maintain sufficient holding company liquidity to meet
our short- and long-term liquidity needs. We expect to contribute a
significant amount of our holding company liquidity to support Radian
Guaranty Inc.’s compliance with the final financial requirements
(“PMIERs Financial Requirements”) of the Private Mortgage Insurer
Eligibility Requirements that were issued by the FHFA in final form on
April 17, 2015 (“PMIERs”) and which become effective for existing
mortgage insurers on December 31, 2015. Our projections regarding the
amount of holding company liquidity that we may contribute to Radian
Guaranty Inc. to comply with the PMIERs Financial Requirements are based
on our estimates of Radian Guaranty’s “Minimum Required Assets”(a
risk-based minimum required asset amount, as defined in the PMIERs,
calculated based on net risk in force, which approximates the maximum
loss exposure at any point in time and a variety of measures designed to
evaluate credit quality) and “Available Assets” (as defined in the
PMIERs, these assets primarily include the liquid assets of a mortgage
insurer and its affiliated reinsurers, and exclude premiums received but
not yet earned), which may not prove to be accurate, and which could be
impacted by: (1) our ability to receive, as expected, GSE approval for
the amendments to our existing reinsurance arrangements and receive the
full PMIERs benefit for these arrangements; (2) whether we elect to
convert certain liquid assets into PMIERs-compliant Available Assets;
(3) factors affecting the performance of our mortgage insurance
business, including our level of defaults, prepayments, the losses we
incur on new or existing defaults and the credit characteristics of our
mortgage insurance; and (4) how much capital we expect to maintain at
our mortgage insurance subsidiaries in excess of the amount required to
satisfy the PMIERs Financial Requirements. Contributions of holding
company cash and investments from Radian Group will leave less liquidity
to satisfy Radian Group’s future obligations. Depending on the amount of
holding company contributions that we make, we may be required or may
decide to seek additional capital by incurring additional debt, by
issuing additional equity, or by selling assets, which we may not be
able to do on favorable terms, if at all;
• our ability to maintain an adequate level of capital in our insurance
subsidiaries to satisfy existing and future state regulatory
requirements, including new capital adequacy standards that currently
are being developed by the National Association of Insurance
Commissioners (“NAIC”) and that could be adopted by states in which we
write business;
• changes in the charters or business practices of, or rules or
regulations imposed by or applicable to the GSEs, including: (1) the
implementation of the final PMIERs (including as updated on June 30,
2015 to increase the amount of Available Assets that must be held
against risk in force associated with lender paid mortgage insurance
originated on or after January 1, 2016), which (a) will increase the
amount of capital that Radian Guaranty is required to hold, and
therefore, reduce our current returns on subsidiary capital, (b)
potentially impact the type of business that Radian Guaranty is willing
to write, which could reduce our new insurance written (“NIW”) and
market share, (c) impose extensive and more stringent operational
requirements in areas such as claim processing, loss mitigation,
document retention, underwriting, quality control, reporting and
monitoring, among others, that may result in additional costs to achieve
and maintain compliance, and (d) require the consent of the GSEs for
Radian Guaranty to take certain actions such as paying dividends,
entering into various inter-company agreements, and commuting or
reinsuring risk, among others; (2) changes that could limit the type of
business that Radian Guaranty and other private mortgage insurers are
willing to write, which could reduce our new insurance written NIW and
market share; (3) changes that could increase the cost of private
mortgage insurance, including as compared to the Federal Housing
Administration’s (“FHA”) pricing, or result in the emergence of other
forms of credit enhancement; and (4) changes that could require us to
alter our business practices and which may result in substantial
additional costs;
• our ability to continue to effectively mitigate our mortgage insurance
losses, including a decrease in net “Rescissions” (our legal right,
under certain conditions, to unilaterally rescind coverage on our
mortgage insurance policies if we determine that a loan did not qualify
for insurance), “Claim Denials” (our legal right, under certain
conditions, to deny a claim) or “Claim Curtailments” (our legal right,
under certain conditions, to reduce the amount of a claim, including due
to servicer negligence) resulting from an increase in the number of
successful challenges to previous Rescissions, Claim Denials or Claim
Curtailments (including as part of one or more settlements of disputed
Rescissions or Claim Denials), or as a result of the GSEs intervening in
or otherwise limiting our loss mitigation practices, including
settlements of disputes regarding “Loss Mitigation Activities”
(activities such as Rescissions, Claim Denials, Claim Curtailments and
cancellations);
• 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;
• any disruption in the servicing of mortgages covered by our insurance
policies, as well as poor servicer performance;
• a substantial decrease in the persistency rates of our mortgage
insurance policies, which has the effect of reducing our premium income
on our premiums on mortgage insurance products paid on a monthly
installment basis 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 with respect to other private
mortgage insurers, those that have been assigned higher ratings than we
have, that may have access to greater amounts of capital than we do, or
that are new entrants to the industry, and therefore, are not burdened
by legacy obligations) and the impact such heightened competition may
have on our returns and our NIW;
• the increased demand from lenders for customized (reduced) rates on
lender-paid, single premium mortgage insurance products, which could
further reduce our overall average premium rates and returns and, to the
extent we decide to limit this type of business, could adversely impact
our market share and our customer relationships;
• 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 Wall Street Reform and Consumer
Protection Act on the financial services industry in general, and on our
businesses in particular;
• the adoption of new or 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: (1) the resolution
of existing, or the possibility of additional, lawsuits, inquiries or
investigations (including a recent inquiry from the Wisconsin Office of
the Commissioner of Insurance to all private mortgage insurers
pertaining to customized insurance rates and terms offered to mortgage
insurance customers); (2) changes to the Mortgage Guaranty Insurers
Model Act (“Model Act”) being considered by the NAIC that could include
more stringent capital and other requirements for Radian Guaranty in
states that adopt the new Model Act in the future; and (3) legislative
and regulatory changes (a) impacting the demand for our products, (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 or future prospects;
• the amount and timing of potential payments or adjustments associated
with federal or other tax examinations, including deficiencies assessed
by the Internal Revenue Service (“IRS”) resulting from the 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” (accounting principles generally accepted in the
U.S.) or “SAP” (statutory accounting practices including those required
or permitted, if applicable, by the insurance departments of the
respective states of domicile of our insurance subsidiaries) rules and
guidance, or their interpretation;
• 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; and
• the possibility that we may need to impair the estimated fair value of
goodwill established in connection with our acquisition of Clayton
Holdings LLC, the valuation of which requires the use of significant
estimates and assumptions with respect to the estimated future economic
benefits arising from certain assets acquired in the transaction such as
the value of expected future cash flows of Clayton, Clayton’s workforce,
expected synergies with our other affiliates and other unidentifiable
intangible assets.
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, 2014 and in our 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.
CONTACT:
Radian Group Inc.
Emily Riley, 215-231-1035
emily.riley@radian.biz
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