RDN Radian Group Inc

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of report (Date of earliest event reported) February 12, 2015

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Radian Group Inc.
(Exact Name of Registrant as Specified in Its Charter)

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(215) 231 - 1000
(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

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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 February 12, 2015, Radian Group Inc. issued a news release announcing its financial results for the quarter and full year ended December 31, 2014. 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 February 12, 2015.

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*  Furnished herewith.

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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.

EXHIBIT INDEX

Exhibit 99.1

Radian Reports Fourth Quarter and Full Year 2014 Financial Results

– Achieves full-year profitability and makes significant progress in eliminating legacy exposure –

– Reports fourth quarter net income of $428 million or $1.78 per diluted share –

– Results include reversal of DTA valuation allowance and loss on pending sale of FG business –

PHILADELPHIA--(BUSINESS WIRE)--February 12, 2015--Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended December 31, 2014, of $428.3 million, or $1.78 per diluted share. This compares to net income for the quarter ended December 31, 2013, of $36.4 million, or $0.21 per diluted share.

“We made significant progress in 2014 with full year profitability and by reducing Radian’s overall risk profile,” said Chief Executive Officer S.A. Ibrahim. “By focusing on our core strengths in mortgage insurance and mortgage and real estate services, we are driving long-term value from our existing and growing portfolio while diversifying our future revenue sources.”

Results for the fourth quarter of 2014 include two significant items:

• A net loss on discontinued operations of $449.7 million, or $1.85 per diluted share, which includes the loss on sale of Radian Asset Assurance Inc., Radian’s financial guaranty insurance subsidiary. Operations for Radian Asset for all periods have been reported as discontinued operations. The completion of the sale is subject to satisfaction of customary closing conditions, including regulatory approvals, and is expected to occur in the first half of 2015. Details regarding the sale of Radian Asset may be found below; the balance sheet and statement of operations associated with discontinued operations may be found in press release Exhibit D.
• The reversal of substantially all of the company’s deferred tax asset (DTA) valuation allowance, in the amount of $815.6 million, or $3.36 per diluted share, in the fourth quarter of 2014. The DTA valuation allowance reversal, which represented $4.27 in book value per share as of December 31, 2014, is the result of Radian’s sustained profitability in recent quarters as well as the positive outlook for future profitability, driven by the reduction in the company’s legacy exposure and the improved composition of the overall portfolio.

Net income for the full year 2014 was $959.5 million, or $4.16 per diluted share, which included a net loss after tax of $300.1 million from discontinued operations and an income tax benefit of $852.4 million from continuing operations, which was primarily driven by the reversal of the DTA valuation allowance. This compares to a net loss for the full year 2013 of $197.0 million, or $1.18 per diluted share, which included an after-tax loss of $55.1 million from discontinued operations and an income tax benefit of $31.5 million from continuing operations.

Adjusted pretax operating income for the quarter ended December 31, 2014, was $58.4 million, compared to an adjusted pretax operating loss for the quarter ended December 31, 2013, of $13.3 million. Adjusted pretax operating income for the twelve months ended December 31, 2014, was $342.4 million, compared to an adjusted pretax operating loss for the twelve months ended December 31, 2013, of $67.4 million.

Book value per share at December 31, 2014, was $10.98.

Ibrahim continued, “As we look to 2015 and beyond, we believe the combination of our mortgage insurance and mortgage and real estate services platforms will better enable us to sharpen our customer focus and provide a variety of services to meet their needs. This directly aligns with our strategy to serve the entire mortgage finance market and to be well positioned to compete in the next phase of the evolving housing finance market.”

FOURTH QUARTER AND FULL YEAR HIGHLIGHTS

• New mortgage insurance written (NIW) was $10.0 billion during the quarter, compared to $11.2 billion in the third quarter of 2014, and $9.3 billion in the prior-year quarter.
  • Of the $10.0 billion in new business written in the fourth quarter of 2014, 69 percent was written with monthly premiums and 31 percent with single premiums. This compares to a mix of 70 percent monthly premiums and 30 percent single premiums in the fourth quarter of 2013.
  • NIW continued to consist of loans with excellent risk characteristics.

• Total primary mortgage insurance in force was an industry-leading $171.8 billion as of December 31, 2014, compared to $169.2 billion as of September 30, 2014, and $161.2 billion as of December 31, 2013. Persistency, which is the percentage of mortgage insurance in force that remains on the company’s books after a twelve-month period, was 83.4 percent as of December 31, 2014, compared to 83.5 percent as of September 30, 2014, and 81.1 percent as of December 31, 2013.
• Consistent with the company’s strategy for actively managing and reducing legacy mortgage insurance exposure, on September 16, 2014, Radian Guaranty Inc. entered into a Confidential Settlement Agreement with Countrywide Home Loans and Bank of America (BofA) in order to resolve various actual and potential claims and disputes related to mortgage insurance coverage on legacy loans. In late December 2014, Radian received the necessary consents from Fannie Mae and Freddie Mac to implement the Settlement Agreement. The implementation, which commenced on February 1, 2015, will result in a decrease to future rescissions and denials and an increase in claims paid, but is not expected to impact future net income.
• The mortgage insurance provision for losses was $83.6 million in the fourth quarter of 2014, compared to $48.9 million in the third quarter of 2014, and $144.1 million in the prior-year period.
  • The loss ratio in the fourth quarter was 36.9 percent, compared to 22.5 percent in the third quarter of 2014, and 71.9 percent in the fourth quarter of 2013.
  • Mortgage insurance loss reserves were $1.6 billion as of December 31, 2014, compared to $1.6 billion as of September 30, 2014, and $2.2 billion as of December 31, 2013.
  • Primary reserve per default (excluding IBNR and other reserves) was $27,683 as of December 31, 2014. This compares to primary reserve per default of $27,477 as of September 30, 2014, and $26,717 as of December 31, 2013.

• The total number of primary delinquent loans decreased by three percent in the fourth quarter from the third quarter of 2014, and by 26 percent from the fourth quarter of 2013. The primary mortgage insurance delinquency rate decreased to 5.2 percent in the fourth quarter of 2014, compared to 5.4 percent in the third quarter of 2014, and 7.3 percent in the fourth quarter of 2013.
• Total mortgage insurance claims paid were $117.2 million in the fourth quarter of 2014, compared to $173.9 million in the third quarter of 2014, and $283.4 million in the fourth quarter of 2013. Claims paid in the fourth quarter of 2014 exclude
  • $15.7 million of claims processed in the quarter in accordance with the terms of the August 2013 Freddie Mac Agreement, for which no cash payment was necessary, and
  • claims expected to be paid of approximately $250 million in the first half of 2015 relating to the September 2014 BofA Settlement Agreement.

For the full-year 2014, total claims paid excluding the Freddie Mac agreement were $838.3 million, compared to $1.2 billion for the full-year 2013. The company currently expects mortgage insurance net claims paid for the full-year 2015 of approximately $600 – $700 million. This includes the approximately $250 million of claims expected to be paid related to the September 2014 BofA Settlement Agreement.

• Other operating expenses were $85.8 million in the fourth quarter, including $24.4 million related to long-term compensation expenses and other year-end bonus accruals, a significant portion of which was driven by the variable compensation expense related to an increase in the company’s stock price. Other operating expenses in the fourth quarter also included an $11.2 million settlement of remedies related to services provided on legacy business. This compares to $51.2 million in the third quarter, which included $2.1 million of long-term compensation expenses, and $64.1 million in the fourth quarter of 2013, which included $16.1 million of long-term compensation expenses and other year-end bonus accruals.
• On June 30, 2014, Radian completed the acquisition of Clayton Holdings LLC, which was an important step in its growth and diversification strategy. The Mortgage and Real Estate Services segment is primarily comprised of Clayton’s operations. Total service revenues were $34.5 million and gross profit on services was $14.8 million in the fourth quarter of 2014. This compares to total service revenues of $42.2 million and gross profit on services of $18.3 million in the third quarter of 2014.
• As previously disclosed, on December 22, 2014, Radian Guaranty, the mortgage insurance subsidiary of Radian Group Inc., entered into a Stock Purchase Agreement to sell 100% of the issued and outstanding shares of Radian Asset, Radian’s financial guaranty insurance subsidiary, to Assured Guaranty Corp., a subsidiary of Assured Guaranty Ltd. (NYSE: AGO), for a purchase price of $810 million.
  • Expected net proceeds of $790 million will be payable in cash on the closing date.
  • The financial results of Radian Asset are not expected to have an impact on Radian’s consolidated net income after December 31, 2014.
  • Details regarding the assets and liabilities associated with the discontinued operations may be found on press release Exhibit D.

• As a result of the pending sale of Radian Asset discussed above, the company has reclassified the operating results related to the disposition as discontinued operations for all periods presented in our consolidated statements of operations and no longer presents a Financial Guaranty segment. In addition, certain corporate income and expenses that were previously allocated to the Financial Guaranty segment have been reallocated to the Mortgage Insurance segment for all periods presented.

CAPITAL AND LIQUIDITY UPDATE

Radian Guaranty’s risk-to-capital ratio was 17.9:1 as of December 31, 2014, which included a contribution of $100 million of capital from Radian Group to Radian Guaranty to support continued growth in the company’s net risk in force. After the $100 million contribution, Radian Group maintains approximately $670 million of currently available liquidity.

• As of December 31, 2014, Radian Guaranty’s statutory capital was $1.7 billion, compared to $1.6 billion at September 30, 2014, and $1.3 billion a year ago.
• As of December 31, 2014, 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. Effective January 1, 2015, Radian is no longer ceding NIW under these agreements.
  • Radian had the option to recapture a portion of the ceded risk on December 31, 2014, however the company chose not to recapture that risk and received a $9.2 million profit commission based on experience to date, which increased net premiums earned in the quarter, and a $15.0 million prepaid supplemental ceding commission, which has been deferred and will be amortized as a reduction to our policy acquisition costs over approximately the next five years.
• In July 2014, The Federal Housing Finance Agency issued proposed new Private Mortgage Insurer Eligibility Requirements (PMIERs). The public comment period for the proposed PMIERs ended in September 2014, and Radian expects the final PMIERs to be published sometime in the first half of 2015, with an effective date 180 days after publication. The proposed PMIERs state that, subject to the approval of Fannie Mae and Freddie Mac, private mortgage insurers may be granted a transition period of up to two years from the publication date to comply with the PMIERs’ financial requirements. As previously disclosed, the sale of Radian Asset is expected to increase Radian Guaranty’s Available Assets (as defined by PMIERs) by approximately $790.0 million. Assuming that the final PMIERs are published in their current form on June 30, 2015, with an effective date of December 31, 2015, the company currently estimates that Radian Guaranty’s projected net shortfall in Available Assets would be approximately $350 million as of December 31, 2015, after consideration of the company’s holding company cash. Additionally, absent the use of external reinsurance or other potential options available to the company to accelerate PMIERs compliance, the company further projects that Radian Guaranty would have no net shortfall in Available Assets by June 30, 2017, which is the assumed end of the two-year transition period. Radian Guaranty expects to be able to comply fully with the PMIERs without a need to raise additional capital.

CONFERENCE CALL

Radian will discuss fourth quarter and year-end 2014 financial results in its conference call today, Thursday, February 12, 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 800.230.1074 inside the U.S., or 612.234.9960 for international callers, using passcode 351274 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 351274.

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 MEASURE

Radian believes that adjusted pretax operating income (a non-GAAP measure) facilitates evaluation of the company’s fundamental financial performance and provides relevant and meaningful information to investors about the ongoing operating results of the company. On a consolidated basis, this measure is not recognized in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be viewed as an alternative to a GAAP measure of performance. The measure described below has been established in order to increase transparency for the purpose of evaluating the company’s core operating trends and enable 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 GAAP measure. See press release Exhibit F or Radian’s website for a description of these items, as well as a reconciliation of adjusted pretax operating income (loss) to pretax income (loss) from continuing operations.

ABOUT RADIAN

Radian Group Inc. (NYSE: RDN), headquartered in Philadelphia, provides private mortgage insurance and related risk mitigation products and services to mortgage lenders nationwide through its principal operating subsidiary, Radian Guaranty Inc. These services help promote and preserve homeownership opportunities for homebuyers, while protecting lenders from default-related losses on residential first mortgages and facilitating the sale of low-downpayment mortgages in the secondary market. Additional information may be found at www.radian.biz.

FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS (Unaudited)

For trend information on all schedules, refer to Radian’s quarterly financial statistics at http://www.radian.biz/page?name=FinancialReportsCorporate.

FORWARD-LOOKING STATEMENTS

All statements in this press release that address events, developments or results that we expect or anticipate may occur in the future are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the United States (“U.S.”) Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as “anticipate,” “may,” “will,” “could,” “should,” “would,” “expect,” “intend,” “plan,” “goal,” “contemplate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “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 (including 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, in particular in light of the fact that certain of our former competitors have ceased writing new insurance business and have been placed under supervision or receivership by insurance regulators;
• catastrophic events, increased unemployment, home price depreciation or other negative economic changes in geographic regions where our mortgage insurance exposure is more concentrated;
• our ability to maintain sufficient holding company liquidity to meet our short- and long-term liquidity needs;
• our ability to maintain an adequate Risk-to-capital position, minimum policyholder position and other surplus requirements for Radian Guaranty, our principal mortgage insurance subsidiary, and an adequate minimum policyholder position and surplus for our insurance subsidiaries that provide reinsurance or capital support to Radian Guaranty;
• Radian Guaranty's ability to comply with the financial requirements of the PMIERs (once adopted) within the applicable transition period which, based on the proposed PMIERs, may require us to contribute a substantial portion of our holding company cash and investments to Radian Guaranty, and could depend on our ability to, among other things: (1) successfully consummate the transactions contemplated by the Radian Asset Assurance Stock Purchase Agreement; and (2) successfully leverage other options such as commutations or external reinsurance for a portion of our mortgage insurance risk in force in a manner that provides capital relief that is compliant with the PMIERs. Contributing a substantial portion of our holding company cash and investments to Radian Guaranty would leave Radian Group with less liquidity to satisfy its obligations, and we may be required or we 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. The ultimate form of the PMIERs and the timeframe for their implementation remain uncertain;
• changes in the charters or business practices of, or rules or regulations applicable to the GSEs, including the adoption of the PMIERs, which in their current proposed form: (1) would require Radian Guaranty to hold significantly more capital than is currently required and could negatively impact our returns on equity; (2) could limit the type of business that Radian Guaranty and other private mortgage insurers are willing to write, which could reduce our NIW; (3) could increase the cost of private mortgage insurance, including as compared to the FHA's pricing, or result in the emergence of other forms of credit enhancement; and (4) could require changes to our business practices that may result in substantial additional costs in order to achieve and maintain compliance with the PMIERs;
• the possibility that we have not accurately projected our net shortfall under the PMIERs which may be impacted by, among other things: our understanding and interpretation of the PMIERs financial requirements which may differ from the interpretation that the Government Sponsored Enterprises (GSEs) apply; and the performance of our mortgage insurance business, including our level of defaults, the losses we incur on new and existing defaults, the projected roll-off of our existing risk in force, and the amount and credit characteristics of new business we write;
• our ability to continue to effectively mitigate our mortgage insurance losses, including the possibility of a decrease in net rescissions or denials resulting from an increase in the number of successful challenges to previously rescinded policies or claim denials (including as part of one or more settlements of disputed rescissions or 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;
• 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;
• adverse changes in the severity or frequency of losses associated with certain products that we formerly offered (and which constitute a small part of our insured portfolio) that are riskier than traditional mortgage insurance policies;
• a substantial decrease in the persistency rates of our mortgage insurance policies, which has the effect of reducing our premium income on our Monthly Premium policies and could decrease the profitability of our mortgage insurance business;
• heightened competition for our mortgage insurance business from others such as the FHA, the U.S. Department of Veterans Affairs and other private mortgage insurers (including with respect to other private mortgage insurers, those that have been assigned higher ratings than we have, that may be perceived as having a greater ability to comply with the PMIERs Financial Requirements than we do, that may have access to greater amounts of capital than we do, that are less dependent on capital support from their subsidiaries than we are or that are new entrants to the industry, and therefore, are not burdened by legacy obligations) and the impact such heightened competition may have on our returns and our NIW;
• changes to the current system of housing finance, including the possibility of a new system in which private mortgage insurers are not required or their products are significantly limited in effect or scope;
• the effect of the Dodd-Frank Act on the financial services industry in general, and on our 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: (i) the resolution of existing, or the possibility of additional, lawsuits or investigations; (ii) changes to the Mortgage Guaranty Insurers 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 Mortgage Guaranty Insurers Model Act in the future; and (iii) 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 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 businesses;
• volatility in our earnings caused by changes in the fair value of our assets and liabilities carried at fair value, including a significant portion of our investment portfolio and certain of our long-term incentive compensation awards;
• changes in GAAP or SAP, 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;
• the possibility that we may need to impair the estimated fair value of goodwill established in connection with our acquisition of Clayton, 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; and
• our ability to consummate the transactions contemplated by the Stock Purchase Agreement which depends on, among other things, obtaining certain regulatory approvals.

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, 2013 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