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) April
30, 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 April 30, 2015, Radian Group Inc. issued a news release announcing
its financial results for the quarter ended March 31, 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 April 30, 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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April 30, 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 April 30, 2015.
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* Furnished herewith.
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Exhibit 99.1
Radian
Announces First Quarter 2015 Financial Results
--
Reports net income of $92 million or $0.39 per diluted share --
--
Adjusted diluted net operating income of $0.35 per share --
PHILADELPHIA--(BUSINESS WIRE)--April 30, 2015--Radian Group Inc. (NYSE:
RDN) today reported net income from continuing operations for the
quarter ended March 31, 2015, of $91.7 million, or $0.39 per diluted
share, which included net gains on investments and other financial
instruments of $16.8 million. This compares to net income from
continuing operations for the quarter ended March 31, 2014, of $146.0
million, or $0.68 per diluted share, which included net gains on
investments and other financial instruments of $43.0 million. Book value
per share at March 31, 2015, was $11.53.
Adjusted pretax operating income for the quarter ended March 31, 2015,
was $123.9 million, compared to adjusted pretax operating income for the
quarter ended March 31, 2014, of $84.0 million. Adjusted diluted net
operating income per share for the quarter ended March 31, 2015, was
$0.35. 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 March 31, 2015
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Quarter Ended March 31, 2014**
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Percent Change
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Net income from continuing operations
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$91.7
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$146.0
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(37%)
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Diluted net income per share from continuing operations
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$0.39
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$0.68
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(43%)
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Adjusted pretax operating income
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$123.9
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$84.0
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48%
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Adjusted diluted net operating income per share *
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$0.35
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*
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*
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Revenues
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$290.7
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$258.2
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13%
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Book value per share
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$11.53
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$6.10
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89%
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*
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Adjusted diluted net operating income per share is not
comparable for periods prior to the quarter ended March 31, 2015,
due to the impact on the company’s effective tax rate from the
valuation allowance against deferred tax assets.
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**
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Radian acquired Clayton on June 30, 2014, and therefore results
for the quarter ended March 31, 2014, do not include results from
Clayton.
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“We delivered strong results for Radian in the first quarter, driven
primarily by outstanding credit trends in our mortgage insurance
business,” said Radian’s Chief Executive Officer S.A. Ibrahim. “The last
twelve months have been a turning point for Radian, as we’ve eliminated
a significant portion of our legacy risk and therefore simplified our
company with a focus on our core strengths. Today, we are better
positioned to drive long-term value, both from our large and growing
mortgage insurance portfolio and by broadening our future sources of
revenue through our new mortgage and real estate services businesses.”
FIRST QUARTER HIGHLIGHTS AND RECENT EVENTS
Mortgage Insurance
-
New mortgage insurance written (NIW) was $9.4 billion for the quarter,
compared to $10.0 billion in the fourth quarter of 2014 and $6.8
billion in the prior-year quarter.
-
Of the $9.4 billion in new business written in the first quarter
of 2015, 63 percent was written with monthly premiums and 37
percent with single premiums. This compares to a mix of 69 percent
monthly premiums and 31 percent single premiums in the fourth
quarter of 2014. For the twelve-months ended March 31, 2015, the
percentage of new business written with single premiums averaged
approximately 30 percent.
-
Refinances accounted for 33 percent of total NIW in the first
quarter of 2015, compared to 22 percent in the fourth quarter of
2014, and 18 percent a year ago.
-
NIW continued to consist of loans with excellent risk
characteristics.
-
Total primary mortgage insurance in force was $172.1 billion, compared
to $171.8 billion as of December 31, 2014, and $162.4 billion as of
March 31, 2014. Persistency, which is the percentage of mortgage
insurance in force that remains on the company’s books after a
twelve-month period, was 82.6 percent as of March 31, 2015, compared
to 84.2 percent as of December 31, 2014, and 83.3 percent as of March
31, 2014.
-
The mortgage insurance provision for losses was $45.9 million in the
first quarter of 2015, compared to $83.6 million in the fourth quarter
of 2014, and $49.6 million in the prior-year period.
-
The loss ratio in the first quarter was 20.4 percent, compared to
36.9 percent in the fourth quarter of 2014 and 25.0 percent in the
first quarter of 2014.
-
Mortgage insurance loss reserves were $1.4 billion as of March 31,
2015, compared to $1.6 billion as of December 31, 2014, and $1.9
billion as of March 31, 2014.
-
Primary reserve per primary default (excluding IBNR and other
reserves) was $28,423 as of March 31, 2015. This compares to
primary reserve per primary default of $27,683 as of December 31,
2014, and $26,509 as of March 31, 2014.
-
The total number of primary delinquent loans decreased by 11 percent
in the first quarter from the fourth quarter of 2014, and by 24
percent from the first quarter of 2014. The primary mortgage insurance
delinquency rate decreased to 4.6 percent in the first quarter of
2015, compared to 5.2 percent in the fourth quarter of 2014, and 6.3
percent in the first quarter of 2014.
-
Total mortgage insurance claims paid were $207.1 million in the first
quarter, compared to $117.2 million in the fourth quarter of 2014, and
$306.9 million in the first quarter of 2014. Claims paid in the first
quarter of 2015 include $98.5 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 expected to be paid in the first
half of 2015 related to the September 2014 BofA Settlement Agreement.
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On April 17, 2015, the Federal Housing Finance Agency (FHFA) issued
the final Private Mortgage Insurer Eligibility Requirements (PMIERs)
developed by Fannie Mae and Freddie Mac (GSEs). The PMIERs provide
revised requirements for private mortgage insurers (MIs), including
Radian Guaranty, to remain eligible insurers of loans purchased by the
GSEs. The PMIERs effective date for existing approved insurers is
December 31, 2015.
-
As of March 31, 2015, Radian Guaranty would be able to immediately
comply with the financial requirements of the PMIERs by utilizing
approximately $330 million of existing holding company liquidity.
This estimate includes the net proceeds of $789 million from the
recent sale of Radian Asset Assurance Inc., Radian’s financial
guaranty insurance subsidiary, and assumes that the company
converts approximately $130 million of existing liquid assets into
PMIERs-compliant Available Assets (as defined in the PMIERs) and
receives full PMIERs benefit of approximately $145 million for its
outstanding quota-share reinsurance arrangements, following the
completion of amendments needed for GSE approval.
Mortgage and Real Estate Services
-
On June 30, 2014, Radian completed the acquisition of Clayton Holdings
LLC, a leading provider of loan due diligence, surveillance, REO
management and consulting services to the mortgage and real estate
industries, which was an important step in Radian’s growth and
diversification strategy. The Mortgage and Real Estate Services
segment is primarily comprised of Clayton’s operations.
-
Total service revenues for the Mortgage and Real Estate Services
segment were $30.7 million and gross profit on services was $12.3
million in the first quarter of 2015. This compares to total service
revenues of $34.5 million and gross profit on services of $14.8
million in the fourth quarter of 2014.
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On March 20, 2015, Clayton Holdings acquired Red Bell Real Estate, LLC
and its sister company, Main Street Valuations, LLC, in order to
broaden its product offerings within the real estate market. Red Bell
is a real estate brokerage firm that provides products and services
that include automated valuation models (AVMs); broker price opinions
(BPOs) used by investors, lenders and loan servicers; and advanced
technology solutions for monitoring loan portfolio performance,
tracking non-performing loans, managing real estate owned (REO) assets
and valuing residential real estate through a secure platform.
Expenses and Discontinued Operations
-
Other operating expenses were $54.6 million in the first quarter,
compared to $85.8 million in the fourth quarter of 2014, and $54.5
million in the first quarter of last year. Other operating expenses in
the fourth quarter of 2014 included $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, and an $11.2
million settlement of remedies related to services provided on legacy
business.
-
As previously disclosed, on April 1, 2015, Radian Guaranty completed
the sale of Radian Asset to Assured Guaranty Corp., a subsidiary of
Assured Guaranty Ltd. (NYSE: AGO). After consideration of
transaction-related expenses, net proceeds were $789 million. Details
regarding the assets and liabilities associated with these
discontinued operations may be found on press release Exhibits D and E.
CAPITAL AND LIQUIDITY UPDATE
Radian Group maintains approximately $700 million of available liquidity.
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As of March 31, 2015, Radian Guaranty’s risk-to-capital ratio was
17.1:1 and statutory capital was $1.8 billion.
-
As of March 31, 2015, a total of $2.6 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.
CONFERENCE CALL
Radian will discuss first quarter financial results in a conference call
today, Thursday, April 30, 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
800.288.8961 inside the U.S., or 612.332.0335 for international callers,
using passcode 358122 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 358122.
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
effective tax rate for the period. 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
consolidated 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.
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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 Three Months Ended March 31, 2015 and Three
Months Ended March 31, 2014
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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
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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 Pool and Other Risk in
Force, Risk-to-Capital
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Exhibit L:
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Mortgage Insurance Supplemental Information Claims, Reserves and
Reserve per Default
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Exhibit M:
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Mortgage Insurance Supplemental Information Default Statistics
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Exhibit N:
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Mortgage Insurance Supplemental Information Captives, QSR and
Persistency
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Exhibit O:
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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 1
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Qtr 4
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Qtr 3
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Qtr 2
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Qtr 1
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Revenues:
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Net premiums earned - insurance
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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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$
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198,762
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Services revenue
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30,529
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34,450
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42,243
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—
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—
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Net investment income
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17,328
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16,531
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17,143
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16,663
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15,318
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Net gains on investments and other financial instruments
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16,779
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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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42,968
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Other income
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1,432
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1,793
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1,162
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1,739
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1,126
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Total revenues
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290,663
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295,050
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272,081
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247,380
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258,174
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Expenses:
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Provision for losses
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45,028
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82,867
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48,942
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64,648
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49,626
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Policy acquisition costs
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7,750
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6,443
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4,240
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6,746
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7,017
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Direct cost of services
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18,451
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19,709
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23,896
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—
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—
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Other operating expenses
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54,576
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85,800
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51,225
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60,751
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54,507
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Interest expense
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24,385
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24,200
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23,989
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22,348
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19,927
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Amortization and impairment of intangible assets
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3,023
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5,354
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3,294
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—
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—
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Total expenses
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153,213
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224,373
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155,586
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154,493
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131,077
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Pretax income from continuing operations
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137,450
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70,677
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116,495
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92,887
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127,097
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Income tax provision (benefit)
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45,723
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(807,349
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)
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(15,536
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)
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(10,650
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)
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(18,883
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)
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Net income from continuing operations
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91,727
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878,026
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132,031
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103,537
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145,980
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Income (loss) from discontinued operations, net of tax
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530
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(449,691
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)
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21,559
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71,296
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|
|
56,779
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Net income
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$
|
92,257
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|
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$
|
428,335
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|
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$
|
153,590
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|
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$
|
174,833
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|
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$
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202,759
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Diluted net income per share:
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|
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Net income from continuing operations
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$
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0.39
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|
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$
|
3.63
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|
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$
|
0.58
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|
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$
|
0.47
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|
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$
|
0.68
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Income (loss) from discontinued operations, net of tax
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—
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(1.85
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)
|
|
0.09
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|
|
0.31
|
|
|
0.26
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Net income
|
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$
|
0.39
|
|
|
$
|
1.78
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|
|
$
|
0.67
|
|
|
$
|
0.78
|
|
|
$
|
0.94
|
|
|
|
|
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|
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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, until the
April 1, 2015 sale date, the operating results of Radian Asset Assurance
continue to be classified as discontinued operations for all periods
presented in our condensed consolidated statements of operations. Prior
periods have been revised to conform to the current period presentation
for these changes.
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|
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Radian Group Inc. and Subsidiaries
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Net Income Per Share Trend Schedule
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Exhibit B
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The calculation of basic and diluted net income per share was as
follows:
|
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|
|
|
|
|
|
2015
|
|
2014
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(In thousands, except per share amounts)
|
|
Qtr 1
|
|
Qtr 4
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|
Qtr 3
|
|
Qtr 2
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|
Qtr 1
|
Net income from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations—basic
|
|
$
|
91,727
|
|
|
$
|
878,026
|
|
|
$
|
132,031
|
|
|
$
|
103,537
|
|
|
$
|
145,980
|
Adjustment for dilutive Convertible Senior Notes due 2019, net of
tax (1)
|
|
3,673
|
|
|
3,641
|
|
|
5,552
|
|
|
5,503
|
|
|
5,455
|
Net income from continuing operations—diluted
|
|
$
|
95,400
|
|
|
$
|
881,667
|
|
|
$
|
137,583
|
|
|
$
|
109,040
|
|
|
$
|
151,435
|
|
|
|
|
|
|
|
|
|
|
|
Net income:
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations—basic
|
|
$
|
91,727
|
|
|
$
|
878,026
|
|
|
$
|
132,031
|
|
|
$
|
103,537
|
|
|
$
|
145,980
|
Income (loss) from discontinued operations, net of tax
|
|
530
|
|
|
(449,691
|
)
|
|
21,559
|
|
|
71,296
|
|
|
56,779
|
Net income—basic
|
|
92,257
|
|
|
428,335
|
|
|
153,590
|
|
|
174,833
|
|
|
202,759
|
Adjustment for dilutive Convertible Senior Notes due 2019, net
of tax (1)
|
|
3,673
|
|
|
3,641
|
|
|
5,552
|
|
|
5,503
|
|
|
5,455
|
Net income—diluted
|
|
$
|
95,930
|
|
|
$
|
431,976
|
|
|
$
|
159,142
|
|
|
$
|
180,336
|
|
|
$
|
208,214
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding—basic
|
|
191,224
|
|
|
191,053
|
|
|
191,050
|
|
|
182,583
|
|
|
173,165
|
Dilutive effect of Convertible Senior Notes due 2017
|
|
10,886
|
|
|
10,590
|
|
|
6,342
|
|
|
7,599
|
|
|
9,003
|
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)
|
|
3,202
|
|
|
3,422
|
|
|
2,939
|
|
|
2,861
|
|
|
2,764
|
Adjusted average common shares outstanding—diluted
|
|
243,048
|
|
|
242,801
|
|
|
238,067
|
|
|
230,779
|
|
|
222,668
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
$
|
0.48
|
|
|
$
|
4.59
|
|
|
$
|
0.69
|
|
|
$
|
0.57
|
|
|
$
|
0.84
|
Income (loss) from discontinued operations, net of tax
|
|
—
|
|
|
(2.35
|
)
|
|
0.11
|
|
|
0.39
|
|
|
0.33
|
Net income
|
|
$
|
0.48
|
|
|
$
|
2.24
|
|
|
$
|
0.80
|
|
|
$
|
0.96
|
|
|
$
|
1.17
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
$
|
0.39
|
|
|
$
|
3.63
|
|
|
$
|
0.58
|
|
|
$
|
0.47
|
|
|
$
|
0.68
|
Income (loss) from discontinued operations, net of tax
|
|
—
|
|
|
(1.85
|
)
|
|
0.09
|
|
|
0.31
|
|
|
0.26
|
Net income
|
|
$
|
0.39
|
|
|
$
|
1.78
|
|
|
$
|
0.67
|
|
|
$
|
0.78
|
|
|
$
|
0.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
|
For the three months ended March 31, 2015, December 31, 2014,
September 31, 2014, June 30, 2014 and March 31, 2014, 540,400
541,720, 557,240, 1,483,800 and 946,400 shares, respectively, 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.
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Condensed Consolidated Balance Sheets
|
Exhibit C
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
(In thousands, except per share data)
|
|
2015
|
|
2014
|
|
|
|
|
|
Assets:
|
|
|
|
|
Investments
|
|
$
|
3,621,646
|
|
|
$
|
3,629,299
|
Cash
|
|
57,204
|
|
|
30,465
|
Restricted cash
|
|
14,220
|
|
|
14,031
|
Accounts and notes receivable
|
|
64,405
|
|
|
85,792
|
Deferred income taxes, net
|
|
649,996
|
|
|
700,201
|
Goodwill and other intangible assets, net
|
|
293,798
|
|
|
288,240
|
Other assets
|
|
356,713
|
|
|
375,491
|
Assets held for sale
|
|
1,755,873
|
|
|
1,736,444
|
Total assets
|
|
$
|
6,813,855
|
|
|
$
|
6,859,963
|
|
|
|
|
|
Liabilities and stockholders’ equity:
|
|
|
|
|
Unearned premiums
|
|
$
|
657,555
|
|
|
$
|
644,504
|
Reserve for losses and loss adjustment expenses
|
|
1,384,714
|
|
|
1,560,032
|
Long-term debt
|
|
1,218,972
|
|
|
1,209,926
|
Other liabilities
|
|
310,642
|
|
|
326,743
|
Liabilities held for sale
|
|
966,078
|
|
|
947,008
|
Total liabilities
|
|
4,537,961
|
|
|
4,688,213
|
|
|
|
|
|
Equity component of currently redeemable convertible senior notes
|
|
68,982
|
|
|
74,690
|
|
|
|
|
|
Common stock
|
|
209
|
|
|
209
|
Additional paid-in capital
|
|
1,648,436
|
|
|
1,638,552
|
Retained earnings
|
|
498,593
|
|
|
406,814
|
Accumulated other comprehensive income
|
|
59,674
|
|
|
51,485
|
Total common stockholders’ equity
|
|
2,206,912
|
|
|
2,097,060
|
Total liabilities and stockholders’ equity
|
|
$
|
6,813,855
|
|
|
$
|
6,859,963
|
|
|
|
|
|
Shares outstanding, end of period
|
|
191,416
|
|
191,054
|
|
|
|
|
|
Book value per share
|
|
$
|
11.53
|
|
|
$
|
10.98
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
(In thousands)
|
|
2015
|
|
2014
|
Net premiums earned
|
|
$
|
1,007
|
|
|
$
|
6,903
|
|
Net investment income
|
|
9,153
|
|
|
8,911
|
|
Net gains on investments and other financial instruments
|
|
13,668
|
|
|
22,182
|
|
Change in fair value of derivative instruments
|
|
2,625
|
|
|
50,086
|
|
Total revenues
|
|
26,453
|
|
|
88,082
|
|
|
|
|
|
|
Provision for losses
|
|
502
|
|
|
5,649
|
|
Policy acquisition costs
|
|
(191
|
)
|
|
1,597
|
|
Other operating expense
|
|
4,107
|
|
|
5,402
|
|
Total expenses
|
|
4,418
|
|
|
12,648
|
|
|
|
|
|
|
Equity in net loss of affiliates
|
|
(13
|
)
|
|
(13
|
)
|
Income from operations of businesses held for sale
|
|
22,022
|
|
|
75,421
|
|
Loss on classification as held for sale
|
|
(13,930
|
)
|
|
—
|
|
Income tax provision
|
|
7,562
|
|
|
18,642
|
|
Income from discontinued operations, net of tax
|
|
$
|
530
|
|
|
$
|
56,779
|
|
|
|
|
|
|
|
|
|
|
The assets and liabilities associated with the discontinued operations
have been segregated in the condensed consolidated balance sheets. The
following table summarizes the major components of Radian Asset
Assurance’s assets and liabilities held for sale on the condensed
consolidated balance sheets as of March 31, 2015 and December 31, 2014:
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
(In thousands)
|
|
2015
|
|
2014
|
Fixed-maturity investments
|
|
$
|
226,334
|
|
|
$
|
224,552
|
Equity securities
|
|
4,019
|
|
|
3,749
|
Trading securities
|
|
679,972
|
|
|
689,887
|
Short-term investments
|
|
449,391
|
|
|
435,413
|
Other invested assets
|
|
108,080
|
|
|
108,206
|
Other assets
|
|
288,077
|
|
|
274,637
|
Total assets held for sale
|
|
$
|
1,755,873
|
|
|
$
|
1,736,444
|
|
|
|
|
|
Unearned premiums
|
|
$
|
152,445
|
|
|
$
|
158,921
|
Reserve for losses and loss adjustment expenses
|
|
32,420
|
|
|
31,558
|
VIE debt
|
|
82,238
|
|
|
85,016
|
Derivative liabilities
|
|
187,462
|
|
|
183,370
|
Other liabilities
|
|
511,513
|
|
|
488,143
|
Total liabilities held for sale
|
|
$
|
966,078
|
|
|
$
|
947,008
|
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Segment Information
|
Exhibit E (page 1 of 2)
|
|
Summarized financial information concerning our operating segments and
reconciliations to consolidated pretax income from continuing
operations, as of and for the periods indicated, is as follows:
|
|
|
|
|
Three Months Ended March 31, 2015
|
|
|
|
|
Mortgage and
|
|
|
|
|
Mortgage
|
|
Real Estate
|
|
|
(In thousands)
|
|
Insurance
|
|
Services
|
|
Total
|
Net premiums written - insurance
|
|
$241,908
|
|
|
$
|
—
|
|
|
$
|
241,908
|
|
Increase in unearned premiums
|
|
(17,313
|
)
|
|
|
—
|
|
|
|
(17,313
|
)
|
Net premiums earned - insurance
|
|
224,595
|
|
|
|
—
|
|
|
|
224,595
|
|
Services revenue
|
|
—
|
|
|
|
30,742
|
|
|
|
30,742
|
|
Net investment income (1)
|
|
17,328
|
|
|
|
—
|
|
|
|
17,328
|
|
Other income (1)
|
|
1,331
|
|
|
|
790
|
|
|
|
2,121
|
|
Total (2)
|
|
243,254
|
|
|
|
31,532
|
|
|
|
274,786
|
|
|
|
|
|
|
|
|
Provision for losses
|
|
45,851
|
|
|
|
—
|
|
|
|
45,851
|
|
Policy acquisition costs
|
|
7,750
|
|
|
|
—
|
|
|
|
7,750
|
|
Direct cost of services
|
|
—
|
|
|
|
18,451
|
|
|
|
18,451
|
|
Other operating expenses before corporate allocations
|
|
34,050
|
|
|
|
9,659
|
|
|
|
43,709
|
|
Total (3)
|
|
87,651
|
|
|
|
28,110
|
|
|
|
115,761
|
|
Adjusted pretax operating income before corporate allocations
|
|
155,603
|
|
|
|
3,422
|
|
|
|
159,025
|
|
Allocation of corporate operating expenses (1)
|
|
9,758
|
|
|
|
981
|
|
|
|
10,739
|
|
Allocation of interest expense (1)
|
|
19,953
|
|
|
|
4,432
|
|
|
|
24,385
|
|
|
|
|
|
|
|
|
Adjusted pretax operating income (loss)
|
|
$125,892
|
|
|
$
|
(1,991
|
)
|
|
$
|
123,901
|
|
|
|
|
|
|
|
|
At March 31, 2015
|
|
|
|
|
Mortgage and
|
|
|
|
|
Mortgage
|
|
Real Estate
|
|
|
(In thousands)
|
|
Insurance
|
|
Services
|
|
Total
|
Cash & Investments
|
|
$
|
3,669,413
|
|
|
$
|
9,437
|
|
|
$
|
3,678,850
|
|
Restricted cash
|
|
11,348
|
|
|
|
2,872
|
|
|
|
14,220
|
|
Goodwill
|
|
—
|
|
|
|
194,246
|
|
|
|
194,246
|
|
Other intangible assets, net
|
|
—
|
|
|
|
99,552
|
|
|
|
99,552
|
|
Assets held for sale (4)
|
|
—
|
|
|
|
—
|
|
|
|
1,755,873
|
|
Total assets
|
|
4,708,744
|
|
|
|
349,238
|
|
|
|
6,813,855
|
|
Unearned premiums
|
|
657,555
|
|
|
|
—
|
|
|
|
657,555
|
|
Reserve for losses and loss adjustment expenses
|
|
1,384,714
|
|
|
|
—
|
|
|
|
1,384,714
|
|
|
|
|
|
|
|
|
|
|
|
(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 inter-segment revenues of $0.9 million in the Mortgage
and Real Estate Services segment.
|
(3)
|
|
Includes inter-segment expenses of $0.9 million in the Mortgage
Insurance segment.
|
(4)
|
|
Assets held for sale are not part of the Mortgage Insurance or
Mortgage and Real Estate Services segments.
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Segment Information
|
Exhibit E (page 2 of 2)
|
|
|
|
|
|
Three Months Ended March 31, 2014
|
|
|
|
|
Mortgage and
|
|
|
|
|
Mortgage
|
|
Real Estate
|
|
|
(In thousands)
|
|
Insurance
|
|
Services (1)
|
|
Total
|
Net premiums written - insurance
|
|
$
|
212,953
|
|
|
$
|
—
|
|
|
$
|
212,953
|
|
Increase in unearned premiums
|
|
(14,191
|
)
|
|
—
|
|
|
(14,191
|
)
|
Net premiums earned - insurance
|
|
198,762
|
|
|
—
|
|
|
198,762
|
|
Net investment income (2)
|
|
15,318
|
|
|
—
|
|
|
15,318
|
|
Other income (2)
|
|
996
|
|
|
130
|
|
|
1,126
|
|
Total
|
|
215,076
|
|
|
130
|
|
|
215,206
|
|
|
|
|
|
|
|
|
Provision for losses
|
|
49,626
|
|
|
—
|
|
|
49,626
|
|
Change in expected economic loss or recovery for consolidated VIEs
|
|
139
|
|
|
—
|
|
|
139
|
|
Policy acquisition costs
|
|
7,017
|
|
|
—
|
|
|
7,017
|
|
Other operating expenses before corporate allocations
|
|
37,764
|
|
|
859
|
|
|
38,623
|
|
Total
|
|
94,546
|
|
|
859
|
|
|
95,405
|
|
Adjusted pretax operating income (loss) before corporate
allocations
|
|
120,530
|
|
|
(729
|
)
|
|
119,801
|
|
Allocation of corporate operating expenses (2)
|
|
15,884
|
|
|
—
|
|
|
15,884
|
|
Allocation of interest expense (2)
|
|
19,927
|
|
|
—
|
|
|
19,927
|
|
|
|
|
|
|
|
|
Adjusted pretax operating income (loss)
|
|
$
|
84,719
|
|
|
$
|
(729
|
)
|
|
$
|
83,990
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2014
|
|
|
|
|
Mortgage and
|
|
|
|
|
Mortgage
|
|
Real Estate
|
|
|
(In thousands)
|
|
Insurance
|
|
Services
|
|
Total
|
Cash and investments
|
|
$
|
3,302,763
|
|
|
$
|
24
|
|
|
$
|
3,302,787
|
|
Restricted cash
|
|
22,366
|
|
|
—
|
|
|
22,366
|
|
Goodwill
|
|
—
|
|
|
2,095
|
|
|
2,095
|
|
Intangible assets, net
|
|
—
|
|
|
188
|
|
|
188
|
|
Assets held for sale (3)
|
|
—
|
|
|
—
|
|
|
1,795,185
|
|
Total assets
|
|
3,731,139
|
|
|
2,661
|
|
|
5,528,985
|
|
Unearned premiums
|
|
580,453
|
|
|
—
|
|
|
580,453
|
|
Reserve for losses and loss adjustment expenses
|
|
1,893,960
|
|
|
—
|
|
|
1,893,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amounts do not include Clayton Holdings, acquired June 30,
2014. However, effective with the fourth quarter of 2014, the
Mortgage and Real Estate 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
Mortgage and Real Estate Services segment for all periods presented.
|
(2)
|
|
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.
|
(3)
|
|
Assets held for sale are not part of the Mortgage Insurance or
Mortgage and Real Estate 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,
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 period's effective 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. We do not view them to be indicative of our fundamental
operating activities. 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. 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)
|
|
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)
|
|
|
|
|
|
|
|
|
(3)
|
|
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).
|
|
|
|
|
|
|
|
(4)
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted Pretax Operating Income (Loss) to
Consolidated Pretax Income from Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
|
|
(In thousands)
|
|
2015
|
|
2014
|
|
|
|
|
Adjusted pretax operating income (loss):
|
|
|
|
|
|
|
|
|
Mortgage Insurance (1)
|
|
$
|
125,892
|
|
|
$
|
84,719
|
|
|
|
|
|
Mortgage and Real Estate Services (2)
|
|
(1,991
|
)
|
|
(729
|
)
|
|
|
|
|
Total adjusted pretax operating income
|
|
123,901
|
|
|
83,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on investments and other financial instruments (3)
|
|
16,779
|
|
|
43,107
|
|
|
|
|
|
Acquisition-related expenses (4)
|
|
(207
|
)
|
|
—
|
|
|
|
|
|
Amortization and impairment of intangible assets (4)
|
|
(3,023
|
)
|
|
—
|
|
|
|
|
|
Consolidated pretax income from continuing operations
|
|
$
|
137,450
|
|
|
$
|
127,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
Mortgage and Real Estate 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
Mortgage and Real Estate Services segment for all periods
presented.
|
(3)
|
|
The change in expected economic loss or recovery associated
with our consolidated VIEs is included in adjusted pretax
operating income above. Therefore, for purposes of this
reconciliation, net gains on investments and other financial
instruments has been adjusted by $0.1 million for the three months
ended March 31, 2014, to reverse this item, which represents a
non-GAAP amount that is not included in net income.
|
(4)
|
|
Please see Exhibit F for the definition of this line item.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted Diluted Net Operating Income Per
Share to Net Income Per Share from Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31, 2015
|
|
|
|
|
Adjusted diluted net operating income per share
|
|
$
|
0.35
|
|
|
|
|
|
|
|
|
|
|
|
|
After tax per share impact:
|
|
|
|
|
|
|
Net gains on investments and other financial instruments
|
|
0.05
|
|
|
|
|
|
Acquisition-related expenses
|
|
—
|
|
|
|
|
|
Amortization and impairment of intangible assets
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share from continuing operations
|
|
$
|
0.39
|
|
|
|
|
|
|
|
|
|
|
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
|
Exhibit H
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2015
|
|
2014
|
($ in millions)
|
|
$
|
|
%
|
|
$
|
|
%
|
Primary new insurance written
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
9,384
|
|
|
100.0
|
%
|
|
$
|
6,807
|
|
|
100.0
|
%
|
Alt-A and A minus and below
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Total Primary
|
|
$
|
9,385
|
|
|
100.0
|
%
|
|
$
|
6,808
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
Total primary new insurance written by FICO score
|
|
|
|
|
|
|
|
|
>=740
|
|
5,968
|
|
|
63.6
|
%
|
|
4,345
|
|
|
63.8
|
%
|
680-739
|
|
2,845
|
|
|
30.3
|
|
|
2,041
|
|
|
30.0
|
|
620-679
|
|
572
|
|
|
6.1
|
|
|
422
|
|
|
6.2
|
|
Total Primary
|
|
$
|
9,385
|
|
|
100.0
|
%
|
|
$
|
6,808
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
Percentage of primary new insurance written
|
|
|
|
|
|
|
|
|
Monthly premiums
|
|
63
|
%
|
|
|
|
73
|
%
|
|
|
Single premiums
|
|
37
|
%
|
|
|
|
27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Refinances
|
|
33
|
%
|
|
|
|
18
|
%
|
|
|
LTV
|
|
|
|
|
|
|
|
|
95.01% and above
|
|
1.8
|
%
|
|
|
|
0.9
|
%
|
|
|
90.01% to 95.00%
|
|
48.4
|
%
|
|
|
|
51.8
|
%
|
|
|
85.01% to 90.00%
|
|
33.3
|
%
|
|
|
|
34.4
|
%
|
|
|
85.00% and below
|
|
16.5
|
%
|
|
|
|
12.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Mortgage Insurance Supplemental Information
|
Exhibit I
|
|
|
|
|
|
|
|
March 31,
|
|
March 31,
|
|
|
2015
|
|
2014
|
($ in millions)
|
|
$
|
|
%
|
|
$
|
|
%
|
Primary insurance in force (1)
|
|
|
|
|
|
|
|
|
Flow
|
|
$
|
162,832
|
|
|
94.6
|
%
|
|
$
|
152,731
|
|
|
94.1
|
%
|
Structured
|
|
9,309
|
|
|
5.4
|
|
|
9,637
|
|
|
5.9
|
|
Total Primary
|
|
$
|
172,141
|
|
|
100.0
|
%
|
|
$
|
162,368
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
160,452
|
|
|
93.2
|
%
|
|
$
|
148,736
|
|
|
91.6
|
%
|
Alt-A
|
|
7,122
|
|
|
4.1
|
|
|
8,317
|
|
|
5.1
|
|
A minus and below
|
|
4,567
|
|
|
2.7
|
|
|
5,315
|
|
|
3.3
|
|
Total Primary
|
|
$
|
172,141
|
|
|
100.0
|
%
|
|
$
|
162,368
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
Primary risk in force (1)
|
|
|
|
|
|
|
|
|
Flow
|
|
$
|
41,256
|
|
|
95.1
|
%
|
|
$
|
38,252
|
|
|
94.6
|
%
|
Structured
|
|
2,133
|
|
|
4.9
|
|
|
2,180
|
|
|
5.4
|
|
Total Primary
|
|
$
|
43,389
|
|
|
100.0
|
%
|
|
$
|
40,432
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
Flow
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
39,251
|
|
|
95.1
|
%
|
|
$
|
35,867
|
|
|
93.8
|
%
|
Alt-A
|
|
1,243
|
|
|
3.0
|
|
|
1,474
|
|
|
3.8
|
|
A minus and below
|
|
762
|
|
|
1.9
|
|
|
911
|
|
|
2.4
|
|
Total Flow
|
|
$
|
41,256
|
|
|
100.0
|
%
|
|
$
|
38,252
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
Structured
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
1,341
|
|
|
62.9
|
%
|
|
$
|
1,292
|
|
|
59.3
|
%
|
Alt-A
|
|
410
|
|
|
19.2
|
|
|
465
|
|
|
21.3
|
|
A minus and below
|
|
382
|
|
|
17.9
|
|
|
423
|
|
|
19.4
|
|
Total Structured
|
|
$
|
2,133
|
|
|
100.0
|
%
|
|
$
|
2,180
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
40,592
|
|
|
93.6
|
%
|
|
$
|
37,159
|
|
|
91.9
|
%
|
Alt-A
|
|
1,653
|
|
|
3.8
|
|
|
1,939
|
|
|
4.8
|
|
A minus and below
|
|
1,144
|
|
|
2.6
|
|
|
1,334
|
|
|
3.3
|
|
Total Primary
|
|
$
|
43,389
|
|
|
100.0
|
%
|
|
$
|
40,432
|
|
|
100.0
|
%
|
|
|
|
(1)
|
|
Includes amounts ceded under our reinsurance agreements, as
well as amounts related to the Freddie Mac Agreement.
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Mortgage Insurance Supplemental Information
|
Exhibit J
|
|
|
|
|
|
|
|
March 31,
|
|
March 31,
|
|
|
2015
|
|
2014
|
($ in millions)
|
|
$
|
|
%
|
|
$
|
|
|
|
%
|
Total primary risk in force by FICO score
|
|
|
|
|
|
|
|
|
|
|
Flow
|
|
|
|
|
|
|
|
|
|
|
>=740
|
|
$
|
23,964
|
|
|
58.1
|
%
|
|
$
|
21,976
|
|
|
|
|
57.4
|
%
|
680-739
|
|
12,356
|
|
|
30.0
|
|
|
11,158
|
|
|
|
|
29.2
|
|
620-679
|
|
4,392
|
|
|
10.6
|
|
|
4,459
|
|
|
|
|
11.7
|
|
<=619
|
|
544
|
|
|
1.3
|
|
|
659
|
|
|
|
|
1.7
|
|
Total Flow
|
|
$
|
41,256
|
|
|
100.0
|
%
|
|
$
|
38,252
|
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Structured
|
|
|
|
|
|
|
|
|
|
|
>=740
|
|
$
|
664
|
|
|
31.1
|
%
|
|
$
|
590
|
|
|
|
|
27.1
|
%
|
680-739
|
|
599
|
|
|
28.1
|
|
|
624
|
|
|
|
|
28.6
|
|
620-679
|
|
513
|
|
|
24.1
|
|
|
572
|
|
|
|
|
26.2
|
|
<=619
|
|
357
|
|
|
16.7
|
|
|
394
|
|
|
|
|
18.1
|
|
Total Structured
|
|
$
|
2,133
|
|
|
100.0
|
%
|
|
$
|
2,180
|
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
>=740
|
|
$
|
24,628
|
|
|
56.8
|
%
|
|
$
|
22,566
|
|
|
|
|
55.8
|
%
|
680-739
|
|
12,955
|
|
|
29.8
|
|
|
11,782
|
|
|
|
|
29.1
|
|
620-679
|
|
4,905
|
|
|
11.3
|
|
|
5,031
|
|
|
|
|
12.5
|
|
<=619
|
|
901
|
|
|
2.1
|
|
|
1,053
|
|
|
|
|
2.6
|
|
Total Primary
|
|
$
|
43,389
|
|
|
100.0
|
%
|
|
$
|
40,432
|
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total primary risk in force by LTV
|
|
|
|
|
|
|
|
|
|
|
95.01% and above
|
|
$
|
3,440
|
|
|
7.9
|
%
|
|
$
|
4,008
|
|
|
|
|
9.9
|
%
|
90.01% to 95.00%
|
|
20,897
|
|
|
48.2
|
|
|
17,767
|
|
|
|
|
44.0
|
|
85.01% to 90.00%
|
|
15,187
|
|
|
35.0
|
|
|
14,807
|
|
|
|
|
36.6
|
|
85.00% and below
|
|
3,865
|
|
|
8.9
|
|
|
3,850
|
|
|
|
|
9.5
|
|
Total
|
|
$
|
43,389
|
|
|
100.0
|
%
|
|
$
|
40,432
|
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total primary risk in force by policy year
|
|
|
|
|
|
|
|
|
|
|
2005 and prior
|
|
$
|
3,364
|
|
|
7.8
|
%
|
|
$
|
4,209
|
|
|
|
|
10.4
|
%
|
2006
|
|
1,922
|
|
|
4.4
|
|
|
2,243
|
|
|
|
|
5.6
|
|
2007
|
|
4,442
|
|
|
10.2
|
|
|
5,064
|
|
|
|
|
12.5
|
|
2008
|
|
3,267
|
|
|
7.5
|
|
|
3,810
|
|
|
|
|
9.4
|
|
2009
|
|
994
|
|
|
2.3
|
|
|
1,363
|
|
|
|
|
3.4
|
|
2010
|
|
859
|
|
|
2.0
|
|
|
1,144
|
|
|
|
|
2.8
|
|
2011
|
|
1,677
|
|
|
3.9
|
|
|
2,165
|
|
|
|
|
5.4
|
|
2012
|
|
6,170
|
|
|
14.2
|
|
|
7,511
|
|
|
|
|
18.6
|
|
2013
|
|
9,704
|
|
|
22.4
|
|
|
11,210
|
|
|
|
|
27.7
|
|
2014
|
|
8,684
|
|
|
20.0
|
|
|
1,713
|
|
|
|
|
4.2
|
|
2015
|
|
2,306
|
|
|
5.3
|
|
|
—
|
|
|
|
|
—
|
|
Total
|
|
$
|
43,389
|
|
|
100
|
%
|
|
$
|
40,432
|
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Primary risk in force on defaulted loans (1)
|
|
$
|
1,883
|
|
|
|
|
$
|
2,466
|
|
|
(1)
|
|
|
|
|
|
(1)
|
|
Excludes risk related to loans subject to the Freddie Mac
Agreement.
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Mortgage Insurance Supplemental Information
|
Exhibit K
|
|
|
|
|
|
|
|
|
March 31,
|
|
March 31,
|
($ in millions)
|
|
2015
|
|
2014
|
|
|
$
|
|
|
%
|
|
$
|
|
%
|
Pool risk in force
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
867
|
|
|
|
|
74.7
|
%
|
|
$
|
1,263
|
|
|
78.9
|
%
|
Alt-A
|
|
54
|
|
|
|
|
4.7
|
|
|
68
|
|
|
4.3
|
|
A minus and below
|
|
239
|
|
|
|
|
20.6
|
|
|
269
|
|
|
16.8
|
|
Total
|
|
$
|
1,160
|
|
|
|
|
100.0
|
%
|
|
$
|
1,600
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total pool risk in force by policy year
|
|
|
|
|
|
|
|
|
|
|
2005 and prior
|
|
$
|
1,090
|
|
|
|
|
94.0
|
%
|
|
$
|
1,516
|
|
|
94.7
|
%
|
2006
|
|
7
|
|
|
|
|
0.6
|
|
|
19
|
|
|
1.2
|
|
2007
|
|
62
|
|
|
|
|
5.3
|
|
|
64
|
|
|
4.0
|
|
2008
|
|
1
|
|
|
|
|
0.1
|
|
|
1
|
|
|
0.1
|
|
Total pool risk in force
|
|
$
|
1,160
|
|
|
|
|
100.0
|
%
|
|
$
|
1,600
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Other risk in force
|
|
|
|
|
|
|
|
|
|
|
Second-lien
|
|
|
|
|
|
|
|
|
|
|
1st loss
|
|
$
|
42
|
|
|
|
|
|
|
$
|
54
|
|
|
|
2nd loss
|
|
12
|
|
|
|
|
|
|
16
|
|
|
|
NIMS
|
|
—
|
|
|
|
|
|
|
5
|
|
|
|
1st loss-Hong Kong primary mortgage insurance
|
|
9
|
|
|
|
|
|
|
18
|
|
|
|
Total other risk in force
|
|
$
|
63
|
|
|
|
|
|
|
$
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk to capital ratio-Radian Guaranty only
|
|
17.1
|
:1
|
|
(1)
|
|
|
|
19.2
|
:1
|
|
|
Risk to capital ratio-Mortgage Insurance combined
|
|
19.1
|
:1
|
|
(1)
|
|
|
|
23.0
|
:1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio (2)
|
|
20.4
|
%
|
|
25.0
|
%
|
|
|
|
|
Expense ratio - NPE basis (2)
|
|
23.0
|
%
|
|
30.5
|
%
|
|
|
|
|
Expense ratio - NPW basis (3)
|
|
21.3
|
%
|
|
28.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Preliminary.
|
(2)
|
|
Calculated on a GAAP basis using net premiums earned (“NPE”).
For the three months ended March 31, 2015 and 2014, the expense
ratio includes 0.9% and 2.1%, respectively, of expenses that were
previously allocated to the Financial Guaranty segment, because
these corporate items were not reclassified to discontinued
operations. These expenses have been reallocated to the Mortgage
Insurance segment.
|
(3)
|
|
Calculated on a GAAP basis using net premiums written (“NPW”).
For the three months ended March 31, 2015 and 2014, includes 0.9%
and 1.9%, respectively, of expenses that were previously allocated
to the Financial Guaranty segment, because these corporate items
were not reclassified to discontinued operations. These expenses
have been reallocated to the Mortgage Insurance segment.
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Mortgage Insurance Supplemental Information
|
Exhibit L
|
|
|
|
|
|
Three Months Ended March 31,
|
($ in thousands)
|
|
2015
|
|
2014
|
|
|
|
|
|
Net claims paid
|
|
|
|
|
Prime
|
|
$
|
76,434
|
|
|
$
|
195,446
|
|
Alt-A
|
|
20,194
|
|
|
46,593
|
|
A minus and below
|
|
15,209
|
|
|
33,593
|
|
Total primary claims paid
|
|
111,837
|
|
|
275,632
|
|
Pool
|
|
8,901
|
|
|
30,863
|
|
Second-lien and other
|
|
(111
|
)
|
|
727
|
|
Subtotal
|
|
120,627
|
|
|
307,222
|
|
Impact of captive terminations
|
|
(12,000
|
)
|
|
(1,156
|
)
|
Impact of settlements
|
|
98,468
|
|
|
875
|
|
Total
|
|
$
|
207,095
|
|
|
$
|
306,941
|
|
|
|
|
|
|
Average claim paid (1)
|
|
|
|
|
Prime
|
|
$
|
44.0
|
|
|
$
|
44.3
|
|
Alt-A
|
|
54.6
|
|
|
55.4
|
|
A minus and below
|
|
35.9
|
|
|
37.1
|
|
Total primary average claims paid
|
|
44.2
|
|
|
44.7
|
|
Pool
|
|
51.5
|
|
|
60.3
|
|
Second-lien and other
|
|
(12.3
|
)
|
|
20.8
|
|
Total
|
|
$
|
44.5
|
|
|
$
|
45.8
|
|
|
|
|
|
|
Average primary claim paid (2)
|
|
$
|
45.3
|
|
|
$
|
46.5
|
|
Average total claim paid (2)
|
|
$
|
45.5
|
|
|
$
|
47.4
|
|
|
|
|
|
|
Reserve for losses by category
|
|
|
|
|
Prime
|
|
$
|
640,919
|
|
|
$
|
790,529
|
|
Alt-A
|
|
278,350
|
|
|
351,695
|
|
A minus and below
|
|
163,390
|
|
|
189,453
|
|
IBNR and other
|
|
167,204
|
|
|
347,674
|
|
LAE
|
|
53,210
|
|
|
50,684
|
|
Reinsurance recoverable (3)
|
|
13,365
|
|
|
25,751
|
|
Total primary reserves
|
|
1,316,438
|
|
|
1,755,786
|
|
Pool insurance
|
|
62,943
|
|
|
123,596
|
|
IBNR and other
|
|
1,227
|
|
|
5,679
|
|
LAE
|
|
3,051
|
|
|
4,517
|
|
Total pool reserves
|
|
67,221
|
|
|
133,792
|
|
Total 1st lien reserves
|
|
1,383,659
|
|
|
1,889,578
|
|
Second lien and other
|
|
1,055
|
|
|
4,382
|
|
Total reserves
|
|
$
|
1,384,714
|
|
|
$
|
1,893,960
|
|
|
|
|
|
|
1st lien reserve per default (4)
|
|
|
|
|
Primary reserve per primary default excluding IBNR and other
|
|
$
|
28,423
|
|
|
$
|
26,509
|
|
Pool reserve per pool default excluding IBNR and other
|
|
$
|
9,774
|
|
|
$
|
13,054
|
|
|
|
|
(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.
|
(4)
|
|
If calculated before giving effect to deductibles and stop
losses in pool transactions, this would be $17,942 and $22,172 at
March 31, 2015 and 2014, respectively.
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Mortgage Insurance Supplemental Information
|
Exhibit M
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
March 31,
|
|
|
2015
|
|
2014
|
|
2014
|
Default Statistics
|
|
|
|
|
|
|
Primary Insurance:
|
|
|
|
|
|
|
Prime
|
|
|
|
|
|
|
Number of insured loans
|
|
801,332
|
|
|
797,436
|
|
|
755,396
|
|
Number of loans in default
|
|
25,114
|
|
|
28,246
|
|
|
32,708
|
|
Percentage of loans in default
|
|
3.13
|
%
|
|
3.54
|
%
|
|
4.33
|
%
|
|
|
|
|
|
|
|
Alt-A
|
|
|
|
|
|
|
Number of insured loans
|
|
37,468
|
|
|
38,953
|
|
|
43,508
|
|
Number of loans in default
|
|
7,480
|
|
|
8,136
|
|
|
10,173
|
|
Percentage of loans in default
|
|
19.96
|
%
|
|
20.89
|
%
|
|
23.38
|
%
|
|
|
|
|
|
|
|
A minus and below
|
|
|
|
|
|
|
Number of insured loans
|
|
35,425
|
|
|
36,688
|
|
|
40,898
|
|
Number of loans in default
|
|
7,846
|
|
|
8,937
|
|
|
10,238
|
|
Percentage of loans in default
|
|
22.15
|
%
|
|
24.36
|
%
|
|
25.03
|
%
|
|
|
|
|
|
|
|
Total Primary
|
|
|
|
|
|
|
Number of insured loans
|
|
874,225
|
|
|
873,077
|
|
|
839,802
|
|
Number of loans in default (1)
|
|
40,440
|
|
|
45,319
|
|
|
53,119
|
|
Percentage of loans in default
|
|
4.63
|
%
|
|
5.19
|
%
|
|
6.33
|
%
|
|
|
|
|
|
|
|
Pool insurance
|
|
|
|
|
|
|
Number of loans in default
|
|
6,748
|
|
|
8,297
|
|
|
9,814
|
|
|
|
|
(1)
|
|
Excludes 3,715, 4,467 and 6,022 loans subject to the Freddie
Mac Agreement that are in default at March 31, 2015, December 31,
2014 and March 31, 2014, respectively, as we no longer have claims
exposure on these loans.
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Mortgage Insurance Supplemental Information
|
Exhibit N
|
|
|
|
|
|
Three Months Ended March 31,
|
($ in thousands)
|
|
2015
|
|
2014
|
|
|
|
|
|
1st Lien Captives
|
|
|
|
|
Premiums ceded to captives
|
|
$
|
2,585
|
|
|
$
|
3,508
|
|
% of total premiums
|
|
1.1
|
%
|
|
1.6
|
%
|
Insurance in force included in captives (1)
|
|
2.5
|
%
|
|
3.5
|
%
|
Risk in force included in captives (1)
|
|
2.4
|
%
|
|
3.3
|
%
|
|
|
|
|
|
Initial Quota Share Reinsurance (“QSR”) Transaction
|
|
|
|
|
QSR ceded premiums written
|
|
$
|
4,067
|
|
|
$
|
5,304
|
|
% of premiums written
|
|
1.6
|
%
|
|
2.3
|
%
|
QSR ceded premiums earned
|
|
$
|
6,018
|
|
|
$
|
6,807
|
|
% of premiums earned
|
|
2.5
|
%
|
|
3.2
|
%
|
Ceding commissions
|
|
$
|
880
|
|
|
$
|
1,326
|
|
Risk in force included in QSR (2)
|
|
$
|
1,041,383
|
|
|
$
|
1,289,856
|
|
|
|
|
|
|
Second QSR Transaction
|
|
|
|
|
QSR ceded premiums written
|
|
$
|
6,529
|
|
|
$
|
7,293
|
|
% of premiums written
|
|
2.6
|
%
|
|
3.2
|
%
|
QSR ceded premiums earned
|
|
$
|
8,768
|
|
|
$
|
6,585
|
|
% of premiums earned
|
|
3.6
|
%
|
|
3.1
|
%
|
Ceding commissions
|
|
$
|
2,285
|
|
|
$
|
2,553
|
|
Risk in force included in QSR (2)
|
|
$
|
1,533,677
|
|
|
$
|
1,360,651
|
|
|
|
|
|
|
Persistency (twelve months ended March 31) (3)
|
|
82.6
|
%
|
|
83.3
|
%
|
|
(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 RIF.
|
(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
|
Mortgage and Real Estate Services Supplemental Information
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Exhibit O
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The following table shows additional trend information for the
Mortgage and Real Estate Services segment:
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Three Months Ended March 31, 2015
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Three Months Ended December 31, 2014
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Three Months Ended September 30, 2014
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(In thousands)
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Services revenue
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$
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30,742
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$
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34,466
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$
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42,243
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Direct cost of services
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18,451
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19,709
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23,896
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Gross profit on services
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$
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12,291
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$
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14,757
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$
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18,347
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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 Mortgage and
Real Estate Services segment.
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2013
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2014
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(In thousands)
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Qtr 1
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Qtr 2
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Qtr 3
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Qtr 4
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Qtr 1
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Qtr 2
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Services revenue
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$
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37,041
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$
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39,115
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$
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32,718
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$
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25,593
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$
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28,043
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$
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36,347
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Direct cost of services
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20,173
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22,028
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18,015
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14,957
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15,469
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19,956
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Gross profit on services
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$
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16,868
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$
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17,087
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$
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14,703
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$
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10,636
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$
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12,574
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$
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16,391
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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:
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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;
-
catastrophic events, increased unemployment, home price depreciation
or other negative economic changes in geographic regions where our
mortgage insurance exposure is more concentrated;
-
Radian Guaranty's ability to remain eligible under applicable
requirements imposed by the Federal Housing Finance Agency and the
government-sponsored entities ("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
portion of our holding company liquidity to Radian Guaranty to support
Radian Guaranty's compliance with the final PMIERs financial
requirements. Our projections regarding the amount of holding company
liquidity that we may contribute to Radian Guaranty are based on our
estimates of Radian Guaranty's Minimum Required Assets (as defined
under the PMIERs) and Available Assets (as defined under the PMIERs),
which may not prove to be accurate, and which could be impacted by:
(1) our ability to receive GSE approval for the full benefit of our
existing reinsurance arrangements under the PMIERs after any necessary
amendments to 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, the losses we incur on new or
existing defaults and the credit characteristics of new business that
we write; and (4) the GSEs' intention to update the factors that are
applied to calculate and determine a mortgage insurer's Minimum
Required Assets every two years or more frequently, as determined by
the GSEs, to reflect changes in macroeconomic conditions or loan
performance. Contributing holding company cash and investments from
Radian Group to Radian Guaranty 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;
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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 certain states in
which we write conduct 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, which (i) will increase the amount
of capital that Radian Guaranty is required to hold, and therefore,
reduce our current returns on subsidiary capital; (ii) 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 in order to achieve and maintain
compliance; (iii) 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 NIW; (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, which may result in
substantial additional costs in order to achieve and maintain
compliance with the PMIERs;
-
our ability to continue to effectively mitigate our mortgage insurance
losses, including a decrease in net rescissions, denials or
curtailments resulting from an increase in the number of successful
challenges to previously rescinded policies, claim denials or claim
curtailments (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;
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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;
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any disruption in the servicing of mortgages covered by our insurance
policies, as well as poor servicer performance;
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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 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;
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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;
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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;
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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 or
investigations; (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;
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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;
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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;
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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 and certain of our long-term incentive
compensation awards;
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changes in generally accepted accounting principles or statutory
accounting practices, 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,
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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