- Full year 2015 net income of $287 million or
$1.22 per diluted share –
- Full year 2015 adjusted pretax operating
income of $511 million or $1.40 per diluted share –
- Book value per share increases 10%
year-over-year to $12.07 –
Radian Group Inc. (NYSE: RDN) today reported net income for the
quarter ended December 31, 2015, of $74.5 million, or $0.32 per
diluted share. Net income for the full year 2015 was $286.9
million, or $1.22 per diluted share. GAAP net income for 2015 and
2014 are not directly comparable due to the significant impact in
2014 of the sale of Radian Asset Assurance Inc., Radian’s former
financial guaranty subsidiary, and the reversal of the company’s
deferred tax asset (DTA) valuation allowance.
Key Financial Highlights (dollars
in millions, except per share data)
Quarter Ended
December 31, 2015
Quarter Ended
December 31, 2014
Percent
Change
Net income from continuing operations $74.5
$878.0 (92%) Diluted net income per share from
continuing operations $0.32 $3.63
(91%) Adjusted pretax operating income
$124.1 $58.4 113% Adjusted diluted net
operating income per share * $0.34
$0.17 100% Revenues $274.9
$295.1 (7%) Net premiums earned - insurance
$226.4 $224.3 1% Income
(loss) on discontinued operations, net of tax
--
($449.7)
--
Income tax benefit resulting from reversal of DTA valuation
allowance
--
$815.6
--
Year Ended
December 31, 2015
Year Ended
December 31, 2014
Percent
Change
Net income from continuing operations $281.5
$1,259.6 (78%) Diluted net income per share
from continuing operations $1.20 $5.44
(78%) Adjusted pretax operating income
$510.9 $342.4 49% Adjusted diluted net
operating income per share * $1.40
$1.01 39% Revenues $1,193.3
$1,072.7 11% Net premiums earned - insurance
$915.9 $844.5 8% Income
(loss) on discontinued operations, net of tax
$5.4
($300.1)
--
Income tax benefit resulting from reversal of DTA valuation
allowance
--
$995.0
--
Book value per share $12.07 $10.98
10%
* Adjusted diluted net operating income per share is calculated
using the company’s statutory tax rate.
Adjusted pretax operating income for the quarter ended December
31, 2015, was $124.1 million, compared to $58.4 million for the
same period of 2014. Adjusted diluted net operating income per
share for the quarter ended December 31, 2015, was $0.34, compared
to $0.17 for the same period of 2014. Adjusted pretax operating
income for the year ended December 31, 2015, was $510.9 million,
compared to $342.4 million for the same period of 2014. Adjusted
diluted net operating income per share for the twelve months ended
December 31, 2015, was $1.40, compared to $1.01 for the same period
of 2014. See “Non-GAAP Financial Measures” below.
Book value per share at December 31, 2015, was $12.07, compared
to $11.77 at September 30, 2015, and $10.98 at December 31,
2014.
“Radian’s fourth quarter was a strong finish to an equally
strong full-year 2015,” said Radian’s Chief Executive Officer S.A.
Ibrahim. “We successfully grew adjusted pretax operating income by
49% year-over-year, wrote an amount of high-quality and profitable
flow MI business that was among the highest in our company history,
and improved the credit profile of our MI portfolio. I am pleased
to say that we strongly believe Radian is better positioned today
than ever before to drive long-term stockholder value.”
FOURTH QUARTER AND FULL YEAR HIGHLIGHTS
Mortgage Insurance
- New mortgage insurance written (NIW)
was $41.4 billion for the full year 2015, compared to $37.3 billion
for the prior-year period. NIW was $9.1 billion for the quarter,
compared to $11.2 billion in the third quarter of 2015 and $10.0
billion in the prior-year quarter.
- Of the $9.1 billion in new business
written in the fourth quarter of 2015, 29 percent was written with
single premiums, compared to 27 percent in the third quarter of
2015.
- Refinances accounted for 17 percent of
total NIW in the fourth quarter of 2015, compared to 13 percent in
the third quarter of 2015, and 22 percent a year ago.
- NIW continued to consist of loans with
excellent risk characteristics.
- Total primary mortgage insurance in
force as of December 31, 2015, grew to $175.6 billion, compared to
$174.9 billion as of September 30, 2015, and $171.8 billion as of
December 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 78.8 percent as of December 31,
2015, compared to 79.2 percent as of September 30, 2015, and 84.2
percent as of December 31, 2014.
- Annualized persistency for the
three-months ended December 31, 2015, was 81.8 percent, compared to
80.5 percent for the three-months ended September 30, 2015, and
83.3 percent for the three-months ended December 31, 2014.
- Total net premiums earned were $226.4
million for the quarter ended December 31, 2015, compared to $227.4
million for the quarter ended September 30, 2015, and $224.3
million for the quarter ended December 31, 2014.
- The mortgage insurance provision for
losses was $56.8 million in the fourth quarter of 2015, compared to
$64.1 million in the third quarter of 2015, and $83.6 million in
the prior-year period.
- The provision for losses in the fourth
quarter included the positive impact of a reduction in the
company’s default to claim rate assumption for new notices of
default.
- The loss ratio in the fourth quarter
was 25.1 percent, compared to 28.2 percent in the third quarter of
2015 and 36.9 percent in the fourth quarter of 2014.
- Mortgage insurance loss reserves were
$976.4 million as of December 31, 2015, compared to $1,098.6
million as of September 30, 2015, and $1,560.0 million as of
December 31, 2014.
- Primary reserve per primary default
(excluding IBNR and other reserves) was $24,019 as of December 31,
2015. This compares to primary reserve per primary default of
$26,237 as of September 30, 2015, and $27,683 as of December 31,
2014. In addition to the reduction in the company's default to
claim rate assumption, the decrease in the primary reserve per
primary default was the result of a change in the mix of defaults
from aged defaults to less aged defaults, which require a
comparatively smaller reserve.
- The total number of primary delinquent
loans decreased by 2 percent in the fourth quarter from the third
quarter of 2015, and by 22 percent from the fourth quarter of 2014.
The primary mortgage insurance delinquency rate decreased to 4.0
percent in the fourth quarter of 2015, compared to 4.1 percent in
the third quarter of 2015, and 5.2 percent in the fourth quarter of
2014.
- Total mortgage insurance claims paid
were $176.5 million in the fourth quarter, compared to $169.1
million in the third quarter, and $117.2 million in the fourth
quarter of 2014. For the full-year 2015, total claims paid were
$764.7 million, compared to $838.3 million for the full-year 2014.
Claims paid in 2015 included claims related to the September 2014
BofA Settlement Agreement. The company continues to expect claims
paid for the full-year 2016 of approximately $400–450 million.
Mortgage and Real Estate Services
- On June 30, 2014, Radian completed the
acquisition of Clayton Holdings LLC, a leading provider of
risk-based analytics, residential loan due diligence, consulting,
surveillance and staffing solutions. The company also provides
- customized Real Estate Owned (REO)
asset management and single-family rental services through its
Green River Capital subsidiary;
- advanced Automated Valuation Models,
Broker Price Opinions and technology solutions to monitor loan
portfolio performance, acquire and track non-performing loans, and
value and sell residential real estate through its Red Bell Real
Estate subsidiary;
- valuation, title closing and settlement
services as well as technology solutions for vendor management
through its ValuAmerica subsidiary; and
- a global reach through its Clayton
EuroRisk subsidiary.
- Total revenues were $157.4 million for
the full year 2015, its first full year of operations as a
subsidiary of Radian. Total revenues for the fourth quarter were
$38.2 million, compared to $43.1 million for the third quarter of
2015, and $35.4 million for the fourth quarter of 2014.
- Adjusted pretax operating income before
corporate allocations for the quarter ended December 31, 2015, was
$3.6 million, compared to $5.7 million for the quarter ended
September 30, 2015, and $7.3 million for the quarter ended December
31, 2014. Earnings before interest, income taxes, depreciation and
amortization (EBITDA) for the quarter ended December 31, 2015 was
$4.2 million, compared to $6.3 million for the quarter ended
September 30, 2015, and $7.7 million for the quarter ended December
31, 2014. You may find details regarding these non-GAAP measures
and their definition in Exhibits E, F and G.
- In October 2015, Clayton announced that
it had acquired ValuAmerica, Inc., a national title agency and
appraisal management company with coverage across all 3,143
counties in the U.S. In addition, the company's award-winning
technology platform, ValuNet xsp, helps mortgage lenders and their
vendors streamline and manage their supply chains and operational
workflow. The acquisition expands the scope of title and valuation
services Clayton offers to its mortgage clients and is consistent
with the company’s strategy of being a complete solution provider
to the mortgage and real estate industries.
Consolidated Expenses
Other operating expenses were $59.6 million in the fourth
quarter, compared to $65.1 million in the third quarter of 2015,
and $85.8 million in the fourth quarter of last year.
- Operating expenses for the fourth
quarter of 2015 were comprised of $46.7 million for the Mortgage
Insurance segment, compared to $51.5 million in the third quarter
of 2015, and $76.3 million in the fourth quarter of last year.
- Operating expenses for the fourth
quarter of 2015 were comprised of $12.7 million for the Services
segment, compared to $13.1 million in the third quarter of 2015,
and $9.1 million in the fourth quarter of last year.
- In the fourth quarter of 2014, other
operating expenses of $85.8 million 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.
CAPITAL AND LIQUIDITY UPDATE
Radian Group has approximately $340 million of currently
available liquidity.
- As previously announced, Radian
Guaranty met the Private Mortgage Insurer Eligibility Requirements
(PMIERs) as of the December 31, 2015, effective date by taking the
following actions:
- Radian Group transferred $325 million
of cash and marketable securities to Radian Guaranty in exchange
for a surplus note issued by Radian Guaranty. The surplus note has
a 0 percent interest rate and is scheduled to mature on December
31, 2025. Based on positive trends reflected in its capital
projections, Radian Guaranty expects to seek to redeem a portion
and possibly all of the surplus note in 2016, and any remaining
amounts in 2017. Any redemption of the surplus note increases
holding company liquidity by the corresponding amount of the
redemption.
- Radian Group contributed $50 million to
an exclusive affiliated reinsurer of Radian Guaranty. The
combination of the surplus note and capital contribution provides
Radian Guaranty with an initial cushion above the projected amount
required to satisfy the PMIERs’ financial requirements. This
cushion is expected to increase based in part on expected future
financial performance at Radian Guaranty; as a result, Radian
Guaranty is not expected to require any additional capital
contributions in order to remain compliant.
- In order to reduce the company’s
required capital under PMIERs, Radian Guaranty is pursuing a
reinsurance transaction that is intended to reduce the exposure on
its single premium policies. The company has made substantial
progress toward a potential transaction and may enter into such a
program as early as the first quarter of 2016.
- As of December 31, 2015, a total of
$2.1 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 did not cede any
premium on new business in 2015. On December 31, 2015, Radian
Guaranty had the option to recapture a portion of the risk ceded
under its existing Second Quota Share Reinsurance Transaction. The
company chose not to recapture that risk and received a profit
commission of approximately $8 million in 2015 based on performance
to date. In addition, Radian Guaranty received an $8.5 million
prepaid supplemental ceding commission, the recognition of which
has been deferred and will be amortized over approximately the next
five years.
- As previously announced on January 15,
2016, Radian’s Board of Directors approved a share repurchase
program that authorizes the company to purchase up to $100 million
of its common stock through the end of 2016. The shares may be
purchased in the open market or in privately negotiated
transactions. The authorization provides Radian the flexibility to
repurchase shares opportunistically from time to time, based on
market and business conditions, stock price and other factors.
Radian may utilize a Rule 10b5-1 plan, which would permit the
company to purchase shares, at pre-determined price targets, when
it may otherwise be precluded from doing so.
CONFERENCE CALL
Radian will discuss fourth quarter and year-end 2015 results in
a conference call today, Thursday, January 28, 2016, at 10:00 a.m.
Eastern time.
The conference call will be broadcast live over the Internet at
http://www.radian.biz/page?name=Webcasts or at www.radian.biz. The
call may also be accessed by dialing 800.288.8961 inside the U.S.,
or 612.332.0226 for international callers, using passcode 383877 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 383877.
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 pretax operating income adjusts GAAP pretax income from
continuing operations to remove the effects of: (i) net gains
(losses) on investments and other financial instruments; (ii) loss
on induced conversion and debt extinguishment; (iii)
acquisition-related expenses; (iv) amortization and impairment of
intangible assets; and (v) net impairment losses recognized in
earnings. Adjusted diluted net operating income per share
represents a diluted net income per share calculation using as its
basis adjusted pretax operating income, net of taxes at the
company’s statutory tax rate for the period.
In addition to the above non-GAAP measures for the consolidated
company, the company also presents as supplemental information a
non-GAAP measure for the Services segment, representing earnings
before interest, income taxes, depreciation and amortization
(EBITDA). Services EBITDA is calculated by using adjusted pretax
operating income as described above, further adjusted to remove the
impact of depreciation and corporate allocations for interest and
operating expenses. Services EBITDA is presented to facilitate
comparisons with other services companies, since it is a widely
accepted measure of performance in the services industry.
See Exhibit F or Radian’s website for a description of these
items, as well as Exhibit G for reconciliations to the most
comparable consolidated GAAP measures.
ABOUT RADIAN
Radian Group Inc. (NYSE: RDN), headquartered in Philadelphia,
provides private mortgage insurance, risk management products and
real estate services to financial institutions. Radian offers
products and services through two business segments:
- Mortgage Insurance, through its
principal mortgage insurance subsidiary Radian Guaranty Inc. This
private mortgage insurance protects lenders from default-related
losses, facilitates the sale of low-downpayment mortgages in the
secondary market and enables homebuyers to purchase homes more
quickly with downpayments less than 20%.
- Mortgage and Real Estate
Services, through its principal services subsidiary Clayton, as
well as Green River Capital, Red Bell Real Estate and ValuAmerica.
These solutions include information and services that financial
institutions, investors and government entities use to evaluate,
acquire, securitize, service and monitor loans and asset-backed
securities.
Additional information may be found at www.radian.biz.
FINANCIAL RESULTS AND SUPPLEMENTAL
INFORMATION CONTENTS
(Unaudited)
For trend information on all schedules, refer to Radian’s
quarterly financial statistics at
http://www.radian.biz/page?name=FinancialReportsCorporate.
Exhibit A: Condensed Consolidated Statements of
Operations Trend Schedule Exhibit B: Net Income Per Share Trend
Schedule Exhibit C: Condensed Consolidated Balance Sheets Exhibit
D: Discontinued Operations Exhibit E: Segment Information Exhibit
F: Definition of Consolidated Non-GAAP Financial Measure Exhibit G:
Consolidated Non-GAAP Financial Measure Reconciliations Exhibit H:
Mortgage Insurance Supplemental Information New Insurance Written
Exhibit I: Mortgage Insurance Supplemental Information Primary
Insurance in Force and Risk in Force by Product, Statutory Capital
Ratios Exhibit J: Mortgage Insurance Supplemental Information
Percentage of Primary Risk in Force by FICO, LTV and Policy Year
Exhibit K: Mortgage Insurance Supplemental Information Claims and
Reserves Exhibit L: Mortgage Insurance Supplemental Information
Default Statistics Exhibit M: Mortgage Insurance Supplemental
Information Captives, QSR and Persistency
Radian Group Inc. and
Subsidiaries
Condensed Consolidated Statements of
Operations Trend Schedule
Exhibit A (page 1 of 2)
2015 2014
(In thousands,
except per share amounts)
Qtr 4 Qtr 3 Qtr 2
Qtr 1 Qtr 4
Revenues: Net premiums earned -
insurance $ 226,443 $ 227,433 $ 237,437 $ 224,595
$ 224,293
Services revenue 37,493 42,189 43,503
30,630 34,450
Net investment income 22,833 22,091
19,285 17,328 16,531
Net (losses) gains on investments and other
financial instruments (13,402 ) 3,868 28,448
16,779 17,983
Other income 1,515
1,711 1,743 1,331 1,793
Total revenues 274,882
297,292 330,416 290,663
295,050
Expenses: Provision for losses
56,805 64,192 32,560 45,028 82,867
Policy acquisition
costs 4,831 2,880 6,963 7,750 6,443
Direct cost of
services 22,241 24,949 23,520 19,253 19,709
Other
operating expenses 59,570 65,082 67,731 53,774 85,800
Interest expense 20,996 21,220 24,501 24,385 24,200
Loss on induced conversion and debt extinguishment
2,320 11 91,876
—
—
Amortization and impairment of intangible assets
3,409 3,273 3,281
3,023 5,354
Total expenses
170,172 181,607 250,432
153,213 224,373
Pretax income
from continuing operations 104,710 115,685 79,984
137,450 70,677
Income tax provision (benefit)
30,182 45,594 34,791
45,723 (807,349 )
Net income from
continuing operations 74,528 70,091 45,193 91,727
878,026
Income (loss) from discontinued operations, net of
tax — — 4,855
530 (449,691 )
Net income $
74,528 $ 70,091 $ 50,048 $ 92,257
$ 428,335
Diluted net income per share:
Net income from continuing operations $ 0.32 $
0.29 $ 0.20 $ 0.39 $ 3.63
Income (loss) from discontinued
operations, net of tax — —
0.02 — (1.85 )
Net income
$ 0.32 $ 0.29 $ 0.22 $ 0.39
$ 1.78
Selected Mortgage Insurance Key
Ratios Loss ratio (1) 25.1 % 28.2 % 13.3 %
20.4 % 36.9 %
Expense ratio - NPE basis (1) 22.7
% 23.9 % 25.8 % 23.0 % 36.9 %
Expense ratio - NPW basis
(2) 22.1 % 22.5 % 24.4 % 21.3 % 33.8 %
(1)
Calculated on a GAAP basis using net
premiums earned (“NPE”).
(2)
Calculated on a GAAP basis using net
premiums written (“NPW”).
On April 1, 2015, Radian Guaranty completed the previously
disclosed sale of 100% of the issued and outstanding shares of
Radian Asset Assurance to Assured, pursuant to the Radian Asset
Assurance Stock Purchase Agreement dated as of December 22, 2014.
As a result, the operating results of Radian Asset Assurance are
classified as discontinued operations for all periods presented in
our condensed consolidated statements of operations. See Exhibit D
for additional information on discontinued operations.
Radian Group Inc. and
Subsidiaries
Condensed Consolidated Statements of
Operations
Exhibit A (page 2 of 2)
Year EndedDecember 31,
(In thousands,
except per-share data)
2015 2014
Revenues: Net
premiums earned - insurance $ 915,908 $ 844,528
Services revenue 153,815 76,693
Net investment
income 81,537 65,655
Net gains on investments and
other financial instruments 35,693 79,989
Other
income 6,300 5,820
Total
revenues 1,193,253 1,072,685
Expenses: Provision for losses 198,585
246,083
Policy acquisition costs 22,424 24,446
Direct cost of services 89,963 43,605
Other
operating expenses 246,157 252,283
Interest
expense 91,102 90,464
Loss on induced conversion and
debt extinguishment 94,207 —
Amortization and
impairment of intangible assets 12,986
8,648
Total expenses 755,424
665,529
Pretax income from
continuing operations 437,829 407,156
Income tax
provision (benefit) 156,290
(852,418 )
Net income from continuing operations
281,539 1,259,574
Income (loss) from discontinued
operations, net of tax (2) 5,385
(300,057 )
Net income $ 286,924 $
959,517
Diluted net income per share: Net
income from continuing operations $ 1.20 $ 5.44
Income (loss) from discontinued operations, net of tax
0.02 (1.28 )
Net income $
1.22 $ 4.16
Selected Mortgage
Insurance Key Ratios Loss ratio (1) 21.7 %
29.1 %
Expense ratio - NPE basis (1) 23.9 %
29.6 %
Expense ratio - NPW basis (2) 22.6 %
27.0 %
(1)
Calculated on a GAAP basis using net
premiums earned (“NPE”).
(2)
Calculated on a GAAP basis using net
premiums written (“NPW”).
Radian Group Inc. and Subsidiaries Net
Income Per Share Trend Schedule Exhibit B (page 1 of 2)
The calculation of basic and diluted net income per share
was as follows: 2015
2014
(In thousands,
except per share amounts)
Qtr 4 Qtr 3 Qtr 2
Qtr 1 Qtr 4
Net income from continuing operations: Net
income from continuing operations—basic $ 74,528
$ 70,091 $ 45,193 $ 91,727 $ 878,026
Adjustment for dilutive
Convertible Senior Notes due 2019, net of tax (1)
3,664 3,714 3,707 3,673 3,641
Net income from continuing operations—diluted
$ 78,192 $ 73,805 $ 48,900 $ 95,400 $ 881,667
Net income: Net income from continuing
operations—basic $ 74,528 $ 70,091 $ 45,193 $
91,727 $ 878,026
Income (loss) from discontinued operations, net
of tax — — 4,855 530
(449,691 )
Net income—basic 74,528 70,091 50,048
92,257 428,335
Adjustment for dilutive Convertible Senior Notes
due 2019, net of tax (1) 3,664 3,714
3,707 3,673 3,641
Net
income—diluted $ 78,192 $ 73,805 $ 53,755 $
95,930 $ 431,976
Average common shares
outstanding—basic 206,872 207,938 193,112 191,224
191,053
Dilutive effect of Convertible Senior Notes due 2017
1,057 1,798 12,438 10,886 10,590
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) 2,316 3,323 3,364
3,202 3,422
Adjusted average common shares
outstanding—diluted 247,981 250,795
246,650 243,048 242,801
Net income per
share:
Basic: Net income from continuing operations $
0.36 $ 0.34 $ 0.23 $ 0.48 $ 4.60
(3) Income (loss)
from discontinued operations, net of tax —
— 0.03 — (2.36 )
Net income $
0.36 $ 0.34 $ 0.26 $ 0.48 $ 2.24
Diluted: Net income from continuing operations
$ 0.32 $ 0.29 $ 0.20 $ 0.39 $ 3.63
(3)
Income (loss) from discontinued operations, net of tax
— — 0.02 — (1.85 )
Net
income $ 0.32 $ 0.29 $ 0.22 $ 0.39 $ 1.78
(1)
As applicable, includes coupon
interest, amortization of discount and fees, and other changes in
income or loss that would result from the assumed
conversion.
(2)
The following number of shares of our
common stock equivalents issued under our stock-based compensation
arrangements were not included in the calculation of diluted net
income per share because they were anti-dilutive:
2015 2014
(In
thousands)
Qtr 4 Qtr 3
Qtr 2 Qtr 1 Qtr 4
Shares of
common stock equivalents 728 469 264 540 542
(3)
Includes the tax benefit of $3.36 per
share realized relating to the reversal of our valuation allowance
in the 4th quarter of 2014.
Radian Group Inc. and
Subsidiaries
Net Income (Loss) Per Share
Exhibit B (page 2 of 2)
Year Ended December 31,
(In thousands,
except per share amounts)
2015 2014
Net income from continuing
operations: Net income from continuing operations -
basic $ 281,539 $ 1,259,574
Adjustment for
dilutive Convertible Senior Notes due 2019, net of tax (1)
14,758 14,372
Net income from
continuing operations - diluted $ 296,297 $
1,273,946
Net income: Net income from
continuing operations - basic $ 281,539 $
1,259,574
Income (loss) from discontinued operations, net of
tax 5,385 (300,057 )
Net income -
basic 286,924 959,517
Adjustment for dilutive Convertible
Senior Notes due 2019, net of tax (1)
14,758 14,372
Net income -
diluted $ 301,682 $ 973,889
Average common shares outstanding—basic 199,910
184,551
Dilutive effect of Convertible Senior Notes due 2017
6,293 8,465
Dilutive effect of Convertible Senior Notes
due 2019 37,736 37,736
Dilutive effect of stock-based
compensation arrangements (2)
2,393 3,150
Adjusted average common
shares outstanding—diluted 246,332 233,902
Net income (loss)
per share:
Basic: Net income from continuing operations
$ 1.41 $ 6.83
(3)
Income (loss) from discontinued operations, net of tax
0.03 (1.63 )
Net income $
1.44 $ 5.20
Diluted: Net income from
continuing operations $ 1.20 $ 5.44
(3)
Income (loss) from discontinued operations, net of tax
0.02 (1.28 )
Net income $
1.22 $ 4.16
(1)
As applicable, includes coupon
interest, amortization of discount and fees, and other changes in
income or loss that would result from the assumed
conversion.
(2)
The following number of shares of our
common stock equivalents issued under our stock-based compensation
arrangements were not included in the calculation of diluted net
income per share because they were anti-dilutive:
Year Ended December 31,
(In
thousands)
2015 2014
Shares of common
stock equivalents 728 542
(3)
Includes the tax benefit of $4.25 per
share realized relating to the reversal of our valuation allowance
in 2014.
Radian Group Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
Exhibit C
December 31, September
30, June 30, March 31,
December 31,
(In thousands,
except per share data)
2015 2015 2015 2015 2014
Assets:
Investments $ 4,298,686 $ 4,376,771 $
4,309,148 $ 3,621,646 $ 3,629,299
Cash 46,898 69,030
51,381 57,204 30,465
Restricted cash 13,000 10,280
12,633 14,220 14,031
Accounts and notes receivable
61,734 65,951 72,093 64,405 85,792
Deferred income taxes,
net 577,945 601,893 651,238 649,996 700,201
Goodwill
and other intangible assets, net 289,417 287,334 290,640
293,798 288,240
Other assets 364,108 349,657 349,371
340,276 357,864
Assets held for sale —
— — 1,755,873 1,736,444
Total assets $ 5,651,788 $ 5,760,916
$ 5,736,504 $ 6,797,418 $ 6,842,336
Liabilities and stockholders’ equity: Unearned
premiums $ 680,300 $ 676,938 $ 665,947 $ 657,555
$ 644,504
Reserve for losses and loss adjustment expenses
976,399 1,098,570 1,204,792 1,384,714 1,560,032
Long-term
debt 1,219,454 1,230,246 1,224,892 1,202,535 1,192,299
Other liabilities 278,704 311,855 278,929 310,642
326,743
Liabilities held for sale —
— — 966,078 947,008
Total liabilities 3,154,857
3,317,609 3,374,560 4,521,524
4,670,586
Equity component of currently redeemable
convertible senior notes — 7,737 8,546 68,982 74,690
Common stock 224 224 226 209 209
Additional
paid-in capital 1,823,442 1,825,034 1,816,545 1,648,436
1,638,552
Retained earnings 691,742 617,731 548,161
498,593 406,814
Accumulated other comprehensive (loss)
income (18,477 ) (7,419 )
(11,534 ) 59,674 51,485
Total common stockholders’
equity 2,496,931 2,435,570
2,353,398 2,206,912 2,097,060
Total
liabilities and stockholders’ equity $ 5,651,788
$ 5,760,916 $ 5,736,504 $ 6,797,418 $
6,842,336
Shares outstanding 206,872 206,870
208,587 191,416 191,054
Book value per share $
12.07 $ 11.77 $ 11.28 $ 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:
2015
(In
thousands)
Qtr 2 Qtr 1
Net premiums earned $ — $ 1,007
Net investment income — 9,153
Net gains on investments
and other financial instruments 7,818 13,668
Change in fair
value of derivative instruments — 2,625
Total revenues 7,818 26,453
Provision for losses — 502
Policy
acquisition costs — (191 )
Other operating expense
— 4,107
Total expenses —
4,418
Equity in net loss of
affiliates — (13 )
Income from
operations of businesses held for sale 7,818 22,022
Loss on
sale (350 ) (13,930 )
Income tax provision 2,613
7,562
Income from discontinued operations,
net of tax $ 4,855 $ 530
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 1 of 3)
Summarized financial information concerning our operating
segments as of and for the periods indicated, is as follows. For a
definition of adjusted pretax operating income and reconciliations
to consolidated GAAP measures, see Exhibits F and G.
Mortgage
Insurance 2015 2014
(In
thousands)
Qtr 4 Qtr 3 Qtr 2 Qtr 1 Qtr 4
Net premiums written -
insurance $ 233,347 $ 242,168 $ 251,082 $ 241,908
$ 244,506
Increase in unearned premiums (6,904
) (14,735 ) (13,645 ) (17,313 )
(20,213 )
Net premiums earned - insurance 226,443
227,433 237,437 224,595 224,293
Net investment income (1)
22,833 22,091 19,285 17,328 16,531
Other income (1)
1,515 1,711 1,743
1,331 1,668
Total
250,791 251,235 258,465
243,254 242,492
Provision for
losses 56,817 64,128 31,637 45,851 83,649
Change in
expected economic loss or recovery for consolidated VIEs
— — — — (16 )
Policy acquisition costs 4,831
2,880 6,963 7,750 6,443
Other operating expenses before
corporate allocations 37,406 36,632
41,853 34,050
62,591
Total 99,054
103,640 80,453 87,651
152,667
Adjusted pretax operating
income before corporate allocations 151,737 147,595
178,012 155,603 89,825
Allocation of corporate operating
expenses (1) 9,251 14,893 12,516 9,758 13,729
Allocation of interest expense (1) 16,582
16,797 20,070 19,953
19,760
Adjusted pretax operating income
$ 125,904 $ 115,905 $ 145,426 $
125,892 $ 56,336
Services
2015 2014
(In
thousands)
Qtr 4 Qtr 3 Qtr 2 Qtr 1 Qtr 4
Services revenue
$ 38,175 $ 43,114 $ 44,595 $ 31,532 $ 34,466
Other
income — — —
— 891
Total 38,175
43,114 44,595 31,532
35,357
Direct cost of services
22,880 25,870 25,501 19,253 19,709
Other operating
expenses before corporate allocations 11,710
11,533 11,522 8,857
8,360
Total
34,590 37,403 37,023
28,110 28,069
Adjusted pretax operating income before
corporate allocations
3,585 5,711 7,572 3,422 7,288
Allocation of corporate
operating expenses 968 1,567 1,307 981 740
Allocation
of interest expense 4,414 4,423
4,431 4,432 4,440
Adjusted pretax operating (loss)
income
$ (1,797 ) $ (279 ) $ 1,834 $ (1,991 )
$ 2,108
(1)
For periods prior to the quarter ended
June 30, 2015, includes certain corporate income and expenses that
have been reallocated from our prior financial guaranty segment to
the Mortgage Insurance segment and that were not reclassified to
discontinued operations.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 2 of 3)
Mortgage Insurance Year
EndedDecember 31,
(In
thousands)
2015 2014
Net premiums written -
insurance $ 968,505 $ 925,181
Increase in
unearned premiums (52,597 ) (80,653
)
Net premiums earned - insurance 915,908 844,528
Net investment income (1) 81,537 65,655
Other
income (1) 6,300 5,321
Total 1,003,745 915,504
Provision for losses 198,433 246,865
Change
in expected economic loss or recovery for consolidated VIEs
— 113
Policy acquisition costs 22,424 24,446
Other operating expenses before corporate allocations
149,941 170,390
Total 370,798
441,814
Adjusted pretax operating income before corporate
allocations 632,947 473,690
Allocation of corporate
operating expenses (1) 46,418 55,154
Allocation of
interest expense (1) 73,402 81,600
Adjusted pretax operating income $
513,127 $ 336,936
Services Year EndedDecember 31,
(In
thousands)
2015
2014(2)
Services revenue $ 157,416 $ 76,709
Other
income — 1,265
Total
157,416 77,974
Direct
cost of services 93,504 43,605
Other operating
expenses before corporate allocations 43,622
18,915
Total
137,126 62,520
Adjusted pretax operating income before
corporate allocations
20,290 15,454
Allocation of corporate operating
expenses 4,823 1,144
Allocation of interest
expense 17,700 8,864
Adjusted pretax operating (loss)
income
$ (2,233 ) $ 5,446
(1)
For periods prior to the quarter ended
June 30, 2015, includes certain corporate income and expenses that
have been reallocated from our prior financial guaranty segment to
the Mortgage Insurance segment and that were not reclassified to
discontinued operations.
(2)
Primarily represents the activity of
Clayton; Clayton was acquired on June 30, 2014.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 3 of 3)
Inter-segment information:
2015 2014
Qtr 4
Qtr 3 Qtr 2 Qtr 1 Qtr 4
Inter-segment expense included in Mortgage Insurance segment
$ 682 $ 925 $ 1,092 $ 902 $ 782
Inter-segment
revenue included in Services segment 682 925 1,092 902
782
Supplemental information for Services
EBITDA (see definition in Exhibit F):
2015 2014
Qtr 4 Qtr 3 Qtr 2 Qtr
1 Qtr 4
Adjusted pretax operating income before corporate
allocations $ 3,585 $ 5,711 $ 7,572 $ 3,422 $
7,288
Depreciation and amortization 612
555 482 449 442
Services EBITDA
$ 4,197 $ 6,266 $ 8,054 $ 3,871 $ 7,730
Selected balance sheet information for
our segments as of the periods indicated, is a follows:
At December 31, 2015
(In
thousands)
Mortgage
Insurance
Services Total Total assets $
5,291,284 $ 360,504 $ 5,651,788
At December 31, 2014
(In
thousands)
Mortgage
Insurance
Services Total
Assets held for sale (1) $ — $ — $ 1,736,444
Total assets 4,769,014 336,878 6,842,336
(1) Assets held for sale are not
part of the Mortgage Insurance or Services segments.
Radian Group Inc. and
Subsidiaries
Definition of Consolidated Non-GAAP
Financial Measure
Exhibit F (page 1 of 2)
Use of Non-GAAP Financial Measure
In addition to the traditional GAAP financial measures, we have
presented non-GAAP financial measures for the consolidated company,
“adjusted pretax operating income (loss)” and “adjusted diluted net
operating income (loss) per share,” among our key performance
indicators to evaluate our fundamental financial performance. These
non-GAAP financial measures align with the way the Company’s
business performance is evaluated by both management and the board
of directors. These measures have been established in order to
increase transparency for the purposes of evaluating our core
operating trends and enabling more meaningful comparisons with our
peers. Although on a consolidated basis “adjusted pretax operating
income (loss)” and “adjusted diluted net operating income (loss)
per share” are non-GAAP financial measures, we believe these
measures aid in understanding the underlying performance of our
operations. Our senior management, including our Chief Executive
Officer (the Company’s chief operating decision maker), uses
adjusted pretax operating income (loss) as our primary measure to
evaluate the fundamental financial performance of the Company’s
business segments and to allocate resources to the segments.
Adjusted pretax operating income (loss) is defined as GAAP
pretax income (loss) from continuing operations excluding the
effects of net gains (losses) on investments and other financial
instruments, loss on induced conversion and debt extinguishment,
acquisition-related expenses, amortization and impairment of
intangible assets and net impairment losses recognized in earnings.
Adjusted diluted net operating income (loss) per share is
calculated by dividing (i) adjusted pretax operating income (loss)
attributable to common shareholders, net of taxes computed using
the company’s statutory tax rate, by (ii) the sum of the weighted
average number of common shares outstanding and all dilutive
potential common shares outstanding. Interest expense on
convertible debt, share dilution from convertible debt and the
impact of stock-based compensation arrangements have been reflected
in the per share calculations consistent with the accounting
standard regarding earnings per share, whenever the impact is
dilutive.
Although adjusted pretax operating income (loss) excludes
certain items that have occurred in the past and are expected to
occur in the future, the excluded items represent those that are:
(1) not viewed as part of the operating performance of our primary
activities; or (2) not expected to result in an economic impact
equal to the amount reflected in pretax income (loss) from
continuing operations. These adjustments, along with the reasons
for their treatment, are described below.
(1)
Net gains (losses) on investments and
other financial instruments. The recognition of realized investment
gains or losses can vary significantly across periods as the
activity is highly discretionary based on the timing of individual
securities sales due to such factors as market opportunities, our
tax and capital profile and overall market cycles. Unrealized
investment gains and losses arise primarily from changes in the
market value of our investments that are classified as trading.
These valuation adjustments may not necessarily result in economic
gains or losses.
Trends in the profitability of our fundamental operating
activities can be more clearly identified without the fluctuations
of these realized and unrealized gains or losses. We do not view
them to be indicative of our fundamental operating activities.
Therefore, these items are excluded from our calculation of
adjusted pretax operating income (loss). However, we include the
change in expected economic loss or recovery associated with our
consolidated VIEs, if any, in the calculation of adjusted pretax
operating income (loss). (2)
Loss on induced conversion and debt
extinguishment. Gains or losses on early extinguishment of debt or
losses incurred to induce conversion of convertible debt prior to
maturity are discretionary activities that are undertaken in order
to take advantage of market opportunities to strengthen our
financial position; therefore, these activities are not viewed as
part of our operating performance. Such transactions do not reflect
expected future operations and do not provide meaningful insight
regarding our current or past operating trends. Therefore, these
items are excluded from our calculation of adjusted pretax
operating income (loss).
(3)
Acquisition-related expenses.
Acquisition-related expenses represent the costs incurred to effect
an acquisition of a business (i.e., a business combination).
Because we pursue acquisitions on a strategic and selective basis
and not in the ordinary course of our business, we do not view
acquisition-related expenses as a consequence of a primary business
activity. Therefore, we do not consider these expenses to be part
of our operating performance and they are excluded from our
calculation of adjusted pretax operating income (loss).
(4)
Amortization and impairment of intangible
assets. Amortization of intangible assets represents the periodic
expense required to amortize the cost of intangible assets over
their estimated useful lives. Intangible assets with an indefinite
useful life are also periodically reviewed for potential
impairment, and impairment adjustments are made whenever
appropriate. These charges are not viewed as part of the operating
performance of our primary activities and therefore are excluded
from our calculation of adjusted pretax operating income
(loss).
Radian Group Inc. and
Subsidiaries
Definition of Consolidated Non-GAAP
Financial Measure
Exhibit F (page 2 of 2)
(5)
Net impairment losses recognized in
earnings. The recognition of net impairment losses on investments
can vary significantly in both size and timing, depending on market
credit cycles. We do not view these impairment losses to be
indicative of our fundamental operating activities. Therefore,
whenever these losses occur, we exclude them from our calculation
of adjusted pretax operating income (loss).
In addition to the above non-GAAP measures for the consolidated
company, we also have presented as supplemental information a
non-GAAP measure for our Services segment, representing earnings
before interest, income taxes, depreciation and amortization
(“EBITDA”). We calculate Services EBITDA by using adjusted pretax
operating income as described above, further adjusted to remove the
impact of depreciation and corporate allocations for interest and
operating expenses. We have presented Services EBITDA to facilitate
comparisons with other services companies, since it is a widely
accepted measure of performance in the services industry.
See Exhibit G for the reconciliation of our non-GAAP financial
measures for the consolidated company, adjusted pretax operating
income and adjusted diluted net operating income per share, to the
most comparable GAAP measures, pretax income from continuing
operations and net income per share from continuing operations,
respectively. Exhibit G also contains the reconciliation of
Services EBITDA to the most comparable GAAP measure, pretax income
from continuing operations.
Total adjusted pretax operating income (loss), adjusted diluted
net operating income (loss) per share and Services EBITDA 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), adjusted diluted net operating income (loss) per share or
EBITDA may not be comparable to similarly-named measures reported
by other companies.
Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit G (page 1 of 3) Reconciliation of Adjusted
Pretax Operating Income (Loss) to Consolidated Pretax Income
from Continuing Operations
2015 2014
(In
thousands)
Qtr 4 Qtr 3 Qtr 2 Qtr 1 Qtr 4
Adjusted pretax operating income (loss): Mortgage
Insurance (1) $ 125,904 $ 115,905 $ 145,426 $
125,892 $ 56,336
Services (2) (1,797 ) (279 )
1,834 (1,991 ) 2,108
Total adjusted pretax
operating income 124,107 115,626 147,260
123,901 58,444
Net (losses) gains on investments and
other financial instruments (3)
(13,402 ) 3,868 28,448 16,779 17,967
Loss on
induced conversion and debt extinguishment (2,320
) (11 ) (91,876 ) — —
Acquisition-related expenses
(4) (266 ) (525 ) (567 ) (207 ) (380 )
Amortization and impairment of intangible assets (4)
(3,409 ) (3,273 ) (3,281 ) (3,023 ) (5,354 )
Consolidated pretax income from continuing operations
$ 104,710 $ 115,685 $ 79,984 $
137,450 $ 70,677
(1)
For periods prior to the quarter ended
June 30, 2015, includes certain corporate income and expenses that
have been reallocated from our prior financial guaranty segment to
the Mortgage Insurance segment and that were not reclassified to
discontinued operations.
(2)
Effective with the fourth quarter of
2014, the Services segment undertook the management
responsibilities of certain additional loan servicer surveillance
functions previously considered part of the Mortgage Insurance
segment. As a result, these activities are now reported in the
Services segment for all periods presented.
(3)
This line item includes a de minimis
amount of expected economic loss or recovery associated with our
previously consolidated VIEs that is included in adjusted pretax
operating income above.
(4)
Please see Exhibit F for the definition
of this line item.
Reconciliation of Adjusted Diluted Net
Operating Income Per Share (1) to Net Income Per
Share
from Continuing Operations 2015 2014
Qtr
4 Qtr 3 Qtr 2 Qtr 1 Qtr 4
Adjusted
diluted net operating income per share $ 0.34
$ 0.31 $ 0.40 $ 0.35 $ 0.17
After tax per share impact: Net gains
(losses) on investments and other financial instruments
(0.03 ) 0.01 0.07 0.04 0.05
Loss on induced
conversion and debt extinguishment (0.01 ) —
(0.28 ) — —
Acquisition-related expenses — — — — —
Amortization and impairment of intangible assets
(0.01 ) (0.01 ) (0.01 ) (0.01 ) (0.01 )
Difference
between statutory and effective tax rate 0.03 (0.02 )
0.02 0.01 3.42
(2) Net
income per share from continuing operations $
0.32 $ 0.29 $ 0.20 $ 0.39 $ 3.63
(1)
Calculated using the company’s
statutory tax rate.
(2)
Includes the tax benefit of $3.36 per
share realized relating to the reversal of our valuation allowance
in the 4th quarter of 2014.
Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit G (page 2 of 3) Reconciliation of Adjusted
Pretax Operating Income (Loss) to Consolidated Pretax Income
from Continuing Operations
Year EndedDecember 31,
(In
thousands)
2015 2014
Adjusted pretax operating income
(loss): Mortgage Insurance (1) $ 513,127 $
336,936
Services (2) (2,233 ) 5,446
Total adjusted pretax operating income 510,894
342,382
Net gains (losses) on investments and
other financial instruments (3) 35,693 80,102
Loss on
induced conversion and debt extinguishment (94,207
) —
Acquisition-related expenses (4) (1,565
) (6,680 )
Amortization and impairment of intangible
assets (4) (12,986 ) (8,648 )
Consolidated
pretax income from continuing operations $
437,829 $ 407,156
(1)
For periods prior to the quarter ended
June 30, 2015, includes certain corporate income and expenses that
have been reallocated from our prior financial guaranty segment to
the Mortgage Insurance segment and that were not reclassified to
discontinued operations.
(2)
Effective with the fourth quarter of
2014, the Services segment undertook the management
responsibilities of certain additional loan servicer surveillance
functions previously considered part of the Mortgage Insurance
segment. As a result, these activities are now reported in the
Services segment for all periods presented.
(3)
This line item includes a de minimis
amount of expected economic loss or recovery associated with our
previously consolidated VIEs that is included in adjusted pretax
operating income above.
(4)
Please see Exhibit F for the definition
of this line item.
Reconciliation of Adjusted Diluted Net
Operating Income Per Share (1) to Net Income Per
Share
from Continuing Operations
Year EndedDecember 31, 2015 2014
Adjusted diluted net operating income per share $
1.40 $ 1.01
After tax per share
impact: Net gains (losses) on investments and other
financial instruments 0.09 0.22
Loss on induced
conversion and debt extinguishment (0.29 ) —
Acquisition-related expenses — (0.02 )
Amortization and impairment of intangible assets
(0.04 ) (0.02 )
Difference between statutory and
effective tax rate 0.04 4.25
(2)
Net income per share from continuing operations $
1.20 $ 5.44
(1)
Calculated using the company’s
statutory tax rate.
(2)
Includes the tax benefit of $4.25 per
share realized relating to the reversal of our valuation allowance
in 2014.
Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit G (page 3 of 3) Reconciliation of
Services Segment EBITDA to Consolidated Pretax Income from
Continuing Operations 2015 2014
(In
thousands)
Qtr 4 Qtr 3 Qtr 2 Qtr 1 Qtr 4
Services EBITDA $ 4,197 $ 6,266 $ 8,054 $
3,871 $ 7,730
Allocation of corporate operating expenses to
Services (968 ) (1,567 ) (1,307 ) (981 ) (740 )
Allocation of corporate interest expenses to Services
(4,414 ) (4,423 ) (4,431 ) (4,432 ) (4,440 )
Services depreciation and amortization (612 )
(555 ) (482 ) (449 ) (442 )
Services adjusted pretax operating
(loss) income (1,797 ) (279 ) 1,834 (1,991 )
2,108
Mortgage Insurance adjusted pretax operating income
125,904 115,905 145,426 125,892
56,336
Total adjusted pretax operating income
124,107 115,626 147,260 123,901 58,444
Net (losses) gains on investments and
other financial instruments
(13,402 ) 3,868 28,448 16,779 17,967
Loss on
induced conversion and debt extinguishment (2,320
) (11 ) (91,876 ) — —
Acquisition-related expenses
(266 ) (525 ) (567 ) (207 ) (380 )
Amortization
and impairment of intangible assets (3,409 )
(3,273 ) (3,281 ) (3,023 ) (5,354 )
Consolidated pretax income
from continuing operations $ 104,710 $
115,685 $ 79,984 $ 137,450 $ 70,677
On a consolidated basis, “adjusted pretax operating income” and
“adjusted diluted net operating income per share” are measures not
determined in accordance with GAAP. These measures are not
representative of total profitability, and therefore should not be
viewed as substitutes for GAAP pretax income from continuing
operations or net income per share from continuing operations. Our
definitions of adjusted pretax operating income and adjusted
diluted net operating income per share may not be comparable to
similarly-named measures reported by other companies. See Exhibit F
for additional information on our consolidated non-GAAP financial
measures.
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information - New Insurance Written
Exhibit H 2015 2014
($ in
millions)
Qtr 4 Qtr 3 Qtr 2 Qtr 1 Qtr 4
Total primary new insurance written $ 9,099
$ 11,176 $ 11,751 $ 9,385 $ 10,009
Percentage of
primary new insurance written by FICO score
>=740
60.3 % 61.0 % 63.0 % 63.6 % 60.2 %
680-739
32.2 31.9 30.8 30.3 32.6
620-679
7.5 7.1 6.2 6.1 7.2
Total Primary 100.0 % 100.0 % 100.0 % 100.0 %
100.0 %
Percentage of
primary new insurance written
Monthly and other premiums 71 % 73 % 68 % 63 %
69 %
Single premiums 29 % 27 % 32 % 37 % 31 %
Refinances 17 % 13 % 23 % 33 % 22 %
LTV 95.01% and above 3.6 % 3.5 % 3.2 %
1.8 % 0.5 %
90.01% to 95.00% 49.5 % 51.5 %
49.4 % 48.4 % 51.7 %
85.01% to 90.00% 34.4 %
34.1 % 34.0 % 33.3 % 33.2 %
85.00% and below 12.5
% 10.9 % 13.4 % 16.5 % 14.6 %
Radian Group
Inc. and Subsidiaries Mortgage Insurance Supplemental
Information - Primary Insurance in Force and Risk in Force by
Product, Statutory Capital Ratios Exhibit I
December 31, September 30, June 30,
March 31, December 31,
($ in
millions)
2015 2015 2015 2015 2014
Primary insurance
in force (1)
Flow $ 167,469 $ 166,527 $ 164,137 $ 162,832 $
162,302
Structured 8,115 8,339 8,555
9,309 9,508
Total Primary $
175,584 $ 174,866 $ 172,692 $ 172,141
$ 171,810
Prime $ 165,291
$ 164,060 $ 161,397 $ 160,452 $ 159,647
Alt-A 6,176
6,531 6,857 7,122 7,412
A minus and below 4,117
4,275 4,438 4,567 4,751
Total
Primary $ 175,584 $ 174,866 $
172,692 $ 172,141 $ 171,810
Primary risk in
force (1) (2)
Flow $ 42,771 $ 42,454 $ 41,706 $ 41,256 $
41,071
Structured 1,856 1,910 1,957
2,133 2,168
Total Primary $
44,627 $ 44,364 $ 43,663 $ 43,389
$ 43,239
Flow Prime $
41,036 $ 40,629 $ 39,781 $ 39,251 $ 38,977
Alt-A
1,061 1,124 1,191 1,243 1,295
A minus and below
674 701 734 762 799
Total Flow $ 42,771 $ 42,454 $
41,706 $ 41,256 $ 41,071
Structured Prime $ 1,134 $ 1,155 $
1,182 $ 1,341 $ 1,349
Alt-A 366 386 397 410 425
A
minus and below 356 369 378 382
394
Total Structured $ 1,856
$ 1,910 $ 1,957 $ 2,133 $ 2,168
Total Prime $ 42,170 $ 41,784 $
40,963 $ 40,592 $ 40,326
Alt-A 1,427 1,510 1,588
1,653 1,720
A minus and below 1,030 1,070
1,112 1,144 1,193
Total Primary
$ 44,627 $ 44,364 $ 43,663 $
43,389 $ 43,239
Statutory Capital
Ratios
Risk to capital ratio-Radian Guaranty only
14.3
:1
(3)
16.5 :1 16.5 :1 17.1 :1 17.9 :1
Risk to capital ratio-Mortgage
Insurance combined
14.6
:1
(3)
17.9 :1 18.0 :1 19.1 :1 20.3 :1
(1)
Includes amounts ceded under our
reinsurance agreements, as well as amounts related to the Freddie
Mac Agreement.
(2)
Does not include pool risk in force or
other risk in force, which combined represent less than 3.0% of our
total risk in force for all periods presented.
(3)
Preliminary.
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information - Percentage of Primary Risk in
Force by FICO, LTV and Policy Year Exhibit J
December 31,
September 30, June 30, March 31,
December 31,
($ in
millions)
2015 2015 2015 2015 2014
Percentage of
primary risk in force by FICO score
Flow >=740 58.3 % 58.2 % 58.1 % 58.1
% 58.1 %
680-739 30.5 30.3 30.2 30.0 29.7
620-679 10.1 10.3 10.5 10.6 10.8
<=619
1.1 1.2 1.2 1.3 1.4
Total Flow 100.0 % 100.0 % 100.0 % 100.0 %
100.0 %
Structured >=740 29.4
%
28.9
%
28.7 % 31.1 % 30.3 %
680-739 27.7 27.9 27.9 28.1 28.5
620-679 25.0 25.2 25.4 24.1 24.3
<=619
17.9 18.0 18.0 16.7 16.9
Total Structured 100.0 % 100.0
%
100.0 % 100.0 % 100.0 %
Total >=740
57.1 % 57.0 % 56.7 % 56.8 % 56.7 %
680-739
30.3 30.2 30.1 29.8 29.6
620-679 10.8 10.9
11.2 11.3 11.6
<=619 1.8 1.9 2.0
2.1 2.1
Total Primary 100.0
% 100.0 % 100.0 % 100.0 % 100.0 %
Percentage of
primary risk in force by LTV
95.01% and above 7.3 % 7.4 % 7.6 % 7.9 % 8.2 %
90.01% to 95.00% 50.4 49.8 49.0 48.2 47.5
85.01%
to 90.00% 34.0 34.3 34.6 35.0 35.4
85.00% and
below 8.3 8.5 8.8 8.9 8.9
Total 100.0 % 100.0 % 100.0 % 100.0 %
100.0 %
Percentage of
primary risk in force by policy year
2005 and prior 6.3 % 6.8 % 7.3 % 7.8 % 8.2 %
2006
3.7 3.9 4.2 4.4 4.6
2007
8.7 9.1 9.6 10.2 10.6
2008
6.3 6.6 7.0 7.5 7.9
2009
1.7 1.8 2.0 2.3 2.5
2010
1.4 1.5 1.7 2.0 2.1
2011
2.9 3.1 3.5 3.9 4.2
2012
11.2 12.0 13.0 14.2 15.1
2013
18.1 19.2 20.8 22.4 23.8
2014
17.1 18.0 19.0 20.0 21.0
2015
22.6 18.0 11.9 5.3 —
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Primary risk in force on defaulted loans (1) $
1,625 $ 1,666 $ 1,753 $ 1,883 $ 2,089
(1)
Excludes risk related to loans subject
to the Freddie Mac Agreement.
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information - Claims and Reserves
Exhibit K 2015 2014
($ in
thousands)
Qtr 4 Qtr 3 Qtr 2 Qtr 1 Qtr 4
Net claims paid Prime $ 56,900 $ 65,396
$ 83,489 $ 76,186 $ 74,342
Alt-A 21,343 18,966 23,260
19,999 21,909
A minus and below 11,530
14,028 14,965 15,141
12,600
Total primary claims paid 89,773 98,390
121,714 111,326 108,851
Pool 6,477 8,721 10,798 8,874
8,086
Second-lien and other (143 )
(16 ) (53 ) (111 ) 283
Subtotal
96,107 107,095 132,459 120,089 117,220
Impact of captive
terminations (65 ) — — (12,000 ) —
Impact of
settlements 80,426 61,994
79,557 99,006 —
Total $
176,468 $ 169,089 $ 212,016 $ 207,095 $
117,220
Average claim paid (1) Prime $
46.9 $ 46.2 $ 48.1 $ 44.0 $ 48.7
Alt-A 61.7
60.2 59.5 54.6 58.7
A minus and below 40.6 42.5 40.1
35.9 39.3
Total primary average claims paid 48.7 47.8
48.7 44.2 49.0
Pool 56.3 51.3 69.7 51.5 46.5
Total $ 48.9 $ 47.8 $ 49.6 $ 44.5 $ 48.2
Average primary claim paid (2) $ 50.5 $
48.5 $ 49.6 $ 45.3 $ 50.4
Average total claim paid (2)
$ 50.6 $ 48.5 $ 50.4 $ 45.5 $ 49.4
($ in thousands,
except primary reserve per
December 31,
September 30,
June 30,
March 31, December 31,
primary default
amounts)
2015
2015
2015
2015 2014
Reserve for losses by category
Prime $ 480,481 $ 519,572 $ 562,918 $ 640,919
$ 700,174
Alt-A 203,706
234,772
256,854 278,350 292,293
A minus and below 129,352
137,441 148,043 163,390 179,103
IBNR and other 83,066
107,179 125,038 167,204 223,114
LAE 26,108 41,464
48,141 53,210 56,164
Reinsurance recoverable (3)
8,286 11,071 11,677
13,365 26,665
Total primary reserves
930,999 1,051,499
1,152,671 1,316,438 1,477,513
Pool
insurance 42,084 43,234 47,902 62,943 75,785
IBNR and
other 1,118 949 891 1,227 1,775
LAE
1,335 1,983 2,353
3,051 3,542
Total pool reserves
44,537 46,166 51,146
67,221 81,102
Total 1st lien reserves
975,536 1,097,665 1,203,817 1,383,659 1,558,615
Second-lien and other 863 905
975 1,055 1,417
Total
reserves $ 976,399 $ 1,098,570 $
1,204,792 $ 1,384,714 $ 1,560,032
1st lien
reserve per default Primary reserve per primary default
excluding IBNR and other $ 24,019 $ 26,237 $
27,279 $ 28,423 $ 27,683
(1)
Net of reinsurance recoveries and
without giving effect to the impact of captive terminations and
settlements.
(2)
Before reinsurance recoveries and
without giving effect to the impact of captive terminations and
settlements.
(3)
Primarily represents ceded losses on
captive transactions and quota share reinsurance
transactions.
Radian Group Inc. and
Subsidiaries Mortgage Insurance Supplemental Information -
Default Statistics Exhibit L December 31,
September 30, June 30, March 31, December 31,
2015 2015 2015
2015 2014
Default
Statistics
Primary Insurance:
Prime
Number of insured loans 816,797 812,657 802,719
801,332 797,436
Number of loans in default 22,223
22,328 23,237 25,114 28,246
Percentage of loans in default
2.72 % 2.75 % 2.89 % 3.13 % 3.54 %
Alt-A
Number of insured loans 32,411 34,166 35,927 37,468
38,953
Number of loans in default 5,813 6,318 6,949
7,480 8,136
Percentage of loans in default 17.94
% 18.49 % 19.34 % 19.96 % 20.89 %
A minus and
below
Number of insured loans 31,902 33,018 34,224 35,425
36,688
Number of loans in default 7,267 7,229 7,490
7,846 8,937
Percentage of loans in default 22.78
% 21.89 % 21.89 % 22.15 % 24.36 %
Total
Primary Number of insured loans 881,110 879,841
872,870 874,225 873,077
Number of loans in default (1)
35,303 35,875 37,676 40,440 45,319
Percentage of loans in
default 4.01 % 4.08 % 4.32 % 4.63 % 5.19 %
(1)
Excludes the following number of loans
subject to the Freddie Mac Agreement that are in default as we no
longer have claims exposure on these loans:
December 31, September
30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
Number of loans in default 2,821 2,993 3,246 3,715
4,467
Radian Group Inc. and
Subsidiaries Mortgage Insurance Supplemental Information -
Captives, QSR and Persistency Exhibit M
2015 2014
($ in
thousands)
Qtr 4 Qtr 3 Qtr 2 Qtr 1 Qtr 4
1st Lien
Captives
Premiums ceded to captives $ 2,268 $ 2,434 $
2,700 $ 2,585 $ 3,078
% of total premiums 1.0
% 1.0 % 1.1 % 1.1 % 1.3 %
Insurance in force included in
captives (1) 2.1 % 2.2 % 2.4 % 2.5 % 2.8 %
Risk in force included in captives (1) 1.9 %
2.1 % 2.2 % 2.4 % 2.7 %
Initial Quota
Share Reinsurance (“QSR”) Transaction
QSR ceded premiums written $ 3,145 $ 3,437 $
3,822 $ 4,067 $ (4,801 )
% of premiums written 1.3
% 1.4 % 1.5 % 1.6 % (1.9 )%
QSR ceded premiums earned
$ 4,647 $ 5,067 $ 6,425 $ 6,018 $ (2,869 )
% of
premiums earned 1.9 % 2.1 % 2.6 % 2.5 % (1.2 )%
Ceding commissions $ 681 $ 745 $ 828 $ 880 $
1,108
Risk in force included in QSR (2) $
836,192 $ 889,298 $ 954,673 $ 1,041,383 $ 1,105,545
Second QSR
Transaction
QSR ceded premiums written $ 3,789 $ 5,030 $
394 $ 6,529 $ 9,303
% of premiums written 1.6
% 2.0 % 0.2 % 2.6 % 3.7 %
QSR ceded premiums earned
$ 5,876 $ 7,134 $ 3,040 $ 8,768 $ 8,339
% of
premiums earned 2.5 % 3.0 % 1.2 % 3.6 % 3.6 %
Ceding commissions $ 1,872 $ 1,998 $ 2,154 $
2,285 $ 3,256
Risk in force included in QSR (2) $
1,294,838 $ 1,364,615 $ 1,440,312 $ 1,533,677 $ 1,615,554
Persistency (twelve months ended) (3) 78.8
% 79.2 % 80.1 % 82.6 % 84.2 %
Persistency (quarterly,
annualized) 81.8 % 80.5 % 76.2 % 80.3 %
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 risk in
force.
(3)
Effective March 31, 2015, we refined
our persistency calculation to incorporate loan level detail rather
than aggregated portfolio data. Prior periods have been
recalculated and reflect the current calculation
methodology.
FORWARD-LOOKING STATEMENTS
All statements in this report that address events, developments
or results that we expect or anticipate may occur in the future are
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, Section 21E of the Exchange Act and the
U.S. Private Securities Litigation Reform Act of 1995. In most
cases, forward-looking statements may be identified by words such
as "anticipate," "may," "will," "could," "should," "would,"
"expect," "intend," "plan," "goal," "contemplate," "believe,"
"estimate," "predict," "project," "potential," "continue," "seek,"
"strategy," "future," "likely" or the negative or other variations
on these words and other similar expressions. These statements,
which may include, without limitation, projections regarding our
future performance and financial condition, are made on the basis
of management's current views and assumptions with respect to
future events. Any forward-looking statement is not a guarantee of
future performance and actual results could differ materially from
those contained in the forward-looking statement. These statements
speak only as of the date they were made, and we undertake no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
We operate in a changing environment. New risks emerge from time to
time and it is not possible for us to predict all risks that may
affect us. The forward-looking statements, as well as our prospects
as a whole, are subject to risks and uncertainties that could cause
actual results to differ materially from those set forth in the
forward-looking statements including:
- changes in general economic and
political conditions, including in particular but without
limitation, unemployment rates and changes in housing markets and
mortgage credit markets;
- changes in the way customers,
investors, regulators or legislators perceive the strength of
private mortgage insurers;
- Radian Guaranty Inc.’s ability to
remain eligible under the Private Mortgage Insurer Eligibility
Requirements (“PMIERs”) and other applicable requirements imposed
by the Federal Housing Finance Agency (“FHFA”) and by Fannie Mae
and Freddie Mac (collectively, the “GSEs”) to insure loans
purchased by the GSEs;
- our ability to maintain sufficient
holding company liquidity to meet our short- and long-term
liquidity needs and to successfully execute and implement actions
and activities related to our capital plans, including our ability
to enter into and receive GSE approval for a reinsurance
transaction to reduce exposure to our single premium policies,
which we may not be able to do on favorable terms, if at all;
- our ability to successfully execute and
implement our business plans and strategies, including in
particular but without limitation, plans and strategies that
require GSE approval;
- our ability to maintain an adequate
level of capital in our insurance subsidiaries to satisfy existing
and future state regulatory requirements;
- changes in the charters or business
practices of, or rules or regulations imposed by or applicable to
the GSEs;
- any disruption in the servicing of
mortgages covered by our insurance policies, as well as poor
servicer performance;
- a decrease in the persistency rates of
our mortgage insurance policies;
- heightened competition in our mortgage
insurance business, including in particular but without limitation,
increased price competition;
- changes to the current system of
housing finance;
- the effect of the Dodd-Frank Wall
Street Reform and Consumer Protection Act on the financial services
industry in general, and on our businesses in particular;
- the adoption of new laws and
regulations, or changes in existing laws and regulations, or the
way they are interpreted;
- the amount and timing of potential
payments or adjustments associated with federal or other tax
examinations, including deficiencies assessed by the Internal
Revenue Service (“IRS”) resulting from the examination of our 2000
through 2007 tax years, which we are currently contesting;
- the possibility that we may fail to
estimate accurately the likelihood, magnitude and timing of losses
in connection with establishing loss reserves for our mortgage
insurance business;
- volatility in our results of operations
caused by changes in the fair value of our assets and liabilities,
including a significant portion of our investment portfolio;
- changes in “GAAP” (accounting
principles generally accepted in the U.S.) or “SAP” (statutory
accounting practices including those required or permitted, if
applicable, by the insurance departments of the respective states
of domicile of our insurance subsidiaries) rules and guidance, or
their interpretation;
- legal and other limitations on amounts
we may receive from our subsidiaries; and
- the possibility that we may need to
impair the estimated fair value of goodwill established in
connection with our acquisition of Clayton Holdings LLC.
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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160128005352/en/
Radian Group Inc.Emily Riley,
215-231-1035emily.riley@radian.biz
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