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) October
27, 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 October 27, 2015, Radian Group Inc. issued a news release announcing
its financial results for the quarter ended September 30, 2015. A copy
of this news release is furnished as Exhibit 99.1 to this report.
The information included in, or furnished with, this report shall not be
deemed "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934 (the "Exchange Act"), nor shall it be deemed incorporated by
reference in any filing under the Securities Act of 1933 or the Exchange
Act, except as shall be expressly set forth by specific reference in
such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
99.1* Radian Group Inc. News Release dated October 27,
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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October 27, 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 October 27, 2015.
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* Furnished herewith.
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Exhibit 99.1
Radian
Announces Third Quarter 2015 Financial Results
– Reports
net income of $70 million or $0.29 per diluted share –
–
Adjusted diluted net operating income of $0.31 per share –
PHILADELPHIA--(BUSINESS WIRE)--October 27, 2015--Radian Group Inc.
(NYSE: RDN) today reported net income for the quarter ended September
30, 2015, of $70.1 million, or $0.29 per diluted share. This compares to
net income for the quarter ended September 30, 2014, of $153.6 million,
or $0.67 per diluted share.
Adjusted pretax operating income for the quarter ended September 30,
2015, was $115.6 million, compared to adjusted pretax operating income
for the quarter ended September 30, 2014, of $125.8 million. Adjusted
diluted net operating income per share for the quarter ended September
30, 2015, was $0.31. See “Non-GAAP Financial Measures” below.
Key Financial Highlights (dollars in millions, except per
share data)
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Quarter Ended September 30, 2015
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Quarter Ended September 30, 2014
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Percent Change
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Net income from continuing operations
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$70.1
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$132.0
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(47%)
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Diluted net income per share from continuing operations
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$0.29
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$0.58
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(50%)
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Adjusted pretax operating income
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$115.6
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$125.8
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(8%)
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Adjusted diluted net operating income per share *
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$0.31
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$0.37
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(16%)
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Revenues
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$297.3
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$272.1
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9%
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Book value per share
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$11.77
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$9.08
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30%
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* Adjusted diluted net operating income per share is
calculated using the company’s statutory tax rate.
“We were successful in growing our mortgage insurance in force with
high-quality business and in further expanding the scope of services we
offer through our fee-based businesses,” said Radian’s Chief Executive
Officer S.A. Ibrahim. “We are excited about the growth and opportunities
ahead for our mortgage insurance and mortgage and real estate services
segments, as we continue to enhance and seek new opportunities for our
existing products and services.”
THIRD QUARTER HIGHLIGHTS AND RECENT EVENTS
Mortgage Insurance
-
New mortgage insurance written (NIW) was $11.2 billion for the
quarter, compared to $11.8 billion in the second quarter of 2015 and
$11.2 billion in the prior-year quarter.
-
Of the $11.2 billion in new business written in the third quarter
of 2015, 73 percent was written with monthly premiums and 27
percent with single premiums. This compares to a mix of 68 percent
monthly premiums and 32 percent single premiums in the second
quarter of 2015.
-
Refinances accounted for 13 percent of total NIW in the third
quarter of 2015, compared to 23 percent in the second quarter of
2015, and 16 percent a year ago.
-
NIW continued to consist of loans with excellent risk
characteristics.
-
Total primary mortgage insurance in force as of September 30, 2015,
was $174.9 billion, compared to $172.7 billion as of June 30, 2015,
and $169.2 billion as of September 30, 2014. Persistency, which is the
percentage of mortgage insurance in force that remains on the
company’s books after a twelve-month period, was 79.2 percent as of
September 30, 2015, compared to 80.1 percent as of June 30, 2015, and
84.3 percent as of September 30, 2014. Annualized persistency for the
three-months ended September 30, 2015, was 80.5 percent, compared to
76.2 percent for the three-months ended June 30, 2015, and 84.0
percent for the three-months ended September 30, 2014.
-
Total net premiums earned were $227.4 million for the quarter ended
September 30, 2015, which included the favorable impact of an
approximate $5 million reduction to the company’s accrual for
rescission-related premium refunds, resulting from a reduction in
rescission estimates. This compares to $237.4 million for the quarter
ended June 30, 2015, which included the favorable impact of two
significant items totaling $15.6 million, and $217.8 million for the
quarter ended September 30, 2014.
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The mortgage insurance provision for losses was $64.1 million in the
third quarter of 2015, compared to $31.6 million in the second quarter
of 2015, and $48.9 million in the prior-year period.
-
As compared to the third quarter of 2015, results in the second
quarter of 2015 significantly benefited from a reduction in the
company’s estimated claim rate on new defaults.
-
The loss ratio in the third quarter was 28.2 percent, compared to
13.3 percent in the second quarter of 2015 and 22.5 percent in the
third quarter of 2014.
-
Mortgage insurance loss reserves were $1.1 billion as of September
30, 2015, compared to $1.2 billion as of June 30, 2015, and $1.6
billion as of September 30, 2014.
-
Primary reserve per primary default (excluding IBNR and other
reserves) was $26,237 as of September 30, 2015. This compares to
primary reserve per primary default of $27,279 as of June 30,
2015, and $27,477 as of September 30, 2014.
-
The total number of primary delinquent loans decreased by 5 percent in
the third quarter from the second quarter of 2015, and by 23 percent
from the third quarter of 2014. The primary mortgage insurance
delinquency rate decreased to 4.1 percent in the third quarter of
2015, compared to 4.3 percent in the second quarter of 2015, and 5.4
percent in the third quarter of 2014.
-
Total mortgage insurance claims paid were $169.1 million in the third
quarter, compared to $212.0 million in the second quarter, and $173.9
million in the third quarter of 2014. Claims paid in the third quarter
of 2015 include $62.0 million of claims paid relating to the September
2014 BofA Settlement Agreement. The company expects mortgage insurance
net claims paid for the full-year 2015 of approximately $700 million.
Claims paid for the full-year 2016 are expected to be approximately
$400–450 million.
-
Radian Guaranty expects to be able to immediately comply with the
financial requirements of the Private Mortgage Insurer Eligibility
Requirements (PMIERs) developed by Fannie Mae and Freddie Mac that
come into effect on December 31, 2015, by utilizing approximately $320
million of existing holding company liquidity.
Mortgage and Real Estate Services
-
On June 30, 2014, Radian completed the acquisition of Clayton Holdings
LLC, a leading provider of risk-based analytics, residential loan due
diligence, consulting, surveillance and staffing solutions. The
company also provides customized Real Estate Owned (REO) asset
management and single-family rental services through its Green River
Capital subsidiary; advanced Automated Valuation Models, Broker Price
Opinions and technology solutions to monitor loan portfolio
performance, acquire and track non-performing loans, and value and
sell residential real estate through its Red Bell Real Estate
subsidiary; and a global reach through its Clayton EuroRisk subsidiary.
-
Total revenues for the quarter were $43.1 million, compared to $44.6
for the second quarter of 2015, and $42.2 million for the third
quarter of 2014. Gross profit for the quarter was $17.2 million,
compared to $19.1 million for the second quarter of 2015, and $18.3
million for the third quarter of 2014.
-
Adjusted pretax operating income before corporate allocations for the
quarter ended September 30, 2015, was $5.7 million, compared to $7.6
million for the quarter ended June 30, 2015, and $9.4 million for the
quarter ended September 30, 2014.
-
In order to help facilitate the evaluation of its Services segment,
the company has introduced an additional non-GAAP financial measure
representing earnings before interest, income taxes, depreciation and
amortization (EBITDA). You may find details regarding this measure and
its definition in press release Exhibits E, F and G.
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In October, Clayton announced that it had acquired ValuAmerica, Inc.,
a national title agency and a fully-compliant 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.
Expenses
Other operating expenses were $65.1 million in the third quarter,
compared to $67.7 million in the second quarter of 2015, and $51.2
million in the third quarter of last year.
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Operating expenses for the third quarter of 2015 were comprised of
$51.5 million for the Mortgage Insurance segment, compared to $54.4
million in the second quarter of 2015, and $42.2 million in the third
quarter of last year.
-
Operating expenses for the third quarter of 2015 were comprised of
$13.1 million for the Services segment, compared to $12.8 million in
the second quarter of 2015, and $9.5 million in the third quarter of
last year.
CAPITAL AND LIQUIDITY UPDATE
Radian Group maintains approximately $710 million of currently available
liquidity.
-
Currently available holding company liquidity of approximately $710
million reflects the following fourth quarter 2015 transactions:
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A cash payment to repurchase $8.5 million principal amount of the
company’s convertible senior notes due 2017 in a negotiated
transaction
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The expected settlement of a holder’s conversion of $10.0 million
principal amount of the company’s convertible senior notes due 2019
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Cash utilized for the Clayton acquisition of ValuAmerica
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Book value per share at September 30, 2015, was $11.77, compared to
$11.28 at June 30, 2015.
-
As of September 30, 2015, Radian Guaranty’s risk-to-capital ratio was
16.5:1 and statutory capital was $2.0 billion. The Mortgage Insurance
segment’s combined risk-to-capital ratio was 17.9:1 and statutory
capital was $2.3 billion.
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As of September 30, 2015, a total of $2.3 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.
Radian expects to exercise its option to recapture 50 percent of the
ceded risk under the Second Quota Share Reinsurance Transaction on
December 31, 2015.
CONFERENCE CALL
Radian will discuss third quarter financial results in a conference call
today, Tuesday, October 27, 2015, at 10:00 a.m. Eastern time. The
conference call will be broadcast live over the Internet at http://www.radian.biz/page?name=Webcasts
or at www.radian.biz. The call may also be accessed by dialing
800.230.1096 inside the U.S., or 612.332.0228 for international callers,
using passcode 371396 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,
using passcode 371396 or by referencing Radian.
In addition to the information provided in the company’s earnings news
release, other statistical and financial information, which is expected
to be referred to during the conference call, will be available on
Radian's website under Investors >Quarterly Results, or by clicking on http://www.radian.biz/page?name=QuarterlyResults.
NON-GAAP FINANCIAL MEASURES
Radian believes that adjusted pretax operating income and adjusted
diluted net operating income per share (non-GAAP measures) facilitate
evaluation of the company’s fundamental financial performance and
provide relevant and meaningful information to investors about the
ongoing operating results of the company. On a consolidated basis, these
measures are not recognized in accordance with accounting principles
generally accepted in the United States of America (GAAP) and should not
be viewed as alternatives to GAAP measures of performance. The measures
described below have been established in order to increase transparency
for the purpose of evaluating the company’s core operating trends and
enabling more meaningful comparisons with Radian’s competitors.
Adjusted pretax operating income is defined as earnings excluding the
impact of certain items that are not viewed as part of the operating
performance of the company’s primary activities, or not expected to
result in an economic impact equal to the amount reflected in pretax
income (loss) from continuing operations. Adjusted diluted net operating
income per share represents a diluted net income per share calculation
using as its basis adjusted pretax operating income, net of taxes at the
company’s statutory tax rate for the period.
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 press release 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.
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Exhibit A:
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Condensed Consolidated Statements of Operations Trend Schedule
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Exhibit B:
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Net Income Per Share Trend Schedule
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Exhibit C:
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Condensed Consolidated Balance Sheets
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Exhibit D:
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Discontinued Operations
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Exhibit E:
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Segment Information
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Exhibit F:
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Definition of Consolidated Non-GAAP Financial Measure
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Exhibit G:
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Consolidated Non-GAAP Financial Measure Reconciliations
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Exhibit H:
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Mortgage Insurance Supplemental Information
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New Insurance Written
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Exhibit I:
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Mortgage Insurance Supplemental Information
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Primary Insurance in Force and Risk in Force by Product, Statutory
Capital Ratios
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Exhibit J:
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Mortgage Insurance Supplemental Information
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Percentage of Primary Risk in Force by FICO, LTV and Policy Year
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Exhibit K:
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Mortgage Insurance Supplemental Information
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Claims and Reserves
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Exhibit L:
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Mortgage Insurance Supplemental Information
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Default Statistics
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Exhibit M:
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Mortgage Insurance Supplemental Information
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Captives, QSR and Persistency
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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 3
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Qtr 2
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Qtr 1
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Qtr 4
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Qtr 3
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Revenues:
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Net premiums earned - insurance
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$
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227,433
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$
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237,437
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$
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224,595
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$
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224,293
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$
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217,827
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Services revenue
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42,189
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43,503
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30,630
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34,450
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42,243
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Net investment income
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22,091
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19,285
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17,328
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16,531
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17,143
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Net gains (losses) on investments and other financial instruments
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3,868
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28,448
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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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Other income
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1,711
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1,743
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1,331
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1,793
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1,162
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Total revenues
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297,292
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330,416
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290,663
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295,050
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272,081
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Expenses:
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Provision for losses
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64,192
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32,560
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45,028
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82,867
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48,942
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Policy acquisition costs
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2,880
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6,963
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7,750
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6,443
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4,240
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Direct cost of services
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24,949
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23,520
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19,253
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|
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19,709
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23,896
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Other operating expenses
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65,082
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67,731
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53,774
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85,800
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51,225
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Interest expense
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21,220
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24,501
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24,385
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24,200
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23,989
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Loss on induced conversion and debt extinguishment
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11
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91,876
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—
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—
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—
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Amortization and impairment of intangible assets
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3,273
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3,281
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3,023
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5,354
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3,294
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Total expenses
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181,607
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|
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250,432
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|
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153,213
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|
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224,373
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155,586
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Pretax income from continuing operations
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115,685
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79,984
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137,450
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70,677
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|
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116,495
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Income tax provision (benefit)
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45,594
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34,791
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|
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45,723
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|
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(807,349
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)
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|
(15,536
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)
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Net income from continuing operations
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|
70,091
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|
|
45,193
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|
|
91,727
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|
|
878,026
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132,031
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Income (loss) from discontinued operations, net of tax
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—
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4,855
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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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Net income
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$
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70,091
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|
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$
|
50,048
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|
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$
|
92,257
|
|
|
$
|
428,335
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|
|
$
|
153,590
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|
|
|
|
|
|
|
|
|
|
|
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Diluted net income per share:
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
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|
$
|
0.29
|
|
|
$
|
0.20
|
|
|
$
|
0.39
|
|
|
$
|
3.63
|
|
|
$
|
0.58
|
|
Income (loss) from discontinued operations, net of tax
|
|
—
|
|
|
0.02
|
|
|
—
|
|
|
(1.85
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)
|
|
0.09
|
|
Net income
|
|
$
|
0.29
|
|
|
$
|
0.22
|
|
|
$
|
0.39
|
|
|
$
|
1.78
|
|
|
$
|
0.67
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Mortgage Insurance Key Ratios
|
|
|
|
|
|
|
|
|
|
|
Loss ratio (1)
|
|
28.2
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%
|
|
13.3
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%
|
|
20.4
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%
|
|
36.9
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%
|
|
22.5
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%
|
Expense ratio - NPE basis (1)
|
|
23.9
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%
|
|
25.8
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%
|
|
23.0
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%
|
|
36.9
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%
|
|
21.3
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%
|
Expense ratio - NPW basis (2)
|
|
22.5
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%
|
|
24.4
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%
|
|
21.3
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%
|
|
33.8
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%
|
|
18.9
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%
|
|
|
|
(1)
|
|
Calculated on a GAAP basis using net premiums earned (“NPE”).
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(2)
|
|
Calculated on a GAAP basis using net premiums written (“NPW”).
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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, the
operating results of Radian Asset Assurance are classified as
discontinued operations for all periods presented in our condensed
consolidated statements of operations. See Exhibit D for additional
information on discontinued operations.
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
|
Net Income Per Share Trend Schedule
|
|
Exhibit B
|
|
|
|
The calculation of basic and diluted net income per share was as
follows:
|
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
(In thousands, except per share amounts)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
Net income from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations—basic
|
|
$
|
70,091
|
|
|
$
|
45,193
|
|
|
$
|
91,727
|
|
|
$
|
878,026
|
|
|
$
|
132,031
|
|
Adjustment for dilutive Convertible Senior Notes due 2019, net of
tax (1)
|
|
3,714
|
|
|
3,707
|
|
|
3,673
|
|
|
3,641
|
|
|
5,552
|
|
Net income from continuing operations—diluted
|
|
$
|
73,805
|
|
|
$
|
48,900
|
|
|
$
|
95,400
|
|
|
$
|
881,667
|
|
|
$
|
137,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income:
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations—basic
|
|
$
|
70,091
|
|
|
$
|
45,193
|
|
|
$
|
91,727
|
|
|
$
|
878,026
|
|
|
$
|
132,031
|
|
Income (loss) from discontinued operations, net of tax
|
|
—
|
|
|
4,855
|
|
|
530
|
|
|
(449,691
|
)
|
|
21,559
|
|
Net income—basic
|
|
70,091
|
|
|
50,048
|
|
|
92,257
|
|
|
428,335
|
|
|
153,590
|
|
Adjustment for dilutive Convertible Senior Notes due 2019, net of
tax (1)
|
|
3,714
|
|
|
3,707
|
|
|
3,673
|
|
|
3,641
|
|
|
5,552
|
|
Net income—diluted
|
|
$
|
73,805
|
|
|
$
|
53,755
|
|
|
$
|
95,930
|
|
|
$
|
431,976
|
|
|
$
|
159,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding—basic
|
|
207,938
|
|
|
193,112
|
|
|
191,224
|
|
|
191,053
|
|
|
191,050
|
|
Dilutive effect of Convertible Senior Notes due 2017
|
|
1,798
|
|
|
12,438
|
|
|
10,886
|
|
|
10,590
|
|
|
6,342
|
|
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)
|
|
3,323
|
|
|
3,364
|
|
|
3,202
|
|
|
3,422
|
|
|
2,939
|
|
Adjusted average common shares outstanding—diluted
|
|
250,795
|
|
|
246,650
|
|
|
243,048
|
|
|
242,801
|
|
|
238,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
$
|
0.34
|
|
|
$
|
0.23
|
|
|
$
|
0.48
|
|
|
$
|
4.60
|
|
|
$
|
0.69
|
|
Income (loss) from discontinued operations, net of tax
|
|
—
|
|
|
0.03
|
|
|
—
|
|
|
(2.36
|
)
|
|
0.11
|
|
Net income
|
|
$
|
0.34
|
|
|
$
|
0.26
|
|
|
$
|
0.48
|
|
|
$
|
2.24
|
|
|
$
|
0.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
$
|
0.29
|
|
|
$
|
0.20
|
|
|
$
|
0.39
|
|
|
$
|
3.63
|
|
|
$
|
0.58
|
|
Income (loss) from discontinued operations, net of tax
|
|
—
|
|
|
0.02
|
|
|
—
|
|
|
(1.85
|
)
|
|
0.09
|
|
Net income
|
|
$
|
0.29
|
|
|
$
|
0.22
|
|
|
$
|
0.39
|
|
|
$
|
1.78
|
|
|
$
|
0.67
|
|
|
|
|
(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 3
|
|
|
|
|
|
|
|
|
Qtr 2
|
|
|
|
|
|
|
|
|
Qtr 1
|
|
|
|
|
|
|
|
|
Qtr 4
|
|
|
|
|
|
|
|
|
Qtr 3
|
Shares of common stock equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
469
|
|
|
|
|
|
|
|
|
|
264
|
|
|
|
|
|
|
|
|
|
540
|
|
|
|
|
|
|
|
|
|
542
|
|
|
|
|
|
|
|
|
|
557
|
|
|
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Condensed Consolidated Balance Sheets
|
Exhibit C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
(In thousands, except per share data)
|
|
2015
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
$
|
4,376,771
|
|
|
$
|
4,309,148
|
|
|
$
|
3,621,646
|
|
|
$
|
3,629,299
|
|
|
$
|
3,529,310
|
|
Cash
|
|
69,030
|
|
|
51,381
|
|
|
57,204
|
|
|
30,465
|
|
|
30,491
|
|
Restricted cash
|
|
10,280
|
|
|
12,633
|
|
|
14,220
|
|
|
14,031
|
|
|
16,509
|
|
Accounts and notes receivable
|
|
65,951
|
|
|
72,093
|
|
|
64,405
|
|
|
85,792
|
|
|
69,029
|
|
Deferred income taxes, net
|
|
601,893
|
|
|
651,238
|
|
|
649,996
|
|
|
700,201
|
|
|
—
|
|
Goodwill and other intangible assets, net
|
|
287,334
|
|
|
290,640
|
|
|
293,798
|
|
|
288,240
|
|
|
293,632
|
|
Other assets
|
|
349,657
|
|
|
349,371
|
|
|
340,276
|
|
|
357,864
|
|
|
364,665
|
|
Assets held for sale
|
|
—
|
|
|
—
|
|
|
1,755,873
|
|
|
1,736,444
|
|
|
1,637,233
|
|
Total assets
|
|
$
|
5,760,916
|
|
|
$
|
5,736,504
|
|
|
$
|
6,797,418
|
|
|
$
|
6,842,336
|
|
|
$
|
5,940,869
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
Unearned premiums
|
|
$
|
676,938
|
|
|
$
|
665,947
|
|
|
$
|
657,555
|
|
|
$
|
644,504
|
|
|
$
|
625,269
|
|
Reserve for losses and loss adjustment expenses
|
|
1,098,570
|
|
|
1,204,792
|
|
|
1,384,714
|
|
|
1,560,032
|
|
|
1,591,150
|
|
Long-term debt
|
|
1,230,246
|
|
|
1,224,892
|
|
|
1,202,535
|
|
|
1,192,299
|
|
|
1,182,247
|
|
Other liabilities
|
|
311,855
|
|
|
278,929
|
|
|
310,642
|
|
|
326,743
|
|
|
314,395
|
|
Liabilities held for sale
|
|
—
|
|
|
—
|
|
|
966,078
|
|
|
947,008
|
|
|
493,407
|
|
Total liabilities
|
|
3,317,609
|
|
|
3,374,560
|
|
|
4,521,524
|
|
|
4,670,586
|
|
|
4,206,468
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity component of currently redeemable convertible senior notes
|
|
7,737
|
|
|
8,546
|
|
|
68,982
|
|
|
74,690
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
224
|
|
|
226
|
|
|
209
|
|
|
209
|
|
|
209
|
|
Additional paid-in capital
|
|
1,825,034
|
|
|
1,816,545
|
|
|
1,648,436
|
|
|
1,638,552
|
|
|
1,706,222
|
|
Retained earnings (deficit)
|
|
617,731
|
|
|
548,161
|
|
|
498,593
|
|
|
406,814
|
|
|
(21,044
|
)
|
Accumulated other comprehensive (loss) income
|
|
(7,419
|
)
|
|
(11,534
|
)
|
|
59,674
|
|
|
51,485
|
|
|
49,014
|
|
Total common stockholders’ equity
|
|
2,435,570
|
|
|
2,353,398
|
|
|
2,206,912
|
|
|
2,097,060
|
|
|
1,734,401
|
|
Total liabilities and stockholders’ equity
|
|
$
|
5,760,916
|
|
|
$
|
5,736,504
|
|
|
$
|
6,797,418
|
|
|
$
|
6,842,336
|
|
|
$
|
5,940,869
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding
|
|
206,870
|
|
|
208,587
|
|
|
191,416
|
|
|
191,054
|
|
|
191,050
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share
|
|
$
|
11.77
|
|
|
$
|
11.28
|
|
|
$
|
11.53
|
|
|
$
|
10.98
|
|
|
$
|
9.08
|
|
|
Radian Group Inc. and Subsidiaries
|
Discontinued Operations
|
Exhibit D
|
|
The income from discontinued operations, net of tax consisted of
the following components for the periods indicated:
|
|
|
|
|
|
2015
|
(In thousands)
|
|
Qtr 2
|
|
Qtr 1
|
Net premiums earned
|
|
$
|
—
|
|
|
$
|
1,007
|
|
Net investment income
|
|
—
|
|
|
9,153
|
|
Net gains on investments and other financial instruments
|
|
7,818
|
|
|
13,668
|
|
Change in fair value of derivative instruments
|
|
—
|
|
|
2,625
|
|
Total revenues
|
|
7,818
|
|
|
26,453
|
|
|
|
|
|
|
Provision for losses
|
|
—
|
|
|
502
|
|
Policy acquisition costs
|
|
—
|
|
|
(191
|
)
|
Other operating expense
|
|
—
|
|
|
4,107
|
|
Total expenses
|
|
—
|
|
|
4,418
|
|
|
|
|
|
|
Equity in net loss of affiliates
|
|
—
|
|
|
(13
|
)
|
Income from operations of businesses held for sale
|
|
7,818
|
|
|
22,022
|
|
Loss on sale
|
|
(350
|
)
|
|
(13,930
|
)
|
Income tax provision
|
|
2,613
|
|
|
7,562
|
|
Income from discontinued operations, net of tax
|
|
$
|
4,855
|
|
|
$
|
530
|
|
|
Radian Group Inc. and Subsidiaries
|
Segment Information
|
Exhibit E (page 1 of 2)
|
|
Summarized financial information concerning our operating segments
as of and for the periods indicated, is as follows. For a definition
of adjusted pretax operating income and EBITDA, along with
reconciliations to consolidated GAAP measures, see Exhibits F and G.
|
|
|
|
|
|
Mortgage Insurance
|
|
|
2015
|
|
2014
|
(In thousands)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
Net premiums written - insurance
|
|
$
|
242,168
|
|
|
$
|
251,082
|
|
|
$
|
241,908
|
|
|
$
|
244,506
|
|
|
$
|
245,775
|
|
Increase in unearned premiums
|
|
(14,735
|
)
|
|
(13,645
|
)
|
|
(17,313
|
)
|
|
(20,213
|
)
|
|
(27,948
|
)
|
Net premiums earned - insurance
|
|
227,433
|
|
|
237,437
|
|
|
224,595
|
|
|
224,293
|
|
|
217,827
|
|
Net investment income (1)
|
|
22,091
|
|
|
19,285
|
|
|
17,328
|
|
|
16,531
|
|
|
17,143
|
|
Other income (1)
|
|
1,711
|
|
|
1,743
|
|
|
1,331
|
|
|
1,668
|
|
|
1,037
|
|
Total
|
|
251,235
|
|
|
258,465
|
|
|
243,254
|
|
|
242,492
|
|
|
236,007
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for losses
|
|
64,128
|
|
|
31,637
|
|
|
45,851
|
|
|
83,649
|
|
|
48,942
|
|
Change in expected economic loss or recovery for consolidated VIEs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
|
(190
|
)
|
Policy acquisition costs
|
|
2,880
|
|
|
6,963
|
|
|
7,750
|
|
|
6,443
|
|
|
4,240
|
|
Other operating expenses before corporate allocations
|
|
36,632
|
|
|
41,853
|
|
|
34,050
|
|
|
62,591
|
|
|
33,679
|
|
Total (2)
|
|
103,640
|
|
|
80,453
|
|
|
87,651
|
|
|
152,667
|
|
|
86,671
|
|
Adjusted pretax operating income before corporate allocations
|
|
147,595
|
|
|
178,012
|
|
|
155,603
|
|
|
89,825
|
|
|
149,336
|
|
Allocation of corporate operating expenses (1)
|
|
14,893
|
|
|
12,516
|
|
|
9,758
|
|
|
13,729
|
|
|
8,520
|
|
Allocation of interest expense (1)
|
|
16,797
|
|
|
20,070
|
|
|
19,953
|
|
|
19,760
|
|
|
19,565
|
|
Adjusted pretax operating income
|
|
$
|
115,905
|
|
|
$
|
145,426
|
|
|
$
|
125,892
|
|
|
$
|
56,336
|
|
|
$
|
121,251
|
|
|
|
|
|
|
Services
|
|
|
2015
|
|
2014
|
(In thousands)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
Services revenue
|
|
$
|
43,114
|
|
|
$
|
44,595
|
|
|
$
|
31,532
|
|
|
$
|
34,466
|
|
|
$
|
42,243
|
|
Other income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
891
|
|
|
125
|
|
Total (2)
|
|
43,114
|
|
|
44,595
|
|
|
31,532
|
|
|
35,357
|
|
|
42,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct cost of services
|
|
25,870
|
|
|
25,501
|
|
|
19,253
|
|
|
19,709
|
|
|
23,896
|
|
Other operating expenses before corporate allocations
|
|
11,533
|
|
|
11,522
|
|
|
8,857
|
|
|
8,360
|
|
|
9,054
|
|
Total
|
|
37,403
|
|
|
37,023
|
|
|
28,110
|
|
|
28,069
|
|
|
32,950
|
|
Adjusted pretax operating income before corporate allocations (3)
|
|
5,711
|
|
|
7,572
|
|
|
3,422
|
|
|
7,288
|
|
|
9,418
|
|
Allocation of corporate operating expenses
|
|
1,567
|
|
|
1,307
|
|
|
981
|
|
|
740
|
|
|
404
|
|
Allocation of interest expense
|
|
4,423
|
|
|
4,431
|
|
|
4,432
|
|
|
4,440
|
|
|
4,424
|
|
Adjusted pretax operating (loss) income
|
|
$
|
(279
|
)
|
|
$
|
1,834
|
|
|
$
|
(1,991
|
)
|
|
$
|
2,108
|
|
|
$
|
4,590
|
|
|
|
|
(1)
|
|
For periods prior to the quarter ended June 30, 2015, includes
certain corporate income and expenses that have been reallocated
from our prior financial guaranty segment to the Mortgage
Insurance segment and that were not reclassified to discontinued
operations.
|
(2)
|
|
Inter-segment information:
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
Inter-segment expense included in Mortgage Insurance segment
|
|
$
|
925
|
|
|
$
|
1,092
|
|
|
$
|
902
|
|
|
$
|
782
|
|
|
$
|
—
|
|
Inter-segment revenue included in Services segment
|
|
925
|
|
|
1,092
|
|
|
902
|
|
|
782
|
|
|
—
|
|
|
Radian Group Inc. and Subsidiaries
|
Segment Information
|
Exhibit E (page 2 of 2)
|
|
(3) Supplemental information for Services EBITDA (see
definition in Exhibit F):
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
Adjusted pretax operating income before corporate allocations
|
|
$
|
5,711
|
|
|
$
|
7,572
|
|
|
$
|
3,422
|
|
|
$
|
7,288
|
|
|
$
|
9,418
|
|
Depreciation and amortization
|
|
555
|
|
|
482
|
|
|
449
|
|
|
442
|
|
|
383
|
|
Services EBITDA
|
|
$
|
6,266
|
|
|
$
|
8,054
|
|
|
$
|
3,871
|
|
|
$
|
7,730
|
|
|
$
|
9,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2015
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Insurance
|
|
|
|
|
|
|
|
Services
|
|
|
|
|
|
|
|
Total
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,408,200
|
|
|
|
|
|
|
|
|
$
|
352,716
|
|
|
|
|
|
|
|
|
$
|
5,760,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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).
|
|
Radian Group Inc. and Subsidiaries
|
Definition of Consolidated Non-GAAP Financial Measure
|
Exhibit F (page 2 of 2)
|
|
|
|
(4)
|
|
Amortization and impairment of intangible assets.
Amortization of intangible assets represents the periodic expense
required to amortize the cost of intangible assets over their
estimated useful lives. Intangible assets with an indefinite
useful life are also periodically reviewed for potential
impairment, and impairment adjustments are made whenever
appropriate. These charges are not viewed as part of the operating
performance of our primary activities and therefore are excluded
from our calculation of adjusted pretax operating income (loss).
|
|
|
|
(5)
|
|
Net impairment losses recognized in earnings. The
recognition of net impairment losses on investments can vary
significantly in both size and timing, depending on market credit
cycles. We do not view these impairment losses to be indicative of
our fundamental operating activities. Therefore, whenever these
losses occur, we exclude them from our calculation of adjusted
pretax operating income (loss).
|
|
|
|
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 2)
|
|
Reconciliation of Adjusted Pretax Operating Income (Loss) to
Consolidated Pretax Income from Continuing Operations
|
|
|
|
|
|
|
|
2015
|
|
2014
|
(In thousands)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
Adjusted pretax operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
Mortgage Insurance (1)
|
|
$
|
115,905
|
|
|
$
|
145,426
|
|
|
$
|
125,892
|
|
|
$
|
56,336
|
|
|
$
|
121,251
|
|
Services (2)
|
|
(279
|
)
|
|
1,834
|
|
|
(1,991
|
)
|
|
2,108
|
|
|
4,590
|
|
Total adjusted pretax operating income
|
|
115,626
|
|
|
147,260
|
|
|
123,901
|
|
|
58,444
|
|
|
125,841
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on investments and other financial instruments
(3)
|
|
3,868
|
|
|
28,448
|
|
|
16,779
|
|
|
17,967
|
|
|
(6,484
|
)
|
Loss on induced conversion and debt extinguishment
|
|
(11
|
)
|
|
(91,876
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Acquisition-related expenses (4)
|
|
(525
|
)
|
|
(567
|
)
|
|
(207
|
)
|
|
(380
|
)
|
|
432
|
|
Amortization and impairment of intangible assets (4)
|
|
(3,273
|
)
|
|
(3,281
|
)
|
|
(3,023
|
)
|
|
(5,354
|
)
|
|
(3,294
|
)
|
Consolidated pretax income from continuing operations
|
|
$
|
115,685
|
|
|
$
|
79,984
|
|
|
$
|
137,450
|
|
|
$
|
70,677
|
|
|
$
|
116,495
|
|
|
|
|
(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 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
Adjusted diluted net operating income per share
|
|
$
|
0.31
|
|
|
$
|
0.40
|
|
|
$
|
0.35
|
|
|
$
|
0.17
|
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
After tax per share impact:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on investments and other financial instruments
|
|
0.01
|
|
|
0.07
|
|
|
0.04
|
|
|
0.05
|
|
|
(0.02
|
)
|
Loss on induced conversion and debt extinguishment
|
|
—
|
|
|
(0.28
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization and impairment of intangible assets
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
(0.01
|
)
|
Difference between statutory and effective tax rate
|
|
(0.02
|
)
|
|
0.02
|
|
|
0.01
|
|
|
3.42
|
|
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share from continuing operations
|
|
$
|
0.29
|
|
|
$
|
0.20
|
|
|
$
|
0.39
|
|
|
$
|
3.63
|
|
|
$
|
0.58
|
|
|
|
|
(1)
|
|
Calculated using the company’s statutory tax rate.
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Consolidated Non-GAAP Financial Measure Reconciliations
|
Exhibit G (page 2 of 2)
|
|
Reconciliation of Services Segment EBITDA to Consolidated Pretax
Income from Continuing Operations
|
|
|
|
|
|
|
|
2015
|
|
2014
|
(In thousands)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
|
|
|
|
|
|
|
|
|
|
Services EBITDA
|
|
$
|
6,266
|
|
|
$
|
8,054
|
|
|
$
|
3,871
|
|
|
$
|
7,730
|
|
|
$
|
9,801
|
|
Allocation of corporate operating expenses to Services
|
|
(1,567
|
)
|
|
(1,307
|
)
|
|
(981
|
)
|
|
(740
|
)
|
|
(404
|
)
|
Allocation of corporate interest expenses to Services
|
|
(4,423
|
)
|
|
(4,431
|
)
|
|
(4,432
|
)
|
|
(4,440
|
)
|
|
(4,424
|
)
|
Services depreciation and amortization
|
|
(555
|
)
|
|
(482
|
)
|
|
(449
|
)
|
|
(442
|
)
|
|
(383
|
)
|
Services adjusted pretax operating (loss) income
|
|
(279
|
)
|
|
1,834
|
|
|
(1,991
|
)
|
|
2,108
|
|
|
4,590
|
|
Mortgage Insurance adjusted pretax operating income
|
|
115,905
|
|
|
145,426
|
|
|
125,892
|
|
|
56,336
|
|
|
121,251
|
|
Total adjusted pretax operating income
|
|
115,626
|
|
|
147,260
|
|
|
123,901
|
|
|
58,444
|
|
|
125,841
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on investments and other financial instruments
|
|
3,868
|
|
|
28,448
|
|
|
16,779
|
|
|
17,967
|
|
|
(6,484
|
)
|
Loss on induced conversion and debt extinguishment
|
|
(11
|
)
|
|
(91,876
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Acquisition-related expenses
|
|
(525
|
)
|
|
(567
|
)
|
|
(207
|
)
|
|
(380
|
)
|
|
432
|
|
Amortization and impairment of intangible assets
|
|
(3,273
|
)
|
|
(3,281
|
)
|
|
(3,023
|
)
|
|
(5,354
|
)
|
|
(3,294
|
)
|
Consolidated pretax income from continuing operations
|
|
$
|
115,685
|
|
|
$
|
79,984
|
|
|
$
|
137,450
|
|
|
$
|
70,677
|
|
|
$
|
116,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On a consolidated basis, “adjusted pretax operating income” and
“adjusted diluted net operating income per share” are measures not
determined in accordance with GAAP. “Services EBITDA” is also a non-GAAP
measure. These measures are not representative of total profitability,
and therefore should not be viewed as substitutes for GAAP pretax income
from continuing operations or net income per share from continuing
operations. Our definitions of adjusted pretax operating income,
adjusted diluted net operating income per share or EBITDA may not be
comparable to similarly-named measures reported by other companies. See
Exhibit F for additional information on our consolidated non-GAAP
financial measures.
|
Radian Group Inc. and Subsidiaries
|
Mortgage Insurance Supplemental Information - New Insurance
Written
|
Exhibit H
|
|
|
|
|
|
|
|
2015
|
|
2014
|
($ in millions)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
|
|
|
|
|
|
|
|
|
|
Total primary new insurance written
|
|
$
|
11,176
|
|
|
$
|
11,751
|
|
|
$
|
9,385
|
|
|
$
|
10,009
|
|
|
$
|
11,210
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of primary new insurance written by FICO score
|
|
|
|
|
|
|
|
|
|
|
>=740
|
|
|
61.0
|
%
|
|
|
63.0
|
%
|
|
|
63.6
|
%
|
|
|
60.2
|
%
|
|
|
61.6
|
%
|
680-739
|
|
|
31.9
|
|
|
|
30.8
|
|
|
|
30.3
|
|
|
|
32.6
|
|
|
|
31.2
|
|
620-679
|
|
|
7.1
|
|
|
|
6.2
|
|
|
|
6.1
|
|
|
|
7.2
|
|
|
|
7.2
|
|
Total Primary
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of primary new insurance written
|
|
|
|
|
|
|
|
|
|
|
Monthly premiums
|
|
|
73
|
%
|
|
|
68
|
%
|
|
|
63
|
%
|
|
|
69
|
%
|
|
|
72
|
%
|
Single premiums
|
|
|
27
|
%
|
|
|
32
|
%
|
|
|
37
|
%
|
|
|
31
|
%
|
|
|
28
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Refinances
|
|
|
13
|
%
|
|
|
23
|
%
|
|
|
33
|
%
|
|
|
22
|
%
|
|
|
16
|
%
|
LTV
|
|
|
|
|
|
|
|
|
|
|
95.01% and above
|
|
|
3.5
|
%
|
|
|
3.2
|
%
|
|
|
1.8
|
%
|
|
|
0.5
|
%
|
|
|
0.3
|
%
|
90.01% to 95.00%
|
|
|
51.5
|
%
|
|
|
49.4
|
%
|
|
|
48.4
|
%
|
|
|
51.7
|
%
|
|
|
53.7
|
%
|
85.01% to 90.00%
|
|
|
34.1
|
%
|
|
|
34.0
|
%
|
|
|
33.3
|
%
|
|
|
33.2
|
%
|
|
|
33.5
|
%
|
85.00% and below
|
|
|
10.9
|
%
|
|
|
13.4
|
%
|
|
|
16.5
|
%
|
|
|
14.6
|
%
|
|
|
12.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Mortgage Insurance Supplemental Information - Primary Insurance
in Force and Risk in Force by Product, Statutory Capital Ratios
|
Exhibit I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
($ in millions)
|
|
2015
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
Primary insurance in force (1)
|
|
|
|
|
|
|
|
|
|
|
Flow
|
|
$
|
166,527
|
|
$
|
164,137
|
|
$
|
162,832
|
|
$
|
162,302
|
|
$
|
159,770
|
Structured
|
|
8,339
|
|
8,555
|
|
9,309
|
|
9,508
|
|
9,452
|
Total Primary
|
|
$
|
174,866
|
|
$
|
172,692
|
|
$
|
172,141
|
|
$
|
171,810
|
|
$
|
169,222
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
164,060
|
|
$
|
161,397
|
|
$
|
160,452
|
|
$
|
159,647
|
|
$
|
156,581
|
Alt-A
|
|
6,531
|
|
6,857
|
|
7,122
|
|
7,412
|
|
7,709
|
A minus and below
|
|
4,275
|
|
4,438
|
|
4,567
|
|
4,751
|
|
4,932
|
Total Primary
|
|
$
|
174,866
|
|
$
|
172,692
|
|
$
|
172,141
|
|
$
|
171,810
|
|
$
|
169,222
|
|
|
|
|
|
|
|
|
|
|
|
Primary risk in force (1) (2)
|
|
|
|
|
|
|
|
|
|
|
Flow
|
|
$
|
42,454
|
|
$
|
41,706
|
|
$
|
41,256
|
|
$
|
41,071
|
|
$
|
40,337
|
Structured
|
|
1,910
|
|
1,957
|
|
2,133
|
|
2,168
|
|
2,150
|
Total Primary
|
|
$
|
44,364
|
|
$
|
43,663
|
|
$
|
43,389
|
|
$
|
43,239
|
|
$
|
42,487
|
|
|
|
|
|
|
|
|
|
|
|
Flow
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
40,629
|
|
$
|
39,781
|
|
$
|
39,251
|
|
$
|
38,977
|
|
$
|
38,156
|
Alt-A
|
|
1,124
|
|
1,191
|
|
1,243
|
|
1,295
|
|
1,350
|
A minus and below
|
|
701
|
|
734
|
|
762
|
|
799
|
|
831
|
Total Flow
|
|
$
|
42,454
|
|
$
|
41,706
|
|
$
|
41,256
|
|
$
|
41,071
|
|
$
|
40,337
|
|
|
|
|
|
|
|
|
|
|
|
Structured
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
1,155
|
|
$
|
1,182
|
|
$
|
1,341
|
|
$
|
1,349
|
|
$
|
1,302
|
Alt-A
|
|
386
|
|
397
|
|
410
|
|
425
|
|
441
|
A minus and below
|
|
369
|
|
378
|
|
382
|
|
394
|
|
407
|
Total Structured
|
|
$
|
1,910
|
|
$
|
1,957
|
|
$
|
2,133
|
|
$
|
2,168
|
|
$
|
2,150
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
41,784
|
|
$
|
40,963
|
|
$
|
40,592
|
|
$
|
40,326
|
|
$
|
39,458
|
Alt-A
|
|
1,510
|
|
1,588
|
|
1,653
|
|
1,720
|
|
1,791
|
A minus and below
|
|
1,070
|
|
1,112
|
|
1,144
|
|
1,193
|
|
1,238
|
Total Primary
|
|
$
|
44,364
|
|
$
|
43,663
|
|
$
|
43,389
|
|
$
|
43,239
|
|
$
|
42,487
|
|
|
|
|
|
|
|
|
|
|
|
Statutory Capital Ratios
|
|
|
|
|
|
|
|
|
|
|
Risk to capital ratio-Radian Guaranty only
|
|
16.5:1
|
(3)
|
16.5:1
|
|
17.1:1
|
|
17.9:1
|
|
18.4:1
|
Risk to capital ratio-Mortgage Insurance combined
|
|
17.9:1
|
(3)
|
18.0:1
|
|
19.1:1
|
|
20.3:1
|
|
21.2:1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
($ in millions)
|
|
2015
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
Percentage of primary risk in force by FICO score
|
|
|
|
|
|
|
|
|
|
|
Flow
|
|
|
|
|
|
|
|
|
|
|
>=740
|
|
58.2
|
%
|
|
58.1
|
%
|
|
58.1
|
%
|
|
58.1
|
%
|
|
58.0
|
%
|
680-739
|
|
30.3
|
|
|
30.2
|
|
|
30.0
|
|
|
29.7
|
|
|
29.5
|
|
620-679
|
|
10.3
|
|
|
10.5
|
|
|
10.6
|
|
|
10.8
|
|
|
11.0
|
|
<=619
|
|
1.2
|
|
|
1.2
|
|
|
1.3
|
|
|
1.4
|
|
|
1.5
|
|
Total Flow
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Structured
|
|
|
|
|
|
|
|
|
|
|
>=740
|
|
28.9
|
%
|
|
28.7
|
|
|
31.1
|
%
|
|
30.3
|
%
|
|
28.7
|
%
|
680-739
|
|
27.9
|
|
|
27.9
|
|
|
28.1
|
|
|
28.5
|
|
|
28.3
|
|
620-679
|
|
25.2
|
|
|
25.4
|
|
|
24.1
|
|
|
24.3
|
|
|
25.4
|
|
<=619
|
|
18.0
|
|
|
18.0
|
|
|
16.7
|
|
|
16.9
|
|
|
17.6
|
|
Total Structured
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
>=740
|
|
57.0
|
%
|
|
56.7
|
%
|
|
56.8
|
%
|
|
56.7
|
%
|
|
56.6
|
%
|
680-739
|
|
30.2
|
|
|
30.1
|
|
|
29.8
|
|
|
29.6
|
|
|
29.4
|
|
620-679
|
|
10.9
|
|
|
11.2
|
|
|
11.3
|
|
|
11.6
|
|
|
11.7
|
|
<=619
|
|
1.9
|
|
|
2.0
|
|
|
2.1
|
|
|
2.1
|
|
|
2.3
|
|
Total Primary
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of primary risk in force by LTV
|
|
|
|
|
|
|
|
|
|
|
95.01% and above
|
|
7.4
|
%
|
|
7.6
|
%
|
|
7.9
|
%
|
|
8.2
|
%
|
|
8.6
|
%
|
90.01% to 95.00%
|
|
49.8
|
|
|
49.0
|
|
|
48.2
|
|
|
47.5
|
|
|
46.5
|
|
85.01% to 90.00%
|
|
34.3
|
|
|
34.6
|
|
|
35.0
|
|
|
35.4
|
|
|
35.8
|
|
85.00% and below
|
|
8.5
|
|
|
8.8
|
|
|
8.9
|
|
|
8.9
|
|
|
9.1
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of primary risk in force by policy year
|
|
|
|
|
|
|
|
|
|
|
2005 and prior
|
|
6.8
|
%
|
|
7.3
|
%
|
|
7.8
|
%
|
|
8.2
|
%
|
|
8.8
|
%
|
2006
|
|
3.9
|
|
|
4.2
|
|
|
4.4
|
|
|
4.6
|
|
|
4.9
|
|
2007
|
|
9.1
|
|
|
9.6
|
|
|
10.2
|
|
|
10.6
|
|
|
11.1
|
|
2008
|
|
6.6
|
|
|
7.0
|
|
|
7.5
|
|
|
7.9
|
|
|
8.3
|
|
2009
|
|
1.8
|
|
|
2.0
|
|
|
2.3
|
|
|
2.5
|
|
|
2.8
|
|
2010
|
|
1.5
|
|
|
1.7
|
|
|
2.0
|
|
|
2.1
|
|
|
2.3
|
|
2011
|
|
3.1
|
|
|
3.5
|
|
|
3.9
|
|
|
4.2
|
|
|
4.5
|
|
2012
|
|
12.0
|
|
|
13.0
|
|
|
14.2
|
|
|
15.1
|
|
|
16.2
|
|
2013
|
|
19.2
|
|
|
20.8
|
|
|
22.4
|
|
|
23.8
|
|
|
25.1
|
|
2014
|
|
18.0
|
|
|
19.0
|
|
|
20.0
|
|
|
21.0
|
|
|
16.0
|
|
2015
|
|
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)
|
|
$
|
1,666
|
|
|
$
|
1,753
|
|
|
$
|
1,883
|
|
|
$
|
2,089
|
|
|
$
|
2,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
|
|
|
|
|
|
|
|
|
|
Net claims paid
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
65,396
|
|
|
$
|
83,489
|
|
|
$
|
76,186
|
|
|
$
|
74,342
|
|
|
$
|
104,440
|
Alt-A
|
|
18,966
|
|
|
23,260
|
|
|
19,999
|
|
|
21,909
|
|
|
26,882
|
A minus and below
|
|
14,028
|
|
|
14,965
|
|
|
15,141
|
|
|
12,600
|
|
|
19,658
|
Total primary claims paid
|
|
98,390
|
|
|
121,714
|
|
|
111,326
|
|
|
108,851
|
|
|
150,980
|
Pool
|
|
8,721
|
|
|
10,798
|
|
|
8,874
|
|
|
8,086
|
|
|
8,880
|
Second-lien and other
|
|
(16
|
)
|
|
(53
|
)
|
|
(111
|
)
|
|
283
|
|
|
490
|
Subtotal
|
|
107,095
|
|
|
132,459
|
|
|
120,089
|
|
|
117,220
|
|
|
160,350
|
Impact of captive terminations
|
|
—
|
|
|
—
|
|
|
(12,000
|
)
|
|
—
|
|
|
—
|
Impact of settlements
|
|
61,994
|
|
|
79,557
|
|
|
99,006
|
|
|
—
|
|
|
13,500
|
Total
|
|
$
|
169,089
|
|
|
$
|
212,016
|
|
|
$
|
207,095
|
|
|
$
|
117,220
|
|
|
$
|
173,850
|
|
|
|
|
|
|
|
|
|
|
|
Average claim paid (1)
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
46.2
|
|
|
$
|
48.1
|
|
|
$
|
44.0
|
|
|
$
|
48.7
|
|
|
$
|
49.2
|
Alt-A
|
|
60.2
|
|
|
59.5
|
|
|
54.6
|
|
|
58.7
|
|
|
56.7
|
A minus and below
|
|
42.5
|
|
|
40.1
|
|
|
35.9
|
|
|
39.3
|
|
|
40.3
|
Total primary average claims paid
|
|
47.8
|
|
|
48.7
|
|
|
44.2
|
|
|
49.0
|
|
|
49.0
|
Pool
|
|
51.3
|
|
|
69.7
|
|
|
51.5
|
|
|
46.5
|
|
|
48.0
|
Second-lien and other
|
|
(1.6
|
)
|
|
(3.5
|
)
|
|
(12.3
|
)
|
|
7.6
|
|
|
18.9
|
Total
|
|
$
|
47.8
|
|
|
$
|
49.6
|
|
|
$
|
44.5
|
|
|
$
|
48.2
|
|
|
$
|
48.7
|
|
|
|
|
|
|
|
|
|
|
|
Average primary claim paid (2)
|
|
$
|
48.5
|
|
|
$
|
49.6
|
|
|
$
|
45.3
|
|
|
$
|
50.4
|
|
|
$
|
50.0
|
Average total claim paid (2)
|
|
$
|
48.5
|
|
|
$
|
50.4
|
|
|
$
|
45.5
|
|
|
$
|
49.4
|
|
|
$
|
49.6
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands, except primary reserve per
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
primary default amounts)
|
|
2015
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for losses by category
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
519,572
|
|
|
$
|
562,918
|
|
|
$
|
640,919
|
|
|
$
|
700,174
|
|
|
$
|
721,811
|
Alt-A
|
|
234,772
|
|
|
256,854
|
|
|
278,350
|
|
|
292,293
|
|
|
308,283
|
A minus and below
|
|
137,441
|
|
|
148,043
|
|
|
163,390
|
|
|
179,103
|
|
|
182,885
|
IBNR and other
|
|
107,179
|
|
|
125,038
|
|
|
167,204
|
|
|
223,114
|
|
|
212,908
|
LAE
|
|
41,464
|
|
|
48,141
|
|
|
53,210
|
|
|
56,164
|
|
|
52,690
|
Reinsurance recoverable (3)
|
|
11,071
|
|
|
11,677
|
|
|
13,365
|
|
|
26,665
|
|
|
21,201
|
Total primary reserves
|
|
1,051,499
|
|
|
1,152,671
|
|
|
1,316,438
|
|
|
1,477,513
|
|
|
1,499,778
|
Pool insurance
|
|
43,234
|
|
|
47,902
|
|
|
62,943
|
|
|
75,785
|
|
|
80,664
|
IBNR and other
|
|
949
|
|
|
891
|
|
|
1,227
|
|
|
1,775
|
|
|
2,468
|
LAE
|
|
1,983
|
|
|
2,353
|
|
|
3,051
|
|
|
3,542
|
|
|
3,434
|
Total pool reserves
|
|
46,166
|
|
|
51,146
|
|
|
67,221
|
|
|
81,102
|
|
|
86,566
|
Total 1st lien reserves
|
|
1,097,665
|
|
|
1,203,817
|
|
|
1,383,659
|
|
|
1,558,615
|
|
|
1,586,344
|
Second-lien and other
|
|
905
|
|
|
975
|
|
|
1,055
|
|
|
1,417
|
|
|
1,787
|
Total reserves
|
|
$
|
1,098,570
|
|
|
$
|
1,204,792
|
|
|
$
|
1,384,714
|
|
|
$
|
1,560,032
|
|
|
$
|
1,588,131
|
|
|
|
|
|
|
|
|
|
|
|
1st lien reserve per default
|
|
|
|
|
|
|
|
|
|
|
Primary reserve per primary default excluding IBNR and other
|
|
$
|
26,237
|
|
|
$
|
27,279
|
|
|
$
|
28,423
|
|
|
$
|
27,683
|
|
|
$
|
27,477
|
|
|
|
(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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
|
2015
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
Default Statistics
|
|
|
|
|
|
|
|
|
|
|
Primary Insurance:
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
|
|
|
|
|
|
|
|
|
Number of insured loans
|
|
812,657
|
|
|
802,719
|
|
|
801,332
|
|
|
797,436
|
|
|
783,414
|
|
Number of loans in default
|
|
22,328
|
|
|
23,237
|
|
|
25,114
|
|
|
28,246
|
|
|
28,963
|
|
Percentage of loans in default
|
|
2.75
|
%
|
|
2.89
|
%
|
|
3.13
|
%
|
|
3.54
|
%
|
|
3.70
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A
|
|
|
|
|
|
|
|
|
|
|
Number of insured loans
|
|
34,166
|
|
|
35,927
|
|
|
37,468
|
|
|
38,953
|
|
|
40,319
|
|
Number of loans in default
|
|
6,318
|
|
|
6,949
|
|
|
7,480
|
|
|
8,136
|
|
|
8,629
|
|
Percentage of loans in default
|
|
18.49
|
%
|
|
19.34
|
%
|
|
19.96
|
%
|
|
20.89
|
%
|
|
21.40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
A minus and below
|
|
|
|
|
|
|
|
|
|
|
Number of insured loans
|
|
33,018
|
|
|
34,224
|
|
|
35,425
|
|
|
36,688
|
|
|
37,843
|
|
Number of loans in default
|
|
7,229
|
|
|
7,490
|
|
|
7,846
|
|
|
8,937
|
|
|
9,251
|
|
Percentage of loans in default
|
|
21.89
|
%
|
|
21.89
|
%
|
|
22.15
|
%
|
|
24.36
|
%
|
|
24.45
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total Primary
|
|
|
|
|
|
|
|
|
|
|
Number of insured loans
|
|
879,841
|
|
|
872,870
|
|
|
874,225
|
|
|
873,077
|
|
|
861,576
|
|
Number of loans in default (1)
|
|
35,875
|
|
|
37,676
|
|
|
40,440
|
|
|
45,319
|
|
|
46,843
|
|
Percentage of loans in default
|
|
4.08
|
%
|
|
4.32
|
%
|
|
4.63
|
%
|
|
5.19
|
%
|
|
5.44
|
%
|
|
|
|
(1)
|
|
Excludes the following number of loans subject to the Freddie
Mac Agreement that are in default as we no longer have claims
exposure on these loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
|
2015
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
Number of loans in default
|
|
2,993
|
|
3,246
|
|
3,715
|
|
4,467
|
|
4,824
|
|
|
|
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
Mortgage Insurance Supplemental Information - Captives, QSR and
Persistency
|
Exhibit M
|
|
|
|
|
|
|
|
2015
|
|
2014
|
($ in thousands)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
|
|
|
|
|
|
|
|
|
|
1st Lien Captives
|
|
|
|
|
|
|
|
|
|
|
Premiums ceded to captives
|
|
$
|
2,434
|
|
|
$
|
2,700
|
|
|
$
|
2,585
|
|
|
$
|
3,078
|
|
|
$
|
3,096
|
|
% of total premiums
|
|
1.0
|
%
|
|
1.1
|
%
|
|
1.1
|
%
|
|
1.3
|
%
|
|
1.3
|
%
|
Insurance in force included in captives (1)
|
|
2.2
|
%
|
|
2.4
|
%
|
|
2.5
|
%
|
|
2.8
|
%
|
|
3.0
|
%
|
Risk in force included in captives (1)
|
|
2.1
|
%
|
|
2.2
|
%
|
|
2.4
|
%
|
|
2.7
|
%
|
|
2.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Initial Quota Share Reinsurance (“QSR”) Transaction
|
|
|
|
|
|
|
|
|
|
|
QSR ceded premiums written
|
|
$
|
3,437
|
|
|
$
|
3,822
|
|
|
$
|
4,067
|
|
|
$
|
(4,801
|
)
|
|
$
|
4,668
|
|
% of premiums written
|
|
1.4
|
%
|
|
1.5
|
%
|
|
1.6
|
%
|
|
(1.9
|
)%
|
|
1.8
|
%
|
QSR ceded premiums earned
|
|
$
|
5,067
|
|
|
$
|
6,425
|
|
|
$
|
6,018
|
|
|
$
|
(2,869
|
)
|
|
$
|
6,578
|
|
% of premiums earned
|
|
2.1
|
%
|
|
2.6
|
%
|
|
2.5
|
%
|
|
(1.2
|
)%
|
|
2.8
|
%
|
Ceding commissions
|
|
$
|
745
|
|
|
$
|
828
|
|
|
$
|
880
|
|
|
$
|
1,108
|
|
|
$
|
1,166
|
|
Risk in force included in QSR (2)
|
|
$
|
889,298
|
|
|
$
|
954,673
|
|
|
$
|
1,041,383
|
|
|
$
|
1,105,545
|
|
|
$
|
1,170,496
|
|
|
|
|
|
|
|
|
|
|
|
|
Second QSR Transaction
|
|
|
|
|
|
|
|
|
|
|
QSR ceded premiums written
|
|
$
|
5,030
|
|
|
$
|
394
|
|
|
$
|
6,529
|
|
|
$
|
9,303
|
|
|
$
|
9,082
|
|
% of premiums written
|
|
2.0
|
%
|
|
0.2
|
%
|
|
2.6
|
%
|
|
3.7
|
%
|
|
3.5
|
%
|
QSR ceded premiums earned
|
|
$
|
7,134
|
|
|
$
|
3,040
|
|
|
$
|
8,768
|
|
|
$
|
8,339
|
|
|
$
|
7,699
|
|
% of premiums earned
|
|
3.0
|
%
|
|
1.2
|
%
|
|
3.6
|
%
|
|
3.6
|
%
|
|
3.3
|
%
|
Ceding commissions
|
|
$
|
1,998
|
|
|
$
|
2,154
|
|
|
$
|
2,285
|
|
|
$
|
3,256
|
|
|
$
|
3,179
|
|
Risk in force included in QSR (2)
|
|
$
|
1,364,615
|
|
|
$
|
1,440,312
|
|
|
$
|
1,533,677
|
|
|
$
|
1,615,554
|
|
|
$
|
1,546,311
|
|
|
|
|
|
|
|
|
|
|
|
|
Persistency (twelve months ended) (3)
|
|
79.2
|
%
|
|
80.1
|
%
|
|
82.6
|
%
|
|
84.2
|
%
|
|
84.3
|
%
|
Persistency (quarterly, annualized)
|
|
80.5
|
%
|
|
76.2
|
%
|
|
80.3
|
%
|
|
83.3
|
%
|
|
84.0
|
%
|
|
|
|
(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.
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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:
-
changes in general economic and political conditions, including
unemployment rates, changes in the U.S. housing and mortgage credit
markets, declines in home prices and property values, the performance
of the U.S. or global economies, the amount of liquidity in the
capital or credit markets, changes or volatility in interest rates or
consumer confidence and changes in credit spreads, all of which may be
impacted by, among other things, legislative activity or inactivity,
actual or threatened downgrades of U.S. government credit ratings, or
actual or threatened defaults on U.S. government obligations;
-
changes in the way customers, investors, regulators or legislators
perceive the strength of private mortgage insurers;
-
catastrophic events, increased unemployment, home price depreciation
or other negative economic changes in geographic regions where our
mortgage insurance exposure is more concentrated;
-
Radian Guaranty's ability to remain eligible under applicable
requirements imposed by the FHFA and the GSEs to insure loans
purchased by the GSEs;
-
our ability to maintain sufficient holding company liquidity to meet
our short- and long-term liquidity needs. We expect to distribute to
Radian Guaranty a significant amount of our holding company liquidity
to support Radian Guaranty's compliance with the PMIERs Financial
Requirements, which become effective for existing mortgage insurers on
December 31, 2015. Our projections regarding the amount of holding
company liquidity that we may distribute to Radian Guaranty to comply
with the PMIERs Financial Requirements are based on our estimates of
Radian Guaranty's Minimum Required Assets and Available Assets, which
may not prove to be accurate, and which could be impacted by: (1) our
ability to receive, as expected, GSE approval for the amendments to
our existing reinsurance arrangements and to receive the full PMIERs
benefit for these arrangements; (2) whether we elect to convert
certain holding company assets into PMIERs-compliant Available Assets;
(3) factors affecting the performance of our mortgage insurance
business, including our level of defaults, prepayments, the losses we
incur on new or existing defaults and the credit characteristics of
our mortgage insurance; and (4) how much capital we expect to maintain
at our mortgage insurance subsidiaries in excess of the amount
required to satisfy the PMIERs Financial Requirements. Contributions
of holding company cash and investments from Radian Group will leave
less liquidity to satisfy Radian Group's future obligations. Depending
on the amount of holding company contributions that we make, we may be
required or may decide to seek additional capital by incurring
additional debt, by issuing additional equity, or by selling assets,
which we may not be able to do on favorable terms, if at all;
-
our ability to maintain an adequate level of capital in our insurance
subsidiaries to satisfy existing and future state regulatory
requirements, including new capital adequacy standards that currently
are being developed by the NAIC and that could be adopted by states in
which we write business;
-
changes in the charters or business practices of, or rules or
regulations imposed by or applicable to the GSEs, including: (1) the
implementation of the final PMIERs (including as updated on June 30,
2015 to increase the amount of Available Assets that must be held
against risk in force associated with lender paid mortgage insurance
originated on or after January 1, 2016), which (a) will increase the
amount of capital that Radian Guaranty is required to hold, and
therefore, reduce our current returns on subsidiary capital, (b)
potentially impact the type of business that Radian Guaranty is
willing to write, which could reduce our NIW and market share, (c)
impose extensive and more stringent operational requirements in areas
such as claim processing, loss mitigation, document retention,
underwriting, quality control, reporting and monitoring, among others,
that may result in additional costs to achieve and maintain
compliance, and (d) require the consent of the GSEs for Radian
Guaranty to take certain actions such as paying dividends, entering
into various inter-company agreements, and commuting or reinsuring
risk, among others; (2) changes that could limit the type of business
that Radian Guaranty is willing to write, which could reduce our NIW
and market share; (3) changes that could increase the cost of private
mortgage insurance, including as compared to the FHA's pricing, or
result in the emergence of other forms of credit enhancement; and (4)
changes that could require us to alter our business practices and
which may result in substantial additional costs;
-
our ability to continue to effectively mitigate our mortgage insurance
losses, including a decrease in net Rescissions, Claim Denials or
Claim Curtailments resulting from an increase in the number of
successful challenges to previous Rescissions, Claim Denials or Claim
Curtailments (including as part of one or more settlements of disputed
Rescissions or Claim Denials), or as a result of the GSEs intervening
in or otherwise limiting our loss mitigation practices, including
settlements of disputes regarding Loss Mitigation Activities;
-
the negative impact that our Loss Mitigation Activities may have on
our relationships with our customers and potential customers,
including the potential loss of current or future business and the
heightened risk of disputes and litigation;
-
any disruption in the servicing of mortgages covered by our insurance
policies, as well as poor servicer performance;
-
a substantial decrease in the persistency rates of our mortgage
insurance policies, which has the effect of reducing our premium
income on our mortgage insurance products paid on a monthly
installment basis and could decrease the profitability of our mortgage
insurance business;
-
heightened competition for our mortgage insurance business from others
such as the FHA, the U.S. Department of Veterans Affairs and other
private mortgage insurers (including with respect to other private
mortgage insurers, those that have been assigned higher ratings than
we have, that may have access to greater amounts of capital than we
do, or that are new entrants to the industry, and therefore, are not
burdened by legacy obligations and may be more willing to aggressively
price their mortgage insurance offerings to gain market share from
more established mortgage insurers) and the impact such heightened
competition may have on our returns and our NIW;
-
the increased demand from lenders for customized (reduced) rates on
mortgage insurance products, which could further reduce our overall
average premium rates and returns and, to the extent we decide to
limit certain types of business, could adversely impact our NIW and
market share;
-
changes to the current system of housing finance, including the
possibility of a new system in which private mortgage insurers are not
required or their products are significantly limited in effect or
scope;
-
the effect of the Dodd-Frank Wall Street Reform and Consumer
Protection Act on the financial services industry in general, and on
our businesses in particular;
-
the adoption of new laws and regulations, or changes in existing laws
and regulations, or the way they are interpreted or applied,
including, without limitation: (1) the resolution of existing, or the
possibility of additional, lawsuits, inquiries or investigations
(including an inquiry from the Wisconsin Office of the Commissioner of
Insurance to all private mortgage insurers pertaining to customized
insurance rates and terms offered to mortgage insurance customers);
(2) changes to the Model Act being considered by the NAIC that could
include more stringent requirements for Radian Guaranty in states that
adopt the new Model Act in the future; and (3) other legislative and
regulatory changes (a) impacting the demand for our products, (b)
limiting or restricting the products we may offer or increasing the
amount of capital we are required to hold, (c) affecting the form in
which we execute credit protection, or (d) otherwise impacting our
existing businesses or future prospects;
-
the amount and timing of potential payments or adjustments associated
with federal or other tax examinations, including deficiencies
assessed by the IRS resulting from the examination of our 2000 through
2007 tax years, which we are currently contesting;
-
the possibility that we may fail to estimate accurately the
likelihood, magnitude and timing of losses in connection with
establishing loss reserves for our mortgage insurance business;
-
volatility in our results of operations caused by changes in the fair
value of our assets and liabilities, including a significant portion
of our investment portfolio;
-
changes in GAAP or SAP rules and guidance, or their interpretation;
-
legal and other limitations on 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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