Investments

Available for Sale Securities

Our available for sale securities within our investment portfolio consisted of the following as of the dates indicated:



	December 31, 2016
(In thousands)	Amortized Cost		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses
Fixed-maturities available for sale:
U.S. government and agency securities	$	78,931	$	75,474	$	2	$	3,459
State and municipal obligations	66,124		67,171		1,868		821
Corporate bonds and notes	1,463,720		1,455,628		14,320		22,412
RMBS	358,262		350,628		197		7,831
CMBS	429,057		428,289		2,255		3,023
Other ABS	433,603		434,728		2,037		912
Foreign government and agency securities	24,771		24,594		148		325
Other investments	2,000		2,000		—		—
	2,856,468		2,838,512		20,827		38,783
Equity securities available for sale (1)	1,330		1,330		—		—
Total debt and equity securities	$	2,857,798	$	2,839,842	$	20,827	$	38,783

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(1)	Primarily consists of investments in Federal Home Loan Bank stock as required in connection with the memberships of Radian Guaranty and Radian Reinsurance in the Federal Home Loan Bank of Pittsburgh.



	December 31, 2015
(In thousands)	Amortized Cost		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses
Fixed-maturities available for sale:
U.S. government and agency securities	$	13,773	$	13,752	$	—	$	21
State and municipal obligations	36,920		37,900		1,100		120
Corporate bonds and notes	815,024		802,193		4,460		17,291
RMBS	226,744		224,905		625		2,464
CMBS	415,780		406,910		69		8,939
Other ABS	359,452		355,494		16		3,974
Foreign government and agency securities	25,663		24,307		27		1,383
	1,893,356		1,865,461		6,297		34,192
Equity securities available for sale (1)	75,538		75,430		—		108
Total debt and equity securities	$	1,968,894	$	1,940,891	$	6,297	$	34,300

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(1)	Primarily consists of a multi-sector exchange-traded fund.

Gross Unrealized Losses and Related Fair Values of Available for Sale Securities

For securities deemed “available for sale” and that are in an unrealized loss position, the following tables show the gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of the dates indicated:



	December 31, 2016
($ in thousands) Description of Securities	Less Than 12 Months					12 Months or Greater					Total
($ in thousands) Description of Securities	# of securities	Fair Value		Unrealized Losses		# of securities	Fair Value		Unrealized Losses		# of securities	Fair Value		Unrealized Losses
U.S. government and agency securities	7	$	73,160	$	3,459	—	$	—	$	—	7	$	73,160	$	3,459
State and municipal obligations	7	30,901		821		—	—		—		7	30,901		821
Corporate bonds and notes	185	788,876		22,135		2	4,582		277		187	793,458		22,412
RMBS	56	311,031		7,822		1	1,398		9		57	312,429		7,831
CMBS	37	218,170		2,909		2	6,585		114		39	224,755		3,023
Other ABS	58	131,268		470		16	45,886		442		74	177,154		912
Foreign government and agency securities	12	13,034		325		—	—		—		12	13,034		325
Total	362	$	1,566,440	$	37,941	21	$	58,451	$	842	383	$	1,624,891	$	38,783



	December 31, 2015
($ in thousands) Description of Securities	Less Than 12 Months					12 Months or Greater					Total
($ in thousands) Description of Securities	# of securities	Fair Value		Unrealized Losses		# of securities	Fair Value		Unrealized Losses		# of securities	Fair Value		Unrealized Losses
U.S. government and agency securities	1	$	5,752	$	21	—	$	—	$	—	1	$	5,752	$	21
State and municipal obligations	2	11,674		120		—	—		—		2	11,674		120
Corporate bonds and notes	117	510,807		16,773		6	8,700		518		123	519,507		17,291
RMBS	12	168,415		2,464		—	—		—		12	168,415		2,464
CMBS	58	387,268		8,939		—	—		—		58	387,268		8,939
Other ABS	96	284,998		2,559		14	43,225		1,415		110	328,223		3,974
Foreign government and agency securities	18	18,733		1,095		3	2,278		288		21	21,011		1,383
Equity securities	1	74,930		108		—	—		—		1	74,930		108
Total	305	$	1,462,577	$	32,079	23	$	54,203	$	2,221	328	$	1,516,780	$	34,300

Impairments due to credit deterioration that result in a conclusion that the present value of cash flows expected to be collected will not be sufficient to recover the amortized cost basis of the security are considered other-than-temporary. Other declines in fair value (for example, due to interest rate changes, sector credit rating changes or company-specific rating changes) that result in a conclusion that the present value of cash flows expected to be collected will not be sufficient to recover the amortized cost basis of the security also may serve as a basis to conclude that an other-than-temporary impairment has occurred. To the extent we determine that a security is deemed to have had an other-than-temporary impairment, an impairment loss is recognized.

We recognized an other-than-temporary impairment loss in earnings of $0.5 million due to our intent to sell certain corporate bonds carried at a loss as of December 31, 2016. For the years ended December 31, 2016, 2015 and 2014, there were no credit-related impairment losses recognized in earnings or in AOCI.

We had securities in an unrealized loss position that we did not consider to be other-than-temporarily impaired as of December 31, 2016. For all investment categories, the unrealized losses of 12 months or greater duration as of December 31, 2016, were generally caused by interest rate or credit spread movements since the purchase date, and as such, we expect the present value of cash flows to be collected from these securities to be sufficient to recover the amortized cost basis of these securities. As of December 31, 2016, other than as discussed above, we did not have the intent to sell any debt securities in an unrealized loss position and we determined that it is more likely than not that we will not be required to sell the securities before recovery of their cost basis, which may be at maturity; therefore, we did not consider these investments to be other-than-temporarily impaired at December 31, 2016.

Trading Securities

The trading securities within our investment portfolio, which are recorded at fair value, consisted of the following as of the dates indicated:



	December 31,
(In thousands)	2016		2015
Trading securities:
U.S. government and agency securities	$	33,042	$	129,913
State and municipal obligations	259,573		303,946
Corporate bonds and notes	453,617		580,993
RMBS	38,214		72,192
CMBS	78,984		137,678
Other ABS	8,219		16,131
Foreign government and agency securities	8,213		13,268
Equity securities	—		25,016
Total	$	879,862	$	1,279,137

For trading securities that were held at December 31, 2016 and 2015, we had net unrealized gains of $16.8 million during 2016, compared to net unrealized losses of $25.2 million during 2015.

As of December 31, 2016 and 2015, our investment portfolio included no securities of countries that have obligations that have been under particular stress due to economic uncertainty, potential restructuring and ratings downgrades.

For the years ended December 31, 2016, 2015 and 2014, we did not sell or transfer any fixed-maturity investments classified as held to maturity. For the years ended December 31, 2016, 2015 and 2014, we did not transfer any securities from the available for sale or trading categories.

Net Investment Income

Net investment income consisted of:



	Year Ended December 31,
(In thousands)	2016			2015			2014
Investment income:
Fixed-maturities	$	115,880		$	81,127		$	62,352
Equity securities	86			4,539			6,287
Short-term investments	3,086			745			246
Other	1,161			600			1,848
Gross investment income	120,213			87,011			70,733
Investment expenses	(6,747		)	(5,474		)	(5,078		)
Net investment income	$	113,466		$	81,537		$	65,655

Net Gains (Losses) on Investments and Other Financial Instruments

Net realized and unrealized gains (losses), including impairment losses, on investments and other financial instruments consisted of:



	Year Ended December 31,
(In thousands)	2016			2015				2014
Net realized gains (losses) on investments:
Fixed-maturities held to maturity	$	—		$	—			$	(9	)
Fixed-maturities available for sale (1)	4,160			(1,176		)		(1,599		)
Equities available for sale (2)	(170		)	69,150				—
Trading securities	(237		)	(9,231		)		(6,996		)
Short-term investments	(135		)	(24		)		1
Other invested assets	631			3,267				—
Other gains (losses)	64			110				246
Net realized gains (losses) on investments	4,313			62,096			(3)	(8,357		)
Other-than-temporary impairment losses	(526		)	—				—
Unrealized gains (losses) on trading securities	27,217			(27,015		)		92,226
Total gains (losses) on investments	31,004			35,081				83,869
Net gains (losses) on other financial instruments	(253		)	612				(3,880		)
Net gains (losses) on investments and other financial instruments	$	30,751		$	35,693			$	79,989

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(1)Components of net realized gains (losses) on fixed-maturities available for sale include:



	Year Ended December 31,
(In thousands)	2016			2015			2014
Gross investment gains from sales and redemptions	$	10,326		$	64		$	99
Gross investment losses from sales and redemptions	(6,166		)	(1,240		)	(1,698		)


(2)	Net realized gains (losses) on equities available for sale for the years ended December 31, 2016 and 2015 represent the gross amount of losses and gains, respectively, realized for those periods.


(3)	During the second quarter of 2015, we sold equity securities in our portfolio and reinvested the proceeds in assets that qualify as PMIERs-compliant Available Assets, recognizing pretax gains of $69.2 million.

Change in Unrealized Gains (Losses) Recorded in Accumulated Other Comprehensive Income (Loss)

The change in unrealized gains (losses) recorded in accumulated other comprehensive income (loss) consisted of the following:



	Year Ended December 31,
(In thousands)	2016			2015			2014
Fixed-maturities:
Unrealized holding gains (losses) arising during the period, net of tax	$	8,822		$	(24,246	)	$	4,531
Less reclassification adjustment for net gains (losses) included in net income (loss), net of tax	2,361			(764		)	(1,039		)
Net unrealized gains (losses) on investments, net of tax	$	6,461		$	(23,482	)	$	5,570

Equities:
Unrealized holding gains (losses) arising during the period, net of tax	$	(40	)	$	1,673		$	9,119
Less reclassification adjustment for net gains (losses) included in net income (loss), net of tax	(110		)	44,947			—
Net unrealized gains (losses) on investments, net of tax	$	70		$	(43,274	)	$	9,119

Contractual Maturities

The contractual maturities of fixed-maturity investments available for sale are as follows:



	December 31, 2016
(In thousands)	Amortized Cost		Fair Value
Due in one year or less (1)	$	40,639	$	40,570
Due after one year through five years (1)	316,744		317,728
Due after five years through ten years (1)	851,375		841,208
Due after ten years (1)	426,788		425,361
RMBS (2)	358,262		350,628
CMBS (2)	429,057		428,289
Other ABS (2)	433,603		434,728
Total	$	2,856,468	$	2,838,512

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(1)	Actual maturities may differ as a result of calls before scheduled maturity.


(2)	RMBS, CMBS, and Other ABS are shown separately, as they are not due at a single maturity date.

Other

As of December 31, 2016, we did not have any investment in any person and its affiliates that exceeded 10% of our total stockholders’ equity.

Securities on deposit with various state insurance commissioners amounted to $10.8 million and $10.4 million at December 31, 2016 and 2015, respectively.

At December 31, 2016 and 2015, Radian Guaranty had $63.9 million and $74.7 million, respectively, in a collateral account pursuant to the Freddie Mac Agreement. This collateral account, which contains investments primarily invested in trading securities, is pledged to cover Loss Mitigation Activity on the loans subject to the Freddie Mac Agreement. Subject to certain conditions in the Freddie Mac Agreement, amounts in the collateral account may be released to Radian Guaranty over time to the extent that Loss Mitigation Activity becomes final in accordance with the terms of that agreement. See Note 11 for additional information.