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) July
28, 2016
Radian Group Inc.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware |
1-11356 |
23-2691170 |
(State or Other Jurisdiction |
(Commission |
(IRS Employer |
1601 Market Street, Philadelphia, Pennsylvania |
19103 |
(Address of Principal Executive Offices) |
(Zip Code) |
(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 July 28, 2016, Radian Group Inc. issued a news release announcing its financial results for the quarter ended June 30, 2016. 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 July 28, 2016.
_____________________
* 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.
RADIAN GROUP INC. |
|||
(Registrant) | |||
Date: | July 28, 2016 | By: |
/s/ J. Franklin Hall |
J. Franklin Hall |
|||
Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. |
Description |
|
99.1* |
Radian Group Inc. News Release dated July 28, 2016. |
|
* Furnished herewith. |
Exhibit 99.1
Radian Announces Second Quarter 2016 Financial Results
-- Net income of $98 million or $0.44 per diluted share --
-- Adjusted diluted net operating income per share of $0.38 --
-- New MI business volume grows 60% over first quarter 2016 and 10% over last year --
-- Book value per share increases 16% year-over-year to $13.09 --
PHILADELPHIA--(BUSINESS WIRE)--July 28, 2016--Radian Group Inc. (NYSE: RDN) today reported net income from continuing operations for the quarter ended June 30, 2016, of $98.1 million, or $0.44 per diluted share. This compares to net income from continuing operations for the quarter ended June 30, 2015, of $45.2 million, or $0.20 per diluted share. Pretax income from continuing operations for the quarter ended June 30, 2016, was $156.5 million, compared to $80.0 million for the quarter ended June 30, 2015.
Key Financial Highlights (dollars in millions, except per share data) |
||||||
Quarter Ended June 30, 2016 |
Quarter Ended June 30, 2015 |
Percent |
||||
Net income from continuing operations |
$98.1 | $45.2 | 117% | |||
Diluted net income per share from continuing operations | $0.44 | $0.20 | 120% | |||
Pretax income from continuing operations | $156.5 | $80.0 | 96% | |||
Adjusted pretax operating income | $131.4 | $147.3 | (11%) | |||
Adjusted diluted net operating income per share * | $0.38 | $0.40 | (5%) | |||
Net premiums earned - insurance | $229.1 | $237.4 | (3%) | |||
New Mortgage Insurance Written (NIW) | $12,921 | $11,751 | 10% | |||
Book value per share | $13.09 | $11.28 | 16% |
* |
Adjusted diluted net operating income per share is calculated using the company’s statutory tax rate of 35 percent. |
|
Adjusted pretax operating income for the quarter ended June 30, 2016, was $131.4 million, compared to $147.3 million for the quarter ended June 30, 2015. Adjusted diluted net operating income per share for the quarter ended June 30, 2016, was $0.38, compared to $0.40 for the quarter ended June 30, 2015. See “Non-GAAP Financial Measures” below.
Book value per share at June 30, 2016 was $13.09, an increase of 5 percent from $12.42 at March 31, 2016, and an increase of 16 percent from $11.28 at June 30, 2015.
“Radian continued to deliver excellent results in the second quarter, adding to insurance in force with high-quality new business that is expected to generate attractive returns and strengthen our company,” said Radian’s Chief Executive Officer S.A. Ibrahim. “We were also successful in enhancing our holding company liquidity position, and in taking the next steps to accelerate our capital plan.”
SECOND QUARTER HIGHLIGHTS
Mortgage Insurance
Mortgage and Real Estate Services
Consolidated Expenses
Other operating expenses were $65.7 million in the second quarter, compared to $59.0 million in the first quarter of 2016, and $67.7 million in the second quarter of last year.
CAPITAL AND LIQUIDITY UPDATE
CONFERENCE CALL
Radian will discuss second quarter financial results in a conference call today, Thursday, July 28, 2016, at 10:00 a.m. Eastern time. The conference call will be broadcast live over the Internet at http://www.radian.biz/page?name=Webcasts or at www.radian.biz. The call may also be accessed by dialing 800.288.8960 inside the U.S., or 612.332.0107 for international callers, using passcode 398387 or by referencing Radian.
A replay of the webcast will be available on the Radian website approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available approximately two and a half hours after the call ends for a period of two weeks, using the following dial-in numbers and passcode: 800.475.6701 inside the U.S., or 320.365.3844 for international callers, passcode 398387.
In addition to the information provided in the company’s earnings news release, other statistical and financial information, which is expected to be referred to during the conference call, will be available on Radian’s website under Investors >Quarterly Results, or by clicking on http://www.radian.biz/page?name=QuarterlyResults.
NON-GAAP FINANCIAL MEASURES
Radian believes that adjusted pretax operating income and adjusted diluted net operating income per share (non-GAAP measures) facilitate evaluation of the company’s fundamental financial performance and provide relevant and meaningful information to investors about the ongoing operating results of the company. On a consolidated basis, these measures are not recognized in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be viewed as alternatives to GAAP measures of performance. The measures described below have been established in order to increase transparency for the purpose of evaluating the company’s core operating trends and enabling more meaningful comparisons with Radian’s competitors.
Adjusted pretax operating income is defined as earnings excluding the impact of certain items that are not viewed as part of the operating performance of the company’s primary activities, or not expected to result in an economic impact equal to the amount reflected in pretax income (loss) from continuing operations. Adjusted pretax operating income adjusts GAAP pretax income from continuing operations to remove the effects of: (i) net gains (losses) on investments and other financial instruments; (ii) loss on induced conversion and debt extinguishment; (iii) acquisition-related expenses; (iv) amortization and impairment of intangible assets; and (v) net impairment losses recognized in earnings. Adjusted diluted net operating income per share represents a diluted net income per share calculation using as its basis adjusted pretax operating income, net of taxes at the company’s statutory tax rate for the period.
In addition to the above non-GAAP measures for the consolidated company, the company also presents as supplemental information a non-GAAP measure for the Services segment, representing earnings before interest, income taxes, depreciation and amortization (EBITDA). Services adjusted EBITDA is calculated by using the Services segment’s adjusted pretax operating income as described above, further adjusted to remove the impact of depreciation and corporate allocations for interest and operating expenses. Services adjusted EBITDA is presented to facilitate comparisons with other services companies, since it is a widely accepted measure of performance in the services industry.
See Exhibit G or Radian’s website for a description of these items, as well as Exhibit H 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:
Additional information may be found at www.radian.biz.
FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS (Unaudited)
For trend information on all schedules, refer to Radian’s quarterly financial statistics at http://www.radian.biz/page?name=FinancialReportsCorporate.
Exhibit A: | Condensed Consolidated Statements of Operations Trend Schedule | ||
Exhibit B: | Net Income Per Share Trend Schedule | ||
Exhibit C: | Condensed Consolidated Balance Sheets | ||
Exhibit D: |
Net Premiums Earned-Insurance and Other Operating Expenses |
||
Exhibit E: | Discontinued Operations | ||
Exhibit F: | Segment Information | ||
Exhibit G: | Definition of Consolidated Non-GAAP Financial Measures | ||
Exhibit H: | Consolidated Non-GAAP Financial Measure Reconciliations | ||
Exhibit I: | Mortgage Insurance Supplemental Information | ||
New Insurance Written | |||
Exhibit J: | Mortgage Insurance Supplemental Information | ||
Insurance in Force, Risk in Force by Product and Statutory Capital Ratios | |||
Exhibit K: | Mortgage Insurance Supplemental Information | ||
Risk in Force by FICO, LTV and Policy Year | |||
Exhibit L: | Mortgage Insurance Supplemental Information | ||
Claims and Reserves | |||
Exhibit M: | Mortgage Insurance Supplemental Information | ||
Default Statistics | |||
Exhibit N: | Mortgage Insurance Supplemental Information | ||
QSR, Captives and Persistency |
|||
Radian Group Inc. and Subsidiaries | ||||||||||||||||||||
Condensed Consolidated Statements of Operations | ||||||||||||||||||||
Exhibit A | ||||||||||||||||||||
2016 | 2015 | |||||||||||||||||||
(In thousands, except per share amounts) |
Qtr 2 | Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | |||||||||||||||
Revenues: | ||||||||||||||||||||
Net premiums earned - insurance | $ | 229,085 | $ | 220,950 | $ | 226,443 | $ | 227,433 | $ | 237,437 | ||||||||||
Services revenue | 38,294 | 31,600 | 37,493 | 42,189 | 43,503 | |||||||||||||||
Net investment income | 28,839 | 27,201 | 22,833 | 22,091 | 19,285 | |||||||||||||||
Net gains (losses) on investments and other financial instruments | 30,527 | 31,286 | (13,402 | ) | 3,868 | 28,448 | ||||||||||||||
Other income | 3,423 | 1,915 | 1,515 | 1,711 | 1,743 | |||||||||||||||
Total revenues | 330,168 | 312,952 | 274,882 | 297,292 | 330,416 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Provision for losses | 49,725 | 42,991 | 56,805 | 64,192 | 32,560 | |||||||||||||||
Policy acquisition costs | 5,393 | 6,389 | 4,831 | 2,880 | 6,963 | |||||||||||||||
Direct cost of services | 24,858 | 21,749 | 22,241 | 24,949 | 23,520 | |||||||||||||||
Other operating expenses | 65,680 | 58,989 | 59,570 | 65,082 | 67,731 | |||||||||||||||
Interest expense | 22,546 | 21,534 | 20,996 | 21,220 | 24,501 | |||||||||||||||
Loss on induced conversion and debt extinguishment | 2,108 | 55,570 | 2,320 | 11 | 91,876 | |||||||||||||||
Amortization and impairment of intangible assets | 3,311 | 3,328 | 3,409 | 3,273 | 3,281 | |||||||||||||||
Total expenses | 173,621 | 210,550 | 170,172 | 181,607 | 250,432 | |||||||||||||||
Pretax income from continuing operations | 156,547 | 102,402 | 104,710 | 115,685 | 79,984 | |||||||||||||||
Income tax provision (benefit) | 58,435 | 36,153 | 30,182 | 45,594 | 34,791 | |||||||||||||||
Net income from continuing operations | 98,112 | 66,249 | 74,528 | 70,091 | 45,193 | |||||||||||||||
Income (loss) from discontinued operations, net of tax | — | — | — | — | 4,855 | |||||||||||||||
Net income | $ | 98,112 | $ | 66,249 | $ | 74,528 | $ | 70,091 | $ | 50,048 | ||||||||||
Diluted net income per share: | ||||||||||||||||||||
Net income from continuing operations | $ | 0.44 | $ | 0.29 | $ | 0.32 | $ | 0.29 | $ | 0.20 | ||||||||||
Income from discontinued operations, net of tax | — | — | — | — | 0.02 | |||||||||||||||
Net income | $ | 0.44 | $ | 0.29 | $ | 0.32 | $ | 0.29 | $ | 0.22 | ||||||||||
Selected Mortgage Insurance Key Ratios | ||||||||||||||||||||
Loss ratio (1) | 21.9 | % | 19.6 | % | 25.1 | % | 28.2 | % | 13.3 | % | ||||||||||
Expense ratio (1) | 24.4 | % | 22.4 | % | 22.7 | % | 23.9 | % | 25.8 | % | ||||||||||
(1) |
Calculated on a GAAP basis using net premiums earned. |
|
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 E for additional information on discontinued operations. |
Radian Group Inc. and Subsidiaries | |||||||||||||||||||
Net Income Per Share | |||||||||||||||||||
Exhibit B | |||||||||||||||||||
The calculation of basic and diluted net income per share was as follows: |
|||||||||||||||||||
2016 | 2015 | ||||||||||||||||||
(In thousands, except per share amounts) |
Qtr 2 | Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | ||||||||||||||
Net income from continuing operations: | |||||||||||||||||||
Net income from continuing operations—basic | $ | 98,112 | $ | 66,249 | $ | 74,528 | $ | 70,091 | $ | 45,193 | |||||||||
Adjustment for dilutive Convertible Senior Notes due 2019, net of tax (1) | 913 | 3,390 | 3,664 | 3,714 | 3,707 | ||||||||||||||
Net income from continuing operations—diluted | $ | 99,025 | $ | 69,639 | $ | 78,192 | $ | 73,805 | $ | 48,900 | |||||||||
Net income: | |||||||||||||||||||
Net income from continuing operations—basic | $ | 98,112 | $ | 66,249 | $ | 74,528 | $ | 70,091 | $ | 45,193 | |||||||||
Income (loss) from discontinued operations, net of tax | — | — | — | — | 4,855 | ||||||||||||||
Net income—basic | 98,112 | 66,249 | 74,528 | 70,091 | 50,048 | ||||||||||||||
Adjustment for dilutive Convertible Senior Notes due 2019, net of tax (1) | 913 | 3,390 | 3,664 | 3,714 | 3,707 | ||||||||||||||
Net income—diluted | $ | 99,025 | $ | 69,639 | $ | 78,192 | $ | 73,805 | $ | 53,755 | |||||||||
Average common shares outstanding—basic | 214,274 | 203,706 | 206,872 | 207,938 | 193,112 | ||||||||||||||
Dilutive effect of Convertible Senior Notes due 2017 (2) | 12 | — | 1,057 | 1,798 | 12,438 | ||||||||||||||
Dilutive effect of Convertible Senior Notes due 2019 | 8,928 | 33,583 | 37,736 | 37,736 | 37,736 | ||||||||||||||
Dilutive effect of stock-based compensation arrangements (2) | 2,989 | 2,418 | 2,316 | 3,323 | 3,364 | ||||||||||||||
Adjusted average common shares outstanding—diluted | 226,203 | 239,707 | 247,981 | 250,795 | 246,650 | ||||||||||||||
Net income per share: |
|||||||||||||||||||
Basic: | |||||||||||||||||||
Net income from continuing operations | $ | 0.46 | $ | 0.33 | $ | 0.36 | $ | 0.34 | $ | 0.23 | |||||||||
Income (loss) from discontinued operations, net of tax | — | — | — | — | 0.03 | ||||||||||||||
Net income | $ | 0.46 | $ | 0.33 | $ | 0.36 | $ | 0.34 | $ | 0.26 | |||||||||
Diluted: | |||||||||||||||||||
Net income from continuing operations | $ | 0.44 | $ | 0.29 | $ | 0.32 | $ | 0.29 | $ | 0.20 | |||||||||
Income (loss) from discontinued operations, net of tax | — | — | — | — | 0.02 | ||||||||||||||
Net income | $ | 0.44 | $ | 0.29 | $ | 0.32 | $ | 0.29 | $ | 0.22 | |||||||||
(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 and convertible debt were not included in the calculation of diluted net income per share because they were anti-dilutive: |
2016 | 2015 | ||||||||||||||
(In thousands) |
Qtr 2 | Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | ||||||||||
Shares of common stock equivalents | 1,042 | 709 | 728 | 469 | 264 | ||||||||||
Shares of Convertible Senior Notes due 2017 | — | 1,902 | — | — | — | ||||||||||
Radian Group Inc. and Subsidiaries | ||||||||||||||||||||
Condensed Consolidated Balance Sheets | ||||||||||||||||||||
Exhibit C | ||||||||||||||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
(In thousands, except per share data) | 2016 | 2016 | 2015 | 2015 | 2015 | |||||||||||||||
Assets: | ||||||||||||||||||||
Investments | $ | 4,636,914 | $ | 4,470,172 | $ | 4,298,686 | $ | 4,376,771 | $ | 4,309,148 | ||||||||||
Cash | 55,062 | 64,844 | 46,898 | 69,030 | 51,381 | |||||||||||||||
Restricted cash | 9,298 | 10,060 | 13,000 | 10,280 | 12,633 | |||||||||||||||
Accounts and notes receivable | 77,170 | 66,340 | 61,734 | 65,951 | 72,093 | |||||||||||||||
Deferred income taxes, net | 444,513 | 518,059 | 577,945 | 601,893 | 651,238 | |||||||||||||||
Goodwill and other intangible assets, net | 282,703 | 286,069 | 289,417 | 287,334 | 290,640 | |||||||||||||||
Prepaid reinsurance premium | 229,231 | 228,718 | 40,491 | 44,091 | 47,835 | |||||||||||||||
Other assets | 332,372 | 325,129 | 313,929 | 305,566 | 301,536 | |||||||||||||||
Total assets | $ | 6,067,263 | $ | 5,969,391 | $ | 5,642,100 | $ | 5,760,916 | $ | 5,736,504 | ||||||||||
Liabilities and stockholders’ equity: | ||||||||||||||||||||
Unearned premiums | $ | 677,599 | $ | 673,887 | $ | 680,300 | $ | 676,938 | $ | 665,947 | ||||||||||
Reserve for losses and loss adjustment expense | 848,379 | 891,348 | 976,399 | 1,098,570 | 1,204,792 | |||||||||||||||
Long-term debt | 1,278,051 | 1,286,466 | 1,219,454 | 1,230,246 | 1,224,892 | |||||||||||||||
Reinsurance funds withheld | 163,360 | 151,104 | — | — | — | |||||||||||||||
Other liabilities | 294,507 | 306,188 | 269,016 | 311,855 | 278,929 | |||||||||||||||
Total liabilities | 3,261,896 | 3,308,993 | 3,145,169 | 3,317,609 | 3,374,560 | |||||||||||||||
Equity component of currently redeemable convertible senior notes | — | — | — | 7,737 | 8,546 | |||||||||||||||
Common stock | 232 | 232 | 224 | 224 | 226 | |||||||||||||||
Additional paid-in capital | 1,887,960 | 1,880,173 | 1,823,442 | 1,825,034 | 1,816,545 | |||||||||||||||
Retained earnings | 855,070 | 757,202 | 691,742 | 617,731 | 548,161 | |||||||||||||||
Accumulated other comprehensive income (loss) | 62,105 | 22,791 | (18,477 | ) | (7,419 | ) | (11,534 | ) | ||||||||||||
Total stockholders’ equity | 2,805,367 | 2,660,398 | 2,496,931 | 2,435,570 | 2,353,398 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 6,067,263 | $ | 5,969,391 | $ | 5,642,100 | $ | 5,760,916 | $ | 5,736,504 | ||||||||||
Shares outstanding | 214,284 | 214,265 | 206,872 | 206,870 | 208,587 | |||||||||||||||
Book value per share | $ | 13.09 | $ | 12.42 | $ | 12.07 | $ | 11.77 | $ | 11.28 | ||||||||||
Radian Group Inc. and Subsidiaries |
||||||||||||
Net Premiums Earned - Insurance and Other Operating Expenses |
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Exhibit D |
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2016 | 2015 | |||||||||||
(In millions) |
Qtr 2 | Qtr 1 | Qtr 2 | |||||||||
Premiums earned - insurance: | ||||||||||||
Direct | $ | 248,938 | $ | 240,330 | $ | 249,797 | ||||||
Assumed | 9 | 9 | 10 | |||||||||
Ceded | (19,862 | ) | (19,389 | ) | (12,370 | ) | ||||||
Net premiums earned - insurance | $ | 229,085 | $ | 220,950 | $ | 237,437 | ||||||
Notable variable items (1): | ||||||||||||
Single Premium Policy cancellations | $ | 14,841 | $ | 9,783 | $ | 24,975 | ||||||
Profit commission - reinsurance (2) | 7,891 | 6,134 | 5,760 | |||||||||
Total | $ | 22,732 | $ | 15,917 | $ | 30,735 | ||||||
Other operating expenses | $ | 65,680 | $ | 58,989 | $ | 67,731 | ||||||
Notable variable items (3): | ||||||||||||
Technology upgrade project (4) | $ | 2,443 | $ | 2,271 | $ | 1,304 | ||||||
Severance costs | 277 | 3,040 | 665 | |||||||||
Increase (decrease) in long-term incentive compensation (5) | 7,271 | — | 5,345 | |||||||||
Ceding commissions | (6,297 | ) | (5,820 | ) | (3,304 | ) | ||||||
Total | $ | 3,694 | $ | (509 | ) | $ | 4,010 | |||||
(1) |
Affecting net premiums earned-insurance. |
|
(2) |
For the first and second quarters of 2016, the amounts represent the profit commission on the Single Premium QSR Transaction. For the second quarter of 2015, the amount represents an accrual for the profit commission on the Second QSR Transaction. |
|
(3) |
Affecting other operating expenses. |
|
(4) |
Represents the expense impact of certain costs incurred in our initiative to significantly upgrade our technology systems. |
|
(5) |
Represents the impact of specifically identified items during the quarters shown. The expense increase in the second quarter of 2016 related to annual grants of new equity-settled long-term incentive awards, primarily due to the acceleration of such expense for retirement-eligible employees. The annual grants for 2015 were made in the third quarter of 2015. The expense increase in the second quarter of 2015 represents the impact of stock price appreciation on the estimated fair value of cash-settled equity-based long-term incentive awards that were valued, in large part, relative to the price of Radian Group’s common stock. Now that substantially all of the cash-settled awards have vested, this expense volatility due to the level of Radian’s stock price is not expected in the future. |
|
Radian Group Inc. and Subsidiaries |
Discontinued Operations |
Exhibit E |
The income from discontinued operations, net of tax consisted of the following components for the periods indicated: |
2015 | ||||
(In thousands) |
Qtr 2 | |||
Net premiums earned | $ | — | ||
Net investment income | — | |||
Net gains (losses) on investments and other financial instruments | 7,818 | |||
Change in fair value of derivative instruments | — | |||
Total revenues | 7,818 | |||
Provision for losses | — | |||
Policy acquisition costs | — | |||
Other operating expense | — | |||
Total expenses | — | |||
Equity in net income (loss) of affiliates | — | |||
Income (loss) from operations of businesses held for sale | 7,818 | |||
Income (loss) on sale | (350 | ) | ||
Income tax provision (benefit) | 2,613 | |||
Income (loss) from discontinued operations, net of tax | $ | 4,855 | ||
Radian Group Inc. and Subsidiaries |
Segment Information |
Exhibit F (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 Services adjusted EBITDA, along with reconciliations to consolidated GAAP measures, see Exhibits G and H. |
Mortgage Insurance | |||||||||||||||||||||||
2016 | 2015 | ||||||||||||||||||||||
(In thousands) |
Qtr 2 | Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | ||||||||||||||||||
Net premiums written - insurance | $ | 232,353 | $ | 26,310 |
(1) |
|
$ | 233,347 | $ | 242,168 | $ | 251,082 | |||||||||||
Decrease (increase) in unearned premiums | (3,268 | ) | 194,640 | (6,904 | ) | (14,735 | ) | (13,645 | ) | ||||||||||||||
Net premiums earned - insurance | 229,085 | 220,950 | 226,443 | 227,433 | 237,437 | ||||||||||||||||||
Net investment income | 28,839 | 27,201 | 22,833 | 22,091 | 19,285 | ||||||||||||||||||
Other income | 3,424 | 1,915 | 1,515 | 1,711 | 1,743 | ||||||||||||||||||
Total | 261,348 | 250,066 | 250,791 | 251,235 | 258,465 | ||||||||||||||||||
Provision for losses | 50,074 | 43,275 | 56,817 | 64,128 | 31,637 | ||||||||||||||||||
Policy acquisition costs | 5,393 | 6,389 | 4,831 | 2,880 | 6,963 | ||||||||||||||||||
Other operating expenses before corporate allocations | 36,126 | 33,829 | 37,406 | 36,632 | 41,853 | ||||||||||||||||||
Total (2) | 91,593 | 83,493 | 99,054 | 103,640 | 80,453 | ||||||||||||||||||
Adjusted pretax operating income before corporate allocations | 169,755 | 166,573 | 151,737 | 147,595 | 178,012 | ||||||||||||||||||
Allocation of corporate operating expenses | 14,286 | 9,329 | 9,251 | 14,893 | 12,516 | ||||||||||||||||||
Allocation of interest expense | 18,124 | 17,112 | 16,582 | 16,797 | 20,070 | ||||||||||||||||||
Adjusted pretax operating income | $ | 137,345 | $ | 140,132 | $ | 125,904 | $ | 115,905 | $ | 145,426 | |||||||||||||
Services | |||||||||||||||||||||||
2016 | 2015 | ||||||||||||||||||||||
(In thousands) |
Qtr 2 | Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | ||||||||||||||||||
Services revenue (2) | $ | 39,002 | $ | 32,196 | $ | 38,175 | $ | 43,114 | $ | 44,595 | |||||||||||||
Direct cost of services | 25,224 | 22,053 | 22,880 | 25,870 | 25,501 | ||||||||||||||||||
Other operating expenses before corporate allocations | 12,537 | 13,883 | 11,710 | 11,533 | 11,522 | ||||||||||||||||||
Total | 37,761 | 35,936 | 34,590 | 37,403 | 37,023 | ||||||||||||||||||
Adjusted pretax operating income (loss) before corporate allocations (3) | 1,241 | (3,740 | ) | 3,585 | 5,711 | 7,572 | |||||||||||||||||
Allocation of corporate operating expenses | 2,779 | 1,751 | 968 | 1,567 | 1,307 | ||||||||||||||||||
Allocation of interest expense | 4,422 | 4,422 | 4,414 | 4,423 | 4,431 | ||||||||||||||||||
Adjusted pretax operating income (loss) | $ | (5,960 | ) | $ | (9,913 | ) | $ | (1,797 | ) | $ | (279 | ) | $ | 1,834 | |||||||||
(1) |
Net of ceded premiums written under the Single Premium QSR transaction of $197.6 million. |
|
(2) |
Inter-segment information: |
|
2016 | 2015 | ||||||||||||||||||
Qtr 2 | Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | |||||||||||||||
Inter-segment expense included in Mortgage Insurance segment | $ | 709 | $ | 596 | $ | 682 | $ | 925 | $ | 1,092 | |||||||||
Inter-segment revenue included in Services segment | 709 | 596 | 682 | 925 | 1,092 | ||||||||||||||
Radian Group Inc. and Subsidiaries |
Segment Information |
Exhibit F (page 2 of 2) |
(3) Supplemental information for Services adjusted EBITDA (see definition in Exhibit G): |
2016 | 2015 | ||||||||||||||||||
Qtr 2 | Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | |||||||||||||||
Adjusted pretax operating income (loss) before corporate allocations | $ | 1,241 | $ | (3,740 | ) | $ | 3,585 | $ | 5,711 | $ | 7,572 | ||||||||
Depreciation and amortization | 747 | 661 | 612 | 555 | 482 | ||||||||||||||
Services adjusted EBITDA | $ | 1,988 | $ | (3,079 | ) | $ | 4,197 | $ | 6,266 | $ | 8,054 | ||||||||
Selected balance sheet information for our segments, as of the periods indicated, is as follows: |
At June 30, 2016 | |||||||||||
(In thousands) |
Mortgage |
Services | Total | ||||||||
Total assets | $ | 5,708,233 | $ | 359,030 | $ | 6,067,263 | |||||
At December 31, 2015 | |||||||||||
(In thousands) |
Mortgage |
Services | Total | ||||||||
Total assets | $ | 5,281,597 | $ | 360,503 | $ | 5,642,100 | |||||
Radian Group Inc. and Subsidiaries |
|||||
Definition of Consolidated Non-GAAP Financial Measures |
|||||
Exhibit G (page 1 of 2) |
|||||
Use of Non-GAAP Financial Measures |
|||||
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 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 and losses incurred to purchase our convertible debt prior to maturity are discretionary activities that are undertaken in order to take advantage of market opportunities to strengthen our financial and capital positions; therefore, we do not view these activities 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 Measures |
|||||
Exhibit G (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 a measure of earnings before interest, income taxes, depreciation and amortization (“EBITDA”). We calculate Services adjusted 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 adjusted EBITDA to facilitate comparisons with other services companies, since it is a widely accepted measure of performance in the services industry. | |||||
See Exhibit H 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 diluted net income per share from continuing operations, respectively. Exhibit H also contains the reconciliation of Services adjusted EBITDA to the most comparable GAAP measure, net income. |
|||||
Total adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and Services adjusted EBITDA are not measures of total profitability, and therefore should not be viewed as substitutes for GAAP pretax income (loss) from continuing operations, diluted net income (loss) per share from continuing operations or net income. Our definitions of adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share or Services adjusted 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 H (page 1 of 2) |
||||||||||||||||||||
|
||||||||||||||||||||
Reconciliation of Adjusted Pretax Operating Income (Loss) to Consolidated Pretax Income |
||||||||||||||||||||
from Continuing Operations |
||||||||||||||||||||
2016 | 2015 | |||||||||||||||||||
(In thousands) |
Qtr 2 | Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | |||||||||||||||
Adjusted pretax operating income (loss): | ||||||||||||||||||||
Mortgage Insurance | $ | 137,345 | $ | 140,132 | $ | 125,904 | $ | 115,905 | $ | 145,426 | ||||||||||
Services | (5,960 | ) | (9,913 | ) | (1,797 | ) | (279 | ) | 1,834 | |||||||||||
Total adjusted pretax operating income | 131,385 | 130,219 | 124,107 | 115,626 | 147,260 | |||||||||||||||
Net gains (losses) on investments and other financial instruments | 30,527 | 31,286 | (13,402 | ) | 3,868 | 28,448 | ||||||||||||||
Loss on induced conversion and debt extinguishment | (2,108 | ) | (55,570 | ) | (2,320 | ) | (11 | ) | (91,876 | ) | ||||||||||
Acquisition-related expenses (1) |
54 | (205 | ) | (266 | ) | (525 | ) | (567 | ) | |||||||||||
Amortization and impairment of intangible assets (1) |
(3,311 | ) | (3,328 | ) | (3,409 | ) | (3,273 | ) | (3,281 | ) | ||||||||||
Consolidated pretax income from continuing operations | $ | 156,547 | $ | 102,402 | $ | 104,710 | $ | 115,685 | $ | 79,984 | ||||||||||
(1) |
Please see Exhibit G for the definition of this line item. |
||
Reconciliation of Adjusted Diluted Net Operating Income Per Share to Diluted Net Income Per Share | ||||||||||||||||||||
from Continuing Operations | ||||||||||||||||||||
2016 | 2015 | |||||||||||||||||||
Qtr 2 | Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | ||||||||||||||||
Adjusted diluted net operating income per share (1) |
$ | 0.38 | $ | 0.37 | $ | 0.34 | $ | 0.31 | $ | 0.40 | ||||||||||
Per share impact of debt items: | ||||||||||||||||||||
Loss on induced conversion and debt extinguishment | (0.01 | ) | (0.23 | ) | (0.01 | ) | — | (0.37 | ) | |||||||||||
Income tax provision (benefit) (2) |
— | (0.03 | ) | (0.04 | ) | — | (0.09 | ) | ||||||||||||
Per share impact of debt items | (0.01 | ) | (0.20 | ) | 0.03 | — | (0.28 | ) | ||||||||||||
Per share impact of other reconciling items: | ||||||||||||||||||||
Net gains (losses) on investments and other financial instruments | 0.13 | 0.13 | (0.05 | ) | 0.01 | 0.11 | ||||||||||||||
Acquisition-related expenses | — | — | — | — | — | |||||||||||||||
Amortization and impairment of intangible assets | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | ||||||||||
Income tax provision (benefit) on other reconciling items (1) |
0.04 | 0.04 | (0.02 | ) | — | 0.04 | ||||||||||||||
Difference between statutory and effective tax rate | (0.01 | ) | 0.04 | (0.01 | ) | (0.02 | ) | 0.02 | ||||||||||||
Per share impact of other reconciling items | 0.07 | 0.12 | (0.05 | ) | (0.02 | ) | 0.08 | |||||||||||||
Diluted net income per share from continuing operations (3) |
$ | 0.44 | $ | 0.29 | $ | 0.32 | $ | 0.29 | $ | 0.20 | ||||||||||
(1) |
Calculated using the company’s federal statutory tax rate. Any permanent tax adjustments and state income taxes on these items have been deemed immaterial and are not included. |
||
(2) |
A portion of the loss on induced conversion and debt extinguishment is non-deductible for tax purposes. The income tax benefit is based on the tax deductible loss using the company's federal statutory tax rate. |
||
(3) |
In periods with no activity from discontinued operations, diluted net income per share from continuing operations is equivalent to diluted net income per share. |
||
Radian Group Inc. and Subsidiaries | ||||||||||||||||||||
Consolidated Non-GAAP Financial Measure Reconciliations | ||||||||||||||||||||
Exhibit H (page 2 of 2) | ||||||||||||||||||||
Reconciliation of Services Adjusted EBITDA to Net Income |
||||||||||||||||||||
2016 | 2015 | |||||||||||||||||||
(In thousands) |
Qtr 2 | Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | |||||||||||||||
Services adjusted EBITDA | $ | 1,988 | $ | (3,079 | ) | $ | 4,197 | $ | 6,266 | $ | 8,054 | |||||||||
Allocation of corporate operating expenses to Services | (2,779 | ) | (1,751 | ) | (968 | ) | (1,567 | ) | (1,307 | ) | ||||||||||
Allocation of corporate interest expenses to Services | (4,422 | ) | (4,422 | ) | (4,414 | ) | (4,423 | ) | (4,431 | ) | ||||||||||
Services depreciation and amortization | (747 | ) | (661 | ) | (612 | ) | (555 | ) | (482 | ) | ||||||||||
Services adjusted pretax operating income (loss) | (5,960 | ) | (9,913 | ) | (1,797 | ) | (279 | ) | 1,834 | |||||||||||
Mortgage Insurance adjusted pretax operating income | 137,345 | 140,132 | 125,904 | 115,905 | 145,426 | |||||||||||||||
Total adjusted pretax operating income | 131,385 | 130,219 | 124,107 | 115,626 | 147,260 | |||||||||||||||
Net gains (losses) on investments and other financial instruments | 30,527 | 31,286 | (13,402 | ) | 3,868 | 28,448 | ||||||||||||||
Loss on induced conversion and debt extinguishment | (2,108 | ) | (55,570 | ) | (2,320 | ) | (11 | ) | (91,876 | ) | ||||||||||
Acquisition-related expenses | 54 | (205 | ) | (266 | ) | (525 | ) | (567 | ) | |||||||||||
Amortization and impairment of intangible assets | (3,311 | ) | (3,328 | ) | (3,409 | ) | (3,273 | ) | (3,281 | ) | ||||||||||
Consolidated pretax income from continuing operations | 156,547 | 102,402 | 104,710 | 115,685 | 79,984 | |||||||||||||||
Income tax provision | 58,435 | 36,153 | 30,182 | 45,594 | 34,791 | |||||||||||||||
Net income from continuing operations | 98,112 | 66,249 | 74,528 | 70,091 | 45,193 | |||||||||||||||
Income from discontinued operations, net of tax | — | — | — | — | 4,855 | |||||||||||||||
Net income | $ | 98,112 | $ | 66,249 | $ | 74,528 | $ | 70,091 | $ | 50,048 | ||||||||||
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 adjusted 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 diluted net income per share from continuing operations. Our definitions of adjusted pretax operating income, adjusted diluted net operating income per share or Services adjusted EBITDA may not be comparable to similarly-named measures reported by other companies. See Exhibit G for additional information on our consolidated non-GAAP financial measures. |
Radian Group Inc. and Subsidiaries | ||||||||||||||||||||
Mortgage Insurance Supplemental Information - New Insurance Written | ||||||||||||||||||||
Exhibit I | ||||||||||||||||||||
2016 | 2015 | |||||||||||||||||||
($ in millions) |
Qtr 2 | Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | |||||||||||||||
Total primary new insurance written | $ | 12,921 | $ | 8,071 | $ | 9,099 | $ | 11,176 | $ | 11,751 | ||||||||||
Percentage of primary new insurance written by FICO score |
||||||||||||||||||||
>=740 | 60.9 | % | 58.4 | % | 60.3 | % | 61.0 | % | 63.0 | % | ||||||||||
680-739 |
32.2 | 33.7 | 32.2 | 31.9 | 30.8 | |||||||||||||||
620-679 |
6.9 | 7.9 | 7.5 | 7.1 | 6.2 | |||||||||||||||
Total Primary | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Percentage of primary new insurance written |
||||||||||||||||||||
Direct monthly and other premiums | 74 | % | 71 | % | 71 | % | 73 | % | 68 | % | ||||||||||
Direct single premiums | 26 | % | 29 | % | 29 | % | 27 | % | 32 | % | ||||||||||
Net single premiums (1) |
17 | % | 19 | % | 29 | % | 27 | % | 32 | % | ||||||||||
Refinances | 18 | % | 19 | % | 17 | % | 13 | % | 23 | % | ||||||||||
LTV | ||||||||||||||||||||
95.01% and above | 4.8 | % | 3.7 | % | 3.6 | % | 3.5 | % | 3.2 | % | ||||||||||
90.01% to 95.00% | 50.2 | % | 50.5 | % | 49.5 | % | 51.5 | % | 49.4 | % | ||||||||||
85.01% to 90.00% | 31.8 | % | 33.1 | % | 34.4 | % | 34.1 | % | 34.0 | % | ||||||||||
85.00% and below | 13.2 | % | 12.7 | % | 12.5 | % | 10.9 | % | 13.4 | % | ||||||||||
(1) |
In 2016, represents percentage of direct single premiums written, after consideration of the 35% single premium NIW ceded under the Single Premium QSR. |
||
Radian Group Inc. and Subsidiaries | ||||||||||||||||||||
Mortgage Insurance Supplemental Information - Primary Insurance in Force and Risk in Force by Product, Statutory Capital Ratios |
||||||||||||||||||||
Exhibit J |
||||||||||||||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
($ in millions) | 2016 | 2016 | 2015 | 2015 | 2015 | |||||||||||||||
Primary insurance in force (1) |
||||||||||||||||||||
Flow | $ | 170,069 | $ | 167,526 | $ | 167,469 | $ | 166,527 | $ | 164,137 | ||||||||||
Structured | 7,603 | 7,860 | 8,115 | 8,339 | 8,555 | |||||||||||||||
Total Primary | $ | 177,672 | $ | 175,386 | $ | 175,584 | $ | 174,866 | $ | 172,692 | ||||||||||
Prime | $ | 168,259 | $ | 165,526 | $ | 165,291 | $ | 164,060 | $ | 161,397 | ||||||||||
Alt-A | 5,627 | 5,907 | 6,176 | 6,531 | 6,857 | |||||||||||||||
A minus and below | 3,786 | 3,953 | 4,117 | 4,275 | 4,438 | |||||||||||||||
Total Primary | $ | 177,672 | $ | 175,386 | $ | 175,584 | $ | 174,866 | $ | 172,692 | ||||||||||
Primary risk in force (1) (2) |
||||||||||||||||||||
Flow | $ | 43,576 | $ | 42,861 | $ | 42,771 | $ | 42,454 | $ | 41,706 | ||||||||||
Structured | 1,748 | 1,805 | 1,856 | 1,910 | 1,957 | |||||||||||||||
Total Primary | $ | 45,324 | $ | 44,666 | $ | 44,627 | $ | 44,364 | $ | 43,663 | ||||||||||
Flow | ||||||||||||||||||||
Prime | $ | 42,008 | $ | 41,211 | $ | 41,036 | $ | 40,629 | $ | 39,781 | ||||||||||
Alt-A | 959 | 1,010 | 1,061 | 1,124 | 1,191 | |||||||||||||||
A minus and below | 609 | 640 | 674 | 701 | 734 | |||||||||||||||
Total Flow | $ | 43,576 | $ | 42,861 | $ | 42,771 | $ | 42,454 | $ | 41,706 | ||||||||||
Structured | ||||||||||||||||||||
Prime | $ | 1,068 | $ | 1,101 | $ | 1,134 | $ | 1,155 | $ | 1,182 | ||||||||||
Alt-A | 343 | 356 | 366 | 386 | 397 | |||||||||||||||
A minus and below | 337 | 348 | 356 | 369 | 378 | |||||||||||||||
Total Structured | $ | 1,748 | $ | 1,805 | $ | 1,856 | $ | 1,910 | $ | 1,957 | ||||||||||
Total | ||||||||||||||||||||
Prime | $ | 43,076 | $ | 42,312 | $ | 42,170 | $ | 41,784 | $ | 40,963 | ||||||||||
Alt-A | 1,302 | 1,366 | 1,427 | 1,510 | 1,588 | |||||||||||||||
A minus and below | 946 | 988 | 1,030 | 1,070 | 1,112 | |||||||||||||||
Total Primary | $ | 45,324 | $ | 44,666 | $ | 44,627 | $ | 44,364 | $ | 43,663 | ||||||||||
Percentage of primary risk in force |
||||||||||||||||||||
Direct monthly and other premiums | 69 | % | 69 | % | 69 | % | 70 | % | 70 | % | ||||||||||
Direct single premiums | 31 | % | 31 | % | 31 | % | 30 | % | 30 | % | ||||||||||
Net single premiums (3) | 25 | % | 25 | % | 30 | % | 30 | % | 29 | % | ||||||||||
Statutory Capital Ratios |
||||||||||||||||||||
Risk to capital ratio-Radian Guaranty only | 14.0 | :1 | (4) | 12.5 | :1 | 14.3 | :1 | 16.5 | :1 | 16.5 | :1 | |||||||||
Risk to capital ratio-Mortgage Insurance combined | 14.2 | :1 | (4) | 12.9 | :1 | 14.6 | :1 | 17.9 | :1 | 18.0 | :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) |
Represents RIF after giving effect to all reinsurance ceded ("Net RIF"). |
|
(4) |
Preliminary. |
|
Radian Group Inc. and Subsidiaries | ||||||||||||||||||||
Mortgage Insurance Supplemental Information - Percentage of Primary Risk in Force by FICO, LTV and Policy Year and Primary Risk in Force on Defaulted Loans(1) |
||||||||||||||||||||
Exhibit K | ||||||||||||||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
($ in millions) | 2016 | 2016 | 2015 | 2015 | 2015 | |||||||||||||||
Percentage of primary risk in force by FICO score |
||||||||||||||||||||
Flow | ||||||||||||||||||||
>=740 | 58.2 | % | 58.2 | % | 58.3 | % | 58.2 | % | 58.1 | % | ||||||||||
680-739 | 30.9 | 30.7 | 30.5 | 30.3 | 30.2 | |||||||||||||||
620-679 | 9.9 | 10.0 | 10.1 | 10.3 | 10.5 | |||||||||||||||
<=619 | 1.0 | 1.1 | 1.1 | 1.2 | 1.2 | |||||||||||||||
Total Flow | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Structured | ||||||||||||||||||||
>=740 | 29.3 | % | 29.3 | 29.4 | % | 28.9 | % | 28.7 | % | |||||||||||
680-739 | 27.7 | 27.8 | 27.7 | 27.9 | 27.9 | |||||||||||||||
620-679 | 25.0 | 25.0 | 25.0 | 25.2 | 25.4 | |||||||||||||||
<=619 | 18.0 | 17.9 | 17.9 | 18.0 | 18.0 | |||||||||||||||
Total Structured | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Total | ||||||||||||||||||||
>=740 | 57.1 | % | 57.0 | % | 57.1 | % | 57.0 | % | 56.7 | % | ||||||||||
680-739 | 30.8 | 30.6 | 30.3 | 30.2 | 30.1 | |||||||||||||||
620-679 | 10.5 | 10.7 | 10.8 | 10.9 | 11.2 | |||||||||||||||
<=619 | 1.6 | 1.7 | 1.8 | 1.9 | 2.0 | |||||||||||||||
Total Primary | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Percentage of primary risk in force by LTV |
||||||||||||||||||||
95.01% and above | 7.1 | % | 7.2 | % | 7.3 | % | 7.4 | % | 7.6 | % | ||||||||||
90.01% to 95.00% | 51.6 | 50.9 | 50.4 | 49.8 | 49.0 | |||||||||||||||
85.01% to 90.00% | 33.3 | 33.7 | 34.0 | 34.3 | 34.6 | |||||||||||||||
85.00% and below | 8.0 | 8.2 | 8.3 | 8.5 | 8.8 | |||||||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Percentage of primary risk in force by policy year |
||||||||||||||||||||
2005 and prior | 5.5 | % | 6.0 | % | 6.3 | % | 6.8 | % | 7.3 | % | ||||||||||
2006 | 3.4 | 3.6 | 3.7 | 3.9 | 4.2 | |||||||||||||||
2007 | 7.9 | 8.4 | 8.7 | 9.1 | 9.6 | |||||||||||||||
2008 | 5.6 | 6.0 | 6.3 | 6.6 | 7.0 | |||||||||||||||
2009 | 1.3 | 1.5 | 1.7 | 1.8 | 2.0 | |||||||||||||||
2010 | 1.2 | 1.3 | 1.4 | 1.5 | 1.7 | |||||||||||||||
2011 | 2.5 | 2.7 | 2.9 | 3.1 | 3.5 | |||||||||||||||
2012 | 9.7 | 10.6 | 11.2 | 12.0 | 13.0 | |||||||||||||||
2013 | 15.5 | 17.0 | 18.1 | 19.2 | 20.8 | |||||||||||||||
2014 | 14.9 | 16.3 | 17.1 | 18.0 | 19.0 | |||||||||||||||
2015 | 21.0 | 22.0 | 22.6 | 18.0 | 11.9 | |||||||||||||||
2016 | 11.5 | 4.6 | — | — | — | |||||||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
Primary risk in force on defaulted loans (2) | $ | 1,398 | $ | 1,562 | $ | 1,625 | $ | 1,666 | $ | 1,753 | ||||||||||
(1) |
Includes amounts ceded under our reinsurance agreements. |
|
(2) |
Excludes risk related to loans subject to the Freddie Mac Agreement. |
|
Radian Group Inc. and Subsidiaries | |||||||||||||||||||||||||||||||||||||||||
Mortgage Insurance Supplemental Information - Claims and Reserves | |||||||||||||||||||||||||||||||||||||||||
Exhibit L | |||||||||||||||||||||||||||||||||||||||||
2016 | 2015 | ||||||||||||||||||||||||||||||||||||||||
($ in thousands) |
Qtr 2 | Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | ||||||||||||||||||||||||||||||||||||
Net claims paid | |||||||||||||||||||||||||||||||||||||||||
Prime | $ | 56,036 | $ | 74,432 | $ | 56,900 | $ | 65,396 | $ | 83,489 | |||||||||||||||||||||||||||||||
Alt-A | 18,349 | 28,929 | 21,343 | 18,966 | 23,260 | ||||||||||||||||||||||||||||||||||||
A minus and below | 12,315 | 13,196 | 11,530 | 14,028 | 14,965 | ||||||||||||||||||||||||||||||||||||
Total primary claims paid | 86,700 | 116,557 | 89,773 | 98,390 | 121,714 | ||||||||||||||||||||||||||||||||||||
Pool | 5,451 | 7,389 | 6,477 | 8,721 | 10,798 | ||||||||||||||||||||||||||||||||||||
Second-lien and other | (231 | ) | 345 | (143 | ) | (16 | ) | (53 | ) | ||||||||||||||||||||||||||||||||
Subtotal | 91,920 | 124,291 | 96,107 | 107,095 | 132,459 | ||||||||||||||||||||||||||||||||||||
Impact of captive terminations | (2,618 | ) | (120 | ) | (65 | ) | — | — | |||||||||||||||||||||||||||||||||
Impact of settlements | 1,400 | 3,500 | 80,426 | 61,994 | 79,557 | ||||||||||||||||||||||||||||||||||||
Total | $ | 90,702 | $ | 127,671 | $ | 176,468 | $ | 169,089 | $ | 212,016 | |||||||||||||||||||||||||||||||
Average claim paid (1) | |||||||||||||||||||||||||||||||||||||||||
Prime | $ | 48.6 | $ | 47.7 | $ | 46.9 | $ | 46.2 | $ | 48.1 | |||||||||||||||||||||||||||||||
Alt-A | 63.5 | 63.0 | 61.7 | 60.2 | 59.5 | ||||||||||||||||||||||||||||||||||||
A minus and below | 39.9 | 36.8 | 40.6 | 42.5 | 40.1 | ||||||||||||||||||||||||||||||||||||
Total primary average claims paid | 49.5 | 49.0 | 48.7 | 47.8 | 48.7 | ||||||||||||||||||||||||||||||||||||
Pool | 58.0 | 53.2 | 56.3 | 51.3 | 69.7 | ||||||||||||||||||||||||||||||||||||
Total | $ | 49.6 | $ | 48.9 | $ | 48.9 | $ | 47.8 | $ | 49.6 | |||||||||||||||||||||||||||||||
Average primary claim paid (2) | $ | 49.9 | $ | 49.6 | $ | 50.5 | $ | 48.5 | $ | 49.6 | |||||||||||||||||||||||||||||||
Average total claim paid (2) | $ | 50.0 | $ | 49.5 | $ | 50.6 | $ | 48.5 | $ | 50.4 | |||||||||||||||||||||||||||||||
($ in thousands, except primary reserve per |
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||
primary default amounts) |
2016 | 2016 | 2015 | 2015 | 2015 | ||||||||||||||
Reserve for losses by category | |||||||||||||||||||
Prime | $ | 420,281 | $ | 438,598 | $ | 480,481 | $ | 519,572 | $ | 562,918 | |||||||||
Alt-A | 173,284 | 183,189 | 203,706 | 234,772 | 256,854 | ||||||||||||||
A minus and below | 112,001 | 116,835 | 129,352 | 137,441 | 148,043 | ||||||||||||||
IBNR and other | 74,639 | 79,051 | 83,066 | 107,179 | 125,038 | ||||||||||||||
LAE | 22,389 | 23,600 | 26,108 | 41,464 | 48,141 | ||||||||||||||
Reinsurance recoverable (3) | 6,044 | 8,239 | 8,286 | 11,071 | 11,677 | ||||||||||||||
Total primary reserves | 808,638 | 849,512 | 930,999 | 1,051,499 | 1,152,671 | ||||||||||||||
Pool insurance | 36,982 | 38,843 | 42,084 | 43,234 | 47,902 | ||||||||||||||
IBNR and other | 897 | 1,050 | 1,118 | 949 | 891 | ||||||||||||||
LAE | 1,163 | 1,227 | 1,335 | 1,983 | 2,353 | ||||||||||||||
Reinsurance recoverable (3) | 33 | — | — | — | — | ||||||||||||||
Total pool reserves | 39,075 | 41,120 | 44,537 | 46,166 | 51,146 | ||||||||||||||
Total 1st lien reserves | 847,713 | 890,632 | 975,536 | 1,097,665 | 1,203,817 | ||||||||||||||
Second-lien and other | 666 | 716 | 863 | 905 | 975 | ||||||||||||||
Total reserves | $ | 848,379 | $ | 891,348 | $ | 976,399 | $ | 1,098,570 | $ | 1,204,792 | |||||||||
1st lien reserve per default | |||||||||||||||||||
Primary reserve per primary default excluding IBNR and other | $ | 24,609 | $ | 24,959 | $ | 24,019 | $ | 26,237 | $ | 27,279 | |||||||||
(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 M | |||||||||||||||
June 30, | March 31, | December 31, | September 30, | June 30 | |||||||||||
2016 | 2016 | 2015 | 2015 | 2015 | |||||||||||
Default Statistics |
|||||||||||||||
Primary Insurance: | |||||||||||||||
Prime |
|||||||||||||||
Number of insured loans | 826,511 | 817,236 | 816,797 | 812,657 | 802,719 | ||||||||||
Number of loans in default | 19,025 | 19,510 | 22,223 | 22,328 | 23,237 | ||||||||||
Percentage of loans in default | 2.30 | % | 2.39 | % | 2.72 | % | 2.75 | % | 2.89 | % | |||||
Alt-A |
|||||||||||||||
Number of insured loans | 29,445 | 30,990 | 32,411 | 34,166 | 35,927 | ||||||||||
Number of loans in default | 4,820 | 5,138 | 5,813 | 6,318 | 6,949 | ||||||||||
Percentage of loans in default | 16.37 | % | 16.58 | % | 17.94 | % | 18.49 | % | 19.34 | % | |||||
A minus and below |
|||||||||||||||
Number of insured loans |
29,450 | 30,681 | 31,902 | 33,018 | 34,224 | ||||||||||
Number of loans in default | 5,982 | 6,221 | 7,267 | 7,229 | 7,490 | ||||||||||
Percentage of loans in default | 20.31 | % | 20.28 | % | 22.78 | % | 21.89 | % | 21.89 | % | |||||
Total Primary | |||||||||||||||
Number of insured loans | 885,406 | 878,907 | 881,110 | 879,841 | 872,870 | ||||||||||
Number of loans in default (1) | 29,827 | 30,869 | 35,303 | 35,875 | 37,676 | ||||||||||
Percentage of loans in default | 3.37 | % | 3.51 | % | 4.01 | % | 4.08 | % | 4.32 | % | |||||
(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: |
|
June 30, | March 31, | December 31, | September 30, | June 30 | ||||||||||||
2016 | 2016 | 2015 | 2015 | 2015 | ||||||||||||
Number of loans in default | 2,180 | 2,339 | 2,821 | 2,993 | 3,246 | |||||||||||
Radian Group Inc. and Subsidiaries | ||||||||||||||||||||
Mortgage Insurance Supplemental Information - QSR, Captives and Persistency | ||||||||||||||||||||
Exhibit N | ||||||||||||||||||||
2016 | 2015 | |||||||||||||||||||
($ in thousands) |
Qtr 2 | Qtr 1 | Qtr 4 | Qtr 3 | Qtr 2 | |||||||||||||||
Initial and Second Quota Share Reinsurance (“QSR”) Transactions |
||||||||||||||||||||
QSR ceded premiums written (1) | $ | 7,356 | $ | 7,962 | $ | 6,934 | $ | 8,466 | $ | 4,217 | ||||||||||
% of premiums written | 2.9 | % | 3.4 | % | 2.9 | % | 3.4 | % | 1.7 | % | ||||||||||
QSR ceded premiums earned (1) | $ | 11,172 | $ | 11,325 | $ | 10,523 | $ | 12,203 | $ | 9,463 | ||||||||||
% of premiums earned | 4.5 | % | 4.7 | % | 4.4 | % | 5.1 | % | 3.8 | % | ||||||||||
Ceding commissions written | $ | 2,099 | $ | 2,270 | $ | 2,553 | $ | 2,743 | $ | 2,982 | ||||||||||
Ceding commissions earned | $ | 4,976 | $ | 5,739 | $ | 4,921 | $ | 4,026 | $ | 5,363 | ||||||||||
Profit commission | $ | — |
$ |
— | $ | 1,559 | $ | 678 | $ | 5,760 | ||||||||||
Risk in force included in QSR (2) | $ | 1,872,017 | $ | 2,018,468 | $ | 2,131,030 | $ | 2,253,913 | $ | 2,394,985 | ||||||||||
Single Premium QSR Transaction |
||||||||||||||||||||
QSR ceded premiums written (1) | $ | 11,488 | $ | 197,593 | N/A | N/A | N/A | |||||||||||||
% of premiums written | 4.6 | % | 84.7 | % | N/A | N/A | N/A | |||||||||||||
QSR ceded premiums earned (1) | $ | 7,146 | $ | 5,994 | N/A | N/A | N/A | |||||||||||||
% of premiums earned | 2.9 | % | 2.5 | % | N/A | N/A | N/A | |||||||||||||
Ceding commissions written | $ | 4,844 | $ | 50,932 | N/A | N/A | N/A | |||||||||||||
Ceding commissions earned | $ | 3,759 | $ | 3,032 | N/A | N/A | N/A | |||||||||||||
Profit commission | $ | 7,891 | $ | 6,134 | N/A | N/A | N/A | |||||||||||||
Risk in force included in QSR (2) | $ | 3,461,464 | $ | 3,308,057 | N/A | N/A | N/A | |||||||||||||
Total risk in force included in QSRs | $ | 5,333,481 | $ | 5,326,525 | $ | 2,131,030 | $ | 2,253,913 | $ | 2,394,985 | ||||||||||
1st Lien Captives |
||||||||||||||||||||
Premiums earned ceded to captives | $ | 1,346 | $ | 1,869 | $ | 2,268 | $ | 2,434 | $ | 2,700 | ||||||||||
% of total premiums earned | 0.5 | % | 0.8 | % | 1.0 | % | 1.0 | % | 1.1 | % | ||||||||||
Persistency (twelve months ended) | 79.9 | % | 79.4 | % | 78.8 | % | 79.2 | % | 80.1 | % | ||||||||||
Persistency (quarterly, annualized) | 78.0 | % | 82.3 | % | 81.8 | % | 80.5 | % | 76.2 | % | ||||||||||
(1) |
Net of profit commission. |
|
(2) |
Included in primary risk in force. |
|
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:
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 our 2015 Form 10-K, and in our subsequent quarterly and other reports filed from time to time with the SEC. 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 report. 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