| [October 26, 2017] |
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Radian Announces Third Quarter 2017 Financial Results
Radian Group Inc. (NYSE: RDN) today reported net income for the quarter
ended September 30, 2017, of $65.1 million, or $0.30 per diluted share.
Results for the third quarter of 2017 include $45.8 million of pretax
loss on induced conversion and debt extinguishment as well as $12.0
million of pretax restructuring and other exit costs related to the
Mortgage and Real Estate Services segment. This compares to net income
for the quarter ended September 30, 2016, of $82.8 million, or $0.37 per
diluted share.
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Key Financial Highlights (dollars in millions, except
per-share data)
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Quarter Ended
September 30, 2017
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Quarter Ended
September 30, 2016
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Percent
Change
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Net income (loss) (1)
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$65.1
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$82.8
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(21)%
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Diluted net income per share
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$0.30
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$0.37
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(19)%
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Consolidated pretax income
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$102.8
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$126.9
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(19)%
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Adjusted pretax operating income (2)
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$155.6
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$139.9
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11%
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Adjusted diluted net operating
income per share (2) (3)
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$0.46
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$0.41
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12%
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Net premiums earned - insurance
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$236.7
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$238.1
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(1)%
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MI New Insurance Written (NIW)
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$15,125
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$15,656
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(3)%
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MI insurance in force
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$196.5
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$181.2
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8%
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Book value per share
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$13.88
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$13.47
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3%
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Tangible book value per share (2)
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$13.57
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$12.17
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12%
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(1)
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Net income for the third quarter of 2017 includes $45.8 million
of pretax loss on induced conversion and debt extinguishment as
well as $12.0 million of pretax restructuring and other exit costs
related to the Mortgage and Real Estate Services segment.
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(2)
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Adjusted results, including adjusted pretax operating income
and adjusted diluted net operating income per share, as well as
tangible book value per share, are non-GAAP financial measures.
For definitions and a reconciliation of these measures to the
comparable GAAP measures, see Exhibits F and G.
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(3)
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Adjusted diluted net operating income per share is calculated
using the company's statutory tax rate of 35 percent.
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Adjusted pretax operating income for the quarter ended September 30,
2017, was $155.6 million, compared to $139.9 million for the quarter
ended September 30, 2016. Adjusted diluted net operating income per
share for the quarter ended September 30, 2017, was $0.46, an increase
of 12 percent compared to $0.41 for the quarter ended September 30, 2016.
Book value per share at September 30, 2017, was $13.88, an increase of
3% compared to $13.54 at June 30, 2017, and $13.47 at September 30,
2016. Tangible book value per share at September 30, 2017, was $13.57,
an increase of 3% compared to $13.22 at June 30, 2017, and an increase
of 12% compared to $12.17 at September 30, 2016.
"We reported another quarter of excellent operating results for Radian
and took several actions that strengthened our financial position and
improved our capital structure," said Radian's Chief Executive Officer
Rick Thornberry. "We also completed a strategic review of our Services
business and finalized our restructuring plan, which is focused on
re-positioning the segment for sustained profitability. We believe the
changes we have made across our Services business will drive future
growth and profitability for Radian, and deliver even greater value to
our customers and stockholders."
THIRD QUARTER HIGHLIGHTS AND RECENT EVENTS
Mortgage Insurance
-
MI new insurance written (NIW) grew to $15.1 billion for the quarter,
an increase of 5 percent compared to $14.3 billion in the second
quarter of 2017 and a decrease of 3 percent compared to $15.7 billion
in the prior-year quarter.
-
NIW for the month of August 2017 represented record monthly volume
written on a flow basis for the company.
-
Of the $15.1 billion in NIW in the third quarter of 2017, 23
percent was written with single premiums. After consideration of
the 35 percent ceded under the Single Premium Quota Share
Reinsurance Transaction, net single premiums were 15 percent of
new business written in the third quarter of 2017.
-
Refinances accounted for 9 percent of total NIW in the third
quarter of 2017, the same as the second quarter of 2017, and a
decrease compared to 22 percent a year ago.
-
Total primary mortgage insurance in force as of September 30, 2017,
grew to $196.5 billion, an increase of 3 percent compared to $191.6
billion as of June 30, 2017, and an increase of 8 percent compared to
$181.2 billion as of September 30, 2016.
-
The composition of Radian's mortgage insurance portfolio continues
to improve, with 91 percent consisting of new business written
after 2008, including those loans that successfully completed the
Home Affordable Refinance Program (HARP).
-
Persistency, which is the percentage of mortgage insurance that
remains in force after a 12-month period, was 80.0 percent as of
September 30, 2017, compared to 78.5 percent as of June 30, 2017,
and 78.4 percent as of September 30, 2016.
-
Annualized persistency for the three-months ended September 30,
2017, was 80.4 percent, compared to 82.8 percent for the
three-months ended June 30, 2017, and 75.3 percent for the
three-months ended September 30, 2016.
-
Total net premiums earned were $236.7 million for the quarter ended
September 30, 2017, compared to $229.1 million for the quarter ended
June 30, 2017, and $238.1 million for the quarter ended September 30,
2016.
-
Accelerated revenue recognition due to single premium policy
cancellations was $15.4 million in the third quarter, compared to
$13.3 million in the second quarter of 2017, and $30.6 million in
the third quarter of 2016. Net of reinsurance, accelerated revenue
recognition due to single premium policy cancellations was $8.3
million in the third quarter, compared to $7.4 million in the
second quarter of 2017, and $18.4 million in the third quarter of
2016.
-
Ceded premiums of $13.8 million, $14.1 million and $19.9 million
for the quarters ended September 30, 2017, June 30, 2017, and
September 30, 2016, respectively, are net of accrued profit
commission on reinsurance transactions of $7.4 million in the
third quarter of 2017, compared to $6.7 million in the second
quarter of 2017, and $8.9 million in the third quarter of 2016.
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Direct mortgage insurance premium yield was 52 basis points in the
third quarter, the same as the second quarter of 2017, and a
decrease compared to 58 basis points in the third quarter of 2016.
-
Total net mortgage insurance premium yield, which includes the
impact of ceded premiums and accrued profit commission, was 49
basis points in the third quarter, compared to 49 basis points in
the second quarter of 2017, and 53 basis points in the third
quarter of 2016.
-
The mortgage insurance provision for losses was $36.0 million in the
third quarter of 2017, compared to $17.7 million in the second quarter
of 2017, and $56.2 million in the prior-year period.
-
The total number of primary delinquent loans was flat in the third
quarter compared to the second quarter of 2017, and decreased by
19 percent from the third quarter of 2016. The total number of
primary new notices of default increased by 18 percent in the
third quarter from the second quarter of 2017, and decreased by 4
percent from the third quarter of 2016.
-
The primary mortgage insurance delinquency rate decreased to 2.5
percent in the third quarter of 2017, compared to 2.6 percent in
the second quarter of 2017, and 3.3 percent in the third quarter
of 2016.
-
The loss ratio in the third quarter was 15.2 percent, compared to
7.7 percent in the second quarter of 2017 and 23.6 percent in the
third quarter of 2016.
-
Mortgage insurance loss reserves were $556.5 million as of
September 30, 2017, compared to $651.6 million as of June 30,
2017, and $821.9 million as of September 30, 2016.
-
Primary reserve per primary default (excluding IBNR and other
reserves) was $21,367 as of September 30, 2017. This compares to
primary reserve per primary default of $23,185 as of June 30,
2017, and $24,049 as of September 30, 2016.
-
Total mortgage insurance claims paid were $131.5 million in the third
quarter, compared to $91.3 million in the second quarter of 2017, and
$82.7 million in the third quarter of 2016. Excluding the $55.0
million impact of commutations and captive terminations (which
includes payments that, as expected, were made during the third
quarter in connection with the final settlement of the Freddie Mac
agreement entered into in August 2013), claims paid were $76.5 million
in the third quarter of 2017. In addition, the company's pending claim
inventory declined 56 percent from the third quarter of 2016.
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The company continues to focus on effectively managing its capital
position in a cost-efficient manner, improving its return on capital
and proactively managing the retained mix of single-premium business
in its total MI portfolio. In October 2017, Radian Guaranty Inc., the
MI subsidiary of Radian Group, agreed to terms for a new quota share
reinsurance arrangement for single-premium MI business (Single Premium
QSR) with a panel of eight third-party reinsurance providers in order
to cede new single-premium MI business. The terms of the new Single
Premium QSR include a 65 percent cession of business written in 2018
and 2019. Other terms of the new arrangement are substantially the
same as our existing single premium reinsurance transaction. The
company's existing single premium reinsurance transaction, which was
entered into in 2016, provides for a 35 percent cession of
single-premium NIW through 2017. The new Single Premium QSR and the
company's related PMIERs credit under the program remain subject to
GSE approval.
Mortgage and Real Estate Services
-
As previously announced, based on recent performance below
expectations for its Services segment, the company committed to a
restructuring plan and incurred related charges in the third quarter
of $12 million. Additional pretax charges of approximately $8 million,
including approximately $6 million in cash, are expected to be
recognized within the next 12 months. The total charges of
approximately $20 million are expected to consist of approximately $8
million in asset impairments, approximately $7 million in employee
severance and benefit costs, approximately $3 million in facility and
lease termination costs, and approximately $2 million in contract
termination and other restructuring costs.
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Total revenues for the third quarter were $41.1 million, compared to
$40.0 million for the second quarter of 2017, and $48.0 million for
the third quarter of 2016.
-
The adjusted pretax operating loss before corporate allocations for
the quarter ended September 30, 2017, was $4.7 million, compared to
income of $1.2 million for the quarter ended June 30, 2017, and income
of $4.8 million for the quarter ended September 30, 2016.
-
Adjusted earnings before interest, income taxes, depreciation and
amortization (Services adjusted EBITDA) for the quarter ended
September 30, 2017, was a loss of $3.6 million, compared to income of
$2.0 million for the quarter ended June 30, 2017, and income of $5.7
million for the quarter ended September 30, 2016. Additional details
regarding the non-GAAP measure Services adjusted EBITDA may be found
in Exhibits F and G.
Consolidated Expenses
Other operating expenses were $64.2 million in the third quarter,
compared to $68.8 million in the second quarter of 2017, and $62.1
million in the third quarter of last year. Details regarding notable
variable items impacting other operating expenses may be found in
Exhibit D.
CAPITAL AND LIQUIDITY UPDATE
-
Radian Group maintained approximately $300 million of available
liquidity as of September 30, 2017.
-
On September 26, 2017, Radian completed its public offering of $450
million principal amount of 4.500% Senior Notes due 2024, and
announced the early tender results and upsizing of its tender offers
to purchase for cash a portion of its 5.500% Senior Notes due 2019,
its 5.250% Senior Notes due 2020, and its 7.000% Senior Notes due
2021. These transactions will reduce the company's annual cash
interest by approximately $4.3 million and extend the weighted average
maturity of its outstanding debt by nearly two years. The company has
no material debt maturities prior to June 2019.
-
As of September 30, 2017, Radian had only $0.5 million of convertible
senior notes outstanding. Radian has provided notice that it will
settle all remaining conversions in cash. The remaining outstanding
convertible senior notes mature in November 2017.
-
On October 16, 2017, Radian entered into a three-year, $225 million
unsecured revolving credit facility with a panel of seven banks.
Borrowings under the credit facility may be used for working capital
and general corporate purposes, including, without limitation, capital
contributions to Radian's insurance and reinsurance subsidiaries as
well as growth initiatives. Terms of the credit facility include an
option to increase the capacity during the term of the agreement, up
to a total of $300 million.
CONFERENCE CALL
Radian will discuss third quarter financial results in a conference call
today, Thursday, October 26, 2017, 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 800.230.1766 inside the U.S.,
or 612.332.0226 for international callers, using passcode 431859 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 431859.
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 considered in isolation or viewed as substitutes for GAAP measures of
performance. The measures described below have been established in order
to increase transparency for the purpose of evaluating the company's
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). Adjusted pretax operating income adjusts GAAP pretax
income (loss) 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 or impairment of goodwill and other 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.
The company has also presented a non-GAAP measure for tangible book
value per share, which represents book value per share less the
per-share impact of goodwill and other intangible assets, net. The
company uses this measure to assess the quality and growth of its
capital. Because tangible book value per share is a widely used
financial measure which focuses on the underlying fundamentals of the
company's financial position and operating trends without the impact of
goodwill and other intangible assets, the company believes that current
and prospective investors may find it useful in their analysis.
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
tax provision (benefit), 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 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 helps
protect 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 Holdings LLC, 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 historical trend information, 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 (Loss) 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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Net Premiums Earned - Insurance and Other Operating Expenses
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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 Measures
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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
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Exhibit J:
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Mortgage Insurance Supplemental Information
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Claims and Reserves
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Exhibit K:
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Mortgage Insurance Supplemental Information
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Default Statistics
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Exhibit L:
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Mortgage Insurance Supplemental Information
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QSR Transaction, Captives 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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2017
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2016
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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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236,702
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$
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229,096
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$
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221,800
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$
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233,585
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$
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238,149
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Services revenue
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39,571
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37,802
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38,027
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49,905
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45,877
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Net investment income
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32,540
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30,071
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31,032
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28,996
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28,430
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Net gains (losses) on investments and other financial instruments
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2,480
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5,331
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(2,851
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)
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(38,773
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)
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7,711
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Other income
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760
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|
612
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|
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746
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736
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716
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Total revenues
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312,053
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|
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302,912
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|
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288,754
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274,449
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320,883
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Expenses:
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Provision for losses
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35,841
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17,222
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|
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46,913
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54,287
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55,785
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Policy acquisition costs
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5,554
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6,123
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6,729
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5,579
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|
|
6,119
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Cost of services
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27,240
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25,635
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28,375
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33,812
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29,447
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Other operating expenses
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64,195
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|
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68,750
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68,377
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62,416
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|
62,119
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Restructuring and other exit costs
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12,038
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-
|
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-
|
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-
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-
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Interest expense
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15,715
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16,179
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15,938
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17,269
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19,783
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Loss on induced conversion and debt extinguishment
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45,766
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1,247
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4,456
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-
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17,397
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Impairment of goodwill
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-
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184,374
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-
|
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-
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-
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Amortization and impairment of other intangible assets
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2,890
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18,856
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3,296
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3,290
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3,292
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Total expenses
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209,239
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|
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338,386
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|
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174,084
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|
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176,653
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193,942
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|
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|
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Pretax income (loss)
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102,814
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(35,474
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)
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114,670
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97,796
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126,941
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Income tax provision (benefit)
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37,672
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(8,132
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)
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38,198
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36,707
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|
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44,138
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Net income (loss)
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$
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65,142
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$
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(27,342
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)
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$
|
76,472
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|
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$
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61,089
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$
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82,803
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Diluted net income (loss) per share
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$
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0.30
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$
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(0.13
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)
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$
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0.34
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|
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$
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0.27
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$
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0.37
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Selected Mortgage Insurance Key Ratios
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Loss ratio (1)
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15.2
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%
|
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7.7
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%
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21.3
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%
|
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23.4
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%
|
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23.6
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%
|
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Expense ratio (1)
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22.9
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%
|
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26.2
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%
|
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27.1
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%
|
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22.7
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%
|
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22.7
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%
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|
(1)
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|
Calculated on a GAAP basis using net premiums earned.
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Radian Group Inc. and Subsidiaries
|
|
Net Income (Loss) Per Share Trend Schedule
|
|
Exhibit B
|
|
|
|
The calculation of basic and diluted net income (loss) per share
was as follows:
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
(In thousands, except per-share amounts)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Net income (loss)-basic
|
|
$
|
65,142
|
|
|
$
|
(27,342
|
)
|
|
$
|
76,472
|
|
|
$
|
61,089
|
|
|
$
|
82,803
|
|
Adjustment for dilutive Convertible Senior Notes due 2019, net of
tax (1)
|
|
-
|
|
|
-
|
|
|
(215
|
)
|
|
665
|
|
|
848
|
|
Net income (loss)-diluted
|
|
$
|
65,142
|
|
|
$
|
(27,342
|
)
|
|
$
|
76,257
|
|
|
$
|
61,754
|
|
|
$
|
83,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding-basic
|
|
215,279
|
|
|
215,152
|
|
|
214,925
|
|
|
214,481
|
|
|
214,387
|
|
Dilutive effect of Convertible Senior Notes due 2017 (2)
|
|
16
|
|
|
-
|
|
|
701
|
|
|
421
|
|
|
178
|
|
Dilutive effect of Convertible Senior Notes due 2019
|
|
-
|
|
|
-
|
|
|
1,854
|
|
|
6,417
|
|
|
8,274
|
|
Dilutive effect of stock-based compensation arrangements (2)
|
|
4,096
|
|
|
-
|
|
|
4,017
|
|
|
3,457
|
|
|
3,129
|
|
Adjusted average common shares outstanding-diluted
|
|
219,391
|
|
|
215,152
|
|
|
221,497
|
|
|
224,776
|
|
|
225,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share
|
|
$
|
0.30
|
|
|
$
|
(0.13
|
)
|
|
$
|
0.36
|
|
|
$
|
0.28
|
|
|
$
|
0.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share
|
|
$
|
0.30
|
|
|
$
|
(0.13
|
)
|
|
$
|
0.34
|
|
|
$
|
0.27
|
|
|
$
|
0.37
|
|
(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. Included in the three months
ended March 31, 2017 is a benefit related to our adjustment of
estimated accrued expense to actual amounts, as a result of the
January 2017 settlement of our obligations on the remaining
Convertible Senior Notes due 2019.
|
|
(2)
|
|
There were no dilutive shares for the three months ended June
30, 2017, as a result of our net loss for the period. The
following number of shares of our common stock equivalents issued
under our share-based compensation arrangements and our
convertible debt were not included in the calculation of diluted
net income (loss) per share because they were anti-dilutive:
|
|
|
|
2017
|
|
2016
|
|
(In thousands)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Shares of common stock equivalents
|
|
676
|
|
|
5,975
|
|
|
445
|
|
|
1,042
|
|
|
1,045
|
|
Shares of Convertible Senior Notes due 2017
|
|
-
|
|
|
509
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Investments (1)
|
|
$
|
4,546,664
|
|
|
$
|
4,583,842
|
|
|
$
|
4,437,716
|
|
|
$
|
4,462,430
|
|
|
$
|
4,565,748
|
|
|
Cash
|
|
61,917
|
|
|
56,918
|
|
|
73,701
|
|
|
52,149
|
|
|
46,356
|
|
|
Restricted cash
|
|
36,888
|
|
|
25,486
|
|
|
12,689
|
|
|
9,665
|
|
|
10,312
|
|
|
Accounts and notes receivable
|
|
97,020
|
|
|
78,540
|
|
|
73,794
|
|
|
77,631
|
|
|
94,692
|
|
|
Deferred income taxes, net
|
|
356,181
|
|
|
389,759
|
|
|
369,209
|
|
|
411,798
|
|
|
401,442
|
|
|
Goodwill and other intangible assets, net
|
|
66,967
|
|
|
69,857
|
|
|
273,068
|
|
|
276,228
|
|
|
279,400
|
|
|
Prepaid reinsurance premium
|
|
239,620
|
|
|
235,349
|
|
|
230,148
|
|
|
229,438
|
|
|
229,754
|
|
|
Other assets
|
|
439,016
|
|
|
377,355
|
|
|
357,435
|
|
|
343,835
|
|
|
422,123
|
|
|
Total assets
|
|
$
|
5,844,273
|
|
|
$
|
5,817,106
|
|
|
$
|
5,827,760
|
|
|
$
|
5,863,174
|
|
|
$
|
6,049,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
Unearned premiums
|
|
$
|
717,589
|
|
|
$
|
702,210
|
|
|
$
|
684,797
|
|
|
$
|
681,222
|
|
|
$
|
680,973
|
|
|
Reserve for losses and loss adjustment expense
|
|
556,488
|
|
|
651,591
|
|
|
726,169
|
|
|
760,269
|
|
|
821,934
|
|
|
Long-term debt
|
|
1,026,806
|
|
|
989,010
|
|
|
1,008,777
|
|
|
1,069,537
|
|
|
1,067,666
|
|
|
Reinsurance funds withheld
|
|
194,353
|
|
|
180,991
|
|
|
167,427
|
|
|
158,001
|
|
|
177,147
|
|
|
Other liabilities
|
|
360,835
|
|
|
379,144
|
|
|
319,282
|
|
|
321,859
|
|
|
413,401
|
|
|
Total liabilities
|
|
2,856,071
|
|
|
2,902,946
|
|
|
2,906,452
|
|
|
2,990,888
|
|
|
3,161,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity component of currently redeemable convertible senior notes
|
|
-
|
|
|
16
|
|
|
883
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
233
|
|
|
233
|
|
|
233
|
|
|
232
|
|
|
232
|
|
|
Treasury stock
|
|
(893,754
|
)
|
|
(893,531
|
)
|
|
(893,372
|
)
|
|
(893,332
|
)
|
|
(893,197
|
)
|
|
Additional paid-in capital
|
|
2,747,393
|
|
|
2,743,872
|
|
|
2,743,594
|
|
|
2,779,891
|
|
|
2,778,860
|
|
|
Retained earnings
|
|
1,110,057
|
|
|
1,045,453
|
|
|
1,073,333
|
|
|
997,890
|
|
|
937,338
|
|
|
Accumulated other comprehensive income (loss)
|
|
24,273
|
|
|
18,117
|
|
|
(3,363
|
)
|
|
(12,395
|
)
|
|
65,473
|
|
|
Total stockholders' equity
|
|
2,988,202
|
|
|
2,914,144
|
|
|
2,920,425
|
|
|
2,872,286
|
|
|
2,888,706
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
5,844,273
|
|
|
$
|
5,817,106
|
|
|
$
|
5,827,760
|
|
|
$
|
5,863,174
|
|
|
$
|
6,049,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding
|
|
215,299
|
|
|
215,175
|
|
|
215,091
|
|
|
214,521
|
|
|
214,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share
|
|
$
|
13.88
|
|
|
$
|
13.54
|
|
|
$
|
13.58
|
|
|
$
|
13.39
|
|
|
$
|
13.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible book value per share (See Exhibit G)
|
|
$
|
13.57
|
|
|
$
|
13.22
|
|
|
$
|
12.31
|
|
|
$
|
12.10
|
|
|
$
|
12.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory Capital Ratios
|
|
|
|
|
|
|
|
|
|
|
|
Risk to capital ratio-Radian Guaranty only
|
|
14.4
|
:1
|
(2)
|
14.3
|
:1
|
|
14.3
|
:1
|
|
13.5
|
:1
|
|
13.7
|
:1
|
|
Risk to capital ratio-Mortgage Insurance combined
|
|
13.4
|
:1
|
(2)
|
13.4
|
:1
|
|
13.4
|
:1
|
|
13.6
|
:1
|
|
13.9
|
:1
|
|
(1)
|
|
September 30, 2017 includes $36,782 of reinvested cash
collateral under securities lending agreements.
|
|
(2)
|
|
Preliminary.
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
|
Net Premiums Earned - Insurance and Other Operating Expenses
|
|
Exhibit D
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
(In thousands)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums earned - insurance:
|
|
|
|
|
|
|
|
|
|
|
|
Direct
|
|
$
|
250,541
|
|
|
$
|
243,229
|
|
|
$
|
236,062
|
|
|
$
|
251,751
|
|
|
$
|
258,074
|
|
|
Assumed
|
|
7
|
|
|
7
|
|
|
7
|
|
|
8
|
|
|
9
|
|
|
Ceded
|
|
(13,846
|
)
|
|
(14,140
|
)
|
|
(14,269
|
)
|
|
(18,174
|
)
|
|
(19,934
|
)
|
|
Net premiums earned - insurance
|
|
$
|
236,702
|
|
|
$
|
229,096
|
|
|
$
|
221,800
|
|
|
$
|
233,585
|
|
|
$
|
238,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notable variable items: (1)
|
|
|
|
|
|
|
|
|
|
|
|
Single Premium Policy cancellations, direct
|
|
$
|
15,415
|
|
|
$
|
13,346
|
|
|
$
|
10,415
|
|
|
$
|
26,707
|
|
|
$
|
30,631
|
|
|
Single Premium Policy cancellations, ceded
|
|
(7,085
|
)
|
|
(5,898
|
)
|
|
(4,536
|
)
|
|
(11,005
|
)
|
|
(12,183
|
)
|
|
Profit commission - reinsurance (2)
|
|
7,373
|
|
|
6,682
|
|
|
5,888
|
|
|
8,458
|
|
|
8,922
|
|
|
Total
|
|
$
|
15,703
|
|
|
$
|
14,130
|
|
|
$
|
11,767
|
|
|
$
|
24,160
|
|
|
$
|
27,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating expenses
|
|
$
|
64,195
|
|
|
$
|
68,750
|
|
|
$
|
68,377
|
|
|
$
|
62,416
|
|
|
$
|
62,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notable variable items: (3)
|
|
|
|
|
|
|
|
|
|
|
|
Technology upgrade project (4)
|
|
$
|
3,569
|
|
|
$
|
5,121
|
|
|
$
|
3,512
|
|
|
$
|
3,648
|
|
|
$
|
2,440
|
|
|
Employee severance and related benefit costs
|
|
101
|
|
|
386
|
|
|
977
|
|
|
902
|
|
|
1,195
|
|
|
Retirement and consulting agreement (5)
|
|
927
|
|
|
867
|
|
|
3,622
|
|
|
-
|
|
|
-
|
|
|
Incentive compensation (6) (7)
|
|
6,950
|
|
|
9,641
|
|
|
7,447
|
|
|
9,072
|
|
|
12,652
|
|
|
Ceding commissions (7)
|
|
(4,231
|
)
|
|
(4,064
|
)
|
|
(3,864
|
)
|
|
(5,105
|
)
|
|
(5,460
|
)
|
|
Total
|
|
$
|
7,316
|
|
|
$
|
11,951
|
|
|
$
|
11,694
|
|
|
$
|
8,517
|
|
|
$
|
10,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other exit costs: (8)
|
|
|
|
|
|
|
|
|
|
|
|
Employee severance, related benefits and other exit costs (9)
|
|
$
|
5,463
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Impairment of other long-lived assets (10)
|
|
6,575
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Total restructuring and other exit costs
|
|
$
|
12,038
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
(1)
|
|
Affecting net premiums earned - insurance. These amounts are
included in net premiums earned - insurance.
|
|
(2)
|
|
The amounts represent the profit commission on the Single
Premium QSR Transaction.
|
|
(3)
|
|
Affecting other operating expenses. These amounts are included
in other operating expenses.
|
|
(4)
|
|
Represents the expense impact of certain costs incurred in our
initiative to significantly upgrade our technology systems.
|
|
(5)
|
|
The amount represents expenses associated with retirement and
consulting agreements entered into in February 2017 with our
former CEO. Additional expenses are expected to be recognized
throughout the year. A portion of both the current and future
expenses are subject to change, based on the Company's and the
former CEO's future performance.
|
|
(6)
|
|
The expense relates to short- and long-term incentive programs.
|
|
(7)
|
|
Shown net of deferred policy acquisition costs.
|
|
(8)
|
|
For the three months ended September 30, 2017, includes charges
associated with our plan to restructure the Services business.
|
|
(9)
|
|
Employee severance, related benefits and other exit costs is a
component of adjusted pretax operating income.
|
|
(10)
|
|
Impairment of other long-lived assets is not a component of
adjusted pretax operating income.
|
|
|
|
|
|
|
|
|
|
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 Services
adjusted EBITDA, along with reconciliations to consolidated GAAP
measures, see Exhibits F and G.
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Insurance
|
|
|
|
2017
|
|
2016
|
|
(In thousands)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Net premiums written - insurance
|
|
$
|
247,810
|
|
|
$
|
241,307
|
|
|
$
|
224,665
|
|
|
$
|
234,172
|
|
|
$
|
240,999
|
|
|
(Increase) decrease in unearned premiums
|
|
|
(11,108
|
)
|
|
|
(12,211
|
)
|
|
|
(2,865
|
)
|
|
|
(587
|
)
|
|
|
(2,850
|
)
|
|
Net premiums earned - insurance
|
|
|
236,702
|
|
|
|
229,096
|
|
|
|
221,800
|
|
|
|
233,585
|
|
|
|
238,149
|
|
|
Net investment income
|
|
|
32,540
|
|
|
|
30,071
|
|
|
|
31,032
|
|
|
|
28,996
|
|
|
|
28,430
|
|
|
Other income
|
|
|
760
|
|
|
|
612
|
|
|
|
746
|
|
|
|
736
|
|
|
|
716
|
|
|
Total
|
|
|
270,002
|
|
|
|
259,779
|
|
|
|
253,578
|
|
|
|
263,317
|
|
|
|
267,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for losses
|
|
|
35,980
|
|
|
|
17,714
|
|
|
|
47,232
|
|
|
|
54,675
|
|
|
|
56,151
|
|
|
Policy acquisition costs
|
|
|
5,554
|
|
|
|
6,123
|
|
|
|
6,729
|
|
|
|
5,579
|
|
|
|
6,119
|
|
|
Other operating expenses before corporate allocations
|
|
|
36,941
|
|
|
|
37,939
|
|
|
|
39,289
|
|
|
|
37,773
|
|
|
|
35,940
|
|
|
Total (1)
|
|
|
78,475
|
|
|
|
61,776
|
|
|
|
93,250
|
|
|
|
98,027
|
|
|
|
98,210
|
|
|
Adjusted pretax operating income before corporate allocations
|
|
|
191,527
|
|
|
|
198,003
|
|
|
|
160,328
|
|
|
|
165,290
|
|
|
|
169,085
|
|
|
Allocation of corporate operating expenses
|
|
|
11,737
|
|
|
|
15,894
|
|
|
|
14,186
|
|
|
|
9,652
|
|
|
|
11,911
|
|
|
Allocation of interest expense
|
|
|
11,282
|
|
|
|
11,748
|
|
|
|
11,509
|
|
|
|
12,843
|
|
|
|
15,360
|
|
|
Adjusted pretax operating income
|
|
$
|
168,508
|
|
|
$
|
170,361
|
|
|
$
|
134,633
|
|
|
$
|
142,795
|
|
|
$
|
141,814
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
|
2017
|
|
2016
|
|
(In thousands)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Services revenue (1)
|
|
$
|
41,062
|
|
|
$
|
39,975
|
|
|
$
|
40,089
|
|
|
$
|
52,558
|
|
|
$
|
48,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
|
|
|
27,544
|
|
|
|
25,962
|
|
|
|
28,690
|
|
|
|
34,130
|
|
|
|
29,655
|
|
|
Other operating expenses before corporate allocations
|
|
|
12,781
|
|
|
|
12,803
|
|
|
|
12,604
|
|
|
|
14,842
|
|
|
|
13,575
|
|
|
Restructuring and other exit costs (2)
|
|
|
5,463
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
|
45,788
|
|
|
|
38,765
|
|
|
|
41,294
|
|
|
|
48,972
|
|
|
|
43,230
|
|
|
Adjusted pretax operating income (loss) before corporate
allocations (3)
|
|
|
(4,726
|
)
|
|
|
1,210
|
|
|
|
(1,205
|
)
|
|
|
3,586
|
|
|
|
4,803
|
|
|
Allocation of corporate operating expenses
|
|
|
3,730
|
|
|
|
3,404
|
|
|
|
3,718
|
|
|
|
1,738
|
|
|
|
2,265
|
|
|
Allocation of interest expense
|
|
|
4,433
|
|
|
|
4,431
|
|
|
|
4,429
|
|
|
|
4,426
|
|
|
|
4,423
|
|
|
Adjusted pretax operating income (loss)
|
|
$
|
(12,889
|
)
|
|
$
|
(6,625
|
)
|
|
$
|
(9,352
|
)
|
|
$
|
(2,578
|
)
|
|
$
|
(1,885
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(1) Inter-segment information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Inter-segment expense included in Mortgage Insurance segment
|
|
$
|
1,491
|
|
|
$
|
2,173
|
|
|
$
|
2,062
|
|
|
$
|
2,653
|
|
|
$
|
2,156
|
|
|
Inter-segment revenue included in Services segment
|
|
|
1,491
|
|
|
|
2,173
|
|
|
|
2,062
|
|
|
|
2,653
|
|
|
|
2,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
|
Segment Information
|
|
Exhibit E (page 2 of 2)
|
|
|
|
(2)
|
|
Primarily includes employee severance and related benefit
costs. Does not include impairment of long-lived assets, which is
not considered a component of adjusted pretax operating income.
|
|
(3)
|
|
Supplemental information for Services adjusted EBITDA (see
definition in Exhibit F):
|
|
|
|
2017
|
|
2016
|
|
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Adjusted pretax operating income (loss) before corporate
allocations
|
|
$
|
(4,726
|
)
|
|
$
|
1,210
|
|
|
$
|
(1,205
|
)
|
|
$
|
3,586
|
|
|
$
|
4,803
|
|
Depreciation and amortization
|
|
1,172
|
|
|
835
|
|
|
858
|
|
|
829
|
|
|
884
|
|
Services adjusted EBITDA
|
|
$
|
(3,554
|
)
|
|
$
|
2,045
|
|
|
$
|
(347
|
)
|
|
$
|
4,415
|
|
|
$
|
5,687
|
|
Selected balance sheet information for our segments, as of the
periods indicated, is as follows:
|
|
|
|
|
|
|
|
At September 30, 2017
|
|
(In thousands)
|
|
Mortgage
Insurance
|
|
Services (1)
|
|
Total
|
|
Total assets
|
|
$
|
5,630,687
|
|
|
$
|
213,586
|
|
|
$
|
5,844,273
|
|
|
|
|
|
|
|
At December 31, 2016
|
|
(In thousands)
|
|
Mortgage
Insurance
|
|
Services (1)
|
|
Total
|
|
Total assets
|
|
$
|
5,506,338
|
|
|
$
|
356,836
|
|
|
$
|
5,863,174
|
|
(1)
|
|
The decrease in total assets for the Services segment at
September 30, 2017, as compared to total assets at December 31,
2016, is primarily due to the impairment of goodwill and other
intangible assets.
|
|
Radian Group Inc. and Subsidiaries
|
|
Definition of Consolidated Non-GAAP Financial Measures
|
|
Exhibit F (page 1 of 2)
|
|
|
|
Use of Non-GAAP Financial Measures
|
|
|
|
In addition to the traditional GAAP financial measures, we have
presented "adjusted pretax operating income" and "adjusted diluted
net operating income per share," non-GAAP financial measures for the
consolidated company, 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" and "adjusted
diluted net operating income 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 (Radian'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 is defined as GAAP pretax income
(loss) excluding 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 or impairment of goodwill and other
intangible assets; and (v) net impairment losses recognized in
earnings. Adjusted diluted net operating income per share is
calculated by dividing (i) adjusted pretax operating income
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
share-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 excludes certain items
that have occurred in the past and are expected to occur in the
future, the excluded items represent those that are: (i) not viewed
as part of the operating performance of our primary activities or
(ii) not expected to result in an economic impact equal to the
amount reflected in pretax income (loss). 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 securities.
These valuation adjustments may not necessarily result in realized
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).
|
|
(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 F (page 2 of 2)
|
|
|
|
|
|
(4)
|
|
Amortization or impairment of goodwill and other 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 and the
impairment of other long-lived assets does not result in a cash
payment and can vary significantly in both amount and frequency,
depending on market credit cycles and other factors. 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).
|
|
We have also presented a non-GAAP measure for tangible book value
per share, which represents book value per share less the per-share
impact of goodwill and other intangible assets, net. We use this
measure to assess the quality and growth of our capital. Because
tangible book value per share is a widely-used financial measure
which focuses on the underlying fundamentals of our financial
position and operating trends without the impact of goodwill and
other intangible assets, we believe that current and prospective
investors may find it useful in their analysis of the Company.
|
|
|
|
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 tax provision (benefit),
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 G for the reconciliation of the most comparable GAAP
measures, consolidated pretax income (loss), diluted net income
(loss) per share and book value per share, to our non-GAAP financial
measures for the consolidated company, adjusted pretax operating
income, adjusted diluted net operating income per share and tangible
book value per share, respectively. Exhibit G also contains the
reconciliation of the most comparable GAAP measure, net income
(loss), to Services adjusted EBITDA.
|
|
|
|
Total adjusted pretax operating income, adjusted diluted net
operating income per share, tangible book value per share and
Services adjusted EBITDA should not be considered in isolation or
viewed as substitutes for GAAP pretax income (loss), diluted net
income (loss) per share, book value per share or net income (loss).
Our definitions of adjusted pretax operating income, adjusted
diluted net operating income per share, tangible book value 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 G (page 1 of 3)
|
|
|
|
|
|
|
|
Reconciliation of Consolidated Pretax Income (Loss) to Adjusted
Pretax Operating Income
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
(In thousands)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Consolidated pretax income (loss)
|
|
$
|
102,814
|
|
|
$
|
(35,474
|
)
|
|
$
|
114,670
|
|
|
$
|
97,796
|
|
|
$
|
126,941
|
|
|
Less income (expense) items:
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on investments and other financial instruments
|
|
2,480
|
|
|
5,331
|
|
|
(2,851
|
)
|
|
(38,773
|
)
|
|
7,711
|
|
|
Loss on induced conversion and debt extinguishment
|
|
(45,766
|
)
|
|
(1,247
|
)
|
|
(4,456
|
)
|
|
-
|
|
|
(17,397
|
)
|
|
Acquisition-related expenses (1)
|
|
(54
|
)
|
|
(64
|
)
|
|
(8
|
)
|
|
(358
|
)
|
|
(10
|
)
|
|
Impairment of goodwill
|
|
-
|
|
|
(184,374
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Amortization and impairment of other intangible assets
|
|
(2,890
|
)
|
|
(18,856
|
)
|
|
(3,296
|
)
|
|
(3,290
|
)
|
|
(3,292
|
)
|
|
Impairment of other long-lived assets (2)
|
|
(6,575
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Total adjusted pretax operating income (3)
|
|
$
|
155,619
|
|
|
$
|
163,736
|
|
|
$
|
125,281
|
|
|
$
|
140,217
|
|
|
$
|
139,929
|
|
|
(1)
|
|
Please see Exhibit F for the definition of this line item. This
item is included within other operating expenses on the Condensed
Consolidated Statement of Operations in Exhibit A.
|
|
(2)
|
|
This item is included within restructuring and other exit costs
on the Condensed Consolidated Statement of Operations in Exhibit A.
|
|
(3)
|
|
Total adjusted pretax operating income consists of adjusted
pretax operating income (loss) for each segment as follows:
|
|
|
|
2017
|
|
2016
|
|
(In thousands)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Adjusted pretax operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Insurance
|
|
$
|
168,508
|
|
|
$
|
170,361
|
|
|
$
|
134,633
|
|
|
$
|
142,795
|
|
|
$
|
141,814
|
|
|
Services
|
|
(12,889
|
)
|
|
(6,625
|
)
|
|
(9,352
|
)
|
|
(2,578
|
)
|
|
(1,885
|
)
|
|
Total adjusted pretax operating income
|
|
$
|
155,619
|
|
|
$
|
163,736
|
|
|
$
|
125,281
|
|
|
$
|
140,217
|
|
|
$
|
139,929
|
|
|
Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit G (page 2 of 3)
|
|
|
|
|
|
|
|
Reconciliation of Diluted Net Income (Loss) Per Share to
Adjusted Diluted Net Operating Income Per Share
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Diluted net income (loss) per share
|
|
$
|
0.30
|
|
|
$
|
(0.13
|
)
|
|
$
|
0.34
|
|
|
$
|
0.27
|
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less per-share impact of debt items:
|
|
|
|
|
|
|
|
|
|
|
|
Loss on induced conversion and debt extinguishment
|
|
(0.21
|
)
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
-
|
|
|
(0.08
|
)
|
|
Income tax provision (benefit) (1)
|
|
(0.07
|
)
|
|
-
|
|
|
(0.01
|
)
|
|
-
|
|
|
(0.03
|
)
|
|
Per-share impact of debt items
|
|
(0.14
|
)
|
|
(0.01
|
)
|
|
(0.01
|
)
|
|
-
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less per-share impact of other income (expense) items:
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on investments and other financial instruments
|
|
0.01
|
|
|
0.02
|
|
|
(0.01
|
)
|
|
(0.17
|
)
|
|
0.03
|
|
|
Acquisition-related expenses
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Impairment of goodwill
|
|
-
|
|
|
(0.86
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Amortization and impairment of other intangible assets
|
|
(0.01
|
)
|
|
(0.09
|
)
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
(0.01
|
)
|
|
Impairment of other long-lived assets
|
|
(0.03
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
Income tax provision (benefit) on other income (expense) items (2)
|
|
(0.01
|
)
|
|
(0.32
|
)
|
|
(0.01
|
)
|
|
(0.07
|
)
|
|
0.01
|
|
|
Difference between statutory and effective tax rate
|
|
-
|
|
|
-
|
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
-
|
|
|
Per-share impact of other income (expense) items
|
|
(0.02
|
)
|
|
(0.61
|
)
|
|
(0.02
|
)
|
|
(0.14
|
)
|
|
0.01
|
|
|
Add per-share impact of share dilution
|
|
-
|
|
|
(0.01
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Adjusted diluted net operating income per share (2)
|
|
$
|
0.46
|
|
|
$
|
0.48
|
|
|
$
|
0.37
|
|
|
$
|
0.41
|
|
|
$
|
0.41
|
|
|
(1)
|
|
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 of 35%.
|
|
(2)
|
|
Calculated using the company's federal statutory tax rate of
35%. Any permanent tax adjustments and state income taxes on these
items have been deemed immaterial and are not included.
|
|
Reconciliation of Book Value Per Share to Tangible Book Value Per
Share (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
Book value per share
|
$
|
13.88
|
|
|
$
|
13.54
|
|
|
$
|
13.58
|
|
|
$
|
13.39
|
|
|
$
|
13.47
|
|
Less: Goodwill and other intangible assets, net per share
|
0.31
|
|
|
0.32
|
|
|
1.27
|
|
|
1.29
|
|
|
1.30
|
|
Tangible book value per share
|
$
|
13.57
|
|
|
$
|
13.22
|
|
|
$
|
12.31
|
|
|
$
|
12.10
|
|
|
$
|
12.17
|
|
(1)
|
|
All book value per share items are calculated based on the
number of shares outstanding at the end of each respective period.
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
|
Consolidated Non-GAAP Financial Measure Reconciliations
|
|
Exhibit G (page 3 of 3)
|
|
|
|
Reconciliation of Net Income (Loss) to Services Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
(In thousands)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
65,142
|
|
|
$
|
(27,342
|
)
|
|
$
|
76,472
|
|
|
$
|
61,089
|
|
|
$
|
82,803
|
|
|
Less income (expense) items:
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) on investments and other financial instruments
|
|
2,480
|
|
|
5,331
|
|
|
(2,851
|
)
|
|
(38,773
|
)
|
|
7,711
|
|
|
Loss on induced conversion and debt extinguishment
|
|
(45,766
|
)
|
|
(1,247
|
)
|
|
(4,456
|
)
|
|
-
|
|
|
(17,397
|
)
|
|
Acquisition-related expenses
|
|
(54
|
)
|
|
(64
|
)
|
|
(8
|
)
|
|
(358
|
)
|
|
(10
|
)
|
|
Impairment of goodwill
|
|
-
|
|
|
(184,374
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Amortization and impairment of other intangible assets
|
|
(2,890
|
)
|
|
(18,856
|
)
|
|
(3,296
|
)
|
|
(3,290
|
)
|
|
(3,292
|
)
|
|
Impairment of other long-lived assets
|
|
(6,575
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Income tax provision (benefit)
|
|
37,672
|
|
|
(8,132
|
)
|
|
38,198
|
|
|
36,707
|
|
|
44,138
|
|
|
Mortgage Insurance adjusted pretax operating income
|
|
168,508
|
|
|
170,361
|
|
|
134,633
|
|
|
142,795
|
|
|
141,814
|
|
|
Services adjusted pretax operating income (loss)
|
|
(12,889
|
)
|
|
(6,625
|
)
|
|
(9,352
|
)
|
|
(2,578
|
)
|
|
(1,885
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less income (expense) items:
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of corporate operating expenses to Services
|
|
(3,730
|
)
|
|
(3,404
|
)
|
|
(3,718
|
)
|
|
(1,738
|
)
|
|
(2,265
|
)
|
|
Allocation of corporate interest expense to Services
|
|
(4,433
|
)
|
|
(4,431
|
)
|
|
(4,429
|
)
|
|
(4,426
|
)
|
|
(4,423
|
)
|
|
Services depreciation and amortization
|
|
(1,172
|
)
|
|
(835
|
)
|
|
(858
|
)
|
|
(829
|
)
|
|
(884
|
)
|
|
Services adjusted EBITDA
|
|
$
|
(3,554
|
)
|
|
$
|
2,045
|
|
|
$
|
(347
|
)
|
|
$
|
4,415
|
|
|
$
|
5,687
|
|
|
On a consolidated basis, "adjusted pretax operating income,"
"adjusted diluted net operating income per share" and "tangible book
value per share" are measures not determined in accordance with
GAAP. "Services adjusted EBITDA" is also a non-GAAP measure. These
measures should not be considered in isolation or viewed as
substitutes for GAAP pretax income (loss), diluted net income (loss)
per share, book value per share or net income (loss). Our
definitions of adjusted pretax operating income, adjusted diluted
net operating income per share, tangible book value per share or
Services adjusted 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
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
($ in millions)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total primary new insurance written
|
|
$
|
15,125
|
|
|
$
|
14,342
|
|
|
$
|
10,055
|
|
|
$
|
13,882
|
|
|
$
|
15,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of primary new insurance
written by FICO score
|
|
|
|
|
|
|
|
|
|
|
|
>=740
|
|
61.1
|
%
|
|
61.6
|
%
|
|
61.3
|
%
|
|
63.4
|
%
|
|
64.2
|
%
|
|
680-739
|
|
32.5
|
|
|
32.6
|
|
|
32.7
|
|
|
31.4
|
|
|
30.4
|
|
|
620-679
|
|
6.4
|
|
|
5.8
|
|
|
6.0
|
|
|
5.2
|
|
|
5.4
|
|
|
Total Primary
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of primary new insurance
written
|
|
|
|
|
|
|
|
|
|
|
|
Direct monthly and other premiums
|
|
77
|
%
|
|
77
|
%
|
|
75
|
%
|
|
73
|
%
|
|
73
|
%
|
|
Direct single premiums
|
|
23
|
%
|
|
23
|
%
|
|
25
|
%
|
|
27
|
%
|
|
27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net single premiums (1)
|
|
15
|
%
|
|
15
|
%
|
|
16
|
%
|
|
17
|
%
|
|
17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refinances
|
|
9
|
%
|
|
9
|
%
|
|
16
|
%
|
|
27
|
%
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTV
|
|
|
|
|
|
|
|
|
|
|
|
95.01% and above
|
|
14.3
|
%
|
|
12.8
|
%
|
|
9.2
|
%
|
|
7.4
|
%
|
|
6.0
|
%
|
|
90.01% to 95.00%
|
|
45.7
|
%
|
|
47.3
|
%
|
|
47.3
|
%
|
|
43.6
|
%
|
|
47.1
|
%
|
|
85.01% to 90.00%
|
|
28.1
|
%
|
|
28.8
|
%
|
|
30.3
|
%
|
|
32.3
|
%
|
|
31.4
|
%
|
|
85.00% and below
|
|
11.9
|
%
|
|
11.1
|
%
|
|
13.2
|
%
|
|
16.7
|
%
|
|
15.5
|
%
|
|
(1)
|
|
Represents the percentage of direct single premiums written,
after consideration of the 35% single premium NIW ceded under the
Single Premium QSR Transaction.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
|
Mortgage Insurance Supplemental Information - Primary Insurance
in Force and Risk in Force
|
|
Exhibit I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
($ in millions)
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
Primary insurance in force (1)
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
189,340
|
|
|
$
|
183,886
|
|
|
$
|
177,702
|
|
|
$
|
174,927
|
|
|
$
|
172,178
|
|
|
Alt-A
|
|
4,327
|
|
|
4,602
|
|
|
4,842
|
|
|
5,064
|
|
|
5,363
|
|
|
A minus and below
|
|
2,874
|
|
|
3,149
|
|
|
3,315
|
|
|
3,459
|
|
|
3,624
|
|
|
Total Primary
|
|
$
|
196,541
|
|
|
$
|
191,637
|
|
|
$
|
185,859
|
|
|
$
|
183,450
|
|
|
$
|
181,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary risk in force (1) (2)
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
48,516
|
|
|
$
|
47,075
|
|
|
$
|
45,442
|
|
|
$
|
44,708
|
|
|
$
|
44,075
|
|
|
Alt-A
|
|
998
|
|
|
1,062
|
|
|
1,118
|
|
|
1,168
|
|
|
1,241
|
|
|
A minus and below
|
|
723
|
|
|
792
|
|
|
834
|
|
|
865
|
|
|
906
|
|
|
Total Primary
|
|
$
|
50,237
|
|
|
$
|
48,929
|
|
|
$
|
47,394
|
|
|
$
|
46,741
|
|
|
$
|
46,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of primary risk in force
|
|
|
|
|
|
|
|
|
|
|
|
Direct monthly and other premiums
|
|
69
|
%
|
|
69
|
%
|
|
69
|
%
|
|
69
|
%
|
|
69
|
%
|
|
Direct single premiums
|
|
31
|
%
|
|
31
|
%
|
|
31
|
%
|
|
31
|
%
|
|
31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net single premiums (3)
|
|
24
|
%
|
|
25
|
%
|
|
25
|
%
|
|
25
|
%
|
|
25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of primary risk in force by
FICO score
|
|
|
|
|
|
|
|
|
|
|
|
>=740
|
|
58.8
|
%
|
|
58.3
|
%
|
|
57.9
|
%
|
|
57.6
|
%
|
|
57.4
|
%
|
|
680-739
|
|
31.3
|
|
|
31.1
|
|
|
31.1
|
|
|
31.0
|
|
|
30.9
|
|
|
620-679
|
|
8.8
|
|
|
9.3
|
|
|
9.6
|
|
|
9.9
|
|
|
10.2
|
|
|
<=619
|
|
1.1
|
|
|
1.3
|
|
|
1.4
|
|
|
1.5
|
|
|
1.5
|
|
|
Total Primary
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of primary risk in force by LTV
|
|
|
|
|
|
|
|
|
|
|
|
95.01% and above
|
|
8.6
|
%
|
|
8.0
|
%
|
|
7.6
|
%
|
|
7.4
|
%
|
|
7.2
|
%
|
|
90.01% to 95.00%
|
|
53.1
|
|
|
52.9
|
|
|
52.6
|
|
|
52.3
|
|
|
52.1
|
|
|
85.01% to 90.00%
|
|
31.1
|
|
|
31.7
|
|
|
32.2
|
|
|
32.5
|
|
|
32.8
|
|
|
85.00% and below
|
|
7.2
|
|
|
7.4
|
|
|
7.6
|
|
|
7.8
|
|
|
7.9
|
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of primary risk in force by
policy year
|
|
|
|
|
|
|
|
|
|
|
|
2005 and prior
|
|
3.6
|
%
|
|
4.1
|
%
|
|
4.4
|
%
|
|
4.8
|
%
|
|
5.1
|
%
|
|
2006
|
|
2.3
|
|
|
2.5
|
|
|
2.8
|
|
|
2.9
|
|
|
3.1
|
|
|
2007
|
|
5.6
|
|
|
6.2
|
|
|
6.7
|
|
|
7.0
|
|
|
7.4
|
|
|
2008
|
|
3.7
|
|
|
4.2
|
|
|
4.6
|
|
|
4.8
|
|
|
5.2
|
|
|
2009
|
|
0.7
|
|
|
0.8
|
|
|
0.9
|
|
|
1.0
|
|
|
1.2
|
|
|
2010
|
|
0.6
|
|
|
0.7
|
|
|
0.8
|
|
|
0.9
|
|
|
1.0
|
|
|
2011
|
|
1.5
|
|
|
1.7
|
|
|
1.8
|
|
|
2.0
|
|
|
2.2
|
|
|
2012
|
|
6.1
|
|
|
6.7
|
|
|
7.4
|
|
|
8.0
|
|
|
8.8
|
|
|
2013
|
|
9.8
|
|
|
10.7
|
|
|
11.8
|
|
|
12.6
|
|
|
13.9
|
|
|
2014
|
|
9.3
|
|
|
10.2
|
|
|
11.2
|
|
|
12.0
|
|
|
13.4
|
|
|
2015
|
|
14.9
|
|
|
16.1
|
|
|
17.3
|
|
|
18.1
|
|
|
19.4
|
|
|
2016
|
|
22.5
|
|
|
23.7
|
|
|
25.0
|
|
|
25.9
|
|
|
19.3
|
|
|
2017
|
|
19.4
|
|
|
12.4
|
|
|
5.3
|
|
|
-
|
|
|
-
|
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary risk in force on defaulted loans (4)
|
|
$
|
1,137
|
|
|
$
|
1,124
|
|
|
$
|
1,224
|
|
|
$
|
1,363
|
|
|
$
|
1,381
|
|
|
(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 the percentage of Single Premium RIF, after giving
effect to all reinsurance ceded.
|
|
(4)
|
|
Excludes risk related to loans subject to the Freddie Mac
Agreement.
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
|
Mortgage Insurance Supplemental Information - Claims and Reserves
|
|
Exhibit J (page 1 of 2)
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
($ in thousands)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net claims paid: (1)
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
47,541
|
|
|
$
|
45,562
|
|
|
$
|
52,044
|
|
|
$
|
70,151
|
|
|
$
|
51,964
|
|
|
Alt-A
|
|
16,035
|
|
|
13,700
|
|
|
16,165
|
|
|
27,558
|
|
|
16,334
|
|
|
A minus and below
|
|
10,772
|
|
|
10,586
|
|
|
9,460
|
|
|
13,760
|
|
|
9,615
|
|
|
Total primary claims paid
|
|
74,348
|
|
|
69,848
|
|
|
77,669
|
|
|
111,469
|
|
|
77,913
|
|
|
Pool
|
|
2,148
|
|
|
1,901
|
|
|
4,180
|
|
|
4,788
|
|
|
4,492
|
|
|
Second-lien and other
|
|
32
|
|
|
(1,937
|
)
|
|
78
|
|
|
(264
|
)
|
|
(234
|
)
|
|
Subtotal
|
|
76,528
|
|
|
69,812
|
|
|
81,927
|
|
|
115,993
|
|
|
82,171
|
|
|
Impact of captive terminations
|
|
-
|
|
|
645
|
|
|
-
|
|
|
492
|
|
|
(171
|
)
|
|
Impact of commutations (2)
|
|
54,956
|
|
|
20,838
|
|
|
161
|
|
|
-
|
|
|
705
|
|
|
Total net claims paid
|
|
$
|
131,484
|
|
|
$
|
91,295
|
|
|
$
|
82,088
|
|
|
$
|
116,485
|
|
|
$
|
82,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average net claims paid: (1) (3)
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
48.4
|
|
|
$
|
48.2
|
|
|
$
|
50.5
|
|
|
$
|
45.5
|
|
|
$
|
48.3
|
|
|
Alt-A
|
|
69.4
|
|
|
61.7
|
|
|
67.1
|
|
|
65.5
|
|
|
65.3
|
|
|
A minus and below
|
|
44.0
|
|
|
41.7
|
|
|
39.6
|
|
|
37.7
|
|
|
41.3
|
|
|
Total average net primary claims paid
|
|
51.0
|
|
|
49.1
|
|
|
51.4
|
|
|
47.9
|
|
|
50.0
|
|
|
Pool
|
|
59.7
|
|
|
47.5
|
|
|
49.2
|
|
|
45.6
|
|
|
51.0
|
|
|
Total average net claims paid
|
|
$
|
51.0
|
|
|
$
|
47.3
|
|
|
$
|
50.9
|
|
|
$
|
47.6
|
|
|
$
|
49.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average direct primary claims paid (3) (4)
|
|
$
|
51.4
|
|
|
$
|
49.4
|
|
|
$
|
51.6
|
|
|
$
|
48.2
|
|
|
$
|
50.3
|
|
|
Average total direct claims paid (3) (4)
|
|
$
|
51.4
|
|
|
$
|
47.6
|
|
|
$
|
51.1
|
|
|
$
|
47.9
|
|
|
$
|
50.0
|
|
|
(1)
|
|
Net of reinsurance recoveries.
|
|
(2)
|
|
Includes the impact of commutations and captive terminations.
For the three months ended September 30, 2017, primarily includes
payments made under the Freddie Mac agreement, as the final
settlement date was reached during the quarter.
|
|
(3)
|
|
Calculated without giving effect to the impact of the
termination of captive transactions and commutations.
|
|
(4)
|
|
Before reinsurance recoveries.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information - Claims and
Reserves
Exhibit J (page 2 of 2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands, except primary reserve
per
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
primary default amounts)
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for losses by category
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
$
|
296,885
|
|
|
$
|
318,169
|
|
|
$
|
362,804
|
|
|
$
|
379,845
|
|
|
$
|
409,438
|
|
Alt-A
|
|
112,033
|
|
|
124,477
|
|
|
140,543
|
|
|
148,006
|
|
|
166,349
|
|
A minus and below
|
|
78,048
|
|
|
85,283
|
|
|
96,373
|
|
|
101,653
|
|
|
106,678
|
|
IBNR and other (1)
|
|
13,085
|
|
|
69,620
|
|
|
70,651
|
|
|
71,107
|
|
|
73,057
|
|
LAE
|
|
14,687
|
|
|
15,492
|
|
|
17,551
|
|
|
18,630
|
|
|
21,255
|
|
Reinsurance recoverable (2)
|
|
7,445
|
|
|
7,341
|
|
|
7,680
|
|
|
6,816
|
|
|
6,448
|
|
Total primary reserves
|
|
522,183
|
|
|
620,382
|
|
|
695,602
|
|
|
726,057
|
|
|
783,225
|
|
Pool insurance
|
|
18,630
|
|
|
29,099
|
|
|
28,453
|
|
|
31,853
|
|
|
36,065
|
|
IBNR and other
|
|
14,576
|
|
|
658
|
|
|
603
|
|
|
673
|
|
|
823
|
|
LAE
|
|
550
|
|
|
843
|
|
|
822
|
|
|
932
|
|
|
1,112
|
|
Reinsurance recoverable (2)
|
|
25
|
|
|
30
|
|
|
28
|
|
|
35
|
|
|
36
|
|
Total pool reserves
|
|
33,781
|
|
|
30,630
|
|
|
29,906
|
|
|
33,493
|
|
|
38,036
|
|
Total 1st lien reserves
|
|
555,964
|
|
|
651,012
|
|
|
725,508
|
|
|
759,550
|
|
|
821,261
|
|
Second-lien and other
|
|
524
|
|
|
579
|
|
|
661
|
|
|
719
|
|
|
673
|
|
Total reserves
|
|
$
|
556,488
|
|
|
$
|
651,591
|
|
|
$
|
726,169
|
|
|
$
|
760,269
|
|
|
$
|
821,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st lien reserve per default
|
|
|
|
|
|
|
|
|
|
|
|
Primary reserve per primary default excluding IBNR and other
|
|
$
|
21,367
|
|
|
$
|
23,185
|
|
|
$
|
24,230
|
|
|
$
|
22,503
|
|
|
$
|
24,049
|
|
(1)
|
|
At June 30, 2017 and prior, primarily related to expected
payments under the Freddie Mac Agreement. However, during the
third quarter of 2017, the final settlement date under the Freddie
Mac Agreement was reached. Therefore, except for loans with loss
mitigation and claims activity already in process, most of the
loans subject to the Freddie Mac Agreement were removed from RIF
and IIF, because the insurance no longer remains in force.
|
|
(2)
|
|
Represents ceded losses on captive transactions and quota share
reinsurance transactions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
|
Mortgage Insurance Supplemental Information - Default Statistics
|
|
Exhibit K
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
|
September 30,
|
|
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
Default Statistics
|
|
|
|
|
|
|
|
|
|
|
|
Primary Insurance:
|
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
|
|
|
|
|
|
|
|
|
|
Number of insured loans
|
|
897,253
|
|
|
879,926
|
|
|
858,248
|
|
|
849,227
|
|
|
840,534
|
|
|
Number of loans in default
|
|
15,953
|
|
|
15,664
|
|
|
16,981
|
|
|
19,101
|
|
|
19,100
|
|
|
Percentage of loans in default
|
|
1.78
|
%
|
|
1.78
|
%
|
|
1.98
|
%
|
|
2.25
|
%
|
|
2.27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A
|
|
|
|
|
|
|
|
|
|
|
|
Number of insured loans
|
|
22,643
|
|
|
24,089
|
|
|
25,425
|
|
|
26,536
|
|
|
28,080
|
|
|
Number of loans in default
|
|
3,166
|
|
|
3,366
|
|
|
3,812
|
|
|
4,193
|
|
|
4,545
|
|
|
Percentage of loans in default
|
|
13.98
|
%
|
|
13.97
|
%
|
|
14.99
|
%
|
|
15.80
|
%
|
|
16.19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A minus and below
|
|
|
|
|
|
|
|
|
|
|
|
Number of insured loans
|
|
22,912
|
|
|
24,864
|
|
|
26,043
|
|
|
27,115
|
|
|
28,313
|
|
|
Number of loans in default
|
|
4,707
|
|
|
4,725
|
|
|
5,000
|
|
|
5,811
|
|
|
5,885
|
|
|
Percentage of loans in default
|
|
20.54
|
%
|
|
19.00
|
%
|
|
19.20
|
%
|
|
21.43
|
%
|
|
20.79
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Primary
|
|
|
|
|
|
|
|
|
|
|
|
Number of insured loans
|
|
942,808
|
|
|
928,879
|
|
|
909,716
|
|
|
902,878
|
|
|
896,927
|
|
|
Number of loans in default (1)
|
|
23,826
|
|
|
23,755
|
|
|
25,793
|
|
|
29,105
|
|
|
29,530
|
|
|
Percentage of loans in default
|
|
2.53
|
%
|
|
2.56
|
%
|
|
2.84
|
%
|
|
3.22
|
%
|
|
3.29
|
%
|
|
(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,
|
|
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2016
|
|
Number of loans in default (a)
|
|
118
|
|
|
1,305
|
|
|
1,395
|
|
|
1,639
|
|
|
1,888
|
|
(a)
|
|
During the third quarter of 2017, the final settlement date
under the Freddie Mac Agreement was reached. As of September 30,
2017, the remaining loans subject to the Freddie Mac Agreement
were those with Loss Mitigation and pending claims activity
already in process but not yet finalized.
|
|
|
|
|
|
|
|
Radian Group Inc. and Subsidiaries
|
|
Mortgage Insurance Supplemental Information - QSR Transactions,
Captives and Persistency
|
|
Exhibit L
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
($ in thousands)
|
|
Qtr 3
|
|
Qtr 2
|
|
Qtr 1
|
|
Qtr 4
|
|
Qtr 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quota Share Reinsurance ("QSR")
Transactions
|
|
|
|
|
|
|
|
|
|
|
|
QSR ceded premiums written (1)
|
|
$
|
4,621
|
|
|
$
|
5,059
|
|
|
$
|
5,457
|
|
|
$
|
6,049
|
|
|
$
|
6,730
|
|
|
% of premiums written
|
|
1.7
|
%
|
|
1.9
|
%
|
|
2.3
|
%
|
|
2.4
|
%
|
|
2.6
|
%
|
|
QSR ceded premiums earned (1)
|
|
$
|
6,826
|
|
|
$
|
7,404
|
|
|
$
|
7,834
|
|
|
$
|
9,421
|
|
|
$
|
10,597
|
|
|
% of premiums earned
|
|
2.7
|
%
|
|
3.1
|
%
|
|
3.3
|
%
|
|
3.8
|
%
|
|
4.1
|
%
|
|
Ceding commissions written
|
|
$
|
1,323
|
|
|
$
|
1,446
|
|
|
$
|
1,559
|
|
|
$
|
1,728
|
|
|
$
|
1,922
|
|
|
Ceding commissions earned (2)
|
|
$
|
2,925
|
|
|
$
|
3,379
|
|
|
$
|
3,894
|
|
|
$
|
4,374
|
|
|
$
|
3,974
|
|
|
Profit commission
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
RIF included in QSR Transactions (3)
|
|
$
|
1,298,954
|
|
|
$
|
1,393,038
|
|
|
$
|
1,488,972
|
|
|
$
|
1,578,300
|
|
|
$
|
1,718,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single Premium QSR Transaction
|
|
|
|
|
|
|
|
|
|
|
|
QSR ceded premiums written (1)
|
|
$
|
13,248
|
|
|
$
|
13,856
|
|
|
$
|
8,960
|
|
|
$
|
11,121
|
|
|
$
|
13,004
|
|
|
% of premiums written
|
|
5.0
|
%
|
|
5.3
|
%
|
|
3.7
|
%
|
|
4.4
|
%
|
|
5.0
|
%
|
|
QSR ceded premiums earned (1)
|
|
$
|
6,771
|
|
|
$
|
6,311
|
|
|
$
|
5,859
|
|
|
$
|
8,060
|
|
|
$
|
8,608
|
|
|
% of premiums earned
|
|
2.7
|
%
|
|
2.6
|
%
|
|
2.5
|
%
|
|
3.2
|
%
|
|
3.3
|
%
|
|
Ceding commissions written
|
|
$
|
5,156
|
|
|
$
|
5,134
|
|
|
$
|
3,712
|
|
|
$
|
4,895
|
|
|
$
|
5,482
|
|
|
Ceding commissions earned (2)
|
|
$
|
3,536
|
|
|
$
|
3,248
|
|
|
$
|
2,937
|
|
|
$
|
4,130
|
|
|
$
|
4,382
|
|
|
Profit commission
|
|
$
|
7,373
|
|
|
$
|
6,682
|
|
|
$
|
5,888
|
|
|
$
|
8,458
|
|
|
$
|
8,922
|
|
|
RIF included in Single Premium QSR Transaction (3)
|
|
$
|
4,286,529
|
|
|
$
|
4,103,410
|
|
|
$
|
3,904,402
|
|
|
$
|
3,761,648
|
|
|
$
|
3,621,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RIF included in QSR Transactions and Single Premium QSR
Transaction
|
|
$
|
5,585,483
|
|
|
$
|
5,496,448
|
|
|
$
|
5,393,374
|
|
|
$
|
5,339,948
|
|
|
$
|
5,340,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st Lien Captives
|
|
|
|
|
|
|
|
|
|
|
|
Premiums earned ceded to captives
|
|
$
|
68
|
|
|
$
|
242
|
|
|
$
|
389
|
|
|
$
|
503
|
|
|
$
|
537
|
|
|
% of total premiums earned
|
|
0.0
|
%
|
|
0.1
|
%
|
|
0.2
|
%
|
|
0.2
|
%
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Persistency Rate (12 months ended) (4)
|
|
80.0
|
%
|
|
78.5
|
%
|
|
77.1
|
%
|
|
76.7
|
%
|
|
78.4
|
%
|
|
Persistency Rate (quarterly, annualized) (4) (5)
|
|
80.4
|
%
|
|
82.8
|
%
|
|
84.4
|
%
|
|
76.8
|
%
|
|
75.3
|
%
|
|
(1)
|
|
Net of profit commission.
|
|
(2)
|
|
Includes amounts reported in policy acquisition costs and other
operating expenses.
|
|
(3)
|
|
Included in primary RIF.
|
|
(4)
|
|
During the third quarter of 2017, the final settlement date
under the Freddie Mac Agreement was reached, resulting in a
negative impact to the Persistency Rate due to the removal from
RIF and IIF of most of the loans subject to the Freddie Mac
Agreement. If these loans remained in force, the Persistency Rate
for the 12 months ended September 30, 2017 would have been 80.5%
and the quarterly annualized Persistency Rate for the quarter
ended September 30, 2017 would have been 82.0%.
|
|
(5)
|
|
The Persistency Rate on a quarterly, annualized basis may be
impacted by seasonality or other factors, and may not be
indicative of full-year trends.
|
|
|
|
|
FORWARD-LOOKING STATEMENTS
All statements in this press release 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 where 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. These risks and uncertainties include,
without limitation:
-
changes in general economic and political conditions, including in
particular unemployment rates, interest rates and changes in housing
and mortgage credit markets, that impact the size of the insurable
market, the credit performance of our insured portfolio, and the
business opportunities in our Services segment;
-
changes in the way customers, investors, ratings agencies, regulators
or legislators perceive our performance, financial strength and future
prospects;
-
Radian Guaranty Inc.'s ability to remain eligible under the PMIERs and
other applicable requirements imposed by the Federal Housing Finance
Agency and by Fannie Mae and Freddie Mac (collectively, the "GSEs") to
insure loans purchased by the GSEs;
-
our ability to successfully execute and implement our capital plans
and to maintain sufficient holding company liquidity to meet our
short- and long-term liquidity needs, including temporary reductions
in liquidity resulting from federal alternative minimum tax ("AMT")
payments that we are currently required to make and future federal
income tax payments that we expect to make once our NOLs are fully
utilized, which we anticipate occurring within the next 12 months;
-
our ability to successfully execute and implement our business plans
and strategies, including plans and strategies to reposition our
Services segment as well as plans and strategies that require GSE
and/or regulatory approvals and licenses;
-
our ability to maintain an adequate level of capital in our insurance
subsidiaries to satisfy existing and future state regulatory
requirements;
-
changes in the charters or business practices of, or rules or
regulations imposed by or applicable to, the GSEs, including the GSEs'
interpretation and application of the PMIERs to our mortgage insurance
business;
-
changes in the current housing finance system in the U.S., including
the role of the Federal Housing Administration (the "FHA"), the GSEs
and private mortgage insurers in this system;
-
any disruption in the servicing of mortgages covered by our insurance
policies, as well as poor servicer performance;
-
a significant decrease in the Persistency Rates of our mortgage
insurance policies;
-
competition in our mortgage insurance business, including price
competition and competition from the FHA, U.S. Department of Veterans
Affairs and other forms of credit enhancement;
-
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;
-
legislative and regulatory activity (or inactivity), including the
adoption of (or failure to adopt) new laws and regulations, or changes
in existing laws and regulations, or the way they are interpreted or
applied;
-
legal and regulatory claims, assertions, actions, reviews, audits,
inquiries and investigations that could result in adverse judgments,
settlements, fines, injunctions, restitutions or other relief that
could require significant expenditures or have other effects on our
business;
-
the amount and timing of potential payments or adjustments associated
with federal or other tax examinations, including deficiencies
assessed by the Internal Revenue Service resulting from its
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;
-
potential future impairment charges related to our goodwill and other
intangible assets, and uncertainties regarding our ability to execute
our restructuring plans within expected costs;
-
changes in "GAAP" (accounting principles generally accepted in the
U.S.) or "SAP" (statutory accounting practices including those
required or permitted, if applicable, by the insurance departments of
the respective states of domicile of our insurance subsidiaries) rules
and guidance, or their interpretation;
-
our ability to attract and retain key employees; and
-
legal and other limitations on dividends and other amounts we may
receive from our subsidiaries.
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 Annual Report on Form 10-K for the
year ended December 31, 2016, and subsequent reports filed from time to
time with the U.S. Securities and Exchange Commission. We caution you
not to place undue reliance on these forward-looking statements, which
are current only as of the date on which we issued this press release.
We do not intend to, and we disclaim any duty or obligation to, update
or revise any forward-looking statements to reflect new information or
future events or for any other reason.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171026005313/en/
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