PHILADELPHIA, Nov. 5 /PRNewswire-FirstCall/ -- Radian Group Inc.
(NYSE: RDN) today reported net income for the quarter ended September 30, 2008
of $36.7 million, or $0.46 per share. This compares to a net loss of $703.9
million, or $8.82 per share, for the prior year quarter. Book value per share
at September 30, 2008 was $28.90.
'Radian's third quarter results were impacted by a continuation of
elevated mortgage insurance losses, which were offset by a reduction in our
first-lien premium deficiency reserve,' said S. A. Ibrahim, Chief Executive
Officer of Radian. 'During the third quarter, we significantly strengthened
the statutory capital of our mortgage insurance business through the
contribution of our financial guaranty business. This non-dilutive action is
expected to provide the MI business with cash infusions over time. We are
focused on growing our core MI business and taking advantage of opportunities
to write profitable, new business that will better position us as we move
through and beyond these uncertain economic times.'
THIRD QUARTER HIGHLIGHTS
-- As announced on September 18, Radian contributed its ownership interest
in Radian Asset Assurance Inc. (Radian Asset), its principal financial
guaranty subsidiary, to Radian Guaranty Inc. (Radian Guaranty), the Company's
principal mortgage insurance subsidiary, providing capital support to its
mortgage insurance (MI) business.
-- Radian Asset has $2.9 billion in claims-paying resources including,
$935 million in statutory surplus.
-- Radian has a 29 percent ownership interest in Sherman Financial and
received $35.5 million in dividends from Sherman during the first three
quarters of 2008, including $16 million in the third quarter. Sherman remains
a solid contributor of earnings and quarterly dividends, and Radian has the
flexibility to pursue a sale of its stake in Sherman.
-- First and second-lien MI claims paid were in line with expectations at
$277 million. Fourth quarter MI claims paid are expected to be similar to
third quarter, with total claims paid for 2008 expected to be approximately
$950 million, lower than previously guided.
-- First-lien primary MI defaults were 9.71 percent, a 16 percent increase
over the prior quarter.
-- As a result of reduced mortgage origination volume, total primary new
MI insurance written was $7.5 billion, a 22 percent decrease from the prior
quarter. Radian Guaranty continues to maintain a strong market position.
-- Representing a dramatic shift during the past year, approximately 98.4
percent of new MI business production in the third quarter of 2008 was prime,
a trend that is expected to continue into 2009.
-- Radian Guaranty's strong efforts in loss mitigation remain a critical
priority to its capital preservation. Radian Guaranty is involved in a number
of initiatives to increase effective loss management, which include placing
staff on-site with major mortgage servicers to expedite solutions, creating
the Fast Advance program, launching a number of direct outreach programs
including a borrower web site, partnering with the Consumer Credit Counseling
Service of Delaware Valley to offer borrower counseling services and joining
the Hope Now initiative.
-- Radian has sustained relatively minimal credit losses through its high
quality, diversified investment portfolio that has limited exposure to
vulnerable asset classes.
-- Compared to other financial guaranty insurers, Radian Asset has
significantly less exposure to the weakening housing markets, further
contributing to its strong capital position. Premiums written this quarter
were much lower due to the Company's decision to cease writing new business in
light of current market conditions. Premiums earned were very strong
reflecting heavy refunding activity.
-- The GSE charter remains unchanged and Radian Guaranty remains a Top
Tier provider to the GSEs through frequent and proactive collaboration and
demonstration of its strong capital position.
UPDATE on RESERVES
Radian had total reserves of $3 billion as of September 30, 2008,
including updated first-lien and second-lien premium deficiency reserves of
$150.1 million and $181.3 million, respectively. As of September 30, 2008,
the present value of Radian's current projected aggregate future losses and
expenses exceeded future premiums and current loss reserves for the domestic
first-lien mortgage insurance book by $150.1 million. This projected net loss
reflects the remaining life of the June 30, 2008 and prior book of business.
The third quarter new production is expected to be profitable and therefore,
its projected profitability is excluded from the premium deficiency reserve
balance.
CONFERENCE CALL
Radian will discuss each of these items in its conference call today,
Wednesday, November 5 at 10:00 a.m. Eastern time. The conference call will be
broadcast live over the internet at
http://www.ir.radian.biz/phoenix.zhtml?c=112301&p=irol-audioarchives or at
http://www.radian.biz >News. The call may also be accessed by dialing 800-398-
9397 inside the U.S., or 612-332-1213 for international callers, using
passcode 965834 or by referencing Radian.
A replay of the webcast will be available at the Radian Web site
approximately two hours after the live broadcast ends for a period of one
year. A replay of the conference call will be available two and a half hours
after the call ends for one week, using the following dial-in numbers and
passcode: 800-475-6701 inside the U.S., or 320-365-3844 for international
callers, passcode 965834.
About Radian
Radian Group Inc. is a global credit risk management company headquartered
in Philadelphia. Radian develops innovative financial solutions by applying
its core mortgage credit risk expertise and structured finance capabilities to
the credit enhancement needs of the capital markets worldwide, primarily
through credit insurance products. The company also provides credit
enhancement for public finance and other corporate and consumer assets on both
a direct and reinsurance basis and holds strategic interests in credit-based
consumer asset businesses. 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/investors/financial/corporate.aspx.
Exhibit A: Condensed Consolidated Statements of Income
Exhibit B: Condensed Consolidated Balance Sheets
Exhibit C: Segment Information Quarter Ended September 30, 2008
Exhibit D: Segment Information Quarter Ended September 30, 2007
Exhibit E: Segment Information Nine Months Ended September 30, 2008
Exhibit F: Segment Information Nine Months Ended September 30, 2007
Exhibit G: Financial Guaranty Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Exhibit H: Financial Guaranty Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Exhibit I: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
New Insurance Written and Risk Written
Exhibit J: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Insurance in Force and Risk in Force
Exhibit K: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Risk in Force by LTV and Policy Year and other Risk in Force
Exhibit L: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Claims and Reserves
Exhibit M: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Defaults
Exhibit N: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Net Premiums Written and Earned, Smart Home, Captives and
Persistency
Exhibit O: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Reinsurance Progression Toward Attachment - Summary by Book
Year
Exhibit P: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Modified Pool Risk in Force
Exhibit Q: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Alt-A
Exhibit R: Financial Services Supplemental Information -
For the Quarter and Nine Months Ended September 30, 2008
Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Income
Exhibit A
Quarter Ended Nine Months Ended
September 30 September 30
2008 2007 2008 2007
(In thousands, except
per-share data)
Revenues:
Net premiums written -
insurance $202,451 $308,011 $669,402 $798,860
Net premiums earned -
insurance $249,718 $245,396 $740,776 $677,913
Net investment income 65,215 64,959 196,322 188,605
Change in fair value
of derivative
instruments (1) 164,757 (615,936) 928,792 (633,765)
Net (losses) gains on
other financial
instruments (63,737) 14,840 (126,872) 54,279
Gain on sale of
affiliate - 181,734 - 181,734
Other income 2,756 4,599 9,591 11,519
Total revenues 418,709 (104,408) 1,748,609 480,285
Expenses:
Provision for losses 544,915 330,504 1,586,505 611,508
Provision for premium
deficiency (2) (252,170) 155,176 135,727 155,176
Policy acquisition costs 20,770 35,743 120,628 (3) 88,195
Other operating expenses 80,781 34,891 199,771 137,471
Merger expenses - 1,278 - 14,001
Interest expense 13,852 13,394 40,177 38,810
Total expenses 408,148 570,986 2,082,808 1,045,161
Equity in net income
(loss) of affiliates 15,798 (448,924) 44,028 (376,645)
Pretax income (loss) 26,359 (1,124,318) (290,171) (941,521)
Income tax (benefit)
provision (10,340) (420,454) (129,984) (372,207)
Net income (loss) $36,699 $(703,864) $(160,187) $(569,314)
Diluted net income
(loss) per share (4) $0.46 $(8.82) $(2.01) $(7.16)
(1) Includes premiums earned on derivative contracts.
(2) Includes $(271.7) million for first-lien and $19.6 million for
second-lien in the third quarter of 2008, and $150.1 million for
first-lien and $(14.3) million for second-lien for the first nine
months of 2008.
(3) Includes the acceleration of $50.8 million of deferred policy
acquisition cost amortization in the nine months ended September 30,
2008, as a result of the establishment of a first-lien premium
deficiency reserve in the second quarter of 2008.
(4) Weighted average shares outstanding (in thousands)
Average common shares
outstanding 79,960 79,800 79,603 79,467
Increase in shares-
potential exercise
of options -
diluted basis 433 - - -
Weighted average shares
outstanding
(in thousands) 80,393 79,800 79,603 79,467
For Trend Information, refer to our Quarterly Financial Statistics on
Radian's (RDN) website.
Radian Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Exhibit B
(In thousands, except share and September 30 December 31 September 30
per-share data) 2008 2007 2007
Assets:
Cash and investments $6,330,214 $6,611,836 $6,575,797
Investments in affiliates 87,256 104,354 94,144
Deferred policy acquisition costs 178,581 234,955 233,582
Prepaid federal income taxes 248,828 793,486 861,809
Tax recoverables 462,694 1,816 2,043
Reinsurance recoverables 310,984 33,960 37,674
Other assets 619,597 429,782 409,811
Total assets $8,238,154 $8,210,189 $8,214,860
Liabilities and stockholders' equity:
Unearned premiums $1,000,725 $1,094,710 $1,045,267
Reserve for losses and loss
adjustment expenses 2,680,381 1,598,756 1,094,704
Reserve for premium deficiency 331,373 195,646 155,176
Long-term debt and other borrowings 908,282 953,524 948,010
Variable interest entity debt 127,624 - -
Deferred income taxes - 26,705 383,172
Derivative liabilities 343,296 1,305,665 675,432
Other liabilities 514,147 314,447 465,607
Total liabilities 5,905,828 5,489,453 4,767,368
Common stock 98 98 97
Additional paid-in capital 453,836 442,312 436,828
Retained earnings 2,017,542 2,181,191 2,903,798
Accumulated other comprehensive income (139,150) 97,135 106,769
Total common stockholders' equity 2,332,326 2,720,736 3,447,492
Total liabilities and
stockholders' equity $8,238,154 $8,210,189 $8,214,860
Book value per share $28.90 $33.83 $42.86
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended September 30, 2008
Exhibit C
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written -
insurance $188,583 $13,868 $- $202,451
Net premiums earned -
insurance $196,207 $53,511 $- $249,718
Net investment income 38,017 27,198 - 65,215
Change in fair value of
derivative instruments 8,606 156,151 - 164,757
Net gains (losses) on
other financial
instruments (39,925) (23,895) 83 (63,737)
Other income 2,561 58 137 2,756
Total revenues 205,466 213,023 220 418,709
Expenses:
Provision for losses 519,257 25,658 - 544,915
Provision for premium
deficiency (252,170) - - (252,170)
Policy acquisition costs 5,327 15,443 - 20,770
Other operating expenses 43,771 36,885 125 80,781
Interest expense 6,718 7,134 - 13,852
Total expenses 322,903 85,120 125 408,148
Equity in net income of
affiliates - - 15,798 15,798
Pretax (loss) income (117,437) 127,903 15,893 26,359
Income tax (benefit)
provision (70,473) 53,550 6,583 (10,340)
Net (loss) income $(46,964) $74,353 $9,310 $36,699
Assets $5,120,152 $2,934,032 $183,970 $8,238,154
Total investments 3,816,513 2,406,739 - 6,223,252
Deferred policy
acquisition costs 17,997 160,584 - 178,581
Reserve for losses and
loss adjustment expenses 2,496,412 183,969 - 2,680,381
Derivative liabilities 220,363 122,933 - 343,296
Unearned premiums 351,200 649,525 - 1,000,725
Stockholders' equity 838,474 1,349,016 144,836 2,332,326
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended September 30, 2007
Exhibit D
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written
- insurance $249,521 $58,490 $- $308,011
Net premiums earned -
insurance $212,998 $32,398 $- $245,396
Net investment income 37,437 27,403 119 64,959
Change in fair value
of derivative
instruments (374,024) (241,912) - (615,936)
Net gains (losses) on
other financial
instruments 9,312 5,560 (32) 14,840
Gain on sale of
affiliate - - 181,734 181,734
Other income 3,782 517 300 4,599
Total revenues (110,495) (176,034) 182,121 (104,408)
Expenses:
Provision for losses 278,785 51,719 - 330,504
Provision for premium
deficiency 155,176 - - 155,176
Policy acquisition
costs 24,865 10,878 - 35,743
Other operating
expenses 25,460 9,863 (432) 34,891
Merger expenses 1,116 162 - 1,278
Interest expense 6,764 4,808 1,822 13,394
Total expenses 492,166 77,430 1,390 570,986
Equity in net loss of
affiliates - - (448,924) (448,924)
Pretax loss (602,661) (253,464) (268,193) (1,124,318)
Income tax benefit (227,374) (99,350) (93,730) (420,454)
Net loss $(375,287) $(154,114) $(174,463) $(703,864)
Assets $5,232,832 $2,833,748 $148,280 $8,214,860
Total investments 3,956,943 2,556,054 - 6,512,997
Deferred policy
acquisition costs 62,371 171,211 - 233,582
Reserve for losses
and loss adjustment
expenses 884,985 209,719 - 1,094,704
Unearned premiums 322,109 723,158 - 1,045,267
Stockholders' equity 1,894,959 1,409,168 143,365 3,447,492
Radian Group Inc. and Subsidiaries
Segment Information
Nine Months Ended September 30, 2008
Exhibit E
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written -
insurance $598,864 $70,538 $- $669,402
Net premiums earned - insurance $605,568 $135,208 $- $740,776
Net investment income 115,803 80,505 14 196,322
Change in fair value of
derivative instruments 105,548 823,244 - 928,792
Net (losses) gains on other
financial instruments (66,214) (60,778) 120 (126,872)
Other income 9,051 237 303 9,591
Total revenues 769,756 978,416 437 1,748,609
Expenses:
Provision for losses 1,539,561 46,944 - 1,586,505
Provision for premium
deficiency 135,727 - - 135,727
Policy acquisition costs 82,473 38,155 - 120,628
Other operating expenses 126,644 72,642 485 199,771
Interest expense 21,140 18,788 249 40,177
Total expenses 1,905,545 176,529 734 2,082,808
Equity in net income of
affiliates - - 44,028 44,028
Pretax (loss) income (1,135,789) 801,887 43,731 (290,171)
Income tax (benefit) provision (428,186) 279,537 18,665 (129,984)
Net (loss) income $(707,603) $522,350 $25,066 $(160,187)
Radian Group Inc.
