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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Radian Group Inc | NYSE:RDN | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 31.34 | 0 | 09:05:39 |
x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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23-2691170
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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1601 Market Street, Philadelphia, PA
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19103
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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TABLE OF CONTENTS
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
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Term
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Definition
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2014 Master Policy
|
Radian Guaranty’s Master Policy that became effective October 1, 2014
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2015 Form 10-K
|
Annual Report on Form 10-K for the year ended December 31, 2015
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ABS
|
Asset-backed securities
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Alt-A
|
Alternative-A loan where the documentation is generally limited as compared to fully documented loans (considered a non-prime loan grade)
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AOCI
|
Accumulated other comprehensive income (loss)
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Appeals
|
Internal Revenue Service Office of Appeals
|
Assured
|
Assured Guaranty Corp., a subsidiary of Assured Guaranty Ltd.
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Available Assets
|
As defined in the PMIERs, these assets primarily include the liquid assets of a mortgage insurer and its affiliated reinsurers, and exclude premiums received but not yet earned
|
BofA Settlement Agreement
|
The Confidential Settlement Agreement and Release dated September 16, 2014, by and among Radian Guaranty and Countrywide Home Loans, Inc. and Bank of America, N.A., as a successor to BofA Home Loan Servicing f/k/a Countrywide Home Loan Servicing LP, entered into in order to resolve various actual and potential claims or disputes as to mortgage insurance coverage on certain Subject Loans
|
Claim Curtailment
|
Our legal right, under certain conditions, to reduce the amount of a claim, including due to servicer negligence
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Claim Denial
|
Our legal right, under certain conditions, to deny a claim
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Claim Severity
|
The total claim amount paid divided by the original coverage amount
|
Clayton
|
Clayton Holdings LLC, a Delaware domiciled indirect non-insurance subsidiary of Radian Group
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CMBS
|
Commercial mortgage-backed securities
|
Convertible Senior Notes due 2017
|
Our 3.000% convertible unsecured senior notes due November 2017 ($450 million original principal amount)
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Convertible Senior Notes due 2019
|
Our 2.250% convertible unsecured senior notes due March 2019 ($400 million original principal amount)
|
Cures
|
Loans that were in default as of the beginning of a period and are no longer in default because payments were received and the loan is no longer past due
|
Default to Claim Rate
|
Rate at which defaulted loans result in a claim
|
Deficiency Amount
|
The assessed tax liabilities, penalties and interest associated with a formal notice of deficiency letter from the IRS
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Exchange Act
|
Securities Exchange Act of 1934, as amended
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Fannie Mae
|
Federal National Mortgage Association
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FHA
|
Federal Housing Administration
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FICO
|
Fair Isaac Corporation
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Flow Business
|
With respect to mortgage insurance, transactions in which mortgage insurance is provided on mortgages on an individual loan basis as they are originated. Flow Business contrasts with Structured Transactions, in which mortgage insurance is provided on a group of mortgages after they have been originated
|
Foreclosure Stage Default
|
The Stage of Default indicating that the foreclosure sale has been scheduled or held
|
Freddie Mac
|
Federal Home Loan Mortgage Corporation
|
Freddie Mac Agreement
|
The Master Transaction Agreement between Radian Guaranty and Freddie Mac entered into in August 2013
|
Term
|
Definition
|
Future Legacy Loans
|
With respect to the BofA Settlement Agreement, Legacy Loans where a claim decision has been or will be communicated by Radian Guaranty after February 13, 2013
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GAAP
|
Accounting principles generally accepted in the United States of America
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Green River Capital
|
Green River Capital LLC, a wholly-owned subsidiary of Clayton
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GSEs
|
Government-Sponsored Enterprises (Fannie Mae and Freddie Mac)
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HARP
|
Home Affordable Refinance Program
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IBNR
|
Losses incurred but not reported
|
IIF
|
Insurance in force
|
Initial QSR Transaction
|
Initial quota share reinsurance agreement entered into with a third-party reinsurance provider in the second quarter of 2012
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Insureds
|
Insured parties, with respect to the BofA Settlement Agreement, Countrywide Home Loans, Inc. and Bank of America, N.A., as a successor to BofA Home Loan Servicing f/k/a Countrywide Home Loans Servicing LP
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IRS
|
Internal Revenue Service
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LAE
|
Loss adjustment expense, which includes the cost of investigating and adjusting losses and paying claims
|
Legacy Loans
|
With respect to the BofA Settlement Agreement, loans that were originated or acquired by an Insured and were insured by Radian Guaranty prior to January 1, 2009, excluding such loans that were refinanced under HARP 2 (the FHFA’s extension of and enhancements to the HARP program)
|
Legacy Portfolio
|
Mortgage insurance written during the poor underwriting years of 2005 through 2008, together with business written prior to 2005
|
Loss Mitigation Activity/Activities
|
Activities such as Rescissions, Claim Denials, Claim Curtailments and cancellations
|
LTV
|
Loan-to-value ratio which is calculated as the percentage of the original loan amount to the original value of the property
|
Master Policies
|
The Prior Master Policy and the 2014 Master Policy, collectively
|
Minimum Required Assets
|
A risk-based minimum required asset amount, as defined in the PMIERs, calculated based on net RIF (RIF, net of credits permitted for reinsurance) and a variety of measures designed to evaluate credit quality
|
Model Act
|
Mortgage Guaranty Insurers Model Act
|
Monthly and Other
|
Insurance policies where premiums are paid on a monthly or other installment basis, excluding Single Premium Policies that are paid in a single premium at origination
|
Monthly Premium Policy/Policies
|
Insurance policies where premiums are paid on a monthly installment basis
|
Mortgage Insurance
|
Radian’s Mortgage Insurance business segment, which provides credit-related insurance coverage, principally through private mortgage insurance, to mortgage lending institutions
|
MPP Requirement
|
Certain states’ statutory or regulatory risk-based capital requirement that the mortgage insurer must maintain a minimum policyholder position, which is calculated based on both risk and surplus levels
|
NAIC
|
National Association of Insurance Commissioners
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NIW
|
New insurance written
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NOL
|
Net operating loss, calculated on a tax basis
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Notices of Deficiency
|
Formal letters from the IRS informing the taxpayer of an IRS determination of tax deficiency and appeal rights
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OCI
|
Other comprehensive income (loss)
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Persistency Rate
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The percentage of insurance in force that remains on our books over a period of time
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PMIERs
|
Private Mortgage Insurer Eligibility Requirements that were issued by the Federal Housing Finance Agency in proposed form for public comment on July 10, 2014 and issued in final form on April 17, 2015, as updated on June 30, 2015
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Term
|
Definition
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PMIERs Financial Requirements
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Financial requirements of the PMIERs
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Prior Master Policy
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Radian Guaranty’s master insurance policy in effect prior to the effective date of its 2014 Master Policy
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QSR
|
Quota share reinsurance
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QSR Transactions
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The Initial QSR Transaction and Second QSR Transaction, collectively
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Radian
|
Radian Group Inc. together with its consolidated subsidiaries
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Radian Asset Assurance
|
Radian Asset Assurance Inc., a New York domiciled insurance company that was formerly a subsidiary of Radian Guaranty
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Radian Asset Assurance Stock Purchase Agreement
|
The Stock Purchase Agreement dated December 22, 2014, between Radian Guaranty and Assured, to sell 100% of the issued and outstanding shares of Radian Asset Assurance, Radian’s financial guaranty insurance subsidiary, to Assured
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Radian Group
|
Radian Group Inc., the registrant
|
Radian Guaranty
|
Radian Guaranty Inc., a Pennsylvania domiciled insurance subsidiary of Radian Group
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RBC States
|
Risk-based capital states, which are those states that currently impose a statutory or regulatory risk-based capital requirement
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Red Bell
|
Red Bell Real Estate, LLC, a wholly-owned subsidiary of Clayton
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Reinstatements
|
Reversals of previous Rescissions, Claim Denials and Claim Curtailments
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REMIC
|
Real Estate Mortgage Investment Conduit
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REO
|
Real estate owned
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Rescission
|
Our legal right, under certain conditions, to unilaterally rescind coverage on our mortgage insurance policies if we determine that a loan did not qualify for insurance
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RIF
|
Risk in force is equal to the underlying loan unpaid principal balance multiplied by the insurance coverage percentage
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Risk-to-capital
|
Under certain state regulations, a minimum ratio of statutory capital calculated relative to the level of RIF, net of both RIF ceded under reinsurance and RIF related to defaulted loans
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RMBS
|
Residential mortgage-backed securities
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S&P
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Standard & Poor’s Financial Services LLC
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SAP
|
Statutory accounting practices include those required or permitted, if applicable, by the insurance departments of the respective states of domicile of our insurance subsidiaries
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SEC
|
United States Securities and Exchange Commission
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Second QSR Transaction
|
Second quota share reinsurance transaction entered into with a third-party reinsurance provider in the fourth quarter of 2012
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Second-lien
|
Second-lien mortgage loan
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Senior Notes due 2017
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Our 9.000% unsecured senior notes due June 2017 ($195.5 million principal amount)
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Senior Notes due 2019
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Our 5.500% unsecured senior notes due June 2019 ($300 million principal amount)
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Senior Notes due 2020
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Our 5.250% unsecured senior notes due June 2020 ($350 million principal amount)
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Senior Notes due 2021
|
Our 7.000% unsecured senior notes due March 2021 ($350 million principal amount)
|
Services
|
Radian’s Mortgage and Real Estate Services business segment, which provides mortgage- and real estate-related products and services to the mortgage finance market
|
Term
|
Definition
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Servicing Only Loans
|
With respect to the BofA Settlement Agreement, loans other than Legacy Loans that were or are serviced by the Insureds and were 90 days or more past due as of July 31, 2014, or if servicing has been transferred to a servicer other than the Insureds, 90 days or more past due as of the transfer date
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SFR
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Single family rental
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Single Premium Policy/Policies
|
Insurance policies where premiums are paid in a single payment at origination
|
Single Premium QSR Transaction
|
Quota share reinsurance agreement covering Single Premium Policies that was entered into with a panel of six third-party reinsurance providers in the first quarter of 2016, effective January 1, 2016
|
Stage of Default
|
The stage a loan is in relative to the foreclosure process, based on whether a foreclosure sale has been scheduled or held
|
Statutory RBC Requirement
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Risk-based capital requirement imposed by the RBC States, requiring a minimum surplus level and, in certain states, a minimum ratio of statutory capital relative to the level of risk
|
Structured Transactions
|
With respect to mortgage insurance, transactions in which mortgage insurance is provided on a group of mortgages after they have been originated. Structured Transactions contrast with Flow Business, in which mortgage insurance is provided on mortgages on an individual loan basis as they are originated
|
Subject Loans
|
Loans covered under the BofA Settlement Agreement, comprising Legacy Loans and Servicing Only Loans
|
Surplus Note
|
An intercompany 0.000% surplus note due December 31, 2025 ($325 million principal amount), issued by Radian Guaranty to Radian Group in December 2015 and repaid by Radian Guaranty on June 30, 2016
|
Time in Default
|
The time period from the point a loan reaches default status (based on the month the default occurred) to the current reporting date
|
TRID
|
Truth in Lending Act - Real Estate Settlement Procedures Act of 1974 (“RESPA”) Integrated Disclosure
|
U.S.
|
The United States of America
|
U.S. Treasury
|
United States Department of the Treasury
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ValuAmerica
|
ValuAmerica, Inc., a wholly-owned subsidiary of Clayton
|
VIE
|
Variable interest entity is a legal entity subject to the variable interest entity subsections of the accounting standard regarding consolidation, and generally includes a corporation, trust or partnership in which, by design, equity investors do not have a controlling financial interest or do not have sufficient equity at risk to finance activities without additional subordinated financial support
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•
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changes in general economic and political conditions, including in particular but without limitation, unemployment rates, interest rates and changes in housing markets and mortgage credit markets that could impact the size of the insurable market and the credit performance of our insured portfolio;
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•
|
changes in the way customers, investors, regulators or legislators perceive the performance and financial strength of private mortgage insurers;
|
•
|
Radian Guaranty’s ability to remain eligible under the PMIERs and other applicable requirements imposed by the Federal Housing Finance Agency and by 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;
|
•
|
our ability to successfully execute and implement our business plans and strategies, including in particular but without limitation, plans and strategies that require GSE and/or regulatory approvals;
|
•
|
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 Radian Guaranty;
|
•
|
changes in the current housing finance system in the U.S., including in particular but without limitation, the role of 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 Monthly Premium Policies;
|
•
|
heightened competition in our mortgage insurance business, including in particular but without limitation, increased price competition and competition from 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;
|
•
|
the adoption of new laws and regulations, or changes in existing laws and regulations, or the way they are interpreted;
|
•
|
the outcome of legal and regulatory 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 IRS 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;
|
•
|
changes in GAAP or SAP rules and guidance, or their interpretation;
|
•
|
legal and other limitations on dividends and other amounts we may receive from our subsidiaries; and
|
•
|
the possibility that we may need to impair the carrying value of goodwill established in connection with our acquisition of Clayton.
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
($ in thousands, except share amounts)
|
|
|
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||||
ASSETS
|
|
|
|
||||
Investments (Note 5)
|
|
|
|
||||
Fixed-maturities available for sale—at fair value (amortized cost $2,614,680 and $1,893,356)
|
$
|
2,711,395
|
|
|
$
|
1,865,461
|
|
Equity securities available for sale—at fair value (cost $500 and $75,538)
|
500
|
|
|
75,430
|
|
||
Trading securities—at fair value
|
1,123,038
|
|
|
1,279,137
|
|
||
Short-term investments—at fair value
|
800,465
|
|
|
1,076,944
|
|
||
Other invested assets
|
1,516
|
|
|
1,714
|
|
||
Total investments
|
4,636,914
|
|
|
4,298,686
|
|
||
Cash
|
55,062
|
|
|
46,898
|
|
||
Restricted cash
|
9,298
|
|
|
13,000
|
|
||
Accounts and notes receivable
|
77,170
|
|
|
61,734
|
|
||
Deferred income taxes, net (Note 9)
|
444,513
|
|
|
577,945
|
|
||
Goodwill and other intangible assets, net (Note 6)
|
282,703
|
|
|
289,417
|
|
||
Prepaid reinsurance premium
|
229,231
|
|
|
40,491
|
|
||
Other assets (Note 8)
|
332,372
|
|
|
313,929
|
|
||
Total assets
|
$
|
6,067,263
|
|
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$
|
5,642,100
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||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
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Unearned premiums
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$
|
677,599
|
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$
|
680,300
|
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Reserve for losses and loss adjustment expense (“LAE”) (Note 10)
|
848,379
|
|
|
976,399
|
|
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Long-term debt (Note 11)
|
1,278,051
|
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|
1,219,454
|
|
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Reinsurance funds withheld (Note 1)
|
163,360
|
|
|
—
|
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Other liabilities
|
294,507
|
|
|
269,016
|
|
||
Total liabilities
|
3,261,896
|
|
|
3,145,169
|
|
||
Commitments and contingencies (Note 12)
|
|
|
|
||||
Stockholders’ equity
|
|
|
|
||||
Common stock: par value $.001 per share; 485,000,000 shares authorized at June 30, 2016 and December 31, 2015; 231,844,615 and 224,432,465 shares issued at June 30, 2016 and December 31, 2015, respectively; 214,283,918 and 206,871,768 shares outstanding at June 30, 2016 and December 31, 2015, respectively
|
232
|
|
|
224
|
|
||
Treasury stock, at cost: 17,560,697 shares at June 30, 2016 and December 31, 2015
|
(893,176
|
)
|
|
(893,176
|
)
|
||
Additional paid-in capital
|
2,781,136
|
|
|
2,716,618
|
|
||
Retained earnings
|
855,070
|
|
|
691,742
|
|
||
Accumulated other comprehensive income (loss) (“AOCI”) (Note 14)
|
62,105
|
|
|
(18,477
|
)
|
||
Total stockholders’ equity
|
2,805,367
|
|
|
2,496,931
|
|
||
Total liabilities and stockholders’ equity
|
$
|
6,067,263
|
|
|
$
|
5,642,100
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands, except per share amounts)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Net premiums earned—insurance
|
$
|
229,085
|
|
|
$
|
237,437
|
|
|
$
|
450,035
|
|
|
$
|
462,032
|
|
Services revenue
|
38,294
|
|
|
43,503
|
|
|
69,894
|
|
|
74,133
|
|
||||
Net investment income
|
28,839
|
|
|
19,285
|
|
|
56,040
|
|
|
36,613
|
|
||||
Net gains (losses) on investments and other financial instruments
|
30,527
|
|
|
28,448
|
|
|
61,813
|
|
|
45,227
|
|
||||
Other income
|
3,423
|
|
|
1,743
|
|
|
5,338
|
|
|
3,074
|
|
||||
Total revenues
|
330,168
|
|
|
330,416
|
|
|
643,120
|
|
|
621,079
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
||||||||
Provision for losses
|
49,725
|
|
|
32,560
|
|
|
92,716
|
|
|
77,588
|
|
||||
Policy acquisition costs
|
5,393
|
|
|
6,963
|
|
|
11,782
|
|
|
14,713
|
|
||||
Direct cost of services
|
24,858
|
|
|
23,520
|
|
|
46,607
|
|
|
42,773
|
|
||||
Other operating expenses
|
65,680
|
|
|
67,731
|
|
|
124,669
|
|
|
121,505
|
|
||||
Interest expense
|
22,546
|
|
|
24,501
|
|
|
44,080
|
|
|
48,886
|
|
||||
Loss on induced conversion and debt extinguishment (Note 11)
|
2,108
|
|
|
91,876
|
|
|
57,678
|
|
|
91,876
|
|
||||
Amortization and impairment of intangible assets
|
3,311
|
|
|
3,281
|
|
|
6,639
|
|
|
6,304
|
|
||||
Total expenses
|
173,621
|
|
|
250,432
|
|
|
384,171
|
|
|
403,645
|
|
||||
Pretax income from continuing operations
|
156,547
|
|
|
79,984
|
|
|
258,949
|
|
|
217,434
|
|
||||
Income tax provision (benefit)
|
58,435
|
|
|
34,791
|
|
|
94,588
|
|
|
80,514
|
|
||||
Net income from continuing operations
|
98,112
|
|
|
45,193
|
|
|
164,361
|
|
|
136,920
|
|
||||
Income (loss) from discontinued operations, net of tax
|
—
|
|
|
4,855
|
|
|
—
|
|
|
5,385
|
|
||||
Net income
|
$
|
98,112
|
|
|
$
|
50,048
|
|
|
$
|
164,361
|
|
|
$
|
142,305
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per share:
|
|
|
|
|
|
|
|
||||||||
Basic:
|
|
|
|
|
|
|
|
||||||||
Net income from continuing operations
|
$
|
0.46
|
|
|
$
|
0.23
|
|
|
$
|
0.79
|
|
|
$
|
0.71
|
|
Income (loss) from discontinued operations, net of tax
|
—
|
|
|
0.03
|
|
|
—
|
|
|
0.03
|
|
||||
Net income
|
$
|
0.46
|
|
|
$
|
0.26
|
|
|
$
|
0.79
|
|
|
$
|
0.74
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted:
|
|
|
|
|
|
|
|
||||||||
Net income from continuing operations
|
$
|
0.44
|
|
|
$
|
0.20
|
|
|
$
|
0.73
|
|
|
$
|
0.59
|
|
Income (loss) from discontinued operations, net of tax
|
—
|
|
|
0.02
|
|
|
—
|
|
|
0.02
|
|
||||
Net income
|
$
|
0.44
|
|
|
$
|
0.22
|
|
|
$
|
0.73
|
|
|
$
|
0.61
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Weighted-average number of common shares outstanding—basic
|
214,274
|
|
|
193,112
|
|
|
208,991
|
|
|
192,245
|
|
||||
Weighted-average number of common and common equivalent shares outstanding—diluted
|
226,203
|
|
|
246,650
|
|
|
232,945
|
|
|
244,981
|
|
||||
Dividends per share
|
$
|
0.0025
|
|
|
$
|
0.0025
|
|
|
$
|
0.0050
|
|
|
$
|
0.0050
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net income
|
$
|
98,112
|
|
|
$
|
50,048
|
|
|
$
|
164,361
|
|
|
$
|
142,305
|
|
Other comprehensive income (loss), net of tax (Note 14):
|
|
|
|
|
|
|
|
||||||||
Unrealized gains (losses) on investments:
|
|
|
|
|
|
|
|
||||||||
Unrealized holding gains (losses) arising during the period
|
40,297
|
|
|
(21,620
|
)
|
|
79,671
|
|
|
(15,166
|
)
|
||||
Less: Reclassification adjustment for net gains (losses) included in net income
|
758
|
|
|
44,664
|
|
|
(1,399
|
)
|
|
44,631
|
|
||||
Net unrealized gains (losses) on investments
|
39,539
|
|
|
(66,284
|
)
|
|
81,070
|
|
|
(59,797
|
)
|
||||
Net foreign currency translation adjustments
|
(225
|
)
|
|
158
|
|
|
(310
|
)
|
|
32
|
|
||||
Activity related to investments recorded as assets held for sale
|
—
|
|
|
(5,082
|
)
|
|
—
|
|
|
(3,254
|
)
|
||||
Net actuarial gains (losses)
|
—
|
|
|
—
|
|
|
(178
|
)
|
|
—
|
|
||||
Other comprehensive income (loss), net of tax
|
39,314
|
|
|
(71,208
|
)
|
|
80,582
|
|
|
(63,019
|
)
|
||||
Comprehensive income (loss)
|
$
|
137,426
|
|
|
$
|
(21,160
|
)
|
|
$
|
244,943
|
|
|
$
|
79,286
|
|
|
|
Six Months Ended June 30,
|
||||||
(In thousands)
|
|
2016
|
|
2015
|
||||
Common Stock
|
|
|
|
|
||||
Balance, beginning of period
|
|
$
|
224
|
|
|
$
|
209
|
|
Impact of extinguishment of Convertible Senior Notes due 2017 and 2019 (Note 11)
|
|
17
|
|
|
28
|
|
||
Issuance of common stock under incentive and benefit plans
|
|
—
|
|
|
1
|
|
||
Termination of capped calls (Note 11)
|
|
—
|
|
|
(3
|
)
|
||
Shares repurchased under share repurchase program (Note 13)
|
|
(9
|
)
|
|
(9
|
)
|
||
Balance, end of period
|
|
232
|
|
|
226
|
|
||
|
|
|
|
|
||||
Treasury Stock
|
|
|
|
|
||||
Balance, beginning of period
|
|
(893,176
|
)
|
|
(892,961
|
)
|
||
Repurchases of common stock under incentive plans
|
|
—
|
|
|
(215
|
)
|
||
Balance, end of period
|
|
(893,176
|
)
|
|
(893,176
|
)
|
||
|
|
|
|
|
||||
Additional Paid-in Capital
|
|
|
|
|
||||
Balance, beginning of period
|
|
2,716,618
|
|
|
2,531,513
|
|
||
Issuance of common stock under incentive and benefit plans
|
|
726
|
|
|
1,594
|
|
||
Stock-based compensation
|
|
14,428
|
|
|
6,494
|
|
||
Impact of extinguishment of Convertible Senior Notes due 2017 and 2019 (Note 11)
|
|
149,543
|
|
|
349,033
|
|
||
Termination of capped calls (Note 11)
|
|
—
|
|
|
11,976
|
|
||
Change in equity component of currently redeemable convertible senior notes
|
|
—
|
|
|
11,102
|
|
||
Shares repurchased under share repurchase program (Note 13)
|
|
(100,179
|
)
|
|
(201,991
|
)
|
||
Balance, end of period
|
|
2,781,136
|
|
|
2,709,721
|
|
||
|
|
|
|
|
||||
Retained Earnings
|
|
|
|
|
||||
Balance, beginning of period
|
|
691,742
|
|
|
406,814
|
|
||
Net income
|
|
164,361
|
|
|
142,305
|
|
||
Dividends declared
|
|
(1,033
|
)
|
|
(958
|
)
|
||
Balance, end of period
|
|
855,070
|
|
|
548,161
|
|
||
|
|
|
|
|
||||
Accumulated Other Comprehensive Income (Loss) (“AOCI”)
|
|
|
|
|
||||
Balance, beginning of period
|
|
(18,477
|
)
|
|
51,485
|
|
||
Net foreign currency translation adjustment, net of tax
|
|
(310
|
)
|
|
32
|
|
||
Net unrealized gains (losses) on investments, net of tax
|
|
81,070
|
|
|
(63,051
|
)
|
||
Net actuarial gains (losses)
|
|
(178
|
)
|
|
—
|
|
||
Balance, end of period
|
|
62,105
|
|
|
(11,534
|
)
|
||
|
|
|
|
|
||||
Total Stockholders’ Equity
|
|
$
|
2,805,367
|
|
|
$
|
2,353,398
|
|
Radian Group Inc.
|
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|||||||
|
|
|
|
||||
(In thousands)
|
Six Months Ended
June 30, |
||||||
2016
|
|
2015
|
|||||
Cash flows from operating activities:
|
|
|
|
||||
Net cash provided by (used in) operating activities, continuing operations
|
$
|
154,498
|
|
|
$
|
(66,804
|
)
|
Net cash provided by (used in) operating activities, discontinued operations
|
—
|
|
|
(1,759
|
)
|
||
Net cash provided by (used in) operating activities
|
154,498
|
|
|
(68,563
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Proceeds from sales of:
|
|
|
|
||||
Fixed-maturity investments available for sale
|
306,575
|
|
|
3,621
|
|
||
Equity securities available for sale
|
74,868
|
|
|
145,550
|
|
||
Trading securities
|
150,118
|
|
|
13,566
|
|
||
Proceeds from redemptions of:
|
|
|
|
||||
Fixed-maturity investments available for sale
|
137,909
|
|
|
25,179
|
|
||
Trading securities
|
60,127
|
|
|
120,861
|
|
||
Purchases of:
|
|
|
|
||||
Fixed-maturity investments available for sale
|
(1,170,474
|
)
|
|
(671,952
|
)
|
||
Equity securities available for sale
|
—
|
|
|
(500
|
)
|
||
Sales, redemptions and (purchases) of:
|
|
|
|
||||
Short-term investments, net
|
276,292
|
|
|
(348,702
|
)
|
||
Other assets and other invested assets, net
|
1,157
|
|
|
965
|
|
||
Proceeds from the sale of investment in affiliate, net of cash transferred
|
—
|
|
|
784,866
|
|
||
Purchases of property and equipment, net
|
(16,626
|
)
|
|
(10,654
|
)
|
||
Acquisitions, net of cash acquired
|
—
|
|
|
(6,449
|
)
|
||
Net cash provided by (used in) investing activities, continuing operations
|
(180,054
|
)
|
|
56,351
|
|
||
Net cash provided by (used in) investing activities, discontinued operations
|
—
|
|
|
4,999
|
|
||
Net cash provided by (used in) investing activities
|
(180,054
|
)
|
|
61,350
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Dividends paid
|
(1,033
|
)
|
|
(958
|
)
|
||
Issuance of long-term debt, net
|
343,549
|
|
|
344,260
|
|
||
Purchases and redemptions of long-term debt
|
(208,251
|
)
|
|
(128,303
|
)
|
||
Proceeds from termination of capped calls
|
—
|
|
|
11,973
|
|
||
Issuance of common stock
|
65
|
|
|
—
|
|
||
Purchase of common shares
|
(100,188
|
)
|
|
(202,000
|
)
|
||
Excess tax benefits from stock-based awards
|
63
|
|
|
2,679
|
|
||
Repayment of other borrowings
|
(206
|
)
|
|
—
|
|
||
Net cash provided by (used in) financing activities, continuing operations
|
33,999
|
|
|
27,651
|
|
||
Net cash provided by (used in) financing activities, discontinued operations
|
—
|
|
|
—
|
|
||
Net cash provided by (used in) financing activities
|
33,999
|
|
|
27,651
|
|
||
Effect of exchange rate changes on cash
|
(279
|
)
|
|
57
|
|
||
Increase (decrease) in cash
|
8,164
|
|
|
20,495
|
|
||
Cash, beginning of period
|
46,898
|
|
|
30,465
|
|
||
Less: Increase (decrease) in cash of business held for sale
|
—
|
|
|
(421
|
)
|
||
Cash, end of period
|
$
|
55,062
|
|
|
$
|
51,381
|
|
|
•
|
loan review and due diligence;
|
•
|
surveillance, including RMBS surveillance, loan servicer oversight, loan-level servicing compliance reviews and operational reviews of mortgage servicers and originators;
|
•
|
real estate valuation and component services that provide outsourcing and technology solutions for the SFR and residential real estate markets; as well as outsourced solutions for appraisal, title and closing services;
|
•
|
REO management services; and
|
•
|
services for the United Kingdom and European mortgage markets through our EuroRisk operations.
|
•
|
the issuance of
$350 million
aggregate principal amount of Senior Notes due 2021;
|
•
|
the purchases of aggregate principal amounts of
$30.1 million
and
$300.8 million
, respectively, of our outstanding Convertible Senior Notes due 2017 and 2019;
|
•
|
the termination of the portion of the capped call transactions related to the purchased Convertible Senior Notes due 2017;
|
•
|
the completion of the share repurchase program announced in January 2016, by purchasing an aggregate of
9.4 million
shares of Radian Group common stock for
$100.2 million
, including commissions; and
|
•
|
the execution of the Single Premium QSR Transaction, which had the effect of increasing the amount by which Radian Guaranty’s Available Assets exceed its Minimum Required Assets under the PMIERs Financial Requirements.
|
•
|
the early redemption of the remaining
$195.5 million
aggregate principal amount of our
9.000%
Senior Notes due 2017; and
|
•
|
a new share repurchase program of up to
$125 million
of Radian Group common stock.
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands, except share and per share amounts)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net income from continuing operations:
|
|
|
|
|
|
|
|
||||||||
Net income from continuing operations - basic
|
$
|
98,112
|
|
|
$
|
45,193
|
|
|
$
|
164,361
|
|
|
$
|
136,920
|
|
Adjustment for dilutive Convertible Senior Notes due 2019, net of tax
(1)
|
913
|
|
|
3,707
|
|
|
4,303
|
|
|
7,380
|
|
||||
Net income from continuing operations - diluted
|
$
|
99,025
|
|
|
$
|
48,900
|
|
|
$
|
168,664
|
|
|
$
|
144,300
|
|
|
|
|
|
|
|
|
|
||||||||
Net income:
|
|
|
|
|
|
|
|
||||||||
Net income from continuing operations - basic
|
$
|
98,112
|
|
|
$
|
45,193
|
|
|
$
|
164,361
|
|
|
$
|
136,920
|
|
Income (loss) from discontinued operations, net of tax
|
—
|
|
|
4,855
|
|
|
—
|
|
|
5,385
|
|
||||
Net income - basic
|
98,112
|
|
|
50,048
|
|
|
164,361
|
|
|
142,305
|
|
||||
Adjustment for dilutive Convertible Senior Notes due 2019, net of tax
(1)
|
913
|
|
|
3,707
|
|
|
4,303
|
|
|
7,380
|
|
||||
Net income - diluted
|
$
|
99,025
|
|
|
$
|
53,755
|
|
|
$
|
168,664
|
|
|
$
|
149,685
|
|
|
|
|
|
|
|
|
|
||||||||
Average common shares outstanding - basic
|
214,274
|
|
|
193,112
|
|
|
208,991
|
|
|
192,245
|
|
||||
Dilutive effect of Convertible Senior Notes due 2017
(2)
|
12
|
|
|
12,438
|
|
|
—
|
|
|
11,789
|
|
||||
Dilutive effect of Convertible Senior Notes due 2019
|
8,928
|
|
|
37,736
|
|
|
21,256
|
|
|
37,736
|
|
||||
Dilutive effect of stock-based compensation arrangements
(2)
|
2,989
|
|
|
3,364
|
|
|
2,698
|
|
|
3,211
|
|
||||
Adjusted average common shares outstanding - diluted
|
226,203
|
|
|
246,650
|
|
|
232,945
|
|
|
244,981
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income per share:
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Basic:
|
|
|
|
|
|
|
|
||||||||
Net income from continuing operations
|
$
|
0.46
|
|
|
$
|
0.23
|
|
|
$
|
0.79
|
|
|
$
|
0.71
|
|
Income (loss) from discontinued operations
|
—
|
|
|
0.03
|
|
|
—
|
|
|
0.03
|
|
||||
Net income
|
$
|
0.46
|
|
|
$
|
0.26
|
|
|
$
|
0.79
|
|
|
$
|
0.74
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted:
|
|
|
|
|
|
|
|
||||||||
Net income from continuing operations
|
$
|
0.44
|
|
|
$
|
0.20
|
|
|
$
|
0.73
|
|
|
$
|
0.59
|
|
Income (loss) from discontinued operations
|
—
|
|
|
0.02
|
|
|
—
|
|
|
0.02
|
|
||||
Net income
|
$
|
0.44
|
|
|
$
|
0.22
|
|
|
$
|
0.73
|
|
|
$
|
0.61
|
|
(1)
|
As applicable, includes coupon interest, amortization of discount and fees, and other changes in income or loss that would result from the assumed conversion.
|
(2)
|
The following number of shares of our common stock equivalents issued under our stock-based compensation arrangements and convertible debt were not included in the calculation of net income per share because they were anti-dilutive:
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
(in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Shares of common stock equivalents
|
1,042
|
|
|
264
|
|
|
1,042
|
|
|
530
|
|
Shares of Convertible Senior Notes due 2017
|
—
|
|
|
—
|
|
|
1,902
|
|
|
—
|
|
|
(1)
|
Net gains (losses) on investments and other financial instruments.
The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities, our tax and capital profile and overall market cycles. Unrealized investment gains and losses arise primarily from changes in the market value of our investments that are classified as trading. These valuation adjustments may not necessarily result in economic gains or losses.
|
(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).
|
(4)
|
Amortization and impairment of intangible assets.
Amortization of intangible assets represents the periodic expense required to amortize the cost of intangible assets over their estimated useful lives. Intangible assets with an indefinite useful life are also periodically reviewed for potential impairment, and impairment adjustments are made whenever appropriate. These charges are not viewed as part of the operating performance of our primary activities and therefore are excluded from our calculation of adjusted pretax operating income (loss).
|
(5)
|
Net impairment losses recognized in earnings.
The recognition of net impairment losses on investments can vary significantly in both size and timing, depending on market credit cycles. We do not view these impairment losses to be indicative of our fundamental operating activities. Therefore, whenever these losses occur, we exclude them from our calculation of adjusted pretax operating income (loss).
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Mortgage Insurance
|
|
|
|
|
|
|
|
||||||||
Net premiums written—insurance
(1)
|
$
|
232,353
|
|
|
$
|
251,082
|
|
|
$
|
258,663
|
|
|
$
|
492,990
|
|
Decrease (increase) in unearned premiums
|
(3,268
|
)
|
|
(13,645
|
)
|
|
191,372
|
|
|
(30,958
|
)
|
||||
Net premiums earned—insurance
|
229,085
|
|
|
237,437
|
|
|
450,035
|
|
|
462,032
|
|
||||
Net investment income
|
28,839
|
|
|
19,285
|
|
|
56,040
|
|
|
36,613
|
|
||||
Other income
|
3,424
|
|
|
1,743
|
|
|
5,339
|
|
|
3,074
|
|
||||
Total
(2)
|
261,348
|
|
|
258,465
|
|
|
511,414
|
|
|
501,719
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Provision for losses
|
50,074
|
|
|
31,637
|
|
|
93,349
|
|
|
77,488
|
|
||||
Policy acquisition costs
|
5,393
|
|
|
6,963
|
|
|
11,782
|
|
|
14,713
|
|
||||
Other operating expenses before corporate allocations
|
36,126
|
|
|
41,853
|
|
|
69,955
|
|
|
75,903
|
|
||||
Total
(3)
|
91,593
|
|
|
80,453
|
|
|
175,086
|
|
|
168,104
|
|
||||
Adjusted pretax operating income before corporate allocations
|
169,755
|
|
|
178,012
|
|
|
336,328
|
|
|
333,615
|
|
||||
Allocation of corporate operating expenses
|
14,286
|
|
|
12,516
|
|
|
23,615
|
|
|
22,274
|
|
||||
Allocation of interest expense
|
18,124
|
|
|
20,070
|
|
|
35,236
|
|
|
40,023
|
|
||||
Adjusted pretax operating income
|
$
|
137,345
|
|
|
$
|
145,426
|
|
|
$
|
277,477
|
|
|
$
|
271,318
|
|
(1)
|
Net of ceded premiums written under the QSR Transactions and the Single Premium QSR Transaction. See Note 7 for additional information.
|
(2)
|
Excludes net gains on investments and other financial instruments of
$30.5 million
and
$61.8 million
, respectively, for the
three and six months ended June 30, 2016
, and
$28.4 million
and
$45.2 million
, respectively, for the
three and six months ended June 30, 2015
, not included in adjusted pretax operating income.
|
(3)
|
Includes inter-segment expenses as follows:
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Inter-segment expenses
|
$
|
709
|
|
|
$
|
1,092
|
|
|
$
|
1,305
|
|
|
$
|
1,994
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Services
|
|
|
|
|
|
|
|
||||||||
Services revenue
(1)
|
$
|
39,002
|
|
|
$
|
44,595
|
|
|
$
|
71,198
|
|
|
$
|
76,127
|
|
|
|
|
|
|
|
|
|
||||||||
Direct cost of services
|
25,224
|
|
|
25,501
|
|
|
47,277
|
|
|
44,754
|
|
||||
Other operating expenses before corporate allocations
|
12,537
|
|
|
11,522
|
|
|
26,420
|
|
|
20,379
|
|
||||
Total
|
37,761
|
|
|
37,023
|
|
|
73,697
|
|
|
65,133
|
|
||||
Adjusted pretax operating income (loss) before corporate allocations
|
1,241
|
|
|
7,572
|
|
|
(2,499
|
)
|
|
10,994
|
|
||||
Allocation of corporate operating expenses
|
2,779
|
|
|
1,307
|
|
|
4,530
|
|
|
2,288
|
|
||||
Allocation of interest expense
|
4,422
|
|
|
4,431
|
|
|
8,844
|
|
|
8,863
|
|
||||
Adjusted pretax operating income (loss)
|
$
|
(5,960
|
)
|
|
$
|
1,834
|
|
|
$
|
(15,873
|
)
|
|
$
|
(157
|
)
|
(1)
|
Includes inter-segment revenues as follows:
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Inter-segment revenues
|
$
|
709
|
|
|
$
|
1,092
|
|
|
$
|
1,305
|
|
|
$
|
1,994
|
|
|
At June 30, 2016
|
||||||||||
(In thousands)
|
Mortgage Insurance
|
|
Services
|
|
Total
|
||||||
Total assets
|
$
|
5,708,233
|
|
|
$
|
359,030
|
|
|
$
|
6,067,263
|
|
|
At December 31, 2015
|
||||||||||
(In thousands)
|
Mortgage Insurance
|
|
Services
|
|
Total
|
||||||
Total assets
|
$
|
5,281,597
|
|
|
$
|
360,503
|
|
|
$
|
5,642,100
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Adjusted pretax operating income (loss):
|
|
|
|
|
|
|
|
||||||||
Mortgage Insurance
(1)
|
$
|
137,345
|
|
|
$
|
145,426
|
|
|
$
|
277,477
|
|
|
$
|
271,318
|
|
Services
(1)
|
(5,960
|
)
|
|
1,834
|
|
|
(15,873
|
)
|
|
(157
|
)
|
||||
Total adjusted pretax operating income
|
131,385
|
|
|
147,260
|
|
|
261,604
|
|
|
271,161
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net gains (losses) on investments and other financial instruments
|
30,527
|
|
|
28,448
|
|
|
61,813
|
|
|
45,227
|
|
||||
Loss on induced conversion and debt extinguishment
|
(2,108
|
)
|
|
(91,876
|
)
|
|
(57,678
|
)
|
|
(91,876
|
)
|
||||
Acquisition-related (expenses) benefits
(2)
|
54
|
|
|
(567
|
)
|
|
(151
|
)
|
|
(774
|
)
|
||||
Amortization and impairment of intangible assets
|
(3,311
|
)
|
|
(3,281
|
)
|
|
(6,639
|
)
|
|
(6,304
|
)
|
||||
Consolidated pretax income from continuing operations
|
$
|
156,547
|
|
|
$
|
79,984
|
|
|
$
|
258,949
|
|
|
$
|
217,434
|
|
(1)
|
Includes inter-segment expenses and revenues as listed in the notes to the preceding tables.
|
(2)
|
Acquisition-related (expenses) benefits represent expenses incurred to effect the acquisition of a business, net of adjustments to accruals previously recorded for acquisition expenses.
|
Level I
|
— Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
|
Level II
|
— Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities; and
|
Level III
|
— Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Level III inputs are used to measure fair value only to the extent that observable inputs are not available.
|
|
(In thousands)
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
Assets at Fair Value
|
|
|
|
|
|
|
|
||||||||
Investment Portfolio:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
$
|
256,943
|
|
|
$
|
7,400
|
|
|
$
|
—
|
|
|
$
|
264,343
|
|
State and municipal obligations
|
—
|
|
|
378,094
|
|
|
—
|
|
|
378,094
|
|
||||
Money market instruments
|
601,101
|
|
|
—
|
|
|
—
|
|
|
601,101
|
|
||||
Corporate bonds and notes
|
—
|
|
|
1,885,964
|
|
|
—
|
|
|
1,885,964
|
|
||||
RMBS
|
—
|
|
|
390,219
|
|
|
—
|
|
|
390,219
|
|
||||
CMBS
|
—
|
|
|
611,524
|
|
|
—
|
|
|
611,524
|
|
||||
Other ABS
|
—
|
|
|
442,636
|
|
|
—
|
|
|
442,636
|
|
||||
Foreign government and agency securities
|
—
|
|
|
43,499
|
|
|
—
|
|
|
43,499
|
|
||||
Equity securities
|
—
|
|
|
—
|
|
|
500
|
|
|
500
|
|
||||
Other investments
(1)
|
—
|
|
|
17,018
|
|
|
500
|
|
|
17,518
|
|
||||
Total Investments at Fair Value
(2)
|
858,044
|
|
|
3,776,354
|
|
|
1,000
|
|
|
4,635,398
|
|
||||
Total Assets at Fair Value
|
$
|
858,044
|
|
|
$
|
3,776,354
|
|
|
$
|
1,000
|
|
|
$
|
4,635,398
|
|
(1)
|
Comprising short-term certificates of deposit and commercial paper, included within Level II, and private convertible notes, included within Level III.
|
(2)
|
Does not include certain other invested assets (
$1.5 million
), primarily invested in limited partnerships, accounted for as cost-method investments and not measured at fair value.
|
(In thousands)
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
Assets at Fair Value
|
|
|
|
|
|
|
|
||||||||
Investment Portfolio:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
$
|
670,328
|
|
|
$
|
8,000
|
|
|
$
|
—
|
|
|
$
|
678,328
|
|
State and municipal obligations
|
—
|
|
|
341,845
|
|
|
—
|
|
|
341,845
|
|
||||
Money market instruments
|
443,272
|
|
|
—
|
|
|
—
|
|
|
443,272
|
|
||||
Corporate bonds and notes
|
—
|
|
|
1,383,186
|
|
|
—
|
|
|
1,383,186
|
|
||||
RMBS
|
—
|
|
|
297,097
|
|
|
—
|
|
|
297,097
|
|
||||
CMBS
|
—
|
|
|
544,588
|
|
|
—
|
|
|
544,588
|
|
||||
Other ABS
|
—
|
|
|
371,625
|
|
|
—
|
|
|
371,625
|
|
||||
Foreign government and agency securities
|
—
|
|
|
37,576
|
|
|
—
|
|
|
37,576
|
|
||||
Equity securities
|
74,930
|
|
|
25,016
|
|
|
500
|
|
|
100,446
|
|
||||
Other investments
(1)
|
—
|
|
|
99,009
|
|
|
—
|
|
|
99,009
|
|
||||
Total Investments at Fair Value
(2)
|
1,188,530
|
|
|
3,107,942
|
|
|
500
|
|
|
4,296,972
|
|
||||
Total Assets at Fair Value
|
$
|
1,188,530
|
|
|
$
|
3,107,942
|
|
|
$
|
500
|
|
|
$
|
4,296,972
|
|
(1)
|
Comprising short-term certificates of deposit and commercial paper.
|
(2)
|
Does not include certain other invested assets (
$1.7 million
), primarily invested in limited partnerships, accounted for as cost-method investments and not measured at fair value.
|
|
|
June 30, 2016
|
|
December 31, 2015
|
||||||||||||
(In thousands)
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Other invested assets
|
$
|
1,516
|
|
|
$
|
4,864
|
|
|
$
|
1,714
|
|
|
$
|
4,901
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Long-term debt
|
1,278,051
|
|
|
1,371,141
|
|
|
1,219,454
|
|
|
1,414,875
|
|
|
June 30, 2016
|
||||||||||||||
(In thousands)
|
Amortized
Cost
|
|
Fair Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
||||||||
Fixed-maturities available for sale:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
$
|
110,167
|
|
|
$
|
114,482
|
|
|
$
|
4,315
|
|
|
$
|
—
|
|
State and municipal obligations
|
72,134
|
|
|
79,052
|
|
|
6,918
|
|
|
—
|
|
||||
Corporate bonds and notes
|
1,163,406
|
|
|
1,225,809
|
|
|
63,955
|
|
|
1,552
|
|
||||
RMBS
|
316,533
|
|
|
323,980
|
|
|
7,641
|
|
|
194
|
|
||||
CMBS
|
485,693
|
|
|
501,811
|
|
|
17,061
|
|
|
943
|
|
||||
Other ABS
|
436,535
|
|
|
435,693
|
|
|
1,754
|
|
|
2,596
|
|
||||
Foreign government and agency securities
|
29,712
|
|
|
30,068
|
|
|
680
|
|
|
324
|
|
||||
Other investments
|
500
|
|
|
500
|
|
|
—
|
|
|
—
|
|
||||
Total fixed-maturities available for sale
|
2,614,680
|
|
|
2,711,395
|
|
|
102,324
|
|
|
5,609
|
|
||||
Equity securities available for sale
|
500
|
|
|
500
|
|
|
—
|
|
|
—
|
|
||||
Total debt and equity securities
|
$
|
2,615,180
|
|
|
$
|
2,711,895
|
|
|
$
|
102,324
|
|
|
$
|
5,609
|
|
|
|
December 31, 2015
|
||||||||||||||
(In thousands)
|
Amortized
Cost
|
|
Fair Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
||||||||
Fixed-maturities available for sale:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
$
|
13,773
|
|
|
$
|
13,752
|
|
|
$
|
—
|
|
|
$
|
21
|
|
State and municipal obligations
|
36,920
|
|
|
37,900
|
|
|
1,100
|
|
|
120
|
|
||||
Corporate bonds and notes
|
815,024
|
|
|
802,193
|
|
|
4,460
|
|
|
17,291
|
|
||||
RMBS
|
226,744
|
|
|
224,905
|
|
|
625
|
|
|
2,464
|
|
||||
CMBS
|
415,780
|
|
|
406,910
|
|
|
69
|
|
|
8,939
|
|
||||
Other ABS
|
359,452
|
|
|
355,494
|
|
|
16
|
|
|
3,974
|
|
||||
Foreign government and agency securities
|
25,663
|
|
|
24,307
|
|
|
27
|
|
|
1,383
|
|
||||
Total fixed-maturities available for sale
|
1,893,356
|
|
|
1,865,461
|
|
|
6,297
|
|
|
34,192
|
|
||||
Equity securities available for sale
(1)
|
75,538
|
|
|
75,430
|
|
|
—
|
|
|
108
|
|
||||
Total debt and equity securities
|
$
|
1,968,894
|
|
|
$
|
1,940,891
|
|
|
$
|
6,297
|
|
|
$
|
34,300
|
|
(1)
|
Comprising primarily a multi-sector exchange-traded fund.
|
(In thousands)
|
June 30,
2016 |
|
December 31,
2015 |
||||
Trading securities:
|
|
|
|
||||
U.S. government and agency securities
|
$
|
33,874
|
|
|
$
|
129,913
|
|
State and municipal obligations
|
299,042
|
|
|
303,946
|
|
||
Corporate bonds and notes
|
596,018
|
|
|
580,993
|
|
||
RMBS
|
66,239
|
|
|
72,192
|
|
||
CMBS
|
107,608
|
|
|
137,678
|
|
||
Other ABS
|
6,826
|
|
|
16,131
|
|
||
Foreign government and agency securities
|
13,431
|
|
|
13,268
|
|
||
Equity securities
|
—
|
|
|
25,016
|
|
||
Total
|
$
|
1,123,038
|
|
|
$
|
1,279,137
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended June 30,
|
|
||||||||||||
(In thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
||||||||
Net realized gains (losses):
|
|
|
|
|
|
|
|
|
||||||||
Fixed-maturities available for sale
|
$
|
1,166
|
|
|
$
|
(8
|
)
|
|
$
|
(1,982
|
)
|
|
$
|
(59
|
)
|
|
Equities available for sale
|
—
|
|
|
68,723
|
|
|
(170
|
)
|
|
68,723
|
|
|
||||
Trading securities
|
421
|
|
|
(8,291
|
)
|
|
(1,819
|
)
|
|
(12,859
|
)
|
|
||||
Short-term investments
|
—
|
|
|
4
|
|
|
(39
|
)
|
|
4
|
|
|
||||
Other gains (losses)
|
—
|
|
|
1
|
|
|
18
|
|
|
106
|
|
|
||||
Net realized gains (losses) on investments
|
1,587
|
|
|
60,429
|
|
(1)
|
(3,992
|
)
|
|
55,915
|
|
(1)
|
||||
Unrealized gains (losses) on trading securities
|
27,678
|
|
|
(31,638
|
)
|
|
62,909
|
|
|
(10,937
|
)
|
|
||||
Total net gains (losses) on investments
|
29,265
|
|
|
28,791
|
|
|
58,917
|
|
|
44,978
|
|
|
||||
Net gains (losses) on other financial instruments
|
1,262
|
|
|
(343
|
)
|
|
2,896
|
|
|
249
|
|
|
||||
Net gains (losses) on investments and other financial instruments
|
$
|
30,527
|
|
|
$
|
28,448
|
|
|
$
|
61,813
|
|
|
$
|
45,227
|
|
|
(1)
|
During the second quarter of 2015, we sold equity securities in our portfolio and reinvested the proceeds in assets that qualify as PMIERs-compliant Available Assets, recognizing pretax gains of
$68.7 million
.
|
June 30, 2016: ($ in thousands) Description of Securities
|
|
Less Than 12 Months
|
|
12 Months or Greater
|
|
Total
|
|||||||||||||||||||||||||||
# of
securities
|
|
Fair Value
|
|
Unrealized
Losses
|
|
# of
securities
|
|
Fair Value
|
|
Unrealized
Losses
|
|
# of
securities
|
|
Fair Value
|
|
Unrealized
Losses
|
|||||||||||||||||
Corporate bonds and notes
|
|
5
|
|
|
$
|
10,699
|
|
|
$
|
63
|
|
|
16
|
|
|
$
|
28,962
|
|
|
$
|
1,489
|
|
|
21
|
|
|
$
|
39,661
|
|
|
$
|
1,552
|
|
RMBS
|
|
6
|
|
|
84,687
|
|
|
194
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
84,687
|
|
|
194
|
|
||||||
CMBS
|
|
18
|
|
|
59,486
|
|
|
322
|
|
|
3
|
|
|
17,815
|
|
|
621
|
|
|
21
|
|
|
77,301
|
|
|
943
|
|
||||||
Other ABS
|
|
56
|
|
|
138,443
|
|
|
701
|
|
|
35
|
|
|
90,446
|
|
|
1,895
|
|
|
91
|
|
|
228,889
|
|
|
2,596
|
|
||||||
Foreign government and agency securities
|
|
1
|
|
|
996
|
|
|
4
|
|
|
8
|
|
|
9,723
|
|
|
320
|
|
|
9
|
|
|
10,719
|
|
|
324
|
|
||||||
Total
|
|
86
|
|
|
$
|
294,311
|
|
|
$
|
1,284
|
|
|
62
|
|
|
$
|
146,946
|
|
|
$
|
4,325
|
|
|
148
|
|
|
$
|
441,257
|
|
|
$
|
5,609
|
|
|
December 31, 2015: ($ in thousands) Description of Securities
|
|
Less Than 12 Months
|
|
12 Months or Greater
|
|
Total
|
|||||||||||||||||||||||||||
# of
securities
|
|
Fair Value
|
|
Unrealized
Losses
|
|
# of
securities
|
|
Fair Value
|
|
Unrealized
Losses
|
|
# of
securities
|
|
Fair Value
|
|
Unrealized
Losses
|
|||||||||||||||||
U.S. government and agency securities
|
|
1
|
|
|
$
|
5,752
|
|
|
$
|
21
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
1
|
|
|
$
|
5,752
|
|
|
$
|
21
|
|
State and municipal obligations
|
|
2
|
|
|
11,674
|
|
|
120
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
11,674
|
|
|
120
|
|
||||||
Corporate bonds and notes
|
|
117
|
|
|
510,807
|
|
|
16,773
|
|
|
6
|
|
|
8,700
|
|
|
518
|
|
|
123
|
|
|
519,507
|
|
|
17,291
|
|
||||||
RMBS
|
|
12
|
|
|
168,415
|
|
|
2,464
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
168,415
|
|
|
2,464
|
|
||||||
CMBS
|
|
58
|
|
|
387,268
|
|
|
8,939
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
387,268
|
|
|
8,939
|
|
||||||
Other ABS
|
|
96
|
|
|
284,998
|
|
|
2,559
|
|
|
14
|
|
|
43,225
|
|
|
1,415
|
|
|
110
|
|
|
328,223
|
|
|
3,974
|
|
||||||
Foreign government and agency securities
|
|
18
|
|
|
18,733
|
|
|
1,095
|
|
|
3
|
|
|
2,278
|
|
|
288
|
|
|
21
|
|
|
21,011
|
|
|
1,383
|
|
||||||
Equity securities
|
|
1
|
|
|
74,930
|
|
|
108
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
74,930
|
|
|
108
|
|
||||||
Total
|
|
305
|
|
|
$
|
1,462,577
|
|
|
$
|
32,079
|
|
|
23
|
|
|
$
|
54,203
|
|
|
$
|
2,221
|
|
|
328
|
|
|
$
|
1,516,780
|
|
|
$
|
34,300
|
|
|
June 30, 2016
|
||||||
|
Available for Sale
|
||||||
(In thousands)
|
Amortized
Cost
|
|
Fair
Value
|
||||
Due in one year or less
(1)
|
$
|
25,974
|
|
|
$
|
25,768
|
|
Due after one year through five years
(1)
|
289,287
|
|
|
295,684
|
|
||
Due after five years through ten years
(1)
|
670,894
|
|
|
700,619
|
|
||
Due after ten years
(1)
|
389,764
|
|
|
427,840
|
|
||
RMBS
(2)
|
316,533
|
|
|
323,980
|
|
||
CMBS
(2)
|
485,693
|
|
|
501,811
|
|
||
Other ABS
(2)
|
436,535
|
|
|
435,693
|
|
||
Total
|
$
|
2,614,680
|
|
|
$
|
2,711,395
|
|
(1)
|
Actual maturities may differ as a result of calls before scheduled maturity.
|
(2)
|
RMBS, CMBS and Other ABS are shown separately, as they are not due at a single maturity date.
|
|
(In thousands)
|
Goodwill
|
|
Accumulated Impairment Losses
|
|
Net
|
||||||
Balance at December 31, 2014
|
$
|
194,027
|
|
|
$
|
(2,095
|
)
|
|
$
|
191,932
|
|
Goodwill acquired
|
3,238
|
|
|
—
|
|
|
3,238
|
|
|||
Impairment losses
|
—
|
|
|
—
|
|
|
—
|
|
|||
Balance at December 31, 2015
|
197,265
|
|
|
(2,095
|
)
|
|
195,170
|
|
|||
Goodwill acquired
|
—
|
|
|
—
|
|
|
—
|
|
|||
Impairment losses
|
—
|
|
|
—
|
|
|
—
|
|
|||
Balance at June 30, 2016
|
$
|
197,265
|
|
|
$
|
(2,095
|
)
|
|
$
|
195,170
|
|
|
|
As of June 30, 2016
|
||||||||||
(In thousands)
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||
Client relationships
|
$
|
83,374
|
|
|
$
|
(15,382
|
)
|
|
$
|
67,992
|
|
Technology
|
15,100
|
|
|
(4,216
|
)
|
|
10,884
|
|
|||
Trade name and trademarks
|
8,340
|
|
|
(1,684
|
)
|
|
6,656
|
|
|||
Client backlog
|
6,680
|
|
|
(4,709
|
)
|
|
1,971
|
|
|||
Non-competition agreements
|
185
|
|
|
(155
|
)
|
|
30
|
|
|||
Total
|
$
|
113,679
|
|
|
$
|
(26,146
|
)
|
|
$
|
87,533
|
|
|
|
|
|
|
|
||||||
|
As of December 31, 2015
|
||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||
Client relationships
|
$
|
83,471
|
|
|
$
|
(11,038
|
)
|
|
$
|
72,433
|
|
Technology
|
15,100
|
|
|
(2,949
|
)
|
|
12,151
|
|
|||
Trade name and trademarks
|
8,340
|
|
|
(1,243
|
)
|
|
7,097
|
|
|||
Client backlog
|
6,680
|
|
|
(4,184
|
)
|
|
2,496
|
|
|||
Non-competition agreements
|
185
|
|
|
(115
|
)
|
|
70
|
|
|||
Total
|
$
|
113,776
|
|
|
$
|
(19,529
|
)
|
|
$
|
94,247
|
|
|
2016
|
$
|
6,579
|
|
2017
|
12,623
|
|
|
2018
|
12,029
|
|
|
2019
|
10,769
|
|
|
2020
|
9,161
|
|
|
2021
|
7,354
|
|
|
Thereafter
|
29,018
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net premiums written-insurance:
|
|
|
|
|
|
|
|
||||||||
Direct
|
$
|
252,728
|
|
|
$
|
258,198
|
|
|
$
|
486,654
|
|
|
$
|
513,446
|
|
Assumed
|
—
|
|
|
8
|
|
|
—
|
|
|
55
|
|
||||
Ceded
(1)
|
(20,375
|
)
|
|
(7,124
|
)
|
|
(227,991
|
)
|
|
(20,511
|
)
|
||||
Net premiums written-insurance
|
$
|
232,353
|
|
|
$
|
251,082
|
|
|
$
|
258,663
|
|
|
$
|
492,990
|
|
Net premiums earned-insurance:
|
|
|
|
|
|
|
|
||||||||
Direct
|
$
|
248,938
|
|
|
$
|
249,797
|
|
|
$
|
489,268
|
|
|
$
|
491,961
|
|
Assumed
|
9
|
|
|
10
|
|
|
18
|
|
|
23
|
|
||||
Ceded
(1)
|
(19,862
|
)
|
|
(12,370
|
)
|
|
(39,251
|
)
|
|
(29,952
|
)
|
||||
Net premiums earned-insurance
|
$
|
229,085
|
|
|
$
|
237,437
|
|
|
$
|
450,035
|
|
|
$
|
462,032
|
|
(1)
|
Net of profit commission.
|
•
|
20%
of its existing performing Single Premium Policies written between January 1, 2012 and March 31, 2013;
|
•
|
35%
of its existing performing Single Premium Policies written between April 1, 2013 and December 31, 2015; and
|
•
|
35%
of its Single Premium NIW from January 1, 2016 to December 31, 2017, subject to a limitation on ceded premiums equal to
$195 million
for policies issued between January 1, 2016 and December 31, 2017.
|
|
|
QSR Transactions
|
||||||||||||||
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Ceded premiums written
(1)
|
$
|
7,356
|
|
|
$
|
4,217
|
|
|
$
|
15,318
|
|
|
$
|
14,813
|
|
Ceded premiums earned
(1)
|
11,172
|
|
|
9,463
|
|
|
22,497
|
|
|
24,249
|
|
||||
Ceding commissions written
|
2,099
|
|
|
2,982
|
|
|
4,369
|
|
|
6,147
|
|
||||
Ceding commissions earned
|
4,976
|
|
|
5,363
|
|
|
10,715
|
|
|
12,027
|
|
|
Single Premium QSR Transaction
|
||||||
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||
(In thousands)
|
2016
|
|
2016
|
||||
Ceded premiums written
(1)
|
$
|
11,488
|
|
|
$
|
209,081
|
|
Ceded premiums earned
(1)
|
7,146
|
|
|
13,140
|
|
||
Ceding commissions written
|
4,844
|
|
|
55,776
|
|
||
Ceding commissions earned
|
3,759
|
|
|
6,791
|
|
(1)
|
Net of profit commission.
|
|
(In thousands)
|
June 30,
2016 |
|
December 31,
2015 |
||||
Deposit with the IRS (Note 9)
|
$
|
88,557
|
|
|
$
|
88,557
|
|
Corporate-owned life insurance
|
85,579
|
|
|
82,543
|
|
||
Property and equipment
(1)
|
58,800
|
|
|
46,802
|
|
||
Accrued investment income
|
28,630
|
|
|
25,620
|
|
||
Deferred policy acquisition costs
|
12,304
|
|
|
14,267
|
|
||
Reinsurance recoverables
|
6,432
|
|
|
11,044
|
|
||
Other
|
52,070
|
|
|
45,096
|
|
||
Total other assets
|
$
|
332,372
|
|
|
$
|
313,929
|
|
(1)
|
Property and equipment, at cost less accumulated depreciation of
$111.5 million
and
$106.9 million
at
June 30, 2016
and
December 31, 2015
, respectively.
|
|
(In thousands)
|
June 30,
2016 |
|
December 31,
2015 |
||||
Reserves for losses by category:
|
|
|
|
||||
Prime
|
$
|
420,281
|
|
|
$
|
480,481
|
|
Alt-A
|
173,284
|
|
|
203,706
|
|
||
A minus and below
|
112,001
|
|
|
129,352
|
|
||
IBNR and other
(1)
|
74,639
|
|
|
83,066
|
|
||
LAE
|
22,389
|
|
|
26,108
|
|
||
Reinsurance recoverable
(2)
|
6,044
|
|
|
8,286
|
|
||
Total primary reserves
|
808,638
|
|
|
930,999
|
|
||
Pool
|
36,982
|
|
|
42,084
|
|
||
IBNR and other
|
897
|
|
|
1,118
|
|
||
LAE
|
1,163
|
|
|
1,335
|
|
||
Reinsurance recoverable
(2)
|
33
|
|
|
—
|
|
||
Total pool reserves
|
39,075
|
|
|
44,537
|
|
||
Total First-lien reserves
|
847,713
|
|
|
975,536
|
|
||
Second-lien and other
(3)
|
666
|
|
|
863
|
|
||
Total reserve for losses
|
$
|
848,379
|
|
|
$
|
976,399
|
|
(1)
|
Primarily related to expected payments under the Freddie Mac Agreement.
|
(2)
|
Represents ceded losses on captive transactions, the QSR Transactions and the Single Premium QSR Transaction.
|
(3)
|
Does not include our Second-lien premium deficiency reserve that is included in other liabilities.
|
|
|
Six Months Ended
June 30, |
||||||
(In thousands)
|
2016
|
|
2015
|
||||
Balance at beginning of period
|
$
|
976,399
|
|
|
$
|
1,560,032
|
|
Less: Reinsurance recoverables
(1)
|
8,286
|
|
|
26,665
|
|
||
Balance at beginning of period, net of reinsurance recoverables
|
968,113
|
|
|
1,533,367
|
|
||
Add: Losses and LAE incurred in respect of default notices reported and unreported in:
|
|
|
|
||||
Current year
(2)
|
100,999
|
|
|
134,054
|
|
||
Prior years
|
(8,438
|
)
|
|
(55,195
|
)
|
||
Total incurred
|
92,561
|
|
|
78,859
|
|
||
Deduct: Paid claims and LAE related to:
|
|
|
|
||||
Current year
(2)
|
632
|
|
|
576
|
|
||
Prior years
|
217,740
|
|
|
418,535
|
|
||
Total paid
|
218,372
|
|
|
419,111
|
|
||
Balance at end of period, net of reinsurance recoverables
|
842,302
|
|
|
1,193,115
|
|
||
Add reinsurance recoverables
(1)
|
6,077
|
|
|
11,677
|
|
||
Balance at end of period
|
$
|
848,379
|
|
|
$
|
1,204,792
|
|
(1)
|
Related to ceded losses recoverable, if any, on captive reinsurance transactions, the QSR Transactions and the Single Premium QSR Transaction. See Note 7 for additional information.
|
(2)
|
Related to underlying defaulted loans with a most recent default notice dated in the year indicated. For example, if a loan had defaulted in a prior year, but then subsequently cured and later re-defaulted in the current year, that default would be considered a current year default.
|
|
|
(In thousands)
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
9.000%
|
Senior Notes due 2017
|
$
|
193,318
|
|
|
$
|
192,261
|
|
3.000%
|
Convertible Senior Notes due 2017
|
20,261
|
|
|
46,115
|
|
||
2.250%
|
Convertible Senior Notes due 2019
|
79,649
|
|
|
341,214
|
|
||
5.500%
|
Senior Notes due 2019
|
296,320
|
|
|
295,751
|
|
||
5.250%
|
Senior Notes due 2020
|
344,702
|
|
|
344,113
|
|
||
7.000%
|
Senior Notes due 2021
|
343,801
|
|
|
—
|
|
||
|
Total long-term debt
|
$
|
1,278,051
|
|
|
$
|
1,219,454
|
|
•
|
the
$41.0 million
market premium representing the consideration paid to the sellers of the Convertible Senior Notes due 2017 and 2019 in excess of the conversion value of the purchased notes;
|
•
|
the
$15.6 million
difference between the fair value and the carrying value, net of unamortized issuance costs, of the liability component of the purchased notes; and
|
•
|
the
$1.1 million
impact of related transaction costs.
|
|
|
Convertible Senior Notes due 2017
|
|
Convertible Senior Notes due 2019
|
||||||||||||
(In thousands)
|
June 30,
2016 |
|
December 31,
2015 |
|
June 30,
2016 |
|
December 31,
2015 |
||||||||
Liability component:
|
|
|
|
|
|
|
|
||||||||
Principal
|
$
|
22,233
|
|
|
$
|
52,370
|
|
|
$
|
89,194
|
|
|
$
|
389,992
|
|
Debt discount, net
(1)
|
(1,873
|
)
|
|
(5,941
|
)
|
|
(8,671
|
)
|
|
(44,313
|
)
|
||||
Debt issuance costs
(1)
|
(99
|
)
|
|
(314
|
)
|
|
(874
|
)
|
|
(4,465
|
)
|
||||
Net carrying amount
|
$
|
20,261
|
|
|
$
|
46,115
|
|
|
$
|
79,649
|
|
|
$
|
341,214
|
|
(1)
|
Included within long-term debt and is being amortized over the life of the convertible notes.
|
|
|
Convertible Senior Notes due 2017
|
||||||||||||||
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Contractual interest expense
|
$
|
167
|
|
|
$
|
3,122
|
|
|
$
|
539
|
|
|
$
|
6,497
|
|
Amortization of debt issuance costs
|
17
|
|
|
298
|
|
|
54
|
|
|
616
|
|
||||
Amortization of debt discount
|
314
|
|
|
5,394
|
|
|
1,022
|
|
|
11,102
|
|
||||
Total interest expense
|
$
|
498
|
|
|
$
|
8,814
|
|
|
$
|
1,615
|
|
|
$
|
18,215
|
|
|
Convertible Senior Notes due 2019
|
||||||||||||||
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Contractual interest expense
|
$
|
537
|
|
|
$
|
2,250
|
|
|
$
|
2,550
|
|
|
$
|
4,500
|
|
Amortization of debt issuance costs
|
80
|
|
|
330
|
|
|
373
|
|
|
658
|
|
||||
Amortization of debt discount
|
788
|
|
|
3,123
|
|
|
3,697
|
|
|
6,196
|
|
||||
Total interest expense
|
$
|
1,405
|
|
|
$
|
5,703
|
|
|
$
|
6,620
|
|
|
$
|
11,354
|
|
|
|
|
Three Months Ended June 30, 2016
|
|
Six Months Ended June 30, 2016
|
||||||||||||||||||||
(In thousands)
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
||||||||||||
Balance at beginning of period
|
$
|
35,064
|
|
|
$
|
12,273
|
|
|
$
|
22,791
|
|
|
$
|
(28,425
|
)
|
|
$
|
(9,948
|
)
|
|
$
|
(18,477
|
)
|
OCI:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized gains (losses) on investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized holding gains (losses) arising during the period
|
61,996
|
|
|
21,699
|
|
|
40,297
|
|
|
122,571
|
|
|
42,900
|
|
|
79,671
|
|
||||||
Less: Reclassification adjustment for net gains (losses) included in net income
(1)
|
1,166
|
|
|
408
|
|
|
758
|
|
|
(2,152
|
)
|
|
(753
|
)
|
|
(1,399
|
)
|
||||||
Net unrealized gains (losses) on investments
|
60,830
|
|
|
21,291
|
|
|
39,539
|
|
|
124,723
|
|
|
43,653
|
|
|
81,070
|
|
||||||
Net foreign currency translation adjustments
|
(346
|
)
|
|
(121
|
)
|
|
(225
|
)
|
|
(476
|
)
|
|
(166
|
)
|
|
(310
|
)
|
||||||
Net actuarial gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
(274
|
)
|
|
(96
|
)
|
|
(178
|
)
|
||||||
OCI
|
60,484
|
|
|
21,170
|
|
|
39,314
|
|
|
123,973
|
|
|
43,391
|
|
|
80,582
|
|
||||||
Balance at end of period
|
$
|
95,548
|
|
|
$
|
33,443
|
|
|
$
|
62,105
|
|
|
$
|
95,548
|
|
|
$
|
33,443
|
|
|
$
|
62,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Three Months Ended June 30, 2015
|
|
Six Months Ended June 30, 2015
|
||||||||||||||||||||
(In thousands)
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
||||||||||||
Balance at beginning of period
|
$
|
91,806
|
|
|
$
|
32,132
|
|
|
$
|
59,674
|
|
|
$
|
79,208
|
|
|
$
|
27,723
|
|
|
$
|
51,485
|
|
OCI:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized gains (losses) on investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized holding gains (losses) arising during the period
|
(33,261
|
)
|
|
(11,641
|
)
|
|
(21,620
|
)
|
|
(23,332
|
)
|
|
(8,166
|
)
|
|
(15,166
|
)
|
||||||
Less: Reclassification adjustment for net gains (losses) included in net income
(1)
|
68,714
|
|
|
24,050
|
|
|
44,664
|
|
|
68,663
|
|
|
24,032
|
|
|
44,631
|
|
||||||
Net unrealized gains (losses) on investments
|
(101,975
|
)
|
|
(35,691
|
)
|
|
(66,284
|
)
|
|
(91,995
|
)
|
|
(32,198
|
)
|
|
(59,797
|
)
|
||||||
Net foreign currency translation adjustments
|
243
|
|
|
85
|
|
|
158
|
|
|
49
|
|
|
17
|
|
|
32
|
|
||||||
Activity related to investments recorded as assets held for sale
(2)
|
(7,818
|
)
|
|
(2,736
|
)
|
|
(5,082
|
)
|
(3)
|
(5,006
|
)
|
|
(1,752
|
)
|
|
(3,254
|
)
|
||||||
OCI
|
(109,550
|
)
|
|
(38,342
|
)
|
|
(71,208
|
)
|
|
(96,952
|
)
|
|
(33,933
|
)
|
|
(63,019
|
)
|
||||||
Balance at end of period
|
$
|
(17,744
|
)
|
|
$
|
(6,210
|
)
|
|
$
|
(11,534
|
)
|
|
$
|
(17,744
|
)
|
|
$
|
(6,210
|
)
|
|
$
|
(11,534
|
)
|
(1)
|
Included in net gains (losses) on investments and other financial instruments on our unaudited condensed consolidated statements of operations. During the second quarter of 2015, we sold equity securities in our portfolio and reinvested the proceeds in assets that qualify as PMIERs-compliant Available Assets, recognizing pretax gains of
$68.7 million
.
|
(2)
|
Represents the unrealized holding gains (losses) arising during the period on investments recorded as assets held for sale, net of reclassification adjustments for net gains (losses) included in net income (loss) from discontinued operations.
|
(3)
|
For the three months ended June 30, 2015, this amount represents the recognition of investment gains included in income from discontinued operations, net of tax, as a result of the completion of the sale of Radian Asset Assurance on April 1, 2015. Previously, pursuant to accounting standards, such investment gains had been deferred and recorded in AOCI.
|
|
|
Three Months Ended
June 30, 2015 |
|
Six Months Ended
June 30, 2015 |
||||
(In thousands)
|
|
|
|
||||
Net premiums earned
|
$
|
—
|
|
|
$
|
1,007
|
|
Net investment income
|
—
|
|
|
9,153
|
|
||
Net gains (losses) on investments and other financial instruments
|
7,818
|
|
|
21,486
|
|
||
Change in fair value of derivative instruments
|
—
|
|
|
2,625
|
|
||
Total revenues
|
7,818
|
|
|
34,271
|
|
||
|
|
|
|
||||
Provision for losses
|
—
|
|
|
502
|
|
||
Policy acquisition costs
|
—
|
|
|
(191
|
)
|
||
Other operating expenses
|
—
|
|
|
4,107
|
|
||
Total expenses
|
—
|
|
|
4,418
|
|
||
|
|
|
|
||||
Equity in net income (loss) of affiliates
|
—
|
|
|
(13
|
)
|
||
Income (loss) from operations of businesses held for sale
|
7,818
|
|
|
29,840
|
|
||
Income (loss) on sale
|
(350
|
)
|
|
(14,280
|
)
|
||
Income tax provision (benefit)
|
2,613
|
|
|
10,175
|
|
||
Income (loss) from discontinued operations, net of tax
|
$
|
4,855
|
|
|
$
|
5,385
|
|
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
($ in millions)
|
|
|
|
||||
RIF, net
(1)
|
$
|
34,028.0
|
|
|
$
|
36,396.1
|
|
|
|
|
|
||||
Common stock and paid-in capital
|
$
|
2,041.5
|
|
|
$
|
2,041.4
|
|
Surplus Note
|
—
|
|
|
325.0
|
|
||
Unassigned earnings (deficit)
|
(653.6
|
)
|
|
(679.9
|
)
|
||
Statutory policyholders’ surplus
|
1,387.9
|
|
|
1,686.5
|
|
||
Contingency reserve
|
1,051.1
|
|
|
860.9
|
|
||
Statutory capital
|
$
|
2,439.0
|
|
|
$
|
2,547.4
|
|
|
|
|
|
||||
Risk-to-capital
|
14.0:1
|
|
14.3:1
|
(1)
|
Excludes risk ceded through reinsurance contracts (to third parties and affiliates) and RIF on defaulted loans.
|
|
•
|
the early redemption of the remaining
$195.5 million
aggregate principal amount of its
9.000%
Senior Notes due 2017; and
|
•
|
a new share repurchase program of up to
$125 million
of Radian Group common stock.
|
|
Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
PAGE
|
|
|
RADIAN’S LONG-TERM STRATEGIC OBJECTIVES
|
• Grow earnings per share while maintaining attractive returns on equity
»
Write high-quality and profitable NIW
»
Improve margins through efficiency initiatives and business mix
|
• Expand the role of private mortgage insurance in the mortgage finance industry
|
• Grow fee income by expanding our presence in the real estate and mortgage finance industries
|
• Enhance our financial strength and effectively manage Radian Group’s debt maturity profile
|
• Manage risk and compliance proactively through strong governance and culture
|
•
|
increased our filed rates for lender-paid mortgage insurance;
|
•
|
adjusted our borrower-paid, filed rates, effective on April 7, 2016, which generally had the effect of decreasing our standard rates on higher FICO business, and raising our standard rates on lower FICO business where the FHA is already very competitive;
|
•
|
continued to use the authority set forth in our rate filings to provide customized premiums for lender-paid, Single Premium mortgage insurance on a limited basis while maintaining our focus on our overall risk and return targets, and subsequent to June 30, 2016, because the level of discounting has moderated, have chosen to selectively participate in certain discounted, Single Premium business that has been offered on an aggregated basis; and
|
•
|
entered into the Single Premium QSR Transaction to proactively manage the risk and return profile of Radian Guaranty’s insured portfolio, which resulted in increasing our return on required capital for Single Premium Policies and decreasing the percentage of our Single Premium RIF, net of reinsurance ceded.
|
|
|
•
|
the issuance of
$350 million
aggregate principal amount of Senior Notes due 2021;
|
•
|
the purchases of aggregate principal amounts of
$30.1 million
and
$300.8 million
, respectively, of our outstanding Convertible Senior Notes due 2017 and 2019;
|
•
|
the termination of the portion of the capped call transactions related to the purchased Convertible Senior Notes due 2017;
|
•
|
the completion of the share repurchase program announced in January 2016, by purchasing an aggregate of
9.4 million
shares of Radian Group common stock for
$100.2 million
, including commissions; and
|
•
|
the execution of the Single Premium QSR Transaction, which had the effect of increasing the amount by which Radian Guaranty’s Available Assets exceed its Minimum Required Assets under the PMIERs Financial Requirements.
|
•
|
a net increase in available holding company liquidity of
$34.9 million
;
|
•
|
a net increase in long-term debt of
$50.9 million
; and
|
•
|
a net decrease in stockholders’ equity of
$0.8 million
.
|
|
•
|
increases the amount of our RIF covered by reinsurance, and therefore, the amount of premiums and losses ceded;
|
•
|
reduces net premiums written and earned;
|
•
|
reduces other operating expenses by the amount of ceding commissions earned; and
|
•
|
improves Radian Guaranty’s return on required capital for its Single Premium mortgage insurance products as a result of the combination of the favorable impact to our PMIERs Financial Requirements and the expected ceded underwriting margin.
|
•
|
the early redemption of the remaining
$195.5 million
aggregate principal amount of our 9.000% Senior Notes due 2017; and
|
•
|
a new share repurchase program of up to
$125 million
of Radian Group common stock.
|
|
|
|
|
|
|
$ Change
|
|
|
|
|
|
$ Change
|
||||||||||||
|
Three Months Ended
June 30, |
|
Favorable (Unfavorable)
|
|
Six Months Ended
June 30, |
|
Favorable (Unfavorable)
|
||||||||||||||||
($ in millions, except per-share amounts)
|
2016
|
|
2015
|
|
2016 vs. 2015
|
|
2016
|
|
2015
|
|
2016 vs. 2015
|
||||||||||||
Pretax income from continuing operations
|
$
|
156.5
|
|
|
$
|
80.0
|
|
|
$
|
76.5
|
|
|
$
|
258.9
|
|
|
$
|
217.4
|
|
|
$
|
41.5
|
|
Net income from continuing operations
|
98.1
|
|
|
45.2
|
|
|
52.9
|
|
|
164.4
|
|
|
136.9
|
|
|
27.5
|
|
||||||
Income (loss) from discontinued operations, net of tax
|
—
|
|
|
4.9
|
|
|
(4.9
|
)
|
|
—
|
|
|
5.4
|
|
|
(5.4
|
)
|
||||||
Net income
|
98.1
|
|
|
50.1
|
|
|
48.0
|
|
|
164.4
|
|
|
142.3
|
|
|
22.1
|
|
||||||
Diluted net income per share
|
0.44
|
|
|
0.22
|
|
|
0.22
|
|
|
0.73
|
|
|
0.61
|
|
|
0.12
|
|
||||||
Book value per share at June 30
|
13.09
|
|
|
11.28
|
|
|
1.81
|
|
|
13.09
|
|
|
11.28
|
|
|
1.81
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net premiums earned—insurance
|
229.1
|
|
|
237.4
|
|
|
(8.3
|
)
|
|
450.0
|
|
|
462.0
|
|
|
(12.0
|
)
|
||||||
Services revenue
|
38.3
|
|
|
43.5
|
|
|
(5.2
|
)
|
|
69.9
|
|
|
74.1
|
|
|
(4.2
|
)
|
||||||
Net investment income
|
28.8
|
|
|
19.3
|
|
|
9.5
|
|
|
56.0
|
|
|
36.6
|
|
|
19.4
|
|
||||||
Net gains (losses) on investments and other financial instruments
|
30.5
|
|
|
28.4
|
|
|
2.1
|
|
|
61.8
|
|
|
45.2
|
|
|
16.6
|
|
||||||
Provision for losses
|
49.7
|
|
|
32.6
|
|
|
(17.1
|
)
|
|
92.7
|
|
|
77.6
|
|
|
(15.1
|
)
|
||||||
Direct cost of services
|
24.9
|
|
|
23.5
|
|
|
(1.4
|
)
|
|
46.6
|
|
|
42.8
|
|
|
(3.8
|
)
|
||||||
Other operating expenses
|
65.7
|
|
|
67.7
|
|
|
2.0
|
|
|
124.7
|
|
|
121.5
|
|
|
(3.2
|
)
|
||||||
Interest expense
|
22.5
|
|
|
24.5
|
|
|
2.0
|
|
|
44.1
|
|
|
48.9
|
|
|
4.8
|
|
||||||
Loss on induced conversion and debt extinguishment
|
2.1
|
|
|
91.9
|
|
|
89.8
|
|
|
57.7
|
|
|
91.9
|
|
|
34.2
|
|
||||||
Amortization and impairment of intangible assets
|
3.3
|
|
|
3.3
|
|
|
—
|
|
|
6.6
|
|
|
6.3
|
|
|
(0.3
|
)
|
||||||
Income tax provision (benefit)
|
58.4
|
|
|
34.8
|
|
|
(23.6
|
)
|
|
94.6
|
|
|
80.5
|
|
|
(14.1
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Adjusted pretax operating income
(1)
|
131.4
|
|
|
147.3
|
|
|
(15.9
|
)
|
|
261.6
|
|
|
271.2
|
|
|
(9.6
|
)
|
(1)
|
See “—
Use of Non-GAAP Financial Measure
” below.
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
|
||||||||||||
(In millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
||||||||
Net unrealized gains (losses) related to change in fair value of trading securities and other investments
|
$
|
27.7
|
|
|
$
|
(31.6
|
)
|
|
$
|
62.9
|
|
|
$
|
(10.9
|
)
|
|
Net realized gains (losses) on sales
|
1.6
|
|
|
60.4
|
|
(1)
|
(4.0
|
)
|
|
55.9
|
|
(1)
|
||||
Net gains (losses) on other financial instruments
|
1.2
|
|
|
(0.4
|
)
|
|
2.9
|
|
|
0.2
|
|
|
||||
Net gains (losses) on investments and other financial instruments
|
$
|
30.5
|
|
|
$
|
28.4
|
|
|
$
|
61.8
|
|
|
$
|
45.2
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
During the second quarter of 2015, we sold equity securities in our portfolio and reinvested the proceeds in assets that qualify as PMIERs-compliant Available Assets, recognizing pretax gains of
$68.7 million
.
|
|
(1)
|
Net gains (losses) on investments and other financial instruments.
The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities, our tax and capital profile and overall market cycles. Unrealized investment gains and losses arise primarily from changes in the market value of our investments that are classified as trading. These valuation adjustments may not necessarily result in economic gains or losses.
|
|
(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).
|
(4)
|
Amortization and impairment of intangible assets.
Amortization of intangible assets represents the periodic expense required to amortize the cost of intangible assets over their estimated useful lives. Intangible assets with an indefinite useful life are also periodically reviewed for potential impairment, and impairment adjustments are made whenever appropriate. These charges are not viewed as part of the operating performance of our primary activities and therefore are excluded from our calculation of adjusted pretax operating income (loss).
|
(5)
|
Net impairment losses recognized in earnings.
The recognition of net impairment losses on investments can vary significantly in both size and timing, depending on market credit cycles. We do not view these impairment losses to be indicative of our fundamental operating activities. Therefore, whenever these losses occur, we exclude them from our calculation of adjusted pretax operating income (loss).
|
(1)
|
Includes inter-segment expenses and revenues as disclosed in Note 3 of Notes to Unaudited Condensed Consolidated Financial Statements.
|
(2)
|
Acquisition-related (expenses) benefits represent expenses incurred to effect the acquisition of a business, net of adjustments to accruals previously recorded for acquisition expenses.
|
|
|
|
|
|
|
$ Change
|
|
|
|
|
|
$ Change
|
||||||||||||
|
Three Months Ended
June 30, |
|
Favorable (Unfavorable)
|
|
Six Months Ended
June 30, |
|
Favorable (Unfavorable)
|
||||||||||||||||
($ in millions)
|
2016
|
|
2015
|
|
2016 vs. 2015
|
|
2016
|
|
2015
|
|
2016 vs. 2015
|
||||||||||||
Adjusted pretax operating income
(1)
|
$
|
137.3
|
|
|
$
|
145.4
|
|
|
$
|
(8.1
|
)
|
|
$
|
277.5
|
|
|
$
|
271.3
|
|
|
$
|
6.2
|
|
Net premiums written—insurance
(2)
|
232.4
|
|
|
251.1
|
|
|
(18.7
|
)
|
|
258.7
|
|
|
493.0
|
|
|
(234.3
|
)
|
||||||
(Increase) decrease in unearned premiums
|
(3.3
|
)
|
|
(13.6
|
)
|
|
10.3
|
|
|
191.4
|
|
|
(31.0
|
)
|
|
222.4
|
|
||||||
Net premiums earned—insurance
|
229.1
|
|
|
237.4
|
|
|
(8.3
|
)
|
|
450.0
|
|
|
462.0
|
|
|
(12.0
|
)
|
||||||
Net investment income
|
28.8
|
|
|
19.3
|
|
|
9.5
|
|
|
56.0
|
|
|
36.6
|
|
|
19.4
|
|
||||||
Provision for losses
|
50.1
|
|
|
31.6
|
|
|
(18.5
|
)
|
|
93.4
|
|
|
77.5
|
|
|
(15.9
|
)
|
||||||
Other operating expenses
|
50.4
|
|
|
54.4
|
|
|
4.0
|
|
|
93.6
|
|
|
98.2
|
|
|
4.6
|
|
||||||
Interest expense
|
18.1
|
|
|
20.1
|
|
|
2.0
|
|
|
35.2
|
|
|
40.0
|
|
|
4.8
|
|
(1)
|
Our senior management uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of each of the Company’s business segments.
|
(2)
|
Net of ceded premiums written under the QSR Transactions and the Single Premium QSR Transaction. See Note 7 of Notes to Unaudited Condensed Consolidated Financial Statements for more information.
|
|
(1)
|
In 2009, the GSEs began offering the HARP, which allows a borrower who is not delinquent to refinance a mortgage if the borrower has been unable to take advantage of lower interest rates because the borrower’s home has decreased in value. We exclude HARP loans from our NIW for the period in which the refinance occurs. During the
six months ended June 30, 2016
, new HARP loans accounted for
$120.3 million
of newly refinanced loans that were not included in Radian Guaranty’s NIW for the period, compared to
$505.5 million
for the same period of
2015
.
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
($ in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||||||||||||||
Total primary NIW by FICO Score
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
>=740
|
$
|
7,871
|
|
|
60.9
|
%
|
|
$
|
7,405
|
|
|
63.0
|
%
|
|
$
|
12,587
|
|
|
60.0
|
%
|
|
$
|
13,373
|
|
|
63.3
|
%
|
680-739
|
4,165
|
|
|
32.2
|
|
|
3,615
|
|
|
30.8
|
|
|
6,880
|
|
|
32.8
|
|
|
6,460
|
|
|
30.5
|
|
||||
620-679
|
885
|
|
|
6.9
|
|
|
731
|
|
|
6.2
|
|
|
1,525
|
|
|
7.2
|
|
|
1,303
|
|
|
6.2
|
|
||||
Total Primary
|
$
|
12,921
|
|
|
100.0
|
%
|
|
$
|
11,751
|
|
|
100.0
|
%
|
|
$
|
20,992
|
|
|
100.0
|
%
|
|
$
|
21,136
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Percentage of primary NIW
|
|
|
|
|
|
|
|
||||||||
Direct Monthly and Other Premiums
|
74
|
%
|
|
68
|
%
|
|
73
|
%
|
|
66
|
%
|
||||
Direct Single Premiums
|
26
|
%
|
|
32
|
%
|
|
27
|
%
|
|
34
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Net Single Premiums
(1)
|
17
|
%
|
|
32
|
%
|
|
18
|
%
|
|
34
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Refinances
|
18
|
%
|
|
23
|
%
|
|
18
|
%
|
|
27
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
LTV
|
|
|
|
|
|
|
|
||||||||
95.01% and above
|
4.8
|
%
|
|
3.2
|
%
|
|
4.4
|
%
|
|
2.5
|
%
|
||||
90.01% to 95.00%
|
50.2
|
%
|
|
49.4
|
%
|
|
50.3
|
%
|
|
49.0
|
%
|
||||
85.01% to 90.00%
|
31.8
|
%
|
|
34.0
|
%
|
|
32.3
|
%
|
|
33.7
|
%
|
||||
85.00% and below
|
13.2
|
%
|
|
13.4
|
%
|
|
13.0
|
%
|
|
14.8
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Primary risk written
|
$
|
3,256
|
|
|
$
|
2,963
|
|
|
$
|
5,293
|
|
|
$
|
5,278
|
|
(1)
|
In 2016, represents the percentage of direct single premiums written, after consideration of the 35% single premium NIW ceded under the Single Premium QSR Transaction.
|
|
($ in millions)
|
June 30,
2016 |
|
December 31,
2015 |
|
June 30,
2015 |
||||||
Primary IIF
|
|
|
|
|
|
||||||
Direct Monthly and Other premiums
|
68
|
%
|
|
69
|
%
|
|
70
|
%
|
|||
Direct Single Premiums
|
32
|
%
|
|
31
|
%
|
|
30
|
%
|
|||
|
|
|
|
|
|
||||||
Net Single Premiums
(1)
|
25
|
%
|
|
31
|
%
|
|
30
|
%
|
|||
|
|
|
|
|
|
||||||
Total Primary IIF
|
$
|
177,672
|
|
|
$
|
175,584
|
|
|
$
|
172,692
|
|
|
|
|
|
|
|
||||||
Persistency Rate
(12 months ended)
|
79.9
|
%
|
|
78.8
|
%
|
|
80.1
|
%
|
|||
Persistency Rate
(quarterly, annualized)
(2)
|
78.0
|
%
|
|
81.8
|
%
|
|
76.2
|
%
|
(1)
|
Represents the percentage of single premium IIF, after giving effect to all reinsurance ceded.
|
(2)
|
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.
|
($ in millions)
|
June 30,
2016 |
|
December 31,
2015 |
|
June 30,
2015 |
|||||||||||||||
Primary RIF by Product
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Flow
|
$
|
43,576
|
|
|
96.1
|
%
|
|
$
|
42,771
|
|
|
95.8
|
%
|
|
$
|
41,706
|
|
|
95.5
|
%
|
Structured
|
1,748
|
|
|
3.9
|
|
|
1,856
|
|
|
4.2
|
|
|
1,957
|
|
|
4.5
|
|
|||
Total Primary RIF
|
$
|
45,324
|
|
|
100.0
|
%
|
|
$
|
44,627
|
|
|
100.0
|
%
|
|
$
|
43,663
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Primary RIF by Premium Type
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Direct Monthly and Other Premiums
|
$
|
31,205
|
|
|
68.8
|
%
|
|
$
|
30,940
|
|
|
69.3
|
%
|
|
$
|
30,688
|
|
|
70.3
|
%
|
Direct Single Premiums
|
14,119
|
|
|
31.2
|
|
|
13,687
|
|
|
30.7
|
|
|
12,975
|
|
|
29.7
|
|
|||
Total Primary RIF
|
$
|
45,324
|
|
|
100.0
|
%
|
|
$
|
44,627
|
|
|
100.0
|
%
|
|
$
|
43,663
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net Single Premiums
(1)
|
$
|
9,885
|
|
|
24.7
|
%
|
|
$
|
12,846
|
|
|
30.2
|
%
|
|
$
|
12,077
|
|
|
29.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Primary RIF by Risk Grade
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prime
|
$
|
43,076
|
|
|
95.0
|
%
|
|
$
|
42,170
|
|
|
94.5
|
%
|
|
$
|
40,963
|
|
|
93.8
|
%
|
Alt-A
|
1,302
|
|
|
2.9
|
|
|
1,427
|
|
|
3.2
|
|
|
1,588
|
|
|
3.6
|
|
|||
A minus and below
|
946
|
|
|
2.1
|
|
|
1,030
|
|
|
2.3
|
|
|
1,112
|
|
|
2.6
|
|
|||
Total Primary RIF
|
$
|
45,324
|
|
|
100.0
|
%
|
|
$
|
44,627
|
|
|
100.0
|
%
|
|
$
|
43,663
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the dollar amount and percentage, respectively, of Single Premium RIF, after giving effect to all reinsurance ceded.
|
($ in millions)
|
June 30,
2016 |
|
December 31,
2015 |
|
June 30,
2015 |
|||||||||||||||
Total primary RIF by FICO score
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
>=740
|
$
|
25,897
|
|
|
57.1
|
%
|
|
$
|
25,467
|
|
|
57.1
|
%
|
|
$
|
24,778
|
|
|
56.7
|
%
|
680-739
|
13,941
|
|
|
30.8
|
|
|
13,543
|
|
|
30.3
|
|
|
13,131
|
|
|
30.1
|
|
|||
620-679
|
4,739
|
|
|
10.5
|
|
|
4,806
|
|
|
10.8
|
|
|
4,880
|
|
|
11.2
|
|
|||
<=619
|
747
|
|
|
1.6
|
|
|
811
|
|
|
1.8
|
|
|
874
|
|
|
2.0
|
|
|||
Total Primary RIF
|
$
|
45,324
|
|
|
100.0
|
%
|
|
$
|
44,627
|
|
|
100.0
|
%
|
|
$
|
43,663
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Primary RIF on defaulted loans
(1)
|
$
|
1,398
|
|
|
|
|
$
|
1,625
|
|
|
|
|
$
|
1,753
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excludes risk related to loans subject to the Freddie Mac Agreement.
|
|
($ in millions)
|
June 30,
2016 |
|
December 31,
2015 |
|
June 30,
2015 |
|||||||||||||||
Total primary RIF by LTV
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
95.01% and above
|
$
|
3,211
|
|
|
7.1
|
%
|
|
$
|
3,249
|
|
|
7.3
|
%
|
|
$
|
3,340
|
|
|
7.6
|
%
|
90.01% to 95.00%
|
23,397
|
|
|
51.6
|
|
|
22,479
|
|
|
50.4
|
|
|
21,398
|
|
|
49.0
|
|
|||
85.01% to 90.00%
|
15,107
|
|
|
33.3
|
|
|
15,184
|
|
|
34.0
|
|
|
15,103
|
|
|
34.6
|
|
|||
85.00% and below
|
3,609
|
|
|
8.0
|
|
|
3,715
|
|
|
8.3
|
|
|
3,822
|
|
|
8.8
|
|
|||
Total primary RIF
|
$
|
45,324
|
|
|
100.0
|
%
|
|
$
|
44,627
|
|
|
100.0
|
%
|
|
$
|
43,663
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Percentage of primary RIF
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Refinances
|
22
|
%
|
|
|
|
23
|
%
|
|
|
|
25
|
%
|
|
|
||||||
Loan Type:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Fixed
|
96.5
|
%
|
|
|
|
96.1
|
%
|
|
|
|
95.7
|
%
|
|
|
||||||
Adjustable rate mortgages (fully indexed)
(1)
|
2.5
|
|
|
|
|
2.7
|
|
|
|
|
2.9
|
|
|
|
||||||
Mortgages with interest only or potential negative amortization
|
1.0
|
|
|
|
|
1.2
|
|
|
|
|
1.4
|
|
|
|
||||||
Total
|
100.0
|
%
|
|
|
|
100.0
|
%
|
|
|
|
100.0
|
%
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total primary RIF by policy year
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2005 and prior
|
$
|
2,511
|
|
|
5.5
|
%
|
|
$
|
2,823
|
|
|
6.3
|
%
|
|
$
|
3,189
|
|
|
7.3
|
%
|
2006
|
1,517
|
|
|
3.4
|
|
|
1,666
|
|
|
3.7
|
|
|
1,841
|
|
|
4.2
|
|
|||
2007
|
3,589
|
|
|
7.9
|
|
|
3,891
|
|
|
8.7
|
|
|
4,188
|
|
|
9.6
|
|
|||
2008
|
2,538
|
|
|
5.6
|
|
|
2,798
|
|
|
6.3
|
|
|
3,065
|
|
|
7.0
|
|
|||
2009
|
608
|
|
|
1.3
|
|
|
736
|
|
|
1.7
|
|
|
884
|
|
|
2.0
|
|
|||
2010
|
519
|
|
|
1.2
|
|
|
616
|
|
|
1.4
|
|
|
741
|
|
|
1.7
|
|
|||
2011
|
1,112
|
|
|
2.5
|
|
|
1,294
|
|
|
2.9
|
|
|
1,495
|
|
|
3.5
|
|
|||
2012
|
4,410
|
|
|
9.7
|
|
|
5,010
|
|
|
11.2
|
|
|
5,688
|
|
|
13.0
|
|
|||
2013
|
7,028
|
|
|
15.5
|
|
|
8,056
|
|
|
18.1
|
|
|
9,071
|
|
|
20.8
|
|
|||
2014
|
6,768
|
|
|
14.9
|
|
|
7,646
|
|
|
17.1
|
|
|
8,291
|
|
|
19.0
|
|
|||
2015
|
9,497
|
|
|
21.0
|
|
|
10,091
|
|
|
22.6
|
|
|
5,210
|
|
|
11.9
|
|
|||
2016
|
5,227
|
|
|
11.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total primary RIF
|
$
|
45,324
|
|
|
100.0
|
%
|
|
$
|
44,627
|
|
|
100.0
|
%
|
|
$
|
43,663
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
“Fully indexed” refers to loans where payment adjustments are equal to mortgage-rate adjustments.
|
|
•
|
A decrease to net premiums earned of
$13.1 million
, net of accrued profit commission;
|
•
|
A decrease to operating expenses of
$6.5 million
, related to the ceding commission;
|
•
|
A decrease to provision for losses and amortization of deferred acquisition costs totaling
$1.2 million
; and
|
•
|
A net decrease to pretax income from continuing operations (and to adjusted pretax operating income) of
$5.4 million
.
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Initial and Second QSR Transactions
|
|
|
|
|
|
|
|
||||
% of total direct premiums written
|
2.9
|
%
|
|
1.7
|
%
|
|
3.2
|
%
|
|
2.9
|
%
|
% of total direct premiums earned
|
4.5
|
%
|
|
3.8
|
%
|
|
4.6
|
%
|
|
4.9
|
%
|
|
|
|
|
|
|
|
|
||||
Single Premium QSR Transaction
|
|
|
|
|
|
|
|
||||
% of total direct premiums written
|
4.6
|
%
|
|
—
|
%
|
|
43.1
|
%
|
|
—
|
%
|
% of total direct premiums earned
|
2.9
|
%
|
|
—
|
%
|
|
2.7
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
||||
First-Lien Captives
|
|
|
|
|
|
|
|
||||
% of total direct premiums written
|
0.5
|
%
|
|
1.0
|
%
|
|
0.7
|
%
|
|
1.0
|
%
|
% of total direct premiums earned
|
0.5
|
%
|
|
1.1
|
%
|
|
0.7
|
%
|
|
1.1
|
%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Current year defaults
(1)
|
$
|
44.8
|
|
|
$
|
53.7
|
|
|
$
|
101.0
|
|
|
$
|
134.1
|
|
Prior year defaults
|
5.1
|
|
|
(19.8
|
)
|
|
(8.4
|
)
|
|
(55.2
|
)
|
||||
Second-lien premium deficiency reserve and other
|
0.2
|
|
|
(2.3
|
)
|
|
0.8
|
|
|
(1.4
|
)
|
||||
Provision for losses
|
$
|
50.1
|
|
|
$
|
31.6
|
|
|
$
|
93.4
|
|
|
$
|
77.5
|
|
|
|
|
|
|
|
|
|
(1)
|
Related to underlying defaulted loans with a most recent default notice in the year indicated. For example, if a loan had defaulted in a prior year, but then subsequently cured and later re-defaulted in the current year, the default would be considered a current year default.
|
|
|
June 30,
2016 |
|
December 31,
2015 |
|
June 30,
2015 |
|||
Default Statistics—Primary Insurance:
|
|
|
|
|
|
|||
Total Primary Insurance
|
|
|
|
|
|
|||
Prime
|
|
|
|
|
|
|||
Number of insured loans
|
826,511
|
|
|
816,797
|
|
|
802,719
|
|
Number of loans in default
|
19,025
|
|
|
22,223
|
|
|
23,237
|
|
Percentage of loans in default
|
2.30
|
%
|
|
2.72
|
%
|
|
2.89
|
%
|
Alt-A
|
|
|
|
|
|
|||
Number of insured loans
|
29,445
|
|
|
32,411
|
|
|
35,927
|
|
Number of loans in default
|
4,820
|
|
|
5,813
|
|
|
6,949
|
|
Percentage of loans in default
|
16.37
|
%
|
|
17.94
|
%
|
|
19.34
|
%
|
A minus and below
|
|
|
|
|
|
|||
Number of insured loans
|
29,450
|
|
|
31,902
|
|
|
34,224
|
|
Number of loans in default
|
5,982
|
|
|
7,267
|
|
|
7,490
|
|
Percentage of loans in default
|
20.31
|
%
|
|
22.78
|
%
|
|
21.89
|
%
|
Total Primary Insurance
|
|
|
|
|
|
|||
Number of insured loans
(1)
|
885,406
|
|
|
881,110
|
|
|
872,870
|
|
Number of loans in default
(2)
|
29,827
|
|
|
35,303
|
|
|
37,676
|
|
Percentage of loans in default
|
3.37
|
%
|
|
4.01
|
%
|
|
4.32
|
%
|
(1)
|
Includes 6,690; 7,353; and 8,041 insured loans subject to the Freddie Mac Agreement at
June 30, 2016
,
December 31, 2015
and
June 30, 2015
, respectively.
|
(2)
|
Excludes 2,180; 2,821; and 3,246 loans that are in default at
June 30, 2016
,
December 31, 2015
and
June 30, 2015
, respectively, subject to the Freddie Mac Agreement, and for which we no longer have claims exposure.
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Beginning default inventory
|
30,869
|
|
|
40,440
|
|
|
35,303
|
|
|
45,319
|
|
Plus: New defaults
|
9,544
|
|
|
10,006
|
|
|
19,115
|
|
|
20,259
|
|
Less: Cures
|
8,750
|
|
|
9,591
|
|
|
20,327
|
|
|
21,180
|
|
Less: Claims paid
(1) (2)
|
1,797
|
|
|
3,891
|
|
|
4,285
|
|
|
7,823
|
|
Less: Rescissions and Claim Denials, net of (Reinstatements)
(3)
(4)
|
39
|
|
|
10
|
|
|
(21
|
)
|
|
7
|
|
Less: Rescissions and Claim Denials, net of (Reinstatements), related to the BofA Settlement Agreement
(4)
|
—
|
|
|
(722
|
)
|
|
—
|
|
|
(1,108
|
)
|
Ending default inventory
|
29,827
|
|
|
37,676
|
|
|
29,827
|
|
|
37,676
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes those charged to a deductible or captive.
|
(2)
|
Includes 1,315 and 2,790 claim payments related to the BofA Settlement Agreement for the
three and six months ended June 30, 2015
, respectively.
|
(3)
|
Net of any previous Rescissions and Claim Denials that were reinstated during the period. Such reinstated Rescissions and Claim Denials may ultimately result in a paid claim.
|
(4)
|
Includes Rescissions, Claim Denials and Reinstatements on the population of loans subject to the BofA Settlement Agreement. Rescissions and Claim Denials, net of (Reinstatements), related to the BofA Settlement Agreement prior to the February 1, 2015 implementation date represent such activities on loans that subsequently became subject to the BofA Settlement Agreement.
|
|
|
June 30, 2016
|
|||||||||||||||||
|
Total
|
|
Foreclosure Stage Defaulted Loans
|
|
Cure % During the 2nd Quarter
|
|
Reserve for Losses
|
|
% of Reserve
|
|||||||||
($ in thousands)
|
#
|
|
%
|
|
#
|
|
%
|
|
$
|
|
%
|
|||||||
Missed payments:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Three payments or less
|
8,917
|
|
|
29.9
|
%
|
|
153
|
|
|
32.2
|
%
|
|
$
|
94,075
|
|
|
13.2
|
%
|
Four to eleven payments
|
7,272
|
|
|
24.4
|
|
|
543
|
|
|
20.0
|
|
|
121,827
|
|
|
17.1
|
|
|
Twelve payments or more
|
11,882
|
|
|
39.8
|
|
|
3,098
|
|
|
6.4
|
|
|
410,242
|
|
|
57.7
|
|
|
Pending claims
|
1,756
|
|
|
5.9
|
|
|
N/A
|
|
|
1.8
|
|
|
85,466
|
|
|
12.0
|
|
|
Total
|
29,827
|
|
|
100.0
|
%
|
|
3,794
|
|
|
|
|
711,610
|
|
|
100.0
|
%
|
||
IBNR and other
|
|
|
|
|
|
|
|
|
74,639
|
|
|
|
||||||
LAE
|
|
|
|
|
|
|
|
|
22,389
|
|
|
|
||||||
Total primary reserve
|
|
|
|
|
|
|
|
|
$
|
808,638
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
||||
Key Reserve Assumptions
|
||||
Gross Default to Claim Rate %
|
|
Net Default to Claim Rate %
|
|
Claim Severity %
(2)
|
49%
|
|
46%
|
|
102%
|
|
December 31, 2015
|
|||||||||||||||||
|
Total
|
|
Foreclosure Stage Defaulted Loans
|
|
Cure % During the 4th Quarter
|
|
Reserve for Losses
|
|
% of Reserve
|
|||||||||
($ in thousands)
|
#
|
|
%
|
|
#
|
|
%
|
|
$
|
|
%
|
|||||||
Missed payments:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Three payments or less
|
10,742
|
|
|
30.4
|
%
|
|
187
|
|
|
29.0
|
%
|
|
$
|
107,632
|
|
|
13.1
|
%
|
Four to eleven payments
|
8,481
|
|
|
24.0
|
|
|
541
|
|
|
16.2
|
|
|
127,183
|
|
|
15.5
|
|
|
Twelve payments or more
|
13,731
|
|
|
38.9
|
|
|
3,160
|
|
|
4.2
|
|
|
473,440
|
|
|
57.6
|
|
|
Pending claims
|
2,349
|
|
|
6.7
|
|
|
N/A
|
|
|
1.5
|
|
|
113,570
|
|
|
13.8
|
|
|
Total
|
35,303
|
|
|
100.0
|
%
|
|
3,888
|
|
|
|
|
821,825
|
|
|
100.0
|
%
|
||
IBNR and other
|
|
|
|
|
|
|
|
|
83,066
|
|
|
|
||||||
LAE
|
|
|
|
|
|
|
|
|
26,108
|
|
|
|
||||||
Total primary reserve
|
|
|
|
|
|
|
|
|
$
|
930,999
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
||||
Key Reserve Assumptions
|
||||
Gross Default to Claim Rate %
|
|
Net Default to Claim Rate %
|
|
Claim Severity %
(2)
|
48%
|
|
46%
|
|
101%
|
(1)
|
A total of 77% of new notices of default are from our Legacy Portfolio.
|
(2)
|
Factors that impact the severity of a claim include, but are not limited to: the size of the loan; the amount of mortgage insurance coverage placed on the loan; the amount of time between default and claim during which we are expected to cover interest (capped at two years under our Prior Master Policy and capped at three years under our 2014 Master Policy) and certain expenses; and the impact of certain loss management activities with respect to the loan.
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net claims paid
(1)
:
|
|
|
|
|
|
|
|
||||||||
Prime
|
$
|
56,036
|
|
|
$
|
83,489
|
|
|
$
|
130,468
|
|
|
$
|
159,675
|
|
Alt-A
|
18,349
|
|
|
23,260
|
|
|
47,278
|
|
|
43,259
|
|
||||
A minus and below
|
12,315
|
|
|
14,965
|
|
|
25,511
|
|
|
30,106
|
|
||||
Total primary claims paid
|
86,700
|
|
|
121,714
|
|
|
203,257
|
|
|
233,040
|
|
||||
Pool
|
5,451
|
|
|
10,798
|
|
|
12,840
|
|
|
19,672
|
|
||||
Second-lien and other
|
(231
|
)
|
|
(53
|
)
|
|
114
|
|
|
(164
|
)
|
||||
Subtotal
|
91,920
|
|
|
132,459
|
|
|
216,211
|
|
|
252,548
|
|
||||
Impact of captive terminations
|
(2,619
|
)
|
|
—
|
|
|
(2,739
|
)
|
|
(12,000
|
)
|
||||
Impact of settlements
(2)
|
1,400
|
|
|
79,557
|
|
|
4,900
|
|
|
178,563
|
|
||||
Total net claims paid
|
$
|
90,701
|
|
|
$
|
212,016
|
|
|
$
|
218,372
|
|
|
$
|
419,111
|
|
|
|
|
|
|
|
|
|
||||||||
Average net claim paid
(3)
:
|
|
|
|
|
|
|
|
||||||||
Prime
|
$
|
48.6
|
|
|
$
|
48.1
|
|
|
$
|
48.3
|
|
|
$
|
46.3
|
|
Alt-A
|
63.5
|
|
|
59.5
|
|
|
63.5
|
|
|
56.8
|
|
||||
A minus and below
|
39.9
|
|
|
40.1
|
|
|
38.4
|
|
|
38.4
|
|
||||
Total average net primary claim paid
|
49.5
|
|
|
48.7
|
|
|
49.4
|
|
|
46.7
|
|
||||
Pool
|
58.0
|
|
|
69.7
|
|
|
55.1
|
|
|
63.3
|
|
||||
Total average net claim paid
|
$
|
49.6
|
|
|
$
|
49.6
|
|
|
$
|
49.4
|
|
|
$
|
47.4
|
|
|
|
|
|
|
|
|
|
||||||||
Average direct primary claim paid
(3) (4)
|
$
|
49.9
|
|
|
$
|
49.6
|
|
|
$
|
50.0
|
|
|
$
|
47.6
|
|
Average total direct claim paid
(3) (4)
|
$
|
50.0
|
|
|
$
|
50.4
|
|
|
$
|
49.9
|
|
|
$
|
48.3
|
|
(1)
|
Net of reinsurance recoveries.
|
(2)
|
For 2015, includes the impact of the BofA Settlement Agreement.
|
(3)
|
Calculated without giving effect to the impact of the termination of captive transactions and settlements.
|
(4)
|
Before reinsurance recoveries.
|
|
|
|
|
|
|
$ Change
|
|
|
|
|
|
$ Change
|
||||||||||||
|
Three Months Ended
June 30, 2016 |
|
Favorable (Unfavorable)
|
|
Six Months Ended
June 30, |
|
Favorable (Unfavorable)
|
||||||||||||||||
($ in millions)
|
2016
|
|
2015
|
|
2016 vs. 2015
|
|
2016
|
|
2015
|
|
2016 vs. 2015
|
||||||||||||
Adjusted pretax operating income (loss)
(1)
|
$
|
(6.0
|
)
|
|
$
|
1.8
|
|
|
$
|
(7.8
|
)
|
|
$
|
(15.9
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
(15.7
|
)
|
Services revenue
|
39.0
|
|
|
44.6
|
|
|
(5.6
|
)
|
|
71.2
|
|
|
76.1
|
|
|
(4.9
|
)
|
||||||
Direct cost of services
|
25.2
|
|
|
25.5
|
|
|
0.3
|
|
|
47.3
|
|
|
44.7
|
|
|
(2.6
|
)
|
||||||
Gross profit on services
|
13.8
|
|
|
19.1
|
|
|
(5.3
|
)
|
|
23.9
|
|
|
31.4
|
|
|
(7.5
|
)
|
||||||
Other operating expenses
|
15.3
|
|
|
12.8
|
|
|
(2.5
|
)
|
|
31.0
|
|
|
22.7
|
|
|
(8.3
|
)
|
||||||
Interest expense
|
4.4
|
|
|
4.4
|
|
|
—
|
|
|
8.8
|
|
|
8.9
|
|
|
0.1
|
|
(1)
|
Our senior management uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of each of the Company’s business segments.
|
|
|
•
|
During the first six months of 2016, Radian Group entered into privately negotiated agreements to purchase, for cash or a combination of cash and shares of Radian Group common stock, aggregate principal amounts of
$30.1 million
and
$300.8 million
, respectively, of our outstanding Convertible Senior Notes due 2017 and 2019. Radian Group funded the purchases with
$206.9 million
in cash (plus accrued and unpaid interest due on the purchased notes) and by issuing to the sellers
17.0 million
shares of Radian Group common stock. Following the purchases described above,
$22.2 million
and
$89.2 million
, respectively, of the principal amounts of the Convertible Senior Notes due 2017 and 2019 remained outstanding as of
June 30, 2016
. See Note 11 of Notes to Unaudited Condensed Consolidated Financial Statements for further information.
|
•
|
In March 2016, Radian Group issued
$350 million
aggregate principal amount of Senior Notes due 2021 and received net proceeds of
$343.5 million
. See Note 11 of Notes to Unaudited Condensed Consolidated Financial Statements for further information.
|
|
CAPITAL AND DEBT MATURITY MANAGEMENT
|
• Issued $350 million aggregate principal amount of Senior Notes due 2021 for net proceeds of $343.5 million;
|
• Purchased aggregate principal amounts of $30.1 million and $300.8 million, respectively, of our outstanding Convertible Senior Notes due 2017 and 2019, for a combination of $206.9 million in cash and 17.0 million shares of Radian Group common stock;
|
• Terminated the portion of the capped call transactions related to the purchased Convertible Senior Notes due 2017, and received consideration of 0.2 million shares of Radian Group common stock;
|
• Completed the share repurchase program announced in January 2016, by purchasing an aggregate of 9.4 million shares of Radian Group common stock for $100.2 million, including commissions; and
|
• Entered into the Single Premium QSR Transaction, which had the effect of increasing the amount by which Radian Guaranty’s Available Assets exceed its Minimum Required Assets under the PMIERs Financial Requirements.
|
•
|
the early redemption of the remaining
$195.5 million
aggregate principal amount of our 9.000% Senior Notes due 2017; and
|
•
|
a new share repurchase program of up to
$125 million
of Radian Group common stock.
|
|
|
|
(1)
|
the repayment of our outstanding long-term debt, consisting of:
|
•
|
$22.2 million
principal amount of convertible debt due in November 2017, which must be settled in cash, plus, any related conversion premium which may, at our option, be settled in cash, common shares or a combination thereof;
|
•
|
$89.2 million
principal amount of convertible debt due in March 2019 for which the principal amount, if converted, and any conversion premium may, at our option, be settled in cash, common shares or a combination thereof;
|
•
|
$300 million
principal amount of outstanding debt due in June 2019;
|
•
|
$350 million
principal amount of outstanding debt due in June 2020;
|
•
|
$350 million
principal amount of outstanding debt due in March 2021; and
|
(2)
|
potential additional capital contributions to our subsidiaries.
|
|
(In thousands)
|
Six Months Ended
June 30, |
||||||
2016
|
|
2015
|
|||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
154,498
|
|
|
$
|
(68,563
|
)
|
Investing activities
|
(180,054
|
)
|
|
61,350
|
|
||
Financing activities
|
33,999
|
|
|
27,651
|
|
||
Effect of exchange rate changes on cash
|
(279
|
)
|
|
57
|
|
||
Increase (decrease) in cash
|
$
|
8,164
|
|
|
$
|
20,495
|
|
|
|
Moody’s
(1)
|
|
S&P
(2)
|
Radian Group
|
Ba3
|
|
BB-
|
Radian Guaranty
|
Baa3
|
|
BBB-
|
(1)
|
Moody’s outlook for Radian Group and Radian Guaranty is currently Stable.
|
(2)
|
S&P’s outlook for Radian Group and Radian Guaranty is currently Positive.
|
|
Radian Group Inc.
|
|
|
August 5, 2016
|
/s/ J. F
RANKLIN
H
ALL
|
|
J. Franklin Hall
|
|
Executive Vice President, Chief Financial Officer
|
|
|
|
/s/ C
ATHERINE
M. J
ACKSON
|
|
Catherine M. Jackson
|
|
Senior Vice President, Controller
|
1 Year Radian Chart |
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