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Share Name | Share Symbol | Market | Type |
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Radian Group Inc | NYSE:RDN | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 31.31 | 0 | 01:00:00 |
-- Reports net income of $50 million or $0.22 per diluted share --
-- Net income from continuing operations of $45 million or $0.20 per diluted share --
-- Adjusted diluted net operating income of $0.40 per share, up 74% from prior-year period --
Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended June 30, 2015, of $50.0 million, or $0.22 per diluted share, which included the following pre-tax items: a loss of $91.9 million on induced conversion and debt extinguishment from recent actions to strengthen the company’s capital structure, and net gains of $28.4 million on investments and other financial instruments. This compares to net income for the quarter ended June 30, 2014, of $174.8 million, or $0.78 per diluted share, which included pre-tax net gains of $25.3 million on investments and other financial instruments, and $71.3 million of net income from discontinued operations. The company also reported an income tax provision of $34.8 million for the quarter ended June 30, 2015, compared to an income tax benefit of $10.7 million for the quarter ended June 30, 2014.
Adjusted pretax operating income for the quarter ended June 30, 2015, was $147.3 million, compared to adjusted pretax operating income for the quarter ended June 30, 2014, of $74.1 million. Adjusted diluted net operating income per share for the quarter ended June 30, 2015, was $0.40. See “Non-GAAP Financial Measures” below.
Key Financial Highlights (dollars in millions, except per share data)
Quarter Ended Quarter Ended Percent June 30, 2015 June 30, 2014 Change Net income from continuing operations $45.2 $103.5 (56%) Diluted net income per share from continuing operations $0.20 $0.47 (57%) Adjusted pretax operating income $147.3 $74.1 99% Adjusted diluted net operating income per share * $0.40 $0.23 74% Revenues $330.4 $247.4 34% Book value per share $11.28 $8.29 36%* Adjusted diluted net operating income per share is calculated using the company’s statutory tax rate.
“Radian delivered strong financial results in the second quarter, driven by positive trends and solid performance for our two business segments,” said Radian’s Chief Executive Officer S.A. Ibrahim. “We also took actions in the quarter to simplify and strengthen Radian’s capital structure in a way that will reduce our overall cost of capital, improve the maturity profile of our debt and focus on long-term growth.”
SECOND QUARTER HIGHLIGHTS AND RECENT EVENTS
Mortgage Insurance
Mortgage and Real Estate Services
Expenses and Discontinued Operations
CAPITAL AND LIQUIDITY UPDATE
Radian Group maintains approximately $735 million of currently available liquidity.
As noted above, these actions resulted in a loss on induced conversion and debt extinguishment of $91.9 million, an expected reduction in the company’s annual interest expense of approximately $16 million, and an expected increase in fully diluted share count of approximately 2.8 million shares. Additional details related to these capital actions may be found on Slide 11 of the second quarter presentation slides.
CONFERENCE CALL
Radian will discuss second quarter financial results in a conference call today, Wednesday, July 22, 2015, at 10:00 a.m. Eastern time. The conference call will be broadcast live over the Internet at http://www.radian.biz/page?name=Webcasts or at www.radian.biz. The call may also be accessed by dialing 800.230.1951 inside the U.S., or 612.332.0107 for international callers, using passcode 364879 or by referencing Radian.
A replay of the webcast will be available on the Radian website approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available approximately two and a half hours after the call ends for a period of two weeks, using the following dial-in numbers and passcode: 800.475.6701 inside the U.S., or 320.365.3844 for international callers, passcode 364879.
In addition to the information provided in the company’s earnings news release, other statistical and financial information, which is expected to be referred to during the conference call, will be available on Radian's website under Investors >Quarterly Results, or by clicking on http://www.radian.biz/page?name=QuarterlyResults.
NON-GAAP FINANCIAL MEASURES
Radian believes that adjusted pretax operating income and adjusted diluted net operating income per share (non-GAAP measures) facilitate evaluation of the company’s fundamental financial performance and provide relevant and meaningful information to investors about the ongoing operating results of the company. On a consolidated basis, these measures are not recognized in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be viewed as alternatives to GAAP measures of performance. The measures described below have been established in order to increase transparency for the purpose of evaluating the company’s core operating trends and enabling more meaningful comparisons with Radian’s competitors.
Adjusted pretax operating income is defined as earnings excluding the impact of certain items that are not viewed as part of the operating performance of the company’s primary activities, or not expected to result in an economic impact equal to the amount reflected in pretax income (loss) from continuing operations. Adjusted diluted net operating income per share represents a diluted net income per share calculation using as its basis adjusted pretax operating income, net of taxes at the company’s statutory tax rate for the period. See press release Exhibit F or Radian’s website for a description of these items, as well as Exhibit G for reconciliations to consolidated GAAP measures.
ABOUT RADIAN
Radian Group Inc. (NYSE: RDN), headquartered in Philadelphia, provides private mortgage insurance, risk management products and real estate services to financial institutions. Radian offers products and services through two business segments:
Additional information may be found at www.radian.biz.
FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS
(Unaudited)
For trend information on all schedules, refer to Radian’s quarterly financial statistics at http://www.radian.biz/page?name=FinancialReportsCorporate.
Exhibit A: Condensed Consolidated Statements of Operations Trend Schedule Exhibit B: Net Income Per Share Trend Schedule Exhibit C: Condensed Consolidated Balance Sheets Exhibit D: Discontinued Operations Exhibit E: Segment Information Exhibit F: Definition of Consolidated Non-GAAP Financial Measure Exhibit G: Consolidated Non-GAAP Financial Measure Reconciliations Exhibit H:Mortgage Insurance Supplemental Information New Insurance Written
Exhibit I:Mortgage Insurance Supplemental Information Insurance in Force and Risk in Force by Product, Statutory Capital Ratios
Exhibit J:Mortgage Insurance Supplemental Information Risk in Force by FICO, LTV and Policy Year
Exhibit K:Mortgage Insurance Supplemental Information Claims and Reserves
Exhibit L:Mortgage Insurance Supplemental Information Default Statistics
Exhibit M:Mortgage Insurance Supplemental Information Captives, QSR and Persistency
Exhibit N: Mortgage and Real Estate Services Supplemental InformationRadian Group Inc. and Subsidiaries Condensed Consolidated Statements of Operations Trend Schedule Exhibit A 2015 2014
(In thousands, except per share amounts)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Revenues: Net premiums earned - insurance $ 237,437 $ 224,595 $ 224,293 $ 217,827 $ 203,646 Services revenue 43,503 30,630 34,450 42,243 — Net investment income 19,285 17,328 16,531 17,143 16,663 Net gains (losses) on investments and other financial instruments 28,448 16,779 17,983 (6,294 ) 25,332 Other income 1,743 1,331 1,793 1,162 1,739 Total revenues 330,416 290,663 295,050 272,081 247,380 Expenses: Provision for losses 32,560 45,028 82,867 48,942 64,648 Policy acquisition costs 6,963 7,750 6,443 4,240 6,746 Direct cost of services 23,520 19,253 19,709 23,896 — Other operating expenses 67,731 53,774 85,800 51,225 60,751 Interest expense 24,501 24,385 24,200 23,989 22,348 Loss on induced conversion and debt extinguishment 91,876 — — — — Amortization and impairment of intangible assets 3,281 3,023 5,354 3,294 — Total expenses 250,432 153,213 224,373 155,586 154,493 Pretax income from continuing operations 79,984 137,450 70,677 116,495 92,887 Income tax provision (benefit) 34,791 45,723 (807,349 ) (15,536 ) (10,650 ) Net income from continuing operations 45,193 91,727 878,026 132,031 103,537 Income (loss) from discontinued operations, net of tax 4,855 530 (449,691 ) 21,559 71,296 Net income $ 50,048 $ 92,257 $ 428,335 $ 153,590 $ 174,833 Diluted net income per share: Net income from continuing operations $ 0.20 $ 0.39 $ 3.63 $ 0.58 $ 0.47 Income (loss) from discontinued operations, net of tax 0.02 — (1.85 ) 0.09 0.31 Net income $ 0.22 $ 0.39 $ 1.78 $ 0.67 $ 0.78 Selected Mortgage Insurance Key Ratios Loss ratio (1) 13.3 % 20.4 % 36.9 % 22.5 % 31.7 % Expense ratio - NPE basis (1) 25.8 % 23.0 % 36.9 % 21.3 % 29.5 % Expense ratio - NPW basis (2) 24.4 % 21.3 % 33.8 % 18.9 % 27.1 % (1) Calculated on a GAAP basis using net premiums earned (“NPE”). (2) Calculated on a GAAP basis using net premiums written (“NPW”).On April 1, 2015, Radian Guaranty completed the previously disclosed sale of 100% of the issued and outstanding shares of Radian Asset Assurance to Assured, pursuant to the Radian Asset Assurance Stock Purchase Agreement dated as of December 22, 2014. As a result, the operating results of Radian Asset Assurance are classified as discontinued operations for all periods presented in our condensed consolidated statements of operations. See Exhibit D for additional information on discontinued operations.
Radian Group Inc. and Subsidiaries Net Income Per Share Trend Schedule Exhibit B The calculation of basic and diluted net income per share was as follows: 2015 2014(In thousands, except per share amounts)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Net income from continuing operations: Net income from continuing operations—basic $ 45,193 $ 91,727 $ 878,026 $ 132,031 $ 103,537 Adjustment for dilutive Convertible Senior Notes due 2019, net of tax (1) 3,707 3,673 3,641 5,552 5,503 Net income from continuing operations—diluted $ 48,900 $ 95,400 $ 881,667 $ 137,583 $ 109,040 Net income: Net income from continuing operations—basic $ 45,193 $ 91,727 $ 878,026 $ 132,031 $ 103,537 Income (loss) from discontinued operations, net of tax 4,855 530 (449,691 ) 21,559 71,296 Net income—basic 50,048 92,257 428,335 153,590 174,833 Adjustment for dilutive Convertible Senior Notes due 2019, net of tax (1) 3,707 3,673 3,641 5,552 5,503 Net income—diluted $ 53,755 $ 95,930 $ 431,976 $ 159,142 $ 180,336 Average common shares outstanding—basic 193,112 191,224 191,053 191,050 182,583 Dilutive effect of Convertible Senior Notes due 2017 12,438 10,886 10,590 6,342 7,599 Dilutive effect of Convertible Senior Notes due 2019 37,736 37,736 37,736 37,736 37,736 Dilutive effect of stock-based compensation arrangements (2) 3,364 3,202 3,422 2,939 2,861 Adjusted average common shares outstanding—diluted 246,650 243,048 242,801 238,067 230,779Net income per share:
Basic: Net income from continuing operations $ 0.23 $ 0.48 $ 4.60 $ 0.69 $ 0.57 Income (loss) from discontinued operations, net of tax 0.03 — (2.36 ) 0.11 0.39 Net income $ 0.26 $ 0.48 $ 2.24 $ 0.80 $ 0.96 Diluted: Net income from continuing operations $ 0.20 $ 0.39 $ 3.63 $ 0.58 $ 0.47 Income (loss) from discontinued operations, net of tax 0.02 — (1.85 ) 0.09 0.31 Net income $ 0.22 $ 0.39 $ 1.78 $ 0.67 $ 0.78(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 were not included in the calculation of diluted net income per share because they were anti-dilutive:
2015 2014(In thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Shares of common stock equivalents 264 540 542 557 1,484Radian Group Inc. and Subsidiaries Condensed Consolidated Balance Sheets Exhibit C June 30, March 31, December 31, September 30, June 30,
(In thousands, except per share data)
2015 2015 2014 2014 2014 Assets: Investments $ 4,309,148 $ 3,621,646 $ 3,629,299 $ 3,529,310 $ 3,351,792 Cash 51,381 57,204 30,465 30,491 42,379 Restricted cash 12,633 14,220 14,031 16,509 13,361 Accounts and notes receivable 72,093 64,405 85,792 69,029 52,090 Deferred income taxes, net 651,238 649,996 700,201 — — Goodwill and other intangible assets, net 290,640 293,798 288,240 293,632 296,948 Other assets 349,371 340,276 357,864 364,665 366,752 Assets held for sale — 1,755,873 1,736,444 1,637,233 1,789,401 Total assets $ 5,736,504 $ 6,797,418 $ 6,842,336 $ 5,940,869 $ 5,912,723 Liabilities and stockholders’ equity: Unearned premiums $ 665,947 $ 657,555 $ 644,504 $ 625,269 $ 597,860 Reserve for losses and loss adjustment expenses 1,204,792 1,384,714 1,560,032 1,591,150 1,717,314 Long-term debt 1,224,892 1,202,535 1,192,299 1,182,247 1,172,569 Other liabilities 278,929 310,642 326,743 314,395 316,796 Liabilities held for sale — 966,078 947,008 493,407 523,937 Total liabilities 3,374,560 4,521,524 4,670,586 4,206,468 4,328,476 Equity component of currently redeemable convertible senior notes 8,546 68,982 74,690 — — Common stock 226 209 209 209 209 Additional paid-in capital 1,816,545 1,648,436 1,638,552 1,706,222 1,707,655 Retained earnings (deficit) 548,161 498,593 406,814 (21,044 ) (174,634 ) Accumulated other comprehensive (loss) income (11,534 ) 59,674 51,485 49,014 51,017 Total common stockholders’ equity 2,353,398 2,206,912 2,097,060 1,734,401 1,584,247 Total liabilities and stockholders’ equity $ 5,736,504 $ 6,797,418 $ 6,842,336 $ 5,940,869 $ 5,912,723 Shares outstanding 208,587 191,416 191,054 191,050 191,014 Book value per share $ 11.28 $ 11.53 $ 10.98 $ 9.08 $ 8.29
Radian Group Inc. and Subsidiaries
Discontinued Operations
Exhibit D
The income from discontinued operations, net of tax consisted of the following components for the periods indicated:
2015(In thousands)
Qtr 2 Qtr 1 Net premiums earned $ — $ 1,007 Net investment income — 9,153 Net gains on investments and other financial instruments 7,818 13,668 Change in fair value of derivative instruments — 2,625 Total revenues 7,818 26,453 Provision for losses — 502 Policy acquisition costs — (191 ) Other operating expense — 4,107 Total expenses — 4,418 Equity in net loss of affiliates — (13 ) Income from operations of businesses held for sale 7,818 22,022 Loss on sale (350 ) (13,930 ) Income tax provision 2,613 7,562 Income from discontinued operations, net of tax $ 4,855 $ 530
Radian Group Inc. and Subsidiaries
Segment Information
Exhibit E (page 1 of 2)
Summarized financial information concerning our operating segments as of and for the periods indicated, is as follows. For a definition of adjusted pretax operating income and reconciliations to consolidated GAAP measures, see Exhibits F and G.
Mortgage Insurance 2015 2014(In thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Net premiums written - insurance $ 251,082 $ 241,908 $ 244,506 $ 245,775 $ 221,947 Increase in unearned premiums (13,645 ) (17,313 ) (20,213 ) (27,948 ) (18,301 ) Net premiums earned - insurance 237,437 224,595 224,293 217,827 203,646 Net investment income (1) 19,285 17,328 16,531 17,143 16,663 Other income (1) 1,743 1,331 1,668 1,037 1,620 Total 258,465 243,254 242,492 236,007 221,929 Provision for losses 31,637 45,851 83,649 48,942 64,648 Change in expected economic loss or recovery for consolidated VIEs — — (16 ) (190 ) 180 Policy acquisition costs 6,963 7,750 6,443 4,240 6,746 Other operating expenses before corporate allocations 41,853 34,050 62,591 33,679 36,356 Total (2) 80,453 87,651 152,667 86,671 107,930 Adjusted pretax operating income before corporate allocations 178,012 155,603 89,825 149,336 113,999 Allocation of corporate operating expenses (1) 12,516 9,758 13,729 8,520 17,021 Allocation of interest expense (1) 20,070 19,953 19,760 19,565 22,348 Adjusted pretax operating income $ 145,426 $ 125,892 $ 56,336 $ 121,251 $ 74,630 Services 2015 2014(In thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Services revenue $ 44,595 $ 31,532 $ 34,466 $ 42,243 $ — Other income — — 891 125 119 Total (2) 44,595 31,532 35,357 42,368 119 Direct cost of services 25,501 19,253 19,709 23,896 — Other operating expenses before corporate allocations 11,522 8,857 8,360 9,054 642 Total 37,023 28,110 28,069 32,950 642 Adjusted pretax operating income (loss) before corporate allocations 7,572 3,422 7,288 9,418 (523 ) Allocation of corporate operating expenses 1,307 981 740 404 — Allocation of interest expense 4,431 4,432 4,440 4,424 — Adjusted pretax operating income (loss) $ 1,834 $ (1,991 ) $ 2,108 $ 4,590 $ (523 )(1)
For periods prior to the quarter ended June 30, 2015, includes certain corporate income and expenses that have been reallocated from our prior financial guaranty segment to the Mortgage Insurance segment and that were not reclassified to discontinued operations.
(2)
Inter-segment information:
2015 2014 Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Inter-segment expense included in Mortgage Insurance segment $ 1,092 $ 902 $ 782 $ — $ — Inter-segment revenue included in Services segment 1,092 902 782 — —Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 2 of 2) At June 30, 2015 Mortgage
(In thousands)
Insurance Services Total Total assets $ 5,384,224 $ 352,280 $ 5,736,504 At December 31, 2014 Mortgage(In thousands)
Insurance Services Total Assets held for sale (1) $ — $ — $ 1,736,444 Total assets 4,769,014 336,878 6,842,336(1) Assets held for sale are not part of the Mortgage Insurance or Services segments.
Radian Group Inc. and Subsidiaries
Definition of Consolidated Non-GAAP Financial Measure
Exhibit F (page 1 of 2)
Use of Non-GAAP Financial Measure
In addition to the traditional GAAP financial measures, we have presented non-GAAP financial measures for the consolidated company, “adjusted pretax operating income (loss)” and “adjusted diluted net operating income (loss) per share,” among our key performance indicators to evaluate our fundamental financial performance. These non-GAAP financial measures align with the way the Company’s business performance is evaluated by both management and the board of directors. These measures have been established in order to increase transparency for the purposes of evaluating our core operating trends and enabling more meaningful comparisons with our peers. Although on a consolidated basis “adjusted pretax operating income (loss)” and “adjusted diluted net operating income (loss) per share” are non-GAAP financial measures, we believe these measures aid in understanding the underlying performance of our operations. Our senior management, including our Chief Executive Officer (the Company’s chief operating decision maker), uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of the Company’s business segments and to allocate resources to the segments.
Adjusted pretax operating income (loss) is defined as GAAP pretax income (loss) from continuing operations excluding the effects of net gains (losses) on investments and other financial instruments, loss on induced conversion and debt extinguishment, acquisition-related expenses, amortization and impairment of intangible assets and net impairment losses recognized in earnings. Adjusted diluted net operating income (loss) per share is calculated by dividing (i) adjusted pretax operating income (loss) attributable to common shareholders, net of taxes computed using the company’s statutory tax rate, by (ii) the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Interest expense on convertible debt, share dilution from convertible debt and the impact of stock-based compensation arrangements have been reflected in the per share calculations consistent with the accounting standard regarding earnings per share, whenever the impact is dilutive.
Although adjusted pretax operating income (loss) excludes certain items that have occurred in the past and are expected to occur in the future, the excluded items represent those that are: (1) not viewed as part of the operating performance of our primary activities; or (2) not expected to result in an economic impact equal to the amount reflected in pretax income (loss) from continuing operations. These adjustments, along with the reasons for their treatment, are described below.
(1) Net gains (losses) on investments and other financial instruments. The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities, our tax and capital profile and overall market cycles. Unrealized investment gains and losses arise primarily from changes in the market value of our investments that are classified as trading. These valuation adjustments may not necessarily result in economic gains or losses.
Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these realized and unrealized gains or losses. We do not view them to be indicative of our fundamental operating activities. Therefore, these items are excluded from our calculation of adjusted pretax operating income (loss). However, we include the change in expected economic loss or recovery associated with our consolidated VIEs, if any, in the calculation of adjusted pretax operating income (loss).
(2) Loss on induced conversion and debt extinguishment. Gains or losses on early extinguishment of debt or losses incurred to induce conversion of convertible debt prior to maturity are discretionary activities that are undertaken in order to take advantage of market opportunities to strengthen our financial position; therefore, these activities are not viewed as part of our operating performance. Such transactions do not reflect expected future operations and do not provide meaningful insight regarding our current or past operating trends. Therefore, these items are excluded from our calculation of adjusted pretax operating income (loss).
(3) Acquisition-related expenses. Acquisition-related expenses represent the costs incurred to effect an acquisition of a business (i.e., a business combination). Because we pursue acquisitions on a strategic and selective basis and not in the ordinary course of our business, we do not view acquisition-related expenses as a consequence of a primary business activity. Therefore, we do not consider these expenses to be part of our operating performance and they are excluded from our calculation of adjusted pretax operating income (loss).
Radian Group Inc. and Subsidiaries
Definition of Consolidated Non-GAAP Financial Measure
Exhibit F (page 2 of 2)
(4) Amortization and impairment of intangible assets. Amortization of intangible assets represents the periodic expense required to amortize the cost of intangible assets over their estimated useful lives. Intangible assets with an indefinite useful life are also periodically reviewed for potential impairment, and impairment adjustments are made whenever appropriate. These charges are not viewed as part of the operating performance of our primary activities and therefore are excluded from our calculation of adjusted pretax operating income (loss).
(5) Net impairment losses recognized in earnings. The recognition of net impairment losses on investments can vary significantly in both size and timing, depending on market credit cycles. We do not view these impairment losses to be indicative of our fundamental operating activities. Therefore, whenever these losses occur, we exclude them from our calculation of adjusted pretax operating income (loss).
See Exhibit G for the reconciliation of our non-GAAP financial measures for the consolidated company, adjusted pretax operating income and adjusted diluted net operating income per share, to the most comparable GAAP measures, pretax income from continuing operations and net income per share from continuing operations, respectively.
Total adjusted pretax operating income (loss) and adjusted diluted net operating income (loss) per share are not measures of total profitability, and therefore should not be viewed as substitutes for GAAP pretax income (loss) from continuing operations or net income (loss) per share from continuing operations. Our definitions of adjusted pretax operating income (loss) and adjusted diluted net operating income (loss) per share may not be comparable to similarly-named measures reported by other companies.
Radian Group Inc. and Subsidiaries Consolidated Non-GAAP Financial Measure ReconciliationsExhibit G (page 1 of 2)
Reconciliation of Adjusted Pretax Operating Income (Loss) to Consolidated Pretax Income from Continuing Operations
2015 2014(In thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Adjusted pretax operating income (loss): Mortgage Insurance (1) $ 145,426 $ 125,892 $ 56,336 $ 121,251 $ 74,630 Services (2) 1,834 (1,991 ) 2,108 4,590 (523 ) Total adjusted pretax operating income 147,260 123,901 58,444 125,841 74,107 Net gains (losses) on investments and other financial instruments (3) 28,448 16,779 17,967 (6,484 ) 25,512 Loss on induced conversion and debt extinguishment (91,876 ) — — — — Acquisition-related expenses (4) (567 ) (207 ) (380 ) 432 (6,732 ) Amortization and impairment of intangible assets (4) (3,281 ) (3,023 ) (5,354 ) (3,294 ) — Consolidated pretax income from continuing operations $ 79,984 $ 137,450 $ 70,677 $ 116,495 $ 92,887(1)
Includes certain corporate income and expenses that have been reallocated from our prior financial guaranty segment to the Mortgage Insurance segment and that were not reclassified to discontinued operations.
(2)
Includes the acquisition of Clayton Holdings, effective June 30, 2014. Also, effective with the fourth quarter of 2014, the Services segment undertook the management responsibilities of certain additional loan servicer surveillance functions previously considered part of the Mortgage Insurance segment. As a result, these activities are now reported in the Services segment for all periods presented.
(3)
This line item includes a de minimis amount of expected economic loss or recovery associated with our previously consolidated VIEs that is included in adjusted pretax operating income above.
(4)
Please see Exhibit F for the definition of this line item.
Radian Group Inc. and Subsidiaries Consolidated Non-GAAP Financial Measure Reconciliations Exhibit G (page 2 of 2)
Reconciliation of Adjusted Diluted Net Operating Income Per Share (1) to Net Income Per Share from Continuing Operations
2015 2014 Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Adjusted diluted net operating income per share $ 0.40 $ 0.35 $ 0.17 $ 0.37 $ 0.23 After tax per share impact: Net gains (losses) on investments and other financial instruments 0.07 0.04 0.05 (0.02 ) 0.08 Loss on induced conversion and debt extinguishment (0.28 ) — — — (0.01 ) Acquisition-related expenses — — — — (0.02 ) Amortization and impairment of intangible assets (0.01 ) (0.01 ) (0.01 ) (0.01 ) — Difference between statutory and effective tax rate 0.02 0.01 3.42 0.24 0.19 Net income per share from continuing operations $ 0.20 $ 0.39 $ 3.63 $ 0.58 $ 0.47(1) Calculated using the company’s statutory tax rate.
On a consolidated basis, “adjusted pretax operating income” and “adjusted diluted net operating income per share” are measures not determined in accordance with GAAP. These measures are not representative of total profitability, and therefore should not be viewed as substitutes for GAAP pretax income from continuing operations or net income per share from continuing operations. Our definitions of adjusted pretax operating income and adjusted diluted net operating income per share may not be comparable to similarly-named measures reported by other companies. See Exhibit F for additional information on our consolidated non-GAAP financial measures.
Radian Group Inc. and Subsidiaries Mortgage Insurance Supplemental Information - New Insurance Written Exhibit H 2015 2014($ in millions)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Total primary new insurance written $ 11,751 $ 9,385 $ 10,009 $ 11,210 $ 9,322Percentage of primary new insurance written by FICO score
>=740 63.0 % 63.6 % 60.2 % 61.6 % 61.9 %680-739
30.8 30.3 32.6 31.2 31.4620-679
6.2 6.1 7.2 7.2 6.7 Total Primary 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %Percentage of primary new insurance written
Monthly premiums 68 % 63 % 69 % 72 % 76 % Single premiums 32 % 37 % 31 % 28 % 24 % Refinances 23 % 33 % 22 % 16 % 13 % LTV 95.01% and above 3.2 % 1.8 % 0.5 % 0.3 % 0.2 % 90.01% to 95.00% 49.4 % 48.4 % 51.7 % 53.7 % 53.9 % 85.01% to 90.00% 34.0 % 33.3 % 33.2 % 33.5 % 34.5 % 85.00% and below 13.4 % 16.5 % 14.6 % 12.5 % 11.4 %Radian Group Inc. and Subsidiaries Mortgage Insurance Supplemental Information - Primary Insurance in Force and Risk in Force by Product, Statutory Capital Ratios Exhibit I June 30, March 31, December 31, September 30, June 30, ($ in millions) 2015 2015 2014 2014 2014
Primary insurance in force (1)
Flow $ 164,137 $ 162,832 $ 162,302 $ 159,770 $ 155,604 Structured 8,555 9,309 9,508 9,452 9,385 Total Primary $ 172,692 $ 172,141 $ 171,810 $ 169,222 $ 164,989 Prime $ 161,397 $ 160,452 $ 159,647 $ 156,581 $ 151,865 Alt-A 6,857 7,122 7,412 7,709 8,014 A minus and below 4,438 4,567 4,751 4,932 5,110 Total Primary $ 172,692 $ 172,141 $ 171,810 $ 169,222 $ 164,989Primary risk in force (1) (2)
Flow $ 41,706 $ 41,256 $ 41,071 $ 40,337 $ 39,139 Structured 1,957 2,133 2,168 2,150 2,131 Total Primary $ 43,663 $ 43,389 $ 43,239 $ 42,487 $ 41,270 Flow Prime $ 39,781 $ 39,251 $ 38,977 $ 38,156 $ 36,861 Alt-A 1,191 1,243 1,295 1,350 1,411 A minus and below 734 762 799 831 867 Total Flow $ 41,706 $ 41,256 $ 41,071 $ 40,337 $ 39,139 Structured Prime $ 1,182 $ 1,341 $ 1,349 $ 1,302 $ 1,263 Alt-A 397 410 425 441 452 A minus and below 378 382 394 407 416 Total Structured $ 1,957 $ 2,133 $ 2,168 $ 2,150 $ 2,131 Total Prime $ 40,963 $ 40,592 $ 40,326 $ 39,458 $ 38,124 Alt-A 1,588 1,653 1,720 1,791 1,863 A minus and below 1,112 1,144 1,193 1,238 1,283 Total Primary $ 43,663 $ 43,389 $ 43,239 $ 42,487 $ 41,270 Statutory Capital Ratios Risk to capital ratio-Radian Guaranty only 16.5 :1(3)
17.1 :1 17.9 :1 18.4 :1 18.7 :1 Risk to capital ratio-Mortgage Insurance combined 18.0 :1(3)
19.1 :1 20.3 :1 21.2 :1 22.1 :1(1)
Includes amounts ceded under our reinsurance agreements, as well as amounts related to the Freddie Mac Agreement.
(2)
Does not include pool risk in force or other risk in force, which combined represent less than 4.0% of our total risk in force for all periods presented.
(3)
Preliminary.
Radian Group Inc. and Subsidiaries Mortgage Insurance Supplemental Information - Percentage of Primary Risk in Force by FICO, LTV and Policy Year Exhibit J June 30, March 31, December 31, September 30, June 30, ($ in millions) 2015 2015 2014 2014 2014
Percentage of primary risk in force by FICO score
Flow >=740 58.1 % 58.1 % 58.1 % 58.0 % 57.8 % 680-739 30.2 30.0 29.7 29.5 29.3 620-679 10.5 10.6 10.8 11.0 11.3 <=619 1.2 1.3 1.4 1.5 1.6 Total Flow 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Structured >=740 28.7 % 31.1 30.3 % 28.7 % 27.0 % 680-739 27.9 28.1 28.5 28.3 28.6 620-679 25.4 24.1 24.3 25.4 26.3 <=619 18.0 16.7 16.9 17.6 18.1 Total Structured 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Total >=740 56.7 % 56.8 % 56.7 % 56.6 % 56.2 % 680-739 30.1 29.8 29.6 29.4 29.3 620-679 11.2 11.3 11.6 11.7 12.1 <=619 2.0 2.1 2.1 2.3 2.4 Total Primary 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %Percentage of primary risk in force by LTV
95.01% and above 7.6 % 7.9 % 8.2 % 8.6 % 9.3 % 90.01% to 95.00% 49.0 48.2 47.5 46.5 45.1 85.01% to 90.00% 34.6 35.0 35.4 35.8 36.3 85.00% and below 8.8 8.9 8.9 9.1 9.3 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %Percentage of primary risk in force by policy year
2005 and prior
7.3 % 7.8 % 8.2 % 8.8 % 9.5 %2006
4.2 4.4 4.6 4.9 5.22007
9.6 10.2 10.6 11.1 11.82008
7.0 7.5 7.9 8.3 8.92009
2.0 2.3 2.5 2.8 3.12010
1.7 2.0 2.1 2.3 2.62011
3.5 3.9 4.2 4.5 5.02012
13.0 14.2 15.1 16.2 17.52013
20.8 22.4 23.8 25.1 26.62014
19.0 20.0 21.0 16.0 9.82015
11.9 5.3 — — — Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Primary risk in force on defaulted loans (1) $ 1,753 $ 1,883 $ 2,089 $ 2,168 $ 2,270(1) Excludes risk related to loans subject to the Freddie Mac Agreement.
Radian Group Inc. and Subsidiaries Mortgage Insurance Supplemental Information - Claims and Reserves Exhibit K 2015 2014
($ in thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Net claims paid Prime $ 83,489 $ 76,186 $ 74,342 $ 104,440 $ 159,335 Alt-A 23,260 19,999 21,909 26,882 37,368 A minus and below 14,965 15,141 12,600 19,658 26,675 Total primary claims paid 121,714 111,326 108,851 150,980 223,378 Pool 10,798 8,874 8,086 8,880 16,362 Second-lien and other (53 ) (111 ) 283 490 511 Subtotal 132,459 120,089 117,220 160,350 240,251 Impact of captive terminations — (12,000 ) — — — Impact of settlements 79,557 99,006 — 13,500 — Total $ 212,016 $ 207,095 $ 117,220 $ 173,850 $ 240,251 Average claim paid (1) Prime $ 48.1 $44.0
$ 48.7 $ 49.2 $ 46.3 Alt-A 59.554.6
58.7 56.7 55.9 A minus and below 40.1
35.9
39.3 40.3 37.8 Total primary average claims paid 48.744.2
49.0 49.0 46.4 Pool 69.751.5
46.5 48.0 63.4 Second-lien and other (3.5 )(12.3
) 7.6 18.9 16.5 Total $ 49.6 $44.5
$ 48.2 $ 48.7 $ 47.0 Average primary claim paid (2) $ 49.6 $45.3
$ 50.4 $ 50.0 $ 47.4 Average total claim paid (2) $ 50.4 $45.5
$ 49.4 $ 49.6 $ 48.0($ in thousands, except primary reserve per
June 30, March 31, December 31, September 30, June 30,primary default amounts)
2015 2015 2014 2014 2014 Reserve for losses by category Prime $ 562,918$
640,919
$ 700,174 $ 721,811 $ 701,718 Alt-A 256,854278,350
292,293 308,283 323,490 A minus and below 148,043163,390
179,103 182,885 174,922 IBNR and other 125,038167,204
223,114 212,908 326,821 LAE 48,14153,210
56,164 52,690 50,071 Reinsurance recoverable (3) 11,67713,365
26,665 21,201 22,458 Total primary reserves 1,152,6711,316,438
1,477,513 1,499,778 1,599,480 Pool insurance 47,90262,943
75,785 80,664 104,424 IBNR and other 8911,227
1,775 2,468 4,621 LAE 2,3533,051
3,542 3,434 4,180 Total pool reserves 51,14667,221
81,102 86,566 113,225 Total 1st lien reserves 1,203,8171,383,659
1,558,615 1,586,344 1,712,705 Second-lien and other 9751,055
1,417 1,787 1,976 Total reserves $ 1,204,792$
1,384,714
$ 1,560,032 $ 1,588,131 $ 1,714,681 1st lien reserve per default Primary reserve per primary default excluding IBNR and other $ 27,279$
28,423
$
27,683
$
27,477
$
26,024
(1)
Net of reinsurance recoveries and without giving effect to the impact of captive terminations and settlements.
(2)
Before reinsurance recoveries and without giving effect to the impact of captive terminations and settlements.
(3)
Primarily represents ceded losses on captive transactions and quota share reinsurance transactions.
Radian Group Inc. and Subsidiaries Mortgage Insurance Supplemental Information - Default Statistics Exhibit L June 30 March 31, December 31, September 30, June 30, 2015 2015 2014 2014 2014 Default Statistics Primary Insurance:
Prime
Number of insured loans 802,719 801,332 797,436 783,414 764,508 Number of loans in default 23,237 25,114 28,246 28,963 30,012 Percentage of loans in default 2.89 % 3.13 % 3.54 % 3.70 % 3.93 %Alt-A
Number of insured loans 35,927 37,468 38,953 40,319 41,846 Number of loans in default 6,949 7,480 8,136 8,629 9,299 Percentage of loans in default 19.34 % 19.96 % 20.89 % 21.40 % 22.22 %
A minus and below
Number of insured loans 34,224 35,425 36,688 37,843 39,180 Number of loans in default 7,490 7,846 8,937 9,251 9,593 Percentage of loans in default 21.89 % 22.15 % 24.36 % 24.45 % 24.48 % Total Primary Number of insured loans 872,870 874,225 873,077 861,576 845,534 Number of loans in default (1) 37,676 40,440 45,319 46,843 48,904 Percentage of loans in default 4.32 % 4.63 % 5.19 % 5.44 % 5.78 %(1)
Excludes the following number of loans subject to the Freddie Mac Agreement that are in default as we no longer have claims exposure on these loans:
June 30 March 31, December 31, September 30, June 30, 2015 2015 2014 2014 2014 Number of loans in default 3,246 3,715 4,467 4,824 5,238Radian Group Inc. and Subsidiaries Mortgage Insurance Supplemental Information - Captives, QSR and Persistency Exhibit M 2015 2014
($ in thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 21st Lien Captives
Premiums ceded to captives $ 2,700 $ 2,585 $ 3,078 $ 3,096 $ 3,314 % of total premiums 1.1 % 1.1 % 1.3 % 1.3 % 1.5 % Insurance in force included in captives (1) 2.4 % 2.5 % 2.8 % 3.0 % 3.3 % Risk in force included in captives (1) 2.2 % 2.4 % 2.7 % 2.9 % 3.1 %Initial Quota Share Reinsurance (“QSR”) Transaction
QSR ceded premiums written $ 3,822 $ 4,067 $ (4,801 ) $ 4,668 $ 5,046 % of premiums written 1.5 % 1.6 % (1.9 )% 1.8 % 2.1 % QSR ceded premiums earned $ 6,424 $ 6,018 $ (2,869 ) $ 6,578 $ 6,803 % of premiums earned 2.6 % 2.5 % (1.2 )% 2.8 % 3.1 % Ceding commissions $ 828 $ 880 $ 1,108 $ 1,166 $ 1,262 Risk in force included in QSR (2) $ 954,673 $ 1,041,383 $ 1,105,545 $ 1,170,496 $ 1,234,975
Second QSR Transaction
QSR ceded premiums written $ 395 $ 6,529 $ 9,303 $ 9,082 $ 8,072 % of premiums written 0.2 % 2.6 % 3.7 % 3.5 % 3.4 % QSR ceded premiums earned $ 3,039 $ 8,768 $ 8,339 $ 7,699 $ 7,197 % of premiums earned 1.2 % 3.6 % 3.6 % 3.3 % 3.3 % Ceding commissions $ 2,154 $ 2,285 $ 3,256 $ 3,179 $ 2,825 Risk in force included in QSR (2) $ 1,440,312 $ 1,533,677 $ 1,615,554 $ 1,546,311 $ 1,447,088 Persistency (twelve months ended) (3) 80.1 % 82.6 % 84.2 % 84.3 % 83.9 %(1)
Radian reinsures the middle layer risk positions, while retaining a significant portion of the total risk comprising the first loss and most remote risk positions.
(2)
Included in primary risk in force.
(3)
Effective March 31, 2015, we refined our persistency calculation to incorporate loan level detail rather than aggregated portfolio data. Prior periods have been recalculated and reflect the current calculation methodology.
Radian Group Inc. and Subsidiaries
Services Supplemental Information - Gross Profit on Services
Exhibit N
The following table shows additional trend information for the Services segment:
2015 2014(In thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Services revenue $ 44,595 $ 31,532 $ 34,466 $ 42,243 Direct cost of services 25,501 19,253 19,709 23,896 Gross profit on services $ 19,094 $ 12,279 $ 14,757 $ 18,347The selected unaudited financial information presented below represents unaudited quarterly historical information for the businesses of Clayton Holdings LLC (“Clayton”) for periods prior to our acquisition on June 30, 2014. Financial information for periods after the acquisition is included in the table above and in Exhibit E as part of our Services segment.
2013 2014(In thousands)
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Services revenue $ 37,041 $ 39,115 $ 32,718 $ 25,593 $ 28,043 $ 36,347 Direct cost of services 20,173 22,028 18,015 14,957 15,469 19,956 Gross profit on services $ 16,868 $ 17,087 $ 14,703 $ 10,636 $ 12,574 $ 16,391
FORWARD-LOOKING STATEMENTS
All statements in this report that address events, developments or results that we expect or anticipate may occur in the future are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Exchange Act and the U.S. Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as "anticipate," "may," "will," "could," "should," "would," "expect," "intend," "plan," "goal," "contemplate," "believe," "estimate," "predict," "project," "potential," "continue," "seek," "strategy," "future," "likely" or the negative or other variations on these words and other similar expressions. These statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management's current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking statement. These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment. New risks emerge from time to time and it is not possible for us to predict all risks that may affect us. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements including:
• changes in general economic and political conditions, including unemployment rates, changes in the U.S. housing and mortgage credit markets, declines in home prices and property values, the performance of the U.S. or global economies, the amount of liquidity in the capital or credit markets, changes or volatility in interest rates or consumer confidence and changes in credit spreads, all of which may be impacted by, among other things, legislative activity or inactivity, actual or threatened downgrades of U.S. government credit ratings, or actual or threatened defaults on U.S. government obligations;
• changes in the way customers, investors, regulators or legislators perceive the strength of private mortgage insurers;
• catastrophic events, increased unemployment, home price depreciation or other negative economic changes generally or in geographic regions where our mortgage insurance exposure is more concentrated;
• Radian Guaranty Inc.’s ability to remain eligible under applicable requirements imposed by the Federal Housing Finance Agency (“FHFA”) and by Fannie Mae and Freddie Mac (collectively, the “GSEs”) to insure loans purchased by the GSEs;
• our ability to maintain sufficient holding company liquidity to meet our short- and long-term liquidity needs. We expect to contribute a significant amount of our holding company liquidity to support Radian Guaranty Inc.’s compliance with the final financial requirements (“PMIERs Financial Requirements”) of the Private Mortgage Insurer Eligibility Requirements that were issued by the FHFA in final form on April 17, 2015 (“PMIERs”) and which become effective for existing mortgage insurers on December 31, 2015. Our projections regarding the amount of holding company liquidity that we may contribute to Radian Guaranty Inc. to comply with the PMIERs Financial Requirements are based on our estimates of Radian Guaranty’s “Minimum Required Assets”(a risk-based minimum required asset amount, as defined in the PMIERs, calculated based on net risk in force, which approximates the maximum loss exposure at any point in time and a variety of measures designed to evaluate credit quality) and “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), which may not prove to be accurate, and which could be impacted by: (1) our ability to receive, as expected, GSE approval for the amendments to our existing reinsurance arrangements and receive the full PMIERs benefit for these arrangements; (2) whether we elect to convert certain liquid assets into PMIERs-compliant Available Assets; (3) factors affecting the performance of our mortgage insurance business, including our level of defaults, prepayments, the losses we incur on new or existing defaults and the credit characteristics of our mortgage insurance; and (4) how much capital we expect to maintain at our mortgage insurance subsidiaries in excess of the amount required to satisfy the PMIERs Financial Requirements. Contributions of holding company cash and investments from Radian Group will leave less liquidity to satisfy Radian Group’s future obligations. Depending on the amount of holding company contributions that we make, we may be required or may decide to seek additional capital by incurring additional debt, by issuing additional equity, or by selling assets, which we may not be able to do on favorable terms, if at all;
• our ability to maintain an adequate level of capital in our insurance subsidiaries to satisfy existing and future state regulatory requirements, including new capital adequacy standards that currently are being developed by the National Association of Insurance Commissioners (“NAIC”) and that could be adopted by states in which we write business;
• changes in the charters or business practices of, or rules or regulations imposed by or applicable to the GSEs, including: (1) the implementation of the final PMIERs (including as updated on June 30, 2015 to increase the amount of Available Assets that must be held against risk in force associated with lender paid mortgage insurance originated on or after January 1, 2016), which (a) will increase the amount of capital that Radian Guaranty is required to hold, and therefore, reduce our current returns on subsidiary capital, (b) potentially impact the type of business that Radian Guaranty is willing to write, which could reduce our new insurance written (“NIW”) and market share, (c) impose extensive and more stringent operational requirements in areas such as claim processing, loss mitigation, document retention, underwriting, quality control, reporting and monitoring, among others, that may result in additional costs to achieve and maintain compliance, and (d) require the consent of the GSEs for Radian Guaranty to take certain actions such as paying dividends, entering into various inter-company agreements, and commuting or reinsuring risk, among others; (2) changes that could limit the type of business that Radian Guaranty and other private mortgage insurers are willing to write, which could reduce our new insurance written NIW and market share; (3) changes that could increase the cost of private mortgage insurance, including as compared to the Federal Housing Administration’s (“FHA”) pricing, or result in the emergence of other forms of credit enhancement; and (4) changes that could require us to alter our business practices and which may result in substantial additional costs;
• our ability to continue to effectively mitigate our mortgage insurance losses, including a decrease in net “Rescissions” (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), “Claim Denials” (our legal right, under certain conditions, to deny a claim) or “Claim Curtailments” (our legal right, under certain conditions, to reduce the amount of a claim, including due to servicer negligence) resulting from an increase in the number of successful challenges to previous Rescissions, Claim Denials or Claim Curtailments (including as part of one or more settlements of disputed Rescissions or Claim Denials), or as a result of the GSEs intervening in or otherwise limiting our loss mitigation practices, including settlements of disputes regarding “Loss Mitigation Activities” (activities such as Rescissions, Claim Denials, Claim Curtailments and cancellations);
• the negative impact that our Loss Mitigation Activities may have on our relationships with our customers and potential customers, including the potential loss of current or future business and the heightened risk of disputes and litigation;
• any disruption in the servicing of mortgages covered by our insurance policies, as well as poor servicer performance;
• a substantial decrease in the persistency rates of our mortgage insurance policies, which has the effect of reducing our premium income on our premiums on mortgage insurance products paid on a monthly installment basis and could decrease the profitability of our mortgage insurance business;
• heightened competition for our mortgage insurance business from others such as the FHA, the U.S. Department of Veterans Affairs and other private mortgage insurers (including with respect to other private mortgage insurers, those that have been assigned higher ratings than we have, that may have access to greater amounts of capital than we do, or that are new entrants to the industry, and therefore, are not burdened by legacy obligations) and the impact such heightened competition may have on our returns and our NIW;
• the increased demand from lenders for customized (reduced) rates on lender-paid, single premium mortgage insurance products, which could further reduce our overall average premium rates and returns and, to the extent we decide to limit this type of business, could adversely impact our market share and our customer relationships;
• changes to the current system of housing finance, including the possibility of a new system in which private mortgage insurers are not required or their products are significantly limited in effect or scope;
• 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 or application of existing federal or state laws and regulations, or changes in these laws and regulations or the way they are interpreted, including, without limitation: (1) the resolution of existing, or the possibility of additional, lawsuits, inquiries or investigations (including a recent inquiry from the Wisconsin Office of the Commissioner of Insurance to all private mortgage insurers pertaining to customized insurance rates and terms offered to mortgage insurance customers); (2) changes to the Mortgage Guaranty Insurers Model Act (“Model Act”) being considered by the NAIC that could include more stringent capital and other requirements for Radian Guaranty in states that adopt the new Model Act in the future; and (3) legislative and regulatory changes (a) impacting the demand for our products, (b) limiting or restricting the products we may offer or increasing the amount of capital we are required to hold, (c) affecting the form in which we execute credit protection, or (d) otherwise impacting our existing businesses or future prospects;
• the amount and timing of potential payments or adjustments associated with federal or other tax examinations, including deficiencies assessed by the Internal Revenue Service (“IRS”) resulting from the 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” (accounting principles generally accepted in the U.S.) or “SAP” (statutory accounting practices including those required or permitted, if applicable, by the insurance departments of the respective states of domicile of our insurance subsidiaries) rules and guidance, or their interpretation;
• legal and other limitations on amounts we may receive from our subsidiaries as dividends or through our tax- and expense-sharing arrangements with our subsidiaries; and
• the possibility that we may need to impair the estimated fair value of goodwill established in connection with our acquisition of Clayton Holdings LLC, the valuation of which requires the use of significant estimates and assumptions with respect to the estimated future economic benefits arising from certain assets acquired in the transaction such as the value of expected future cash flows of Clayton, Clayton’s workforce, expected synergies with our other affiliates and other unidentifiable intangible assets.
For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2014 and in our subsequent reports and registration statements filed from time to time with the U.S. Securities and Exchange Commission. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which we issued this press release. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements to reflect new information or future events or for any other reason.
View source version on businesswire.com: http://www.businesswire.com/news/home/20150722005326/en/
Radian Group Inc.Emily Riley, 215-231-1035emily.riley@radian.biz
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