Triad Guaranty Inc. Reports 2010 Second Quarter Results

WINSTON-SALEM, N.C., Aug. 11 /PRNewswire-FirstCall/ -- Triad Guaranty Inc. (OTC Bulletin Board: TGIC) today reported net income of $79.1 million for its second quarter ended June 30, 2010 compared to a net loss of $27.8 million for the first quarter of 2010 and a net loss of $359.4 million for the second quarter of 2009.  The 2010 second quarter diluted income per share was $5.24 compared to a diluted loss per share of $1.84 for the 2010 first quarter and a diluted loss per share of $23.91 for the 2009 second quarter.

The net income for the six months ended June 30, 2010 was $51.3 million compared to a net loss of $414.6 million for the six months ended June 30, 2009.  The diluted income per share was $3.40 for the six months ended June 30, 2010 compared to a diluted loss per share of $27.65 for the six months ended June 30, 2009.

Ken Jones, President and CEO, said, "We continued to see improvement in several key areas during the second quarter of 2010, which allowed us to decrease the reserves held for existing defaults at June 30, 2010.  Higher actual cures experienced during the first two quarters of 2010 caused us to adjust our reserve factors during the second quarter for future cure rates on existing defaults. These adjustments, along with modestly higher rescission expectations, allowed us to reduce our estimated reserve for losses.  The impact of the change in reserve factors on our second quarter financial results, coupled with an additional accrual of earned premiums during the quarter, were the primary drivers of our net income reported for the quarter.  The earned premium accrual reflects the present value of estimated future premiums on Modified Pool structures where we have already paid out the maximum amount that we are contractually required to pay.  While we are seeing improvements in the performance of our insured portfolio, we remain cautious about the outlook for the remainder of 2010 and continuing into 2011, as many economists are now expecting a slower recovery with lingering high unemployment rates and continued pressure on the residential real estate market and home prices."  

Mr. Jones continued, "As a company in run-off, our primary focus remains the efficient and effective servicing of our insured portfolio, particularly with respect to loss management, in order to maximize our claims-paying ability.  While we are pleased by our 2010 results compared to 2008 and 2009, the income reported in the second quarter of 2010 was due to items that we believe are unlikely to occur in the future in similar amounts and it is unlikely that we will report similar levels of income, and may report no income at all, in future periods. Furthermore, our financial position improved only slightly during the second quarter, and our deficit in assets was $648.1 million at June 30, 2010.  To meet all of our existing obligations, we will need to earn at least $649 million during the remaining run-off of our business.  We believe that absent significant, positive changes in the economy and the residential real estate market, our existing assets and future premiums may not be sufficient to meet our current and future policyholder obligations."

For additional information concerning our results for the second quarter of 2010 and our financial position at June 30, 2010, please see our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, which will be filed with the Securities and Exchange Commission and will be available at www.sec.gov or via our web site at www.triadguaranty.com.  We have updated the quarterly statistical and supplemental information for the 2010 second quarter results on our web site at www.triadguaranty.com.  The supplemental information can be found under "Investors" and then under "Webcasts and Presentations" by the title "Supplemental Information – Second Quarter 2010".

(Relevant Triad Guaranty Inc. financial and statistical information follows)

Triad Guaranty Inc.'s wholly owned subsidiary, Triad Guaranty Insurance Corporation, is a nationwide mortgage insurer pursuing a run-off of its existing in-force book of business.  For more information, please visit the Company's web site at www.triadguaranty.com.

Certain of the statements contained in this release are "forward-looking statements" and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include estimates and assumptions related to economic, competitive, regulatory, operational and legislative developments. These forward-looking statements are subject to change, uncertainty and circumstances that are, in many instances, beyond our control and they have been made based upon our current expectations and beliefs concerning future developments and their potential effect on us. Actual developments and their results could differ materially from those expected by us, depending on the outcome of a number of factors, including: the possibility that the Illinois Department of Insurance may take various actions regarding Triad if it does not operate its business in accordance with its revised financial and operating plan and the corrective orders, including seeking receivership proceedings; our ability to operate our business in run-off and maintain a solvent run-off; our ability to continue as a going concern; the possibility of general economic and business conditions that are different than anticipated; legislative, regulatory, and other similar developments; changes in interest rates, employment rates, the housing market, the mortgage industry and the stock market; the possibility that there will not be adequate interest in our common stock on the over the counter markets to ensure efficient pricing; and various factors described under "Risk Factors" and in the "Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995" in our Annual Report on Form 10-K for the year ended December 31, 2009 and in other reports and statements filed with the Securities and Exchange Commission.  Forward-looking statements are based upon our current expectations and beliefs concerning future events and we undertake no obligation to update or revise any forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements are made, except as otherwise required by law.

Triad Guaranty Inc. Consolidated Statements of Operations
		Three Months Ended				Six Months Ended
		June 30,				June 30,
		(Unaudited)				(Unaudited)
		2010		2009		2010		2009
		(Dollars in thousands except per share amounts)
	Earned premiums	$ 72,330		$    64,833		$ 118,218		$  109,191
	Net investment income	10,561		10,859		20,434		22,051
	Net realized investment (losses) gains	(985)		2,017		(1,227)		(2,548)
	Other income (expense)	-		2		(8)		4
	Total revenues	81,906		77,711		137,417		128,698
	Net (benefit) losses and loss adjustment expenses	(7,770)		431,368		64,468		532,945
	Interest expense	2,816		1,895		5,285		2,589
	Other operating expenses	7,021		8,680		16,353		18,091
	Total losses and expenses	2,067		441,943		86,106		553,625
	Income (loss) before income taxes	79,839		(364,232)		51,311		(424,927)
	Income tax expense (benefit)	717		(4,813)		-		(10,334)
	Net income (loss)	$ 79,122		$ (359,419)		$   51,311		$ (414,593)
	Diluted income (loss) per share	$     5.24		$     (23.91)		$       3.40		$     (27.65)
	Diluted weighted average common and common
	stock equivalents outstanding (in thousands)	15,112		15,031		15,109		14,995

Triad Guaranty Inc.
Consolidated Balance Sheets
				(Unaudited)				(Unaudited)
				June 30,		December 31,		June 30,
				2010		2009		2009
			(Dollars in thousands except per share amounts)
	Assets:
		Invested assets:
		Fixed maturities, available for sale, at market		$    906,992		$        784,830		$    847,809
		Equity securities, available for sale, at market		-		-		31
		Short-term investments		29,166		26,651		3,800
				936,158		811,481		851,640
		Cash and cash equivalents		35,576		21,839		31,600
		Reinsurance recoverable		49,829		233,499		234,248
		Other assets		64,000		58,007		57,650
		Total assets		$ 1,085,563		$     1,124,826		$ 1,175,138
	Liabilities:
		Losses and loss adjustment expenses		$ 1,307,028		$     1,537,043		$ 1,591,207
		Unearned premiums		11,346		12,153		14,890
		Long-term debt		34,546		34,540		34,535
		Deferred payment obligation		292,169		168,386		27,020
		Other liabilities		88,619		79,062		37,176
		Total liabilities		1,733,708		1,831,184		1,704,828
	Stockholders' equity:
		Accumulated deficit		(799,830)		(851,141)		(670,102)
		Accumulated other comprehensive income		37,516		30,782		27,262
		Other equity accounts		114,169		114,001		113,150
		Deficit in assets		(648,145)		(706,358)		(529,690)
	Total liabilities and stockholders' equity			$ 1,085,563		$     1,124,826		$ 1,175,138
	Stockholders' deficit in assets per share:			$      (42.48)		$           (46.29)		$      (34.81)
	Common shares outstanding			15,258,128		15,258,128		15,215,378

Triad Guaranty Inc.
Consolidated Statements of Cash Flow
		Six Months Ended June 30,
		2010		2009
		(Unaudited)
		(Dollars in Thousands)
OPERATING ACTIVITIES
Net income (loss)		$  51,311		$ (414,593)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
	Increase (decrease) in loss and unearned premium reserves	(230,822)		402,394
	Decrease (increase) in amounts due to/from reinsurer	183,669		(84,004)
	Net realized investment losses	1,227		2,548
	Deferred income taxes	-		(11,415)
	Deferred payment obligation	123,783		27,020
	Other operating activities	(995)		6,410
Net cash provided by (used in) operating activities		128,173		(71,640)
INVESTING ACTIVITIES
	Purchases of investment securities	(251,268)		(128,623)
	Sales and maturities of investment securities	138,918		155,188
	(Increase) decrease in short-term investments	(2,516)		36,769
	Other investing activities	430		(34)
Net cash provided by (used in) investing activities		(114,436)		63,300
Net increase (decrease) in cash		13,737		(8,340)
Cash at beginning of period		21,839		39,940
Cash at end of period		$  35,576		$    31,600

TRIAD GUARANTY INC. Sequential Quarterly Financial Statements (unaudited)
						Condensed Statements of Operations For The Quarter Ended (Dollars in thousands)
					Jun 30,			Mar 31,		Dec 31,		Sept 30,		Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
					2010			2010		2009		2009		2009		2009		2008		2008		2008
Revenue:
	Earned premiums				$      72,330			$      45,888		$      34,891		$      35,576		$      64,833		$      44,358		$      49,840		$      65,654		$      69,864
	Net investment income				10,561			9,873		9,739		12,342		10,859		11,192		10,509		10,349		9,175
	Realized investment gains (losses)				(985)			(242)		649		3,253		2,017		(4,565)		(18,944)		(6,519)		(3,799)
	Other income (loss)				-			(8)		12,536		127		2		2		2		2		2
	Total revenues				81,906			55,511		57,815		51,298		77,711		50,987		41,407		69,486		75,242
Losses and expenses:
	Net settled claims				145,460			(43,684)		153,749		157,881		149,863		53,920		69,372		59,357		68,263
	Change in reserves				(158,058)			111,204		(30,195)		(15,836)		278,956		39,628		106,080		165,958		218,568
	Loss adjustment expenses				4,828			4,718		5,370		3,713		2,549		8,029		2,647		5,879		5,918
	Net losses and LAE				(7,770)			72,238		128,924		145,758		431,368		101,577		178,099		231,194		292,749
	Change in premium deficiency reserve				-			-		-		-		-		-		-		-		(15,000)
	Interest expense				2,816			2,469		2,243		1,202		1,895		694		694		691		696
	Other operating expenses				7,021			9,332		8,160		9,659		8,680		9,411		8,639		8,726		27,238
	Total losses and expenses				2,067			84,039		139,327		156,619		441,943		111,682		187,432		240,611		305,683
Income (loss) before income taxes					79,839			(28,528)		(81,512)		(105,321)		(364,232)		(60,695)		(146,025)		(171,125)		(230,441)
	Income taxes (benefit)				717			(717)		(2,368)		(3,426)		(4,813)		(5,521)		(23,818)		(11,030)		(31,630)
Net income (loss)					$      79,122			$    (27,811)		$    (79,144)		$  (101,895)		$  (359,419)		$    (55,174)		$  (122,207)		$  (160,095)		$  (198,811)

				Condensed  Balance Sheets As Of (Dollars in thousands)
					Jun 30,		Mar 31,		Dec 31,		Sept 30,		Jun 30,		Mar 31,		Dec 31,		Sep 30,		Jun 30,
					2010		2010		2009		2009		2009		2009		2008		2008		2008
Assets
	Invested assets				$    936,158		$    957,115		$    811,481		$    846,905		$    851,640		$    918,531		$    895,422		$    890,720		$    869,022
	Cash				35,576		38,662		21,839		7,480		31,600		21,394		39,940		47,818		19,669
	Real estate acquired				-		-		-		-		-		526		713		3,661		6,202
	Prepaid federal income tax				-		-		-		-		-		15		15		15		63,184
	Reinsurance recoverable				49,829		52,963		233,499		245,436		234,248		182,589		150,848		111,827		55,316
	Other assets				64,000		54,406		58,007		54,331		57,650		52,307		43,596		47,915		50,405
	Total assets				$ 1,085,563		$ 1,103,146		$ 1,124,826		$ 1,154,152		$ 1,175,138		$ 1,175,362		$ 1,130,534		$ 1,101,956		$ 1,063,798
Liabilities and stockholders' equity
	Liabilities:
	Losses and loss adjustment expenses				$ 1,307,028		$ 1,468,719		$ 1,537,043		$ 1,576,303		$ 1,591,207		$ 1,262,746		$ 1,187,840		$ 1,042,053		$    817,262
	Deferred payment obligation				292,169		229,953		168,386		97,048		27,020		-		-		-		-
	Accrued expenses and other liabilities				134,511		102,677		91,215		71,291		52,066		59,477		44,831		30,887		40,714
	Total liabilities				1,733,708		1,835,892		1,831,184		1,779,179		1,704,828		1,356,755		1,267,200		1,130,356		922,889
	(Deficit in assets) total stockholders' equity				(648,145)		(732,746)		(706,358)		(625,027)		(529,690)		(181,393)		(136,666)		(28,400)		140,909
	Total liabilities and stockholders' equity				$ 1,085,563		$ 1,103,146		$ 1,124,826		$ 1,154,152		$ 1,175,138		$ 1,175,362		$ 1,130,534		$ 1,101,956		$ 1,063,798

SOURCE Triad Guaranty Inc.

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