Triad Guaranty Inc. Reports Fourth Quarter and Year End Results

WINSTON-SALEM, N.C., Feb. 17, 2012 /PRNewswire/ -- Triad Guaranty Inc. (OTCBB: TGIC) today reported a net loss for the quarter ended December 31, 2011 of $60.9 million compared to a net loss of $37.5 million for the third quarter of 2011 and net income of $26.8 million for the fourth quarter of 2010.  The 2011 fourth quarter diluted loss per share was $3.99 compared to a diluted loss per share of $2.46 for the 2011 third quarter and diluted income per share of $1.76 for the fourth quarter of 2010.

The net loss for the year ended December 31, 2011 was $107.8 million compared to net income of $132.1 million for the year ended December 31, 2010.  The diluted loss per share was $7.07 for the year ended December 31, 2011 compared to diluted income per share of $8.72 for the year ended December 31, 2010.

Ken Jones, President and CEO, said, "Stubbornly high unemployment, tight credit and depressed home prices have prevented any meaningful recovery in the housing market, which continues to negatively impact our financial results.  During the fourth quarter of 2011, we increased the frequency factors utilized in our reserve calculation, which added approximately $30 million to the loss for the quarter.  As necessary, we make refinements to our reserve estimate each quarter to reflect actual experience.  Risk in default continued to decline during the fourth quarter, but at a slower rate than we experienced during the previous five quarters.  Settled claims declined 14% from the third quarter while cures and newly reported defaults remained essentially flat during the 2011 fourth quarter.  Persistency, the key driver of our earned premiums, remained at elevated levels compared to historical norms as many borrowers are finding it very difficult to sell their homes."

Mr. Jones continued, "As a company in run-off, our primary focus remains on the efficient and effective servicing of our insured portfolio, particularly with respect to loss management, in order to maximize our claims-paying ability.  Our deficit in assets remains substantial and was $703.6 million at December 31, 2011.  We believe that, absent significant positive changes in the economy and the residential real estate market, our existing assets and future premiums likely will not be sufficient to meet our current and future policyholder obligations."

We have updated the quarterly statistical and supplemental information for the 2011 fourth 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 – Fourth Quarter 2011".

(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; legal and other proceedings regarding modifications and refinancing of mortgages and/or foreclosure proceedings; 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, 2010 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
(Unaudited)
		Three Months Ended				Twelve Months Ended
		December 31,				December 31,
		2011		2010		2011		2010
		(Dollars in thousands except per share amounts)
Revenues:
	Earned premiums	$                    39,111		$                  40,920		$              161,352		$              203,416
	Net investment income	6,779		8,658		30,760		38,774
	Net realized investment gains (losses)	11,296		(950)		15,209		12,516
	Other income	1		60		67		23
	Total revenues	57,187		48,688		207,388		254,729
Losses and Expenses:
	Net settled claims	113,936		139,435		464,974		562,007
	Decrease in reserves	(5,885)		(129,993)		(187,524)		(462,732)
	Loss adjustment (benefit) expenses	(633)		322		815		10,358
	Net losses and loss adjustment expenses	107,418		9,764		278,265		109,633
	Interest expense	4,984		3,836		18,244		11,763
	Other operating expenses	4,583		8,319		18,648		30,878
	Total losses and expenses	116,985		21,919		315,157		152,274
	Income (loss) before income taxes and extraordinary item	(59,798)		26,769		(107,769)		102,455
	Income tax expense	1,134		-		-		-
	Income (loss) before extraordinary item	(60,932)		26,769		(107,769)		102,455
	Extraordinary item - gain from repurchase and retirement   of long-term debt	-		-		-		29,640
Net (loss) income		$                  (60,932)		$                  26,769		$            (107,769)		$              132,095
Per Share Information:
	Diluted (loss) income per share before extraordinary item	$                      (3.99)		$                      1.76		$                  (7.07)		$                    6.76
	Diluted income per share for extraordinary item	-		-		-		1.96
	Diluted (loss) income per share	$                      (3.99)		$                      1.76		$                  (7.07)		$                    8.72
	Diluted weighted average common stock and common
	stock equivalents outstanding (in thousands of shares)	15,258		15,204		15,250		15,151

Triad Guaranty Inc.
Consolidated Balance Sheets
(Unaudited)
				December 31,		December 31,
				2011		2010
				(Dollars in thousands)
	Assets:
		Invested assets:
		Fixed maturities, available for sale, at market		$                    746,238		$                   812,335
		Short-term investments		30,102		39,561
				776,340		851,896
		Cash and cash equivalents		40,590		38,762
		Reinsurance recoverable		22,988		40,806
		Other assets		56,309		60,161
		Total assets		$                    896,227		$                   991,625
	Liabilities:
		Losses and loss adjustment expenses		$                    854,188		$                1,060,036
		Unearned premiums		6,871		9,057
		Deferred payment obligation		629,700		415,657
		Other liabilities		109,042		93,075
		Total liabilities		1,599,801		1,577,825
	Stockholders' deficit:
		Accumulated deficit		(826,815)		(719,046)
		Accumulated other comprehensive income		8,977		18,609
		Other equity accounts		114,264		114,237
		Deficit in assets		(703,574)		(586,200)
	Total liabilities and stockholders' deficit			$                    896,227		$                   991,625
	Common shares outstanding (in thousands)			15,328		15,258

Triad Guaranty Inc.
Consolidated Statements of Cash Flow
(Unaudited)
		Twelve Months Ended December 31,
		2011		2010
		(Dollars in thousands)
OPERATING ACTIVITIES
Net (loss) income		$              (107,769)		$                   132,095
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
	Decrease in loss and unearned premium reserves	(208,034)		(480,103)
	Decrease in amounts due to/from reinsurer	17,818		192,693
	Net realized investment gains	(15,209)		(12,516)
	Extraordinary gain on repurchase of long-term debt	-		(29,640)
	Increase in deferred payment obligation	214,043		247,271
	Collection of income tax recoverable	11,707		-
	Other operating activities	10,830		8,058
Net cash (used in) provided by operating activities		(76,614)		57,858
INVESTING ACTIVITIES
	Purchases of investment securities	(277,829)		(469,283)
	Sales and maturities of investment securities	347,150		445,545
	Decrease (increase) in short-term investments	9,459		(12,911)
	Other investing activities	(338)		620
Net cash provided by (used in) investing activities		78,442		(36,029)
FINANCING ACTIVITIES
	Repurchase of long-term debt	-		(4,906)
Net cash used in financing activities		-		(4,906)
Net increase in cash		1,828		16,923
Cash at beginning of year		38,762		21,839
Cash at end of period		$                  40,590		$                     38,762

Triad Guaranty Inc.
Sequential Quarterly Financial Statements
(unaudited)
			Condensed Statements of Operations For The  Quarter Ended
	(Dollars in thousands)		Dec. 31,		Sept. 30,		Jun. 30,		Mar. 31,		Dec. 31,
			2011		2011		2011		2011		2010
Revenue:
	Earned premiums		$                 39,111		$                 49,719		$                35,394		$                37,128		$                40,920
	Net investment income		6,779		7,364		8,126		8,491		8,658
	Net realized investment gains (losses)		11,296		1,349		3,000		(436)		(950)
	Other income		1		10		29		27		60
	Total revenues		57,187		58,442		46,549		45,210		48,688
Losses and Expenses:
	Net settled claims		113,936		132,545		111,583		106,909		139,435
	Decrease in reserves		(5,885)		(44,192)		(70,752)		(66,694)		(129,993)
	Loss adjustment (benefit) expenses		(633)		(511)		469		1,490		322
	Net losses and LAE expense		107,418		87,842		41,300		41,705		9,764
	Interest expense		4,984		4,813		4,469		3,978		3,836
	Other operating expenses		4,583		4,450		5,178		4,437		8,319
	Total losses and expenses		116,985		97,105		50,947		50,120		21,919
Income (loss) before taxes			(59,798)		(38,663)		(4,398)		(4,910)		26,769
	Income tax expense (benefit)		1,134		(1,134)		-		-		-
Net (loss) income			$                (60,932)		$                (37,529)		$                 (4,398)		$                 (4,910)		$                26,769
			Condensed  Balance Sheets As Of
			Dec. 31,		Sept. 30,		Jun. 30,		Mar. 31,		Dec. 31,
			2011		2011		2011		2011		2010
Assets
	Invested assets		$               776,340		$               773,078		$              823,018		$              842,908		$              851,896
	Cash and cash equivalents		40,590		65,051		40,277		39,073		38,762
	Reinsurance recoverable		22,988		23,719		31,230		33,499		40,806
	Other assets		56,309		56,897		46,141		48,528		60,161
	Total assets		$               896,227		$               918,745		$              940,666		$              964,008		$              991,625
Liabilities and stockholders' deficit
	Liabilities:
	Losses and loss adjustment expenses		$               854,188		$               864,049		$              910,530		$              990,494		$           1,060,036
	Deferred payment obligation		629,700		576,510		517,193		464,342		415,657
	Accrued expenses and other liabilities		115,913		109,095		106,271		102,911		102,132
	Total liabilities		1,599,801		1,549,654		1,533,994		1,557,747		1,577,825
	Deficit in assets		(703,574)		(630,909)		(593,328)		(593,739)		(586,200)
	Total liabilities and stockholders' deficit		$               896,227		$               918,745		$              940,666		$              964,008		$              991,625

SOURCE Triad Guaranty Inc.

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