PHILADELPHIA, July 24 /PRNewswire-FirstCall/ -- Radian Group Inc. today reported net income for the quarter ended June 30, 2007, of $21.1 million and diluted net income per share of $0.26.
"Our second quarter results clearly illustrate the credit challenges in today's mortgage market, but I believe they also reflect long-term positive trends for our business," said S.A. Ibrahim, Chief Executive Officer. "Market conditions, particularly in California and Florida, led to an increase in defaults that impacted our results."
Mr. Ibrahim added, "The company experienced top-line growth, improved persistency and renewed demand for our traditional mortgage insurance product. Our balance sheet remains solid, with a highly rated investment portfolio of more than $6 billion and total loss reserves of more than $900 million. And, our financial guaranty business continues to demonstrate the benefit of our diversification by contributing strong operating earnings again this quarter."
For Financial Guaranty, net income was $22.0 million, up from $19.0 million in the second quarter of 2006. In the Financial Services segment, net income was $27.3 million, down from $45.9 million for the same period last year.
The company also provided an update on its proposed merger with MGIC, which was announced in February this year. All significant regulatory and stockholder approvals have been completed, except for two state insurance regulatory authorities. Radian and MGIC continue to anticipate completing the merger late in the third quarter or early in the fourth quarter of 2007.
The key financial highlights are as follows:
Key Financial Highlights (dollars in millions, except per share data)
(Unaudited)
Second quarter
Quarter ended Quarter ended Percent
June 30, 2007 June 30, 2006 change
Revenue $243.2 $304.6 (20.2)%
Net income $21.1 $148.1 (85.8)%
Diluted net income per share $0.26 $1.79 (85.5)%
Net premiums written $267.6 $298.9 (10.5)%
Net premiums earned $254.9 $259.1 (1.6)%
Equity in net income of affiliates $49.5 $72.0 (31.3)%
Change in fair value of
derivative instruments * $(103.1) $(25.3) -
Book value per share $51.53 $46.95 9.8 %
Six months
Six months Six months
ended June 30, ended June 30, Percent
2007 2006 change
Revenue $584.7 $658.2 (11.2)%
Net income $134.6 $311.8 (56.8)%
Diluted net income per share $1.68 $3.75 (55.2)%
Net premiums written $545.2 $578.5 (5.8)%
Net premiums earned $504.0 $512.8 (1.7)%
Equity in net income of affiliates $72.3 $130.4 (44.6)%
Change in fair value of $(89.3) $(7.7) -
derivative instruments *
* The change in fair value of derivative instruments for the second
quarter and six months includes $61.0 million of credit reserves for
Radian's Net Interest Margin Securities (NIMs) book of business.
Radian will hold a conference call on Wednesday, July 25, 2007, at 9:00 a.m. Eastern time to discuss the company's second quarter results. This call will be broadcast live over the Internet at http://www.ir.radian.biz/phoenix.zhtml?c=112301&p=irol-audioarchives or at http://www.radian.biz/ > News. A replay of the webcast will be available at this site approximately two hours after the live broadcast ends for a period of one year.
Statistical and financial information, which is expected to be referred to during the conference call, will be available on Radian's website under Investors > Webcasts, Presentations and Transcripts or by clicking on http://www.ir.radian.biz/phoenix.zhtml?c=112301&p=irol-audioarchives.
About Radian
Radian Group Inc. is a global credit risk management company headquartered in Philadelphia with significant operations in New York and London. Radian develops innovative financial solutions by applying its core mortgage credit risk expertise and structured finance capabilities to the credit enhancement needs of the capital markets worldwide, primarily through credit insurance products. The company also provides credit enhancement for public finance and other corporate and consumer assets on both a direct and reinsurance basis and holds strategic interests in active credit-based consumer asset businesses. Additional information may be found at http://www.radian.biz/.
Financial Results and Supplemental Information Contents (Unaudited)
For trend information on all schedules, refer to Radian's quarterly financial statistics at http://www.radian.biz/investors/financial/corporate.aspx.
Exhibit A: Condensed Consolidated Statements of Income
Exhibit B: Condensed Consolidated Balance Sheets
Exhibit C: Segment Information Quarter Ended June 30, 2007
Exhibit D: Segment Information Quarter Ended June 30, 2006
Exhibit E: Segment Information Six Months Ended June 30, 2007
Exhibit F: Segment Information Six Months Ended June 30, 2006
Exhibit G: Financial Guaranty Insurance Supplemental Information -
Quarter Ended and as of June 30, 2007
Exhibit H: Financial Guaranty Insurance Supplemental Information -
Quarter Ended and as of June 30, 2007
Exhibit I: Mortgage Insurance Supplemental Information: New Insurance
Written and Risk Written
Exhibit J: Mortgage Insurance Supplemental Information: Insurance in
Force and Risk in Force
Exhibit K: Mortgage Insurance Supplemental Information: Risk in Force by
LTV and Policy Year and Other Risk in Force
Exhibit L: Mortgage Insurance Supplemental Information: Claims and
Reserves
Exhibit M: Mortgage Insurance Supplemental Information: Defaults
Exhibit N: Mortgage Insurance Supplemental Information: Net Premiums
Written and Earned, Smart Home, Captives and Persistency
Exhibit O: Mortgage Insurance Supplemental Information: ALT A
Exhibit P: Financial Services Supplemental Information
Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Income
Exhibit A
Quarter Ended Six Months Ended
June 30 June 30
2007 2006 2007 2006
(In thousands, except per-share
data)
Revenues:
Net premiums written $267,556 $298,875 $545,190 $578,480
Net premiums earned - insurance $218,010 $233,527 $432,517 $460,761
Net premiums earned - credit
derivatives 36,874 25,559 71,502 52,022
Net premiums earned - total 254,884 259,086 504,019 512,783
Net investment income 62,650 59,678 123,646 113,938
Net gains on securities 25,694 5,324 39,439 28,178
Change in fair value of
derivative instruments (103,120) (25,287) (89,331) (7,657)
Other income 3,102 5,778 6,920 10,989
Total revenues 243,210 304,579 584,693 658,231
Expenses:
Provision for losses 173,962 84,860 281,004 163,494
Policy acquisition costs 24,198 26,820 52,452 54,184
Other operating expenses 48,213 58,099 102,580 118,376
Merger expenses 9,395 - 12,723 -
Interest expense 12,360 12,538 25,416 24,378
Total expenses 268,128 182,317 474,175 360,432
Equity in net income of
affiliates 49,507 72,038 72,279 130,378
Pretax income 24,589 194,300 182,797 428,177
Income tax provision 3,506 46,155 48,247 116,334
Net income $21,083 $148,145 $134,550 $311,843
Diluted net income per share (1) $0.26 $1.79 $1.68 $3.75
(1) Weighted average shares
outstanding (in thousands)
Average common shares
outstanding 79,627 81,921 79,295 82,355
Increase in shares-potential
exercise of options-diluted
basis 918 835 984 745
Weighted average shares
outstanding (in thousands) 80,545 82,756 80,279 83,100
For Trend Information, refer to our Quarterly Financial Statistics on
Radian's (RDN) website.
Radian Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Exhibit B
(In thousands, except share June 30 December 31 June 30
and per-share data) 2007 2006 2006
Assets:
Cash and investments $6,028,815 $5,803,228 $5,598,168
Investments in affiliates 639,571 618,841 492,175
Deferred policy acquisition
costs 232,548 221,769 215,803
Prepaid federal income taxes 860,135 808,740 709,304
Other assets 357,016 476,093 491,897
Total assets $8,118,085 $7,928,671 $7,507,347
Liabilities and
stockholders' equity:
Unearned premiums $987,788 $943,687 $913,879
Reserve for losses and loss
adjustment expenses 909,371 842,283 789,701
Long-term debt 747,929 747,770 747,615
Current income taxes 220,951 - -
Deferred income taxes 888,667 1,129,740 1,020,720
Other liabilities 220,661 197,634 205,264
Total liabilities 3,975,367 3,861,114 3,677,179
Common stock 97 97 97
Additional paid-in capital 436,017 416,193 538,698
Retained earnings 3,609,259 3,489,290 3,222,189
Accumulated other
comprehensive income 97,345 161,977 69,184
Total common
stockholders' equity 4,142,718 4,067,557 3,830,168
Total liabilities and
stockholders' equity $8,118,085 $7,928,671 $7,507,347
Book value per share $51.53 $51.23 $46.95
Treasury Stock Repurchases
(Year-to-Date for Periods
Presented)
Total number of shares
repurchased 398,645(1) 4,500,000 2,000,000
Average price paid per share $57.25 $58.58 $60.96
Total cost of repurchased
shares $22,822,537 $263,600,341 $121,921,937
(1) 0.3 million shares were repurchased in the 2nd quarter of 2007 at a
cost of $18.8 million.
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended June 30, 2007
Exhibit C
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written $217,040 $50,516 $- $267,556
Net premiums earned -
insurance $185,588 $32,422 $- $218,010
Net premiums earned -
credit derivatives 21,090 15,784 - 36,874
Net premiums earned -
total 206,678 48,206 - 254,884
Net investment income 36,287 26,320 43 62,650
Net gains on
securities 19,356 5,609 729 25,694
Change in fair value
of derivative
instruments (70,500) (32,620) - (103,120)
Other income 2,726 126 250 3,102
Total revenues 194,547 47,641 1,022 243,210
Expenses:
Provision for losses 180,152 (6,190) - 173,962
Policy acquisition
costs 12,556 11,642 - 24,198
Other operating
expenses 34,036 12,533 1,644 48,213
Merger expenses 8,990 405 - 9,395
Interest expense 6,341 4,462 1,557 12,360
Total expenses 242,075 22,852 3,201 268,128
Equity in net income
of affiliates - - 49,507 49,507
Pretax income (loss) (47,528) 24,789 47,328 24,589
Income tax provision
(benefit) (19,326) 2,768 20,064 3,506
Net income (loss) $(28,202) $22,021 $27,264 $21,083
Assets $4,762,306 $2,706,691 $649,088 $8,118,085
Deferred policy
acquisition costs 70,525 162,023 - 232,548
Reserve for losses
and loss adjustment
expenses 746,095 163,276 - 909,371
Unearned premiums 287,824 699,964 - 987,788
Stockholders' equity 2,270,272 1,456,497 415,949 4,142,718
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended June 30, 2006
Exhibit D
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written $217,050 $81,825 $- $298,875
Net premiums earned -
insurance $200,641 $32,886 $- $233,527
Net premiums earned - credit
derivatives 8,029 17,530 - 25,559
Net premiums earned - total 208,670 50,416 - 259,086
Net investment income 36,150 23,520 8 59,678
Net gains (losses) on
securities 3,684 1,709 (69) 5,324
Change in fair value of
derivative instruments (3,998) (21,289) - (25,287)
Other income 3,475 120 2,183 5,778
Total revenues 247,981 54,476 2,122 304,579
Expenses:
Provision for losses 77,577 7,283 - 84,860
Policy acquisition costs 15,720 11,100 - 26,820
Other operating expenses 40,542 15,297 2,260 58,099
Interest expense 6,984 4,325 1,229 12,538
Total expenses 140,823 38,005 3,489 182,317
Equity in net income of
affiliates - - 72,038 72,038
Pretax income 107,158 16,471 70,671 194,300
Income tax provision
(benefit) 23,986 (2,565) 24,734 46,155
Net income $83,172 $19,036 $45,937 $148,145
Assets $4,505,679 $2,500,483 $501,185 7,507,347
Deferred policy acquisition
costs 68,843 146,960 - 215,803
Reserve for losses and loss
adjustment expenses 592,526 197,175 - 789,701
Unearned premiums 241,012 672,867 - 913,879
Stockholders' equity 2,225,680 1,266,979 337,509 3,830,168
Radian Group Inc. and Subsidiaries
Segment Information
Six Months Ended June 30, 2007
Exhibit E
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written $439,329 $105,861 $- $545,190
Net premiums earned - insurance $365,831 $66,686 $- $432,517
Net premiums earned - credit
derivatives 36,779 34,723 - 71,502
Net premiums earned - total 402,610 101,409 - 504,019
Net investment income 71,846 51,757 43 123,646
Net gains on securities 30,479 8,433 527 39,439
Change in fair value of derivative
instruments (81,851) (7,480) - (89,331)
Other income 5,575 266 1,079 6,920
Total revenues 428,659 154,385 1,649 584,693
Expenses:
Provision for losses 293,006 (12,002) - 281,004
Policy acquisition costs 29,079 23,373 - 52,452
Other operating expenses 70,308 26,768 5,504 102,580
Merger expenses 12,318 405 - 12,723
Interest expense 13,195 9,058 3,163 25,416
Total expenses 417,906 47,602 8,667 474,175
Equity in net income of affiliates - - 72,279 72,279
Pretax income 10,753 106,783 65,261 182,797
Income tax provision (benefit) (5,747) 26,846 27,148 48,247
Net income $16,500 $79,937 $38,113 $134,550
Radian Group Inc. and Subsidiaries
Segment Information
Six Months Ended June 30, 2006
Exhibit F
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written $440,816 $137,664 $- $578,480
Net premiums earned - insurance $393,612 $67,149 $- $460,761
Net premiums earned - credit
derivatives 17,764 34,258 - 52,022
Net premiums earned - total 411,376 101,407 - 512,783
Net investment income 67,815 46,038 85 113,938
Net gains on securities 17,261 8,887 2,030 28,178
Change in fair value of derivative
instruments 5,123 (12,780) - (7,657)
Other income 7,109 334 3,546 10,989
Total revenues 508,684 143,886 5,661 658,231
Expenses:
Provision for losses 148,674 14,820 - 163,494
Policy acquisition costs 29,065 25,119 - 54,184
Other operating expenses 84,809 30,053 3,514 118,376
Interest expense 13,685 8,351 2,342 24,378
Total expenses 276,233 78,343 5,856 360,432
Equity in net income of affiliates - - 130,378 130,378
Pretax income 232,451 65,543 130,183 428,177
Income tax provision 61,135 9,635 45,564 116,334
Net income $171,316 $55,908 $84,619 $311,843
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter and Six Months Ended and as of June 30, 2007
Exhibit G
Quarter Ended Six Months Ended
June 30 June 30
($ in thousands, except ratios) 2007 2006 2007 2006
Net Premiums Written:
Public finance direct $18,130 $24,808 $30,910 $38,246
Public finance reinsurance 17,495 28,712 35,649 46,695
Structured direct 2,789 6,441 8,036 10,432
Structured reinsurance 5,693 5,404 11,605 8,409
Trade credit reinsurance 805 1,473 731 4,451
Net premiums written - insurance 44,912 66,838 86,931 108,233
Net premiums written - credit
derivatives 5,604 14,987 18,930 29,431
Total Net Premiums Written $50,516 $81,825 $105,861 $137,664
Net Premiums Earned:
Public finance direct $9,961 $7,401 $21,546 $15,154
Public finance reinsurance 11,692 7,865 22,792 16,158
Structured direct 4,389 5,374 9,080 10,286
Structured reinsurance 5,742 5,594 11,936 10,188
Trade credit reinsurance 638 6,652 1,332 15,363
Net premiums earned - insurance 32,422 32,886 66,686 67,149
Net premiums earned - credit
derivatives 15,784 17,530 34,723 34,258
Total Net Premiums Earned $48,206 $50,416 $101,409 $101,407
Refundings included in earned
premium $5,177 $928 $11,763 $3,310
Claims paid:
Trade credit reinsurance $2,625 $4,354 $5,271 $8,354
Other financial guaranty 803 6,919 734 6,809
Conseco 3,011 4,428 6,119 8,745
Total $6,439 $15,701 $12,124 $23,908
Incurred losses:
Trade credit reinsurance $(8,480) $3,244 $(11,616) $7,194
Other financial guaranty 2,290 4,039 (386) 8,658
Conseco - - - (1,032)
Total $(6,190) $7,283 $(12,002) $14,820
Loss ratio- GAAP Basis (12.8)% 14.4% (11.8)% 14.6%
Expense ratio- GAAP Basis (1) 50.2% 52.4% 49.5% 54.4%
37.4% 66.8% 37.7% 69.0%
Net (receipts) payments under
derivatives contracts $(16,147) $(1,226) $(27,375) $65,413
(1) Excludes merger expenses.
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter and Six Months Ended and as of June 30, 2007
Exhibit H
June 30 December 31 June 30
($ in thousands, except ratios) 2007 2006 2006
Capital and surplus $1,066,378 $1,014,958 $989,716
Contingency reserve 380,222 336,719 301,364
Qualified statutory
capital 1,446,600 1,351,677 1,291,080
Unearned premium reserve 846,254 829,340 794,989
Loss and loss expense reserve 73,083 96,829 106,494
Total statutory
policyholders' reserves 2,365,937 2,277,846 2,192,563
Present value of installment
premiums 366,572 345,565 310,178
Reinsurance and soft capital
facilities 150,000 150,000 150,000
Total statutory claims
paying resources $2,882,509 $2,773,411 $2,652,741
Net debt service outstanding $152,351,096 $143,728,116 $126,568,891
Capital leverage ratio (1) 105 106 98
Claims paying leverage ratio (2) 53 52 48
Net par outstanding by product:
Public finance direct $17,131,513 $16,324,170 $14,717,373
Public finance reinsurance 40,063,123 37,488,972 36,020,773
Structured direct 48,071,745 44,960,360 35,152,186
Structured reinsurance 5,270,740 5,192,122 4,792,978
Total $110,537,121 $103,965,624 $90,683,310
Reinsurance business net par
outstanding:
Treaty 59% 59% 59%
Facultative 41% 41% 41%
Reserve for losses and LAE
Specific $29,274 $35,320 $36,569
Conseco 27,855 33,975 40,993
Non-specific 106,147 119,752 119,613
Total $163,276 $189,047 $197,175
(1) Net debt service outstanding divided by qualified statutory capital
(2) Net debt service outstanding divided by total statutory claims paying
resources
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Six Months Ended and as of June 30, 2007
Exhibit I
Quarter Ended
June 30
2007 % 2006 %
Primary New Insurance Written ($ in
millions)
Flow $10,639 63.1% $6,662 57.7%
Structured 6,211 36.9% 4,886 42.3%
Total Primary $16,850 100.0% $11,548 100.0%
Flow
Prime $7,673 72.1% $4,879 73.2%
Alt-A 2,026 19.1% 1,266 19.0%
A minus and below 940 8.8% 517 7.8%
Total Flow $10,639 100.0% $6,662 100.0%
Structured
Prime $581 9.4% $1,287 26.3%
Alt-A 5,200 83.7% 3,555 72.8%
A minus and below 430 6.9% 44 0.9%
Total Structured $6,211 100.0% $4,886 100.0%
Total
Prime $8,254 49.0% $6,166 53.4%
Alt-A 7,226 42.9% 4,821 41.7%
A minus and below 1,370 8.1% 561 4.9%
Total Primary $16,850 100.0% $11,548 100.0%
Total Primary New Insurance Written
by FICO Score
($ in millions)
Flow
<=619 $641 6.0% $387 5.8%
620-679 3,397 32.0% 2,010 30.2%
680-739 3,854 36.2% 2,448 36.7%
>=740 2,747 25.8% 1,817 27.3%
Total Flow $10,639 100.0% $6,662 100.0%
Structured
<=619 $283 4.6% $57 1.2%
620-679 2,090 33.6% 1,604 32.8%
680-739 2,761 44.5% 2,214 45.3%
>=740 1,077 17.3% 1,011 20.7%
Total Structured $6,211 100.0% $4,886 100.0%
Total
<=619 $924 5.5% $444 3.8%
620-679 5,487 32.6% 3,614 31.3%
680-739 6,615 39.2% 4,662 40.4%
>=740 3,824 22.7% 2,828 24.5%
Total Primary $16,850 100.0% $11,548 100.0%
Percentage of primary new insurance
written
Refinances 41% 35%
95.01% LTV and above 21% 13%
ARMs
Less than 5 years 7% 12%
5 years and longer 10% 17%
Primary risk written ($ in millions)
Flow $2,699 83.4% $1,695 94.1%
Structured 537 16.6% 107 5.9%
Total Primary $3,236 100.0% $1,802 100.0%
Pool risk written (In millions) $96 $208
Other risk written (In millions)
Seconds
1st loss $3 $18
2nd loss - 45
NIMs 109 17
International
1st loss-Hong Kong primary
mortgage insurance 31 5
Reinsurance 17 3
Other
Domestic credit default swaps - 12
Total other risk written $160 $100
Six Months Ended
June 30
2007 % 2006 %
Primary New Insurance Written ($ in
millions)
Flow $17,688 58.8% $11,896 48.9%
Structured 12,389 41.2% 12,455 51.1%
Total Primary $30,077 100.0% $24,351 100.0%
Flow
Prime $12,723 71.9% $8,650 72.7%
Alt-A 3,427 19.4% 2,371 19.9%
A minus and below 1,538 8.7% 875 7.4%
Total Flow $17,688 100.0% $11,896 100.0%
Structured
Prime $674 5.5% $3,551 28.5%
Alt-A 11,105 89.6% 7,472 60.0%
A minus and below 610 4.9% 1,432 11.5%
Total Structured $12,389 100.0% $12,455 100.0%
Total
Prime $13,397 44.6% $12,201 50.1%
Alt-A 14,532 48.3% 9,843 40.4%
A minus and below 2,148 7.1% 2,307 9.5%
Total Primary $30,077 100.0% $24,351 100.0%
Total Primary New Insurance Written
by FICO Score
($ in millions)
Flow
<=619 $1,127 6.4% $665 5.6%
620-679 5,652 31.9% 3,557 29.9%
680-739 6,333 35.8% 4,439 37.3%
>=740 4,576 25.9% 3,235 27.2%
Total Flow $17,688 100.0% $11,896 100.0%
Structured
<=619 $409 3.3% $1,445 11.6%
620-679 3,466 28.0% 3,785 30.4%
680-739 5,829 47.0% 4,719 37.9%
>=740 2,685 21.7% 2,506 20.1%
Total Structured $12,389 100.0% $12,455 100.0%
Total
<=619 $1,536 5.1% $2,110 8.7%
620-679 9,118 30.3% 7,342 30.1%
680-739 12,162 40.4% 9,158 37.6%
>=740 7,261 24.2% 5,741 23.6%
Total Primary $30,077 100.0% $24,351 100.0%
Percentage of primary new insurance
written
Refinances 46% 37%
95.01% LTV and above 19% 10%
ARMs
Less than 5 years 23% 27%
5 years and longer 8% 18%
Primary risk written ($ in millions)
Flow $4,445 85.9% $3,024 72.3%
Structured 731 14.1% 1,157 27.7%
Total Primary $5,176 100.0% $4,181 100.0%
Pool risk written (In millions) $185 $269
Other risk written (In millions)
Seconds
1st loss $6 $42
2nd loss 21 177
NIMs 377 106
International
1st loss-Hong Kong primary
mortgage insurance 50 22
Reinsurance 34 5
Other
Domestic credit default swaps - 32
Total other risk written $488 $384
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Six Months Ended and as of June 30, 2007
Exhibit J
June 30 June 30
2007 % 2006 %
Primary insurance in force ($ in
millions)
Flow $91,098 71.0% $81,828 70.5%
Structured 37,172 29.0% 34,168 29.5%
Total Primary $128,270 100.0% $115,996 100.0%
Prime $80,984 63.1% $76,868 66.3%
Alt-A 35,671 27.8% 25,998 22.4%
A minus and below 11,615 9.1% 13,130 11.3%
Total Primary $128,270 100.0% $115,996 100.0%
Primary risk in force ($ in millions)
Flow $22,702 83.2% $20,191 78.5%
Structured 4,580 16.8% 5,528 21.5%
Total Primary $27,282 100.0% $25,719 100.0%
Flow
Prime $17,677 77.9% $15,756 78.0%
Alt-A 3,305 14.5% 2,902 14.4%
A minus and below 1,720 7.6% 1,533 7.6%
Total Flow $22,702 100.0% $20,191 100.0%
Structured
Prime $1,653 36.1% $2,207 39.9%
Alt-A 1,756 38.3% 1,540 27.9%
A minus and below 1,171 25.6% 1,781 32.2%
Total Structured $4,580 100.0% $5,528 100.0%
Total
Prime $19,330 70.9% $17,963 69.8%
Alt-A 5,061 18.5% 4,442 17.3%
A minus and below 2,891 10.6% 3,314 12.9%
Total Primary $27,282 100.0% $25,719 100.0%
Total Primary Risk in Force by FICO
Score
($ in millions)
Flow
<=619 $1,458 6.4% $1,285 6.4%
620-679 7,037 31.0% 6,245 30.9%
680-739 8,264 36.4% 7,410 36.7%
>=740 5,943 26.2% 5,251 26.0%
Total Flow $22,702 100.0% $20,191 100.0%
Structured
<=619 $1,121 24.5% $1,782 32.2%
620-679 1,571 34.3% 1,993 36.1%
680-739 1,262 27.5% 1,209 21.9%
>=740 626 13.7% 544 9.8%
Total Structured $4,580 100.0% $5,528 100.0%
Total
<=619 $2,579 9.4% $3,067 11.9%
620-679 8,608 31.7% 8,238 32.1%
680-739 9,526 34.9% 8,619 33.5%
>=740 6,569 24.1% 5,795 22.5%
Total Primary $27,282 100.0% $25,719 100.0%
Percentage of primary risk in force
Refinances 33% 35%
95.01% LTV and above 20% 15%
ARMs
Less than 5 years 16% 23%
5 years and longer 9% 9%
Pool risk in force ($ in millions)
Prime $2,206 70.2% $2,210 75.0%
Alt-A 297 9.5% 266 9.0%
A minus and below 638 20.3% 470 16.0%
Total $3,141 100.0% $2,946 100.0%
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Six Months Ended and as of June 30, 2007
Exhibit K
June 30 June 30
2007 % 2006 %
Total Primary Risk in Force by LTV
($ in millions)
95.01% and above $5,549 20.3% $3,901 15.2%
90.01% to 95.00% 8,227 30.2% 8,293 32.2%
85.01% to 90.00% 9,497 34.8% 9,291 36.1%
85.00% and below 4,009 14.7% 4,234 16.5%
Total $27,282 100.0% $25,719 100.0%
Total Primary Risk in Force by
Policy Year ($ in millions)
2003 and prior $6,196 22.7% $8,484 33.0%
2004 3,833 14.0% 5,761 22.4%
2005 5,704 20.9% 7,496 29.1%
2006 6,482 23.8% 3,978 15.5%
2007 5,067 18.6% - -
Total $27,282 100.0% $25,719 100.0%
Total Pool Risk in Force by Policy
Year ($ in millions)
2003 and prior 1,732 55.2% $1,803 61.2%
2004 287 9.1% 291 9.9%
2005 650 20.7% 651 22.1%
2006 281 8.9% 201 6.8%
2007 191 6.1% - -
Total Pool risk in Force $3,141 100.0% $2,946 100.0%
Other risk in force (In millions)
Seconds
1st loss $495 $653
2nd loss 590 776
NIMs 796 289
International
1st loss-Hong Kong primary
mortgage insurance 384 293
Reinsurance 79 31
Credit default swaps 7,872 7,889
Other
Domestic credit default swaps 212 224
Financial guaranty wrap - 159
Total other risk in force $10,428 $10,314
Risk to capital ratio-STAT Basis 10.6:1 10.7:1
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Six Months Ended and as of June 30, 2007
Exhibit L
Quarter Ended Six Months Ended
June 30 June 30
2007 2006 2007 2006
Direct claims paid (In
thousands)
Prime $34,226 $29,722 $67,351 $59,831
Alt-A 21,755 15,231 41,753 34,021
A minus and below 35,027 22,390 64,107 45,781
Seconds and other 21,071 10,264 34,692 18,167
Total $112,079 $77,607 $207,903 $157,800
Average claim paid (In
thousands)
Prime $28.4 $25.3 $28.2 $26.1
Alt-A 40.9 33.7 40.3 37.1
A minus and below 31.1 26.7 30.4 27.9
Seconds 27.8 28.4 28.2 25.7
Total $30.9 $27.4 $30.8 $28.4
Loss ratio - GAAP Basis 87.2% 37.2% 72.8% 36.1%
Expense ratio - GAAP Basis (2) 22.5% 26.9% 24.7% 27.7%
109.7% 64.1% 97.5% 63.8%
Reserve for losses by
category (In thousands):
Prime $212,191 $177,692
Alt-A 182,537 134,940
A minus and below 246,062 207,077
Pool insurance 37,531 33,149
Seconds 37,251 30,862
Other 1,004 8,806
Reserve for losses, net 716,576 592,526
Reinsurance recoverable 29,519(1) -
Total $746,095 $592,526
(1) Reinsurance recoverable on a first-loss second lien captive.
(2) Excludes merger expenses.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Six Months Ended and as of June 30, 2007
Exhibit M
June 30 December 31 June 30
2007 2006 2006
Default Statistics
Primary insurance:
Flow
Prime
Number of insured loans 520,488 500,464 499,435
Number of loans in default 14,795 15,141 14,283
Percentage of loans in default 2.84% 3.03% 2.86%
Alt-A
Number of insured loans 68,454 63,469 63,985
Number of loans in default 5,034 4,348 4,167
Percentage of loans in default 7.35% 6.85% 6.51%
A minus and below
Number of insured loans 56,073 52,440 52,348
Number of loans in default 7,456 7,250 6,765
Percentage of loans in default 13.30% 13.83% 12.92%
Total Flow
Number of insured loans 645,015 616,373 615,768
Number of loans in default 27,285 26,739 25,215
Percentage of loans in default 4.23% 4.34% 4.09%
Structured
Prime
Number of insured loans 57,500 62,680 70,416
Number of loans in default 3,612 3,300 2,540
Percentage of loans in default 6.28% 5.26% 3.61%
Alt-A
Number of insured loans 98,242 70,164 76,131
Number of loans in default 4,992 3,647 2,589
Percentage of loans in default 5.08% 5.20% 3.40%
A minus and below
Number of insured loans 32,612 36,597 46,500
Number of loans in default 8,278 9,014 8,193
Percentage of loans in default 25.38% 24.63% 17.62%
Total Structured
Number of insured loans 188,354 169,441 193,047
Number of loans in default 16,882 15,961 13,322
Percentage of loans in default 8.96% 9.42% 6.90%
Total Primary Insurance
Prime
Number of insured loans 577,988 563,144 569,851
Number of loans in default 18,407 18,441 16,823
Percentage of loans in default 3.18% 3.27% 2.95%
Alt-A
Number of insured loans 166,696 133,633 140,116
Number of loans in default 10,026 7,995 6,756
Percentage of loans in default 6.01% 5.98% 4.82%
A minus and below
Number of insured loans 88,685 89,037 98,848
Number of loans in default 15,734 16,264 14,958
Percentage of loans in default 17.74% 18.27% 15.13%
Total Primary Insurance
Number of insured loans 833,369 785,814 808,815
Number of loans in default 44,167(1) 42,700(1) 38,537(1)
Percentage of loans in default 5.30% 5.43% 4.76%
Pool insurance:
Number of loans in default 21,409(2) 18,681(2) 15,338(2)
(1) Includes approximately 2,318, 1,161 and 551 defaults at June 30, 2007,
December 31, 2006 and June 30, 2006, respectively, where reserves have
not been established because no claim payment is currently
anticipated.
(2) Includes approximately 16,101, 13,309 and 9,867 defaults at June 30,
2007, December 31, 2006 and June 30, 2006, respectively, where
reserves have not been established because no claim payment is
currently anticipated.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Six Months Ended and as of June 30, 2007
Exhibit N
Quarter Ended Six Months Ended
June 30 June 30
2007 2006 2007 2006
Net Premiums Written (In
thousands)
Primary and Pool Insurance $184,492 $187,686 $376,600 $381,132
Seconds 6,450 15,245 17,629 25,784
International 6,565 2,276 9,689 4,196
Net premiums written - insurance 197,507 205,207 403,918 411,112
Net premiums written - credit
derivatives 19,533 11,843 35,411 29,704
Total Net Premiums Written $217,040 $217,050 $439,329 $440,816
Net Premiums Earned (In thousands)
Primary and Pool Insurance $174,174 $185,020 $341,329 $360,828
Seconds 8,723 13,848 17,895 28,758
International 2,691 1,773 6,607 4,026
Net premiums earned - insurance 185,588 200,641 365,831 393,612
Net premiums earned - credit
derivatives 21,090 8,029 36,779 17,764
Total Net Premiums Earned $206,678 $208,670 $402,610 $411,376
SMART HOME (In millions)
Ceded Premiums Written $3.2 $2.9 $6.4 $5.1
Ceded Premiums Earned $3.1 $2.8 $6.0 $5.2
Captives
Premiums ceded to captives (In
millions) $30.0 $24.3 $58.1 $47.2
% of total premiums 14.5% 11.4% 14.3% 11.4%
NIW subject to captives (In
millions) $6,146 $3,764 $11,140 $6,540
% of primary NIW 36.5% 32.6% 37.0% 26.9%
IIF included in captives (1) 34.6% 32.1%
RIF included in captives (1) 40.5% 36.5%
Persistency (twelve months ended
June 30) 71.1% 62.8%
June 30 June 30
2007 2006
SMART HOME
% of Primary RIF included in Smart
Home Transactions (1) 7.4% 11.8%
(1) Radian reinsures the middle layer risk positions, while retaining a
significant portion of the total risk comprising the first loss and
most remote risk positions.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of June 30, 2007
ALT-A
Exhibit O
Quarter Ended Six Months Ended
($ in millions) June 30 June 30
2007 % 2006 % 2007 % 2006 %
Primary New
Insurance
Written by
FICO Score
<=619 $84 1.2% $17 0.4% 92 0.6% 23 0.2%
620-659 1,090 15.1% 550 11.4% 1,679 11.6% 1,259 12.8%
660-679 1,221 16.9% 754 15.6% 2,386 16.4% 1,388 14.1%
680-739 3,383 46.8% 2,369 49.1% 7,023 48.3% 4,693 47.7%
>=740 1,448 20.0% 1,131 23.5% 3,352 23.1% 2,480 25.2%
Total $7,226 100.0% $4,821 100.0% 14,532 100.0% 9,843 100.0%
Primary Risk in
Force by FICO
Score
<=619 $38 0.7% $32 0.7%
620-659 767 15.2% 865 19.5%
660-679 811 16.0% 730 16.4%
680-739 2,313 45.7% 1,933 43.5%
>=740 1,132 22.4% 882 19.9%
Total $5,061 100.0% $4,442 100.0%
Primary Risk in
Force by LTV
95.01% and
above $239 4.7% $142 3.2%
90.01% to
95.00% 1,299 25.7% 1,309 29.5%
85.01% to
90.00% 2,044 40.4% 1,882 42.3%
85.00% and
below 1,479 29.2% 1,109 25.0%
Total $5,061 100.0% $4,442 100.0%
Primary Risk in
Force by
Policy Year
2003 and
prior $721 14.2% $1,064 24.0%
2004 551 10.9% 1,008 22.7%
2005 966 19.1% 1,391 31.3%
2006 1,389 27.5% 979 22.0%
2007 1,434 28.3% - -
Total $5,061 100.0% $4,442 100.0%
Radian Group Inc.
Financial Services Supplemental Information
For the Quarter and Six Months Ended and as of June 30, 2007
Exhibit P
Quarter Ended Six Months Ended
June 30 June 30
(In thousands) 2007 2006 2007 2006
Investment in Affiliates-
Selected Information
C-BASS
Balance, beginning of period $444,591 $387,043 $451,395 $364,364
Net income for period 23,209 44,855 16,405 74,881
Dividends received - 16,547 - 23,894
Balance, end of period $467,800 $415,351 $467,800 $415,351
Sherman
Balance, beginning of period $143,698 $49,608 $167,412 $81,753
Net income for period 26,298 27,182 55,874 55,497
Dividends received - - 51,512 60,515
Other comprehensive income 1,741 - (37) 55
Balance, end of period $171,737 $76,790 $171,737 $76,790
Portfolio Information:
C-BASS
Servicing portfolio $58,100,000 $56,460,000
Total assets 6,619,605 6,289,258
Servicing income 48,621 40,199 $91,747 $71,547
Net interest income 66,572 69,872 145,424 134,912
Total revenues 101,099 171,891 140,080 300,204
Sherman
Total assets $1,778,299 $1,058,989
Total revenues $272,449 $253,168 $529,920 $493,570
Radian owns a 46% interest in C-BASS and an interest in Sherman,
consisting of 40.96% of the Class A Common Units of Sherman (Class A
Common Units represent 94% of the total equity in Sherman) and 50% of the
Preferred Units of Sherman.
All statements made in this news release that address events or developments 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 Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management's current views and assumptions with respect to future events. The forward-looking statements, as well as Radian's prospects as a whole, are subject to risks and uncertainties, including the following: changes in general financial and political conditions such as extended national or regional economic recessions (or expansions), changes in housing demand or mortgage originations, changes in housing values, population trends and changes in household formation patterns, changes in unemployment rates, changes or volatility in interest rates, consumer confidence, or changes in credit spreads; changes in investor perception of the strength of private mortgage insurers or financial guaranty providers; risks faced by the businesses, municipalities or pools of assets covered by Radian's insurance; the loss of a customer with whom Radian has a concentration of its insurance in force or the influence of large customers; increased severity or frequency of losses associated with certain Radian products that are riskier than traditional mortgage insurance and financial guaranty insurance policies; material changes in persistency rates of Radian's mortgage insurance policies; changes in Radian's credit ratings or the insurance financial-strength ratings assigned by the major ratings agencies to Radian's operating subsidiaries; heightened competition from other insurance providers and from alternative products to private mortgage insurance and financial guaranty insurance; changes in the charters or business practices of Fannie Mae and Freddie Mac; the application of federal or state consumer, lending, insurance and other applicable laws and regulations, or unfavorable changes in these laws and regulations or the way they are interpreted, including: (i) the possibility of private lawsuits or investigations by state insurance departments and state attorneys general alleging that services offered by the mortgage insurance industry, such as captive reinsurance, pool insurance and contract underwriting, are violative of the Real Estate Settlement Procedures Act and/or similar state regulations (particularly in light of inquiries that we and other mortgage insurers have received from the New York Insurance Department and public reports that other state insurance departments are investigating or planning to investigate captive reinsurance arrangements used in the mortgage insurance industry) or (ii) legislative and regulatory changes affecting demand for private mortgage insurance or financial guaranty insurance; 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 or financial guaranty businesses or to estimate accurately the fair value amounts of derivative financial guaranty contracts in determining gains and losses on these contracts; changes in accounting guidance from the SEC or the Financial Accounting Standards Board regarding income recognition and the treatment of loss reserves in the mortgage insurance or financial guaranty industries; changes in claims against mortgage insurance products resulting from the aging of Radian's mortgage insurance policies; vulnerability to the performance of Radian's strategic investments; changes in the availability of affordable or adequate reinsurance for our non-prime risk; legal and other limitations on the amount of dividends we may receive from our insurance subsidiaries; international expansion of our mortgage insurance and financial guaranty businesses into new markets and risks associated with our international business activities; and risks and uncertainties associated with our proposed merger with MGIC Investment Corporation, including, without limitation: the ability to complete the transaction on the proposed terms and schedule; the risk that the two companies and their businesses will not be integrated successfully; customer attrition and disruption from the transaction making it more difficult to maintain relationships with customers, employees or other business relationships; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; the risk that potential sales of assets in connection with the merger may negatively impact the financial performance of the combined company; and the possibility that the merger may not be completed, whether due to the failure to receive the requisite regulatory approvals or otherwise, which may have an adverse effect on our customers, employees and other business relationships, and may have a materially adverse impact on our financial results and prospects. For more information regarding these risks and uncertainties, as well as certain additional risks that we face, investors should refer to the risk factors detailed in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2006 and in the joint proxy statement/prospectus for our 2007 annual meeting. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date of this news release. Radian does not intend to, and disclaims any duty or obligation to, update or revise any forward-looking statements made in this news release to reflect new information, future events or for any other reason.
