PHILADELPHIA, Feb. 13 /PRNewswire-FirstCall/ -- Radian Group Inc. today confirmed its expectation that its mortgage insurance business will have sufficient capital and liquidity to pay all anticipated claims, maintain a strong market position and continue to write new mortgage insurance business throughout 2009.
Noting Moody's Investors Service's rating action today, S.A. Ibrahim, Chief Executive Officer of Radian, commented, "We do not believe today's action by Moody's reflects our substantial claims-paying resources and the improving quality of our mortgage insurance portfolio. Radian Guaranty is a long-standing approved mortgage insurer to the GSEs. We do not expect that this action will result in any change to our ability to insure loans that are sold to either Fannie Mae or Freddie Mac. In addition, we remain encouraged by recent government efforts including the allocation of $50 billion to aid troubled home owners. Furthermore, we are optimistic regarding recent comments by the FHFA, acknowledging the need to make TARP funds available to the mortgage insurance industry."
Radian provided the following business highlights: -- The Company remains adequately capitalized with a strong market position and believes that it can write MI business throughout 2009 while maintaining a risk to capital level below the 25 to 1 statutory limit. -- Radian Asset, the principal financial guaranty subsidiary, continues to serve as an important source of capital support for Radian Guaranty, the principal mortgage insurance subsidiary, and is expected to continue to provide this core business with cash infusions over time. -- The Company continues to believe that it has adequate liquidity in its mortgage insurance business to pay all future claims for the next 3 years without including any of the Financial Guaranty capital. -- In December, Radian further enhanced its strong holding company liquidity position by amending its credit agreement to provide the Company with greater financial flexibility by limiting the scope of certain covenants. Radian has no ratings, risk to capital, or debt to capitalization covenants.
Radian remains focused on efficiently managing its operations, preserving capital through a variety of loss management strategies, and maximizing opportunities to write profitable, new business that will best position the Company for the long term.
About Radian
Radian Group Inc. , headquartered in Philadelphia, provides private mortgage insurance and related risk management products and services to mortgage lenders nationwide through its principal operating subsidiary, Radian Guaranty Inc. These services help promote and preserve homeownership opportunities for homebuyers, while protecting lenders from default-related losses on residential first mortgages and facilitating the sale of low downpayment mortgages in the secondary market. Additional information may be found at http://www.radian.biz/.
Forward Looking Statements
All statements in this news release 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 Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. These statements, which 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 information. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties, including the following:
-- changes in general financial and political conditions, such as a deepening of the existing national economic recession, further decreases in housing demand, mortgage originations or housing values (in particular, further deterioration in the housing, mortgage and related credit markets, which would harm our future consolidated results of operations and could cause losses for our businesses to be worse than expected), a further reduction in the liquidity in the capital markets and further contraction of credit markets, further increases in unemployment rates, changes or volatility in interest rates or consumer confidence, changes in credit spreads, changes in the way investors perceive the strength of private mortgage insurers or financial guaranty providers, investor concern over the credit quality and specific risks faced by the particular businesses, municipalities or pools of assets covered by our insurance; -- Further economic changes or catastrophic events in geographic regions where our mortgage insurance or financial guaranty insurance in force is more concentrated; -- our ability to successfully execute upon our internally sourced capital plan, and if necessary, to obtain additional capital to support new business writings in our mortgage insurance business and our long-term liquidity needs and to protect our credit ratings and the financial strength ratings of Radian Guaranty Inc., our primary mortgage insurance subsidiary, from further downgrades; -- a further decrease in the volume of home mortgage originations due to reduced liquidity in the lending market, tighter underwriting standards and the on-going deterioration in housing markets throughout the U.S.; -- our ability to maintain adequate risk-to-capital ratios, leverage ratios and surplus requirements in our mortgage insurance business in light of on-going losses in this business; -- the concentration of our mortgage insurance business among a relatively small number of large customers; -- disruption in the servicing of mortgages covered by our insurance policies; -- the aging of our mortgage insurance portfolio and changes in severity or frequency of losses associated with certain of our products that are riskier than traditional mortgage insurance or financial guaranty insurance policies; -- the performance of our insured portfolio of higher risk loans, such as Alternative-A ("Alt-A") and subprime loans, and adjustable rate products, such as adjustable rate mortgages and interest-only mortgages, which have resulted in increased losses in 2007 and 2008 and are expected to result in further losses; -- reduced opportunities for loss mitigation in markets where housing values fail to appreciate or continue to decline; -- changes in persistency rates of our mortgage insurance policies caused by changes in refinancing activity, in the rate of appreciation or depreciation of home values and changes in the mortgage insurance cancellation requirements of mortgage lenders and investors; -- further downgrades or threatened downgrades of, or other ratings actions with respect to, our credit ratings or the ratings assigned by the major rating agencies to any of our rated insurance subsidiaries at any time (in particular, the credit rating of Radian Group Inc. and the financial strength ratings assigned to Radian Guaranty Inc.); -- heightened competition for our mortgage insurance business from others such as the Federal Housing Administration and the Veterans' Administration or other private mortgage insurers (in particular those that have been assigned higher ratings from the major rating agencies); -- changes in the charters or business practices of Federal National Mortgage Association ("Fannie Mae") and Freddie Mac, the largest purchasers of mortgage loans that we insure, and our ability to remain an eligible provider to both Freddie Mac and Fannie Mae; -- the application of existing federal or state consumer, lending, insurance, securities and other applicable laws and regulations, or changes in these laws and regulations or the way they are interpreted; including, without limitation: (i) the outcome of existing investigations or the possibility of private lawsuits or other formal 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, (ii) legislative and regulatory changes affecting demand for private mortgage insurance, or (iii) legislation and regulatory changes limiting or restricting our use of (or requirements for) additional capital, the products we may offer, the form in which we may execute the credit protection we provide or the aggregate notional amount of any product we may offer for any one transaction or in the aggregate; -- 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 the premium deficiencies for our first- and second-lien mortgage insurance business, or to estimate accurately the fair value amounts of derivative contracts in our mortgage insurance and financial guaranty businesses in determining gains and losses on these contracts; -- volatility in our earnings caused by changes in the fair value of our derivative instruments and our need to reevaluate the premium deficiencies in our mortgage insurance business on a quarterly basis; -- changes in accounting guidance from the Securities and Exchange Commission ("SEC") or the Financial Accounting Standards Board; -- legal and other limitations on amounts we may receive from our subsidiaries as dividends or through tax and expense sharing arrangements with our subsidiaries; and -- vulnerability to the performance of our investment in Sherman Financial Group LLC.
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 news release. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements made in this news release to reflect new information or future events or for any other reason.
