WINSTON-SALEM, N.C., Aug. 11 /PRNewswire-FirstCall/ -- Triad Guaranty Inc. (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 http://www.sec.gov/ or via our web site at http://www.triadguaranty.com/. We have updated the quarterly statistical and supplemental information for the 2010 second quarter results on our web site at http://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 http://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, 2010 2010 ---- ---- Revenue: Earned premiums $72,330 $45,888 Net investment income 10,561 9,873 Realized investment gains (losses) (985) (242) Other income (loss) - (8) Total revenues 81,906 55,511 ------ ------ Losses and expenses: Net settled claims 145,460 (43,684) Change in reserves (158,058) 111,204 Loss adjustment expenses 4,828 4,718 Net losses and LAE (7,770) 72,238 Change in premium deficiency reserve - - Interest expense 2,816 2,469 Other operating expenses 7,021 9,332 Total losses and expenses 2,067 84,039 ----- ------ Income (loss) before income taxes 79,839 (28,528) Income taxes (benefit) 717 (717) --- ---- Net income (loss) $79,122 $(27,811) ======= ======== Dec 31, Sept 30, Jun 30, Mar 31, 2009 2009 2009 2009 ---- ---- ---- ---- Revenue: Earned premiums $34,891 $35,576 $64,833 $44,358 Net investment income 9,739 12,342 10,859 11,192 Realized investment gains (losses) 649 3,253 2,017 (4,565) Other income (loss) 12,536 127 2 2 Total revenues 57,815 51,298 77,711 50,987 ------ ------ ------ ------ Losses and expenses: Net settled claims 153,749 157,881 149,863 53,920 Change in reserves (30,195) (15,836) 278,956 39,628 Loss adjustment expenses 5,370 3,713 2,549 8,029 Net losses and LAE 128,924 145,758 431,368 101,577 Change in premium deficiency reserve - - - - Interest expense 2,243 1,202 1,895 694 Other operating expenses 8,160 9,659 8,680 9,411 Total losses and expenses 139,327 156,619 441,943 111,682 ------- ------- ------- ------- Income (loss) before income taxes (81,512) (105,321) (364,232) (60,695) Income taxes (benefit) (2,368) (3,426) (4,813) (5,521) ------ ------ ------ ------ Net income (loss) $(79,144) $(101,895) $(359,419) $(55,174) ======== ========= ========= ======== Dec 31, Sep 30, Jun 30, 2008 2008 2008 ---- ---- ---- Revenue: Earned premiums $49,840 $65,654 $69,864 Net investment income 10,509 10,349 9,175 Realized investment gains (losses) (18,944) (6,519) (3,799) Other income (loss) 2 2 2 Total revenues 41,407 69,486 75,242 ------ ------ ------ Losses and expenses: Net settled claims 69,372 59,357 68,263 Change in reserves 106,080 165,958 218,568 Loss adjustment expenses 2,647 5,879 5,918 Net losses and LAE 178,099 231,194 292,749 Change in premium deficiency reserve - - (15,000) Interest expense 694 691 696 Other operating expenses 8,639 8,726 27,238 Total losses and expenses 187,432 240,611 305,683 ------- ------- ------- Income (loss) before income taxes (146,025) (171,125) (230,441) Income taxes (benefit) (23,818) (11,030) (31,630) ------- ------- ------- Net income (loss) $(122,207) $(160,095) $(198,811) ========= ========= ========= Condensed Balance Sheets As Of ------------------------------- (Dollars in thousands) ---------------------- Jun 30, Mar 31, 2010 2010 ---- ---- Assets Invested assets $936,158 $957,115 Cash 35,576 38,662 Real estate acquired - - Prepaid federal income tax - - Reinsurance recoverable 49,829 52,963 Other assets 64,000 54,406 Total assets $1,085,563 $1,103,146 ========== ========== Liabilities and stockholders' equity Liabilities: Losses and loss adjustment expenses $1,307,028 $1,468,719 Deferred payment obligation 292,169 229,953 Accrued expenses and other liabilities 134,511 102,677 Total liabilities 1,733,708 1,835,892 (Deficit in assets) total stockholders' equity (648,145) (732,746) Total liabilities and stockholders' equity $1,085,563 $1,103,146 ========== ========== Dec 31, Sept 30, Jun 30, Mar 31, 2009 2009 2009 2009 ---- ---- ---- ---- Assets Invested assets $811,481 $846,905 $851,640 $918,531 Cash 21,839 7,480 31,600 21,394 Real estate acquired - - - 526 Prepaid federal income tax - - - 15 Reinsurance recoverable 233,499 245,436 234,248 182,589 Other assets 58,007 54,331 57,650 52,307 Total assets $1,124,826 $1,154,152 $1,175,138 $1,175,362 ========== ========== ========== ========== Liabilities and stockholders' equity Liabilities: Losses and loss adjustment expenses $1,537,043 $1,576,303 $1,591,207 $1,262,746 Deferred payment obligation 168,386 97,048 27,020 - Accrued expenses and other liabilities 91,215 71,291 52,066 59,477 Total liabilities 1,831,184 1,779,179 1,704,828 1,356,755 (Deficit in assets) total stockholders' equity (706,358) (625,027) (529,690) (181,393) Total liabilities and stockholders' equity $1,124,826 $1,154,152 $1,175,138 $1,175,362 ========== ========== ========== ========== Dec 31, Sep 30, Jun 30, 2008 2008 2008 ---- ---- ---- Assets Invested assets $895,422 $890,720 $869,022 Cash 39,940 47,818 19,669 Real estate acquired 713 3,661 6,202 Prepaid federal income tax 15 15 63,184 Reinsurance recoverable 150,848 111,827 55,316 Other assets 43,596 47,915 50,405 Total assets $1,130,534 $1,101,956 $1,063,798 ========== ========== ========== Liabilities and stockholders' equity Liabilities: Losses and loss adjustment expenses $1,187,840 $1,042,053 $817,262 Deferred payment obligation - - - Accrued expenses and other liabilities 44,831 30,887 40,714 Total liabilities 1,267,200 1,130,356 922,889 (Deficit in assets) total stockholders' equity (136,666) (28,400) 140,909 Total liabilities and stockholders' equity $1,130,534 $1,101,956 $1,063,798 ========== ========== ==========
Triad Guaranty Inc.
CONTACT: Bob Ogburn, Vice President and Treasurer, +1-336-723-1282 ext.
1167 or bogburn@tgic.com
Web Site: http://www.triadguaranty.com/
