- Record 2006 diluted EPS increases 19.8 percent to $7.08
- Grows book value by 16.1 percent over 2005
- Posts fourth quarter 2006 diluted EPS of $1.96
PHILADELPHIA, Jan. 23 /PRNewswire-FirstCall/ -- Radian Group Inc.
(NYSE: RDN) today reported that for the year ended December 31, 2006,
Radian earned record net income of $582.2 million and diluted net income
per share of $7.08. This represents an increase of 11.3 percent and 19.8
percent, respectively, over 2005. Book value per share at December 31,
2006, was $51.23, an increase of 16.1 percent from a year earlier.
For the fourth quarter, Radian reported net income of $158.4 million
and diluted net income per share of $1.96, compared to $104.5 million and
$1.24 reported in the fourth quarter of 2005.
"Radian delivered record net income and grew book value by 16.1
percent, despite a challenging operating environment for our businesses
including tight credit-spreads and competition from alternative products,"
said Chief Executive Officer S.A. Ibrahim. "This performance demonstrates
that our strategy to focus on diversification while maintaining a strict
risk management culture continues to deliver long-term value."
In its mortgage insurance business, Radian said it continued to benefit
from its unique capital markets expertise, as well as positive trends in
the mortgage market including stable interest rates and strong employment.
The company also made strong progress in its international expansion
efforts, establishing Radian Australia Limited and announcing a multi-year
partnership with St. George Insurance Australia, a wholly owned subsidiary
of St. George Bank, Australia's fifth largest bank.
Mr. Ibrahim noted that the mortgage insurance business experienced a
seasonal increase in delinquencies in the fourth quarter of 2006. The loss
reserve, while up $57.0 million on a gross basis from year-end 2005, was up
only slightly from the third quarter, due in part to an improved economic
outlook.
"Forecasts for interest rate stability, strong employment and improved
persistency bode well for the mortgage insurance industry," Mr. Ibrahim
added. "In this environment, we believe we are well positioned to benefit
over the long term from both cyclical and structural opportunities in the
mortgage market."
The company's financial guaranty business continued to perform well in
a difficult environment, reporting a 17.9 percent increase in net premiums
written year-over-year. Radian also reported progress in international
efforts for this business as it finds an attractive, fast-growing synthetic
market for the AA credit enhancement solutions that are at the core of its
success.
"During the year, we achieved an important milestone for our financial
guaranty business when S&P affirmed the AA financial strength rating for
Radian Asset Assurance, and revised its outlook upward to stable," Mr.
Ibrahim said. "In the fourth quarter, we exceeded $100 billion in net par
outstanding. We believe that these milestones, along with the outstanding
performance throughout the year, validate our AA franchise strategy. Our
goal in 2007 is to continue to prudently grow our financial guaranty
business."
In the Financial Services segment, both C-BASS and Sherman continued to
be important and steady contributors to Radian's results.
The key financial highlights of the quarter and year ended December 31,
2006, are as follows:
Key Financial Highlights (dollars in thousands, except per share data)
Fourth quarter
Quarter ended Quarter ended
December 31, December 31, Percent
2006 2005 Change
Revenue $347,884 $298,641 16.5%
Net income $158,370 $104,461 51.6%
Diluted net income per share $1.96 $1.24 58.1%
Net premiums written $278,700 $272,721 2.2%
Net premiums earned $248,919 $262,031 (5.0)%
Equity in net income
of affiliates $70,745 $55,746 26.9%
Book value per share $51.23 $44.11 16.1%
Full Year
Year Ended Year Ended Percent
December 31, December 31, Change
2006 2005
Revenue $1,327,946 $1,298,151 2.3%
Net income $582,172 $522,854 11.3%
Diluted net income per share $7.08 $5.91 19.8%
Net premiums written $1,111,985 $1,100,687 1.0%
Net premiums earned $1,015,846 $1,018,670 (0.3)%
Equity in net income
of affiliates $256,993 $217,692 18.1%
Radian will hold a conference call on Wednesday, January 24, 2007, at
9:00 a.m. Eastern time to discuss the company's fourth quarter and annual
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.
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
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 December 31, 2006
Exhibit D: Segment Information Quarter Ended December 31, 2005
Exhibit E: Segment Information Twelve Months Ended December 31, 2006
Exhibit F: Segment Information Twelve Months Ended December 31, 2005
Exhibit G: Financial Guaranty Insurance Supplemental Information -
Quarter and Twelve Months Ended and as of December 31, 2006
Exhibit H: Financial Guaranty Insurance Supplemental Information -
Quarter and Twelve Months Ended and as of December 31, 2006
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 Year Ended
December 31 December 31
2006 2005 2006 2005
(In thousands, except
per-share data)
Revenues:
Net premiums written $278,700 $272,721 $1,111,985 $1,100,687
Net premiums earned $248,919 $262,031 $1,015,846 $1,018,670
Net investment income 60,222 54,303 234,345 208,422
Net gains on securities 11,255 11,195 40,842 36,638
Change in fair value of
derivative instruments 23,097 (36,131) 16,066 9,170
Other income 4,391 7,243 20,847 25,251
Total revenues 347,884 298,641 1,327,946 1,298,151
Expenses:
Provision for losses 84,389 104,865 369,278 390,633
Policy acquisition costs 31,074 27,496 111,609 115,851
Other operating expenses 61,552 62,958 242,634 225,977
Interest expense 12,256 11,940 48,149 43,043
Total expenses 189,271 207,259 771,670 775,504
Equity in net income of
affiliates 70,745 55,746 256,993 217,692
Pretax income 229,358 147,128 813,269 740,339
Provision for income taxes 70,988 42,667 231,097 217,485
Net income $158,370 $104,461 $582,172 $522,854
Diluted net income per
share (1) $1.96 $1.24 $7.08 $5.91
(1) Net income per share
reconciliation
Net income $158,370 $104,461 $582,172 $522,854
Interest expense on
convertible senior
debentures (net of tax) - - - 1,871
Net income available to
common stockholders $158,370 $104,461 $582,172 $524,725
Weighted average shares
outstanding (in thousands)
Average common shares
outstanding 79,923 83,028 81,338 85,637
Increase in shares-
potential exercise of
options-diluted basis 770 889 923 894
Increase in shares-
contingently convertible
debt (2) - - - 2,215
Weighted average shares
outstanding (in thousands) 80,693 83,917 82,261 88,746
(2) The 2005 period includes the impact of shares underlying convertible
debt that was redeemed on August 1, 2005. The impact
on diluted net income per share of including these shares in the
calculation was a reduction of $0.13 per share for the
year ended December 31, 2005.
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
December 31 December 31
(In thousands, except share and
per-share data) 2006 2005
Assets:
Cash and investments $5,827,344 $5,521,561
Investments in affiliates 618,841 446,151
Deferred policy acquisition costs 221,769 208,325
Prepaid federal income taxes 808,740 585,514
Other assets 451,977 469,059
Total assets $7,928,671 $7,230,610
Liabilities and stockholders' equity:
Unearned premiums $943,687 $849,360
Reserve for losses and loss
adjustment expenses 842,283 801,002
Long-term debt 747,770 747,466
Deferred federal income taxes 1,129,740 961,993
Other liabilities 197,634 207,909
Total liabilities 3,861,114 3,567,730
Common stock 97 97
Additional paid-in capital 416,193 629,019
Retained earnings 3,489,290 2,913,649
Accumulated other comprehensive
income 161,977 120,115
Total common stockholders' equity 4,067,557 3,662,880
Total liabilities and
stockholders' equity $7,928,671 $7,230,610
Book value per share $51.23 $44.11
Treasury Stock Repurchases (Year-to-Date for Periods Presented)
Total number of shares repurchased 4,500,000 (1) 10,767,800
Average price paid per share $58.58 $49.58
Total cost of repurchased shares $263,600,341 $533,888,969
(1) 1.5 million shares were repurchased in the 4th quarter of 2006 at a
cost of $81.1 million.
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended December 31, 2006
Exhibit C
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written $202,362 $76,338 $- $278,700
Net premiums earned $199,207 $49,712 $- $248,919
Net investment income 34,947 25,268 7 60,222
Net gains (losses) on
securities 11,956 (1,068) 367 11,255
Change in fair value of
derivative instruments 1,852 21,245 - 23,097
Other income 2,967 74 1,350 4,391
Total revenues 250,929 95,231 1,724 347,884
Expenses:
Provision for losses 80,328 4,061 - 84,389
Policy acquisition costs 20,628 10,446 - 31,074
Other operating expenses 43,278 13,680 4,594 61,552
Interest expense 6,581 4,278 1,397 12,256
Total expenses 150,815 32,465 5,991 189,271
Equity in net income of
affiliates - - 70,745 70,745
Pretax income 100,114 62,766 66,478 229,358
Provision for income taxes 30,004 17,716 23,268 70,988
Net income $70,110 $45,050 $43,210 $158,370
Assets $4,619,451 $2,680,738 $628,482 $7,928,671
Deferred policy
acquisition costs 68,381 153,388 - 221,769
Reserve for losses and
loss adjustment expenses 653,236 189,047 - 842,283
Unearned premiums 249,293 694,394 - 943,687
Stockholders' equity 2,259,796 1,377,263 430,498 4,067,557
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended December 31, 2005
Exhibit D
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written $205,334 $67,387 $- $272,721
Net premiums earned $209,866 $52,165 $- $262,031
Net investment income 31,309 22,962 32 54,303
Net gains on securities 9,692 1,288 215 11,195
Change in fair value of
derivative instruments (2,831) (33,324) 24 (36,131)
Other income 4,384 69 2,790 7,243
Total revenues 252,420 43,160 3,061 298,641
Expenses:
Provision for losses 99,413 5,452 - 104,865
Policy acquisition costs 14,226 13,270 - 27,496
Other operating expenses 45,286 16,511 1,161 62,958
Interest expense 6,650 4,251 1,039 11,940
Total expenses 165,575 39,484 2,200 207,259
Equity in net income of
affiliates - - 55,746 55,746
Pretax income 86,845 3,676 56,607 147,128
Provision for income taxes 25,143 (2,288) 19,812 42,667
Net income $61,702 $5,964 $36,795 $104,461
Assets $4,367,804 $2,405,234 $457,572 $7,230,610
Deferred policy
acquisition costs 67,211 141,114 - 208,325
Reserve for losses and
loss adjustment expenses 596,210 204,792 - 801,002
Unearned premiums 212,875 636,485 - 849,360
Stockholders' equity 2,080,445 1,251,396 331,039 3,662,880
Radian Group Inc. and Subsidiaries
Segment Information
Year Ended December 31, 2006
Exhibit E
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written $849,111 $262,874 $- $1,111,985
Net premiums earned $812,015 $203,831 $- $1,015,846
Net investment income 138,310 95,895 140 234,345
Net gains on securities 30,163 7,827 2,852 40,842
Change in fair value of
derivative instruments 3,682 12,384 - 16,066
Other income 13,075 692 7,080 20,847
Total revenues 997,245 320,629 10,072 1,327,946
Expenses:
Provision for losses 348,618 20,660 - 369,278
Policy acquisition costs 64,964 46,645 - 111,609
Other operating expenses 172,020 59,772 10,842 242,634
Interest expense 26,623 16,590 4,936 48,149
Total expenses 612,225 143,667 15,778 771,670
Equity in net income of
affiliates - - 256,993 256,993
Pretax income 385,020 176,962 251,287 813,269
Provision for income taxes 102,266 40,880 87,951 231,097
Net income $282,754 $136,082 $163,336 $582,172
Radian Group Inc. and Subsidiaries
Segment Information
Year Ended December 31, 2005
Exhibit F
Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written $877,632 $223,055 $- $1,100,687
Net premiums earned $806,897 $211,773 $- $1,018,670
Net investment income 118,325 89,977 120 208,422
Net gains (losses) on
securities 27,649 10,737 (1,748) 36,638
Change in fair value of
derivative instruments 4,110 5,245 (185) 9,170
Other income 19,008 939 5,304 25,251
Total revenues 975,989 318,671 3,491 1,298,151
Expenses:
Provision for losses 359,116 31,517 - 390,633
Policy acquisition costs 62,852 52,999 - 115,851
Other operating expenses 152,731 64,978 8,268 225,977
Interest expense 24,191 15,105 3,747 43,043
Total expenses 598,890 164,599 12,015 775,504
Equity in net income
(loss) of affiliates - (361) 218,053 217,692
Pretax income 377,099 153,711 209,529 740,339
Provision for income
taxes 108,493 35,657 73,335 217,485
Net income $268,606 $118,054(1) $136,194 $522,854(1)
(1) Reflects a $4.1 million net loss from 1st quarter 2005 recapture of
previously ceded business by one of the primary Financial Guaranty
insurers (in millions):
Incr/(Decr)
Net premiums earned $(4.6)
Policy acquisition costs 1.7
Provision for income taxes (2.2)
Net loss $(4.1)
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter and Year Ended and as of December 31, 2006
Exhibit G
Quarter Ended Year Ended
($ in thousands, except ratios) December 31 December 31
2006 2005 2006 2005
Net Premiums Written:
Public finance direct $30,636 $21,832 $80,234 $73,117
Public finance reinsurance 20,526 16,443 81,065 77,797
Structured direct 18,981 18,923 78,107 71,211
Structured reinsurance 5,950 4,294 18,869 20,649
Trade credit reinsurance 245 5,895 4,599 35,023
76,338 67,387 262,874 277,797
Impact of recapture (1) - - - (54,742)
Net Premiums Written $76,338 $67,387 $262,874 $223,055
Net Premiums Earned:
Public finance direct $9,336 $7,866 $33,017 $32,533
Public finance reinsurance 9,510 8,752 37,765 34,413
Structured direct 23,156 22,359 90,295 79,617
Structured reinsurance 5,516 4,877 21,278 20,440
Trade credit reinsurance 2,194 8,311 21,476 49,309
49,712 52,165 203,831 216,312
Impact of recapture (2) - - - (4,539)
Net Premiums Earned $49,712 $52,165 $203,831 $211,773
Refundings included in earned
premium $3,111 $3,282 $11,778 $12,796
Claims paid:
Trade credit reinsurance $1,338 $6,623 $15,144 $23,401
Other financial guaranty 248 (1,224) 7,529 11,708
Conseco 3,513 6,181 15,763 29,574
Total $5,099 $11,580 $38,436 $64,683
Incurred losses:
Trade credit reinsurance $(30) $1,586 $4,991 $16,019
Other financial guaranty 4,091 3,866 16,701 15,498
Conseco - - (1,032) -
Total $4,061 $5,452 $20,660 $31,517
Loss ratio- GAAP Basis 8.2% 10.5% 10.1% 14.9%
Expense ratio- GAAP Basis 48.5% 57.1% 52.2% 55.7%
56.7% 67.6% 62.3% 70.6%
Net claims paid (received) under
derivatives contracts $(729) $(1,419) $63,548 $(7,594)
(1) Reflects the impact on net premiums written of the first quarter 2005
recapture of previously ceded business by one of the primary Financial
Guaranty insurers:
(In thousands)
Public reinsurance 48,238
Structured reinsurance 6,504
(2) Reflects the impact on net premiums earned of the first quarter 2005
recapture of previously ceded business by one of the primary Financial
Guaranty insurers:
(In thousands)
Public reinsurance 3,870
Structured reinsurance 669
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter and Year Ended and as of December 31, 2006
Exhibit H
($ in thousands, except ratios) December 31 December 31
2006 2005
Capital and surplus $1,014,958 $1,004,505
Contingency reserve 336,719 271,907
Qualified statutory capital 1,351,677 1,276,412
Unearned premium reserve 829,340 751,656
Loss and loss expense reserve 96,829 108,576
Total policyholders' reserves 2,277,846 2,136,644
Present value of installment premiums 345,565 302,953
Reinsurance and soft capital
facilities 150,000 150,000
Total claims paying resources $2,773,411 $2,589,597
Net debt service outstanding $143,728,116 $110,344,057
Capital leverage ratio (1) 106 86
Claims paying leverage ratio (2) 52 43
Net par outstanding by product:
Public finance direct $16,324,170 $14,043,786
Public finance reinsurance 37,488,972 33,047,512
Structured direct 44,960,360 24,608,489
Structured reinsurance 5,192,122 4,952,146
Total $103,965,624 $76,651,933
Reinsurance business net par outstanding:
Treaty 59% 58%
Facultative 41% 42%
Reserve for losses and LAE
Specific $35,320 $29,311
Conseco 33,975 50,770
Non-specific 119,752 124,711
Total $189,047 $204,792
(1) Net debt service outstanding divided by qualified statutory capital
(2) Net debt service outstanding divided by total claims paying resources
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Year Ended and as of December 31, 2006
Exhibit I
Quarter Ended
December 31
2006 % 2005 %
Primary New Insurance Written ($ in
millions)
Flow $6,451 85.2% $6,740 61.7%
Structured 1,123 14.8% 4,188 38.3%
Total Primary $7,574 100.0% $10,928 100.0%
Flow
Prime $4,608 71.4% $5,025 74.6%
Alt-A 1,276 19.8% 1,159 17.2%
A minus and below 567 8.8% 556 8.2%
Total Flow $6,451 100.0% $6,740 100.0%
Structured
Prime $341 30.4% $1,676 40.0%
Alt-A 685 61.0% 1,707 40.8%
A minus and below 97 8.6% 805 19.2%
Total Structured $1,123 100.0% $4,188 100.0%
Total
Prime $4,949 65.3% $6,701 61.3%
Alt-A 1,961 25.9% 2,866 26.2%
A minus and below 664 8.8% 1,361 12.5%
Total Primary $7,574 100.0% $10,928 100.0%
Total Primary New Insurance Written
by FICO Score
($ in millions)
Flow
<=619 $498 7.7% $327 4.8%
620-679 2,049 31.8% 2,000 29.7%
680-739 2,246 34.8% 2,505 37.2%
>=740 1,658 25.7% 1,908 28.3%
Total Flow $6,451 100.0% $6,740 100.0%
Structured
<=619 $98 8.7% $808 19.3%
620-679 333 29.7% 1,369 32.7%
680-739 428 38.1% 1,337 31.9%
>=740 264 23.5% 674 16.1%
Total Structured $1,123 100.0% $4,188 100.0%
Total
<=619 $596 7.9% $1,135 10.4%
620-679 2,382 31.4% 3,369 30.8%
680-739 2,674 35.3% 3,842 35.2%
>=740 1,922 25.4% 2,582 23.6%
Total Primary $7,574 100.0% $10,928 100.0%
Percentage of primary new insurance
written
Refinances 38% 37%
95.01% LTV and above 24% 10%
ARMs
Less than 5 years 16% 31%
5 years and longer 7% 17%
Primary risk written ($ in millions)
Flow $1,590 91.8% $1,702 70.0%
Structured 142 8.2% 729 30.0%
Total Primary $1,732 100.0% $2,431 100.0%
Pool risk written (In millions) $26 $102
Other risk written (In millions)
Seconds
1st loss $4 $40
2nd loss 27 247
NIMs 264 33
International
1st loss-Hong Kong primary
mortgage insurance 34 27
Reinsurance 14 2
Credit-default swaps - 7,303
Other
Domestic credit default swaps - 30
Financial guaranty wrap - -
Total other risk written $343 $7,682
Year Ended
December 31
2006 % 2005 %
Primary New Insurance Written ($ in
millions)
Flow $25,364 63.2% $25,596 60.1%
Structured 14,753 36.8% 16,996 39.9%
Total Primary $40,117 100.0% $42,592 100.0%
Flow
Prime $18,578 73.2% $19,177 74.9%
Alt-A 4,836 19.1% 4,093 16.0%
A minus and below 1,950 7.7% 2,326 9.1%
Total Flow $25,364 100.0% $25,596 100.0%
Structured
Prime $4,000 27.1% $5,657 33.3%
Alt-A 9,222 62.5% 7,147 42.0%
A minus and below 1,531 10.4% 4,192 24.7%
Total Structured $14,753 100.0% $16,996 100.0%
Total
Prime $22,578 56.3% $24,834 58.3%
Alt-A 14,058 35.0% 11,240 26.4%
A minus and below 3,481 8.7% 6,518 15.3%
Total Primary $40,117 100.0% $42,592 100.0%
Total Primary New Insurance Written
by FICO Score
($ in millions)
Flow
<=619 $1,603 6.3% $1,489 5.8%
620-679 7,693 30.3% 7,680 30.0%
680-739 9,210 36.4% 9,322 36.4%
>=740 6,858 27.0% 7,105 27.8%
Total Flow $25,364 100.0% $25,596 100.0%
Structured
<=619 $1,545 10.5% $4,207 24.8%
620-679 4,303 29.2% 5,302 31.2%
680-739 5,760 39.0% 4,833 28.4%
>=740 3,145 21.3% 2,654 15.6%
Total Structured $14,753 100.0% $16,996 100.0%
Total
<=619 $3,148 7.9% $5,696 13.4%
620-679 11,996 29.9% 12,982 30.5%
680-739 14,970 37.3% 14,155 33.2%
>=740 10,003 24.9% 9,759 22.9%
Total Primary $40,117 100.0% $42,592 100.0%
Percentage of primary new insurance
written
Refinances 35% 41%
95.01% LTV and above 15% 10%
ARMs
Less than 5 years 24% 35%
5 years and longer 14% 16%
Primary risk written ($ in millions)
Flow $6,386 82.0% $6,384 68.3%
Structured 1,404 18.0% 2,961 31.7%
Total Primary $7,790 100.0% $9,345 100.0%
Pool risk written (In millions) $359 $569
Other risk written (In millions)
Seconds
1st loss $47 $97
2nd loss 233 571
NIMs 502 99
International
1st loss-Hong Kong primary
mortgage insurance 65 271
Reinsurance 21 9
Credit-default swaps - 7,303
Other
Domestic credit default swaps 32 180
Financial guaranty wrap - 511
Total other risk written $900 $9,041
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Year Ended and as of December 31, 2006
Exhibit J
December 31 December 31
2006 % 2005 %
Primary insurance in force ($ in
millions)
Flow $83,529 73.3% $82,700 75.4%
Structured 30,374 26.7% 26,984 24.6%
Total Primary $113,903 100.0% $109,684 100.0%
Prime $76,854 67.5% $74,940 68.3%
Alt-A 25,571 22.4% 21,223 19.4%
A minus and below 11,478 10.1% 13,521 12.3%
Total Primary $113,903 100.0% $109,684 100.0%
Primary risk in force ($ in millions)
Flow $20,724 81.9% $20,330 79.0%
Structured 4,587 18.1% 5,399 21.0%
Total Primary $25,311 100.0% $25,729 100.0%
Flow
Prime $16,283 78.6% $15,630 76.9%
Alt-A 2,880 13.9% 3,131 15.4%
A minus and below 1,561 7.5% 1,569 7.7%
Total Flow $20,724 100.0% $20,330 100.0%
Structured
Prime $1,903 41.5% $2,208 40.9%
Alt-A 1,354 29.5% 1,358 25.1%
A minus and below 1,330 29.0% 1,833 34.0%
Total Structured $4,587 100.0% $5,399 100.0%
Total
Prime $18,186 71.9% $17,838 69.3%
Alt-A 4,234 16.7% 4,489 17.5%
A minus and below 2,891 11.4% 3,402 13.2%
Total Primary $25,311 100.0% $25,729 100.0%
Total Primary Risk in Force by FICO
Score
($ in millions)
Flow
<=619 $1,342 6.5% $1,321 6.5%
620-679 6,391 30.8% 6,352 31.2%
680-739 7,556 36.5% 7,459 36.7%
>=740 5,435 26.2% 5,198 25.6%
Total Flow $20,724 100.0% $20,330 100.0%
Structured
<=619 $1,331 29.0% $1,833 34.0%
620-679 1,619 35.3% 1,957 36.2%
680-739 1,095 23.9% 1,111 20.6%
>=740 542 11.8% 498 9.2%
Total Structured $4,587 100.0% $5,399 100.0%
Total
<=619 $2,673 10.5% $3,154 12.3%
620-679 8,010 31.7% 8,309 32.3%
680-739 8,651 34.2% 8,570 33.3%
>=740 5,977 23.6% 5,696 22.1%
Total Primary $25,311 100.0% $25,729 100.0%
Percentage of primary risk in force
Refinances 33% 37%
95.01% LTV and above 18% 14%
ARMs
Less than 5 years 19% 23%
5 years and longer 9% 9%
Pool risk in force ($ in millions)
Prime $2,182 72.9% $2,098 77.4%
Alt-A 295 9.9% 272 10.0%
A minus and below 514 17.2% 341 12.6%
Total $2,991 100.0% $2,711 100.0%
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Year Ended and as of December 31, 2006
Exhibit K
December 31 December 31
2006 % 2005 %
Total Primary Risk in Force by LTV
($ in millions)
95.01% and above $4,441 17.6% $3,599 14.0%
90.01% to 95.00% 8,005 31.6% 8,616 33.5%
85.01% to 90.00% 9,062 35.8% 9,551 37.1%
85.00% and below 3,803 15.0% 3,963 15.4%
Total $25,311 100.0% $25,729 100.0%
Total Primary Risk in Force by
Policy Year ($ in millions)
2002 and prior $3,313 13.1% $4,658 18.1%
2003 3,800 15.0% 5,511 21.4%
2004 4,565 18.1% 7,091 27.6%
2005 6,538 25.8% 8,469 32.9%
2006 7,095 28.0% - -
Total $25,311 100.0% $25,729 100.0%
Total Pool Risk in Force by Policy
Year ($ in millions)
2002 and prior $1,624 54.3% $1,664 61.4%
2003 134 4.5% 172 6.3%
2004 290 9.7% 294 10.9%
2005 651 21.7% 581 21.4%
2006 292 9.8% - -
Total Pool risk in Force $2,991 100.0% $2,711 100.0%
Other risk in force (In millions)
Seconds
1st loss $592 $591
2nd loss 610 638
NIMs 592 261
International
1st loss-Hong Kong primary
mortgage insurance 335 271
Reinsurance 47 29
Credit default swaps 7,897 7,469
Other
Domestic credit default swaps 212 180
Financial guaranty wrap 37 270
Total other risk in force $10,322 $9,709
Risk to capital ratio-STAT Basis 10.4:1 11.6:1
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Year Ended and as of December 31, 2006
Exhibit L
Quarter Ended Year Ended
December 31 December 31
2006 2005 2006 2005
Direct claims paid (In
thousands)
Prime $28,903 $33,156 $117,471 $121,297
Alt-A 16,654 19,968 64,018 79,371
A minus and below 25,996 23,762 93,662 85,980
Seconds and other 9,590 7,044 38,204 33,699
Total $81,143 $83,930 $313,355 $320,347
Average claim paid (In
thousands)
Prime $26.7 $25.7 $26.1 $24.1
Alt-A 37.9 38.4 35.6 36.5
A minus and below 30.2 28.1 28.3 27.0
Seconds 29.2 20.5 26.8 22.0
Total $29.9 $28.0 $28.4 $26.9
Loss ratio - GAAP Basis 40.3% 47.4% 42.9% 44.5%
Expense ratio - GAAP Basis 32.1% 28.4% 29.2% 26.7%
72.4% 75.8% 72.1% 71.2%
Reserve for losses by category
(In thousands):
Prime $200,429 $179,152
Alt-A 135,073 137,430
A minus and below 227,203 190,312
Pool Insurance 31,116 44,135
Seconds 36,166 35,876
Other 1,635 9,305
Reserve for losses, net 631,622 596,210
Reinsurance recoverable 21,614 (1) -
Total $653,236 $596,210
(1) Reinsurance recoverable on a first-loss second lien captive.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Year Ended and as of December 31, 2006
Exhibit M
December 31 December 31
2006 2005
Default Statistics
Primary insurance:
Flow
Prime
Number of insured loans 500,464 508,117
Number of loans in default 15,141 18,045
Percentage of loans in default 3.03% 3.55%
Alt-A
Number of insured loans 63,469 67,339
Number of loans in default 4,348 4,946
Percentage of loans in default 6.85% 7.34%
A minus and below
Number of insured loans 52,440 54,066
Number of loans in default 7,250 7,543
Percentage of loans in default 13.83% 13.95%
Total Flow
Number of insured loans 616,373 629,522
Number of loans in default 26,739 30,534
Percentage of loans in default 4.34% 4.85%
Structured
Prime
Number of insured loans 62,680 59,457
Number of loans in default 3,300 2,640
Percentage of loans in default 5.26% 4.44%
Alt-A
Number of insured loans 70,164 50,997
Number of loans in default 3,647 2,564
Percentage of loans in default 5.20% 5.03%
A minus and below
Number of insured loans 36,597 47,348
Number of loans in default 9,014 8,472
Percentage of loans in default 24.63% 17.89%
Total Structured
Number of insured loans 169,441 157,802
Number of loans in default 15,961 13,676
Percentage of loans in default 9.42% 8.67%
Total Primary Insurance
Prime
Number of insured loans 563,144 567,574
Number of loans in default 18,441 20,685
Percentage of loans in default 3.27% 3.64%
Alt-A
Number of insured loans 133,633 118,336
Number of loans in default 7,995 7,510
Percentage of loans in default 5.98% 6.35%
A minus and below
Number of insured loans 89,037 101,414
Number of loans in default 16,264 16,015
Percentage of loans in default 18.27% 15.79%
Total Primary Insurance
Number of insured loans 785,814 787,324
Number of loans in default 42,700 (1) 44,210 (1)
Percentage of loans in default 5.43% 5.62%
Pool insurance:
Number of loans in default 18,681 (2) 10,194 (2)
(1) Includes approximately 1,161 and 452 defaults at December 31, 2006
and December 31, 2005, respectively, where reserves have not been
established because no claim payment is currently anticipated.
(2) Includes approximately 13,309 and 3,699 defaults at December 31, 2006
and December 31, 2005, 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 Year Ended and as of December 31, 2006
Exhibit N
Quarter Ended Year Ended
December 31 December 31
2006 2005 2006 2005
Net Premiums Written (In
thousands)
Primary and Pool Insurance $162,875 $185,369 $723,213 $752,194
Seconds 15,469 8,391 57,935 56,092
NIMs 11,564 8,170 34,215 40,318
International 11,614 2,901 23,861 25,612
Domestic credit default swaps 821 408 9,778 3,132
Financial guaranty wrap 19 95 109 284
Net Premiums Written $202,362 $205,334 $849,111 $877,632
Net Premiums Earned (In thousands)
Primary and Pool Insurance $173,413 $187,162 $715,136 $712,538
Seconds 11,564 13,270 52,588 50,043
NIMs 10,228 7,513 28,251 39,877
International 2,448 1,228 10,644 3,338
Domestic credit default swaps 1,535 598 5,287 817
Financial guaranty wrap 19 95 109 284
Net Premiums Earned $199,207 $209,866 $812,015 $806,897
SMART HOME (In millions)
Ceded Premiums Written $3.5 $1.0 $12.0 $3.5
Ceded Premiums Earned $3.7 $0.9 $12.3 $3.0
Captives
Premiums ceded to captives (In
millions) $25.4 $25.3 $96.7 $92.9
% of total premiums 12.6% 12.0% 11.7% 11.5%
NIW subject to captives (In
millions) $3,457 $4,223 $13,157 $12,221
% of primary NIW 45.6% 38.6% 32.8% 28.7%
IIF included in captives (1) 34.1% 38.6%
RIF included in captives (1) 38.9% 35.6%
Persistency (twelve months ended
December 31) 67.3% 58.2%
December December
31 31
2006 2005
SMART HOME
% of Primary RIF included in Smart
Home Transactions (1) 10.1% 7.8%
(1) Radian reinsures the middle layer risk positions, while retaining a
significant portion of the total risk comprising the first loss and
most remote risk positions.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Year Ended and as of December 31, 2006
ALT-A
Exhibit O
Quarter Ended
($ in millions) December 31
2006 % 2005 %
Primary New Insurance Written by FICO
Score
<=619 $3 0.2% $3 0.1%
620-659 208 10.6% 440 15.4%
660-679 351 17.9% 407 14.2%
680-739 903 46.0% 1,302 45.4%
>=740 496 25.3% 714 24.9%
Total $1,961 100.0% $2,866 100.0%
Primary Risk in Force by FICO Score
<=619 $24 0.6% $44 1.0%
620-659 729 17.2% 936 20.9%
660-679 681 16.1% 767 17.0%
680-739 1,897 44.8% 1,903 42.4%
>=740 903 21.3% 839 18.7%
Total $4,234 100.0% $4,489 100.0%
Primary Risk in Force by LTV
95.01% and above $120 2.8% $190 4.2%
90.01% to 95.00% 1,237 29.2% 1,425 31.7%
85.01% to 90.00% 1,832 43.3% 1,938 43.2%
85.00% and below 1,045 24.7% 936 20.9%
Total $4,234 100.0% $4,489 100.0%
Primary Risk in Force by Policy Year
2002 and prior $317 7.5% $520 11.6%
2003 529 12.5% 874 19.5%
2004 712 16.8% 1,432 31.9%
2005 1,157 27.3% 1,663 37.0%
2006 1,519 35.9% - -
Total $4,234 100.0% $4,489 100.0%
Year Ended
($ in millions) December 31
2006 % 2005 %
Primary New Insurance Written by FICO
Score
<=619 $28 0.2% $34 0.3%
620-659 1,600 11.4% 1,903 16.9%
660-679 2,019 14.4% 1,513 13.5%
680-739 6,756 48.0% 4,990 44.4%
>=740 3,655 26.0% 2,800 24.9%
Total $14,058 100.0% $11,240 100.0%
Radian Group Inc.
Financial Services Supplemental Information
For the Quarter and Year Ended and as of December 31, 2006
Exhibit P
Quarter Ended Year Ended
December 31 December 31
(In thousands ) 2006 2005 2006 2005
Investment in Affiliates-
Selected Information
C-BASS
Balance, beginning of period $431,472 $343,344 $364,364 $290,073
Net income for period 31,598 27,520 133,900 107,791
Dividends received 11,675 6,500 46,869 33,500
Balance, end of period $451,395 $364,364 $451,395 $364,364
Sherman
Balance, beginning of period $129,064 $53,313 $81,753 $101,492
Net income for period 39,146 28,225 123,835 110,261
Dividends received - - 103,740 110,661
Other comprehensive income (798) 215 (743) 1,683
Purchase (sale) of ownership
interest - - 66,307 (18,947)
Warrant repurchase - - - (2,075)
Balance, end of period $167,412 $81,753 $167,412 $81,753
Portfolio Information:
C-BASS
Servicing portfolio $60,600,000 $44,830,000
Total assets 8,799,261 7,694,294
Servicing income 77,905 65,415 $309,508 $250,838
Net interest income 73,836 53,878 285,844 190,716
Total revenues 189,645 168,749 746,113 624,825
Sherman
Total assets $1,213,049 $979,215
Net revenues $230,916 $226,844 $934,536 $799,195
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 or consumer confidence, or changes in credit
spreads; changes in investor perception of the strength of private mortgage
insurers or financial guaranty providers, and 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 municipal guaranty
insurance policies; material changes in persistency rates of Radian's
mortgage insurance policies; downgrades of 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 public reports
that some state insurance departments are investigating 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; and international expansion of our mortgage
insurance and financial guaranty businesses into new markets and risks
associated with our international business activities. 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 in our annual report on Form 10-K for the year ended
December 31, 2005 and the material changes to these risks identified in our
quarterly report on Form 10-Q for the quarter ended June 30, 2006. 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.
SOURCE Radian Group Inc.
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Related links:
http://www.radian.biz
CONTACT:
For investors: Mona Zeehandelaar,
+1-215-231-1674, mona.zeehandelaar@radian.biz; or for the media:
Michelle Davidson, +1-215-231-1325, cell: +1-215-260-6760,
michelle.davidson@radian.biz, or Courtney Robinson,
+1-215-231-1762, cell: +1-215-629-6880,
courtney.robinson@radian.biz, all of Radian Group Inc.
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