WINSTON-SALEM, N.C., Jan. 26 /PRNewswire-FirstCall/ -- Triad Guaranty Inc.
(Nasdaq: TGIC) today reported net income for the quarter ended December 31,
2005 of $12.6 million compared to $15.2 million for the same quarter a year
ago, a decline of 17%. Diluted earnings per share were $0.85 for the fourth
quarter of 2005 compared to $1.03 for the fourth quarter of 2004, a decrease
of 18%. Realized investment gains, net of taxes, increased diluted earnings
per share by $0.01 in the fourth quarter of 2005 while not impacting diluted
earnings per share in the same quarter of 2004.
Net income for the full year 2005 was $56.8 million compared to $58.4
million for 2004. Diluted earnings per share for the full year were $3.84 in
2005 compared to $3.98 for 2004. Realized investment gains and losses had no
meaningful impact on earnings per share for the full year 2005 compared to a
contribution of $0.02 in 2004.
Mark K. Tonnesen, President and Chief Executive Officer, said, "While we
are pleased with the continued growth of Triad, we are obviously disappointed
in the financial performance for the quarter; a quarter in which we took
action to ensure a strong balance sheet reflecting the fundamentals in our
business particularly with regard to the Katrina/Rita FEMA-designated areas.
During the fourth quarter, we experienced an increase in defaults. A
large portion of the increase can be explained by the jump in total defaults
in the FEMA-designated areas from 270 at September 30, 2005 to 891 at December
31, 2005, for which we reserved at our normal levels without regard to the
unique circumstances surrounding that situation. This reserve increase was
$3.4 million and accounted for a reduction in earnings per share of $0.15 for
the quarter. There was also an increase in non-hurricane affected defaults,
which may be seasonal in nature. Lastly we increased the severity utilized in
the calculation of our reserves to reflect our long-term underlying trends."
Mr. Tonnesen continued, "We currently estimate 2006 earnings to be in the
range of $4.65 to $4.90 per share on a fully-diluted basis. This is premised
on anticipated earned premium increases of 10% to 15%, a targeted increase in
operating expenses of less than 10% and assumes no economic downturn or broad-
based decline in the housing market." He also stated that the Board of
Directors has authorized the repurchase of up to 1,000,000 shares of common
stock.
Total insurance in force reached $44.4 billion at year-end 2005, compared
to $36.8 billion a year ago. Insurance in force included Primary of $29.8
billion and Modified Pool of $14.6 billion at December 31, 2005 compared to
$29.0 billion and $7.8 billion a year earlier. New insurance written during
the fourth quarter of 2005 totaled $4.5 billion compared to $4.1 billion
written in the fourth quarter of 2004. Primary new insurance written for the
fourth quarter of 2005 was $2.3 billion, down from $2.5 billion written in the
fourth quarter of 2004. New insurance written attributable to Modified Pool
transactions totaled $2.2 billion in the fourth quarter of 2005, up from $1.6
billion for the same period of 2004.
Earned premiums for the fourth quarter of 2005 were $45.0 million, an
increase of 21% over the same period a year ago. The increase in earned
premiums was due primarily to the growth in Modified Pool insurance in force
and the change in the mix of Primary business. Persistency was 70.0% at
December 31, 2005 compared to 68.5% at December 31, 2004.
Incurred losses for the fourth quarter were $22.0 million, including a
$9.3 million reserve increase, up from $17.0 million in the third quarter of
2005 and significantly up from $10.0 million in the fourth quarter of 2004.
The reserve increase is attributable to the rise in defaults from Katrina/Rita
affected areas, the increase in other defaults reported in the fourth quarter
and an increase in the assumed severity utilized in our calculation of
reserves. Total paid claims for the fourth quarter of 2005 were $12.4
million, down from $13.5 million in the third quarter of 2005 but up
significantly from $8.3 million in the fourth quarter of 2004. Primary
severity on paid claims was $26,200 in both the fourth and third quarters of
2005, up from $24,100 in the fourth quarter of 2004. The Primary delinquency
rate was 2.45% at December 31, 2005 compared to 1.97% at September 30, 2005
and 1.93% at December 31, 2004, while the Modified Pool delinquency rates for
the same periods were 2.15%, 1.71% and 2.56%, respectively. Adjusting for the
Katrina/Rita affected area defaults, the Primary and Modified Pool delinquency
rates at December 31, 2005 would have been 2.25% and 1.89%, respectively.
The Company's loss ratio was 48.9% for the fourth quarter of 2005,
inclusive of the increased reserve levels, compared to 38.4% in the third
quarter of 2005 and 27.0% for the fourth quarter of 2004. The Company's
expense ratio was 26.4% for the fourth quarter of 2005 compared to 26.1% in
the third quarter of 2005 and 27.8% in the fourth quarter of 2004.
Triad Guaranty Inc.'s wholly owned subsidiary, Triad Guaranty Insurance
Corporation, is a nationwide mortgage insurer providing credit enhancement
solutions to its lender customers and the capital markets. This allows buyers
to achieve homeownership sooner, facilitates the sale of mortgage loans in the
secondary market and protects lenders from credit default-related expenses.
For more information, please visit the company's web site at
http://www.triadguaranty.com
Diluted realized investment gains/(losses) per share, net of taxes is a
non-GAAP measure. We believe this is relevant and useful information to
investors because, except for losses on impaired securities, it shows the
effect that the Company's discretionary sales of investments had on earnings.
This document may contain forward-looking statements that involve various
risks and uncertainties. Actual results may differ from those set forth in
the forward-looking statements. Attention is directed to the discussion of
risk and uncertainties as part of the Safe Harbor statement under the Private
Securities Litigation Reform Act of 1995 contained in the Company's most
recent annual report, Form 10-K and other reports filed with the Securities
and Exchange Commission.
Triad Guaranty Inc.
Consolidated Income Statement
(Unaudited)
Three Months Ended Twelve Months Ended
December 31. December 31.
2005 2004 2005 2004
(Dollars in thousands except per share amounts)
Premiums written:
Direct $55,102 $47,898 $207,260 $176,696
Ceded (10,781) (9,506) (40,644) (35,365)
Net premiums written $44,321 $38,392 $166,616 $141,331
Earned premiums $44,971 $37,178 $168,997 $140,992
Net investment income 5,944 5,315 22,998 19,754
Net realized investment gains 160 88 36 504
Other income 2 6 15 16
Total revenues 51,077 42,587 192,046 161,266
Net losses and loss adjustment
expenses 21,979 10,046 66,855 35,864
Interest expense on debt 693 693 2,773 2,772
Amortization of deferred policy
acquisition costs 3,836 3,951 14,902 14,256
Other operating expenses - net 7,882 6,715 29,610 26,484
Income before income taxes 16,687 21,182 77,906 81,890
Income taxes 4,127 5,980 21,093 23,473
Net income $12,560 $15,202 $56,813 $58,417
Basic earnings per share $0.85 $1.05 $3.87 $4.04
Diluted earnings per share $0.85 $1.03 $3.84 $3.98
Weighted average common and common
stock equivalents outstanding
(in thousands)
Basic 14,724 14,504 14,691 14,458
Diluted 14,804 14,725 14,808 14,681
NON-GAAP INFORMATION:
Diluted realized investment gains
per share, net of taxes $0.01 $- $- $0.02
Triad Guaranty Inc.
Consolidated Balance Sheet
(Unaudited)
December 31, December 31,
2005 2004
(Dollars in thousands except per share amounts)
Assets:
Invested assets:
Fixed maturities, available for
sale, at market $534,064 $454,121
Equity securities, available for
sale, at market 8,159 10,272
Short-term investments 14,755 16,095
556,978 480,488
Cash (1,025) 6,865
Deferred policy acquisition costs 33,684 32,453
Prepaid federal income tax 139,465 119,132
Other assets 38,401 33,097
Total assets $767,503 $672,035
Liabilities:
Losses and loss adjustment expenses $51,074 $34,042
Unearned premiums 13,494 15,942
Deferred income tax 155,189 137,925
Long-term debt 34,501 34,493
Other liabilities 14,054 12,290
Total liabilities 268,312 234,692
Stockholders' equity:
Retained earnings 387,441 330,628
Accumulated other comprehensive income 11,106 13,218
Other equity accounts 100,644 93,497
Total stockholders' equity 499,191 437,343
Total liabilities and stockholders' equity $767,503 $672,035
Stockholders' equity per share:
Including unrealized investment gains $33.79 $29.89
Excluding unrealized investment gains $33.04 $28.99
Common shares outstanding 14,774,153 14,631,678
Triad Guaranty Inc.
Sequential Quarterly Statistical Information
(Unaudited)
Dec 31, Sep 30, Jun 30, Mar 31,
2005 2005 2005 2005
(Dollars in millions unless otherwise indicated)
Insurance In Force
Primary insurance in force $29,792 $29,820 $29,489 $29,001
- Flow business $29,364 $29,327 $28,904 $28,314
- Bulk business $428 $492 $585 $687
Alt-A insurance in force - primary $2,935 $2,751 $2,479 $2,190
Alt A insurance in force - primary
FICO between 620 and 660 19.2% 20.8% 22.5% 23.9%
FICO greater than 660 80.8% 79.2% 77.5% 76.1%
Primary flow insurance in force
subject to captive reinsurance
arrangements 59.0% 58.3% 57.2% 56.7%
Modified Pool insurance in force $14,615 $13,406 $10,018 $9,217
Risk In Force
Primary net risk in force $6,767 $6,806 $6,700 $6,574
- Flow business $6,624 $6,647 $6,509 $6,351
- Bulk business $143 $159 $191 $223
Total primary risk in force by credit
score
FICO less than 575 0.8% 0.9% 1.0% 1.0%
FICO between 575 and 619 4.3% 4.4% 4.6% 4.6%
FICO greater than 619 94.9% 94.7% 94.4% 94.4%
Flow primary risk in force by credit
score
FICO less than 575 0.7% 0.7% 0.7% 0.7%
FICO between 575 and 619 4.0% 4.2% 4.3% 4.3%
FICO greater than 619 95.3% 95.1% 94.9% 95.0%
Primary flow risk in force subject to
captive reinsurance arrangements 60.4% 58.3% 56.7% 55.8%
Modified Pool gross risk in force $616 $579 $489 $462
Deductibles on gross risk $71 $68 $59 $53
Modified pool risk in force by credit
score
FICO less than 575 0.2% 0.2% 0.3% 0.3%
FICO between 575 and 619 1.1% 1.2% 1.6% 1.8%
FICO greater than 619 98.6% 98.6% 98.1% 97.9%
Triad Guaranty Inc.
Sequential Quarterly Statistical Information
(Unaudited)
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2004 2004 2004 2004 2003
(Dollars in millions unless otherwise indicated)
Insurance In Force
Primary insurance in force $28,964 $28,811 $28,367 $28,272 $27,929
- Flow business $28,191 $27,936 $27,385 $27,224 $26,901
- Bulk business $773 $875 $982 $1,048 $1,028
Alt-A insurance in force -
primary $2,100 $1,916 $1,646 $1,557 $1,451
Alt A insurance in force -
primary
FICO between 620 and 660 23.9% 22.4% 21.1% 22.2% 24.1%
FICO greater than 660 76.1% 77.6% 78.9% 77.8% 75.9%
Primary flow insurance in
force subject to captive
reinsurance arrangements 56.6% 56.1% 55.0% 53.5% 51.5%
Modified Pool insurance in
force $7,863 $7,010 $6,390 $5,614 $3,819
Risk In Force
Primary net risk in force $6,587 $6,540 $6,409 $6,378 $6,295
- Flow business $6,337 $6,257 $6,095 $6,047 $5,977
- Bulk business $250 $283 $314 $331 $318
Total primary risk in force
by credit score
FICO less than 575 1.1% 1.1% 1.3% 1.4% 1.5%
FICO between 575 and 619 4.6% 4.7% 4.9% 4.9% 5.1%
FICO greater than 619 94.3% 94.2% 93.9% 93.7% 93.5%
Flow primary risk in force
by credit score
FICO less than 575 0.7% 0.7% 0.7% 0.8% 0.8%
FICO between 575 and 619 4.2% 4.2% 4.2% 4.1% 4.1%
FICO greater than 619 95.1% 95.1% 95.1% 95.1% 95.1%
Primary flow risk in force
subject to captive
reinsurance arrangements 55.6% 54.8% 52.9% 51.9% 49.8%
Modified Pool gross risk in
force $416 $388 $374 $350 $293
Deductibles on gross risk $42 $35 $31 $25 $13
Modified pool risk in force
by credit score
FICO less than 575 0.4% 0.5% 0.6% 0.7% 0.9%
FICO between 575 and 619 2.2% 2.3% 2.5% 3.1% 3.8%
FICO greater than 619 97.4% 97.2% 96.9% 96.2% 95.3%
Triad Guaranty Inc.
Sequential Quarterly Statistical Information (con't.)
(Unaudited)
Dec 31, Sep 30, Jun 30, Mar 31,
2005 2005 2005 2005
(Dollars in millions unless otherwise indicated)
Production
Primary new insurance written (NIW) $2,263 $3,093 $2,941 $2,191
- Flow business $2,263 $3,091 $2,941 $2,161
- Bulk business $- $2 $- $30
NIW subject to captive reinsurance
arrangements
- Primary flow business 55.1% 58.1% 54.6% 47.4%
Product mix as a % of primary flow
NIW:
- Greater than 95% LTV's 11.2% 13.8% 11.6% 12.8%
- ARMs 30.4% 35.9% 43.7% 38.1%
- Monthly premium 99.5% 96.8% 94.3% 93.1%
- Annual premium 0.2% 3.0% 5.4% 5.7%
- Refinances 28.6% 26.5% 33.6% 35.0%
Primary new risk written (gross) $609 $822 $723 $540
- Flow business $609 $821 $723 $530
- Bulk business $- $1 $- $10
Modified Pool NIW $2,255 $4,526 $1,798 $2,103
Modified Pool new risk written $55 $97 $46 $62
Loan Statistics
Primary number of insured loans 217,397 219,159 219,256 217,657
- Flow business 214,127 215,481 214,964 212,754
- Bulk business 3,270 3,678 4,292 4,903
Primary average loan size ($thousands)
- Flow business $137.1 $136.1 $134.5 $133.1
- Bulk business $131.0 $133.8 $136.3 $140.1
Modified Pool number of insured loans 85,091 78,241 59,581 55,182
Triad Guaranty Inc.
Sequential Quarterly Statistical Information (con't.)
(Unaudited)
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2004 2004 2004 2004 2003
(Dollars in millions unless otherwise indicated)
Production
Primary new insurance written
(NIW) $2,476 $2,716 $3,019 $2,497 $3,669
- Flow business $2,456 $2,665 $2,950 $2,380 $3,255
- Bulk business $20 $51 $69 $117 $414
NIW subject to captive
reinsurance arrangements
- Primary flow business 52.8% 51.3% 58.7% 60.3% 50.3%
Product mix as a % of primary
flow NIW:
- Greater than 95% LTV's 13.7% 13.9% 11.8% 10.0% 7.2%
- ARMs 36.7% 37.0% 33.2% 26.9% 26.1%
- Monthly premium 93.5% 93.3% 90.7% 91.1% 83.1%
- Annual premium 6.1% 6.2% 9.0% 8.5% 16.4%
- Refinances 30.1% 22.0% 32.3% 35.4% 38.5%
Primary new risk written
(gross) $642 $724 $775 $634 $937
- Flow business $635 $706 $751 $594 $797
- Bulk business $7 $18 $24 $40 $140
Modified Pool NIW $1,606 $1,297 $1,394 $2,165 $1,555
Modified Pool new risk
written $46 $27 $30 $59 $54
Loan Statistics
Primary number of insured
loans 218,011 217,305 214,991 214,273 211,805
- Flow business 212,596 211,300 208,384 207,314 205,033
- Bulk business 5,415 6,005 6,607 6,959 6,772
Primary average loan size ($
thousands)
- Flow business $132.6 $132.2 $131.4 $131.3 $131.2
- Bulk business $142.8 $145.7 $148.6 $150.6 $151.8
Modified Pool number of
insured loans 48,563 43,286 39,519 35,410 24,429
Note: The Company periodically enters into structured transactions
involving loans that have insurance effective dates within the current
reporting period but for which detailed loan information regarding the
insured loans is not provided until later. When this occurs, the Company
accrues due premium in the reporting period based on each loan's insurance
effective date; however, the loans are not reflected in the Company's in
force and related data totals until the loan level detail is reported to
the Company. At December 31, 2005, the Company had approximately $979
million of structured transactions with effective dates within the fourth
quarter for which loan level detail had not been received.
Triad Guaranty Inc.
Sequential Quarterly Statistical Information (con't.)
(Unaudited)
Dec 31, Sep 30, Jun 30, Mar 31,
2005 2005 2005 2005
(Dollars in millions unless otherwise indicated)
Delinquencies and Claim Information
Total primary delinquent loans 5,336 4,312 4,013 4,134
- Flow business 4,894 3,892 3,593 3,694
- Bulk business 442 420 420 440
Total modified pool delinquent loans 1,827 1,341 1,312 1,329
- With deductibles 1,090 709 612 538
- Without deductibles 737 632 700 791
Total primary delinquency rate 2.45% 1.97% 1.83% 1.90%
Modified Pool delinquency rate 2.15% 1.71% 2.20% 2.41%
Primary average severity ($ thousands) $26.2 $26.2 $28.9 $24.7
- Flow business $24.9 $26.1 $29.0 $24.9
- Bulk business $40.5 $27.4 $27.6 $21.0
Primary net paid claims ($ thousands)
- Flow business $10,021 $10,555 $10,931 $8,283
- Bulk business $1,540 $1,427 $1,216 $398
Modified Pool net paid claims
($ thousands) $862 $1,475 $1,150 $970
Financial Information
Loss ratio - GAAP 48.9% 38.4% 42.0% 27.4%
Expense ratio - GAAP 26.4% 26.1% 26.4% 28.1%
Combined ratio - GAAP 75.3% 64.5% 68.4% 55.5%
Risk-to-capital ratio 12.6:1 13.0:1 13.1:1 13.7:1
Annual persistency - primary 70.0% 69.7% 70.9% 69.0%
Triad Guaranty Inc.
Sequential Quarterly Statistical Information (con't.)
(Unaudited)
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2004 2004 2004 2004 2003
(Dollars in millions unless otherwise indicated)
Delinquencies and Claim
Information
Total primary delinquent loans 4,203 3,902 3,709 3,728 3,397
- Flow business 3,739 3,469 3,319 3,343 3,053
- Bulk business 464 433 390 385 344
Total modified pool delinquent
loans 1,242 1,106 1,056 994 845
- With deductibles 410 197 121 66 17
- Without deductibles 832 909 935 928 828
Total primary delinquency rate 1.93% 1.80% 1.73% 1.74% 1.60%
Modified Pool delinquency rate 2.56% 2.56% 2.67% 2.81% 3.46%
Primary average severity
($ thousands) $24.1 $19.3 $24.2 $27.4 $28.3
- Flow business $23.6 $19.7 $24.6 $26.9 $28.2
- Bulk business $28.4 $14.1 $19.4 $34.4 $29.3
Primary net paid claims
($ thousands)
- Flow business $6,172 $6,224 $5,883 $5,254 $4,511
- Bulk business $966 $324 $426 $447 $381
Modified Pool net paid claims
($ thousands) $1,193 $733 $406 $308 $454
Financial Information
Loss ratio - GAAP 27.0% 25.8% 22.5% 26.3% 21.6%
Expense ratio - GAAP 27.8% 28.6% 29.7% 29.4% 34.0%
Combined ratio - GAAP 54.8% 54.4% 52.2% 55.7% 55.6%
Risk-to-capital ratio 14.0:1 14.4:1 14.6:1 15.2:1 15.3:1
Annual persistency - primary 68.5% 67.8% 60.9% 56.2% 52.2%
SOURCE Triad Guaranty Inc.
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Related links:
http://www.triadguaranty.com
CONTACT:
Eric B. Dana, Senior Vice President, Chief
Financial Officer of Triad Guaranty Inc., +1-800-451-4872 ext.
1105, or edana@tgic.com
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