WINSTON-SALEM, N.C., July 28 /PRNewswire-FirstCall/ -- Triad Guaranty Inc.
(Nasdaq: TGIC) today reported net income for the quarter ended June 30, 2005
of $13.2 million compared to $14.4 million for the same quarter a year ago, a
decrease of 8 percent. Diluted earnings per share were $0.89 for the quarter
ended June 30, 2005 compared to $0.98 in the second quarter of 2004. There
were no significant realized investment gains or losses in the second quarter
of 2005 or 2004.
Net income for the first six months of 2005 was $29.0 million compared
with $28.4 million for the same period in 2004. For the first six months of
2005, diluted earnings per share were $1.96 compared to $1.93 for the same
period of last year. Realized investment gains had no meaningful impact on
diluted earnings per share for the six months ended June 30, 2005 compared to
a contribution of $0.02 per share during the first six months of 2004.
Darryl W. Thompson, President and Chief Executive Officer, said, "We are
disappointed with the decline in our second quarter earnings. This decline is
attributable, in part, to an unexpected increase in incurred losses resulting
from an abnormal increase in large claims paid and changes in claim processing
procedures by one of our larger servicers. It is also attributable to reserve
strengthening, primarily to reflect higher severity trends. This dampened what
otherwise would have been a strong quarter for Triad.
"We were pleased, however, with the 20 percent increase in both earned
premiums and revenue in the second quarter of 2005 when compared to the same
quarter a year ago. We have been able to grow our insurance in force and
earned premiums with only a 4 percent increase in expenses, resulting in a
drop in our expense ratio compared to the second quarter of 2004."
Insurance in force reached $39.5 billion at June 30, 2005, an increase of
14 percent over a year ago. Total insurance written for the second quarter
was $4.7 billion, up from $4.4 billion in the second quarter of 2004.
Insurance written on flow business in the second quarter totaled $2.9 billion,
about the same level as the second quarter of 2004. Insurance written
attributable to structured bulk transactions totaled $1.8 billion in the
second quarter of 2005, up from $1.5 billion for the same period of 2004.
Refinance business represented 34 percent of new originations on flow business
in the second quarter of 2005 compared to 32 percent in the same quarter a
year ago.
Earned premiums for the second quarter of 2005 amounted to $41.1 million,
an increase of 20 percent over the same period a year ago. The increase in
earned premiums resulted from growth of insurance in force, reflecting
continued solid production and an increase in persistency. Persistency, or the
percentage of insurance remaining in force compared to one year prior, was
69.3 percent at June 30, 2005 compared to 59.9 percent at June 30, 2004.
Incurred losses amounted to $17.3 million in the second quarter of 2005,
up from $7.7 million in the second quarter of 2004. An increase in severity
resulted in higher paid losses in both the flow and bulk business. This
increase resulted from a disproportionately high number of large claims paid
during the quarter. The Company also experienced a change in claims
processing procedures by one of its larger servicers. The new procedures
accelerated their number of claims perfected during the quarter and reduced
the time for the Company to mitigate losses. Procedures have been implemented
which should begin to offset these changes in the third quarter. Reserves were
also strengthened, primarily to reflect higher severity trends. The loss
ratio was 42.0 percent for the second quarter of 2005 compared to 22.5 percent
for the second quarter of 2004. The Company's ratio of delinquent loans to
total policies in force was 1.91 percent at June 30, 2005 compared to 1.87
percent at June 30, 2004. The Company's expense ratio was 26.4 percent for
the second quarter of 2005 compared to 29.7 percent in the second quarter of
2004.
Mr. Thompson stated, "Through the remainder of 2005, we expect continued
growth in earned premiums through further growth of insurance in force. We
also expect further improvement in our expense ratio during 2005. We believe
that the level of paid losses in the second half of the year will be similar
to that experienced in the first half. We are cautious about the current
housing market and potential overheating in certain market segments. We will
continue to monitor and evaluate trends affecting frequency, severity and the
results of our overall loss mitigation efforts."
Triad Guaranty Inc.'s wholly owned subsidiary, Triad Guaranty Insurance
Corporation, is a nationwide mortgage insurer providing mortgage insurance
(MI) to residential mortgage lenders. Private MI makes homeownership
available to borrowers with equity of less than 20%, facilitates the sale of
mortgage loans in the secondary market and protects lenders from default-
related expenses. For more information about Triad Guaranty Insurance
Corporation, 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 contains forward-looking statements which 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
risks 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 Six Months Ended
June 30, June 30,
2005 2004 2005 2004
(Dollars in thousands except per
share amounts)
Premiums written:
Direct $50,559 $43,029 $98,886 $83,346
Ceded (9,948) (8,752) (19,564) (16,723)
Net premiums written $40,611 $34,277 $79,322 $66,623
Earned premiums $41,121 $34,183 $79,898 $67,995
Net investment income 5,743 4,598 11,158 9,184
Net realized investment gains
(losses) 39 (19) 46 558
Other income 2 2 11 5
Total revenues 46,905 38,764 91,113 77,742
Net losses and loss adjustment
expenses 17,288 7,701 27,918 16,584
Interest expense on debt 693 693 1,386 1,386
Amortization of deferred policy
acquisition costs 3,695 3,450 7,352 6,635
Other operating expenses - net 7,017 6,729 14,234 13,069
Income before income taxes 18,212 20,191 40,223 40,068
Income taxes 5,013 5,816 11,264 11,649
Net income $13,199 $14,375 $28,959 $28,419
Basic earnings per share $0.90 $0.99 $1.98 $1.96
Diluted earnings per share $0.89 $0.98 $1.96 $1.93
Weighted average common and common
stock equivalents outstanding
(in thousands)
Basic 14,668 14,502 14,618 14,481
Diluted 14,813 14,718 14,795 14,695
NON-GAAP INFORMATION:
Diluted realized investment gains
per share, net of taxes $- $- $- $0.02
Triad Guaranty Inc.
Consolidated Balance Sheet
(Unaudited) (Unaudited)
June 30, December 31, June 30,
2005 2004 2004
(Dollars in thousands except per
share amounts)
Assets:
Invested assets:
Fixed maturities, available for
sale, at market $499,871 $454,121 $409,053
Equity securities, available for
sale, at market 9,698 10,272 11,865
Short-term investments 14,323 16,095 11,323
523,892 480,488 432,241
Cash 3,528 6,865 5,951
Deferred policy acquisition costs 33,082 32,453 31,553
Prepaid federal income tax 128,682 119,132 107,208
Other assets 34,325 33,097 31,161
Total assets $723,509 $672,035 $608,114
Liabilities:
Losses and loss adjustment expenses $38,576 $34,042 $30,766
Unearned premiums 15,327 15,942 14,231
Deferred income tax 149,533 137,925 121,083
Long-term debt 34,497 34,493 34,490
Other liabilities 10,220 12,290 13,289
Total liabilities 248,153 234,692 213,859
Stockholders' equity:
Retained earnings 359,588 330,628 300,631
Accumulated other comprehensive
income 16,458 13,218 3,851
Other equity accounts 99,310 93,497 89,773
Total stockholders' equity 475,356 437,343 394,255
Total liabilities and stockholders'
equity $723,509 $672,035 $608,114
Stockholders' equity per share:
Including unrealized investment
gains $32.08 $29.89 $27.10
Excluding unrealized investment
gains $30.97 $28.99 $26.84
Common shares outstanding 14,818,546 14,631,678 14,545,669
Triad Guaranty Inc.
Sequential Quarterly Statistical Information
(Unaudited)
Jun 30, Mar 31, Dec 31, Sep 30,
2005 2005 2004 2004
(Dollars in millions unless otherwise indicated)
Direct insurance in force $39,507 $38,218 $36,827 $35,821
- Flow business $28,904 $28,314 $28,191 $27,936
- Bulk business $10,603 $9,904 $8,636 $7,885
Alt-A insurance in force $12,599 $11,632 $10,136 $9,092
- Flow business $2,233 $2,004 $1,836 $1,600
- Bulk business $10,366 $9,628 $8,300 $7,492
Direct risk in force (gross) $7,740 $7,705 $7,627 $7,506
Net risk in force $7,129 $7,099 $7,049 $6,956
Risk-to-capital ratio 13.1:1 13.7:1 14.0:1 14.4:1
Number of insured loans 278,837 272,839 266,574 260,591
- Flow business 214,964 212,754 212,596 211,300
- Bulk business 63,873 60,085 53,978 49,291
Annual persistency 69.3% 67.8% 67.6% 66.8%
Quarterly persistency run rate 64.0% 68.8% 61.9% 63.0%
Average loan size ($ thousands)
- Flow business $134.5 $133.1 $132.6 $132.2
- Bulk business $166.0 $164.8 $160.0 $160.0
Average severity ($ thousands)
- Flow business $29.1 $25.4 $24.1 $21.2
- Bulk business $29.6 $27.4 $27.0 $17.6
Net paid claims and LAE ($ thousands) $13,537 $9,848 $8,551 $7,453
- Flow business $11,129 $8,454 $6,339 $6,368
- Bulk business $2,408 $1,394 $2,212 $1,085
Note: Effective second quarter 2005, risk in force for bulk loans was
calculated net of deductibles.
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 June 30, 2005, the Company had approximately $1.706
billion of structured transactions with effective dates within the second
quarter for which loan level detail had not been received.
Triad Guaranty Inc.
Sequential Quarterly Statistical Information
(Unaudited)
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2004 2004 2003 2003 2003
(Dollars in millions unless otherwise indicated)
Direct insurance in force $34,757 $33,886 $31,748 $29,291 $26,914
- Flow business $27,385 $27,224 $26,901 $25,918 $24,680
- Bulk business $7,372 $6,662 $4,847 $3,373 $2,234
Alt-A insurance in force $8,202 $7,345 $5,436 $3,986 $2,871
- Flow business $1,315 $1,238 $1,203 $1,117 $978
- Bulk business $6,887 $6,107 $4,233 $2,869 $1,893
Direct risk in force (gross) $7,309 $7,207 $7,024 $6,610 $6,245
Net risk in force $6,797 $6,734 $6,590 $6,210 $5,893
Risk-to-capital ratio 14.6:1 15.2:1 15.3:1 15.1:1 15.0:1
Number of insured loans 254,510 249,683 236,234 221,053 205,046
- Flow business 208,384 207,314 205,033 198,366 189,161
- Bulk business 46,126 42,369 31,201 22,687 15,885
Annual persistency 59.9% 54.6% 50.7% 49.0% 54.6%
Quarterly persistency run
rate 56.9% 68.5% 46.3% 19.3% 33.6%
Average loan size
($ thousands)
- Flow business $131.4 $131.3 $131.2 $130.7 $130.5
- Bulk business $159.8 $157.2 $155.4 $148.7 $140.7
Average severity ($ thousands)
- Flow business $25.6 $27.4 $28.2 $25.0 $22.5
- Bulk business $22.5 $30.2 $26.9 $20.0 $12.3
Net paid claims and LAE
($ thousands) $6,879 $6,124 $5,466 $4,933 $4,046
- Flow business $6,024 $5,355 $4,632 $4,070 $3,800
- Bulk business $855 $769 $834 $863 $246
Note: Effective second quarter 2005, risk in force for bulk loans was
calculated net of deductibles.
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 June 30, 2005, the Company had approximately $1.706
billion of structured transactions with effective dates within the second
quarter for which loan level detail had not been received.
Triad Guaranty Inc.
Sequential Quarterly Statistical Information (con't.)
(Unaudited)
Jun 30, Mar 31, Dec 31, Sep 30,
2005 2005 2004 2004
(Dollars in millions unless otherwise indicated)
Total delinquent loans 5,325 5,463 5,445 5,008
- Flow business 3,593 3,694 3,739 3,469
- Bulk business 1,732 1,769 1,706 1,539
With deductibles 612 538 410 197
Without deductibles 1,120 1,231 1,296 1,342
Total delinquency rate 1.91% 2.00% 2.04% 1.92%
- Flow business 1.67% 1.74% 1.76% 1.64%
- Bulk business 2.71% 2.94% 3.16% 3.12%
Risk in force by credit score - Flow
Under 575 0.8% 0.7% 0.7% 0.7%
575 - 619 4.8% 4.8% 4.7% 4.7%
620 and above 94.4% 94.5% 94.6% 94.6%
Risk in force by credit score - Bulk
Under 575 0.9% 1.1% 1.4% 1.8%
575 - 619 2.8% 3.2% 3.9% 4.5%
620 and above 96.3% 95.7% 94.7% 93.7%
Insurance in force subject to captive
reinsurance arrangements 41.8% 42.0% 43.3% 43.7%
Loss ratio - GAAP 42.0% 27.4% 27.0% 25.8%
Expense ratio - GAAP 26.4% 28.1% 27.8% 28.6%
Combined ratio - GAAP 68.4% 55.5% 54.8% 54.4%
Total insurance written $4,739 $4,294 $4,082 $4,013
- Flow $2,941 $2,161 $2,456 $2,665
- Bulk $1,798 $2,133 $1,626 $1,348
NIW subject to captive reinsurance
arrangements
- Flow business 54.6% 47.5% 52.8% 51.3%
New risk written (gross) $769 $602 $688 $751
Product mix as a % of flow insurance
written:
95% LTV's 42.4% 43.1% 46.5% 50.0%
ARMs 43.7% 38.1% 36.7% 37.0%
Monthly premium 94.3% 93.1% 93.5% 93.3%
Annual premium 5.4% 5.7% 6.1% 6.2%
Refinances 33.6% 35.0% 30.1% 22.0%
Triad Guaranty Inc.
Sequential Quarterly Statistical Information (con't.)
(Unaudited)
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2004 2004 2003 2003 2003
(Dollars in millions unless otherwise indicated)
Total delinquent loans 4,765 4,722 4,242 3,700 3,351
- Flow business 3,319 3,343 3,053 2,675 2,510
- Bulk business 1,446 1,379 1,189 1,025 841
With deductibles 121 66 17 - -
Without deductibles 1,325 1,313 1,172 1,025 841
Total delinquency rate 1.87% 1.89% 1.80% 1.67% 1.63%
- Flow business 1.59% 1.61% 1.49% 1.35% 1.33%
- Bulk business 3.13% 3.25% 3.81% 4.52% 5.29%
Risk in force by credit score -
Flow
Under 575 0.8% 0.8% 0.8% 0.8% 0.8%
575 - 619 4.7% 4.6% 4.6% 4.5% 4.6%
620 and above 94.5% 94.6% 94.6% 94.7% 94.6%
Risk in force by credit score -
Bulk
Under 575 2.3% 2.8% 4.1% 4.4% 3.8%
575 - 619 5.2% 6.5% 8.5% 10.3% 12.5%
620 and above 92.5% 90.7% 87.4% 85.3% 83.7%
Insurance in force subject to
captive reinsurance arrangements 43.3% 43.0% 43.6% 43.9% 43.4%
Loss ratio - GAAP 22.5% 26.3% 21.6% 20.0% 19.0%
Expense ratio - GAAP 29.7% 29.4% 34.0% 32.7% 29.3%
Combined ratio - GAAP 52.2% 55.7% 55.6% 52.7% 48.3%
Total insurance written $4,414 $4,663 $5,224 $6,652 $4,853
- Flow $2,950 $2,380 $3,255 $5,028 $4,667
- Bulk $1,464 $2,282 $1,969 $1,624 $186
NIW subject to captive reinsurance
arrangements
- Flow business 58.7% 60.3% 50.3% 44.1% 43.3%
New risk written (gross) $805 $693 $991 $1,305 $1,094
Product mix as a % of flow
insurance written:
95% LTV's 47.2% 45.0% 45.0% 42.3% 39.5%
ARMs 33.2% 26.9% 26.1% 18.3% 14.5%
Monthly premium 90.7% 91.1% 83.1% 75.8% 71.4%
Annual premium 9.0% 8.5% 16.4% 23.7% 28.2%
Refinances 32.3% 35.4% 38.5% 52.3% 55.1%
SOURCE Triad Guaranty Inc.
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Related links:
http://www.triadguaranty.com
CONTACT:
Ron Kessinger, Senior Executive Vice
President and Chief Operating Officer of Triad Guaranty Inc.,
+1-800-451-4872, ext. 1104, or rkessinger@tgic.com
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