x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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23-2691170
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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1601 Market Street, Philadelphia, PA
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19103
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Page
Number
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 6.
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•
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changes in general financial and political conditions, such as the failure of the U.S. economy to fully recover from the most recent recession or the U.S. economy reentering a recessionary period, the lack of meaningful liquidity in the capital markets or in the credit markets, a prolonged period of high unemployment rates and limited home price appreciation or further depreciation (which has resulted in some borrowers voluntarily defaulting on their mortgages when their mortgage balances exceed the value of their homes), changes or volatility in interest rates or consumer confidence, changes in credit spreads, changes in the way customers, investors or regulators perceive the strength of private mortgage insurers or financial guaranty providers, or investor concern over the credit quality and specific risks faced by the particular businesses, municipalities or pools of assets covered by our insurance;
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•
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catastrophic events or further economic changes in geographic regions where our mortgage insurance or financial guaranty insurance exposure is more concentrated;
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•
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our ability to successfully execute upon our capital plan for our mortgage insurance business (which depends, in part, on the performance of our financial guaranty portfolio), and if necessary, to obtain additional capital to support our mortgage insurance business and the long-term liquidity needs of our holding company;
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•
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a further reduction in, or prolonged period of depressed levels of, home mortgage originations due to reduced liquidity in the lending market, tighter underwriting standards, the risk retention requirements established under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") and the decrease in housing demand throughout the U.S.;
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•
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our ability to maintain adequate risk-to-capital ratios and surplus requirements in our mortgage insurance business in light of ongoing losses in this business and further deterioration in our financial guaranty portfolio which, in the absence of new capital, could depend on our ability to execute strategies for which regulatory and other approvals are required and may not be obtained;
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•
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our ability to continue to effectively mitigate our mortgage insurance and financial guaranty losses;
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•
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reduced opportunities for loss mitigation in markets where housing values do not appreciate or continue to decline;
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•
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a more rapid than expected decrease in the level of insurance rescissions and claim denials from the current elevated levels (including as a result of successful challenges to previously rescinded policies or claim denials), which rescissions and denials have materially mitigated our paid losses and resulted in a significant reduction in our loss reserves;
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•
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the negative impact our insurance rescissions and claim denials may have on our relationships with customers and potential customers, including the potential loss of business and the heightened risk of disputes and litigation;
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•
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the need, in the event that we are unsuccessful in defending our rescissions or denials, to increase our loss reserves for, and reassume risk on, rescinded loans and pay additional claims;
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•
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the concentration of our mortgage insurance business among a relatively small number of large customers;
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•
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any disruption in the servicing of mortgages covered by our insurance policies;
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•
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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;
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•
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the performance of our insured portfolio of higher risk loans, such as Alternative-A and subprime loans, and of adjustable rate products, such as adjustable rate mortgages and interest-only mortgages;
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•
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a decrease in persistency rates of our mortgage insurance policies;
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•
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an increase in the risk profile of our existing mortgage insurance portfolio due to the availability of mortgage refinancing to only the most qualified borrowers in the current mortgage and housing market;
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•
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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.);
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•
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heightened competition for our mortgage insurance business from others such as the Federal Housing Administration (the "FHA"), the Veteran's Administration and private mortgage insurers (in particular, the FHA and those private mortgage insurers that have been assigned higher ratings from the major rating agencies or new entrants to the industry that are not burdened by legacy obligations);
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•
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changes in the charters or business practices of, or rules or regulations applicable to, 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;
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•
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changes to the current system of housing finance, including the possibility of a new system in which private mortgage insurers are not required or their products are significantly limited in scope;
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•
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the effect of the Dodd-Frank Act on the financial services industry in general, and on our mortgage insurance and financial guaranty businesses in particular, including whether and to what extent loans with mortgage insurance are considered "qualified residential mortgages" for purposes of the Dodd-Frank Act securitization provisions or "qualified mortgages" for purposes of the ability to repay provisions of the Dodd-Frank Act and potential obligations to post collateral on our existing insured derivatives portfolio;
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•
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the application of existing federal or state consumer, lending, insurance, tax, 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, or the possibility of additional, lawsuits or investigations, and (ii) legislative and regulatory changes (a) affecting demand for private mortgage insurance, (b) limiting or restricting our use of (or increasing requirements for) additional capital and the products we may offer, or (c) affecting the form in which we execute credit protection or affecting our existing financial guaranty portfolio;
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•
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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 premium deficiencies for our mortgage insurance business, or to estimate accurately the fair value amounts of derivative instruments in our mortgage insurance and financial guaranty businesses in determining gains and losses on these contracts;
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•
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the ability of our primary insurance customers in our financial guaranty reinsurance business to provide appropriate surveillance and to mitigate losses adequately with respect to our assumed insurance portfolio;
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•
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volatility in our earnings caused by changes in the fair value of our derivative instruments and our need to reevaluate the possibility of a premium deficiency in our mortgage insurance business on a quarterly basis;
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•
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our ability to realize the tax benefits associated with our gross deferred tax assets, which will depend on our ability to generate sufficient sustainable taxable income in future periods;
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•
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our ability to obtain the necessary regulatory approval to consummate our purchase of Municipal and Infrastructure Assurance Corporation (the "FG Insurance Shell") and to successfully develop and implement a strategy to utilize the FG Insurance Shell in the public finance financial guaranty market, which strategy may depend on, among other items, our ability to obtain further necessary regulatory or other approvals, to attract third-party capital and to obtain ratings sufficient to support such a strategy;
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•
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changes in accounting guidance from the Securities and Exchange Commission or the Financial Accounting Standards Board; and
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•
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legal and other limitations on amounts we may receive from our subsidiaries as dividends or through our tax- and expense-sharing arrangements with our subsidiaries.
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(In thousands, except share and per share amounts)
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March 31,
2011 |
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December 31,
2010 |
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ASSETS
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Investments
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Fixed-maturities held to maturity—at amortized cost (fair value $9,250 and $11,416)
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$
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8,743
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$
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10,773
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Fixed-maturities available for sale—at fair value (amortized cost $332,445 and $340,795)
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262,722
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273,799
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Equity securities available for sale—at fair value (cost $160,083 and $160,242)
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194,921
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184,365
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Trading securities—at fair value (including variable interest entity (“VIE”) securities of $90,187 and $83,184)
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4,640,719
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4,562,821
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Short-term investments—at fair value (including VIE investments of $149,984 and $149,981)
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1,224,931
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1,537,498
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Other invested assets—at cost
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61,218
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59,627
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Total investments
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6,393,254
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6,628,883
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Cash
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19,209
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20,334
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Restricted cash
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29,801
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31,413
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Deferred policy acquisition costs
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145,721
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148,326
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Accrued investment income
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45,492
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40,498
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Accounts and notes receivable (less allowance of $50,000 and $50,000)
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115,116
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116,452
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Property and equipment, at cost (less accumulated depreciation of $93,822 and $92,451)
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12,411
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13,024
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Derivative assets (including VIE derivative assets of $8,955 and $10,855)
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24,554
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26,212
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Deferred income taxes, net
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27,531
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27,531
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Reinsurance recoverables
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218,963
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244,894
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Other assets (including VIE other assets of $108,163 and $112,426)
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319,511
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323,320
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Total assets
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$
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7,351,563
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$
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7,620,887
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Unearned premiums
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$
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666,019
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$
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686,364
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Reserve for losses and loss adjustment expenses (“LAE”)
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3,627,695
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3,596,735
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Reserve for premium deficiency
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9,353
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10,736
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Long-term debt
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968,199
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964,788
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VIE debt—at fair value (including $7,561 and $9,514 of non-recourse debt)
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373,007
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520,114
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Derivative liabilities (including VIE derivative liabilities of $17,430 and $19,226)
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487,345
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723,579
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Accounts payable and accrued expenses (including VIE accounts payable of $883 and $837)
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247,048
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258,791
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Total liabilities
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6,378,666
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6,761,107
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Commitments and Contingencies (Note 13)
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Stockholders’ equity
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Common stock: par value $.001 per share; 325,000,000 shares authorized; 150,567,283 and 150,507,853 shares issued at March 31, 2011 and December 31, 2010, respectively; 133,105,845 and 133,049,213 shares outstanding at March 31, 2011 and December 31, 2010, respectively
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150
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150
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Treasury stock, at cost: 17,461,438 and 17,458,640 shares at March 31, 2011 and December 31, 2010, respectively
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(892,036
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)
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(892,012
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)
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Additional paid-in capital
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1,963,382
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1,963,092
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Retained deficit
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(101,920
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)
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(204,926
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)
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Accumulated other comprehensive income (loss)
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3,321
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(6,524
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)
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Total stockholders’ equity
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972,897
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859,780
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Total liabilities and stockholders’ equity
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$
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7,351,563
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$
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7,620,887
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Three Months Ended
March 31, |
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(In thousands, except per share amounts)
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2011
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2010
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Revenues:
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Premiums written—insurance:
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Direct
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$
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190,841
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$
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184,278
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Assumed
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1,624
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(1,248
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)
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Ceded
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(9,716
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)
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(27,529
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)
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Net premiums written
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182,749
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|
155,501
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Decrease in unearned premiums
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20,274
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|
42,767
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Net premiums earned—insurance
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203,023
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|
|
198,268
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Net investment income
|
42,240
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|
45,358
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Net gains on investments
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37,435
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|
|
57,948
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Total other-than-temporary impairment ("OTTI") losses
|
—
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(18
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)
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Losses recognized in other comprehensive income (loss)
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—
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|
|
—
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Net impairment losses recognized in earnings
|
—
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(18
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)
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Change in fair value of derivative instruments
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243,892
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|
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(77,954
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)
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Net gains (losses) on other financial instruments
|
75,251
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(101,564
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)
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Other income
|
1,448
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|
|
5,775
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|
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Total revenues
|
603,289
|
|
|
127,813
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Expenses:
|
|
|
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Provision for losses
|
427,373
|
|
|
543,880
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|
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Change in reserve for premium deficiency
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(1,383
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)
|
|
(1,231
|
)
|
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Policy acquisition costs
|
14,131
|
|
|
14,868
|
|
||
Other operating expenses
|
46,219
|
|
|
65,056
|
|
||
Interest expense
|
17,024
|
|
|
10,804
|
|
||
Total expenses
|
503,364
|
|
|
633,377
|
|
||
Equity in net income of affiliates
|
65
|
|
|
8,098
|
|
||
Pretax income (loss)
|
99,990
|
|
|
(497,466
|
)
|
||
Income tax benefit
|
(3,016
|
)
|
|
(187,111
|
)
|
||
Net income (loss)
|
$
|
103,006
|
|
|
$
|
(310,355
|
)
|
Basic net income (loss) per share
|
$
|
0.78
|
|
|
$
|
(3.77
|
)
|
Diluted net income (loss) per share
|
$
|
0.77
|
|
|
$
|
(3.77
|
)
|
Weighted-average number of common shares outstanding—basic
|
132,427
|
|
|
82,341
|
|
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Weighted-average number of common and common equivalent shares outstanding—diluted
|
133,703
|
|
|
82,341
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Dividends per share
|
$
|
0.0025
|
|
|
$
|
0.0025
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(In thousands)
|
Common
Stock
|
|
Treasury
Stock
|
|
Additional Paid-in Capital
|
|
Retained
Earnings/(Deficit)
|
|
Foreign Currency Translation Adjustment
|
|
Unrealized Holding Gains/Losses
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Other
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Total
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|
||||||||
BALANCE, JANUARY 1, 2010
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$
|
100
|
|
$
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(889,496
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)
|
$
|
1,363,255
|
|
$
|
1,602,143
|
|
$
|
18,285
|
|
$
|
(72,802
|
)
|
$
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(16,491
|
)
|
$
|
2,004,994
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net loss
|
—
|
|
—
|
|
—
|
|
(310,355
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)
|
—
|
|
—
|
|
—
|
|
(310,355
|
)
|
||||||||
Unrealized foreign currency translation adjustment, net of tax of $1,512
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,006
|
)
|
—
|
|
—
|
|
—
|
|
||||||||
Less: Reclassification adjustment for net gains included in net loss, net of tax of $240
|
—
|
|
—
|
|
—
|
|
—
|
|
447
|
|
—
|
|
—
|
|
—
|
|
||||||||
Net foreign currency translation adjustment, net of tax of $1,272
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,453
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)
|
—
|
|
—
|
|
(2,453
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)
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||||||||
Unrealized holding gains arising during the period, net of tax of $9,077
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
16,857
|
|
—
|
|
—
|
|
||||||||
Less: Reclassification adjustment for net gains included in net loss, net of tax of $39
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
72
|
|
—
|
|
—
|
|
||||||||
Net unrealized gain on investments, net of tax of $9,038
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
16,785
|
|
—
|
|
16,785
|
|
||||||||
Comprehensive loss
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(296,023
|
)
|
||||||||
Repurchases of common stock under incentive plans
|
—
|
|
(749
|
)
|
108
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(641
|
)
|
||||||||
Issuance of common stock under benefit plans
|
—
|
|
—
|
|
1,155
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,155
|
|
||||||||
Amortization of restricted stock
|
—
|
|
—
|
|
1,624
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,624
|
|
||||||||
Stock-based compensation expense
|
—
|
|
—
|
|
1,457
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,457
|
|
||||||||
Dividends declared
|
—
|
|
—
|
|
—
|
|
(205
|
)
|
—
|
|
—
|
|
—
|
|
(205
|
)
|
||||||||
BALANCE, March 31, 2010
|
$
|
100
|
|
$
|
(890,245
|
)
|
$
|
1,367,599
|
|
$
|
1,291,583
|
|
$
|
15,832
|
|
$
|
(56,017
|
)
|
$
|
(16,491
|
)
|
$
|
1,712,361
|
|
BALANCE, JANUARY 1, 2011
|
$
|
150
|
|
$
|
(892,012
|
)
|
$
|
1,963,092
|
|
$
|
(204,926
|
)
|
$
|
21,094
|
|
$
|
(27,857
|
)
|
$
|
239
|
|
$
|
859,780
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
—
|
|
—
|
|
—
|
|
103,006
|
|
—
|
|
—
|
|
—
|
|
103,006
|
|
||||||||
Unrealized foreign currency translation adjustment
|
—
|
|
—
|
|
—
|
|
—
|
|
1,565
|
|
—
|
|
—
|
|
|
|
||||||||
Less: Reclassification adjustment for net losses on sales
|
—
|
|
—
|
|
—
|
|
—
|
|
(292
|
)
|
—
|
|
—
|
|
|
|
||||||||
Net foreign currency translation adjustment
|
—
|
|
—
|
|
—
|
|
—
|
|
1,857
|
|
—
|
|
—
|
|
1,857
|
|
||||||||
Unrealized holding gains arising during the period
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8,066
|
|
—
|
|
|
|||||||||
Less: Reclassification adjustment for net gains included in net income
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
78
|
|
—
|
|
|
|||||||||
Net unrealized gain on investments
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
7,988
|
|
—
|
|
7,988
|
|
||||||||
Comprehensive income
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
112,851
|
|
||||||||
Repurchases of common stock under incentive plans
|
—
|
|
(24
|
)
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(24
|
)
|
||||||||
Issuance of common stock under benefit plans
|
—
|
|
—
|
|
359
|
|
—
|
|
—
|
|
—
|
|
—
|
|
359
|
|
||||||||
Amortization of restricted stock
|
—
|
|
—
|
|
274
|
|
—
|
|
—
|
|
—
|
|
—
|
|
274
|
|
||||||||
Additional convertible debt issuance costs, net
|
—
|
|
—
|
|
(33
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(33
|
)
|
||||||||
Stock-based compensation expense
|
—
|
|
—
|
|
23
|
|
—
|
|
—
|
|
—
|
|
—
|
|
23
|
|
||||||||
Dividends declared
|
—
|
|
—
|
|
(333
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(333
|
)
|
||||||||
BALANCE, March 31, 2011
|
$
|
150
|
|
$
|
(892,036
|
)
|
$
|
1,963,382
|
|
$
|
(101,920
|
)
|
$
|
22,951
|
|
$
|
(19,869
|
)
|
$
|
239
|
|
$
|
972,897
|
|
(In thousands)
|
Three Months Ended
March 31, |
||||||
2011
|
|
2010
|
|||||
Cash flows used in operating activities
|
$
|
(260,863
|
)
|
|
$
|
(287,011
|
)
|
Cash flows from investing activities:
|
|
|
|
||||
Proceeds from sales of fixed-maturity investments available for sale
|
515
|
|
|
6,555
|
|
||
Proceeds from sales of equity securities available for sale
|
376
|
|
|
5,353
|
|
||
Proceeds from sales of trading securities
|
313,036
|
|
|
229,349
|
|
||
Proceeds from redemptions of fixed-maturity investments available for sale
|
8,594
|
|
|
12,799
|
|
||
Proceeds from redemptions of fixed-maturity investments held to maturity
|
2,195
|
|
|
2,320
|
|
||
Purchases of trading securities
|
(376,825
|
)
|
|
(371,150
|
)
|
||
Sales and redemptions of short-term investments, net
|
312,739
|
|
|
425,848
|
|
||
Purchases of other invested assets, net
|
(1,591
|
)
|
|
(2,684
|
)
|
||
Purchases of property and equipment, net
|
(760
|
)
|
|
(296
|
)
|
||
Net cash provided by investing activities
|
258,279
|
|
|
308,094
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Dividends paid
|
(333
|
)
|
|
(205
|
)
|
||
Redemption of long-term debt
|
—
|
|
|
(29,348
|
)
|
||
Net cash used in financing activities
|
(333
|
)
|
|
(29,553
|
)
|
||
Effect of exchange rate changes on cash
|
1,792
|
|
|
(608
|
)
|
||
Decrease in cash
|
(1,125
|
)
|
|
(9,078
|
)
|
||
Cash, beginning of period
|
20,334
|
|
|
77,181
|
|
||
Cash, end of period
|
$
|
19,209
|
|
|
$
|
68,103
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Income taxes paid
|
$
|
826
|
|
|
$
|
1,453
|
|
Interest paid
|
$
|
7,283
|
|
|
$
|
7,414
|
|
•
|
Potential adverse effects on us of the failure or significant delay of the United States ("U.S.") economy to fully recover, including ongoing uncertainty in the housing and related credit markets and high unemployment, which could increase our mortgage insurance or financial guaranty incurred losses beyond existing expectations (See Notes 7, 8 and 9).
|
•
|
Potential adverse effects if the capital and liquidity levels of Radian Group or our regulated subsidiaries’ statutory capital levels are deemed inadequate to support current business operations and strategies. Radian Group had immediately available, directly or through an unregulated direct subsidiary, unrestricted cash and marketable securities of approximately
$819.2 million
at March 31, 2011, which includes $150 million of investments contained in our committed preferred custodian trust securities ("CPS") as discussed in Note 5. Radian Guaranty Inc.’s ("Radian Guaranty") statutory policyholders’ surplus declined from
$1.3 billion
at
December 31, 2010
, to
$1.1 billion
at
March 31, 2011
.
|
•
|
Potential adverse effects if Radian Guaranty’s regulatory risk-to-capital ratio were to increase above 25 to 1, including the possibility that insurance regulators or the Government Sponsored Enterprises ("GSEs") may limit or cause Radian Guaranty to cease underwriting new mortgage insurance risk, and Radian Guaranty's customers may decide not to insure loans with Radian Guaranty or may otherwise limit the type or amount of business done with Radian Guaranty. We have been preparing Amerin Guaranty Corporation ("Amerin Guaranty") to write new first-lien mortgage ("first-lien") insurance, if needed, and could pursue waivers from those states that impose a 25 to 1 limitation. If we are unable to continue writing new first-lien insurance business through Amerin Guaranty or obtain the necessary waivers from the risk-to-capital limitations, it will significantly impair our franchise value and reduce our cash flow associated with new business while we continue to honor and settle all valid claims and related expenses. At
March 31, 2011
, this ratio was
20.3
to 1.
|
•
|
Potential adverse effects if Radian Guaranty were to lose its eligibility status with the GSEs, which could occur at any time at the discretion of the GSEs. Loss of GSE eligibility would likely result in a significant curtailment of our ability to write new mortgage insurance business, which would significantly impair our franchise value and limit our cash flow arising from new business while we continue to honor and settle all valid claims and related expenses.
|
•
|
Potential adverse effects from legislative efforts to reform the housing finance market, including the possibility that new federal legislation could reduce or eliminate the requirement for private mortgage insurance.
|
•
|
Potential impact on our businesses as a result of the implementation of regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), the effect of the Dodd-Frank Act on the financial services industry in general, and on our mortgage insurance and financial guaranty businesses in particular, including whether and to what extent loans with mortgage insurance are considered "qualified residential mortgages" for purposes of the Dodd-Frank Act securitization provisions or "qualified mortgages" for purposes of the ability to repay provisions of the Dodd-Frank Act and potential obligations to post collateral on our existing insured derivatives portfolio.
|
•
|
Potential adverse effects on Radian Group liquidity if regulators or the GSEs limit, disallow or terminate our expense allocation agreements among Radian Group and its subsidiaries. In the first three months of
2011
, Radian Group received
$29.7 million
in reimbursements from its subsidiaries under these agreements.
|
|
Three Months Ended
March 31, |
||||||
(In thousands)
|
2011
|
|
2010
|
||||
Mortgage Insurance
|
|
|
|
||||
Net premiums written—insurance
|
$
|
180,846
|
|
|
$
|
157,032
|
|
Net premiums earned—insurance
|
$
|
186,134
|
|
|
$
|
177,339
|
|
Net investment income
|
26,833
|
|
|
26,359
|
|
||
Net gains on investments
|
17,762
|
|
|
28,781
|
|
||
Net impairment losses recognized in earnings
|
—
|
|
|
(18
|
)
|
||
Change in fair value of derivative instruments
|
(394
|
)
|
|
277
|
|
||
Net gains (losses) on other financial instruments
|
2,466
|
|
|
(30,200
|
)
|
||
Other income
|
1,400
|
|
|
1,799
|
|
||
Total revenues
|
234,201
|
|
|
204,337
|
|
||
Provision for losses
|
413,973
|
|
|
529,091
|
|
||
Change in reserve for premium deficiency
|
(1,383
|
)
|
|
(1,231
|
)
|
||
Policy acquisition costs
|
10,216
|
|
|
10,504
|
|
||
Other operating expenses
|
34,137
|
|
|
46,233
|
|
||
Interest expense
|
9,789
|
|
|
2,120
|
|
||
Total expenses
|
466,732
|
|
|
586,717
|
|
||
Equity in net income of affiliates
|
—
|
|
|
—
|
|
||
Pretax loss
|
(232,531
|
)
|
|
(382,380
|
)
|
||
Income tax provision (benefit)
|
3,501
|
|
|
(145,847
|
)
|
||
Net loss
|
$
|
(236,032
|
)
|
|
$
|
(236,533
|
)
|
Cash and investments
|
$
|
3,977,445
|
|
|
$
|
3,546,637
|
|
Deferred policy acquisition costs
|
42,322
|
|
|
36,762
|
|
||
Total assets
|
4,471,425
|
|
|
4,919,093
|
|
||
Unearned premiums
|
191,910
|
|
|
219,753
|
|
||
Reserve for losses and LAE
|
3,542,797
|
|
|
3,597,035
|
|
||
VIE debt
|
72,369
|
|
|
268,443
|
|
||
Derivative liabilities
|
—
|
|
|
—
|
|
|
Three Months Ended
March 31, |
||||||
(In thousands)
|
2011
|
|
2010
|
||||
Financial Guaranty
|
|
|
|
||||
Net premiums written—insurance
|
$
|
1,903
|
|
|
$
|
(1,531
|
)
|
Net premiums earned—insurance
|
$
|
16,889
|
|
|
$
|
20,929
|
|
Net investment income
|
15,407
|
|
|
18,999
|
|
||
Net gains on investments
|
19,673
|
|
|
29,167
|
|
||
Net impairment losses recognized in earnings
|
—
|
|
|
—
|
|
||
Change in fair value of derivative instruments
|
244,286
|
|
|
(78,231
|
)
|
||
Net gains (losses) on other financial instruments
|
72,785
|
|
|
(71,364
|
)
|
||
Other income
|
48
|
|
|
3,913
|
|
||
Total revenues
|
369,088
|
|
|
(76,587
|
)
|
||
Provision for losses
|
13,400
|
|
|
14,789
|
|
||
Change in reserve for premium deficiency
|
—
|
|
|
—
|
|
||
Policy acquisition costs
|
3,915
|
|
|
4,364
|
|
||
Other operating expenses
|
12,082
|
|
|
18,673
|
|
||
Interest expense
|
7,235
|
|
|
8,684
|
|
||
Total expenses
|
36,632
|
|
|
46,510
|
|
||
Equity in net income of affiliates
|
65
|
|
|
78
|
|
||
Pretax income (loss)
|
332,521
|
|
|
(123,019
|
)
|
||
Income tax benefit
|
(6,517
|
)
|
|
(44,041
|
)
|
||
Net income (loss)
|
$
|
339,038
|
|
|
$
|
(78,978
|
)
|
Cash and investments
|
$
|
2,464,819
|
|
|
$
|
2,523,751
|
|
Deferred policy acquisition costs
|
103,399
|
|
|
120,169
|
|
||
Total assets
|
2,880,138
|
|
|
3,161,663
|
|
||
Unearned premiums
|
474,109
|
|
|
560,808
|
|
||
Reserve for losses and LAE
|
84,898
|
|
|
138,789
|
|
||
VIE debt
|
300,638
|
|
|
327,618
|
|
||
Derivative liabilities
|
487,345
|
|
|
234,504
|
|
(In thousands)
|
Three Months Ended
March 31, 2010 |
||
Financial Services
|
|
||
Net premiums written—insurance
|
$
|
—
|
|
Net premiums earned—insurance
|
$
|
—
|
|
Net investment income
|
—
|
|
|
Net gains on investments
|
—
|
|
|
Net impairment losses recognized in earnings
|
—
|
|
|
Change in fair value of derivative instruments
|
—
|
|
|
Net (losses) gains on other financial instruments
|
—
|
|
|
Gain on sale of affiliate
|
—
|
|
|
Other income
|
63
|
|
|
Total revenues
|
63
|
|
|
Provision for losses
|
—
|
|
|
Change in reserve for premium deficiency
|
—
|
|
|
Policy acquisition costs
|
—
|
|
|
Other operating expenses
|
150
|
|
|
Interest expense
|
—
|
|
|
Total expenses
|
150
|
|
|
Equity in net income of affiliates
|
8,020
|
|
|
Pretax income
|
7,933
|
|
|
Income tax provision
|
2,777
|
|
|
Net income
|
$
|
5,156
|
|
Cash and investments
|
$
|
—
|
|
Deferred policy acquisition costs
|
—
|
|
|
Total assets
|
127,402
|
|
|
Unearned premiums
|
—
|
|
|
Reserve for losses and LAE
|
—
|
|
|
VIE debt
|
—
|
|
|
Derivative liabilities
|
—
|
|
|
Three Months Ended
March 31, |
||||||
(In thousands)
|
2011
|
|
2010
|
||||
Consolidated
|
|
|
|
||||
Net income (loss):
|
|
|
|
||||
Mortgage Insurance
|
$
|
(236,032
|
)
|
|
$
|
(236,533
|
)
|
Financial Guaranty
|
339,038
|
|
|
(78,978
|
)
|
||
Financial Services
|
—
|
|
|
5,156
|
|
||
Total
|
$
|
103,006
|
|
|
$
|
(310,355
|
)
|
(In millions)
|
March 31,
2011 |
|
December 31,
2010 |
||||
Balance Sheets
|
|
|
|
||||
Derivative assets:
|
|
|
|
||||
Financial Guaranty credit derivative assets
|
$
|
15.1
|
|
|
$
|
14.5
|
|
Net interest margin securities ("NIMS") assets
|
9.0
|
|
|
10.8
|
|
||
Other
|
0.5
|
|
|
0.9
|
|
||
Total derivative assets
|
24.6
|
|
|
26.2
|
|
||
Derivative liabilities:
|
|
|
|
||||
Financial Guaranty credit derivative liabilities
|
469.9
|
|
|
704.4
|
|
||
Financial Guaranty VIE derivative liabilities
|
17.4
|
|
|
19.2
|
|
||
Total derivative liabilities
|
487.3
|
|
|
723.6
|
|
||
Total derivative liabilities, net
|
$
|
(462.7
|
)
|
|
$
|
(697.4
|
)
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Statements of Operations
|
|
|
|
||||
Net premiums earned—derivatives
|
$
|
10.9
|
|
|
$
|
12.1
|
|
Financial Guaranty credit derivatives
|
234.6
|
|
|
(84.1
|
)
|
||
Financial Guaranty VIE derivative liabilities
|
(0.9
|
)
|
|
(3.2
|
)
|
||
NIMS
|
(1.9
|
)
|
|
(0.2
|
)
|
||
Put options on CPS
|
—
|
|
|
(2.1
|
)
|
||
Other
|
1.2
|
|
|
(0.5
|
)
|
||
Change in fair value of derivative instruments
|
$
|
243.9
|
|
|
$
|
(78.0
|
)
|
($ in millions)
|
March 31, 2011
|
|||||||||
Number of
Contracts
|
|
Par/
Notional
Exposure
|
|
Total Net Asset/
(Liability)
|
||||||
Product
|
|
|
|
|
|
|||||
NIMS related and other (1)
|
—
|
|
|
$
|
—
|
|
|
$
|
9.5
|
|
Corporate collateralized debt obligations ("CDOs")
|
84
|
|
|
33,511.3
|
|
|
(45.7
|
)
|
||
Non-Corporate CDOs and other derivative transactions:
|
|
|
|
|
|
|||||
Trust Preferred Securities ("TruPs")
|
19
|
|
|
2,006.7
|
|
|
(211.8
|
)
|
||
CDOs of commercial mortgage-backed securities ("CMBS")
|
4
|
|
|
1,831.0
|
|
|
(54.3
|
)
|
||
Other:
|
|
|
|
|
|
|||||
Structured finance
|
9
|
|
|
833.7
|
|
|
(82.3
|
)
|
||
Public finance
|
26
|
|
|
1,693.9
|
|
|
(37.6
|
)
|
||
Total Non-Corporate CDOs and other derivative transactions
|
58
|
|
|
6,365.3
|
|
|
(386.0
|
)
|
||
Assumed financial guaranty credit derivatives:
|
|
|
|
|
|
|||||
Structured finance
|
274
|
|
|
1,083.0
|
|
|
(19.0
|
)
|
||
Public finance
|
14
|
|
|
350.5
|
|
|
(4.1
|
)
|
||
Total Assumed
|
288
|
|
|
1,433.5
|
|
|
(23.1
|
)
|
||
Financial Guaranty VIE derivative liabilities (2)
|
—
|
|
|
—
|
|
|
(17.4
|
)
|
||
Grand Total
|
430
|
|
|
$
|
41,310.1
|
|
|
$
|
(462.7
|
)
|
(1)
|
Represents NIMS derivative assets related to consolidated NIMS VIEs. Also includes one common stock warrant. Because neither of these investments represent financial guaranty contracts that we issued, they cannot become liabilities, and therefore, do not represent additional par exposure.
|
(2)
|
Represents the fair value of an interest rate swap included in the consolidation of one of our financial guaranty transactions. The notional amount of the interest rate swap does not represent additional par exposure, and therefore, is excluded from this table. See Note 5 for information on our maximum exposure to loss from our consolidated financial guaranty transactions.
|
(In basis points)
|
March 31,
2011 |
|
December 31,
2010 |
|
March 31,
2010 |
|
December 31,
2009 |
||||
Radian Group's five-year CDS spread
|
642
|
|
|
465
|
|
|
983
|
|
|
1,530
|
|
(In millions)
|
Fair Value Liability
before Consideration
of Radian
Non-Performance Risk
March 31, 2011
|
|
Impact of Radian
Non-Performance Risk March 31, 2011
|
|
Fair Value Liability
Recorded
March 31, 2011
|
||||||
Product
|
|
|
|
|
|
||||||
Corporate CDOs
|
$
|
(324.1
|
)
|
|
$
|
278.4
|
|
|
$
|
(45.7
|
)
|
Non-Corporate CDO-related (1)
|
(1,579.1
|
)
|
|
1,072.5
|
|
|
(506.6
|
)
|
|||
NIMS-related (2)
|
(68.8
|
)
|
|
5.4
|
|
|
(63.4
|
)
|
|||
Total
|
$
|
(1,972.0
|
)
|
|
$
|
1,356.3
|
|
|
$
|
(615.7
|
)
|
(In millions)
|
Fair Value Liability
before Consideration
of Radian
Non-Performance Risk
December 31, 2010
|
|
Impact of Radian
Non-Performance Risk
December 31, 2010
|
|
Fair Value Liability
Recorded
December 31,
2010
|
||||||
Product
|
|
|
|
|
|
||||||
Corporate CDOs
|
$
|
(387.1
|
)
|
|
$
|
281.5
|
|
|
$
|
(105.6
|
)
|
Non-Corporate CDO-related (1)
|
(1,696.2
|
)
|
|
934.1
|
|
|
(762.1
|
)
|
|||
NIMS-related (2)
|
(134.1
|
)
|
|
4.8
|
|
|
(129.3
|
)
|
|||
Total
|
$
|
(2,217.4
|
)
|
|
$
|
1,220.4
|
|
|
$
|
(997.0
|
)
|
(1)
|
Includes the net liability recorded within derivative assets and derivative liabilities, and the net liability recorded within VIE debt and other financial statement line items for consolidated VIEs.
|
(2)
|
Includes NIMS VIE debt and NIMS derivative assets.
|
(In millions)
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
Assets and Liabilities at Fair Value
|
|
|
|
|
|
|
|
|
||||||||
Investment Portfolio:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
|
$
|
707.5
|
|
|
$
|
744.8
|
|
|
$
|
—
|
|
|
$
|
1,452.3
|
|
State and municipal obligations
|
|
—
|
|
|
1,220.8
|
|
|
23.2
|
|
|
1,244.0
|
|
||||
Money market instruments
|
|
365.8
|
|
|
—
|
|
|
—
|
|
|
365.8
|
|
||||
Corporate bonds and notes
|
|
—
|
|
|
1,005.0
|
|
|
—
|
|
|
1,005.0
|
|
||||
Residential mortgage-backed securities ("RMBS")
|
|
—
|
|
|
913.1
|
|
|
55.3
|
|
|
968.4
|
|
||||
CMBS
|
|
—
|
|
|
193.1
|
|
|
24.0
|
|
|
217.1
|
|
||||
CDO
|
|
—
|
|
|
—
|
|
|
4.1
|
|
|
4.1
|
|
||||
Other ABS
|
|
—
|
|
|
120.8
|
|
|
4.7
|
|
|
125.5
|
|
||||
Foreign government securities
|
|
—
|
|
|
70.1
|
|
|
—
|
|
|
70.1
|
|
||||
Hybrid securities
|
|
—
|
|
|
367.6
|
|
|
—
|
|
|
367.6
|
|
||||
Equity securities (1)
|
|
178.3
|
|
|
165.3
|
|
|
4.3
|
|
|
347.9
|
|
||||
Other investments (2)
|
|
—
|
|
|
151.6
|
|
|
3.9
|
|
|
155.5
|
|
||||
Total Investments at Fair Value (3)
|
|
1,251.6
|
|
|
4,952.2
|
|
|
119.5
|
|
|
6,323.3
|
|
||||
Derivative Assets
|
|
—
|
|
|
0.5
|
|
|
24.1
|
|
|
24.6
|
|
||||
Other Assets (4)
|
|
—
|
|
|
—
|
|
|
106.3
|
|
|
106.3
|
|
||||
Total Assets at Fair Value
|
|
$
|
1,251.6
|
|
|
$
|
4,952.7
|
|
|
$
|
249.9
|
|
|
$
|
6,454.2
|
|
Derivative Liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
487.3
|
|
|
$
|
487.3
|
|
VIE debt (5)
|
|
—
|
|
|
—
|
|
|
373.0
|
|
|
373.0
|
|
||||
Total Liabilities at Fair Value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
860.3
|
|
|
$
|
860.3
|
|
(1)
|
Comprised of broadly diversified domestic equity mutual funds included within Level I and various preferred and common stocks invested across numerous companies and industries included within Level II and III.
|
(2)
|
Comprised of short-term commercial paper within CPS trusts ($
150.0
million) and short-term CDs ($
1.6
million) included within Level II and lottery annuities (
$1.8 million
) and TruPs held by consolidated VIEs (
$2.1 million
) included within Level III.
|
(3)
|
Does not include fixed-maturities held to maturity (
$8.7 million
) and other invested assets ($
61.2
million), primarily invested in limited partnerships, accounted for as cost-method investments and not measured at fair value.
|
(4)
|
Comprised of manufactured housing loan collateral related to two consolidated financial guaranty VIEs.
|
(5)
|
Comprised of consolidated debt related to NIMS VIEs (
$72.4 million
) and amounts related to financial guaranty VIEs (
$300.6 million
).
|
(In millions)
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
Assets and Liabilities at Fair Value
|
|
|
|
|
|
|
|
|
||||||||
Investment Portfolio:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
|
$
|
1,075.0
|
|
|
$
|
731.4
|
|
|
$
|
—
|
|
|
$
|
1,806.4
|
|
State and municipal obligations
|
|
—
|
|
|
1,159.7
|
|
|
23.2
|
|
|
1,182.9
|
|
||||
Money market instruments
|
|
310.9
|
|
|
—
|
|
|
—
|
|
|
310.9
|
|
||||
Corporate bonds and notes
|
|
—
|
|
|
1,060.4
|
|
|
—
|
|
|
1,060.4
|
|
||||
RMBS
|
|
—
|
|
|
913.5
|
|
|
52.5
|
|
|
966.0
|
|
||||
CMBS
|
|
—
|
|
|
173.6
|
|
|
23.0
|
|
|
196.6
|
|
||||
CDO
|
|
—
|
|
|
—
|
|
|
2.4
|
|
|
2.4
|
|
||||
Other ABS
|
|
—
|
|
|
131.1
|
|
|
3.3
|
|
|
134.4
|
|
||||
Foreign government securities
|
|
—
|
|
|
83.5
|
|
|
—
|
|
|
83.5
|
|
||||
Hybrid securities
|
|
—
|
|
|
318.9
|
|
|
—
|
|
|
318.9
|
|
||||
Equity securities (1)
|
|
168.4
|
|
|
168.6
|
|
|
2.9
|
|
|
339.9
|
|
||||
Other investments (2)
|
|
—
|
|
|
150.0
|
|
|
4.6
|
|
|
154.6
|
|
||||
Total Investments at Fair Value (3)
|
|
1,554.3
|
|
|
4,890.7
|
|
|
111.9
|
|
|
6,556.9
|
|
||||
Derivative Assets
|
|
—
|
|
|
—
|
|
|
26.2
|
|
|
26.2
|
|
||||
Other Assets (4)
|
|
—
|
|
|
—
|
|
|
109.7
|
|
|
109.7
|
|
||||
Total Assets at Fair Value
|
|
$
|
1,554.3
|
|
|
$
|
4,890.7
|
|
|
$
|
247.8
|
|
|
$
|
6,692.8
|
|
Derivative Liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
723.6
|
|
|
$
|
723.6
|
|
VIE debt (5)
|
|
—
|
|
|
—
|
|
|
520.1
|
|
|
520.1
|
|
||||
Total Liabilities at Fair Value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,243.7
|
|
|
$
|
1,243.7
|
|
(1)
|
Comprised of broadly diversified domestic equity mutual funds included within Level I and various preferred and common stocks invested across numerous companies and industries included within Level II and III.
|
(2)
|
Comprised of short-term commercial paper within CPS trusts included within Level II and lottery annuities (
$2.6 million
) and TruPs held by consolidated VIEs (
$2.0 million
) included within Level III.
|
(3)
|
Does not include fixed-maturities held to maturity (
$10.8 million
), certain short-term investments ($1.6 million), primarily invested in CDs and time deposits, and other invested assets (
$59.6 million
), primarily invested in limited partnerships, accounted for as cost-method investments and not measured at fair value.
|
(4)
|
Comprised of manufactured housing loan collateral related to two consolidated financial guaranty VIEs.
|
(5)
|
Comprised of consolidated debt related to NIMS VIEs (
$141.0 million
) and amounts related to financial guaranty VIEs (
$379.1 million
) that required consolidation as of January 1, 2010, under the accounting standard update regarding improvements to financial reporting by enterprises involving VIEs.
|
(In millions)
|
Beginning
Balance at
January 1, 2011
|
|
Realized and
Unrealized
Gains (Losses)
Recorded
in Earnings (1)
|
|
Purchases
|
|
Sales
|
|
Issuances
|
|
Settlements
|
|
Transfers Into
(Out of)
Level III (2)
|
|
Ending
Balance at
March 31, 2011
|
||||||||||||||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
State and municipal obligations
|
$
|
23.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23.2
|
|
RMBS
|
52.5
|
|
|
4.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.2
|
)
|
|
—
|
|
|
55.3
|
|
||||||||
CMBS
|
23.0
|
|
|
1.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24.0
|
|
||||||||
CDO
|
2.4
|
|
|
1.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
4.1
|
|
||||||||
Other ABS
|
3.3
|
|
|
1.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.7
|
|
||||||||
Hybrid securities
|
—
|
|
|
(0.7
|
)
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Equity securities
|
2.9
|
|
|
0.4
|
|
|
1.1
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.3
|
|
||||||||
Other investments
|
4.6
|
|
|
0.1
|
|
|
—
|
|
|
(0.5
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
3.9
|
|
||||||||
Total Level III Investments
|
111.9
|
|
|
7.8
|
|
|
1.8
|
|
|
(0.6
|
)
|
|
—
|
|
|
(1.4
|
)
|
|
—
|
|
|
119.5
|
|
||||||||
NIMS derivative assets
|
11.7
|
|
|
(2.4
|
)
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|
9.0
|
|
||||||||
Other assets
|
109.7
|
|
|
3.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7.3
|
)
|
|
—
|
|
|
106.3
|
|
||||||||
Total Level III Assets, net
|
$
|
233.3
|
|
|
$
|
9.3
|
|
|
$
|
1.9
|
|
|
$
|
(0.6
|
)
|
|
$
|
—
|
|
|
$
|
(8.7
|
)
|
|
$
|
(0.4
|
)
|
|
$
|
234.8
|
|
Derivative liabilities, net
|
$
|
(709.1
|
)
|
|
$
|
244.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(7.8
|
)
|
|
$
|
—
|
|
|
$
|
(472.2
|
)
|
VIE debt
|
(520.1
|
)
|
|
72.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
74.2
|
|
|
—
|
|
|
(373.0
|
)
|
||||||||
Total Level III liabilities, net
|
$
|
(1,229.2
|
)
|
|
$
|
317.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
66.4
|
|
|
$
|
—
|
|
|
$
|
(845.2
|
)
|
(1)
|
Includes unrealized gains (losses) relating to assets and liabilities still held as of
March 31, 2011
, as follows:
$6.8 million
for investments,
$(2.0) million
for NIMS derivative assets,
$0.8 million
for other assets,
$229.2 million
for derivative liabilities, and
$0.7 million
for VIE debt.
|
(2)
|
Transfers are recognized at the end of the period as the availability of market observed inputs change from period to period.
|
(In millions)
|
Beginning
Balance at
January 1, 2010
|
|
VIE Consolidation at January 1, 2010 (1)
|
|
Realized and
Unrealized
Gains(Losses)
Recorded
in Earnings (2)
|
|
Purchases
|
|
Sales
|
|
Issuances
|
|
Settlements
|
|
Transfers Into
(Out of)
Level III (3)
|
|
Ending
Balance at
March 31, 2010
|
||||||||||||||||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
State and municipal obligations
|
$
|
24.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
24.4
|
|
RMBS
|
—
|
|
|
44.3
|
|
|
12.0
|
|
|
—
|
|
|
(2.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54.1
|
|
|||||||||
CMBS
|
—
|
|
|
23.8
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24.3
|
|
|||||||||
CDO
|
—
|
|
|
3.8
|
|
|
(0.1
|
)
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.8
|
|
|||||||||
Other ABS
|
—
|
|
|
3.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.5
|
|
|||||||||
Hybrid securities
|
0.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|
1.1
|
|
|||||||||
Equity securities
|
1.7
|
|
|
—
|
|
|
(0.3
|
)
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|||||||||
Other investments
|
3.8
|
|
|
3.7
|
|
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.7
|
|
|||||||||
Total Level III Investments
|
30.5
|
|
|
79.1
|
|
|
12.1
|
|
|
0.1
|
|
|
(2.9
|
)
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|
119.4
|
|
|||||||||
NIMS and CPS derivative assets
|
44.7
|
|
|
—
|
|
|
(2.8
|
)
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
42.5
|
|
|||||||||
Other assets
|
—
|
|
|
119.7
|
|
|
2.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.4
|
)
|
|
—
|
|
|
118.3
|
|
|||||||||
Total Level III Assets, net
|
$
|
75.2
|
|
|
$
|
198.8
|
|
|
$
|
11.3
|
|
|
$
|
0.3
|
|
|
$
|
(2.9
|
)
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
0.5
|
|
|
$
|
280.2
|
|
Derivative liabilities, net
|
$
|
(214.9
|
)
|
|
$
|
51.8
|
|
|
$
|
(75.1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28
|
|
|
$
|
—
|
|
|
$
|
(210.2
|
)
|
VIE debt
|
(296.1
|
)
|
|
(253.5
|
)
|
|
(107.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60.5
|
|
|
—
|
|
|
(596.1
|
)
|
|||||||||
Total Level III liabilities, net
|
$
|
(511.0
|
)
|
|
$
|
(201.7
|
)
|
|
$
|
(182.1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
88.5
|
|
|
$
|
—
|
|
|
$
|
(806.3
|
)
|
(1)
|
Represents the impact of our adoption of the accounting standard update regarding improvements to financial reporting by enterprises involving VIEs.
|
(2)
|
Includes unrealized gains (losses) relating to assets and liabilities still held as of
March 31, 2010
as follows:
$11.6 million
for investments,
$(0.2) million
for NIMS derivative assets,
$(1.7) million
for CPS derivative assets,
$2.0 million
for other assets,
$(88.8) million
for derivative liabilities, and
$(31.0) million
for VIE debt.
|
(3)
|
Transfers are recognized at the end of the period as the availability of market observed inputs change from period to period.
|
|
March 31, 2011
|
|
December 31, 2010
|
||||||||||||
(In millions)
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Fixed-maturities held to maturity
|
$
|
8.7
|
|
|
$
|
9.3
|
|
|
$
|
10.8
|
|
|
$
|
11.4
|
|
Short-term investments (carried at cost)
|
—
|
|
|
—
|
|
|
1.6
|
|
|
1.6
|
|
||||
Other invested assets
|
61.2
|
|
|
62.6
|
|
|
59.6
|
|
|
58.4
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Long-term debt
|
968.2
|
|
|
1,039.0
|
|
|
964.8
|
|
|
1,082.5
|
|
||||
Non-derivative financial guaranty liabilities
|
407.5
|
|
|
520.5
|
|
|
406.1
|
|
|
531.1
|
|
(In millions)
|
March 31,
2011 |
|
December 31,
2010 |
||||
Balance Sheet:
|
|
|
|
||||
Derivative assets
|
$
|
9.0
|
|
|
$
|
10.8
|
|
VIE debt—at fair value
|
72.4
|
|
|
141.0
|
|
||
|
|
|
|
||||
Maximum exposure (1)
|
69.3
|
|
|
135.8
|
|
(1)
|
The difference between the carrying amounts of the net asset/liability position and maximum exposure related to VIEs is primarily due to the difference between the face amount of the obligation and the recorded fair values, which includes an adjustment for our non-performance risk. The maximum exposure is based on the net par amount of our insured obligation as of the reporting date.
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Statement of Operations:
|
|
|
|
||||
Net investment income
|
$
|
0.1
|
|
|
$
|
—
|
|
Change in fair value of derivative instruments—loss
|
(1.9
|
)
|
|
(0.2
|
)
|
||
Net gain (loss) on other financial instruments
|
2.4
|
|
|
(30.7
|
)
|
||
|
|
|
|
||||
Net Cash Outflow
|
66.2
|
|
|
50.1
|
|
|
Consolidated
|
||||||
(In millions)
|
March 31,
2011 |
|
December 31,
2010 |
||||
Balance Sheet:
|
|
|
|
||||
Short-term investments
|
$
|
150.0
|
|
|
$
|
150.0
|
|
|
|
|
|
||||
Maximum exposure (1)
|
150.0
|
|
|
150.0
|
|
(1)
|
The maximum exposure is based on our carrying amounts of the investments.
|
|
Consolidated
|
|
Unconsolidated (1)
|
||||||||||||
|
Three Months Ended
March 31, |
|
Three Months Ended
March 31, |
||||||||||||
(In millions)
|
2011
|
|
2010
|
|
2011
|
|
2010
|
||||||||
Statement of Operations:
|
|
|
|
|
|
|
|
||||||||
Net gain (loss) on investments
|
$
|
0.1
|
|
|
$
|
(0.5
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Change in fair value of derivative instruments—loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.1
|
)
|
||||
Net loss on other financial instruments
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
||||
Interest expense
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
||||
Other operating expenses
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net Cash Outflow
|
—
|
|
|
29.5
|
|
|
—
|
|
|
0.4
|
|
(1)
|
Activity displayed reflects the impact for the periods prior to June 30, 2010, for one CPS custodial trust that was not consolidated prior to that date.
|
|
Consolidated
|
|
Unconsolidated
|
||||||||||||
(In millions)
|
March 31, 2011
|
|
December 31, 2010
|
|
March 31, 2011
|
|
December 31, 2010
|
||||||||
Balance Sheet:
|
|
|
|
|
|
|
|
||||||||
Trading securities
|
$
|
90.2
|
|
|
$
|
83.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative assets
|
—
|
|
|
—
|
|
|
5.6
|
|
|
6.0
|
|
||||
Premiums receivable
|
—
|
|
|
—
|
|
|
4.7
|
|
|
5.2
|
|
||||
Other assets
|
108.1
|
|
|
112.4
|
|
|
—
|
|
|
—
|
|
||||
Unearned premiums
|
—
|
|
|
—
|
|
|
5.5
|
|
|
6.0
|
|
||||
Reserve for losses and LAE
|
—
|
|
|
—
|
|
|
18.4
|
|
|
15.0
|
|
||||
Derivative liabilities
|
17.4
|
|
|
19.2
|
|
|
410.3
|
|
|
585.9
|
|
||||
VIE debt—at fair value
|
300.6
|
|
|
379.1
|
|
|
—
|
|
|
—
|
|
||||
Accounts payable and accrued expenses
|
0.9
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Maximum exposure (1)
|
582.7
|
|
|
584.6
|
|
|
6,585.2
|
|
|
6,874.2
|
|
||||
|
|
|
|
|
|
|
|
||||||||
|
Consolidated
|
|
Unconsolidated
|
||||||||||||
|
Three Months Ended
March 31, |
|
Three Months Ended
March 31, |
||||||||||||
(In millions)
|
2011
|
|
2010
|
|
2011
|
|
2010
|
||||||||
Statement of Operations:
|
|
|
|
|
|
|
|
||||||||
Premiums earned
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.5
|
|
|
$
|
0.7
|
|
Net investment income
|
2.1
|
|
|
2.7
|
|
|
—
|
|
|
—
|
|
||||
Net gains on investments
|
8.0
|
|
|
12.4
|
|
|
—
|
|
|
—
|
|
||||
Change in fair value of derivative instruments—(loss) gain
|
(0.9
|
)
|
|
(3.2
|
)
|
|
176.7
|
|
|
(81.6
|
)
|
||||
Net gain (loss) on other financial instruments
|
74.5
|
|
|
(73.3
|
)
|
|
—
|
|
|
—
|
|
||||
Other income
|
—
|
|
|
3.9
|
|
|
—
|
|
|
—
|
|
||||
Provision for losses —increase
|
—
|
|
|
—
|
|
|
3.4
|
|
|
5.7
|
|
||||
Interest expense
|
—
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
||||
Other operating expenses
|
0.8
|
|
|
2.0
|
|
|
—
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net Cash Inflow (Outflow)
|
0.2
|
|
|
(0.7
|
)
|
|
2.0
|
|
|
(37.4
|
)
|
(1)
|
The difference between the carrying amounts of the net asset/liability position and maximum exposure related to VIEs is primarily due to the difference between the face amount of the obligation and the recorded fair values, which includes an adjustment for our non-performance risk. The maximum exposure is based on the net par amount of our insured obligation as of the reporting date.
|
|
March 31, 2011
|
||||||||||||||
(In thousands)
|
Amortized
Cost
|
|
Fair Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
||||||||
Fixed-maturities held to maturity:
|
|
|
|
|
|
|
|
||||||||
Bonds and notes:
|
|
|
|
|
|
|
|
||||||||
State and municipal obligations
|
$
|
8,743
|
|
|
$
|
9,250
|
|
|
$
|
523
|
|
|
$
|
16
|
|
|
$
|
8,743
|
|
|
$
|
9,250
|
|
|
$
|
523
|
|
|
$
|
16
|
|
Fixed-maturities available for sale:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
$
|
25,202
|
|
|
$
|
27,640
|
|
|
$
|
2,438
|
|
|
$
|
—
|
|
State and municipal obligations
|
269,926
|
|
|
197,420
|
|
|
222
|
|
|
72,728
|
|
||||
Corporate bonds and notes
|
19,408
|
|
|
19,062
|
|
|
295
|
|
|
641
|
|
||||
RMBS
|
11,508
|
|
|
11,994
|
|
|
502
|
|
|
16
|
|
||||
CMBS
|
3,042
|
|
|
3,051
|
|
|
60
|
|
|
51
|
|
||||
Other ABS
|
1,712
|
|
|
1,819
|
|
|
113
|
|
|
6
|
|
||||
Other investments
|
1,647
|
|
|
1,736
|
|
|
89
|
|
|
—
|
|
||||
|
$
|
332,445
|
|
|
$
|
262,722
|
|
|
$
|
3,719
|
|
|
$
|
73,442
|
|
Equity securities available for sale (1)
|
$
|
160,083
|
|
|
$
|
194,921
|
|
|
$
|
34,847
|
|
|
$
|
9
|
|
Total debt and equity securities
|
$
|
501,271
|
|
|
$
|
466,893
|
|
|
$
|
39,089
|
|
|
$
|
73,467
|
|
(1)
|
Comprised of broadly diversified domestic equity mutual funds (
$178.3 million
fair value) and various preferred and common stocks invested across numerous companies and industries (
$16.6 million
fair value).
|
|
December 31, 2010
|
||||||||||||||
(In thousands)
|
Amortized
Cost
|
|
Fair Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
||||||||
Fixed-maturities held to maturity:
|
|
|
|
|
|
|
|
||||||||
Bonds and notes:
|
|
|
|
|
|
|
|
||||||||
State and municipal obligations
|
$
|
10,773
|
|
|
$
|
11,416
|
|
|
$
|
662
|
|
|
$
|
19
|
|
|
$
|
10,773
|
|
|
$
|
11,416
|
|
|
$
|
662
|
|
|
$
|
19
|
|
Fixed-maturities available for sale:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
$
|
25,120
|
|
|
$
|
27,742
|
|
|
$
|
2,622
|
|
|
$
|
—
|
|
State and municipal obligations
|
269,185
|
|
|
199,187
|
|
|
272
|
|
|
70,270
|
|
||||
Corporate bonds and notes
|
26,748
|
|
|
26,206
|
|
|
334
|
|
|
876
|
|
||||
RMBS
|
11,952
|
|
|
12,538
|
|
|
600
|
|
|
14
|
|
||||
CMBS
|
3,279
|
|
|
3,310
|
|
|
70
|
|
|
39
|
|
||||
Other ABS
|
2,104
|
|
|
2,226
|
|
|
127
|
|
|
5
|
|
||||
Other investments
|
2,407
|
|
|
2,590
|
|
|
183
|
|
|
—
|
|
||||
|
$
|
340,795
|
|
|
$
|
273,799
|
|
|
$
|
4,208
|
|
|
$
|
71,204
|
|
Equity securities available for sale (1)
|
$
|
160,242
|
|
|
$
|
184,365
|
|
|
$
|
24,188
|
|
|
$
|
65
|
|
Total debt and equity securities
|
$
|
511,810
|
|
|
$
|
469,580
|
|
|
$
|
29,058
|
|
|
$
|
71,288
|
|
(1)
|
Comprised of broadly diversified domestic equity mutual funds (
$168.4 million
fair value) and various preferred and common stocks invested across numerous companies and industries (
$16.0 million
fair value).
|
(In thousands)
|
March 31,
2011 |
|
December 31,
2010 |
||||
Trading securities:
|
|
|
|
||||
U.S. government and agency securities
|
$
|
717,157
|
|
|
$
|
703,636
|
|
State and municipal obligations
|
1,046,582
|
|
|
983,680
|
|
||
Corporate bonds and notes
|
985,982
|
|
|
1,034,206
|
|
||
RMBS
|
956,405
|
|
|
953,416
|
|
||
CMBS
|
214,050
|
|
|
193,244
|
|
||
CDO
|
4,054
|
|
|
2,406
|
|
||
Other ABS
|
123,681
|
|
|
132,149
|
|
||
Foreign government securities
|
70,078
|
|
|
83,508
|
|
||
Hybrid securities
|
367,633
|
|
|
318,940
|
|
||
Equity securities
|
152,962
|
|
|
155,636
|
|
||
Other investments
|
2,135
|
|
|
2,000
|
|
||
Total
|
$
|
4,640,719
|
|
|
$
|
4,562,821
|
|
March 31, 2011: ($ in thousands) Description of Securities
|
|
Less Than 12 Months
|
|
12 Months or Greater
|
|
Total
|
|||||||||||||||||||||||||||
# of
securities
|
|
Fair Value
|
|
Unrealized
Losses
|
|
# of
securities
|
|
Fair Value
|
|
Unrealized
Losses
|
|
# of
securities
|
|
Fair Value
|
|
Unrealized
Losses
|
|||||||||||||||||
State and municipal obligations
|
|
7
|
|
|
$
|
6,692
|
|
|
$
|
1,659
|
|
|
25
|
|
|
$
|
184,212
|
|
|
$
|
71,085
|
|
|
32
|
|
|
$
|
190,904
|
|
|
$
|
72,744
|
|
Corporate bonds and notes
|
|
25
|
|
|
12,179
|
|
|
627
|
|
|
1
|
|
|
403
|
|
|
14
|
|
|
26
|
|
|
12,582
|
|
|
641
|
|
||||||
RMBS
|
|
2
|
|
|
2,140
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2,140
|
|
|
16
|
|
||||||
CMBS
|
|
2
|
|
|
674
|
|
|
12
|
|
|
1
|
|
|
1,012
|
|
|
39
|
|
|
3
|
|
|
1,686
|
|
|
51
|
|
||||||
Other ABS
|
|
2
|
|
|
510
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
510
|
|
|
6
|
|
||||||
Equity securities
|
|
2
|
|
|
104
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
104
|
|
|
9
|
|
||||||
Total
|
|
40
|
|
|
$
|
22,299
|
|
|
$
|
2,329
|
|
|
27
|
|
|
$
|
185,627
|
|
|
$
|
71,138
|
|
|
67
|
|
|
$
|
207,926
|
|
|
$
|
73,467
|
|
December 31, 2010:
($ in thousands)
Description of Securities
|
|
Less Than 12 Months
|
|
12 Months or Greater
|
|
Total
|
|||||||||||||||||||||||||||
# of
securities
|
|
Fair Value
|
|
Unrealized
Losses
|
|
# of
securities
|
|
Fair Value
|
|
Unrealized
Losses
|
|
# of
securities
|
|
Fair Value
|
|
Unrealized
Losses
|
|||||||||||||||||
State and municipal obligations
|
|
6
|
|
|
$
|
3,507
|
|
|
$
|
110
|
|
|
26
|
|
|
$
|
189,194
|
|
|
$
|
70,179
|
|
|
32
|
|
|
$
|
192,701
|
|
|
$
|
70,289
|
|
Corporate bonds and notes
|
|
31
|
|
|
16,364
|
|
|
852
|
|
|
2
|
|
|
604
|
|
|
24
|
|
|
33
|
|
|
16,968
|
|
|
876
|
|
||||||
RMBS
|
|
1
|
|
|
1,436
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1,436
|
|
|
14
|
|
||||||
CMBS
|
|
3
|
|
|
1,885
|
|
|
39
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
1,885
|
|
|
39
|
|
||||||
Other ABS
|
|
2
|
|
|
802
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
802
|
|
|
5
|
|
||||||
Equity securities
|
|
2
|
|
|
205
|
|
|
65
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
205
|
|
|
65
|
|
||||||
Total
|
|
45
|
|
|
$
|
24,199
|
|
|
$
|
1,085
|
|
|
28
|
|
|
$
|
189,798
|
|
|
$
|
70,203
|
|
|
73
|
|
|
$
|
213,997
|
|
|
$
|
71,288
|
|
|
March 31, 2011
|
||||||||||||||
|
Held to Maturity
|
|
Available for Sale
|
||||||||||||
(In thousands)
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
||||||||
Due in one year or less (1)
|
$
|
658
|
|
|
$
|
661
|
|
|
$
|
16,981
|
|
|
$
|
17,863
|
|
Due after one year through five years (1)
|
4,719
|
|
|
4,924
|
|
|
16,295
|
|
|
16,630
|
|
||||
Due after five years through ten years (1)
|
3,065
|
|
|
3,381
|
|
|
7,618
|
|
|
7,715
|
|
||||
Due after ten years (1)
|
301
|
|
|
284
|
|
|
275,289
|
|
|
203,650
|
|
||||
RMBS (2)
|
—
|
|
|
—
|
|
|
11,508
|
|
|
11,994
|
|
||||
CMBS (2)
|
—
|
|
|
—
|
|
|
3,042
|
|
|
3,051
|
|
||||
Other ABS (2)
|
—
|
|
|
—
|
|
|
1,712
|
|
|
1,819
|
|
||||
Total
|
$
|
8,743
|
|
|
$
|
9,250
|
|
|
$
|
332,445
|
|
|
$
|
262,722
|
|
(1)
|
Actual maturities may differ as a result of calls before scheduled maturity.
|
(2)
|
RMBS, CMBS and Other ABS are shown separately, as they are not due at a single maturity date.
|
(In thousands)
|
March 31,
2011 |
|
December 31,
2010 |
||||
Mortgage insurance reserves
|
$
|
3,542,797
|
|
|
$
|
3,524,971
|
|
Financial guaranty reserves
|
84,898
|
|
|
71,764
|
|
||
Total reserve for losses and LAE
|
$
|
3,627,695
|
|
|
$
|
3,596,735
|
|
|
Three Months Ended
March 31, |
||||||
(In thousands)
|
2011
|
|
2010
|
||||
Mortgage Insurance
|
|
|
|
||||
Balance at beginning of period
|
$
|
3,524,971
|
|
|
$
|
3,450,538
|
|
Less Reinsurance recoverables (1)
|
(223,254
|
)
|
|
(621,644
|
)
|
||
Balance at beginning of period, net of reinsurance recoverables
|
3,301,717
|
|
|
2,828,894
|
|
||
Add losses and LAE incurred in respect of default notices reported and unreported in:
|
|
|
|
||||
Current year (2)
|
190,686
|
|
|
251,287
|
|
||
Prior years
|
223,287
|
|
|
277,804
|
|
||
Total incurred
|
413,973
|
|
|
529,091
|
|
||
Deduct paid claims and LAE in:
|
|
|
|
||||
Current year (2)
|
(837
|
)
|
|
(18,966
|
)
|
||
Prior years
|
(364,314
|
)
|
|
(338,309
|
)
|
||
Total paid
|
(365,151
|
)
|
|
(357,275
|
)
|
||
Balance at end of period, net of reinsurance recoverables
|
3,350,539
|
|
|
3,000,710
|
|
||
Add Reinsurance recoverables (1)
|
192,258
|
|
|
596,325
|
|
||
Balance at end of period
|
$
|
3,542,797
|
|
|
$
|
3,597,035
|
|
(1)
|
Related to ceded losses on captive reinsurance transactions and Smart Home. See "Management's Discussion and Analysis of Financial Condition and Results of Operations
—
Critical Accounting Policies
—
Off-Balance Sheet Arrangements" for additional information regarding our Smart Home transactions.
|
(2)
|
Related to underlying defaulted loans with a most recent date of default notice in the current year. For example, if a loan had defaulted in a prior year, but then subsequently cured and re-defaulted in the current year, that default would be considered a current year default.
|
(In millions)
|
March 31,
2011 |
|
December 31,
2010 |
||||
Decrease to our loss reserve due to estimated rescissions and denials
|
$
|
(783
|
)
|
|
$
|
(922
|
)
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Rescissions—first loss position
|
$
|
93.8
|
|
|
$
|
129.4
|
|
Denials—first loss position
|
24.6
|
|
|
8.0
|
|
||
Total first loss position (1)
|
118.4
|
|
|
137.4
|
|
||
Rescissions—second loss position
|
31.0
|
|
|
110.4
|
|
||
Denials—second loss position
|
2.7
|
|
|
3.7
|
|
||
Total second loss position (2)
|
33.7
|
|
|
114.1
|
|
||
Total first-lien claims submitted for payment that were rescinded or denied (3)
|
$
|
152.1
|
|
|
$
|
251.5
|
|
(1)
|
Related to claims from policies in which we were in a first loss position and would have paid the claim absent the rescission or denial.
|
(2)
|
Related to claims from policies in which we were in a second loss position. These rescissions or denials may not have resulted in a claim payment obligation due to deductibles and other exposure limitations included in our policies.
|
(3)
|
Includes a small amount of submitted claims that were subsequently withdrawn by the insured.
|
(In millions)
|
2011
|
|
2010
|
|
2009
|
||||||
First loss position
|
$
|
33.5
|
|
|
$
|
153.6
|
|
|
$
|
97.7
|
|
Second loss position
|
8.4
|
|
|
59.1
|
|
|
87.8
|
|
|||
Total non-overturned rebuttals on rescinded first-lien claims
|
$
|
41.9
|
|
|
$
|
212.7
|
|
|
$
|
185.5
|
|
Claim
Received
Quarter
|
|
Cumulative Rescission Rate for Each Quarter (1)
|
|
Percentage of
Claims Resolved (2)
|
||
Q1 2008
|
|
12.2
|
%
|
|
100
|
%
|
Q2 2008
|
|
13.2
|
%
|
|
100
|
%
|
Q3 2008
|
|
19.3
|
%
|
|
100
|
%
|
Q4 2008
|
|
21.4
|
%
|
|
100
|
%
|
Q1 2009
|
|
24.4
|
%
|
|
99
|
%
|
Q2 2009
|
|
26.0
|
%
|
|
99
|
%
|
Q3 2009
|
|
23.5
|
%
|
|
99
|
%
|
Q4 2009
|
|
21.2
|
%
|
|
97
|
%
|
Q1 2010
|
|
18.4
|
%
|
|
94
|
%
|
Q2 2010
|
|
16.1
|
%
|
|
88
|
%
|
Q3 2010
|
|
9.3
|
%
|
|
74
|
%
|
(1)
|
Rescission rates represent the ratio of claims rescinded or denied to claims received (by claim count) and represent (as of
March 31, 2011
) the cumulative rate for each quarter based on number of claims received during that quarter. Until all of the claims received during the periods shown have been resolved, the rescission rates for each quarter will be subject to change. These rates are also subject to change based on reinstatements of previously rescinded policies or denied claims.
|
(2)
|
The percentage of claims resolved for each quarter presented in the table above, represents the number of claims that have been internally resolved as a percentage of the total number of claims received for that specific quarter. A claim is considered internally resolved when it is either paid or it is concluded that the claim should be denied or rescinded. For the fourth quarter of 2010 and the first quarter of 2011, a significant portion of claims received for those quarters have not been internally resolved; therefore, we do not believe the cumulative rescission rates for those periods are presently meaningful.
|
(In millions):
|
March 31,
2011 |
|
December 31,
2010 |
||||
First-lien portfolio
|
|
|
|
||||
Net present value of expected premiums
|
$
|
2,647
|
|
|
$
|
2,806
|
|
Net present value of expected losses and expenses
|
(4,497
|
)
|
|
(4,537
|
)
|
||
Reserve for premiums and losses established, net of reinsurance recoverables
|
3,324
|
|
|
3,276
|
|
||
Net projected premium excess
|
$
|
1,474
|
|
|
$
|
1,545
|
|
|
Three Months Ended
March 31, |
||||||
(In thousands)
|
2011
|
|
2010
|
||||
Second-lien PDR
|
|
|
|
||||
Balance at beginning of period
|
$
|
10,736
|
|
|
$
|
25,357
|
|
Incurred losses recognized in loss reserves
|
(2,805
|
)
|
|
(5,080
|
)
|
||
Premiums recognized in earned premiums
|
620
|
|
|
510
|
|
||
Changes in underlying assumptions
|
(129
|
)
|
|
3,486
|
|
||
Accretion of discount and other
|
931
|
|
|
(147
|
)
|
||
Balance at end of period
|
$
|
9,353
|
|
|
$
|
24,126
|
|
|
Surveillance Categories
|
||||||||||||||||||
($ in millions)
|
Performing
|
|
Special
Mention
|
|
Intensified
Surveillance
|
|
Case
Reserve
|
|
Total
|
||||||||||
Number of policies
|
7
|
|
|
150
|
|
|
64
|
|
|
110
|
|
|
331
|
|
|||||
Remaining weighted-average contract period (in years)
|
22
|
|
|
20
|
|
|
21
|
|
|
26
|
|
|
21
|
|
|||||
Insured contractual payments outstanding:
|
|
|
|
|
|
|
|
|
|
||||||||||
Principal
|
$
|
27.5
|
|
|
$
|
1,251.2
|
|
|
$
|
405.1
|
|
|
$
|
347.5
|
|
|
$
|
2,031.3
|
|
Interest
|
10.9
|
|
|
838.8
|
|
|
174.7
|
|
|
182.6
|
|
|
1,207.0
|
|
|||||
Total
|
$
|
38.4
|
|
|
$
|
2,090.0
|
|
|
$
|
579.8
|
|
|
$
|
530.1
|
|
|
$
|
3,238.3
|
|
Gross claim liability
|
$
|
0.4
|
|
|
$
|
20.1
|
|
|
$
|
148.9
|
|
|
$
|
103.1
|
|
|
$
|
272.5
|
|
Less:
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross potential recoveries
|
—
|
|
|
0.7
|
|
|
66.7
|
|
|
79.6
|
|
|
147.0
|
|
|||||
Discount, net
|
0.1
|
|
|
6.8
|
|
|
20.1
|
|
|
0.3
|
|
|
27.3
|
|
|||||
Net claim liability
|
$
|
0.3
|
|
|
$
|
12.6
|
|
|
$
|
62.1
|
|
|
$
|
23.2
|
|
|
$
|
98.2
|
|
Unearned premium revenue
|
$
|
0.1
|
|
|
$
|
33.3
|
|
|
$
|
9.9
|
|
|
$
|
—
|
|
|
$
|
43.3
|
|
Claim liability reported in the balance sheet
|
$
|
0.2
|
|
|
$
|
3.3
|
|
|
$
|
53.9
|
|
|
$
|
23.2
|
|
|
$
|
80.6
|
|
Reinsurance recoverables
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(In millions)
|
March 31,
2011 |
|
December 31, 2010
|
||||
Premiums receivable
|
$
|
43.8
|
|
|
$
|
44.0
|
|
Unearned premiums
|
59.0
|
|
|
60.5
|
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Premiums written
|
$
|
0.3
|
|
|
$
|
0.4
|
|
Premiums earned
|
0.3
|
|
|
0.4
|
|
||
Policy acquisition costs
|
0.1
|
|
|
0.1
|
|
(In millions)
|
Future
Expected
Premium
Payments
|
||
Second Quarter 2011
|
$
|
1.3
|
|
Third Quarter 2011
|
1.6
|
|
|
Fourth Quarter 2011
|
1.0
|
|
|
2011
|
3.9
|
|
|
2012
|
6.0
|
|
|
2013
|
3.8
|
|
|
2014
|
2.0
|
|
|
2015
|
3.4
|
|
|
2011 – 2015
|
19.1
|
|
|
2016 – 2020
|
12.7
|
|
|
2021 – 2025
|
8.7
|
|
|
2026 – 2030
|
5.8
|
|
|
After 2030
|
10.1
|
|
|
Total
|
$
|
56.4
|
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Balance at beginning of period
|
$
|
44.0
|
|
|
$
|
54.4
|
|
Payments received
|
(1.3
|
)
|
|
(1.6
|
)
|
||
Accretion
|
0.2
|
|
|
0.3
|
|
||
Adjustments to installment premiums
|
(0.1
|
)
|
|
(0.3
|
)
|
||
Foreign exchange revaluation
|
1.0
|
|
|
(1.7
|
)
|
||
Balance at end of period
|
$
|
43.8
|
|
|
$
|
51.1
|
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Refundings
|
$
|
4.8
|
|
|
$
|
9.5
|
|
Unearned premium acceleration upon establishment of case reserves
|
—
|
|
|
0.3
|
|
||
Foreign exchange revaluation, gross of commissions
|
1.3
|
|
|
(1.7
|
)
|
||
Adjustments to installment premiums, gross of commissions
|
0.2
|
|
|
—
|
|
||
Total adjustment to premiums earned
|
$
|
6.3
|
|
|
$
|
8.1
|
|
(In millions)
|
Ending Net
Unearned
Premiums
|
|
Unearned
Premium
Amortization
|
|
Accretion
|
|
Total
Premium
Revenue
|
||||||||
Second Quarter 2011
|
$
|
464.0
|
|
|
$
|
10.1
|
|
|
$
|
0.4
|
|
|
$
|
10.5
|
|
Third Quarter 2011
|
453.9
|
|
|
10.1
|
|
|
0.3
|
|
|
10.4
|
|
||||
Fourth Quarter 2011
|
443.0
|
|
|
10.9
|
|
|
0.3
|
|
|
11.2
|
|
||||
2011
|
443.0
|
|
|
31.1
|
|
|
1.0
|
|
|
32.1
|
|
||||
2012
|
405.5
|
|
|
37.5
|
|
|
1.3
|
|
|
38.8
|
|
||||
2013
|
368.7
|
|
|
36.8
|
|
|
1.2
|
|
|
38.0
|
|
||||
2014
|
333.7
|
|
|
35.0
|
|
|
1.1
|
|
|
36.1
|
|
||||
2015
|
302.1
|
|
|
31.6
|
|
|
1.0
|
|
|
32.6
|
|
||||
2011 – 2015
|
302.1
|
|
|
172.0
|
|
|
5.6
|
|
|
177.6
|
|
||||
2016 – 2020
|
175.2
|
|
|
126.9
|
|
|
4.1
|
|
|
131.0
|
|
||||
2021 – 2025
|
89.3
|
|
|
85.9
|
|
|
2.8
|
|
|
88.7
|
|
||||
2026 – 2030
|
39.4
|
|
|
49.9
|
|
|
1.8
|
|
|
51.7
|
|
||||
After 2030
|
—
|
|
|
39.4
|
|
|
2.6
|
|
|
42.0
|
|
||||
Total
|
$
|
—
|
|
|
$
|
474.1
|
|
|
$
|
16.9
|
|
|
$
|
491.0
|
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Claim liability at beginning of period
|
$
|
67.4
|
|
|
$
|
121.8
|
|
Incurred losses and LAE:
|
|
|
|
||||
Increase in gross claim liability
|
19.3
|
|
|
40.1
|
|
||
Increase in gross potential recoveries
|
(3.2
|
)
|
|
(23.4
|
)
|
||
Increase in discount
|
(3.3
|
)
|
|
(2.5
|
)
|
||
Decrease in unearned premiums
|
0.6
|
|
|
1.0
|
|
||
Incurred losses and LAE
|
13.4
|
|
|
15.2
|
|
||
Paid losses and LAE
|
(0.2
|
)
|
|
(3.6
|
)
|
||
Claim liability at end of period
|
$
|
80.6
|
|
|
$
|
133.4
|
|
Components of incurred losses and LAE:
|
|
|
|
||||
Claim liability established in current period
|
$
|
—
|
|
|
$
|
0.9
|
|
Changes in existing claim liabilities
|
13.4
|
|
|
14.3
|
|
||
Total incurred losses and LAE
|
$
|
13.4
|
|
|
$
|
15.2
|
|
Components of increase in discount:
|
|
|
|
||||
Increase in discount related to claim liabilities established in current period
|
$
|
(0.1
|
)
|
|
$
|
(2.1
|
)
|
Increase in discount related to existing claim liabilities
|
(3.2
|
)
|
|
(0.4
|
)
|
||
Total increase in discount
|
$
|
(3.3
|
)
|
|
$
|
(2.5
|
)
|
December 31, 2009
|
4.34
|
%
|
March 31, 2010
|
4.39
|
%
|
December 31, 2010
|
3.69
|
%
|
March 31, 2011
|
4.11
|
%
|
(In thousands)
|
March 31,
2011 |
|
December 31, 2010
|
||||
Investment in subsidiaries, at equity in net assets
|
$
|
1,063,814
|
|
|
$
|
947,724
|
|
Total assets
|
1,984,080
|
|
|
1,864,896
|
|
||
Long-term debt
|
968,199
|
|
|
964,788
|
|
||
Total liabilities
|
1,011,183
|
|
|
1,005,116
|
|
||
Total stockholders’ equity
|
972,897
|
|
|
859,780
|
|
||
Total liabilities and stockholders’ equity
|
1,984,080
|
|
|
1,864,896
|
|
•
|
Public Finance
—Insurance of public finance obligations, including tax-exempt and taxable indebtedness of states, counties, cities, special service districts, other political subdivisions, enterprises such as public and private higher education institutions and health care facilities and infrastructure, project finance and private finance initiative assets in sectors such as airports, education, healthcare and other infrastructure projects;
|
•
|
Structured Finance
—Insurance of structured finance obligations, including CDOs and asset-backed securities ("ABS"), consisting of funded and non-funded (referred to herein as "synthetic") executions that are payable from or tied to the performance of a specific pool of assets or covered reference entities. Examples of the pools of assets that collateralize or underlie structured finance obligations include corporate loans, bonds or other borrowed money, residential and commercial mortgages, trust preferred securities ("TruPs"), diversified payment rights ("DPR"), a variety of consumer loans, equipment receivables, real and personal property leases, or a combination of asset classes or securities backed by one or more of these pools of assets. We have also guaranteed excess clearing losses of securities exchange clearinghouses;
|
•
|
Reinsurance
—Reinsurance of domestic and international public finance obligations, including those issued by sovereign and sub-sovereign entities, and structured finance obligations.
|
Statement of Operations (In millions)
|
|
||
Decrease in assumed premiums written
|
$
|
(244.2
|
)
|
Decrease in net premiums earned
|
$
|
(37.0
|
)
|
Increase in change in fair value of derivative instruments - gain
|
23.8
|
|
|
Decrease in policy acquisition costs
|
4.9
|
|
|
Decrease in provision for losses
|
10.6
|
|
|
Increase in pre-tax income
|
$
|
2.3
|
|
Balance Sheet (In millions)
|
|
||
Decrease in:
|
|
||
Cash
|
$
|
177.3
|
|
Deferred policy acquisition costs
|
69.3
|
|
|
Accounts and notes receivable
|
32.7
|
|
|
Derivative assets
|
1.2
|
|
|
Unearned premiums
|
207.2
|
|
|
Reserves for losses and loss adjustment expenses ("LAE")
|
50.6
|
|
|
Derivative liabilities
|
25.0
|
|
•
|
Defaults
. Our first-lien primary default rate at
March 31, 2011
, was
15.5%
, compared to
16.5%
at
December 31, 2010
. Our primary default inventory decreased by
6.8%
during the
first
quarter of
2011
and continued to decline in April 2011. This positive trend is primarily the result of fewer new defaults compared to the number of defaults that cured ("cures"), combined with the payment of claims on defaulted loans and the number of loans for which coverage was rescinded or claims were denied. Despite this positive trend, our overall primary default rates continue to remain elevated due to high unemployment and continued weakness in the U.S. housing and mortgage credit markets. Defaults have remained at elevated levels across all our mortgage insurance product lines, including our insured portfolio of prime, first-lien mortgages. Overall, the underlying trend of high defaults continues to be driven primarily by the poor performance of our 2005 through 2008 books of business. We believe that a return to sustained profitability in our mortgage insurance business is dependent upon both a further reduction in the number of new defaults and an increase in the number of cures, particularly coming from our older delinquent loans. While we expect new primary, first-lien defaults to continue to decrease throughout 2011, based on the current pace of this decrease, we do not expect our mortgage insurance business to be profitable for the remainder of 2011.
|
•
|
Provision for Losses
. Our mortgage insurance provision for losses was
$414.0 million
for the
three
months ended
March 31, 2011
. While our loss provision for new default notices received in the
first
quarter of
2011
was less than both the first quarter and fourth quarter of 2010, this positive trend was substantially offset by (i) incurred losses related to an increase in our aggregate weighted average estimated rate at which defaults move to claim ("default to claim rate"), primarily due to an increase in the weighted average age of underlying defaulted loans, and to a lesser extent, a reduction in our estimated future rescissions and denials, and (ii) an increase in our incurred but not reported ("IBNR") reserve estimate, primarily related to an increase in our estimate of the future reinstatements of previously rescinded policies and denied claims.
|
•
|
Claims paid
. Total mortgage insurance claims paid in the
first
quarter of
2011
were
$365.2 million
. Foreclosure moratoriums and loan modification programs have reduced the number of defaults going to claim. We cannot be certain of the ultimate impact of these programs on our business or results of operations, or the timing of this impact. Some of the most recent foreclosure moratoriums related to foreclosure documentation may further delay our receipt of claims, although we expect claims to increase during the balance of 2011. We currently expect total claims paid in
2011
to be approximately
$1.7 billion
.
|
•
|
New Insurance Written
. We wrote
$2.6 billion
of new mortgage insurance in the
first
quarter of
2011
, compared to $1.9 billion of insurance written in the corresponding period of
2010
. This increase is mainly the result of an increase in the penetration rate of private mortgage insurance in the overall insured mortgage market and our increased sales efforts. We have been more aggressively marketing our product offerings that favorably compete with the FHA prices in order to gain market share back from the FHA. Effective April 18, 2011, the FHA reduced its upfront mortgage insurance premium and increased its annual premium. While we cannot predict what impact these premium changes will have on our new insurance written ("NIW") in the future, we believe that the new FHA pricing could allow us to be more competitive with the FHA than in the recent past. While the private mortgage insurance industry has made some progress in recapturing business from the FHA, the FHA's market share remains historically high, and this competition with the FHA, in conjunction with the other factors identified above, is likely to continue to negatively affect the volume of our NIW.
|
•
|
Terminations
. In 2009, we began pursuing opportunities to manage our legacy mortgage insurance portfolio and non-traditional mortgage insurance RIF through a series of commutations, transaction settlements and terminations, including the following notable transactions during 2011:
|
•
|
In February 2011, we exercised our option to terminate two of our four Smart Home transactions, which added approximately $41.0 million of RIF to our portfolio. There was minimal impact to our financial statements, as funds received were offset by expenses paid.
|
•
|
In order to mitigate future expected losses, during the first quarter of 2011, we purchased one NIMS bond with approximately
$0.9 million
face value, at a purchase price approximately equal to our fair value liability for such NIMS at the time of purchase.
|
•
|
In April 2011, we paid approximately $39 million to terminate a structured transaction, comprising $45 million of pool insurance RIF. This transaction had the effect of reducing our pool insurance default count by approximately 2,200 loans. This transaction will result in approximately $6.5 million of pre-tax income in the second quarter of 2011 as a result of a reduction in reserves.
|
•
|
Net Par Outstanding
. Our financial guaranty segment's net par outstanding was
$77.5
billion as of
March 31, 2011
, compared to
$78.8 billion
at
December 31, 2010
. The reduction in net par outstanding was primarily due to a counterparty exercising its early termination right with respect to a TruPs CDO transaction, the amortization or scheduled maturity of our insured portfolio, and prepayments ("refundings") of public finance transactions. Our financial guaranty segment's net par outstanding decreased by an additional $2.2 billion in April 2011, primarily as a result of the April 2011 Reinsurance Commutation and the termination of five corporate CDO transactions as discussed above. In light of our decision in 2008 to discontinue writing new financial guaranty business, we expect our net par outstanding to continue to decrease as our financial guaranty portfolio matures and as we seek to proactively reduce our financial guaranty RIF.
|
•
|
Credit Performance
. The overall credit quality of our financial guaranty insured portfolio improved slightly during the first quarter of 2011. The percentage of internally rated AAA credits in our portfolio increased to
45.2%
of our net par outstanding at
March 31, 2011
, from
43.0%
at
December 31, 2010
, primarily due to credit improvements in our insured corporate CDO portfolio, which offset some credit deterioration in our public finance portfolio.
|
•
|
Public Finance.
Our public finance insured portfolio continues to experience stress from the general economic downturn and slow economic recovery. The percentage of our insured public finance portfolio rated below investment grade ("BIG") increased to 4.9% of our financial guaranty segment's net par outstanding at March 31, 2011, compared to 4.6% at December 31, 2010. The greatest level of stress continues to be in the healthcare and long-term care sectors. Although we have seen some stabilization and modest improvement in the performance of some healthcare credits in the portfolio, with no additional downgrades to BIG within the sector during the first quarter of 2011, the credit performance outlook for the healthcare sector remains challenging, particularly due to uncertainty regarding the future of healthcare reform and state and federal funding for healthcare expenditures. Although the states and municipalities included within our government-related insured credits have generally been able to withstand stresses to date, the lagging impact on municipal governments from recent economic conditions is becoming more evident. We expect the negative trend in this sector to continue at least through the remainder of 2011 due to the protracted economic downturn and slow economic recovery, the end of federal stimulus revenues and slow recoveries of tax-based revenues (in particular where tax revenues are derived from the value of real estate), which trend we expect will continue to strain the ability of government entities to maintain balanced budgets and adequate liquidity to meet near-term financial obligations. As a result, we may continue to experience further credit deterioration and municipal defaults in our government-related insured credits.
|
•
|
Structured Finance.
The credit performance of our structured finance portfolio continued to improve in the first quarter of 2011, with no structured finance credits being downgraded to BIG and no new defaults occurring in the collateral underlying our corporate CDOs in 2011. The percentage of internally rated AAA credits in our structured finance portfolio increased to 78.9% of our financial guaranty segment's net par outstanding at March 31, 2011, from 75.8% of our net par outstanding at December 31, 2010. With respect to our directly insured TruPs CDOs, we experienced both deterioration (due mainly to interest deferrals) and some stabilization in the TruPs collateral (due to cures of previous interest deferrals). In addition, during the first quarter of 2011, one counterparty exercised its right to terminate a TruPs CDO with $84.9 million of net par outstanding. See "Results of Operations
—
Financial Guaranty
—
Financial Guaranty Exposure Information" below for additional information regarding material changes in the credit performance of our insured TruPs CDO portfolio.
|
(In millions)
|
NIMS
|
|
Financial
Guaranty
Derivatives
and VIEs
|
|
Total
|
||||||
Balance Sheet
|
|
|
|
|
|
||||||
Trading securities
|
$
|
—
|
|
|
$
|
90.2
|
|
|
$
|
90.2
|
|
Derivative assets
|
9.0
|
|
|
15.1
|
|
|
24.1
|
|
|||
Other assets
|
—
|
|
|
108.1
|
|
|
108.1
|
|
|||
Total assets
|
9.0
|
|
|
213.4
|
|
|
222.4
|
|
|||
Derivative liabilities
|
—
|
|
|
487.3
|
|
|
487.3
|
|
|||
VIE debt-at fair value
|
72.4
|
|
|
300.6
|
|
|
373.0
|
|
|||
Accounts payable and accrued expenses
|
—
|
|
|
0.9
|
|
|
0.9
|
|
|||
Total liabilities
|
72.4
|
|
|
788.8
|
|
|
861.2
|
|
|||
Total fair value net liabilities
|
$
|
63.4
|
|
|
$
|
575.4
|
|
|
$
|
638.8
|
|
Present value of estimated credit loss payments (1)
|
$
|
70.9
|
|
|
$
|
456.4
|
|
|
$
|
527.3
|
|
(1)
|
Represents the present value of our estimated credit loss payments (net of estimated recoveries) for those transactions for which we currently anticipate paying net losses, calculated using a discount rate of
2.5%
, which represents our current investment yield. At a discount rate of
5%
, our estimated credit loss payments would decrease by approximately
$189.9 million
to
$337.4 million
, with most of the decrease related to financial guaranty derivatives and VIEs.
|
|
Three Months Ended
March 31, |
|
% Change
|
|||||||
($ in millions)
|
2011
|
|
2010
|
|
2011 vs. 2010
|
|||||
Net income (loss)
|
$
|
103.0
|
|
|
$
|
(310.4
|
)
|
|
n/m
|
|
Net premiums written—insurance
|
182.7
|
|
|
155.5
|
|
|
17.5
|
%
|
||
Net premiums earned—insurance
|
203.0
|
|
|
198.3
|
|
|
2.4
|
|
||
Net investment income
|
42.2
|
|
|
45.4
|
|
|
(7.0
|
)
|
||
Net gains on investments
|
37.4
|
|
|
58.0
|
|
|
(35.5
|
)
|
||
Change in fair value of derivative instruments
|
243.9
|
|
|
(78.0
|
)
|
|
n/m
|
|
||
Net gains (losses) on other financial instruments
|
75.3
|
|
|
(101.6
|
)
|
|
n/m
|
|
||
Other income
|
1.4
|
|
|
5.8
|
|
|
(75.9
|
)
|
||
Provision for losses
|
427.4
|
|
|
543.9
|
|
|
(21.4
|
)
|
||
Change in reserve for premium deficiency
|
(1.4
|
)
|
|
(1.2
|
)
|
|
16.7
|
|
||
Policy acquisition costs
|
14.1
|
|
|
14.9
|
|
|
(5.4
|
)
|
||
Other operating expenses
|
46.2
|
|
|
65.1
|
|
|
(29.0
|
)
|
||
Interest expense
|
17.0
|
|
|
10.8
|
|
|
57.4
|
|
||
Equity in net income of affiliates
|
0.1
|
|
|
8.1
|
|
|
(98.8
|
)
|
||
Income tax benefit
|
(3.0
|
)
|
|
(187.1
|
)
|
|
(98.4
|
)
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Net gains related to change in fair value of trading securities
|
$
|
25.7
|
|
|
$
|
52.2
|
|
Net realized gains on sales and redemptions
|
11.7
|
|
|
5.8
|
|
||
Net gains on investments
|
$
|
37.4
|
|
|
$
|
58.0
|
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Statements of Operations
|
|
|
|
||||
Net premiums earned—derivatives
|
$
|
10.9
|
|
|
$
|
12.1
|
|
Financial Guaranty credit derivative liabilities
|
234.6
|
|
|
(84.1
|
)
|
||
Financial Guaranty VIE derivative liabilities
|
(0.9
|
)
|
|
(3.2
|
)
|
||
NIMS
|
(1.9
|
)
|
|
(0.2
|
)
|
||
Put options on Money Market Committed Preferred Custodial Trust Securities ("CPS")
|
—
|
|
|
(2.1
|
)
|
||
Other
|
1.2
|
|
|
(0.5
|
)
|
||
Change in fair value of derivative instruments
|
$
|
243.9
|
|
|
$
|
(78.0
|
)
|
(In basis points)
|
March 31,
2011 |
|
December 31, 2010
|
|
March 31,
2010 |
|
December 31, 2009
|
||||
Radian Group's five-year CDS spread
|
642
|
|
|
465
|
|
|
983
|
|
|
1,530
|
|
Product (In millions)
|
Fair Value Liability
before Consideration
of Radian
Non-Performance Risk
March 31,
2011
|
|
Impact of Radian
Non-Performance Risk
March 31,
2011
|
|
Fair Value Liability
Recorded
March 31,
2011
|
||||||
Corporate CDOs
|
$
|
(324.1
|
)
|
|
$
|
278.4
|
|
|
$
|
(45.7
|
)
|
Non-Corporate CDO-related
|
(1,579.1
|
)
|
|
1,072.5
|
|
|
(506.6
|
)
|
|||
NIMS-related
|
(68.8
|
)
|
|
5.4
|
|
|
(63.4
|
)
|
|||
Total
|
$
|
(1,972.0
|
)
|
|
$
|
1,356.3
|
|
|
$
|
(615.7
|
)
|
Product (In millions)
|
Fair Value Liability
before Consideration
of Radian
Non-Performance Risk
December 31,
2010
|
|
Impact of Radian
Non-Performance Risk
December 31,
2010
|
|
Fair Value Liability
Recorded
December 31,
2010
|
||||||
Corporate CDOs
|
$
|
(387.1
|
)
|
|
$
|
281.5
|
|
|
$
|
(105.6
|
)
|
Non-Corporate CDO-related
|
(1,696.2
|
)
|
|
934.1
|
|
|
(762.1
|
)
|
|||
NIMS-related
|
(134.1
|
)
|
|
4.8
|
|
|
(129.3
|
)
|
|||
Total
|
$
|
(2,217.4
|
)
|
|
$
|
1,220.4
|
|
|
$
|
(997.0
|
)
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Net gains (losses) related to NIMS VIE debt
|
$
|
2.4
|
|
|
$
|
(30.7
|
)
|
Gain (loss) related to change in fair value of Financial Guaranty VIE debt
|
70.5
|
|
|
(75.7
|
)
|
||
Gains related to other Financial Guaranty VIE assets
|
3.9
|
|
|
1.9
|
|
||
Gain on the repurchase of long-term debt
|
—
|
|
|
2.5
|
|
||
Loss related to CPS VIE
|
—
|
|
|
(0.2
|
)
|
||
Other
|
(1.5
|
)
|
|
0.6
|
|
||
Net gains (losses) on other financial instruments
|
$
|
75.3
|
|
|
$
|
(101.6
|
)
|
|
Three Months Ended
March 31, |
|
% Change
|
|||||||
($ in millions)
|
2011
|
|
2010
|
|
2011 vs. 2010
|
|||||
Net loss
|
$
|
(236.0
|
)
|
|
$
|
(236.5
|
)
|
|
(0.2
|
)%
|
Net premiums written—insurance
|
180.8
|
|
|
157.0
|
|
|
15.2
|
|
||
Net premiums earned—insurance
|
186.1
|
|
|
177.3
|
|
|
5.0
|
|
||
Net investment income
|
26.8
|
|
|
26.4
|
|
|
1.8
|
|
||
Net gains on investments
|
17.7
|
|
|
28.8
|
|
|
(38.6
|
)
|
||
Change in fair value of derivative instruments
|
(0.4
|
)
|
|
0.2
|
|
|
n/m
|
|
||
Net gains (losses) on other financial instruments
|
2.5
|
|
|
(30.2
|
)
|
|
n/m
|
|
||
Other income
|
1.4
|
|
|
1.8
|
|
|
(22.2
|
)
|
||
Provision for losses
|
414.0
|
|
|
529.1
|
|
|
(21.8
|
)
|
||
Change in reserve for premium deficiency
|
(1.4
|
)
|
|
(1.2
|
)
|
|
12.3
|
|
||
Policy acquisition costs
|
10.2
|
|
|
10.5
|
|
|
(2.7
|
)
|
||
Other operating expenses
|
34.1
|
|
|
46.2
|
|
|
(26.2
|
)
|
||
Interest expense
|
9.8
|
|
|
2.1
|
|
|
n/m
|
|
||
Income tax provision (benefit)
|
3.5
|
|
|
(145.8
|
)
|
|
n/m
|
|
|
Three Months Ended
March 31, |
||||||
(In thousands)
|
2011
|
|
2010
|
||||
Premiums written
|
|
|
|
||||
Primary and Pool Insurance
|
$
|
180,257
|
|
|
$
|
157,413
|
|
Second-lien
|
620
|
|
|
(455
|
)
|
||
International
|
(31
|
)
|
|
74
|
|
||
Total premiums written—insurance
|
$
|
180,846
|
|
|
$
|
157,032
|
|
Premiums earned
|
|
|
|
||||
Primary and Pool Insurance
|
$
|
183,469
|
|
|
$
|
174,112
|
|
Second-lien
|
620
|
|
|
511
|
|
||
International
|
2,045
|
|
|
2,716
|
|
||
Total premiums earned—insurance
|
$
|
186,134
|
|
|
$
|
177,339
|
|
Smart Home
|
|
|
|
||||
Ceded premiums written and earned
|
$
|
2,185
|
|
|
$
|
2,322
|
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Net gains related to change in fair value of trading securities
|
$
|
12.4
|
|
|
$
|
24.6
|
|
Net realized gains on sales and redemptions
|
5.3
|
|
|
4.2
|
|
||
Net gains on investments
|
$
|
17.7
|
|
|
$
|
28.8
|
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Net premiums earned—derivatives
|
$
|
—
|
|
|
$
|
0.1
|
|
NIMS
|
(1.9
|
)
|
|
(0.2
|
)
|
||
Put options on CPS
|
0.3
|
|
|
—
|
|
||
Other
|
1.2
|
|
|
0.3
|
|
||
Change in fair value of derivative instruments
|
$
|
(0.4
|
)
|
|
$
|
0.2
|
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Net gains (losses) related to NIMS VIE debt
|
$
|
2.4
|
|
|
$
|
(30.7
|
)
|
Gain on the repurchase of long-term debt
|
—
|
|
|
0.5
|
|
||
Other
|
0.1
|
|
|
—
|
|
||
Net gains (losses) on other financial instruments
|
$
|
2.5
|
|
|
$
|
(30.2
|
)
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
New defaults
|
$
|
178.0
|
|
|
$
|
233.9
|
|
Cures and prepayments
|
(254.8
|
)
|
|
(268.9
|
)
|
||
Existing defaults (1)
|
368.6
|
|
|
474.0
|
|
||
Claim dispositions (2)
|
110.6
|
|
|
51.0
|
|
||
Second-lien, LAE and Other
|
11.6
|
|
|
39.1
|
|
||
Provision for losses
|
$
|
414.0
|
|
|
$
|
529.1
|
|
(In millions)
|
March 31,
2011 |
|
December 31,
2010 |
||||
Decrease to our loss reserve due to estimated rescissions and denials
|
$
|
(783
|
)
|
|
$
|
(922
|
)
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Rescissions—first loss position
|
$
|
93.8
|
|
|
129.4
|
|
|
Denials—first loss position
|
24.6
|
|
|
8.0
|
|
||
Total first loss position (1)
|
118.4
|
|
|
137.4
|
|
||
|
|
|
|
||||
Rescissions—second loss position
|
31.0
|
|
|
110.4
|
|
||
Denials—second loss position
|
2.7
|
|
|
3.7
|
|
||
Total second loss position (2)
|
33.7
|
|
|
114.1
|
|
||
Total first-lien claims submitted for payment that were rescinded or denied (3)
|
$
|
152.1
|
|
|
$
|
251.5
|
|
(In millions)
|
2011
|
|
2010
|
|
2009
|
||||||
First loss position
|
$
|
33.5
|
|
|
$
|
153.6
|
|
|
$
|
97.7
|
|
Second loss position
|
8.4
|
|
|
59.1
|
|
|
87.8
|
|
|||
Total non-overturned rebuttals on rescinded first-lien claims
|
$
|
41.9
|
|
|
$
|
212.7
|
|
|
$
|
185.5
|
|
Claim
Received
Quarter
|
|
Cumulative
Rescission Rate
for Each Quarter (1)
|
|
Percentage of
Claims Resolved (2)
|
||
Q1 2008
|
|
12.2
|
%
|
|
100
|
%
|
Q2 2008
|
|
13.2
|
%
|
|
100
|
%
|
Q3 2008
|
|
19.3
|
%
|
|
100
|
%
|
Q4 2008
|
|
21.4
|
%
|
|
100
|
%
|
Q1 2009
|
|
24.4
|
%
|
|
99
|
%
|
Q2 2009
|
|
26.0
|
%
|
|
99
|
%
|
Q3 2009
|
|
23.5
|
%
|
|
99
|
%
|
Q4 2009
|
|
21.2
|
%
|
|
97
|
%
|
Q1 2010
|
|
18.4
|
%
|
|
94
|
%
|
Q2 2010
|
|
16.1
|
%
|
|
88
|
%
|
Q3 2010
|
|
9.3
|
%
|
|
74
|
%
|
(1)
|
Rescission rates represent the ratio of claims rescinded or denied to claims received (by claim count) and represent (as of
March 31, 2011
) the cumulative rate for each quarter based on number of claims received during that quarter. Until all of the claims received during the periods shown have been resolved, the rescission rates for each quarter will be subject to change. These rates are also subject to change based on reinstatements of previously rescinded policies or denied claims.
|
(2)
|
The percentage of claims resolved for each quarter presented in the table above, represents the number of claims that have been internally resolved as a percentage of the total number of claims received for that specific quarter. A claim is considered internally resolved when it is either paid or it is concluded that the claim should be denied or rescinded. For the fourth quarter of 2010 and the first quarter of 2011, a significant portion of claims received for those quarters have not been internally resolved; therefore, we do not believe the cumulative rescission rates for those periods are presently meaningful.
|
|
Three Months Ended
March 31, |
||||||||||||
($ in millions)
|
2011
|
|
2010
|
||||||||||
Primary NIW
|
|
|
|
|
|
|
|
||||||
Prime
|
$
|
2,583
|
|
|
99.9
|
%
|
|
$
|
1,896
|
|
|
99.9
|
%
|
Alternative-A ("Alt-A")
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
A minus and below
|
2
|
|
|
0.1
|
|
|
1
|
|
|
0.1
|
|
||
Total Primary
|
$
|
2,586
|
|
|
100.0
|
%
|
|
$
|
1,897
|
|
|
100.0
|
%
|
|
Three Months Ended
March 31, |
||||||||||||
($ in millions)
|
2011
|
|
2010
|
||||||||||
Total primary NIW by FICO (1) Score
|
|
|
|
|
|
|
|
||||||
>=740
|
$
|
2,081
|
|
|
80.5
|
%
|
|
$
|
1,461
|
|
|
77.0
|
%
|
680-739
|
502
|
|
|
19.4
|
|
|
435
|
|
|
22.9
|
|
||
620-679
|
3
|
|
|
0.1
|
|
|
1
|
|
|
0.1
|
|
||
Total Primary
|
$
|
2,586
|
|
|
100.0
|
%
|
|
$
|
1,897
|
|
|
100.0
|
%
|
(1)
|
FICO credit scoring model.
|
|
|
Three Months Ended
March 31, |
||||
|
|
2011
|
|
2010
|
||
Percentage of primary NIW
|
|
|
|
|
||
Refinances
|
|
51.0
|
%
|
|
35.0
|
%
|
95.01% LTV (b) and above
|
|
1.2
|
%
|
|
0.5
|
%
|
Adjustable Rate Mortgages ("ARMs")
|
|
|
|
|
||
Less than five years
|
|
<1%
|
|
|
<1%
|
|
Five years and longer
|
|
4.9
|
%
|
|
5.1
|
%
|
($ in millions)
|
March 31,
2011 |
|
December 31,
2010 |
|
March 31,
2010 |
|||||||||||||||
Primary insurance in force
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Flow
|
$
|
113,853
|
|
|
89.0
|
%
|
|
$
|
115,532
|
|
|
89.2
|
%
|
|
$
|
119,943
|
|
|
86.1
|
%
|
Structured
|
14,100
|
|
|
11.0
|
|
|
14,034
|
|
|
10.8
|
|
|
19,419
|
|
|
13.9
|
|
|||
Total Primary
|
$
|
127,953
|
|
|
100.0
|
%
|
|
$
|
129,566
|
|
|
100.0
|
%
|
|
$
|
139,362
|
|
|
100.0
|
%
|
Prime
|
$
|
105,645
|
|
|
82.6
|
%
|
|
$
|
106,466
|
|
|
82.2
|
%
|
|
$
|
109,404
|
|
|
78.5
|
%
|
Alt-A
|
14,023
|
|
|
10.9
|
|
|
14,542
|
|
|
11.2
|
|
|
20,396
|
|
|
14.6
|
|
|||
A minus and below
|
8,285
|
|
|
6.5
|
|
|
8,558
|
|
|
6.6
|
|
|
9,562
|
|
|
6.9
|
|
|||
Total Primary
|
$
|
127,953
|
|
|
100.0
|
%
|
|
$
|
129,566
|
|
|
100.0
|
%
|
|
$
|
139,362
|
|
|
100.0
|
%
|
Modified pool insurance in force (1)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prime
|
$
|
1,065
|
|
|
31.5
|
%
|
|
$
|
671
|
|
|
22.2
|
%
|
|
$
|
705
|
|
|
10.8
|
%
|
Alt-A
|
2,163
|
|
|
63.9
|
|
|
2,216
|
|
|
73.1
|
|
|
5,681
|
|
|
86.7
|
|
|||
A minus and below
|
157
|
|
|
4.6
|
|
|
143
|
|
|
4.7
|
|
|
164
|
|
|
2.5
|
|
|||
Total modified pool
|
$
|
3,385
|
|
|
100.0
|
%
|
|
$
|
3,030
|
|
|
100.0
|
%
|
|
$
|
6,550
|
|
|
100.0
|
%
|
Primary risk in force
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Flow
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prime
|
$
|
23,963
|
|
|
85.6
|
%
|
|
$
|
24,213
|
|
|
85.3
|
%
|
|
$
|
24,783
|
|
|
83.9
|
%
|
Alt-A
|
2,510
|
|
|
9.0
|
|
|
2,618
|
|
|
9.2
|
|
|
2,996
|
|
|
10.1
|
|
|||
A minus and below
|
1,508
|
|
|
5.4
|
|
|
1,566
|
|
|
5.5
|
|
|
1,763
|
|
|
6.0
|
|
|||
Total Flow
|
$
|
27,981
|
|
|
100.0
|
%
|
|
$
|
28,397
|
|
|
100.0
|
%
|
|
$
|
29,542
|
|
|
100.0
|
%
|
Structured
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prime
|
$
|
1,753
|
|
|
58.3
|
%
|
|
$
|
1,788
|
|
|
58.4
|
%
|
|
$
|
1,977
|
|
|
55.1
|
%
|
Alt-A
|
692
|
|
|
23.0
|
|
|
702
|
|
|
22.9
|
|
|
981
|
|
|
27.4
|
|
|||
A minus and below
|
563
|
|
|
18.7
|
|
|
574
|
|
|
18.7
|
|
|
628
|
|
|
17.5
|
|
|||
Total Structured
|
$
|
3,008
|
|
|
100.0
|
%
|
|
$
|
3,064
|
|
|
100.0
|
%
|
|
$
|
3,586
|
|
|
100.0
|
%
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prime
|
$
|
25,716
|
|
|
83.0
|
%
|
|
$
|
26,001
|
|
|
82.6
|
%
|
|
$
|
26,760
|
|
|
80.8
|
%
|
Alt-A
|
3,202
|
|
|
10.3
|
|
|
3,320
|
|
|
10.6
|
|
|
3,977
|
|
|
12.0
|
|
|||
A minus and below
|
2,071
|
|
|
6.7
|
|
|
2,140
|
|
|
6.8
|
|
|
2,391
|
|
|
7.2
|
|
|||
Total Primary
|
$
|
30,989
|
|
|
100.0
|
%
|
|
$
|
31,461
|
|
|
100.0
|
%
|
|
$
|
33,128
|
|
|
100.0
|
%
|
($ in millions)
|
March 31,
2011 |
|
December 31,
2010 |
|
March 31,
2010 |
|||||||||||||||
Modified pool risk in force (1)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prime
|
$
|
87
|
|
|
29.2
|
%
|
|
$
|
74
|
|
|
25.6
|
%
|
|
$
|
76
|
|
|
16.1
|
%
|
Alt-A
|
192
|
|
|
64.4
|
|
|
197
|
|
|
68.2
|
|
|
377
|
|
|
79.9
|
|
|||
A minus and below
|
19
|
|
|
6.4
|
|
|
18
|
|
|
6.2
|
|
|
19
|
|
|
4.0
|
|
|||
Total modified pool
|
$
|
298
|
|
|
100.0
|
%
|
|
$
|
289
|
|
|
100.0
|
%
|
|
$
|
472
|
|
|
100.0
|
%
|
(1)
|
Included in primary insurance amounts.
|
($ in millions)
|
March 31,
2011 |
|
December 31,
2010 |
|
March 31,
2010 |
|||||||||||||||
Total primary risk in force by FICO Score
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Flow
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
>=740
|
$
|
11,128
|
|
|
39.8
|
%
|
|
$
|
11,039
|
|
|
38.9
|
%
|
|
$
|
10,561
|
|
|
35.7
|
%
|
680-739
|
9,611
|
|
|
34.3
|
|
|
9,849
|
|
|
34.7
|
|
|
10,572
|
|
|
35.8
|
|
|||
620-679
|
6,131
|
|
|
21.9
|
|
|
6,359
|
|
|
22.4
|
|
|
7,119
|
|
|
24.1
|
|
|||
<=619
|
1,111
|
|
|
4.0
|
|
|
1,150
|
|
|
4.0
|
|
|
1,290
|
|
|
4.4
|
|
|||
Total Flow
|
$
|
27,981
|
|
|
100.0
|
%
|
|
$
|
28,397
|
|
|
100.0
|
%
|
|
$
|
29,542
|
|
|
100.0
|
%
|
Structured
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
>=740
|
$
|
803
|
|
|
26.7
|
%
|
|
$
|
825
|
|
|
26.9
|
%
|
|
$
|
982
|
|
|
27.4
|
%
|
680-739
|
874
|
|
|
29.1
|
|
|
892
|
|
|
29.1
|
|
|
1,091
|
|
|
30.4
|
|
|||
620-679
|
807
|
|
|
26.8
|
|
|
815
|
|
|
26.6
|
|
|
934
|
|
|
26.1
|
|
|||
<=619
|
524
|
|
|
17.4
|
|
|
532
|
|
|
17.4
|
|
|
579
|
|
|
16.1
|
|
|||
Total Structured
|
$
|
3,008
|
|
|
100.0
|
%
|
|
$
|
3,064
|
|
|
100.0
|
%
|
|
$
|
3,586
|
|
|
100.0
|
%
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
>=740
|
$
|
11,931
|
|
|
38.5
|
%
|
|
$
|
11,864
|
|
|
37.7
|
%
|
|
$
|
11,543
|
|
|
34.9
|
%
|
680-739
|
10,485
|
|
|
33.8
|
|
|
10,741
|
|
|
34.1
|
|
|
11,663
|
|
|
35.2
|
|
|||
620-679
|
6,938
|
|
|
22.4
|
|
|
7,174
|
|
|
22.8
|
|
|
8,053
|
|
|
24.3
|
|
|||
<=619
|
1,635
|
|
|
5.3
|
|
|
1,682
|
|
|
5.4
|
|
|
1,869
|
|
|
5.6
|
|
|||
Total Primary
|
$
|
30,989
|
|
|
100.0
|
%
|
|
$
|
31,461
|
|
|
100.0
|
%
|
|
$
|
33,128
|
|
|
100.0
|
%
|
Percentage of primary risk in force
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Refinances
|
32
|
%
|
|
|
|
31
|
%
|
|
|
|
31
|
%
|
|
|
||||||
95.01% LTV and above
|
19
|
%
|
|
|
|
19
|
%
|
|
|
|
20
|
%
|
|
|
||||||
ARMs
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Less than five years
|
6
|
%
|
|
|
|
6
|
%
|
|
|
|
7
|
%
|
|
|
||||||
Five years and longer
|
7
|
%
|
|
|
|
7
|
%
|
|
|
|
8
|
%
|
|
|
($ in millions)
|
March 31,
2011 |
|
December 31,
2010 |
|
March 31,
2010 |
|||||||||||||||
Total primary risk in force by LTV
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
85.00% and below
|
$
|
2,819
|
|
|
9.1
|
%
|
|
$
|
2,816
|
|
|
8.9
|
%
|
|
$
|
3,117
|
|
|
9.4
|
%
|
85.01% to 90.00%
|
11,942
|
|
|
38.6
|
|
|
12,102
|
|
|
38.5
|
|
|
12,440
|
|
|
37.6
|
|
|||
90.01% to 95.00%
|
10,391
|
|
|
33.5
|
|
|
10,506
|
|
|
33.4
|
|
|
10,829
|
|
|
32.7
|
|
|||
95.01% and above
|
5,837
|
|
|
18.8
|
|
|
6,037
|
|
|
19.2
|
|
|
6,742
|
|
|
20.3
|
|
|||
Total Primary
|
$
|
30,989
|
|
|
100.0
|
%
|
|
$
|
31,461
|
|
|
100.0
|
%
|
|
$
|
33,128
|
|
|
100.0
|
%
|
($ in millions)
|
March 31,
2011 |
|
December 31,
2010 |
|
March 31,
2010 |
|||||||||||||||
Pool risk in force
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prime
|
$
|
1,753
|
|
|
75.3
|
%
|
|
$
|
1,828
|
|
|
74.5
|
%
|
|
$
|
1,882
|
|
|
72.7
|
%
|
Alt-A
|
139
|
|
|
6.0
|
|
|
165
|
|
|
6.7
|
|
|
192
|
|
|
7.4
|
|
|||
A minus and below
|
437
|
|
|
18.7
|
|
|
460
|
|
|
18.8
|
|
|
515
|
|
|
19.9
|
|
|||
Total pool risk in force
|
$
|
2,329
|
|
|
100.0
|
%
|
|
$
|
2,453
|
|
|
100.0
|
%
|
|
$
|
2,589
|
|
|
100.0
|
%
|
(In millions)
|
March 31,
2011 |
|
December 31,
2010 |
|
March 31,
2010 |
||||||
Other risk in force
|
|
|
|
|
|
||||||
Second-lien
|
|
|
|
|
|
||||||
1
st
loss
|
$
|
108
|
|
|
$
|
114
|
|
|
$
|
138
|
|
2
nd
loss
|
76
|
|
|
79
|
|
|
89
|
|
|||
NIMS
|
69
|
|
|
136
|
|
|
292
|
|
|||
International
|
|
|
|
|
|
||||||
1st loss-Hong Kong primary mortgage insurance
|
104
|
|
|
126
|
|
|
222
|
|
|||
CDS
|
—
|
|
|
—
|
|
|
120
|
|
|||
Total other risk in force
|
$
|
357
|
|
|
$
|
455
|
|
|
$
|
861
|
|
|
|
March 31,
2011 |
|
December 31,
2010 |
|
March 31,
2010 |
||||||||||||
|
|
Risk in Force
|
|
Reserve for Losses
|
|
Risk in Force
|
|
Reserve for Losses
|
|
Risk in Force
|
|
Reserve for Losses
|
||||||
2005 and prior
|
|
25.4
|
%
|
|
30.3
|
%
|
|
25.9
|
%
|
|
32.7
|
%
|
|
28.1
|
%
|
|
33.4
|
%
|
2006
|
|
11.5
|
|
|
19.1
|
|
|
11.7
|
|
|
20.4
|
|
|
12.7
|
|
|
19.9
|
|
2007
|
|
25.1
|
|
|
37.8
|
|
|
25.7
|
|
|
36.5
|
|
|
27.7
|
|
|
37.4
|
|
2008
|
|
18.4
|
|
|
12.3
|
|
|
18.9
|
|
|
10.1
|
|
|
19.8
|
|
|
9.1
|
|
2009
|
|
9.7
|
|
|
0.5
|
|
|
9.8
|
|
|
0.3
|
|
|
10.4
|
|
|
0.2
|
|
2010
|
|
8.0
|
|
|
—
|
|
|
8.0
|
|
|
—
|
|
|
1.3
|
|
|
—
|
|
2011
|
|
1.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
March 31,
2011 |
|
December 31,
2010 |
|
March 31,
2010 |
||||||||||||
|
Risk in Force
|
|
Reserve for Losses
|
|
Risk in Force
|
|
Reserve for Losses
|
|
Risk in Force
|
|
Reserve for Losses
|
||||||
Top Ten States
|
|
|
|
|
|
|
|
|
|
|
|
||||||
California
|
11.5
|
%
|
|
13.0
|
%
|
|
11.4
|
%
|
|
13.0
|
%
|
|
11.6
|
%
|
|
16.7
|
%
|
Florida
|
8.2
|
|
|
18.6
|
|
|
8.3
|
|
|
18.9
|
|
|
8.6
|
|
|
18.1
|
|
Texas
|
6.3
|
|
|
3.3
|
|
|
6.4
|
|
|
3.4
|
|
|
6.5
|
|
|
3.4
|
|
Illinois
|
5.1
|
|
|
5.7
|
|
|
5.0
|
|
|
5.7
|
|
|
4.7
|
|
|
5.1
|
|
Georgia
|
4.7
|
|
|
4.3
|
|
|
4.7
|
|
|
4.3
|
|
|
4.7
|
|
|
4.4
|
|
Ohio
|
4.3
|
|
|
2.9
|
|
|
4.3
|
|
|
3.0
|
|
|
4.3
|
|
|
2.8
|
|
New York
|
4.1
|
|
|
4.9
|
|
|
4.1
|
|
|
4.9
|
|
|
4.0
|
|
|
4.5
|
|
New Jersey
|
3.7
|
|
|
4.7
|
|
|
3.7
|
|
|
4.5
|
|
|
3.5
|
|
|
3.9
|
|
Michigan
|
3.3
|
|
|
3.2
|
|
|
3.3
|
|
|
3.3
|
|
|
3.3
|
|
|
3.4
|
|
Pennsylvania
|
3.1
|
|
|
2.3
|
|
|
3.1
|
|
|
2.4
|
|
|
3.1
|
|
|
2.2
|
|
Total
|
54.3
|
%
|
|
62.9
|
%
|
|
54.3
|
%
|
|
63.4
|
%
|
|
54.3
|
%
|
|
64.5
|
%
|
|
March 31,
2011 |
|
December 31,
2010 |
|
March 31,
2010 |
|||
Default Statistics
|
|
|
|
|
|
|||
Primary Insurance:
|
|
|
|
|
|
|||
Flow
|
|
|
|
|
|
|||
Prime
|
|
|
|
|
|
|||
Number of insured loans
|
576,388
|
|
|
584,213
|
|
|
607,552
|
|
Number of loans in default
|
66,615
|
|
|
71,196
|
|
|
77,423
|
|
Percentage of loans in default
|
11.56
|
%
|
|
12.19
|
%
|
|
12.74
|
%
|
Alt-A
|
|
|
|
|
|
|||
Number of insured loans
|
49,866
|
|
|
51,765
|
|
|
58,588
|
|
Number of loans in default
|
16,720
|
|
|
17,934
|
|
|
21,533
|
|
Percentage of loans in default
|
33.53
|
%
|
|
34.65
|
%
|
|
36.75
|
%
|
A minus and below
|
|
|
|
|
|
|||
Number of insured loans
|
45,522
|
|
|
47,044
|
|
|
52,547
|
|
Number of loans in default
|
14,713
|
|
|
16,401
|
|
|
19,264
|
|
Percentage of loans in default
|
32.32
|
%
|
|
34.86
|
%
|
|
36.66
|
%
|
Total Flow
|
|
|
|
|
|
|||
Number of insured loans
|
671,776
|
|
|
683,022
|
|
|
718,687
|
|
Number of loans in default
|
98,048
|
|
|
105,531
|
|
|
118,220
|
|
Percentage of loans in default
|
14.60
|
%
|
|
15.45
|
%
|
|
16.45
|
%
|
Structured
|
|
|
|
|
|
|||
Prime
|
|
|
|
|
|
|||
Number of insured loans
|
44,700
|
|
|
42,131
|
|
|
46,234
|
|
Number of loans in default
|
6,519
|
|
|
6,735
|
|
|
6,565
|
|
Percentage of loans in default
|
14.58
|
%
|
|
15.99
|
%
|
|
14.20
|
%
|
Alt-A
|
|
|
|
|
|
|||
Number of insured loans
|
20,315
|
|
|
20,234
|
|
|
32,960
|
|
Number of loans in default
|
6,380
|
|
|
6,635
|
|
|
11,949
|
|
Percentage of loans in default
|
31.41
|
%
|
|
32.79
|
%
|
|
36.25
|
%
|
A minus and below
|
|
|
|
|
|
|||
Number of insured loans
|
16,589
|
|
|
16,716
|
|
|
18,161
|
|
Number of loans in default
|
5,949
|
|
|
6,569
|
|
|
7,180
|
|
Percentage of loans in default
|
35.86
|
%
|
|
39.30
|
%
|
|
39.54
|
%
|
Total Structured
|
|
|
|
|
|
|||
Number of insured loans
|
81,604
|
|
|
79,081
|
|
|
97,355
|
|
Number of loans in default
|
18,848
|
|
|
19,939
|
|
|
25,694
|
|
Percentage of loans in default
|
23.10
|
%
|
|
25.21
|
%
|
|
26.39
|
%
|
Total Primary Insurance
|
|
|
|
|
|
|||
Prime
|
|
|
|
|
|
|||
Number of insured loans
|
621,088
|
|
|
626,344
|
|
|
653,786
|
|
Number of loans in default
|
73,134
|
|
|
77,931
|
|
|
83,988
|
|
Percentage of loans in default
|
11.78
|
%
|
|
12.44
|
%
|
|
12.85
|
%
|
Alt-A
|
|
|
|
|
|
|||
Number of insured loans
|
70,181
|
|
|
71,999
|
|
|
91,548
|
|
Number of loans in default
|
23,100
|
|
|
24,569
|
|
|
33,482
|
|
Percentage of loans in default
|
32.91
|
%
|
|
34.12
|
%
|
|
36.57
|
%
|
A minus and below
|
|
|
|
|
|
|||
Number of insured loans
|
62,111
|
|
|
63,760
|
|
|
70,708
|
|
Number of loans in default
|
20,662
|
|
|
22,970
|
|
|
26,444
|
|
Percentage of loans in default
|
33.27
|
%
|
|
36.03
|
%
|
|
37.40
|
%
|
Total Primary
|
|
|
|
|
|
|||
Number of insured loans
|
753,380
|
|
|
762,103
|
|
|
816,042
|
|
Number of loans in default (1)
|
116,896
|
|
|
125,470
|
|
|
143,914
|
|
Percentage of loans in default
|
15.52
|
%
|
|
16.46
|
%
|
|
17.64
|
%
|
Pool insurance
|
|
|
|
|
|
|||
Number of loans in default (2)
|
29,044
|
|
|
32,456
|
|
|
33,934
|
|
(1)
|
Includes an estimated
841
,
525
and
1,517
defaults at
March 31, 2011
,
December 31, 2010
, and
March 31, 2010
, respectively, for which no reserve was established because we do not expect to make a claim payment, primarily due to deductibles.
|
(2)
|
Includes an estimated
7,962
,
9,712
and
15,230
defaults at
March 31, 2011
,
December 31, 2010
, and
March 31, 2010
, respectively, for which no reserve was established because we do not expect to make a claim payment, primarily due to deductibles.
|
|
March 31,
2011 |
|
December 31,
2010 |
|
March 31,
2010 |
|||
Default Statistics—Modified Pool Insurance:
|
|
|
|
|
|
|||
Number of insured loans in force
|
19,424
|
|
|
15,487
|
|
|
26,122
|
|
Number of loans in default
|
3,963
|
|
|
4,009
|
|
|
8,111
|
|
Percentage of loans in default
|
20.40
|
%
|
|
25.89
|
%
|
|
31.05
|
%
|
|
Three Months Ended
|
|||||||
|
March 31,
2011 |
|
December 31,
2010 |
|
March 31,
2010 |
|||
Beginning default inventory
|
125,470
|
|
|
130,049
|
|
|
151,998
|
|
Plus: New defaults
|
23,348
|
|
|
27,137
|
|
|
32,522
|
|
Less: Cures
|
(23,824
|
)
|
|
(22,198
|
)
|
|
(29,518
|
)
|
Less: Claims paid (1)
|
(6,780
|
)
|
|
(7,438
|
)
|
|
(4,825
|
)
|
Less: Rescissions and denials (2)
|
(1,318
|
)
|
|
(2,080
|
)
|
|
(1,834
|
)
|
Less: Terminations of transactions
|
—
|
|
|
—
|
|
|
(4,429
|
)
|
Ending default inventory
|
116,896
|
|
|
125,470
|
|
|
143,914
|
|
(1)
|
Includes those charged to a deductible or captive.
|
(2)
|
Net of any previously rescinded policies or denied claims that were reinstated during the period. Such reinstated rescissions may ultimately result in a paid claim, while any previously denied claims are generally reviewed for possible rescission prior to any claim payment. During the period ending March 31, 2011, there were 1,470 rescissions and 175 reinstatements of previously rescinded policies, and 1,477 denials and 1,454 reinstatements of previously denied claims.
|
|
March 31, 2011
|
|||||||||||||||||
|
|
|
|
|
Projected Default to Claim Rate
|
|
|
|
|
|||||||||
|
|
|
|
|
Gross (1)
|
|
Net (2)
|
|
Reserve for Losses
|
|
% of Reserve
|
|||||||
($ in thousands)
|
#
|
|
%
|
|
%
|
|
%
|
|
$
|
|
%
|
|||||||
Missed payments:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Three payments or less
|
19,163
|
|
|
16.4
|
%
|
|
23
|
%
|
|
21
|
%
|
|
$
|
190,765
|
|
|
6.8
|
%
|
Four to eleven payments
|
36,883
|
|
|
31.6
|
|
|
51
|
%
|
|
44
|
%
|
|
792,562
|
|
|
28.2
|
|
|
Twelve payments or more
|
60,850
|
|
|
52.0
|
|
|
67
|
%
|
|
53
|
%
|
|
1,830,433
|
|
|
65.0
|
|
|
Total
|
116,896
|
|
|
100.0
|
%
|
|
55
|
%
|
|
45
|
%
|
|
2,813,760
|
|
|
100.0
|
%
|
|
IBNR
|
|
|
|
|
|
|
|
|
98,611
|
|
|
|
||||||
LAE and Other
|
|
|
|
|
|
|
|
|
71,925
|
|
|
|
||||||
Total primary reserves
|
|
|
|
|
|
|
|
|
$
|
2,984,296
|
|
|
|
|
March 31,
2011 |
|
December 31,
2010 |
|
March 31,
2010 |
||||||
First-lien reserve per default
|
|
|
|
|
|
||||||
Primary reserve per default
|
$
|
25,714
|
|
|
$
|
23,467
|
|
|
$
|
22,378
|
|
Pool reserve per default
|
25,230
|
|
|
24,911
|
|
|
20,305
|
|
|||
Total first-lien reserve per default
|
25,640
|
|
|
23,689
|
|
|
22,138
|
|
|
Three Months Ended
|
|
||||||
(In thousands)
|
March 31,
2011 |
|
March 31,
2010 |
|
||||
Net claims paid (1):
|
|
|
|
|
||||
Prime
|
$
|
208,195
|
|
|
$
|
125,964
|
|
|
Alt-A
|
75,130
|
|
|
65,031
|
|
|
||
A minus and below
|
44,585
|
|
|
36,384
|
|
|
||
Total primary claims paid
|
327,910
|
|
|
227,379
|
|
|
||
Pool
|
34,358
|
|
|
31,409
|
|
|
||
Second-lien and other
|
2,883
|
|
|
7,979
|
|
|
||
Subtotal
|
365,151
|
|
|
266,767
|
|
|
||
Impact of first-lien terminations
|
—
|
|
|
80,110
|
|
|
||
Impact of captive terminations
|
—
|
|
|
(436
|
)
|
|
||
Impact of second-lien terminations
|
—
|
|
|
10,834
|
|
|
||
Total net claims paid
|
$
|
365,151
|
|
|
$
|
357,275
|
|
|
Average net claim paid (1) (2):
|
|
|
|
|
||||
Prime
|
$
|
47.8
|
|
|
$
|
45.8
|
|
|
Alt-A
|
59.6
|
|
|
59.6
|
|
|
||
A minus and below
|
37.1
|
|
|
39.9
|
|
|
||
Total average net primary claim paid
|
48.1
|
|
|
47.8
|
|
|
||
Pool
|
69.0
|
|
|
64.9
|
|
|
||
Second-lien and other
|
30.7
|
|
|
34.8
|
|
|
||
Total average net claim paid
|
$
|
49.3
|
|
|
$
|
48.7
|
|
|
Average direct primary claim paid (2) (3)
|
$
|
54.3
|
|
|
$
|
53.9
|
|
|
Average total direct claim paid (2) (3)
|
$
|
55.0
|
|
|
$
|
54.1
|
|
|
(1)
|
Net of reinsurance recoveries.
|
(2)
|
Calculated without giving effect to the impact of terminations of captive reinsurance transactions and first- and second-lien transactions.
|
(3)
|
Before reinsurance recoveries.
|
|
Three Months Ended
March 31, |
||||||||||||
($ in thousands)
|
2011
|
|
2010
|
||||||||||
States with highest direct claims paid (first-lien):
|
|
|
|
|
|
|
|
||||||
Florida
|
$
|
63,102
|
|
|
17.3
|
%
|
|
$
|
47,371
|
|
|
13.3
|
%
|
California
|
62,493
|
|
|
17.1
|
|
|
63,344
|
|
|
17.7
|
|
||
Arizona
|
33,482
|
|
|
9.2
|
|
|
25,726
|
|
|
7.2
|
|
||
Georgia
|
20,499
|
|
|
5.6
|
|
|
15,451
|
|
|
4.3
|
|
||
Michigan
|
18,819
|
|
|
5.2
|
|
|
23,091
|
|
|
6.5
|
|
||
States with highest number of defaults:
|
|
|
|
|
|
|
|
||||||
Florida
|
19,618
|
|
|
16.8
|
%
|
|
23,183
|
|
|
16.1
|
%
|
||
California
|
10,363
|
|
|
8.9
|
|
|
16,217
|
|
|
11.3
|
|
||
Illinois
|
6,826
|
|
|
5.8
|
|
|
7,650
|
|
|
5.3
|
|
||
Georgia
|
5,832
|
|
|
5.0
|
|
|
7,553
|
|
|
5.3
|
|
||
Ohio
|
5,336
|
|
|
4.6
|
|
|
6,140
|
|
|
4.3
|
|
(In thousands)
|
March 31,
2011 |
|
December 31,
2010 |
|
March 31,
2010 |
||||||
Reserves for losses by category:
|
|
|
|
|
|
||||||
Prime
|
$
|
1,684,039
|
|
|
$
|
1,607,741
|
|
|
$
|
1,347,003
|
|
Alt-A
|
704,751
|
|
|
687,960
|
|
|
821,551
|
|
|||
A minus and below
|
403,248
|
|
|
413,137
|
|
|
421,748
|
|
|||
Reinsurance recoverable (1)
|
192,258
|
|
|
223,254
|
|
|
596,325
|
|
|||
Total primary reserves
|
2,984,296
|
|
|
2,932,092
|
|
|
3,186,627
|
|
|||
Pool
|
531,903
|
|
|
566,565
|
|
|
379,794
|
|
|||
Total first-lien reserves
|
3,516,199
|
|
|
3,498,657
|
|
|
3,566,421
|
|
|||
Second-lien (2)
|
26,470
|
|
|
26,161
|
|
|
30,490
|
|
|||
Other
|
128
|
|
|
153
|
|
|
124
|
|
|||
Total reserve for losses
|
$
|
3,542,797
|
|
|
$
|
3,524,971
|
|
|
$
|
3,597,035
|
|
Modified pool reserves (included in primary reserves above)
|
$
|
79,571
|
|
|
$
|
87,218
|
|
|
$
|
245,522
|
|
Reserve for premium deficiency on second-liens
|
$
|
9,353
|
|
|
$
|
10,736
|
|
|
$
|
24,126
|
|
(1)
|
Represents ceded losses on captive transactions and Smart Home. See "Critical Accounting Policies—Off-Balance Sheet Arrangements" for additional information regarding our Smart Home transactions.
|
(2)
|
Does not include second-lien premium deficiency reserve ("PDR").
|
|
At or for the Three Months Ended March 31,
|
||||||
|
2011
|
|
2010
|
||||
First-lien Captives
|
|
|
|
||||
Premiums ceded to captives (in thousands)
|
$
|
7,587
|
|
|
$
|
25,474
|
|
% of total premiums
|
3.9
|
%
|
|
12.6
|
%
|
||
NIW subject to captives (in thousands)
|
$
|
—
|
|
|
$
|
333
|
|
% of primary NIW
|
—
|
|
|
<1%
|
|
||
IIF (1) subject to captives
|
10.2
|
%
|
|
29.5
|
%
|
||
RIF (2) subject to captives
|
10.1
|
%
|
|
31.1
|
%
|
||
Persistency
(12 months ended) (3)
|
83.0
|
%
|
|
81.0
|
%
|
(1)
|
Insurance in force on captives as a percentage of total insurance in force.
|
(2)
|
RIF on captives as a percentage of total insurance in force.
|
(3)
|
Reflects the impact of terminations of captive reinsurance transactions and first- and second-lien transactions.
|
|
Three Months Ended
March 31, |
|
% Change
|
|||||||
($ in millions)
|
2011
|
|
2010
|
|
2011 vs. 2010
|
|||||
Net income (loss)
|
$
|
339.0
|
|
|
$
|
(79.0
|
)
|
|
n/m
|
|
Net premiums written—insurance
|
1.9
|
|
|
(1.5
|
)
|
|
n/m
|
|
||
Net premiums earned—insurance
|
16.9
|
|
|
20.9
|
|
|
(19.3
|
)%
|
||
Net investment income
|
15.4
|
|
|
19.0
|
|
|
(18.9
|
)
|
||
Net gains on investments
|
19.7
|
|
|
29.2
|
|
|
(32.6
|
)
|
||
Change in fair value of derivative instruments
|
244.3
|
|
|
(78.2
|
)
|
|
n/m
|
|
||
Net gains (losses) on other financial instruments
|
72.8
|
|
|
(71.4
|
)
|
|
n/m
|
|
||
Other income
|
—
|
|
|
3.9
|
|
|
n/m
|
|
||
Provision for losses
|
13.4
|
|
|
14.8
|
|
|
(9.4
|
)
|
||
Policy acquisition costs
|
3.9
|
|
|
4.4
|
|
|
(10.3
|
)
|
||
Other operating expenses
|
12.1
|
|
|
18.7
|
|
|
(35.3
|
)
|
||
Interest expense
|
7.2
|
|
|
8.7
|
|
|
(16.7
|
)
|
||
Income tax benefit
|
(6.5
|
)
|
|
(44.0
|
)
|
|
85.2
|
|
|
Three Months Ended
March 31, |
||||||
(In thousands)
|
2011
|
|
2010
|
||||
Net premiums earned:
|
|
|
|
||||
Public finance direct
|
$
|
7,836
|
|
|
$
|
12,336
|
|
Public finance reinsurance
|
7,804
|
|
|
6,913
|
|
||
Structured direct
|
441
|
|
|
717
|
|
||
Structured reinsurance
|
809
|
|
|
915
|
|
||
Trade credit reinsurance
|
(1
|
)
|
|
48
|
|
||
Total net premiums earned—insurance
|
$
|
16,889
|
|
|
$
|
20,929
|
|
Refundings included in total net premiums earned
|
$
|
4,831
|
|
|
$
|
9,533
|
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Net gains related to change in fair value of trading securities
|
$
|
13.3
|
|
|
$
|
27.6
|
|
Net realized gains on sales and redemptions
|
6.4
|
|
|
1.6
|
|
||
Net gains on investments
|
$
|
19.7
|
|
|
$
|
29.2
|
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Net premiums earned—derivatives
|
$
|
10.9
|
|
|
$
|
12.0
|
|
Financial Guaranty credit derivatives
|
234.6
|
|
|
(84.1
|
)
|
||
Financial Guaranty VIE derivative liabilities
|
(0.9
|
)
|
|
(3.2
|
)
|
||
Put options on CPS
|
(0.3
|
)
|
|
(2.1
|
)
|
||
Other
|
—
|
|
|
(0.8
|
)
|
||
Change in fair value of derivative instruments
|
$
|
244.3
|
|
|
$
|
(78.2
|
)
|
|
Three Months Ended
March 31, |
||||||
(In millions)
|
2011
|
|
2010
|
||||
Gain (loss) related to change in fair value of Financial Guaranty VIE debt
|
70.5
|
|
|
(75.7
|
)
|
||
Gains related to other Financial Guaranty VIE assets
|
3.9
|
|
|
1.9
|
|
||
Gain on the repurchase of long-term debt
|
—
|
|
|
2.0
|
|
||
Loss related to CPS VIE
|
—
|
|
|
(0.2
|
)
|
||
Other
|
(1.6
|
)
|
|
0.6
|
|
||
Net gains (losses) on other financial instruments
|
$
|
72.8
|
|
|
$
|
(71.4
|
)
|
|
Three Months Ended
March 31, |
||||||
(In thousands)
|
2011 (1)
|
|
2010
|
||||
Claims Paid:
|
|
|
|
||||
Financial guaranty
|
$
|
290
|
|
|
$
|
3,357
|
|
Trade credit reinsurance
|
(24
|
)
|
|
1,086
|
|
||
Total
|
$
|
266
|
|
|
$
|
4,443
|
|
(1)
|
Includes recoveries on claims paid in prior periods.
|
(In thousands)
|
March 31,
2011 |
|
December 31, 2010
|
|
March 31,
2010 |
||||||
Reserve for Losses:
|
|
|
|
|
|
||||||
Financial guaranty
|
$
|
80,578
|
|
|
$
|
67,446
|
|
|
$
|
133,425
|
|
Trade credit reinsurance
|
4,320
|
|
|
4,318
|
|
|
5,364
|
|
|||
Total
|
$
|
84,898
|
|
|
$
|
71,764
|
|
|
$
|
138,789
|
|
|
March 31, 2011
|
|||||||||||||
|
Net Par
Outstanding (1)
|
|
% of Total
Net Par
Outstanding (1)
|
|
Net
Claim (Asset)
Liability (2)
|
|
Fair Value
Net (Asset)
Liability (3)
|
|||||||
Type of Obligation
|
(In billions)
|
|
|
|
(In millions)
|
|
(In millions)
|
|||||||
Public finance:
|
|
|
|
|
|
|
|
|||||||
General obligation and other tax supported
|
$
|
16.9
|
|
|
21.8
|
%
|
|
$
|
0.5
|
|
|
$
|
0.4
|
|
Healthcare and long-term care
|
6.1
|
|
|
7.9
|
|
|
18.2
|
|
|
(0.7
|
)
|
|||
Water/sewer/electric gas and investor-owned utilities
|
4.0
|
|
|
5.2
|
|
|
34.9
|
|
|
1.8
|
|
|||
Airports/transportation
|
3.9
|
|
|
5.0
|
|
|
6.5
|
|
|
39.4
|
|
|||
Education
|
2.5
|
|
|
3.2
|
|
|
(9.3
|
)
|
|
0.1
|
|
|||
Escrowed transactions (4)
|
2.0
|
|
|
2.6
|
|
|
—
|
|
|
—
|
|
|||
Housing
|
0.3
|
|
|
0.4
|
|
|
0.3
|
|
|
—
|
|
|||
Other municipal (5)
|
1.0
|
|
|
1.3
|
|
|
(4.0
|
)
|
|
0.7
|
|
|||
Total public finance
|
36.7
|
|
|
47.4
|
|
|
47.1
|
|
|
41.7
|
|
|||
Structured finance:
|
|
|
|
|
|
|
|
|||||||
CDO
|
39.5
|
|
|
50.9
|
|
|
1.7
|
|
|
516.9
|
|
|||
Asset-backed obligations
|
1.0
|
|
|
1.3
|
|
|
31.8
|
|
|
18.2
|
|
|||
Other structured (6)
|
0.3
|
|
|
0.4
|
|
|
—
|
|
|
(1.4
|
)
|
|||
Total structured finance
|
40.8
|
|
|
52.6
|
|
|
33.5
|
|
|
533.7
|
|
|||
Total
|
$
|
77.5
|
|
|
100.0
|
%
|
|
$
|
80.6
|
|
|
$
|
575.4
|
|
|
December 31, 2010
|
|||||||||||||
|
Net Par
Outstanding (1)
|
|
% of Total
Net Par
Outstanding (1)
|
|
Net
Claim (Asset)
Liability (2)
|
|
Fair Value
Net (Asset)
Liability (3)
|
|||||||
Type of Obligation
|
(In billions)
|
|
|
|
(In millions)
|
|
(In millions)
|
|||||||
Public finance:
|
|
|
|
|
|
|
|
|||||||
General obligation and other tax supported
|
$
|
17.5
|
|
|
22.2
|
%
|
|
$
|
(0.3
|
)
|
|
$
|
0.4
|
|
Healthcare and long-term care
|
6.2
|
|
|
7.9
|
|
|
18.1
|
|
|
(0.6
|
)
|
|||
Water/sewer/electric gas and investor-owned utilities
|
4.2
|
|
|
5.3
|
|
|
30.0
|
|
|
2.3
|
|
|||
Airports/transportation
|
3.9
|
|
|
4.9
|
|
|
2.7
|
|
|
45.4
|
|
|||
Education
|
2.6
|
|
|
3.3
|
|
|
(10.4
|
)
|
|
0.3
|
|
|||
Escrowed transactions (4)
|
1.9
|
|
|
2.4
|
|
|
—
|
|
|
—
|
|
|||
Housing
|
0.3
|
|
|
0.4
|
|
|
0.3
|
|
|
—
|
|
|||
Other municipal (5)
|
1.1
|
|
|
1.4
|
|
|
(3.5
|
)
|
|
0.7
|
|
|||
Total public finance
|
37.7
|
|
|
47.8
|
|
|
36.9
|
|
|
48.5
|
|
|||
Structured finance:
|
|
|
|
|
|
|
|
|||||||
CDO
|
39.6
|
|
|
50.3
|
|
|
1.2
|
|
|
825.9
|
|
|||
Asset-backed obligations
|
1.1
|
|
|
1.4
|
|
|
29.3
|
|
|
20.4
|
|
|||
Other structured (6)
|
0.4
|
|
|
0.5
|
|
|
—
|
|
|
(1.3
|
)
|
|||
Total structured finance
|
41.1
|
|
|
52.2
|
|
|
30.5
|
|
|
845.0
|
|
|||
Total
|
$
|
78.8
|
|
|
100.0
|
%
|
|
$
|
67.4
|
|
|
$
|
893.5
|
|
(1)
|
Represents our exposure to the aggregate outstanding principal on insured obligations.
|
(2)
|
A claim liability is recorded on the balance sheet when there is evidence that deterioration has occurred and the net present value of our expected losses for a particular policy exceeds the unearned premium reserve for that policy. The claim liability reported is net of estimated salvage and subrogation, which may result in a net claim asset.
|
(3)
|
Represents either the net (asset) liability recorded within derivative assets or derivative liabilities for derivative contracts, or the net (asset) liability recorded within VIE debt and other financial statement line items for financial guaranty consolidated VIEs.
|
(4)
|
Legally defeased bond issuances where our financial guaranty policy is not extinguished, but cash or securities in an amount sufficient to pay remaining obligations under such bonds have been deposited in an escrow account for the benefit of the bond holders.
|
(5)
|
Represents other types of municipal obligations, including human service providers, second-to-pay international public finance, non-profit institutions, project finance accommodations and stadiums, none of which individually constitutes a material amount of our financial guaranty net par outstanding.
|
(6)
|
Represents other types of structured finance obligations, including DPRs, collateralized guaranteed investment contracts or letters of credit, foreign commercial assets and life insurance securitizations, none of which individually constitutes a material amount of our financial guaranty net par outstanding.
|
•
|
We have provided credit protection on the senior-most tranche of a CDO of ABS transaction with $452.1 million net par outstanding at
March 31, 2011
. The underlying collateral consists predominantly of mezzanine tranches of mortgage-backed securities ("MBS”). As of
March 31, 2011
, $386.6 million (or 87.1%) of the underlying collateral was rated BIG by at least one rating agency, and $242.4 million (or 54.6%) of the underlying collateral had defaulted. Due to the substantial deterioration of the underlying collateral, we currently expect to begin paying claims related to interest shortfalls on this transaction in early 2012, and possibly earlier if the deterioration is worse than projected. Due to the structure of this transaction, we do not expect to pay claims related to principal shortfalls until sometime between 2036 and the legal final maturity date for the transaction in 2046. Although losses for this transaction are difficult to estimate, we currently believe that our ultimate claim payments in respect of principal for this transaction will be substantially all of our total net par outstanding. This transaction is currently rated CC internally and by Standard & Poor's Rating Service ("S&P”) and Ca by Moody's Investor Service ("Moody's”). We continue to explore loss mitigation alternatives with respect to this transaction, including the possibility of commuting our remaining risk. We can provide no assurance that we will be successful in such loss mitigation efforts.
|
•
|
We have reinsured several primary financial guaranty insurers' obligations with respect to $227.5 million in net par outstanding at
March 31, 2011
, related to Jefferson County, Alabama (the "County”) sewer bonds. We began paying claims related to these obligations in 2008, and have paid $21.1 million of claims, net of salvage, on this transaction through
March 31, 2011
. The County's sewer system operations have generated sufficient revenues since the beginning of 2009 to pay interest on its outstanding debt, as well as regularly scheduled annual installments of principal in February 2010 and 2011, primarily due to historically low prevailing interest rates on the County's variable rate obligations. However, we believe a number of factors are adversely affecting the performance of our insured obligations, including the County's highly leveraged capital position, the sub-par performance of the sewer facilities and the possibility that the County will be unable to generate sufficient revenues to make regularly scheduled payments of principal and interest on the underlying obligations if interest rates increase. In addition, the severe storms that struck the southern United States in April 2011, caused significant damage in the County. Although they do not appear to have directly materially affected the County's sewer system facilities or operations, the impact that these storms will have on the County's finances is uncertain at this time.
|
•
|
We have provided credit protection on 15 directly insured senior bonds ("TruPs bonds") issued pursuant to TruPs CDOs. We provide credit protection on these TruPs bonds through 19 separate CDS contracts, meaning that with respect to four of the TruPs bonds we insure, we entered into two separate CDS contracts (each with a different counterparty) covering the same TruPs bond with an aggregate net par outstanding of $2,006.7 million as of
March 31, 2011
. Many issuers of the TruPs collateral underlying our insured obligations have been negatively affected by the recent U.S. economic recession and have defaulted on their obligation to pay interest on their TruPs or have voluntarily chosen to defer interest payments, which is permissible for up to five years. As of March 31, 2011, $1.3 billion of our net par outstanding to directly insured senior TruPs bonds was internally rated BIG. The weighted average internal rating for all of our directly insured TruPs bonds remained at B+ as of
March 31, 2011
. The fair value liability of our directly insured TruPs transactions, which are accounted for as derivatives, was $211.8 million as of
March 31, 2011
.
|
(In thousands)
|
Three Months Ended
March 31, 2010 |
||
Equity in net income of affiliates—Sherman
|
$
|
8,098
|
|
Net income
|
5,156
|
|
|
Initial
|
|
As of March 31,
2011 |
Pool of mortgages (par value)
|
$ 12.2 billion
|
|
$ 3.6 billion
|
Risk in force (par value)
|
$ 3.1 billion
|
|
$ 0.9 billion
|
Notes sold to investors/risk ceded (principal amount)
|
$534.0 million
|
|
$433.4 million
|
|
Three Months Ended
March 31, |
||||||
(In thousands)
|
2011
|
|
2010
|
||||
Net income (loss)
|
$
|
103,006
|
|
|
$
|
(310,355
|
)
|
Change in loss and LAE reserves
|
30,960
|
|
|
247,981
|
|
||
Change in second-lien PDR
|
(1,383
|
)
|
|
(1,231
|
)
|
||
Deferred tax benefit
|
—
|
|
|
(189,335
|
)
|
||
Depreciation and amortization, net
|
18,131
|
|
|
6,392
|
|
||
Change in unearned premiums
|
(20,345
|
)
|
|
(42,094
|
)
|
||
Change in deferred policy acquisition costs
|
2,604
|
|
|
3,347
|
|
||
Net payments related to derivative contracts and VIE debt (1)
|
(66,434
|
)
|
|
(87,415
|
)
|
||
Equity in earnings of affiliates
|
(65
|
)
|
|
(8,098
|
)
|
||
Distributions from affiliates (1)
|
—
|
|
|
1,515
|
|
||
Net (gains) losses on investments and other financial instruments, change in fair value of derivatives and net impairment losses recognized in earnings
|
(356,578
|
)
|
|
121,588
|
|
||
Change in reinsurance recoverables
|
25,931
|
|
|
22,027
|
|
||
Cash paid for commutations, terminations and recaptures (1)
|
—
|
|
|
(93,365
|
)
|
||
Change in other assets
|
5,531
|
|
|
43,320
|
|
||
Change in accounts payable and accrued expenses
|
(2,221
|
)
|
|
(1,288
|
)
|
||
Cash flows used in operating activities
|
$
|
(260,863
|
)
|
|
$
|
(287,011
|
)
|
(1)
|
Cash item.
|
(1)
|
Moody’s ratings outlook for Radian Group, Radian Guaranty, Radian Insurance and Amerin Guaranty is currently Positive. Moody’s ratings outlook for Radian Asset Assurance is currently Stable.
|
(2)
|
S&P’s ratings outlook for Radian Group and all our rated insurance subsidiaries is currently Negative.
|
(3)
|
Ratings have been withdrawn.
|
•
|
first, we define a tranche on the CDX index (defined below) that equates to the risk profile of our specific transaction (we refer to this tranche as an "equivalent-risk tranche");
|
•
|
second, we determine the fair premium amount on the equivalent-risk tranche for those market participants engaged in trading on the CDX index (we refer to each of these participants as a "typical market participant"); and
|
•
|
third, we adjust the fair premium amount for a typical market participant to account for the difference between the non-performance or default risk of a typical market participant and the non-performance or default risk of a financial guarantor of similar credit quality to us (in each case, we refer to the risk of non-performance as "non-performance risk").
|
•
|
the extent and the duration of the decline in value;
|
•
|
the reasons for the decline in value (e.g., credit event, interest related or market fluctuations);
|
•
|
the financial position and access to capital of the issuer, including the current and future impact of any specific events; and
|
•
|
the financial condition, and near term prospects, of the issuer.
|
NIMS related ($ in millions)
|
|
|
|
|
|
||||||
Weighted average credit spread
|
42.83
|
%
|
|
|
|
|
|||||
Fair value of net liabilities (1)
|
$
|
63.4
|
|
|
|
|
|
||||
|
Increase/(Decrease) in Fair Value Liability based on:
|
||||||||||
|
10% tightening of
NIMS credit spreads
|
|
0% change in NIMS
credit spreads
|
|
10% widening of NIMS
credit spreads
|
||||||
50% tightening of Radian Group's CDS spread
|
$
|
2.2
|
|
|
$
|
2.2
|
|
|
$
|
2.2
|
|
0 basis points change in Radian Group's CDS spread
|
—
|
|
|
—
|
|
|
—
|
|
|||
50% widening of Radian Group's CDS spread
|
(1.7
|
)
|
|
(1.7
|
)
|
|
(1.7
|
)
|
|||
_______________________
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Corporate CDOs ($ in millions)
|
|
|
|
|
|
||||||
Weighted average credit spread
|
0.54
|
%
|
|
|
|
|
|||||
Fair value of net liabilities
|
$
|
45.7
|
|
|
|
|
|
||||
|
Increase/(Decrease) in Fair Value Liability based on:
|
||||||||||
|
10% tightening of CDO
credit spreads
|
|
0% change in CDO
credit spreads
|
|
10% widening of CDO
credit spreads
|
||||||
50% tightening of Radian Group's CDS spread
|
$
|
63.3
|
|
|
$
|
80.0
|
|
|
$
|
97.6
|
|
0 basis points change in Radian Group's CDS spread
|
(12.7
|
)
|
|
—
|
|
|
3.6
|
|
|||
50% widening of Radian Group's CDS spread
|
(39.0
|
)
|
|
(34.7
|
)
|
|
(29.2
|
)
|
|||
_______________________
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Non-Corporate CDO related (2) ($ in millions)
|
|
|
|
|
|
||||||
Weighted average credit spread
|
2.77
|
%
|
|
|
|
|
|||||
Fair value of net liabilities (3)
|
$
|
(506.6
|
)
|
|
|
|
|
||||
|
Increase/(Decrease) in Fair Value Liability based on:
|
||||||||||
|
10% tightening of CDO
credit spreads
|
|
0% change in CDO
credit spreads
|
|
10% widening of CDO
credit spreads
|
||||||
50% tightening of Radian Group's CDS spread
|
$
|
432.9
|
|
|
$
|
461.2
|
|
|
$
|
489.7
|
|
0 basis points change in Radian Group's CDS spread
|
(20.4
|
)
|
|
—
|
|
|
20.6
|
|
|||
50% widening of Radian Group's CDS spread
|
(200.0
|
)
|
|
(184.6
|
)
|
|
(169.1
|
)
|
•
|
implement new eligibility requirements for mortgage insurers and alter or liberalize underwriting standards on low-down-payment mortgages they purchase;
|
•
|
alter the terms on which mortgage insurance coverage may be canceled before reaching the cancellation thresholds established by law;
|
•
|
require private mortgage insurers to perform activities intended to avoid or mitigate loss on insured mortgages that are in default;
|
•
|
establish the amount of loan level delivery fees (which result in higher cost to borrowers) that the GSEs charge on loans that require mortgage insurance; and
|
•
|
influence a mortgage lender's selection of the mortgage insurer providing coverage.
|
•
|
establishes the Bureau of Consumer Financial Protection to regulate the offering and provision of consumer financial products or services under federal law, including residential mortgages;
|
•
|
requires securitizers to retain 5% of the economic risk associated with mortgage loans that they cause to be securitized, unless the mortgage loans are "qualified residential mortgages" ("QRMs"), are insured by the FHA or guaranteed by the VA or another federal agency or fall within another exception. In certain circumstances, the securitizers may elect to allocate a portion of this risk retention to willing originators. The Dodd-Frank Act provides that the definition of QRMs will be determined by regulators, with consideration to be given, among other things, to the presence of mortgage insurance, to the extent that the presence of mortgage insurance reduces the risk of default. On March 29, 2011, federal regulators issued the proposed risk retention rule that includes a definition of QRM. Among other requirements, the proposed rule excludes loans with non-traditional features, such as negative amortization loans, and required adherence to strict, objective underwriting standards, including a maximum LTV of 80% on a home purchase transaction, regardless of whether mortgage insurance is present, maximum debt-to-income ratios and borrower credit history restrictions, among other requirements. The proposal also includes a request for comment on an alternative QRM definition that, if approved by regulators, would take mortgage insurance into account in determining whether the borrower met a 90% LTV requirement. The proposed rule seeks public comment through June 10, 2011, on virtually all aspects of the QRM definition, including: (1) a request for historical loan data that the regulators may use to assess whether loans with mortgage insurance are less likely to default than loans without mortgage insurance, (2) if the QRM definition included mortgage insurance, what financial eligibility standards should be incorporated for mortgage insurance providers and how might those standards be monitored and enforced, and (3) the potential benefits and costs of the alternative QRM definition that would give credit to mortgage insurance. Under the proposed rule, loans purchased and securitized by the GSEs while they are in conservatorship would be exempt from the risk retention requirements. Members of the U.S. House of Representatives have voiced their opposition to this GSE exemption from the risk retention requirements, and the Capital Markets Subcommittee of the House unanimously passed H.R. 1223, the GSE Credit Risk Equitable Treatment Act, which would eliminate the GSE exemption altogether.
|
•
|
may impose additional reporting, capital and collateral requirements on our financial guaranty business, including potentially, the posting of collateral for existing derivative contracts. Although Senators Christopher Dodd and Blanche Lincoln have written that the capital and margin requirements of the Dodd-Frank Act are not intended to apply retroactively to existing derivative contracts, the Dodd-Frank Act is silent on this point, leaving the determination to the applicable regulatory agencies in their rule-making under the Dodd-Frank Act. On April 28, 2011, the Commodities Future Trading Commission published in the Federal Register its proposed rule regarding margin for uncleared swaps entered into by swap dealers or major swap participants. Under this proposal, the rules would apply to uncleared swaps entered into after the effective date of the regulation. Thus, the proposed requirements would not apply retroactively. Comments are due on this proposal on June 27
th
. The CFTC has not yet released its proposed rules regarding capital requirements for swap dealers and major swap participants. Until these rules are finalized, we cannot provide assurance that these requirements will not be applied retroactively to our existing derivative contracts, which if so applied, would likely require that we post significant collateral amounts that could exceed our current investment balances, and consequently, could have a material adverse effect on our businesses and on our financial condition, including significantly reducing or eliminating the ability of our financial guaranty business to provide dividends to our mortgage insurance business;
|
•
|
sets new limitations and restrictions on banking, derivatives and asset-backed securities that may make it more difficult for us to commute, restructure, hedge or otherwise mitigate losses or reduce exposure on our existing financial guaranty portfolio; and
|
•
|
establishes a Financial Stability Oversight Council, which is authorized to subject nonbank financial companies deemed systemically significant to more rigorous prudential standards and other requirements and to subject such companies to a special liquidation process outside the federal bankruptcy code, administered by the FDIC (although insurance company subsidiaries would remain subject to liquidation and rehabilitation proceedings under state law). In addition, the Dodd-Frank Act establishes a Federal Insurance Office within the Department of the Treasury. While not having a general supervisory or regulatory authority over the business of insurance, the director of this office will perform various functions with respect to insurance, including serving as a non-voting member of the Financial Stability Oversight Council and making recommendations to the Council regarding insurers to be designated for more stringent regulation. The director is also required to conduct a study on how to modernize and improve the system of insurance regulation in the United States, including by increased national uniformity through either a federal charter or effective action by the states.
|
|
Radian Group Inc.
|
|
|
Date: May 10, 2011
|
/s/ C. R
OBERT
Q
UINT
|
|
C. Robert Quint
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
/s/ C
ATHERINE
M. J
ACKSON
|
|
Catherine M. Jackson
|
|
Senior Vice President, Controller
|
|
Three Months Ended
March 31,
|
|
|||||
(In thousands, except per-share amounts and market prices)
|
2011
|
|
2010
|
||||
Net income (loss)
|
$
|
103,006
|
|
|
$
|
(310,355
|
)
|
Average diluted stock options outstanding
|
454
|
|
|
—
|
|
||
Average exercise price per share
|
$
|
2.48
|
|
|
$
|
—
|
|
Average market price per share—diluted basis
|
$
|
7.50
|
|
|
$
|
—
|
|
Average common shares outstanding
|
132,427
|
|
|
82,341
|
|
||
Increase in share due to potential exercise of common stock equivalents—diluted basis (1)
|
1,276
|
|
|
—
|
|
||
Adjusted shares outstanding—diluted
|
133,703
|
|
|
82,341
|
|
||
Net income (loss) per share—basic
|
$
|
0.78
|
|
|
$
|
(3.77
|
)
|
Net income (loss) per share—diluted
|
$
|
0.77
|
|
|
$
|
(3.77
|
)
|
(1)
|
For the three months ended
March 31, 2011
,
2,708,882
shares of our common stock equivalents issued under our stock-based compensation plans were not included in the calculation of diluted net income per share because they were anti-dilutive. As a result of our net loss for the three months ended
March 31, 2010
,
4,278,010
shares of our common stock equivalents issued under our stock-based compensations plans were not included in the calculation of diluted net loss per share because they were anti-dilutive.
|
|
|
Date: May 10, 2011
|
/s/ S
ANFORD
A. I
BRAHIM
|
|
Sanford A. Ibrahim
Chief Executive Officer
|
|
|
Date: May 10, 2011
|
/s/ C. R
OBERT
Q
UINT
|
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C. Robert Quint
Chief Financial Officer
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Date: May 10, 2011
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/s/ S. A. I
BRAHIM
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Sanford A. Ibrahim
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/s/ C. R
OBERT
Q
UINT
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C. Robert Quint
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