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
o
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Accelerated filer
x
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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 economic and political conditions, including high unemployment rates and weakness in the U.S. housing and mortgage credit markets, a significant downturn in the U.S. or global economies, a lack of meaningful liquidity in the capital or credit markets, changes or volatility in interest rates or consumer confidence and changes in credit spreads, each of which may be accelerated or intensified by, among other things, legislative activity or inactivity or actual or threatened downgrades of U.S. credit ratings;
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•
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changes in the way customers, investors, regulators or legislators perceive the strength of private mortgage insurers or financial guaranty providers, in particular in light of the fact that certain of our former competitors have ceased writing new insurance business and have been placed under supervision or receivership by insurance regulators;
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•
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catastrophic events or economic changes in geographic regions where our mortgage insurance exposure is more concentrated or where we have financial guaranty exposure;
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•
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our ability to maintain sufficient holding company liquidity to meet our short- and long-term liquidity needs;
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•
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a reduction in, or prolonged period of depressed levels of, home mortgage originations due to reduced liquidity in the lending market, tighter underwriting standards, and general reduced housing demand in the U.S., which may be exacerbated by regulations impacting home mortgage originations, including requirements established under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”);
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•
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our ability to maintain an adequate risk-to-capital position, minimum policyholder position and other surplus requirements for Radian Guaranty Inc. (“Radian Guaranty”), our principal mortgage insurance subsidiary, and an adequate minimum policyholder position and surplus for those insurance subsidiaries that provide reinsurance to Radian Guaranty;
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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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a more rapid than expected decrease in the current elevated levels of mortgage insurance rescissions and claim denials, which have reduced our paid losses and resulted in a significant reduction in our loss reserves, including a decrease in net rescissions or denials resulting from an increase in the number of successful challenges to previously rescinded policies or claim denials, or by the government-sponsored entities (“GSEs”) intervening in or otherwise limiting our loss mitigation practices, including settlements of disputes regarding loss mitigation activities;
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•
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the negative impact that our loss mitigation activities may have on our relationships with our customers and potential customers, including the potential loss of current or future 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 loss mitigation activities, to increase our loss reserves for, and reassume risk on, rescinded or cancelled loans or denied claims, and to pay additional claims, including amounts previously curtailed;
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•
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any disruption in the servicing of mortgages covered by our insurance policies, as well as poor servicer performance;
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•
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adverse changes in the severity or frequency of losses associated with certain products that we formerly offered (and which remain in our insured portfolio) that are riskier than traditional mortgage insurance or financial guaranty insurance policies;
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•
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a decrease in the persistency rates of our mortgage insurance policies, which has the effect of reducing our premium income on our monthly premium policies and could decrease the profitability of our mortgage insurance business;
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•
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heightened competition for our mortgage insurance business from others such as the FHA, the U.S. Department of Veterans Affairs and other private mortgage insurers, including in particular, those that have been assigned higher ratings than we have, that may have access to greater amounts of capital than we do, that are less dependent on capital support from their subsidiaries than we are or that are new entrants to the industry, and therefore, are not burdened by legacy obligations;
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•
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changes in requirements to remain an eligible insurer to the GSEs (which are expected to be released by the end of 2013 and implemented following a transition period), which may include more stringent risk-to-capital ratio requirements, higher capital requirements for loans insured prior to 2009 and a limitation on the amount of capital credit available for our subsidiaries, including capital attributable to our financial guaranty business;
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•
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changes in the charters or business practices of, or rules or regulations applicable to, the GSEs;
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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 effect or 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 private mortgage insurance may be considered “qualified residential mortgages” for purposes of the Dodd-Frank Act securitization provisions;
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•
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the application of existing federal or state laws and regulations, or changes in these laws and regulations or the way they are interpreted, including, without limitation: (i) the resolution of existing, or the possibility of additional, lawsuits or investigations (including in particular investigations and litigation relating to captive reinsurance arrangements under the Real Estate Settlement Practices Act of 1974); and (ii) legislative and regulatory changes (a) impacting the demand for private mortgage insurance, (b) limiting or restricting the products we may offer or increasing the amount of capital we are required to hold, (c) affecting the form in which we execute credit protection, or (d) otherwise impacting our existing businesses;
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•
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the amount and timing of potential payments or adjustments associated with federal or other tax examinations, including adjustments proposed by the IRS resulting from the examination of our 2000 through 2007 tax years;
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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 to estimate accurately the fair value amounts of derivative instruments in determining gains and losses on these instruments;
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•
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volatility in our earnings caused by changes in the fair value of our assets and liabilities carried at fair value, including our derivative instruments, substantially all of our investment portfolio and certain of our long-term incentive compensation awards;
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•
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our ability to realize some or all of 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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changes in accounting principles generally accepted in the United States of America or statutory accounting principles, rules and guidance, or their interpretation; 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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June 30,
2013 |
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December 31,
2012 |
||||
ASSETS
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Investments
|
|
|
|
||||
Fixed-maturities held to maturity—at amortized cost (fair value $420 and $676)
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$
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427
|
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$
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679
|
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Fixed-maturities available for sale—at fair value (amortized cost $22,112 and $39,481)
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21,880
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|
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40,696
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Equity securities available for sale—at fair value (cost $78,106 and $88,260)
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115,978
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|
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112,139
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Trading securities—at fair value
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3,722,975
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4,094,622
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Short-term investments—at fair value
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1,332,090
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777,532
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Other invested assets (including variable interest entity (“VIE”) assets of $76,959 and $78,006)
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117,961
|
|
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126,750
|
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Total investments
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5,311,311
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|
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5,152,418
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Cash
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31,831
|
|
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31,555
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Restricted cash
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23,491
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|
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24,226
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Deferred policy acquisition costs
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70,427
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|
|
88,202
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|
||
Accrued investment income
|
33,106
|
|
|
34,349
|
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Accounts and notes receivable
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85,703
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|
|
87,519
|
|
||
Property and equipment, at cost (less accumulated depreciation of $100,181 and $98,909)
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6,672
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|
|
7,456
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Derivative assets (including VIE derivative assets of $1,575 and $1,585)
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9,379
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13,609
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Deferred income taxes, net
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17,902
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—
|
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Reinsurance recoverables
|
65,750
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|
|
89,204
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Other assets (including VIE other assets of $96,125 and $99,337)
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398,428
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|
|
374,662
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|
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Total assets
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$
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6,054,000
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|
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$
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5,903,200
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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|
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|
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Unearned premiums
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$
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712,706
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$
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648,682
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Reserve for losses and loss adjustment expenses (“LAE”)
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2,716,490
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|
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3,149,936
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Reserve for premium deficiency (“PDR”)
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4,308
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|
3,685
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Long-term debt
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913,952
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663,571
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VIE debt—at fair value
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106,767
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108,858
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Derivative liabilities (including VIE derivative liabilities of $64,637 and $70,467)
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350,576
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266,873
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Accounts payable and accrued expenses (including VIE accounts payable of $338 and $366)
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346,335
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325,270
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|
||
Total liabilities
|
5,151,134
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|
5,166,875
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Commitments and Contingencies (Note 15)
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Stockholders’ equity
|
|
|
|
||||
Common stock: par value $.001 per share; 485,000,000 and 325,000,000 shares authorized at June 30, 2013 and December 31, 2012, respectively;190,565,887 and 151,131,173 shares issued at June 30, 2013 and December 31, 2012, respectively; 173,028,101 and 133,647,216 shares outstanding at June 30, 2013 and December 31, 2012, respectively
|
191
|
|
|
151
|
|
||
Treasury stock, at cost: 17,537,786 and 17,483,957 shares at June 30, 2013 and December 31, 2012, respectively
|
(892,810
|
)
|
|
(892,094
|
)
|
||
Additional paid-in capital
|
2,346,932
|
|
|
1,967,414
|
|
||
Retained deficit
|
(575,913
|
)
|
|
(355,241
|
)
|
||
Accumulated other comprehensive income
|
24,466
|
|
|
16,095
|
|
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Total stockholders’ equity
|
902,866
|
|
|
736,325
|
|
||
Total liabilities and stockholders’ equity
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$
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6,054,000
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$
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5,903,200
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|
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
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(In thousands, except per share amounts)
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2013
|
|
2012
|
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2013
|
|
2012
|
||||||||
Revenues:
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||||||||
Premiums written—insurance:
|
|
|
|
|
|
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||||||||
Direct
|
$
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269,827
|
|
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$
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214,349
|
|
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$
|
515,294
|
|
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$
|
418,102
|
|
Assumed
|
(206
|
)
|
|
(1,028
|
)
|
|
(10,603
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)
|
|
(88,516
|
)
|
||||
Ceded
|
(18,392
|
)
|
|
(31,389
|
)
|
|
(46,277
|
)
|
|
(69,976
|
)
|
||||
Net premiums written
|
251,229
|
|
|
181,932
|
|
|
458,414
|
|
|
259,610
|
|
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(Increase) decrease in unearned premiums
|
(38,105
|
)
|
|
4,847
|
|
|
(52,702
|
)
|
|
94,534
|
|
||||
Net premiums earned—insurance
|
213,124
|
|
|
186,779
|
|
|
405,712
|
|
|
354,144
|
|
||||
Net investment income
|
27,615
|
|
|
30,877
|
|
|
54,488
|
|
|
65,590
|
|
||||
Net (losses) gains on investments
|
(130,254
|
)
|
|
26,419
|
|
|
(135,759
|
)
|
|
93,878
|
|
||||
Change in fair value of derivative instruments
|
86,535
|
|
|
(33,124
|
)
|
|
(81,135
|
)
|
|
(105,881
|
)
|
||||
Net gains (losses) on other financial instruments
|
1,188
|
|
|
(61,862
|
)
|
|
(4,487
|
)
|
|
(79,714
|
)
|
||||
Gain on sale of affiliate
|
—
|
|
|
7,708
|
|
|
—
|
|
|
7,708
|
|
||||
Other income
|
2,234
|
|
|
1,395
|
|
|
4,005
|
|
|
2,835
|
|
||||
Total revenues
|
200,442
|
|
|
158,192
|
|
|
242,824
|
|
|
338,560
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
||||||||
Provision for losses
|
140,291
|
|
|
210,868
|
|
|
272,350
|
|
|
477,022
|
|
||||
Change in PDR
|
1,251
|
|
|
559
|
|
|
622
|
|
|
539
|
|
||||
Policy acquisition costs
|
10,006
|
|
|
10,805
|
|
|
27,201
|
|
|
38,851
|
|
||||
Other operating expenses
|
60,981
|
|
|
40,193
|
|
|
141,081
|
|
|
90,347
|
|
||||
Interest expense
|
19,420
|
|
|
12,581
|
|
|
35,301
|
|
|
26,729
|
|
||||
Total expenses
|
231,949
|
|
|
275,006
|
|
|
476,555
|
|
|
633,488
|
|
||||
Equity in net (loss) income of affiliates
|
—
|
|
|
(2
|
)
|
|
1
|
|
|
(13
|
)
|
||||
Pretax loss
|
(31,507
|
)
|
|
(116,816
|
)
|
|
(233,730
|
)
|
|
(294,941
|
)
|
||||
Income tax provision (benefit)
|
1,665
|
|
|
2,443
|
|
|
(13,058
|
)
|
|
(6,450
|
)
|
||||
Net loss
|
$
|
(33,172
|
)
|
|
$
|
(119,259
|
)
|
|
$
|
(220,672
|
)
|
|
$
|
(288,491
|
)
|
Basic net loss per share
|
$
|
(0.19
|
)
|
|
$
|
(0.90
|
)
|
|
$
|
(1.40
|
)
|
|
$
|
(2.18
|
)
|
Diluted net loss per share
|
$
|
(0.19
|
)
|
|
$
|
(0.90
|
)
|
|
$
|
(1.40
|
)
|
|
$
|
(2.18
|
)
|
Weighted-average number of common shares outstanding—basic
|
171,783
|
|
|
132,346
|
|
|
158,180
|
|
|
132,350
|
|
||||
Weighted-average number of common and common equivalent shares outstanding—diluted
|
171,783
|
|
|
132,346
|
|
|
158,180
|
|
|
132,350
|
|
||||
Dividends per share
|
$
|
0.0025
|
|
|
$
|
0.0025
|
|
|
$
|
0.0050
|
|
|
$
|
0.0050
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net loss
|
$
|
(33,172
|
)
|
|
$
|
(119,259
|
)
|
|
$
|
(220,672
|
)
|
|
$
|
(288,491
|
)
|
Other comprehensive income (loss), net of tax (see Note 11):
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments:
|
|
|
|
|
|
|
|
||||||||
Unrealized foreign currency translation adjustment, net of tax
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
||||
Less: Reclassification adjustment for net gains (losses) included in net income (loss), net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net foreign currency translation adjustment, net of tax
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
||||
Unrealized gains (losses) on investments:
|
|
|
|
|
|
|
|
||||||||
Unrealized holding gains (losses) arising during the period, net of tax
|
1,480
|
|
|
(1,419
|
)
|
|
8,946
|
|
|
15,795
|
|
||||
Less: Reclassification adjustment for net gains (losses) included in net loss, net of tax
|
554
|
|
|
(741
|
)
|
|
575
|
|
|
8,869
|
|
||||
Net unrealized gains (losses) on investments, net of tax
|
926
|
|
|
(678
|
)
|
|
8,371
|
|
|
6,926
|
|
||||
Other comprehensive income (loss)
|
926
|
|
|
(686
|
)
|
|
8,371
|
|
|
6,918
|
|
||||
Comprehensive loss
|
$
|
(32,246
|
)
|
|
$
|
(119,945
|
)
|
|
$
|
(212,301
|
)
|
|
$
|
(281,573
|
)
|
(In thousands)
|
Common
Stock
|
Treasury
Stock
|
Additional Paid-in Capital
|
Retained
Earnings/(Deficit)
|
Accumulated Other Comprehensive Income
|
Total
|
||||||||||||
BALANCE, JANUARY 1, 2012
|
$
|
151
|
|
$
|
(892,052
|
)
|
$
|
1,966,565
|
|
$
|
96,227
|
|
$
|
11,400
|
|
$
|
1,182,291
|
|
Net loss
|
—
|
|
—
|
|
—
|
|
(288,491
|
)
|
—
|
|
(288,491
|
)
|
||||||
Net foreign currency translation adjustment, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
(8
|
)
|
(8
|
)
|
||||||
Net unrealized gain on investments, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
6,926
|
|
6,926
|
|
||||||
Repurchases of common stock under incentive plans
|
—
|
|
(32
|
)
|
—
|
|
—
|
|
—
|
|
(32
|
)
|
||||||
Issuance of common stock under benefit plans
|
—
|
|
—
|
|
213
|
|
—
|
|
—
|
|
213
|
|
||||||
Amortization of restricted stock
|
—
|
|
—
|
|
1,101
|
|
—
|
|
—
|
|
1,101
|
|
||||||
Stock-based compensation expense
|
—
|
|
—
|
|
(446
|
)
|
—
|
|
—
|
|
(446
|
)
|
||||||
Dividends declared
|
—
|
|
—
|
|
(666
|
)
|
—
|
|
—
|
|
(666
|
)
|
||||||
BALANCE, JUNE 30, 2012
|
$
|
151
|
|
$
|
(892,084
|
)
|
$
|
1,966,767
|
|
$
|
(192,264
|
)
|
$
|
18,318
|
|
$
|
900,888
|
|
|
|
|
|
|
|
|
||||||||||||
BALANCE, JANUARY 1, 2013
|
$
|
151
|
|
$
|
(892,094
|
)
|
$
|
1,967,414
|
|
$
|
(355,241
|
)
|
$
|
16,095
|
|
$
|
736,325
|
|
Net loss
|
—
|
|
—
|
|
—
|
|
(220,672
|
)
|
—
|
|
(220,672
|
)
|
||||||
Net unrealized gain on investments, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
8,371
|
|
8,371
|
|
||||||
Repurchases of common stock under incentive plans
|
—
|
|
(716
|
)
|
—
|
|
—
|
|
—
|
|
(716
|
)
|
||||||
Issuance of common stock - stock offering
|
39
|
|
—
|
|
299,503
|
|
—
|
|
—
|
|
299,542
|
|
||||||
Issuance of common stock under benefit plans
|
—
|
|
—
|
|
298
|
|
—
|
|
—
|
|
298
|
|
||||||
Issuance of common stock under incentive plans
|
1
|
|
—
|
|
62
|
|
—
|
|
—
|
|
63
|
|
||||||
Amortization of restricted stock
|
—
|
|
—
|
|
3,375
|
|
—
|
|
—
|
|
3,375
|
|
||||||
Issuance of convertible debt (See Note 10)
|
—
|
|
—
|
|
77,026
|
|
—
|
|
—
|
|
77,026
|
|
||||||
Stock-based compensation expense
|
—
|
|
—
|
|
21
|
|
—
|
|
—
|
|
21
|
|
||||||
Dividends declared
|
—
|
|
—
|
|
(767
|
)
|
—
|
|
—
|
|
(767
|
)
|
||||||
BALANCE, JUNE 30, 2013
|
$
|
191
|
|
$
|
(892,810
|
)
|
$
|
2,346,932
|
|
$
|
(575,913
|
)
|
$
|
24,466
|
|
$
|
902,866
|
|
(In thousands)
|
Six Months Ended
June 30, |
||||||
2013
|
|
2012
|
|||||
Cash flows used in operating activities
|
$
|
(291,570
|
)
|
|
$
|
(361,899
|
)
|
Cash flows from investing activities:
|
|
|
|
||||
Proceeds from sales of fixed-maturity investments available for sale
|
16,049
|
|
|
44,935
|
|
||
Proceeds from sales of equity securities available for sale
|
—
|
|
|
30,727
|
|
||
Proceeds from sales of trading securities
|
630,435
|
|
|
2,066,088
|
|
||
Proceeds from redemptions of fixed-maturity investments available for sale
|
2,415
|
|
|
3,738
|
|
||
Proceeds from redemptions of fixed-maturity investments held to maturity
|
255
|
|
|
250
|
|
||
Proceeds from redemptions of equity securities available for sale
|
10,503
|
|
|
—
|
|
||
Purchases of trading securities
|
(429,001
|
)
|
|
(2,137,677
|
)
|
||
(Purchases)/sales and redemptions of short-term investments, net
|
(554,429
|
)
|
|
556,048
|
|
||
Sales (purchases) of other invested assets, net
|
15,210
|
|
|
(74,999
|
)
|
||
Proceeds from sale of investment in affiliate
|
—
|
|
|
14,700
|
|
||
Purchases of property and equipment, net
|
(712
|
)
|
|
(452
|
)
|
||
Net cash (used in) provided by investing activities
|
(309,275
|
)
|
|
503,358
|
|
||
Cash flows from financing activities:
|
|
|
|
||||
Dividends paid
|
(767
|
)
|
|
(666
|
)
|
||
Proceeds/payments related to issuance or exchange of debt, net
|
381,165
|
|
|
—
|
|
||
Redemption of long-term debt
|
(79,372
|
)
|
|
(143,770
|
)
|
||
Issuance of common stock
|
299,542
|
|
|
—
|
|
||
Excess tax benefits from stock-based awards
|
553
|
|
|
—
|
|
||
Net cash provided by (used in) financing activities
|
601,121
|
|
|
(144,436
|
)
|
||
Effect of exchange rate changes on cash
|
—
|
|
|
5
|
|
||
Increase (decrease) in cash
|
276
|
|
|
(2,972
|
)
|
||
Cash, beginning of period
|
31,555
|
|
|
35,589
|
|
||
Cash, end of period
|
$
|
31,831
|
|
|
$
|
32,617
|
|
|
|
|
|
||||
Supplemental disclosures of cash flow information:
|
|
|
|
||||
Income taxes paid
|
$
|
1,785
|
|
|
$
|
1,498
|
|
Interest paid
|
$
|
15,970
|
|
|
$
|
21,820
|
|
•
|
Radian Asset Assurance continued to proactively reduce its financial guaranty portfolio through a series of risk commutations, transaction settlements and terminations.
|
-
|
In January 2013,
$6.7 million
of contingency reserves were released due to the commutation of the remaining
$822.2 million
net par reinsured by Radian Asset Assurance from Financial Guaranty Insurance Company (the “FGIC Commutation”), including substantially all of our exposure to general obligation bonds issued by the City of Detroit;
|
-
|
In February 2013, the New York State Department of Financial Services approved the release of an additional
$61.1 million
of contingency reserves resulting from the reduction in Radian Asset Assurance’s net par outstanding;
|
-
|
During the first half of 2013, in our financial guaranty business,
four
of our CDS counterparties exercised their termination rights with respect to
nine
collateralized debt obligations (“CDOs”) that we insured, and we agreed to the commutation of an additional CDO with another CDS counterparty (collectively, the “2013 CDO Terminations”), which reduced our net par outstanding by
$3.4 billion
in the aggregate; and
|
-
|
In July 2013, Radian Asset Assurance paid an ordinary dividend of
$36 million
to Radian Guaranty.
|
•
|
During the first
six
months of
2013
, Radian Group exchanged
$195.5 million
of its outstanding
5.375%
Senior Notes due June 2015 for a new series of
9.000%
Senior Notes due June 2017 in order to improve its debt maturity profile. See Note 10 for further information.
|
•
|
In March 2013, Radian Group issued
$400 million
principal amount of
2.250%
convertible unsecured senior notes due March 2019 (the “2019 Convertible Senior Notes”) and received net proceeds of approximately $389.8 million. See Note 10 for further information.
|
•
|
In March 2013, Radian Group sold
39.1 million
shares of common stock at a public offering price of
$8.00
per share and received net proceeds of approximately
$299.5 million
.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Mortgage Insurance
|
|
|
|
|
|
|
|
||||||||
Net premiums written—insurance
|
$
|
251,159
|
|
|
$
|
182,518
|
|
|
$
|
468,445
|
|
|
$
|
379,371
|
|
Net premiums earned—insurance
|
$
|
197,952
|
|
|
$
|
170,763
|
|
|
$
|
380,944
|
|
|
$
|
344,214
|
|
Net investment income
|
15,266
|
|
|
17,608
|
|
|
30,368
|
|
|
35,619
|
|
||||
Net (losses) gains on investments
|
(83,386
|
)
|
|
26,662
|
|
|
(86,623
|
)
|
|
58,840
|
|
||||
Change in fair value of derivative instruments
|
—
|
|
|
(52
|
)
|
|
—
|
|
|
(31
|
)
|
||||
Net gains (losses) on other financial instruments
|
74
|
|
|
42
|
|
|
(1,803
|
)
|
|
(667
|
)
|
||||
Other income
|
2,159
|
|
|
1,304
|
|
|
3,871
|
|
|
2,648
|
|
||||
Total revenues
|
132,065
|
|
|
216,327
|
|
|
326,757
|
|
|
440,623
|
|
||||
Provision for losses
|
136,410
|
|
|
208,078
|
|
|
268,366
|
|
|
442,807
|
|
||||
Change in PDR
|
1,251
|
|
|
559
|
|
|
622
|
|
|
539
|
|
||||
Policy acquisition costs
|
6,501
|
|
|
7,890
|
|
|
18,233
|
|
|
16,536
|
|
||||
Other operating expenses
|
51,295
|
|
|
31,272
|
|
|
117,075
|
|
|
67,537
|
|
||||
Interest expense
|
3,704
|
|
|
1,723
|
|
|
6,373
|
|
|
3,445
|
|
||||
Total expenses
|
199,161
|
|
|
249,522
|
|
|
410,669
|
|
|
530,864
|
|
||||
Pretax loss
|
$
|
(67,096
|
)
|
|
$
|
(33,195
|
)
|
|
$
|
(83,912
|
)
|
|
$
|
(90,241
|
)
|
|
|
|
|
|
|
|
|
||||||||
Cash and investments
|
$
|
2,962,997
|
|
|
$
|
3,176,027
|
|
|
|
|
|
||||
Deferred policy acquisition costs
|
29,138
|
|
|
44,240
|
|
|
|
|
|
||||||
Total assets
|
3,431,444
|
|
|
3,388,524
|
|
|
|
|
|
||||||
Unearned premiums
|
483,303
|
|
|
290,880
|
|
|
|
|
|
||||||
Reserve for losses and LAE
|
2,690,861
|
|
|
3,155,343
|
|
|
|
|
|
||||||
VIE debt
|
10,963
|
|
|
7,500
|
|
|
|
|
|
||||||
Derivative liabilities
|
—
|
|
|
—
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
||||||||
New Insurance Written (“NIW”) (in millions)
|
$
|
13,377
|
|
|
$
|
8,335
|
|
|
$
|
24,283
|
|
|
$
|
14,800
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Financial Guaranty
|
|
|
|
|
|
|
|
||||||||
Net premiums written—insurance
|
$
|
70
|
|
|
$
|
(586
|
)
|
|
$
|
(10,031
|
)
|
|
$
|
(119,761
|
)
|
Net premiums earned—insurance
|
$
|
15,172
|
|
|
$
|
16,016
|
|
|
$
|
24,768
|
|
|
$
|
9,930
|
|
Net investment income
|
12,349
|
|
|
13,269
|
|
|
24,120
|
|
|
29,971
|
|
||||
Net (losses) gains on investments
|
(46,868
|
)
|
|
(243
|
)
|
|
(49,136
|
)
|
|
35,038
|
|
||||
Change in fair value of derivative instruments
|
86,535
|
|
|
(33,072
|
)
|
|
(81,135
|
)
|
|
(105,850
|
)
|
||||
Net gains (losses) on other financial instruments
|
1,114
|
|
|
(61,904
|
)
|
|
(2,684
|
)
|
|
(79,047
|
)
|
||||
Gain on sale of affiliate
|
—
|
|
|
7,708
|
|
|
—
|
|
|
7,708
|
|
||||
Other income
|
75
|
|
|
91
|
|
|
134
|
|
|
187
|
|
||||
Total revenues
|
68,377
|
|
|
(58,135
|
)
|
|
(83,933
|
)
|
|
(102,063
|
)
|
||||
Provision for losses
|
3,881
|
|
|
2,790
|
|
|
3,984
|
|
|
34,215
|
|
||||
Change in PDR
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Policy acquisition costs
|
3,505
|
|
|
2,915
|
|
|
8,968
|
|
|
22,315
|
|
||||
Other operating expenses
|
9,686
|
|
|
8,921
|
|
|
24,006
|
|
|
22,810
|
|
||||
Interest expense
|
15,716
|
|
|
10,858
|
|
|
28,928
|
|
|
23,284
|
|
||||
Total expenses
|
32,788
|
|
|
25,484
|
|
|
65,886
|
|
|
102,624
|
|
||||
Equity in net (loss) income of affiliates
|
—
|
|
|
(2
|
)
|
|
1
|
|
|
(13
|
)
|
||||
Pretax income (loss)
|
$
|
35,589
|
|
|
$
|
(83,621
|
)
|
|
$
|
(149,818
|
)
|
|
$
|
(204,700
|
)
|
|
|
|
|
|
|
|
|
||||||||
Cash and investments
|
$
|
2,403,636
|
|
|
$
|
2,137,956
|
|
|
|
|
|
||||
Deferred policy acquisition costs
|
41,289
|
|
|
55,146
|
|
|
|
|
|
||||||
Total assets
|
2,622,556
|
|
|
2,643,006
|
|
|
|
|
|
||||||
Unearned premiums
|
229,403
|
|
|
297,551
|
|
|
|
|
|
||||||
Reserve for losses and LAE
|
25,629
|
|
|
94,937
|
|
|
|
|
|
||||||
VIE debt
|
95,804
|
|
|
100,333
|
|
|
|
|
|
||||||
Derivative liabilities
|
350,576
|
|
|
219,960
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Mortgage Insurance pretax loss
|
$
|
(67,096
|
)
|
|
$
|
(33,195
|
)
|
|
$
|
(83,912
|
)
|
|
$
|
(90,241
|
)
|
Financial Guaranty pretax income (loss)
|
35,589
|
|
|
(83,621
|
)
|
|
(149,818
|
)
|
|
(204,700
|
)
|
||||
Income tax provision (benefit)
|
1,665
|
|
|
2,443
|
|
|
(13,058
|
)
|
|
(6,450
|
)
|
||||
Consolidated net loss
|
$
|
(33,172
|
)
|
|
$
|
(119,259
|
)
|
|
$
|
(220,672
|
)
|
|
$
|
(288,491
|
)
|
(In thousands)
|
June 30,
2013 |
|
December 31,
2012 |
||||
Balance Sheets
|
|
|
|
||||
Derivative assets:
|
|
|
|
||||
Financial Guaranty credit derivative assets
|
$
|
7,036
|
|
|
$
|
12,024
|
|
NIMS related and other
|
2,343
|
|
|
1,585
|
|
||
Total derivative assets
|
9,379
|
|
|
13,609
|
|
||
Derivative liabilities:
|
|
|
|
||||
Financial Guaranty credit derivative liabilities
|
285,939
|
|
|
196,406
|
|
||
Financial Guaranty VIE derivative liabilities
|
64,637
|
|
|
70,467
|
|
||
Total derivative liabilities
|
350,576
|
|
|
266,873
|
|
||
Total derivative liabilities, net
|
$
|
341,197
|
|
|
$
|
253,264
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Statements of Operations
|
|
|
|
|
|
|
|
||||||||
Net premiums earned—derivatives
|
$
|
4,857
|
|
|
$
|
7,224
|
|
|
$
|
9,849
|
|
|
$
|
15,872
|
|
Financial Guaranty credit derivatives
|
80,293
|
|
|
(39,161
|
)
|
|
(95,431
|
)
|
|
(119,380
|
)
|
||||
Financial Guaranty VIE derivatives
|
1,477
|
|
|
(1,136
|
)
|
|
4,539
|
|
|
(2,363
|
)
|
||||
NIMS related and other
|
(92
|
)
|
|
(51
|
)
|
|
(92
|
)
|
|
(10
|
)
|
||||
Change in fair value of derivative instruments
|
$
|
86,535
|
|
|
$
|
(33,124
|
)
|
|
$
|
(81,135
|
)
|
|
$
|
(105,881
|
)
|
($ in thousands)
|
June 30, 2013
|
|||||||||
Number of
Contracts
|
|
Par/
Notional
Exposure
|
|
Total Net Asset/
(Liability)
|
||||||
Product
|
|
|
|
|
|
|||||
NIMS related and other (1)
|
—
|
|
|
$
|
—
|
|
|
$
|
2,343
|
|
Corporate CDOs
|
24
|
|
|
9,553,298
|
|
|
1,584
|
|
||
Non-Corporate CDOs and other derivative transactions:
|
|
|
|
|
|
|||||
Trust Preferred Securities (“TruPs”)
|
13
|
|
|
1,053,987
|
|
|
(21,792
|
)
|
||
CDOs of commercial mortgage-backed securities (“CMBS”)
|
4
|
|
|
1,831,000
|
|
|
(102,330
|
)
|
||
Other:
|
|
|
|
|
|
|||||
Structured finance
|
5
|
|
|
559,955
|
|
|
(84,002
|
)
|
||
Public finance
|
22
|
|
|
1,297,729
|
|
|
(55,881
|
)
|
||
Total Non-Corporate CDOs and other derivative transactions
|
44
|
|
|
4,742,671
|
|
|
(264,005
|
)
|
||
Assumed financial guaranty credit derivatives:
|
|
|
|
|
|
|||||
Structured finance
|
32
|
|
|
187,015
|
|
|
(15,883
|
)
|
||
Public finance
|
5
|
|
|
104,800
|
|
|
(599
|
)
|
||
Total Assumed
|
37
|
|
|
291,815
|
|
|
(16,482
|
)
|
||
Financial Guaranty VIE derivative liabilities (2)
|
1
|
|
|
77,236
|
|
|
(64,637
|
)
|
||
Grand Total
|
106
|
|
|
$
|
14,665,020
|
|
|
$
|
(341,197
|
)
|
(1)
|
Represents NIMS derivative assets related to consolidated NIMS VIEs and common stock warrants. Because 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 a CDS included in a VIE that we have consolidated. See Note 5 for more information on this transaction, the underlying reference securities and our maximum exposure to loss from this consolidated financial guaranty transaction. The assets in the VIE represent the only funds available to pay the CDS counterparty for amounts due under the contract; therefore, the notional exposure presented for the CDS is limited to the current trust assets.
|
Level I
|
— Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
|
Level II
|
— Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities; and
|
Level III
|
— Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
|
(In millions)
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
Assets and Liabilities at Fair Value
|
|
|
|
|
|
|
|
|
||||||||
Investment Portfolio:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
|
$
|
625.5
|
|
|
$
|
420.8
|
|
|
$
|
—
|
|
|
$
|
1,046.3
|
|
State and municipal obligations
|
|
—
|
|
|
633.2
|
|
|
19.4
|
|
|
652.6
|
|
||||
Money market instruments
|
|
704.9
|
|
|
—
|
|
|
—
|
|
|
704.9
|
|
||||
Corporate bonds and notes
|
|
—
|
|
|
1,315.0
|
|
|
—
|
|
|
1,315.0
|
|
||||
Residential mortgage-backed securities (“RMBS”)
|
|
—
|
|
|
533.3
|
|
|
—
|
|
|
533.3
|
|
||||
CMBS
|
|
—
|
|
|
300.0
|
|
|
—
|
|
|
300.0
|
|
||||
Other ABS
|
|
—
|
|
|
204.4
|
|
|
1.2
|
|
|
205.6
|
|
||||
Hybrid securities
|
|
—
|
|
|
152.8
|
|
|
—
|
|
|
152.8
|
|
||||
Equity securities (1)
|
|
131.6
|
|
|
147.4
|
|
|
0.4
|
|
|
279.4
|
|
||||
Other investments (2)
|
|
—
|
|
|
2.6
|
|
|
77.4
|
|
|
80.0
|
|
||||
Total Investments at Fair Value (3)
|
|
1,462.0
|
|
|
3,709.5
|
|
|
98.4
|
|
|
5,269.9
|
|
||||
Derivative Assets
|
|
—
|
|
|
0.8
|
|
|
8.6
|
|
|
9.4
|
|
||||
Other Assets (4)
|
|
—
|
|
|
—
|
|
|
96.0
|
|
|
96.0
|
|
||||
Total Assets at Fair Value
|
|
$
|
1,462.0
|
|
|
$
|
3,710.3
|
|
|
$
|
203.0
|
|
|
$
|
5,375.3
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivative Liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
350.6
|
|
|
$
|
350.6
|
|
VIE debt (5)
|
|
—
|
|
|
—
|
|
|
106.8
|
|
|
106.8
|
|
||||
Total Liabilities at Fair Value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
457.4
|
|
|
$
|
457.4
|
|
(1)
|
Comprising broadly diversified domestic equity mutual funds included within Level I and various preferred and common stocks invested across numerous companies and industries included within Levels II and III.
|
(2)
|
Comprising TruPs (
$0.9 million
) and short-term certificates of deposit (“CDs”) (
$1.7 million
) included within Level II, and lottery annuities (
$0.4 million
) and a guaranteed investment contract held by a consolidated VIE (
$77.0 million
) within Level III.
|
(3)
|
Does not include fixed-maturities held to maturity (
$0.4 million
) and certain other invested assets (
$41.0 million
), primarily invested in limited partnerships, accounted for as cost-method investments and not measured at fair value.
|
(4)
|
Primarily comprising manufactured housing loan collateral related to
two
consolidated financial guaranty VIEs.
|
(5)
|
Comprising consolidated debt related to NIMS VIEs (
$11.0 million
) and amounts related to financial guaranty VIEs (
$95.8 million
).
|
(In millions)
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
Assets and Liabilities at Fair Value
|
|
|
|
|
|
|
|
|
||||||||
Investment Portfolio:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
|
$
|
137.8
|
|
|
$
|
433.8
|
|
|
$
|
—
|
|
|
$
|
571.6
|
|
State and municipal obligations
|
|
—
|
|
|
669.0
|
|
|
19.0
|
|
|
688.0
|
|
||||
Money market instruments
|
|
638.0
|
|
|
—
|
|
|
—
|
|
|
638.0
|
|
||||
Corporate bonds and notes
|
|
—
|
|
|
1,373.6
|
|
|
—
|
|
|
1,373.6
|
|
||||
RMBS
|
|
—
|
|
|
663.4
|
|
|
—
|
|
|
663.4
|
|
||||
CMBS
|
|
—
|
|
|
237.3
|
|
|
—
|
|
|
237.3
|
|
||||
Other ABS
|
|
—
|
|
|
252.4
|
|
|
1.7
|
|
|
254.1
|
|
||||
Foreign government securities
|
|
—
|
|
|
117.7
|
|
|
—
|
|
|
117.7
|
|
||||
Hybrid securities
|
|
—
|
|
|
211.9
|
|
|
—
|
|
|
211.9
|
|
||||
Equity securities (1)
|
|
98.9
|
|
|
166.0
|
|
|
1.0
|
|
|
265.9
|
|
||||
Other investments (2)
|
|
—
|
|
|
2.5
|
|
|
79.0
|
|
|
81.5
|
|
||||
Total Investments at Fair Value (3)
|
|
874.7
|
|
|
4,127.6
|
|
|
100.7
|
|
|
5,103.0
|
|
||||
Derivative Assets
|
|
—
|
|
|
—
|
|
|
13.6
|
|
|
13.6
|
|
||||
Other Assets (4)
|
|
—
|
|
|
—
|
|
|
99.2
|
|
|
99.2
|
|
||||
Total Assets at Fair Value
|
|
$
|
874.7
|
|
|
$
|
4,127.6
|
|
|
$
|
213.5
|
|
|
$
|
5,215.8
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivative Liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
266.9
|
|
|
$
|
266.9
|
|
VIE debt (5)
|
|
—
|
|
|
—
|
|
|
108.9
|
|
|
108.9
|
|
||||
Total Liabilities at Fair Value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
375.8
|
|
|
$
|
375.8
|
|
(1)
|
Comprising broadly diversified domestic equity mutual funds included within Level I and various preferred and common stocks invested across numerous companies and industries included within Levels II and III.
|
(2)
|
Comprising TruPs (
$0.9 million
) and short-term CDs (
$1.6 million
) included within Level II, and lottery annuities (
$1.0 million
) and a guaranteed investment contract held by a consolidated VIE (
$78.0 million
) within Level III.
|
(3)
|
Does not include fixed-maturities held to maturity (
$0.7 million
) and certain other invested assets (
$48.7 million
), primarily invested in limited partnerships, accounted for as cost-method investments and not measured at fair value.
|
(4)
|
Primarily comprising manufactured housing loan collateral related to
two
consolidated financial guaranty VIEs.
|
(5)
|
Comprising consolidated debt related to NIMS VIEs (
$9.9 million
) and amounts related to financial guaranty VIEs (
$99.0 million
).
|
(In basis points)
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2012 |
|
December 31,
2011 |
||||
Radian Group’s five-year CDS spread
|
504
|
|
|
913
|
|
|
1,780
|
|
|
2,732
|
|
(In millions)
|
Fair Value Liability
before Consideration
of Radian Non-Performance Risk June 30, 2013
|
|
|
Impact of Radian
Non-Performance Risk June 30, 2013
|
|
|
Fair Value (Asset) Liability
Recorded
June 30, 2013
|
|
|||
Product
|
|
|
|
|
|
||||||
Corporate CDOs
|
$
|
34.9
|
|
|
$
|
36.5
|
|
|
$
|
(1.6
|
)
|
Non-Corporate CDO-related (1)
|
495.6
|
|
|
215.1
|
|
|
280.5
|
|
|||
NIMS-related and other (2)
|
11.6
|
|
|
3.0
|
|
|
8.6
|
|
|||
Total
|
$
|
542.1
|
|
|
$
|
254.6
|
|
|
$
|
287.5
|
|
(In millions)
|
Fair Value Liability
before Consideration
of Radian Non-Performance Risk
December 31, 2012
|
|
|
Impact of Radian
Non-Performance Risk
December 31, 2012
|
|
|
Fair Value (Asset) Liability
Recorded
December 31, 2012
|
|
|||
Product
|
|
|
|
|
|
||||||
Corporate CDOs
|
$
|
98.8
|
|
|
$
|
101.6
|
|
|
$
|
(2.8
|
)
|
Non-Corporate CDO-related (1)
|
696.6
|
|
|
509.3
|
|
|
187.3
|
|
|||
NIMS-related (2)
|
13.0
|
|
|
4.7
|
|
|
8.3
|
|
|||
Total
|
$
|
808.4
|
|
|
$
|
615.6
|
|
|
$
|
192.8
|
|
(1)
|
Includes the net fair value liability recorded within derivative assets and derivative liabilities, but does not include the net fair value liability of derivative assets or derivative liabilities within our consolidated VIEs, as Radian Group’s credit spread has no impact on the financial instruments in these VIEs.
|
(2)
|
Includes NIMS VIE debt and NIMS derivative assets in 2013 and 2012, and fixed maturity derivatives in 2013.
|
(In millions)
|
Beginning
Balance at
April 1, 2013
|
|
|
Realized and
Unrealized
Gains (Losses)
Recorded
in Earnings (1)
|
|
Purchases
|
|
Sales
|
|
Issuances
|
|
Settlements
|
|
Transfers Into
(Out of)
Level III (2)
|
|
Ending Balance at June 30, 2013
|
|||||||||||||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
State and municipal obligations
|
$
|
19.2
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19.4
|
|
Corporate bonds and notes
|
2.7
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.6
|
)
|
(3)
|
—
|
|
||||||||
CMBS
|
3.1
|
|
|
—
|
|
|
—
|
|
|
3.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Other ABS
|
1.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
1.2
|
|
||||||||
Equity securities
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
||||||||
Other investments
|
77.3
|
|
|
(0.3
|
)
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
77.4
|
|
||||||||
Total Level III Investments
|
104.2
|
|
|
(0.2
|
)
|
|
0.4
|
|
|
3.1
|
|
|
—
|
|
|
0.3
|
|
|
(2.6
|
)
|
|
98.4
|
|
||||||||
NIMS derivative assets
|
1.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.6
|
|
||||||||
Other assets
|
96.5
|
|
|
5.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5.6
|
|
|
—
|
|
|
96.0
|
|
||||||||
Total Level III Assets
|
$
|
202.3
|
|
|
$
|
4.9
|
|
|
$
|
0.4
|
|
|
$
|
3.1
|
|
|
$
|
—
|
|
|
$
|
5.9
|
|
|
$
|
(2.6
|
)
|
|
$
|
196.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Derivative liabilities, net
|
$
|
426.1
|
|
|
$
|
86.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(4.1
|
)
|
|
$
|
—
|
|
|
$
|
343.6
|
|
VIE debt
|
107.4
|
|
|
(3.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.5
|
|
|
—
|
|
|
106.8
|
|
||||||||
Total Level III Liabilities, net
|
$
|
533.5
|
|
|
$
|
82.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.4
|
|
|
$
|
—
|
|
|
$
|
450.4
|
|
(1)
|
Includes unrealized gains (losses) for the quarter ended
June 30, 2013
, relating to assets and liabilities still held at
June 30, 2013
as follows:
$(0.4) million
for investments,
$2.6 million
for other assets,
$82.3 million
for derivative liabilities and
$(2.9) 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.
|
(3)
|
During the period, pricing from a third-party pricing source became available that utilized observable inputs for individual instruments. As a result, these instruments were transferred out of Level III and into Level II.
|
(In millions)
|
Beginning
Balance at
January 1, 2013
|
|
|
Realized and
Unrealized
Gains (Losses)
Recorded
in Earnings (1)
|
|
Purchases
|
|
Sales
|
|
Issuances
|
|
Settlements
|
|
Transfers Into
(Out of)
Level III (2)
|
|
Ending Balance at June 30, 2013
|
|||||||||||||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
State and municipal obligations
|
$
|
19.0
|
|
|
$
|
0.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19.4
|
|
Corporate bonds and notes
|
—
|
|
|
(0.1
|
)
|
|
2.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.6
|
)
|
(3)
|
—
|
|
||||||||
CMBS
|
—
|
|
|
—
|
|
|
3.1
|
|
|
3.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Other ABS
|
1.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
1.2
|
|
||||||||
Equity securities
|
1.0
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
||||||||
Other investments
|
79.0
|
|
|
(1.9
|
)
|
|
0.8
|
|
|
0.1
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
77.4
|
|
||||||||
Total Level III Investments
|
100.7
|
|
|
(1.6
|
)
|
|
6.6
|
|
|
3.8
|
|
|
—
|
|
|
0.9
|
|
|
(2.6
|
)
|
|
98.4
|
|
||||||||
NIMS derivative assets
|
1.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.6
|
|
||||||||
Other assets
|
99.2
|
|
|
8.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11.6
|
|
|
—
|
|
|
96.0
|
|
||||||||
Total Level III Assets
|
$
|
201.5
|
|
|
$
|
6.8
|
|
|
$
|
6.6
|
|
|
$
|
3.8
|
|
|
$
|
—
|
|
|
$
|
12.5
|
|
|
$
|
(2.6
|
)
|
|
$
|
196.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Derivative liabilities, net
|
$
|
254.9
|
|
|
$
|
(81.1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(7.6
|
)
|
|
$
|
—
|
|
|
$
|
343.6
|
|
VIE debt
|
108.9
|
|
|
(7.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.3
|
|
|
—
|
|
|
106.8
|
|
||||||||
Total Level III Liabilities, net
|
$
|
363.8
|
|
|
$
|
(88.3
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1.7
|
|
|
$
|
—
|
|
|
$
|
450.4
|
|
(1)
|
Includes unrealized gains (losses) for the
six
months ended
June 30, 2013
, relating to assets and liabilities still held at
June 30, 2013
as follows:
$(1.9) million
for investments,
$3.4 million
for other assets,
$(89.7) million
for derivative liabilities and
$(5.4) 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.
|
(3)
|
During the period, pricing from a third-party pricing source became available that utilized observable inputs for individual instruments. As a result, these instruments were transferred out of Level III and into Level II.
|
(In millions)
|
Balance at
April 1, 2012
|
|
|
Realized and
Unrealized
Gains (Losses)
Recorded
in Earnings (1)
|
|
Purchases
|
|
Sales
|
|
Issuances
|
|
Settlements
|
|
Transfers Into
(Out of)
Level III (2)
|
|
Ending
Balance at
June 30, 2012
|
|
||||||||||||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
State and municipal obligations
|
$
|
58.1
|
|
|
$
|
(10.7
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(27.8
|
)
|
(3)
|
$
|
19.6
|
|
RMBS
|
51.2
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
51.1
|
|
|
—
|
|
|
—
|
|
||||||||
CMBS
|
24.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24.0
|
|
|
—
|
|
|
—
|
|
||||||||
CDOs
|
6.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.4
|
|
|
—
|
|
|
—
|
|
||||||||
Other ABS
|
3.7
|
|
|
—
|
|
|
5.2
|
|
|
—
|
|
|
—
|
|
|
4.1
|
|
|
—
|
|
|
4.8
|
|
||||||||
Hybrid securities
|
0.2
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
(3)
|
—
|
|
||||||||
Equity securities
|
2.1
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.0
|
|
||||||||
Other investments
|
7.1
|
|
|
0.4
|
|
|
75.0
|
|
|
—
|
|
|
—
|
|
|
6.0
|
|
|
—
|
|
|
76.5
|
|
||||||||
Total Level III Investments
|
152.8
|
|
|
(10.5
|
)
|
|
80.3
|
|
|
—
|
|
|
—
|
|
|
91.6
|
|
|
(28.1
|
)
|
|
102.9
|
|
||||||||
NIMS derivative assets
|
1.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.7
|
|
||||||||
Other assets
|
101.3
|
|
|
5.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.5
|
|
|
—
|
|
|
100.7
|
|
||||||||
Total Level III Assets
|
$
|
255.8
|
|
|
$
|
(4.6
|
)
|
|
$
|
80.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
98.1
|
|
|
$
|
(28.1
|
)
|
|
$
|
205.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Derivative liabilities, net
|
$
|
187.7
|
|
|
$
|
(33.1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13.3
|
|
|
$
|
—
|
|
|
$
|
207.5
|
|
VIE debt
|
255.2
|
|
|
(68.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
215.8
|
|
(4)
|
—
|
|
|
107.8
|
|
||||||||
Total Level III Liabilities, net
|
$
|
442.9
|
|
|
$
|
(101.5
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
229.1
|
|
|
$
|
—
|
|
|
$
|
315.3
|
|
(1)
|
Includes unrealized gains (losses) for the quarter ended
June 30, 2012
, relating to assets and liabilities still held at
June 30, 2012
, as follows:
$0.4 million
for investments,
$3.2 million
for other assets,
$(56.8) million
for derivative liabilities, and
$(3.8) 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.
|
(3)
|
During the period, pricing from a third-party pricing source became available that utilized observable inputs for individual instruments. As a result, these instruments were transferred out of Level III and into Level II.
|
(4)
|
Primarily represents the settlement of our CDO of ABS.
|
(In millions)
|
Balance at
January 1, 2012
|
|
|
Realized and
Unrealized
Gains (Losses)
Recorded
in Earnings (1)
|
|
Purchases
|
|
Sales
|
|
Issuances
|
|
Settlements
|
|
Transfers Into
(Out of)
Level III (2)
|
|
Ending
Balance at
June 30, 2012
|
|
||||||||||||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
State and municipal obligations
|
$
|
62.5
|
|
|
$
|
(4.0
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11.1
|
|
|
$
|
(27.8
|
)
|
(3)
|
$
|
19.6
|
|
RMBS
|
45.5
|
|
|
6.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
51.6
|
|
|
—
|
|
|
—
|
|
||||||||
CMBS
|
35.4
|
|
|
(11.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24.0
|
|
|
—
|
|
|
—
|
|
||||||||
CDOs
|
5.5
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.3
|
|
|
—
|
|
|
—
|
|
||||||||
Other ABS
|
2.9
|
|
|
0.8
|
|
|
5.2
|
|
|
—
|
|
|
—
|
|
|
4.1
|
|
|
—
|
|
|
4.8
|
|
||||||||
Hybrid securities
|
4.8
|
|
|
0.1
|
|
|
0.1
|
|
|
4.9
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
(3)
|
—
|
|
||||||||
Equity securities
|
0.8
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
|
2.0
|
|
||||||||
Other investments
|
6.8
|
|
|
1.2
|
|
|
75.0
|
|
|
0.5
|
|
|
—
|
|
|
6.0
|
|
|
—
|
|
|
76.5
|
|
||||||||
Total Level III Investments
|
164.2
|
|
|
(5.9
|
)
|
|
80.3
|
|
|
5.4
|
|
|
—
|
|
|
103.1
|
|
|
(27.2
|
)
|
|
102.9
|
|
||||||||
NIMS derivative assets
|
1.6
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.7
|
|
||||||||
Other assets
|
104.0
|
|
|
9.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12.6
|
|
|
—
|
|
|
100.7
|
|
||||||||
Total Level III Assets
|
$
|
269.8
|
|
|
$
|
3.4
|
|
|
$
|
80.4
|
|
|
$
|
5.4
|
|
|
$
|
—
|
|
|
$
|
115.7
|
|
|
$
|
(27.2
|
)
|
|
$
|
205.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Derivative liabilities, net
|
$
|
110.6
|
|
|
$
|
(105.9
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9.0
|
|
|
$
|
—
|
|
|
$
|
207.5
|
|
VIE debt
|
228.2
|
|
|
(104.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
224.8
|
|
(4)
|
—
|
|
|
107.8
|
|
||||||||
Total Level III Liabilities, net
|
$
|
338.8
|
|
|
$
|
(210.3
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
233.8
|
|
|
$
|
—
|
|
|
$
|
315.3
|
|
(1)
|
Includes unrealized gains (losses) for the
six
months ended
June 30, 2012
, relating to assets and liabilities still held at
June 30, 2012
, as follows:
$1.0 million
for investments,
$3.8 million
for other assets,
$(140.2) million
for derivative liabilities, and
$(4.9) 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.
|
(3)
|
During the period, pricing from a third-party pricing source became available that utilized observable inputs for individual instruments. As a result, these instruments were transferred out of Level III and into Level II.
|
(4)
|
Primarily represents the settlement of our CDO of ABS.
|
(In millions)
|
Fair Value June 30, 2013 (1)
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Range/ Weighted Average
|
||||||
Level III Investments:
|
|
|
|
|
|
|
|
|
|
||||
State and municipal obligations
|
$
|
19.4
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
|
|
|
8.8
|
%
|
|
|
|
|
|
Expected loss
|
|
|
|
|
19.0
|
%
|
||
Other investments
|
77.0
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
|
|
2.5
|
%
|
||
Level III Derivative Assets:
|
|
|
|
|
|
|
|
|
|
||||
Corporate CDOs
|
6.0
|
|
|
Base correlation model
|
|
Radian correlation to corporate index
|
|
|
|
85.0
|
%
|
||
|
|
|
|
|
Average credit spread
|
|
<0.1%
|
|
-
|
1.6
|
%
|
||
|
|
|
|
|
Own credit spread (2)
|
|
1.7
|
%
|
-
|
5.9
|
%
|
||
CDOs of CMBS
|
1.0
|
|
|
Discounted cash flow
|
|
Radian correlation to CMBS transaction index
|
|
72.0
|
%
|
-
|
85.0
|
%
|
|
|
|
|
|
|
Own credit spread (2)
|
|
1.7
|
%
|
-
|
5.9
|
%
|
||
NIMS derivative assets
|
1.6
|
|
|
Discounted cash flow
|
|
NIMS credit spread
|
|
|
|
43.7
|
%
|
||
|
|
|
|
|
Own credit spread (2)
|
|
|
|
1.7
|
%
|
|||
Level III Derivative Liabilities/VIEs:
|
|
|
|
|
|
|
|
|
|
||||
Corporate CDOs
|
4.4
|
|
|
Base correlation model
|
|
Radian correlation to corporate index
|
|
|
|
85.0
|
%
|
||
|
|
|
|
|
Average credit spread
|
|
<0.1%
|
|
-
|
1.6
|
%
|
||
|
|
|
|
|
Own credit spread (2)
|
|
1.7
|
%
|
-
|
5.9
|
%
|
||
CDOs of CMBS
|
103.3
|
|
|
Discounted cash flow
|
|
Radian correlation to CMBS transaction index
|
|
72.0
|
%
|
-
|
85.0
|
%
|
|
|
|
|
|
|
Own credit spread (2)
|
|
1.7
|
%
|
-
|
5.9
|
%
|
||
TruPs CDOs
|
21.8
|
|
|
Discounted cash flow
|
|
Principal recovery
|
|
|
|
72.0
|
%
|
||
|
|
|
|
|
Principal recovery (stressed)
|
|
|
|
62.0
|
%
|
|||
|
|
|
|
|
Probability of conditional liquidity payment
|
|
0.8
|
%
|
-
|
10.0
|
%
|
||
|
|
|
|
|
Own credit spread (2)
|
|
1.7
|
%
|
-
|
5.9
|
%
|
||
TruPs - related VIE liabilities
|
64.7
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
|
|
12.3
|
%
|
||
Other non-corporate CDOs and derivative transactions
|
156.4
|
|
|
Risk-based model
|
|
Average life (in years)
|
|
<1
|
|
-
|
20
|
|
|
|
|
|
|
Own credit spread (2)
|
|
1.7
|
%
|
-
|
5.9
|
%
|
|||
NIMS VIE
|
11.0
|
|
|
Discounted cash flow
|
|
NIMS credit spread
|
|
|
|
43.7
|
%
|
||
|
|
|
|
|
Own credit spread (2)
|
|
2.0
|
%
|
-
|
9.0
|
%
|
(1)
|
Excludes certain assets and liabilities for which we do not develop quantitative unobservable inputs. The fair value estimates for these assets and liabilities are developed using third-party pricing information, generally without adjustment.
|
(2)
|
Represents the range of Radian Group’s CDS spread that a typical market participant might use in the valuation analysis based on the remaining term of the investment.
|
(In millions)
|
Fair Value December 31, 2012 (1)
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Range/ Weighted Average
|
||||||
Level III Investments:
|
|
|
|
|
|
|
|
|
|
||||
State and municipal obligations
|
$
|
19.0
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
|
|
8.8
|
%
|
|
|
|
|
|
|
Expected loss
|
|
|
|
19.0
|
%
|
|||
Other investments
|
78.0
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
|
|
1.9
|
%
|
||
Level III Derivative Assets:
|
|
|
|
|
|
|
|
|
|
||||
Corporate CDOs
|
8.8
|
|
|
Base correlation model
|
|
Radian correlation to corporate index
|
|
|
|
85.0
|
%
|
||
|
|
|
|
|
Average credit spread
|
|
<0.1%
|
|
-
|
2.7
|
%
|
||
|
|
|
|
|
Own credit spread (2)
|
|
8.0
|
%
|
-
|
9.1
|
%
|
||
CDOs of CMBS
|
1.6
|
|
|
Discounted cash flow
|
|
Radian correlation to CMBS transaction index
|
|
72.0
|
%
|
-
|
85.0
|
%
|
|
|
|
|
|
|
Own credit spread (2)
|
|
8.0
|
%
|
-
|
9.1
|
%
|
||
TruPs CDOs
|
1.6
|
|
|
Discounted cash flow
|
|
Principal recovery
|
|
|
|
65.0
|
%
|
||
|
|
|
|
|
Principal recovery (stressed)
|
|
|
|
60.0
|
%
|
|||
|
|
|
|
|
Probability of conditional liquidity payment
|
|
0.8
|
%
|
-
|
36.7
|
%
|
||
|
|
|
|
|
Own credit spread (2)
|
|
8.0
|
%
|
-
|
9.1
|
%
|
||
NIMS derivative assets
|
1.6
|
|
|
Discounted cash flow
|
|
NIMS credit spread
|
|
|
|
44.0
|
%
|
||
|
|
|
|
|
Own credit spread (2)
|
|
|
|
8.5
|
%
|
|||
Level III Derivative Liabilities/VIEs:
|
|
|
|
|
|
|
|
|
|
||||
Corporate CDOs
|
6.0
|
|
|
Base correlation model
|
|
Radian correlation to corporate index
|
|
|
|
85.0
|
%
|
||
|
|
|
|
|
Average credit spread
|
|
<0.1%
|
|
-
|
2.7
|
%
|
||
|
|
|
|
|
Own credit spread (2)
|
|
8.0
|
%
|
-
|
9.1
|
%
|
||
CDOs of CMBS
|
76.3
|
|
|
Discounted cash flow
|
|
Radian correlation to CMBS transaction index
|
|
72.0
|
%
|
-
|
85.0
|
%
|
|
|
|
|
|
|
Own credit spread (2)
|
|
8.0
|
%
|
-
|
9.1
|
%
|
||
TruPs CDOs
|
12.7
|
|
|
Discounted cash flow
|
|
Principal recovery
|
|
|
|
65.0
|
%
|
||
|
|
|
|
|
Principal recovery (stressed)
|
|
|
|
60.0
|
%
|
|||
|
|
|
|
|
Probability of conditional liquidity payment
|
|
0.8
|
%
|
-
|
36.7
|
%
|
||
|
|
|
|
|
Own credit spread (2)
|
|
8.0
|
%
|
-
|
9.1
|
%
|
||
TruPs - related VIE liabilities
|
70.4
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
|
|
13.4
|
%
|
||
Other non-corporate CDOs and derivative transactions
|
101.4
|
|
|
Risk-based model
|
|
Average life (in years)
|
|
<1
|
|
-
|
20
|
|
|
|
|
|
|
Own credit spread (2)
|
|
8.0
|
%
|
-
|
9.1
|
%
|
|||
NIMS VIE
|
9.9
|
|
|
Discounted cash flow
|
|
NIMS credit spread
|
|
|
|
43.7
|
%
|
||
|
|
|
|
|
Own credit spread (2)
|
|
8.5
|
%
|
-
|
10.9
|
%
|
(1)
|
Excludes certain assets and liabilities for which we do not develop quantitative unobservable inputs. The fair value estimates for these assets and liabilities are developed using third-party pricing information, generally without adjustment.
|
(2)
|
Represents the range of Radian Group’s CDS spread that a typical market participant might use in the valuation analysis based on the remaining term of the investment.
|
|
June 30, 2013
|
|
December 31, 2012
|
|
||||||||||||
(In millions)
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Fixed-maturities held to maturity
|
$
|
0.4
|
|
|
$
|
0.4
|
|
(1)
|
$
|
0.7
|
|
|
$
|
0.7
|
|
(1)
|
Other invested assets
|
41.0
|
|
|
45.7
|
|
(1)
|
48.7
|
|
|
57.4
|
|
(1)
|
||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Long-term debt
|
914.0
|
|
|
1,340.2
|
|
(1)
|
663.6
|
|
|
704.8
|
|
(1)
|
||||
Non-derivative financial guaranty liabilities
|
167.5
|
|
|
257.4
|
|
(2)
|
232.9
|
|
|
308.1
|
|
(2)
|
(1)
|
These estimated fair values would be classified in Level II of the fair value hierarchy.
|
(2)
|
These estimated fair values would be classified in Level III of the fair value hierarchy.
|
|
Consolidated
|
|
Unconsolidated
|
||||||||||||
(In thousands)
|
June 30,
2013 |
|
December 31, 2012
|
|
June 30,
2013 |
|
December 31, 2012
|
||||||||
Balance Sheet:
|
|
|
|
|
|
|
|
||||||||
Other invested assets
|
$
|
76,959
|
|
|
$
|
78,006
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative assets
|
—
|
|
|
—
|
|
|
897
|
|
|
3,201
|
|
||||
Premiums receivable
|
—
|
|
|
—
|
|
|
2,528
|
|
|
2,859
|
|
||||
Other assets
|
96,125
|
|
|
99,337
|
|
|
—
|
|
|
—
|
|
||||
Unearned premiums
|
—
|
|
|
—
|
|
|
2,209
|
|
|
2,513
|
|
||||
Reserve for losses and LAE
|
—
|
|
|
—
|
|
|
15,004
|
|
|
14,376
|
|
||||
Derivative liabilities
|
64,637
|
|
|
70,467
|
|
|
262,942
|
|
|
175,781
|
|
||||
VIE debt—at fair value
|
95,804
|
|
|
98,983
|
|
|
—
|
|
|
—
|
|
||||
Accounts payable and accrued expenses
|
338
|
|
|
365
|
|
|
—
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Maximum exposure (1)
|
115,324
|
|
|
120,939
|
|
|
4,777,930
|
|
|
5,096,718
|
|
(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 include an adjustment for our non-performance risk, as applicable. For those VIEs that have recourse to our general credit, the maximum exposure is based on the net par amount of our insured obligation. For any VIEs that do not have recourse to our general credit, the maximum exposure is generally based on the recorded net assets of the VIE, as of the reporting date.
|
|
Consolidated
|
|
Unconsolidated
|
||||||||||||
|
Six Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Statement of Operations:
|
|
|
|
|
|
|
|
||||||||
Premiums earned
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
611
|
|
|
$
|
899
|
|
Net investment income
|
888
|
|
|
2,427
|
|
|
—
|
|
|
—
|
|
||||
Net loss on investments
|
(1,935
|
)
|
|
(2,863
|
)
|
|
—
|
|
|
—
|
|
||||
Change in fair value of derivative
instruments—gain (loss)
|
4,539
|
|
|
(2,364
|
)
|
|
(87,170
|
)
|
|
(114,415
|
)
|
||||
Net gain (loss) on other financial
instruments
|
2,282
|
|
|
(92,517
|
)
|
|
—
|
|
|
—
|
|
||||
Provision for losses—increase
|
—
|
|
|
—
|
|
|
819
|
|
|
5,748
|
|
||||
Other operating expenses
|
995
|
|
|
1,266
|
|
|
—
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net Cash Inflow (Outflow)
|
225
|
|
|
(134,748
|
)
|
|
2,742
|
|
|
(71,776
|
)
|
(In thousands)
|
June 30,
2013 |
|
December 31,
2012 |
||||
Balance Sheet:
|
|
|
|
||||
Derivative assets
|
$
|
1,575
|
|
|
$
|
1,585
|
|
VIE debt—at fair value
|
10,963
|
|
|
9,875
|
|
||
|
|
|
|
||||
Maximum exposure (1)
|
14,061
|
|
|
14,061
|
|
(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 include an adjustment for our non-performance risk, as applicable. For those VIEs that have recourse to our general credit, the maximum exposure is based on the net par amount of our insured obligation. For any VIEs that do not have recourse to our general credit, the maximum exposure is generally based on the recorded net assets of the VIE, as of the reporting date.
|
|
Six Months Ended
June 30, |
||||||
(In thousands)
|
2013
|
|
2012
|
||||
Statement of Operations:
|
|
|
|
||||
Net investment income
|
$
|
114
|
|
|
$
|
282
|
|
Change in fair value of derivative instruments—gain
|
—
|
|
|
7
|
|
||
Net loss on other financial instruments
|
(1,112
|
)
|
|
(2,534
|
)
|
||
|
|
|
|
||||
Net Cash Inflow (Outflow)
|
100
|
|
|
(4,351
|
)
|
|
June 30, 2013
|
||||||||||||||
(In thousands)
|
Amortized
Cost
|
|
Fair Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
||||||||
Fixed-maturities held to maturity:
|
|
|
|
|
|
|
|
||||||||
Bonds and notes:
|
|
|
|
|
|
|
|
||||||||
State and municipal obligations
|
$
|
427
|
|
|
$
|
420
|
|
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
427
|
|
|
$
|
420
|
|
|
$
|
—
|
|
|
$
|
7
|
|
Fixed-maturities available for sale:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
$
|
3,450
|
|
|
$
|
3,711
|
|
|
$
|
261
|
|
|
$
|
—
|
|
State and municipal obligations
|
11,738
|
|
|
11,322
|
|
|
24
|
|
|
440
|
|
||||
Corporate bonds and notes
|
6,493
|
|
|
6,383
|
|
|
296
|
|
|
406
|
|
||||
Other investments
|
431
|
|
|
464
|
|
|
33
|
|
|
—
|
|
||||
|
$
|
22,112
|
|
|
$
|
21,880
|
|
|
$
|
614
|
|
|
$
|
846
|
|
Equity securities available for sale (1)
|
$
|
78,106
|
|
|
$
|
115,978
|
|
|
$
|
37,872
|
|
|
$
|
—
|
|
Total debt and equity securities
|
$
|
100,645
|
|
|
$
|
138,278
|
|
|
$
|
38,486
|
|
|
$
|
853
|
|
(1)
|
Comprising broadly diversified domestic equity mutual funds (
$111.5 million
fair value) and various preferred and common stocks invested across numerous companies and industries (
$4.5 million
fair value).
|
|
December 31, 2012
|
||||||||||||||
(In thousands)
|
Amortized
Cost
|
|
Fair Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
||||||||
Fixed-maturities held to maturity:
|
|
|
|
|
|
|
|
||||||||
Bonds and notes:
|
|
|
|
|
|
|
|
||||||||
State and municipal obligations
|
$
|
679
|
|
|
$
|
676
|
|
|
$
|
3
|
|
|
$
|
6
|
|
|
$
|
679
|
|
|
$
|
676
|
|
|
$
|
3
|
|
|
$
|
6
|
|
Fixed-maturities available for sale:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
$
|
4,969
|
|
|
$
|
5,305
|
|
|
$
|
336
|
|
|
$
|
—
|
|
State and municipal obligations
|
17,922
|
|
|
17,995
|
|
|
116
|
|
|
43
|
|
||||
Corporate bonds and notes
|
15,618
|
|
|
16,369
|
|
|
1,110
|
|
|
359
|
|
||||
RMBS
|
50
|
|
|
51
|
|
|
3
|
|
|
2
|
|
||||
Other investments
|
922
|
|
|
976
|
|
|
54
|
|
|
—
|
|
||||
|
$
|
39,481
|
|
|
$
|
40,696
|
|
|
$
|
1,619
|
|
|
$
|
404
|
|
Equity securities available for sale (1)
|
$
|
88,260
|
|
|
$
|
112,139
|
|
|
$
|
23,879
|
|
|
$
|
—
|
|
Total debt and equity securities
|
$
|
128,420
|
|
|
$
|
153,511
|
|
|
$
|
25,501
|
|
|
$
|
410
|
|
(1)
|
Comprising broadly diversified domestic equity mutual funds (
$98.9 million
fair value) and various preferred and common stocks invested across numerous companies and industries (
$13.2 million
fair value).
|
(In thousands)
|
June 30,
2013 |
|
December 31,
2012 |
||||
Trading securities:
|
|
|
|
||||
U.S. government and agency securities
|
$
|
417,067
|
|
|
$
|
428,519
|
|
State and municipal obligations
|
641,210
|
|
|
669,975
|
|
||
Corporate bonds and notes
|
1,308,570
|
|
|
1,357,175
|
|
||
RMBS
|
533,289
|
|
|
663,307
|
|
||
CMBS
|
300,010
|
|
|
237,294
|
|
||
Other ABS
|
205,590
|
|
|
254,102
|
|
||
Foreign government securities (1)
|
—
|
|
|
117,686
|
|
||
Hybrid securities
|
152,885
|
|
|
211,944
|
|
||
Equity securities
|
163,466
|
|
|
153,722
|
|
||
Other investments
|
888
|
|
|
898
|
|
||
Total
|
$
|
3,722,975
|
|
|
$
|
4,094,622
|
|
(1)
|
As of
June 30, 2013
, there were
no
foreign government securities in our investment portfolio. We sold our investment in foreign government securities during the first quarter of 2013, as our market view of these investments changed, and their performance did not meet our expectations.
|
|
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
|
|
1
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
2
|
|
|
$
|
5,605
|
|
|
$
|
446
|
|
|
3
|
|
|
$
|
5,607
|
|
|
$
|
447
|
|
Corporate bonds and notes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2,953
|
|
|
406
|
|
|
2
|
|
|
2,953
|
|
|
406
|
|
||||||
Total
|
|
1
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
4
|
|
|
$
|
8,558
|
|
|
$
|
852
|
|
|
5
|
|
|
$
|
8,560
|
|
|
$
|
853
|
|
December 31, 2012:
($ 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
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
2
|
|
|
$
|
6,004
|
|
|
$
|
49
|
|
|
2
|
|
|
$
|
6,004
|
|
|
$
|
49
|
|
Corporate bonds and notes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
5,329
|
|
|
359
|
|
|
6
|
|
|
5,329
|
|
|
359
|
|
||||||
RMBS
|
|
1
|
|
|
31
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
31
|
|
|
2
|
|
||||||
Total
|
|
1
|
|
|
$
|
31
|
|
|
$
|
2
|
|
|
8
|
|
|
$
|
11,333
|
|
|
$
|
408
|
|
|
9
|
|
|
$
|
11,364
|
|
|
$
|
410
|
|
|
June 30, 2013
|
||||||||||||||
|
Held to Maturity
|
|
Available for Sale
|
||||||||||||
(In thousands)
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
||||||||
Due in one year or less (1)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,223
|
|
|
$
|
5,227
|
|
Due after one year through five years (1)
|
120
|
|
|
120
|
|
|
9,520
|
|
|
9,490
|
|
||||
Due after five years through ten years (1)
|
—
|
|
|
—
|
|
|
692
|
|
|
714
|
|
||||
Due after ten years (1)
|
307
|
|
|
300
|
|
|
6,677
|
|
|
6,449
|
|
||||
Total
|
$
|
427
|
|
|
$
|
420
|
|
|
$
|
22,112
|
|
|
$
|
21,880
|
|
(1)
|
Actual maturities may differ as a result of calls before scheduled maturity.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net premiums written-insurance:
|
|
|
|
|
|
|
|
||||||||
Direct
|
$
|
269,827
|
|
|
$
|
214,349
|
|
|
$
|
515,294
|
|
|
$
|
418,102
|
|
Assumed
|
(206
|
)
|
|
(1,028
|
)
|
|
(10,603
|
)
|
|
(88,516
|
)
|
||||
Ceded
|
(18,392
|
)
|
|
(31,389
|
)
|
|
(46,277
|
)
|
|
(69,976
|
)
|
||||
Net premiums written-insurance
|
$
|
251,229
|
|
|
$
|
181,932
|
|
|
$
|
458,414
|
|
|
$
|
259,610
|
|
Net premiums earned-insurance:
|
|
|
|
|
|
|
|
||||||||
Direct
|
$
|
224,585
|
|
|
$
|
196,012
|
|
|
$
|
432,525
|
|
|
$
|
388,028
|
|
Assumed
|
6,419
|
|
|
1,704
|
|
|
8,630
|
|
|
(8,981
|
)
|
||||
Ceded
|
(17,880
|
)
|
|
(10,937
|
)
|
|
(35,443
|
)
|
|
(24,903
|
)
|
||||
Net premiums earned-insurance
|
$
|
213,124
|
|
|
$
|
186,779
|
|
|
$
|
405,712
|
|
|
$
|
354,144
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Ceded premiums written
|
$
|
5,900
|
|
|
$
|
25,477
|
|
|
$
|
12,022
|
|
|
$
|
25,477
|
|
Ceded premiums earned
|
7,662
|
|
|
3,098
|
|
|
15,495
|
|
|
3,098
|
|
||||
Ceding commissions written
|
1,475
|
|
|
6,369
|
|
|
3,005
|
|
|
6,369
|
|
(i)
|
Radian Guaranty agreed to cede to the reinsurer
20%
of all premiums and losses incurred with respect to conventional GSE loans and will initially receive a
35%
ceding commission; provided, that if we do not exercise our Commutation Option, the ceding commission will be reduced to
30%
for the portion of the ceded RIF that was subject to the Commutation Option; and
|
(ii)
|
Radian Guaranty has the ability to cede
100%
of all premiums and losses incurred with respect to non-conventional portfolio loans and will receive a
25%
ceding commission. We have not ceded any risk on non-conventional loans.
|
(In thousands)
|
Three Months Ended June 30, 2013
|
|
Six Months Ended June 30, 2013
|
||||
Ceded premiums written
|
$
|
7,580
|
|
|
$
|
24,020
|
|
Ceded premiums earned
|
4,283
|
|
|
7,121
|
|
||
Ceding commissions written
|
2,653
|
|
|
8,407
|
|
(In thousands)
|
June 30,
2013 |
|
December 31,
2012 |
||||
Mortgage insurance reserves
|
$
|
2,690,861
|
|
|
$
|
3,083,608
|
|
Financial guaranty reserves
|
25,629
|
|
|
66,328
|
|
||
Total reserve for losses and LAE
|
$
|
2,716,490
|
|
|
$
|
3,149,936
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Mortgage Insurance
|
|
|
|
|
|
|
|
||||||||
Balance at beginning of period
|
$
|
2,894,500
|
|
|
$
|
3,230,938
|
|
|
$
|
3,083,608
|
|
|
$
|
3,247,900
|
|
Less reinsurance recoverables (1)
|
72,101
|
|
|
118,071
|
|
|
83,238
|
|
|
151,569
|
|
||||
Balance at beginning of period, net of reinsurance recoverables
|
2,822,399
|
|
|
3,112,867
|
|
|
3,000,370
|
|
|
3,096,331
|
|
||||
Add losses and LAE incurred in respect of default notices reported and unreported in:
|
|
|
|
|
|
|
|
||||||||
Current year (2)
|
154,606
|
|
|
218,929
|
|
|
337,140
|
|
|
437,274
|
|
||||
Prior years
|
(18,196
|
)
|
|
(10,851
|
)
|
|
(68,774
|
)
|
|
5,533
|
|
||||
Total incurred
|
136,410
|
|
|
208,078
|
|
|
268,366
|
|
|
442,807
|
|
||||
Deduct paid claims and LAE related to:
|
|
|
|
|
|
|
|
||||||||
Current year (2)
|
149
|
|
|
273
|
|
|
149
|
|
|
273
|
|
||||
Prior years
|
326,226
|
|
|
263,174
|
|
|
636,153
|
|
|
481,367
|
|
||||
Total paid
|
326,375
|
|
|
263,447
|
|
|
636,302
|
|
|
481,640
|
|
||||
Balance at end of period, net of reinsurance recoverables
|
2,632,434
|
|
|
3,057,498
|
|
|
2,632,434
|
|
|
3,057,498
|
|
||||
Add reinsurance recoverables (1)
|
58,427
|
|
|
97,845
|
|
|
58,427
|
|
|
97,845
|
|
||||
Balance at end of period
|
$
|
2,690,861
|
|
|
$
|
3,155,343
|
|
|
$
|
2,690,861
|
|
|
$
|
3,155,343
|
|
(1)
|
Related to ceded losses on captive reinsurance transactions, capital markets reinsurance transactions (“Smart Home”) and quota share reinsurance transactions.
|
(2)
|
Related to underlying defaulted loans with a most recent date of default notice in the year indicated. For example, if a loan had defaulted in a prior year, but then subsequently cured and later re-defaulted in the current year, that default would be considered a current year default.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Rescissions
|
$
|
19.6
|
|
|
$
|
64.7
|
|
|
$
|
34.9
|
|
|
$
|
117.4
|
|
Denials
|
100.0
|
|
|
192.7
|
|
|
127.2
|
|
|
405.1
|
|
||||
Total first-lien claims submitted for payment that were rescinded or denied (1)
|
$
|
119.6
|
|
|
$
|
257.4
|
|
|
$
|
162.1
|
|
|
$
|
522.5
|
|
(1)
|
Includes an amount related to a small number of submitted claims that were subsequently withdrawn by the insured.
|
Claim
Received
Quarter
|
|
Cumulative Rescission/Denial Rate for Each Quarter (1)
|
|
Percentage of
Total Claims Resolved (2)
|
Q4 2010
|
|
17.5%
|
|
100%
|
Q1 2011
|
|
21.0%
|
|
100%
|
Q2 2011
|
|
26.1%
|
|
99%
|
Q3 2011
|
|
31.8%
|
|
99%
|
Q4 2011
|
|
27.9%
|
|
98%
|
Q1 2012
|
|
24.1%
|
|
97%
|
Q2 2012
|
|
19.8%
|
|
91%
|
Q3 2012
|
|
17.2%
|
|
80%
|
Q4 2012
|
|
15.3%
|
|
62%
|
(1)
|
The cumulative rescission/denial rates represent the ratio of claims rescinded or denied to claims received (by claim count). Rescissions and denials are net of actual reinstatements, plus our current estimate for expected reinstatements of previously rescinded or denied claims (excluding certain potential reinstatements we are in the process of discussing with servicers). These amounts represent the cumulative rates for each quarter as of
June 30, 2013
. As discussed in footnote (2) below, these rates remain subject to change based on differences between estimated and actual reinstatements of previously rescinded policies or denied claims. Until all of the claims received during the periods shown have been internally resolved, the rescission/denial rates for each quarter are projections and remain subject to change.
|
(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, though such denials or rescissions could be challenged and, potentially reinstated or overturned. For the first and second quarters of 2013, a significant portion of claims received for those quarters have not been internally resolved; therefore, we do not believe the cumulative rescission/denial rates for those periods are presently meaningful.
|
|
Surveillance Categories
|
||||||||||||||||||
($ in thousands)
|
Performing
|
|
Special
Mention
|
|
Intensified
Surveillance
|
|
Case
Reserve
|
|
Total
|
||||||||||
Number of policies
|
7
|
|
|
109
|
|
|
74
|
|
|
84
|
|
|
274
|
|
|||||
Remaining weighted-average contract period (in years)
|
22
|
|
|
18
|
|
|
20
|
|
|
18
|
|
|
19
|
|
|||||
Insured contractual payments outstanding:
|
|
|
|
|
|
|
|
|
|
||||||||||
Principal
|
$
|
1,832
|
|
|
$
|
765,880
|
|
|
$
|
655,340
|
|
|
$
|
120,564
|
|
|
$
|
1,543,616
|
|
Interest
|
174
|
|
|
406,064
|
|
|
348,958
|
|
|
32,702
|
|
|
787,898
|
|
|||||
Total
|
$
|
2,006
|
|
|
$
|
1,171,944
|
|
|
$
|
1,004,298
|
|
|
$
|
153,266
|
|
|
$
|
2,331,514
|
|
Gross claim liability
|
$
|
1
|
|
|
$
|
21,782
|
|
|
$
|
232,253
|
|
|
$
|
40,484
|
|
|
$
|
294,520
|
|
Less:
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross potential recoveries
|
—
|
|
|
7,145
|
|
|
261,755
|
|
|
62,031
|
|
|
330,931
|
|
|||||
Discount, net
|
—
|
|
|
517
|
|
|
(77,874
|
)
|
|
3,069
|
|
|
(74,288
|
)
|
|||||
Net claim liability/(asset) (prior to reduction for unearned premium)
|
$
|
1
|
|
|
$
|
14,120
|
|
|
$
|
48,372
|
|
|
$
|
(24,616
|
)
|
|
$
|
37,877
|
|
Unearned premium revenue
|
$
|
6
|
|
|
$
|
16,011
|
|
|
$
|
11,537
|
|
|
$
|
—
|
|
|
$
|
27,554
|
|
Net claim liability/(asset) reported in the balance sheet
|
$
|
—
|
|
|
$
|
6,917
|
|
|
$
|
41,310
|
|
|
$
|
(24,616
|
)
|
|
$
|
23,611
|
|
Reinsurance recoverables
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Refundings
|
$
|
10,288
|
|
|
$
|
10,483
|
|
|
$
|
15,041
|
|
|
$
|
18,707
|
|
Recaptures/commutations
|
—
|
|
|
—
|
|
|
(2,447
|
)
|
|
(16,269
|
)
|
||||
Unearned premium acceleration upon establishment of case reserves
|
4
|
|
|
—
|
|
|
69
|
|
|
—
|
|
||||
Reinsurance agreements
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,995
|
)
|
||||
Foreign exchange revaluation, gross of commissions
|
(319
|
)
|
|
(981
|
)
|
|
(1,087
|
)
|
|
(769
|
)
|
||||
Adjustments to installment premiums, gross of commissions
|
(10
|
)
|
|
23
|
|
|
2,682
|
|
|
117
|
|
||||
Total adjustment to premiums earned
|
$
|
9,963
|
|
|
$
|
9,525
|
|
|
$
|
14,258
|
|
|
$
|
(4,209
|
)
|
(In thousands)
|
Ending Net
Unearned
Premiums
|
|
Unearned
Premium
Amortization
|
|
Accretion
|
|
Total
Premium
Revenue
|
||||||||
Third Quarter 2013
|
$
|
205,911
|
|
|
$
|
6,516
|
|
|
$
|
215
|
|
|
$
|
6,731
|
|
Fourth Quarter 2013
|
197,350
|
|
|
8,561
|
|
|
212
|
|
|
8,773
|
|
||||
2013
|
197,350
|
|
|
15,077
|
|
|
427
|
|
|
15,504
|
|
||||
2014
|
173,422
|
|
|
23,928
|
|
|
802
|
|
|
24,730
|
|
||||
2015
|
156,491
|
|
|
16,931
|
|
|
734
|
|
|
17,665
|
|
||||
2016
|
142,027
|
|
|
14,464
|
|
|
690
|
|
|
15,154
|
|
||||
2017
|
128,607
|
|
|
13,420
|
|
|
630
|
|
|
14,050
|
|
||||
2013-2017
|
128,607
|
|
|
83,820
|
|
|
3,283
|
|
|
87,103
|
|
||||
2018-2022
|
73,227
|
|
|
55,379
|
|
|
2,397
|
|
|
57,776
|
|
||||
2023-2027
|
36,298
|
|
|
36,929
|
|
|
1,485
|
|
|
38,414
|
|
||||
2028-2032
|
15,236
|
|
|
21,062
|
|
|
914
|
|
|
21,976
|
|
||||
After 2032
|
—
|
|
|
15,236
|
|
|
1,057
|
|
|
16,293
|
|
||||
Total
|
$
|
—
|
|
|
$
|
212,426
|
|
|
$
|
9,136
|
|
|
$
|
221,562
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Claim liability at beginning of period
|
$
|
22,469
|
|
|
$
|
83,049
|
|
|
$
|
64,291
|
|
|
$
|
60,550
|
|
Incurred losses and LAE:
|
|
|
|
|
|
|
|
||||||||
(Decrease) increase in gross claim liability
|
(36,381
|
)
|
|
(25,413
|
)
|
|
(27,991
|
)
|
|
161,698
|
|
||||
Decrease (increase) in gross potential recoveries
|
30,389
|
|
|
109,883
|
|
|
26,443
|
|
|
(191,715
|
)
|
||||
Decrease (increase) in discount
|
9,688
|
|
|
(80,434
|
)
|
|
6,133
|
|
|
66,145
|
|
||||
Decrease (increase) in unearned premiums
|
84
|
|
|
(1,204
|
)
|
|
(713
|
)
|
|
(1,908
|
)
|
||||
Incurred losses and LAE
|
3,780
|
|
|
2,832
|
|
|
3,872
|
|
|
34,220
|
|
||||
Deduct paid losses and LAE:
|
|
|
|
|
|
|
|
||||||||
Current years
|
34
|
|
|
334
|
|
|
33
|
|
|
334
|
|
||||
Prior years
|
2,604
|
|
|
(7,098
|
)
|
|
44,519
|
|
|
1,791
|
|
||||
Paid losses and LAE:
|
2,638
|
|
|
(6,764
|
)
|
|
44,552
|
|
|
2,125
|
|
||||
Claim liability at end of period
|
$
|
23,611
|
|
|
$
|
92,645
|
|
|
$
|
23,611
|
|
|
$
|
92,645
|
|
Components of incurred losses and LAE:
|
|
|
|
|
|
|
|
|
|||||||
Claim liability established in current period
|
$
|
279
|
|
|
$
|
51
|
|
|
$
|
383
|
|
|
$
|
51
|
|
Changes in existing claim liabilities
|
3,501
|
|
|
2,781
|
|
|
3,489
|
|
|
34,169
|
|
||||
Total incurred losses and LAE
|
$
|
3,780
|
|
|
$
|
2,832
|
|
|
$
|
3,872
|
|
|
$
|
34,220
|
|
Components of (increase) decrease in discount:
|
|
|
|
|
|
|
|
||||||||
(Increase) decrease in discount related to net claim liabilities established in current period
|
$
|
(37
|
)
|
|
$
|
(84,929
|
)
|
|
$
|
(165
|
)
|
|
$
|
65,682
|
|
Decrease in discount related to existing net claim liabilities
|
9,725
|
|
|
4,495
|
|
|
6,298
|
|
|
463
|
|
||||
Total decrease (increase) in discount
|
$
|
9,688
|
|
|
$
|
(80,434
|
)
|
|
$
|
6,133
|
|
|
$
|
66,145
|
|
June 30, 2013
|
2.29
|
%
|
December 31, 2012
|
2.00
|
%
|
June 30, 2012
|
1.95
|
%
|
December 31, 2011
|
2.80
|
%
|
(In thousands)
|
|
June 30,
2013 |
|
December 31,
2012 |
||||
5.625%
|
Senior Notes due 2013
|
$
|
—
|
|
|
$
|
79,449
|
|
5.375%
|
Senior Notes due 2015
|
54,476
|
|
|
249,868
|
|
||
3.000%
|
Convertible Senior Notes due 2017 (1)
|
343,792
|
|
|
334,254
|
|
||
9.000%
|
Senior Notes due 2017
|
191,148
|
|
|
—
|
|
||
2.250%
|
Convertible Senior Notes due 2019 (2)
|
324,536
|
|
|
—
|
|
||
|
Total long-term debt
|
$
|
913,952
|
|
|
$
|
663,571
|
|
(1)
|
The principal amount of these notes is
$450 million
.
|
(2)
|
The principal amount of these notes is
$400 million
.
|
1.
|
During any calendar quarter commencing after March 31, 2013 (and only during such calendar quarter), if the last reported sale price of our common stock for each of at least
20
trading days (whether or not consecutive) during the
30
consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter, is greater than or equal to
130%
of the applicable conversion price on each applicable trading day;
|
2.
|
During the
five
business day period after any
five
consecutive trading day period in which the trading price per
$1,000
principal amount of the notes (for each trading day during that
five
day measurement period) was less than
98%
of the product of the last reported sale price of the common stock and the applicable conversion rate on such trading day;
|
3.
|
Any time prior to the close of business on the business day prior to the redemption date if we call the notes for redemption; or
|
4.
|
Upon the occurrence of specified corporate events as described in the indenture for the notes.
|
(In thousands)
|
June 30,
2013 |
||
Liability component:
|
|
||
Principal
|
$
|
400,000
|
|
Less: debt discount, net (1)
|
(75,464
|
)
|
|
Net carrying amount
|
$
|
324,536
|
|
|
|
||
Equity component (net of tax impact) (2) (3)
|
$
|
77,026
|
|
(1)
|
Included within long-term debt and is being amortized over the life of the convertible notes.
|
(2)
|
Included within additional paid-in capital, net of related issuance costs.
|
(3)
|
A full valuation allowance has been recorded against the deferred income tax impact.
|
(In thousands)
|
Three Months Ended June 30, 2013
|
|
Six Months Ended June 30, 2013
|
||||
Contractual interest expense
|
$
|
2,250
|
|
|
$
|
2,925
|
|
Amortization of debt issuance costs
|
308
|
|
|
400
|
|
||
Amortization of debt discount
|
2,758
|
|
|
3,577
|
|
||
Total interest expense
|
$
|
5,316
|
|
|
$
|
6,902
|
|
|
|
|
|
||||
Effective interest rate of the liability component
|
6.25
|
%
|
|
6.25
|
%
|
|
|
Three Months Ended June 30, 2013
|
|
Six Months Ended June 30, 2013
|
||||||||||||||||||||
(In thousands)
|
|
Before tax
|
|
Tax effect
|
|
Net of tax
|
|
Before tax
|
|
Tax effect
|
|
Net of tax
|
||||||||||||
Balance at beginning of period
|
|
$
|
36,323
|
|
|
$
|
12,783
|
|
|
$
|
23,540
|
|
|
$
|
24,904
|
|
|
$
|
8,809
|
|
|
$
|
16,095
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized gains on investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized holding gains arising during the period
|
|
2,277
|
|
|
797
|
|
|
1,480
|
|
|
13,763
|
|
|
4,817
|
|
|
8,946
|
|
||||||
Less: Reclassification adjustment for net gains included in net loss (1)
|
|
1,150
|
|
|
596
|
|
|
554
|
|
|
1,217
|
|
|
642
|
|
|
575
|
|
||||||
Net unrealized gains on investments
|
|
1,127
|
|
|
201
|
|
|
926
|
|
|
12,546
|
|
|
4,175
|
|
|
8,371
|
|
||||||
Other comprehensive income
|
|
1,127
|
|
|
201
|
|
|
926
|
|
|
12,546
|
|
|
4,175
|
|
|
8,371
|
|
||||||
Balance at end of period
|
|
$
|
37,450
|
|
|
$
|
12,984
|
|
|
$
|
24,466
|
|
|
$
|
37,450
|
|
|
$
|
12,984
|
|
|
$
|
24,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
Three Months Ended June 30, 2012
|
|
Six Months Ended June 30, 2012
|
||||||||||||||||||||
(In thousands)
|
|
Before tax
|
|
Tax effect
|
|
Net of tax
|
|
Before tax
|
|
Tax effect
|
|
Net of tax
|
||||||||||||
Balance at beginning of period
|
|
$
|
23,737
|
|
|
$
|
4,733
|
|
|
$
|
19,004
|
|
|
$
|
12,039
|
|
|
$
|
639
|
|
|
$
|
11,400
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized foreign currency translation adjustment
|
|
(12
|
)
|
|
(4
|
)
|
|
(8
|
)
|
|
(12
|
)
|
|
(4
|
)
|
|
(8
|
)
|
||||||
Less: Reclassification adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net foreign currency translation adjustments
|
|
(12
|
)
|
|
(4
|
)
|
|
(8
|
)
|
|
(12
|
)
|
|
(4
|
)
|
|
(8
|
)
|
||||||
Unrealized (losses) gains on investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized holding (losses) gains arising during the period
|
|
(2,183
|
)
|
|
(764
|
)
|
|
(1,419
|
)
|
|
24,300
|
|
|
8,505
|
|
|
15,795
|
|
||||||
Less: Reclassification adjustment for net (losses) gains included in net loss (1)
|
|
(1,140
|
)
|
|
(399
|
)
|
|
(741
|
)
|
|
13,645
|
|
|
4,776
|
|
|
8,869
|
|
||||||
Net unrealized (losses) gains on investments
|
|
(1,043
|
)
|
|
(365
|
)
|
|
(678
|
)
|
|
10,655
|
|
|
3,729
|
|
|
6,926
|
|
||||||
Other comprehensive (loss) income
|
|
(1,055
|
)
|
|
(369
|
)
|
|
(686
|
)
|
|
10,643
|
|
|
3,725
|
|
|
6,918
|
|
||||||
Balance at end of period
|
|
$
|
22,682
|
|
|
$
|
4,364
|
|
|
$
|
18,318
|
|
|
$
|
22,682
|
|
|
$
|
4,364
|
|
|
$
|
18,318
|
|
(1)
|
Included in net (losses) gains on investments on our condensed consolidated statements of operations.
|
(In millions)
|
As of and for the Six Months Ended June 30, 2013
|
|
As of and for the Year Ended December 31, 2012
|
||||
Statutory net income (loss)
|
$
|
0.9
|
|
|
$
|
(175.9
|
)
|
Statutory surplus
|
1,135.9
|
|
|
926.0
|
|
||
Contingency reserve
|
19.7
|
|
|
—
|
|
(1)
|
RIF, net excludes risk ceded through reinsurance contracts and RIF on defaulted loans.
|
(In thousands)
|
June 30,
2013 |
|
December 31, 2012
|
||||
Investment in subsidiaries, at equity in net assets
|
$
|
1,161,878
|
|
|
$
|
1,234,229
|
|
Total assets
|
2,017,981
|
|
|
1,550,619
|
|
||
Long-term debt
|
913,952
|
|
|
663,571
|
|
||
Total liabilities
|
1,115,115
|
|
|
814,294
|
|
||
Total stockholders’ equity
|
902,866
|
|
|
736,325
|
|
||
Total liabilities and stockholders’ equity
|
2,017,981
|
|
|
1,550,619
|
|
•
|
On December 30, 2011, a putative class action under RESPA titled White v. PNC Financial Services Group was filed in the U.S. District Court for the Eastern District of Pennsylvania. On September 29, 2012, plaintiffs filed an amended complaint. In this case, Radian Guaranty has insured the loan of
one
of the plaintiffs. On November 26, 2012, Radian Guaranty filed a motion to dismiss the plaintiffs’ claims as barred by the statute of limitations. On June 20, 2013, the court granted Radian Guaranty’s motion and dismissed plaintiffs’ claims, but granted plaintiffs leave to file a second amended complaint. Plaintiffs filed their second amended complaint on July 5, 2013. Radian Guaranty filed a motion to dismiss plaintiffs’ second amended complaint on July 22, 2013.
|
•
|
On January 13, 2012, a putative class action under RESPA titled Menichino, et al. v. Citibank, N.A., et al., was filed in the U.S. District Court for the Western District of Pennsylvania. Radian Guaranty was not named as a defendant in the original complaint. On December 4, 2012, plaintiffs amended their complaint to add Radian Guaranty as an additional defendant. In this case, Radian Guaranty has insured the loan of
one
of the plaintiffs. On February 4, 2013, Radian Guaranty filed a motion to dismiss the claims against it as barred by the statute of limitations. On July 19, 2013, the court granted Radian Guaranty’s motion and dismissed plaintiffs’ claims, but granted plaintiffs leave to file a second amended complaint.
|
•
|
On April 5, 2012, a putative class action under RESPA titled Riddle v. Bank of America Corporation, et al. was filed in the U.S. District Court for the Eastern District of Pennsylvania. On January 4, 2013, Radian Guaranty moved to dismiss plaintiffs’ claims as barred by the statute of limitations. The court denied that motion on April 11, 2013, and ordered a brief period of discovery limited to the statute of limitations issue. The discovery period was scheduled to end on June 14, 2013; however, on May 31, 2013, the plaintiffs voluntarily dismissed Radian Guaranty from the lawsuit because it did not insure any of their loans.
|
•
|
On April 5, 2012, a putative class action under RESPA titled Manners, et al. v. Fifth Third Bank, et al. was filed in the U.S. District Court for the Western District of Pennsylvania. On September 28, 2012, plaintiffs filed an amended complaint adding
three
borrowers whose loans were insured by Radian Guaranty. On November 28, 2012, Radian Guaranty moved to dismiss plaintiffs’ claims as barred by the statute of limitations. On July 19, 2013, the court granted Radian Guaranty’s motion and dismissed plaintiffs’ claims, but granted plaintiffs leave to file a second amended complaint.
|
•
|
On May 18, 2012, a putative class action under RESPA titled Hill, et al. v. Flagstar Bank FSB, et al. was filed in the U.S. District Court for the Eastern District of Pennsylvania. In this case, Radian Guaranty has insured the loan of
one
of the plaintiffs. On January 28, 2013, plaintiffs filed an amended complaint. On March 28, 2013, Radian Guaranty filed a motion to dismiss plaintiffs’ claims as barred by the statute of limitations. On June 27, 2013, the court denied that motion and ordered a brief period of discovery limited to the statute of limitations issue. The discovery period is scheduled to end on September 13, 2013.
|
•
|
On May 31, 2012, a putative class action under RESPA titled Barlee, et al. v. First Horizon National Corporation, et al. was filed in the U.S. District Court for the Eastern District of Pennsylvania. On October 9, 2012, plaintiffs filed an amended complaint, and on November 5, 2012, Radian Guaranty filed a motion to dismiss the amended complaint for lack of standing because it did not insure any of the plaintiffs’ loans. On February 27, 2013, the court granted Radian Guaranty’s motion to dismiss and Radian Guaranty has been dismissed from this lawsuit.
|
•
|
On June 28, 2012, a putative class action under RESPA titled Cunningham, et al. v. M&T Bank Corporation, et al. was filed in the U.S. District Court for the Middle District of Pennsylvania. On October 9, 2012, plaintiffs filed an amended complaint in which they added
one
borrower whose loan was insured by Radian Guaranty. On December 10, 2012, Radian Guaranty moved to dismiss plaintiffs’ claims as barred by the statute of limitations, and on February 11, 2013, plaintiffs filed an opposition to the motion to dismiss.
|
•
|
On January 4, 2013, a putative class action under RESPA titled Ba, et al. v. HSBC USA, Inc., et al., was filed in the U.S. District Court for the Eastern District of Pennsylvania. On February 26, 2013, Radian Guaranty moved to dismiss this lawsuit for lack of standing because it did not insure any of the plaintiffs’ loans. On March 25, 2013, plaintiffs voluntarily dismissed Radian Guaranty from this lawsuit.
|
•
|
Premiums.
Premiums on our mortgage insurance products are paid either on a monthly installment basis (“monthly premium”), in a single payment at origination (“single premium”), as a combination of up-front premium at origination plus a monthly renewal, or in some cases, as an annual or multi-year premium. An increase or decrease in insurance in force (“IIF”) will generally have a corresponding impact on premiums earned. Premiums earned are also affected by premium rates that are based on a number of borrower, loan and property characteristics.
|
•
|
NIW.
NIW is affected by the overall size of the mortgage origination market, the penetration percentage of private mortgage insurance into the overall mortgage origination market and our market share of the private mortgage insurance market. The overall mortgage origination market is influenced by macroeconomic factors such as interest rates and housing prices, as well as credit availability. The percentage of private mortgage insurance penetration mainly is influenced by the competition from FHA insurance and the relative percentage of originations that are for purchased homes versus refinances. Typically, private mortgage insurance penetration is significantly higher on new mortgages for purchased homes than on the refinance of existing mortgages as a result of higher average loan-to-value ratios (“LTVs”) on new home purchases. Radian Guaranty’s share of the private mortgage insurance market is influenced by competition in the private mortgage insurance market and our ability to maintain or grow existing levels of new mortgage originations from our current customers or to gain new customers.
|
•
|
Losses
. Incurred losses represent the estimated claim payments on newly defaulted insured loans as well as any change in our claim estimates for previously existing defaults. Our mortgage insurance incurred losses are driven primarily by new mortgage insurance defaults and changes in the estimates we use to determine our losses, including estimates with respect to the likelihood, magnitude and timing of anticipated losses, and our estimate of the rate at which we expect defaults will ultimately result in paid claims. Other factors influencing incurred losses include:
|
-
|
The product mix of our total direct RIF (loans with higher risk characteristics generally result in higher delinquencies and claims);
|
-
|
The average loan size (higher average loan amounts generally result in higher losses incurred);
|
-
|
The percentage of coverage on insured loans (higher percentages of insurance coverage result in higher incurred losses) and the presence of structural mitigants such as deductibles or stop losses;
|
-
|
Changes in housing values (declines in housing values negatively impact our ability to mitigate our losses and also may negatively affect a borrower’s willingness to continue to make mortgage payments when the home value is less than the mortgage balance);
|
-
|
The distribution of claims over the life cycle of a portfolio (historically, claims are relatively low during the first two years after a loan is originated and then increase substantially over a period of several years before declining; however, as is evident with much of our legacy portfolio, several factors can impact and change this cycle, including the economic environment, the credit profile of the borrower, housing prices and unemployment rates);
|
-
|
Our ability to mitigate potential claims through rescissions, denials, cancellations and the curtailment of claims submitted to us. These actions have been much more prevalent on our legacy portfolio loans. Generally, we rescind insurance coverage when we conclude through our review of the underwriting of a loan that the loan was not originated in accordance with our underwriting guidelines. Generally, we deny claims when the documentation we receive is not sufficient to perfect the claim in accordance with our master insurance policy. In addition, we may cancel coverage or curtail claim payments when we identify servicer negligence, or we may make other adjustments to claims as permitted by our master insurance policy. These actions all result in a reduction in our incurred losses. Conversely, if our loss mitigation activities are successfully challenged at rates that are higher than expected, our incurred losses will increase.
|
•
|
Other Operating Expenses
. Our other operating expenses are generally affected by both the level of NIW, as well as the level of RIF. Additionally, our operating expenses are impacted by compensation expense associated with changes in the estimated fair value of certain long-term incentive awards that have been granted to our officers and directors that are settled in cash, but which are valued based on the stock price of Radian Group’s common stock and, to a lesser extent, other factors. Radian Group’s stock price has increased significantly from December 31, 2012.
|
•
|
Investment Income.
Investment income is determined primarily by the average investment balances held and the average yield on our overall portfolio.
|
•
|
Third-Party Reinsurance.
We use third-party reinsurance in our mortgage insurance business to manage capital and risk. When we enter into a reinsurance agreement, the reinsurer receives a premium and, in exchange, agrees to insure an agreed upon portion of any incurred losses. This arrangement has the impact of reducing our earned premiums but also reduces our net RIF, which provides capital relief to the insurance subsidiary ceding the RIF and reduces our incurred losses by any incurred losses ceded in accordance with the reinsurance agreement. In addition, the ceding commissions that we receive in connection with such reinsurance reduces our overall expenses. In the past, we also had entered into reinsurance transactions designed to transfer all or a portion of the risk associated with certain higher risk mortgage insurance products.
|
•
|
Premiums.
We earn premiums on our financial guaranty insurance policies and on other forms of credit protection we provide. In our financial guaranty business, premiums on public finance exposures are generally paid as single up-front premiums and are earned over the life of the contract. Premiums on our structured finance contracts are generally paid on a periodic basis (monthly or quarterly installment premiums) and are earned on a monthly basis. In addition, we recognize the remaining unearned premium revenue when securities that we insure are redeemed or otherwise retired (we refer to this activity as “refundings”) and this results in the extinguishment of the financial guaranty policies insuring such securities. Furthermore, our earned premiums are reduced by premiums ceded through reinsurance agreements. Since we have discontinued writing new financial guaranty insurance, our premiums earned have been reduced commensurate with the decrease in our net par outstanding.
|
•
|
Net Par Outstanding
. Our net par outstanding represents risk exposure on insured contracts. As noted above, our net par outstanding has been declining since we discontinued writing new financial guaranty business. The decline in our net par outstanding is driven by scheduled maturities within the financial guaranty portfolio and negotiated commutations and other transactions that we have entered into proactively to reduce our net par outstanding.
|
•
|
Changes in Fair Value of Obligations.
Many of our structured finance and some of our public finance contracts are accounted for as derivatives or variable interest entities (“VIEs”), which are carried at fair market value. Therefore, our results are impacted by changes in the fair value of these contracts. The estimated fair value of these obligations and instruments is measured as of a specific point in time and may be influenced by changes in interest rates, credit spreads (of both the underlying collateral as well as Radian Group Inc.’s (“Radian Group’s”) credit spread), credit ratings and other market, asset-class and transaction-specific conditions and factors that may be unrelated to our obligation to pay future claims.
|
•
|
Losses/Credit Performance
. Our financial guaranty incurred losses are driven primarily by economic conditions that affect the ability of the issuers of our insured obligations to meet such financial obligations and by changes in the assumptions used to determine our losses, including assumptions with respect to the likelihood, magnitude and timing of anticipated losses. Stronger economic conditions increase the likelihood that obligors will have the ability to pay interest and principal on the bonds we insure. Weaker economic conditions often place strains on the revenue flows available to pay interest and principal on our insured obligations. Other factors influencing defaults and incurred losses include:
|
-
|
Our ability, and the ability of the primary insurers (primarily subsidiaries of Assured Guaranty Ltd. (collectively “Assured”)) from whom we have ceded reinsurance, to mitigate claims;
|
-
|
The performance of the primary insurers from whom we have either ceded reinsurance or who have the primary obligation to pay claims on our second-to-pay obligations (if such primary insurers have financial difficulties, they may be unable or unwilling to devote sufficient resources to loss mitigation efforts or could fail to pay claims on transactions where we have second-to-pay obligations);
|
-
|
Real estate values, which can affect the ability of municipalities and other governmental entities to generate sufficient tax revenues to satisfy their financial obligations;
|
-
|
The potential impact of federal, state and local budgetary constraints affecting funding and payments (including Medicare and Medicaid payments) to healthcare, long-term care, educational and other governmental and non-governmental entities whose obligations we insure;
|
-
|
Potential changes to entitlement programs, such as Social Security, Medicare and Medicaid that could affect the ability of the entities whose obligations we insure to receive adequate reimbursement for the services they provide and for individuals and entities to utilize the services provided by the entities whose obligations we insure;
|
-
|
Performance of commercial and residential mortgage loans and other types of indebtedness that we insure;
|
-
|
The movement of interest rates (increases in interest rates will increase the interest component of the variable rate obligations we insure, and as a result, will increase the strain on the obligors to make payments on these obligations).
|
|
Three Months Ended
June 30, |
|
% Change
|
|
Six Months Ended
June 30, |
|
% Change
|
||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013 vs. 2012
|
|
2013
|
|
2012
|
|
2013 vs. 2012
|
||||||||||
Net loss
|
$
|
(33.2
|
)
|
|
$
|
(119.3
|
)
|
|
(72.2
|
)%
|
|
$
|
(220.7
|
)
|
|
$
|
(288.5
|
)
|
|
(23.5
|
)%
|
Net (losses) gains on investments
|
(130.3
|
)
|
|
26.4
|
|
|
n/m
|
|
|
(135.8
|
)
|
|
93.9
|
|
|
n/m
|
|
||||
Change in fair value of derivative instruments
|
86.5
|
|
|
(33.1
|
)
|
|
n/m
|
|
|
(81.1
|
)
|
|
(105.9
|
)
|
|
(23.4
|
)
|
||||
Provision for losses
|
140.3
|
|
|
210.9
|
|
|
(33.5
|
)
|
|
272.4
|
|
|
477.0
|
|
|
(42.9
|
)
|
||||
Other operating expenses
|
61.0
|
|
|
40.2
|
|
|
51.7
|
|
|
141.1
|
|
|
90.3
|
|
|
56.3
|
|
||||
Interest expense
|
19.4
|
|
|
12.6
|
|
|
54.0
|
|
|
35.3
|
|
|
26.7
|
|
|
32.2
|
|
||||
Income tax provision (benefit)
|
1.7
|
|
|
2.4
|
|
|
(29.2
|
)
|
|
(13.1
|
)
|
|
(6.5
|
)
|
|
n/m
|
|
|
Three Months Ended
June 30, |
|
% Change
|
|
Six Months Ended
June 30, |
|
% Change
|
||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013 vs. 2012
|
|
2013
|
|
2012
|
|
2013 vs. 2012
|
||||||||||
Pretax loss
|
$
|
(67.1
|
)
|
|
$
|
(33.2
|
)
|
|
n/m
|
|
|
$
|
(83.9
|
)
|
|
$
|
(90.2
|
)
|
|
(7.0
|
)%
|
Net premiums written—insurance
|
251.2
|
|
|
182.5
|
|
|
37.6
|
%
|
|
468.4
|
|
|
379.4
|
|
|
23.5
|
|
||||
Net premiums earned—insurance
|
198.0
|
|
|
170.8
|
|
|
15.9
|
|
|
380.9
|
|
|
344.2
|
|
|
10.7
|
|
||||
Net investment income
|
15.3
|
|
|
17.6
|
|
|
(13.1
|
)
|
|
30.4
|
|
|
35.6
|
|
|
(14.6
|
)
|
||||
Net (losses) gains on investments
|
(83.4
|
)
|
|
26.7
|
|
|
n/m
|
|
|
(86.6
|
)
|
|
58.9
|
|
|
n/m
|
|
||||
Net gains (losses) on other financial instruments
|
0.1
|
|
|
—
|
|
|
n/m
|
|
|
(1.8
|
)
|
|
(0.7
|
)
|
|
n/m
|
|
||||
Other income
|
2.2
|
|
|
1.3
|
|
|
69.2
|
|
|
3.9
|
|
|
2.6
|
|
|
50.0
|
|
||||
Provision for losses
|
136.4
|
|
|
208.1
|
|
|
(34.5
|
)
|
|
268.4
|
|
|
442.8
|
|
|
(39.4
|
)
|
||||
Change in reserve for premium deficiency (“PDR”)
|
1.3
|
|
|
0.6
|
|
|
n/m
|
|
|
0.6
|
|
|
0.5
|
|
|
20.0
|
|
||||
Policy acquisition costs
|
6.5
|
|
|
7.9
|
|
|
(17.7
|
)
|
|
18.2
|
|
|
16.5
|
|
|
10.3
|
|
||||
Other operating expenses
|
51.3
|
|
|
31.3
|
|
|
63.9
|
|
|
117.1
|
|
|
67.5
|
|
|
73.5
|
|
||||
Interest expense
|
3.7
|
|
|
1.7
|
|
|
n/m
|
|
|
6.4
|
|
|
3.4
|
|
|
88.2
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||||||||||||||
Primary NIW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prime
|
$
|
13,376
|
|
|
100.0
|
%
|
|
$
|
8,330
|
|
|
99.9
|
%
|
|
$
|
24,281
|
|
|
100.0
|
%
|
|
$
|
14,790
|
|
|
99.9
|
%
|
Alternative-A (“Alt-A”) and A minus and below
|
1
|
|
|
—
|
|
|
5
|
|
|
0.1
|
|
|
2
|
|
|
—
|
|
|
10
|
|
|
0.1
|
|
||||
Total Primary
|
$
|
13,377
|
|
|
100.0
|
%
|
|
$
|
8,335
|
|
|
100.0
|
%
|
|
$
|
24,283
|
|
|
100.0
|
%
|
|
$
|
14,800
|
|
|
100.0
|
%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||||||||||||||
Total primary NIW by FICO Score
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
>=740
|
$
|
9,666
|
|
|
72.3
|
%
|
|
$
|
6,326
|
|
|
75.9
|
%
|
|
$
|
17,876
|
|
|
73.6
|
%
|
|
$
|
11,246
|
|
|
76.0
|
%
|
680-739
|
3,256
|
|
|
24.3
|
|
|
1,816
|
|
|
21.8
|
|
|
5,654
|
|
|
23.3
|
|
|
3,216
|
|
|
21.7
|
|
||||
620-679
|
455
|
|
|
3.4
|
|
|
193
|
|
|
2.3
|
|
|
753
|
|
|
3.1
|
|
|
338
|
|
|
2.3
|
|
||||
Total Primary
|
$
|
13,377
|
|
|
100.0
|
%
|
|
$
|
8,335
|
|
|
100.0
|
%
|
|
$
|
24,283
|
|
|
100.0
|
%
|
|
$
|
14,800
|
|
|
100.0
|
%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Percentage of primary NIW
|
|
|
|
|
|
|
|
||||||||
Refinances
|
34
|
%
|
|
34
|
%
|
|
40
|
%
|
|
39
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
LTV (1)
|
|
|
|
|
|
|
|
||||||||
95.01% and above
|
2.3
|
%
|
|
1.3
|
%
|
|
2.1
|
%
|
|
1.5
|
%
|
||||
90.01% to 95.00%
|
44.8
|
%
|
|
42.6
|
%
|
|
42.5
|
%
|
|
40.9
|
%
|
||||
85.01% to 90.00%
|
37.5
|
%
|
|
41.4
|
%
|
|
38.3
|
%
|
|
41.5
|
%
|
||||
80.01% to 85.00%
|
15.4
|
%
|
|
14.7
|
%
|
|
17.1
|
%
|
|
16.1
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Primary risk written
|
$
|
3,301
|
|
|
$
|
2,040
|
|
|
$
|
5,890
|
|
|
$
|
3,571
|
|
(1)
|
LTV ratio: The percentage of the original loan amount to the original value of the property.
|
($ in millions)
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2012 |
|||||||||||||||
Primary IIF
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Flow
|
$
|
140,776
|
|
|
93.0
|
%
|
|
$
|
129,079
|
|
|
92.0
|
%
|
|
$
|
118,420
|
|
|
90.8
|
%
|
Structured
|
10,596
|
|
|
7.0
|
|
|
11,284
|
|
|
8.0
|
|
|
11,991
|
|
|
9.2
|
|
|||
Total Primary
|
$
|
151,372
|
|
|
100.0
|
%
|
|
$
|
140,363
|
|
|
100.0
|
%
|
|
$
|
130,411
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prime
|
$
|
135,818
|
|
|
89.7
|
%
|
|
$
|
123,437
|
|
|
87.9
|
%
|
|
$
|
112,112
|
|
|
86.0
|
%
|
Alt-A
|
9,557
|
|
|
6.3
|
|
|
10,447
|
|
|
7.5
|
|
|
11,383
|
|
|
8.7
|
|
|||
A minus and below
|
5,997
|
|
|
4.0
|
|
|
6,479
|
|
|
4.6
|
|
|
6,916
|
|
|
5.3
|
|
|||
Total Primary
|
$
|
151,372
|
|
|
100.0
|
%
|
|
$
|
140,363
|
|
|
100.0
|
%
|
|
$
|
130,411
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Persistency
(12 months ended)
|
|
|
80.3
|
%
|
|
|
|
81.8
|
%
|
|
|
|
83.9
|
%
|
($ in millions)
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2012 |
|||||||||||||||
Primary RIF
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Flow
|
$
|
34,842
|
|
|
93.7
|
%
|
|
$
|
31,891
|
|
|
92.8
|
%
|
|
$
|
29,200
|
|
|
91.8
|
%
|
Structured
|
2,355
|
|
|
6.3
|
|
|
2,481
|
|
|
7.2
|
|
|
2,609
|
|
|
8.2
|
|
|||
Total Primary
|
$
|
37,197
|
|
|
100.0
|
%
|
|
$
|
34,372
|
|
|
100.0
|
%
|
|
$
|
31,809
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prime
|
$
|
33,484
|
|
|
90.0
|
%
|
|
$
|
30,348
|
|
|
88.3
|
%
|
|
$
|
27,471
|
|
|
86.4
|
%
|
Alt-A
|
2,211
|
|
|
6.0
|
|
|
2,404
|
|
|
7.0
|
|
|
2,611
|
|
|
8.2
|
|
|||
A minus and below
|
1,502
|
|
|
4.0
|
|
|
1,620
|
|
|
4.7
|
|
|
1,727
|
|
|
5.4
|
|
|||
Total Primary
|
$
|
37,197
|
|
|
100.0
|
%
|
|
$
|
34,372
|
|
|
100.0
|
%
|
|
$
|
31,809
|
|
|
100.0
|
%
|
($ in millions)
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2012 |
|||||||||||||||
Total primary RIF by FICO Score
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Flow
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
>=740
|
$
|
19,120
|
|
|
54.9
|
%
|
|
$
|
16,448
|
|
|
51.6
|
%
|
|
$
|
13,868
|
|
|
47.5
|
%
|
680-739
|
10,258
|
|
|
29.4
|
|
|
9,686
|
|
|
30.4
|
|
|
9,265
|
|
|
31.7
|
|
|||
620-679
|
4,700
|
|
|
13.5
|
|
|
4,918
|
|
|
15.4
|
|
|
5,162
|
|
|
17.7
|
|
|||
<=619
|
764
|
|
|
2.2
|
|
|
839
|
|
|
2.6
|
|
|
905
|
|
|
3.1
|
|
|||
Total Flow
|
$
|
34,842
|
|
|
100.0
|
%
|
|
$
|
31,891
|
|
|
100.0
|
%
|
|
$
|
29,200
|
|
|
100.0
|
%
|
Structured
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
>=740
|
$
|
632
|
|
|
26.8
|
%
|
|
$
|
661
|
|
|
26.6
|
%
|
|
$
|
690
|
|
|
26.4
|
%
|
680-739
|
678
|
|
|
28.8
|
|
|
716
|
|
|
28.9
|
|
|
757
|
|
|
29.0
|
|
|||
620-679
|
623
|
|
|
26.5
|
|
|
661
|
|
|
26.6
|
|
|
698
|
|
|
26.8
|
|
|||
<=619
|
422
|
|
|
17.9
|
|
|
443
|
|
|
17.9
|
|
|
464
|
|
|
17.8
|
|
|||
Total Structured
|
$
|
2,355
|
|
|
100.0
|
%
|
|
$
|
2,481
|
|
|
100.0
|
%
|
|
$
|
2,609
|
|
|
100.0
|
%
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
>=740
|
$
|
19,752
|
|
|
53.1
|
%
|
|
$
|
17,109
|
|
|
49.8
|
%
|
|
$
|
14,558
|
|
|
45.8
|
%
|
680-739
|
10,936
|
|
|
29.4
|
|
|
10,402
|
|
|
30.3
|
|
|
10,022
|
|
|
31.5
|
|
|||
620-679
|
5,323
|
|
|
14.3
|
|
|
5,579
|
|
|
16.2
|
|
|
5,860
|
|
|
18.4
|
|
|||
<=619
|
1,186
|
|
|
3.2
|
|
|
1,282
|
|
|
3.7
|
|
|
1,369
|
|
|
4.3
|
|
|||
Total Primary
|
$
|
37,197
|
|
|
100.0
|
%
|
|
$
|
34,372
|
|
|
100.0
|
%
|
|
$
|
31,809
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Primary RIF on defaulted loans
|
$
|
3,624
|
|
|
|
|
$
|
4,320
|
|
|
|
|
$
|
4,628
|
|
|
|
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2012 |
|||
Percentage of primary RIF
|
|
|
|
|
|
|||
Refinances
|
32
|
%
|
|
32
|
%
|
|
32
|
%
|
Loan Type:
|
|
|
|
|
|
|||
Fixed
|
93.0
|
%
|
|
91.6
|
%
|
|
89.7
|
%
|
Adjustable rate mortgages
|
|
|
|
|
|
|||
Less than five years
|
2.8
|
%
|
|
3.5
|
%
|
|
4.2
|
%
|
Five years and longer
|
4.1
|
%
|
|
4.9
|
%
|
|
5.9
|
%
|
($ in millions)
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2012 |
|||||||||||||||
Total primary RIF by LTV
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
95.01% and above
|
$
|
4,349
|
|
|
11.7
|
%
|
|
$
|
4,643
|
|
|
13.5
|
%
|
|
$
|
4,960
|
|
|
15.6
|
%
|
90.01% to 95.00%
|
15,154
|
|
|
40.8
|
|
|
13,303
|
|
|
38.7
|
|
|
11,648
|
|
|
36.6
|
|
|||
85.01% to 90.00%
|
13,996
|
|
|
37.6
|
|
|
13,134
|
|
|
38.2
|
|
|
12,265
|
|
|
38.6
|
|
|||
85.00% and below
|
3,698
|
|
|
9.9
|
|
|
3,292
|
|
|
9.6
|
|
|
2,936
|
|
|
9.2
|
|
|||
Total Primary
|
$
|
37,197
|
|
|
100.0
|
%
|
|
$
|
34,372
|
|
|
100.0
|
%
|
|
$
|
31,809
|
|
|
100.0
|
%
|
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2012 |
||||||||||||
|
RIF
|
|
Reserve for Losses
|
|
RIF
|
|
Reserve for Losses
|
|
RIF
|
|
Reserve for Losses
|
||||||
Total primary RIF by policy year
|
|
|
|
|
|
|
|
|
|
|
|
||||||
2005 and prior
|
13.6
|
%
|
|
31.8
|
%
|
|
16.5
|
%
|
|
31.9
|
%
|
|
19.7
|
%
|
|
31.9
|
%
|
2006
|
6.8
|
|
|
17.9
|
|
|
8.0
|
|
|
17.9
|
|
|
9.3
|
|
|
18.3
|
|
2007
|
15.2
|
|
|
35.1
|
|
|
17.6
|
|
|
35.8
|
|
|
20.3
|
|
|
36.4
|
|
2008
|
11.5
|
|
|
13.3
|
|
|
13.3
|
|
|
12.9
|
|
|
15.3
|
|
|
12.2
|
|
2009
|
4.6
|
|
|
1.2
|
|
|
5.9
|
|
|
1.1
|
|
|
7.4
|
|
|
0.9
|
|
2010
|
3.8
|
|
|
0.3
|
|
|
5.0
|
|
|
0.3
|
|
|
6.4
|
|
|
0.2
|
|
2011
|
6.9
|
|
|
0.3
|
|
|
8.6
|
|
|
0.1
|
|
|
10.5
|
|
|
0.1
|
|
2012
|
21.9
|
|
|
0.1
|
|
|
25.1
|
|
|
—
|
|
|
11.1
|
|
|
—
|
|
2013
|
15.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
First-Lien Captives
|
|
|
|
|
|
|
|
||||||||
Premiums ceded to captives
|
$
|
4,787
|
|
|
$
|
6,289
|
|
|
$
|
9,939
|
|
|
$
|
12,718
|
|
% of total premiums
|
2.2
|
%
|
|
3.5
|
%
|
|
2.4
|
%
|
|
3.6
|
%
|
||||
IIF subject to captives (1)
|
5.2
|
%
|
|
8.9
|
%
|
|
|
|
|
||||||
RIF subject to captives (2)
|
5.0
|
%
|
|
7.7
|
%
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
||||||||
Initial QSR Transaction
|
|
|
|
|
|
|
|
||||||||
Ceded premiums written
|
$
|
5,900
|
|
|
$
|
25,477
|
|
|
$
|
12,022
|
|
|
$
|
25,477
|
|
% of premiums written
|
2.2
|
%
|
|
12.0
|
%
|
|
2.3
|
%
|
|
12.0
|
%
|
||||
Ceded premiums earned
|
$
|
7,662
|
|
|
$
|
3,098
|
|
|
$
|
15,495
|
|
|
$
|
3,098
|
|
% of total premiums
|
3.6
|
%
|
|
1.7
|
%
|
|
3.8
|
%
|
|
1.7
|
%
|
||||
Ceding commissions written
|
$
|
1,475
|
|
|
$
|
6,369
|
|
|
$
|
3,005
|
|
|
$
|
6,369
|
|
RIF included in QSR (3)
|
$
|
1,421,096
|
|
|
$
|
922,497
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Second QSR Transaction
|
|
|
|
|
|
|
|
||||||||
Ceded premiums written
|
$
|
7,580
|
|
|
$
|
—
|
|
|
$
|
24,020
|
|
|
$
|
—
|
|
% of premiums written
|
2.8
|
%
|
|
—
|
%
|
|
4.7
|
%
|
|
—
|
%
|
||||
Ceded premiums earned
|
$
|
4,283
|
|
|
$
|
—
|
|
|
$
|
7,121
|
|
|
$
|
—
|
|
% of total premiums
|
2.0
|
%
|
|
—
|
%
|
|
1.7
|
%
|
|
—
|
%
|
||||
Ceding commissions written
|
$
|
2,653
|
|
|
$
|
—
|
|
|
$
|
8,407
|
|
|
$
|
—
|
|
RIF included in QSR (3)
|
$
|
1,046,041
|
|
|
$
|
—
|
|
|
|
|
|
(1)
|
IIF on captives as a percentage of total IIF.
|
(2)
|
RIF on captives as a percentage of total RIF.
|
(3)
|
RIF ceded under QSR Transactions and included in total RIF.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net unrealized (losses) gains related to change in fair value of trading securities and other investments
|
$
|
(88.8
|
)
|
|
$
|
(5.3
|
)
|
|
$
|
(103.4
|
)
|
|
$
|
12.0
|
|
Net realized gains on sales
|
5.4
|
|
|
32.0
|
|
|
16.8
|
|
|
46.9
|
|
||||
Net (losses) gains on investments
|
$
|
(83.4
|
)
|
|
$
|
26.7
|
|
|
$
|
(86.6
|
)
|
|
$
|
58.9
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
New defaults
|
$
|
116.3
|
|
|
$
|
153.3
|
|
|
$
|
210.2
|
|
|
$
|
300.0
|
|
Existing defaults (1)
|
21.4
|
|
|
32.5
|
|
|
56.7
|
|
|
87.5
|
|
||||
Second-liens, Loss adjustment expenses (“LAE”) and Other (2)
|
(1.3
|
)
|
|
22.3
|
|
|
1.5
|
|
|
55.3
|
|
||||
Provision for losses
|
$
|
136.4
|
|
|
$
|
208.1
|
|
|
$
|
268.4
|
|
|
$
|
442.8
|
|
(1)
|
Represents the provision for losses attributable to loans that were in default as of the beginning of each period indicated, including: (a) the change in reserves for loans that were in default status (including pending claims) as of both the beginning and end of each period indicated; (b) the net impact to provision for losses from loans that were in default as of the beginning of each period indicated but which were cured (“cures”), were prepaid, or which resulted in a paid claim or a rescission or denial during the period indicated; and (c) the impact to our incurred but not reported (“IBNR”) reserve during the period related to changes in actual and estimated reinstatements of previously rescinded policies and denied claims.
|
(2)
|
Includes the effect of reinsurance recoveries from certain reinsurance transactions (including a $40 million write-down of Smart Home (defined below) recoverables in the first half of 2012), second-lien mortgage (“second-lien”) activity, LAE and other miscellaneous loss-related activity.
|
|
June 30, 2013
|
||||||||||||||||||||
|
|
|
|
|
Projected Default to Claim Rate
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
Gross (1)
|
|
Net (2)
|
|
Cure % During the Quarter
|
|
Reserve for Losses
|
|
% of Reserve
|
||||||||
($ in thousands)
|
#
|
|
%
|
|
%
|
|
%
|
|
%
|
|
$
|
|
%
|
||||||||
Missed payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Three payments or less
|
14,241
|
|
|
18.2
|
%
|
|
25
|
%
|
|
22
|
%
|
|
29.6
|
%
|
|
$
|
145,946
|
|
|
7.0
|
%
|
Four to eleven payments
|
15,927
|
|
|
20.3
|
|
|
49
|
|
|
45
|
|
|
15.3
|
|
|
350,513
|
|
|
16.9
|
|
|
Twelve payments or more
|
33,071
|
|
|
42.3
|
|
|
57
|
|
|
49
|
|
|
4.0
|
|
|
903,343
|
|
|
43.4
|
|
|
Pending claims
|
15,018
|
|
|
19.2
|
|
|
100
|
|
|
89
|
|
|
0.4
|
|
|
680,794
|
|
|
32.7
|
|
|
Total
|
78,257
|
|
|
100.0
|
%
|
|
58
|
%
|
|
51
|
%
|
|
|
|
2,080,596
|
|
|
100.0
|
%
|
||
IBNR
|
|
|
|
|
|
|
|
|
|
|
284,844
|
|
|
|
|||||||
LAE and Other
|
|
|
|
|
|
|
|
|
|
|
55,235
|
|
|
|
|||||||
Total primary reserves
|
|
|
|
|
|
|
|
|
|
|
$
|
2,420,675
|
|
|
|
|
June 30, 2012
|
||||||||||||||||||||
|
|
|
|
|
Projected Default to Claim Rate
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
Gross (1)
|
|
Net (2)
|
|
Cure % During the Quarter
|
|
Reserve for Losses
|
|
% of Reserve
|
||||||||
($ in thousands)
|
#
|
|
%
|
|
%
|
|
%
|
|
%
|
|
$
|
|
%
|
||||||||
Missed payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Three payments or less
|
16,898
|
|
|
17.2
|
%
|
|
25
|
%
|
|
23
|
%
|
|
26.4
|
%
|
|
$
|
178,146
|
|
|
7.1
|
%
|
Four to eleven payments
|
23,243
|
|
|
23.6
|
|
|
48
|
|
|
44
|
|
|
10.2
|
|
|
508,725
|
|
|
20.3
|
|
|
Twelve payments or more
|
41,571
|
|
|
42.2
|
|
|
57
|
|
|
47
|
|
|
2.7
|
|
|
1,084,479
|
|
|
43.4
|
|
|
Pending claims
|
16,738
|
|
|
17.0
|
|
|
100
|
|
|
84
|
|
|
0.2
|
|
|
729,382
|
|
|
29.2
|
|
|
Total
|
98,450
|
|
|
100.0
|
%
|
|
56
|
%
|
|
48
|
%
|
|
|
|
2,500,732
|
|
|
100.0
|
%
|
||
IBNR
|
|
|
|
|
|
|
|
|
|
|
221,893
|
|
|
|
|||||||
LAE and Other
|
|
|
|
|
|
|
|
|
|
|
74,386
|
|
|
|
|||||||
Total primary reserves
|
|
|
|
|
|
|
|
|
|
|
$
|
2,797,011
|
|
|
|
(1)
|
Represents the weighted average default to claim rate before consideration of estimated rescissions, denials and reinstatements for each category of defaulted loans.
|
(2)
|
Net of estimate of rescissions, denials and reinstatements.
|
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2012 |
|||
Default Statistics—Primary Insurance:
|
|
|
|
|
|
|||
Flow
|
|
|
|
|
|
|||
Prime
|
|
|
|
|
|
|||
Number of insured loans
|
675,246
|
|
|
630,094
|
|
|
588,335
|
|
Number of loans in default
|
45,899
|
|
|
55,483
|
|
|
57,961
|
|
Percentage of loans in default
|
6.80
|
%
|
|
8.81
|
%
|
|
9.85
|
%
|
Alt-A
|
|
|
|
|
|
|||
Number of insured loans
|
34,589
|
|
|
37,754
|
|
|
40,976
|
|
Number of loans in default
|
10,024
|
|
|
11,798
|
|
|
13,001
|
|
Percentage of loans in default
|
28.98
|
%
|
|
31.25
|
%
|
|
31.73
|
%
|
A minus and below
|
|
|
|
|
|
|||
Number of insured loans
|
32,204
|
|
|
35,150
|
|
|
37,755
|
|
Number of loans in default
|
9,240
|
|
|
11,211
|
|
|
11,688
|
|
Percentage of loans in default
|
28.69
|
%
|
|
31.89
|
%
|
|
30.96
|
%
|
Total Flow
|
|
|
|
|
|
|||
Number of insured loans
|
742,039
|
|
|
702,998
|
|
|
667,066
|
|
Number of loans in default
|
65,163
|
|
|
78,492
|
|
|
82,650
|
|
Percentage of loans in default
|
8.78
|
%
|
|
11.17
|
%
|
|
12.39
|
%
|
Structured
|
|
|
|
|
|
|||
Prime
|
|
|
|
|
|
|||
Number of insured loans
|
35,796
|
|
|
37,528
|
|
|
39,278
|
|
Number of loans in default
|
4,676
|
|
|
5,371
|
|
|
5,608
|
|
Percentage of loans in default
|
13.06
|
%
|
|
14.31
|
%
|
|
14.28
|
%
|
Alt-A
|
|
|
|
|
|
|||
Number of insured loans
|
15,156
|
|
|
16,315
|
|
|
17,435
|
|
Number of loans in default
|
3,707
|
|
|
4,207
|
|
|
5,053
|
|
Percentage of loans in default
|
24.46
|
%
|
|
25.79
|
%
|
|
28.98
|
%
|
A minus and below
|
|
|
|
|
|
|||
Number of insured loans
|
13,476
|
|
|
14,157
|
|
|
14,816
|
|
Number of loans in default
|
4,711
|
|
|
5,099
|
|
|
5,139
|
|
Percentage of loans in default
|
34.96
|
%
|
|
36.02
|
%
|
|
34.69
|
%
|
Total Structured
|
|
|
|
|
|
|||
Number of insured loans
|
64,428
|
|
|
68,000
|
|
|
71,529
|
|
Number of loans in default
|
13,094
|
|
|
14,677
|
|
|
15,800
|
|
Percentage of loans in default
|
20.32
|
%
|
|
21.58
|
%
|
|
22.09
|
%
|
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2012 |
|||
Default Statistics—Primary Insurance:
|
|
|
|
|
|
|||
Total Primary Insurance
|
|
|
|
|
|
|||
Prime
|
|
|
|
|
|
|||
Number of insured loans
|
711,042
|
|
|
667,622
|
|
|
627,613
|
|
Number of loans in default
|
50,575
|
|
|
60,854
|
|
|
63,569
|
|
Percentage of loans in default
|
7.11
|
%
|
|
9.12
|
%
|
|
10.13
|
%
|
Alt-A
|
|
|
|
|
|
|||
Number of insured loans
|
49,745
|
|
|
54,069
|
|
|
58,411
|
|
Number of loans in default
|
13,731
|
|
|
16,005
|
|
|
18,054
|
|
Percentage of loans in default
|
27.60
|
%
|
|
29.60
|
%
|
|
30.91
|
%
|
A minus and below
|
|
|
|
|
|
|||
Number of insured loans
|
45,680
|
|
|
49,307
|
|
|
52,571
|
|
Number of loans in default
|
13,951
|
|
|
16,310
|
|
|
16,827
|
|
Percentage of loans in default
|
30.54
|
%
|
|
33.08
|
%
|
|
32.01
|
%
|
Total Primary
|
|
|
|
|
|
|||
Number of insured loans
|
806,467
|
|
|
770,998
|
|
|
738,595
|
|
Number of loans in default
|
78,257
|
|
|
93,169
|
|
|
98,450
|
|
Percentage of loans in default
|
9.70
|
%
|
|
12.08
|
%
|
|
13.33
|
%
|
Default Statistics—Pool insurance:
|
|
|
|
|
|
|||
Number of loans in default
|
15,212
|
|
|
18,147
|
|
|
19,336
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
Beginning defaulted inventory
|
85,109
|
|
|
103,027
|
|
|
93,169
|
|
|
110,861
|
|
Plus: New defaults (1)
|
14,646
|
|
|
17,945
|
|
|
29,492
|
|
|
36,604
|
|
Less: Cures (1)
|
(13,464
|
)
|
|
(13,486
|
)
|
|
(30,361
|
)
|
|
(32,883
|
)
|
Less: Claims paid (2)
|
(6,593
|
)
|
|
(5,190
|
)
|
|
(12,153
|
)
|
|
(9,012
|
)
|
Less: Rescissions (3)
|
(249
|
)
|
|
(785
|
)
|
|
(436
|
)
|
|
(1,461
|
)
|
Less: Denials (4)
|
(1,192
|
)
|
|
(3,061
|
)
|
|
(1,454
|
)
|
|
(5,659
|
)
|
Ending defaulted inventory
|
78,257
|
|
|
98,450
|
|
|
78,257
|
|
|
98,450
|
|
(1)
|
Amounts reflected are compiled monthly based on reports received from loan servicers. The number of new defaults and cures presented includes the following monthly defaults that both defaulted and cured within the periods indicated:
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
Intra-period new defaults
|
5,002
|
|
|
5,379
|
|
|
15,908
|
|
|
17,780
|
|
(2)
|
Includes those charged to a deductible or captive.
|
(3)
|
Net of any previously rescinded policies that were reinstated during the period. Such reinstated rescissions may ultimately result in a paid claim.
|
(4)
|
Net of any denied claims that were reinstated during the period. Such previously denied but reinstated claims are generally reviewed for possible rescission prior to any claim payment. A significant number of denials in 2012 relate to loans serviced by one servicer.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
Rescinded policies:
|
|
|
|
|
|
|
|
||||
Rescinded
|
(534
|
)
|
|
(1,073
|
)
|
|
(975
|
)
|
|
(1,928
|
)
|
Reinstated
|
285
|
|
|
288
|
|
|
539
|
|
|
467
|
|
Denied claims:
|
|
|
|
|
|
|
|
||||
Denied
|
(2,677
|
)
|
|
(3,953
|
)
|
|
(4,783
|
)
|
|
(7,297
|
)
|
Reinstated
|
1,485
|
|
|
892
|
|
|
3,329
|
|
|
1,638
|
|
Total net rescissions and denials
|
(1,441
|
)
|
|
(3,846
|
)
|
|
(1,890
|
)
|
|
(7,120
|
)
|
(In millions)
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2012 |
||||||
Decrease to our loss reserve due to estimated future rescissions and denials, net
|
$
|
334
|
|
|
$
|
455
|
|
|
$
|
532
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Rescissions
|
$
|
19.6
|
|
|
$
|
64.7
|
|
|
$
|
34.9
|
|
|
$
|
117.4
|
|
Denials
|
100.0
|
|
|
192.7
|
|
|
127.2
|
|
|
405.1
|
|
||||
Total first-lien claims submitted for payment that were rescinded or denied (1)
|
$
|
119.6
|
|
|
$
|
257.4
|
|
|
$
|
162.1
|
|
|
$
|
522.5
|
|
(1)
|
Includes an amount related to a small number of submitted claims that were subsequently withdrawn by the insured.
|
Claim
Received
Quarter
|
|
Cumulative Rescission/Denial Rate for Each Quarter (1)
|
|
Percentage of
Total Claims Resolved (2)
|
Q4 2010
|
|
17.5%
|
|
100%
|
Q1 2011
|
|
21.0%
|
|
100%
|
Q2 2011
|
|
26.1%
|
|
99%
|
Q3 2011
|
|
31.8%
|
|
99%
|
Q4 2011
|
|
27.9%
|
|
98%
|
Q1 2012
|
|
24.1%
|
|
97%
|
Q2 2012
|
|
19.8%
|
|
91%
|
Q3 2012
|
|
17.2%
|
|
80%
|
Q4 2012
|
|
15.3%
|
|
62%
|
(1)
|
The cumulative rescission/denial rates represent the ratio of claims rescinded or denied to claims received (by claim count). Rescissions and denials are net of actual reinstatements, plus our current estimate for expected reinstatements of previously rescinded or denied claims (excluding certain potential reinstatements we are in the process of discussing with servicers). These amounts represent the cumulative rates for each quarter as of
June 30, 2013
. As discussed in footnote (2) below, these rates remain subject to change based on differences between estimated and actual reinstatements of previously rescinded policies or denied claims. Until all of the claims received during the periods shown have been internally resolved, the rescission/denial rates for each quarter are projections and remain subject to change.
|
(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, though such denials or rescissions could be challenged and, potentially reinstated or overturned. For the first and second quarter of
2013
, a significant portion of claims received for those quarters have not been internally resolved; therefore, we do not believe the cumulative rescission/denial rates for those periods are presently meaningful.
|
(In thousands)
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2012 |
||||||
Reserves for losses by category:
|
|
|
|
|
|
||||||
Prime
|
$
|
1,521,888
|
|
|
$
|
1,739,968
|
|
|
$
|
1,740,492
|
|
Alt-A
|
522,396
|
|
|
564,719
|
|
|
597,570
|
|
|||
A minus and below
|
317,964
|
|
|
361,533
|
|
|
361,104
|
|
|||
Reinsurance recoverables (1)
|
58,427
|
|
|
83,238
|
|
|
97,845
|
|
|||
Total primary reserves
|
2,420,675
|
|
|
2,749,458
|
|
|
2,797,011
|
|
|||
Pool
|
265,114
|
|
|
323,403
|
|
|
348,288
|
|
|||
Total first-lien reserves
|
2,685,789
|
|
|
3,072,861
|
|
|
3,145,299
|
|
|||
Second-lien and other (2)
|
5,072
|
|
|
10,747
|
|
|
10,044
|
|
|||
Total reserve for losses
|
$
|
2,690,861
|
|
|
$
|
3,083,608
|
|
|
$
|
3,155,343
|
|
|
|
|
|
|
|
||||||
PDR on second-liens
|
$
|
4,308
|
|
|
$
|
3,685
|
|
|
$
|
4,183
|
|
(1)
|
Represents ceded losses on captive transactions, Smart Home and the QSR Transactions.
|
(2)
|
Does not include second-lien PDR.
|
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2012 |
||||||
First-lien reserve per default
(1)
|
|
|
|
|
|
||||||
Primary reserve per default
|
$
|
30,932
|
|
|
$
|
29,510
|
|
|
$
|
28,410
|
|
Primary reserve per default excluding IBNR
|
27,293
|
|
|
26,408
|
|
|
26,157
|
|
|||
Pool reserve per default (2)
|
17,428
|
|
|
17,821
|
|
|
18,012
|
|
|||
Total first-lien reserve per default
|
28,735
|
|
|
27,605
|
|
|
26,704
|
|
(1)
|
Calculated as total reserves divided by total defaults.
|
(2)
|
If calculated before giving effect to deductibles and stop losses in pool transactions, the pool reserve per default at
June 30, 2013
,
December 2012
, and
June 30, 2012
, would have been
$29,846
, $27,545 and $27,949, respectively.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net claims paid (1):
|
|
|
|
|
|
|
|
||||||||
Prime
|
$
|
217,878
|
|
|
$
|
170,351
|
|
|
$
|
418,395
|
|
|
$
|
297,452
|
|
Alt-A
|
46,059
|
|
|
40,261
|
|
|
95,150
|
|
|
76,912
|
|
||||
A minus and below
|
33,213
|
|
|
31,112
|
|
|
60,699
|
|
|
57,192
|
|
||||
Total primary claims paid
|
297,150
|
|
|
241,724
|
|
|
574,244
|
|
|
431,556
|
|
||||
Pool
|
28,610
|
|
|
20,374
|
|
|
59,559
|
|
|
45,300
|
|
||||
Second-lien and other
|
614
|
|
|
1,349
|
|
|
2,498
|
|
|
4,932
|
|
||||
Subtotal
|
326,374
|
|
|
263,447
|
|
|
636,301
|
|
|
481,788
|
|
||||
Impact of captive terminations
|
—
|
|
|
—
|
|
|
—
|
|
|
(148
|
)
|
||||
Total net claims paid
|
$
|
326,374
|
|
|
$
|
263,447
|
|
|
$
|
636,301
|
|
|
$
|
481,640
|
|
|
|
|
|
|
|
|
|
||||||||
Average net claim paid (1) (2):
|
|
|
|
|
|
|
|
||||||||
Prime
|
$
|
46.0
|
|
|
$
|
47.1
|
|
|
$
|
47.4
|
|
|
$
|
48.6
|
|
Alt-A
|
52.5
|
|
|
56.4
|
|
|
56.1
|
|
|
57.8
|
|
||||
A minus and below
|
34.1
|
|
|
36.0
|
|
|
35.6
|
|
|
38.0
|
|
||||
Total average net primary claim paid
|
45.1
|
|
|
46.6
|
|
|
46.9
|
|
|
47.6
|
|
||||
Pool
|
74.9
|
|
|
65.9
|
|
|
74.2
|
|
|
66.9
|
|
||||
Second-lien and other
|
11.8
|
|
|
24.5
|
|
|
18.2
|
|
|
26.2
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total average net claim paid
|
$
|
46.5
|
|
|
$
|
47.4
|
|
|
$
|
48.3
|
|
|
$
|
48.5
|
|
Average direct primary claim paid (2) (3)
|
$
|
47.2
|
|
|
$
|
49.2
|
|
|
$
|
49.2
|
|
|
$
|
50.4
|
|
Average total direct claim paid (2) (3)
|
$
|
48.5
|
|
|
$
|
49.9
|
|
|
$
|
50.4
|
|
|
$
|
51.0
|
|
(1)
|
Net of reinsurance recoveries.
|
(2)
|
Calculated without giving effect to the impact of terminations of captive reinsurance transactions.
|
(3)
|
Before reinsurance recoveries.
|
•
|
In January 2013,
$6.7 million
of contingency reserves were released due to the commutation of the remaining
$822.2 million
net par reinsured by Radian Asset Assurance from Financial Guaranty Insurance Company (the “FGIC Commutation”), including substantially all of our exposure to general obligation bonds issued by the City of Detroit;
|
•
|
In February 2013, the New York State Department of Financial Services (“NYSDFS”) approved the release of an additional
$61.1 million
of contingency reserves resulting from the reduction in Radian Asset Assurance’s net par outstanding;
|
•
|
During the first half of 2013, in our financial guaranty business,
four
of our CDS counterparties exercised their termination rights with respect to
nine
collateralized debt obligations (“CDOs”) that we insured, and we agreed to the commutation of an additional CDO with another CDS counterparty (collectively, the “2013 CDO Terminations”), which reduced our net par outstanding by
$3.4 billion
in the aggregate; and
|
•
|
In July 2013, Radian Asset Assurance paid an ordinary dividend of
$36 million
to Radian Guaranty.
|
|
June 30, 2013
|
|||||||||||||
|
Net Par
Outstanding (1)
|
|
% of Total
Net Par
Outstanding (1)
|
|
Net
Claim (Asset)
Liability (2)
|
|
Fair Value
Net
Liability (3)
|
|||||||
Type of Obligation
|
(In billions)
|
|
|
|
(In millions)
|
|
(In millions)
|
|||||||
Public finance:
|
|
|
|
|
|
|
|
|||||||
General obligation and other tax supported (4)
|
$
|
5.5
|
|
|
20.1
|
%
|
|
$
|
13.7
|
|
|
$
|
0.2
|
|
Healthcare and long-term care
|
2.7
|
|
|
9.9
|
|
|
12.3
|
|
|
1.7
|
|
|||
Water/sewer/electric gas and investor-owned utilities
|
1.3
|
|
|
4.8
|
|
|
(7.8
|
)
|
|
1.1
|
|
|||
Education
|
1.2
|
|
|
4.4
|
|
|
(5.1
|
)
|
|
—
|
|
|||
Airports/transportation
|
1.0
|
|
|
3.7
|
|
|
1.8
|
|
|
52.7
|
|
|||
Escrowed transactions (5)
|
1.0
|
|
|
3.7
|
|
|
—
|
|
|
—
|
|
|||
Housing
|
0.1
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|||
Other public finance (6)
|
0.6
|
|
|
2.2
|
|
|
(12.6
|
)
|
|
0.8
|
|
|||
Total public finance (7)
|
13.4
|
|
|
49.1
|
|
|
2.3
|
|
|
56.5
|
|
|||
Structured finance:
|
|
|
|
|
|
|
|
|||||||
CDOs
|
13.1
|
|
|
48.0
|
|
|
4.0
|
|
|
206.7
|
|
|||
Asset-backed obligations
|
0.7
|
|
|
2.5
|
|
|
17.2
|
|
|
15.6
|
|
|||
Other structured (8)
|
0.1
|
|
|
0.4
|
|
|
—
|
|
|
0.1
|
|
|||
Total structured finance
|
13.9
|
|
|
50.9
|
|
|
21.2
|
|
|
222.4
|
|
|||
Total
|
$
|
27.3
|
|
|
100.0
|
%
|
|
$
|
23.5
|
|
|
$
|
278.9
|
|
|
December 31, 2012
|
|||||||||||||
|
Net Par
Outstanding (1)
|
|
% of Total
Net Par
Outstanding (1)
|
|
Net
Claim (Asset)
Liability (2)
|
|
Fair Value
Net Liability (3)
|
|||||||
Type of Obligation
|
(In billions)
|
|
|
|
(In millions)
|
|
(In millions)
|
|||||||
Public finance:
|
|
|
|
|
|
|
|
|||||||
General obligation and other tax supported (4)
|
$
|
6.3
|
|
|
18.7
|
%
|
|
$
|
10.0
|
|
|
$
|
0.1
|
|
Healthcare and long-term care
|
3.2
|
|
|
9.5
|
|
|
13.2
|
|
|
0.6
|
|
|||
Water/sewer/electric gas and investor-owned utilities
|
1.8
|
|
|
5.3
|
|
|
27.4
|
|
|
1.1
|
|
|||
Airports/transportation
|
1.2
|
|
|
3.6
|
|
|
(5.3
|
)
|
|
—
|
|
|||
Education
|
1.1
|
|
|
3.2
|
|
|
2.0
|
|
|
42.6
|
|
|||
Escrowed transactions (5)
|
1.0
|
|
|
3.0
|
|
|
—
|
|
|
—
|
|
|||
Housing
|
0.1
|
|
|
0.3
|
|
|
0.3
|
|
|
—
|
|
|||
Other Public finance (6)
|
0.6
|
|
|
1.8
|
|
|
(12.4
|
)
|
|
0.7
|
|
|||
Total public finance (7)
|
15.3
|
|
|
45.4
|
|
|
35.2
|
|
|
45.1
|
|
|||
Structured finance:
|
|
|
|
|
|
|
|
|||||||
CDOs
|
17.5
|
|
|
51.9
|
|
|
4.5
|
|
|
126.0
|
|
|||
Asset-backed obligations
|
0.8
|
|
|
2.4
|
|
|
24.6
|
|
|
13.2
|
|
|||
Other structured (8)
|
0.1
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|||
Total structured finance
|
18.4
|
|
|
54.6
|
|
|
29.1
|
|
|
139.2
|
|
|||
Total
|
$
|
33.7
|
|
|
100.0
|
%
|
|
$
|
64.3
|
|
|
$
|
184.3
|
|
(1)
|
Represents our exposure to the aggregate outstanding principal on insured obligations.
|
(2)
|
A net 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 the net (asset) liability recorded within derivative assets or derivative liabilities for derivative contracts.
|
(4)
|
Includes
$1.5 billion
and
$1.6 billion
at
June 30, 2013
and
December 31, 2012
, respectively, of tax supported revenue bonds.
|
(5)
|
Escrowed transactions are legally defeased bond issuances where our financial guaranty policy is not legally extinguished although 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. Although we have little to no remaining credit risk on these transactions, they remain outstanding for GAAP purposes.
|
(6)
|
Represents other types of municipal obligations, including human services 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.
|
(7)
|
Includes
$2.4 billion
and
$2.9 billion
at
June 30, 2013
and
December 31, 2012
, respectively, of international public finance insured obligations (which includes sovereign and sub-sovereign (“Sovereign”) indebtedness, of which
$99.2 million
and
$105.2 million
at
June 30, 2013
and
December 31, 2012
, respectively, is related to Greece, Spain, Italy, Hungary, Portugal and Ireland (collectively, the “Stressed European Countries”)).
|
(8)
|
Represents other types of structured finance obligations, including diversified payment rights, collateralized guaranteed investment contracts or letters of credit, foreign commercial assets and life insurance securitizations, none of which individually constitutes a material amount of our financial guaranty net par outstanding.
|
|
Three Months Ended
June 30, |
|
% Change
|
|
Six Months Ended
June 30, |
|
% Change
|
||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2013 vs. 2012
|
|
2013
|
|
2012
|
|
2013 vs. 2012
|
||||||||||
Pretax income (loss)
|
$
|
35.6
|
|
|
$
|
(83.6
|
)
|
|
n/m
|
|
|
$
|
(149.8
|
)
|
|
$
|
(204.7
|
)
|
|
(26.8
|
)%
|
Net premiums written—insurance
|
0.1
|
|
|
(0.6
|
)
|
|
n/m
|
|
|
(10.0
|
)
|
|
(119.8
|
)
|
|
(91.7
|
)
|
||||
Net premiums earned—insurance
|
15.2
|
|
|
16.0
|
|
|
(5.0
|
)%
|
|
24.8
|
|
|
9.9
|
|
|
n/m
|
|
||||
Net investment income
|
12.3
|
|
|
13.3
|
|
|
(7.5
|
)
|
|
24.1
|
|
|
30.0
|
|
|
(19.7
|
)
|
||||
Net (losses) gains on investments
|
(46.9
|
)
|
|
(0.3
|
)
|
|
n/m
|
|
|
(49.1
|
)
|
|
35.0
|
|
|
n/m
|
|
||||
Change in fair value of derivative instruments
|
86.6
|
|
|
(33.1
|
)
|
|
n/m
|
|
|
(81.1
|
)
|
|
(105.9
|
)
|
|
(23.4
|
)
|
||||
Net gains (losses) on other financial instruments
|
1.1
|
|
|
(61.9
|
)
|
|
n/m
|
|
|
(2.7
|
)
|
|
(79.0
|
)
|
|
(96.6
|
)
|
||||
Gain on sale of affiliate
|
—
|
|
|
7.7
|
|
|
(100.0
|
)
|
|
—
|
|
|
7.7
|
|
|
(100.0
|
)
|
||||
Other income
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
0.2
|
|
|
(50.0
|
)
|
||||
Provision for losses
|
3.9
|
|
|
2.8
|
|
|
39.3
|
|
|
4.0
|
|
|
34.2
|
|
|
(88.3
|
)
|
||||
Policy acquisition costs
|
3.5
|
|
|
2.9
|
|
|
20.7
|
|
|
9.0
|
|
|
22.3
|
|
|
(59.6
|
)
|
||||
Other operating expenses
|
9.7
|
|
|
8.9
|
|
|
9.0
|
|
|
24.0
|
|
|
22.8
|
|
|
5.3
|
|
||||
Interest expense
|
15.7
|
|
|
10.9
|
|
|
44.0
|
|
|
28.9
|
|
|
23.3
|
|
|
24.0
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net premiums earned:
|
|
|
|
|
|
|
|
||||||||
Public finance direct
|
$
|
8,614
|
|
|
$
|
14,147
|
|
|
$
|
15,814
|
|
|
$
|
24,360
|
|
Public finance reinsurance
|
5,903
|
|
|
822
|
|
|
7,350
|
|
|
5,592
|
|
||||
Structured direct
|
152
|
|
|
246
|
|
|
352
|
|
|
628
|
|
||||
Structured reinsurance
|
503
|
|
|
803
|
|
|
3,699
|
|
|
1,616
|
|
||||
Trade credit reinsurance
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
||||
Total premiums earned—insurance
|
15,172
|
|
|
16,016
|
|
|
27,215
|
|
|
32,194
|
|
||||
Impact of commutations/reinsurance
|
—
|
|
|
—
|
|
|
(2,447
|
)
|
|
(22,264
|
)
|
||||
Net premiums earned—insurance
|
$
|
15,172
|
|
|
$
|
16,016
|
|
|
$
|
24,768
|
|
|
$
|
9,930
|
|
|
|
|
|
|
|
|
|
||||||||
Refundings included in total net premiums earned
|
$
|
10,288
|
|
|
$
|
10,483
|
|
|
$
|
15,041
|
|
|
$
|
18,707
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net unrealized (losses) gains related to change in fair value of trading securities and other investments
|
$
|
(50.3
|
)
|
|
$
|
(9.8
|
)
|
|
$
|
(55.0
|
)
|
|
$
|
3.0
|
|
Net realized gains on sales
|
3.4
|
|
|
9.5
|
|
|
5.8
|
|
|
32.0
|
|
||||
Net (losses) gains on investments
|
$
|
(46.9
|
)
|
|
$
|
(0.3
|
)
|
|
$
|
(49.2
|
)
|
|
$
|
35.0
|
|
(In basis points)
|
June 30,
2013 |
|
December 31,
2012 |
|
June 30,
2012 |
|
December 31,
2011 |
||||
Radian Group’s five-year CDS spread
|
504
|
|
|
913
|
|
|
1,780
|
|
|
2,732
|
|
(In millions)
|
Fair Value Liability
before Consideration
of Radian Non-Performance Risk June 30, 2013
|
|
|
Impact of Radian
Non-Performance Risk June 30, 2013
|
|
|
Fair Value (Asset) Liability
Recorded
June 30, 2013
|
|
|||
Product
|
|
|
|
|
|
||||||
Corporate CDOs
|
$
|
34.9
|
|
|
$
|
36.5
|
|
|
$
|
(1.6
|
)
|
Non-Corporate CDO-related (1)
|
495.6
|
|
|
215.1
|
|
|
280.5
|
|
|||
Total
|
$
|
530.5
|
|
|
$
|
251.6
|
|
|
$
|
278.9
|
|
(In millions)
|
Fair Value Liability
before Consideration
of Radian Non-Performance Risk
December 31, 2012
|
|
|
Impact of Radian
Non-Performance Risk
December 31, 2012
|
|
|
Fair Value (Asset) Liability
Recorded
December 31, 2012
|
|
|||
Product
|
|
|
|
|
|
||||||
Corporate CDOs
|
$
|
98.8
|
|
|
$
|
101.6
|
|
|
$
|
(2.8
|
)
|
Non-Corporate CDO-related (1)
|
696.6
|
|
|
509.3
|
|
|
187.3
|
|
|||
Total
|
$
|
795.4
|
|
|
$
|
610.9
|
|
|
$
|
184.5
|
|
(1)
|
Includes the net fair value liability recorded within derivative assets and derivative liabilities, but does not include the net fair value liability of derivative assets or derivative liabilities within our consolidated VIEs, as Radian Group’s credit spread has no impact on the financial instruments in these VIEs.
|
(In millions)
|
Derivatives
and VIEs
|
||
Balance Sheet
|
|
||
Other invested assets
|
$
|
77.0
|
|
Derivative assets
|
7.0
|
|
|
Other assets
|
96.1
|
|
|
Total assets
|
180.1
|
|
|
Derivative liabilities
|
350.6
|
|
|
VIE debt - at fair value
|
95.8
|
|
|
Accounts payable and accrued expenses
|
0.3
|
|
|
Total liabilities
|
446.7
|
|
|
Total fair value net liabilities
|
$
|
266.6
|
|
|
|
||
Present value of estimated credit loss payments (recoveries) (1)
|
$
|
(77.2
|
)
|
(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 or receiving recoveries of losses already paid. In April 2012, as part of several CDO commutation transactions, we made a payment with respect to the Terminated TruPs CDOs for which we currently expect a full recovery. There are no significant credit loss payments expected on the remaining fair value derivatives or VIEs, and when combined with the salvage recovery expected on the Terminated TruPs CDOs, this results in an aggregate net recovery as of
June 30, 2013
. The present value is calculated using a discount rate of approximately
1.9%
, which approximates the average investment yield as reported in our most recently filed statutory financial statements.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net premiums earned—derivatives
|
$
|
4.8
|
|
|
$
|
7.3
|
|
|
$
|
9.8
|
|
|
$
|
15.9
|
|
Financial Guaranty credit derivatives
|
80.3
|
|
|
(39.2
|
)
|
|
(95.4
|
)
|
|
(119.4
|
)
|
||||
Financial Guaranty VIE derivatives
|
1.4
|
|
|
(1.2
|
)
|
|
4.5
|
|
|
(2.4
|
)
|
||||
Change in fair value of derivative instruments
|
$
|
86.5
|
|
|
$
|
(33.1
|
)
|
|
$
|
(81.1
|
)
|
|
$
|
(105.9
|
)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Losses related to change in fair value of financial guaranty VIE debt
|
$
|
(3.9
|
)
|
|
$
|
(68.3
|
)
|
|
$
|
(6.1
|
)
|
|
$
|
(101.8
|
)
|
Gains related to other financial guaranty VIE assets
|
5.0
|
|
|
5.9
|
|
|
8.3
|
|
|
9.3
|
|
||||
Gain (loss) on the purchase or exchange of long-term debt
|
—
|
|
|
0.7
|
|
|
(3.2
|
)
|
|
14.0
|
|
||||
Other
|
—
|
|
|
(0.2
|
)
|
|
(1.7
|
)
|
|
(0.5
|
)
|
||||
Net gains (losses) on other financial instruments
|
$
|
1.1
|
|
|
$
|
(61.9
|
)
|
|
$
|
(2.7
|
)
|
|
$
|
(79.0
|
)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Total net claims paid (recoveries)
|
$
|
2,825
|
|
|
$
|
(6,720
|
)
|
(1)
|
$
|
44,683
|
|
(2)
|
$
|
2,280
|
|
(1)
|
Reduction primarily due to salvage recovery on a prior claim.
|
(2)
|
Reflects the impact of the FGIC Commutation.
|
(In thousands)
|
June 30,
2013 |
|
December 31, 2012
|
|
June 30,
2012 |
||||||
Total reserve for losses
|
$
|
25,629
|
|
|
$
|
66,328
|
|
|
$
|
94,937
|
|
•
|
During the first
six
months of 2013, we exchanged
$195.5 million
of our outstanding
5.375%
Senior Notes due June 2015 for a new series of
9.000%
Senior Notes due June 2017 in order to improve our debt maturity profile. See Note 10 of Notes to Unaudited Condensed Consolidated Financial Statements for further information, including certain covenants to which we are subject.
|
•
|
On February 15, 2013, we repaid the remaining outstanding balance of $79.4 million of our 5.625% Senior Notes due February 2013.
|
•
|
In March 2013, we issued
$400 million
principal amount of the 2019 Convertible Senior Notes and received net proceeds of $389.8 million. See Note 10 of Notes to Unaudited Condensed Consolidated Financial Statements for further information, including certain covenants to which we are subject.
|
|
Six Months Ended
June 30, |
||||||
(In thousands)
|
2013
|
|
2012
|
||||
Net loss
|
$
|
(220,672
|
)
|
|
$
|
(288,491
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Net losses on investments and other financial instruments, change in fair value of derivatives and net impairment losses recognized in earnings
|
221,381
|
|
|
91,717
|
|
||
Net payments related to derivative contracts and VIE debt (1)
|
(9,265
|
)
|
|
(4,709
|
)
|
||
Net cash paid for commutations, terminations and recaptures (1)
|
(52,400
|
)
|
|
(240,110
|
)
|
||
Commutation-related charges
|
5,300
|
|
|
36,500
|
|
||
Gain on sale of affiliate
|
—
|
|
|
(7,708
|
)
|
||
Equity in net (income) loss of affiliates
|
(1
|
)
|
|
13
|
|
||
Distribution from affiliates
|
—
|
|
|
92
|
|
||
Deferred tax benefit
|
(24,468
|
)
|
|
(5,435
|
)
|
||
Depreciation and amortization, net
|
39,556
|
|
|
30,761
|
|
||
Change in:
|
|
|
|
||||
Reserve for losses and LAE
|
(391,846
|
)
|
|
(60,770
|
)
|
||
PDR
|
623
|
|
|
539
|
|
||
Unearned premiums
|
74,124
|
|
|
22,659
|
|
||
Deferred policy acquisition costs
|
14,475
|
|
|
14,320
|
|
||
Reinsurance recoverables
|
23,454
|
|
|
52,446
|
|
||
Other assets
|
9,681
|
|
|
10,095
|
|
||
Accounts payable and accrued expenses
|
18,488
|
|
|
(13,818
|
)
|
||
Cash flows used in operating activities
|
$
|
(291,570
|
)
|
|
$
|
(361,899
|
)
|
(1)
|
Cash item.
|
|
MOODY’S (1)
|
|
|
S&P (2)
|
|
Radian Group
|
Caa1
|
|
|
B-
|
|
Radian Guaranty
|
Ba3
|
|
|
B
|
|
Radian Insurance Inc. (“Radian Insurance”)
|
(3
|
)
|
|
(3
|
)
|
RMAI
|
Ba3
|
|
|
B
|
|
Radian Asset Assurance
|
Ba1
|
|
|
B+
|
|
(1)
|
Moody’s outlook for Radian Group and all of our rated mortgage insurance subsidiaries is currently Positive. Moody’s outlook for Radian Asset Assurance is currently Negative.
|
(2)
|
S&P’s outlook for Radian Group and all of our rated insurance subsidiaries is currently Stable.
|
(3)
|
Not currently rated.
|
Level I
|
— Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
|
Level II
|
— Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities; and
|
Level III
|
— Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
|
•
|
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); and
|
•
|
the financial position, access to capital and near term prospects of the issuer, including the current and future impact of any specific events.
|
Corporate CDOs ($ in millions)
|
|
|
|
|
|
||||||
Weighted average credit spread
|
0.35
|
%
|
|
|
|
|
|||||
Fair value of net assets
|
$
|
(1.6
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
||||||
|
Increase/(Decrease) in Fair Value Net Asset 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
|
$
|
(12.4
|
)
|
|
$
|
(15.3
|
)
|
|
$
|
(18.3
|
)
|
0 basis points change in Radian Group’s CDS spread
|
0.8
|
|
|
—
|
|
|
(0.9
|
)
|
|||
50% widening of Radian Group’s CDS spread
|
3.3
|
|
|
3.0
|
|
|
2.7
|
|
|||
_______________________
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Non-Corporate CDO-related (1) ($ in millions)
|
|
|
|
|
|
||||||
Weighted average credit spread
|
1.52
|
%
|
|
|
|
|
|||||
Fair value of net liabilities
|
$
|
264.0
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||||
|
Increase/(Decrease) in Fair Value Net 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
|
$
|
80.7
|
|
|
$
|
109.8
|
|
|
$
|
139.1
|
|
0 basis points change in Radian Group’s CDS spread
|
(25.6
|
)
|
|
—
|
|
|
26.0
|
|
|||
50% widening of Radian Group’s CDS spread
|
(59.6
|
)
|
|
(36.3
|
)
|
|
(12.6
|
)
|
(1)
|
Includes TruPs, CDOs of CMBS, and other non-corporate CDOs.
|
•
|
On December 30, 2011, a putative class action under RESPA titled White v. PNC Financial Services Group was filed in the U.S. District Court for the Eastern District of Pennsylvania. On September 29, 2012, plaintiffs filed an amended complaint. In this case, Radian Guaranty has insured the loan of
one
of the plaintiffs. On November 26, 2012, Radian Guaranty filed a motion to dismiss the plaintiffs’ claims as barred by the statute of limitations. On June 20, 2013, the court granted Radian Guaranty’s motion and dismissed plaintiffs’ claims, but granted plaintiffs leave to file a second amended complaint. Plaintiffs filed their second amended complaint on July 5, 2013. Radian Guaranty filed a motion to dismiss plaintiffs’ second amended complaint on July 22, 2013.
|
•
|
On January 13, 2012, a putative class action under RESPA titled Menichino, et al. v. Citibank, N.A., et al., was filed in the U.S. District Court for the Western District of Pennsylvania. Radian Guaranty was not named as a defendant in the original complaint. On December 4, 2012, plaintiffs amended their complaint to add Radian Guaranty as an additional defendant. In this case, Radian Guaranty has insured the loan of one of the plaintiffs. On February 4, 2013, Radian Guaranty filed a motion to dismiss the claims against it as barred by the statute of limitations. On July 19, 2013, the court granted Radian Guaranty’s motion and dismissed plaintiffs’ claims, but granted plaintiffs leave to file a second amended complaint.
|
•
|
On April 5, 2012, a putative class action under RESPA titled Riddle v. Bank of America Corporation, et al. was filed in the U.S. District Court for the Eastern District of Pennsylvania. On January 4, 2013, Radian Guaranty moved to dismiss plaintiffs’ claims as barred by the statute of limitations. The court denied that motion on April 11, 2013, and ordered a brief period of discovery limited to the statute of limitations issue. The discovery period was scheduled to end on June 14, 2013; however, on May 31, 2013, the plaintiffs voluntarily dismissed Radian Guaranty from the lawsuit because it did not insure any of their loans.
|
•
|
On April 5, 2012, a putative class action under RESPA titled Manners, et al. v. Fifth Third Bank, et al. was filed in the U.S. District Court for the Western District of Pennsylvania. On September 28, 2012, plaintiffs filed an amended complaint adding
three
borrowers whose loans were insured by Radian Guaranty. On November 28, 2012, Radian Guaranty moved to dismiss plaintiffs’ claims as barred by the statute of limitations. On July 19, 2013, the court granted Radian Guaranty’s motion and dismissed plaintiffs’ claims, but granted plaintiffs leave to file a second amended complaint.
|
•
|
On May 18, 2012, a putative class action under RESPA titled Hill, et al. v. Flagstar Bank FSB, et al. was filed in the U.S. District Court for the Eastern District of Pennsylvania. In this case, Radian Guaranty has insured the loan of one of the plaintiffs. On January 28, 2013, plaintiffs filed an amended complaint. On March 28, 2013, Radian Guaranty filed a motion to dismiss plaintiffs’ claims as barred by the statute of limitations. On June 27, 2013, the court denied that motion and ordered a brief period of discovery limited to the statute of limitations issue. The discovery period is scheduled to end on September 13, 2013.
|
•
|
On May 31, 2012, a putative class action under RESPA titled Barlee, et al. v. First Horizon National Corporation, et al. was filed in the U.S. District Court for the Eastern District of Pennsylvania. On October 9, 2012, plaintiffs filed an amended complaint, and on November 5, 2012, Radian Guaranty filed a motion to dismiss the amended complaint for lack of standing because it did not insure any of the plaintiffs’ loans. On February 27, 2013, the court granted Radian Guaranty’s motion to dismiss and Radian Guaranty has been dismissed from this lawsuit.
|
•
|
On June 28, 2012, a putative class action under RESPA titled Cunningham, et al. v. M&T Bank Corporation, et al. was filed in the U.S. District Court for the Middle District of Pennsylvania. On October 9, 2012, plaintiffs filed an amended complaint in which they added
one
borrower whose loan was insured by Radian Guaranty. On December 10, 2012, Radian Guaranty moved to dismiss plaintiffs’ claims as barred by the statute of limitations, and on February 11, 2013, plaintiffs filed an opposition to the motion to dismiss.
|
•
|
On January 4, 2013, a putative class action under RESPA titled Ba, et al. v. HSBC USA, Inc., et al., was filed in the U.S. District Court for the Eastern District of Pennsylvania. On February 26, 2013, Radian Guaranty moved to dismiss this lawsuit for lack of standing because it did not insure any of the plaintiffs’ loans. On March 25, 2013, plaintiffs voluntarily dismissed Radian Guaranty from this lawsuit.
|
Exhibit No.
|
|
Exhibit Name
|
3.1
|
|
Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated May 11, 2004 and filed on May 12, 2004)
|
3.2
|
|
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated May 22, 2008 and filed on May 29, 2008)
|
3.3
|
|
Second Amendment to the Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated May 12, 2010 and filed on May 18, 2010)
|
3.4
|
|
Certificate of Change of Registered Agent and Registered Office of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated November 10, 2010 and filed on November 16, 2010)
|
3.5
|
|
Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated October 9, 2009 and filed on October 13, 2009)
|
3.6
|
|
Certificate of Amendment of Certificate of Incorporation of Radian Group Inc. effective as of May 15, 2013 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated May 14, 2013 and filed on May 20, 2013)
|
*+10.1
|
|
2013 Performance-Based Restricted Stock Unit Grant Letter under the 2008 Equity Compensation Plan, dated as of May 14, 2013, between Radian Group Inc. and Sanford A. Ibrahim
|
*+10.2
|
|
2013 Stock Option Agreement under the 2008 Equity Compensation Plan, dated as of May 14, 2013, between Radian Group Inc. and Sanford A. Ibrahim
|
*+10.3
|
|
2013 Performance-Based Restricted Stock Unit Grant Letter under the 2008 Equity Compensation Plan, dated as of May 14, 2013, between Radian Group Inc. and C. Robert Quint
|
*+10.4
|
|
2013 Stock Option Agreement under the 2008 Equity Compensation Plan, dated as of May 14, 2013, between Radian Group Inc. and C. Robert Quint
|
*+10.5
|
|
Form of 2013 Performance-Based Restricted Stock Unit Agreement under the 2008 Equity Compensation Plan
|
*+10.6
|
|
Form of 2013 Stock Option Agreement under the 2008 Equity Compensation Plan
|
+10.7
|
|
Letter Agreement, dated May 16, 2013, between the Radian Group Inc. and S.A. Ibrahim (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated May 14, 2013 and filed on May 20, 2013)
|
*12
|
|
Statement of Ratio of Earnings to Fixed Charges and to Combined Fixed Charges and Preferred Stock Dividends
|
*31
|
|
Rule 13a - 14(a) Certifications
|
**32
|
|
Section 1350 Certifications
|
*101
|
|
Pursuant to Rule 405 of Regulation S-T, the following financial information from Radian Group Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, is formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012, (iii) Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2013 and 2012, (iv) Condensed Consolidated Statements of Changes in Common Stockholders’ Equity for the six months ended June 30, 2013 and 2012, (v) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012, and (vi) the Notes to Unaudited Condensed Consolidated Financial Statements.
|
|
Radian Group Inc.
|
|
|
August 9, 2013
|
/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
|
Exhibit No.
|
|
Exhibit Name
|
3.1
|
|
Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated May 11, 2004 and filed on May 12, 2004)
|
3.2
|
|
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated May 22, 2008 and filed on May 29, 2008)
|
3.3
|
|
Second Amendment to the Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated May 12, 2010 and filed on May 18, 2010)
|
3.4
|
|
Certificate of Change of Registered Agent and Registered Office of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated November 10, 2010 and filed on November 16, 2010)
|
3.5
|
|
Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated October 9, 2009 and filed on October 13, 2009)
|
3.6
|
|
Certificate of Amendment of Certificate of Incorporation of Radian Group Inc. effective as of May 15, 2013 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated May 14, 2013 and filed on May 20, 2013)
|
*+10.1
|
|
2013 Performance-Based Restricted Stock Unit Grant Letter under the 2008 Equity Compensation Plan, dated as of May 14, 2013, between Radian Group Inc. and Sanford A. Ibrahim
|
*+10.2
|
|
2013 Stock Option Agreement under the 2008 Equity Compensation Plan, dated as of May 14, 2013, between Radian Group Inc. and Sanford A. Ibrahim
|
*+10.3
|
|
2013 Performance-Based Restricted Stock Unit Grant Letter under the 2008 Equity Compensation Plan, dated as of May 14, 2013, between Radian Group Inc. and C. Robert Quint
|
*+10.4
|
|
2013 Stock Option Agreement under the 2008 Equity Compensation Plan, dated as of May 14, 2013, between Radian Group Inc. and C. Robert Quint
|
*+10.5
|
|
Form of 2013 Performance-Based Restricted Stock Unit Agreement under the 2008 Equity Compensation Plan
|
*+10.6
|
|
Form of 2013 Stock Option Agreement under the 2008 Equity Compensation Plan
|
+10.7
|
|
Letter Agreement, dated May 16, 2013, between the Radian Group Inc. and S.A. Ibrahim (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated May 14, 2013 and filed on May 20, 2013)
|
*12
|
|
Statement of Ratio of Earnings to Fixed Charges and to Combined Fixed Charges and Preferred Stock Dividends
|
*31
|
|
Rule 13a - 14(a) Certifications
|
**32
|
|
Section 1350 Certifications
|
*101
|
|
Pursuant to Rule 405 of Regulation S-T, the following financial information from Radian Group Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, is formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012, (iii) Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2013 and 2012, (iv) Condensed Consolidated Statements of Changes in Common Stockholders’ Equity for the six months ended June 30, 2013 and 2012, (v) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012, and (vi) the Notes to Unaudited Condensed Consolidated Financial Statements.
|
1.
|
Grant of Performance-Based Restricted Stock Units.
|
2.
|
Vesting.
|
•
|
($13.99 multiplied by 600%) multiplied by the Target Award of Restricted Stock Units,
|
•
|
Divided by the fair market value of a share of the Company's Common Stock on the Distribution Date.
|
|
Radian Group Inc.
|
/s/ Anita Scott
|
Anita Scott
|
SVP, Chief Human Resources Officer
|
•
|
If the relative TSR vesting percentage is 102% and the Company Absolute TSR vesting percentage is 70%, the vesting percentage for the Restricted Stock Units will be 70%.
|
•
|
If the relative TSR vesting percentage is 102% and the Company Absolute TSR vesting percentage is 150%, the vesting percentage for the Restricted Stock Units will be 102%.
|
Performance
(increments of +/- point differential)
|
Relative TSR Vesting Percentage
|
Maximum at 50% above Median
|
200%
|
+1% Company TSR above Median
|
102%
|
Median Peer Group TSR
|
100%
|
-1% Company TSR below Median
|
97%
|
Threshold at -34% below Median
|
—%
|
Date
|
Vested Shares subject to the Option
|
|
Radian Group Inc.
|
/s/ Anita Scott
|
Anita Scott
|
SVP, Chief Human Resources Officer
|
Acknowledged and Agreed by Award Recipient:
Signature:_____________________________________
Print Name:_____________________________________
Date:_____________________________________
|
•
|
($13.99 multiplied by 600%) multiplied by the Target Award of Restricted Stock Units,
|
•
|
Divided by the fair market value of a share of the Company's Common Stock on the Distribution Date.
|
5.
|
Certain Corporate Changes.
|
6.
|
Restrictive Covenants.
|
|
Radian Group Inc.
|
/s/ Anita Scott
|
Anita Scott
|
SVP, Chief Human Resources Officer
|
•
|
If the relative TSR vesting percentage is 102% and the Company Absolute TSR vesting percentage is 70%, the vesting percentage for the Restricted Stock Units will be 70%.
|
•
|
If the relative TSR vesting percentage is 102% and the Company Absolute TSR vesting percentage is 150%, the vesting percentage for the Restricted Stock Units will be 102%.
|
Performance
(increments of +/- point differential)
|
Relative TSR Vesting Percentage
|
Maximum at 50% above Median
|
200%
|
+1% Company TSR above Median
|
102%
|
Median Peer Group TSR
|
100%
|
-1% Company TSR below Median
|
97%
|
Threshold at -34% below Median
|
—%
|
Date
|
Vested Shares subject to the Option
|
|
Radian Group Inc.
|
/s/ Anita Scott
|
Anita Scott
|
SVP, Chief Human Resources Officer
|
Acknowledged and Agreed by Award Recipient:
Signature:_____________________________________
Print Name:_____________________________________
Date:_____________________________________
|
•
|
($13.99 multiplied by 600%) multiplied by the Target Award of Restricted Stock Units,
|
•
|
Divided by the fair market value of a share of the Company's Common Stock on the Distribution Date.
|
|
Radian Group Inc.
|
/s/ Anita Scott
|
Anita Scott
|
SVP, Chief Human Resources Officer
|
•
|
If the relative TSR vesting percentage is 102% and the Company Absolute TSR vesting percentage is 70%, the vesting percentage for the Restricted Stock Units will be 70%.
|
•
|
If the relative TSR vesting percentage is 102% and the Company Absolute TSR vesting percentage is 150%, the vesting percentage for the Restricted Stock Units will be 102%.
|
Performance
(increments of +/- point differential)
|
Relative TSR Vesting Percentage
|
Maximum at 50% above Median
|
200%
|
+1% Company TSR above Median
|
102%
|
Median Peer Group TSR
|
100%
|
-1% Company TSR below Median
|
97%
|
Threshold at -34% below Median
|
—%
|
Date
|
Vested Shares subject to the Option
|
|
Radian Group Inc.
|
/s/ Anita Scott
|
Anita Scott
|
SVP, Chief Human Resources Officer
|
(In thousands)
|
Six Months Ended
|
|
Fiscal Years Ended December 31,
|
||||||||||||||||||||
|
June 30, 2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
||||||||||||
Net (loss) earnings
|
$
|
(220,672
|
)
|
|
$
|
(451,468
|
)
|
|
$
|
302,150
|
|
|
$
|
(1,805,867
|
)
|
|
$
|
(147,879
|
)
|
|
$
|
(410,579
|
)
|
Federal and state income tax (benefit) provision
|
(13,058
|
)
|
|
7,271
|
|
|
66,362
|
|
|
226,189
|
|
|
(94,401
|
)
|
|
(263,550
|
)
|
||||||
(Loss) earnings before income taxes
|
(233,730
|
)
|
|
(444,197
|
)
|
|
368,512
|
|
|
(1,579,678
|
)
|
|
(242,280
|
)
|
|
(674,129
|
)
|
||||||
Equity in net (income) loss of affiliates
|
(1
|
)
|
|
13
|
|
|
(65
|
)
|
|
(14,668
|
)
|
|
(33,226
|
)
|
|
(59,797
|
)
|
||||||
Distributed income from equity investees
|
—
|
|
|
92
|
|
|
—
|
|
|
29,498
|
|
|
11,040
|
|
|
35,460
|
|
||||||
Net (loss) earnings
|
(233,731
|
)
|
|
(444,092
|
)
|
|
368,447
|
|
|
(1,564,848
|
)
|
|
(264,466
|
)
|
|
(698,466
|
)
|
||||||
Fixed charges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest
|
35,301
|
|
|
51,832
|
|
|
61,394
|
|
|
41,777
|
|
|
46,010
|
|
|
53,514
|
|
||||||
One-Third of all rentals
|
718
|
|
|
1,873
|
|
|
1,678
|
|
|
1,621
|
|
|
2,496
|
|
|
2,529
|
|
||||||
Fixed charges
|
36,019
|
|
|
53,705
|
|
|
63,072
|
|
|
43,398
|
|
|
48,506
|
|
|
56,043
|
|
||||||
Preferred dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Fixed charges and preferred dividends
|
36,019
|
|
|
53,705
|
|
|
63,072
|
|
|
43,398
|
|
|
48,506
|
|
|
56,043
|
|
||||||
Net (loss) earnings and fixed charges
|
$
|
(197,712
|
)
|
|
$
|
(390,387
|
)
|
|
$
|
431,519
|
|
|
$
|
(1,521,450
|
)
|
|
$
|
(215,960
|
)
|
|
$
|
(642,423
|
)
|
Net (loss) earnings, fixed charges and preferred dividends
|
$
|
(197,712
|
)
|
|
$
|
(390,387
|
)
|
|
$
|
431,519
|
|
|
$
|
(1,521,450
|
)
|
|
$
|
(215,960
|
)
|
|
$
|
(642,423
|
)
|
Ratio of net (loss) earnings and fixed charges to fixed charges
|
(1
|
)
|
|
(1
|
)
|
|
6.8x
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||||
Ratio of net (loss) earnings, fixed charges and preferred stock dividends to fixed charges and preferred stock dividends (2)
|
(1
|
)
|
|
(1
|
)
|
|
6.8x
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
(1)
|
For the
six
months ended
June 30, 2013
, and in 2012, 2010, 2009, and 2008, earnings were not adequate to cover fixed charges in the amount of
$197.7 million
,
$390.4 million
,
$1,521.5 million
,
$216.0 million
, and
$642.4 million
, respectively.
|
(2)
|
Interest on tax accruals that are non-third party indebtedness are excluded from the calculation.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Radian Group Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
|
Date: August 9, 2013
|
/s/ S
ANFORD
A. I
BRAHIM
|
|
Sanford A. Ibrahim
Chief Executive Officer
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
|
Date: August 9, 2013
|
/s/ C. R
OBERT
Q
UINT
|
|
C. Robert Quint
Chief Financial Officer
|
|
|
Date: August 9, 2013
|
/s/ S. A. I
BRAHIM
|
|
Sanford A. Ibrahim
|
|
|
|
/s/ C. R
OBERT
Q
UINT
|
|
C. Robert Quint
|