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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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Title of each class
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Name of each exchange on which registered
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Common Stock, $.001 par value per share
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New York Stock Exchange
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Preferred Stock Purchase Rights
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New York Stock Exchange
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Large accelerated filer
x
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Accelerated filer
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o
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Non-accelerated filer
o
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(Do not check if a smaller reporting company)
|
Smaller reporting company
|
o
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Form 10-K Reference Document
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Definitive Proxy Statement for the Registrant’s 2014 Annual Meeting of Stockholders
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Part III
(Items 10 through 14)
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Page
Number
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PART I
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Item 1
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Item 1A
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Item 1B
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Item 2
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Item 3
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Item 4
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PART II
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Item 5
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Item 6
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Item 7
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Item 7A
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Item 8
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Item 9
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Item 9A
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Item 9B
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PART III
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Item 10
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Item 11
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Item 12
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Item 13
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Item 14
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PART IV
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Item 15
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||
•
|
changes in general economic and political conditions, including unemployment rates, changes in the U.S. housing and mortgage credit markets (including declines in home prices and property values), the performance of the U.S. or global economies, the amount of liquidity in the capital or credit markets, changes or volatility in interest rates or consumer confidence and changes in credit spreads, all of which may be impacted by, among other things, legislative activity or inactivity, actual or threatened downgrades of U.S. government credit ratings, or actual or threatened defaults on U.S. government obligations;
|
•
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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;
|
•
|
catastrophic events, municipal and sovereign or sub-sovereign bankruptcy filings or other economic changes in geographic regions where our mortgage insurance exposure is more concentrated or where we have financial guaranty exposure;
|
•
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our ability to maintain sufficient holding company liquidity to meet our short- and long-term liquidity needs;
|
•
|
a reduction in, or prolonged period of depressed levels of, home mortgage originations due to reduced liquidity in the lending market, tighter underwriting standards, or 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”);
|
•
|
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 our insurance subsidiaries that provide reinsurance to Radian Guaranty;
|
•
|
our ability to continue to effectively mitigate our mortgage insurance and financial guaranty losses;
|
•
|
a more rapid than expected decrease in the 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 (including as part of one or more settlements of disputed rescissions or denials), or by Fannie Mae or Freddie Mac (the “Government-Sponsored Enterprises” or the “GSEs”) intervening in or otherwise limiting our loss mitigation practices, including settlements of disputes regarding loss mitigation activities;
|
•
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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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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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any disruption in the servicing of mortgages covered by our insurance policies, as well as poor servicer performance;
|
•
|
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;
|
•
|
a decrease i
n 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;
|
•
|
heightened competition for our mortgage insurance business from others such as the Federal Housing Administration, the U.S. Department of Veterans Affairs and other private mortgage insurers, including with respect to private mortgage in
surers, 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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changes in requirements to remain an eligible insurer to the GSEs (which are expected to be released in 2014 and implemented following a transition period), which may include, among other items, more onerous 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 the equity in our subsidiaries, including capital attributable to our financial guaranty business;
|
•
|
changes in the charters or business practices of, or rules or regulations applicable to, the GSEs;
|
•
|
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;
|
•
|
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;
|
•
|
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 Procedures 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 or future prospects;
|
•
|
the amount and timing of potential payments or adjustments associated with federal or other tax examinations, including adjustments proposed by the Internal Revenue Service resulting from the examination of our 2000 through 2007 tax years, which we are currently contesting;
|
•
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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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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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our ability to realize some or all of the tax benefits associated with our gross deferred tax assets, which will depend, in part, on our ability to generate sufficient sustainable taxable income in future periods;
|
•
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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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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.
|
Item 1.
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Business.
|
I.
|
General
|
•
|
We significantly tightened our mortgage insurance underwriting standards to focus primarily on insuring high credit quality, first-liens originated in the U.S. and we ceased writing mortgage insurance on non-traditional and other inherently riskier products
(referred to collectively, as “non-traditional” risk). See “—Mortgage Insurance—Business—
Traditional Risk
.”
|
•
|
We expanded our claims management and loss mitigation efforts to better manage losses in the weak housing market and high default and claim environment
.
|
•
|
Through risk commutations, ceded reinsurance and other transaction settlements and terminations of insured risk, we reduced our direct primary RIF associated with our mortgage insurance portfolio, including non-traditional mortgage insurance RIF.
|
•
|
We reduced our financial guaranty net par outstanding primarily through risk commutations, discounted security purchases, ceded reinsurance and transaction settlements and terminations.
|
•
|
We discontinued writing new financial guaranty business and Radian Group contributed its ownership interest in Radian Asset Assurance
to Radian Guaranty. Although this structure makes the capital adequacy of our mortgage insurance business dependent, to a significant degree, on the successful run-off of our financial guaranty business, the structure has provided Radian Guaranty with substantial regulatory capital and, through dividends from Radian Asset Assurance, has increased liquidity at Radian Guaranty
.
|
•
|
In 2013, we wrote $47.3 billion of primary mortgage insurance. Substantially all of our portfolio of insurance written after 2008 is of high credit quality and is expected to generate strong returns.
|
•
|
Through the expanded eligibility criteria under the most recent Home Affordable Refinance Program (“HARP”) (see “—Regulation—Federal Regulation—
Homeowner Assistance Programs
”), many borrowers have been able to participate in and benefit from the program. As of December 31, 2013, approximately 11% of our total primary RIF had successfully completed a HARP refinance, which we believe further improves the overall credit profile of our mortgage insurance portfolio.
|
•
|
We continued to diversify and expand our customer base, adding more than 200 new customers during 2013. Customers added since 2009 accounted for 46% of our new insurance written (“NIW”) during 2013.
|
•
|
During 2013, Radian Group executed the following transactions in order to improve its liquidity:
|
-
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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. See Note 11 of Notes to Consolidated Financial Statements for further information.
|
-
|
Issued $400 million principal amount of 2.250% convertible unsecured senior notes due March 2019 (the “Convertible Senior Notes due 2019”), resulting in net proceeds of approximately $389.8 million. See Note 11 of Notes to Consolidated Financial Statements for further information.
|
-
|
Sold 39.1 million shares of common stock in a public offering for $8.00 per share, resulting in net proceeds of approximately $299.4 million.
|
•
|
In August 2013, Radian Guaranty entered into a Master Transaction Agreement with Freddie Mac (the “Freddie Mac Agreement”) related to a group of 25,760 first-liens guaranteed by Freddie Mac that were insured by Radian Guaranty and were in default as of December 31, 2011.
The Freddie Mac Agreement caps Radian Guaranty’s total exposure on the entire population of loans subject to the agreement to $840 million.
The maximum exposure of $840 million is comprised of $625 million of claim payments (consisting of $370 million of claims previously paid on this population of loans prior to July 12, 2013, which is the measurement date for purposes of the transaction, and an additional $255 million paid at closing) and $215 million related to rescissions, denials, claim curtailments and cancellations (“Loss Mitigation Activity”) on these loans.
See Notes 7 and 9 of Notes to Consolidated Financial Statements for additional information regarding this agreement.
|
•
|
Radian Asset Assurance continued to reduce its financial guaranty portfolio and provide capital support to Radian Guaranty. Since we stopped writing new financial guaranty business in June 2008, Radian Asset Assurance’s total net par exposure has been reduced by
79.3%
to
$23.9 billion
. From 2008 through the end of 2013, Radian Asset Assurance has released financial guaranty contingency reserves of
$424.8 million
(which has increased Radian Guaranty’s statutory surplus by an equal amount) and has paid
$419.8 million
in dividends to Radian Guaranty. See “—Financial Guaranty—Business.”
|
II.
|
Mortgage Insurance
|
A.
|
Business
|
1.
|
Traditional Risk
|
2.
|
Non-Traditional Risk
|
3.
|
Premium Rates
|
4.
|
Underwriting
|
B.
|
Direct Risk in Force
|
|
December 31,
|
||||||
(In millions)
|
2013
|
|
2012
|
||||
Primary:
|
|
|
|
||||
Prime
|
$
|
36,613
|
|
|
$
|
30,348
|
|
Alt-A
|
2,017
|
|
|
2,404
|
|
||
A minus and below
|
1,387
|
|
|
1,620
|
|
||
Total Primary
|
40,017
|
|
|
34,372
|
|
||
Pool
|
1,604
|
|
|
1,834
|
|
||
Second-lien, NIMS and other
|
97
|
|
|
148
|
|
||
Total Direct Mortgage Insurance RIF
|
$
|
41,718
|
|
|
$
|
36,354
|
|
•
|
general economic conditions (in particular home prices and unemployment);
|
•
|
the age of the loans insured;
|
•
|
the geographic dispersion of the properties securing the insured loans and the condition of the housing market;
|
•
|
the quality of underwriting decisions at loan origination; and
|
•
|
the credit characteristics of the borrower and the characteristics of the loans insured (including loan-to-value (“LTV”), purpose of the loan, type of loan instrument, source of down payment, and type of underlying property securing the loan).
|
1.
|
Direct Primary RIF by Year of Policy Origination
|
|
December 31, 2013
|
|||||||||||||||||
($ in millions)
|
RIF
|
|
Number of Defaults
|
|
Delinquency Rate
|
|
Percentage of Reserve for Losses
|
|
Average FICO (1) at Origination
|
|
Original Average LTV
|
|||||||
2005 and prior
|
$
|
4,461
|
|
|
24,254
|
|
|
16.0
|
%
|
|
32.9
|
%
|
|
680
|
|
|
90.4
|
%
|
2006
|
2,326
|
|
|
10,440
|
|
|
17.5
|
|
|
18.0
|
|
|
690
|
|
|
91.5
|
|
|
2007
|
5,247
|
|
|
17,158
|
|
|
15.2
|
|
|
34.5
|
|
|
702
|
|
|
92.9
|
|
|
2008
|
3,950
|
|
|
7,174
|
|
|
8.9
|
|
|
12.1
|
|
|
727
|
|
|
91.1
|
|
|
2009
|
1,448
|
|
|
815
|
|
|
2.5
|
|
|
1.2
|
|
|
755
|
|
|
90.0
|
|
|
2010
|
1,206
|
|
|
247
|
|
|
1.0
|
|
|
0.4
|
|
|
764
|
|
|
91.2
|
|
|
2011
|
2,263
|
|
|
266
|
|
|
0.6
|
|
|
0.4
|
|
|
762
|
|
|
91.8
|
|
|
2012
|
7,710
|
|
|
392
|
|
|
0.3
|
|
|
0.4
|
|
|
761
|
|
|
91.8
|
|
|
2013
|
11,406
|
|
|
163
|
|
|
0.1
|
|
|
0.1
|
|
|
756
|
|
|
92.1
|
|
|
Total
|
$
|
40,017
|
|
|
60,909
|
|
|
|
|
|
100.0
|
%
|
|
|
|
|
(1)
|
Fair Isaac Corporation (“FICO”).
|
2.
|
Geographic Dispersion
|
|
December 31,
|
||||||||||
|
2013
|
|
2012
|
||||||||
Top Ten States
|
RIF
|
|
Reserve for Losses
|
|
RIF
|
|
Reserve for Losses
|
||||
California
|
13.7
|
%
|
|
8.2
|
%
|
|
12.8
|
%
|
|
10.5
|
%
|
Texas
|
6.5
|
|
|
3.0
|
|
|
6.3
|
|
|
2.9
|
|
Florida
|
6.2
|
|
|
18.3
|
|
|
6.8
|
|
|
17.9
|
|
Illinois
|
5.6
|
|
|
6.8
|
|
|
5.5
|
|
|
6.8
|
|
Georgia
|
4.4
|
|
|
3.4
|
|
|
4.4
|
|
|
3.8
|
|
New Jersey
|
4.0
|
|
|
7.8
|
|
|
4.0
|
|
|
6.2
|
|
Ohio
|
3.4
|
|
|
3.3
|
|
|
3.8
|
|
|
3.2
|
|
Virginia
|
3.4
|
|
|
1.4
|
|
|
3.2
|
|
|
1.5
|
|
New York
|
3.3
|
|
|
7.7
|
|
|
3.6
|
|
|
5.9
|
|
Pennsylvania
|
3.3
|
|
|
3.5
|
|
|
3.3
|
|
|
2.9
|
|
Total
|
53.8
|
%
|
|
63.4
|
%
|
|
53.7
|
%
|
|
61.6
|
%
|
|
December 31,
|
||||||||||
|
2013
|
|
2012
|
||||||||
Top Fifteen MSAs
|
RIF
|
|
Reserve for Losses
|
|
RIF
|
|
Reserve for Losses
|
||||
Chicago, IL
|
4.6
|
%
|
|
5.7
|
%
|
|
4.4
|
%
|
|
5.6
|
%
|
Atlanta, GA
|
3.4
|
|
|
2.6
|
|
|
3.4
|
|
|
3.0
|
|
Los Angeles - Long Beach, CA
|
2.9
|
|
|
1.8
|
|
|
2.6
|
|
|
2.0
|
|
Washington, DC-MD-VA
|
2.8
|
|
|
1.8
|
|
|
2.6
|
|
|
1.7
|
|
Phoenix/Mesa, AZ
|
2.4
|
|
|
1.2
|
|
|
2.4
|
|
|
2.1
|
|
Houston, TX
|
2.0
|
|
|
1.0
|
|
|
2.0
|
|
|
1.0
|
|
New York, NY
|
1.9
|
|
|
4.6
|
|
|
2.1
|
|
|
3.5
|
|
Denver, CO
|
1.9
|
|
|
0.5
|
|
|
1.7
|
|
|
0.6
|
|
Minneapolis-St. Paul, MN-WI
|
1.9
|
|
|
0.9
|
|
|
1.7
|
|
|
1.2
|
|
Dallas, TX
|
1.8
|
|
|
0.7
|
|
|
1.6
|
|
|
0.7
|
|
Philadelphia, PA
|
1.6
|
|
|
1.2
|
|
|
1.5
|
|
|
1.0
|
|
Riverside-San Bernardino, CA
|
1.6
|
|
|
1.6
|
|
|
1.5
|
|
|
2.0
|
|
San Diego, CA
|
1.5
|
|
|
0.6
|
|
|
1.2
|
|
|
0.7
|
|
Seattle, WA
|
1.4
|
|
|
1.4
|
|
|
1.4
|
|
|
1.5
|
|
Portland, OR
|
1.4
|
|
|
0.9
|
|
|
1.3
|
|
|
0.9
|
|
Total
|
33.1
|
%
|
|
26.5
|
%
|
|
31.4
|
%
|
|
27.5
|
%
|
3.
|
Mortgage Loan Characteristics
|
|
December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Prime
|
$
|
195.8
|
|
|
$
|
184.9
|
|
|
$
|
174.2
|
|
Alt-A
|
190.0
|
|
|
193.2
|
|
|
196.3
|
|
|||
A minus and below
|
129.9
|
|
|
131.4
|
|
|
131.9
|
|
|||
Total
|
$
|
192.1
|
|
|
$
|
182.1
|
|
|
$
|
172.8
|
|
C.
|
Defaults and Claims
|
|
December 31,
|
||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||||||||
States with highest number of defaults:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Florida
|
9,530
|
|
|
15.6
|
%
|
|
15,415
|
|
|
16.5
|
%
|
|
18,265
|
|
|
16.5
|
%
|
Illinois
|
3,776
|
|
|
6.2
|
|
|
6,034
|
|
|
6.5
|
|
|
6,869
|
|
|
6.2
|
|
New York
|
3,632
|
|
|
6.0
|
|
|
4,586
|
|
|
4.9
|
|
|
4,572
|
|
|
4.1
|
|
New Jersey
|
3,503
|
|
|
5.8
|
|
|
4,587
|
|
|
4.9
|
|
|
4,523
|
|
|
4.1
|
|
California
|
3,221
|
|
|
5.3
|
|
|
6,101
|
|
|
6.5
|
|
|
8,457
|
|
|
7.6
|
|
|
Year Ended December 31,
|
|||||||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2011
|
|||||||||||||||
Direct claims paid by origination year (first-lien):
|
|
|||||||||||||||||||
2005 and prior
|
$
|
303
|
|
|
25.7
|
%
|
|
$
|
268
|
|
|
26.4
|
%
|
|
$
|
333
|
|
|
22.7
|
%
|
2006
|
239
|
|
|
20.3
|
|
|
194
|
|
|
19.1
|
|
|
331
|
|
|
22.5
|
|
|||
2007
|
446
|
|
|
37.9
|
|
|
403
|
|
|
39.8
|
|
|
634
|
|
|
43.1
|
|
|||
2008
|
169
|
|
|
14.3
|
|
|
137
|
|
|
13.5
|
|
|
166
|
|
|
11.3
|
|
|||
2009
|
15
|
|
|
1.3
|
|
|
11
|
|
|
1.1
|
|
|
6
|
|
|
0.4
|
|
|||
2010
|
4
|
|
|
0.3
|
|
|
1
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|||
2011
|
2
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total direct claims paid
|
$
|
1,178
|
|
|
100.0
|
%
|
|
$
|
1,014
|
|
|
100.0
|
%
|
|
$
|
1,470
|
|
|
100.0
|
%
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
States with highest direct claims paid (first-lien):
|
|
|
|
|
|
||||||
Florida
|
$
|
247.6
|
|
|
$
|
138.8
|
|
|
$
|
216.2
|
|
California
|
201.5
|
|
|
168.0
|
|
|
255.7
|
|
|||
Illinois
|
108.2
|
|
|
56.8
|
|
|
64.8
|
|
|||
Arizona
|
72.8
|
|
|
83.8
|
|
|
139.7
|
|
|||
Georgia
|
63.5
|
|
|
57.1
|
|
|
78.4
|
|
D.
|
Claims Management
|
(1)
|
pay the maximum liability—determined by multiplying the claim amount (which consists of the unpaid loan principal, plus past due interest (up to a maximum of two years) and certain expenses associated with the default) by the applicable coverage percentage—and allow the insured lender to keep title to the property;
|
(2)
|
pay the amount of the claim required to make the lender whole, commonly referred to as the “deficiency amount” (not to exceed our maximum liability), following an approved sale; or
|
(3)
|
pay the full claim amount and acquire title to the property.
|
•
|
a review to ensure compliance with applicable loan origination programs and our mortgage insurance policy requirements, including: (i) whether the loan qualified for insurance at the time the certificate of coverage was issued; and (ii) whether the insured has satisfied its obligation in meeting all necessary conditions in order for us to pay a claim (commonly referred to as “claim perfection”), including submitting all necessary documentation in connection with the claim;
|
•
|
analysis and prompt processing to ensure that valid claims are paid in an accurate and timely manner;
|
•
|
responses to loss mitigation opportunities presented by the insured; and
|
•
|
aggressive management and disposal of acquired real estate.
|
•
|
a failure to report information to us on a timely basis as required under our master insurance policy;
|
•
|
a failure to pursue loss mitigation opportunities presented by borrowers, realtors and/or any other interested parties;
|
•
|
a failure to pursue loan modifications and/or refinancings through programs available to borrowers or an undue delay in presenting claims to us (including as a result of improper handling of foreclosure proceedings), which increases the interest (up to a maximum of two years) or other components of a claim we are required to pay; and
|
•
|
a failure to initiate and diligently pursue foreclosure or other appropriate proceedings within the timeframe specified in our master insurance policy.
|
E.
|
Risk Management
|
1.
|
Risk Origination and Servicing
|
2.
|
Portfolio Management
|
3.
|
Credit Analytics
|
4.
|
Reinsurance—Ceded
|
F.
|
Customers
|
G.
|
Sales, Marketing and Customer Support
|
H.
|
Competition
|
III.
|
Financial Guaranty
|
A.
|
Business
|
•
|
Public Finance
—Insurance of public finance obligations, including tax-exempt and taxable indebtedness of states, counties, cities, special service districts, other political subdivisions, enterprises such as public and private higher education institutions and health care facilities and infrastructure, project finance and private finance initiative assets in sectors such as airports, education, healthcare and other infrastructure projects;
|
•
|
Structured Finance
—Insurance of structured finance obligations, including collateralized debt obligations (“CDOs”) and asset-backed securities (“ABS”), consisting of funded and non-funded (referred to as “synthetic”) executions that are payable from or tied to the performance of a specific pool of assets or covered reference entities. Examples of the pools of assets that collateralize or underlie our structured finance obligations include corporate loans, bonds or other borrowed money, residential and commercial mortgage loans, trust preferred securities (“TruPs”), diversified payment rights (“DPRs”), a variety of consumer loans, equipment receivables, real and personal property leases or a combination of asset classes or securities backed by one or more of these pools of assets; and
|
•
|
Reinsurance
—Reinsurance of domestic and international public finance obligations, including those issued by sovereign and sub-sovereign (collectively, “Sovereign”) entities, and structured finance obligations of the types described above.
|
•
|
In January 2013, Radian Asset Assurance commuted the remaining
$822.2 million
net par that had been reinsured by Radian Asset Assurance from Financial Guaranty Insurance Company (“FGIC”), including approximately
$195.9 million
of our
$225.3 million
net par outstanding,
as of December 31, 2012 related to Jefferson County, Alabama sewer warrants, a large distressed public finance credit. This commutation also included all of our exposure to general obligation bonds issued by the City of Detroit, except for $7.9 million, as of December 31, 2013. Radian Asset Assurance paid FGIC
$52.4 million
as part of this transaction (the “FGIC Commutation”), which payment approximated our existing loss reserves and unearned premium reserves on the commuted transactions
;
|
•
|
During 2013, we agreed with a counterparty in our financial guaranty business to commute a $105 million corporate
CDO
transaction (the “2013 CDO Commutation”), and four other financial guaranty CDS counterparties exercised their termination rights on a walkaway basis (meaning that our counterparty was not obligated to pay any unaccrued premium or other amount to terminate the transaction) with respect to ten corporate CDOs and a second-to-pay CDO of corporate loans that we insured (collectively, with the 2013 CDO Commutation, the “CDO Early Terminations”). These CDO Early Terminations reduced our financial guaranty net par outstanding by $3.9 billion in the aggregate. There was no material impact on our financial statements as a result of these terminations
. In January 2014, a counterparty to a $450 million AAA-rated CDO of commercial mortgage-backed security (“CMBS”) exercised its right to terminate the transaction on a walkaway basis; and
|
•
|
In 2013, we released an aggregate of
$67.8 million
of statutory contingency reserves as a result of the general reduction in Radian Asset Assurance’s net par outstanding as well as the FGIC Commutation.
|
1.
|
Public Finance
|
2.
|
Structured Finance
|
3.
|
Reinsurance
|
4.
|
Second-to-pay Obligations
|
5.
|
Premium Rates
|
B.
|
Net Par Outstanding
|
1.
|
Aggregate Financial Guaranty Net Par Outstanding
|
|
December 31,
|
||||||||||||
|
2013
|
|
2012
|
||||||||||
($ in billions)
|
Net Par
Outstanding (1)
|
|
% of Total
Net Par
Outstanding (1)
|
|
Net Par
Outstanding (1)
|
|
% of Total
Net Par
Outstanding (1)
|
||||||
Type of Obligation
|
|
|
|
|
|
||||||||
Public finance:
|
|
|
|
|
|
|
|
||||||
General obligation and other tax supported
|
$
|
5.3
|
|
|
22.2
|
%
|
|
$
|
6.3
|
|
|
18.7
|
%
|
Healthcare and long-term care
|
2.4
|
|
|
10.0
|
|
|
3.2
|
|
|
9.5
|
|
||
Water/sewer/electric gas and investor-owned utilities
|
1.3
|
|
|
5.4
|
|
|
1.8
|
|
|
5.3
|
|
||
Education
|
1.1
|
|
|
4.6
|
|
|
1.2
|
|
|
3.6
|
|
||
Airports/transportation
|
0.9
|
|
|
3.8
|
|
|
1.1
|
|
|
3.2
|
|
||
Escrowed transactions (2)
|
0.9
|
|
|
3.8
|
|
|
1.0
|
|
|
3.0
|
|
||
Housing
|
0.1
|
|
|
0.4
|
|
|
0.1
|
|
|
0.3
|
|
||
Other municipal (3)
|
0.5
|
|
|
2.1
|
|
|
0.6
|
|
|
1.8
|
|
||
Total public finance
|
12.5
|
|
|
52.3
|
|
|
15.3
|
|
|
45.4
|
|
||
Structured finance:
|
|
|
|
|
|
|
|
||||||
CDO
|
10.7
|
|
|
44.8
|
|
|
17.5
|
|
|
51.9
|
|
||
Asset-backed obligations
|
0.6
|
|
|
2.5
|
|
|
0.8
|
|
|
2.4
|
|
||
Other structured (4)
|
0.1
|
|
|
0.4
|
|
|
0.1
|
|
|
0.3
|
|
||
Total structured finance
|
11.4
|
|
|
47.7
|
|
|
18.4
|
|
|
54.6
|
|
||
Total
|
$
|
23.9
|
|
|
100.0
|
%
|
|
$
|
33.7
|
|
|
100.0
|
%
|
(1)
|
Represents our exposure to the aggregate outstanding principal on insured obligations. We are also responsible for the timely payment of interest on substantially all of our public finance and our non-corporate CDO structured finance obligations. For our insured corporate CDOs and CDOs of CMBS, net par outstanding represents the notional amount of credit protection we are providing on a pool of obligations.
|
(2)
|
Escrowed transactions are legally defeased bond issuances where cash or U.S. government securities in an amount sufficient to pay the 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, our insurance policies remain outstanding under accounting principles generally accepted in the United States of America (“GAAP”).
|
(3)
|
Represents other types of municipal obligations, including human service providers, second-to-pay international public finance, non-profit institutions, project finance accommodations and stadiums, none of which individually constitutes a material amount of our financial guaranty net par outstanding.
|
(4)
|
Represents other types of structured finance obligations, including DPRs, collateralized guaranteed investment contracts or letters of credit, foreign commercial assets and life insurance securitizations, none of which individually constitutes a material amount of our financial guaranty net par outstanding. We no longer have exposure to DPRs as of December 31, 2013.
|
2.
|
Internal Ratings of our Financial Guaranty Net Par Outstanding
|
|
December 31,
|
||||||||||||
|
2013
|
|
2012
|
||||||||||
($ in billions)
|
Net Par
Outstanding
|
|
Percent
|
|
Net Par
Outstanding
|
|
Percent
|
||||||
Internal Credit Rating (1)
|
|
||||||||||||
AAA
|
$
|
9.2
|
|
|
38.5
|
%
|
|
$
|
15.2
|
|
|
45.1
|
%
|
AA
|
1.1
|
|
|
4.6
|
|
|
1.6
|
|
|
4.7
|
|
||
A
|
3.1
|
|
|
13.0
|
|
|
3.6
|
|
|
10.7
|
|
||
BBB
|
8.3
|
|
|
34.7
|
|
|
10.5
|
|
|
31.2
|
|
||
BIG
|
2.2
|
|
|
9.2
|
|
|
2.8
|
|
|
8.3
|
|
||
Total
|
$
|
23.9
|
|
|
100.0
|
%
|
|
$
|
33.7
|
|
|
100.0
|
%
|
(1)
|
Represents our internal ratings estimates assigned to these credits utilizing our internal rating system. See “—Risk Management” below. Each rating within a letter category includes all rating grades within that letter category (e.g., an “A” rating includes “A+,” “A” and “A-”).
|
3.
|
Geographic Distribution of Insured Portfolio
|
|
December 31,
|
||||
State
|
2013
|
|
2012
|
||
Domestic Public Finance by State:
|
|
|
|
||
California
|
7.4
|
%
|
|
6.2
|
%
|
New Jersey
|
4.1
|
|
|
3.7
|
|
Pennsylvania
|
2.8
|
|
|
2.5
|
|
Colorado
|
2.5
|
|
|
1.9
|
|
Texas
|
2.3
|
|
|
1.9
|
|
Illinois
|
2.2
|
|
|
1.6
|
|
Puerto Rico
|
1.9
|
|
|
1.6
|
|
Washington
|
1.5
|
|
|
1.1
|
|
Florida
|
1.5
|
|
|
1.1
|
|
New York
|
1.4
|
|
|
1.5
|
|
Other states
|
10.9
|
|
|
11.1
|
|
Total Domestic Public Finance
|
38.5
|
|
|
34.2
|
|
Escrowed Public Finance (1)
|
3.8
|
|
|
2.8
|
|
International Public Finance
|
10.0
|
|
|
8.4
|
|
Total Public Finance
|
52.3
|
%
|
|
45.4
|
%
|
(1)
|
The geographic breakdown of our Escrowed Public Finance is not relevant given that amounts due to be paid on these transactions have been collateralized and deposited with a trustee in an escrow account.
|
|
December 31,
|
||||||
|
2013
|
|
2012
|
||||
(In millions)
|
Net Par
Outstanding
|
|
Net Par
Outstanding
|
||||
Type of Obligation
|
|
|
|
|
|||
International Public Finance:
|
|
|
|
||||
Non-European International Public Finance
|
$
|
1,078.0
|
|
|
$
|
1,386.9
|
|
Europe (other than “Stressed European Countries” below)
|
1,223.0
|
|
|
1,360.7
|
|
||
Stressed European Countries (1):
|
|
|
|
||||
Spain
|
49.3
|
|
|
47.7
|
|
||
Italy
|
25.1
|
|
|
28.9
|
|
||
Hungary
|
21.9
|
|
|
22.5
|
|
||
Portugal
|
4.9
|
|
|
6.1
|
|
||
Total Stressed European Countries
|
101.2
|
|
|
105.2
|
|
||
International Structured Finance (2)
|
722.3
|
|
|
3,497.2
|
|
||
Total International Financial Guaranty Obligations (3)
|
$
|
3,124.5
|
|
|
$
|
6,350.0
|
|
(1)
|
Represents the six countries (Portugal, Italy, Ireland, Greece, Spain and Hungary) whose Sovereign obligations have been under particular stress in recent years due to economic uncertainty, potential restructuring and ratings downgrades. As of December 31, 2013, we have no net par exposure to Sovereign obligations in Greece or Ireland.
|
(2)
|
We consider an insured CDO transaction to be international if the jurisdiction where the largest portion of such transaction’s obligors or obligations, as applicable, is domiciled, is outside of the U.S. We consider our other structured finance insured obligations to be international if the issuer of such obligation is domiciled outside of the U.S.
|
(3)
|
As of December 31, 2013 and 2012,
$172.9 million
and $171.8 million, respectively, of our international public finance net par outstanding is Sovereign indebtedness.
|
4.
|
Largest Single Insured Risks
|
|
Internal
Credit
Rating (1)
|
|
Obligation Type
|
|
Aggregate
Net Par Outstanding as of |
||
Credit
|
|
|
December 31, 2013
|
||||
|
|
|
|
|
(In millions)
|
||
State of California
|
BBB
|
|
General Obligations
|
|
$
|
570.6
|
|
North Bay Plenary Health Canadian Hospital (Assured Primary Insurer)
|
AAA
|
|
Healthcare
|
|
332.2
|
|
|
State of New Jersey
|
A
|
|
General Obligations
|
|
311.8
|
|
|
New Jersey, Transportation Trust Fund Authority
|
A
|
|
General Obligations
|
|
309.3
|
|
|
New Jersey Economic Development Authority School FAC
|
A
|
|
General Obligations
|
|
233.9
|
|
|
Puerto Rico, Commonwealth GO (2) (3)
|
BIG
|
|
General Obligations
|
|
225.5
|
|
|
Puerto Rico Highway and Transportation Authority (3)
|
BIG
|
|
Tax-Backed
|
|
175.7
|
|
|
Reliance Rail Finance Pty LTD (4)
|
BIG
|
|
Transportation
|
|
164.5
|
|
|
Thames Water Utilities Finance PLC
|
A
|
|
Investor Owned Utilities
|
|
128.5
|
|
|
United Utilities Water PLC (Syncora Guarantee Inc. (“Syncora”) Primary Insurer)
|
A
|
|
Investor Owned Utilities
|
|
115.0
|
|
|
|
|
|
|
|
$
|
2,567.0
|
|
(1)
|
Represents our internal ratings category assigned to these credits utilizing our internal rating system. Each letter category includes all rating grades within that letter category (e.g., an “A” rating includes “A+,” “A” and “A-”).
|
(2)
|
Includes exposure to Puerto Rico Public Buildings Authority, which is guaranteed by Puerto Rico.
|
(3)
|
We downgraded this exposure from the BBB category to the BB category in February 2014.
|
(4)
|
Represents second-to-pay exposure, either directly written or assumed, where the primary insurer is either Syncora (
$103.7 million
) or FGIC (
$60.8 million
).
|
|
Internal
Credit
Rating
|
|
Obligation Type
|
|
Scheduled
Maturity
Date
|
|
Aggregate Net
Par Outstanding
as of
|
||
Credit
|
|
|
|
December 31, 2013
|
|||||
|
|
|
|
|
|
|
(In millions)
|
||
10-Yr Static Synthetic Investment-Grade Corporate CDO
|
AAA
|
|
Corporate CDO
|
|
2017
|
|
$
|
600.0
|
|
10-Yr Static Synthetic Investment-Grade Corporate CDO
|
AAA
|
|
Corporate CDO
|
|
2017
|
|
600.0
|
|
|
10-Yr Static Synthetic Investment-Grade Corporate CDO
|
AAA
|
|
Corporate CDO
|
|
2017
|
|
600.0
|
|
|
10-Yr Static Synthetic Investment-Grade Corporate CDO
|
AAA
|
|
Corporate CDO
|
|
2017
|
|
600.0
|
|
|
10-Yr Static Synthetic Investment-Grade Corporate CDO
|
AAA
|
|
Corporate CDO
|
|
2017
|
|
600.0
|
|
|
Static Synthetic CDO of CMBS
|
AAA
|
|
CDO of CMBS
|
|
2049
|
(1)
|
598.5
|
|
|
10-Yr Static Synthetic Investment-Grade Corporate CDO
|
AAA
|
|
Corporate CDO
|
|
2017
|
|
562.5
|
|
|
Static Synthetic CDO of CMBS
|
AAA
|
|
CDO of CMBS
|
|
(2)
|
|
450.0
|
|
|
10-Yr Static Synthetic Investment-Grade Corporate CDO
|
AAA
|
|
Corporate CDO
|
|
2017
|
|
450.0
|
|
|
7-Yr Static Synthetic Investment-Grade Corporate CDO
|
AAA
|
|
Corporate CDO
|
|
2014
|
|
449.4
|
|
|
|
|
|
|
|
|
|
$
|
5,510.4
|
|
(1)
|
While the legal scheduled maturity date is in 2049, the expected maturity is in 2016.
|
(2)
|
Terminated in January 2014 due to our counterparty exercising its right to terminate the transaction on a walkaway basis.
|
5.
|
Corporate CDO Portfolio—Industry Concentration
|
Industry Classification
|
% of Total
Notional
|
|
Telecommunications
|
7.4
|
%
|
Financial Intermediaries
|
6.1
|
|
Industrial Equipment
|
5.6
|
|
Retail (excluding food and drug)
|
5.6
|
|
Utilities
|
5.0
|
|
Total of five largest industry concentrations
|
29.7
|
%
|
C.
|
Defaults and Claims
|
D.
|
Risk Management
|
Internal Rating Category
(1)
|
Rating is Assigned When our Analysis Indicates
:
|
AAA
|
the obligor’s capacity to meet its financial commitment on the obligation is extremely strong and it is subject to the lowest level of credit risk
|
AA
|
the obligor’s capacity to meet its financial commitment on the obligation is very strong and it is subject to very low credit risk
|
A
|
the obligor’s capacity to meet its financial commitment on the obligation is strong, but it is somewhat more susceptible to adverse changes in circumstances or economic conditions than higher rated obligations and it is subject to low credit risk
|
BBB
|
the obligor’s capacity to meet its financial commitment on the obligation is adequate, but adverse changes in circumstances or economic conditions are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation and it is subject to moderate credit risk
|
BB
|
the obligation faces significant ongoing uncertainties or exposure to adverse business, financial or economic conditions, which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation and it is subject to substantial credit risk
|
B
|
adverse business, financial or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation even though the obligor currently has the capacity to meet its financial commitments on the obligation and it is subject to high credit risk
|
CCC
|
the obligation is currently vulnerable to nonpayment and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation and it is subject to very high credit risk
|
CC
|
the obligation is currently highly vulnerable to nonpayment, and absent favorable business, financial and economic conditions, the obligor is highly likely not to have the financial capacity to meet its financial commitment on the obligation and it is subject to extremely high credit risk
|
C
|
the obligation is currently extremely vulnerable to nonpayment and payment default is imminent, but the obligation has not yet experienced a payment default
|
D
|
there is currently a payment default on the obligation
|
(1)
|
Our internal ratings may be modified by the addition of a “+” or “-” to show the relative standing within a letter category.
|
E.
|
Customers
|
IV.
|
Investment Policy and Portfolio
|
•
|
At least 75% of our investment portfolio, based on market value, must consist of investment securities that are assigned a quality designation of NAIC 1 by the National Association of Insurance Commissioners (“NAIC”) or equivalent ratings by a NRSRO (i.e., “A-” or better by S&P and “A3” or better by Moody’s Investor Service (“Moody’s”));
|
•
|
A maximum of 15% of our investment portfolio, based on market value, may consist of investment securities that are assigned a quality designation of NAIC 2 by the NAIC or equivalent ratings by a NRSRO (i.e., “BBB+” to “BBB-” by S&P and “Baa1” to “Baa3” by Moody’s); and
|
•
|
A maximum of 10% of our investment portfolio, based on market value, may consist of investment securities that are assigned quality designations NAIC 3 through 6 or equivalent ratings by a NRSRO (i.e., “BB+” and below by S&P and “Ba1” and below by Moody’s) and other investments not assigned NAIC quality designations (generally equity).
|
A.
|
Investment Portfolio Diversification
|
|
Fair
Value
|
|
Percent
|
|||
($ in millions)
|
|
|
|
|||
U.S. government and agency securities (1)
|
$
|
402.9
|
|
|
8.2
|
%
|
State and municipal obligations
|
621.4
|
|
|
12.6
|
|
|
Money market instruments
|
672.6
|
|
|
13.6
|
|
|
Corporate bonds and notes
|
1,036.6
|
|
|
21.0
|
|
|
RMBS (2)
|
560.4
|
|
|
11.4
|
|
|
CMBS
|
288.9
|
|
|
5.8
|
|
|
Other ABS (3)
|
195.8
|
|
|
4.0
|
|
|
Foreign government and agency securities
|
40.7
|
|
|
0.8
|
|
|
Equity securities (4)
|
225.8
|
|
|
4.6
|
|
|
Other investments (5)
|
136.4
|
|
|
2.7
|
|
|
Short-term investments—U.S. government treasury bills
|
756.6
|
|
|
15.3
|
|
|
Total
|
$
|
4,938.1
|
|
|
100.0
|
%
|
(1)
|
Substantially all of these securities are backed by the full faith and credit of the U.S. government.
|
(2)
|
These RMBS are guaranteed by Fannie Mae, Freddie Mac or Government National Mortgage Association (“Ginnie Mae”).
|
(3)
|
Primarily comprised of AAA-rated obligations.
|
(4)
|
Comprised of broadly diversified domestic equity mutual funds ($128.3 million fair value) and various preferred and common stocks invested across numerous companies and industries ($97.5 million fair value).
|
(5)
|
Includes $54.3 million (fair value) of investments that have a carrying value of $47.4 million, which represents amortized cost, as well as a guaranteed investment contract that is accounted for at fair value.
|
B.
|
Investment Portfolio Scheduled Maturity
|
|
Fair
Value
|
|
Percent
|
|||
($ in millions)
|
|
|
|
|||
Short-term investments
|
$
|
1,429.2
|
|
|
28.9
|
%
|
Due in one year or less (1)
|
178.2
|
|
|
3.6
|
|
|
Due after one year through five years (1)
|
493.6
|
|
|
10.0
|
|
|
Due after five years through ten years (1)
|
825.6
|
|
|
16.7
|
|
|
Due after ten years (1)
|
686.3
|
|
|
13.9
|
|
|
RMBS (2)
|
560.4
|
|
|
11.4
|
|
|
CMBS (2)
|
288.9
|
|
|
5.8
|
|
|
Other ABS (2)
|
195.8
|
|
|
4.0
|
|
|
Other investments (3)
|
280.1
|
|
|
5.7
|
|
|
Total
|
$
|
4,938.1
|
|
|
100.0
|
%
|
(1)
|
Actual maturities may differ as a result of calls before scheduled maturity.
|
(2)
|
RMBS, CMBS and other ABS are shown separately, as they are not due at a single maturity date.
|
(3)
|
No stated maturity date.
|
C.
|
Investment Portfolio by Rating
|
|
Fair
Value
|
|
Percent
|
|||
($ in millions)
|
|
|
|
|||
Rating (1)
|
|
|
|
|||
AAA (2)
|
$
|
2,886.1
|
|
|
58.5
|
%
|
AA
|
421.5
|
|
|
8.5
|
|
|
A
|
932.8
|
|
|
18.9
|
|
|
BBB
|
348.7
|
|
|
7.1
|
|
|
BB and below (3)
|
37.9
|
|
|
0.8
|
|
|
Not rated
|
25.7
|
|
|
0.5
|
|
|
Equity securities
|
150.1
|
|
|
3.0
|
|
|
Other invested assets (4)
|
135.3
|
|
|
2.7
|
|
|
Total
|
$
|
4,938.1
|
|
|
100.0
|
%
|
(1)
|
Reflects the highest NRSRO rating assigned to the security as of
December 31, 2013
.
|
(2)
|
Includes $402.9 million of AAA-rated U.S. government and agency securities, $508.8 million in Ginnie Mae securities, $31.0 million in Freddie Mac securities, and $20.5 million in Fannie Mae securities that have not been rated by a NRSRO as of
December 31, 2013
.
|
(3)
|
Securities in this category have been rated non-investment grade by a NRSRO as of
December 31, 2013
.
|
(4)
|
Includes Limited Partnership investments and a guaranteed investment contract held by a consolidated VIE.
|
D.
|
Investment Risk Concentration
|
|
|
|
|
|
Securities Classifications
|
|||||||||||||
|
Market Value
|
|
Municipal Securities
|
|
US Treasury Money Market
|
|
Equity
|
|||||||||||
($ in thousands)
|
$
|
|
%
|
|
|
|
|
|
|
|||||||||
Issuer Description
|
|
|
|
|
|
|
|
|
|
|||||||||
Northern Institutional Treasury Portfolio
|
$
|
399,559
|
|
|
8.1
|
%
|
|
$
|
—
|
|
|
$
|
399,559
|
|
|
$
|
—
|
|
Vanguard Institutional Index Fund
|
128,286
|
|
|
2.6
|
|
|
—
|
|
|
—
|
|
|
128,286
|
|
||||
State of Illinois
|
103,348
|
|
|
2.1
|
|
|
103,348
|
|
|
—
|
|
|
—
|
|
||||
BlackRock Liquidity Funds T-Fund Portfolio Money Market
|
100,980
|
|
|
2.0
|
|
|
—
|
|
|
100,980
|
|
|
—
|
|
||||
Federated Treasury Obligations Fund
|
99,450
|
|
|
2.0
|
|
|
—
|
|
|
99,450
|
|
|
—
|
|
||||
Top Investment Portfolio Risk Concentrations
|
$
|
831,623
|
|
|
16.8
|
%
|
|
$
|
103,348
|
|
|
$
|
599,989
|
|
|
$
|
128,286
|
|
V.
|
Regulation
|
A.
|
State Regulation
|
1.
|
Insurance Holding Company Regulation
|
2.
|
Dividends
|
3.
|
Risk-to-Capital
|
4.
|
Contingency Reserves
|
5.
|
Reinsurance
|
B.
|
Federal Regulation
|
1.
|
Real Estate Settlement Procedures Act of 1974 (“RESPA”)
|
2.
|
SAFE Mortgage Licensing Act (the “SAFE Act”)
|
3.
|
Home Mortgage Disclosure Act of 1975 (“HMDA”)
|
4.
|
Mortgage Insurance Cancellation
|
5.
|
The Fair Credit Reporting Act
.
|
6.
|
The GSEs and FHA
|
•
|
implement new eligibility requirements for mortgage insurers, including increased capital adequacy standards (see “Item 1A. Risk Factors—
Radian Guaranty could lose its eligibility status with the GSEs, causing Freddie Mac and Fannie Mae to decide not to purchase mortgages insured by Radian Guaranty, which would significantly impair our mortgage insurance franchise
.”)
;
|
•
|
alter underwriting standards on mortgages they purchase;
|
•
|
establish policies or requirements that may result in a reduction in the number of mortgages they acquire;
|
•
|
alter the national conforming loan limit for mortgages acquired by them;
|
•
|
alter the terms on which mortgage insurance coverage may be canceled before reaching the cancellation thresholds established by law;
|
•
|
establish and change the terms required to be included in mortgage insurance policies they acquire. (The private mortgage insurers recently implemented changes to their master insurance policies to reflect a series of changes agreed upon with the GSEs with respect to, among other things, loss mitigation and claims processing activities, as well as the GSEs’ rights under the policies. These changes are expected to become effective in 2014.)
;
|
•
|
require private mortgage insurers to perform specified activities intended to avoid or mitigate loss on insured mortgages that are in default;
|
•
|
establish and require changes to the amount of loan level delivery fees or guarantee fees (which may result in higher cost to borrowers) that the GSEs charge on loans that require mortgage insurance (see “Item 1A. Risk Factors—
Our mortgage insurance business faces intense competition
.”
);
|
•
|
intervene in mortgage insurers’ rescission practices or settlements with servicers. (In April 2011, Freddie Mac advised its servicers that they must obtain its prior approval for settlements with servicers and Fannie Mae advised its servicers that they are prohibited from entering into such settlements.); and
|
•
|
influence a mortgage lender’s selection of the mortgage insurer providing coverage.
|
7.
|
Housing Finance Reform
|
8.
|
The Dodd-Frank Act
|
•
|
the term of the loan is less than or equal to 30 years;
|
•
|
there are no negative amortization, interest only or balloon features;
|
•
|
the lender properly documents the loan in accordance with the requirements;
|
•
|
the total “points and fees” do not exceed certain thresholds (as further discussed below); and
|
•
|
the total debt-to-income ratio of the borrower does not exceed 43%.
|
•
|
sets new limitations and restrictions on banking, derivatives and ABS, including the imposition of additional registration, reporting, market conduct and capital and margin posting requirements on certain participants in the derivatives markets that may make it more difficult for us to commute, restructure, hedge or otherwise mitigate losses or reduce exposure on our existing financial guaranty portfolio;
|
•
|
places limits on the ability of many financial institutions to hold certain assets, including those referred to as “covered funds.” To the extent that financial institutions that are included in our insured portfolios (primarily in our insured TruPs CDOs) for which we provide credit protection may be required to liquidate assets at a loss, or the market perceives there is a risk of such losses, it may adversely affect the credit quality of the institution and consequently increase our derivative liability, and could produce credit losses, on such insured obligations;
|
•
|
establishes a Financial Stability Oversight Council (“FSOC”), which is authorized to subject non-bank financial companies deemed systemically important financial institutions to more rigorous prudential standards and other requirements and to subject such companies to a special liquidation process outside the federal bankruptcy code, administered by the Federal Deposit Insurance Corporation (the “FDIC”) (although insurance company subsidiaries would remain subject to liquidation and rehabilitation proceedings under state law). Additionally, in 2013, the FSOC designated several large insurers as systemically important financial institutions and is in the stages of reviewing several more. In its 2012 Annual Report, the FSOC recommended that FSOC member agencies, HUD, and Congress develop a long-term housing finance reform framework that supports the central role of private capital and the emphasis on consumer and investor protections in any future housing finance system. It is unclear whether the FSOC will take any additional steps to address housing finance reform; and
|
•
|
establishes a Federal Insurance Office within the U.S. Treasury. While not having a general supervisory or regulatory authority over the business of insurance, the director of this office performs various functions with respect to insurance, including serving as a non-voting member of the FSOC and making recommendations to the FSOC regarding insurers to be designated as systemically important institutions and subject to more stringent regulation. The Federal Insurance Office recently published a study on how to modernize and improve the system of insurance regulation in the U.S., which recommended the development and implementation of federal oversight for private mortgage insurers. To the extent these recommendations are acted upon by legislators or other executive action, a divergence from the current system of state regulation could increase compliance burdens and possibly impact our financial condition.
|
9.
|
Homeowner Assistance Programs
|
•
|
In 2009, the GSEs began offering the HARP program, which allows a borrower who is not delinquent to refinance his or her mortgage to a more stable or affordable loan if such borrower has been unable to take advantage of lower interest rates because his or her home has decreased in value. To be eligible, a borrower must meet certain conditions, including that the borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months. In November 2011, FHFA made enhancements to the HARP program (“HARP 2”) to increase the number of borrowers who can qualify for refinancing. The HARP 2 program was recently extended to December 31, 2015 for loans that were originated or acquired by the GSEs by or before May 30, 2009. Importantly, the FHFA reached an agreement with private mortgage insurers to facilitate the transfer of mortgage insurance on loans to be refinanced without regard to LTV. Legislation is not required to make changes to HARP because FHFA has the authority to make changes to the program on its own. This may include changes to further extend the program beyond 2015 or to expand eligibility requirements. Whether any changes will be implemented or the potential impact of any such changes is unknown.
|
•
|
In February 2009, the U.S. Treasury established HAMP as a program to modify certain loans to make them more affordable to borrowers, with the goal of reducing the number of foreclosures. Under HAMP, an eligible borrower’s monthly payments may be lowered by lowering interest rates, extending the term of the mortgage or deferring principal. To be eligible, a borrower must meet certain conditions, including conditions with respect to the borrower’s current income and non-mortgage debt obligations. In June 2012, the HAMP program extended the population of eligible homeowners to (i) homeowners applying for a modification on a home that is not their primary residence, but the property is currently rented or the homeowner intends to rent it; (ii) homeowners who were previously ineligible because their debt-to-income ratio was 31% or lower; (iii) homeowners who previously received a HAMP trial period plan, but defaulted in their trial payments; and (iv) homeowners who previously received a HAMP permanent modification, but defaulted in their payments, therefore losing good standing. Enrollment in the HAMP program was recently extended to coincide with the HARP deadline of December 31, 2015.
|
•
|
HAFA, which became effective in April 2010, is intended to provide additional alternatives to foreclosures by providing incentives to encourage a borrower and servicer to agree that: (i) a borrower can sell his or her home for less than the full amount due on the mortgage and fully satisfy the mortgage; or (ii) a borrower can voluntarily transfer ownership of his or her home to the servicer in full satisfaction of the mortgage. Loans that are eligible for this program must have been originated prior to January 1, 2009.
|
•
|
The U.S. Treasury also has developed uniform guidance for loan modifications to be used by participating servicers in the private sector. The GSEs have incorporated material aspects of these guidelines for loans that they own and loans backing securities that they guaranty.
|
C.
|
Basel II and Basel III Capital Accords
|
D.
|
Foreign Regulation
|
VI.
|
Employees
|
Item 1A.
|
Risk Factors.
|
•
|
implement new eligibility requirements for mortgage insurers, including more onerous capital standards (see “
Radian Guaranty could lose its eligibility status with the GSEs, causing Freddie Mac and Fannie Mae to decide not to purchase mortgages insured by Radian Guaranty, which would significantly impair our mortgage insurance franchise
.”)
;
|
•
|
alter underwriting standards on mortgages they purchase;
|
•
|
establish policies or requirements that may result in a reduction in the number of mortgages they acquire;
|
•
|
alter the national conforming loan limit for mortgages acquired by them;
|
•
|
alter the terms on which mortgage insurance coverage may be canceled before reaching the cancellation thresholds established by law;
|
•
|
establish and change the terms required to be included in mortgage insurance policies they acquire. (The private mortgage insurers recently implemented changes to their master insurance policies to reflect a series of changes agreed upon with the GSEs with respect to, among other things, loss mitigation and claims processing activities, as well as the GSEs’ rights under the policies. These changes are expected to become effective in 2014.)
;
|
•
|
require private mortgage insurers to perform specified activities intended to avoid or mitigate loss on insured mortgages that are in default;
|
•
|
establish and require changes to the amount of loan level delivery fees or guarantee fees (which may result in a higher cost to borrowers) that the GSEs charge on loans that require mortgage insurance (see “
Our mortgage insurance business faces intense competition
.”
);
|
•
|
intervene in mortgage insurers’ rescission practices or settlements with servicers. (In April 2011, Freddie Mac advised its servicers that they must obtain its prior approval for settlements with servicers and Fannie Mae advised its servicers that they are prohibited from entering into such settlements.); and
|
•
|
influence a mortgage lender’s selection of the mortgage insurer providing coverage.
|
•
|
the level of home mortgage interest rates and the deductibility of mortgage interest for income tax purposes;
|
•
|
the health of the domestic economy as well as conditions in regional and local economies;
|
•
|
housing affordability;
|
•
|
population trends, including the rate of household formation;
|
•
|
the rate of home price appreciation, which in times of heavy refinancing can affect whether refinance loans have loan-to-value ratios that require private mortgage insurance; and
|
•
|
government housing policy encouraging loans to first-time homebuyers.
|
•
|
past and potential future capital constraints of the private mortgage insurance industry;
|
•
|
the tightening by private mortgage insurers of underwriting guidelines based on past loan performance or other risk concerns;
|
•
|
the increased levels of loss mitigation activity by private mortgage insurers on older vintage portfolios compared to the FHA’s historical practice of engaging in limited loss mitigation activities;
|
•
|
an increase in the loan level delivery fees charged by the GSEs on loans that require mortgage insurance and changes in the amount of guarantee fees for the loans that the GSEs acquire (which may result in higher cost to borrowers), which changes have, in the past, been implemented in furtherance of goals other than profits;
|
•
|
the perceived operational ease of using FHA insurance compared to the products of private mortgage insurers; and
|
•
|
the implementation of new regulations under the Dodd-Frank Act and the Basel III guidelines that may be more favorable to the FHA compared to private mortgage insurers (see “
The Dodd-Frank Act may have a material effect on our mortgage insurance and financial guaranty businesses
” and
“
The implementation of the Basel II capital adequacy requirements and the Basel III guidelines may discourage the use of mortgage insurance
”
).
|
|
Moody’s
|
|
S&P
|
Radian Guaranty
|
Ba3
|
|
BB-
|
Radian Asset Assurance
|
Ba1
|
|
B+
|
•
|
The Dodd-Frank Act and the rules and regulations adopted thereunder, including in particular the definition of QRM that is ultimately adopted. See “
The Dodd-Frank Act may have a material effect on our mortgage insurance and financial guaranty businesses
.”;
|
•
|
Legislation or regulatory action impacting the charters or business practices of the GSEs. See “
Because most of the mortgage loans that we insure are sold to Freddie Mac and Fannie Mae, changes in their charters or business practices could significantly impact our mortgage insurance business
.”;
|
•
|
Legislative reform of the U.S. housing finance system;
|
•
|
Legislation and regulation impacting the FHA and its competitive position versus private mortgage insurers. See “
Our mortgage insurance business faces intense competition
.”;
|
•
|
State insurance laws and regulations that address, among other items, licensing of companies to transact business, claims handling, reinsurance requirements, premium rates, policy forms offered to customers and requirements for risk-to-capital ratios, minimum policyholder positions, reserves, surplus, reinsurance and payment of dividends. See “
Our insurance subsidiaries are subject to comprehensive regulations and other requirements, including capital adequacy measures, which if we fail to satisfy, could limit our ability to write new insurance and increase restrictions and requirements placed on our insurance subsidiaries.
”;
|
•
|
The application of state, federal or private sector programs aimed at supporting borrowers and the housing market;
|
•
|
The application of RESPA, the FCRA and other laws to mortgage insurers, including with respect to captive reinsurance arrangements. See “
We are subject to the risk of private litigation and regulatory proceedings.
”;
|
•
|
New federal standards and oversight for mortgage insurers, including as a result of the Federal Insurance Office of the U.S. Treasury having recently published a study on how to modernize and improve the system of insurance regulation in the U.S. that, among other things, calls for federal standards and oversight for mortgage insurers to be developed and implemented. See “
The Dodd-Frank Act may have a material effect on our mortgage insurance and financial guaranty businesses
.”; and
|
•
|
The implementation in the U.S. of the Basel II capital adequacy requirements and the Basel III guidelines. See “
The implementation of the Basel II capital adequacy requirements and the Basel III guidelines may discourage the use of mortgage insurance
.”
|
•
|
the term of the loan is less than or equal to 30 years;
|
•
|
there are no negative amortization, interest only or balloon features;
|
•
|
the lender properly documents the loan in accordance with the requirements;
|
•
|
the total “points and fees” do not exceed certain thresholds (as further discussed below); and
|
•
|
the total debt-to-income ratio of the borrower does not exceed 43%.
|
•
|
sets new limitations and restrictions on banking, derivatives and ABS, including the imposition of additional registration, reporting, market conduct and capital and margin posting requirements on certain participants in the derivatives markets that may make it more difficult for us to commute, restructure, hedge or otherwise mitigate losses or reduce exposure on our existing financial guaranty portfolio;
|
•
|
places limits on the ability of many financial institutions to hold certain assets, including those referred to as “covered funds.” To the extent that financial institutions that are included in our insured portfolios (primarily in our insured TruPs CDOs) for which we provide credit protection may be required to liquidate assets at a loss, or the market perceives there is a risk of such losses, it may adversely affect the credit quality of the institution and consequently increase our derivative liability, and could produce credit losses on such insured obligations;
|
•
|
establishes a Federal Insurance Office within the U.S. Treasury. While not having a general supervisory or regulatory authority over insurance, the director of this office performs various functions with respect to insurance at a federal level. The Federal Insurance Office recently published a study on how to modernize and improve the system of insurance regulation in the U.S., which recommended the development and implementation of federal oversight for private mortgage insurers. To the extent these recommendations are acted upon by legislators or other executive action, a divergence from the current system of state regulation could increase compliance burdens and possibly impact our financial condition.
|
Item 1B.
|
Unresolved Staff Comments.
|
Item 2.
|
Properties.
|
•
|
23,453 feet of office space in Philadelphia, Pennsylvania (separate from our headquarters) which is intended for our mortgage insurance operations and IT personnel. This lease expires December 31, 2024;
|
•
|
7,314 square feet of office space in Ohio and South Carolina, serving as our mortgage insurance service center (Ohio) and space for a subsidiary office (South Carolina). The lease for our Ohio service center expires in 2015 and the space for our South Carolina office is month to month;
|
•
|
121,093 square feet of office space for our financial guaranty operations in New York City. The lease for this space expires August 31, 2015. We occupy 26,538 square feet of this space and sublease 94,555 square feet;
|
•
|
Approximately 500 square feet of office space for our mortgage insurance operations in Hong Kong. The lease for this space expires on January 31, 2015;
|
•
|
27,360 square feet of office space for our data center in Dayton, Ohio. The lease for this space expires on March 31, 2016;
|
•
|
4,782 square feet of office space for our mortgage insurance operations in Denver, Colorado that expires September 30, 2015; and
|
•
|
Approximately 125 square feet of office space for investment management services in Wilmington, Delaware that is month to month.
|
Item 3.
|
Legal Proceedings.
|
•
|
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, reasserting a putative claim under RESPA on substantially the same allegations. 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. Plaintiffs filed their second amended complaint on August 16, 2013, reasserting a putative claim under RESPA on substantially the same allegations. Radian Guaranty filed a motion to dismiss plaintiffs’ second amended complaint on September 17, 2013. The court denied Radian Guaranty’s motion on February 4, 2014, without prejudice to Radian Guaranty’s ability to raise the statute of limitations bar on a motion for summary judgment.
|
•
|
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. Plaintiffs filed their second amended complaint on August 16, 2013, reasserting a putative claim under RESPA on substantially the same allegations. Radian Guaranty filed a motion to dismiss plaintiffs’ second amended complaint on September 17, 2013. The court denied Radian Guaranty’s motion on February 5, 2014, without prejudice to Radian Guaranty’s ability to raise the statute of limitations bar on a motion for summary judgment.
|
•
|
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 October 30, 2013, the court denied that motion and ordered a brief period of discovery limited to the statute of limitations issue. On January 31, 2014, plaintiffs voluntarily dismissed Radian Guaranty from this lawsuit.
|
Item 4.
|
Mine Safety Disclosures.
|
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
|
|
2013
|
|
2012
|
||||||||||||
|
High
|
|
Low
|
|
High
|
|
Low
|
||||||||
1st Quarter
|
$
|
10.95
|
|
|
$
|
5.97
|
|
|
$
|
4.68
|
|
|
$
|
2.21
|
|
2nd Quarter
|
14.34
|
|
|
9.62
|
|
|
4.45
|
|
|
2.00
|
|
||||
3rd Quarter
|
14.80
|
|
|
11.36
|
|
|
4.96
|
|
|
2.65
|
|
||||
4th Quarter
|
15.15
|
|
|
12.57
|
|
|
6.30
|
|
|
3.74
|
|
Item 6.
|
Selected Financial Data.
|
($ in millions, except per-share amounts and ratios)
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
||||||||||
|
|
||||||||||||||||||
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums earned—insurance
|
$
|
830.9
|
|
|
$
|
739.0
|
|
|
$
|
756.0
|
|
|
$
|
825.7
|
|
|
$
|
825.9
|
|
Net investment income
|
108.1
|
|
|
114.3
|
|
|
163.5
|
|
|
178.8
|
|
|
214.2
|
|
|||||
Net (losses) gains on investments
|
(149.7
|
)
|
|
184.9
|
|
|
202.2
|
|
|
139.9
|
|
|
257.1
|
|
|||||
Change in fair value of derivative instruments
|
(31.8
|
)
|
|
(144.0
|
)
|
|
628.4
|
|
|
(558.7
|
)
|
|
100.0
|
|
|||||
Net (losses) gains on other financial instruments
|
(4.7
|
)
|
|
(82.3
|
)
|
|
193.3
|
|
|
(211.7
|
)
|
|
(88.6
|
)
|
|||||
Gain on sale of affiliate
|
—
|
|
|
7.7
|
|
|
—
|
|
|
34.8
|
|
|
—
|
|
|||||
Total revenues
|
759.0
|
|
|
825.4
|
|
|
1,947.8
|
|
|
417.5
|
|
|
1,313.4
|
|
|||||
Provision for losses
|
567.1
|
|
|
959.2
|
|
|
1,296.5
|
|
|
1,739.2
|
|
|
1,337.6
|
|
|||||
Policy acquisition costs
|
41.7
|
|
|
61.9
|
|
|
52.8
|
|
|
53.5
|
|
|
63.0
|
|
|||||
Other operating expenses
|
284.5
|
|
|
196.7
|
|
|
175.8
|
|
|
191.9
|
|
|
203.8
|
|
|||||
Interest expense
|
74.6
|
|
|
51.8
|
|
|
61.4
|
|
|
41.8
|
|
|
46.0
|
|
|||||
Equity in net income of affiliates
|
—
|
|
|
—
|
|
|
0.1
|
|
|
14.7
|
|
|
33.2
|
|
|||||
Pretax (loss) income
|
(207.1
|
)
|
|
(444.2
|
)
|
|
368.5
|
|
|
(1,579.7
|
)
|
|
(242.3
|
)
|
|||||
Net (loss) income
|
(197.0
|
)
|
|
(451.5
|
)
|
|
302.2
|
|
|
(1,805.9
|
)
|
|
(147.9
|
)
|
|||||
Diluted net (loss) income per share (1)
|
$
|
(1.18
|
)
|
|
$
|
(3.41
|
)
|
|
$
|
2.26
|
|
|
$
|
(15.74
|
)
|
|
$
|
(1.80
|
)
|
Cash dividends declared per share
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
Average shares outstanding-diluted
|
166.4
|
|
|
132.5
|
|
|
133.9
|
|
|
114.7
|
|
|
81.9
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
$
|
5,621.7
|
|
|
$
|
5,903.2
|
|
|
$
|
6,656.8
|
|
|
$
|
7,620.9
|
|
|
$
|
8,057.2
|
|
Total investments
|
4,931.2
|
|
|
5,152.4
|
|
|
5,783.6
|
|
|
6,628.9
|
|
|
6,137.2
|
|
|||||
Unearned premiums
|
768.9
|
|
|
648.7
|
|
|
637.4
|
|
|
686.4
|
|
|
823.6
|
|
|||||
Reserve for losses and LAE
|
2,185.4
|
|
|
3,149.9
|
|
|
3,310.9
|
|
|
3,596.7
|
|
|
3,579.0
|
|
|||||
Long-term debt and other borrowings
|
930.1
|
|
|
663.6
|
|
|
818.6
|
|
|
964.8
|
|
|
698.2
|
|
|||||
VIE debt
|
94.6
|
|
|
108.9
|
|
|
228.2
|
|
|
520.1
|
|
|
296.1
|
|
|||||
Derivative liabilities
|
307.2
|
|
|
266.9
|
|
|
126.0
|
|
|
723.6
|
|
|
238.7
|
|
|||||
Stockholders’ equity
|
939.6
|
|
|
736.3
|
|
|
1,182.3
|
|
|
859.8
|
|
|
2,005.0
|
|
|||||
Book value per share
|
$
|
5.43
|
|
|
$
|
5.51
|
|
|
$
|
8.88
|
|
|
$
|
6.46
|
|
|
$
|
24.22
|
|
($ in millions, except per-share amounts and ratios)
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
||||||||||
|
|
||||||||||||||||||
Selected Ratios—Mortgage Insurance (2)
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss ratio
|
72.3
|
%
|
|
131.2
|
%
|
|
189.8
|
%
|
|
234.0
|
%
|
|
179.6
|
%
|
|||||
Expense ratio
|
34.0
|
|
|
26.6
|
|
|
24.7
|
|
|
24.0
|
|
|
23.2
|
|
|||||
Combined ratio
|
106.3
|
%
|
|
157.8
|
%
|
|
214.5
|
%
|
|
258.0
|
%
|
|
202.8
|
%
|
|||||
Risk-to-capital ratio-Radian Guaranty only
|
19.5
|
:1
|
|
20.8
|
:1
|
|
21.5
|
:1
|
|
16.8
|
:1
|
|
15.4
|
:1
|
|||||
Risk-to-capital ratio-Mortgage Insurance combined
|
23.9
|
:1
|
|
29.9
|
:1
|
|
30.9
|
:1
|
|
19.7
|
:1
|
|
17.5
|
:1
|
|||||
Other Data—Mortgage Insurance
|
|
|
|
|
|
|
|
|
|
||||||||||
Primary new insurance written
|
$
|
47,255
|
|
|
$
|
37,061
|
|
|
$
|
15,510
|
|
|
$
|
11,558
|
|
|
$
|
16,969
|
|
Direct primary insurance in force
|
161,240
|
|
|
140,363
|
|
|
126,185
|
|
|
129,566
|
|
|
144,268
|
|
|||||
Direct primary risk in force
|
40,017
|
|
|
34,372
|
|
|
30,692
|
|
|
31,461
|
|
|
33,765
|
|
|||||
Persistency (12 months ended)
|
81.1
|
%
|
|
81.8
|
%
|
|
85.4
|
%
|
|
81.8
|
%
|
|
82.0
|
%
|
|||||
Other Data—Financial Guaranty
|
|
|
|
|
|
|
|
|
|
||||||||||
Net par outstanding
|
$
|
23,855
|
|
|
$
|
33,741
|
|
|
$
|
69,189
|
|
|
$
|
78,756
|
|
|
$
|
87,420
|
|
Net debt service outstanding
|
32,136
|
|
|
44,053
|
|
|
90,167
|
|
|
103,789
|
|
|
113,378
|
|
(1)
|
Diluted net (loss) income per share and average share information in accordance with the accounting standard regarding earnings per share.
|
(2)
|
Calculated using amounts determined under GAAP, using provision for losses to calculate the loss ratio and policy acquisition costs and other operating expenses to calculate the expense ratio as a percentage of net premiums earned.
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
•
|
Premiums.
The premium rates we charge for our insurance are based on a number of borrower, loan and property characteristics. 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.
|
•
|
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 household formation, home affordability, interest rates, housing markets in general, credit availability and the impact of various legislative and regulatory actions that may influence the mortgage finance industry. The percentage of private mortgage insurance is mainly influenced by the competitiveness of private mortgage insurance on Government-Sponsored Enterprise (“GSE”) conforming loans compared to Federal Housing Administration (“FHA”) insurance and the relative percentage of mortgage 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 because average loan-to-value (“LTV”) ratios are higher on home purchases. Radian Guaranty’s share of the private mortgage insurance market is influenced by competition in that market and our ability to maintain or grow existing levels of new mortgage originations from our current customers, expand our customer base and gain new customers. We compete with other private mortgage insurers on the basis of price, terms and conditions, customer relationships, reputation, financial strength measures and overall service. Service-based competition includes effective and timely delivery of products, risk management services, timeliness of claims payments, training, loss mitigation efforts and management and field service expertise.
|
•
|
Losses
. Incurred losses represent the estimated future claim payments on newly defaulted insured loans as well as any change in our claim estimates for previous defaults. Our mortgage insurance incurred losses are driven primarily by new 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 more delinquencies and claims);
|
‑
|
The average loan size (higher average loan amounts generally result in higher incurred losses);
|
-
|
The percentage of coverage on insured loans (higher percentages of insurance coverage generally 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 by either paying the full claim amount and acquiring the property or facilitating a sale of the property 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 happened with much of our legacy portfolio, several factors can impact and change this cycle, including the economic environment, the characteristics of the mortgage loan, the credit profile of the borrower, housing prices and unemployment rates); and
|
-
|
Our ability to mitigate potential losses through rescissions, denials, cancellations and the curtailment of claims submitted to us. We have taken these actions much more frequently with 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 reduce 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 affected by both the level of NIW, as well as the level of RIF. Additionally, in recent periods, our operating expenses have been impacted significantly by compensation expense associated with changes in the estimated fair value of certain of our long-term incentive awards that are settled in cash. The fair value of these awards is dependent, in large part, on our stock price at any given point in time.
|
•
|
Investment Income.
Investment income is determined primarily by the investment balances held and the average yield on our overall investment portfolio.
|
•
|
Freddie Mac Transaction.
In August 2013, Radian Guaranty entered into a Master Transaction Agreement with Freddie Mac (the “Freddie Mac Agreement”) related to a group of 25,760 first-liens guaranteed by Freddie Mac that were insured by Radian Guaranty and were in default as of December 31, 2011.
This transaction significantly impacted our financial position in 2013 by reducing our primary delinquent loan inventory and capping Radian Guaranty’s total exposure on the entire population of loans subject to the agreement to $840 million, leaving Radian Guaranty with no additional exposure to claims on these loans. The Freddie Mac Agreement provides for the future treatment of the loans subject to the terms of the agreement including claim payments, loss mitigation activity and insurance coverage, and eliminated Radian Guaranty’s claim exposure on 9,756 loans that were delinquent and 4,586 loans that were re-performing as of July 31, 2013. The remaining loans in the original population of 25,760 loans had been paid off, had resulted in a rescission or claim denial or had become a paid claim prior to July 31, 2013.
The maximum exposure of $840 million is comprised of $625 million of claim payments (consisting of $370 million of claims previously paid on this population of loans prior to July 12, 2013, which is the measurement date for purposes of the transaction, and an additional $255 million paid at closing) and $215 million related to rescissions, denials, claim curtailments and cancellations (“Loss Mitigation Activity”) on these loans.
At the closing, Radian Guaranty deposited $205 million into a collateral account to cover future Loss Mitigation Activity on these loans. The amount deposited in the collateral account represents $215 million, less $10 million of Loss Mitigation Activity that had become final in accordance with the Freddie Mac Agreement prior to the date the collateral account was established. The collateral account consists of investment securities and remains on our consolidated balance sheets as a result of the rights that Radian Guaranty has with respect to the funds. Subject to certain conditions in the Freddie Mac Agreement, amounts in the collateral account may be released to Radian Guaranty over time to the extent that Loss Mitigation Activity becomes final in accordance with the terms of the Freddie Mac Agreement. From the time the collateral account was established through December 31, 2013, approximately $6.0 million of additional Loss Mitigation Activity had become final in accordance with the Freddie Mac Agreement and $142.9 million of submitted claims had been rescinded, denied, curtailed or cancelled, but were not considered final in accordance with the Freddie Mac Agreement. If the amount of Loss Mitigation Activity that becomes final in accordance with the Freddie Mac Agreement after the collateral account was established does not accumulate to $205 million prior to termination of the Freddie Mac Agreement, then any remaining funds will be paid to Freddie Mac. Radian Guaranty will continue to administer all claims submitted with respect to these loans in accordance with the applicable insurance policy for these loans and in a manner consistent with its normal claims handling practices. The Freddie Mac Agreement will terminate upon the earliest to occur of: (1) August 29, 2017; (2) any time after August 29, 2015 if the amounts remaining in the collateral account are reduced to $0; or (3) any time after August 29, 2015 if Radian Guaranty exercises its early termination option to conclude the transactions under the Freddie Mac Agreement, by paying to Freddie Mac an amount equal to the initial collateral amount less the amount of Loss Mitigation Activity that had then become final under the terms of the agreement.
|
•
|
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 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, we often receive ceding commissions from the reinsurer as part of the transaction, which contributes to reducing our overall expenses. In the past, we also had entered into capital markets-based reinsurance transactions designed to transfer all or a portion of the risk associated with certain higher risk mortgage insurance products. See Note 8 of Notes to Consolidated Financial Statements for more information about our reinsurance arrangements.
|
•
|
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”), which generally results in the termination 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. See Note 2 of Notes to Consolidated Financial Statements for further information regarding the revenue recognition of premiums.
|
•
|
Net Par Outstanding
. Our net par outstanding represents principal 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 and permitted early terminations within our financial guaranty portfolio and negotiated commutations and other transactions that we have entered into to reduce our net par outstanding.
|
-
|
In January 2013, Radian Asset Assurance commuted the remaining
$822.2 million
net par that had been reinsured by Radian Asset Assurance from Financial Guaranty Insurance Company (“FGIC”), including approximately
$195.9 million
of our
$225.3 million
in net par outstanding
as of December 31, 2012 related to Jefferson County, Alabama sewer warrants, a large distressed public finance credit. This commutation also included all of our exposure to general obligation bonds issued by the City of Detroit, except for $7.9 million, as of December 31, 2013. Radian Asset Assurance paid FGIC
$52.4 million
as part of this transaction (the “FGIC Commutation”), which payment approximated our existing loss reserves and unearned premium reserves on the commuted transactions
.
|
-
|
During 2013, we agreed with a counterparty in our financial guaranty business to commute a $105 million corporate
collateralized debt obligation (“CDO”)
transaction (the “2013 CDO Commutation”), and four other financial guaranty CDS counterparties exercised their termination rights on a walkaway basis (meaning that our counterparty was not obligated to pay any unaccrued premium or other amount to terminate the transaction) with respect to ten corporate CDOs and a second-to-pay CDO of corporate loans that we insured (collectively, with the 2013 CDO Commutation, the “CDO Early Terminations”). These CDO Early Terminations reduced our financial guaranty net par outstanding by $3.9 billion in the aggregate. There was no material impact on our financial statements as a result of these terminations
. In January 2014, a counterparty to a $450 million AAA-rated CDO of commercial mortgage-backed security (“CMBS”) exercised its right to terminate the transaction on a walkaway basis.
|
•
|
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 the credit spread for Radian Group), credit ratings, changes in regulations affecting the holders of such obligations or the value of obligations underlying our insured portfolio and other market, asset-class and transaction-specific conditions and factors that may be unrelated or only indirectly related 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 significant factors influencing defaults and incurred losses include:
|
-
|
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;
|
-
|
The potential impact of threatened or actual government shutdowns or defaults on the payment of government-issued debt securities or other financial obligations;
|
-
|
Potential changes to entitlement programs, such as Social Security, Medicare and Medicaid, that could affect the ability of certain 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 these entities;
|
-
|
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); and
|
-
|
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.
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2011
|
|
2013 vs. 2012
|
|
2012 vs. 2011
|
||||||||
Net (loss) income
|
$
|
(197.0
|
)
|
|
$
|
(451.5
|
)
|
|
$
|
302.2
|
|
|
(56.4
|
)%
|
|
n/m
|
|
Net premiums earned-insurance
|
830.9
|
|
|
739.0
|
|
|
756.0
|
|
|
12.4
|
|
|
(2.2
|
)%
|
|||
Net investment income
|
108.1
|
|
|
114.3
|
|
|
163.5
|
|
|
(5.4
|
)
|
|
(30.1
|
)
|
|||
Net (losses) gains on investments
|
(149.7
|
)
|
|
184.9
|
|
|
202.2
|
|
|
n/m
|
|
|
(8.6
|
)
|
|||
Change in fair value of derivative instruments
|
(31.8
|
)
|
|
(144.0
|
)
|
|
628.4
|
|
|
(77.9
|
)
|
|
n/m
|
|
|||
Net (losses) gains on other financial instruments
|
(4.7
|
)
|
|
(82.3
|
)
|
|
193.3
|
|
|
(94.3
|
)
|
|
n/m
|
|
|||
Provision for losses
|
567.1
|
|
|
959.2
|
|
|
1,296.5
|
|
|
(40.9
|
)
|
|
(26.0
|
)
|
|||
Other operating expenses
|
284.5
|
|
|
196.7
|
|
|
175.8
|
|
|
44.6
|
|
|
11.9
|
|
|||
Interest expense
|
74.6
|
|
|
51.8
|
|
|
61.4
|
|
|
44.0
|
|
|
(15.6
|
)
|
|||
Income tax (benefit) provision
|
(10.1
|
)
|
|
7.3
|
|
|
66.4
|
|
|
n/m
|
|
|
(89.0
|
)
|
(1)
|
Net gains (losses) on investments and other financial instruments.
The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities, our tax and capital profile and overall market cycles. Unrealized investment gains and losses arise primarily from changes in the market value of our investments that are classified as trading. These valuation adjustments may not necessarily result in economic gains or losses. We do not view them to be indicative of our fundamental operating activities. Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these realized and unrealized gains or losses. Therefore, these items are excluded from our calculation of adjusted pretax operating income.
|
(2)
|
Net impairment losses recognized in earnings.
The recognition of net impairment losses on investments can vary significantly in both size and timing, depending on market credit cycles. We do not view them to be indicative of our fundamental operating activities. Therefore, these losses are excluded from our calculation of adjusted pretax operating income.
|
(3)
|
Change in fair value of derivative instruments
. Gains and losses related to changes in the fair value of insured credit derivatives are subject to significant fluctuation based on changes in interest rates, credit spreads (of both the underlying collateral as well as our credit spread), credit ratings and other market, asset-class and transaction-specific conditions and factors that may be unrelated or only indirectly related to our obligation to pay future claims. With the exception of the estimated present value of net credit (losses) recoveries incurred and net premiums earned on derivatives, discussed in items 4 and 5 below, we believe these gains and losses will reverse over time and consequently these changes are not expected to result in economic gains or losses. Therefore, these gains and losses are excluded from our calculation of adjusted pretax operating income.
|
(4)
|
Estimated present value of net credit (losses) recoveries incurred.
The change in present value of insurance claims we expect to pay or recover on insured credit derivatives represents the amount of the change in credit derivatives from item 3 above, that we expect to result in an economic loss or recovery based on our ongoing loss monitoring analytics. Therefore, this item is expected to have an economic impact and is included in our calculation of adjusted pretax operating income.
|
(5)
|
Net premiums earned on derivatives.
The net premiums earned on insured credit derivatives are classified as part of the change in fair value of derivative instruments discussed in item 3 above. However, since net premiums earned on derivatives are considered part of our fundamental operating activities, these premiums are included in our calculation of adjusted pretax operating income.
|
|
Year Ended December 31, 2013
|
||||||||||
(In thousands)
|
Mortgage Insurance
|
|
Financial Guaranty
|
|
Consolidated
|
||||||
Pretax loss
|
$
|
(93,153
|
)
|
|
$
|
(113,902
|
)
|
|
$
|
(207,055
|
)
|
Exclusions:
|
|
|
|
|
|
||||||
Net losses on investments
|
(93,821
|
)
|
|
(55,899
|
)
|
|
(149,720
|
)
|
|||
Net impairment losses recognized in earnings
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
|||
Change in fair value of derivative instruments
|
635
|
|
|
(32,406
|
)
|
|
(31,771
|
)
|
|||
Net losses on other financial instruments
|
(2,840
|
)
|
|
(1,896
|
)
|
|
(4,736
|
)
|
|||
Total exclusions
|
(96,026
|
)
|
|
(90,204
|
)
|
|
(186,230
|
)
|
|||
Additions:
|
|
|
|
|
|
||||||
Estimated present value of net credit recoveries incurred
|
21
|
|
|
509
|
|
|
530
|
|
|||
Net premiums earned on derivatives
|
—
|
|
|
17,898
|
|
|
17,898
|
|
|||
Total additions
|
21
|
|
|
18,407
|
|
|
18,428
|
|
|||
Adjusted pretax operating income (loss)
|
$
|
2,894
|
|
|
$
|
(5,291
|
)
|
|
$
|
(2,397
|
)
|
|
|
|
|
|
|
||||||
Net loss
|
$
|
(196,985
|
)
|
||||||||
Exclusions:
|
|
|
|
|
|
||||||
Net losses on investments
|
(149,720
|
)
|
|||||||||
Net impairment losses recognized in earnings
|
(3
|
)
|
|||||||||
Change in fair value of derivative instruments
|
(31,771
|
)
|
|||||||||
Net losses on other financial instruments
|
(4,736
|
)
|
|||||||||
Income tax benefit
|
10,070
|
|
|||||||||
Total exclusions
|
(176,160
|
)
|
|||||||||
Additions:
|
|
|
|
|
|
||||||
Estimated present value of net credit recoveries incurred
|
530
|
|
|||||||||
Net premiums earned on derivatives
|
17,898
|
|
|||||||||
Income tax benefit computed at the statutory tax rate
|
839
|
|
|||||||||
Total additions
|
19,267
|
|
|||||||||
Adjusted net operating loss
|
$
|
(1,558
|
)
|
||||||||
|
|
|
|
|
|
||||||
Diluted net loss per share
|
$
|
(1.18
|
)
|
||||||||
Total adjustments from net loss to adjusted net operating loss (1)
|
1.17
|
|
|||||||||
Adjusted diluted net operating loss per share (2)
|
$
|
(0.01
|
)
|
(1)
|
EPS impact of adjustments from net loss to adjusted net operating loss as described above.
|
(2)
|
“Adjusted diluted net operating loss per share” consists of “Adjusted net operating loss” divided by the weighted-average number of common and common equivalent shares outstanding on a diluted basis. Interest expense, shares issuable on convertible debt and the impact of stock-based compensation arrangements have been reflected in the per share calculations consistent with the accounting standard regarding earnings per share, whenever the impact is dilutive.
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2011
|
|
2013 vs. 2012
|
|
2012 vs. 2011
|
||||||||
Pretax loss
|
$
|
(93.2
|
)
|
|
$
|
(244.6
|
)
|
|
$
|
(560.8
|
)
|
|
(61.9
|
)%
|
|
(56.4
|
)%
|
Net premiums written—insurance
|
951.0
|
|
|
806.3
|
|
|
717.3
|
|
|
17.9
|
|
|
12.4
|
|
|||
Net premiums earned—insurance
|
781.4
|
|
|
702.4
|
|
|
680.9
|
|
|
11.2
|
|
|
3.2
|
|
|||
Net investment income
|
61.6
|
|
|
63.2
|
|
|
93.7
|
|
|
(2.5
|
)
|
|
(32.6
|
)
|
|||
Net (losses) gains on investments
|
(93.8
|
)
|
|
103.7
|
|
|
126.2
|
|
|
n/m
|
|
|
(17.8
|
)
|
|||
Provision for losses
|
564.6
|
|
|
921.5
|
|
|
1,293.9
|
|
|
(38.7
|
)
|
|
(28.8
|
)
|
|||
Policy acquisition costs
|
28.5
|
|
|
34.1
|
|
|
36.1
|
|
|
(16.4
|
)
|
|
(5.5
|
)
|
|||
Other operating expenses
|
237.0
|
|
|
152.4
|
|
|
132.2
|
|
|
55.5
|
|
|
15.3
|
|
|||
Interest expense
|
18.0
|
|
|
7.5
|
|
|
13.9
|
|
|
n/m
|
|
|
(46.0
|
)
|
|
Year Ended December 31,
|
|||||||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2011
|
|||||||||||||||
Primary NIW
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prime
|
$
|
47,251
|
|
|
100.0
|
%
|
|
$
|
37,041
|
|
|
99.9
|
%
|
|
$
|
15,499
|
|
|
99.9
|
%
|
Alternative-A (“Alt-A”) and A minus and below
|
4
|
|
|
—
|
|
|
20
|
|
|
0.1
|
|
|
11
|
|
|
0.1
|
|
|||
Total Primary
|
$
|
47,255
|
|
|
100.0
|
%
|
|
$
|
37,061
|
|
|
100.0
|
%
|
|
$
|
15,510
|
|
|
100.0
|
%
|
|
Year Ended December 31,
|
|||||||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2011
|
|||||||||||||||
Total primary NIW by FICO Score
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
>=740
|
$
|
33,466
|
|
|
70.8
|
%
|
|
$
|
28,151
|
|
|
75.9
|
%
|
|
$
|
12,142
|
|
|
78.3
|
%
|
680-739
|
11,971
|
|
|
25.3
|
|
|
7,994
|
|
|
21.6
|
|
|
3,192
|
|
|
20.6
|
|
|||
620-679
|
1,818
|
|
|
3.9
|
|
|
916
|
|
|
2.5
|
|
|
175
|
|
|
1.1
|
|
|||
<=619
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|||
Total Primary
|
$
|
47,255
|
|
|
100.0
|
%
|
|
$
|
37,061
|
|
|
100.0
|
%
|
|
$
|
15,510
|
|
|
100.0
|
%
|
|
Year Ended December 31,
|
||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2011
|
||||||
Percentage of primary NIW
|
|
|
|
|
|
||||||
Refinances
|
30
|
%
|
|
40
|
%
|
|
39
|
%
|
|||
|
|
|
|
|
|
||||||
LTV (1)
|
|
|
|
|
|
||||||
95.01% and above
|
2.6
|
%
|
|
1.4
|
%
|
|
1.9
|
%
|
|||
90.01% to 95.00%
|
45.4
|
%
|
|
41.2
|
%
|
|
36.3
|
%
|
|||
85.01% to 90.00%
|
37.3
|
%
|
|
41.0
|
%
|
|
45.4
|
%
|
|||
80.01% to 85.00%
|
14.7
|
%
|
|
16.4
|
%
|
|
16.4
|
%
|
|||
Adjustable rate mortgages (“ARMs”)
|
|
|
|
|
|
||||||
Less than five years
|
<1%
|
|
|
<1%
|
|
|
<1%
|
|
|||
Five years and longer
|
2.0
|
%
|
|
1.9
|
%
|
|
4.8
|
%
|
|||
|
|
|
|
|
|
||||||
Primary risk written
|
$
|
11,737
|
|
|
$
|
8,959
|
|
|
$
|
3,694
|
|
(1)
|
LTV ratio: The percentage of the original loan amount to the original value of the property.
|
|
December 31,
|
|||||||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2011
|
|||||||||||||||
Primary IIF (1)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Flow
|
$
|
151,383
|
|
|
93.9
|
%
|
|
$
|
129,079
|
|
|
92.0
|
%
|
|
$
|
113,438
|
|
|
89.9
|
%
|
Structured
|
9,857
|
|
|
6.1
|
|
|
11,284
|
|
|
8.0
|
|
|
12,747
|
|
|
10.1
|
|
|||
Total Primary
|
$
|
161,240
|
|
|
100.0
|
%
|
|
$
|
140,363
|
|
|
100.0
|
%
|
|
$
|
126,185
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prime
|
$
|
147,072
|
|
|
91.2
|
%
|
|
$
|
123,437
|
|
|
87.9
|
%
|
|
$
|
106,407
|
|
|
84.3
|
%
|
Alt-A
|
8,634
|
|
|
5.4
|
|
|
10,447
|
|
|
7.5
|
|
|
12,344
|
|
|
9.8
|
|
|||
A minus and below
|
5,534
|
|
|
3.4
|
|
|
6,479
|
|
|
4.6
|
|
|
7,434
|
|
|
5.9
|
|
|||
Total Primary
|
$
|
161,240
|
|
|
100.0
|
%
|
|
$
|
140,363
|
|
|
100.0
|
%
|
|
$
|
126,185
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Persistency
(12 months ended)
|
|
|
81.1
|
%
|
|
|
|
81.8
|
%
|
|
|
|
85.4
|
%
|
(1)
|
Includes amounts related to loans subject to the Freddie Mac Agreement.
|
|
December 31,
|
|||||||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2011
|
|||||||||||||||
Primary RIF (1)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Flow
|
$
|
37,792
|
|
|
94.4
|
%
|
|
$
|
31,891
|
|
|
92.8
|
%
|
|
$
|
27,937
|
|
|
91.0
|
%
|
Structured
|
2,225
|
|
|
5.6
|
|
|
2,481
|
|
|
7.2
|
|
|
2,755
|
|
|
9.0
|
|
|||
Total Primary
|
$
|
40,017
|
|
|
100.0
|
%
|
|
$
|
34,372
|
|
|
100.0
|
%
|
|
$
|
30,692
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prime
|
$
|
36,613
|
|
|
91.5
|
%
|
|
$
|
30,348
|
|
|
88.3
|
%
|
|
$
|
26,011
|
|
|
84.8
|
%
|
Alt-A
|
2,017
|
|
|
5.0
|
|
|
2,404
|
|
|
7.0
|
|
|
2,825
|
|
|
9.2
|
|
|||
A minus and below
|
1,387
|
|
|
3.5
|
|
|
1,620
|
|
|
4.7
|
|
|
1,856
|
|
|
6.0
|
|
|||
Total Primary
|
$
|
40,017
|
|
|
100.0
|
%
|
|
$
|
34,372
|
|
|
100.0
|
%
|
|
$
|
30,692
|
|
|
100.0
|
%
|
(1)
|
Includes amounts related to loans subject to the Freddie Mac Agreement.
|
|
December 31,
|
|||||||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2011
|
|||||||||||||||
Total primary RIF by FICO score
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Flow
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
>=740
|
$
|
21,525
|
|
|
57.0
|
%
|
|
$
|
16,448
|
|
|
51.6
|
%
|
|
$
|
12,242
|
|
|
43.8
|
%
|
680-739
|
11,019
|
|
|
29.2
|
|
|
9,686
|
|
|
30.4
|
|
|
9,205
|
|
|
33.0
|
|
|||
620-679
|
4,555
|
|
|
12.0
|
|
|
4,918
|
|
|
15.4
|
|
|
5,503
|
|
|
19.7
|
|
|||
<=619
|
693
|
|
|
1.8
|
|
|
839
|
|
|
2.6
|
|
|
987
|
|
|
3.5
|
|
|||
Total Flow
|
$
|
37,792
|
|
|
100.0
|
%
|
|
$
|
31,891
|
|
|
100.0
|
%
|
|
$
|
27,937
|
|
|
100.0
|
%
|
Structured
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
>=740
|
$
|
602
|
|
|
27.0
|
%
|
|
$
|
661
|
|
|
26.6
|
%
|
|
$
|
732
|
|
|
26.6
|
%
|
680-739
|
640
|
|
|
28.8
|
|
|
716
|
|
|
28.9
|
|
|
802
|
|
|
29.1
|
|
|||
620-679
|
585
|
|
|
26.3
|
|
|
661
|
|
|
26.6
|
|
|
738
|
|
|
26.8
|
|
|||
<=619
|
398
|
|
|
17.9
|
|
|
443
|
|
|
17.9
|
|
|
483
|
|
|
17.5
|
|
|||
Total Structured
|
$
|
2,225
|
|
|
100.0
|
%
|
|
$
|
2,481
|
|
|
100.0
|
%
|
|
$
|
2,755
|
|
|
100.0
|
%
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
>=740
|
$
|
22,127
|
|
|
55.3
|
%
|
|
$
|
17,109
|
|
|
49.8
|
%
|
|
$
|
12,974
|
|
|
42.3
|
%
|
680-739
|
11,659
|
|
|
29.1
|
|
|
10,402
|
|
|
30.3
|
|
|
10,007
|
|
|
32.6
|
|
|||
620-679
|
5,140
|
|
|
12.9
|
|
|
5,579
|
|
|
16.2
|
|
|
6,241
|
|
|
20.3
|
|
|||
<=619
|
1,091
|
|
|
2.7
|
|
|
1,282
|
|
|
3.7
|
|
|
1,470
|
|
|
4.8
|
|
|||
Total Primary
|
$
|
40,017
|
|
|
100.0
|
%
|
|
$
|
34,372
|
|
|
100.0
|
%
|
|
$
|
30,692
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Primary RIF on defaulted loans
|
$
|
2,786
|
|
(1)
|
|
|
$
|
4,320
|
|
|
|
|
$
|
5,198
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excludes risk related to loans subject to the Freddie Mac Agreement.
|
|
December 31,
|
|||||||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2011
|
|||||||||||||||
Percentage of primary RIF
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Refinances
|
29
|
%
|
|
|
|
32
|
%
|
|
|
|
32
|
%
|
|
|
||||||
Loan Type:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Fixed
|
94.1
|
%
|
|
|
|
91.6
|
%
|
|
|
|
88.7
|
%
|
|
|
||||||
ARM (fully indexed) (1)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Less than five years
|
1.5
|
|
|
|
|
2.1
|
|
|
|
|
2.9
|
|
|
|
||||||
Five years and longer
|
3.4
|
|
|
|
|
4.7
|
|
|
|
|
6.2
|
|
|
|
||||||
ARM (potential negative amortization) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Less than five years
|
0.9
|
|
|
|
|
1.4
|
|
|
|
|
1.9
|
|
|
|
||||||
Five years and longer
|
0.1
|
|
|
|
|
0.2
|
|
|
|
|
0.3
|
|
|
|
||||||
Total
|
100.0
|
%
|
|
|
|
100.0
|
%
|
|
|
|
100.0
|
%
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total primary RIF by LTV (3)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
95.01% and above
|
$
|
4,171
|
|
|
10.4
|
%
|
|
$
|
4,643
|
|
|
13.5
|
%
|
|
$
|
5,324
|
|
|
17.3
|
%
|
90.01% to 95.00%
|
17,239
|
|
|
43.1
|
|
|
13,303
|
|
|
38.7
|
|
|
10,735
|
|
|
35.0
|
|
|||
85.01% to 90.00%
|
14,750
|
|
|
36.9
|
|
|
13,134
|
|
|
38.2
|
|
|
11,861
|
|
|
38.7
|
|
|||
85.00% and below
|
3,857
|
|
|
9.6
|
|
|
3,292
|
|
|
9.6
|
|
|
2,772
|
|
|
9.0
|
|
|||
Total Primary
|
$
|
40,017
|
|
|
100.0
|
%
|
|
$
|
34,372
|
|
|
100.0
|
%
|
|
$
|
30,692
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total primary RIF by policy year
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2005 and prior
|
$
|
4,461
|
|
|
11.1
|
%
|
|
$
|
5,657
|
|
|
16.5
|
%
|
|
$
|
6,887
|
|
|
22.4
|
%
|
2006
|
2,326
|
|
|
5.8
|
|
|
2,735
|
|
|
8.0
|
|
|
3,172
|
|
|
10.3
|
|
|||
2007
|
5,247
|
|
|
13.1
|
|
|
6,059
|
|
|
17.6
|
|
|
6,960
|
|
|
22.7
|
|
|||
2008
|
3,950
|
|
|
9.9
|
|
|
4,582
|
|
|
13.3
|
|
|
5,206
|
|
|
17.0
|
|
|||
2009
|
1,448
|
|
|
3.6
|
|
|
2,021
|
|
|
5.9
|
|
|
2,656
|
|
|
8.7
|
|
|||
2010
|
1,206
|
|
|
3.0
|
|
|
1,726
|
|
|
5.0
|
|
|
2,244
|
|
|
7.3
|
|
|||
2011
|
2,263
|
|
|
5.7
|
|
|
2,956
|
|
|
8.6
|
|
|
3,567
|
|
|
11.6
|
|
|||
2012
|
7,710
|
|
|
19.3
|
|
|
8,636
|
|
|
25.1
|
|
|
—
|
|
|
—
|
|
|||
2013
|
11,406
|
|
|
28.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total Primary
|
$
|
40,017
|
|
|
100.0
|
%
|
|
$
|
34,372
|
|
|
100.0
|
%
|
|
$
|
30,692
|
|
|
100.0
|
%
|
(1)
|
“Fully Indexed” refers to loans where payment adjustments are equal to mortgage interest-rate adjustments.
|
(2)
|
Loans with potential negative amortization will have increased principal balances only if interest rates increase, as compared to loans with scheduled negative amortization, for which an increase in loan balance will occur even if interest rates do not change.
|
(3)
|
LTV ratio: The percentage of the original loan amount to the original value of the property.
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Net premiums written
|
|
|
|
|
|
||||||
Primary and pool insurance
|
$
|
949,457
|
|
|
$
|
804,371
|
|
|
$
|
715,125
|
|
Second-lien mortgages (“Second-liens”)
|
1,492
|
|
|
1,874
|
|
|
2,314
|
|
|||
International
|
49
|
|
|
60
|
|
|
(175
|
)
|
|||
Net premiums written-insurance
|
$
|
950,998
|
|
|
$
|
806,305
|
|
|
$
|
717,264
|
|
Net premiums earned
|
|
|
|
|
|
||||||
Primary and pool insurance
|
$
|
779,415
|
|
|
$
|
699,079
|
|
|
$
|
673,869
|
|
Second-liens
|
1,492
|
|
|
1,874
|
|
|
2,314
|
|
|||
International
|
513
|
|
|
1,432
|
|
|
4,712
|
|
|||
Net premiums earned-insurance
|
$
|
781,420
|
|
|
$
|
702,385
|
|
|
$
|
680,895
|
|
(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 portfolio loans.
|
|
At or For the Year Ended December 31,
|
||||||||||
($ in thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
First-Lien Captives
|
|
|
|
|
|
||||||
Premiums ceded to captives
|
$
|
17,901
|
|
|
$
|
23,416
|
|
|
$
|
28,816
|
|
% of total premiums
|
2.1
|
%
|
|
3.2
|
%
|
|
4.1
|
%
|
|||
IIF (1) subject to captives
|
4.0
|
%
|
|
6.5
|
%
|
|
8.9
|
%
|
|||
RIF (2) subject to captives
|
3.8
|
%
|
|
6.3
|
%
|
|
8.8
|
%
|
|||
|
|
|
|
|
|
||||||
Initial QSR Transaction
|
|
|
|
|
|
||||||
Ceded premiums written
|
$
|
23,047
|
|
|
$
|
52,151
|
|
|
|
||
% of premiums written
|
2.2
|
%
|
|
5.9
|
%
|
|
|
||||
Ceded premiums earned
|
$
|
29,746
|
|
|
$
|
16,088
|
|
|
|
||
% of total premiums
|
3.5
|
%
|
|
2.2
|
%
|
|
|
||||
Ceding commissions written
|
$
|
5,762
|
|
|
$
|
13,038
|
|
|
|
||
RIF included in Initial QSR Transaction (3)
|
$
|
1,329,544
|
|
|
$
|
1,525,840
|
|
|
|
||
|
|
|
|
|
|
||||||
Second QSR Transaction
|
|
|
|
|
|
||||||
Ceded premiums written
|
$
|
40,225
|
|
|
$
|
9,648
|
|
|
|
||
% of premiums written
|
3.9
|
%
|
|
1.1
|
%
|
|
|
||||
Ceded premiums earned
|
$
|
18,356
|
|
|
$
|
504
|
|
|
|
||
% of total premiums
|
2.2
|
%
|
|
0.1
|
%
|
|
|
||||
Ceding commissions written
|
$
|
14,079
|
|
|
$
|
3,377
|
|
|
|
||
RIF included in Second QSR Transaction (3)
|
$
|
1,298,631
|
|
|
$
|
368,429
|
|
|
|
(1)
|
IIF on captives as a percentage of total IIF.
|
(2)
|
RIF on captives as a percentage of total RIF.
|
(3)
|
RIF ceded under Reinsurance Transactions and included in primary RIF.
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
Net unrealized (losses) gains related to change in fair value of trading securities and other investments
|
$
|
(110.4
|
)
|
|
$
|
(32.7
|
)
|
|
$
|
67.8
|
|
Net realized gains on sales
|
16.6
|
|
|
136.4
|
|
|
58.4
|
|
|||
Net (losses) gains on investments
|
$
|
(93.8
|
)
|
|
$
|
103.7
|
|
|
$
|
126.2
|
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2013 (1)
|
|
2012 (1)
|
|
2011 (1)
|
||||||
New defaults
|
$
|
372.4
|
|
|
$
|
647.8
|
|
|
$
|
854.5
|
|
Existing defaults, second-liens, loss adjustment expenses (“LAE”) and other (2)
|
192.2
|
|
|
273.7
|
|
|
439.4
|
|
|||
Provision for losses
|
$
|
564.6
|
|
|
$
|
921.5
|
|
|
$
|
1,293.9
|
|
(1)
|
The financial impact for each component has been recalculated on a full year basis, such that the sum of the individual quarterly impacts within each respective year do not equal the recalculated impacts. For example, the impact from a loan that defaults in one quarter that then cures in the next quarter of the same year is not reflected within the full year provision for losses, as the net impact is zero for the full year period.
|
(2)
|
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 were either cured (“cures”), prepaid, or resulted in a paid claim or a rescission or denial during the period indicated; (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, including potential reinstatements we are in the process of discussing with servicers; (d) second-lien loss reserves; and (e) LAE and other loss reserves.
|
|
December 31, 2013
|
||||||||||||||||||||
|
|
|
|
|
Projected Default to Claim Rate
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
Gross (1)
|
|
Net (2)
|
|
Cure % During the 4th Quarter
|
|
Reserve for Losses
|
|
% of Reserve
|
||||||||
($ in thousands)
|
#
|
|
%
|
|
%
|
|
%
|
|
%
|
|
$
|
|
%
|
||||||||
Missed payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Three payments or less
|
13,274
|
|
|
21.8
|
%
|
|
24
|
%
|
|
22
|
%
|
|
30.1
|
%
|
|
$
|
133,398
|
|
|
8.5
|
%
|
Four to eleven payments
|
12,939
|
|
|
21.2
|
|
|
48
|
|
|
44
|
|
|
17.7
|
|
|
267,279
|
|
|
17.0
|
|
|
Twelve payments or more
|
23,995
|
|
|
39.4
|
|
|
57
|
|
|
50
|
|
|
4.4
|
|
|
686,198
|
|
|
43.5
|
|
|
Pending claims
|
10,701
|
|
|
17.6
|
|
|
100
|
|
|
90
|
|
|
0.5
|
|
|
489,181
|
|
|
31.0
|
|
|
Total
|
60,909
|
|
|
100.0
|
%
|
|
55
|
%
|
|
49
|
%
|
|
|
|
1,576,056
|
|
|
100.0
|
%
|
||
IBNR and other
|
|
|
|
|
|
|
|
|
|
|
347,698
|
|
|
|
|||||||
LAE
|
|
|
|
|
|
|
|
|
|
|
51,245
|
|
|
|
|||||||
Total primary reserves
|
|
|
|
|
|
|
|
|
|
|
$
|
1,974,999
|
|
|
|
|
December 31, 2012
|
||||||||||||||||||||
|
|
|
|
|
Projected Default to Claim Rate
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
Gross (1)
|
|
Net (2)
|
|
Cure % During the 4th Quarter
|
|
Reserve for Losses
|
|
% of Reserve
|
||||||||
($ in thousands)
|
#
|
|
%
|
|
%
|
|
%
|
|
%
|
|
$
|
|
%
|
||||||||
Missed payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Three payments or less
|
18,007
|
|
|
19.3
|
%
|
|
25
|
%
|
|
23
|
%
|
|
25.1
|
%
|
|
$
|
187,454
|
|
|
7.8
|
%
|
Four to eleven payments
|
20,080
|
|
|
21.6
|
|
|
48
|
|
|
44
|
|
|
12.1
|
|
|
435,895
|
|
|
18.2
|
|
|
Twelve payments or more
|
37,457
|
|
|
40.2
|
|
|
57
|
|
|
47
|
|
|
4.6
|
|
|
991,159
|
|
|
41.4
|
|
|
Pending claims
|
17,625
|
|
|
18.9
|
|
|
100
|
|
|
86
|
|
|
0.5
|
|
|
781,666
|
|
|
32.6
|
|
|
Total
|
93,169
|
|
|
100.0
|
%
|
|
57
|
%
|
|
49
|
%
|
|
|
|
2,396,174
|
|
|
100.0
|
%
|
||
IBNR and other
|
|
|
|
|
|
|
|
|
|
|
289,032
|
|
|
|
|||||||
LAE
|
|
|
|
|
|
|
|
|
|
|
64,252
|
|
|
|
|||||||
Total primary reserves
|
|
|
|
|
|
|
|
|
|
|
$
|
2,749,458
|
|
|
|
(1)
|
Represents the weighted average default to claim rate before consideration of estimated rescissions, denials and reinstatements of rescissions and denials for each category of defaulted loans.
|
(2)
|
Net of estimate of rescissions, denials and reinstatements of rescissions and denials.
|
|
December 31,
|
|||||||
|
2013
|
|
2012
|
|
2011
|
|||
Default Statistics—Primary Insurance:
|
|
|
|
|
|
|||
Total Primary Insurance
|
|
|
|
|
|
|||
Prime
|
|
|
|
|
|
|||
Number of insured loans
|
741,554
|
|
|
667,622
|
|
|
610,438
|
|
Number of loans in default
|
37,932
|
|
|
60,854
|
|
|
71,546
|
|
Percentage of loans in default
|
5.12
|
%
|
|
9.12
|
%
|
|
11.72
|
%
|
Alt-A
|
|
|
|
|
|
|||
Number of insured loans
|
44,905
|
|
|
54,069
|
|
|
62,839
|
|
Number of loans in default
|
11,209
|
|
|
16,005
|
|
|
20,044
|
|
Percentage of loans in default
|
24.96
|
%
|
|
29.60
|
%
|
|
31.90
|
%
|
A minus and below
|
|
|
|
|
|
|||
Number of insured loans
|
40,930
|
|
|
49,307
|
|
|
56,361
|
|
Number of loans in default
|
11,768
|
|
|
16,310
|
|
|
19,271
|
|
Percentage of loans in default
|
28.75
|
%
|
|
33.08
|
%
|
|
34.19
|
%
|
Total Primary
|
|
|
|
|
|
|||
Number of insured loans
|
839,249
|
|
(1)
|
770,998
|
|
|
729,638
|
|
Number of loans in default
|
60,909
|
|
(2)
|
93,169
|
|
|
110,861
|
|
Percentage of loans in default
|
7.26
|
%
|
|
12.08
|
%
|
|
15.19
|
%
|
Default Statistics—Pool Insurance:
|
|
|
|
|
|
|||
Number of loans in default
|
11,921
|
|
|
18,147
|
|
|
21,685
|
|
(1)
|
Includes 11,860 insured loans subject to the Freddie Mac Agreement.
|
(2)
|
Excludes 7,221 loans subject to the Freddie Mac Agreement that are in default at
December 31, 2013
, as we no longer have claims exposure on these loans.
|
|
Year Ended December 31,
|
|||||||
|
2013
|
|
2012
|
|
2011
|
|||
Beginning default inventory
|
93,169
|
|
|
110,861
|
|
|
125,470
|
|
Less: Freddie Mac Agreement Loans
|
9,756
|
|
|
—
|
|
|
—
|
|
Plus: New defaults (1)
|
58,577
|
|
|
73,517
|
|
|
94,817
|
|
Less: Cures (1)
|
56,507
|
|
|
61,906
|
|
|
77,997
|
|
Less: Claims paid (2)
|
22,554
|
|
|
18,933
|
|
|
24,479
|
|
Less: Rescissions (3)
|
967
|
|
|
3,433
|
|
|
4,852
|
|
Less: Denials (4)
|
1,053
|
|
|
6,937
|
|
|
2,098
|
|
Ending default inventory
|
60,909
|
|
|
93,169
|
|
|
110,861
|
|
(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:
|
|
Year Ended December 31,
|
|||||||
|
2013
|
|
2012
|
|
2011
|
|||
Intra-period new defaults
|
39,584
|
|
|
42,159
|
|
|
53,103
|
|
(2)
|
Includes those charged to a deductible or captive.
|
(3)
|
Net of any previously rescinded policies or denied claims that were reinstated during the period. Such reinstated rescissions may ultimately result in a paid claim.
|
(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 one servicer.
|
|
December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
Decrease to our loss reserve due to estimated future rescissions and denials
|
$
|
247
|
|
|
$
|
455
|
|
|
$
|
631
|
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
Rescissions
|
$
|
81.2
|
|
|
$
|
279.3
|
|
|
$
|
474.2
|
|
Denials
|
171.7
|
|
|
539.4
|
|
|
170.9
|
|
|||
Total first-lien claims submitted for payment that were rescinded or denied (1)
|
$
|
252.9
|
|
|
$
|
818.7
|
|
|
$
|
645.1
|
|
(1)
|
Includes an amount related to a small number of submitted claims that were subsequently withdrawn by the insured.
|
Claim
Received
Quarter
|
|
Projected Net Cumulative Rescission/Denial Rate for Each Quarter (1)
|
|
Percentage of
Total Claims Resolved (2)
|
Q1 2011
|
|
20.1%
|
|
99%
|
Q2 2011
|
|
25.0%
|
|
99%
|
Q3 2011
|
|
30.6%
|
|
99%
|
Q4 2011
|
|
26.6%
|
|
99%
|
Q1 2012
|
|
23.4%
|
|
99%
|
Q2 2012
|
|
21.0%
|
|
99%
|
Q3 2012
|
|
18.1%
|
|
95%
|
Q4 2012
|
|
16.5%
|
|
89%
|
Q1 2013
|
|
16.7%
|
|
78%
|
Q2 2013
|
|
18.1%
|
|
69%
|
(1)
|
Projected net 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 policies or denied claims (excluding certain potential reinstatements we are in the process of discussing with servicers). These projected amounts represent the cumulative rates for each quarter as of
December 31, 2013
. Until all of the claims received during the periods shown have been internally resolved, the rescission/denial rates for each quarter will be subject to change; these rates also will remain subject to change based on differences between estimated and actual reinstatements of previously rescinded policies or denied claims.
|
(2)
|
The percentage of claims resolved for each quarter presented in the table above represents the number of claims that have been internally resolved as a percentage of the total number of claims received for that specific quarter. A claim is considered internally resolved when it is either paid or it is concluded that the claim should be denied or rescinded, though such denials and rescissions could be challenged and potentially reinstated or overturned. For the third and fourth quarters of
2013
, a significant portion of claims received for those quarters have not been internally resolved; therefore, we do not believe the projected net cumulative rescission/denial rates for those periods are presently meaningful.
|
|
December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Reserves for losses by category:
|
|
|
|
|
|
||||||
Prime
|
$
|
937,307
|
|
|
$
|
1,508,140
|
|
|
$
|
1,604,398
|
|
Alt-A
|
384,841
|
|
|
490,728
|
|
|
562,423
|
|
|||
A minus and below
|
215,545
|
|
|
314,068
|
|
|
339,535
|
|
|||
IBNR and other
|
347,698
|
|
|
289,032
|
|
|
151,965
|
|
|||
LAE
|
51,245
|
|
|
64,252
|
|
|
73,320
|
|
|||
Reinsurance recoverable (1)
|
38,363
|
|
|
83,238
|
|
|
151,569
|
|
|||
Total primary reserves
|
1,974,999
|
|
|
2,749,458
|
|
|
2,883,210
|
|
|||
Pool
|
169,682
|
|
|
281,937
|
|
|
326,063
|
|
|||
IBNR and other
|
8,938
|
|
|
34,000
|
|
|
18,638
|
|
|||
LAE
|
5,439
|
|
|
7,466
|
|
|
8,882
|
|
|||
Total pool reserves
|
184,059
|
|
|
323,403
|
|
|
353,583
|
|
|||
Total first-lien reserves
|
2,159,058
|
|
|
3,072,861
|
|
|
3,236,793
|
|
|||
Second-lien and other (2)
|
5,295
|
|
|
10,747
|
|
|
11,107
|
|
|||
Total reserve for losses
|
$
|
2,164,353
|
|
|
$
|
3,083,608
|
|
|
$
|
3,247,900
|
|
|
|
|
|
|
|
||||||
PDR on second-liens
|
$
|
1,785
|
|
|
$
|
3,685
|
|
|
$
|
3,644
|
|
(1)
|
Primarily represents ceded losses on captive transactions, Smart Home (for 2012 and 2011) and the Reinsurance Transactions.
|
(2)
|
Does not include second-lien PDR.
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Mortgage Insurance
|
|
|
|
|
|
||||||
Balance at January 1
|
$
|
3,083,608
|
|
|
$
|
3,247,900
|
|
|
$
|
3,524,971
|
|
Less reinsurance recoverables (1)
|
83,238
|
|
|
151,569
|
|
|
223,254
|
|
|||
Balance at January 1, net of reinsurance recoverables
|
3,000,370
|
|
|
3,096,331
|
|
|
3,301,717
|
|
|||
Add total losses and LAE incurred in respect of default notices reported and unreported
|
564,648
|
|
|
921,507
|
|
|
1,293,857
|
|
|||
Deduct paid claims and LAE
|
1,439,028
|
|
|
1,017,468
|
|
|
1,499,243
|
|
|||
Balance at December 31, net of reinsurance recoverables
|
2,125,990
|
|
|
3,000,370
|
|
|
3,096,331
|
|
|||
Add reinsurance recoverables (1)
|
38,363
|
|
|
83,238
|
|
|
151,569
|
|
|||
Balance at December 31
|
$
|
2,164,353
|
|
|
$
|
3,083,608
|
|
|
$
|
3,247,900
|
|
(1)
|
Primarily related to ceded losses on captive transactions, Smart Home (for 2012 and 2011) and Reinsurance Transactions.
|
(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
December 31, 2013
,
2012
and
2011
would be $24,640, $27,545 and $25,402, respectively.
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Net claims paid (1):
|
|
|
|
|
|
||||||
Prime
|
$
|
770,500
|
|
|
$
|
638,820
|
|
|
$
|
796,940
|
|
Alt-A
|
183,846
|
|
|
165,776
|
|
|
257,448
|
|
|||
A minus and below
|
111,828
|
|
|
112,216
|
|
|
164,429
|
|
|||
Total primary claims paid
|
1,066,174
|
|
|
916,812
|
|
|
1,218,817
|
|
|||
Pool
|
115,192
|
|
|
92,206
|
|
|
178,610
|
|
|||
Second-lien and other
|
2,995
|
|
|
8,598
|
|
|
11,331
|
|
|||
Subtotal
|
1,184,361
|
|
|
1,017,616
|
|
|
1,408,758
|
|
|||
Impact of Freddie Mac Agreement
|
254,667
|
|
|
—
|
|
|
—
|
|
|||
Impact of first-lien terminations
|
—
|
|
|
—
|
|
|
75,101
|
|
|||
Impact of captive terminations
|
—
|
|
|
(148
|
)
|
|
(1,166
|
)
|
|||
Impact of second-lien terminations
|
—
|
|
|
—
|
|
|
16,550
|
|
|||
Total net claims paid
|
$
|
1,439,028
|
|
|
$
|
1,017,468
|
|
|
$
|
1,499,243
|
|
Average net claim paid (2):
|
|
|
|
|
|
||||||
Prime
|
$
|
47.4
|
|
|
$
|
48.6
|
|
|
$
|
49.6
|
|
Alt-A
|
56.3
|
|
|
57.9
|
|
|
60.7
|
|
|||
A minus and below
|
37.0
|
|
|
37.7
|
|
|
40.2
|
|
|||
Total average net primary claim paid
|
47.3
|
|
|
47.8
|
|
|
50.0
|
|
|||
Pool
|
65.6
|
|
|
67.9
|
|
|
76.2
|
|
|||
Second-lien and other
|
15.9
|
|
|
25.1
|
|
|
25.8
|
|
|||
Total average net claim paid
|
$
|
48.4
|
|
|
$
|
48.7
|
|
|
$
|
51.9
|
|
|
|
|
|
|
|
||||||
Average direct primary claim paid (2) (3)
|
$
|
49.6
|
|
|
$
|
50.4
|
|
|
$
|
54.6
|
|
Average total direct claim paid (2) (3)
|
$
|
50.5
|
|
|
$
|
51.1
|
|
|
$
|
56.0
|
|
(1)
|
Net of reinsurance recoveries.
|
(2)
|
Calculated without giving effect to the impact of the Freddie Mac Agreement and the termination of captive transactions and first- and second-lien transactions.
|
(3)
|
Before reinsurance recoveries.
|
Year of
Origination
|
|
End of 1st year
|
|
End of 2nd year
|
|
End of 3rd year
|
|
End of 4th year
|
|
End of 5th year
|
|
End of 6th year
|
|
End of 7th year
|
|
End of 8th year
|
|
End of 9th year
|
|
End of 10th year
|
||||||||||
2003
|
|
0.4
|
%
|
|
7.3
|
%
|
|
17.1
|
%
|
|
23.0
|
%
|
|
28.0
|
%
|
|
31.1
|
%
|
|
33.3
|
%
|
|
37.1
|
%
|
|
38.4
|
%
|
|
39.5
|
%
|
2004
|
|
0.6
|
%
|
|
6.6
|
%
|
|
15.8
|
%
|
|
28.0
|
%
|
|
38.9
|
%
|
|
45.5
|
%
|
|
53.7
|
%
|
|
56.0
|
%
|
|
58.3
|
%
|
|
61.7
|
%
|
2005
|
|
0.3
|
%
|
|
6.0
|
%
|
|
24.7
|
%
|
|
58.9
|
%
|
|
74.0
|
%
|
|
92.3
|
%
|
|
100.9
|
%
|
|
105.4
|
%
|
|
111.2
|
%
|
|
—
|
|
2006
|
|
0.9
|
%
|
|
13.1
|
%
|
|
45.4
|
%
|
|
63.6
|
%
|
|
94.4
|
%
|
|
117.5
|
%
|
|
128.1
|
%
|
|
139.3
|
%
|
|
—
|
|
|
—
|
|
2007
|
|
0.5
|
%
|
|
9.8
|
%
|
|
33.6
|
%
|
|
81.0
|
%
|
|
124.2
|
%
|
|
142.4
|
%
|
|
162.6
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
2008
|
|
0.2
|
%
|
|
5.0
|
%
|
|
29.2
|
%
|
|
61.2
|
%
|
|
78.0
|
%
|
|
97.8
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2009
|
|
—
|
|
|
1.3
|
%
|
|
3.9
|
%
|
|
7.6
|
%
|
|
11.7
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2010
|
|
—
|
|
|
0.4
|
%
|
|
1.3
|
%
|
|
3.1
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2011
|
|
—
|
|
|
0.2
|
%
|
|
1.1
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2012
|
|
—
|
|
|
0.1
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2013
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
December 31,
|
|||||||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2011
|
|||||||||||||||
Direct claims paid by origination year (first-lien):
|
|
|||||||||||||||||||
2005 and prior
|
$
|
303
|
|
|
25.7
|
%
|
|
$
|
268
|
|
|
26.4
|
%
|
|
$
|
333
|
|
|
22.7
|
%
|
2006
|
239
|
|
|
20.3
|
|
|
194
|
|
|
19.1
|
|
|
331
|
|
|
22.5
|
|
|||
2007
|
446
|
|
|
37.9
|
|
|
403
|
|
|
39.8
|
|
|
634
|
|
|
43.1
|
|
|||
2008
|
169
|
|
|
14.3
|
|
|
137
|
|
|
13.5
|
|
|
166
|
|
|
11.3
|
|
|||
2009
|
15
|
|
|
1.3
|
|
|
11
|
|
|
1.1
|
|
|
6
|
|
|
0.4
|
|
|||
2010
|
4
|
|
|
0.3
|
|
|
1
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|||
2011
|
2
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total direct claims paid
|
$
|
1,178
|
|
|
100.0
|
%
|
|
$
|
1,014
|
|
|
100.0
|
%
|
|
$
|
1,470
|
|
|
100.0
|
%
|
|
December 31, 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)
|
$
|
5.3
|
|
|
22.2
|
%
|
|
$
|
12.9
|
|
|
$
|
0.2
|
|
Healthcare and long-term care
|
2.4
|
|
|
10.0
|
|
|
11.1
|
|
|
0.8
|
|
|||
Water/sewer/electric gas and investor-owned utilities
|
1.3
|
|
|
5.4
|
|
|
(9.6
|
)
|
|
1.2
|
|
|||
Education
|
1.1
|
|
|
4.6
|
|
|
(4.2
|
)
|
|
—
|
|
|||
Airports/transportation
|
0.9
|
|
|
3.8
|
|
|
(0.5
|
)
|
|
27.5
|
|
|||
Escrowed transactions (5)
|
0.9
|
|
|
3.8
|
|
|
—
|
|
|
—
|
|
|||
Housing
|
0.1
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|||
Other public finance (6)
|
0.5
|
|
|
2.1
|
|
|
(12.9
|
)
|
|
0.4
|
|
|||
Total public finance (7)
|
12.5
|
|
|
52.3
|
|
|
(3.2
|
)
|
|
30.1
|
|
|||
Structured finance:
|
|
|
|
|
|
|
|
|||||||
CDO
|
10.7
|
|
|
44.8
|
|
|
2.9
|
|
|
193.4
|
|
|||
Asset-backed obligations
|
0.6
|
|
|
2.5
|
|
|
19.6
|
|
|
8.6
|
|
|||
Other structured (8)
|
0.1
|
|
|
0.4
|
|
|
—
|
|
|
0.2
|
|
|||
Total structured finance
|
11.4
|
|
|
47.7
|
|
|
22.5
|
|
|
202.2
|
|
|||
Total
|
$
|
23.9
|
|
|
100.0
|
%
|
|
$
|
19.3
|
|
|
$
|
232.3
|
|
|
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
|
1.1
|
|
|
3.2
|
|
|
2.0
|
|
|
42.6
|
|
|||
Education
|
1.2
|
|
|
3.6
|
|
|
(5.3
|
)
|
|
—
|
|
|||
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:
|
|
|
|
|
|
|
|
|||||||
CDO
|
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, or the net (asset) liability recorded within VIE debt and other financial statement line items for financial guaranty consolidated VIEs.
|
(4)
|
Includes
$1.5 billion
and $1.6 billion at
December 31, 2013
and
2012
, respectively, of tax supported revenue bonds.
|
(5)
|
Escrowed transactions are legally defeased bond issuances where cash or U.S. government 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 service providers, second-to-pay international public finance, non-profit institutions, stadiums and project finance public facilities, 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
December 31, 2013
and
2012
, respectively, of international public finance insured obligations (which includes sovereign and sub-sovereign (collectively, “Sovereign”) indebtedness, of which
$101.2 million
and $105.2 million at
December 31, 2013
and
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 collateralized guaranteed investment contracts (“GICs”) or letters of credit, foreign commercial assets, life insurance securitizations, and, for 2012, diversified payment rights (“DPRs”), none of which individually constitutes a material amount of our financial guaranty net par outstanding.
|
|
As of December 31, 2013
|
||||||||
Asset Class
|
Total Exposure
(Net Par)
|
|
% of CDO
Net Par
Outstanding
|
|
% of Total
Net Par
Outstanding
|
||||
|
(In billions)
|
|
|
|
|
||||
Direct CDOs:
|
|
||||||||
Corporate CDOs (1)
|
$
|
7.3
|
|
|
68.2
|
%
|
|
30.6
|
%
|
CDOs of CMBS (2)
|
1.8
|
|
|
16.8
|
|
|
7.5
|
|
|
Trust preferred securities (“TruPs”)
|
1.0
|
|
|
9.4
|
|
|
4.2
|
|
|
CDOs of collateralized loan obligations (“CLO”) (3)
|
0.5
|
|
|
4.7
|
|
|
2.1
|
|
|
Total Direct CDOs
|
10.6
|
|
|
99.1
|
|
|
44.4
|
|
|
Assumed CDOs
|
0.1
|
|
|
0.9
|
|
|
0.4
|
|
|
Total CDOs
|
$
|
10.7
|
|
|
100.0
|
%
|
|
44.8
|
%
|
(1)
|
Includes one CDO comprised of Corporate CDOs with net par outstanding of
$3.9 million
. This transaction is the only CDO comprised of other CDOs in our directly insured financial guaranty portfolio.
|
(2)
|
In January 2014, a counterparty to a $450 million AAA-rated CDO of CMBS exercised its right to terminate the transaction on a walkaway basis.
|
(3)
|
Consists of two second-to-pay CLOs with aggregate net par outstanding of
$443.2 million
and ratings of A+ and B+ that are scheduled to mature in 2017 and 2018, respectively.
|
Second-to-Pay Exposure
|
|
Public
Finance Net
Par
Outstanding
|
|
%
Second-to-
Pay
|
|
Structured Finance
Net Par
Outstanding
|
|
%
Second-to-
Pay
|
|
Total
Net Par
Outstanding
|
|
%
Second-to-
Pay
|
|||||||||
($ in billions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Investment grade primary obligors
|
|
$
|
0.5
|
|
|
27.7
|
%
|
|
$
|
0.1
|
|
|
5.6
|
%
|
|
$
|
0.6
|
|
|
33.3
|
%
|
BIG primary obligors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
MBIA Insurance Corporation (“MBIA”)
|
|
0.1
|
|
|
5.6
|
|
|
0.5
|
|
|
27.7
|
|
|
0.6
|
|
(1)
|
33.3
|
|
|||
Syncora Guaranty Inc.
|
|
0.3
|
|
|
16.6
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
(2)
|
16.6
|
|
|||
Ambac Assurance Corporation
|
|
0.1
|
|
|
5.6
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
(3)
|
5.6
|
|
|||
FGIC
|
|
0.1
|
|
|
5.6
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
(4)
|
5.6
|
|
|||
Other
|
|
0.1
|
|
|
5.6
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
(5)
|
5.6
|
|
|||
Total BIG primary obligors
|
|
0.7
|
|
|
39.0
|
|
|
0.5
|
|
|
27.7
|
|
|
1.2
|
|
|
66.7
|
|
|||
Total Second-to-Pay
|
|
$
|
1.2
|
|
|
66.7
|
%
|
|
$
|
0.6
|
|
|
33.3
|
%
|
|
$
|
1.8
|
|
|
100.0
|
%
|
(1)
|
$392.1 million
or
67.9%
of this net par outstanding is related to underlying obligations that are also rated BIG.
|
(2)
|
$125.3 million
or
36.0%
of this net par outstanding is related to underlying obligations that are also rated BIG.
|
(3)
|
$4.5 million
or
3.6%
of this net par outstanding is related to underlying obligations that are also rated BIG.
|
(4)
|
All of this net par outstanding is related to underlying obligations that are also rated BIG.
|
(5)
|
$16.5 million
or
51.2%
of this net par outstanding is related to underlying obligations that are also rated BIG.
|
|
Net Par Outstanding (1) Rated AAA
|
|
Net Par Outstanding (1) Rated Non-AAA Investment Grade
|
|
Net Par Outstanding (1) Rated BIG
|
||||||||||||||||||
|
Year Ended December 31,
|
|
Year Ended December 31,
|
|
Year Ended December 31,
|
||||||||||||||||||
(in billions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||||||
Type of Obligation
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Public Finance:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
General obligation and other tax supported
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4.6
|
|
|
$
|
5.5
|
|
|
$
|
0.7
|
|
|
$
|
0.8
|
|
Healthcare and long-term care
|
0.3
|
|
|
0.3
|
|
|
1.9
|
|
|
2.7
|
|
|
0.2
|
|
|
0.2
|
|
||||||
Water/sewer electric/gas and investor-owned utilities
|
0.1
|
|
|
0.1
|
|
|
1.2
|
|
|
1.5
|
|
|
—
|
|
|
0.2
|
|
||||||
Education
|
—
|
|
|
—
|
|
|
1.1
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
||||||
Airports/transportation
|
0.1
|
|
|
0.1
|
|
|
0.5
|
|
|
0.7
|
|
|
0.3
|
|
|
0.3
|
|
||||||
Escrowed transactions (2)
|
0.9
|
|
|
1.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Housing
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
||||||
Other public finance (3)
|
0.1
|
|
|
0.1
|
|
|
0.4
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
||||||
Total public finance
|
1.5
|
|
|
1.6
|
|
|
9.8
|
|
|
12.2
|
|
|
1.2
|
|
|
1.5
|
|
||||||
Structured Finance:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
CDO
|
7.7
|
|
|
13.5
|
|
|
2.4
|
|
|
3.2
|
|
|
0.6
|
|
|
0.8
|
|
||||||
Asset-backed obligations
|
—
|
|
|
0.1
|
|
|
0.2
|
|
|
0.2
|
|
|
0.4
|
|
|
0.5
|
|
||||||
Other structured (4)
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
||||||
Total structured finance
|
7.7
|
|
|
13.6
|
|
|
2.7
|
|
|
3.5
|
|
|
1.0
|
|
|
1.3
|
|
||||||
Total
|
$
|
9.2
|
|
|
$
|
15.2
|
|
|
$
|
12.5
|
|
|
$
|
15.7
|
|
|
$
|
2.2
|
|
|
$
|
2.8
|
|
(1)
|
Represents our exposure to the aggregate outstanding principal on insured obligations.
|
(2)
|
Escrowed transactions are legally defeased bond issuances where cash or U.S. government 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.
|
(3)
|
Represents other types of municipal obligations, including human service providers, second-to-pay international public finance, non-profit institutions, stadiums and project finance accommodations, none of which individually constitutes a material amount of our financial guaranty net par outstanding.
|
(4)
|
Represents other types of structured finance obligations, including GICs or letters of credit, foreign commercial assets, life insurance securitizations and, in the case of 2012, DPRs, none of which individually constitutes a material amount of our financial guaranty net par outstanding.
|
|
As of December 31, 2013
|
||||||||
Internal Credit Rating (1)
|
# of CDO
Contracts
|
|
Net Par
Outstanding
|
|
% of CDO Net
Par Outstanding
|
||||
|
|
|
(In billions)
|
|
|
||||
AAA
|
30
|
|
|
$
|
7.7
|
|
|
72.0
|
%
|
AA
|
2
|
|
|
0.3
|
|
|
2.8
|
|
|
A
|
10
|
|
|
0.8
|
|
|
7.5
|
|
|
BBB
|
8
|
|
|
1.3
|
|
|
12.1
|
|
|
BIG
|
4
|
|
|
0.6
|
|
|
5.6
|
|
|
Total
|
54
|
|
|
$
|
10.7
|
|
|
100.0
|
%
|
(1)
|
Represents our internal ratings estimates. Each rating within a letter category includes all rating grades within that letter category (e.g., an “A” rating includes “A+,” “A” and “A-”).
|
Credit Ratings (1)
|
% of Notional
Amount of
Underlying
Collateral
|
|
($ in billions)
|
|
|
AAA
|
0.6
|
%
|
AA
|
4.9
|
|
A
|
19.9
|
|
BBB
|
49.8
|
|
Total investment grade collateral
|
75.2
|
|
BB
|
15.4
|
|
B
|
4.6
|
|
CCC and below
|
2.0
|
|
Not Rated
|
2.8
|
|
Total Non-investment grade collateral
|
24.8
|
|
Total
|
100.0
|
%
|
(1)
|
Represents the lower of the ratings of the underlying corporate entities as determined by Moody’s and S&P. Each rating within a letter category includes all rating grades within that letter category (e.g., an “A” rating includes “A+” “A” and “A-”).
|
Year of Scheduled
Maturity (1)
|
Number of CDO
Contracts/ Policies (2) |
|
Aggregate Net
Par
Exposure
|
|
Initial Average
# of Sustainable Credit Events (3)(5) |
|
Current Average #
of Sustainable
Credit
Events (4)(5)
|
|
Minimum # of
Sustainable Credit Events (5) |
|
Avg. # of
Current
Remaining
Entities in
Transaction (6)
|
|||||||
|
|
|
(In billions)
|
|
|
|
|
|
|
|
|
|||||||
2014
|
4
|
|
|
$
|
1.5
|
|
|
24.0
|
|
|
16.8
|
|
|
6.1
|
|
|
95
|
|
2017
|
13
|
|
|
5.8
|
|
|
27.4
|
|
|
26.4
|
|
|
10.3
|
|
|
99
|
|
|
Total
|
17
|
|
|
$
|
7.3
|
|
|
|
|
|
|
|
|
|
(1)
|
No directly insured corporate CDO transactions are scheduled to mature in 2015 or 2016. All of our directly insured corporate CDO transactions are scheduled to mature on or before December 31, 2017.
|
(2)
|
Does not include our one insured corporate CDO of CDOs with a net par outstanding of
$3.9 million
, with a legal maturity date in 2018, because the payments of principal and interest on this CDO depend on the cash flows actually generated from the CDO’s underlying collateral and the likelihood that we would have to pay a claim is not measurable in terms of sustainable credit events.
|
(3)
|
The average number of sustainable credit events at the inception of each transaction. Average amounts presented are simple averages.
|
(4)
|
The average number of sustainable credit events determined as of
December 31, 2013
. Average amounts presented are simple averages.
|
(5)
|
The number of sustainable credit events represents the number of credit events on different corporate entities that can occur within a single transaction before we would be obligated to pay a claim. It is calculated using the weighted average exposure per corporate entity and assumes a recovery value of 30% to determine future losses (unless the parties have agreed upon a fixed recovery, then such recovery is used to determine future loss) or in the case of a defaulted reference entity pending settlement, we use market-indicated recovery levels.
|
(6)
|
The current average number of different corporate entities in each of the transactions.
|
TruPs Bond
|
|
CDS
Termination
Date
|
|
TruPs CDO
Maturity
Date
|
|
Net Par
Outstanding
|
|
Subordination
after defaults
(%)
|
|
Subordination after
defaults and deferrals
(%) (2)
|
|
Interest Coverage
Ratio (3)
|
|||||||||||
|
|
|
December 31, 2013
|
|
December 31, 2013
|
|
December 31, 2013
|
|
December 31, 2012
|
|
December 31, 2013
|
|
December 31, 2012
|
||||||||||
|
|
|
|
|
|
(In millions)
|
|
(1)
|
|
|
|
|
|
|
|
|
|||||||
1
|
|
11/2016
|
(4)
|
9/2037
|
|
$
|
93.6
|
|
|
52.4
|
%
|
|
50.1
|
%
|
|
45.3
|
%
|
|
282.8
|
%
|
|
374.2
|
%
|
|
|
11/2018
|
(4)(5)
|
9/2037
|
|
64.4
|
|
|
52.4
|
|
|
50.1
|
|
|
45.3
|
|
|
282.8
|
|
|
374.2
|
|
|
2
|
|
12/2016
|
(4)
|
3/2037
|
|
107.5
|
|
|
45.8
|
|
|
37.2
|
|
|
31.6
|
|
|
337.6
|
|
|
300.3
|
|
|
3
|
|
3/2018
|
(4)(5)
|
9/2036
|
|
83.6
|
|
|
60.2
|
|
|
55.7
|
|
|
49.0
|
|
|
395.6
|
|
|
312.6
|
|
|
|
|
9/2036
|
|
9/2036
|
|
133.8
|
|
|
60.2
|
|
|
55.7
|
|
|
49.0
|
|
|
395.6
|
|
|
312.6
|
|
|
4
|
|
9/2018
|
(4)(5)
|
12/2036
|
|
63.9
|
|
|
57.0
|
|
|
45.7
|
|
|
30.1
|
|
|
602.3
|
|
|
295.5
|
|
|
5
|
|
10/2018
|
(4)(5)
|
7/2037
|
|
117.2
|
|
|
45.5
|
|
|
37.8
|
|
|
32.5
|
|
|
300.2
|
|
|
219.4
|
|
|
6
|
|
1/2033
|
|
1/2033
|
|
6.2
|
|
|
93.8
|
|
|
92.4
|
|
|
76.4
|
|
|
353.3
|
|
|
831.5
|
|
|
7
|
|
9/2033
|
|
9/2033
|
|
62.5
|
|
|
57.7
|
|
|
49.1
|
|
|
42.9
|
|
|
447.7
|
|
|
356.2
|
|
|
8
|
|
12/2033
|
|
12/2033
|
|
18.7
|
|
|
69.4
|
|
|
65.0
|
|
|
58.1
|
|
|
475.7
|
|
|
365.2
|
|
|
9
|
|
10/2034
|
|
10/2034
|
|
38.2
|
|
|
53.6
|
|
|
40.2
|
|
|
38.4
|
|
|
348.6
|
|
|
568.4
|
|
|
10
|
|
6/2036
|
|
6/2036
|
|
76.1
|
|
|
48.8
|
|
|
38.9
|
|
|
30.0
|
|
|
399.9
|
|
|
324.8
|
|
|
11
|
|
12/2036
|
|
12/2036
|
|
106.9
|
|
|
55.1
|
|
|
52.6
|
|
|
47.6
|
|
|
821.4
|
|
|
682.1
|
|
|
Total
|
|
|
|
|
|
$
|
972.6
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflects the amount of principal subordination (expressed as a percentage of the principal of the total collateral pool) remaining beneath our insured TruPs bond, after giving effect to paydowns or redemptions (“amortization”) of collateral and actual defaults and assuming no recoveries of principal on the defaulted TruPs. Notwithstanding this principal subordination, it is possible that the remaining performing collateral in these transactions will not generate sufficient cash to pay interest on our insured TruPs bonds. In this event, we may be required to make a claim payment in respect of interest, even on transactions where subordination remains to cover principal payments.
|
(2)
|
Reflects the amount of principal subordination (expressed as a percentage of the principal of the total collateral pool) remaining beneath our insured TruPs bond, after giving effect to deferrals of interest payments on the TruPs collateral, as well as amortization and actual defaults, assuming no recoveries of principal on the defaulted or deferred TruPs.
|
(3)
|
Internally generated interest coverage ratio for each TruPs bond equal to the gross interest collections on the TruPs collateral minus transaction expenses as a percentage of the sum of hedge payments and interest payable on the TruPs bond and securities senior to, or ranking equally with, the TruPs bond.
|
(4)
|
The transactions with a CDS Termination Date prior to the TruPs CDO Maturity Date provide for automatic annual one-year extensions (absent written notifications from our counterparty) until the TruPs CDO Maturity Date.
|
(5)
|
Pursuant to the terms of our CDS contracts covering these TruPs bonds, we could be required to pay our counterparties the outstanding par on our insured TruPs bond on the scheduled termination date of our CDS contract. For more information regarding this potential liquidity risk, see “—Liquidity and Capital Resources.”
|
|
|
CMBS 1
|
|
CMBS 2 (1)
|
|
CMBS 3
|
|
CMBS 4
|
|
Total
|
||||||||||
Total Size of CDO Collateral Pool (in billions)
|
|
$
|
2.4
|
|
|
$
|
1.9
|
|
|
$
|
1.4
|
|
|
$
|
1.0
|
|
|
$
|
6.7
|
|
Net Par Outstanding (in millions)
|
|
$
|
598.5
|
|
|
$
|
450.0
|
|
|
$
|
352.5
|
|
|
$
|
430.0
|
|
|
$
|
1,831.0
|
|
Radian Attachment/Detachment Points (2)
|
|
5.1% - 30.0%
|
|
6.9% - 30.6%
|
|
6.2% - 31.3%
|
|
7.0% - 50.0%
|
|
|
||||||||||
Internal Credit Rating
|
|
AAA
|
|
AAA
|
|
AA-
|
|
BBB-
|
|
|
||||||||||
Number of CMBS Tranches in CDO (3)
|
|
30
|
|
|
27
|
|
|
29
|
|
|
40
|
|
|
126
|
|
|||||
Size of CMBS Tranches in CDO (in millions)
|
|
$
|
80.0
|
|
|
$
|
70.4
|
|
|
$
|
48.5
|
|
|
$
|
25.0
|
|
|
|
||
Original Subordination of CMBS Tranches (4)
|
|
20
|
%
|
|
30
|
%
|
|
13
|
%
|
|
13
|
%
|
|
|
||||||
Average Remaining Subordination of CMBS Tranches (5)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2013
|
|
23
|
%
|
|
38
|
%
|
|
17
|
%
|
|
12
|
%
|
|
|
||||||
December 31, 2012
|
|
23
|
%
|
|
36
|
%
|
|
17
|
%
|
|
12
|
%
|
|
|
||||||
Total Delinquencies (Average of Securitizations) (6)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2013
|
|
7.0
|
%
|
|
8.1
|
%
|
|
4.2
|
%
|
|
7.5
|
%
|
|
|
||||||
December 31, 2012
|
|
8.7
|
%
|
|
10.2
|
%
|
|
6.2
|
%
|
|
10.1
|
%
|
|
|
(1)
|
In January 2014, the counterparty for this transaction exercised its right to terminate the transaction on a walkaway basis.
|
(2)
|
The “Attachment Point” is the percentage of losses in the collateral pool that must occur before we are obligated to pay claims. The “Detachment Point” is the point where the percentage of losses reaches a level where we cease to have an obligation to pay claims on additional losses. For example, a 7.0% attachment point on a $1 billion collateral pool means that we are not obligated to pay claims until there are $70 million of losses and a 50% detachment point means that our obligation to pay claims for losses ceases when the transaction reaches an aggregate of $500 million of losses.
|
(3)
|
Represents the number of CMBS tranches that comprise the collateral pool for the applicable CDOs of CMBS transaction.
|
(4)
|
The average subordination at the inception of our participation in the transaction.
|
(5)
|
The average remaining subordination after giving effect to both amortization of principal and realized losses.
|
(6)
|
Delinquencies reflect the average percentage (of total notional) of the CMBS collateral that is delinquent.
|
|
Year Ended December 31,
|
|
% Change
|
||||||||||||||
($ in millions)
|
2013
|
|
2012
|
|
2011
|
|
2013 vs. 2012
|
|
2012 vs. 2011
|
||||||||
Pretax (loss) income
|
$
|
(113.9
|
)
|
|
$
|
(199.6
|
)
|
|
$
|
929.3
|
|
|
(42.9
|
)%
|
|
n/m
|
|
Net premiums written—insurance
|
(10.2
|
)
|
|
(119.7
|
)
|
|
(10.0
|
)
|
|
(91.5
|
)
|
|
n/m
|
|
|||
Net premiums earned—insurance
|
49.5
|
|
|
36.6
|
|
|
75.1
|
|
|
35.2
|
|
|
(51.3
|
)%
|
|||
Net investment income
|
46.5
|
|
|
51.1
|
|
|
69.8
|
|
|
(9.0
|
)
|
|
(26.8
|
)
|
|||
Net (losses) gains on investments
|
(55.9
|
)
|
|
81.2
|
|
|
76.0
|
|
|
n/m
|
|
|
6.8
|
|
|||
Change in fair value of derivative instruments
|
(32.4
|
)
|
|
(143.7
|
)
|
|
629.0
|
|
|
(77.5
|
)
|
|
n/m
|
|
|||
Net (losses) gains on other financial instruments
|
(1.9
|
)
|
|
(78.8
|
)
|
|
189.4
|
|
|
(97.6
|
)
|
|
n/m
|
|
|||
Gain on sale of affiliate
|
—
|
|
|
7.7
|
|
|
—
|
|
|
(100.0
|
)
|
|
n/m
|
|
|||
Provision for losses
|
2.5
|
|
|
37.7
|
|
|
2.7
|
|
|
(93.4
|
)
|
|
n/m
|
|
|||
Policy acquisition costs
|
13.2
|
|
|
27.7
|
|
|
16.7
|
|
|
(52.3
|
)
|
|
65.9
|
|
|||
Other operating expenses
|
47.6
|
|
|
44.2
|
|
|
43.6
|
|
|
7.7
|
|
|
1.4
|
|
|||
Interest expense
|
56.6
|
|
|
44.4
|
|
|
47.5
|
|
|
27.5
|
|
|
(6.5
|
)
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Net premiums earned:
|
|
|
|
|
|
||||||
Public finance direct
|
$
|
36,361
|
|
|
$
|
43,727
|
|
|
$
|
40,797
|
|
Public finance reinsurance
|
10,384
|
|
|
13,434
|
|
|
25,942
|
|
|||
Structured direct
|
661
|
|
|
1,527
|
|
|
2,093
|
|
|||
Structured reinsurance
|
4,514
|
|
|
173
|
|
|
3,434
|
|
|||
Trade credit reinsurance
|
1
|
|
|
—
|
|
|
35
|
|
|||
Total premiums earned—insurance
|
51,921
|
|
|
58,861
|
|
|
72,301
|
|
|||
Impact of commutations/recaptures
|
(2,447
|
)
|
|
(22,264
|
)
|
|
2,829
|
|
|||
Total net premiums earned—insurance
|
$
|
49,474
|
|
|
$
|
36,597
|
|
|
$
|
75,130
|
|
|
|
|
|
|
|
||||||
Refundings included in total net premiums earned
|
$
|
30,593
|
|
|
$
|
33,985
|
|
|
$
|
27,187
|
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
Net unrealized (losses) gains related to change in fair value of trading securities and other investments
|
$
|
(64.2
|
)
|
|
$
|
(15.4
|
)
|
|
$
|
58.6
|
|
Net realized gains on sales
|
8.3
|
|
|
96.6
|
|
|
17.4
|
|
|||
Net (losses) gains on investments
|
$
|
(55.9
|
)
|
|
$
|
81.2
|
|
|
$
|
76.0
|
|
|
December 31,
|
||||||||||
(In basis points)
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||
Radian Group’s five-year CDS spread
|
323
|
|
|
913
|
|
|
2,732
|
|
|
465
|
|
(In millions)
|
Fair Value Liability
before Consideration
of Radian
Non-Performance Risk
December 31,
2013
|
|
Impact of Radian
Non-Performance Risk
December 31,
2013
|
|
Fair Value Liability
Recorded
December 31,
2013
|
||||||
Product
|
|
|
|
|
|
||||||
Corporate CDOs
|
$
|
30.4
|
|
|
$
|
29.0
|
|
|
$
|
1.4
|
|
Non-Corporate CDO-related
|
409.7
|
|
|
178.7
|
|
|
231.0
|
|
|||
Total
|
$
|
440.1
|
|
|
$
|
207.7
|
|
|
$
|
232.4
|
|
(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
|
689.1
|
|
|
509.3
|
|
|
179.8
|
|
|||
Total
|
$
|
787.9
|
|
|
$
|
610.9
|
|
|
$
|
177.0
|
|
(In millions)
|
Derivatives
and VIEs
|
||
Balance Sheet
|
|
||
Other invested assets
|
$
|
81.0
|
|
Derivative assets
|
6.3
|
|
|
Other assets
|
92.0
|
|
|
Total assets
|
179.3
|
|
|
Derivative liabilities
|
307.2
|
|
|
VIE debt - at fair value
|
91.8
|
|
|
Other liabilities
|
0.3
|
|
|
Total liabilities
|
399.3
|
|
|
Total fair value net liabilities
|
$
|
220.0
|
|
Present value of estimated credit loss recoveries (1)
|
$
|
(74.2
|
)
|
(1)
|
Represents the present value of our estimated credit loss recoveries (net of estimated credit loss payments) for those transactions for which we currently anticipate paying net losses or receiving recoveries of losses already paid. 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. As illustrated above, expected recoveries for our insured credit derivatives and VIEs exceeded estimated credit loss payments for these transactions as of December 31, 2013. This is primarily a result of our expected recovery on six TruPs (“Terminated TruPs CDOs”) that we commuted in April 2012 as part of the Commutation Transactions. We are entitled to recoveries related to these Terminated TruPs CDOs to the extent that any funds previously placed in a consolidated VIE as part of the commutation are remaining after the payment by the consolidated VIE of any credit losses on the Terminated TruPs CDOs.
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
Net premiums earned—derivatives
|
$
|
17.9
|
|
|
$
|
28.7
|
|
|
$
|
41.7
|
|
Financial Guaranty credit derivatives
|
(49.5
|
)
|
|
(173.6
|
)
|
|
598.0
|
|
|||
Financial Guaranty VIE derivative
|
(0.5
|
)
|
|
1.2
|
|
|
(10.7
|
)
|
|||
Other
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|||
Change in fair value of derivative instruments
|
$
|
(32.4
|
)
|
|
$
|
(143.7
|
)
|
|
$
|
629.0
|
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
(Losses) gains related to change in fair value of Financial Guaranty VIE debt
|
$
|
(10.8
|
)
|
|
$
|
(110.4
|
)
|
|
$
|
134.0
|
|
Gains related to other Financial Guaranty VIE assets
|
15.2
|
|
|
20.3
|
|
|
21.4
|
|
|||
(Loss) gain on the exchange/repurchase of long-term debt
|
(3.3
|
)
|
|
14.2
|
|
|
—
|
|
|||
Foreign currency gain related to the liquidation of a foreign subsidiary
|
—
|
|
|
—
|
|
|
39.6
|
|
|||
Other
|
(3.0
|
)
|
|
(2.9
|
)
|
|
(5.6
|
)
|
|||
Net (losses) gains on other financial instruments
|
$
|
(1.9
|
)
|
|
$
|
(78.8
|
)
|
|
$
|
189.4
|
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
New defaults
|
$
|
1.8
|
|
|
$
|
9.1
|
|
(1)
|
$
|
2.3
|
|
Existing defaults
|
0.7
|
|
|
28.6
|
|
(2)
|
0.4
|
|
|||
Provision for losses
|
$
|
2.5
|
|
|
$
|
37.7
|
|
|
$
|
2.7
|
|
(1)
|
Includes an $8.7 million increase in our assumed reserves related to our exposure to Spain.
|
(2)
|
Includes a $19.0 million increase related to our exposure to Greece, all of which was settled in 2012.
|
|
As of December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Total reserve for losses
|
$
|
21,069
|
|
|
$
|
66,328
|
|
|
$
|
63,002
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Total claims paid
|
$
|
47,745
|
|
|
$
|
34,338
|
|
|
$
|
11,427
|
|
|
Payments Due by Period
|
|
||||||||||||||||||||||
(In thousands)
|
Total
|
|
Less than
1 Year
|
|
1-3 years
|
|
3-5 years
|
|
More than
5 years
|
|
Uncertain
|
|
||||||||||||
Long-term debt obligations (principal and interest) (Note 11)
|
$
|
1,269,477
|
|
|
$
|
43,024
|
|
|
$
|
136,154
|
|
|
$
|
685,799
|
|
(1)
|
$
|
404,500
|
|
(2)
|
$
|
—
|
|
|
Operating lease obligations (Note 17)
|
36,512
|
|
|
12,876
|
|
|
15,650
|
|
|
4,093
|
|
|
3,893
|
|
|
—
|
|
|
||||||
Net interest margin securities (“NIMS”)
|
6,425
|
|
|
68
|
|
|
377
|
|
|
343
|
|
|
5,637
|
|
|
—
|
|
|
||||||
Derivative instruments and VIEs (3)
|
(74,215
|
)
|
|
92
|
|
|
3,842
|
|
|
(8
|
)
|
|
(78,141
|
)
|
|
—
|
|
|
||||||
Reserve for losses and LAE (Note 9) (4)
|
2,185,421
|
|
|
939,100
|
|
|
1,302,513
|
|
|
501
|
|
|
(61,205
|
)
|
|
4,512
|
|
|
||||||
Purchase obligations (5)
|
18,754
|
|
|
16,755
|
|
|
1,999
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||
Unrecognized tax benefits (Note 13)
|
177,586
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
177,586
|
|
(6)
|
||||||
Total
|
$
|
3,619,960
|
|
|
$
|
1,011,915
|
|
|
$
|
1,460,535
|
|
|
$
|
690,728
|
|
|
$
|
274,684
|
|
|
$
|
182,098
|
|
|
(1)
|
Excludes any amounts in excess of the aggregate principal amount that we may have to pay on our Convertible Senior Notes due 2017.
|
(2)
|
Includes $400 million of convertible senior notes that may be settled in cash, shares of our common stock or a combination thereof, at our election.
|
(3)
|
Amounts represent management’s estimate of credit loss payments (recoveries) related to these transactions as described in “Results of Operations—Financial Guaranty” above.
|
(4)
|
Our reserve for losses and LAE reflects the application of accounting policies described below in “Critical Accounting Policies—
Reserve for Losses
.” The payments due by period are based on management’s estimates and assume that all of the loss reserves included in the table will result in claim payments, net of expected recoveries. Included in the uncertain category is
$11.3 million
of unearned premium reserves on our financial guaranty contracts, which are included in our reserve for losses and LAE. Negative amounts presented are primarily related to expected recoveries on our financial guaranty transactions.
|
(5)
|
Includes two annual payments, totaling
$4.0 million
, of a seven year software contract under which we are obligated to pay
$14.0 million
. In 2015 (the end of the third year), we have the option to terminate this contract.
|
(6)
|
The timing of these potential payments is uncertain given the nature of the obligations.
|
•
|
Radian Guaranty and Radian Mortgage Assurance Inc. (“RMAI”) are parties to a cross-guaranty agreement. This agreement provides that if either party fails to make a payment to a policyholder, then the other party will step in and make the payment. The obligations of both parties are unconditional and irrevocable; however, no payments may be made without prior approval by the Pennsylvania Insurance Department.
|
•
|
Radian Guaranty has agreed to maintain Radian Insurance Inc.’s (“Radian Insurance”) tangible net worth at a minimum of $30 million and to cause Radian Insurance to at all times have sufficient liquidity to meet its current obligations, pursuant to a Net Worth and Liquidity Maintenance Agreement (“NWLMA”) between the two companies.
|
•
|
Radian Group has agreed to guarantee, up to a maximum amount of $300 million, Radian Guaranty’s obligations to Radian Insurance under the NWLMA in the event that Radian Guaranty is not able to or permitted by the Pennsylvania Insurance Department to perform under the agreement.
|
•
|
Radian Group and Radian Mortgage Insurance Inc. (“Radian Mortgage Insurance”), a subsidiary of Radian Guaranty, are parties to a guaranty agreement in which Radian Group has agreed for the benefit of Radian Mortgage Insurance’s creditors to make funds available on demand for the full and complete payment of all due but unpaid liabilities.
|
•
|
Radian Group and RMAI are parties to a guaranty agreement, which provides that Radian Group will make sufficient funds available to RMAI to ensure that RMAI has a minimum of $5 million of statutory surplus every calendar quarter. RMAI had
$18.0 million
of statutory capital and no RIF exposure as of
December 31, 2013
.
|
•
|
To allow our mortgage insurance customers to comply with applicable securities regulations for issuers of ABS (including MBS), we have been required, depending on the amount of credit enhancement we were providing, to provide: (1) audited financial statements for the insurance subsidiary participating in these transactions; or (2) a full and unconditional holding-company level guarantee for our insurance subsidiaries’ obligations in such transactions. Radian Group has guaranteed two structured transactions for Radian Guaranty with approximately
$133.5 million
of remaining credit exposure.
|
•
|
The Internal Revenue Service (“IRS”) examined Radian Group’s U.S. consolidated federal income tax returns for tax years 2000 through 2007, which include Radian Guaranty Reinsurance Inc. (“RGRI”) (formerly known as Commonwealth Mortgage Assurance Company of Texas). We are currently contesting proposed adjustments resulting from the IRS examination of these tax years, which if sustained, will result in additional income taxes of approximately $128 million plus proposed penalties of approximately $42 million. Additionally, we would incur interest on any sustained adjustments. Effective December 2011, Radian Group and RGRI entered into an Assumption and Indemnification Agreement with regard to these proposed adjustments. In this agreement, Radian Group agreed to indemnify RGRI for any tax payments ultimately due to the IRS for the proposed adjustments, which relate to the recognition of certain tax losses and deductions that were generated through our investment in a portfolio of non-economic REMIC residual interests currently held by RGRI. This indemnification was in lieu of an immediate capital contribution that otherwise would have been needed from Radian Group to RGRI, based on an estimate for this potential liability, in order for RGRI to maintain its minimum statutory surplus requirements. We can provide no assurance regarding the outcome of this IRS matter, which is likely to take several years in order to resolve. Additionally, there remains significant uncertainty with regard to the amount and timing of any potential payments under the indemnity agreement described above. See “Item 1A. Risk Factors—
The IRS is examining our consolidated federal income tax returns for the years 2000 through 2007
.”
|
•
|
On March 1, 2011, our subsidiary, Enhance Financial Services Group Inc. (“EFSG”), sold its 45% interest in the holding company of a Brazilian insurance company, which specializes in surety and agricultural insurance, to another owner for a nominal purchase price. This holding company and its subsidiaries are subject to regulation by The Superintendence of Private Insurance, the regulatory agency responsible for the supervision and control of the insurance market in Brazil. Although EFSG wrote off its entire interest in this company in 2005 and has sold its ownership interest, under Brazilian law, it is possible that EFSG could become liable for its proportionate share of the liabilities of the company related to the period in which EFSG was a significant shareholder, if the company was to become insolvent and had insufficient capital to satisfy its outstanding liabilities. EFSG’s share of the liabilities of the company attributable to this period was approximately
$103.4 million
as of December 31, 2010, the date of the most recent financial information available to us.
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Net (loss) income
|
$
|
(196,985
|
)
|
|
$
|
(451,468
|
)
|
|
$
|
302,150
|
|
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
|
|
|
|
|
||||||
Net losses (gains) on investments and other financial instruments, change in fair value of derivatives and net impairment losses recognized in earnings
|
186,230
|
|
|
41,409
|
|
|
(1,022,699
|
)
|
|||
Net payments related to derivative contracts and VIE debt (1)
|
(37,060
|
)
|
|
(8,213
|
)
|
|
(119,888
|
)
|
|||
Equity in (earnings) loss of affiliates
|
(1
|
)
|
|
13
|
|
|
(65
|
)
|
|||
Distributions from affiliate (1)
|
—
|
|
|
92
|
|
|
—
|
|
|||
Gain on sale of affiliate
|
—
|
|
|
(7,708
|
)
|
|
—
|
|
|||
Net cash paid for commutations, terminations, and recaptures (1)
|
(307,067
|
)
|
|
(240,110
|
)
|
|
(92,599
|
)
|
|||
Commutation-related charges
|
5,300
|
|
|
36,500
|
|
|
—
|
|
|||
Deferred tax (benefit) provision
|
(31,820
|
)
|
|
6,000
|
|
|
6,758
|
|
|||
Depreciation and amortization, net
|
80,136
|
|
|
72,389
|
|
|
63,120
|
|
|||
Change in:
|
|
|
|
|
|
|
|||||
Unearned premiums
|
130,289
|
|
|
82,910
|
|
|
(46,665
|
)
|
|||
Deferred policy acquisition costs
|
17,976
|
|
|
25,504
|
|
|
8,420
|
|
|||
Reinsurance recoverables
|
42,358
|
|
|
66,385
|
|
|
86,047
|
|
|||
Reserve for losses and LAE
|
(668,248
|
)
|
|
(161,114
|
)
|
|
(194,486
|
)
|
|||
Other assets
|
44,804
|
|
|
7,706
|
|
|
65,388
|
|
|||
Other liabilities
|
69,151
|
|
|
19,205
|
|
|
46,744
|
|
|||
Cash flows used in operations
|
$
|
(664,937
|
)
|
|
$
|
(510,500
|
)
|
|
$
|
(897,775
|
)
|
(1)
|
Cash item.
|
|
Moody’s
(1)
|
|
S&P
(2)
|
Radian Group
|
Caa1
|
|
B-
|
Radian Guaranty
|
Ba3
|
|
BB-
|
Radian Insurance Inc.
|
(3)
|
|
(3)
|
RMAI (4)
|
Ba3
|
|
B
|
Radian Asset Assurance
|
Ba1
|
|
B+
|
(1)
|
Moody’s outlook for Radian Group and all 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 Radian Guaranty is currently Positive. The outlook for all other subsidiaries is currently Stable.
|
(3)
|
Not currently rated.
|
(4)
|
Currently, RMAI is not writing new business and has no RIF.
|
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. Level III inputs are used to measure fair value only to the extent that observable inputs are not available.
|
•
|
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.
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Corporate CDOs ($ in millions)
|
|
|
|
|
|
||||||
Weighted average credit spread
|
0.33
|
%
|
|
|
|
|
|||||
Fair value of net liabilities
|
$
|
1.4
|
|
|
|
|
|
||||
|
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
|
$
|
10.7
|
|
|
$
|
13.6
|
|
|
$
|
16.5
|
|
0 basis points change in Radian Group’s CDS spread
|
(1.5
|
)
|
|
—
|
|
|
1.5
|
|
|||
50% widening of Radian Group’s CDS spread
|
(5.8
|
)
|
|
(5.2
|
)
|
|
(4.6
|
)
|
|||
_______________________
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Non-Corporate CDO related (1) ($ in millions)
|
|
|
|
|
|
||||||
Weighted average credit spread
|
1.47
|
%
|
|
|
|
|
|||||
Fair value of net liabilities
|
$
|
221.8
|
|
|
|
|
|
||||
|
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
|
$
|
94.2
|
|
|
$
|
114.4
|
|
|
$
|
134.7
|
|
0 basis points change in Radian Group’s CDS spread
|
(18.2
|
)
|
|
—
|
|
|
18.4
|
|
|||
50% widening of Radian Group’s CDS spread
|
(44.9
|
)
|
|
(27.6
|
)
|
|
(10.2
|
)
|
(1)
|
Includes TruPs, CDOs of CMBS and other non-corporate CDOs.
|
Item 8.
|
Financial Statements and Supplementary Data.
|
|
PAGE
|
|
December 31,
2013 |
|
December 31,
2012 |
||||
($ in thousands, except share and per-share amounts)
|
|
|
|
||||
ASSETS
|
|
|
|
||||
Investments
|
|
|
|
||||
Fixed-maturities held to maturity—at amortized cost (fair value $351 and $676)
|
$
|
358
|
|
|
$
|
679
|
|
Fixed-maturities available for sale—at fair value (amortized cost $120,385 and $39,481)
|
120,553
|
|
|
40,696
|
|
||
Equity securities available for sale—at fair value (cost $78,106 and $88,260)
|
135,168
|
|
|
112,139
|
|
||
Trading securities—at fair value
|
3,117,429
|
|
|
4,094,622
|
|
||
Short-term investments—at fair value
|
1,429,228
|
|
|
777,532
|
|
||
Other invested assets—(including variable interest entity (“VIE”) assets at fair value of $81,000 and $78,006)
|
128,421
|
|
|
126,750
|
|
||
Total investments
|
4,931,157
|
|
|
5,152,418
|
|
||
Cash
|
23,858
|
|
|
31,555
|
|
||
Restricted cash
|
22,527
|
|
|
24,226
|
|
||
Deferred policy acquisition costs
|
66,926
|
|
|
88,202
|
|
||
Accrued investment income
|
30,264
|
|
|
34,349
|
|
||
Accounts and notes receivable
|
75,106
|
|
|
87,519
|
|
||
Property and equipment, at cost (less accumulated depreciation of $101,625 and $98,909)
|
10,516
|
|
|
7,456
|
|
||
Derivative assets (including VIE derivative assets of $0 and $1,585)
|
16,642
|
|
|
13,609
|
|
||
Deferred income taxes, net
|
17,902
|
|
|
—
|
|
||
Reinsurance recoverables
|
46,846
|
|
|
89,204
|
|
||
Other assets (including VIE other assets of $92,023 and $99,337)
|
379,947
|
|
|
374,662
|
|
||
Total assets
|
$
|
5,621,691
|
|
|
$
|
5,903,200
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Unearned premiums
|
$
|
768,871
|
|
|
$
|
648,682
|
|
Reserve for losses and loss adjustment expenses (“LAE”)
|
2,185,421
|
|
|
3,149,936
|
|
||
Long-term debt
|
930,072
|
|
|
663,571
|
|
||
VIE debt—at fair value
|
94,645
|
|
|
108,858
|
|
||
Derivative liabilities (including VIE derivative liabilities of $68,457 and $70,467)
|
307,185
|
|
|
266,873
|
|
||
Other liabilities (including VIE accounts payable of $254 and $366)
|
395,852
|
|
|
328,955
|
|
||
Total liabilities
|
4,682,046
|
|
|
5,166,875
|
|
||
Commitments and Contingencies (Note 17)
|
|
|
|
||||
Stockholders’ equity
|
|
|
|
||||
Common stock: par value $.001 per share; 485,000,000 and 325,000,000 shares authorized at December 31, 2013 and December 31, 2012; 190,636,972 and 151,131,173 shares issued at December 31, 2013 and 2012, respectively; 173,099,515 and 133,647,216 shares outstanding at December 31, 2013 and 2012, respectively
|
191
|
|
|
151
|
|
||
Treasury stock, at cost: 17,537,457 and 17,483,957 shares at December 31, 2013 and 2012, respectively
|
(892,807
|
)
|
|
(892,094
|
)
|
||
Additional paid-in capital
|
2,347,104
|
|
|
1,967,414
|
|
||
Retained deficit
|
(552,226
|
)
|
|
(355,241
|
)
|
||
Accumulated other comprehensive income
|
37,383
|
|
|
16,095
|
|
||
Total stockholders’ equity
|
939,645
|
|
|
736,325
|
|
||
Total liabilities and stockholders’ equity
|
$
|
5,621,691
|
|
|
$
|
5,903,200
|
|
|
Year Ended December 31,
|
||||||||||
($ in thousands, except per-share amounts)
|
2013
|
|
2012
|
|
2011
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Premiums written—insurance:
|
|
|
|
|
|
||||||
Direct
|
$
|
1,033,421
|
|
|
$
|
892,983
|
|
|
$
|
755,758
|
|
Assumed
|
(11,183
|
)
|
|
(88,991
|
)
|
|
(11,162
|
)
|
|||
Ceded
|
(81,421
|
)
|
|
(117,362
|
)
|
|
(37,349
|
)
|
|||
Net premiums written
|
940,817
|
|
|
686,630
|
|
|
707,247
|
|
|||
(Increase) decrease in unearned premiums
|
(109,923
|
)
|
|
52,352
|
|
|
48,778
|
|
|||
Net premiums earned—insurance
|
830,894
|
|
|
738,982
|
|
|
756,025
|
|
|||
Net investment income
|
108,088
|
|
|
114,337
|
|
|
163,520
|
|
|||
Net (losses) gains on investments
|
(149,720
|
)
|
|
184,888
|
|
|
202,177
|
|
|||
Total other-than-temporary impairment (“OTTI”) losses
|
(3
|
)
|
|
(3
|
)
|
|
(1,202
|
)
|
|||
Losses recognized in other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net impairment losses recognized in earnings
|
(3
|
)
|
|
(3
|
)
|
|
(1,202
|
)
|
|||
Change in fair value of derivative instruments
|
(31,771
|
)
|
|
(144,025
|
)
|
|
628,395
|
|
|||
Net (losses) gains on other financial instruments
|
(4,736
|
)
|
|
(82,269
|
)
|
|
193,329
|
|
|||
Gain on sale of affiliate
|
—
|
|
|
7,708
|
|
|
—
|
|
|||
Other income
|
6,235
|
|
|
5,790
|
|
|
5,599
|
|
|||
Total revenues
|
758,987
|
|
|
825,408
|
|
|
1,947,843
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Provision for losses
|
567,134
|
|
|
959,171
|
|
|
1,296,521
|
|
|||
Change in PDR
|
(1,901
|
)
|
|
41
|
|
|
(7,092
|
)
|
|||
Policy acquisition costs
|
41,664
|
|
|
61,876
|
|
|
52,763
|
|
|||
Other operating expenses
|
284,528
|
|
|
196,672
|
|
|
175,810
|
|
|||
Interest expense
|
74,618
|
|
|
51,832
|
|
|
61,394
|
|
|||
Total expenses
|
966,043
|
|
|
1,269,592
|
|
|
1,579,396
|
|
|||
Equity in net income (loss) of affiliates
|
1
|
|
|
(13
|
)
|
|
65
|
|
|||
Pretax (loss) income
|
(207,055
|
)
|
|
(444,197
|
)
|
|
368,512
|
|
|||
Income tax (benefit) provision
|
(10,070
|
)
|
|
7,271
|
|
|
66,362
|
|
|||
Net (loss) income
|
$
|
(196,985
|
)
|
|
$
|
(451,468
|
)
|
|
$
|
302,150
|
|
Basic net (loss) income per share
|
$
|
(1.18
|
)
|
|
$
|
(3.41
|
)
|
|
$
|
2.28
|
|
Diluted net (loss) income per share
|
$
|
(1.18
|
)
|
|
$
|
(3.41
|
)
|
|
$
|
2.26
|
|
Weighted-average number of common shares outstanding—basic
|
166,366
|
|
|
132,533
|
|
|
132,372
|
|
|||
Weighted-average number of common and common equivalent shares outstanding—diluted
|
166,366
|
|
|
132,533
|
|
|
133,863
|
|
|||
Dividends per share
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Net (loss) income
|
$
|
(196,985
|
)
|
|
$
|
(451,468
|
)
|
|
$
|
302,150
|
|
Other comprehensive income, net of tax (see Note 12):
|
|
|
|
|
|
||||||
Foreign currency translation adjustments:
|
|
|
|
|
|
||||||
Unrealized foreign currency translation adjustment
|
—
|
|
|
(7
|
)
|
|
6,265
|
|
|||
Less: Reclassification adjustment for liquidation of foreign subsidiary and other adjustments included in net (loss) income
|
—
|
|
|
—
|
|
|
27,305
|
|
|||
Net foreign currency translation adjustments
|
—
|
|
|
(7
|
)
|
|
(21,040
|
)
|
|||
Unrealized gains (losses) on investments:
|
|
|
|
|
|
||||||
Unrealized holding gains arising during the period
|
21,969
|
|
|
14,132
|
|
|
7,400
|
|
|||
Less: Reclassification adjustment for net gains (losses) included in net (loss) income
|
879
|
|
|
9,272
|
|
|
(31,928
|
)
|
|||
Net unrealized gains on investments
|
21,090
|
|
|
4,860
|
|
|
39,328
|
|
|||
Other comprehensive income
|
21,090
|
|
|
4,853
|
|
|
18,288
|
|
|||
Comprehensive (loss) income
|
$
|
(175,895
|
)
|
|
$
|
(446,615
|
)
|
|
$
|
320,438
|
|
(In thousands)
|
Common
Stock
|
|
Treasury
Stock
|
|
Additional Paid-in Capital
|
Retained
Earnings/(Deficit)
|
|
Accumulated Other Comprehensive Income
|
Total
|
|||||||||
BALANCE, JANUARY 1, 2011
|
$
|
150
|
|
$
|
(892,012
|
)
|
$
|
1,963,092
|
|
$
|
(204,926
|
)
|
$
|
(6,524
|
)
|
$
|
859,780
|
|
Net income
|
—
|
|
—
|
|
—
|
|
302,150
|
|
—
|
|
302,150
|
|
||||||
Net foreign currency translation adjustment, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
(21,040
|
)
|
(21,040
|
)
|
||||||
Net unrealized gain on investments, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
39,328
|
|
39,328
|
|
||||||
Repurchases of common stock under incentive plans
|
—
|
|
(40
|
)
|
—
|
|
—
|
|
—
|
|
(40
|
)
|
||||||
Issuance of common stock under benefit plans
|
1
|
|
—
|
|
741
|
|
—
|
|
—
|
|
742
|
|
||||||
Amortization of restricted stock
|
—
|
|
—
|
|
1,837
|
|
—
|
|
—
|
|
1,837
|
|
||||||
Additional convertible debt issuance costs, net
|
—
|
|
—
|
|
(22
|
)
|
—
|
|
—
|
|
(22
|
)
|
||||||
Net actuarial loss
|
—
|
|
—
|
|
—
|
|
—
|
|
(364
|
)
|
(364
|
)
|
||||||
Stock-based compensation expense, net
|
—
|
|
—
|
|
1,250
|
|
—
|
|
—
|
|
1,250
|
|
||||||
Dividends declared
|
—
|
|
—
|
|
(333
|
)
|
(997
|
)
|
—
|
|
(1,330
|
)
|
||||||
BALANCE, DECEMBER 31, 2011
|
$
|
151
|
|
$
|
(892,052
|
)
|
$
|
1,966,565
|
|
$
|
96,227
|
|
$
|
11,400
|
|
$
|
1,182,291
|
|
Net loss
|
—
|
|
—
|
|
—
|
|
(451,468
|
)
|
—
|
|
(451,468
|
)
|
||||||
Net foreign currency translation adjustment, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
(7
|
)
|
(7
|
)
|
||||||
Net unrealized gain on investments, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
4,860
|
|
4,860
|
|
||||||
Repurchases of common stock under incentive plans
|
—
|
|
(42
|
)
|
—
|
|
—
|
|
—
|
|
(42
|
)
|
||||||
Issuance of common stock under benefit plans
|
—
|
|
—
|
|
489
|
|
—
|
|
—
|
|
489
|
|
||||||
Amortization of restricted stock
|
—
|
|
—
|
|
1,523
|
|
—
|
|
—
|
|
1,523
|
|
||||||
Net actuarial loss
|
—
|
|
—
|
|
—
|
|
—
|
|
(158
|
)
|
(158
|
)
|
||||||
Stock-based compensation expense, net
|
—
|
|
—
|
|
172
|
|
—
|
|
—
|
|
172
|
|
||||||
Dividends declared
|
—
|
|
—
|
|
(1,335
|
)
|
—
|
|
—
|
|
(1,335
|
)
|
||||||
BALANCE, DECEMBER 31, 2012
|
$
|
151
|
|
$
|
(892,094
|
)
|
$
|
1,967,414
|
|
$
|
(355,241
|
)
|
$
|
16,095
|
|
$
|
736,325
|
|
Net loss
|
—
|
|
—
|
|
—
|
|
(196,985
|
)
|
—
|
|
(196,985
|
)
|
||||||
Net unrealized gain on investments, net of tax
|
—
|
|
—
|
|
—
|
|
—
|
|
21,090
|
|
21,090
|
|
||||||
Repurchases of common stock under incentive plans
|
—
|
|
(713
|
)
|
—
|
|
—
|
|
—
|
|
(713
|
)
|
||||||
Issuance of common stock - stock offering
|
39
|
|
—
|
|
299,371
|
|
—
|
|
—
|
|
299,410
|
|
||||||
Issuance of common stock under incentive plans
|
1
|
|
—
|
|
62
|
|
—
|
|
—
|
|
63
|
|
||||||
Issuance of common stock under benefit plans
|
—
|
|
—
|
|
672
|
|
—
|
|
—
|
|
672
|
|
||||||
Issuance of convertible debt (See Note 11)
|
—
|
|
—
|
|
77,026
|
|
—
|
|
—
|
|
77,026
|
|
||||||
Amortization of restricted stock
|
—
|
|
—
|
|
4,357
|
|
—
|
|
—
|
|
4,357
|
|
||||||
Net actuarial gain
|
—
|
|
—
|
|
—
|
|
—
|
|
198
|
|
198
|
|
||||||
Stock-based compensation expense, net
|
—
|
|
—
|
|
(166
|
)
|
—
|
|
—
|
|
(166
|
)
|
||||||
Dividends declared
|
—
|
|
—
|
|
(1,632
|
)
|
—
|
|
—
|
|
(1,632
|
)
|
||||||
BALANCE, DECEMBER 31, 2013
|
$
|
191
|
|
$
|
(892,807
|
)
|
$
|
2,347,104
|
|
$
|
(552,226
|
)
|
$
|
37,383
|
|
$
|
939,645
|
|
Radian Group Inc.
|
|||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||||||
|
|
|
|
|
|
||||||
(In thousands)
|
Year Ended December 31,
|
||||||||||
2013
|
|
2012
|
|
2011
|
|||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net (loss) income
|
$
|
(196,985
|
)
|
|
$
|
(451,468
|
)
|
|
$
|
302,150
|
|
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
|
|
|
|
|
||||||
Net losses (gains) on investments and other financial instruments, change in fair value of derivative instruments and net impairment losses recognized in earnings
|
186,230
|
|
|
41,409
|
|
|
(1,022,699
|
)
|
|||
Net payments related to derivative contracts and VIE debt
|
(37,060
|
)
|
|
(8,213
|
)
|
|
(119,888
|
)
|
|||
Equity in net (income) loss of affiliates
|
(1
|
)
|
|
13
|
|
|
(65
|
)
|
|||
Distributions from affiliates
|
—
|
|
|
92
|
|
|
—
|
|
|||
Gain on sale of affiliate
|
—
|
|
|
(7,708
|
)
|
|
—
|
|
|||
Net cash paid for commutations, terminations and recaptures
|
(307,067
|
)
|
|
(240,110
|
)
|
|
(92,599
|
)
|
|||
Commutation - related charges
|
5,300
|
|
|
36,500
|
|
|
—
|
|
|||
Deferred income tax (benefit) provision
|
(31,820
|
)
|
|
6,000
|
|
|
6,758
|
|
|||
Depreciation and other amortization, net
|
80,136
|
|
|
72,389
|
|
|
63,120
|
|
|||
Change in:
|
|
|
|
|
|
|
|
|
|||
Unearned premiums
|
130,289
|
|
|
82,910
|
|
|
(46,665
|
)
|
|||
Deferred policy acquisition costs
|
17,976
|
|
|
25,504
|
|
|
8,420
|
|
|||
Reinsurance recoverables
|
42,358
|
|
|
66,385
|
|
|
86,047
|
|
|||
Reserve for losses and LAE
|
(668,248
|
)
|
|
(161,114
|
)
|
|
(194,486
|
)
|
|||
Other assets
|
44,804
|
|
|
7,706
|
|
|
65,388
|
|
|||
Other liabilities
|
69,151
|
|
|
19,205
|
|
|
46,744
|
|
|||
Net cash used in operating activities
|
(664,937
|
)
|
|
(510,500
|
)
|
|
(897,775
|
)
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Proceeds from sales of fixed-maturity investments available for sale
|
22,248
|
|
|
79,534
|
|
|
136,217
|
|
|||
Proceeds from sales of equity securities available for sale
|
—
|
|
|
31,235
|
|
|
52,014
|
|
|||
Proceeds from sales of trading securities
|
1,289,726
|
|
|
6,004,371
|
|
|
6,028,267
|
|
|||
Proceeds from redemptions of fixed-maturity investments available for sale
|
9,269
|
|
|
5,909
|
|
|
32,214
|
|
|||
Proceeds from redemptions of fixed-maturity investments held to maturity
|
325
|
|
|
2,076
|
|
|
8,775
|
|
|||
Proceeds from redemptions of equity securities available for sale
|
10,503
|
|
|
—
|
|
|
—
|
|
|||
Purchases of fixed-maturity investments available for sale
|
(110,747
|
)
|
|
—
|
|
|
—
|
|
|||
Purchases of trading securities
|
(518,327
|
)
|
|
(5,895,099
|
)
|
|
(5,456,565
|
)
|
|||
(Purchases) sales and redemptions of short-term investments, net
|
(651,506
|
)
|
|
484,347
|
|
|
276,082
|
|
|||
Sales (purchases) of other assets, net
|
14,610
|
|
|
(65,090
|
)
|
|
(1,373
|
)
|
|||
Proceeds from the sale of investment in affiliate
|
—
|
|
|
14,700
|
|
|
—
|
|
|||
Purchases of property and equipment, net
|
(5,802
|
)
|
|
(910
|
)
|
|
(2,976
|
)
|
|||
Net cash provided by investing activities
|
60,299
|
|
|
661,073
|
|
|
1,072,655
|
|
Radian Group Inc.
|
|||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||||||
|
|
|
|
|
|
||||||
(In thousands)
|
Year Ended December 31,
|
||||||||||
2013
|
|
2012
|
|
2011
|
|||||||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Dividends paid
|
(1,632
|
)
|
|
(1,335
|
)
|
|
(1,330
|
)
|
|||
Proceeds/payments related to issuance or exchange of debt, net
|
377,783
|
|
|
—
|
|
|
—
|
|
|||
Redemption of long-term debt
|
(79,372
|
)
|
|
(153,261
|
)
|
|
(160,000
|
)
|
|||
Issuance of common stock
|
299,410
|
|
|
—
|
|
|
—
|
|
|||
Excess tax benefits from stock based awards
|
752
|
|
|
—
|
|
|
4
|
|
|||
Net cash provided by (used in) financing activities
|
596,941
|
|
|
(154,596
|
)
|
|
(161,326
|
)
|
|||
Effect of exchange rate changes on cash
|
—
|
|
|
(11
|
)
|
|
1,701
|
|
|||
(Decrease) increase in cash
|
(7,697
|
)
|
|
(4,034
|
)
|
|
15,255
|
|
|||
Cash, beginning of period
|
31,555
|
|
|
35,589
|
|
|
20,334
|
|
|||
Cash, end of period
|
$
|
23,858
|
|
|
$
|
31,555
|
|
|
$
|
35,589
|
|
|
|
|
|
|
|
||||||
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
||||||
Income taxes paid
|
$
|
5,487
|
|
|
$
|
2,079
|
|
|
$
|
1,573
|
|
Interest paid
|
$
|
40,380
|
|
|
$
|
38,378
|
|
|
$
|
48,643
|
|
•
|
We significantly tightened our mortgage insurance underwriting standards to focus primarily on insuring high credit quality, first-liens originated in the U.S. and we ceased writing mortgage insurance on non-traditional and other inherently riskier products
.
|
•
|
We expanded our claims management and loss mitigation efforts to better manage losses in the weak housing market and high default and claim environment
.
|
•
|
We discontinued writing new financial guaranty business and Radian Group contributed its ownership interest in Radian Asset Assurance
to Radian Guaranty. Although this structure makes the capital adequacy of our mortgage insurance business dependent, to a significant degree, on the successful run-off of our financial guaranty business, the structure has provided Radian Guaranty with substantial regulatory capital and, through dividends from Radian Asset Assurance, has increased liquidity at Radian Guaranty
.
|
•
|
We reduced our legacy mortgage insurance portfolio, non-traditional mortgage insurance RIF and our financial guaranty portfolio through risk commutations, discounted security purchases, ceded reinsurance and transaction settlements and terminations.
|
•
|
During 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 our debt maturity profile. See Note 11 for further information.
|
•
|
In March 2013, Radian Group issued
$400 million
principal amount of
2.250%
convertible unsecured senior notes due March 2019 (the “Convertible Senior Notes due 2019”) and received net proceeds of approximately
$389.8 million
. See Note 11 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
$299.4 million
.
|
•
|
In August 2013, Radian Guaranty entered into a Master Transaction Agreement with Freddie Mac (the “Freddie Mac Agreement”) related to a group of
25,760
first-lien mortgage loans guaranteed by Freddie Mac that were insured by Radian Guaranty and were in default as of December 31, 2011. The Freddie Mac Agreement caps Radian Guaranty’s total exposure on the entire population of loans subject to the agreement at
$840 million
. The maximum exposure of
$840 million
is comprised of
$625 million
of claim payments (consisting of
$370 million
of claims previously paid on this population of loans prior to July 12, 2013, which is the measurement date for purposes of the transaction, and an additional
$255 million
paid at closing) and
$215 million
related to rescissions, denials, claim curtailments and cancellations (“Loss Mitigation Activity”) on these loans. See Notes 7 and 9 for additional information regarding this agreement.
|
•
|
Radian Asset Assurance continued to reduce its financial guaranty portfolio through risk commutations, discounted insured bond purchases, ceded reinsurance and transaction settlements and terminations, and continued to provide capital support to Radian Guaranty.
|
-
|
In January 2013, we commuted the remaining
$822.2 million
net par reinsured by Radian Asset Assurance from Financial Guaranty Insurance Company (the “FGIC Commutation”), resulting in the release of
$6.7 million
of statutory contingency reserves;
|
-
|
In February 2013, the New York State Department of Financial Services (“NYSDFS”) approved the release of an additional
$61.1 million
of statutory contingency reserves resulting from the reduction in Radian Asset Assurance’s net par outstanding;
|
-
|
During 2013, we agreed with a counterparty in our financial guaranty business to commute a
$105 million
corporate collateralized debt obligation (“CDO”) transaction (the “2013 CDO Commutation”) and
four
other financial guaranty CDS counterparties exercised their termination rights with respect to
ten
corporate CDOs and a second-to-pay CDO of corporate loans that we insured (collectively with the 2013 CDO Commutation, the “CDO Early Terminations”), on a walkaway basis (meaning that our counterparty was not obligated to pay any unaccrued premium or other amount to terminate the transaction), which further reduced our financial guaranty net par outstanding by
$3.9 billion
in the aggregate. There was no material impact on our financial statements as a result of these terminations; and
|
-
|
In July 2013, Radian Asset Assurance paid an ordinary dividend of
$36.0 million
to Radian Guaranty.
|
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. Level III inputs are used to measure fair value only to the extent that observable inputs are not available.
|
•
|
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.
|
|
December 31, 2013
|
||||||||||
(In thousands)
|
Mortgage Insurance
|
|
Financial Guaranty
|
|
Consolidated
|
||||||
Net premiums written—insurance
|
$
|
950,998
|
|
|
$
|
(10,181
|
)
|
|
$
|
940,817
|
|
Net premiums earned—insurance
|
$
|
781,420
|
|
|
$
|
49,474
|
|
|
$
|
830,894
|
|
Net investment income
|
61,615
|
|
|
46,473
|
|
|
108,088
|
|
|||
Net losses on investments
|
(93,821
|
)
|
|
(55,899
|
)
|
|
(149,720
|
)
|
|||
Net impairment losses recognized in earnings
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
|||
Change in fair value of derivative instruments
|
635
|
|
|
(32,406
|
)
|
|
(31,771
|
)
|
|||
Net losses on other financial instruments
|
(2,840
|
)
|
|
(1,896
|
)
|
|
(4,736
|
)
|
|||
Other income
|
6,024
|
|
|
211
|
|
|
6,235
|
|
|||
Total revenues
|
753,033
|
|
|
5,954
|
|
|
758,987
|
|
|||
Provision for losses
|
564,648
|
|
|
2,486
|
|
|
567,134
|
|
|||
Change in PDR
|
(1,901
|
)
|
|
—
|
|
|
(1,901
|
)
|
|||
Policy acquisition costs
|
28,485
|
|
|
13,179
|
|
|
41,664
|
|
|||
Other operating expenses
|
236,959
|
|
|
47,569
|
|
|
284,528
|
|
|||
Interest expense
|
17,995
|
|
|
56,623
|
|
|
74,618
|
|
|||
Total expenses
|
846,186
|
|
|
119,857
|
|
|
966,043
|
|
|||
Equity in net income of affiliates
|
—
|
|
|
1
|
|
|
1
|
|
|||
Pretax loss
|
$
|
(93,153
|
)
|
|
$
|
(113,902
|
)
|
|
$
|
(207,055
|
)
|
|
|
|
|
|
|
||||||
Cash and investments
|
$
|
2,683,467
|
|
|
$
|
2,294,075
|
|
|
$
|
4,977,542
|
|
Deferred policy acquisition costs
|
29,741
|
|
|
37,185
|
|
|
66,926
|
|
|||
Total assets
|
3,120,904
|
|
|
2,500,787
|
|
|
5,621,691
|
|
|||
Unearned premiums
|
567,072
|
|
|
201,799
|
|
|
768,871
|
|
|||
Reserve for losses and LAE
|
2,164,353
|
|
|
21,068
|
|
|
2,185,421
|
|
|||
VIE debt
|
2,845
|
|
|
91,800
|
|
|
94,645
|
|
|||
Derivative liabilities
|
—
|
|
|
307,185
|
|
|
307,185
|
|
|||
|
|
|
|
|
|
||||||
NIW (in millions)
|
$
|
47,255
|
|
|
|
|
|
|
|
December 31, 2012
|
||||||||||
(In thousands)
|
Mortgage Insurance
|
|
Financial Guaranty
|
|
Consolidated
|
||||||
Net premiums written—insurance
|
$
|
806,305
|
|
|
$
|
(119,675
|
)
|
|
$
|
686,630
|
|
Net premiums earned—insurance
|
$
|
702,385
|
|
|
$
|
36,597
|
|
|
$
|
738,982
|
|
Net investment income
|
63,191
|
|
|
51,146
|
|
|
114,337
|
|
|||
Net gains on investments
|
103,666
|
|
|
81,222
|
|
|
184,888
|
|
|||
Net impairment losses recognized in earnings
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
|||
Change in fair value of derivative instruments
|
(330
|
)
|
|
(143,695
|
)
|
|
(144,025
|
)
|
|||
Net losses on other financial instruments
|
(3,491
|
)
|
|
(78,778
|
)
|
|
(82,269
|
)
|
|||
Gain on sale of affiliate
|
—
|
|
|
7,708
|
|
|
7,708
|
|
|||
Other income
|
5,516
|
|
|
274
|
|
|
5,790
|
|
|||
Total revenues
|
870,937
|
|
|
(45,529
|
)
|
|
825,408
|
|
|||
Provision for losses
|
921,507
|
|
|
37,664
|
|
|
959,171
|
|
|||
Change in PDR
|
41
|
|
|
—
|
|
|
41
|
|
|||
Policy acquisition costs
|
34,131
|
|
|
27,745
|
|
|
61,876
|
|
|||
Other operating expenses
|
152,448
|
|
|
44,224
|
|
|
196,672
|
|
|||
Interest expense
|
7,454
|
|
|
44,378
|
|
|
51,832
|
|
|||
Total expenses
|
1,115,581
|
|
|
154,011
|
|
|
1,269,592
|
|
|||
Equity in net loss of affiliates
|
—
|
|
|
(13
|
)
|
|
(13
|
)
|
|||
Pretax loss
|
$
|
(244,644
|
)
|
|
$
|
(199,553
|
)
|
|
$
|
(444,197
|
)
|
|
|
|
|
|
|
||||||
Cash and investments
|
$
|
3,118,153
|
|
|
$
|
2,090,046
|
|
|
$
|
5,208,199
|
|
Deferred policy acquisition costs
|
38,478
|
|
|
49,724
|
|
|
88,202
|
|
|||
Total assets
|
3,575,427
|
|
|
2,327,773
|
|
|
5,903,200
|
|
|||
Unearned premiums
|
382,413
|
|
|
266,269
|
|
|
648,682
|
|
|||
Reserve for losses and LAE
|
3,083,608
|
|
|
66,328
|
|
|
3,149,936
|
|
|||
VIE debt
|
9,875
|
|
|
98,983
|
|
|
108,858
|
|
|||
Derivative liabilities
|
—
|
|
|
266,873
|
|
|
266,873
|
|
|||
|
|
|
|
|
|
||||||
NIW (in millions)
|
$
|
37,061
|
|
|
|
|
|
|
|
December 31, 2011
|
||||||||||
(In thousands)
|
Mortgage Insurance
|
|
Financial Guaranty
|
|
Consolidated
|
||||||
Net premiums written—insurance
|
$
|
717,264
|
|
|
$
|
(10,017
|
)
|
|
$
|
707,247
|
|
Net premiums earned—insurance
|
$
|
680,895
|
|
|
$
|
75,130
|
|
|
$
|
756,025
|
|
Net investment income
|
93,678
|
|
|
69,842
|
|
|
163,520
|
|
|||
Net gains on investments
|
126,205
|
|
|
75,972
|
|
|
202,177
|
|
|||
Net impairment losses recognized in earnings
|
(1,202
|
)
|
|
—
|
|
|
(1,202
|
)
|
|||
Change in fair value of derivative instruments
|
(632
|
)
|
|
629,027
|
|
|
628,395
|
|
|||
Net gains on other financial instruments
|
3,864
|
|
|
189,465
|
|
|
193,329
|
|
|||
Other income
|
5,369
|
|
|
230
|
|
|
5,599
|
|
|||
Total revenues
|
908,177
|
|
|
1,039,666
|
|
|
1,947,843
|
|
|||
Provision for losses
|
1,293,857
|
|
|
2,664
|
|
|
1,296,521
|
|
|||
Change in PDR
|
(7,092
|
)
|
|
—
|
|
|
(7,092
|
)
|
|||
Policy acquisition costs
|
36,051
|
|
|
16,712
|
|
|
52,763
|
|
|||
Other operating expenses
|
132,225
|
|
|
43,585
|
|
|
175,810
|
|
|||
Interest expense
|
13,894
|
|
|
47,500
|
|
|
61,394
|
|
|||
Total expenses
|
1,468,935
|
|
|
110,461
|
|
|
1,579,396
|
|
|||
Equity in net income of affiliates
|
—
|
|
|
65
|
|
|
65
|
|
|||
Pretax (loss) income
|
$
|
(560,758
|
)
|
|
$
|
929,270
|
|
|
$
|
368,512
|
|
|
|
|
|
|
|
||||||
Cash and investments
|
$
|
3,210,279
|
|
|
$
|
2,635,889
|
|
|
$
|
5,846,168
|
|
Deferred policy acquisition costs
|
52,094
|
|
|
87,812
|
|
|
139,906
|
|
|||
Total assets
|
3,470,103
|
|
|
3,186,662
|
|
|
6,656,765
|
|
|||
Unearned premiums
|
233,446
|
|
|
403,926
|
|
|
637,372
|
|
|||
Reserve for losses and LAE
|
3,247,900
|
|
|
63,002
|
|
|
3,310,902
|
|
|||
VIE debt
|
9,450
|
|
|
218,790
|
|
|
228,240
|
|
|||
Derivative liabilities
|
—
|
|
|
126,006
|
|
|
126,006
|
|
|||
|
|
|
|
|
|
||||||
NIW (in millions)
|
$
|
15,510
|
|
|
|
|
|
|
|
Year Ended December 31,
|
||||||||
|
2013
|
2012
|
2011
|
||||||
(In thousands)
|
|
|
|
||||||
Mortgage Insurance pretax loss
|
$
|
(93,153
|
)
|
$
|
(244,644
|
)
|
$
|
(560,758
|
)
|
Financial Guaranty pretax (loss) income
|
(113,902
|
)
|
(199,553
|
)
|
929,270
|
|
|||
Income tax (benefit) provision
|
(10,070
|
)
|
7,271
|
|
66,362
|
|
|||
Consolidated net (loss) income
|
$
|
(196,985
|
)
|
$
|
(451,468
|
)
|
$
|
302,150
|
|
|
December 31,
|
||||||
(In thousands)
|
2013
|
|
2012
|
||||
Balance Sheets
|
|
|
|
||||
Derivative assets:
|
|
|
|
||||
Financial Guaranty credit derivative assets
|
$
|
6,323
|
|
|
$
|
12,024
|
|
NIMS related and other
|
10,319
|
|
|
1,585
|
|
||
Total derivative assets
|
16,642
|
|
|
13,609
|
|
||
Derivative liabilities:
|
|
|
|
||||
Financial Guaranty credit derivative liabilities
|
238,728
|
|
|
196,406
|
|
||
Financial Guaranty VIE derivative liabilities
|
68,457
|
|
|
70,467
|
|
||
Total derivative liabilities
|
307,185
|
|
|
266,873
|
|
||
Total derivative liabilities, net
|
$
|
290,543
|
|
|
$
|
253,264
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Statements of Operations
|
|
|
|
|
|
||||||
Net premiums earned—derivatives
|
$
|
17,898
|
|
|
$
|
28,693
|
|
|
$
|
41,753
|
|
Financial Guaranty credit derivatives
|
(49,510
|
)
|
|
(173,610
|
)
|
|
597,969
|
|
|||
Financial Guaranty VIE derivatives
|
(503
|
)
|
|
1,189
|
|
|
(10,696
|
)
|
|||
NIMS related and other
|
344
|
|
|
(297
|
)
|
|
(631
|
)
|
|||
Change in fair value of derivative instruments
|
$
|
(31,771
|
)
|
|
$
|
(144,025
|
)
|
|
$
|
628,395
|
|
($ in thousands)
|
December 31, 2013
|
|||||||||
Number of
Contracts
|
|
Par/
Notional
Exposure
|
|
Total Net Asset/
(Liability)
|
||||||
Product
|
|
|
|
|
|
|||||
Corporate CDOs
|
18
|
|
|
$
|
7,337,838
|
|
|
$
|
(1,361
|
)
|
Non-Corporate CDOs and other derivative transactions:
|
|
|
|
|
|
|||||
Trust preferred securities (“TruPs”)
|
13
|
|
|
972,569
|
|
|
(43,881
|
)
|
||
CDOs of commercial mortgage-backed securities (“CMBS”)
|
4
|
|
|
1,831,000
|
|
|
(67,777
|
)
|
||
Other:
|
|
|
|
|
|
|||||
Structured finance
|
4
|
|
|
518,031
|
|
|
(80,326
|
)
|
||
Public finance
|
21
|
|
|
1,276,115
|
|
|
(29,793
|
)
|
||
Total Non-Corporate CDOs and other derivative transactions
|
42
|
|
|
4,597,715
|
|
|
(221,777
|
)
|
||
Assumed financial guaranty credit derivatives:
|
|
|
|
|
|
|||||
Structured finance
|
26
|
|
|
159,693
|
|
|
(8,812
|
)
|
||
Public finance
|
5
|
|
|
96,040
|
|
|
(455
|
)
|
||
Total Assumed
|
31
|
|
|
255,733
|
|
|
(9,267
|
)
|
||
Financial Guaranty VIE derivative liabilities (1)
|
1
|
|
|
78,135
|
|
|
(68,457
|
)
|
||
Other (2)
|
1
|
|
|
—
|
|
|
10,319
|
|
||
Grand Total
|
93
|
|
|
$
|
12,269,421
|
|
|
$
|
(290,543
|
)
|
(1)
|
Represents the fair value of a CDS included in a VIE that we have consolidated. See Note 6 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.
|
(2)
|
Represents derivative assets related to other purchased derivatives for which we do not have loss exposure that exceeds our net asset amount.
|
(In millions)
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
||||||||
Assets and Liabilities at Fair Value
|
|
|
|
|
|
|
|
|
||||||||
Investment Portfolio:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
|
$
|
755.0
|
|
|
$
|
402.9
|
|
|
$
|
—
|
|
|
$
|
1,157.9
|
|
State and municipal obligations
|
|
—
|
|
|
602.3
|
|
|
18.7
|
|
|
621.0
|
|
||||
Money market instruments
|
|
672.6
|
|
|
—
|
|
|
—
|
|
|
672.6
|
|
||||
Corporate bonds and notes
|
|
—
|
|
|
1,036.6
|
|
|
—
|
|
|
1,036.6
|
|
||||
Residential mortgage-backed securities (“RMBS”)
|
|
—
|
|
|
560.4
|
|
|
—
|
|
|
560.4
|
|
||||
CMBS
|
|
—
|
|
|
288.9
|
|
|
—
|
|
|
288.9
|
|
||||
Other ABS
|
|
—
|
|
|
194.9
|
|
|
0.9
|
|
|
195.8
|
|
||||
Foreign government and agency securities
|
|
—
|
|
|
40.7
|
|
|
—
|
|
|
40.7
|
|
||||
Equity securities (1)
|
|
128.3
|
|
|
97.1
|
|
|
0.4
|
|
|
225.8
|
|
||||
Other investments (2)
|
|
—
|
|
|
2.2
|
|
|
81.5
|
|
|
83.7
|
|
||||
Total Investments at Fair Value (3)
|
|
1,555.9
|
|
|
3,226.0
|
|
|
101.5
|
|
|
4,883.4
|
|
||||
Derivative assets
|
|
—
|
|
|
10.3
|
|
|
6.3
|
|
|
16.6
|
|
||||
Other assets (4)
|
|
—
|
|
|
—
|
|
|
91.9
|
|
|
91.9
|
|
||||
Total Assets at Fair Value
|
|
$
|
1,555.9
|
|
|
$
|
3,236.3
|
|
|
$
|
199.7
|
|
|
$
|
4,991.9
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivative liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
307.2
|
|
|
$
|
307.2
|
|
VIE debt (5)
|
|
—
|
|
|
—
|
|
|
94.6
|
|
|
94.6
|
|
||||
Total Liabilities at Fair Value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
401.8
|
|
|
$
|
401.8
|
|
(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 (
$0.6 million
) and short-term CDs (
$1.6 million
) included within Level II and lottery annuities (
$0.3 million
), TruPs (
$0.2 million
), and a guaranteed investment contract held by a consolidated VIE (
$81.0 million
) within Level III.
|
(3)
|
Does not include fixed-maturities held to maturity (
$0.4 million
) and certain other invested assets (
$47.4 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 (
$2.8 million
) and amounts related to financial guaranty VIEs (
$91.8 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 and agency 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 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
).
|
|
December 31,
|
||||||||||
(In basis points)
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||
Radian Group’s five-year CDS spread
|
323
|
|
|
913
|
|
|
2,732
|
|
|
465
|
|
(In millions)
|
Fair Value Liability
before Consideration
of Radian Non-Performance Risk
December 31, 2013
|
|
Impact of Radian
Non-Performance Risk December 31, 2013
|
|
Fair Value Liability
Recorded
December 31, 2013
|
||||||
Product
|
|
|
|
|
|
||||||
Corporate CDOs
|
$
|
30.4
|
|
|
$
|
29.0
|
|
|
$
|
1.4
|
|
Non-Corporate CDO-related (1)
|
409.7
|
|
|
178.7
|
|
|
231.0
|
|
|||
NIMS-related (2)
|
5.0
|
|
|
2.2
|
|
|
2.8
|
|
|||
Total
|
$
|
445.1
|
|
|
$
|
209.9
|
|
|
$
|
235.2
|
|
(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)
|
689.1
|
|
|
509.3
|
|
|
179.8
|
|
|||
NIMS-related (2)
|
13.0
|
|
|
4.7
|
|
|
8.3
|
|
|||
Total
|
$
|
800.9
|
|
|
$
|
615.6
|
|
|
$
|
185.3
|
|
(1)
|
Includes the net fair value liability recorded within derivative assets and derivative liabilities and the net fair value liabilities included in our consolidated VIEs.
|
(2)
|
Includes NIMS VIE debt and NIMS derivative assets.
|
•
|
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”).
|
(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
December 31, 2013
|
||||||||||||||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
State and municipal obligations
|
$
|
19.0
|
|
|
$
|
1.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1.4
|
|
|
$
|
—
|
|
|
$
|
18.7
|
|
Corporate bonds and notes
|
—
|
|
|
(0.1
|
)
|
|
2.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.6
|
)
|
|
—
|
|
||||||||
CMBS
|
—
|
|
|
—
|
|
|
3.1
|
|
|
3.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Other ABS
|
1.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
|
0.9
|
|
||||||||
Equity securities
|
1.0
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
||||||||
Other investments
|
79.0
|
|
|
1.2
|
|
|
1.7
|
|
|
0.1
|
|
|
—
|
|
|
0.5
|
|
|
0.2
|
|
|
81.5
|
|
||||||||
Total Level III Investments
|
100.7
|
|
|
2.2
|
|
|
7.5
|
|
|
3.8
|
|
|
—
|
|
|
2.7
|
|
|
(2.4
|
)
|
|
101.5
|
|
||||||||
NIMS derivative assets
|
1.6
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.2
|
|
|
—
|
|
|
—
|
|
||||||||
Other assets
|
99.2
|
|
|
15.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22.5
|
|
|
—
|
|
|
91.9
|
|
||||||||
Total Level III Assets
|
$
|
201.5
|
|
|
$
|
18.0
|
|
|
$
|
7.5
|
|
|
$
|
3.8
|
|
|
$
|
—
|
|
|
$
|
27.4
|
|
|
$
|
(2.4
|
)
|
|
$
|
193.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Derivative liabilities, net
|
$
|
254.9
|
|
|
$
|
(29.6
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(16.4
|
)
|
|
$
|
—
|
|
|
$
|
300.9
|
|
VIE debt
|
108.9
|
|
|
(12.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26.6
|
|
|
—
|
|
|
94.6
|
|
||||||||
Total Level III Liabilities, net
|
$
|
363.8
|
|
|
$
|
(41.9
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10.2
|
|
|
$
|
—
|
|
|
$
|
395.5
|
|
(1)
|
Includes unrealized gains (losses) relating to assets and liabilities still held as of
December 31, 2013
as follows:
$1.2 million
for investments,
$5.8 million
for other assets,
$(47.4) million
for derivative liabilities and
$(8.5) million
for VIE debt.
|
(2)
|
Transfers are recognized at the end of the period as the availability of market observed inputs change from period to period.
|
(In millions)
|
Beginning
Balance at
January 1, 2012
|
|
Realized and
Unrealized
Gains(Losses)
Recorded
in Earnings (1)
|
|
Purchases
|
|
Sales
|
|
Issuances
|
|
Settlements
|
|
Transfers Into
(Out of) Level III (2) |
|
Ending
Balance at
December 31, 2012
|
||||||||||||||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
State and municipal obligations
|
$
|
62.5
|
|
|
$
|
(3.4
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12.3
|
|
|
$
|
(27.8
|
)
|
|
$
|
19.0
|
|
RMBS
|
45.5
|
|
|
6.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
51.6
|
|
|
—
|
|
|
—
|
|
||||||||
CMBS
|
35.4
|
|
|
(11.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24.0
|
|
|
—
|
|
|
—
|
|
||||||||
CDO
|
5.5
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.3
|
|
|
—
|
|
|
—
|
|
||||||||
Other ABS
|
2.9
|
|
|
0.8
|
|
|
5.2
|
|
|
—
|
|
|
—
|
|
|
4.6
|
|
|
(2.6
|
)
|
|
1.7
|
|
||||||||
Hybrid securities
|
4.8
|
|
|
0.1
|
|
|
0.1
|
|
|
4.9
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
||||||||
Equity securities
|
0.8
|
|
|
0.1
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
|
1.0
|
|
||||||||
Other investments
|
6.8
|
|
|
2.5
|
|
|
76.3
|
|
|
0.6
|
|
|
—
|
|
|
6.0
|
|
|
—
|
|
|
79.0
|
|
||||||||
Total Level III Investments
|
164.2
|
|
|
(4.4
|
)
|
|
81.6
|
|
|
6.1
|
|
|
—
|
|
|
104.8
|
|
|
(29.8
|
)
|
|
100.7
|
|
||||||||
NIMS derivative assets
|
1.6
|
|
|
(0.3
|
)
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.6
|
|
||||||||
Other assets
|
104.0
|
|
|
20.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25.1
|
|
|
—
|
|
|
99.2
|
|
||||||||
Total Level III Assets
|
$
|
269.8
|
|
|
$
|
15.6
|
|
|
$
|
81.9
|
|
|
$
|
6.1
|
|
|
$
|
—
|
|
|
$
|
129.9
|
|
|
$
|
(29.8
|
)
|
|
$
|
201.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Derivative liabilities, net
|
$
|
110.6
|
|
|
$
|
(143.7
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.6
|
)
|
|
$
|
—
|
|
|
$
|
254.9
|
|
VIE debt
|
228.2
|
|
|
(115.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
234.6
|
|
|
—
|
|
|
108.9
|
|
||||||||
Total Level III Liabilities, net
|
$
|
338.8
|
|
|
$
|
(259.0
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
234.0
|
|
|
$
|
—
|
|
|
$
|
363.8
|
|
(1)
|
Includes unrealized gains (losses) relating to assets and liabilities still held as of
December 31, 2012
as follows:
$1.4 million
for investments,
$9.5 million
for other assets,
$(189.7) million
for derivative liabilities and
$(16.0) million
for VIE debt.
|
(2)
|
Transfers are recognized at the end of the period as the availability of market observed inputs change from period to period.
|
(In millions)
|
Fair Value Net Asset (Liability) December 31, 2013 (1)
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Range/ Weighted Average
|
||||||
Level III Assets/Liabilities:
|
|
|
|
|
|
|
|
|
|
||||
State and municipal obligations
|
$
|
18.7
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
|
|
12.3
|
%
|
|
|
|
|
|
|
Expected loss
|
|
|
|
11.1
|
%
|
|||
Other investments
|
81.0
|
|
|
Discounted cash flow
|
|
Discount rate
|
|
|
|
1.2
|
%
|
||
Corporate CDOs
|
(1.4
|
)
|
|
Base correlation model
|
|
Radian correlation to corporate index
|
|
|
|
85.0
|
%
|
||
|
|
|
|
|
Average credit spread
|
|
0.1
|
%
|
-
|
0.9
|
%
|
||
|
|
|
|
|
Own credit spread (2)
|
|
0.8
|
%
|
-
|
4.3
|
%
|
||
CDOs of CMBS
|
(67.8
|
)
|
|
Discounted cash flow
|
|
Radian correlation to CMBS transaction index
|
|
72.0
|
%
|
-
|
85.0
|
%
|
|
|
|
|
|
|
Own credit spread (2)
|
|
0.8
|
%
|
-
|
4.3
|
%
|
||
TruPs CDOs
|
(43.9
|
)
|
|
Discounted cash flow
|
|
Principal recovery
|
|
|
|
75.0
|
%
|
||
|
|
|
|
|
Principal recovery (stressed)
|
|
|
|
65.0
|
%
|
|||
|
|
|
|
|
Probability of conditional liquidity payment
|
|
1.1
|
%
|
-
|
12.4
|
%
|
||
|
|
|
|
|
Own credit spread (2)
|
|
0.8
|
%
|
-
|
4.3
|
%
|
||
TruPs - related VIE
|
(68.4
|
)
|
|
Discounted cash flow
|
|
Discount rate
|
|
|
|
13.1
|
%
|
||
Other non-corporate CDOs and derivative transactions
|
(119.4
|
)
|
|
Risk-based model
|
|
Average life (in years)
|
|
<1
|
|
-
|
20
|
|
|
|
|
|
|
|
Own credit spread (2)
|
|
0.8
|
%
|
-
|
4.3
|
%
|
||
NIMS VIE
|
(2.8
|
)
|
|
Discounted cash flow
|
|
NIMS credit spread
|
|
|
|
43.8
|
%
|
||
|
|
|
|
|
Own credit spread
|
|
|
|
7.9
|
%
|
(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 our 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 Net Asset (Liability) December 31, 2012 (1)
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Range/ Weighted Average
|
||||||
Level III Assets/Liabilities:
|
|
|
|
|
|
|
|
|
|
||||
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
|
%
|
||
Corporate CDOs
|
2.8
|
|
|
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
|
%
|
||
NIMS derivatives
|
1.6
|
|
|
Discounted cash flow
|
|
NIMS credit spread
|
|
|
|
44.0
|
%
|
||
|
|
|
|
|
Own credit spread (2)
|
|
|
|
8.5
|
%
|
|||
CDOs of CMBS
|
(74.7
|
)
|
|
Discounted cash flow
|
|
Radian correlation to CMBS transaction index
|
|
72.0
|
%
|
-
|
85.0
|
%
|
|
|
|
|
|
|
Own credit spread (2)
|
|
8.0
|
%
|
-
|
9.1
|
%
|
||
TruPs CDOs
|
(11.1
|
)
|
|
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
|
(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 our CDS spread that a typical market participant might use in the valuation analysis based on the remaining term of the investment.
|
|
December 31, 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
|
47.4
|
|
|
54.3
|
|
(1)
|
48.7
|
|
|
57.4
|
|
(1)
|
||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Long-term debt
|
930.1
|
|
|
1,502.7
|
|
(1)
|
663.6
|
|
|
704.8
|
|
(1)
|
||||
Non-derivative financial guaranty liabilities
|
144.7
|
|
|
189.1
|
|
(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
|
||||||||||||
|
December 31,
|
|
December 31,
|
||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Balance Sheet:
|
|
|
|
|
|
|
|
||||||||
Other invested assets
|
$
|
81,000
|
|
|
$
|
78,006
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative assets
|
—
|
|
|
—
|
|
|
—
|
|
|
3,201
|
|
||||
Premiums receivable
|
—
|
|
|
—
|
|
|
2,211
|
|
|
2,859
|
|
||||
Other assets
|
92,023
|
|
|
99,337
|
|
|
—
|
|
|
—
|
|
||||
Unearned premiums
|
—
|
|
|
—
|
|
|
1,872
|
|
|
2,513
|
|
||||
Reserve for losses and LAE
|
—
|
|
|
—
|
|
|
14,094
|
|
|
14,376
|
|
||||
Derivative liabilities
|
68,457
|
|
|
70,467
|
|
|
220,633
|
|
|
175,781
|
|
||||
VIE debt—at fair value
|
91,800
|
|
|
98,983
|
|
|
—
|
|
|
—
|
|
||||
Other liabilities
|
254
|
|
|
366
|
|
|
—
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Maximum exposure (1)
|
121,628
|
|
|
120,939
|
|
|
4,578,784
|
|
|
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
|
||||||||||||||||||||
|
Year Ended December 31,
|
|
Year Ended December 31,
|
||||||||||||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
|
2013
|
|
2012
|
|
2011
|
||||||||||||
Statement of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Premiums earned
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,203
|
|
|
$
|
2,087
|
|
|
$
|
2,648
|
|
Net investment income
|
1,786
|
|
|
3,362
|
|
|
8,696
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net gain (loss) on investments
|
1,208
|
|
|
(1,205
|
)
|
|
14,746
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Change in fair value of derivative
instruments—(loss) gain
|
(503
|
)
|
|
1,189
|
|
|
(10,696
|
)
|
|
(43,553
|
)
|
|
(168,255
|
)
|
|
511,202
|
|
||||||
Net gain (loss) on other financial
instruments
|
4,435
|
|
|
(90,071
|
)
|
|
155,507
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Provision for losses—increase (decrease)
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
5,930
|
|
|
(6,015
|
)
|
||||||
Other operating expenses
|
1,940
|
|
|
2,332
|
|
|
3,090
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net Cash Inflow (Outflow)
|
438
|
|
|
(134,509
|
)
|
|
823
|
|
|
5,443
|
|
|
(68,990
|
)
|
|
7,620
|
|
|
December 31,
|
||||||
(In thousands)
|
2013
|
|
2012
|
||||
Balance Sheet:
|
|
|
|
||||
Derivative assets
|
$
|
—
|
|
|
$
|
1,585
|
|
VIE debt—at fair value
|
2,845
|
|
|
9,875
|
|
||
|
|
|
|
||||
Maximum exposure (1)
|
5,000
|
|
|
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.
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Statement of Operations:
|
|
|
|
|
|
||||||
Net investment income
|
$
|
242
|
|
|
$
|
528
|
|
|
$
|
528
|
|
Change in fair value of derivative instruments—gain (loss)
|
636
|
|
|
(279
|
)
|
|
(1,624
|
)
|
|||
Net (loss) gain on other financial instruments
|
(1,544
|
)
|
|
(4,938
|
)
|
|
4,420
|
|
|||
|
|
|
|
|
|
||||||
Net Cash Outflow
|
(6,111
|
)
|
|
(4,250
|
)
|
|
(119,137
|
)
|
|
December 31, 2013
|
||||||||||||||
(In thousands)
|
Amortized
Cost
|
|
Fair Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
||||||||
Fixed-maturities held to maturity:
|
|
|
|
|
|
|
|
||||||||
State and municipal obligations
|
$
|
358
|
|
|
$
|
351
|
|
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
358
|
|
|
$
|
351
|
|
|
$
|
—
|
|
|
$
|
7
|
|
Fixed-maturities available for sale:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
$
|
8,939
|
|
|
$
|
9,106
|
|
|
$
|
224
|
|
|
$
|
57
|
|
State and municipal obligations
|
26,489
|
|
|
25,946
|
|
|
26
|
|
|
569
|
|
||||
Corporate bonds and notes
|
11,951
|
|
|
12,045
|
|
|
578
|
|
|
484
|
|
||||
RMBS
|
72,665
|
|
|
73,115
|
|
|
450
|
|
|
—
|
|
||||
Other investments
|
341
|
|
|
341
|
|
|
—
|
|
|
—
|
|
||||
|
$
|
120,385
|
|
|
$
|
120,553
|
|
|
$
|
1,278
|
|
|
$
|
1,110
|
|
Equity securities available for sale (1)
|
$
|
78,106
|
|
|
$
|
135,168
|
|
|
$
|
57,062
|
|
|
$
|
—
|
|
Total debt and equity securities
|
$
|
198,849
|
|
|
$
|
256,072
|
|
|
$
|
58,340
|
|
|
$
|
1,117
|
|
(1)
|
Comprising broadly diversified domestic equity mutual funds (
$128.3 million
fair value) and various preferred and common stocks invested across numerous companies and industries (
$6.9 million
fair value).
|
|
December 31, 2012
|
||||||||||||||
(In thousands)
|
Amortized
Cost
|
|
Fair Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
||||||||
Fixed-maturities held to maturity:
|
|
|
|
|
|
|
|
||||||||
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).
|
|
December 31,
|
||||||
(In thousands)
|
2013
|
|
2012
|
||||
Trading securities:
|
|
|
|
||||
U.S. government and agency securities
|
$
|
393,815
|
|
|
$
|
428,519
|
|
State and municipal obligations
|
595,070
|
|
|
669,975
|
|
||
Corporate bonds and notes
|
1,024,574
|
|
|
1,357,175
|
|
||
RMBS
|
487,239
|
|
|
663,307
|
|
||
CMBS
|
288,895
|
|
|
237,294
|
|
||
Other ABS
|
195,816
|
|
|
254,102
|
|
||
Foreign government and agency securities (1)
|
40,657
|
|
|
117,686
|
|
||
Hybrid securities
|
—
|
|
|
211,944
|
|
||
Equity securities
|
90,604
|
|
|
153,722
|
|
||
Other investments
|
759
|
|
|
898
|
|
||
Total
|
$
|
3,117,429
|
|
|
$
|
4,094,622
|
|
(1)
|
As of
December 31, 2013
and
2012
, our trading portfolio included
no
foreign sovereign or sub-sovereign (collectively, “Sovereign”) securities of the
six
European countries (Portugal, Ireland, Italy, Greece, Spain and Hungary) whose Sovereign obligations have been under particular stress due to economic uncertainty, potential restructuring and ratings downgrades or securities of any other countries under similar stress.
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Investment income:
|
|
|
|
|
|
||||||
Fixed-maturities
|
$
|
101,851
|
|
|
$
|
106,418
|
|
|
$
|
155,183
|
|
Equity securities
|
10,843
|
|
|
10,136
|
|
|
11,559
|
|
|||
Short-term investments
|
309
|
|
|
345
|
|
|
611
|
|
|||
Other
|
3,749
|
|
|
5,261
|
|
|
4,017
|
|
|||
Gross investment income
|
116,752
|
|
|
122,160
|
|
|
171,370
|
|
|||
Investment expenses
|
(8,664
|
)
|
|
(7,823
|
)
|
|
(7,850
|
)
|
|||
Net investment income
|
$
|
108,088
|
|
|
$
|
114,337
|
|
|
$
|
163,520
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Net realized gains (losses):
|
|
|
|
|
|
||||||
Fixed-maturities held to maturity
|
$
|
2
|
|
|
$
|
37
|
|
|
$
|
491
|
|
Fixed-maturities available for sale
|
1,314
|
|
|
3,556
|
|
|
(52,473
|
)
|
|||
Equities available for sale
|
349
|
|
|
5,070
|
|
|
6,228
|
|
|||
Trading securities
|
14,215
|
|
|
224,000
|
|
|
121,393
|
|
|||
Short-term investments
|
2
|
|
|
7
|
|
|
(1
|
)
|
|||
Other invested assets
|
8,841
|
|
|
375
|
|
|
—
|
|
|||
Other gains
|
190
|
|
|
—
|
|
|
—
|
|
|||
Net realized gains on investments
|
24,913
|
|
|
233,045
|
|
|
75,638
|
|
|||
Unrealized (losses) gains on trading securities
|
(175,841
|
)
|
|
(49,815
|
)
|
|
126,539
|
|
|||
Unrealized gains on other invested assets
|
1,208
|
|
|
1,658
|
|
|
—
|
|
|||
Total (losses) gains on investments
|
$
|
(149,720
|
)
|
|
$
|
184,888
|
|
|
$
|
202,177
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Fixed-maturities available for sale:
|
|
|
|
|
|
||||||
Proceeds received from redemptions
|
$
|
9,269
|
|
|
$
|
5,909
|
|
|
$
|
32,214
|
|
Proceeds received from sales
|
22,248
|
|
|
79,535
|
|
|
136,217
|
|
|||
Gross investment gains from sales and redemptions
|
1,455
|
|
|
4,081
|
|
|
1,577
|
|
|||
Gross investment losses from sales and redemptions
|
(141
|
)
|
|
(525
|
)
|
|
(54,050
|
)
|
|||
Equities available for sale:
|
|
|
|
|
|
|
|
|
|||
Proceeds received from sales and redemptions
|
10,503
|
|
|
31,234
|
|
|
52,014
|
|
|||
Gross investment gains from sales and redemptions
|
349
|
|
|
5,070
|
|
|
6,238
|
|
|||
Gross investment losses from sales and redemptions
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Fixed-maturities:
|
|
|
|
|
|
||||||
Unrealized holding gains arising during the period, net of tax
|
$
|
173
|
|
|
$
|
4,415
|
|
|
$
|
11,328
|
|
Less reclassification adjustment for net gains (losses) included in net (loss) income, net of tax
|
1,152
|
|
|
5,750
|
|
|
(34,697
|
)
|
|||
Net unrealized (losses) gains on investments, net of tax
|
$
|
(979
|
)
|
|
$
|
(1,335
|
)
|
|
$
|
46,025
|
|
Equities:
|
|
|
|
|
|
|
|
|
|||
Unrealized holding gains (losses) arising during the period, net of tax
|
$
|
21,796
|
|
|
$
|
9,717
|
|
|
$
|
(3,928
|
)
|
Less reclassification adjustment for net (losses) gains included in net (loss) income, net of tax
|
(273
|
)
|
|
3,522
|
|
|
2,769
|
|
|||
Net unrealized gains (losses) on investments, net of tax
|
$
|
22,069
|
|
|
$
|
6,195
|
|
|
$
|
(6,697
|
)
|
December 31, 2013: ($ 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
|
|||||||||||||||||
U.S. government and agency securities
|
|
1
|
|
|
$
|
5,401
|
|
|
$
|
57
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
1
|
|
|
$
|
5,401
|
|
|
$
|
57
|
|
State and municipal obligations
|
|
4
|
|
|
14,502
|
|
|
42
|
|
|
2
|
|
|
5,514
|
|
|
534
|
|
|
6
|
|
|
20,016
|
|
|
576
|
|
||||||
Corporate bonds and notes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2,966
|
|
|
484
|
|
|
2
|
|
|
2,966
|
|
|
484
|
|
||||||
Total
|
|
5
|
|
|
$
|
19,903
|
|
|
$
|
99
|
|
|
4
|
|
|
$
|
8,480
|
|
|
$
|
1,018
|
|
|
9
|
|
|
$
|
28,383
|
|
|
$
|
1,117
|
|
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
|
|
|
December 31, 2013
|
||||||||||||||
|
Held to Maturity
|
|
Available for Sale
|
||||||||||||
(In thousands)
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
||||||||
Due in one year or less (1)
|
$
|
50
|
|
|
$
|
50
|
|
|
$
|
3,577
|
|
|
$
|
3,168
|
|
Due after one year through five years (1)
|
—
|
|
|
—
|
|
|
15,127
|
|
|
15,262
|
|
||||
Due after five years through ten years (1)
|
—
|
|
|
—
|
|
|
4,700
|
|
|
4,683
|
|
||||
Due after ten years (1)
|
308
|
|
|
301
|
|
|
24,316
|
|
|
24,325
|
|
||||
RMBS (2)
|
—
|
|
|
—
|
|
|
72,665
|
|
|
73,115
|
|
||||
Total
|
$
|
358
|
|
|
$
|
351
|
|
|
$
|
120,385
|
|
|
$
|
120,553
|
|
(1)
|
Actual maturities may differ as a result of calls before scheduled maturity.
|
(2)
|
RMBS are shown separately, as they are not due at a single maturity date.
|
|
December 31, 2013
|
||||||||||||||
(In thousands) Name
|
Equity Securities AFS
|
|
Trading
Securities
|
|
Short-Term
Investments
|
|
|
Total
|
|||||||
Northern Institutional Treasury Portfolio
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
399,559
|
|
|
$
|
399,559
|
|
Vanguard Institutional Index Fund
|
128,286
|
|
|
—
|
|
|
—
|
|
|
128,286
|
|
||||
State of Illinois
|
—
|
|
|
103,348
|
|
|
—
|
|
|
103,348
|
|
||||
BlackRock Liquidity Funds T-Fund Portfolio Money Market
|
—
|
|
|
—
|
|
|
100,980
|
|
|
100,980
|
|
||||
Federated Treasury Obligations Fund
|
—
|
|
|
—
|
|
|
99,450
|
|
|
99,450
|
|
||||
Total
|
$
|
128,286
|
|
|
$
|
103,348
|
|
|
$
|
599,989
|
|
|
$
|
831,623
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
2011
|
|||||||
Net premiums written-insurance:
|
|
|
|
|
|
||||||
Direct
|
$
|
1,033,421
|
|
|
$
|
892,983
|
|
|
$
|
755,758
|
|
Assumed
|
(11,183
|
)
|
|
(88,991
|
)
|
|
(11,162
|
)
|
|||
Ceded
|
(81,421
|
)
|
|
(117,362
|
)
|
|
(37,349
|
)
|
|||
Net premiums written-insurance
|
$
|
940,817
|
|
|
$
|
686,630
|
|
|
$
|
707,247
|
|
Net premiums earned-insurance:
|
|
|
|
|
|
||||||
Direct
|
$
|
890,487
|
|
|
$
|
796,253
|
|
|
$
|
762,428
|
|
Assumed
|
12,508
|
|
|
(3,571
|
)
|
|
32,337
|
|
|||
Ceded
|
(72,101
|
)
|
|
(53,700
|
)
|
|
(38,740
|
)
|
|||
Net premiums earned-insurance
|
$
|
830,894
|
|
|
$
|
738,982
|
|
|
$
|
756,025
|
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
2013
|
|
2012
|
||||
Ceded premiums written
|
$
|
23,047
|
|
|
$
|
52,151
|
|
Ceded premiums earned
|
29,746
|
|
|
16,088
|
|
||
Ceding commissions written
|
5,762
|
|
|
13,038
|
|
(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 portfolio loans.
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
2013
|
|
2012
|
||||
Ceded premiums written
|
$
|
40,225
|
|
|
$
|
9,648
|
|
Ceded premiums earned
|
18,356
|
|
|
504
|
|
||
Ceding commissions written
|
14,079
|
|
|
3,377
|
|
|
Year Ended December 31,
|
||||||
(In millions)
|
2013
|
|
2012
|
||||
RIF ceded under captive reinsurance arrangements
|
$
|
199.8
|
|
|
$
|
275.0
|
|
Ceded losses recoverable related to captives
|
45.0
|
|
|
82.2
|
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
Ceded premiums written related to captives
|
$
|
17.8
|
|
|
$
|
23.3
|
|
|
$
|
28.6
|
|
Ceded premiums earned related to captives
|
17.9
|
|
|
23.4
|
|
|
28.8
|
|
|||
Ceded recoveries, excluding amounts received upon terminations of captive reinsurance transactions
|
47.2
|
|
|
34.7
|
|
|
84.5
|
|
|
December 31,
|
||||||
(In thousands)
|
2013
|
|
2012
|
||||
Mortgage insurance reserves
|
$
|
2,164,353
|
|
|
$
|
3,083,608
|
|
Financial guaranty reserves
|
21,068
|
|
|
66,328
|
|
||
Total reserve for losses and LAE
|
$
|
2,185,421
|
|
|
$
|
3,149,936
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Mortgage Insurance
|
|
|
|
|
|
||||||
Balance at January 1
|
$
|
3,083,608
|
|
|
$
|
3,247,900
|
|
|
$
|
3,524,971
|
|
Less reinsurance recoverables (1)
|
83,238
|
|
|
151,569
|
|
|
223,254
|
|
|||
Balance at January 1, net of reinsurance recoverables
|
3,000,370
|
|
|
3,096,331
|
|
|
3,301,717
|
|
|||
Add losses and LAE incurred in respect of default notices reported and unreported in:
|
|
|
|
|
|
||||||
Current year (2)
|
584,174
|
|
|
899,511
|
|
|
1,127,079
|
|
|||
Prior years
|
(19,526
|
)
|
|
21,996
|
|
|
166,778
|
|
|||
Total incurred
|
564,648
|
|
|
921,507
|
|
|
1,293,857
|
|
|||
Deduct paid claims and LAE related to:
|
|
|
|
|
|
||||||
Current year (2)
|
31,399
|
|
|
12,503
|
|
|
39,642
|
|
|||
Prior years
|
1,407,629
|
|
|
1,004,965
|
|
|
1,459,601
|
|
|||
Total paid
|
1,439,028
|
|
|
1,017,468
|
|
|
1,499,243
|
|
|||
Balance at end of period, net of reinsurance recoverables
|
2,125,990
|
|
|
3,000,370
|
|
|
3,096,331
|
|
|||
Add reinsurance recoverables (1)
|
38,363
|
|
|
83,238
|
|
|
151,569
|
|
|||
Balance at December 31
|
$
|
2,164,353
|
|
|
$
|
3,083,608
|
|
|
$
|
3,247,900
|
|
(1)
|
Related to ceded losses on captive reinsurance transactions, Smart Home and Reinsurance Transactions. See Note 8 for additional information.
|
(2)
|
Related to underlying defaulted loans with a most recent default notice dated 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.
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
Rescissions
|
$
|
81.2
|
|
|
$
|
279.3
|
|
|
$
|
474.2
|
|
Denials
|
171.7
|
|
|
539.4
|
|
|
170.9
|
|
|||
Total first-lien claims submitted for payment that were rescinded or denied (1)
|
$
|
252.9
|
|
|
$
|
818.7
|
|
|
$
|
645.1
|
|
(1)
|
Includes an amount related to a small number of submitted claims that were subsequently withdrawn by the insured.
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
2013
|
|
2012
|
||||
Reserves for losses by category:
|
|
|
|
||||
Prime
|
$
|
937,307
|
|
|
$
|
1,508,140
|
|
Alt-A
|
384,841
|
|
|
490,728
|
|
||
A minus and below
|
215,545
|
|
|
314,068
|
|
||
IBNR and other
|
347,698
|
|
|
289,032
|
|
||
LAE
|
51,245
|
|
|
64,252
|
|
||
Reinsurance recoverable (1)
|
38,363
|
|
|
83,238
|
|
||
Total primary reserves
|
1,974,999
|
|
|
2,749,458
|
|
||
Pool
|
169,682
|
|
|
281,937
|
|
||
IBNR and other
|
8,938
|
|
|
34,000
|
|
||
LAE
|
5,439
|
|
|
7,466
|
|
||
Total pool reserves
|
184,059
|
|
|
323,403
|
|
||
Total first-lien reserves
|
2,159,058
|
|
|
3,072,861
|
|
||
Second-lien and other (2)
|
5,295
|
|
|
10,747
|
|
||
Total reserve for losses
|
$
|
2,164,353
|
|
|
$
|
3,083,608
|
|
(1)
|
Primarily represents ceded losses on captive transactions and Smart Home (for 2012).
|
(2)
|
Does not include second-lien premium deficiency reserve.
|
•
|
non-investment grade obligations with increasing credit risk, but with the possibility of recovering and returning to investment grade levels;
|
•
|
slight probability of payment default due to current adverse economic conditions and operating challenges;
|
•
|
limited capacity for absorbing volatility and uncertainty;
|
•
|
vulnerability to further downward pressure, which could lead to difficulty in covering future debt obligations; and
|
•
|
requires additional monitoring by the risk manager to evaluate developing, potentially adverse credit trends.
|
•
|
non-investment grade transactions with high credit risk and low possibility of recovery back to performing levels;
|
•
|
impaired ability to satisfy future payments;
|
•
|
debtors or servicers with distressed operations that we believe have a questionable ability to continue operating in the future without external assistance from government and/or private third parties;
|
•
|
requires frequent monitoring and risk management action to prevent and mitigate possible claims; and
|
•
|
requires the allocation of claim liability reserves.
|
•
|
restructuring the obligation;
|
•
|
enforcing available security arrangements;
|
•
|
working with the issuer to work through or to find alternatives to mitigate the impact of financial management and/or potential political factors;
|
•
|
when appropriate, exercising applicable rights to replace servicers, trustees, advisers or the other parties responsible for the performance of the transaction; and
|
•
|
purchasing the insured obligation at a discount to its net par outstanding.
|
•
|
the current and projected performance of the underlying obligation (both on an expected case basis and stressed for more adverse performance and/or market circumstances than we expect);
|
•
|
the likelihood that we will pay a claim in light of credit deterioration and reductions in available payment reserves and existing subordination;
|
•
|
our total exposure to the obligation;
|
•
|
expected future premium payments from the credit;
|
•
|
the potential impact on our capital position; and
|
•
|
the cost to us of pursuing mitigation remedies.
|
|
Surveillance Categories
|
||||||||||||||||||
($ in thousands)
|
Performing
|
|
Special
Mention
|
|
Intensified
Surveillance
|
|
Case
Reserve
|
|
Total
|
||||||||||
Number of policies
|
7
|
|
|
105
|
|
|
59
|
|
|
85
|
|
|
256
|
|
|||||
Remaining weighted-average contract period (in years)
|
22
|
|
|
18
|
|
|
20
|
|
|
18
|
|
|
19
|
|
|||||
Insured contractual payments outstanding:
|
|
|
|
|
|
|
|
|
|
||||||||||
Principal
|
$
|
1,576
|
|
|
$
|
714,891
|
|
|
$
|
570,011
|
|
|
$
|
116,625
|
|
|
$
|
1,403,103
|
|
Interest
|
162
|
|
|
405,588
|
|
|
307,286
|
|
|
33,468
|
|
|
746,504
|
|
|||||
Total
|
$
|
1,738
|
|
|
$
|
1,120,479
|
|
|
$
|
877,297
|
|
|
$
|
150,093
|
|
|
$
|
2,149,607
|
|
Gross claim liability
|
$
|
1
|
|
|
$
|
19,077
|
|
|
$
|
229,385
|
|
|
$
|
34,096
|
|
|
$
|
282,559
|
|
Less:
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross potential recoveries
|
—
|
|
|
6,493
|
|
|
365,843
|
|
|
57,586
|
|
|
429,922
|
|
|||||
Discount, net
|
—
|
|
|
439
|
|
|
(177,390
|
)
|
|
(1,210
|
)
|
|
(178,161
|
)
|
|||||
Net claim liability/(asset) (prior to reduction for unearned premium)
|
$
|
1
|
|
|
$
|
12,145
|
|
|
$
|
40,932
|
|
|
$
|
(22,280
|
)
|
|
$
|
30,798
|
|
Unearned premium revenue
|
$
|
6
|
|
|
$
|
13,660
|
|
|
$
|
9,207
|
|
|
$
|
—
|
|
|
$
|
22,873
|
|
Net claim liability/(asset) reported in the balance sheet
|
$
|
—
|
|
|
$
|
6,294
|
|
|
$
|
35,444
|
|
|
$
|
(22,280
|
)
|
|
$
|
19,458
|
|
Reinsurance recoverables
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
December 31,
|
||||||
(In thousands)
|
2013
|
|
2012
|
||||
Premiums written
|
$
|
874
|
|
|
$
|
999
|
|
Premiums earned
|
874
|
|
|
999
|
|
||
Policy acquisition costs
|
189
|
|
|
212
|
|
(In thousands)
|
Future Expected Premium Payments
|
||
1
st
quarter 2014
|
$
|
780
|
|
2
nd
quarter 2014
|
638
|
|
|
3
rd
quarter 2014
|
1,015
|
|
|
4
th
quarter 2014
|
452
|
|
|
2014
|
2,885
|
|
|
2015
|
2,689
|
|
|
2016
|
2,656
|
|
|
2017
|
2,235
|
|
|
2018
|
2,000
|
|
|
2014 - 2018
|
12,465
|
|
|
2019 - 2023
|
7,683
|
|
|
2024 - 2028
|
4,466
|
|
|
2029 - 2033
|
2,987
|
|
|
After 2033
|
3,993
|
|
|
Total
|
$
|
31,594
|
|
|
December 31,
|
||||||
(In thousands)
|
2013
|
|
2012
|
||||
Balance at January 1
|
$
|
28,929
|
|
|
$
|
34,287
|
|
Payments received
|
(3,603
|
)
|
|
(4,033
|
)
|
||
Accretion
|
685
|
|
|
787
|
|
||
Adjustments to installment premiums
|
442
|
|
|
(1,007
|
)
|
||
Foreign exchange revaluation
|
(84
|
)
|
|
40
|
|
||
Recaptures/commutation
|
(1,219
|
)
|
|
(1,145
|
)
|
||
Balance at December 31
|
$
|
25,150
|
|
|
$
|
28,929
|
|
|
December 31,
|
||||||
(In thousands)
|
2013
|
|
2012
|
||||
Refundings
|
$
|
30,593
|
|
|
$
|
33,985
|
|
Recaptures/Commutations
|
(2,447
|
)
|
|
(16,269
|
)
|
||
Adjustments to installment premiums, gross of commissions
|
1,204
|
|
|
(2,277
|
)
|
||
Unearned premium acceleration upon establishment of case reserves
|
155
|
|
|
1,109
|
|
||
Foreign exchange revaluation, gross of commissions
|
(122
|
)
|
|
46
|
|
||
Reinsurance agreements
|
—
|
|
|
(5,996
|
)
|
||
Total adjustment to premiums earned
|
$
|
29,383
|
|
|
$
|
10,598
|
|
(In thousands)
|
Ending Net
Unearned
Premiums
|
|
Unearned
Premium
Amortization
|
|
Accretion
|
|
Total
Premium
Revenue
|
||||||||
1
st
quarter 2014
|
$
|
182,224
|
|
|
$
|
5,346
|
|
|
$
|
200
|
|
|
$
|
5,546
|
|
2
nd
quarter 2014
|
176,117
|
|
|
6,107
|
|
|
197
|
|
|
6,304
|
|
||||
3
rd
quarter 2014
|
168,077
|
|
|
8,040
|
|
|
191
|
|
|
8,231
|
|
||||
4
th
quarter 2014
|
163,441
|
|
|
4,635
|
|
|
188
|
|
|
4,823
|
|
||||
2014
|
163,441
|
|
|
24,128
|
|
|
776
|
|
|
24,904
|
|
||||
2015
|
147,112
|
|
|
16,329
|
|
|
709
|
|
|
17,038
|
|
||||
2016
|
133,624
|
|
|
13,488
|
|
|
666
|
|
|
14,154
|
|
||||
2017
|
121,270
|
|
|
12,354
|
|
|
608
|
|
|
12,962
|
|
||||
2018
|
109,664
|
|
|
11,606
|
|
|
554
|
|
|
12,160
|
|
||||
2014 - 2018
|
109,664
|
|
|
77,905
|
|
|
3,313
|
|
|
81,218
|
|
||||
2019 - 2023
|
61,772
|
|
|
47,892
|
|
|
2,114
|
|
|
50,006
|
|
||||
2024 - 2028
|
30,304
|
|
|
31,468
|
|
|
1,345
|
|
|
32,813
|
|
||||
2029 - 2033
|
12,767
|
|
|
17,537
|
|
|
856
|
|
|
18,393
|
|
||||
After 2033
|
—
|
|
|
12,767
|
|
|
989
|
|
|
13,756
|
|
||||
Total
|
$
|
—
|
|
|
$
|
187,569
|
|
|
$
|
8,617
|
|
|
$
|
196,186
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Claim liability at January 1
|
$
|
64,291
|
|
|
$
|
60,550
|
|
|
$
|
67,447
|
|
Incurred losses and LAE:
|
|
|
|
|
|
||||||
(Decrease)/increase in gross claim liability
|
(28,313
|
)
|
|
188,222
|
|
|
68,082
|
|
|||
Increase in gross potential recoveries
|
(79,968
|
)
|
|
(235,787
|
)
|
|
(76,105
|
)
|
|||
Decrease in discount
|
110,007
|
|
|
84,646
|
|
|
7,506
|
|
|||
Decrease in unearned premiums
|
2,213
|
|
|
95
|
|
|
4,668
|
|
|||
Incurred losses and LAE
|
3,939
|
|
|
37,176
|
|
|
4,151
|
|
|||
Paid losses and LAE:
|
|
|
|
|
|
||||||
Current year
|
(195
|
)
|
|
(4
|
)
|
|
—
|
|
|||
Prior years
|
(48,577
|
)
|
|
(33,431
|
)
|
|
(11,048
|
)
|
|||
Paid losses and LAE
|
(48,772
|
)
|
|
(33,435
|
)
|
|
(11,048
|
)
|
|||
Claim liability at December 31
|
$
|
19,458
|
|
|
$
|
64,291
|
|
|
$
|
60,550
|
|
Components of incurred losses and LAE:
|
|
|
|
|
|
||||||
Claim liability established in current period
|
$
|
1,804
|
|
|
$
|
9,063
|
|
|
$
|
2,254
|
|
Changes in existing claim liabilities
|
2,135
|
|
|
28,113
|
|
|
1,897
|
|
|||
Total incurred losses and LAE
|
$
|
3,939
|
|
|
$
|
37,176
|
|
|
$
|
4,151
|
|
Components of decrease in discount:
|
|
|
|
|
|
||||||
(Increase)/decrease in discount related to claim liabilities established in current period
|
$
|
(3
|
)
|
|
$
|
81,061
|
|
|
$
|
177
|
|
Decrease in discount related to existing claim liabilities
|
110,010
|
|
|
3,585
|
|
|
7,329
|
|
|||
Total decrease in discount
|
$
|
110,007
|
|
|
$
|
84,646
|
|
|
$
|
7,506
|
|
December 31, 2013
|
2.95
|
%
|
December 31, 2012
|
2.00
|
%
|
December 31, 2011
|
2.80
|
%
|
December 31, 2010
|
3.69
|
%
|
|
|
December 31,
|
||||||
(In thousands)
|
|
2013
|
|
2012
|
||||
5.625%
|
Senior Notes due 2013
|
$
|
—
|
|
|
$
|
79,449
|
|
5.375%
|
Senior Notes due 2015
|
54,481
|
|
|
249,868
|
|
||
9.000%
|
Senior Notes due 2017
|
191,611
|
|
|
—
|
|
||
3.000%
|
Convertible Senior Notes due 2017 (1)
|
353,798
|
|
|
334,254
|
|
||
2.250%
|
Convertible Senior Notes due 2019 (2)
|
330,182
|
|
|
—
|
|
||
|
Total long-term debt
|
$
|
930,072
|
|
|
$
|
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 after December 31, 2010 (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 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; or
|
3.
|
Upon the occurrence of specified corporate events as described in the indenture for the notes.
|
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. During the calendar quarter ended December 31, 2013, the sale price of our common stock met this criteria and therefore, the holders of the notes currently are able to convert the notes, at their option, during the first calendar quarter of 2014;
|
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.
|
|
Convertible Senior Notes due 2017
|
|
Convertible Senior Notes due 2019
|
|
||||||||
|
December 31,
|
|
December 31,
|
|
||||||||
(In thousands)
|
2013
|
|
2012
|
|
2013
|
|
||||||
Liability component:
|
|
|
|
|
|
|
||||||
Principal
|
$
|
450,000
|
|
|
$
|
450,000
|
|
|
$
|
400,000
|
|
|
Less: debt discount, net (1)
|
(96,202
|
)
|
|
(115,746
|
)
|
|
(69,818
|
)
|
|
|||
Net carrying amount
|
$
|
353,798
|
|
|
$
|
334,254
|
|
|
$
|
330,182
|
|
|
|
|
|
|
|
|
|
||||||
Equity component (net of tax impact) (2)
|
$
|
65,679
|
|
|
$
|
65,679
|
|
|
$
|
77,026
|
|
(3)
|
(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 the capped call transactions (Convertible Senior Notes due 2017) and related issuance costs (Convertible Senior Notes due 2017 and 2019).
|
(3)
|
There was
no
net tax impact recorded in equity related to the Convertible Senior Notes due 2019, as a result of our full valuation allowance.
|
|
Convertible Senior Notes due 2017
|
|
Convertible Senior Notes due 2019
|
||||||||
|
December 31,
|
|
December 31,
|
||||||||
|
2013
|
|
2012
|
|
2013
|
||||||
($ in thousands)
|
|
|
|
|
|
||||||
Contractual interest expense
|
$
|
13,500
|
|
|
$
|
13,500
|
|
|
$
|
7,425
|
|
Amortization of debt issuance costs
|
1,157
|
|
|
1,094
|
|
|
1,025
|
|
|||
Amortization of debt discount
|
19,544
|
|
|
17,756
|
|
|
9,223
|
|
|||
Total interest expense
|
$
|
34,201
|
|
|
$
|
32,350
|
|
|
$
|
17,673
|
|
|
|
|
|
|
|
||||||
Effective interest rate of the liability component
|
9.75
|
%
|
|
9.75
|
%
|
|
6.25
|
%
|
|
Year Ended December 31, 2013
|
||||||||||
(In thousands)
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
||||||
Balance at beginning of period
|
$
|
24,904
|
|
|
$
|
8,809
|
|
|
$
|
16,095
|
|
Other comprehensive income:
|
|
|
|
|
|
||||||
Unrealized gains on investments:
|
|
|
|
|
|
||||||
Unrealized holding gains arising during the period
|
33,799
|
|
|
11,830
|
|
|
21,969
|
|
|||
Less: Reclassification adjustment for net gains included in net loss (1)
|
1,663
|
|
|
784
|
|
|
879
|
|
|||
Net unrealized gains on investments
|
32,136
|
|
|
11,046
|
|
|
21,090
|
|
|||
Other comprehensive income
|
32,136
|
|
|
11,046
|
|
|
21,090
|
|
|||
Net actuarial gain
|
305
|
|
|
107
|
|
|
198
|
|
|||
Balance at end of period
|
$
|
57,345
|
|
|
$
|
19,962
|
|
|
$
|
37,383
|
|
|
|
|
|
|
|
||||||
|
Year Ended December 31, 2012
|
||||||||||
(In thousands)
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
||||||
Balance at beginning of period
|
$
|
12,039
|
|
|
$
|
639
|
|
|
$
|
11,400
|
|
Other comprehensive income:
|
|
|
|
|
|
||||||
Foreign currency translation adjustments:
|
|
|
|
|
|
||||||
Unrealized foreign currency translation adjustment
|
(11
|
)
|
|
(4
|
)
|
|
(7
|
)
|
|||
Less: Reclassification adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net foreign currency translation adjustments
|
(11
|
)
|
|
(4
|
)
|
|
(7
|
)
|
|||
Unrealized gains on investments:
|
|
|
|
|
|
||||||
Unrealized holding gains arising during the period
|
21,743
|
|
|
7,611
|
|
|
14,132
|
|
|||
Less: Reclassification adjustment for net gains (losses) included in net loss (1)
|
8,624
|
|
|
(648
|
)
|
|
9,272
|
|
|||
Net unrealized gains on investments
|
13,119
|
|
|
8,259
|
|
|
4,860
|
|
|||
Other comprehensive income
|
13,108
|
|
|
8,255
|
|
|
4,853
|
|
|||
Net actuarial loss
|
(243
|
)
|
|
(85
|
)
|
|
(158
|
)
|
|||
Balance at end of period
|
$
|
24,904
|
|
|
$
|
8,809
|
|
|
$
|
16,095
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
Year Ended December 31, 2011
|
||||||||||
(In thousands)
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
||||||
Balance at beginning of period
|
$
|
(10,038
|
)
|
|
$
|
(3,514
|
)
|
|
$
|
(6,524
|
)
|
Other comprehensive income:
|
|
|
|
|
|
||||||
Foreign currency translation adjustments:
|
|
|
|
|
|
||||||
Unrealized foreign currency translation adjustment
|
6,265
|
|
|
—
|
|
|
6,265
|
|
|||
Less: Reclassification adjustment
|
38,672
|
|
|
11,367
|
|
|
27,305
|
|
|||
Net foreign currency translation adjustments
|
(32,407
|
)
|
|
(11,367
|
)
|
|
(21,040
|
)
|
|||
Unrealized gains on investments:
|
|
|
|
|
|
||||||
Unrealized holding gains arising during the period
|
7,400
|
|
|
—
|
|
|
7,400
|
|
|||
Less: Reclassification adjustment for net losses included in net income (1)
|
(47,448
|
)
|
|
(15,520
|
)
|
|
(31,928
|
)
|
|||
Net unrealized gains on investments
|
54,848
|
|
|
15,520
|
|
|
39,328
|
|
|||
Other comprehensive income
|
22,441
|
|
|
4,153
|
|
|
18,288
|
|
|||
Net actuarial loss
|
(364
|
)
|
|
—
|
|
|
(364
|
)
|
|||
Balance at end of period
|
$
|
12,039
|
|
|
$
|
639
|
|
|
$
|
11,400
|
|
(1)
|
Included in net (losses) gains on investments on our consolidated statements of operations.
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Current
|
$
|
21,750
|
|
|
$
|
1,271
|
|
|
$
|
59,604
|
|
Deferred
|
(31,820
|
)
|
|
6,000
|
|
|
6,758
|
|
|||
Total income tax (benefit) provision
|
$
|
(10,070
|
)
|
|
$
|
7,271
|
|
|
$
|
66,362
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
(Benefit) provision for income taxes computed at the statutory tax rate
|
$
|
(72,469
|
)
|
|
$
|
(155,469
|
)
|
|
$
|
128,979
|
|
Change in tax resulting from:
|
|
|
|
|
|
|
|
|
|||
Tax-exempt municipal bond interest and dividends received deduction (net of proration)
|
(2,390
|
)
|
|
(3,101
|
)
|
|
(5,237
|
)
|
|||
Foreign tax (benefit) expense
|
(1
|
)
|
|
146
|
|
|
(13,496
|
)
|
|||
State tax expense (benefit)
|
1,468
|
|
|
4,003
|
|
|
(6,224
|
)
|
|||
Unrecognized tax expense (benefit)
|
1,696
|
|
|
(2,906
|
)
|
|
17,860
|
|
|||
Deferred inventory adjustment related to fair value of derivatives and other financial instruments
|
—
|
|
|
(23,217
|
)
|
|
—
|
|
|||
Valuation allowance
|
59,783
|
|
|
188,290
|
|
|
(50,582
|
)
|
|||
Other, net
|
1,843
|
|
|
(475
|
)
|
|
(4,938
|
)
|
|||
(Benefit) provision for income taxes
|
$
|
(10,070
|
)
|
|
$
|
7,271
|
|
|
$
|
66,362
|
|
|
December 31,
|
||||||
(In thousands)
|
2013
|
|
2012
|
||||
Deferred tax assets:
|
|
|
|
||||
Accrued expenses
|
$
|
79,460
|
|
|
$
|
51,049
|
|
Unearned premiums
|
54,993
|
|
|
36,060
|
|
||
PDR
|
625
|
|
|
1,290
|
|
||
Net operating loss (“NOL”)
|
642,333
|
|
|
666,633
|
|
||
Differences in fair value of derivative and other financial instruments
|
130,773
|
|
|
54,335
|
|
||
Rescission premium
|
5,964
|
|
|
16,797
|
|
||
State NOL carryforward
|
33,095
|
|
|
31,744
|
|
||
Foreign tax credit carryforward
|
26,292
|
|
|
26,292
|
|
||
Depreciation
|
6,366
|
|
|
5,478
|
|
||
Partnership investments
|
75,100
|
|
|
65,704
|
|
||
Loss reserves
|
28,257
|
|
|
39,540
|
|
||
Residual interest in LPV
|
22,957
|
|
|
24,084
|
|
||
Other
|
40,657
|
|
|
53,319
|
|
||
Total deferred tax assets
|
1,146,872
|
|
|
1,072,325
|
|
||
Deferred tax liabilities:
|
|
|
|
|
|
||
Deferred policy acquisition costs
|
23,435
|
|
|
30,882
|
|
||
Convertible and other long-term debt
|
47,579
|
|
|
28,449
|
|
||
Net unrealized gain on investments
|
20,030
|
|
|
8,783
|
|
||
Foreign currency
|
18
|
|
|
18
|
|
||
Other
|
15,628
|
|
|
14,536
|
|
||
Total deferred tax liabilities
|
106,690
|
|
|
82,668
|
|
||
Valuation allowance
|
1,022,280
|
|
|
989,657
|
|
||
Net DTA
|
$
|
17,902
|
|
|
$
|
—
|
|
(In thousands)
|
December 31, 2012
|
|
Increase
|
|
December 31, 2013
|
||||||
Unrecognized tax benefits
|
$
|
114,013
|
|
|
$
|
5,223
|
|
|
$
|
119,236
|
|
Unrecognized tax benefits that, if recognized, would affect the effective tax rate
|
$
|
58,994
|
|
|
$
|
1,696
|
|
|
$
|
60,690
|
|
Interest and penalties accrued
|
$
|
53,002
|
|
|
$
|
5,348
|
|
|
$
|
58,350
|
|
Interest and penalties charged to income tax benefit
|
|
|
|
|
$
|
5,348
|
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
2013
|
|
2012
|
||||
Balance at beginning of period
|
$
|
114,013
|
|
|
$
|
125,757
|
|
Tax positions related to the current year:
|
|
|
|
|
|
||
Increases
|
2,363
|
|
|
1,209
|
|
||
Decreases
|
—
|
|
|
(1,624
|
)
|
||
Tax positions related to prior years:
|
|
|
|
|
|
||
Increases
|
29,962
|
|
|
27,302
|
|
||
Decreases
|
(3,615
|
)
|
|
(4,243
|
)
|
||
Lapses of applicable statute of limitation
|
(23,487
|
)
|
|
(34,388
|
)
|
||
Balance at end of period
|
$
|
119,236
|
|
|
$
|
114,013
|
|
U.S. Federal Corporation Income Tax
|
2000 - 2007(1), 2010 - 2012
|
Significant State and Local Jurisdictions (2)
|
1999 - 2012
|
(1)
|
We are currently contesting proposed adjustments resulting from the examination by the IRS of our 2000 through 2007 consolidated federal income tax returns. As part of this process, we have agreed to extend all relevant statute of limitations for the assessment of tax to June 30, 2014. All such statute of limitation extensions have limited the scope of the examinations to the recognition of certain tax benefits that relate to our investment in a portfolio of non-economic REMIC residual interests.
|
(2)
|
Arizona, California, Florida, Georgia, New York, Ohio, Pennsylvania, Texas and New York City.
|
|
December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
Statutory net loss
|
$
|
(23.8
|
)
|
|
$
|
(175.9
|
)
|
|
$
|
(545.1
|
)
|
Statutory surplus
|
1,317.8
|
|
|
926.0
|
|
|
843.2
|
|
|||
Contingency reserve
|
23.0
|
|
|
—
|
|
|
—
|
|
|
December 31,
|
||||||
|
2013
|
|
2012
|
||||
($ in millions)
|
|
|
|
||||
RIF, net (1)
|
$
|
26,128.2
|
|
|
$
|
19,226.7
|
|
|
|
|
|
||||
Statutory surplus
|
$
|
1,317.8
|
|
|
$
|
926.0
|
|
Statutory contingency reserve
|
23.0
|
|
|
—
|
|
||
Statutory position
|
$
|
1,340.8
|
|
|
$
|
926.0
|
|
|
|
|
|
||||
Risk-to-capital
|
19.5:1
|
|
|
20.8:1
|
(1)
|
Excludes risk ceded through reinsurance contracts (to third parties and affiliates) and RIF on defaulted loans.
|
|
December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
Statutory net income
|
$
|
26.5
|
|
|
$
|
58.0
|
|
|
$
|
9.9
|
|
Statutory policyholders’ surplus
|
230.8
|
|
|
218.6
|
|
|
162.4
|
|
|||
Contingency reserve
|
35.5
|
|
|
20.6
|
|
|
—
|
|
|
December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
Statutory net (loss) income
|
$
|
(0.5
|
)
|
|
$
|
2.0
|
|
|
$
|
(0.6
|
)
|
Statutory policyholders’ surplus
|
18.0
|
|
|
18.5
|
|
|
16.5
|
|
|
December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
Statutory net income (loss)
|
$
|
18.1
|
|
|
$
|
1.7
|
|
|
$
|
(11.1
|
)
|
Statutory policyholders’ surplus
|
98.0
|
|
|
81.8
|
|
|
20.0
|
|
|||
Contingency reserve
|
6.9
|
|
|
—
|
|
|
—
|
|
|
December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
Statutory net income (loss)
|
$
|
55.5
|
|
|
$
|
16.0
|
|
|
$
|
(37.6
|
)
|
Statutory policyholders’ surplus
|
59.3
|
|
|
42.3
|
|
|
26.2
|
|
|||
Contingency reserve
|
38.5
|
|
|
—
|
|
|
—
|
|
|
December 31,
|
||||||||||
(In millions)
|
2013
|
|
2012
|
|
2011
|
||||||
Statutory net (loss) income
|
$
|
(24.9
|
)
|
|
$
|
103.3
|
|
|
$
|
69.1
|
|
Statutory surplus
|
1,198.0
|
|
|
1,144.1
|
|
|
973.9
|
|
|||
Contingency reserve
|
264.0
|
|
|
300.1
|
|
|
421.4
|
|
•
|
Generally, stock options vest
50%
on each of the third and fourth anniversaries of the grant date, while restricted stock, restricted stock units and performance share awards vest
100%
on the third anniversary of the grant date. All awards require the grantee to remain in service with us through the vesting period, except in the event of the grantee’s death, disability, retirement or upon a change of control.
|
•
|
Generally, the awards vest upon a grantee’s death, disability or retirement.
|
•
|
Awards granted prior to May 13, 2009 generally vest upon a change of control, defined as: (i) the acquisition by any third party of the beneficial ownership of
40%
or more of our outstanding common stock (
20%
or more of our outstanding common stock for awards under the 1995 Equity Plan); (ii) the purchase by any third party of substantially all of our assets; or (iii) during any
24
-month period, a change in
75%
of the members of the Board with
75%
of the prior members of the Board not approving such change.
|
•
|
Beginning in May 2009, awards granted under the 2008 Equity Plan provide for “double trigger” vesting in the event of a change of control, meaning that awards will vest in connection with a change of control only in the event the grantee’s employment is terminated by us without cause or the grantee terminates employment for “good reason,” in each case within
90 days
before or
one year
after the change of control.
|
|
|
December 31,
|
||||||||||||||||||||||
($ in thousands)
|
|
2013
|
|
2012
|
|
2011
|
||||||||||||||||||
Share-Based Compensation Programs
|
|
Liability
Recorded/
Equity
Instruments
Outstanding
|
|
Compensation
Cost
Recognized (1)
|
|
Liability
Recorded/
Equity
Instruments
Outstanding
|
|
Compensation
Cost
Recognized (1)
|
|
Liability
Recorded/
Equity
Instruments
Outstanding
|
|
Compensation
Cost
Recognized (1)
|
||||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
RSUs
—
Cash-Settled
|
|
$
|
104,114
|
|
|
$
|
79,322
|
|
|
$
|
26,164
|
|
|
$
|
21,301
|
|
|
$
|
5,229
|
|
|
$
|
480
|
|
SARs
—
Cash-Settled
|
|
8,195
|
|
|
8,544
|
|
|
4,602
|
|
|
3,498
|
|
|
1,156
|
|
|
(5,229
|
)
|
||||||
Officer LTI Plan
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
||||||
Liabilities
|
|
$
|
112,309
|
|
|
87,866
|
|
|
$
|
30,766
|
|
|
24,799
|
|
|
$
|
6,385
|
|
|
(4,717
|
)
|
|||
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Stock Options
|
|
3,989,641
|
|
|
2,488
|
|
|
4,402,344
|
|
|
1,787
|
|
|
3,472,762
|
|
|
1,558
|
|
||||||
Phantom Stock
|
|
284,645
|
|
|
3
|
|
|
343,094
|
|
|
4
|
|
|
518,441
|
|
|
5
|
|
||||||
RSUs
—
Equity Settled
|
|
1,273,556
|
|
|
4,336
|
|
|
990,881
|
|
|
1,466
|
|
|
505,183
|
|
|
1,717
|
|
||||||
Restricted Stock
|
|
—
|
|
|
21
|
|
|
131,374
|
|
|
57
|
|
|
324,778
|
|
|
120
|
|
||||||
Employee Stock Purchase Plan (“ESPP”)
|
|
|
|
267
|
|
|
|
|
253
|
|
|
|
|
348
|
|
|||||||||
Equity
|
|
|
|
7,115
|
|
|
|
|
3,567
|
|
|
|
|
3,748
|
|
|||||||||
Total all share-based plans
|
|
|
|
$
|
94,981
|
|
|
|
|
$
|
28,366
|
|
|
|
|
$
|
(969
|
)
|
(1)
|
For purposes of calculating compensation cost recognized, we generally consider time-vested awards effectively vested (and we recognize the full compensation costs) when grantees become retirement eligible. However, under the terms of our stock option awards granted in 2013, 2012 and 2011, legal vesting for retirement occurs when the grantee actually separates from service, with the exception of certain senior executives for whom vesting remains dependent on the stock price hurdle being met regardless of when the executive separates from service. Performance-based RSU awards granted in 2013, 2012 and 2011 provide that vesting remains dependent on the Company’s performance for the full term of the awards notwithstanding the grantee’s earlier retirement.
|
|
Year Ended December 31,
|
||||||||||
($ in thousands except per-share amounts)
|
2013
|
|
2012
|
|
2011
|
||||||
Total compensation cost recognized
|
$
|
94,981
|
|
|
$
|
28,366
|
|
|
$
|
(969
|
)
|
Less: Costs deferred as acquisition costs
|
1,769
|
|
|
465
|
|
|
171
|
|
|||
Stock-based compensation expense impact on net (loss) income before income taxes—increase (decrease)
|
$
|
93,212
|
|
|
$
|
27,901
|
|
|
$
|
(1,140
|
)
|
Stock-based compensation expense impact on net (loss) income—decrease (increase)
|
$
|
60,588
|
|
|
$
|
18,136
|
|
|
$
|
(741
|
)
|
Stock-based compensation expense impact on diluted (loss) income per share—increase (decrease)
|
$
|
0.36
|
|
|
$
|
0.14
|
|
|
$
|
(0.01
|
)
|
|
Number of
Shares
|
|
Weighted
Average
Exercise Price
Per Share
|
|||
Outstanding, December 31, 2012
|
4,402,344
|
|
|
$
|
15.82
|
|
Granted
|
279,650
|
|
|
13.99
|
|
|
Exercised
|
(25,100
|
)
|
|
2.48
|
|
|
Forfeited
|
(17,054
|
)
|
|
4.46
|
|
|
Expired
|
(650,199
|
)
|
|
47.71
|
|
|
Outstanding, December 31, 2013
|
3,989,641
|
|
|
10.63
|
|
|
Exercisable, December 31, 2013
|
1,699,608
|
|
|
18.72
|
|
|
Available for grant, December 31, 2013
|
123,859
|
|
|
|
($ in millions, except per-share amounts)
|
Outstanding and
Exercisable
|
||
Number of options vested
|
1,699,608
|
|
|
Fair value of options vested during the year
|
$
|
0.9
|
|
Weighted-average exercise price per share
|
$
|
18.72
|
|
Aggregate intrinsic value (excess market price over exercise price)
|
$
|
5.3
|
|
Weighted-average remaining contractual term of options (in years)
|
1.0 years
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||
Range of Exercise Prices
|
Number
Outstanding
|
|
Weighted Average
Remaining
Contractual Life
(Years)
|
|
Weighted Average
Exercise Price
|
|
Number
Exercisable
|
|
Weighted Average
Exercise Price
|
||||||
$2.45 - $3.58
|
2,250,190
|
|
|
6.20
|
|
$
|
2.73
|
|
|
419,700
|
|
|
$
|
2.48
|
|
$5.76 - $7.06
|
75,143
|
|
|
4.18
|
|
6.88
|
|
|
—
|
|
|
—
|
|
||
$10.42 - $13.99
|
491,450
|
|
|
6.75
|
|
12.43
|
|
|
107,050
|
|
|
10.42
|
|
||
$20.34
|
946,400
|
|
|
0.70
|
|
20.34
|
|
|
946,400
|
|
|
20.34
|
|
||
$45.95
|
226,458
|
|
|
0.11
|
|
45.95
|
|
|
226,458
|
|
|
45.95
|
|
||
|
3,989,641
|
|
|
2.73
|
|
|
|
1,699,608
|
|
|
|
|
Year Ended December 31,
|
|||||||
|
2013
|
|
2012
|
|
2011
|
|||
Expected life (years) (1)
|
(2)
|
|
(3)
|
|
6 years
|
|
||
Risk-free interest rate (4)
|
1.96
|
%
|
|
1.66
|
%
|
|
1.88
|
%
|
Volatility (5)
|
94.63
|
%
|
|
96.97
|
%
|
|
114.51
|
%
|
Dividend yield
|
0.07
|
%
|
|
0.41
|
%
|
|
0.28
|
%
|
(1)
|
In
2011
, the expected life of stock options granted was estimated to be less than the full term of the options awarded. The expected life is estimated using historical data.
|
(2)
|
In 2013, we used a Monte Carlo valuation, which assumes a derived service period of between
3.02 years
and
4 years
instead of an expected life assumption.
|
(3)
|
In 2012, we used a Monte Carlo valuation, which assumes a derived service period of between
3.14 years
and
4 years
instead of an expected life assumption.
|
(4)
|
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant.
|
(5)
|
Volatility is determined at the date of grant using historical share price volatility and expected life of each award.
|
|
2013
|
|
Expected life
|
3 years
|
|
Risk-free interest rate
|
0.4
|
%
|
Volatility
|
81.8
|
%
|
Dividend yield
|
0.07
|
%
|
|
Number of
Shares
|
|
Weighted Average
Grant Date Fair
Value Per Share
|
|||
Unvested, December 31, 2012
|
131,374
|
|
|
$
|
2.72
|
|
Vested
|
(131,374
|
)
|
|
2.72
|
|
|
Unvested, December 31, 2013
|
—
|
|
|
$
|
—
|
|
|
January 1, 2013
|
|
July 1, 2013
|
||
Expected life
|
6 months
|
|
|
6 months
|
|
Risk-free interest rate
|
0.50
|
%
|
|
0.41
|
%
|
Volatility
|
79.91
|
%
|
|
58.64
|
%
|
Dividend yield
|
0.08
|
%
|
|
0.04
|
%
|
•
|
allow for the immediate eligibility of new hire participation and provide for the automatic enrollment of eligible employees;
|
•
|
provide for the immediate vesting of matching contributions (including existing unvested matching contributions attributable to prior periods) and the elimination of all restrictions on a participant’s ability to diversify his/her position in matching contributions;
|
•
|
permit the company to make discretionary, pro rata (based on eligible pay) cash allocations to each eligible participant’s account, with vesting upon completion of three years of service with us; and
|
•
|
provided certain participants who were active in our pension plan with yearly cash “transition credits” (initially for up to five years, if employed by us during this time) under the Savings Plan equal to a fixed percentage of their eligible pay, calculated based on a formula that takes into account their age and years of completed vesting service as of January 1, 2007. The last transition payment was made in January 2012.
|
•
|
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, reasserting a putative claim under RESPA on substantially the same allegations. 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. Plaintiffs filed their second amended complaint on August 16, 2013, reasserting a putative claim under RESPA on substantially the same allegations. Radian Guaranty filed a motion to dismiss plaintiffs’ second amended complaint on September 17, 2013. The court denied Radian Guaranty’s motion on February 4, 2014, without prejudice to Radian Guaranty’s ability to raise the statute of limitations bar on a motion for summary judgment.
|
•
|
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. Plaintiffs filed their second amended complaint on August 16, 2013, reasserting a putative claim under RESPA on substantially the same allegations. Radian Guaranty filed a motion to dismiss plaintiffs’ second amended complaint on September 17, 2013. The court denied Radian Guaranty’s motion on February 5, 2014, without prejudice to Radian Guaranty’s ability to raise the statute of limitations bar on a motion for summary judgment.
|
•
|
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
With respect to the Samp case and the other similar putative class actions discussed above, Radian Guaranty believes that the claims are without merit and intends to vigorously defend itself against these claims. We are not able to estimate the reasonably possible loss or range of loss for these matters because the proceedings are in a very preliminary stage and there is uncertainty as to the likelihood of a class being certified or the ultimate size of a class.
|
(In thousands, except per share information)
|
2013 Quarters
|
||||||||||||||||||
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Year
|
||||||||||
Net premiums earned—insurance
|
$
|
192,588
|
|
|
$
|
213,124
|
|
|
$
|
211,984
|
|
|
$
|
213,198
|
|
|
$
|
830,894
|
|
Net investment income
|
26,873
|
|
|
27,615
|
|
|
26,732
|
|
|
26,868
|
|
|
108,088
|
|
|||||
Net losses on investments (1)
|
(5,505
|
)
|
|
(130,254
|
)
|
|
(7,132
|
)
|
|
(6,829
|
)
|
|
(149,720
|
)
|
|||||
Net change in fair value of derivative instruments (2)
|
(167,670
|
)
|
|
86,535
|
|
|
10,778
|
|
|
38,586
|
|
|
(31,771
|
)
|
|||||
Net (losses) gains on other financial instruments (3)
|
(5,675
|
)
|
|
1,188
|
|
|
902
|
|
|
(1,151
|
)
|
|
(4,736
|
)
|
|||||
Provision for losses (4)
|
132,059
|
|
|
140,291
|
|
|
157,174
|
|
|
137,610
|
|
|
567,134
|
|
|||||
Policy acquisition and other operating expenses
|
97,295
|
|
|
70,987
|
|
|
78,932
|
|
|
78,978
|
|
|
326,192
|
|
|||||
Net (loss) income (5)
|
(187,500
|
)
|
|
(33,172
|
)
|
|
(12,682
|
)
|
|
36,369
|
|
|
(196,985
|
)
|
|||||
Diluted net (loss) income per share (6)(7)
|
$
|
(1.30
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
0.19
|
|
|
$
|
(1.18
|
)
|
Weighted average shares outstanding (6)
|
144,355
|
|
|
171,783
|
|
|
171,830
|
|
|
213,504
|
|
|
166,366
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
2012 Quarters
|
||||||||||||||||||
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Year
|
||||||||||
Net premiums earned—insurance
|
$
|
167,365
|
|
|
$
|
186,779
|
|
|
$
|
190,963
|
|
|
$
|
193,875
|
|
|
$
|
738,982
|
|
Net investment income
|
34,713
|
|
|
30,877
|
|
|
25,635
|
|
|
23,112
|
|
|
114,337
|
|
|||||
Net gains on investments (1)
|
67,459
|
|
|
26,419
|
|
|
84,659
|
|
|
6,351
|
|
|
184,888
|
|
|||||
Net change in fair value of derivative instruments (2)
|
(72,757
|
)
|
|
(33,124
|
)
|
|
(41,056
|
)
|
|
2,912
|
|
|
(144,025
|
)
|
|||||
Net losses on other financial instruments (3)
|
(17,852
|
)
|
|
(61,862
|
)
|
|
(740
|
)
|
|
(1,815
|
)
|
|
(82,269
|
)
|
|||||
Provision for losses (4)
|
266,154
|
|
|
210,868
|
|
|
176,352
|
|
|
305,797
|
|
|
959,171
|
|
|||||
Policy acquisition and other operating expenses
|
78,200
|
|
|
50,998
|
|
|
63,356
|
|
|
65,994
|
|
|
258,548
|
|
|||||
Net (loss) income
|
(169,232
|
)
|
|
(119,259
|
)
|
|
14,325
|
|
|
(177,302
|
)
|
|
(451,468
|
)
|
|||||
Diluted net (loss) income per share (6)(7)
|
$
|
(1.28
|
)
|
|
$
|
(0.90
|
)
|
|
$
|
0.11
|
|
|
$
|
(1.34
|
)
|
|
$
|
(3.41
|
)
|
Weighted average shares outstanding (6)
|
132,465
|
|
|
132,346
|
|
|
134,033
|
|
|
132,525
|
|
|
132,533
|
|
(1)
|
The
2013
and
2012
amounts reflect unrealized (losses) gains, respectively, on our trading securities. The
2012
amounts also reflect realized gains (losses) on investments in connection with the continued reallocation of our investment portfolio.
|
(2)
|
The change in fair value of derivative instruments for
2013
and
2012
reflects the volatility in the cumulative unrealized (loss) gain attributable to the market’s perception of our non-performance risk as a result of the changes in our CDS spread during both years. The
2013
amounts also reflect improvements in the credit spreads of the underlying securities.
|
(3)
|
The
2013
and
2012
periods primarily reflect fair value gains and losses on our VIE debt.
|
(4)
|
The results for
2013
reflect a continued decline in new defaults and positive development in our estimate of future losses on existing defaults. The results for the fourth quarter of 2012 include the effects of an increase in our IBNR reserve estimate.
|
(5)
|
Net income in the fourth quarter of 2013 reflects unrealized gains in the change in fair value of derivative instruments and a decline in the provision for losses in our mortgage insurance segment.
|
(6)
|
Diluted net (loss) income per share and average shares outstanding per the accounting standard regarding earnings per share.
|
(7)
|
Net (loss) income per share is computed independently for each period presented. Consequently, the sum of the quarters may not equal the total net (loss) income per share for the year.
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
(In thousands, except share and per-share amounts)
|
|
|
|
|
|
||||||
Net (loss) income
|
$
|
(196,985
|
)
|
|
$
|
(451,468
|
)
|
|
$
|
302,150
|
|
Average common shares outstanding
|
166,366
|
|
|
132,533
|
|
|
132,372
|
|
|||
Increase in shares due to potential exercise of common stock equivalents—diluted basis
|
—
|
|
|
—
|
|
|
1,491
|
|
|||
Adjusted shares outstanding—diluted
|
166,366
|
|
|
132,533
|
|
|
133,863
|
|
|||
Net (loss) income per share—basic
|
$
|
(1.18
|
)
|
|
$
|
(3.41
|
)
|
|
$
|
2.28
|
|
Net (loss) income per share—diluted
|
$
|
(1.18
|
)
|
|
$
|
(3.41
|
)
|
|
$
|
2.26
|
|
Item 9A.
|
Controls and Procedures.
|
Item 9B.
|
Other Information.
|
Item 10.
|
Directors, Executive Officers and Corporate Governance.
|
Item 11.
|
Executive Compensation.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|
Plan Category (1)
|
(a)
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
|
|
(b)
Weighted-average
exercise price of
outstanding
options,
warrants and rights
|
|
(c)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column(a))
|
|
||||
Equity compensation plans approved by stockholders (2)
|
5,547,842
|
|
(3)
|
$
|
7.65
|
|
(4)
|
1,422,871
|
|
(5)
|
Equity compensation plans not approved by stockholders
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Total
|
5,547,842
|
|
(3)
|
$
|
7.65
|
|
(4)
|
1,422,871
|
|
(5)
|
(1)
|
The table does not include information for equity compensation plans assumed by us in mergers, under which we do not grant additional awards.
|
(2)
|
These plans consist of our 1995 Equity Plan, 2008 Equity Plan and our 2008 ESPP Plan.
|
(3)
|
Represents
3,989,641
non-qualified stock options and
284,645
shares of phantom stock issued under our 1995 Equity Plan and our 2008 Equity Plan and
1,273,556
Restricted Stock Units (“RSUs”) issued under our 2008 Equity Plan.
Of the RSUs included herein,
432,440
are performance-based stock-settled RSUs that could potentially pay out between 0% and 200% of this represented target.
|
(4)
|
The shares of phantom stock and RSUs were granted at full value, and therefore, have a weighted average exercise price of $0. Excluding shares of phantom stock and RSUs from this calculation, the weighted average exercise price of outstanding non-qualified stock options was
$10.63
at December 31, 2013.
|
(5)
|
Includes
118,813
shares available for issuance under our 2008 Equity Plan and
1,304,058
shares available for issuance under our 2008 ESPP Plan, in each case as of December 31, 2013. In January 2014, we issued
35,037
of the shares available for issuance under our 2008 ESPP Plan. As a result,
1,269,021
shares currently remain available for issuance under the 2008 ESPP Plan. When we obtained stockholder approval for our 2008 Equity Plan, we stated that we would not issue any additional shares under our 1995 Equity Plan.
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence.
|
Item 14.
|
Principal Accountant Fees and Services.
|
Item 15.
|
Exhibits and Financial Statement Schedules.
|
1.
|
Financial Statements—See the “Index to Consolidated Financial Statements” included in Item 8 of this report for a list of the financial statements filed as part of this report.
|
Radian Group Inc.
|
|
|
|
By:
|
/s/ SANFORD A. IBRAHIM
|
|
Sanford A. Ibrahim,
Chief Executive Officer
|
Name
|
|
Title
|
/
S
/ S
ANFORD
A. I
BRAHIM
|
|
Chief Executive Officer (Principal Executive Officer) and Director
|
Sanford A. Ibrahim
|
|
|
|
|
|
/s/
C. ROBERT QUINT
|
|
Executive Vice President, Chief Financial Officer (Principal Financial Officer)
|
C. Robert Quint
|
|
|
|
|
|
/s/
CATHERINE M. JACKSON
|
|
Senior Vice President, Controller
(Principal Accounting Officer)
|
Catherine M. Jackson
|
|
|
|
|
|
/
S
/ H
ERBERT
W
ENDER
|
|
Non-Executive Chairman of the Board
|
Herbert Wender
|
|
|
|
|
|
/s/ D
AVID
C. C
ARNEY
|
|
Director
|
David C. Carney
|
|
|
|
|
|
/s/ H
OWARD
B. C
ULANG
|
|
Director
|
Howard B. Culang
|
|
|
|
|
|
/s/ L
ISA
W. H
ESS
|
|
Director
|
Lisa W. Hess
|
|
|
|
|
|
/s/ S
TEPHEN
T. H
OPKINS
|
|
Director
|
Stephen T. Hopkins
|
|
|
|
|
|
/s/ B
RIAN
D. M
ONTGOMERY
|
|
Director
|
Brian D. Montgomery
|
|
|
|
|
|
/s/ G
AETANO
M
UZIO
|
|
Director
|
Gaetano Muzio
|
|
|
|
|
|
/s/ J
AN
N
ICHOLSON
|
|
Director
|
Jan Nicholson
|
|
|
|
|
|
/s/ G
REGORY
V. S
ERIO
|
|
Director
|
Gregory V. Serio
|
|
|
|
|
|
/s/ N
OEL
J. S
PIEGEL
|
|
Director
|
Noel J. Spiegel
|
|
|
Type of Investment
|
Amortized
Cost
|
|
Fair Value
|
|
Amount Reflected on
the Balance
Sheet
|
||||||
(In thousands)
|
|
||||||||||
Fixed-Maturities:
|
|
|
|
|
|
||||||
Bonds:
|
|
|
|
|
|
||||||
U.S. government and agency securities
|
$
|
8,939
|
|
|
$
|
9,106
|
|
|
$
|
9,106
|
|
State and municipal obligations (1)
|
26,847
|
|
|
26,296
|
|
|
26,304
|
|
|||
Corporate bonds and notes
|
11,951
|
|
|
12,045
|
|
|
12,045
|
|
|||
RMBS
|
72,665
|
|
|
73,115
|
|
|
73,115
|
|
|||
Other investments
|
341
|
|
|
341
|
|
|
341
|
|
|||
Total fixed-maturities
|
120,743
|
|
|
120,903
|
|
|
120,911
|
|
|||
Trading securities (2)
|
3,255,921
|
|
|
3,117,429
|
|
|
3,117,429
|
|
|||
Equity securities available for sale:
|
|
|
|
|
|
||||||
Common stocks
|
77,758
|
|
|
129,939
|
|
|
129,939
|
|
|||
Nonredeemable preferred stocks
|
348
|
|
|
5,229
|
|
|
5,229
|
|
|||
Total equity securities available for sale
|
78,106
|
|
|
135,168
|
|
|
135,168
|
|
|||
Short-term investments
|
1,429,227
|
|
|
1,429,228
|
|
|
1,429,228
|
|
|||
Other invested assets
|
125,555
|
|
|
135,318
|
|
|
128,421
|
|
|||
Total investments other than investments in related parties
|
$
|
5,009,552
|
|
|
$
|
4,938,046
|
|
|
$
|
4,931,157
|
|
(1)
|
Held to maturity and available for sale.
|
(2)
|
Includes foreign government and agency securities.
|
|
December 31,
|
||||||
(In thousands, except share and per-share amounts)
|
2013
|
|
2012
|
||||
Assets
|
|
|
|
||||
Investments
|
|
|
|
||||
Trading securities—at fair value
|
$
|
5,240
|
|
|
$
|
99,171
|
|
Short-term investments—at fair value
|
633,178
|
|
|
136,075
|
|
||
Other invested assets
|
—
|
|
|
16,666
|
|
||
Cash
|
4,304
|
|
|
2,978
|
|
||
Restricted cash
|
123
|
|
|
360
|
|
||
Investment in subsidiaries, at equity in net assets
|
1,419,360
|
|
|
1,234,229
|
|
||
Debt issuance costs
|
15,741
|
|
|
8,582
|
|
||
Due from affiliates, net
|
12,283
|
|
|
17,690
|
|
||
Property and equipment, at cost (less accumulated depreciation of $49,632 and $48,786)
|
1,281
|
|
|
1,344
|
|
||
Other assets
|
20,985
|
|
|
33,524
|
|
||
Total assets
|
$
|
2,112,495
|
|
|
$
|
1,550,619
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Accrued interest payable
|
5,551
|
|
|
3,959
|
|
||
Accrued compensation expense
|
132,848
|
|
|
46,835
|
|
||
Long-term debt
|
930,072
|
|
|
663,571
|
|
||
Federal income taxes—current and deferred
|
98,476
|
|
|
91,895
|
|
||
Other liabilities
|
5,903
|
|
|
8,034
|
|
||
Total liabilities
|
1,172,850
|
|
|
814,294
|
|
||
Common stockholders’ equity
|
|
|
|
||||
Common stock: par value $.001 per share; 485,000,000 and 325,000,000 shares authorized at December 31, 2013 and December 31, 2012; 190,636,972 and 151,131,173 shares issued at December 31, 2013 and 2012, respectively; 173,099,515 and 133,647,216 shares outstanding at December 31, 2013 and 2012, respectively
|
191
|
|
|
151
|
|
||
Treasury stock, at cost: 17,537,457 and 17,483,957 shares at December 31, 2013 and 2012, respectively
|
(892,807
|
)
|
|
(892,094
|
)
|
||
Additional paid-in capital
|
2,347,104
|
|
|
1,967,414
|
|
||
Retained deficit
|
(552,226
|
)
|
|
(355,241
|
)
|
||
Accumulated other comprehensive income
|
37,383
|
|
|
16,095
|
|
||
Total common stockholders’ equity
|
939,645
|
|
|
736,325
|
|
||
Total liabilities and stockholders’ equity
|
$
|
2,112,495
|
|
|
$
|
1,550,619
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Net investment income
|
$
|
4,300
|
|
|
$
|
9,093
|
|
|
$
|
15,890
|
|
Net (losses) gains on investments
|
(930
|
)
|
|
8,816
|
|
|
24,603
|
|
|||
Net (losses) gains on other financial instruments
|
(6,026
|
)
|
|
9,180
|
|
|
1,085
|
|
|||
Other income
|
—
|
|
|
3
|
|
|
3
|
|
|||
Total revenues
|
(2,656
|
)
|
|
27,092
|
|
|
41,581
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Other operating expenses
|
—
|
|
|
2,690
|
|
|
—
|
|
|||
Interest expense
|
37,087
|
|
|
17,756
|
|
|
16,132
|
|
|||
Total expenses
|
37,087
|
|
|
20,446
|
|
|
16,132
|
|
|||
(Loss) income before income taxes
|
(39,743
|
)
|
|
6,646
|
|
|
25,449
|
|
|||
Provision (benefit) for income taxes
|
9,234
|
|
|
(40,187
|
)
|
|
(201,741
|
)
|
|||
Equity in net (loss) income of affiliates
|
(148,008
|
)
|
|
(498,301
|
)
|
|
74,960
|
|
|||
Net (loss) income
|
$
|
(196,985
|
)
|
|
$
|
(451,468
|
)
|
|
$
|
302,150
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2013
|
|
2012
|
|
2011
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net (loss) income
|
$
|
(196,985
|
)
|
|
$
|
(451,468
|
)
|
|
$
|
302,150
|
|
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
||||||
Net losses (gains) on other investments
|
3,004
|
|
|
(1,821
|
)
|
|
(24,603
|
)
|
|||
Losses (gains) on the repurchase of long-term debt
|
3,952
|
|
|
(16,175
|
)
|
|
—
|
|
|||
Equity in undistributed net loss (income) of subsidiaries and affiliates (1)
|
150,090
|
|
|
505,267
|
|
|
(495,954
|
)
|
|||
Increase (decrease) in federal income taxes
|
6,583
|
|
|
(7,145
|
)
|
|
49,396
|
|
|||
Depreciation and other amortization, net
|
30,286
|
|
|
18,603
|
|
|
17,185
|
|
|||
Change in other assets
|
23,301
|
|
|
(17,708
|
)
|
|
(3,801
|
)
|
|||
Change in other liabilities
|
85,450
|
|
|
25,336
|
|
|
90,895
|
|
|||
Net cash provided by (used in) operating activities
|
105,681
|
|
|
54,889
|
|
|
(64,732
|
)
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Sales/redemptions of trading securities
|
9,000
|
|
|
153,992
|
|
|
151,840
|
|
|||
Purchases of trading securities
|
—
|
|
|
(3
|
)
|
|
(32,825
|
)
|
|||
(Purchases) sales of short-term investments, net
|
(496,979
|
)
|
|
41,042
|
|
|
156,665
|
|
|||
Sales of other assets, net
|
21,473
|
|
|
8,709
|
|
|
—
|
|
|||
Purchases of property and equipment, net
|
(647
|
)
|
|
(1,124
|
)
|
|
(523
|
)
|
|||
Capital contributions to subsidiaries and affiliates (1)
|
(233,391
|
)
|
|
(100,384
|
)
|
|
(50,587
|
)
|
|||
Net cash (used in) provided by investing activities
|
(700,544
|
)
|
|
102,232
|
|
|
224,570
|
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Dividends paid
|
(1,632
|
)
|
|
(1,335
|
)
|
|
(1,330
|
)
|
|||
Proceeds/payments related to issuance or exchange of debt, net
|
377,783
|
|
|
—
|
|
|
—
|
|
|||
Redemption of long-term debt
|
(79,372
|
)
|
|
(153,261
|
)
|
|
(160,000
|
)
|
|||
Issuance of common stock
|
299,410
|
|
|
—
|
|
|
—
|
|
|||
Net cash provided by (used in) financing activities
|
596,189
|
|
|
(154,596
|
)
|
|
(161,330
|
)
|
|||
Increase (decrease) in cash
|
1,326
|
|
|
2,525
|
|
|
(1,492
|
)
|
|||
Cash, beginning of year
|
2,978
|
|
|
453
|
|
|
1,945
|
|
|||
Cash, end of year
|
$
|
4,304
|
|
|
$
|
2,978
|
|
|
$
|
453
|
|
(1)
|
See Note D.
|
($ in thousands)
|
Gross
Amount
|
|
Ceded to
Other
Companies
|
|
Assumed
from
Other
Companies
|
|
Net Amount
|
|
Assumed
Premiums as a
Percentage
of Net
Premiums
|
|||||||||
2013
|
$
|
890,487
|
|
|
$
|
72,101
|
|
|
$
|
12,508
|
|
|
$
|
830,894
|
|
|
1.51
|
%
|
2012
|
$
|
796,253
|
|
|
$
|
53,700
|
|
|
$
|
(3,571
|
)
|
|
$
|
738,982
|
|
|
(0.48
|
)%
|
2011
|
$
|
762,428
|
|
|
$
|
38,740
|
|
|
$
|
32,337
|
|
|
$
|
756,025
|
|
|
4.28
|
%
|
Exhibit
Number
|
Exhibit
|
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 Amendment of Certificate of Incorporation of the Registrant 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)
|
|
|
3.5
|
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)
|
|
|
3.6
|
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)
|
|
|
3.7
|
Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated November 9. 2011 and filed on November 15, 2011)
|
|
|
4.1
|
Specimen certificate for Common Stock (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 1999)
|
|
|
4.2
|
Amended and Restated Tax Benefit Preservation Plan, dated as of February 12, 2010, between the Registrant and The Bank of New York Mellon (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated February 12, 2010 and filed on February 17, 2010)
|
|
|
4.3
|
First Amendment to the Amended and Restated Tax Benefit Preservation Plan, dated as of May 3, 2010, between the Registrant and The Bank of New York Mellon (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated May 3, 2010 and filed on May 4, 2010)
|
|
|
4.4
|
Senior Indenture, dated as of June 7, 2005, between the Registrant and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated June 2, 2005 and filed on June 7, 2005)
|
|
|
4.5
|
Officers’ Certificate, dated as of June 7, 2005, including the terms of the Registrant’s 5.375% Senior Notes due 2015, as Attachment A, and including the form of the Notes as Exhibit A-1 to Attachment A (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated June 2, 2005 and filed on June 7, 2005)
|
|
|
4.6
|
Senior Indenture, dated as of November 15, 2010, between the Registrant and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated November 10, 2010 and filed on November 16, 2010)
|
|
|
4.7
|
First Supplemental Indenture, dated as of November 15, 2010, between the Registrant and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated November 10, 2010 and filed on November 16, 2010)
|
Exhibit
Number
|
Exhibit
|
|
|
4.8
|
Form of 3.00% Convertible Senior Notes Due 2017 (included within Exhibit 4.7)
|
|
|
4.9
|
Officers’ Certificate, dated as of January 4, 2013, including the terms of the Registrant’s 9.000% Senior Notes due 2017, as Attachment A, and including the form of the Notes as Exhibit A-1 to Attachment A (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated January 4, 2013 and filed on January 7, 2013)
|
|
|
4.10
|
Form of 9.000% Senior Notes Due 2017 (included within Exhibit 4.9)
|
|
|
4.11
|
Registration Rights Agreement, dated as of January 4, 2013, between the Registrant and Morgan Stanley & Co. LLC (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated January 4, 2013 and filed on January 7, 2013)
|
|
|
4.12
|
Senior Indenture dated as of March 4, 2013 between the Registrant and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated February 27, 2013 and filed on March 4, 2013)
|
|
|
4.13
|
First Supplemental Indenture dated as of March 4, 2013 between the Registrant and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated February 27, 2013 and filed on March 4, 2013)
|
|
|
4.14
|
Form of 2.25% Convertible Senior Notes due 2019 (included within Exhibit 4.13)
|
|
|
4.15
|
Officers’ Certificate, dated as of February 28, 2013, including the terms of the Registrant’s 9.000% Senior Notes due 2017, as Attachment A, and including the form of the Registered Notes as Exhibit A-1 to Attachment A (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated February 28, 2013 and filed on March 6, 2013)
|
|
|
4.16
|
Form of 9.000% Senior Notes due 2017 (included within exhibit 4.15)
|
|
|
+10.1
|
Employment Agreement between the Registrant and Sanford A. Ibrahim, dated as of April 5, 2011(incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated April 5, 2011 and filed on April 7, 2011)
|
|
|
+10.2
|
Stock Appreciation Right Agreement under 2008 Equity Compensation Plan, dated as of May 13, 2009, between the Registrant and Sanford A. Ibrahim (incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2009)
|
|
|
+10.3
|
Restricted Stock Award Agreement under 2008 Equity Compensation Plan, dated as of May 13, 2009, between the Registrant and Sanford A. Ibrahim (incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2009)
|
|
|
+10.4
|
Restricted Stock Award Agreement under 2008 Equity Compensation Plan, dated as of May 16, 2009, between the Registrant and Sanford A. Ibrahim (incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2009)
|
|
|
+10.5
|
Amendments to Restricted Stock and Stock Option Grants between the Registrant and Sanford A. Ibrahim, dated as of February 10, 2010 (incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2009)
|
|
|
+10.6
|
2010 Performance-Based Restricted Stock Unit Agreement under the 2008 Equity Compensation Plan, dated May 12, 2010 between the Registrant and Sanford A. Ibrahim (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2010)
|
|
|
Exhibit
Number
|
Exhibit
|
+10.7
|
2010 Stock Option Agreement under the 2008 Equity Compensation Plan, dated May 12, 2010 between the Registrant and Sanford A. Ibrahim (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2010)
|
|
|
+10.8
|
Change of Control Agreement between the Registrant and Teresa A. Bryce, dated November 14, 2006 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated December 12, 2005 and filed on December 16, 2005)
|
|
|
+10.9
|
Amendment to Change of Control Agreement—Section 409A between the Registrant and Teresa A. Bryce, dated December 8, 2008 (incorporated by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2009)
|
|
|
+10.10
|
Form of Severance Agreement (including for Richard I. Altman, Derek Brummer, Edward J. Hoffman, C. Robert Quint and H. Scott Theobald) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated December 30, 2010 and filed on January 6, 2011)
|
|
|
+10.11
|
Radian Group Inc. Amended and Restated Benefit Restoration Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated November 6, 2007 and filed on November 13, 2007)
|
|
|
+10.12
|
Amendment No. 1 to the Radian Group Inc. Amended and Restated Benefit Restoration Plan, effective January 1, 2008 (incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2008)
|
|
|
*+10.13
|
Radian Group Inc. Savings Incentive Plan (Amended and Restated Effective January 1, 2010 incorporating all amendments through December 31, 2012)
|
|
|
*+10.14
|
Amendment No. 1 to the Radian Group Inc. Savings Incentive Plan (Amended and Restated Effective January 1, 2010), effective May 22, 2013
|
|
|
+10.15
|
Radian Group Inc. 1995 Equity Compensation Plan (Amended and Restated May 9, 2006) (incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement for the 2006 Annual Meeting of Stockholders (file no. 1-11356), as filed with the Securities and Exchange Commission on April 18, 2006).
|
|
|
+10.16
|
Amendment to Radian Group Inc. 1995 Equity Compensation Plan (Amended and Restated May 9, 2006) dated February 5, 2007 (incorporated by reference to Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2006)
|
|
|
+10.17
|
Amendment No. 2 to Radian Group Inc. 1995 Equity Compensation Plan, dated November 6, 2007 (incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2007)
|
|
|
+10.18
|
Form of Stock Option Grant Letter under 1995 Equity Compensation Plan (incorporated by reference to Exhibit 10 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended September 30, 2004)
|
|
|
+10.19
|
Form of Restricted Stock Award Agreement for awards granted before February 5, 2007 under 1995 Equity Compensation Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2005)
|
|
|
+10.20
|
Form of Restricted Stock Award Agreement for awards granted on or after February 5, 2007 under 1995 Equity Compensation Plan (incorporated by reference to Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2006)
|
|
|
+10.21
|
Form of Phantom Stock Agreement for Non-Employee Directors under 1995 Equity Compensation Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated February 8, 2005 and filed on February 14, 2005)
|
Exhibit
Number
|
Exhibit
|
|
|
+10.22
|
Radian Group Inc. Amended and Restated 2008 Equity Compensation Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-8 (file no. 333-174428) filed on May 23, 2011)
|
|
|
+10.23
|
Form of Stock Option Grant Letter under 2008 Equity Compensation Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended September 30, 2008)
|
|
|
+10.24
|
Form of Restricted Stock Award Agreement under 2008 Equity (file no. 1-11356) Compensation Plan (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2008)
|
|
|
+10.25
|
Form of Phantom Stock Agreement for Non-Employee Directors under 2008 Equity Compensation Plan (incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended September 30, 2008)
|
|
|
+10.26
|
Amendment to Form of 2008 Phantom Stock Agreement for Non-Employee Directors under the 2008 Equity Compensation Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2009)
|
|
|
+10.27
|
Form of 2009 Restricted Stock Award Agreement under the 2008 Equity Compensation Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2009)
|
|
|
+10.28
|
Form of 2009 Stock Appreciation Right Agreement under the 2008 Equity Compensation Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2009)
|
|
|
+10.29
|
Form of Restricted Stock Unit Award Agreement for Employees under the 2008 Equity Compensation Plan (incorporated by reference to Exhibit 10.34 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2010)
|
|
|
+10.30
|
Form of 2009 Restricted Stock Unit Award Agreement for Non-Employee Directors under the 2008 Equity Compensation Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2009)
|
|
|
+10.31
|
Amended and Restated Radian Group Inc. 2008 Executive Long-Term Incentive Cash Plan (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended March 31, 2011)
|
|
|
+10.32
|
Form of 2008 Executive Long-Term Incentive Cash Plan Award (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended September 30, 2008)
|
|
|
+10.33
|
Form of 2009 Executive Long-Term Incentive Cash Plan Award (incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2009)
|
|
|
+10.34
|
Form of 2010 Performance-Based Restricted Stock Unit Agreement under the 2008 Equity Compensation Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2010)
|
|
|
+10.35
|
Form of 2010 Stock Option Agreement under the 2008 Equity Compensation Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2010)
|
|
|
+10.36
|
Form of 2010 Executive Long-Term Incentive Cash Plan Award (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2010)
|
|
|
Exhibit
Number
|
Exhibit
|
+10.37
|
Radian Group Inc. Amended and Restated Performance Share Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Amended Current Report on Form 8-K (file no. 1-11356) dated February 8, 2005 and filed on February 14, 2005)
|
|
|
+10.38
|
Amended and Restated Radian Group Inc. Voluntary Deferred Compensation Plan for Directors (incorporated by reference to Exhibit 10.40 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356)for the year ended December 31, 2009)
|
|
|
+10.39
|
Amended and Restated Radian Voluntary Deferred Compensation Plan for Officers (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated November 12, 2009 and filed on November 18, 2009)
|
|
|
+10.40
|
Radian Group Inc. 2008 Employee Stock Purchase Plan, as amended and restated on December 11, 2012 (incorporated by reference to Exhibit 10.42 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2012)
|
|
|
+10.41
|
Radian Group Inc. STI/MTI Incentive Plan for Executive Employees (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated November 12, 2009 and filed on November 18, 2009)
|
|
|
*+10.42
|
Radian Group Inc.
STI Incentive Plan For Financial Guaranty Employees
|
|
|
+10.43
|
Enhance Financial Services Group Inc. 1997 Long-Term Incentive Plan for Key Employees (As Amended Through June 3, 1999) (incorporated by reference to Exhibit 10.2.2 to the Quarterly Report on Form 10-Q (file no. 1-10967) for the period ended June 30, 1999, of Enhance Financial Services Group Inc.)
|
|
|
+10.44
|
Enhance Reinsurance Company Supplemental Pension Plan (incorporated by reference to Exhibit 10.4 to the Annual Report on Form 10-K (file no. 1-10967) for the year ended December 31, 1999, of Enhance Financial Services Group Inc.)
|
|
|
+10.45
|
Amendment to Enhance Reinsurance Company Supplemental Pension Plan, effective January 1, 2008 (incorporated by reference to Exhibit 10.40 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2008)
|
|
|
+10.46
|
Certain Compensation Arrangements with Directors (Effective May, 2008) (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2008)
|
|
|
10.47
|
Form of Radian Guaranty Inc. master insurance policy, effective June 1, 1995 (incorporated by reference to Exhibit 10.21 to the Registrant’s Registration Statement on Form S-4 (file no. 333-65440) filed on July 19, 2001)
|
|
|
10.48
|
Net Worth and Liquidity Maintenance Agreement, dated as of October 10, 2000, between Radian Guaranty Inc. and Radian Insurance Inc. (incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2002)
|
|
|
10.49
|
Form of Expense Allocation and Services Agreement between the Registrant and each of Radian Guaranty Inc., Radian Insurance Inc., Radian Asset Assurance Inc. and Amerin Guaranty Corporation (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2005)
|
|
|
10.50
|
Form Amendment to Expense Allocation and Services Agreement between the Registrant and each of Radian Guaranty Inc. Radian Insurance Inc., Radian Asset Assurance Inc. and Amerin Guaranty Corporation (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on form 10-Q (file no. 1-11356) for the period ended March 31, 2009)
|
|
|
Exhibit
Number
|
Exhibit
|
10.51
|
Radian Group Inc. Allocation of Consolidated Tax Liability Agreement between the Registrant and each of its subsidiaries, dated January 1, 2002, including Addendums 1 through 6 dated between January 1, 2002 and July 10, 2008 (incorporated by reference to Exhibit 10.49 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2008)
|
|
|
10.52
|
Capped Call Confirmation (Reference No. 99AMQGZY8) dated as of November 8, 2010 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated November 8, 2010 and filed on November 10, 2010)
|
|
|
10.53
|
Capped Call Confirmation (Reference No. 99AMQM627) dated as of November 10, 2010 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated November 8, 2010 and filed on November 10, 2010)
|
|
|
10.54
|
Securities Purchase Agreement, dated as of May 3, 2010, by and between Radian Guaranty Inc. and Sherman Financial Group LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated April 30, 2010 and filed on May 4, 2010)
|
|
|
+10.55
|
Amendment to Incentive Awards under 2008 Executive Long-Term Incentive Cash Plan, dated April 5, 2011 (incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated April 5, 2011 and filed on April 7, 2011)
|
|
|
+10.56
|
Form of 2011 Performance Based Restricted Stock Unit Agreement under the 2008 Equity Compensation Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2011)
|
|
|
+10.57
|
Form of 2011 Stock Option Agreement under the 2008 Equity Compensation Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2011)
|
|
|
+10.58
|
2011 Performance Based Restricted Stock Unit Agreement under the 2008 Equity Compensation Plan, dated June 9, 2011, between the Registrant and Sanford A. Ibrahim (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2011)
|
|
|
+10.59
|
2011 Performance Based Restricted Stock Unit Agreement under the 2008 Equity Compensation Plan, dated June 9, 2011, between the Registrant and C. Robert Quint (incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2011)
|
|
|
+10.60
|
2011 Stock Option Agreement under the 2008 Equity Compensation Plan, dated June 9, 2011, between the Registrant and Sanford A. Ibrahim (incorporated by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2011)
|
|
|
+10.61
|
2011 Stock Option Agreement under the 2008 Equity Compensation Plan, dated June 9, 2011, between the Registrant and C. Robert Quint (incorporated by reference to Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2011)
|
|
|
+10.62
|
Severance Agreement, dated December 23, 2011, between Teresa Bryce Bazemore and the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) filed December 29, 2011)
|
|
|
*+10.63
|
Transfer Letter Agreement between the Registrant and Derek Brummer, dated April 3, 2013.
|
|
|
10.64
|
Commutation, Reassumption and Release Agreement, effective as of January 1, 2012 (signed January 24, 2012), between Assured Guaranty Municipal Corp. (formerly Financial Security Assurance Inc.), Assured Guaranty (Europe) Ltd. (formerly Financial Security Assurance (U.K.) Limited), and Radian Asset Assurance Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated January 30, 2012 and filed on January 30, 2012)
|
|
|
Exhibit
Number
|
Exhibit
|
10.65
|
Letter Agreement dated February 27, 2012, by and between Radian Guaranty Inc., Radian Mortgage Assurance Inc., Radian Group Inc. and Federal National Mortgage Association (incorporated by reference to Exhibit 10.65 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2011)
|
|
|
10.66
|
Letter dated February 28, 2012 from Freddie Mac to Radian Guaranty Inc. and Radian Mortgage Assurance Inc. (incorporated by reference to Exhibit 10.66 to the Registrant’s Annual Report on Form 10-K (file no. 1-11356) for the year ended December 31, 2011)
|
|
|
10.67
|
Letter dated December 20, 2012, from Freddie Mac to Radian Guaranty Inc. and Radian Mortgage Assurance Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 1-11356) dated December 20, 2012 and filed on December 21, 2012)
|
|
|
+10.68
|
Form of 2012 Performance Based Restricted Stock Unit Agreement under the 2008 Equity Compensation Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2012)
|
|
|
+10.69
|
Form of 2012 Stock Option Agreement under the 2008 Equity Compensation Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2012)
|
|
|
+10.70
|
2012 Performance Based Restricted Stock Unit Grant Letter under the 2008 Equity Compensation Plan, dated as of June 6, 2012, between the Registrant and Sanford A. Ibrahim (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2012)
|
|
|
+10.71
|
2012 Performance Based Restricted Stock Unit Grant Letter under the 2008 Equity Compensation Plan, dated as of June 6, 2012, between the Registrant and C. Robert Quint (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2012)
|
|
|
+10.72
|
2012 Stock Option Agreement under the 2008 Equity Compensation Plan, dated as of June 6, 2012, between the Registrant and Sanford A. Ibrahim (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2012)
|
|
|
+10.73
|
2012 Stock Option Agreement under the 2008 Equity Compensation Plan, dated as of June 6, 2012, between the Registrant and C. Robert Quint (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2012)
|
|
|
+10.74
|
Waiver Letter, dated May 30, 2012, under Employment Agreement between the Registrant and S.A. Ibrahim, dated April 5, 2011 (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2012)
|
|
|
+10.75
|
Letter Agreement, dated May 16, 2013, between the Registrant 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)
|
|
|
+10.76
|
2013 Performance-Based Restricted Stock Unit Grant Letter under the 2008 Equity Compensation Plan, dated as of May 14, 2013, between the Registrant and Sanford A. Ibrahim (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2013)
|
|
|
+10.77
|
2013 Stock Option Agreement under the 2008 Equity Compensation Plan, dated as of May 14, 2013, between the Registrant and Sanford A. Ibrahim (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (file no. 1-11356) for the period ended June 30, 2013)
|
|
|
*
|
Filed herewith.
|
**
|
Furnished herewith.
|
+
|
Management contract, compensatory plan or arrangement.
|
|
Table of Contents
|
|
|
|
|
Page
|
|
PREAMBLE
|
|
|
1
|
ARTICLE I -
|
|
DEFINITIONS
|
2
|
1.1
|
|
Account
|
2
|
1.2
|
|
Affiliated Company
|
3
|
1.3
|
|
Age
|
3
|
1.4
|
|
Annuity Starting Date
|
3
|
1.5
|
|
Beneficiary
|
4
|
1.6
|
|
Board of Directors
|
4
|
1.7
|
|
Code
|
4
|
1.8
|
|
Company
|
4
|
1.9
|
|
Company Stock
|
4
|
1.10
|
|
Compensation
|
4
|
1.11
|
|
Discretionary Contributions
|
5
|
1.12
|
|
Early Retirement Date
|
5
|
1.13
|
|
Eligible Employee
|
5
|
1.14
|
|
Employee
|
6
|
1.15
|
|
Employment Commencement Date
|
6
|
1.16
|
|
ERISA
|
7
|
1.17
|
|
Fund
|
7
|
1.18
|
|
Highly Compensated Employee
|
7
|
1.19
|
|
Hour of Service
|
7
|
1.20
|
|
Investment Medium
|
9
|
1.21
|
|
Matching Contributions
|
9
|
1.22
|
|
Non-Highly Compensated Employee
|
9
|
1.23
|
|
Normal Retirement Age
|
9
|
1.24
|
|
Participant
|
9
|
1.25
|
|
Participating Company
|
9
|
1.26
|
|
Period of Severance
|
10
|
1.27
|
|
Plan
|
10
|
1.28
|
|
Plan Administrator
|
11
|
1.29
|
|
Plan Year
|
11
|
1.30
|
|
Required Beginning Date
|
11
|
1.31
|
|
Rollover Contributions and Roth Rollover Contributions
|
12
|
1.32
|
|
Roth Contributions
|
12
|
1.33
|
|
Salary Reduction Contributions
|
12
|
1.34
|
|
Separation from Service
|
12
|
1.35
|
|
Spouse
|
12
|
1.36
|
|
Total Disability
|
12
|
|
Table of Contents
|
|
|
|
|
Page
|
|
1.37
|
|
Transition Credit Contributions
|
13
|
1.38
|
|
Trust Agreement
|
13
|
1.39
|
|
Trustee
|
13
|
1.40
|
|
Valuation Date
|
13
|
1.41
|
|
Voluntary Contributions
|
13
|
1.42
|
|
Year of Service
|
13
|
ARTICLE II -
|
|
ELIGIBILITY TO PARTICIPATE
|
15
|
2.1
|
|
Eligibility to Participate
|
15
|
2.2
|
|
Participation and Service Upon Reemployment
|
16
|
2.3
|
|
Data
|
16
|
2.4
|
|
Transfers
|
16
|
2.5
|
|
Reemployment after Military Service
|
17
|
ARTICLE III -
|
|
CONTRIBUTIONS TO THE PLAN
|
19
|
3.1
|
|
Salary Reduction Contributions and Roth Contributions
|
19
|
3.2
|
|
Voluntary Contributions
|
22
|
3.3
|
|
Employer Contributions
|
22
|
3.4
|
|
Timing of Contributions
|
25
|
3.5
|
|
Maximum Allocation
|
25
|
3.6
|
|
Rollover Contributions
|
28
|
ARTICLE IV -
|
|
PARTICIPANT ST ACCOUNTS
|
31
|
4.1
|
|
Accounts
|
31
|
4.2
|
|
Valuation
|
31
|
4.3
|
|
Apportionment of Gain or Loss
|
31
|
ARTICLE V -
|
|
VESTING
|
32
|
5.1
|
|
Nonforfeitable Amounts
|
32
|
5.2
|
|
Period of Severance and Loss of Service
|
33
|
5.3
|
|
Restoration of Service
|
33
|
5.4
|
|
Forfeitures and Restoration of Forfeited Amounts upon Reemployment
|
24
|
ARTICLE VI -
|
|
DISTRIBUTIONS
|
36
|
6.1
|
|
General
|
36
|
6.2
|
|
Normal Retirement
|
36
|
6.3
|
|
Early Retirement
|
36
|
6.4
|
|
Late Retirement
|
36
|
6.5
|
|
Death
|
36
|
6.6
|
|
Total Disability
|
36
|
6.7
|
|
Valuation for Distribution
|
37
|
6.8
|
|
Payment of Benefits
|
37
|
6.9
|
|
Timing of Distribution
|
38
|
6.10
|
|
Beneficiary Designation
|
39
|
6.11
|
|
Treatment of Terminated Vested Participant
|
41
|
6.12
|
|
Direct Rollover
|
43
|
ARTICLE VII -
|
|
WITHDRAWALS
|
46
|
7.1
|
|
Non-Hardship In-Service Withdrawals
|
46
|
|
Table of Contents
|
|
|
|
|
Page
|
|
7.2
|
|
Hardship Withdrawals Subject to Code Section 401(k)
|
46
|
7.3
|
|
Amount and Payment of Withdrawals
|
49
|
7.4
|
|
Withdrawals Not Subject to Replacement
|
49
|
7.5
|
|
Investment Medium to be Charged with Withdrawal
|
49
|
7.6
|
|
Order of Withdrawals
|
49
|
7.7
|
|
Timing of Withdrawals
|
50
|
7.8
|
|
Qualified Reservist Distributions
|
50
|
ARTICLE VIII -
|
|
LOANS TO PARTICIPANTS
|
51
|
8.1
|
|
Loan Application
|
51
|
8.2
|
|
Loan Approval
|
51
|
8.3
|
|
Amount of Loan
|
51
|
8.4
|
|
Terms of Loan
|
52
|
8.5
|
|
Loan Fees
|
53
|
8.6
|
|
Suspension of Repayments
|
54
|
8.7
|
|
Additional Rules
|
54
|
ARTICLE IX -
|
|
PLAN ADMINISTRATION
|
55
|
9.1
|
|
Plan Administrator
|
55
|
9.2
|
|
Appointment
|
55
|
9.3
|
|
Term and Compensation
|
55
|
9.4
|
|
Claims Review
|
55
|
9.5
|
|
Plan Administrator Actions
|
57
|
9.6
|
|
Investment Manager
|
57
|
9.7
|
|
Benefit Payment Directions
|
57
|
9.8
|
|
Nondiscrimination
|
58
|
9.9
|
|
Advisors
|
58
|
9.10
|
|
Records and Reports
|
58
|
9.11
|
|
Indemnification
|
59
|
9.12
|
|
Power and Duties of the Plan Administrator
|
59
|
9.13
|
|
Participating Company to Supply Information
|
60
|
9.14
|
|
Self-Interest
|
51
|
ARTICLE X -
|
|
THE FUND
|
62
|
10.1
|
|
Designation of Trustee
|
62
|
10.2
|
|
Exclusive Benefit
|
62
|
10.3
|
|
No Interest in Fund
|
62
|
10.4
|
|
Trustee
|
62
|
10.5
|
|
Investments
|
62
|
10.6
|
|
Fund
|
64
|
10.7
|
|
Qualifying Employer Securities
|
64
|
ARTICLE XI -
|
|
AMENDMENT OR TERMINATION OF THE PLAN
|
65
|
11.1
|
|
Power of Amendment and Termination
|
65
|
11.2
|
|
Merger
|
66
|
ARTICLE XII -
|
|
TOP-HEAVY PROVISIONS
|
67
|
12.1
|
|
General
|
67
|
|
Table of Contents
|
|
|
|
|
Page
|
|
12.2
|
|
Definitions
|
67
|
12.3
|
|
Minimum Contribution for Non-Key Employees
|
70
|
12.4
|
|
Social Security
|
71
|
12.5
|
|
Adjustment to Maximum Benefit Limitation
|
72
|
ARTICLE XIII -
|
|
GENERAL PROVISIONS
|
73
|
13.1
|
|
No Employment Rights
|
73
|
13.2
|
|
Governing Law
|
73
|
13.3
|
|
No Interest in Fund
|
73
|
13.4
|
|
Spendthrift Clause
|
73
|
13.5
|
|
Incapacity
|
73
|
13.6
|
|
Lost Payees
|
74
|
ARTICLE XIV -
|
|
MINIMUM DISTRIBUTION REQUIREMENTS
|
75
|
14.1
|
|
General Rules
|
75
|
14.2
|
|
Time and Manner of Distribution
|
75
|
14.3
|
|
Definitions
|
76
|
SCHEDULE A
|
|
PARTICIPATING COMPANIES
|
78
|
1.1
|
“
Account
” means the entries maintained in the records of the Trustee which represent the Participant’s interest in the Fund. The term “Account” shall refer, as the context indicates, to any or all of the following subaccounts:
|
(a)
|
“
Matching Contribution Account
” ‑ the Account to which are credited Matching Contributions allocated to a Participant, and adjustments related thereto.
|
(b)
|
“
Rollover Contribution Account
” ‑ the Account to which are credited a
|
(c)
|
“
Roth Contribution Account
” - Effective January 1, 2011, the Account to which are credited a Participant’s Roth Contributions and adjustments related thereto.
|
(d)
|
“
Roth Rollover Contribution Account
” - the Account to which are credited a Participant’s Roth Rollover Contributions and adjustments related thereto.
|
(e)
|
“
Salary Reduction Contribution Account
” ‑ the Account to which are credited
|
(f)
|
“
Voluntary Savings Account
” ‑ the Account to which are credited a Participant’s Voluntary Contributions prior to January 1, 1994, and adjustments related thereto. Effective January 1, 1994, Voluntary Contributions are not permitted to be made to the Plan.
|
(g)
|
“
Discretionary Contribution Account
” - the Account to which are credited Discretionary Contributions allocated to a Participant, and adjustments related thereto.
|
(h)
|
“
Transition Credit Contributions Account
” - the Account to which Transition Credit Contributions are credited.
|
1.2
|
“
Affiliated Company
” means, with respect to the Company:
|
(a)
|
any corporation that is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as the Company;
|
(b)
|
any member of an affiliated service group, as determined under Section 414(m) of the Code, of which the Company is a member;
|
(c)
|
any trade or business that is under common control with the Company, as
|
(d)
|
any other entity required to be aggregated with the Company pursuant to
|
1.3
|
“
Age
” means, for any individual, his age as of his nearest birthday, except that an individual attains Age 70½ on the corresponding date in the sixth calendar month following the month in which his 70th birthday falls (or the last day of such sixth month if there is no such corresponding date therein).
|
1.4
|
“
Annuity Starting Date
” means the first day on which all events have occurred which entitle the Participant to a benefit from the Plan.
|
1.5
|
“
Beneficiary
” means the person or persons designated by the Participant to receive the value of his vested Account upon his death; provided, that, in the case of a married Participant, his Beneficiary shall automatically be his Spouse unless his Spouse has consented to the designation of another Beneficiary pursuant to Section 6.10.
|
1.6
|
“
Board of Directors
” means the Board of Directors of the Company.
|
1.7
|
“
Code
” means the Internal Revenue Code of 1986, as amended.
|
1.8
|
“
Company
” means Radian Group Inc., a Pennsylvania Corporation, or any successor or assignee which adopts this Plan in writing.
|
1.9
|
“
Company Stock
” means any tradable class of voting common stock of the Company or an Affiliated Company which satisfies the meaning of “qualifying employer security” under Section 407 of ERISA.
|
1.10
|
“
Compensation
” means, for any Eligible Employee, for any Plan Year or Limitation Year, as the case may be:
|
(a)
|
except as otherwise provided, his base pay, plus for those sales employees compensated under Radian’s Sales Compensation Program (or any successor compensation plan), commissions and quarterly Management Based Objective payments (MBOs) from a Participating Company for the Plan Year, but exclusive of overtime, bonuses, or other forms of special payments.
|
(b)
|
for the purpose of the definition of “Highly Compensated Employee” in this Article (except as otherwise provided in such definition), his “Compensation” as such word is defined in Section 415(c)(3) of the Code, but including amounts that are excluded from gross income under a plan described in Sections 125, 132(f) or 401(k) of the Code.
|
(c)
|
For each Plan Year or Limitation Year, as the case may be, Compensation for all purposes under the Plan shall not exceed $200,000, adjusted for cost-of-living increases in accordance with Section 401(a)(17)(B) of the Code.
|
(d)
|
For purposes of any definition of Compensation under this Plan that includes a reference to amounts under Code Section 125, amounts under Code Section 125 include any amounts not available to a Participant in cash in lieu of group health coverage because the Participant is unable to certify that he or she has other health coverage. An amount will be treated as an amount under Code Section 125 only if the Company does not request or collect information regarding the Participant’s other health coverage as part of the enrollment process for the health plan.
|
1.11
|
“
Discretionary Contributions
” means the amounts which may be contributed by a Participating Company pursuant to Section 3.3(c).
|
1.12
|
“
Early Retirement Date
” means, for any Participant, effective January 1, 1994, the date a Participant attains age 55 and completes six Years of Service.
|
1.13
|
“
Eligible Employee
” means an Employee who is employed by a Participating Company and who is classified by the Participating Company as a common law employee, except that Employees whose employment is covered by a collective bargaining agreement shall not be Eligible Employees unless such agreement specifically provides for their participation in the Plan. For purposes of determining eligibility under the Plan, the classification to which an individual is assigned by a Participating Company shall be final and conclusive, regardless of whether a court, a governmental agency or other entity subsequently finds such individual should have been assigned a different classification. Effective for individuals
|
1.14
|
“
Employee
” means an individual who is reported on payroll records as a common law employee of a Participating Company or Affiliated Company. An individual who is not a common law employee of a Participating Company or Affiliated Company shall be deemed a common law employee by such Company if he is a leased employee (but only if the coverage requirements of Code Section 410(b) would otherwise not be met).
|
1.15
|
“
Employment Commencement Date
” means, for any Employee, the date on which he is first entitled to be credited with an “Hour of Service” described in Section 1.19(a)(1). For each employee of Amerin Guaranty Corporation, as of the date Amerin Guaranty Corporation merged with the Company, “Employment Commencement Date” shall be the date recognized as such by Amerin Guaranty Corporation.
|
1.16
|
“
ERISA
” means the Employee Retirement Income Security Act of 1974, as amended.
|
1.17
|
“
Fund
” means the fund established for this Plan, administered under the Trust Agreement, out of which benefits payable under this Plan shall be paid.
|
1.18
|
“
Highly Compensated Employee
” means any Employee who
|
(a)
|
(1) was a 5-percent owner (as defined in Section 415(c)(3) of the Code) at any time during the Plan Year or the preceding Plan Year; or (2) for the preceding Plan Year, received Compensation from a Participating Company in excess of $80,000 (as adjusted pursuant to Sections 414(q) and 415(d) of the Code) and was in the top-paid group (as defined in Section 414(q)(3) of the Code) of Employees;
|
(b)
|
A former Employee shall be treated as a Highly Compensated Employee if such Employee was a Highly Compensated Employee when such Employee separated from service or such Employee was a Highly Compensated Employee at any time after the Employee's 55th birthday.
|
1.19
|
“
Hour of Service
” means, for any Employee:
|
(a)
|
except as provided in (b):
|
(1)
|
each hour for which he is directly or indirectly paid or entitled to payment by a Participating Company or an Affiliated Company for the performance of employment duties; or
|
(2)
|
each hour for which he is entitled, either by award or agreement, to back pay from a Participating Company or an Affiliated Company, irrespective of mitigation of damages; or
|
(3)
|
each hour for which he is directly or indirectly paid or entitled to payment by a Participating Company or an Affiliated Company on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), jury duty, layoff, leave of absence, or military duty; or
|
(b)
|
Anything to the contrary in Subsection (a) notwithstanding:
|
(1)
|
No Hours of Service shall be credited to an Employee for any period during which payments are made or due him under a plan maintained solely for the purpose of complying with applicable workers’ compensation, unemployment compensation, or disability insurance laws.
|
(2)
|
No more than 501 Hours of Service shall be credited to an Employee under Paragraph (a)(3) of this definition on account of any single continuous period during which no duties are performed by him, except to the extent otherwise provided in the Plan.
|
(3)
|
No Hours of Service shall be credited to an Employee with respect to
|
(4)
|
No Hours of Service shall be credited twice.
|
(5)
|
Hours of Service shall be credited at least as liberally as required by the rules set forth, in U.S. Department of Labor Reg. §2530.200b‑2(b) and (c).
|
(c)
|
Notwithstanding the foregoing, an Employee who is employed on a full‑time basis shall be credited with ten Hours of Service for each day he is entitled to be credited with at least one Hour of Service. For purposes hereof, an Employee shall be considered to be employed on a full‑time basis if he is expected to normally work at least 20 hours per week or, in the case of an Employee who works on a seasonal or temporary basis, is expected to normally work at least 30 weeks in a year at 35 or more hours per week.
|
1.20
|
“
Investment Medium
” means any fund, contract, obligation, or other mode of investment to which a Participant may direct the investment of the assets of his Account, including Company Stock
|
1.21
|
“
Matching Contributions
” means the amounts contributed by a Participating Company pursuant to Section 3.3(a).
|
1.22
|
“
Non-Highly Compensated Employee
” means an Employee who is not a Highly Compensated Employee. For purposes of applying applicable nondiscrimination testing requirements, an Employee’s status as a Non-Highly Compensated Employee in the preceding Plan Year is determined without regard to his status in the current Plan Year.
|
1.23
|
“
Normal Retirement Age
” means, for any Participant, the first day of the calendar month coincident with or next following the date on which he attains Age 65.
|
1.24
|
“
Participant
” means any Eligible Employee who enters the Plan pursuant to Section 2.1 or a former Eligible Employee with an Account under the Plan.
|
1.25
|
“
Participating Company
” means the Company and each Affiliated Company which is authorized by the Board of Directors to adopt this Plan by action of its board of directors or other governing body. The Participating Companies are listed in Schedule A.
|
1.26
|
“
Period of Severance
” means, effective January 1, 1998, a Plan Year during which an Employee has not completed more than 500 Hours of Service due to a Separation from Service.
|
1.27
|
“
Plan
” means the Radian Group Inc. Savings Incentive Plan, a profit-sharing plan, as set forth herein.
|
1.28
|
“
Plan Administrator
” or “
Administrator
” means the individuals appointed by the Board of Directors to supervise the administration of the Plan, as provided in Article IX.
|
1.29
|
“
Plan Year
” means each 12 consecutive‑month period that begins on January 1 and ends on the next following December 31.
|
1.30
|
“
Required Beginning Date
” means, for any Participant:
|
(a)
|
if he attained Age 70-1/2 on or after January 1, 1996, the April 1 of the calendar year following the calendar year in which occurs the later of (i) his attainment of Age 70-1/2 or (ii) his Separation from Service; provided, however, if he is a 5-percent owner (within the meaning of Code Section 416) of a Participating Company, clause (ii) shall not apply;
|
(b)
|
if he attained age 70-1/2 before January 1, 1988, and is not a 5‑percent owner (within the meaning of Code Section 416) of a Participating Company, April 1 of the calendar year following the later of the calendar year in which he has a Separation from Service or the calendar year in which he attained Age 70-1/2;
|
(c)
|
if he attained age 70-1/2 before January 1, 1988, and is a 5‑percent owner (within the meaning of Code Section 416) of a Participating Company, the later of December 31, 1987 or April 1 of the calendar year following the calendar year in which he attained Age 70-1/2;
|
(d)
|
if he attained age 70-1/2 before January 1, 1989 and after December 31, 1987, is not a 5‑percent owner (within the meaning of Code Section 416) of a Participating Company, and has not had a Separation from Service before January 1, 1989, April 1, 1990;
|
(e)
|
if he attains age 70-1/2 on or after January 1, 1989, April 1 of the calendar year next following the calendar year in which he attains Age 70-1/2.
|
1.31
|
“
Rollover Contributions and Roth Rollover Contributions”
means, for any Eligible Employee, his rollover contributions as provided in Section 3.6.
|
1.32
|
“
Roth Contributions
” means, for any Participant, elective deferrals designated irrevocably by the Participant at the time of the cash or deferred election as Roth Contributions that are being made in lieu of all or a portion of the Salary Reduction Contributions otherwise eligible to be made by the Participating Company on behalf of the Participant under Section 3.1 of the Plan. Such contributions shall be treated by the Company as includible in the Participant’s gross income at the time the Participant would have received that amount in cash if the Participant had not made an election to defer such amount. Unless specifically provided otherwise, Roth Contributions shall be treated as Salary Reduction Contributions for all purposes under the Plan.
|
1.33
|
“
Salary Reduction Contributions
” means, for any Participant, pre‑tax contributions made by the Participating Company on his behalf as provided in Section 3.1.
|
1.34
|
“
Separation from Service
” means, for any Employee, his death, retirement, resignation, discharge or any absence that causes him to cease to be an Employee.
|
1.35
|
“
Spouse
” means the person to whom the Participant is married on his Annuity Starting Date (without regard to whether the marriage terminates at a later date).
|
1.36
|
“
Total Disability
” shall mean a disability which:
|
(a)
|
is deemed by the Plan Administrator, to be of a potentially permanent nature on the basis of the Participant’s demonstration to the Plan Administrator that he is entitled to both benefits under a long-term disability plan of a Participating Company and disability benefits under the Social Security Act (prior to January 1, 2002, the Plan Administrator’s determination of the potentially permanent nature of the disability is based upon medical certification);
|
(b)
|
prevents an Employee from continuing to perform, for a Participating Company or Affiliated Company, the duties of his customary job or any other available job for which he is qualified by training or experience, and
|
(c)
|
results from illness or injury which is not self-inflicted and does not result from alcoholism or the use of narcotics.
|
1.37
|
“
Transition Credit Contributions
” means the transition credit amounts contributed by a Participating Company pursuant to Section 3.3(d).
|
1.38
|
“
Trust Agreement
” means the agreement and declaration of trust executed for purposes of the Plan.
|
1.39
|
“
Trustee
” means the corporate trustee or one or more individuals collectively appointed and acting under the Trust Agreement.
|
1.40
|
“
Valuation Date
” means, effective, January 1, 2000, each day on which the stock exchange is open. Prior to January 1, 2000, “Valuation Date” means each March 31st, June 30th, September 30th and December 31st.
|
1.41
|
“
Voluntary Contributions
” means a Participant's after-tax contributions, if any, made to the Plan prior to January 1, 1994, as provided in Section 3.2.
|
1.42
|
“
Year of Service
” for purposes of determining the vesting percentage under Section 5.1, shall mean, effective January 1, 1998, each Plan Year during which an Employee is credited with at least 1,000 Hours of Service.
|
2.1
|
Eligibility to Participate
. Except as otherwise provided, effective for new hires on or after January 1, 2007, each Eligible Employee shall be eligible to participate in the Plan as of his date of hire. An Employee who would be eligible to participate but for the fact that the Employee is not classified as an Eligible Employee shall be eligible to participate as of the first day after he is classified as an Eligible Employee. Similarly, if an Eligible Employee transfers and is no longer classified as an Eligible Employee, he shall cease to participate as of the date that he is no longer considered an Eligible Employee.
|
2.3
|
Data
. Each Eligible Employee shall furnish to the Plan Administrator such data as the Plan Administrator may consider necessary for the determination of the Eligible Employee's rights and benefits under the Plan and shall otherwise cooperate fully with the Plan Administrator in the administration of the Plan.
|
2.4
|
Transfers
. If a Participant is transferred to employment with a member of the controlled group of corporations of which a Participating Company is a part, his participation under the Plan shall be suspended; provided, however, that during the period of his employment in such ineligible position:
|
(a)
|
subject to the reemployment provisions of Section 2.2, service for vesting purposes shall continue to accrue,
|
(b)
|
he shall cease to have any right to enter into a salary reduction agreement with a Participating Company pursuant to Section 3.1,
|
(c)
|
his Matching Contribution Account, Discretionary Contribution Account, Salary Reduction Contribution Account, and Roth Contribution Account shall not receive any contribution allocations under Sections 3.1 and 3.3,
|
(d)
|
his Account shall continue to participate in income allocations pursuant to Section 4.3, and
|
(e)
|
the withdrawal privileges under Sections 7.1 and 7.2 shall continue to apply.
|
2.5
|
Reemployment after Military Service.
Effective December 12, 1994, notwithstanding any provision of the Plan to the contrary, contributions, benefits and service credit with respect to qualified military service shall be provided in accordance with Code Section 414(u).
|
3.1
|
Salary Reduction Contributions and Roth Contributions.
|
(a)
|
In order to authorize Salary Reduction Contributions or Roth Contributions to be made on his behalf to his Salary Reduction Contribution Account or Roth Contribution Account, a Participant shall execute a salary reduction agreement indicating the percentage (in any whole increment) by which his Compensation shall be reduced on account of such Salary Reduction Contributions and/or Roth Contributions, or take such other action at such time and in such form (including without limitation, telephonic and electronic transmission, utilization of voice response systems and computer entry) as the Plan Administrator shall prescribe. Subject to the terms and conditions hereinafter stated, and subject to such further limitations, terms and conditions as may be prescribed from time to time by the Plan Administrator, each Participant may enter into, change or revoke a salary reduction agreement at any time. Each salary reduction agreement will be applicable to all payroll periods during which such agreement is in effect.
|
(b)
|
Notwithstanding the foregoing, with respect to any Eligible Employee who is hired or rehired on or after January 1, 2007, Salary Reduction Contributions shall automatically be contributed to a Salary Reduction Contribution Account (in an amount described in Subsection (e) below) and invested in a designated default investment fund unless he either (i) affirmatively elects not to participate in the Plan, or (ii) affirmatively elects a deferral percentage by executing a salary reduction agreement or taking such other action at such time and in such form (including without limitation, telephonic and electronic transmission, utilization of voice response systems and computer entry) as the Plan Administrator shall prescribe.
|
(c)
|
Salary Reduction Contributions and Roth Contributions made on behalf of a Participant for any calendar year shall not exceed $10,500 (as adjusted in accordance with Section 402(g) of the Code and regulations thereunder). To the extent necessary to satisfy this limitation for any calendar year:
|
(1)
|
elections under Subsection (a) of this Section shall be prospectively restricted; and,
|
(2)
|
after application of Subparagraph (1), the excess Salary Reduction Contributions and/or Roth Contributions (with earnings thereon, but reduced by any amounts previously distributed) shall be paid to the Participant on or before the April 15 first following the calendar year in which such excess Salary Reduction Contributions and/or Roth Contributions were made. If the Participant has made both Salary Reduction Contributions and Roth Contributions, the Participant shall be deemed to have elected a return of Roth Contributions first and Salary Reduction Contributions second, to the extent necessary to meet the dollar limitations specified in this Section 3.1(c). Investment earnings on excess Salary Reduction Contributions and/or Roth Contributions shall be determined pursuant to IRS Treas. Reg. Section 1.402(g)-1(e)(5). For the 2007 Plan Year, such earnings shall include the allocation of investment earnings for the period subsequent to the end of the Plan Year and prior to distribution of such excess Salary Reduction Contributions (“gap period earnings”). Effective with the 2008 Plan Year, such earnings shall not reflect these “gap period earnings”.
|
(d)
|
A salary reduction agreement and any revocation which conforms to the terms and conditions prescribed by the Plan Administrator shall be effective for the first payroll period following the receipt of such agreement or within a reasonable period thereafter and shall continue in effect until revoked by the Participant.
|
(e)
|
For any Eligible Employee who is hired or rehired on or after January 1, 2007 and with respect to whom a salary reduction agreement has not been filed or is not effective for any given payroll period, he shall be deemed to have elected a Salary Reduction Contribution equal to three percent (3%) of his Compensation in lieu of cash. This automatic deferral percentage will automatically be increased by one percent (1%) annually beginning in 2008 until the automatic deferral percentage reaches six percent (6%). Such automatic deferral percentage increases shall be communicated to Eligible Employees and shall take effect annually each April (unless an alternative election is made). Eligible Employees may elect to opt out of such automatic increases.
|
(f)
|
Catch-up Contributions
. Effective October 1, 2002, each Participant who is eligible to make Salary Reduction Contributions and, effective January 1, 2011, Roth Contributions and who has attained age 50 before the close of a Plan Year shall be eligible to make Catch-up Contributions in accordance with, and subject to the limitations of, Section 414(v) of the Code. Such Catch-up Contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Sections 402(g) and 415 of the Code. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Sections 401(k)(3), 410(b), or 416 of the Code, as applicable, by reason of the making of such Catch-up Contributions.
|
3.2
|
Voluntary Contributions
.
|
(a)
|
Effective January 1, 1994, Voluntary Contributions shall not be permitted to be made under this Plan. Voluntary Contributions made prior to January 1, 1994 shall be maintained in each Participant's Voluntary Contribution Account and shall be subject to the Plan provisions as herein set forth.
|
(b)
|
Prior to January 1, 1994, Participants were permitted to make Voluntary Contributions under this Plan in an amount which when added to the amount, if any, of any voluntary contributions to other qualified plans of the Participating Company, did not exceed 10% of their Compensation while Participants, and which amount was subject to the applicable nondiscrimination testing and maximum allocation requirements under the Plan at that time. Voluntary Contributions are credited to a Participant’s Voluntary Savings Account and amounts credited to such Account shall be 100 percent vested and nonforfeitable at all times. Contributions made hereunder by Participants are not intended to be deductible by Participants under Section 219(a) of the Code.
|
(a)
|
Matching Contributions
. Subject to the limitations set forth in Section 3.5, the Company shall make Matching Contributions to the Plan on behalf of each Participant for whom Salary Reduction Contributions and/or Roth Contributions are made pursuant to Section 3.1 above, equal to one hundred percent (100%) of the Participant’s Salary Reduction Contributions and/or Roth Contributions, including Catch-up Contributions described in Subsection 3.1(f), up to six percent (6%) of his Compensation. Matching Contributions will be allocated on a quarterly basis to Participants who have made Salary Reduction Contributions and/or Roth Contributions during
|
(b)
|
401(k) Safe Harbor Matching Contribution Status. Matching Contributions are intended to satisfy the safe harbor rules under Sections 401(k)(12) and 401(m)(1) of the Code and the Plan shall be interpreted and administered in accordance therewith. However, the fact that the Company has elected that the Plan be treated as a safe harbor 401(k) plan for a Plan Year shall in no way bind the Plan to continue to maintain such status for future Plan Years.
|
(c)
|
Discretionary Contributions
. The Company may contribute to the Plan such discretionary amounts as the Board of Directors shall determine annually in its sole and absolute discretion. Such contribution may be made without regard to the existence or nonexistence of net profits of the Company. The contribution, if any, may be fixed in terms of dollars, percentage of net profits, percentage of Compensation, or any other method determined by the Board of Directors. Any such contributions will be allocated to the Discretionary Contribution Account of each eligible Participant (as defined in Section 2.1) as a uniform flat dollar amount.
|
(d)
|
Transition Credit Contributions
. Commencing with the Plan Year beginning January 1, 2007, and for a total period of five (5) Plan Years including the 2007 Plan Year, the Company will contribute a percentage (described as the “Contribution Percentage” below) of an eligible Participant’s Compensation to the Plan based on the sum of a Participant’s whole age as of January 1, 2007 plus two (2) times the Participant’s Years of Service (as defined under the Radian Group Inc. Pension Plan) as of January 1, 2007 (each eligible Participant will be assigned points representing the above total). Additionally, for purposes of this paragraph, a Participant who has completed one thousand (1,000) Hours of Service in a Year of Service period commencing in 2006 shall be credited with a Year of Service for that fractional period. The number of points assigned to a Participant as of January 1, 2007 shall not increase thereafter. The contribution percentage that applies to an eligible Participant for each Plan Year shall be determined in accordance with the following schedule:
|
(e)
|
All Matching Contributions to the Plan shall be made in Company Stock or cash subject to the Participant’s right to diversify in accordance with Subsection 10.5(c). Effective November 10, 2010, the Plan Administrator shall determine the form in which Matching Contributions shall be made. All other employer contributions described in this Section 3.3 shall be made in cash from the Company’s current or accumulated earnings as computed in accordance with accepted accounting practices, before deduction of federal income taxes and reserves for contingencies, if any, other than reasonable reserves of a type or character allowed or allowable as deductions for federal income tax purposes, and before deduction of any contributions hereunder. In no event, however, shall Company contributions for any year (whether made pursuant to Section 3.1 or otherwise) exceed
|
3.4
|
Timing of Contributions
. Contributions for any Plan Year under Section 3.3 shall be made no later than the last date on which amounts so paid may be deducted for Federal income tax purposes for the taxable year of the Company in which the Plan Year ends. All Contributions made under Section 3.3 are expressly conditioned upon their deductibility for Federal income tax purposes.
|
3.5
|
Maximum Allocation
. The provisions of this Section (which shall be effective for Plan Years and Limitation Years beginning on or after January 1, 2008) shall be construed in a manner which is consistent with Section 415 of the Code (which is hereby incorporated herein) and the rulings and regulations issued thereunder.
|
(a)
|
Notwithstanding anything in this Article to the contrary, effective for Limitation Years beginning on or after January 1, 2008, the Annual Addition with respect to a Participant for a Limitation Year shall in no event exceed the lesser of:
|
(1)
|
The maximum dollar amount permitted under Code Section 415(c)(1)(A), adjusted as provided in Code Section 415(d) (e.g., $46,000 for the Limitation Year ending in 2008); or
|
(2)
|
100 percent of the Participant’s 415 Compensation for the Limitation Year.
|
(b)
|
Notwithstanding any provision of the Plan to the contrary, if the Annual Addition (within the meaning of Code Section 415) for any Participant exceeds the limits specified above in Section 3.5(a), the Plan Administrator shall correct such excess in accordance with the methods prescribed under the Employee Plans Compliance Resolution System (EPCRS) as set forth in Revenue Procedure 2008-50 or any superseding guidance, including, but not limited to, the preamble of the final Section 415 regulations.
|
(c)
|
“415 Compensation” shall mean compensation as defined in Treasury Regulation Section 1.415(c)-2(b), exclusive of amounts listed in Regulation Section 1.415(c)-2(c). Thus, such 415 Compensation includes but is not limited to all income recognized as a result of an election under Section 83(b) of the Code, taxable amounts received by the Participant through accident or health insurance for personal injury or sickness or from a self-insured medical expense reimbursement plan, moving expenses paid or reimbursed by a Participating Company in excess of any amount deductible by the Participant, and any amount included in his taxable income as a result of the grant of a nonqualified stock option by a Participating Company. 415 Compensation for this purpose shall not include any amounts which are not included in a Member’s gross income for federal tax purposes, provided, however, that 415 Compensation shall include amounts that would have been received and included in gross income but for elective deferrals under Code Sections 125, 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b).
|
(d)
|
“Limitation Year” shall mean, for the purposes of Section 415 of the Code, the Plan Year.
|
(e)
|
“Annual Addition” shall include the following amounts allocated to the Participant for the Limitation Year:
|
(1)
|
all employer contributions allocated to the Participant’s Account under any qualified defined contribution plan maintained by the Company (or a Participating Company), including amounts attributable to forfeitures, if any, applied to reduce the Company’s contribution obligation, but excluding Catch-up Contributions;
|
(2)
|
all employee contributions allocated to the Participant’s Account under any qualified defined contribution plan maintained by the Company (or a Participating Company);
|
(3)
|
all forfeitures allocated to the Participant’s Account under any qualified defined contribution plan maintained by the Company (or a Participating Company).
|
3.6
|
Rollover Contributions
.
|
(a)
|
A Participant or an Eligible Employee (including an Employee who is not eligible to participate in this Plan because he has not satisfied the eligibility requirements of Section 2.1) may transfer, or have transferred directly to the Fund from an individual retirement account described in Section 408(a) of the Code; an individual retirement annuity described in Section 408(b) of the Code; an annuity plan described in Section 403(a) of the Code; an annuity contract described in Section 403(b) of the Code; an eligible retirement plan under Section 457(b) of the Code; or a qualified trust described in Section 401(a) of the Code of a former employer, all or a portion of his interest in the distributing plan, except that:
|
(1)
|
the interest being transferred shall not include assets from any plan to the extent that the Plan Administrator determines that such interest would impose upon this Plan requirements as to form of distribution that would not otherwise apply hereunder; and
|
(2)
|
the interest being transferred shall not contain nondeductible contributions made to the distributing plan by the Participant or Eligible Employee unless the transfer to the Fund is directly from the funding agent of the distributing plan.
|
(b)
|
In addition, a Participant or an Eligible Employee who has established an individual retirement account to hold distributions received from qualified retirement plans of former employers may, with the consent of the Plan Administrator, transfer all of the assets of such individual retirement account to the Fund. Such individual retirement account shall not contain non-deductible contributions made by the Participant or Eligible Employee while he was a participant in the plans of his former employers.
|
(c)
|
The distributions transferred by a Participant or an Eligible Employee from another qualified retirement plan or from an individual retirement account shall be credited to the Participant’s or Eligible Employee’s Rollover
|
(d)
|
The Plan shall not accept a distribution from any other qualified retirement plan or from an individual retirement account unless the following conditions are met:
|
(1)
|
the distribution being transferred must come directly from the fiduciary of the plan of the former employer, or it must come from the Participant or Eligible Employee within 60 days after the Participant or Eligible Employee receives a distribution from such other qualified retirement plan or individual retirement account;
|
(2)
|
distributions from a plan for a self‑employed person shall not be transferred to this Plan, unless the transfer is directly to the Fund from the funding agent of the distributing plan;
|
(3)
|
the distribution being transferred will not cause the Plan to be a direct or indirect transferee of a plan to which the joint and survivor annuity requirements of Sections 401(a)(11) and 417 of the Code apply; and
|
(4)
|
the distribution being transferred will not cause the Plan, by operation of Code Section 411(d)(6), to provide an optional form of benefit payment that differs from the forms provided in Article VI.
|
(e)
|
Notwithstanding any provisions of the Plan to the contrary, effective January 1, 2011, the Plan will accept a rollover contribution to the Roth Rollover Contribution Account (but only if it is a direct rollover from a Roth elective deferral account under an applicable retirement plan described in Section 402A(e)(1) of the Code and only to the extent the rollover is permitted under the rules of Section 402(c) of the Code).
|
(f)
|
Any amounts contributed to the Plan pursuant to this Section 3.6 shall be excluded from the value of a Participant’s Account for the purpose of determining whether such value is $5,000 or less pursuant to Sections 6.6(a), 6.11(a) and 6.11(b) of the Plan.
|
4.1
|
Accounts
. All Contributions and earnings thereon may be invested in one commingled Fund for the benefit of all Participants. However, in order that the interest of each Participant may be accurately determined and computed, a separate Account shall be maintained for each Participant. These Accounts shall represent the Participants’ individual interest in the Fund. All Contributions shall be credited to Participants’ Accounts as set forth in Article III.
|
4.3
|
Apportionment of Gain or Loss
. The value of each Investment Medium in the Fund shall be apportioned pro rata among the Participant’s Accounts which are invested in such Investment Medium at the current Valuation Date.
|
5.1
|
Nonforfeitable Amounts.
|
(a)
|
A Participant shall have a 100% nonforfeitable interest at all times in his Salary Reduction Contribution Account, Roth Contribution Account, Transition Credit Contributions Account, Rollover Contribution Account, Roth Rollover Contribution Account and Voluntary Savings Account.
|
(b)
|
A Participant who terminated from employment prior to December 31, 2006 shall be vested in his Matching Contribution and Discretionary Contribution Accounts based on his Years of Service in accordance with the following table:
|
(c)
|
A Participant shall have a 100% nonforfeitable interest at all times in his Matching Contribution Account with respect to Matching Contributions attributable to Salary Reduction Contributions and/or Roth Contributions made on or after January 1, 2007. Additionally, with respect to the portion of his Matching Contribution Account attributable to Salary Reduction Contributions made prior to January 1, 2007, a Participant shall have a 100% nonforfeitable interest if the Participant is actively employed by a Participating Company on December 31, 2006.
|
(d)
|
A Participant employed by a Participating Company on January 1, 2007 or thereafter shall be vested in his Discretionary Contribution Account based on his Years of Service in accordance with the following table:
|
5.2
|
Period of Severance and Loss of Service
. A Participant’s Years of Service shall be canceled if he incurs a Period of Severance before his Normal Retirement Age and at a time when his vested percentage in his Matching Contribution Account under Subsection 5.1(b) is zero, or he has no Matching Contribution Account under the Plan.
|
5.3
|
Restoration of Service
.
|
(a)
|
The Years of Service of a Participant whose Years of Service have been canceled pursuant to Section 5.2 shall be restored to his credit if he thereafter completes a Year of Service at a time when a Period of Severance is less than the greater of (1) the number of Years of Service to his credit when the first such Separation from Service occurred, or (2) five.
|
(b)
|
If any other Participant has had a five-year Period of Severance and subsequently becomes an Eligible Employee again, Years of Service after such five-year period shall not be taken into account in increasing the vested percentage of his Account as of his Separation from Service.
|
5.4
|
Forfeitures and Restoration of Forfeited Amounts upon Reemployment
.
|
(a)
|
The nonvested portion of a terminated Participant's Account shall become a forfeiture as of last day of the Plan Year in which he incurs a Separation from Service.
|
(a)
|
Amounts forfeited from a Participant's Account under Subsection (a) of this Section shall be used by the Participating Companies to reduce future Company Contributions.
|
(c)
|
If a Participant who has received a distribution whereby any part of his Account has been forfeited subsequently becomes an Eligible Employee again prior to incurring a five-year Period of Severance, the amount forfeited, if any, from his previous Matching Contribution Account or Discretionary Contribution Account under Subsection (a) shall be restored to his new Matching Contribution Account or Discretionary Contribution Account.
|
(d)
|
If a Participant has had a five-year Period of Severance and subsequently becomes an Eligible Employee again, the amount forfeited under Subsection (a) of this Section shall not be restored to his Matching Contribution Account or Discretionary Contribution Account under any circumstances.
|
(e)
|
Notwithstanding the foregoing, Salary Reduction Contributions and/or Roth Contributions will not be disregarded under the Plan when determining whether a Participant has had his entire vested interest under the Plan distributed to him. Therefore, a Participant who is zero percent vested under the Plan’s forfeiture provisions will not incur a deemed distribution so long as a Salary Reduction Contribution Account or Roth Contribution Account is maintained for the Participant.
|
(f)
|
Service prior to a five-year Period of Severance shall not be disregarded in the case of a Participant who is zero percent vested, but for whom a Salary Reduction Contribution Account or Roth Contribution Account is maintained.
|
6.1
|
General
. The vested interest of each Participant in the Fund shall be distributed in the manner, in the amount, and at the time provided in this Article, except as provided in Article VII and except in the event of the termination of the Plan. All distributions shall be made in the form of cash.
|
6.2
|
Normal Retirement
. A Participant who has a Separation from Service on his Normal Retirement Age shall have his Account paid to him in a single lump sum.
|
6.3
|
Early Retirement
. A Participant who has a Separation from Service on his Early Retirement Date may request to have his Account paid to him in a single lump sum.
|
6.4
|
Late Retirement
. A Participant who has a Separation from Service after his Normal Retirement Age shall participate in the Plan on the same basis as other Participants. When such a Participant has a Separation from Service, his Account shall be paid to him in a single lump sum.
|
6.5
|
Death
. If a Participant dies prior to his Annuity Starting Date, his vested Account shall be paid to his Beneficiary in a single lump sum. In the case of a death occurring on or after January 1, 2007, if a Participant dies while performing qualified military service (as defined in Section 414(u) of the Code), the Participant’s Beneficiary shall be entitled to any benefits that would have been provided under the Plan as if the Participant had resumed and then terminated employment on account of death, in accordance with the Heroes Earnings Assistance and Relief Tax Act of 2008.
|
6.6
|
Total Disability
.
|
(a)
|
If a Participant who is an Employee suffers a Total Disability and has a Separation from Service, his Account shall be paid to him in a single lump sum following the determination of his Total Disability and his Separation from Service. If the value of his Account is $5,000 ($3,500 prior to January 1, 1998) or less, his Account shall not be paid to him until (1) he submits his written consent to such distribution not more than 90 days prior to the Annuity Starting Date or (2) he attains his Normal Retirement Date, or (3) he dies.
|
(b)
|
The Plan Administrator shall provide to each such Participant a notice that he has the right to defer his Annuity Starting Date until the earlier of his Normal Retirement Age or his death. Such notice shall be furnished not less than 30 days nor more than 90 days prior to any Annuity Starting Date that occurs prior to the earlier of his Normal Retirement Date or his death.
|
6.7
|
Valuation for Distribution
. For the purposes of paying any vested Account balance to a Participant or his beneficiaries under the provisions of this Article, the value of the Fund and the amount of the Participant's interest shall be determined in accordance with the provisions of Article VI as of the Valuation Date coincident with or immediately following the later of the date of the Participant's Separation from Service or the date the properly executed distribution request forms are processed for payment by the Plan Administrator.
|
6.8
|
Payment of Benefits
. The value of a Participant's vested Account may also be paid in installment payments over a period not to exceed 120 months, with the amount of each installment to be equal to the value of the vested Participant's interest in the Plan on the Annuity Starting Date, multiplied by a fraction, the numerator of which is one and the denominator of which is the number of remaining installments due (including the installment in question).
|
6.9
|
Timing of Distribution
.
|
(a)
|
Except as provided in Subsections (b) through (d) of this Section and Section 6.11, a Participant's benefit shall be paid as soon as practicable after the later of the date of the Participant's Separation from Service or the date the properly executed distribution request forms are processed for payment by the Plan Administrator.
|
(b)
|
A Participant's Annuity Starting Date shall be no later than the 60th day after the close of the Plan Year in which the Participant attains his Normal Retirement Age or has a Separation from Service, whichever occurs last.
|
(c)
|
If a Participant dies before his Annuity Starting Date, his entire Account under the Plan shall be distributed to his Beneficiary as soon as administratively practicable after the Plan Administrator processes a request for the payment of the benefit.
|
(d)
|
Notwithstanding anything in the Plan to the contrary, effective beginning with the 2003 calendar year, the form and the timing of all distributions under the Plan shall be in accordance with final regulations issued by the Department of the Treasury under Section 401(a)(9) of the Code, including the incidental death benefit requirements of Section 401(a)(9)(G) of the Code, the provisions of which are incorporated and described in Article XIV. Notwithstanding anything in the Plan to the contrary, with respect to distributions under the Plan made on or after January 1, 2001, the Plan will apply the minimum distribution requirements of Section 401(a)(9) of the Code in accordance with the regulations under Section 401(a)(9) of the Code that were proposed on January 17, 2001 (the 2001 Proposed Regulations). Minimum distributions under the Plan shall continue to be made in accordance with the 2001 Proposed Regulations until the calendar year beginning before the effective date of the final regulations under Section 401(a)(9) of the Code or such other date as may be published by the Internal Revenue Service.
|
6.10
|
Beneficiary Designation
.
|
(a)
|
A Participant may designate the Beneficiary or Beneficiaries who shall receive his Account balance, upon his death. Such designation shall be made by executing and filing with the Plan Administrator a written instrument in such form as may be prescribed by the Plan Administrator for that purpose. Except as otherwise provided in this Section, the Participant may also revoke or change, at any time and from time to time, any Beneficiary designations previously made. Such revocations and/or changes shall be made by executing and filing with the Plan Administrator a written instrument in such form as may be prescribed by the Plan Administrator for that purpose. If a Participant names a trust as Beneficiary, a change in the identity of the trustees or in the instrument governing such trust shall not be deemed a change in Beneficiary.
|
(b)
|
No designation, revocation, or change of Beneficiaries shall be valid and effective unless and until filed with the Plan Administrator.
|
(c)
|
A Participant who does not establish to the satisfaction of the Plan Administrator that he has no Spouse may not designate someone other than his Spouse to be his Beneficiary unless:
|
(1)
|
(A) such Spouse (or the Spouse's legal guardian if the Spouse is legally incompetent) executes a written instrument whereby such Spouse consents not to receive such benefit and consents either:
|
(i)
|
to the specific Beneficiary or Beneficiaries designated by the Participant; or
|
(B)
|
such instrument acknowledges the effect of the election to which the Spouse’s consent is being given; and
|
(C)
|
such instrument is witnessed by a Plan representative or notary public; or
|
(2)
|
the Participant:
|
(A)
|
establishes to the satisfaction of the Plan Administrator that his Spouse cannot be located; or
|
(B)
|
furnishes a court order to the Plan Administrator establishing that the Participant is legally separated or has been abandoned (within the meaning of local law), unless a qualified domestic relations order (as defined in Section 414(p) of the Code) pertaining to such Participant provides that the Spouse's consent must be obtained; or
|
(3)
|
the Spouse has previously given consent in accordance with this Subsection and consented to the Participant's right to designate any Beneficiary without further consent by the Spouse. The consent of a Spouse in accordance with this Subsection (c) shall not be effective with respect to other spouses of the Participant prior to the Participant's Annuity Starting Date, and an election to which Paragraph (2) of this Subsection (c) applies shall become void if the circumstances causing the consent of the Spouse not to be required no longer exist prior to the Participant's Annuity Starting Date.
|
(d)
|
If a Participant has no Beneficiary under Subsection (a) of this Section, or if the Participant's Beneficiary(ies) predecease the Participant, or if the Beneficiary(ies) cannot be located by the Plan Administrator, the interest of the deceased Participant shall be paid in the following order of priority: first, to the Participant's children, if any; and second, to the Participant's estate.
|
6.11
|
Treatment of Terminated Vested Participant
|
(a)
|
(1) In the case of a Participant who has a Separation from Service (other than by reason of retirement, death, or Total Disability) and who has a nonforfeitable interest in his Account which is $5,000 ($3,500 prior to January 1, 1998) or less, excluding any amounts contributed to the Plan by the Participant pursuant to Section 3.6, the nonforfeitable interest of such Participant, valued in accordance with Article IV, shall be paid to such Participant in a single lump sum as soon as practicable following 60 days after his Separation from Service.
|
(b)
|
(1) In case of a Participant who has a Separation from Service (other than by reason of retirement under Article VI, death, or Total Disability) and who has a nonforfeitable interest in his Account which is more than $5,000 ($3,500 prior to January 1, 1998), the nonforfeitable interest of such Participant, valued in accordance with Article IV, shall be paid to such Participant as soon as practicable following the Valuation Date coincident with or next following his Separation from Service, provided the Participant submits his written consent to the distribution not more than 90 days prior to the Annuity Starting Date.
|
(A)
|
the Participant attains age 65;
|
(B)
|
occurs the 10
th
anniversary of the year in which the Participant commenced participation in the Plan; or
|
(C)
|
the Participant terminates service with the Participating Companies and Affiliated Companies.
|
(2)
|
The Plan Administrator shall notify a Participant that he has the right to defer distribution until the earlier of what would have been his Normal Retirement date or his death, prior to obtaining his written consent. Such notice shall be furnished not less than 30 days nor more than 90 days prior to the Annuity Starting Date that occurs prior to what would have been the Participant’s Normal Retirement Age, or his death if earlier.
|
6.12
|
Direct Rollover
.
|
(a)
|
Definitions.
|
(i)
|
“
Eligible Rollover Distribution
” means any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee’s designated Beneficiary, any distribution for a specified period of ten years or more, any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; or any portion of a hardship withdrawal. A portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax employee contributions that are not includible in gross income. However, any such portion of after-tax contributions may be paid only to an individual retirement account or annuity described in Section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in Section 401(a) or 403(a) of the Code (or, on and after January 1, 2007, a qualified defined benefit plan described in Section 401(a) of the Code or an annuity contract described in Section 403(b) of the Code) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.
|
(ii)
|
“
Eligible Retirement Plan
” means an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, an annuity contract described in Section 403(b) of the Code, an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan, a Roth IRA described in Section 408A of the Code (for distributions commencing on or after January 1, 2008), or a qualified trust described in Section 401(a) of the Code, that accepts the Distributee’s Eligible Rollover Distribution. With respect to any portion of a Participant’s distribution consisting of after-tax contributions (Voluntary Contributions), an Eligible Retirement Plan means an individual retirement account or annuity described in Section 408(a) or (b) of the Code, a qualified defined contribution plan described in Section 401(a) or 403(a) of the Code (or, on and after January 1, 2007, a qualified defined benefit plan described in Section 401(a) of the Code or an annuity contract described in Section 403(b) of the Code) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible. Notwithstanding the foregoing, in the case of a Distributee who is a non-spouse Beneficiary of a Participant, an Eligible Retirement Plan shall only include an individual retirement account or annuity described in Code Section 408(a), 408(b) or
|
(iii)
|
“
Distributee
” means a Participant, a Participant’s Spouse or a Participant’s former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code. For distributions on or after January 1, 2010, a Distributee also includes a Beneficiary other than a Spouse.
|
(iv)
|
“
Direct Rollover
” means a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.
|
(b)
|
A distribution to which this Section 6.12 applies, may commence less than 30 days after the notice required under section 1.411(a)‑11(c) of Code Regulation is given, provided that
|
(1)
|
the Plan Administrator clearly informs the Participant that he has the right to a period of a least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution.
|
(2)
|
the Participant, after receiving the notice, affirmatively elects a distribution.
|
7.1
|
Non‑Hardship In‑Service Withdrawals
. The following withdrawals shall be governed by the provisions of Sections 7.3 through 7.7 of the Plan:
|
(a)
|
A Participant who has a Voluntary Savings Account may withdraw such subaccount by submitting a written request to the Plan Administrator specifying the amount to be withdrawn 15 days before the date such withdrawal will be made.
|
(b)
|
A Participant may withdraw any portion of his vested Account balance upon his attainment of Age 59-1/2.
|
(c)
|
A Participant may withdraw of any portion of his Rollover Contribution Account and/or Roth Rollover Contribution Account.
|
7.2
|
Hardship Withdrawals Subject to Code Section 401(k)
.
|
(a)
|
A Participant may apply in writing to the Plan Administrator for a hardship withdrawal from his Discretionary Contribution Account, Transition Credit Contribution Account, Salary Reduction Contribution Account, Roth Contribution Account, Matching Contribution Account (other than that portion attributable to Matching Contributions made to the Plan on or after January 1, 2007) , Rollover Contribution Account or Roth Rollover Contribution Account at any time. The withdrawal must satisfy the criteria set forth below, and may be approved or disapproved at the discretion of the Plan Administrator. Hardship withdrawals from a Participant's Salary Reduction Contribution Account are not permitted from income on a Participant's Salary Reduction Contributions, except to the extent of earnings on or before December 31, 1988, nor are such withdrawals permitted to include Employer Contributions which were treated as pre‑tax contributions as a result of the application of the special nondiscrimination requirements under rules prescribed by the Secretary of the Treasury for employer contributions that are used to meet the vesting and withdrawal restrictions for Salary Reduction Contributions. The amount withdrawn shall be governed by the provisions of Sections 7.3 through 7.7.
|
(b)
|
A withdrawal under this Section shall be permitted only if the Plan Administrator finds that:
|
(1)
|
it is made on account of immediate and heavy financial need (as defined in Subsection (c) of this Section) of the Participant; and
|
(2)
|
it is necessary (as defined in Subsection (d) of this Section) to satisfy such immediate and heavy financial need.
|
(c)
|
A Participant shall be deemed to have an immediate and heavy financial need if the Participant requests distribution on account of:
|
(1)
|
medical expenses described in Section 213(d) of the Code and incurred by the Participant, his Spouse, or any of the Participant's dependents (as defined in Section 152 of the Code);
|
(2)
|
costs directly related to the purchase (excluding mortgage payments) of a principal residence of the Participant;
|
(3)
|
the payment of tuition, related expenses and room and board for the next 12‑months of post‑secondary education for the Participant, his Spouse, children, or dependents;
|
(4)
|
payments necessary to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of his principal residence;
|
(5)
|
effective January 1, 2007, payments for funeral or burial expenses for the Participant’s deceased parent, spouse, child or dependents;
|
(6)
|
effective January 1, 2007, expenses to repair damage to the Participant’s principal residence that would qualify for a casualty loss deduction under Code Section 165 (determined without regard to whether the loss exceeds ten percent of adjusted gross income); or
|
(7)
|
such other circumstances or events as may be prescribed by the Secretary of the Treasury or his delegate.
|
(d)
|
A withdrawal shall be deemed to be necessary to satisfy an immediate and heavy financial need if:
|
(1)
|
the amount of the withdrawal does not exceed the amount of the Participant's immediate and heavy financial need and may include any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from such withdrawal;
|
(2)
|
the Participant has obtained all currently permissible distributions (other than hardship distributions) and non‑taxable loans, if any, under this and all other plans maintained by the Participating Companies and all Affiliated Companies; and
|
(3)
|
the Participant is not permitted to make Salary Reduction Contributions, Roth Contributions or elective contributions and employee contribution deferrals (other than mandatory contributions under a defined benefit plan) under any plan maintained by the Participating Company or any Affiliated Company for a period of six months commencing on the date of his receipt of the withdrawal.
|
7.3
|
Amount and Payment of Withdrawals
. The amount of any withdrawal will be determined on the basis of the value of the applicable portions of the Participant's Account as of the Valuation Date coincident with or immediately preceding the date of the withdrawal. The minimum amount that may be withdrawn under Section 7.2 is five hundred ($500) dollars.
|
7.4
|
Withdrawals Not Subject to Replacement
. A Participant may not repay any portion of his Account withdrawn under this Plan.
|
7.5
|
Investment Medium to be Charged with Withdrawal
. Unless otherwise elected by the Participant, the withdrawal will be made out of the Participant's interest in the various Investment Media in proportion to the Participant's share in such Investment Media.
|
7.6
|
Order of Withdrawals
.
|
(a)
|
Withdrawals from the Plan upon the Participant’s attainment of age 59-1/2 shall be charged against the Participant's Account in the following order: first from the Voluntary Savings Account, if any; second from the
|
(b)
|
Hardship withdrawals from the Plan shall be charged against the applicable portions of the Participant’s Account in the following order: first from the Rollover Contribution Account, if any; second from the Matching Contribution Account (other than that portion attributable to Matching Contributions made on or after January 1, 2007), if any; third from the Transition Credit Contribution Account and Discretionary Contribution Account, if any; fourth from the Salary Reduction Contribution Account, if any; fifth from the Roth Contribution Account, if any; and sixth from the Roth Rollover Contribution Account.
|
7.7
|
Timing of Withdrawals
. A Participant may make only two hardship withdrawals, pursuant to Section 7.2, in any Plan Year or 12-month period and only one withdrawal in any Plan Year or 12-month period pursuant to Sections 7.1(a), (b) and (c).
|
7.8
|
Qualified Reservist Distributions
. Effective January 1, 2010, a Participant shall be permitted to elect a Qualified Reservist Distribution. A “Qualified Reservist Distribution” is any distribution to a Participant who is ordered or called to active duty after September 11, 2001, if: (i) the distribution is from the Participant’s Salary Reduction Contributions Account and/or Roth Contributions Account; (ii) the individual was (by reason of being a member of a reserve component, as defined in Section 101 of Title 37, United States Code) ordered or called to active duty for a period in excess of 179 days or for an indefinite period; and (iii) the Plan makes the distribution during the period beginning on the date of such order or call, and ending at the close of the active duty period.
|
8.1
|
Loan Application
. Each Participant shall be eligible to make an application for a loan from the Plan. All applications shall be made to the Plan Administrator on forms which it prescribes, and the Plan Administrator shall rule upon such applications in a uniform and nondiscriminatory manner in accordance with the rules and guidelines set forth in this Article.
|
8.2
|
Loan Approval
. No more than one application for a loan shall be approved per Participant during any Plan Year. Notwithstanding the foregoing, for the period beginning on August 1, 2004, and ending June 20, 2012, a Participant may have up to two loan applications approved during a Plan Year. In no event shall a Participant be permitted to have more than one loan from this Plan outstanding at any time.
|
8.3
|
Amount of Loan
.
|
(a)
|
Subject to the limits on loan amounts in Subsections (b) and (c) below, a
|
(1)
|
the Voluntary Savings Account,
|
(2)
|
the Salary Reduction Contribution Account,
|
(3)
|
the Roth Contribution Account,
|
(4)
|
the Rollover Contribution Account,
|
(5)
|
the Roth Rollover Contribution Account,
|
(6)
|
the Matching Contribution Account,
|
(7)
|
the Transition Credit Contribution Account and the Discretionary Contribution Account.
|
(b)
|
The minimum loan amount shall be $1,000.00.
|
(c)
|
The total amount of a Participant's outstanding loans under this Plan and all other plans qualified under Section 401(a) of the Code which are sponsored by the Participating Company or any Affiliated Company shall not exceed the lesser of (1) $50,000, reduced by the excess of the highest outstanding loan balance during the 12-months before the new loan is made over the outstanding loan balance on the date of the new loan, or (2) fifty percent (50%) of the value of the Participant's vested interest in the subaccounts listed in (a).
|
8.4
|
Terms of Loan
.
|
(a)
|
Each loan shall be evidenced by the Participant's execution of a personal installment note on such form as shall be supplied by the Plan Administrator. Each such note shall specify the period of repayment, which shall be no longer than 60 months from the date on which the loan is distributed, except that in the event of a purchase of a primary residence, the period may be up to 25 years. Each note shall also specify the interest rate, which shall be equal to (1) the rate a banking institution charges its most creditworthy customers as of the first day of the calendar month in which the completed loan application is received by the Plan Administrator, plus (2) one percentage point. All loans from the Plan shall be nonrenewable.
|
(b)
|
All loans shall be repaid in equal installments through payroll deductions or in such other manner as the Plan Administrator may determine. A Participant may repay the outstanding balance of any loan in one lump sum at any time by notifying the Plan Administrator of his or her intent to do so and by forwarding to the Plan Administrator payment in full of the then outstanding balance, plus interest accrued to the date of payment. The amount of principal and interest repaid by a Participant shall be credited to a Participant's Account as each repayment is made.
|
(2)
|
the termination of the Participant's employment with the Participating Company and its affiliates for any reason, or
|
(3)
|
the discontinuance of a Participant’s Compensation before a loan is repaid in full,
|
8.5
|
Loan Fees
.
|
(a)
|
The Administrator shall assess a one‑time loan origination fee, payable in cash at the time the funds are distributed or charged against the Account of a Participant who makes a loan from the Plan.
|
(b)
|
The amount of the loan origination fee shall be set by the Plan Administrator as of the beginning of each Plan Year, and shall remain in effect throughout such Plan Year. Fees shall be specified in flat dollar amounts, and shall not vary according to the amount of the loan.
|
8.6
|
Suspension of Repayments
. Loan repayments will be suspended under this Plan as permitted under Section 414(u)(4) of the Code.
|
8.7
|
Additional Rules
. The Plan Administrator may establish additional rules relating to Participant loans under the Plan, which rules shall be applied on a uniform and non-discriminatory basis.
|
9.1
|
Plan Administrator
. The Plan Administrator appointed by the Company pursuant to Section 9.2 shall be the plan administrator for purposes of ERISA.
|
9.2
|
Appointment
. The Plan Administrator shall be a committee appointed by the Board of Directors.
|
9.3
|
Term and Compensation
. Each member of the committee appointed pursuant to Section 9.2 shall serve until his resignation or dismissal by the Board of Directors. Vacancies shall be filled in the same manner as the original appointments. To resign, a member of the committee shall give written notice, which resignation shall be effective on the earliest of (a) the appointment of his successor, (b) the resignation date specified in such notice, (c) the passing of thirty (30) days after such notice is mailed or personally delivered to the Company, or (d) in the case of a committee member who is an Employee, such member’s termination of employment with the Company and all Affiliated Companies. Each member of the committee which serves as the Plan Administrator who is an Employee shall serve as such without compensation.
|
9.4
|
Claims Review
.
|
(a)
|
The Plan Administrator shall interpret this Plan and shall make all determinations with regard to the administration and application of this Plan. All such determinations shall be final, conclusive and binding except to the extent that they are appealed with regard to benefit claims under the following procedure. In the event that the claim of any person to all or any part of any payment or benefit under this Plan shall be denied, the Plan Administrator shall provide to the claimant, within sixty (60) days after receipt of such claim, a written notice setting forth, in a manner calculated to be understood by the claimant:
|
(1)
|
the specific reason or reasons for the denial;
|
(2)
|
specific references to the pertinent Plan provision or provisions on which the denial is based;
|
(3)
|
a description of any additional material or information necessary for the claimant to perfect the claim and an explanation as to why such material or information is necessary; and
|
(4)
|
an explanation of the Plan's claims procedure.
|
(b)
|
Within sixty (60) days after receipt of the material described in Section 9.4(a), the claimant or his duly authorized representative shall have a reasonable opportunity to appeal the claim denial to the Plan Administrator for a full and fair review. The claimant or his duly authorized representative may:
|
(1)
|
request a review upon written notice to the Plan Administrator;
|
(2)
|
review pertinent documents; and
|
(3)
|
submit issues and comments in writing.
|
(c)
|
Not later than sixty (60) days after receipt of a request for review, a decision by the Plan Administrator shall be made unless special circumstances require an extension of time for processing, in which event a decision shall be rendered as soon as possible, but in no event later than one hundred twenty (120) days after such receipt. The Plan Administrator shall notify the Participant in writing of any such extension of time before such extension begins.
|
(d)
|
The Plan Administrator's decision on review shall be written and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, with specific references to the pertinent Plan provision or provisions on which the decision is based; provided, however, if a written decision is not provided within the period described in Section 9.4(c), the claim shall be deemed to have been denied.
|
9.5
|
Plan Administrator Actions
. Except as otherwise specifically provided in the Plan, every decision and action of a committee acting as Plan Administrator shall be by a majority vote of the committee or without a formal meeting by the written
|
9.6
|
Investment Manager
. All contributions so received together with the income there from shall be managed, invested and reinvested by the Trustee, subject, however, to the right of the Company to appoint and employ an Investment Manager or Managers, to manage and/or invest and reinvest the Trust Fund, or any part thereof, in which event the Investment Manager shall be certified as such to the Trustee by the Company and the Trustee shall not be liable for the acts or omissions of such Investment Manager or Managers or be under any obligation to manage or invest the assets of the Trust Fund which are subject to management by such Investment Manager or Managers. An authorized officer of any such Investment Manager shall certify in writing to the Trustee the names of all persons who shall act on behalf of the Investment Manager with respect to the Trust Fund, and the Trustee may rely thereon in its dealings with such Investment Manager. Where appropriate, references in this Plan to Trustee may be interpreted to include any Investment Manager appointed under this Section.
|
9.7
|
Benefit Payment Directions
. The Plan Administrator shall direct the Trustee or shall cause the Trustee to be directed in writing to make benefit payments from the Trust Fund to Participants, Spouses or Beneficiaries who qualify for such payments under the Plan. Such written order to the Trustee shall specify the name of each such recipient, his address, his Social Security number, and the amount and frequency of such payments.
|
9.8
|
Nondiscrimination
. The Plan Administrator shall act and shall direct the Trustee to act or cause such action with respect to any Plan benefits or any other matter under the powers of the Plan Administrator under this Plan in a uniform and nondiscriminatory manner toward all Participants and Employees under substantially similar sets of facts and shall not permit discrimination in favor of any officers, owners or Highly Compensated Employees of the Participating Companies.
|
9.9
|
Advisors
. The Plan Administrator may employ such counsel (who may be counsel for the Company), consultants, accountants, and other individuals as it shall deem advisable. All costs and expenses of the Plan Administrator and the fees of legal counsel, consultants, accounts, and other agents shall be paid by the Participating Companies, or the Participating Companies shall cause such costs and expenses to be paid by the Trustee out of the Trust Fund as provided in Section 10.6.
|
9.10
|
Records and Reports
. The Plan Administrator shall keep all records relating to Participants (including former Participants) and obtain annual reports from the Trustee and any Investment Manager and collect from the Trustee and any such Investment Manager and other sources any such records as are necessary for proper operation of the Plan. The Plan Administrator shall make an annual report of the assets and liabilities of the Plan and a brief description of the Plan's operation for the immediately preceding Plan Year to the Participating Companies and shall make such report and any other such records available to the Participating Companies, or any Participant, Spouse or Beneficiary for examination during business hours except that a Participant, Spouse or Beneficiary shall examine only such records as pertain exclusively to the examining Participant, Spouse or Beneficiary and the Plan and Trust Agreement as currently in effect or hereafter amended.
|
9.11
|
Indemnification
. The Company shall indemnify and hold harmless the Plan Administrator, any member thereof and any Employee who may act on behalf of the Company in the administration of this Plan from and against any liability, loss, cost or expense (including reasonable attorneys' fees) incurred at any time as a result of or in connection with any claims, demands, actions or causes of action of any Participants, any person claiming through or under any of them, or any other person, party or authority claiming to have an interest in this Plan or Trust Fund or standing to act for any persons or groups having an interest in this Plan or Trust Fund, for or on account of, any of the acts or omissions (or alleged acts or omissions) of the Plan Administrator, any member thereof or any such employee, except to the extent resulting from such person's willful misconduct.
|
9.12
|
Power and Duties of the Plan Administrator
. The Plan Administrator shall have absolute discretionary authority to interpret this Plan and make determinations as to eligibility for benefits, or construe any other terms of the Plan. Benefits under this Plan shall be paid only if the Plan Administrator decides in his discretion the claimant is entitled to them. The Plan Administrator shall supervise the administration and enforcement of the Plan according to the terms and provisions of this Plan and shall have all powers necessary to accomplish these purposes, including, without limitation and in addition to any other powers described in this Article 9, the right, power, authority and duty:
|
(a)
|
to make rules, regulations and bylaws for the administration of the Plan which are not inconsistent with the terms and provisions of this Plan, provided such rules, regulations and bylaws are evidenced in writing and copies thereof are delivered to the Trustee and to the Company;
|
(b)
|
to construe all terms, provisions, conditions and limitations of the Plan (in all cases, the construction necessary for the Plan to qualify under the applicable provisions of the Code shall control);
|
(c)
|
to correct any defect or supply any omission or reconcile any inconsistency that may appear in the Plan, in such manner and to such extent as it shall deem expedient to carry the Plan into effect for the greatest benefit of all interested parties;
|
(d)
|
to determine all questions relating to eligibility to determine the amount, manner and time of payment of any Plan benefits and to prescribe procedures to be followed by distributee in obtaining benefits;
|
(f)
|
to prepare, file and distribute, in such manner as the Plan Administrator determines to be appropriate, such information and material as is required by the reporting and disclosure requirements of ERISA;
|
(g)
|
to make a determination as to the right of any person to a benefit under the Plan;
|
(h)
|
to receive and review reports from the Trustee and any Investment Manager as to the financial condition of the Trust Fund including its receipts and disbursements; and
|
(i)
|
to delegate, in its sole discretion, any of its powers or duties to subcommittees, task forces or study groups at such times in such manner as it shall deem expedient to administer and enforce the Plan in a uniform and non‑discriminatory manner for the benefit of all interested parties.
|
9.13
|
Participating Company to Supply Information
. The Participating Companies shall supply full and timely information to the Plan Administrator relating to the Compensation of all Participants, their ages, their retirement, death or other cause for termination of employment and such other pertinent facts as the Plan Administrator may require. The Participating Companies also shall supply such information to the Trustee and every Investment Manager as necessary for the Trustee and each such Investment Manager to carry out its duties. When making a determination in connection with the Plan, the Plan Administrator shall be entitled to rely upon information furnished by the Participating Companies; provided the Plan Administrator shall resolve any factual dispute under this Plan by giving weight to all information available to him.
|
9.14
|
Self‑Interest
. No member of the Plan Administrator committee shall have any right to vote or decide upon any matter related directly or indirectly to him or any right of his to claim any benefit under the Plan (as opposed to matters relating to Plan Participants in general). In any case in which a committee member is so disqualified to act, and the remaining members cannot agree, the Board of Directors shall appoint a temporary substitute member to exercise all the powers of the disqualified member concerning the matter in which he is disqualified.
|
10.1
|
Designation of Trustee
. The Company, by appropriate resolution of its Board of Directors, shall name and designate a Trustee and shall enter into a Trust Agreement. The Company shall have the power, by appropriate resolution of its Board of Directors, to amend the Trust Agreement, remove the Trustee, and designate a successor Trustee, as provided in the Trust Agreement. All of the assets of the Plan shall be held by the Trustee for use in accordance with the Plan.
|
10.2
|
Exclusive Benefit
. Prior to the satisfaction of all liabilities under the Plan in the event of termination of the Plan, no part of the corpus or income of the Fund shall be used for or diverted to purposes other than for the exclusive benefit of
|
10.3
|
No Interest in Fund
. No person shall have any interest in or right to any part of the assets or income of the Fund, except to the extent expressly provided in this Plan and in the Trust Agreement.
|
10.4
|
Trustee
. The Trustee shall be the named fiduciary with respect to management and control of Plan assets held by it and shall have exclusive and sole responsibility for the custody and investment thereof in accordance with the Trust Agreement.
|
10.5
|
Investments
.
|
(a)
|
The Trustee shall invest Salary Reduction Contribution Accounts, Roth Contribution Accounts, Voluntary Savings Accounts, Matching Contribution Accounts, Discretionary Contribution Accounts, Transition Credit Contribution Accounts, Rollover Contribution Accounts and Roth Rollover Contribution Accounts paid to it and income thereon in such Investment Media as each Participant may select from among the Investment Media established by the Plan Administrator, subject to the provisions of Section 10.5(c). The Investment Media established by the Plan Administrator shall include Company Stock. Such investments acquired in the manner prescribed by the Plan shall be held by or for the Trustee.
|
(b)
|
A Participant shall select one or more of the Investment Media in which his Account shall be invested, except as provided in Subsection (c), and the percentage thereof (in multiples of 1%) that shall be invested in each Investment Medium selected, in accordance with the rules prescribed by the Plan Administrator.
|
(c)
|
Matching Contributions contributed to the Plan before 2011 and Matching Contributions made in Company Stock shall be invested in Company Stock until such time as the Participant may transfer all or a portion of Company Stock to one or more Investment Media in accordance with rules prescribed by the Plan Administrator. Matching Contributions contributed to the Plan after 2010 in cash shall be invested in each Investment Medium selected by the Participant (or the default Investment Medium deemed to have been selected by the Participant), in accordance with rules prescribed by the Plan Administrator. Effective January 1, 2007, a Participant will have an immediate right to transfer all or any portion of any Company Stock investments (including any pre-existing Company Stock investments) to another Investment Medium.
|
(d)
|
Except as provided in Subsection (c), a Participant may transfer, effective as of the following Valuation Date, such portion of the value of his interest in any Investment Medium to another Investment Medium. A Participant may change his selection of the Investment Media in which subsequent contributions to his Accounts shall be invested, effective as of the following Valuation Date. Such investment changes shall be made via a toll-free number or internet website provided to Participants by the Plan Administrator for such purpose.
|
(e)
|
The amounts contributed by all Participants to each Investment Medium shall be commingled for investment purposes.
|
10.6
|
Fund
. The contributions deposited by the Participating Companies in the Fund shall constitute a fund held for the benefit of Participants and their eligible Beneficiaries under and in accordance with this Plan. No part of the principal or income of the Fund shall be used for, or diverted to, purposes other than for the exclusive benefit of such Participants and their eligible Beneficiaries (including necessary administrative costs); provided, that in the case of a contribution made by the Participating Company as a mistake of fact, or for which a tax deduction is disallowed, in whole or in part, by the Internal Revenue Service, or which is conditioned upon the initial qualification of the Plan under Section 401(a) of the Code and such initial qualification cannot be obtained, the Participating Company shall be entitled to a refund of said contributions, subject to investment loss, but not investment gain. Any such refund of contributions described in this Section must be made within one year after payment of a contribution made as a mistake of fact, or within one year after disallowance of the tax deduction, to the extent of such disallowance, or within one year of the date on which the initial qualification of the Plan is denied by the Internal Revenue Service, as the case may be.
|
10.7
|
Qualifying Employer Securities
. The Trustee shall be empowered to acquire and hold Company Stock in an amount sufficient to invest (a) any Matching Contributions made before 2011, (b) any Matching Contributions contributed to the
|
11.1
|
Power of Amendment and Termination
.
|
(a)
|
The Company reserves the power to amend or terminate the Plan at any time by action of the Board of Directors. Notwithstanding the foregoing, the Compensation and Human Resources Committee of the Company by majority of its members, may adopt any Plan amendments that (a) are designated to implement contractual commitments by the Company, (b) reflect changes approved in substance by the Board of Directors, or (c) make changes not involving material cost increases of the Plan for purposes of legal compliance, clarity, administrative convenience or otherwise. No further administrative action shall be required for such amendment by the Compensation and Human Resources Committee of the Company to be effective (except to the extent otherwise required by the Board of Directors). In addition, the Plan Administrator (effective November 10, 2010) or an executive officer (effective prior to November 10, 2010) shall have the authority and discretion to adopt any amendment to the Plan that is legally necessary, improves clarity, promotes administrative convenience or is non-material.
|
(b)
|
Each amendment to the Plan shall be binding on each Participating Company. Any amendment or termination of the Plan shall become effective as of the date designated by the Board of Directors or other authorized party. Except as expressly provided elsewhere in the Plan, prior to the satisfaction of all liabilities with respect to the benefits provided under this Plan, no amendment or termination shall cause any part of the monies contributed hereunder to revert to the Participating Companies or to be diverted to any purpose other than for the exclusive benefit of Participants and their beneficiaries. Upon termination or partial termination of the Plan, or upon complete discontinuance of contributions, the rights of all affected persons to benefits accrued to the date of such termination shall be nonforfeitable. Upon termination of the Plan, Accounts shall be distributed in accordance with applicable law.
|
11.2
|
Merger
. The Plan shall not be merged with or consolidated with, nor shall its assets be transferred to, any other qualified retirement plan unless each Participant would receive a benefit after such merger, consolidation, or transfer (assuming the Plan then terminated) which is of actuarial value equal to or greater than the benefit he would have received from his Account if the Plan had been terminated on the day before such merger, consolidation, or transfer.
|
12.1
|
General
. The following provisions shall apply automatically to the Plan and shall supersede any contrary provisions for each Plan Year in which the Plan is a Top‑Heavy Plan (as defined below). It is intended that this Article shall be construed in accordance with the provisions of Section 416 of the Code.
|
12.2
|
Definitions
. The following definitions shall supplement those set forth in Article I of the Plan:
|
(a)
|
“
Aggregation Group
” means this Plan and each other qualified retirement plan (including a frozen plan or a plan which has been terminated during the 60‑month period ending on the Determination Date) of a Participating Company or an Affiliated Company:
|
(1)
|
in which a Key Employee is a participant; or
|
(2)
|
which enables any plan in which a Key Employee participates to meet the requirements of Sections 401(a)(4) and 410 of the Code;
|
(3)
|
or without the inclusion of which, the plans in the Aggregation Group would be Top‑Heavy Plans, but, with the inclusion of which, the plans in the Aggregation Group are not Top‑Heavy Plans and, taken together, meet the requirements of Sections 401(a)(4) and 410 of the Code.
|
(b)
|
“
Determination Date
” means, for any Plan Year, the last day of the preceding Plan Year, except that for the first Plan Year it means the last day thereof.
|
(c)
|
“
Key Employee
” means any Employee or former Employee (including any deceased employee) who at any time during the Plan Year that includes the Determination Date was an officer of a Participating Company having annual compensation greater than $130,000 (as adjusted under Section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a 5-percent owner of a Participating Company, or a 1-percent owner of a Participating Company having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of Section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.
|
(d)
|
“
Key Employee Ratio
” means, for any Determination Date, the ratio of the amount described in Paragraph (1) of this Subsection to the amount described in Paragraph (2) of this Subsection, after deducting from each such amount any portion thereof described in Paragraph (3) of this Subsection, where:
|
(1)
|
the amount described in this Paragraph is the sum of:
|
(A)
|
the present value of all accrued benefits of Key Employees under all qualified defined benefit plans included in the Aggregation Group;
|
(B)
|
the balances in all of the accounts of Key Employees under all qualified defined contribution plans included in the Aggregation Group; and
|
(2)
|
the amount described in this Paragraph is the sum of:
|
(A)
|
the present value of all accrued benefits of all participants under all qualified defined benefit plans included in the Aggregation Group;
|
(B)
|
the balances in all of the accounts of all participants under all qualified defined contribution plans included in the Aggregation Group; and
|
(3)
|
the amount described in this Paragraph is the sum of:
|
(A)
|
all rollover contributions (or fund to fund transfers) to the Plan by an Employee from a plan sponsored by an employer which is not a Participating Company or an Affiliated Company;
|
(B)
|
any amount that is included in Paragraphs (1) and (2) of this Subsection for a person who is a Non‑Key Employee as to the Plan Year of reference but who was a Key Employee as to any earlier Plan Year; and
|
(4)
|
the present value of accrued benefits and the amounts of account balances of an Employee as of the Determination Date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Section 416(g)(2) of the Code during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than severance from employment, death, or disability, this provision shall be applied by substituting “5-year period” for “1-year period”. The accrued benefits and accounts of any individual who has not performed services for any Participating Company during the 1-year period ending on the Determination Date shall not be taken into account.
|
(e)
|
“
Non‑Key Employee
” means, for any Plan Year:
|
(1)
|
an Employee or former Employee who is not a Key Employee with respect to such Plan Year; or
|
(2)
|
a beneficiary of an individual described in Paragraph of this Subsection.
|
(f)
|
“
Top‑Heavy Compensation
” means, for any Participant for any Plan Year, the average of his annual Compensation over the period of five consecutive Plan Years (or, if shorter, the longest period of consecutive Plan Years during which the Participant was in the employ of any Participating Company) yielding the highest average, disregarding Compensation for Plan Years after the close of the last Plan Year in which the Plan was a Top‑Heavy Plan. Compensation shall mean Compensation as defined in Section 3.5.
|
(g)
|
“
Top‑Heavy Plan
” means, for any Plan Year, each plan in the Aggregation Group for such Plan Year if, as of the applicable Determination Date, the Key Employee Ratio exceeds sixty percent (60%).
|
(h)
|
“
Year of Top‑Heavy Service
” means, for any Participant, a Plan Year in which he completes 1,000 or more Hours of Service, excluding Plan Years in which the Plan is not a Top‑Heavy Plan.
|
12.3
|
Minimum Contribution for Non‑Key Employees
.
|
(a)
|
In each Plan Year in which the Plan is a Top‑Heavy Plan, each Eligible Employee who is a Non‑Key Employee (except an Eligible Employee who is a Non‑Key Employee as to the Plan Year of reference but who was a Key Employee as to any earlier Plan Year) and who is an Employee on the last day of such Plan Year will receive a total minimum Participating Company or Affiliated Company contribution (including forfeitures) under all plans
|
(b)
|
The percentage set forth in Subsection (a) shall be reduced to the percentage at which contributions, including forfeitures, are made (or are required to be made) for a Plan Year for the Key Employee for whom such percentage is the highest for that Plan Year. This percentage shall be determined for each Key Employee by dividing the contribution for such Key Employee by his Compensation for the Plan Year. All defined contribution plans required to be included in an Aggregation Group shall be treated as one plan for the purpose of this Section; however, this Section shall not apply to any plan which is required to be included in the Aggregation Group if such plan enables a defined benefit plan in the group to meet the requirements of Section 401(a)(4) or Section 410 of the Code.
|
(c)
|
If a Non‑Key Employee described in Subsection (a) participates in both a defined benefit plan and a defined contribution plan described in Paragraphs (a)(1) and (a)(2) of Section 12.2, the Participating Company is not required to provide such Employee with both the minimum benefit under the defined benefit plan and the minimum contribution. In such event, the Non‑Key Employee shall receive the minimum benefit under the defined benefit plan.
|
12.4
|
Social Security
. The Plan, for each Plan Year in which it is a Top Heavy Plan, must meet the requirements of this Article without regard to any Social Security or similar contributions or benefits.
|
12.5
|
Adjustment to Maximum Benefit Limitation
. If, in any Plan Year in which the Plan is a Top‑Heavy Plan, the Aggregation Group includes a defined benefit plan, the minimum Company contribution described in Section 12.3(a) for each Non- Key Employee who is not covered under a defined benefit plan shall be increased to four percent (4%), and the minimum Company contribution described in Section 12.3(c) for each Non‑Key Employee who is covered under a defined benefit plan (but who does not have a minimum benefit under the defined benefit plan) equal to the lesser of:
|
(1)
|
three percent (3%) of his Top‑Heavy Compensation multiplied by his Years of Top‑Heavy Service, or
|
(2)
|
thirty percent (30%) of his Top‑Heavy Compensation)
|
13.1
|
No Employment Rights
. Neither the action of the Company in establishing the Plan, nor of any Participating Company in adopting the Plan, nor any provisions of the Plan, nor any action taken by the Company, any Participating Company or the Plan Administrator shall be construed as giving to any Employee the right to be retained in the employ of the Company or any Participating Company, or any right to payment except to the extent of the benefits provided under the terms of the Plan, and which are to be paid from the Fund.
|
13.2
|
Governing Law
. Except to the extent superseded by ERISA, all questions pertaining to the validity, construction, and operation of the Plan shall be determined in accordance with the laws of the Commonwealth of Pennsylvania.
|
13.3
|
No Interest in Fund
. No person shall have any interest in, or right to, any part of the principal or income of the Fund, except as and to the extent expressly provided in this Plan and in the Trust Agreement.
|
13.4
|
Spendthrift Clause
. No benefit payable at any time under this Plan and no interest or expectancy herein shall be anticipated, assigned, or alienated by any Participant or Beneficiary, or subject to attachment, garnishment, levy, execution, or other legal or equitable process, except for any benefit payable pursuant to a qualified domestic relations order as defined in Section 414(p) of the Code. Except as provided above, any attempt to alienate or assign a benefit hereunder, whether currently or hereafter payable, shall be void.
|
13.5
|
Incapacity
. If the Plan Administrator deems any Participant who is entitled to receive payments hereunder incapable of receiving or disbursing the same by reason of Age, illness, infirmity, or incapacity of any kind, the Plan Administrator may direct the Trustee to apply such payments directly for the comfort, support, and maintenance of such Participant, or to pay the same to any responsible person caring for the Participant who is determined by the Plan Administrator to be qualified to receive and disburse such payments for the Participant's benefit; and the receipt by such person shall be a complete acquittance for the payment of the benefit. Payments pursuant to this Section shall be complete discharge to the extent thereof of any and all liability of the Participating Companies, the Plan Administrator, the Trustee, and the Fund.
|
13.6
|
Lost Payees
. If the Plan Administrator is unable to make payment to any person to whom a payment is due under the Plan because it cannot ascertain the whereabouts of such person, and if a notice of payment so due is mailed to the last known address of such person and no response or claim is made within an administratively reasonable time of such mailing, the payment and all remaining payments otherwise due shall be canceled and placed in the Plan’s forfeiture account. Notwithstanding the above, if a benefit is forfeited because the Participant or Beneficiary cannot be found, such benefit shall be reinstated if a claim is made by the Participant or Beneficiary for the forfeited amount.
|
(a)
|
Effective Date
. The provisions of this Article will apply for purposes of determining required minimum distributions for calendar years beginning with the 2003 calendar year.
|
(b)
|
Precedence
. The requirements of this Article will take precedence over any inconsistent provisions of the Plan.
|
(c)
|
Requirements of Treasury Regulations Incorporated
. All distributions required under this Article will be determined and made in accordance with the Treasury regulations under Code Section 401(a)(9).
|
14.2
|
Time and Manner of Distribution
.
|
(a)
|
Required Beginning Date
. The Participant’s entire interest will be distributed to the Participant no later than the Participant’s Required Beginning Date.
|
(b)
|
Death of Participant Before Distributions Begin
. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed no later than as follows:
|
(1)
|
If the Participant’s Surviving Spouse is the Participant’s sole Designated Beneficiary, then, distribution to the Surviving Spouse will be made by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70-1/2, if later.
|
(2)
|
If the Participant’s Surviving Spouse is not the Participant’s sole Designated Beneficiary, then distribution to the Designated Beneficiary will be made by December 31 of the calendar year immediately following the calendar year in which the Participant died.
|
(3)
|
If there is no Designated Beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.
|
(4)
|
If the Participant’s Surviving Spouse dies after the Participant but before distributions to the Surviving Spouse begin, this Section 14.2(b), other than Section 14.2(b)(1), will apply as if the Surviving Spouse were the Participant.
|
(c)
|
Form of Distribution
. The Participant’s interest shall be distributed in a single sum on or before the Required Beginning Date.
|
(d)
|
Notwithstanding the foregoing, any distributions required to be made in accordance with this Article XIV with respect to the 2009 Plan Year (including distributions due for the 2009 Plan Year that would be required to be paid by April 1, 2010) will, in accordance with Section 401(a)(9)(H) of the Code and IRS Notice 2009-82, not be made absent an election by the Participant to receive such distribution.
|
14.3
|
Definitions
.
|
(a)
|
Designated Beneficiary
. The individual or individuals designated as the Beneficiary under Section 1.5 of the Plan and the designated Beneficiary under Code Section 401(a)(9) and Section 1.401(a)(9)-1, Q&A-4, of the Treasury regulations.
|
(b)
|
Required Beginning Date
. The date specified in Section 1.30 of the Plan.
|
I.
|
Purpose
.
The purpose of the Plan is to provide a means whereby Radian Group Inc. may provide incentive compensation to eligible employees of its Financial Guaranty business. The Plan is effective as of January 1, 2013.
|
II.
|
Definitions
.
Whenever used in this Plan, the following terms will have the respective meanings set forth below:
|
•
|
The expected start date of the new position is June 1, 2013 (June 1, 2013, or such other start date as is agreed between you and Radian, is referred to as the “
Transfer Date
”).
|
•
|
Base Salary: The new base salary of $390,000 annualized will be effective as of the Transfer Date. Your current base salary will continue in effect until the Transfer Date.
|
•
|
Short-Term Incentive (“STI”) target: 110% of your base salary, beginning with the 2013 fiscal year. STI will be paid in accordance with the Radian Group Inc. STI/MTI Incentive Plan for Executive Employees.
|
•
|
Long-Term Incentive (“LTI”) target: $575,000, beginning with the 2013 fiscal year. Your 2013 LTI award will be granted to you in May 2013, as determined by the Compensation and Human Resources Committee of the Board of Directors of Radian (the “
Compensation Committee
”).
|
•
|
You are entitled to the 2013 STI Match that was credited to you pursuant to your Incentive, Retention and Severance Agreement dated as of September 14, 2012 (the “
2012 Agreement
”) between you and Radian Asset Assurance Inc. The 2013 Match will be paid to you in accordance with the terms of the Prior Position Compensation Agreement, attached as
Appendix A
.
|
•
|
You are entitled to severance as set forth in the severance agreement (“
Executive Officer Agreement
”) attached as
Appendix B
.
|
•
|
You will receive relocation assistance as set forth in the relocation terms attached as
Appendix C
.
|
•
|
By executing this letter agreement, you hereby agree that the 2012 Agreement is terminated and that no further payments will be made under the 2012 Agreement after the date of execution of this Agreement.
|
•
|
By executing this letter agreement, you hereby agree that the cash LTI grant that you received as of January 1, 2013 under Radian’s 2008 Long Term Performance Cash Plan, as amended, pursuant to the 2012 Agreement, is terminated and that no payments will be made under that grant.
|
•
|
By executing this letter agreement, you hereby agree that your Agreement dated June 26, 2006 with Radian Asset Assurance Inc. (“
CIC Agreement
”) is terminated and that no payments will be made under the CIC Agreement.
|
•
|
Before you lease or purchase a primary residence in Philadelphia area, ETC will assist you by making temporary lodging arrangements. Radian will pay for up to 6 months of temporary housing, up to a monthly maximum of $5,000 with reimbursement of reasonable commuting expenses between Katonah and Philadelphia on the weekends.
|
•
|
Two house hunting trips for you and your spouse to Philadelphia to identify housing alternatives.
|
•
|
As part of your relocation benefits with Radian, your ETC Global Service Manager will provide you with the guidance and service you need to quickly integrate with your new community, make sound buying decisions, and establish a residence. At your request, your ETC Global Service Manager will direct your realtor to recommend qualified companies to handle your home inspection, pest and radon inspections. Radian will reimburse you for this expense.
|
•
|
The packing, transportation and unpacking of your household items to Philadelphia.
|
•
|
Storage of your household goods up to 6 months after sale of Katonah home
before the closing of your purchase of a principal residence in the Philadelphia area which will be paid in monthly installments.
|
•
|
For current homeowners, customary home purchase costs will be reimbursed. These costs include:
|
◦
|
Recording fees
|
◦
|
Document/closing costs
|
◦
|
Surveys
|
◦
|
Appraisal Fee
|
◦
|
Title Insurance
|
◦
|
Notary Fees
|
◦
|
No points or pre-paids are reimbursed
|
•
|
ETC will help you with the Realtor selection if you desire, help you be a well-informed seller and will be available to you throughout the process.
|
•
|
Any and all normal and typical closing costs will be reimbursed to you after closing. The typical closing costs that are considered reimbursable can include:
|
◦
|
Realtor’s Commission up to 6%
|
◦
|
Recording Fees
|
◦
|
Transfer Tax
|
◦
|
Document/Closing Fees
|
◦
|
Surveys
|
◦
|
Notary Fees
|
(a)
|
“
Deferred Compensation Account
” means a bookkeeping account representing the Participant’s Deferred Compensation, including any adjustments for earnings or losses; and
|
(b)
|
“
RSU Account
” means a bookkeeping account representing the Participant’s Deferred RSUs, including any adjustments for earnings, losses, or Dividend Equivalents.
|
(a)
|
“
Active Participan
t” means a Participant who is an employee of the Company at the time in question; and
|
(a)
|
As soon as practicable after each year, each Active Participant’s Deferred Compensation Account shall be credited
|
(b)
|
Each Active Participant may invest amounts held in his or her Deferred Compensation Account among the available investment alternatives selected by the Committee for purposes of measuring investment return for the investment of the Participant’s Deferred Compensation for each Plan Year. The investment funds shall be used only for purposes of measuring the return on the Participant’s Deferred Compensation Account, and no Participant shall have any interest in any actual investment fund. The Company shall calculate the return on the hypothetical investments in investment funds on a quarterly or more frequent basis.
|
(c)
|
The Committee shall establish procedures by which Participants can change their investment elections among the available investment alternatives, with such changes to be effective as of the first business day following the date of the election, except as otherwise determined by the Committee. Any changes with respect to the Common Stock investment return shall be subject to applicable securities laws and Company policies.
|
(i)
|
The portion of the Participant’s RSU Account related to unvested Deferred RSUs shall be denominated in notional shares of Common Stock in accordance with subsection (b).
|
(ii)
|
Upon vesting of a Deferred RSU that is payable in cash, such vested Deferred RSU shall be converted into a notional cash amount based on the Fair Market Value of a share of the Company’s Common Stock on the vesting date, as determined under the Equity Compensation Plan, and shall be credited to a subaccount of the Participant’s RSU Account.
|
(iii)
|
After vesting of the Deferred RSU, the notional cash amount, as described in subsection (ii) above, shall be adjusted for earnings and losses in accordance with the rate of return option elected by the Participant. The rate of return options available under the Plan are based on funds designated by the Committee. The investment funds shall be used only for purposes of measuring the return on the Participant’s RSU Account, and no Participant shall have any interest in any actual investment fund. The Company shall calculate the return on the hypothetical investments in investment funds on a quarterly or more frequent basis. The Committee shall establish procedures by which Participants can change their investment elections among the available investment alternatives, with such changes to be effective as of the first business day following the date of the election, except as otherwise determined by the Committee. Any changes with respect to the investment return shall be subject to applicable securities laws and Company policies.
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
||||||||||
Net (loss) earnings
|
$
|
(196,985
|
)
|
|
$
|
(451,468
|
)
|
|
$
|
302,150
|
|
|
$
|
(1,805,867
|
)
|
|
$
|
(147,879
|
)
|
Federal and state income tax (benefit) provision
|
(10,070
|
)
|
|
7,271
|
|
|
66,362
|
|
|
226,189
|
|
|
(94,401
|
)
|
|||||
(Loss) earnings before income taxes
|
(207,055
|
)
|
|
(444,197
|
)
|
|
368,512
|
|
|
(1,579,678
|
)
|
|
(242,280
|
)
|
|||||
Equity in net (income) loss of affiliates
|
(1
|
)
|
|
13
|
|
|
(65
|
)
|
|
(14,668
|
)
|
|
(33,226
|
)
|
|||||
Distributed income from equity investees
|
—
|
|
|
92
|
|
|
—
|
|
|
29,498
|
|
|
11,040
|
|
|||||
Net (loss) earnings
|
(207,056
|
)
|
|
(444,092
|
)
|
|
368,447
|
|
|
(1,564,848
|
)
|
|
(264,466
|
)
|
|||||
Fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest
|
74,618
|
|
|
51,832
|
|
|
61,394
|
|
|
41,777
|
|
|
46,010
|
|
|||||
One-Third of all rentals
|
1,432
|
|
|
1,873
|
|
|
1,678
|
|
|
1,621
|
|
|
2,496
|
|
|||||
Fixed charges
|
76,050
|
|
|
53,705
|
|
|
63,072
|
|
|
43,398
|
|
|
48,506
|
|
|||||
Preferred dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Fixed charges and preferred dividends
|
76,050
|
|
|
53,705
|
|
|
63,072
|
|
|
43,398
|
|
|
48,506
|
|
|||||
Net (loss) earnings and fixed charges
|
$
|
(131,006
|
)
|
|
$
|
(390,387
|
)
|
|
$
|
431,519
|
|
|
$
|
(1,521,450
|
)
|
|
$
|
(215,960
|
)
|
Net (loss) earnings, fixed charges and preferred dividends
|
$
|
(131,006
|
)
|
|
$
|
(390,387
|
)
|
|
$
|
431,519
|
|
|
$
|
(1,521,450
|
)
|
|
$
|
(215,960
|
)
|
Ratio of net (loss) earnings and fixed charges to fixed charges
|
(1)
|
|
(1)
|
|
6.8x
|
|
|
(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.
|
I have reviewed this Annual Report on Form 10-K 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: February 28, 2014
|
/s/ S
ANFORD
A. I
BRAHIM
|
|
Sanford A. Ibrahim
Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K 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: February 28, 2014
|
/s/ C. R
OBERT
Q
UINT
|
|
C. Robert Quint
Chief Financial Officer
|
|
|
Date: February 28, 2014
|
/s/ S. A. I
BRAHIM
|
|
Sanford A. Ibrahim
Chief Executive Officer
|
|
|
|
/s/ C. R
OBERT
Q
UINT
|
|
C. Robert Quint
Chief Financial Officer
|