x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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23-2691170
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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1500 Market Street, Philadelphia, PA
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19102
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging growth company
o
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(Do not check if a smaller reporting company)
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TABLE OF CONTENTS
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
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Term
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Definition
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2014 Master Policy
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Radian Guaranty’s master insurance policy, setting forth the terms and conditions of our mortgage insurance coverage, which became effective October 1, 2014
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2016 Single Premium QSR Agreement
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Quota share reinsurance agreement entered into with a panel of third-party reinsurance providers in the first quarter of 2016 and subsequently amended in the fourth quarter of 2017
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2017 Form 10-K
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Annual Report on Form 10-K for the year ended December 31, 2017
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2018 Single Premium QSR Agreement
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Quota share reinsurance agreement entered into with a panel of third-party reinsurance providers in October 2017 to cede a portion of Single Premium NIW beginning January 1, 2018
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ABS
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Asset-backed securities
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Alt-A
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Alternative-A loans, representing loans for which the underwriting documentation is generally limited as compared to fully documented loans (considered a non-prime loan grade)
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Available Assets
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As defined in the PMIERs, assets primarily including the liquid assets of a mortgage insurer, and reduced by premiums received but not yet earned
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Back-end
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With respect to credit risk transfer programs established by the GSEs, policies written on loans that are already part of an existing GSE portfolio, as contrasted with loans that are to be purchased by the GSEs in the future
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Borrower
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With respect to our securities lending agreements, the third-party institutions to which we loan certain securities in our investment portfolio for short periods of time
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Claim Curtailment
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Our legal right, under certain conditions, to reduce the amount of a claim, including due to servicer negligence
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Claim Denial
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Our legal right, under certain conditions, to deny a claim
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Claim Severity
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The total claim amount paid divided by the original coverage amount
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Clayton
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Clayton Holdings LLC, a Delaware domiciled indirect non-insurance subsidiary of Radian Group
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CMBS
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Commercial mortgage-backed securities
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Convertible Senior Notes due 2017
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Our 3.000% convertible unsecured senior notes due November 2017 ($450 million original principal amount)
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Convertible Senior Notes due 2019
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Our 2.250% convertible unsecured senior notes due March 2019 ($400 million original principal amount)
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Cures
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Loans that were in default as of the beginning of a period and are no longer in default because payments were received such that the loan is no longer 60 or more days past due
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Default to Claim Rate
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The percentage of defaulted loans that are assumed to result in a claim
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Deficiency Amount
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The assessed tax liabilities, penalties and interest associated with a formal Notice of Deficiency from the IRS
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Discrete Item(s)
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For tax calculation purposes, certain items that are required to be accounted for in the provision for income taxes as they occur and are not considered a component of the estimated annualized effective tax rate for purposes of reporting interim results. Generally, these are items that are: (i) clearly defined (such as changes in tax rate or tax law); (ii) infrequent or unusual in nature; or (iii) gains or losses that are not a component of continuing operating income, such as income from discontinued operations or losses reflected as a component of other comprehensive income. These items impact the difference between the statutory rate and Radian’s effective tax rate.
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EnTitle Direct
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EnTitle Direct Group, Inc., a wholly-owned subsidiary of Radian Group
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EnTitle Insurance
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EnTitle Insurance Company, a wholly-owned subsidiary of EnTitle Direct
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Exchange Act
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Securities Exchange Act of 1934, as amended
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Extraordinary Dividend
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A dividend distribution required to be approved by an insurance company’s primary regulator that is greater than would be permitted as an ordinary dividend which does not require regulatory approval
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Term
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Definition
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Fannie Mae
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Federal National Mortgage Association
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FASB
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Financial Accounting Standards Board
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FEMA
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Federal Emergency Management Agency, an agency of the U.S. Department of Homeland Security
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FEMA Designated Area
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Generally, an area that has been subject to a disaster, designated by FEMA as an individual assistance disaster area for the purpose of determining eligibility for various forms of federal assistance
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FHA
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Federal Housing Administration
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FHFA
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Federal Housing Finance Agency
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FHLB
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Federal Home Loan Bank of Pittsburgh
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FICO
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Fair Isaac Corporation (“FICO”) credit scores, for Radian’s portfolio statistics, represent the borrower’s credit score at origination and, in circumstances where there is more than one borrower, the FICO score for the primary borrower is utilized
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Flow Basis
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With respect to mortgage insurance, includes mortgage insurance policies that are written on an individual loan basis as each loan is originated or on an aggregated basis (in which each individual loan in a group of loans is insured in a single transaction, typically shortly after the loans have been originated). Among other items, Flow Basis business excludes Pool Insurance, which we originated prior to 2009.
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Foreclosure Stage Default
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The Stage of Default indicating that the foreclosure sale has been scheduled or held
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Freddie Mac
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Federal Home Loan Mortgage Corporation
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Front-end
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With respect to credit risk transfer programs established by the GSEs, policies written on loans that are to be purchased by the GSEs in the future, as contrasted with loans that are already part of an existing GSE portfolio
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GAAP
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Accounting principles generally accepted in the U.S.
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Green River Capital
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Green River Capital LLC, a wholly-owned subsidiary of Clayton
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GSEs
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Government-Sponsored Enterprises (Fannie Mae and Freddie Mac)
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HARP
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Home Affordable Refinance Program. See “Item 1. Business—Regulation—Federal Regulation—
Homeowner Assistance Programs
” in our 2017 Form 10-K for more information.
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IBNR
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Losses incurred but not reported
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IIF
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Insurance in force, equal to the aggregate unpaid principal balances of the underlying loans
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IRC
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Internal Revenue Code of 1986, as amended
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IRS
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Internal Revenue Service
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IRS Matter
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Our dispute with the IRS related to the Deficiency Amount from the IRS’s examination of our 2000 through 2007 consolidated federal income tax returns. See Note 9 of Notes to Unaudited Condensed Consolidated Financial Statements for more information.
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JCT
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Congressional Joint Committee on Taxation
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LAE
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Loss adjustment expenses, which include the cost of investigating and adjusting losses and paying claims
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Legacy Portfolio
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Mortgage insurance written during the poor underwriting years of 2005 through 2008, together with business written prior to 2005
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Loss Mitigation Activity/Activities
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Activities such as Rescissions, Claim Denials, Claim Curtailments and cancellations
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LTV
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Loan-to-value ratio, calculated as the percentage of the original loan amount to the original value of the property
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Master Policies
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The Prior Master Policy and the 2014 Master Policy, collectively
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Minimum Required Assets
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A risk-based minimum required asset amount, as defined in the PMIERs, calculated based on net RIF (RIF, net of credits permitted for reinsurance) and a variety of measures related to expected credit performance and other factors
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Model Act
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Mortgage Guaranty Insurers Model Act, as issued by the NAIC to establish minimum capital and surplus requirements for mortgage insurers
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Term
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Definition
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Monthly and Other Premiums
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Insurance policies where premiums are paid on a monthly or other installment basis, in contrast to Single Premium Policies
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Monthly Premium Policies
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Insurance policies where premiums are paid on a monthly installment basis
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Moody’s
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Moody’s Investors Service
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Mortgage Insurance
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Radian’s Mortgage Insurance business segment, which provides credit-related insurance coverage, principally through private mortgage insurance, as well as other credit risk management solutions to mortgage lending institutions and mortgage investors
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MPP Requirement
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Certain states’ statutory or regulatory risk-based capital requirement that the mortgage insurer must maintain a minimum policyholder position, which is calculated based on both risk and surplus levels
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NAIC
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National Association of Insurance Commissioners
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NIW
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New insurance written
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NOL
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Net operating loss; for tax purposes, accumulated during years a company reported more tax deductions than taxable income. NOLs may be carried back or carried forward a certain number of years, depending on each jurisdiction, when the NOL occurs and the type of legal entity, thus reducing a company’s tax liability
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Notices of Deficiency
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Formal letters from the IRS informing the taxpayer of an IRS determination of tax deficiency and appeal rights
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OCI
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Other comprehensive income (loss)
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Persistency Rate
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The percentage of insurance in force that remains in force over a period of time
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PMIERs
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Private Mortgage Insurer Eligibility Requirements effective on December 31, 2015, issued by the GSEs under oversight of the FHFA to set forth requirements an approved insurer must meet and maintain to provide mortgage guaranty insurance on loans acquired by the GSEs
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Pool Insurance
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Pool Insurance differs from primary insurance in that our maximum liability is not limited to a specific coverage percentage on an individual mortgage loan. Instead, an aggregate exposure limit, or “stop loss,” is applied to the initial aggregate loan balance on a group or “pool” of mortgages
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Post-legacy
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The time period subsequent to 2008
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Post-legacy Portfolio
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Mortgage insurance on loans written subsequent to 2008
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Prior Master Policy
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Radian Guaranty’s master insurance policy, setting forth the terms and conditions of our mortgage insurance coverage, which was in effect prior to the effective date of its 2014 Master Policy
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QSR Program
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The quota share reinsurance agreements entered into with a third-party reinsurance provider in the second and fourth quarters of 2012, collectively
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Radian
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Radian Group Inc. together with its consolidated subsidiaries
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Radian Group
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Radian Group Inc.
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Radian Guaranty
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Radian Guaranty Inc., a Pennsylvania domiciled insurance subsidiary of Radian Group
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Radian Reinsurance
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Radian Reinsurance Inc., a Pennsylvania domiciled insurance subsidiary of Radian Group
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RBC States
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Risk-based capital states, which are those states that currently impose a statutory or regulatory risk-based capital requirement
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Red Bell
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Red Bell Real Estate, LLC, a wholly-owned subsidiary of Clayton
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Reinstatements
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Reversals of previous Rescissions, Claim Denials and Claim Curtailments
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REMIC
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Real Estate Mortgage Investment Conduit
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REO
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Real estate owned
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Rescission
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Our legal right, under certain conditions, to unilaterally rescind coverage on our mortgage insurance policies if we determine that a loan did not qualify for insurance
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RIF
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Risk in force; for primary insurance, RIF is equal to the underlying loan unpaid principal balance multiplied by the insurance coverage percentage, whereas for Pool Insurance, it represents the remaining exposure under the agreements
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Risk-to-capital
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Under certain state regulations, a minimum ratio of statutory capital calculated relative to the level of net RIF
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Term
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Definition
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RMBS
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Residential mortgage-backed securities
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S&P
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Standard & Poor’s Financial Services LLC
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SAB 118
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Staff Accounting Bulletin No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act,” issued by the SEC staff in December 2017
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SAPP
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Statutory accounting principles and practices include those required or permitted, if applicable, by the insurance departments of the respective states of domicile of our insurance subsidiaries
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SEC
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United States Securities and Exchange Commission
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Senior Notes due 2017
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Our 9.000% unsecured senior notes due June 2017 ($195.5 million original principal amount, of which the remaining outstanding principal was redeemed in August 2016)
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Senior Notes due 2019
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Our 5.500% unsecured senior notes due June 2019 ($300 million original principal amount)
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Senior Notes due 2020
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Our 5.250% unsecured senior notes due June 2020 ($350 million original principal amount)
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Senior Notes due 2021
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Our 7.000% unsecured senior notes due March 2021 ($350 million original principal amount)
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Senior Notes due 2024
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Our 4.500% unsecured senior notes due October 2024 ($450 million original principal amount)
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Services
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Radian’s Services business segment, which is primarily a fee-for-service business that offers a broad array of both mortgage and real estate services to market participants across the mortgage and real estate value chain
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Single Premium NIW (or IIF)
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New insurance written or insurance in force, respectively, on Single Premium Policies
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Single Premium Policy/Policies
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Insurance policies where premiums are paid in a single payment and includes policies written on an individual basis (as each loan is originated) and on an aggregated basis (in which each individual loan in a group of loans is insured in a single transaction, typically shortly after the loans have been originated)
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Single Premium QSR Program
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The 2016 Single Premium QSR Agreement and the 2018 Single Premium QSR Agreement, collectively
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Stage of Default
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The stage a loan is in relative to the foreclosure process, based on whether a foreclosure sale has been scheduled or held
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Statutory RBC Requirement
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Risk-based capital requirement imposed by the RBC States, requiring a minimum surplus level and, in certain states, a minimum ratio of statutory capital relative to the level of risk
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Surplus Note
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An intercompany 0.000% surplus note issued by Radian Guaranty to Radian Group
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TCJA
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H.R. 1, known as the Tax Cuts and Jobs Act, signed into law on December 22, 2017
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Time in Default
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The time period from the point a loan reaches default status (based on the month the default occurred) to the current reporting date
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U.S.
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The United States of America
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U.S. Treasury
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United States Department of the Treasury
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VA
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U.S. Department of Veterans Affairs
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ValuAmerica
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ValuAmerica, Inc., a wholly-owned subsidiary of Clayton
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•
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changes in economic and political conditions that impact the size of the insurable market, the credit performance of our insured portfolio, and our business prospects;
|
•
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changes in the way customers, investors, ratings agencies, regulators or legislators perceive our performance, financial strength and future prospects;
|
•
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Radian Guaranty’s ability to remain eligible under the PMIERs and other applicable requirements imposed by the FHFA and by the GSEs to insure loans purchased by the GSEs;
|
•
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our ability to successfully execute and implement our capital plans and to maintain sufficient holding company liquidity to meet our short- and long-term liquidity needs;
|
•
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our ability to successfully execute and implement our business plans and strategies, including plans and strategies to reposition our Services segment as well as plans and strategies that require GSE and/or regulatory approvals and licenses;
|
•
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our ability to maintain an adequate level of capital in our insurance subsidiaries to satisfy existing and future state regulatory requirements;
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•
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changes in the charters or business practices of, or rules or regulations imposed by or applicable to, the GSEs, which may include changes in the requirements to remain an approved insurer to the GSEs, the GSEs’ interpretation and application of the PMIERs, as well as potential future changes to the PMIERs requirements which, among other things, may be impacted by the general economic environment and housing market, as well as the proposed Conservator Capital Framework (“CCF”) that would establish capital requirements for the GSEs, if the CCF is finalized;
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•
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changes in the current housing finance system in the U.S., including the role of the FHA, the GSEs and private mortgage insurers in this system;
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•
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any disruption in the servicing of mortgages covered by our insurance policies, as well as poor servicer performance;
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•
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a significant decrease in the Persistency Rates of our mortgage insurance on monthly premium products;
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•
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competition in our mortgage insurance business, including price competition and competition from the FHA and VA as well as from other forms of credit enhancement;
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•
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the effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the financial services industry in general, and on our businesses in particular;
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•
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legislative and regulatory activity (or inactivity), including the adoption of (or failure to adopt) new laws and regulations, or changes in existing laws and regulations, or the way they are interpreted or applied, including interpretations and guidance pertaining to recently enacted tax reform legislation;
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•
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legal and regulatory claims, assertions, actions, reviews, audits, inquiries and investigations that could result in adverse judgments, settlements, fines, injunctions, restitutions or other relief that could require significant expenditures or have other effects on our business;
|
•
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the amount and timing of potential settlements, payments or adjustments associated with federal or other tax examinations;
|
•
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the possibility that we may fail to estimate accurately the likelihood, magnitude and timing of losses in establishing loss reserves for our mortgage insurance business or in assessing our ability to comply with the proposed PMIERs when implemented, including the accuracy of our estimates of our Available Assets and Minimum Required Assets under the proposed PMIERs, which will be impacted by, among other things, the size and mix of our IIF, the level of defaults in our portfolio, and the level of cash flow generated by our insurance operations;
|
•
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volatility in our results of operations caused by changes in the fair value of our assets and liabilities, including a significant portion of our investment portfolio;
|
•
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potential future impairment charges related to our goodwill and other intangible assets, and uncertainties regarding our ability to execute our restructuring plans within expected costs;
|
•
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changes in GAAP or SAPP rules and guidance, or their interpretation;
|
•
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our ability to attract and retain key employees; and
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•
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legal and other limitations on dividends and other amounts we may receive from our subsidiaries.
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($ in thousands, except per-share amounts)
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June 30,
2018 |
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December 31,
2017 |
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Assets
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Investments (Note 5)
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Fixed-maturities available for sale—at fair value (amortized cost $3,659,311 and $3,426,217)
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$
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3,586,055
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$
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3,458,719
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Trading securities—at fair value
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535,634
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606,401
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Equity securities—at fair value (at December 31, 2017, classified as available for sale with related cost of $163,106)
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122,977
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162,830
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Short-term investments—at fair value (includes $39,224 and $19,357 of reinvested cash collateral held under securities lending agreements)
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626,060
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415,658
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Other invested assets—at fair value (amortized cost at December 31, 2017)
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3,193
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|
334
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Total investments
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4,873,919
|
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4,643,942
|
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Cash
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95,573
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80,569
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Restricted cash
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9,152
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|
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15,675
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Accounts and notes receivable
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94,848
|
|
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72,558
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Deferred income taxes, net (Note 9)
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171,293
|
|
|
229,567
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Goodwill and other intangible assets, net (Note 6)
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59,179
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64,212
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Prepaid reinsurance premium
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405,447
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|
|
386,509
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Other assets (Note 8)
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430,077
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|
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407,849
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Total assets
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$
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6,139,488
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$
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5,900,881
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Liabilities and Stockholders’ Equity
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Unearned premiums
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$
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741,296
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$
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723,938
|
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Reserve for losses and loss adjustment expense (“LAE”) (Note 10)
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451,542
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507,588
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Senior notes (Note 11)
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1,028,687
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1,027,074
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Reinsurance funds withheld
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331,776
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288,398
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Other liabilities (Note 12)
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385,051
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353,845
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Total liabilities
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2,938,352
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2,900,843
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Commitments and contingencies (Note 13)
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Stockholders’ equity
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Common stock: par value $0.001 per share; 485,000,000 shares authorized at June 30, 2018 and December 31, 2017; 230,875,884 and 233,416,989 shares issued at June 30, 2018 and December 31, 2017, respectively; 213,232,370 and 215,814,188 shares outstanding at June 30, 2018 and December 31, 2017, respectively
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231
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|
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233
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Treasury stock, at cost: 17,643,514 and 17,602,801 shares at June 30, 2018 and December 31, 2017, respectively
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(894,610
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)
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(893,888
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)
|
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Additional paid-in capital
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2,715,426
|
|
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2,754,275
|
|
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Retained earnings
|
1,438,032
|
|
|
1,116,333
|
|
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Accumulated other comprehensive income (loss) (Note 15)
|
(57,943
|
)
|
|
23,085
|
|
||
Total stockholders’ equity
|
3,201,136
|
|
|
3,000,038
|
|
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Total liabilities and stockholders’ equity
|
$
|
6,139,488
|
|
|
$
|
5,900,881
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands, except per-share amounts)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
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Revenues:
|
|
|
|
|
|
|
|
||||||||
Net premiums earned—insurance
|
$
|
251,344
|
|
|
$
|
229,096
|
|
|
$
|
493,894
|
|
|
$
|
450,896
|
|
Services revenue
|
36,828
|
|
|
37,802
|
|
|
69,992
|
|
|
75,829
|
|
||||
Net investment income
|
37,473
|
|
|
30,071
|
|
|
71,429
|
|
|
61,103
|
|
||||
Net gains (losses) on investments and other financial instruments
|
(7,404
|
)
|
|
5,331
|
|
|
(26,291
|
)
|
|
2,480
|
|
||||
Other income
|
1,016
|
|
|
612
|
|
|
1,823
|
|
|
1,358
|
|
||||
Total revenues
|
319,257
|
|
|
302,912
|
|
|
610,847
|
|
|
591,666
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
||||||||
Provision for losses
|
19,337
|
|
|
17,222
|
|
|
56,620
|
|
|
64,135
|
|
||||
Policy acquisition costs
|
5,996
|
|
|
6,123
|
|
|
13,113
|
|
|
12,852
|
|
||||
Cost of services
|
24,205
|
|
|
25,635
|
|
|
47,331
|
|
|
54,010
|
|
||||
Other operating expenses
|
70,184
|
|
|
68,750
|
|
|
133,427
|
|
|
137,127
|
|
||||
Restructuring and other exit costs (Note 1)
|
925
|
|
|
—
|
|
|
1,476
|
|
|
—
|
|
||||
Interest expense
|
15,291
|
|
|
16,179
|
|
|
30,371
|
|
|
32,117
|
|
||||
Loss on induced conversion and debt extinguishment
|
—
|
|
|
1,247
|
|
|
—
|
|
|
5,703
|
|
||||
Impairment of goodwill (Note 6)
|
—
|
|
|
184,374
|
|
|
—
|
|
|
184,374
|
|
||||
Amortization and impairment of other intangible assets
|
2,748
|
|
|
18,856
|
|
|
5,496
|
|
|
22,152
|
|
||||
Total expenses
|
138,686
|
|
|
338,386
|
|
|
287,834
|
|
|
512,470
|
|
||||
Pretax income (loss)
|
180,571
|
|
|
(35,474
|
)
|
|
323,013
|
|
|
79,196
|
|
||||
Income tax provision (benefit)
|
(28,378
|
)
|
|
(8,132
|
)
|
|
(422
|
)
|
|
30,066
|
|
||||
Net income (loss)
|
$
|
208,949
|
|
|
$
|
(27,342
|
)
|
|
$
|
323,435
|
|
|
$
|
49,130
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.98
|
|
|
$
|
(0.13
|
)
|
|
$
|
1.50
|
|
|
$
|
0.23
|
|
Diluted
|
$
|
0.96
|
|
|
$
|
(0.13
|
)
|
|
$
|
1.48
|
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|||||||
Weighted-average number of common shares outstanding—basic
|
213,976
|
|
|
215,152
|
|
|
215,049
|
|
|
215,054
|
|
||||
Weighted-average number of common and common equivalent shares outstanding—diluted
|
217,830
|
|
|
215,152
|
|
|
218,741
|
|
|
220,474
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Dividends per share
|
$
|
0.0025
|
|
|
$
|
0.0025
|
|
|
$
|
0.0050
|
|
|
$
|
0.0050
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
208,949
|
|
|
$
|
(27,342
|
)
|
|
$
|
323,435
|
|
|
$
|
49,130
|
|
Other comprehensive income, net of tax (Note 15):
|
|
|
|
|
|
|
|
||||||||
Unrealized gains (losses) on investments:
|
|
|
|
|
|
|
|
||||||||
Unrealized holding gains (losses) arising during the period
|
(27,804
|
)
|
|
20,239
|
|
|
(88,447
|
)
|
|
27,606
|
|
||||
Less: Reclassification adjustment for net gains (losses) included in net income
|
(1,336
|
)
|
|
(1,167
|
)
|
|
(4,468
|
)
|
|
(2,798
|
)
|
||||
Net unrealized gains (losses) on investments
|
(26,468
|
)
|
|
21,406
|
|
|
(83,979
|
)
|
|
30,404
|
|
||||
Unrealized foreign currency translation adjustments
|
—
|
|
|
74
|
|
|
3
|
|
|
108
|
|
||||
Other comprehensive income (loss), net of tax
|
(26,468
|
)
|
|
21,480
|
|
|
(83,976
|
)
|
|
30,512
|
|
||||
Comprehensive income
|
$
|
182,481
|
|
|
$
|
(5,862
|
)
|
|
$
|
239,459
|
|
|
$
|
79,642
|
|
|
Six Months Ended June 30,
|
||||||
(In thousands)
|
2018
|
|
2017
|
||||
Common Stock
|
|
|
|
||||
Balance, beginning of period
|
$
|
233
|
|
|
$
|
232
|
|
Issuance of common stock under incentive and benefit plans
|
1
|
|
|
1
|
|
||
Shares repurchased under share repurchase program (Note 14)
|
(3
|
)
|
|
—
|
|
||
Balance, end of period
|
231
|
|
|
233
|
|
||
|
|
|
|
||||
Treasury Stock
|
|
|
|
||||
Balance, beginning of period
|
(893,888
|
)
|
|
(893,332
|
)
|
||
Repurchases of common stock under incentive plans
|
(722
|
)
|
|
(199
|
)
|
||
Balance, end of period
|
(894,610
|
)
|
|
(893,531
|
)
|
||
|
|
|
|
||||
Additional Paid-in Capital
|
|
|
|
||||
Balance, beginning of period
|
2,754,275
|
|
|
2,779,891
|
|
||
Issuance of common stock under incentive and benefit plans
|
1,579
|
|
|
3,840
|
|
||
Share-based compensation
|
9,622
|
|
|
7,676
|
|
||
Impact of extinguishment of convertible senior notes
|
—
|
|
|
(52,352
|
)
|
||
Cumulative effect of adopting the accounting standard update for share-based payment transactions
|
—
|
|
|
756
|
|
||
Termination of capped calls (Note 11)
|
—
|
|
|
4,083
|
|
||
Change in equity component of currently redeemable convertible senior notes
|
—
|
|
|
(16
|
)
|
||
Shares repurchased under share repurchase program (Note 14)
|
(50,050
|
)
|
|
(6
|
)
|
||
Balance, end of period
|
2,715,426
|
|
|
2,743,872
|
|
||
|
|
|
|
||||
Retained Earnings
|
|
|
|
||||
Balance, beginning of period
|
1,116,333
|
|
|
997,890
|
|
||
Net income
|
323,435
|
|
|
49,130
|
|
||
Dividends declared
|
(1,073
|
)
|
|
(1,076
|
)
|
||
Cumulative effect of adopting the accounting standard update for financial instruments
|
2,061
|
|
|
—
|
|
||
Cumulative effect of adopting the accounting standard update for the reclassification of certain tax effects from accumulated other comprehensive income
|
(2,724
|
)
|
|
—
|
|
||
Cumulative effect of adopting the accounting standard update for share-based payment transactions, net of tax
|
—
|
|
|
(491
|
)
|
||
Balance, end of period
|
1,438,032
|
|
|
1,045,453
|
|
||
|
|
|
|
||||
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
||||
Balance, beginning of period
|
23,085
|
|
|
(12,395
|
)
|
||
Cumulative effect of adopting the accounting standard update for financial instruments
|
224
|
|
|
—
|
|
||
Cumulative effect of adopting the accounting standard update for the reclassification of certain tax effects from accumulated other comprehensive income
|
2,724
|
|
|
—
|
|
||
Net unrealized gains (losses) on investments, net of tax
|
(83,979
|
)
|
|
30,404
|
|
||
Net foreign currency translation adjustment, net of tax
|
3
|
|
|
108
|
|
||
Balance, end of period
|
(57,943
|
)
|
|
18,117
|
|
||
|
|
|
|
||||
Total Stockholders’ Equity
|
$
|
3,201,136
|
|
|
$
|
2,914,144
|
|
Radian Group Inc.
|
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|||||||
|
|
|
|
||||
(In thousands)
|
Six Months Ended
June 30, |
||||||
2018
|
|
2017
|
|||||
Cash flows from operating activities:
|
|
|
|
||||
Net cash provided by (used in) operating activities
|
$
|
300,822
|
|
|
$
|
206,412
|
|
Cash flows from investing activities:
|
|
|
|
||||
Proceeds from sales of:
|
|
|
|
||||
Fixed-maturity investments available for sale
|
348,082
|
|
|
649,687
|
|
||
Trading securities
|
16,639
|
|
|
130,022
|
|
||
Equity securities
|
82,701
|
|
|
18,103
|
|
||
Proceeds from redemptions of:
|
|
|
|
||||
Fixed-maturity investments available for sale
|
219,825
|
|
|
260,848
|
|
||
Trading securities
|
33,849
|
|
|
43,603
|
|
||
Purchases of:
|
|
|
|
||||
Fixed-maturity investments available for sale
|
(807,204
|
)
|
|
(1,147,875
|
)
|
||
Equity securities
|
(52,357
|
)
|
|
(193,409
|
)
|
||
Sales, redemptions and (purchases) of:
|
|
|
|
||||
Short-term investments, net
|
(205,566
|
)
|
|
201,942
|
|
||
Other assets and other invested assets, net
|
293
|
|
|
412
|
|
||
Purchases of property and equipment, net
|
(12,328
|
)
|
|
(13,444
|
)
|
||
Acquisitions, net of cash acquired
|
(634
|
)
|
|
(86
|
)
|
||
Net cash provided by (used in) investing activities
|
(376,700
|
)
|
|
(50,197
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Dividends paid
|
(1,073
|
)
|
|
(1,076
|
)
|
||
Purchases and redemptions of senior notes
|
—
|
|
|
(141,686
|
)
|
||
Proceeds from termination of capped calls
|
—
|
|
|
4,083
|
|
||
Issuance of common stock
|
810
|
|
|
3,123
|
|
||
Purchase of common shares
|
(50,053
|
)
|
|
(6
|
)
|
||
Credit facility commitment fees paid
|
(405
|
)
|
|
—
|
|
||
Change in secured borrowings (Note 12)
|
119,631
|
|
|
—
|
|
||
Proceeds from secured borrowings (with terms greater than 3 months)
|
15,544
|
|
|
—
|
|
||
Repayment of other borrowings
|
(94
|
)
|
|
(140
|
)
|
||
Net cash provided by (used in) financing activities
|
84,360
|
|
|
(135,702
|
)
|
||
Effect of exchange rate changes on cash and restricted cash
|
(1
|
)
|
|
77
|
|
||
Increase (decrease) in cash and restricted cash
|
8,481
|
|
|
20,590
|
|
||
Cash and restricted cash, beginning of period
|
96,244
|
|
|
61,814
|
|
||
Cash and restricted cash, end of period
|
$
|
104,725
|
|
|
$
|
82,404
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Services segment revenue
|
|
|
|
|
|
|
|
||||||||
Mortgage Services
|
$
|
16,346
|
|
|
$
|
17,782
|
|
|
$
|
30,335
|
|
|
$
|
36,153
|
|
Real Estate Services
|
19,301
|
|
|
15,463
|
|
|
37,204
|
|
|
32,477
|
|
||||
Title Services
|
2,461
|
|
|
6,730
|
|
|
4,735
|
|
|
11,434
|
|
||||
Total
(1)
|
$
|
38,108
|
|
|
$
|
39,975
|
|
|
$
|
72,274
|
|
|
$
|
80,064
|
|
(1)
|
Includes inter-segment revenues of
$0.9 million
and
$1.9 million
for the
three and six months ended June 30, 2018
and
$2.2 million
and
$4.2 million
for the
three and six months ended June 30, 2017
, respectively. For both the
three- and six-month periods ended June 30, 2018
, amounts exclude
$2.4 million
of Services segment net premiums earned—insurance and net investment income, as both are excluded from the scope of the revenue recognition standard. See Note
3
for segment information.
|
(In thousands)
|
June 30, 2018
|
|
December 31, 2017
|
||||
Accounts Receivable - Services Contracts
|
$
|
11,705
|
|
|
$
|
17,391
|
|
Unbilled Receivables - Services Contracts
|
16,478
|
|
|
22,257
|
|
||
Deferred Revenues - Services Contracts
|
3,814
|
|
|
3,235
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands, except per-share amounts)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net income (loss)—basic
|
$
|
208,949
|
|
|
$
|
(27,342
|
)
|
|
$
|
323,435
|
|
|
$
|
49,130
|
|
Adjustment for dilutive Convertible Senior Notes due 2019, net of tax
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
(215
|
)
|
||||
Net income (loss)—diluted
|
$
|
208,949
|
|
|
$
|
(27,342
|
)
|
|
$
|
323,435
|
|
|
$
|
48,915
|
|
|
|
|
|
|
|
|
|
||||||||
Average common shares outstanding—basic
|
213,976
|
|
|
215,152
|
|
|
215,049
|
|
|
215,054
|
|
||||
Dilutive effect of Convertible Senior Notes due 2017
|
—
|
|
|
—
|
|
|
—
|
|
|
602
|
|
||||
Dilutive effect of Convertible Senior Notes due 2019
|
—
|
|
|
—
|
|
|
—
|
|
|
922
|
|
||||
Dilutive effect of share-based compensation arrangements
(2)
|
3,854
|
|
|
—
|
|
|
3,692
|
|
|
3,896
|
|
||||
Adjusted average common shares outstanding—diluted
|
217,830
|
|
|
215,152
|
|
|
218,741
|
|
|
220,474
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.98
|
|
|
$
|
(0.13
|
)
|
|
$
|
1.50
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted
|
$
|
0.96
|
|
|
$
|
(0.13
|
)
|
|
$
|
1.48
|
|
|
$
|
0.22
|
|
(1)
|
As applicable, includes coupon interest, amortization of discount and fees, and other changes in income that would result from the assumed conversion. Included in the
six months
ended
June 30, 2017
is a benefit related to our adjustment of estimated accrued expense to actual amounts, resulting from the January 2017 settlement of our obligations on the remaining Convertible Senior Notes due 2019.
|
(2)
|
There were
no
dilutive shares for the three months ended June 30, 2017, as a result of our net loss for the period. The following number of shares of our common stock equivalents issued under our share-based compensation arrangements and convertible debt, if any, were not included in the calculation of diluted net income (loss) per share because they were anti-dilutive:
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Shares of common stock equivalents
|
484
|
|
|
5,975
|
|
|
351
|
|
|
442
|
|
Shares of Convertible Senior Notes due 2017
|
—
|
|
|
509
|
|
|
—
|
|
|
—
|
|
|
(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 or equity securities. These valuation adjustments may not necessarily result in realized economic gains or losses.
|
(2)
|
Loss on induced conversion and debt extinguishment.
Gains or losses on early extinguishment of debt and losses incurred to purchase our convertible debt prior to maturity are discretionary activities that are undertaken in order to take advantage of market opportunities to strengthen our financial and capital positions; therefore, we do not view these activities as part of our operating performance. Such transactions do not reflect expected future operations and do not provide meaningful insight regarding our current or past operating trends. Therefore, these items are excluded from our calculation of adjusted pretax operating income (loss).
|
(3)
|
Acquisition-related expenses.
Acquisition-related expenses represent the costs incurred to effect an acquisition of a business (i.e., a business combination). Because we pursue acquisitions on a strategic and selective basis and not in the ordinary course of our business, we do not view acquisition-related expenses as a consequence of a primary business activity. Therefore, we do not consider these expenses to be part of our operating performance and they are excluded from our calculation of adjusted pretax operating income (loss).
|
(4)
|
Amortization or impairment of goodwill and other intangible assets.
Amortization of intangible assets represents the periodic expense required to amortize the cost of intangible assets over their estimated useful lives. Intangible assets with an indefinite useful life are also periodically reviewed for potential impairment, and impairment adjustments are made whenever appropriate. These charges are not viewed as part of the operating performance of our primary activities and therefore are excluded from our calculation of adjusted pretax operating income (loss).
|
|
(5)
|
Net impairment losses recognized in earnings and losses from the sale of lines of business
. The recognition of net impairment losses on investments and the impairment of other long-lived assets does not result in a cash payment and can vary significantly in both amount and frequency, depending on market credit cycles and other factors. Losses from the sale of lines of business are highly discretionary as a result of strategic restructuring decisions, and generally do not occur in the normal course of our business. We do not view these losses to be indicative of our fundamental operating activities. Therefore, whenever these losses occur, we exclude them from our calculation of adjusted pretax operating income (loss).
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Mortgage Insurance
|
|
|
|
|
|
|
|
||||||||
Net premiums written—insurance
(1)
|
$
|
251,958
|
|
|
$
|
241,307
|
|
|
$
|
489,938
|
|
|
$
|
465,972
|
|
(Increase) decrease in unearned premiums
|
(2,990
|
)
|
|
(12,211
|
)
|
|
1,580
|
|
|
(15,076
|
)
|
||||
Net premiums earned—insurance
|
248,968
|
|
|
229,096
|
|
|
491,518
|
|
|
450,896
|
|
||||
Net investment income
|
37,447
|
|
|
30,071
|
|
|
71,403
|
|
|
61,103
|
|
||||
Other income
|
621
|
|
|
612
|
|
|
1,428
|
|
|
1,358
|
|
||||
Total
(2)
|
287,036
|
|
|
259,779
|
|
|
564,349
|
|
|
513,357
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Provision for losses
|
19,362
|
|
|
17,714
|
|
|
56,753
|
|
|
64,946
|
|
||||
Policy acquisition costs
|
5,996
|
|
|
6,123
|
|
|
13,113
|
|
|
12,852
|
|
||||
Other operating expenses before corporate allocations
|
33,262
|
|
|
37,939
|
|
|
65,150
|
|
|
77,228
|
|
||||
Total
(3)
|
58,620
|
|
|
61,776
|
|
|
135,016
|
|
|
155,026
|
|
||||
Adjusted pretax operating income before corporate allocations
|
228,416
|
|
|
198,003
|
|
|
429,333
|
|
|
358,331
|
|
||||
Allocation of corporate operating expenses
|
20,136
|
|
|
15,894
|
|
|
38,713
|
|
|
30,080
|
|
||||
Allocation of interest expense
|
10,840
|
|
|
11,748
|
|
|
21,469
|
|
|
23,257
|
|
||||
Adjusted pretax operating income
|
$
|
197,440
|
|
|
$
|
170,361
|
|
|
$
|
369,151
|
|
|
$
|
304,994
|
|
(1)
|
Net of ceded premiums written under the QSR Program and the Single Premium QSR Program. See Note
7
for additional information.
|
(2)
|
Excludes net losses on investments and other financial instruments of
$7.4 million
and
$26.3 million
for the
three and six months ended June 30, 2018
, and net gains on investments and other financial instruments of
$5.3 million
and
$2.5 million
for the
three and six months ended June 30, 2017
, not included in adjusted pretax operating income.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Inter-segment expenses
|
$
|
885
|
|
|
$
|
2,173
|
|
|
$
|
1,887
|
|
|
$
|
4,235
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Services
|
|
|
|
|
|
|
|
||||||||
Net premiums earned—insurance
(1)
|
$
|
2,376
|
|
|
$
|
—
|
|
|
$
|
2,376
|
|
|
$
|
—
|
|
Services revenue
(2)
|
37,713
|
|
|
39,975
|
|
|
71,879
|
|
|
80,064
|
|
||||
Net investment income
(1)
|
26
|
|
|
—
|
|
|
26
|
|
|
—
|
|
||||
Other income
(1)
|
395
|
|
|
—
|
|
|
395
|
|
|
—
|
|
||||
Total
(2)
|
40,510
|
|
|
39,975
|
|
|
74,676
|
|
|
80,064
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Provision for losses
(1)
|
53
|
|
|
—
|
|
|
53
|
|
|
—
|
|
||||
Cost of services
|
24,357
|
|
|
25,962
|
|
|
47,627
|
|
|
54,652
|
|
||||
Other operating expenses before corporate allocations
|
14,015
|
|
|
12,803
|
|
|
24,759
|
|
|
25,407
|
|
||||
Restructuring and other exit costs
(3)
|
1,055
|
|
|
—
|
|
|
1,580
|
|
|
—
|
|
||||
Total
|
39,480
|
|
|
38,765
|
|
|
74,019
|
|
|
80,059
|
|
||||
Adjusted pretax operating income (loss) before corporate allocations
|
1,030
|
|
|
1,210
|
|
|
657
|
|
|
5
|
|
||||
Allocation of corporate operating expenses
|
3,010
|
|
|
3,404
|
|
|
5,794
|
|
|
7,122
|
|
||||
Allocation of interest expense
|
4,451
|
|
|
4,431
|
|
|
8,902
|
|
|
8,860
|
|
||||
Adjusted pretax operating income (loss)
|
$
|
(6,431
|
)
|
|
$
|
(6,625
|
)
|
|
$
|
(14,039
|
)
|
|
$
|
(15,977
|
)
|
(1)
|
Results from inclusion of the operations of EnTitle Direct, a national title insurance and settlement services company, acquired in March 2018.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Inter-segment revenues
|
$
|
885
|
|
|
$
|
2,173
|
|
|
$
|
1,887
|
|
|
$
|
4,235
|
|
(3)
|
Does not include impairment of long-lived assets and loss from the sale of a business line, which is not a component of adjusted pretax operating income.
|
|
At June 30, 2018
|
||||||||||
(In thousands)
|
Mortgage Insurance
|
|
Services
|
|
Total
|
||||||
Total assets
|
$
|
5,949,845
|
|
|
$
|
189,643
|
|
|
$
|
6,139,488
|
|
|
|
|
|
|
|
||||||
|
At December 31, 2017
|
||||||||||
(In thousands)
|
Mortgage Insurance
|
|
Services
|
|
Total
|
||||||
Total assets
|
$
|
5,733,918
|
|
|
$
|
166,963
|
|
|
$
|
5,900,881
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Adjusted pretax operating income (loss):
|
|
|
|
|
|
|
|
||||||||
Mortgage Insurance
(1)
|
$
|
197,440
|
|
|
$
|
170,361
|
|
|
$
|
369,151
|
|
|
$
|
304,994
|
|
Services
(1)
|
(6,431
|
)
|
|
(6,625
|
)
|
|
(14,039
|
)
|
|
(15,977
|
)
|
||||
Total adjusted pretax operating income
|
191,009
|
|
|
163,736
|
|
|
355,112
|
|
|
289,017
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net gains (losses) on investments and other financial instruments
|
(7,404
|
)
|
|
5,331
|
|
|
(26,291
|
)
|
|
2,480
|
|
||||
Loss on induced conversion and debt extinguishment
|
—
|
|
|
(1,247
|
)
|
|
—
|
|
|
(5,703
|
)
|
||||
Acquisition-related expenses
(2)
|
(416
|
)
|
|
(64
|
)
|
|
(416
|
)
|
|
(72
|
)
|
||||
Impairment of goodwill
|
—
|
|
|
(184,374
|
)
|
|
—
|
|
|
(184,374
|
)
|
||||
Amortization and impairment of other intangible assets
|
(2,748
|
)
|
|
(18,856
|
)
|
|
(5,496
|
)
|
|
(22,152
|
)
|
||||
Impairment of other long-lived assets and loss from the sale of a business line
(3)
|
130
|
|
|
—
|
|
|
104
|
|
|
—
|
|
||||
Consolidated pretax income (loss)
|
$
|
180,571
|
|
|
$
|
(35,474
|
)
|
|
$
|
323,013
|
|
|
$
|
79,196
|
|
(1)
|
Includes inter-segment expenses and revenues as listed in the notes to the preceding tables.
|
(2)
|
Acquisition-related expenses represent expenses incurred to effect the acquisition of a business, net of adjustments to accruals previously recorded for acquisition expenses.
|
(3)
|
Included within restructuring and other exit costs. See Note 1.
|
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.
|
|
(In thousands)
|
Level I
|
|
Level II
|
|
Total
|
|
||||||
Assets at Fair Value
|
|
|
|
|
|
|
||||||
Investment Portfolio:
|
|
|
|
|
|
|
||||||
U.S. government and agency securities
|
$
|
137,749
|
|
|
$
|
19,457
|
|
|
$
|
157,206
|
|
|
State and municipal obligations
|
—
|
|
|
351,085
|
|
|
351,085
|
|
|
|||
Money market instruments
|
211,348
|
|
|
—
|
|
|
211,348
|
|
|
|||
Corporate bonds and notes
|
—
|
|
|
2,331,887
|
|
|
2,331,887
|
|
|
|||
RMBS
|
—
|
|
|
268,449
|
|
|
268,449
|
|
|
|||
CMBS
|
—
|
|
|
527,098
|
|
|
527,098
|
|
|
|||
Other ABS
|
—
|
|
|
693,672
|
|
|
693,672
|
|
|
|||
Foreign government and agency securities
|
—
|
|
|
50,433
|
|
|
50,433
|
|
|
|||
Equity securities
|
139,637
|
|
|
5,269
|
|
|
144,906
|
|
|
|||
Other investments
(1)
|
—
|
|
|
172,993
|
|
|
172,993
|
|
|
|||
Total Investments at Fair Value
(2)
|
488,734
|
|
|
4,420,343
|
|
|
4,909,077
|
|
(3)
|
|||
Total Assets at Fair Value
|
$
|
488,734
|
|
|
$
|
4,420,343
|
|
|
$
|
4,909,077
|
|
(3)
|
(1)
|
Comprising short-term certificates of deposit and commercial paper.
|
(2)
|
Does not include certain other invested assets (
$3.2 million
), primarily invested in limited partnership investments valued using the net asset value as a practical expedient. Includes cash collateral held under securities lending agreements (
$39.2 million
) reinvested in money market instruments.
|
(3)
|
Includes
$38.4 million
of securities loaned to third-party Borrowers under securities lending agreements, classified as other assets in our consolidated balance sheets. See Note
5
for more information.
|
(In thousands)
|
Level I
|
|
Level II
|
|
Total
|
|
||||||
Assets at Fair Value
|
|
|
|
|
|
|
||||||
Investment Portfolio:
|
|
|
|
|
|
|
||||||
U.S. government and agency securities
|
$
|
124,969
|
|
|
$
|
8,023
|
|
|
$
|
132,992
|
|
|
State and municipal obligations
|
—
|
|
|
386,111
|
|
|
386,111
|
|
|
|||
Money market instruments
|
213,357
|
|
|
—
|
|
|
213,357
|
|
|
|||
Corporate bonds and notes
|
—
|
|
|
2,304,017
|
|
|
2,304,017
|
|
|
|||
RMBS
|
—
|
|
|
216,749
|
|
|
216,749
|
|
|
|||
CMBS
|
—
|
|
|
503,955
|
|
|
503,955
|
|
|
|||
Other ABS
|
—
|
|
|
676,158
|
|
|
676,158
|
|
|
|||
Foreign government and agency securities
|
—
|
|
|
36,448
|
|
|
36,448
|
|
|
|||
Equity securities
|
175,205
|
|
|
860
|
|
|
176,065
|
|
|
|||
Other investments
(1)
|
—
|
|
|
25,720
|
|
|
25,720
|
|
|
|||
Total Investments at Fair Value
(2)
|
513,531
|
|
|
4,158,041
|
|
|
4,671,572
|
|
(3)
|
|||
Total Assets at Fair Value
|
$
|
513,531
|
|
|
$
|
4,158,041
|
|
|
$
|
4,671,572
|
|
(3)
|
(1)
|
Comprising short-term certificates of deposit and commercial paper.
|
(2)
|
Does not include certain other invested assets (
$0.3 million
), primarily invested in limited partnerships, accounted for as cost-method investments and not measured at fair value. Includes cash collateral held under securities lending agreements (
$19.4 million
) reinvested in money market instruments.
|
(3)
|
Includes
$28.0 million
of securities loaned to third-party Borrowers under securities lending agreements, classified as other assets in our consolidated balance sheets. See Note
5
for more information.
|
|
June 30, 2018
|
|
December 31, 2017
|
||||||||||||
(In thousands)
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Other invested assets
(1)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
334
|
|
|
$
|
3,226
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Senior notes
|
1,028,687
|
|
|
1,040,249
|
|
|
1,027,074
|
|
|
1,093,934
|
|
(1)
|
As a result of implementing the update to the standard for the accounting of financial instruments effective January 1, 2018, other invested assets are no longer carried at amortized cost.
|
|
June 30, 2018
|
||||||||||||||
(In thousands)
|
Amortized
Cost
|
|
Fair Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
||||||||
Fixed-maturities available for sale:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
$
|
72,811
|
|
|
$
|
71,045
|
|
(1)
|
$
|
1
|
|
|
$
|
1,767
|
|
State and municipal obligations
|
136,649
|
|
|
137,699
|
|
|
2,957
|
|
|
1,907
|
|
||||
Corporate bonds and notes
|
1,987,444
|
|
|
1,933,044
|
|
|
4,617
|
|
|
59,017
|
|
||||
RMBS
|
249,577
|
|
|
243,659
|
|
(2)
|
1
|
|
|
5,919
|
|
||||
CMBS
|
487,805
|
|
|
477,751
|
|
|
228
|
|
|
10,282
|
|
||||
Other ABS
|
694,613
|
|
|
692,564
|
|
|
1,132
|
|
|
3,181
|
|
||||
Foreign government and agency securities
|
46,826
|
|
|
46,290
|
|
|
116
|
|
|
652
|
|
||||
Total fixed-maturities available for sale
|
$
|
3,675,725
|
|
|
$
|
3,602,052
|
|
(3)
|
$
|
9,052
|
|
|
$
|
82,725
|
|
(1)
|
Includes securities with a fair value of
$10.6 million
serving as collateral for FHLB advances.
|
(2)
|
Includes securities with a fair value of
$112.2 million
serving as collateral for FHLB advances.
|
(3)
|
Includes
$16.0 million
of fixed maturity securities loaned to third-party Borrowers under securities lending agreements, classified as other assets in our condensed consolidated balance sheets, as further described below.
|
|
December 31, 2017
|
||||||||||||||
(In thousands)
|
Amortized
Cost
|
|
Fair Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
||||||||
Fixed-maturities available for sale:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
$
|
69,667
|
|
|
$
|
69,396
|
|
|
$
|
96
|
|
|
$
|
367
|
|
State and municipal obligations
|
156,587
|
|
|
161,722
|
|
|
5,834
|
|
|
699
|
|
||||
Corporate bonds and notes
|
1,869,318
|
|
|
1,894,886
|
|
|
33,620
|
|
|
8,052
|
|
||||
RMBS
|
189,455
|
|
|
187,229
|
|
|
636
|
|
|
2,862
|
|
||||
CMBS
|
451,595
|
|
|
453,394
|
|
|
3,409
|
|
|
1,610
|
|
||||
Other ABS
|
672,715
|
|
|
674,548
|
|
|
2,655
|
|
|
822
|
|
||||
Foreign government and agency securities
|
31,417
|
|
|
32,207
|
|
|
823
|
|
|
33
|
|
||||
Total fixed-maturities available for sale
|
3,440,754
|
|
|
3,473,382
|
|
(1)
|
47,073
|
|
|
14,445
|
|
||||
Equity securities available for sale
(2)
|
176,349
|
|
|
176,065
|
|
(1)
|
1,705
|
|
|
1,989
|
|
||||
Total debt and equity securities available for sale
|
$
|
3,617,103
|
|
|
$
|
3,649,447
|
|
|
$
|
48,778
|
|
|
$
|
16,434
|
|
(1)
|
Includes
$14.7 million
of fixed maturity securities and
$13.2 million
of equity securities loaned to third-party Borrowers under securities lending agreements, classified as other assets in our condensed consolidated balance sheets, as further described below.
|
(2)
|
Primarily consists of investments in fixed-income and equity exchange-traded funds and publicly-traded business development company equities.
|
|
|
|
June 30, 2018
|
|||||||||||||||||||||||||||||||
(
$ 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
|
|
8
|
|
|
$
|
41,506
|
|
|
$
|
1,253
|
|
|
3
|
|
|
$
|
9,502
|
|
|
$
|
514
|
|
|
11
|
|
|
$
|
51,008
|
|
|
$
|
1,767
|
|
State and municipal obligations
|
|
27
|
|
|
78,350
|
|
|
1,907
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
78,350
|
|
|
1,907
|
|
||||||
Corporate bonds and notes
|
|
406
|
|
|
1,548,096
|
|
|
50,572
|
|
|
29
|
|
|
119,977
|
|
|
8,445
|
|
|
435
|
|
|
1,668,073
|
|
|
59,017
|
|
||||||
RMBS
|
|
24
|
|
|
168,364
|
|
|
2,175
|
|
|
27
|
|
|
75,189
|
|
|
3,744
|
|
|
51
|
|
|
243,553
|
|
|
5,919
|
|
||||||
CMBS
|
|
76
|
|
|
436,659
|
|
|
9,898
|
|
|
8
|
|
|
8,222
|
|
|
384
|
|
|
84
|
|
|
444,881
|
|
|
10,282
|
|
||||||
Other ABS
|
|
124
|
|
|
423,815
|
|
|
3,063
|
|
|
10
|
|
|
15,436
|
|
|
118
|
|
|
134
|
|
|
439,251
|
|
|
3,181
|
|
||||||
Foreign government and agency securities
|
|
26
|
|
|
39,520
|
|
|
652
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26
|
|
|
39,520
|
|
|
652
|
|
||||||
Total
|
|
691
|
|
|
$
|
2,736,310
|
|
|
$
|
69,520
|
|
|
77
|
|
|
$
|
228,326
|
|
|
$
|
13,205
|
|
|
768
|
|
|
$
|
2,964,636
|
|
|
$
|
82,725
|
|
|
|
December 31, 2017
|
|||||||||||||||||||||||||||||||
(
$ 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
|
|
6
|
|
|
$
|
23,309
|
|
|
$
|
129
|
|
|
3
|
|
|
$
|
9,799
|
|
|
$
|
238
|
|
|
9
|
|
|
$
|
33,108
|
|
|
$
|
367
|
|
State and municipal obligations
|
|
21
|
|
|
65,898
|
|
|
699
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
65,898
|
|
|
699
|
|
||||||
Corporate bonds and notes
|
|
152
|
|
|
672,318
|
|
|
4,601
|
|
|
32
|
|
|
139,105
|
|
|
3,451
|
|
|
184
|
|
|
811,423
|
|
|
8,052
|
|
||||||
RMBS
|
|
8
|
|
|
19,943
|
|
|
204
|
|
|
26
|
|
|
101,812
|
|
|
2,658
|
|
|
34
|
|
|
121,755
|
|
|
2,862
|
|
||||||
CMBS
|
|
35
|
|
|
139,353
|
|
|
1,395
|
|
|
4
|
|
|
3,518
|
|
|
215
|
|
|
39
|
|
|
142,871
|
|
|
1,610
|
|
||||||
Other ABS
|
|
92
|
|
|
260,864
|
|
|
777
|
|
|
7
|
|
|
8,297
|
|
|
45
|
|
|
99
|
|
|
269,161
|
|
|
822
|
|
||||||
Foreign government and agency securities
|
|
5
|
|
|
7,397
|
|
|
33
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
7,397
|
|
|
33
|
|
||||||
Equity securities
|
|
13
|
|
|
149,785
|
|
|
1,989
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
149,785
|
|
|
1,989
|
|
||||||
Total
|
|
332
|
|
|
$
|
1,338,867
|
|
|
$
|
9,827
|
|
|
72
|
|
|
$
|
262,531
|
|
|
$
|
6,607
|
|
|
404
|
|
|
$
|
1,601,398
|
|
|
$
|
16,434
|
|
|
(In thousands)
|
June 30,
2018 |
|
December 31,
2017 |
||||
Trading securities:
|
|
|
|
||||
State and municipal obligations
|
$
|
200,702
|
|
|
$
|
214,841
|
|
Corporate bonds and notes
|
256,652
|
|
|
307,271
|
|
||
RMBS
|
24,790
|
|
|
29,520
|
|
||
CMBS
|
49,347
|
|
|
50,561
|
|
||
Foreign government and agency securities
|
4,143
|
|
|
4,241
|
|
||
Total
(1)
|
$
|
535,634
|
|
|
$
|
606,434
|
|
(1)
|
At December 31, 2017, includes a de minimis amount of loaned securities under securities lending agreements that are classified as other assets in our consolidated balance sheets, as further described below.
|
|
(In thousands)
|
June 30,
2018 |
|
December 31,
2017 |
||||
Loaned securities
(1)
:
|
|
|
|
||||
Corporate bonds and notes
|
$
|
16,199
|
|
|
$
|
13,862
|
|
Foreign government and agency securities
|
222
|
|
|
867
|
|
||
Equity securities
|
21,929
|
|
|
13,235
|
|
||
Total loaned securities, at fair value
|
$
|
38,350
|
|
|
$
|
27,964
|
|
|
|
|
|
||||
Total loaned securities, at amortized cost
|
$
|
39,503
|
|
|
$
|
27,846
|
|
Securities collateral on deposit from Borrowers
(2)
|
92
|
|
|
9,342
|
|
||
Reinvested cash collateral, at estimated fair value
(3)
|
39,224
|
|
|
19,357
|
|
(1)
|
Our securities loaned under securities lending agreements are reported at fair value within other assets in our condensed consolidated balance sheets. All of our securities lending agreements are classified as overnight and revolving.
None
of the amounts are subject to offsetting.
|
(2)
|
Securities collateral on deposit with us from Borrowers may not be transferred or re-pledged unless the Borrower is in default, and is therefore not reflected in our condensed consolidated financial statements.
|
(3)
|
All cash collateral received has been reinvested in accordance with the securities lending agreements and is included in short-term investments in our condensed consolidated balance sheets. Amounts payable on the return of cash collateral under securities lending agreements are included within other liabilities in our condensed consolidated balance sheets.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net realized gains (losses):
|
|
|
|
|
|
|
|
||||||||
Fixed-maturities available for sale
|
$
|
(1,691
|
)
|
|
$
|
(1,180
|
)
|
|
$
|
(4,811
|
)
|
|
$
|
(3,689
|
)
|
Equity securities
|
498
|
|
|
385
|
|
|
640
|
|
|
385
|
|
||||
Trading securities
|
(112
|
)
|
|
(349
|
)
|
|
(650
|
)
|
|
(6,043
|
)
|
||||
Short-term investments
|
(7
|
)
|
|
(38
|
)
|
|
(7
|
)
|
|
(32
|
)
|
||||
Other invested assets
|
201
|
|
|
—
|
|
|
263
|
|
|
—
|
|
||||
Other gains (losses)
|
23
|
|
|
—
|
|
|
35
|
|
|
18
|
|
||||
Net realized gains (losses) on investments
|
(1,088
|
)
|
|
(1,182
|
)
|
|
(4,530
|
)
|
|
(9,361
|
)
|
||||
Other-than-temporary impairment losses
|
—
|
|
|
(1,000
|
)
|
|
(844
|
)
|
|
(1,000
|
)
|
||||
Net unrealized gains (losses) on investment securities
(1)
|
(5,733
|
)
|
|
6,938
|
|
|
(18,537
|
)
|
|
12,164
|
|
||||
Total net gains (losses) on investments
|
(6,821
|
)
|
|
4,756
|
|
|
(23,911
|
)
|
|
1,803
|
|
||||
Net gains (losses) on other financial instruments
|
(583
|
)
|
|
575
|
|
|
(2,380
|
)
|
|
677
|
|
||||
Net gains (losses) on investments and other financial instruments
|
$
|
(7,404
|
)
|
|
$
|
5,331
|
|
|
$
|
(26,291
|
)
|
|
$
|
2,480
|
|
|
(1)
|
These amounts include unrealized gains (losses) on investment securities other than securities available for sale. For the
three and six months ended June 30, 2017
, the unrealized gains (losses) on investments exclude the net change in unrealized gains and losses on equity securities. Prior to the implementation of the update to the standard for the accounting of financial instruments effective January 1, 2018, the unrealized gains (losses) associated with equity securities were classified in accumulated other comprehensive income.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net changes in unrealized gains (losses)
(1)
:
|
|
|
|
|
|
|
|
||||||||
Equity securities
|
$
|
224
|
|
|
$
|
—
|
|
|
$
|
(702
|
)
|
|
$
|
—
|
|
Trading securities
(2)
|
(5,801
|
)
|
|
5,913
|
|
|
(16,801
|
)
|
|
7,979
|
|
||||
Net unrealized gains (losses) on investment securities
|
$
|
(5,577
|
)
|
|
$
|
5,913
|
|
|
$
|
(17,503
|
)
|
|
$
|
7,979
|
|
(1)
|
Related only to securities still held at period end. All amounts shown are included in net gains (losses) on investments and other financial instruments. Prior to the implementation of the update to the standard for the accounting of financial instruments effective January 1, 2018, the unrealized losses associated with equity securities were classified in accumulated other comprehensive income.
|
(2)
|
Includes a de minimis amount of net changes in unrealized gains (losses) related to short-term securities.
|
|
June 30, 2018
|
||||||
|
Available for Sale
|
||||||
(In thousands)
|
Amortized
Cost
|
|
Fair
Value
|
||||
Due in one year or less
(1)
|
$
|
45,836
|
|
|
$
|
45,694
|
|
Due after one year through five years
(1)
|
789,095
|
|
|
774,712
|
|
||
Due after five years through 10 years
(1)
|
1,012,314
|
|
|
973,838
|
|
||
Due after 10 years
(1)
|
396,485
|
|
|
393,834
|
|
||
RMBS
(2)
|
249,577
|
|
|
243,659
|
|
||
CMBS
(2)
|
487,805
|
|
|
477,751
|
|
||
Other ABS
(2)
|
694,613
|
|
|
692,564
|
|
||
Total
(3)
|
$
|
3,675,725
|
|
|
$
|
3,602,052
|
|
(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)
|
Includes securities loaned under securities lending agreements.
|
|
(In thousands)
|
Goodwill
|
|
Accumulated Impairment Losses
|
|
Net
|
||||||
Balance at December 31, 2016
|
$
|
197,265
|
|
|
$
|
(2,095
|
)
|
|
$
|
195,170
|
|
Goodwill acquired
|
126
|
|
|
—
|
|
|
126
|
|
|||
Impairment losses
|
—
|
|
|
(184,374
|
)
|
|
(184,374
|
)
|
|||
Balance at December 31, 2017
|
197,391
|
|
|
(186,469
|
)
|
|
10,922
|
|
|||
Goodwill acquired
|
—
|
|
|
—
|
|
|
—
|
|
|||
Impairment losses
|
—
|
|
|
—
|
|
|
—
|
|
|||
Balance at June 30, 2018
|
$
|
197,391
|
|
|
$
|
(186,469
|
)
|
|
$
|
10,922
|
|
|
June 30, 2018
|
||||||||||
(In thousands)
|
Original Amount Acquired
|
|
Accumulated Amortization and Impairment
|
|
Net Carrying Amount
|
||||||
Client relationships
(1)
|
$
|
82,530
|
|
|
$
|
(44,912
|
)
|
|
$
|
37,618
|
|
Technology
(2)
|
15,250
|
|
|
(9,992
|
)
|
|
5,258
|
|
|||
Trade name and trademarks
|
8,340
|
|
|
(3,434
|
)
|
|
4,906
|
|
|||
Client backlog
|
6,680
|
|
|
(6,680
|
)
|
|
—
|
|
|||
Non-competition agreements
|
185
|
|
|
(173
|
)
|
|
12
|
|
|||
Licenses
|
463
|
|
|
—
|
|
|
463
|
|
|||
Total
|
$
|
113,448
|
|
|
$
|
(65,191
|
)
|
|
$
|
48,257
|
|
|
December 31, 2017
|
||||||||||
(In thousands)
|
Original Amount Acquired
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||
Client relationships
(1)
|
$
|
82,530
|
|
|
$
|
(41,596
|
)
|
|
$
|
40,934
|
|
Technology
(2)
|
15,250
|
|
|
(8,922
|
)
|
|
6,328
|
|
|||
Trade name and trademarks
|
8,340
|
|
|
(3,003
|
)
|
|
5,337
|
|
|||
Client backlog
|
6,680
|
|
|
(6,006
|
)
|
|
674
|
|
|||
Non-competition agreements
|
185
|
|
|
(168
|
)
|
|
17
|
|
|||
Total
|
$
|
112,985
|
|
|
$
|
(59,695
|
)
|
|
$
|
53,290
|
|
(1)
|
Includes an impairment charge of
$14.9 million
in the quarter ended June 30, 2017.
|
(2)
|
Includes an impairment charge of
$0.9 million
in the quarter ended June 30, 2017.
|
2018
|
$
|
6,934
|
|
2019
|
8,146
|
|
|
2020
|
6,827
|
|
|
2021
|
5,413
|
|
|
2022
|
4,881
|
|
|
2023
|
4,430
|
|
|
Thereafter
|
11,626
|
|
|
Total
|
$
|
48,257
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net premiums written—insurance:
|
|
|
|
|
|
|
|
||||||||
Direct
|
$
|
283,783
|
|
|
$
|
260,647
|
|
|
$
|
541,694
|
|
|
$
|
500,292
|
|
Ceded
(1)
|
(31,825
|
)
|
|
(19,340
|
)
|
|
(51,756
|
)
|
|
(34,320
|
)
|
||||
Net premiums written—insurance
|
$
|
251,958
|
|
|
$
|
241,307
|
|
|
$
|
489,938
|
|
|
$
|
465,972
|
|
Net premiums earned—insurance:
|
|
|
|
|
|
|
|
||||||||
Direct
|
$
|
265,581
|
|
|
$
|
243,229
|
|
|
$
|
524,324
|
|
|
$
|
479,291
|
|
Assumed
|
7
|
|
|
7
|
|
|
13
|
|
|
14
|
|
||||
Ceded
(1)
|
(16,620
|
)
|
|
(14,140
|
)
|
|
(32,819
|
)
|
|
(28,409
|
)
|
||||
Net premiums earned—insurance
|
$
|
248,968
|
|
|
$
|
229,096
|
|
|
$
|
491,518
|
|
|
$
|
450,896
|
|
(1)
|
Net of profit commission.
|
|
|
Single Premium QSR Program
|
||||||||||||||
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Ceded premiums written
(1)
|
$
|
28,107
|
|
|
$
|
13,856
|
|
|
$
|
43,898
|
|
|
$
|
22,816
|
|
Ceded premiums earned
(1)
|
11,160
|
|
|
6,311
|
|
|
21,537
|
|
|
12,170
|
|
||||
Ceding commissions written
|
9,880
|
|
|
5,134
|
|
|
16,501
|
|
|
8,846
|
|
||||
Ceding commissions earned
(2)
|
5,643
|
|
|
3,248
|
|
|
10,911
|
|
|
6,185
|
|
||||
Ceded losses
|
1,013
|
|
|
464
|
|
|
1,913
|
|
|
1,037
|
|
|
QSR Program
|
||||||||||||||
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Ceded premiums written
(1)
|
$
|
3,516
|
|
|
$
|
5,059
|
|
|
$
|
7,447
|
|
|
$
|
10,516
|
|
Ceded premiums earned
(1)
|
5,258
|
|
|
7,404
|
|
|
10,870
|
|
|
15,238
|
|
||||
Ceding commissions written
|
1,012
|
|
|
1,446
|
|
|
2,140
|
|
|
3,005
|
|
||||
Ceding commissions earned
(2)
|
2,896
|
|
|
3,379
|
|
|
6,444
|
|
|
7,273
|
|
||||
Ceded losses
|
6
|
|
|
(310
|
)
|
|
252
|
|
|
260
|
|
(1)
|
Net of profit commission.
|
(2)
|
Includes amounts reported in policy acquisition costs and other operating expenses.
|
(In thousands)
|
June 30,
2018 |
|
December 31,
2017 |
||||
Property and equipment
(1)
|
$
|
90,184
|
|
|
87,042
|
|
|
Deposit with the IRS (Note 9)
|
88,557
|
|
|
88,557
|
|
||
Corporate-owned life insurance
|
84,560
|
|
|
85,862
|
|
||
Loaned securities
|
38,350
|
|
|
27,964
|
|
||
Accrued investment income
|
33,762
|
|
|
31,389
|
|
||
Unbilled receivables
|
16,478
|
|
|
22,257
|
|
||
Deferred policy acquisition costs
|
16,266
|
|
|
16,987
|
|
||
Reinsurance recoverables
|
12,841
|
|
|
8,492
|
|
||
Other
|
49,079
|
|
|
39,299
|
|
||
Total other assets
|
$
|
430,077
|
|
|
$
|
407,849
|
|
(1)
|
Property and equipment at cost, less accumulated depreciation of
$115.5 million
and
$106.0 million
at
June 30, 2018
and
December 31, 2017
, respectively. Depreciation expense was
$4.8 million
and
$4.1 million
for the three-month periods ended
June 30, 2018
and
2017
, respectively, and
$9.5 million
and
$8.3 million
for the six-month periods ended
June 30, 2018
and
2017
, respectively.
|
|
(In thousands)
|
June 30,
2018 |
|
December 31,
2017 |
||||
Mortgage insurance loss reserves
|
$
|
448,094
|
|
|
$
|
507,588
|
|
Services loss reserves
(1)
|
3,448
|
|
|
—
|
|
||
Total reserve for losses and LAE
|
$
|
451,542
|
|
|
$
|
507,588
|
|
(1)
|
A majority of this amount is included in the reinsurance recoverables reported in other assets in our condensed consolidated balance sheet, and relates to the acquisition of EnTitle Direct, completed on March 27, 2018.
|
(In thousands)
|
June 30,
2018 |
|
December 31,
2017 |
||||
Reserves for losses by category:
|
|
|
|
||||
Prime
|
$
|
255,284
|
|
|
$
|
285,022
|
|
Alt-A and A minus and below
|
144,379
|
|
|
170,873
|
|
||
IBNR and other
|
14,246
|
|
|
16,021
|
|
||
LAE
|
12,228
|
|
|
13,349
|
|
||
Reinsurance recoverable
(1)
|
9,317
|
|
|
8,315
|
|
||
Total primary reserves
|
435,454
|
|
|
493,580
|
|
||
Total pool reserves
(2)
|
12,197
|
|
|
13,463
|
|
||
Total First-lien reserves
|
447,651
|
|
|
507,043
|
|
||
Other
(3)
|
443
|
|
|
545
|
|
||
Total reserve for losses
|
$
|
448,094
|
|
|
$
|
507,588
|
|
(1)
|
Represents ceded losses on captive reinsurance transactions, the QSR Program and the Single Premium QSR Program.
|
(2)
|
Includes reinsurance recoverable of
$24 thousand
and
$35 thousand
as of
June 30, 2018
and
December 31, 2017
, respectively.
|
(3)
|
Does not include our Second-lien premium deficiency reserve that is included in other liabilities.
|
|
Six Months Ended
June 30, |
|
||||||
(In thousands)
|
2018
|
|
2017
|
|
||||
Balance at beginning of period
|
$
|
507,588
|
|
|
$
|
760,269
|
|
|
Less: Reinsurance recoverables
(1)
|
8,350
|
|
|
6,851
|
|
|
||
Balance at beginning of period, net of reinsurance recoverables
|
499,238
|
|
|
753,418
|
|
|
||
Add: Losses and LAE incurred in respect of default notices reported and unreported in:
|
|
|
|
|
||||
Current year
(2)
|
67,286
|
|
|
88,906
|
|
|
||
Prior years
|
(11,311
|
)
|
|
(24,721
|
)
|
|
||
Total incurred
|
55,975
|
|
|
64,185
|
|
|
||
Deduct: Paid claims and LAE related to:
|
|
|
|
|
||||
Current year
(2)
|
1,091
|
|
|
1,027
|
|
|
||
Prior years
|
115,369
|
|
|
172,356
|
|
|
||
Total paid
|
116,460
|
|
|
173,383
|
|
|
||
Balance at end of period, net of reinsurance recoverables
|
438,753
|
|
|
644,220
|
|
|
||
Add: Reinsurance recoverables
(1)
|
9,341
|
|
|
7,371
|
|
|
||
Balance at end of period
|
$
|
448,094
|
|
|
$
|
651,591
|
|
|
(1)
|
Related to ceded losses recoverable, if any, on captive reinsurance transactions, the QSR Program and the Single Premium QSR Program. See Note
7
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.
|
|
(In thousands)
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
5.500%
|
Senior Notes due 2019
|
$
|
157,975
|
|
|
$
|
157,636
|
|
5.250%
|
Senior Notes due 2020
|
232,275
|
|
|
231,834
|
|
||
7.000%
|
Senior Notes due 2021
|
195,500
|
|
|
195,146
|
|
||
4.500%
|
Senior Notes due 2024
|
442,937
|
|
|
442,458
|
|
||
|
Total Senior Notes
|
$
|
1,028,687
|
|
|
$
|
1,027,074
|
|
(In thousands)
|
June 30,
2018 |
|
December 31,
2017 |
||||
FHLB advances
|
$
|
115,308
|
|
|
$
|
—
|
|
Deferred ceding commission
|
92,070
|
|
|
89,907
|
|
||
Accrued compensation
|
39,621
|
|
|
67,687
|
|
||
Amount payable on the return of cash collateral under securities lending agreements
|
39,224
|
|
|
19,357
|
|
||
Current federal income taxes
|
8,807
|
|
|
96,740
|
|
||
Other
|
90,021
|
|
|
80,154
|
|
||
Total other liabilities
|
$
|
385,051
|
|
|
$
|
353,845
|
|
|
|
|
Three Months Ended June 30, 2018
|
|
Six Months Ended June 30, 2018
|
||||||||||||||||||||
(In thousands)
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
||||||||||||
Balance at beginning of period
|
$
|
(39,842
|
)
|
|
$
|
(8,367
|
)
|
|
$
|
(31,475
|
)
|
|
$
|
32,669
|
|
|
$
|
9,584
|
|
|
$
|
23,085
|
|
Cumulative effect of adopting the accounting standard update for financial instruments
|
—
|
|
|
—
|
|
|
—
|
|
|
284
|
|
|
60
|
|
|
224
|
|
||||||
Cumulative effect of adopting the accounting standard update for the reclassification of certain tax effects
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,724
|
)
|
|
2,724
|
|
||||||
Balance adjusted for cumulative effect of adopting accounting standard updates
|
(39,842
|
)
|
|
(8,367
|
)
|
|
(31,475
|
)
|
|
32,953
|
|
|
6,920
|
|
|
26,033
|
|
||||||
OCI:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized gains (losses) on investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized holding gains (losses) arising during the period
|
(35,194
|
)
|
|
(7,390
|
)
|
|
(27,804
|
)
|
|
(111,957
|
)
|
|
(23,510
|
)
|
|
(88,447
|
)
|
||||||
Less: Reclassification adjustment for net gains (losses) included in net income
(1)
|
(1,691
|
)
|
|
(355
|
)
|
|
(1,336
|
)
|
|
(5,655
|
)
|
|
(1,187
|
)
|
|
(4,468
|
)
|
||||||
Net unrealized gains (losses) on investments
|
(33,503
|
)
|
|
(7,035
|
)
|
|
(26,468
|
)
|
|
(106,302
|
)
|
|
(22,323
|
)
|
|
(83,979
|
)
|
||||||
Unrealized foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
1
|
|
|
3
|
|
||||||
OCI
|
(33,503
|
)
|
|
(7,035
|
)
|
|
(26,468
|
)
|
|
(106,298
|
)
|
|
(22,322
|
)
|
|
(83,976
|
)
|
||||||
Balance at end of period
|
$
|
(73,345
|
)
|
|
$
|
(15,402
|
)
|
|
$
|
(57,943
|
)
|
|
$
|
(73,345
|
)
|
|
$
|
(15,402
|
)
|
|
$
|
(57,943
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Three Months Ended June 30, 2017
|
|
Six Months Ended June 30, 2017
|
||||||||||||||||||||
(In thousands)
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
||||||||||||
Balance at beginning of period
|
$
|
(5,168
|
)
|
|
$
|
(1,805
|
)
|
|
$
|
(3,363
|
)
|
|
$
|
(19,063
|
)
|
|
$
|
(6,668
|
)
|
|
$
|
(12,395
|
)
|
OCI:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized gains (losses) on investments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized holding gains (losses) arising during the period
|
31,137
|
|
|
10,898
|
|
|
20,239
|
|
|
42,471
|
|
|
14,865
|
|
|
27,606
|
|
||||||
Less: Reclassification adjustment for net gains (losses) included in net income
(1)
|
(1,795
|
)
|
|
(628
|
)
|
|
(1,167
|
)
|
|
(4,304
|
)
|
|
(1,506
|
)
|
|
(2,798
|
)
|
||||||
Net unrealized gains (losses) on investments
|
32,932
|
|
|
11,526
|
|
|
21,406
|
|
|
46,775
|
|
|
16,371
|
|
|
30,404
|
|
||||||
Unrealized foreign currency translation adjustments
|
114
|
|
|
40
|
|
|
74
|
|
|
166
|
|
|
58
|
|
|
108
|
|
||||||
OCI
|
33,046
|
|
|
11,566
|
|
|
21,480
|
|
|
46,941
|
|
|
16,429
|
|
|
30,512
|
|
||||||
Balance at end of period
|
$
|
27,878
|
|
|
$
|
9,761
|
|
|
$
|
18,117
|
|
|
$
|
27,878
|
|
|
$
|
9,761
|
|
|
$
|
18,117
|
|
(1)
|
Included in net gains (losses) on investments and other financial instruments on our consolidated statements of operations.
|
|
|
June 30,
2018 |
|
December 31,
2017 |
||||
($ in millions)
|
|
|
|
||||
RIF, net
(1)
|
$
|
38,956.0
|
|
|
$
|
36,793.5
|
|
|
|
|
|
||||
Common stock and paid-in capital
|
$
|
1,866.0
|
|
|
$
|
1,866.0
|
|
Surplus Note
|
100.0
|
|
|
100.0
|
|
||
Unassigned earnings (deficit)
|
(737.4
|
)
|
|
(765.0
|
)
|
||
Statutory policyholders’ surplus
|
1,228.6
|
|
|
1,201.0
|
|
||
Contingency reserve
|
1,883.5
|
|
|
1,667.0
|
|
||
Statutory capital
|
$
|
3,112.1
|
|
|
$
|
2,868.0
|
|
|
|
|
|
||||
Risk-to-capital
|
12.5:1
|
|
|
12.8:1
|
(1)
|
Excludes risk ceded through reinsurance contracts (to third parties and affiliates) and RIF on defaulted loans.
|
|
Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
PAGE
|
|
|
|
|
RADIAN’S LONG-TERM STRATEGIC OBJECTIVES
|
• Write high-quality and profitable NIW to drive future earnings, in a manner that enhances the long-term economic value of the portfolio
|
• Leverage our competitive differentiation through:
» Our diverse products and business model
» Our core credit risk management competency
» Driving a one-company market view through our enterprise sales and marketing platform
» Operational excellence, including customer service, process quality and operational efficiency
» Digitally enabling our products and services by leveraging technology and data to drive our businesses
» Broadening our existing relationships as a valued business partner
|
• Manage our capital and financial flexibility to optimize stockholder value
|
• Increase operating leverage through accretive revenue growth and effective expense management
(1)
|
(1)
|
Operating leverage is a performance metric we define as the year-over-year percentage change in revenues minus the percentage change in expenses.
|
|
|
|
|
|
|
|
$ Change
|
|
|
|
|
|
$ Change
|
||||||||||||
|
Three Months Ended
June 30, |
|
Favorable (Unfavorable)
|
|
Six Months Ended
June 30, |
|
Favorable (Unfavorable)
|
||||||||||||||||
(In millions, except per-share amounts)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|
2018
|
|
2017
|
|
2018 vs. 2017
|
||||||||||||
Pretax income (loss)
|
$
|
180.6
|
|
|
$
|
(35.5
|
)
|
|
$
|
216.1
|
|
|
$
|
323.0
|
|
|
$
|
79.2
|
|
|
$
|
243.8
|
|
Net income (loss)
|
208.9
|
|
|
(27.3
|
)
|
|
236.2
|
|
|
323.4
|
|
|
49.1
|
|
|
274.3
|
|
||||||
Diluted net income (loss) per share
|
0.96
|
|
|
(0.13
|
)
|
|
1.09
|
|
|
1.48
|
|
|
0.22
|
|
|
1.26
|
|
||||||
Book value per share at June 30
|
15.01
|
|
|
13.54
|
|
|
1.47
|
|
|
15.01
|
|
|
13.54
|
|
|
1.47
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net premiums earned—insurance
|
251.3
|
|
|
229.1
|
|
|
22.2
|
|
|
493.9
|
|
|
450.9
|
|
|
43.0
|
|
||||||
Services revenue
|
36.8
|
|
|
37.8
|
|
|
(1.0
|
)
|
|
70.0
|
|
|
75.8
|
|
|
(5.8
|
)
|
||||||
Net investment income
|
37.5
|
|
|
30.1
|
|
|
7.4
|
|
|
71.4
|
|
|
61.1
|
|
|
10.3
|
|
||||||
Net gains (losses) on investments and other financial instruments
|
(7.4
|
)
|
|
5.3
|
|
|
(12.7
|
)
|
|
(26.3
|
)
|
|
2.5
|
|
|
(28.8
|
)
|
||||||
Provision for losses
|
19.3
|
|
|
17.2
|
|
|
(2.1
|
)
|
|
56.6
|
|
|
64.1
|
|
|
7.5
|
|
||||||
Cost of services
|
24.2
|
|
|
25.6
|
|
|
1.4
|
|
|
47.3
|
|
|
54.0
|
|
|
6.7
|
|
||||||
Other operating expenses
|
70.2
|
|
|
68.8
|
|
|
(1.4
|
)
|
|
133.4
|
|
|
137.1
|
|
|
3.7
|
|
||||||
Restructuring and other exit costs
|
0.9
|
|
|
—
|
|
|
(0.9
|
)
|
|
1.5
|
|
|
—
|
|
|
(1.5
|
)
|
||||||
Loss on induced conversion and debt extinguishment
|
—
|
|
|
1.2
|
|
|
1.2
|
|
|
—
|
|
|
5.7
|
|
|
5.7
|
|
||||||
Impairment of goodwill
|
—
|
|
|
184.4
|
|
|
184.4
|
|
|
—
|
|
|
184.4
|
|
|
184.4
|
|
||||||
Amortization and impairment of other intangible assets
|
2.7
|
|
|
18.9
|
|
|
16.2
|
|
|
5.5
|
|
|
22.2
|
|
|
16.7
|
|
||||||
Income tax provision (benefit)
|
(28.4
|
)
|
|
(8.1
|
)
|
|
20.3
|
|
|
(0.4
|
)
|
|
30.1
|
|
|
30.5
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Adjusted pretax operating income
(1)
|
$
|
191.0
|
|
|
$
|
163.8
|
|
|
$
|
27.2
|
|
|
$
|
355.1
|
|
|
$
|
289.0
|
|
|
$
|
66.1
|
|
(1)
|
See “—
Use of Non-GAAP Financial Measure
” below.
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net unrealized gains (losses) related to change in fair value of trading securities and other investments
|
$
|
(5.7
|
)
|
|
$
|
6.9
|
|
|
$
|
(18.5
|
)
|
|
$
|
12.2
|
|
Net realized gains (losses) on investments
|
(1.1
|
)
|
|
(1.2
|
)
|
|
(4.5
|
)
|
|
(9.4
|
)
|
||||
Other-than-temporary impairment losses
|
—
|
|
|
(1.0
|
)
|
|
(0.9
|
)
|
|
(1.0
|
)
|
||||
Net gains (losses) on other financial instruments
|
(0.6
|
)
|
|
0.6
|
|
|
(2.4
|
)
|
|
0.7
|
|
||||
Net gains (losses) on investments and other financial instruments
|
$
|
(7.4
|
)
|
|
$
|
5.3
|
|
|
$
|
(26.3
|
)
|
|
$
|
2.5
|
|
|
|
|
|
|
|
|
|
|
(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 or equity securities. These valuation adjustments may not necessarily result in realized economic gains or losses.
|
|
(2)
|
Loss on induced conversion and debt extinguishment.
Gains or losses on early extinguishment of debt and losses incurred to purchase our convertible debt prior to maturity are discretionary activities that are undertaken in order to take advantage of market opportunities to strengthen our financial and capital positions; therefore, we do not view these activities as part of our operating performance. Such transactions do not reflect expected future operations and do not provide meaningful insight regarding our current or past operating trends. Therefore, these items are excluded from our calculation of adjusted pretax operating income (loss).
|
(3)
|
Acquisition-related expenses.
Acquisition-related expenses represent the costs incurred to effect an acquisition of a business (i.e., a business combination). Because we pursue acquisitions on a strategic and selective basis and not in the ordinary course of our business, we do not view acquisition-related expenses as a consequence of a primary business activity. Therefore, we do not consider these expenses to be part of our operating performance and they are excluded from our calculation of adjusted pretax operating income (loss).
|
(4)
|
Amortization or impairment of goodwill and other intangible assets.
Amortization of intangible assets represents the periodic expense required to amortize the cost of intangible assets over their estimated useful lives. Intangible assets with an indefinite useful life are also periodically reviewed for potential impairment, and impairment adjustments are made whenever appropriate. These charges are not viewed as part of the operating performance of our primary activities and therefore are excluded from our calculation of adjusted pretax operating income (loss).
|
(5)
|
Net impairment losses recognized in earnings and losses from the sale of lines of business
. The recognition of net impairment losses on investments and the impairment of other long-lived assets does not result in a cash payment and can vary significantly in both amount and frequency, depending on market credit cycles and other factors. Losses from the sale of lines of business are highly discretionary as a result of strategic restructuring decisions, and generally do not occur in the normal course of our business. We do not view these losses to be indicative of our fundamental operating activities. Therefore, whenever these losses occur, we exclude them from our calculation of adjusted pretax operating income (loss).
|
|
Reconciliation of Consolidated Non-GAAP Financial Measure
|
|||||||||||||||
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Consolidated pretax income (loss)
|
$
|
180,571
|
|
|
$
|
(35,474
|
)
|
|
$
|
323,013
|
|
|
$
|
79,196
|
|
Less income (expense) items:
|
|
|
|
|
|
|
|
||||||||
Net gains (losses) on investments and other financial instruments
|
(7,404
|
)
|
|
5,331
|
|
|
(26,291
|
)
|
|
2,480
|
|
||||
Loss on induced conversion and debt extinguishment
|
—
|
|
|
(1,247
|
)
|
|
—
|
|
|
(5,703
|
)
|
||||
Acquisition-related expenses
(1)
|
(416
|
)
|
|
(64
|
)
|
|
(416
|
)
|
|
(72
|
)
|
||||
Impairment of goodwill
|
—
|
|
|
(184,374
|
)
|
|
—
|
|
|
(184,374
|
)
|
||||
Amortization and impairment of other intangible assets
|
(2,748
|
)
|
|
(18,856
|
)
|
|
(5,496
|
)
|
|
(22,152
|
)
|
||||
Impairment of other long-lived assets
(2)
|
130
|
|
|
—
|
|
|
104
|
|
|
—
|
|
||||
Total adjusted pretax operating income
(3)
|
$
|
191,009
|
|
|
$
|
163,736
|
|
|
$
|
355,112
|
|
|
$
|
289,017
|
|
|
|
|
|
|
|
|
|
(1)
|
Acquisition-related expenses represent expenses incurred to effect the acquisition of a business, net of adjustments to accruals previously recorded for acquisition expenses.
|
(2)
|
Included within restructuring and other exit costs. Includes, for the three months ended June 30, 2018, a working capital adjustment related to the sale of our EuroRisk business.
|
(3)
|
Total adjusted pretax operating income consists of adjusted pretax operating income (loss) for each segment as follows:
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Adjusted pretax operating income (loss):
|
|
|
|
|
|
|
|
||||||||
Mortgage insurance
(a)
|
$
|
197,440
|
|
|
$
|
170,361
|
|
|
$
|
369,151
|
|
|
$
|
304,994
|
|
Services
(a)
|
(6,431
|
)
|
|
(6,625
|
)
|
|
(14,039
|
)
|
|
(15,977
|
)
|
||||
Total adjusted pretax operating income
|
$
|
191,009
|
|
|
$
|
163,736
|
|
|
$
|
355,112
|
|
|
$
|
289,017
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes inter-segment expenses and revenues as disclosed in Note
3
of Notes to Unaudited Condensed Consolidated Financial Statements.
|
|
|
|
|
|
|
$ Change
|
|
|
|
|
|
$ Change
|
||||||||||||
|
Three Months Ended
June 30, |
|
Favorable (Unfavorable)
|
|
Six Months Ended
June 30, |
|
Favorable (Unfavorable)
|
||||||||||||||||
(In millions)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|
2018
|
|
2017
|
|
2018 vs. 2017
|
||||||||||||
Adjusted pretax operating income
(1)
|
$
|
197.4
|
|
|
$
|
170.4
|
|
|
$
|
27.0
|
|
|
$
|
369.2
|
|
|
$
|
305.0
|
|
|
$
|
64.2
|
|
Net premiums written—insurance
(2)
|
252.0
|
|
|
241.3
|
|
|
10.7
|
|
|
489.9
|
|
|
466.0
|
|
|
23.9
|
|
||||||
(Increase) decrease in unearned premiums
|
(3.0
|
)
|
|
(12.2
|
)
|
|
9.2
|
|
|
1.6
|
|
|
(15.1
|
)
|
|
16.7
|
|
||||||
Net premiums earned—insurance
|
249.0
|
|
|
229.1
|
|
|
19.9
|
|
|
491.5
|
|
|
450.9
|
|
|
40.6
|
|
||||||
Net investment income
|
37.4
|
|
|
30.1
|
|
|
7.3
|
|
|
71.4
|
|
|
61.1
|
|
|
10.3
|
|
||||||
Provision for losses
|
19.4
|
|
|
17.7
|
|
|
(1.7
|
)
|
|
56.8
|
|
|
64.9
|
|
|
8.1
|
|
||||||
Other operating expenses
(3)
|
53.4
|
|
|
53.8
|
|
|
0.4
|
|
|
103.9
|
|
|
107.3
|
|
|
3.4
|
|
(1)
|
Our senior management uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of each of the Company’s business segments. See Note 3 of Notes to Unaudited Condensed Consolidated Financial Statements.
|
(2)
|
Net of ceded premiums written under the QSR Program and the Single Premium QSR Program. See Note
7
of Notes to Unaudited Condensed Consolidated Financial Statements for more information.
|
(3)
|
Includes allocation of corporate operating expenses of
$20.1 million
and
$38.7 million
for the
three and six months ended June 30, 2018
, respectively, and
$15.9 million
and
$30.1 million
for the three and six months ended
June 30, 2017
, respectively.
|
|
(1)
|
Policy years represent the original policy years, and have not been adjusted to reflect subsequent HARP refinancing activity.
|
(2)
|
Adjusted to reflect subsequent HARP refinancing activity, this percentage would decrease to 7.1%.
|
|
|
(1)
|
Represents inception-to-date losses incurred as a percentage of net premiums earned.
|
(2)
|
Incurred losses in 2017 were slightly elevated due to the impact of Hurricanes Harvey and Irma. See “Overview—
Operating Environment
—
Hurricanes
” for additional information.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||||||||
Total primary NIW by FICO score
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
>=740
|
$
|
9,988
|
|
|
60.8
|
%
|
|
$
|
8,836
|
|
|
61.6
|
%
|
|
$
|
17,100
|
|
|
60.9
|
%
|
|
$
|
15,004
|
|
|
61.5
|
%
|
680-739
|
5,332
|
|
|
32.5
|
|
|
4,672
|
|
|
32.6
|
|
|
9,134
|
|
|
32.5
|
|
|
7,955
|
|
|
32.6
|
|
||||
620-679
|
1,097
|
|
|
6.7
|
|
|
834
|
|
|
5.8
|
|
|
1,847
|
|
|
6.6
|
|
|
1,438
|
|
|
5.9
|
|
||||
Total Primary NIW
|
$
|
16,417
|
|
|
100.0
|
%
|
|
$
|
14,342
|
|
|
100.0
|
%
|
|
$
|
28,081
|
|
|
100.0
|
%
|
|
$
|
24,397
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Percentage of primary NIW
|
|
|
|
|
|
|
|
||||||||
Direct Monthly and Other Premiums
|
76
|
%
|
|
77
|
%
|
|
77
|
%
|
|
76
|
%
|
||||
Direct Single Premiums
|
24
|
%
|
|
23
|
%
|
|
23
|
%
|
|
24
|
%
|
||||
Lender-paid
|
10
|
%
|
|
21
|
%
|
|
12
|
%
|
|
22
|
%
|
||||
Borrower-paid
(1)
|
14
|
%
|
|
2
|
%
|
|
11
|
%
|
|
2
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Net Single Premiums
(2)
|
8
|
%
|
|
15
|
%
|
|
8
|
%
|
|
16
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
NIW for Purchases
|
95
|
%
|
|
91
|
%
|
|
92
|
%
|
|
88
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
NIW for Refinances
|
5
|
%
|
|
9
|
%
|
|
8
|
%
|
|
12
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
LTV
|
|
|
|
|
|
|
|
||||||||
95.01% and above
|
16.3
|
%
|
|
12.8
|
%
|
|
15.9
|
%
|
|
11.3
|
%
|
||||
90.01% to 95.00%
|
45.3
|
%
|
|
47.3
|
%
|
|
45
|
%
|
|
47.3
|
%
|
||||
85.01% to 90.00%
|
27.5
|
%
|
|
28.8
|
%
|
|
27.5
|
%
|
|
29.4
|
%
|
||||
85.00% and below
|
10.9
|
%
|
|
11.1
|
%
|
|
11.6
|
%
|
|
12.0
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Primary risk written
|
$
|
4,155
|
|
|
$
|
3,646
|
|
|
$
|
7,084
|
|
|
$
|
6,153
|
|
|
|
|
|
|
|
|
|
(1)
|
Borrower-paid Single Premium Policies provide an increased return on required capital because, over the life of the loans, the Minimum Required Assets under PMIERs are lower than for lender-paid Single Premium Policies. See “Overview—
Operating Environment
—
Competition and Pricing”
for additional information.
|
(2)
|
Represents the percentage of direct Single Premium Policies written, after giving effect to the Single Premium NIW ceded under the Single Premium QSR Program (for NIW after the effective dates of the respective agreements). See Note
7
of Notes to Unaudited Condensed Consolidated Financial Statements for additional information about these arrangements.
|
($ in millions)
|
June 30,
2018 |
|
December 31,
2017 |
|
June 30,
2017 |
||||||
Primary IIF
|
|
|
|
|
|
||||||
Direct Monthly and Other Premiums
|
69
|
%
|
|
69
|
%
|
|
68
|
%
|
|||
Direct Single Premiums
|
31
|
%
|
|
31
|
%
|
|
32
|
%
|
|||
|
|
|
|
|
|
||||||
Net Single Premiums
(1)
|
19
|
%
|
|
20
|
%
|
|
25
|
%
|
|||
|
|
|
|
|
|
||||||
Total Primary IIF
|
$
|
210,741
|
|
|
$
|
200,724
|
|
|
$
|
191,637
|
|
|
|
|
|
|
|
||||||
Persistency Rate
(12 months ended)
|
80.9
|
%
|
|
81.1
|
%
|
|
78.5
|
%
|
|||
Persistency Rate
(quarterly, annualized)
(2)
|
82.3
|
%
|
|
79.4
|
%
|
(3)
|
82.8
|
%
|
(1)
|
Represents the percentage of Single Premium IIF, after giving effect to all reinsurance ceded. See Note
7
of Notes to Unaudited Condensed Consolidated Financial Statements for additional information about reinsurance transactions.
|
(2)
|
The Persistency Rate on a quarterly, annualized basis may be impacted by seasonality or other factors, and may not be indicative of full-year trends.
|
(3)
|
The Persistency Rate in the fourth quarter of 2017 was reduced by an increase in cancellations of Single Premium Policies due to increased cancellations identified by our ongoing servicer monitoring process for Single Premium Policies.
|
|
($ in millions)
|
June 30,
2018 |
|
December 31,
2017 |
|
June 30,
2017 |
|||||||||||||||
Primary RIF by Premium Type
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Direct Monthly and Other Premiums
|
$
|
37,515
|
|
|
69.6
|
%
|
|
$
|
35,452
|
|
|
69.1
|
%
|
|
$
|
33,571
|
|
|
68.6
|
%
|
Direct Single Premiums
|
16,407
|
|
|
30.4
|
|
|
15,836
|
|
|
30.9
|
|
|
15,358
|
|
|
31.4
|
|
|||
Total primary RIF
|
$
|
53,922
|
|
|
100.0
|
%
|
|
$
|
51,288
|
|
|
100.0
|
%
|
|
$
|
48,929
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net Single Premiums
(1)
|
$
|
8,266
|
|
|
18.3
|
%
|
|
$
|
8,320
|
|
|
19.3
|
%
|
|
$
|
10,621
|
|
|
24.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Primary RIF by Internal Risk Grade
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prime
|
$
|
52,446
|
|
|
97.3
|
%
|
|
$
|
49,674
|
|
|
96.9
|
%
|
|
$
|
47,075
|
|
|
96.2
|
%
|
Alt-A and A minus and below
|
1,476
|
|
|
2.7
|
|
|
1,614
|
|
|
3.1
|
|
|
1,854
|
|
|
3.8
|
|
|||
Total primary RIF
|
$
|
53,922
|
|
|
100.0
|
%
|
|
$
|
51,288
|
|
|
100.0
|
%
|
|
$
|
48,929
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the dollar amount and percentage, respectively, of Single Premium RIF, after giving effect to all reinsurance ceded.
|
($ in millions)
|
June 30,
2018 |
|
December 31,
2017 |
|
June 30,
2017 |
|||||||||||||||
Total primary RIF by FICO score
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
>=740
|
$
|
31,955
|
|
|
59.3
|
%
|
|
$
|
30,225
|
|
|
58.9
|
%
|
|
$
|
28,514
|
|
|
58.3
|
%
|
680-739
|
16,998
|
|
|
31.5
|
|
|
16,097
|
|
|
31.4
|
|
|
15,249
|
|
|
31.1
|
|
|||
620-679
|
4,472
|
|
|
8.3
|
|
|
4,425
|
|
|
8.6
|
|
|
4,537
|
|
|
9.3
|
|
|||
<=619
|
497
|
|
|
0.9
|
|
|
541
|
|
|
1.1
|
|
|
629
|
|
|
1.3
|
|
|||
Total primary RIF
|
$
|
53,922
|
|
|
100.0
|
%
|
|
$
|
51,288
|
|
|
100.0
|
%
|
|
$
|
48,929
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Primary RIF on defaulted loans
|
$
|
1,093
|
|
|
|
|
$
|
1,389
|
|
|
|
|
$
|
1,124
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
June 30,
2018 |
|
December 31,
2017 |
|
June 30,
2017 |
|||||||||||||||
Total primary RIF by LTV
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
95.01% and above
|
$
|
5,575
|
|
|
10.3
|
%
|
|
$
|
4,704
|
|
|
9.2
|
%
|
|
$
|
3,926
|
|
|
8.0
|
%
|
90.01% to 95.00%
|
28,737
|
|
|
53.3
|
|
|
27,276
|
|
|
53.2
|
|
|
25,880
|
|
|
52.9
|
|
|||
85.01% to 90.00%
|
16,024
|
|
|
29.7
|
|
|
15,719
|
|
|
30.6
|
|
|
15,508
|
|
|
31.7
|
|
|||
85.00% and below
|
3,586
|
|
|
6.7
|
|
|
3,589
|
|
|
7.0
|
|
|
3,615
|
|
|
7.4
|
|
|||
Total primary RIF
|
$
|
53,922
|
|
|
100.0
|
%
|
|
$
|
51,288
|
|
|
100.0
|
%
|
|
$
|
48,929
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total primary RIF by policy year
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2008 and prior
|
$
|
6,429
|
|
|
11.9
|
%
|
|
$
|
7,159
|
|
|
14.0
|
%
|
|
$
|
8,316
|
|
|
17.0
|
%
|
2009
|
247
|
|
|
0.4
|
|
|
298
|
|
|
0.6
|
|
|
377
|
|
|
0.8
|
|
|||
2010
|
195
|
|
|
0.4
|
|
|
264
|
|
|
0.5
|
|
|
351
|
|
|
0.7
|
|
|||
2011
|
563
|
|
|
1.0
|
|
|
682
|
|
|
1.3
|
|
|
802
|
|
|
1.7
|
|
|||
2012
|
2,423
|
|
|
4.5
|
|
|
2,830
|
|
|
5.5
|
|
|
3,279
|
|
|
6.7
|
|
|||
2013
|
3,993
|
|
|
7.4
|
|
|
4,557
|
|
|
8.9
|
|
|
5,235
|
|
|
10.7
|
|
|||
2014
|
3,844
|
|
|
7.1
|
|
|
4,356
|
|
|
8.5
|
|
|
5,000
|
|
|
10.2
|
|
|||
2015
|
6,408
|
|
|
11.9
|
|
|
7,096
|
|
|
13.8
|
|
|
7,890
|
|
|
16.1
|
|
|||
2016
|
10,329
|
|
|
19.2
|
|
|
10,992
|
|
|
21.4
|
|
|
11,608
|
|
|
23.7
|
|
|||
2017
|
12,506
|
|
|
23.2
|
|
|
13,054
|
|
|
25.5
|
|
|
6,071
|
|
|
12.4
|
|
|||
2018
|
6,985
|
|
|
13.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total primary RIF
(1)
|
$
|
53,922
|
|
|
100.0
|
%
|
|
$
|
51,288
|
|
|
100.0
|
%
|
|
$
|
48,929
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
At
June 30, 2018
,
December 31, 2017
and
June 30, 2017
, consists of
97.5%
,
97.3%
and
97.1%
, respectively, of RIF related to fixed-rate mortgages.
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(in thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net premiums earned
—
insurance:
|
|
|
|
|
|
|
|
||||||||
Direct
|
|
|
|
|
|
|
|
||||||||
Premiums earned, excluding revenue from cancellations
|
$
|
250,805
|
|
|
$
|
229,883
|
|
|
$
|
497,213
|
|
|
$
|
455,530
|
|
Single Premium Policy cancellations
|
14,776
|
|
|
13,346
|
|
|
27,111
|
|
|
23,761
|
|
||||
Direct premiums earned
|
265,581
|
|
|
243,229
|
|
|
524,324
|
|
|
479,291
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Ceded
|
|
|
|
|
|
|
|
||||||||
Premiums earned, excluding revenue from cancellations
|
(20,491
|
)
|
|
(16,039
|
)
|
|
(40,794
|
)
|
|
(32,405
|
)
|
||||
Single Premium Policy cancellations
(1)
|
(4,046
|
)
|
|
(2,622
|
)
|
|
(7,347
|
)
|
|
(4,725
|
)
|
||||
Profit commission—other
(2)
|
7,917
|
|
|
4,521
|
|
|
15,322
|
|
|
8,721
|
|
||||
Ceded premiums, net of profit commission
|
(16,620
|
)
|
|
(14,140
|
)
|
|
(32,819
|
)
|
|
(28,409
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Assumed premiums earned
|
7
|
|
|
7
|
|
|
13
|
|
|
14
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total net premiums earned
—
insurance
|
$
|
248,968
|
|
|
$
|
229,096
|
|
|
$
|
491,518
|
|
|
$
|
450,896
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes the impact of related profit commissions.
|
(2)
|
The amounts represent the profit commission on the Single Premium QSR Program, excluding impact of Single Premium Policy cancellations.
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
QSR Program
|
|
|
|
|
|
|
|
||||
% of total direct premiums written
|
1.2
|
%
|
|
1.9
|
%
|
|
1.4
|
%
|
|
2.1
|
%
|
% of total direct premiums earned
|
2.0
|
%
|
|
3.1
|
%
|
|
2.1
|
%
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
||||
Single Premium QSR Program
|
|
|
|
|
|
|
|
||||
% of total direct premiums written
|
9.8
|
%
|
|
5.3
|
%
|
|
8.1
|
%
|
|
4.6
|
%
|
% of total direct premiums earned
|
4.2
|
%
|
|
2.6
|
%
|
|
4.1
|
%
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
||||
First-Lien Captives
|
|
|
|
|
|
|
|
||||
% of total direct premiums written
|
0.0
|
%
|
|
0.1
|
%
|
|
0.0
|
%
|
|
0.1
|
%
|
% of total direct premiums earned
|
0.0
|
%
|
|
0.1
|
%
|
|
0.0
|
%
|
|
0.1
|
%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Current period defaults
(1)
|
$
|
37.2
|
|
|
$
|
45.3
|
|
|
$
|
67.3
|
|
|
$
|
88.9
|
|
Prior period defaults
(2)
|
(18.1
|
)
|
|
(28.2
|
)
|
|
(11.3
|
)
|
|
(24.7
|
)
|
||||
Second-lien mortgage loan premium deficiency reserve and other
|
0.3
|
|
|
0.6
|
|
|
0.8
|
|
|
0.7
|
|
||||
Provision for losses
|
$
|
19.4
|
|
|
$
|
17.7
|
|
|
$
|
56.8
|
|
|
$
|
64.9
|
|
|
|
|
|
|
|
|
|
||||||||
Loss ratio
(3)
|
7.8
|
%
|
|
7.7
|
%
|
|
11.6
|
%
|
|
14.4
|
%
|
||||
|
|
|
|
|
|
|
|
(1)
|
Related to defaulted loans with a most recent default notice dated in the period indicated. For example, if a loan had defaulted in a prior period, but then subsequently cured and later re-defaulted in the current period, the default would be considered a current period default.
|
(2)
|
Related to defaulted loans with a default notice dated in a period earlier than the period indicated, which have been continuously in default since that time.
|
(3)
|
Provision for losses as a percentage of net premiums earned.
|
|
|
June 30,
2018 |
|
December 31,
2017 |
|
June 30,
2017 |
|||
Default Statistics—Primary Insurance:
|
|
|
|
|
|
|||
Total Primary Insurance
|
|
|
|
|
|
|||
Prime
|
|
|
|
|
|
|||
Number of insured loans
|
947,165
|
|
|
913,408
|
|
|
879,926
|
|
Number of loans in default
|
15,849
|
|
|
20,269
|
|
|
15,664
|
|
Percentage of loans in default
|
1.67
|
%
|
|
2.22
|
%
|
|
1.78
|
%
|
Alt-A and A minus and below
|
|
|
|
|
|
|||
Number of insured loans
|
38,892
|
|
|
42,318
|
|
|
48,953
|
|
Number of loans in default
|
6,239
|
|
|
7,653
|
|
|
8,091
|
|
Percentage of loans in default
|
16.04
|
%
|
|
18.08
|
%
|
|
16.53
|
%
|
Total Primary Insurance
|
|
|
|
|
|
|||
Number of insured loans
|
986,057
|
|
|
955,726
|
|
|
928,879
|
|
Number of loans in default
(1)
|
22,088
|
|
|
27,922
|
|
|
23,755
|
|
Percentage of loans in default
|
2.24
|
%
|
|
2.92
|
%
|
|
2.56
|
%
|
Default Statistics—Pool Insurance:
|
|
|
|
|
|
|||
Number of loans in default
|
1,788
|
|
|
2,117
|
|
|
3,365
|
|
(1)
|
Included in this amount at
June 30, 2018
and
December 31, 2017
are the defaults in the FEMA Designated Areas associated with Hurricanes Harvey and Irma, which occurred during the third quarter of 2017. At
June 30, 2018
,
December 31, 2017
and
June 30, 2017
, defaults in these areas were
4,132
;
7,051
; and
2,749
, respectively.
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Beginning default inventory
|
24,597
|
|
|
25,793
|
|
|
27,922
|
|
|
29,105
|
|
Plus: New defaults
(1)
|
|
|
|
|
|
|
|
||||
Legacy Portfolio new defaults
|
4,695
|
|
|
5,714
|
|
|
9,708
|
|
|
11,893
|
|
Post-legacy new defaults
|
3,644
|
|
|
2,856
|
|
|
7,720
|
|
|
5,865
|
|
Total new defaults
|
8,339
|
|
|
8,570
|
|
|
17,428
|
|
|
17,758
|
|
Less: Cures
(1)
|
9,739
|
|
|
8,513
|
|
|
21,106
|
|
|
19,502
|
|
Less: Claims paid
(2)
|
1,105
|
|
|
2,082
|
|
|
2,157
|
|
|
3,586
|
|
Less: Rescissions and Claim Denials, net of (Reinstatements)
(3)
|
4
|
|
|
13
|
|
|
(1
|
)
|
|
20
|
|
Ending default inventory
|
22,088
|
|
|
23,755
|
|
|
22,088
|
|
|
23,755
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts include the new defaults and Cures in the FEMA Designated Areas associated with Hurricanes Harvey and Irma, which occurred during the third quarter of 2017. For
the
three and six months ended June 30, 2018
and
2017
, new defaults and Cures in these areas were as follows:
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
New defaults
|
755
|
|
|
860
|
|
|
1,744
|
|
|
1,739
|
|
Cures
|
2,284
|
|
|
817
|
|
|
4,452
|
|
|
1,890
|
|
(2)
|
Includes those charged to a deductible or captive reinsurance transactions, as well as commutations.
|
(3)
|
Net of any previous Rescissions and Claim Denials that were reinstated during the period. Such reinstated Rescissions and Claim Denials may ultimately result in a paid claim.
|
|
|
June 30, 2018
|
|||||||||||||||||
|
Total
|
|
Foreclosure Stage Defaulted Loans
|
|
Cure % During the 2nd Quarter
|
|
Reserve for Losses
|
|
% of Reserve
|
|||||||||
($ in thousands)
|
#
|
|
%
|
|
#
|
|
%
|
|
$
|
|
%
|
|||||||
Missed payments:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Three payments or less
|
8,696
|
|
|
39.4
|
%
|
|
143
|
|
|
39.9
|
%
|
|
$
|
78,048
|
|
|
19.1
|
%
|
Four to eleven payments
|
7,213
|
|
|
32.6
|
|
|
461
|
|
|
26.1
|
|
|
96,650
|
|
|
23.6
|
|
|
Twelve payments or more
|
5,491
|
|
|
24.9
|
|
|
1,676
|
|
|
5.8
|
|
|
197,849
|
|
|
48.4
|
|
|
Pending claims
|
688
|
|
|
3.1
|
|
|
N/A
|
|
|
4.8
|
|
|
36,433
|
|
|
8.9
|
|
|
Total
|
22,088
|
|
|
100.0
|
%
|
|
2,280
|
|
|
|
|
408,980
|
|
|
100.0
|
%
|
||
IBNR and other
|
|
|
|
|
|
|
|
|
14,246
|
|
|
|
||||||
LAE
|
|
|
|
|
|
|
|
|
12,228
|
|
|
|
||||||
Total primary reserve
|
|
|
|
|
|
|
|
|
$
|
435,454
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
||||
Key Reserve Assumptions
|
||||
Gross Default to Claim Rate %
|
|
Net Default to Claim Rate %
|
|
Claim Severity %
|
37%
|
|
35%
|
|
98%
|
|
December 31, 2017
|
|||||||||||||||||
|
Total
|
|
Foreclosure Stage Defaulted Loans
|
|
Cure % During the 4th Quarter
|
|
Reserve for Losses
|
|
% of Reserve
|
|||||||||
($ in thousands)
|
#
|
|
%
|
|
#
|
|
%
|
|
$
|
|
%
|
|||||||
Missed payments:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Three payments or less
|
13,004
|
|
|
46.6
|
%
|
|
172
|
|
|
31.7
|
%
|
|
$
|
89,412
|
|
|
19.3
|
%
|
Four to eleven payments
|
7,528
|
|
|
27.0
|
|
|
426
|
|
|
20.9
|
|
|
99,759
|
|
|
21.5
|
|
|
Twelve payments or more
|
6,651
|
|
|
23.8
|
|
|
1,933
|
|
|
6.3
|
|
|
234,895
|
|
|
50.6
|
|
|
Pending claims
|
739
|
|
|
2.6
|
|
|
N/A
|
|
|
3.1
|
|
|
40,144
|
|
|
8.6
|
|
|
Total
|
27,922
|
|
|
100.0
|
%
|
|
2,531
|
|
|
|
|
464,210
|
|
|
100.0
|
%
|
||
IBNR and other
|
|
|
|
|
|
|
|
|
16,021
|
|
|
|
||||||
LAE
|
|
|
|
|
|
|
|
|
13,349
|
|
|
|
||||||
Total primary reserve
|
|
|
|
|
|
|
|
|
$
|
493,580
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
||||
Key Reserve Assumptions
|
||||
Gross Default to Claim Rate %
|
|
Net Default to Claim Rate %
|
|
Claim Severity %
|
33%
|
|
31%
|
|
98%
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net claims paid:
(1)
|
|
|
|
|
|
|
|
||||||||
Prime
|
$
|
30,936
|
|
|
$
|
45,562
|
|
|
$
|
68,078
|
|
|
$
|
97,606
|
|
Alt-A and A minus and below
|
17,156
|
|
|
24,286
|
|
|
38,572
|
|
|
49,911
|
|
||||
Total primary claims paid
|
48,092
|
|
|
69,848
|
|
|
106,650
|
|
|
147,517
|
|
||||
Pool
|
954
|
|
|
1,901
|
|
|
2,106
|
|
|
6,081
|
|
||||
Other
|
157
|
|
|
(1,937
|
)
|
|
305
|
|
|
(1,859
|
)
|
||||
Subtotal
|
49,203
|
|
|
69,812
|
|
|
109,061
|
|
|
151,739
|
|
||||
Impact of captive terminations
|
—
|
|
|
645
|
|
|
(36
|
)
|
|
645
|
|
||||
Impact of commutations
|
7,331
|
|
|
20,838
|
|
|
7,435
|
|
|
20,999
|
|
||||
Total net claims paid
|
$
|
56,534
|
|
|
$
|
91,295
|
|
|
$
|
116,460
|
|
|
$
|
173,383
|
|
|
|
|
|
|
|
|
|
||||||||
Average net claim paid:
(1) (2)
|
|
|
|
|
|
|
|
||||||||
Prime
|
$
|
50.1
|
|
|
$
|
48.2
|
|
|
$
|
50.1
|
|
|
$
|
49.4
|
|
Alt-A and A minus and below
|
65.7
|
|
|
51.0
|
|
|
64.2
|
|
|
52.2
|
|
||||
Total average net primary claim paid
|
54.8
|
|
|
49.1
|
|
|
54.4
|
|
|
50.3
|
|
||||
Pool
|
73.4
|
|
|
47.5
|
|
|
60.2
|
|
|
48.6
|
|
||||
Total average net claim paid
|
$
|
54.1
|
|
|
$
|
47.3
|
|
|
$
|
53.6
|
|
|
$
|
49.2
|
|
|
|
|
|
|
|
|
|
||||||||
Average direct primary claim paid
(2) (3)
|
$
|
55.5
|
|
|
$
|
49.4
|
|
|
$
|
55.0
|
|
|
$
|
50.6
|
|
Average total direct claim paid
(2) (3)
|
$
|
54.8
|
|
|
$
|
47.6
|
|
|
$
|
54.1
|
|
|
$
|
49.4
|
|
(1)
|
Net of reinsurance recoveries.
|
(2)
|
Calculated without giving effect to the impact of the termination of captive transactions and commutations.
|
(3)
|
Before reinsurance recoveries.
|
|
|
|
|
|
|
$ Change
|
|
|
|
|
|
$ Change
|
||||||||||||
|
Three Months Ended
June 30, |
|
Favorable (Unfavorable)
|
|
Six Months Ended
June 30, |
|
Favorable (Unfavorable)
|
||||||||||||||||
(In millions)
|
2018
|
|
2017
|
|
2018 vs. 2017
|
|
2018
|
|
2017
|
|
2018 vs. 2017
|
||||||||||||
Adjusted pretax operating income (loss)
(1)
|
$
|
(6.4
|
)
|
|
$
|
(6.6
|
)
|
|
$
|
0.2
|
|
|
$
|
(14.0
|
)
|
|
$
|
(16.0
|
)
|
|
$
|
2.0
|
|
Net premiums earned—insurance
|
2.4
|
|
|
—
|
|
|
2.4
|
|
|
2.4
|
|
|
—
|
|
|
2.4
|
|
||||||
Services revenue
|
37.7
|
|
|
40.0
|
|
|
(2.3
|
)
|
|
71.9
|
|
|
80.1
|
|
|
(8.2
|
)
|
||||||
Cost of services
|
24.4
|
|
|
26.0
|
|
|
1.6
|
|
|
47.6
|
|
|
54.7
|
|
|
7.1
|
|
||||||
Gross profit on services
|
13.3
|
|
|
14.0
|
|
|
(0.7
|
)
|
|
24.3
|
|
|
25.4
|
|
|
(1.1
|
)
|
||||||
Other operating expenses
(2)
|
17.0
|
|
|
16.2
|
|
|
(0.8
|
)
|
|
30.6
|
|
|
32.5
|
|
|
1.9
|
|
||||||
Restructuring and other exit costs
(3)
|
1.1
|
|
|
—
|
|
|
(1.1
|
)
|
|
1.6
|
|
|
—
|
|
|
(1.6
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Our senior management uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of each of the Company’s business segments. See Note 3 of Notes to Unaudited Condensed Consolidated Financial Statements.
|
(2)
|
Includes allocation of corporate operating expenses of
$3.0 million
and
$5.8 million
for the three- and six-month periods ended
June 30, 2018
, respectively, and
$3.4 million
and
$7.1 million
for the three- and six month periods ended
June 30, 2017
, respectively.
|
(3)
|
Primarily includes facility and lease termination costs. Does not include impairment of long-lived assets and loss from the sale of a business line, which is not considered a component of adjusted pretax operating income.
|
|
|
|
(1)
|
Represents Radian Group’s Liquidity, net of the $35 million minimum liquidity requirement under the unsecured revolving credit facility.
|
(2)
|
The amendment to the 2016 Single Premium QSR Agreement which became effective as of December 31, 2017, and the $100 million of cash and marketable securities that Radian Group transferred to Radian Guaranty in December 2017 in exchange for a Surplus Note both had the effect of increasing the amount of Radian Guaranty’s cushion under the PMIERs financial requirements at December 31, 2017. These increases were partially offset by an elevated level of Minimum Required Assets at December 31, 2017 and June 30, 2018, due to the increase in reported delinquencies from hurricane-affected areas, which is expected to be temporary, as discussed above.
|
(3)
|
Represents Radian Guaranty’s excess of Available Assets over its Minimum Required Assets, calculated in accordance with the PMIERs financial requirements.
|
|
|
(1)
|
the repayment of our outstanding Senior Notes, consisting of:
|
•
|
$234.1 million
principal amount of outstanding debt due in June 2020;
|
•
|
$197.7 million
principal amount of outstanding debt due in March 2021;
|
•
|
$450.0 million
principal amount of outstanding debt due in October 2024; and
|
(2)
|
potential additional capital contributions to our subsidiaries.
|
|
|
(In thousands)
|
Six Months Ended
June 30, |
||||||
2018
|
|
2017
|
|||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
300,822
|
|
|
$
|
206,412
|
|
Investing activities
|
(376,700
|
)
|
|
(50,197
|
)
|
||
Financing activities
|
84,360
|
|
|
(135,702
|
)
|
||
Effect of exchange rate changes on cash and restricted cash
|
(1
|
)
|
|
77
|
|
||
Increase (decrease) in cash and restricted cash
|
$
|
8,481
|
|
|
$
|
20,590
|
|
|
|
|
|
|
|
Moody’s
(1)
|
|
S&P
(2)
|
Radian Group
|
Ba3
|
|
BB+
|
Radian Guaranty
|
Baa3
|
|
BBB+
|
Radian Reinsurance
|
N/A
|
|
BBB+
|
(1)
|
Based on the August 17, 2017 update, Moody’s outlook for Radian Group and Radian Guaranty currently is Positive.
|
(2)
|
Based on the September 11, 2017 update, S&P’s outlook for Radian Group, Radian Guaranty and Radian Reinsurance is currently Stable.
|
|
Short-term and Available for Sale
|
|
Trading
|
||||||||||||
($ in millions)
|
June 30,
2018 |
|
December 31,
2017 |
|
June 30,
2018 |
|
December 31,
2017 |
||||||||
Carrying value of fixed income investment portfolio
(1)
|
$
|
4,286.2
|
|
|
$
|
4,009.8
|
|
|
$
|
535.6
|
|
|
$
|
606.4
|
|
Percentage of fixed income
investment portfolio compared to total investment portfolio
(2)
|
87.3
|
%
|
|
85.8
|
%
|
|
10.9
|
%
|
|
13.0
|
%
|
||||
Average duration of fixed income portfolio
|
4.0 years
|
|
|
4.4 years
|
|
|
5.0 years
|
|
|
5.1 years
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Interest-rate risk increase/(decrease) in market value
|
|
|
|
|
|
|
|
||||||||
+100 basis points - $
|
$
|
(165.4
|
)
|
|
$
|
(169.8
|
)
|
|
$
|
(25.4
|
)
|
|
$
|
(29.7
|
)
|
+100 basis points - %
(3)
|
(3.9
|
)%
|
|
(4.2
|
)%
|
|
(4.7
|
)%
|
|
(4.9
|
)%
|
||||
- 100 basis points - $
|
$
|
179.2
|
|
|
$
|
184.7
|
|
|
$
|
27.8
|
|
|
$
|
32.5
|
|
- 100 basis points - %
(3)
|
4.2
|
%
|
|
4.6
|
%
|
|
5.2
|
%
|
|
5.4
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Credit-spread risk increase (decrease) in market value
|
|
|
|
|
|
|
|
||||||||
+100 basis points - $
|
$
|
(179.0
|
)
|
|
$
|
(183.8
|
)
|
|
$
|
(25.8
|
)
|
|
$
|
(30.4
|
)
|
+100 basis points - %
(3)
|
(4.2
|
)%
|
|
(4.6
|
)%
|
|
(4.8
|
)%
|
|
(5.0
|
)%
|
||||
- 100 basis points - $
|
$
|
157.4
|
|
|
$
|
148.6
|
|
|
$
|
21.7
|
|
|
$
|
24.6
|
|
- 100 basis points - %
(3)
|
3.7
|
%
|
|
3.7
|
%
|
|
4.1
|
%
|
|
4.1
|
%
|
(1)
|
Total fixed income securities include fixed-maturity investments available for sale, trading securities and short-term investments and exclude reinvested cash collateral held under securities lending agreements. At
June 30, 2018
and
December 31, 2017
, fixed income securities shown above also include
$76.4 million
and
$134.1 million
, respectively, invested in certain fixed income exchange-traded funds that are classified as equity securities in our condensed consolidated balance sheets, as well as
$36.9 million
and $20.7 million, respectively, in fixed income securities loaned under securities lending agreements that are classified as other assets in our condensed consolidated balance sheets.
|
(2)
|
Total investment portfolio comprises total investments per the consolidated balance sheets including securities loaned under securities lending agreements that are classified as other assets in our consolidated balance sheets.
|
(3)
|
Change in value expressed as a percentage of the market value of the related fixed income portfolio.
|
Issuer Purchases of Equity Securities
|
|||||||||||||
Period
|
Total Number of Shares Purchased
(1)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(2)
|
|
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
|
||||||
Share repurchase program
|
|
|
|
|
|
|
|
||||||
4/1/2018 to 4/30/2018
|
926,262
|
|
|
$
|
16.25
|
|
|
924,720
|
|
|
$
|
25,007,505
|
|
5/1/2018 to 5/31/2018
|
1,591,556
|
|
|
$
|
16.02
|
|
|
1,567,123
|
|
|
$
|
—
|
|
6/1/2018 to 6/30/2018
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Total
|
2,517,818
|
|
|
|
|
2,491,843
|
|
|
|
||||
|
|
|
|
|
|
|
|
(1)
|
Includes
25,975
shares tendered by employees as payment of taxes withheld on the vesting of certain restricted stock awards granted under the Company’s equity compensation plans.
|
(2)
|
On August 9, 2017, Radian Group’s board of directors renewed the Company’s share repurchase program that enables it to spend up to
$50 million
to repurchase its common stock. At
June 30, 2018
, there was no remaining purchase authority under this program. See Note
14
of Notes to Unaudited Condensed Consolidated Financial Statements.
|
Exhibit No.
|
|
Exhibit Name
|
|
|
|
4.1
|
|
|
|
|
|
4.2
|
|
|
|
|
|
+*10.1
|
|
|
|
|
|
+*10.2
|
|
|
|
|
|
+*10.3
|
|
|
|
|
|
+*10.4
|
|
|
|
|
|
*12
|
|
|
|
|
|
*31
|
|
|
|
|
|
**32
|
|
|
|
|
|
*101
|
|
Pursuant to Rule 405 of Regulation S-T, the following financial information from Radian Group Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 is formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017; (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2018 and 2017; (iv) Condensed Consolidated Statements of Changes in Common Stockholders’ Equity for the six months ended June 30, 2018 and 2017; (v) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017; and (vi) the Notes to Unaudited Condensed Consolidated Financial Statements.
|
|
Radian Group Inc.
|
|
|
August 6, 2018
|
/s/ J. F
RANKLIN
H
ALL
|
|
J. Franklin Hall
|
|
Senior Executive Vice President, Chief Financial Officer
|
|
|
|
/s/ C
ATHERINE
M. J
ACKSON
|
|
Catherine M. Jackson
|
|
Senior Vice President, Controller
|
|
|
|
LTI Book Value per Share Growth
(1)
|
|
Payout Percentage
(1)
(Percentage of Target Award)
|
³60%
|
|
200%
|
50%
|
|
150%
|
40%
|
|
100%
|
30%
|
|
50%
|
<20%
(2)
|
|
0%
|
Vesting Date
|
Vested Restricted Stock Units
|
1
st
Anniversary of the Grant Date
|
33% of the awarded Restricted Stock Units
|
2
nd
Anniversary of the Grant Date
|
33% of the awarded Restricted Stock Units
|
3
rd
Anniversary of the Grant Date
|
34% of the awarded Restricted Stock Units
|
|
|
|
LTI Book Value per Share Growth
(1)
|
|
Payout Percentage
(1)
(Percentage of Target Award)
|
³60%
|
|
200%
|
50%
|
|
150%
|
40%
|
|
100%
|
30%
|
|
50%
|
<20%
(2)
|
|
0%
|
Vesting Date
|
Vested Restricted Stock Units
|
1
st
Anniversary of the Grant Date
|
33% of the awarded Restricted Stock Units
|
2
nd
Anniversary of the Grant Date
|
33% of the awarded Restricted Stock Units
|
3
rd
Anniversary of the Grant Date
|
34% of the awarded Restricted Stock Units
|
|
Six Months Ended
|
|
Fiscal Years Ended December 31,
|
||||||||||||||||||||
($ in thousands)
|
June 30, 2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||||
Pretax income (loss) from continuing operations
|
$
|
323,013
|
|
|
$
|
346,737
|
|
|
$
|
483,686
|
|
|
$
|
437,829
|
|
|
$
|
407,156
|
|
|
$
|
(173,346
|
)
|
Fixed charges
|
31,172
|
|
|
64,672
|
|
|
82,807
|
|
|
92,758
|
|
|
91,772
|
|
|
75,638
|
|
||||||
Total earnings available for fixed charges
|
354,185
|
|
|
411,409
|
|
|
566,493
|
|
|
530,587
|
|
|
498,928
|
|
|
(97,708
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed charges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense, including capitalized interest
|
30,371
|
|
|
62,761
|
|
|
81,132
|
|
|
91,102
|
|
|
90,464
|
|
|
74,618
|
|
||||||
Interest portion of rental expense
|
801
|
|
|
1,911
|
|
|
1,675
|
|
|
1,656
|
|
|
1,308
|
|
|
1,020
|
|
||||||
Total fixed charges
|
$
|
31,172
|
|
|
$
|
64,672
|
|
|
$
|
82,807
|
|
|
$
|
92,758
|
|
|
$
|
91,772
|
|
|
$
|
75,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Ratio of earnings to fixed charges
|
11.4x
|
|
6.4x
|
|
6.8x
|
|
5.7x
|
|
5.4x
|
|
(1)
|
(1)
|
Ratio coverage less than 1:1 is not presented. For the period ended December 31, 2013, additional earnings of $173,346 would have been required to achieve a ratio of 1:1.
|
•
|
consolidated pretax income from continuing operations before adjustment for income or loss from equity investees;
|
•
|
fixed charges, as defined below;
|
•
|
amortization of capitalized interest;
|
•
|
distributed income of equity investees; and
|
•
|
our share of pretax losses of equity investees for which charges arising from guarantees are included in fixed charges.
|
•
|
interest capitalized;
|
•
|
preference security dividend requirements of consolidated subsidiaries; and
|
•
|
the noncontrolling interest in pretax income of subsidiaries that have not incurred fixed charges.
|
•
|
interest expensed and capitalized (from both continuing and discontinued operations);
|
•
|
amortization of premiums, discounts and capitalized expenses related to indebtedness;
|
•
|
an estimate of the interest component within rental expense; and
|
•
|
preference security dividend requirements of consolidated subsidiaries.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Radian Group Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
|
Date: August 6, 2018
|
/s/ RICHARD G. THORNBERRY
|
|
Richard G. Thornberry
Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Radian Group Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
|
Date: August 6, 2018
|
/s/ J. FRANKLIN HALL
|
|
J. Franklin Hall
Senior Executive Vice President, Chief Financial Officer
|
|
|
Date: August 6, 2018
|
/s/ RICHARD G. THORNBERRY
|
|
Richard G. Thornberry
Chief Executive Officer
|
|
|
|
/s/ J. FRANKLIN HALL
|
|
J. Franklin Hall
Senior Executive Vice President, Chief Financial Officer
|