|
Delaware
|
23-2691170
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
1500 Market Street, Philadelphia, PA
|
19102
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
Name of each exchange on which registered
|
Common Stock, $.001 par value per share
|
New York Stock Exchange
|
Preferred Stock Purchase Rights
|
New York Stock Exchange
|
Large accelerated filer x
|
|
Accelerated filer o
|
|
Non-accelerated filer o
|
|
Smaller reporting company o
|
Emerging growth company o
|
|
Form 10-K Reference Document
|
Definitive Proxy Statement for the Registrant’s 2019 Annual Meeting of Stockholders
|
Part III
(Items 10 through 14)
|
TABLE OF CONTENTS
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Page
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PART I
|
Item 1
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Item 1A
|
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Item 1B
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Item 2
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Item 3
|
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Item 4
|
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PART II
|
Item 5
|
||
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Item 6
|
||
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Item 7
|
||
|
Item 7A
|
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Item 8
|
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|
Item 9
|
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|
Item 9A
|
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Item 9B
|
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|
PART III
|
Item 10
|
||
|
Item 11
|
||
|
Item 12
|
||
|
Item 13
|
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|
Item 14
|
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PART IV
|
Item 15
|
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|
Item 16
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|
Term
|
Definition
|
Deficiency Amount
|
The assessed tax liabilities, penalties and interest associated with a formal Notice of Deficiency from the IRS
|
Discrete Item(s)
|
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 components 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 components of continuing operating income, such as income from discontinued operations or losses reflected as components of other comprehensive income. These items impact the difference between the statutory rate and Radian’s effective tax rate.
|
Dodd-Frank Act
|
Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended
|
Eagle Re
|
Eagle Re 2018-1 Ltd., an unaffiliated special purpose reinsurer (a variable interest entity) domiciled in Bermuda
|
EnTitle Direct
|
EnTitle Direct Group, Inc., a wholly-owned indirect subsidiary of Radian Group, acquired in March 2018
|
EnTitle Insurance
|
EnTitle Insurance Company, a wholly-owned subsidiary of EnTitle Direct
|
Equity Plans
|
The 1995 Equity Plan, the 2008 Equity Plan and the Amended and Restated Equity Compensation Plan, together
|
ERM
|
Enterprise Risk Management
|
Excess-of-Loss Program
|
The credit risk protection obtained by Radian Guaranty in November 2018, including: (i) the excess-of-loss reinsurance agreement with Eagle Re, in connection with the issuance by Eagle Re of mortgage insurance-linked notes and (ii) a separate excess-of-loss reinsurance agreement with a third-party reinsurer. Excess-of-loss reinsurance is a type of reinsurance that indemnifies the ceding company against loss in excess of a specific agreed limit, up to a specified sum.
|
Exchange Act
|
Securities Exchange Act of 1934, as amended
|
Extraordinary Distribution
|
A dividend or distribution of capital that is required to be approved by an insurance company’s primary regulator that is greater than would be permitted as an ordinary distribution (which does not require regulatory approval)
|
Fannie Mae
|
Federal National Mortgage Association
|
FASB
|
Financial Accounting Standards Board
|
FEMA
|
Federal Emergency Management Agency, an agency of the U.S. Department of Homeland Security
|
FEMA Designated Area
|
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
|
FHA
|
Federal Housing Administration
|
FHFA
|
Federal Housing Finance Agency
|
FHLB
|
Federal Home Loan Bank of Pittsburgh
|
FICO
|
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
|
Five Bridges
|
Five Bridges Advisors, LLC. Radian acquired the assets of Five Bridges in December 2018.
|
Flow Basis
|
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.
|
Foreclosure Stage Default
|
The Stage of Default indicating that the foreclosure sale has been scheduled or held
|
Freddie Mac
|
Federal Home Loan Mortgage Corporation
|
Freddie Mac Agreement
|
The Master Transaction Agreement between Radian Guaranty and Freddie Mac entered into in August 2013
|
Term
|
Definition
|
Front-end
|
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
|
GAAP
|
Generally accepted accounting principles in the U.S., as amended from time to time
|
Green River Capital
|
Green River Capital LLC, a wholly-owned subsidiary of Clayton
|
GSE(s)
|
Government-Sponsored Enterprises (Fannie Mae and Freddie Mac)
|
HAMP
|
Homeowner Affordable Modification Program
|
HARP
|
Home Affordable Refinance Program
|
HPA
|
Homeowners Protection Act of 1998
|
IBNR
|
Losses incurred but not reported
|
IIF
|
Insurance in force, equal to the aggregate unpaid principal balances of the underlying loans
|
Independent Settlement Services
|
Independent Settlement Services, LLC, a wholly-owned indirect subsidiary of Radian Group, acquired in November 2018
|
IRC
|
Internal Revenue Code of 1986, as amended
|
IRS
|
Internal Revenue Service
|
IRS Matter
|
Our dispute with the IRS related to the assessed tax liabilities, penalties and interest from the IRS’s examination of our 2000 through 2007 consolidated federal income tax returns. See Note 10 of Notes to Consolidated Financial Statements for more information.
|
LAE
|
Loss adjustment expenses, which include the cost of investigating and adjusting losses and paying claims
|
Loss Mitigation Activity/Activities
|
Activities such as Rescissions, Claim Denials, Claim Curtailments and cancellations
|
LTV
|
Loan-to-value ratio, calculated as the percentage of the original loan amount to the original value of the property
|
Master Policies
|
The Prior Master Policy and the 2014 Master Policy, together
|
Minimum Required Assets
|
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
|
Model Act
|
Mortgage Guaranty Insurance Model Act, as issued by the NAIC to establish minimum capital and surplus requirements for mortgage insurers
|
Monthly and Other Premiums
|
Insurance policies where premiums are paid on a monthly or other installment basis, in contrast to Single Premium Policies
|
Monthly Premium Policies
|
Insurance policies where premiums are paid on a monthly installment basis
|
Moody’s
|
Moody’s Investors Service
|
Mortgage Insurance
|
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 credit investors
|
MPP Requirement
|
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
|
NAIC
|
National Association of Insurance Commissioners
|
NIW
|
New insurance written
|
NOL
|
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 various factors which can reduce a company’s tax liability
|
Notices of Deficiency
|
Formal letters from the IRS informing the taxpayer of an IRS determination of tax deficiency and appeal rights
|
OCI
|
Other comprehensive income (loss)
|
PDR
|
Premium deficiency reserve
|
Term
|
Definition
|
S&P
|
Standard & Poor’s Financial Services LLC
|
SAFE Act
|
Secure and Fair Enforcement for Mortgage Licensing Act, as amended
|
SAPP
|
Statutory accounting principles and practices, including those required or permitted, if applicable, by the insurance departments of the respective states of domicile of our insurance subsidiaries
|
SEC
|
United States Securities and Exchange Commission
|
Senior Notes due 2017
|
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)
|
Senior Notes due 2019
|
Our 5.500% unsecured senior notes due June 2019 ($300 million original principal amount)
|
Senior Notes due 2020
|
Our 5.250% unsecured senior notes due June 2020 ($350 million original principal amount)
|
Senior Notes due 2021
|
Our 7.000% unsecured senior notes due March 2021 ($350 million original principal amount)
|
Senior Notes due 2024
|
Our 4.500% unsecured senior notes due October 2024 ($450 million original principal amount)
|
Services
|
Radian’s Services business segment, which is primarily a fee-for-service business that offers a broad array of mortgage, real estate and title services to market participants across the mortgage and real estate value chain
|
Single Premium NIW / RIF / IIF
|
NIW, RIF or IIF, respectively, on Single Premium Policies
|
Single Premium Policy / Policies
|
Insurance policies where premiums are paid in a single payment, which 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)
|
Single Premium QSR Program
|
The 2016 Single Premium QSR Agreement and the 2018 Single Premium QSR Agreement, together
|
Stage of Default
|
The stage a loan is in relative to the foreclosure process, based on whether a foreclosure sale has been scheduled or held
|
Statutory RBC Requirement
|
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
|
Surplus Note
|
An intercompany 0.000% surplus note issued by Radian Guaranty to Radian Group
|
TCJA
|
H.R. 1, known as the Tax Cuts and Jobs Act, signed into law on December 22, 2017
|
Time in Default
|
The time period from the point a loan reaches default status (based on the month the default occurred) to the current reporting date
|
TRID
|
Truth in Lending Act - RESPA Integrated Disclosure
|
U.S.
|
The United States of America
|
U.S. Treasury
|
United States Department of the Treasury
|
VA
|
U.S. Department of Veterans Affairs
|
ValuAmerica
|
ValuAmerica, Inc., a wholly-owned subsidiary of Clayton, renamed in 2018 to Radian Settlement Services Inc.
|
•
|
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;
|
•
|
changes in the way customers, investors, ratings agencies, regulators or legislators perceive our performance, financial strength and future prospects;
|
•
|
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, including PMIERs 2.0 and potential future changes to the PMIERs which, among other things, may be impacted by the general economic environment and housing market, as well as the proposed CCF that would establish capital requirements for the GSEs, if the CCF is finalized;
|
•
|
our ability to successfully execute and implement our capital plans, including plans for expanding our risk distribution strategy through the capital markets and reinsurance markets, and to maintain sufficient holding company liquidity to meet our short- and long-term liquidity needs;
|
•
|
our ability to successfully execute and implement our business plans and strategies, including plans and strategies to reposition and grow our Services segment as well as plans and strategies that require GSE and/or regulatory approvals and licenses;
|
•
|
our ability to maintain an adequate level of capital in our insurance subsidiaries to satisfy existing and future state regulatory requirements;
|
•
|
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 changes impacting loans purchased by the GSEs, such as the GSEs’ requirements regarding mortgage credit and loan size and the GSEs’ pricing;
|
•
|
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;
|
•
|
any disruption in the servicing of mortgages covered by our insurance policies, as well as poor servicer performance;
|
•
|
a significant decrease in the Persistency Rates of our mortgage insurance on monthly premium products;
|
•
|
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;
|
•
|
the effect of the Dodd-Frank Act on the financial services industry in general, and on our businesses in particular, including future changes to the QM Rule;
|
•
|
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;
|
•
|
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;
|
•
|
the amount and timing of potential settlements, payments or adjustments associated with federal or other tax examinations;
|
•
|
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 to accurately calculate and/or project our Available Assets and Minimum Required Assets under the PMIERs, including PMIERs 2.0, which will be impacted by, among other things, the size and mix of our IIF, the level of defaults in our portfolio, the level of cash flow generated by our insurance operations and our risk distribution strategies;
|
•
|
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;
|
•
|
potential future impairment charges related to our goodwill and other acquired intangible assets;
|
•
|
changes in GAAP or SAPP rules and guidance, or their interpretation;
|
•
|
our ability to attract and retain key employees; and
|
•
|
legal and other limitations on dividends and other amounts we may receive from our subsidiaries.
|
Item 1.
|
Business.
|
•
|
Wrote $56.5 billion of NIW on a Flow Basis, the highest flow volume in Radian’s 40-year history
|
–
|
Represents a 5% increase over 2017
|
–
|
Grew primary IIF by 10%, from $200.7 billion at December 31, 2017 to $221.4 billion at December 31, 2018
|
•
|
Earned pretax income of $684.2 million in 2018, compared to $346.7 million in 2017
|
•
|
Grew adjusted pretax operating income to $745.5 million, an increase of 21% compared to $617.2 million for 2017 (1)
|
•
|
Improved composition of mortgage insurance portfolio
|
–
|
94% of our primary RIF consists of business written after 2008, including HARP loans
|
–
|
Increased risk-based pricing granularity and our volume of higher value products
|
•
|
Took steps to optimize our capital and liquidity position
|
–
|
Repurchased over 3 million shares of Radian Group’s common stock
|
–
|
Added $450 million to Radian Group liquidity as a result of Radian Guaranty’s return of $450 million in capital to Radian Group in December 2018
|
–
|
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Radian Group—Short-Term Liquidity Needs”
|
•
|
Expanded our risk distribution strategy to optimize the amounts and types of capital and risk distribution deployed against insured risk in order to: (i) support our overall capital plans; (ii) lower our cost of capital; and (iii) reduce portfolio risk and financial volatility through economic cycles
|
–
|
Executed the mortgage insurance industry’s first simultaneous insurance-linked note and excess-of-loss reinsurance placement totaling $455 million
|
–
|
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Other 2018 Developments—Reinsurance”
|
•
|
Increased excess of Available Assets over Minimum Required Assets under PMIERs to $567 million, or 19% of Minimum Required Assets
|
•
|
Finalized a settlement with the IRS regarding the IRS Matter
|
•
|
Launched our new branding to reflect One Radian, beginning the process to unite all of our businesses under one brand
|
•
|
Aligned our sales team to provide integrated enterprise solutions to our customers
|
(1)
|
Adjusted pretax operating income is a non-GAAP measure. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Consolidated—Use of Non-GAAP Financial Measures” for the definition and reconciliation of this measure to the most comparable GAAP measure, pretax income.
|
•
|
Write high-quality and profitable NIW to drive future earnings, in a manner that enhances the long-term economic value of our insured mortgage portfolio
|
•
|
Leverage our core competencies and increase our competitive differentiation in order to:
|
–
|
Grow our traditional mortgage insurance business in innovative ways
|
–
|
Expand our presence in the mortgage and real estate value chain beyond traditional mortgage insurance
|
–
|
Enhance our value to customers with increased diversification of services delivered by our integrated team
|
–
|
Maintain strong comprehensive enterprise risk management based on sound data and analytics
|
–
|
Enhance the quality, efficiency and performance of our operations and delivery of products and services
|
•
|
Manage our capital and financial flexibility to optimize stockholder value
|
•
|
Drive positive operating leverage by maintaining accretive revenue growth and effective expense management
|
•
|
GSE Credit Risk Transfer. Part of our business strategy includes leveraging our core expertise in credit risk management and expanding our presence in the mortgage finance industry. We are currently participating in Front-end and Back-end credit risk transfer programs developed by Fannie Mae and Freddie Mac as part of their
|
•
|
Pool Insurance. Prior to 2008, we wrote Pool Insurance on a limited basis. At December 31, 2018, Pool Insurance made up only $324.6 million of our total direct first-lien insurance RIF, as compared to $339.0 million at December 31, 2017. With respect to our Pool Insurance, an aggregate exposure limit, or “stop loss” (usually between 1% and 10%), is generally applied to the initial aggregate loan balance on a group or “pool” of mortgages. In addition, an insured pool of mortgages may contain mortgages that are already covered by primary mortgage insurance. In these transactions, Pool Insurance is secondary to any primary mortgage insurance that exists on mortgages within the pool. Our Pool Insurance policies are privately negotiated and are separate from the Master Policies that we use for our primary mortgage insurance.
|
•
|
Non-Traditional Risk. In the past, we provided other forms of credit enhancement on residential mortgage assets. Our non-traditional products included mortgage insurance on second-lien mortgage loans and we also provided mortgage insurance on an international basis. As of December 31, 2018, we have terminated all of our international mortgage insurance. Our total amount of non-traditional risk was $15.2 million at December 31, 2018, which consisted entirely of second-lien RIF, as compared to $24.4 million at December 31, 2017.
|
•
|
general economic conditions (in particular, interest rates, home prices and unemployment);
|
•
|
the age and performance history of the loans insured;
|
•
|
the geographic dispersion and other characteristics of the properties securing the insured loans and the condition of local housing markets;
|
•
|
the quality of underwriting at loan origination; and
|
•
|
the credit characteristics of the borrower and the characteristics of the loans insured.
|
|
December 31, 2018
|
|||||||||||||||||
($ in millions)
|
RIF
|
|
Number of Defaults
|
|
Delinquency Rate
|
|
Percentage of Reserve for Losses
|
|
Average FICO (1) at Origination (2)
|
|
Original Average LTV (2)
|
|||||||
2008 and prior
|
$
|
5,749
|
|
|
13,095
|
|
|
8.8
|
%
|
|
70.3
|
%
|
|
698
|
|
|
89.9
|
%
|
2009
|
199
|
|
|
156
|
|
|
3.1
|
|
|
0.7
|
|
|
752
|
|
|
88.5
|
|
|
2010
|
170
|
|
|
67
|
|
|
1.7
|
|
|
0.3
|
|
|
765
|
|
|
91.7
|
|
|
2011
|
465
|
|
|
141
|
|
|
1.4
|
|
|
0.6
|
|
|
763
|
|
|
91.9
|
|
|
2012
|
2,094
|
|
|
457
|
|
|
1.1
|
|
|
1.8
|
|
|
763
|
|
|
91.8
|
|
|
2013
|
3,504
|
|
|
892
|
|
|
1.4
|
|
|
3.7
|
|
|
758
|
|
|
92.2
|
|
|
2014
|
3,464
|
|
|
1,174
|
|
|
1.8
|
|
|
4.7
|
|
|
747
|
|
|
92.3
|
|
|
2015
|
5,806
|
|
|
1,366
|
|
|
1.3
|
|
|
5.9
|
|
|
749
|
|
|
92.0
|
|
|
2016
|
9,544
|
|
|
1,649
|
|
|
1.0
|
|
|
6.1
|
|
|
750
|
|
|
91.8
|
|
|
2017
|
11,958
|
|
|
1,586
|
|
|
0.8
|
|
|
4.9
|
|
|
748
|
|
|
92.3
|
|
|
2018
|
13,775
|
|
|
510
|
|
|
0.2
|
|
|
1.0
|
|
|
746
|
|
|
92.5
|
|
|
Total
|
$
|
56,728
|
|
|
21,093
|
|
(3)
|
|
|
|
100.0
|
%
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the borrower’s credit score at origination. In circumstances where there is more than one borrower, the FICO score for the primary borrower is utilized.
|
(2)
|
Average FICO at origination and original average LTV are weighted averages based on the unpaid principal balances of the underlying mortgage loans in our portfolio at December 31, 2018.
|
(3)
|
Includes 2,627 defaults at December 31, 2018 in the FEMA Designated Areas associated with Hurricanes Harvey and Irma, both of which occurred during the third quarter of 2017. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Mortgage Insurance—NIW, IIF, RIF—Provision for Losses.”
|
|
December 31,
|
||||||||||
|
2018
|
|
2017
|
||||||||
Top Ten States
|
RIF
|
|
Reserve for Losses
|
|
RIF
|
|
Reserve for Losses
|
||||
California
|
12.3
|
%
|
|
7.1
|
%
|
|
12.4
|
%
|
|
6.7
|
%
|
Texas
|
8.9
|
|
|
6.6
|
|
|
8.3
|
|
|
5.5
|
|
Florida
|
7.0
|
|
|
11.8
|
|
|
6.8
|
|
|
12.2
|
|
Illinois
|
5.2
|
|
|
4.9
|
|
|
5.4
|
|
|
4.7
|
|
Georgia
|
4.0
|
|
|
3.9
|
|
|
4.0
|
|
|
3.3
|
|
Virginia
|
3.5
|
|
|
1.6
|
|
|
3.5
|
|
|
1.7
|
|
Arizona
|
3.2
|
|
|
1.6
|
|
|
3.1
|
|
|
1.4
|
|
Colorado
|
3.1
|
|
|
1.0
|
|
|
3.0
|
|
|
0.9
|
|
Maryland
|
3.0
|
|
|
3.6
|
|
|
2.9
|
|
|
3.4
|
|
New Jersey
|
3.0
|
|
|
7.7
|
|
|
3.3
|
|
|
10.8
|
|
Total
|
53.2
|
%
|
|
49.8
|
%
|
|
52.7
|
%
|
|
50.6
|
%
|
|
|
|
|
|
|
|
|
|
December 31,
|
||||||||||
|
2018
|
|
2017
|
||||||||
Top Fifteen CBSAs (1)
|
RIF
|
|
Reserve for Losses
|
|
RIF
|
|
Reserve for Losses
|
||||
Chicago, IL-IN-WI
|
4.9
|
%
|
|
4.7
|
%
|
|
5.2
|
%
|
|
4.5
|
%
|
New York, NY-NJ-PA
|
4.0
|
|
|
16.6
|
|
|
4.2
|
|
|
18.9
|
|
Washington, DC-MD-VA
|
3.7
|
|
|
2.7
|
|
|
3.6
|
|
|
2.9
|
|
Dallas, TX
|
3.4
|
|
|
2.1
|
|
|
3.1
|
|
|
1.6
|
|
Los Angeles - Long Beach, CA
|
3.4
|
|
|
1.8
|
|
|
3.5
|
|
|
1.8
|
|
Atlanta, GA
|
3.2
|
|
|
2.9
|
|
|
3.2
|
|
|
2.5
|
|
Phoenix/Mesa, AZ
|
2.4
|
|
|
1.1
|
|
|
2.3
|
|
|
1.0
|
|
Philadelphia, PA-NJ-DE-MD
|
2.3
|
|
|
3.0
|
|
|
2.4
|
|
|
3.5
|
|
Miami, FL
|
2.2
|
|
|
4.4
|
|
|
2.1
|
|
|
4.6
|
|
Houston, TX
|
2.2
|
|
|
2.5
|
|
|
2.1
|
|
|
2.1
|
|
Minneapolis-St. Paul, MN-WI
|
2.0
|
|
|
0.7
|
|
|
2.0
|
|
|
0.7
|
|
Denver, CO
|
1.8
|
|
|
0.5
|
|
|
1.8
|
|
|
0.4
|
|
Riverside-San Bernardino, CA
|
1.8
|
|
|
1.4
|
|
|
1.8
|
|
|
1.3
|
|
Boston, MA-NH
|
1.7
|
|
|
1.5
|
|
|
1.8
|
|
|
1.6
|
|
Seattle, WA
|
1.6
|
|
|
0.7
|
|
|
1.5
|
|
|
1.0
|
|
Total
|
40.6
|
%
|
|
46.6
|
%
|
|
40.6
|
%
|
|
48.4
|
%
|
|
|
|
|
|
|
|
|
(1)
|
CBSAs are metropolitan areas and include a portion of adjoining states as noted above.
|
|
December 31,
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||||||||
States with highest number of defaults:
|
|
|
|
|
|
|
|
|
|
||||||||
Florida (1)
|
2,023
|
|
|
9.6
|
%
|
|
5,337
|
|
|
19.1
|
%
|
|
2,666
|
|
|
9.2
|
%
|
Texas (1)
|
1,779
|
|
|
8.4
|
|
|
2,885
|
|
|
10.3
|
|
|
1,897
|
|
|
6.5
|
|
New York
|
1,241
|
|
|
5.9
|
|
|
1,588
|
|
|
5.7
|
|
|
2,211
|
|
|
7.6
|
|
Illinois
|
1,230
|
|
|
5.8
|
|
|
1,283
|
|
|
4.6
|
|
|
1,534
|
|
|
5.3
|
|
California
|
1,214
|
|
|
5.8
|
|
|
1,264
|
|
|
4.5
|
|
|
1,426
|
|
|
4.9
|
|
(1)
|
Certain areas within these states are FEMA Designated Areas associated with Hurricanes Harvey and Irma and, as a result, defaults in these states are elevated at December 31, 2017.
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2018
|
|
2017
|
|
2016
|
||||||
States with highest direct claims paid (first-lien):
|
|
|
|
|
|
||||||
New Jersey
|
$
|
37.2
|
|
|
$
|
54.7
|
|
|
$
|
46.1
|
|
Florida
|
22.5
|
|
|
45.7
|
|
|
59.4
|
|
|||
New York
|
20.4
|
|
|
34.2
|
|
|
26.6
|
|
|||
Illinois
|
13.8
|
|
|
23.4
|
|
|
32.3
|
|
|||
California
|
8.9
|
|
|
16.3
|
|
|
23.1
|
|
(1)
|
Percentage Option: Pay the maximum liability and allow the insured lender to keep title to the property. The maximum liability is determined by multiplying (x) the claim amount (which consists of the unpaid loan principal, plus past due interest for a period of time specified in our Master Policies and certain expenses associated with the default) by (y) the applicable coverage percentage;
|
(2)
|
Approved Sale Option: Pay the amount of the claim required to make the lender whole (not to exceed our maximum liability), following an approved sale; or
|
(3)
|
Acquisition Option: Pay the full claim amount and acquire title to the property.
|
•
|
a review to determine compliance with applicable loan origination programs and our mortgage insurance policy requirements, including: (i) whether the loan qualified for insurance at the time the certificate of coverage was issued, (ii) whether the insured has satisfied its obligation in meeting all necessary conditions in order for us to pay a claim, including submitting all necessary documentation in connection with the claim (commonly referred to as “claim perfection”) and (iii) whether the loan was appropriately serviced in accordance with the standards set forth in our Master Policies;
|
•
|
analysis and prompt processing to ensure that valid claims are paid in an accurate and timely manner;
|
•
|
responses to loss mitigation opportunities presented by the insured; and
|
•
|
management and disposal of acquired real estate.
|
•
|
a failure to report information to us on a timely basis as required under our Master Policies;
|
•
|
a failure to pursue loss mitigation opportunities presented by borrowers, realtors and/or any other interested parties;
|
•
|
a failure to pursue loan modifications and/or refinancings through programs available to borrowers or an undue delay in presenting claims to us (including as a result of improper handling of foreclosure proceedings), which increases the interest or other components of a claim we are required to pay; and
|
•
|
a failure to initiate and diligently pursue foreclosure or other appropriate proceedings within the timeframe specified in our Master Policies.
|
•
|
Arch U.S. MI;
|
•
|
Essent Guaranty Inc.;
|
•
|
Genworth Financial Inc.;
|
•
|
Mortgage Guaranty Insurance Corporation;
|
•
|
NMI Holdings, Inc.; and
|
•
|
United Guaranty Corp. (acquired by Arch Capital Group LLC in December 2016).
|
•
|
Independent Settlement Services, a technology-driven national appraisal and title management services company, in November 2018; and
|
•
|
The assets of Five Bridges, a provider of consumer and real estate analytics through a cloud-based portal that provides customers with valuation and risk management tools, in December 2018.
|
•
|
Banks, credit unions, independent mortgage banks and other originators of mortgage loans;
|
•
|
RMBS/ABS issuers, securitization trusts, the GSEs, private equity, hedge funds, real estate investment trusts, investment banks and other investors in mortgage-related debt instruments, whole loans and other securities;
|
•
|
Owners of single family rental homes;
|
•
|
Mortgage servicers;
|
•
|
Real estate brokers and agents; and
|
•
|
Regulators and rating agencies involved in the mortgage, real estate and housing finance markets.
|
•
|
Mortgage Services - American Mortgage Consultants, Inc., Digital Risk, LLC, Opus Capital Markets Consultants, LLC, FTI Consulting, Inc., Pentalpha Surveillance LLC, TENA Companies, Inc., Adfitech Inc. and Navigant Consulting, Inc.
|
•
|
Real Estate Services - ClearCapital.com, Inc., CoreLogic, Inc., Pro Teck Valuation Services, First American Financial Corporation, Black Knight, Inc., VRM Mortgage Services, Fidelity National Financial, Inc. and ServiceLink
|
•
|
Title Services - First American Financial Corporation, Fidelity National Financial, Inc., Stewart Information Services Corporation, Old Republic Title Insurance Group, Inc., Westcor Land Title Insurance Company and WFG National Title Insurance Company
|
•
|
At least 75% of our fixed income portfolio, based on market value, must consist of investment securities that are assigned a quality designation of NAIC 1 by the NAIC or equivalent ratings by a nationally recognized statistical ratings organization (“NRSRO”) (i.e., “A-” or better by S&P and “A3” or better by Moody’s);
|
•
|
A maximum of 25% of our fixed income portfolio, based on market value, may consist of investment securities that are assigned a quality designation of NAIC 2 by the NAIC or equivalent ratings by a NRSRO (i.e., “BBB+” to “BBB-” by S&P and “Baa1” to “Baa3” by Moody’s); and
|
•
|
A maximum of 10% of our fixed income portfolio, based on market value, may consist of investment securities that are assigned quality designations NAIC 3 through 6 or equivalent ratings by a NRSRO (i.e., “BB+” and below by S&P and “Ba1” and below by Moody’s).
|
(1)
|
Primarily consists of taxable state and municipal investments.
|
|
Fair
Value
|
|
Percent
|
|||
($ in millions)
|
|
|
|
|||
Short-term investments
|
$
|
538.8
|
|
|
10.4
|
%
|
Due in one year or less (1)
|
87.3
|
|
|
1.7
|
|
|
Due after one year through five years (1)
|
1,118.8
|
|
|
21.6
|
|
|
Due after five years through ten years (1)
|
1,125.5
|
|
|
21.7
|
|
|
Due after ten years (1)
|
517.3
|
|
|
10.0
|
|
|
RMBS (2)
|
353.2
|
|
|
6.8
|
|
|
CMBS (2)
|
591.4
|
|
|
11.4
|
|
|
Other ABS (2)
|
704.7
|
|
|
13.6
|
|
|
Other investments (3)
|
144.0
|
|
|
2.8
|
|
|
Total (4)
|
$
|
5,181.0
|
|
|
100.0
|
%
|
|
|
|
|
(1)
|
Actual maturities may differ as a result of calls before scheduled maturity.
|
(2)
|
RMBS, CMBS and other ABS are shown separately, as they are not due at a single maturity date.
|
(3)
|
No stated maturity date.
|
(4)
|
Includes $27.9 million of securities loaned to third-party Borrowers under securities lending agreements, classified as other assets in our consolidated balance sheets. See Note 6 of Notes to Consolidated Financial Statements for more information.
|
•
|
Embed and continually reinforce a disciplined, corporate-wide risk culture that utilizes an understanding of risk/return tradeoffs to drive quality decisions, utilizing a disciplined approach designed to achieve long-term, through-the-cycle profitability;
|
•
|
Maintain credit, underwriting and risk/return disciplines based on sound data and analytics and continuous feedback throughout the organization;
|
•
|
Proactively monitor origination, portfolio and market trends to identify and mitigate emerging risks;
|
•
|
Continually refine analytical and technological capabilities, processes and systems to effectively identify, assess and manage risks; and
|
•
|
Develop and leverage tools and capabilities to analyze the risk/return trade-offs of corporate strategy and business decisions in order to inform and optimize capital allocation.
|
•
|
Define the risk Radian is willing to accept and manage in pursuit of long-term value on a risk-adjusted basis;
|
•
|
Incorporate risk management into our strategic planning process;
|
•
|
Enhance risk understanding and awareness at the board and executive management levels;
|
•
|
Develop risk tolerances for business units within the context of the defined risk appetite; and
|
•
|
Improve the quality of decision-making on significant business decisions.
|
•
|
Credit: The risk of default or failure to fulfill a financial obligation in a timely manner;
|
•
|
Financial: The risk of market forces on the ability to meet financial obligations;
|
•
|
Strategic: The risk of failure to properly respond to changes in the business environment;
|
•
|
Operational: The risk that business practices, processes, policies and systems are not adequate to meet enterprise objectives; and
|
•
|
Regulatory and Compliance: The risk of non-compliance with laws, rules, regulations and prescribed practices in any jurisdiction in which the business operates.
|
•
|
Radian Guaranty. Radian Guaranty is our primary mortgage insurance company. Radian Guaranty is a direct subsidiary of Radian Group. Radian Guaranty is our only mortgage insurance company that is eligible to provide mortgage insurance on GSE loans. It is a monoline insurer, restricted to writing first-lien residential mortgage guaranty insurance. In addition to Pennsylvania, Radian Guaranty is authorized to write mortgage guaranty insurance (or in states where there is no specific authorization for mortgage guaranty insurance, the applicable line of insurance under which mortgage guaranty insurance is regulated) in each of the other 49 states, the District of Columbia and Guam.
|
•
|
Radian Reinsurance. Radian Reinsurance is a licensed affiliated reinsurer that primarily provides reinsurance to Radian Guaranty. Radian Reinsurance is a direct subsidiary of Radian Group. We also use Radian Reinsurance to participate in the Front-end and Back-end credit risk transfer programs developed by Fannie Mae and Freddie Mac. See “Mortgage Insurance—Mortgage Insurance Business Overview—Mortgage Insurance Products—Other Mortgage Insurance Products—GSE Credit Risk Transfer” for more information about these programs.
|
•
|
Radian Insurance. Radian Insurance is our insurance subsidiary that insures our remaining second-lien mortgage loan risk. Radian Insurance is a direct subsidiary of Radian Group. Previously, Radian Insurance also insured our Hong Kong insurance portfolio. As of December 31, 2018, we had no remaining RIF in Hong Kong.
|
•
|
the GSEs’ proposal of new minimum requirements for master insurance policies to revise the GSE Rescission Relief Principles to, among other things, further limit the circumstances under which mortgage insurers may rescind insurance coverage;
|
•
|
the changes to the PMIERs under PMIERs 2.0 that become effective on March 31, 2019; and
|
•
|
changes to underwriting standards on mortgages they purchase, including for example, the GSEs’ decision to expand credit in 2017 by purchasing a larger portion of loans with debt-to-income ratios greater than 45%.
|
•
|
Asset-level disclosure requirements for ABS backed by residential mortgage loans, commercial mortgage loans, automobile loans or leases, re-securitizations of ABS backed by any of those asset types, and debt securities; and
|
•
|
A requirement that the transaction documents provide for the appointment of an “asset representations manager” to review the pool assets when certain trigger events occur.
|
•
|
prevailing mortgage interest rates compared to the mortgage rates on our IIF, which affects the incentive for borrowers to refinance (i.e., lower current interest rates make it more attractive for borrowers to refinance and receive a lower interest rate);
|
•
|
applicable policies for mortgage insurance cancellation, along with the current value of the homes underlying the mortgages in our IIF;
|
•
|
the credit policies of lenders, which may make it more difficult for homeowners to refinance loans; and
|
•
|
economic conditions that can affect a borrower’s decision to pay off a mortgage earlier than required.
|
•
|
eligibility requirements for a mortgage insurer to become and remain an approved eligible insurer for the GSEs;
|
•
|
underwriting standards on mortgages they purchase;
|
•
|
policies or requirements that may result in a reduction in the number of mortgages they acquire;
|
•
|
the national conforming loan limit for mortgages they acquire;
|
•
|
the level of mortgage insurance required, including expanding the loans that are eligible for reduced insurance coverage;
|
•
|
the terms on which mortgage insurance coverage may be canceled before reaching the cancellation thresholds established by law;
|
•
|
the terms required to be included in master policies for the mortgage insurance policies they acquire, including limitations on our ability to mitigate losses on insured mortgages that are in default;
|
•
|
the amount of loan level price adjustments (based on risk) or guarantee fees (which may result in a higher cost to borrowers) that the GSEs charge on loans that require mortgage insurance; and
|
•
|
the degree of influence that the GSEs have over a mortgage lender’s selection of the mortgage insurer providing coverage.
|
•
|
restrictions on mortgage credit due to changes in lender underwriting standards, capital requirements affecting lenders, regulatory requirements, and the health of the private securitization market;
|
•
|
mortgage interest rates;
|
•
|
the health of the domestic economy generally, as well as specific conditions in regional and local economies;
|
•
|
housing affordability;
|
•
|
tax laws and policies and their impact on, among other things, deductions for mortgage insurance premiums, mortgage interest payments and real estate taxes;
|
•
|
demographic trends, including the rate of household formation;
|
•
|
the rate of home price appreciation;
|
•
|
government housing policy encouraging loans to first-time homebuyers; and
|
•
|
the practices of the GSEs, including the extent to which the guaranty fees, loan level price adjustments (based on risk), credit underwriting guidelines and other business terms provided by the GSEs affect the cost of mortgages and lenders’ willingness to extend credit for low down payment mortgages.
|
•
|
governmental policy, including decreases in the pricing of FHA insurance or changes in the terms of FHA insurance such as the current life-of-loan coverage requirement;
|
•
|
capital constraints of the private mortgage insurance industry;
|
•
|
the tightening by private mortgage insurers of underwriting guidelines based on credit risk concerns;
|
•
|
business changes by the GSEs, including underwriting changes, a reduction in loan limits or increases in the loan level price adjustments (based on risk) charged by the GSEs on loans that require mortgage insurance and changes in the amount of guarantee fees for the loans that they acquire (which may result in higher cost to borrowers); and
|
•
|
the perceived operational ease of using FHA insurance compared to the products of private mortgage insurers.
|
•
|
structures, such as the limited pilot programs IMAGIN and EPMI launched in 2018 by Freddie Mac and Fannie Mae, respectively, that are commonly referred to as “investor paid mortgage insurance” in which affiliates of traditional mortgage insurers directly insure the GSEs against loss;
|
•
|
lenders and other investors holding mortgages in their portfolio and self-insuring;
|
•
|
lenders using pass-through vehicles that take on the risk of loss for loans ultimately sold to the GSEs;
|
•
|
structured risk transfer transactions in the capital markets;
|
•
|
risk sharing, risk transfer or using other risk mitigation techniques in conjunction with reduced levels of private mortgage insurance coverage;
|
•
|
lenders originating mortgages using “piggyback” structures to avoid private mortgage insurance, such as a first-lien mortgage with an 80% LTV and a second mortgage with a 10%, 15% or 20% LTV, which could become more attractive given that interest on piggyback loans remains tax deductible while the tax deduction for mortgage insurance premiums has not been extended beyond the 2017 tax year; and
|
•
|
other potential forms of credit enhancement that do not involve private mortgage insurance.
|
•
|
legislation, administrative or regulatory action impacting the charters or business practices of the GSEs;
|
•
|
reform of the U.S. housing finance system;
|
•
|
legislation and regulation impacting the FHA and its competitive position versus private mortgage insurers;
|
•
|
state insurance laws and regulations that address, among other items, licensing of companies to transact business, claims handling, reinsurance requirements, premium rates, policy forms offered to customers and requirements for Risk-to-capital, minimum policyholder positions, reserves (including contingency reserves), surplus, reinsurance and payment of dividends;
|
•
|
the application of state, federal or private sector programs aimed at supporting borrowers and the housing market;
|
•
|
the application of RESPA, the FCRA and other laws to our businesses;
|
•
|
the interpretation and application of the TRID rules requiring enhanced disclosures to consumers in connection with the origination of residential mortgage loans;
|
•
|
new federal standards and oversight for mortgage insurers, including as a result of the recommendation of the Federal Insurance Office of the U.S. Treasury that federal standards and oversight for mortgage insurers be developed and implemented;
|
•
|
the implementation of new regulations under, or the potential repeal or amendment of provisions of, the Dodd-Frank Act, including changes in the QM Rule; and
|
•
|
the implementation in the U.S. of the Basel III capital adequacy guidelines.
|
•
|
the use of capital and potential diversion of other resources, such as the diversion of management’s attention from our core businesses and potential disruption of those businesses;
|
•
|
the assumption of liabilities in connection with any strategic investment, including any acquired business;
|
•
|
our ability to comply with additional regulatory requirements associated with new products, services, lines of business, or other business or strategic initiatives;
|
•
|
our ability to successfully integrate or develop the operations of any new business initiative or acquisition;
|
•
|
the possibility that we may fail to realize the anticipated benefits of an acquisition or other strategic investment or initiative, including expected synergies, cost savings, or sales or growth opportunities, within the anticipated timeframe or at all; and
|
•
|
the possibility that we may fail to achieve forecasted results for a strategic investment, acquisition or other initiative that could result in lower or negative earnings contribution and/or impairment charges associated with intangible assets acquired.
|
•
|
Our Services revenue is dependent on a limited number of large customers that represent a significant proportion of our Services total revenues. The loss or reduction of business from one or more of these significant customers could adversely affect our revenues and results of operations. In addition, Radian Guaranty does business with many of these significant customers. In the event of a dispute between a significant customer and either of our business segments, the overall customer relationship for Radian could be negatively impacted.
|
•
|
While Clayton is not a defendant in litigation arising out of the financial crisis involving the issuance of RMBS in connection with which it has provided services, it has in the past, and may again in the future, receive subpoenas from various parties to provide documents and information related to such litigation, and there can be no assurance that Clayton will not be subject to future claims against it, whether in connection with such litigation or otherwise. It is possible that our exposure to potential liabilities resulting from our Services business, some of which may be material or unknown, could exceed amounts we can recover through indemnification claims.
|
•
|
A significant portion of our Services engagements are transactional in nature and may be performed in connection with securitizations, loan sales, loan purchases or other transactions. Due to the transactional nature of our business, our Services segment revenues are subject to fluctuation from period to period and are difficult to predict.
|
•
|
Sales of our mortgage, real estate and title services are influenced by the level of overall activity in the mortgage, real estate and mortgage finance markets generally, and are specifically dependent on the mortgage loan origination volumes of our customers which may fluctuate from period to period. If mortgage origination volumes decline we could experience less demand for our mortgage, real estate and title services.
|
•
|
Red Bell is a licensed real estate brokerage and provides real estate brokerage services in all 50 states and the District of Columbia. As a licensed real estate brokerage, Red Bell receives residential real estate information from various multiple listing services (“MLS”). Red Bell receives this information, which it uses in its business to broker real estate transactions and provide valuation products and services, pursuant to the terms of agreements with the MLS providers. If these agreements were to terminate or Red Bell otherwise were to lose access to this information, it could negatively impact Red Bell’s ability to conduct its business.
|
•
|
By their nature, title claims are often complex, vary greatly in dollar amounts and are affected by economic and market conditions and the legal environment existing at the time of settlement of the claims. Estimating future title loss payments is difficult because of the complex nature of title claims, the long periods of time over which claims are paid, significantly varying dollar amounts of individual claims and other factors. From time to time, we could experience large losses or an overall worsening of our loss payment experience in regard to the frequency or severity of claims that require us to record additional charges to our claims loss reserve. These loss events are unpredictable and could adversely affect the financial performance of our Services business.
|
Item 1B.
|
Unresolved Staff Comments.
|
Item 2.
|
Properties.
|
Item 3.
|
Legal Proceedings.
|
Item 4.
|
Mine Safety Disclosures.
|
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
|
Issuer Purchases of Equity Securities
|
|||||||||||||
($ in thousands, except per-share amounts)
|
|
|
|
|
|
|
|
||||||
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
|
|
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (2)
|
||||||
Share repurchase program
|
|
|
|
|
|
|
|
||||||
10/1/2018 to 10/31/2018
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
100,000
|
|
11/1/2018 to 11/30/2018
|
2,329
|
|
|
$
|
19.30
|
|
|
—
|
|
|
$
|
100,000
|
|
12/1/2018 to 12/31/2018
|
11,792
|
|
|
$
|
15.19
|
|
|
—
|
|
|
$
|
100,000
|
|
Total
|
14,121
|
|
|
|
|
—
|
|
|
|
||||
|
|
|
|
|
|
|
|
(1)
|
Represents 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 16, 2018, Radian Group’s board of directors approved a new share repurchase program that authorizes the Company to repurchase up to $100 million of its common stock. As of December 31, 2018, the full purchase authority of up to $100 million remained available under this program, which expires on July 31, 2019. See Note 15 of Notes to Consolidated Financial Statements for additional information.
|
Item 6.
|
Selected Financial Data.
|
(In millions, except per-share amounts and ratios)
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums earned—insurance
|
$
|
1,014.0
|
|
|
$
|
932.8
|
|
|
$
|
921.8
|
|
|
$
|
915.9
|
|
|
$
|
844.5
|
|
Services revenue (1)
|
145.0
|
|
|
155.1
|
|
|
168.9
|
|
|
157.2
|
|
|
78.0
|
|
|||||
Net investment income
|
152.5
|
|
|
127.2
|
|
|
113.5
|
|
|
81.5
|
|
|
65.7
|
|
|||||
Net gains (losses) on investments and other financial instruments
|
(42.5
|
)
|
|
3.6
|
|
|
30.8
|
|
|
35.7
|
|
|
80.0
|
|
|||||
Total revenues
|
1,273.0
|
|
|
1,221.6
|
|
|
1,238.5
|
|
|
1,193.3
|
|
|
1,072.7
|
|
|||||
Provision for losses
|
104.6
|
|
|
135.2
|
|
|
202.8
|
|
|
198.6
|
|
|
246.1
|
|
|||||
Cost of services (1)
|
98.1
|
|
|
104.6
|
|
|
114.2
|
|
|
93.7
|
|
|
44.7
|
|
|||||
Other operating expenses
|
280.8
|
|
|
267.3
|
|
|
244.9
|
|
|
242.4
|
|
|
251.2
|
|
|||||
Restructuring and other exit costs
|
6.1
|
|
|
17.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Interest expense
|
61.5
|
|
|
62.8
|
|
|
81.1
|
|
|
91.1
|
|
|
90.5
|
|
|||||
Impairment of goodwill
|
—
|
|
|
184.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Amortization and impairment of acquired intangible assets
|
12.4
|
|
|
27.7
|
|
|
13.2
|
|
|
13.0
|
|
|
8.6
|
|
|||||
Pretax income from continuing operations
|
684.2
|
|
|
346.7
|
|
|
483.7
|
|
|
437.8
|
|
|
407.2
|
|
|||||
Income tax provision (benefit)
|
78.2
|
|
|
225.6
|
|
|
175.4
|
|
|
156.3
|
|
|
(852.4
|
)
|
|||||
Net income from continuing operations
|
606.0
|
|
|
121.1
|
|
|
308.3
|
|
|
281.5
|
|
|
1,259.6
|
|
|||||
Income (loss) from discontinued operations, net of tax (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
5.4
|
|
|
(300.1
|
)
|
|||||
Net income
|
606.0
|
|
|
121.1
|
|
|
308.3
|
|
|
286.9
|
|
|
959.5
|
|
|||||
Diluted net income per share from continuing operations (3)
|
$
|
2.77
|
|
|
$
|
0.55
|
|
|
$
|
1.37
|
|
|
$
|
1.20
|
|
|
$
|
5.44
|
|
Diluted net income per share (3)
|
$
|
2.77
|
|
|
$
|
0.55
|
|
|
$
|
1.37
|
|
|
$
|
1.22
|
|
|
$
|
4.16
|
|
Cash dividends declared per share
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
Weighted average shares outstanding-diluted (3)
|
218.6
|
|
|
220.4
|
|
|
229.3
|
|
|
246.3
|
|
|
233.9
|
|
(In millions, except per-share amounts and ratios)
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
||||||||||
Total investments
|
$
|
5,153.0
|
|
|
$
|
4,643.9
|
|
|
$
|
4,462.4
|
|
|
$
|
4,298.7
|
|
|
$
|
3,629.3
|
|
Assets held for sale (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,736.4
|
|
|||||
Total assets
|
6,314.7
|
|
|
5,900.9
|
|
|
5,863.2
|
|
|
5,642.1
|
|
|
6,842.3
|
|
|||||
Unearned premiums
|
739.4
|
|
|
723.9
|
|
|
681.2
|
|
|
680.3
|
|
|
644.5
|
|
|||||
Reserve for losses and LAE
|
401.4
|
|
|
507.6
|
|
|
760.3
|
|
|
976.4
|
|
|
1,560.0
|
|
|||||
Senior notes (4)
|
1,030.3
|
|
|
1,027.1
|
|
|
1,069.5
|
|
|
1,219.5
|
|
|
1,192.3
|
|
|||||
Liabilities held for sale (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
947.0
|
|
|||||
Stockholders’ equity
|
3,488.7
|
|
|
3,000.0
|
|
|
2,872.3
|
|
|
2,496.9
|
|
|
2,097.1
|
|
|||||
Book value per share
|
$
|
16.34
|
|
|
$
|
13.90
|
|
|
$
|
13.39
|
|
|
$
|
12.07
|
|
|
$
|
10.98
|
|
Selected Ratios—Mortgage Insurance
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss ratio (5)
|
10.4
|
%
|
|
14.6
|
%
|
|
22.2
|
%
|
|
21.7
|
%
|
|
29.1
|
%
|
|||||
Expense ratio—net premiums earned basis (5)
|
23.9
|
%
|
|
24.7
|
%
|
|
22.7
|
%
|
|
23.7
|
%
|
|
28.2
|
%
|
|||||
Risk-to-capital-Radian Guaranty only
|
13.9
|
:1
|
|
12.8
|
:1
|
|
13.5
|
:1
|
|
14.3:1
|
|
|
17.9:1
|
|
|||||
Risk-to-capital-Mortgage Insurance combined
|
12.8
|
:1
|
|
12.1
|
:1
|
|
13.6
|
:1
|
|
14.6:1
|
|
|
20.3:1
|
|
|||||
Other Data—Mortgage Insurance
|
|
|
|
|
|
|
|
|
|
||||||||||
Primary NIW
|
$
|
56,547
|
|
|
$
|
53,905
|
|
|
$
|
50,530
|
|
|
$
|
41,411
|
|
|
$
|
37,349
|
|
Direct primary IIF
|
221,443
|
|
|
200,724
|
|
|
183,450
|
|
|
175,584
|
|
|
171,810
|
|
|||||
Direct primary RIF
|
56,728
|
|
|
51,288
|
|
|
46,741
|
|
|
44,627
|
|
|
43,239
|
|
|||||
Persistency Rate (12 months ended) (6)
|
83.1
|
%
|
|
81.1
|
%
|
|
76.7
|
%
|
|
78.8
|
%
|
|
84.2
|
%
|
|||||
Persistency (quarterly, annualized) (6)
|
85.5
|
%
|
|
79.4
|
%
|
|
76.8
|
%
|
|
81.8
|
%
|
|
83.3
|
%
|
(1)
|
Primarily represents the activity of Clayton, acquired June 30, 2014.
|
(2)
|
Radian completed the sale of its former financial guaranty subsidiary, Radian Asset Assurance, to Assured on April 1, 2015, pursuant to the Radian Asset Assurance Stock Purchase Agreement. Until the April 1, 2015 sale date, the operating results of Radian Asset Assurance were classified as discontinued operations for all periods presented in our consolidated statements of operations.
|
(3)
|
Diluted net income per share and average share information calculated in accordance with the accounting standard regarding earnings per share. See Note 3 of Notes to Consolidated Financial Statements.
|
(4)
|
Includes Senior Notes and Convertible Senior Notes.
|
(5)
|
Calculated using amounts determined under GAAP, using provision for losses to calculate the loss ratio and policy acquisition costs and other operating expenses to calculate the expense ratio, as percentages of net premiums earned—insurance.
|
(6)
|
Based on loan level detail for the fourth quarter of each year shown. 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. In Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, see “Key Factors Affecting Our Results—Mortgage Insurance—IIF; Persistency Rate; Mix of Business” and “Results of Operations—Mortgage Insurance—NIW, IIF, RIF” for additional information about the Persistency Rate.
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
Index to Management’s Discussion and Analysis
of Financial Condition and Results of Operations
|
|
|
PAGE
|
(1)
|
Includes net premiums earned and services revenue on a segment basis, and excludes net investment income, net gain on investments and other financial instruments and other income.
|
(1)
|
For the PMIERs, in circumstances where there is more than one borrower, the lowest of the borrowers’ FICO scores is used.
|
(2)
|
Seasoning factors are designed to adjust claim rate estimates for an expected loss pattern based on origination vintage.
|
•
|
Reduction of net deferred tax assets of $102.6 million at December 31, 2017, due to the lower statutory tax rate resulting in an increased tax provision;
|
•
|
Significant reduction in our annualized effective tax rate and future cash tax payments due to the reduction in the statutory federal tax rate from 35% to 21% (excluding the impact of Discrete Items), effective January 1, 2018;
|
•
|
A material reduction in cash tax payments in 2018 due to the repeal of the corporate alternative minimum tax;
|
•
|
Reduced deductibility of certain executive compensation; and
|
•
|
Potential impacts of state tax changes that could be prompted in response to the TCJA.
|
•
|
implementing rate reductions on our borrower-paid Single Premium Policies in order to shift our NIW toward more profitable borrower-paid Single Premium Policies;
|
•
|
increasing risk-based granularity of our pricing across most products, including the use of rate adjustors related to multi-borrower loans and loans with a debt-to-income ratio greater than 45%; and
|
•
|
introducing our proprietary RADAR Rates, which became available to customers beginning in January 2019, subject to regulatory approval.
|
•
|
IIF
|
•
|
Persistency Rate
|
•
|
Premium rates and mix of business
|
•
|
Size of mortgage origination market and market demand for low down payment loans
|
•
|
Level of mortgage originations for purchase transactions
|
•
|
Penetration percentage of private mortgage insurance in overall mortgage market and legislative, regulatory and administrative changes impacting the demand for private mortgage insurance
|
•
|
Radian’s market share of the private mortgage insurance market
|
•
|
The level of reinsurance we cede to third parties
|
•
|
Levels of GSE credit risk transfer
|
•
|
IIF; Persistency Rate; Mix of Business. Our IIF is one of the primary drivers of our future premiums that we expect to earn over time. Although not reflected in the current period financial statements, nor in our reported
|
•
|
NIW; Origination Market; Penetration Rate. NIW increases our IIF and our premiums written and earned. NIW is affected by the overall size of the mortgage origination market, the penetration percentage of private mortgage insurance into the overall mortgage origination market and our market share of the private mortgage insurance market. The overall mortgage origination market is influenced by macroeconomic factors such as household formation, household composition, home affordability, interest rates, housing markets in general, credit availability and the impact of various legislative and regulatory actions that may influence the housing and mortgage finance industries. The penetration percentage of private mortgage insurance is mainly influenced by: (i) the competitiveness of private mortgage insurance for GSE conforming loans compared to FHA and VA insured loans and (ii) the relative percentage of mortgage originations that are for purchased homes versus refinances. We believe, for example, that better execution for borrowers with higher FICO scores, lender preference and the inability to cancel FHA insurance for certain loans are factors that continue to provide a competitive advantage for private mortgage insurers. See “Results of Operations—Mortgage Insurance—NIW, IIF, RIF.”
|
(1)
|
Based on actual dollars generated in the credit enhanced market, as reported by the U.S. Department of Housing and Urban Development and industry publicly reported information. Mortgage originations are based upon the average of Mortgage Bankers Association, Freddie Mac and Fannie Mae January 2019 Financial Forecasts.
|
(2)
|
Excluding HARP originations.
|
(1)
|
Based on actual dollars generated in the market based on industry publicly reported information and the most recent available reporting by the U.S. Department of Housing and Urban Development.
|
•
|
Premiums. The premium rates we charge for our insurance are based on a number of borrower, loan and property characteristics. The mortgage insurance industry is highly competitive and private mortgage insurers compete with each other and with the FHA and VA with respect to price and other factors. We expect price competition to continue throughout the mortgage insurance industry and future price changes from private mortgage insurers or the FHA could impact our future premium rates or our ability to compete.
|
•
|
Losses. Incurred losses represent the estimated future claim payments on newly defaulted insured loans as well as any change in our claim estimates for existing defaults, including changes in the estimates we use to determine our expected losses, and estimates with respect to the frequency, magnitude and timing of anticipated losses on defaulted loans. Other factors influencing incurred losses include:
|
–
|
The mix of credit characteristics in our total direct RIF (e.g., loans with higher risk characteristics, or loans with layered risk that combine multiple higher-risk attributes within the same loan, generally result in more delinquencies and claims). See “Results of Operations—Mortgage Insurance—NIW, IIF, RIF.
|
–
|
The average loan size (relatively higher priced properties with larger average loan amounts may result in higher incurred losses).
|
–
|
The percentage of coverage on insured loans (higher percentages of insurance coverage generally correlate with higher incurred losses) and the presence of structural mitigants such as deductibles or stop losses.
|
–
|
Changes in housing values (declines in housing values generally make it more difficult for borrowers to sell a home to avoid default or for the property to be sold to mitigate any claim, and also may negatively affect a borrower’s willingness to continue to make mortgage payments when the home value is less than the mortgage balance; conversely, increases in housing values tend to reduce the level of defaults as well as make it more likely that foreclosures will result in the loan being satisfied).
|
–
|
The distribution of claims over the life cycle of a portfolio (historically, claims are relatively low during the first two years after a loan is originated and then increase over a period of several years before declining; however, several factors can impact and change this cycle, including the economic environment, the quality of the underwriting of the loan, characteristics of the mortgage loan, the credit profile of the borrower, housing prices and unemployment rates).
|
–
|
Our ability to mitigate potential losses through Rescissions, Claim Denials, cancellations and Claim Curtailments on claims submitted to us. These actions all reduce our incurred losses. However, if these Loss Mitigation Activities are successfully challenged at rates that are higher than expected or we agree to settle disputes related to our Loss Mitigation Activities, our incurred losses will increase. We may enter into specific agreements that govern activities such as claims decisions, claim payments, Loss Mitigation Activities and insurance coverage. As our portfolio originated prior to and including 2008 has become a smaller percentage of our overall insured portfolio, there has been a decrease in the amount of Loss Mitigation Activity with respect to the claims we receive, and we expect this trend to continue, particularly given the limitations on our Loss Mitigation Activities imposed in the 2014 Master Policy. See Note 11 of Notes to Consolidated Financial Statements for additional information on Loss Mitigation Activities and “Item 1A. Risk Factors—Our Loss Mitigation Activity is not expected to mitigate mortgage insurance losses to the same extent as in prior years; Loss Mitigation Activity could continue to negatively impact our customer relationships.”
|
•
|
Other Operating Expenses. Our other operating expenses are affected by the amount of our NIW, as well as the amount of RIF. Our other operating expenses may also be affected by the impact of performance on our incentive
|
•
|
Third-Party Reinsurance. We use third-party reinsurance in our mortgage insurance business to manage capital and risk in an effort to optimize the amounts and types of capital and risk distribution deployed against insured risk. See “Overview—Other 2018 Developments—Reinsurance” and “—IIF; Persistency Rate; Mix of Business.” Currently Radian participates in quota share and excess-of-loss reinsurance programs. When we enter into a quota share reinsurance agreement, the reinsurer receives a premium and, in exchange, agrees to insure an agreed upon portion of incurred losses. These arrangements have the impact of reducing our earned premiums but also reduce our net RIF, which provides capital relief, including under the PMIERs financial requirements. Our incurred losses are reduced by any incurred losses ceded in accordance with the reinsurance agreement, and we often receive ceding commissions from the reinsurer as part of the transaction, which reduces our operating expenses and policy acquisition costs. Our Excess-of-Loss Program accesses both the capital and the reinsurance markets to distribute risk, and includes reinsurance through a variable interest entity funded by mortgage insurance-linked notes, as well as separate excess-of-loss reinsurance with a third-party reinsurer. Our Excess-of-Loss Program reduces our net RIF and our incurred losses are reduced by any incurred losses allocated in accordance with the structure of the transaction. While these arrangements have the impact of reducing our earned premiums, they also provide capital relief, including under the PMIERs financial requirements. See Note 8 of Notes to Consolidated Financial Statements for more information about our reinsurance arrangements.
|
•
|
Services Revenue. Our Services segment is dependent upon overall activity in the mortgage, real estate and mortgage finance markets, as well as the overall health of the related industries. Due, in part, to the transactional nature of its business, revenues for our Services segment are subject to fluctuations from period to period, including seasonal fluctuations that reflect the activities in these markets. Sales volume is also affected by the number of competing companies and alternative products offered in the market. We believe the diversity of services we offer has the potential to produce fee income from the Services segment throughout various mortgage finance environments, although market conditions can significantly impact the mix and amount of fee income we generate in any particular period. In addition, see Note 2 of Notes to Consolidated Financial Statements for information on revenue recognition policies for our Services segment.
|
–
|
Fixed-Price Contracts. Under fixed-price contracts, we agree to perform the specified services and deliverables for a pre-determined per-unit or per-file price or day rate. To the extent our actual direct and allocated indirect costs decrease or increase from the estimates upon which the price was negotiated, we will generate more or less profit, respectively, or could incur a loss.
|
–
|
Time-and-Expense Contracts. Under a time-and-expense contract, we are paid a fixed hourly rate, and we are reimbursed for billable out-of-pocket expenses as work is performed. To the extent our actual direct labor costs decrease or increase in relation to the fixed hourly billing rates provided in the contract, we may generate more or less profit, respectively. However, because these contracts are generally short-term in nature, the risk is limited to the periods covered by the contracts. These contracts are used for our loan review, underwriting and due diligence services.
|
–
|
Percentage-of-Sale Contracts. Under percentage-of-sale contracts, we are paid a contractual percentage of the sale proceeds upon the sale of each property. To the extent the sale of a property is delayed or not consummated, or the sales proceeds are significantly less than originally estimated, we may generate less profit than anticipated, or could incur a loss. See “Item 1. Business—Services—Services Business Overview” for more information on our Services revenue.
|
•
|
Cost of Services. Our cost of services is primarily affected by our level of services revenue. Our cost of services primarily consists of employee compensation and related payroll benefits, including the cost of billable labor assigned to revenue-generating activities and, to a lesser extent, other costs of providing services such as travel and related expenses incurred in providing client services, costs paid to outside vendors, data acquisition costs and other compensation-related expenses to maintain software application platforms that directly support our businesses. The level of these costs may fluctuate if market rates of compensation change, or if there is decreased availability or a loss of qualified employees.
|
•
|
Gross Profit on Services. In addition to the key factors affecting Services revenue and cost of services described above, our gross profit on services may fluctuate from period to period due to a shifting mix of services we provide resulting from changes in the relative demand for those services in the marketplace. Shifts in the business mix of our Services business can impact our gross profit because each product and service generally produces a different level of gross margin. These individual gross margins in turn can be impacted in any given period by factors such as the implementation of new regulatory requirements, our operating capacity, competition or other environmental factors.
|
•
|
Premiums. We earn net premiums on title insurance, effective with our acquisition of EnTitle Direct in the first quarter of 2018. By adding the capabilities of its subsidiary, EnTitle Insurance, to the title and settlement services that we already were offering through our existing title agency, Radian Settlement Services, we have expanded the geographic reach of our title services and are positioned to provide title insurance and settlement services to our customers across the country.
|
•
|
Operating Expenses. Our operating expenses primarily consist of salaries and benefits not classified as cost of services because they are related to employees, such as sales and corporate employees, who are not directly involved in providing client services. Operating expenses also include other selling, general and administrative expenses, depreciation, and allocations of corporate general and administrative expenses.
|
•
|
Investment Income. Investment income is determined primarily by the investment balances held and the average yield on our overall investment portfolio.
|
•
|
Net Gains (Losses) on Investments. The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on such factors as market opportunities, our tax and capital profile and overall market cycles that impact the timing of the sales of securities. Unrealized investment gains and losses arise primarily from changes in the market value of our investments that are classified as trading securities or, effective with our implementation of the update to the standard for the accounting of financial
|
•
|
Impairment of Goodwill or Other Acquired Intangible Assets. The periodic review of goodwill and other acquired intangible assets for potential impairment may impact consolidated results. Our goodwill and other acquired intangible assets primarily relate to the acquisition of Clayton, and their valuation is based on management’s assumptions, which are inherently subject to risks and uncertainties. In 2017, we recorded total impairment charges of $200.2 million related to the goodwill and other acquired intangible assets of the Services segment. See Note 7 of Notes to Consolidated Financial Statements for additional information.
|
•
|
Tax Cuts and Jobs Act. The enactment of the TCJA resulted in a material reduction of our net deferred tax assets at December 31, 2017, because deferred tax assets and liabilities are measured using the enacted tax rates that are expected to apply to taxable income in the periods in which the deferred tax assets or liabilities are expected to be realized or settled. See Note 10 of Notes to Consolidated Financial Statements for additional information on the TCJA.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Diluted net income per share
|
$
|
2.77
|
|
|
$
|
0.55
|
|
|
$
|
1.37
|
|
Adjusted diluted net operating income per share (1)
|
2.69
|
|
|
1.82
|
|
|
1.56
|
|
|||
Book value per share at December 31
|
16.34
|
|
|
13.90
|
|
|
13.39
|
|
|||
Return on equity
|
18.7
|
%
|
|
4.1
|
%
|
|
11.5
|
%
|
|||
Adjusted net operating return on equity (1)
|
18.2
|
%
|
|
13.7
|
%
|
|
13.1
|
%
|
(1)
|
See “Results of Operations—Consolidated—Use of Non-GAAP Financial Measures”.
|
|
|
|
$ Change
|
||||||||||||||||
|
Year Ended December 31,
|
|
Favorable (Unfavorable)
|
||||||||||||||||
($ in millions, except per-share amounts)
|
2018
|
|
2017
|
|
2016
|
|
2018 vs. 2017
|
|
2017 vs. 2016
|
||||||||||
Pretax income
|
$
|
684.2
|
|
|
$
|
346.7
|
|
|
$
|
483.7
|
|
|
$
|
337.5
|
|
|
$
|
(137.0
|
)
|
Net income
|
606.0
|
|
|
121.1
|
|
|
308.3
|
|
|
484.9
|
|
|
(187.2
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums earned—insurance
|
$
|
1,014.0
|
|
|
$
|
932.8
|
|
|
$
|
921.8
|
|
|
$
|
81.2
|
|
|
$
|
11.0
|
|
Services revenue
|
145.0
|
|
|
155.1
|
|
|
168.9
|
|
|
(10.1
|
)
|
|
(13.8
|
)
|
|||||
Net investment income
|
152.5
|
|
|
127.2
|
|
|
113.5
|
|
|
25.3
|
|
|
13.7
|
|
|||||
Net gains (losses) on investments and other financial instruments
|
(42.5
|
)
|
|
3.6
|
|
|
30.8
|
|
|
(46.1
|
)
|
|
(27.2
|
)
|
|||||
Provision for losses
|
104.6
|
|
|
135.2
|
|
|
202.8
|
|
|
30.6
|
|
|
67.6
|
|
|||||
Cost of services
|
98.1
|
|
|
104.6
|
|
|
114.2
|
|
|
6.5
|
|
|
9.6
|
|
|||||
Other operating expenses
|
280.8
|
|
|
267.3
|
|
|
244.9
|
|
|
(13.5
|
)
|
|
(22.4
|
)
|
|||||
Restructuring and other exit costs
|
6.1
|
|
|
17.3
|
|
|
—
|
|
|
11.2
|
|
|
(17.3
|
)
|
|||||
Interest expense
|
61.5
|
|
|
62.8
|
|
|
81.1
|
|
|
1.3
|
|
|
18.3
|
|
|||||
Loss on induced conversion and debt extinguishment
|
—
|
|
|
51.5
|
|
|
75.1
|
|
|
51.5
|
|
|
23.6
|
|
|||||
Impairment of goodwill
|
—
|
|
|
184.4
|
|
|
—
|
|
|
184.4
|
|
|
(184.4
|
)
|
|||||
Amortization and impairment of other acquired intangible assets
|
12.4
|
|
|
27.7
|
|
|
13.2
|
|
|
15.3
|
|
|
(14.5
|
)
|
|||||
Income tax provision
|
78.2
|
|
|
225.6
|
|
|
175.4
|
|
|
147.4
|
|
|
(50.2
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Adjusted pretax operating income (1)
|
$
|
745.5
|
|
|
$
|
617.2
|
|
|
$
|
541.8
|
|
|
$
|
128.3
|
|
|
$
|
75.4
|
|
(1)
|
See “—Use of Non-GAAP Financial Measures” below.
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Net unrealized gains (losses) related to change in fair value of trading securities and other investments (1)
|
$
|
(27.3
|
)
|
|
$
|
13.2
|
|
|
$
|
27.2
|
|
Net realized gains (losses) on investments
|
(12.1
|
)
|
|
(8.6
|
)
|
|
4.3
|
|
|||
Other-than-temporary impairment losses
|
(1.7
|
)
|
|
(1.4
|
)
|
|
(0.5
|
)
|
|||
Net gains (losses) on other financial instruments
|
(1.4
|
)
|
|
0.4
|
|
|
(0.2
|
)
|
|||
Net gains (losses) on investments and other financial instruments
|
$
|
(42.5
|
)
|
|
$
|
3.6
|
|
|
$
|
30.8
|
|
|
|
|
|
|
|
(1)
|
These amounts include unrealized gains (losses) on investment securities other than securities available for sale. For 2017 and 2016, 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.
|
(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 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 acquired intangible assets. Amortization of acquired intangible assets represents the periodic expense required to amortize the cost of acquired intangible assets over their estimated useful lives. Acquired 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 t
|
(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)
|
All amounts are included within restructuring and other exit costs on the consolidated statements of operations, except for $1.6 million in 2018 related to the impairment of other long-lived assets, included in other operating expenses.
|
(3)
|
Total adjusted pretax operating income on a consolidated basis consists of adjusted pretax operating income (loss) for our
|
Reconciliation of Diluted Net Income Per Share
to Adjusted Diluted Net Operating Income Per Share
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Diluted net income per share
|
$
|
2.77
|
|
|
$
|
0.55
|
|
|
$
|
1.37
|
|
|
|
|
|
|
|
||||||
Less per-share impact of debt items:
|
|
|
|
|
|
||||||
Loss on induced conversion and debt extinguishment
|
—
|
|
|
(0.23
|
)
|
|
(0.33
|
)
|
|||
Income tax provision (benefit) (1)
|
—
|
|
|
(0.08
|
)
|
|
(0.07
|
)
|
|||
Per-share impact of debt items
|
—
|
|
|
(0.15
|
)
|
|
(0.26
|
)
|
|||
|
|
|
|
|
|
||||||
Less per-share impact of reconciling income (expense) items:
|
|
|
|
|
|
||||||
Net gains (losses) on investments and other financial instruments
|
(0.19
|
)
|
|
0.02
|
|
|
0.14
|
|
|||
Impairment of goodwill
|
—
|
|
|
(0.84
|
)
|
|
—
|
|
|||
Amortization and impairment of other acquired intangible assets
|
(0.06
|
)
|
|
(0.13
|
)
|
|
(0.06
|
)
|
|||
Impairment of other long-lived assets and loss from the sale of a business line
|
(0.03
|
)
|
|
(0.05
|
)
|
|
—
|
|
|||
Income tax provision (benefit) on other income (expense) items (1)
|
(0.06
|
)
|
|
(0.35
|
)
|
|
0.03
|
|
|||
Difference between statutory and effective tax rate (2)
|
0.30
|
|
|
(0.47
|
)
|
|
0.02
|
|
|||
Per-share impact of other income (expense) items
|
0.08
|
|
|
(1.12
|
)
|
|
0.07
|
|
|||
Adjusted diluted net operating income per share (1)
|
$
|
2.69
|
|
|
$
|
1.82
|
|
|
$
|
1.56
|
|
|
|
|
|
|
|
(1)
|
Calculated using the company’s federal statutory tax rates of 21% for 2018 and 35% for 2017 and 2016. Any permanent tax adjustments and state income taxes on these items have been deemed immaterial and are not included.
|
(2)
|
For 2018, includes $0.34 of tax benefit related to the settlement of the IRS Matter, which includes both the impact of the settlement with the IRS as well as the reversal of certain related previously accrued state and local tax liabilities. All of the 2017 amount represents additional tax expense related to the remeasurement of our net deferred tax assets as a result of the TCJA enacted in December 2017.
|
(1)
|
Calculated by dividing net income by average stockholders’ equity.
|
(2)
|
As a percentage of average stockholders’ equity.
|
(3)
|
Calculated using the company’s federal statutory tax rates of 21% for 2018 and 35% for 2017 and 2016. Any permanent tax adjustments and state income taxes on these items have been deemed immaterial and are not included.
|
(4)
|
The difference in 2018 includes the tax benefit related to the settlement of the IRS Matter, which includes both the impact of the settlement with the IRS as well as the reversal of certain related previously accrued state and local tax liabilities. All of the 2017 amount represents additional tax expense related to the remeasurement of our net deferred tax assets as a result of the TCJA enacted in December 2017.
|
|
|
|
$ Change
|
||||||||||||||||
|
Year Ended December 31,
|
|
Favorable (Unfavorable)
|
||||||||||||||||
(In millions)
|
2018
|
|
2017
|
|
2016
|
|
2018 vs. 2017
|
|
2017 vs. 2016
|
||||||||||
Adjusted pretax operating income (1)
|
$
|
772.6
|
|
|
$
|
651.0
|
|
|
$
|
561.9
|
|
|
$
|
121.6
|
|
|
$
|
89.1
|
|
Net premiums written—insurance (2)
|
991.0
|
|
|
818.4
|
|
|
733.8
|
|
|
172.6
|
|
|
84.6
|
|
|||||
(Increase) decrease in unearned premiums
|
15.7
|
|
|
114.4
|
|
|
187.9
|
|
|
(98.7
|
)
|
|
(73.5
|
)
|
|||||
Net premiums earned—insurance
|
1,006.7
|
|
|
932.8
|
|
|
921.8
|
|
|
73.9
|
|
|
11.0
|
|
|||||
Net investment income
|
152.1
|
|
|
127.2
|
|
|
113.5
|
|
|
24.9
|
|
|
13.7
|
|
|||||
Provision for losses
|
104.5
|
|
|
136.2
|
|
|
204.2
|
|
|
31.7
|
|
|
68.0
|
|
|||||
Other operating expenses (3)
|
215.5
|
|
|
206.4
|
|
|
185.8
|
|
|
(9.1
|
)
|
|
(20.6
|
)
|
|||||
Interest expense
|
43.7
|
|
|
45.0
|
|
|
63.4
|
|
|
1.3
|
|
|
18.4
|
|
(1)
|
Our senior management uses adjusted pretax operating income as our primary measure to evaluate the fundamental financial performance of our business segments. See Note 4 of Notes to Consolidated Financial Statements for more information.
|
(2)
|
Net of ceded premiums written under the QSR Program, the Single Premium QSR Program and the Excess-of-Loss Program. See Note 8 of Notes to Consolidated Financial Statements for more information.
|
(3)
|
Includes allocation of corporate operating expenses of $80.1 million, $55.4 million and $45.2 million for 2018, 2017 and 2016, respectively.
|
(1)
|
Policy years represent the original policy years, and have not been adjusted to reflect subsequent HARP refinancing activity.
|
(2)
|
If adjusted to reflect subsequent HARP refinancing activity, this percentage would decrease to 6.0%, 8.4%, and 12.1% as of December 31, 2018, December 31, 2017 and December 31, 2016, respectively.
|
(1)
|
Represents inception-to-date losses incurred as a percentage of net premiums earned on mortgage insurance.
|
(2)
|
Incurred losses in 2017 were slightly elevated due to the impact of Hurricanes Harvey and Irma. See “Overview— Operating Environment—Hurricanes” for additional information.
|
(3)
|
Radian’s stochastic modeling, used for pricing, indicates an approximate 20% through-the-cycle loss ratio on newly originated mortgage insurance business.
|
|
Year Ended December 31,
|
|||||||||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2016
|
|||||||||||||||
Total Primary NIW by FICO Score
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
>=740
|
$
|
34,209
|
|
|
60.5
|
%
|
|
$
|
32,928
|
|
|
61.1
|
%
|
|
$
|
31,426
|
|
|
62.2
|
%
|
680-739
|
18,250
|
|
|
32.3
|
|
|
17,641
|
|
|
32.7
|
|
|
16,001
|
|
|
31.7
|
|
|||
620-679
|
4,088
|
|
|
7.2
|
|
|
3,336
|
|
|
6.2
|
|
|
3,103
|
|
|
6.1
|
|
|||
Total Primary NIW
|
$
|
56,547
|
|
|
100.0
|
%
|
|
$
|
53,905
|
|
|
100.0
|
%
|
|
$
|
50,530
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Percentage of Primary NIW
|
|
|
|
|
|
||||||
Borrower-paid
|
90
|
%
|
|
78
|
%
|
|
75
|
%
|
|||
Premium Type
|
|
|
|
|
|
||||||
Direct Monthly and Other Premiums
|
79
|
%
|
|
77
|
%
|
|
73
|
%
|
|||
Direct Single Premiums
|
|
|
|
|
|
||||||
Lender-paid
|
9
|
%
|
|
21
|
%
|
|
25
|
%
|
|||
Borrower-paid (1)
|
12
|
%
|
|
2
|
%
|
|
2
|
%
|
|||
Total Primary NIW
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|||
|
|
|
|
|
|
||||||
Net Single Premiums (2)
|
8
|
%
|
|
15
|
%
|
|
18
|
%
|
|||
|
|
|
|
|
|
||||||
NIW for Purchases
|
94
|
%
|
|
89
|
%
|
|
78
|
%
|
|||
|
|
|
|
|
|
||||||
NIW for Refinances
|
6
|
%
|
|
11
|
%
|
|
22
|
%
|
|||
|
|
|
|
|
|
||||||
LTV
|
|
|
|
|
|
||||||
95.01% and above
|
16.7
|
%
|
|
13.2
|
%
|
|
5.7
|
%
|
|||
90.01% to 95.00%
|
44.4
|
%
|
|
46.0
|
%
|
|
47.5
|
%
|
|||
85.01% to 90.00%
|
27.6
|
%
|
|
28.5
|
%
|
|
32.0
|
%
|
|||
85.00% and below
|
11.3
|
%
|
|
12.3
|
%
|
|
14.8
|
%
|
|||
|
|
|
|
|
|
||||||
Primary risk written
|
$
|
14,264
|
|
|
$
|
13,569
|
|
|
$
|
12,538
|
|
(1)
|
Borrower-paid Single Premium Policies have lower Minimum Required Assets under PMIERs as compared to lender-paid Single Premium Policies. See “Overview—Competition and Pricing—Radian’s 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 8 of Notes to Consolidated Financial Statements for additional information about these arrangements.
|
|
December 31,
|
|
||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2016
|
|
||||||
Primary IIF
|
|
|
|
|
|
|
||||||
Direct Monthly and Other Premiums
|
70
|
%
|
|
69
|
%
|
|
68
|
%
|
|
|||
Direct Single Premiums
|
30
|
%
|
|
31
|
%
|
|
32
|
%
|
|
|||
|
|
|
|
|
|
|
||||||
Net Single Premiums (1)
|
17
|
%
|
|
20
|
%
|
|
25
|
%
|
|
|||
|
|
|
|
|
|
|
||||||
Total Primary IIF
|
$
|
221,443
|
|
|
$
|
200,724
|
|
|
$
|
183,450
|
|
|
|
|
|
|
|
|
|
||||||
Persistency Rate (12 months ended)
|
83.1
|
%
|
|
81.1
|
%
|
(2)
|
76.7
|
%
|
(3)
|
|||
Persistency Rate (quarterly, annualized) (4)
|
85.5
|
%
|
|
79.4
|
%
|
(2)
|
76.8
|
%
|
|
(1)
|
Represents the percentage of Single Premium IIF, after giving effect to all quota-share reinsurance ceded. See Note 8 of Notes to Consolidated Financial Statements for additional information about reinsurance transactions.
|
(2)
|
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 through our ongoing servicer monitoring process for Single Premium Policies.
|
(3)
|
The Persistency Rate for the 12 months ended December 31, 2016 was less than in subsequent years, primarily due to increased refinancing activity and the cancellations of Single Premium Policies in 2016. See “—Net Premiums Written and Earned” below.
|
(4)
|
The Persistency Rate on a quarterly, annualized basis is calculated based on loan level detail for the fourth quarter of each year shown. It may be affected by seasonality or other factors, and may not be indicative of full-year trends.
|
|
December 31,
|
|||||||||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2016
|
|||||||||||||||
Primary RIF by Premium Type
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Direct Monthly and Other Premiums
|
$
|
39,894
|
|
|
70.3
|
%
|
|
$
|
35,452
|
|
|
69.1
|
%
|
|
$
|
32,136
|
|
|
68.8
|
%
|
Direct Single Premiums
|
16,834
|
|
|
29.7
|
|
|
15,836
|
|
|
30.9
|
|
|
14,605
|
|
|
31.2
|
|
|||
Total primary RIF
|
$
|
56,728
|
|
|
100.0
|
%
|
|
$
|
51,288
|
|
|
100.0
|
%
|
|
$
|
46,741
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net Single Premiums (1)
|
$
|
8,182
|
|
|
17.2
|
%
|
|
$
|
8,320
|
|
|
19.3
|
%
|
|
$
|
10,161
|
|
|
24.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Primary RIF by Internal Risk Grade
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Prime
|
$
|
55,374
|
|
|
97.6
|
%
|
|
$
|
49,674
|
|
|
96.9
|
%
|
|
$
|
44,708
|
|
|
95.6
|
%
|
Alt-A and A minus and below
|
1,354
|
|
|
2.4
|
|
|
1,614
|
|
|
3.1
|
|
|
2,033
|
|
|
4.4
|
|
|||
Total primary RIF
|
$
|
56,728
|
|
|
100.0
|
%
|
|
$
|
51,288
|
|
|
100.0
|
%
|
|
$
|
46,741
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the dollar amount and percentage, respectively, of RIF on Single Premium Policies, after giving effect to all quota-share reinsurance ceded.
|
|
December 31,
|
|||||||||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2016
|
|||||||||||||||
Total primary RIF by FICO score
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
>=740
|
$
|
33,703
|
|
|
59.4
|
%
|
|
$
|
30,225
|
|
|
58.9
|
%
|
|
$
|
26,939
|
|
|
57.6
|
%
|
680-739
|
17,941
|
|
|
31.6
|
|
|
16,097
|
|
|
31.4
|
|
|
14,497
|
|
|
31.0
|
|
|||
620-679
|
4,626
|
|
|
8.2
|
|
|
4,425
|
|
|
8.6
|
|
|
4,620
|
|
|
9.9
|
|
|||
<=619
|
458
|
|
|
0.8
|
|
|
541
|
|
|
1.1
|
|
|
685
|
|
|
1.5
|
|
|||
Total primary RIF
|
$
|
56,728
|
|
|
100.0
|
%
|
|
$
|
51,288
|
|
|
100.0
|
%
|
|
$
|
46,741
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Primary RIF on defaulted loans
|
$
|
1,032
|
|
|
|
|
$
|
1,389
|
|
|
|
|
$
|
1,363
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|||||||||||||||||||
($ in millions)
|
2018
|
|
2017
|
|
2016
|
|||||||||||||||
Total primary RIF by LTV
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
95.01% and above
|
$
|
6,591
|
|
|
11.6
|
%
|
|
$
|
4,704
|
|
|
9.2
|
%
|
|
$
|
3,447
|
|
|
7.4
|
%
|
90.01% to 95.00%
|
30,132
|
|
|
53.1
|
|
|
27,276
|
|
|
53.2
|
|
|
24,439
|
|
|
52.3
|
|
|||
85.01% to 90.00%
|
16,464
|
|
|
29.0
|
|
|
15,719
|
|
|
30.6
|
|
|
15,208
|
|
|
32.5
|
|
|||
85.00% and below
|
3,541
|
|
|
6.3
|
|
|
3,589
|
|
|
7.0
|
|
|
3,647
|
|
|
7.8
|
|
|||
Total primary RIF
|
$
|
56,728
|
|
|
100.0
|
%
|
|
$
|
51,288
|
|
|
100.0
|
%
|
|
$
|
46,741
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total primary RIF by policy year
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2008 and prior
|
$
|
5,749
|
|
|
10.1
|
%
|
|
$
|
7,159
|
|
|
14.0
|
%
|
|
$
|
9,143
|
|
|
19.5
|
%
|
2009
|
199
|
|
|
0.4
|
|
|
298
|
|
|
0.6
|
|
|
468
|
|
|
1.0
|
|
|||
2010
|
170
|
|
|
0.3
|
|
|
264
|
|
|
0.5
|
|
|
417
|
|
|
0.9
|
|
|||
2011
|
465
|
|
|
0.8
|
|
|
682
|
|
|
1.3
|
|
|
917
|
|
|
2.0
|
|
|||
2012
|
2,094
|
|
|
3.7
|
|
|
2,830
|
|
|
5.5
|
|
|
3,734
|
|
|
8.0
|
|
|||
2013
|
3,504
|
|
|
6.2
|
|
|
4,557
|
|
|
8.9
|
|
|
5,902
|
|
|
12.6
|
|
|||
2014
|
3,464
|
|
|
6.1
|
|
|
4,356
|
|
|
8.5
|
|
|
5,607
|
|
|
12.0
|
|
|||
2015
|
5,806
|
|
|
10.2
|
|
|
7,096
|
|
|
13.8
|
|
|
8,469
|
|
|
18.1
|
|
|||
2016
|
9,544
|
|
|
16.8
|
|
|
10,992
|
|
|
21.4
|
|
|
12,084
|
|
|
25.9
|
|
|||
2017
|
11,958
|
|
|
21.1
|
|
|
13,054
|
|
|
25.5
|
|
|
—
|
|
|
—
|
|
|||
2018
|
13,775
|
|
|
24.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total primary RIF (1)
|
$
|
56,728
|
|
|
100.0
|
%
|
|
$
|
51,288
|
|
|
100.0
|
%
|
|
$
|
46,741
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
At December 31, 2018, 2017 and 2016, consists of 97.7%, 97.3% and 97.0%, respectively, of RIF related to fixed-rate mortgages.
|
(in thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
|
|
||||||
Net premiums earned—insurance:
|
|
|
|
|
|
||||||
Direct
|
|
|
|
|
|
||||||
Premiums earned, excluding revenue from cancellations
|
$
|
1,018,874
|
|
|
$
|
929,668
|
|
|
$
|
902,269
|
|
Single Premium Policy cancellations
|
47,990
|
|
|
60,348
|
|
|
96,824
|
|
|||
Direct premiums earned
|
1,066,864
|
|
|
990,016
|
|
|
999,093
|
|
|||
|
|
|
|
|
|
||||||
Ceded
|
|
|
|
|
|
||||||
Premiums earned, excluding revenue from cancellations
|
(85,357
|
)
|
|
(63,406
|
)
|
|
(70,714
|
)
|
|||
Single Premium Policy cancellations (1)
|
(13,726
|
)
|
|
(11,734
|
)
|
|
(21,886
|
)
|
|||
Profit commission—other (2)
|
32,036
|
|
|
17,869
|
|
|
15,241
|
|
|||
Ceded premiums, net of profit commission
|
(67,047
|
)
|
|
(57,271
|
)
|
|
(77,359
|
)
|
|||
|
|
|
|
|
|
||||||
Assumed premiums earned
|
6,904
|
|
(3)
|
28
|
|
|
35
|
|
|||
Total net premiums earned—insurance
|
$
|
1,006,721
|
|
|
$
|
932,773
|
|
|
$
|
921,769
|
|
|
|
|
|
|
|
(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.
|
(3)
|
Includes premiums earned from our participation in certain Front-end and Back-end credit risk transfer programs.
|
|
At or For the Year Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
QSR Program
|
|
|
|
|
|
|||
% of direct and assumed premiums written
|
1.2
|
%
|
|
1.9
|
%
|
|
2.8
|
%
|
% of total direct and assumed premiums earned
|
1.8
|
%
|
|
2.9
|
%
|
|
4.3
|
%
|
|
|
|
|
|
|
|||
Single Premium QSR Program
|
|
|
|
|
|
|||
% of direct and assumed premiums written
|
6.8
|
%
|
|
18.8
|
%
|
|
23.4
|
%
|
% of total direct and assumed premiums earned
|
4.1
|
%
|
|
2.8
|
%
|
|
3.0
|
%
|
|
|
|
|
|
|
|||
Excess-of-Loss Program
|
|
|
|
|
|
|||
% of direct and assumed premiums written
|
0.8
|
%
|
|
—
|
%
|
|
—
|
%
|
% of total direct and assumed premiums earned
|
0.2
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Year Ended December 31,
|
||||||||||
(In millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Current year defaults (1)
|
$
|
135.3
|
|
|
$
|
185.5
|
|
|
$
|
206.4
|
|
Prior year defaults (2)
|
(31.7
|
)
|
|
(49.3
|
)
|
|
(3.5
|
)
|
|||
Second-lien mortgage loan PDR and other
|
0.9
|
|
|
0.0
|
|
|
1.3
|
|
|||
Provision for losses
|
$
|
104.5
|
|
|
$
|
136.2
|
|
|
$
|
204.2
|
|
|
|
|
|
|
|
||||||
Loss ratio (3)
|
10.4
|
%
|
|
14.6
|
%
|
|
22.2
|
%
|
|||
|
|
|
|
|
|
(1)
|
Related to 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.
|
(2)
|
Related to defaulted loans with a default notice dated in a year earlier than the year indicated, which have been continuously in default since that time.
|
(3)
|
Provision for losses as a percentage of net premiums earned.
|
|
December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Default Statistics—Primary Insurance:
|
|
|
|
|
|
|||
Total primary insurance
|
|
|
|
|
|
|||
Prime
|
|
|
|
|
|
|||
Number of insured loans
|
986,704
|
|
|
913,408
|
|
|
849,227
|
|
Number of loans in default
|
15,402
|
|
|
20,269
|
|
|
19,101
|
|
Percentage of loans in default
|
1.56
|
%
|
|
2.22
|
%
|
|
2.25
|
%
|
Alt-A and A minus and below
|
|
|
|
|
|
|||
Number of insured loans
|
35,906
|
|
|
42,318
|
|
|
53,651
|
|
Number of loans in default
|
5,691
|
|
|
7,653
|
|
|
10,004
|
|
Percentage of loans in default
|
15.85
|
%
|
|
18.08
|
%
|
|
18.65
|
%
|
Total primary insurance
|
|
|
|
|
|
|||
Number of insured loans
|
1,022,610
|
|
|
955,726
|
|
|
902,878
|
|
Number of loans in default (1)
|
21,093
|
|
|
27,922
|
|
|
29,105
|
|
Percentage of loans in default
|
2.06
|
%
|
|
2.92
|
%
|
|
3.22
|
%
|
|
|
|
|
|
|
|||
Default Statistics—Pool Insurance:
|
|
|
|
|
|
|||
Number of loans in default
|
1,713
|
|
|
2,117
|
|
(2)
|
4,286
|
|
(1)
|
Included in this amount at December 31, 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 December 31, 2018, 2017 and 2016, defaults in these areas were 2,627; 7,051; and 3,321, respectively.
|
(2)
|
Decrease primarily due to pool commutations that took place during the year.
|
|
Year Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
Beginning default inventory
|
27,922
|
|
|
29,105
|
|
|
35,303
|
|
Plus: New defaults on insurance written in years: (1)
|
|
|
|
|
|
|||
Prior to and including 2008
|
19,629
|
|
|
25,300
|
|
|
29,772
|
|
After 2008
|
17,740
|
|
|
17,588
|
|
|
10,731
|
|
Total new defaults
|
37,369
|
|
|
42,888
|
|
|
40,503
|
|
Less: Cures (1)
|
39,799
|
|
|
37,464
|
|
|
38,589
|
|
Less: Claims paid (2)
|
4,322
|
|
|
6,477
|
|
|
8,223
|
|
Less: Rescissions and Claim Denials, net of (Reinstatements) (3)
|
77
|
|
|
130
|
|
|
(111
|
)
|
Ending default inventory
|
21,093
|
|
|
27,922
|
|
|
29,105
|
|
|
|
|
|
|
|
(1)
|
Included in this amount for the years ended December 31, 2018 and 2017 are 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 years ended December 31, 2018, 2017 and 2016, new defaults and Cures in these areas were as follows:
|
(2)
|
Includes those charged to a deductible or captive reinsurance transactions, as well as commutations.
|
(3)
|
Net of any previous Rescission and Claim Denials that were reinstated during the period. Such reinstated Rescissions and Claim Denials may ultimately result in a paid claim.
|
|
December 31, 2018
|
|||||||||||||||||
|
Total
|
|
Foreclosure Stage Defaulted Loans
|
|
Cure % During the 4th Quarter
|
|
Reserve for Losses
|
|
% of Reserve
|
|||||||||
($ in thousands)
|
#
|
|
%
|
|
#
|
|
%
|
|
$
|
|
%
|
|||||||
Missed payments:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Three payments or less
|
10,038
|
|
|
47.6
|
%
|
|
148
|
|
|
33.2
|
%
|
|
$
|
83,540
|
|
|
23.1
|
%
|
Four to 11 payments
|
5,905
|
|
|
28.0
|
|
|
422
|
|
|
24.7
|
|
|
87,210
|
|
|
24.1
|
|
|
12 payments or more
|
4,468
|
|
|
21.2
|
|
|
1,365
|
|
|
6.5
|
|
|
156,808
|
|
|
43.4
|
|
|
Pending claims
|
682
|
|
|
3.2
|
|
|
N/A
|
|
|
4.3
|
|
|
34,130
|
|
|
9.4
|
|
|
Total
|
21,093
|
|
|
100.0
|
%
|
|
1,935
|
|
|
|
|
|
361,688
|
|
|
100.0
|
%
|
|
IBNR and other
|
|
|
|
|
|
|
|
|
13,864
|
|
|
|
||||||
LAE
|
|
|
|
|
|
|
|
|
10,271
|
|
|
|
||||||
Total primary reserves
|
|
|
|
|
|
|
|
|
$
|
385,823
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
||||
Key Reserve Assumptions
|
||||
Gross Default to Claim Rate %
|
|
Net Default to Claim Rate %
|
|
Claim Severity %
|
35%
|
|
33%
|
|
96%
|
|
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 11 payments
|
7,528
|
|
|
27.0
|
|
|
426
|
|
|
20.9
|
|
|
99,759
|
|
|
21.5
|
|
|
12 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 reserves
|
|
|
|
|
|
|
|
|
$
|
493,580
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
||||
Key Reserve Assumptions
|
||||
Gross Default to Claim Rate %
|
|
Net Default to Claim Rate %
|
|
Claim Severity %
|
33%
|
|
31%
|
|
98%
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Net claims paid: (1)
|
|
|
|
|
|
||||||
Prime
|
$
|
120,503
|
|
|
$
|
182,338
|
|
|
$
|
252,583
|
|
Alt-A and A minus and below
|
67,136
|
|
|
96,102
|
|
|
140,056
|
|
|||
Total primary claims paid
|
187,639
|
|
|
278,440
|
|
|
392,639
|
|
|||
Pool
|
3,520
|
|
|
10,687
|
|
|
22,120
|
|
|||
Other (2)
|
322
|
|
|
(1,937
|
)
|
|
(384
|
)
|
|||
Subtotal
|
191,481
|
|
|
287,190
|
|
|
414,375
|
|
|||
Impact of captive terminations
|
(793
|
)
|
|
645
|
|
|
(2,418
|
)
|
|||
Impact of commutations (3)
|
25,260
|
|
|
102,545
|
|
|
5,605
|
|
|||
Total net claims paid
|
$
|
215,948
|
|
|
$
|
390,380
|
|
|
$
|
417,562
|
|
|
|
|
|
|
|
||||||
Average net claim paid: (1) (4)
|
|
|
|
|
|
||||||
Prime
|
$
|
49.9
|
|
|
$
|
49.2
|
|
|
$
|
47.5
|
|
Alt-A and A minus and below
|
62.4
|
|
|
54.1
|
|
|
52.3
|
|
|||
Total average net primary claim paid
|
53.7
|
|
|
50.8
|
|
|
49.1
|
|
|||
|
|
|
|
|
|
||||||
Average direct primary claim paid (4) (5)
|
$
|
54.4
|
|
|
$
|
51.1
|
|
|
$
|
49.5
|
|
(1)
|
Net of reinsurance recoveries and other recoveries.
|
(2)
|
Net of recoveries collected on claims paid in prior years on second-lien mortgage loans.
|
(3)
|
Includes payments to commute mortgage insurance coverage on certain performing and non-performing loans. For 2017, includes payments that, as expected, were made in connection with the final settlement of the Freddie Mac Agreement, as well as payments to commute mortgage insurance coverage on certain performing and non-performing loans on which we had Pool Insurance risk.
|
(4)
|
Calculated without giving effect to the impact of the termination of captive transactions and commutations.
|
(5)
|
Before reinsurance recoveries.
|
Direct Claims Paid vs. Premiums Written—Primary Insurance
|
||||||||||||||||||||||||||||||
Year of
Origination
|
|
End of 1st year
|
|
End of 2nd year
|
|
End of 3rd year
|
|
End of 4th year
|
|
End of 5th year
|
|
End of 6th year
|
|
End of 7th year
|
|
End of 8th year
|
|
End of 9th year
|
|
End of 10th year
|
||||||||||
2009
|
|
0.0
|
%
|
|
1.3
|
%
|
|
3.9
|
%
|
|
7.6
|
%
|
|
11.7
|
%
|
|
14.2
|
%
|
|
15.3
|
%
|
|
15.9
|
%
|
|
16.4
|
%
|
|
16.4
|
%
|
2010
|
|
0.0
|
%
|
|
0.4
|
%
|
|
1.3
|
%
|
|
3.1
|
%
|
|
4.9
|
%
|
|
5.5
|
%
|
|
6.0
|
%
|
|
6.3
|
%
|
|
6.4
|
%
|
|
—
|
|
2011
|
|
0.0
|
%
|
|
0.2
|
%
|
|
1.1
|
%
|
|
2.0
|
%
|
|
2.7
|
%
|
|
3.2
|
%
|
|
3.6
|
%
|
|
3.8
|
%
|
|
—
|
|
|
—
|
|
2012
|
|
0.0
|
%
|
|
0.1
|
%
|
|
0.5
|
%
|
|
0.8
|
%
|
|
1.2
|
%
|
|
1.5
|
%
|
|
1.7
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
2013
|
|
0.0
|
%
|
|
0.1
|
%
|
|
0.4
|
%
|
|
0.9
|
%
|
|
1.3
|
%
|
|
1.6
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2014
|
|
0.0
|
%
|
|
0.0
|
%
|
|
0.6
|
%
|
|
1.4
|
%
|
|
2.0
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2015
|
|
0.0
|
%
|
|
0.1
|
%
|
|
0.6
|
%
|
|
1.2
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2016
|
|
0.0
|
%
|
|
0.1
|
%
|
|
0.4
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2017
|
|
0.0
|
%
|
|
0.0
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2018
|
|
0.0
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
December 31,
|
|||||||||||||||||||
($ in thousands)
|
2018
|
|
2017
|
|
2016
|
|||||||||||||||
Direct claims paid by origination year (first-lien):
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2008 and prior
|
$
|
183,310
|
|
|
89.5
|
%
|
|
$
|
358,067
|
|
|
94.0
|
%
|
|
$
|
393,063
|
|
|
95.5
|
%
|
2009
|
1,623
|
|
|
0.8
|
|
|
3,970
|
|
|
1.0
|
|
|
4,156
|
|
|
1.0
|
|
|||
2010
|
587
|
|
|
0.3
|
|
|
1,332
|
|
|
0.3
|
|
|
1,644
|
|
|
0.4
|
|
|||
2011
|
1,020
|
|
|
0.5
|
|
|
1,484
|
|
|
0.4
|
|
|
1,835
|
|
|
0.5
|
|
|||
2012
|
2,100
|
|
|
1.0
|
|
|
2,943
|
|
|
0.8
|
|
|
3,380
|
|
|
0.8
|
|
|||
2013
|
3,126
|
|
|
1.5
|
|
|
4,638
|
|
|
1.2
|
|
|
4,561
|
|
|
1.1
|
|
|||
2014
|
5,490
|
|
|
2.7
|
|
|
5,271
|
|
|
1.4
|
|
|
2,961
|
|
|
0.7
|
|
|||
2015
|
4,856
|
|
|
2.4
|
|
|
3,143
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|||
2016
|
2,416
|
|
|
1.2
|
|
|
254
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|||
2017
|
253
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
2018
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total direct claims paid (1)
|
$
|
204,781
|
|
|
100.0
|
%
|
|
$
|
381,102
|
|
|
100.0
|
%
|
|
$
|
411,600
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents total first-lien direct claims paid, excluding impact of reinsurance and LAE.
|
|
|
|
|
|
|
|
$ Change
|
||||||||||||
|
Year Ended December 31,
|
|
Favorable (Unfavorable)
|
||||||||||||||||
(In millions)
|
2018
|
|
2017
|
|
2016
|
|
2018 vs. 2017
|
|
2017 vs. 2016
|
||||||||||
Adjusted pretax operating income (loss) (1)
|
$
|
(27.1
|
)
|
|
$
|
(33.8
|
)
|
|
$
|
(20.2
|
)
|
|
$
|
6.7
|
|
|
$
|
(13.6
|
)
|
Net premiums earned—insurance
|
7.3
|
|
|
—
|
|
|
—
|
|
|
7.3
|
|
|
—
|
|
|||||
Services revenue
|
148.2
|
|
|
161.8
|
|
|
177.2
|
|
|
(13.6
|
)
|
|
(15.4
|
)
|
|||||
Cost of services
|
98.7
|
|
|
105.8
|
|
|
115.4
|
|
|
7.1
|
|
|
9.6
|
|
|||||
Gross profit on services
|
49.5
|
|
|
56.0
|
|
|
61.8
|
|
|
(6.5
|
)
|
|
(5.8
|
)
|
|||||
Other operating expenses (2)
|
65.2
|
|
|
65.3
|
|
|
64.3
|
|
|
0.1
|
|
|
(1.0
|
)
|
|||||
Restructuring and other exit costs (3)
|
2.1
|
|
|
6.8
|
|
|
—
|
|
|
4.7
|
|
|
(6.8
|
)
|
(1)
|
Our senior management uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of each of our business segments. See Note 4 of Notes to Consolidated Financial Statements.
|
(2)
|
Includes allocation of corporate operating expenses of $12.0 million, $14.3 million and $8.5 million for 2018, 2017 and 2016, respectively.
|
(3)
|
Does not include impairment of long-lived assets and loss from the sale of a business line, which are not components of adjusted pretax operating income.
|
|
|
|
Payments Due by Period
|
|
||||||||||||||||
(In thousands)
|
Total
|
|
2019
|
|
2020-2021
|
|
2022-2023
|
|
Thereafter
|
|
||||||||||
Senior notes (principal and interest) (Note 12)
|
$
|
1,219,300
|
|
|
$
|
209,363
|
|
(1)
|
$
|
499,187
|
|
(2)
|
$
|
40,500
|
|
|
$
|
470,250
|
|
(3)
|
Lease obligations (Note 14) (4)
|
108,990
|
|
|
11,310
|
|
|
21,013
|
|
|
20,350
|
|
|
56,317
|
|
|
|||||
Reserve for losses and LAE (Note 11) (5)(6)
|
398,057
|
|
|
154,521
|
|
|
217,939
|
|
|
25,597
|
|
|
—
|
|
|
|||||
Purchase obligations
|
4,361
|
|
|
1,735
|
|
|
2,328
|
|
|
298
|
|
|
—
|
|
|
|||||
Unrecognized tax benefits (Note 10) (7)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|||||
Total
|
$
|
1,730,708
|
|
|
$
|
376,929
|
|
|
$
|
740,467
|
|
|
$
|
86,745
|
|
|
$
|
526,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes $158.6 million of Senior Notes due 2019 that may be redeemed, in whole or in part at any time prior to maturity.
|
(2)
|
Includes $234.1 million and $197.7 million of Senior Notes due 2020 and 2021 that may be redeemed, in whole or in part at any time prior to maturity.
|
(3)
|
Includes $450 million of Senior Notes due 2024 that may be redeemed, in whole or in part at any time prior to maturity.
|
(4)
|
Represents contractual payments for operating leases, with the exception of $0.2 million included for capital lease payment obligations through 2020.
|
(5)
|
Our reserve for losses and LAE reflects the application of accounting policies described below in “Critical Accounting Policies—Reserve for Losses and LAE.” The payments due by period are based on management’s estimates and assume that all of the loss reserves included in the table will result in claim payments, net of expected recoveries.
|
(6)
|
Excludes IBNR reserves of $3.3 million relating to the Services business, as the timing or magnitude of any potential payments is unknown.
|
(7)
|
We have approximately $33.6 million in potential additional liabilities associated with uncertain tax positions as of December 31, 2018. The timing or magnitude of any potential payments is unknown.
|
•
|
Radian Guaranty and Radian Mortgage Assurance were parties to a cross-guaranty agreement that was terminated effective July 1, 2016. However, it remains in effect for insurance written prior to the termination date. This agreement provides that if either party fails to make a payment to a policyholder, then the other party will step in and make the payment. The obligations of both parties are unconditional and irrevocable; however, no payments may be made without prior approval by the Pennsylvania Insurance Department.
|
•
|
Radian Group and Radian Mortgage Assurance are parties to a guaranty agreement, which provides that Radian Group will make sufficient funds available to Radian Mortgage Assurance to ensure that Radian Mortgage Assurance has a minimum of $5 million of statutory policyholders’ surplus every calendar quarter. Radian Mortgage Assurance had $8.7 million of statutory policyholders’ surplus and no RIF exposure as of December 31, 2018.
|
•
|
To allow our mortgage insurance customers to comply with applicable securities regulations for issuers of ABS (including mortgage-backed securities), we have been required, depending on the amount of credit enhancement we were providing, to provide: (i) audited financial statements for the insurance subsidiary participating in these transactions or (ii) a full and unconditional holding-company level guarantee for our insurance subsidiaries’ obligations in such transactions. Radian Group has guaranteed two structured transactions for Radian Guaranty with approximately $87.8 million of aggregate remaining credit exposure as of December 31, 2018.
|
•
|
Radian Group and Radian Guaranty Reinsurance are parties to an Assumption and Indemnification Agreement with regard to obligations under our tax-sharing arrangements. Pursuant to this agreement, Radian Group is required to assume certain obligations that arise as a result of our tax-sharing arrangements.
|
(1)
|
Represents Radian Group’s Liquidity, net of the $35 million minimum liquidity requirement under the unsecured revolving credit facility. Radian Group’s Liquidity as of December 31, 2018 includes $450 million from the December 2018 distribution of capital to our holding company from its mortgage insurance subsidiary, as approved by the Pennsylvania Insurance Department. See Note 19 of Notes to Consolidated Financial Statements.
|
(2)
|
Represents Radian Guaranty’s excess of Available Assets over its Minimum Required Assets, calculated in accordance with the PMIERs financial requirements.
|
(3)
|
Represents Radian’s PMIERs excess available resources as of December 31, 2018, calculated as if the PMIERs 2.0 requirements were in effect.
|
(4)
|
Percentages represent the values shown as a percentage of Minimum Required Assets under the PMIERs.
|
(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)
|
Year Ended December 31,
|
||||||||||
2018
|
|
2017
|
|
2016
|
|||||||
Net cash provided by (used in):
|
|
|
|
|
|
||||||
Operating activities
|
$
|
677,786
|
|
|
$
|
360,575
|
|
|
$
|
381,724
|
|
Investing activities
|
(689,414
|
)
|
|
(201,492
|
)
|
|
(176,058
|
)
|
|||
Financing activities
|
22,386
|
|
|
(125,084
|
)
|
|
(203,269
|
)
|
|||
Effect of exchange rate changes on cash and restricted cash
|
—
|
|
|
431
|
|
|
(481
|
)
|
|||
Increase (decrease) in cash and restricted cash
|
$
|
10,758
|
|
|
$
|
34,430
|
|
|
$
|
1,916
|
|
|
|
|
|
|
|
|
Moody’s (1)
|
|
S&P (2)
|
Radian Group
|
Ba2
|
|
BB+
|
Radian Guaranty
|
Baa2
|
|
BBB+
|
Radian Reinsurance
|
N/A
|
|
BBB+
|
(1)
|
Based on the October 1, 2018 update, Moody’s outlook for Radian Group and Radian Guaranty currently is Stable.
|
(2)
|
Based on the October 11, 2018 update, S&P’s outlook for Radian Group, Radian Guaranty and Radian Reinsurance is currently Stable.
|
Level I
|
— Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
|
Level II
|
— Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities; and
|
Level III
|
— Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Level III inputs are used to measure fair value only to the extent that observable inputs are not available.
|
•
|
the extent and the duration of the decline in value;
|
•
|
the reasons for the decline in value (e.g., credit event, interest related or market fluctuations); and
|
•
|
the financial position, access to capital and near term prospects of the issuer, including the current and future impact of any specific events.
|
|
Short-term and Available for Sale
|
|
Trading
|
||||||||||||
($ in millions)
|
December 31, 2018
|
|
December 31,
2017 |
|
December 31, 2018
|
|
December 31,
2017 |
||||||||
Carrying value of fixed income investment portfolio (1) (2)
|
$
|
4,556.1
|
|
|
$
|
4,009.8
|
|
|
$
|
566.2
|
|
|
$
|
606.4
|
|
Percentage of fixed income investment portfolio compared to total investment portfolio (3)
|
87.9
|
%
|
|
85.8
|
%
|
|
10.9
|
%
|
|
13.0
|
%
|
||||
Average duration of fixed income portfolio
|
4.0 years
|
|
|
4.4 years
|
|
|
4.3 years
|
|
|
5.1 years
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Interest-rate risk increase/(decrease) in market value
|
|
|
|
|
|
|
|
||||||||
+100 basis points - $
|
$
|
(175.0
|
)
|
|
$
|
(169.8
|
)
|
|
$
|
(23.4
|
)
|
|
$
|
(29.7
|
)
|
+100 basis points - % (4)
|
(3.8
|
)%
|
|
(4.2
|
)%
|
|
(4.1
|
)%
|
|
(4.9
|
)%
|
||||
- 100 basis points - $
|
$
|
186.8
|
|
|
$
|
184.7
|
|
|
$
|
25.3
|
|
|
$
|
32.5
|
|
- 100 basis points - % (4)
|
4.1
|
%
|
|
4.6
|
%
|
|
4.5
|
%
|
|
5.4
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Credit-spread risk increase/(decrease) in market value
|
|
|
|
|
|
|
|
||||||||
+100 basis points - $
|
$
|
(185.5
|
)
|
|
$
|
(183.8
|
)
|
|
$
|
(24.8
|
)
|
|
$
|
(30.4
|
)
|
+100 basis points - % (4)
|
(4.1
|
)%
|
|
(4.6
|
)%
|
|
(4.4
|
)%
|
|
(5.0
|
)%
|
||||
- 100 basis points - $
|
$
|
173.0
|
|
|
$
|
148.6
|
|
|
$
|
22.6
|
|
|
$
|
24.6
|
|
- 100 basis points - % (4)
|
3.8
|
%
|
|
3.7
|
%
|
|
4.0
|
%
|
|
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 December 31, 2018 and 2017, fixed income securities shown above also include $97.1 million and $134.1 million, respectively, invested in certain fixed income exchange-traded funds that are classified as equity securities in our consolidated balance sheets, as well as $17.8 million and $20.7 million, respectively, in fixed income securities loaned under securities lending agreements that are classified as other assets in our consolidated balance sheets.
|
(2)
|
At December 31, 2017, equity securities, including our fixed income exchange-traded funds included in this table, were classified as available for sale in our consolidated balance sheet. At December 31, 2018, in accordance with the new accounting guidance adopted for 2018, equity securities are no longer classified as available for sale in our consolidated balance sheet and changes in fair value for equity securities are recognized through earnings. As a result, at December 31, 2018, the fixed income exchange-traded funds that are classified as equity securities in our consolidated balance sheet are included in trading securities in this table. See Note 2 of Notes to Consolidated Financial Statements for additional details on the implementation of this new accounting guidance.
|
(3)
|
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.
|
(4)
|
Change in value expressed as a percentage of the market value of the related fixed income portfolio.
|
Item 8.
|
Financial Statements and Supplementary Data.
|
Index to Consolidated Financial Statements
|
|
Annual Financial Statements:
|
PAGE
|
Financial Statements as of December 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016:
|
|
Notes to Consolidated Financial Statements:
|
|
|
|
Radian Group Inc.
|
|||||||
CONSOLIDATED BALANCE SHEETS
|
|||||||
|
December 31,
2018 |
|
December 31,
2017 |
||||
(In thousands, except per-share amounts)
|
|
|
|
||||
Assets
|
|
|
|
||||
Investments (Note 6)
|
|
|
|
||||
Fixed-maturities available for sale—at fair value (amortized cost $4,098,962 and $3,426,217)
|
$
|
4,021,575
|
|
|
$
|
3,458,719
|
|
Trading securities—at fair value
|
469,071
|
|
|
606,401
|
|
||
Equity securities—at fair value (cost of $139,377 and $163,106)
|
130,565
|
|
|
162,830
|
|
||
Short-term investments—at fair value (includes $11,699 and $19,357 of reinvested cash collateral held under securities lending agreements)
|
528,403
|
|
|
415,658
|
|
||
Other invested assets—at fair value (amortized cost at December 31, 2017)
|
3,415
|
|
|
334
|
|
||
Total investments
|
5,153,029
|
|
|
4,643,942
|
|
||
Cash
|
95,393
|
|
|
80,569
|
|
||
Restricted cash
|
11,609
|
|
|
15,675
|
|
||
Accounts and notes receivable
|
78,652
|
|
|
72,558
|
|
||
Deferred income taxes, net (Note 10)
|
131,643
|
|
|
229,567
|
|
||
Goodwill and other acquired intangible assets, net (Note 7)
|
58,998
|
|
|
64,212
|
|
||
Prepaid reinsurance premium (Note 2)
|
417,628
|
|
|
386,509
|
|
||
Other assets (Note 9)
|
367,700
|
|
|
407,849
|
|
||
Total assets
|
$
|
6,314,652
|
|
|
$
|
5,900,881
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Unearned premiums
|
$
|
739,357
|
|
|
$
|
723,938
|
|
Reserve for losses and loss adjustment expenses (“LAE”) (Note 11)
|
401,361
|
|
|
507,588
|
|
||
Senior notes (Note 12)
|
1,030,348
|
|
|
1,027,074
|
|
||
Reinsurance funds withheld (Note 2)
|
321,212
|
|
|
288,398
|
|
||
Other liabilities (Note 13)
|
333,659
|
|
|
353,845
|
|
||
Total liabilities
|
2,825,937
|
|
|
2,900,843
|
|
||
Commitments and Contingencies (Note 14)
|
|
|
|
||||
Stockholders’ equity
|
|
|
|
||||
Common stock: par value $.001 per share; 485,000 shares authorized at December 31, 2018 and 2017; 231,132 and 233,417 shares issued at December 31, 2018 and 2017, respectively; 213,473 and 215,814 shares outstanding at December 31, 2018 and 2017, respectively
|
231
|
|
|
233
|
|
||
Treasury stock, at cost: 17,660 and 17,603 shares at December 31, 2018 and 2017, respectively
|
(894,870
|
)
|
|
(893,888
|
)
|
||
Additional paid-in capital
|
2,724,733
|
|
|
2,754,275
|
|
||
Retained earnings
|
1,719,541
|
|
|
1,116,333
|
|
||
Accumulated other comprehensive income (loss) (Note 18)
|
(60,920
|
)
|
|
23,085
|
|
||
Total stockholders’ equity
|
3,488,715
|
|
|
3,000,038
|
|
||
Total liabilities and stockholders’ equity
|
$
|
6,314,652
|
|
|
$
|
5,900,881
|
|
Radian Group Inc.
|
|||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
(In thousands, except per-share amounts)
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Net premiums earned—insurance
|
$
|
1,014,007
|
|
|
$
|
932,773
|
|
|
$
|
921,769
|
|
Services revenue
|
144,972
|
|
|
155,103
|
|
|
168,894
|
|
|||
Net investment income
|
152,475
|
|
|
127,248
|
|
|
113,466
|
|
|||
Net gains (losses) on investments and other financial instruments
|
(42,476
|
)
|
|
3,621
|
|
|
30,751
|
|
|||
Other income
|
4,028
|
|
|
2,886
|
|
|
3,572
|
|
|||
Total revenues
|
1,273,006
|
|
|
1,221,631
|
|
|
1,238,452
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Provision for losses
|
104,641
|
|
|
135,154
|
|
|
202,788
|
|
|||
Policy acquisition costs
|
25,265
|
|
|
24,277
|
|
|
23,480
|
|
|||
Cost of services
|
98,124
|
|
|
104,599
|
|
|
114,174
|
|
|||
Other operating expenses
|
280,818
|
|
|
267,321
|
|
|
244,896
|
|
|||
Restructuring and other exit costs (Note 1)
|
6,053
|
|
|
17,268
|
|
|
—
|
|
|||
Interest expense
|
61,490
|
|
|
62,761
|
|
|
81,132
|
|
|||
Loss on induced conversion and debt extinguishment (Note 12)
|
—
|
|
|
51,469
|
|
|
75,075
|
|
|||
Impairment of goodwill (Note 7)
|
—
|
|
|
184,374
|
|
|
—
|
|
|||
Amortization and impairment of other acquired intangible assets
|
12,429
|
|
|
27,671
|
|
|
13,221
|
|
|||
Total expenses
|
588,820
|
|
|
874,894
|
|
|
754,766
|
|
|||
Pretax income
|
684,186
|
|
|
346,737
|
|
|
483,686
|
|
|||
Income tax provision
|
78,175
|
|
|
225,649
|
|
|
175,433
|
|
|||
Net income
|
$
|
606,011
|
|
|
$
|
121,088
|
|
|
$
|
308,253
|
|
|
|
|
|
|
|
||||||
Net income per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
2.83
|
|
|
$
|
0.56
|
|
|
$
|
1.46
|
|
Diluted
|
$
|
2.77
|
|
|
$
|
0.55
|
|
|
$
|
1.37
|
|
|
|
|
|
|
|
||||||
Weighted-average number of common shares outstanding—basic
|
214,267
|
|
|
215,321
|
|
|
211,789
|
|
|||
Weighted-average number of common and common equivalent shares outstanding—diluted
|
218,553
|
|
|
220,406
|
|
|
229,258
|
|
Radian Group Inc.
|
|||||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Net income
|
$
|
606,011
|
|
|
$
|
121,088
|
|
|
$
|
308,253
|
|
Other comprehensive income (loss), net of tax (Note 18):
|
|
|
|
|
|
||||||
Unrealized gains (losses) on investments:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during the period
|
(97,356
|
)
|
|
31,903
|
|
|
8,782
|
|
|||
Less: Reclassification adjustment for net gains (losses) included in net income
|
(10,270
|
)
|
|
(2,642
|
)
|
|
2,251
|
|
|||
Net unrealized gains (losses) on investments
|
(87,086
|
)
|
|
34,545
|
|
|
6,531
|
|
|||
Foreign currency translation adjustments:
|
|
|
|
|
|
||||||
Unrealized foreign currency translation adjustments
|
5
|
|
|
150
|
|
|
(474
|
)
|
|||
Less: Reclassification adjustment for liquidation of foreign subsidiary and other adjustments included in net income
|
1
|
|
|
(721
|
)
|
|
—
|
|
|||
Net foreign currency translation adjustments
|
4
|
|
|
871
|
|
|
(474
|
)
|
|||
Net actuarial gains
|
129
|
|
|
64
|
|
|
25
|
|
|||
Other comprehensive income (loss), net of tax
|
(86,953
|
)
|
|
35,480
|
|
|
6,082
|
|
|||
Comprehensive income
|
$
|
519,058
|
|
|
$
|
156,568
|
|
|
$
|
314,335
|
|
Radian Group Inc.
|
|||||||||||
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ EQUITY
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Common Stock
|
|
|
|
|
|
||||||
Balance, beginning of period
|
$
|
233
|
|
|
$
|
232
|
|
|
$
|
224
|
|
Impact of extinguishment of convertible senior notes (Note 12)
|
—
|
|
|
—
|
|
|
17
|
|
|||
Issuance of common stock under incentive and benefit plans
|
1
|
|
|
1
|
|
|
—
|
|
|||
Shares repurchased under share repurchase program (Note 15)
|
(3
|
)
|
|
—
|
|
|
(9
|
)
|
|||
Balance, end of period
|
231
|
|
|
233
|
|
|
232
|
|
|||
|
|
|
|
|
|
||||||
Treasury Stock
|
|
|
|
|
|
||||||
Balance, beginning of period
|
(893,888
|
)
|
|
(893,332
|
)
|
|
(893,176
|
)
|
|||
Repurchases of common stock under incentive plans
|
(982
|
)
|
|
(556
|
)
|
|
(156
|
)
|
|||
Balance, end of period
|
(894,870
|
)
|
|
(893,888
|
)
|
|
(893,332
|
)
|
|||
|
|
|
|
|
|
||||||
Additional Paid-in Capital
|
|
|
|
|
|
||||||
Balance, beginning of period
|
2,754,275
|
|
|
2,779,891
|
|
|
2,716,618
|
|
|||
Issuance of common stock under incentive and benefit plans
|
2,859
|
|
|
8,635
|
|
|
2,117
|
|
|||
Stock-based compensation
|
17,649
|
|
|
13,491
|
|
|
18,257
|
|
|||
Impact of extinguishment of convertible senior notes (Note 12)
|
—
|
|
|
(52,700
|
)
|
|
143,078
|
|
|||
Cumulative effect of adoption of the accounting standard update for share-based payment transactions
|
—
|
|
|
756
|
|
|
—
|
|
|||
Termination of capped calls (Note 12)
|
—
|
|
|
4,208
|
|
|
—
|
|
|||
Shares repurchased under share repurchase program (Note 15)
|
(50,050
|
)
|
|
(6
|
)
|
|
(100,179
|
)
|
|||
Balance, end of period
|
2,724,733
|
|
|
2,754,275
|
|
|
2,779,891
|
|
|||
|
|
|
|
|
|
||||||
Retained Earnings
|
|
|
|
|
|
||||||
Balance, beginning of period
|
1,116,333
|
|
|
997,890
|
|
|
691,742
|
|
|||
Net income
|
606,011
|
|
|
121,088
|
|
|
308,253
|
|
|||
Dividends declared
|
(2,140
|
)
|
|
(2,154
|
)
|
|
(2,105
|
)
|
|||
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 adoption of the accounting standard update for share-based payment transactions, net of tax
|
—
|
|
|
(491
|
)
|
|
—
|
|
|||
Balance, end of period
|
1,719,541
|
|
|
1,116,333
|
|
|
997,890
|
|
|||
|
|
|
|
|
|
Radian Group Inc.
|
|||||||||||
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ EQUITY
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
||||||
Balance, beginning of period
|
23,085
|
|
|
(12,395
|
)
|
|
(18,477
|
)
|
|||
Cumulative effect of adopting the accounting standard update for financial instruments
|
224
|
|
|
—
|
|
|
—
|
|
|||
Cumulative effect of adopting the accounting standard update for reclassification of certain tax effects from accumulated other comprehensive income
|
2,724
|
|
|
—
|
|
|
—
|
|
|||
Net unrealized gains (losses) on investments, net of tax
|
(87,086
|
)
|
|
34,545
|
|
|
6,531
|
|
|||
Net foreign currency translation adjustment, net of tax
|
4
|
|
|
871
|
|
|
(474
|
)
|
|||
Net actuarial gains
|
129
|
|
|
64
|
|
|
25
|
|
|||
Balance, end of period
|
(60,920
|
)
|
|
23,085
|
|
|
(12,395
|
)
|
|||
|
|
|
|
|
|
||||||
Total Stockholders’ Equity
|
$
|
3,488,715
|
|
|
$
|
3,000,038
|
|
|
$
|
2,872,286
|
|
Radian Group Inc.
|
|||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||||||
(In thousands)
|
Year Ended December 31,
|
||||||||||
2018
|
|
2017
|
|
2016
|
|||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
606,011
|
|
|
$
|
121,088
|
|
|
$
|
308,253
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
||||||
Net (gains) losses on investments and other financial instruments
|
42,476
|
|
|
(3,621
|
)
|
|
(30,751
|
)
|
|||
Loss on induced conversion and debt extinguishment
|
—
|
|
|
51,469
|
|
|
75,075
|
|
|||
Deferred income tax provision
|
120,573
|
|
|
166,527
|
|
|
170,887
|
|
|||
Impairment of goodwill
|
—
|
|
|
184,374
|
|
|
—
|
|
|||
Amortization and impairment of other acquired intangible assets
|
12,429
|
|
|
27,797
|
|
|
13,221
|
|
|||
Depreciation, other amortization, and other impairments, net
|
56,661
|
|
|
58,038
|
|
|
57,795
|
|
|||
Change in:
|
|
|
|
|
|
|
|
|
|||
Accounts and notes receivable
|
(4,599
|
)
|
|
3,628
|
|
|
(16,011
|
)
|
|||
Prepaid reinsurance premiums
|
(31,119
|
)
|
|
(157,071
|
)
|
|
(188,947
|
)
|
|||
Unearned premiums
|
15,419
|
|
|
42,716
|
|
|
862
|
|
|||
Reserve for losses and LAE
|
(109,642
|
)
|
|
(252,681
|
)
|
|
(216,135
|
)
|
|||
Reinsurance funds withheld
|
32,814
|
|
|
130,397
|
|
|
158,001
|
|
|||
Other assets
|
43,562
|
|
|
(16,491
|
)
|
|
(7,662
|
)
|
|||
Other liabilities
|
(106,799
|
)
|
|
4,405
|
|
|
57,136
|
|
|||
Net cash provided by (used in) operating activities
|
677,786
|
|
|
360,575
|
|
|
381,724
|
|
|||
|
|
|
|
|
|
||||||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Proceeds from sales of:
|
|
|
|
|
|
||||||
Fixed-maturity investments available for sale
|
728,584
|
|
|
888,219
|
|
|
687,173
|
|
|||
Trading securities
|
58,317
|
|
|
194,784
|
|
|
290,855
|
|
|||
Equity securities
|
95,697
|
|
|
38,318
|
|
|
74,868
|
|
|||
Proceeds from redemptions of:
|
|
|
|
|
|
||||||
Fixed-maturity investments available for sale
|
457,595
|
|
|
463,548
|
|
|
337,630
|
|
|||
Trading securities
|
54,329
|
|
|
79,296
|
|
|
123,645
|
|
|||
Purchases of:
|
|
|
|
|
|
||||||
Fixed-maturity investments available for sale
|
(1,875,069
|
)
|
|
(1,947,916
|
)
|
|
(1,990,652
|
)
|
|||
Equity securities
|
(69,160
|
)
|
|
(213,469
|
)
|
|
(830
|
)
|
|||
Sales, redemptions and (purchases) of:
|
|
|
|
|
|
||||||
Short-term investments, net
|
(108,325
|
)
|
|
324,258
|
|
|
334,456
|
|
|||
Other assets and other invested assets, net
|
2,590
|
|
|
882
|
|
|
2,489
|
|
|||
Net cash received (transferred) in sale of subsidiaries
|
—
|
|
|
(650
|
)
|
|
—
|
|
|||
Purchases of property and equipment, net
|
(26,008
|
)
|
|
(28,676
|
)
|
|
(35,542
|
)
|
|||
Acquisitions, net of cash acquired
|
(7,964
|
)
|
|
(86
|
)
|
|
(150
|
)
|
|||
Net cash provided by (used in) investing activities
|
(689,414
|
)
|
|
(201,492
|
)
|
|
(176,058
|
)
|
Radian Group Inc.
|
|||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||||||
(In thousands)
|
Year Ended December 31,
|
||||||||||
2018
|
|
2017
|
|
2016
|
|||||||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Dividends paid
|
(2,140
|
)
|
|
(2,154
|
)
|
|
(2,105
|
)
|
|||
Issuance of senior notes, net
|
—
|
|
|
442,163
|
|
|
343,417
|
|
|||
Purchases and redemptions of senior notes
|
—
|
|
|
(593,527
|
)
|
|
(445,072
|
)
|
|||
Proceeds from termination of capped calls
|
—
|
|
|
4,208
|
|
|
—
|
|
|||
Issuance of common stock
|
1,385
|
|
|
7,132
|
|
|
717
|
|
|||
Purchases of common shares
|
(50,053
|
)
|
|
(6
|
)
|
|
(100,188
|
)
|
|||
Credit facility commitment fees paid
|
(1,510
|
)
|
|
(1,993
|
)
|
|
—
|
|
|||
Change in secured borrowings (Note 13)
|
39,342
|
|
|
19,357
|
|
|
—
|
|
|||
Proceeds from secured borrowings (with terms greater than 3 months)
|
56,449
|
|
|
—
|
|
|
—
|
|
|||
Payments of secured borrowings (with terms greater than 3 months)
|
(20,917
|
)
|
|
—
|
|
|
—
|
|
|||
Excess tax benefits from stock-based awards
|
—
|
|
|
—
|
|
|
333
|
|
|||
Repayments of other borrowings
|
(170
|
)
|
|
(264
|
)
|
|
(371
|
)
|
|||
Net cash provided by (used in) financing activities
|
22,386
|
|
|
(125,084
|
)
|
|
(203,269
|
)
|
|||
Effect of exchange rate changes on cash and restricted cash
|
—
|
|
|
431
|
|
|
(481
|
)
|
|||
Increase (decrease) in cash and restricted cash
|
10,758
|
|
|
34,430
|
|
|
1,916
|
|
|||
Cash and restricted cash, beginning of period
|
96,244
|
|
|
61,814
|
|
|
59,898
|
|
|||
Cash and restricted cash, end of period
|
$
|
107,002
|
|
|
$
|
96,244
|
|
|
$
|
61,814
|
|
|
|
|
|
|
|
||||||
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
||||||
Income taxes paid (received) (Note 10)
|
$
|
8,364
|
|
|
$
|
94,328
|
|
|
$
|
(673
|
)
|
Interest paid
|
56,688
|
|
|
57,453
|
|
|
65,531
|
|
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.
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Services segment revenue
|
|
|
|
|
|
||||||
Mortgage Services
|
$
|
80,314
|
|
|
$
|
83,405
|
|
|
$
|
102,244
|
|
Real Estate Services
|
58,874
|
|
|
55,095
|
|
|
58,056
|
|
|||
Title Services
|
10,263
|
|
|
23,333
|
|
|
16,949
|
|
|||
Total (1)
|
$
|
149,451
|
|
|
$
|
161,833
|
|
|
$
|
177,249
|
|
(1)
|
Includes inter-segment revenues of $3.2 million, $6.7 million, and $8.4 million in 2018, 2017 and 2016, respectively. For 2018, amounts exclude $7.7 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 4 for segment information.
|
(In thousands)
|
December 31, 2018
|
|
December 31, 2017
|
||||
Accounts Receivable - Services Contracts
|
$
|
15,461
|
|
|
$
|
17,391
|
|
Unbilled Receivables - Services Contracts
|
19,917
|
|
|
22,257
|
|
||
Deferred Revenues - Services Contracts
|
3,204
|
|
|
3,235
|
|
•
|
the extent and the duration of the decline in value;
|
•
|
the reasons for the decline in value (e.g., credit event, interest related or market fluctuations); and
|
•
|
the financial position, access to capital and near term prospects of the issuer, including the current and future impact of any specific events.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
(In thousands, except per-share amounts)
|
|
|
|
|
|
||||||
Net income—basic
|
$
|
606,011
|
|
|
$
|
121,088
|
|
|
$
|
308,253
|
|
Adjustment for dilutive Convertible Senior Notes due 2019, net of tax (1)
|
—
|
|
|
(215
|
)
|
|
5,816
|
|
|||
Net income —diluted
|
$
|
606,011
|
|
|
$
|
120,873
|
|
|
$
|
314,069
|
|
|
|
|
|
|
|
||||||
Average common shares outstanding—basic
|
214,267
|
|
|
215,321
|
|
|
211,789
|
|
|||
Dilutive effect of Convertible Senior Notes due 2017
|
—
|
|
|
323
|
|
|
207
|
|
|||
Dilutive effect of Convertible Senior Notes due 2019
|
—
|
|
|
457
|
|
|
14,263
|
|
|||
Dilutive effect of stock-based compensation arrangements (2)
|
4,286
|
|
|
4,305
|
|
|
2,999
|
|
|||
Adjusted average common shares outstanding—diluted
|
218,553
|
|
|
220,406
|
|
|
229,258
|
|
|||
|
|
|
|
|
|
||||||
Net income per share:
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Basic
|
$
|
2.83
|
|
|
$
|
0.56
|
|
|
$
|
1.46
|
|
|
|
|
|
|
|
||||||
Diluted
|
$
|
2.77
|
|
|
$
|
0.55
|
|
|
$
|
1.37
|
|
(1)
|
As applicable, includes coupon interest, amortization of discount and fees, and other changes in income or loss that would result from the assumed conversion. Included in the year ended December 31, 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)
|
The following number of shares of our common stock equivalents issued under our share-based compensation arrangements were not included in the calculation of diluted net income per share because they were anti-dilutive:
|
|
Year Ended December 31,
|
|||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
|||
Shares of common stock equivalents
|
337
|
|
|
353
|
|
|
1,042
|
|
(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 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 acquired intangible assets. Amortization of acquired intangible assets represents the periodic expense required to amortize the cost of acquired intangible assets over their estimated useful lives. Acquired 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).
|
|
December 31, 2018
|
||||||||||
(In thousands)
|
Mortgage Insurance
|
|
Services
|
|
Total
|
||||||
Net premiums written—insurance (1)
|
$
|
991,021
|
|
|
$
|
7,286
|
|
(2)
|
$
|
998,307
|
|
(Increase) decrease in unearned premiums
|
15,700
|
|
|
—
|
|
(2)
|
15,700
|
|
|||
Net premiums earned—insurance
|
1,006,721
|
|
|
7,286
|
|
(2)
|
1,014,007
|
|
|||
Services revenue
|
—
|
|
|
148,217
|
|
|
148,217
|
|
|||
Net investment income
|
152,102
|
|
|
373
|
|
(2)
|
152,475
|
|
|||
Other income
|
2,794
|
|
|
1,234
|
|
(2)
|
4,028
|
|
|||
Total (3) (4)
|
1,161,617
|
|
|
157,110
|
|
|
1,318,727
|
|
|||
|
|
|
|
|
|
||||||
Provision for losses
|
104,547
|
|
|
408
|
|
(2)
|
104,955
|
|
|||
Policy acquisition costs
|
25,265
|
|
|
—
|
|
|
25,265
|
|
|||
Cost of services
|
—
|
|
|
98,692
|
|
|
98,692
|
|
|||
Other operating expenses before corporate allocations
|
135,372
|
|
|
53,250
|
|
|
188,622
|
|
|||
Restructuring and other exit costs (5)
|
—
|
|
|
2,100
|
|
|
2,100
|
|
|||
Total (4)
|
265,184
|
|
|
154,450
|
|
|
419,634
|
|
|||
Adjusted pretax operating income (loss) before corporate allocations
|
896,433
|
|
|
2,660
|
|
|
899,093
|
|
|||
Allocation of corporate operating expenses
|
80,134
|
|
|
11,974
|
|
|
92,108
|
|
|||
Allocation of interest expense
|
43,685
|
|
|
17,805
|
|
|
61,490
|
|
|||
Adjusted pretax operating income (loss)
|
$
|
772,614
|
|
|
$
|
(27,119
|
)
|
|
$
|
745,495
|
|
|
|
|
|
|
|
||||||
Total assets
|
$
|
6,138,679
|
|
|
$
|
175,973
|
|
|
$
|
6,314,652
|
|
(1)
|
Net of ceded premiums written under the QSR Program, the Single Premium QSR Program and the Excess-of-Loss Program. See Note 8 for additional information.
|
(2)
|
Results from inclusion of the operations of EnTitle Direct, a national title insurance and settlement service company, acquired in March 2018.
|
(3)
|
Excludes net losses on investments and other financial instruments of $42.5 million, not included in adjusted pretax operating income.
|
(4)
|
Includes inter-segment revenues and expenses as follows:
|
|
December 31, 2018
|
||||||
(In thousands)
|
Mortgage Insurance
|
|
Services
|
||||
Inter-segment revenues included in Services segment
|
$
|
—
|
|
|
$
|
3,245
|
|
Inter-segment expenses included in Mortgage Insurance segment
|
3,245
|
|
|
—
|
|
(5)
|
Does not include impairment of long-lived assets and loss from the sale of a business line, which are not components of adjusted pretax operating income.
|
|
December 31, 2017
|
||||||||||
(In thousands)
|
Mortgage Insurance
|
|
Services
|
|
Total
|
||||||
Net premiums written—insurance (1) (2)
|
$
|
818,417
|
|
|
$
|
—
|
|
|
$
|
818,417
|
|
(Increase) decrease in unearned premiums (2)
|
114,356
|
|
|
—
|
|
|
114,356
|
|
|||
Net premiums earned—insurance
|
932,773
|
|
|
—
|
|
|
932,773
|
|
|||
Services revenue
|
—
|
|
|
161,833
|
|
|
161,833
|
|
|||
Net investment income
|
127,248
|
|
|
—
|
|
|
127,248
|
|
|||
Other income
|
2,886
|
|
|
—
|
|
|
2,886
|
|
|||
Total (3) (4)
|
1,062,907
|
|
|
161,833
|
|
|
1,224,740
|
|
|||
|
|
|
|
|
|
||||||
Provision for losses
|
136,183
|
|
|
—
|
|
|
136,183
|
|
|||
Policy acquisition costs
|
24,277
|
|
|
—
|
|
|
24,277
|
|
|||
Cost of services
|
—
|
|
|
105,812
|
|
|
105,812
|
|
|||
Other operating expenses before corporate allocations
|
150,975
|
|
|
50,969
|
|
|
201,944
|
|
|||
Restructuring and other exit costs (5)
|
—
|
|
|
6,828
|
|
|
6,828
|
|
|||
Total (4)
|
311,435
|
|
|
163,609
|
|
|
475,044
|
|
|||
Adjusted pretax operating income (loss) before corporate allocations
|
751,472
|
|
|
(1,776
|
)
|
|
749,696
|
|
|||
Allocation of corporate operating expenses
|
55,441
|
|
|
14,319
|
|
|
69,760
|
|
|||
Allocation of interest expense
|
45,016
|
|
|
17,745
|
|
|
62,761
|
|
|||
Adjusted pretax operating income (loss)
|
$
|
651,015
|
|
|
$
|
(33,840
|
)
|
|
$
|
617,175
|
|
|
|
|
|
|
|
||||||
Total assets
|
$
|
5,733,918
|
|
|
$
|
166,963
|
|
(6)
|
$
|
5,900,881
|
|
(1)
|
Net of ceded premiums written under the QSR Program and the Single Premium QSR Program. See Note 8 for additional information.
|
(2)
|
Effective December 31, 2017, we amended the 2016 Single Premium QSR Agreement to increase the amount of ceded risk for performing loans under the agreement from 35% to 65% for the 2015 through 2017 vintages, resulting in a reduction of $145.7 million in net premiums written.
|
(3)
|
Excludes net gains on investments and other financial instruments of $3.6 million, not included in adjusted pretax operating income.
|
(4)
|
Includes inter-segment revenues and expenses as follows:
|
|
December 31, 2017
|
||||||
(In thousands)
|
Mortgage Insurance
|
|
Services
|
||||
Inter-segment revenues included in Services segment
|
$
|
—
|
|
|
$
|
6,730
|
|
Inter-segment expenses included in Mortgage Insurance segment
|
6,730
|
|
|
—
|
|
(5)
|
Does not include impairment of long-lived assets and loss from the sale of a business line, which are not components of adjusted pretax operating income.
|
(6)
|
The decrease in total assets for the Services segment at December 31, 2017, as compared to December 31, 2016, is primarily due to the impairment of goodwill and other acquired intangible assets. See Note 7 for further details.
|
|
December 31, 2016
|
||||||||||
|
Mortgage Insurance
|
|
Services
|
|
Total
|
||||||
(In thousands)
|
|
|
|
|
|
||||||
Net premiums written—insurance (1)
|
$
|
733,834
|
|
|
$
|
—
|
|
|
$
|
733,834
|
|
(Increase) decrease in unearned premiums
|
187,935
|
|
|
—
|
|
|
187,935
|
|
|||
Net premiums earned—insurance
|
921,769
|
|
|
—
|
|
|
921,769
|
|
|||
Services revenue
|
—
|
|
|
177,249
|
|
|
177,249
|
|
|||
Net investment income
|
113,466
|
|
|
—
|
|
|
113,466
|
|
|||
Other income
|
3,572
|
|
|
—
|
|
|
3,572
|
|
|||
Total (2) (3)
|
1,038,807
|
|
|
177,249
|
|
|
1,216,056
|
|
|||
|
|
|
|
|
|
||||||
Provision for losses
|
204,175
|
|
|
—
|
|
|
204,175
|
|
|||
Policy acquisition costs
|
23,480
|
|
|
—
|
|
|
23,480
|
|
|||
Cost of services
|
—
|
|
|
115,369
|
|
|
115,369
|
|
|||
Other operating expenses before corporate allocations
|
140,624
|
|
|
55,815
|
|
|
196,439
|
|
|||
Total (3)
|
368,279
|
|
|
171,184
|
|
|
539,463
|
|
|||
Adjusted pretax operating income (loss) before corporate allocations
|
670,528
|
|
|
6,065
|
|
|
676,593
|
|
|||
Allocation of corporate operating expenses
|
45,178
|
|
|
8,533
|
|
|
53,711
|
|
|||
Allocation of interest expense
|
63,439
|
|
|
17,693
|
|
|
81,132
|
|
|||
Adjusted pretax operating income (loss)
|
$
|
561,911
|
|
|
$
|
(20,161
|
)
|
|
$
|
541,750
|
|
|
|
|
|
|
|
||||||
Total assets
|
5,506,338
|
|
|
356,836
|
|
|
5,863,174
|
|
(1)
|
Net of ceded premiums written under the QSR Program and the Single Premium QSR Program. See Note 8 for additional information.
|
(2)
|
Excludes net gains on investments and other financial instruments of $30.8 million, not included in adjusted pretax operating income.
|
(3)
|
Includes inter-segment revenues and expenses as follows:
|
|
December 31, 2016
|
||||||
(In thousands)
|
Mortgage Insurance
|
|
Services
|
||||
Inter-segment revenues included in Services segment
|
$
|
—
|
|
|
$
|
8,355
|
|
Inter-segment expenses included in Mortgage Insurance segment
|
8,355
|
|
|
—
|
|
|
December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Adjusted pretax operating income (loss):
|
|
|
|
|
|
||||||
Mortgage insurance (1)
|
$
|
772,614
|
|
|
$
|
651,015
|
|
|
$
|
561,911
|
|
Services (1)
|
(27,119
|
)
|
|
(33,840
|
)
|
|
(20,161
|
)
|
|||
Total adjusted pretax operating income
|
$
|
745,495
|
|
|
$
|
617,175
|
|
|
$
|
541,750
|
|
|
|
|
|
|
|
||||||
Net gains (losses) on investments and other financial instruments
|
(42,476
|
)
|
|
3,621
|
|
|
30,751
|
|
|||
Loss on induced conversion and debt extinguishment
|
—
|
|
|
(51,469
|
)
|
|
(75,075
|
)
|
|||
Acquisition-related expenses (2)
|
(881
|
)
|
|
(105
|
)
|
|
(519
|
)
|
|||
Impairment of goodwill
|
—
|
|
|
(184,374
|
)
|
|
—
|
|
|||
Amortization and impairment of other acquired intangible assets
|
(12,429
|
)
|
|
(27,671
|
)
|
|
(13,221
|
)
|
|||
Impairment of other long-lived assets (3)
|
(5,523
|
)
|
|
(10,440
|
)
|
|
—
|
|
|||
Consolidated pretax income
|
$
|
684,186
|
|
|
$
|
346,737
|
|
|
$
|
483,686
|
|
(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)
|
For the year ended December 31, 2018, this item comprises other operating expenses of $1.5 million and restructuring and other exit costs of $4.0 million, each as included in the consolidated statement of operations. For the year ended December 31, 2017, the full amount is included in restructuring and other exit costs in the consolidated statement of operations. See Note 1.
|
|
December 31, 2018
|
|
||||||||||
(In thousands)
|
Level I
|
|
Level II
|
|
Total
|
|
||||||
Assets at Fair Value
|
|
|
|
|
|
|
||||||
Investment Portfolio:
|
|
|
|
|
|
|
||||||
U.S. government and agency securities
|
$
|
199,302
|
|
|
$
|
28,412
|
|
|
$
|
227,714
|
|
|
State and municipal obligations
|
—
|
|
|
324,742
|
|
|
324,742
|
|
|
|||
Money market instruments
|
95,132
|
|
|
—
|
|
|
95,132
|
|
|
|||
Corporate bonds and notes
|
—
|
|
|
2,564,068
|
|
|
2,564,068
|
|
|
|||
RMBS
|
—
|
|
|
353,224
|
|
|
353,224
|
|
|
|||
CMBS
|
—
|
|
|
591,393
|
|
|
591,393
|
|
|
|||
Other ABS
|
—
|
|
|
705,468
|
|
|
705,468
|
|
|
|||
Equity securities
|
136,662
|
|
|
3,958
|
|
|
140,620
|
|
|
|||
Other investments (1)
|
—
|
|
|
175,113
|
|
|
175,113
|
|
|
|||
Total Investments at Fair Value (2)
|
431,096
|
|
|
4,746,378
|
|
|
5,177,474
|
|
(3)
|
|||
Total Assets at Fair Value (4)
|
$
|
431,096
|
|
|
$
|
4,746,378
|
|
|
$
|
5,177,474
|
|
(3)
|
(1)
|
Comprising short-term certificates of deposit and commercial paper.
|
(2)
|
Does not include certain other invested assets of $3.4 million that is primarily invested in limited partnership investments valued using the net asset value as a practical expedient. Includes cash collateral held under securities lending agreements of $11.7 million that is reinvested in money market instruments.
|
(3)
|
Includes $27.9 million of securities loaned to third-party Borrowers under securities lending agreements, classified as other assets in our consolidated balance sheets. See Note 6 for more information.
|
(4)
|
Does not include the fair value of an immaterial embedded derivative, which we have accounted for separately as a freestanding derivative and classified in other assets in our consolidated balance sheet. See Note 8 for more information.
|
|
December 31, 2017
|
|
|||||||||||
(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 of $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 of $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 6 for more information.
|
|
December 31, 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
|
1,030,348
|
|
|
1,007,687
|
|
|
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, primarily consisting of investments in limited partnerships, are no longer carried at amortized cost, and instead are valued in our consolidated balance sheets using the net asset value as a practical expedient to estimate fair value.
|
|
December 31, 2018
|
||||||||||||||
(In thousands)
|
Amortized
Cost
|
|
Fair Value
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
||||||||
Fixed-maturities available for sale:
|
|
|
|
|
|
|
|
||||||||
U.S. government and agency securities
|
$
|
85,532
|
|
|
$
|
84,070
|
|
(1)
|
$
|
46
|
|
|
$
|
1,508
|
|
State and municipal obligations
|
138,022
|
|
|
138,313
|
|
|
2,191
|
|
|
1,900
|
|
||||
Corporate bonds and notes
|
2,288,720
|
|
|
2,229,885
|
|
|
5,053
|
|
|
63,888
|
|
||||
RMBS
|
334,843
|
|
|
332,142
|
|
(2)
|
1,785
|
|
|
4,486
|
|
||||
CMBS
|
546,729
|
|
|
539,915
|
|
|
544
|
|
|
7,358
|
|
||||
Other ABS
|
712,748
|
|
|
704,662
|
|
|
814
|
|
|
8,900
|
|
||||
Total securities available for sale
|
4,106,594
|
|
|
4,028,987
|
|
(3)
|
10,433
|
|
|
88,040
|
|
(1)
|
Includes securities with a fair value of $10.7 million serving as collateral for FHLB advances.
|
(2)
|
Includes securities with a fair value of $77.7 million serving as collateral for FHLB advances.
|
(3)
|
Includes $7.4 million of fixed maturity securities loaned to third-party Borrowers under securities lending agreements, classified as other assets in our 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
|
|
|
47,073
|
|
|
14,445
|
|
||||
Equity securities available for sale (2)
|
176,349
|
|
|
176,065
|
|
|
1,705
|
|
|
1,989
|
|
||||
Total debt and equity securities
|
$
|
3,617,103
|
|
|
$
|
3,649,447
|
|
(1)
|
$
|
48,778
|
|
|
$
|
16,434
|
|
(1)
|
Includes $14.7 million of fixed maturity securities and $13.2 million of equity securities loaned to third-party Borrowers under securities lending agreements, classified as other assets in our consolidated balance sheets, as further described below.
|
(2)
|
Primarily consists of investments in fixed-income and equity exchange-traded funds and publicly-traded business development company equities.
|
|
|
December 31, 2018
|
|||||||||||||||||||||||||||||||
($ 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
|
|
2
|
|
|
$
|
27,415
|
|
|
$
|
796
|
|
|
8
|
|
|
$
|
23,476
|
|
|
$
|
712
|
|
|
10
|
|
|
$
|
50,891
|
|
|
$
|
1,508
|
|
State and municipal obligations
|
|
12
|
|
|
41,263
|
|
|
955
|
|
|
16
|
|
|
39,982
|
|
|
945
|
|
|
28
|
|
|
81,245
|
|
|
1,900
|
|
||||||
Corporate bonds and notes
|
|
330
|
|
|
1,208,430
|
|
|
36,284
|
|
|
126
|
|
|
601,533
|
|
|
27,604
|
|
|
456
|
|
|
1,809,963
|
|
|
63,888
|
|
||||||
RMBS
|
|
15
|
|
|
92,315
|
|
|
782
|
|
|
28
|
|
|
77,395
|
|
|
3,704
|
|
|
43
|
|
|
169,710
|
|
|
4,486
|
|
||||||
CMBS
|
|
62
|
|
|
328,696
|
|
|
3,973
|
|
|
33
|
|
|
125,728
|
|
|
3,385
|
|
|
95
|
|
|
454,424
|
|
|
7,358
|
|
||||||
Other ABS
|
|
129
|
|
|
503,109
|
|
|
7,917
|
|
|
26
|
|
|
89,628
|
|
|
983
|
|
|
155
|
|
|
592,737
|
|
|
8,900
|
|
||||||
Total
|
|
550
|
|
|
$
|
2,201,228
|
|
|
$
|
50,707
|
|
|
237
|
|
|
$
|
957,742
|
|
|
$
|
37,333
|
|
|
787
|
|
|
$
|
3,158,970
|
|
|
$
|
88,040
|
|
|
|
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
|
|
|
December 31,
|
|
||||||
(In thousands)
|
2018
|
|
2017
|
|
||||
Trading securities:
|
|
|
|
|
||||
State and municipal obligations
|
$
|
168,359
|
|
|
$
|
214,841
|
|
|
Corporate bonds and notes
|
228,151
|
|
|
307,271
|
|
|
||
RMBS
|
21,083
|
|
|
29,520
|
|
|
||
CMBS
|
51,478
|
|
|
50,561
|
|
|
||
Foreign government and agency securities
|
—
|
|
|
4,241
|
|
|
||
Total
|
$
|
469,071
|
|
|
$
|
606,434
|
|
(1)
|
(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)
|
December 31, 2018
|
|
December 31, 2017
|
||||
Loaned securities: (1)
|
|
|
|
||||
U.S. government and agency securities
|
$
|
9,987
|
|
|
$
|
—
|
|
Corporate bonds and notes
|
7,818
|
|
|
13,862
|
|
||
Foreign government and agency securities
|
—
|
|
|
867
|
|
||
Equity securities
|
10,055
|
|
|
13,235
|
|
||
Total loaned securities, at fair value
|
$
|
27,860
|
|
|
$
|
27,964
|
|
|
|
|
|
||||
Total loaned securities, at amortized cost
|
$
|
28,992
|
|
|
27,846
|
|
|
Securities collateral on deposit from Borrowers (2)
|
16,815
|
|
|
9,342
|
|
||
Reinvested cash collateral, at estimated fair value (3)
|
11,699
|
|
|
19,357
|
|
(1)
|
Our securities loaned under securities lending agreements are reported at fair value within other assets in our 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 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 consolidated balance sheets. Amounts payable on the return of cash collateral under securities lending agreements are included within other liabilities in our consolidated balance sheets.
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Investment income:
|
|
|
|
|
|
||||||
Fixed-maturities
|
$
|
141,552
|
|
|
$
|
122,890
|
|
|
$
|
115,880
|
|
Equity securities
|
7,157
|
|
|
4,318
|
|
|
86
|
|
|||
Short-term investments
|
10,270
|
|
|
5,453
|
|
|
3,086
|
|
|||
Other
|
976
|
|
|
987
|
|
|
1,161
|
|
|||
Gross investment income
|
159,955
|
|
|
133,648
|
|
|
120,213
|
|
|||
Investment expenses
|
(7,480
|
)
|
|
(6,400
|
)
|
|
(6,747
|
)
|
|||
Net investment income
|
$
|
152,475
|
|
|
$
|
127,248
|
|
|
$
|
113,466
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Net realized gains (losses) on investments:
|
|
|
|
|
|
||||||
Fixed-maturities available for sale (1)
|
$
|
(11,256
|
)
|
|
$
|
(3,014
|
)
|
|
$
|
4,160
|
|
Trading securities
|
(1,840
|
)
|
|
(5,995
|
)
|
|
(237
|
)
|
|||
Equity securities
|
532
|
|
|
368
|
|
|
(170
|
)
|
|||
Short-term investments
|
(10
|
)
|
|
(16
|
)
|
|
(135
|
)
|
|||
Other invested assets
|
414
|
|
|
22
|
|
|
631
|
|
|||
Other gains (losses)
|
66
|
|
|
32
|
|
|
64
|
|
|||
Net realized gains (losses) on investments
|
(12,094
|
)
|
|
(8,603
|
)
|
|
4,313
|
|
|||
Other-than-temporary impairment losses
|
(1,744
|
)
|
|
(1,420
|
)
|
|
(526
|
)
|
|||
Net unrealized gains (losses) on investment securities (2)
|
(27,287
|
)
|
|
13,230
|
|
|
27,217
|
|
|||
Total net gains (losses) on investments
|
(41,125
|
)
|
|
3,207
|
|
|
31,004
|
|
|||
Net gains (losses) on other financial instruments
|
(1,351
|
)
|
|
414
|
|
|
(253
|
)
|
|||
Net gains (losses) on investments and other financial instruments
|
$
|
(42,476
|
)
|
|
$
|
3,621
|
|
|
$
|
30,751
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Gross investment gains from sales and redemptions
|
$
|
1,986
|
|
|
$
|
6,052
|
|
|
$
|
10,326
|
|
Gross investment losses from sales and redemptions
|
(13,242
|
)
|
|
(9,066
|
)
|
|
(6,166
|
)
|
(2)
|
These amounts include unrealized gains (losses) on investment securities other than securities available for sale. For 2017 and 2016, 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.
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Net changes in unrealized gains (losses):
|
|
|
|
|
|
||||||
Trading securities
|
$
|
(16,462
|
)
|
|
$
|
8,827
|
|
|
$
|
16,850
|
|
Equity securities (1)
|
(8,886
|
)
|
|
—
|
|
|
—
|
|
|||
Net changes in unrealized gains (losses) on investment securities
|
$
|
(25,348
|
)
|
|
$
|
8,827
|
|
|
$
|
16,850
|
|
(1)
|
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.
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Fixed-maturities:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during the period, net of tax
|
$
|
(97,356
|
)
|
|
$
|
32,147
|
|
|
$
|
8,822
|
|
Less reclassification adjustment for net gains (losses) included in net income (loss), net of tax
|
(10,270
|
)
|
|
(2,556
|
)
|
|
2,361
|
|
|||
Net unrealized gains (losses) on investments, net of tax
|
$
|
(87,086
|
)
|
|
$
|
34,703
|
|
|
$
|
6,461
|
|
|
|
|
|
|
|
||||||
Equities (1):
|
|
|
|
|
|
|
|
|
|||
Unrealized holding gains (losses) arising during the period, net of tax
|
$
|
—
|
|
|
$
|
(244
|
)
|
|
$
|
(40
|
)
|
Less reclassification adjustment for net gains (losses) included in net income (loss), net of tax
|
—
|
|
|
(86
|
)
|
|
(110
|
)
|
|||
Net unrealized gains (losses) on investments, net of tax
|
$
|
—
|
|
|
$
|
(158
|
)
|
|
$
|
70
|
|
(1)
|
Prior to our 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. Effective January 1, 2018, we measure our equity investments at fair value, with changes in fair value recognized in net income.
|
|
December 31, 2018
|
||||||
(In thousands)
|
Amortized
Cost |
|
Fair
Value |
||||
Due in one year or less
|
$
|
56,350
|
|
|
$
|
56,067
|
|
Due after one year through five years (1)
|
933,807
|
|
|
920,173
|
|
||
Due after five years through ten years (1)
|
1,142,145
|
|
|
1,107,129
|
|
||
Due after ten years (1)
|
379,972
|
|
|
368,899
|
|
||
RMBS (2)
|
334,843
|
|
|
332,142
|
|
||
CMBS (2)
|
546,729
|
|
|
539,915
|
|
||
Other ABS (2)
|
712,748
|
|
|
704,662
|
|
||
Total (3)
|
$
|
4,106,594
|
|
|
$
|
4,028,987
|
|
(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)
|
Available for sale includes securities loaned under securities lending agreements with a fair value of $7.4 million.
|
(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
|
3,170
|
|
|
—
|
|
|
3,170
|
|
|||
Balance at December 31, 2018
|
$
|
200,561
|
|
|
$
|
(186,469
|
)
|
|
$
|
14,092
|
|
|
December 31, 2018
|
||||||||||
(In thousands)
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||
Client relationships
|
$
|
84,000
|
|
|
$
|
(48,227
|
)
|
(1)
|
$
|
35,773
|
|
Technology
|
17,362
|
|
|
(13,141
|
)
|
(2)
|
4,221
|
|
|||
Trade name and trademarks
|
8,340
|
|
|
(3,864
|
)
|
|
4,476
|
|
|||
Non-competition agreements
|
185
|
|
|
(177
|
)
|
|
8
|
|
|||
Licenses
|
463
|
|
|
(35
|
)
|
|
428
|
|
|||
Total
|
$
|
110,350
|
|
|
$
|
(65,444
|
)
|
|
$
|
44,906
|
|
|
December 31, 2017
|
||||||||||
(In thousands)
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||
Client relationships
|
$
|
82,530
|
|
|
$
|
(41,596
|
)
|
(1)
|
$
|
40,934
|
|
Technology
|
15,250
|
|
|
(8,922
|
)
|
(2)
|
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.
|
(In thousands)
|
|
||
2019
|
$
|
8,688
|
|
2020
|
7,321
|
|
|
2021
|
5,907
|
|
|
2022
|
5,375
|
|
|
2023
|
4,923
|
|
|
Thereafter
|
12,692
|
|
|
Total
|
$
|
44,906
|
|
|
Estimated Useful Life
|
||
Client relationships
|
5 years
|
-
|
15 years
|
Technology
|
3 years
|
-
|
8 years
|
Trade name and trademarks
|
6 years
|
-
|
10 years
|
Licenses
|
10 years
|
|
|
Non-competition agreements
|
2 years
|
-
|
3 years
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Net premiums written—insurance:
|
|
|
|
|
|
||||||
Direct
|
$
|
1,082,285
|
|
|
$
|
1,032,735
|
|
|
$
|
1,000,111
|
|
Assumed
|
6,901
|
|
(1)
|
25
|
|
|
29
|
|
|||
Ceded (2)
|
(98,165
|
)
|
|
(214,343
|
)
|
|
(266,306
|
)
|
|||
Net premiums written—insurance
|
$
|
991,021
|
|
|
$
|
818,417
|
|
|
$
|
733,834
|
|
Net premiums earned—insurance:
|
|
|
|
|
|
||||||
Direct
|
$
|
1,066,864
|
|
|
$
|
990,016
|
|
|
$
|
999,093
|
|
Assumed
|
6,904
|
|
(1)
|
28
|
|
|
35
|
|
|||
Ceded (2)
|
(67,047
|
)
|
|
(57,271
|
)
|
|
(77,359
|
)
|
|||
Net premiums earned—insurance
|
$
|
1,006,721
|
|
|
$
|
932,773
|
|
|
$
|
921,769
|
|
(1)
|
Includes premiums earned from our participation in certain Front-end and Back-end credit risk transfer programs.
|
(2)
|
Net of profit commission.
|
•
|
20% of its existing performing Single Premium Policies written between January 1, 2012 and March 31, 2013;
|
•
|
35% of its existing performing Single Premium Policies written between April 1, 2013 and December 31, 2015; and
|
•
|
35% of its Single Premium NIW from January 1, 2016 to December 31, 2017, subject to a limitation on ceded premiums written equal to $195 million for policies issued between January 1, 2016 and December 31, 2017.
|
|
Single Premium QSR Program
|
|
QSR Program
|
||||||||||||||||||||
|
Year Ended December 31,
|
|
Year Ended December 31,
|
||||||||||||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||||||||
Ceded premiums written (1)
|
$
|
74,876
|
|
|
$
|
193,517
|
|
|
$
|
233,206
|
|
|
$
|
13,486
|
|
|
$
|
19,356
|
|
|
$
|
28,097
|
|
Ceded premiums earned (1)
|
44,286
|
|
|
27,284
|
|
|
29,808
|
|
|
19,660
|
|
|
28,503
|
|
|
42,515
|
|
||||||
Ceding commissions written
|
29,745
|
|
|
55,333
|
|
|
66,153
|
|
|
3,890
|
|
|
5,536
|
|
|
8,019
|
|
||||||
Ceding commissions earned (2)
|
22,097
|
|
|
13,774
|
|
|
15,303
|
|
|
11,349
|
|
|
13,122
|
|
|
16,573
|
|
||||||
Ceded losses
|
4,574
|
|
|
2,490
|
|
|
2,262
|
|
|
512
|
|
|
771
|
|
|
1,858
|
|
(1)
|
Net of profit commission.
|
(2)
|
Includes amounts reported in policy acquisition costs and other operating expenses.
|
|
|
|
|
Maximum Exposure to Loss
|
|||||||||||
(In thousands)
|
|
Total VIE Assets (1)
|
|
On - Balance Sheet
|
|
Off - Balance Sheet (3)
|
|
Total
|
|||||||
Eagle Re
|
|
$
|
434,034
|
|
|
$
|
1,114
|
|
(2)
|
$
|
434,034
|
|
|
435,148
|
|
Total
|
|
$
|
434,034
|
|
|
$
|
1,114
|
|
|
$
|
434,034
|
|
|
435,148
|
|
(1)
|
Eagle Re’s assets are required to be invested in U.S. government money market funds, cash or U.S. Treasury securities. Eagle Re’s liabilities consist of its mortgage insurance-linked notes of $434.0 million, as described above.
|
(2)
|
Represents the fair value of the related embedded derivative, included in other assets in our consolidated balance sheets.
|
(3)
|
Represents the maximum amount that would be payable in the future by Radian Guaranty to its policyholders on claims, without the benefit of any corresponding reinsurance recoverables, in the event of the combination of two events: (i) all of the assets in the reinsurance trust (consisting of U.S. government money market funds, cash or U.S. Treasury securities) have become worthless and (ii) $660.4 million of claims have been paid on the reinsured RIF.
|
|
December 31,
|
||||||
(In thousands)
|
2018
|
|
2017
|
||||
Deposit with the IRS (1)
|
$
|
—
|
|
|
$
|
88,557
|
|
Company-owned life insurance
|
83,377
|
|
|
85,862
|
|
||
Internal-use software (2)
|
51,367
|
|
|
48,751
|
|
||
Current federal income tax receivable (1)
|
44,506
|
|
|
—
|
|
||
Property and equipment (3)
|
37,090
|
|
|
38,291
|
|
||
Accrued investment income
|
34,878
|
|
|
31,389
|
|
||
Loaned securities (Note 6)
|
27,860
|
|
|
27,964
|
|
||
Unbilled receivables
|
19,917
|
|
|
22,257
|
|
||
Deferred policy acquisition costs
|
17,311
|
|
|
16,987
|
|
||
Reinsurance recoverables
|
14,402
|
|
|
8,492
|
|
||
Other
|
36,992
|
|
|
39,299
|
|
||
Total other assets
|
$
|
367,700
|
|
|
$
|
407,849
|
|
(1)
|
In 2018, Radian utilized its “qualified deposits” with the U.S. Treasury to settle its $31 million obligation to the IRS, and in 2019, the Company expects the IRS to refund to Radian the remaining $58 million that was previously on deposit. As such, the remaining balances of the deposits with the IRS as of December 31, 2018 are included in current federal income tax receivable. In January 2019, we received $33 million of the $58 million refund from the IRS and expect to receive the remaining $25 million in the coming months. See Note 10 for additional information regarding the IRS Matter.
|
(2)
|
Internal-use software, at cost, has been reduced by accumulated amortization of $60.3 million and $48.4 million at December 31, 2018 and 2017, respectively, as well as $5.1 million of impairment charges in 2018. Amortization expense was $11.4 million, $10.7 million and $6.0 million for the years ended December 31, 2018, 2017 and 2016 respectively.
|
(3)
|
Property and equipment at cost, less accumulated depreciation of $62.9 million and $57.6 million at December 31, 2018 and 2017, respectively. Depreciation expense was $8.0 million, $6.9 million and $5.6 million for the years ended December 31, 2018, 2017 and 2016 respectively.
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Current provision (benefit)
|
$
|
(42,398
|
)
|
|
$
|
59,122
|
|
|
$
|
4,546
|
|
Deferred provision
|
120,573
|
|
|
166,527
|
|
|
170,887
|
|
|||
Total income tax provision
|
$
|
78,175
|
|
|
$
|
225,649
|
|
|
$
|
175,433
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Provision for income taxes computed at the statutory tax rate
|
$
|
143,679
|
|
|
$
|
121,358
|
|
|
$
|
169,290
|
|
Change in tax resulting from:
|
|
|
|
|
|
|
|
|
|||
Repurchase premium on convertible notes
|
—
|
|
|
(96
|
)
|
|
9,988
|
|
|||
State tax provision (benefit), net of federal impact
|
5,570
|
|
|
(15,641
|
)
|
|
(8,974
|
)
|
|||
Valuation allowance
|
(1,856
|
)
|
|
18,197
|
|
|
10,663
|
|
|||
Remeasurement of net deferred tax assets due to the TCJA
|
—
|
|
|
102,617
|
|
|
—
|
|
|||
Impact related to settlement of IRS Matter
|
(73,585
|
)
|
|
—
|
|
|
—
|
|
|||
Other, net
|
4,367
|
|
|
(786
|
)
|
|
(5,534
|
)
|
|||
Provision for income taxes
|
$
|
78,175
|
|
|
$
|
225,649
|
|
|
$
|
175,433
|
|
|
December 31,
|
||||||
(In thousands)
|
2018
|
|
2017
|
||||
Deferred tax assets:
|
|
|
|
||||
Accrued expenses
|
$
|
17,487
|
|
|
$
|
30,267
|
|
Unearned premiums
|
34,686
|
|
|
35,035
|
|
||
Differences in fair value of financial instruments
|
1,115
|
|
|
—
|
|
||
Net unrealized loss on investments
|
16,297
|
|
|
—
|
|
||
State income taxes
|
67,069
|
|
|
68,577
|
|
||
Partnership investments
|
—
|
|
|
47,991
|
|
||
Loss reserves
|
1,044
|
|
|
1,397
|
|
||
Alternative minimum tax credit carryforward
|
—
|
|
|
57,086
|
|
||
Goodwill and intangibles
|
35,068
|
|
|
36,947
|
|
||
Deferred policy acquisition and ceding commission costs
|
15,288
|
|
|
14,888
|
|
||
Share-based compensation
|
10,776
|
|
|
10,190
|
|
||
Other
|
13,091
|
|
|
16,421
|
|
||
Total deferred tax assets
|
211,921
|
|
|
318,799
|
|
||
Deferred tax liabilities:
|
|
|
|
|
|
||
Partnership investments
|
639
|
|
|
—
|
|
||
Differences in fair value of financial instruments
|
—
|
|
|
3,833
|
|
||
Net unrealized gain on investments
|
—
|
|
|
6,792
|
|
||
Depreciation
|
12,201
|
|
|
11,138
|
|
||
Other
|
2,942
|
|
|
2,446
|
|
||
Total deferred tax liabilities
|
15,782
|
|
|
24,209
|
|
||
Less: Valuation allowance
|
64,496
|
|
|
65,023
|
|
||
Net deferred tax asset
|
$
|
131,643
|
|
|
$
|
229,567
|
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
2018
|
|
2017
|
||||
Balance at beginning of period
|
$
|
123,951
|
|
|
$
|
123,028
|
|
Tax positions related to the current year:
|
|
|
|
||||
Increases
|
5,058
|
|
|
2,343
|
|
||
Tax positions related to prior years:
|
|
|
|
||||
Increases
|
26,465
|
|
|
24,122
|
|
||
Decreases
|
(43,146
|
)
|
|
(1,437
|
)
|
||
Settlements with taxing authorities
|
(52,353
|
)
|
|
—
|
|
||
Lapses of applicable statute of limitation
|
(26,423
|
)
|
|
(24,105
|
)
|
||
Balance at end of period
|
$
|
33,552
|
|
|
$
|
123,951
|
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
2018
|
|
2017
|
||||
Mortgage Insurance loss reserves
|
$
|
397,891
|
|
|
$
|
507,588
|
|
Services loss reserves (1)
|
3,470
|
|
|
—
|
|
||
Total reserve for losses and LAE
|
$
|
401,361
|
|
|
$
|
507,588
|
|
(1)
|
A majority of this amount is subject to reinsurance, with the related reinsurance recoverables reported in other assets in our consolidated balance sheet, and relates to the acquisition of EnTitle Direct, completed on March 27, 2018. See Note 8 for information about our use of reinsurance in our title insurance business.
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
2018
|
|
2017
|
||||
Reserves for losses by category:
|
|
|
|
||||
Prime
|
$
|
231,169
|
|
|
$
|
285,022
|
|
Alt-A and A minus and below
|
119,527
|
|
|
170,873
|
|
||
IBNR and other
|
13,864
|
|
|
16,021
|
|
||
LAE
|
10,271
|
|
|
13,349
|
|
||
Reinsurance recoverable (1)
|
10,992
|
|
|
8,315
|
|
||
Total primary reserves
|
385,823
|
|
|
493,580
|
|
||
Total pool reserves (2)
|
11,640
|
|
|
13,463
|
|
||
Total First-lien reserves
|
397,463
|
|
|
507,043
|
|
||
Other (3)
|
428
|
|
|
545
|
|
||
Total reserve for losses
|
$
|
397,891
|
|
|
$
|
507,588
|
|
(1)
|
Represents ceded losses on reinsurance transactions, including the QSR Program and the Single Premium QSR Program. These amounts are included in the reinsurance recoverables reported in other assets in our consolidated balance sheets.
|
(2)
|
Includes reinsurance recoverable of $17 thousand and $35 thousand as of December 31, 2018 and December 31, 2017, respectively.
|
(3)
|
Does not include our second-lien PDR that is included in other liabilities.
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Balance at January 1,
|
$
|
507,588
|
|
|
$
|
760,269
|
|
|
$
|
976,399
|
|
Less: Reinsurance recoverables (1)
|
8,350
|
|
|
6,851
|
|
|
8,286
|
|
|||
Balance at January 1, net of reinsurance recoverables
|
499,238
|
|
|
753,418
|
|
|
968,113
|
|
|||
Add: Losses and LAE incurred in respect of default notices reported and unreported in:
|
|
|
|
|
|
||||||
Current year (2)
|
135,291
|
|
|
185,486
|
|
|
206,383
|
|
|||
Prior years
|
(31,699
|
)
|
|
(49,286
|
)
|
|
(3,516
|
)
|
|||
Total incurred
|
103,592
|
|
|
136,200
|
|
|
202,867
|
|
|||
Deduct: Paid claims and LAE related to:
|
|
|
|
|
|
||||||
Current year (2)
|
5,856
|
|
|
25,011
|
|
|
11,410
|
|
|||
Prior years
|
210,092
|
|
|
365,369
|
|
|
406,152
|
|
|||
Total paid
|
215,948
|
|
|
390,380
|
|
(3)
|
417,562
|
|
|||
Balance at end of period, net of reinsurance recoverables
|
386,882
|
|
|
499,238
|
|
|
753,418
|
|
|||
Add: reinsurance recoverables (1)
|
11,009
|
|
|
8,350
|
|
|
6,851
|
|
|||
Balance at December 31,
|
$
|
397,891
|
|
|
$
|
507,588
|
|
|
$
|
760,269
|
|
(1)
|
Related to ceded losses recoverable, if any, on reinsurance transactions, the QSR Program and the Single Premium QSR Program. See Note 8 for additional information.
|
(2)
|
Related to underlying defaulted loans with a most recent default notice dated in the year indicated. For example, if a loan had defaulted in a prior year, but then subsequently cured and later re-defaulted in the current year, that default
|
(3)
|
Includes the payment of $54.8 million made in connection with the scheduled final settlement of the Freddie Mac Agreement in the third quarter of 2017.
|
|
Incurred Losses, Net of Reinsurance
|
|
|
|
|
||||||||||||||||||||||||||||||||
|
Year Ended December 31,
|
|
As of December 31, 2018
|
||||||||||||||||||||||||||||||||||
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
Total of IBNR Liabilities Plus Expected Development on Reported Claims (1)
|
|
Cumulative Number of Reported Defaults (2)
|
||||||||||||||||||||||||
|
Unaudited
|
|
|
|
|||||||||||||||||||||||||||||||||
Default Year
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
|
|
|||||||||||||||||||||||||
2009
|
$
|
1,671,239
|
|
$
|
1,894,783
|
|
$
|
1,930,263
|
|
$
|
1,939,479
|
|
$
|
1,974,568
|
|
$
|
1,991,796
|
|
$
|
2,016,412
|
|
$
|
2,018,907
|
|
$
|
2,022,629
|
|
$
|
2,025,828
|
|
|
$
|
1,572
|
|
|
213.836
|
|
2010
|
|
1,102,856
|
|
1,215,136
|
|
1,192,482
|
|
1,195,056
|
|
1,207,774
|
|
1,220,289
|
|
1,218,264
|
|
1,219,469
|
|
1,221,938
|
|
|
1,019
|
|
|
146.324
|
|
||||||||||||
2011
|
|
|
1,058,625
|
|
1,152,016
|
|
1,052,277
|
|
1,050,555
|
|
1,062,579
|
|
1,061,161
|
|
1,059,116
|
|
1,060,376
|
|
|
970
|
|
|
118.972
|
|
|||||||||||||
2012
|
|
|
|
803,831
|
|
763,969
|
|
711,213
|
|
720,502
|
|
715,646
|
|
714,783
|
|
713,750
|
|
|
586
|
|
|
89.845
|
|
||||||||||||||
2013
|
|
|
|
|
505,732
|
|
405,334
|
|
401,444
|
|
404,333
|
|
402,259
|
|
400,243
|
|
|
344
|
|
|
71.749
|
|
|||||||||||||||
2014
|
|
|
|
|
|
337,784
|
|
247,074
|
|
265,891
|
|
264,620
|
|
260,098
|
|
|
241
|
|
|
58.215
|
|
||||||||||||||||
2015
|
|
|
|
|
|
|
222,555
|
|
198,186
|
|
178,042
|
|
183,952
|
|
|
292
|
|
|
49.825
|
|
|||||||||||||||||
2016
|
|
|
|
|
|
|
|
201,016
|
|
165,440
|
|
149,753
|
|
|
428
|
|
|
46.264
|
|
||||||||||||||||||
2017
|
|
|
|
|
|
|
|
|
180,851
|
|
151,802
|
|
|
1,212
|
|
|
47.283
|
|
|||||||||||||||||||
2018
|
|
|
|
|
|
|
|
|
|
131,513
|
|
|
1,876
|
|
|
39.598
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,299,253
|
|
|
|
|
|
|
|
(1)
|
Represents reserves as of December 31, 2018 related to IBNR liabilities.
|
(2)
|
Represents total number of new default notices received in each calendar year as compiled monthly based on reports received from loan servicers. As reflected in our Default to Claim Rate assumptions, a significant portion of reported defaults generally do not result in a claim. In certain instances, a defaulted loan may cure, and then re-default in a later period. Consistent with our reserving practice, each new event of default is treated as a unique occurrence and therefore certain loans that cure and re-default may be included as a reported default in multiple periods. Included in this amount for the year ended December 31, 2018 and December 31, 2017 are 3,776 and 8,862 notices, respectively, of new primary defaults related to the FEMA Designated Areas associated with Hurricanes Harvey and Irma.
|
|
Cumulative Paid Claims, Net of Reinsurance
|
|||||||||||||||||||||||||||||
|
Year Ended December 31,
|
|||||||||||||||||||||||||||||
(In thousands)
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Unaudited
|
|
||||||||||||||||||||||||||||
Default Year
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
||||||||||||||||||||
2009
|
$
|
136,413
|
|
$
|
619,496
|
|
$
|
1,236,210
|
|
$
|
1,471,264
|
|
$
|
1,711,019
|
|
$
|
1,807,031
|
|
$
|
1,921,134
|
|
$
|
1,958,660
|
|
$
|
1,986,076
|
|
$
|
2,004,219
|
|
2010
|
|
11,810
|
|
394,278
|
|
700,316
|
|
956,598
|
|
1,055,935
|
|
1,145,497
|
|
1,178,546
|
|
1,198,031
|
|
1,210,281
|
|
|||||||||||
2011
|
|
|
40,392
|
|
323,216
|
|
756,820
|
|
892,959
|
|
982,830
|
|
1,016,855
|
|
1,038,582
|
|
1,048,966
|
|
||||||||||||
2012
|
|
|
|
19,200
|
|
295,332
|
|
528,744
|
|
631,982
|
|
672,271
|
|
692,291
|
|
702,136
|
|
|||||||||||||
2013
|
|
|
|
|
34,504
|
|
191,040
|
|
307,361
|
|
357,087
|
|
379,036
|
|
388,688
|
|
||||||||||||||
2014
|
|
|
|
|
|
13,108
|
|
115,852
|
|
200,422
|
|
233,607
|
|
246,611
|
|
|||||||||||||||
2015
|
|
|
|
|
|
|
10,479
|
|
84,271
|
|
142,421
|
|
163,916
|
|
||||||||||||||||
2016
|
|
|
|
|
|
|
|
11,061
|
|
76,616
|
|
119,357
|
|
|||||||||||||||||
2017
|
|
|
|
|
|
|
|
|
24,653
|
|
66,585
|
|
||||||||||||||||||
2018
|
|
|
|
|
|
|
|
|
|
5,584
|
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,956,343
|
|
|||||||||||||||||
|
|
|
|
|
All outstanding liabilities before 2009, net of reinsurance
|
|
33,479
|
|
||||||||||||||||||||||
|
|
|
|
|
Liabilities for claims, net of reinsurance (1)
|
|
$
|
376,389
|
|
(1)
|
Calculated as follows:
|
(In thousands)
|
|
||
Incurred losses, net of reinsurance
|
$
|
6,299,253
|
|
Add: All outstanding liabilities before 2009, net of reinsurance
|
33,479
|
|
|
Less: Cumulative paid claims, net of reinsurance
|
5,956,343
|
|
|
Liabilities for claims, net of reinsurance
|
$
|
376,389
|
|
(In thousands)
|
December 31, 2018
|
||
Net outstanding liabilities - Mortgage Insurance:
|
|
||
Reserve for losses and LAE, net of reinsurance
|
$
|
376,389
|
|
Reinsurance recoverables on unpaid claims
|
11,009
|
|
|
Unallocated LAE
|
10,493
|
|
|
Total gross reserve for losses and LAE (1)
|
$
|
397,891
|
|
(1)
|
Excludes Services reserve for losses and LAE of $3.5 million.
|
|
Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance (Unaudited)
|
|||||||||
Years
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
Mortgage Insurance
|
6.1%
|
34.5%
|
31.4%
|
13.8%
|
7.4%
|
4.1%
|
2.9%
|
1.5%
|
1.2%
|
0.9%
|
|
|
December 31,
|
||||||
($ in thousands)
|
|
2018
|
|
2017
|
||||
5.500%
|
Senior Notes due 2019
|
$
|
158,324
|
|
|
$
|
157,636
|
|
5.250%
|
Senior Notes due 2020
|
232,729
|
|
|
231,834
|
|
||
7.000%
|
Senior Notes due 2021
|
195,867
|
|
|
195,146
|
|
||
4.500%
|
Senior Notes due 2024
|
443,428
|
|
|
442,458
|
|
||
|
Total Senior Notes
|
$
|
1,030,348
|
|
|
$
|
1,027,074
|
|
•
|
the $41.8 million market premium representing the excess of the fair value of the total consideration delivered to the sellers of the Convertible Senior Notes due 2017 and 2019 over the fair value of the common stock issuable pursuant to the original conversion terms of the purchased notes;
|
•
|
the $17.2 million difference between the fair value and the carrying value, net of unamortized issuance costs, of the liability component of the purchased notes; and
|
•
|
the $1.1 million impact of related transaction costs.
|
|
Year Ended December 31,
|
||||||
(In thousands)
|
2018
|
|
2017
|
||||
Deferred ceding commission
|
$
|
91,400
|
|
|
$
|
89,907
|
|
FHLB advances
|
82,532
|
|
|
—
|
|
||
Accrued compensation
|
61,452
|
|
|
67,687
|
|
||
Amount payable on the return of cash collateral under securities lending agreements
|
11,699
|
|
|
19,357
|
|
||
Current federal income taxes
|
—
|
|
|
96,740
|
|
||
Other
|
86,576
|
|
|
80,154
|
|
||
Total other liabilities
|
$
|
333,659
|
|
|
$
|
353,845
|
|
(In thousands)
|
|
||
2019
|
$
|
11,310
|
|
2020
|
10,847
|
|
|
2021
|
10,165
|
|
|
2022
|
10,100
|
|
|
2023
|
10,251
|
|
|
Thereafter
|
56,317
|
|
|
Total
|
$
|
108,990
|
|
|
|
December 31,
|
||||||||||||||||||||||
($ in thousands)
|
|
2018
|
|
2017
|
|
2016
|
||||||||||||||||||
Share-Based Compensation Programs
|
|
Liability
Recorded/
Equity
Instruments
Outstanding
|
|
Compensation
Cost
Recognized (1)
|
|
Liability
Recorded/
Equity
Instruments
Outstanding
|
|
Compensation
Cost
Recognized (1)
|
|
Liability
Recorded/
Equity
Instruments
Outstanding
|
|
Compensation
Cost
Recognized (1)
|
||||||||||||
Liabilities: RSUs—Cash-Settled
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
18
|
|
|
$
|
(718
|
)
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
RSUs—Equity Settled
|
|
3,763,633
|
|
|
16,591
|
|
|
3,434,976
|
|
|
12,206
|
|
|
3,208,454
|
|
|
13,285
|
|
||||||
Non-Qualified Stock Options
|
|
1,312,791
|
|
|
603
|
|
|
1,692,743
|
|
|
851
|
|
|
2,839,738
|
|
|
3,286
|
|
||||||
Phantom Stock
|
|
234,427
|
|
|
2
|
|
|
234,302
|
|
|
2
|
|
|
234,174
|
|
|
2
|
|
||||||
Employee Stock Purchase Plan
|
|
|
|
453
|
|
|
|
|
432
|
|
|
|
|
449
|
|
|||||||||
Equity
|
|
|
|
17,649
|
|
|
|
|
13,491
|
|
|
|
|
17,022
|
|
|||||||||
Total all share-based plans
|
|
|
|
$
|
17,649
|
|
|
|
|
$
|
13,492
|
|
|
|
|
$
|
16,304
|
|
(1)
|
For purposes of calculating compensation cost recognized, we generally consider awards effectively vested (and we recognize the full compensation costs) when grantees become retirement eligible.
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Total compensation cost recognized
|
$
|
17,649
|
|
|
$
|
13,492
|
|
|
$
|
16,304
|
|
Less: Costs deferred as acquisition costs
|
324
|
|
|
269
|
|
|
206
|
|
|||
Stock-based compensation expense
|
$
|
17,325
|
|
|
$
|
13,223
|
|
|
$
|
16,098
|
|
|
Number of
Shares
|
|
Weighted-Average
Grant Date
Fair Value
|
|||
Unvested, December 31, 2017 (1)
|
3,434,976
|
|
|
$
|
12.90
|
|
Granted
|
1,058,045
|
|
|
$
|
15.58
|
|
Vested
|
(258,845
|
)
|
|
$
|
12.61
|
|
Forfeited
|
(470,543
|
)
|
|
$
|
18.07
|
|
Unvested, December 31, 2018 (1)
|
3,763,633
|
|
|
$
|
13.04
|
|
(1)
|
Included in unvested amounts are certain awards to employees and non-employee directors that are exercisable upon termination or retirement.
|
|
2017
|
|
2016
|
||
Expected life
|
3 years
|
|
|
3 years
|
|
Risk-free interest rate (1)
|
1.6
|
%
|
|
0.9
|
%
|
Volatility of Radian’s stock (2)
|
28.0
|
%
|
|
29.7
|
%
|
Average volatility of peer companies (3)
|
30.6
|
%
|
|
38.2
|
%
|
Dividend yield
|
0.06
|
%
|
|
0.08
|
%
|
Discount rate (4)
|
10.7
|
%
|
|
10.7
|
%
|
(1)
|
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant.
|
(2)
|
Volatility of Radian’s stock is used in the calculation of the grant date fair value of the portion of the awards based on TSR Measures, as described above. Volatility is determined at the date of grant using the historical share price volatility and the expected life of each award.
|
(3)
|
Average volatility of peer companies is used in the calculation of the grant date fair value of the portion of the awards based on the Relative TSR Measure, as described above.
|
(4)
|
A discount is applied to executive officer awards to reflect illiquidity during the one-year post-vesting holding period.
|
|
Year Ended December 31,
|
|
|||||||
|
2018
|
|
2017 (1)
|
|
2016 (2)
|
|
|||
Time-vested RSUs granted to certain executives and non-executive officers
|
385,962
|
|
(1)
|
372,489
|
|
|
180,380
|
|
|
Time-vested RSUs granted to non-employee directors
|
76,763
|
|
(3)
|
68,337
|
|
|
356,040
|
|
(4)
|
Total time-vested RSUs granted (5)
|
462,725
|
|
|
440,826
|
|
|
536,420
|
|
|
(1)
|
The time-vested RSU awards granted in 2018 and 2017 are scheduled to vest in: (i) pro rata installments on each of the first three anniversaries of the grant date or (ii) generally at the end of three years.
|
(2)
|
The time-vested RSU awards granted in 2016 generally are subject to three-year cliff vesting.
|
(3)
|
The time-vested RSU awards granted in 2018 to non-employee directors generally are subject to one-year cliff vesting.
|
(4)
|
Includes 262,694 time-vested awards granted on February 10, 2016 to convert the outstanding fully-vested 2009 and 2010 time-vested RSUs (to be settled in cash) awarded to our non-employee directors into time-vested RSUs to be settled in shares of our common stock on the conversion date (generally defined as a director’s termination of service with us).
|
(5)
|
The grant date fair value of time-vested RSUs was calculated based on the closing price of our common stock on the New York Stock Exchange on the date of grant, discounted for the lack of dividends earned over the vesting period, and is recognized as compensation expense over the service period.
|
($ in thousands, except per-share amounts)
|
Number of
Shares
|
|
Weighted
Average
Exercise Price
Per Share
|
|
Weighted
Average
Remaining Contractual Term
|
|
Aggregate Intrinsic Value (1)
|
|||||
Outstanding, December 31, 2017
|
1,692,743
|
|
|
$
|
8.16
|
|
|
|
|
|
||
Granted
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Exercised
|
(375,573
|
)
|
|
$
|
3.79
|
|
|
|
|
|
||
Forfeited
|
(4,379
|
)
|
|
$
|
14.38
|
|
|
|
|
|
||
Expired
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Outstanding, December 31, 2018
|
1,312,791
|
|
|
$
|
9.39
|
|
|
4.9
|
|
$
|
9,500
|
|
Exercisable, December 31, 2018
|
966,478
|
|
|
$
|
7.91
|
|
|
4.0
|
|
$
|
8,361
|
|
Available for grant, December 31, 2018
|
7,906,190
|
|
|
|
|
|
|
|
(1)
|
Based on the market price of $16.36 at December 31, 2018.
|
|
Years Ended December 31,
|
||||||||||
($ in thousands, except per-share amounts)
|
2018
|
|
2017
|
|
2016
|
||||||
Granted (number of shares)
|
—
|
|
|
—
|
|
|
342,090
|
|
|||
Weighted-average grant date fair value per share (1)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9.72
|
|
Aggregate intrinsic value of options exercised
|
$
|
6,274
|
|
|
$
|
14,389
|
|
|
$
|
1,519
|
|
Tax benefit of options exercised
|
$
|
1,318
|
|
|
$
|
5,036
|
|
|
$
|
532
|
|
Cash received from options exercised
|
$
|
1,425
|
|
|
$
|
7,131
|
|
|
$
|
717
|
|
(1)
|
We use the Monte Carlo valuation model in determining the grant date fair value of stock options issued to executives and non-executives using the assumptions noted in the following table:
|
|
Year Ended December 31,
|
|
|
2016
|
|
Derived service period (years)
|
3.02 - 4.00
|
|
Risk-free interest rate (a)
|
1.72
|
%
|
Volatility (b)
|
94.20
|
%
|
Dividend yield
|
0.08
|
%
|
(a)
|
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant.
|
(b)
|
Volatility is determined at the date of grant using historical share price volatility and expected life of each award.
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||
Range of Exercise Prices
|
Number
Outstanding
|
|
Weighted Average
Remaining
Contractual Life
(Years)
|
|
Weighted Average
Exercise Price
|
|
Number
Exercisable
|
|
Weighted Average
Exercise Price
|
||||||
$2.45 - $3.58
|
565,317
|
|
|
3.4
|
|
$
|
2.45
|
|
|
565,317
|
|
|
$
|
2.45
|
|
$5.76 - $7.06
|
—
|
|
|
0.0
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
$10.42 - $15.44
|
578,612
|
|
|
6.0
|
|
$
|
13.53
|
|
|
306,611
|
|
|
$
|
14.74
|
|
$18.42
|
168,862
|
|
|
6.3
|
|
$
|
18.42
|
|
|
20,000
|
|
|
$
|
18.42
|
|
|
1,312,791
|
|
|
4.9
|
|
$
|
9.39
|
|
|
891,928
|
|
|
$
|
7.03
|
|
|
January 1, 2018
|
|
July 1, 2018
|
||
Expected life
|
6 months
|
|
|
6 months
|
|
Risk-free interest rate
|
1.76
|
%
|
|
2.43
|
%
|
Volatility
|
31.49
|
%
|
|
32.80
|
%
|
Dividend yield
|
0.05
|
%
|
|
0.06
|
%
|
•
|
allows for the immediate eligibility of new hire participation and provides for the automatic enrollment of eligible employees;
|
•
|
provides for the immediate vesting of matching contributions (including existing unvested matching contributions attributable to prior periods) and the elimination of all restrictions (other than Radian Group’s Insider Trading Policy) on a participant’s ability to diversify his/her position in matching contributions; and
|
•
|
permits Radian Group to make discretionary, pro rata (based on eligible pay) cash allocations to each eligible participant’s account, with vesting upon completion of three years of service with us.
|
|
Year Ended December 31, 2018
|
||||||||||
(In thousands)
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
||||||
Balance at beginning of period
|
$
|
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
|
32,953
|
|
|
6,920
|
|
|
26,033
|
|
|||
Other comprehensive income (loss) (“OCI”):
|
|
|
|
|
|
||||||
Unrealized gains (losses) on investments:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during the period
|
(123,235
|
)
|
|
(25,879
|
)
|
|
(97,356
|
)
|
|||
Less: Reclassification adjustment for net gains (losses) included in net income (1)
|
(13,000
|
)
|
|
(2,730
|
)
|
|
(10,270
|
)
|
|||
Net unrealized gains (losses) on investments
|
(110,235
|
)
|
|
(23,149
|
)
|
|
(87,086
|
)
|
|||
Net foreign currency translation adjustments
|
5
|
|
|
1
|
|
|
4
|
|
|||
Net actuarial gains (losses)
|
163
|
|
|
34
|
|
|
129
|
|
|||
OCI
|
(110,067
|
)
|
|
(23,114
|
)
|
|
(86,953
|
)
|
|||
Balance at end of period
|
$
|
(77,114
|
)
|
|
$
|
(16,194
|
)
|
|
$
|
(60,920
|
)
|
|
|
|
|
|
|
||||||
|
Year Ended December 31, 2017
|
||||||||||
(In thousands)
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
||||||
Balance at beginning of period
|
$
|
(19,063
|
)
|
|
$
|
(6,668
|
)
|
|
$
|
(12,395
|
)
|
OCI:
|
|
|
|
|
|
||||||
Unrealized gains (losses) on investments:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during the period
|
46,235
|
|
|
14,332
|
|
|
31,903
|
|
|||
Less: Reclassification adjustment for net gains (losses) included in net income (1)
|
(4,065
|
)
|
|
(1,423
|
)
|
|
(2,642
|
)
|
|||
Net unrealized gains (losses) on investments
|
50,300
|
|
|
15,755
|
|
|
34,545
|
|
|||
Foreign currency translation adjustments:
|
|
|
|
|
|
||||||
Unrealized foreign currency translation adjustments
|
225
|
|
|
75
|
|
|
150
|
|
|||
Less: Reclassification adjustment for liquidation of foreign subsidiary and other adjustments included in net income (2)
|
(1,109
|
)
|
|
(388
|
)
|
|
(721
|
)
|
|||
Net foreign currency translation adjustments
|
1,334
|
|
|
463
|
|
|
871
|
|
|||
Net actuarial gains (losses)
|
98
|
|
|
34
|
|
|
64
|
|
|||
OCI
|
51,732
|
|
|
16,252
|
|
|
35,480
|
|
|||
Balance at end of period
|
$
|
32,669
|
|
|
$
|
9,584
|
|
|
$
|
23,085
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
||||||||||
(In thousands)
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
||||||
Balance at beginning of period
|
$
|
(28,425
|
)
|
|
$
|
(9,948
|
)
|
|
$
|
(18,477
|
)
|
OCI:
|
|
|
|
|
|
||||||
Unrealized gains (losses) on investments:
|
|
|
|
|
|
||||||
Unrealized holding gains (losses) arising during the period
|
13,510
|
|
|
4,728
|
|
|
8,782
|
|
|||
Less: Reclassification adjustment for net gains (losses) included in net income (1)
|
3,463
|
|
|
1,212
|
|
|
2,251
|
|
|||
Net unrealized gains (losses) on investments
|
10,047
|
|
|
3,516
|
|
|
6,531
|
|
|||
Net foreign currency translation adjustments
|
(724
|
)
|
|
(250
|
)
|
|
(474
|
)
|
|||
Net actuarial gains (losses)
|
39
|
|
|
14
|
|
|
25
|
|
|||
OCI
|
9,362
|
|
|
3,280
|
|
|
6,082
|
|
|||
Balance at end of period
|
$
|
(19,063
|
)
|
|
$
|
(6,668
|
)
|
|
$
|
(12,395
|
)
|
(1)
|
Included in net gains (losses) on investments and other financial instruments in our consolidated statements of operations.
|
(2)
|
Included in restructuring and other exit costs in our consolidated statements of operations.
|
|
December 31,
|
||||||||||
(In millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Statutory net income
|
$
|
501.9
|
|
|
$
|
445.1
|
|
|
$
|
480.8
|
|
Statutory policyholders’ surplus
|
814.1
|
|
|
1,201.0
|
|
|
1,349.7
|
|
|||
Contingency reserve
|
2,109.9
|
|
|
1,667.0
|
|
|
1,260.6
|
|
|
December 31,
|
||||||
($ in millions)
|
2018
|
|
2017
|
||||
RIF, net (1)
|
$
|
40,711.3
|
|
|
$
|
36,793.5
|
|
|
|
|
|
||||
Common stock and paid-in capital
|
$
|
1,416.0
|
|
|
$
|
1,866.0
|
|
Surplus Note
|
100.0
|
|
|
100.0
|
|
||
Unassigned earnings (deficit)
|
(701.9
|
)
|
|
(765.0
|
)
|
||
Statutory policyholders’ surplus
|
814.1
|
|
|
1,201.0
|
|
||
Contingency reserve
|
2,109.9
|
|
|
1,667.0
|
|
||
Statutory capital
|
$
|
2,924.0
|
|
|
$
|
2,868.0
|
|
|
|
|
|
||||
Risk-to-capital
|
13.9:1
|
|
|
12.8:1
|
(1)
|
Excludes risk ceded through all reinsurance programs (including with affiliates) and RIF on defaulted loans.
|
|
December 31,
|
||||||||||
(In millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Statutory net income
|
$
|
86.1
|
|
|
$
|
64.3
|
|
|
$
|
60.3
|
|
Statutory policyholders’ surplus
|
356.2
|
|
|
328.9
|
|
|
147.6
|
|
|||
Contingency reserve
|
293.5
|
|
|
234.0
|
|
|
180.3
|
|
|
December 31,
|
||||||||||
(In millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Statutory net income (loss)
|
$
|
(2.8
|
)
|
|
$
|
0.1
|
|
|
$
|
(6.1
|
)
|
Statutory policyholders’ surplus
|
58.0
|
|
|
58.6
|
|
|
57.1
|
|
|||
Contingency reserve
|
1.7
|
|
|
1.7
|
|
|
1.5
|
|
(a)
|
Under SAPP, mortgage insurance companies are required to establish a contingency reserve equal to 50% of premiums earned in each year, generally to be maintained for 10 years, whereas no such reserve is required under GAAP.
|
(b)
|
Under SAPP, insurance policy acquisition costs are charged against operations in the year incurred, and considered in the recognition of unearned premiums. Under GAAP, such costs are generally deferred and amortized.
|
(c)
|
Under SAPP, deferred tax assets are only recognized to the extent they are expected to be recovered within a one- to three-year period subject to a capital and surplus limitation. Changes in deferred tax assets and deferred tax liabilities are recognized as a direct benefit or charge to unassigned surplus, whereas under GAAP changes in deferred tax assets and deferred tax liabilities are generally recorded as a component of income tax expense.
|
(d)
|
Under SAPP, fixed-maturity investments are generally valued at amortized cost. Under GAAP, those investments are generally recorded at fair value.
|
(e)
|
Under SAPP, certain assets, designated as non-admitted assets, are charged directly against statutory surplus. Such assets are reflected on our GAAP financial statements.
|
|
2018 Quarters
|
||||||||||||||||||
(In thousands, except per-share amounts)
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Year
|
||||||||||
Net premiums earned—insurance
|
$
|
242,550
|
|
|
$
|
251,344
|
|
|
$
|
258,431
|
|
|
$
|
261,682
|
|
|
$
|
1,014,007
|
|
Services revenue
|
33,164
|
|
|
36,828
|
|
|
36,566
|
|
|
38,414
|
|
|
144,972
|
|
|||||
Net investment income
|
33,956
|
|
|
37,473
|
|
|
38,995
|
|
|
42,051
|
|
|
152,475
|
|
|||||
Net gains (losses) on investments and other financial instruments
|
(18,887
|
)
|
|
(7,404
|
)
|
|
(4,480
|
)
|
|
(11,705
|
)
|
|
(42,476
|
)
|
|||||
Provision for losses
|
37,283
|
|
|
19,337
|
|
|
20,881
|
|
|
27,140
|
|
|
104,641
|
|
|||||
Policy acquisition costs
|
7,117
|
|
|
5,996
|
|
|
5,667
|
|
|
6,485
|
|
|
25,265
|
|
|||||
Cost of services
|
23,126
|
|
|
24,205
|
|
|
25,854
|
|
|
24,939
|
|
|
98,124
|
|
|||||
Other operating expenses
|
63,243
|
|
|
70,184
|
|
|
70,125
|
|
|
77,266
|
|
|
280,818
|
|
|||||
Restructuring and other exit costs
|
551
|
|
|
925
|
|
|
4,464
|
|
|
113
|
|
|
6,053
|
|
|||||
Amortization and impairment of other acquired intangible assets
|
2,748
|
|
|
2,748
|
|
|
3,472
|
|
|
3,461
|
|
|
12,429
|
|
|||||
Net income
|
114,486
|
|
|
208,949
|
|
|
142,797
|
|
|
139,779
|
|
|
606,011
|
|
|||||
Diluted net income per share (1)
|
$
|
0.52
|
|
|
$
|
0.96
|
|
|
$
|
0.66
|
|
|
$
|
0.64
|
|
|
$
|
2.77
|
|
Weighted-average shares outstanding-diluted
|
219,883
|
|
|
217,830
|
|
|
217,902
|
|
|
217,883
|
|
|
218,553
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
2017 Quarters
|
||||||||||||||||||
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Year
|
||||||||||
Net premiums earned—insurance
|
$
|
221,800
|
|
|
$
|
229,096
|
|
|
$
|
236,702
|
|
|
$
|
245,175
|
|
|
$
|
932,773
|
|
Services revenue
|
38,027
|
|
|
37,802
|
|
|
39,571
|
|
|
39,703
|
|
|
155,103
|
|
|||||
Net investment income
|
31,032
|
|
|
30,071
|
|
|
32,540
|
|
|
33,605
|
|
|
127,248
|
|
|||||
Net gains (losses) on investments and other financial instruments
|
(2,851
|
)
|
|
5,331
|
|
|
2,480
|
|
|
(1,339
|
)
|
|
3,621
|
|
|||||
Provision for losses
|
46,913
|
|
|
17,222
|
|
|
35,841
|
|
|
35,178
|
|
|
135,154
|
|
|||||
Policy acquisition costs
|
6,729
|
|
|
6,123
|
|
|
5,554
|
|
|
5,871
|
|
|
24,277
|
|
|||||
Cost of services
|
28,375
|
|
|
25,635
|
|
|
27,240
|
|
|
23,349
|
|
|
104,599
|
|
|||||
Other operating expenses
|
68,377
|
|
|
68,750
|
|
|
64,195
|
|
|
65,999
|
|
|
267,321
|
|
|||||
Restructuring and other exit costs
|
—
|
|
|
—
|
|
|
12,038
|
|
|
5,230
|
|
|
17,268
|
|
|||||
Loss on induced conversion and debt extinguishment
|
4,456
|
|
|
1,247
|
|
|
45,766
|
|
|
—
|
|
|
51,469
|
|
|||||
Impairment of goodwill
|
—
|
|
|
184,374
|
|
|
—
|
|
|
—
|
|
|
184,374
|
|
|||||
Amortization and impairment of other acquired intangible assets
|
3,296
|
|
|
18,856
|
|
|
2,890
|
|
|
2,629
|
|
|
27,671
|
|
|||||
Net income (loss)
|
76,472
|
|
|
(27,342
|
)
|
|
65,142
|
|
|
6,816
|
|
(2)
|
121,088
|
|
|||||
Diluted net income (loss) per share (1)
|
$
|
0.34
|
|
|
$
|
(0.13
|
)
|
|
$
|
0.30
|
|
|
$
|
0.03
|
|
(2)
|
$
|
0.55
|
|
Weighted-average shares outstanding-diluted
|
221,497
|
|
|
215,152
|
|
|
219,391
|
|
|
220,250
|
|
|
220,406
|
|
(1)
|
Diluted net income per share is computed independently for each period presented. Consequently, the sum of the quarters may not equal the total net income per share for the year.
|
(2)
|
The fourth quarter of 2017 reflects an incremental tax provision related to the remeasurement of our net deferred tax assets as a result of the enactment of the TCJA.
|
Item 9A.
|
Controls and Procedures.
|
Item 9B.
|
Other Information.
|
Item 10.
|
Directors, Executive Officers and Corporate Governance.
|
Item 11.
|
Executive Compensation.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|
Plan Category (1)
|
(a)
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
|
|
(b)
Weighted-average
exercise price of
outstanding
options,
warrants and rights
|
|
(c)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column(a))
|
|
||||||
Equity compensation plans approved by stockholders (2)
|
5,310,851
|
|
(3)
|
$
|
2.98
|
|
(4)
|
9,955,831
|
|
(5)
|
||
Equity compensation plans not approved by stockholders
|
—
|
|
|
—
|
|
|
—
|
|
|
|||
Total
|
$
|
5,310,851
|
|
(3)
|
$
|
2.98
|
|
(4)
|
$
|
9,955,831
|
|
(5)
|
|
|
|
|
|
|
|
(1)
|
The table does not include information for equity compensation plans assumed by us in mergers, under which we do not grant additional awards.
|
(2)
|
These plans consist of our 1995 Equity Plan, 2008 Equity Plan, the Amended and Restated Equity Compensation Plan and our Amended and Restated Radian Group Inc. ESPP.
|
(3)
|
Represents 234,427 shares of phantom stock issued under our 1995 Equity Plan, 696,187 non-qualified stock options and 889,760 RSUs issued under our 2008 Equity Plan, and 616,604 non-qualified stock options and 2,873,873 RSUs issued under our Amended and Restated Equity Compensation Plan. Of the RSUs included herein, 1,646,223 are performance-based stock-settled RSUs that could potentially pay out between 0% and 200% of this represented target, and 123,496 are performance-based stock-settled RSUs that could pay out to our former chief executive officer at 0% or 100%.
|
(4)
|
The shares of phantom stock and RSUs were granted at full value, and therefore, have a weighted-average exercise price of $0. Excluding shares of phantom stock and RSUs from this calculation, the weighted-average exercise price of outstanding non-qualified stock options was $9.39 at December 31, 2018.
|
(5)
|
Includes 7,906,190 shares available for issuance under our Amended and Restated Equity Compensation Plan, and 2,048,800 shares available for issuance under our Amended and Restated Radian Group Inc. ESPP, in each case as of December 31, 2018. In January 2019, we issued 51,187 shares from the shares available for issuance under our Amended and Restated Radian Group Inc. ESPP. As a result, 1,997,613 shares currently remain available for issuance under the Amended and Restated Radian Group Inc. ESPP.
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence.
|
Item 14.
|
Principal Accountant Fees and Services.
|
Item 15.
|
Exhibits and Financial Statement Schedules.
|
1.
|
Financial Statements—See the “Index to Consolidated Financial Statements” included in Item 8 of this report for a list of the financial statements filed as part of this report.
|
F-5ctionPage#
|
Item 16.
|
Form 10-K Summary.
|
Exhibit
Number
|
Exhibit
|
2.1
|
|
|
|
2.2
|
|
|
|
3.1
|
|
|
|
3.2
|
|
|
|
3.3
|
|
|
|
3.4
|
|
|
|
3.5
|
|
|
|
3.6
|
|
|
|
3.7
|
|
|
|
3.8
|
|
|
|
4.1
|
|
|
|
4.2
|
|
|
|
4.3
|
|
|
|
4.4
|
|
|
|
4.5
|
|
|
|
Exhibit
Number
|
Exhibit
|
4.6
|
|
|
|
4.7
|
|
|
|
4.8
|
|
|
|
4.9
|
|
|
|
4.10
|
|
|
|
4.11
|
|
|
|
4.12
|
|
|
|
+10.1
|
|
|
|
+10.2
|
|
|
|
+10.3
|
|
|
|
+10.4
|
|
|
|
+10.5
|
|
|
|
10.6
|
|
|
|
+10.7
|
|
|
|
+10.8
|
|
|
|
+10.9
|
|
|
|
+10.10
|
|
|
|
+10.11
|
|
|
|
Exhibit
Number
|
Exhibit
|
+10.12
|
|
|
|
+10.13
|
|
|
|
+10.14
|
|
|
|
+10.15
|
|
|
|
+10.16
|
|
|
|
+10.17
|
|
|
|
+10.18
|
|
|
|
+10.19
|
|
|
|
+10.20
|
|
|
|
+10.21
|
|
|
|
+10.22
|
|
|
|
+10.23
|
|
|
|
+10.24
|
|
|
|
+10.25
|
|
|
|
+10.26
|
|
|
|
+10.27
|
|
|
|
Exhibit
Number
|
Exhibit
|
+10.28
|
|
|
|
+10.29
|
|
|
|
+10.30
|
|
|
|
+10.31
|
|
|
|
+10.32
|
|
|
|
+10.33
|
|
|
|
+10.34
|
|
|
|
+10.35
|
|
|
|
+10.36
|
|
|
|
10.37
|
|
|
|
10.38
|
|
|
|
10.39
|
|
|
|
10.40
|
|
|
|
+10.41
|
|
|
|
+10.42
|
|
|
|
Exhibit
Number
|
Exhibit
|
+10.43
|
|
|
|
+10.44
|
|
|
|
10.45
|
|
|
|
+10.46
|
|
|
|
+10.47
|
|
|
|
+10.48
|
|
|
|
+10.49
|
|
|
|
10.50
|
|
|
|
+10.51
|
|
|
|
+10.52
|
|
|
|
+10.53
|
|
|
|
+10.54
|
|
|
|
10.55
|
|
|
|
+10.56
|
|
|
|
Exhibit
Number
|
Exhibit
|
+10.57
|
|
|
|
10.58
|
|
|
|
+10.59
|
|
|
|
+10.60
|
|
|
|
+10.61
|
|
|
|
+10.62
|
|
|
|
+10.63
|
|
|
|
+10.64
|
|
|
|
+10.65
|
|
|
|
+10.66
|
|
|
|
+10.67
|
|
|
|
+10.68
|
|
|
|
+10.69
|
|
|
|
+10.70
|
|
|
|
+10.71
|
|
|
|
+10.72
|
|
|
|
Exhibit
Number
|
Exhibit
|
+10.73
|
|
|
|
+10.74
|
|
|
|
+10.75
|
|
|
|
+10.76
|
|
|
|
+10.77
|
|
|
|
+10.78
|
|
|
|
+10.79
|
|
|
|
+10.80
|
|
|
|
+10.81
|
|
|
|
+10.82
|
|
|
|
+10.83
|
|
|
|
+10.84
|
|
|
|
+10.85
|
|
|
|
+10.86
|
|
|
|
+10.87
|
|
|
|
Exhibit
Number
|
Exhibit
|
+10.88
|
|
|
|
+10.89
|
|
|
|
10.90
|
|
|
|
*10.91
|
|
|
|
*10.92
|
|
|
|
*21
|
|
|
|
*23.1
|
|
|
|
*31
|
|
|
|
**32
|
|
|
|
*101
|
The following financial information from Radian Group Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018, is formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2018 and December 31, 2017, (ii) Consolidated Statements of Operations for the years ended December 31, 2018, 2017, and 2016, (iii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018, 2017, and 2016, (iv) Consolidated Statements of Changes in Common Stockholders’ Equity for the years ended December 31, 2018, 2017, and 2016, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017, and 2016, and (vi) the Notes to Consolidated Financial Statements.
|
*
|
Filed herewith.
|
**
|
Furnished herewith.
|
Radian Group Inc.
|
|
|
|
By:
|
/s/ Richard G. Thornberry
|
|
Richard G. Thornberry
Chief Executive Officer |
Name
|
|
Title
|
/s/ RICHARD G. THORNBERRY
|
|
Chief Executive Officer (Principal Executive Officer) and Director
|
Richard G. Thornberry
|
|
|
|
|
|
/s/ J. FRANKLIN HALL
|
|
Senior Executive Vice President, Chief Financial Officer (Principal Financial Officer)
|
J. Franklin Hall
|
|
|
|
|
|
/s/ ROBERT J. QUIGLEY
|
|
Senior Vice President, Controller
(Principal Accounting Officer) |
Robert J. Quigley
|
|
|
|
|
|
/s/ HERBERT WENDER
|
|
Non-Executive Chairman of the Board
|
Herbert Wender
|
|
|
|
|
|
/s/ DAVID C. CARNEY
|
|
Director
|
David C. Carney
|
|
|
|
|
|
/s/ HOWARD B. CULANG
|
|
Director
|
Howard B. Culang
|
|
|
|
|
|
/s/ LISA W. HESS
|
|
Director
|
Lisa W. Hess
|
|
|
|
|
|
/s/ STEPHEN T. HOPKINS
|
|
Director
|
Stephen T. Hopkins
|
|
|
|
|
|
/s/ GAETANO MUZIO
|
|
Director
|
Gaetano Muzio
|
|
|
|
|
|
/s/ GREGORY V. SERIO
|
|
Director
|
Gregory V. Serio
|
|
|
|
|
|
/s/ NOEL J. SPIEGEL
|
|
Director
|
Noel J. Spiegel
|
|
|
Index to Financial Statement Schedules
|
|
|
Page
|
Financial Statement Schedules
|
|
|
|
Type of Investment
|
Amortized
Cost
|
|
Fair Value
|
|
Amount Reflected on the Consolidated Balance Sheet
|
|
||||||
(In thousands)
|
|
|
||||||||||
Fixed-maturities available for sale:
|
|
|
|
|
|
|
||||||
Bonds:
|
|
|
|
|
|
|
||||||
U.S. government and agency securities
|
$
|
85,532
|
|
|
$
|
84,070
|
|
|
$
|
84,070
|
|
|
State and municipal obligations
|
138,022
|
|
|
138,313
|
|
|
138,313
|
|
|
|||
Corporate bonds and notes
|
2,288,720
|
|
|
2,229,885
|
|
|
2,229,885
|
|
|
|||
RMBS
|
334,843
|
|
|
332,142
|
|
|
332,142
|
|
|
|||
CMBS
|
546,729
|
|
|
539,915
|
|
|
539,915
|
|
|
|||
Other ABS
|
712,748
|
|
|
704,662
|
|
|
704,662
|
|
|
|||
Total securities available for sale
|
4,106,594
|
|
|
4,028,987
|
|
|
4,028,987
|
|
|
|||
Trading securities
|
468,696
|
|
|
469,071
|
|
|
469,071
|
|
|
|||
Equity securities:
|
|
|
|
|
|
|
||||||
Common stocks
|
150,344
|
|
|
140,620
|
|
|
140,620
|
|
|
|||
Total equity securities
|
150,344
|
|
|
140,620
|
|
|
140,620
|
|
|
|||
Short-term investments (1)
|
538,977
|
|
|
538,796
|
|
|
538,796
|
|
|
|||
Other invested assets
|
308
|
|
|
3,415
|
|
|
3,415
|
|
|
|||
Total investments other than investments in related parties
|
$
|
5,264,919
|
|
|
$
|
5,180,889
|
|
(2)
|
$
|
5,180,889
|
|
(2)
|
(1)
|
Includes cash collateral held under securities lending agreements of $11.7 million that is reinvested in money market instruments.
|
(2)
|
Includes $7.4 million of fixed maturity securities available for sale, $10.1 million of trading securities and $10.4 million of equity securities loaned under securities lending agreements that are classified as other assets in our consolidated balance sheets.
|
|
December 31,
|
||||||
(In thousands, except per-share amounts)
|
2018
|
|
2017
|
||||
Assets
|
|
|
|
||||
Investments
|
|
|
|
||||
Fixed-maturities available for sale—at fair value
|
$
|
321,401
|
|
|
$
|
10,785
|
|
Trading securities—at fair value
|
56,011
|
|
|
—
|
|
||
Equity securities—at fair value
|
29,375
|
|
|
—
|
|
||
Short-term investments—at fair value
|
238,185
|
|
|
83,356
|
|
||
Total investments
|
644,972
|
|
|
94,141
|
|
||
Cash
|
32,352
|
|
|
13,173
|
|
||
Investment in subsidiaries, at equity in net assets (Note B)
|
3,927,268
|
|
|
3,764,865
|
|
||
Accounts and notes receivable (Note C)
|
101,072
|
|
|
103,561
|
|
||
Federal income taxes recoverable, net—current
|
49,381
|
|
|
35,741
|
|
||
Other assets (Note D)
|
58,993
|
|
|
166,051
|
|
||
Total assets
|
$
|
4,814,038
|
|
|
$
|
4,177,532
|
|
|
|
|
|
||||
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Senior Notes (Note E)
|
$
|
1,030,348
|
|
|
$
|
1,027,074
|
|
Federal income taxes—deferred
|
243,341
|
|
|
97,067
|
|
||
Other liabilities
|
51,634
|
|
|
53,353
|
|
||
Total liabilities
|
1,325,323
|
|
|
1,177,494
|
|
||
|
|
|
|
||||
Common stockholders’ equity
|
|
|
|
||||
Common stock: par value $.001 per share; 485,000 shares authorized at December 31, 2018 and 2017; 231,132 and 233,417 shares issued at December 31, 2018 and 2017, respectively; 213,473 and 215,814 shares outstanding at December 31, 2018 and 2017, respectively
|
231
|
|
|
233
|
|
||
Treasury stock, at cost: 17,660 and 17,603 shares at December 31, 2018 and 2017, respectively
|
(894,870
|
)
|
|
(893,888
|
)
|
||
Additional paid-in capital
|
2,724,733
|
|
|
2,754,275
|
|
||
Retained earnings
|
1,719,541
|
|
|
1,116,333
|
|
||
Accumulated other comprehensive income (loss)
|
(60,920
|
)
|
|
23,085
|
|
||
Total common stockholders’ equity
|
3,488,715
|
|
|
3,000,038
|
|
||
Total liabilities and stockholders’ equity
|
$
|
4,814,038
|
|
|
$
|
4,177,532
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Net investment income
|
$
|
21,294
|
|
|
$
|
22,528
|
|
|
$
|
20,834
|
|
Net gains (losses) on investments and other financial instruments
|
(470
|
)
|
|
(328
|
)
|
|
(150
|
)
|
|||
Other income
|
—
|
|
|
80
|
|
|
49
|
|
|||
Total revenues
|
20,824
|
|
|
22,280
|
|
|
20,733
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Loss on induced conversion and debt extinguishment
|
—
|
|
|
51,469
|
|
|
75,075
|
|
|||
Interest expense
|
17,805
|
|
|
18,033
|
|
|
29,002
|
|
|||
Total expenses (Note F)
|
17,805
|
|
|
69,502
|
|
|
104,077
|
|
|||
Pretax gain (loss) from continuing operations
|
3,019
|
|
|
(47,222
|
)
|
|
(83,344
|
)
|
|||
Income tax benefit
|
(3,319
|
)
|
|
(141,437
|
)
|
|
(8,676
|
)
|
|||
Equity in net income of affiliates
|
599,673
|
|
|
26,873
|
|
|
382,921
|
|
|||
Net income
|
606,011
|
|
|
121,088
|
|
|
308,253
|
|
|||
Other comprehensive income (loss), net of tax
|
(86,953
|
)
|
|
35,480
|
|
|
6,082
|
|
|||
Comprehensive income
|
$
|
519,058
|
|
|
$
|
156,568
|
|
|
$
|
314,335
|
|
|
Year Ended December 31,
|
||||||||||
(In thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Net cash provided by (used in) operating activities
|
254,698
|
|
|
(23,654
|
)
|
|
38,902
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Proceeds from sales of:
|
|
|
|
|
|
||||||
Fixed-maturity investments available for sale
|
6,779
|
|
|
58,007
|
|
|
47,058
|
|
|||
Trading securities
|
—
|
|
|
—
|
|
|
30,350
|
|
|||
Equity securities
|
—
|
|
|
—
|
|
|
24,992
|
|
|||
Proceeds from redemptions of:
|
|
|
|
|
|
||||||
Fixed-maturity investments available for sale
|
12,391
|
|
|
60,414
|
|
|
49,578
|
|
|||
Trading securities
|
—
|
|
|
—
|
|
|
10,000
|
|
|||
Purchases of:
|
|
|
|
|
|
||||||
Fixed-maturity investments available for sale
|
(37,552
|
)
|
|
(134,456
|
)
|
|
(137,431
|
)
|
|||
Sales, redemptions and (purchases) of :
|
|
|
|
|
|
||||||
Short-term investments, net
|
(131,164
|
)
|
|
210,529
|
|
|
(40,288
|
)
|
|||
Other assets, net
|
(3,317
|
)
|
|
(1,107
|
)
|
|
239
|
|
|||
Capital distributions from subsidiaries
|
—
|
|
|
924
|
|
|
15,000
|
|
|||
Capital contributions to subsidiaries
|
(30,338
|
)
|
|
(21,643
|
)
|
|
(1,500
|
)
|
|||
Acquisition of subsidiaries
|
—
|
|
|
—
|
|
|
(30,443
|
)
|
|||
(Issuance) repayment of note receivable from affiliate (Note C)
|
—
|
|
|
(44
|
)
|
|
201,631
|
|
|||
Net cash provided by (used in) investing activities
|
(183,201
|
)
|
|
172,624
|
|
|
169,186
|
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Dividends paid
|
(2,140
|
)
|
|
(2,154
|
)
|
|
(2,105
|
)
|
|||
Issuance of senior notes, net
|
—
|
|
|
442,163
|
|
|
343,417
|
|
|||
Purchases and redemptions of senior notes
|
—
|
|
|
(593,527
|
)
|
|
(445,072
|
)
|
|||
Proceeds from termination of capped calls
|
—
|
|
|
4,208
|
|
|
—
|
|
|||
Issuance of common stock
|
1,385
|
|
|
7,132
|
|
|
717
|
|
|||
Purchases of common shares
|
(50,053
|
)
|
|
(6
|
)
|
|
(100,188
|
)
|
|||
Credit facility commitment fees paid
|
(1,510
|
)
|
|
(1,993
|
)
|
|
—
|
|
|||
Excess tax benefits from stock-based awards (Note A)
|
—
|
|
|
—
|
|
|
98
|
|
|||
Net cash provided by (used in) financing activities
|
(52,318
|
)
|
|
(144,177
|
)
|
|
(203,133
|
)
|
|||
Increase (decrease) in cash and restricted cash
|
19,179
|
|
|
4,793
|
|
|
4,955
|
|
|||
Cash and restricted cash, beginning of period
|
13,173
|
|
|
8,380
|
|
|
3,425
|
|
|||
Cash and restricted cash, end of period
|
$
|
32,352
|
|
|
$
|
13,173
|
|
|
$
|
8,380
|
|
|
Year Ended December 31,
|
||||||||||
(in thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Allocated operating expenses
|
$
|
94,815
|
|
|
$
|
72,764
|
|
|
$
|
56,446
|
|
Allocated interest expenses
|
42,195
|
|
|
44,686
|
|
|
52,092
|
|
|||
Total allocated expenses
|
$
|
137,010
|
|
|
$
|
117,450
|
|
|
$
|
108,538
|
|
•
|
Radian Group and Radian Mortgage Assurance are parties to a guaranty agreement, which provides that Radian Group will make sufficient funds available to Radian Mortgage Assurance to ensure that Radian Mortgage Assurance has a minimum of $5 million of statutory policyholders’ surplus every calendar quarter. Radian Mortgage Assurance had $8.7 million of statutory policyholders’ surplus and no RIF exposure as of December 31, 2018.
|
•
|
To allow our mortgage insurance customers to comply with applicable securities regulations for issuers of ABS (including mortgage-backed securities), we have been required, depending on the amount of credit enhancement we were providing, to provide: (i) audited financial statements for the insurance subsidiary participating in these transactions or (ii) a full and unconditional holding-company level guarantee for our insurance subsidiaries’ obligations in such transactions. Radian Group has guaranteed two structured transactions for Radian Guaranty with $87.8 million of aggregate remaining credit exposure as of December 31, 2018.
|
•
|
Radian Group and Radian Guaranty Reinsurance are parties to an Assumption and Indemnification Agreement with regard to obligations under our tax-sharing arrangements. Pursuant to this agreement, Radian Group is required to assume certain obligations that arise as a result of our tax-sharing arrangement.
|
($ in thousands)
|
Gross
Amount
|
|
Ceded to
Other
Companies
|
|
Assumed
from
Other
Companies
|
|
Net Amount
|
|
Assumed
Premiums as a Percentage of Net Premiums |
|||||||||
2018
|
$
|
1,074,298
|
|
|
$
|
67,195
|
|
|
$
|
6,904
|
|
|
$
|
1,014,007
|
|
|
0.68
|
%
|
2017
|
$
|
990,016
|
|
|
$
|
57,271
|
|
|
$
|
28
|
|
|
$
|
932,773
|
|
|
0.00
|
%
|
2016
|
$
|
999,093
|
|
|
$
|
77,359
|
|
|
$
|
35
|
|
|
$
|
921,769
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
1.
|
I have reviewed this Annual Report on Form 10-K of Radian Group Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
|
Date: February 28, 2019
|
/s/ RICHARD G. THORNBERRY
|
|
Richard G. Thornberry
Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K of Radian Group Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
|
Date: February 28, 2019
|
/s/ J. Franklin Hall
|
|
J. Franklin Hall
Chief Financial Officer
|
|
|
Date: February 28, 2019
|
/s/ Richard G. Thornberry
|
|
Richard G. Thornberry
Chief Executive Officer |
|
|
|
/s/ J. Franklin Hall
|
|
J. Franklin Hall
Chief Financial Officer
|