RDN
$19.65
Radian Group
$.27
1.39%
Earnings Details
2nd Quarter June 2017
Tuesday, August 01, 2017 6:30:04 AM
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Summary

Radian Group (RDN) Recent Earnings

Radian Group (RDN) reported 2nd Quarter June 2017 earnings of $0.48 per share on revenue of $302.9 million. The consensus earnings estimate was $0.40 per share on revenue of $291.7 million. Revenue fell 8.3% compared to the same quarter a year ago.

Radian Group Inc, through its subsidiaries and affiliates, provides mortgage insurance on domestic residential First-liens and other products and services to the mortgage and real estate industries. Its segments include mortgage insurance and MRES.

Results
Reported Earnings
$0.48
Earnings Whisper
-
Consensus Estimate
$0.40
Reported Revenue
$302.9 Mil
Revenue Estimate
$291.7 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Radian Announces Second Quarter 2017 Financial Results

Adjusted diluted net operating income per share increases 26% year-over-year to $0.48 -

-- New MI business written increases 11% and MI in force increases 8% year-over-year -

Book value per share grows 3% and tangible book value per share grows 12% year-over-year -

Radian Group Inc. (RDN) today reported a net loss for the quarter ended June 30, 2017, of $27.3 million, or $0.13 per diluted share. This compares to net income for the quarter ended June 30, 2016, of $98.1 million, or $0.44 per diluted share. The net loss in the second quarter of 2017 was attributable to after-tax, non-cash impairment charges of $130.9 million associated with an impairment of goodwill and other intangible assets related to its Services segment. While these impairment charges reduced the company’s reported GAAP results, they did not impact cash flows or adjusted pretax operating income and, despite these charges, book value per share increased 3 percent from the prior-year period. Book value per share at June 30, 2017, was $13.54, compared to $13.58 at March 31, 2017, and $13.09 at June 30, 2016. Tangible book value per share at June 30, 2017, was $13.22, compared to $12.31 at March 31, 2017, and $11.77 at June 30, 2016.

The company determined, following a strategic review of the segment’s business lines and in light of recent performance below expectations, that an impairment of goodwill and other intangible assets related to this segment was necessary. This impairment resulted from a decrease in projected future cash flows based on current market trends and changes to the Services segment’s business strategy going forward.

Based on the strategic review of the Services business lines to date, the company has determined to restructure this business and currently expects to incur charges relating to the changes necessary to reposition this business for sustained profitability. While the company’s restructuring plans are not final and therefore the company cannot provide an estimate of its total expected restructuring charges at this time, the company currently expects that such charges would not exceed $25 million on a pretax basis and, depending on the finalization and implementation of its restructuring plans, such charges could be materially less. The company will provide an update during the third quarter, upon completion of its strategic review.

Key Financial Highlights (dollars in millions, except
per share data)
Quarter Ended
Quarter Ended
June 30, 2017
June 30, 2016
Net income (loss)
($27.3)
$98.1
Diluted net income (loss) per share
($0.13)
$0.44
Consolidated pretax income (loss)
($35.5)
$156.5
Adjusted pretax operating income (1)
$163.7
$131.4
Adjusted diluted net operating
$0.48
$0.38
income per share (1) (2)
Net premiums earned - insurance
$229.1
$229.1
New Mortgage Insurance Written (NIW)
$14,342
$12,921
Mortgage insurance in force
$191.6
$177.7
Book value per share
$13.54
$13.09
Tangible book value per share (1)
$13.22
$11.77
(1)
Adjusted results, including adjusted pretax operating income,
adjusted diluted net operating income per share and tangible book
value per share, are non-GAAP financial measures. For definitions
and a reconciliation of the adjusted results to the comparable
GAAP measures, see Exhibits F and G.
(2)
Adjusted diluted net operating income per share is calculated
using the company’s statutory tax rate of 35 percent.

Adjusted pretax operating income for the quarter ended June 30, 2017, was $163.7 million, compared to $131.4 million for the quarter ended June 30, 2016. Adjusted diluted net operating income per share for the quarter ended June 30, 2017, was $0.48, a 26 percent increase compared to $0.38 for the quarter ended June 30, 2016.

"I am pleased to report on our strong operating performance in the second quarter, including a 26% increase in adjusted diluted net operating income per share, 8% growth in our mortgage insurance in force and a 12% increase in tangible book value per share," said Radian’s Chief Executive Officer Rick Thornberry. "I continue to be excited about the opportunities ahead for Radian. We have a unique opportunity to leverage our market-leading Mortgage Insurance franchise combined with our core capabilities across the Services segment to deliver high-value and relevant products and services. Successfully capturing these opportunities will enable us to further deepen customer relationships, grow sustainable revenues and profitability and increase stockholder value."

SECOND QUARTER HIGHLIGHTS AND RECENT EVENTS

Mortgage Insurance

New mortgage insurance written (NIW) grew to $14.3 billion for the quarter, an increase of 43 percent compared to $10.1 billion in the first quarter of 2017 and an increase of 11 percent compared to $12.9 billion in the prior-year quarter. -- NIW for the month of June 2017 represented record monthly volume written on a flow basis for the company.

Of the $14.3 billion in new business written in the second quarter of 2017, 23 percent was written with single premiums. After consideration of the 35 percent ceded under the Single Premium Quota Share Reinsurance Transaction, net single premiums were 15 percent of new business written in the second quarter of 2017.

Refinances accounted for 9 percent of total NIW in the second quarter of 2017, compared to 16 percent in the first quarter of 2017, and 18 percent a year ago.

NIW continued to consist of loans with excellent risk characteristics.

Total primary mortgage insurance in force as of June 30, 2017, grew to $191.6 billion, an increase of 3 percent compared to $185.9 billion as of March 31, 2017, and an increase of 8 percent compared to $177.7 billion as of June 30, 2016. -- The composition of Radian’s mortgage insurance portfolio continues to improve, with 90 percent consisting of new business written after 2008, including those loans that successfully completed the Home Affordable Refinance Program (HARP).

Persistency, which is the percentage of mortgage insurance that remains in force after a twelve-month period, was 78.5 percent as of June 30, 2017, compared to 77.1 percent as of March 31, 2017, and 79.9 percent as of June 30, 2016.

Annualized persistency for the three-months ended June 30, 2017, was 82.8 percent, compared to 84.4 percent for the three-months ended March 31, 2017, and 78.0 percent for the three-months ended June 30, 2016.

Total net premiums earned were $229.1 million for the quarter ended June 30, 2017, compared to $221.8 million for the quarter ended March 31, 2017, and $229.1 million for the quarter ended June 30, 2016. -- Accelerated revenue recognition due to Single Premium Policy cancellations was $13.3 million in the second quarter, compared to $10.4 million in the first quarter of 2017, and $24.0 million in the second quarter of 2016. Net of reinsurance, accelerated revenue recognition due to Single Premium Policy cancellations was $7.4 million in the second quarter, compared to $5.9 million in the first quarter of 2017, and $14.8 million in the second quarter of 2016.

Ceded premiums of $14.1 million, $14.3 million and $19.9 million for the quarters ended June 30, 2017, March 31, 2017, and June 30, 2016, respectively, are net of accrued profit commission on reinsurance transactions of $6.7 million in the second quarter of 2017, compared to $5.9 million in the first quarter of 2017, and $7.9 million in the second quarter of 2016.

Direct mortgage insurance premium yield was 52 basis points in the second quarter, compared to 51 basis points in the first quarter of 2017, and 56 basis points in the second quarter of 2016. The increase in direct premium yield in the second quarter, compared to the first quarter of 2017, is primarily due to the $2.9 million increase in Single Premium Policy cancellations.

Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 49 basis points in the second quarter, compared to 48 basis points in the first quarter of 2017, and 52 basis points in the second quarter of 2016.

The mortgage insurance provision for losses was $17.7 million in the second quarter of 2017, compared to $47.2 million in the first quarter of 2017, and $50.1 million in the prior-year period. -- The provision for losses in the second quarter benefited from positive reserve development on prior-period defaults as well as a modest reduction in the company’s default to claim rate assumption for new notices of default.

The total number of primary delinquent loans decreased by 8 percent in the second quarter from the first quarter of 2017, and by 20 percent from the second quarter of 2016. The total number of primary new notices of default decreased by 7 percent in the second quarter from the first quarter of 2017, and by 10 percent from the second quarter of 2016.

The primary mortgage insurance delinquency rate decreased to 2.6 percent in the second quarter of 2017, compared to 2.8 percent in the first quarter of 2017, and 3.4 percent in the second quarter of 2016.

The loss ratio in the second quarter was 7.7 percent, compared to 21.3 percent in the first quarter of 2017 and 21.9 percent in the second quarter of 2016.

Mortgage insurance loss reserves were $651.6 million as of June 30, 2017, compared to $726.2 million as of March 31, 2017, and $848.4 million as of June 30, 2016.

Primary reserve per primary default (excluding IBNR and other reserves) was $23,185 as of June 30, 2017. This compares to primary reserve per primary default of $24,230 as of March 31, 2017, and $24,609 as of June 30, 2016.

Total mortgage insurance claims paid were $91.3 million in the second quarter, compared to $82.1 million in the first quarter of 2017, and $90.7 million in the second quarter of 2016. Excluding the $21.5 million impact of commutations and captive terminations, claims paid were $69.8 million in the second quarter of 2017. In addition, the company’s pending claim inventory declined 31 percent from the second quarter of 2016.

Mortgage and Real Estate Services

The Services segment provides analytics and outsourced services, including residential loan due diligence and underwriting, valuations, servicing surveillance, title and escrow, and consulting services for buyers and sellers of, and investors in, mortgage- and real estate-related loans and securities. These services and solutions are provided primarily through Clayton and its subsidiaries, including Green River Capital, Red Bell Real Estate and ValuAmerica.

Total revenues for the second quarter were $40.0 million, compared to $40.1 million for the first quarter of 2017, and $42.2 million for the second quarter of 2016.

The adjusted pretax operating income before corporate allocations for the quarter ended June 30, 2017, was $1.2 million, compared to a loss of $1.2 million for the quarter ended March 31, 2017, and income of $1.5 million for the quarter ended June 30, 2016.

Services adjusted earnings before interest, income taxes, depreciation and amortization (Services adjusted EBITDA) for the quarter ended June 30, 2017, was $2.0 million, compared to a loss of $0.3 million for the quarter ended March 31, 2017, and income of $2.2 million for the quarter ended June 30, 2016. Additional details regarding the non-GAAP measure Services adjusted EBITDA may be found in Exhibits F and G.

Consolidated Expenses

Other operating expenses were $68.8 million in the second quarter, compared to $68.4 million in the first quarter of 2017, and $63.2 million in the second quarter of last year. Details regarding notable variable items impacting other operating expenses may be found in Exhibit D.

CAPITAL AND LIQUIDITY UPDATE

Radian Group maintained approximately $360 million of available liquidity as of June 30, 2017.

During the second quarter, Radian completed negotiated purchases of aggregate principal amounts of approximately $21.6 million of the company’s outstanding 3.00% Convertible Senior Notes due 2017, for cash consideration of $31.6 million. As of June 30, 2017, Radian had only $0.6 million of convertible senior notes outstanding. Radian has provided notice that it will settle all remaining conversions in cash.

The company purchased a de minimis number of shares in the second quarter under its share repurchase program, which expired on June 30, 2017.

-- Radian Group has no material debt maturities prior to June 2019.

CONFERENCE CALL

Radian will discuss second quarter financial results in a conference call today, Tuesday, August 1, 2017, at 10:00 a.m. Eastern time. The conference call will be broadcast live over the Internet at http://www.radian.biz/page?name=Webcasts or at www.radian.biz. The call may also be accessed by dialing 800.230.1766 inside the U.S., or 612.288.0329 for international callers, using passcode 427090 or by referencing Radian.

A replay of the webcast will be available on the Radian website approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available approximately two and a half hours after the call ends for a period of two weeks, using the following dial-in numbers and passcode: 800.475.6701 inside the U.S., or 320.365.3844 for international callers, passcode 427090.

In addition to the information provided in the company’s earnings news release, other statistical and financial information, which is expected to be referred to during the conference call, will be available on Radian’s website under Investors >Quarterly Results, or by clicking on http://www.radian.biz/page?name=QuarterlyResults.

NON-GAAP FINANCIAL MEASURES

Radian believes that adjusted pretax operating income and adjusted diluted net operating income per share (non-GAAP measures) facilitate evaluation of the company’s fundamental financial performance and provide relevant and meaningful information to investors about the ongoing operating results of the company. On a consolidated basis, these measures are not recognized in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be considered in isolation or viewed as substitutes for GAAP measures of performance. The measures described below have been established in order to increase transparency for the purpose of evaluating the company’s operating trends and enabling more meaningful comparisons with Radian’s competitors.

Adjusted pretax operating income is defined as earnings excluding the impact of certain items that are not viewed as part of the operating performance of the company’s primary activities, or not expected to result in an economic impact equal to the amount reflected in pretax income (loss). Adjusted pretax operating income adjusts GAAP pretax income (loss) to remove the effects of: (i) net gains (losses) on investments and other financial instruments; (ii) loss on induced conversion and debt extinguishment; (iii) acquisition-related expenses; (iv) amortization or impairment of goodwill and other intangible assets; and (v) net impairment losses recognized in earnings. Adjusted diluted net operating income per share represents a diluted net income per share calculation using as its basis adjusted pretax operating income, net of taxes at the company’s statutory tax rate for the period.

The company has also presented a non-GAAP measure for tangible book value per share, which represents book value per share less the per-share impact of goodwill and other intangible assets, net. The company uses this measure to assess the quality and growth of its capital. Because tangible book value per share is a widely used financial measure which focuses on the underlying fundamentals of the company’s financial position and operating trends without the impact of goodwill and other intangible assets, the company believes that current and prospective investors may find it useful in their analysis.

In addition to the above non-GAAP measures for the consolidated company, the company also presents as supplemental information a non-GAAP measure for the Services segment, representing earnings before interest, income tax provision (benefit), depreciation and amortization (EBITDA). Services adjusted EBITDA is calculated by using the Services segment’s adjusted pretax operating income as described above, further adjusted to remove the impact of depreciation and corporate allocations for interest and operating expenses. Services adjusted EBITDA is presented to facilitate comparisons with other services companies, since it is a widely accepted measure of performance in the services industry.

See Exhibit F or Radian’s website for a description of these items, as well as Exhibit G for reconciliations to the most comparable consolidated GAAP measures.

ABOUT RADIAN

Radian Group Inc. (RDN), headquartered in Philadelphia, provides private mortgage insurance, risk management products and real estate services to financial institutions. Radian offers products and services through two business segments:

Mortgage Insurance, through its principal mortgage insurance subsidiary Radian Guaranty Inc. This private mortgage insurance helps protect lenders from default-related losses, facilitates the sale of low-downpayment mortgages in the secondary market and enables homebuyers to purchase homes more quickly with downpayments less than 20%.

Mortgage and Real Estate Services, through its principal services subsidiary Clayton, as well as Green River Capital, Red Bell Real Estate and ValuAmerica. These solutions include information and services that financial institutions, investors and government entities use to evaluate, acquire, securitize, service and monitor loans and asset-backed securities.

Additional information may be found at www.radian.biz.

FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS (Unaudited)

For historical trend information, refer to Radian’s quarterly financial statistics at http://www.radian.biz/page?name=FinancialReportsCorporate.

Exhibit A:
Condensed Consolidated Statements of Operations Trend Schedule
Exhibit B:
Net Income (Loss) Per Share Trend Schedule
Exhibit C:
Condensed Consolidated Balance Sheets
Exhibit D:
Net Premiums Earned - Insurance and Other Operating Expenses
Exhibit E:
Segment Information
Exhibit F:
Definition of Consolidated Non-GAAP Financial Measures
Exhibit G:
Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit H:
Mortgage Insurance Supplemental Information
New Insurance Written
Exhibit I:
Mortgage Insurance Supplemental Information
Primary Insurance in Force and Risk in Force
Exhibit J:
Mortgage Insurance Supplemental Information
Claims and Reserves
Exhibit K:
Mortgage Insurance Supplemental Information
Default Statistics
Exhibit L:
Mortgage Insurance Supplemental Information
QSR Transaction, Captives and Persistency
Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations Trend Schedule
Exhibit A
2017
2016
(In thousands, except per-share amounts)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Revenues:
Net premiums earned - insurance
$ 229,096
$
221,800
$
233,585
$
238,149
$
229,085
Services revenue
37,802
38,027
49,905
45,877
40,263
Net investment income
30,071
31,032
28,996
28,430
28,839
Net gains (losses) on investments and other financial instruments
5,331
(2,851 )
(38,773 )
7,711
30,527
Other income
612
746
736
716
1,454
Total revenues
302,912
288,754
274,449
320,883
330,168
Expenses:
Provision for losses
17,222
46,913
54,287
55,785
49,725
Policy acquisition costs
6,123
6,729
5,579
6,119
5,393
Cost of services
25,635
28,375
33,812
29,447
27,365
Other operating expenses
68,750
68,377
62,416
62,119
63,173
Interest expense
16,179
15,938
17,269
19,783
22,546
Loss on induced conversion and debt extinguishment
1,247
4,456
--
17,397
2,108
Impairment of goodwill
184,374
--
--
--
--
Amortization and impairment of other intangible assets
18,856
3,296
3,290
3,292
3,311
Total expenses
338,386
174,084
176,653
193,942
173,621
Pretax income (loss)
(35,474 )
114,670
97,796
126,941
156,547
Income tax provision (benefit)
(8,132 )
38,198
36,707
44,138
58,435
Net income (loss)
$ (27,342 )
$
76,472
$
61,089
$
82,803
$
98,112
Diluted net income (loss) per share
$
(0.13 )
$
0.34
$
0.27
$
0.37
$
0.44
Selected Mortgage Insurance Key Ratios
Loss ratio (1)
7.7 %
21.3 %
23.4 %
23.6 %
21.9 %
Expense ratio (1)
26.2 %
27.1 %
22.7 %
22.7 %
23.6 %
(1) Calculated on a GAAP basis using net premiums earned.
Radian Group Inc. and Subsidiaries
Net Income (Loss) Per Share Trend Schedule
Exhibit B
The calculation of basic and diluted net income (loss) per
share was as follows:
2017
2016
(In thousands, except per-share amounts)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Net income (loss):
Net income (loss)--basic
$
(27,342 )
$
76,472
$
61,089
$
82,803
$
98,112
Adjustment for dilutive Convertible Senior Notes due 2019, net of
--
(215 )
665
848
913
tax (1)
Net income (loss)--diluted
$
(27,342 )
$
76,257
$
61,754
$
83,651
$
99,025
Average common shares outstanding--basic
215,152
214,925
214,481
214,387
214,274
Dilutive effect of Convertible Senior Notes due 2017 (2)
--
701
421
178
12
Dilutive effect of Convertible Senior Notes due 2019
--
1,854
6,417
8,274
8,928
Dilutive effect of stock-based compensation arrangements (2)
--
4,017
3,457
3,129
2,989
Adjusted average common shares outstanding--diluted
215,152
221,497
224,776
225,968
226,203
Basic net income (loss) per share
$
(0.13 )
$
0.36
$
0.28
$
0.39
$
0.46
Diluted net income (loss) per share
$
(0.13 )
$
0.34
$
0.27
$
0.37
$
0.44
(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 three months
ended March 31, 2017 is a benefit related to our adjustment of
estimated accrued expense to actual amounts, as a result of the
January 2017 settlement of our obligations on the remaining
Convertible Senior Notes due 2019.
(2)
There were no dilutive shares for the three months ended June
30, 2017, as a result of our net loss for the period. The
following number of shares of our common stock equivalents issued
under our share-based compensation arrangements and our
convertible debt were not included in the calculation of diluted
net income (loss) per share because they were anti-dilutive:
2017
2016
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
(In thousands)
Shares of common stock equivalents
5,975
445
1,042
1,045
1,042
Shares of Convertible Senior Notes due 2017
509
--
--
--
--
Radian Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Exhibit C
June 30,
March 31,
December 31,
September 30,
June 30,
(In thousands, except per-share data)
2017
2017
2016
2016
2016
Assets:
Investments
$ 4,583,842
$ 4,437,716
$
4,462,430
$
4,565,748
$
4,636,914
Cash
56,918
73,701
52,149
46,356
55,062
Restricted cash
25,486
12,689
9,665
10,312
9,298
Accounts and notes receivable
78,540
73,794
77,631
94,692
77,170
Deferred income taxes, net
389,759
369,209
411,798
401,442
444,513
Goodwill and other intangible assets, net
69,857
273,068
276,228
279,400
282,703
Prepaid reinsurance premium
235,349
230,148
229,438
229,754
229,231
Other assets
377,355
357,435
343,835
422,123
332,372
Total assets
$ 5,817,106
$ 5,827,760
$
5,863,174
$
6,049,827
$
6,067,263
Liabilities and stockholders’ equity:
Unearned premiums
$
702,210
$
684,797
$
681,222
$
680,973
$
677,599
Reserve for losses and loss adjustment expense
651,591
726,169
760,269
821,934
848,379
Long-term debt
989,010
1,008,777
1,069,537
1,067,666
1,278,051
Reinsurance funds withheld
180,991
167,427
158,001
177,147
163,360
Other liabilities
379,144
319,282
321,859
413,401
294,507
Total liabilities
2,902,946
2,906,452
2,990,888
3,161,121
3,261,896
Equity component of currently redeemable convertible senior notes
16
883
--
--
--
Common stock
233
233
232
232
232
Treasury stock
(893,531 )
(893,372 )
(893,332 )
(893,197 )
(893,176 )
Additional paid-in capital
2,743,872
2,743,594
2,779,891
2,778,860
2,781,136
Retained earnings
1,045,453
1,073,333
997,890
937,338
855,070
Accumulated other comprehensive income (loss)
18,117
(3,363 )
(12,395 )
65,473
62,105
Total stockholders’ equity
2,914,144
2,920,425
2,872,286
2,888,706
2,805,367
Total liabilities and stockholders’ equity
$ 5,817,106
$ 5,827,760
$
5,863,174
$
6,049,827
$
6,067,263
Shares outstanding
215,175
215,091
214,521
214,405
214,284
Book value per share
$
13.54
$
13.58
$
13.39
$
13.47
$
13.09
Tangible book value per share (See Exhibit G)
$
13.22
$
12.31
$
12.10
$
12.17
$
11.77
Statutory Capital Ratios
Risk to capital ratio-Radian Guaranty only
14.3:1
(1)
14.3:1
13.5:1
13.7:1
14.0:1
Risk to capital ratio-Mortgage Insurance combined
13.4:1
(1)
13.4:1
13.6:1
13.9:1
14.2:1
(1) Preliminary.
Radian Group Inc. and Subsidiaries
Net Premiums Earned - Insurance and Other Operating Expenses
Exhibit D
2017
2016
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Premiums earned - insurance:
Direct
$ 243,229
$ 236,062
$
251,751
$
258,074
$
248,938
Assumed
7
7
8
9
9
Ceded
(14,140 )
(14,269 )
(18,174 )
(19,934 )
(19,862 )
Net premiums earned - insurance
$ 229,096
$ 221,800
$
233,585
$
238,149
$
229,085
Notable variable items: (1)
Single Premium Policy cancellations, direct
$
13,346
$
10,415
$
26,707
$
30,631
$
24,019
Single Premium Policy cancellations, ceded
(5,898 )
(4,536 )
(11,005 )
(12,183 )
(9,178 )
Profit commission - reinsurance (2)
6,682
5,888
8,458
8,922
7,891
Total
$
14,130
$
11,767
$
24,160
$
27,370
$
22,732
Other operating expenses
$
68,750
$
68,377
$
62,416
$
62,119
$
63,173
Notable variable items: (3)
Technology upgrade project (4)
$
5,121
$
3,512
$
3,648
$
2,440
$
2,443
Severance costs
382
961
888
1,137
277
Retirement and consulting agreement (5)
867
3,622
--
--
--
Incentive compensation (6) (7)
9,641
7,447
9,072
12,652
14,183
Ceding commissions (8)
(4,064 )
(3,864 )
(5,105 )
(5,460 )
(5,006 )
Total
$
11,947
$
11,678
$
8,503
$
10,769
$
11,897
(1)
Affecting net premiums earned - insurance. These amounts are
included in net premiums earned - insurance.
(2)
The amounts represent the profit commission on the Single
Premium QSR Transaction.
(3)
Affecting other operating expenses. These amounts are included
in other operating expenses.
(4)
Represents the expense impact of certain costs incurred in our
initiative to significantly upgrade our technology systems.
(5)
The amount represents expenses associated with retirement and
consulting agreements entered into in February 2017 with our
former CEO. Additional expenses are expected to be recognized
throughout the year. A portion of both the current and future
expenses are subject to change, based on the Company’s and the
former CEO’s future performance.
(6)
The expense relates to short- and long-term incentive programs.
(7)
Incentive compensation expense is shown net of deferred policy
acquisition costs.
(8)
Ceding commissions are shown net of deferred policy acquisition
costs.
Radian Group Inc. and Subsidiaries
Segment Information
Exhibit E (page 1 of 2)
Summarized financial information concerning our operating segments
as of and for the periods indicated is as follows. For a
definition of adjusted pretax operating income and Services
adjusted EBITDA, along with reconciliations to consolidated GAAP
measures, see Exhibits F and G.
Mortgage Insurance
2017
2016
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Net premiums written - insurance
$ 241,307
$ 224,665
$ 234,172
$ 240,999
$ 232,353
(Increase) decrease in unearned premiums
(12,211 )
(2,865 )
(587 )
(2,850 )
(3,268 )
Net premiums earned - insurance
229,096
221,800
233,585
238,149
229,085
Net investment income
30,071
31,032
28,996
28,430
28,839
Other income
612
746
736
716
1,454
Total
259,779
253,578
263,317
267,295
259,378
Provision for losses
17,714
47,232
54,675
56,151
50,074
Policy acquisition costs
6,123
6,729
5,579
6,119
5,393
Other operating expenses before corporate allocations
37,939
39,289
37,773
35,940
34,365
Total (1)
61,776
93,250
98,027
98,210
89,832
Adjusted pretax operating income before corporate allocations
198,003
160,328
165,290
169,085
169,546
Allocation of corporate operating expenses
15,894
14,186
9,652
11,911
14,286
Allocation of interest expense
11,748
11,509
12,843
15,360
18,124
Adjusted pretax operating income
$ 170,361
$ 134,633
$ 142,795
$ 141,814
$ 137,136
Services
2017
2016
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Services revenue (1)
$
39,975
$
40,089
$
52,558
$
48,033
$
42,210
Cost of services
25,962
28,690
34,130
29,655
27,730
Other operating expenses before corporate allocations
12,803
12,604
14,842
13,575
13,030
Total
38,765
41,294
48,972
43,230
40,760
Adjusted pretax operating income (loss) before corporate
1,210
(1,205 )
3,586
4,803
1,450
allocations (2)
Allocation of corporate operating expenses
3,404
3,718
1,738
2,265
2,779
Allocation of interest expense
4,431
4,429
4,426
4,423
4,422
Adjusted pretax operating income (loss)
$
(6,625 )
$
(9,352 )
$
(2,578 )
$ (1,885)
$
(5,751 )
(1) Inter-segment information:
2017
2016
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Inter-segment expense included in Mortgage Insurance segment
$
2,173
$
2,062
$
2,653
$
2,156
$
1,947
Inter-segment revenue included in Services segment
2,173
2,062
2,653
2,156
1,947
Radian Group Inc. and Subsidiaries
Segment Information
Exhibit E (page 2 of 2)
(2) Supplemental information for Services adjusted EBITDA (see
definition in Exhibit F):
2017
2016
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Adjusted pretax operating income (loss) before corporate
$ 1,210
$ (1,205 )
$ 3,586
$ 4,803
$
1,450
allocations
Depreciation and amortization
835
858
829
884
749
Services adjusted EBITDA
$ 2,045
$
(347 )
$ 4,415
$ 5,687
$
2,199
Selected balance sheet information for our segments, as of the
periods indicated, is as follows:
At June 30, 2017
(In thousands)
Mortgage
Services (1)
Total
Insurance
Total assets
$ 5,605,607
$ 211,499
$
5,817,106
At December 31, 2016
(In thousands)
Mortgage
Services
Total
Insurance
Total assets
$ 5,506,338
$ 356,836
$
5,863,174
(1)
The decrease in total assets for the Services segment at June
30, 2017, as compared to total assets at December 31, 2016, is
primarily due to the impairment of goodwill and other intangible
assets.
Radian Group Inc. and Subsidiaries
Definition of Consolidated Non-GAAP Financial Measures
Exhibit F (page 1 of 2)
Use of Non-GAAP Financial Measures

In addition to the traditional GAAP financial measures, we have presented "adjusted pretax operating income" and "adjusted diluted net operating income per share," non-GAAP financial measures for the consolidated company, among our key performance indicators to evaluate our fundamental financial performance. These non-GAAP financial measures align with the way the Company’s business performance is evaluated by both management and the board of directors. These measures have been established in order to increase transparency for the purposes of evaluating our operating trends and enabling more meaningful comparisons with our peers. Although on a consolidated basis "adjusted pretax operating income" and "adjusted diluted net operating income per share" are non-GAAP financial measures, we believe these measures aid in understanding the underlying performance of our operations. Our senior management, including our Chief Executive Officer (Radian’s chief operating decision maker), uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of the Company’s business segments and to allocate resources to the segments.

Adjusted pretax operating income is defined as GAAP pretax income (loss) excluding the effects of: (i) net gains (losses) on investments and other financial instruments; (ii) loss on induced conversion and debt extinguishment; (iii) acquisition-related expenses; (iv) amortization or impairment of goodwill and other intangible assets; and (v) net impairment losses recognized in earnings. Adjusted diluted net operating income per share is calculated by dividing (i) adjusted pretax operating income attributable to common shareholders, net of taxes computed using the company’s statutory tax rate, by (ii) the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Interest expense on convertible debt, share dilution from convertible debt and the impact of share-based compensation arrangements have been reflected in the per share calculations consistent with the accounting standard regarding earnings per share, whenever the impact is dilutive.

Although adjusted pretax operating income excludes certain items that have occurred in the past and are expected to occur in the future, the excluded items represent those that are: (i) not viewed as part of the operating performance of our primary activities or (ii) not expected to result in an economic impact equal to the amount reflected in pretax income (loss). These adjustments, along with the reasons for their treatment, are described below.

(1)
Net gains (losses) on investments and other financial
instruments. The recognition of realized investment gains or
losses can vary significantly across periods as the activity is
highly discretionary based on the timing of individual securities
sales due to such factors as market opportunities, our tax and
capital profile and overall market cycles. Unrealized investment
gains and losses arise primarily from changes in the market value
of our investments that are classified as trading securities.
These valuation adjustments may not necessarily result in realized
economic gains or losses.
Trends in the profitability of our fundamental operating activities
can be more clearly identified without the fluctuations of these
realized and unrealized gains or losses. We do not view them to be
indicative of our fundamental operating activities. Therefore, these
items are excluded from our calculation of adjusted pretax operating
income (loss).
(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).
Radian Group Inc. and Subsidiaries
Definition of Consolidated Non-GAAP Financial Measures
Exhibit F (page 2 of 2)
(3)
Acquisition-related expenses. Acquisition-related expenses
represent the costs incurred to effect an acquisition of a
business (i.e., a business combination). Because we pursue
acquisitions on a strategic and selective basis and not in the
ordinary course of our business, we do not view
acquisition-related expenses as a consequence of a primary
business activity. Therefore, we do not consider these expenses to
be part of our operating performance and they are excluded from
our calculation of adjusted pretax operating income (loss).
(4)
Amortization or impairment of goodwill and other intangible
assets. Amortization of intangible assets represents the
periodic expense required to amortize the cost of intangible
assets over their estimated useful lives. Intangible assets with
an indefinite useful life are also periodically reviewed for
potential impairment, and impairment adjustments are made whenever
appropriate. These charges are not viewed as part of the operating
performance of our primary activities and therefore are excluded
from our calculation of adjusted pretax operating income (loss).
(5)
Net impairment losses recognized in earnings. The
recognition of net impairment losses on investments can vary
significantly in both size and timing, depending on market credit
cycles. We do not view these impairment 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).

We have also presented a non-GAAP measure for tangible book value per share, which represents book value per share less the per-share impact of goodwill and other intangible assets, net. We use this measure to assess the quality and growth of our capital. Because tangible book value per share is a widely-used financial measure which focuses on the underlying fundamentals of our financial position and operating trends without the impact of goodwill and other intangible assets, we believe that current and prospective investors may find it useful in their analysis of the Company.

In addition to the above non-GAAP measures for the consolidated company, we also have presented as supplemental information a non-GAAP measure for our Services segment, representing a measure of earnings before interest, income tax provision (benefit), depreciation and amortization ("EBITDA"). We calculate Services adjusted EBITDA by using adjusted pretax operating income as described above, further adjusted to remove the impact of depreciation and corporate allocations for interest and operating expenses. We have presented Services adjusted EBITDA to facilitate comparisons with other services companies, since it is a widely accepted measure of performance in the services industry.

See Exhibit G for the reconciliation of the most comparable GAAP measures, consolidated pretax income (loss), diluted net income (loss) per share and book value per share, to our non-GAAP financial measures for the consolidated company, adjusted pretax operating income, adjusted diluted net operating income per share and tangible book value per share, respectively. Exhibit G also contains the reconciliation of the most comparable GAAP measure, net income (loss), to Services adjusted EBITDA.

Total adjusted pretax operating income, adjusted diluted net operating income per share, tangible book value per share and Services adjusted EBITDA should not be considered in isolation or viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share, book value per share or net income (loss). Our definitions of adjusted pretax operating income, adjusted diluted net operating income per share, tangible book value per share or Services adjusted EBITDA may not be comparable to similarly-named measures reported by other companies.

Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit G (page 1 of 2)
Reconciliation of Consolidated Pretax Income (Loss) to Adjusted
Pretax Operating Income
2017
2016
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Consolidated pretax income (loss)
$
(35,474 )
$
114,670
$
97,796
$
126,941
$
156,547
Less income (expense) items:
Net gains (losses) on investments and other financial instruments
5,331
(2,851 )
(38,773 )
7,711
30,527
Loss on induced conversion and debt extinguishment
(1,247 )
(4,456 )
--
(17,397 )
(2,108 )
Acquisition-related expenses (1)
(64 )
(8 )
(358 )
(10 )
54
Impairment of goodwill
(184,374 )
--
--
--
--
Amortization and impairment of other intangible assets
(18,856 )
(3,296 )
(3,290 )
(3,292 )
(3,311 )
Total adjusted pretax operating income (2)
$
163,736
$
125,281
$
140,217
$
139,929
$
131,385
(1) Please see Exhibit F for the definition of this line item.
(2) Total adjusted pretax operating income consists of adjusted
pretax operating income (loss) for each segment as follows:
2017
2016
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Adjusted pretax operating income (loss):
Mortgage Insurance
$
170,361
$
134,633
$
142,795
$
141,814
$
137,136
Services
(6,625 )
(9,352 )
(2,578 )
(1,885 )
(5,751 )
Total adjusted pretax operating income
$
163,736
$
125,281
$
140,217
$
139,929
$
131,385
Reconciliation of Diluted Net Income (Loss) Per Share to
Adjusted Diluted Net Operating Income Per Share
2017
2016
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Diluted net income (loss) per share
$
(0.13 )
$
0.34
$
0.27
$
0.37
$
0.44
Less per-share impact of debt items:
Loss on induced conversion and debt extinguishment
(0.01 )
(0.02 )
--
(0.08 )
(0.01 )
Income tax provision (benefit) (1)
--
(0.01 )
--
(0.03 )
--
Per-share impact of debt items
(0.01 )
(0.01 )
--
(0.05 )
(0.01 )
Less per-share impact of other income (expense) items:
Net gains (losses) on investments and other financial instruments
0.02
(0.01 )
(0.17 )
0.03
0.13
Acquisition-related expenses
--
--
--
--
--
Impairment of goodwill
(0.86 )
--
--
--
--
Amortization and impairment of other intangible assets
(0.09 )
(0.01 )
(0.02 )
(0.01 )
(0.01 )
Income tax provision (benefit) on other income (expense) items (2)
(0.32 )
(0.01 )
(0.07 )
0.01
0.04
Difference between statutory and effective tax rate
--
(0.01 )
(0.02 )
--
(0.01 )
Per-share impact of other income (expense) items
(0.61 )
(0.02 )
(0.14 )
0.01
0.07
Add per-share impact of share dilution
(0.01 )
--
--
--
--
Adjusted diluted net operating income per share (2)
$
0.48
$
0.37
$
0.41
$
0.41
$
0.38
(1)
A portion of the loss on induced conversion and debt
extinguishment is non-deductible for tax purposes. The income tax
benefit is based on the tax deductible loss using the company’s
federal statutory tax rate of 35%.
Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit G (page 2 of 2)
(2)
Calculated using the company’s federal statutory tax rate of
35%. Any permanent tax adjustments and state income taxes on these
items have been deemed immaterial and are not included.
Reconciliation of Book Value Per Share to Tangible Book Value
Per Share (1)
2017
2016
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Book value per share
$
13.54
$
13.58
$
13.39
$
13.47
$
13.09
Less: Goodwill and other intangible assets, net per share
0.32
1.27
1.29
1.30
1.32
Tangible book value per share
$
13.22
$
12.31
$
12.10
$
12.17
$
11.77
(1) All book value per share items are calculated based on the
number of shares outstanding at the end of each respective period.
Reconciliation of Net Income (Loss) to Services Adjusted EBITDA
2017
2016
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Net income (loss)
$
(27,342 )
$
76,472
$
61,089
$
82,803
$
98,112
Less income (expense) items:
Net gains (losses) on investments and other financial instruments
5,331
(2,851 )
(38,773 )
7,711
30,527
Loss on induced conversion and debt extinguishment
(1,247 )
(4,456 )
--
(17,397 )
(2,108 )
Acquisition-related expenses
(64 )
(8 )
(358 )
(10 )
54
Impairment of goodwill
(184,374 )
--
--
--
--
Amortization and impairment of other intangible assets
(18,856 )
(3,296 )
(3,290 )
(3,292 )
(3,311 )
Income tax provision (benefit)
(8,132 )
38,198
36,707
44,138
58,435
Mortgage Insurance adjusted pretax operating income
170,361
134,633
142,795
141,814
137,136
Services adjusted pretax operating income (loss)
(6,625 )
(9,352 )
(2,578 )
(1,885 )
(5,751 )
Less income (expense) items:
Allocation of corporate operating expenses to Services
(3,404 )
(3,718 )
(1,738 )
(2,265 )
(2,779 )
Allocation of corporate interest expense to Services
(4,431 )
(4,429 )
(4,426 )
(4,423 )
(4,422 )
Services depreciation and amortization
(835 )
(858 )
(829 )
(884 )
(749 )
Services adjusted EBITDA
$
2,045
$
(347 )
$
4,415
$
5,687
$
2,199

On a consolidated basis, "adjusted pretax operating income," "adjusted diluted net operating income per share" and "tangible book value per share" are measures not determined in accordance with GAAP. "Services adjusted EBITDA" is also a non-GAAP measure. These measures should not be considered in isolation or viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share, book value per share or net income (loss). Our definitions of adjusted pretax operating income, adjusted diluted net operating income per share, tangible book value per share or Services adjusted EBITDA may not be comparable to similarly-named measures reported by other companies. See Exhibit F for additional information on our consolidated non-GAAP financial measures.

Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information - New Insurance
Written
Exhibit H
2017
2016
($ in millions)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Total primary new insurance written
$ 14,342
$ 10,055
$ 13,882
$ 15,656
$ 12,921
Percentage of primary new insurance
written by FICO score
>=740
61.6 %
61.3 %
64.2 %
64.2 %
60.9 %
32.6
32.7
31.4
30.4
32.2
680-739
5.8
6.0
5.2
5.4
6.9
620-679
Total Primary
100.0 %
100.0 %
100.8 %
100.0 %
100.0 %
Percentage of primary new insurance
written
Direct monthly and other premiums
77 %
75 %
73 %
73 %
74 %
Direct single premiums
23 %
25 %
27 %
27 %
26 %
Net single premiums (1)
15 %
16 %
17 %
17 %
17 %
Refinances
9 %
16 %
27 %
22 %
18 %
LTV
95.01% and above
12.8 %
9.2 %
7.4 %
6.0 %
4.8 %
90.01% to 95.00%
47.3 %
47.3 %
43.6 %
47.1 %
50.2 %
85.01% to 90.00%
28.8 %
30.3 %
32.3 %
31.4 %
31.8 %
85.00% and below
11.1 %
13.2 %
16.7 %
15.5 %
13.2 %
(1)
Represents the percentage of direct single premiums written,
after consideration of the 35% single premium NIW ceded under the
Single Premium QSR Transaction.
Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information - Primary Insurance
in Force and Risk in Force
Exhibit I
June 30,
March 31,
December 31,
September 30,
June 30,
($ in millions)
2017
2017
2016
2016
2016
Primary insurance in force (1)
Prime
$ 183,886
$ 177,702
$ 174,927
$ 172,178
$ 168,259
Alt-A
4,602
4,842
5,064
5,363
5,627
A minus and below
3,149
3,315
3,459
3,624
3,786
Total Primary
$ 191,637
$ 185,859
$ 183,450
$ 181,165
$ 177,672
Primary risk in force
(1) (2)
Prime
$
47,075
$
45,442
$
44,708
$
44,075
$
43,076
Alt-A
1,062
1,118
1,168
1,241
1,302
A minus and below
792
834
865
906
946
Total Primary
$
48,929
$
47,394
$
46,741
$
46,222
$
45,324
Percentage of primary risk in force
Direct monthly and other premiums
69 %
69 %
69 %
69 %
69 %
Direct single premiums
31 %
31 %
31 %
31 %
31 %
Net single premiums (3)
25 %
25 %
25 %
25 %
25 %
Percentage of primary risk in force by
FICO score
>=740</b>
58.3 %
57.9 %
57.6 %
57.4 %
57.1 %
680-739
31.1
31.1
31.0
30.9
30.8
620-679
9.3
9.6
9.9
10.2
10.5
<=619
1.3
1.4
1.5
1.5
1.6
Total Primary
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
Percentage of primary risk in force by LTV
95.01% and above
8.0 %
7.6 %
7.4 %
7.2 %
7.1 %
90.01% to 95.00%
52.9
52.6
52.3
52.1
51.6
85.01% to 90.00%
31.7
32.2
32.5
32.8
33.3
85.00% and below
7.4
7.6
7.8
7.9
8.0
Total
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
Percentage of primary risk in force by
policy year
2005 and prior
4.1 %
4.4 %
4.8 %
5.1 %
5.5 %
2.5
2.8
2.9
3.1
3.4
2006
6.2
6.7
7.0
7.4
7.9
2007
4.2
4.6
4.8
5.2
5.6
2008
0.8
0.9
1.0
1.2
1.3
2009
0.7
0.8
0.9
1.0
1.2
2010
1.7
1.8
2.0
2.2
2.5
2011
6.7
7.4
8.0
8.8
9.7
2012
10.7
11.8
12.6
13.9
15.5
2013
10.2
11.2
12.0
13.4
14.9
2014
16.1
17.3
18.1
19.4
21.0
2015
23.7
25.0
25.9
19.3
11.5
2016
12.4
5.3
--
--
--
2017
Total
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
Primary risk in force on defaulted loans (4)
$
1,124
$
1,224
$
1,363
$
1,381
$
1,398
(1)
Includes amounts ceded under our reinsurance agreements, as
well as amounts related to the Freddie Mac Agreement.
(2)
Does not include pool risk in force or other risk in force,
which combined represent less than 3.0% of our total risk in force
for all periods presented.
(3)
Represents the percentage of Single Premium RIF, after giving
effect to all reinsurance ceded.
(4)
Excludes risk related to loans subject to the Freddie Mac
Agreement.
Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information - Claims and Reserves
Exhibit J
2017
2016
($ in thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Net claims paid: (1)
Prime
$
45,562
$
52,044
$
70,151
$
51,964
$
56,036
Alt-A
13,700
16,165
27,558
16,334
18,349
A minus and below
10,586
9,460
13,760
9,615
12,315
Total primary claims paid
69,848
77,669
111,469
77,913
86,700
Pool
1,901
4,180
4,788
4,492
5,451
Second-lien and other
(1,937 )
78
(264 )
(234 )
(231 )
Subtotal
69,812
81,927
115,993
82,171
91,920
Impact of captive terminations
645
--
492
(171 )
(2,619 )
Impact of commutations
20,838
161
--
705
1,400
Total net claims paid
$
91,295
$
82,088
$ 116,485
$
82,705
$
90,701
Average net claims paid: (2)
Prime
$
48.2
$
50.5
$
45.5
$
48.3
$
48.6
Alt-A
61.7
67.1
65.5
65.3
63.5
A minus and below
41.7
39.6
37.7
41.3
39.9
Total average net primary claims paid
49.1
51.4
47.9
50.0
49.5
Pool
47.5
49.2
45.6
51.0
58.0
Total average net claims paid
$
47.3
$
50.9
$
47.6
$
49.7
$
49.6
Average direct primary claims paid (2) (3)
$
49.4
$
51.6
$
48.2
$
50.3
$
49.9
Average total direct claims paid (2) (3)
$
47.6
$
51.1
$
47.9
$
50.0
$
50.0
June 30,
March 31,
December 31,
September 30,
June 30,
($ in thousands, except primary reserve
2017
2017
2016
2016
2016
per primary default amounts)
Reserve for losses by category
Prime
$ 318,169
$ 362,804
$ 379,845
$ 409,438
$ 420,281
Alt-A
124,477
140,543
148,006
166,349
173,284
A minus and below
85,283
96,373
101,653
106,678
112,001
IBNR and other
69,620
70,651
71,107
73,057
74,639
LAE
15,492
17,551
18,630
21,255
22,389
Reinsurance recoverable (4)
7,341
7,680
6,816
6,448
6,044
Total primary reserves
620,382
695,602
726,057
783,225
808,638
Pool insurance
29,099
28,453
31,853
36,065
36,982
IBNR and other
658
603
673
823
897
LAE
843
822
932
1,112
1,163
Reinsurance recoverable (4)
30
28
35
36
33
Total pool reserves
30,630
29,906
33,493
38,036
39,075
Total 1st lien reserves
651,012
725,508
759,550
821,261
847,713
Second-lien and other
579
661
719
673
666
Total reserves
$ 651,591
$ 726,169
$ 760,269
$ 821,934
$ 848,379
1st lien reserve per default
Primary reserve per primary default excluding IBNR and other
$
23,185
$
24,230
$
22,503
$
24,049
$
24,609
(1)
Net of reinsurance recoveries.
(2)
Calculated without giving effect to the impact of the
termination of captive transactions and commutations.
(3)
Before reinsurance recoveries.
(4)
Represents ceded losses on captive transactions and quota share
reinsurance transactions.
Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information - Default Statistics
Exhibit K
June 30,
March 31,
December 31,
September 30,
June 30,
2017
2017
2016
2016
2016
Default Statistics
Primary Insurance:
Prime
Number of insured loans
879,926
858,248
849,227
840,534
826,511
Number of loans in default
15,664
16,981
19,101
19,100
19,025
Percentage of loans in default
1.78 %
1.98 %
2.25 %
2.27 %
2.30 %
Alt-A
Number of insured loans
24,089
25,425
26,536
28,080
29,445
Number of loans in default
3,366
3,812
4,193
4,545
4,820
Percentage of loans in default
13.97 %
14.99 %
15.80 %
16.19 %
16.37 %
A minus and below
Number of insured loans
24,864
26,043
27,115
28,313
29,450
Number of loans in default
4,725
5,000
5,811
5,885
5,982
Percentage of loans in default
19.00 %
19.20 %
21.43 %
20.79 %
20.31 %
Total Primary
Number of insured loans
928,879
909,716
902,878
896,927
885,406
Number of loans in default (1)
23,755
25,793
29,105
29,530
29,827
Percentage of loans in default
2.56 %
2.84 %
3.22 %
3.29 %
3.37 %
(1)
Excludes the following number of loans subject to the Freddie
Mac Agreement that are in default as we no longer have claims
exposure on these loans:
June 30,
March 31,
December 31,
September 30,
June 30,
2017
2017
2016
2016
2016
Number of loans in default
1,305
1,395
1,639
1,888
2,180
Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information - QSR Transactions,
Captives and Persistency
Exhibit L
2017
2016
($ in thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Quota Share Reinsurance ("QSR")
Transactions
QSR ceded premiums written (1)
$
5,059
$
5,457
$
6,049
$
6,730
$
7,356
% of premiums written
1.9 %
2.3 %
2.4 %
2.6 %
2.9 %
QSR ceded premiums earned (1)
$
7,404
$
7,834
$
9,421
$
10,597
$
11,172
% of premiums earned
3.1 %
3.3 %
3.8 %
4.1 %
4.5 %
Ceding commissions written
$
1,446
$
1,559
$
1,728
$
1,922
$
2,099
Ceding commissions earned (2)
$
3,379
$
3,894
$
4,374
$
3,974
$
3,779
Profit commission
$ --
$ --
$ --
$ --
$ --
RIF included in QSR Transactions (3)
$
1,393,038
$
1,488,972
$
1,578,300
$
1,718,031
$
1,872,017
Single Premium QSR Transaction
QSR ceded premiums written (1)
$
13,856
$
8,960
$
11,121
$
13,004
$
11,488
% of premiums written
5.3 %
3.7 %
4.4 %
5.0 %
4.6 %
QSR ceded premiums earned (1)
$
6,311
$
5,859
$
8,060
$
8,608
$
7,146
% of premiums earned
2.6 %
2.5 %
3.2 %
3.3 %
2.9 %
Ceding commissions written
$
5,134
$
3,712
$
4,895
$
5,482
$
4,844
Ceding commissions earned (2)
$
3,248
$
2,937
$
4,130
$
4,382
$
3,759
Profit commission
$
6,682
$
5,888
$
8,458
$
8,922
$
7,891
RIF included in Single Premium QSR Transaction (3)
$
4,103,410
$
3,904,402
$
3,761,648
$
3,621,993
$
3,461,464
Total RIF included in QSR Transactions and Single Premium QSR
$
5,496,448
$
5,393,374
$
5,339,948
$
5,340,024
$
5,333,481
Transaction
1st Lien Captives
Premiums earned ceded to captives
$
242
$
389
$
503
$
537
$
1,346
% of total premiums earned
0.1 %
0.2 %
0.2 %
0.2 %
0.5 %
Persistency Rate (twelve months ended)
78.5 %
77.1 %
76.7 %
78.4 %
79.9 %
Persistency Rate (quarterly, annualized) (4)
82.8 %
84.4 %
76.8 %
75.3 %
78.0 %
(1)
Net of profit commission.
(2)
Includes amounts reported in policy acquisition costs and other
operating expenses.
(3)
Included in primary RIF.
(4)
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.

FORWARD-LOOKING STATEMENTS

All statements in this press release that address events, developments or results that we expect or anticipate may occur in the future are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Exchange Act and the U.S. Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as "anticipate," "may," "will," "could," "should," "would," "expect," "intend," "plan," "goal," "contemplate," "believe," "estimate," "predict," "project," "potential," "continue," "seek," "strategy," "future," "likely" or the negative or other variations on these words and other similar expressions. These statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management’s current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking statement. These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment where new risks emerge from time to time and it is not possible for us to predict all risks that may affect us. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. These risks and uncertainties include, without limitation:

changes in general economic and political conditions, including unemployment rates, interest rates and changes in housing and mortgage credit markets, that impact the size of the insurable market and the credit performance of our insured portfolio;

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 Private Mortgage Insurance Eligibility Requirements ("PMIERs") and other applicable requirements imposed by the Federal Housing Finance Agency and by the Government-Sponsored Enterprises ("GSEs") to insure loans purchased by the GSEs;

our ability to successfully execute and implement our capital plans and to maintain sufficient holding company liquidity to meet our short- and long-term liquidity needs;

our ability to successfully execute and implement our business plans and strategies, including plans and strategies to reposition our Services business as well as plans and strategies that require GSE and/or regulatory approvals;

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, including the GSEs’ interpretation and application of the PMIERs to our mortgage insurance business;

changes in the current housing finance system in the U.S., including the role of the Federal Housing Administration ("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 policies;

competition in our mortgage insurance business, including price competition and competition from the FHA, U.S. Department of Veteran Affairs and other forms of credit enhancement;

the effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") on the financial services industry in general, and on our businesses in particular;

the adoption of new laws and regulations, or changes in existing laws and regulations (including to the Dodd-Frank Act), 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 payments or adjustments associated with federal or other tax examinations, including deficiencies assessed by the IRS resulting from its examination of our 2000 through 2007 tax years, which we are currently contesting;

the possibility that we may fail to estimate accurately the likelihood, magnitude and timing of losses in connection with establishing loss reserves for our mortgage insurance business;

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 intangible assets, and uncertainties regarding our ability to execute our restructuring plans within expected costs;

changes in accounting principles generally accepted in the U.S. ("GAAP") or statutory accounting principles and practices ("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.

For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016, and subsequent reports filed from time to time with the U.S. Securities and Exchange Commission. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which we issued this press release. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements to reflect new information or future events or for any other reason.

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Radian Group Inc.
Emily Riley, 215-231-1035
emily.riley@radian.biz