RDN
$15.34
Radian Group
$.18
1.19%
Earnings Details
3rd Quarter September 2016
Thursday, October 27, 2016 6:30:15 AM
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Summary

Radian Group (RDN) Recent Earnings

Radian Group (RDN) reported 3rd Quarter September 2016 earnings of $0.41 per share on revenue of $320.9 million. The consensus earnings estimate was $0.39 per share on revenue of $284.8 million. Revenue grew 7.9% on a year-over-year basis.

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
$0.41
Earnings Whisper
-
Consensus Estimate
$0.39
Reported Revenue
$320.9 Mil
Revenue Estimate
$284.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Radian Announces Third Quarter 2016 Financial Results

Adjusted diluted net operating income per share of $0.41-

Writes $15.7 billion in new MI business; sets company record for highest quarterly volume of flow MI -

-- Book value per share increases 14% year-over-year to $13.47 -

Radian Group Inc. (RDN) today reported net income for the quarter ended September 30, 2016, of $82.8 million, or $0.37 per diluted share. This compares to net income for the quarter ended September 30, 2015, of $70.1 million, or $0.29 per diluted share. Pretax income for the quarter ended September 30, 2016, was $126.9 million, compared to $115.7 million for the quarter ended September 30, 2015.

Key Financial Highlights (dollars in millions, except
per share data)
Quarter Ended
Quarter Ended
Percent
September 30,
September 30,
Change
2016
2015
Net income
$82.8
$70.1
18%
Diluted net income per share
$0.37
$0.29
28%
Pretax income
$126.9
$115.7
10%
Adjusted pretax operating income
$139.9
$115.6
21%
Adjusted diluted net operating income per share *
$0.41
$0.31
32%
Net premiums earned - insurance
$238.1
$227.4
5%
New Mortgage Insurance Written (NIW)
$15,656
$11,176
40%
Book value per share
$13.47
$11.77
14%

* 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 September 30, 2016, was $139.9 million, compared to $115.6 million for the quarter ended September 30, 2015. Adjusted diluted net operating income per share for the quarter ended September 30, 2016, was $0.41, compared to $0.31 for the quarter ended September 30, 2015. See "Non-GAAP Financial Measures" below.

Book value per share at September 30, 2016 was $13.47, an increase of 3 percent from $13.09 at June 30, 2016, and an increase of 14 percent from $11.77 at September 30, 2015.

"We set a record for Radian in the third quarter, writing the highest volume of new flow mortgage insurance business ever in our 40-year history, adding to our existing high-quality insurance in-force book," said Radian’s Chief Executive Officer S.A. Ibrahim. "Our company continued to benefit from positive credit trends, including another decline in our total number of delinquent loans, high quarterly cure rates and continued outstanding performance from our newest books of mortgage insurance business."

THIRD QUARTER HIGHLIGHTS

Mortgage Insurance

New mortgage insurance written (NIW) grew to $15.7 billion for the quarter, representing record volume of NIW written on a flow basis for the company, and an increase of 40 percent compared to $11.2 billion in the prior-year quarter. -- Of the $15.7 billion in new business written in the third quarter of 2016, 27 percent was written with single premiums. Net single premiums written, after consideration of the 35 percent ceded under the company’s Single Premium Quota Share Reinsurance Agreement, was 17 percent in the third quarter of 2016.

Refinances accounted for 22 percent of total NIW in the third quarter of 2016, compared to 18 percent in the second quarter of 2016, and 13 percent a year ago.

NIW continued to consist of loans with excellent risk and return characteristics.

Total primary mortgage insurance in force as of September 30, 2016, grew to $181.2 billion, compared to $177.7 billion as of June 30, 2016, and $174.9 billion as of September 30, 2015. -- The composition of Radian’s mortgage insurance portfolio has significantly improved over the past several years: -- 87 percent of primary mortgage insurance risk in force consisted of new business written after 2008, including those loans that successfully completed the Home Affordable Refinance Program (HARP).

57 percent of primary mortgage insurance risk in force at September 30, 2016, consisted of loans with FICO scores greater than or equal to 740, compared to 26 percent of loans at December 31, 2007.

7 percent of primary mortgage insurance risk in force at September 30, 2016, consisted of loans with a loan-to-value (LTV) greater than 95 percent, compared to 24 percent of loans at December 31, 2007.

Persistency, which is the percentage of mortgage insurance in force that remains on the company’s books after a twelve-month period, was 78.4 percent as of September 30, 2016, compared to 79.9 percent as of June 30, 2016, and 79.2 percent as of September 30, 2015.

Annualized persistency for the three-months ended September 30, 2016, was 75.3 percent, compared to 78.0 percent for the three-months ended June 30, 2016, and 80.5 percent for the three-months ended September 30, 2015.

Total net premiums earned were $238.1 million for the quarter ended September 30, 2016, compared to $229.1 million for the quarter ended June 30, 2016, and $227.4 million for the quarter ended September 30, 2015. Notable variable items impacting net premiums earned include: -- Acceleration of premiums related to Single Premium Policy cancellations, which are net of reinsurance, were $18.4 million in the third quarter, compared to $14.8 million in the second quarter of 2016, and $12.8 million in the third quarter of 2015.

Ceded premiums of $19.9 million, $19.9 million and $14.8 million for the quarters ended September 30, 2016, June 30, 2016, and September 30, 2015, respectively, are net of accrued profit commission on reinsurance transactions of $8.9 million in the third quarter, compared to $7.9 million in the second quarter of 2016, and $0.7 million in the third quarter of 2015.

-- Additional details may be found in Exhibit D.

The mortgage insurance provision for losses was $56.1 million in the third quarter of 2016, compared to $50.1 million in the second quarter of 2016, and $64.1 million in the third quarter of 2015. -- The loss ratio in the third quarter was 23.6 percent, compared to 21.9 percent in the second quarter of 2016 and 28.2 percent in the third quarter of 2015.

Mortgage insurance loss reserves were $821.9 million as of September 30, 2016, compared to $848.4 million as of June 30, 2016, and $1,098.6 million as of September 30, 2015.

Primary reserve per primary default (excluding IBNR and other reserves) was $24,049 as of September 30, 2016. This compares to primary reserve per primary default of $24,609 as of June 30, 2016, and $26,237 as of September 30, 2015.

The total number of primary delinquent loans decreased by 1 percent in the third quarter from the second quarter of 2016, and by 18 percent from the third quarter of 2015. The primary mortgage insurance delinquency rate decreased to 3.3 percent in the third quarter of 2016, compared to 3.4 percent in the second quarter of 2016, and 4.1 percent in the third quarter of 2015.

Total mortgage insurance claims paid were $82.7 million in the third quarter, compared to $90.7 million in the second quarter of 2016, and $169.1 million in the third quarter of 2015. The company expects claims paid for the full-year 2016 of approximately $375 million.

Mortgage and Real Estate Services

The Services segment provides outsourced services, information-based analytics, residential loan due diligence, valuations, surveillance and specialty consulting 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 third quarter were $43.8 million, compared to $39.0 million for the second quarter of 2016, and $43.1 million for the third quarter of 2015.

The adjusted pretax operating loss for the quarter ended September 30, 2016, was $2.5 million, compared to $6.0 million for the quarter ended June 30, 2016, and $0.3 million for the quarter ended September 30, 2015. Services adjusted earnings before interest, income taxes, depreciation and amortization (Services adjusted EBITDA) for the quarter ended September 30, 2016, was $5.0 million, compared to $2.0 million for the quarter ended June 30, 2016, and $6.3 million for the quarter ended September 30, 2015. Additional details regarding the non-GAAP measure Services adjusted EBITDA may be found in Exhibits F and G.

Consolidated Expenses

Other operating expenses were $64.9 million in the third quarter, compared to $65.7 million in the second quarter of 2016, and $65.1 million in the third quarter of last year.

Notable variable items impacting other operating expenses include: -- The company’s investment to significantly upgrade its technology systems, which represented $2.4 million in the third quarter, compared to $2.4 million in the second quarter of 2016, and $1.8 million in the third quarter of 2015.

Severance charges of $1.1 million in the third quarter, compared to $0.3 million in the second quarter, and $0.3 million in the third quarter of 2015.

Total incentive compensation expense of $12.8 million in the third quarter, compared to $14.2 million in the second quarter of 2016, and $11.9 million in the third quarter of 2015. The expense in the third quarter of 2016 was impacted by an increase to accrued short-term incentive compensation. The expense in the second quarter of 2016 and the third quarter of 2015 included expense related to the annual grants of new equity-settled long-term incentive awards. The expense in these periods was significantly elevated primarily due to the required acceleration of expense recognition for retirement-eligible employees.

-- Additional details may be found in Exhibit D.

Operating expenses before corporate allocations for the third quarter of 2016 were comprised of $38.1 million for the Mortgage Insurance segment, compared to $36.1 million in the second quarter of 2016, and $36.6 million in the third quarter of last year.

Operating expenses before corporate allocations for the third quarter of 2016 were comprised of $12.7 million for the Services segment, compared to $12.5 million in the second quarter of 2016, and $11.5 million in the third quarter of last year.

CAPITAL AND LIQUIDITY UPDATE

Radian Group maintained approximately $480 million of available liquidity as of September 30, 2016. The company continues to utilize a portion of its liquidity in order to accelerate its capital plan, with the objective of better positioning Radian Group for a return to investment grade ratings in the future.

During the third quarter, the company took the following actions:

Radian purchased approximately $21.2 million face value of its outstanding 2.25% Convertible Senior Notes due 2019. This decreased the company’s fully diluted share count by approximately 2 million shares.

The company adopted a Rule 10b5-1 plan to implement the previously authorized $125 million share repurchase program through its June 2017 expiration. As a result of the timing of implementation and the initial parameters of the 10b5-1 plan, Radian did not repurchase any shares of its common stock during the third quarter.

Radian redeemed the remaining $196 million aggregate principal amount outstanding of its 9.000% Senior Notes due 2017. Radian Group paid an aggregate redemption amount of $211 million, including accrued interest through the redemption date.

The combination of these capital actions, along with the actions taken in the first and second quarters of 2016, decreased the company’s total number of diluted shares by 23.1 million.

CONFERENCE CALL

Radian will discuss third quarter financial results in a conference call today, Thursday, October 27, 2016, 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 800.230.1096 inside the U.S., or 612.332.0107 for international callers, using passcode 404490 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 404490.

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 viewed as alternatives to GAAP measures of performance. The measures described below have been established in order to increase transparency for the purpose of evaluating the company’s core 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 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 and impairment of 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.

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 taxes, 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 protects 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 trend information on all schedules, refer to Radian’s
Exhibit A:
Condensed Consolidated Statements of Operations Trend Schedule
Exhibit B:
Net Income Per Share Trend Schedule
Exhibit C:
Condensed Consolidated Balance Sheets
Exhibit D:
Net Premiums - Insurance Earned 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, Captives and Persistency
Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Exhibit A
2016
2015
(In thousands, except per share amounts)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Revenues:
Net premiums earned - insurance
$ 238,149
$ 229,085
$ 220,950
$ 226,443
$ 227,433
Services revenue
43,096
38,294
31,600
37,493
42,189
Net investment income
28,430
28,839
27,201
22,833
22,091
Net gains (losses) on investments and other financial instruments
7,711
30,527
31,286
(13,402 )
3,868
Other income
3,497
3,423
1,915
1,515
1,711
Total revenues
320,883
330,168
312,952
274,882
297,292
Expenses:
Provision for losses
55,785
49,725
42,991
56,805
64,192
Policy acquisition costs
6,119
5,393
6,389
4,831
2,880
Direct cost of services
26,704
24,858
21,749
22,241
24,949
Other operating expenses
64,862
65,680
58,989
59,570
65,082
Interest expense
19,783
22,546
21,534
20,996
21,220
Loss on induced conversion and debt extinguishment
17,397
2,108
55,570
2,320
11
Amortization and impairment of intangible assets
3,292
3,311
3,328
3,409
3,273
Total expenses
193,942
173,621
210,550
170,172
181,607
Pretax income
126,941
156,547
102,402
104,710
115,685
Income tax provision
44,138
58,435
36,153
30,182
45,594
Net income
$
82,803
$
98,112
$
66,249
$
74,528
$
70,091
Diluted net income per share:
$
0.37
$
0.44
$
0.29
$
0.32
$
0.29
Selected Mortgage Insurance Key Ratios
Loss ratio (1)
23.6
%
21.9
%
19.6
%
25.1
%
28.2
%
Expense ratio (1)
23.6
%
24.4
%
22.4
%
22.7
%
23.9
%
(1)
Calculated on a GAAP basis using net premiums earned.
Radian Group Inc. and Subsidiaries
Net Income Per Share
Exhibit B
The calculation of basic and diluted net income per share was
as follows:
2016
2015
(In thousands, except per share amounts)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net income:
Net income--basic
$ 82,803
$ 98,112
$
66,249
$ 74,528
$
70,091
Adjustment for dilutive Convertible Senior Notes due 2019, net of
848
913
3,390
3,664
3,714
tax (1)
Net income--diluted
$ 83,651
$ 99,025
$
69,639
$ 78,192
$
73,805
Average common shares outstanding--basic
214,387
214,274
203,706
206,872
207,938
Dilutive effect of Convertible Senior Notes due 2017 (2)
178
12
--
1,057
1,798
Dilutive effect of Convertible Senior Notes due 2019
8,274
8,928
33,583
37,736
37,736
Dilutive effect of stock-based compensation arrangements (2)
3,129
2,989
2,418
2,316
3,323
Adjusted average common shares outstanding--diluted
225,968
226,203
239,707
247,981
250,795
Basic net income per share:
$
0.39
$
0.46
$
0.33
$
0.36
$
0.34
Diluted net income per share:
$
0.37
$
0.44
$
0.29
$
0.32
$
0.29
(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.
(2)
The following number of shares of our common stock equivalents
issued under our stock-based compensation arrangements and
convertible debt were not included in the calculation of diluted
net income per share because they were anti-dilutive:
2016
2015
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Shares of common stock equivalents
1,045
1,042
709
728
469
Shares of Convertible Senior Notes due 2017
--
--
1,902
--
--
Radian Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Exhibit C
September 30,
June 30,
March 31,
December 31,
September 30,
(In thousands, except per share data)
2016
2016
2016
2015
2015
Assets:
Investments
$ 4,565,748
$ 4,636,914
$ 4,470,172
$ 4,298,686
$ 4,376,771
Cash
46,356
55,062
64,844
46,898
69,030
Restricted cash
10,312
9,298
10,060
13,000
10,280
Accounts and notes receivable
94,692
77,170
66,340
61,734
65,951
Deferred income taxes, net
401,442
444,513
518,059
577,945
601,893
Goodwill and other intangible assets, net
279,400
282,703
286,069
289,417
287,334
Prepaid reinsurance premium
229,754
229,231
228,718
40,491
44,091
Other assets
422,123
332,372
325,129
313,929
305,566
Total assets
$ 6,049,827
$ 6,067,263
$ 5,969,391
$ 5,642,100
$ 5,760,916
Liabilities and stockholders’ equity:
Unearned premiums
$
680,973
$
677,599
$
673,887
$
680,300
$
676,938
Reserve for losses and loss adjustment expense
821,934
848,379
891,348
976,399
1,098,570
Long-term debt
1,067,666
1,278,051
1,286,466
1,219,454
1,230,246
Reinsurance funds withheld
177,147
163,360
151,104
--
--
Other liabilities
413,401
294,507
306,188
269,016
311,855
Total liabilities
3,161,121
3,261,896
3,308,993
3,145,169
3,317,609
Equity component of currently redeemable convertible senior notes
--
--
--
--
7,737
Common stock
232
232
232
224
224
Treasury stock
(893,197 )
(893,176 )
(893,176 )
(893,176 )
(893,176 )
Additional paid-in capital
2,778,860
2,781,136
2,773,349
2,716,618
2,718,210
Retained earnings
937,338
855,070
757,202
691,742
617,731
Accumulated other comprehensive income (loss)
65,473
62,105
22,791
(18,477 )
(7,419 )
Total stockholders’ equity
2,888,706
2,805,367
2,660,398
2,496,931
2,435,570
Total liabilities and stockholders’ equity
$ 6,049,827
$ 6,067,263
$ 5,969,391
$ 5,642,100
$ 5,760,916
Shares outstanding
214,405
214,284
214,265
206,872
206,870
Book value per share
$
13.47
$
13.09
$
12.42
$
12.07
$
11.77
Statutory Capital Ratios
Risk to capital ratio-Radian Guaranty only
13.7
:1
(1)
14.0
:1
12.5
:1
14.3
:1
16.5
:1
Risk to capital ratio-Mortgage Insurance combined
13.9
:1
(1)
14.2
:1
12.9
:1
14.6
:1
17.9
:1
(1)
Preliminary.
Radian Group Inc. and Subsidiaries
Net Premiums Earned - Insurance and Other Operating Expenses
Exhibit D
2016
2015
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Premiums earned - insurance:
Direct
$ 258,074
$ 248,938
$ 240,330
$ 239,424
$ 242,260
Assumed
9
9
9
10
10
Ceded
(19,934 )
(19,862 )
(19,389 )
(12,991 )
(14,837 )
Net premiums earned - insurance
$ 238,149
$ 229,085
$ 220,950
$ 226,443
$ 227,433
Notable variable items: (1)
Single Premium Policy cancellations, net of reinsurance
$
18,448
$
14,841
$
9,783
$
13,520
$
12,771
Profit commission - reinsurance (2)
8,922
7,891
6,134
1,559
678
Total
$
27,370
$
22,732
$
15,917
$
15,079
$
13,449
Other operating expenses
$
64,862
$
65,680
$
58,989
$
59,570
$
65,082
Notable variable items: (3)
Technology upgrade project (4)
$
2,440
$
2,443
$
2,271
$
1,558
$
1,818
Severance costs
1,137
277
3,040
116
327
Incentive compensation (5) (6)
12,771
14,248
6,196
4,037
11,916
Ceding commissions (7)
(5,460 )
(5,006 )
(4,413 )
(1,229 )
(1,318 )
Total
$
10,888
$
11,962
$
7,094
$
4,482
$
12,743
(1)
Affecting net premiums earned-insurance.
(2)
For 2016, the amounts represent the profit commission on the
Single Premium QSR Transaction. For 2015, the amount represents an
accrual for the profit commission on the Second QSR Transaction.
(3)
Affecting other operating expenses.
(4)
Represents the expense impact of certain costs incurred in our
initiative to significantly upgrade our technology systems.
(5)
The expense relates to short- and long-term incentive
compensation programs. For our equity-settled long-term incentive
awards the annual grants for 2015 were made in the third quarter
of 2015, whereas the annual grants for 2016 were made in the
second quarter of 2016. The expense is elevated in these two
quarters primarily due to the required acceleration of expense
recognition for retirement-eligible employees, who are considered
effectively vested immediately in these grants that would
otherwise vest over a period of 3 or 4 years. The expense in the
third quarter of 2016 remained elevated, primarily due to an
adjustment to accrued short-term incentives based on year-to-date
performance.
(6)
Incentive compensation expense is shown net of deferred policy
acquisition costs.
(7)
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
2016
2015
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net premiums written - insurance
$ 240,999
$ 232,353
$
26,310
(1)
$ 233,347
$ 242,168
Decrease (increase) in unearned premiums
(2,850 )
(3,268 )
194,640
(6,904 )
(14,735 )
Net premiums earned - insurance
238,149
229,085
220,950
226,443
227,433
Net investment income
28,430
28,839
27,201
22,833
22,091
Other income
3,511
3,424
1,915
1,515
1,711
Total
270,090
261,348
250,066
250,791
251,235
Provision for losses
56,151
50,074
43,275
56,817
64,128
Policy acquisition costs
6,119
5,393
6,389
4,831
2,880
Other operating expenses before corporate allocations
38,081
36,126
33,829
37,406
36,632
Total (2)
100,351
91,593
83,493
99,054
103,640
Adjusted pretax operating income before corporate allocations
169,739
169,755
166,573
151,737
147,595
Allocation of corporate operating expenses
11,911
14,286
9,329
9,251
14,893
Allocation of interest expense
15,360
18,124
17,112
16,582
16,797
Adjusted pretax operating income
$ 142,468
$ 137,345
$ 140,132
$ 125,904
$ 115,905
Services
2016
2015
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Services revenue (2)
$
43,800
$
39,002
$
32,196
$
38,175
$
43,114
Direct cost of services
26,911
25,224
22,053
22,880
25,870
Other operating expenses before corporate allocations
12,740
12,537
13,883
11,710
11,533
Total
39,651
37,761
35,936
34,590
37,403
Adjusted pretax operating income (loss) before corporate
4,149
1,241
(3,740 )
3,585
5,711
allocations (3)
Allocation of corporate operating expenses
2,265
2,779
1,751
968
1,567
Allocation of interest expense
4,423
4,422
4,422
4,414
4,423
Adjusted pretax operating income (loss)
$
(2,539 )
$
(5,960 )
$
(9,913 )
$
(1,797 )
$
(279 )
(1)
Net of ceded premiums written under the Single Premium QSR
transaction of $197.6 million.
(2)
Inter-segment information:
2016
2015
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Inter-segment expense included in Mortgage Insurance segment
$ 718
$ 709
$ 596
$ 682
$ 1,092
Inter-segment revenue included in Services segment
718
709
596
682
1,092
Radian Group Inc. and Subsidiaries
Segment Information
Exhibit E (page 2 of 2)
(3)
Supplemental information for Services adjusted EBITDA (see
definition in Exhibit F):
2016
2015
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Adjusted pretax operating income (loss) before corporate
$ 4,149
$ 1,241
$ (3,740 )
$ 3,585
$
5,711
allocations
Depreciation and amortization
882
747
661
612
555
Services adjusted EBITDA
$ 5,031
$ 1,988
$ (3,079 )
$ 4,197
$
6,266

Selected balance sheet information for our segments, as of the periods indicated, is as follows:

At September 30, 2016
(In thousands)
Mortgage
Services
Total
Insurance
Total assets
$ 5,686,726
$ 363,101
$ 6,049,827
At December 31, 2015
(In thousands)
Mortgage
Services
Total
Insurance
Total assets
$ 5,281,597
$ 360,503
$ 5,642,100
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 (loss)" and "adjusted diluted net operating income (loss) 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 (loss)" and "adjusted diluted net operating income (loss) 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 (the Company’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 (loss) is defined as GAAP pretax income (loss) excluding the effects of net gains (losses) on investments and other financial instruments, loss on induced conversion and debt extinguishment, acquisition-related expenses, amortization and impairment of intangible assets and net impairment losses recognized in earnings. Adjusted diluted net operating income (loss) per share is calculated by dividing (i) adjusted pretax operating income (loss) 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 stock-based compensation arrangements have been reflected in the per share calculations consistent with the accounting standard regarding earnings per share, whenever the impact is dilutive.

Although adjusted pretax operating income (loss) excludes certain items that have occurred in the past and are expected to occur in the future, the excluded items represent those that are: (1) not viewed as part of the operating performance of our primary activities; or (2) 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. These valuation
adjustments may not necessarily result in 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). However, we include the change in expected economic
loss or recovery associated with our consolidated VIEs, if any, in
the 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).
(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).
Radian Group Inc. and Subsidiaries
Definition of Consolidated Non-GAAP Financial Measures
Exhibit F (page 2 of 2)
(4)
Amortization and impairment of 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).

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

Total adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and Services adjusted EBITDA are not measures of total profitability, and therefore should not be viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share or net income. Our definitions of adjusted pretax operating income (loss), adjusted diluted net operating income (loss) 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 Adjusted Pretax Operating Income (Loss) to
Consolidated Pretax Income
2016
2015
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Adjusted pretax operating income (loss):
Mortgage Insurance
$ 142,468
$ 137,345
$ 140,132
$ 125,904
$ 115,905
Services
(2,539 )
(5,960 )
(9,913 )
(1,797 )
(279 )
Total adjusted pretax operating income
139,929
131,385
130,219
124,107
115,626
Net gains (losses) on investments and other financial instruments
7,711
30,527
31,286
(13,402 )
3,868
Loss on induced conversion and debt extinguishment
(17,397 )
(2,108 )
(55,570 )
(2,320 )
(11 )
Acquisition-related expenses (1)
(10 )
54
(205 )
(266 )
(525 )
Amortization and impairment of intangible assets (1)
(3,292 )
(3,311 )
(3,328 )
(3,409 )
(3,273 )
Consolidated pretax income
$ 126,941
$ 156,547
$ 102,402
$ 104,710
$ 115,685
(1)
Please see Exhibit F for the definition of this line item.
Reconciliation of Adjusted Diluted Net Operating Income Per
Share to Diluted Net Income Per Share
2016
2015
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Adjusted diluted net operating income per share (1)
$
0.41
$
0.38
$
0.37
$
0.34
$
0.31
Per share impact of debt items:
Loss on induced conversion and debt extinguishment
(0.08 )
(0.01 )
(0.23 )
(0.01 )
--
Income tax provision (benefit) (2)
(0.03 )
--
(0.03 )
(0.04 )
--
Per share impact of debt items
(0.05 )
(0.01 )
(0.20 )
0.03
--
Per share impact of other reconciling items:
Net gains (losses) on investments and other financial instruments
0.03
0.13
0.13
(0.05 )
0.01
Acquisition-related expenses
--
--
--
--
--
Amortization and impairment of intangible assets
(0.01 )
(0.01 )
(0.01 )
(0.01 )
(0.01 )
Income tax provision (benefit) on other reconciling items (1)
0.01
0.04
0.04
(0.02 )
--
Difference between statutory and effective tax rate
--
(0.01 )
0.04
(0.01 )
(0.02 )
0.01
0.07
0.12
(0.05 )
(0.02 )
Per share impact of other reconciling items
Diluted net income per share
$
0.37
$
0.44
$
0.29
$
0.32
$
0.29
(1)
Calculated using the company’s federal statutory tax rate. Any
permanent tax adjustments and state income taxes on these items
have been deemed immaterial and are not included.
(2)
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.
Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit G (page 2 of 2)
Reconciliation of Services Adjusted EBITDA to Net Income
2016
2015
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Services adjusted EBITDA
$
5,031
$
1,988
$ (3,079 )
$
4,197
$
6,266
Allocation of corporate operating expenses to Services
(2,265 )
(2,779 )
(1,751 )
(968 )
(1,567 )
Allocation of corporate interest expenses to Services
(4,423 )
(4,422 )
(4,422 )
(4,414 )
(4,423 )
Services depreciation and amortization
(882 )
(747 )
(661 )
(612 )
(555 )
Services adjusted pretax operating income (loss)
(2,539 )
(5,960 )
(9,913 )
(1,797 )
(279 )
Mortgage Insurance adjusted pretax operating income
142,468
137,345
140,132
125,904
115,905
Total adjusted pretax operating income
139,929
131,385
130,219
124,107
115,626
Net gains (losses) on investments and other financial instruments
7,711
30,527
31,286
(13,402 )
3,868
Loss on induced conversion and debt extinguishment
(17,397 )
(2,108 )
(55,570 )
(2,320 )
(11 )
Acquisition-related expenses
(10 )
54
(205 )
(266 )
(525 )
Amortization and impairment of intangible assets
(3,292 )
(3,311 )
(3,328 )
(3,409 )
(3,273 )
Consolidated pretax income
126,941
156,547
102,402
104,710
115,685
Income tax provision
44,138
58,435
36,153
30,182
45,594
Net income
$ 82,803
$ 98,112
$ 66,249
$ 74,528
$ 70,091

On a consolidated basis, "adjusted pretax operating income" and "adjusted diluted net operating income per share" are measures not determined in accordance with GAAP. "Services adjusted EBITDA" is also a non-GAAP measure. These measures are not representative of total profitability, and therefore should not be viewed as substitutes for GAAP pretax income or diluted net income per share. Our definitions of adjusted pretax operating income, adjusted diluted net operating income 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
2016
2015
($ in millions)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Total primary new insurance written
$ 15,656
$ 12,921
$ 8,071
$ 9,099
$ 11,176
Percentage of primary new insurance
written by FICO score
>=740
64.2 %
60.9 %
58.4 %
60.3 %
61.0 %
30.4
32.2
33.7
32.2
31.9
680-739
5.4
6.9
7.9
7.5
7.1
620-679
Total Primary
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
Percentage of primary new insurance
written
Direct monthly and other premiums
73 %
74 %
71 %
71 %
73 %
Direct single premiums
27 %
26 %
29 %
29 %
27 %
Net single premiums (1)
17 %
17 %
19 %
29 %
27 %
Refinances
22 %
18 %
19 %
17 %
13 %
LTV
95.01% and above
6.0 %
4.8 %
3.7 %
3.6 %
3.5 %
90.01% to 95.00%
47.1 %
50.2 %
50.5 %
49.5 %
51.5 %
85.01% to 90.00%
31.4 %
31.8 %
33.1 %
34.4 %
34.1 %
85.00% and below
15.5 %
13.2 %
12.7 %
12.5 %
10.9 %
(1)
In 2016, 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
September 30,
June 30,
March 31,
December 31,
September 30,
($ in millions)
2016
2016
2016
2015
2015
Primary insurance in force (1)
Prime
$ 172,178
$ 168,259
$ 165,526
$ 165,291
$ 164,060
Alt-A
5,363
5,627
5,907
6,176
6,531
A minus and below
3,624
3,786
3,953
4,117
4,275
Total Primary
$ 181,165
$ 177,672
$ 175,386
$ 175,584
$ 174,866
Primary risk in force (1) (2)
Prime
$
44,075
$
43,076
$
42,312
$
42,170
$
41,784
Alt-A
1,241
1,302
1,366
1,427
1,510
A minus and below
906
946
988
1,030
1,070
Total Primary
$
46,222
$
45,324
$
44,666
$
44,627
$
44,364
Percentage of primary risk in force
Direct monthly and other premiums
69 %
69 %
69 %
69 %
70 %
Direct single premiums
31 %
31 %
31 %
31 %
30 %
Net single premiums (3)
25 %
25 %
25 %
30 %
30 %
Percentage of primary risk in force by
FICO score
>=740</b>
57.4 %
57.1 %
57.0 %
57.1 %
57.0 %
680-739
30.9
30.8
30.6
30.3
30.2
620-679
10.2
10.5
10.7
10.8
10.9
<=619
1.5
1.6
1.7
1.8
1.9
Total Primary
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
Percentage of primary risk in force by LTV
95.01% and above
7.2 %
7.1 %
7.2 %
7.3 %
7.4 %
90.01% to 95.00%
52.1
51.6
50.9
50.4
49.8
85.01% to 90.00%
32.8
33.3
33.7
34.0
34.3
85.00% and below
7.9
8.0
8.2
8.3
8.5
Total
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
Percentage of primary risk in force by
policy year
5.1 %
5.5 %
6.0 %
6.3 %
6.8 %
2005 and prior
3.1
3.4
3.6
3.7
3.9
2006
7.4
7.9
8.4
8.7
9.1
2007
5.2
5.6
6.0
6.3
6.6
2008
1.2
1.3
1.5
1.7
1.8
2009
1.0
1.2
1.3
1.4
1.5
2010
2.2
2.5
2.7
2.9
3.1
2011
8.8
9.7
10.6
11.2
12.0
2012
13.9
15.5
17.0
18.1
19.2
2013
13.4
14.9
16.3
17.1
18.0
2014
19.4
21.0
22.0
22.6
18.0
2015
19.3
11.5
4.6
--
--
2016
Total
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
Primary risk in force on defaulted loans (4)
$
1,381
$
1,398
$
1,562
$
1,625
$
1,666
(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
2016
2015
($ in thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net claims paid: (1)
Prime
$
51,964
$
56,036
$
74,432
$
56,900
$
65,396
Alt-A
16,334
18,349
28,929
21,343
18,966
A minus and below
9,615
12,315
13,196
11,530
14,028
Total primary claims paid
77,913
86,700
116,557
89,773
98,390
Pool
4,492
5,451
7,389
6,477
8,721
Second-lien and other
(234 )
(231 )
345
(143 )
(16 )
Subtotal
82,171
91,920
124,291
96,107
107,095
Impact of captive terminations
(171 )
(2,619 )
(120 )
(65 )
--
Impact of settlements (2)
705
1,400
3,500
80,426
61,994
Total net claims paid
$
82,705
$
90,701
$ 127,671
$ 176,468
$
169,089
Average net claim paid: (3)
Prime
$
48.3
$
48.6
$
47.7
$
46.9
$
46.2
Alt-A
65.3
63.5
63.0
61.7
60.2
A minus and below
41.3
39.9
36.8
40.6
42.5
Total average net primary claim paid
50.0
49.5
49.0
48.7
47.8
Pool
51.0
58.0
53.2
56.3
51.3
Total average net claim paid
$
49.7
$
49.6
$
48.9
$
48.9
$
47.8
Average direct primary claim paid (3) (4)
$
50.3
$
49.9
$
49.6
$
50.5
$
48.5
Average total direct claim paid (3) (4)
$
50.0
$
50.0
$
49.5
$
50.6
$
48.5
($ in thousands, except primary reserve
September 30,
June 30,
March 31,
December 31,
September 30,
per primary default amounts)
2016
2016
2016
2015
2015
Reserve for losses by category
Prime
$ 409,438
$ 420,281
$ 438,598
$ 480,481
$
519,572
Alt-A
166,349
173,284
183,189
203,706
234,772
A minus and below
106,678
112,001
116,835
129,352
137,441
IBNR and other
73,057
74,639
79,051
83,066
107,179
LAE
21,255
22,389
23,600
26,108
41,464
Reinsurance recoverable (5)
6,448
6,044
8,239
8,286
11,071
Total primary reserves
783,225
808,638
849,512
930,999
1,051,499
Pool insurance
36,065
36,982
38,843
42,084
43,234
IBNR and other
823
897
1,050
1,118
949
LAE
1,112
1,163
1,227
1,335
1,983
Reinsurance recoverable (5)
36
33
--
--
--
Total pool reserves
38,036
39,075
41,120
44,537
46,166
Total 1st lien reserves
821,261
847,713
890,632
975,536
1,097,665
Second-lien and other
673
666
716
863
905
Total reserves
$ 821,934
$ 848,379
$ 891,348
$ 976,399
$ 1,098,570
1st lien reserve per default
Primary reserve per primary default excluding IBNR and other
$
24,049
$
24,609
$
24,959
$
24,019
$
26,237
(1)
Net of reinsurance recoveries.
(2)
For 2015, includes the impact of the BofA Settlement Agreement.
(3)
Calculated without giving effect to the impact of the
termination of captive transactions and settlements.
(4)
Before reinsurance recoveries.
(5)
Represents ceded losses on captive transactions and quota share
reinsurance transactions.
Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information - Default Statistics
Exhibit K
September 30,
June 30,
March 31,
December 31,
September 30,
2016
2016
2016
2015
2015
Default Statistics
Primary Insurance:
Prime
Number of insured loans
840,534
826,511
817,236
816,797
812,657
Number of loans in default
19,100
19,025
19,510
22,223
22,328
Percentage of loans in default
2.27 %
2.30 %
2.39 %
2.72 %
2.75 %
Alt-A
Number of insured loans
28,080
29,445
30,990
32,411
34,166
Number of loans in default
4,545
4,820
5,138
5,813
6,318
Percentage of loans in default
16.19 %
16.37 %
16.58 %
17.94 %
18.49 %
A minus and below
Number of insured loans
28,313
29,450
30,681
31,902
33,018
Number of loans in default
5,885
5,982
6,221
7,267
7,229
Percentage of loans in default
20.79 %
20.31 %
20.28 %
22.78 %
21.89 %
Total Primary
Number of insured loans
896,927
885,406
878,907
881,110
879,841
Number of loans in default (1)
29,530
29,827
30,869
35,303
35,875
Percentage of loans in default
3.29 %
3.37 %
3.51 %
4.01 %
4.08 %
(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:
September 30,
June 30,
March 31,
December 31,
September 30,
2016
2016
2016
2015
2015
Number of loans in default
1,888
2,180
2,339
2,821
2,993
Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information - QSR, Captives and
Persistency
Exhibit L
2016
2015
($ in thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Initial and Second Quota Share
Reinsurance ("QSR") Transactions
QSR ceded premiums written (1)
$
6,730
$
7,356
$
7,962
$
6,934
$
8,466
% of premiums written
2.6
%
2.9
%
3.4
%
2.9
%
3.4
%
QSR ceded premiums earned (1)
$
10,597
$
11,172
$
11,325
$
10,523
$
12,203
% of premiums earned
4.1
%
4.5
%
4.7
%
4.4
%
5.1
%
Ceding commissions written
$
1,922
$
2,099
$
2,270
$
2,553
$
2,743
Ceding commissions earned (2)
$
3,974
$
3,779
$
4,446
$
3,466
$
2,463
Profit commission
$ --
$ --
$ --
$
1,559
$
678
Risk in force included in QSR (3)
$
1,718,031
$
1,872,017
$
2,018,468
$ 2,131,030
$ 2,253,913
Single Premium QSR Transaction
QSR ceded premiums written (1)
$
13,004
$
11,488
$
197,593
N/A
N/A
% of premiums written
5.0
%
4.6
%
84.7
%
N/A
N/A
QSR ceded premiums earned (1)
$
8,608
$
7,146
$
5,994
N/A
N/A
% of premiums earned
3.3
%
2.9
%
2.5
%
N/A
N/A
Ceding commissions written
$
5,482
$
4,844
$
50,932
N/A
N/A
Ceding commissions earned (2)
$
4,382
$
3,759
$
3,032
N/A
N/A
Profit commission
$
8,922
$
7,891
$
6,134
N/A
N/A
Risk in force included in QSR (3)
$
3,621,993
$
3,461,464
$
3,308,057
N/A
N/A
Total risk in force included in QSRs
$
5,340,024
$
5,333,481
$
5,326,525
$ 2,131,030
$ 2,253,913
1st Lien Captives
Premiums earned ceded to captives
$
537
$
1,346
$
1,869
$
2,268
$
2,434
% of total premiums earned
0.2
%
0.5
%
0.8
%
1.0
%
1.0
%
Persistency Rate (twelve months ended)
78.4
%
79.9
%
79.4
%
78.8
%
79.2
%
Persistency Rate (quarterly, annualized) (4)
75.3
%
78.0
%
82.3
%
81.8
%
80.5
%
(1)
Net of profit commission.
(2)
Includes amounts reported in policy acquisition costs and other
operating expenses.
(3)
Included in primary risk in force.
(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 report 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. 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 including:

changes in general economic and political conditions, including in particular but without limitation, unemployment rates, interest rates and changes in housing and mortgage credit markets that could impact the size of the insurable market and the credit performance of our insured portfolio;

changes in the way customers, investors, regulators or legislators perceive the performance and financial strength of private mortgage insurers;

Radian Guaranty’s ability to remain eligible under the PMIERs and other applicable requirements imposed by the Federal Housing Finance Agency and by the 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 in particular but without limitation, 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 Radian Guaranty;

changes in the current housing finance system in the U.S., including in particular but without limitation, 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 Monthly Premium Policies;

competition in our mortgage insurance business, including in particular but without limitation, price competition (in particular from those mortgage insurers with advantageous tax positions) and competition from the FHA, VA and other forms of credit enhancement;

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

the adoption of new laws and regulations, or changes in existing laws and regulations, or the way they are interpreted;

the outcome of legal and regulatory 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;

-- changes in GAAP or SAP rules and guidance, or their interpretation;

legal and other limitations on dividends and other amounts we may receive from our subsidiaries; and

the possibility that we may need to impair the carrying value of goodwill established in connection with our acquisition of Clayton.

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 2015 Form 10-K, and in our subsequent quarterly and other reports filed from time to time with the SEC. 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 report. 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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SOURCE: Radian Group Inc.

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