Exhibit 99.1
Quarterly | ||||
Operating Supplement | ||||
Third Quarter 2008 |
Table of Contents
Page | ||
Introductory Note | 2 | |
Company Profile | 2 | |
Company Information | 2 | |
Consolidated GAAP Income Statements | 3 | |
Consolidated GAAP Balance Sheets | 4 | |
Consolidated Gross Premiums Written by Product | 5 | |
Consolidated Net Premiums Earned by Product | 5 | |
Consolidated Future Revenue | 5 | |
Consolidated Selected Loss Information | 6 | |
Consolidated Selected Derivative Information | 7 | |
Consolidated Investment Portfolio Highlights | 8 | |
Consolidated Insured Portfolio Highlights | 9 | |
Consolidated Explanatory Notes | 18 | |
Safe Harbor Statement | 20 |
1 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Table of Contents |
Radian Asset Assurance Inc.
Quarterly Operating Supplement
September 30, 2008
Introductory Note
This operating supplement presents financial information for Radian Asset Assurance Inc. (Radian) and its consolidated subsidiaries on a GAAP basis. Please visit our website at www.radian.biz for selected statutory information.
Company Profile
Radian, founded in 1985 and rated BBB+ (Negative Outlook) by Standard & Poor’s, a division of The McGraw-Hill Companies (S&P) and A3 (Under Review for Possible Downgrade) by Moody’s Investor Service (Moody’s), is a niche insurer of public finance transactions and a provider of credit enhancement to leading financial institutions in the structured finance market. Radian has traditionally written financial guaranty insurance for municipal bonds, asset-backed securities and structured transactions. Radian has also traditionally provided reinsurance to the monoline financial guarantors. In addition, Radian provided Trade Credit reinsurance until 2005, when this line of business was placed in runoff.
In June 2008, the financial strength ratings of Radian were downgraded by both S&P and Moody’s. These downgrades, combined with the difficult market conditions for financial guaranty insurance, have severely limited Radian’s ability to write new direct insurance and reinsurance both domestically and internationally. As a result, new business production across all our product lines has been significantly reduced in the nine months of 2008 and is likely to remain minimal for the foreseeable future, if not permanently. In light of these conditions, Radian has discontinued, for the foreseeable future, writing any new financial guaranty insurance other than as may be necessary to commute, restructure, hedge or otherwise mitigate losses or reduce exposure in our existing portfolio. Although Radian cannot be certain of the extent and duration of any continued deterioration, disruptions or uncertainty in credit markets or other sectors of the economy in which Radian’s financial guaranty business participates, Radian believes these conditions are likely to persist for the foreseeable future. In the third quarter of 2008, Radian initiated plans to reduce its financial guaranty operations, including reducing its workforce commensurate with our current intention not to originate new business.
Radian is a direct subsidiary of Radian Guaranty Inc., a Pennsylvania mortgage insurer, and an indirect subsidiary of Radian Group Inc. (Radian Group) (NYSE: RDN), a global credit risk management company headquartered in Philadelphia with significant operations in both New York and London.
For more information regarding Radian and Radian Group, please visit our website at www.radian.biz
Company Information
Radian Asset Assurance Inc. | Contact: | |||
335 Madison Avenue | John C. DeLuca | |||
New York, New York 10017 | Senior Vice President | |||
1 877 337.4925 (within the U.S.) | 1 212 984.9222 | |||
1 212 983.3100 | john.deluca@radian.biz | |||
www.radian.biz |
2 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Introductory Note / Company Profile / Company Information |
Radian Asset Assurance Inc.
Consolidated GAAP Income Statements* ($ Thousands)
(Unaudited)
Quarter ended | Nine Months ended | |||||||||||||||
September 30 2008 | September 30 2007 | September 30 2008 | September 30 2007 | |||||||||||||
Revenues | ||||||||||||||||
Net premiums written - insurance | $ | 13,843 | $ | 59,068 | $ | 70,427 | $ | 144,462 | ||||||||
Net premiums earned - insurance | $ | 53,382 | $ | 32,678 | $ | 134,688 | $ | 98,200 | ||||||||
Net investment income | 26,152 | 26,456 | 78,443 | 76,813 | ||||||||||||
(Loss) gain on investments | (26,898 | ) | 5,473 | (63,758 | ) | 13,873 | ||||||||||
Realized gain on derivatives | 8,660 | 17,479 | 27,538 | 79,577 | ||||||||||||
Unrealized gains (losses) on derivatives | 147,490 | (259,391 | ) | 795,705 | (294,246 | ) | ||||||||||
Total change in fair value of derivative instruments | 156,150 | (241,912 | ) | 823,243 | (214,669 | ) | ||||||||||
Total revenues | 208,786 | (177,305 | ) | 972,616 | (25,783 | ) | ||||||||||
Expenses | ||||||||||||||||
Losses and loss adjustment expenses | 25,719 | 52,133 | 48,141 | 48,174 | ||||||||||||
Policy acquisition costs | 15,421 | 10,923 | 38,092 | 34,002 | ||||||||||||
Other operating expenses | 36,902 | 9,933 | 72,510 | 36,799 | ||||||||||||
Other expense | 6,847 | 3,833 | 17,721 | 12,226 | ||||||||||||
Total expenses | 84,889 | 76,822 | 176,464 | 131,201 | ||||||||||||
Income (loss) before income taxes | 123,897 | (254,127 | ) | 796,152 | (156,984 | ) | ||||||||||
Income tax expense (benefit) | 53,006 | (101,709 | ) | 275,340 | (75,598 | ) | ||||||||||
Net Income (loss) | $ | 70,891 | $ | (152,418 | ) | $ | 520,812 | $ | (81,386 | ) | ||||||
* | See Consolidated Explanatory Notes on page 18. |
3 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Consolidated GAAP Income Statements |
Radian Asset Assurance Inc.
Consolidated GAAP Balance Sheets* ($ Thousands)**
(Unaudited)
September 30 2008 | December 31 2007 | ||||||
Assets | |||||||
Investments: | |||||||
Fixed maturities, available for sale, at fair value (amortized cost $2,014,068 and $2,066,052) | $ | 1,926,754 | $ | 2,092,720 | |||
Fixed maturities - trading, at fair value (amortized cost $39,141 and $16,125) | 39,027 | 16,132 | |||||
Hybrid securities, at fair value (amortized cost $143,627 and $140,325) | 128,641 | 155,844 | |||||
Preferred stock, at fair value (cost $21,956 and $0) | 18,056 | — | |||||
Common stock, at fair value (cost $931 and $931) | 1,049 | 1,143 | |||||
Short-term investments | 124,772 | 253,614 | |||||
Total Investments | 2,238,299 | 2,519,453 | |||||
Cash and cash equivalents | 10,768 | 6,012 | |||||
Deferred federal income taxes - net | — | 233,996 | |||||
Accrued interest and dividends receivable | 27,898 | 28,319 | |||||
Premiums and other receivables | 15,027 | 21,582 | |||||
Deferred policy acquisition costs | 160,492 | 172,560 | |||||
Prepaid reinsurance premiums | 962 | 1,138 | |||||
Prepaid federal income taxes | — | 14,995 | |||||
Derivative assets | 163,433 | 43,145 | |||||
Other assets | 9,146 | 13,428 | |||||
Total Assets | $ | 2,626,025 | $ | 3,054,628 | |||
Liabilities and Shareholder’s Equity | |||||||
Liabilities | |||||||
Losses and loss adjustment expenses | $ | 182,567 | $ | 249,864 | |||
Reinsurance payable on paid losses and loss adjustment expenses | 1,837 | 1,410 | |||||
Deferred premium revenue | 649,289 | 713,726 | |||||
Federal income taxes payable | 37,878 | 4,348 | |||||
Deferred federal income taxes - net | 15,155 | — | |||||
Payable to affiliates | 10,055 | 6,298 | |||||
Derivative liabilities | 122,933 | 801,284 | |||||
Accrued expenses and other liabilities | 16,857 | 24,721 | |||||
Total Liabilities | 1,036,571 | 1,801,651 | |||||
Shareholder’s Equity | |||||||
Common stock — $150 par value | |||||||
Authorized, issued and outstanding — 100,000 shares | 15,000 | 15,000 | |||||
Additional paid-in capital | 703,848 | 704,500 | |||||
Retained earnings | 917,653 | 504,341 | |||||
Accumulated other comprehensive (loss) income | (47,047 | ) | 29,136 | ||||
Total Shareholder’s Equity | 1,589,454 | 1,252,977 | |||||
Total Liabilities and Shareholder’s Equity | $ | 2,626,025 | $ | 3,054,628 | |||
* | See Consolidated Explanatory Notes on page 18. |
** | Except share amounts. |
4 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Consolidated GAAP Balance Sheets |
Radian Asset Assurance Inc.
Consolidated Gross Premiums Written by Product* ($ Thousands)
Quarter ended | Nine months ended | |||||||||||||||||||
September 30 2008 | September 30 2007 | Percent Change | September 30 2008 | September 30 2007 | Percent Change | |||||||||||||||
Public Finance Direct | $ | 2,059 | $ | 17,748 | -88.4 | % | $ | 15,538 | $ | 48,656 | -68.1 | % | ||||||||
Structured Finance Direct | 3,358 | 3,812 | -11.9 | % | 10,546 | 12,075 | -12.7 | % | ||||||||||||
Public Finance Reinsurance | 6,046 | 31,432 | -80.8 | % | 30,808 | 67,082 | -54.1 | % | ||||||||||||
Structured Finance Reinsurance | 2,748 | 5,001 | -45.1 | % | 13,601 | 16,606 | -18.1 | % | ||||||||||||
Trade Credit Reinsurance | (371 | ) | 837 | -144.3 | % | (84 | ) | 1,507 | -105.6 | % | ||||||||||
Total | $ | 13,840 | $ | 58,830 | -76.5 | % | $ | 70,409 | $ | 145,926 | -51.8 | % | ||||||||
Consolidated Net Premiums Earned by Product* ($ Thousands)
Quarter ended | Nine months ended | |||||||||||||||||||
September 30 2008 | September 30 2007 | Percent Change | September 30 2008 | September 30 2007 | Percent Change | |||||||||||||||
Public Finance Direct | $ | 13,380 | $ | 10,765 | 24.3 | % | $ | 43,194 | $ | 32,311 | 33.7 | % | ||||||||
Structured Finance Direct | 3,569 | 4,426 | -19.4 | % | 11,211 | 13,506 | -17.0 | % | ||||||||||||
Public Finance Reinsurance | 32,311 | 11,105 | 191.0 | % | 65,146 | 33,897 | 92.2 | % | ||||||||||||
Structured Finance Reinsurance | 4,472 | 5,560 | -19.6 | % | 15,163 | 17,496 | -13.3 | % | ||||||||||||
Trade Credit Reinsurance | (350 | ) | 822 | -142.6 | % | (26 | ) | 990 | -102.6 | % | ||||||||||
Total | $ | 53,382 | $ | 32,678 | 63.4 | % | $ | 134,688 | $ | 98,200 | 37.2 | % | ||||||||
Consolidated Future Revenue**
As of September 30, 2008
($ Millions)
Net Deferred Premium Amortization | Future Installments | Insurance Premium Earnings | Realized Gains on Credit Derivatives | Total Future Revenue | |||||||||||
2008 | $ | 19.9 | $ | 3.8 | $ | 23.7 | $ | 13.5 | $ | 37.2 | |||||
2009 | 58.1 | 30.3 | 88.4 | 49.1 | 137.5 | ||||||||||
2010 | 50.3 | 23.8 | 74.1 | 43.2 | 117.3 | ||||||||||
2011 | 46.9 | 17.5 | 64.4 | 40.3 | 104.7 | ||||||||||
2012 | 44.1 | 16.7 | 60.8 | 37.0 | 97.8 | ||||||||||
2008 – 2012 | 219.3 | 92.1 | 311.4 | 183.1 | 494.5 | ||||||||||
2013 – 2017 | 180.9 | 65.0 | 245.9 | 72.7 | 318.6 | ||||||||||
2018 – 2022 | 124.3 | 41.0 | 165.3 | 4.5 | 169.8 | ||||||||||
2023 – 2027 | 76.4 | 31.4 | 107.8 | 3.9 | 111.7 | ||||||||||
After 2027 | 47.4 | 55.7 | 103.1 | 5.5 | 108.6 | ||||||||||
Total | $ | 648.3 | $ | 285.2 | $ | 933.5 | $ | 269.7 | $ | 1,203.2 | |||||
* | See Consolidated Explanatory Notes on page 18. |
** | This table depicts the expected revenue from insurance premiums, net of prepaid reinsurance premiums, and realized gains on credit derivatives, for the existing financial guaranty contracts, assuming no advance refundings as of September 30, 2008. Expected revenue will differ from contractual revenue because borrowers have the right to call or repay financial guaranty obligations. Realized gains on credit derivatives are our expected future premium earnings on derivative contracts. |
5 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Consolidated: Gross Premiums Written / Net PremiumsEarned / Net Unearned Premium |
Radian Asset Assurance Inc.
Consolidated Selected Loss Information*
($ Thousands)
Components of Claims Paid and Incurred Losses
and Loss Adjustment Expenses
Quarter ended | Nine months ended | |||||||||||||||
September 30 2008 | September 30 2007 | September 30 2008 | September 30 2007 | |||||||||||||
Claims Paid | ||||||||||||||||
Trade Credit | $ | 402 | $ | 1,853 | $ | 1,484 | $ | 6,445 | ||||||||
Financial Guaranty | 3,723 | 1,030 | 106,876 | 1,032 | ||||||||||||
Conseco Finance Corp | 2,218 | 2,663 | 6,591 | 8,782 | ||||||||||||
Total | $ | 6,343 | $ | 5,546 | $ | 114,951 | $ | 16,259 | ||||||||
Incurred Losses and Loss Adjustment Expenses | ||||||||||||||||
Trade Credit | $ | (1,763 | ) | $ | (1,514 | ) | $ | (6,101 | ) | $ | (5,087 | ) | ||||
Financial Guaranty | 27,482 | 53,647 | 54,914 | 53,261 | ||||||||||||
Conseco Finance Corp | — | — | (672 | ) | — | |||||||||||
Total | $ | 25,719 | $ | 52,133 | $ | 48,141 | $ | 48,174 | ||||||||
Components of Losses and
Loss Adjustment Expense Reserves
September 30 2008 | December 31 2007 | |||||
Financial Guaranty | ||||||
Case | $ | 48,589 | $ | 31,685 | ||
Allocated non-specific | 71,610 | 141,270 | ||||
Unallocated non-specific | 42,871 | 49,195 | ||||
163,070 | 222,150 | |||||
Trade Credit and Other | ||||||
Case | 12,113 | 14,800 | ||||
IBNR | 7,384 | 12,914 | ||||
19,497 | 27,714 | |||||
Total | $ | 182,567 | $ | 249,864 | ||
* | See Consolidated Explanatory Notes on page 18. |
6 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Consolidated Selected Loss Information |
Radian Asset Assurance Inc.
Consolidated Selected Derivative Information*
($ Millions)
Balance Sheet Information
September 30 2008 | December 31 2007 | |||||||
Notional value - insured portfolio | $ | 48,561.1 | $ | 48,539.4 | ||||
Assets | ||||||||
Gross unrealized gains on derivative financial guaranty contracts | $ | 66.4 | $ | 7.9 | ||||
Gross unrealized gains on put options on committed preferred securities | 97.0 | 35.2 | ||||||
Total assets | 163.4 | 43.1 | ||||||
Liabilities | ||||||||
Gross unrealized losses on derivative financial guaranty contracts | (122.9 | ) | (801.2 | ) | ||||
Net assets (liabilities) | $ | 40.5 | $ | (758.1 | ) | |||
Income Statement Information
Quarter ended | Nine months ended | |||||||||||||||
September 30 2008 | September 30 2007 | September 30 2008 | September 30 2007 | |||||||||||||
Realized gains and (losses) on derivatives | ||||||||||||||||
Premiums earned on credit derivatives | $ | 13.7 | $ | 13.9 | $ | 40.9 | $ | 48.6 | ||||||||
Net payments on credit derivatives | (3.8 | ) | — | (10.1 | ) | — | ||||||||||
Premium settlements on terminated credit derivatives | — | 3.6 | 0.8 | 31.0 | ||||||||||||
Payment to maintain put options on committed preferred securities | (1.3 | ) | — | (4.1 | ) | — | ||||||||||
Total realized | 8.6 | 17.5 | 27.5 | 79.6 | ||||||||||||
Unrealized gains (losses) on derivatives | ||||||||||||||||
Change in fair value of credit derivatives | 160.6 | (259.1 | ) | 734.0 | (293.9 | ) | ||||||||||
Change in fair value of put options on committed preferred securities | (13.1 | ) | — | 61.7 | — | |||||||||||
Change in fair value of investments | — | (0.3 | ) | — | (0.4 | ) | ||||||||||
Total unrealized | 147.5 | (259.4 | ) | 795.7 | (294.3 | ) | ||||||||||
Change in fair value of derivative instruments | $ | 156.1 | $ | (241.9 | ) | $ | 823.2 | $ | (214.7 | ) | ||||||
Roll Forward of Net Derivative Assets and Liabilities
September 30 2008 | December 31 2007 | |||||||
Balance at January 1 | $ | (758.1 | ) | $ | 59.6 | |||
Realized gains on derivatives | 27.5 | 90.2 | ||||||
Unrealized gains on derivatives | 795.7 | (836.7 | ) | |||||
Premiums written on credit derivatives | (38.0 | ) | (43.0 | ) | ||||
Payment to maintain put options on committed preferred securities | 4.1 | 3.0 | ||||||
Net payments on credit derivatives | 10.1 | — | ||||||
Premium settlements on terminated credit derivatives | (0.8 | ) | (31.2 | ) | ||||
Balance at end of period | $ | 40.5 | $ | (758.1 | ) | |||
* | See Consolidated Explanatory Notes on page 18. |
7 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Consolidated Selected Derivative Information |
Radian Asset Assurance Inc.
Consolidated Investment Portfolio Highlights*
($ Millions)
Asset Quality** | Book Value (09/30/2008) | Percent of Book Value | Book Value (12/31/2007) | Percent of Book Value | ||||||||
AAA | $ | 1,153.3 | 51.6 | % | $ | 1,698.4 | 67.5 | % | ||||
AA | 657.5 | 29.4 | % | 418.9 | 16.6 | % | ||||||
A | 251.4 | 11.2 | % | 220.8 | 8.8 | % | ||||||
BBB | 168.1 | 7.5 | % | 174.1 | 6.9 | % | ||||||
BIG | 1.7 | 0.1 | % | — | 0.0 | % | ||||||
NR | 5.3 | 0.2 | % | 6.1 | 0.2 | % | ||||||
Other | 1.0 | 0.0 | % | 1.2 | 0.0 | % | ||||||
Total | $ | 2,238.3 | 100.0 | % | $ | 2,519.5 | 100.0 | % | ||||
Asset Class | Book Value (09/30/2008) | Percent of Book Value | Book Value (12/31/2007) | Percent of Book Value | ||||||||
Municipal Bonds | $ | 1,589.5 | 71.0 | % | $ | 1,747.6 | 69.4 | % | ||||
Taxable Bonds | 376.3 | 16.8 | % | 361.3 | 14.3 | % | ||||||
Convertible Bonds | 114.1 | 5.1 | % | 125.8 | 5.0 | % | ||||||
Short-Term | 124.8 | 5.6 | % | 253.6 | 10.1 | % | ||||||
Other | 33.6 | 1.5 | % | 31.2 | 1.2 | % | ||||||
Total | $ | 2,238.3 | 100.0 | % | $ | 2,519.5 | 100.0 | % | ||||
* | See Consolidated Explanatory Notes on page 18. |
** | Average duration of 6.5 years and 5.8 years at 09/30/2008 and 12/31/2007, respectively. |
8 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Consolidated Investment Portfolio Highlights |
Radian Asset Assurance Inc.
Consolidated Insured Portfolio Highlights* ($ Millions)
Consolidated Gross Par Originated
Nine months ended | ||||||||||||||||||
September 30, 2008 | September 30, 2007 | |||||||||||||||||
Direct | Assumed** | Total | Direct | Assumed** | Total | |||||||||||||
Public Finance | $ | 1,419 | $ | 2,084 | $ | 3,503 | $ | 2,788 | $ | 6,831 | $ | 9,619 | ||||||
Structured Finance | 231 | 405 | 636 | 13,064 | 1,080 | 14,144 | ||||||||||||
Total | $ | 1,650 | $ | 2,489 | $ | 4,139 | $ | 15,852 | $ | 7,911 | $ | 23,763 | ||||||
Sector Breakout
Net Par Outstanding (09/30/2008) | Percent of total Net Par | Net Par Outstanding (12/31/2007) | Percent of total Net Par | |||||||||
Public Finance | ||||||||||||
General Obligations | $ | 19,738 | 17.8 | % | $ | 19,780 | 17.0 | % | ||||
Healthcare | 9,168 | 8.3 | % | 10,849 | 9.4 | % | ||||||
Transportation | 6,941 | 6.2 | % | 6,938 | 6.0 | % | ||||||
Utilities | 6,229 | 5.6 | % | 6,555 | 5.7 | % | ||||||
Tax Backed | 5,402 | 4.9 | % | 5,851 | 5.0 | % | ||||||
Investor-Owned Utilities | 3,845 | 3.4 | % | 3,889 | 3.4 | % | ||||||
Education | 3,717 | 3.3 | % | 4,237 | 3.7 | % | ||||||
Long Term Care | 1,447 | 1.3 | % | 1,548 | 1.3 | % | ||||||
Housing | 539 | 0.5 | % | 621 | 0.5 | % | ||||||
Other Public Finance | 1,739 | 1.6 | % | 1,784 | 1.5 | % | ||||||
Subtotal Public Finance | $ | 58,765 | 52.9 | % | $ | 62,052 | 53.5 | % | ||||
Structured Finance | ||||||||||||
Collateralized Debt Obligations | $ | 45,930 | 41.4 | % | $ | 46,961 | 40.4 | % | ||||
Asset Backed – Mortgage and MBS | 1,413 | 1.3 | % | 1,579 | 1.4 | % | ||||||
Asset Backed – Consumer | 1,253 | 1.1 | % | 1,415 | 1.2 | % | ||||||
Asset Backed – Commercial and Other | 1,196 | 1.1 | % | 1,359 | 1.2 | % | ||||||
Other Structured Finance | 2,471 | 2.2 | % | 2,656 | 2.3 | % | ||||||
Subtotal Structured Finance | 52,263 | 47.1 | % | 53,970 | 46.5 | % | ||||||
Total | $ | 111,028 | 100.0 | % | $ | 116,022 | 100.0 | % | ||||
* | See Consolidated Explanatory Notes on page 18. |
** | Current in 2008; reflects one quarter lag in 2007. |
9 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Consolidated Insured Portfolio Highlights |
Radian Asset Assurance Inc.
Consolidated Insured Portfolio Highlights*
($ Millions)
Rating Distribution**
Rating** | Net Par Outstanding (09/30/2008) | Percent of total Net Par | Net Par Outstanding (12/31/2007) | Percent of total Net Par | ||||||||
Public Finance | ||||||||||||
AAA | $ | 2,533 | 2.4 | % | $ | 1,943 | 1.7 | % | ||||
AA | 18,455 | 16.6 | % | 19,560 | 16.8 | % | ||||||
A | 18,693 | 16.8 | % | 20,753 | 17.9 | % | ||||||
BBB | 16,587 | 14.9 | % | 18,044 | 15.6 | % | ||||||
Below Investment Grade | 2,465 | 2.2 | % | 1,709 | 1.5 | % | ||||||
Not Rated | 32 | 0.0 | % | 43 | 0.0 | % | ||||||
Subtotal Public Finance | $ | 58,765 | 52.9 | % | $ | 62,052 | 53.5 | % | ||||
Structured Finance | ||||||||||||
AAA | $ | 46,428 | 41.9 | % | $ | 48,267 | 41.6 | % | ||||
AA | 889 | 0.8 | % | 858 | 0.8 | % | ||||||
A | 1,657 | 1.5 | % | 1,541 | 1.3 | % | ||||||
BBB | 2,498 | 2.2 | % | 2,471 | 2.1 | % | ||||||
Below Investment Grade | 97 | 0.1 | % | 86 | 0.1 | % | ||||||
Not Rated | 694 | 0.6 | % | 747 | 0.6 | % | ||||||
Subtotal Structured Finance | $ | 52,263 | 47.1 | % | $ | 53,970 | 46.5 | % | ||||
Total | ||||||||||||
AAA | $ | 48,961 | 44.3 | % | $ | 50,210 | 43.3 | % | ||||
AA | 19,344 | 17.4 | % | 20,418 | 17.6 | % | ||||||
A | 20,350 | 18.3 | % | 22,294 | 19.2 | % | ||||||
BBB | 19,085 | 17.1 | % | 20,515 | 17.7 | % | ||||||
Below Investment Grade | 2,562 | 2.3 | % | 1,795 | 1.6 | % | ||||||
Not Rated | 726 | 0.6 | % | 790 | 0.6 | % | ||||||
Total | $ | 111,028 | 100.0 | % | $ | 116,022 | 100.0 | % | ||||
* | See Consolidated Explanatory Notes on page 18. |
** | Indicated ratings category reflects the highest rating assigned to the underlying obligation from the three rating agencies (S&P, Moody’s and Fitch), or, if no such rating has been assigned, Radian’s rating estimate of the obligation utilizing rating agency models and methodologies to the extent available. Radian’s rating estimates are subject to revision at any time and may differ from the credit ratings ultimately assigned by the three rating agencies. |
10 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Consolidated Insured Portfolio Highlights |
Radian Asset Assurance Inc.
Consolidated Insured Portfolio Highlights*
($ Millions)
Geographic Diversification
Net Par Outstanding (09/30/2008) | Percent of total Net Par | Net Par Outstanding (12/31/2007) | Percent of total Net Par | |||||||||
Domestic public finance | ||||||||||||
California | $ | 6,831 | 6.2 | % | $ | 7,191 | 6.2 | % | ||||
New York | 5,374 | 4.8 | % | 5,862 | 5.2 | % | ||||||
Texas | 4,491 | 4.0 | % | 4,454 | 3.8 | % | ||||||
Pennsylvania | 3,319 | 3.0 | % | 3,298 | 2.8 | % | ||||||
Illinois | 3,054 | 2.8 | % | 3,156 | 2.7 | % | ||||||
Florida | 2,996 | 2.8 | % | 3,466 | 3.0 | % | ||||||
New Jersey | 2,525 | 2.3 | % | 2,666 | 2.3 | % | ||||||
Massachusetts | 2,044 | 1.8 | % | 2,417 | 2.1 | % | ||||||
Washington | 1,942 | 1.7 | % | 2,056 | 1.8 | % | ||||||
Colorado | 1,828 | 1.6 | % | 1,831 | 1.6 | % | ||||||
Top ten states – domestic public finance subtotal | 34,404 | 31.0 | % | 36,397 | 31.5 | % | ||||||
Total of other states – domestic public finance | 18,369 | 16.5 | % | 20,124 | 17.3 | % | ||||||
Total domestic public finance | 52,773 | 47.5 | % | 56,521 | 48.8 | % | ||||||
Domestic structured finance | 35,587 | 32.1 | % | 37,054 | 31.9 | % | ||||||
International public and structured finance | 22,668 | 20.4 | % | 22,447 | 19.3 | % | ||||||
Total | $ | 111,028 | 100.0 | % | $ | 116,022 | 100.0 | % | ||||
* | See Consolidated Explanatory Notes on page 18. |
11 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Consolidated Insured Portfolio Highlights |
Radian Asset Assurance Inc.
Consolidated Insured Portfolio Highlights* ($ Millions)
25 Largest Public Finance Exposures
Obligor | Net Par Outstanding (09/30/2008) | Percent of total Net Par | Rating** | |||||
New York, NY – G.O. | $ | 755 | 0.7 | % | AA | |||
California – G.O. | 738 | 0.7 | % | A+ | ||||
Port Authority of New York & New Jersey | 683 | 0.6 | % | AA- | ||||
Chicago, IL – G.O. | 567 | 0.5 | % | AA | ||||
New Jersey Transportation Trust Fund Authority | 538 | 0.5 | % | AA- | ||||
Washington – G.O. | 461 | 0.4 | % | AA+ | ||||
Los Angeles Unified School District, CA | 421 | 0.4 | % | AA- | ||||
Metropolitan Transportation Authority, NY | 402 | 0.4 | % | A | ||||
Massachusetts – G.O. | 379 | 0.3 | % | AA | ||||
Massachusetts School Building Authority | 359 | 0.3 | % | AA+ | ||||
Thames Water Utilities Finance PLC, UK | 356 | 0.3 | % | A3 | ||||
New Jersey Economic Development Authority School Facilities | 347 | 0.3 | % | AA- | ||||
Illinois – G.O. | 289 | 0.3 | % | AA | ||||
Puerto Rico – G.O. | 287 | 0.3 | % | BBB- | ||||
Jefferson County, AL – Sewer Revenue | 283 | 0.3 | % | CCC | ||||
Long Island Power Authority, NY | 276 | 0.2 | % | A- | ||||
District of Columbia | 259 | 0.2 | % | A+ | ||||
New Jersey Turnpike Authority | 248 | 0.2 | % | A | ||||
Metropolitan Washington DC Airports Authority | 243 | 0.2 | % | AA- | ||||
Illinois Toll Highway Authority | 243 | 0.2 | % | AA- | ||||
New York City Municipal Water Finance Authority | 225 | 0.2 | % | AA+ | ||||
Reliance Rail Corp., AU | 218 | 0.2 | % | BBB+ | ||||
Bay Area Toll Authority, CA | 212 | 0.2 | % | AA | ||||
Houston Airport System | 212 | 0.2 | % | A+ | ||||
Puerto Rico Electric Power Authority | 205 | 0.2 | % | A- | ||||
Total | $ | 9,206 | 8.3 | % | ||||
Largest Structured Finance Exposures
Radian’s largest Structured Finance exposures consist of the following:
• | Seven $600 million transactions representing Static Synthetic Investment Grade Corporate CDOs rated AAA. |
• | One $599 million transaction representing a Static Synthetic Investment Grade Commercial Mortgage Backed Securities CDO rated AAA. |
• | One $563 million transaction representing a Static Synthetic Investment Grade Corporate CDO rated AAA. |
• | One $486 million transaction representing a Managed Cashflow Investment Grade Asset-Backed CDO rated A. This transaction is on Radian’s Watch List with an internal rating of CCC-. |
• | Twenty eight $450 million transactions representing Static Synthetic Investment Grade Corporate CDOs rated AAA. |
• | One $450 million transaction representing a Second-to-Pay CDO rated AAA. |
• | One $450 million transaction representing a Static Synthetic Investment Grade Commercial Mortgage Backed Securities CDO rated AAA. |
These 40 transactions combine to total $19.3 billion, or 17.4% of Radian’s Net Par Outstanding as of September 30, 2008.
* | See Consolidated Explanatory Notes on page 18. |
** | Indicated ratings category reflects the highest rating assigned to the underlying obligation from the three rating agencies (S&P, Moody’s and Fitch), or, if no such rating has been assigned, Radian’s rating estimate of the obligation utilizing rating agency models and methodologies to the extent available. Radian’s rating estimates are subject to revision at any time and may differ from the credit ratings ultimately assigned by the three rating agencies. |
12 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Consolidated Insured Portfolio Highlights |
Radian Asset Assurance Inc.
Consolidated Insured Portfolio Highlights*
($ Millions)
Below Investment Grade Exposure by Sector**
Sector | Net Par Outstanding (09/30/2008) | Percent of total Net Par | Net Par Outstanding (12/31/2007) | Percent of total Net Par | ||||||||
Public Finance | ||||||||||||
General Obligations | $ | 1,301 | 1.2 | % | $ | 1,155 | 1.0 | % | ||||
Utilities | 405 | 0.4 | % | 121 | 0.1 | % | ||||||
Healthcare | 222 | 0.2 | % | 79 | 0.1 | % | ||||||
Education | 218 | 0.2 | % | 114 | 0.1 | % | ||||||
Tax Backed | 165 | 0.1 | % | 102 | 0.1 | % | ||||||
Long Term Care | 84 | 0.1 | % | 55 | 0.1 | % | ||||||
Transportation | 22 | 0.0 | % | 24 | 0.0 | % | ||||||
Housing | 7 | 0.0 | % | 20 | 0.0 | % | ||||||
Other Public Finance | 41 | 0.0 | % | 39 | 0.0 | % | ||||||
Subtotal Public Finance | 2,465 | 2.2 | % | 1,709 | 1.5 | % | ||||||
Structured Finance | ||||||||||||
Asset Backed – Consumer | 61 | 0.1 | % | 67 | 0.1 | % | ||||||
Asset Backed – Mortgage and MBS | 22 | 0.0 | % | — | 0.0 | % | ||||||
Asset Backed – Commercial and Other | 12 | 0.0 | % | 14 | 0.0 | % | ||||||
Collateralized Debt Obligations | 2 | 0.0 | % | 5 | 0.0 | % | ||||||
Subtotal Structured Finance | 97 | 0.1 | % | 86 | 0.1 | % | ||||||
Total | $ | 2,562 | 2.3 | % | $ | 1,795 | 1.6 | % | ||||
10 Largest Health Care Exposures
Obligor | Net Par Outstanding (09/30/2008) | Percent of total Net Par | Rating** | |||||
North Bay Plenary Health Canadian Hospital | $ | 189 | 0.2 | % | AAA | |||
Consort Healthcare Limited | 118 | 0.1 | % | BBB- | ||||
Catholic Health Initiatives | 112 | 0.1 | % | AA | ||||
Capital Hospitals | 108 | 0.1 | % | BBB- | ||||
Bon Secours Health System Inc. | 107 | 0.1 | % | A- | ||||
OSF Healthcare System Inc. | 105 | 0.1 | % | A | ||||
Group Health Cooperative | 102 | 0.1 | % | A- | ||||
Carolinas Healthcare System Charlotte- Mecklenburg Hospital | 94 | 0.1 | % | AA- | ||||
Stanford Health Services | 91 | 0.1 | % | A+ | ||||
Memorial Hermann Hospital System | 86 | 0.1 | % | A | ||||
Total | $ | 1,112 | 1.1 | % | ||||
* | See Consolidated Explanatory Notes on page 18. |
** | Indicated ratings category reflects the highest rating assigned to the underlying obligation from the three rating agencies (S&P, Moody’s and Fitch), or, if no such rating has been assigned, Radian’s rating estimate of the obligation utilizing rating agency models and methodologies to the extent available. Radian’s rating estimates are subject to revision at any time and may differ from the credit ratings ultimately assigned by the three rating agencies. |
13 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Consolidated Insured Portfolio Highlights |
Radian Asset Assurance Inc.
Consolidated Insured Portfolio Highlights*
($ Millions)
CDO Exposure
Net Par Outstanding (09/30/2008) | Percent of Total CDO Net Par | Net Par Outstanding (12/31/2007) | Percent of Total CDO Net Par | |||||||||
Direct | $ | 44,141 | 96.1 | % | $ | 45,121 | 96.1 | % | ||||
Assumed | 1,789 | 3.9 | % | 1,840 | 3.9 | % | ||||||
Total | $ | 45,930 | 100.0 | % | $ | 46,961 | 100.0 | % | ||||
Total CDO Portfolio Rating Distribution**
Net Par Outstanding (09/30/2008) | Percent of Total CDO Net Par | Net Par Outstanding (12/31/2007) | Percent of Total CDO Net Par | |||||||||
AAA | $ | 45,132 | 98.3 | % | $ | 46,491 | 99.0 | % | ||||
AA | 142 | 0.3 | % | 149 | 0.3 | % | ||||||
A | 651 | 1.4 | % | 175 | 0.4 | % | ||||||
BBB | 3 | 0.0 | % | 141 | 0.3 | % | ||||||
Below Investment Grade | 2 | 0.0 | % | 5 | 0.0 | % | ||||||
Not Rated | — | 0.0 | % | — | 0.0 | % | ||||||
Total | $ | 45,930 | 100.0 | % | $ | 46,961 | 100.0 | % | ||||
Direct CDO Underlying Asset Types
Direct CDO Net Par Outstanding (09/30/2008) | Percent of Direct CDO Net Par | Direct CDO Net Par Outstanding (12/31/2007) | Percent of Direct CDO Net Par | |||||||||
Corporates | $ | 38,021 | 86.1 | % | $ | 38,822 | 86.0 | % | ||||
Other | 6,120 | 13.9 | % | 6,299 | 14.0 | % | ||||||
Total | $ | 44,141 | 100.0 | % | $ | 45,121 | 100.0 | % | ||||
* | See Consolidated Explanatory Notes on page 18. |
** | Indicated ratings category reflects the highest rating assigned to the underlying obligation from the three rating agencies (S&P, Moody’s and Fitch), or, if no such rating has been assigned, Radian’s rating estimate of the obligation utilizing rating agency models and methodologies to the extent available. Radian’s rating estimates are subject to revision at any time and may differ from the credit ratings ultimately assigned by the three rating agencies. |
14 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Consolidated Insured Portfolio Highlights |
Radian Asset Assurance Inc.
Consolidated Insured Portfolio Highlights*
($ Millions)
CDO of ABS, CMBS, and Multi-sector Portfolio
Type of Collateral as a Percentage of Total Pool
Year | Legal Final Maturity | Net Par Out- standing ($ Millions) | ABS | RMBS | Sub- prime RMBS | CMBS | CDO of Invest- ment Grade Corporate | CDO of High Yield Grade Corporate | CDO of ABS | CDO of CDO | Other | Total Collateral Pool | S&P Rating | Moody’s Rating | Original AAA Subor- dination | Radian Asset Attach- ment Point | Radian Asset Detach- ment Point | % RMBS A3 or Better** | % Sub- prime A3 or Better** | ||||||||||||||||||||||||||||||||||
2004 | 2009 | 253 | 33.3 | % | 30.2 | % | 0.0 | % | 0.0 | % | 33.6 | % | 2.9 | % | 0.0 | % | 0.0 | % | 0.0 | % | 100.0 | % | AAA | Aaa | 2.2 | % | 24.3 | % | 46.2 | % | 100.0 | % | 0.0 | % | |||||||||||||||||||
2005 | 2010 | 150 | 25.2 | % | 49.0 | % | 15.8 | % | 0.0 | % | 8.3 | % | 1.7 | % | 0.0 | % | 0.0 | % | 0.0 | % | 100.0 | % | AAA | N/R | 4.5 | % | 13.0 | % | 38.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||||||
2006 | 2046 | 486 | 0.0 | % | 21.8 | % | 42.7 | % | 14.0 | % | 0.0 | % | 0.0 | % | 13.1 | % | 3.4 | % | 5.0 | % | 100.0 | % | B+*** | A2*** | 4.9 | % | **** | 100.0 | % | 58.0 | % | 40.2 | % | ||||||||||||||||||||
2006 | 2047 | 450 | 0.0 | % | 0.0 | % | 0.0 | % | 100.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 100.0 | % | AAA | N/R | 2.4 | % | 6.8 | % | 30.0 | % | NA | NA | |||||||||||||||||||||
2006 | 2049 | 599 | 0.0 | % | 0.0 | % | 0.0 | % | 100.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 100.0 | % | AAA | N/R | 0.6 | % | 5.1 | % | 30.0 | % | NA | NA | |||||||||||||||||||||
2006 | 2056 | 353 | 0.0 | % | 0.0 | % | 0.0 | % | 100.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 100.0 | % | AAA | N/R | 5.5 | % | 6.5 | % | 30.0 | % | NA | NA | |||||||||||||||||||||
2007 | 2047 | 430 | 0.0 | % | 0.0 | % | 0.0 | % | �� | 100.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 100.0 | % | AAA | Aaa | 2.4 | % | 7.0 | % | 50.0 | % | NA | NA | ||||||||||||||||||||
Total | 2,721 |
* | See Consolidated Explanatory Notes on page 18. |
** | Ratings are based on Moody’s ratings. If Moody’s rating is unavailable, then S&P rating applies. |
*** | S&P downgraded this CDO to AA- in March 2008 and then to B+ in July 2008 and Moody’s downgraded it to Aa3 in April 2008 and then to A2 in July 2008. This credit was added to Radian Asset’s Watch List with an internal rating of BB- in April 2008 and subsequently downgraded to CCC- in August 2008. |
**** | Although the current attachment point equals $119.9 million (19.8%), Radian does not currently expect the remaining subordination will be sufficient to absorb losses from the remaining collateral and expects to pay claims on this transaction. The amount and timing of any claims that Radian may be obligated to pay in the future is uncertain. However, given the transaction structure and current level of remaining subordination, Radian does not expect to begin paying claims for many years. |
15 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 / Consolidated Insured Portfolio Highlights |
Radian Asset Assurance Inc.
Consolidated Insured Portfolio Highlights*
($ Millions)
Non-CDO RMBS Portfolio: Breakdown by Asset Type
Net Par | % of RMBS | Direct | Assumed Non- | Assumed | Assumed | % 2006/2007 | Ratings*** | |||||||||||||||||||||||||||||||
Outstanding | Portfolio | Total** | HELOC’s | HELOC’s | Total | Vintage | AAA | AA | A | BBB**** | BIG***** | |||||||||||||||||||||||||||
SubPrime | $ | 392.5 MM 141 Policies | 36.1 | % | $
| 126.7 MM 7 Policies 32.3 | % | $
| 221.6 MM 130 Policies 56.5 | % | $
| 44.2 MM 4 Policies 11.2 | % | $ | 265.8 MM 134 Policies 67.7% | 10.2% / 31.2% | 17.4 | % | 0.6 | % | 2.2 | % | 4.5 | % | 75.3 | % | ||||||||||||
Prime | $ | 274.7 MM 68 Policies | 25.3 | % | $
| 123.0 MM 7 Policies 44.8 | % | $ | 69.6 MM 45 Policies 25.3 | % | $
| 82.1 MM 16 Policies 29.9 | % | $ | 151.7 MM 61 Policies 55.2% | 6.6% / 33.1% | 64.6 | % | 7.7 | % | 3.9 | % | 15.4 | % | 8.4 | % | ||||||||||||
Alt A | $ | 388.2 MM 61 Policies | 35.7 | % | $
| 73.2 MM 3 Policies 18.9 | % | $ | 248.9 MM 52 Policies 64.1 | % | $
| 66.1 MM 6 Policies 17.0 | % | $ | 315.0 MM 58 Policies 81.1% | 26.0% / 32.9% | 50.7 | % | 2.6 | % | 8.5 | % | 12.3 | % | 25.9 | % | ||||||||||||
Second to Pay | $
| 30.9 MM 8 Policies | 2.9 | % | $
| 0 MM 0 Policies 0.0 |
% | $ | 30.9 MM 8 Policies | | $
| 0 MM 0 Policies 0.0 |
% | $ | 30.9 MM 8 Policies | 0.0% / 100.0% | 16.9 | % | 8.3 | % | 0.0 | % | 0.0 | % | 74.8 | % | ||||||||||||
Total RMBS | $ | 1,086.3 MM 278 Policies | 100.0 | % | $
| 322.9 MM 17 Policies 29.7 | % | $ | 571.0 MM 235Policies 52.6 | % | $
| 192.4MM 26 Policies 17.7 | % | $ | 763.4 MM 261 Policies 70.3% | 14.6% / 34.3% | 41.2 | % | 3.3 | % | 4.8 | % | 10.0 | % | 40.7 | % |
* | See Consolidated Explanatory Notes on page 18. |
** | Radian has no direct HELOC exposure. No direct RMBS have been written since 2005 and no direct SubPrime RMBS have been written since 2004 |
*** | Indicated ratings are based on Radian’s Internal Ratings |
**** | 100% of the BBB exposure is assumed through treaties from the monoline primaries |
***** | All of the BIG exposure is on Radian’s Watch List and reserves have been established for these as needed |
16 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008/ Consolidated Insured Portfolio Highlights |
Radian Asset Assurance Inc.
Consolidated Insured Portfolio Highlights*
($ Millions)
Net Debt Service Amortization
��
Scheduled Net Debt Service Amortization as of 09/30/2008 | Ending Net Debt Service Outstanding | |||||
2008 | $ | 1,357 | $ | 155,572 | ||
2009 | 7,291 | 148,281 | ||||
2010 | 6,844 | 141,437 | ||||
2011 | 7,014 | 134,423 | ||||
2012 | 11,054 | 123,369 | ||||
2013-2017 | 53,008 | 70,361 | ||||
2018-2022 | 22,543 | 47,818 | ||||
2023-2027 | 17,715 | 30,103 | ||||
After 2027 | 30,103 | — | ||||
Total | $ | 156,929 | ||||
* | See Consolidated Explanatory Notes on page 18. |
17 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008/ Consolidated Insured Portfolio Highlights |
Radian Asset Assurance Inc.
Consolidated Explanatory Notes
1. The accompanying unaudited GAAP financial information includes the accounts of Radian, Radian Asset Assurance Limited, Radian Financial Products Limited, Van-American Insurance Agency, Inc. and Asset Recovery Solutions Group Inc.
These unaudited consolidated financial statements do not include all of the information and disclosures required by generally accepted accounting principles. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, including the Report of Independent Registered Public Accounting Firm for Radian for the year ended December 31, 2007.
2. Prior year amounts have been restated to conform to current year presentation.
3. For the quarter ended September 30, 2008, net premiums written decreased $45.3 million to $13.8 million as compared to $59.1 million for the quarter ended September 30, 2007. The decrease was primarily due to a $15.7 million decrease in public finance direct and a $25.4 million decrease in public finance reinsurance. For the year-to-date periods, net premiums written during 2008 decreased $74.1 million to $70.4 million from $144.5 million of net premium written during the 2007 period, as public finance direct written decreased $33.1 million and public finance reinsurance written decreased $36.3 million. In light of current market conditions, Radian has discontinued, for the foreseeable future, writing any new financial guaranty insurance other than as may be necessary to commute, restructure, hedge or otherwise mitigate losses or reduce exposure in our existing portfolio.
4. Net premiums earned for the quarter ended September 30, 2008, increased $20.7 million to $53.4 million from $32.7 million during the 2007 quarter. The increase was primarily the result of public finance refundings which were $23.2 million higher for the 2008 quarter than the 2007 quarter. Net premiums earned for the year-to-date period ended September 30, 2008 were $134.7 million compared to $98.2 million earned during the comparable period in 2007, an increase of $36.5 million primarily the result of an increase in public finance refundings of $39.8 million.
5. For the quarter ended September 30, 2008, the loss on investments was $26.9 million versus a gain of $5.5 million for the 2007 quarter, a change of $(32.4) million. The 2008 quarter included impairments of $11.8 million and a $13.0 million loss pertaining to the mark to market on hybrid securities. During the 2007 quarter, there were no impairments and the mark to market on hybrid securities was a gain of $4.1 million. For the year-to-date period of 2008, the loss on investments was $63.8 million versus a gain of $13.9 million for the comparable period of 2007, a change of $(77.7) million. The 2008 results included impairments of $34.0 million and a loss of $30.5 million on the mark to market on hybrid securities. The 2007 year-to-date results had no impairments and a $3.9 million gain on the mark to market on hybrid securities.
18 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Consolidated Explanatory Notes |
Radian Asset Assurance Inc.
Consolidated Explanatory Notes
6. Loss and loss adjustment expenses for the quarters ended September 30, 2008 and 2007, were $25.7 million and $52.1 million, respectively. The 2008 quarter included $21.0 million of reserve strengthening of non-specific for the structured finance reinsurance line of business as a result of market conditions in the residential mortgage sector. The 2007 quarter losses and loss adjustment expenses is primarily related to one financial guaranty transaction. An allocated non-specific reserve of $50 million was established for this transaction. Loss and loss adjustment expenses for the year-to-date periods ended September 30, 2008 and 2007, were $48.1 million and $48.2 million respectively. The 2008 year-to-date period included $39.0 million of reserve strengthening of non-specific for the structured finance reinsurance line of business as a result of market conditions in the residential mortgage sector.
7. Other operating expenses were $36.9 million for the quarter ended September 30, 2008 versus $9.9 million for the 2007 period, an increase of $27.0 million. The increase in other operating expenses for the third quarter of 2008 was primarily comprised of $10.8 million of severance as a result of Radian’s decision to cease writing new business in light of current market conditions, and an increase of $12.5 million of allocated expenses from Radian Group primarily due to increases of audit fees, legal fees, insurance, and employee costs. For the year-to-date period of 2008, other operating expenses were $72.5 million compared to $36.8 million for the year-to-date period of 2007, an increase of $35.7 million. The increase in other operating expenses for the year-to-date period of 2008 was primarily comprised of $16.2 million of severance and a year-over-year increase of $16.3 million of allocated expenses from Radian Group primarily due to increases of audit fees, legal fees, insurance, and employee costs.
8. The decrease in losses and loss adjustment expense reserves reflects 2008 payments of $100.0 million pertaining to one financial guaranty transaction for which reserves of $100.0 million were established in 2007 which was partially offset by the increase in reserve strengthening resulting from market conditions in the residential mortgage sector.
9. During June 2008, Radian declared an ordinary dividend in the amount of $107.5 million.
19 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008 /Consolidated Explanatory Notes |
Safe Harbor Statement
All statements made herein that address events or developments 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 Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management’s current views and assumptions with respect to future events. These forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties, including the following: changes in general financial and political conditions such as extended national or regional economic recessions (or expansions), changes in income, population trends and changes in household formation patterns, changes in unemployment rates, changes or volatility in interest rates, consumer confidence, or credit spreads; future credit market disruptions - in particular, further deterioration in the municipal finance, corporate credit, structured finance, mortgage and related credit markets; changes in investor perception of the strength of us individually, or financial guaranty providers generally, or in the perception of the strength of our ultimate parent Radian Group Inc. and the other businesses in which it or its other subsidiaries participate, including the mortgage insurance industry; risks faced by the businesses, municipalities or pools of assets covered by our insurance; the loss of, or substantial reduction of business from, a customer with whom we have a concentration of our insurance in force or the influence of large customers; rights of primary insures to recapture business previously ceded to us, increased severity or frequency of losses associated with certain of our products that are riskier than traditional financial guaranty insurance policies; losses associated with the aging of our municipal and structured finance insurance portfolios; ratings actions with respect to Radian Group’s credit ratings or the financial strength ratings assigned by the major ratings agencies to us or any of our insurance subsidiaries, and rights of customers to terminate policies as a result of such ratings actions; heightened competition from other insurance providers, from federal and state governmental or quasi-governmental entities and from alternative products to financial guaranty insurance; the application of federal or state consumer, lending, insurance and other applicable laws and regulations, or changes in these laws and regulations or the way they are interpreted; potential for regulatory action or litigation; the possibility that we may fail to estimate accurately the likelihood, magnitude and timing of losses in connection with establishing loss reserves for our financial guaranty businesses or to estimate accurately the fair value amounts of derivative financial guaranty contracts in determining gains and losses on these contracts; changes in accounting guidance from the SEC or the Financial Accounting Standards Board regarding income recognition and the treatment of loss reserves in the financial guaranty insurance industry; legal and other limitations on the amount of dividends that we may pay; risks associated with our international business activities. For more information regarding these risks and uncertainties, as well as certain additional risks that we face, investors should refer to the risk factors detailed in Part I, Item 1A of Radian Group’s annual report on Form 10-K for the year ended December 31, 2007, as modified by Part I Item 1A of Radian Group’s quarterly report on Form 10-Q for the period ended March 31, 2008, Part I Item 1A of Radian Group’s quarterly report on Form 10-Q for the period ended June 30, 2008 and Part I Item 1A of Radian Group’s quarterly report on Form 10-Q for the period ended September 30, 2008. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which this information was publicly released. We do not intend to, and disclaim any duty or obligation to, update or revise any forward-looking statements made in this document to reflect new information, future events or for any other reason.
20 Quarterly Operating Supplement for the Period Ended Sept. 30, 2008/ Safe Harbor Statement |