SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to _____________________
Commission file number 1-11356
RADIAN GROUP INC.
-----------------
(Exact name of registrant as specified in its charter)
DELAWARE 23-2691170
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1601 MARKET STREET, PHILADELPHIA, PA 19103
------------------------------------ -----
(Address of principal executive offices) (zip code)
(215) 564-6600
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or if such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 94,663,101 shares of
Common Stock, $0.001 par value, outstanding on May 8, 2002.
RADIAN GROUP INC. AND SUBSIDIARIES
INDEX
PAGE NUMBER
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets .................................... 3
Condensed Consolidated Statements of Income .............................. 4
Condensed Consolidated Statement of Changes in Common Stockholders' Equity 5
Condensed Consolidated Statements of Cash Flows .......................... 6
Notes to Unaudited Condensed Consolidated Financial Statements ........... 7 - 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................................. 11 - 17
Item 3. Quantitative and Qualitative Disclosures about Market Risk ............... 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ......................................................... 18
Item 2. Changes in Securities ..................................................... 18
Item 6. Exhibits and Reports on Form 8-K .......................................... 18
SIGNATURES ............................................................................. 19
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RADIAN GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31 December 31
2002 2001
----------- -----------
(In thousands, except share amounts)
Assets
Investments
Fixed maturities held to maturity - at amortized cost (fair value $446,232
and $461,962) $ 428,285 $ 442,198
Fixed maturities available for sale - at fair value (amortized cost $2,914,496
and $2,552,930) 2,910,444 2,567,200
Trading securities - at fair value (cost $36,994 and $22,599) 32,777 21,659
Equity securities - at fair value (cost $156,256 and $116,978) 162,787 120,320
Short-term investments 125,963 210,788
Other invested assets 9,103 7,310
----------- -----------
Total Investments 3,669,359 3,369,475
----------- -----------
Cash 69,128 60,159
Investment in affiliates 203,197 177,465
Deferred policy acquisition costs 157,924 151,037
Prepaid federal income taxes 326,514 326,514
Provisional losses recoverable 46,069 47,229
Other assets 360,565 306,747
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$ 4,832,756 $ 4,438,626
=========== ===========
Liabilities and Stockholders' Equity
Unearned premiums $ 528,041 $ 513,932
Reserve for losses 593,685 588,643
Long-term debt 544,093 324,076
Deferred federal income taxes 457,576 432,098
Accounts payable and accrued expenses 258,578 233,549
----------- -----------
2,381,973 2,092,298
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Redeemable preferred stock, par value $.001 per share; 800,000 shares issued
and outstanding - at redemption value 40,000 40,000
----------- -----------
Common stockholders' equity
Common stock, par value $.001 per share; 200,000,000 shares authorized;
94,635,489 and 94,170,300 shares issued in 2002 and 2001, respectively 95 94
Treasury stock; 188,092 shares in 2002 and 2001 (7,874) (7,874)
Additional paid-in capital 1,223,403 1,210,088
Retained earnings 1,194,803 1,093,580
Accumulated other comprehensive income 356 10,440
----------- -----------
2,410,783 2,306,328
----------- -----------
$ 4,832,756 $ 4,438,626
=========== ===========
See notes to unaudited condensed consolidated financial statements.
3
RADIAN GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Quarter Ended
March 31
2002 2001
--------- ---------
(In thousands, except per-share amounts)
Revenues:
Premiums written:
Direct $ 202,864 $ 164,407
Assumed 35,402 7,722
Ceded (13,628) (11,880)
--------- ---------
Net premiums written 224,638 160,249
Increase in unearned premiums (15,449) (4,486)
--------- ---------
Premiums earned 209,189 155,763
Net investment income 42,753 28,020
Equity in net income of affiliates 18,620 12,044
Other income 11,282 6,292
--------- ---------
281,844 202,119
--------- ---------
Expenses:
Provision for losses 57,427 49,272
Policy acquisition costs 23,447 17,041
Other operating expenses 44,745 23,958
Interest expense 7,154 1,401
--------- ---------
132,773 91,672
--------- ---------
Gains and losses:
Net gains on sales of investments 621 3,424
Change in fair value of derivative instruments (3,242) (1,601)
--------- ---------
(2,621) 1,823
--------- ---------
Pretax income 146,450 112,270
Provision for income taxes 42,517 32,113
--------- ---------
Net income 103,933 80,157
Dividends to preferred stockholder 825 825
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Net income available to common stockholders $ 103,108 $ 79,332
========= =========
Basic net income per share $ 1.09 $ 0.97
========= =========
Diluted net income per share $ 1.08 $ 0.96
========= =========
Average number of common shares outstanding - basic 94,224 81,676
========= =========
Average number of common and common equivalent shares
outstanding - diluted 95,881 83,038
========= =========
See notes to unaudited condensed consolidated financial statements.
4
RADIAN GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
(UNAUDITED)
Accumulated Other
Comprehensive
Income (Loss)
-------------------------
Foreign Unrealized
Additional Currency Holding
Common Treasury Paid-in Retained Translation Gains
Stock Stock Capital Earnings Adjustment (Losses) Total
------ -------- ---------- ---------- ----------- ---------- ----------
(In thousands)
Balance, January 1, 2002 $ 94 $ (7,874) $1,210,088 $1,093,580 $ (586) $ 11,026 $2,306,328
Comprehensive income:
Net income -- -- -- 103,933 -- -- 103,933
Unrealized foreign currency
translation adjustment, net of tax
benefit of $24 -- -- -- -- (42) -- (42)
Unrealized holding losses arising
during period, net of tax benefit
of $5,624 -- -- -- -- -- (10,445)
Less: Reclassification adjustment
for net gains included in net
income, net of tax of $217 -- -- -- -- -- 403
----------
Net unrealized loss on investments,
net of tax benefit of $5,407 -- -- -- -- -- (10,042) (10,042)
----------
Comprehensive income 93,849
Issuance of common stock under
incentive plans 1 -- 13,315 -- -- -- 13,316
Dividends -- -- -- (2,710) -- -- (2,710)
------ -------- ---------- ---------- ----------- ---------- ----------
Balance, March 31, 2002 $ 95 $ (7,874) $1,223,403 $1,194,803 $ (628) $ 984 $2,410,783
====== ======== ========== ========== =========== ========== ==========
See notes to unaudited condensed consolidated financial statements.
5
RADIAN GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Quarter Ended
March 31
2002 2001
--------- ---------
(in thousands)
Cash flows from operating activities $ 120,623 $ 113,783
--------- ---------
Cash flows from investing activities:
Proceeds from sales of fixed maturity investments available
for sale 238,887 160,430
Proceeds from sales of equity securities available for sale 120,098 2,084
Proceeds from redemptions of fixed maturity investments
available for sale 50,833 6,010
Proceeds from redemptions of fixed maturity investments
held to maturity 14,854 1,355
Purchases of fixed maturity investments available for sale (667,094) (286,992)
Purchases of equity securities available for sale (159,174) (2,733)
Sales of short-term investments, net 84,853 17,148
(Purchases) sales of property and equipment, net (16,373) 88
Purchases of other invested assets (1,836) (259)
Acquisitions, net of cash acquired -- 6,788
Investment in affiliates (20,000) (5,000)
Distributions from affiliates 12,595 5,100
Other 4,144 (354)
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Net cash used in investing activities (338,213) (96,335)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock under incentive plans 13,316 3,319
Acquisition costs -- (6,997)
Issuance of long-term debt 215,953 --
Dividends paid (2,710) (1,963)
--------- ---------
Net cash provided by (used in) financing activities 226,559 (5,641)
--------- ---------
Increase in cash 8,969 11,807
Cash, beginning of period 60,159 2,424
--------- ---------
Cash, end of period $ 69,128 $ 14,231
========= =========
Supplemental disclosures of cash flow information:
Income taxes paid $ 6,513 $ 6,164
========= =========
Interest paid $ 2,708 $ 2,625
========= =========
See notes to unaudited condensed consolidated financial statements.
6
RADIAN GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS - BASIS OF PRESENTATION
The consolidated financial statements included herein, include the
accounts of Radian Group Inc. (the "Company") and its subsidiaries, including
its principal mortgage guaranty subsidiaries, Radian Guaranty Inc. ("Radian")
and Amerin Guaranty Corporation ("Amerin") (together referred to as "Mortgage
Insurance") and its principal financial guaranty operating subsidiaries, Radian
Reinsurance Inc. ("Radian Re") and Radian Asset Assurance Inc. ("Radian Asset
Assurance"). The Company also has a partial equity interest in two active
credit-based asset businesses, Credit-Based Asset Servicing and Securitization
LLC ("C-BASS") and Sherman Financial Group LLC ("Sherman"). These statements are
presented on the basis of accounting principles generally accepted in the United
States of America ("GAAP"). The Company has condensed or omitted certain
information and footnote disclosures normally included in consolidated financial
statements prepared in accordance with GAAP pursuant to such rules and
regulations.
The financial information for the interim periods is unaudited;
however, such information reflects all adjustments, which are, in the opinion of
management, necessary for a fair presentation of the financial position, results
of operations, and cash flows for the interim periods. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 2001. The results of operations for interim periods are not
necessarily indicative of results to be expected for the full year or for any
other period.
The preparation of financial statements in accordance with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from these estimates.
Basic net income per share is based on the weighted average number of
common shares outstanding, while diluted net income per share is based on the
weighted average number of common shares outstanding and common share
equivalents that would arise from the exercise of stock options. Preferred stock
dividends are deducted from net income in the net income per share computation.
Certain prior period balances have been reclassified to conform to the
current period presentation.
2 - ACQUISITION OF ENHANCE FINANCIAL
On February 28, 2001, the Company acquired the financial guaranty and
other businesses of Enhance Financial Services Group Inc. ("Financial
Guaranty"), a New York based insurance holding company that primarily insures
and reinsures credit-based risks, at a purchase price of approximately $581.5
million. The 2001 results include the results of Financial Guaranty's operations
for the period from the date of the acquisition.
The following unaudited pro forma information presents a summary of the
consolidated operating results of the Company for the three month period ended
March 31, 2001, as if the acquisition of Financial Guaranty had occurred on
January 1, 2001 (in thousands, except per-share information):
March 31, 2001
--------------
Total revenues $ 206,124
Net loss (15,115)
Net loss per share-basic $ (0.19)
Net loss per share-diluted $ (0.19)
7
3 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended, on January 1, 2001.
Transactions that the Company has entered into that are accounted for under SFAS
No. 133, as amended, include convertible debt securities, credit default swaps
and certain financial guaranty contracts that are considered credit default
swaps. Credit default swaps and certain financial guaranty contracts that are
accounted for under SFAS No. 133 are part of the Company's overall business
strategy of offering financial guaranty protection to its customers. Currently,
none of the derivatives qualify as hedges under SFAS No. 133.
At March 31, 2002, the fair value of the Company's derivative
instruments, classified as trading securities, was $32.8 million, as compared to
an amortized value of $37.0 million, and the Company recognized $1.5 million,
net of tax, of loss on changes in the fair value of derivative instruments in
the consolidated statements of income for 2002. The notional value of the
Company's credit default swaps and certain other financial guaranty contracts
accounted for under SFAS No. 133 was $3.5 billion at March 31, 2002 and the
Company recognized $0.6 million, net of tax, of loss on these instruments.
The application of SFAS 133, as amended, could result in volatility
from period to period in gains and losses as reported on the Company's
consolidated statements of income. The Company is unable to predict the effect
this volatility may have on its financial position or results of operations.
4 - SEGMENT REPORTING
The Company has three reportable segments: mortgage insurance, mortgage
services, and financial guaranty. The mortgage insurance segment provides
private mortgage insurance and risk management services to mortgage lending
institutions located throughout the United States. Private mortgage insurance
primarily protects lenders from default-related losses on residential first
mortgage loans made to homebuyers who make downpayments of less than 20% of the
purchase price and facilitates the sale of these mortgages in the secondary
market. The mortgage services segment deals primarily with credit-based
servicing and securitization of assets in underserved markets, in particular,
the purchase and servicing of and securitization of special assets, including
sub-performing/non-performing mortgages, seller financed residential mortgages
and delinquent consumer assets. In addition, mortgage services includes the
results of RadianExpress.com ("RadianExpress"), an internet-based settlement
company that provides real estate information products and services to the first
and second lien mortgage industry. The financial guaranty segment provides
credit-related insurance coverage to meet the needs of customers in a wide
variety of domestic and international markets. The Company's insurance
businesses within this segment include the assumption of reinsurance from the
monoline financial guaranty insurers for both municipal bonds and structured
finance obligations. The Company also provides direct financial guaranty
insurance for municipal bonds, structured finance, trade credit reinsurance and
excess Securities Investor Protection Corporation ("SIPC") insurance. The
Company's reportable segments are strategic business units, which are managed
separately, as each business requires different marketing and sales expertise.
Certain corporate expenses have been allocated to the segments. Prior period
information has been restated to conform with the current year segment
definitions.
In the mortgage insurance segment, the highest state concentration of
risk is California. At March 31, 2002, California accounted for 16.8% of
Mortgage Insurance's total direct primary insurance in force and 11.3% of
Mortgage Insurance's total direct pool insurance in force. California accounted
for 20.0% of Mortgage Insurance's direct primary new insurance written in the
first quarter 2002. The largest single customer of Mortgage Insurance (including
branches and affiliates of such customer) measured by new insurance written,
accounted for 28.5% of new insurance written during the first quarter of 2002
compared to 12.6% for full year 2001 and 11.2% for full year 2000. The amount
reported in 2002 includes a large structured transaction for one customer
comprised of prime mortgage loans originated throughout the United States.
In the financial guaranty segment, the Company derives a substantial
portion of its premiums written from a small number of primary insurers. In the
first quarter of 2002, 29.3% of gross written premiums were derived from two
primary insurers. Four primary insurers were responsible for 36.9% of gross
written premiums. This customer concentration results from the small number of
primary insurance companies licensed to write financial guaranty insurance.
8
The Company evaluates performance based on net income. Summarized
financial information concerning the Company's operating segments as of and for
the year-to-date periods indicated, is presented in the following tables:
March 31, 2002
------------------------------------------------------------
(in thousands) Mortgage Mortgage Financial
Insurance Services Guaranty Consolidated
------------------------------------------------------------
Net premiums written $ 162,062 $ 62,576 $ 224,638
============================================================
Net premiums earned $ 169,039 $ 40,150 $ 209,189
Net investment income 25,851 $ 43 16,859 42,753
Equity in net income of affiliates -- 18,504 116 18,620
Other income 4,017 6,696 569 11,282
------------------------------------------------------------
Total revenues 198,907 25,243 57,694 281,844
Provision for losses 45,098 12,329 57,427
Policy acquisition costs 15,572 7,875 23,447
Other operating expenses 28,806 7,238 8,701 44,745
Interest expense 4,042 508 2,604 7,154
------------------------------------------------------------
Total expenses 93,518 7,746 31,509 132,773
Net gains (losses) (315) (68) (2,238) (2,621)
------------------------------------------------------------
Pretax income 105,074 17,429 23,947 146,450
Income tax provision 28,948 6,971 6,598 42,517
------------------------------------------------------------
Net income $ 76,126 $ 10,458 $ 17,349 $ 103,933
============================================================
Total assets $ 2,990,738 $ 199,882 $ 1,642,136 $ 4,832,756
Deferred policy acquisition costs 73,690 84,234 157,924
Reserve for losses 471,268 122,417 593,685
Unearned premiums 98,630 429,411 528,041
9
March 31, 2001
------------------------------------------------------------
(in thousands) Mortgage Mortgage Financial
Insurance Services Guaranty Consolidated
------------------------------------------------------------
Net premiums written $ 150,634 $ 9,615 $ 160,249
============================================================
Net premiums earned $ 144,575 $ 11,188 $ 155,763
Net investment income 22,985 $ 32 5,003 28,020
Equity in net income of affiliates -- 11,845 199 12,044
Other income 3,978 1,900 414 6,292
------------------------------------------------------------
Total revenues 171,538 13,777 16,804 202,119
------------------------------------------------------------
Provision for losses 46,444 2,828 49,272
Policy acquisition costs 15,128 1,913 17,041
Other operating expenses 16,889 3,103 3,966 23,958
Interest expense 960 96 345 1,401
------------------------------------------------------------
Total expenses 79,421 3,199 9,052 91,672
------------------------------------------------------------
Net gains (losses) 1,849 1 (27) 1,823
------------------------------------------------------------
Pretax income 93,966 10,579 7,725 112,270
Income tax provision 25,763 4,232 2,118 32,113
------------------------------------------------------------
Net income $ 68,203 $ 6,347 $ 5,607 $ 80,157
============================================================
Total assets $ 2,406,671 $ 164,042 $ 1,249,650 $ 3,820,363
Deferred policy acquisition costs 72,055 54,265 126,320
Reserve for losses 412,935 111,963 524,898
Unearned premiums 82,889 367,954 450,843
5 - LONG-TERM DEBT
In January 2002, the Company sold $220 million of Senior Convertible
Debentures. The debentures bear interest at the rate of 2.25% per year and
interest is payable semi-annually on January 1 and July 1, beginning July 1,
2002. The Company will also pay contingent interest on specified semi-annual
periods, if the sale price of its common stock for a specified period of time is
less than 60% of the conversion price. The debentures are convertible, at the
purchaser's option, into shares of common stock at prices and on dates specified
in the offering. At that time, the shares become common shares for the purposes
of calculating earnings per share.
The composition of long-term debt was as follows:
March 31 December 31
($ in thousands) 2002 2001
-----------------------
2.25% Senior Convertible Debentures due 2022 $ 220,000 $ --
7.75% debentures due 2011 249,093 249,076
6.75% debentures due 2003 75,000 75,000
--------- ---------
$ 544,093 $ 324,076
========= =========
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a "Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995:
The statements contained in this Form 10-Q that are not historical
facts are forward-looking statements. Actual results may differ materially from
those projected in the forward-looking statements. These forward-looking
statements involve risks and uncertainties including, but not limited to: the
possibility that interest rates may increase rather than remain stable or
decrease; the possibility that housing demand may decrease for any number of
reasons, some of which may be out of the control of the Company, including
changes in interest rates, adverse economic conditions, or other reasons; the
Company's market share may decrease as a result of changes in underwriting
criteria by the Company or its competitors, or other reasons; performance of the
financial markets generally, changes in the demand for and market acceptance of
the Company's products, increased competition from government programs and the
use of substitutes for mortgage insurance, changes in government regulation or
tax laws that may affect one or more of the Company's businesses, changes in
investor perceptions regarding the strength of financial guaranty providers and
the guaranty offered by such providers, changes in investor concern regarding
the credit quality of municipalities and corporations, including the need or
desirability for financial guaranty insurance at all or as an alternative for
other credit enhancement; and changes in general financial conditions. Investors
are also directed to other risks discussed in documents filed by the Company
with the Securities and Exchange Commission.
RESULTS OF CONSOLIDATED OPERATIONS
Net income for the first quarter of 2002 was $103.9 million or $1.08
per share compared to $80.2 million or $0.96 per share for the first quarter of
2001. The 29.6% increase in net income was primarily a result of growth in the
Company's business volumes of insurance in force. Insurance in force for
Mortgage Insurance increased from $103.4 billion at March 31, 2001 to $111.3
billion at March 31, 2002. Total exposure outstanding for Financial Guaranty
increased from $92.7 billion at March 31, 2001 to $100.3 billion at March 31,
2002. These increases in business volumes produced increases in earned premiums,
investment income and other income. In addition, equity in net income of
affiliates increased by $6.6 million in 2002 from the $12.0 million recorded in
the first quarter of 2001. Partially offsetting these increases, were increases
in the provision for losses, policy acquisition costs, operating expenses and
interest expense to support the higher business volumes.
Consolidated earned premiums of $209.2 million increased $53.4 million
or 34.3% from $155.8 million in the first quarter of 2001. Financial Guaranty
contributed $29.0 million of this increase, partially due to the inclusion of
that segment for three months during 2002 versus only one month in 2001. Net
investment income increased to $42.8 million from $28.0 million in 2001. Of the
$14.8 million or 52.6% increase, $11.9 million was related to Financial
Guaranty. Equity in net income of affiliates increased from $12.0 million in
2001 to $18.6 million in 2002. Other income increased to $11.3 million in 2002
from $6.3 million in 2001, primarily related to the activities of RadianExpress,
our internet-based settlement company.
The provision for losses of $57.4 million for the first quarter of
2002, increased $8.1 million from the $49.3 million reported for the first
quarter of 2001. Substantially all of this was related to Financial Guaranty.
Policy acquisition costs for the first quarter of 2002 were $23.4 million, up
from $17.0 million in the first quarter of 2001. Other operating expenses of
$44.7 million increased $20.7 million or 86.8% from the $24.0 million reported
in the first quarter of 2001. These increases were primarily due to the
inclusion of Financial Guaranty discussed above. Interest expense of $7.2
million increased from $1.4 million for the first quarter of 2001, as a result
of the issuance of $250 million of long-term debt in 2001 and $220 million of
convertible debt in 2002, combined with the $75 million of long-term debt
acquired as a result of the Financial Guaranty acquisition. The consolidated
effective tax rate for 2002 was 29.0% compared to 28.6% in the first quarter of
2001.
MORTGAGE INSURANCE - RESULTS OF OPERATIONS
Net income for the first quarter was $76.1 million, up from $68.2
million in the first quarter of 2001. This increase was due to an increase in
earned premiums, investment income and other income, and a slight decrease in
the provision for losses, offset by increases in policy acquisition costs, other
operating expenses and interest expense.
11
New primary insurance written during the first quarter of 2002 was
$13.9 billion, a 61.4% increase compared to $8.6 billion for the first quarter
of 2001. This increase in Mortgage Insurance's primary new insurance written
volume for the first quarter of 2002 was primarily due to a 57% increase in new
insurance written volume in the private mortgage insurance industry for the
first quarter of 2002 as compared to the first quarter of 2001 and an increase
in structured transactions. In addition, the Company's market share of the
industry increased to 17.9% in the first quarter of 2002, compared to 17.2% for
the same period of 2001. The Company believes the market share increase was due
in part to an increase in the Company's share of new insurance written under
structured transactions, which are included in industry new insurance written
figures. During the first quarter of 2002, Mortgage Insurance wrote $4.8 billion
of such transactions as compared to $1.3 billion in the same quarter of 2001.
The amount originated in 2002 includes a large structured transaction for one
customer comprised of prime mortgage loans originated throughout the United
States. The Company's participation in the structured transactions market is
likely to vary significantly from quarter to quarter as the Company competes
with other mortgage insurers as well as capital market executions for these
transactions. In the first quarter of 2002, Mortgage Insurance wrote $86.0
million of pool insurance risk as compared to $33.1 million in the first quarter
of 2001.
Mortgage Insurance's volume in the first three months of 2002 was
positively impacted by relatively lower interest rates that affected the entire
mortgage industry. The continued low interest rate environment caused
refinancing activity at the beginning of 2002 to continue to remain high and
contributed to the increase in the industry new insurance volume for the first
quarter of 2002. Mortgage Insurance's refinancing activity as a percentage of
primary new insurance written was 39.1% for the first quarter of 2002 as
compared to 36.0% for the same period in 2001. The persistency rate, which is
defined as the percentage of insurance in force that is renewed in any given
year, was 59.5% for the twelve months ended March 31, 2002 as compared to 76.9%
for the twelve months ended March 31, 2001. This decrease was consistent with
the increasing level of refinancing activity, which caused the cancellation rate
to increase. The expectation for the balance of 2002 is lower industry volume
and higher persistency rates, influenced by relatively higher interest rates.
The Company insures non-traditional loans, specifically Alternative A
and A minus loans (collectively, referred to as "non-prime" business).
Alternative A borrowers have an equal or better credit profile than the
Company's typical insured borrowers, but these loans are underwritten with
reduced documentation and verification of information. The Company typically
charges a higher premium rate for this business due to the reduced
documentation, but does not consider this business to be significantly more
risky than its prime business. The A minus loan programs typically have
non-traditional credit standards that are less stringent than standard credit
guidelines. To compensate for this additional risk, the Company receives a
higher premium for insuring this product that the Company believes is
commensurate with the additional default risk. During the first quarter of 2002,
non-prime business accounted for $4.5 billion or 32.3% of Mortgage Insurance's
new primary insurance written as compared to $2.8 billion or 31.5% for the same
period in 2001. Of the $4.5 billion of non-prime business, $3.5 billion was
Alternative A.
In the third quarter of 2000, the Company began to insure
mortgage-related assets in a Pennsylvania domiciled insurer, Radian Insurance
Inc. ("Radian Insurance"). Radian Insurance is rated AA by Standard & Poor's
Insurance Rating Service and Aa3 by Moody's Investors Service and was formed to
write credit insurance and financial guaranty insurance on mortgage-related
assets that are not permitted to be insured by monoline mortgage guaranty
insurers. Such assets include second mortgages, manufactured housing loans, home
equity loans and mortgages with loan-to-value ratios above 100%. Beginning in
October 2001, Radian Insurance entered into a reinsurance agreement with one of
its affiliates, Radian Asset Assurance, whereby Radian Insurance ceded
substantially all of the insurance business and premium associated with certain
obligations secured by mortgage-backed securities and manufactured housing
loans. Because most Financial Guaranty business on mortgage related assets will
be written in Radian Asset Assurance and Amerin will be the primary writer of
second mortgage insurance in the future, the business written by Radian
Insurance has been substantially reduced in 2002.
Net premiums earned in the first quarter of 2002 were $169.0 million, a
16.9% increase compared to $144.6 million for the first quarter of 2001. This
increase, which was greater than the increase in insurance in force, reflected a
significant increase in new insurance volume. This increase included a higher
percentage of non-prime business. This type of business has higher premium
rates, which are commensurate with the increased level of risk associated with
the insurance. The insurance in force growth resulting from strong new insurance
volume in the first quarter of 2002 was offset slightly by the decrease in
persistency levels. There was an increase in direct primary insurance in force
for the quarter of 3.1%, from $107.9 billion at December 31, 2001 to $111.3
billion at March 31,
12
2002. Total pool risk in force was $1.7 billion at March 31, 2002 compared to
$1.6 billion at December 31, 2001.
Mortgage Insurance and other companies in the industry have entered
into risk-sharing arrangements with various customers that are designed to allow
the customer to participate in the risks and rewards of the mortgage insurance
business. One such product is captive reinsurance, in which a mortgage lender
sets up a mortgage reinsurance company that assumes part of the risk associated
with that lender's insured book of business. In most cases, the risk assumed by
the reinsurance company is an excess layer of aggregate losses that would be
penetrated only in a situation of adverse loss development. For the first
quarter of 2002, premiums ceded under captive reinsurance arrangements were
$17.0 million, or 10.0% of total premiums earned during the period, as compared
to $12.0 million, or 8.0% of total premiums earned for the same period of 2001.
New primary insurance written under captive reinsurance arrangements was $3.8
billion, or 27.6% of total new primary insurance written for the first quarter
of 2002 as compared to $2.8 billion, or 33.1% for the same period in 2001.
Net investment income for the first quarter of 2002 was $25.9 million,
a 12.5% increase compared to $23.0 million for the same period of 2001. This
increase was a result of continued growth in invested assets primarily due to
positive operating cash flows during the first quarter of 2002 and the
allocation of interest income from net financing activities. The Company has
continued to invest some of its new operating cash flow in tax-advantaged
securities, primarily municipal bonds, although the Company's investment policy
allows the purchase of various other asset classes, including common stock and
convertible securities. The Company's intent is to target the common equity
exposure at a maximum of 5% of the investment portfolio's market value while the
investment-grade convertible securities and investment-grade asset-backed
securities exposures are each targeted not to exceed 10% each.
The provision for losses was $45.1 million for the first three months
of 2002, a decrease of 2.9% compared to $46.4 million for the first three months
of 2001. Claim activity is not spread evenly throughout the coverage period of a
book of business. Relatively few claims are received during the first two years
following issuance of the policy. Historically, claim activity has reached its
highest level in the third through fifth years after the year of loan
origination. Approximately 68.5% of the primary risk in force and approximately
54% of the pool risk in force at March 31, 2002 had not yet reached its
anticipated highest claim frequency years. The overall default rate at March 31,
2002 was 2.2%, consistent with December 31, 2001, while the default rate on the
primary business was 3.4% at March 31, 2002 as compared to 3.5% at December 31,
2001. The decrease in the primary default rate resulted from a 45 basis point
decline in the delinquency rate on our prime loans, partially offset by a 178
basis point increase in the non-prime delinquency rate. A strong economy
generally results in better loss experience and a decrease in the overall level
of losses. A continued weakening of the economy could negatively impact the
Company's overall default rates, which would result in an increase in the
provision for losses. The number of defaults declined from 41,147 at December
31, 2001 to 40,112 at March 31, 2002 while the average loss reserve per default
increased from $11,291 at the end of 2001 to $11,749 at March 31, 2002. The
reserve as a percentage of risk in force was 1.6% at March 31, 2002 and at
December 31, 2001. The default rate in California was 1.6% (including pool) at
March 31, 2002 as compared to 1.9% at December 31, 2001 and claims paid in
California during the first quarter of 2002 were $2.7 million, representing
approximately 8.5% of total claims as compared to 7.7% in the fourth quarter of
2001. California represented approximately 16.7% of primary risk in force at
March 31, 2002 as compared to 16.4% at December 31, 2001. The default rate in
Florida was 3.0% (including pool) at March 31, 2002 as compared to 3.3% at
December 31, 2001 and claims paid in Florida during the first quarter of 2002
were $1.7 million, representing approximately 5.3% of total claims as compared
to 7.0% in the fourth quarter of 2001. Florida represented approximately 7.5% of
primary risk in force at March 31, 2002 and 7.4% at December 31, 2001. Claims
paid during the first quarter of 2002 in Georgia were $3.7 million or 11.6% of
total claims. Georgia represented approximately 4.5% of primary risk in force at
March 31, 2002. Claims paid during the first quarter of 2002 in Utah were $2.5
million or 7.9% of total claims. Utah represented approximately 1.5% of primary
risk in force at March 31, 2002. Mortgage Insurance has reported an increased
number of defaults on non-prime business insured beginning in 1997. Although the
default rate for this business is higher than on the prime book of business, it
is within the expected range for this type of business, and the higher premium
rates charged are expected to compensate for the increased level of risk. The
number of non-prime loans in default at March 31, 2002 was 10,593, which
represented 34.4% of the total number of primary loans in default as compared to
7,704 at December 31, 2001, which represented 24.8% of the primary loans in
default. The default rate on this business rose from 5.5% at December 31, 2001
to 7.3% at March 31, 2002 as compared to the primary default rate on the prime
business of 2.6% at March 31, 2002 and 3.1% at December 31, 2001. Direct losses
paid in the first quarter of 2002 increased to $37.0 million as compared to
$31.7 million in the fourth quarter of 2001 and $21.8 million for the first
quarter of 2001. The severity of loss payments has increased due to deeper
coverage amounts and larger loan balances, and any negative impact on future
13
property values would most likely increase the loss severity.
Underwriting and other operating expenses were $44.4 million for the
first three months of 2002, an increase of 38.6% compared to $32.0 million for
the same period of 2001. These expenses consisted of policy acquisition
expenses, which relate directly to the acquisition of new business, and other
operating expenses, which primarily represent contract underwriting expenses,
overhead and administrative costs.
Policy acquisition costs were $15.6 million in the first quarter of
2002, an increase of 2.9% compared to $15.1 million in the first quarter of
2001. This reflects an increase in expenses to support the higher new insurance
written volume during the first quarter of 2002 as compared to the same period
of 2001. Other operating expenses for the first quarter of 2002 were $28.8
million, an increase of 70.6% compared to $16.9 million for the first quarter of
2001. This reflects an increase in expenses associated with the Company's
technological, administrative and support functions, primarily an increase of
approximately $7.1 million in salaries and benefits, combined with an increase
in expenses associated with contract underwriting services. Contract
underwriting expenses for the first quarter of 2002 included in other operating
expenses were $9.7 million as compared to $8.0 million for the same period in
2001, an increase of 21.4%. This $1.7 million increase in contract underwriting
expenses during the first quarter of 2002 reflected the continued demand for
contract underwriting services, as mortgage origination volume has remained
high. Consistent with the increase in contract underwriting expenses, other
income related to contract underwriting services increased 14.1% to $3.7 million
for the first quarter of 2002 as compared to $3.3 million for the same period in
2001. During the first three months of 2002, loans underwritten via contract
underwriting accounted for 32.3% of applications, 28.3% of insurance
commitments, and 19.0% of certificates issued by the Company as compared to
33.1% of applications, 29.7% of commitments and 21.3% of certificates in the
first three months of 2001.
The effective tax rate for the quarter ended March 31, 2002 was 27.6%
as compared to 27.4% for the first quarter of 2001.
FINANCIAL GUARANTY INSURANCE - RESULTS OF OPERATIONS
The financial guaranty insurance operations are conducted through
Financial Guaranty and primarily involve the direct insurance and reinsurance of
municipal bonds and structured finance obligations. Reinsurance is assumed
primarily from the four primary monoline financial guaranty insurers. Radian
Reinsurance Inc., a subsidiary of Financial Guaranty ("Radian Re"), currently
derives substantially all of its reinsurance premium revenues from those four
monolines. Approximately 36.9% of total gross premiums for Financial Guaranty
were derived from these four monolines in 2002. A substantial reduction in the
amount of insurance ceded by one or more of these four principal clients could
have a material adverse effect on Financial Guaranty's gross written premiums
and, consequently, its results from operations.
The results of operations for 2001 include the results of Financial
Guaranty from the date of acquisition.
Net income for the first quarter of 2002 was $17.3 million. Net
premiums written and earned for the first three months of 2002 were $62.6
million and $40.2 million, respectively, compared to $9.6 million and $11.2
million for the same period of 2001. For the first quarter of 2002, there was
$481 million of par insured originated in the municipal bond insurance area
including $290 million in the healthcare sector. In the non-municipal or global
structured products area, Financial Guaranty wrote $1.7 billion of par,
primarily in the form of collateralized debt obligations. Financial Guaranty
wrote credit insurance for an additional $100 million of par in the form of
excess SIPC insurance. The following table shows the breakdown of premiums
written and earned for each period.
Quarter Ended
March 31
2002 2001
--------- ---------
(in thousands)
Net premiums written:
Muni direct $ 14,584 $ 1,181
Muni reinsurance 15,982 1,991
Non-muni direct 8,015 2,454
Non-muni reinsurance 15,714 713
Trade credit 8,281 3,276
--------- ---------
Total net premiums written $ 62,576 $ 9,615
========= =========
14
Net premiums earned:
Muni direct $ 3,519 $ 2,067
Muni reinsurance 7,665 2,130
Non-muni direct 6,555 3,129
Non-muni reinsurance 15,040 1,199
Trade credit 7,371 2,663
--------- ---------
Total net premiums earned $ 40,150 $ 11,188
========= =========
Included in net premiums earned for the first quarter of 2002 were
refundings of $639,000 while the first quarter of 2001 included refundings of
$1.2 million.
Net investment income was $16.9 million for the first quarter of 2002
compared to $5.0 million for the same period of 2001. The provision for losses
was $12.3 million for 2002, compared to $2.8 million reported in 2001. The
provision represented 30.7% of premiums earned in the first quarter of 2002
compared to 25.3% in the same period of 2001. The Company paid one large claim
for approximately $9.0 million in the first quarter of 2002. Policy acquisition
costs and other operating expenses were $16.6 million for 2002 compared to $5.9
million for the first quarter of 2001. This resulted in an expense ratio of
41.3% for 2002, compared to 52.5% for 2001. Interest expense for the first
quarter of 2002, which included interest allocated on the Company's debt
financing, was $2.6 million compared to $345,000 in the same period of 2001. Net
losses for 2002 of $2.2 million related primarily to the change in the fair
value of derivative instruments, primarily trading securities and credit default
swaps. The effective tax rate was 27.6% for 2002 compared to 27.4% for 2001.
MORTGAGE SERVICES - RESULTS OF OPERATIONS
The mortgage services results include the operations of Radian
Express.com Inc. ("RadianExpress") and the asset-based businesses conducted
through Financial Guaranty's minority owned subsidiaries, Sherman Financial
Services Group LLC ("Sherman") and Credit-Based Asset Servicing and
Securitization LLC ("C-BASS"). The Company owns a 46% interest in C-BASS and a
45.5% interest in Sherman. C-BASS is engaged in the purchasing, servicing and/or
securitizing of special assets, including sub-performing/non-performing and
seller-financed residential mortgages, real estate and subordinated residential
mortgage-based securities. Sherman conducts a business that focuses on
purchasing and servicing delinquent, primarily unsecured consumer assets.
Net income for the first three months of 2002 was $10.5 million
compared to $6.3 million for the same period in 2001. Equity in net income of
affiliates (pre-tax) was $18.5 million for the first quarter of 2002 compared to
$11.8 million for the comparable period in 2001. C-BASS accounted for $16.1
million (pre-tax) of the total income from affiliates in the first quarter of
2002 compared to $11.6 million in the first quarter of 2001. These results could
vary from period to period due to a significant portion of C-BASS's income being
generated from sales of mortgage-backed securities in the capital markets.
RadianExpress contributed $5.8 million of other income and $6.4 million
of operating expenses for the first quarter of 2002 compared to $1.9 million and
$2.7 million, respectively, for 2001. RadianExpress processed approximately
120,000 applications during 2002 and increased capacity significantly.
OTHER
Two wholly-owned subsidiaries of Financial Guaranty, Singer Asset
Finance Company, L.L.C. ("Singer") and Enhance Consumer Services LLC ("ECS"),
which had been engaged in the purchase, servicing, and securitization of assets
including state lottery awards, structured settlement payments and viatical
settlements, are currently operating on a run-off basis. Their operations
consist of servicing the prior originations of non-consolidated special purpose
vehicles and the results of these subsidiaries are not expected to be material
to the financial results of the Company.
Another insurance subsidiary, Van-American Insurance Company, Inc., is
engaged on a run-off basis, in
15
reclamation bonds for the coal mining industry and surety bonds covering closure
and post-closure obligations of landfill operators. Such business is not
expected to be material to the financial results of the Company.
At March 31, 2002, the Company, through its ownership of Financial
Guaranty, owned an indirect 36.5% equity interest in Exporters Insurance Company
Ltd., an insurer of primarily foreign trade receivables for multinational
companies. Financial Guaranty provides significant reinsurance capacity to this
joint venture on a quota-share, surplus share and excess-of-loss basis.
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of funds consist primarily of premiums and
investment income. Funds are applied primarily to the payment of the Company's
claims and operating expenses.
Cash flows from operating activities for the quarter ended March 31,
2002 were $120.6 million as compared to $113.8 million for the same period of
2001. This increase consisted of an increase in net premiums written and
investment income received partially offset by increases in losses paid and
operating expenses. Positive cash flows are invested pending future payments of
claims and other expenses; excess cash flow needs, if any, are funded through
sales of short-term investments and other investment portfolio securities.
Stockholders' equity, plus redeemable preferred stock of $40.0 million,
increased to $2.4 billion at March 31, 2002 from $2.3 billion at December 31,
2001. This resulted from net income of $103.9 million and proceeds from the
issuance of common stock of $13.3 million, offset by a decrease in the market
value of securities available for sale of $10.0 million, net of tax, and
dividends of $2.7 million.
As of March 31, 2002, the Company and its subsidiaries had plans to
continue investing in significant information technology and infrastructure
upgrades over the next two years at an estimated cost of $25 million to $30
million. Cash flows from operations will be used to fund these expenditures.
Financial Guaranty was party to a credit agreement (as amended, the
"Credit Agreement") with major commercial banks providing Financial Guaranty
with a borrowing facility aggregating up to $175.0 million, the proceeds of
which were used for general corporate purposes. The outstanding principal
balance under the Credit Agreement of $173.7 million was retired on May 29,
2001.
The Company owns a 46% interest in C-BASS. The Company has not made any
capital contributions to C-BASS since the Company acquired its interest in
C-BASS in connection with the acquisition of Financial Guaranty. C-BASS paid
$12.6 million of dividends to the Company in the first quarter of 2002 and $12.8
million during all of 2001.
The Company owns a 45.5% interest in Sherman. The Company did not made
any capital contributions to Sherman in 2002, but made $15.0 million of
contributions during full year 2001. In conjunction with the acquisition, the
Company guaranteed payment of up to $25.0 million of a revolving credit facility
issued to Sherman. There were no outstanding drawdowns on the line of credit as
of March 31, 2002.
In January 2002, the Company sold $220 million of Senior Convertible
Debentures. Approximately $125 million of the proceeds from the offering was
used to increase capital at Radian Asset Assurance. The remainder will be used
for general corporate purposes. The debentures bear interest at the rate of
2.25% per year and interest is payable semi-annually on January 1 and July 1,
beginning July 1, 2002. The Company will also pay contingent interest on
specified semi-annual periods, if the sale price of its common stock for a
specified period of time is less than 60% of the conversion price. The
debentures are convertible, at the purchaser's option, into shares of common
stock at prices and on dates specified in the offering. At that time, the shares
become common shares for the purposes of calculating earnings per share. The
Company may redeem all or some of the debentures on or after January 1, 2005.
In February 2002, the Company closed on a $50 million Senior Revolving
Credit Facility. The facility is unsecured and expires in one year. The facility
will be used for working capital and general corporate purposes. The facility
bears interest on any amounts drawn at either the Borrower's Base rate as
defined in the agreement, or at a rate above LIBOR based on certain debt to
capital ratios.
16
In March 2002, the Company made a $20 million investment in Primus
Guaranty, Ltd, a Bermuda holding company and parent company to Primus Financial
Products, Inc. ("Primus"), a Triple A rated company that provides credit risk
protection to derivatives dealers and credit portfolio managers on individual
investment-grade entities. In connection with the capitalization and Triple A
rating of Primus, Radian Re has provided Primus with an excess of loss insurance
policy. The Company accounts for the Primus investment under the equity method
of accounting.
The Company believes that Radian Guaranty will have sufficient funds to
satisfy its claims payments and operating expenses and to pay dividends to the
Company for at least the next 12 months. The Company also believes that it will
be able to satisfy its long-term (more than 12 months) liquidity needs with cash
flow from Mortgage Insurance and Financial Guaranty. As a holding company, the
Company conducts its principal operations through Mortgage Insurance and
Financial Guaranty. The Company's ability to pay dividends on the $4.125
Preferred Stock is dependent upon dividends or other distributions from Mortgage
Insurance or Financial Guaranty. In connection with obtaining approval from the
New York Insurance Department for the change of control of Financial Guaranty
when the Company acquired Financial Guaranty, it agreed not to declare or pay
dividends for a period of two years following consummation of the acquisition.
Consequently, the Company cannot rely upon or expect any dividends or other
distributions from Financial Guaranty. Based on the Company's current intention
to pay quarterly common stock dividends of approximately $0.02 per share, the
Company will require distributions from Mortgage Insurance of $10.9 million
annually to pay the dividends on the outstanding shares of $4.125 Preferred
Stock and common stock. The Company will also require distributions from
Mortgage Insurance of $29.4 million annually to pay the debt service on its
long-term debt financing. There are regulatory and contractual limitations on
the payment of dividends or other distributions. The Company does not believe
that any of these restrictions will prevent the payment by Mortgage Insurance or
the Company of these anticipated dividends or distributions in the foreseeable
future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the first three months of 2002, the Company experienced a
decrease in the fair market value of the available for sale portfolio, which
resulted in a decrease in the net unrealized gain on the investment portfolio of
$10.0 million, from a net unrealized gain of $11.0 million at December 31, 2001
to a net unrealized gain of $1.0 million at March 31, 2002. This decrease in
value was a result of changes in market interest rates and not as a result of
changes in the composition of the Company's investment portfolio. The market
value of the Company's long-term debt at March 31, 2002 was $578.0 million. For
a more complete discussion about the potential impact of interest rate changes
upon the fair value of the financial instruments in the Company's investment
portfolio, see "Quantitative and Qualitative Disclosures about Market Risk" in
the Company's 2001 Form 10-K.
17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments in legal proceedings involving
the Company or its subsidiaries since those reported in the Company's Annual
Report on Form 10-K for the year ended December 31, 2001.
The Company is involved in certain litigation arising in the normal
course of its business. The Company is contesting the allegations in each such
pending action and believes, based on current knowledge and after consultation
with counsel, that the outcome of such litigation will not have a material
adverse effect on the Company's consolidated financial position and results of
operations.
ITEM 2. CHANGES IN SECURITIES
(c) On January 11, 2002, the Company completed the private
placement of $220.0 million aggregate principal amount (including proceeds from
the over-allotment option) of 2.25% Senior Convertible Debentures due 2022 (the
"Debentures"), with registration rights, to initial purchasers, who then
immediately resold the Debentures under an offering memorandum dated January 7,
2002 to persons reasonably believed by them to be "qualified institutional
buyers" in reliance on Rule 144A under the Securities Act of 1933, as amended.
The initial purchasers, Banc of America Securities LLC and Lehman Brothers Inc.,
acted as joint book-running managers in the transaction, and received $3,850,000
from the Company in total underwriting discounts and commissions. The Debentures
were issued at a price equal to 100% of their principal amount plus accrued
interest, if any, from January 11, 2002, and mature on January 1, 2022. The
Debentures are convertible into shares of the Company's common stock, par value
$.001 per share, initially at a price per share of $57.75, subject to adjustment
or upon other terms and conditions described in the Company's registration
statement on Form S-3 filed with the Securities and Exchange Commission on April
19, 2002 in the section encaptioned "DESCRIPTION OF DEBENTURES-Conversion
Rights" (which section is filed as Exhibit 99 to this report and incorporated
into this report by reference).
ITEM 6. (a) EXHIBITS
Exhibit No. Exhibit Name
- ----------- ------------
4.1 Indenture dated January 11, 2002 between the Company and Bank
of New York, as Trustee. (1) (Exhibit 4.10)
4.2 Form of 2.25% Senior Convertible Debentures due 2022.
(Included within Exhibit 4.1)
4.3 Registration Rights Agreement dated January 11, 2002 relating
to the 2.25% Senior Convertible Debentures due 2022. (2)
(Exhibit 4.2)
10.1 Enhance Financial Services Group Inc. 401(k) Savings Plan.
10.2 Credit Agreement dated as of February 8, 2002 between the
Company and First Union National Bank, as Lender. (1) (Exhibit
10.28)
11 Statement Re: Computation of Per Share Earnings.
99 Excerpt from the Company's registration statement on Form S-3
filed with the Securities and Exchange Commission April 19,
2002 in the section thereof encaptioned "DESCRIPTION OF
DEBENTURES-Conversion Rights".
- -----------------------
(1) Incorporated by reference to the exhibit identified in parentheses, filed
as an exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 2001.
(2) Incorporated by reference to the exhibit identified in parentheses, filed
as an exhibit to the Company's Registration Statement on Form S-3 filed
April 19, 2002.
(b) REPORTS ON FORM 8-K
None.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RADIAN GROUP INC.
Date: May 14, 2002 /s/ C. Robert Quint
------------------------------------------
Executive Vice President and
Chief Financial Officer
/s/ John J. Calamari
------------------------------------------
Vice President and Corporate Controller
19
EXHIBIT INDEX
Exhibit No. Exhibit Name
- ----------- ------------
4.1 Indenture dated January 11, 2002 between the Company and Bank
of New York, as Trustee. (1) (Exhibit 4.10)
4.2 Form of 2.25% Senior Convertible Debentures due 2022.
(Included within Exhibit 4.1)
4.3 Registration Rights Agreement dated January 11, 2002 relating
to the 2.25% Senior Convertible Debentures due 2022. (2)
(Exhibit 4.2)
10.1 Enhance Financial Services Group Inc. 401(k) Savings Plan.
10.2 Credit Agreement dated as of February 8, 2002 between the
Company and First Union National Bank, as Lender. (1) (Exhibit
10.28)
11 Statement Re: Computation of Per Share Earnings.
99 Excerpt from the Company's registration statement on Form S-3
filed with the Securities and Exchange Commission April 19,
2002 in the section thereof encaptioned "DESCRIPTION OF
DEBENTURES-Conversion Rights".
- -----------------------
(1) Incorporated by reference to the exhibit identified in parentheses, filed
as an exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 2001.
(2) Incorporated by reference to the exhibit identified in parentheses, filed
as an exhibit to the Company's Registration Statement on Form S-3 filed
April 19, 2002.
20