EXHIBIT 99
FOR IMMEDIATE RELEASE
NEWS RELEASE
Triad Guaranty Inc.
NASDAQ Symbol: TGIC
www.triadguaranty.com
- ---------------------
Contact: Ken Jones
Senior Vice President, Chief Financial Officer
800-451-4872 ext.1105
kjones@tgic.com
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TRIAD GUARANTY INC. REPORTS RECORD
EARNINGS OF $19.6 MILLION FOR THE SECOND QUARTER
WINSTON-SALEM, N.C., July 27, 2006-- Triad Guaranty Inc. (NASDAQ: TGIC) today
reported record net income for the quarter ended June 30, 2006 of $19.6 million
compared with $13.2 million for the same quarter a year ago, an increase of 48%.
Diluted earnings per share were $1.31 for the second quarter of 2006 compared
with $0.89 for the second quarter of 2005, an increase of 47%. Realized
investment gains, net of taxes, increased diluted earnings per share by $0.03 in
the second quarter of 2006 while not impacting diluted earnings per share in the
same quarter of 2005.
Net income for the six months ended June 30, 2006 was $38.1 million compared to
$29.0 million for the same period in 2005. Diluted earnings per share were $2.56
for the first six months of 2006 compared to $1.96 for the same period last
year. Realized investment gains contributed $0.07 per share for the first six
months of 2006 but had no impact on the six months ended June 30, 2005.
Mark K. Tonnesen, President and Chief Executive Officer, said, "Our strong
results for the quarter confirm that we continue to execute very well against
our plan. Our success in the Modified Pool channel, combined with improving
long-term persistency in the Primary flow channel, generated a 23% increase in
earned premiums for both the quarter and year-to-date periods when compared with
the prior year. Our loss ratio for the quarter at 34.1% was in line with our
expectations and included a $2.3 million increase in reserves from the preceding
quarter. This compared with a loss ratio of 42.0% for last year's second
quarter. The expense ratio at 25.6% declined from the prior year's second
quarter even as we are making significant investments to grow our business. "
Mr. Tonnesen continued, "We are particularly encouraged by the increasing
strength of Triad's capital position and the foundation it provides for us to
expand our operations into Canada. However, in light of the capital required to
support this growth opportunity, the Board of Directors has authorized the
cancellation of the share repurchase program that was put in place earlier this
year. No shares were repurchased under the program."
Total insurance in force reached $50.8 billion at June 30, 2006 compared with
$39.5 billion a year ago. Insurance in force included Primary of $30.8 billion
and Modified Pool of $20.0 billion at June 30, 2006, compared with $29.5 billion
and $10.0 billion, respectively, a year earlier. New insurance written during
the second quarter of 2006 totaled $5.9 billion compared with $4.7 billion
written in the second quarter of 2005. Primary new insurance written for the
second quarter of 2006 was $2.9 billion, level with the second quarter of 2005.
New insurance written from Modified Pool transactions totaled $3.0 billion in
the second quarter of 2006 compared with $1.8 billion for the same period of
2005. The underlying volume of Modified Pool transactions that generates the new
insurance written may fluctuate significantly from quarter to quarter.
Earned premiums for the second quarter of 2006 were $50.7 million, an increase
of 23% over the same period a year ago and up 6% from the first quarter of 2006.
The increase in earned premiums was due to growth in both Primary and Modified
Pool insurance in force. Annual persistency on the Primary business was 73% at
June 30, 2006 compared with 71% for June 30, 2005.
Incurred losses for the second quarter were $17.3 million, up 6% from the first
quarter and level with the second quarter of 2005. Total paid claims for the
second quarter of 2006 were $14.4 million, level with $14.4 million in the first
quarter of 2006, and up from $13.3 million in the second quarter of 2005.
Severity on Primary paid claims was $25,800 in the second quarter of 2006, down
from $26,300 in the first quarter of 2006 and $28,900 in the second quarter of
2005. Total defaults at June 30, 2006 were 6,485, down from 6,892 at March 31,
2006 and up from 5,325 reported at June 30, 2005. The increase from the prior
year reflects the continued seasoning of the portfolio and, to a lesser degree,
the impact of defaults related to last fall's hurricanes. Of the June 30, 2006
defaults, 612 are in the Katrina/Rita FEMA designated areas compared with 791 at
March 31, 2006. The Primary delinquency rate was 2.21% at June 30, 2006 compared
with 2.37% at March 31, 2006 and 1.83% at June 30, 2005. The Modified Pool
delinquency rate was 1.58% at June 30, 2006 compared with 1.74% and 2.20% at
March 31, 2006 and June 30, 2005, respectively. The decline in the Modified Pool
delinquency rate reflects the strong growth of unseasoned insurance in force
during the last twelve months.
Triad Guaranty Inc.'s wholly owned subsidiary, Triad Guaranty Insurance
Corporation, is a nationwide mortgage insurer providing credit enhancement
solutions to its lender customers and the capital markets. This allows buyers to
achieve homeownership sooner, facilitates the sale of mortgage loans in the
secondary market and protects lenders from credit default-related expenses. For
more information, please visit the Company's web site at
http://www.triadguaranty.com
Diluted realized investment gains/(losses) per share, net of taxes is a non-GAAP
measure. We believe this is relevant and useful information to investors
because, except for losses on impaired securities, it shows the effect that the
Company's discretionary sale of investments had on earnings.
This document may contain forward-looking statements that involve various risks
and uncertainties. Actual results may differ from those set forth in the
forward-looking statements. Attention is directed to the discussion of risk and
uncertainties as part of the Safe Harbor statement under the Private Securities
Litigation Reform Act of 1995 contained in the Company's most recent annual
report, Form 10-K and other reports filed with the Securities and Exchange
Commission.
- ### -
(Relevant Triad Guaranty Inc. financial statistics follow this news release.)
Triad Guaranty Inc.
Consolidated Income Statement
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
---- ---- ---- ----
(Dollars in thousands except per share amounts)
Premiums written:
Direct $ 60,961 $ 50,559 $120,273 $ 98,886
Ceded (11,603) (9,948) (22,573) (19,564)
-------- -------- -------- --------
Net premiums written $ 49,358 $ 40,611 $ 97,700 $ 79,322
======== ======== ======== ========
Earned premiums $ 50,667 $ 41,121 $ 98,557 $ 79,898
Net investment income 6,535 5,743 12,757 11,158
Net realized investment gains 772 39 1,672 46
Other income 5 2 3 11
-------- -------- -------- --------
Total revenues 57,979 46,905 112,989 91,113
Net losses and loss adjustment expenses 17,271 17,288 33,622 27,918
Interest expense on debt 694 693 1,387 1,386
Amortization of deferred policy acquisition costs 4,118 3,695 7,980 7,352
Other operating expenses - net 8,496 7,017 17,009 14,234
-------- -------- -------- --------
Income before income taxes 27,400 18,212 52,991 40,223
Income taxes 7,813 5,013 14,851 11,264
-------- -------- -------- --------
Net income $ 19,587 $ 13,199 $ 38,140 $ 28,959
======== ======== ======== ========
Basic earnings per share $ 1.33 $ 0.90 $ 2.58 $ 1.98
Diluted earnings per share $ 1.31 $ 0.89 $ 2.56 $ 1.96
Weighted average common and common
stock equivalents outstanding (in thousands)
Basic 14,769 14,668 14,764 14,643
Diluted 14,914 14,813 14,888 14,795
NON-GAAP INFORMATION:
Diluted realized investment gains per share,
net of taxes $ 0.03 $ - $ 0.07 $ -
Triad Guaranty Inc.
Consolidated Balance Sheet
(Unaudited) (Unaudited)
June 30, December 31, June 30,
2006 2005 2005
---- ---- ----
(Dollars in thousands except per share amounts)
Assets:
Invested assets:
Fixed maturities, available for sale, at market $ 556,378 $ 534,064 $ 499,871
Equity securities, available for sale, at market 9,660 8,159 9,698
Other investments 5,000 - -
Short-term investments 4,277 4,796 14,323
---------- ---------- ----------
575,315 547,019 523,892
Cash and cash equivalents 5,191 8,934 3,528
Deferred policy acquisition costs 34,203 33,684 33,082
Prepaid federal income tax 151,908 139,465 128,682
Other assets 42,406 38,401 34,325
---------- ---------- ----------
Total assets $ 809,023 $ 767,503 $ 723,509
========== ========== ==========
Liabilities:
Losses and loss adjustment expenses $ 54,905 $ 51,074 $ 38,576
Unearned premiums 12,630 13,494 15,327
Deferred income tax 163,436 155,189 149,533
Long-term debt 34,505 34,501 34,497
Other liabilities 12,394 14,054 10,220
---------- ---------- ----------
Total liabilities 277,870 268,312 248,153
Stockholders' equity:
Retained earnings 425,581 387,441 359,588
Accumulated other comprehensive income 2,367 11,106 16,458
Other equity accounts 103,205 100,644 99,310
---------- ---------- ----------
Total stockholders' equity 531,153 499,191 475,356
---------- ---------- ----------
Total liabilities and stockholders' equity $ 809,023 $ 767,503 $ 723,509
========== ========== ==========
Stockholders' equity per share:
Including unrealized investment gains $ 35.68 $ 33.79 $ 32.08
Excluding unrealized investment gains $ 35.52 $ 33.04 $ 30.97
Common shares outstanding 14,887,984 14,774,153 14,818,546
Triad Guaranty Inc.
Sequential Quarterly Statistical Information
(Unaudited)
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2006 2006 2005 2005 2005 2005 2004 2004 2004
---- ---- ---- ---- ---- ---- ---- ---- ----
(Dollars in millions unless otherwise indicated)
INSURANCE IN FORCE
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Primary insurance in force $ 30,783 $ 29,891 $ 29,792 $ 29,820 $ 29,489 $ 29,001 $ 28,964 $ 28,811 $ 28,367
Modified Pool insurance in force $ 20,022 $ 18,309 $ 14,615 $ 13,406 $ 10,018 $ 9,217 $ 7,863 $ 7,010 $ 6,390
Credit quality of primary insurance
in force(1)
Prime 82.9% 84.6% 84.9% 85.5% 86.2% 87.2% 87.7% 88.2% 88.9%
Alt-A 12.3% 10.4% 9.9% 9.2% 8.4% 7.6% 7.3% 6.7% 5.8%
A Minus 3.9% 4.1% 4.2% 4.3% 4.4% 4.3% 4.2% 4.2% 4.2%
Sub Prime 0.9% 0.9% 1.0% 1.0% 1.0% 1.0% 0.9% 1.0% 1.1%
Alt A insurance in force - primary
FICO between 620 and 659 14.4% 17.9% 19.2% 20.0% 21.6% 22.7% 22.9% 21.4% 20.0%
FICO between 660 and 699 34.4% 34.0% 33.9% 34.4% 36.6% 38.0% 38.4% 39.4% 41.1%
FICO between 700 and 739 28.2% 27.1% 26.4% 26.0% 23.8% 22.7% 22.4% 23.0% 23.1%
FICO greater than 739 22.9% 21.0% 20.5% 19.6% 18.0% 16.5% 16.3% 16.1% 15.8%
Primary flow insurance in force subject to
captive reinsurance arrangements 62.7% 59.7% 59.0% 58.3% 57.2% 56.7% 56.6% 56.1% 55.0%
RISK IN FORCE
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Primary net risk in force $ 6,966 $ 6,779 $ 6,767 $ 6,806 $ 6,700 $ 6,574 $ 6,587 $ 6,540 $ 6,409
Total primary risk in force by credit score
FICO less than 575 0.7% 0.8% 0.8% 0.9% 1.0% 1.0% 1.1% 1.1% 1.3%
FICO between 575 and 619 3.9% 4.1% 4.3% 4.4% 4.6% 4.6% 4.6% 4.7% 4.9%
FICO between 620 and 659 17.3% 17.8% 17.9% 18.2% 18.3% 18.1% 17.9% 17.6% 17.2%
FICO between 660 and 699 24.5% 24.5% 24.4% 24.4% 24.6% 24.7% 24.7% 24.6% 24.5%
FICO between 700 and 739 24.2% 23.9% 23.9% 23.8% 23.7% 23.8% 23.8% 24.1% 24.2%
FICO greater than 739 29.3% 28.9% 28.7% 28.3% 27.9% 27.8% 27.8% 28.0% 28.0%
Modified Pool gross risk in force $ 764 $ 751 $ 616 $ 579 $ 489 $ 462 $ 416 $ 388 $ 374
Deductibles on gross risk $ 90 $ 83 $ 71 $ 68 $ 59 $ 53 $ 42 $ 35 $ 31
Modified pool risk in force by
credit score(2)
FICO less than 575 0.2% 0.2% 0.2% 0.2% 0.3% 0.3% 0.4% 0.5% 0.6%
FICO between 575 and 619 1.0% 1.0% 1.1% 1.2% 1.6% 1.8% 2.2% 2.3% 2.5%
FICO between 620 and 659 12.0% 12.2% 14.2% 14.8% 17.4% 18.3% 20.5% 21.2% 22.6%
FICO between 660 and 699 30.2% 29.9% 31.1% 31.5% 33.2% 33.1% 32.9% 33.7% 33.8%
FICO between 700 and 739 29.5% 29.7% 28.4% 28.1% 27.2% 26.7% 25.1% 24.2% 23.2%
FICO greater than 739 27.1% 27.1% 25.0% 24.1% 20.2% 19.7% 18.9% 18.1% 17.3%
<FN>
(1) The Credit Quality of loans notated above are defined as followed: Prime -
All business that is not Alt A, A-, or subprime; Alt A - Loans with credit
scores >= 620 and that were underwritten with low or no documentation; A
minus - Loans with credit scores >= 575 and <= 619; Subprime - Loans with
credit scores less than 575
(2) Percentages represent distribution of direct risk in force (RIF) on a per
policy basis and do not account for applicable stop loss amounts.
</FN>
Triad Guaranty Inc.
Sequential Quarterly Statistical Information (con't.)
(Unaudited)
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2006 2006 2005 2005 2005 2005 2004 2004 2004
---- ---- ---- ---- ---- ---- ---- ---- ----
(Dollars in millions unless otherwise indicated)
PRODUCTION
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Primary new insurance written (NIW) $ 2,944 $ 1,948 $ 2,263 $ 3,093 $ 2,941 $ 2,191 $ 2,476 $ 2,716 $ 3,019
- Flow business $ 2,559 $ 1,947 $ 2,263 $ 3,091 $ 2,941 $ 2,161 $ 2,456 $ 2,665 $ 2,950
- Bulk business $ 385 $ 1 $ - $ 2 $ - $ 30 $ 20 $ 51 $ 69
Modified Pool NIW $ 2,980 $ 4,606 $ 2,255 $ 4,526 $ 1,798 $ 2,103 $ 1,606 $ 1,297 $ 1,394
Product mix as a % of primary flow NIW:
- Greater than 95% LTV's 14.1% 10.1% 11.2% 13.8% 11.6% 12.8% 13.7% 13.9% 11.8%
- ARMs 37.7% 32.4% 30.4% 35.9% 43.7% 38.1% 36.7% 37.0% 33.2%
- Monthly premium 99.3% 99.6% 99.5% 96.8% 94.3% 93.1% 93.5% 93.3% 90.7%
- Annual premium 0.1% 0.1% 0.2% 3.0% 5.4% 5.7% 6.1% 6.2% 9.0%
- Refinances 28.7% 33.6% 28.6% 26.5% 33.6% 35.0% 30.1% 22.0% 32.3%
Primary new risk written (gross) $ 730 $ 490 $ 583 $ 822 $ 723 $ 540 $ 642 $ 724 $ 775
Modified Pool new risk written $ 92 $ 142 $ 55 $ 97 $ 46 $ 62 $ 46 $ 27 $ 30
NIW subject to captive reinsurance
arrangements
- Primary flow business 61.2% 55.1% 55.1% 58.1% 54.6% 47.4% 52.8% 51.3% 58.7%
LOAN STATISTICS
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Primary number of insured loans 216,458 215,736 217,397 219,159 219,256 217,657 218,011 217,305 214,991
Primary average loan size ($ thousands) $ 142.2 $ 138.6 $ 137.0 $ 136.1 $ 134.5 $ 133.2 $ 132.9 $ 132.6 $ 131.9
Primary risk in force by policy year
2001 and prior 5.7% 6.4% 6.9% 7.6% 8.6% 9.7% 10.7% 12.1% 14.1%
2002 7.1% 8.0% 8.6% 9.5% 11.1% 12.6% 14.0% 15.9% 18.4%
2003 22.0% 24.6% 26.6% 29.3% 33.4% 37.3% 40.5% 44.5% 49.0%
2004 21.9% 24.4% 26.1% 28.2% 31.4% 34.2% 34.8% 27.5% 18.5%
2005 29.1% 31.3% 31.8% 25.4% 15.5% 6.2% - - -
2006 14.2% 5.3% - - - - - - -
Modified Pool number of insured loans 107,653 101,934 85,091 78,241 59,581 55,182 48,563 43,286 39,519
Modified Pool average loan
size ($ thousands) $ 186.0 $ 179.6 $ 171.8 $ 171.3 $ 168.1 $ 167.0 $ 161.9 $ 161.9 $ 161.7
<FN>
Note: The Company periodically enters into structured transactions involving
loans that have insurance effective dates within the current reporting
period but for which detailed loan information regarding the insured loans
is not provided until later. When this occurs, the Company accrues due
premium in the reporting period based on each loan's insurance effective
date; however, the loans are not reflected in the Company's in force and
related data totals until the loan level detail is reported to the Company.
At June 30, 2006, the Company had approximately $363 million of structured
transactions with effective dates within the second quarter for which loan
level detail had not been received.
</FN>
Triad Guaranty Inc.
Sequential Quarterly Statistical Information (con't.)
(Unaudited)
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2006 2006 2005 2005 2005 2005 2004 2004 2004
---- ---- ---- ---- ---- ---- ---- ---- ----
(Dollars in millions unless otherwise indicated)
DELINQUENCIES AND CLAIM INFORMATION
- -----------------------------------
Total primary delinquent loans 4,787 5,116 5,336 4,312 4,013 4,134 4,203 3,902 3,709
Total modified pool delinquent loans 1,698 1,776 1,827 1,341 1,312 1,329 1,242 1,106 1,056
- With deductibles 1,099 1,127 1,090 709 612 538 410 197 121
- Without deductibles 599 649 737 632 700 791 832 909 935
Total primary delinquency rate 2.21% 2.37% 2.45% 1.97% 1.83% 1.90% 1.93% 1.80% 1.73%
Modified Pool delinquency rate 1.58% 1.74% 2.15% 1.71% 2.20% 2.41% 2.56% 2.56% 2.67%
Primary average severity ($ thousands) $ 25.8 $ 26.3 $ 26.2 $ 26.2 $ 28.9 $ 24.7 $ 24.1 $ 19.3 $ 24.2
Primary net paid claims ($ thousands) $ 13,501 $ 13,284 $ 11,562 $ 11,982 $ 12,147 $ 8,681 $ 7,138 $ 6,547 $ 6,310
Modified Pool average
severity ($ thousands) $ 19.4 $ 16.4 $ 18.0 $ 22.0 $ 24.5 $ 17.6 $ 14.7 $ 12.4 $ 14.0
Modified Pool net paid
claims ($ thousands) $ 930 $ 1,100 $ 862 $ 1,475 $ 1,150 $ 970 $ 1,193 $ 733 $ 406
FINANCIAL INFORMATION
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Loss ratio - GAAP 34.1% 34.1% 48.9% 38.4% 42.0% 27.4% 27.0% 25.8% 22.5%
Expense ratio - GAAP 25.6% 25.6% 26.4% 26.1% 26.4% 28.1% 27.8% 28.6% 29.7%
Combined ratio - GAAP 59.7% 59.7% 75.3% 64.5% 68.4% 55.5% 54.8% 54.4% 52.2%
Risk-to-capital ratio 11.8:1 12.3:1 12.6:1 13.0:1 13.1:1 13.7:1 14.0:1 14.4:1 14.6:1
Annual persistency - primary 72.7% 71.1% 70.0% 69.7% 70.9% 69.0% 68.5% 67.8% 60.9%