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Triad Guaranty Inc. Reports Fourth Quarter And Year End Results

WINSTON-SALEM, N.C., Feb. 25 /PRNewswire-FirstCall/ -- Triad Guaranty Inc. (OTC Bulletin Board: TGIC) today reported a net loss for the quarter ended December 31, 2009 of $79.1 million compared to a net loss of $101.9 million for the third quarter of 2009 and a net loss of $122.2 million for the fourth quarter of 2008.  The 2009 fourth quarter diluted loss per share was $5.26 compared to a diluted loss per share of $6.78 for the 2009 third quarter and $8.16 for the fourth quarter of 2008.

The net loss for the year ended December 31, 2009 was $595.6 million compared to a net loss of $631.1 million for the year ended December 31, 2008.  The diluted loss per share was $39.70 for the year ended December 31, 2009 compared to a diluted loss per share of $42.27 for the year ended December 31, 2008.

Ken Jones, President and CEO, said, "The fourth quarter of 2009 continued to be a very difficult environment for our business.  First-time defaults, while down moderately from earlier 2009 quarters, continued at a high volume.  We have seen very little permanent impact to date from the existing loan modification programs and, consequently, the cure rates on existing defaults remain at historic lows and have shown little sign of improvement.  As a company in run-off, our primary focus remains on the efficient and effective servicing of our insured portfolio, particularly with respect to loss management, in order to maximize our claims-paying ability."  

Total insurance in force declined to $50.5 billion at December 31, 2009, a 7.5% drop from September 30, 2009 and a 19.3% decline from December 31, 2008.  Persistency rates have remained high over the past year due primarily to more restrictive credit standards in mortgage lending and declines in home prices, both of which limit the opportunities for borrowers to refinance existing mortgages.  The majority of the decline in insurance in force over the past year is attributable to paid claims and rescinded coverage, as opposed to refinancing or sales.  In addition, during the fourth quarter five Modified Pool contracts terminated in accordance with their terms after reaching the paid stop loss, which accounted for approximately 2% of the decline in insurance in force during the quarter.

Total revenues increased sequentially by $6.5 million to $57.8 million for the fourth quarter of 2009, as compared to $51.3 million in the third quarter of 2009 and $41.4 million in the fourth quarter of 2008.  Driving the fourth quarter growth in revenues was a gain of $12.9 million related to the sale of the operating platform to Essent Guaranty, Inc.  Earned premiums were essentially flat for the fourth quarter of 2009 when compared to the 2009 third quarter, but declined 30% when compared to the fourth quarter of 2008.  The decline in year-over-year earned premiums was primarily due to the decline in insurance in force combined with the impact of refunds and expected refunds of premium relating to rescission activity.  Revenues in the fourth quarter of 2008 were negatively impacted by an $18.9 million non-cash impairment loss, while the Company realized a small investment gain of $0.7 million in the fourth quarter of 2009.  

Net losses and loss adjustment expenses were $128.9 million for the fourth quarter of 2009, down from $145.8 million in the 2009 third quarter and $178.1 million for the fourth quarter of 2008.  Net settled claims totaled $153.7 million in the 2009 fourth quarter, down slightly from $157.9 million in the 2009 third quarter, but up significantly when compared to the $69.4 million settled in the fourth quarter of 2008.  The increase in net settled claims during 2009 reflects the progression through the foreclosure process of a higher number of defaults from the 2006 and 2007 vintages.  In the fourth quarter of 2009, loss reserves declined by $30.2 million compared to a decline of $15.8 million in the 2009 third quarter, while loss reserves increased by $106.1 million in the fourth quarter of 2008.

As a result of the Corrective Orders issued by the Illinois Department of Insurance, since June 1, 2009, all valid claims under Triad's mortgage guaranty insurance policies have been settled 60% in cash and 40% by the creation of a deferred payment obligation ("DPO") payable to the insured.  The DPO requires that the Company accrue a carrying charge, or interest, based on the investment yield earned by its investment portfolio.  Payments of the carrying charge and the DPO will be subject to the future financial performance of the operating insurance subsidiary and will require the approval of the Director of the Illinois Department of Insurance.  Under U.S. generally accepted accounting principles, the DPOs and the related accrued interest are recorded as liabilities and are included in the "deferred payment obligation" line on our balance sheet.   Other operating expenses were down moderately for the fourth quarter of 2009 as compared to the third quarter of 2009 and the fourth quarter of 2008 as the Company continues through the run-off process.  The increase in interest expense in the fourth quarter of 2009 reflects an additional $1.5 million of accrued interest related to the DPOs.

We have updated the quarterly statistical and supplemental information for the 2009 fourth quarter results on our web site at www.triadguaranty.com.   The supplemental information can be found under "Investors" and then under "Webcasts and Presentations" by the title "Supplemental Information – Fourth Quarter 2009".

(Relevant Triad Guaranty Inc. financial and statistical information follows)

Triad Guaranty Inc.'s wholly owned subsidiary, Triad Guaranty Insurance Corporation, is a nationwide mortgage insurer pursuing a voluntary run-off of its existing in-force book of business. For more information, please visit the Company's web site at www.triadguaranty.com .

Certain of the statements contained in this release are "forward-looking statements" and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include estimates and assumptions related to economic, competitive, regulatory, operational and legislative developments. These forward-looking statements are subject to change, uncertainty and circumstances that are, in many instances, beyond our control and they have been made based upon our current expectations and beliefs concerning future developments and their potential effect on us. Actual developments and their results could differ materially from those expected by us, depending on the outcome of a number of factors, including: the possibility that the Illinois Department of Insurance may take various actions regarding Triad if it does not operate its business in accordance with its revised financial and operating plan and the corrective orders, including seeking receivership proceedings; our ability to operate our business in run-off and maintain a solvent run-off; our ability to continue as a going concern; the possibility of general economic and business conditions that are different than anticipated; legislative, regulatory, and other similar developments; changes in interest rates, employment rates, the housing market, the mortgage industry and the stock market; the possibility that there will not be adequate interest in the Company's common stock on the over the counter markets to ensure efficient pricing; and various factors described under "Risk Factors" and in the "Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995" in our Annual Report on Form 10-K for the year ended December 31, 2008 and in other reports and statements filed with the Securities and Exchange Commission.  Forward-looking statements are based upon our current expectations and beliefs concerning future events and we undertake no obligation to update or revise any forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements are made.

    
    
                              Triad Guaranty Inc.
                      Consolidated Statement of Operations
    
                         Three Months Ended              Twelve Months Ended
                             December 31,                   December 31,
                             (Unaudited)            (Unaudited)
                         2009           2008            2009           2008
                         ----           ----            ----           ----
                          (Dollars in thousands except per share amounts)
    
    Earned premiums    $34,891         $49,840        $179,658       $257,423
    Net investment
     income              9,739          10,509          44,133        $39,580
    Net realized
     investment
     gains (losses)        649         (18,944)          1,354        (26,559)
    Other income        12,536               2          12,666              8
                        ------             ---          ------            ---
      Total revenues    57,815          41,407         237,811        270,452
    
    Losses and
     loss adjustment
     expenses:
      Net settled
       claims          153,749          69,373         515,413        237,080
      Change
       in reserves     (30,195)        106,080         272,553        665,549
      Loss adjustment
       expenses          5,370           2,646          19,661         20,672
                         -----           -----          ------         ------
          Net losses
           and loss
           adjustment
           expenses    128,924         178,099         807,627        923,301
    
    Interest expense     2,243             694           6,034          3,557
    DAC amortization         -               -               -         39,416
    Other operating
     expenses - net      8,160           8,639          35,911         58,709
                         -----           -----          ------         ------
    Loss before
     income taxes      (81,512)       (146,025)       (611,761)      (754,531)
    
    Income tax
     benefit            (2,368)        (23,818)        (16,129)      (123,404)
                        ------         -------         -------       --------
    
    Net loss          $(79,144)      $(122,207)      $(595,632)     $(631,127)
                      ========       =========       =========      =========
    
    Diluted loss
     per share          $(5.26)         $(8.16)        $(39.70)       $(42.27)
    
    Diluted
     weighted
     average
     common and
     common stock
     equivalents
     outstanding 
     (in thousands)     15,059          14,980          15,002         14,930
    
    
    
                              Triad Guaranty Inc.
                          Consolidated Balance Sheet
    
                                        (Unaudited)
                                        December 31,        December 31,
                                            2009                2008
                                            ----                ----
                               (Dollars in thousands except per share amounts)
    Assets:
      Invested assets:
         Fixed maturities, 
          available for sale,
          at market                       $784,830            $854,186
         Equity securities,
          available for
          sale, at market                                          583
         Short-term investments             26,651              40,653
                                            ------              ------
                                           811,481             895,422
    
      Cash and cash equivalents             21,839              39,940
      Prepaid federal income tax                 -                  15
      Reinsurance recoverable              233,499             150,848
      Other assets                          58,007              44,309
                                            ------              ------
    
           Total assets                 $1,124,826          $1,130,534
                                        ==========          ==========
    
    Liabilities:
      Losses and loss adjustment
       expenses                         $1,537,043          $1,187,840
      Unearned premiums                     12,153              15,863
      Deferred income tax                        -                   -
      Long-term debt                        34,540              34,529
      Deferred payment obligation          168,386                   -
      Other liabilities                     79,062              28,968
                                            ------              ------
    
          Total liabilities              1,831,184           1,267,200
    
    Stockholders' equity:
      Accumulated deficit                 (851,141)           (255,509)
      Accumulated other
       comprehensive income                 30,782               6,063
      Other equity accounts                114,001             112,780
                                           -------             -------
    
         Total stockholders' deficit
          in assets                       (706,358)           (136,666)
                                          --------            --------
    
    Total liabilities and
     stockholders' equity               $1,124,826          $1,130,534
                                        ==========          ==========
    
    
    Stockholders' deficit in assets
     per share:                            $(46.29)             $(9.01)
    
    Common shares outstanding           15,258,128          15,161,259
    
    
    
                              Triad Guaranty Inc.
                      Consolidated Statement of Cash Flow
     
                                                    Twelve Months Ended
                                                         December 31,
                                                   2009                2008
                                                   ----                ----
                                               (Unaudited)
                                                   (Dollars in Thousands)
    OPERATING ACTIVITIES
    Net loss                                    $(595,632)          $(631,127)
    Adjustments to reconcile net loss to
     net cash provided by operating activities:
      Increase in loss and unearned premium
       reserves                                   345,493             825,971
      Amounts due to/from reinsurer               (83,363)           (150,839)
      Net realized investment (gains) losses       (1,354)             26,559
      Policy acquisition costs deferred                 -              (3,173)
      Amortization of policy acquisition costs          -              39,416
      Deferred income taxes                       (13,311)           (121,392)
      Redemption of Tax and Loss Bonds                 15             115,993
      Deferred payment obligation                 168,386                   -
      Other operating activities                   44,856              45,730
                                                   ------              ------
    
    Net cash (used in) provided by
     operating activities                        (134,910)            147,138
                                                 --------             -------
    
    INVESTING ACTIVITIES
      Purchases of investment securities         (182,251)           (839,372)
      Sales and maturities of investment
       securities                                 284,188             674,688
      Net change in short-term investments         13,915              14,074
      Other investing activities                      957              (1,296)
                                                      ---              ------
    
    Net cash provided by (used in)
     investing activities                         116,809            (151,906)
                                                  -------            --------
    
    FINANCING ACTIVITIES
      Repayments on credit facility                     -             (80,000)
      Excess tax benefits related to share
       based compensation                               -                  15
                                                      ---                 ---
    
    Net cash used in financing activities               -             (79,985)
                                                      ---             -------
    
    Foreign currency translation adjustment             -                (118)
                                                      ---                ----
    
    Net decrease in cash                          (18,101)            (84,871)
    Cash at beginning of period                    39,940             124,811
                                                   ------             -------
    
    Cash at end of period                         $21,839             $39,940
                                                  =======             =======
    
    
    
                                TRIAD GUARANTY INC.
                    Sequential Quarterly Financial Statements
                                    (unaudited)
    
             Condensed Statements of Operations For The Quarter Ended
                              (Dollars in thousands)
                              ----------------------
    
                                 Dec 31,    Sept 30,   Jun 30,   Mar 31,
                                   2009       2009       2009      2009
                                   ----       ----       ----      ----
    Revenue:
      Earned premiums            $34,891    $35,576    $64,833   $44,358
      Net investment income        9,739     12,342     10,859    11,192
      Realized investment
       gains (losses)                649      3,253      2,017    (4,565)
      Other income (loss)         12,536        127          2         2
                                  ------        ---        ---       ---
        Total revenues            57,815     51,298     77,711    50,987
                                  ------     ------     ------    ------
    Losses and expenses:
         Net settled claims      153,749    157,881    149,863    53,920
         Change in reserves      (30,195)   (15,836)   278,956    39,628
         Loss adjustment expenses  5,370      3,713      2,549     8,029
                                   -----      -----      -----     -----
      Net losses and LAE         128,924    145,758    431,368   101,577
      Change in premium
       deficiency reserve              -          -          -         -
      Interest expense             2,243      1,202      1,895       694
      Amortization of DAC              -          -          -         -
      Other operating expenses     8,160      9,659      8,680     9,411
                                   -----      -----      -----     -----
        Total losses and
         expenses                139,327    156,619    441,943   111,682
                                 -------    -------    -------   -------
    Income (loss) before
     income taxes                (81,512)  (105,321)  (364,232)  (60,695)
      Income taxes (benefit)      (2,368)    (3,426)    (4,813)   (5,521)
                                  ------     ------     ------    ------
    Net income (loss)           $(79,144) $(101,895) $(359,419) $(55,174)
                                ========  =========  =========  ========
    
    
    
                        Dec 31,     Sep 30,   Jun 30,    Mar 31,    Dec 31,
                          2008       2008       2008       2008       2007
                          ----       ----       ----       ----       ----
    Revenue:
      Earned premiums   $49,840    $65,654    $69,864    $72,065    $73,130
      Net investment
       income            10,509     10,349      9,175      9,547      9,544
      Realized
       investment
       gains (losses)   (18,944)    (6,519)    (3,799)     2,703        (29)
      Other income (loss)     2          2          2          2          2
                            ---        ---        ---        ---        ---
        Total revenues   41,407     69,486     75,242     84,317     82,647
                         ------     ------     ------     ------     ------
    Losses and expenses:
         Net settled
          claims         69,372     59,357     68,263     40,471     36,341
         Change in
          reserves      106,080    165,958    218,568    174,561    150,687
         Loss adjustment
          expenses        2,647      5,879      5,918      6,227      4,624
                          -----      -----      -----      -----      -----
      Net losses
       and LAE          178,099    231,194    292,749    221,259    191,652
      Change in premium
       deficiency reserve     -          -    (15,000)    15,000          -
      Interest expense      694        691        696      1,476      1,828
      Amortization
       of DAC                 -          -          -     39,416      4,637
      Other operating
       expenses           8,639      8,726     27,238     14,106     10,895
                          -----      -----     ------     ------     ------
        Total losses
         and expenses   187,432    240,611    305,683    291,257    209,012
                        -------    -------    -------    -------    -------
    Income (loss)
     before income
     taxes             (146,025)  (171,125)  (230,441)  (206,940)  (126,365)
      Income taxes
       (benefit)        (23,818)   (11,030)   (31,630)   (56,926)   (51,406)
                        -------    -------    -------    -------    -------
    Net income (loss) $(122,207) $(160,095) $(198,811) $(150,014)  $(74,959)
                      =========  =========  =========  =========   ========
    
    
    
                               Condensed  Balance Sheets As Of
                                    (Dollars in thousands)
                                    ----------------------
    
                               Dec 31,    Sept 30,        Jun 30,     Mar 31,
                                2009       2009            2009        2009
                                ----       ----            ----        ----
    Assets
      Invested assets        $811,481    $846,905        $851,640    $918,531
      Cash                     21,839       7,480          31,600      21,394
      Real estate acquired          -           -               -         526
      Deferred policy
       acquisition costs            -           -               -           -
      Prepaid federal
       income tax                   -           -               -          15
      Reinsurance 
       recoverable            233,499     245,436         234,248     182,589
      Other assets             58,007      54,331          57,650      52,307
                               ------      ------          ------      ------
      Total assets         $1,124,826  $1,154,152      $1,175,138  $1,175,362
                           ==========  ==========      ==========  ==========
    
    Liabilities and
     stockholders' equity
      Liabilities:
            Losses and loss
             adjustment
             expenses      $1,537,043  $1,576,303      $1,591,207  $1,262,746
            Premium
             deficiency
             reserve                -           -               -           -
            Deferred income
             taxes                  -           -               -           -
            Borrowing under
             credit facility        -           -               -           -
            Long term debt     34,540      34,537          34,535      34,532
            Deferred
             payment
             obligation       168,386      97,048          27,020           -
            Accrued
             expenses and
             other
             liabilities       91,215      71,291          52,066      59,477
                               ------      ------          ------      ------
      Total
       liabilities          1,831,184   1,779,179       1,704,828   1,356,755
      Total
       stockholders'
       equity (deficit in
       assets)               (706,358)   (625,027)       (529,690)   (181,393)
                             --------    --------        --------    --------
      Total
       liabilities
       and stockholders'
       equity              $1,124,826   $1,154,152     $1,175,138  $1,175,362
                           ==========   ==========      ========== ==========
    
    
    
                          Dec 31,    Sep 30,    Jun 30,    Mar 31,    Dec 31,
                           2008       2008       2008       2008       2007
                           ----       ----       ----       ----       ----
    Assets
      Invested assets    $895,422   $890,720   $869,022   $760,073   $784,539
      Cash                 39,940     47,818     19,669     80,544    124,811
      Real estate
       acquired               713      3,661      6,202      8,993     10,860
      Deferred
       policy
       acquisition
       costs                    -          -          -          -     36,243
      Prepaid
       federal
       income
       tax                     15         15     63,184    115,598    116,008
      Reinsurance
       recoverable        150,848    111,827     55,316     93,244      5,815
      Other assets         43,596     47,915     50,405     52,572     54,577
                           ------     ------     ------     ------     ------
      Total assets     $1,130,534 $1,101,956 $1,063,798 $1,111,024 $1,132,853
                       ========== ========== ========== ========== ==========
    
     Liabilities
      and stockholders'
      equity
       Liabilities:
         Losses and
          loss
          adjustment
          expenses     $1,187,840 $1,042,053   $817,262   $547,766   $359,939
         Premium
          deficiency
          reserve               -          -          -     96,073          -
         Deferred
          income taxes          -     22,889     30,386     61,522    123,297
         Borrowing
          under credit
          facility              -          -          -          -     80,000
         Long term
          debt             34,529     34,527     34,527     34,522     34,519
         Deferred
          payment
          obligation            -          -          -          -          -
         Accrued
          expenses
          and other
          liabilities      44,831     30,887     40,714     32,699     36,247
                           ------     ------     ------     ------     ------
      Total
       liabilities      1,267,200  1,130,356    922,889    772,582    634,002
      Total
       stockholders'
       equity (deficit
       in assets)        (136,666)   (28,400)   140,909    338,442    498,851
                         --------    -------    -------    -------    -------
      Total
       liabilities
       and stockholders'
       equity          $1,130,534 $1,101,956 $1,063,798 $1,111,024 $1,132,853
                       ========== ========== ========== ========== ==========

SOURCE Triad Guaranty Inc.

Copyright 2009 PR Newswire. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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