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Radian Group (RDN)

Q4 2011 Earnings Call

February 23, 2012 10:00 am ET


Emily Riley -

S. A. Ibrahim - Chief Executive Officer and Director

C. Robert Quint - Chief Financial Officer and Executive Vice President

David J. Beidler - President of Radian Asset Assurance Inc

Teresa Bryce - President of Radian Guaranty Inc


Geoffrey Dunn - Dowling & Partners Securities, LLC

Mark C. DeVries - Barclays Capital, Research Division

Jonathan Evans

Robert Haines

Christopher Gamaitoni - Compass Point Research & Trading, LLC, Research Division

John R. Benda - Susquehanna Financial Group, LLLP, Research Division

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Stuart Yingst

Steve Stelmach - FBR Capital Markets & Co., Research Division

Patrick Dowd

Matthew Howlett - Macquarie Research



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Ladies and gentlemen, thank you for standing by, and welcome to Radian's Fourth Quarter 2011 Earnings Call. [Operator Instructions] As a reminder, today's conference is being recorded. At this time, I'd like to turn the conference over to Emily Riley, Vice President of Financial Communications. Please go ahead.

Emily Riley

Thank you, and welcome to Radian's Fourth Quarter 2011 Conference Call. Our press release, which contains Radian's financial results for the quarter and full year, was issued earlier today and is posted to the Investors section of our website at During today's call, you will hear from S.A. Ibrahim, Radian's Chief Executive Officer; and Bob Quint, Chief Financial Officer. Also on hand for the Q&A portion of the call are: Teresa Bryce Bazemore, President of Radian Guaranty; David Beidler, President of Radian Asset Assurance; and Scott Theobald, Executive Vice President and Chief Risk Officer of Radian Guaranty.

Before we begin, I would like to remind you that comments made during this call will include forward-looking statements. These statements are based on current expectations, estimates, projections and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially. For a discussion of these risks, please review the cautionary statements regarding forward-looking statements included in our earnings release and the risk factors included in our 2010 Form 10-K and our third quarter 2011 Form 10-Q. These are also available on our website. Now I would like to turn the call over to S.A.

S. A. Ibrahim

Thank you, Emily, and thank you, all, for joining us. 2011 has been an important year for Radian as we position the company for growth and future profitability. The past few years have been impacted in many respects by the macro environment, but we are now beginning to see some improvements in the economy and are capturing opportunities for profitable new business for Radian. We are pleased with the progress we have made and look forward to differentiating ourselves in the market as a leader in new business.

The enhancements we have made in our capital position and operations are built upon the key priorities that we have highlighted throughout 2011 and which remain our core focus. During the call today, I will first provide a high-level overview of our fourth quarter results, then an update on capital and liquidity and report on progress on our key business priorities. Bob will then provide details on our financial position before I offer a few summary remarks and we open the call to your questions.

Earlier today, we reported a net loss for the fourth quarter of 2011 of $122 million or $0.92 per diluted share. This includes the impact of fair value gains of $102 million and an income tax provision of $65 million. For the full year 2011, we reported net income of $302 million or $2.26 per diluted share, which includes a fair value gain of $822 million. At December 31, our book value per share was $8.88.

Our financial results were once again impacted by the challenges of our legacy portfolio and the macroeconomic environment. At the same time, the credit environment is stabilizing and we are encouraged by the steady improvement in our delinquency portfolio and our ability to write more high-quality business in the fourth quarter. The amount of NIW written in the fourth quarter of 2011 could generate nearly $50 million in after-tax income over its life. And as the market leader in new business, we have positioned ourselves well to capitalize on the opportunity afforded by the improving environment.

Now let's turn to our capital and liquidity positions and the progress we've made to strengthen our company. First, our risk-to-capital ratio, which is a key measure of Radian Guaranty's financial strength for our stockholders, regulators and customers, was 21.5:1 as of December 31, 2011. Our risk-to-capital ratio in the fourth quarter includes a $100 million contribution from Radian Group, but importantly, does not include the impact of the recently announced Assured transaction or any potential benefit from the termination of 14 corporate CDO transactions in the first quarter of 2011 due to counterparties exercising their walkaway rights.

Next, Radian Group maintains $480 million of available liquidity today. We have $250 million of debt that matures in February 2013. Earlier today, we launched a tender offer to opportunistically reduce that amount -- to reduce the amount of that debt outstanding. Finally, we have received waivers to write business in certain states that impose a risk-based capital requirement. And we are in the process of finalizing agreements with both Fannie Mae and Freddie Mac for RMAI, a licensed subsidiary of Radian Guaranty, to be approved as an eligible mortgage insurer to write new business. We expect to announce the details of these agreements in the near future. With our risk-to-capital ratio and holding company liquidity, we are confident that Radian is competitively well-positioned to continue our momentum in writing new high-quality mortgage insurance business.

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