Note 7 - Reinsurance

6 Months Ended

Jun. 30, 2012

7. Reinsurance [Abstract]

Reinsurance [Text Block]

Reinsurance

In our mortgage insurance business, we use reinsurance as a risk management tool to reduce our net risk and strengthen our regulatory risk-to-capital ratio. We have primarily used reinsurance in our financial guaranty business to the extent necessary in specific transactions to comply with applicable single risk limits. Although the use of reinsurance does not discharge an insurer from its primary liability to the insured, the reinsuring company assumes the related liability under these arrangements. Included in other assets are unearned premiums on risk that we have ceded of $22.7 million and $0.8 million at June 30, 2012 and December 31, 2011, respectively.

The effect of reinsurance on net premiums written and earned is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2012			2011			2012			2011
Net premiums written-insurance:
Direct	$	214,349		$	174,008		$	418,102		$	364,849
Assumed	(1,028		)	(11,788		)	(88,516		)	(10,164		)
Ceded	(31,389		)	(9,442		)	(69,976		)	(19,158		)
Net premiums written-insurance	$	181,932		$	152,778		$	259,610		$	335,527
Net premiums earned-insurance:
Direct	$	196,012		$	186,640		$	388,028		$	391,098
Assumed	1,704			12,064			(8,981		)	20,694
Ceded	(10,937		)	(9,770		)	(24,903		)	(19,835		)
Net premiums earned-insurance	$	186,779		$	188,934		$	354,144		$	391,957

In the second quarter of 2012, Radian Guaranty entered into the 2012 Quota Share Reinsurance Transaction. Through the 2012 Quota Share Reinsurance Transaction, Radian Guaranty agreed to cede 20% of its new insurance written beginning with the business written in the fourth quarter of 2011. As of June 30, 2012, the amount ceded pursuant to this transaction was $922.5 million of Radian Guaranty’s RIF. The amount of risk that ultimately may be ceded is expected to be between $1.25 billion and $1.6 billion. At a 25 to 1 risk-to-capital ratio, the equivalent initial capital benefit associated with ceding this amount of risk will be between $50 million and $62.5 million. Radian Guaranty has the ability, at its option, to commute two-thirds of the reinsurance ceded as part of this transaction on December 31, 2014, which would result in Radian Guaranty reassuming the related RIF in exchange for a predefined commutation amount.

Under the 2012 Quota Share Reinsurance Transaction, for the three and six months ended June 30, 2012, ceded premiums written were $25.5 million and ceded premiums earned were $3.1 million. Ceding commissions under this transaction for the three and six months ended June 30, 2012 were $6.4 million.

In the second quarter of 2012, we terminated one of our remaining Smart Home transactions that was scheduled to mature in November 2012. The early termination did not have a material impact on our financial or risk-to-capital position, statutory capital, results of operations or cash flows. The final remaining Smart Home transaction is scheduled to mature in June 2013.

See also Note 1 for the impact of the Assured Transaction, executed in the quarter ended March 31, 2012, on net premiums written and earned.