Note 2 - Discontinued Operations (Notes)

3 Months Ended

Mar. 31, 2015

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Discontinued Operations

On April 1, 2015, Radian Guaranty completed the sale of 100% of the issued and outstanding shares of Radian Asset Assurance for a purchase price of approximately $810 million, pursuant to the Radian Asset Assurance Stock Purchase Agreement. The divestiture was intended to better position Radian Guaranty to comply with the PMIERs and to support Radian’s strategic focus on the mortgage and real estate industries. After closing costs and other adjustments, Radian Guaranty received net proceeds of $789 million. See Note 1 for additional information regarding the PMIERs.

Previously, Radian Asset Assurance comprised substantially all of the financial guaranty segment. Radian Asset Assurance provided direct insurance and reinsurance on credit-based risks. As a result, the assets and liabilities associated with the discontinued operations historically were a source of significant volatility to Radian’s results of operations, due to various factors including fluctuations in fair value and credit risk.

Based upon the applicable terms of the Radian Asset Assurance Stock Purchase Agreement, we determined that Radian Asset Assurance met the criteria for held for sale and discontinued operations accounting at December 31, 2014. As a result, we recognized a pre-tax impairment charge of approximately $468 million for the year ended December 31, 2014 and an additional charge of $13.9 million for the three months ended March 31, 2015. The operating results of Radian Asset Assurance are classified as discontinued operations for all periods presented in our condensed consolidated statements of operations. Since the purchase price was not subject to adjustment between December 31, 2014 and the closing date for the impact of: (i) Radian Asset Assurance’s results of operations; (ii) changes in valuation; or (iii) market conditions, the after-tax impact of such changes reflected in income (loss) from operations of businesses held for sale were substantially offset by the resulting change in loss on classification as held for sale. We recorded net income on discontinued operations of $0.5 million related to this sale in the first quarter of 2015. No general corporate overhead or interest expense was allocated to discontinued operations.

In the tables below we have summarized the major components of the net income from discontinued operations, as well as the assets and liabilities held for sale.

The income from discontinued operations, net of tax, consisted of the following components for the periods indicated:

	Three Months Ended March 31,
(In thousands)	2015			2014
Net premiums earned	$	1,007		$	6,903
Net investment income	9,153			8,911
Net gains on investments and other financial instruments	13,668			22,182
Change in fair value of derivative instruments	2,625			50,086
Total revenues	26,453			88,082
Provision for losses	502			5,649
Policy acquisition costs	(191		)	1,597
Other operating expense	4,107			5,402
Total expenses	4,418			12,648
Equity in net loss of affiliates	(13		)	(13		)
Income from operations of businesses held for sale	22,022			75,421
Loss on classification as held for sale	(13,930		)	—
Income tax provision	7,562			18,642
Income from discontinued operations, net of tax	$	530		$	56,779

The assets and liabilities associated with the discontinued operations have been segregated in the condensed consolidated balance sheets. The following table summarizes the major components of Radian Asset Assurance’s assets and liabilities held for sale on the condensed consolidated balance sheets as of the dates indicated:

(In thousands)	March 31, 2015		December 31, 2014
Fixed-maturity investments	$	226,334	$	224,552
Equity securities	4,019		3,749
Trading securities	679,972		689,887
Short-term investments	449,391		435,413
Other invested assets	108,080		108,206
Other assets	288,077		274,637
Total assets held for sale	$	1,755,873	$	1,736,444
Unearned premiums	$	152,445	$	158,921
Reserve for losses and LAE	32,420		31,558
VIE debt	82,238		85,016
Derivative liabilities	187,462		183,370
Other liabilities	511,513		488,143
Total liabilities held for sale	$	966,078	$	947,008