Note 2 - Discontinued Operations (Notes)

6 Months Ended

Jun. 30, 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 pretax impairment charge of approximately $468 million for the year ended December 31, 2014 and an additional charge of $14.3 million for the six months ended June 30, 2015. The operating results of Radian Asset Assurance are classified as discontinued operations for all periods presented in our condensed consolidated statements of operations. We recorded net income from discontinued operations of $5.4 million related to this sale in the first six months of 2015, consisting primarily of the recognition of investment gains previously deferred and recorded in accumulated other comprehensive income and recognized as a result of the completion of the sale of Radian Asset Assurance to Assured on April 1, 2015, and adjustments to estimated transaction costs and taxes. 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 June 30,					Six Months Ended June 30,
(In thousands)	2015			2014		2015			2014
Net premiums earned	$	—		$	10,468	$	1,007		$	17,371
Net investment income	—			9,074		9,153			17,985
Net gains on investments and other financial instruments	7,818			19,978		21,486			42,159
Change in fair value of derivative instruments	—			57,477		2,625			107,563
Other income	—			78		—			79
Total revenues	7,818			97,075		34,271			185,157
Provision for losses	—			5,078		502			10,727
Policy acquisition costs	—			1,675		(191		)	3,272
Other operating expense	—			4,800		4,107			10,202
Total expenses	—			11,553		4,418			24,201
Equity in net loss of affiliates	—			—		(13		)	(13		)
Income from operations of businesses held for sale	7,818			85,522		29,840			160,943
Loss on sale	(350		)	—		(14,280		)	—
Income tax provision	2,613			14,226		10,175			32,868
Income from discontinued operations, net of tax	$	4,855		$	71,296	$	5,385		$	128,075

The assets and liabilities associated with the discontinued operations have been segregated in the condensed consolidated balance sheets for periods prior to the sale. 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 date indicated:

(In thousands)	December 31, 2014
Fixed-maturity investments	$	224,552
Equity securities	3,749
Trading securities	689,887
Short-term investments	435,413
Other invested assets	108,206
Other assets	274,637
Total assets held for sale	$	1,736,444
Unearned premiums	$	158,921
Reserve for losses and LAE	31,558
VIE debt	85,016
Derivative liabilities	183,370
Other liabilities	488,143
Total liabilities held for sale	$	947,008