Note 2 - Discontinued Operations (Notes)

9 Months Ended

Sep. 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 through April 1, 2015, when the sale was completed. 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, as well as adjustments to estimated transaction costs and taxes. No general corporate overhead or interest expense was allocated to discontinued operations in 2015 or 2014.

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 September 30,					Nine Months Ended September 30,
(In thousands)	2015 (1)		2014			2015			2014
Net premiums earned	$	—	$	9,329		$	1,007		$	26,700
Net investment income	—		9,035			9,153			27,020
Net (losses) gains on investments and other financial instruments	—		(563		)	21,486			41,596
Change in fair value of derivative instruments	—		19,360			2,625			126,923
Other income	—		9			—			88
Total revenues	—		37,170			34,271			222,327
Provision for losses	—		(6,416		)	502			4,311
Policy acquisition costs	—		1,794			(191		)	5,066
Other operating expense	—		5,037			4,107			15,239
Total expenses	—		415			4,418			24,616
Equity in net loss of affiliates	—		—			(13		)	(13		)
Income from operations of businesses held for sale	—		36,755			29,840			197,698
Loss on sale	—		—			(14,280		)	—
Income tax provision	—		15,196			10,175			48,064
Income from discontinued operations, net of tax	$	—	$	21,559		$	5,385		$	149,634

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(1) There was no activity for discontinued operations in the three months ended September 30, 2015.

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 dates indicated:

(In thousands)	September 30, 2015		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