Note 7 - Reinsurance

9 Months Ended

Sep. 30, 2016

Reinsurance Disclosures [Abstract]

Reinsurance

Reinsurance

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

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2016			2015			2016			2015
Net premiums written-insurance:
Direct	$	261,456		$	253,262		$	748,110		$	766,708
Assumed	—			7			—			62
Ceded (1)	(20,457		)	(11,101		)	(248,448		)	(31,612		)
Net premiums written-insurance	$	240,999		$	242,168		$	499,662		$	735,158
Net premiums earned-insurance:
Direct	$	258,074		$	242,260		$	747,342		$	734,221
Assumed	9			10			27			33
Ceded (1)	(19,934		)	(14,837		)	(59,185		)	(44,789		)
Net premiums earned-insurance	$	238,149		$	227,433		$	688,184		$	689,465

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(1) Net of profit commission.

In 2012, Radian Guaranty entered into two separate QSR Transactions with a third-party reinsurance provider. Radian Guaranty has ceded the maximum amount permitted under the QSR Transactions; therefore, Radian Guaranty is no longer ceding NIW under these transactions. Effective January 1, 2016, the ceding commission was reduced from 35% to 30% for a portion of the remaining reinsurance ceded under the Second QSR Transaction. Ceded losses to date under the QSR Transactions have been immaterial. See Note 8 of Notes to Consolidated Financial Statements in our 2015 Form 10-K for more information.

In the first quarter of 2016, in order to proactively manage the risk and return profile of Radian Guaranty’s insured portfolio and continue managing its position under the PMIERs Financial Requirements in a cost-effective manner, Radian Guaranty entered into the Single Premium QSR Transaction with a panel of third-party reinsurers.

Under the Single Premium QSR Transaction, effective January 1, 2016, Radian Guaranty began ceding the following Single Premium IIF and NIW, subject to certain conditions:

• 20% of its existing performing Single Premium Policies written between January 1, 2012 and March 31, 2013;

• 35% of its existing performing Single Premium Policies written between April 1, 2013 and December 31, 2015; and

• 35% of its Single Premium NIW from January 1, 2016 to December 31, 2017, subject to a limitation on ceded premiums written equal to $195 million for policies issued between January 1, 2016 and December 31, 2017.

Radian Guaranty will receive a 25% ceding commission for premiums ceded pursuant to this transaction. Radian Guaranty will also receive a profit commission, provided that the loss ratio on the loans covered under the agreement generally remains below 55%. Losses on the ceded risk reduce Radian Guaranty’s profit commission on a dollar-for-dollar basis. Ceded losses to date under the Single Premium QSR Transaction have been immaterial.

Notwithstanding the limitation on ceded premiums written on the Single Premium QSR Transaction, the parties may mutually agree to increase the amount of ceded risk on December 31, 2017. Radian Guaranty is entitled to discontinue ceding new policies under the agreement at the end of any calendar quarter. The agreement is scheduled to terminate on December 31, 2027; however, Radian Guaranty has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of January 1, 2020, or at the end of any calendar quarter thereafter, which would result in Radian Guaranty reassuming the related RIF in exchange for a net payment from the reinsurer calculated in accordance with the terms of the agreement.

The following tables show the amounts related to the QSR Transactions and the Single Premium QSR Transaction for the periods indicated:

	QSR Transactions
	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2016		2015		2016		2015
Ceded premiums written (1)	$	6,730	$	8,466	$	22,048	$	23,279
Ceded premiums earned (1)	10,597		12,203		33,094		36,452
Ceding commissions written	1,922		2,743		6,291		8,890
Ceding commissions earned (2)	3,974		2,463		12,199		10,987

	Single Premium QSR Transaction
	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands)	2016		2016
Ceded premiums written (1)	$	13,004	$	222,085
Ceded premiums earned (1)	8,608		21,748
Ceding commissions written	5,482		61,258
Ceding commissions earned (2)	4,382		11,173

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(1) Net of profit commission.

(2) Includes amounts reported in policy acquisition costs and other operating expenses.

RIF ceded under the QSR Transactions was $1.7 billion and $2.3 billion as of September 30, 2016 and 2015, respectively. RIF ceded under the Single Premium QSR Transaction was $3.6 billion as of September 30, 2016.