Investments

Available for Sale Securities

Our available for sale securities within our investment portfolio consisted of the following as of the dates indicated:



	September 30, 2017
(In thousands)	Amortized Cost		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses
Fixed-maturities available for sale:
U.S. government and agency securities	$	61,287	$	60,860	$	187	$	614
State and municipal obligations	125,485		129,507		4,461		439
Corporate bonds and notes	1,806,796		1,836,316		34,927		5,407
RMBS	176,789		175,408		796		2,177
CMBS	433,916		436,892		4,167		1,191
Other ABS	616,687		618,832		2,627		482
Foreign government and agency securities	31,437		32,392		961		6
Total fixed-maturities available for sale (1)	3,252,397		3,290,207		48,126		10,316
Equity securities available for sale (1) (2)	188,065		188,502		937		500
Total debt and equity securities	$	3,440,462	$	3,478,709	$	49,063	$	10,816

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(1)	Includes loaned securities under securities lending agreements that are classified as other assets in our condensed consolidated balance sheets, as further described below.


(2)	Primarily consists of investments in fixed income and equity exchange-traded funds and publicly-traded business development company equities.



	December 31, 2016
(In thousands)	Amortized Cost		Fair Value		Gross Unrealized Gains		Gross Unrealized Losses
Fixed-maturities available for sale:
U.S. government and agency securities	$	78,931	$	75,474	$	2	$	3,459
State and municipal obligations	66,124		67,171		1,868		821
Corporate bonds and notes	1,463,720		1,455,628		14,320		22,412
RMBS	358,262		350,628		197		7,831
CMBS	429,057		428,289		2,255		3,023
Other ABS	433,603		434,728		2,037		912
Foreign government and agency securities	24,771		24,594		148		325
Other investments	2,000		2,000		—		—
Total fixed-maturities available for sale	2,856,468		2,838,512		20,827		38,783
Equity securities available for sale (1)	1,330		1,330		—		—
Total debt and equity securities	$	2,857,798	$	2,839,842	$	20,827	$	38,783

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(1)	Primarily consists of investments in Federal Home Loan Bank stock as required in connection with the memberships of Radian Guaranty and Radian Reinsurance in the FHLB.

Gross Unrealized Losses and Fair Value of Available for Sale Securities

The following tables show the gross unrealized losses and fair value of our securities deemed “available for sale” aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of the dates indicated. Included in the amounts as of September 30, 2017, are loaned securities under securities lending agreements that are classified as other assets in our condensed consolidated balance sheets, as further described below.



	September 30, 2017
($ in thousands) Description of Securities	Less Than 12 Months					12 Months or Greater					Total
($ in thousands) Description of Securities	# of securities	Fair Value		Unrealized Losses		# of securities	Fair Value		Unrealized Losses		# of securities	Fair Value		Unrealized Losses
U.S. government and agency securities	8	$	37,926	$	604	2	$	1,580	$	10	10	$	39,506	$	614
State and municipal obligations	17	60,210		439		—	—		—		17	60,210		439
Corporate bonds and notes	108	439,016		5,104		5	11,013		303		113	450,029		5,407
RMBS	29	114,243		1,862		5	14,262		315		34	128,505		2,177
CMBS	30	122,980		1,009		3	1,811		182		33	124,791		1,191
Other ABS	64	174,128		478		1	1,484		4		65	175,612		482
Foreign government and agency securities	2	1,196		6		—	—		—		2	1,196		6
Equity securities	11	79,856		500		—	—		—		11	79,856		500
Total	269	$	1,029,555	$	10,002	16	$	30,150	$	814	285	$	1,059,705	$	10,816



	December 31, 2016
($ in thousands) Description of Securities	Less Than 12 Months					12 Months or Greater					Total
($ in thousands) Description of Securities	# of securities	Fair Value		Unrealized Losses		# of securities	Fair Value		Unrealized Losses		# of securities	Fair Value		Unrealized Losses
U.S. government and agency securities	7	$	73,160	$	3,459	—	$	—	$	—	7	$	73,160	$	3,459
State and municipal obligations	7	30,901		821		—	—		—		7	30,901		821
Corporate bonds and notes	185	788,876		22,135		2	4,582		277		187	793,458		22,412
RMBS	56	311,031		7,822		1	1,398		9		57	312,429		7,831
CMBS	37	218,170		2,909		2	6,585		114		39	224,755		3,023
Other ABS	58	131,268		470		16	45,886		442		74	177,154		912
Foreign government and agency securities	12	13,034		325		—	—		—		12	13,034		325
Total	362	$	1,566,440	$	37,941	21	$	58,451	$	842	383	$	1,624,891	$	38,783

Impairments due to credit deterioration that result in a conclusion that the present value of cash flows expected to be collected will not be sufficient to recover the amortized cost basis of the security are considered other-than-temporary. Other declines in fair value (for example, due to interest rate changes, sector credit rating changes or company-specific rating changes) that result in a conclusion that the present value of cash flows expected to be collected will not be sufficient to recover the amortized cost basis of the security also may serve as a basis to conclude that an other-than-temporary impairment has occurred. To the extent we determine that a security is deemed to have had an other-than-temporary impairment, an impairment loss is recognized.

During the nine months ended September 30, 2017, we recorded other-than-temporary impairment losses in earnings of $1.0 million, including $0.5 million related to a convertible note of a non-public company issuer included in debt securities and $0.5 million related to a privately-placed equity security. We concluded that we would not recover the amortized cost basis of these securities due to credit deterioration. There were no credit-related impairment losses recognized in earnings or in AOCI during the year ended December 31, 2016.

Although we held securities in an unrealized loss position as of September 30, 2017, we did not consider those securities to be other-than-temporarily impaired as of such date. For all investment categories, the unrealized losses of 12 months or greater duration as of September 30, 2017 were generally caused by interest rate or credit spread movements since the purchase date, and as such, we expect the present value of cash flows to be collected from these securities to be sufficient to recover the amortized cost basis of these securities. As of September 30, 2017, we did not have the intent to sell any debt securities in an unrealized loss position, and we determined that it is more likely than not that we will not be required to sell the securities before recovery of their cost basis, which may be at maturity; therefore, we did not consider these investments to be other-than-temporarily impaired at September 30, 2017.

Trading Securities

The trading securities within our investment portfolio, which are recorded at fair value, consisted of the following as of the dates indicated:



(In thousands)	September 30, 2017			December 31, 2016
Trading securities:
U.S. government and agency securities	$	—		$	33,042
State and municipal obligations	214,599			259,573
Corporate bonds and notes	327,306			453,617
RMBS	31,742			38,214
CMBS	58,337			78,984
Other ABS	—			8,219
Foreign government and agency securities	4,292			8,213
Total	$	636,276	(1)	$	879,862

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(1)	Includes loaned securities under securities lending agreements that are classified as other assets in our condensed consolidated balance sheets, as further described below.

For trading securities held at September 30, 2017 and December 31, 2016, we had net unrealized gains associated with those securities of $10.0 million and $16.8 million during the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively.

For the nine months ended September 30, 2017, we did not transfer any securities from the available for sale or trading categories.

Securities Lending Agreements

During the third quarter of 2017, we commenced participation in a securities lending program whereby we loan certain securities in our investment portfolio to Borrowers for short periods of time. These securities lending agreements are collateralized financing arrangements whereby we transfer securities to third parties through an intermediary in exchange for cash or other securities. In all of our securities lending agreements, the securities we transfer to Borrowers (loaned securities) may be transferred or loaned by the Borrowers; however, we maintain effective control over all loaned securities, including: (i) retaining ownership of the securities; (ii) receiving the related investment or other income; and (iii) having the right to request the return of the loaned securities at any time. Although we report such securities at fair value within other assets on our condensed consolidated balance sheets, the detailed information provided in this Note includes these securities. See Notes 1 and 8 for additional information.

Under our securities lending agreements, the Borrower is required to provide to us collateral, consisting of cash or securities, in amounts generally equal to or exceeding (i) 102% of the value of the loaned securities (105% in the case of foreign securities) or (ii) another agreed-upon percentage not less than 100% of the market value of the loaned securities. Any cash collateral we receive may be invested in liquid assets.

Under our securities lending agreements, the Borrower generally may return the loaned securities to us at any time, which would require us to return the collateral within the standard settlement period for the loaned securities on the principal exchange or market in which the securities are traded. We manage this liquidity risk associated with cash collateral by regularly monitoring our available sources of cash and collateral to ensure we can meet short-term liquidity demands in both normal and stressed scenarios. We may use our general liquidity resources to meet any potential cash demands when loaned securities are returned to us. The credit risk under these programs is reduced by the amounts of collateral received. On a daily basis, the value of the underlying securities that we have loaned to the Borrowers is compared to the value of cash and securities collateral we received from the Borrowers, and additional cash or securities are requested or returned, as applicable. In addition, we are indemnified against counterparty credit risk by the intermediary.

Key components of our securities lending agreements at September 30, 2017 consisted of the following:



(In thousands)	September 30, 2017
Loaned securities: (1)
Corporate bonds and notes	$	33,557
Foreign government and agency securities	120
Equity securities	27,199
Total loaned securities, at fair value	$	60,876

Total loaned securities, at amortized cost	$	60,740
Securities collateral on deposit from Borrowers (2)	25,589
Reinvested cash collateral, at estimated fair value (3)	36,782

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(1)	Our securities loaned under securities lending agreements are included at fair value within other assets on our condensed consolidated balance sheets. All of our securities lending agreements are classified as overnight and continuous. None of the amounts are subject to offsetting.


(2)	Securities collateral on deposit with us from Borrowers may not be transferred or re-pledged unless the Borrower is in default, and is therefore not reflected in our condensed consolidated financial statements.


(3)	All cash collateral received has been reinvested in accordance with the securities lending and collateral agreements and is included in short-term investments. Amounts payable on the return of cash collateral under securities lending agreements are included within other liabilities on our condensed consolidated balance sheets.

There were no securities lending transactions outstanding at December 31, 2016.

Net Gains (Losses) on Investments and Other Financial Instruments

Net realized and unrealized gains (losses) on investments and other financial instruments consisted of:



	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2017			2016			2017			2016
Net realized gains (losses):
Fixed-maturities available for sale	$	137		$	5,685		$	(3,552	)	$	3,703
Equity securities available for sale	33			—			418			(170		)
Trading securities	(223		)	1,524			(6,266		)	(295		)
Short-term investments	14			38			(18		)	(1		)
Other invested assets	—			631			—			631
Other gains (losses)	7			15			25			33
Net realized gains (losses) on investments	(32		)	7,893			(9,393		)	3,901
Other-than-temporary impairment losses	—			—			(1,000		)	—
Unrealized gains (losses) on trading securities	2,353			(47		)	14,517			62,862
Total net gains (losses) on investments	2,321			7,846			4,124			66,763
Net gains (losses) on other financial instruments	159			(135		)	836			2,761
Net gains (losses) on investments and other financial instruments	$	2,480		$	7,711		$	4,960		$	69,524

Contractual Maturities

The contractual maturities of fixed-maturity investments were as follows:



	September 30, 2017
	Available for Sale
(In thousands)	Amortized Cost		Fair Value
Due in one year or less (1)	$	41,767	$	41,780
Due after one year through five years (1)	687,822		694,932
Due after five years through 10 years (1)	965,360		974,600
Due after 10 years (1)	330,056		347,763
RMBS (2)	176,789		175,408
CMBS (2)	433,916		436,892
Other ABS (2)	616,687		618,832
Total (3)	$	3,252,397	$	3,290,207

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(1)	Actual maturities may differ as a result of calls before scheduled maturity.


(2)	RMBS, CMBS and Other ABS are shown separately, as they are not due at a single maturity date.


(3)	Includes securities loaned under securities lending agreements.

Other

At December 31, 2016, Radian Guaranty had $63.9 million in a collateral account invested in and classified as part of our trading securities and pledged to cover Loss Mitigation Activity on the loans subject to the Freddie Mac Agreement. During the third quarter of 2017, the scheduled final settlement date under the Freddie Mac Agreement occurred. As of September 30, 2017, the remaining balance of $5.5 million in the collateral account was invested in and classified as short-term investments and pledged to cover Loss Mitigation Activity and pending claims activity already in process but not yet finalized. See Note 10 for additional information.