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Note 5 - Investments
 9 Months Ended
Sep. 30, 2018
Investments [Abstract]  
Investments 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, 2018
(In thousands)
Amortized
Cost
 
Fair Value
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
Fixed-maturities available for sale:
 
 
 
 
 
 
 
U.S. government and agency securities
$
75,369

 
$
72,645

(1)
$
—

 
$
2,724

State and municipal obligations
140,877

 
139,986

 
1,859

 
2,750

Corporate bonds and notes
2,158,991

 
2,108,779

 
4,262

 
54,474

RMBS
258,152

 
250,056

(2)
4

 
8,100

CMBS
536,982

 
525,858

 
363

 
11,487

Other ABS
675,686

 
673,418

 
967

 
3,235

Total securities available for sale
$
3,846,057

 
$
3,770,742

(3)
$
7,455

 
$
82,770


______________________
(1)
Includes securities with a fair value of $10.5 million serving as collateral for FHLB advances.
(2)
Includes securities with a fair value of $66.1 million serving as collateral for FHLB advances.
(3)
Includes $7.0 million of fixed-maturity securities loaned to third-party Borrowers under securities lending agreements, classified as other assets in our condensed consolidated balance sheets, as further described below.
 
December 31, 2017
(In thousands)
Amortized
Cost
 
Fair Value
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
Fixed-maturities available for sale:
 
 
 
 
 
 
 
U.S. government and agency securities
$
69,667

 
$
69,396

 
$
96

 
$
367

State and municipal obligations
156,587

 
161,722

 
5,834

 
699

Corporate bonds and notes
1,869,318

 
1,894,886

 
33,620

 
8,052

RMBS
189,455

 
187,229

 
636

 
2,862

CMBS
451,595

 
453,394

 
3,409

 
1,610

Other ABS
672,715

 
674,548

 
2,655

 
822

Foreign government and agency securities
31,417

 
32,207

 
823

 
33

Total fixed-maturities available for sale
3,440,754

 
3,473,382

(1)
47,073

 
14,445

Equity securities available for sale (2) 
176,349

 
176,065

(1)
1,705

 
1,989

Total debt and equity securities available for sale
$
3,617,103

 
$
3,649,447

 
$
48,778

 
$
16,434

______________________
(1)
Includes $14.7 million of fixed maturity securities and $13.2 million of equity securities loaned to third-party Borrowers under securities lending agreements, 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.
For the nine months ended September 30, 2018, we did not transfer any securities from the available for sale or trading categories.
Gross Unrealized Losses and Fair Value of Available for Sale Securities
For securities deemed “available for sale” and that are in an unrealized loss position, the following tables show the gross unrealized losses and fair values, 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, 2018 and December 31, 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, 2018
($ in thousands) Description of Securities
 
Less Than 12 Months
 
12 Months or Greater
 
Total
 
# of
securities
 
Fair Value
 
Unrealized
Losses
 
# of
securities
 
Fair Value
 
Unrealized
Losses
 
# of
securities
 
Fair Value
 
Unrealized
Losses
U.S. government and agency securities
 
9

 
$
39,342

 
$
1,944

 
5

 
$
11,758

 
$
780

 
14

 
$
51,100

 
$
2,724

State and municipal obligations
 
25

 
76,914

 
2,166

 
6

 
13,172

 
584

 
31

 
90,086

 
2,750

Corporate bonds and notes
 
383

 
1,619,774

 
43,840

 
35

 
157,323

 
10,634

 
418

 
1,777,097

 
54,474

RMBS
 
23

 
169,259

 
3,271

 
28

 
80,158

 
4,829

 
51

 
249,417

 
8,100

CMBS
 
78

 
423,684

 
10,098

 
11

 
26,830

 
1,389

 
89

 
450,514

 
11,487

Other ABS
 
118

 
461,978

 
3,002

 
16

 
24,890

 
233

 
134

 
486,868

 
3,235

Total
 
636

 
$
2,790,951

 
$
64,321

 
101

 
$
314,131

 
$
18,449

 
737

 
$
3,105,082

 
$
82,770

 
 
December 31, 2017
($ in thousands) Description of Securities
 
Less Than 12 Months
 
12 Months or Greater
 
Total
 
# of
securities
 
Fair Value
 
Unrealized
Losses
 
# of
securities
 
Fair Value
 
Unrealized
Losses
 
# of
securities
 
Fair Value
 
Unrealized
Losses
U.S. government and agency securities
 
6

 
$
23,309

 
$
129

 
3

 
$
9,799

 
$
238

 
9

 
$
33,108

 
$
367

State and municipal obligations
 
21

 
65,898

 
699

 
—

 
—

 
—

 
21

 
65,898

 
699

Corporate bonds and notes
 
152

 
672,318

 
4,601

 
32

 
139,105

 
3,451

 
184

 
811,423

 
8,052

RMBS
 
8

 
19,943

 
204

 
26

 
101,812

 
2,658

 
34

 
121,755

 
2,862

CMBS
 
35

 
139,353

 
1,395

 
4

 
3,518

 
215

 
39

 
142,871

 
1,610

Other ABS
 
92

 
260,864

 
777

 
7

 
8,297

 
45

 
99

 
269,161

 
822

Foreign government and agency securities
 
5

 
7,397

 
33

 
—

 
—

 
—

 
5

 
7,397

 
33

Equity securities
 
13

 
149,785

 
1,989

 
—

 
—

 
—

 
13

 
149,785

 
1,989

Total
 
332

 
$
1,338,867

 
$
9,827

 
72

 
$
262,531

 
$
6,607

 
404

 
$
1,601,398

 
$
16,434


Although we held securities in an unrealized loss position as of September 30, 2018, 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, 2018 were generally caused by interest rate or credit spread movements since the purchase date, and as such, we expect to recover the amortized cost basis of these securities. As of September 30, 2018, 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, 2018.
Other-than-temporary Impairment Activity. 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, 2018, we recorded other-than-temporary impairment losses in earnings of $1.7 million due to our intent to sell certain: (i) corporate bonds and notes and (ii) state and municipal obligations, each with an amortized cost basis greater than their fair value. While we recognized other-than-temporary impairment losses related to our intent to sell securities, there were no credit-related impairment losses recognized in earnings during the nine months ended September 30, 2018.
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, because we concluded that we would not recover the amortized cost basis of these securities due to credit deterioration. There were no other-than-temporary impairment losses recognized in accumulated other comprehensive income (loss) during the nine months ended September 30, 2018 or the year ended December 31, 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,
2018
 
December 31,
2017
 
Trading securities:
 
 
 
 
State and municipal obligations
$
185,494

 
$
214,841

 
Corporate bonds and notes
235,422

 
307,271

 
RMBS
22,069

 
29,520

 
CMBS
50,971

 
50,561

 
Foreign government and agency securities
—

 
4,241

 
Total
$
493,956

 
$
606,434

(1)
______________________
(1)
At December 31, 2017, includes a de minimis amount of loaned securities under securities lending agreements that are classified as other assets in our consolidated balance sheets, as further described below.
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 in our condensed consolidated balance sheets, the detailed information regarding investments provided in this Note includes these securities.
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.
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 maintaining the cash collateral in a short-term money-market fund with daily availability. 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 balances related to our securities lending agreements consisted of the following as of the dates indicated:
(In thousands)
September 30,
2018
 
December 31,
2017
Loaned securities (1):
 
 
 
U.S. government and agency securities
$
90

 
$
—

Corporate bonds and notes
7,427

 
13,862

Foreign government and agency securities
—

 
867

Equity securities
26,847

 
13,235

Total loaned securities, at fair value
$
34,364

 
$
27,964

 
 
 
 
Total loaned securities, at amortized cost
$
34,651

 
$
27,846

Securities collateral on deposit from Borrowers (2) 
3,367

 
9,342

Reinvested cash collateral, at estimated fair value (3) 
31,799

 
19,357

______________________
(1)
Our securities loaned under securities lending agreements are reported at fair value within other assets in our condensed consolidated balance sheets. All of our securities lending agreements are classified as overnight and revolving. 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 agreements and is included in short-term investments in our condensed consolidated balance sheets. Amounts payable on the return of cash collateral under securities lending agreements are included within other liabilities in our condensed consolidated balance sheets.
Net Gains (Losses) on Investments and Other Financial Instruments
Net gains (losses) on investments and other financial instruments consisted of:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(In thousands)
2018
 
2017
 
2018
 
2017
Net realized gains (losses):
 
 
 
 
 
 
 
Fixed-maturities available for sale (1) 
$
(4,219
)
 
$
137

 
$
(9,030
)
 
$
(3,552
)
Equity securities
(69
)
 
33

 
571

 
418

Trading securities
(260
)
 
(223
)
 
(910
)
 
(6,266
)
Short-term investments
7

 
14

 
—

 
(18
)
Other invested assets
83

 
—

 
346

 
—

Other gains (losses)
11

 
7

 
46

 
25

Net realized gains (losses) on investments
(4,447
)
 
(32
)
 
(8,977
)
 
(9,393
)
Other-than-temporary impairment losses
(900
)
 
—

 
(1,744
)
 
(1,000
)
Net unrealized gains (losses) on investment securities (2) 
1,405

 
2,353

 
(17,132
)
 
14,517

Total net gains (losses) on investments
(3,942
)
 
2,321

 
(27,853
)
 
4,124

Net gains (losses) on other financial instruments
(538
)
 
159

 
(2,918
)
 
836

Net gains (losses) on investments and other financial instruments
$
(4,480
)
 
$
2,480

 
$
(30,771
)
 
$
4,960


______________________
(1)Components of net realized gains (losses) on fixed-maturities available for sale include:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(In thousands)
2018
 
2017
 
2018
 
2017
Gross investment gains from sales and redemptions
$
814

 
$
419

 
$
1,831

 
$
5,150

Gross investment losses from sales and redemptions
(5,033
)
 
(282
)
 
(10,861
)
 
(8,702
)

(2)
These amounts include unrealized gains (losses) on investment securities other than securities available for sale. For the three and nine months ended September 30, 2017, the unrealized gains (losses) on investments exclude the net change in unrealized gains and losses on equity securities. Prior to the implementation of the update to the standard for the accounting of financial instruments effective January 1, 2018, the unrealized gains (losses) associated with equity securities were classified in accumulated other comprehensive income.
Net Unrealized Gains (Losses) on Investment Securities
The net changes in unrealized gains (losses) from trading securities and equity securities still held at period end were as follows for the periods indicated:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(In thousands)
2018
 
2017
 
2018
 
2017
Net changes in unrealized gains (losses) (1):
 
 
 
 
 
 
 
Equity securities
$
2,971

 
$
—

 
$
2,238

 
$
—

Trading securities (2) 
(2,622
)
 
2,694

 
(18,506
)
 
10,011

Net changes in unrealized gains (losses) on investment securities
$
349

 
$
2,694

 
$
(16,268
)
 
$
10,011

______________________
(1)
Related only to securities still held at period end. All amounts shown are included in net gains (losses) on investments and other financial instruments. Prior to the implementation of the update to the standard for the accounting of financial instruments effective January 1, 2018, the unrealized losses associated with equity securities were classified in accumulated other comprehensive income.
(2)
Includes a de minimis amount of net changes in unrealized gains (losses) related to short-term securities.
Contractual Maturities
The contractual maturities of fixed-maturity investments available for sale were as follows:
 
September 30, 2018
 
Available for Sale
(In thousands)
Amortized
Cost
 
Fair
Value
Due in one year or less (1) 
$
51,228

 
$
51,101

Due after one year through five years (1) 
823,314

 
809,555

Due after five years through 10 years (1) 
1,099,144

 
1,065,556

Due after 10 years (1) 
401,551

 
395,198

RMBS (2) 
258,152

 
250,056

CMBS (2) 
536,982

 
525,858

Other ABS (2) 
675,686

 
673,418

Total (3) 
$
3,846,057

 
$
3,770,742

______________________
(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 September 30, 2018, Radian had an aggregate amount of $76.6 million of U.S. government and agency securities and RMBS, classified as fixed-maturities available for sale within our investment securities portfolio, serving as collateral for our FHLB advances. There were no FHLB advances outstanding at December 31, 2017. See Note 12 for additional information.
Securities on deposit with various state insurance commissioners amounted to $15.4 million and $11.8 million at September 30, 2018 and December 31, 2017, respectively.