Note 15 - Statutory Information

3 Months Ended

Mar. 31, 2020

SEC Schedule, 12-16, Insurance Companies, Supplementary Insurance Information [Abstract]

State insurance regulations include various capital requirements and dividend restrictions based on our insurance subsidiaries’ statutory financial position and results of operations, as described below. As of March 31, 2020, the amount of restricted net assets held by our consolidated insurance subsidiaries (which represents our equity investment in those insurance subsidiaries) totaled $4.0 billion of our consolidated net assets.

Under state insurance regulations, our mortgage insurance subsidiaries are required to maintain minimum surplus levels. In certain RBC States, mortgage insurers licensed in those states must also satisfy a Statutory RBC Requirement that is a minimum ratio of statutory capital relative to the level of net RIF, or Risk-to-capital. Other RBC States require mortgage insurers licensed in those states to satisfy a MPP Requirement that is calculated on both risk and surplus levels. Our mortgage insurance subsidiaries were in compliance with the Statutory RBC Requirements or MPP Requirements, to the extent applicable, in each of the RBC States as of March 31, 2020.

In addition, in order to be eligible to insure loans purchased by the GSEs, mortgage insurers such as Radian Guaranty must meet the GSEs’ eligibility requirements, or PMIERs. At March 31, 2020, Radian Guaranty is an approved mortgage insurer under the PMIERs and is in compliance with the current PMIERs financial requirements. Under the PMIERs there are increased financial requirements for loans in default, including as a result of natural disasters and pandemics. As a result, increases in defaults related to the COVID-19 pandemic would subject Radian Guaranty to an increase in Minimum Required Assets under the PMIERs, and therefore, could impact our compliance with the PMIERs or negatively impact our results of operations. See Note 1 for discussion about the elevated risks and uncertainties associated with the COVID-19 pandemic and Note 18 of Notes to Consolidated Financial Statements in our 2019 Form 10-K for additional information regarding the PMIERs.

Radian Guaranty’s Risk-to-capital calculation appears in the table below. For purposes of the Risk-to-capital requirements imposed by certain states, statutory capital is defined as the sum of statutory policyholders’ surplus plus statutory contingency reserves.



	March 31, 2020			December 31, 2019
($ in millions)
RIF, net (1)	$	49,820.3		$	44,076.7

Common stock and paid-in capital	$	1,041.0		$	1,041.0
Surplus Note	300.0			100.0
Unassigned earnings (deficit)	(819.8		)	(503.3		)
Statutory policyholders’ surplus	521.2			637.7
Contingency reserve	3,089.6			2,607.8
Statutory capital	$	3,610.8		$	3,245.5

Risk-to-capital	13.8:1			13.6:1

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(1)	Excludes risk ceded through all reinsurance programs (including with affiliates) and RIF on defaulted loans.

Radian Guaranty’s statutory capital increased by $365.3 million in the first three months of 2020, primarily due to Radian Guaranty’s statutory net income of $195.5 million during this period and the impact of the additional surplus note issued in January 2020, as described below. The net increase in Radian Guaranty’s Risk-to-capital in the first three months of 2020 was primarily due to the increase in RIF resulting from both NIW and the termination of the intercompany reinsurance agreement as described below, partially offset by the increase in overall statutory capital. Due to Radian Guaranty’s negative unassigned surplus position, no dividends or other ordinary distributions can be paid in 2020.

The Risk-to-capital ratio for our combined mortgage insurance operations was 12.4 to 1 as of March 31, 2020, compared to 12.3 to 1 as of December 31, 2019.

In January 2020, in connection with the termination of an intercompany reinsurance agreement between Radian Reinsurance and Radian Guaranty, Radian Reinsurance transferred $6.0 billion in RIF to Radian Guaranty and released substantially all of its contingency reserves to unassigned surplus. In turn, Radian Guaranty established equivalent contingency reserves with a corresponding decrease to its unassigned surplus. As part of these actions, the Pennsylvania Insurance Department approved a $465 million return of capital from Radian Reinsurance to Radian Group as well as the transfer of $200 million of cash and marketable securities from Radian Group to Radian Guaranty in exchange for a surplus note. This intercompany surplus note has a 3% interest rate and a stated maturity of January 31, 2030. The surplus note may be redeemed at any time upon 30 days prior notice, subject to a request by Radian Guaranty for the approval of the Pennsylvania Insurance Department.

For a description of our compliance with statutory and other regulations for our mortgage insurance and title insurance businesses, including statutory capital requirements and divided restrictions, see Note 18 of Notes to Consolidated Financial Statements in our 2019 Form 10-K.