Triad Guaranty Inc. Reports First Quarter Results

News provided by

Triad Guaranty Inc.

May 13, 2011, 08:00 ET

WINSTON-SALEM, N.C., May 13, 2011 /PRNewswire/ -- Triad Guaranty Inc. (OTCBB: TGIC) today reported a net loss for the quarter ended March 31, 2011 of $4.9 million compared to net income of $26.8 million for the fourth quarter of 2010 and a net loss of $27.8 million for the first quarter of 2010.  The 2011 first quarter diluted loss per share was $0.32 compared to diluted income per share of $1.76 for the 2010 fourth quarter and a diluted loss per share of $1.84 for the first quarter of 2010.

Ken Jones, President and CEO, said, "After three consecutive quarters of profits, we reported a small loss during the 2011 first quarter.  Although we had a decrease in new defaults from the fourth quarter of 2010, we did not receive as much benefit from the positive development of our reserves during the quarter compared to the fourth quarter of 2010.  Net settled claims declined 23% and 26% compared to the fourth quarter of 2010 and the first quarter of 2010, respectively.  We believe the drop in our net settled claims is primarily related to loan servicers' issues surrounding foreclosure policies and practices, including in some cases, foreclosure moratoriums.  The drop in net settled claims had little impact on our 2011 first quarter financial results because we continue to reserve for a default until we settle the default or receive definitive information from the servicer that the default has cured."  

Mr. Jones continued, "As a company in run-off, our primary focus remains on the efficient and effective servicing of our insured portfolio, particularly with respect to loss management, in order to maximize our claims-paying ability.  Our deficit in assets remains substantial and was $593.7 million at March 31, 2011.  We continue to believe that, absent significant positive changes in the economy and the residential real estate market, our existing assets and future premiums may not be sufficient to meet our current and future policyholder obligations."

We have updated the quarterly statistical and supplemental information for the 2011 first quarter results on our web site at www.triadguaranty.com.  The supplemental information can be found under "Investors" and then under "Webcasts and Presentations" by the title "Supplemental Information – First Quarter 2011".

(Relevant Triad Guaranty Inc. financial and statistical information follows)

Triad Guaranty Inc.'s wholly owned subsidiary, Triad Guaranty Insurance Corporation, is a nationwide mortgage insurer pursuing a run-off of its existing in-force book of business.  For more information, please visit the Company's web site at www.triadguaranty.com.

Certain of the statements contained in this release are "forward-looking statements" and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include estimates and assumptions related to economic, competitive, regulatory, operational and legislative developments. These forward-looking statements are subject to change, uncertainty and circumstances that are, in many instances, beyond our control and they have been made based upon our current expectations and beliefs concerning future developments and their potential effect on us. Actual developments and their results could differ materially from those expected by us, depending on the outcome of a number of factors, including: the possibility that the Illinois Department of Insurance may take various actions regarding Triad if it does not operate its business in accordance with its revised financial and operating plan and the corrective orders, including seeking receivership proceedings; our ability to operate our business in run-off and maintain a solvent run-off; our ability to continue as a going concern; the possibility of general economic and business conditions that are different than anticipated; legislative, regulatory, and other similar developments; changes in interest rates, employment rates, the housing market, the mortgage industry and the stock market; legal and other proceedings regarding modifications and refinancing of mortgages and/or foreclosure proceedings; the possibility that there will not be adequate interest in our common stock on the over the counter markets to ensure efficient pricing; and various factors described under "Risk Factors" and in the "Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995" in our Annual Report on Form 10-K for the year ended December 31, 2010 and in other reports and statements filed with the Securities and Exchange Commission.  Forward-looking statements are based upon our current expectations and beliefs concerning future events and we undertake no obligation to update or revise any forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements are made, except as otherwise required by law.

Triad Guaranty Inc.

Consolidated Statements of Operations

(Unaudited)









Three Months Ended


March 31,







2011

2010


(Dollars in thousands except per share amounts)

Revenues:



Earned premiums

$                    37,128

$                  45,888

Net investment income

8,491

9,873

Net realized investment losses

(436)

(242)

Other income (losses)

27

(8)

 Total revenues

45,210

55,511

Losses and Expenses:



Net settled claims

106,909

144,973

Change in reserves

(66,694)

(77,453)

Loss adjustment expenses

1,490

4,718

Net losses and loss adjustment expenses

41,705

72,238






Interest expense

3,978

2,469

Other operating expenses

4,437

9,332

  Total losses and expenses

50,120

84,039






Loss before income taxes

(4,910)

(28,528)

Income tax benefit

-

(717)





Net loss

$                    (4,910)

$                (27,811)





Per Share Information:



Diluted loss per share

$                      (0.32)

$                    (1.84)






Diluted weighted average common stock and common



  stock equivalents outstanding (in thousands of shares)

15,225

15,099

Triad Guaranty Inc.

Consolidated Balance Sheets












(Unaudited)


(Unaudited)



March 31,

December 31,

March 31,



2011

2010

2010



(Dollars in thousands)

Assets:






Invested assets:






  Fixed maturities, available for sale, at market

$    810,439

$        812,335

$    811,040

  Short-term investments

32,469

39,561

146,075











842,908

851,896

957,115









Cash and cash equivalents

39,073

38,762

38,662

Reinsurance recoverable

33,499

40,806

52,963

Other assets

48,528

60,161

54,406









    Total assets

$    964,008

$        991,625

$ 1,103,146








Liabilities:






Losses and loss adjustment expenses

$    990,494

$     1,060,036

$ 1,468,719

Unearned premiums

9,220

9,057

12,210

Long-term debt

-

-

34,543

Deferred payment obligation

464,342

415,657

229,953

Other liabilities

93,691

93,075

90,467









   Total liabilities

1,557,747

1,577,825

1,835,892








Stockholders' deficit:






Accumulated deficit

(723,956)

(719,046)

(878,951)

Accumulated other comprehensive income

15,963

18,609

32,114

Other equity accounts

114,254

114,237

114,091









  Deficit in assets

(593,739)

(586,200)

(732,746)








Total liabilities and stockholders' deficit

$    964,008

$        991,625

$ 1,103,146
























Common shares outstanding


15,258,128

12,258,128

15,258,128

Triad Guaranty Inc.

Consolidated Statements of Cash Flow

(Unaudited)





Three Months Ended

March 31,







2011

2010


(Dollars in thousands)





OPERATING ACTIVITIES


Net loss

$ (4,910)

$ (27,811)

Adjustments to reconcile net loss to net cash


provided by operating activities:



Decrease in loss and unearned premium reserves

(69,379)

(68,267)

Decrease in amounts due to/from reinsurer

7,307

180,536

Net realized investment losses

436

242

Decrease in deferred income taxes

-

(717)

Increase in deferred payment obligation

48,685

61,567

Other operating activities

12,835

11,704





Net cash (used in) provided by operating activities

(5,026)

157,254





INVESTING ACTIVITIES



Purchases of investment securities

(27,539)

(72,318)

Sales and maturities of investment securities

26,514

50,729

Decrease (increase) in short-term investments

7,092

(119,425)

Other investing activities

(730)

583

Net cash provided by (used in) investing activities

5,337

(140,431)





Net increase in cash

311

16,823

Cash at beginning of year

38,762

21,839





Cash at end of year

$ 39,073

$  38,662

Triad Guaranty Inc.

Sequential Quarterly Financial Statements

(unaudited)













Condensed Statements of Operations For The Quarter Ended








(Dollars in thousands)

Mar. 31,

Dec. 31,

Sept. 30,

Jun. 30,

Mar. 31,


2011

2010

2010

2010

2010

Revenue:









Earned premiums

$                37,128

$                40,920

$                44,278

$                72,330

$                45,888

Net investment income

8,491

8,658

9,681

10,560

9,873

Realized investment (losses) gains

(436)

(950)

14,694

(985)

(242)

Other income (expense)

27

60

(29)

-

(8)

 Total revenues

45,210

48,688

68,624

81,905

55,511

Losses and Expenses:









  Net settled claims

106,909

139,435

132,139

145,460

144,973

  Change in reserves

(66,694)

(129,993)

(97,229)

(158,058)

(77,453)

  Loss adjustment expenses

1,490

322

491

4,828

4,718

Net losses and LAE expense (benefit)

41,705

9,764

35,401

(7,770)

72,238

Interest expense

3,978

3,836

2,642

2,816

2,469

Other operating expenses

4,437

8,319

6,206

7,021

9,332

 Total losses and expenses

50,120

21,919

44,249

2,067

84,039

Income (loss) before taxes and extraordinary item

(4,910)

26,769

24,375

79,838

(28,528)

Income taxes (benefit)

-

-

-

717

(717)

Income (loss) before extraordinary item

(4,910)

26,769

24,375

79,121

(27,811)

Extraordinary item - gain from repurchase and retirement
  of long-term debt

-

-

29,640

-

-

Net income (loss)

$                 (4,910)

$                26,769

$                54,015

$                79,121

$               (27,811)


Condensed  Balance Sheets As Of










Mar. 31,

Dec. 31,

Sept. 30,

Jun. 30,

Mar. 31,


2011

2010

2010

2010

2010

Assets









Invested assets

$              842,908

$              851,896

$              905,758

$              936,158

$              957,115

Cash

39,073

38,762

36,823

35,576

38,662

Reinsurance recoverable

33,499

40,806

48,155

49,829

52,963

Other assets

48,528

60,161

65,416

64,000

54,406

Total assets

$              964,008

$              991,625

$           1,056,152

$           1,085,563

$           1,103,146











Liabilities and stockholders' deficit









Liabilities:









     Losses and loss adjustment expenses

$              990,494

$           1,060,036

$           1,200,518

$           1,307,028

$           1,468,719

     Long-term debt

-

-

-

34,546

34,543

     Deferred payment obligation

464,342

415,657

351,720

292,169

229,953

     Accrued expenses and other liabilities

102,911

102,132

99,292

99,965

102,677

Total liabilities

1,557,747

1,577,825

1,651,530

1,733,708

1,835,892

Deficit in assets

(593,739)

(586,200)

(595,378)

(648,145)

(732,746)

Total liabilities and stockholders' deficit

$              964,008

$              991,625

$           1,056,152

$           1,085,563

$           1,103,146

SOURCE Triad Guaranty Inc.

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