Triad Guaranty Inc. Reports Fourth Quarter and Year End Results
WINSTON-SALEM, N.C., Feb. 25 /PRNewswire-FirstCall/ -- Triad Guaranty Inc. (OTC Bulletin Board: TGIC) today reported a net loss for the quarter ended December 31, 2009 of $79.1 million compared to a net loss of $101.9 million for the third quarter of 2009 and a net loss of $122.2 million for the fourth quarter of 2008. The 2009 fourth quarter diluted loss per share was $5.26 compared to a diluted loss per share of $6.78 for the 2009 third quarter and $8.16 for the fourth quarter of 2008.
The net loss for the year ended December 31, 2009 was $595.6 million compared to a net loss of $631.1 million for the year ended December 31, 2008. The diluted loss per share was $39.70 for the year ended December 31, 2009 compared to a diluted loss per share of $42.27 for the year ended December 31, 2008.
Ken Jones, President and CEO, said, "The fourth quarter of 2009 continued to be a very difficult environment for our business. First-time defaults, while down moderately from earlier 2009 quarters, continued at a high volume. We have seen very little permanent impact to date from the existing loan modification programs and, consequently, the cure rates on existing defaults remain at historic lows and have shown little sign of improvement. 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."
Total insurance in force declined to $50.5 billion at December 31, 2009, a 7.5% drop from September 30, 2009 and a 19.3% decline from December 31, 2008. Persistency rates have remained high over the past year due primarily to more restrictive credit standards in mortgage lending and declines in home prices, both of which limit the opportunities for borrowers to refinance existing mortgages. The majority of the decline in insurance in force over the past year is attributable to paid claims and rescinded coverage, as opposed to refinancing or sales. In addition, during the fourth quarter five Modified Pool contracts terminated in accordance with their terms after reaching the paid stop loss, which accounted for approximately 2% of the decline in insurance in force during the quarter.
Total revenues increased sequentially by $6.5 million to $57.8 million for the fourth quarter of 2009, as compared to $51.3 million in the third quarter of 2009 and $41.4 million in the fourth quarter of 2008. Driving the fourth quarter growth in revenues was a gain of $12.9 million related to the sale of the operating platform to Essent Guaranty, Inc. Earned premiums were essentially flat for the fourth quarter of 2009 when compared to the 2009 third quarter, but declined 30% when compared to the fourth quarter of 2008. The decline in year-over-year earned premiums was primarily due to the decline in insurance in force combined with the impact of refunds and expected refunds of premium relating to rescission activity. Revenues in the fourth quarter of 2008 were negatively impacted by an $18.9 million non-cash impairment loss, while the Company realized a small investment gain of $0.7 million in the fourth quarter of 2009.
Net losses and loss adjustment expenses were $128.9 million for the fourth quarter of 2009, down from $145.8 million in the 2009 third quarter and $178.1 million for the fourth quarter of 2008. Net settled claims totaled $153.7 million in the 2009 fourth quarter, down slightly from $157.9 million in the 2009 third quarter, but up significantly when compared to the $69.4 million settled in the fourth quarter of 2008. The increase in net settled claims during 2009 reflects the progression through the foreclosure process of a higher number of defaults from the 2006 and 2007 vintages. In the fourth quarter of 2009, loss reserves declined by $30.2 million compared to a decline of $15.8 million in the 2009 third quarter, while loss reserves increased by $106.1 million in the fourth quarter of 2008.
As a result of the Corrective Orders issued by the Illinois Department of Insurance, since June 1, 2009, all valid claims under Triad's mortgage guaranty insurance policies have been settled 60% in cash and 40% by the creation of a deferred payment obligation ("DPO") payable to the insured. The DPO requires that the Company accrue a carrying charge, or interest, based on the investment yield earned by its investment portfolio. Payments of the carrying charge and the DPO will be subject to the future financial performance of the operating insurance subsidiary and will require the approval of the Director of the Illinois Department of Insurance. Under U.S. generally accepted accounting principles, the DPOs and the related accrued interest are recorded as liabilities and are included in the "deferred payment obligation" line on our balance sheet. Other operating expenses were down moderately for the fourth quarter of 2009 as compared to the third quarter of 2009 and the fourth quarter of 2008 as the Company continues through the run-off process. The increase in interest expense in the fourth quarter of 2009 reflects an additional $1.5 million of accrued interest related to the DPOs.
We have updated the quarterly statistical and supplemental information for the 2009 fourth 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 – Fourth Quarter 2009".
(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 voluntary 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; the possibility that there will not be adequate interest in the Company's 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, 2008 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.
Triad Guaranty Inc.
Consolidated Statement of Operations
Three Months Ended Twelve Months Ended
December 31, December 31,
(Unaudited) (Unaudited)
2009 2008 2009 2008
---- ---- ---- ----
(Dollars in thousands except per share amounts)
Earned premiums $34,891 $49,840 $179,658 $257,423
Net investment
income 9,739 10,509 44,133 $39,580
Net realized
investment
gains (losses) 649 (18,944) 1,354 (26,559)
Other income 12,536 2 12,666 8
------ --- ------ ---
Total revenues 57,815 41,407 237,811 270,452
Losses and
loss adjustment
expenses:
Net settled
claims 153,749 69,373 515,413 237,080
Change
in reserves (30,195) 106,080 272,553 665,549
Loss adjustment
expenses 5,370 2,646 19,661 20,672
----- ----- ------ ------
Net losses
and loss
adjustment
expenses 128,924 178,099 807,627 923,301
Interest expense 2,243 694 6,034 3,557
DAC amortization - - - 39,416
Other operating
expenses - net 8,160 8,639 35,911 58,709
----- ----- ------ ------
Loss before
income taxes (81,512) (146,025) (611,761) (754,531)
Income tax
benefit (2,368) (23,818) (16,129) (123,404)
------ ------- ------- --------
Net loss $(79,144) $(122,207) $(595,632) $(631,127)
======== ========= ========= =========
Diluted loss
per share $(5.26) $(8.16) $(39.70) $(42.27)
Diluted
weighted
average
common and
common stock
equivalents
outstanding
(in thousands) 15,059 14,980 15,002 14,930
Triad Guaranty Inc.
Consolidated Balance Sheet
(Unaudited)
December 31, December 31,
2009 2008
---- ----
(Dollars in thousands except per share amounts)
Assets:
Invested assets:
Fixed maturities,
available for sale,
at market $784,830 $854,186
Equity securities,
available for
sale, at market 583
Short-term investments 26,651 40,653
------ ------
811,481 895,422
Cash and cash equivalents 21,839 39,940
Prepaid federal income tax - 15
Reinsurance recoverable 233,499 150,848
Other assets 58,007 44,309
------ ------
Total assets $1,124,826 $1,130,534
========== ==========
Liabilities:
Losses and loss adjustment
expenses $1,537,043 $1,187,840
Unearned premiums 12,153 15,863
Deferred income tax - -
Long-term debt 34,540 34,529
Deferred payment obligation 168,386 -
Other liabilities 79,062 28,968
------ ------
Total liabilities 1,831,184 1,267,200
Stockholders' equity:
Accumulated deficit (851,141) (255,509)
Accumulated other
comprehensive income 30,782 6,063
Other equity accounts 114,001 112,780
------- -------
Total stockholders' deficit
in assets (706,358) (136,666)
-------- --------
Total liabilities and
stockholders' equity $1,124,826 $1,130,534
========== ==========
Stockholders' deficit in assets
per share: $(46.29) $(9.01)
Common shares outstanding 15,258,128 15,161,259
Triad Guaranty Inc.
Consolidated Statement of Cash Flow
Twelve Months Ended
December 31,
2009 2008
---- ----
(Unaudited)
(Dollars in Thousands)
OPERATING ACTIVITIES
Net loss $(595,632) $(631,127)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Increase in loss and unearned premium
reserves 345,493 825,971
Amounts due to/from reinsurer (83,363) (150,839)
Net realized investment (gains) losses (1,354) 26,559
Policy acquisition costs deferred - (3,173)
Amortization of policy acquisition costs - 39,416
Deferred income taxes (13,311) (121,392)
Redemption of Tax and Loss Bonds 15 115,993
Deferred payment obligation 168,386 -
Other operating activities 44,856 45,730
------ ------
Net cash (used in) provided by
operating activities (134,910) 147,138
-------- -------
INVESTING ACTIVITIES
Purchases of investment securities (182,251) (839,372)
Sales and maturities of investment
securities 284,188 674,688
Net change in short-term investments 13,915 14,074
Other investing activities 957 (1,296)
--- ------
Net cash provided by (used in)
investing activities 116,809 (151,906)
------- --------
FINANCING ACTIVITIES
Repayments on credit facility - (80,000)
Excess tax benefits related to share
based compensation - 15
--- ---
Net cash used in financing activities - (79,985)
--- -------
Foreign currency translation adjustment - (118)
--- ----
Net decrease in cash (18,101) (84,871)
Cash at beginning of period 39,940 124,811
------ -------
Cash at end of period $21,839 $39,940
======= =======
TRIAD GUARANTY INC.
Sequential Quarterly Financial Statements
(unaudited)
Condensed Statements of Operations For The Quarter Ended
(Dollars in thousands)
----------------------
Dec 31, Sept 30, Jun 30, Mar 31,
2009 2009 2009 2009
---- ---- ---- ----
Revenue:
Earned premiums $34,891 $35,576 $64,833 $44,358
Net investment income 9,739 12,342 10,859 11,192
Realized investment
gains (losses) 649 3,253 2,017 (4,565)
Other income (loss) 12,536 127 2 2
------ --- --- ---
Total revenues 57,815 51,298 77,711 50,987
------ ------ ------ ------
Losses and expenses:
Net settled claims 153,749 157,881 149,863 53,920
Change in reserves (30,195) (15,836) 278,956 39,628
Loss adjustment expenses 5,370 3,713 2,549 8,029
----- ----- ----- -----
Net losses and LAE 128,924 145,758 431,368 101,577
Change in premium
deficiency reserve - - - -
Interest expense 2,243 1,202 1,895 694
Amortization of DAC - - - -
Other operating expenses 8,160 9,659 8,680 9,411
----- ----- ----- -----
Total losses and
expenses 139,327 156,619 441,943 111,682
------- ------- ------- -------
Income (loss) before
income taxes (81,512) (105,321) (364,232) (60,695)
Income taxes (benefit) (2,368) (3,426) (4,813) (5,521)
------ ------ ------ ------
Net income (loss) $(79,144) $(101,895) $(359,419) $(55,174)
======== ========= ========= ========
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2008 2008 2008 2008 2007
---- ---- ---- ---- ----
Revenue:
Earned premiums $49,840 $65,654 $69,864 $72,065 $73,130
Net investment
income 10,509 10,349 9,175 9,547 9,544
Realized
investment
gains (losses) (18,944) (6,519) (3,799) 2,703 (29)
Other income (loss) 2 2 2 2 2
--- --- --- --- ---
Total revenues 41,407 69,486 75,242 84,317 82,647
------ ------ ------ ------ ------
Losses and expenses:
Net settled
claims 69,372 59,357 68,263 40,471 36,341
Change in
reserves 106,080 165,958 218,568 174,561 150,687
Loss adjustment
expenses 2,647 5,879 5,918 6,227 4,624
----- ----- ----- ----- -----
Net losses
and LAE 178,099 231,194 292,749 221,259 191,652
Change in premium
deficiency reserve - - (15,000) 15,000 -
Interest expense 694 691 696 1,476 1,828
Amortization
of DAC - - - 39,416 4,637
Other operating
expenses 8,639 8,726 27,238 14,106 10,895
----- ----- ------ ------ ------
Total losses
and expenses 187,432 240,611 305,683 291,257 209,012
------- ------- ------- ------- -------
Income (loss)
before income
taxes (146,025) (171,125) (230,441) (206,940) (126,365)
Income taxes
(benefit) (23,818) (11,030) (31,630) (56,926) (51,406)
------- ------- ------- ------- -------
Net income (loss) $(122,207) $(160,095) $(198,811) $(150,014) $(74,959)
========= ========= ========= ========= ========
Condensed Balance Sheets As Of
(Dollars in thousands)
----------------------
Dec 31, Sept 30, Jun 30, Mar 31,
2009 2009 2009 2009
---- ---- ---- ----
Assets
Invested assets $811,481 $846,905 $851,640 $918,531
Cash 21,839 7,480 31,600 21,394
Real estate acquired - - - 526
Deferred policy
acquisition costs - - - -
Prepaid federal
income tax - - - 15
Reinsurance
recoverable 233,499 245,436 234,248 182,589
Other assets 58,007 54,331 57,650 52,307
------ ------ ------ ------
Total assets $1,124,826 $1,154,152 $1,175,138 $1,175,362
========== ========== ========== ==========
Liabilities and
stockholders' equity
Liabilities:
Losses and loss
adjustment
expenses $1,537,043 $1,576,303 $1,591,207 $1,262,746
Premium
deficiency
reserve - - - -
Deferred income
taxes - - - -
Borrowing under
credit facility - - - -
Long term debt 34,540 34,537 34,535 34,532
Deferred
payment
obligation 168,386 97,048 27,020 -
Accrued
expenses and
other
liabilities 91,215 71,291 52,066 59,477
------ ------ ------ ------
Total
liabilities 1,831,184 1,779,179 1,704,828 1,356,755
Total
stockholders'
equity (deficit in
assets) (706,358) (625,027) (529,690) (181,393)
-------- -------- -------- --------
Total
liabilities
and stockholders'
equity $1,124,826 $1,154,152 $1,175,138 $1,175,362
========== ========== ========== ==========
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2008 2008 2008 2008 2007
---- ---- ---- ---- ----
Assets
Invested assets $895,422 $890,720 $869,022 $760,073 $784,539
Cash 39,940 47,818 19,669 80,544 124,811
Real estate
acquired 713 3,661 6,202 8,993 10,860
Deferred
policy
acquisition
costs - - - - 36,243
Prepaid
federal
income
tax 15 15 63,184 115,598 116,008
Reinsurance
recoverable 150,848 111,827 55,316 93,244 5,815
Other assets 43,596 47,915 50,405 52,572 54,577
------ ------ ------ ------ ------
Total assets $1,130,534 $1,101,956 $1,063,798 $1,111,024 $1,132,853
========== ========== ========== ========== ==========
Liabilities
and stockholders'
equity
Liabilities:
Losses and
loss
adjustment
expenses $1,187,840 $1,042,053 $817,262 $547,766 $359,939
Premium
deficiency
reserve - - - 96,073 -
Deferred
income taxes - 22,889 30,386 61,522 123,297
Borrowing
under credit
facility - - - - 80,000
Long term
debt 34,529 34,527 34,527 34,522 34,519
Deferred
payment
obligation - - - - -
Accrued
expenses
and other
liabilities 44,831 30,887 40,714 32,699 36,247
------ ------ ------ ------ ------
Total
liabilities 1,267,200 1,130,356 922,889 772,582 634,002
Total
stockholders'
equity (deficit
in assets) (136,666) (28,400) 140,909 338,442 498,851
-------- ------- ------- ------- -------
Total
liabilities
and stockholders'
equity $1,130,534 $1,101,956 $1,063,798 $1,111,024 $1,132,853
========== ========== ========== ========== ==========
SOURCE Triad Guaranty Inc.
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