WINSTON-SALEM, N.C.,
Nov. 11, 2010 /PRNewswire-FirstCall/
-- Triad Guaranty Inc. (OTC Bulletin Board: TGIC) today reported
net income of $54.0 million, which
includes $29.6 million attributable
to the repurchase of its long-term debt (reported as an
extraordinary item) and $14.7 million
attributable to realized investment gains, for the third quarter
ended September 30, 2010 compared to
net income of $79.1 million for the
second quarter of 2010 and a net loss of $101.9 million for the third quarter of 2009.
The 2010 third quarter diluted income per share was
$3.56 ($1.61 per share before extraordinary item)
compared to diluted income per share of $5.24 for the 2010 second quarter and diluted
loss per share of $6.78 for the 2009
third quarter.
The net income for the nine months ended September 30, 2010 was $105.3 million ($75.7
million before extraordinary item) compared to a net loss of
$516.5 million for the nine months
ended September 30, 2009. The
diluted income per share was $6.96
($5.00 per share before extraordinary
item) for the nine months ended September
30, 2010 compared to a diluted loss per share of
$34.44 for the nine months ended
September 30, 2009.
Ken Jones, President and CEO,
said, "We continued to see improvement on various operating fronts
during the third quarter. Persistency, the key driver of our
earned premiums, remained high, while the number of defaults and
the corresponding risk in default continued their decline as cure
rates and rescission rates remained consistent with the prior
quarter. The decline in our risk in default once again led to
a decrease in reserves, making this the fifth consecutive quarter
that we have reported a decrease in reserves. Approximately
35% of the decrease in reserves was the result of a reduction in
factors utilized in our reserve assumptions. During the third
quarter, we also saw a slowdown in settled claims as foreclosures
slowed. At this time, we are unsure what impact, if any, the
current documentation issue surrounding foreclosures will have on
our future financial results. While we are encouraged by the
performance of our insured portfolio, we remain cautious about the
outlook for the remainder of 2010 and continuing into 2011 due to a
slower than expected U.S. economic recovery, lingering high
unemployment rates and stagnant home prices.
Mr. Jones continued, "In July we repurchased all of our
outstanding long-term debt from our bondholders at less than face
value, resulting in a $29.6 million
gain that was reported as an extraordinary item in our third
quarter financial statements. This action better positions
us, as a company in run-off, to maintain our focus on the efficient
and effective servicing of our insured portfolio, particularly with
respect to loss management, in order to maximize our claims-paying
ability. We also realized net investment gains of
$14.7 million during the third
quarter, which were due primarily to the repositioning of our
investment portfolio to reflect the delays in claim settlements.
Finally, while our financial position improved during the
last two quarters, our deficit in assets remains substantial and
was $595.4 million at September 30, 2010. To meet all of our
existing obligations, we will need to earn at least $596 million during the remaining run-off of our
business. We 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."
For additional information concerning our results for the third
quarter of 2010 and our financial position at September 30, 2010, please see our Quarterly
Report on Form 10-Q for the quarter ended September 30, 2010, which will be filed with the
Securities and Exchange Commission and will be available at
www.sec.gov or via our web site at www.triadguaranty.com. We
have updated the quarterly statistical and supplemental information
for the 2010 third 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 – Third Quarter 2010".
(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, 2009 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
(Dollars in
thousands except per share amounts)
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Earned premiums
|
$ 44,278
|
|
$ 35,576
|
|
$ 162,496
|
|
$ 144,767
|
|
|
Net investment income
|
9,681
|
|
12,342
|
|
30,115
|
|
34,393
|
|
|
Net realized investment
gains
|
14,694
|
|
3,253
|
|
13,467
|
|
705
|
|
|
Other (expense)
income
|
(29)
|
|
127
|
|
(37)
|
|
131
|
|
|
Total revenues
|
68,624
|
|
51,298
|
|
206,041
|
|
179,996
|
|
Losses and
Expenses:
|
|
|
|
|
|
|
|
|
|
Net settled claims
|
132,139
|
|
157,881
|
|
233,915
|
|
361,664
|
|
|
Change in reserves
|
(97,229)
|
|
(15,836)
|
|
(144,082)
|
|
302,748
|
|
|
Loss adjustment
expenses
|
491
|
|
3,713
|
|
10,036
|
|
14,291
|
|
|
Net losses and loss adjustment
expenses
|
35,401
|
|
145,758
|
|
99,869
|
|
678,703
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
2,642
|
|
1,202
|
|
7,927
|
|
3,791
|
|
|
Other operating
expenses
|
6,206
|
|
9,659
|
|
22,559
|
|
27,750
|
|
|
Total losses and
expenses
|
44,249
|
|
156,619
|
|
130,355
|
|
710,244
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes and
extraordinary item
|
24,375
|
|
(105,321)
|
|
75,686
|
|
(530,248)
|
|
|
Income tax benefit
|
-
|
|
(3,426)
|
|
-
|
|
(13,760)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
extraordinary item
|
24,375
|
|
(101,895)
|
|
75,686
|
|
(516,488)
|
|
|
Extraordinary item - gain from
repurchase and retirement
of long-term
debt
|
29,640
|
|
-
|
|
29,640
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$ 54,015
|
|
$ (101,895)
|
|
$ 105,326
|
|
$ (516,488)
|
|
|
|
|
|
|
|
|
|
|
|
Per Share
Information:
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share
before extraordinary item
|
$ 1.61
|
|
$
(6.78)
|
|
$
5.00
|
|
$
(34.44)
|
|
|
Diluted income per share for
extraordinary item
|
1.95
|
|
-
|
|
1.96
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per
share
|
$
3.56
|
|
$
(6.78)
|
|
$
6.96
|
|
$
(34.44)
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common
and common
|
|
|
|
|
|
|
|
|
|
stock equivalents
outstanding (in thousands)
|
15,185
|
|
15,033
|
|
15,134
|
|
14,995
|
|
|
|
|
|
|
|
|
|
|
Triad
Guaranty Inc.
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
|
|
September
30,
|
|
December
31,
|
|
September
30,
|
|
|
|
|
2010
|
|
2009
|
|
2009
|
|
|
|
(Dollars in
thousands except per share amounts)
|
|
Assets:
|
|
|
|
|
|
|
|
|
Invested assets:
|
|
|
|
|
|
|
|
|
Fixed maturities,
available for sale, at market
|
|
$
879,050
|
|
$
784,830
|
|
$
814,821
|
|
|
Equity securities,
available for sale, at market
|
|
-
|
|
-
|
|
56
|
|
|
Short-term
investments
|
|
26,708
|
|
26,651
|
|
32,028
|
|
|
|
|
905,758
|
|
811,481
|
|
846,905
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
36,823
|
|
21,839
|
|
7,480
|
|
|
Reinsurance
recoverable
|
|
48,155
|
|
233,499
|
|
245,436
|
|
|
Other assets
|
|
65,416
|
|
58,007
|
|
54,331
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
1,056,152
|
|
$
1,124,826
|
|
$
1,154,152
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Losses and loss adjustment
expenses
|
|
$
1,200,518
|
|
$
1,537,043
|
|
$
1,576,303
|
|
|
Unearned premiums
|
|
10,197
|
|
12,153
|
|
13,385
|
|
|
Long-term debt
|
|
-
|
|
34,540
|
|
34,537
|
|
|
Deferred payment
obligation
|
|
351,720
|
|
168,386
|
|
97,048
|
|
|
Other liabilities
|
|
89,095
|
|
79,062
|
|
57,906
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
1,651,530
|
|
1,831,184
|
|
1,779,179
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
deficit:
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
(745,815)
|
|
(851,141)
|
|
(771,997)
|
|
|
Accumulated other comprehensive
income
|
|
36,228
|
|
30,782
|
|
33,626
|
|
|
Other equity accounts
|
|
114,209
|
|
114,001
|
|
113,344
|
|
|
|
|
|
|
|
|
|
|
|
Deficit in
assets
|
|
(595,378)
|
|
(706,358)
|
|
(625,027)
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders' deficit
|
|
$
1,056,152
|
|
$
1,124,826
|
|
$
1,154,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit in assets
per share:
|
|
$
(39.02)
|
|
$
(46.29)
|
|
$
(40.96)
|
|
|
|
|
|
|
|
|
|
|
Common shares
outstanding
|
|
15,258,128
|
|
15,258,128
|
|
15,258,128
|
|
|
|
|
|
|
|
|
|
Triad
Guaranty Inc.
|
|
Consolidated
Statements of Cash Flow
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
September
30,
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
(Dollars in
Thousands)
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net income (loss)
|
$ 105,326
|
|
$ (516,488)
|
|
Adjustments to reconcile net
income (loss) to net cash
|
|
|
|
|
provided by operating
activities:
|
|
|
|
|
|
Increase (decrease) in loss and
unearned premium reserves
|
(338,481)
|
|
385,985
|
|
|
Decrease (increase) in amounts
due to/from reinsurer
|
185,343
|
|
(95,275)
|
|
|
Net realized investment
gains
|
(13,467)
|
|
(705)
|
|
|
Extraordinary gain on repurchase
of long-term debt
|
(29,640)
|
|
-
|
|
|
Decrease in deferred income
taxes
|
-
|
|
(14,841)
|
|
|
Increase in deferred payment
obligation
|
183,334
|
|
97,048
|
|
|
Other operating
activities
|
(1,562)
|
|
29,207
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities
|
90,853
|
|
(115,069)
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
Purchases of investment
securities
|
(453,699)
|
|
(171,049)
|
|
|
Sales and maturities of
investment securities
|
382,297
|
|
245,225
|
|
|
(Increase) decrease in
short-term investments
|
(58)
|
|
8,538
|
|
|
Other investing
activities
|
497
|
|
(105)
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
(70,963)
|
|
82,609
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
Repurchase of long-term
debt
|
(4,906)
|
|
-
|
|
Net cash provided by (used in)
financing activities
|
(4,906)
|
|
0
|
|
|
|
|
|
|
|
Net increase (decrease) in
cash
|
14,984
|
|
(32,460)
|
|
Cash at beginning of
period
|
21,839
|
|
39,940
|
|
|
|
|
|
|
|
Cash at end of
period
|
$ 36,823
|
|
$
7,480
|
|
|
|
|
|
|
Triad
Guaranty Inc.
|
|
Sequential
Quarterly Financial Statements
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Statements of Operations For The Quarter Ended
|
|
|
|
|
|
|
(Dollars in
thousands)
|
Sept
30,
|
|
Jun
30,
|
|
Mar
31,
|
|
Dec
31,
|
|
Sept
30,
|
|
Jun
30,
|
|
Mar
31,
|
|
Dec
31,
|
|
Sep
30,
|
|
|
|
2010
|
|
2010
|
|
2010
|
|
2009
|
|
2009
|
|
2009
|
|
2009
|
|
2008
|
|
2008
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums
|
$
44,278
|
|
$
72,330
|
|
$
45,888
|
|
$
34,891
|
|
$
35,576
|
|
$
64,833
|
|
$
44,358
|
|
$
49,840
|
|
$
65,654
|
|
|
Net investment income
|
9,681
|
|
10,561
|
|
9,873
|
|
9,739
|
|
12,342
|
|
10,859
|
|
11,192
|
|
10,509
|
|
10,349
|
|
|
Realized investment gains
(losses)
|
14,694
|
|
(985)
|
|
(242)
|
|
649
|
|
3,253
|
|
2,017
|
|
(4,565)
|
|
(18,944)
|
|
(6,519)
|
|
|
Other (expense)
income
|
(29)
|
|
-
|
|
(8)
|
|
12,536
|
|
127
|
|
2
|
|
2
|
|
2
|
|
2
|
|
|
Total revenues
|
68,624
|
|
81,906
|
|
55,511
|
|
57,815
|
|
51,298
|
|
77,711
|
|
50,987
|
|
41,407
|
|
69,486
|
|
Losses and
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net settled
claims
|
132,139
|
|
145,460
|
|
144,973
|
|
153,749
|
|
157,881
|
|
149,863
|
|
53,920
|
|
69,372
|
|
59,357
|
|
|
Change in
reserves
|
(97,229)
|
|
(158,058)
|
|
(77,453)
|
|
(30,195)
|
|
(15,836)
|
|
278,956
|
|
39,628
|
|
106,080
|
|
165,958
|
|
|
Loss adjustment
expenses
|
491
|
|
4,828
|
|
4,718
|
|
5,370
|
|
3,713
|
|
2,549
|
|
8,029
|
|
2,647
|
|
5,879
|
|
|
Net losses and LAE
|
35,401
|
|
(7,770)
|
|
72,238
|
|
128,924
|
|
145,758
|
|
431,368
|
|
101,577
|
|
178,099
|
|
231,194
|
|
|
Interest Expense
|
2,642
|
|
2,816
|
|
2,469
|
|
2,243
|
|
1,202
|
|
1,895
|
|
694
|
|
694
|
|
691
|
|
|
Other operating
expenses
|
6,206
|
|
7,021
|
|
9,332
|
|
8,160
|
|
9,659
|
|
8,680
|
|
9,411
|
|
8,639
|
|
8,726
|
|
|
Total losses and
expenses
|
44,249
|
|
2,067
|
|
84,039
|
|
139,327
|
|
156,619
|
|
441,943
|
|
111,682
|
|
187,432
|
|
240,611
|
|
Income (loss) before taxes and
extraordinary item
|
24,375
|
|
79,839
|
|
(28,528)
|
|
(81,512)
|
|
(105,321)
|
|
(364,232)
|
|
(60,695)
|
|
(146,025)
|
|
(171,125)
|
|
|
Income taxes
(benefit)
|
-
|
|
717
|
|
(717)
|
|
(2,368)
|
|
(3,426)
|
|
(4,813)
|
|
(5,521)
|
|
(23,818)
|
|
(11,030)
|
|
Income (loss) before
extraordinary item
|
24,375
|
|
79,122
|
|
(27,811)
|
|
(79,144)
|
|
(101,895)
|
|
(359,419)
|
|
(55,174)
|
|
(122,207)
|
|
(160,095)
|
|
|
Extraordinary item - gain from
repurchase and retirement
of long-term
debt
|
29,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
54,015
|
|
$
79,122
|
|
$
(27,811)
|
|
$
(79,144)
|
|
$
(101,895)
|
|
$
(359,419)
|
|
$
(55,174)
|
|
$
(122,207)
|
|
$
(160,095)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Balance Sheets As Of
|
|
|
|
|
|
|
|
Sept
30,
|
|
Jun
30,
|
|
Mar
31,
|
|
Dec
31,
|
|
Sept
30,
|
|
Jun
30,
|
|
Mar
31,
|
|
Dec
31,
|
|
Sep
30,
|
|
|
|
2010
|
|
2010
|
|
2010
|
|
2009
|
|
2009
|
|
2009
|
|
2009
|
|
2008
|
|
2008
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Invested assets
|
$
905,758
|
|
$
936,158
|
|
$
957,115
|
|
$
811,481
|
|
$
846,905
|
|
$
851,640
|
|
$
918,531
|
|
$
895,422
|
|
$
890,720
|
|
|
Cash
|
36,823
|
|
35,576
|
|
38,662
|
|
21,839
|
|
7,480
|
|
31,600
|
|
21,394
|
|
39,940
|
|
47,818
|
|
|
Real estate acquired
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
526
|
|
713
|
|
3,661
|
|
|
Prepaid federal income
tax
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
15
|
|
15
|
|
15
|
|
|
Reinsurance
recoverable
|
48,155
|
|
49,829
|
|
52,963
|
|
233,499
|
|
245,436
|
|
234,248
|
|
182,589
|
|
150,848
|
|
111,827
|
|
|
Other assets
|
65,416
|
|
64,000
|
|
54,406
|
|
58,007
|
|
54,331
|
|
57,650
|
|
52,307
|
|
43,596
|
|
47,915
|
|
|
Total assets
|
$ 1,056,152
|
|
$ 1,085,563
|
|
$ 1,103,146
|
|
$ 1,124,826
|
|
$ 1,154,152
|
|
$ 1,175,138
|
|
$ 1,175,362
|
|
$ 1,130,534
|
|
$ 1,101,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders'
deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and
loss adjustment expenses
|
$ 1,200,518
|
|
$ 1,307,028
|
|
$ 1,468,719
|
|
$ 1,537,043
|
|
$ 1,576,303
|
|
$ 1,591,207
|
|
$ 1,262,746
|
|
$ 1,187,840
|
|
$ 1,042,053
|
|
|
Long term
debt
|
-
|
|
34,546
|
|
34,543
|
|
34,540
|
|
34,537
|
|
34,535
|
|
34,532
|
|
34,529
|
|
34,527
|
|
|
Deferred
payment obligation
|
351,720
|
|
292,169
|
|
229,953
|
|
168,386
|
|
97,048
|
|
27,020
|
|
-
|
|
-
|
|
-
|
|
|
Accrued
expenses and other liabilities
|
99,292
|
|
99,965
|
|
102,677
|
|
91,215
|
|
71,291
|
|
52,066
|
|
59,477
|
|
44,831
|
|
30,887
|
|
|
Total liabilities
|
1,651,530
|
|
1,733,708
|
|
1,835,892
|
|
1,831,184
|
|
1,779,179
|
|
1,704,828
|
|
1,356,755
|
|
1,267,200
|
|
1,130,356
|
|
|
Deficit in assets
|
(595,378)
|
|
(648,145)
|
|
(732,746)
|
|
(706,358)
|
|
(625,027)
|
|
(529,690)
|
|
(181,393)
|
|
(136,666)
|
|
(28,400)
|
|
|
Total liabilities and
stockholders' deficit
|
$ 1,056,152
|
|
$ 1,085,563
|
|
$ 1,103,146
|
|
$ 1,124,826
|
|
$ 1,154,152
|
|
$ 1,175,138
|
|
$ 1,175,362
|
|
$ 1,130,534
|
|
$ 1,101,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE Triad Guaranty Inc.