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| 8-K - FORM 8-K - 2Q2011 EARNINGS RELEASE - TRIAD GUARANTY INC | form8k-2q2011earnings.htm |
Exhibit 99.1
Press Release
Triad Guaranty Inc. Reports Second Quarter Results
WINSTON-SALEM, N.C., August 12, 2011 -- Triad Guaranty Inc. (OTCBB: TGIC) today reported a net loss for the quarter ended June 30, 2011 of $4.4 million compared to a net loss of $4.9 million for the first quarter of 2011 and net income of $79.1 million for the second quarter of 2010. The 2011 second quarter diluted loss per share was $0.29 compared to diluted loss per share of $0.32 for the 2011 first quarter and diluted income per share of $5.24 for the second quarter of 2010.
The net loss for the six months ended June 30, 2011 was $9.3 million compared to net income of $51.3 million for the six months ended June 30, 2010. The diluted loss per share was $0.61 for the six months ended June 30, 2011 compared to diluted income per share of $3.40 for the six months ended June 30, 2010.
Ken Jones, President and CEO, said, “We continue to see the impact of the troubled economy on employment and housing. Unemployment remained elevated and housing prices were either stagnant or dropped even further during the second quarter. These economic trends continued to impact our financial results during the second quarter. While total risk in default decreased again in the second quarter, the rate of decline slowed from that experienced for the past several quarters. While the level of newly reported defaults remained elevated, new defaults declined slightly in the second quarter. However, the benefit from the decline in new defaults was offset by lower cures and lower rescissions during the quarter. The average age of our default inventory continued to increase as the volume of settled claims for the second quarter remained low when compared to settled claims during 2010. We believe the drop in net settled claims is primarily related to widely reported loan servicers’ issues surrounding foreclosure policies and practices, including foreclosure moratoriums. The second quarter of 2010 included the positive impact of a significant change in reserve factors coupled with an additional accrual of earned premiums related to modified pool structures. These were the primary drivers of the increase in reported income for that quarter and make comparisons to the 2011 second quarter difficult.”
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 million at June 30, 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 second 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 – Second 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.
SOURCE: Triad Guaranty Inc.
CONTACT: Bob Ogburn, Vice President and Treasurer, at 336.723.1282 ext. 1167 or bogburn@tgic.com
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Consolidated Statements of Operations
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(Unaudited)
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Three Months Ended
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Six Months Ended
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June 30,
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June 30,
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2011
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2010
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2011
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2010
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(Dollars in thousands except per share amounts)
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Revenues:
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Earned premiums
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$ | 35,394 | $ | 72,330 | $ | 72,522 | $ | 118,218 | ||||||||
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Net investment income
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8,126 | 10,560 | 16,617 | 20,434 | ||||||||||||
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Net realized investment gains (losses)
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3,000 | (985 | ) | 2,564 | (1,227 | ) | ||||||||||
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Other income (loss)
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29 | - | 56 | (8 | ) | |||||||||||
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Total revenues
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46,549 | 81,905 | 91,759 | 137,417 | ||||||||||||
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Losses and Expenses:
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Net settled claims
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111,583 | 145,460 | 218,492 | 290,433 | ||||||||||||
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Decrease in reserves
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(70,752 | ) | (158,058 | ) | (137,446 | ) | (235,511 | ) | ||||||||
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Loss adjustment expenses
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469 | 4,828 | 1,959 | 9,546 | ||||||||||||
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Net losses (benefit) and loss adjustment expenses
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41,300 | (7,770 | ) | 83,005 | 64,468 | |||||||||||
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Interest expense
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4,469 | 2,816 | 8,447 | 5,285 | ||||||||||||
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Other operating expenses
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5,178 | 7,021 | 9,615 | 16,353 | ||||||||||||
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Total losses and expenses
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50,947 | 2,067 | 101,067 | 86,106 | ||||||||||||
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Income (loss) before income taxes
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(4,398 | ) | 79,838 | (9,308 | ) | 51,311 | ||||||||||
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Income tax expense
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- | 717 | - | - | ||||||||||||
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Net (loss) income
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$ | (4,398 | ) | $ | 79,121 | $ | (9,308 | ) | $ | 51,311 | ||||||
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Per Share Information:
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Diluted (loss) income per share
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$ | (0.29 | ) | $ | 5.24 | $ | (0.61 | ) | $ | 3.40 | ||||||
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Diluted weighted average common stock and common stock equivalents outstanding (in thousands of shares)
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15,258 | 15,112 | 15,241 | 15,109 | ||||||||||||
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Consolidated Balance Sheets
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(Unaudited)
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(Unaudited)
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June 30,
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December 31,
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June 30,
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2011
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2010
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2010
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(Dollars in thousands)
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Assets:
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Invested assets:
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Fixed maturities, available for sale, at market
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$ | 757,124 | $ | 812,335 | $ | 906,992 | ||||||
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Short-term investments
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65,894 | 39,561 | 29,166 | |||||||||
| 823,018 | 851,896 | 936,158 | ||||||||||
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Cash and cash equivalents
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40,277 | 38,762 | 35,576 | |||||||||
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Reinsurance recoverable
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31,230 | 40,806 | 49,829 | |||||||||
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Other assets
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46,141 | 60,161 | 64,000 | |||||||||
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Total assets
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$ | 940,666 | $ | 991,625 | $ | 1,085,563 | ||||||
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Liabilities:
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Losses and loss adjustment expenses
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$ | 910,530 | $ | 1,060,036 | $ | 1,307,028 | ||||||
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Unearned premiums
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8,642 | 9,057 | 11,346 | |||||||||
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Long-term debt
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- | - | 34,546 | |||||||||
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Deferred payment obligation
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517,193 | 415,657 | 292,169 | |||||||||
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Other liabilities
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97,629 | 93,075 | 88,619 | |||||||||
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Total liabilities
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1,533,994 | 1,577,825 | 1,733,708 | |||||||||
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Stockholders' deficit:
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Accumulated deficit
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(728,354 | ) | (719,046 | ) | (799,830 | ) | ||||||
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Accumulated other comprehensive income
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20,769 | 18,609 | 37,516 | |||||||||
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Other equity accounts
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114,257 | 114,237 | 114,169 | |||||||||
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Deficit in assets
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(593,328 | ) | (586,200 | ) | (648,145 | ) | ||||||
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Total liabilities and stockholders' deficit
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$ | 940,666 | $ | 991,625 | $ | 1,085,563 | ||||||
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Common shares outstanding
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15,328,128 | 15,258,128 | 15,258,128 | |||||||||
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Triad Guaranty Inc.
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Consolidated Statements of Cash Flow
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(Unaudited)
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Six Months Ended
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June 30,
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2011
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2010
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(Dollars in thousands)
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OPERATING ACTIVITIES
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Net (loss) income
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$ | (9,308 | ) | $ | 51,311 | |||
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Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
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Decrease in loss and unearned premium reserves
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(149,921 | ) | (230,822 | ) | ||||
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Decrease in amounts due to/from reinsurer
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9,576 | 183,670 | ||||||
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Net realized investment (gains) losses
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(2,564 | ) | 1,227 | |||||
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Increase in deferred payment obligation
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101,536 | 123,783 | ||||||
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Other operating activities
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19,589 | (996 | ) | |||||
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Net cash (used in) provided by operating activities
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(31,092 | ) | 128,173 | |||||
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INVESTING ACTIVITIES
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Purchases of investment securities
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(35,338 | ) | (251,268 | ) | ||||
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Sales and maturities of investment securities
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94,372 | 138,918 | ||||||
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Increase in short-term investments
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(26,333 | ) | (2,516 | ) | ||||
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Other investing activities
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(94 | ) | 430 | |||||
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Net cash provided by (used in) investing activities
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32,607 | (114,436 | ) | |||||
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Net increase in cash
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1,515 | 13,737 | ||||||
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Cash at beginning of year
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38,762 | 21,839 | ||||||
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Cash at end of period
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$ | 40,277 | $ | 35,576 | ||||
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Sequential Quarterly Financial Statements
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(unaudited)
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Condensed Statements of Operations For The Quarter Ended
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(Dollars in thousands)
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Jun. 30,
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Mar. 31,
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Dec. 31,
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Sept. 30,
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Jun. 30,
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2011
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2011
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2010
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2010
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2010
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Revenue:
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Earned premiums
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$ | 35,394 | $ | 37,128 | $ | 40,920 | $ | 44,278 | $ | 72,330 | ||||||||||
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Net investment income
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8,126 | 8,491 | 8,658 | 9,681 | 10,560 | |||||||||||||||
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Realized investment (losses) gains
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3,000 | (436 | ) | (950 | ) | 14,694 | (985 | ) | ||||||||||||
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Other income (expense)
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29 | 27 | 60 | (29 | ) | - | ||||||||||||||
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Total revenues
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46,549 | 45,210 | 48,688 | 68,624 | 81,905 | |||||||||||||||
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Losses and Expenses:
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Net settled claims
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111,583 | 106,909 | 139,435 | 132,139 | 145,460 | |||||||||||||||
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Change in reserves
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(70,752 | ) | (66,694 | ) | (129,993 | ) | (97,229 | ) | (158,058 | ) | ||||||||||
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Loss adjustment expenses
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469 | 1,490 | 322 | 491 | 4,828 | |||||||||||||||
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Net losses and LAE expense (benefit)
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41,300 | 41,705 | 9,764 | 35,401 | (7,770 | ) | ||||||||||||||
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Interest expense
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4,469 | 3,978 | 3,836 | 2,642 | 2,816 | |||||||||||||||
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Other operating expenses
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5,178 | 4,437 | 8,319 | 6,206 | 7,021 | |||||||||||||||
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Total losses and expenses
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50,947 | 50,120 | 21,919 | 44,249 | 2,067 | |||||||||||||||
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Income (loss) before taxes and extraordinary item
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(4,398 | ) | (4,910 | ) | 26,769 | 24,375 | 79,838 | |||||||||||||
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Income taxes
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- | - | - | - | 717 | |||||||||||||||
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Income (loss) before extraordinary item
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(4,398 | ) | (4,910 | ) | 26,769 | 24,375 | 79,121 | |||||||||||||
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Extraordinary item - gain from repurchase and retirement of long-term debt
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- | - | - | 29,640 | - | |||||||||||||||
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Net (loss) income
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$ | (4,398 | ) | $ | (4,910 | ) | $ | 26,769 | $ | 54,015 | $ | 79,121 | ||||||||
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Condensed Balance Sheets As Of
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Jun. 30,
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Mar. 31,
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Dec. 31,
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Sept. 30,
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Jun. 30,
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| 2011 | 2011 | 2010 | 2010 | 2010 | ||||||||||||||||
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Assets
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Invested assets
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$ | 823,018 | $ | 842,908 | $ | 851,896 | $ | 905,758 | $ | 936,158 | ||||||||||
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Cash
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40,277 | 39,073 | 38,762 | 36,823 | 35,576 | |||||||||||||||
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Reinsurance recoverable
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31,230 | 33,499 | 40,806 | 48,155 | 49,829 | |||||||||||||||
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Other assets
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46,141 | 48,528 | 60,161 | 65,416 | 64,000 | |||||||||||||||
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Total assets
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$ | 940,666 | $ | 964,008 | $ | 991,625 | $ | 1,056,152 | $ | 1,085,563 | ||||||||||
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Liabilities and stockholders' deficit
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Liabilities:
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Losses and loss adjustment expenses
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$ | 910,530 | $ | 990,494 | $ | 1,060,036 | $ | 1,200,518 | $ | 1,307,028 | ||||||||||
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Long-term debt
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- | - | - | - | 34,546 | |||||||||||||||
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Deferred payment obligation
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517,193 | 464,342 | 415,657 | 351,720 | 292,169 | |||||||||||||||
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Accrued expenses and other liabilities
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106,271 | 102,911 | 102,132 | 99,292 | 99,965 | |||||||||||||||
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Total liabilities
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1,533,994 | 1,557,747 | 1,577,825 | 1,651,530 | 1,733,708 | |||||||||||||||
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Deficit in assets
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(593,328 | ) | (593,739 | ) | (586,200 | ) | (595,378 | ) | (648,145 | ) | ||||||||||
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Total liabilities and stockholders' deficit
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$ | 940,666 | $ | 964,008 | $ | 991,625 | $ | 1,056,152 | $ | 1,085,563 | ||||||||||