TRIAD GUARANTY INC - FORM 8-K - EX-99.1 - PRESS RELEASE FOR 3Q2011 EARNINGS

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8-K - FORM 8-K FOR 3Q2011 EARNINGS RELEASE - TRIAD GUARANTY INC	form8k-3q2011earnings.htm

Exhibit 99.1

Press Release

Triad Guaranty Inc. Reports Third Quarter Results

WINSTON-SALEM, N.C., November 11, 2011 -- Triad Guaranty Inc. (OTCBB: TGIC) today reported a net loss for the quarter ended September 30, 2011 of $37.5 million compared to a net loss of $4.4 million for the second quarter of 2011 and net income of $54.0 million for the third quarter of 2010. The 2011 third quarter diluted loss per share was $2.46 compared to a diluted loss per share of $0.29 for the 2011 second quarter and diluted income per share of $3.56 for the third quarter of 2010.

The net loss for the nine months ended September 30, 2011 was $46.8 million compared to net income of $105.3 million for the nine months ended September 30, 2010. The diluted loss per share was $3.07 for the nine months ended September 30, 2011 compared to diluted income per share of $6.96 for the nine months ended September 30, 2010.

Ken Jones, President and CEO, said, “Our risk in default and the corresponding reserve for losses continued to decline during the third quarter. However, incurred losses for the third quarter of 2011 were up sequentially compared to the second quarter of 2011 and on a year-over-year basis compared to the third quarter of 2010. During the third quarter of 2011, benefits from adjustments to frequency factors based on the development of our reserves were substantially lower than in the second quarter of 2011 and the comparable prior year period, and while newly reported defaults continued to decrease, the rate of decline slowed from prior quarters. The third quarter of 2010 also contained an extraordinary gain of $29.6 million from the repurchase and retirement of our long-term debt. High unemployment, tight credit and depressed home prices have prevented any meaningful recovery in the housing market, which continues to negatively impact our financial results.”

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 $631 million at September 30, 2011. We believe that, absent significant positive changes in the economy and the residential real estate market, our existing assets and future premiums likely will not be sufficient to meet our current and future policyholder obligations.”

We have updated the quarterly statistical and supplemental information for the 2011 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 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

####

Triad Guaranty Inc.
Consolidated Statements of Operations
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(Dollars in thousands except per share amounts)
Revenues:
Earned premiums		49,719			44,278			122,241			162,496
Net investment income		7,364			9,681			23,981			30,115
Net realized investment gains		1,349			14,694			3,913			13,467
Other income (loss)		10			(29	)		66			(37	)
Total revenues		58,442			68,624			150,201			206,041
Losses and Expenses:
Net settled claims		132,545			132,139			351,037			422,573
Decrease in reserves		(44,192	)		(97,229	)		(181,638	)		(332,740	)
Loss adjustment expenses (benefit)		(511	)		491			1,448			10,036
Net losses and loss adjustment expenses		87,842			35,401			170,847			99,869

Interest expense		4,813			2,642			13,260			7,927
Other operating expenses		4,450			6,206			14,065			22,559
Total losses and expenses		97,105			44,249			198,172			130,355
Income (loss) before income taxes and extraordinary item		(38,663	)		24,375			(47,971	)		75,686
Income tax benefit		(1,134	)		-			(1,134	)		-
Loss before extraordinary item		(37,529	)		24,375			(46,837	)		75,686
Extraordinary item - gain from repurchase and retirement of long-term debt		-			29,640			-			29,640
Net income (loss)		(37,529	)		54,015			(46,837	)		105,326

Per Share Information:
Diluted (loss) income per share before extraordinary item		(2.46	)		1.61			(3.07	)		5.00
Diluted income per share for extraordinary item		-			1.95			-			1.96
Diluted (loss) income per share		(2.46	)		3.56			(3.07	)		6.96

Diluted weighted average common stock and common stock equivalents outstanding (in thousands of shares)		15,258			15,185			15,274			15,134

Triad Guaranty Inc.
Consolidated Balance Sheets

	(Unaudited)						(Unaudited)
	September 30,			December 31,			September 30,
	2011			2010			2010
	(Dollars in thousands)
Assets:
Invested assets:
Fixed maturities, available for sale, at market	$	739,604		$	812,335		$	879,050
Short-term investments		33,474			39,561			26,708
		773,078			851,896			905,758
Cash and cash equivalents		65,051			38,762			36,823
Reinsurance recoverable		23,719			40,806			48,155
Other Assets		56,897			60,161			65,416
Total assets	$	918,745		$	991,625		$	1,056,152

Liabilities:
Losses and loss adjustment expenses	$	864,049		$	1,060,036		$	1,200,518
Unearned premiums		7,636			9,057			10,197
Deferred payment obligation		576,510			415,657			351,720
Other liabilities		101,459			93,075			89,095
Total liabilities		1,549,654			1,577,825			1,651,530

Stockholders' deficit:
Accumulated deficit		(765,883	)		(719,046	)		(745,815	)
Accumulated other comprehensive income		20,714			18,609			36,228
Other equity accounts		114,260			114,237			114,209
Deficit in assets		(630,909	)		(586,200	)		(595,378	)
Total liabilities and stockholders' deficit	$	918,745		$	991,625		$	1,056,152

Common shares outstanding		15,328,128			15,258,128			15,258,128

Triad Guaranty Inc.
Consolidated Statements of Cash Flow
(Unaudited)

	Nine Months Ended September 30,
	2011			2010
	(Dollars in thousands)

OPERATING ACTIVITIES
Net (loss) income	$	(46,837	)	$	105,326
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Decrease in loss and unearned premium reserves		(197,408	)		(338,481	)
Decrease in amounts due to/from reinsurer		17,087			185,343
Net realized investment gains		(3,913	)		(13,467	)
Extraordinary gain on repurchase of long-term debt		-			(29,640	)
Increase in deferred payment obligation		160,853			183,334
Other operating activities		12,398			(1,562	)
Net cash (used in) provided by operating activities		(57,820	)		90,853

INVESTING ACTIVITIES
Purchases of investment securities		(92,206	)		(453,699	)
Sales and maturities of investment securities		171,536			382,297
Increase in short-term investments		6,087			(58	)
Other investing activities		(1,308	)		497
Net cash provided by (used in) investing activities		84,109			(70,963	)

FINANCING ACTIVITIES
Repurchase of long-term debt		-			(4,906	)
Net cash used in financing activities		-			(4,906	)

Net increase in cash		26,289			14,984
Cash at beginning of year		38,762			21,839
Cash at end of period	$	65,051		$	36,823

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,
	2011			2011			2011			2010			2010
Revenue:
Earned premiums	$	49,719		$	35,394		$	37,128		$	40,920		$	44,278
Net investment income		7,364			8,126			8,491			8,658			9,681
Realized investment gains (losses)		1,349			3,000			(436	)		(950	)		14,694
Other income (expense)		10			29			27			60			(29	)
Total revenues		58,442			46,549			45,210			48,688			68,624
Losses and Expenses:
Net settled claims		132,545			111,583			106,909			139,435			132,139
Change in reserves		(44,192	)		(70,752	)		(66,694	)		(129,993	)		(97,229	)
Loss adjustment expenses (benefit)		(511	)		469			1,490			322			491
Net losses and LAE expense		87,842			41,300			41,705			9,764			35,401
Interest expense		4,813			4,469			3,978			3,836			2,642
Other operating expenses		4,450			5,178			4,437			8,319			6,206
Total losses and expenses		97,105			50,947			50,120			21,919			44,249
Income (loss) before taxes and extraordinary item		(38,663	)		(4,398	)		(4,910	)		26,769			24,375
Income taxes		(1,134	)		-			-			-			-
Income (loss) before extraordinary item		(37,529	)		(4,398	)		(4,910	)		26,769			24,375
Extraordinary item - gain from repurchase and retirement of long-term debt		-			-			-			-			29,640
Net income (loss)	$	(37,529	)	$	(4,398	)	$	(4,910	)	$	26,769		$	54,015

	Condensed Balance Sheets As Of
	Sept. 30,			Jun. 30,			Mar. 31,			Dec. 31,			Sept. 30,
	2011			2011			2011			2010			2010
Assets
Invested assets	$	773,078		$	823,018		$	842,908		$	851,896		$	905,758
Cash		65,051			40,277			39,073			38,762			36,823
Reinsurance recoverable		23,719			31,230			33,499			40,806			48,155
Other assets		56,897			46,141			48,528			60,161			65,416
Total assets	$	918,745		$	940,666		$	964,008		$	991,625		$	1,056,152

Liabilities and stockholders' deficit
Liabilities:
Losses and loss adjustment expenses	$	864,049		$	910,530		$	990,494		$	1,060,036		$	1,200,518
Deferred payment obligation		576,510			517,193			464,342			415,657			351,720
Accrued expenses and other liabilities		109,095			106,271			102,911			102,132			99,292
Total liabilities		1,549,654			1,533,994			1,557,747			1,577,825			1,651,530
Deficit in assets		(630,909	)		(593,328	)		(593,739	)		(586,200	)		(595,378	)
Total liabilities and stockholders' deficit	$	918,745		$	940,666		$	964,008		$	991,625		$	1,056,152

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