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Note 16 - Statutory Information Level 1 (Notes) | 12 Months Ended
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Dec. 31, 2020
SEC Schedule, 12-16, Insurance Companies, Supplementary Insurance Information [Abstract] |
Insurance Disclosure [Text Block] | Statutory Information Radian Group serves as the holding company for our insurance subsidiaries, through which we conduct our mortgage insurance and title insurance businesses. These insurance subsidiaries are subject to comprehensive, detailed regulation by the insurance departments in the various states where our insurance subsidiaries are domiciled or licensed to transact business. Insurance laws vary from state to state, but generally grant broad supervisory powers to state agencies or officials to examine insurance companies and enforce rules or exercise discretion affecting almost every significant aspect of the insurance business, including the power to revoke or restrict an insurance company’s ability to write new business. In addition, in order to be eligible to insure loans purchased by the GSEs, mortgage insurers such as Radian Guaranty must meet the GSEs’ eligibility requirements, or PMIERs. The PMIERs are comprehensive, covering virtually all aspects of the business and operations of a private mortgage insurer, including internal risk management and quality controls, the relationship between the GSEs and the approved insurer, as well as the approved insurer’s financial condition. See “PMIERs” below for additional information. The PMIERs and state insurance regulations include various capital requirements and dividend restrictions based on our insurance subsidiaries’ statutory financial position and results of operations, as described below. Our failure to maintain adequate levels of capital could lead to intervention by the various insurance regulatory authorities, which could materially and adversely affect our business, business prospects and financial condition. Statutory Financial Statements We prepare our statutory financial statements in accordance with the accounting practices required or permitted, if applicable, by the insurance departments of the respective states of domicile of our insurance subsidiaries. Required SAP are established by the NAIC, as well as state laws, regulations and general administrative rules. In addition, insurance departments have the right to permit other specific practices that may deviate from prescribed practices. As of December 31, 2020, we did not have any prescribed or permitted SAP that resulted in reported statutory surplus or risk-based capital being different from what would have been reported had NAIC statutory accounting practices been followed. Reflecting the principal differences between SAP and GAAP, statutory financial statements typically do not include unrealized gains or losses on fixed-maturity securities, deferred policy acquisition costs, and certain net deferred tax assets and certain other less readily marketable assets that are designated as non-admitted assets. In addition to these general differences, SAP also requires that mortgage insurance companies establish a special contingency reserve equal to 50% of premiums earned in each year, generally to be maintained for 10 years, to protect policyholders against loss during adverse economic cycles. As a result of the requirement to establish and maintain this statutory liability, contingency reserves affect the ability of a mortgage insurer to pay dividends, as described below. With regulatory approval, a mortgage insurance company may make early withdrawals from this contingency reserve when incurred losses exceed 35% of net premiums in a calendar year. Due to elevated losses in 2020, Radian Guaranty received regulatory approval to release $93.0 million from contingency reserves for the year. Radian Guaranty did not release any amounts from their contingency reserves in 2019 or 2018. Based on the typical 10-year holding requirement, Radian Guaranty is scheduled to release contingency reserves to unassigned surplus in material amounts beginning in 2024. See “—Statutory Dividend Restrictions” below for additional information. As a mortgage guaranty insurer, we are eligible for a tax deduction, subject to certain limitations, related to amounts required to be set aside in statutory contingency reserves to the extent we purchase U.S. Mortgage Guaranty Tax and Loss Bonds issued by the U.S. Department of the Treasury. Under SAP, this deduction reduces the tax provision reflected in the statutory financial statements, which in turn increases statutory net income and surplus as well as Available Assets under the PMIERs. As of December 31, 2020, Radian Guaranty held $210.9 million of these bonds, which have a 10-year original maturity but may be redeemed in any tax year prior to maturity. If redeemed, the taxable income in the tax year of the redemption includes the previously deducted amount associated with the redeemed bond, and is subject to tax at the statutory tax rate applicable in the year of the redemption. Accordingly, if corporate income tax rates were to increase in a year subsequent to the tax year in which the deduction was taken, additional amounts of tax above what was paid originally for the bonds must be paid when those amounts are included in income in future years. If Radian Guaranty were to redeem its bonds early in anticipation of future corporate tax rate increases, its statutory surplus and PMIERs Available Assets would decline by the amount of the redemption only, which would be up to $210.9 million based on the amount held as of December 31, 2020. Under that scenario, Radian Guaranty would still remain in compliance with both minimum surplus requirements and the current PMIERs financial requirements, as described below. All of our mortgage insurance subsidiaries are domiciled in Pennsylvania, and we currently write new business using two principal subsidiaries, Radian Guaranty and Radian Reinsurance. Radian Guaranty, our only approved insurer under the PMIERs, is authorized as a monoline insurer to write mortgage guaranty insurance (or in states where there is no specific authorization for mortgage guaranty insurance, the applicable line of insurance under which mortgage guaranty insurance is regulated) in all 50 states, the District of Columbia and Guam. Radian Reinsurance is licensed only in Pennsylvania as a stock casualty insurance company authorized to carry on the business of credit insurance, which includes the authority to write direct mortgage guaranty insurance. We use Radian Reinsurance to participate in the credit risk transfer programs developed by Fannie Mae and Freddie Mac. Prior to the January 2020 actions described below, we also used Radian Reinsurance to provide reinsurance to Radian Guaranty. In January 2020, in connection with the termination of an intercompany reinsurance agreement between Radian Reinsurance and Radian Guaranty, Radian Reinsurance transferred $6.0 billion in RIF to Radian Guaranty and released substantially all of its contingency reserves to unassigned surplus. In turn, Radian Guaranty established equivalent contingency reserves with a corresponding decrease to its unassigned surplus. As part of these actions, the Pennsylvania Insurance Department approved a $465 million return of capital from Radian Reinsurance to Radian Group as well as the transfer of $200 million of cash and marketable securities from Radian Group to Radian Guaranty in exchange for a surplus note. This intercompany surplus note has a 3% interest rate and a stated maturity of January 31, 2030; however, any principal or interest payments made by Radian Guaranty are subject to approval by the Pennsylvania Insurance Department. To date, no payments have been made related to this surplus note. The surplus note may be redeemed or converted to paid in capital at any time upon 30 days prior notice, subject to a request by Radian Guaranty for the approval of the Pennsylvania Insurance Department. Our mortgage insurance subsidiaries also include Radian Mortgage Assurance, Radian Insurance Inc., Radian Investor Surety Inc. and Radian Mortgage Guaranty Inc. Additionally, as part of our title services, we offer title insurance through Radian Title Insurance, an Ohio domiciled title insurance underwriter and settlement services company that is licensed to issue title insurance policies in 39 states and the District of Columbia. Our insurance subsidiaries’ statutory net income and statutory policyholders’ surplus for the years ended and as of December 31, 2020, 2019 and 2018 were as follows.
|  | December 31,
(In millions) |  | 2020 |  | 2019 |  | 2018
Statutory net income (loss) |  |  |  |  |  |
Radian Guaranty |  | $ | 441.9 |  |  | $ | 703.4 |  |  | $ | 501.9 |
Radian Reinsurance |  | 32.5 |  |  | 101.6 |  |  | 86.1 |
Other Mortgage Subsidiaries |  | 1.1 |  |  | 0.1 |  |  | (2.8) |
Radian Title Insurance |  | 2.1 |  |  | 0.3 |  |  | (1.8) |
Statutory policyholders’ surplus |  |  |  |  |  |
Radian Guaranty |  | $ | 481.5 |  |  | $ | 637.7 |  |  | $ | 814.1 |
Radian Reinsurance |  | 360.7 |  |  | 455.6 |  |  | 356.2 |
Other Mortgage Subsidiaries |  | 41.3 |  |  | 45.7 |  |  | 58.0 |
Radian Title Insurance |  | 28.8 |  |  | 27.0 |  |  | 27.0 |
Statutory Capital Requirements Under state insurance regulations, Radian Guaranty is required to maintain minimum surplus levels and, in certain states, a maximum ratio of net RIF relative to statutory capital, or Risk-to-capital. There are 16 RBC States that currently impose a Statutory RBC Requirement. The most common Statutory RBC Requirement is that a mortgage insurer’s Risk-to-capital may not exceed 25 to 1. In certain of the RBC States, a mortgage insurer must satisfy a MPP Requirement. Unless an RBC State grants a waiver or other form of relief, if a mortgage insurer, such as Radian Guaranty, is not in compliance with the Statutory RBC Requirement of that state, the mortgage insurer may be prohibited from writing new mortgage insurance business in that state. The statutory capital requirements for the non-RBC States are de minimis (ranging from $1 million to $5 million); however, the insurance laws of these states generally grant broad supervisory powers to state agencies or officials to enforce rules or exercise discretion affecting almost every significant aspect of the insurance business, including the power to revoke or restrict an insurance company’s ability to write new business. Radian Guaranty’s domiciliary state, Pennsylvania, is not one of the RBC States. Radian Guaranty was in compliance with all applicable Statutory RBC Requirements or MPP Requirements, as applicable, in each of the RBC States as of December 31, 2020. Radian Guaranty’s Risk-to-capital calculation was 12.7:1 and 13.6:1 as of December 31, 2020 and 2019, respectively. For purposes of the Risk-to-capital requirements imposed by certain states, statutory capital is defined as the sum of statutory policyholders’ surplus plus statutory contingency reserves. Our other mortgage insurance and title insurance subsidiaries were also in compliance with all statutory and counterparty capital requirements as of December 31, 2020 and 2019. The NAIC is in the process of reviewing the minimum capital and surplus requirements for mortgage insurers and considering changes to the Model Act. In December 2019, a working group of state regulators released exposure drafts of a revised Model Act, including new proposed mortgage guaranty insurance capital requirements for mortgage insurers. While the process for developing this framework was inactive as a result of the COVID-19 pandemic, we understand the initiative remains active and that an effort to resume work on the exposure draft is expected in 2021. As proposed, the capital requirements set forth in the most recent exposure draft rely on, among other things, changes in the economic and housing environment, including changes in home prices and incomes. PMIERs The PMIERs financial requirements require that a mortgage insurer’s Available Assets meet or exceed its Minimum Required Assets. At December 31, 2020, Radian Guaranty is an approved mortgage insurer under the PMIERs and is in compliance with the current PMIERs financial requirements. Under the PMIERs there are increased financial requirements for loans in default, including as a result of natural disasters and pandemics. As a result, increases in defaults related to the COVID-19 pandemic have subjected Radian Guaranty to an increase in Minimum Required Assets under the PMIERs, and therefore, could impact our compliance with the PMIERs or continue to negatively impact our results of operations. However, as further described below, the PMIERs apply a multiplier that reduces the Minimum Required Asset factor for loans that have become non-performing as a result of a “FEMA Declared Major Disaster” event, including as a result of participation in a forbearance program, because those loans generally have a higher likelihood of curing following the conclusion of the event. For these defaults, the PMIERs apply the Disaster Related Capital Charge, which is a 0.30 multiplier to the factor that normally would be applied to such default, effectively reducing the required asset amount by 70%, unless the resulting Minimum Required Asset amount after applying the Disaster Related Capital Charge would be less than the Minimum Required Asset amount for the loan if it was performing, in which case the Minimum Required Asset amount would equal the performing level amount. Pursuant to the COVID-19 Amendment, the Disaster Related Capital Charge is now applied nationwide to all COVID-19 Defaulted Loans for no longer than three calendar months beginning with the month the loan becomes non-performing (i.e., missed two monthly payments), or if greater, the period of time that the loan is subject to a forbearance plan, repayment plan or loan modification trial period granted in response to a financial hardship related to COVID-19. See Note 1 for discussion about the elevated risks and uncertainties associated with the COVID-19 pandemic. The GSEs may amend the PMIERs at any time, and they have broad discretion to interpret the requirements, which could impact the calculation of Radian Guaranty’s Available Assets and/or Minimum Required Assets. In addition, the GSEs have a broad range of consent rights under the PMIERs and require private mortgage insurers to obtain the prior consent of the GSEs before taking certain actions. If Radian Guaranty is unable to satisfy the requirements set forth in the PMIERs, the GSEs could restrict it from conducting certain types of business with them or take actions that may include not purchasing loans insured by Radian Guaranty. Statutory Dividend Restrictions As of December 31, 2020, the amount of restricted net assets held by our consolidated insurance subsidiaries (which represents our equity investment in those insurance subsidiaries) totaled $4.1 billion of our consolidated net assets. Despite holding assets above the minimum statutory capital thresholds and PMIERs financial requirements, the ability of Radian’s mortgage insurance subsidiaries to pay dividends on their common stock is restricted by certain provisions of the insurance laws of Pennsylvania, their state of domicile. Under Pennsylvania’s insurance laws, ordinary dividends and distributions may only be paid out of an insurer’s positive unassigned surplus, measured as of the end of the prior fiscal year, unless the Pennsylvania Insurance Department approves the payment of extraordinary dividends or other distributions from another source. As of December 31, 2020, Radian Guaranty had negative unassigned surplus of $859.5 million. Therefore, no dividends or other ordinary distributions can be paid by Radian Guaranty in 2021. In light of Radian Guaranty’s negative unassigned surplus related to operating losses in prior periods and the ongoing need to set aside contingency reserves, we do not anticipate that Radian Guaranty will be permitted under applicable insurance laws to pay ordinary dividends to Radian Group for the foreseeable future. As of December 31, 2020, Radian Reinsurance had positive unassigned surplus of $319.7 million. As a result, Radian Reinsurance does have the ability to pay an ordinary dividend in 2021. Under Pennsylvania’s insurance laws, Radian Reinsurance can distribute up to $36.1 million in 2021 without prior approval from the Pennsylvania Insurance Department. As of December 31, 2020 and 2019, Radian Guaranty had contingency reserves of $3.4 billion and $2.6 billion, respectively. As discussed above, absent early releases related to elevated incurred losses such as occurred in 2020, Radian Guaranty is scheduled to release contingency reserves to unassigned surplus in material amounts beginning in 2024, which should accelerate the reduction of its negative unassigned surplus. Under Pennsylvania’s insurance laws, an insurer may request approval to pay an Extraordinary Distribution, subject to the approval of the Pennsylvania Insurance Department. Radian Guaranty sought and received such approval to return capital by paying Extraordinary Distributions to Radian Group in 2019 and 2018. As described above, Radian Reinsurance sought and received approval to return capital by paying an Extraordinary Distribution to Radian Group in January 2020. The surplus additions (distributions) between Radian Group and Radian Guaranty and our other insurance subsidiaries for the years ended December 31, 2020, 2019 and 2018 were as follows.
|  | Year Ended December 31,
(In millions) |  | 2020 |  | 2019 |  | 2018
Additions to Radian Guaranty surplus |  | $ | 200.0 |  |  | $ | — |  |  | $ | — |
Distributions from Radian Guaranty surplus |  | — |  |  | (375.0) |  |  | (450.0) |
Additions to other insurance subsidiaries’ surplus |  | — |  |  | 65.2 |  |  | — |
Distributions from other insurance subsidiaries’ surplus |  | (465.0) |  |  | (14.0) |  |  | — |

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