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Company Perspectives:
More to come. We chose a new name for our company rather than recycling one of our old ones, to send a message and make a promise: Radian isn't just a bigger Amerin or a more wholesale CMAC. As Radian, we have more depth and resources, serve more clients and are financially stronger. But to sustain these advantages, we'll have to continually demonstrate that working with Radian will make a difference in your business. If we don't, we'll be just another mortgage insurance company competing with commodity prices, products and services. And that's out of the question.
Radian Group Inc. is one of the leading mortgage insurance (MI) companies in the United States. Helping consumers buy homes for less money down is the company's mission. Its major subsidiary, Radian Guaranty, offers mortgage insurance to more than 3,500 lenders nationwide. Radian was created following the 1998 merger of CMAC Investment Corporation and Amerin Corporation.
From Subsidiary to Public Company: 1992
Radian Group got its start in 1992 when CMAC Investment Corporation, a wholly owned subsidiary of Reliance Group Holdings, was spun off through an initial public offering in 1992. CMAC Investment's principal subsidiary was named Commonwealth Mortgage Assurance Company and provided private mortgage insurance (PMI) to U.S. mortgage lenders. From 1976 to 1992, the company was a subsidiary of Reliance.
The IPO of 9.1 million shares was priced at $24 per share, but the company went public on the New York Stock Exchange at a reduced $18 per share. Most of the proceeds were directed to the Commonwealth Mortgage Assurance Company subsidiary for expansion and growth. At the time of the public offering, CMAC was one of the largest U.S. private mortgage insurers and had over 5 percent of the market.
James C. Miller was named president and CEO of CMAC Investment as well as the principal subsidiary, with Frank P. Filipps serving as senior vice-president and chief financial officer. Headquarters for the company were in Philadelphia, Pennsylvania. The company's income grew quickly in 1992, increasing 70 percent over the previous year, to $21.8 million on revenues of $83.5 million.
"Our 1992 business growth resulted from strong refinancing activity and a significant increase in home purchase," said Miller in a corporate press release. "Despite a high level of cancellations due to refinancing, our primary insurance in force has grown by 9 percent to $17.1 billion at Dec. 31, 1992, and our increased level of new insurance written provides a solid renewal base for future years. We are also pleased with the improving trend in our claims department. In addition, our balance sheet has been strengthened substantially and our risk to reserve ratio has been reduced to a conservative 15.8 to 1."
Years of Growth for CMAC: 1993–99
As a mortgage insurer, CMAC focused in 1993 on how to make home ownership more affordable, and in September it introduced the Monthly Premium Plan to reduce the closing dollars needed by borrowers. The plan was offered in all 50 states and let borrowers take advantage of the low interest rates in the early 1990s even if they lacked a large amount of funds for closing costs.
In 1995, Frank P. Filipps succeeded James Miller as president of the company upon the latter's retirement. One of the first changes Filipps made was to alter the commission structure for the sales team. Before Filipps salespeople had been earning commission for both renewals and new sales. After he became CEO, only new business paid commission. The response among the sales team was quick and predictable, with a rise in sales (as well as the departure of some of the staff). The new aggressiveness of the company came at a good time for the industry.
The MI industry grew in the 1990s as more homeowners chose to purchase their homes with less money used as down payments. In 1992, when CMAC went public, 11 percent of new mortgages were covered by private mortgage insurance, but just three years later in 1995, private mortgage insurers guaranteed 17 percent of new mortgages. CMAC, in particular, gained market share during that same period. At the time of its IPO, CMAC had over 5 percent of the market. By 1995, that number had risen to nearly 10 percent.
In 1996, as part of its ongoing mission to provide mortgage insurance to a greater population, CMAC partnered with the Navajo Nation and Fannie Mae to provide mortgage lending to Navajos living on Native American trust lands in the United States. This program was offered to 250,000 Navajos nationwide. Later that same year, the company announced a partnership with National Credit Counseling Services to provide pre-purchase counseling for new homeowners.
Income for 1996 rose 22 percent to $62.2 million, on revenues of $183.6 million. President and CEO Frank Filipps said, "1996 was a tremendous year for CMAC's growth, both in terms of insurance-in-force and earnings, as well as in the range of products and services we offer. We intend to expand such efforts to provide innovative business solutions to our industry partners."
In 1997, the company continued its expansion with the announcement that it would insure loans to those with less than an "A" credit rating in some instances. Also, in August 1997, CMAC partnered with the Kentucky Housing Corporation and Fannie Mae on an affordable housing program in Kentucky that would insure loans with as little as 3 percent down. Earnings also continued to climb in 1997, with income rising 20 percent to $75 million on revenues of $277 million.
CMAC purchased Amerin Corporation of Chicago in November 1998 in a $606 million stock deal. Though announced as a "merger," the combined companies moved to the CMAC headquarters in Philadelphia and Frank Filipps remained as CEO of the company. The newly formed company would serve 3,500 customers and ranked as the second largest mortgage insurer in the country. "The merger is about creativity, breaking the mold, and a commitment to delivering the best of the best," said President and CEO Frank Filipps.
1999 to 2000s: New Company, New Name
When CMAC Investment Corporation announced the purchase of Amerin Corporation in 1998, a new company was formed, which in April 1999 took the name Radian Group Inc., with the principal mortgage insurance subsidiary named Radian Guaranty Inc. The company would trade on the New York Stock Exchange under the symbol RDN. Not only was Radian a bigger company than CMAC had been, but the combination of CMAC and Amerin created more efficiency for the company and was expected to save $15 million in 1999 alone.
In 2000, Radian announced that it would begin insuring 100 percent mortgages so that more families could become homeowners even with no downpayment. "This is good news for homebuyers who need zero-down payment options, and for Radian's clients—large and smaller lenders across America," said CEO Frank Filipps. Also in 2000, the company expanded its Internet offerings to provide even more e-commerce options to its customers and lenders. In addition, Radian offered a discount for policies purchased online. The rationale for the discount was that by ordering online, lenders would be saving Radian processing costs.
Radian Group launched a new subsidiary in September 2000. The new business, Radian Reinsurance, planned to offer credit enhancement for home equity loans, second mortgages, and manufactured housing. While Radian Guaranty protected conventional loans, the new subsidiary was designed to protect the unconventional. The new business would also offer protection to subprime borrowers, where Radian Guaranty was applicable for A minus and above borrowers.
Radian announced that it would purchase ExpressClose .com, a Dayton, Ohio Internet company. "ExpressClose.com is an extremely good fit for Radian and our clients in both first and second mortgage markets," said CEO Frank Filipps in a company press release. "Our customers increasingly look to us for end-to-end solutions that lower their origination costs, speed decision-making and get borrowers into homes faster." Soon after the ExpressClose.com deal was finalized, the company announced it would acquire Enhance Financial Services Group Inc. for $558 million in stock.
Early in 2001, the company targeted the European market through a partnership with AGS Financial LLC, a New York mortgage advisory and investment banking firm. The company formed a new subsidiary, Asset Guaranty Insurance Company, to enter the European market. Asset Guaranty, though headquartered in New York, opened a London office in May 2001 and was approved for business in the United Kingdom. Thriving despite competition from rivals MGIC and PMI, Radian Group was clearly focused on remaining a leader in the MI industry as expansions and growth continued in the early 2000s.
Principal Subsidiaries: Expressclose.com; Enhance Financial Services Group Inc.; Amerin Re Corp; Radian Guaranty Inc.; Radian Reinsurance Co.; Asset Guaranty Insurance Company.
Principal Competitors: GE Capital; MGIC Investment; PMI Group; Triad Guaranty, Inc.
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