UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One):
| x | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2005
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-11356
| A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
| B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
RADIAN GROUP INC.
1601 Market Street
Philadelphia, PA 19103
SAVINGS INCENTIVE PLAN
INDEX
| Page | ||
| 1 | ||
| Financial Statements: |
||
| Statements of Net Assets Available for Benefits as of December 31, 2005 and 2004 |
2 | |
| 3 | ||
| 4-12 | ||
| Supplemental Schedules * |
||
| 13 | ||
| 14 | ||
| 15 | ||
| 16 | ||
| Exhibit: |
||
| Consent of Independent Registered Public Accounting Firm |
||
| * | All other schedules required by Section 2520-103-10 of the Department of Labor Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable. |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees and Participants
in the Radian Group Inc.
Savings Incentive Plan
Philadelphia, Pennsylvania:
We have audited the accompanying statements of net assets available for benefits of Radian Group Inc. Savings Incentive Plan (the “Plan”) as of December 31, 2005 and 2004, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2005 and 2004, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules (1) assets held at end of year as of December 31, 2005, and (2) reportable transactions for the year ended December 31, 2005, are presented for the purpose of additional analysis and are not a required part of the basic financial statements, but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These schedules are the responsibility of the Plan’s management. Such schedules have been subjected to the auditing procedures applied in our audit of the basic 2005 financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole.
/s/ Deloitte & Touche LLP
Philadelphia, PA
June 29, 2006
1
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2005 AND 2004
| 2005 | 2004 | |||||
| ASSETS |
||||||
| Investments (at fair value): |
||||||
| Common Stock Fund - Radian Group Inc. |
||||||
| Participant-directed |
$ | 2,284,700 | $ | 2,263,551 | ||
| Nonparticipant-directed (Note Q) |
13,407,261 | 11,792,245 | ||||
| 15,691,961 | 14,055,796 | |||||
| Other participant-directed investments (Note J) |
40,169,945 | 33,199,876 | ||||
| Loans receivable |
701,599 | 668,173 | ||||
| Employer contributions receivable |
2,841,828 | 2,603,166 | ||||
| NET ASSETS AVAILABLE FOR BENEFITS |
$ | 59,405,333 | $ | 50,527,011 | ||
See notes to financial statements.
2
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2005 AND 2004
| 2005 | 2004 | |||||
| ADDITIONS TO NET ASSETS ATTRIBUTED TO: |
||||||
| Investment income: |
||||||
| Net appreciation in fair value of investments |
$ | 2,775,500 | $ | 3,374,938 | ||
| Loan interest |
39,454 | 35,384 | ||||
| Interest |
191,017 | 76,643 | ||||
| Dividends |
1,164,396 | 409,503 | ||||
| Total investment income |
4,170,367 | 3,896,468 | ||||
| Contributions: |
||||||
| Participants’ |
5,515,146 | 5,119,298 | ||||
| Employer’s |
2,841,828 | 2,603,166 | ||||
| Rollover |
726,811 | 443,100 | ||||
| Total contributions |
9,083,785 | 8,165,564 | ||||
| Total additions |
13,254,152 | 12,062,032 | ||||
| DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: |
||||||
| Other deductions |
646 | 15,698 | ||||
| Benefits paid to participants |
4,375,184 | 4,158,991 | ||||
| Total deductions |
4,375,830 | 4,174,689 | ||||
| NET ADDITIONS |
8,878,322 | 7,887,343 | ||||
| NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF THE YEAR |
50,527,011 | 42,639,668 | ||||
| NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR |
$ | 59,405,333 | $ | 50,527,011 | ||
See notes to financial statements.
3
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS
A. Significant Accounting Policies
Basis of Accounting and Use of Estimates
The financial statements of the Plan are prepared under the accrual method of accounting. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the changes therein during the reporting period. Actual results may differ from those estimates and assumptions.
Investment Valuation and Income Recognition
Shares of mutual funds are valued at the quoted market prices. For the Radian Common Stock Fund investment, the valuation of the investment is based on the value of the underlying assets, which represents fair value. The underlying assets include Radian common stock and money market accounts, and are valued at quoted market price. For the common collective trusts, the underlying assets include traditional investment contracts issued by insurance companies and banks, alternative contracts and short-term investments, and are valued by discounting the related cash flows on yields of similar instruments with comparable duration. Participant loans are valued at their outstanding balances, which approximate fair value. Dividends are recorded as of the declaration date and interest is recorded when earned. Purchases and sales of securities are recorded as of the trade date.
Plan Expenses
All expenses for administration of the Plan are paid directly by Radian Group Inc. (“Radian” or the “Company”). Loan origination fees are paid by the participant and are deducted from the loan proceeds. An annual administrative fee for loans is deducted from a participant’s account. Brokerage commissions and other expenses incurred in connection with purchases and sales of securities, which are participant-directed, are included as a reduction of the amount earned on each fund.
B. Plan Description
The following description of the Plan provides only general information. Participants should refer to the Plan documents for a complete description of the Plan.
The Plan is a defined contribution plan designed to allow eligible employees of Radian and its subsidiaries to save for their retirement. Full-time employees, upon completion of 90 consecutive days of service, are eligible to join the Plan. Savings are achieved through a program of salary deferrals in which a participant’s salary is reduced by the amount elected to be saved on a pre-tax basis.
All participants are entitled to contribute between 1% and 25% of their annual salary to the Plan, subject to the dollar limitations discussed below. Prior to January 1, 1994, participants were permitted to contribute after-tax savings (“savings contributions”) under the Plan. After January 1, 1994, all contributions must be made on a salary reduction, pre-tax basis. Additional limitations are imposed under the Plan on the amount of salary reduction contributions that may be elected by highly compensated participants in order to comply with certain non-discrimination requirements of the Internal Revenue Code of 1986 (“the Code”). The annual limit on salary reduction contributions by a participant is determined from time to time by the Plan’s Benefits Administration Committee (the “Committee”) (not to exceed the indexed limitations contained in the Code), and those limits were set at $14,000 for 2005 and $13,000 for 2004.
On August 6, 2002, the Board of Directors of Radian approved an amendment to the Plan to allow for catch-up contributions in accordance with, and subject to the limitations of, Section 414 (vi) of the Code effective October 1, 2002 as well as other changes permitted under the Economic Growth and Tax Relief Reconciliation Act of 2001.
C. Administration of the Plan
The Plan is administered by the Committee, which has fiduciary responsibility for the general operation of the Plan. Members of the Committee are appointed by the Board of Directors of Radian for indefinite terms and may resign or be removed at any time. Members of the Committee serve without compensation for their service. As such, Radian indemnifies such members to the extent determined by its Board of Directors.
Although Radian expects to continue the Plan, Radian reserves the right to amend or terminate the Plan at any time. In the event the Plan is terminated, all benefits would become fully vested and non-forfeitable and the net assets of the Plan would be allocated as required by the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, and by the Plan.
Administrative expenses of the Plan, as noted above, are paid by Radian, the Plan sponsor as provided in the Plan Document.
4
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS - Continued
D. Participant Accounts
Individual accounts are maintained for each Plan participant. Each participant’s account is credited with the participant’s contribution, the Company’s matching contributions, which is made to a separate incentive account, and allocations of Company discretionary contributions and Plan earnings, and charged with withdrawals and an allocation of Plan losses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
All investment funds are considered participant - directed funds and contain only participant - directed amounts. The only nonparticipant - directed amounts in the Plan are the Company matching contributions, which are made in Radian common stock.
E. Matching Contributions
Radian makes an annual “matching contribution” with respect to the salary reduction contributions of each participant, subject to a limit of six percent of the participant’s base salary in any pay period. For every dollar a participant contributes to the Plan (not exceeding a total of six percent of base salary in any pay period) and does not withdraw before the close of the Plan year (calendar year), Radian will make a contribution of at least $0.25.
After the close of any year, Radian may, in its sole discretion, make a supplemental matching contribution. For the years ended December 31, 2005 and 2004, for every eligible dollar a participant contributed to the Plan during the year, Radian made a supplemental matching contribution of $0.75 in Radian common stock.
Matching contributions generally must be made no later than the last date on which such amounts may be deducted for federal income tax purposes. In order to be entitled to the matching contribution for a Plan year, a participant must (i) be employed by Radian on the last working day of the Plan year, (ii) be on an authorized leave of absence (provided the participant has not withdrawn his or her current year contribution) or (iii) be entitled to receive a distribution of the participant’s account following the participant’s retirement, death or disability in the relevant Plan year.
Matching contributions, which may be made in cash or Radian common stock, are invested in the Common Stock Fund. The matching portion of the Common Stock Fund is considered a nonparticipant - directed fund (See Note Q).
F. Forfeited Accounts
A participant forfeits his or her right to matching contributions, and any earnings thereon, that remain unvested at the time of the participant’s termination of service. These amounts will be used to reduce future employer contributions. At December 31, 2005 and 2004, forfeited nonvested accounts totaled $407,333 and $459,604, respectively. During the year ended December 31, 2005 and 2004, employer contributions were reduced by $407,333 and $409,604, respectively, from forfeited nonvested accounts.
5
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS - Continued
G. Trust Agreement
Effective August 2004, the Company and Vanguard Fiduciary Trust Company (“Vanguard”) or (the “trustee”) established a trust (the “Trust”) for investment purposes as part of the Plan. The Trust replaced a predecessor trust established with Massachusetts Financial Services (“MFS”). At the same time, The Vanguard Group (“TVG”) also became the Plan’s record keeper. All assets held in trust by MFS at that time were transferred to Vanguard.
H. Vesting
The rights of a participant to savings contributions made by the participant and salary reduction contributions made by Radian on the participant’s behalf, and any earnings thereon, are at all times fully vested and non-forfeitable. Matching contributions, and any earnings thereon, become vested based on such participant’s years of vesting service. A participant earns one year of vesting service for each Plan year in which such participant completes at least 1,000 hours of service.
Participants become vested under the following schedule:
| Years of Service |
Vested Percentage of the Participant’s Incentive Account |
||
| Less than 2 |
0 | % | |
| 2 but less than 3 |
20 | % | |
| 3 but less than 4 |
40 | % | |
| 4 but less than 5 |
60 | % | |
| 5 but less than 6 |
80 | % | |
| 6 or more |
100 | % |
Effective January 1, 2003, in connection with Radian’s acquisition of Enhance Financial Services Group Inc. (“EFSG”), the EFSG 401(k) Savings Plan was merged into the Plan. Employees of EFSG who were eligible to participate in the EFSG Plan prior to January 1, 2003 retain the vesting schedule under the EFSG Plan as follows:
| Years of Service |
Vested Percentage of the Participant’s Incentive Account |
||
| Less than 1 |
0 | % | |
| 1 but less than 2 |
33 | % | |
| 2 but less than 3 |
68 | % | |
| 3 or more |
100 | % |
Newly eligible employees of EFSG follow the Plan vesting schedule.
I. Investment Options
The selection of investment options, which may be done in increments of 1% pursuant to the Plan, with the exception of employer matching contributions, is the sole responsibility of each participant. Neither the Trustee nor Radian has any responsibility to select investment options or to advise participants in selecting their investment options. Subject to applicable provisions of law, each participant assumes all risks connected with any decrease in the market value of any securities in the funds, and such funds shall be the sole source of payments to be made under the Plan. See Note P below.
6
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS - Continued
J. Other Participant-Directed Investments
Other participant-directed investments consisted of the following:
| December 31, 2005 | ||||||||
| Cost | Fair Value | |||||||
| TVG | Morgan Growth Fund | $ | 6,112,757 | $ | 7,328,094 | |||
| TVG | Wellington Fund | 6,398,547 | 6,604,863 | |||||
| TVG | Retirement Savings Trust | 5,033,218 | 5,033,218 | |||||
| TVG | Total Bond Market Index Fund | 3,034,579 | 3,001,661 | |||||
| TVG | Growth and Income Fund | 2,643,486 | 2,962,770 | |||||
| TVG | Columbia Acorn Fund | 1,905,210 | 2,174,107 | |||||
| TVG | Growth Equity Fund | 1,792,313 | 2,118,203 | |||||
| TVG | International Explorer Fund | 1,776,488 | 1,975,123 | |||||
| TVG | Oppenheimer Global Fund | 1,277,482 | 1,604,498 | |||||
| TVG | Target Retirement 2035 Fund | 1,035,247 | 1,114,412 | |||||
| TVG | Target Retirement 2025 Fund | 881,540 | 914,849 | |||||
| TVG | Windsor II Fund | 762,025 | 771,280 | |||||
| TVG | Mid – Cap Index Fund | 672,834 | 755,356 | |||||
| TVG | Inflation Protected Securities Fund | 687,795 | 672,026 | |||||
| TVG | Target Retirement 2015 Fund | 604,154 | 633,287 | |||||
| TVG | 500 Index Fund | 524,005 | 550,854 | |||||
| TVG | Small – Cap Index Fund | 380,856 | 404,370 | |||||
| TVG | Selected Value Fund | 379,622 | 389,454 | |||||
| TVG | Target Retirement 2045 Fund | 266,083 | 272,807 | |||||
| TVG | Royce Fund | 231,598 | 241,909 | |||||
| TVG | Artisan International Fund | 154,684 | 181,565 | |||||
| TVG | High –Yield Corporate Fund | 143,615 | 141,638 | |||||
| TVG | Strategic Equity Fund | 116,086 | 114,601 | |||||
| TVG | Target Retirement 2005 Fund | 92,990 | 94,484 | |||||
| TVG | Mid – Cap Growth Fund | 81,623 | 86,833 | |||||
| TVG | Target Retirement Income | 27,755 | 27,683 | |||||
| Total | $ | 37,016,592 | $ | 40,169,945 | ||||
7
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS - Continued
| December 31, 2004 | ||||||||
| Cost | Fair Value | |||||||
| TVG | Morgan Growth Fund | $ | 6,131,150 | $ | 6,883,654 | |||
| TVG | Wellington Fund | 5,736,578 | 5,965,378 | |||||
| TVG | Retirement Savings Trust | 5,060,538 | 5,060,538 | |||||
| TVG | Total Bond Market Index Fund | 2,884,403 | 2,911,945 | |||||
| TVG | Growth and Income Fund | 2,589,733 | 2,834,879 | |||||
| TVG | Columbia Acorn Fund | 1,706,757 | 1,900,892 | |||||
| TVG | Growth Equity Fund | 1,674,034 | 1,865,154 | |||||
| TVG | Oppenheimer Global Fund | 1,470,014 | 1,749,093 | |||||
| TVG | International Explorer Fund | 790,497 | 917,872 | |||||
| TVG | Target Retirement 2035 Fund | 529,442 | 571,025 | |||||
| TVG | Target Retirement 2015 Fund | 466,808 | 482,250 | |||||
| TVG | Target Retirement 2025 Fund | 344,349 | 352,482 | |||||
| TVG | Windsor II Fund | 229,280 | 240,601 | |||||
| TVG | Small – Cap Index Fund | 194,677 | 216,813 | |||||
| TVG | Target Retirement 2005 Fund | 195,208 | 199,305 | |||||
| TVG | 500 Index Fund | 185,955 | 197,594 | |||||
| TVG | Mid – Cap Index Fund | 159,085 | 180,158 | |||||
| TVG | Inflation Protected Securities Fund | 171,017 | 170,924 | |||||
| TVG | Royce Fund | 136,044 | 142,090 | |||||
| TVG | Selected Value Fund | 122,976 | 133,060 | |||||
| TVG | Artisan International Fund | 77,547 | 86,076 | |||||
| TVG | High –Yield Corporate Fund | 49,962 | 50,709 | |||||
| TVG | Target Retirement 2045 Fund | 28,469 | 30,183 | |||||
| TVG | Mid – Cap Growth Fund | 27,546 | 29,538 | |||||
| TVG | Strategic Equity Fund | 16,725 | 17,013 | |||||
| TVG | Target Retirement Income | 10,484 | 10,650 | |||||
| Total | $ | 30,989,278 | $ | 33,199,876 | ||||
8
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS - Continued
K. Payment of Benefits and Withdrawals
On termination of service due to death, disability or retirement, a participant or a participant’s beneficiary, as applicable, may elect to receive either a lump-sum amount equal to the value of the participant’s vested interest in his or her account, or annual installments over a ten-year period. For termination of service for other reasons, a participant may receive the value of the vested interest in his or her account only as a lump-sum distribution. Benefit payments to participants are recorded upon distribution. If the amount in a participant’s account is less than $5,000, a lump-sum distribution is made following termination of the participant’s service.
Participants are permitted to make withdrawals in accordance with Plan provisions. The minimum withdrawal permitted is the lesser of $500 or the full value of the participant’s applicable account.
All amounts attributable to savings contributions must be withdrawn prior to any “hardship withdrawal” of amounts attributable to matching contributions or salary reduction contributions.
The Plan’s hardship withdrawal rules comply with the Code. In order to make a hardship withdrawal, a participant must exhaust the possibility of all other withdrawals (other than hardship withdrawals) under the Plan and all such withdrawals and nontaxable loans available under all other retirement plans maintained by Radian and its affiliates. Earnings credited after 1988 on salary reduction contributions are not available for hardship withdrawals, even if the contributions were made before 1989. Upon receiving a hardship distribution, a participant is generally suspended from making contributions to the Plan (and all other deferred compensation plans maintained by Radian and its affiliates) for six months following the year of the hardship withdrawal.
9
L. Net Appreciation in Fair Value
Net appreciation (depreciation) in fair value of investments (including gains and losses on investments bought and sold, as well as held during the year) for the years ended December 31, 2005 and 2004 consisted of:
| 2005 | 2004 | |||||||||
| TVG | Artisan International Fund | $ | 20,689 | $ | 8,529 | |||||
| TVG | Columbia Acorn Fund | 129,604 | 203,302 | |||||||
| TVG | Oppenheimer Global Fund | 147,466 | 290,084 | |||||||
| TVG | Royce Fund | 4,720 | 6,046 | |||||||
| TVG | 500 Index Fund | 18,269 | 11,833 | |||||||
| TVG | Growth Equity Fund | 154,560 | 194,996 | |||||||
| TVG | Growth and Income Fund | 117,314 | 257,674 | |||||||
| TVG | High –Yield Corporate Fund | (3,232 | ) | 748 | ||||||
| TVG | Inflation Protected Securities Fund | (15,631 | ) | (93 | ) | |||||
| TVG | International Explorer Fund | 97,142 | 133,253 | |||||||
| TVG | Mid – Cap Growth Fund | 2,645 | 2,096 | |||||||
| TVG | Mid – Cap Index Fund | 51,628 | 21,074 | |||||||
| TVG | Morgan Growth Fund | 565,823 | 795,613 | |||||||
| TVG | Selected Value Fund | 2,548 | 10,084 | |||||||
| TVG | Small – Cap Index Fund | 11,344 | 22,137 | |||||||
| TVG | Strategic Equity Fund | 331 | 287 | |||||||
| TVG | Target Retirement 2005 Fund | 4,225 | 4,097 | |||||||
| TVG | Target Retirement 2015 Fund | 14,136 | 15,584 | |||||||
| TVG | Target Retirement 2025 Fund | 25,833 | 8,141 | |||||||
| TVG | Target Retirement 2035 Fund | 51,565 | 41,638 | |||||||
| TVG | Target Retirement 2045 Fund | 6,916 | 1,715 | |||||||
| TVG | Target Retirement Income | (225 | ) | 166 | ||||||
| TVG | Total Bond Market Index Fund | (61,750 | ) | 33,497 | ||||||
| TVG | Wellington Fund | 23,158 | 240,609 | |||||||
| TVG | Windsor II Fund | 31 | 11,327 | |||||||
| MFS | Fixed Fund Institutional Series | — | (113 | ) | ||||||
| MFS | Money Market Fund | — | — | |||||||
| MFS | Emerging Growth Fund | — | (116,367 | ) | ||||||
| MFS | Bond Fund | — | (56,283 | ) | ||||||
| MFS | International New Discovery Fund | — | 2,496 | |||||||
| MFS | Total Return Fund – A | — | (10,944 | ) | ||||||
| MFS | Massachusetts Investors Trust | — | (38,085 | ) | ||||||
| MFS | Massachusetts Investors Growth Stock Fund | — | (59,420 | ) | ||||||
| MFS | Research Fund | — | (351 | ) | ||||||
| MFS | Capital Opportunities Fund | — | (30,644 | ) | ||||||
| MFS | Global Equity Fund | — | 29,605 | |||||||
| MFS | New Discovery Fund | — | (170,341 | ) | ||||||
| Common Stock Fund - Radian Group Inc. |
1,406,391 | 1,510,948 | ||||||||
| Net Appreciation in Fair Value |
$ | 2,775,500 | $ | 3,374,938 | ||||||
10
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS - Continued
M. Loans
Participants may borrow from the Plan in an amount up to 50% of their vested balance. The maximum loan amount is $50,000 as set forth by the IRS and Department of Labor regulations. The minimum loan allowed by the Plan is $1,000. Loans are to be repaid via payroll deductions including interest at the prime rate plus 1% over a maximum five-year period, except loans that are used toward the purchase of a primary residence, which can be repaid over a longer time period. A participant may have only one loan outstanding at any one time. Outstanding loans are due and payable upon termination of service.
N. Federal Tax Considerations
The Internal Revenue Service (“IRS”) has determined and informed the Company by a letter dated September 11, 2002 that the Plan and related trust is designed in accordance with applicable sections of the Internal Revenue Code (“IRC”). Radian’s board of directors has since amended the Plan; however, the Plan administrator believes that the Plan is currently designed and operated in compliance with the applicable requirements of the IRC. Accordingly, no provision for income taxes has been included in the financial statements herein.
O. Schedule of Investments Greater than Five Percent of Net Assets (at fair value)
The following presents investments that represented five percent or more of the Plan’s net assets for each respective year.
| Number of Shares/Units |
2005 | |||||
| Vanguard Growth and Income Fund |
92,906 | $ | 2,962,770 | |||
| Vanguard Morgan Growth Fund |
413,783 | 7,328,094 | ||||
| Vanguard Total Bond Market Index Fund |
298,376 | 3,001,661 | ||||
| Vanguard Wellington Fund |
217,623 | 6,604,863 | ||||
| Vanguard Retirement Savings Trust |
5,033,218 | 5,033,218 | ||||
| Common Stock Fund - Radian Group Inc. |
643,641 | * | 15,691,961 | |||
| Number of Shares/Units |
2004 | |||||
| Vanguard Growth and Income Fund |
92,613 | $ | 2,834,879 | |||
| Vanguard Morgan Growth Fund |
421,793 | 6,883,654 | ||||
| Vanguard Total Bond Market Index Fund |
283,539 | 2,911,945 | ||||
| Vanguard Wellington Fund |
197,595 | 5,965,378 | ||||
| Vanguard Retirement Savings Trust |
5,060,538 | 5,060,538 | ||||
| Common Stock Fund - Radian Group Inc. |
634,001 | * | 14,055,796 | |||
| * | The Common Stock Fund is reported as units. |
P. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market volatility and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits.
11
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS - Continued
Q. Nonparticipant - Directed Investments
Information about the net assets and the significant components of the changes in net assets relating to the nonparticipant - directed investments is as follows:
| December 31, | ||||||||
| 2005 | 2004 | |||||||
| Net Assets: |
||||||||
| Common Stock Fund - Radian Group Inc.* |
$ | 13,407,261 | $ | 11,792,245 | ||||
| Total |
$ | 13,407,261 | $ | 11,792,245 | ||||
| Year Ended December 31 | ||||||||
| 2005 | 2004 | |||||||
| Changes in Net Assets: |
||||||||
| Net appreciation |
$ | 1,159,065 | $ | 1,267,625 | ||||
| Interest and dividends |
20,183 | 9,758 | ||||||
| Contributions |
2,603,166 | 2,759,493 | ||||||
| Benefits paid to participants |
(805,778 | ) | (1,206,531 | ) | ||||
| Other deductions |
(495 | ) | (353,680 | ) | ||||
| Loan activity |
3,809 | (46,123 | ) | |||||
| Transfers to participant - directed investments |
(1,364,934 | ) | (1,581,848 | ) | ||||
| $ | 1,615,016 | $ | 848,694 | |||||
| * | Indicates party-in-interest to the Plan. |
R. Exempt Party-in-Interest Transactions
Certain Plan investments are shares of mutual funds managed by TVG. Vanguard is the trustee as defined by the Plan and, therefore, these transactions qualify as exempt party-in-interest transactions. At December 31, 2005 and 2004, the Plan held 643,641 and 634,001 units, respectively, of common stock of Radian Group Inc., the sponsoring employer, with a cost basis of $11,407,598 and $10,561,962, respectively. During the year ended December 31, 2005, the Plan recorded dividend income on Radian Group Inc. common stock of $23,899. Radian Group Inc., as the Plan sponsor qualifies as an exempt party-in-interest.
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RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
Form 5500, Schedule H, Part IV Item 4i: Schedule of Assets (Held at End of Year)
December 31, 2005
| Identity of Issuer |
Description Of Investment |
Number of Shares/Units |
Cost | Current Value | |||||||
| TVG* | Morgan Growth Fund*** | 413,783 | $ | 6,112,757 | $ | 7,328,094 | |||||
| TVG* | Wellington Fund*** | 217,623 | 6,398,547 | 6,604,863 | |||||||
| TVG* | Retirement Savings Trust | 5,033,218 | 5,033,218 | 5,033,218 | |||||||
| TVG* | Total Bond Market Index Fund*** | 298,376 | 3,034,579 | 3,001,661 | |||||||
| TVG* | Growth and Income Fund*** | 92,906 | 2,643,486 | 2,962,770 | |||||||
| TVG | Columbia Acorn Fund*** | 77,178 | 1,905,210 | 2,174,107 | |||||||
| TVG* | Growth Equity Fund*** | 203,282 | 1,792,313 | 2,118,203 | |||||||
| TVG* | International Explorer Fund*** | 110,219 | 1,776,488 | 1,975,123 | |||||||
| TVG | Oppenheimer Global Fund*** | 24,055 | 1,277,482 | 1,604,498 | |||||||
| TVG* | Target Retirement 2035 Fund*** | 90,898 | 1,035,247 | 1,114,412 | |||||||
| TVG* | Target Retirement 2025 Fund*** | 77,727 | 881,540 | 914,849 | |||||||
| TVG* | Windsor II Fund*** | 24,618 | 762,025 | 771,280 | |||||||
| TVG* | Mid – Cap Index Fund*** | 42,845 | 672,834 | 755,356 | |||||||
| TVG* | Inflation Protected Securities Fund*** | 55,265 | 687,795 | 672,026 | |||||||
| TVG* | Target Retirement 2015 Fund*** | 55,261 | 604,154 | 633,287 | |||||||
| TVG* | 500 Index Fund*** | 4,793 | 524,005 | 550,854 | |||||||
| TVG* | Small – Cap Index Inv*** | 14,178 | 380,856 | 404,370 | |||||||
| TVG* | Selected Value Fund*** | 20,650 | 379,622 | 389,454 | |||||||
| TVG* | Target Retirement 2045 Fund*** | 21,703 | 266,083 | 272,807 | |||||||
| TVG | Royce Fund*** | 15,577 | 231,598 | 241,909 | |||||||
| TVG | Artisan International Fund*** | 7,174 | 154,684 | 181,565 | |||||||
| TVG* | High – Yield Corporate Fund*** | 22,956 | 143,615 | 141,638 | |||||||
| TVG* | Strategic Equity Fund*** | 5,226 | 116,086 | 114,601 | |||||||
| TVG* | Target Retirement 2005 Fund*** | 8,644 | 92,990 | 94,484 | |||||||
| TVG* | Mid – Cap Growth Fund*** | 4,959 | 81,623 | 86,833 | |||||||
| TVG* | Target Retirement Income*** | 2,652 | 27,755 | 27,683 | |||||||
| Radian* | Common Stock Fund | 643,641 | ** | 11,407,598 | 15,691,961 | ||||||
| Loans receivable @4.25% to 10.5% Maturing between 2006 and 2024 | 701,599 | 701,599 | |||||||||
| TOTAL |
$ | 49,125,789 | $ | 56,563,505 | |||||||
| * | Indicates party-in-interest to the Plan. |
| ** | Amount represents units based on third party independent report. |
| *** | All registered investment company investments. |
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RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
Form 5500, Schedule H, Part IV Item 4j: Schedule of Reportable Transactions
December 31, 2005
Investments Purchased
| Identity Of Party |
Description of Security |
Number of Shares/Units |
Purchase Price |
Fair Value of Asset on Transaction Date | ||||
| Single Transaction | ||||||||
| Radian* | Common Stock Fund | 137,211 | 3,012,770 | 3,012,770 |
| * | Indicates party-in-interest to the Plan. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Benefits Administration Committee has duly caused this annual report to be signed on its behalf by the undersigned here unto duly authorized.
| RADIAN GROUP INC. | ||
| SAVINGS INCENTIVE PLAN | ||
| By: | Benefits Administration Committee | |
Date: June 29, 2006
| By: | /s/ C. Robert Quint | |
| C. Robert Quint | ||
| Executive Vice President and Chief Financial Officer |
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| Exhibit No. | Description | |
| 23 | Consent of Independent Registered Public Accounting Firm |
16