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 (NO FEE REQUIRED), FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) 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
RADIAN GROUP INC.
SAVINGS INCENTIVE PLAN
INDEX
Page
----
Independent Auditors' Report............................................................................ 1
Financial Statements:
Statements of Net Assets Available for Benefits as of December 31, 2001 and 2000..................... 2
Statements of Changes in Net Assets Available for Benefits for the Years Ended December 31
2001 and 2000........................................................................................ 3
Notes to Financial Statements ..................................................................... 4-8
Supplemental Schedule Furnished Pursuant to Requirements of the Employee
Retirement Income Security Act of 1974:
Schedule H, Item 4i: Schedule of Assets Held for Investment Purposes as of
December 31, 2001.................................................................................. 9
Signature.............................................................................................. 10
Exhibit Index ......................................................................................... 11
Exhibit:
Independent Auditors' Consent....................................................................... 12
INDEPENDENT AUDITORS' REPORT
To the Savings Incentive Plan Committee and
Participants of the Radian Group Inc.
Savings Incentive Plan
Philadelphia, Pennsylvania:
We have audited the accompanying statements of net assets available for benefits
of the Radian Group Inc. Savings Incentive Plan (the "Plan") as of December 31,
2001 and 2000, 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes 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,
2001 and 2000, 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 schedule of assets held
for investment purposes as of December 31, 2001 is presented for the purpose of
additional analysis and is not a required part of the basic financial
statements, but is 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. The supplemental schedule is the
responsibility of the Plan's management. Such supplemental schedule has been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects when considered in relation to the basic financial statements taken as
whole.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
June 19, 2002
1
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2001 AND 2000
--------------------------------------------------------------------------------
2001 2000
---- ----
ASSETS
Cash ............................... $ - $ 13,594
Investments (at fair value):
Common Stock Fund - Radian Group Inc. 9,614,314 9,016,346
Other investments (Note G) ...... 16,255,341 13,883,963
Loans receivable ................ 465,172 442,280
Employer contribution receivable ... 1,126,556 1,180,895
----------- -----------
27,461,383 24,537,078
LIABILITIES
Other liabilities - net ........... 29,325 17,946
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS .... $27,432,058 $24,519,132
=========== ===========
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, 2001 AND 2000
--------------------------------------------------------------------------------
2001 2000
---- ----
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income:
Loan interest ........................................... $ 33,760 $ 28,423
Interest and dividends .................................. 156,030 1,254,758
----------- ------------
Total investment income .............................. 189,790 1,283,181
----------- ------------
Contributions:
Participants' ........................................... 2,844,721 2,162,218
Employer's .............................................. 1,126,556 1,180,895
Rollover ................................................ 1,676,556 279,525
----------- ------------
Total contributions .................................. 5,647,833 3,622,638
----------- ------------
Other additions ............................................ 12,021 54,537
----------- ------------
Total additions ......................................... 5,849,644 4,960,356
----------- ------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Net depreciation (appreciation) in fair value of investments 815,945 (1,200,237)
Benefits paid to participants .............................. 2,120,773 3,542,082
----------- ------------
Total deductions ........................................ 2,936,718 2,341,845
----------- ------------
NET ADDITIONS ................................................ 2,912,926 2,618,511
NET ASSETS AVAILABLE FOR BENEFITS, BEGINNING
OF THE YEAR ................................................ 24,519,132 21,900,621
----------- ------------
NET ASSETS AVAILABLE FOR BENEFITS, END OF YEAR ............... $27,432,058 $ 24,519,132
=========== ============
See notes to financial statements.
3
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS
A. ACCOUNTING PRINCIPLES
The financial statements of the Radian Group Inc. Savings Incentive Plan (the
"Plan") are presented on the accrual basis of accounting. Investments are
carried at fair value which is based on quoted market prices. Dividends and
interest are recorded when earned. Participant and employer contributions are
recorded in the period to which they are applicable. Brokerage commissions, and
other expenses incurred in connection with the purchase or sale of securities,
and all other costs and expenses of the Plan are charged directly to the Plan.
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 reported amounts of
income and expense during the reporting period. Actual results may differ from
those estimates and assumptions.
B. PLAN DESCRIPTION
The following is a brief overview of the Plan. Participants should refer to the
Plan documents for a complete description of the Plan.
The Plan became effective on November 6, 1992, concurrent with the initial
public offering of CMAC Investment Corporation's ("CMT") common stock. Prior to
that date, employees of Commonwealth Mortgage Assurance Company ("CMAC")
participated in a similar plan offered by CMAC's former parent. On April 1,
1993, account balances of CMAC employees from the prior plan were transferred to
a separate trust which became part of the Plan.
On November 22, 1998, the Board of Directors of CMT and the Board of Directors
of Amerin Corporation ("Amerin") each approved an Agreement and Plan of Merger
pursuant to which CMT and Amerin merged with CMT surviving. The merger was
effective June 9, 1999 after approval by the stockholders of both companies, at
which time CMT was renamed Radian Group Inc. ("Radian"). At the same time, CMT's
main operating subsidiary, CMAC, was renamed Radian Guaranty Inc. ("Radian
Guaranty"). From the date of merger until their termination on September 30,
1999, the remaining Amerin Guaranty Corporation ("Amerin Guaranty") employees
continued to contribute to the Amerin 401(k) plan. Any Amerin Guaranty employees
that transferred to Radian Guaranty effective with the merger began to
contribute to the Plan on June 9, 1999. Subsequent to June 29, 2001, $1.1
million in balances from Amerin Guaranty employees that remained in the Amerin
401(k) plan were converted to the Plan unless a distribution could be made to
the employee.
The Plan is a defined contribution plan designed to allow eligible employees of
Radian and Radian Guaranty to save for their retirement. Full-time employees,
upon completion of 90 days employment, and part-time employees, employed for at
least 90 consecutive days, are eligible to join the Plan. Effective January 1,
1994, all participant contributions from 1% to 15% are made on a salary
reduction basis.
Additional limitations may be imposed under the Plan on the amount of salary
reduction contributions and after-tax savings 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 Benefits Administration Committee (the
"Committee") (not to exceed the indexed limitations contained in the Code),
which were $10,500 for 2001 and 2000. Participant after-tax contributions have
not been permitted after January 1, 1994.
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, and Radian indemnifies such members to the extent determined by
its Board of Directors.
4
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Although Radian expects to continue the Plan, the right to amend or terminate
the Plan is reserved. In the event of Plan termination, all benefits become
fully vested and nonforfeitable and the net assets of the Plan would be
allocated as required by the Employee Retirement Income Security Act of 1974
("ERISA"), as amended.
D. MATCHING CONTRIBUTIONS
Radian will make an annual "matching contribution" to a separate "Incentive
Account" with respect to the salary reduction contributions of each participant,
subject to a limit of five 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 five 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.
Matching contributions generally must be made no later than the last date on
which amounts so paid may be deducted for Federal income tax purposes. In order
to be entitled to the matching contribution for a Plan year, a participant must
be employed by Radian on the last working day of the Plan year, be on an
authorized leave of absence (provided the participant has not withdrawn his
current year contribution) or be entitled to receive a distribution of his
account following his retirement, death or disability in the relevant Plan year.
Matching contributions, which may be made with Radian common stock, will be
invested in the Common Stock Fund (see Note F) or some other investment or a
combination thereof as determined by the Board of Directors of Radian or a
committee thereof. Prior to the making of matching contributions for each year,
the Board of Directors or committee thereof will make a one-time determination
regarding the investment of the Employer matching contributions for such year.
All matching contributions for the years ended December 31, 2001 and 2000 were
invested in the Common Stock Fund.
After the close of any year, Radian may, in its sole discretion, make a
supplemental matching contribution. For every eligible dollar the participants
contributed to the Plan during the years ended December 31, 2001 and 2000,
Radian made supplemental matching contributions of $0.75 per participant in
Radian common stock. For the year ended December 31, 2001, the Company utilized
$389,864 of forfeiture assets held in the MFS Money Market Fund at December 31,
2001 to fund a portion of the 2001 Company matching contribution. No forfeiture
assets were used for the Company's matching contribution at December 31, 2000.
E. 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 nonforfeitable. 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:
Vested Percentage
of the Participant's
Years of Service 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%
5
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS - CONTINUED
F. INVESTMENT OPTIONS
All assets in the Plan other than those in the Common Stock Fund are invested in
various funds offered by Massachusetts Financial Services ("MFS"). A description
of the investment options available under the Plan is as follows:
(a) MFS Money Market Fund -- A conservative fund that provides
liquidity and a short-term variable interest rate.
(b) MFS Emerging Growth Fund -- This fund seeks long-term growth of
capital primarily through common stocks of small and medium-sized
companies (at least 80% under normal circumstances) early in their
lifecycle.
(c) MFS Bond Fund -- The fund's primary investment objective is to
provide as high a level of current income as is believed to be consistent
with prudent investment risk. The fund's secondary objective is to protect
shareholders' capital.
(d) MFS Total Return Fund-A -- The fund seeks above average income
(compared to a portfolio entirely invested in equity securities)
consistent with the prudent employment of capital. The fund also seeks
long-term growth of capital and income. The portfolio consists of diverse
securities and varies the percentage of assets invested in any one type.
(e) Massachusetts Investors Trust -- This fund invests in stocks
that offer both current income and the potential for long-term growth of
capital and future income. The portfolio holds primarily quality stocks
representing many well-known companies across a wide range of industries.
(f) Massachusetts Investors Growth Stock Fund -- This fund seeks
long-term growth of capital and future income, rather than current income,
by investing in common stocks or convertible securities of large companies
exhibiting above-average prospects for long-term growth.
(g) MFS Research Fund -- This fund seeks long-term growth of capital
and future income by investing in common stock and convertible securities
of large companies that are fairly representative of the overall stock
market in both size and price.
(h) MFS Capital Opportunities Fund -- This fund seeks primarily
capital appreciation by investing in common stocks of large companies that
are fairly representative of the overall stock market in both size and
price.
(i) MFS Global Equity Fund -- This fund seeks long-term growth of
capital by investing in equities issued by both foreign and domestic
companies. The portfolio is comprised of approximately one third U.S.
assets, one third European assets and 10% Japanese assets, with the
remainder divided among developed nations and emerging markets.
(j) MFS New Discovery Fund -- This fund seeks long-term growth of
capital primarily through common stocks of companies with small market
capitalizations in emergent industries or early in their growth stages.
(k) Common Stock Fund -- The assets of the Common Stock Fund,
including earnings thereon, are invested in Radian common stock purchased
by or contributed by Radian. Radian common stock is purchased at
prevailing market prices in the open market, or in privately negotiated
transactions. In the normal course of business, such stock is sold only to
meet administrative and distribution requirements of the Plan. The value
of this fund fluctuates based on the market price of Radian common stock.
The selection of investment options, which may be done in increments of 1% in
any one of the above mentioned funds, pursuant to the Plan, with the exception
of Employer matching contributions, is the sole responsibility of each
participant. Neither the trustee nor the Employer shall have 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.
6
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS - CONTINUED
G. OTHER INVESTMENTS
Other investments consist of the following:
December 31, 2001 December 31, 2000
----------------------------- -----------------------------
Fair Fair
Cost Value Cost Value
----------- ----------- ----------- -----------
MFS Money Market Fund ............. $ 2,941,823 $ 2,941,823 $ 1,187,142 $ 1,187,142
MFS Emerging Growth Fund .......... 2,230,617 3,266,333 2,495,372 4,130,356
MFS Bond Fund ..................... 1,116,709 1,477,599 531,766 896,783
MFS Total Return Fund-A ........... 2,867,891 2,886,132 2,444,492 2,665,411
Massachusetts Investors Trust ..... 2,100,145 2,530,881 2,322,113 3,199,298
Massachusetts Investors Growth
Stock Fund ................... 930,413 734,317 744,181 602,406
MFS Research Fund ................. 301,816 237,456 173,537 140,476
MFS Capital Opportunities Fund .... 1,377,481 1,183,796 580,348 464,535
MFS Global Equity Fund ............ 366,967 327,768 219,060 194,016
MFS New Discovery Fund ............ 770,553 669,236 510,922 403,540
----------- ----------- ----------- -----------
Total Other Investments ............. $15,004,415 $16,255,341 $11,208,933 $13,883,963
=========== =========== =========== ===========
H. WITHDRAWALS
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 salary reduction contributions
and savings contributions to the Plan (and all other deferred compensation plans
maintained by Radian and its affiliates) for one year and an additional
limitation is imposed on the amount of salary reduction contributions that can
be made by the participant for the calendar year following the year of the
hardship withdrawal.
7
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS - CONTINUED
I. 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 repaid via payroll deductions including interest at the prime rate
plus 1% over a maximum five-year period, except loans which are used toward the
purchase of a primary residence which can be repaid over a longer time period.
J. FEDERAL TAX CONSIDERATIONS
The IRS determined and informed Radian by a letter dated January 22, 1996, that
the Plan and related trust were designed in accordance with applicable sections
of the Internal Revenue Code. As required under that determination letter,
Radian adopted the amended and restated Plan on April 16, 1996, with an
effective date of January 1, 1994. The Plan has been amended since receiving the
determination letter. A request for an updated determination letter, which
considers all amendments through 2002 was filed with the IRS on February 25,
2002. The Committee and the Plan's tax counsel believe that the Plan continues
to comply in form and operation with the applicable requirements of the Internal
Revenue Code. Therefore, no provision for income taxes has been made in these
financial statements.
K. SCHEDULE OF INVESTMENTS GREATER THAN FIVE PERCENT OF NET ASSETS (AT FAIR
VALUE)
The following presents investments that represent five percent or more of the
Plan's net assets.
2001 2000
---- ----
MFS Money Market Fund................ $2,941,823 $ -
MFS Emerging Growth Fund............. 3,266,333 4,130,356
MFS Bond Fund........................ 1,477,599 -
MFS Total Return Fund - A............ 2,886,132 2,665,411
Massachusetts Investors Trust........ 2,530,881 3,199,298
Common Stock Fund.................... 9,614,314 9,016,346
8
RADIAN GROUP INC. SAVINGS INCENTIVE PLAN
SCHEDULE H, ITEM 4I: SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 2001
--------------------------------------------------------------------------------
Identity Number of Current
of Issuer Description of Investment Shares Cost Value
--------- ------------------------- ------ ---- -----
MFS Money Market Fund 2,941,823 2,941,823 2,941,823
MFS Emerging Growth Fund 98,324 2,230,617 3,266,333
MFS Bond Fund 119,257 1,116,709 1,477,599
MFS Total Return Fund - A 199,318 2,867,891 2,886,132
MFS Massachusetts Investors Trust 152,647 2,100,145 2,530,881
MFS Massachusetts Investors Growth Stock Fund 56,968 930,413 734,317
MFS Research Fund 12,631 301,816 237,456
MFS Capital Opportunities Fund 88,146 1,377,481 1,183,796
MFS Global Equity Fund 17,407 366,967 327,768
MFS New Discovery Fund 38,932 770,553 669,236
Radian* Common Stock Fund 535,181** 5,622,179 9,614,314
Loans receivable @ 5.75% to 10.50% 465,172 465,172
----------- -----------
TOTAL $21,091,766 $26,334,827
=========== ===========
----------
*Indicates party-in-interest to the Plan.
** Amount represents units based on third party independent report.
9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Savings Incentive Plan Committee has duly caused this annual report to be signed
by the undersigned, thereunto duly authorized.
RADIAN GROUP INC.
SAVINGS INCENTIVE PLAN
Date: June 28, 2002
By: /s/ C. Robert Quint
--------------------------------
C. Robert Quint
Executive Vice President
and Chief Financial Officer
/s/ John J. Calamari
----------------------------
John J. Calamari
Vice President and
Corporate Controller
10
Exhibit Index
Exhibit No. Description
23 Independent Auditors' Consent
11