RDN Radian Group Inc

— Primary mortgage insurance in force increases 4% year-over-year to $269.5 billion —

— Net income of $157 million, or $0.98 per diluted share —

— Return on equity of 15.0% —

— Book value per share grew 12% year-over-year to $26.69 —

— Company purchased 1.9 million shares or $50 million of Radian Group common stock during the three months ended September 30th —

— In October 2023, Radian Guaranty improved its capital position and enhanced its risk distribution program with the closing of the $353 million ILN and the $246 million excess-of-loss reinsurance agreements —

Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended September 30, 2023, of $157 million, or $0.98 per diluted share. This compares with net income for the quarter ended September 30, 2022, of $198 million, or $1.20 per diluted share.

Key Financial Highlights

 

Quarter ended

($ in millions, except per-share amounts)

 

September 30, 2023

 

June 30, 2023

 

September 30, 2022

Total revenues (1)

 

$314

 

$290

 

$296

Net income

 

$157

 

$146

 

$198

Diluted net income per share

 

$0.98

 

$0.91

 

$1.20

Consolidated pretax income

 

$201

 

$183

 

$255

Adjusted pretax operating income (2)

 

$210

 

$184

 

$273

Adjusted diluted net operating income per share (2) (3)

 

$1.04

 

$0.91

 

$1.31

Return on equity (4)

 

15.0%

 

14.1%

 

20.7%

Adjusted net operating return on equity (2) (3)

 

16.0%

 

14.1%

 

22.5%

Primary mortgage insurance in force

 

$269,511

 

$266,859

 

$259,121

New Insurance Written (NIW) - mortgage insurance

 

$13,922

 

$16,946

 

$17,616

Net premiums earned - mortgage insurance (1)

 

$237

 

$211

 

$235

New defaults

 

11,156

 

9,775

 

9,601

Provision for losses - mortgage insurance

 

($8)

 

($22)

 

($97)

Book value per share

 

$26.69

 

$26.51

 

$23.80

Accumulated other comprehensive income (loss) value per share (5)

 

($3.35)

 

($2.69)

 

($3.20)

PMIERs Available Assets (6)

 

$5,758

 

$5,689

 

$5,358

PMIERs excess Available Assets (7)

 

$1,670

 

$1,662

 

$1,628

Total Holding Company Liquidity (8)

 

$1,279

 

$1,285

 

$848

Total investments

 

$5,886

 

$5,896

 

$5,592

Percentage of primary loans in default (9)

 

2.0%

 

2.0%

 

2.1%

Mortgage insurance loss reserves

 

$362

 

$374

 

$478

(1)

 

Total revenue and net premiums earned during the second quarter of 2023 reflect an increase in ceded premiums incurred, primarily due to costs associated with the successful completion of tender offers by Eagle Re 2019-1 Ltd. and Eagle Re 2020-1 Ltd. for the mortgage insurance-linked notes that supported their reinsurance agreement with Radian Guaranty.

(2)

 

Adjusted results, including adjusted pretax operating income, adjusted diluted net operating income per share and adjusted net operating return on equity, are non-GAAP financial measures. For definitions and reconciliations of these measures to the comparable GAAP measures, see Exhibits F and G.

(3)

 

Calculated using the company’s statutory tax rate of 21%.

(4)

 

Calculated by dividing annualized net income by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.

(5)

 

Included in book value per share for each period presented.

(6)

 

Represents Radian Guaranty’s Available Assets, calculated in accordance with the Private Mortgage Insurer Eligibility Requirements (PMIERs) financial requirements in effect for each date shown.

(7)

 

Represents Radian Guaranty’s excess or “cushion” of Available Assets over its Minimum Required Assets, calculated in accordance with the PMIERs financial requirements in effect for each date shown.

(8)

 

Represents Radian Group’s total liquidity, including available capacity under its $275 million unsecured revolving credit facility.

(9)

 

Represents the number of primary loans in default as a percentage of the total number of insured primary loans.

Net income for the quarter ended September 30, 2023, was $157 million, or $0.98 per diluted share. This compares with net income for the quarter ended September 30, 2022, of $198 million, or $1.20 per diluted share.

Adjusted pretax operating income for the quarter ended September 30, 2023, was $210 million, or $1.04 per diluted share. This compares with adjusted pretax operating income for the quarter ended September 30, 2022, of $273 million, or $1.31 per diluted share.

Book value per share at September 30, 2023, was $26.69, compared to $26.51 at June 30, 2023, and $23.80 at September 30, 2022. This represents a 12% growth in book value per share at September 30, 2023, as compared to September 30, 2022, and includes accumulated other comprehensive income (loss) of $(3.35) per share as of September 30, 2023, and $(3.20) per share as of September 30, 2022. Beginning in the first quarter of 2022, the change in accumulated other comprehensive income (loss) is primarily from net unrealized losses on investments as a result of an increase in market interest rates.

“We reported another quarter of excellent financial results for Radian, increasing book value per share by 12% year-over-year, generating net income of $157 million, and delivering return on equity of 15%. Our primary mortgage insurance in force, which is the main driver of future earnings for our company, grew 4% year-over-year to $270 billion, and, in October, we improved our capital position as well as enhanced our risk distribution program with the closing of two new reinsurance agreements,” said Radian’s Chief Executive Officer Rick Thornberry. “We continue to strategically manage capital and opportunistically repurchase shares, including $50 million of common stock purchased in the quarter. Our overall performance reflects the strength of our business model and our growing insured portfolio, as well as the depth of our customer relationships and dedication of our team.”

THIRD QUARTER HIGHLIGHTS

• NIW was $13.9 billion in the third quarter of 2023, compared to $16.9 billion in the second quarter of 2023, and $17.6 billion in the third quarter of 2022.
  • Purchase NIW decreased 18% in the third quarter of 2023 compared to the second quarter of 2023 and decreased 21% compared to the third quarter of 2022.
  • Refinances accounted for 1% of total NIW in the third quarter of 2023, compared to 1% in the second quarter of 2023, and 2% in the third quarter of 2022.
• Total primary mortgage insurance in force as of September 30, 2023, increased to $269.5 billion, an increase of 1% as compared to $266.9 billion as of June 30, 2023, and an increase of 4% compared to $259.1 billion as of September 30, 2022.
  • The year-over-year change reflects a 7% increase in monthly premium policy insurance in force and a 12% decline in single premium policy insurance in force.
  • Persistency, which is the percentage of mortgage insurance that remains in force after a twelve-month period, was 84% for the twelve months ended September 30, 2023, compared to 83% for the twelve months ended June 30, 2023, and 76% for the twelve months ended September 30, 2022.
  • Annualized persistency for the three months ended September 30, 2023, was 84%, compared to 84% for the three months ended June 30, 2023, and 82% for the three months ended September 30, 2022.
• Net mortgage insurance premiums earned were $237 million for the third quarter of 2023, compared to $211 million for the second quarter of 2023, and $235 million for the third quarter of 2022.
  • The second quarter of 2023 reflected an increase in ceded premiums earned, primarily as a result of the successful completion of tender offers by Eagle Re 2019-1 Ltd. and Eagle Re 2020-1 Ltd. during the second quarter of 2023 to purchase the mortgage insurance-linked notes that supported their reinsurance agreements with Radian Guaranty.
  • Mortgage insurance in force portfolio premium yield was 38.0 basis points in the third quarter of 2023. This compares to 38.2 basis points in the second quarter of 2023, and 39.2 basis points in the third quarter of 2022.
  • The impact of single premium policy cancellations before consideration of reinsurance represented 0.5 basis points of direct premium yield in the third quarter of 2023, 0.6 basis points in the second quarter of 2023, and 1.0 basis points in the third quarter of 2022.
  • Total net mortgage insurance premium yield, which includes the impact of ceded premiums earned and accrued profit commission, was 35.3 basis points in the third quarter of 2023. This compares to 31.9 basis points in the second quarter of 2023, and 36.7 basis points in the third quarter of 2022. The second quarter of 2023 reflected an increase of 3.2 basis points in ceded premiums earned, as a result of the tender offers by Eagle Re 2019-1 Ltd. and Eagle Re 2020-1 Ltd.
  • Details regarding premiums earned may be found in Exhibit D.
• The mortgage insurance provision for losses was a benefit of $8 million in the third quarter of 2023, compared to benefits of $22 million and $97 million in the second quarter of 2023 and third quarter of 2022, respectively.
  • Favorable reserve development on prior period defaults was $55 million in the third quarter of 2023, compared to $63 million in the second quarter of 2023 and $136 million in the third quarter of 2022.
  • The number of primary delinquent loans was 20,406 as of September 30, 2023, compared to 19,880 as of June 30, 2023, and 21,077 as of September 30, 2022.
  • The loss ratio in the third quarter of 2023 was (3.5)%, compared to (10.3)% in the second quarter of 2023, and (41.5)% in the third quarter of 2022.
  • Total mortgage insurance claims paid were $5 million in the third quarter of 2023, compared to $3 million in the second quarter of 2023, and $5 million in the third quarter of 2022.
• Radian’s homegenius segment offers an array of title, real estate and real estate technology products and services to consumers, mortgage lenders, mortgage and real estate investors, GSEs, real estate brokers and agents.
  • Total homegenius segment revenues for the third quarter of 2023 were $15 million, compared to $15 million for the second quarter of 2023, and $25 million for the third quarter of 2022.
  • Adjusted pretax operating loss, our primary segment measure of profitability for the homegenius segment, was $21 million for the third quarter of 2023, compared to $24 million for the second quarter of 2023, and $26 million for the third quarter of 2022.
• Other operating expenses were $79 million in the third quarter of 2023, compared to $90 million in the second quarter of 2023, and $91 million in the third quarter of 2022.
  • Other operating expenses decreased in the third quarter of 2023 as compared to expenses in the second quarter of 2023, primarily due to the timing of our annual share-based incentive grants and severance and related expenses recognized in the second quarter of 2023, as well as a decrease in other general operating expenses in the third quarter of 2023.
  • Additional details regarding other operating expenses may be found in Exhibit D.

CAPITAL AND LIQUIDITY UPDATE

Radian Group

• As of September 30, 2023, Radian Group maintained $1.0 billion of available liquidity. Total holding company liquidity, including the company’s $275 million unsecured revolving credit facility, was $1.3 billion as of September 30, 2023.
• Radian Group paid a dividend on its common stock in the amount of $0.225 per share, totaling $35 million on September 6, 2023.
• During the third quarter of 2023, the company repurchased 1.9 million shares of Radian Group common stock at a total cost of $50 million, including commissions. As of September 30, 2023, purchase authority of up to $230 million remained available under the existing program.

Radian Guaranty

• In the third quarter of 2023, Radian Guaranty paid an ordinary dividend to Radian Group of $100 million, bringing the total ordinary dividends paid from Radian Guaranty to Radian Group during the year to $300 million. Based on current performance expectations, Radian Guaranty expects to pay another dividend of between $50 million to $100 million in the fourth quarter, bringing the expected full year 2023 total of ordinary dividends paid from Radian Guaranty to Radian Group to between $350 million to $400 million.
• At September 30, 2023, Radian Guaranty’s Available Assets under PMIERs totaled approximately $5.8 billion, resulting in PMIERs excess Available Assets of $1.7 billion.

RECENT EVENTS

• As previously announced, in October 2023, Radian Guaranty entered into a new fully collateralized mortgage insurance-linked-note (ILN) reinsurance transaction, in which the company obtained $353 million of credit-risk protection from Eagle Re 2023-1 Ltd. (Eagle Re) on $8.8 billion of eligible policies that were issued between April 1, 2022, and December 31, 2022, through the issuance by Eagle Re of $353 million of ILNs to capital markets investors in an unregistered private offering. Eagle Re is a special purpose insurer domiciled in Bermuda and is not a subsidiary or affiliate of Radian Guaranty.
• Also in October 2023, Radian Guaranty entered into an excess-of-loss reinsurance agreement with a panel of third-party reinsurance providers. This reinsurance agreement provides for up to $246 million of aggregate excess-of-loss reinsurance coverage for the mortgage insurance losses on new defaults on an existing portfolio of eligible policies with RIF of $8.0 billion that were issued between October 1, 2021, and March 31, 2022. Radian Guaranty retains a portion of the aggregate losses up to a specified amount, as well as any losses in excess of the reinsurance coverage amount.
• Assuming these reinsurance arrangements were in place as of September 30, 2023, Radian Guaranty’s PMIERs excess Available Assets would have increased to approximately $2.2 billion.

CONFERENCE CALL

Radian will discuss third quarter 2023 financial results in a conference call tomorrow, Thursday, November 2, 2023, at 12:00 p.m. Eastern time. The conference call will be webcast live on the company’s website at https://radian.com/who-we-are/for-investors/webcasts or at www.radian.com. The webcast is listen-only. Those interested in participating in the question-and-answer session should follow the conference call dial-in instructions below.

The call may be accessed via telephone by registering for the call here to receive the dial-in numbers and unique PIN. It is recommended that you join 10 minutes prior to the event start (although you may register and dial in at any time during the call).

A digital replay of the webcast will be available on Radian’s website approximately two hours after the live broadcast ends for a period of one year at https://radian.com/who-we-are/for-investors/webcasts.

In addition to the information provided in the company’s earnings news release, other statistical and financial information, which is expected to be referred to during the conference call, will be available on Radian’s website at www.radian.com, under Investors.

NON-GAAP FINANCIAL MEASURES

Radian believes that adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity (non-GAAP measures) facilitate evaluation of the company’s fundamental financial performance and provide relevant and meaningful information to investors about the ongoing operating results of the company. On a consolidated basis, these measures are not recognized in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be considered in isolation or viewed as substitutes for GAAP measures of performance. The measures described below have been established in order to increase transparency for the purpose of evaluating the company’s operating trends and enabling more meaningful comparisons with Radian’s competitors.

Adjusted pretax operating income (loss) is defined as GAAP consolidated pretax income (loss) excluding the effects of: (i) net gains (losses) on investments and other financial instruments, except for certain investments and other financial instruments attributable to our reportable segments and All Other activities; (ii) amortization and impairment of goodwill and other acquired intangible assets; and (iii) impairment of other long-lived assets and other non-operating items, if any, such as gains (losses) from the sale of lines of business, acquisition-related income and expenses and gains (losses) on extinguishment of debt. Adjusted diluted net operating income (loss) per share is calculated by dividing adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the company’s statutory tax rate, by the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Adjusted net operating return on equity is calculated by dividing annualized adjusted pretax operating income (loss), net of taxes computed using the company’s statutory tax rate, by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.

See Exhibit F or Radian’s website for a description of these items, as well as Exhibit G for reconciliations to the most comparable consolidated GAAP measures.

ABOUT RADIAN

Radian Group Inc. (NYSE: RDN) is ensuring the American dream of homeownership responsibly and sustainably through products and services that include industry-leading mortgage insurance and a comprehensive suite of mortgage, risk, title, valuation, asset management and other real estate services. We are powered by technology, informed by data and driven to deliver new and better ways to transact and manage risk. Visit www.radian.com and homegenius.com to learn more about how Radian and its pioneering homegenius platform are building a smarter future for mortgage and real estate services.

FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS (Unaudited)

Exhibit A:

Condensed Consolidated Statements of Operations

Exhibit B:

Net Income Per Share

Exhibit C:

Condensed Consolidated Balance Sheets

Exhibit D:

Net Premiums Earned and Other Operating Expenses

Exhibit E:

Segment Information

Exhibit F:

Definition of Consolidated Non-GAAP Financial Measures

Exhibit G:

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit H:

Mortgage Supplemental Information - New Insurance Written

Exhibit I:

Mortgage Supplemental Information - Primary Insurance in Force and Risk in Force

Radian Group Inc. and Subsidiaries Condensed Consolidated Statements of Operations Exhibit A

   

 

 

2023

 

2022

(In thousands, except per-share amounts)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Revenues

 

 

 

 

 

 

 

 

 

 

Net premiums earned

 

$

240,262

 

 

$

213,429

 

 

$

233,238

 

 

$

232,827

 

 

$

240,222

 

Services revenue

 

 

10,892

 

 

 

11,797

 

 

 

10,984

 

 

 

15,441

 

 

 

20,146

 

Net investment income

 

 

68,825

 

 

 

64,182

 

 

 

59,221

 

 

 

59,091

 

 

 

51,414

 

Net gains (losses) on investments and other financial instruments

 

 

(8,555

)

 

 

(236

)

 

 

5,585

 

 

 

6,845

 

 

 

(16,252

)

Other income

 

 

2,109

 

 

 

1,241

 

 

 

1,592

 

 

 

520

 

 

 

659

 

Total revenues

 

 

313,533

 

 

 

290,413

 

 

 

310,620

 

 

 

314,724

 

 

 

296,189

 

Expenses

 

 

 

 

 

 

 

 

 

 

Provision for losses

 

 

(8,135

)

 

 

(21,632

)

 

 

(16,929

)

 

 

(43,599

)

 

 

(96,964

)

Policy acquisition costs

 

 

6,920

 

 

 

5,218

 

 

 

6,293

 

 

 

5,931

 

 

 

5,442

 

Cost of services

 

 

8,886

 

 

 

10,257

 

 

 

10,398

 

 

 

16,128

 

 

 

18,717

 

Other operating expenses

 

 

79,206

 

 

 

89,885

 

 

 

83,269

 

 

 

109,785

 

 

 

91,327

 

Interest expense

 

 

24,302

 

 

 

22,639

 

 

 

22,207

 

 

 

21,594

 

 

 

21,183

 

Amortization of other acquired intangible assets

 

 

1,371

 

 

 

1,370

 

 

 

1,371

 

 

 

1,587

 

 

 

1,023

 

Total expenses

 

 

112,550

 

 

 

107,737

 

 

 

106,609

 

 

 

111,426

 

 

 

40,728

 

Pretax income

 

 

200,983

 

 

 

182,676

 

 

 

204,011

 

 

 

203,298

 

 

 

255,461

 

Income tax provision

 

 

44,401

 

 

 

36,589

 

 

 

46,254

 

 

 

40,968

 

 

 

57,181

 

Net income

 

$

156,582

 

 

$

146,087

 

 

$

157,757

 

 

$

162,330

 

 

$

198,280

 

Diluted net income per share

 

$

0.98

 

 

$

0.91

 

 

$

0.98

 

 

$

1.01

 

 

$

1.20

 

 

 

Radian Group Inc. and Subsidiaries Net Income Per Share Exhibit B

 

The calculation of basic and diluted net income per share is as follows.

 

 

2023

 

2022

(In thousands, except per-share amounts)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Net income—basic and diluted

 

$

156,582

 

$

146,087

 

$

157,757

 

$

162,330

 

$

198,280

Average common shares outstanding—basic

 

 

158,461

 

 

159,010

 

 

158,304

 

 

158,357

 

 

162,506

Dilutive effect of share-based compensation arrangements (1)

 

 

1,686

 

 

1,734

 

 

3,045

 

 

2,450

 

 

2,232

Adjusted average common shares outstanding—diluted

 

 

160,147

 

 

160,744

 

 

161,349

 

 

160,807

 

 

164,738

Basic net income per share

 

$

0.99

 

$

0.92

 

$

1.00

 

$

1.03

 

$

1.22

Diluted net income per share

 

$

0.98

 

$

0.91

 

$

0.98

 

$

1.01

 

$

1.20

(1)

The following number of shares of our common stock equivalents issued under our share-based compensation arrangements are not included in the calculation of diluted net income per share because their effect would be anti-dilutive.

 

 

 

2023

 

2022

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Shares of common stock equivalents

 

—

 

112

 

25

 

—

 

—

 

Radian Group Inc. and Subsidiaries Condensed Consolidated Balance Sheets Exhibit C

   

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

(In thousands, except per-share amounts)

 

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2022

 

Assets

 

 

 

 

 

 

 

 

 

 

Investments

 

$

5,885,652

 

 

$

5,895,871

 

 

$

5,837,892

 

 

$

5,693,491

 

 

$

5,591,881

 

Cash

 

 

55,489

 

 

 

61,142

 

 

 

50,167

 

 

 

56,183

 

 

 

54,701

 

Restricted cash

 

 

1,305

 

 

 

1,317

 

 

 

577

 

 

 

377

 

 

 

1,107

 

Accrued investment income

 

 

45,623

 

 

 

42,650

 

 

 

42,567

 

 

 

40,093

 

 

 

38,596

 

Accounts and notes receivable

 

 

144,614

 

 

 

138,432

 

 

 

129,565

 

 

 

119,834

 

 

 

174,041

 

Reinsurance recoverable

 

 

24,148

 

 

 

22,979

 

 

 

24,396

 

 

 

25,633

 

 

 

30,569

 

Deferred policy acquisition costs

 

 

18,817

 

 

 

19,272

 

 

 

18,236

 

 

 

18,460

 

 

 

17,920

 

Property and equipment, net

 

 

74,558

 

 

 

73,885

 

 

 

72,111

 

 

 

70,981

 

 

 

75,740

 

Goodwill and other acquired intangible assets, net

 

 

11,173

 

 

 

12,543

 

 

 

13,914

 

 

 

15,285

 

 

 

16,873

 

Prepaid federal income taxes

 

 

696,820

 

 

 

663,320

 

 

 

596,368

 

 

 

596,368

 

 

 

526,123

 

Other assets

 

 

420,483

 

 

 

375,132

 

 

 

418,609

 

 

 

427,024

 

 

 

458,292

 

Total assets

 

$

7,378,682

 

 

$

7,306,543

 

 

$

7,204,402

 

 

$

7,063,729

 

 

$

6,985,843

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

Unearned premiums

 

$

236,400

 

 

$

246,666

 

 

$

257,735

 

 

$

271,479

 

 

$

285,290

 

Reserve for losses and loss adjustment expense

 

 

367,568

 

 

 

379,434

 

 

 

405,651

 

 

 

426,843

 

 

 

483,664

 

Senior notes

 

 

1,416,687

 

 

 

1,415,610

 

 

 

1,414,549

 

 

 

1,413,504

 

 

 

1,412,473

 

Secured borrowings

 

 

241,753

 

 

 

178,762

 

 

 

121,642

 

 

 

155,822

 

 

 

153,550

 

Reinsurance funds withheld

 

 

156,114

 

 

 

154,354

 

 

 

153,099

 

 

 

152,067

 

 

 

218,777

 

Net deferred tax liability

 

 

497,560

 

 

 

479,754

 

 

 

455,517

 

 

 

391,083

 

 

 

335,374

 

Other liabilities

 

 

309,701

 

 

 

281,127

 

 

 

289,731

 

 

 

333,604

 

 

 

358,665

 

Total liabilities

 

 

3,225,783

 

 

 

3,135,707

 

 

 

3,097,924

 

 

 

3,144,402

 

 

 

3,247,793

 

Common stock

 

 

175

 

 

 

177

 

 

 

176

 

 

 

176

 

 

 

176

 

Treasury stock

 

 

(945,504

)

 

 

(945,032

)

 

 

(931,313

)

 

 

(930,643

)

 

 

(930,396

)

Additional paid-in capital

 

 

1,482,712

 

 

 

1,522,895

 

 

 

1,515,852

 

 

 

1,519,641

 

 

 

1,513,615

 

Retained earnings

 

 

4,136,598

 

 

 

4,016,482

 

 

 

3,908,396

 

 

 

3,786,952

 

 

 

3,656,870

 

Accumulated other comprehensive income (loss)

 

 

(521,082

)

 

 

(423,686

)

 

 

(386,633

)

 

 

(456,799

)

 

 

(502,215

)

Total stockholders’ equity

 

 

4,152,899

 

 

 

4,170,836

 

 

 

4,106,478

 

 

 

3,919,327

 

 

 

3,738,050

 

Total liabilities and stockholders’ equity

 

$

7,378,682

 

 

$

7,306,543

 

 

$

7,204,402

 

 

$

7,063,729

 

 

$

6,985,843

 

Shares outstanding

 

 

155,582

 

 

 

157,350

 

 

 

156,547

 

 

 

157,056

 

 

 

157,058

 

Book value per share

 

$

26.69

 

 

$

26.51

 

 

$

26.23

 

 

$

24.95

 

 

$

23.80

 

 

Holding company debt-to-capital ratio (1)

 

25.4

%

 

25.3

%

 

25.6

%

 

26.5

%

 

27.4

%

(1)

Calculated as carrying value of senior notes, which were issued and are owed by our holding company, divided by carrying value of senior notes and stockholders’ equity. This holding company ratio does not include the effects of amounts owed by our subsidiaries related to secured borrowings.

 

Radian Group Inc. and Subsidiaries Net Premiums Earned and Other Operating Expenses Exhibit D

 

Net Premiums Earned

 

 

 

2023

 

2022

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Premiums earned

 

 

 

 

 

 

 

 

 

 

Direct - Mortgage

 

 

 

 

 

 

 

 

 

 

Premiums earned, excluding revenue from cancellations

 

$

254,903

 

 

$

252,537

 

 

$

251,166

 

 

$

247,880

 

 

$

250,140

 

Single Premium Policy cancellations

 

 

3,304

 

 

 

3,980

 

 

 

5,361

 

 

 

5,756

 

 

 

6,705

 

Total direct - Mortgage

 

 

258,207

 

 

 

256,517

 

 

 

256,527

 

 

 

253,636

 

 

 

256,845

 

Assumed - Mortgage (1)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(56

)

 

 

1,211

 

Ceded - Mortgage

 

 

 

 

 

 

 

 

 

 

Premiums earned, excluding revenue from cancellations (2)

 

 

(32,363

)

 

 

(57,916

)

 

 

(35,526

)

 

 

(35,773

)

 

 

(38,879

)

Single Premium Policy cancellations (3)

 

 

(873

)

 

 

(1,114

)

 

 

(1,472

)

 

 

(1,676

)

 

 

(1,844

)

Profit commission - other (4)

 

 

11,830

 

 

 

13,245

 

 

 

11,921

 

 

 

13,802

 

 

 

17,864

 

Total ceded premiums - Mortgage

 

 

(21,406

)

 

 

(45,785

)

 

 

(25,077

)

 

 

(23,647

)

 

 

(22,859

)

Net premiums earned - Mortgage

 

 

236,801

 

 

 

210,732

 

 

 

231,450

 

 

 

229,933

 

 

 

235,197

 

Net premiums earned - homegenius

 

 

3,461

 

 

 

2,697

 

 

 

1,788

 

 

 

2,894

 

 

 

5,025

 

Net premiums earned

 

$

240,262

 

 

$

213,429

 

 

$

233,238

 

 

$

232,827

 

 

$

240,222

 

(1)

Represents premiums from our participation in certain credit risk transfer programs. We discontinued our participation in these programs in December 2022 by novating these insurance policies to an unrelated third-party reinsurer.

(2)

The second quarter of 2023 includes the result of the tender offers by Eagle Re 2019-1 Ltd. and Eagle Re 2020-1 Ltd. to purchase the mortgage insurance-linked notes that supported their reinsurance agreements with Radian Guaranty. As a result, Radian Guaranty incurred additional ceded premiums earned during the second quarter of 2023 of $21 million, consisting of $16 million related to the cost of tender premiums and associated expenses and $5 million related to the acceleration of deferred costs from the original executions of these transactions.

(3)

Includes the impact of related profit commissions.

(4)

The amounts represent the profit commission under our QSR Program, excluding the impact of Single Premium Policy cancellations.

 

Other Operating Expenses

 

 

Total

 

 

2023

 

2022

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Other operating expenses by type

 

 

 

 

 

 

 

 

 

 

Salaries and other base employee expenses

 

$

33,272

 

 

$

39,032

 

 

$

35,064

 

 

$

47,995

 

 

$

38,656

 

Variable and share-based incentive compensation

 

 

19,546

 

 

 

18,908

 

 

 

18,273

 

 

 

15,321

 

 

 

15,366

 

Other general operating expenses

 

 

29,812

 

 

 

35,655

 

 

 

33,863

 

 

 

50,488

 

 

 

39,728

 

Ceding commissions

 

 

(5,153

)

 

 

(4,824

)

 

 

(4,628

)

 

 

(5,098

)

 

 

(4,273

)

Title agent commissions

 

 

1,729

 

 

 

1,114

 

 

 

697

 

 

 

1,079

 

 

 

1,850

 

Total

 

$

79,206

 

 

$

89,885

 

 

$

83,269

 

 

$

109,785

 

(1)

$

91,327

 

(1)

Includes $12 million of severance and related expenses, primarily in salaries and other base employee expenses and $15 million of impairment of long-lived assets, primarily in other general operating expenses.

 

Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 1 of 4)

Summarized financial information concerning our operating segments as of and for the periods indicated is as follows. For a definition of adjusted pretax operating income (loss), along with a reconciliation to its consolidated GAAP measure, see Exhibits F and G.

 

 

Three Months Ended September 30, 2023

(In thousands)

 

Mortgage

 

homegenius

 

All Other (1)

 

Inter segment (2)

 

Total

Net premiums written (3)

 

$

235,169

 

 

$

3,461

 

 

$

—

 

$

—

 

 

$

238,630

 

(Increase) decrease in unearned premiums

 

 

1,632

 

 

 

—

 

 

 

—

 

 

—

 

 

 

1,632

 

Net premiums earned

 

 

236,801

 

 

 

3,461

 

 

 

—

 

 

—

 

 

 

240,262

 

Services revenue

 

 

266

 

 

 

10,723

 

 

 

—

 

 

(97

)

 

 

10,892

 

Net investment income

 

 

50,345

 

 

 

523

 

 

 

17,957

 

 

—

 

 

 

68,825

 

Net gains (losses) on investments and other financial instruments

 

 

—

 

 

 

—

 

 

 

283

 

 

—

 

 

 

283

 

Other income

 

 

1,237

 

 

 

—

 

 

 

9

 

 

(5

)

 

 

1,241

 

Total

 

 

288,649

 

 

 

14,707

 

 

 

18,249

 

 

(102

)

 

 

321,503

 

Provision for losses

 

 

(8,257

)

 

 

122

 

 

 

—

 

 

—

 

 

 

(8,135

)

Policy acquisition costs

 

 

6,920

 

 

 

—

 

 

 

—

 

 

—

 

 

 

6,920

 

Cost of services

 

 

172

 

 

 

8,714

 

 

 

—

 

 

—

 

 

 

8,886

 

Other operating expenses before allocated corporate operating expenses (4)

 

 

16,776

 

 

 

22,562

 

 

 

3,500

 

 

(102

)

 

 

42,736

 

Interest expense

 

 

22,693

 

 

 

—

 

 

 

1,609

 

 

—

 

 

 

24,302

 

Total

 

 

38,304

 

 

 

31,398

 

 

 

5,109

 

 

(102

)

 

 

74,709

 

Adjusted pretax operating income (loss) before allocated corporate operating expenses

 

 

250,345

 

 

 

(16,691

)

 

 

13,140

 

 

—

 

 

 

246,794

 

Allocation of corporate operating expenses

 

 

31,744

 

 

 

4,241

 

 

 

354

 

 

—

 

 

 

36,339

 

Adjusted pretax operating income (loss)

 

$

218,601

 

 

$

(20,932

)

 

$

12,786

 

$

—

 

 

$

210,455

 

 

Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 2 of 4)

   

 

 

Three Months Ended September 30, 2022

(In thousands)

 

Mortgage

 

homegenius

 

All Other (1)

 

Inter- segment (2)

 

Total

Net premiums written (3)

 

$

235,076

 

 

$

5,025

 

 

$

—

 

$

—

 

 

$

240,101

 

(Increase) decrease in unearned premiums

 

 

121

 

 

 

—

 

 

 

—

 

 

—

 

 

 

121

 

Net premiums earned

 

 

235,197

 

 

 

5,025

 

 

 

—

 

 

—

 

 

 

240,222

 

Services revenue

 

 

405

 

 

 

19,812

 

 

 

—

 

 

(71

)

 

 

20,146

 

Net investment income

 

 

44,842

 

 

 

246

 

 

 

6,326

 

 

—

 

 

 

51,414

 

Other income

 

 

589

 

 

 

—

 

 

 

70

 

 

—

 

 

 

659

 

Total

 

 

281,033

 

 

 

25,083

 

 

 

6,396

 

 

(71

)

 

 

312,441

 

Provision for losses

 

 

(97,493

)

 

 

435

 

 

 

—

 

 

94

 

 

 

(96,964

)

Policy acquisition costs

 

 

5,442

 

 

 

—

 

 

 

—

 

 

—

 

 

 

5,442

 

Cost of services

 

 

373

 

 

 

18,344

 

 

 

—

 

 

—

 

 

 

18,717

 

Other operating expenses before allocated corporate operating expenses (4)

 

 

23,396

 

 

 

26,285

 

 

 

3,444

 

 

(165

)

 

 

52,960

 

Interest expense

 

 

21,183

 

 

 

—

 

 

 

—

 

 

—

 

 

 

21,183

 

Total

 

 

(47,099

)

 

 

45,064

 

 

 

3,444

 

 

(71

)

 

 

1,338

 

Adjusted pretax operating income (loss) before allocated corporate operating expenses

 

 

328,132

 

 

 

(19,981

)

 

 

2,952

 

 

—

 

 

 

311,103

 

Allocation of corporate operating expenses

 

 

32,457

 

 

 

5,555

 

 

 

371

 

 

—

 

 

 

38,383

 

Adjusted pretax operating income (loss)

 

$

295,675

 

 

$

(25,536

)

 

$

2,581

 

$

—

 

 

$

272,720

 

(1)

All Other activities include: (i) income (losses) from assets held by our holding company; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; and (iii) certain investments in new business opportunities, including activities and investments associated with Radian Mortgage Capital, and other immaterial activities.

(2)

Includes immaterial inter-segment revenue for our homegenius segment and immaterial inter-segment expenses for our Mortgage segment and All Other activities.

(3)

Net of ceded premiums written under our quota share and excess-of-loss reinsurance agreements.

(4)

Does not include impairment of long-lived assets and other non-operating items, which are not considered components of adjusted pretax operating income (loss).

 

Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 3 of 4)

   

 

 

Mortgage

 

 

2023

 

2022

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Net premiums written (1)

 

$

235,169

 

 

$

214,540

 

 

$

229,419

 

 

$

227,791

 

 

$

235,076

 

(Increase) decrease in unearned premiums

 

 

1,632

 

 

 

(3,808

)

 

 

2,031

 

 

 

2,142

 

 

 

121

 

Net premiums earned

 

 

236,801

 

 

 

210,732

 

 

 

231,450

 

 

 

229,933

 

 

 

235,197

 

Services revenue

 

 

266

 

 

 

284

 

 

 

336

 

 

 

328

 

 

 

405

 

Net investment income

 

 

50,345

 

 

 

48,555

 

 

 

46,497

 

 

 

52,165

 

 

 

44,842

 

Other income

 

 

1,237

 

 

 

1,246

 

 

 

1,587

 

 

 

512

 

 

 

589

 

Total

 

 

288,649

 

 

 

260,817

 

 

 

279,870

 

 

 

282,938

 

 

 

281,033

 

Provision for losses (2)

 

 

(8,257

)

 

 

(21,623

)

 

 

(16,864

)

 

 

(43,509

)

 

 

(97,493

)

Policy acquisition costs

 

 

6,920

 

 

 

5,218

 

 

 

6,293

 

 

 

5,931

 

 

 

5,442

 

Cost of services

 

 

172

 

 

 

143

 

 

 

241

 

 

 

235

 

 

 

373

 

Other operating expenses before allocated corporate operating expenses (2) (3)

 

 

16,776

 

 

 

20,009

 

 

 

18,806

 

 

 

20,131

 

 

 

23,396

 

Interest expense

 

 

22,693

 

 

 

22,239

 

 

 

22,130

 

 

 

21,580

 

 

 

21,183

 

Total (2)

 

 

38,304

 

 

 

25,986

 

 

 

30,606

 

 

 

4,368

 

 

 

(47,099

)

Adjusted pretax operating income before allocated corporate operating expenses

 

 

250,345

 

 

 

234,831

 

 

 

249,264

 

 

 

278,570

 

 

 

328,132

 

Allocation of corporate operating expenses

 

 

31,744

 

 

 

37,081

 

 

 

34,829

 

 

 

36,663

 

 

 

32,457

 

Adjusted pretax operating income

 

$

218,601

 

 

$

197,750

 

 

$

214,435

 

 

$

241,907

 

 

$

295,675

 

   

 

 

homegenius

 

 

2023

 

2022

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Net premiums earned

 

$

3,461

 

 

$

2,697

 

 

$

1,788

 

 

$

2,894

 

 

$

5,025

 

Services revenue (2)

 

 

10,723

 

 

 

11,617

 

 

 

10,743

 

 

 

15,207

 

 

 

19,812

 

Net investment income

 

 

523

 

 

 

492

 

 

 

430

 

 

 

366

 

 

 

246

 

Other income (2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

170

 

 

 

—

 

Total (2)

 

 

14,707

 

 

 

14,806

 

 

 

12,961

 

 

 

18,637

 

 

 

25,083

 

Provision for losses

 

 

122

 

 

 

(9

)

 

 

(65

)

 

 

(90

)

 

 

435

 

Cost of services

 

 

8,714

 

 

 

10,114

 

 

 

10,157

 

 

 

15,893

 

 

 

18,344

 

Other operating expenses before allocated corporate operating expenses (3)

 

 

22,562

 

 

 

24,168

 

 

 

21,252

 

 

 

27,998

 

 

 

26,285

 

Total

 

 

31,398

 

 

 

34,273

 

 

 

31,344

 

 

 

43,801

 

 

 

45,064

 

Adjusted pretax operating income (loss) before allocated corporate operating expenses

 

 

(16,691

)

 

 

(19,467

)

 

 

(18,383

)

 

 

(25,164

)

 

 

(19,981

)

Allocation of corporate operating expenses

 

 

4,241

 

 

 

4,954

 

 

 

4,658

 

 

 

6,302

 

 

 

5,555

 

Adjusted pretax operating income (loss)

 

$

(20,932

)

 

$

(24,421

)

 

$

(23,041

)

 

$

(31,466

)

 

$

(25,536

)

 

Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 4 of 4)

   

 

 

All Other (4)

 

 

2023

 

2022

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Net investment income

 

$

17,957

 

$

15,135

 

 

$

12,294

 

$

6,560

 

$

6,326

Net gains (losses) on investments and other financial instruments

 

 

283

 

 

95

 

 

 

80

 

 

47

 

 

—

Other income

 

 

9

 

 

(1

)

 

 

5

 

 

8

 

 

70

Total

 

 

18,249

 

 

15,229

 

 

 

12,379

 

 

6,615

 

 

6,396

Other operating expenses before allocated corporate operating expenses (2) (3)

 

 

3,500

 

 

3,370

 

 

 

518

(5)

 

3,606

 

 

3,444

Interest expense

 

 

1,609

 

 

400

 

 

 

77

 

 

14

 

 

—

Total (2)

 

 

5,109

 

 

3,770

 

 

 

595

 

 

3,620

 

 

3,444

Adjusted pretax operating income before allocated corporate operating expenses

 

 

13,140

 

 

11,459

 

 

 

11,784

 

 

2,995

 

 

2,952

Allocation of corporate operating expenses

 

 

354

 

 

413

 

 

 

3,315

(5)

 

420

 

 

371

Adjusted pretax operating income (loss)

 

$

12,786

 

$

11,046

 

 

$

8,469

 

$

2,575

 

$

2,581

(1)

Net of ceded premiums written under our quota share and excess-of-loss reinsurance agreements.

(2)

Includes immaterial inter-segment revenue for our homegenius segment and immaterial inter-segment expenses for our Mortgage segment and All Other activities.

(3)

Does not include impairment of long-lived assets and other non-operating items, which are not considered components of adjusted pretax operating income (loss).

(4)

All Other activities include: (i) income (losses) from assets held by our holding company; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; and (iii) certain investments in new business opportunities, including activities and investments associated with Radian Mortgage Capital, and other immaterial activities.

(5)

In the first quarter of 2023, as a one-time adjustment, we reclassified $2.9 million in cumulative expenses previously reflected in the All Other results as direct other operating expenses to allocated corporate operating expenses.

 

Selected Mortgage Key Ratios

 

 

 

2023

 

2022

 

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Loss ratio (1)

 

(3.5

)%

 

(10.3

)%

 

(7.3

)%

 

(18.9

)%

 

(41.5

)%

Expense ratio (2)

 

23.4

%

 

29.6

%

 

25.9

%

 

27.3

%

 

26.1

%

(1)

For our Mortgage segment, calculated as provision for losses expressed as a percentage of net premiums earned.

(2)

For our Mortgage segment, calculated as operating expenses, (which consist of policy acquisition costs and other operating expenses, as well as allocated corporate operating expenses), expressed as a percentage of net premiums earned.

 

Radian Group Inc. and Subsidiaries Definition of Consolidated Non-GAAP Financial Measures Exhibit F (page 1 of 2) Use of Non-GAAP Financial Measures

In addition to the traditional GAAP financial measures, we have presented “adjusted pretax operating income (loss),” “adjusted diluted net operating income (loss) per share” and “adjusted net operating return on equity,” which are non-GAAP financial measures for the consolidated company, among our key performance indicators to evaluate our fundamental financial performance. These non-GAAP financial measures align with the way our business performance is evaluated by both management and by our board of directors. These measures have been established in order to increase transparency for the purposes of evaluating our operating trends and enabling more meaningful comparisons with our peers. Although on a consolidated basis adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity are non-GAAP financial measures, we believe these measures aid in understanding the underlying performance of our operations. Our senior management, including our Chief Executive Officer (Radian’s chief operating decision maker), uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of our business segments and to allocate resources to the segments.

Adjusted pretax operating income (loss) is defined as GAAP consolidated pretax income (loss) excluding the effects of: (i) net gains (losses) on investments and other financial instruments, except for certain investments and other financial instruments attributable to our reportable segments and All Other activities; (ii) amortization and impairment of goodwill and other acquired intangible assets; and (iii) impairment of other long-lived assets and other non-operating items, if any, such as gains (losses) from the sale of lines of business, acquisition-related income and expenses and gains (losses) on extinguishment of debt. Adjusted diluted net operating income (loss) per share is calculated by dividing adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the company’s statutory tax rate, by the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Adjusted net operating return on equity is calculated by dividing annualized adjusted pretax operating income (loss), net of taxes computed using the company’s statutory tax rate, by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.

Although adjusted pretax operating income (loss) excludes certain items that have occurred in the past and are expected to occur in the future, the excluded items represent those that are: (i) not viewed as part of the operating performance of our primary activities or (ii) not expected to result in an economic impact equal to the amount reflected in pretax income (loss). These adjustments, along with the reasons for their treatment, are described below.

(1)

Net gains (losses) on investments and other financial instruments. The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities, our tax and capital profile and overall market cycles. Unrealized gains and losses arise primarily from changes in the market value of our investments that are classified as trading or equity securities. These valuation adjustments may not necessarily result in realized economic gains or losses.

 

Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these realized and unrealized gains or losses and changes in fair value of other financial instruments. Except for certain investments and other financial instruments attributable to our reportable segments and All Other activities, we do not view them to be indicative of our fundamental operating activities.

  (2)

Amortization and impairment of goodwill and other acquired intangible assets. Amortization of acquired intangible assets represents the periodic expense required to amortize the cost of acquired intangible assets over their estimated useful lives. Acquired intangible assets are also periodically reviewed for potential impairment, and impairment adjustments are made whenever appropriate. We do not view these charges as part of the operating performance of our primary activities.

  (3)

Impairment of other long-lived assets and other non-operating items, if any. Impairment of other long-lived assets and other non-operating items includes activities that we do not view to be indicative of our fundamental operating activities, such as: (i) impairment of internal-use software and other long-lived assets; (ii) gains (losses) from the sale of lines of business; (iii) acquisition-related income and expenses; and (iv) gains (losses) on extinguishment of debt.

 

Radian Group Inc. and Subsidiaries Definition of Consolidated Non-GAAP Financial Measures Exhibit F (page 2 of 2)

See Exhibit G for the reconciliations of the most comparable GAAP measures, consolidated pretax income (loss), diluted net income (loss) per share and return on equity to our non-GAAP financial measures for the consolidated company, adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity, respectively.

Total adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity should not be considered in isolation or viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share, return on equity or net income (loss). Our definitions of adjusted pretax operating income (loss) and adjusted diluted net operating income (loss) per share may not be comparable to similarly-named measures reported by other companies.

 

Radian Group Inc. and Subsidiaries Consolidated Non-GAAP Financial Measure Reconciliations Exhibit G (page 1 of 2)

 

Reconciliation of Consolidated Pretax Income to Adjusted Pretax Operating Income

 

 

 

2023

 

2022

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Consolidated pretax income

 

$

200,983

 

 

$

182,676

 

 

$

204,011

 

 

$

203,298

 

 

$

255,461

 

Less reconciling income (expense) items

 

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments (1)

 

 

(8,838

)

 

 

(331

)

 

 

5,505

 

 

 

6,798

 

 

 

(16,252

)

Amortization of other acquired intangible assets

 

 

(1,371

)

 

 

(1,370

)

 

 

(1,371

)

 

 

(1,587

)

 

 

(1,023

)

Impairment of other long-lived assets and other non-operating items

 

 

737

 

 

 

2

 

 

 

14

 

 

 

(14,929

) (2)

 

 

16

 

Total adjusted pretax operating income (3)

 

$

210,455

 

 

$

184,375

 

 

$

199,863

 

 

$

213,016

 

 

$

272,720

 

(1)

Excludes certain net gains (losses), if any, on investments and other financial instruments that are attributable to specific operating segments and therefore included in adjusted pretax operating income (loss).

(2)

The amount is included in other operating expenses on the Condensed Consolidated Statement of Operations in Exhibit A and primarily relates to impairment of other long-lived assets.

(3)

Total adjusted pretax operating income consists of adjusted pretax operating income (loss) for each reportable segment and All Other activities as follows.

 

 

 

2023

 

2022

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Adjusted pretax operating income (loss)

 

 

 

 

 

 

 

 

 

 

Mortgage segment

 

$

218,601

 

 

$

197,750

 

 

$

214,435

 

 

$

241,907

 

 

$

295,675

 

homegenius segment

 

 

(20,932

)

 

 

(24,421

)

 

 

(23,041

)

 

 

(31,466

)

 

 

(25,536

)

All Other activities

 

 

12,786

 

 

 

11,046

 

 

 

8,469

 

 

 

2,575

 

 

 

2,581

 

Total adjusted pretax operating income

 

$

210,455

 

 

$

184,375

 

 

$

199,863

 

 

$

213,016

 

 

$

272,720

 

 

Radian Group Inc. and Subsidiaries Consolidated Non-GAAP Financial Measure Reconciliations Exhibit G (page 2 of 2)

 

Reconciliation of Diluted Net Income Per Share to Adjusted Diluted Net Operating Income Per Share

 

 

 

2023

 

2022

 

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Diluted net income per share

 

$

0.98

 

 

$

0.91

 

 

$

0.98

 

 

$

1.01

 

 

$

1.20

 

Less per-share impact of reconciling income (expense) items

 

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

 

 

(0.06

)

 

 

—

 

 

 

0.03

 

 

 

0.04

 

 

 

(0.10

)

Amortization of other acquired intangible assets

 

 

(0.01

)

 

 

(0.01

)

 

 

(0.01

)

 

 

(0.01

)

 

 

(0.01

)

Impairment of other long-lived assets and other non-operating items

 

 

0.01

 

 

 

—

 

 

 

—

 

 

 

(0.09

)

 

 

—

 

Income tax (provision) benefit on reconciling income (expense) items (1)

 

 

0.01

 

 

 

—

 

 

 

(0.01

)

 

 

0.01

 

 

 

0.02

 

Difference between statutory and effective tax rates

 

 

(0.01

)

 

 

0.01

 

 

 

(0.01

)

 

 

0.01

 

 

 

(0.02

)

Per-share impact of reconciling income (expense) items

 

 

(0.06

)

 

 

—

 

 

 

—

 

 

 

(0.04

)

 

 

(0.11

)

Adjusted diluted net operating income per share (1)

 

$

1.04

 

 

$

0.91

 

 

$

0.98

 

 

$

1.05

 

 

$

1.31

 

(1)

Calculated using the company’s federal statutory tax rate of 21%. Any permanent tax adjustments and state income taxes on these items have been deemed immaterial and are not included.

 

Reconciliation of Return on Equity to Adjusted Net Operating Return on Equity (1)

 

 

 

2023

 

2022

 

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Return on equity (1)

 

15.0

%

 

14.1

%

 

15.7

%

 

17.0

%

 

20.7

%

Less impact of reconciling income (expense) items (2)

 

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

 

(0.9

)

 

—

 

 

0.5

 

 

0.7

 

 

(1.7

)

Amortization of other acquired intangible assets

 

(0.2

)

 

(0.1

)

 

(0.1

)

 

(0.2

)

 

(0.1

)

Impairment of other long-lived assets and other non-operating items

 

0.1

 

 

—

 

 

—

 

 

(1.6

)

 

—

 

Income tax (provision) benefit on reconciling income (expense) items (3)

 

0.2

 

 

(0.1

)

 

(0.1

)

 

0.2

 

 

0.4

 

Difference between statutory and effective tax rates

 

(0.2

)

 

0.2

 

 

(0.3

)

 

0.3

 

 

(0.4

)

Impact of reconciling income (expense) items

 

(1.0

)

 

—

 

 

—

 

 

(0.6

)

 

(1.8

)

Adjusted net operating return on equity (3)

 

16.0

%

 

14.1

%

 

15.7

%

 

17.6

%

 

22.5

%

(1)

Calculated by dividing annualized net income by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.

(2)

Annualized, as a percentage of average stockholders’ equity.

(3)

Calculated using the company’s federal statutory tax rate of 21%. Any permanent tax adjustments and state income taxes on these items have been deemed immaterial and are not included.

 

On a consolidated basis, “adjusted pretax operating income (loss),” “adjusted diluted net operating income (loss) per share” and “adjusted net operating return on equity” are measures not determined in accordance with GAAP. These measures should not be considered in isolation or viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share, return on equity or net income (loss).

Our definitions of adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity may not be comparable to similarly-named measures reported by other companies. See Exhibit F for additional information on our consolidated non-GAAP financial measures.

 

Radian Group Inc. and Subsidiaries Mortgage Supplemental Information - New Insurance Written Exhibit H

   

 

 

2023

 

2022

($ in millions)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

NIW

 

$

13,922

 

 

$

16,946

 

 

$

11,261

 

 

$

12,859

 

 

$

17,616

 

NIW by premium type

 

 

 

 

 

 

 

 

 

 

Direct monthly and other recurring premiums

 

 

96.0

%

 

 

96.5

%

 

 

94.9

%

 

 

94.8

%

 

 

95.5

%

Direct single premiums

 

 

4.0

%

 

 

3.5

%

 

 

5.1

%

 

 

5.2

%

 

 

4.5

%

 

 

 

 

 

 

 

 

 

 

 

NIW for purchases

 

 

98.7

%

 

 

98.6

%

 

 

97.6

%

 

 

98.3

%

 

 

98.4

%

NIW for refinances

 

 

1.3

%

 

 

1.4

%

 

 

2.4

%

 

 

1.7

%

 

 

1.6

%

NIW by FICO score (1)

 

 

 

 

 

 

 

 

 

 

>=740

 

 

67.3

%

 

 

66.1

%

 

 

60.7

%

 

 

59.4

%

 

 

63.3

%

680-739

 

 

27.4

 

 

 

28.4

 

 

 

32.8

 

 

 

33.1

 

 

 

28.5

 

620-679

 

 

5.3

 

 

 

5.5

 

 

 

6.5

 

 

 

7.5

 

 

 

8.2

 

<=619

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total NIW

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

NIW by LTV

 

 

 

 

 

 

 

 

 

 

95.01% and above

 

 

16.5

%

 

 

17.9

%

 

 

17.7

%

 

 

15.5

%

 

 

18.3

%

90.01% to 95.00%

 

 

38.6

 

 

 

39.1

 

 

 

40.2

 

 

 

40.8

 

 

 

37.1

 

85.01% to 90.00%

 

 

30.2

 

 

 

29.5

 

 

 

28.7

 

 

 

29.7

 

 

 

28.0

 

85.00% and below

 

 

14.7

 

 

 

13.5

 

 

 

13.4

 

 

 

14.0

 

 

 

16.6

 

Total NIW

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

(1)

For loans with multiple borrowers, the percentage of NIW by FICO score represents the lowest of the borrowers’ FICO scores.

 

Radian Group Inc. and Subsidiaries Mortgage Supplemental Information - Primary Insurance in Force and Risk in Force Exhibit I

   

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

($ in millions)

 

 

2023

 

 

 

2023

 

 

 

2023

 

 

 

2022

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

Primary insurance in force

 

$

269,511

 

 

$

266,859

 

 

$

261,450

 

 

$

260,994

 

 

$

259,121

 

 

 

 

 

 

 

 

 

 

 

 

Primary risk in force (“RIF”)

 

$

69,298

 

 

$

68,323

 

 

$

66,580

 

 

$

66,094

 

 

$

65,288

 

Primary RIF by premium type

 

 

 

 

 

 

 

 

 

 

Direct monthly and other recurring premiums

 

 

88.6

%

 

 

88.2

%

 

 

87.6

%

 

 

87.1

%

 

 

86.4

%

Direct single premiums

 

 

11.4

%

 

 

11.8

%

 

 

12.4

%

 

 

12.9

%

 

 

13.6

%

Primary RIF by FICO score (1)

 

 

 

 

 

 

 

 

 

 

>=740

 

 

58.2

%

 

 

57.8

%

 

 

57.4

%

 

 

57.4

%

 

 

57.5

%

680-739

 

 

34.0

 

 

 

34.3

 

 

 

34.6

 

 

 

34.6

 

 

 

34.5

 

620-679

 

 

7.4

 

 

 

7.5

 

 

 

7.6

 

 

 

7.6

 

 

 

7.6

 

<=619

 

 

0.4

 

 

 

0.4

 

 

 

0.4

 

 

 

0.4

 

 

 

0.4

 

Total

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Primary RIF by LTV

 

 

 

 

 

 

 

 

 

 

95.01% and above

 

 

18.4

%

 

 

18.0

%

 

 

17.5

%

 

 

17.1

%

 

 

16.8

%

90.01% to 95.00%

 

 

48.2

 

 

 

48.4

 

 

 

48.5

 

 

 

48.4

 

 

 

48.4

 

85.01% to 90.00%

 

 

27.0

 

 

 

26.9

 

 

 

27.0

 

 

 

27.2

 

 

 

27.2

 

85.00% and below

 

 

6.4

 

 

 

6.7

 

 

 

7.0

 

 

 

7.3

 

 

 

7.6

 

Total

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Primary RIF by policy year

 

 

 

 

 

 

 

 

 

 

2008 and prior

 

 

2.9

%

 

 

3.1

%

 

 

3.3

%

 

 

3.5

%

 

 

3.7

%

2009 - 2017

 

 

7.5

 

 

 

8.2

 

 

 

9.1

 

 

 

10.0

 

 

 

10.9

 

2018

 

 

2.9

 

 

 

3.1

 

 

 

3.3

 

 

 

3.5

 

 

 

3.7

 

2019

 

 

5.6

 

 

 

5.9

 

 

 

6.4

 

 

 

6.7

 

 

 

7.1

 

2020

 

 

17.5

 

 

 

18.7

 

 

 

20.3

 

 

 

21.6

 

 

 

23.0

 

2021

 

 

25.6

 

 

 

26.9

 

 

 

28.6

 

 

 

29.5

 

 

 

30.6

 

2022

 

 

22.8

 

 

 

23.6

 

 

 

24.7

 

 

 

25.2

 

 

 

21.0

 

2023

 

 

15.2

 

 

 

10.5

 

 

 

4.3

 

 

 

—

 

 

 

—

 

Total

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

Persistency Rate (12 months ended)

 

 

83.6

%

 

 

82.8

%

 

 

81.6

%

 

 

79.6

%

 

 

75.9

%

Persistency Rate (quarterly, annualized) (2)

 

 

84.2

%

 

 

83.5

%

 

 

84.4

%

 

 

84.1

%

 

 

81.6

%

(1)

For loans with multiple borrowers, the percentage of primary RIF by FICO score represents the lowest of the borrowers’ FICO scores.

(2)

The Persistency Rate on a quarterly, annualized basis is calculated based on loan-level detail for the quarter ending as of the date shown. It may be impacted by seasonality or other factors, including the level of refinance activity during the applicable periods and may not be indicative of full-year trends.

FORWARD-LOOKING STATEMENTS

All statements in this press release that address events, developments or results that we expect or anticipate may occur in the future are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as “anticipate,” “may,” “will,” “could,” “should,” “would,” “expect,” “intend,” “plan,” “goal,” “contemplate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “seek,” “strategy,” “future,” “likely” or the negative or other variations on these words and other similar expressions. These statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management’s current views and assumptions with respect to future events. These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment where new risks emerge from time to time and it is not possible for us to predict all risks that may affect us. The forward-looking statements are not guarantees of future performance, and the forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. These risks and uncertainties include, without limitation:

• the health of the U.S. housing market generally and changes in economic conditions that impact the size of the insurable mortgage market, the credit performance of our insured mortgage portfolio and our business prospects, including more recently, changes resulting from inflationary pressures, the higher interest rate environment and the risks of a recession and of higher unemployment rates, as well as other macroeconomic stresses and uncertainties, including potential impacts resulting from geopolitical events;
• changes in the way customers, investors, ratings agencies, regulators or legislators perceive our performance, financial strength and future prospects;
• Radian Guaranty Inc.’s (“Radian Guaranty”) ability to remain eligible under the Private Mortgage Insurer Eligibility Requirements (the “PMIERs”) to insure loans purchased by Fannie Mae and Freddie Mac (collectively, the “GSEs”);
• our ability to maintain an adequate level of capital in our insurance subsidiaries to satisfy current and future regulatory requirements;
• changes in the charters or business practices of, or rules or regulations imposed by or applicable to, the GSEs or loans purchased by the GSEs, or changes in the requirements for Radian Guaranty to remain an approved insurer to the GSEs, such as changes in the PMIERs or the GSEs’ interpretation and application of the PMIERs or other applicable requirements;
• the effects of the Enterprise Regulatory Capital Framework, which establishes a new regulatory capital framework for the GSEs, and which, as finalized, increases the capital requirements for the GSEs, and among other things, could impact the GSEs’ operations and pricing as well as the size of the insurable mortgage market, and which may form the basis for future changes to the PMIERs to better align with the Enterprise Regulatory Capital Framework;
• changes in the current housing finance system in the United States, including the roles of the Federal Housing Administration (the “FHA”), the GSEs and private mortgage insurers in this system;
• our ability to successfully execute and implement our capital plans, including our risk distribution strategy through the capital markets and traditional reinsurance markets, and to maintain sufficient holding company liquidity to meet our liquidity needs;
• our ability to successfully execute and implement our business plans and strategies, including plans and strategies that may require GSE and/or regulatory approvals and licenses, that are subject to complex compliance requirements that we may be unable to satisfy, or that may expose us to new risks, including those that could impact our capital and liquidity positions;
• risks related to the quality of third-party mortgage underwriting and mortgage servicing;
• a decrease in the “Persistency Rates” (the percentage of insurance in force that remains in force over a period of time) of our mortgage insurance on monthly premium products;
• competition in the private mortgage insurance industry generally, and more specifically: price competition in our mortgage insurance business, including the prevalence of formulaic, granular risk-based pricing methodologies that are less transparent than historical rate-card-based pricing practices; and competition from the FHA and the U.S. Department of Veterans Affairs as well as from other forms of credit enhancement, such as any potential GSE-sponsored alternatives to traditional mortgage insurance;
• U.S. political conditions and legislative and regulatory activity (or inactivity), including adoption of (or failure to adopt) new laws and regulations, or changes in existing laws and regulations, or the way they are interpreted or applied;
• legal and regulatory claims, assertions, actions, reviews, audits, inquiries and investigations that could result in adverse judgments, settlements, fines, injunctions, restitutions or other relief that could require significant expenditures, new or increased reserves or have other effects on our business;
• the amount and timing of potential payments or adjustments associated with federal or other tax examinations;
• the possibility that we may fail to estimate accurately, especially in the event of an extended economic downturn or a period of extreme market volatility and economic uncertainty, the likelihood, magnitude and timing of losses in establishing loss reserves for our mortgage insurance business or to accurately calculate and/or project our Available Assets and Minimum Required Assets under the PMIERs, which could be impacted by, among other things, the size and mix of our insurance in force, future changes to the PMIERs, the level of defaults in our portfolio, the reported status of defaults in our portfolio (including whether they are subject to mortgage forbearance, a repayment plan or a loan modification trial period), the level of cash flow generated by our insurance operations and our risk distribution strategies;
• volatility in our financial results caused by changes in the fair value of our assets and liabilities, including with respect to our use of derivatives and within our investment portfolio;
• changes in “GAAP” (accounting principles generally accepted in the U.S.) or “SAP” (statutory accounting principles and practices including those required or permitted, if applicable, by the insurance departments of the respective states of domicile of our insurance subsidiaries) rules and guidance, or their interpretation;
• risks associated with investments to grow our existing businesses, or to pursue new lines of business or new products and services, including our ability and related costs to develop, launch and implement new and innovative technologies and digital products and services, whether these products and services receive broad customer acceptance or disrupt existing customer relationships, and additional financial risks related to these investments, including required changes in our investment, financing and hedging strategies, risks associated with our increased use of financial leverage, which could expose us to liquidity risks resulting from changes in the fair values of assets, and the risk that we may fail to achieve forecasted results, which could result in lower or negative earnings contribution and/or impairment charges associated with intangible assets;
• the effectiveness and security of our information technology systems and digital products and services, including the risk that these systems, products or services fail to operate as expected or planned or expose us to cybersecurity or third-party risks, including due to malware, unauthorized access, cyberattack, ransomware or other similar events;
• our ability to attract and retain key employees;
• the amount of dividends, if any, that our insurance subsidiaries may distribute to us, which under applicable regulatory requirements is based primarily on the financial performance of our insurance subsidiaries, and therefore, may be impacted by general economic, competitive and other factors, many of which are beyond our control; and
• the ability of our operating subsidiaries to distribute amounts to us under our internal tax- and expense-sharing arrangements, which for our insurance subsidiaries are subject to regulatory review and could be terminated at the discretion of such regulators.

For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, and to subsequent reports and registration statements filed from time to time with the U.S. Securities and Exchange Commission. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which we issued this press release. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements to reflect new information or future events or for any other reason.

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For Investors John Damian - Phone: 215.231.1383 email: john.damian@radian.com For Media Rashi Iyer - Phone: 215.231.1167 email: rashi.iyer@radian.com