— Primary mortgage insurance in force increases
5% year-over-year to $266.9 billion —
— Total holding company liquidity grows to $1.3
billion —
— PMIERs excess Available Assets of $1.7
billion (or 41% over the Minimum Required Assets) —
— Net income of $146 million, or $0.91 per
diluted share —
— Return on equity of 14.1% —
— Book value per share grows 12% year-over-year
to $26.51 —
Radian Group Inc. (NYSE: RDN) today reported net income for the
quarter ended June 30, 2023, of $146 million, or $0.91 per diluted
share. This compares with net income for the quarter ended June 30,
2022, of $201 million, or $1.15 per diluted share.
Key Financial Highlights
Quarter ended
($ in millions, except per-share
amounts)
June 30, 2023
March 31, 2023
June 30, 2022
Total revenues (1) (2)
$290
$311
$287
Net income (2)
$146
$158
$201
Diluted net income per share
$0.91
$0.98
$1.15
Consolidated pretax income
$183
$204
$260
Adjusted pretax operating income
(3)
$184
$200
$302
Adjusted diluted net operating
income per share (3) (4)
$0.91
$0.98
$1.36
Return on equity (2) (5)
14.1
%
15.7
%
19.9
%
Adjusted net operating return on
equity (3) (4)
14.1
%
15.7
%
23.6
%
New Insurance Written (NIW) -
mortgage insurance
$16,946
$11,261
$18,935
Net premiums earned - mortgage
insurance (1)
$211
$231
$247
New defaults
9,775
10,624
8,009
Provision for losses - mortgage
insurance
($22
)
($17
)
($114
)
homegenius revenues
$15
$13
$32
Book value per share
$26.51
$26.23
$23.63
Accumulated other comprehensive
income (loss) value per share (6)
($2.69
)
($2.47
)
($1.98
)
PMIERs Available Assets (7)
$5,689
$5,651
$5,175
PMIERs excess Available Assets
(8)
$1,662
$1,740
$1,424
Total Holding Company Liquidity
(9)
$1,285
$1,231
$1,048
Total investments
$5,896
$5,838
$5,906
Primary mortgage insurance in
force
$266,859
$261,450
$254,226
Percentage of primary loans in
default (10)
2.0
%
2.1
%
2.2
%
Mortgage insurance loss
reserves
$374
$400
$589
(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. See
Eagle Re Tender Offers section below for more information regarding
these tender offers.
(2)
Total revenues and net income for
the second quarter of 2023 includes a pretax net loss of $236
thousand on investments and other financial instruments compared
with a pretax net gain on investments and other financial
instruments of $6 million in the first quarter of 2023 and a pretax
net loss on investments and other financial instruments of $42
million for the second quarter of 2022.
(3)
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.
(4)
Calculated using the company’s
statutory tax rate of 21%.
(5)
Calculated by dividing annualized
net income by average stockholders' equity, based on the average of
the beginning and ending balances for each period presented.
(6)
Included in book value per share
for each period presented.
(7)
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.
(8)
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.
(9)
Represents Radian Group's total
liquidity, including available capacity under its $275 million
unsecured revolving credit facility.
(10)
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 June 30, 2023, was $146
million, or $0.91 per diluted share. This compares with net income
for the quarter ended June 30, 2022, of $201 million, or $1.15 per
diluted share.
Adjusted pretax operating income for the quarter ended June 30,
2023, was $184 million, or $0.91 per diluted share. This compares
with adjusted pretax operating income for the quarter ended June
30, 2022, of $302 million, or $1.36 per diluted share.
Book value per share at June 30, 2023, was $26.51, compared to
$26.23 at March 31, 2023, and $23.63 at June 30, 2022. This
represents a 12% growth in book value per share at June 30, 2023,
as compared to June 30, 2022, and includes accumulated other
comprehensive income (loss) of $(2.69) per share as of June 30,
2023, and $(1.98) per share as of June 30, 2022, which, if excluded
as of both dates, would represent 14% growth for the period. The
change in accumulated other comprehensive income (loss) since March
31, 2022, is primarily from net unrealized losses on investments as
a result of an increase in market interest rates.
“We reported excellent second quarter results for Radian,
increasing book value per share by 12% year-over-year, generating
net income of $146 million and delivering return on equity of
14.1%. Our primary mortgage insurance in force, which is the main
driver of future earnings for our company, grew 5% year-over-year
to $267 billion, and our total holding company liquidity increased
to $1.3 billion,” said Radian’s Chief Executive Officer Rick
Thornberry. “Our overall performance reflects the resilience of our
business model, the strength of our growing insured portfolio, the
depth of our customer relationships and the commitment of our
team.”
SECOND QUARTER HIGHLIGHTS
- NIW was $16.9 billion in the second quarter of 2023, compared
to $11.3 billion in the first quarter of 2023, and $18.9 billion in
the second quarter of 2022.
- Purchase NIW increased 52% in the second quarter of 2023
compared to the first quarter of 2023 and decreased 9% compared to
the second quarter of 2022.
- Refinances accounted for 1% of total NIW in the second quarter
of 2023, compared to 2% in the first quarter of 2023, and 3% in the
second quarter of 2022.
- Of the $16.9 billion in NIW in the second quarter of 2023, 97%
was written with monthly and other recurring premiums, as compared
to 95% in both the first quarter of 2023 and the second quarter of
2022.
- Total primary mortgage insurance in force as of June 30, 2023,
increased to $266.9 billion, an increase of 2% as compared to
$261.5 billion as of March 31, 2023, and an increase of 5% compared
to $254.2 billion as of June 30, 2022. The year-over-year change
reflects an 8% 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 83% for the
twelve months ended June 30, 2023, compared to 82% for the twelve
months ended March 31, 2023, and 72% for the twelve months ended
June 30, 2022.
- Annualized persistency for the three months ended June 30,
2023, was 84%, compared to 84% for the three months ended March 31,
2023, and 80% for the three months ended June 30, 2022.
- Net mortgage insurance premiums earned were $211 million for
the second quarter of 2023, compared to $231 million for the first
quarter of 2023, and $247 million for the second quarter of 2022.
The decline in the second quarter of 2023 reflects 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. See Eagle Re Tender Offers section
below for more details.
- Mortgage insurance in force portfolio premium yield was 38.2
basis points in the second quarter of 2023. This compares to 38.5
basis points in the first quarter of 2023, and 40.0 basis points in
the second quarter of 2022.
- The impact of single premium policy cancellations before
consideration of reinsurance represented 0.6 basis points of direct
premium yield in the second quarter of 2023, 0.8 basis points in
the first quarter of 2023, and 1.1 basis points in the second
quarter of 2022.
- Total net mortgage insurance premium yield, which includes the
impact of ceded premiums earned and accrued profit commission, was
31.9 basis points in the second quarter of 2023. This compares to
35.4 basis points in the first quarter of 2023, and 39.3 basis
points in the second quarter of 2022. The decline in the second
quarter of 2023 compared to the first quarter of 2023 was due
primarily to 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. See Eagle Re Tender Offers section below
for more details.
- Details regarding premiums earned may be found in Exhibit
D.
- The mortgage insurance provision for losses was a benefit of
$22 million in the second quarter of 2023, compared to benefits of
$17 million and $114 million in the first quarter of 2023 and
second quarter of 2022, respectively.
- All periods benefited from significant favorable reserve
development on prior period defaults, due to more favorable trends
in cures than originally estimated. The decreased benefit in the
first quarter and second quarter of 2023 compared to the second
quarter of 2022 was primarily related to less favorable development
on prior period reserves, as the remaining number of defaults and
loss reserve balance continue to decline.
- The number of primary delinquent loans was 19,880 as of June
30, 2023, compared to 20,748 as of March 31, 2023, and 21,861 as of
June 30, 2022.
- The loss ratio in the second quarter of 2023 was (10.3)%
compared to (7.3)% in the first quarter of 2023, and (46.2)% in the
second quarter of 2022.
- Total mortgage insurance claims paid were $3 million in the
second quarter of 2023, compared to $3 million in the first quarter
of 2023, and $3 million in the second 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 second quarter of
2023 were $15 million, compared to $13 million for the first
quarter of 2023, and $32 million for the second quarter of
2022.
- Adjusted pretax operating loss, our primary segment measure of
profitability for the homegenius segment, was $24 million for the
second quarter of 2023, compared to $23 million for the first
quarter of 2023, and $18 million for the second quarter of
2022.
- Other operating expenses were $90 million in the second quarter
of 2023, compared to $83 million in the first quarter of 2023, and
$90 million in the second quarter of 2022.
- Other operating expenses increased in the second quarter of
2023 as compared to expenses in the first quarter of 2023,
primarily due to the timing of our annual share-based incentive
grants as well as severance and related expenses recognized in the
second quarter of 2023.
- Additional details regarding other operating expenses by
segment may be found in Exhibit E.
EAGLE RE TENDER OFFERS
- In June 2023, Eagle Re 2019-1 Ltd. and Eagle Re 2020-1 Ltd.
conducted tender offers to purchase the mortgage insurance-linked
notes that supported their reinsurance agreements with Radian
Guaranty.
- As a result of the tender offers, $455 million and $332 million
of the original principal amount of the Eagle Re 2019-1 Ltd. and
Eagle Re 2020-1 Ltd. insurance-linked notes, respectively, were
tendered, representing 100% of the Eagle Re 2019-1 Ltd.
insurance-linked notes and 82% of the Eagle Re 2020-1 Ltd.
insurance-linked notes. The corresponding portion of the
reinsurance agreements supported by the tendered notes were
terminated.
- An impact of the completed successful tender offers was to
reduce our net premiums earned and premium yield during the second
quarter of 2023, as described below:
- Mortgage insurance net premiums earned - Radian Guaranty
incurred an additional $21 million of ceded premiums earned during
the second quarter of 2023, consisting of $16 million related to
the cost of tender premiums and expenses associated with the tender
offers and $5 million related to the acceleration of deferred costs
from the original executions of these transactions.
- Total net mortgage insurance premium yield - The increase in
ceded premiums earned due to the tender offers discussed above
reduced Radian Guaranty’s total net mortgage insurance premium
yield for the second quarter of 2023 by 3.2 basis points.
- The tender offers were beneficial for Radian Guaranty because
the Eagle Re reinsurance agreements noted above were no longer
providing the level of PMIERs capital benefit or risk mitigation
value they provided in prior years. In addition, based on current
projections and expectations, Radian Guaranty expects to save
approximately $58 million of future ceded premiums as a result of
the termination of the reinsurance agreements resulting from these
tender offers, including the expected recovery of the $21 million
of one-time costs noted above within one year.
CAPITAL AND LIQUIDITY UPDATE
Radian Group
- As of June 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 June 30, 2023.
- Radian Group paid a dividend on its common stock in the amount
of $0.225 per share, totaling $35 million on June 14, 2023.
- During the second quarter of 2023, the company repurchased 229
thousand shares of Radian Group common stock at a total cost of $5
million, including commissions. After these repurchases, purchase
authority of up to $280 million remained available under the
existing program.
Radian Guaranty
- In May 2023, Radian Guaranty paid an ordinary dividend to
Radian Group of $100 million. During the first six months of 2023,
Radian Guaranty paid $200 million in ordinary dividends to Radian
Group. Radian Guaranty expects to pay a total of between $300
million to $400 million of ordinary dividends to Radian Group
during 2023, based on current performance expectations.
- At June 30, 2023, Radian Guaranty’s Available Assets under
PMIERs totaled approximately $5.7 billion, resulting in excess
available resources or a “cushion” of $1.7 billion, or 41%, over
its Minimum Required Assets under PMIERs.
RECENT EVENTS
- In July 2023, consistent with our use of risk distribution
strategies to effectively manage capital and proactively mitigate
risk, Radian Guaranty entered into a quota share reinsurance
arrangement (“2023 QSR Agreement”) with a panel of third-party
reinsurance providers. Under the 2023 QSR Agreement, we expect to
cede 22.5% of policies issued between July 1, 2023, and June 30,
2024, subject to certain conditions.
CONFERENCE CALL
Radian will discuss second quarter 2023 financial results in a
conference call tomorrow, Thursday, August 3, 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 (i) adjusted pretax operating income (loss) attributable
to common stockholders, net of taxes computed using the company’s
statutory tax rate, by (ii) 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.
In addition to the above non-GAAP measures for the consolidated
company, we also have presented as supplemental information
non-GAAP measures for our homegenius segment of adjusted pretax
operating income (loss) before allocated corporate operating
expenses and adjusted gross profit. Adjusted pretax operating
income (loss) before allocated corporate operating expenses is
calculated as adjusted pretax operating income (loss) as described
above (which is the segment's ASC 280 GAAP measure of operating
performance), adjusted to remove the impact of corporate
allocations of other operating expenses for the homegenius segment.
Adjusted gross profit is further adjusted to remove other operating
expenses. For the homegenius segment, adjusted pretax operating
income (loss) before allocated corporate operating expenses and
adjusted gross profit are used to facilitate comparisons with other
services companies, since they are widely accepted measures of
performance in the services industry and are used internally as
supplemental measures to evaluate the performance of our homegenius
segment.
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 Trend
Schedule Exhibit B: Net Income Per Share Trend Schedule Exhibit C:
Condensed Consolidated Balance Sheets Exhibit D: Net Premiums
Earned 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 Exhibit J: Mortgage Supplemental Information -
Default, Reserves and Claim Statistics Exhibit K: Mortgage
Supplemental Information - Reinsurance Programs
Radian Group Inc. and
Subsidiaries
Condensed Consolidated Statements of
Operations Trend Schedule
Exhibit A
2023
2022
(In thousands, except per-share
amounts)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Revenues
Net premiums earned
$
213,429
$
233,238
$
232,827
$
240,222
$
253,892
Services revenue
11,797
10,984
15,441
20,146
27,281
Net investment income
64,182
59,221
59,091
51,414
46,957
Net gains (losses) on investments and
other financial instruments
(236
)
5,585
6,845
(16,252
)
(41,869
)
Other income
1,241
1,592
520
659
572
Total revenues
290,413
310,620
314,724
296,189
286,833
Expenses
Provision for losses
(21,632
)
(16,929
)
(43,599
)
(96,964
)
(113,922
)
Policy acquisition costs
5,218
6,293
5,931
5,442
5,940
Cost of services
10,257
10,398
16,128
18,717
22,760
Other operating expenses
89,885
83,269
109,785
91,327
90,495
Interest expense
22,639
22,207
21,594
21,183
20,831
Amortization of other acquired intangible
assets
1,370
1,371
1,587
1,023
849
Total expenses
107,737
106,609
111,426
40,728
26,953
Pretax income
182,676
204,011
203,298
255,461
259,880
Income tax provision
36,589
46,254
40,968
57,181
58,687
Net income
$
146,087
$
157,757
$
162,330
$
198,280
$
201,193
Diluted net income per share
$
0.91
$
0.98
$
1.01
$
1.20
$
1.15
Selected Mortgage Key
Ratios
2023
2022
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Loss ratio (1)
(10.3
)%
(7.3
)%
(18.9
)%
(41.5
)%
(46.2
)%
Expense ratio (2)
29.6
%
25.9
%
27.3
%
26.1
%
26.2
%
(1)
For our Mortgage segment, calculated as
provision for losses expressed as a percentage of net premiums
earned. See Exhibit E for additional information.
(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. See
Exhibit E for additional information.
Radian Group Inc. and
Subsidiaries
Net Income Per Share Trend
Schedule
Exhibit B
The calculation of basic and diluted net
income per share is as follows.
2023
2022
(In thousands, except per-share
amounts)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Net income—basic and diluted
$
146,087
$
157,757
$
162,330
$
198,280
$
201,193
Average common shares
outstanding—basic
159,010
158,304
158,357
162,506
173,705
Dilutive effect of share-based
compensation arrangements (1)
1,734
3,045
2,450
2,232
1,714
Adjusted average common shares
outstanding—diluted
160,744
161,349
160,807
164,738
175,419
Basic net income per share
$
0.92
$
1.00
$
1.03
$
1.22
$
1.16
Diluted net income per share
$
0.91
$
0.98
$
1.01
$
1.20
$
1.15
(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 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Shares of common stock equivalents
112
25
—
—
189
Radian Group Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
Exhibit C
June 30,
March 31,
December 31,
September 30,
June 30,
(In thousands, except per-share
amounts)
2023
2023
2022
2022
2022
Assets
Investments
$
5,895,871
$
5,837,892
$
5,693,491
$
5,591,881
$
5,906,147
Cash
61,142
50,167
56,183
54,701
135,262
Restricted cash
1,317
577
377
1,107
561
Accrued investment income
42,650
42,567
40,093
38,596
35,774
Accounts and notes receivable
138,432
129,565
119,834
174,041
166,380
Reinsurance recoverable
22,979
24,396
25,633
30,569
39,876
Deferred policy acquisition costs
19,272
18,236
18,460
17,920
16,983
Property and equipment, net
73,885
72,111
70,981
75,740
74,874
Goodwill and other acquired intangible
assets, net
12,543
13,914
15,285
16,873
17,895
Prepaid federal income taxes
663,320
596,368
596,368
526,123
466,123
Other assets
375,132
418,609
427,024
458,292
414,412
Total assets
$
7,306,543
$
7,204,402
$
7,063,729
$
6,985,843
$
7,274,287
Liabilities and stockholders’ equity
Unearned premiums
$
246,666
$
257,735
$
271,479
$
285,290
$
298,991
Reserve for losses and loss adjustment
expense
379,434
405,651
426,843
483,664
594,808
Senior notes
1,415,610
1,414,549
1,413,504
1,412,473
1,411,458
Secured borrowings
178,762
121,642
155,822
153,550
184,284
Reinsurance funds withheld
154,354
153,099
152,067
218,777
223,649
Net deferred tax liability
479,754
455,517
391,083
335,374
324,866
Other liabilities
281,127
289,731
333,604
358,665
305,269
Total liabilities
3,135,707
3,097,924
3,144,402
3,247,793
3,343,325
Common stock
177
176
176
176
186
Treasury stock
(945,032
)
(931,313
)
(930,643
)
(930,396
)
(930,284
)
Additional paid-in capital
1,522,895
1,515,852
1,519,641
1,513,615
1,698,490
Retained earnings
4,016,482
3,908,396
3,786,952
3,656,870
3,491,675
Accumulated other comprehensive income
(loss)
(423,686
)
(386,633
)
(456,799
)
(502,215
)
(329,105
)
Total stockholders’ equity
4,170,836
4,106,478
3,919,327
3,738,050
3,930,962
Total liabilities and stockholders’
equity
$
7,306,543
$
7,204,402
$
7,063,729
$
6,985,843
$
7,274,287
Shares outstanding
157,350
156,547
157,056
157,058
166,388
Book value per share
$
26.51
$
26.23
$
24.95
$
23.80
$
23.63
Debt to capital ratio (1)
25.3
%
25.6
%
26.5
%
27.4
%
26.4
%
Risk to capital ratio-Radian Guaranty
only
10.8:1
10.6:1
10.7:1
11.1:1
11.9:1
(1) Calculated as senior notes divided by
senior notes and stockholders' equity.
Radian Group Inc. and
Subsidiaries
Net Premiums Earned
Exhibit D
2023
2022
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Premiums earned
Direct - Mortgage
Premiums earned, excluding revenue from
cancellations
$
252,537
$
251,166
$
247,880
$
250,140
$
249,936
Single Premium Policy cancellations
3,980
5,361
5,756
6,705
6,894
Total direct - Mortgage
256,517
256,527
253,636
256,845
256,830
Assumed - Mortgage (1)
—
—
(56
)
1,211
1,539
Ceded - Mortgage
Premiums earned, excluding revenue from
cancellations (2)
(57,916
)
(35,526
)
(35,773
)
(38,879
)
(28,565
)
Single Premium Policy cancellations
(3)
(1,114
)
(1,472
)
(1,676
)
(1,844
)
(1,965
)
Profit commission - other (4)
13,245
11,921
13,802
17,864
19,070
Total ceded premiums - Mortgage (5)
(45,785
)
(25,077
)
(23,647
)
(22,859
)
(11,460
)
Net premiums earned - Mortgage
210,732
231,450
229,933
235,197
246,909
Net premiums earned - homegenius
2,697
1,788
2,894
5,025
6,983
Net premiums earned
$
213,429
$
233,238
$
232,827
$
240,222
$
253,892
(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 on the Single Premium QSR Program and 2022 QSR
Agreement, excluding the impact of Single Premium Policy
cancellations.
(5)
See Exhibit K for additional information
on ceded premiums for our various reinsurance programs.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 1 of 6)
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), homegenius adjusted pretax operating
income (loss) before allocated corporate operating expenses and
homegenius adjusted gross profit, along with reconciliations to
consolidated GAAP measures, see Exhibits F and G.
Three Months Ended June 30,
2023
(In thousands)
Mortgage
homegenius
All Other (1)
Inter- segment (2)
Total
Net premiums written (3)
$
214,540
$
2,697
$
—
$
—
$
217,237
(Increase) decrease in unearned
premiums
(3,808
)
—
—
—
(3,808
)
Net premiums earned
210,732
2,697
—
—
213,429
Services revenue
284
11,617
—
(104
)
11,797
Net investment income
48,555
492
15,135
—
64,182
Net gains (losses) on investments and
other financial instruments
—
—
95
—
95
Other income
1,246
—
(1
)
(4
)
1,241
Total
260,817
14,806
15,229
(108
)
290,744
Provision for losses
(21,623
)
(9
)
—
—
(21,632
)
Policy acquisition costs
5,218
—
—
—
5,218
Cost of services
143
10,114
—
—
10,257
Other operating expenses before allocated
corporate operating expenses (4)
20,009
24,168
3,370
(108
)
47,439
Interest expense
22,239
—
400
—
22,639
Total
25,986
34,273
3,770
(108
)
63,921
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
234,831
(19,467
)
11,459
—
226,823
Allocation of corporate operating
expenses
37,081
4,954
413
—
42,448
Adjusted pretax operating income
(loss)
$
197,750
$
(24,421
)
$
11,046
$
—
$
184,375
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 2 of 6)
Three Months Ended June 30,
2022
(In thousands)
Mortgage
homegenius
All Other (1)
Inter- segment (2)
Total
Net premiums written (3)
$
248,645
$
6,983
$
—
$
—
$
255,628
(Increase) decrease in unearned
premiums
(1,736
)
—
—
—
(1,736
)
Net premiums earned
246,909
6,983
—
—
253,892
Services revenue
2,105
25,261
—
(85
)
27,281
Net investment income
40,197
99
6,661
—
46,957
Other income
572
—
—
—
572
Total
289,783
32,343
6,661
(85
)
328,702
Provision for losses
(114,179
)
309
—
(52
)
(113,922
)
Policy acquisition costs
5,940
—
—
—
5,940
Cost of services
1,960
20,800
—
—
22,760
Other operating expenses before allocated
corporate operating expenses (4)
25,474
23,205
3,077
(33
)
51,723
Interest expense
20,831
—
—
—
20,831
Total
(59,974
)
44,314
3,077
(85
)
(12,668
)
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
349,757
(11,971
)
3,584
—
341,370
Allocation of corporate operating
expenses
33,237
5,719
381
—
39,337
Adjusted pretax operating income
(loss)
$
316,520
$
(17,690
)
$
3,203
$
—
$
302,033
(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. See Exhibit
K for additional information.
(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 6)
Mortgage
2023
2022
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Net premiums written (1)
$
214,540
$
229,419
$
227,791
$
235,076
$
248,645
(Increase) decrease in unearned
premiums
(3,808
)
2,031
2,142
121
(1,736
)
Net premiums earned
210,732
231,450
229,933
235,197
246,909
Services revenue
284
336
328
405
2,105
Net investment income
48,555
46,497
52,165
44,842
40,197
Other income
1,246
1,587
512
589
572
Total
260,817
279,870
282,938
281,033
289,783
Provision for losses (2)
(21,623
)
(16,864
)
(43,509
)
(97,493
)
(114,179
)
Policy acquisition costs
5,218
6,293
5,931
5,442
5,940
Cost of services
143
241
235
373
1,960
Other operating expenses before allocated
corporate operating expenses (2) (3)
20,009
18,806
20,131
23,396
25,474
Interest expense
22,239
22,130
21,580
21,183
20,831
Total (2)
25,986
30,606
4,368
(47,099
)
(59,974
)
Adjusted pretax operating income before
allocated corporate operating expenses
234,831
249,264
278,570
328,132
349,757
Allocation of corporate operating
expenses
37,081
34,829
36,663
32,457
33,237
Adjusted pretax operating income
$
197,750
$
214,435
$
241,907
$
295,675
$
316,520
homegenius
2023
2022
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Net premiums earned
$
2,697
$
1,788
$
2,894
$
5,025
$
6,983
Services revenue (2)
11,617
10,743
15,207
19,812
25,261
Net investment income
492
430
366
246
99
Other income (2)
—
—
170
—
—
Total (2)
14,806
12,961
18,637
25,083
32,343
Provision for losses
(9
)
(65
)
(90
)
435
309
Cost of services
10,114
10,157
15,893
18,344
20,800
Other operating expenses before allocated
corporate operating expenses (3)
24,168
21,252
27,998
26,285
23,205
Total
34,273
31,344
43,801
45,064
44,314
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
(19,467
)
(18,383
)
(25,164
)
(19,981
)
(11,971
)
Allocation of corporate operating
expenses
4,954
4,658
6,302
5,555
5,719
Adjusted pretax operating income
(loss)
$
(24,421
)
$
(23,041
)
$
(31,466
)
$
(25,536
)
$
(17,690
)
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 4 of 6)
All Other (4)
2023
2022
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Net investment income
$
15,135
$
12,294
$
6,560
$
6,326
$
6,661
Net gains (losses) on investments and
other financial instruments
95
80
47
—
—
Other income
(1
)
5
8
70
—
Total
15,229
12,379
6,615
6,396
6,661
Other operating expenses before allocated
corporate operating expenses (2) (3)
3,370
518
(5)
3,606
3,444
3,077
Interest expense
400
77
14
—
—
Total (2)
3,770
595
3,620
3,444
3,077
Adjusted pretax operating income before
allocated corporate operating expenses
11,459
11,784
2,995
2,952
3,584
Allocation of corporate operating
expenses
413
3,315
(5)
420
371
381
Adjusted pretax operating income
(loss)
$
11,046
$
8,469
$
2,575
$
2,581
$
3,203
(1)
Net of ceded premiums written under our
quota share and excess-of-loss reinsurance agreements. See Exhibit
K for additional information.
(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.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 5 of 6)
Supplemental Other Operating
Expense Information by Segment
Mortgage
2023
2022
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Other operating expenses by type
Salaries and other base employee
expenses
$
22,970
$
22,377
$
28,059
$
23,824
$
24,420
Variable and share-based incentive
compensation
13,468
13,306
10,419
10,186
11,524
Other general operating expenses
25,476
22,580
23,414
26,116
25,611
Ceding commissions
(4,824
)
(4,628
)
(5,098
)
(4,273
)
(2,844
)
Total
$
57,090
$
53,635
$
56,794
$
55,853
$
58,711
homegenius
2023
2022
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Other operating expenses by type
Salaries and other base employee
expenses
$
14,502
$
10,494
$
17,403
$
13,403
$
12,187
Variable and share-based incentive
compensation
4,450
4,700
4,148
4,429
4,776
Other general operating expenses
9,057
10,019
11,670
12,158
10,162
Title agent commissions
1,113
697
1,079
1,850
1,799
Total
$
29,122
$
25,910
$
34,300
$
31,840
$
28,924
All Other
2023
2022
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Other operating expenses by type
Salaries and other base employee
expenses
$
1,562
$
2,193
$
1,529
$
1,429
$
1,726
Variable and share-based incentive
compensation
991
267
755
751
709
Other general operating expenses
1,230
1,373
1,742
1,635
1,023
Total
$
3,783
$
3,833
$
4,026
$
3,815
$
3,458
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 6 of 6)
Inter-segment
2023
2022
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Other operating expenses by type
Other general operating expenses
$
(108
)
$
(95
)
$
(264
)
$
(165
)
$
(33
)
Total
$
(108
)
$
(95
)
$
(264
)
$
(165
)
$
(33
)
Total
2023
2022
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Other operating expenses by type
Salaries and other base employee
expenses
$
39,034
$
35,064
$
46,991
$
38,656
$
38,333
Variable and share-based incentive
compensation
18,909
18,273
15,322
15,366
17,009
Other general operating expenses
35,655
33,877
36,562
39,744
36,763
Ceding commissions
(4,824
)
(4,628
)
(5,098
)
(4,273
)
(2,844
)
Title agent commissions
1,113
697
1,079
1,850
1,799
Total
$
89,887
$
83,283
$
94,856
(1)
$
91,343
$
91,060
(1)
Includes $11.7 million of severance and
related expenses, including $10.4 million of severance expense in
salaries and other base employee expenses, $0.6 million of related
share-based compensation in variable and share-based incentive
compensation, and $0.7 million of outplacement costs in other
general operating expenses.
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 (i) adjusted
pretax operating income (loss) attributable to common stockholders,
net of taxes computed using the company’s statutory tax rate, by
(ii) 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)
In addition to the above non-GAAP measures
for the consolidated company, we also have presented as
supplemental information non-GAAP measures for our homegenius
segment of adjusted pretax operating income (loss) before allocated
corporate operating expenses and adjusted gross profit. Adjusted
pretax operating income (loss) before allocated corporate operating
expenses is calculated as adjusted pretax operating income (loss)
as described above (which is the segment's ASC 280 GAAP measure of
operating performance), adjusted to remove the impact of corporate
allocations of other operating expenses for the homegenius segment.
Adjusted gross profit is further adjusted to remove other operating
expenses. For the homegenius segment, adjusted pretax operating
income (loss) before allocated corporate operating expenses and
adjusted gross profit are used to facilitate comparisons with other
services companies, since they are widely accepted measures of
performance in the services industry and are used internally as
supplemental measures to evaluate the performance of our homegenius
segment.
See Exhibit G for the reconciliation 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. Exhibit G also contains the reconciliation
of adjusted pretax operating income (loss) to adjusted pretax
operating income (loss) before allocated corporate operating
expenses and adjusted gross profit for the homegenius segment.
Total adjusted pretax operating income
(loss), adjusted diluted net operating income (loss) per share,
adjusted net operating return on equity, homegenius adjusted pretax
operating income (loss) before allocated corporate operating
expenses and homegenius adjusted gross profit 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), or in the case of the homegenius
non-GAAP measures, for homegenius adjusted pretax operating income
(loss). Our definitions of adjusted pretax operating income (loss),
adjusted diluted net operating income (loss) per share, adjusted
net operating return on equity, homegenius adjusted pretax
operating income (loss) before allocated corporate operating
expenses and homegenius adjusted gross profit 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 3)
Reconciliation of Consolidated
Pretax Income to Adjusted Pretax Operating Income
2023
2022
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Consolidated pretax income
$
182,676
$
204,011
$
203,298
$
255,461
$
259,880
Less reconciling income (expense)
items
Net gains (losses) on investments and
other financial instruments (1)
(331
)
5,505
6,798
(16,252
)
(41,869
)
Amortization of other acquired intangible
assets
(1,370
)
(1,371
)
(1,587
)
(1,023
)
(849
)
Impairment of other long-lived assets and
other non-operating items (2)
2
14
(14,929
)
16
565
Total adjusted pretax operating income
(3)
$
184,375
$
199,863
$
213,016
$
272,720
$
302,033
(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 amounts for all the periods presented
are included in other operating expenses on the Condensed
Consolidated Statement of Operations in Exhibit A and primarily
relate 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 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Adjusted pretax operating income
(loss)
Mortgage segment
$
197,750
$
214,435
$
241,907
$
295,675
$
316,520
homegenius segment
(24,421
)
(23,041
)
(31,466
)
(25,536
)
(17,690
)
All Other activities
11,046
8,469
2,575
2,581
3,203
Total adjusted pretax operating income
$
184,375
$
199,863
$
213,016
$
272,720
$
302,033
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit G (page 2 of 3)
Reconciliation of Diluted Net
Income Per Share to Adjusted Diluted Net Operating Income Per
Share
2023
2022
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Diluted net income per share
$
0.91
$
0.98
$
1.01
$
1.20
$
1.15
Less per-share impact of reconciling
income (expense) items
Net gains (losses) on investments and
other financial instruments
—
0.03
0.04
(0.10
)
(0.24
)
Amortization of other acquired intangible
assets
(0.01
)
(0.01
)
(0.01
)
(0.01
)
—
Impairment of other long-lived assets and
other non-operating items
—
—
(0.09
)
—
—
Income tax (provision) benefit on
reconciling income (expense) items (1)
—
(0.01
)
0.01
0.02
0.05
Difference between statutory and effective
tax rates
0.01
(0.01
)
0.01
(0.02
)
(0.02
)
Per-share impact of reconciling income
(expense) items
—
—
(0.04
)
(0.11
)
(0.21
)
Adjusted diluted net operating income per
share (1)
$
0.91
$
0.98
$
1.05
$
1.31
$
1.36
(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 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Return on equity (1)
14.1
%
15.7
%
17.0
%
20.7
%
19.9
%
Less impact of reconciling income
(expense) items (2)
Net gains (losses) on investments and
other financial instruments
—
0.5
0.7
(1.7
)
(4.1
)
Amortization of other acquired intangible
assets
(0.1
)
(0.1
)
(0.2
)
(0.1
)
(0.1
)
Impairment of other long-lived assets and
other non-operating items
—
—
(1.6
)
—
0.1
Income tax (provision) benefit on
reconciling income (expense) items (3)
(0.1
)
(0.1
)
0.2
0.4
0.9
Difference between statutory and effective
tax rates
0.2
(0.3
)
0.3
(0.4
)
(0.5
)
Impact of reconciling income (expense)
items
—
—
(0.6
)
(1.8
)
(3.7
)
Adjusted net operating return on equity
(3)
14.1
%
15.7
%
17.6
%
22.5
%
23.6
%
(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.
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit G (page 3 of 3)
Reconciliation of homegenius
Adjusted Pretax Operating Income (Loss) to homegenius Adjusted
Gross Profit
2023
2022
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
homegenius adjusted pretax operating
income (loss)
$
(24,421
)
$
(23,041
)
$
(31,466
)
$
(25,536
)
$
(17,690
)
Less reconciling income (expense)
items
Allocation of corporate operating
expenses
(4,954
)
(4,658
)
(6,302
)
(5,555
)
(5,719
)
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
(19,467
)
(18,383
)
(25,164
)
(19,981
)
(11,971
)
Less reconciling income (expense)
items
Other operating expenses before allocated
corporate operating expenses
(24,168
)
(21,252
)
(27,998
)
(26,285
)
(23,205
)
homegenius adjusted gross profit
$
4,701
$
2,869
$
2,834
$
6,304
$
11,234
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. In addition,
“homegenius adjusted pretax operating income (loss) before
allocated corporate operating expenses" and "homegenius adjusted
gross profit" are also non-GAAP measures. 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), or in the case of the homegenius
non-GAAP measures, for homegenius adjusted pretax operating income
(loss).
Our definitions of adjusted pretax
operating income (loss), adjusted diluted net operating income
(loss) per share, adjusted net operating return on equity,
homegenius adjusted pretax operating income (loss) before allocated
corporate operating expenses and homegenius adjusted gross profit
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 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
NIW
$
16,946
$
11,261
$
12,859
$
17,616
$
18,935
Total borrower-paid NIW
99.6
%
99.4
%
99.3
%
99.1
%
99.2
%
NIW by premium type
Direct monthly and other recurring
premiums
96.5
%
94.9
%
94.8
%
95.5
%
95.4
%
Direct single premiums (1)
3.5
%
5.1
%
5.2
%
4.5
%
4.6
%
NIW for purchases
98.6
%
97.6
%
98.3
%
98.4
%
97.1
%
NIW for refinances
1.4
%
2.4
%
1.7
%
1.6
%
2.9
%
NIW by FICO score (2)
>=740
66.1
%
60.7
%
59.4
%
63.3
%
59.6
%
680-739
28.4
32.8
33.1
28.5
32.3
620-679
5.5
6.5
7.5
8.2
8.1
<=619
—
—
—
—
—
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
NIW by LTV
95.01% and above
17.9
%
17.7
%
15.5
%
18.3
%
17.7
%
90.01% to 95.00%
39.1
40.2
40.8
37.1
39.9
85.01% to 90.00%
29.5
28.7
29.7
28.0
26.7
85.00% and below
13.5
13.4
14.0
16.6
15.7
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
(1)
Borrower-paid single premium policies were
3.3%, 4.9%, 4.9%, 4.3% and 4.4% NIW for the periods indicated,
respectively.
(2)
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
June 30,
March 31,
December 31,
September 30,
June 30,
($ in millions)
2023
2023
2022
2022
2022
Primary insurance in force
$
266,859
$
261,450
$
260,994
$
259,121
$
254,226
Primary risk in force (“RIF”)
$
68,323
$
66,580
$
66,094
$
65,288
$
63,770
Primary RIF by premium type
Direct monthly and other
recurring premiums
88.2
%
87.6
%
87.1
%
86.4
%
85.6
%
Direct single premiums (1)
11.8
%
12.4
%
12.9
%
13.6
%
14.4
%
Primary RIF by FICO score (2)
>=740
57.8
%
57.4
%
57.4
%
57.5
%
57.2
%
680-739
34.3
34.6
34.6
34.5
34.9
620-679
7.5
7.6
7.6
7.6
7.5
<=619
0.4
0.4
0.4
0.4
0.4
Total Primary
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Primary RIF by LTV
95.01% and above
18.0
%
17.5
%
17.1
%
16.8
%
16.1
%
90.01% to 95.00%
48.4
48.5
48.4
48.4
48.7
85.01% to 90.00%
26.9
27.0
27.2
27.2
27.4
85.00% and below
6.7
7.0
7.3
7.6
7.8
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Primary RIF by policy year
2008 and prior
3.1
%
3.3
%
3.5
%
3.7
%
4.0
%
2009 - 2017
8.2
9.1
10.0
10.9
12.2
2018
3.1
3.3
3.5
3.7
4.1
2019
5.9
6.4
6.7
7.1
7.7
2020
18.7
20.3
21.6
23.0
25.0
2021
26.9
28.6
29.5
30.6
32.1
2022
23.6
24.7
25.2
21.0
14.9
2023
10.5
4.3
—
—
—
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Persistency Rate (12 months
ended)
82.8
%
81.6
%
79.6
%
75.9
%
71.7
%
Persistency Rate (quarterly,
annualized) (3)
83.5
%
84.4
%
84.1
%
81.6
%
79.8
%
(1)
Borrower-paid single premium policies were
7.3%, 7.5%, 7.7%, 7.9% and 8.1% of primary RIF for the periods
indicated, respectively.
(2)
For loans with multiple borrowers, the
percentage of primary RIF by FICO score represents the lowest of
the borrowers’ FICO scores.
(3)
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.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Default, Reserves and Claim Statistics
Exhibit J
June 30,
March 31,
December 31,
September 30,
June 30,
2023
2023
2022
2022
2022
Default Statistics
Primary Insurance
Number of insured loans
1,004,844
997,443
1,003,183
1,004,305
998,520
Number of loans in default
19,880
20,748
21,913
21,077
21,861
Percentage of loans in default
2.0
%
2.1
%
2.2
%
2.1
%
2.2
%
June 30,
March 31,
December 31,
September 30,
June 30,
($ in thousands, except per default
amounts)
2023
2023
2022
2022
2022
Reserve for losses by category (1)
Mortgage insurance
Primary case
$
353,281
$
378,992
$
398,874
$
454,726
$
562,436
Primary IBNR and LAE
10,483
11,307
12,169
13,672
16,571
Pool and other
9,917
9,551
9,912
9,349
9,940
Total Mortgage insurance
373,681
399,850
420,955
477,747
588,947
Title insurance
5,753
5,801
5,888
5,917
5,861
Total reserve for losses and LAE
$
379,434
$
405,651
$
426,843
$
483,664
$
594,808
Primary reserve per primary default
excluding IBNR and other
$
18,218
$
18,726
$
18,661
$
22,122
$
26,380
(1)
Includes ceded losses on reinsurance
transactions, which are expected to be recovered and are included
in the reinsurance recoverables reported in our Condensed
Consolidated Balance Sheets in Exhibit C.
2023
2022
($ in thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Net claims paid (1)
Primary claims paid
$
3,458
$
3,019
$
3,821
$
3,606
$
3,659
Pool and other
(296
)
(3
)
(49
)
(420
)
(396
)
Subtotal
3,162
3,016
3,772
3,186
3,263
Impact of commutations and settlements
(2)
—
—
4,582
1,317
—
Total net claims paid
$
3,162
$
3,016
$
8,354
$
4,503
$
3,263
Total average net primary claims paid (1)
(3)
$
34.6
$
35.5
$
51.6
$
45.1
$
41.6
Average direct primary claims paid (3)
(4)
$
36.4
$
36.1
$
52.7
$
45.2
$
41.9
(1)
Includes the impact of reinsurance
recoveries and LAE.
(2)
Includes payments to commute mortgage
insurance coverage on certain performing and non-performing
loans.
(3)
Calculated without giving effect to the
impact of commutations and settlements.
(4)
Before reinsurance recoveries.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Reinsurance Programs
Exhibit K
2023
2022
($ in thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
2022 and 2012 QSR Agreements (1)
Ceded premiums written (2)
$
8,866
$
7,834
$
6,770
$
10,363
$
253
% of premiums written
3.7
%
3.2
%
2.8
%
4.2
%
0.1
%
Ceded premiums earned
$
7,686
$
6,745
$
5,570
$
4,036
$
360
% of premiums earned
3.1
%
2.6
%
2.2
%
1.5
%
0.1
%
Ceding commissions earned (3)
$
2,630
$
2,529
$
2,128
$
1,609
$
127
Profit commission
$
6,182
$
4,925
$
4,433
$
4,008
$
—
Ceded losses
$
1,748
$
1,553
$
736
$
(235
)
$
(917
)
Single Premium QSR Program
Ceded premiums written (2)
$
(8,743
)
$
(9,202
)
$
(11,523
)
$
(19,303
)
$
(21,806
)
% of premiums written
(3.6
)%
(3.8
)%
(4.8
)%
(7.7
)%
(8.6
)%
Ceded premiums earned
$
1,312
$
2,070
$
114
$
(3,465
)
$
(8,297
)
% of premiums earned
0.5
%
0.8
%
—
%
(1.3
)%
(3.1
)%
Ceding commissions earned (3)
$
2,412
$
2,712
$
3,530
$
3,153
$
3,287
Profit commission
$
8,337
$
8,778
$
11,159
$
16,074
$
21,447
Ceded losses
$
(2,951
)
$
(2,725
)
$
(5,587
)
$
(9,049
)
$
(14,120
)
Excess-of-Loss Program
Ceded premiums written
$
30,680
$
14,629
$
16,691
$
18,114
$
18,151
% of premiums written
12.5
%
6.0
%
6.9
%
7.3
%
7.2
%
Ceded premiums earned
$
36,683
$
16,159
$
17,924
$
22,184
$
19,292
% of premiums earned
14.5
%
6.3
%
7.0
%
8.4
%
7.3
%
Ceded RIF (4)
Single Premium QSR Program
$
3,737,290
$
3,885,689
$
4,076,690
$
4,273,500
$
4,665,020
Excess-of-Loss Program
1,023,508
1,789,145
1,866,808
1,940,126
2,076,121
2022 QSR Agreement
4,611,102
3,830,179
3,307,429
2,710,247
—
2012 QSR Agreements
116,076
125,718
142,364
160,106
175,046
Total Ceded RIF
$
9,487,976
$
9,630,731
$
9,393,291
$
9,083,979
$
6,916,187
PMIERs impact - reduction in Minimum
Required Assets
Excess-of-Loss Program
$
537,230
$
610,567
$
665,617
$
732,895
$
785,705
Single Premium QSR Program
207,571
218,931
231,339
243,911
268,847
2022 QSR Agreement
325,194
272,489
233,532
189,408
—
2012 QSR Agreements
6,872
7,395
8,357
9,310
10,226
Total PMIERs impact
$
1,076,867
$
1,109,382
$
1,138,845
$
1,175,524
$
1,064,778
(1)
Beginning with the third quarter of 2022,
includes the impact of the 2022 QSR Agreement.
(2)
Net of profit commission.
(3)
Includes amounts reported in policy
acquisition costs and other operating expenses. See Exhibit E for
details.
(4)
Included in primary RIF.
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 such as the
continuing Russia-Ukraine conflict or other 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, which may include changes in furtherance of
housing policy objectives such as the accessibility and
affordability of homeownership for low-and moderate-income
borrowers and underrepresented communities, 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 associated with the discontinuance of LIBOR and
transition to one or more alternative benchmarks that could cause
interest rate volatility and, among other things, impact our
investment portfolio, cost of debt and cost of reinsurance through
mortgage insurance-linked notes transactions;
- 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230728510483/en/
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
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