— Primary mortgage insurance in force increases
5% year-over-year to $261.5 billion —
— Total revenues increase 6% year-over-year to
$311 million —
— Total holding company liquidity grows to $1.2
billion, including benefit from $100 million ordinary dividend paid
by Radian Guaranty —
— PMIERs excess Available Assets of $1.7
billion (or 44% over the Minimum Required Assets) —
— GAAP net income of $158 million, or $0.98 per
diluted share —
— Adjusted diluted net operating income of
$0.98 per share —
— Return on equity of 15.7% —
Radian Group Inc. (NYSE: RDN) today reported net income for the
quarter ended March 31, 2023, of $158 million, or $0.98 per diluted
share. This compares with net income for the quarter ended March
31, 2022, of $181 million, or $1.01 per diluted share.
Key Financial Highlights
Quarter ended
($ in millions, except per-share
amounts)
March 31, 2023
December 31, 2022
March 31, 2022
Total revenues (1)
$311
$315
$293
Net income (1)
$158
$162
$181
Diluted net income per share
$0.98
$1.01
$1.01
Consolidated pretax income
$204
$203
$234
Adjusted pretax operating income
(2)
$200
$213
$265
Adjusted diluted net operating
income per share (2) (3)
$0.98
$1.05
$1.17
Return on equity (1) (4)
15.7%
17.0%
17.2%
Adjusted net operating return on
equity (2) (3)
15.7%
17.6%
19.9%
New Insurance Written (NIW) -
mortgage insurance
$11,261
$12,859
$18,655
Net premiums earned - mortgage
insurance
$231
$230
$245
New defaults
10,624
10,735
9,393
Provision for losses - mortgage
insurance
($17)
($44)
($84)
homegenius revenues
$13
$19
$34
Book value per share
$26.23
$24.95
$23.75
Accumulated other comprehensive
income (loss) value per share (5)
($2.47)
($2.91)
($0.74)
PMIERs Available Assets (6)
$5,651
$5,553
$5,102
PMIERs excess Available Assets
(7)
$1,740
$1,727
$1,560
Total Holding Company Liquidity
(8)
$1,231
$1,178
$1,282
Total investments
$5,838
$5,693
$6,335
Primary mortgage insurance in
force
$261,450
$260,994
$248,951
Percentage of primary loans in
default (9)
2.1%
2.2%
2.6%
Mortgage insurance loss
reserves
$400
$421
$722
(1)
Total revenues and net income for
the first quarter of 2023 includes a pretax net gain of $6 million
on investments and other financial instruments compared with a
pretax net gain on investments and other financial instruments of
$7 million in the fourth quarter of 2022 and a pretax net loss on
investments and other financial instruments of $29 million for the
first quarter of 2022.
(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 March 31, 2023, was $158
million, or $0.98 per diluted share. This compares with net income
for the quarter ended March 31, 2022, of $181 million, or $1.01 per
diluted share.
Adjusted pretax operating income for the quarter ended March 31,
2023, was $200 million, or $0.98 per diluted share. This compares
with adjusted pretax operating income for the quarter ended March
31, 2022, of $265 million, or $1.17 per diluted share.
Book value per share at March 31, 2023, was $26.23, compared to
$24.95 at December 31, 2022, and $23.75 at March 31, 2022. This
represents a 10% growth in book value per share at March 31, 2023,
as compared to March 31, 2022, and includes accumulated other
comprehensive income (loss) of $(2.47) per share as of March 31,
2023, and $(0.74) per share as of March 31, 2022, which, if
excluded as of both dates, would represent 17% 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 kicked off the year with another solid quarter for Radian,
increasing book value per share by 10% year-over-year to $26.23,
generating net income of $158 million and delivering return on
equity of 15.7%. Our primary mortgage insurance in force, which is
the main driver of future earnings for our company, grew 5%
year-over-year and our cure rate on defaulted loans reached the
second highest level in 15 years during the first quarter of 2023,”
said Radian’s Chief Executive Officer Rick Thornberry. “We continue
to strategically manage capital by maintaining strong holding
company liquidity and PMIERs cushion, repurchasing shares
opportunistically and paying the highest yielding dividend in the
industry.”
FIRST QUARTER HIGHLIGHTS
- NIW was $11.3 billion in the first quarter of 2023, compared to
$12.9 billion in the fourth quarter of 2022, and $18.7 billion in
the first quarter of 2022.
- Purchase NIW decreased 13% in the first quarter of 2023
compared to the fourth quarter of 2022 and decreased 36% compared
to the first quarter of 2022.
- Refinances accounted for 2% of total NIW in the first quarter
of 2023, compared to 2% in the fourth quarter of 2022, and 9% in
the first quarter of 2022.
- Of the $11.3 billion in NIW in the first quarter of 2023, 95%
was written with monthly and other recurring premiums, which was
the same percentage as in the fourth quarter of 2022 and the first
quarter of 2022.
- Total primary mortgage insurance in force as of March 31, 2023,
increased to $261.5 billion, relatively flat as compared to $261.0
billion as of December 31, 2022, and an increase of 5% compared to
$249.0 billion as of March 31, 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 82% for the
twelve months ended March 31, 2023, compared to 80% for the twelve
months ended December 31, 2022, and 68% for the twelve months ended
March 31, 2022.
- Annualized persistency for the three months ended March 31,
2023, was 84%, compared to 84% for the three months ended December
31, 2022, and 77% for the three months ended March 31, 2022.
- Net mortgage insurance premiums earned were $231 million for
the first quarter of 2023, compared to $230 million for the fourth
quarter of 2022, and $245 million for the first quarter of 2022.
- Mortgage insurance in force portfolio premium yield was 38.5
basis points in the first quarter of 2023. This compares to 38.1
basis points in the fourth quarter of 2022, and 39.6 basis points
in the first quarter of 2022.
- The impact of single premium policy cancellations before
consideration of reinsurance represented 0.8 basis points of direct
premium yield in the first quarter of 2023, 0.9 basis points in the
fourth quarter of 2022, and 2.4 basis points in the first quarter
of 2022.
- Total net mortgage insurance premium yield, which includes the
impact of ceded premiums and accrued profit commission, was 35.4
basis points in the first quarter of 2023. This compares to 35.4
basis points in the fourth quarter of 2022, and 39.6 basis points
in the first quarter of 2022.
- Details regarding premiums earned may be found in Exhibit
D.
- The mortgage insurance provision for losses was a benefit of
$17 million in the first quarter of 2023, compared to benefits of
$44 million and $84 million in the fourth quarter of 2022 and first
quarter of 2022, respectively.
- All periods benefited from significant favorable reserve
development on prior period defaults, particularly in 2022, due to
more favorable trends in cures than originally estimated. The
decreased benefit in the first quarter of 2023 compared to the
fourth quarter of 2022 and the first quarter of 2022 was primarily
related to less favorable development on prior period reserves, as
the remaining number of defaults and loss reserve balance continues
to decline.
- The number of primary delinquent loans was 20,748 as of March
31, 2023, compared to 21,913 as of December 31, 2022, and 25,510 as
of March 31, 2022.
- The loss ratio in the first quarter of 2023 was (7.3)% compared
to (18.9)% in the fourth quarter of 2022, and (34.3)% in the first
quarter of 2022.
- Total mortgage insurance claims paid were $3 million in the
first quarter of 2023, compared to $8 million in the fourth quarter
of 2022, and $5 million in the first quarter of 2022.
- Radian's homegenius segment offers an array of title, real
estate and 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 first quarter of 2023
were $13 million, compared to $19 million for the fourth quarter of
2022, and $34 million for the first quarter of 2022.
- Adjusted pretax operating loss, our primary segment measure of
profitability for the homegenius segment, was $23 million for the
first quarter of 2023, compared to $31 million for the fourth
quarter of 2022, and $14 million for the first quarter of
2022.
- Other operating expenses were $83 million in the first quarter
of 2023, compared to $110 million in the fourth quarter of 2022,
and $90 million in the first quarter of 2022.
- Other operating expenses decreased in the first quarter of 2023
as compared to expenses in the fourth quarter of 2022, which were
elevated primarily due to impairments to our lease-related assets
and severance and related expenses previously reported and
recognized in that quarter. Our expense reduction actions taken
during 2022 helped to lower the level of our expenses in the first
quarter of 2023. Additional details regarding other operating
expenses by segment may be found in Exhibit E.
CAPITAL AND LIQUIDITY UPDATE
Radian Group
- As of March 31, 2023, Radian Group maintained $956 million of
available liquidity. Total holding company liquidity, which
includes the company’s $275 million unsecured revolving credit
facility, was $1.2 billion as of March 31, 2023.
- During the first quarter of 2023, the company repurchased 716
thousand shares of Radian Group common stock at a total cost of $15
million, including commissions.
- In addition, in April 2023 the company purchased an additional
229 thousand shares of Radian Group common stock at a total cost of
$5 million, including commissions. After the repurchases in April,
purchase authority of up to $280 million remained available under
this program.
- As previously announced, on February 15, 2023, Radian Group’s
board of directors authorized a regular quarterly dividend on its
common stock in the amount of $0.225 per share, an increase of
12.5% from the previous quarterly dividend. The dividend was paid
on March 15, 2023.
Radian Guaranty
- In March 2023, Radian Guaranty paid an ordinary dividend to
Radian Group of $100 million. Radian Guaranty expects to pay
between $200 million to $300 million of additional ordinary
dividends to Radian Group during the remainder of 2023, based on
current performance expectations.
- At March 31, 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 44%, over
its Minimum Required Assets under PMIERs.
CONFERENCE CALL
Radian will discuss first quarter 2023 financial results in a
conference call tomorrow, Thursday, May 4, 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) gains (losses) on extinguishment of debt; (iii) amortization
and impairment of goodwill and other acquired intangible assets;
and (iv) impairment of other long-lived assets and other
non-operating items, such as impairment of internal-use software,
gains (losses) from the sale of lines of business and
acquisition-related income and expenses. 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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Revenues
Net premiums earned
$
233,238
$
232,827
$
240,222
$
253,892
$
254,190
Services revenue
10,984
15,441
20,146
27,281
29,348
Net investment income
59,221
59,091
51,414
46,957
38,196
Net gains (losses) on investments and
other financial instruments
5,585
6,845
(16,252
)
(41,869
)
(29,457
)
Other income
1,592
520
659
572
703
Total revenues
310,620
314,724
296,189
286,833
292,980
Expenses
Provision for losses
(16,929
)
(43,599
)
(96,964
)
(113,922
)
(83,754
)
Policy acquisition costs
6,293
5,931
5,442
5,940
6,605
Cost of services
10,398
16,128
18,717
22,760
24,753
Other operating expenses
83,269
109,785
91,327
90,495
89,541
Interest expense
22,207
21,594
21,183
20,831
20,846
Amortization of other acquired intangible
assets
1,371
1,587
1,023
849
849
Total expenses
106,609
111,426
40,728
26,953
58,840
Pretax income
204,011
203,298
255,461
259,880
234,140
Income tax provision
46,254
40,968
57,181
58,687
53,009
Net income
$
157,757
$
162,330
$
198,280
$
201,193
$
181,131
Diluted net income per share
$
0.98
$
1.01
$
1.20
$
1.15
$
1.01
Selected Mortgage Key
Ratios
2023
2022
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Loss ratio (1)
(7.3
)%
(18.9
)%
(41.5
)%
(46.2
)%
(34.3
)%
Expense ratio (2)
25.9
%
27.3
%
26.1
%
26.2
%
27.2
%
(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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Net income—basic and diluted
$
157,757
$
162,330
$
198,280
$
201,193
$
181,131
Average common shares
outstanding—basic
158,304
158,357
162,506
173,705
176,816
Dilutive effect of stock-based
compensation arrangements (1)
3,045
2,450
2,232
1,714
2,263
Adjusted average common shares
outstanding—diluted
161,349
160,807
164,738
175,419
179,079
Basic net income per share
$
1.00
$
1.03
$
1.22
$
1.16
$
1.02
Diluted net income per share
$
0.98
$
1.01
$
1.20
$
1.15
$
1.01
(1)
The following number of shares of our
common stock equivalents issued under our share-based compensation
arrangements were not included in the calculation of diluted net
income per share because they would be anti-dilutive.
2023
2022
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Shares of common stock equivalents
25
—
—
189
—
Radian Group Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
Exhibit C
March 31,
December 31,
September 30,
June 30
March 31,
(In thousands, except per-share
amounts)
2023
2022
2022
2022
2022
Assets
Investments
$
5,837,892
$
5,693,491
$
5,591,881
$
5,906,147
$
6,334,950
Cash
50,167
56,183
54,701
135,262
131,853
Restricted cash
577
377
1,107
561
1,651
Accrued investment income
42,567
40,093
38,596
35,774
35,531
Accounts and notes receivable
129,565
119,834
174,041
166,380
142,579
Reinsurance recoverable
24,396
25,633
30,569
39,876
55,015
Deferred policy acquisition costs
18,236
18,460
17,920
16,983
16,383
Property and equipment, net
72,111
70,981
75,740
74,874
75,275
Goodwill and other acquired intangible
assets, net
13,914
15,285
16,873
17,895
18,744
Prepaid federal income taxes
596,368
596,368
526,123
466,123
354,123
Other assets
418,609
427,024
458,292
414,412
449,642
Total assets
$
7,204,402
$
7,063,729
$
6,985,843
$
7,274,287
$
7,615,746
Liabilities and stockholders’ equity
Unearned premiums
$
257,735
$
271,479
$
285,290
$
298,991
$
312,013
Reserve for losses and loss adjustment
expense
405,651
426,843
483,664
594,808
727,247
Senior notes
1,414,549
1,413,504
1,412,473
1,411,458
1,410,458
Other borrowings
121,642
155,822
153,550
184,284
148,983
Reinsurance funds withheld
153,099
152,067
218,777
223,649
225,363
Net deferred tax liability
455,517
391,083
335,374
324,866
324,004
Other liabilities
289,731
333,604
358,665
305,269
320,114
Total liabilities
3,097,924
3,144,402
3,247,793
3,343,325
3,468,182
Common stock
176
176
176
186
193
Treasury stock
(931,313
)
(930,643
)
(930,396
)
(930,284
)
(920,958
)
Additional paid-in capital
1,515,852
1,519,641
1,513,615
1,698,490
1,871,763
Retained earnings
3,908,396
3,786,952
3,656,870
3,491,675
3,326,119
Accumulated other comprehensive income
(loss)
(386,633
)
(456,799
)
(502,215
)
(329,105
)
(129,553
)
Total stockholders’ equity
4,106,478
3,919,327
3,738,050
3,930,962
4,147,564
Total liabilities and stockholders’
equity
$
7,204,402
$
7,063,729
$
6,985,843
$
7,274,287
$
7,615,746
Shares outstanding
156,547
157,056
157,058
166,388
174,648
Book value per share
$
26.23
$
24.95
$
23.80
$
23.63
$
23.75
Debt to capital ratio (1)
25.6 %
26.5 %
27.4 %
26.4 %
25.4 %
Risk to capital ratio-Radian Guaranty
only
10.6:1
10.7:1
11.1:1
11.9:1
12.1:1
(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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Premiums earned
Direct - Mortgage
Premiums earned, excluding revenue from
cancellations
$
251,166
$
247,880
$
250,140
$
249,936
$
243,600
Single Premium Policy cancellations
5,361
5,756
6,705
6,894
14,696
Total direct - Mortgage
256,527
253,636
256,845
256,830
258,296
Assumed - Mortgage (1)
—
(56
)
1,211
1,539
1,331
Ceded - Mortgage
Premiums earned, excluding revenue from
cancellations
(35,526
)
(35,773
)
(38,879
)
(28,565
)
(27,339
)
Single Premium Policy cancellations
(2)
(1,472
)
(1,676
)
(1,844
)
(1,965
)
(4,192
)
Profit commission - other (3)
11,921
13,802
17,864
19,070
17,078
Total ceded premiums - Mortgage (4)
(25,077
)
(23,647
)
(22,859
)
(11,460
)
(14,453
)
Net premiums earned - Mortgage
231,450
229,933
235,197
246,909
245,174
Net premiums earned - homegenius
1,788
2,894
5,025
6,983
9,016
Net premiums earned
$
233,238
$
232,827
$
240,222
$
253,892
$
254,190
(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)
Includes the impact of related profit
commissions.
(3)
The amounts represent the profit
commission on the Single Premium QSR Program and 2022 QSR
Agreement, excluding the impact of Single Premium Policy
cancellations.
(4)
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 March 31,
2023
(In thousands)
Mortgage
homegenius
All Other (1)
Inter-segment (2)
Total
Net premiums written (3)
$
229,419
$
1,788
$
—
$
—
$
231,207
(Increase) decrease in unearned
premiums
2,031
—
—
—
2,031
Net premiums earned
231,450
1,788
—
—
233,238
Services revenue
336
10,743
—
(95
)
10,984
Net investment income
46,497
430
12,294
—
59,221
Net gains (losses) on investments and
other financial instruments
—
—
80
—
80
Other income
1,587
—
5
—
1,592
Total
279,870
12,961
12,379
(95
)
305,115
Provision for losses
(16,864
)
(65
)
—
—
(16,929
)
Policy acquisition costs
6,293
—
—
—
6,293
Cost of services
241
10,157
—
—
10,398
Other operating expenses before allocated
corporate operating expenses (4)
18,806
21,252
518
(5)
(95
)
40,481
Interest expense
22,130
—
77
—
22,207
Total
30,606
31,344
595
(95
)
62,450
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
249,264
(18,383
)
11,784
—
242,665
Allocation of corporate operating
expenses
34,829
4,658
3,315
(5)
—
42,802
Adjusted pretax operating income
(loss)
$
214,435
$
(23,041
)
$
8,469
$
—
$
199,863
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 2 of 6)
Three Months Ended March 31,
2022
(In thousands)
Mortgage
homegenius
All Other (1)
Inter-segment (2)
Total
Net premiums written (3)
$
248,360
$
9,016
$
—
$
—
$
257,376
(Increase) decrease in unearned
premiums
(3,186
)
—
—
—
(3,186
)
Net premiums earned
245,174
9,016
—
—
254,190
Services revenue
4,552
24,878
—
(82
)
29,348
Net investment income
34,017
18
4,161
—
38,196
Other income
703
—
—
—
703
Total
284,446
33,912
4,161
(82
)
322,437
Provision for losses
(84,193
)
481
—
(42
)
(83,754
)
Policy acquisition costs
6,605
—
—
—
6,605
Cost of services
3,383
21,370
—
—
24,753
Other operating expenses before allocated
corporate operating expenses (4)
23,755
20,287
3,142
(40
)
47,144
Interest expense
20,846
—
—
—
20,846
Total
(29,604
)
42,138
3,142
(82
)
15,594
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
314,050
(8,226
)
1,019
—
306,843
Allocation of corporate operating
expenses
36,209
5,280
406
—
41,895
Adjusted pretax operating income
(loss)
$
277,841
$
(13,506
)
$
613
$
—
$
264,948
(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).
(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 3 of 6)
Mortgage
2023
2022
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Net premiums written (1)
$
229,419
$
227,791
$
235,076
$
248,645
$
248,360
(Increase) decrease in unearned
premiums
2,031
2,142
121
(1,736
)
(3,186
)
Net premiums earned
231,450
229,933
235,197
246,909
245,174
Services revenue
336
328
405
2,105
4,552
Net investment income
46,497
52,165
44,842
40,197
34,017
Other income
1,587
512
589
572
703
Total
279,870
282,938
281,033
289,783
284,446
Provision for losses (2)
(16,864
)
(43,509
)
(97,493
)
(114,179
)
(84,193
)
Policy acquisition costs
6,293
5,931
5,442
5,940
6,605
Cost of services
241
235
373
1,960
3,383
Other operating expenses before allocated
corporate operating expenses (2) (3)
18,806
20,131
23,396
25,474
23,755
Interest expense
22,130
21,580
21,183
20,831
20,846
Total (2)
30,606
4,368
(47,099
)
(59,974
)
(29,604
)
Adjusted pretax operating income before
allocated corporate operating expenses
249,264
278,570
328,132
349,757
314,050
Allocation of corporate operating
expenses
34,829
36,663
32,457
33,237
36,209
Adjusted pretax operating income
$
214,435
$
241,907
$
295,675
$
316,520
$
277,841
homegenius
2023
2022
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Net premiums earned
$
1,788
$
2,894
$
5,025
$
6,983
$
9,016
Services revenue (2)
10,743
15,207
19,812
25,261
24,878
Net investment income
430
366
246
99
18
Other income (2)
—
170
—
—
—
Total (2)
12,961
18,637
25,083
32,343
33,912
Provision for losses
(65
)
(90
)
435
309
481
Cost of services
10,157
15,893
18,344
20,800
21,370
Other operating expenses before allocated
corporate operating expenses (3)
21,252
27,998
26,285
23,205
20,287
Total
31,344
43,801
45,064
44,314
42,138
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
(18,383
)
(25,164
)
(19,981
)
(11,971
)
(8,226
)
Allocation of corporate operating
expenses
4,658
6,302
5,555
5,719
5,280
Adjusted pretax operating income
(loss)
$
(23,041
)
$
(31,466
)
$
(25,536
)
$
(17,690
)
$
(13,506
)
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 4 of 6)
All Other (4)
2023
2022
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Net investment income
$
12,294
$
6,560
$
6,326
$
6,661
$
4,161
Net gains (losses) on investments and
other financial instruments
80
47
—
—
—
Other income
5
8
70
—
—
Total
12,379
6,615
6,396
6,661
4,161
Other operating expenses before allocated
corporate operating expenses (2) (3)
518
(5)
3,606
3,444
3,077
3,142
Interest expense
77
14
—
—
—
Total (2)
595
3,620
3,444
3,077
3,142
Adjusted pretax operating income before
allocated corporate operating expenses
11,784
2,995
2,952
3,584
1,019
Allocation of corporate operating
expenses
3,315
(5)
420
371
381
406
Adjusted pretax operating income
(loss)
$
8,469
$
2,575
$
2,581
$
3,203
$
613
(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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Other operating expenses by type
Salaries and other base employee
expenses
$
22,377
$
28,059
$
23,824
$
24,420
$
22,189
Variable and share-based incentive
compensation
13,306
10,419
10,186
11,524
16,697
Other general operating expenses
22,580
23,414
26,116
25,611
25,027
Ceding commissions
(4,628
)
(5,098
)
(4,273
)
(2,844
)
(3,949
)
Total
$
53,635
$
56,794
$
55,853
$
58,711
$
59,964
homegenius
2023
2022
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Other operating expenses by type
Salaries and other base employee
expenses
$
10,494
$
17,403
$
13,403
$
12,187
$
10,375
Variable and share-based incentive
compensation
4,700
4,148
4,429
4,776
5,522
Other general operating expenses
10,019
11,670
12,158
10,162
8,571
Title agent commissions
697
1,079
1,850
1,799
1,099
Total
$
25,910
$
34,300
$
31,840
$
28,924
$
25,567
All Other
2023
2022
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Other operating expenses by type
Salaries and other base employee
expenses
$
2,193
$
1,529
$
1,429
$
1,726
$
1,613
Variable and share-based incentive
compensation
267
755
751
709
953
Other general operating expenses
1,373
1,742
1,635
1,023
982
Total
$
3,833
$
4,026
$
3,815
$
3,458
$
3,548
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 6 of 6)
Inter-segment
2023
2022
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Other operating expenses by type
Other general operating expenses
$
(95
)
$
(264
)
$
(165
)
$
(33
)
$
(40
)
Total
$
(95
)
$
(264
)
$
(165
)
$
(33
)
$
(40
)
Total
2023
2022
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Other operating expenses by type
Salaries and other base employee
expenses
$
35,064
$
46,991
$
38,656
$
38,333
$
34,177
Variable and share-based incentive
compensation
18,273
15,322
15,366
17,009
23,172
Other general operating expenses
33,877
36,562
39,744
36,763
34,540
Ceding commissions
(4,628
)
(5,098
)
(4,273
)
(2,844
)
(3,949
)
Title agent commissions
697
1,079
1,850
1,799
1,099
Total
$
83,283
$
94,856
(1)
$
91,343
$
91,060
$
89,039
(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) gains (losses) on extinguishment of debt; (iii) amortization
and impairment of goodwill and other acquired intangible assets;
and (iv) impairment of other long-lived assets and other
non-operating items, such as impairment of internal-use software,
gains (losses) from the sale of lines of business and
acquisition-related income and expenses. 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) Gains (losses) on extinguishment
of debt. Gains or losses on early extinguishment of debt and
losses incurred to purchase our debt prior to maturity are
discretionary activities that are undertaken in order to take
advantage of market opportunities to strengthen our financial and
capital positions; therefore, we do not view these activities as
part of our operating performance. Such transactions do not reflect
expected future operations and do not provide meaningful insight
regarding our current or past operating trends.
(3) 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.
(4) 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; and (iii) acquisition-related income and expenses.
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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Consolidated pretax income
$
204,011
$
203,298
$
255,461
$
259,880
$
234,140
Less reconciling income (expense)
items
Net gains (losses) on investments and
other financial instruments (1)
5,505
6,798
(16,252
)
(41,869
)
(29,457
)
Amortization of other acquired intangible
assets
(1,371
)
(1,587
)
(1,023
)
(849
)
(849
)
Impairment of other long-lived assets and
other non-operating items (2)
14
(14,929
)
16
565
(502
)
Total adjusted pretax operating income
(3)
$
199,863
$
213,016
$
272,720
$
302,033
$
264,948
(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 impairments 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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Adjusted pretax operating income
(loss)
Mortgage segment
$
214,435
$
241,907
$
295,675
$
316,520
$
277,841
homegenius segment
(23,041
)
(31,466
)
(25,536
)
(17,690
)
(13,506
)
All Other activities
8,469
2,575
2,581
3,203
613
Total adjusted pretax operating income
$
199,863
$
213,016
$
272,720
$
302,033
$
264,948
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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Diluted net income per share
$
0.98
$
1.01
$
1.20
$
1.15
$
1.01
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
)
(0.16
)
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
0.03
Difference between statutory and effective
tax rates
(0.01
)
0.01
(0.02
)
(0.02
)
(0.02
)
Per-share impact of reconciling income
(expense) items
—
(0.04
)
(0.11
)
(0.21
)
(0.16
)
Adjusted diluted net operating income per
share (1)
$
0.98
$
1.05
$
1.31
$
1.36
$
1.17
(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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Return on equity (1)
15.7
%
17.0
%
20.7
%
19.9
%
17.2
%
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
)
(2.8
)
Amortization of other acquired intangible
assets
(0.1
)
(0.2
)
(0.1
)
(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
)
0.2
0.4
0.9
0.6
Difference between statutory and effective
tax rates
(0.3
)
0.3
(0.4
)
(0.5
)
(0.4
)
Impact of reconciling income (expense)
items
—
(0.6
)
(1.8
)
(3.7
)
(2.7
)
Adjusted net operating return on equity
(3)
15.7
%
17.6
%
22.5
%
23.6
%
19.9
%
(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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
homegenius adjusted pretax operating
income (loss)
$
(23,041
)
$
(31,466
)
$
(25,536
)
$
(17,690
)
$
(13,506
)
Less reconciling income (expense)
items
Allocation of corporate operating
expenses
(4,658
)
(6,302
)
(5,555
)
(5,719
)
(5,280
)
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
(18,383
)
(25,164
)
(19,981
)
(11,971
)
(8,226
)
Less reconciling income (expense)
items
Other operating expenses before allocated
corporate operating expenses
(21,252
)
(27,998
)
(26,285
)
(23,205
)
(20,287
)
homegenius adjusted gross profit
$
2,869
$
2,834
$
6,304
$
11,234
$
12,061
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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
New insurance written (“NIW”)
$
11,261
$
12,859
$
17,616
$
18,935
$
18,655
Total borrower-paid NIW
99.4
%
99.3
%
99.1
%
99.2
%
99.2
%
NIW by premium type
Direct monthly and other recurring
premiums
94.9
%
94.8
%
95.5
%
95.4
%
94.5
%
Direct single premiums (1)
5.1
%
5.2
%
4.5
%
4.6
%
5.5
%
NIW for purchases
97.6
%
98.3
%
98.4
%
97.1
%
91.4
%
NIW for refinances
2.4
%
1.7
%
1.6
%
2.9
%
8.6
%
NIW by FICO score (2)
>=740
60.7
%
59.4
%
63.3
%
59.6
%
57.1
%
680-739
32.8
33.1
28.5
32.3
35.7
620-679
6.5
7.5
8.2
8.1
7.2
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
NIW by LTV
95.01% and above
17.7
%
15.5
%
18.3
%
17.7
%
14.6
%
90.01% to 95.00%
40.2
40.8
37.1
39.9
42.0
85.01% to 90.00%
28.7
29.7
28.0
26.7
29.4
85.00% and below
13.4
14.0
16.6
15.7
14.0
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
(1)
Borrower-paid Single Premium Policies were 4.9%, 4.9%, 4.3%, 4.4%
and 5.3% 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
March 31,
December 31,
September 30,
June 30,
March 31,
($ in millions)
2023
2022
2022
2022
2022
Primary insurance in force
$
261,450
$
260,994
$
259,121
$
254,226
$
248,951
Primary risk in force (“RIF”)
$
66,580
$
66,094
$
65,288
$
63,770
$
62,036
Primary RIF by premium type
Direct monthly and other recurring
premiums
87.6
%
87.1
%
86.4
%
85.6
%
84.9
%
Direct single premiums (1)
12.4
%
12.9
%
13.6
%
14.4
%
15.1
%
Primary RIF by FICO score (2)
>=740
57.4
%
57.4
%
57.5
%
57.2
%
56.9
%
680-739
34.6
34.6
34.5
34.9
35.1
620-679
7.6
7.6
7.6
7.5
7.5
<=619
0.4
0.4
0.4
0.4
0.5
Total Primary
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Primary RIF by LTV
95.01% and above
17.5
%
17.1
%
16.8
%
16.1
%
15.5
%
90.01% to 95.00%
48.5
48.4
48.4
48.7
48.9
85.01% to 90.00%
27.0
27.2
27.2
27.4
27.6
85.00% and below
7.0
7.3
7.6
7.8
8.0
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Primary RIF by policy year
2008 and prior
3.3
%
3.5
%
3.7
%
4.0
%
4.3
%
2009 - 2017
9.1
10.0
10.9
12.2
13.6
2018
3.3
3.5
3.7
4.1
4.6
2019
6.4
6.7
7.1
7.7
8.6
2020
20.3
21.6
23.0
25.0
27.2
2021
28.6
29.5
30.6
32.1
34.0
2022
24.7
25.2
21.0
14.9
7.7
2023
4.3
—
—
—
—
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Persistency Rate (12 months ended)
81.6
%
79.6
%
75.9
%
71.7
%
68.0
%
Persistency Rate (quarterly, annualized)
(3)
84.4
%
(4)
84.1
%
(4)
81.6
%
(4)
79.8
%
76.9
%
(4)
(1)
Borrower-paid Single Premium Policies were 7.5%, 7.7%, 7.9%, 8.1%
and 8.4% 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.
(4)
The Persistency Rate was reduced by an increase in cancellations of
Single Premium Policies due to increased cancellations identified
by our ongoing servicer monitoring process for Single Premium
Policies.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Default, Reserves and Claim Statistics
Exhibit J
March 31,
December 31,
September 30,
June 30,
March 31,
2023
2022
2022
2022
2022
Default Statistics
Primary Insurance
Number of insured loans
997,443
1,003,183
1,004,305
998,520
994,721
Number of loans in default
20,748
21,913
21,077
21,861
25,510
Percentage of loans in default
2.1
%
2.2
%
2.1
%
2.2
%
2.6
%
March 31,
December 31,
September 30,
June 30,
March 31,
($ in thousands, except per default
amounts)
2023
2022
2022
2022
2022
Reserve for losses by category (1)
Mortgage reserves
Primary case reserves
$
378,992
$
398,874
$
454,726
$
562,436
$
691,090
LAE
9,535
10,041
11,443
14,147
17,367
IBNR
1,772
2,128
2,229
2,424
2,539
Total primary reserves
390,299
411,043
468,398
579,007
710,996
Total pool reserves
9,379
9,740
9,175
9,756
10,330
Total 1st lien reserves
399,678
420,783
477,573
588,763
721,326
Other
172
172
174
184
184
Total Mortgage reserves
399,850
420,955
477,747
588,947
721,510
homegenius reserves
5,801
5,888
5,917
5,861
5,737
Total reserves
$
405,651
$
426,843
$
483,664
$
594,808
$
727,247
Primary reserve per primary default
excluding IBNR and other
$
18,726
$
18,661
$
22,122
$
26,380
$
27,776
(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.
2023
2022
($ in thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Net claims paid (1)
Primary claims paid
$
3,019
$
3,821
$
3,606
$
3,659
$
5,153
Pool and other
(3
)
(49
)
(420
)
(396
)
(415
)
Subtotal
3,016
3,772
3,186
3,263
4,738
Impact of commutations and settlements
(2)
—
4,582
1,317
—
—
Total net claims paid
$
3,016
$
8,354
$
4,503
$
3,263
$
4,738
Total average net primary claims paid (1)
(3)
$
35.5
$
51.6
$
45.1
$
41.6
$
41.6
Average direct primary claims paid (3)
(4)
$
36.1
$
52.7
$
45.2
$
41.9
$
42.1
(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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
2022 and 2012 QSR Agreements (1)
Ceded premiums written (2)
$
7,834
$
6,770
$
10,363
$
253
$
306
% of premiums written
3.2
%
2.8
%
4.2
%
0.1
%
0.1
%
Ceded premiums earned
$
6,745
$
5,570
$
4,036
$
360
$
491
% of premiums earned
2.6
%
2.2
%
1.5
%
0.1
%
0.2
%
Ceding commissions earned (3)
$
2,529
$
2,128
$
1,609
$
127
$
537
Profit commission
$
4,925
$
4,433
$
4,008
$
—
$
—
Ceded losses
$
1,553
$
736
$
(235
)
$
(917
)
$
(720
)
Single Premium QSR Program
Ceded premiums written (2)
$
(9,202
)
$
(11,523
)
$
(19,303
)
$
(21,806
)
$
(22,386
)
% of premiums written
(3.8
)%
(4.8
)%
(7.7
)%
(8.6
)%
(8.9
)%
Ceded premiums earned
$
2,070
$
114
$
(3,465
)
$
(8,297
)
$
(3,731
)
% of premiums earned
0.8
%
—
%
(1.3
)%
(3.1
)%
(1.4
)%
Ceding commissions earned (3)
$
2,712
$
3,530
$
3,153
$
3,287
$
4,586
Profit commission
$
8,778
$
11,159
$
16,074
$
21,447
$
22,075
Ceded losses
$
(2,725
)
$
(5,587
)
$
(9,049
)
$
(14,120
)
$
(11,868
)
Excess-of-Loss Program
Ceded premiums written
$
14,629
$
16,691
$
18,114
$
18,151
$
16,164
% of premiums written
6.0
%
6.9
%
7.3
%
7.2
%
6.4
%
Ceded premiums earned
$
16,159
$
17,924
$
22,184
$
19,292
$
17,588
% of premiums earned
6.3
%
7.0
%
8.4
%
7.3
%
6.5
%
Ceded RIF (4)
Single Premium QSR Program
$
3,885,689
$
4,076,690
$
4,273,500
$
4,665,020
$
4,855,228
Excess-of-Loss Program
1,789,145
1,866,808
1,940,126
2,076,121
2,199,919
2022 QSR Agreement
3,830,179
3,307,429
2,710,247
—
—
2012 QSR Agreements
125,718
142,364
160,106
175,046
186,930
Total Ceded RIF
$
9,630,731
$
9,393,291
$
9,083,979
$
6,916,187
$
7,242,077
PMIERs impact - reduction in Minimum
Required Assets
Excess-of-Loss Program
$
610,567
$
665,617
$
732,895
$
785,705
$
881,917
Single Premium QSR Program
218,931
231,339
243,911
268,847
286,706
2022 QSR Agreement
272,489
233,532
189,408
—
—
2012 QSR Agreements
7,395
8,357
9,310
10,226
11,214
Total PMIERs impact
$
1,109,382
$
1,138,845
$
1,175,524
$
1,064,778
$
1,179,837
(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 those that
may arise from the need to raise the U.S. debt limit in the
near-term, including a failure to raise the limit or uncertainty as
to whether it will be raised and the 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 any failure to take action to
increase the U.S.’s debt limit, 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 will be impacted by, among other
things, the size and mix of our insurance in force, 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 “SAPP” (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/20230428005519/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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