-- GAAP net income of $126 million, or $0.67
per diluted share --
-- Adjusted diluted net operating income of
$0.67 per diluted share --
-- New Insurance Written of $26.6 billion,
grows 23% quarter-over-quarter --
-- Primary mortgage insurance in force grows
$4.3 billion to $241.6 billion quarter-over-quarter --
-- Book value per share grows 9% year-over-year
to $23.48 --
-- homegenius revenues grow 51% year-over-year
to $45.1 million --
-- Company purchases 7.1 million shares or
$158.3 million of Radian Group common stock during the three months
ended September 30th --
Radian Group Inc. (NYSE: RDN) today reported net income for the
quarter ended September 30, 2021, of $126.4 million, or $0.67 per
diluted share. This compares with net income for the quarter ended
September 30, 2020, of $135.1 million, or $0.70 per diluted
share.
Key Financial Highlights (dollars in millions, except
per-share amounts)
Quarter ended
September 30, 2021
June 30, 2021
September 30, 2020
Net income (1)
$126.4
$155.2
$135.1
Diluted net income per share
$0.67
$0.80
$0.70
Consolidated pretax income
$161.6
$195.5
$161.2
Adjusted pretax operating income
(2)
$160.6
$184.7
$145.0
Adjusted diluted net
operating
income per share (2)(3)
$0.67
$0.75
$0.59
Return on equity (1)(4)
11.8%
14.5%
13.3%
Adjusted net operating return on
equity (2)(3)
11.8%
13.6%
11.3%
New Insurance Written (NIW) -
mortgage insurance
$26,558
$21,662
$33,320
Net premiums earned - mortgage
insurance
$236.9
$247.1
$283.4
New defaults (5)
8,132
8,145
20,508
Provision for losses - mortgage
insurance
$16.8
$3.3
$87.8
Book value per share (6)
$23.48
$23.02
$21.52
PMIERs Available Assets (7)
$5,262
$5,042
$4,469
PMIERs excess Available Assets
(8)
$1,741
$1,857
$970
Total Holding Company Liquidity
(9)
$1,036
$1,191
$1,376
Total investments
$6,658
$6,682
$6,585
Primary mortgage insurance in
force
$241,575
$237,302
$245,467
Percentage of primary loans in
default (10)
3.4%
4.0%
5.9%
Mortgage insurance loss
reserves
$888
$881
$822
homegenius revenues
$45.1
$33.5
$29.8
(1)
Net income for the third quarter of 2021
includes a pretax net gain on investments and other financial
instruments of $2.1 million, compared to a pretax net gain on
investments and other financial instruments of $15.7 million in the
second quarter of 2021 and a pretax net gain on investments and
other financial instruments for the third quarter of 2020 of $17.7
million.
(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 percent.
(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)
Represents the number of new defaults
reported during the period on loans related to primary mortgage
insurance policies.
(6)
Book value per share includes accumulated
other comprehensive income (loss) of $0.84 as of September 30,
2021, $0.95 as of June 30, 2021 and $1.21 as of September 30,
2020.
(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 the $35 million minimum liquidity requirement and
available capacity under its unsecured revolving credit
facility.
(10)
Represents the number of primary loans in
default as a percentage of the total number of insured primary
loans.
Adjusted pretax operating income for the quarter ended September
30, 2021, was $160.6 million, or $0.67 per diluted share. This
compares with adjusted pretax operating income for the quarter
ended September 30, 2020, of $145.0 million, or $0.59 per diluted
share.
Book value as of September 30, 2021, was $4.3 billion, an
increase of 3 percent compared to $4.1 billion as of September 30,
2020. Book value per share at September 30, 2021, was $23.48, an
increase of 9 percent compared to $21.52 at September 30, 2020.
“We continue to see strong growth in the housing and real estate
markets, driven by historically low interest rates and robust
demand. And while we continue to closely monitor the pandemic and
the economic environment, we are encouraged by the favorable credit
trends within our insured portfolio," said Radian’s Chief Executive
Officer Rick Thornberry. “We reported net income of $126 million,
increased book value per share by 9% year-over-year, grew our
primary mortgage insurance in-force portfolio to $241.6 billion and
reported a year-over-year increase in homegenius revenue of 51%.
These results reflect the momentum of our businesses, the strength
of our products and customer relationships, and the dedication of
our team.”
THIRD QUARTER HIGHLIGHTS
- NIW was $26.6 billion in the third quarter of 2021, compared to
$21.7 billion in the second quarter of 2021, and $33.3 billion in
the third quarter of 2020.
- Of the $26.6 billion in NIW in the third quarter of 2021, 93.8
percent was written with monthly and other recurring premiums,
compared to 93.1 percent in the second quarter of 2021, and 90.0
percent in the third quarter of 2020.
- Refinances accounted for 10.2 percent of total NIW in the third
quarter of 2021, compared to 22.9 percent in the second quarter of
2021, and 29.5 percent in the third quarter of 2020.
- Total primary mortgage insurance in force as of September 30,
2021, increased to $241.6 billion, an increase of 1.8 percent
compared to $237.3 billion as of June 30, 2021, and a decrease of
1.6 percent compared to $245.5 billion as of September 30, 2020.
The year-over-year decrease included a 25.1 percent decline in
single premium policy insurance in force, partially offset by a 5.8
percent increase in monthly premium policy insurance in force.
- Persistency, which is the percentage of mortgage insurance that
remains in force after a twelve-month period, was 60.8 percent for
the twelve months ended September 30, 2021, compared to 57.7
percent for the twelve months ended June 30, 2021, and 65.6 percent
for the twelve months ended September 30, 2020.
- Annualized persistency for the three months ended September 30,
2021, was 67.5 percent, compared to 66.3 percent for the three
months ended June 30, 2021, and 60.0 percent for the three months
ended September 30, 2020.
- Net mortgage insurance premiums earned were $236.9 million for
the quarter ended September 30, 2021, compared to $247.1 million
for the quarter ended June 30, 2021, and $283.4 million for the
quarter ended September 30, 2020.
- Mortgage insurance in force portfolio premium yield was 40.3
basis points in the third quarter of 2021, compared to 41.1 basis
points in the second quarter of 2021, and 43.2 basis points in the
third quarter of 2020.
- The impact of single premium policy cancellations before
consideration of reinsurance represented 4.3 basis points of direct
premium yield in the third quarter of 2021, 5.3 basis points in the
second quarter of 2021, and 10.7 basis points in the third quarter
of 2020.
- Total net mortgage insurance premium yield, which includes the
impact of ceded premiums and accrued profit commission, was 39.6
basis points in the third quarter of 2021, 41.5 basis points in the
second quarter of 2021, and 46.6 basis points in the third quarter
of 2020.
- Additional details regarding premiums earned may be found in
Exhibit D.
- The mortgage insurance provision for losses was $16.8 million
in the third quarter of 2021, compared to $3.3 million in the
second quarter of 2021, and $87.8 million in the third quarter of
2020.
- The increase in the third quarter of 2021 compared to the
second quarter of 2021 was primarily related to less favorable
development on prior period reserves, as compared to the second
quarter of 2021. Both periods were impacted by more favorable
trends in cures than originally estimated. The decrease in the
third quarter of 2021 compared to the third quarter of 2020 was
driven primarily by a significant decrease in primary new default
notices related to the effects of the COVID-19 pandemic.
- The number of primary delinquent loans was 33,795 as of
September 30, 2021, compared to 40,464 as of June 30, 2021, and
62,737 as of September 30, 2020.
- The loss ratio in the third quarter of 2021 was 7.1 percent,
compared to 1.3 percent in the second quarter of 2021, and 31.0
percent in the third quarter of 2020.
- Total mortgage insurance claims paid were $10.2 million in the
third quarter of 2021, compared to $4.2 million in the second
quarter of 2021, and $10.8 million in the third quarter of 2020.
Excluding the impact of commutations and settlements, claims paid
were $6.3 million in the third quarter of 2021, compared to $4.2
million in the second quarter of 2021, and $11.1 million in the
third quarter of 2020.
- Radian's homegenius segment offers a broad array of title,
valuation, asset management, software-as-a-service and other real
estate services to mortgage lenders, mortgage and real estate
investors, GSEs, real estate brokers and agents.
- Total homegenius segment revenues for the third quarter of 2021
were $45.1 million, compared to $33.5 million for the second
quarter of 2021, and $29.8 million for the third quarter of
2020.
- The increase in revenues for the homegenius segment in the
third quarter of 2021 compared to the second quarter of 2021 and
the third quarter of 2020 was primarily driven by increases in net
title premiums earned and services revenue attributable to our
title and asset management businesses. homegenius Profitability
Metrics
- Adjusted pretax operating loss, our primary segment measure of
profitability for the homegenius segment, for the quarter ended
September 30, 2021 was $5.6 million, compared to
$9.2 million for the quarter ended June 30, 2021, and
$5.0 million for the quarter ended September 30,
2020.
- Adjusted pretax operating loss before allocated corporate
operating expenses for the homegenius segment for the quarter ended
September 30, 2021 was $0.6 million, compared to
$4.5 million for the quarter ended June 30, 2021, and
$1.8 million for the quarter ended September 30, 2020.
Additional details regarding the homegenius results and related
non-GAAP measures may be found in Exhibits F and G.
- Adjusted gross profit for the homegenius segment for the
quarter ended September 30, 2021 was $17.9 million,
compared to $11.7 million for the quarter ended June 30,
2021, and $11.3 million for the quarter ended
September 30, 2020. Additional details regarding the
homegenius results and related non-GAAP measures may be found in
Exhibits F and G.
- Other operating expenses were $86.5 million in the third
quarter of 2021, compared to $86.5 million in the second quarter of
2021, and $69.4 million in the third quarter of 2020.
- The increase in the third quarter of 2021 compared to the third
quarter of 2020 was driven primarily by an increase in incentive
compensation expense and a decrease in ceding commissions.
CAPITAL AND LIQUIDITY UPDATE
Radian Group
- As of September 30, 2021, Radian Group maintained $768.4
million of available liquidity. Total liquidity, which includes the
company’s $267.5 million unsecured revolving credit facility, was
$1.0 billion as of September 30, 2021.
- During the quarter ended September 30, 2021, the company
repurchased 7.1 million shares of Radian Group common stock at a
total cost of $158.3 million, including commissions. As of
September 30, 2021, purchase authority of up to $142.0 million
remained available under this program. The current share repurchase
authorization expires on August 31, 2022.
- In addition, in October the Company purchased an additional 2.0
million shares, or approximately $46.5 million of Radian Group
common stock, including commissions. After the repurchases in
October, purchase authority of up to approximately $95.5 million
remained available under the existing program.
- On August 11, 2021, Radian Group’s Board of Directors
authorized a regular quarterly dividend on its common stock in the
amount of $0.14 per share and the dividend was paid on September 2,
2021.
Radian Guaranty
- At September 30, 2021, Radian Guaranty’s Available Assets under
PMIERs totaled approximately $5.3 billion, resulting in excess
available resources or a “cushion” of $1.7 billion, or 49 percent,
over its Minimum Required Assets.
- As of September 30, 2021, 63 percent of Radian Guaranty's
primary mortgage insurance risk in force is subject to some form of
risk distribution, providing a $1.0 billion reduction of Minimum
Required Assets under PMIERs.
RECENT EVENTS
Insurance-Linked Note
As previously announced, Radian Guaranty expects to obtain up to
$484.1 million of credit-risk protection from Eagle Re 2021-2 Ltd.
(Eagle Re), covering an existing portfolio of mortgage insurance
policies written predominantly from January 1,2021 through and
including July 31, 2021. Eagle Re will finance the coverage through
the issuance of ILNs to capital markets investors of $484.1 million
aggregate principal amount of 12.5-year mortgage insurance-linked
notes, in an unregistered private offering that priced on October
29, 2021. The offering is expected to close on or about November 9,
2021. Eagle Re is a special purpose insurer domiciled in Bermuda
and is not a subsidiary or affiliate of Radian Guaranty. Radian
Guaranty's related PMIERs credit under this ILN transaction will be
subject to GSE approval. As of September 30, 2021, assuming the
November ILN transaction described above closes on or about
November 9, 2021, as expected:
- Radian Guaranty's Minimum Required Assets would have decreased
by approximately $480 million, which would have resulted in an
increase in PMIERs excess Available Assets or "cushion" to $2.2
billion, or 73 percent over the Minimum Required Assets.
- Radian Guaranty's primary mortgage insurance risk in force that
is subject to some form of risk distribution would have increased
to 80 percent, providing a $1.5 billion reduction of Minimum
Required Assets under PMIERs.
CONFERENCE CALL
Radian will discuss third quarter 2021 financial results in a
conference call tomorrow, Wednesday, November 3, 2021, at 11:00
a.m. Eastern daylight time. The conference call will be broadcast
live over the Internet at
https://radian.com/who-we-are/for-investors/webcasts or at
www.radian.com. The call may also be accessed by dialing
800.447.0521 inside the U.S., or 847.413.3238 for international
callers, using passcode 50246248 by referencing Radian.
A digital replay of the webcast will be available on the Radian
website approximately two hours after the live broadcast ends for a
period of two weeks at
https://radian.com/who-we-are/for-investors/webcasts using passcode
50246248.
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, adjusted
diluted net operating income 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; (ii)
loss 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. In addition, homegenius adjusted pretax operating margin
before allocated corporate operating expenses and homegenius
adjusted gross profit margin are calculated by dividing homegenius
adjusted pretax operating margin before allocated corporate
operating expenses and homegenius adjusted gross profit,
respectively, by GAAP total revenue for the homegenius segment. For
the homegenius segment, adjusted pretax operating income (loss)
before allocated corporate operating expenses, adjusted gross
profit, and the related homegenius profit margins 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, software-as-a service 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 to learn more about how Radian is shaping the future
of 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
Claims and Reserves
Exhibit K:
Mortgage Supplemental Information
Default Statistics
Exhibit L:
Mortgage Supplemental Information
Reinsurance Programs
Radian Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations Trend Schedule
Exhibit A
2021
2020
(In thousands, except per-share
amounts)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Revenues:
Net premiums earned
$
249,118
$
254,756
$
271,872
$
302,140
(1)
$
286,471
Services revenue
37,773
29,464
22,895
11,440
(1)
33,943
Net investment income
35,960
36,291
38,251
38,115
36,255
Net gains (losses) on investments and
other financial instruments
2,098
15,661
(5,181)
17,376
17,652
Other income
809
822
976
790
913
Total revenues
325,758
336,994
328,813
369,861
375,234
Expenses:
Provision for losses
17,305
3,648
46,143
56,664
88,084
Policy acquisition costs
7,924
4,838
8,996
7,395
10,166
Cost of services
30,520
24,615
20,246
21,600
24,353
Other operating expenses
86,479
86,469
70,262
81,641
69,377
Interest expense
21,027
21,065
21,115
21,169
21,088
Amortization and impairment of other
acquired intangible assets
862
863
862
2,225
961
Total expenses
164,117
141,498
167,624
190,694
214,029
Pretax income
161,641
195,496
161,189
179,167
161,205
Income tax provision
35,229
40,290
35,581
31,154
26,102
Net income
$
126,412
$
155,206
$
125,608
$
148,013
$
135,103
Diluted net income per share
$
0.67
$
0.80
$
0.64
$
0.76
$
0.70
(1)
Includes the impact of a line item
reclassification recorded in the fourth quarter to correct earlier
periods in 2020, which increased net premiums earned and decreased
services revenue by $7.8 million each. See Exhibit E for additional
detail by period related to this out-of-period adjustment reflected
in our All Other results.
Radian Group Inc. and
Subsidiaries
Net Income Per Share Trend
Schedule
Exhibit B
The calculation of basic and diluted
net income per share was as follows:
2021
2020
(In thousands, except per-share
amounts)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net income —basic and diluted
$
126,412
$
155,206
$
125,608
$
148,013
$
135,103
Average common shares
outstanding—basic
186,741
193,436
193,439
193,248
193,176
Dilutive effect of stock-based
compensation arrangements (1)
1,301
1,202
1,764
1,415
980
Adjusted average common shares
outstanding—diluted
188,042
194,638
195,203
194,663
194,156
Basic net income per share
$
0.68
$
0.80
$
0.65
$
0.77
.
$
0.70
Diluted net income per share
$
0.67
$
0.80
$
0.64
$
0.76
$
0.70
(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 (loss) per share because they were anti-dilutive:
2021
2020
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Shares of common stock equivalents
—
—
—
324
710
Radian Group Inc. and Subsidiaries Condensed
Consolidated Balance Sheets Exhibit C
September 30,
June 30,
March 31,
December 31,
September 30,
(In thousands, except per-share
amounts)
2021
2021
2021
2020
2020
Assets:
Investments
$
6,658,487
$
6,681,659
$
6,671,874
$
6,788,442
$
6,584,577
Cash
154,709
134,939
102,776
87,915
82,020
Restricted cash
1,866
2,968
20,987
6,231
4,424
Accrued investment income
33,258
32,223
34,841
34,047
36,093
Accounts and notes receivable
166,730
153,128
134,075
121,294
145,164
Reinsurance recoverables
76,048
75,411
76,664
73,202
66,515
Deferred policy acquisition
costs
16,823
17,873
15,652
18,305
17,926
Property and equipment, net
74,170
74,288
78,309
80,457
88,717
Goodwill and other acquired intangible
assets, net
20,456
21,318
22,181
23,043
25,268
Other assets
839,061
815,261
763,502
715,085
726,641
Total assets
$
8,041,608
$
8,009,068
$
7,920,861
$
7,948,021
$
7,777,345
Liabilities and stockholders’
equity:
Unearned premiums
$
348,322
$
373,031
$
406,689
$
448,791
$
501,787
Reserve for losses and loss adjustment
expense
893,155
885,498
887,355
848,413
825,792
Senior notes
1,408,502
1,407,545
1,406,603
1,405,674
1,404,759
FHLB advances
172,649
153,983
138,833
176,483
141,058
Reinsurance funds withheld
290,502
285,406
282,345
278,555
318,773
Net deferred tax liability
286,957
266,330
210,571
213,897
166,136
Other liabilities
383,585
303,442
353,173
291,855
296,661
Total liabilities
3,783,672
3,675,235
3,685,569
3,663,668
3,654,966
Common stock
200
207
210
210
210
Treasury stock
(920,355
)
(920,225
)
(910,347
)
(910,115
)
(909,745
)
Additional paid-in capital
2,012,870
2,161,857
2,242,950
2,245,897
2,238,869
Retained earnings
3,012,997
2,913,138
2,785,744
2,684,636
2,561,076
Accumulated other comprehensive
income
152,224
178,856
116,735
263,725
231,969
Total stockholders’ equity
4,257,936
4,333,833
4,235,292
4,284,353
4,122,379
Total liabilities and stockholders’
equity
$
8,041,608
$
8,009,068
$
7,920,861
$
7,948,021
$
7,777,345
Shares outstanding
181,336
188,290
191,311
191,606
191,556
Book value per share
$
23.48
$
23.02
$
22.14
$
22.36
$
21.52
Debt to capital ratio (1)
24.9
%
24.5
%
24.9
%
24.7
%
25.4
%
Risk to capital ratio-Radian Guaranty
only
11.4:1
11.4:1
11.9:1
12.7:1
13.2:1
(1)
Calculated as senior notes divided by
senior notes and stockholders' equity.
Radian Group Inc. and
Subsidiaries
Net Premiums Earned
Exhibit D
2021
2020
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Premiums earned:
Direct - Mortgage:
Premiums earned, excluding revenue from
cancellations (1)
$
239,786
$
243,077
$
256,905
$
272,331
$
259,889
Single Premium Policy
cancellations
25,592
31,592
38,510
53,526
65,667
Total direct - Mortgage (1)
265,378
274,669
295,415
325,857
325,556
Assumed - Mortgage: (2)
1,683
1,615
2,298
2,615
2,946
Ceded - Mortgage:
Premiums earned, excluding revenue from
cancellations
(27,662)
(27,324)
(25,373)
(27,229)
(25,120)
Single Premium Policy cancellations
(3)
(7,338)
(9,036)
(11,109)
(15,197)
(18,679)
Profit commission - other (4)
4,806
7,162
3,433
770
(1,347)
Total ceded premiums - Mortgage
(5)
(30,194)
(29,198)
(33,049)
(41,656)
(45,146)
Net premiums earned - Mortgage
(1)
236,867
247,086
264,664
286,816
283,356
Net premiums earned - homegenius
(6)
12,251
7,670
7,208
7,572
7,099
Net premiums earned - All Other
(6)
—
—
—
7,752
(3,984)
Net premiums earned (1)
$
249,118
$
254,756
$
271,872
$
302,140
$
286,471
(1)
The fourth quarter of 2020 includes an
increase to premiums earned of $11.3 million related to changes in
present value estimates for initial premiums on monthly policies
that are deferred and not collected until cancellation. The impact
of changes in this estimate in other periods is not material.
(2)
Relates primarily to premiums earned from
our participation in certain credit risk transfer programs.
(3)
Includes the impact of related profit
commissions.
(4)
The amounts represent the profit
commission on the Single Premium QSR Program, excluding the impact
of Single Premium Policy cancellations.
(5)
See Exhibit L for additional information
on ceded premiums for our various reinsurance programs.
(6)
See Exhibit E for additional information
on changes that impacted our reported segment results for all
periods.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 1 of 4)
Summarized financial information concerning our operating
segments as of and for the periods indicated is as follows. For a
definition of adjusted pretax operating income (loss), 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 September
30, 2021
(In thousands)
Mortgage
homegenius
All Other
Inter-segment
Total
Net premiums written (1)
$
228,116
$
12,251
$
—
$
—
$
240,367
(Increase) decrease in unearned
premiums
8,751
—
—
—
8,751
Net premiums earned
236,867
12,251
—
—
249,118
Services revenue
5,027
32,805
27
(86)
37,773
Net investment income
32,158
35
3,767
—
35,960
Other income
607
—
202
—
809
Total
274,659
45,091
3,996
(86)
323,660
Provision for losses
16,794
540
—
(29)
17,305
Policy acquisition costs
7,924
—
—
—
7,924
Cost of services
3,865
26,646
9
—
30,520
Other operating expenses before
allocated corporate operating expenses (2)
27,584
18,544
905
(57)
46,976
Interest expense (3)
21,027
—
—
—
21,027
Total (4)
77,194
45,730
914
(86)
123,752
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
197,465
(639)
3,082
—
199,908
Allocation of corporate operating
expenses
34,341
4,918
—
—
39,259
Adjusted pretax operating income
(loss)
$
163,124
$
(5,557)
$
3,082
$
—
$
160,649
Three Months Ended September 30,
2020
(In thousands)
Mortgage
homegenius
All Other
Inter-segment
Total
Net premiums written (1)
$
259,278
$
7,099
$
(3,984)
$
—
$
262,393
(Increase) decrease in unearned
premiums
24,078
—
—
—
24,078
Net premiums earned
283,356
7,099
(3,984)
—
286,471
Services revenue
3,914
22,627
8,267
(865)
33,943
Net investment income
32,054
67
4,134
—
36,255
Other income
689
—
224
—
913
Total
320,013
29,793
8,641
(865)
357,582
Provision for losses
87,753
370
—
(39)
88,084
Policy acquisition costs
10,166
—
—
—
10,166
Cost of services
2,908
18,085
4,127
(767)
24,353
Other operating expenses before
allocated corporate operating expenses (2)
21,635
13,136
1,824
(59)
36,536
Interest expense (3) (5)
21,088
—
—
—
21,088
Total (4)
143,550
31,591
5,951
(865)
180,227
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
176,463
(1,798)
2,690
—
177,355
Allocation of corporate operating
expenses
29,127
3,248
—
—
32,375
Adjusted pretax operating income
(loss)
$
147,336
$
(5,046)
$
2,690
$
—
$
144,980
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 2 of 4)
Mortgage
2021
2020
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net premiums written (1) (6)
$
228,116
$
231,027
$
246,874
$
261,244
$
259,278
(Increase) decrease in unearned
premiums
8,751
16,059
17,790
25,572
24,078
Net premiums earned
236,867
247,086
264,664
286,816
283,356
Services revenue
5,027
3,732
4,351
3,717
3,914
Net investment income
32,158
32,842
34,013
34,235
32,054
Other income
607
641
769
735
689
Total
274,659
284,301
303,797
325,503
320,013
Provision for losses
16,794
3,334
45,869
56,312
87,753
Policy acquisition costs
7,924
4,838
8,996
7,395
10,166
Cost of services
3,865
3,161
3,192
3,245
2,908
Other operating expenses before
allocated corporate operating expenses (2)
27,584
27,441
22,454
21,974
21,635
Interest expense (3) (5)
21,027
21,065
21,115
21,169
21,088
Total (4)
77,194
59,839
101,626
110,095
143,550
Adjusted pretax operating income before
allocated corporate operating expenses
197,465
224,462
202,171
215,408
176,463
Allocation of corporate operating
expenses
34,341
33,000
27,884
31,102
29,127
Adjusted pretax operating
income
$
163,124
$
191,462
$
174,287
$
184,306
$
147,336
homegenius (5)
2021
2020
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net premiums earned (7)
$
12,251
$
7,670
$
7,208
$
7,572
$
7,099
Services revenue (4) (7)
32,805
25,750
18,550
15,958
22,627
Net investment income
35
31
37
43
67
Total
45,091
33,451
25,795
23,573
29,793
Provision for losses
540
335
296
392
370
Cost of services
26,646
21,433
17,028
15,706
18,085
Other operating expenses before
allocated corporate operating expenses (2)
18,544
16,160
14,928
15,238
13,136
Total (4)
45,730
37,928
32,252
31,336
31,591
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
(639)
(4,477)
(6,457)
(7,763)
(1,798)
Allocation of corporate operating
expenses
4,918
4,721
3,996
3,369
3,248
Adjusted pretax operating income
(loss)
$
(5,557)
$
(9,198)
$
(10,453)
$
(11,132)
$
(5,046)
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 3 of 4)
All Other (5) (8)
2021
2020
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net premiums earned (7)
$
—
$
—
$
—
$
7,752
$
(3,984)
Services revenue (4) (7)
27
44
53
(7,963)
8,267
Net investment income
3,767
3,418
4,201
3,837
4,134
Other income
202
181
207
55
224
Total
3,996
3,643
4,461
3,681
8,641
Cost of services
9
19
28
2,835
4,127
Other operating expenses (2)
905
1,169
951
3,033
1,824
Total
914
1,188
979
5,868
5,951
Adjusted pretax operating income
(loss)
$
3,082
$
2,455
$
3,482
$
(2,187)
$
2,690
(1)
Net of ceded premiums written under the
QSR Programs and the Excess-of-Loss Program. See Exhibit L for
additional information.
(2)
Does not include impairment of long-lived
assets and other non-operating items, which are not considered
components of adjusted pretax operating income (loss).
(3)
Relates to interest on our borrowing and
financing activities including our Senior Notes issued by our
holding company and FHLB borrowings made by our mortgage insurance
subsidiaries.
(4)
Inter-segment information:
2021
2020
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Inter-segment revenue included
in:
Mortgage
$
—
$
—
$
—
$
—
$
—
homegenius
86
62
59
86
98
All Other
—
—
—
186
767
Total inter-segment revenue
$
86
$
62
$
59
$
272
$
865
Inter-segment expense included
in:
Mortgage
$
86
$
62
$
59
$
86
$
98
homegenius
—
—
—
186
767
All Other
—
—
—
—
—
Total inter-segment expense
$
86
$
62
$
59
$
272
$
865
See notes continued on next page.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 4 of 4)
Notes continued from prior
page.
(5)
The wind-down of our traditional appraisal
business announced in the fourth quarter of 2020 caused the
composition of our reportable segments to change, including all
activity related to that business and certain other adjustments to
services revenue now being reflected in All Other activities. In
addition, there were certain other immaterial reclassifications to
net investment income and interest expense. These changes to our
reportable segments have been reflected in our segment operating
results for all periods presented.
(6)
The fourth quarter of 2020 includes an
increase to premiums earned of $11.3 million, related to changes in
present value estimates for initial premiums on monthly policies
that are deferred and not collected until cancellation. The impact
of changes in this estimate in other periods is not material.
(7)
In the fourth quarter of 2020, we
reclassified certain revenue previously reflected in the homegenius
segment results as services revenue to net premiums earned. As a
result, for the third quarter of 2020, on the homegenius segment,
net premiums earned has been increased and services revenue has
been decreased, with offsetting adjustments reflected in All Other
activities.
(8)
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; (iii) for all periods presented, the
income and expenses related to our traditional appraisal services;
and (iv) certain other immaterial revenue and expense items.
Selected Mortgage Key Ratios
2021
2020
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Loss ratio (1)
7.1
%
1.3
%
17.3
%
19.6
%
31.0
%
Expense ratio (2)
29.5
%
26.4
%
22.4
%
21.1
%
21.5
%
(1)
Calculated as provision for losses on a
GAAP basis expressed as a percentage of net premiums earned.
(2)
Calculated as operating expenses (which include policy acquisition
costs and other operating expenses, as well as allocated corporate
operating expenses) on a GAAP basis expressed as a percentage of
net premiums earned.
Radian Group Inc. and
Subsidiaries
Definition of Consolidated Non-GAAP
Financial Measures
Exhibit F (page 1 of 2)
Use of Non-GAAP Financial Measures
In addition to the traditional GAAP financial measures, we have
presented “adjusted pretax operating income (loss),” “adjusted
diluted net operating income (loss) per share” and “adjusted
net operating return on equity,” which are non-GAAP
financial measures for the consolidated company, among our key
performance indicators to evaluate our fundamental financial
performance. These non-GAAP financial measures align with the way
the Company’s business performance is evaluated by both management
and the 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 the Company’s 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; (ii)
loss 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. We
do not view them to be indicative of our fundamental operating
activities.
(2)
Loss 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) acquistion-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. In addition, homegenius adjusted pretax operating margin
before allocated corporate operating expenses and adjusted gross
profit margin are calculated by dividing homegenius adjusted pretax
operating margin before allocated corporate operating expenses and
adjusted gross profit, respectively, by GAAP total revenue for the
homegenius segment. For the homegenius segment, adjusted pretax
operating income (loss) before allocated corporate operating
expenses, adjusted gross profit, and the related profit margins 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 and homegenius adjusted pretax operating income (loss)
before allocated corporate operating expenses, homegenius adjusted
gross profit, homegenius adjusted pretax operating margin before
allocated corporate operating expenses or homegenius adjusted gross
profit margin 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
2021
2020
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Consolidated pretax income
$
161,641
$
195,496
$
161,189
$
179,167
$
161,205
Less reconciling income (expense)
items:
Net gains (losses) on investments and
other financial instruments
2,098
15,661
(5,181)
17,376
17,652
Amortization and impairment of other
acquired intangible assets
(862)
(863)
(862)
(2,225)
(961)
Impairment of other long-lived assets
and other non-operating items (1)
(244)
(4,021)
(84)
(6,971)
(466)
Total adjusted pretax operating income
(2)
$
160,649
$
184,719
$
167,316
$
170,987
$
144,980
(1)
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.
(2)
Total adjusted pretax operating income
(loss) consists of adjusted pretax operating income (loss) for each
reportable segment and All Other activities as follows:
2021
2020
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Adjusted pretax operating income
(loss):
Mortgage segment
$
163,124
$
191,462
$
174,287
$
184,306
$
147,336
homegenius segment
(5,557)
(9,198)
(10,453)
(11,132)
(5,046)
All Other activities
3,082
2,455
3,482
(2,187)
2,690
Total adjusted pretax operating
income
$
160,649
$
184,719
$
167,316
$
170,987
$
144,980
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
2021
2020
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Diluted net income per share
$
0.67
$
0.80
$
0.64
$
0.76
$
0.70
Less per-share impact of reconciling
income (expense) items:
Net gains (losses) on investments and
other financial instruments
0.01
0.08
(0.03)
0.09
0.09
Amortization and impairment of other
acquired intangible assets
—
—
—
(0.01)
—
Impairment of other long-lived assets
and other non-operating items
—
(0.02)
—
(0.04)
—
Income tax (provision) benefit on
reconciling income (expense) items (1)
—
(0.01)
0.01
(0.01)
(0.02)
Difference between statutory and
effective tax rate
(0.01)
—
(0.02)
0.04
0.04
Per-share impact of reconciling income
(expense) items
—
0.05
(0.04)
0.07
0.11
Adjusted diluted net operating income
per share (1)
$
0.67
$
0.75
$
0.68
$
0.69
$
0.59
(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)
2021
2020
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Return on equity (1)
11.8
%
14.5
%
11.8
%
14.1
%
13.3
%
Less impact of reconciling income
(expense) items: (2)
Net gains (losses) on investments and
other financial instruments
0.2
1.5
(0.5)
1.7
1.7
Amortization and impairment of other
acquired intangible assets
(0.1)
(0.1)
(0.1)
(0.2)
(0.1)
Impairment of other long-lived assets
and other non-operating items
—
(0.4)
—
(0.7)
—
Income tax (provision) benefit on
reconciling income (expense) items (3)
—
(0.2)
0.1
(0.2)
(0.3)
Difference between statutory and
effective tax rate
(0.1)
0.1
(0.1)
0.6
0.7
Impact of reconciling income (expense)
items
—
0.9
(0.6)
1.2
2.0
Adjusted net operating return on
equity
11.8
%
13.6
%
12.4
%
12.9
%
11.3
%
(1)
Calculated by dividing annualized net
income (loss) 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
2021
2020
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
homegenius adjusted pretax operating
income (loss)
$
(5,557)
$
(9,198)
$
(10,453)
$
(11,132)
$
(5,046)
Less reconciling income (expense)
items:
Allocation of corporate operating
expenses
(4,918)
(4,721)
(3,996)
(3,369)
(3,248)
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
(639)
(4,477)
(6,457)
(7,763)
(1,798)
Less reconciling income (expense)
items:
Other operating expenses before
allocated corporate operating expenses
(18,544)
(16,160)
(14,928)
(15,238)
(13,136)
homegenius adjusted gross
profit
$
17,905
$
11,683
$
8,471
$
7,475
$
11,338
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", "homegenius adjusted gross profit,"
“homegenius adjusted pretax operating margin before allocated
corporate operating expenses” and “homegenius adjusted pretax
operating margin" 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, homegenius adjusted gross profit, homegenius adjusted
pretax operating margin before allocated corporate operating
expenses or homegenius adjusted gross profit margin 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
2021
2020
($ in millions)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
New insurance written ("NIW")
$
26,558
$
21,662
$
20,161
$
29,781
$
33,320
Percentage of
NIW
Borrower-paid
99.2
%
99.1
%
99.2
%
99.2
%
98.5
%
Percentage by
premium type
Direct monthly and other recurring
premiums
93.8
%
93.1
%
90.2
%
91.4
%
90.0
%
Borrower-paid (1) (2)
6.0
6.6
9.4
8.3
9.0
Lender-paid (1)
0.2
0.3
0.4
0.3
1.0
Direct single premiums (1)
6.2
6.9
9.8
8.6
10.0
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
NIW for purchases
89.8
%
77.1
%
59.1
%
64.6
%
70.5
%
NIW for refinances
10.2
%
22.9
%
40.9
%
35.4
%
29.5
%
Percentage of NIW
by FICO score (3)
>=740
56.0
%
61.4
%
64.3
%
64.7
%
66.2
%
680-739
34.9
33.1
31.5
31.5
30.7
620-679
9.1
5.5
4.2
3.8
3.1
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Percentage by
LTV
95.01% and above
12.1
%
10.9
%
8.0
%
8.9
%
9.7
%
90.01% to 95.00%
46.7
40.4
31.6
34.7
39.6
85.01% to 90.00%
26.5
27.6
31.3
29.8
28.3
85.00% and below
14.7
21.1
29.1
26.6
22.4
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
(1)
Percentages exclude the impact of
reinsurance.
(2)
Borrower-paid Single Premium Policies have
lower Minimum Required Assets under PMIERs as compared to
lender-paid Single Premium Policies.
(3)
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 (page 1 of 2)
September 30,
June 30,
March 31,
December 31,
September 30,
($ in millions)
2021
2021
2021
2020
2020
Primary insurance
in force (1)
Prime
$
238,047
$
233,543
$
234,980
$
242,044
$
241,166
Alt-A and A minus and below
3,528
3,759
3,941
4,100
4,301
Primary
$
241,575
$
237,302
$
238,921
$
246,144
$
245,467
Primary risk in
force (1) (2)
Prime
$
58,585
$
57,155
$
57,579
$
59,689
$
59,972
Alt-A and A minus and below
836
885
929
967
1,017
Primary
$
59,421
$
58,040
$
58,508
$
60,656
$
60,989
Percentage of
primary risk in force
Direct monthly and other recurring
premiums
82.7
%
81.2
%
80.0
%
79.1
%
76.8
%
Direct single premiums
17.3
%
18.8
%
20.0
%
20.9
%
23.2
%
Percentage of
primary risk in force by FICO score (3)
>=740
57.3
%
57.5
%
57.2
%
57.5
%
57.6
%
680-739
34.8
34.8
34.9
34.6
34.3
620-679
7.4
7.2
7.3
7.3
7.5
<=619
0.5
0.5
0.6
0.6
0.6
Total Primary
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Percentage of
primary risk in force by LTV
95.01% and above
14.6
%
14.5
%
14.4
%
14.4
%
14.3
%
90.01% to 95.00%
48.9
48.5
48.6
49.3
50.1
85.01% to 90.00%
27.8
28.1
28.2
28.0
27.9
85.00% and below
8.7
8.9
8.8
8.3
7.7
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Percentage of
primary risk in force by policy year
2008 and prior
5.2
%
5.7
%
6.1
%
6.2
%
6.6
%
2009 - 2015
7.4
8.7
9.9
11.3
13.3
2016
5.1
6.0
6.8
7.6
8.9
2017
5.7
6.8
8.0
9.1
10.7
2018
6.1
7.3
8.7
9.8
11.7
2019
11.4
13.6
15.6
17.8
20.6
2020
32.1
35.4
37.2
38.2
28.2
2021
27.0
16.5
7.7
—
—
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Primary risk in force on defaulted
loans
$
1,928
$
2,345
$
2,910
$
3,250
$
3,747
Table continued on next page.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Primary Insurance in Force and Risk in Force
Exhibit I (page 2 of 2)
Table continued from prior
page.
September 30,
June 30,
March 31,
December 31,
September 30,
2021
2021
2021
2020
2020
Persistency Rate (12 months
ended)
60.8
%
57.7
%
(4)
57.2
%
(4)
61.2
%
(4)
65.6
%
(4)
Persistency Rate (quarterly,
annualized) (5)
67.5
%
66.3
%
62.5
%
60.4
%
(4)
60.0
%
(4)
(1)
Excludes the impact of premiums ceded
under our reinsurance agreements.
(2)
Does not include pool risk in force or
other risk in force, which combined represent approximately 1% of
our total risk in force for all periods presented.
(3)
For loans with multiple borrowers, the
percentage of primary risk in force by FICO score represents the
lowest of the borrowers’ FICO scores.
(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.
(5)
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 -
Claims and Reserves
Exhibit J
2021
2020
($ in thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net claims paid: (1)
Total primary claims paid
$
5,330
$
4,870
$
6,611
$
8,353
$
11,331
Total pool and other
991
(649)
(138)
70
(230)
Subtotal
6,321
4,221
6,473
8,423
11,101
Impact of commutations and settlements
(2)
3,915
—
4,000
32,170
(267)
Total net claims paid
$
10,236
$
4,221
$
10,473
$
40,593
$
10,834
Total average net primary claims paid
(1) (3)
$
42.0
$
46.8
$
43.8
$
46.9
$
46.4
Average direct primary claims paid (3)
(4)
$
43.2
$
48.4
$
45.5
$
48.5
$
47.8
(1)
Includes the impact of reinsurance
recoveries and LAE.
(2)
Includes payments to commute mortgage
insurance coverage on certain performing and non-performing loans.
For the first quarter of 2021 and the fourth quarter of 2020,
primarily includes payments made to settle certain previously
disclosed legal proceedings.
(3)
Calculated without giving effect to the
impact of commutations and settlements.
(4)
Before reinsurance recoveries.
September 30,
June 30,
March 31,
December 31,
September 30,
($ in thousands, except per default
amounts)
2021
2021
2021
2020
2020
Reserve for losses by category
(1)
Mortgage reserves
Prime
$
763,071
$
750,699
$
751,100
$
711,245
$
655,754
Alt-A and A minus and below
88,080
90,065
90,455
88,269
88,879
IBNR and other
3,788
5,464
6,626
9,966
43,153
LAE
21,400
21,180
21,212
20,172
18,745
Total primary reserves
876,339
867,408
869,393
829,652
806,531
Total pool reserves
11,413
13,085
13,175
14,163
14,779
Total 1st lien reserves
887,752
880,493
882,568
843,815
821,310
Other
269
270
270
292
398
Total Mortgage reserves
888,021
880,763
882,838
844,107
821,708
homegenius reserves
5,134
4,735
4,517
4,306
4,084
Total reserves
$
893,155
$
885,498
$
887,355
$
848,413
$
825,792
Primary reserve per primary default
excluding IBNR and other
$
25,822
$
21,304
$
17,219
$
14,759
$
12,168
(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.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Default Statistics
Exhibit K
September 30,
June 30,
March 31,
December 31,
September 30,
2021
2021
2021
2020
2020
Default
Statistics
Primary Insurance:
Prime
Number of insured loans
975,565
976,344
996,082
1,031,736
1,043,450
Number of loans in default
30,503
36,826
45,929
51,032
58,057
Percentage of loans in default
3.13
%
3.77
%
4.61
%
4.95
%
5.56
%
Alt-A and A minus
and below
Number of insured loans
22,843
24,205
25,282
26,208
27,310
Number of loans in default
3,292
3,638
4,177
4,505
4,680
Percentage of loans in default
14.41
%
15.03
%
16.52
%
17.19
%
17.14
%
Total Primary
Number of insured loans
998,408
1,000,549
1,021,364
1,057,944
1,070,760
Number of loans in default
33,795
40,464
50,106
55,537
62,737
Percentage of loans in default
3.38
%
4.04
%
4.91
%
5.25
%
5.86
%
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Reinsurance Programs
Exhibit L
2021
2020
($ in thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Quota Share Reinsurance (“QSR”) and
Single Premium QSR Programs
Ceded premiums written (1)
$
(1,304)
$
(7,032)
$
(2,852)
$
(1,117)
$
2,119
% of premiums written
(0.5)
%
(2.8)
%
(1.1)
%
(0.4)
%
0.8
%
Ceded premiums earned
$
13,506
$
13,491
$
20,788
$
29,510
$
36,742
% of premiums earned
4.8
%
4.8
%
6.8
%
8.6
%
11.2
%
Ceding commissions written
$
(7,861)
$
(2,362)
$
(2,949)
$
(3,847)
$
(4,984)
Ceding commissions earned (2)
$
7,087
$
7,920
$
10,407
$
13,197
$
17,038
Profit commission
$
13,630
$
17,935
$
16,350
$
18,406
$
20,425
Ceded losses
$
883
$
(1,007)
$
3,661
$
7,106
$
10,189
Excess-of-Loss Program
Ceded premiums written
$
15,434
$
18,524
$
11,482
$
15,240
$
7,499
% of premiums written
6.1
%
7.4
%
4.4
%
5.2
%
2.8
%
Ceded premiums earned
$
16,581
$
15,601
$
12,154
$
12,037
$
8,290
% of premiums earned
5.9
%
5.5
%
4.0
%
3.7
%
2.5
%
Ceded RIF (3)
Single Premium QSR Program
$
5,439,056
$
5,728,142
$
6,147,808
$
6,646,812
$
7,358,932
Excess-of-Loss Program
1,873,426
1,952,900
1,525,100
1,560,600
1,170,200
QSR Program
232,539
268,337
317,827
381,787
454,585
Total Ceded RIF
$
7,545,021
$
7,949,379
$
7,990,735
$
8,589,199
$
8,983,717
PMIERs impact - reduction in Minimum
Required Assets
Excess-of-Loss Program
$
659,151
$
907,112
$
673,957
$
912,734
$
783,842
Single Premium QSR Program
328,339
355,115
388,536
423,712
469,625
QSR Program
14,116
16,545
19,378
22,712
26,213
Total PMIERs impact
$
1,001,606
$
1,278,772
$
1,081,871
$
1,359,158
$
1,279,680
(1)
Net of profit commission.
(2)
Includes amounts reported in policy
acquisition costs and other operating expenses. Operating expenses
include the following ceding commissions, net of deferred policy
acquisition costs, for the periods indicated:
2021
2020
($ in thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Ceding commissions
$
(5,638)
$
(6,501)
$
(7,689)
$
(10,436)
$
(12,337)
(3)
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, including
management’s current views regarding the likely impacts of the
COVID-19 pandemic. 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, particularly those
associated with the COVID-19 pandemic, which has had wide-ranging
and continually evolving effects. 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 COVID-19 pandemic, which has caused significant economic
disruption, high unemployment, periods of volatility and disruption
in financial markets, and required adjustments in the housing
finance system and real estate markets. The COVID-19 pandemic has
adversely impacted our businesses, and the COVID-19 pandemic could
further impact our business and subject us to certain risks,
including those discussed in “Item 1A. Risk Factors—The COVID-19
pandemic has adversely impacted us, and its ultimate impact on our
business and financial results will depend on future developments,
which are highly uncertain and cannot be predicted, including the
scope, severity and duration of the pandemic and actions taken by
governmental authorities in response to the pandemic.” and the
other risk factors in our Annual Report on Form 10-K for the year
ended December 31, 2020 and in our subsequent reports and
registration statements filed from time to time with the U.S.
Securities and Exchange Commission;
- changes in economic conditions that impact the size of the
insurable market, the credit performance of our insured portfolio,
and our business prospects;
- 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”) and other applicable requirements
imposed by the Federal Housing Finance Agency (the "FHFA") and by
Fannie Mae and Freddie Mac (collectively, the “GSEs”) to insure
loans purchased by the GSEs;
- our ability to maintain an adequate level of capital in our
insurance subsidiaries to satisfy existing and future regulatory
requirements, including the PMIERs and any changes thereto and
potential changes to the Mortgage Guaranty Insurance Model Act
currently under consideration;
- changes in the charters or business practices of, or rules or
regulations imposed by or applicable to, the GSEs, which may
include further changes in response to the COVID-19 pandemic,
changes in furtherance of housing policy objectives such as the
current FHFA focus on increasing the accessibility and
affordability of homeownership for low-and-moderate income
borrowers and minority communities, changes in the requirements for
Radian Guaranty to remain an approved insurer to the GSEs, changes
in the GSEs’ interpretation and application of the PMIERs, or
changes impacting loans purchased by the GSEs;
- the effects of the Enterprise Regulatory Capital Framework
which, among other things, increases the capital requirements for
the GSEs and reduces the credit they receive for risk transfer,
which could impact their operations and pricing as well as the size
of the insurable mortgage insurance market, and which may form the
basis for future versions of the PMIERs;
- 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 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 require
GSE and/or regulatory approvals and licenses or 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;
- uncertainty from the upcoming 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;
- any disruption in the servicing of mortgages covered by our
insurance policies, as well as poor servicer performance, which
could be impacted by the burdens placed on many servicers due to
the COVID-19 pandemic;
- 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 as a result of the increased use of
loan level pricing delivery methodologies that are less transparent
than historical 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 GSE-sponsored alternatives to
traditional mortgage insurance;
- the effect of the Dodd-Frank Wall Street Reform and Consumer
Protection Act on the financial services industry in general, and
on our businesses in particular;
- legislative and regulatory activity (or inactivity), including
the 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, including potential changes in tax law and
other matters currently under consideration in the U.S.
Congress;
- 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 forbearance, a
repayment plan or a loan modification trial period granted in
response to a financial hardship related to COVID-19, 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;
- our ability and related costs to develop, launch and implement
new and innovative technologies and digital products and services,
and whether we will have broad customer acceptance of these
products and services;
- 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 computer viruses, unauthorized access,
cyber-attack, natural disasters or other similar events;
- our ability to attract and retain key employees; and
- legal and other limitations on amounts we may receive from our
subsidiaries, including dividends or ordinary course distributions
under our internal tax- and expense-sharing arrangements.
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, 2020, 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/20211102006357/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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