— GAAP net income of $201 million, or $1.15 per
diluted share —
— Adjusted diluted net operating income of
$1.36 per diluted share —
— Provision for losses of $(114) million in the
second quarter of 2022 favorably impacted by positive development
on prior period defaults —
— Primary mortgage insurance in force increases
7.1% year-over-year to $254 billion —
— Return on equity of 19.9% and adjusted net
operating return on equity of 23.6% —
— Purchased $183.8 million in the second
quarter, or 5.2% of total shares outstanding of Radian Group common
stock —
— PMIERs excess Available Assets of $1.4
billion (or 38% over the Minimum Required Assets) —
Radian Group Inc. (NYSE: RDN) today reported net income for the
quarter ended June 30, 2022, of $201.2 million, or $1.15 per
diluted share. This compares with net income for the quarter ended
June 30, 2021, of $155.2 million, or $0.80 per diluted share.
Key Financial Highlights
Quarter ended
($ in millions, except per-share
amounts)
June 30, 2022
March 31, 2022
June 30, 2021
Net income (1)
$201.2
$181.1
$155.2
Diluted net income per share
$1.15
$1.01
$0.80
Consolidated pretax income
$259.9
$234.1
$195.5
Adjusted pretax operating income
(2)
$302.0
$264.9
$184.7
Adjusted diluted net operating
income per share (2)(3)
$1.36
$1.17
$0.75
Return on equity (1)(4)
19.9 %
17.2 %
14.5 %
Adjusted net operating return on
equity (2)(3)
23.6 %
19.9 %
13.6 %
New Insurance Written (NIW) -
mortgage insurance
$18,935
$18,655
$21,662
Net premiums earned - mortgage
insurance
$246.9
$245.2
$247.1
New defaults (5)
8,009
9,393
8,145
Provision for losses - mortgage
insurance
($114.2)
($84.2)
$3.3
homegenius revenues
$32.3
$33.9
$33.5
Book value per share
$23.63
$23.75
$23.02
Accumulated other comprehensive
income
(loss) value per share (6)
($1.98)
($0.74)
$0.95
PMIERs Available Assets (7)
$5,175
$5,102
$5,042
PMIERs excess Available Assets
(8)
$1,424
$1,560
$1,857
Total Holding Company Liquidity
(9)
$1,048
$1,282
$1,191
Total investments
$5,906
$6,335
$6,682
Primary mortgage insurance in
force
$254,226
$248,951
$237,302
Percentage of primary loans in
default (10)
2.2 %
2.6 %
4.0 %
Mortgage insurance loss
reserves
$589
$722
$881
(1)
Net income for the second quarter of 2022 includes a pretax
net loss on investments and other financial instruments of $41.9
million, compared with a $29.5 million pretax net loss on
investments and other financial instruments in the first quarter of
2022 and a pretax net gain on investments and other financial
instruments of $15.7 million for the second quarter of 2021.
(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)
Included in book value per share for each period presented.
(7)
Represents Radian Guaranty’s Available Assets, calculated in
accordance with the Private Mortgage Insurer Eligibility
Requirements (PMIERs) financial requirements in effect for each
date shown.
(8)
Represents Radian Guaranty’s excess or "cushion" of
Available Assets over its Minimum Required Assets, calculated in
accordance with the PMIERs financial requirements in effect for
each date shown.
(9)
Represents Radian Group's total liquidity, including
available capacity under its 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 June 30,
2022, was $302.0 million, or $1.36 per diluted share. This compares
with adjusted pretax operating income for the quarter ended June
30, 2021, of $184.7 million, or $0.75 per diluted share.
Book value per share at June 30, 2022, was $23.63, compared to
$23.75 at March 31, 2022, and $23.02 at June 30, 2021. This
represents a 2.6 percent growth in book value per share at June 30,
2022, as compared to June 30, 2021, and includes accumulated other
comprehensive income (loss) of $(1.98) per share as of June 30,
2022 and $0.95 per share as of June 30, 2021, which, if excluded as
of both dates, would represent 16.0 percent growth for the period.
Changes in accumulated other comprehensive income (loss) for the
period are primarily from net unrealized losses on investments as a
result of an increase in market interest rates during the period.
We do not expect to realize these losses given that we have the
ability and the expectation to hold these securities until
recovery.
“We are pleased with our excellent results in the second quarter
with net income of $201 million, return on equity of 19.9 percent
and total holding company liquidity of $1 billion. Our primary
mortgage insurance in force, which is the main driver of future
earnings for our company, grew 7 percent year-over-year, and the
number of new defaults in the quarter was the lowest we’ve seen in
more than 20 years,” said Radian’s Chief Executive Officer Rick
Thornberry. “Moody’s recently upgraded our company, reflecting our
improved capital adequacy through risk distribution, our improving
profitability metrics, our strong market position and our financial
flexibility with strong liquidity. We continue to strategically
manage capital, repurchase shares opportunistically and pay regular
dividends to stockholders and believe we are well positioned to
continue our mission of ensuring affordable, sustainable and
equitable homeownership for many years ahead.”
SECOND QUARTER HIGHLIGHTS
- NIW was $18.9 billion in the second quarter of 2022, compared
to $18.7 billion in the first quarter of 2022, and $21.7 billion in
the second quarter of 2021.
- Purchase NIW increased 7.8 percent in the second quarter of
2022 compared to the first quarter of 2022 and increased 10.0
percent compared to the second quarter of 2021.
- Refinances accounted for 2.9 percent of total NIW in the second
quarter of 2022, compared to 8.6 percent in the first quarter of
2022, and 22.9 percent in the second quarter of 2021.
- Of the $18.9 billion in NIW in the second quarter of 2022, 95.4
percent was written with monthly and other recurring premiums,
compared to 94.5 percent in the first quarter of 2022, and 93.1
percent in the second quarter of 2021.
- Total primary mortgage insurance in force as of June 30, 2022,
increased to $254.2 billion, an increase of 2.1 percent compared to
$249.0 billion as of March 31, 2022, and an increase of 7.1 percent
compared to $237.3 billion as of June 30, 2021. The year-over-year
change reflects a 12.6 percent increase in monthly premium policy
insurance in force and a 15.1 percent 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 71.7 percent for
the twelve months ended June 30, 2022, compared to 68.0 percent for
the twelve months ended March 31, 2022, and 57.7 percent for the
twelve months ended June 30, 2021.
- Annualized persistency for the three months ended June 30,
2022, was 79.8 percent, compared to 76.9 percent for the three
months ended March 31, 2022, and 66.3 percent for the three months
ended June 30, 2021.
- Net mortgage insurance premiums earned were $246.9 million for
the quarter ended June 30, 2022, compared to $245.2 million for the
quarter ended March 31, 2022, and $247.1 million for the quarter
ended June 30, 2021.
- Mortgage insurance in force portfolio premium yield was 40.0
basis points in the second quarter of 2022. This compares to 39.6
basis points in the first quarter of 2022, and 41.1 basis points in
the second quarter of 2021.
- The impact of single premium policy cancellations before
consideration of reinsurance represented 1.1 basis points of direct
premium yield in the second quarter of 2022, 2.4 basis points in
the first quarter of 2022, and 5.3 basis points in the second
quarter of 2021.
- Total net mortgage insurance premium yield, which includes the
impact of ceded premiums and accrued profit commission, was 39.3
basis points in the second quarter of 2022. This compares to 39.6
basis points in the first quarter of 2022, and 41.5 basis points in
the second quarter of 2021.
- Additional details regarding premiums earned may be found in
Exhibit D.
- The mortgage insurance provision for losses was a benefit of
$114.2 million in the second quarter of 2022, compared to a benefit
of $84.2 million in the first quarter of 2022, and a provision of
$3.3 million in the second quarter of 2021.
- The decrease in the second quarter of 2022 compared to both the
first quarter of 2022 and the second quarter of 2021 was primarily
related to more favorable development on prior period reserves, as
compared to the first quarter of 2022 and second quarter of 2021.
All periods were impacted by more favorable trends in cures than
originally estimated.
- The number of primary delinquent loans was 21,861 as of June
30, 2022, compared to 25,510 as of March 31, 2022, and 40,464 as of
June 30, 2021.
- The loss ratio in the second quarter of 2022 was (46.2)
percent, compared to (34.3) percent in the first quarter of 2022,
and 1.3 percent in the second quarter of 2021.
- Total mortgage insurance claims paid were $3.3 million in the
second quarter of 2022, compared to $4.7 million in the first
quarter of 2022, and $4.2 million in the second quarter of
2021.
- 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 second quarter of
2022 were $32.3 million, compared to $33.9 million for the first
quarter of 2022, and $33.5 million for the second quarter of
2021.
- Adjusted pretax operating loss, our primary segment measure of
profitability for the homegenius segment, for the quarter ended
June 30, 2022 was $17.7 million, compared to $13.5 million for the
quarter ended March 31, 2022, and $9.2 million for the quarter
ended June 30, 2021.
- homegenius non-GAAP performance measures:
- Adjusted pretax operating loss before allocated corporate
operating expenses for the homegenius segment for the quarter ended
June 30, 2022 was $12.0 million, compared to $8.2 million for the
quarter ended March 31, 2022, and $4.5 million for the quarter
ended June 30, 2021.
- Adjusted gross profit for the homegenius segment for the
quarter ended June 30, 2022 was $11.2 million, compared to $12.1
million for the quarter ended March 31, 2022, and $11.7 million for
the quarter ended June 30, 2021.
- Additional details regarding these and other related non-GAAP
measures may be found in Exhibits F and G.
- Other operating expenses were $90.5 million in the second
quarter of 2022, compared to $89.5 million in the first quarter of
2022, and $86.5 million in the second quarter of 2021.
- The increase in the second quarter of 2022 compared to the
second quarter of 2021 was driven primarily by a decrease in ceding
commissions and an increase in compensation expense. Additional
details regarding other operating expenses by segment may be found
in Exhibit E.
CAPITAL AND LIQUIDITY UPDATE
Radian Group
- As of June 30, 2022, Radian Group maintained $772.5 million of
available liquidity. Total Holding Company Liquidity, which
includes the company’s $275.0 million unsecured revolving credit
facility, was $1.0 billion as of June 30, 2022.
- During the second quarter of 2022, the company repurchased 9.1
million shares of Radian Group common stock at a total cost of
$183.8 million, including commissions.
- In addition, in July 2022 the Company purchased an additional
4.8 million shares of Radian Group common stock at a total cost of
approximately $97.5 million, including commissions. After the
repurchases in July, purchase authority of up to approximately
$97.6 million remained available under the existing program.
- The Company purchased $281.3 million of Radian Group common
stock, including commissions, during the period April 1, 2022 to
July 31, 2022. This represented 7.9 percent in the aggregate of
total shares outstanding as of the end of the first quarter.
- On May 11, 2022, Radian Group’s board of directors authorized a
regular quarterly dividend on its common stock in the amount of
$0.20 per share and the dividend was paid on June 3, 2022.
Radian Guaranty
- At June 30, 2022, Radian Guaranty’s Available Assets under
PMIERs totaled approximately $5.2 billion, resulting in excess
available resources or a “cushion” of $1.4 billion, or 38 percent,
over its Minimum Required Assets.
- As of June 30, 2022, 62 percent of Radian Guaranty's primary
mortgage insurance risk in force is subject to some form of risk
distribution, providing a $1.1 billion reduction of Minimum
Required Assets under PMIERs.
RECENT EVENTS
- Consistent with our use of risk distribution strategies to
effectively manage capital and proactively mitigate risk, Radian
Guaranty agreed to principal terms in July 2022 on a quota share
reinsurance arrangement ("2022 QSR Agreement") with a panel of
third-party reinsurance providers. Under the 2022 QSR Agreement,
which remains subject to final documentation, starting July 1,
2022, we expect to cede 20 percent of policies issued between
January 1, 2022, and June 30, 2023, subject to certain conditions.
As of June 30, 2022, assuming the 2022 QSR Agreement had been in
place:
- Radian Guaranty's Minimum Required Assets would have decreased
by approximately $132 million, which would have resulted in an
increase in PMIERs excess Available Assets or "cushion" to $1.5
billion, or 43 percent.
- Radian Guaranty's primary mortgage insurance risk in force that
is subject to some form of risk distribution would have increased
to 76 percent, providing a $1.2 billion reduction of Minimum
Required Assets under PMIERs.
- On July 21, 2022, Moody's Investors Service ("Moody's")
upgraded the insurance financial strength (IFS) rating of Radian
Guaranty to A3 from Baa1. In the same rating action, Moody's also
upgraded the senior unsecured debt rating of Radian Group Inc. to
Baa3 from Ba1. The outlook for the ratings is stable.
CONFERENCE CALL
Radian will discuss second quarter 2022 financial results in a
conference call tomorrow, Tuesday, August 2, 2022, at 10:00 a.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.
Please note that there is a new process to access the call via
telephone. 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 attributable to our reportable
segments; (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. 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 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, real estate and
technology products and 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, Default Statistics Exhibit
K: Mortgage Supplemental Information Reinsurance
Programs
Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of
Operations Trend Schedule
Exhibit A
2022
2021
(In thousands, except per-share
amounts)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Revenues
Net premiums earned
$
253,892
$
254,190
$
261,437
$
249,118
$
254,756
Services revenue
27,281
29,348
35,693
37,773
29,464
Net investment income
46,957
38,196
37,407
35,960
36,291
Net gains (losses) on investments and
other financial instruments
(41,869
)
(29,457
)
3,025
2,098
15,661
Other income
572
703
805
809
822
Total revenues
286,833
292,980
338,367
325,758
336,994
Expenses
Provision for losses
(113,922
)
(83,754
)
(46,219
)
17,305
3,648
Policy acquisition costs
5,940
6,605
7,271
7,924
4,838
Cost of services
22,760
24,753
28,333
30,520
24,615
Other operating expenses
90,495
89,541
80,476
86,479
86,469
Interest expense
20,831
20,846
21,137
21,027
21,065
Amortization of other acquired intangible
assets
849
849
863
862
863
Total expenses
26,953
58,840
91,861
164,117
141,498
Pretax income
259,880
234,140
246,506
161,641
195,496
Income tax provision
58,687
53,009
53,061
35,229
40,290
Net income
$
201,193
$
181,131
$
193,445
$
126,412
$
155,206
Diluted net income per share
$
1.15
$
1.01
$
1.07
$
0.67
$
0.80
Selected Mortgage Key
Ratios
2022
2021
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Loss ratio (1)
(46.2
)%
(34.3
)%
(18.6
)%
7.1
%
1.3
%
Expense ratio (2)
26.2
%
27.2
%
25.6
%
28.6
%
25.4
%
(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
Net Income Per Share Trend
Schedule
Exhibit B
The calculation of basic and diluted net
income per share was as follows.
2022
2021
(In thousands, except per-share
amounts)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Net income—basic and diluted
$
201,193
$
181,131
$
193,445
$
126,412
$
155,206
Average common shares
outstanding—basic
173,705
176,816
179,500
186,741
193,436
Dilutive effect of stock-based
compensation arrangements (1)
1,714
2,263
1,628
1,301
1,202
Adjusted average common shares
outstanding—diluted
175,419
179,079
181,128
188,042
194,638
Basic net income per share
$
1.16
$
1.02
$
1.08
$
0.68
$
0.80
Diluted net income per share
$
1.15
$
1.01
$
1.07
$
0.67
$
0.80
(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 would be anti-dilutive.
2022
2021
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Shares of common stock equivalents
189
—
35
—
—
Radian Group Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
Exhibit C
June 30
March 31,
December 31,
September 30,
June 30,
(In thousands, except per-share
amounts)
2022
2022
2021
2021
2021
Assets
Investments
$
5,906,147
$
6,334,950
$
6,513,542
$
6,658,487
$
6,681,659
Cash
135,262
131,853
151,145
154,709
134,939
Restricted cash
561
1,651
1,475
1,866
2,968
Accrued investment income
35,774
35,531
32,812
33,258
32,223
Accounts and notes receivable
166,380
142,579
124,016
166,730
153,128
Reinsurance recoverables
39,876
55,015
67,896
76,048
75,411
Deferred policy acquisition costs
16,983
16,383
16,317
16,823
17,873
Property and equipment, net
74,874
75,275
75,086
74,170
74,288
Goodwill and other acquired intangible
assets, net
17,895
18,744
19,593
20,456
21,318
Prepaid federal income taxes
466,123
354,123
354,123
313,123
275,623
Other assets
414,412
449,642
483,180
525,938
539,638
Total assets
$
7,274,287
$
7,615,746
$
7,839,185
$
8,041,608
$
8,009,068
Liabilities and stockholders’ equity
Unearned premiums
$
298,991
$
312,013
$
329,090
$
348,322
$
373,031
Reserve for losses and loss adjustment
expense
594,808
727,247
828,642
893,155
885,498
Senior notes
1,411,458
1,410,458
1,409,473
1,408,502
1,407,545
FHLB advances
184,284
148,983
150,983
172,649
153,983
Reinsurance funds withheld
223,649
225,363
228,078
290,502
285,406
Net deferred tax liability
324,866
324,004
337,509
286,957
266,330
Other liabilities
305,269
320,114
296,614
383,585
303,442
Total liabilities
3,343,325
3,468,182
3,580,389
3,783,672
3,675,235
Common stock
186
193
194
200
207
Treasury stock
(930,284
)
(920,958
)
(920,798
)
(920,355
)
(920,225
)
Additional paid-in capital
1,698,490
1,871,763
1,878,372
2,012,870
2,161,857
Retained earnings
3,491,675
3,326,119
3,180,935
3,012,997
2,913,138
Accumulated other comprehensive income
(loss)
(329,105
)
(129,553
)
120,093
152,224
178,856
Total stockholders’ equity
3,930,962
4,147,564
4,258,796
4,257,936
4,333,833
Total liabilities and stockholders’
equity
$
7,274,287
$
7,615,746
$
7,839,185
$
8,041,608
$
8,009,068
Shares outstanding
166,388
174,648
175,421
181,336
188,290
Book value per share
$
23.63
$
23.75
$
24.28
$
23.48
$
23.02
Debt to capital ratio (1)
26.4
%
25.4
%
24.9
%
24.9
%
24.5
%
Risk to capital ratio-Radian Guaranty
only
11.9:1
12.1:1
11.1:1
11.4:1
11.4:1
(1)
Calculated as senior notes divided by senior notes and
stockholders' equity.
Radian Group Inc. and
Subsidiaries
Net Premiums Earned
Exhibit D
2022
2021
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Premiums earned
Direct - Mortgage
Premiums earned, excluding revenue from
cancellations
$
249,937
$
243,599
$
248,704
$
239,786
$
243,077
Single Premium Policy cancellations
6,894
14,696
20,530
25,592
31,592
Total direct - Mortgage
256,831
258,295
269,234
265,378
274,669
Assumed - Mortgage (1)
1,538
1,332
1,470
1,683
1,615
Ceded - Mortgage
Premiums earned, excluding revenue from
cancellations
(28,565
)
(27,339
)
(28,333
)
(27,662
)
(27,324
)
Single Premium Policy cancellations
(2)
(1,965
)
(4,192
)
(5,905
)
(7,338
)
(9,036
)
Profit commission - other (3)
19,070
17,078
13,199
4,806
7,162
Total ceded premiums - Mortgage (4)
(11,460
)
(14,453
)
(21,039
)
(30,194
)
(29,198
)
Net premiums earned - Mortgage
246,909
245,174
249,665
236,867
247,086
Net premiums earned - homegenius
6,983
9,016
11,772
12,251
7,670
Net premiums earned
$
253,892
$
254,190
$
261,437
$
249,118
$
254,756
(1)
Represents premiums from our participation in certain credit risk
transfer programs.
(2)
Includes the impact of related profit commissions.
(3)
The amounts represent the profit commission on the Single Premium
QSR Program, 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 June 30,
2022
(In thousands)
Mortgage
homegenius
All Other (1)
Inter- segment (2)
Total
Net premiums written (3)
$
248,645
$
6,983
$
—
$
—
$
255,628
Increase in unearned premiums
(1,736
)
—
—
—
(1,736
)
Net premiums earned
246,909
6,983
—
—
253,892
Services revenue
2,105
25,261
—
(85
)
27,281
Net investment income
40,197
99
6,661
—
46,957
Other income
572
—
—
—
572
Total
289,783
32,343
6,661
(85
)
328,702
Provision for losses
(114,179
)
309
—
(52
)
(113,922
)
Policy acquisition costs
5,940
—
—
—
5,940
Cost of services
1,960
20,800
—
—
22,760
Other operating expenses before allocated
corporate operating expenses (4)
25,474
23,205
3,077
(33
)
51,723
Interest expense (5)
20,831
—
—
—
20,831
Total
(59,974
)
44,314
3,077
(85
)
(12,668
)
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
349,757
(11,971
)
3,584
—
341,370
Allocation of corporate operating
expenses
33,237
5,719
381
—
39,337
Adjusted pretax operating income
(loss)
$
316,520
$
(17,690
)
$
3,203
$
—
$
302,033
Three Months Ended June 30,
2021
(In thousands)
Mortgage
homegenius
All Other (1)
Inter- segment (2)
Total
Net premiums written (3)
$
231,027
$
7,670
$
—
$
—
$
238,697
Decrease in unearned premiums
16,059
—
—
—
16,059
Net premiums earned
247,086
7,670
—
—
254,756
Services revenue
3,732
25,750
44
(62
)
29,464
Net investment income
32,842
31
3,418
—
36,291
Other income
641
—
181
—
822
Total
284,301
33,451
3,643
(62
)
321,333
Provision for losses
3,334
335
—
(21
)
3,648
Policy acquisition costs
4,838
—
—
—
4,838
Cost of services
3,161
21,433
19
2
24,615
Other operating expenses before allocated
corporate operating expenses (4)
25,222
16,160
3,387
(43
)
44,726
Interest expense (5)
21,065
—
—
—
21,065
Total
57,620
37,928
3,406
(62
)
98,892
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
226,681
(4,477
)
237
—
222,441
Allocation of corporate operating
expenses
32,638
4,721
363
—
37,722
Adjusted pretax operating income
(loss)
$
194,043
$
(9,198
)
$
(126
)
$
—
$
184,719
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 2 of 6)
(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 LLC, and other immaterial activities.
(2)
Includes immaterial inter-segment services revenue for our
homegenius segment and immaterial inter-segment provision for
losses, cost of services and other operating expenses for our
Mortgage segment.
(3)
Net of ceded premiums written under the QSR Programs and the
Excess-of-Loss Program. 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)
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.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 3 of 6)
Mortgage
2022
2021
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Net premiums written (1)
$
248,645
$
248,360
$
238,529
$
228,116
$
231,027
(Increase) decrease in unearned
premiums
(1,736
)
(3,186
)
11,136
8,751
16,059
Net premiums earned
246,909
245,174
249,665
236,867
247,086
Services revenue
2,105
4,552
4,560
5,027
3,732
Net investment income
40,197
34,017
33,916
32,158
32,842
Other income
572
703
661
607
641
Total
289,783
284,446
288,802
274,659
284,301
Provision for losses (2)
(114,179
)
(84,193
)
(46,560
)
16,794
3,334
Policy acquisition costs
5,940
6,605
7,271
7,924
4,838
Cost of services (2)
1,960
3,383
3,710
3,865
3,161
Other operating expenses before allocated
corporate operating expenses (2) (3)
25,474
23,755
23,365
25,866
25,222
Interest expense (4)
20,831
20,846
21,137
21,027
21,065
Total (2)
(59,974
)
(29,604
)
8,923
75,476
57,620
Adjusted pretax operating income before
allocated corporate operating expenses
349,757
314,050
279,879
199,183
226,681
Allocation of corporate operating
expenses
33,237
36,209
33,305
33,963
32,638
Adjusted pretax operating income
$
316,520
$
277,841
$
246,574
$
165,220
$
194,043
homegenius
2022
2021
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Net premiums earned
$
6,983
$
9,016
$
11,772
$
12,251
$
7,670
Services revenue (2)
25,261
24,878
31,177
32,805
25,750
Net investment income
99
18
255
35
31
Net gains (losses) on investments
—
—
1,509
—
—
Total (2)
32,343
33,912
44,713
45,091
33,451
Provision for losses
309
481
369
540
335
Cost of services
20,800
21,370
24,615
26,646
21,433
Other operating expenses before allocated
corporate operating expenses (3)
23,205
20,287
16,998
18,544
16,160
Total
44,314
42,138
41,982
45,730
37,928
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
(11,971
)
(8,226
)
2,731
(639
)
(4,477
)
Allocation of corporate operating
expenses
5,719
5,280
4,847
4,918
4,721
Adjusted pretax operating income
(loss)
$
(17,690
)
$
(13,506
)
$
(2,116
)
$
(5,557
)
$
(9,198
)
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 4 of 6)
All Other (5)
2022
2021
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Services revenue
$
—
$
—
$
30
$
27
$
44
Net investment income
6,661
4,161
3,236
3,767
3,418
Other income
—
—
144
202
181
Total
6,661
4,161
3,410
3,996
3,643
Cost of services
—
—
8
9
19
Other operating expenses before allocated
corporate operating expenses (3)
3,077
3,142
2,422
2,623
3,387
Total
3,077
3,142
2,430
2,632
3,406
Adjusted pretax operating income before
allocated corporate operating expenses
3,584
1,019
980
1,364
237
Allocation of corporate operating
expenses
381
406
373
378
363
Adjusted pretax operating income
(loss)
$
3,203
$
613
$
607
$
986
$
(126
)
(1)
Net of ceded premiums written under the QSR Programs and the
Excess-of-Loss Program. See Exhibit K for additional information.
(2)
Includes immaterial inter-segment services revenue for our
homegenius segment and immaterial inter-segment provision for
losses, cost of services and other operating expenses for our
Mortgage segment.
(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)
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.
(5)
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 LLC, and other immaterial activities.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 5 of 6)
Supplemental Other Operating
Expense Information by Segment
Mortgage
2022
2021
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Other operating expenses by type
Salaries and other base employee
expenses
$
24,420
$
22,189
$
23,610
$
22,685
$
22,542
Variable and share-based incentive
compensation
11,524
16,697
12,649
17,143
15,236
Other general operating expenses
25,611
25,027
25,290
25,639
26,583
Ceding commissions
(2,844
)
(3,949
)
(4,879
)
(5,638
)
(6,501
)
Total
$
58,711
$
59,964
$
56,670
$
59,829
$
57,860
homegenius
2022
2021
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Other operating expenses by type
Salaries and other base employee
expenses
$
12,187
$
10,375
$
7,993
$
6,975
$
6,701
Variable and share-based incentive
compensation
4,776
5,522
4,678
6,238
5,896
Other general operating expenses
10,162
8,571
7,851
7,982
6,525
Title agent commissions
1,799
1,099
1,323
2,267
1,759
Total
$
28,924
$
25,567
$
21,845
$
23,462
$
20,881
All Other
2022
2021
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Other operating expenses by type
Salaries and other base employee
expenses
$
1,726
$
1,613
$
1,001
$
1,158
$
1,187
Variable and share-based incentive
compensation
709
953
874
1,144
958
Other general operating expenses
1,023
982
920
699
1,605
Total
$
3,458
$
3,548
$
2,795
$
3,001
$
3,750
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 6 of 6)
Inter-segment
2022
2021
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Other operating expenses by type
Other general operating expenses
$
(33
)
$
(40
)
$
(46
)
$
(57
)
$
(43
)
Total
$
(33
)
$
(40
)
$
(46
)
$
(57
)
$
(43
)
Total
2022
2021
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Other operating expenses by type
Salaries and other base employee
expenses
$
38,333
$
34,177
$
32,604
$
30,818
$
30,430
Variable and share-based incentive
compensation
17,009
23,172
18,201
24,525
22,090
Other general operating expenses
36,763
34,540
34,015
34,263
34,670
Ceding commissions
(2,844
)
(3,949
)
(4,879
)
(5,638
)
(6,501
)
Title agent commissions
1,799
1,099
1,323
2,267
1,759
Total
$
91,060
$
89,039
$
81,264
$
86,235
$
82,448
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, except for certain investments
attributable to our reportable segments; (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 attributable to our reportable
segments, 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) 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. 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
2022
2021
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Consolidated pretax income
$
259,880
$
234,140
$
246,506
$
161,641
$
195,496
Less reconciling income (expense)
items
Net gains (losses) on investments and
other financial instruments (1)
(41,869
)
(29,457
)
1,516
2,098
15,661
Amortization of other acquired intangible
assets
(849
)
(849
)
(863
)
(862
)
(863
)
Impairment of other long-lived assets and
other non-operating items (2)
565
(502
)
788
(244
)
(4,021
)
Total adjusted pretax operating income
(3)
$
302,033
$
264,948
$
245,065
$
160,649
$
184,719
(1)
For the fourth quarter of 2021, excludes $1.5 million in net gains
on investments attributable to our homegenius segment and included
in adjusted pretax operating income (loss) for that reportable
segment.
(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.
2022
2021
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Adjusted pretax operating income
(loss)
Mortgage segment
$
316,520
$
277,841
$
246,574
$
165,220
$
194,043
homegenius segment
(17,690
)
(13,506
)
(2,116
)
(5,557
)
(9,198
)
All Other activities
3,203
613
607
986
(126
)
Total adjusted pretax operating income
$
302,033
$
264,948
$
245,065
$
160,649
$
184,719
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
2022
2021
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Diluted net income per share
$
1.15
$
1.01
$
1.07
$
0.67
$
0.80
Less per-share impact of reconciling
income (expense) items
Net gains (losses) on investments and
other financial instruments
(0.24
)
(0.16
)
0.01
0.01
0.08
Amortization of other acquired intangible
assets
—
(0.01
)
—
—
—
Impairment of other long-lived assets and
other non-operating items
—
—
—
—
(0.02
)
Income tax (provision) benefit on
reconciling income (expense) items (1)
0.05
0.03
—
—
(0.01
)
Difference between statutory and effective
tax rate
(0.02
)
(0.02
)
(0.01
)
(0.01
)
—
Per-share impact of reconciling income
(expense) items
(0.21
)
(0.16
)
—
—
0.05
Adjusted diluted net operating income per
share (1)
$
1.36
$
1.17
$
1.07
$
0.67
$
0.75
(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)
2022
2021
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Return on equity (1)
19.9
%
17.2
%
18.2
%
11.8
%
14.5
%
Less impact of reconciling income
(expense) items (2)
Net gains (losses) on investments and
other financial instruments
(4.1
)
(2.8
)
0.1
0.2
1.5
Amortization of other acquired intangible
assets
(0.1
)
(0.1
)
(0.1
)
(0.1
)
(0.1
)
Impairment of other long-lived assets and
other non-operating items
0.1
—
0.1
—
(0.4
)
Income tax (provision) benefit on
reconciling income (expense) items (3)
0.9
0.6
—
—
(0.2
)
Difference between statutory and effective
tax rate
(0.5
)
(0.4
)
(0.1
)
(0.1
)
0.1
Impact of reconciling income (expense)
items
(3.7
)
(2.7
)
—
—
0.9
Adjusted net operating return on equity
(3)
23.6
%
19.9
%
18.2
%
11.8
%
13.6
%
(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
2022
2021
(In thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
homegenius adjusted pretax operating
income (loss)
$
(17,690
)
$
(13,506
)
$
(2,116
)
$
(5,557
)
$
(9,198
)
Less reconciling income (expense)
items
Allocation of corporate operating
expenses
(5,719
)
(5,280
)
(4,847
)
(4,918
)
(4,721
)
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
(11,971
)
(8,226
)
2,731
(639
)
(4,477
)
Less reconciling income (expense)
items
Other operating expenses before allocated
corporate operating expenses
(23,205
)
(20,287
)
(16,998
)
(18,544
)
(16,160
)
homegenius adjusted gross profit
$
11,234
$
12,061
$
19,729
$
17,905
$
11,683
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
2022
2021
($ in millions)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
New insurance written ("NIW")
$
18,935
$
18,655
$
23,710
$
26,558
$
21,662
Total borrower-paid NIW
99.2
%
99.2
%
99.4
%
99.2
%
99.1
%
NIW by premium type
Direct monthly and other recurring
premiums
95.4
%
94.5
%
93.5
%
93.8
%
93.1
%
Borrower-paid
4.4
5.3
6.3
6.0
6.6
Lender-paid
0.2
0.2
0.2
0.2
0.3
Direct single premiums
4.6
5.5
6.5
6.2
6.9
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
NIW for purchases
97.1
%
91.4
%
91.1
%
89.8
%
77.1
%
NIW for refinances
2.9
%
8.6
%
8.9
%
10.2
%
22.9
%
NIW by FICO score (1)
>=740
59.6
%
57.1
%
53.8
%
56.0
%
61.4
%
680-739
32.3
35.7
36.9
34.9
33.1
620-679
8.1
7.2
9.3
9.1
5.5
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
NIW by LTV
95.01% and above
17.7
%
14.6
%
16.3
%
12.1
%
10.9
%
90.01% to 95.00%
39.9
42.0
41.9
46.7
40.4
85.01% to 90.00%
26.7
29.4
28.4
26.5
27.6
85.00% and below
15.7
14.0
13.4
14.7
21.1
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
(1)
For loans with multiple borrowers, the percentage of NIW by FICO
score represents the lowest of the borrowers’ FICO scores.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Primary Insurance in Force and Risk in Force
Exhibit I
June 30
March 31,
December 31,
September 30,
June 30,
($ in millions)
2022
2022
2021
2021
2021
Primary insurance in force
$
254,226
$
248,951
$
245,972
$
241,575
$
237,302
Primary risk in force ("RIF")
$
63,770
$
62,036
$
60,913
$
59,421
$
58,040
Primary RIF by premium type
Direct monthly and other recurring
premiums
85.6
%
84.9
%
83.9
%
82.7
%
81.2%
Direct single premiums (1)
14.4
%
15.1
%
16.1
%
17.3
%
18.8%
Primary RIF by FICO score (2)
>=740
57.2
%
56.9
%
56.9
%
57.3
%
57.5%
680-739
34.9
35.1
35.0
34.8
34.8
620-679
7.5
7.5
7.6
7.4
7.2
<=619
0.4
0.5
0.5
0.5
0.5
Total Primary
100.0
%
100.0
%
100.0
%
100.0
%
100.0%
Primary RIF by LTV
95.01% and above
16.1
%
15.5
%
15.1
%
14.6
%
14.5%
90.01% to 95.00%
48.7
48.9
48.9
48.9
48.5
85.01% to 90.00%
27.4
27.6
27.7
27.8
28.1
85.00% and below
7.8
8.0
8.3
8.7
8.9
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0%
Primary RIF by policy year
2008 and prior
4.0
%
4.3
%
4.7
%
5.2
%
5.7%
2009 - 2016
8.3
9.3
10.8
12.5
14.7
2017
3.9
4.3
4.9
5.7
6.8
2018
4.1
4.6
5.2
6.1
7.3
2019
7.7
8.6
9.7
11.4
13.6
2020
25.0
27.2
29.2
32.1
35.4
2021
32.1
34.0
35.5
27.0
16.5
2022
14.9
7.7
—
—
—
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0%
Persistency Rate (12 months ended)
71.7
%
68.0
%
64.3
%
60.8
%
57.7%(3)
Persistency Rate (quarterly, annualized)
(4)
79.8
%
76.9
%
(3)
71.7
%
67.5
%
66.3%
(1)
Borrower-paid Single Premium Policies were 8.1%, 8.4%, 8.5%, 8.8%
and 9.2% 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 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.
(4)
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, Default Statistics
Exhibit J
2022
2021
($ in thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Net claims paid (1)
Total primary claims paid
$
3,658
$
5,153
$
4,300
$
5,330
$
4,870
Total pool and other
(396
)
(415
)
(462
)
991
(649
)
Subtotal
3,262
4,738
3,838
6,321
4,221
Impact of commutations and settlements
(2)
—
—
6,549
3,915
—
Total net claims paid
$
3,262
$
4,738
$
10,387
$
10,236
$
4,221
Total average net primary claims paid (1)
(3)
$
41.6
$
41.6
$
47.8
$
42.0
$
46.8
Average direct primary claims paid (3)
(4)
$
41.9
$
42.1
$
49.1
$
43.2
$
48.4
(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.
June 30,
March 31,
December 31,
September 30,
June 30,
($ in thousands, except per default
amounts)
2022
2022
2021
2021
2021
Reserve for losses by category (1)
Mortgage reserves
Primary case reserves
$
562,436
$
691,090
$
790,380
$
851,151
$
840,764
LAE
14,147
17,367
19,859
21,400
21,180
IBNR
2,424
2,539
2,886
3,788
5,464
Total primary reserves
579,007
710,996
813,125
876,339
867,408
Total pool reserves
9,756
10,330
9,826
11,413
13,085
Total 1st lien reserves
588,763
721,326
822,951
887,752
880,493
Other
184
184
185
269
270
Total Mortgage reserves
588,947
721,510
823,136
888,021
880,763
homegenius reserves
5,861
5,737
5,506
5,134
4,735
Total reserves
$
594,808
$
727,247
$
828,642
$
893,155
$
885,498
Primary reserve per primary default
excluding IBNR and other
$
26,380
$
27,776
$
27,884
$
25,822
$
21,304
(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.
June 30,
March 31,
December 31,
September 30,
June 30,
2022
2022
2021
2021
2021
Default Statistics
Primary Insurance
Number of insured loans
998,520
994,721
999,203
998,408
1,000,549
Number of loans in default
21,861
25,510
29,061
33,795
40,464
Percentage of loans in default
2.19
%
2.56
%
2.91
%
3.38
%
4.04
%
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Reinsurance Programs
Exhibit K
2022
2021
($ in thousands)
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Quota Share Reinsurance (“QSR”) and Single
Premium QSR Programs
Ceded premiums written (1)
$ (21,554)
$ (22,079)
$ (7,670)
$ (1,304)
$ (7,032)
% of premiums written
(8.5) %
(8.8) %
(2.9) %
(0.5) %
(2.8) %
Ceded premiums earned
$ (7,937)
$ (3,240)
$ 3,116
$ 13,506
$ 13,491
% of premiums earned
(3.0) %
(1.2) %
1.1 %
4.8 %
4.8 %
Ceding commissions written
$ (6,584)
$ (9,153)
$ (8,232)
$ (7,861)
$ (2,362)
Ceding commissions earned (2)
$ 3,414
$ 5,123
$ 6,288
$ 7,087
$ 7,920
Profit commission
$ 21,447
$ 22,075
$ 20,290
$ 13,630
$ 17,935
Ceded losses
$ (15,037)
$ (12,588)
$ (7,940)
$ 883
$ (1,007)
Excess-of-Loss Program
Ceded premiums written
$ 18,151
$ 16,164
$ 20,508
$ 15,434
$ 18,524
% of premiums written
7.2 %
6.4 %
7.9 %
6.1 %
7.4 %
Ceded premiums earned
$ 19,292
$ 17,588
$ 17,817
$ 16,581
$ 15,601
% of premiums earned
7.3 %
6.5 %
6.3 %
5.9 %
5.5 %
Ceded RIF (3)
Single Premium QSR Program
$ 4,665,020
$ 4,855,228
$ 5,228,037
$ 5,439,056
$ 5,728,142
Excess-of-Loss Program
2,076,121
2,199,919
2,295,954
1,873,426
1,952,900
QSR Program
175,046
186,930
207,106
232,539
268,337
Total Ceded RIF
$ 6,916,187
$ 7,242,077
$ 7,731,097
$ 7,545,021
$ 7,949,379
PMIERs impact - reduction in Minimum
Required Assets
Excess-of-Loss Program
$ 785,705
$ 881,917
$ 995,171
$ 659,151
$ 907,112
Single Premium QSR Program
268,847
286,706
314,183
328,339
355,115
QSR Program
10,226
11,214
12,541
14,116
16,545
Total PMIERs impact
$ 1,064,778
$ 1,179,837
$ 1,321,895
$ 1,001,606
$ 1,278,772
(1)
Net of profit commission.
(2)
Includes amounts reported in policy acquisition costs and other
operating expenses. See Exhibit E for details.
(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. 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 as a result of inflationary
pressures from a rising interest rate environment and the potential
for a recession and higher unemployment rates, as well as other
macroeconomic stresses such as those that may arise from the
ongoing effects of the COVID-19 pandemic and government control
responses to the pandemic as well as the ongoing Russia-Ukraine
conflict;
- 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 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;
- 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;
- the effects of the Enterprise 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;
- 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, are subject
to complex compliance requirements that we may be unable to
satisfy, or may expose us to new risks including those that could
impact our capital and liquidity positions;
- uncertainty from 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 increasing 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
GSE-sponsored alternatives to traditional mortgage insurance;
- 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;
- 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
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;
- 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 will
receive broad customer acceptance or will disrupt existing customer
relations, and additional financial risks related to these
investments, including required changes in our investment,
financing and hedging strategies, and 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;
- 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, 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, 2021, 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/20220727005926/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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