-- GAAP net income increases to $208.9
million; diluted net income per share grows to $0.96 --
-- Adjusted diluted net operating income per
share increases 44% year-over-year to $0.69 --
-- Writes new MI business of $16.4 billion,
setting a company record for highest quarterly volume of flow MI;
MI in force increases 10% year-over-year to $210.7 billion
--
-- Book value per share grows 11%
year-over-year --
Radian Group Inc. (NYSE: RDN) today reported net income for the
quarter ended June 30, 2018, of $208.9 million, or $0.96 per
diluted share, which includes the impact of tax benefits related to
the previously disclosed expected settlement with the IRS as well
as the reversal of certain previously accrued state and local tax
liabilities. This compares to a net loss for the quarter ended
June 30, 2017, of $27.3 million, or $0.13 per diluted
share.
Key Financial Highlights (dollars
in millions, except per-share data)
Quarter EndedJune 30, 2018
Quarter EndedJune 30, 2017
PercentChange
Net income (loss) (1) $208.9 $(27.3)
N/M (2) Diluted net income (loss) per share
$0.96 $(0.13) N/M (2)
Consolidated pretax income (loss) $180.6
$(35.5) N/M (2) Adjusted pretax operating
income (3) $191.0 $163.7
17%
Adjusted diluted net operating income per
share(3) (4)
$0.69 $0.48 44% Net
premiums earned - mortgage insurance $249.0
$229.1 9% MI New Insurance Written (NIW)
$16,417 $14,342 14% MI
primary insurance in force $210,741
$191,637 10% Book value per share
$15.01 $13.54 11% Tangible book value
per share (3) $14.73 $13.22
11% Return on Equity (5) 26.7%
(3.7)% N/M (2) Adjusted Net Operating Return on
Equity (3) 19.3% 14.6%
32% (1)
Net income for the second quarter of 2018
includes the impact of tax benefits related to the previously
disclosed settlement with the IRS and the reversal of certain
related previously accrued state and local tax liabilities, as well
as a pretax net loss on investments and other financial instruments
of $7.4 million and $0.9 million of pretax restructuring and other
exit costs related to the Mortgage and Real Estate Services
segment.
(2)
N/M - Calculation results are not
meaningful. The net loss in the second quarter of 2017 was
attributed to after-tax, non-cash impairment charges of $130.9
million associated with an impairment of goodwill and other
intangible assets related to the Mortgage and Real Estate Services
segment.
(3)
Adjusted results, including adjusted
pretax operating income, adjusted diluted net operating income per
share, tangible book value per share and adjusted net operating
return on equity, are non-GAAP financial measures. For definitions
and a reconciliation of these measures to the comparable GAAP
measures, see Exhibits F and G.
(4)
Adjusted diluted net operating income per
share is calculated using the company’s statutory tax rates of 21
percent in 2018 and 35 percent in 2017.
(5)
Calculated by dividing annualized net
income by average stockholders' equity, based on the average of the
beginning and ending balances for each period presented.
Adjusted pretax operating income for the quarter ended June 30,
2018, was $191.0 million, compared to $163.7 million for the
quarter ended June 30, 2017. Adjusted diluted net operating income
per share for the quarter ended June 30, 2018, was $0.69, an
increase of 44 percent compared to $0.48 for the quarter ended June
30, 2017.
Book value per share at June 30, 2018, was $15.01, an
increase of 6 percent compared to $14.16 at March 31, 2018,
and an increase of 11 percent compared to $13.54 at June 30,
2017. Tangible book value per share at June 30, 2018, was
$14.73, an increase of 6 percent compared to $13.88 at
March 31, 2018, and an increase of 11 percent compared to
$13.22 at June 30, 2017.
“We reported outstanding financial results for the second
quarter, with net income of $209 million, adjusted net operating
ROE of 19%, record-breaking NIW of $16.4 billion, growth in our
Services segment, 10% growth in MI insurance in force and 11%
growth in book value,” said Radian’s Chief Executive Officer Rick
Thornberry. “These results reflect the success of our business
strategy as one Radian, the breadth and depth of our customer
relationships, the strength and flexibility of our financial
position, the value of our $211 billion insurance portfolio and the
hard work of our outstanding team.”
SECOND QUARTER HIGHLIGHTS AND RECENT EVENTS
Mortgage Insurance
- Mortgage insurance new insurance
written (NIW) was $16.4 billion for the quarter, representing
record volume of NIW on a flow basis for the company, and an
increase of 41 percent compared to $11.7 billion in the first
quarter of 2018 as well as an increase of 14 percent compared to
$14.3 billion in the prior-year quarter. Purchase originations
accounted for 95 percent of total NIW in the second quarter of
2018, compared to 89 percent in the first quarter of 2018, and 91
percent a year ago.
- Total primary mortgage insurance in
force as of June 30, 2018, grew to $210.7 billion, an increase
of 3 percent compared to $204.0 billion as of March 31, 2018,
and an increase of 10 percent compared to $191.6 billion as of
June 30, 2017.
- The composition of Radian’s mortgage
insurance portfolio continues to improve, with 93 percent
consisting of new business written after 2008, including those
loans that successfully completed the Home Affordable Refinance
Program (HARP).
- Persistency, which is the percentage of
mortgage insurance that remains in force after a 12-month period,
was 80.9 percent as of June 30, 2018, compared to 81.0 percent
as of March 31, 2018, and 78.5 percent as of June 30,
2017.
- Annualized persistency for the three
months ended June 30, 2018, was 82.3 percent, compared to 84.3
percent for the three months ended March 31, 2018, and 82.8
percent for the three months ended June 30, 2017.
- Net mortgage insurance premiums earned
were $249.0 million for the quarter ended June 30, 2018,
compared to $242.6 million for the quarter ended March 31,
2018, and $229.1 million for the quarter ended June 30, 2017.
- Mortgage insurance in force premium
yield was 48.4 basis points in the second quarter of 2018, a slight
decrease compared to 48.7 basis points in the first quarter of 2018
and in the second quarter of 2017.
- Total net mortgage insurance premium
yield, which includes the impact of ceded premiums and accrued
profit commission, was 48.0 basis points in the second quarter of
2018, compared to 47.9 basis points in the first quarter of 2018,
and 48.5 basis points in the second quarter of 2017.
- Additional details regarding notable
variable items impacting premiums earned may be found in Exhibit
D.
- The mortgage insurance provision for
losses was $19.4 million in the second quarter of 2018, compared to
$37.4 million in the first quarter of 2018, and $17.7 million in
the prior-year quarter.
- The number of primary delinquent loans
was 22,088 as of June 30, 2018, a decrease of 10 percent
compared to 24,597 as of March 31, 2018 and a decrease of 7
percent compared to 23,755 as of June 30, 2017.
- Excluding the impact of delinquent
loans from areas affected by major 2017 hurricanes, the total
number of primary delinquent loans of 17,956 decreased by 15
percent from 21,006 as of June 30, 2017. Based on past
experience, the company continues to expect that these
delinquencies will not result in a material number of new paid
claims.
- The primary mortgage insurance
delinquency rate decreased to 2.2 percent in the second quarter of
2018, compared to 2.5 percent in the first quarter of 2018, and 2.6
percent in the second quarter of 2017.
- The loss ratio in the second quarter of
2018 was 7.8 percent, compared to 15.4 percent in the first quarter
of 2018, and 7.7 percent in the second quarter of 2017.
- Mortgage insurance loss reserves were
$448.1 million as of June 30, 2018, compared to $485.2 million
as of March 31, 2018, and $651.6 million as of June 30,
2017.
- Total mortgage insurance claims paid
were $56.5 million in the second quarter of 2018, compared to $59.9
million in the first quarter of 2018, and $91.3 million in the
second quarter of 2017. In addition, the company’s pending claim
inventory declined 43 percent from June 30, 2017.
Mortgage and Real Estate Services
- Total revenues for the second quarter
of 2018 were $40.5 million, compared to $34.2 million for the first
quarter of 2018, and $40.0 million for the second quarter of
2017.
- Adjusted pretax operating income before
corporate allocations for the quarter ended June 30, 2018, was
$1.0 million, which includes $1.1 million in restructuring and
other exit costs as well as a loss of $0.9 million related to
Radian's recently aquired national title insurance and settlement
company. This compares to a loss of $0.4 million for the quarter
ended March 31, 2018, which includes $0.5 million in
restructuring and other exit costs, and income of $1.2 million for
the quarter ended June 30, 2017.
- Adjusted earnings before interest,
income taxes, depreciation and amortization (Services adjusted
EBITDA) for the quarter ended June 30, 2018, was $2.0 million,
which includes $1.1 million in restructuring and other exit costs
as well as a loss of $0.9 million related to Radian's recently
acquired national title insurance and settlement company. This
compares to $0.5 million for the quarter ended March 31, 2018,
which includes $0.5 million in restructuring and other exit costs,
and $2.0 million for the quarter ended June 30, 2017.
Additional details regarding the non-GAAP measure Services adjusted
EBITDA may be found in Exhibits E, F and G.
Consolidated Expenses and Operating Leverage
Other operating expenses were $70.2 million in the second
quarter of 2018, compared to $63.2 million in the first quarter of
2018, and $68.8 million in the second quarter of 2017. Beginning in
the second quarter of 2018, operating expenses include expenses
related to Radian's national title insurance and settlement
services company acquired in March 2018, which were $3.7 million in
the quarter. Additionally, consistent with prior years, operating
expenses in the second quarter also include the seasonal impact
associated with the annual grant of the company's long-term equity
awards.
Revenue in the second quarter of 2018 grew 5 percent year over
year, driven by a 10 percent increase in net premiums earned, while
other operating expenses increased 2 percent. These results are
consistent with Radian's long-term strategic objective of
generating positive operating leverage through accretive revenue
growth and disciplined expense management.
CAPITAL AND LIQUIDITY UPDATE
Radian Group maintained approximately $200 million of available
liquidity as of June 30, 2018, which excludes the $31 million
expected to be submitted to the U.S. Department of the Treasury for
the IRS settlement. Total liquidity, which includes the company’s
$225 million unsecured revolving credit facility entered into in
October 2017, was approximately $425 million as of June 30,
2018. The company remains focused on improving its capital
position, enhancing its return on capital, and increasing its
financial flexibility, as well as positioning Radian Group for a
return to investment grade ratings.
- During the second quarter, Radian
repurchased 2,491,843 shares, or approximately $40 million, of
Radian Group common stock.
- As previously announced, in December
2017 Radian Guaranty received the proposed changes to the Private
Mortgage Insurer Eligibility Requirements (PMIERs) of Fannie Mae
and Freddie Mac (the GSEs), referred to as PMIERs 2.0. In June
2018, the company received revisions to PMIERs 2.0 that take into
consideration, among other items, the comments previously provided
by the private mortgage insurance industry to the GSEs and FHFA.
- The company expects that PMIERs 2.0
will be finalized in the third quarter of 2018 and, after an
implementation period, will become effective at the end of the
first quarter of 2019.
- Based on the most recent version of
PMIERs 2.0, as of the effective date, Radian expects to be able to
fully comply with PMIERs 2.0 and to maintain substantially the same
excess of Available Assets over Minimum Required Assets under
PMIERs 2.0 as it does today under the current PMIERs, without a
need to take further actions to do so.
- Radian’s expectation is based on the
company's current understanding of the most recent version of
PMIERs 2.0, its forecasted NIW, its projections for ongoing
positive operating results, its strong capital position and the
benefits of its reinsurance programs.
CONFERENCE CALL
Radian will discuss second quarter financial results in a
conference call today, Thursday, July 26, 2018, at 10:00 a.m.
Eastern time. The conference call will be broadcast live over the
Internet at http://www.radian.biz/page?name=Webcasts or at
www.radian.biz. The call may also be accessed by dialing
800.288.8976 inside the U.S., or 612.332.0228 for international
callers, using passcode 451857 or by referencing Radian.
A replay of the webcast will be available on the Radian website
approximately two hours after the live broadcast ends for a period
of one year. A replay of the conference call will be available
approximately two and a half hours after the call ends for a period
of two weeks, using the following dial-in numbers and passcode:
800.475.6701 inside the U.S., or 320.365.3844 for international
callers, passcode 451857.
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 under Investors >
Quarterly Results, or by clicking on
http://www.radian.biz/page?name=QuarterlyResults.
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 is defined as earnings
excluding the impact of certain items that are not viewed as part
of the operating performance of the company’s primary activities,
or not expected to result in an economic impact equal to the amount
reflected in pretax income (loss). Adjusted pretax operating income
adjusts GAAP pretax income (loss) to remove the effects of: (i) net
gains (losses) on investments and other financial instruments; (ii)
loss on induced conversion and debt extinguishment; (iii)
acquisition-related expenses; (iv) amortization or impairment of
goodwill and other intangible assets; and (v) net impairment losses
recognized in earnings and losses from the sale of business lines.
Adjusted diluted net operating income per share represents a
diluted net income per share calculation using as its basis
adjusted pretax operating income, net of taxes at the company’s
statutory tax rate for the period. Adjusted net operating return on
equity is calculated by dividing annualized adjusted pretax
operating income, 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.
The company has also presented a non-GAAP measure for tangible
book value per share, which represents book value per share less
the per-share impact of goodwill and other intangible assets, net.
The company uses this measure to assess the quality and growth of
its capital. Because tangible book value per share is a widely used
financial measure which focuses on the underlying fundamentals of
the company’s financial position and operating trends without the
impact of goodwill and other intangible assets, the company
believes that current and prospective investors may find it useful
in their analysis.
In addition to the above non-GAAP measures for the consolidated
company, the company also presents as supplemental information a
non-GAAP measure for the Services segment, representing earnings
before interest, income tax provision (benefit), depreciation and
amortization (EBITDA). Services adjusted EBITDA is calculated by
using the Services segment’s adjusted pretax operating income as
described above, further adjusted to remove the impact of
depreciation and corporate allocations for interest and operating
expenses. In addition, the company also has presented a related
non-GAAP measure, Services adjusted EBITDA margin, which is
calculated by dividing Services adjusted EBITDA by GAAP total
revenue for the Services segment. Services adjusted EBITDA and
Services adjusted EBITDA margin are presented 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 Services 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), headquartered in Philadelphia,
provides private mortgage insurance, risk management products and
real estate services to financial institutions. Radian offers
products and services through two business segments:
- Mortgage Insurance, through its
principal mortgage insurance subsidiary Radian Guaranty Inc. This
private mortgage insurance helps protect lenders from
default-related losses, facilitates the sale of low-downpayment
mortgages in the secondary market and enables homebuyers to
purchase homes more quickly with downpayments less than 20%.
- Mortgage and Real Estate
Services, through its principal services subsidiary Clayton, as
well as Entitle Direct, Green River Capital, Red Bell Real Estate
and ValuAmerica. These solutions include information and services
that financial institutions, investors and government entities use
to evaluate, acquire, securitize, service and monitor loans and
asset-backed securities.
Additional information may be found at www.radian.biz.
FINANCIAL RESULTS AND SUPPLEMENTAL
INFORMATION CONTENTS (Unaudited)
For historical trend information, refer to
Radian’s quarterly financial statistics at
http://www.radian.biz/page?name=FinancialReportsCorporate.
Exhibit A: Condensed Consolidated Statements of
Operations Trend Schedule Exhibit B: Net Income (Loss) Per Share
Trend Schedule Exhibit C: Condensed Consolidated Balance Sheets
Exhibit D: Net Premiums Earned - Insurance and Restructuring and
Other Exit Costs Exhibit E: Segment Information Exhibit F:
Definition of Consolidated Non-GAAP Financial Measures Exhibit G:
Consolidated Non-GAAP Financial Measure Reconciliations Exhibit H:
Mortgage Insurance Supplemental
InformationNew Insurance Written
Exhibit I: Mortgage Insurance Supplemental InformationPrimary
Insurance in Force and Risk in Force Exhibit J: Mortgage Insurance
Supplemental InformationClaims and Reserves Exhibit K: Mortgage
Insurance Supplemental InformationDefault Statistics Exhibit L:
Mortgage Insurance Supplemental InformationQSR Transactions,
Captives and Persistency
Radian Group Inc. and
Subsidiaries Condensed Consolidated Statements of Operations
Trend Schedule Exhibit A 2018
2017
(In thousands,
except per-share amounts)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2
Revenues: Net premiums earned - insurance $
251,344 $ 242,550 $ 245,175 $ 236,702 $ 229,096
Services
revenue 36,828 33,164 39,703 39,571 37,802
Net
investment income 37,473 33,956 33,605 32,540 30,071
Net gains (losses) on investments and other financial
instruments (7,404 ) (18,887 ) (1,339 ) 2,480
5,331
Other income 1,016 807
768 760 612
Total revenues 319,257 291,590
317,912 312,053 302,912
Expenses: Provision for losses
19,337 37,283 35,178 35,841 17,222
Policy acquisition
costs 5,996 7,117 5,871 5,554 6,123
Cost of
services 24,205 23,126 23,349 27,240 25,635
Other
operating expenses 70,184 63,243 65,999 64,195 68,750
Restructuring and other exit costs 925 551 5,230
12,038 —
Interest expense 15,291 15,080 14,929 15,715
16,179
Loss on induced conversion and debt extinguishment
— — — 45,766 1,247
Impairment of goodwill — —
— — 184,374
Amortization and impairment of other intangible
assets 2,748 2,748
2,629 2,890 18,856
Total
expenses 138,686 149,148
153,185 209,239 338,386
Pretax income (loss) 180,571 142,442 164,727
102,814 (35,474 )
Income tax provision (benefit)
(28,378 ) 27,956 157,911
37,672 (8,132 )
Net income (loss)
$ 208,949 $ 114,486 $ 6,816 $
65,142 $ (27,342 )
Diluted net income (loss) per
share $ 0.96 $ 0.52 $ 0.03 $ 0.30 $ (0.13 )
Selected Mortgage Insurance Key Ratios Loss ratio
(1) 7.8 % 15.4 % 14.4 % 15.2 % 7.7 %
Expense
ratio (1) 23.9 % 23.7 % 23.0 % 22.9 % 26.2 %
(1)
Calculated on a GAAP basis using net
premiums earned.
Radian Group Inc. and Subsidiaries Net
Income (Loss) Per Share Trend Schedule Exhibit B
The calculation of basic and diluted net income (loss) per share
was as follows: 2018 2017
(In thousands,
except per-share amounts)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2
Net
income (loss)—basic and diluted $ 208,949 $
114,486 $ 6,816 $ 65,142 $ (27,342 )
Average common
shares outstanding—basic 213,976 215,967 215,623 215,279
215,152
Dilutive effect of Convertible Senior Notes due 2017
(1) — — 9 16 —
Dilutive effect of stock-based
compensation arrangements (1) 3,854 3,916
4,618 4,096 —
Adjusted average
common shares outstanding—diluted 217,830
219,883 220,250 219,391 215,152
Basic net income (loss) per share $ 0.98 $
0.53 $ 0.03 $ 0.30 $ (0.13 )
Diluted net income (loss)
per share $ 0.96 $ 0.52 $ 0.03 $ 0.30 $ (0.13 )
(1)
There are no Convertible Senior Notes
outstanding at December 31, 2017, or in subsequent periods. There
were no dilutive shares for the three months ended June 30, 2017,
as a result of our net loss for the period. The following number of
shares of our common stock equivalents issued under our share-based
compensation arrangements and our convertible debt were not
included in the calculation of diluted net income (loss) per share
because they were anti-dilutive:
2018 2017
(In
thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2
Shares
of common stock equivalents 484 170 170 676 5,975
Shares of Convertible Senior Notes due 2017 — — — —
509
Radian Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets Exhibit C
(In thousands,
except per-share data)
June 30,2018 March 31,2018
December 31,2017 September 30,2017 June 30,2017
Assets: Investments $ 4,873,919
$ 4,668,217 $ 4,643,942 $ 4,546,664 $ 4,583,842
Cash
95,573 122,481 80,569 61,917 56,918
Restricted cash
9,152 7,623 15,675 36,888 25,486
Accounts and notes
receivable 94,848 80,068 72,558 97,020 78,540
Deferred income taxes, net 171,293 253,381 229,567
356,181 389,759
Goodwill and other intangible assets, net
59,179 61,465 64,212 66,967 69,857
Prepaid reinsurance
premium 405,447 390,241 386,509 239,620 235,349
Other
assets 430,077 426,773
407,849 439,016
377,355
Total assets $
6,139,488 $ 6,010,249 $
5,900,881 $ 5,844,273 $ 5,817,106
Liabilities and stockholders’ equity:
Unearned premiums $ 741,296 $ 723,100 $
723,938 $ 717,589 $ 702,210
Reserve for losses and loss
adjustment expense 451,542 488,656 507,588 556,488
651,591
Senior notes 1,028,687 1,027,875 1,027,074
1,026,806 989,010
Reinsurance funds withheld 331,776
305,409 288,398 194,353 180,991
Other liabilities
385,051
412,793 353,845
360,835 379,144
Total
liabilities 2,938,352
2,957,833 2,900,843
2,856,071 2,902,946
Equity component of currently redeemable convertible senior
notes — — — — 16
Common stock 231
233 233 233 233
Treasury stock (894,610 )
(894,191 ) (893,888 ) (893,754 ) (893,531 )
Additional paid-in
capital 2,715,426 2,748,233 2,754,275 2,747,393
2,743,872
Retained earnings 1,438,032 1,229,616
1,116,333 1,110,057 1,045,453
Accumulated other comprehensive
income (loss) (57,943 )
(31,475 ) 23,085 24,273
18,117
Total stockholders’
equity 3,201,136 3,052,416
3,000,038 2,988,202
2,914,144
Total liabilities
and stockholders’ equity $ 6,139,488
$ 6,010,249 $ 5,900,881 $
5,844,273 $ 5,817,106
Shares
outstanding 213,232 215,543 215,814 215,299 215,175
Book value per share $ 15.01 $ 14.16 $
13.90 $ 13.88 $ 13.54
Tangible book value per share (See
Exhibit G) $ 14.73 $ 13.88 $ 13.60 $ 13.57 $
13.22
Statutory Capital Ratios Risk to capital
ratio-Radian Guaranty only
12.5
:1
(1)
12.6
:1
12.8
:1
14.4
:1
14.3
:1
Risk to capital ratio-Mortgage Insurance combined
11.8
:1
(1)
11.9
:1
12.1
:1
13.4
:1
13.4
:1
(1)
Preliminary.
Radian Group Inc. and Subsidiaries Net
Premiums Earned - Insurance and Restructuring and Other Exit
Costs Exhibit D 2018 2017
(In
thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2
Premiums earned - insurance:
(1)
Direct $ 267,957 $ 258,743 $ 260,184 $ 250,541
$ 243,229
Assumed 7 6 7 7 7
Ceded
(16,620 ) (16,199 ) (15,016 )
(13,846 ) (14,140 )
Net premiums earned - insurance
$ 251,344 $ 242,550 $ 245,175 $
236,702 $ 229,096
Notable variable items: (2)
Single Premium Policy cancellations, direct $
14,776 $ 12,335 $ 21,172 $ 15,415 $ 13,346
Single Premium Policy cancellations,
ceded (3)
(4,046 ) (3,301 ) (3,934 )
(3,075 ) (2,622 )
Single Premium Policy
cancellations, net $ 10,730 $ 9,034
$ 17,238 $ 12,340 $ 10,724
Profit commission - other (4)
$ 7,917 $ 7,405 $ 4,272 $ 4,876
$ 4,521
Restructuring and other exit costs:
(5)
Employee severance, related benefits
and other exit costs (6)
$ 1,055 $ 525 $ 1,365 $ 5,463 $ —
Impairment of other long-lived assets
and loss from the sale of a business line (7)
(130 ) 26 3,865
6,575 —
Total restructuring and
other exit costs $ 925 $ 551 $
5,230 $ 12,038 $ —
(1)
These amounts are related to our
Mortgage Insurance segment.
(2)
These amounts are included in net
premiums earned - insurance, in our Mortgage Insurance
segment.
(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)
Represents the charges associated with
our plan to restructure the Services business.
(6)
Employee severance, related benefits
and other exit costs are components of adjusted pretax operating
income.
(7)
Impairment of other long-lived assets
and loss from the sale of a business line are not components of
adjusted pretax operating income. The amounts for the three months
ended June 30, 2018 and December 31, 2017 primarily relate to the
loss on the sale of our EuroRisk business, which was completed
during the fourth quarter of 2017. The amounts for the three months
ended March 31, 2018 and September 30, 2017 relate to the
impairment of other long-lived assets. See Exhibit F for additional
information on our non-GAAP financial measures.
Radian Group Inc. and Subsidiaries Segment
Information Exhibit E (page 1 of 2) 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 and Services adjusted EBITDA,
along with reconciliations to consolidated GAAP measures, see
Exhibits F and G.
Mortgage Insurance
2018 2017
(In
thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2
Net
premiums written - insurance $ 251,958 $ 237,980
$ 104,635
(1 ) $ 247,810 $ 241,307
(Increase)
decrease in unearned premiums (2,990 )
4,570 140,540 (11,108 )
(12,211 )
Net premiums earned - insurance 248,968
242,550 245,175 236,702 229,096
Net investment income
37,447 33,956 33,605 32,540 30,071
Other income
621 807 768
760 612
Total 287,036
277,313 279,548 270,002
259,779
Provision for losses
19,362 37,391 35,257 35,980 17,714
Policy acquisition
costs 5,996 7,117 5,871 5,554 6,123
Other operating
expenses before corporate allocations 33,262
31,888 36,806 36,941
37,939
Total (2) 58,620
76,396 77,934 78,475
61,776
Adjusted pretax operating income
before corporate allocations 228,416 200,917 201,614
191,527 198,003
Allocation of corporate operating expenses
20,136 18,577 13,624 11,737 15,894
Allocation of interest
expense 10,840 10,629
10,477 11,282 11,748
Adjusted
pretax operating income $ 197,440 $
171,711 $ 177,513 $ 168,508 $ 170,361
Services 2018 2017
(In
thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2
Net premiums earned -
insurance $ 2,376 $ — $ — $ — $ —
Services
revenue (2) 37,713 34,166 40,707 41,062 39,975
Net
investment income 26 — — — —
Other income
395 — — —
—
Total 40,510
34,166 40,707 41,062
39,975
Provision for losses 53 — — — —
Cost of services 24,357 23,270 23,616 27,544 25,962
Other operating expenses before corporate allocations
14,015 10,744 12,781 12,781 12,803
Restructuring and
other exit costs (3) 1,055 525
1,365 5,463 —
Total 39,480 34,539
37,762 45,788 38,765
Adjusted pretax operating income (loss) before corporate
allocations (4) 1,030 (373 ) 2,945 (4,726 ) 1,210
Allocation of corporate operating expenses 3,010
2,784 3,467 3,730 3,404
Allocation of interest expense
4,451 4,451 4,452
4,433 4,431
Adjusted pretax
operating income (loss)
$
(6,431
)
$
(7,608
)
$ (4,974 ) $ (12,889 ) $ (6,625 )
(1)
Effective December 31, 2017, we amended
the 2016 Single Premium QSR Agreement to increase the amount of
ceded risk for 2015 through 2017 vintages under the agreement from
35% to 65%, resulting in a reduction of $145.7 million in net
premiums written for the fourth quarter of 2017.
See notes continued on next
page.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 2 of 2)
Notes continued from prior
page.
(2)
Inter-segment information:
2018 2017
Qtr 2 Qtr 1 Qtr 4 Qtr
3 Qtr 2
Inter-segment expense included in Mortgage
Insurance segment $ 885 $ 1,002 $ 1,004 $ 1,491 $
2,173
Inter-segment revenue included in Services segment
885 1,002 1,004 1,491 2,173
(3)
Primarily includes employee severance
and related benefit costs. Does not include impairment of
long-lived assets and loss from the sale of a business line, which
are not considered components of adjusted pretax operating income
(loss).
(4)
Supplemental information for Services
adjusted EBITDA (see definition in Exhibit F):
2018 2017
Qtr
2 Qtr 1 Qtr 4 Qtr 3 Qtr 2
Adjusted
pretax operating income (loss) before corporate allocations
$ 1,030 $ (373 ) $ 2,945 $ (4,726 ) $ 1,210
Depreciation and amortization 920 867
893 1,172 835
Services
adjusted EBITDA $ 1,950 $ 494 $ 3,838 $
(3,554 ) $ 2,045
Selected balance sheet information for
our segments, as of the periods indicated, is as follows:
At June 30, 2018
(In
thousands)
MortgageInsurance
Services Total Total assets
$ 5,949,845 $ 189,643 $
6,139,488 At December 31, 2017
(In
thousands)
MortgageInsurance
Services Total
Total assets $ 5,733,918 $ 166,963 $
5,900,881
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,” “adjusted
diluted net operating income per share” and “adjusted net operating
return on equity,” 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,” “adjusted
diluted net operating income 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 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 induced
conversion and debt extinguishment; (iii) acquisition-related
expenses; (iv) amortization or impairment of goodwill and other
intangible assets; and (v) net impairment losses recognized in
earnings and losses from the sale of lines of business. Adjusted
diluted net operating income per share is calculated by dividing
(i) adjusted pretax operating income attributable to common
shareholders, 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. Interest expense on convertible debt, share dilution
from convertible debt and the impact of share-based compensation
arrangements have been reflected in the per share calculations
consistent with the accounting standard regarding earnings per
share, whenever the impact is dilutive. Adjusted net operating
return on equity is calculated by dividing annualized adjusted
pretax operating income, 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
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
investment 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. We do not view them to be indicative of our fundamental
operating activities. Therefore, these items are excluded from our
calculation of adjusted pretax operating income (loss).
(2)
Loss on induced conversion and debt
extinguishment. Gains or losses on early extinguishment of debt and
losses incurred to purchase our convertible 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. Therefore, these
items are excluded from our calculation of adjusted pretax
operating income (loss).
(3)
Acquisition-related expenses.
Acquisition-related expenses represent the costs incurred to effect
an acquisition of a business (i.e., a business combination).
Because we pursue acquisitions on a strategic and selective basis
and not in the ordinary course of our business, we do not view
acquisition-related expenses as a consequence of a primary business
activity. Therefore, we do not consider these expenses to be part
of our operating performance and they are excluded from our
calculation of adjusted pretax operating income (loss).
Radian Group Inc. and
Subsidiaries
Definition of Consolidated Non-GAAP
Financial Measures
Exhibit F (page 2 of 2)
(4)
Amortization or impairment of goodwill and
other intangible assets. Amortization of intangible assets
represents the periodic expense required to amortize the cost of
intangible assets over their estimated useful lives. Intangible
assets with an indefinite useful life are also periodically
reviewed for potential impairment, and impairment adjustments are
made whenever appropriate. These charges are not viewed as part of
the operating performance of our primary activities and therefore
are excluded from our calculation of adjusted pretax operating
income (loss).
(5)
Net impairment losses recognized in
earnings and losses from the sale of lines of business. The
recognition of net impairment losses on investments and the
impairment of other long-lived assets does not result in a cash
payment and can vary significantly in both amount and frequency,
depending on market credit cycles and other factors. Losses from
the sale of lines of business are highly discretionary as a result
of strategic restructuring decisions, and generally do not occur in
the normal course of our business. We do not view these losses to
be indicative of our fundamental operating activities. Therefore,
whenever these losses occur, we exclude them from our calculation
of adjusted pretax operating income (loss).
We have also presented a non-GAAP measure for tangible book
value per share, which represents book value per share less the
per-share impact of goodwill and other intangible assets, net. We
use this measure to assess the quality and growth of our capital.
Because tangible book value per share is a widely-used financial
measure which focuses on the underlying fundamentals of our
financial position and operating trends without the impact of
goodwill and other intangible assets, we believe that current and
prospective investors may find it useful in their analysis of the
Company. In addition to the above non-GAAP measures for the
consolidated company, we also have presented as supplemental
information a non-GAAP measure for our Services segment,
representing a measure of earnings before interest, income tax
provision (benefit), depreciation and amortization (“EBITDA”). We
calculate Services adjusted EBITDA by using adjusted pretax
operating income as described above, further adjusted to remove the
impact of depreciation and corporate allocations for interest and
operating expenses. In addition, we also have presented a related
non-GAAP measure, Services adjusted EBITDA margin, which we
calculate by dividing Services adjusted EBITDA by GAAP total
revenue for the Services segment. We have presented Services
adjusted EBITDA and Services adjusted EBITDA margin 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 Services segment. See Exhibit G for the
reconciliation of the most comparable GAAP measures, consolidated
pretax income (loss), diluted net income (loss) per share, return
on equity and book value per share, to our non-GAAP financial
measures for the consolidated company, adjusted pretax operating
income, adjusted diluted net operating income per share, adjusted
net operating return on equity, and tangible book value per share,
respectively. Exhibit G also contains the reconciliation of the
most comparable GAAP measure, net income (loss), to Services
adjusted EBITDA. Total adjusted pretax operating income,
adjusted diluted net operating income per share, adjusted net
operating return on equity, tangible book value per share, Services
adjusted EBITDA and Services adjusted EBITDA margin should not be
considered in isolation or viewed as substitutes for GAAP pretax
income (loss), diluted net income (loss) per share, return on
equity, book value per share or net income (loss). Our definitions
of adjusted pretax operating income, adjusted diluted net operating
income per share, adjusted net operating return on equity, tangible
book value per share, Services adjusted EBITDA or Services adjusted
EBITDA 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 4)
Reconciliation of Consolidated Pretax Income (Loss) to Adjusted
Pretax Operating Income 2018
2017
(In
thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3
Qtr 2
Consolidated pretax income (loss) $
180,571 $ 142,442 $ 164,727 $ 102,814 $ (35,474 )
Less
reconciling income (expense) items: Net gains (losses) on
investments and other financial instruments (7,404
) (18,887 ) (1,339 ) 2,480 5,331
Loss on induced
conversion and debt extinguishment — — — (45,766 )
(1,247 )
Acquisition-related expenses (1) (416
) — 21 (54 ) (64 )
Impairment of goodwill — —
— — (184,374 )
Amortization and impairment of other intangible
assets (2,748 ) (2,748 ) (2,629 ) (2,890 )
(18,856 )
Impairment of other long-lived assets and loss from
the sale of a business line (2) 130
(26 ) (3,865 ) (6,575 ) —
Total adjusted pretax operating income
(3)
$ 191,009 $ 164,103 $ 172,539 $
155,619 $ 163,736
(1)
Please see Exhibit F for the definition
of this line item. This item is included within other operating
expenses on the Condensed Consolidated Statement of Operations in
Exhibit A.
(2)
This item is included within
restructuring and other exit costs on the Condensed Consolidated
Statement of Operations in Exhibit A.
(3)
Total adjusted pretax operating income
consists of adjusted pretax operating income (loss) for each
segment as follows:
2018
2017
(In
thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3
Qtr 2
Adjusted pretax operating income (loss) (1):
Mortgage Insurance $ 197,440 $ 171,711 $
177,513 $ 168,508 $ 170,361
Services (2)
(6,431 ) (7,608 ) (4,974 )
(12,889 ) (6,625 )
Total adjusted pretax operating
income $ 191,009 $ 164,103 $
172,539 $ 155,619 $ 163,736
(1)
Please see Exhibit E for additional
segment-level detail.
(2)
Please see Exhibit G, page 4 of 4, for
Services Adjusted EBITDA, a supplemental metric used to facilitate
comparisons with other services companies.
Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit G (page 2 of 4) Reconciliation of Diluted
Net Income (Loss) Per Share to Adjusted Diluted Net Operating
Income Per Share 2018
2017
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr
2
Diluted net income (loss) per share $ 0.96
$ 0.52 $ 0.03 $ 0.30 $ (0.13 )
Less per-share impact of reconciling income (expense) items:
Net gains (losses) on investments and other financial
instruments (0.03 ) (0.09 ) (0.01 ) 0.01 0.02
Loss on induced conversion and debt extinguishment —
— — (0.14 ) (0.01 )
Acquisition-related expenses — —
— — —
Impairment of goodwill — — — — (0.86 )
Amortization and impairment of other intangible assets
(0.01 ) (0.01 ) (0.01 ) (0.01 ) (0.09 )
Impairment
of other long-lived assets and loss from the sale of a business
line — — (0.02 ) (0.03 ) —
Income tax provision
(benefit) on reconciling income (expense) items (1)
(0.01 ) (0.02 ) (0.01 ) (0.01 ) (0.32 )
Difference
between statutory and effective tax rate 0.30
(2) 0.01 (0.45 )
(3)
— —
Per-share impact of reconciling
income (expense) items 0.27 (0.07 )
(0.48 ) (0.16 ) (0.62 )
Add per-share
impact of share dilution — —
— — (0.01 )
Adjusted diluted
net operating income per share (1) $ 0.69
$ 0.59 $ 0.51 $ 0.46 $ 0.48
(1)
Calculated using the company’s federal
statutory tax rates of 21% and 35% for 2018 and 2017, respectively.
Any permanent tax adjustments and state income taxes on these items
have been deemed immaterial and are not included.
(2)
Includes $0.34 of tax benefit related
to the settlement of the IRS Matter, which includes both the impact
of the settlement with the IRS as well as the reversal of certain
related previously accrued state and local tax liabilities.
(3)
Includes $0.47 in additional tax
expense related to the remeasurement of our net deferred tax assets
as a result of the Tax Cuts and Jobs Act enacted in December
2017.
Radian Group Inc. and Subsidiaries Consolidated
Non-GAAP Financial Measure Reconciliations Exhibit G (page 3
of 4) Reconciliation of Return on Equity to Adjusted
Net Operating Return on Equity (1) 2018 2017
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2
Return on equity (1)
26.7 % 15.1 % 0.9 % 8.8 % (3.7 )%
Less impact of
reconciling income (expense) items: (2) Net gains (losses)
on investments and other financial instruments (0.9
) (2.5 ) (0.2 ) 0.3 0.7
Loss on induced conversion and
debt extinguishment — — — (6.2 ) (0.2 )
Acquisition-related expenses (0.1 ) — — — —
Impairment of goodwill — — — — (25.3 )
Amortization and impairment of other intangible assets
(0.4 ) (0.4 ) (0.4 ) (0.4 ) (2.6 )
Impairment of
other long-lived assets and loss from the sale of a business
line — — (0.5 ) (0.9 ) —
Income tax provision
(benefit) on reconciling income (expense) items (3) (0.3
) (0.6 ) (0.4 ) (2.5 ) (9.6 )
Difference between
statutory and effective tax rate 8.5 (4)
0.3 (13.4 ) (0.2 ) (0.5 )
Impact of reconciling income
(expense) items 7.4 (2.0 ) (14.1 ) (4.9 ) (18.3 )
Adjusted net operating return on equity 19.3 %
17.1 % 15.0 % 13.7 % 14.6 %
(1)
Calculated by dividing annualized net
income by average stockholders’ equity, based on the average of the
beginning and ending balances for each period presented.
(2)
Annualized, as a percentage of average
stockholders’ equity.
(3)
Calculated using the company’s federal
statutory tax rates of 21% and 35% for 2018 and 2017, respectively.
Any permanent tax adjustments and state income taxes on these items
have been deemed immaterial and are not included.
(4)
Includes 9.4% of tax benefit related to
the settlement of the IRS Matter, which includes both the impact of
the settlement with the IRS as well as the reversal of certain
related previously accrued state and local tax liabilities.
Reconciliation of Book Value Per Share to Tangible
Book Value Per Share (1)
2018 2017
Qtr 2
Qtr 1 Qtr 4 Qtr 3 Qtr 2
Book value per share $
15.01 $ 14.16 $ 13.90 $ 13.88 $ 13.54
Less: Goodwill and
other intangible assets, net per share 0.28
0.28 0.30 0.31 0.32
Tangible book
value per share $ 14.73 $ 13.88 $ 13.60 $ 13.57 $
13.22
(1)
All book value per share items are
calculated based on the number of shares outstanding at the end of
each respective period.
Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit G (page 4 of 4) Reconciliation of Net
Income (Loss) to Services Adjusted EBITDA
2018 2017
(In
thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3
Qtr 2
Net income (loss) $
208,949 $ 114,486 $ 6,816 $ 65,142 $ (27,342 )
Less
reconciling income (expense) items: Net gains (losses) on
investments and other financial instruments (7,404
) (18,887 ) (1,339 ) 2,480 5,331
Loss on induced
conversion and debt extinguishment — — — (45,766 )
(1,247 )
Acquisition-related expenses (416 ) —
21 (54 ) (64 )
Impairment of goodwill — — — —
(184,374 )
Amortization and impairment of other intangible
assets (2,748 ) (2,748 ) (2,629 ) (2,890 )
(18,856 )
Impairment of other long-lived assets and loss from
the sale of a business line 130
(26 ) (3,865 ) (6,575 ) —
Income tax provision (benefit)
(28,378 ) 27,956 157,911 37,672 (8,132 )
Mortgage
Insurance adjusted pretax operating income
197,440 171,711 177,513
168,508 170,361
Services adjusted
pretax operating income (loss) (6,431 ) (7,608 )
(4,974 ) (12,889 ) (6,625 )
Less reconciling income
(expense) items: Allocation of corporate operating expenses
to Services (3,010 ) (2,784 ) (3,467 ) (3,730 )
(3,404 )
Allocation of corporate interest expense to
Services (4,451 ) (4,451 ) (4,452 ) (4,433 )
(4,431 )
Services depreciation and amortization
(920 ) (867 ) (893 ) (1,172 )
(835 )
Services adjusted EBITDA $ 1,950
$ 494 $ 3,838 $ (3,554 ) $ 2,045
On a consolidated basis, “adjusted pretax operating income,”
“adjusted diluted net operating income per share,” “adjusted net
operating return on equity” and “tangible book value per share” are
measures not determined in accordance with GAAP. “Services adjusted
EBITDA” and “Services adjusted EBITDA 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, book value per share or
net income (loss). Our definitions of adjusted pretax operating
income, adjusted diluted net operating income per share, adjusted
net operating return on equity, tangible book value per share,
Services adjusted EBITDA or Services adjusted EBITDA 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 Insurance Supplemental
Information - New Insurance Written Exhibit H
2018 2017
($ in
millions)
Qtr 2 Qtr 1 Qtr 4 Qtr 3
Qtr 2
Total primary new insurance written
$ 16,417 $ 11,664 $ 14,383 $
15,125 $ 14,342
Percentage of
primary new insurance written by FICO score
>=740
60.8 % 61.0 % 60.4 % 61.1 % 61.6 %
680-739
32.5 32.6 33.1 32.5 32.6
620-679
6.7 6.4 6.5
6.4 5.8
Total Primary
100.0 % 100.0 % 100.0 % 100.0 %
100.0 %
Percentage of
primary new insurance written
Direct monthly and other premiums 76 % 79 % 77
% 77 % 77 %
Direct single premiums: Lender-paid
10 % 16 % 20 % 21 % 21 %
Borrower-paid (1)
14 % 5 % 3 % 2 % 2 %
Net single premiums
(2) 8 % 7 % 15 % 15 % 15 %
NIW for
purchases 95 % 89 % 88 % 91 % 91 %
NIW for
refinances 5 % 11 % 12 % 9 % 9 %
LTV 95.01% and above 16.3 % 15.4 % 15.4
% 14.3 % 12.8 %
90.01% to 95.00% 45.3 % 44.5 %
43.9 % 45.7 % 47.3 %
85.01% to 90.00% 27.5 %
27.5 % 27.4 % 28.1 % 28.8 %
85.00% and below 10.9
% 12.6 % 13.3 % 11.9 % 11.1 %
(1)
Borrower-paid Single Premium Policies
have lower Minimum Required Assets under PMIERs as compared to
lender-paid Single Premium Policies.
(2)
Represents the percentage of direct
Single Premium Policies written, after consideration of the Single
Premium NIW ceded under the Single Premium QSR Program (for NIW
after the effective dates of the respective agreements). Effective
December 31, 2017, we amended the 2016 Single Premium QSR Agreement
to increase the amount of ceded risk for 2015 through 2017 vintages
under the agreement from 35% to 65%.
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information - Primary Insurance in Force and
Risk in Force Exhibit I (page 1 of 2)
June 30, March 31,
December 31, September 30, June 30,
($ in millions) 2018 2018 2017 2017 2017
Primary insurance
in force (1)
Prime $ 204,537 $ 197,589 $ 193,949 $ 189,340
$ 183,886
Alt-A and A minus and below 6,204
6,436 6,775 7,201
7,751
Total Primary $ 210,741
$ 204,025 $ 200,724 $ 196,541 $ 191,637
Primary risk in
force (1) (2)
Prime $ 52,446 $ 50,623 $ 49,674 $ 48,516 $
47,075
Alt-A and A minus and below 1,476
1,530 1,614 1,721
1,854
Total Primary $ 53,922
$ 52,153 $ 51,288 $ 50,237 $ 48,929
Percentage of
primary risk in force
Direct monthly and other premiums 70 % 69 % 69
% 69 % 69 %
Direct single premiums 30 % 31 %
31 % 31 % 31 %
Net single premiums (3) 18
% 19 % 19 % 24 % 25 %
Percentage of
primary risk in force by FICO score
>=740 59.3 % 59.2 % 58.9 % 58.8 % 58.3 %
680-739
31.5 31.4 31.4 31.3 31.1
620-679
8.3 8.4 8.6 8.8 9.3
<=619 0.9
1.0 1.1 1.1 1.3
Total Primary 100.0 %
100.0 % 100.0 % 100.0 % 100.0 %
Percentage of
primary risk in force by LTV
95.01% and above 10.3 % 9.7 % 9.2 % 8.6 % 8.0
%
90.01% to 95.00% 53.3 53.2 53.2 53.1 52.9
85.01%
to 90.00% 29.7 30.2 30.6 31.1 31.7
85.00% and
below 6.7 6.9 7.0
7.2 7.4
Total
100.0 % 100.0 % 100.0 % 100.0 %
100.0 %
Percentage of
primary risk in force by policy year
2005 and prior 2.8 % 3.0 % 3.3 % 3.6 % 4.1 %
2006
1.8 2.0 2.1 2.3 2.5
2007
4.4 4.8 5.2 5.6 6.2
2008
2.9 3.2 3.4 3.7 4.2
2009
0.4 0.5 0.6 0.7 0.8
2010
0.4 0.5 0.5 0.6 0.7
2011
1.0 1.2 1.3 1.5 1.7
2012
4.5 5.1 5.5 6.1 6.7
2013
7.4 8.2 8.9 9.8 10.7
2014
7.1 7.9 8.5 9.3 10.2
2015
11.9 13.0 13.8 14.9 16.1
2016
19.2 20.5 21.4 22.5 23.7
2017
23.2 24.5 25.5 19.4 12.4
2018
13.0 5.6 —
— —
Total 100.0 %
100.0 % 100.0 % 100.0 % 100.0 %
Primary risk in force on defaulted loans (4) $
1,093 $ 1,223 $ 1,389 $ 1,137 $ 1,124
See notes on next page.
Radian Group Inc. and
Subsidiaries
Mortgage Insurance Supplemental
Information - Primary Insurance in Force and Risk in Force
Exhibit I (page 2 of 2)
Notes to table on preceding
page,
(1)
Includes amounts ceded under our
reinsurance agreements, as well as amounts related to the Freddie
Mac Agreement.
(2)
Does not include pool risk in force or
other risk in force, which combined represent less than 1.0% of our
total risk in force for all periods presented.
(3)
Represents the percentage of Single
Premium RIF, after giving effect to all reinsurance ceded.
Effective December 31, 2017, we amended the 2016 Single Premium QSR
Agreement to increase the amount of ceded risk for 2015 through
2017 vintages under the agreement from 35% to 65%, resulting in a
reduction of $2.5 billion in net RIF on Single Premium Policies at
December 31, 2017.
(4)
Excludes risk related to loans subject
to the Freddie Mac Agreement.
Radian Group Inc. and Subsidiaries Mortgage
Insurance (“MI”) Supplemental Information - Claims and Reserves
Exhibit J (page 1 of 2) 2018
2017
($ in
thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3
Qtr 2
Net claims paid: (1) Prime
$ 30,936 $ 37,142 $ 37,191 $ 47,541 $ 45,562
Alt-A
and A minus and below 17,156 21,416
19,384 26,807 24,286
Total
primary claims paid 48,092 58,558 56,575 74,348 69,848
Pool 954 1,152 2,458 2,148 1,901
Second-lien and
other 157 148 (110 )
32 (1,937 )
Subtotal 49,203 59,858 58,923
76,528 69,812
Impact of captive terminations — (36 )
— — 645
Impact of commutations (2) 7,331
104 26,590 54,956 20,838
Total net claims paid $ 56,534 $ 59,926
$ 85,513 $ 131,484 $ 91,295
Average
net claims paid: (1) (3) Prime $ 50.1 $
50.0 $ 49.7 $ 48.4 $ 48.2
Alt-A and A minus and below
65.7 63.0 56.5 56.3 51.0
Total average net primary claims
paid 54.8 54.1 51.8 51.0 49.1
Pool 73.4
52.4 102.4 59.7 47.5
Total average net claims paid $
54.1 $ 53.2 $ 52.3 $ 51.0 $ 47.3
Average direct
primary claims paid (3) (4) $ 55.5 $ 54.5 $ 52.2
$ 51.4 $ 49.4
Average total direct claims paid (3) (4)
$ 54.8 $ 53.6 $ 52.7 $ 51.4 $ 47.6
(1)
Net of reinsurance recoveries.
(2)
Includes payments to commute mortgage
insurance coverage on certain performing and non-performing loans.
For the three months ended September 30, 2017, primarily includes
payments made under the Freddie Mac agreement, as the final
settlement date was reached during the quarter.
(3)
Calculated without giving effect to the
impact of the termination of captive transactions and
commutations.
(4)
Before reinsurance recoveries.
Radian
Group Inc. and Subsidiaries Mortgage Insurance (“MI”)
Supplemental Information - Claims and Reserves Exhibit J
(page 2 of 2)
($ in thousands,
except primary reserve per primary default amounts)
June 30,
2018
March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
MI Reserve for losses by category Prime
$ 255,284 $ 274,595 $ 285,022 $ 296,885 $ 318,169
Alt-A and A minus and below 144,379 158,612 170,873
190,081 209,760
IBNR and other (1) 14,246 17,164
16,021 13,085 69,620
LAE 12,228 13,440 13,349 14,687
15,492
Reinsurance recoverable (2) 9,317
8,953 8,315 7,445 7,341
Total
primary reserves 435,454 472,764
493,580 522,183 620,382
Pool insurance
11,674 11,387 12,794
18,630 29,099
IBNR and other 172 226 278 14,576 658
LAE 327 319 356 550 843
Reinsurance recoverable
(2) 24 20 35 25 30
Total pool reserves 12,197 11,952
13,463 33,781 30,630
Total 1st lien
reserves 447,651 484,716 507,043 555,964 651,012
Second-lien and other 443 476
545 524 579
Total MI reserves $
448,094 $ 485,192 $ 507,588 $ 556,488 $ 651,591
1st lien reserve per default Primary reserve per primary
default excluding IBNR and other $ 19,070
(3)
$ 18,523
(3)
$ 17,103
(3) $ 21,367 $ 23,185
(1)
At June 30, 2017, primarily related to
expected payments under the Freddie Mac Agreement. However, during
the third quarter of 2017, the final settlement date under the
Freddie Mac Agreement was reached. Therefore, except for loans with
loss mitigation and claims activity already in process, most of the
loans subject to the Freddie Mac Agreement were removed from RIF
and IIF, because the insurance no longer remains in force.
(2)
Represents ceded losses on captive
transactions and quota share reinsurance transactions.
(3)
Includes the impact of reserves and
defaults related to areas designated as individual assistance
disaster areas by FEMA (“FEMA Designated Areas”) associated with
Hurricanes Harvey and Irma. Excluding the impact from defaults
received subsequent to Hurricanes Harvey and Irma in these FEMA
Designated Areas, this amount would be approximately $20,656,
$21,512 and $20,500 at June 30, 2018, March 31, 2018 and December
31, 2017, respectively.
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information - Default Statistics
Exhibit K June 30,
March 31, December 31, September 30,
June 30,
2018 2018 2017 2017 2017
Default
Statistics
Primary Insurance:
Prime
Number of insured loans 947,165 925,648 913,408
897,253 879,926
Number of loans in default 15,849
17,887 20,269 15,953 15,664
Percentage of loans in default
1.67 % 1.93 % 2.22 % 1.78 % 1.78 %
Alt-A and A minus
and below
Number of insured loans 38,892 40,661 42,318 45,555
48,953
Number of loans in default 6,239 6,710 7,653
7,873 8,091
Percentage of loans in default 16.04
% 16.50 % 18.08 % 17.28 % 16.53 %
Total
Primary Number of insured loans 986,057 966,309
955,726 942,808 928,879
Number of loans in default (1)
22,088 24,597 27,922 23,826 23,755
Percentage of loans in
default 2.24 % 2.55 % 2.92 % 2.53 % 2.56 %
(1)
Included in this amount at June 30,
2018, March 31, 2018 and December 31, 2017 are 4,132, 5,780 and
7,051 defaults, respectively, related to the FEMA Designated Areas
associated with Hurricanes Harvey and Irma.
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information - QSR Transactions, Captives and
Persistency Exhibit L 2018
2017
($ in
thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3
Qtr 2
Quota Share
Reinsurance (“QSR”) Program
QSR ceded premiums written (1) $ 3,516 $ 3,931
$ 4,219 $ 4,621 $ 5,059
% of premiums written 1.2
% 1.5 % 1.6 % 1.7 % 1.9 %
QSR ceded premiums earned
(1) $ 5,258 $ 5,612 $ 6,439 $ 6,826 $ 7,404
%
of premiums earned 2.0 % 2.2 % 2.5 % 2.7 % 3.1 %
Ceding commissions written $ 1,012 $ 1,128 $
1,208 $ 1,323 $ 1,446
Ceding commissions earned (2) $
2,896 $ 3,548 $ 2,924 $ 2,925 $ 3,379
Profit
commission $ — $ — $ — $ — $ —
RIF included in
QSR Program (3) $ 1,044,463 $ 1,135,597 $
1,207,426 $ 1,298,954 $ 1,393,038
Single Premium
QSR Program
QSR ceded premiums written (1) (4) $ 28,107 $
15,791 $ 157,453 $ 13,248 $ 13,856
% of premiums written
9.8 % 6.1 % 59.5 % 5.0 % 5.3 %
QSR ceded premiums
earned (1) $ 11,160 $ 10,377 $ 8,342 $ 6,771 $
6,311
% of premiums earned 4.2 % 4.0 % 3.2 %
2.7 % 2.6 %
Ceding commissions written $ 9,880
$ 6,621 $ 41,331 $ 5,156 $ 5,134
Ceding commissions earned
(2) $ 5,643 $ 5,268 $ 4,053 $ 3,536 $ 3,248
Profit commission $ 11,414 $ 10,693 $ 7,870 $
7,373 $ 6,682
RIF included in Single Premium QSR Program (3)
(4) $ 7,614,614 $ 7,176,662 $ 6,941,781 $
4,286,529 $ 4,103,410
Total RIF included in QSR Program
and Single Premium QSR Program $ 8,659,077 $
8,312,259 $ 8,149,207 $ 5,585,483 $ 5,496,448
1st Lien
Captives
Premiums earned ceded to captives $ 31 $ 35 $
57 $ 68 $ 242
% of total premiums earned 0.0 %
0.1 % 0.0 % 0.1 % 0.1 %
Persistency Rate (12 months
ended) (5) (6) 80.9 % 81.0 % 81.1 % 80.0 % 78.5 %
Persistency Rate (quarterly, annualized) (5) (6) (7)
82.3 % 84.3 % 79.4 % 80.4 % 82.8 %
(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:
2018 2017
($ in
thousands)
Qtr 2 Qtr 1 Qtr 4 Qtr 3
Qtr 2
Ceding commissions $
(6,085 ) $ (5,812 ) $ (4,624 ) $ (4,231 ) $ (4,064 )
(3)
Included in primary RIF.
(4)
Effective December 31, 2017, we amended
the 2016 Single Premium QSR Agreement to increase the amount of
ceded risk for 2015 through 2017 vintages under the agreement from
35% to 65%, resulting in ceded premiums written of $145.7 million
for the fourth quarter of 2017 and an increase of $2.5 billion in
ceded RIF at December 31, 2017.
(5)
During the fourth quarter of 2017, 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.
(6)
During the third quarter of 2017, the
final settlement date under the Freddie Mac Agreement was reached,
resulting in a negative impact to the Persistency Rate due to the
removal from RIF and IIF of most of the loans subject to the
Freddie Mac Agreement.
(7)
The Persistency Rate on a quarterly,
annualized basis may be impacted by seasonality or other factors,
and may not be indicative of full-year trends.
FORWARD-LOOKING STATEMENTS
All statements in this report 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 Exchange Act 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. Any forward-looking statement is not a guarantee of
future performance and actual results could differ materially from
those contained in the forward-looking statement. 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, 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:
- changes in economic and political
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’s ability to remain
eligible under the PMIERs and other applicable requirements imposed
by the FHFA and by the GSEs to insure loans purchased by the
GSEs;
- our ability to successfully execute and
implement our capital plans and to maintain sufficient holding
company liquidity to meet our short- and long-term liquidity
needs;
- our ability to successfully execute and
implement our business plans and strategies, including plans and
strategies to reposition our Services segment as well as plans and
strategies that require GSE and/or regulatory approvals and
licenses;
- our ability to maintain an adequate
level of capital in our insurance subsidiaries to satisfy existing
and future state regulatory requirements;
- changes in the charters or business
practices of, or rules or regulations imposed by or applicable to
the GSEs, which may include changes in the requirements to remain
an approved insurer to the GSEs, the GSEs’ interpretation and
application of the PMIERs, as well as potential future changes to
the PMIERs requirements which, among other things, may be
impacted by the general economic environment and housing market, as
well as the proposed Conservator Capital Framework (“CCF”) that
would establish capital requirements for the GSEs, if and when the
CCF is finalized;
- changes in the current housing finance
system in the U.S., including the role of the FHA, the GSEs and
private mortgage insurers in this system;
- any disruption in the servicing of
mortgages covered by our insurance policies, as well as poor
servicer performance;
- a significant decrease in the
Persistency Rates of our mortgage insurance on monthly premium
products;
- competition in our mortgage insurance
business, including price competition and competition from the FHA
and VA as well as from other forms of credit enhancement;
- 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
interpretations and guidance pertaining to recently enacted tax
reform legislation;
- 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 or have other effects on our
business;
- the amount and timing of potential
settlements, payments or adjustments associated with federal or
other tax examinations, including, with respect to the IRS matter,
our ability to obtain approval from the U.S. Tax court for the
settlement terms and the possibility that our estimated liability
may not be accurate due to, among other things, the IRS assessing
interest at an amount that is different than our current estimated
liability and potential additional true-ups of the settlement
amounts;
- the possibility that we may fail to
estimate accurately the likelihood, magnitude and timing of losses
in establishing loss reserves for our mortgage insurance business
or in assessing our ability to comply with the proposed PMIERs when
implemented, including the accuracy of our estimates of our
Available Assets and Minimum Required Assets under the proposed
PMIERs, which will be impacted by, among other things, the size and
mix of our IIF, the level of defaults in our portfolio, and the
level of cash flow generated by our insurance operations;
- volatility in our results of operations
caused by changes in the fair value of our assets and liabilities,
including a significant portion of our investment portfolio;
- potential future impairment charges
related to our goodwill and other intangible assets, and
uncertainties regarding our ability to execute our restructuring
plans within expected costs;
- changes in GAAP or SAPP rules and
guidance, or their interpretation;
- our ability to attract and retain key
employees; and
- legal and other limitations on
dividends and other amounts we may receive from our
subsidiaries.
For more information regarding these risks and uncertainties as
well as certain additional risks that we face, you should refer to
the Risk Factors detailed in Item 1A of our 2017 Form 10-K, and to
subsequent reports filed from time to time with the SEC. 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 report. 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/20180726005186/en/
Radian Group Inc.Emily Riley,
215-231-1035emily.riley@radian.biz
Radian (NYSE:RDN)
Graphique Historique de l'Action
De Juin 2024 à Juil 2024
Radian (NYSE:RDN)
Graphique Historique de l'Action
De Juil 2023 à Juil 2024