-- Fourth quarter GAAP net income of $193
million, or $1.07 per diluted share, and full year GAAP net income
of $601 million, or $3.16 per diluted share -- -- MI New Insurance
Written of $92 billion for 2021; second highest annual volume in
Company's history -- -- homegenius revenues increase 45% in 2021 to
$149 million -- -- Provision for losses of $(46.2) million in the
fourth quarter of 2021 favorably impacted by positive development
on prior period defaults -- -- Book value per share grows 9%
year-over-year to $24.28 -- -- Company purchases 17.8 million
shares or $399.1 million of Radian Group common stock during 2021
--
Radian Group Inc. (NYSE: RDN) today reported net income for the
quarter ended December 31, 2021, of $193.4 million, or $1.07 per
diluted share. This compares with net income for the quarter ended
December 31, 2020, of $148.0 million, or $0.76 per diluted
share.
Net income for the full year 2021 was $600.7 million, or $3.16
per diluted share. This compares with net income for the full year
2020 of $393.6 million, or $2.00 per diluted share.
Key Financial Highlights (dollars in millions, except
per-share amounts)
Quarter ended
Year ended
December 31, 2021
September 30, 2021
December 31, 2020
December 31, 2021
December 31, 2020
Net income (1)
$193.4
$126.4
$148.0
$600.7
$393.6
Diluted net income per share
$1.07
$0.67
$0.76
$3.16
$2.00
Consolidated pretax income
$246.5
$161.6
$179.2
$764.8
$479.4
Adjusted pretax operating income
(2)
$245.1
$160.6
$171.0
$757.7
$432.1
Adjusted diluted net operating
income per share (2)(3)
$1.07
$0.67
$0.69
$3.15
$1.74
Return on equity (1)(4)
18.2 %
11.8 %
14.1 %
14.1 %
9.4 %
Adjusted net operating return on
equity (2)(3)
18.2 %
11.8 %
12.9 %
14.0 %
8.2 %
New Insurance Written (NIW) -
mortgage insurance
$23,710
$26,558
$29,781
$91,830
$105,024
Net premiums earned - mortgage
insurance (5)
$249.7
$236.9
$286.8
$998.3
$1,092.8
New defaults (6)
9,342
8,132
14,552
37,470
108,025
Provision for losses - mortgage
insurance
($46.6)
$16.8
$56.3
$19.4
$483.3
homegenius revenues
$44.7
$45.1
$23.6
$149.1
$102.4
Quarter ended
December 31, 2021
September 30, 2021
December 31, 2020
Book value per share (7)
$24.28
$23.48
$22.36
PMIERs Available Assets (8)
$5,406
$5,262
$4,700
PMIERs excess Available Assets
(9)
$2,077
$1,741
$1,338
Total Holding Company Liquidity
(10)
$880
$1,036
$1,371
Total investments
$6,514
$6,658
$6,788
Primary mortgage insurance in
force
$245,972
$241,575
$246,144
Percentage of primary loans in
default (11)
2.9 %
3.4 %
5.2 %
Mortgage insurance loss
reserves
$823
$888
$844
(1)
Net income for the fourth quarter, third
quarter and full year of 2021 includes a pretax net gain on
investments and other financial instruments of $3.0 million, $2.1
million and $15.6 million, respectively, compared with a pretax net
gain on investments and other financial instruments of $17.4
million and $60.3 million for the fourth quarter and full year of
2020, respectively.
(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)
The fourth quarter of 2020 includes an
increase to premiums earned of $11.3 million, related to changes in
present value estimates for initial premiums on monthly policies
that are deferred and not collected until cancellation. The impact
of changes in these estimates in other periods is not material.
(6)
Represents the number of new defaults
reported during the period on loans related to primary mortgage
insurance policies.
(7)
Book value per share includes accumulated
other comprehensive income (loss) of $0.68 as of December 31,
2021, $0.84 as of September 30, 2021 and $1.38 as of
December 31, 2020.
(8)
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.
(9)
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.
(10)
Represents Radian Group's total liquidity,
including available capacity under its unsecured revolving credit
facility.
(11)
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 December
31, 2021, was $245.1 million, or $1.07 per diluted share. This
compares with adjusted pretax operating income for the quarter
ended December 31, 2020, of $171.0 million, or $0.69 per diluted
share.
Adjusted pretax operating income for the full year 2021 was
$757.7 million, or $3.15 per diluted share. This compares to
adjusted pretax operating income for the full year 2020 of $432.1
million, or $1.74 per diluted share.
Book value as of December 31, 2021 was $4.3 billion, relatively
flat compared to December 31, 2020. Book value per share at
December 31, 2021, was $24.28, an increase of 9 percent compared to
$22.36 at December 31, 2020. Partially offsetting the increase in
book value per share in 2021 is: (i) a decrease of $0.75 per share
due to unrealized losses in our available for sale securities,
recorded in accumulated other comprehensive income and (ii) a $0.54
per share impact of dividends and dividend equivalents.
“Our excellent results for 2021 reflect strong growth in the
housing and real estate markets; continued demand for our products
and services; and the commitment of our talented team,” said
Radian’s Chief Executive Officer Rick Thornberry. “For the full
year, we reported net income of more than $600 million; grew book
value per share by 9%; wrote the second-highest level of new
mortgage insurance business in Radian’s history; and increased
homegenius revenue by 45%. Also in 2021, we continued to prudently
manage our capital and returned more than $500 million to
stockholders through a combination of dividends and stock
repurchases.”
Thornberry added, “We are pleased with our business momentum in
2022. We increased our quarterly dividend this month, which
provides the highest dividend yield in the private MI industry, and
we announced a new $400 million share repurchase authorization. Our
team is focused on our mission of ensuring affordable, sustainable
and equitable homeownership; and utilizing data, analytics and
technology to help our customers succeed in a fast-moving, digital
market.”
FOURTH QUARTER HIGHLIGHTS
- NIW was $23.7 billion in the fourth quarter of 2021, compared
to $26.6 billion in the third quarter of 2021, and $29.8 billion in
the fourth quarter of 2020. NIW was $91.8 billion for the full year
2021, compared to $105.0 billion for the prior year.
- Of the $23.7 billion in NIW in the fourth quarter of 2021, 93.5
percent was written with monthly and other recurring premiums,
compared to 93.8 percent in the third quarter of 2021, and 91.4
percent in the fourth quarter of 2020.
- Refinances accounted for 8.9 percent of total NIW in the fourth
quarter of 2021, compared to 10.2 percent in the third quarter of
2021, and 35.4 percent in the fourth quarter of 2020.
- Total primary mortgage insurance in force as of December 31,
2021, increased to $246.0 billion, an increase of 1.8 percent
compared to $241.6 billion as of September 30, 2021, and a decrease
of 0.1 percent compared to $246.1 billion as of December 31, 2020.
The year-over-year change reflects a 5.8 percent increase in
monthly premium policy insurance in force and a 21.1 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 64.3 percent for
the twelve months ended December 31, 2021, compared to 60.8 percent
for the twelve months ended September 30, 2021, and 61.2 percent
for the twelve months ended December 31, 2020.
- Annualized persistency for the three months ended December 31,
2021, was 71.7 percent, compared to 67.5 percent for the three
months ended September 30, 2021, and 60.4 percent for the three
months ended December 31, 2020.
- Net mortgage insurance premiums earned were $249.7 million for
the quarter ended December 31, 2021, compared to $236.9 million for
the quarter ended September 30, 2021, and $286.8 million for the
quarter ended December 31, 2020. Net mortgage insurance premiums
earned were $998.3 million for the year ended December 31, 2021,
compared to $1.1 billion for the year ended December 31, 2020.
- Mortgage insurance in force portfolio premium yield was 41.0
basis points in the fourth quarter of 2021. This compares to 40.3
basis points in the third quarter of 2021, and 44.6 basis points in
the fourth quarter of 2020, or 42.8 basis points excluding the
impact of the fourth quarter 2020 premium adjustment described
below
- The impact of single premium policy cancellations before
consideration of reinsurance represented 3.4 basis points of direct
premium yield in the fourth quarter of 2021, 4.3 basis points in
the third quarter of 2021, and 8.7 basis points in the fourth
quarter of 2020.
- Total net mortgage insurance premium yield, which includes the
impact of ceded premiums and accrued profit commission, was 41.0
basis points in the fourth quarter of 2021. This compares to 39.6
basis points in the third quarter of 2021, and 46.7 basis points in
the fourth quarter of 2020, or 44.8 basis points excluding the
impact of the fourth quarter 2020 premium adjustment described
below.
- The fourth quarter of 2020 includes an increase to premiums
earned of $11.3 million related to changes in present value
estimates for initial premiums on monthly policies that are
deferred and not collected until cancellation.
- Additional details regarding premiums earned may be found in
Exhibit D.
- The mortgage insurance provision for losses was a benefit of
$46.6 million in the fourth quarter of 2021, compared to provisions
of $16.8 million in the third quarter of 2021, and $56.3 million in
the fourth quarter of 2020. The mortgage insurance provision for
losses was $19.4 million for the year ended December 31, 2021,
compared to $483.3 million for the year ended December 31, 2020.
- The decrease in the fourth quarter of 2021 compared to both the
third quarter of 2021 and the fourth quarter of 2020 was primarily
related to more favorable development on prior period reserves, as
compared to the third quarter of 2021 and fourth quarter of 2020.
All periods were impacted by more favorable trends in cures than
originally estimated. The decrease for the full year 2021 compared
to the full year 2020 was driven primarily by a significant
decrease in primary new default notices related to the effects of
the COVID-19 pandemic, as well as a decrease in the default to
claim rate applied to those defaults.
- The number of primary delinquent loans was 29,061 as of
December 31, 2021, compared to 33,795 as of September 30, 2021, and
55,537 as of December 31, 2020.
- The loss ratio in the fourth quarter of 2021 was (18.6)
percent, compared to 7.1 percent in the third quarter of 2021, and
19.6 percent in the fourth quarter of 2020.
- Total mortgage insurance claims paid were $10.4 million in the
fourth quarter of 2021, compared to $10.2 million in the third
quarter of 2021, and $40.6 million in the fourth quarter of 2020.
Excluding the impact of commutations and settlements, claims paid
were $3.8 million in the fourth quarter of 2021, compared to $6.3
million in the third quarter of 2021, and $8.4 million in the
fourth quarter of 2020. For the full year 2021, total net claims
paid were $35.3 million, compared to $97.6 million for the full
year 2020.
- 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 fourth quarter of
2021 were $44.7 million, compared to $45.1 million for the third
quarter of 2021, and $23.6 million for the fourth quarter of 2020.
Total homegenius segment revenues for the full year of 2021 were
$149.1 million, compared to $102.4 million for the full year of
2020.
- The 45.5 percent increase in revenues in the year 2021 compared
to the year 2020 was primarily driven by a 72.6 percent increase in
our title business and a 26.1 percent increase in our real estate
services businesses.
- homegenius Profitability Metrics
- Adjusted pretax operating loss, our primary segment measure of
profitability for the homegenius segment, for the quarter ended
December 31, 2021 was $2.1 million, compared to $5.6 million for
the quarter ended September 30, 2021, and $11.1 million for the
quarter ended December 31, 2020. Adjusted pretax operating loss for
the full year 2021 was $27.3 million, compared to $23.2 million for
the full year 2020.
- Adjusted pretax operating income before allocated corporate
operating expenses for the homegenius segment for the quarter ended
December 31, 2021 was $2.7 million, compared to a loss of $0.6
million for the quarter ended September 30, 2021, and a loss of
$7.8 million for the quarter ended December 31, 2020. Adjusted
pretax operating loss before allocated corporate operating expenses
for the homegenius segment for the full year 2021 was $8.8 million,
compared to $10.4 million for the full year 2020.
- Adjusted gross profit for the homegenius segment for the
quarter ended December 31, 2021 was $19.7 million, compared to
$17.9 million for the quarter ended September 30, 2021, and $7.5
million for the quarter ended December 31, 2020. Adjusted gross
profit for the homegenius segment for the full year 2021 was $57.8
million, compared to $39.0 million for the full year 2020.
Additional details regarding the homegenius results and related
non-GAAP measures may be found in Exhibits F and G.
- Other operating expenses were $80.5 million in the fourth
quarter of 2021, compared to $86.5 million in the third quarter of
2021, and $81.6 million in the fourth quarter of 2020. Other
operating expenses were $323.7 million for the full year 2021,
compared to $280.7 million for the full year 2020.
- The increase for the full year of 2021 compared to the full
year of 2020 was driven primarily by an increase in incentive
compensation expense and a decrease in ceding commissions.
Additional details regarding other operating expenses by segment
may be found in Exhibit E.
CAPITAL AND LIQUIDITY UPDATE
Radian Group
- As of December 31, 2021, Radian Group maintained $604.9 million
of available liquidity. Total liquidity, which includes the
company’s $275.0 million unsecured revolving credit facility, was
$879.9 million as of December 31, 2021.
- During the fourth quarter of 2021, the company repurchased 6.4
million shares of Radian Group common stock at a total cost of
$142.1 million, including commissions. For the full year 2021, the
company repurchased 17.8 million shares of Radian Group common
stock at a total cost of $399.1 million, including
commissions.
- On November 10, 2021, Radian Group’s board of directors
authorized a regular quarterly dividend on its common stock in the
amount of $0.14 per share and the dividend was paid on December 3,
2021.
Radian Guaranty
- As previously announced, in November 2021, Radian Guaranty
entered into its sixth fully collateralized mortgage
insurance-linked note (ILN) reinsurance transaction in which the
company obtained $484.1 million of credit-risk protection from
Eagle Re 2021-2 Ltd. (Eagle Re), covering an existing portfolio of
mortgage insurance policies written predominantly from January 1,
2021 through and including July 31, 2021. Eagle Re financed the
coverage through the issuance of ILNs to eligible capital markets
investors of $484.1 million aggregate principal amount of 12.5-year
mortgage insurance-linked notes, in an unregistered private
offering. Eagle Re is a special purpose insurer domiciled in
Bermuda and is not a subsidiary or affiliate of Radian Guaranty.
Radian Guaranty's related PMIERs credit under this ILN transaction
is determined by the GSE's.
- At December 31, 2021, Radian Guaranty’s Available Assets under
PMIERs totaled approximately $5.4 billion, resulting in excess
available resources or a “cushion” of $2.1 billion, or 62 percent,
over its Minimum Required Assets.
- As of December 31, 2021, 73 percent of Radian Guaranty's
primary mortgage insurance risk in force is subject to some form of
risk distribution, providing a $1.3 billion reduction of Minimum
Required Assets under PMIERs.
RECENT EVENTS
- As previously announced on February 9, 2022, Radian Group’s
Board of Directors authorized the following strategic capital
actions based on the company's strong financial position and
capital flexibility:
- A quarterly dividend of $0.20 per share, representing an
increase of 43 percent from the previous quarterly dividend of
$0.14 per share paid on December 3, 2021. The dividend is payable
on March 3, 2022, to stockholders of record as of February 21,
2022.
- A new $400 million share repurchase authorization. The shares
may be purchased in the open market or in privately negotiated
transactions. Radian plans to utilize a value-based Rule 10b5-1
plan to execute the new authorization which, once implemented,
would permit the company to purchase shares, at pre-determined
price targets, when it may otherwise be precluded from doing so.
The authorization will expire in February 2024.
CONFERENCE CALL
Radian will discuss fourth quarter and year-end 2021 financial
results in a conference call tomorrow, Wednesday, February 23,
2022, at 10:00 a.m. Eastern standard time. The conference call will
be broadcast live over the Internet at
https://radian.com/who-we-are/for-investors/webcasts or at
www.radian.com. The call may also be accessed by dialing
800.447.0521 inside the U.S., or 847.413.3238 for international
callers, using passcode 50275325 by referencing Radian.
A digital replay of the webcast will be available on the Radian
website approximately two hours after the live broadcast ends for a
period of two weeks at
https://radian.com/who-we-are/for-investors/webcasts using passcode
50275325.
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) loss on extinguishment of debt; (iii) amortization
and impairment of goodwill and other acquired intangible assets;
and (iv) impairment of other long-lived assets and other
non-operating items, such as impairment of internal-use software,
gains (losses) from the sale of lines of business and
acquisition-related income and expenses. Adjusted diluted net
operating income (loss) per share is calculated by dividing (i)
adjusted pretax operating income (loss) attributable to common
stockholders, net of taxes computed using the company’s statutory
tax rate, by (ii) the sum of the weighted average number of common
shares outstanding and all dilutive potential common shares
outstanding. Adjusted net operating return on equity is calculated
by dividing annualized adjusted pretax operating income (loss), net
of taxes computed using the company's statutory tax rate, by
average stockholders' equity, based on the average of the beginning
and ending balances for each period presented.
In addition to the above non-GAAP measures for the consolidated
company, we also have presented as supplemental information
non-GAAP measures for our homegenius segment of adjusted pretax
operating income (loss) before allocated corporate operating
expenses and adjusted gross profit. Adjusted pretax operating
income (loss) before allocated corporate operating expenses is
calculated as adjusted pretax operating income (loss) as described
above (which is the segment's ASC 280 GAAP measure of operating
performance), adjusted to remove the impact of corporate
allocations of other operating expenses for the homegenius segment.
Adjusted gross profit is further adjusted to remove other operating
expenses. In addition, homegenius adjusted pretax operating margin
before allocated corporate operating expenses and homegenius
adjusted gross profit margin are calculated by dividing homegenius
adjusted pretax operating margin before allocated corporate
operating expenses and homegenius adjusted gross profit,
respectively, by GAAP total revenue for the homegenius segment. For
the homegenius segment, adjusted pretax operating income (loss)
before allocated corporate operating expenses, adjusted gross
profit, and the related homegenius profit margins are used to
facilitate comparisons with other services companies, since they
are widely accepted measures of performance in the services
industry and are used internally as supplemental measures to
evaluate the performance of our homegenius segment.
See Exhibit F or Radian’s website for a description of these
items, as well as Exhibit G for reconciliations to the most
comparable consolidated GAAP measures.
ABOUT RADIAN
Radian Group Inc. (NYSE: RDN) is ensuring the American dream of
homeownership responsibly and sustainably through products and
services that include industry-leading mortgage insurance and a
comprehensive suite of mortgage, risk, title, 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
Exhibit K:
Mortgage Supplemental Information
Default Statistics
Exhibit L:
Mortgage Supplemental Information
Reinsurance Programs
Radian Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations Trend Schedule
Exhibit A (page 1 of
2)
2021
2020
(In thousands, except per-share
amounts)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Revenues:
Net premiums earned
$
261,437
$
249,118
$
254,756
$
271,872
$
302,140
(1)
Services revenue
35,693
37,773
29,464
22,895
11,440
(1)
Net investment income
37,407
35,960
36,291
38,251
38,115
Net gains (losses) on investments and
other financial instruments
3,025
2,098
15,661
(5,181
)
17,376
Other income
805
809
822
976
790
Total revenues
338,367
325,758
336,994
328,813
369,861
Expenses:
Provision for losses
(46,219
)
17,305
3,648
46,143
56,664
Policy acquisition costs
7,271
7,924
4,838
8,996
7,395
Cost of services
28,333
30,520
24,615
20,246
21,600
Other operating expenses
80,476
86,479
86,469
70,262
81,641
Interest expense
21,137
21,027
21,065
21,115
21,169
Amortization and impairment of other
acquired intangible assets
863
862
863
862
2,225
Total expenses
91,861
164,117
141,498
167,624
190,694
Pretax income
246,506
161,641
195,496
161,189
179,167
Income tax provision
53,061
35,229
40,290
35,581
31,154
Net income
$
193,445
$
126,412
$
155,206
$
125,608
$
148,013
Diluted net income per share
$
1.07
$
0.67
$
0.80
$
0.64
$
0.76
(1)
Includes the impact of a line item
reclassification recorded in the fourth quarter to correct earlier
periods in 2020, which increased net premiums earned and decreased
services revenue by $7.8 million each. See Exhibit E for additional
detail by period related to this out-of-period adjustment reflected
in our All Other results.
Selected Mortgage Key Ratios
2021
2020
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Loss ratio (1)
(18.6
) %
7.1
%
1.3
%
17.3
%
19.6
%
Expense ratio (2)
25.6
%
28.6
%
25.4
%
21.9
%
20.6
%
(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
Condensed Consolidated Statements of
Operations
Exhibit A (page 2 of 2)
Year Ended
December 31,
(In thousands, except per-share
amounts)
2021
2020
Revenues:
Net premiums earned
$
1,037,183
$
1,115,321
Services revenue
125,825
105,385
Net investment income
147,909
154,037
Net gains (losses) on investments and
other financial instruments
15,603
60,277
Other income
3,412
3,597
Total revenues
1,329,932
1,438,617
Expenses:
Provision for losses
20,877
485,117
Policy acquisition costs
29,029
30,989
Cost of services
103,714
86,066
Other operating expenses
323,686
280,710
Interest expense
84,344
71,150
Amortization and impairment of other
acquired intangible assets
3,450
5,144
Total expenses
565,100
959,176
Pretax income
764,832
479,441
Income tax provision
164,161
85,815
Net income
$
600,671
$
393,626
Diluted net income per share
$
3.16
$
2.00
Selected Mortgage Key
Ratios
Year Ended
December 31,
2021
2020
Loss ratio (1)
1.9
%
44.2
%
Expense ratio (2)
25.3
%
21.0
%
(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:
2021
2020
(In thousands, except per-share
amounts)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net income —basic and diluted
$
193,445
$
126,412
$
155,206
$
125,608
$
148,013
Average common shares
outstanding—basic
179,500
186,741
193,436
193,439
193,248
Dilutive effect of stock-based
compensation arrangements (1)
1,628
1,301
1,202
1,764
1,415
Adjusted average common shares
outstanding—diluted
181,128
188,042
194,638
195,203
194,663
Basic net income per share
$
1.08
$
0.68
$
0.80
$
0.65
$
0.77
Diluted net income per share
$
1.07
$
0.67
$
0.80
$
0.64
$
0.76
(1)
The following number of shares of
our common stock equivalents issued under our share-based
compensation arrangements were not included in the calculation of
diluted net income (loss) per share because they were
anti-dilutive:
2021
2020
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Shares of common stock equivalents
35
—
—
—
324
Year Ended December
31,
(In thousands, except per-share
amounts)
2021
2020
Net income - basic and diluted
$
600,671
$
393,626
Average common shares
outstanding—basic
188,370
195,443
Dilutive effect of stock-based
compensation arrangements (1)
1,893
1,199
Adjusted average common shares
outstanding—diluted
190,263
196,642
Basic net income per share
$
3.19
$
2.01
Diluted net income per share
$
3.16
$
2.00
(1)
The following number of shares of
our common stock equivalents issued under our share-based
compensation arrangements were not included in the calculation of
diluted net income per share because they were anti-dilutive:
Year Ended December
31,
(In thousands)
2021
2020
Shares of common stock equivalents
28
865
Radian Group Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
Exhibit C
December 31,
September 30,
June 30,
March 31,
December 31,
(In thousands, except per-share
amounts)
2021
2021
2021
2021
2020
Assets:
Investments
$
6,513,542
$
6,658,487
$
6,681,659
$
6,671,874
$
6,788,442
Cash
151,145
154,709
134,939
102,776
87,915
Restricted cash
1,475
1,866
2,968
20,987
6,231
Accrued investment income
32,812
33,258
32,223
34,841
34,047
Accounts and notes receivable
124,016
166,730
153,128
134,075
121,294
Reinsurance recoverables
67,896
76,048
75,411
76,664
73,202
Deferred policy acquisition
costs
16,317
16,823
17,873
15,652
18,305
Property and equipment, net
75,086
74,170
74,288
78,309
80,457
Goodwill and other acquired intangible
assets, net
19,593
20,456
21,318
22,181
23,043
Other assets
837,303
839,061
815,261
763,502
715,085
Total assets
$
7,839,185
$
8,041,608
$
8,009,068
$
7,920,861
$
7,948,021
Liabilities and stockholders’
equity:
Unearned premiums
$
329,090
$
348,322
$
373,031
$
406,689
$
448,791
Reserve for losses and loss adjustment
expense
828,642
893,155
885,498
887,355
848,413
Senior notes
1,409,473
1,408,502
1,407,545
1,406,603
1,405,674
FHLB advances
150,983
172,649
153,983
138,833
176,483
Reinsurance funds withheld
228,078
290,502
285,406
282,345
278,555
Net deferred tax liability
337,509
286,957
266,330
210,571
213,897
Other liabilities
296,614
383,585
303,442
353,173
291,855
Total liabilities
3,580,389
3,783,672
3,675,235
3,685,569
3,663,668
Common stock
194
200
207
210
210
Treasury stock
(920,798
)
(920,355
)
(920,225
)
(910,347
)
(910,115
)
Additional paid-in capital
1,878,372
2,012,870
2,161,857
2,242,950
2,245,897
Retained earnings
3,180,935
3,012,997
2,913,138
2,785,744
2,684,636
Accumulated other comprehensive
income
120,093
152,224
178,856
116,735
263,725
Total stockholders’ equity
4,258,796
4,257,936
4,333,833
4,235,292
4,284,353
Total liabilities and stockholders’
equity
$
7,839,185
$
8,041,608
$
8,009,068
$
7,920,861
$
7,948,021
Shares outstanding
175,421
181,336
188,290
191,311
191,606
Book value per share
$
24.28
$
23.48
$
23.02
$
22.14
$
22.36
Debt to capital ratio (1)
24.9
%
24.9
%
24.5
%
24.9
%
24.7
%
Risk to capital ratio-Radian Guaranty
only
11.1:1
11.4:1
11.4:1
11.9:1
12.7:1
(1)
Calculated as senior notes
divided by senior notes and stockholders' equity.
Radian Group Inc. and
Subsidiaries
Net Premiums Earned
Exhibit D (page 1 of
2)
2021
2020
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Premiums earned:
Direct - Mortgage:
Premiums earned, excluding revenue from
cancellations (1)
$
248,704
$
239,786
$
243,077
$
256,905
$
272,331
Single Premium Policy
cancellations
20,530
25,592
31,592
38,510
53,526
Total direct - Mortgage (1)
269,234
265,378
274,669
295,415
325,857
Assumed - Mortgage: (2)
1,470
1,683
1,615
2,298
2,615
Ceded - Mortgage:
Premiums earned, excluding revenue from
cancellations
(28,333
)
(27,662
)
(27,324
)
(25,373
)
(27,229
)
Single Premium Policy cancellations
(3)
(5,905
)
(7,338
)
(9,036
)
(11,109
)
(15,197
)
Profit commission - other (4)
13,199
4,806
7,162
3,433
770
Total ceded premiums - Mortgage
(5)
(21,039
)
(30,194
)
(29,198
)
(33,049
)
(41,656
)
Net premiums earned - Mortgage
(1)
249,665
236,867
247,086
264,664
286,816
Net premiums earned - homegenius
(6)
11,772
12,251
7,670
7,208
7,572
Net premiums earned - All Other
(6)
—
—
—
—
7,752
Net premiums earned (1)
$
261,437
$
249,118
$
254,756
$
271,872
$
302,140
(1)
The fourth quarter of 2020
includes an increase to premiums earned of $11.3 million related to
changes in present value estimates for initial premiums on monthly
policies that are deferred and not collected until cancellation.
The impact of changes in this estimate in other periods is not
material.
(2)
Relates primarily to premiums
earned from our participation in certain credit risk transfer
programs.
(3)
Includes the impact of related
profit commissions.
(4)
The amounts represent the profit
commission on the Single Premium QSR Program, excluding the impact
of Single Premium Policy cancellations.
(5)
See Exhibit L for additional
information on ceded premiums for our various reinsurance
programs.
(6)
See Exhibit E for additional
information on changes that impacted our reported segment results
for the fourth quarter of 2020.
Radian Group Inc. and
Subsidiaries
Net Premiums Earned
Exhibit D (page 2 of
2)
Year Ended
December 31,
(In thousands)
2021
2020
Premiums earned:
Direct - Mortgage:
Premiums earned, excluding revenue from
cancellations (1)
$
988,472
$
1,070,335
Single Premium Policy
cancellations
116,224
193,349
Total direct - Mortgage (1)
1,104,696
1,263,684
Assumed - Mortgage: (2)
7,066
12,214
Ceded - Mortgage:
Premiums earned, excluding revenue from
cancellations
(108,692
)
(107,451
)
Single Premium Policy cancellations
(3)
(33,388
)
(55,483
)
Profit commission - other (4)
28,600
(20,197
)
Total ceded premiums - Mortgage
(5)
(113,480
)
(183,131
)
Net premiums earned - Mortgage
998,282
1,092,767
Net premiums earned - homegenius
(6)
38,901
22,554
Net premiums earned
$
1,037,183
$
1,115,321
(1)
The fourth quarter of 2020
includes an increase to premiums earned of $11.3 million related to
changes in present value estimates for initial premiums on monthly
policies that are deferred and not collected until cancellation.
The impact of changes in this estimate in other periods is not
material.
(2)
Relates primarily to premiums
earned from our participation in certain credit risk transfer
programs.
(3)
Includes the impact of related
profit commissions.
(4)
The amounts represent the profit
commission on the Single Premium QSR Program, excluding the impact
of Single Premium Policy cancellations.
(5)
See Exhibit L for additional
information on ceded premiums for our various reinsurance
programs.
(6)
See Exhibit E for additional
information on changes that impacted our reported segment results
for the fourth quarter of 2020.
Radian Group Inc. and Subsidiaries Segment Information
Exhibit E (page 1 of 8)
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 December
31, 2021
(In thousands)
Mortgage
homegenius
All Other
Inter-segment (1)
Total
Net premiums written (2)
$
238,529
$
11,772
$
—
$
—
$
250,301
Decrease in unearned premiums
11,136
—
—
—
11,136
Net premiums earned
249,665
11,772
—
—
261,437
Services revenue
4,560
31,177
30
(74
)
35,693
Net investment income
33,916
255
3,236
—
37,407
Net gains (losses) on
investments
—
1,509
—
—
1,509
Other income
661
—
144
—
805
Total
288,802
44,713
3,410
(74
)
336,851
Provision for losses
(46,560
)
369
—
(28
)
(46,219
)
Policy acquisition costs
7,271
—
—
—
7,271
Cost of services
3,710
24,615
8
—
28,333
Other operating expenses before
allocated corporate operating expenses (3)
23,365
16,998
2,795
(46
)
43,112
Interest expense (4)
21,137
—
—
—
21,137
Total
8,923
41,982
2,803
(74
)
53,634
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
279,879
2,731
607
—
283,217
Allocation of corporate operating
expenses
33,305
4,847
—
—
38,152
Adjusted pretax operating income
(loss)
$
246,574
$
(2,116
)
$
607
$
—
$
245,065
Three Months Ended December 31,
2020
(In thousands)
Mortgage
homegenius
All Other
Inter-segment (1)
Total
Net premiums written (2) (5)
$
261,244
$
7,572
$
7,752
$
—
$
276,568
Decrease in unearned premiums
25,572
—
—
—
25,572
Net premiums earned
286,816
7,572
7,752
—
302,140
Services revenue
3,717
15,958
(7,963
)
(272
)
11,440
Net investment income
34,235
43
3,837
—
38,115
Other income
735
—
55
—
790
Total
325,503
23,573
3,681
(272
)
352,485
Provision for losses
56,312
392
—
(40
)
56,664
Policy acquisition costs
7,395
—
—
—
7,395
Cost of services
3,245
15,706
2,835
(186
)
21,600
Other operating expenses before
allocated corporate operating expenses (3) (6)
20,569
15,238
4,438
(46
)
40,199
Interest expense (4)
21,169
—
—
—
21,169
Total
108,690
31,336
7,273
(272
)
147,027
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
216,813
(7,763
)
(3,592
)
—
205,458
Allocation of corporate operating
expenses (6)
31,102
3,369
—
—
34,471
Adjusted pretax operating income
(loss)
$
185,711
$
(11,132
)
$
(3,592
)
$
—
$
170,987
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 2 of
8)
Year Ended December 31,
2021
(In thousands)
Mortgage
homegenius
All Other
Inter-segment (1)
Total
Net premiums written (2)
$
944,546
$
38,901
$
—
$
—
$
983,447
Decrease in unearned premiums
53,736
—
—
—
53,736
Net premiums earned
998,282
38,901
—
—
1,037,183
Services revenue
17,670
108,282
154
(281
)
125,825
Net investment income
132,929
358
14,622
—
147,909
Net gains (losses) on
investments
—
1,509
—
—
1,509
Other income
2,678
—
734
—
3,412
Total
1,151,559
149,050
15,510
(281
)
1,315,838
Provision for losses
19,437
1,540
—
(100
)
20,877
Policy acquisition costs
29,029
—
—
—
29,029
Cost of services
13,928
89,722
64
—
103,714
Other operating expenses before
allocated corporate operating expenses (3)
95,793
66,630
11,919
(181
)
174,161
Interest expense (4)
84,344
—
—
—
84,344
Total
242,531
157,892
11,983
(281
)
412,125
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
909,028
(8,842
)
3,527
—
903,713
Allocation of corporate operating
expenses
127,482
18,482
—
—
145,964
Adjusted pretax operating income
(loss)
$
781,546
$
(27,324
)
$
3,527
$
—
$
757,749
Year Ended December 31, 2020
(In thousands)
Mortgage
homegenius
All Other
Inter-segment (1)
Total
Net premiums written (2) (5)
$
1,010,954
$
22,554
$
—
$
—
$
1,033,508
Decrease in unearned premiums
81,813
—
—
—
81,813
Net premiums earned
1,092,767
22,554
—
—
1,115,321
Services revenue
14,765
79,524
12,535
(1,439
)
105,385
Net investment income
137,195
361
16,481
—
154,037
Other income
2,816
—
534
—
3,350
Total
1,247,543
102,439
29,550
(1,439
)
1,378,093
Provision for losses
483,332
1,931
—
(146
)
485,117
Policy acquisition costs
30,989
—
—
—
30,989
Cost of services (1)
10,043
61,461
15,639
(1,077
)
86,066
Other operating expenses before
allocated corporate operating expenses (3) (6)
83,933
49,480
11,898
(216
)
145,095
Interest expense (4)
71,150
—
—
—
71,150
Total
679,447
112,872
27,537
(1,439
)
818,417
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
568,096
(10,433
)
2,013
—
559,676
Allocation of corporate operating
expenses
114,802
12,807
—
—
127,609
Adjusted pretax operating income
(loss)
$
453,294
$
(23,240
)
$
2,013
$
—
$
432,067
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 3 of
8)
(1)
Inter-segment information:
Three Months Ended
December 31,
Year Ended
December 31,
(In thousands)
2021
2020
2021
2020
Inter-segment revenue included
in:
Mortgage
$
—
$
—
$
—
$
83
homegenius
74
86
281
362
All Other
—
186
—
994
Total inter-segment revenue
$
74
$
272
$
281
$
1,439
Inter-segment expense included
in:
Mortgage
$
74
$
86
$
281
$
362
homegenius
—
186
—
994
All Other
—
—
—
83
Total inter-segment expense
$
74
$
272
$
281
$
1,439
(2)
Net of ceded premiums written
under the QSR Programs and the Excess-of-Loss Program. See Exhibit
L for additional information.
(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)
The fourth quarter of 2020
includes an increase to premiums earned of $11.3 million related to
changes in present value estimates for initial premiums on monthly
policies that are deferred and not collected until cancellation.
The impact of changes in this estimate in other periods is not
material.
(6)
Includes a change in the
composition of our reportable segments, effective in the fourth
quarter of 2021, that has been reflected in our segment operating
results for all periods presented, resulting in certain expenses
being reclassified from Mortgage to All Other.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 4 of
8)
Mortgage
2021
2020
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net premiums written (1) (2)
$
238,529
$
228,116
$
231,027
$
246,874
$
261,244
Decrease in unearned premiums
11,136
8,751
16,059
17,790
25,572
Net premiums earned
249,665
236,867
247,086
264,664
286,816
Services revenue
4,560
5,027
3,732
4,351
3,717
Net investment income
33,916
32,158
32,842
34,013
34,235
Other income
661
607
641
769
735
Total
288,802
274,659
284,301
303,797
325,503
Provision for losses (3)
(46,560
)
16,794
3,334
45,869
56,312
Policy acquisition costs
7,271
7,924
4,838
8,996
7,395
Cost of services
3,710
3,865
3,161
3,192
3,245
Other operating expenses before
allocated corporate operating expenses (3) (4) (5)
23,365
25,866
25,222
21,340
20,569
Interest expense (6)
21,137
21,027
21,065
21,115
21,169
Total (3)
8,923
75,476
57,620
100,512
108,690
Adjusted pretax operating income before
allocated corporate operating expenses
279,879
199,183
226,681
203,285
216,813
Allocation of corporate operating
expenses (5)
33,305
33,963
32,638
27,576
31,102
Adjusted pretax operating
income
$
246,574
$
165,220
$
194,043
$
175,709
$
185,711
homegenius
2021
2020
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net premiums earned (7)
$
11,772
$
12,251
$
7,670
$
7,208
$
7,572
Services revenue (3) (7)
31,177
32,805
25,750
18,550
15,958
Net investment income
255
35
31
37
43
Net gains (losses) on
investments
1,509
—
—
—
—
Total (3)
44,713
45,091
33,451
25,795
23,573
Provision for losses
369
540
335
296
392
Cost of services (3)
24,615
26,646
21,433
17,028
15,706
Other operating expenses before
allocated corporate operating expenses (4)
16,998
18,544
16,160
14,928
15,238
Total (3)
41,982
45,730
37,928
32,252
31,336
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
2,731
(639
)
(4,477
)
(6,457
)
(7,763
)
Allocation of corporate operating
expenses
4,847
4,918
4,721
3,996
3,369
Adjusted pretax operating income
(loss)
$
(2,116
)
$
(5,557
)
$
(9,198
)
$
(10,453
)
$
(11,132
)
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 5 of
8)
All Other (8)
2021
2020
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net premiums earned (7)
$
—
$
—
$
—
$
—
$
7,752
Services revenue (3) (7)
30
27
44
53
(7,963
)
Net investment income
3,236
3,767
3,418
4,201
3,837
Other income
144
202
181
207
55
Total (3)
3,410
3,996
3,643
4,461
3,681
Cost of services
8
9
19
28
2,835
Other operating expenses (4)
(5)
2,795
3,001
3,750
2,373
4,438
Total
2,803
3,010
3,769
2,401
7,273
Adjusted pretax operating income
(loss)
$
607
$
986
$
(126
)
$
2,060
$
(3,592
)
(1)
Net of ceded premiums written
under the QSR Programs and the Excess-of-Loss Program. See Exhibit
L for additional information.
(2)
The fourth quarter of 2020
includes an increase to premiums earned of $11.3 million related to
changes in present value estimates for initial premiums on monthly
policies that are deferred and not collected until cancellation.
The impact of changes in this estimate in other periods is not
material.
(3)
Inter-segment information:
2021
2020
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Inter-segment revenue included
in:
homegenius
$
74
$
86
$
62
$
59
$
86
All Other
—
—
—
—
186
Total inter-segment revenue
$
74
$
86
$
62
$
59
$
272
Inter-segment expense included
in:
Mortgage
$
74
$
86
$
62
$
59
$
86
homegenius
—
—
—
—
186
Total inter-segment expense
$
74
$
86
$
62
$
59
$
272
(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)
Includes a change in the
composition of our reportable segments, effective in the fourth
quarter of 2021, that has been reflected in our segment operating
results for all periods presented, resulting in certain expenses
being reclassified from Mortgage to All Other.
(6)
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.
See notes continued on next
page.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 6 of
8)
Notes continued from prior
page.
(7)
In the fourth quarter of 2020, we
reclassified certain revenue previously reflected in the homegenius
segment results as services revenue to net premiums earned.
(8)
All Other activities include: (i)
income (losses) from assets held by our holding company; (ii)
related general corporate operating expenses not attributable or
allocated to our reportable segments; (iii) for all periods
presented, the income and expenses related to our traditional
appraisal services, which we wound down beginning in the fourth
quarter of 2020; and (iv) certain other immaterial activities,
including investments in new business opportunities.
Supplemental Other Operating Expense Information by Segment
Mortgage
2021
2020
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Other operating expenses by
type
Salaries and other base employee
expenses
$
24,377
$
23,541
$
23,546
$
23,533
$
23,945
Variable and share-based incentive
compensation
11,882
16,287
14,232
8,734
11,737
Other general operating
expenses
25,290
25,639
26,583
24,338
26,425
Ceding commissions
(4,879
)
(5,638
)
(6,501
)
(7,689
)
(10,436
)
Total
$
56,670
$
59,829
$
57,860
$
48,916
$
51,671
homegenius
2021
2020
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Other operating expenses by
type
Salaries and other base employee
expenses
$
8,073
$
7,061
$
6,759
$
8,315
$
7,305
Variable and share-based incentive
compensation
4,598
6,152
5,838
2,949
3,476
Other general operating
expenses
7,851
7,982
6,525
6,253
6,059
Title agent commissions
1,323
2,267
1,759
1,407
1,767
Total
$
21,845
$
23,462
$
20,881
$
18,924
$
18,607
All Other
2021
2020
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Other operating expenses by
type
Salaries and other base employee
expenses
$
1,004
$
1,164
$
1,192
$
997
$
2,011
Variable and share-based incentive
compensation
871
1,138
953
399
452
Other general operating
expenses
920
699
1,605
977
1,975
Total
$
2,795
$
3,001
$
3,750
$
2,373
$
4,438
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 7 of
8)
Inter-segment
2021
2020
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Other operating expenses by
type
Other general operating
expenses
$
(46
)
$
(57
)
$
(43
)
$
(35
)
$
(46
)
Total
$
(46
)
$
(57
)
$
(43
)
$
(35
)
$
(46
)
Total
2021
2020
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Other operating expenses by
type
Salaries and other base employee
expenses
$
33,454
$
31,766
$
31,497
$
32,845
$
33,261
Variable and share-based incentive
compensation
17,351
23,577
21,023
12,082
15,665
Other general operating
expenses
34,015
34,263
34,670
31,533
34,413
Ceding commissions
(4,879
)
(5,638
)
(6,501
)
(7,689
)
(10,436
)
Title agent commissions
1,323
2,267
1,759
1,407
1,767
Total
$
81,264
$
86,235
$
82,448
$
70,178
$
74,670
Mortgage
Year Ended December
31,
(In thousands)
2021
2020
Other operating expenses by
type
Salaries and other base employee
expenses
$
94,997
$
95,121
Variable and share-based incentive
compensation
51,135
37,458
Other general operating
expenses
101,850
107,302
Ceding commissions
(24,707
)
(41,146
)
Total
$
223,275
$
198,735
homegenius
Year Ended December
31,
(In thousands)
2021
2020
Other operating expenses by
type
Salaries and other base employee
expenses
$
30,208
$
24,878
Variable and share-based incentive
compensation
19,537
10,254
Other general operating
expenses
28,611
21,975
Title agent commissions
6,756
5,180
Total
$
85,112
$
62,287
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 8 of
8)
All Other
Year Ended December
31,
(In thousands)
2021
2020
Other operating expenses by
type
Salaries and other base employee
expenses
$
4,357
$
5,446
Variable and share-based incentive
compensation
3,361
1,241
Other general operating
expenses
4,201
5,211
Total
$
11,919
$
11,898
Inter-segment
Year Ended December
31,
(In thousands)
2021
2020
Other operating expenses by
type
Other general operating
expenses
$
(181
)
$
(216
)
Total
$
(181
)
$
(216
)
Total
Year Ended December
31,
(In thousands)
2021
2020
Other operating expenses by
type
Salaries and other base employee
expenses
$
129,562
$
125,445
Variable and share-based incentive
compensation
74,033
48,953
Other general operating
expenses
134,481
134,272
Ceding commissions
(24,707
)
(41,146
)
Title agent commissions
6,756
5,180
Total
$
320,125
$
272,704
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) loss on extinguishment of debt; (iii) amortization
and impairment of goodwill and other acquired intangible assets;
and (iv) impairment of other long-lived assets and other
non-operating items, such as impairment of internal-use software,
gains (losses) from the sale of lines of business and
acquisition-related income and expenses. Adjusted diluted net
operating income (loss) per share is calculated by dividing (i)
adjusted pretax operating income (loss) attributable to common
stockholders, net of taxes computed using the Company’s statutory
tax rate, by (ii) the sum of the weighted average number of common
shares outstanding and all dilutive potential common shares
outstanding. Adjusted net operating return on equity is calculated
by dividing annualized adjusted pretax operating income (loss), net
of taxes computed using the Company’s statutory tax rate, by
average stockholders’ equity, based on the average of the beginning
and ending balances for each period presented.
Although adjusted pretax operating income (loss) excludes
certain items that have occurred in the past and are expected to
occur in the future, the excluded items represent those that are:
(i) not viewed as part of the operating performance of our primary
activities or (ii) not expected to result in an economic impact
equal to the amount reflected in pretax income (loss). These
adjustments, along with the reasons for their treatment, are
described below.
(1)
Net gains (losses) on
investments and other financial instruments. The recognition of
realized investment gains or losses can vary significantly across
periods as the activity is highly discretionary based on the timing
of individual securities sales due to such factors as market
opportunities, our tax and capital profile and overall market
cycles. Unrealized gains and losses arise primarily from changes in
the market value of our investments that are classified as trading
or equity securities. These valuation adjustments may not
necessarily result in realized economic gains or losses.
Trends in the profitability of
our fundamental operating activities can be more clearly identified
without the fluctuations of these realized and unrealized gains or
losses and changes in fair value of other financial instruments.
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
5)
Reconciliation of Consolidated
Pretax Income to Adjusted Pretax Operating Income
2021
2020
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Consolidated pretax income
$
246,506
$
161,641
$
195,496
$
161,189
$
179,167
Less reconciling income (expense)
items:
Net gains (losses) on investments and
other financial instruments (1)
1,516
2,098
15,661
(5,181
)
17,376
Amortization and impairment of other
acquired intangible assets
(863
)
(862
)
(863
)
(862
)
(2,225
)
Impairment of other long-lived assets
and other non-operating items (2)
788
(244
)
(4,021
)
(84
)
(6,971
)
Total adjusted pretax operating income
(3)
$
245,065
$
160,649
$
184,719
$
167,316
$
170,987
(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 (loss) consists of adjusted pretax operating income (loss)
for each reportable segment and All Other activities as
follows:
2021
2020
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Adjusted pretax operating income
(loss):
Mortgage segment
$
246,574
$
165,220
$
194,043
$
175,709
$
185,711
homegenius segment
(2,116
)
(5,557
)
(9,198
)
(10,453
)
(11,132
)
All Other activities
607
986
(126
)
2,060
(3,592
)
Total adjusted pretax operating
income
$
245,065
$
160,649
$
184,719
$
167,316
$
170,987
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP
Financial Measure Reconciliations
Exhibit G (page 2 of
5)
Reconciliation of Diluted Net
Income Per Share to Adjusted Diluted Net Operating Income Per
Share
2021
2020
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Diluted net income per share
$
1.07
$
0.67
$
0.80
$
0.64
$
0.76
Less per-share impact of reconciling
income (expense) items:
Net gains (losses) on investments and
other financial instruments
0.01
0.01
0.08
(0.03
)
0.09
Amortization and impairment of other
acquired intangible assets
—
—
—
—
(0.01
)
Impairment of other long-lived assets
and other non-operating items
—
—
(0.02
)
—
(0.04
)
Income tax (provision) benefit on
reconciling income (expense) items (1)
—
—
(0.01
)
0.01
(0.01
)
Difference between statutory and
effective tax rate
(0.01
)
(0.01
)
—
(0.02
)
0.04
Per-share impact of reconciling income
(expense) items
—
—
0.05
(0.04
)
0.07
Adjusted diluted net operating income
per share (1)
$
1.07
$
0.67
$
0.75
$
0.68
$
0.69
(1)
Calculated using the company’s
federal statutory tax rate of 21%. Any permanent tax adjustments
and state income taxes on these items have been deemed immaterial
and are not included.
Reconciliation of Return on
Equity to Adjusted Net Operating Return on Equity (1)
2021
2020
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Return on equity (1)
18.2
%
11.8
%
14.5
%
11.8
%
14.1
%
Less impact of reconciling income
(expense) items: (2)
Net gains (losses) on investments and
other financial instruments
0.1
0.2
1.5
(0.5
)
1.7
Amortization and impairment of other
acquired intangible assets
(0.1
)
(0.1
)
(0.1
)
(0.1
)
(0.2
)
Impairment of other long-lived assets
and other non-operating items
0.1
—
(0.4
)
—
(0.7
)
Income tax (provision) benefit on
reconciling income (expense) items (3)
—
—
(0.2
)
0.1
(0.2
)
Difference between statutory and
effective tax rate
(0.1
)
(0.1
)
0.1
(0.1
)
0.6
Impact of reconciling income (expense)
items
—
—
0.9
(0.6
)
1.2
Adjusted net operating return on
equity
18.2
%
11.8
%
13.6
%
12.4
%
12.9
%
(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
5)
Reconciliation of homegenius
Adjusted Pretax Operating Income (Loss) to homegenius Adjusted
Gross Profit
2021
2020
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
homegenius adjusted pretax operating
income (loss)
$
(2,116
)
$
(5,557
)
$
(9,198
)
$
(10,453
)
$
(11,132
)
Less reconciling income (expense)
items:
Allocation of corporate operating
expenses
(4,847
)
(4,918
)
(4,721
)
(3,996
)
(3,369
)
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
2,731
(639
)
(4,477
)
(6,457
)
(7,763
)
Less reconciling income (expense)
items:
Other operating expenses before
allocated corporate operating expenses
(16,998
)
(18,544
)
(16,160
)
(14,928
)
(15,238
)
homegenius adjusted gross
profit
$
19,729
$
17,905
$
11,683
$
8,471
$
7,475
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP
Financial Measure Reconciliations
Exhibit G (page 4 of
5)
Reconciliation of Consolidated
Pretax Income to Adjusted Pretax Operating Income
Year Ended
December 31,
(In thousands)
2021
2020
Consolidated pretax income
$
764,832
$
479,441
Less reconciling income (expense)
items:
Net gains (losses) on investments and
other financial instruments (1)
14,094
60,277
Amortization and impairment of other
acquired intangible assets
(3,450
)
(5,144
)
Impairment of other long-lived assets
and other non-operating items (2)
(3,561
)
(7,759
)
Total adjusted pretax operating income
(3)
$
757,749
$
432,067
(1)
For 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 both periods 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:
Year Ended
December 31,
(In thousands)
2021
2020
Adjusted pretax operating income
(loss):
Mortgage segment
$
781,546
$
453,294
homegenius segment
(27,324
)
(23,240
)
All Other activities
3,527
2,013
Total adjusted pretax operating
income
$
757,749
$
432,067
Reconciliation of Diluted Net
Income Per Share to Adjusted Diluted Net Operating Income Per
Share
Year Ended
December 31,
2021
2020
Diluted net income per share
$
3.16
$
2.00
Less per-share impact of reconciling
income (expense) items:
Net gains (losses) on investments and
other financial instruments
0.08
0.31
Amortization and impairment of other
acquired intangible assets
(0.02
)
(0.03
)
Impairment of other long-lived assets
and other non-operating items
(0.02
)
(0.04
)
Income tax (provision) benefit on other
income (expense) items (1)
(0.01
)
(0.05
)
Difference between statutory and
effective tax rate
(0.02
)
0.07
Per-share impact of other income
(expense) items
0.01
0.26
Adjusted diluted net operating income
per share (1)
$
3.15
$
1.74
(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.
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit G (page 5 of 5)
Reconciliation of Return on
Equity to Adjusted Net Operating Return on Equity (1)
Year Ended
December 31,
2021
2020
Return on equity (1)
14.1
%
9.4
%
Less impact of reconciling income
(expense) items: (2)
Net gains (losses) on investments and
other financial instruments
0.4
1.4
Amortization and impairment of other
acquired intangible assets
(0.1
)
(0.1
)
Impairment of other long-lived assets
and other non-operating items
(0.1
)
(0.2
)
Income tax (provision) benefit on
reconciling income (expense) items (3)
—
(0.2
)
Difference between statutory and
effective tax rate
(0.1
)
0.3
Impact of reconciling income (expense)
items
0.1
1.2
Adjusted net operating return on
equity
14.0
%
8.2
%
(1)
Calculated by dividing net income
by average stockholders’ equity.
(2)
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.
Reconciliation of homegenius
Adjusted Pretax Operating Income (Loss) to homegenius Adjusted
Gross Profit
Year Ended
December 31,
(In thousands)
2021
2020
homegenius adjusted pretax operating
income (loss)
$
(27,324
)
$
(23,240
)
Less reconciling income (expense)
items:
Allocation of corporate operating
expenses
(18,482
)
(12,807
)
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
(8,842
)
(10,433
)
Less reconciling income (expense)
items:
Other operating expenses before
allocated corporate operating expenses
(66,630
)
(49,480
)
homegenius adjusted gross
profit
$
57,788
$
39,047
On a consolidated basis, “adjusted pretax operating income
(loss),” “adjusted diluted net operating income (loss) per share”
and “adjusted net operating return on equity” are measures not
determined in accordance with GAAP. In addition, “homegenius
adjusted pretax operating income (loss) before allocated corporate
operating expenses", "homegenius adjusted gross profit,"
“homegenius adjusted pretax operating margin before allocated
corporate operating expenses” and “homegenius adjusted pretax
operating margin" are also non-GAAP measures. These measures should
not be considered in isolation or viewed as substitutes for GAAP
pretax income (loss), diluted net income (loss) per share, return
on equity or net income (loss), or in the case of the homegenius
non-GAAP measures, for homegenius adjusted pretax operating income
(loss).
Our definitions of adjusted pretax operating income (loss),
adjusted diluted net operating income (loss) per share, adjusted
net operating return on equity, homegenius adjusted pretax
operating income (loss) before allocated corporate operating
expenses, homegenius adjusted gross profit, homegenius adjusted
pretax operating margin before allocated corporate operating
expenses or homegenius adjusted gross profit margin may not be
comparable to similarly-named measures reported by other companies.
See Exhibit F for additional information on our consolidated
non-GAAP financial measures.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental
Information - New Insurance Written
Exhibit H
2021
2020
($ in millions)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
New insurance written ("NIW")
$
23,710
$
26,558
$
21,662
$
20,161
$
29,781
Percentage of
NIW
Borrower-paid
99.4
%
99.2
%
99.1
%
99.2
%
99.2
%
Percentage by
premium type
Direct monthly and other recurring
premiums
93.5
%
93.8
%
93.1
%
90.2
%
91.4
%
Borrower-paid (1) (2)
6.3
6.0
6.6
9.4
8.3
Lender-paid (1)
0.2
0.2
0.3
0.4
0.3
Direct single premiums (1)
6.5
6.2
6.9
9.8
8.6
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
NIW for purchases
91.1
%
89.8
%
77.1
%
59.1
%
64.6
%
NIW for refinances
8.9
%
10.2
%
22.9
%
40.9
%
35.4
%
Percentage of NIW
by FICO score (3)
>=740
53.8
%
56.0
%
61.4
%
64.3
%
64.7
%
680-739
36.9
34.9
33.1
31.5
31.5
620-679
9.3
9.1
5.5
4.2
3.8
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Percentage by
LTV
95.01% and above
16.3
%
12.1
%
10.9
%
8.0
%
8.9
%
90.01% to 95.00%
41.9
46.7
40.4
31.6
34.7
85.01% to 90.00%
28.4
26.5
27.6
31.3
29.8
85.00% and below
13.4
14.7
21.1
29.1
26.6
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
(1)
Percentages exclude the impact of
reinsurance.
(2)
Borrower-paid Single Premium
Policies have lower Minimum Required Assets under PMIERs as
compared to lender-paid Single Premium Policies.
(3)
For loans with multiple
borrowers, the percentage of NIW by FICO score represents the
lowest of the borrowers’ FICO scores.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental
Information - Primary Insurance in Force and Risk in Force
Exhibit I (page 1 of
2)
December 31,
September 30,
June 30,
March 31,
December 31,
($ in millions)
2021
2021
2021
2021
2020
Primary insurance
in force (1)
Prime
$
242,635
$
238,047
$
233,543
$
234,980
$
242,044
Alt-A and A minus and below
3,337
3,528
3,759
3,941
4,100
Primary
$
245,972
$
241,575
$
237,302
$
238,921
$
246,144
Primary risk in
force (1) (2)
Prime
$
60,121
$
58,585
$
57,155
$
57,579
$
59,689
Alt-A and A minus and below
792
836
885
929
967
Primary
$
60,913
$
59,421
$
58,040
$
58,508
$
60,656
Percentage of
primary risk in force
Direct monthly and other recurring
premiums
83.9
%
82.7
%
81.2
%
80.0
%
79.1
%
Direct single premiums
16.1
%
17.3
%
18.8
%
20.0
%
20.9
%
Percentage of
primary risk in force by FICO score (3)
>=740
56.9
%
57.3
%
57.5
%
57.2
%
57.5
%
680-739
35.0
34.8
34.8
34.9
34.6
620-679
7.6
7.4
7.2
7.3
7.3
<=619
0.5
0.5
0.5
0.6
0.6
Total Primary
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Percentage of
primary risk in force by LTV
95.01% and above
15.1
%
14.6
%
14.5
%
14.4
%
14.4
%
90.01% to 95.00%
48.9
48.9
48.5
48.6
49.3
85.01% to 90.00%
27.7
27.8
28.1
28.2
28.0
85.00% and below
8.3
8.7
8.9
8.8
8.3
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Percentage of
primary risk in force by policy year
2008 and prior
4.7
%
5.2
%
5.7
%
6.1
%
6.2
%
2009 - 2015
6.4
7.4
8.7
9.9
11.3
2016
4.4
5.1
6.0
6.8
7.6
2017
4.9
5.7
6.8
8.0
9.1
2018
5.2
6.1
7.3
8.7
9.8
2019
9.7
11.4
13.6
15.6
17.8
2020
29.2
32.1
35.4
37.2
38.2
2021
35.5
27.0
16.5
7.7
—
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Table continued on next page.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental
Information - Primary Insurance in Force and Risk in Force
Exhibit I (page 2 of
2)
Table continued from prior
page.
December 31,
September 30,
June 30,
March 31,
December 31,
2021
2021
2021
2021
2020
Persistency Rate (12 months
ended)
64.3
%
60.8
%
57.7
%
(4)
57.2
%
(4)
61.2
%
(4)
Persistency Rate (quarterly,
annualized) (5)
71.7
%
67.5
%
66.3
%
62.5
%
60.4
%
(4)
(1)
Excludes the impact of premiums
ceded under our reinsurance agreements.
(2)
Does not include pool risk in
force or other risk in force, which combined represent
approximately 1% of our total risk in force for all periods
presented.
(3)
For loans with multiple
borrowers, the percentage of primary risk in force by FICO score
represents the lowest of the borrowers’ FICO scores.
(4)
The Persistency Rate was reduced
by an increase in cancellations of Single Premium Policies due to
increased cancellations identified by our ongoing servicer
monitoring process for Single Premium Policies.
(5)
The Persistency Rate on a
quarterly, annualized basis is calculated based on loan-level
detail for the quarter ending as of the date shown. It may be
impacted by seasonality or other factors, including the level of
refinance activity during the applicable periods and may not be
indicative of full-year trends.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental
Information - Claims and Reserves
Exhibit J
2021
2020
($ in thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net claims paid: (1)
Total primary claims paid
$
4,300
$
5,330
$
4,870
$
6,611
$
8,353
Total pool and other
(462
)
991
(649
)
(138
)
70
Subtotal
3,838
6,321
4,221
6,473
8,423
Impact of commutations and settlements
(2)
6,549
3,915
—
4,000
32,170
Total net claims paid
$
10,387
$
10,236
$
4,221
$
10,473
$
40,593
Total average net primary claims paid
(1) (3)
$
47.8
$
42.0
$
46.8
$
43.8
$
46.9
Average direct primary claims paid (3)
(4)
$
49.1
$
43.2
$
48.4
$
45.5
$
48.5
(1)
Includes the impact of
reinsurance recoveries and LAE.
(2)
Includes payments to commute
mortgage insurance coverage on certain performing and
non-performing loans. For the first quarter of 2021 and the fourth
quarter of 2020, primarily includes payments made to settle certain
previously disclosed legal proceedings.
(3)
Calculated without giving effect
to the impact of commutations and settlements.
(4)
Before reinsurance
recoveries.
December 31,
September 30,
June 30,
March 31,
December 31,
($ in thousands, except per default
amounts)
2021
2021
2021
2021
2020
Reserve for losses by category
(1)
Mortgage reserves
Prime
$
704,665
$
763,071
$
750,699
$
751,100
$
711,245
Alt-A and A minus and below
85,715
88,080
90,065
90,455
88,269
IBNR and other
2,886
3,788
5,464
6,626
9,966
LAE
19,859
21,400
21,180
21,212
20,172
Total primary reserves
813,125
876,339
867,408
869,393
829,652
Total pool reserves
9,826
11,413
13,085
13,175
14,163
Total 1st lien reserves
822,951
887,752
880,493
882,568
843,815
Other
185
269
270
270
292
Total Mortgage reserves
823,136
888,021
880,763
882,838
844,107
homegenius reserves
5,506
5,134
4,735
4,517
4,306
Total reserves
$
828,642
$
893,155
$
885,498
$
887,355
$
848,413
Primary reserve per primary default
excluding IBNR and other
$
27,884
$
25,822
$
21,304
$
17,219
$
14,759
(1)
Includes ceded losses on
reinsurance transactions, which are expected to be recovered and
are included in the reinsurance recoverables reported in our
condensed consolidated balance sheets.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental
Information - Default Statistics
Exhibit K
December 31,
September 30,
June 30,
March 31,
December 31,
2021
2021
2021
2021
2020
Default
Statistics
Primary Insurance:
Prime
Number of insured loans
977,465
975,565
976,344
996,082
1,031,736
Number of loans in default
25,883
30,503
36,826
45,929
51,032
Percentage of loans in default
2.65
%
3.13
%
3.77
%
4.61
%
4.95
%
Alt-A and A minus
and below
Number of insured loans
21,738
22,843
24,205
25,282
26,208
Number of loans in default
3,178
3,292
3,638
4,177
4,505
Percentage of loans in default
14.62
%
14.41
%
15.03
%
16.52
%
17.19
%
Total Primary
Number of insured loans
999,203
998,408
1,000,549
1,021,364
1,057,944
Number of loans in default
29,061
33,795
40,464
50,106
55,537
Percentage of loans in default
2.91
%
3.38
%
4.04
%
4.91
%
5.25
%
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental
Information - Reinsurance Programs
Exhibit L
2021
2020
($ in thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Quota Share
Reinsurance (“QSR”) and Single Premium QSR Programs
Ceded premiums written (1)
$
(7,670
)
$
(1,304
)
$
(7,032
)
$
(2,852
)
$
(1,117
)
% of premiums written
(2.9
) %
(0.5
) %
(2.8
) %
(1.1
) %
(0.4
) %
Ceded premiums earned
$
3,116
$
13,506
$
13,491
$
20,788
$
29,510
% of premiums earned
1.1
%
4.8
%
4.8
%
6.8
%
8.6
%
Ceding commissions written
$
(8,232
)
$
(7,861
)
$
(2,362
)
$
(2,949
)
$
(3,847
)
Ceding commissions earned (2)
$
6,288
$
7,087
$
7,920
$
10,407
$
13,197
Profit commission
$
20,290
$
13,630
$
17,935
$
16,350
$
18,406
Ceded losses
$
(7,940
)
$
883
$
(1,007
)
$
3,661
$
7,106
Excess-of-Loss
Program
Ceded premiums written
$
20,508
$
15,434
$
18,524
$
11,482
$
15,240
% of premiums written
7.9
%
6.1
%
7.4
%
4.4
%
5.2
%
Ceded premiums earned
$
17,817
$
16,581
$
15,601
$
12,154
$
12,037
% of premiums earned
6.3
%
5.9
%
5.5
%
4.0
%
3.7
%
Ceded RIF
(3)
Single Premium QSR Program
$
5,228,037
$
5,439,056
$
5,728,142
$
6,147,808
$
6,646,812
Excess-of-Loss Program
2,295,954
1,873,426
1,952,900
1,525,100
1,560,600
QSR Program
207,106
232,539
268,337
317,827
381,787
Total Ceded RIF
$
7,731,097
$
7,545,021
$
7,949,379
$
7,990,735
$
8,589,199
PMIERs impact -
reduction in Minimum Required Assets
Excess-of-Loss Program
$
995,171
$
659,151
$
907,112
$
673,957
$
912,734
Single Premium QSR Program
314,183
328,339
355,115
388,536
423,712
QSR Program
12,541
14,116
16,545
19,378
22,712
Total PMIERs impact
$
1,321,895
$
1,001,606
$
1,278,772
$
1,081,871
$
1,359,158
(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 COVID-19 pandemic, which has created periods of significant
economic disruption, high unemployment, volatility and disruption
in financial markets, and required adjustments in the housing
finance system and real estate markets. The COVID-19 pandemic has
adversely impacted our businesses, and could further impact our
business and subject us to certain risks, including those discussed
in “Item 1A. Risk Factors—The COVID-19 pandemic has adversely
impacted us, and its ultimate impact on our business and financial
results will depend on future developments, which are highly
uncertain and cannot be predicted, including the scope, severity
and duration of the pandemic and actions taken by governmental
authorities in response to the pandemic.” and the other risk
factors in our Annual Report on Form 10-K for the year ended
December 31, 2020 and in our subsequent reports and registration
statements filed from time to time with the U.S. Securities and
Exchange Commission;
- changes in economic conditions that impact the size of the
insurable mortgage market, the credit performance of our insured
mortgage portfolio and our business prospects;
- changes in the way customers, investors, ratings agencies,
regulators or legislators perceive our performance, financial
strength and future prospects;
- Radian Guaranty Inc.’s (“Radian Guaranty”) ability to remain
eligible under the Private Mortgage Insurer Eligibility
Requirements (the “PMIERs”) and other applicable requirements
imposed by the Federal Housing Finance Agency (the "FHFA") and by
Fannie Mae and Freddie Mac (collectively, the “GSEs”) to insure
loans purchased by the GSEs;
- our ability to maintain an adequate level of capital in our
insurance subsidiaries to satisfy existing and future regulatory
requirements, including the PMIERs and any changes thereto and
potential changes to the National Association of Insurance
Commissioners Model Act;
- 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 further changes in
response to the COVID-19 pandemic, changes in furtherance of
housing policy objectives such as the current FHFA focus on
increasing the accessibility and affordability of homeownership for
low-and-moderate income borrowers and minority communities, 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 Regulatory Capital Framework
which, in the form finalized in December 2020, increases the
capital requirements for the GSEs and reduces the credit they
receive for risk transfer, 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 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 upcoming discontinuance of LIBOR and
transition to one or more alternative benchmarks that could cause
interest rate volatility and, among other things, impact our
investment portfolio, cost of debt and cost of reinsurance through
mortgage insurance-linked notes transactions;
- any disruption in the servicing of mortgages covered by our
insurance policies, as well as poor servicer performance, which
could be impacted by the burdens placed on many servicers due to
the COVID-19 pandemic;
- a decrease in the “Persistency Rates” (the percentage of
insurance in force that remains in force over a period of time) of
our mortgage insurance on monthly premium products;
- competition in the private mortgage insurance industry
generally, and more specifically: price competition in our mortgage
insurance business, including as a result of 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, including potential changes in tax law and
other matters currently under consideration in the U.S.
Congress;
- legal and regulatory claims, assertions, actions, reviews,
audits, inquiries and investigations that could result in adverse
judgments, settlements, fines, injunctions, restitutions or other
relief that could require significant expenditures, new or
increased reserves or have other effects on our business;
- the amount and timing of potential payments or adjustments
associated with federal or other tax examinations;
- the possibility that we may fail to estimate accurately,
especially in the event of an extended economic downturn or a
period of extreme market volatility and economic uncertainty, the
likelihood, magnitude and timing of losses in establishing loss
reserves for our mortgage insurance business or to accurately
calculate and/or project our Available Assets and Minimum Required
Assets under the PMIERs, which will be impacted by, among other
things, the size and mix of our insurance in force, the level of
defaults in our portfolio, the reported status of defaults in our
portfolio, including whether they are subject to 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, and whether these products and services will
receive broad customer acceptance;
- 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, 2020, and to subsequent reports and
registration statements filed from time to time with the U.S.
Securities and Exchange Commission. We caution you not to place
undue reliance on these forward-looking statements, which are
current only as of the date on which we issued this press release.
We do not intend to, and we disclaim any duty or obligation to,
update or revise any forward-looking statements to reflect new
information or future events or for any other reason.
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version on businesswire.com: https://www.businesswire.com/news/home/20220216006200/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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