— GAAP net income of $198 million, or $1.20 per
diluted share —
— Adjusted diluted net operating income of
$1.31 per diluted share —
— Return on equity of 20.7% and adjusted net
operating return on equity of 22.5% —
— Purchased 19.5 million shares, or 11.1% of
total shares outstanding of Radian Group common stock year-to-date
through October 31st —
— Primary mortgage insurance in force increases
7.3% year-over-year to $259 billion —
Radian Group Inc. (NYSE: RDN) today reported net income for the
quarter ended September 30, 2022, of $198.3 million, or $1.20 per
diluted share. This compares with net income for the quarter ended
September 30, 2021, of $126.4 million, or $0.67 per diluted
share.
Key Financial Highlights
Quarter ended
($ in millions, except per-share
amounts)
September 30, 2022
June 30, 2022
September 30, 2021
Net income (1)
$198.3
$201.2
$126.4
Diluted net income per share
$1.20
$1.15
$0.67
Consolidated pretax income
$255.5
$259.9
$161.6
Adjusted pretax operating income
(2)
$272.7
$302.0
$160.6
Adjusted diluted net operating
income per share (2)(3)
$1.31
$1.36
$0.67
Return on equity (1)(4)
20.7 %
19.9 %
11.8 %
Adjusted net operating return on
equity (2)(3)
22.5 %
23.6 %
11.8 %
New Insurance Written (NIW) -
mortgage insurance
$17,616
$18,935
$26,558
Net premiums earned - mortgage
insurance
$235.2
$246.9
$236.9
New defaults (5)
9,601
8,009
8,132
Provision for losses - mortgage
insurance
($97.5)
($114.2)
$16.8
homegenius revenues
$25.1
$32.3
$45.1
Book value per share
$23.80
$23.63
$23.48
Accumulated other comprehensive
income
(loss) value per share (6)
($3.20)
($1.98)
$0.84
PMIERs Available Assets (7)
$5,358
$5,175
$5,262
PMIERs excess Available Assets
(8)
$1,628
$1,424
$1,741
Total Holding Company Liquidity
(9)
$848
$1,048
$1,036
Total investments
$5,592
$5,906
$6,658
Primary mortgage insurance in
force
$259,121
$254,226
$241,575
Percentage of primary loans in
default (10)
2.1 %
2.2 %
3.4 %
Mortgage insurance loss
reserves
$478
$589
$888
(1)
Net income for the third quarter of 2022
includes a pretax net loss on investments and other financial
instruments of $16.3 million, compared with a $41.9 million pretax
net loss on investments and other financial instruments in the
second quarter of 2022 and a pretax net gain on investments and
other financial instruments of $2.1 million for the third quarter
of 2021.
(2)
Adjusted results, including adjusted
pretax operating income, adjusted diluted net operating income per
share and adjusted net operating return on equity, are non-GAAP
financial measures. For definitions and reconciliations of these
measures to the comparable GAAP measures, see Exhibits F and G.
(3)
Calculated using the company’s statutory
tax rate of 21%.
(4)
Calculated by dividing annualized net
income by average stockholders' equity, based on the average of the
beginning and ending balances for each period presented.
(5)
Represents the number of new defaults
reported during the period on loans related to primary mortgage
insurance policies.
(6)
Included in book value per share for each
period presented.
(7)
Represents Radian Guaranty’s Available
Assets, calculated in accordance with the Private Mortgage Insurer
Eligibility Requirements (PMIERs) financial requirements in effect
for each date shown.
(8)
Represents Radian Guaranty’s excess or
"cushion" of Available Assets over its Minimum Required Assets,
calculated in accordance with the PMIERs financial requirements in
effect for each date shown.
(9)
Represents Radian Group's total liquidity,
including available capacity under its unsecured revolving credit
facility.
(10)
Represents the number of primary loans in
default as a percentage of the total number of insured primary
loans.
Adjusted pretax operating income for the quarter ended September
30, 2022, was $272.7 million, or $1.31 per diluted share. This
compares with adjusted pretax operating income for the quarter
ended September 30, 2021, of $160.6 million, or $0.67 per diluted
share.
Book value per share at September 30, 2022, was $23.80, compared
to $23.63 at June 30, 2022, and $23.48 at September 30, 2021. This
represents a 1.4% growth in book value per share at September 30,
2022, as compared to September 30, 2021, and includes accumulated
other comprehensive income (loss) of $(3.20) per share as of
September 30, 2022 and $0.84 per share as of September 30, 2021,
which, if excluded as of both dates, would represent 19.3% growth
for the period. Changes in accumulated other comprehensive income
(loss) for the period are primarily from net unrealized losses on
investments as a result of an increase in market interest rates
during the period. We do not expect to realize these losses given
that we have the ability and the expectation to hold these
securities until recovery.
“Despite a challenging macroeconomic environment and cooling of
the mortgage and real estate markets, we are pleased to report on
another excellent quarter for Radian with net income of $198
million, return on equity of 20.7% and total holding company
liquidity of $848 million. Our primary mortgage insurance in force
portfolio, which is the main driver of future earnings for our
company, grew more than 7% year-over-year to $259 billion and
credit performance remained strong,” said Radian’s Chief Executive
Officer Rick Thornberry. “We are managing our expense structure to
align to today’s operating environment and strategically managing
our capital. We believe we are well positioned to continue our
mission of ensuring affordable, sustainable and equitable
homeownership.”
THIRD QUARTER HIGHLIGHTS
- NIW was $17.6 billion in the third quarter of 2022, compared to
$18.9 billion in the second quarter of 2022, and $26.6 billion in
the third quarter of 2021.
- Purchase NIW decreased 5.7% in the third quarter of 2022
compared to the second quarter of 2022 and decreased 27.3% compared
to the third quarter of 2021.
- Refinances accounted for 1.6% of total NIW in the third quarter
of 2022, compared to 2.9% in the second quarter of 2022, and 10.2%
in the third quarter of 2021.
- Of the $17.6 billion in NIW in the third quarter of 2022, 95.5%
was written with monthly and other recurring premiums, compared to
95.4% in the second quarter of 2022, and 93.8% in the third quarter
of 2021.
- Total primary mortgage insurance in force as of September 30,
2022, increased to $259.1 billion, an increase of 1.9% compared to
$254.2 billion as of June 30, 2022, and an increase of 7.3%
compared to $241.6 billion as of September 30, 2021. The
year-over-year change reflects an 11.8% increase in monthly premium
policy insurance in force and a 13.2% 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 75.9% for the
twelve months ended September 30, 2022, compared to 71.7% for the
twelve months ended June 30, 2022, and 60.8% for the twelve months
ended September 30, 2021.
- Annualized persistency for the three months ended September 30,
2022, was 81.6%, compared to 79.8% for the three months ended June
30, 2022, and 67.5% for the three months ended September 30,
2021.
- Net mortgage insurance premiums earned were $235.2 million for
the quarter ended September 30, 2022, compared to $246.9 million
for the quarter ended June 30, 2022, and $236.9 million for the
quarter ended September 30, 2021.
- Mortgage insurance in force portfolio premium yield was 39.2
basis points in the third quarter of 2022. This compares to 40.0
basis points in the second quarter of 2022, and 40.3 basis points
in the third quarter of 2021.
- The impact of single premium policy cancellations before
consideration of reinsurance represented 1.0 basis points of direct
premium yield in the third quarter of 2022, 1.1 basis points in the
second quarter of 2022, and 4.3 basis points in the third quarter
of 2021.
- Total net mortgage insurance premium yield, which includes the
impact of ceded premiums and accrued profit commission, was 36.7
basis points in the third quarter of 2022. This compares to 39.3
basis points in the second quarter of 2022, and 39.6 basis points
in the third quarter of 2021.
- Details regarding premiums earned may be found in Exhibit
D.
- The mortgage insurance provision for losses was a benefit of
$97.5 million in the third quarter of 2022, compared to a benefit
of $114.2 million in the second quarter of 2022, and a provision of
$16.8 million in the third quarter of 2021.
- The decreased benefit in the third quarter of 2022 compared to
the second quarter of 2022 was primarily related to less favorable
development on prior period reserves, as compared to the second
quarter of 2022. The benefit compared to the provision recorded in
the same quarter prior year is primarily related to more favorable
development on prior period reserves, as compared to the third
quarter of 2021. All periods were impacted by more favorable trends
in cures than originally estimated.
- The number of primary delinquent loans was 21,077 as of
September 30, 2022, compared to 21,861 as of June 30, 2022, and
33,795 as of September 30, 2021.
- The loss ratio in the third quarter of 2022 was (41.5)%
compared to (46.2)% in the second quarter of 2022, and 7.1% in the
third quarter of 2021.
- Total mortgage insurance claims paid were $4.5 million in the
third quarter of 2022, compared to $3.3 million in the second
quarter of 2022, and $10.2 million in the third quarter of
2021.
- Radian's homegenius segment offers an array of title, real
estate and technology products and services to consumers, mortgage
lenders, mortgage and real estate investors, GSEs, real estate
brokers and agents.
- Total homegenius segment revenues for the third quarter of 2022
were $25.1 million, compared to $32.3 million for the second
quarter of 2022, and $45.1 million for the third quarter of
2021.
- Adjusted pretax operating loss, our primary segment measure of
profitability for the homegenius segment, was $25.5 million for the
quarter ended September 30, 2022, compared to $17.7 million for the
quarter ended June 30, 2022, and $5.6 million for the quarter ended
September 30, 2021.
- Additional details regarding related non-GAAP measures may be
found in Exhibits F and G.
- Other operating expenses were $91.3 million in the third
quarter of 2022, compared to $90.5 million in the second quarter of
2022, and $86.5 million in the third quarter of 2021.
- The increase in the third quarter of 2022 compared to the third
quarter of 2021 was driven primarily by an increase in other
general operating expenses 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 September 30, 2022, Radian Group maintained $572.6
million of available liquidity. Total Holding Company Liquidity,
which includes the company’s $275.0 million unsecured revolving
credit facility, was $847.6 million as of September 30, 2022.
- During the third quarter of 2022, the company repurchased 9.5
million shares of Radian Group common stock at a total cost of
$194.1 million, including commissions. This represented 5.7% in the
aggregate of total shares outstanding as of the end of the second
quarter.
- In addition, in October 2022 the Company purchased an
additional 49 thousand shares of Radian Group common stock at a
total cost of approximately $1.0 million, including commissions.
After the repurchases in October, no purchase authority remained
available under our most recent repurchase authorization.
- On August 10, 2022, Radian Group’s board of directors
authorized a regular quarterly dividend on its common stock in the
amount of $0.20 per share and the dividend was paid on September 1,
2022.
- Radian Reinsurance paid an ordinary dividend of $32.5 million
to Radian Group in September 2022.
Radian Guaranty
- At September 30, 2022, Radian Guaranty’s Available Assets under
PMIERs totaled approximately $5.4 billion, resulting in excess
available resources or a “cushion” of $1.6 billion, or 44%, over
its Minimum Required Assets.
- As of September 30, 2022, 68% of Radian Guaranty's primary
mortgage insurance risk in force is subject to some form of risk
distribution, providing a $1.2 billion reduction of Minimum
Required Assets under PMIERs.
- As previously announced, consistent with our use of risk
distribution strategies to effectively manage capital and
proactively mitigate risk, Radian Guaranty entered into a quota
share reinsurance arrangement ("2022 QSR Agreement") with a panel
of third-party reinsurance providers in the third quarter of 2022.
Under the 2022 QSR Agreement, starting July 1, 2022, we began to
cede 20% of policies issued between January 1, 2022, and June 30,
2023, subject to certain conditions.
CONFERENCE CALL
Radian will discuss third quarter 2022 financial results in a
conference call tomorrow, Thursday, November 3, 2022, at 12:00 p.m.
Eastern time. The conference call will be webcast live on the
company’s website at
https://radian.com/who-we-are/for-investors/webcasts or at
www.radian.com. The webcast is listen-only. Those interested in
participating in the question-and-answer session should follow the
conference call dial-in instructions below.
Please note that there is a new process to access the call via
telephone. The call may be accessed via telephone by registering
for the call here to receive the dial-in numbers and unique PIN. It
is recommended that you join 10 minutes prior to the event start
(although you may register and dial in at any time during the
call).
A digital replay of the webcast will be available on Radian’s
website approximately two hours after the live broadcast ends for a
period of one year at
https://radian.com/who-we-are/for-investors/webcasts.
In addition to the information provided in the company's
earnings news release, other statistical and financial information,
which is expected to be referred to during the conference call,
will be available on Radian's website at www.radian.com, under
Investors.
NON-GAAP FINANCIAL MEASURES
Radian believes that adjusted pretax operating income (loss),
adjusted diluted net operating income (loss) per share and adjusted
net operating return on equity (non-GAAP measures) facilitate
evaluation of the company’s fundamental financial performance and
provide relevant and meaningful information to investors about the
ongoing operating results of the company. On a consolidated basis,
these measures are not recognized in accordance with accounting
principles generally accepted in the United States of America
(GAAP) and should not be considered in isolation or viewed as
substitutes for GAAP measures of performance. The measures
described below have been established in order to increase
transparency for the purpose of evaluating the company’s operating
trends and enabling more meaningful comparisons with Radian’s
competitors.
Adjusted pretax operating income (loss) is defined as GAAP
consolidated pretax income (loss) excluding the effects of: (i) net
gains (losses) on investments and other financial instruments,
except for certain investments attributable to our reportable
segments; (ii) gains (losses) on extinguishment of debt; (iii)
amortization and impairment of goodwill and other acquired
intangible assets; and (iv) impairment of other long-lived assets
and other non-operating items, such as impairment of internal-use
software, gains (losses) from the sale of lines of business and
acquisition-related income and expenses. Adjusted diluted net
operating income (loss) per share is calculated by dividing (i)
adjusted pretax operating income (loss) attributable to common
stockholders, net of taxes computed using the company’s statutory
tax rate, by (ii) the sum of the weighted average number of common
shares outstanding and all dilutive potential common shares
outstanding. Adjusted net operating return on equity is calculated
by dividing annualized adjusted pretax operating income (loss), net
of taxes computed using the company’s statutory tax rate, by
average stockholders’ equity, based on the average of the beginning
and ending balances for each period presented.
In addition to the above non-GAAP measures for the consolidated
company, we also have presented as supplemental information
non-GAAP measures for our homegenius segment of adjusted pretax
operating income (loss) before allocated corporate operating
expenses and adjusted gross profit. Adjusted pretax operating
income (loss) before allocated corporate operating expenses is
calculated as adjusted pretax operating income (loss) as described
above (which is the segment's ASC 280 GAAP measure of operating
performance), adjusted to remove the impact of corporate
allocations of other operating expenses for the homegenius segment.
Adjusted gross profit is further adjusted to remove other operating
expenses. In addition, homegenius adjusted pretax operating margin
before allocated corporate operating expenses and adjusted gross
profit margin are calculated by dividing homegenius adjusted pretax
operating margin before allocated corporate operating expenses and
adjusted gross profit, respectively, by GAAP total revenue for the
homegenius segment. For the homegenius segment, adjusted pretax
operating income (loss) before allocated corporate operating
expenses, adjusted gross profit, and the related profit margins are
used to facilitate comparisons with other services companies, since
they are widely accepted measures of performance in the services
industry and are used internally as supplemental measures to
evaluate the performance of our homegenius segment.
See Exhibit F or Radian’s website for a description of these
items, as well as Exhibit G for reconciliations to the most
comparable consolidated GAAP measures.
ABOUT RADIAN
Radian Group Inc. (NYSE: RDN) is ensuring the American dream of
homeownership responsibly and sustainably through products and
services that include industry-leading mortgage insurance and a
comprehensive suite of mortgage, risk, title, real estate and
technology products and services. We are powered by technology,
informed by data and driven to deliver new and better ways to
transact and manage risk. Visit www.radian.com to learn more about
how Radian is shaping the future of mortgage and real estate
services.
FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS
(Unaudited)
Exhibit A:
Condensed Consolidated Statements of
Operations Trend Schedule
Exhibit B:
Net Income Per Share Trend Schedule
Exhibit C:
Condensed Consolidated Balance Sheets
Exhibit D:
Net Premiums Earned
Exhibit E:
Segment Information
Exhibit F:
Definition of Consolidated Non-GAAP
Financial Measures
Exhibit G:
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit H:
Mortgage Supplemental Information
New Insurance Written
Exhibit I:
Mortgage Supplemental Information
Primary Insurance in Force and Risk in
Force
Exhibit J:
Mortgage Supplemental Information
Claims and Reserves, Default
Statistics
Exhibit K:
Mortgage Supplemental Information
Reinsurance Programs
Radian Group Inc. and
Subsidiaries
Condensed Consolidated Statements of
Operations Trend Schedule
Exhibit A
2022
2021
(In thousands, except per-share
amounts)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Revenues
Net premiums earned
$
240,222
$
253,892
$
254,190
$
261,437
$
249,118
Services revenue
20,146
27,281
29,348
35,693
37,773
Net investment income
51,414
46,957
38,196
37,407
35,960
Net gains (losses) on investments and
other financial instruments
(16,252
)
(41,869
)
(29,457
)
3,025
2,098
Other income
659
572
703
805
809
Total revenues
296,189
286,833
292,980
338,367
325,758
Expenses
Provision for losses
(96,964
)
(113,922
)
(83,754
)
(46,219
)
17,305
Policy acquisition costs
5,442
5,940
6,605
7,271
7,924
Cost of services
18,717
22,760
24,753
28,333
30,520
Other operating expenses
91,327
90,495
89,541
80,476
86,479
Interest expense
21,183
20,831
20,846
21,137
21,027
Amortization of other acquired intangible
assets
1,023
849
849
863
862
Total expenses
40,728
26,953
58,840
91,861
164,117
Pretax income
255,461
259,880
234,140
246,506
161,641
Income tax provision
57,181
58,687
53,009
53,061
35,229
Net income
$
198,280
$
201,193
$
181,131
$
193,445
$
126,412
Diluted net income per share
$
1.20
$
1.15
$
1.01
$
1.07
$
0.67
Selected Mortgage Key
Ratios
2022
2021
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Loss ratio (1)
(41.5
)%
(46.2
)%
(34.3
)%
(18.6
)%
7.1
%
Expense ratio (2)
26.1
%
26.2
%
27.2
%
25.6
%
28.6
%
(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
Net Income Per Share Trend
Schedule
Exhibit B
The calculation of basic and diluted net
income per share was as follows.
2022
2021
(In thousands, except per-share
amounts)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net income—basic and diluted
$
198,280
$
201,193
$
181,131
$
193,445
$
126,412
Average common shares
outstanding—basic
162,506
173,705
176,816
179,500
186,741
Dilutive effect of stock-based
compensation arrangements (1)
2,232
1,714
2,263
1,628
1,301
Adjusted average common shares
outstanding—diluted
164,738
175,419
179,079
181,128
188,042
Basic net income per share
$
1.22
$
1.16
$
1.02
$
1.08
$
0.68
Diluted net income per share
$
1.20
$
1.15
$
1.01
$
1.07
$
0.67
(1)
The following number of shares of our
common stock equivalents issued under our share-based compensation
arrangements were not included in the calculation of diluted net
income (loss) per share because they would be anti-dilutive.
2022
2021
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Shares of common stock equivalents
—
189
—
35
—
Radian Group Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
Exhibit C
September 30,
June 30
March 31,
December 31,
September 30,
(In thousands, except per-share
amounts)
2022
2022
2022
2021
2021
Assets
Investments
$
5,591,881
$
5,906,147
$
6,334,950
$
6,513,542
$
6,658,487
Cash
54,701
135,262
131,853
151,145
154,709
Restricted cash
1,107
561
1,651
1,475
1,866
Accrued investment income
38,596
35,774
35,531
32,812
33,258
Accounts and notes receivable
174,041
166,380
142,579
124,016
166,730
Reinsurance recoverables
30,569
39,876
55,015
67,896
76,048
Deferred policy acquisition costs
17,920
16,983
16,383
16,317
16,823
Property and equipment, net
75,740
74,874
75,275
75,086
74,170
Goodwill and other acquired intangible
assets, net
16,873
17,895
18,744
19,593
20,456
Prepaid federal income taxes
526,123
466,123
354,123
354,123
313,123
Other assets
458,292
414,412
449,642
483,180
525,938
Total assets
$
6,985,843
$
7,274,287
$
7,615,746
$
7,839,185
$
8,041,608
Liabilities and stockholders’ equity
Unearned premiums
$
285,290
$
298,991
$
312,013
$
329,090
$
348,322
Reserve for losses and loss adjustment
expense
483,664
594,808
727,247
828,642
893,155
Senior notes
1,412,473
1,411,458
1,410,458
1,409,473
1,408,502
FHLB advances
153,550
184,284
148,983
150,983
172,649
Reinsurance funds withheld
218,777
223,649
225,363
228,078
290,502
Net deferred tax liability
335,374
324,866
324,004
337,509
286,957
Other liabilities
358,665
305,269
320,114
296,614
383,585
Total liabilities
3,247,793
3,343,325
3,468,182
3,580,389
3,783,672
Common stock
176
186
193
194
200
Treasury stock
(930,396
)
(930,284
)
(920,958
)
(920,798
)
(920,355
)
Additional paid-in capital
1,513,615
1,698,490
1,871,763
1,878,372
2,012,870
Retained earnings
3,656,870
3,491,675
3,326,119
3,180,935
3,012,997
Accumulated other comprehensive income
(loss)
(502,215
)
(329,105
)
(129,553
)
120,093
152,224
Total stockholders’ equity
3,738,050
3,930,962
4,147,564
4,258,796
4,257,936
Total liabilities and stockholders’
equity
$
6,985,843
$
7,274,287
$
7,615,746
$
7,839,185
$
8,041,608
Shares outstanding
157,058
166,388
174,648
175,421
181,336
Book value per share
$
23.80
$
23.63
$
23.75
$
24.28
$
23.48
Debt to capital ratio (1)
27.4
%
26.4
%
25.4
%
24.9
%
24.9
%
Risk to capital ratio-Radian Guaranty
only
11.1:1
11.9:1
12.1:1
11.1:1
11.4:1
(1)
Calculated as senior notes divided by
senior notes and stockholders' equity.
Radian Group Inc. and
Subsidiaries
Net Premiums Earned
Exhibit D
2022
2021
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Premiums earned
Direct - Mortgage
Premiums earned, excluding revenue from
cancellations
$
250,140
$
249,936
$
243,600
$
248,704
$
239,786
Single Premium Policy cancellations
6,705
6,894
14,696
20,530
25,592
Total direct - Mortgage
256,845
256,830
258,296
269,234
265,378
Assumed - Mortgage (1)
1,211
1,539
1,331
1,470
1,683
Ceded - Mortgage
Premiums earned, excluding revenue from
cancellations
(38,879
)
(28,565
)
(27,339
)
(28,333
)
(27,662
)
Single Premium Policy cancellations
(2)
(1,844
)
(1,965
)
(4,192
)
(5,905
)
(7,338
)
Profit commission - other (3)
17,864
19,070
17,078
13,199
4,806
Total ceded premiums - Mortgage (4)
(22,859
)
(11,460
)
(14,453
)
(21,039
)
(30,194
)
Net premiums earned - Mortgage
235,197
246,909
245,174
249,665
236,867
Net premiums earned - homegenius
5,025
6,983
9,016
11,772
12,251
Net premiums earned
$
240,222
$
253,892
$
254,190
$
261,437
$
249,118
(1)
Represents premiums from our participation
in certain credit risk transfer programs.
(2)
Includes the impact of related profit
commissions.
(3)
The amounts represent the profit
commission on the Single Premium QSR Program and 2022 QSR
Agreement, excluding the impact of Single Premium Policy
cancellations.
(4)
See Exhibit K for additional information
on ceded premiums for our various reinsurance programs.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 1 of 6)
Summarized financial information
concerning our operating segments as of and for the periods
indicated is as follows. For a definition of adjusted pretax
operating income (loss), homegenius adjusted pretax operating
income (loss) before allocated corporate operating expenses and
homegenius adjusted gross profit, along with reconciliations to
consolidated GAAP measures, see Exhibits F and G.
Three Months Ended September
30, 2022
(In thousands)
Mortgage
homegenius
All Other (1)
Inter- segment (2)
Total
Net premiums written (3)
$
235,076
$
5,025
$
—
$
—
$
240,101
Decrease in unearned premiums
121
—
—
—
121
Net premiums earned
235,197
5,025
—
—
240,222
Services revenue
405
19,812
—
(71
)
20,146
Net investment income
44,842
246
6,326
—
51,414
Other income
589
—
70
—
659
Total
281,033
25,083
6,396
(71
)
312,441
Provision for losses
(97,493
)
435
—
94
(96,964
)
Policy acquisition costs
5,442
—
—
—
5,442
Cost of services
373
18,344
—
—
18,717
Other operating expenses before allocated
corporate operating expenses (4)
23,396
26,285
3,444
(165
)
52,960
Interest expense (5)
21,183
—
—
—
21,183
Total
(47,099
)
45,064
3,444
(71
)
1,338
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
328,132
(19,981
)
2,952
—
311,103
Allocation of corporate operating
expenses
32,457
5,555
371
—
38,383
Adjusted pretax operating income
(loss)
$
295,675
$
(25,536
)
$
2,581
$
—
$
272,720
Three Months Ended September
30, 2021
(In thousands)
Mortgage
homegenius
All Other (1)
Inter- segment (2)
Total
Net premiums written (3)
$
228,116
$
12,251
$
—
$
—
$
240,367
Decrease in unearned premiums
8,751
—
—
—
8,751
Net premiums earned
236,867
12,251
—
—
249,118
Services revenue
5,027
32,805
27
(86
)
37,773
Net investment income
32,158
35
3,767
—
35,960
Other income
607
—
202
—
809
Total
274,659
45,091
3,996
(86
)
323,660
Provision for losses
16,794
540
—
(29
)
17,305
Policy acquisition costs
7,924
—
—
—
7,924
Cost of services
3,865
26,646
9
—
30,520
Other operating expenses before allocated
corporate operating expenses (4)
25,866
18,544
2,623
(57
)
46,976
Interest expense (5)
21,027
—
—
—
21,027
Total
75,476
45,730
2,632
(86
)
123,752
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
199,183
(639
)
1,364
—
199,908
Allocation of corporate operating
expenses
33,963
4,918
378
—
39,259
Adjusted pretax operating income
(loss)
$
165,220
$
(5,557
)
$
986
$
—
$
160,649
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 2 of 6)
(1)
All Other activities include: (i) income
(losses) from assets held by our holding company; (ii) related
general corporate operating expenses not attributable or allocated
to our reportable segments; and (iii) certain investments in new
business opportunities, including activities and investments
associated with Radian Mortgage Capital, and other immaterial
activities.
(2)
Includes immaterial inter-segment services
revenue for our homegenius segment and immaterial inter-segment
provision for losses and other operating expenses for our Mortgage
segment.
(3)
Net of ceded premiums written under under
our quota share and excess-of-loss reinsurance agreements. See
Exhibit K for additional information.
(4)
Does not include impairment of long-lived
assets and other non-operating items, which are not considered
components of adjusted pretax operating income (loss).
(5)
Relates to interest on our borrowing and
financing activities including our Senior Notes issued by our
holding company and FHLB borrowings made by our mortgage insurance
subsidiaries.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 3 of 6)
Mortgage
2022
2021
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net premiums written (1)
$
235,076
$
248,645
$
248,360
$
238,529
$
228,116
(Increase) decrease in unearned
premiums
121
(1,736
)
(3,186
)
11,136
8,751
Net premiums earned
235,197
246,909
245,174
249,665
236,867
Services revenue
405
2,105
4,552
4,560
5,027
Net investment income
44,842
40,197
34,017
33,916
32,158
Other income
589
572
703
661
607
Total
281,033
289,783
284,446
288,802
274,659
Provision for losses (2)
(97,493
)
(114,179
)
(84,193
)
(46,560
)
16,794
Policy acquisition costs
5,442
5,940
6,605
7,271
7,924
Cost of services
373
1,960
3,383
3,710
3,865
Other operating expenses before allocated
corporate operating expenses (2) (3)
23,396
25,474
23,755
23,365
25,866
Interest expense (4)
21,183
20,831
20,846
21,137
21,027
Total (2)
(47,099
)
(59,974
)
(29,604
)
8,923
75,476
Adjusted pretax operating income before
allocated corporate operating expenses
328,132
349,757
314,050
279,879
199,183
Allocation of corporate operating
expenses
32,457
33,237
36,209
33,305
33,963
Adjusted pretax operating income
$
295,675
$
316,520
$
277,841
$
246,574
$
165,220
homegenius
2022
2021
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net premiums earned
$
5,025
$
6,983
$
9,016
$
11,772
$
12,251
Services revenue (2)
19,812
25,261
24,878
31,177
32,805
Net investment income
246
99
18
255
35
Net gains (losses) on investments
—
—
—
1,509
—
Total (2)
25,083
32,343
33,912
44,713
45,091
Provision for losses
435
309
481
369
540
Cost of services
18,344
20,800
21,370
24,615
26,646
Other operating expenses before allocated
corporate operating expenses (3)
26,285
23,205
20,287
16,998
18,544
Total
45,064
44,314
42,138
41,982
45,730
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
(19,981
)
(11,971
)
(8,226
)
2,731
(639
)
Allocation of corporate operating
expenses
5,555
5,719
5,280
4,847
4,918
Adjusted pretax operating income
(loss)
$
(25,536
)
$
(17,690
)
$
(13,506
)
$
(2,116
)
$
(5,557
)
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 4 of 6)
All Other (5)
2022
2021
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Services revenue
$
—
$
—
$
—
$
30
$
27
Net investment income
6,326
6,661
4,161
3,236
3,767
Other income
70
—
—
144
202
Total
6,396
6,661
4,161
3,410
3,996
Cost of services
—
—
—
8
9
Other operating expenses before allocated
corporate operating expenses (3)
3,444
3,077
3,142
2,422
2,623
Total
3,444
3,077
3,142
2,430
2,632
Adjusted pretax operating income before
allocated corporate operating expenses
2,952
3,584
1,019
980
1,364
Allocation of corporate operating
expenses
371
381
406
373
378
Adjusted pretax operating income
(loss)
$
2,581
$
3,203
$
613
$
607
$
986
(1)
Net of ceded premiums written under under
our quota share and excess-of-loss reinsurance agreements. See
Exhibit K for additional information.
(2)
Includes immaterial inter-segment services
revenue for our homegenius segment and immaterial inter-segment
provision for losses and other operating expenses for our Mortgage
segment.
(3)
Does not include impairment of long-lived
assets and other non-operating items, which are not considered
components of adjusted pretax operating income (loss).
(4)
Relates to interest on our borrowing and
financing activities including our Senior Notes issued by our
holding company and FHLB borrowings made by our mortgage insurance
subsidiaries.
(5)
All Other activities include: (i) income
(losses) from assets held by our holding company; (ii) related
general corporate operating expenses not attributable or allocated
to our reportable segments; and (iii) certain investments in new
business opportunities, including activities and investments
associated with Radian Mortgage Capital, and other immaterial
activities.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 5 of 6)
Supplemental Other Operating
Expense Information by Segment
Mortgage
2022
2021
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Other operating expenses by type
Salaries and other base employee
expenses
$
23,824
$
24,420
$
22,189
$
23,610
$
22,685
Variable and share-based incentive
compensation
10,186
11,524
16,697
12,649
17,143
Other general operating expenses
26,116
25,611
25,027
25,290
25,639
Ceding commissions
(4,273
)
(2,844
)
(3,949
)
(4,879
)
(5,638
)
Total
$
55,853
$
58,711
$
59,964
$
56,670
$
59,829
homegenius
2022
2021
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Other operating expenses by type
Salaries and other base employee
expenses
$
14,079
$
12,187
$
10,375
$
7,993
$
6,975
Variable and share-based incentive
compensation
3,753
4,776
5,522
4,678
6,238
Other general operating expenses
12,158
10,162
8,571
7,851
7,982
Title agent commissions
1,850
1,799
1,099
1,323
2,267
Total
$
31,840
$
28,924
$
25,567
$
21,845
$
23,462
All Other
2022
2021
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Other operating expenses by type
Salaries and other base employee
expenses
$
753
$
1,726
$
1,613
$
1,001
$
1,158
Variable and share-based incentive
compensation
1,427
709
953
874
1,144
Other general operating expenses
1,635
1,023
982
920
699
Total
$
3,815
$
3,458
$
3,548
$
2,795
$
3,001
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 6 of 6)
Inter-segment
2022
2021
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Other operating expenses by type
Other general operating expenses
$
(165
)
$
(33
)
$
(40
)
$
(46
)
$
(57
)
Total
$
(165
)
$
(33
)
$
(40
)
$
(46
)
$
(57
)
Total
2022
2021
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Other operating expenses by type
Salaries and other base employee
expenses
$
38,656
$
38,333
$
34,177
$
32,604
$
30,818
Variable and share-based incentive
compensation
15,366
17,009
23,172
18,201
24,525
Other general operating expenses
39,744
36,763
34,540
34,015
34,263
Ceding commissions
(4,273
)
(2,844
)
(3,949
)
(4,879
)
(5,638
)
Title agent commissions
1,850
1,799
1,099
1,323
2,267
Total
$
91,343
$
91,060
$
89,039
$
81,264
$
86,235
Radian Group Inc. and Subsidiaries Definition of
Consolidated Non-GAAP Financial Measures Exhibit F (page 1
of 2) Use of Non-GAAP Financial Measures
In addition to the traditional GAAP financial measures, we have
presented “adjusted pretax operating income (loss),” “adjusted
diluted net operating income (loss) per share” and “adjusted net
operating return on equity,” which are non-GAAP financial measures
for the consolidated company, among our key performance indicators
to evaluate our fundamental financial performance. These non-GAAP
financial measures align with the way the Company’s business
performance is evaluated by both management and the board of
directors. These measures have been established in order to
increase transparency for the purposes of evaluating our operating
trends and enabling more meaningful comparisons with our peers.
Although on a consolidated basis “adjusted pretax operating income
(loss),” “adjusted diluted net operating income (loss) per share”
and “adjusted net operating return on equity” are non-GAAP
financial measures, we believe these measures aid in understanding
the underlying performance of our operations. Our senior
management, including our Chief Executive Officer (Radian’s chief
operating decision maker), uses adjusted pretax operating income
(loss) as our primary measure to evaluate the fundamental financial
performance of the Company’s business segments and to allocate
resources to the segments.
Adjusted pretax operating income (loss) is defined as GAAP
consolidated pretax income (loss) excluding the effects of: (i) net
gains (losses) on investments and other financial instruments,
except for certain investments attributable to our reportable
segments; (ii) gains (losses) on extinguishment of debt; (iii)
amortization and impairment of goodwill and other acquired
intangible assets; and (iv) impairment of other long-lived assets
and other non-operating items, such as impairment of internal-use
software, gains (losses) from the sale of lines of business and
acquisition-related income and expenses. Adjusted diluted net
operating income (loss) per share is calculated by dividing (i)
adjusted pretax operating income (loss) attributable to common
stockholders, net of taxes computed using the company’s statutory
tax rate, by (ii) the sum of the weighted average number of common
shares outstanding and all dilutive potential common shares
outstanding. Adjusted net operating return on equity is calculated
by dividing annualized adjusted pretax operating income (loss), net
of taxes computed using the company’s statutory tax rate, by
average stockholders’ equity, based on the average of the beginning
and ending balances for each period presented.
Although adjusted pretax operating income (loss) excludes
certain items that have occurred in the past and are expected to
occur in the future, the excluded items represent those that are:
(i) not viewed as part of the operating performance of our primary
activities or (ii) not expected to result in an economic impact
equal to the amount reflected in pretax income (loss). These
adjustments, along with the reasons for their treatment, are
described below.
(1)
Net gains (losses) on investments and
other financial instruments. The recognition of realized
investment gains or losses can vary significantly across periods as
the activity is highly discretionary based on the timing of
individual securities sales due to such factors as market
opportunities, our tax and capital profile and overall market
cycles. Unrealized gains and losses arise primarily from changes in
the market value of our investments that are classified as trading
or equity securities. These valuation adjustments may not
necessarily result in realized economic gains or losses.
Trends in the profitability of our
fundamental operating activities can be more clearly identified
without the fluctuations of these realized and unrealized gains or
losses and changes in fair value of other financial instruments.
Except for certain investments attributable to our reportable
segments, we do not view them to be indicative of our fundamental
operating activities.
(2)
Loss on extinguishment of debt.
Gains or losses on early extinguishment of debt and losses incurred
to purchase our debt prior to maturity are discretionary activities
that are undertaken in order to take advantage of market
opportunities to strengthen our financial and capital positions;
therefore, we do not view these activities as part of our operating
performance. Such transactions do not reflect expected future
operations and do not provide meaningful insight regarding our
current or past operating trends.
(3)
Amortization and impairment of goodwill
and other acquired intangible assets. Amortization of acquired
intangible assets represents the periodic expense required to
amortize the cost of acquired intangible assets over their
estimated useful lives. Acquired intangible assets are also
periodically reviewed for potential impairment, and impairment
adjustments are made whenever appropriate. We do not view these
charges as part of the operating performance of our primary
activities.
(4)
Impairment of other long-lived assets
and other non-operating items. Includes activities that we do
not view to be indicative of our fundamental operating activities,
such as: (i) impairment of internal-use software and other
long-lived assets; (ii) gains (losses) from the sale of lines of
business; and (iii) acquisition-related income and expenses.
Radian Group Inc. and Subsidiaries Definition of
Consolidated Non-GAAP Financial Measures Exhibit F (page 2
of 2)
In addition to the above non-GAAP measures for the consolidated
company, we also have presented as supplemental information
non-GAAP measures for our homegenius segment of adjusted pretax
operating income (loss) before allocated corporate operating
expenses and adjusted gross profit. Adjusted pretax operating
income (loss) before allocated corporate operating expenses is
calculated as adjusted pretax operating income (loss) as described
above (which is the segment's ASC 280 GAAP measure of operating
performance), adjusted to remove the impact of corporate
allocations of other operating expenses for the homegenius segment.
Adjusted gross profit is further adjusted to remove other operating
expenses. In addition, homegenius adjusted pretax operating margin
before allocated corporate operating expenses and adjusted gross
profit margin are calculated by dividing homegenius adjusted pretax
operating margin before allocated corporate operating expenses and
adjusted gross profit, respectively, by GAAP total revenue for the
homegenius segment. For the homegenius segment, adjusted pretax
operating income (loss) before allocated corporate operating
expenses, adjusted gross profit, and the related profit margins are
used to facilitate comparisons with other services companies, since
they are widely accepted measures of performance in the services
industry and are used internally as supplemental measures to
evaluate the performance of our homegenius segment.
See Exhibit G for the reconciliation of the most comparable GAAP
measures, consolidated pretax income (loss), diluted net income
(loss) per share and return on equity to our non-GAAP financial
measures for the consolidated company, adjusted pretax operating
income (loss), adjusted diluted net operating income (loss) per
share and adjusted net operating return on equity, respectively.
Exhibit G also contains the reconciliation of adjusted pretax
operating income (loss) to adjusted pretax operating income (loss)
before allocated corporate operating expenses and adjusted gross
profit for the homegenius segment.
Total adjusted pretax operating income (loss), adjusted diluted
net operating income (loss) per share, adjusted net operating
return on equity, homegenius adjusted pretax operating income
(loss) before allocated corporate operating expenses and homegenius
adjusted gross profit should not be considered in isolation or
viewed as substitutes for GAAP pretax income (loss), diluted net
income (loss) per share, return on equity or net income (loss), or
in the case of the homegenius non-GAAP measures, for homegenius
adjusted pretax operating income (loss). Our definitions of
adjusted pretax operating income (loss), adjusted diluted net
operating income (loss) per share, adjusted net operating return on
equity and homegenius adjusted pretax operating income (loss)
before allocated corporate operating expenses, homegenius adjusted
gross profit, homegenius adjusted pretax operating margin before
allocated corporate operating expenses or homegenius adjusted gross
profit margin may not be comparable to similarly-named measures
reported by other companies.
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit G (page 1 of 3)
Reconciliation of Consolidated
Pretax Income to Adjusted Pretax Operating Income
2022
2021
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Consolidated pretax income
$
255,461
$
259,880
$
234,140
$
246,506
$
161,641
Less reconciling income (expense)
items
Net gains (losses) on investments and
other financial instruments (1)
(16,252
)
(41,869
)
(29,457
)
1,516
2,098
Amortization of other acquired intangible
assets
(1,023
)
(849
)
(849
)
(863
)
(862
)
Impairment of other long-lived assets and
other non-operating items (2)
16
565
(502
)
788
(244
)
Total adjusted pretax operating income
(3)
$
272,720
$
302,033
$
264,948
$
245,065
$
160,649
(1)
For the fourth quarter of 2021, excludes
$1.5 million in net gains on investments attributable to our
homegenius segment and included in adjusted pretax operating income
(loss) for that reportable segment.
(2)
The amounts for all the periods presented
are included in other operating expenses on the Condensed
Consolidated Statement of Operations in Exhibit A and primarily
relate to impairments of other long-lived assets.
(3)
Total adjusted pretax operating income
consists of adjusted pretax operating income (loss) for each
reportable segment and All Other activities as follows.
2022
2021
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Adjusted pretax operating income
(loss)
Mortgage segment
$
295,675
$
316,520
$
277,841
$
246,574
$
165,220
homegenius segment
(25,536
)
(17,690
)
(13,506
)
(2,116
)
(5,557
)
All Other activities
2,581
3,203
613
607
986
Total adjusted pretax operating income
$
272,720
$
302,033
$
264,948
$
245,065
$
160,649
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit G (page 2 of 3)
Reconciliation of Diluted Net
Income Per Share to Adjusted Diluted Net Operating Income Per
Share
2022
2021
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Diluted net income per share
$
1.20
$
1.15
$
1.01
$
1.07
$
0.67
Less per-share impact of reconciling
income (expense) items
Net gains (losses) on investments and
other financial instruments
(0.10
)
(0.24
)
(0.16
)
0.01
0.01
Amortization of other acquired intangible
assets
(0.01
)
—
(0.01
)
—
—
Income tax (provision) benefit on
reconciling income (expense) items (1)
0.02
0.05
0.03
—
—
Difference between statutory and effective
tax rates
(0.02
)
(0.02
)
(0.02
)
(0.01
)
(0.01
)
Per-share impact of reconciling income
(expense) items
(0.11
)
(0.21
)
(0.16
)
—
—
Adjusted diluted net operating income per
share (1)
$
1.31
$
1.36
$
1.17
$
1.07
$
0.67
(1)
Calculated using the company’s federal
statutory tax rate of 21%. Any permanent tax adjustments and state
income taxes on these items have been deemed immaterial and are not
included.
Reconciliation of Return on
Equity to Adjusted Net Operating Return on Equity (1)
2022
2021
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Return on equity (1)
20.7
%
19.9
%
17.2
%
18.2
%
11.8
%
Less impact of reconciling income
(expense) items (2)
Net gains (losses) on investments and
other financial instruments
(1.7
)
(4.1
)
(2.8
)
0.1
0.2
Amortization of other acquired intangible
assets
(0.1
)
(0.1
)
(0.1
)
(0.1
)
(0.1
)
Impairment of other long-lived assets and
other non-operating items
—
0.1
—
0.1
—
Income tax (provision) benefit on
reconciling income (expense) items (3)
0.4
0.9
0.6
—
—
Difference between statutory and effective
tax rates
(0.4
)
(0.5
)
(0.4
)
(0.1
)
(0.1
)
Impact of reconciling income (expense)
items
(1.8
)
(3.7
)
(2.7
)
—
—
Adjusted net operating return on equity
(3)
22.5
%
23.6
%
19.9
%
18.2
%
11.8
%
(1)
Calculated by dividing annualized net
income (loss) by average stockholders’ equity, based on the average
of the beginning and ending balances for each period presented.
(2)
Annualized, as a percentage of average
stockholders’ equity.
(3)
Calculated using the company’s federal
statutory tax rate of 21%. Any permanent tax adjustments and state
income taxes on these items have been deemed immaterial and are not
included.
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit G (page 3 of 3)
Reconciliation of homegenius
Adjusted Pretax Operating Income (Loss) to homegenius Adjusted
Gross Profit
2022
2021
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
homegenius adjusted pretax operating
income (loss)
$
(25,536
)
$
(17,690
)
$
(13,506
)
$
(2,116
)
$
(5,557
)
Less reconciling income (expense)
items
Allocation of corporate operating
expenses
(5,555
)
(5,719
)
(5,280
)
(4,847
)
(4,918
)
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
(19,981
)
(11,971
)
(8,226
)
2,731
(639
)
Less reconciling income (expense)
items
Other operating expenses before allocated
corporate operating expenses
(26,285
)
(23,205
)
(20,287
)
(16,998
)
(18,544
)
homegenius adjusted gross profit
$
6,304
$
11,234
$
12,061
$
19,729
$
17,905
On a consolidated basis, “adjusted pretax operating income
(loss),” “adjusted diluted net operating income (loss) per share”
and “adjusted net operating return on equity” are measures not
determined in accordance with GAAP. In addition, “homegenius
adjusted pretax operating income (loss) before allocated corporate
operating expenses","homegenius adjusted gross profit," “homegenius
adjusted pretax operating margin before allocated corporate
operating expenses” and “homegenius adjusted pretax operating
margin" are also non-GAAP measures. These measures should not be
considered in isolation or viewed as substitutes for GAAP pretax
income (loss), diluted net income (loss) per share, return on
equity or net income (loss), or in the case of the homegenius
non-GAAP measures, for homegenius adjusted pretax operating income
(loss).
Our definitions of adjusted pretax operating income (loss),
adjusted diluted net operating income (loss) per share, adjusted
net operating return on equity, homegenius adjusted pretax
operating income (loss) before allocated corporate operating
expenses, homegenius adjusted gross profit, homegenius adjusted
pretax operating margin before allocated corporate operating
expenses or homegenius adjusted gross profit margin may not be
comparable to similarly-named measures reported by other companies.
See Exhibit F for additional information on our consolidated
non-GAAP financial measures.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information - New
Insurance Written
Exhibit H
2022
2021
($ in millions)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
New insurance written ("NIW")
$
17,616
$
18,935
$
18,655
$
23,710
$
26,558
Total borrower-paid NIW
99.1
%
99.2
%
99.2
%
99.4
%
99.2
%
NIW by premium type
Direct monthly and other recurring
premiums
95.5
%
95.4
%
94.5
%
93.5
%
93.8
%
Borrower-paid
4.3
4.4
5.3
6.3
6.0
Lender-paid
0.2
0.2
0.2
0.2
0.2
Direct single premiums
4.5
4.6
5.5
6.5
6.2
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
NIW for purchases
98.4
%
97.1
%
91.4
%
91.1
%
89.8
%
NIW for refinances
1.6
%
2.9
%
8.6
%
8.9
%
10.2
%
NIW by FICO score (1)
>=740
63.3
%
59.6
%
57.1
%
53.8
%
56.0
%
680-739
28.5
32.3
35.7
36.9
34.9
620-679
8.2
8.1
7.2
9.3
9.1
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
NIW by LTV
95.01% and above
18.3
%
17.7
%
14.6
%
16.3
%
12.1
%
90.01% to 95.00%
37.1
39.9
42.0
41.9
46.7
85.01% to 90.00%
28.0
26.7
29.4
28.4
26.5
85.00% and below
16.6
15.7
14.0
13.4
14.7
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
(1)
For loans with multiple borrowers, the
percentage of NIW by FICO score represents the lowest of the
borrowers’ FICO scores.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Primary Insurance in Force and Risk in Force
Exhibit I
September 30,
June 30
March 31,
December 31,
September 30,
($ in millions)
2022
2022
2022
2021
2021
Primary insurance in force
$
259,121
$
254,226
$
248,951
$
245,972
$
241,575
Primary risk in force ("RIF")
$
65,288
$
63,770
$
62,036
$
60,913
$
59,421
Primary RIF by premium type
Direct monthly and other
recurring premiums
86.4
%
85.6
%
84.9
%
83.9
%
82.7
%
Direct single premiums (1)
13.6
%
14.4
%
15.1
%
16.1
%
17.3
%
Primary RIF by FICO score (2)
>=740
57.5
%
57.2
%
56.9
%
56.9
%
57.3
%
680-739
34.5
34.9
35.1
35.0
34.8
620-679
7.6
7.5
7.5
7.6
7.4
<=619
0.4
0.4
0.5
0.5
0.5
Total Primary
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Primary RIF by LTV
95.01% and above
16.8
%
16.1
%
15.5
%
15.1
%
14.6
%
90.01% to 95.00%
48.4
48.7
48.9
48.9
48.9
85.01% to 90.00%
27.2
27.4
27.6
27.7
27.8
85.00% and below
7.6
7.8
8.0
8.3
8.7
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Primary RIF by policy year
2008 and prior
3.7
%
4.0
%
4.3
%
4.7
%
5.2
%
2009 - 2016
7.4
8.3
9.3
10.8
12.5
2017
3.5
3.9
4.3
4.9
5.7
2018
3.7
4.1
4.6
5.2
6.1
2019
7.1
7.7
8.6
9.7
11.4
2020
23.0
25.0
27.2
29.2
32.1
2021
30.6
32.1
34.0
35.5
27.0
2022
21.0
14.9
7.7
—
—
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Persistency Rate (12 months
ended)
75.9
%
71.7
%
68.0
%
64.3
%
60.8
%
Persistency Rate (quarterly,
annualized) (3)
81.6
%
(4)
79.8
%
76.9
%
(4)
71.7
%
67.5
%
(1)
Borrower-paid Single Premium Policies were
7.9%, 8.1%, 8.4%, 8.5% and 8.8% of primary RIF for the periods
indicated, respectively.
(2)
For loans with multiple borrowers, the
percentage of primary RIF by FICO score represents the lowest of
the borrowers’ FICO scores.
(3)
The Persistency Rate on a quarterly,
annualized basis is calculated based on loan-level detail for the
quarter ending as of the date shown. It may be impacted by
seasonality or other factors, including the level of refinance
activity during the applicable periods and may not be indicative of
full-year trends.
(4)
The Persistency Rate was reduced by an
increase in cancellations of Single Premium Policies due to
increased cancellations identified by our ongoing servicer
monitoring process for Single Premium Policies.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Claims and Reserves, Default Statistics
Exhibit J
2022
2021
($ in thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net claims paid (1)
Primary claims paid
$
3,606
$
3,659
$
5,153
$
4,300
$
5,330
Pool and other
(420
)
(396
)
(415
)
(462
)
991
Subtotal
3,186
3,263
4,738
3,838
6,321
Impact of commutations and settlements
(2)
1,317
—
—
6,549
3,915
Total net claims paid
$
4,503
$
3,263
$
4,738
$
10,387
$
10,236
Total average net primary claims paid (1)
(3)
$
45.1
$
41.6
$
41.6
$
47.8
$
42.0
Average direct primary claims paid (3)
(4)
$
45.2
$
41.9
$
42.1
$
49.1
$
43.2
(1)
Includes the impact of reinsurance
recoveries and LAE.
(2)
Includes payments to commute mortgage
insurance coverage on certain performing and non-performing
loans.
(3)
Calculated without giving effect to the
impact of commutations and settlements.
(4)
Before reinsurance recoveries.
September 30,
June 30,
March 31,
December 31,
September 30,
($ in thousands, except per default
amounts)
2022
2022
2022
2021
2021
Reserve for losses by category (1)
Mortgage reserves
Primary case reserves
$
454,726
$
562,436
$
691,090
$
790,380
$
851,151
LAE
11,443
14,147
17,367
19,859
21,400
IBNR
2,229
2,424
2,539
2,886
3,788
Total primary reserves
468,398
579,007
710,996
813,125
876,339
Total pool reserves
9,175
9,756
10,330
9,826
11,413
Total 1st lien reserves
477,573
588,763
721,326
822,951
887,752
Other
174
184
184
185
269
Total Mortgage reserves
477,747
588,947
721,510
823,136
888,021
homegenius reserves
5,917
5,861
5,737
5,506
5,134
Total reserves
$
483,664
$
594,808
$
727,247
$
828,642
$
893,155
Primary reserve per primary default
excluding IBNR and other
$
22,122
$
26,380
$
27,776
$
27,884
$
25,822
(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.
September 30,
June 30,
March 31,
December 31,
September 30,
2022
2022
2022
2021
2021
Default Statistics
Primary Insurance
Number of insured loans
1,004,305
998,520
994,721
999,203
998,408
Number of loans in default
21,077
21,861
25,510
29,061
33,795
Percentage of loans in default
2.10
%
2.19
%
2.56
%
2.91
%
3.38
%
Radian Group Inc. and Subsidiaries
Mortgage Supplemental Information -
Reinsurance Programs
Exhibit K
2022
2021
($ in thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
2022 and 2012 QSR Agreements (1)
Ceded premiums written (2)
$
10,363
$
253
$
306
$
381
$
491
% of premiums written
4.2
%
0.1
%
0.1
%
0.1
%
0.2
%
Ceded premiums earned
$
4,036
$
360
$
491
$
584
$
753
% of premiums earned
1.5
%
0.1
%
0.2
%
0.2
%
0.3
%
Ceding commissions written
$
1,359
$
80
$
96
$
119
$
152
Ceding commissions earned (3)
$
1,609
$
127
$
537
$
582
$
492
Profit commission
$
4,008
$
—
$
—
$
—
$
—
Ceded losses
$
(235
)
$
(917
)
$
(720
)
$
(358
)
$
(170
)
Single Premium QSR Program
Ceded premiums written (2)
$
(19,303
)
$
(21,806
)
$
(22,386
)
$
(8,051
)
$
(1,795
)
% of premiums written
(7.7
)%
(8.6
)%
(8.9
)%
(3.1
)%
(0.7
)%
Ceded premiums earned
$
(3,465
)
$
(8,297
)
$
(3,731
)
$
2,532
$
12,752
% of premiums earned
(1.3
)%
(3.1
)%
(1.4
)%
0.9
%
4.6
%
Ceding commissions written
$
(6,400
)
$
(6,664
)
$
(9,250
)
$
(8,351
)
$
(8,013
)
Ceding commissions earned (3)
$
3,153
$
3,287
$
4,586
$
5,706
$
6,595
Profit commission
$
16,074
$
21,447
$
22,075
$
20,290
$
13,630
Ceded losses
$
(9,049
)
$
(14,120
)
$
(11,868
)
$
(7,582
)
$
1,053
Excess-of-Loss Program
Ceded premiums written
$
18,114
$
18,151
$
16,164
$
20,508
$
15,434
% of premiums written
7.3
%
7.2
%
6.4
%
7.9
%
6.1
%
Ceded premiums earned
$
22,184
$
19,292
$
17,588
$
17,817
$
16,581
% of premiums earned
8.4
%
7.3
%
6.5
%
6.3
%
5.9
%
Ceded RIF (4)
Single Premium QSR Program
$
4,273,500
$
4,665,020
$
4,855,228
$
5,228,037
$
5,439,056
Excess-of-Loss Program
1,940,126
2,076,121
2,199,919
2,295,954
1,873,426
2022 QSR Agreement
2,710,247
—
—
—
—
2012 QSR Agreements
160,106
175,046
186,930
207,106
232,539
Total Ceded RIF
$
9,083,979
$
6,916,187
$
7,242,077
$
7,731,097
$
7,545,021
PMIERs impact - reduction in Minimum
Required Assets
Excess-of-Loss Program
$
732,895
$
785,705
$
881,917
$
995,171
$
659,151
Single Premium QSR Program
243,911
268,847
286,706
314,183
328,339
2022 QSR Agreement
189,408
—
—
—
—
2012 QSR Agreements
9,310
10,226
11,214
12,541
14,116
Total PMIERs impact
$
1,175,524
$
1,064,778
$
1,179,837
$
1,321,895
$
1,001,606
(1)
Beginning with the third quarter of 2022,
includes the impact of the 2022 QSR Agreement.
(2)
Net of profit commission.
(3)
Includes amounts reported in policy
acquisition costs and other operating expenses. See Exhibit E for
details.
(4)
Included in primary RIF.
FORWARD-LOOKING STATEMENTS
All statements in this press release that address events,
developments or results that we expect or anticipate may occur in
the future are “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934 and the U.S. Private Securities
Litigation Reform Act of 1995. In most cases, forward-looking
statements may be identified by words such as “anticipate,” “may,”
“will,” “could,” “should,” “would,” “expect,” “intend,” “plan,”
“goal,” “contemplate,” “believe,” “estimate,” “predict,” “project,”
“potential,” “continue,” “seek,” “strategy,” “future,” “likely” or
the negative or other variations on these words and other similar
expressions. These statements, which may include, without
limitation, projections regarding our future performance and
financial condition, are made on the basis of management’s current
views and assumptions with respect to future events. These
statements speak only as of the date they were made, and we
undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. We operate in a changing environment where new risks
emerge from time to time and it is not possible for us to predict
all risks that may affect us. The forward-looking statements are
not guarantees of future performance, and the forward-looking
statements, as well as our prospects as a whole, are subject to
risks and uncertainties that could cause actual results to differ
materially from those set forth in the forward-looking statements.
These risks and uncertainties include, without limitation:
- the health of the U.S. housing market generally and changes in
economic conditions that impact the size of the insurable mortgage
market, the credit performance of our insured mortgage portfolio
and our business prospects, including more recently, changes
resulting from inflationary pressures, the rising interest rate
environment and the risk of a recession and higher unemployment
rates, as well as other macroeconomic stresses such as those that
may arise from the Russia-Ukraine conflict or other geopolitical
events or as a result of the COVID-19 pandemic;
- changes in the way customers, investors, ratings agencies,
regulators or legislators perceive our performance, financial
strength and future prospects;
- Radian Guaranty Inc.’s (“Radian Guaranty”) ability to remain
eligible under the Private Mortgage Insurer Eligibility
Requirements (the “PMIERs”) and other applicable requirements
imposed by the Federal Housing Finance Agency and by Fannie Mae and
Freddie Mac (collectively, the “GSEs”) to insure loans purchased by
the GSEs;
- our ability to maintain an adequate level of capital in our
insurance subsidiaries to satisfy current and future regulatory
requirements;
- changes in the charters or business practices of, or rules or
regulations imposed by or applicable to, the GSEs or loans
purchased by the GSEs, which may include changes in furtherance of
housing policy objectives such as the accessibility and
affordability of homeownership for low-and moderate-income
borrowers and underrepresented communities, or changes in the
requirements for Radian Guaranty to remain an approved insurer to
the GSEs, such as changes in the PMIERs or the GSEs’ interpretation
and application of the PMIERs or other applicable
requirements;
- the effects of the Enterprise Capital Framework, which
establishes a new regulatory capital framework for the GSEs, and
which, as finalized, increases the capital requirements for the
GSEs, and among other things, could impact the GSEs' operations and
pricing as well as the size of the insurable mortgage market, and
which may form the basis for future changes to the PMIERs;
- changes in the current housing finance system in the United
States, including the roles of the Federal Housing Administration
(the "FHA"), the GSEs and private mortgage insurers in this
system;
- our ability to successfully execute and implement our capital
plans, including our risk distribution strategy through the capital
markets and traditional reinsurance markets, and to maintain
sufficient holding company liquidity to meet our liquidity
needs;
- our ability to successfully execute and implement our business
plans and strategies, including plans and strategies that may
require GSE and/or regulatory approvals and licenses, that are
subject to complex compliance requirements that we may be unable to
satisfy, or that may expose us to new risks, including those that
could impact our capital and liquidity positions;
- uncertainty from the discontinuance of LIBOR and transition to
one or more alternative benchmarks that could cause interest rate
volatility and, among other things, impact our investment
portfolio, cost of debt and cost of reinsurance through mortgage
insurance-linked notes transactions;
- risks related to the quality of third-party mortgage
underwriting and mortgage servicing;
- a decrease in the “Persistency Rates” (the percentage of
insurance in force that remains in force over a period of time) of
our mortgage insurance on monthly premium products;
- competition in the private mortgage insurance industry
generally, and more specifically: price competition in our mortgage
insurance business, including the prevalence of formulaic, granular
risk-based pricing methodologies that are less transparent than
historical rate-card-based pricing practices; and competition from
the FHA and the U.S. Department of Veterans Affairs as well as from
other forms of credit enhancement, such as GSE-sponsored
alternatives to traditional mortgage insurance;
- U.S. political conditions and legislative and regulatory
activity (or inactivity), including the adoption of (or failure to
adopt) new laws and regulations, or changes in existing laws and
regulations, or the way they are interpreted or applied;
- legal and regulatory claims, assertions, actions, reviews,
audits, inquiries and investigations that could result in adverse
judgments, settlements, fines, injunctions, restitutions or other
relief that could require significant expenditures, new or
increased reserves or have other effects on our business;
- the amount and timing of potential payments or adjustments
associated with federal or other tax examinations;
- the possibility that we may fail to estimate accurately,
especially in the event of an extended economic downturn or a
period of extreme market volatility and economic uncertainty, the
likelihood, magnitude and timing of losses in establishing loss
reserves for our mortgage insurance business or to accurately
calculate and/or project our Available Assets and Minimum Required
Assets under the PMIERs, which will be impacted by, among other
things, the size and mix of our insurance in force, the level of
defaults in our portfolio, the reported status of defaults in our
portfolio, (including whether they are subject to mortgage
forbearance, a repayment plan or a loan modification trial period),
the level of cash flow generated by our insurance operations and
our risk distribution strategies;
- volatility in our financial results caused by changes in the
fair value of our assets and liabilities, including with respect to
our use of derivatives and within our investment portfolio;
- changes in “GAAP” (accounting principles generally accepted in
the U.S.) or “SAPP” (statutory accounting principles and practices
including those required or permitted, if applicable, by the
insurance departments of the respective states of domicile of our
insurance subsidiaries) rules and guidance, or their
interpretation;
- risks associated with investments to grow our existing
businesses, or to pursue new lines of business or new products and
services, including our ability and related costs to develop,
launch and implement new and innovative technologies and digital
products and services, whether these products and services will
receive broad customer acceptance or will disrupt existing customer
relations, and additional financial risks related to these
investments, including required changes in our investment,
financing and hedging strategies, risks associated with our
increased use of financial leverage, which could expose us to
liquidity risks resulting from changes in the fair values of
assets, and the risk that we may fail to achieve forecasted results
which could result in lower or negative earnings contribution
and/or impairment charges associated with intangible assets;
- the effectiveness and security of our information technology
systems and digital products and services, including the risk that
these systems, products or services fail to operate as expected or
planned or expose us to cybersecurity or third-party risks,
including due to malware, unauthorized access, cyber-attack,
ransomware or other similar events;
- our ability to attract and retain key employees; and
- legal and other limitations on amounts we may receive from our
subsidiaries, including dividends or ordinary course distributions
under our internal tax- and expense-sharing arrangements.
For more information regarding these risks and uncertainties as
well as certain additional risks that we face, you should refer to
“Item 1A. Risk Factors” in our Annual Report on Form 10-K for the
year ended December 31, 2021, and to subsequent reports and
registration statements filed from time to time with the U.S.
Securities and Exchange Commission. We caution you not to place
undue reliance on these forward-looking statements, which are
current only as of the date on which we issued this press release.
We do not intend to, and we disclaim any duty or obligation to,
update or revise any forward-looking statements to reflect new
information or future events or for any other reason.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221027006177/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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