-- Net income of $76 million or $0.34 per
diluted share –
-- Adjusted diluted net operating income per
share of $0.37 –
-- New MI business written grows 25%; MI in
force increases 6% year-over-year –
-- Book value per share increases 9%
year-over-year to $13.58 –
Radian Group Inc. (NYSE: RDN) today reported net income for the
quarter ended March 31, 2017, of $76.5 million, or $0.34 per
diluted share. This compares to net income for the quarter ended
March 31, 2016, of $66.2 million, or $0.29 per diluted share.
Consolidated pretax income for the quarter ended March 31, 2017,
was $114.7 million, which compares to consolidated pretax income of
$102.4 million for the quarter ended March 31, 2016.
Book value per share at March 31, 2017, was $13.58, compared to
$13.39 at December 31, 2016, and an increase of 9 percent from
$12.42 at March 31, 2016.
Key Financial Highlights (dollars in millions, except per
share data)
Quarter EndedMarch 31, 2017
Quarter EndedMarch 31, 2016
PercentChange
Net income $76.5 $66.2 16 % Diluted net income
per share $0.34 $0.29 17 % Pretax income
$114.7 $102.4 12 % Adjusted pretax operating
income $125.3 $130.2 (4 %) Adjusted diluted
net operating
income per share *
$0.37 $0.37 -- Net premiums earned –
insurance $221.8 $221.0 -- New Mortgage
Insurance Written (NIW) $10,055 $8,071 25 %
Mortgage insurance in force 185.9 175.4 6 %
Book value per share $13.58 $12.42 9 %
* Adjusted diluted net operating income per share is calculated
using the company’s statutory tax rate of 35 percent.
Adjusted pretax operating income for the quarter ended March 31,
2017, was $125.3 million, compared to $130.2 million for the
quarter ended March 31, 2016. Adjusted diluted net operating income
per share for the quarter ended March 31, 2017, was $0.37, flat to
$0.37 for the quarter ended March 31, 2016. See “Non-GAAP Financial
Measures” below as well as Exhibits F and G for additional details
regarding these adjusted measures.
“I am pleased to report strong first quarter results for Radian,
including year over year growth in net income, book value and new
MI business written,” said Radian’s Chief Executive Officer Rick
Thornberry. “As persistency rises, we expect our large,
high-quality MI in-force portfolio to grow and generate future
premium revenue. This is the primary driver of future earnings for
Radian.”
Thornberry added, “After nearly two months with Radian as CEO,
my excitement about the prospects ahead continues to grow. I
decided to join the company based on the excellent businesses,
great team, diversified set of products and services, high quality
portfolio, and the institutional commitment to serve customers.
Those qualities, along with a strong capital base, solid
profitability and excellent market opportunity, are a winning
combination.”
FIRST QUARTER HIGHLIGHTS
Mortgage Insurance
- New mortgage insurance written (NIW)
was $10.1 billion for the quarter, compared to $13.9 billion in the
fourth quarter of 2016 and $8.1 billion in the prior-year quarter.
- For the first quarter of 2017, NIW grew
25 percent compared to the first quarter of 2016.
- Of the $10.1 billion in new business
written in the first quarter of 2017, 25 percent was written with
single premiums. Net single premiums written, after consideration
of the 35 percent ceded under the Single Premium Quota Share
Reinsurance Transaction, was 16 percent in the first quarter of
2017.
- Refinances accounted for 16 percent of
total NIW in the first quarter of 2017, compared to 27 percent in
the fourth quarter of 2016, and 19 percent a year ago.
- NIW continued to consist of loans with
excellent risk characteristics.
- Total primary mortgage insurance in
force as of March 31, 2017, grew to $185.9 billion, compared to
$183.5 billion as of December 31, 2016, and $175.4 billion as of
March 31, 2016.
- The composition of Radian’s mortgage
insurance portfolio continues to improve, with 89 percent
consisting of new business written after 2008, including those
loans that successfully completed the Home Affordable Refinance
Program (HARP).
- Persistency, which is the percentage of
mortgage insurance that remains in force after a twelve-month
period, was 77.1 percent as of March 31, 2017, compared to 76.7
percent as of December 31, 2016, and 79.4 percent as of March 31,
2016.
- Annualized persistency for the
three-months ended March 31, 2017, was 84.4 percent, compared to
76.8 percent for the three-months ended December 31, 2016, and 82.3
percent for the three-months ended March 31, 2016.
- Total net premiums earned were $221.8
million for the quarter ended March 31, 2017, compared to $233.6
million for the quarter ended December 31, 2016, and $221.0 million
for the quarter ended March 31, 2016.
- Accelerated revenue recognition due to
Single Premium Policy cancellations, which are net of reinsurance,
were $5.9 million in the first quarter, compared to $15.7 million
in the fourth quarter of 2016, and $9.8 million in the first
quarter of 2016.
- Ceded premiums of $14.3 million, $18.2
million and $19.4 million for the quarters ended March 31, 2017,
December 31, 2016, and March 31, 2016, respectively, are net of
accrued profit commission on reinsurance transactions of $5.9
million in the first quarter of 2017, compared to $8.5 million in
the fourth quarter of 2016, and $6.1 million in the first quarter
of 2016.
- The decrease in the level of
refinancing activity in the first quarter contributed to the
decrease in acceleration of premiums related to Single Premium
Policy cancellations as well as the decrease in ceded premiums and
profit commission related to the company’s Single Premium Quota
Share Reinsurance transaction.
- The mortgage insurance provision for
losses was $47.2 million in the first quarter of 2017, compared to
$54.7 million in the fourth quarter of 2016, and $43.3 million in
the prior-year period.
- The provision for losses in the first
quarter included the positive impact of a modest reduction in the
company’s default to claim rate assumption for new notices of
default.
- The loss ratio in the first quarter was
21.3 percent, compared to 23.4 percent in the fourth quarter of
2016 and 19.6 percent in the first quarter of 2016.
- Mortgage insurance loss reserves were
$726.2 million as of March 31, 2017, compared to $760.3 million as
of December 31, 2016, and $891.3 million as of March 31, 2016.
- Primary reserve per primary default
(excluding IBNR and other reserves) was $24,230 as of March 31,
2017. This compares to primary reserve per primary default of
$22,503 as of December 31, 2016, and $24,959 as of March 31,
2016.
- The total number of primary delinquent
loans decreased by 11.4 percent in the first quarter from the
fourth quarter of 2016, and by 16.4 percent from the first quarter
of 2016. The primary mortgage insurance delinquency rate decreased
to 2.8 percent in the first quarter of 2017, compared to 3.2
percent in the fourth quarter of 2016, and 3.5 percent in the first
quarter of 2016.
- Total net mortgage insurance claims
paid were $82.1 million in the first quarter, compared to $116.5
million in the fourth quarter of 2016, and $127.7 million in the
first quarter of 2016. In addition, the company’s pending claim
inventory declined 37 percent from the first quarter of 2016.
Mortgage and Real Estate Services
- The Services segment provides analytics
and outsourced services, including residential loan due diligence
and underwriting, valuations, servicing surveillance, title and
escrow, and consulting services for buyers and sellers of, and
investors in, mortgage- and real estate-related loans and
securities. These services and solutions are provided primarily
through Clayton and its subsidiaries, including Green River
Capital, Red Bell Real Estate and ValuAmerica.
- Total revenues for the first quarter
were $40.1 million, compared to $52.6 million for the fourth
quarter of 2016, and $34.5 million for the first quarter of
2016.
- The adjusted pretax operating loss
before corporate allocations for the quarter ended March 31, 2017,
was $1.2 million, compared to income of $3.6 million for the
quarter ended December 31, 2016, and a loss of $3.8 million for the
quarter ended March 31, 2016.
- Services adjusted earnings before
interest, income taxes, depreciation and amortization (Services
adjusted EBITDA) for the quarter ended March 31, 2017, was a loss
of $0.3 million, compared to income of $4.4 million for the quarter
ended December 31, 2016, and a loss of $3.1 million for the quarter
ended March 31, 2016. Additional details regarding the non-GAAP
measure Services adjusted EBITDA may be found in Exhibits F and
G.
Consolidated Expenses
Other operating expenses were $68.4 million in the first
quarter, compared to $62.4 million in the fourth quarter of 2016,
and $57.2 million in the first quarter of last year.
- Notable increases to items impacting
other operating expenses in the first quarter of 2017 compared to
the first quarter of 2016 include:
- $3.6 million associated with retirement
and consulting agreements entered into in February 2017 with the
company’s former CEO. Additional expenses are expected to be
recognized throughout the year. A portion of both the current and
future expenses are subject to change, based on the company’s and
former CEO’s future performance. Details may be found in the
company’s recent proxy statement.
- $3.7 million related to variable and
incentive-based compensation expenses, including an increase in the
first quarter 2017 for year-end bonus accruals related to the
company’s 2016 performance, compared to a decrease in year-end
bonus accruals in the first quarter of 2016.
- $2.4 million associated with various
items including periodic non-capitalized costs associated with
recently deployed technology systems as well as consulting
services, including those related to the company’s CEO search.
- $1.2 million in expense, driven
primarily by depreciation, related to the company’s investment to
significantly upgrade its technology systems.
Details regarding notable variable items impacting other
operating expenses may be found in Exhibit D.
CAPITAL AND LIQUIDITY UPDATE
- Radian Group maintained approximately
$360 million of available liquidity as of March 31, 2017. The
company initiated a series of capital actions two years ago, in
order to strengthen its capital and liquidity position, improve its
debt maturity profile and reduce the impact of dilution from its
convertible bonds. The combination of these capital actions
decreased the company’s total number of diluted shares outstanding
by 27.1 million from March 31, 2015, to March 31, 2017. During the
same time period, the company’s debt to capital ratio decreased
from 34.6 percent to 25.7 percent. Radian Group has no material
debt maturities prior to June 2019.
- The company’s most recent capital
action was executed in January 2017, in which Radian settled its
obligations with respect to the remaining $68.0 million aggregate
principal amount of its Convertible Senior Notes due 2019. While
the transaction had a negative impact of $0.20 to book value per
share during the first quarter of 2017, it also reduced the
company’s diluted shares by 6.4 million at the time of the
settlement, or approximately 3 percent of diluted shares
outstanding as of December 31, 2016.
CONFERENCE CALL
Radian will discuss first quarter financial results in a
conference call today, Thursday, April 27, 2017, at 10:00 a.m.
Eastern time. The conference call will be broadcast live over the
Internet at http://www.radian.biz/page?name=Webcasts or at
www.radian.biz. The call may also be accessed by dialing
800.230.1096 inside the U.S., or 612.332.0228 for international
callers, using passcode 422045 or by referencing Radian.
A replay of the webcast will be available on the Radian website
approximately two hours after the live broadcast ends for a period
of one year. A replay of the conference call will be available
approximately two and a half hours after the call ends for a period
of two weeks, using the following dial-in numbers and passcode:
800.475.6701 inside the U.S., or 320.365.3844 for international
callers, passcode 422045.
In addition to the information provided in the company's
earnings news release, other statistical and financial information,
which is expected to be referred to during the conference call,
will be available on Radian's website under Investors >Quarterly
Results, or by clicking on
http://www.radian.biz/page?name=QuarterlyResults.
NON-GAAP FINANCIAL MEASURES
Radian believes that adjusted pretax operating income and
adjusted diluted net operating income per share (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 viewed as alternatives to GAAP
measures of performance. The measures described below have been
established in order to increase transparency for the purpose of
evaluating the company’s operating trends and enabling more
meaningful comparisons with Radian’s competitors.
Adjusted pretax operating income is defined as earnings
excluding the impact of certain items that are not viewed as part
of the operating performance of the company’s primary activities,
or not expected to result in an economic impact equal to the amount
reflected in pretax income (loss). Adjusted pretax operating income
adjusts GAAP pretax income to remove the effects of: (i) net gains
(losses) on investments and other financial instruments; (ii) loss
on induced conversion and debt extinguishment; (iii)
acquisition-related expenses; (iv) amortization and impairment of
intangible assets; and (v) net impairment losses recognized in
earnings. Adjusted diluted net operating income per share
represents a diluted net income per share calculation using as its
basis adjusted pretax operating income, net of taxes at the
company’s statutory tax rate for the period.
In addition to the above non-GAAP measures for the consolidated
company, the company also presents as supplemental information a
non-GAAP measure for the Services segment, representing earnings
before interest, income taxes, depreciation and amortization
(EBITDA). Services adjusted EBITDA is calculated by using the
Services segment’s adjusted pretax operating income as described
above, further adjusted to remove the impact of depreciation and
corporate allocations for interest and operating expenses. Services
adjusted EBITDA is presented to facilitate comparisons with other
services companies, since it is a widely accepted measure of
performance in the services industry.
See Exhibit F or Radian’s website for a description of these
items, as well as Exhibit G for reconciliations to the most
comparable consolidated GAAP measures.
ABOUT RADIAN
Radian Group Inc. (NYSE: RDN), headquartered in Philadelphia,
provides private mortgage insurance, risk management products and
real estate services to financial institutions. Radian offers
products and services through two business segments:
- Mortgage Insurance, through its
principal mortgage insurance subsidiary Radian Guaranty Inc. This
private mortgage insurance helps protect lenders from
default-related losses, facilitates the sale of low-downpayment
mortgages in the secondary market and enables homebuyers to
purchase homes more quickly with downpayments less than 20%.
- Mortgage and Real Estate
Services, through its principal services subsidiary Clayton, as
well as Green River Capital, Red Bell Real Estate and ValuAmerica.
These solutions include information and services that financial
institutions, investors and government entities use to evaluate,
acquire, securitize, service and monitor loans and asset-backed
securities.
Additional information may be found at www.radian.biz.
FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS
(Unaudited)
For historical trend information, refer to Radian’s quarterly
financial statistics at
http://www.radian.biz/page?name=FinancialReportsCorporate.
Exhibit A: Condensed Consolidated Statements of Operations
Trend Schedule Exhibit B: Net Income Per Share Trend Schedule
Exhibit C: Condensed Consolidated Balance Sheets Exhibit D: Net
Premiums Earned – Insurance and Other Operating Expenses Exhibit E:
Segment Information Exhibit F: Definition of Consolidated Non-GAAP
Financial Measures Exhibit G: Consolidated Non-GAAP Financial
Measure Reconciliations Exhibit H: Mortgage Insurance Supplemental
Information New Insurance Written Exhibit I: Mortgage Insurance
Supplemental Information Primary Insurance in Force and Risk in
Force Exhibit J: Mortgage Insurance Supplemental Information Claims
and Reserves Exhibit K: Mortgage Insurance Supplemental Information
Default Statistics Exhibit L: Mortgage Insurance Supplemental
Information Captives, QSR and Persistency
Radian
Group Inc. and Subsidiaries Condensed Consolidated
Statements of Operations Trend Schedule (1) Exhibit A
2017 2016
(In thousands,
except per-share amounts)
Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1
Revenues: Net premiums earned - insurance $
221,800 $ 233,585 $ 238,149 $ 229,085 $ 220,950
Services
revenue 38,027 49,905 45,877 40,263 32,849
Net
investment income 31,032 28,996 28,430 28,839 27,201
Net gains (losses) on investments and other financial
instruments (2,851 ) (38,773 ) 7,711 30,527
31,286
Other income 746 736 716
1,454 666
Total revenues 288,754
274,449 320,883 330,168 312,952
Expenses: Provision for losses 46,913 54,287
55,785 49,725 42,991
Policy acquisition costs 6,729
5,579 6,119 5,393 6,389
Cost of services 28,375
33,812 29,447 27,365 23,550
Other operating expenses
68,377 62,416 62,119 63,173 57,188
Interest expense
15,938 17,269 19,783 22,546 21,534
Loss on induced
conversion and debt extinguishment 4,456 — 17,397 2,108
55,570
Amortization and impairment of intangible assets
3,296 3,290 3,292 3,311 3,328
Total expenses 174,084 176,653
193,942 173,621 210,550
Pretax
income 114,670 97,796 126,941 156,547 102,402
Income
tax provision 38,198 36,707 44,138
58,435 36,153
Net income $
76,472 $ 61,089 $ 82,803 $ 98,112
$ 66,249
Diluted net income per share
$ 0.34 $ 0.27 $ 0.37 $ 0.44 $ 0.29
Selected
Mortgage Insurance Key Ratios Loss ratio (1) 21.3
% 23.4 % 23.6 % 21.9 % 19.6 %
Expense ratio (1)
27.1 % 22.7 % 22.7 % 23.6 % 21.8 %
(1)
Calculated on a GAAP basis using 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: 2017 2016
(In thousands,
except per-share amounts)
Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1
Net
income: Net income—basic $ 76,472 $ 61,089
$ 82,803 $ 98,112 $ 66,249
Adjustment for dilutive Convertible
Senior Notes due 2019, net of tax (1) (215 ) 665
848 913 3,390
Net income—diluted
$ 76,257 $ 61,754 $ 83,651 $
99,025 $ 69,639
Average common shares
outstanding—basic 214,925 214,481 214,387 214,274
203,706
Dilutive effect of Convertible Senior Notes due 2017
(2) 701 421 178 12 —
Dilutive effect of Convertible
Senior Notes due 2019 1,854 6,417 8,274 8,928 33,583
Dilutive effect of stock-based compensation arrangements (2)
4,017 3,457 3,129 2,989 2,418
Adjusted average common shares outstanding—diluted
221,497 224,776 225,968 226,203
239,707
Basic net income per share $
0.36 $ 0.28 $ 0.39 $ 0.46 $ 0.33
Diluted net
income per share $ 0.34 $ 0.27 $ 0.37 $ 0.44 $
0.29
(1)
As applicable, includes coupon
interest, amortization of discount and fees, and other changes in
income or loss that would result from the assumed conversion. Due
to the January 2017 settlement of our obligations with respect to
the remaining Convertible Senior Notes due 2019, a benefit was
recorded to adjust estimated accrued expense to actual
amounts.
(2)
The following number of shares of our
common stock equivalents issued under our share-based compensation
arrangements and convertible debt were not included in the
calculation of diluted net income per share because they were
anti-dilutive:
2017 2016
(In
thousands)
Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1
Shares
of Convertible Senior Notes due 2017 — — — — 1,902
Shares of common stock equivalents 445 1,042 1,045
1,042 709
Radian Group
Inc. and Subsidiaries Condensed Consolidated Balance
Sheets Exhibit C March 31, December 31,
September 30, June 30, March 31,
(In thousands,
except per-share data)
2017 2016 2016 2016 2016
Assets:
Investments $ 4,437,716 $ 4,462,430 $
4,565,748 $ 4,636,914 $ 4,470,172
Cash 77,954 52,149
46,356 55,062 64,844
Restricted cash 8,436 9,665
10,312 9,298 10,060
Accounts and notes receivable
73,794 77,631 94,692 77,170 66,340
Deferred income taxes,
net 369,209 411,798 401,442 444,513 518,059
Goodwill
and other intangible assets, net 273,068 276,228 279,400
282,703 286,069
Prepaid reinsurance premium 230,148
229,438 229,754 229,231 228,718
Other assets 357,435
343,835 422,123 332,372 325,129
Total assets $ 5,827,760 $ 5,863,174
$ 6,049,827 $ 6,067,263 $ 5,969,391
Liabilities and stockholders’ equity: Unearned
premiums $ 684,797 $ 681,222 $ 680,973 $ 677,599
$ 673,887
Reserve for losses and loss adjustment expense
726,169 760,269 821,934 848,379 891,348
Long-term
debt 1,008,777 1,069,537 1,067,666 1,278,051 1,286,466
Reinsurance funds withheld 167,427 158,001 177,147
163,360 151,104
Other liabilities 319,282
321,859 413,401 294,507 306,188
Total liabilities 2,906,452 2,990,888
3,161,121 3,261,896 3,308,993
Equity
component of currently redeemable convertible senior notes
883 — — — —
Common stock 233 232 232
232 232
Treasury stock (893,372 ) (893,332 )
(893,197 ) (893,176 ) (893,176 )
Additional paid-in capital
2,743,594 2,779,891 2,778,860 2,781,136 2,773,349
Retained earnings 1,073,333 997,890 937,338 855,070
757,202
Accumulated other comprehensive income (loss)
(3,363 ) (12,395 ) 65,473 62,105 22,791
Total stockholders’ equity 2,920,425
2,872,286 2,888,706 2,805,367 2,660,398
Total liabilities and stockholders’ equity $
5,827,760 $ 5,863,174 $ 6,049,827 $
6,067,263 $ 5,969,391
Shares
outstanding 215,091 214,521 214,405 214,284 214,265
Book value per share $ 13.58 $ 13.39 $
13.47 $ 13.09 $ 12.42
Statutory Capital Ratios
Risk to capital ratio-Radian Guaranty only 14.3
:1
(1)
13.5 :1 13.7 :1 14.0 :1 12.5 :1
Risk to capital ratio-Mortgage
Insurance combined 13.4 :1 (1) 13.6 :1
13.9 :1 14.2 :1 12.9 :1
(1)
Preliminary.
Radian Group Inc. and Subsidiaries Net
Premiums Earned - Insurance and Other Operating Expenses
Exhibit D 2017 2016
(In
thousands)
Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1
Premiums earned - insurance: Direct $
236,062 $ 251,751 $ 258,074 $ 248,938 $ 240,330
Assumed 7 8 9 9 9
Ceded (14,269
) (18,174 ) (19,934 ) (19,862 ) (19,389 )
Net premiums
earned - insurance $ 221,800 $ 233,585
$ 238,149 $ 229,085 $ 220,950
Notable variable items: (1) Single Premium Policy
cancellations, net of reinsurance $ 5,879 $
15,702 $ 18,448 $ 14,841 $ 9,783
Profit commission - reinsurance
(2) 5,888 8,458 8,922 7,891
6,134
Total $ 11,767 $ 24,160
$ 27,370 $ 22,732 $ 15,917
Other operating expenses $ 68,377 $
62,416 $ 62,119 $ 63,173 $ 57,188
Notable variable items: (3) Technology upgrade
project (4) $ 3,512 $ 3,648 $ 2,440 $ 2,443 $
2,271
Severance costs 961 888 1,137 277 3,040
Retirement and consulting agreement (5) 3,622 — — — —
Incentive compensation (6) (7) 7,447 9,072 12,652
14,183 6,235
Ceding commissions (8) (3,864 )
(5,105 ) (5,460 ) (5,006 ) (4,413 )
Total $
11,678 $ 8,503 $ 10,769 $ 11,897
$ 7,133
(1)
Affecting net premiums earned -
insurance. These amounts are included in net premiums earned -
insurance.
(2)
The amounts represent the profit
commission on the Single Premium QSR Transaction.
(3)
Affecting other operating expenses.
These amounts are included in other operating expenses.
(4)
Represents the expense impact of
certain costs incurred in our initiative to significantly upgrade
our technology systems.
(5)
The amount represents expenses
associated with retirement and consulting agreements entered into
in February 2017 with our former CEO. Additional expenses are
expected to be recognized throughout the year. A portion of both
the current and future expenses are subject to change, based on the
Company's and former CEO's future performance.
(6)
The expense relates to short- and
long-term incentive programs.
(7)
Incentive compensation expense is shown
net of deferred policy acquisition costs.
(8)
Ceding commissions are shown net of
deferred policy acquisition costs.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 1 of 2)
Summarized financial information concerning our operating
segments as of and for the periods indicated is as follows. For a
definition of adjusted pretax operating income and Services
adjusted EBITDA, along with reconciliations to consolidated GAAP
measures, see Exhibits F and G.
Mortgage
Insurance 2017 2016
(In
thousands)
Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1
Net premiums written
- insurance $ 224,665 $ 234,172 $ 240,999 $
232,353 $ 26,310
(1)
(Increase) decrease in unearned premiums (2,865
) (587 ) (2,850 ) (3,268 ) 194,640
Net premiums earned - insurance 221,800 233,585
238,149 229,085 220,950
Net investment income 31,032
28,996 28,430 28,839 27,201
Other income 746
736 716 1,454 666
Total 253,578 263,317 267,295
259,378 248,817
Provision for
losses 47,232 54,675 56,151 50,074 43,275
Policy
acquisition costs 6,729 5,579 6,119 5,393 6,389
Other
operating expenses before corporate allocations 39,289
37,773 35,940 34,365
32,546
Total (2) 93,250 98,027
98,210 89,832 82,210
Adjusted
pretax operating income before corporate allocations
160,328 165,290 169,085 169,546 166,607
Allocation of
corporate operating expenses 14,186 9,652 11,911 14,286
9,329
Allocation of interest expense 11,509
12,843 15,360 18,124 17,112
Adjusted pretax operating income $
134,633 $ 142,795 $ 141,814 $ 137,136
$ 140,166
Services
2017 2016
(In
thousands)
Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1
Services revenue
(2) $ 40,089 $ 52,558 $ 48,033
$42,210 $ 34,448
Cost of
services 28,690 34,130 29,655 27,730 23,854
Other
operating expenses before corporate allocations 12,604
14,842 13,575 13,030 14,368
Total 41,294 48,972 43,230
40,760 38,222
Adjusted pretax
operating income (loss) before corporate allocations (3)
(1,205 ) 3,586 4,803 1,450 (3,774 )
Allocation of
corporate operating expenses 3,718 1,738 2,265 2,779
1,751
Allocation of interest expense 4,429
4,426 4,423 4,422 4,422
Adjusted pretax operating income (loss) $
(9,352 ) $ (2,578 ) $ (1,885
)
$(5,751
)
$
(9,947
)
(1)
Net of ceded premiums written under the
Single Premium QSR transaction of $197.6 million.
(2)
Inter-segment information:
2017 2016
Qtr 1
Qtr 4 Qtr 3 Qtr 2 Qtr 1
Inter-segment
expense included in Mortgage Insurance segment $
2,062 $ 2,653 $ 2,156 $ 1,947 $ 1,599
Inter-segment revenue included in Services segment
2,062 2,653 2,156 1,947 1,599
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 2 of 2)
(3)
Supplemental information for Services
adjusted EBITDA (see definition in Exhibit F):
2017 2016
Qtr 1
Qtr 4 Qtr 3 Qtr 2 Qtr 1
Adjusted pretax
operating income (loss) before corporate allocations $
(1,205 ) $ 3,586 $ 4,803 $ 1,450 $ (3,774 )
Depreciation and amortization 858 829
884 749 663
Services adjusted EBITDA
$ (347 ) $ 4,415 $ 5,687 $ 2,199
$ (3,111 )
Selected balance sheet information for
our segments, as of the periods indicated, is as follows:
At March 31, 2017 (In thousands)
MortgageInsurance
Services Total Total assets
$ 5,475,502 $ 352,258 $
5,827,760 At December 31, 2016
(In
thousands)
MortgageInsurance
Services Total
Total assets $ 5,506,338 $ 356,836 $
5,863,174
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” and “adjusted diluted
net operating income per share,” 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”
and “adjusted diluted net operating income per share” are non-GAAP
financial measures, we believe these measures aid in understanding
the underlying performance of our operations. Our senior
management, including our Chief Executive Officer (Radian's chief
operating decision maker), uses adjusted pretax operating income
(loss) as our primary measure to evaluate the fundamental financial
performance of the Company’s business segments and to allocate
resources to the segments.
Adjusted pretax operating income is defined as GAAP pretax
income excluding the effects of: (i) net gains (losses) on
investments and other financial instruments; (ii) loss on induced
conversion and debt extinguishment; (iii) acquisition-related
expenses; (iv) amortization and impairment of intangible assets;
and (v) net impairment losses recognized in earnings. Adjusted
diluted net operating income per share is calculated by dividing
(i) adjusted pretax operating income attributable to common
shareholders, net of taxes computed using the company’s statutory
tax rate, by (ii) the sum of the weighted average number of common
shares outstanding and all dilutive potential common shares
outstanding. Interest expense on convertible debt, share dilution
from convertible debt and the impact of share-based compensation
arrangements have been reflected in the per share calculations
consistent with the accounting standard regarding earnings per
share, whenever the impact is dilutive.
Although adjusted pretax operating income excludes certain items
that have occurred in the past and are expected to occur in the
future, the excluded items represent those that are: (i) not viewed
as part of the operating performance of our primary activities or
(ii) not expected to result in an economic impact equal to the
amount reflected in pretax income (loss). These adjustments, along
with the reasons for their treatment, are described below.
(1)
Net gains (losses) on investments and
other financial instruments. The recognition of realized investment
gains or losses can vary significantly across periods as the
activity is highly discretionary based on the timing of individual
securities sales due to such factors as market opportunities, our
tax and capital profile and overall market cycles. Unrealized
investment gains and losses arise primarily from changes in the
market value of our investments that are classified as trading
securities. These valuation adjustments may not necessarily result
in realized economic gains or losses.
Trends in the profitability of our fundamental operating
activities can be more clearly identified without the fluctuations
of these realized and unrealized gains or losses. We do not view
them to be indicative of our fundamental operating activities.
Therefore, these items are excluded from our calculation of
adjusted pretax operating income (loss). (2)
Loss on induced conversion and debt
extinguishment. Gains or losses on early extinguishment of debt and
losses incurred to purchase our convertible debt prior to maturity
are discretionary activities that are undertaken in order to take
advantage of market opportunities to strengthen our financial and
capital positions; therefore, we do not view these activities as
part of our operating performance. Such transactions do not reflect
expected future operations and do not provide meaningful insight
regarding our current or past operating trends. Therefore, these
items are excluded from our calculation of adjusted pretax
operating income (loss).
(3)
Acquisition-related expenses.
Acquisition-related expenses represent the costs incurred to effect
an acquisition of a business (i.e., a business combination).
Because we pursue acquisitions on a strategic and selective basis
and not in the ordinary course of our business, we do not view
acquisition-related expenses as a consequence of a primary business
activity. Therefore, we do not consider these expenses to be part
of our operating performance and they are excluded from our
calculation of adjusted pretax operating income (loss).
Radian Group Inc. and
Subsidiaries
Definition of Consolidated Non-GAAP
Financial Measures
Exhibit F (page 2 of 2)
(4)
Amortization and impairment of intangible
assets. Amortization of intangible assets represents the periodic
expense required to amortize the cost of intangible assets over
their estimated useful lives. Intangible assets with an indefinite
useful life are also periodically reviewed for potential
impairment, and impairment adjustments are made whenever
appropriate. These charges are not viewed as part of the operating
performance of our primary activities and therefore are excluded
from our calculation of adjusted pretax operating income
(loss).
(5)
Net impairment losses recognized in
earnings. The recognition of net impairment losses on investments
can vary significantly in both size and timing, depending on market
credit cycles. We do not view these impairment losses to be
indicative of our fundamental operating activities. Therefore,
whenever these losses occur, we exclude them from our calculation
of adjusted pretax operating income (loss).
In addition to the above non-GAAP measures for the consolidated
company, we also have presented as supplemental information a
non-GAAP measure for our Services segment, representing a measure
of earnings before interest, income taxes, depreciation and
amortization (“EBITDA”). We calculate Services adjusted EBITDA by
using adjusted pretax operating income as described above, further
adjusted to remove the impact of depreciation and corporate
allocations for interest and operating expenses. We have presented
Services adjusted EBITDA to facilitate comparisons with other
services companies, since it is a widely accepted measure of
performance in the services industry.
See Exhibit G for the reconciliation of the most comparable GAAP
measures, consolidated pretax income and diluted net income per
share, to our non-GAAP financial measures for the consolidated
company, adjusted pretax operating income and adjusted diluted net
operating income per share, respectively. Exhibit G also contains
the reconciliation of the most comparable GAAP measure, net income,
to Services adjusted EBITDA.
Total adjusted pretax operating income, adjusted diluted net
operating income per share and Services adjusted EBITDA are not
measures of total profitability, and therefore should not be viewed
as substitutes for GAAP pretax income, diluted net income per share
or net income. Our definitions of adjusted pretax operating income,
adjusted diluted net operating income per share or Services
adjusted EBITDA 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 2) Reconciliation of
Consolidated Pretax Income to Adjusted Pretax Operating Income
2017 2016
(In
thousands)
Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1
Consolidated pretax income $ 114,670 $ 97,796
$ 126,941 $ 156,547 $ 102,402
Less income (expense) items:
Net gains (losses) on investments and other financial
instruments (2,851 ) (38,773 ) 7,711 30,527
31,286
Loss on induced conversion and debt extinguishment
(4,456 ) — (17,397 ) (2,108 ) (55,570 )
Acquisition-related expenses (1) (8 ) (358 )
(10 ) 54 (205 )
Amortization and impairment of intangible
assets (3,296 ) (3,290 ) (3,292 ) (3,311 ) (3,328
)
Total adjusted pretax operating income (2) $
125,281 $ 140,217 $ 139,929 $ 131,385
$ 130,219
(1)
Please see Exhibit F for the definition
of this line item.
(2)
Total adjusted pretax operating income
consists of adjusted pretax operating income (loss) for each
segment as follows:
2017 2016
(In
thousands)
Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1
Adjusted pretax operating income (loss): Mortgage
Insurance $ 134,633 $ 142,795 $ 141,814 $ 137,136
$ 140,166
Services (9,352 ) (2,578 ) (1,885 )
(5,751 ) (9,947 )
Total adjusted pretax operating income
$ 125,281 $ 140,217 $ 139,929 $
131,385 $ 130,219
Reconciliation of Diluted Net Income
Per Share to Adjusted Diluted Net Operating Income Per
Share
2017 2016
Qtr 1 Qtr 4 Qtr 3 Qtr
2 Qtr 1
Diluted net income per share $
0.34 $ 0.27 $ 0.37 $ 0.44 $ 0.29
Less per-share impact of debt items: Loss
on induced conversion and debt extinguishment (0.02
) — (0.08 ) (0.01 ) (0.23 )
Income tax provision
(benefit) (1) (0.01 ) — (0.03 ) —
(0.03 )
Per-share impact of debt items (0.01 )
— (0.05 ) (0.01 ) (0.20 )
Less per-share impact of
other income (expense) items: Net gains (losses) on
investments and other financial instruments (0.01
) (0.17 ) 0.03 0.13 0.13
Amortization and impairment of
intangible assets (0.01 ) (0.02 ) (0.01 ) (0.01 )
(0.01 )
Income tax provision (benefit) on other income (expense)
items (2) (0.01 ) (0.07 ) 0.01 0.04 0.04
Difference between statutory and effective tax rate
(0.01 ) (0.02 ) — (0.01 ) 0.04
Per-share impact of other income (expense) items
(0.02 ) (0.14 ) 0.01 0.07 0.12
Adjusted diluted net operating income per share (2) $
0.37 $ 0.41 $ 0.41 $ 0.38 $ 0.37
(1)
A portion of the loss on induced
conversion and debt extinguishment is non-deductible for tax
purposes. The income tax benefit is based on the tax deductible
loss using the company's federal statutory tax rate of 35%.
(2)
Calculated using the company’s federal
statutory tax rate of 35%. 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 2 of 2) Reconciliation of Net
Income to Services Adjusted EBITDA 2017 2016
(In
thousands)
Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1
Net income $ 76,472 $ 61,089 $ 82,803 $ 98,112
$ 66,249
Less income (expense) items: Net gains (losses)
on investments and other financial instruments (2,851
) (38,773 ) 7,711 30,527 31,286
Loss on induced
conversion and debt extinguishment (4,456 ) —
(17,397 ) (2,108 ) (55,570 )
Acquisition-related expenses
(8 ) (358 ) (10 ) 54 (205 )
Amortization and
impairment of intangible assets (3,296 ) (3,290 )
(3,292 ) (3,311 ) (3,328 )
Income tax provision
38,198 36,707 44,138 58,435 36,153
Mortgage Insurance
adjusted pretax operating income 134,633 142,795
141,814 137,136 140,166
Services
adjusted pretax operating income (loss) (9,352 )
(2,578 ) (1,885 ) (5,751 ) (9,947 )
Less income (expense)
items: Allocation of corporate operating expenses to
Services (3,718 ) (1,738 ) (2,265 ) (2,779 )
(1,751 )
Allocation of corporate interest expense to
Services (4,429 ) (4,426 ) (4,423 ) (4,422 )
(4,422 )
Services depreciation and amortization (858
) (829 ) (884 ) (749 ) (663 )
Services adjusted
EBITDA $ (347 ) $ 4,415
$ 5,687 $ 2,199
$ (3,111 )
On a consolidated basis, “adjusted pretax operating income” and
“adjusted diluted net operating income per share” are measures not
determined in accordance with GAAP. “Services adjusted EBITDA” is
also a non-GAAP measure. These measures are not representative of
total profitability, and therefore should not be viewed as
substitutes for GAAP pretax income, diluted net income per share or
net income. Our definitions of adjusted pretax operating income,
adjusted diluted net operating income per share or Services
adjusted EBITDA may not be comparable to similarly-named measures
reported by other companies. See Exhibit F for additional
information on our consolidated non-GAAP financial measures.
Radian Group Inc. and Subsidiaries Mortgage
Insurance Supplemental Information - New Insurance Written
Exhibit H 2017 2016
($ in
millions)
Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1
Total primary new insurance written $ 10,055
$ 13,882 $ 15,656 $ 12,921 $ 8,071
Percentage of
primary new insurance written by FICO score
>=740 61.3 % 63.4 % 64.2 % 60.9 % 58.4 %
680-739
32.7 31.4 30.4 32.2 33.7
620-679
6.0 5.2 5.4 6.9 7.9
Total Primary 100.0 % 100.0 % 100.0 % 100.0 %
100.0 %
Percentage of
primary new insurance written
Direct monthly and other premiums 75 % 73 % 73
% 74 % 71 %
Direct single premiums 25 % 27 %
27 % 26 % 29 %
Net single premiums (1) 16
% 17 % 17 % 17 % 19 %
Refinances 16
% 27 % 22 % 18 % 19 %
LTV 95.01% and
above 9.2 % 7.4 % 6.0 % 4.8 % 3.7 %
90.01% to
95.00% 47.3 % 43.6 % 47.1 % 50.2 % 50.5 %
85.01% to 90.00% 30.3 % 32.3 % 31.4 % 31.8 %
33.1 %
85.00% and below 13.2 % 16.7 % 15.5 %
13.2 % 12.7 %
(1)
Represents the percentage of direct
single premiums written, after consideration of the 35% single
premium NIW ceded under the Single Premium QSR Transaction.
Radian Group Inc. and
Subsidiaries
Mortgage Insurance Supplemental
Information - Primary Insurance in Force and Risk in Force
Exhibit I
March 31, December 31, September 30, June 30, March
31,
($ in millions) 2017 2016 2016 2016 2016
Primary insurance in force (1)
Prime $ 177,702 $ 174,927 $ 172,178 $ 168,259
$ 165,526
Alt-A 4,842 5,064 5,363 5,627 5,907
A
minus and below 3,315 3,459 3,624
3,786 3,953
Total Primary $
185,859 $ 183,450 $ 181,165 $ 177,672
$ 175,386
Primary risk in
force (1) (2)
Prime $ 45,442 $ 44,708 $ 44,075
$ 43,076 $ 42,312
Alt-A 1,118 1,168 1,241 1,302 1,366
A minus and below 834 865 906
946 988
Total Primary $ 47,394
$ 46,741 $ 46,222 $ 45,324 $ 44,666
Percentage of
primary risk in force
Direct monthly and other premiums 69 % 69 % 69
% 69 % 69 %
Direct single premiums 31 % 31 %
31 % 31 % 31 %
Net single premiums (3) 25
% 25 % 25 % 25 % 25 %
Percentage of
primary risk in force by FICO score
>=740 57.9 % 57.6 % 57.4 % 57.1 % 57.0 %
680-739 31.1 31.0 30.9 30.8 30.6
620-679
9.6 9.9 10.2 10.5 10.7
<=619 1.4 1.5
1.5 1.6 1.7
Total Primary
100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Percentage of
primary risk in force by LTV
95.01% and above 7.6 % 7.4 % 7.2 % 7.1 % 7.2 %
90.01% to 95.00% 52.6 52.3 52.1 51.6 50.9
85.01%
to 90.00% 32.2 32.5 32.8 33.3 33.7
85.00% and
below 7.6 7.8 7.9 8.0 8.2
Total 100.0 % 100.0 % 100.0 % 100.0 %
100.0 %
Percentage of
primary risk in force by policy year
2008 and prior 18.5 % 19.5 % 20.8 % 22.4 %
24.0 %
2009
0.9 1.0 1.2 1.3 1.5
2010
0.8 0.9 1.0 1.2 1.3
2011
1.8 2.0 2.2 2.5 2.7
2012
7.4 8.0 8.8 9.7 10.6
2013
11.8 12.6 13.9 15.5 17.0
2014
11.2 12.0 13.4 14.9 16.3
2015
17.3 18.1 19.4 21.0 22.0
2016
25.0 25.9 19.3 11.5 4.6
2017
5.3 — — — —
Total
100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Primary risk in force on defaulted loans (4) $
1,224 $ 1,363 $ 1,381 $ 1,398 $ 1,446
(1)
Includes amounts ceded under our
reinsurance agreements, as well as amounts related to the Freddie
Mac Agreement.
(2)
Does not include pool risk in force or
other risk in force, which combined represent less than 3.0% of our
total risk in force for all periods presented.
(3)
Represents the percentage of Single
Premium RIF, after giving effect to all reinsurance ceded.
(4)
Excludes risk related to loans subject
to the Freddie Mac Agreement.
Radian Group Inc. and
Subsidiaries
Mortgage Insurance Supplemental
Information - Claims and Reserves
Exhibit J
2017 2016
($ in
thousands)
Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1
Net claims paid: (1) Prime $ 52,044 $
70,151 $ 51,964 $ 56,036 $ 74,432
Alt-A 16,165 27,558
16,334 18,349 28,929
A minus and below 9,460
13,760 9,615 12,315 13,196
Total
primary claims paid 77,669 111,469 77,913 86,700 116,557
Pool 4,180 4,788 4,492 5,451 7,389
Second-lien and
other 78 (264 ) (234 ) (231 ) 345
Subtotal 81,927 115,993 82,171 91,920 124,291
Impact of captive terminations — 492
(171
) (2,619 ) (120 )
Impact of settlements 161 —
705 1,400 3,500
Total net claims
paid $ 82,088 $ 116,485 $ 82,705
$ 90,701 $ 127,671
Average net
claims paid: (2) Prime $ 50.5 $ 45.5 $
48.3 $ 48.6 $ 47.7
Alt-A 67.1 65.5 65.3 63.5 63.0
A minus and below 39.6 37.7 41.3 39.9 36.8
Total
average net primary claims paid 51.4 47.9 50.0 49.5 49.0
Pool 49.2 45.6 51.0 58.0 53.2
Total average net
claims paid $ 50.9 $ 47.6 $ 49.7 $ 49.6 $ 48.9
Average direct primary claims paid (2) (3) $
51.6 $ 48.2 $ 50.3 $ 49.9 $ 49.6
Average total direct
claims paid (2) (3) $ 51.1 $ 47.9 $ 50.0 $ 50.0 $
49.5
($ in thousands,
except primary reserve per primary default amounts)
March 31,2017
December 31,2016
September 30,2016
June 30,2016
March 31,2016
Reserve for losses by category Prime $
362,804 $ 379,845 $ 409,438 $ 420,281 $ 438,598
Alt-A
140,543 148,006 166,349 173,284 183,189
A minus and
below 96,373 101,653 106,678 112,001 116,835
IBNR and
other 70,651 71,107 73,057 74,639 79,051
LAE
17,550 18,630 21,255 22,389 23,600
Reinsurance
recoverable (4) 7,681 6,816 6,448
6,044 8,239
Total primary reserves
695,602 726,057 783,225 808,638
849,512
Pool insurance 28,453 31,853 36,065
36,982 38,843
IBNR and other 603 673 823 897 1,050
LAE 822 932 1,112 1,163 1,227
Reinsurance
recoverable (4) 28 35 36 33
—
Total pool reserves 29,906 33,493
38,036 39,075 41,120
Total 1st lien
reserves 725,508 759,550 821,261 847,713 890,632
Second-lien and other 661 719 673
666 716
Total reserves $
726,169 $ 760,269 $ 821,934 $ 848,379
$ 891,348
1st lien reserve per default
Primary reserve per primary default excluding IBNR and other
$ 24,230 $ 22,503 $ 24,049 $ 24,609 $ 24,959
(1)
Net of reinsurance recoveries.
(2)
Calculated without giving effect to the
impact of the termination of captive transactions and
settlements.
(3)
Before reinsurance recoveries.
(4)
Represents ceded losses on captive
transactions and quota share reinsurance transactions.
Radian Group Inc. and
Subsidiaries
Mortgage Insurance Supplemental
Information - Default Statistics
Exhibit K
March 31, December 31, September 30, June 30, March
31,
2017 2016 2016 2016 2016
Default
Statistics
Primary Insurance:
Prime
Number of insured loans 858,248 849,227 840,534
826,511 817,236
Number of loans in default 16,981
19,101 19,100 19,025 19,510
Percentage of loans in default
1.98 % 2.25 % 2.27 % 2.30 % 2.39 %
Alt-A
Number of insured loans 25,425 26,536 28,080 29,445
30,990
Number of loans in default 3,812 4,193 4,545
4,820 5,138
Percentage of loans in default 14.99
% 15.80 % 16.19 % 16.37 % 16.58 %
A minus and
below
Number of insured loans 26,043 27,115 28,313 29,450
30,681
Number of loans in default 5,000 5,811 5,885
5,982 6,221
Percentage of loans in default 19.20
% 21.43 % 20.79 % 20.31 % 20.28 %
Total
Primary Number of insured loans 909,716 902,878
896,927 885,406 878,907
Number of loans in default (1)
25,793 29,105 29,530 29,827 30,869
Percentage of loans in
default 2.84 % 3.22 % 3.29 % 3.37 % 3.51 %
(1)
Excludes the following number of loans
subject to the Freddie Mac Agreement that are in default as we no
longer have claims exposure on these loans:
March 31,
December 31, September 30, June 30, March 31,
2017 2016 2016
2016 2016
Number of loans in default
1,395 1,639 1,888 2,180 2,339
Radian Group Inc. and
Subsidiaries
Mortgage Insurance Supplemental
Information - QSR Transactions, Captives and Persistency
Exhibit L
2017 2016
($ in
thousands)
Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1
Quota Share
Reinsurance (“QSR”) Transactions
QSR ceded premiums written (1) $ 5,457 $ 6,049
$ 6,730 $ 7,356 $ 7,962
% of premiums written 2.3
% 2.4 % 2.6 % 2.9 % 3.4 %
QSR ceded premiums earned
(1) $ 7,834 $ 9,421 $ 10,597 $ 11,172 $ 11,325
% of premiums earned 3.3 % 3.8 % 4.1 % 4.5 %
4.7 %
Ceding commissions written $ 1,559 $
1,728 $ 1,922 $ 2,099 $ 2,270
Ceding commissions earned (2)
$ 3,894 $ 4,374 $ 3,974 $ 3,779 $ 4,446
Profit
commission $ — $ — $ — $ — $ —
RIF included in
QSR Transactions (3) $ 1,488,972 $ 1,578,300 $
1,718,031 $ 1,872,017 $ 2,018,468
Single Premium
QSR Transaction
QSR ceded premiums written (1) $ 8,960 $
11,121 $ 13,004 $ 11,488 $ 197,593
(4 ) % of
premiums written 3.7 % 4.4 % 5.0 % 4.6 % 84.7 %
QSR ceded premiums earned (1) $ 5,859 $ 8,060
$ 8,608 $ 7,146 $ 5,994
% of premiums earned 2.5
% 3.2 % 3.3 % 2.9 % 2.5 %
Ceding commissions written
$ 3,712 $ 4,895 $ 5,482 $ 4,844 $ 50,932
Ceding
commissions earned (2) $ 2,937 $ 4,130 $ 4,382 $
3,759 $ 3,032
Profit commission $ 5,888 $
8,458 $ 8,922 $ 7,891 $ 6,134
RIF included in Single Premium QSR
Transaction (3) $ 3,904,402 $ 3,761,648 $
3,621,993 $ 3,461,464 $ 3,308,057
Total RIF included in
QSR Transactions and Single Premium QSR Transaction $
5,393,374 $ 5,339,948 $ 5,340,024 $ 5,333,481 $ 5,326,525
1st Lien
Captives
Premiums earned ceded to captives $ 389 $ 503
$ 537 $ 1,346 $ 1,869
% of total premiums earned 0.2
% 0.2 % 0.2 % 0.5 % 0.8 %
Persistency Rate (twelve
months ended) 77.1 % 76.7 % 78.4 % 79.9 % 79.4 %
Persistency Rate (quarterly, annualized) (5) 84.4
% 76.8 % 75.3 % 78.0 % 82.3 %
(1)
Net of profit commission.
(2)
Includes amounts reported in policy
acquisition costs and other operating expenses.
(3)
Included in primary RIF.
(4)
Includes ceded premiums for policies
written in prior periods.
(5)
The Persistency Rate on a quarterly,
annualized basis may be impacted by seasonality or other factors,
and may not be indicative of full-year trends.
FORWARD-LOOKING STATEMENTS
All statements in this 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
Exchange Act and the U.S. Private Securities Litigation Reform Act
of 1995. In most cases, forward-looking statements may be
identified by words such as “anticipate,” “may,” “will,” “could,”
“should,” “would,” “expect,” “intend,” “plan,” “goal,”
“contemplate,” “believe,” “estimate,” “predict,” “project,”
“potential,” “continue,” “seek,” “strategy,” “future,” “likely” or
the negative or other variations on these words and other similar
expressions. These statements, which may include, without
limitation, projections regarding our future performance and
financial condition, are made on the basis of management’s current
views and assumptions with respect to future events. Any
forward-looking statement is not a guarantee of future performance
and actual results could differ materially from those contained in
the forward-looking statement. These statements speak only as of
the date they were made, and we undertake no obligation to update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. We operate in a
changing environment where new risks emerge from time to time and
it is not possible for us to predict all risks that may affect us.
The forward-looking statements, as well as our prospects as a
whole, are subject to risks and uncertainties that could cause
actual results to differ materially from those set forth in the
forward-looking statements. These risks and uncertainties include,
without limitation:
- changes in general economic and
political conditions, including unemployment rates, interest rates
and changes in housing and mortgage credit markets, that impact the
size of the insurable market and the credit performance of our
insured portfolio;
- changes in the way customers,
investors, regulators or legislators perceive the performance and
financial strength of private mortgage insurers;
- Radian Guaranty’s ability to remain
eligible under the Private Mortgage Insurance Eligibility
Requirements (“PMIERs”) and other applicable requirements imposed
by the Federal Housing Finance Agency and by the
Government-Sponsored Enterprises (“GSEs”) to insure loans purchased
by the GSEs;
- our ability to successfully execute and
implement our capital plans and to maintain sufficient holding
company liquidity to meet our short- and long-term liquidity
needs;
- our ability to successfully execute and
implement our business plans and strategies, including plans and
strategies that require GSE and/or regulatory approvals;
- our ability to maintain an adequate
level of capital in our insurance subsidiaries to satisfy existing
and future state regulatory requirements;
- changes in the charters or business
practices of, or rules or regulations imposed by or applicable to
the GSEs, including the GSEs’ interpretation and application of the
PMIERs to our mortgage insurance business;
- changes in the current housing finance
system in the U.S., including the role of the Federal Housing
Administration (“FHA”), the GSEs and private mortgage insurers in
this system;
- any disruption in the servicing of
mortgages covered by our insurance policies, as well as poor
servicer performance;
- a significant decrease in the
Persistency Rates of our mortgage insurance policies;
- competition in our mortgage insurance
business, including price competition and competition from the FHA,
U.S. Department of Veteran Affairs and other forms of credit
enhancement;
- the effect of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (“Dodd-Frank Act”) on the
financial services industry in general, and on our businesses in
particular;
- the adoption of new laws and
regulations, or changes in existing laws and regulations (including
to the Dodd-Frank Act), or the way they are interpreted or
applied;
- the outcome of legal and regulatory
actions, reviews, audits, inquiries and investigations that could
result in adverse judgments, settlements, fines, injunctions,
restitutions or other relief that could require significant
expenditures or have other effects on our business;
- the amount and timing of potential
payments or adjustments associated with federal or other tax
examinations, including deficiencies assessed by the IRS resulting
from its examination of our 2000 through 2007 tax years, which we
are currently contesting;
- the possibility that we may fail to
estimate accurately the likelihood, magnitude and timing of losses
in connection with establishing loss reserves for our mortgage
insurance business;
- volatility in our results of operations
caused by changes in the fair value of our assets and liabilities,
including a significant portion of our investment portfolio;
- changes in accounting principles
generally accepted in the U.S. (“GAAP”) or statutory accounting
principles and practices (“SAPP”) rules and guidance, or their
interpretation;
- our ability to attract and retain key
employees;
- legal and other limitations on
dividends and other amounts we may receive from our subsidiaries;
and
- the possibility that we may need to
impair the carrying value of goodwill established in connection
with our acquisition of Clayton.
For more information regarding these risks and uncertainties as
well as certain additional risks that we face, you should refer to
the Risk Factors detailed in Item 1A of our Annual Report on Form
10-K for the year ended December 31, 2016, and subsequent reports
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: http://www.businesswire.com/news/home/20170427005367/en/
Radian Group Inc.Emily Riley,
215-231-1035emily.riley@radian.biz
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