-- Fourth quarter GAAP net income of $148
million, or $0.76 per diluted share, and full year GAAP net income
of $394 million, or $2.00 per diluted share --
-- New Insurance Written of $105 billion in new
MI business for 2020; setting company record for annual flow
mortgage insurance --
-- PMIERs excess Available Assets grows 38% to
$1.3 billion (or 40% over the Minimum Required Assets) during the
fourth quarter of 2020 --
-- Total Holding Company Liquidity of $1.4
billion --
-- Book value per share grows 11%
year-over-year to $22.36 --
Radian Group Inc. (NYSE: RDN) today reported net income for the
quarter ended December 31, 2020, of $148.0 million, or $0.76 per
diluted share. This compares with net income for the quarter ended
December 31, 2019, of $161.2 million, or $0.79 per diluted
share.
Net income for the full year 2020 was $393.6 million, or $2.00
per diluted share. This compares to net income for the full year
2019 of $672.3 million, or $3.20 per diluted share.
Key Financial Highlights (dollars in millions, except
per-share amounts)
Quarter ended
Year ended
December 31, 2020
September 30, 2020
December 31, 2019
December 31, 2020
December 31, 2019
Net income (1)
$148.0
$135.1 $161.2
$393.6 $672.3
Diluted net income per share
$0.76 $0.70 $0.79
$2.00 $3.20
Consolidated pretax income
$179.2 $161.2 $205.6
$479.4 $849.0
Adjusted pretax operating income
(2)
$171.0 $145.0 $224.0
$432.1 $854.6
Adjusted diluted net operating
income per share (2)(3)
$0.69 $0.59 $0.86
$1.74 $3.21
Return on equity(1)(4)
14.1% 13.3% 16.2%
9.4% 17.8%
Adjusted net operating return on
equity (2)(3)
12.9% 11.3% 17.8%
8.2% 17.9%
New Insurance Written (NIW) -
mortgage insurance
$29,781 $33,320 $19,953
$105,024 $71,327
Net premiums earned - mortgage
insurance (5)
$286.8 $283.4 $298.5
$1,092.8 $1,134.2
New defaults (6)
14,552 20,508 10,869
108,025 40,985
Provision for losses - mortgage
insurance
$56.3 $87.8 $34.4
$483.3 $131.5
Quarter ended
December 31, 2020
September 30, 2020
December 31, 2019
Book value per share (7)
$22.36
$21.52
$20.13
PMIERs Available Assets (8)
$4,700
$4,469
$3,630
PMIERs excess Available Assets
(9)
$1,338
$970
$804
Total Holding Company Liquidity
(10)
$1,371
$1,376
$921
Excess Available Resources to
Support PMIERs (11)
$2,674
$2,311
$1,690
Total investments
$6,788
$6,585
$5,659
Primary mortgage insurance in
force
$246,144
$245,467
$240,558
Percentage of primary loans
in
default (12)
5.2 %
5.9 %
2.0 %
Mortgage insurance loss
reserves
$844
$822
$401
(1)
Net income for the fourth quarter and full year 2020 includes a
pretax net gain on investments and other financial instruments of
$17.4 million and $60.3 million, respectively, compared to net gain
on investments and other financial instruments for the fourth
quarter and full year 2019 of $4.3 million and $51.7 million,
respectively. Net income for the fourth quarter and full year 2019
also includes a pre-tax, non-cash impairment of goodwill and other
acquired intangible assets of $18.5 million related to the
company's sale of Clayton Services in January 2020.
(2)
Adjusted results, including adjusted pretax operating income,
adjusted diluted net operating income per share, and adjusted net
operating return on equity are non-GAAP financial measures. For
definitions and reconciliations of these measures to the comparable
GAAP measures, see Exhibits F and G.
(3)
Calculated using the company’s statutory tax rate of 21 percent.
(4)
Calculated by dividing annualized net income by average
stockholders' equity, based on the average of the beginning and
ending balances for each period presented.
(5)
The fourth quarters of 2020 and 2019 include increases to premiums
earned of $11.3 million and $17.4 million, respectively, related to
changes in present value estimates for initial premiums on monthly
policies that are deferred and not collected until cancellation.
The impact of changes in this estimate in other periods is not
material.
(6)
Represents new defaults in the number of loans reported during the
period on loans related to primary mortgage insurance policies.
(7)
Accumulated other comprehensive income (loss) impacted book value
per share by $1.38 per share as of December 31, 2020, and $0.55 per
share as of December 31, 2019.
(8)
Represents Radian Guaranty’s Available Assets, calculated in
accordance with the Private Mortgage Insurer Eligibility
Requirements (PMIERs) financial requirements in effect for each
date shown.
(9)
Represents Radian Guaranty’s excess or "cushion" of Available
Assets over its Minimum Required Assets, calculated in accordance
with the PMIERs financial requirements in effect for each date
shown.
(10)
Represents Radian Group's total liquidity, including the $35
million minimum liquidity requirement and available capacity under
its unsecured revolving credit facility.
(11)
Represents the sum of: (1) PMIERs excess Available Assets and (2)
Total Holding Company Liquidity, net of the $35 million minimum
liquidity requirement under the unsecured revolving credit
facility.
(12)
Represents the number of primary loans in default as a percentage
of the total number of insured primary loans.
Adjusted pretax operating income for the quarter ended December
31, 2020, was $171.0 million, or $0.69 per diluted share. This
compares with adjusted pretax operating income for the quarter
ended December 31, 2019 of $224.0 million, or $0.86 per diluted
share.
Adjusted pretax operating income for the full year 2020, was
$432.1 million, or $1.74 per diluted share. This compares to
adjusted pretax operating income for the full year 2019 of $854.6
million, or $3.21 per diluted share.
Book value as of December 31, 2020 was $4.3 billion, an increase
of 6 percent compared to $4.0 billion as of December 31, 2019. Book
value per share at December 31, 2020, was $22.36, an increase of 11
percent compared to $20.13 at December 31, 2019.
“While our quarterly and full-year results for 2020 were
impacted by the pandemic environment, during the year we
successfully increased book value per share by 11%, wrote
record-breaking levels of new mortgage insurance business and grew
revenues in our real estate segment,” said Radian’s Chief Executive
Officer Rick Thornberry. “I’m proud to say that our business model
weathered the storm as designed, demonstrating the strength and
resilience we and the mortgage industry have been building since
the last financial crisis in 2009. In 2020, we also took steps to
fortify our capital position and increase our financial
flexibility, with a focus on lowering the risk profile and
through-the-cycle volatility of the business.”
Thornberry added, “Our solid results reflect the dedication of
our outstanding team, who continue to support our customers and
each other in a demanding, high-volume market. I’m pleased with our
ability to operate well with strong momentum throughout a
challenging year.”
FOURTH QUARTER AND FULL YEAR HIGHLIGHTS
- NIW was $29.8 billion for the fourth quarter of 2020, compared
to $33.3 billion in the third quarter of 2020 and $20.0 billion in
the prior-year quarter. NIW was $105.0 billion for the full year
2020, an increase of 47.2 percent compared to $71.3 billion for the
prior year.
- NIW for the full year 2020 represented record volume written on
a flow basis for the company.
- Of the $29.8 billion in NIW in the fourth quarter of 2020, 91
percent was written with monthly and other recurring premiums,
compared to 90 percent in the third quarter of 2020, and 82 percent
in the fourth quarter of 2019.
- Refinances accounted for 35 percent of total NIW in the fourth
quarter of 2020, compared to 30 percent in the third quarter of
2020, and 33 percent in the fourth quarter of 2019.
- Total primary mortgage insurance in force as of December 31,
2020, grew to $246.1 billion, an increase of 0.3 percent compared
to $245.5 billion as of September 30, 2020, and an increase of 2.3
percent compared to $240.6 billion as of December 31, 2019. The
year over year increase included a 11.4 percent increase in monthly
premium insurance in force and a 20.9 percent decline in single
premium insurance in force.
- Persistency, which is the percentage of mortgage insurance that
remains in force after a twelve- month period, was 61.2 percent for
the twelve months ended December 31, 2020, compared to 65.6 percent
for the twelve months ended September 30, 2020 and 78.2 percent for
the twelve months ended December 31, 2019.
- Annualized persistency for the three months ended December 31,
2020, was 60.4 percent, compared to 60.0 percent for the three
months ended September 30, 2020, and 75.0 percent for the three
months ended December 31, 2019.
- Net mortgage insurance premiums earned were $286.8 million for
the quarter ended December 31, 2020, compared to $283.4 million for
the quarter ended September 30, 2020, and $298.5 million for the
quarter ended December 31, 2019. Net mortgage insurance premiums
earned were $1.1 billion for the year ended December 31, 2020,
compared to $1.1 billion for the year ended December 31, 2019.
- The fourth quarters of 2020 and 2019, include increases to
premiums earned of $11.3 million and $17.4 million, respectively,
related to changes in present value estimates for initial premiums
on monthly policies that are deferred and not collected until
cancellation.
- Mortgage insurance in force portfolio premium yield was 44.6
basis points in the fourth quarter of 2020, or 42.8 basis points
excluding the impact of the fourth quarter 2020 premium adjustment
described above. This compares to 43.2 basis points in the third
quarter of 2020 and 50.0 basis points in the fourth quarter of
2019, or 47.1 basis points excluding the impact of the fourth
quarter 2019 premium adjustment described above.
- The impact of single premium cancellations before consideration
of reinsurance represented 8.7 basis points of direct premium yield
in the fourth quarter of 2020, 10.7 basis points in the third
quarter of 2020, and 4.4 basis points in the fourth quarter of
2019.
- Total net mortgage insurance premium yield, which includes the
impact of ceded premiums and accrued profit commission, was 46.7
basis points in the fourth quarter of 2020, or 44.8 basis points
excluding the impact of the fourth quarter 2020 premium adjustment
described above. This compares to 46.6 basis points in the third
quarter of 2020, and 50.0 basis points in the fourth quarter of
2019 or 47.1 basis points excluding the impact of the fourth
quarter 2019 premium adjustment described above.
- Additional details regarding premiums earned may be found in
Exhibit D.
- The mortgage insurance provision for losses was $56.3 million
in the fourth quarter of 2020, compared to $87.8 million in the
third quarter of 2020, and $34.4 million in the fourth quarter of
2019. The mortgage insurance provision for losses was $483.3
million for the year ended December 31, 2020, compared to $131.5
million for the year ended December 31, 2019. The increase for the
full year 2020 primarily relates to a significant increase in the
number of new default notices as a result of the effects of the
COVID-19 pandemic, substantially all due to borrowers in
forbearance programs. The number of new defaults increased
significantly during the second quarter of 2020, and while new
defaults during the fourth quarter remained elevated compared to
levels before the pandemic, they decreased 76.9 percent from the
second quarter of 2020 and 29.0 percent from the third quarter of
2020.
- The number of primary delinquent loans was 55,537 as of
December 31, 2020, compared to 62,737 as of September 30, 2020 and
21,266 as of December 31, 2019.
- The primary mortgage insurance delinquency rate was 5.2 percent
in the fourth quarter of 2020, compared to 5.9 percent in the third
quarter of 2020, and 2.0 percent in the fourth quarter of
2019.
- The loss ratio in the fourth quarter of 2020 was 19.6 percent,
compared to 31.0 percent in the third quarter of 2020 and 11.5
percent in the fourth quarter of 2019.
- Mortgage insurance loss reserves were $844.1 million as of
December 31, 2020, compared to $821.7 million as of September 30,
2020, and $401.3 million as of December 31, 2019.
- Total mortgage insurance claims paid were $40.6 million in the
fourth quarter of 2020, compared to $10.8 million in the third
quarter of 2020, and $28.5 million in the fourth quarter of 2019.
Excluding the impact of commutations and settlements, claims paid
were $8.4 million in the fourth quarter of 2020, compared to $11.1
million in the third quarter of 2020 and $24.8 million in the
fourth quarter of 2019. For the full year 2020, total net claims
paid were $97.6 million, compared to $132.2 million for the full
year 2019.
- Radian's Real Estate segment offers a broad array of title,
valuation, asset management and other real estate services to
market participants across the real estate value chain.
- Total Real Estate segment revenues for the fourth quarter of
2020 were $23.6 million, compared to $29.8 million for the third
quarter of 2020, and $22.0 million for the fourth quarter of 2019.
Total revenues for the full year 2020 were $102.4 million, compared
to $89.6 million for the same period of 2019.
- Adjusted earnings before interest, income taxes, depreciation
and amortization (Real Estate adjusted EBITDA) for the quarter
ended December 31, 2020 was a loss of $7.0 million, compared to a
loss of $1.1 million for the quarter ended September 30, 2020, and
a loss of $2.4 million for the quarter ended December 31, 2019.
Real Estate adjusted EBITDA for the full year 2020 was a loss of
$7.6 million, compared to a loss of $5.5 million for the prior year
period. Additional details regarding the non-GAAP measure Real
Estate adjusted EBITDA may be found in Exhibits F and G.
- The decrease in Real Estate adjusted EBITDA in the fourth
quarter and full year 2020, compared to the fourth quarter and full
year 2019, was primarily related to the negative impact of the
COVID-19 pandemic on the operating environment for certain business
lines and the continued strategic investment focused on our title
and digital real estate businesses.
- Due to certain changes in the composition of our reportable
segments made in the fourth quarter of 2020, our results for Real
Estate and All Other have been restated for all prior periods to
reflect these changes. See Exhibit E for more details on these
reclassifications.
- Other operating expenses were $81.6 million in the fourth
quarter of 2020, compared to $69.4 million in the third quarter of
2020, and $80.9 million in the fourth quarter of 2019. Other
operating expenses were $280.7 million for the year ended December
31, 2020, compared to $306.1 million for the year ended December
31, 2019.
- The increase in the fourth quarter of 2020 compared to the
third quarter of 2020 was primarily related to a $6.5 million
increase in non-operating items and adjustments to share-based
incentive compensation. The increase in the fourth quarter of 2020
compared to the fourth quarter of 2019 was driven primarily by an
increase in non-operating items, which was partially offset by
lower incentive compensation expense.
- The decrease for the full year 2020, compared to the full year
2019, was driven primarily by an increase in ceding commissions,
lower professional services costs, and lower incentive compensation
expense.
CAPITAL AND LIQUIDITY UPDATE
- At December 31, 2020, Excess Available Resources to Support
Private Mortgage Insurer Eligibility Requirements (PMIERs)were $2.7
billion or 80 percent above Radian Guaranty's Minimum Required
Assets of $3.4 billion.
Radian Group
- As of December 31, 2020, Radian Group maintained $1.1 billion
of available liquidity. Total liquidity, which includes the
company’s $267.5 million unsecured revolving credit facility, was
$1.4 billion as of December 31, 2020.
- For the full year 2020, the company repurchased 11.0 million
shares of Radian Group common stock at a total cost of $226.3
million, including commissions. In March 2020, the company
temporarily suspended purchases under its share repurchase program
by canceling its then current 10b5-1 plan. The company may initiate
a new 10b5-1 plan at its discretion in the future, during an open
trading window and in accordance with SEC rules. As of December 31,
2020, purchase authority of up to $198.9 million remained available
under this program. The current share repurchase authorization
expires on August 31, 2021.
- On November 11, 2020, Radian Group's board of directors
authorized a regular quarterly dividend on its common stock in the
amount of $0.125 per share and the dividend was paid on December 4,
2020. On February 10, 2021 Radian Group's board of directors
authorized a regular quarterly dividend on its common stock in the
amount of $0.125 per share and the dividend will be paid on March
4, 2021.
- For the full year 2020, Radian paid $97.5 million in dividends
on its common stock.
Radian Guaranty
- As previously announced, in October 2020, Radian Guaranty
entered into its fourth fully collateralized mortgage
insurance-linked-note (ILN) reinsurance transaction, in which the
company obtained $390.3 million of credit risk protection from
Eagle Re 2020-2 Ltd. (Eagle Re) through the issuance by Eagle Re of
ILNs to eligible third-party capital markets investors in an
unregistered private offering. Eagle Re is a special purpose
insurer domiciled in Bermuda and is not a subsidiary or affiliate
of Radian Guaranty. Radian Guaranty's related PMIERs credit under
this ILN transaction remains subject to GSE approval.
- At December 31, 2020, Radian Guaranty’s Available Assets under
PMIERs totaled approximately $4.7 billion, resulting in excess
available resources or a “cushion” of $1.3 billion, or 40 percent,
over its Minimum Required Assets of $3.4 billion.
- As of December 31, 2020, 66 percent of Radian Guaranty's
primary mortgage insurance risk in force is subject to some form of
risk distribution, providing a $1.4 billion reduction of Minimum
Required Assets under PMIERs.
CONFERENCE CALL
Radian will discuss fourth quarter and year-end 2020 financial
results in a conference call tomorrow, Thursday, February 25, 2021,
at 10:00 a.m. Eastern standard time. The conference call will be
broadcast live over the Internet at https://radian.com/who-we-are/for-investors/webcasts
or at www.radian.com. The call may also be accessed by dialing
888.771.4371 inside the U.S., or 847.585.4405 for international
callers, using passcode 50081023 by referencing Radian.
A digital replay of the webcast will be available on the Radian
website approximately two hours after the live broadcast ends for a
period of two weeks at
https://radian.com/who-we-are/for-investors/webcasts using passcode
50081023.
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, adjusted
diluted net operating income per share and adjusted net operating
return on equity (non-GAAP measures) facilitate evaluation of the
company’s fundamental financial performance and provide relevant
and meaningful information to investors about the ongoing operating
results of the company. On a consolidated basis, these measures are
not recognized in accordance with accounting principles generally
accepted in the United States of America (GAAP) and should not be
considered in isolation or viewed as substitutes for GAAP measures
of performance. The measures described below have been established
in order to increase transparency for the purpose of evaluating the
company’s operating trends and enabling more meaningful comparisons
with Radian’s competitors.
Adjusted pretax operating income (loss) is defined as GAAP
consolidated pretax income (loss) excluding the effects of: (i) net
gains (losses) on investments and other financial instruments; (ii)
loss on 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 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 a
non-GAAP measure for our Real Estate segment, representing a
measure of earnings before interest, income tax provision
(benefit), depreciation and amortization ("EBITDA"). We calculate
Real Estate adjusted EBITDA by using adjusted pretax operating
income as described above, further adjusted to remove the impact of
depreciation and corporate allocations for interest and operating
expenses. In addition, Real Estate adjusted EBITDA margin is
calculated by dividing Real Estate adjusted EBITDA by GAAP total
revenue for the Real Estate segment. Real Estate adjusted EBITDA
and Real Estate adjusted EBITDA margin 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 Real Estate 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, valuation, asset
management and other real estate services. We are powered by
technology, informed by data and driven to deliver new and better
ways to transact and manage risk. Visit www.radian.com to learn
more about how Radian is shaping the future of mortgage and real
estate services.
FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS
(Unaudited)
Exhibit A: Condensed Consolidated Statements of Operations Trend
Schedule Exhibit B: Net Income Per Share Trend Schedule Exhibit C:
Condensed Consolidated Balance Sheets Exhibit D: Net Premiums
Earned Exhibit E: Segment Information Exhibit F: Definition of
Consolidated Non-GAAP Financial Measures Exhibit G: Consolidated
Non-GAAP Financial Measure Reconciliations Exhibit H: Mortgage
Supplemental Information New Insurance Written Exhibit I: Mortgage
Supplemental Information Primary Insurance in Force and Risk in
Force Exhibit J: Mortgage Supplemental Information Claims and
Reserves Exhibit K: Mortgage Supplemental Information Default
Statistics Exhibit L: Mortgage Supplemental Information Reinsurance
Programs
Radian Group Inc. and
Subsidiaries
Condensed Consolidated Statements of
Operations Trend Schedule
Exhibit A (page 1 of 2)
2020
2019
(In thousands, except per-share
amounts)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Revenues:
Net premiums earned
$
302,140
(1
)
$
286,471
$
249,295
$
277,415
$
301,486
Services revenue
11,440
(1
)
33,943
28,075
31,927
40,031
Net investment income
38,115
36,255
38,723
40,944
41,432
Net gains (losses) on investments and
other financial instruments
17,376
17,652
47,276
(22,027
)
4,257
Other income
790
913
1,072
822
818
Total revenues
369,861
375,234
364,441
329,081
388,024
Expenses:
Provision for losses
56,664
88,084
304,418
35,951
34,619
Policy acquisition costs
7,395
10,166
6,015
7,413
6,783
Cost of services
21,600
24,353
17,972
22,141
27,278
Other operating expenses
81,641
69,377
60,582
69,110
80,894
Interest expense
21,169
21,088
16,699
12,194
12,160
Impairment of goodwill
—
—
—
—
4,828
Amortization and impairment of other
acquired intangible assets
2,225
961
979
979
15,823
Total expenses
190,694
214,029
406,665
147,788
182,385
Pretax income (loss)
179,167
161,205
(42,224
)
181,293
205,639
Income tax provision (benefit)
31,154
26,102
(12,273
)
40,832
44,455
Net income (loss)
$
148,013
$
135,103
$
(29,951
)
$
140,461
$
161,184
Diluted net income (loss) per
share
$
0.76
$
0.70
$
(0.15
)
$
0.70
$
0.79
(1)
Includes the impact of a line item reclassification recorded in the
fourth quarter to correct earlier periods in 2020, which increased
net premiums earned and decreased services revenue by $7.8 million
each. See Exhibit E for additional detail by period related to this
out-of-period adjustment reflected in our All Other results.
Radian Group Inc. and
Subsidiaries
Condensed Consolidated Statements of
Operations
Exhibit A (page 2 of 2)
Year Ended December
31,
(In thousands, except per-share
amounts)
2020
2019
Revenues:
Net premiums earned - insurance
$
1,115,321
$
1,145,349
Services revenue
105,385
154,596
Net investment income
154,037
171,796
Net gains (losses) on investments and
other financial instruments
60,277
51,719
Other income
3,597
3,495
Total revenues
1,438,617
1,526,955
Expenses:
Provision for losses
485,117
132,031
Policy acquisition costs
30,989
25,314
Cost of services
86,066
108,324
Other operating expenses
280,710
306,129
Interest expense
71,150
56,310
Loss on extinguishment of debt
—
22,738
Impairment of goodwill
—
4,828
Amortization and impairment of other
intangible assets
5,144
22,288
Total expenses
959,176
677,962
Pretax income
479,441
848,993
Income tax provision
85,815
176,684
Net income
$
393,626
$
672,309
Diluted net income per share
$
2.00
$
3.20
Radian Group Inc. and
Subsidiaries
Net Income Per Share Trend
Schedule
Exhibit B
The calculation of basic and
diluted net income (loss) per share was as follows:
2020
2019
(In thousands, except per-share
amounts)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net income (loss) —basic and
diluted
$
148,013
$
135,103
$
(29,951
)
$
140,461
$
161,184
Average common shares outstanding—basic
(1)
193,248
193,176
193,299
200,161
203,431
Dilutive effect of stock-based
compensation arrangements (2)
1,415
980
—
1,658
1,734
Adjusted average common shares
outstanding—diluted
194,663
194,156
193,299
201,819
205,165
Basic net income (loss) per
share
$
0.77
$
0.70
$
(0.15
)
$
0.70
$
0.79
Diluted net income (loss) per
share
$
0.76
$
0.70
$
(0.15
)
$
0.70
$
0.79
(1)
Includes the impact of fully vested shares under our share-based
compensation arrangements.
(2)
There were no dilutive shares for the three months ended June 30,
2020, as a result of our net loss for the period. The following
number of shares of our common stock equivalents issued under our
share-based compensation arrangements were not included in the
calculation of diluted net income (loss) per share because they
were anti-dilutive:
2020
2019
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Shares of common stock equivalents
324
710
2,295
132
—
Year Ended December
31,
(In thousands, except per-share
amounts)
2020
2019
Net income - basic and diluted
$
393,626
$
672,309
Average common shares outstanding—basic
(1)
195,443
208,773
Dilutive effect of stock-based
compensation arrangements (2)
1,199
1,567
Adjusted average common shares
outstanding—diluted
196,642
210,340
Basic net income per share
$
2.01
$
3.22
Diluted net income per share
$
2.00
$
3.20
(1)
Includes the impact of fully vested shares under our share-based
compensation arrangements.
(2)
The following number of shares of our common stock equivalents
issued under our share-based compensation arrangements were not
included in the calculation of diluted net income per share because
they were anti-dilutive:
Year Ended December
31,
(In thousands)
2020
2019
Shares of common stock equivalents
865
221
Radian Group Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
Exhibit C
December 31,
September 30,
June 30,
March 31,
December 31,
(In thousands, except per-share
amounts)
2020
2020
2020
2020
2019
Assets:
Investments
$
6,788,442
$
6,584,577
$
6,431,350
$
5,608,627
$
5,658,747
Cash
87,915
82,020
68,387
54,108
92,729
Restricted cash
6,231
4,424
16,279
7,817
3,545
Accrued investment income
34,047
36,093
34,179
32,559
32,333
Accounts and notes receivable
121,294
145,164
110,722
123,381
93,630
Reinsurance recoverables
73,202
66,515
56,852
17,722
16,976
Deferred policy acquisition
costs
18,305
17,926
21,774
20,855
20,759
Property and equipment, net
80,457
88,717
89,143
87,915
87,879
Prepaid reinsurance premium
267,638
295,062
330,476
356,104
363,856
Goodwill and other acquired intangible
assets, net
23,043
25,268
26,229
27,208
28,187
Other assets
447,447
431,579
383,918
354,136
409,672
Total assets
$
7,948,021
$
7,777,345
$
7,569,309
$
6,690,432
$
6,808,313
Liabilities and stockholders’
equity:
Unearned premiums
$
448,791
$
501,787
$
561,280
$
605,045
$
626,822
Reserve for losses and loss adjustment
expense
848,413
825,792
738,885
418,202
404,765
Senior notes
1,405,674
1,404,759
1,403,857
887,584
887,110
FHLB advances
176,483
141,058
175,122
173,760
134,875
Reinsurance funds withheld
278,555
318,773
312,350
302,551
291,829
Net deferred tax liability
213,897
166,136
126,883
90,500
71,084
Other liabilities
291,855
296,661
264,927
348,282
343,105
Total liabilities
3,663,668
3,654,966
3,583,304
2,825,924
2,759,590
Common stock
210
210
210
208
219
Treasury stock
(910,115
)
(909,745
)
(909,738
)
(902,024
)
(901,657
)
Additional paid-in capital
2,245,897
2,238,869
2,232,949
2,231,670
2,449,884
Retained earnings
2,684,636
2,561,076
2,450,423
2,504,853
2,389,789
Accumulated other comprehensive
income
263,725
231,969
212,161
29,801
110,488
Total stockholders’ equity
4,284,353
4,122,379
3,986,005
3,864,508
4,048,723
Total liabilities and stockholders’
equity
$
7,948,021
$
7,777,345
$
7,569,309
$
6,690,432
$
6,808,313
Shares outstanding
191,606
191,556
191,492
190,387
201,164
Book value per share
$
22.36
$
21.52
$
20.82
$
20.30
$
20.13
Debt to capital ratio (1)
24.7
%
25.4
%
26.0
%
18.7
%
18.0
%
Risk to capital ratio-Radian Guaranty
only
12.7:1
13.2:1
13.3:1
13.8:1
13.6:1
(1)
Calculated as senior notes divided by
senior notes and stockholders' equity.
Radian Group Inc. and
Subsidiaries
Net Premiums Earned
Exhibit D (page 1 of 2)
2020
2019
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Premiums earned:
Direct - Mortgage:
Premiums earned, excluding revenue from
cancellations (1)
$
272,331
$
259,889
$
263,468
$
274,647
$
295,845
Single Premium Policy
cancellations
53,526
65,667
50,023
24,133
26,479
Total direct - Mortgage (1)
325,857
325,556
313,491
298,780
322,324
Assumed - Mortgage: (2)
2,615
2,946
3,197
3,456
2,837
Ceded - Mortgage:
Premiums earned, excluding revenue from
cancellations
(27,229
)
(25,120
)
(26,493
)
(28,609
)
(28,055
)
Single Premium Policy cancellations
(3)
(15,197
)
(18,679
)
(14,424
)
(7,183
)
(7,843
)
Profit commission - other (4)
770
(1,347
)
(28,175
)
8,555
9,241
Total ceded premiums, net of profit
commission - Mortgage (5)
(41,656
)
(45,146
)
(69,092
)
(27,237
)
(26,657
)
Net premiums earned - Mortgage
(1)
286,816
283,356
247,596
274,999
298,504
Net premiums earned - Real Estate
(6)
7,572
7,099
4,734
3,149
3,343
Net premiums earned - All Other
(6)
7,752
(3,984
)
(3,035
)
(733
)
(361
)
Net premiums earned (1)
$
302,140
$
286,471
$
249,295
$
277,415
$
301,486
(1)
The fourth quarters of 2020 and 2019 include increases to premiums
earned of $11.3 million and $17.4 million, respectively, related to
changes in present value estimates for initial premiums on monthly
policies that are deferred and not collected until cancellation.
The impact of changes in this estimate in other periods is not
material.
(2)
Relates primarily to premiums earned from
our participation in certain credit risk transfer programs.
(3)
Includes the impact of related profit
commissions.
(4)
The amounts represent the profit
commission on the Single Premium QSR Program, excluding the impact
of Single Premium Policy cancellations.
(5)
See Exhibit L for additional information
on ceded premiums for our various reinsurance programs.
(6)
See Exhibit E for additional information
on changes that impacted our reported segment results for all
periods.
Radian Group Inc. and
Subsidiaries
Net Premiums Earned - Insurance
Exhibit D (page 2 of 2)
Year Ended December
31,
(In thousands)
2020
2019
Premiums earned:
Direct - Mortgage:
Premiums earned, excluding revenue from
cancellations
$
1,070,335
$
1,154,045
(1
)
Single Premium Policy
cancellations
193,349
79,483
Total direct - Mortgage
1,263,684
1,233,528
Assumed - Mortgage: (2)
12,214
10,382
Ceded - Mortgage:
Premiums earned, excluding revenue from
cancellations
(107,451
)
(134,946
)
(1
)
Single Premium Policy cancellations
(3)
(55,483
)
(23,766
)
Profit commission - other (4)
(20,197
)
49,016
(1
)
Total ceded premiums, net of profit
commission - Mortgage (5)
(183,131
)
(109,696
)
Net premiums earned - Mortgage
1,092,767
1,134,214
Net premiums earned - Real Estate
(6)
22,554
11,976
Net premiums earned - All Other
(6)
—
(841
)
Net premiums earned
$
1,115,321
$
1,145,349
(1)
Includes a cumulative adjustment to
unearned premiums related to an update to the amortization rates
used to recognize revenue for Single Premium Policies.
(2)
Relates primarily to premiums earned from
our participation in certain credit risk transfer programs.
(3)
Includes the impact of related profit
commissions.
(4)
The amounts represent the profit
commission on the Single Premium QSR Program, excluding the impact
of Single Premium Policy cancellations.
(5)
See Exhibit L for additional information
on ceded premiums for our various reinsurance programs.
(6)
See Exhibit E for additional information
on changes that impacted our reported segment results for all
periods.
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 and Services adjusted EBITDA, along with
reconciliations to consolidated GAAP measures, see Exhibits F and
G.
Mortgage (1)
2020
2019
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net premiums written (2) (3)
$
261,244
$
259,278
$
229,458
$
260,974
$
287,952
(Increase) decrease in unearned
premiums
25,572
24,078
18,138
14,025
10,552
Net premiums earned
286,816
283,356
247,596
274,999
298,504
Services revenue
3,717
3,914
3,918
3,216
2,936
Net investment income
34,235
32,054
34,708
36,198
37,818
Other income
735
689
721
671
719
Total
325,503
320,013
286,943
315,084
339,977
Provision for losses
56,312
87,753
304,021
35,246
34,411
Policy acquisition costs
7,395
10,166
6,015
7,413
6,783
Cost of services
3,245
2,908
2,133
1,757
1,713
Other operating expenses before
allocated corporate operating expenses (4)
21,974
21,635
18,537
23,593
32,604
Interest expense (5) (7)
21,169
21,088
16,699
12,194
12,160
Total (6)
110,095
143,550
347,405
80,203
87,671
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
215,408
176,463
(60,462
)
234,881
252,306
Allocation of corporate operating
expenses
31,102
29,127
25,359
29,214
27,394
Adjusted pretax operating income
(loss)
$
184,306
$
147,336
$
(85,821
)
$
205,667
$
224,912
Real Estate (1) (7)
2020
2019
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net premiums earned (8)
$
7,572
$
7,099
$
4,734
$
3,149
$
3,343
Services revenue (6) (8)
15,958
22,627
17,688
23,251
18,511
Net investment income
43
67
126
125
144
Total
23,573
29,793
22,548
26,525
21,998
Provision for losses
392
370
426
743
238
Cost of services
15,706
18,085
12,681
14,989
13,904
Other operating expenses before
allocated corporate operating expenses (4)
15,238
13,136
10,527
10,579
10,803
Total
31,336
31,591
23,634
26,311
24,945
Adjusted pretax operating income before
allocated corporate operating expenses (9)
(7,763
)
(1,798
)
(1,086
)
214
(2,947
)
Allocation of corporate operating
expenses
3,369
3,248
2,823
3,367
2,675
Adjusted pretax operating income
(loss)
$
(11,132
)
$
(5,046
)
$
(3,909
)
$
(3,153
)
$
(5,622
)
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 2 of 6)
All Other (1) (7) (10)
2020
2019
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net premiums earned (8)
$
7,752
$
(3,984
)
$
(3,035
)
$
(733
)
$
(361
)
Services revenue (6) (8)
(7,963
)
8,267
6,579
5,652
18,874
Net investment income
3,837
4,134
3,889
4,621
3,470
Other income
55
224
104
151
99
Total
3,681
8,641
7,537
9,691
22,082
Cost of services
2,835
4,127
3,177
5,500
11,871
Other operating expenses (4)
3,033
1,824
3,129
2,106
5,518
Total
5,868
5,951
6,306
7,606
17,389
Adjusted pretax operating income
(loss)
$
(2,187
)
$
2,690
$
1,231
$
2,085
$
4,693
(1)
Certain organizational changes implemented in the first quarter of
2020 following the sale of Clayton caused the composition of our
reportable segments to change, including all activity related to
Clayton prior to the sale and certain other impacts now being
reflected in All Other activities. These changes to our reportable
segments have been reflected in our segment operating results for
all periods presented.
(2)
Net of ceded premiums written under the
QSR Programs and the Excess-of-Loss Program. See Exhibit L for
additional information.
(3)
The fourth quarters of 2020 and 2019
include increases to premiums earned of $11.3 million and $17.4
million, respectively, related to changes in present value
estimates for initial premiums on monthly policies that are
deferred and not collected until cancellation. The impact of
changes in this estimate in other periods is not material.
(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.
(6)
Inter-segment information:
2020
2019
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Inter-segment revenue included
in:
Mortgage
$
—
$
—
$
—
$
83
$
160
Real Estate
86
98
91
87
87
All Other
186
767
19
22
43
Total inter-segment revenue
$
272
$
865
$
110
$
192
$
290
Inter-segment expense included
in:
Mortgage
$
86
$
98
$
91
$
87
$
79
Real Estate
186
767
19
22
16
All Other
—
—
—
83
195
Total inter-segment expense
$
272
$
865
$
110
$
192
$
290
See notes continued on next
page.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 3 of 6)
Notes continued from prior
page.
(7)
The wind-down of our traditional
appraisal business announced in the fourth quarter of 2020 caused
the composition of our reportable segments to change, including all
activity related to that business and certain other adjustments to
services revenue now being reflected in All Other activities. In
addition, there were certain other immaterial reclassifications to
net investment income and interest expense. These changes to our
reportable segments have been reflected in our segment operating
results for all periods presented.
(8)
In the fourth quarter of 2020, we
reclassified certain revenue previously reflected in the Real
Estate segment results as services revenue to net premiums earned.
As a result, for all periods presented, on the Real Estate segment,
net premiums earned has been increased and services revenue has
been decreased, with offsetting adjustments reflected in All Other
activities.
(9)
Supplemental information for Real
Estate adjusted EBITDA (see definition in Exhibit F):
2020
2019
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Adjusted pretax operating income (loss)
before corporate allocations
$
(7,763
)
$
(1,798
)
$
(1,086
)
$
214
$
(2,947
)
Depreciation and amortization
744
679
771
663
552
Real Estate adjusted EBITDA
$
(7,019
)
$
(1,119
)
$
(315
)
$
877
$
(2,395
)
(10)
All Other activities include: (i) income (losses) from assets held
by our holding company; (ii) related general corporate operating
expenses not attributable or allocated to our reportable segments;
(iii) for all periods prior to it's sale in the first quarter of
2020, revenue and expenses related to Clayton; (iv) revenue and
expenses from our traditional appraisal business; and (v) other
immaterial revenue and expense items.
Selected Mortgage Key
Ratios
2020
2019
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Loss ratio (1)
19.6
%
31.0
%
122.8
%
12.8
%
11.5
%
Expense ratio (1)
21.1
%
21.5
%
20.2
%
21.9
%
22.4
%
(1)
Calculated on a GAAP basis using net
premiums earned.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 4 of 6)
Mortgage (1)
Year Ended December
31,
(In thousands)
2020
2019
Net premiums written (2)
$
1,010,954
$
1,075,450
Decrease in unearned premiums
81,813
58,764
(3
)
Net premiums earned
1,092,767
1,134,214
Services revenue
14,765
8,134
Net investment income
137,195
151,491
Other income
2,816
2,798
Total
1,247,543
1,296,637
Provision for losses
483,332
131,473
Policy acquisition costs
30,989
25,314
Cost of services
10,043
4,961
Other operating expenses before
allocated corporate operating expenses (4)
85,739
121,647
Interest expense (5)
71,150
56,310
Total (6)
681,253
339,705
Adjusted pretax operating income before
allocated corporate operating expenses
566,290
956,932
Allocation of corporate operating
expenses
114,802
104,078
Adjusted pretax operating
income
$
451,488
$
852,854
Real Estate (1) (7)
Year Ended December
31,
(In thousands)
2020
2019
Net premiums earned (8)
$
22,554
$
11,976
Services revenue (6) (8)
79,524
76,941
Net investment income
361
680
Total
102,439
89,597
Provision for losses
1,931
749
Cost of services
61,461
56,638
Other operating expenses before
allocated corporate operating expenses (4)
49,480
40,032
Total
112,872
97,419
Adjusted pretax operating income (loss)
before allocated corporate operating expenses (9)
(10,433
)
(7,822
)
Allocation of corporate operating
expenses
12,807
10,165
Adjusted pretax operating income
(loss)
$
(23,240
)
$
(17,987
)
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 5 of 6)
All Other (1) (7) (10)
Year Ended December
31,
(In thousands)
2020
2019
Net premiums earned (8)
$
—
$
(841
)
Services revenue (6) (8)
12,535
70,961
Net investment income
16,481
19,625
Other income
534
697
Total
29,550
90,442
Cost of services
15,639
47,625
Other operating expenses (4)
10,092
23,049
Total
25,731
70,674
Adjusted pretax operating
income
$
3,819
$
19,768
(1)
Certain organizational changes implemented in the first quarter of
2020 following the sale of Clayton caused the composition of our
reportable segments to change, including all activity related to
Clayton prior to the sale and certain other impacts now being
reflected in All Other activities. These changes to our reportable
segments have been reflected in our segment operating results for
all periods presented.
(2)
Net of ceded premiums written under the
QSR Programs and the Excess-of-Loss Program. See Exhibit L for
additional information.
(3)
Includes a cumulative adjustment to
unearned premiums related to an update to the amortization rates
used to recognize revenue for Single Premium Policies.
(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.
(6)
Inter-segment information:
Year Ended December
31,
(In thousands)
2020
2019
Inter-segment revenue included
in:
Mortgage
$
83
$
502
Real Estate
362
87
All Other
994
851
Total inter-segment revenue
$
1,439
$
1,440
Inter-segment expense included
in:
Mortgage
$
362
$
539
Real Estate
994
16
All Other
83
885
Total inter-segment expense
$
1,439
$
1,440
See notes continued on next
page.
Radian Group Inc. and Subsidiaries Segment
Information Exhibit E (page 6 of 6)
Notes continued from prior page.
(7)
The wind-down of our traditional
appraisal business announced in the fourth quarter of 2020 caused
the composition of our reportable segments to change, including all
activity related to that business and certain other adjustments to
services revenue now being reflected in All Other activities. These
changes to our reportable segments have been reflected in our
segment operating results for all periods presented.
(8)
In the fourth quarter of 2020, we
reclassified certain revenue previously reflected in the Real
Estate segment results as services revenue to net premiums earned.
As a result, for all periods presented, on the Real Estate segment,
net premiums earned has been increased and services revenue has
been decreased, with offsetting adjustments reflected in All Other
activities.
(9)
Supplemental information for Real
Estate adjusted EBITDA (see definition in Exhibit F):
Year Ended December
31,
(In thousands)
2020
2019
Adjusted pretax operating income (loss)
before corporate allocations
$
(10,433
)
$
(7,822
)
Depreciation and amortization
2,857
2,321
Real Estate adjusted EBITDA
$
(7,576
)
$
(5,501
)
(10)
All Other activities include: (i) income (losses) from assets held
by our holding company; (ii) related general corporate operating
expenses not attributable or allocated to our reportable segments;
(iii) for all periods prior to it's sale in the first quarter of
2020, revenue and expenses related to Clayton; (iv) revenue and
expenses from our traditional appraisal business; and (v) other
immaterial revenue and expense items.
Selected Mortgage Key Ratios
Year Ended December
31,
2020
2019
Loss ratio (1)
44.2
%
11.6
%
Expense ratio (1)
21.2
%
22.1
%
(1)
Calculated on a GAAP basis using net
premiums earned.
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; (ii) loss on extinguishment of debt;
(iii) amortization and impairment of goodwill and other acquired
intangible assets; and (iv) impairment of other long-lived assets
and other non-operating items, such as 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. 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 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 a non-GAAP measure for our Real Estate
segment, representing a measure of earnings before interest, income
tax provision (benefit), depreciation and amortization (“EBITDA”).
We calculate Real Estate adjusted EBITDA by using adjusted pretax
operating income (loss) as described above, further adjusted to
remove the impact of depreciation and corporate allocations for
interest and operating expenses. In addition, Real Estate adjusted
EBITDA margin is calculated by dividing Real Estate adjusted EBITDA
by GAAP total revenue for the Real Estate segment. Real Estate
adjusted EBITDA and Real Estate adjusted EBITDA margin 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 Real Estate 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 the most comparable GAAP measure,
net income (loss), to Real Estate adjusted EBITDA.
Total adjusted pretax operating
income (loss), adjusted diluted net operating income (loss) per
share, adjusted net operating return on equity, Real Estate
adjusted EBITDA and Real Estate adjusted EBITDA margin should not
be considered in isolation or viewed as substitutes for GAAP pretax
income (loss), diluted net income (loss) per share, return on
equity or net income (loss). Our definitions of adjusted pretax
operating income (loss), adjusted diluted net operating income
(loss) per share, adjusted net operating return on equity, Real
Estate adjusted EBITDA or Real Estate adjusted EBITDA margin may
not be comparable to similarly-named measures reported by other
companies.
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit G (page 1 of 6)
Reconciliation of Consolidated
Pretax Income to Adjusted Pretax Operating Income
2020
2019
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Consolidated pretax income
(loss)
$
179,167
$
161,205
$
(42,224
)
$
181,293
$
205,639
Less reconciling income (expense)
items:
Net gains (losses) on investments and
other financial instruments
17,376
17,652
47,276
(22,027
)
4,257
Impairment of goodwill
—
—
—
—
(4,828
)
Amortization and impairment of other
acquired intangible assets
(2,225
)
(961
)
(979
)
(979
)
(15,823
)
Impairment of other long-lived assets
and other non-operating items (1)
(6,971
)
(466
)
(22
)
(300
)
(1,950
)
Total adjusted pretax operating income
(loss) (2)
$
170,987
$
144,980
$
(88,499
)
$
204,599
$
223,983
(1)
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.
(2)
Total adjusted pretax operating
income (loss) consists of adjusted pretax operating income (loss)
for each reportable segment and All Other activities as
follows:
2020
2019
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Adjusted pretax operating income
(loss):
Mortgage segment
$
184,306
$
147,336
$
(85,821
)
$
205,667
$
224,912
Real Estate segment
(11,132
)
(5,046
)
(3,909
)
(3,153
)
(5,622
)
All Other activities
(2,187
)
2,690
1,231
2,085
4,693
Total adjusted pretax operating income
(loss)
$
170,987
$
144,980
$
(88,499
)
$
204,599
$
223,983
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit G (page 2 of 6)
Reconciliation of Diluted Net
Income (Loss) Per Share to Adjusted Diluted Net Operating Income
(Loss) Per Share
2020
2019
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Diluted net income (loss) per
share
$
0.76
$
0.70
$
(0.15
)
$
0.70
$
0.79
Less per-share impact of reconciling
income (expense) items:
Net gains (losses) on investments and
other financial instruments
0.09
0.09
0.24
(0.11
)
0.02
Impairment of goodwill
—
—
—
—
(0.02
)
Amortization and impairment of other
acquired intangible assets
(0.01
)
—
(0.01
)
—
(0.08
)
Impairment of other long-lived assets
and other non-operating items
(0.04
)
—
—
—
(0.01
)
Income tax (provision) benefit on
reconciling income (expense) items (1)
(0.01
)
(0.02
)
(0.05
)
0.02
0.02
Difference between statutory and
effective tax rate
0.04
0.04
0.03
(0.01
)
—
Per-share impact of reconciling income
(expense) items
0.07
0.11
0.21
(0.10
)
(0.07
)
Adjusted diluted net operating income
(loss) per share (1)
$
0.69
$
0.59
$
(0.36
)
$
0.80
$
0.86
(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)
2020
2019
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Return on equity (1)
14.1
%
13.3
%
(3.1
)%
14.2
%
16.2
%
Less impact of reconciling income
(expense) items: (2)
Net gains (losses) on investments and
other financial instruments
1.7
1.7
4.8
(2.2
)
0.4
Impairment of goodwill
—
—
—
—
(0.5
)
Amortization and impairment of other
acquired intangible assets
(0.2
)
(0.1
)
(0.1
)
(0.1
)
(1.6
)
Impairment of other long-lived assets
and other non-operating items
(0.7
)
—
—
—
(0.2
)
Income tax (provision) benefit on
reconciling income (expense) items (3)
(0.2
)
(0.3
)
(1.0
)
0.5
0.4
Difference between statutory and
effective tax rate
0.6
0.7
0.3
(0.3
)
(0.1
)
Impact of reconciling income (expense)
items
1.2
2.0
4.0
(2.1
)
(1.6
)
Adjusted net operating return on
equity
12.9
%
11.3
%
(7.1
)%
16.3
%
17.8
%
(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 6)
Reconciliation of Net Income
(Loss) to Real Estate Adjusted EBITDA
2020
2019
(In thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net income (loss)
$
148,013
$
135,103
$
(29,951
)
$
140,461
$
161,184
Less reconciling income (expense)
items:
Net gains (losses) on investments and
other financial instruments
17,376
17,652
47,276
(22,027
)
4,257
Impairment of goodwill
—
—
—
—
(4,828
)
Amortization and impairment of other
acquired intangible assets
(2,225
)
(961
)
(979
)
(979
)
(15,823
)
Impairment of other long-lived assets
and other non-operating items
(6,971
)
(466
)
(22
)
(300
)
(1,950
)
Income tax (provision) benefit
(31,154
)
(26,102
)
12,273
(40,832
)
(44,455
)
Mortgage adjusted pretax operating
income (loss)
184,306
147,336
(85,821
)
205,667
224,912
All Other adjusted pretax operating
income
(2,187
)
2,690
1,231
2,085
4,693
Real Estate adjusted pretax operating
income (loss)
(11,132
)
(5,046
)
(3,909
)
(3,153
)
(5,622
)
Less reconciling income (expense)
items:
Allocation of corporate operating
expenses to Real Estate
(3,369
)
(3,248
)
(2,823
)
(3,367
)
(2,675
)
Real Estate depreciation and
amortization
(744
)
(679
)
(771
)
(663
)
(552
)
Real Estate adjusted EBITDA
$
(7,019
)
$
(1,119
)
$
(315
)
$
877
$
(2,395
)
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit G (page 4 of 6)
Reconciliation of Consolidated
Pretax Income to Adjusted Pretax Operating Income
Year Ended December
31,
(In thousands)
2020
2019
Consolidated pretax income
$
479,441
$
848,993
Less reconciling income (expense)
items:
Net gains (losses) on investments and
other financial instruments
60,277
51,719
Loss on extinguishment of debt
—
(22,738
)
Impairment of goodwill
—
(4,828
)
Amortization and impairment of other
acquired intangible assets
(5,144
)
(22,288
)
Impairment of other long-lived assets
and other non-operating items (1)
(7,759
)
(7,507
)
Total adjusted pretax operating income
(2)
$
432,067
$
854,635
(1)
The amounts for both periods are included
in other operating expenses on the Condensed Consolidated Statement
of Operations in Exhibit A and primarily relate to impairments of
other long-lived assets.
(2)
Total adjusted pretax operating income
consists of adjusted pretax operating income (loss) for each
reportable segment and All Other activities as follows:
Year Ended December
31,
(In thousands)
2020
2019
Adjusted pretax operating income
(loss):
Mortgage segment
$
451,488
$
852,854
Real Estate segment
(23,240
)
(17,987
)
All Other activities
3,819
19,768
Total adjusted pretax operating
income
$
432,067
$
854,635
Reconciliation of Diluted Net
Income Per Share to Adjusted Diluted Net Operating Income Per
Share
Year Ended December
31,
2020
2019
Diluted net income per share
$
2.00
$
3.20
Less per-share impact of reconciling
income (expense) items:
Net gains (losses) on investments and
other financial instruments
0.31
0.25
Loss on extinguishment of debt
—
(0.11
)
Impairment of goodwill
—
(0.02
)
Amortization and impairment of other
acquired intangible assets
(0.03
)
(0.11
)
Impairment of other long-lived assets
and other non-operating items
(0.04
)
(0.04
)
Income tax (provision) benefit on other
income (expense) items (1)
(0.05
)
0.01
Difference between statutory and
effective tax rate
0.07
0.01
Per-share impact of other income
(expense) items
0.26
(0.01
)
Adjusted diluted net operating income
per share (1)
$
1.74
$
3.21
(1)
Calculated using the company’s federal
statutory tax rate of 21%. Any permanent tax adjustments and state
income taxes on these items have been deemed immaterial and are not
included.
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit G (page 5 of 6)
Reconciliation of Return on
Equity to Adjusted Net Operating Return on Equity (1)
Year Ended December
31,
2020
2019
Return on equity (1)
9.4
%
17.8
%
Less impact of reconciling income
(expense) items: (2)
Net gains (losses) on investments and
other financial instruments
1.4
1.4
Loss on extinguishment of debt
—
(0.6
)
Impairment of goodwill
—
(0.1
)
Amortization and impairment of other
acquired intangible assets
(0.1
)
(0.6
)
Impairment of other long-lived assets
and other non-operating items
(0.2
)
(0.2
)
Income tax (provision) benefit on
reconciling income (expense) items (3)
(0.2
)
—
Difference between statutory and
effective tax rate (3)
0.3
—
Impact of reconciling income (expense)
items
1.2
(0.1
)
Adjusted net operating return on
equity
8.2
%
17.9
%
(1)
Calculated by dividing net income by
average stockholders’ equity.
(2)
As a percentage of average stockholders’
equity.
(3)
Calculated using the company’s federal
statutory tax rate of 21%. Any permanent tax adjustments and state
income taxes on these items have been deemed immaterial and are not
included.
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit G (page 6 of 6)
Reconciliation of Net Income
to Real Estate Adjusted EBITDA
Year Ended December
31,
(In thousands)
2020
2019
Net income
$
393,626
$
672,309
Less reconciling income (expense)
items:
Net gains (losses) on investments and
other financial instruments
60,277
51,719
Loss on extinguishment of debt
—
(22,738
)
Impairment of goodwill
—
(4,828
)
Amortization and impairment of other
acquired intangible assets
(5,144
)
(22,288
)
Impairment of other long-lived assets
and other non-operating items
(7,759
)
(7,507
)
Income tax (provision) benefit
(85,815
)
(176,684
)
Mortgage adjusted pretax operating
income
451,488
852,854
All Other adjusted pretax operating
income
3,819
19,768
Real Estate adjusted pretax operating
income (loss)
(23,240
)
(17,987
)
Less reconciling income (expense)
items:
Allocation of corporate operating
expenses to Real Estate
(12,807
)
(10,165
)
Real Estate depreciation and
amortization
(2,857
)
(2,321
)
Real Estate adjusted EBITDA
$
(7,576
)
$
(5,501
)
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. “Real Estate
adjusted EBITDA” and “Real Estate adjusted EBITDA margin” are also
non-GAAP measures. These measures should not be considered in
isolation or viewed as substitutes for GAAP pretax income (loss),
diluted net income (loss) per share, return on equity or net income
(loss). Our definitions of adjusted pretax operating income (loss),
adjusted diluted net operating income (loss) per share, adjusted
net operating return on equity, Real Estate adjusted EBITDA or Real
Estate adjusted EBITDA margin may not be comparable to
similarly-named measures reported by other companies. See Exhibit F
for additional information on our consolidated non-GAAP financial
measures.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information - New
Insurance Written
Exhibit H
2020
2019
($ in millions)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
New insurance written ("NIW")
$
29,781
$
33,320
$
25,459
$
16,706
$
19,953
Percentage of NIW
by FICO score (1)
>=740
64.7
%
66.2
%
67.3
%
65.7
%
66.3
%
680-739
31.5
30.7
30.1
31.1
30.5
620-679
3.8
3.1
2.6
3.2
3.2
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Percentage of
NIW
Borrower-paid
99.2
%
98.5
%
97.8
%
96.7
%
97.4
%
Percentage by
premium type
Direct monthly and other recurring
premiums
91.4
%
90.0
%
84.7
%
81.1
%
82.1
%
Borrower-paid (2) (3)
8.3
9.0
13.6
16.5
16.0
Lender-paid (2)
0.3
1.0
1.7
2.4
1.9
Direct single premiums (2)
8.6
10.0
15.3
18.9
17.9
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
NIW for purchases
64.6
%
70.5
%
56.4
%
66.2
%
67.5
%
NIW for refinances
35.4
%
29.5
%
43.6
%
33.8
%
32.5
%
Percentage by
LTV
95.01% and above
8.9
%
9.7
%
8.3
%
9.9
%
11.5
%
90.01% to 95.00%
34.7
39.6
36.4
37.6
35.8
85.01% to 90.00%
29.8
28.3
29.8
30.3
30.0
85.00% and below
26.6
22.4
25.5
22.2
22.7
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.
(2)
Percentages exclude the impact of
reinsurance.
(3)
Borrower-paid Single Premium Policies have
lower Minimum Required Assets under PMIERs as compared to
lender-paid Single Premium Policies.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Primary Insurance in Force and Risk in Force
Exhibit I (page 1 of 2)
December 31,
September 30,
June 30,
March 31,
December 31,
($ in millions)
2020
2020
2020
2020
2019
Primary insurance in force (1)
Prime
$
242,044
$
241,166
$
236,835
$
236,958
$
235,742
Alt-A and A minus and below
4,100
4,301
4,471
4,628
4,816
Primary
$
246,144
$
245,467
$
241,306
$
241,586
$
240,558
Primary risk in force (1) (2)
Prime
$
59,689
$
59,972
$
59,253
$
59,827
$
59,780
Alt-A and A minus and below
967
1,017
1,058
1,096
1,141
Primary
$
60,656
$
60,989
$
60,311
$
60,923
$
60,921
Percentage of primary risk in
force
Direct monthly and other recurring
premiums
79.1
%
76.8
%
73.8
%
72.6
%
72.4
%
Direct single premiums
20.9
%
23.2
%
26.2
%
27.4
%
27.6
%
Percentage of primary risk in force by
FICO score (3)
>=740
57.5
%
57.6
%
57.4
%
57.2
%
56.9
%
680-739
34.6
34.3
34.3
34.2
34.2
620-679
7.3
7.5
7.7
8.0
8.2
<=619
0.6
0.6
0.6
0.6
0.7
Total Primary
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Percentage of primary risk in force by
LTV
95.01% and above
14.4
%
14.3
%
14.2
%
14.3
%
14.2
%
90.01% to 95.00%
49.3
50.1
50.4
51.0
51.3
85.01% to 90.00%
28.0
27.9
28.1
27.9
27.9
85.00% and below
8.3
7.7
7.3
6.8
6.6
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Percentage of primary risk in force by
policy year
2008 and prior
6.2
%
6.6
%
7.2
%
7.5
%
7.8
%
2009 - 2013
4.4
5.2
6.3
6.9
7.5
2014
2.6
3.0
3.6
4.0
4.3
2015
4.3
5.1
6.1
6.9
7.4
2016
7.6
8.9
10.6
11.7
12.5
2017
9.1
10.7
13.0
14.8
16.0
2018
9.8
11.7
14.0
16.4
17.9
2019
17.8
20.6
23.3
25.4
26.6
2020
38.2
28.2
15.9
6.4
—
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Primary risk in force on defaulted
loans
$
3,250
$
3,747
$
4,263
$
1,001
$
1,061
Table continued on next page.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Primary Insurance in Force and Risk in Force
Exhibit I (page 2 of 2)
Table continued from prior
page.
December 31,
September 30,
June 30,
March 31,
December 31,
2020
2020
2020
2020
2019
Persistency Rate (12 months ended)
(4)
61.2
%
65.6
%
70.2
%
75.4
%
78.2
%
Persistency Rate (quarterly,
annualized) (4) (5)
60.4
%
60.0
%
63.8
%
76.5
%
75.0
%
(1)
Excludes the impact of premiums ceded
under our reinsurance agreements.
(2)
Does not include pool risk in force or
other risk in force, which combined represent less than 1.0% of our
total risk in force for all periods presented.
(3)
For loans with multiple borrowers, the
percentage of primary risk in force by FICO score represents the
lowest of the borrowers’ FICO scores.
(4)
For the quarters ended December 31, 2020
and September 30, 2020, the Persistency Rate was reduced by an
increase in cancellations of Single Premium Policies due to
increased cancellations identified by our ongoing servicer
monitoring process for Single Premium Policies.
(5)
The Persistency Rate on a quarterly,
annualized basis is calculated based on loan-level detail for the
quarter ending as of the date shown. It may be impacted by
seasonality or other factors, including the level of refinance
activity during the applicable periods, and may not be indicative
of full-year trends.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Claims and Reserves
Exhibit J
2020
2019
($ in thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net claims paid: (1)
Total primary claims paid
$
8,353
$
11,331
$
22,144
$
24,358
$
24,267
Total pool and other
70
(230
)
639
(911
)
559
Subtotal
8,423
11,101
22,783
23,447
24,826
Impact of commutations and settlements
(2)
32,170
(267
)
—
(56
)
3,691
Total net claims paid
$
40,593
$
10,834
$
22,783
$
23,391
$
28,517
Total average net primary claims paid
(1) (3)
$
46.9
$
46.4
$
47.9
$
50.3
$
50.9
Average direct primary claims paid (3)
(4)
$
48.5
$
47.8
$
49.0
$
51.4
$
52.1
(1)
Net of reinsurance recoveries.
(2)
Includes payments to commute mortgage
insurance coverage on certain performing and non-performing loans.
For the fourth quarter of 2020, primarily includes payments made to
settle certain previously disclosed legal proceedings.
(3)
Calculated without giving effect to the
impact of commutations and settlements.
(4)
Before reinsurance recoveries.
December 31,
September 30,
June 30,
March 31,
December 31,
($ in thousands, except per default
amounts)
2020
2020
2020
2020
2019
Reserve for losses by category
(1)
Mortgage reserves
Prime
$
711,245
$
655,754
$
573,463
$
264,694
$
248,727
Alt-A and A minus and below
88,269
88,879
86,646
88,481
91,093
IBNR and other
9,966
43,153
43,342
40,583
40,920
LAE
20,172
18,745
16,807
9,216
8,918
Total primary reserves
829,652
806,531
720,258
402,974
389,658
Total pool reserves
14,163
14,779
14,398
11,297
11,322
Total 1st lien reserves
843,815
821,310
734,656
414,271
400,980
Other
292
398
335
407
293
Total Mortgage reserves
844,107
821,708
734,991
414,678
401,273
Real Estate reserves
4,306
4,084
3,894
3,524
3,492
Total reserves
$
848,413
$
825,792
$
738,885
$
418,202
$
404,765
1st lien reserve per default
Primary reserve per primary default
excluding IBNR and other
$
14,759
$
12,168
$
9,706
$
18,320
$
16,399
(1)
Includes ceded losses on reinsurance
transactions, which are expected to be recovered and are included
in the reinsurance recoverables reported in other assets in our
condensed consolidated balance sheets.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Default Statistics
Exhibit K
December 31,
September 30,
June 30,
March 31,
December 31,
2020
2020
2020
2020
2019
Default
Statistics
Primary Insurance:
Prime
Number of insured loans
1,031,736
1,043,450
1,040,964
1,049,974
1,049,954
Number of loans in default
51,032
58,057
64,648
15,497
16,532
Percentage of loans in default
4.95
%
5.56
%
6.21
%
1.48
%
1.57
%
Alt-A and A minus
and below
Number of insured loans
26,208
27,310
28,357
29,375
30,439
Number of loans in default
4,505
4,680
5,094
4,284
4,734
Percentage of loans in default
17.19
%
17.14
%
17.96
%
14.58
%
15.55
%
Total Primary
Number of insured loans
1,057,944
1,070,760
1,069,321
1,079,349
1,080,393
Number of loans in default
55,537
62,737
69,742
19,781
21,266
Percentage of loans in default
5.25
%
5.86
%
6.52
%
1.83
%
1.97
%
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Reinsurance Programs
Exhibit L
2020
2019
($ in thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Quota Share
Reinsurance (“QSR”) and Single Premium QSR Programs
Ceded premiums written (1)
$
(1,117
)
$
2,119
$
35,821
$
6,687
$
9,217
% of premiums written
(0.4
)%
0.8
%
13.0
%
2.4
%
3.0
%
Ceded premiums earned
$
29,510
$
36,742
$
60,652
$
18,712
$
19,428
% of premiums earned
8.6
%
11.2
%
19.2
%
6.2
%
6.1
%
Ceding commissions written
$
(3,847
)
$
(4,984
)
$
(5,304
)
$
8,413
$
6,836
Ceding commissions earned (2)
$
13,197
$
17,038
$
13,453
$
9,966
$
12,055
Profit commission
$
18,406
$
20,425
$
(10,649
)
$
16,405
$
17,792
Ceded losses
$
7,106
$
10,189
$
39,635
$
1,962
$
1,533
Excess-of-Loss
Program
Ceded premiums written
$
15,240
$
7,499
$
7,525
$
12,678
$
6,834
% of premiums written
5.2
%
2.8
%
2.7
%
4.5
%
2.2
%
Ceded premiums earned
$
12,037
$
8,290
$
8,321
$
8,405
$
7,104
% of premiums earned
3.7
%
2.5
%
2.6
%
2.8
%
2.2
%
Ceded RIF
(3)
QSR Program
$
381,787
$
454,585
$
532,743
$
596,166
$
644,512
Single Premium QSR Program
6,646,812
7,358,932
8,173,756
8,580,047
8,582,067
Excess-of-Loss Program
1,560,600
1,170,200
1,170,200
1,230,000
850,800
Total Ceded RIF
$
8,589,199
$
8,983,717
$
9,876,699
$
10,406,213
$
10,077,379
PMIERs impact -
reduction in Minimum Required Assets (4)
QSR Program
$
22,712
$
26,213
$
30,837
$
31,638
$
35,382
Single Premium QSR Program
423,712
469,625
517,028
501,668
511,695
Excess-of-Loss Program
912,734
783,842
970,294
1,066,464
738,386
Total PMIERs impact
$
1,359,158
$
1,279,680
$
1,518,159
$
1,599,770
$
1,285,463
(1)
Net of profit commission.
(2)
Includes amounts reported in policy
acquisition costs and other operating expenses. Operating expenses
include the following ceding commissions, net of deferred policy
acquisition costs, for the periods indicated:
2020
2019
($ in thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Ceding commissions
$
(10,436
)
$
(12,337
)
$
(10,406
)
$
(7,967
)
$
(7,973
)
(3)
Included in primary RIF.
(4)
Excludes the impact of intercompany
reinsurance.
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, including
management’s current views regarding the likely impacts of the
COVID-19 pandemic. 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, particularly those associated with
the COVID-19 pandemic, which has had wide-ranging and continually
evolving effects. The forward-looking statements, as well as our
prospects as a whole, are subject to risks and uncertainties that
could cause actual results to differ materially from those set
forth in the forward-looking statements. These risks and
uncertainties include, without limitation:
- the COVID-19 pandemic, which has caused significant economic
disruption, high unemployment, periods of volatility and disruption
in financial markets, and required adjustments in the housing
finance system and real estate markets. The COVID-19 pandemic has
adversely impacted our businesses, and this impact may continue for
an unknown period and could expand in scope. We expect that the
COVID-19 pandemic and measures taken to reduce its spread could
further impact our business and subject us to certain risks,
including those discussed in “Item 1A. Risk Factors-The COVID-19
pandemic has adversely impacted our business, and its ultimate
impact on our business and financial results will depend on future
developments, which are highly uncertain and cannot be predicted,
including the scope, severity and duration of the pandemic and
actions taken by governmental authorities in response to the
pandemic.” and the other risk factors in our Quarterly Report on
Form 10-Q for the quarter ended September 30, 2020 and in our
subsequent reports and registration statements filed from time to
time with the U.S. Securities and Exchange Commission;
- further changes in economic and political conditions that
impact the size of the insurable market, the credit performance of
our insured portfolio, and our business prospects;
- changes in the way customers, investors, ratings agencies,
regulators or legislators perceive our performance, financial
strength and future prospects;
- Radian Guaranty Inc.’s (“Radian Guaranty”) ability to remain
eligible under the Private Mortgage Insurer Eligibility
Requirements (the “PMIERs”) and other applicable requirements
imposed by the Federal Housing Finance Agency (the "FHFA") and by
Fannie Mae and Freddie Mac (collectively, the “GSEs”) to insure
loans purchased by the GSEs;
- the Enterprise Regulatory Capital Framework that was finalized
by the FHFA in December 2020 and, among other items, increases the
capital requirements for the GSEs and reduces their credit for risk
transfer, which could impact the GSEs' operations, pricing and the
size of the insurable mortgage insurance market, and which may form
the basis for future versions of the PMIERs;
- our ability to successfully execute and implement our capital
plans, including our risk distribution strategy through the capital
markets and reinsurance markets, and to maintain sufficient holding
company liquidity to meet our liquidity needs;
- our ability to successfully execute and implement our business
plans and strategies, including plans and strategies that require
GSE and/or regulatory approvals and various licenses and complex
compliance requirements;
- our ability to maintain an adequate level of capital in our
insurance subsidiaries to satisfy existing and future regulatory
requirements, including the PMIERs and any changes thereto, such as
the application of the recent and temporary amendment that applies
a reduced capital charge nationwide for certain COVID-19-related
nonperforming loans, and potential changes to the Mortgage Guaranty
Insurance Model Act currently under consideration;
- changes in the charters or business practices of, or rules or
regulations imposed by or applicable to, the GSEs, which may
include changes in the requirements to remain an approved insurer
to the GSEs, changes in the GSEs’ interpretation and application of
the PMIERs, as well as changes impacting loans purchased by the
GSEs, including changes to the GSEs’ business practices in response
to the COVID-19 pandemic;
- 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;
- uncertainty from the expected discontinuance of LIBOR and
transition to one or more alternative benchmarks that could cause
interest rate volatility and, among other things, impact our
investment portfolio, cost of debt and cost of reinsurance through
mortgage insurance-linked notes transactions;
- any disruption in the servicing of mortgages covered by our
insurance policies, as well as poor servicer performance, which
could be impacted by the burdens placed on many servicers due to
the impact of the COVID-19 pandemic;
- a decrease in the “Persistency Rates” (the percentage of
insurance in force that remains in force over a period of time) of
our mortgage insurance on monthly premium products;
- competition in our mortgage insurance business, including price
competition and competition from the FHA and U.S. Department of
Veterans Affairs as well as from other forms of credit enhancement,
such as GSE-sponsored alternatives to traditional mortgage
insurance;
- the effect of the Dodd-Frank Wall Street Reform and Consumer
Protection Act on the financial services industry in general, and
on our businesses in particular, including the recently finalized
changes to the "qualified mortgages" (QM) loan requirements;
- legislative and regulatory activity (or inactivity), including
the adoption of (or failure to adopt)new laws and regulations, or
changes in existing laws and regulations, or the way they are
interpreted or applied, including potential changes in tax law
under the newly elected Biden Administration;
- 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 settlements, 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 such
as we are currently experiencing due to the COVID-19 pandemic, 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 forbearance, a
repayment plan or a loan modification trial period under a loan
modification in response to COVID-19, the level of cash flow
generated by our insurance operations and our risk distribution
strategies;
- volatility in our financial results caused by changes in the
fair value of our assets and liabilities, including 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;
- effectiveness and security of our information technology
systems and solutions, including our ability to successfully
develop, launch and implement new and innovative technologies and
digital solutions and the potential disruption in, or failure of,
our information technology systems due to computer viruses,
unauthorized access, cyber-attack, natural disasters or other
similar events;
- our ability to attract and retain key employees; and
- legal and other limitations on amounts we may receive from our
subsidiaries, including dividends or ordinary course distributions
under our internal tax- and expense-sharing arrangements.
For more information regarding these risks and uncertainties as
well as certain additional risks that we face, you should refer to
“Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for
the quarter ended September 30, 2020 and “Item 1A. Risk Factors” in
our Annual Report on Form 10-K for the year ended December 31,
2019, 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/20210224006193/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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