-- GAAP net income of $155 million, or $0.80 per diluted share --

-- Adjusted diluted net operating income of $0.75 per diluted share --

-- Book value per share grows 11% year-over-year to $23.02 --

-- homegenius revenues grow 48% year-over-year to $33.5 million --

-- Company purchases 3.9 million shares or $90.1 million of Radian Group common stock during the three months ended June 30th; and an additional 2.8 million shares or $61.4 million purchased in July  --

Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended June 30, 2021, of $155.2 million, or $0.80 per diluted share. This compares with a net loss for the quarter ended June 30, 2020, of $30.0 million, or $0.15 per diluted share.

Key Financial Highlights (dollars in millions, except per-share amounts)

 

Quarter ended

 

June 30, 2021

March 31, 2021

June 30, 2020

Net income (loss) (1)

$155.2

$125.6

($30.0)

Diluted net income (loss) per share

$0.80

$0.64

($0.15)

Consolidated pretax income (loss)

$195.5

$161.2

($42.2)

Adjusted pretax operating income (loss) (2)

$184.7

$167.3

($88.5)

Adjusted diluted net operating

income (loss) per share (2)(3)

$0.75

$0.68

($0.36)

Return on equity (1)(4)

14.5%

11.8%

(3.1)%

Adjusted net operating return on equity (2)(3)

13.6%

12.4%

(7.1)%

New Insurance Written (NIW) - mortgage insurance

$21,662

$20,161

$25,459

Net premiums earned - mortgage insurance

$247.1

$264.7

$247.6

New defaults (5)

8,145

11,851

63,005

Provision for losses - mortgage insurance

$3.3

$45.9

$304.0

Book value per share (6)

$23.02

$22.14

$20.82

PMIERs Available Assets (7)

$5,042

$4,909

$4,229

PMIERs excess Available Assets (8)

$1,857

$1,451

$1,002

Total Holding Company Liquidity (9)

$1,191

$1,292

$1,404

Total investments

$6,682

$6,672

$6,431

Primary mortgage insurance in force

$237,302

$238,921

$241,306

Percentage of primary loans in default (10)

4.0%

4.9%

6.5%

Mortgage insurance loss reserves

$881

$883

$735

homegenius revenues

$33.5

$25.8

$22.5

(1)

Net income for the second quarter of 2021 includes a pretax net gain on investments and other financial instruments of $15.7 million, compared to a pretax net loss on investments and other financial instruments of $5.2 million in the first quarter of 2021 and a pretax net gain on investments and other financial instruments for the second quarter of 2020 of $47.3 million.

(2)

Adjusted results, including 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. 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)

Represents the number of new defaults reported during the period on loans related to primary mortgage insurance policies.

(6)

Book value per share includes accumulated other comprehensive income (loss) of $0.95 as of June 30, 2021, $0.61 as of March 31, 2021 and $1.11 as of June 30, 2020.

(7)

Represents Radian Guaranty’s Available Assets, calculated in accordance with the Private Mortgage Insurer Eligibility Requirements (PMIERs) financial requirements in effect for each date shown.

(8)

Represents Radian Guaranty’s excess or "cushion" of Available Assets over its Minimum Required Assets, calculated in accordance with the PMIERs financial requirements in effect for each date shown.

(9)

Represents Radian Group's total liquidity, including the $35 million minimum liquidity requirement and available capacity under its unsecured revolving credit facility.

(10)

Represents the number of primary loans in default as a percentage of the total number of insured primary loans.

 

Adjusted pretax operating income for the quarter ended June 30, 2021, was $184.7 million, or $0.75 per diluted share. This compares with adjusted pretax operating loss for the quarter ended June 30, 2020, of $88.5 million, or $0.36 per diluted share.

Book value as of June 30, 2021, was $4.3 billion, an increase of 9 percent compared to $4.0 billion as of June 30, 2020. Book value per share at June 30, 2021, was $23.02, an increase of 11 percent compared to $20.82 at June 30, 2020.

“As a company that offers products and services across the mortgage and real estate spectrum, we are encouraged by the continued positive momentum in the housing market, as well as the favorable credit trends within our insured portfolio,” said Radian’s Chief Executive Officer Rick Thornberry. “Year-over-year we successfully increased book value per share by 11%, grew PMIERs excess Available Assets to $1.9 billion, increased monthly premium mortgage insurance in force by 8% and grew revenues in our homegenius segment by 48%. Based on Radian’s strong financial position and capital flexibility, we also increased our quarterly dividend by 12% and repurchased 3.9 million shares during the second quarter.”

Thornberry added, “Our team continues to demonstrate outstanding resilience and dedication as we work together to support our customers and help ensure Radian’s continued success.”

SECOND QUARTER HIGHLIGHTS

  • NIW was $21.7 billion in the second quarter of 2021, compared to $20.2 billion in the first quarter of 2021 and $25.5 billion in the second quarter of 2020.
    • Of the $21.7 billion in NIW in the second quarter of 2021, 93.1 percent was written with monthly and other recurring premiums, compared to 90.2 percent in the first quarter of 2021, and 84.7 percent in the second quarter of 2020.
    • Refinances accounted for 22.9 percent of total NIW in the second quarter of 2021, compared to 40.9 percent in the first quarter of 2021, and 43.6 percent in the second quarter of 2020.
  • Total primary mortgage insurance in force as of June 30, 2021, declined to $237.3 billion, a decrease of 0.7 percent compared to $238.9 billion as of March 31, 2021, and a decrease of 1.7 percent compared to $241.3 billion as of June 30, 2020. The year over year decrease included a 28.2 percent decline in single premium policy insurance in force, partially offset by a 8.1 percent increase in monthly premium policy insurance in force.
    • Persistency, which is the percentage of mortgage insurance that remains in force after a twelve-month period, was 57.7 percent for the twelve months ended June 30, 2021, compared to 57.2 percent for the twelve months ended March 31, 2021 and 70.2 percent for the twelve months ended June 30, 2020.
    • Annualized persistency for the three months ended June 30, 2021, was 66.3 percent, compared to 62.5 percent for the three months ended March 31, 2021, and 63.8 percent for the three months ended June 30, 2020.
  • Net mortgage insurance premiums earned were $247.1 million for the quarter ended June 30, 2021, compared to $264.7 million for the quarter ended March 31, 2021, and $247.6 million for the quarter ended June 30, 2020.
    • Mortgage insurance in force portfolio premium yield was 41.1 basis points in the second quarter of 2021, compared to 42.7 basis points in the first quarter of 2021 and 44.3 basis points in the second quarter of 2020.
    • The impact of single premium policy cancellations before consideration of reinsurance represented 5.3 basis points of direct premium yield in the second quarter of 2021, 6.4 basis points in the first quarter of 2021, and 8.2 basis points in the second quarter of 2020.
    • Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 41.5 basis points in the second quarter of 2021, 43.7 basis points in the first quarter of 2021, and 41.0 basis points in the second quarter of 2020.
    • Additional details regarding premiums earned may be found in Exhibit D.
  • The mortgage insurance provision for losses was $3.3 million in the second quarter of 2021, compared to $45.9 million in the first quarter of 2021, and $304.0 million in the second quarter of 2020.
    • The decrease in the second quarter of 2021 compared to the first quarter of 2021 was primarily related to a favorable development on prior period reserves, based on more favorable trends in cures than originally estimated. The decrease in second quarter of 2021 compared to the second quarter of 2020 was driven primarily by a significant decrease in primary new default notices related to the effects of the COVID-19 pandemic.
    • The number of primary delinquent loans was 40,464 as of June 30, 2021, compared to 50,106 as of March 31, 2021 and 69,742 as of June 30, 2020.
    • The loss ratio in the second quarter of 2021 was 1.3 percent, compared to 17.3 percent in the first quarter of 2021 and 122.8 percent in the second quarter of 2020.
    • Total mortgage insurance claims paid were $4.2 million in the second quarter of 2021, compared to $10.5 million in the first quarter of 2021, and $22.8 million in the second quarter of 2020. Excluding the impact of commutations and settlements, claims paid were $4.2 million in the second quarter of 2021, compared to $6.5 million in the first quarter of 2021 and $22.8 million in the second quarter of 2020.
  • Radian's homegenius segment offers a broad array of title, valuation, asset management, software-as-a-service and other real estate services to mortgage lenders, mortgage and real estate investors, GSEs, real estate brokers and agents.
    • Total homegenius segment revenues for the second quarter of 2021 were $33.5 million, compared to $25.8 million for the first quarter of 2021, and $22.5 million for the second quarter of 2020.
    • The increase in revenues for the homegenius segment in the second quarter of 2021 compared to the first quarter of 2021 was primarily driven by increases in services revenue attributable to all of our services business lines. The increase in revenues for the homegenius segment in the second quarter of 2021 compared to the second quarter of 2020 was primarily driven by increases in net title premiums earned and services revenue attributable to our title and valuation services businesses. homegenius Profitability Metrics
    • Adjusted pretax operating loss, our primary segment measure of profitability for the homegenius segment for the quarter ended June 30, 2021 was $9.2 million, compared to $10.5 million for the quarter ended March 31, 2021, and $3.9 million for the quarter ended June 30, 2020.
    • Adjusted pretax operating loss before allocated corporate operating expenses for the homegenius segment for the quarter ended June 30, 2021 was $4.5 million, compared to $6.5 million for the quarter ended March 31, 2021, and $1.1 million for the quarter ended June 30, 2020. Additional details regarding the homegenius results and related non-GAAP measures may be found in Exhibits F and G.
    • Adjusted gross profit, for the homegenius segment for the quarter ended June 30, 2021 was $11.7 million, compared to $8.5 million for the quarter ended March 31, 2021, and $9.4 million for the quarter ended June 30, 2020. Additional details regarding the homegenius results and related non-GAAP measures may be found in Exhibits F and G.
  • Other operating expenses were $86.5 million in the second quarter of 2021, compared to $70.3 million in the first quarter of 2021, and $60.6 million in the second quarter of 2020.
    • The increase in the second quarter of 2021 compared to the first quarter of 2021 was primarily related to an increase in incentive compensation expense and a $3.9 million increase in non-operating items. The increase in the second quarter of 2021 compared to the second quarter of 2020 was driven primarily by an increase in compensation expense and a decrease in ceding commissions.

CAPITAL AND LIQUIDITY UPDATE

Radian Group

  • As of June 30, 2021, Radian Group maintained $923.0 million of available liquidity. Total liquidity, which includes the company’s $267.5 million unsecured revolving credit facility, was $1.2 billion as of June 30, 2021.
  • During the quarter ended June 30, 2021, the company repurchased 3.9 million shares of Radian Group common stock at a total cost of $90.1 million, including commissions. As of June 30, 2021, purchase authority of up to $100.2 million remained available under this program. The current share repurchase authorization expires on August 31, 2021.
  • In addition, in July the Company purchased an additional 2.8 million shares, or approximately $61.4 million of Radian Group common stock, including commissions. After the repurchases in July, purchase authority of up to approximately $38.9 million remained available under the existing program.
  • On May 4, 2021, Radian Group’s Board of Directors authorized an increase to the Company's quarterly dividend on its common stock from $0.125 to $0.14 per share and paid the dividend on June 4, 2021.

Radian Guaranty

  • At June 30, 2021, Radian Guaranty’s Available Assets under PMIERs totaled approximately $5.0 billion, resulting in excess available resources or a “cushion” of $1.9 billion, or 58 percent, over its Minimum Required Assets.
  • As of June 30, 2021, 71 percent of Radian Guaranty's primary mortgage insurance risk in force is subject to some form of risk distribution, providing a $1.3 billion reduction of Minimum Required Assets under PMIERs.

RECENT EVENTS

Radian Guaranty Operating Statistics for July 2021

The information below includes total new primary defaults, which include defaults under forbearance programs in response to the COVID-19 pandemic, as well as cures, claims paid and rescissions/denials. The information regarding new defaults and cures is reported to Radian Guaranty from loan servicers. We consider a loan to be in default for financial statement and internal tracking purposes upon receipt of notification by servicers that a borrower has missed two monthly payments. Default reporting, particularly on a monthly basis, may be affected by several factors, including the date on which the loan servicer’s report is generated and transmitted to Radian Guaranty, the impact of updated information submitted by servicers and the timing of servicing transfers.

 

July

2021

June

2021

May

2021

April

2021

Beginning primary default inventory (# of loans)

40,464

 

42,802

 

45,689

 

50,106

 

New defaults

2,749

 

2,680

 

2,714

 

2,751

 

Cures

(4,728)

 

(4,980)

 

(5,573)

 

(7,128)

 

Claims paid

(141)

 

(29)

 

(32)

 

(37)

 

Rescissions and Claim Denials, net (1)

3

 

(9)

 

4

 

(3)

 

Ending primary default inventory

38,347

 

40,464

 

42,802

 

45,689

 

(1)

Net of any previous Rescissions and Claim Denials that were reinstated during the period. Such reinstated Rescissions and Claim Denials may ultimately result in a paid claim.

 

CONFERENCE CALL

Radian will discuss second quarter 2021 financial results in a conference call tomorrow, Wednesday, August 4, 2021, at 11:00 a.m. Eastern daylight time. The conference call will be broadcast live over the Internet at https://radian.com/who-we-are/for-investors/webcasts or at www.radian.com. The call may also be accessed by dialing 800.447.0521 inside the U.S., or 847.413.3238 for international callers, using passcode 50201372 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 50201372.

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 impairment of internal-use software, gains (losses) from the sale of lines of business and acquisition-related income and expenses. Adjusted diluted net operating income (loss) per share is calculated by dividing (i) adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the Company’s statutory tax rate, by (ii) the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Adjusted net operating return on equity is calculated by dividing annualized adjusted pretax operating income (loss), net of taxes computed using the Company's statutory tax rate, by average stockholders' equity, based on the average of the beginning and ending balances for each period presented.

In addition to the above non-GAAP measures for the consolidated company, we also have presented as supplemental information non-GAAP measures for our homegenius segment of adjusted pretax operating income (loss) before allocated corporate operating expenses and adjusted gross profit. Adjusted pretax operating income (loss) before allocated corporate operating expenses is calculated as adjusted pretax operating income (loss) as described above (which is the segment's ASC 280 GAAP measure of operating performance), adjusted to remove the impact of corporate allocations of other operating expenses for the homegenius segment. Adjusted gross profit is further adjusted to remove other operating expenses. In addition, homegenius adjusted pretax operating margin before allocated corporate operating expenses and homegenius adjusted gross profit margin are calculated by dividing homegenius adjusted pretax operating margin before allocated corporate operating expenses and homegenius adjusted gross profit, respectively, by GAAP total revenue for the homegenius segment. For the homegenius segment, adjusted pretax operating income (loss) before allocated corporate operating expenses, adjusted gross profit, and the related homegenius profit margins are used to facilitate comparisons with other services companies, since they are widely accepted measures of performance in the services industry and are used internally as supplemental measures to evaluate the performance of our homegenius segment.

See Exhibit F or Radian’s website for a description of these items, as well as Exhibit G for reconciliations to the most comparable consolidated GAAP measures.

ABOUT RADIAN

Radian Group Inc. (NYSE: RDN) is ensuring the American dream of homeownership responsibly and sustainably through products and services that include industry-leading mortgage insurance and a comprehensive suite of mortgage, risk, title, valuation, asset management, software-as-a service 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 (Loss) 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

 

 

2021

 

2020

(In thousands, except per-share amounts)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Net premiums earned

$

254,756

 

 

$

271,872

 

 

$

302,140

 

(1)

$

286,471

 

 

$

249,295

 

Services revenue

29,464

 

 

22,895

 

 

11,440

 

(1)

33,943

 

 

28,075

 

Net investment income

36,291

 

 

38,251

 

 

38,115

 

 

36,255

 

 

38,723

 

Net gains (losses) on investments and other financial instruments

15,661

 

 

(5,181

)

 

17,376

 

 

17,652

 

 

47,276

 

Other income

822

 

 

976

 

 

790

 

 

913

 

 

1,072

 

Total revenues

336,994

 

 

328,813

 

 

369,861

 

 

375,234

 

 

364,441

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Provision for losses

3,648

 

 

46,143

 

 

56,664

 

 

88,084

 

 

304,418

 

Policy acquisition costs

4,838

 

 

8,996

 

 

7,395

 

 

10,166

 

 

6,015

 

Cost of services

24,615

 

 

20,246

 

 

21,600

 

 

24,353

 

 

17,972

 

Other operating expenses

86,469

 

 

70,262

 

 

81,641

 

 

69,377

 

 

60,582

 

Interest expense

21,065

 

 

21,115

 

 

21,169

 

 

21,088

 

 

16,699

 

Amortization and impairment of other acquired intangible assets

863

 

 

862

 

 

2,225

 

 

961

 

 

979

 

Total expenses

141,498

 

 

167,624

 

 

190,694

 

 

214,029

 

 

406,665

 

 

 

 

 

 

 

 

 

 

 

Pretax income (loss)

195,496

 

 

161,189

 

 

179,167

 

 

161,205

 

 

(42,224

)

Income tax provision (benefit)

40,290

 

 

35,581

 

 

31,154

 

 

26,102

 

 

(12,273

)

Net income (loss)

$

155,206

 

 

$

125,608

 

 

$

148,013

 

 

$

135,103

 

 

$

(29,951

)

 

 

 

 

 

 

 

 

 

 

Diluted net income (loss) per share

$

0.80

 

 

$

0.64

 

 

$

0.76

 

 

$

0.70

 

 

$

(0.15

)

(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

Net Income (Loss) Per Share Trend Schedule

Exhibit B

 

The calculation of basic and diluted net income (loss) per share was as follows:

 

 

2021

 

2020

(In thousands, except per-share amounts)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Net income (loss) —basic and diluted

$

155,206

 

 

$

125,608

 

 

$

148,013

 

$

135,103

 

 

$

(29,951

)

 

 

 

 

 

 

 

 

Average common shares outstanding—basic

193,436

 

 

193,439

 

 

193,248

 

193,176

 

193,299

 

Dilutive effect of stock-based compensation arrangements (1)

1,202

 

 

1,764

 

 

1,415

 

980

 

 

Adjusted average common shares outstanding—diluted

194,638

 

 

195,203

 

 

194,663

 

 

194,156

 

 

193,299

 

 

 

 

 

 

 

 

 

Basic net income (loss) per share

$

0.80

 

 

$

0.65

 

 

$

0.77

 

$

0.70

 

$

(0.15

)

 

 

 

 

 

Diluted net income (loss) per share

$

0.80

 

 

$

0.64

 

 

$

0.76

 

$

0.70

 

$

(0.15

)

(1)

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:

 

2021

 

2020

(In thousands)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Shares of common stock equivalents

 

 

 

 

324

 

 

710

 

 

2,295

 

 

Radian Group Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

Exhibit C

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

(In thousands, except per-share amounts)

2021

 

2021

 

2020

 

2020

 

2020

 

 

Assets:

 

Investments

$

6,681,659

 

$

6,671,874

 

$

6,788,442

 

$

6,584,577

 

$

6,431,350

 

Cash

 

134,939

 

 

102,776

 

 

87,915

 

 

82,020

 

 

68,387

 

Restricted cash

 

2,968

 

 

20,987

 

 

6,231

 

 

4,424

 

 

16,279

 

Accrued investment income

 

32,223

 

 

34,841

 

 

34,047

 

 

36,093

 

 

34,179

 

Accounts and notes receivable

 

153,128

 

 

134,075

 

 

121,294

 

 

145,164

 

 

110,722

 

Reinsurance recoverables

 

75,411

 

 

76,664

 

 

73,202

 

 

66,515

 

 

56,852

 

Deferred policy acquisition costs

 

17,873

 

 

15,652

 

 

18,305

 

 

17,926

 

 

21,774

 

Property and equipment, net

 

74,288

 

 

78,309

 

 

80,457

 

 

88,717

 

 

89,143

 

Goodwill and other acquired intangible assets, net

 

21,318

 

 

22,181

 

 

23,043

 

 

25,268

 

 

26,229

 

Other assets

 

815,261

 

 

763,502

 

 

715,085

 

 

726,641

 

 

714,394

 

Total assets

$

8,009,068

 

$

7,920,861

 

$

7,948,021

 

$

7,777,345

 

$

7,569,309

 

 

 

Liabilities and stockholders’ equity:

 

Unearned premiums

$

373,031

 

$

406,689

 

$

448,791

 

$

501,787

 

$

561,280

 

Reserve for losses and loss adjustment expense

 

885,498

 

 

887,355

 

 

848,413

 

 

825,792

 

 

738,885

 

Senior notes

 

1,407,545

 

 

1,406,603

 

 

1,405,674

 

 

1,404,759

 

 

1,403,857

 

FHLB advances

 

153,983

 

 

138,833

 

 

176,483

 

 

141,058

 

 

175,122

 

Reinsurance funds withheld

 

285,406

 

 

282,345

 

 

278,555

 

 

318,773

 

 

312,350

 

Net deferred tax liability

 

266,330

 

 

210,571

 

 

213,897

 

 

166,136

 

 

126,883

 

Other liabilities

 

303,442

 

 

353,173

 

 

291,855

 

 

296,661

 

 

264,927

 

Total liabilities

 

3,675,235

 

 

3,685,569

 

 

3,663,668

 

 

3,654,966

 

 

3,583,304

 

 

 

Common stock

 

207

 

 

210

 

 

210

 

 

210

 

 

210

 

Treasury stock

 

(920,225

)

 

(910,347

)

 

(910,115

)

 

(909,745

)

 

(909,738

)

Additional paid-in capital

 

2,161,857

 

 

2,242,950

 

 

2,245,897

 

 

2,238,869

 

 

2,232,949

 

Retained earnings

 

2,913,138

 

 

2,785,744

 

 

2,684,636

 

 

2,561,076

 

 

2,450,423

 

Accumulated other comprehensive income

 

178,856

 

 

116,735

 

 

263,725

 

 

231,969

 

 

212,161

 

Total stockholders’ equity

 

4,333,833

 

 

4,235,292

 

 

4,284,353

 

 

4,122,379

 

 

3,986,005

 

Total liabilities and stockholders’ equity

$

8,009,068

 

$

7,920,861

 

$

7,948,021

 

$

7,777,345

 

$

7,569,309

 

 

 

Shares outstanding

 

188,290

 

 

191,311

 

 

191,606

 

 

191,556

 

 

191,492

 

 

 

Book value per share

$

23.02

 

$

22.14

 

$

22.36

 

$

21.52

 

$

20.82

 

 

Debt to capital ratio (1)

 

24.5

%

 

24.9

%

 

24.7

%

 

25.4

%

 

26.0

%

Risk to capital ratio-Radian Guaranty only

11.4:1

 

11.9:1

 

 

12.7:1

 

 

13.2:1

 

13.3:1

 

(1)

Calculated as senior notes divided by senior notes and stockholders' equity.

Radian Group Inc. and Subsidiaries

Net Premiums Earned

Exhibit D

 

 

2021

 

2020

(In thousands)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

 

 

 

 

 

 

 

 

 

Premiums earned:

 

 

 

 

 

 

 

 

 

Direct - Mortgage:

 

 

 

 

 

 

 

 

 

Premiums earned, excluding revenue from cancellations (1)

$

243,077

 

 

$

256,905

 

 

$

272,331

 

 

$

259,889

 

 

$

263,468

 

Single Premium Policy cancellations

31,592

 

 

38,510

 

 

53,526

 

 

65,667

 

 

50,023

 

Total direct - Mortgage (1)

274,669

 

 

295,415

 

 

325,857

 

 

325,556

 

 

313,491

 

 

 

 

 

 

 

 

 

 

 

Assumed - Mortgage: (2)

1,615

 

 

2,298

 

 

2,615

 

 

2,946

 

 

3,197

 

 

 

 

 

 

 

 

 

 

 

Ceded - Mortgage:

 

 

 

 

 

 

 

 

 

Premiums earned, excluding revenue from cancellations

(27,324

)

 

(25,373

)

 

(27,229

)

 

(25,120

)

 

(26,493

)

Single Premium Policy cancellations (3)

(9,036

)

 

(11,109

)

 

(15,197

)

 

(18,679

)

 

(14,424

)

Profit commission - other (4)

7,162

 

 

3,433

 

 

770

 

 

(1,347

)

 

(28,175

)

Total ceded premiums - Mortgage (5)

(29,198

)

 

(33,049

)

 

(41,656

)

 

(45,146

)

 

(69,092

)

Net premiums earned - Mortgage (1)

247,086

 

 

264,664

 

 

286,816

 

 

283,356

 

 

247,596

 

Net premiums earned - homegenius (6)

7,670

 

 

7,208

 

 

7,572

 

 

7,099

 

 

4,734

 

Net premiums earned - All Other (6)

 

 

 

 

7,752

 

 

(3,984

)

 

(3,035

)

Net premiums earned (1)

$

254,756

 

 

$

271,872

 

 

$

302,140

 

 

$

286,471

 

 

$

249,295

 

(1)

The fourth quarter of 2020 includes an increase to premiums earned of $11.3 million related to changes in present value estimates for initial premiums on monthly policies that are deferred and not collected until cancellation. The impact of changes in this estimate in other periods is not material.

(2)

Relates primarily to premiums earned from our participation in certain credit risk transfer programs.

(3)

Includes the impact of related profit commissions.

(4)

The amounts represent the profit commission on the Single Premium QSR Program, excluding the impact of Single Premium Policy cancellations.

(5)

See Exhibit L for additional information on ceded premiums for our various reinsurance programs.

(6)

See Exhibit E for additional information on changes that impacted our reported segment results for all periods.

Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 1 of 4)

Summarized financial information concerning our operating segments as of and for the periods indicated is as follows. For a definition of adjusted pretax operating income (loss), homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses and homegenius adjusted gross profit, along with reconciliations to consolidated GAAP measures, see Exhibits F and G.

 

Three Months Ended June 30, 2021

(In thousands)

Mortgage

homegenius

All Other

Inter-segment

Total

Net premiums written

$

231,027

 

$

7,670

 

$

 

$

 

$

238,697

 

(Increase) decrease in unearned premiums

 

16,059

 

 

 

 

 

 

 

 

16,059

 

Net premiums earned

 

247,086

 

 

7,670

 

 

 

 

 

 

254,756

 

Services revenue

 

3,732

 

 

25,750

 

 

44

 

 

(62

)

 

29,464

 

Net investment income

 

32,842

 

 

31

 

 

3,418

 

 

 

 

36,291

 

Other income

 

641

 

 

 

 

181

 

 

 

 

822

 

Total

 

284,301

 

 

33,451

 

 

3,643

 

 

(62

)

 

321,333

 

 

 

 

 

 

 

Provision for losses

 

3,334

 

 

335

 

 

 

 

(21

)

 

3,648

 

Policy acquisition costs

 

4,838

 

 

 

 

 

 

 

 

4,838

 

Cost of services

 

3,161

 

 

21,433

 

 

19

 

 

2

 

 

24,615

 

Other operating expenses before allocated corporate operating expenses (1)

 

27,441

 

 

16,160

 

 

1,169

 

 

(43

)

 

44,727

 

Interest expense

 

21,065

 

 

 

 

 

 

 

 

21,065

 

Total

 

59,839

 

 

37,928

 

 

1,188

 

 

(62

)

 

98,893

 

Adjusted pretax operating income (loss) before allocated corporate operating expenses

 

224,462

 

 

(4,477

)

 

2,455

 

 

 

 

222,440

 

Allocation of corporate operating expenses

 

33,000

 

 

4,721

 

 

 

 

 

 

37,721

 

Adjusted pretax operating income (loss)

$

191,462

 

$

(9,198

)

$

2,455

 

$

 

$

184,719

 

 

 

Three Months Ended June 30, 2020

(In thousands)

Mortgage

homegenius

All Other

Inter-segment

Total

Net premiums written

$

229,458

 

$

4,734

 

$

(3,035

)

$

 

$

231,157

 

(Increase) decrease in unearned premiums

 

18,138

 

 

 

 

 

 

 

 

18,138

 

Net premiums earned

 

247,596

 

 

4,734

 

 

(3,035

)

 

 

 

249,295

 

Services revenue

 

3,918

 

 

17,688

 

 

6,579

 

 

(110

)

 

28,075

 

Net investment income

 

34,708

 

 

126

 

 

3,889

 

 

 

 

38,723

 

Other income (1)

 

721

 

 

 

 

104

 

 

 

 

825

 

Total

 

286,943

 

 

22,548

 

 

7,537

 

 

(110

)

 

316,918

 

 

 

 

 

 

 

Provision for losses

 

304,021

 

 

426

 

 

 

 

(29

)

 

304,418

 

Policy acquisition costs

 

6,015

 

 

 

 

 

 

 

 

6,015

 

Cost of services

 

2,133

 

 

12,681

 

 

3,177

 

 

(19

)

 

17,972

 

Other operating expenses before allocated corporate operating expenses (1)

 

18,537

 

 

10,527

 

 

3,129

 

 

(62

)

 

32,131

 

Interest expense

 

16,699

 

 

 

 

 

 

 

 

16,699

 

Total

 

347,405

 

 

23,634

 

 

6,306

 

 

(110

)

 

377,235

 

Adjusted pretax operating income (loss) before allocated corporate operating expenses

 

(60,462

)

 

(1,086

)

 

1,231

 

 

 

 

(60,317

)

Allocation of corporate operating expenses

 

25,359

 

 

2,823

 

 

 

 

 

 

28,182

 

Adjusted pretax operating income (loss)

$

(85,821

)

$

(3,909

)

$

1,231

 

$

 

$

(88,499

)

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 2 of 4)

 

 

Mortgage

 

2021

 

2020

(In thousands)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Net premiums written (2) (3)

$

231,027

 

 

$

246,874

 

 

$

261,244

 

 

$

259,278

 

 

$

229,458

 

(Increase) decrease in unearned premiums

 

16,059

 

 

 

17,790

 

 

 

25,572

 

 

 

24,078

 

 

 

18,138

 

Net premiums earned

 

247,086

 

 

 

264,664

 

 

 

286,816

 

 

 

283,356

 

 

 

247,596

 

Services revenue

 

3,732

 

 

 

4,351

 

 

 

3,717

 

 

 

3,914

 

 

 

3,918

 

Net investment income

 

32,842

 

 

 

34,013

 

 

 

34,235

 

 

 

32,054

 

 

 

34,708

 

Other income

 

641

 

 

 

769

 

 

 

735

 

 

 

689

 

 

 

721

 

Total

 

284,301

 

 

 

303,797

 

 

 

325,503

 

 

 

320,013

 

 

 

286,943

 

 

 

 

 

 

 

 

 

 

 

Provision for losses

 

3,334

 

 

 

45,869

 

 

 

56,312

 

 

 

87,753

 

 

 

304,021

 

Policy acquisition costs

 

4,838

 

 

 

8,996

 

 

 

7,395

 

 

 

10,166

 

 

 

6,015

 

Cost of services

 

3,161

 

 

 

3,192

 

 

 

3,245

 

 

 

2,908

 

 

 

2,133

 

Other operating expenses before allocated corporate operating expenses (1)

 

27,441

 

 

 

22,454

 

 

 

21,974

 

 

 

21,635

 

 

 

18,537

 

Interest expense (5) (6)

 

21,065

 

 

 

21,115

 

 

 

21,169

 

 

 

21,088

 

 

 

16,699

 

Total (7)

 

59,839

 

 

 

101,626

 

 

 

110,095

 

 

 

143,550

 

 

 

347,405

 

Adjusted pretax operating income (loss) before allocated corporate operating expenses

 

224,462

 

 

 

202,171

 

 

 

215,408

 

 

 

176,463

 

 

 

(60,462

)

Allocation of corporate operating expenses

 

33,000

 

 

 

27,884

 

 

 

31,102

 

 

 

29,127

 

 

 

25,359

 

Adjusted pretax operating income (loss)

$

191,462

 

 

$

174,287

 

 

$

184,306

 

 

$

147,336

 

 

$

(85,821

)

 

 

homegenius (6)

 

2021

 

2020

(In thousands)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Net premiums earned (7)

$

7,670

 

 

$

7,208

 

 

$

7,572

 

 

$

7,099

 

 

$

4,734

 

Services revenue (6) (7)

 

25,750

 

 

 

18,550

 

 

 

15,958

 

 

 

22,627

 

 

 

17,688

 

Net investment income

 

31

 

 

 

37

 

 

 

43

 

 

 

67

 

 

 

126

 

Total

 

33,451

 

 

 

25,795

 

 

 

23,573

 

 

 

29,793

 

 

 

22,548

 

 

 

 

 

 

 

 

 

 

 

Provision for losses

 

335

 

 

 

296

 

 

 

392

 

 

 

370

 

 

 

426

 

Cost of services

 

21,433

 

 

 

17,028

 

 

 

15,706

 

 

 

18,085

 

 

 

12,681

 

Other operating expenses before allocated corporate operating expenses (1)

 

16,160

 

 

 

14,928

 

 

 

15,238

 

 

 

13,136

 

 

 

10,527

 

Total

 

37,928

 

 

 

32,252

 

 

 

31,336

 

 

 

31,591

 

 

 

23,634

 

Adjusted pretax operating income (loss) before allocated corporate operating expenses

 

(4,477

)

 

 

(6,457

)

 

 

(7,763

)

 

 

(1,798

)

 

 

(1,086

)

Allocation of corporate operating expenses

 

4,721

 

 

 

3,996

 

 

 

3,369

 

 

 

3,248

 

 

 

2,823

 

Adjusted pretax operating income (loss)

$

(9,198

)

 

$

(10,453

)

 

$

(11,132

)

 

$

(5,046

)

 

$

(3,909

)

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 3 of 4)

 

 

All Other (6) (9)

 

2021

 

2020

(In thousands)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Net premiums earned (8)

$

 

 

$

 

 

$

7,752

 

 

$

(3,984

)

 

$

(3,035

)

Services revenue (7) (8)

44

 

 

53

 

 

(7,963

)

 

8,267

 

 

6,579

 

Net investment income

3,418

 

 

4,201

 

 

3,837

 

 

4,134

 

 

3,889

 

Other income

181

 

 

207

 

 

55

 

 

224

 

 

104

 

Total

3,643

 

 

4,461

 

 

3,681

 

 

8,641

 

 

7,537

 

 

 

 

 

 

 

 

 

 

 

Cost of services

19

 

 

28

 

 

2,835

 

 

4,127

 

 

3,177

 

Other operating expenses (1)

1,169

 

 

951

 

 

3,033

 

 

1,824

 

 

3,129

 

Total

1,188

 

 

979

 

 

5,868

 

 

5,951

 

 

6,306

 

Adjusted pretax operating income (loss)

$

2,455

 

 

$

3,482

 

 

$

(2,187

)

 

$

2,690

 

 

$

1,231

(1)

Does not include impairment of long-lived assets and other non-operating items, which are not considered components of adjusted pretax operating income (loss).

(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 quarter of 2020 includes an increase to premiums earned of $11.3 million, related to changes in present value estimates for initial premiums on monthly policies that are deferred and not collected until cancellation. The impact of changes in this estimate in other periods is not material.

(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)

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.

(7)

Inter-segment information:

2021

 

2020

(In thousands)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Inter-segment revenue included in:

 

 

 

 

 

 

 

 

 

Mortgage

$

 

 

$

 

 

$

 

 

$

 

 

$

 

homegenius

62

 

 

59

 

 

86

 

 

98

 

 

91

 

All Other

 

 

 

 

186

 

 

767

 

 

19

 

Total inter-segment revenue

$

62

 

 

$

59

 

 

$

272

 

 

$

865

 

 

$

110

 

 

 

 

 

 

 

 

 

 

 

Inter-segment expense included in:

 

 

 

 

 

 

 

 

 

Mortgage

$

62

 

 

$

59

 

 

$

86

 

 

$

98

 

 

$

91

 

homegenius

 

 

 

 

186

 

 

767

 

 

19

 

All Other

 

 

 

 

 

 

 

 

 

Total inter-segment expense

$

62

 

 

$

59

 

 

$

272

 

 

$

865

 

 

$

110

 

 

See notes continued on next page.

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 4 of 4)

 

Notes continued from prior page.

 

(8)

In the fourth quarter of 2020, we reclassified certain revenue previously reflected in the homegenius segment results as services revenue to net premiums earned. As a result, for all periods presented in 2020, on the homegenius segment, net premiums earned has been increased and services revenue has been decreased, with offsetting adjustments reflected in All Other activities.

(9)

All Other activities include: (i) income (losses) from assets held by our holding company; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; (iii) for all periods presented, the income and expenses related to our traditional appraisal services; and (iv) certain other immaterial revenue and expense items.

Selected Mortgage Key Ratios

 

 

2021

 

2020

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

 

 

 

 

 

 

 

 

 

Loss ratio (1)

1.3

%

 

17.3

%

 

19.6

%

 

31.0

%

 

122.8

%

Expense ratio (1)

26.4

%

 

22.4

%

 

21.1

%

 

21.5

%

 

20.2

%

(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 impairment of internal-use software, gains (losses) from the sale of lines of business and acquisition-related income and expenses. Adjusted diluted net operating income (loss) per share is calculated by dividing (i) adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the Company’s statutory tax rate, by (ii) the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Adjusted net operating return on equity is calculated by dividing annualized adjusted pretax operating income (loss), net of taxes computed using the Company’s statutory tax rate, by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.

Although adjusted pretax operating income (loss) excludes certain items that have occurred in the past and are expected to occur in the future, the excluded items represent those that are: (i) not viewed as part of the operating performance of our primary activities or (ii) not expected to result in an economic impact equal to the amount reflected in pretax income (loss). These adjustments, along with the reasons for their treatment, are described below.

 

(1)

Net gains (losses) on investments and other financial instruments. The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities, our tax and capital profile and overall market cycles. Unrealized gains and losses arise primarily from changes in the market value of our investments that are classified as trading or equity securities. These valuation adjustments may not necessarily result in realized economic gains or losses.

 

Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these realized and unrealized gains or losses and changes in fair value of other financial instruments. 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) acquistion-related income and expenses.

Radian Group Inc. and Subsidiaries Definition of Consolidated Non-GAAP Financial Measures Exhibit F (page 2 of 2)

In addition to the above non-GAAP measures for the consolidated company, we also have presented as supplemental information non-GAAP measures for our homegenius segment of adjusted pretax operating income (loss) before allocated corporate operating expenses and adjusted gross profit. Adjusted pretax operating income (loss) before allocated corporate operating expenses is calculated as adjusted pretax operating income (loss) as described above (which is the segment's ASC 280 GAAP measure of operating performance), adjusted to remove the impact of corporate allocations of other operating expenses for the homegenius segment. Adjusted gross profit is further adjusted to remove other operating expenses. In addition, homegenius adjusted pretax operating margin before allocated corporate operating expenses and adjusted gross profit margin are calculated by dividing homegenius adjusted pretax operating margin before allocated corporate operating expenses and adjusted gross profit, respectively, by GAAP total revenue for the homegenius segment. For the homegenius segment, adjusted pretax operating income (loss) before allocated corporate operating expenses, adjusted gross profit, and the related profit margins are used to facilitate comparisons with other services companies, since they are widely accepted measures of performance in the services industry and are used internally as supplemental measures to evaluate the performance of our homegenius segment.

See Exhibit G for the reconciliation of the most comparable GAAP measures, consolidated pretax income (loss), diluted net income (loss) per share and return on equity to our non-GAAP financial measures for the consolidated company, adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity, respectively. Exhibit G also contains the reconciliation of adjusted pretax operating income (loss) to adjusted pretax operating income (loss) before allocated corporate operating expenses and adjusted gross profit for the homegenius segment.

Total adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share, adjusted net operating return on equity, homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses and homegenius adjusted gross profit should not be considered in isolation or viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share, return on equity or net income (loss), or in the case of the homegenius non-GAAP measures, for homegenius adjusted pretax operating income (loss). Our definitions of adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share, adjusted net operating return on equity and homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses, homegenius adjusted gross profit, homegenius adjusted pretax operating margin before allocated corporate operating expenses or homegenius adjusted gross profit margin may not be comparable to similarly-named measures reported by other companies.

Radian Group Inc. and Subsidiaries

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit G (page 1 of 3)

 

Reconciliation of Consolidated Pretax Income (Loss) to Adjusted Pretax Operating Income (Loss)

 

 

2021

 

2020

(In thousands)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Consolidated pretax income (loss)

$

195,496

 

 

$

161,189

 

 

$

179,167

 

 

$

161,205

 

 

$

(42,224

)

Less reconciling income (expense) items:

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

15,661

 

 

(5,181

)

 

17,376

 

 

17,652

 

 

47,276

 

Amortization and impairment of other acquired intangible assets

(863

)

 

(862

)

 

(2,225

)

 

(961

)

 

(979

)

Impairment of other long-lived assets and other non-operating items (1)

(4,021

)

 

(84

)

 

(6,971

)

 

(466

)

 

(22

)

Total adjusted pretax operating income (loss) (2)

$

184,719

 

 

$

167,316

 

 

$

170,987

 

 

$

144,980

 

 

$

(88,499

)

(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:

 

2021

 

2020

(In thousands)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Adjusted pretax operating income (loss):

 

 

 

 

 

 

 

 

 

Mortgage segment

$

191,462

 

 

$

174,287

 

 

$

184,306

 

 

$

147,336

 

 

$

(85,821

)

homegenius segment

(9,198

)

 

(10,453

)

 

(11,132

)

 

(5,046

)

 

(3,909

)

All Other activities

2,455

 

 

3,482

 

 

(2,187

)

 

2,690

 

 

1,231

 

Total adjusted pretax operating income (loss)

$

184,719

 

 

$

167,316

 

 

$

170,987

 

 

$

144,980

 

 

$

(88,499

)

Radian Group Inc. and Subsidiaries

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit G (page 2 of 3)

 

Reconciliation of Diluted Net Income (Loss) Per Share to Adjusted Diluted Net Operating Income (Loss) Per Share

 

 

2021

 

2020

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Diluted net income (loss) per share

$

0.80

 

 

$

0.64

 

 

$

0.76

 

 

$

0.70

 

 

$

(0.15

)

 

 

 

 

 

 

 

 

 

 

Less per-share impact of reconciling income (expense) items:

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

0.08

 

 

(0.03

)

 

0.09

 

 

0.09

 

 

0.24

 

Amortization and impairment of other acquired intangible assets

 

 

 

 

(0.01

)

 

 

 

(0.01

)

Impairment of other long-lived assets and other non-operating items

(0.02

)

 

 

 

(0.04

)

 

 

 

 

Income tax (provision) benefit on reconciling income (expense) items (1)

(0.01

)

 

0.01

 

 

(0.01

)

 

(0.02

)

 

(0.05

)

Difference between statutory and effective tax rate

 

 

(0.02

)

 

0.04

 

 

0.04

 

 

0.03

 

Per-share impact of reconciling income (expense) items

0.05

 

 

(0.04

)

 

0.07

 

 

0.11

 

 

0.21

 

Adjusted diluted net operating income (loss) per share (1)

$

0.75

 

 

$

0.68

 

 

$

0.69

 

 

$

0.59

 

 

$

(0.36

)

(1)

Calculated using the company’s federal statutory tax rate of 21%. Any permanent tax adjustments and state income taxes on these items have been deemed immaterial and are not included.

Reconciliation of Return on Equity to Adjusted Net Operating Return on Equity (1)

 

 

 

 

 

 

 

 

 

 

 

2021

 

2020

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Return on equity (1)

14.5

 

%

 

11.8

 

%

 

14.1

 

%

 

13.3

 

%

 

(3.1

)

%

Less impact of reconciling income (expense) items: (2)

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

1.5

 

 

 

(0.5

)

 

 

1.7

 

 

 

1.7

 

 

 

4.8

 

 

Amortization and impairment of other acquired intangible assets

(0.1

)

 

 

(0.1

)

 

 

(0.2

)

 

 

(0.1

)

 

 

(0.1

)

 

Impairment of other long-lived assets and other non-operating items

(0.4

)

 

 

 

 

 

(0.7

)

 

 

 

 

 

 

 

Income tax (provision) benefit on reconciling income (expense) items (3)

(0.2

)

 

 

0.1

 

 

 

(0.2

)

 

 

(0.3

)

 

 

(1.0

)

 

Difference between statutory and effective tax rate

0.1

 

 

 

(0.1

)

 

 

0.6

 

 

 

0.7

 

 

 

0.3

 

 

Impact of reconciling income (expense) items

0.9

 

 

 

(0.6

)

 

 

1.2

 

 

 

2.0

 

 

 

4.0

 

 

Adjusted net operating return on equity

13.6

 

%

 

12.4

 

%

 

12.9

 

%

 

11.3

 

%

 

(7.1

)

%

(1)

Calculated by dividing annualized net income (loss) by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.

(2)

Annualized, as a percentage of average stockholders’ equity.

(3)

Calculated using the company’s federal statutory tax rate of 21%. Any permanent tax adjustments and state income taxes on these items have been deemed immaterial and are not included.

Radian Group Inc. and Subsidiaries

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit G (page 3 of 3)

 

Reconciliation of homegenius Adjusted Pretax Operating Income (Loss) to homegenius Adjusted Gross Profit

 

 

2021

 

2020

(In thousands)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

homegenius adjusted pretax operating income (loss)

$

(9,198

)

 

$

(10,453

)

 

$

(11,132

)

 

$

(5,046

)

 

$

(3,909

)

Less reconciling income (expense) items:

 

 

 

 

 

 

 

 

 

Allocation of corporate operating expenses

(4,721

)

 

(3,996

)

 

(3,369

)

 

(3,248

)

 

(2,823

)

Adjusted pretax operating income (loss) before allocated corporate operating expenses

(4,477

)

 

(6,457

)

 

(7,763

)

 

(1,798

)

 

(1,086

)

Less reconciling income (expense) items:

 

 

 

 

 

 

 

 

 

Other operating expenses before allocated corporate operating expenses

(16,160

)

 

(14,928

)

 

(15,238

)

 

(13,136

)

 

(10,527

)

homegenius adjusted gross profit

$

11,683

 

 

$

8,471

 

 

$

7,475

 

 

$

11,338

 

 

$

9,441

 

On a consolidated basis, “adjusted pretax operating income (loss),” “adjusted diluted net operating income (loss) per share” and “adjusted net operating return on equity” are measures not determined in accordance with GAAP. In addition, “homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses","homegenius adjusted gross profit," “homegenius adjusted pretax operating margin before allocated corporate operating expenses” and “homegenius adjusted pretax operating margin" are also non-GAAP measures. These measures should not be considered in isolation or viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share, return on equity or net income (loss), or in the case of the homegenius non-GAAP measures, for homegenius adjusted pretax operating income (loss). Our definitions of adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share, adjusted net operating return on equity, homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses, homegenius adjusted gross profit, homegenius adjusted pretax operating margin before allocated corporate operating expenses or homegenius adjusted gross profit margin may not be comparable to similarly-named measures reported by other companies. See Exhibit F for additional information on our consolidated non-GAAP financial measures.

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - New Insurance Written

Exhibit H

 

 

2021

 

2020

($ in millions)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

 

 

 

 

 

 

 

 

 

New insurance written ("NIW")

$

21,662

 

 

$

20,161

 

 

$

29,781

 

 

$

33,320

 

 

$

25,459

 

 

 

 

 

 

 

 

 

 

 

Percentage of NIW

 

 

 

 

 

 

 

 

 

Borrower-paid

99.1

%

 

99.2

%

 

99.2

%

 

98.5

%

 

97.8

%

 

 

 

 

 

 

 

 

 

 

Percentage by premium type

 

 

 

 

 

 

 

 

 

Direct monthly and other recurring premiums

93.1

%

 

90.2

%

 

91.4

%

 

90.0

%

 

84.7

%

Borrower-paid (1) (2)

6.6

 

 

9.4

 

 

8.3

 

 

9.0

 

 

13.6

 

Lender-paid (1)

0.3

 

 

0.4

 

 

0.3

 

 

1.0

 

 

1.7

 

Direct single premiums (1)

6.9

 

 

9.8

 

 

8.6

 

 

10.0

 

 

15.3

 

Total NIW

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

 

NIW for purchases

77.1

%

 

59.1

%

 

64.6

%

 

70.5

%

 

56.4

%

NIW for refinances

22.9

%

 

40.9

%

 

35.4

%

 

29.5

%

 

43.6

%

 

 

 

 

 

 

 

 

 

 

Percentage of NIW by FICO score (3)

 

 

 

 

 

 

 

 

 

>=740

61.4

%

 

64.3

%

 

64.7

%

 

66.2

%

 

67.3

%

680-739

33.1

 

 

31.5

 

 

31.5

 

 

30.7

 

 

30.1

 

620-679

5.5

 

 

4.2

 

 

3.8

 

 

3.1

 

 

2.6

 

Total NIW

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Percentage by LTV

 

 

 

 

 

 

 

 

 

95.01% and above

10.9

%

 

8.0

%

 

8.9

%

 

9.7

%

 

8.3

%

90.01% to 95.00%

40.4

 

 

31.6

 

 

34.7

 

 

39.6

 

 

36.4

 

85.01% to 90.00%

27.6

 

 

31.3

 

 

29.8

 

 

28.3

 

 

29.8

 

85.00% and below

21.1

 

 

29.1

 

 

26.6

 

 

22.4

 

 

25.5

 

Total NIW

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

(1)

Percentages exclude the impact of reinsurance.

(2)

Borrower-paid Single Premium Policies have lower Minimum Required Assets under PMIERs as compared to lender-paid Single Premium Policies.

(3)

For loans with multiple borrowers, the percentage of NIW by FICO score represents the lowest of the borrowers’ FICO scores.

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - Primary Insurance in Force and Risk in Force

Exhibit I (page 1 of 2)

 

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

($ in millions)

2021

 

2021

 

2020

 

2020

 

2020

Primary insurance in force (1)

 

 

 

 

 

 

 

 

 

Prime

$

233,543

 

 

$

234,980

 

 

$

242,044

 

 

$

241,166

 

 

$

236,835

 

Alt-A and A minus and below

3,759

 

 

3,941

 

 

4,100

 

 

4,301

 

 

4,471

 

Primary

$

237,302

 

 

$

238,921

 

 

$

246,144

 

 

$

245,467

 

 

$

241,306

 

 

 

 

 

 

 

 

 

 

 

Primary risk in force (1) (2)

 

 

 

 

 

 

 

 

 

Prime

$

57,155

 

 

$

57,579

 

 

$

59,689

 

 

$

59,972

 

 

$

59,253

 

Alt-A and A minus and below

885

 

 

929

 

 

967

 

 

1,017

 

 

1,058

 

Primary

$

58,040

 

 

$

58,508

 

 

$

60,656

 

 

$

60,989

 

 

$

60,311

 

 

 

 

 

 

 

 

 

 

 

Percentage of primary risk in force

 

 

 

 

 

 

 

 

 

Direct monthly and other recurring premiums

81.2

%

 

80.0

%

 

79.1

%

 

76.8

%

 

73.8

%

Direct single premiums

18.8

%

 

20.0

%

 

20.9

%

 

23.2

%

 

26.2

%

 

 

 

 

 

 

 

 

 

 

Percentage of primary risk in force by FICO score (3)

 

 

 

 

 

 

 

 

 

>=740

57.5

%

 

57.2

%

 

57.5

%

 

57.6

%

 

57.4

%

680-739

34.8

 

 

34.9

 

 

34.6

 

 

34.3

 

 

34.3

 

620-679

7.2

 

 

7.3

 

 

7.3

 

 

7.5

 

 

7.7

 

<=619

0.5

 

 

0.6

 

 

0.6

 

 

0.6

 

 

0.6

 

Total Primary

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Percentage of primary risk in force by LTV

 

 

 

 

 

 

 

 

 

95.01% and above

14.5

%

 

14.4

%

 

14.4

%

 

14.3

%

 

14.2

%

90.01% to 95.00%

48.5

 

 

48.6

 

 

49.3

 

 

50.1

 

 

50.4

 

85.01% to 90.00%

28.1

 

 

28.2

 

 

28.0

 

 

27.9

 

 

28.1

 

85.00% and below

8.9

 

 

8.8

 

 

8.3

 

 

7.7

 

 

7.3

 

Total

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Percentage of primary risk in force by policy year

 

 

 

 

 

 

 

 

 

2008 and prior

5.7

%

 

6.1

%

 

6.2

%

 

6.6

%

 

7.2

%

2009 - 2015

8.7

 

 

9.9

 

 

11.3

 

 

13.3

 

 

16.0

 

2016

6.0

 

 

6.8

 

 

7.6

 

 

8.9

 

 

10.6

 

2017

6.8

 

 

8.0

 

 

9.1

 

 

10.7

 

 

13.0

 

2018

7.3

 

 

8.7

 

 

9.8

 

 

11.7

 

 

14.0

 

2019

13.6

 

 

15.6

 

 

17.8

 

 

20.6

 

 

23.3

 

2020

35.4

 

 

37.2

 

 

38.2

 

 

28.2

 

 

15.9

 

2021

16.5

 

 

7.7

 

 

 

 

 

 

 

Total

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Primary risk in force on defaulted loans

$

2,345

 

 

$

2,910

 

 

$

3,250

 

 

$

3,747

 

 

$

4,263

 

 

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.

 

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

2021

 

2021

 

2020

 

2020

 

2020

Persistency Rate (12 months ended)

57.7

%

(4)

57.2

%

(4)

61.2

%

(4)

65.6

%

(4)

70.2

%

Persistency Rate (quarterly, annualized) (5)

66.3

%

 

62.5

%

 

60.4

%

(4)

60.0

%

(4)

63.8

%

(1)

Excludes the impact of premiums ceded under our reinsurance agreements.

(2)

Does not include pool risk in force or other risk in force, which combined represent approximately 1% of our total risk in force for all periods presented.

(3)

For loans with multiple borrowers, the percentage of primary risk in force by FICO score represents the lowest of the borrowers’ FICO scores.

(4)

The Persistency Rate was reduced by an increase in cancellations of Single Premium Policies due to increased cancellations identified by our ongoing servicer monitoring process for Single Premium Policies.

(5)

The Persistency Rate on a quarterly, annualized basis is calculated based on loan-level detail for the quarter ending as of the date shown. It may be impacted by seasonality or other factors, including the level of refinance activity during the applicable periods, and may not be indicative of full-year trends.

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - Claims and Reserves

Exhibit J

 

 

2021

 

2020

($ in thousands)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

 

 

 

 

 

 

 

 

 

Net claims paid: (1)

 

 

 

 

 

 

 

 

 

Total primary claims paid

$

4,870

 

 

$

6,611

 

 

$

8,353

 

 

$

11,331

 

 

$

22,144

 

Total pool and other

(649

)

 

(138

)

 

70

 

 

(230

)

 

639

 

Subtotal

4,221

 

 

6,473

 

 

8,423

 

 

11,101

 

 

22,783

 

Impact of commutations and settlements (2)

 

 

4,000

 

 

32,170

 

 

(267

)

 

 

Total net claims paid

$

4,221

 

 

$

10,473

 

 

$

40,593

 

 

$

10,834

 

 

$

22,783

 

 

 

 

 

 

 

 

 

 

 

Total average net primary claims paid (1) (3)

$

46.8

 

 

$

43.8

 

 

$

46.9

 

 

$

46.4

 

 

$

47.9

 

 

 

 

 

 

 

 

 

 

 

Average direct primary claims paid (3) (4)

$

48.4

 

 

$

45.5

 

 

$

48.5

 

 

$

47.8

 

 

$

49.0

 

(1)

Includes the impact of reinsurance recoveries and LAE.

(2)

Includes payments to commute mortgage insurance coverage on certain performing and non-performing loans. For the first quarter of 2021 and the fourth quarter of 2020, primarily includes payments made to settle certain previously disclosed legal proceedings.

(3)

Calculated without giving effect to the impact of commutations and settlements.

(4)

Before reinsurance recoveries.

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

($ in thousands, except per default amounts)

2021

 

2021

 

2020

 

2020

 

2020

 

 

 

 

 

 

 

 

 

 

Reserve for losses by category (1)

 

 

 

 

 

 

 

 

 

Mortgage reserves

 

 

 

 

 

 

 

 

 

Prime

$

750,699

 

 

$

751,100

 

 

$

711,245

 

 

$

655,754

 

 

$

573,463

 

Alt-A and A minus and below

90,065

 

 

90,455

 

 

88,269

 

 

88,879

 

 

86,646

 

IBNR and other

5,464

 

 

6,626

 

 

9,966

 

 

43,153

 

 

43,342

 

LAE

21,180

 

 

21,212

 

 

20,172

 

 

18,745

 

 

16,807

 

Total primary reserves

867,408

 

 

869,393

 

 

829,652

 

 

806,531

 

 

720,258

 

Total pool reserves

13,085

 

 

13,175

 

 

14,163

 

 

14,779

 

 

14,398

 

Total 1st lien reserves

880,493

 

 

882,568

 

 

843,815

 

 

821,310

 

 

734,656

 

Other

270

 

 

270

 

 

292

 

 

398

 

 

335

 

Total Mortgage reserves

880,763

 

 

882,838

 

 

844,107

 

 

821,708

 

 

734,991

 

homegenius reserves

4,735

 

 

4,517

 

 

4,306

 

 

4,084

 

 

3,894

 

Total reserves

$

885,498

 

 

$

887,355

 

 

$

848,413

 

 

$

825,792

 

 

$

738,885

 

 

 

 

 

 

 

 

 

 

 

Primary reserve per primary default excluding IBNR and other

$

21,304

 

 

$

17,219

 

 

$

14,759

 

 

$

12,168

 

 

$

9,706

 

(1)

Includes ceded losses on reinsurance transactions, which are expected to be recovered and are included in the reinsurance recoverables reported in our condensed consolidated balance sheets.

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - Default Statistics

Exhibit K

 

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

2021

 

2021

 

2020

 

2020

 

2020

Default Statistics

 

 

 

 

 

 

 

 

 

Primary Insurance:

 

 

 

 

 

 

 

 

 

Prime

 

 

 

 

 

 

 

 

 

Number of insured loans

976,344

 

 

996,082

 

 

1,031,736

 

 

1,043,450

 

 

1,040,964

 

Number of loans in default

36,826

 

 

45,929

 

 

51,032

 

 

58,057

 

 

64,648

 

Percentage of loans in default

3.77

%

 

4.61

%

 

4.95

%

 

5.56

%

 

6.21

%

 

 

 

 

 

 

 

 

 

 

Alt-A and A minus and below

 

 

 

 

 

 

 

 

 

Number of insured loans

24,205

 

 

25,282

 

 

26,208

 

 

27,310

 

 

28,357

 

Number of loans in default

3,638

 

 

4,177

 

 

4,505

 

 

4,680

 

 

5,094

 

Percentage of loans in default

15.03

%

 

16.52

%

 

17.19

%

 

17.14

%

 

17.96

%

 

 

 

 

 

 

 

 

 

 

Total Primary

 

 

 

 

 

 

 

 

 

Number of insured loans

1,000,549

 

 

1,021,364

 

 

1,057,944

 

 

1,070,760

 

 

1,069,321

 

Number of loans in default

40,464

 

 

50,106

 

 

55,537

 

 

62,737

 

 

69,742

 

Percentage of loans in default

4.04

%

 

4.91

%

 

5.25

%

 

5.86

%

 

6.52

%

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - Reinsurance Programs

Exhibit L

 

 

2021

 

2020

($ in thousands)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

 

 

 

 

 

 

 

 

 

Quota Share Reinsurance (“QSR”) and Single Premium QSR Programs

 

 

 

 

 

 

 

 

 

Ceded premiums written (1)

$

(7,032

)

 

 

$

(2,852

)

 

 

$

(1,117

)

 

 

$

2,119

 

 

 

$

35,821

 

 

% of premiums written

(2.8

)

%

 

(1.1

)

%

 

(0.4

)

%

 

0.8

 

%

 

13.0

 

%

Ceded premiums earned

$

13,491

 

 

 

$

20,788

 

 

 

$

29,510

 

 

 

$

36,742

 

 

 

$

60,652

 

 

% of premiums earned

4.8

 

%

 

6.8

 

%

 

8.6

 

%

 

11.2

 

%

 

19.2

 

%

Ceding commissions written

$

(2,362

)

 

 

$

(2,949

)

 

 

$

(3,847

)

 

 

$

(4,984

)

 

 

$

(5,304

)

 

Ceding commissions earned (2)

$

7,920

 

 

 

$

10,407

 

 

 

$

13,197

 

 

 

$

17,038

 

 

 

$

13,453

 

 

Profit commission

$

17,935

 

 

 

$

16,350

 

 

 

$

18,406

 

 

 

$

20,425

 

 

 

$

(10,649

)

 

Ceded losses

$

(1,007

)

 

 

$

3,661

 

 

 

$

7,106

 

 

 

$

10,189

 

 

 

$

39,635

 

 

 

 

 

 

 

 

 

 

 

 

Excess-of-Loss Program

 

 

 

 

 

 

 

 

 

Ceded premiums written

$

18,524

 

 

 

$

11,482

 

 

 

$

15,240

 

 

 

$

7,499

 

 

 

$

7,525

 

 

% of premiums written

7.4

 

%

 

4.4

 

%

 

5.2

 

%

 

2.8

 

%

 

2.7

 

%

Ceded premiums earned

$

15,601

 

 

 

$

12,154

 

 

 

$

12,037

 

 

 

$

8,290

 

 

 

$

8,321

 

 

% of premiums earned

5.5

 

%

 

4.0

 

%

 

3.7

 

%

 

2.5

 

%

 

2.6

 

%

 

 

 

 

 

 

 

 

 

 

Ceded RIF (3)

 

 

 

 

 

 

 

 

 

Single Premium QSR Program

$

5,728,142

 

 

 

$

6,147,808

 

 

 

$

6,646,812

 

 

 

$

7,358,932

 

 

 

$

8,173,756

 

 

Excess-of-Loss Program

1,952,900

 

 

 

1,525,100

 

 

 

1,560,600

 

 

 

1,170,200

 

 

 

1,170,200

 

 

QSR Program

268,337

 

 

 

317,827

 

 

 

381,787

 

 

 

454,585

 

 

 

532,743

 

 

Total Ceded RIF

$

7,949,379

 

 

 

$

7,990,735

 

 

 

$

8,589,199

 

 

 

$

8,983,717

 

 

 

$

9,876,699

 

 

 

 

 

 

 

 

 

 

 

 

PMIERs impact - reduction in Minimum Required Assets

 

 

 

 

 

 

 

 

 

Excess-of-Loss Program

$

907,112

 

 

 

$

673,957

 

 

 

$

912,734

 

 

 

$

783,842

 

 

 

$

970,294

 

 

Single Premium QSR Program

355,115

 

 

 

388,536

 

 

 

423,712

 

 

 

469,625

 

 

 

517,028

 

 

QSR Program

16,545

 

 

 

19,378

 

 

 

22,712

 

 

 

26,213

 

 

 

30,837

 

 

Total PMIERs impact

$

1,278,772

 

 

 

$

1,081,871

 

 

 

$

1,359,158

 

 

 

$

1,279,680

 

 

 

$

1,518,159

 

 

(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:

 

2021

 

2020

($ in thousands)

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

 

 

 

 

 

 

 

 

 

Ceding commissions

$

(6,501

)

 

$

(7,689

)

 

$

(10,436

)

 

$

(12,337

)

 

$

(10,406

)

 

(3)

Included in primary RIF.

FORWARD-LOOKING STATEMENTS

All statements in this press release that address events, developments or results that we expect or anticipate may occur in the future are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as “anticipate,” “may,” “will,” “could,” “should,” “would,” “expect,” “intend,” “plan,” “goal,” “contemplate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “seek,” “strategy,” “future,” “likely” or the negative or other variations on these words and other similar expressions. These statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management’s current views and assumptions with respect to future events, including management’s current views regarding the likely impacts of the COVID-19 pandemic. 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 are not guarantees of future performance, and the forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. These risks and uncertainties include, without limitation:

  • the COVID-19 pandemic, which has 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 we expect that the COVID-19 pandemic could further impact our business and subject us to certain risks, including those discussed in “Item 1A. Risk Factors—The COVID-19 pandemic has adversely impacted us, and its ultimate impact on our business and financial results will depend on future developments, which are highly uncertain and cannot be predicted, including the scope, severity and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.” and the other risk factors in our Annual Report on Form 10-K for the year ended December 31, 2020 and in our subsequent reports and registration statements filed from time to time with the U.S. Securities and Exchange Commission;
  • changes in economic 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;
  • 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 response to the COVID-19 pandemic, changes in the requirements for Radian Guaranty to remain an approved insurer to the GSEs, changes in the GSEs’ interpretation and application of the PMIERs, or changes impacting loans purchased by the GSEs;
  • the effects of the Enterprise Regulatory Capital Framework which was finalized by the FHFA in December 2020 and which, among other things, increases the capital requirements for the GSEs and reduces the credit they receive for risk transfer, which could impact their operations and pricing as well as the size of the insurable mortgage insurance market, and which may form the basis for future versions of the PMIERs;
  • changes in the current housing finance system in the United States, including the roles of the Federal Housing Administration (the "FHA"), the GSEs and private mortgage insurers in this system;
  • our ability to successfully execute and implement our capital plans, including our risk distribution strategy through the capital markets and reinsurance markets, and to maintain sufficient holding company liquidity to meet our liquidity needs;
  • our ability to successfully execute and implement our business plans and strategies, including plans and strategies that require GSE and/or regulatory approvals and licenses or are subject to complex compliance requirements that we may be unable to satisfy, or that may expose us to new risks including those that could impact our capital and liquidity positions;
  • uncertainty from the upcoming discontinuance of LIBOR and transition to one or more alternative benchmarks that could cause interest rate volatility and, among other things, impact our investment portfolio, cost of debt and cost of reinsurance through mortgage insurance-linked notes transactions;
  • any disruption in the servicing of mortgages covered by our insurance policies, as well as poor servicer performance, which could be impacted by the burdens placed on many servicers due to the COVID-19 pandemic;
  • a decrease in the “Persistency Rates” (the percentage of insurance in force that remains in force over a period of time) of our mortgage insurance on monthly premium products;
  • competition in the private mortgage insurance industry generally, and more specifically: price competition in our mortgage insurance business, including as a result of the increased use of loan level pricing delivery methodologies that are less transparent than historical pricing practices; and competition from the FHA and the U.S. Department of Veterans Affairs as well as from other forms of credit enhancement, such as GSE-sponsored alternatives to traditional mortgage insurance;
  • the effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the financial services industry in general, and on our businesses in particular;
  • legislative and regulatory activity (or inactivity), including the adoption of (or failure to adopt) new laws and regulations, or changes in existing laws and regulations, or the way they are interpreted or applied, including potential changes in tax law under the 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 payments or adjustments associated with federal or other tax examinations;
  • the possibility that we may fail to estimate accurately, especially in the event of an extended economic downturn or a period of extreme market volatility and economic uncertainty, the likelihood, magnitude and timing of losses in establishing loss reserves for our mortgage insurance business or to accurately calculate and/or project our Available Assets and Minimum Required Assets under the PMIERs, which will be impacted by, among other things, the size and mix of our insurance in force, the level of defaults in our portfolio, the reported status of defaults in our portfolio, including whether they are subject to forbearance, a repayment plan or a loan modification trial period granted in response to a financial hardship related to COVID-19, the level of cash flow generated by our insurance operations and our risk distribution strategies;
  • volatility in our financial results caused by changes in the fair value of our assets and liabilities, including with respect to our use of derivatives and within our investment portfolio;
  • changes in “GAAP” (accounting principles generally accepted in the U.S.) or “SAPP” (statutory accounting principles and practices including those required or permitted, if applicable, by the insurance departments of the respective states of domicile of our insurance subsidiaries) rules and guidance, or their interpretation;
  • our ability and related costs to develop, launch and implement new and innovative technologies and digital products and services, and whether we will have broad customer acceptance of these products and services;
  • effectiveness and security of our information technology systems and digital products and services, including the risk that these systems, products or services fail to operate as expected or planned or expose us to cybersecurity or third party risks, including due to 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 Annual Report on Form 10-K for the year ended December 31, 2020, and to subsequent reports and registration statements filed from time to time with the U.S. Securities and Exchange Commission. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which we issued this press release. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements to reflect new information or future events or for any other reason.

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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