-- 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210803006113/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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