-- GAAP net income of $126 million, or $0.64
per diluted share --
-- Adjusted diluted net operating income of
$0.68 per diluted share --
-- PMIERs excess Available Assets grows to $1.5
billion (or 42% over the Minimum Required Assets) --
--Total Holding Company Liquidity of $1.3
billion --
-- Book value per share grows 9% year-over-year
to $22.14 --
-- Resumed share repurchase program after
temporarily suspending it beginning March 2020 in response to the
COVID 19 pandemic --
-- In April 2021, Radian Guaranty enhanced its
risk profile and improved its capital position with closing of $498
million ILN transaction --
Radian Group Inc. (NYSE: RDN) today reported net income for the
quarter ended March 31, 2021, of $125.6 million, or $0.64 per
diluted share. This compares with net income for the quarter ended
March 31, 2020, of $140.5 million, or $0.70 per diluted share.
Key Financial Highlights (dollars in millions, except
per-share amounts)
Quarter ended
March 31, 2021
December 31, 2020
March 31, 2020
Net income (1)
$125.6
$148.0
$140.5
Diluted net income per share
$0.64
$0.76
$0.70
Consolidated pretax income
$161.2
$179.2
$181.3
Adjusted pretax operating income
(2)
$167.3
$171.0
$204.6
Adjusted diluted net operating
income per share (2)(3)
$0.68
$0.69
$0.80
Return on equity(1)(4)
11.8%
14.1%
14.2%
Adjusted net operating return on
equity (2)(3)
12.4%
12.9%
16.3%
New Insurance Written (NIW) -
mortgage insurance
$20,161
$29,781
$16,706
Net premiums earned - mortgage
insurance (5)
$264.7
$286.8
$275.0
New defaults (6)
11,851
14,552
9,960
Provision for losses - mortgage
insurance
$45.9
$56.3
$35.2
Book value per share (7)
$22.14
$22.36
$20.30
PMIERs Available Assets (8)
$4,909
$4,700
$4,061
PMIERs excess Available Assets
(9)
$1,451
$1,338
$1,129
Total Holding Company Liquidity
(10)
$1,292
$1,371
$916
Excess Available Resources to
Support PMIERs (11)
$2,708
$2,674
$2,010
Total investments
$6,672
$6,788
$5,609
Primary mortgage insurance in
force
$238,921
$246,144
$241,586
Percentage of primary loans in
default (12)
4.9%
5.2%
1.8%
Mortgage insurance loss
reserves
$883
$844
$415
(1)
Net income for the first quarter
of 2021 includes a pretax net loss on investments and other
financial instruments of $5.2 million, compared to a net gain on
investments and other financial instruments of $17.4 million in the
fourth quarter of 2020 and a net loss on investments and other
financial instruments for the first quarter of 2020 of $22.0
million.
(2)
Adjusted results, including
adjusted pretax operating income, adjusted diluted net operating
income per share and adjusted net operating return on equity, are
non-GAAP financial measures. For definitions and reconciliations of
these measures to the comparable GAAP measures, see Exhibits F and
G.
(3)
Calculated using the company’s
statutory tax rate of 21 percent.
(4)
Calculated by dividing annualized
net income by average stockholders' equity, based on the average of
the beginning and ending balances for each period presented.
(5)
The fourth 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.
(6)
Represents the number of new
defaults reported during the period on loans related to primary
mortgage insurance policies.
(7)
Book value per share includes
accumulated other comprehensive income (loss) of $0.61 as of March
31, 2021, $1.38 as of December 31, 2020 and $0.16 as of March 31,
2020.
(8)
Represents Radian Guaranty’s
Available Assets, calculated in accordance with the Private
Mortgage Insurer Eligibility Requirements (PMIERs) financial
requirements in effect for each date shown.
(9)
Represents Radian Guaranty’s
excess or "cushion" of Available Assets over its Minimum Required
Assets, calculated in accordance with the PMIERs financial
requirements in effect for each date shown.
(10)
Represents Radian Group's total
liquidity, including the $35 million minimum liquidity requirement
and available capacity under its unsecured revolving credit
facility.
(11)
Represents the sum of: (1) PMIERs
excess Available Assets and (2) Total Holding Company Liquidity,
net of the $35 million minimum liquidity requirement under the
unsecured revolving credit facility.
(12)
Represents the number of primary
loans in default as a percentage of the total number of insured
primary loans.
Adjusted pretax operating income for the quarter ended March 31,
2021, was $167.3 million, or $0.68 per diluted share. This compares
with adjusted pretax operating income for the quarter ended March
31, 2020 of $204.6 million, or $0.80 per diluted share.
Book value as of March 31, 2021 was $4.2 billion, an increase of
10 percent compared to $3.9 billion as of March 31, 2020. Book
value per share at March 31, 2021, was $22.14, an increase of 9
percent compared to $20.30 at March 31, 2020.
"While the unprecedented pandemic environment continued in the
first quarter of 2021, year-over-year we successfully increased
book value per share by 9%, grew PMIERs excess available assets to
$1.5 billion, increased monthly premium mortgage insurance in force
by 9% and increased our title revenues by 56%,” said Radian’s Chief
Executive Officer Rick Thornberry. “We are encouraged by the
continued signs of improvement in the overall economy, the positive
momentum in the housing market and the favorable credit trends
within our portfolio. Our results are a testament to the strength
of our business model and the dedication of our team, who has shown
commitment to our customers, our company and to each other as we
have worked together to successfully navigate this challenging
environment."
FIRST QUARTER HIGHLIGHTS
- NIW was $20.2 billion in the first quarter of 2021, compared to
$29.8 billion in the fourth quarter of 2020 and $16.7 billion in
the first quarter of 2020.
- Of the $20.2 billion in NIW in the first quarter of 2021, 90.2
percent was written with monthly and other recurring premiums,
compared to 91.4 percent in the fourth quarter of 2020, and 81.1
percent in the first quarter of 2020.
- Refinances accounted for 41 percent of total NIW in the first
quarter of 2021, compared to 35 percent in the fourth quarter of
2020, and 34 percent in the first quarter of 2020.
- Total primary mortgage insurance in force as of March 31, 2021,
declined to $238.9 billion, a decrease of 2.9 percent compared to
$246.1 billion as of December 31, 2020, and a decrease of 1.1
percent compared to $241.6 billion as of March 31, 2020. The year
over year decrease included a 26.3 percent decline in single
premium policy insurance in force, partially offset by a 8.7
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 57.2 percent for
the twelve months ended March 31, 2021, compared to 61.2 percent
for the twelve months ended December 31, 2020 and 75.4 percent for
the twelve months ended March 31, 2020.
- Annualized persistency for the three months ended March 31,
2021, was 62.5 percent, compared to 60.4 percent for the three
months ended December 31, 2020, and 76.5 percent for the three
months ended March 31, 2020.
- Net mortgage insurance premiums earned were $264.7 million for
the quarter ended March 31, 2021, compared to $286.8 million for
the quarter ended December 31, 2020, and $275.0 million for the
quarter ended March 31, 2020.
- Mortgage insurance in force portfolio premium yield was 42.7
basis points in the first quarter of 2021, compared to 44.6 basis
points in the fourth quarter of 2020 and 46.1 basis points in the
first quarter of 2020. Net mortgage insurance premiums earned in
the fourth quarter of 2020 included an increase of $11.3 million
for the cumulative recognition of deferred initial premiums on
monthly premium policies. Excluding the impact of this adjustment,
in force premium yield was 42.8 basis points in the fourth quarter
of 2020.
- The impact of single premium policy cancellations before
consideration of reinsurance represented 6.4 basis points of direct
premium yield in the first quarter of 2021, 8.7 basis points in the
fourth quarter of 2020, and 4.0 basis points in the first quarter
of 2020.
- Total net mortgage insurance premium yield, which includes the
impact of ceded premiums and accrued profit commission, was 43.7
basis points in the first quarter of 2021, 46.7 basis points in the
fourth quarter of 2020, or 44.8 basis points excluding the impact
of the fourth quarter 2020 premium adjustment, and 45.6 basis
points in the first quarter of 2020.
- Additional details regarding premiums earned may be found in
Exhibit D.
- The mortgage insurance provision for losses was $45.9 million
in the first quarter of 2021, compared to $56.3 million in the
fourth quarter of 2020, and $35.2 million in the first quarter of
2020.
- The number of primary delinquent loans was 50,106 as of March
31, 2021, compared to 55,537 as of December 31, 2020 and 19,781 as
of March 31, 2020.
- The loss ratio in the first quarter of 2021 was 17.3 percent,
compared to 19.6 percent in the fourth quarter of 2020 and 12.8
percent in the first quarter of 2020.
- Total mortgage insurance claims paid were $10.5 million in the
first quarter of 2021, compared to $40.6 million in the fourth
quarter of 2020, and $23.4 million in the first quarter of 2020.
Excluding the impact of commutations and settlements, claims paid
were $6.5 million in the first quarter of 2021, compared to $8.4
million in the fourth quarter of 2020 and $23.4 million in the
first quarter of 2020.
- Radian's Real Estate segment offers a broad array of title,
valuation, asset management and other real estate services to
market participants across the real estate value chain.
- Total Real Estate segment revenues for the first quarter of
2021 were $25.8 million, compared to $23.6 million for the fourth
quarter of 2020, and $26.5 million for the first quarter of
2020.
- Adjusted earnings before interest, income taxes, depreciation
and amortization (Real Estate adjusted EBITDA) for the quarter
ended March 31, 2021 was a loss of $5.9 million, compared to a loss
of $7.0 million for the quarter ended December 31, 2020, and income
of $0.9 million for the quarter ended March 31, 2020. Additional
details regarding the non-GAAP measure Real Estate adjusted EBITDA
may be found in Exhibits F and G.
- The decrease in Real Estate adjusted EBITDA in the first
quarter of 2021 compared to the first quarter of 2020 was primarily
driven by declines in services revenue related to our asset
management services and valuation services due to the continued
negative impact of the COVID-19 pandemic on the operating
environment and continued strategic investments focused on our
title and digital real estate businesses. Such investments
contributed to an increase in total expenses, which was partially
offset by increases in net premiums earned and services revenue
attributable to our title services business.
- Other operating expenses were $70.3 million in the first
quarter of 2021, compared to $81.6 million in the fourth quarter of
2020, and $69.1 million in the first quarter of 2020.
- The decrease in the first quarter of 2021 compared to the
fourth quarter of 2020 was primarily related to a $6.9 million
decrease in non-operating items as well as a decrease in
share-based compensation expense, which was partially offset by a
decrease in ceding commissions. The increase in the first quarter
of 2021 compared to the first quarter of 2020 was driven primarily
by an increase in compensation expense, which was partially offset
by a decrease in travel and entertainment expense.
CAPITAL AND LIQUIDITY UPDATE
- At March 31, 2021, Excess Available Resources to Support
Private Mortgage Insurer Eligibility Requirements (PMIERs) were
$2.7 billion, or 79 percent, above Radian Guaranty's Minimum
Required Assets.
Radian Group
- As of March 31, 2021, Radian Group maintained $1.0 billion of
available liquidity. Total liquidity, which includes the company’s
$267.5 million unsecured revolving credit facility, was $1.3
billion as of March 31, 2021.
- For the quarter ended March 31, 2021, the company repurchased
413 thousand shares of Radian Group common stock at a total cost of
$8.6 million, including commissions. As of March 31, 2021, purchase
authority of up to $190.2 million remained available under this
program. The current share repurchase authorization expires on
August 31, 2021.
- On February 10, 2021, Radian Group's Board of Directors
authorized a regular quarterly dividend on its common stock in the
amount of $0.125 per share and paid the dividend on March 4,
2021.
- On May 4, 2021, Radian Group’s Board of Directors authorized an
increase to the Company’s quarterly dividend from $0.125 to $0.14
per share. The dividend is payable on June 4, 2021, to stockholders
of record as of May 24, 2021.
Radian Guaranty
- At March 31, 2021, Radian Guaranty’s Available Assets under
PMIERs totaled approximately $4.9 billion, resulting in excess
available resources or a “cushion” of $1.5 billion, or 42 percent,
over its Minimum Required Assets.
- As of March 31, 2021, 60 percent of Radian Guaranty's primary
mortgage insurance risk in force is subject to some form of risk
distribution, providing a $1.1 billion reduction of Minimum
Required Assets under PMIERs.
Thornberry added, "We recently increased our quarterly dividend
by 12% and resumed our share repurchase program based on continued
signs of improvement in the overall economy, the positive momentum
in the housing market and the favorable credit trends within our
portfolio."
RECENT EVENTS
Insurance-Linked-Note
As previously announced, in April 2021, Radian Guaranty entered
into its fifth fully collateralized mortgage insurance-linked-note
(ILN) reinsurance transaction, in which the company obtained $497.7
million of credit-risk protection from Eagle Re 2021-1 Ltd. (Eagle
Re) through the issuance by Eagle Re of ILNs to capital markets
investors and Radian Group in the amounts of $452.3 million and
$45.4 million, respectively, in an unregistered private offering.
Eagle Re is a special purpose insurer domiciled in Bermuda and is
not a subsidiary or affiliate of Radian Guaranty. Radian Guaranty's
related PMIERs credit under this ILN transaction remains subject to
GSE approval. As of March 31, 2021, after consideration of the
April ILN transaction described above:
- Radian Guaranty's Minimum Required Assets would have decreased
by approximately $480 million, which would have resulted in an
increase in PMIERs excess Available Assets or "cushion" to $1.9
billion, or 64 percent.
- Radian Guaranty's primary mortgage insurance risk in force that
is subject to some form of risk distribution would have increased
to 78 percent, providing a $1.6 billion reduction of Minimum
Required Assets under PMIERs.
Radian Guaranty Operating Statistics for April 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.
April 2021
March 2021
February 2021
January 2021
Beginning primary default inventory (#
of loans)
50,106
52,882
54,488
55,537
New defaults
2,751
3,314
3,873
4,664
Cures
(7,128
)
(6,043
)
(5,420
)
(5,674
)
Claims paid
(37
)
(45
)
(57
)
(41
)
Rescissions and Claim Denials, net (1)
(3
)
(2
)
(2
)
2
Ending primary default
inventory
45,689
50,106
52,882
54,488
(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 first quarter 2021 financial results in a
conference call tomorrow, Wednesday, May 5, 2021, at 10:00 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 50147770 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
50147770.
In addition to the information provided in the company's
earnings news release, other statistical and financial information,
which is expected to be referred to during the conference call,
will be available on Radian's website at www.radian.com, under
Investors.
NON-GAAP FINANCIAL MEASURES
Radian believes that adjusted pretax operating income, adjusted
diluted net operating income per share and adjusted net operating
return on equity (non-GAAP measures) facilitate evaluation of the
company’s fundamental financial performance and provide relevant
and meaningful information to investors about the ongoing operating
results of the company. On a consolidated basis, these measures are
not recognized in accordance with accounting principles generally
accepted in the United States of America (GAAP) and should not be
considered in isolation or viewed as substitutes for GAAP measures
of performance. The measures described below have been established
in order to increase transparency for the purpose of evaluating the
company’s operating trends and enabling more meaningful comparisons
with Radian’s competitors.
Adjusted pretax operating income (loss) is defined as GAAP
consolidated pretax income (loss) excluding the effects of: (i) net
gains (losses) on investments and other financial instruments; (ii)
loss on extinguishment of debt; (iii) amortization and impairment
of goodwill and other acquired intangible assets; and (iv)
impairment of other long-lived assets and other non-operating
items, such as gains (losses) from the sale of lines of business
and acquisition-related income and expenses. Adjusted diluted net
operating income (loss) per share is calculated by dividing (i)
adjusted pretax operating income (loss) attributable to common
stockholders, net of taxes computed using the Company’s statutory
tax rate, by (ii) the sum of the weighted average number of common
shares outstanding and all dilutive potential common shares
outstanding. Adjusted net operating return on equity is calculated
by dividing annualized adjusted pretax operating income (loss), net
of taxes computed using the Company's statutory tax rate, by
average stockholders' equity, based on the average of the beginning
and ending balances for each period presented.
In addition to the above non-GAAP measures for the consolidated
company, we also have presented as supplemental information a
non-GAAP measure for our Real Estate segment, representing a
measure of earnings before interest, income tax provision
(benefit), depreciation and amortization ("EBITDA"). We calculate
Real Estate adjusted EBITDA by using adjusted pretax operating
income as described above, further adjusted to remove the impact of
depreciation and corporate allocations for interest and operating
expenses. In addition, Real Estate adjusted EBITDA margin is
calculated by dividing Real Estate adjusted EBITDA by GAAP total
revenue for the Real Estate segment. Real Estate adjusted EBITDA
and Real Estate adjusted EBITDA margin are used to facilitate
comparisons with other services companies, since they are widely
accepted measures of performance in the services industry and are
used internally as supplemental measures to evaluate the
performance of our Real Estate segment.
See Exhibit F or Radian’s website for a description of these
items, as well as Exhibit G for reconciliations to the most
comparable consolidated GAAP measures.
ABOUT RADIAN
Radian Group Inc. (NYSE: RDN) is ensuring the American dream of
homeownership responsibly and sustainably through products and
services that include industry-leading mortgage insurance and a
comprehensive suite of mortgage, risk, title, valuation, asset
management and other real estate services. We are powered by
technology, informed by data and driven to deliver new and better
ways to transact and manage risk. Visit www.radian.com to learn
more about how Radian is shaping the future of mortgage and real
estate services.
FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS
(Unaudited)
Exhibit A:
Condensed Consolidated Statements
of Operations Trend Schedule
Exhibit B:
Net Income (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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Revenues:
Net premiums earned
$
271,872
$
302,140
(1
)
$
286,471
$
249,295
$
277,415
Services revenue
22,895
11,440
(1
)
33,943
28,075
31,927
Net investment income
38,251
38,115
36,255
38,723
40,944
Net gains (losses) on investments and
other financial instruments
(5,181
)
17,376
17,652
47,276
(22,027
)
Other income
976
790
913
1,072
822
Total revenues
328,813
369,861
375,234
364,441
329,081
Expenses:
Provision for losses
46,143
56,664
88,084
304,418
35,951
Policy acquisition costs
8,996
7,395
10,166
6,015
7,413
Cost of services
20,246
21,600
24,353
17,972
22,141
Other operating expenses
70,262
81,641
69,377
60,582
69,110
Interest expense
21,115
21,169
21,088
16,699
12,194
Amortization and impairment of other
acquired intangible assets
862
2,225
961
979
979
Total expenses
167,624
190,694
214,029
406,665
147,788
Pretax income (loss)
161,189
179,167
161,205
(42,224
)
181,293
Income tax provision (benefit)
35,581
31,154
26,102
(12,273
)
40,832
Net income (loss)
$
125,608
$
148,013
$
135,103
$
(29,951
)
$
140,461
Diluted net income (loss) per
share
$
0.64
$
0.76
$
0.70
$
(0.15
)
$
0.70
(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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Net income (loss) —basic and
diluted
$
125,608
$
148,013
$
135,103
$
(29,951)
$
140,461
Average common shares
outstanding—basic
193,439
193,248
193,176
193,299
200,161
Dilutive effect of stock-based
compensation arrangements (1)
1,764
1,415
980
—
1,658
Adjusted average common shares
outstanding—diluted
195,203
194,663
194,156
193,299
201,819
Basic net income (loss) per
share
$
0.65
$
0.77
$
0.70
$
(0.15)
$
0.70
Diluted net income (loss) per
share
$
0.64
$
0.76
$
0.70
$
(0.15)
$
0.70
(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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Shares of common stock equivalents
—
324
710
2,295
132
Radian Group Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
Exhibit C
March 31,
December 31,
September 30,
June 30,
March 31,
(In thousands, except per-share
amounts)
2021
2020
2020
2020
2020
Assets:
Investments
$
6,671,874
$
6,788,442
$
6,584,577
$
6,431,350
$
5,608,627
Cash
102,776
87,915
82,020
68,387
54,108
Restricted cash
20,987
6,231
4,424
16,279
7,817
Accrued investment income
34,841
34,047
36,093
34,179
32,559
Accounts and notes receivable
134,075
121,294
145,164
110,722
123,381
Reinsurance recoverables
76,664
73,202
66,515
56,852
17,722
Deferred policy acquisition
costs
15,652
18,305
17,926
21,774
20,855
Property and equipment, net
78,309
80,457
88,717
89,143
87,915
Goodwill and other acquired intangible
assets, net
22,181
23,043
25,268
26,229
27,208
Other assets
763,502
715,085
726,641
714,394
710,240
Total assets
$
7,920,861
$
7,948,021
$
7,777,345
$
7,569,309
$
6,690,432
Liabilities and stockholders’
equity:
Unearned premiums
$
406,689
$
448,791
$
501,787
$
561,280
$
605,045
Reserve for losses and loss adjustment
expense
887,355
848,413
825,792
738,885
418,202
Senior notes
1,406,603
1,405,674
1,404,759
1,403,857
887,584
FHLB advances
138,833
176,483
141,058
175,122
173,760
Reinsurance funds withheld
282,345
278,555
318,773
312,350
302,551
Net deferred tax liability
210,571
213,897
166,136
126,883
90,500
Other liabilities
353,173
291,855
296,661
264,927
348,282
Total liabilities
3,685,569
3,663,668
3,654,966
3,583,304
2,825,924
Common stock
210
210
210
210
208
Treasury stock
(910,347
)
(910,115
)
(909,745
)
(909,738
)
(902,024
)
Additional paid-in capital
2,242,950
2,245,897
2,238,869
2,232,949
2,231,670
Retained earnings
2,785,744
2,684,636
2,561,076
2,450,423
2,504,853
Accumulated other comprehensive
income
116,735
263,725
231,969
212,161
29,801
Total stockholders’ equity
4,235,292
4,284,353
4,122,379
3,986,005
3,864,508
Total liabilities and stockholders’
equity
$
7,920,861
$
7,948,021
$
7,777,345
$
7,569,309
$
6,690,432
Shares outstanding
191,311
191,606
191,556
191,492
190,387
Book value per share
$
22.14
$
22.36
$
21.52
$
20.82
$
20.30
Debt to capital ratio (1)
24.9
%
24.7
%
25.4
%
26.0
%
18.7
%
Risk to capital ratio-Radian Guaranty
only
11.9:1
12.7:1
13.2:1
13.3:1
13.8:1
(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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Premiums earned:
Direct - Mortgage:
Premiums earned, excluding revenue from
cancellations (1)
$
256,905
$
272,331
$
259,889
$
263,468
$
274,647
Single Premium Policy
cancellations
38,510
53,526
65,667
50,023
24,133
Total direct - Mortgage (1)
295,415
325,857
325,556
313,491
298,780
Assumed - Mortgage: (2)
2,298
2,615
2,946
3,197
3,456
Ceded - Mortgage:
Premiums earned, excluding revenue from
cancellations
(25,373
)
(27,229
)
(25,120
)
(26,493
)
(28,609
)
Single Premium Policy cancellations
(3)
(11,109
)
(15,197
)
(18,679
)
(14,424
)
(7,183
)
Profit commission - other (4)
3,433
770
(1,347
)
(28,175
)
8,555
Total ceded premiums, net of profit
commission - Mortgage (5)
(33,049
)
(41,656
)
(45,146
)
(69,092
)
(27,237
)
Net premiums earned - Mortgage
(1)
264,664
286,816
283,356
247,596
274,999
Net premiums earned - Real Estate
(6)
7,208
7,572
7,099
4,734
3,149
Net premiums earned - All Other
(6)
—
7,752
(3,984
)
(3,035
)
(733
)
Net premiums earned (1)
$
271,872
$
302,140
$
286,471
$
249,295
$
277,415
(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 and Services adjusted EBITDA, along with
reconciliations to consolidated GAAP measures, see Exhibits F and
G.
Three Months Ended March 31,
2021
(In thousands)
Mortgage
Real Estate
All Other
Inter- segment
Consolidated
Net premiums written
$
246,874
$
7,208
$
—
$
—
$
254,082
(Increase) decrease in unearned
premiums
17,790
—
—
—
17,790
Net premiums earned
264,664
7,208
—
—
271,872
Services revenue
4,351
18,550
53
(59
)
22,895
Net investment income
34,013
37
4,201
—
38,251
Other income
769
—
207
—
976
Total
303,797
25,795
4,461
(59
)
333,994
Provision for losses
45,869
296
—
(22
)
46,143
Policy acquisition costs
8,996
—
—
—
8,996
Cost of services
3,192
17,028
28
(2
)
20,246
Other operating expenses before
allocated corporate operating expenses
22,454
14,928
951
(35
)
38,298
Interest expense
21,115
—
—
—
21,115
Total
101,626
32,252
979
(59
)
134,798
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
202,171
(6,457
)
3,482
—
199,196
Allocation of corporate operating
expenses
27,884
3,996
—
—
31,880
Adjusted pretax operating income
(loss)
$
174,287
$
(10,453
)
$
3,482
$
—
$
167,316
Three Months Ended March 31,
2020
(In thousands)
Mortgage
Real Estate
All Other
Inter- segment
Consolidated
Net premiums written
$
260,974
$
3,149
$
(733
)
$
—
$
263,390
(Increase) decrease in unearned
premiums
14,025
—
—
—
14,025
Net premiums earned
274,999
3,149
(733
)
—
277,415
Services revenue
3,216
23,251
5,652
(192
)
31,927
Net investment income
36,198
125
4,621
—
40,944
Other income
671
—
151
—
822
Total
315,084
26,525
9,691
(192
)
351,108
Provision for losses
35,246
743
—
(38
)
35,951
Policy acquisition costs
7,413
—
—
—
7,413
Cost of services
1,757
14,989
5,500
(105
)
22,141
Other operating expenses before
allocated corporate operating expenses
23,593
10,579
2,106
(49
)
36,229
Interest expense
12,194
—
—
—
12,194
Total
80,203
26,311
7,606
(192
)
113,928
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
234,881
214
2,085
—
237,180
Allocation of corporate operating
expenses
29,214
3,367
—
—
32,581
Adjusted pretax operating income
(loss)
$
205,667
$
(3,153
)
$
2,085
$
—
$
204,599
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 2 of 4)
Mortgage
2021
2020
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Net premiums written (1) (2)
$
246,874
$
261,244
$
259,278
$
229,458
$
260,974
(Increase) decrease in unearned
premiums
17,790
25,572
24,078
18,138
14,025
Net premiums earned
264,664
286,816
283,356
247,596
274,999
Services revenue
4,351
3,717
3,914
3,918
3,216
Net investment income
34,013
34,235
32,054
34,708
36,198
Other income
769
735
689
721
671
Total
303,797
325,503
320,013
286,943
315,084
Provision for losses
45,869
56,312
87,753
304,021
35,246
Policy acquisition costs
8,996
7,395
10,166
6,015
7,413
Cost of services
3,192
3,245
2,908
2,133
1,757
Other operating expenses before
allocated corporate operating expenses (3)
22,454
21,974
21,635
18,537
23,593
Interest expense (4) (5)
21,115
21,169
21,088
16,699
12,194
Total (6)
101,626
110,095
143,550
347,405
80,203
Adjusted pretax operating income (loss)
before allocated corporate operating expenses
202,171
215,408
176,463
(60,462)
234,881
Allocation of corporate operating
expenses
27,884
31,102
29,127
25,359
29,214
Adjusted pretax operating income
(loss)
$
174,287
$
184,306
$
147,336
$
(85,821)
$
205,667
Real Estate (5)
2021
2020
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Net premiums earned (7)
$
7,208
$
7,572
$
7,099
$
4,734
$
3,149
Services revenue (6) (7)
18,550
15,958
22,627
17,688
23,251
Net investment income
37
43
67
126
125
Total
25,795
23,573
29,793
22,548
26,525
Provision for losses
296
392
370
426
743
Cost of services
17,028
15,706
18,085
12,681
14,989
Other operating expenses before
allocated corporate operating expenses (3)
14,928
15,238
13,136
10,527
10,579
Total
32,252
31,336
31,591
23,634
26,311
Adjusted pretax operating income before
allocated corporate operating expenses (8)
(6,457)
(7,763)
(1,798)
(1,086)
214
Allocation of corporate operating
expenses
3,996
3,369
3,248
2,823
3,367
Adjusted pretax operating income
(loss)
$
(10,453)
$
(11,132)
$
(5,046)
$
(3,909)
$
(3,153)
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 3 of 4)
All Other (5) (9)
2021
2020
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Net premiums earned (7)
$
—
$
7,752
$
(3,984)
$
(3,035)
$
(733)
Services revenue (6) (7)
53
(7,963)
8,267
6,579
5,652
Net investment income
4,201
3,837
4,134
3,889
4,621
Other income
207
55
224
104
151
Total
4,461
3,681
8,641
7,537
9,691
Cost of services
28
2,835
4,127
3,177
5,500
Other operating expenses (3)
951
3,033
1,824
3,129
2,106
Total
979
5,868
5,951
6,306
7,606
Adjusted pretax operating income
(loss)
$
3,482
$
(2,187)
$
2,690
$
1,231
$
2,085
(1)
Net of ceded premiums written
under the QSR Programs and the Excess-of-Loss Program. See Exhibit
L for additional information.
(2)
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.
(3)
Does not include impairment of
long-lived assets and other non-operating items, which are not
considered components of adjusted pretax operating income
(loss).
(4)
Relates to interest on our
borrowing and financing activities including our Senior Notes
issued by our holding company and FHLB borrowings made by our
mortgage insurance subsidiaries.
(5)
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.
(6)
Inter-segment information:
2021
2020
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Inter-segment revenue included
in:
Mortgage
$
—
$
—
$
—
$
—
$
83
Real Estate
59
86
98
91
87
All Other
—
186
767
19
22
Total inter-segment revenue
$
59
$
272
$
865
$
110
$
192
Inter-segment expense included
in:
Mortgage
$
59
$
86
$
98
$
91
$
87
Real Estate
—
186
767
19
22
All Other
—
—
—
—
83
Total inter-segment expense
$
59
$
272
$
865
$
110
$
192
See notes continued on next
page.
Radian Group Inc. and
Subsidiaries
Segment Information
Exhibit E (page 4 of 4)
Notes continued from prior
page.
(7)
In the fourth quarter of 2020, we
reclassified certain revenue previously reflected in the Real
Estate segment results as services revenue to net premiums earned.
As a result, for all periods presented in 2020, on the Real Estate
segment, net premiums earned has been increased and services
revenue has been decreased, with offsetting adjustments reflected
in All Other activities.
(8)
Supplemental information for Real Estate
adjusted EBITDA (see definition in Exhibit F):
2021
2020
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Adjusted pretax operating income (loss)
before corporate allocations
$
(6,457)
$
(7,763)
$
(1,798)
$
(1,086)
$
214
Depreciation and amortization
578
744
679
771
663
Real Estate adjusted EBITDA
$
(5,879)
$
(7,019)
$
(1,119)
$
(315)
$
877
(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 prior
to its sale in the first quarter of 2020, income and expenses
related to Clayton; (iv) for all periods presented, the income and
expenses related to our traditional appraisal services; and (v)
certain other immaterial revenue and expense items.
Selected Mortgage Key
Ratios
2021
2020
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Loss ratio (1)
17.3
%
19.6
%
31.0
%
122.8
%
12.8
%
Expense ratio (1)
22.4
%
21.1
%
21.5
%
20.2
%
21.9
%
(1)
Calculated on a GAAP basis using
net premiums earned.
Radian Group Inc. and
Subsidiaries
Definition of Consolidated Non-GAAP
Financial Measures
Exhibit F (page 1 of 2)
Use of Non-GAAP Financial
Measures
In addition to the traditional
GAAP financial measures, we have presented “adjusted pretax
operating income (loss),” “adjusted diluted net operating income
(loss) per share” and “adjusted net operating return on
equity,” which are non-GAAP financial measures for the
consolidated company, among our key performance indicators to
evaluate our fundamental financial performance. These non-GAAP
financial measures align with the way the Company’s business
performance is evaluated by both management and the board of
directors. These measures have been established in order to
increase transparency for the purposes of evaluating our operating
trends and enabling more meaningful comparisons with our peers.
Although on a consolidated basis “adjusted pretax operating income
(loss),” “adjusted diluted net operating income (loss) per share”
and “adjusted net operating return on equity” are non-GAAP
financial measures, we believe these measures aid in understanding
the underlying performance of our operations. Our senior
management, including our Chief Executive Officer (Radian’s chief
operating decision maker), uses adjusted pretax operating income
(loss) as our primary measure to evaluate the fundamental financial
performance of the Company’s business segments and to allocate
resources to the segments.
Adjusted pretax operating income
(loss) is defined as GAAP consolidated pretax income (loss)
excluding the effects of: (i) net gains (losses) on investments and
other financial instruments; (ii) loss on extinguishment of debt;
(iii) amortization and impairment of goodwill and other acquired
intangible assets; and (iv) impairment of other long-lived assets
and other non-operating items, such as gains (losses) from the sale
of lines of business and acquisition-related income and expenses.
Adjusted diluted net operating income (loss) per share is
calculated by dividing (i) adjusted pretax operating income (loss)
attributable to common stockholders, net of taxes computed using
the Company’s statutory tax rate, by (ii) the sum of the weighted
average number of common shares outstanding and all dilutive
potential common shares outstanding. Adjusted net operating return
on equity is calculated by dividing annualized adjusted pretax
operating income (loss), net of taxes computed using the Company’s
statutory tax rate, by average stockholders’ equity, based on the
average of the beginning and ending balances for each period
presented.
Although adjusted pretax
operating income (loss) excludes certain items that have occurred
in the past and are expected to occur in the future, the excluded
items represent those that are: (i) not viewed as part of the
operating performance of our primary activities or (ii) not
expected to result in an economic impact equal to the amount
reflected in pretax income (loss). These adjustments, along with
the reasons for their treatment, are described below.
(1)
Net gains (losses) on
investments and other financial instruments. The recognition of
realized investment gains or losses can vary significantly across
periods as the activity is highly discretionary based on the timing
of individual securities sales due to such factors as market
opportunities, our tax and capital profile and overall market
cycles. Unrealized gains and losses arise primarily from changes in
the market value of our investments that are classified as trading
or equity securities. These valuation adjustments may not
necessarily result in realized economic gains or losses.
Trends in the profitability of
our fundamental operating activities can be more clearly identified
without the fluctuations of these realized and unrealized gains or
losses and changes in fair value of other financial instruments. We
do not view them to be indicative of our fundamental operating
activities.
(2)
Loss on extinguishment of
debt. Gains or losses on early extinguishment of debt and
losses incurred to purchase our debt prior to maturity are
discretionary activities that are undertaken in order to take
advantage of market opportunities to strengthen our financial and
capital positions; therefore, we do not view these activities as
part of our operating performance. Such transactions do not reflect
expected future operations and do not provide meaningful insight
regarding our current or past operating trends.
(3)
Amortization and impairment of
goodwill and other acquired intangible assets. Amortization of
acquired intangible assets represents the periodic expense required
to amortize the cost of acquired intangible assets over their
estimated useful lives. Acquired intangible assets are also
periodically reviewed for potential impairment, and impairment
adjustments are made whenever appropriate. We do not view these
charges as part of the operating performance of our primary
activities.
(4)
Impairment of other long-lived
assets and other non-operating items. Includes activities that
we do not view to be indicative of our fundamental operating
activities, such as: (i) impairment of internal-use software and
other long-lived assets; (ii) gains (losses) from the sale of lines
of business; and (iii) acquisition-related expenses.
Radian Group Inc. and
Subsidiaries
Definition of Consolidated Non-GAAP
Financial Measures
Exhibit F (page 2 of 2)
In addition to the above non-GAAP measures
for the consolidated company, we also have presented as
supplemental information a non-GAAP measure for our Real Estate
segment, representing a measure of earnings before interest, income
tax provision (benefit), depreciation and amortization (“EBITDA”).
We calculate Real Estate adjusted EBITDA by using adjusted pretax
operating income (loss) as described above, further adjusted to
remove the impact of depreciation and corporate allocations for
interest and operating expenses. In addition, Real Estate adjusted
EBITDA margin is calculated by dividing Real Estate adjusted EBITDA
by GAAP total revenue for the Real Estate segment. Real Estate
adjusted EBITDA and Real Estate adjusted EBITDA margin are used to
facilitate comparisons with other services companies, since they
are widely accepted measures of performance in the services
industry and are used internally as supplemental measures to
evaluate the performance of our Real Estate segment.
See Exhibit G for the reconciliation of
the most comparable GAAP measures, consolidated pretax income
(loss), diluted net income (loss) per share and return on equity to
our non-GAAP financial measures for the consolidated company,
adjusted pretax operating income (loss), adjusted diluted net
operating income (loss) per share and adjusted net operating return
on equity, respectively. Exhibit G also contains the reconciliation
of the most comparable GAAP measure, net income (loss), to Real
Estate adjusted EBITDA.
Total adjusted pretax operating income
(loss), adjusted diluted net operating income (loss) per share,
adjusted net operating return on equity, Real Estate adjusted
EBITDA and Real Estate adjusted EBITDA margin should not be
considered in isolation or viewed as substitutes for GAAP pretax
income (loss), diluted net income (loss) per share, return on
equity or net income (loss). Our definitions of adjusted pretax
operating income (loss), adjusted diluted net operating income
(loss) per share, adjusted net operating return on equity, Real
Estate adjusted EBITDA or Real Estate adjusted EBITDA margin may
not be comparable to similarly-named measures reported by other
companies.
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit G (page 1 of 3)
Reconciliation of Consolidated
Pretax Income (Loss) to Adjusted Pretax Operating Income
(Loss)
2021
2020
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Consolidated pretax income
(loss)
$
161,189
$
179,167
$
161,205
$
(42,224)
$
181,293
Less reconciling income (expense)
items:
Net gains (losses) on investments and
other financial instruments
(5,181)
17,376
17,652
47,276
(22,027)
Amortization and impairment of other
acquired intangible assets
(862)
(2,225)
(961)
(979)
(979)
Impairment of other long-lived assets
and other non-operating items (1)
(84)
(6,971)
(466)
(22)
(300)
Total adjusted pretax operating income
(loss) (2)
$
167,316
$
170,987
$
144,980
$
(88,499)
$
204,599
(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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Adjusted pretax operating income
(loss):
Mortgage segment
$
174,287
$
184,306
$
147,336
$
(85,821)
$
205,667
Real Estate segment
(10,453)
(11,132)
(5,046)
(3,909)
(3,153)
All Other activities
3,482
(2,187)
2,690
1,231
2,085
Total adjusted pretax operating income
(loss)
$
167,316
$
170,987
$
144,980
$
(88,499)
$
204,599
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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Diluted net income (loss) per
share
$
0.64
$
0.76
$
0.70
$
(0.15)
$
0.70
Less per-share impact of reconciling
income (expense) items:
Net gains (losses) on investments and
other financial instruments
(0.03)
0.09
0.09
0.24
(0.11)
Amortization and impairment of other
acquired intangible assets
—
(0.01)
—
(0.01)
—
Impairment of other long-lived assets
and other non-operating items
—
(0.04)
—
—
—
Income tax (provision) benefit on
reconciling income (expense) items (1)
0.01
(0.01)
(0.02)
(0.05)
0.02
Difference between statutory and
effective tax rate
(0.02)
0.04
0.04
0.03
(0.01)
Per-share impact of reconciling income
(expense) items
(0.04)
0.07
0.11
0.21
(0.10)
Adjusted diluted net operating income
(loss) per share (1)
$
0.68
$
0.69
$
0.59
$
(0.36)
$
0.80
(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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Return on equity (1)
11.8
%
14.1
%
13.3
%
(3.1)
%
14.2
%
Less impact of reconciling income
(expense) items: (2)
Net gains (losses) on investments and
other financial instruments
(0.5)
1.7
1.7
4.8
(2.2)
Amortization and impairment of other
acquired intangible assets
(0.1)
(0.2)
(0.1)
(0.1)
(0.1)
Impairment of other long-lived assets
and other non-operating items
—
(0.7)
—
—
—
Income tax (provision) benefit on
reconciling income (expense) items (3)
0.1
(0.2)
(0.3)
(1.0)
0.5
Difference between statutory and
effective tax rate
(0.1)
0.6
0.7
0.3
(0.3)
Impact of reconciling income (expense)
items
(0.6)
1.2
2.0
4.0
(2.1)
Adjusted net operating return on
equity
12.4
%
12.9
%
11.3
%
(7.1)
%
16.3
%
(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 Net Income
(Loss) to Real Estate Adjusted EBITDA
2021
2020
(In thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Net income (loss)
$
125,608
$
148,013
$
135,103
$
(29,951)
$
140,461
Less reconciling income (expense)
items:
Net gains (losses) on investments and
other financial instruments
(5,181)
17,376
17,652
47,276
(22,027)
Amortization and impairment of other
acquired intangible assets
(862)
(2,225)
(961)
(979)
(979)
Impairment of other long-lived assets
and other non-operating items
(84)
(6,971)
(466)
(22)
(300)
Income tax (provision) benefit
(35,581)
(31,154)
(26,102)
12,273
(40,832)
Mortgage adjusted pretax operating
income (loss)
174,287
184,306
147,336
(85,821)
205,667
All Other adjusted pretax operating
income
3,482
(2,187)
2,690
1,231
2,085
Real Estate adjusted pretax operating
income (loss)
(10,453)
(11,132)
(5,046)
(3,909)
(3,153)
Less reconciling income (expense)
items:
Allocation of corporate operating
expenses to Real Estate
(3,996)
(3,369)
(3,248)
(2,823)
(3,367)
Real Estate depreciation and
amortization
(578)
(744)
(679)
(771)
(663)
Real Estate adjusted EBITDA
$
(5,879)
$
(7,019)
$
(1,119)
$
(315)
$
877
On a consolidated basis, “adjusted pretax
operating income (loss),” “adjusted diluted net operating income
(loss) per share” and “adjusted net operating return on equity” are
measures not determined in accordance with GAAP. “Real Estate
adjusted EBITDA” and “Real Estate adjusted EBITDA margin” are also
non-GAAP measures. These measures should not be considered in
isolation or viewed as substitutes for GAAP pretax income (loss),
diluted net income (loss) per share, return on equity or net income
(loss). Our definitions of adjusted pretax operating income (loss),
adjusted diluted net operating income (loss) per share, adjusted
net operating return on equity, Real Estate adjusted EBITDA or Real
Estate adjusted EBITDA margin may not be comparable to
similarly-named measures reported by other companies. See Exhibit F
for additional information on our consolidated non-GAAP financial
measures.
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental
Information - New Insurance Written
Exhibit H
2021
2020
($ in millions)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
New insurance written ("NIW")
$
20,161
$
29,781
$
33,320
$
25,459
$
16,706
Percentage of
NIW
Borrower-paid
99.2
%
99.2
%
98.5
%
97.8
%
96.7
%
Percentage by
premium type
Direct monthly and other recurring
premiums
90.2
%
91.4
%
90.0
%
84.7
%
81.1
%
Borrower-paid (1) (2)
9.4
8.3
9.0
13.6
16.5
Lender-paid (1)
0.4
0.3
1.0
1.7
2.4
Direct single premiums (1)
9.8
8.6
10.0
15.3
18.9
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
NIW for purchases
59.1
%
64.6
%
70.5
%
56.4
%
66.2
%
NIW for refinances
40.9
%
35.4
%
29.5
%
43.6
%
33.8
%
Percentage of NIW
by FICO score (3)
>=740
64.3
%
64.7
%
66.2
%
67.3
%
65.7
%
680-739
31.5
31.5
30.7
30.1
31.1
620-679
4.2
3.8
3.1
2.6
3.2
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Percentage by LTV
95.01% and above
8.0
%
8.9
%
9.7
%
8.3
%
9.9
%
90.01% to 95.00%
31.6
34.7
39.6
36.4
37.6
85.01% to 90.00%
31.3
29.8
28.3
29.8
30.3
85.00% and below
29.1
26.6
22.4
25.5
22.2
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)
March 31,
December 31,
September 30,
June 30,
March 31,
($ in millions)
2021
2020
2020
2020
2020
Primary insurance
in force (1)
Prime
$
234,980
$
242,044
$
241,166
$
236,835
$
236,958
Alt-A and A minus and below
3,941
4,100
4,301
4,471
4,628
Primary
$
238,921
$
246,144
$
245,467
$
241,306
$
241,586
Primary risk in
force (1) (2)
Prime
$
57,579
$
59,689
$
59,972
$
59,253
$
59,827
Alt-A and A minus and below
929
967
1,017
1,058
1,096
Primary
$
58,508
$
60,656
$
60,989
$
60,311
$
60,923
Percentage of
primary risk in force
Direct monthly and other recurring
premiums
80.0
%
79.1
%
76.8
%
73.8
%
72.6
%
Direct single premiums
20.0
%
20.9
%
23.2
%
26.2
%
27.4
%
Percentage of
primary risk in force by FICO score (3)
>=740
57.2
%
57.5
%
57.6
%
57.4
%
57.2
%
680-739
34.9
34.6
34.3
34.3
34.2
620-679
7.3
7.3
7.5
7.7
8.0
<=619
0.6
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
14.4
%
14.4
%
14.3
%
14.2
%
14.3
%
90.01% to 95.00%
48.6
49.3
50.1
50.4
51.0
85.01% to 90.00%
28.2
28.0
27.9
28.1
27.9
85.00% and below
8.8
8.3
7.7
7.3
6.8
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Percentage of
primary risk in force by policy year
2008 and prior
6.1
%
6.2
%
6.6
%
7.2
%
7.5
%
2009 - 2015
9.9
11.3
13.3
16.0
17.8
2016
6.8
7.6
8.9
10.6
11.7
2017
8.0
9.1
10.7
13.0
14.8
2018
8.7
9.8
11.7
14.0
16.4
2019
15.6
17.8
20.6
23.3
25.4
2020
37.2
38.2
28.2
15.9
6.4
2021
7.7
—
—
—
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Primary risk in force on defaulted
loans
$
2,910
$
3,250
$
3,747
$
4,263
$
1,001
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.
March 31,
December 31,
September 30,
June 30,
March 31,
2021
2020
2020
2020
2020
Persistency Rate (12 months
ended)
57.2
%
(4)
61.2
%
(4)
65.6
%
(4)
70.2
%
75.4
%
Persistency Rate (quarterly,
annualized) (5)
62.5
%
60.4
%
(4)
60.0
%
(4)
63.8
%
76.5
%
(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 1.0% of our total risk in force for all periods
presented.
(3)
For loans with multiple
borrowers, the percentage of primary risk in force by FICO score
represents the lowest of the borrowers’ FICO scores.
(4)
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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Net claims paid: (1)
Total primary claims paid
$
6,611
$
8,353
$
11,331
$
22,144
$
24,358
Total pool and other
(138
)
70
(230
)
639
(911
)
Subtotal
6,473
8,423
11,101
22,783
23,447
Impact of commutations and settlements
(2)
4,000
32,170
(267
)
—
(56
)
Total net claims paid
$
10,473
$
40,593
$
10,834
$
22,783
$
23,391
Total average net primary claims paid
(1) (3)
$
43.8
$
46.9
$
46.4
$
47.9
$
50.3
Average direct primary claims paid (3)
(4)
$
45.5
$
48.5
$
47.8
$
49.0
$
51.4
(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.
March 31,
December 31,
September 30,
June 30,
March 31,
($ in thousands, except per default
amounts)
2021
2020
2020
2020
2020
Reserve for losses by category
(1)
Mortgage reserves
Prime
$
751,100
$
711,245
$
655,754
$
573,463
$
264,694
Alt-A and A minus and below
90,455
88,269
88,879
86,646
88,481
IBNR and other
6,626
9,966
43,153
43,342
40,583
LAE
21,212
20,172
18,745
16,807
9,216
Total primary reserves
869,393
829,652
806,531
720,258
402,974
Total pool reserves
13,175
14,163
14,779
14,398
11,297
Total 1st lien reserves
882,568
843,815
821,310
734,656
414,271
Other
270
292
398
335
407
Total Mortgage reserves
882,838
844,107
821,708
734,991
414,678
Real Estate reserves
4,517
4,306
4,084
3,894
3,524
Total reserves
$
887,355
$
848,413
$
825,792
$
738,885
$
418,202
Primary reserve per primary default
excluding IBNR and other
$
17,219
$
14,759
$
12,168
$
9,706
$
18,320
(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
March 31,
December 31,
September 30,
June 30,
March 31,
2021
2020
2020
2020
2020
Default
Statistics
Primary Insurance:
Prime
Number of insured loans
996,082
1,031,736
1,043,450
1,040,964
1,049,974
Number of loans in default
45,929
51,032
58,057
64,648
15,497
Percentage of loans in default
4.61
%
4.95
%
5.56
%
6.21
%
1.48
%
Alt-A and A minus
and below
Number of insured loans
25,282
26,208
27,310
28,357
29,375
Number of loans in default
4,177
4,505
4,680
5,094
4,284
Percentage of loans in default
16.52
%
17.19
%
17.14
%
17.96
%
14.58
%
Total Primary
Number of insured loans
1,021,364
1,057,944
1,070,760
1,069,321
1,079,349
Number of loans in default
50,106
55,537
62,737
69,742
19,781
Percentage of loans in default
4.91
%
5.25
%
5.86
%
6.52
%
1.83
%
Radian Group Inc. and
Subsidiaries
Mortgage Supplemental Information -
Reinsurance Programs
Exhibit L
2021
2020
($ in thousands)
Qtr 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Quota Share
Reinsurance (“QSR”) and Single Premium QSR Programs
Ceded premiums written (1)
$
(2,852)
$
(1,117)
$
2,119
$
35,821
$
6,687
% of premiums written
(1.1)
%
(0.4)
%
0.8
%
13.0
%
2.4
%
Ceded premiums earned
$
20,788
$
29,510
$
36,742
$
60,652
$
18,712
% of premiums earned
6.8
%
8.6
%
11.2
%
19.2
%
6.2
%
Ceding commissions written
$
(2,949)
$
(3,847)
$
(4,984)
$
(5,304)
$
8,413
Ceding commissions earned (2)
$
10,407
$
13,197
$
17,038
$
13,453
$
9,966
Profit commission
$
16,350
$
18,406
$
20,425
$
(10,649)
$
16,405
Ceded losses
$
3,661
$
7,106
$
10,189
$
39,635
$
1,962
Excess-of-Loss
Program
Ceded premiums written
$
11,482
$
15,240
$
7,499
$
7,525
$
12,678
% of premiums written
4.4
%
5.2
%
2.8
%
2.7
%
4.5
%
Ceded premiums earned
$
12,154
$
12,037
$
8,290
$
8,321
$
8,405
% of premiums earned
4.0
%
3.7
%
2.5
%
2.6
%
2.8
%
Ceded RIF
(3)
Single Premium QSR Program
$
6,147,808
$
6,646,812
$
7,358,932
$
8,173,756
$
8,580,047
Excess-of-Loss Program
1,525,100
1,560,600
1,170,200
1,170,200
1,230,000
QSR Program
317,827
381,787
454,585
532,743
596,166
Total Ceded RIF
$
7,990,735
$
8,589,199
$
8,983,717
$
9,876,699
$
10,406,213
PMIERs impact -
reduction in Minimum Required Assets
Excess-of-Loss Program
$
673,957
$
912,734
$
783,842
$
970,294
$
1,066,464
Single Premium QSR Program
388,536
423,712
469,625
517,028
501,668
QSR Program
19,378
22,712
26,213
30,837
31,638
Total PMIERs impact
$
1,081,871
$
1,359,158
$
1,279,680
$
1,518,159
$
1,599,770
(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 1
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Ceding commissions
$
(7,689)
$
(10,436)
$
(12,337)
$
(10,406)
$
(7,967)
(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. Any forward-looking statement is not a guarantee
of future performance and actual results could differ materially
from those contained in the forward-looking statement. These
statements speak only as of the date they were made, and we
undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. We operate in a changing environment where new risks
emerge from time to time and it is not possible for us to predict
all risks that may affect us, particularly those associated with
the COVID-19 pandemic, which has had wide-ranging and continually
evolving effects. The forward-looking statements, as well as our
prospects as a whole, are subject to risks and uncertainties that
could cause actual results to differ materially from those set
forth in the forward-looking statements. These risks and
uncertainties include, without limitation:
- the COVID-19 pandemic, which has caused significant economic
disruption, high unemployment, periods of volatility and disruption
in financial markets, and required adjustments in the housing
finance system and real estate markets. The COVID-19 pandemic has
adversely impacted our businesses, and 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 Enterprise Regulatory Capital Framework that was finalized
by the FHFA in December 2020 and that, 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 and that are subject
to complex compliance requirements;
- uncertainty from the expected discontinuance of LIBOR and
transition to one or more alternative benchmarks that could cause
interest rate volatility and, among other things, impact our
investment portfolio, cost of debt and cost of reinsurance through
mortgage insurance-linked notes transactions;
- any disruption in the servicing of mortgages covered by our
insurance policies, as well as poor servicer performance, which
could be impacted by the burdens placed on many servicers due to
the COVID-19 pandemic;
- a decrease in the “Persistency Rates” (the percentage of
insurance in force that remains in force over a period of time) of
our mortgage insurance on monthly premium products;
- competition in our mortgage insurance business, including price
competition and competition from the FHA and 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, including the recent changes to
the "qualified mortgages" (QM) loan requirements;
- legislative and regulatory activity (or inactivity), including
the adoption of (or failure to adopt) new laws and regulations, or
changes in existing laws and regulations, or the way they are
interpreted or applied, including potential changes in tax law
under the 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 such
as we have been experiencing due to the COVID-19 pandemic, the
likelihood, magnitude and timing of losses in establishing loss
reserves for our mortgage insurance business or to accurately
calculate and/or project our Available Assets and Minimum Required
Assets under the PMIERs, which will be impacted by, among other
things, the size and mix of our insurance in force, the level of
defaults in our portfolio, the reported status of defaults in our
portfolio, including whether they are subject to forbearance, a
repayment plan or a loan modification trial period 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 our investment
portfolio;
- changes in “GAAP” (accounting principles generally accepted in
the U.S.) or “SAPP” (statutory accounting principles and practices
including those required or permitted, if applicable, by the
insurance departments of the respective states of domicile of our
insurance subsidiaries) rules and guidance, or their
interpretation;
- effectiveness and security of our information technology
systems and solutions, including our ability to successfully
develop, launch and implement new and innovative technologies and
digital solutions and the potential disruption in, or failure of,
our information technology systems due to computer viruses,
unauthorized access, cyber-attack, natural disasters or other
similar events;
- our ability to attract and retain key employees; and
- legal and other limitations on amounts we may receive from our
subsidiaries, including dividends or ordinary course distributions
under our internal tax- and expense-sharing arrangements.
For more information regarding these risks and uncertainties as
well as certain additional risks that we face, you should refer to
“Item 1A. Risk Factors” in our 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/20210504006337/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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