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Radian Announces Third Quarter 2022 Financial Results

— GAAP net income of $198 million, or $1.20 per diluted share —

— Adjusted diluted net operating income of $1.31 per diluted share —

— Return on equity of 20.7% and adjusted net operating return on equity of 22.5% —

— Purchased 19.5 million shares, or 11.1% of total shares outstanding of Radian Group common stock year-to-date through October 31st —

— Primary mortgage insurance in force increases 7.3% year-over-year to $259 billion —

Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended September 30, 2022, of $198.3 million, or $1.20 per diluted share. This compares with net income for the quarter ended September 30, 2021, of $126.4 million, or $0.67 per diluted share.

Key Financial Highlights

 

Quarter ended

($ in millions, except per-share amounts)

 

September 30, 2022

 

June 30, 2022

 

September 30, 2021

Net income (1)

 

$198.3

 

$201.2

 

$126.4

Diluted net income per share

 

$1.20

 

$1.15

 

$0.67

Consolidated pretax income

 

$255.5

 

$259.9

 

$161.6

Adjusted pretax operating income (2)

 

$272.7

 

$302.0

 

$160.6

Adjusted diluted net operating income per share (2)(3)

 

$1.31

 

$1.36

 

$0.67

Return on equity (1)(4)

 

20.7 %

 

19.9 %

 

11.8 %

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

 

22.5 %

 

23.6 %

 

11.8 %

New Insurance Written (NIW) - mortgage insurance

 

$17,616

 

$18,935

 

$26,558

Net premiums earned - mortgage insurance

 

$235.2

 

$246.9

 

$236.9

New defaults (5)

 

9,601

 

8,009

 

8,132

Provision for losses - mortgage insurance

 

($97.5)

 

($114.2)

 

$16.8

homegenius revenues

 

$25.1

 

$32.3

 

$45.1

Book value per share

 

$23.80

 

$23.63

 

$23.48

Accumulated other comprehensive income

(loss) value per share (6)

 

($3.20)

 

($1.98)

 

$0.84

PMIERs Available Assets (7)

 

$5,358

 

$5,175

 

$5,262

PMIERs excess Available Assets (8)

 

$1,628

 

$1,424

 

$1,741

Total Holding Company Liquidity (9)

 

$848

 

$1,048

 

$1,036

Total investments

 

$5,592

 

$5,906

 

$6,658

Primary mortgage insurance in force

 

$259,121

 

$254,226

 

$241,575

Percentage of primary loans in default (10)

 

2.1 %

 

2.2 %

 

3.4 %

Mortgage insurance loss reserves

 

$478

 

$589

 

$888

(1)

Net income for the third quarter of 2022 includes a pretax net loss on investments and other financial instruments of $16.3 million, compared with a $41.9 million pretax net loss on investments and other financial instruments in the second quarter of 2022 and a pretax net gain on investments and other financial instruments of $2.1 million for the third quarter of 2021.

(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%.

(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)

Included in book value per share for each period presented.

(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 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 September 30, 2022, was $272.7 million, or $1.31 per diluted share. This compares with adjusted pretax operating income for the quarter ended September 30, 2021, of $160.6 million, or $0.67 per diluted share.

Book value per share at September 30, 2022, was $23.80, compared to $23.63 at June 30, 2022, and $23.48 at September 30, 2021. This represents a 1.4% growth in book value per share at September 30, 2022, as compared to September 30, 2021, and includes accumulated other comprehensive income (loss) of $(3.20) per share as of September 30, 2022 and $0.84 per share as of September 30, 2021, which, if excluded as of both dates, would represent 19.3% growth for the period. Changes in accumulated other comprehensive income (loss) for the period are primarily from net unrealized losses on investments as a result of an increase in market interest rates during the period. We do not expect to realize these losses given that we have the ability and the expectation to hold these securities until recovery.

“Despite a challenging macroeconomic environment and cooling of the mortgage and real estate markets, we are pleased to report on another excellent quarter for Radian with net income of $198 million, return on equity of 20.7% and total holding company liquidity of $848 million. Our primary mortgage insurance in force portfolio, which is the main driver of future earnings for our company, grew more than 7% year-over-year to $259 billion and credit performance remained strong,” said Radian’s Chief Executive Officer Rick Thornberry. “We are managing our expense structure to align to today’s operating environment and strategically managing our capital. We believe we are well positioned to continue our mission of ensuring affordable, sustainable and equitable homeownership.”

THIRD QUARTER HIGHLIGHTS

  • NIW was $17.6 billion in the third quarter of 2022, compared to $18.9 billion in the second quarter of 2022, and $26.6 billion in the third quarter of 2021.
    • Purchase NIW decreased 5.7% in the third quarter of 2022 compared to the second quarter of 2022 and decreased 27.3% compared to the third quarter of 2021.
    • Refinances accounted for 1.6% of total NIW in the third quarter of 2022, compared to 2.9% in the second quarter of 2022, and 10.2% in the third quarter of 2021.
    • Of the $17.6 billion in NIW in the third quarter of 2022, 95.5% was written with monthly and other recurring premiums, compared to 95.4% in the second quarter of 2022, and 93.8% in the third quarter of 2021.
  • Total primary mortgage insurance in force as of September 30, 2022, increased to $259.1 billion, an increase of 1.9% compared to $254.2 billion as of June 30, 2022, and an increase of 7.3% compared to $241.6 billion as of September 30, 2021. The year-over-year change reflects an 11.8% increase in monthly premium policy insurance in force and a 13.2% decline in single premium policy insurance in force.
    • Persistency, which is the percentage of mortgage insurance that remains in force after a twelve-month period, was 75.9% for the twelve months ended September 30, 2022, compared to 71.7% for the twelve months ended June 30, 2022, and 60.8% for the twelve months ended September 30, 2021.
    • Annualized persistency for the three months ended September 30, 2022, was 81.6%, compared to 79.8% for the three months ended June 30, 2022, and 67.5% for the three months ended September 30, 2021.
  • Net mortgage insurance premiums earned were $235.2 million for the quarter ended September 30, 2022, compared to $246.9 million for the quarter ended June 30, 2022, and $236.9 million for the quarter ended September 30, 2021.
    • Mortgage insurance in force portfolio premium yield was 39.2 basis points in the third quarter of 2022. This compares to 40.0 basis points in the second quarter of 2022, and 40.3 basis points in the third quarter of 2021.
    • The impact of single premium policy cancellations before consideration of reinsurance represented 1.0 basis points of direct premium yield in the third quarter of 2022, 1.1 basis points in the second quarter of 2022, and 4.3 basis points in the third quarter of 2021.
    • Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 36.7 basis points in the third quarter of 2022. This compares to 39.3 basis points in the second quarter of 2022, and 39.6 basis points in the third quarter of 2021.
    • Details regarding premiums earned may be found in Exhibit D.
  • The mortgage insurance provision for losses was a benefit of $97.5 million in the third quarter of 2022, compared to a benefit of $114.2 million in the second quarter of 2022, and a provision of $16.8 million in the third quarter of 2021.
    • The decreased benefit in the third quarter of 2022 compared to the second quarter of 2022 was primarily related to less favorable development on prior period reserves, as compared to the second quarter of 2022. The benefit compared to the provision recorded in the same quarter prior year is primarily related to more favorable development on prior period reserves, as compared to the third quarter of 2021. All periods were impacted by more favorable trends in cures than originally estimated.
    • The number of primary delinquent loans was 21,077 as of September 30, 2022, compared to 21,861 as of June 30, 2022, and 33,795 as of September 30, 2021.
    • The loss ratio in the third quarter of 2022 was (41.5)% compared to (46.2)% in the second quarter of 2022, and 7.1% in the third quarter of 2021.
    • Total mortgage insurance claims paid were $4.5 million in the third quarter of 2022, compared to $3.3 million in the second quarter of 2022, and $10.2 million in the third quarter of 2021.
  • Radian's homegenius segment offers an array of title, real estate and technology products and services to consumers, mortgage lenders, mortgage and real estate investors, GSEs, real estate brokers and agents.
    • Total homegenius segment revenues for the third quarter of 2022 were $25.1 million, compared to $32.3 million for the second quarter of 2022, and $45.1 million for the third quarter of 2021.
    • Adjusted pretax operating loss, our primary segment measure of profitability for the homegenius segment, was $25.5 million for the quarter ended September 30, 2022, compared to $17.7 million for the quarter ended June 30, 2022, and $5.6 million for the quarter ended September 30, 2021.
    • Additional details regarding related non-GAAP measures may be found in Exhibits F and G.
  • Other operating expenses were $91.3 million in the third quarter of 2022, compared to $90.5 million in the second quarter of 2022, and $86.5 million in the third quarter of 2021.
    • The increase in the third quarter of 2022 compared to the third quarter of 2021 was driven primarily by an increase in other general operating expenses and a decrease in ceding commissions. Additional details regarding other operating expenses by segment may be found in Exhibit E.

CAPITAL AND LIQUIDITY UPDATE

Radian Group

  • As of September 30, 2022, Radian Group maintained $572.6 million of available liquidity. Total Holding Company Liquidity, which includes the company’s $275.0 million unsecured revolving credit facility, was $847.6 million as of September 30, 2022.
  • During the third quarter of 2022, the company repurchased 9.5 million shares of Radian Group common stock at a total cost of $194.1 million, including commissions. This represented 5.7% in the aggregate of total shares outstanding as of the end of the second quarter.
  • In addition, in October 2022 the Company purchased an additional 49 thousand shares of Radian Group common stock at a total cost of approximately $1.0 million, including commissions. After the repurchases in October, no purchase authority remained available under our most recent repurchase authorization.
  • On August 10, 2022, Radian Group’s board of directors authorized a regular quarterly dividend on its common stock in the amount of $0.20 per share and the dividend was paid on September 1, 2022.
  • Radian Reinsurance paid an ordinary dividend of $32.5 million to Radian Group in September 2022.

Radian Guaranty

  • At September 30, 2022, Radian Guaranty’s Available Assets under PMIERs totaled approximately $5.4 billion, resulting in excess available resources or a “cushion” of $1.6 billion, or 44%, over its Minimum Required Assets.
  • As of September 30, 2022, 68% of Radian Guaranty's primary mortgage insurance risk in force is subject to some form of risk distribution, providing a $1.2 billion reduction of Minimum Required Assets under PMIERs.
  • As previously announced, consistent with our use of risk distribution strategies to effectively manage capital and proactively mitigate risk, Radian Guaranty entered into a quota share reinsurance arrangement ("2022 QSR Agreement") with a panel of third-party reinsurance providers in the third quarter of 2022. Under the 2022 QSR Agreement, starting July 1, 2022, we began to cede 20% of policies issued between January 1, 2022, and June 30, 2023, subject to certain conditions.

CONFERENCE CALL

Radian will discuss third quarter 2022 financial results in a conference call tomorrow, Thursday, November 3, 2022, at 12:00 p.m. Eastern time. The conference call will be webcast live on the company’s website at https://radian.com/who-we-are/for-investors/webcasts or at www.radian.com. The webcast is listen-only. Those interested in participating in the question-and-answer session should follow the conference call dial-in instructions below.

Please note that there is a new process to access the call via telephone. The call may be accessed via telephone by registering for the call here to receive the dial-in numbers and unique PIN. It is recommended that you join 10 minutes prior to the event start (although you may register and dial in at any time during the call).

A digital replay of the webcast will be available on Radian’s website approximately two hours after the live broadcast ends for a period of one year at https://radian.com/who-we-are/for-investors/webcasts.

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 (loss), adjusted diluted net operating income (loss) 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, except for certain investments attributable to our reportable segments; (ii) gains (losses) 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 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 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, real estate and technology products and services. We are powered by technology, informed by data and driven to deliver new and better ways to transact and manage risk. Visit www.radian.com to learn more about how Radian is shaping the future of mortgage and real estate services.

FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS (Unaudited)

Exhibit A:

Condensed Consolidated Statements of Operations Trend Schedule

Exhibit B:

Net Income Per Share Trend Schedule

Exhibit C:

Condensed Consolidated Balance Sheets

Exhibit D:

Net Premiums Earned

Exhibit E:

Segment Information

Exhibit F:

Definition of Consolidated Non-GAAP Financial Measures

Exhibit G:

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit H:

Mortgage Supplemental Information

 

New Insurance Written

Exhibit I:

Mortgage Supplemental Information

 

Primary Insurance in Force and Risk in Force

Exhibit J:

Mortgage Supplemental Information

 

Claims and Reserves, Default Statistics

Exhibit K:

Mortgage Supplemental Information

 

Reinsurance Programs

Radian Group Inc. and Subsidiaries

Condensed Consolidated Statements of Operations Trend Schedule

Exhibit A

 

 

 

2022

 

2021

(In thousands, except per-share amounts)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Revenues

 

 

 

 

 

 

 

 

 

 

Net premiums earned

 

$

240,222

 

 

$

253,892

 

 

$

254,190

 

 

$

261,437

 

 

$

249,118

Services revenue

 

 

20,146

 

 

 

27,281

 

 

 

29,348

 

 

 

35,693

 

 

 

37,773

Net investment income

 

 

51,414

 

 

 

46,957

 

 

 

38,196

 

 

 

37,407

 

 

 

35,960

Net gains (losses) on investments and other financial instruments

 

 

(16,252

)

 

 

(41,869

)

 

 

(29,457

)

 

 

3,025

 

 

 

2,098

Other income

 

 

659

 

 

 

572

 

 

 

703

 

 

 

805

 

 

 

809

Total revenues

 

 

296,189

 

 

 

286,833

 

 

 

292,980

 

 

 

338,367

 

 

 

325,758

Expenses

 

 

 

 

 

 

 

 

 

 

Provision for losses

 

 

(96,964

)

 

 

(113,922

)

 

 

(83,754

)

 

 

(46,219

)

 

 

17,305

Policy acquisition costs

 

 

5,442

 

 

 

5,940

 

 

 

6,605

 

 

 

7,271

 

 

 

7,924

Cost of services

 

 

18,717

 

 

 

22,760

 

 

 

24,753

 

 

 

28,333

 

 

 

30,520

Other operating expenses

 

 

91,327

 

 

 

90,495

 

 

 

89,541

 

 

 

80,476

 

 

 

86,479

Interest expense

 

 

21,183

 

 

 

20,831

 

 

 

20,846

 

 

 

21,137

 

 

 

21,027

Amortization of other acquired intangible assets

 

 

1,023

 

 

 

849

 

 

 

849

 

 

 

863

 

 

 

862

Total expenses

 

 

40,728

 

 

 

26,953

 

 

 

58,840

 

 

 

91,861

 

 

 

164,117

Pretax income

 

 

255,461

 

 

 

259,880

 

 

 

234,140

 

 

 

246,506

 

 

 

161,641

Income tax provision

 

 

57,181

 

 

 

58,687

 

 

 

53,009

 

 

 

53,061

 

 

 

35,229

Net income

 

$

198,280

 

 

$

201,193

 

 

$

181,131

 

 

$

193,445

 

 

$

126,412

Diluted net income per share

 

$

1.20

 

 

$

1.15

 

 

$

1.01

 

 

$

1.07

 

 

$

0.67

Selected Mortgage Key Ratios

 

 

 

2022

 

2021

 

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Loss ratio (1)

 

(41.5

)%

 

(46.2

)%

 

(34.3

)%

 

(18.6

)%

 

7.1

%

Expense ratio (2)

 

26.1

%

 

26.2

%

 

27.2

%

 

25.6

%

 

28.6

%

(1)

Calculated as provision for losses on a GAAP basis expressed as a percentage of net premiums earned.

(2)

Calculated as operating expenses (which include policy acquisition costs and other operating expenses, as well as allocated corporate operating expenses) on a GAAP basis expressed as a percentage of net premiums earned.

Radian Group Inc. and Subsidiaries

Net Income Per Share Trend Schedule

Exhibit B

The calculation of basic and diluted net income per share was as follows.

 

 

 

2022

 

2021

(In thousands, except per-share amounts)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Net income—basic and diluted

 

$

198,280

 

$

201,193

$

181,131

$

193,445

$

126,412

Average common shares outstanding—basic

 

 

162,506

 

 

173,705

 

176,816

 

179,500

 

186,741

Dilutive effect of stock-based compensation arrangements (1)

 

 

2,232

 

 

1,714

 

 

2,263

 

 

1,628

 

 

1,301

Adjusted average common shares outstanding—diluted

 

 

164,738

 

 

175,419

 

 

179,079

 

 

181,128

 

 

188,042

Basic net income per share

 

$

1.22

 

$

1.16

 

$

1.02

 

$

1.08

 

$

0.68

Diluted net income per share

 

$

1.20

 

$

1.15

$

1.01

$

1.07

$

0.67

(1)

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 would be anti-dilutive.

 

 

2022

 

2021

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Shares of common stock equivalents

 

 

189

 

 

35

 

Radian Group Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

Exhibit C

 

 

 

September 30,

 

June 30

 

March 31,

 

December 31,

 

September 30,

(In thousands, except per-share amounts)

 

2022

 

2022

 

2022

 

2021

 

2021

Assets

 

 

 

 

 

 

 

 

 

 

Investments

 

$

5,591,881

 

 

$

5,906,147

 

 

$

6,334,950

 

 

$

6,513,542

 

 

$

6,658,487

 

Cash

 

 

54,701

 

 

 

135,262

 

 

 

131,853

 

 

 

151,145

 

 

 

154,709

 

Restricted cash

 

 

1,107

 

 

 

561

 

 

 

1,651

 

 

 

1,475

 

 

 

1,866

 

Accrued investment income

 

 

38,596

 

 

 

35,774

 

 

 

35,531

 

 

 

32,812

 

 

 

33,258

 

Accounts and notes receivable

 

 

174,041

 

 

 

166,380

 

 

 

142,579

 

 

 

124,016

 

 

 

166,730

 

Reinsurance recoverables

 

 

30,569

 

 

 

39,876

 

 

 

55,015

 

 

 

67,896

 

 

 

76,048

 

Deferred policy acquisition costs

 

 

17,920

 

 

 

16,983

 

 

 

16,383

 

 

 

16,317

 

 

 

16,823

 

Property and equipment, net

 

 

75,740

 

 

 

74,874

 

 

 

75,275

 

 

 

75,086

 

 

 

74,170

 

Goodwill and other acquired intangible assets, net

 

 

16,873

 

 

 

17,895

 

 

 

18,744

 

 

 

19,593

 

 

 

20,456

 

Prepaid federal income taxes

 

 

526,123

 

 

 

466,123

 

 

 

354,123

 

 

 

354,123

 

 

 

313,123

 

Other assets

 

 

458,292

 

 

 

414,412

 

 

 

449,642

 

 

 

483,180

 

 

 

525,938

 

Total assets

 

$

6,985,843

 

 

$

7,274,287

 

 

$

7,615,746

 

 

$

7,839,185

 

 

$

8,041,608

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

Unearned premiums

 

$

285,290

 

 

$

298,991

 

 

$

312,013

 

 

$

329,090

 

 

$

348,322

 

Reserve for losses and loss adjustment expense

 

 

483,664

 

 

 

594,808

 

 

 

727,247

 

 

 

828,642

 

 

 

893,155

 

Senior notes

 

 

1,412,473

 

 

 

1,411,458

 

 

 

1,410,458

 

 

 

1,409,473

 

 

 

1,408,502

 

FHLB advances

 

 

153,550

 

 

 

184,284

 

 

 

148,983

 

 

 

150,983

 

 

 

172,649

 

Reinsurance funds withheld

 

 

218,777

 

 

 

223,649

 

 

 

225,363

 

 

 

228,078

 

 

 

290,502

 

Net deferred tax liability

 

 

335,374

 

 

 

324,866

 

 

 

324,004

 

 

 

337,509

 

 

 

286,957

 

Other liabilities

 

 

358,665

 

 

 

305,269

 

 

 

320,114

 

 

 

296,614

 

 

 

383,585

 

Total liabilities

 

 

3,247,793

 

 

 

3,343,325

 

 

 

3,468,182

 

 

 

3,580,389

 

 

 

3,783,672

 

Common stock

 

 

176

 

 

 

186

 

 

 

193

 

 

 

194

 

 

 

200

 

Treasury stock

 

 

(930,396

)

 

 

(930,284

)

 

 

(920,958

)

 

 

(920,798

)

 

 

(920,355

)

Additional paid-in capital

 

 

1,513,615

 

 

 

1,698,490

 

 

 

1,871,763

 

 

 

1,878,372

 

 

 

2,012,870

 

Retained earnings

 

 

3,656,870

 

 

 

3,491,675

 

 

 

3,326,119

 

 

 

3,180,935

 

 

 

3,012,997

 

Accumulated other comprehensive income (loss)

 

 

(502,215

)

 

 

(329,105

)

 

 

(129,553

)

 

 

120,093

 

 

 

152,224

 

Total stockholders’ equity

 

 

3,738,050

 

 

 

3,930,962

 

 

 

4,147,564

 

 

 

4,258,796

 

 

 

4,257,936

 

Total liabilities and stockholders’ equity

 

$

6,985,843

 

 

$

7,274,287

 

 

$

7,615,746

 

 

$

7,839,185

 

 

$

8,041,608

 

Shares outstanding

 

 

157,058

 

 

 

166,388

 

 

 

174,648

 

 

 

175,421

 

 

 

181,336

 

Book value per share

 

$

23.80

 

 

$

23.63

 

 

$

23.75

 

 

$

24.28

 

 

$

23.48

 

Debt to capital ratio (1)

 

27.4

%

 

26.4

%

 

25.4

%

 

24.9

%

 

24.9

%

Risk to capital ratio-Radian Guaranty only

 

11.1:1

 

11.9:1

 

12.1:1

 

11.1:1

 

11.4:1

(1)

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

Radian Group Inc. and Subsidiaries

Net Premiums Earned

Exhibit D

 

 

 

2022

 

2021

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Premiums earned

 

 

 

 

 

 

 

 

 

 

Direct - Mortgage

 

 

 

 

 

 

 

 

 

 

Premiums earned, excluding revenue from cancellations

 

$

250,140

 

 

$

249,936

 

 

$

243,600

 

 

$

248,704

 

 

$

239,786

 

Single Premium Policy cancellations

 

 

6,705

 

 

 

6,894

 

 

 

14,696

 

 

 

20,530

 

 

 

25,592

 

Total direct - Mortgage

 

 

256,845

 

 

 

256,830

 

 

 

258,296

 

 

 

269,234

 

 

 

265,378

 

Assumed - Mortgage (1)

 

 

1,211

 

 

 

1,539

 

 

 

1,331

 

 

 

1,470

 

 

 

1,683

 

Ceded - Mortgage

 

 

 

 

 

 

 

 

 

 

Premiums earned, excluding revenue from cancellations

 

 

(38,879

)

 

 

(28,565

)

 

 

(27,339

)

 

 

(28,333

)

 

 

(27,662

)

Single Premium Policy cancellations (2)

 

 

(1,844

)

 

 

(1,965

)

 

 

(4,192

)

 

 

(5,905

)

 

 

(7,338

)

Profit commission - other (3)

 

 

17,864

 

 

 

19,070

 

 

 

17,078

 

 

 

13,199

 

 

 

4,806

 

Total ceded premiums - Mortgage (4)

 

 

(22,859

)

 

 

(11,460

)

 

 

(14,453

)

 

 

(21,039

)

 

 

(30,194

)

Net premiums earned - Mortgage

 

 

235,197

 

 

 

246,909

 

 

 

245,174

 

 

 

249,665

 

 

 

236,867

 

Net premiums earned - homegenius

 

 

5,025

 

 

 

6,983

 

 

 

9,016

 

 

 

11,772

 

 

 

12,251

 

Net premiums earned

 

$

240,222

 

 

$

253,892

 

 

$

254,190

 

 

$

261,437

 

 

$

249,118

 

(1)

Represents premiums from our participation in certain credit risk transfer programs.

(2)

Includes the impact of related profit commissions.

(3)

The amounts represent the profit commission on the Single Premium QSR Program and 2022 QSR Agreement, excluding the impact of Single Premium Policy cancellations.

(4)

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

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 1 of 6)

Summarized financial information concerning our operating segments as of and for the periods indicated is as follows. For a definition of adjusted pretax operating income (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 September 30, 2022

(In thousands)

 

Mortgage

 

homegenius

 

All Other (1)

 

Inter-

segment (2)

 

Total

Net premiums written (3)

 

$

235,076

 

 

$

5,025

 

 

$

 

$

 

 

$

240,101

 

Decrease in unearned premiums

 

 

121

 

 

 

 

 

 

 

 

 

 

 

121

 

Net premiums earned

 

 

235,197

 

 

 

5,025

 

 

 

 

 

 

 

 

240,222

 

Services revenue

 

 

405

 

 

 

19,812

 

 

 

 

 

(71

)

 

 

20,146

 

Net investment income

 

 

44,842

 

 

 

246

 

 

 

6,326

 

 

 

 

 

51,414

 

Other income

 

 

589

 

 

 

 

 

 

70

 

 

 

 

 

659

 

Total

 

 

281,033

 

 

 

25,083

 

 

 

6,396

 

 

(71

)

 

 

312,441

 

Provision for losses

 

 

(97,493

)

 

 

435

 

 

 

 

 

94

 

 

 

(96,964

)

Policy acquisition costs

 

 

5,442

 

 

 

 

 

 

 

 

 

 

 

5,442

 

Cost of services

 

 

373

 

 

 

18,344

 

 

 

 

 

 

 

 

18,717

 

Other operating expenses before allocated corporate operating expenses (4)

 

 

23,396

 

 

 

26,285

 

 

 

3,444

 

 

(165

)

 

 

52,960

 

Interest expense (5)

 

 

21,183

 

 

 

 

 

 

 

 

 

 

 

21,183

 

Total

 

 

(47,099

)

 

 

45,064

 

 

 

3,444

 

 

(71

)

 

 

1,338

 

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

 

 

328,132

 

 

 

(19,981

)

 

 

2,952

 

 

 

 

 

311,103

 

Allocation of corporate operating expenses

 

 

32,457

 

 

 

5,555

 

 

 

371

 

 

 

 

 

38,383

 

Adjusted pretax operating income (loss)

 

$

295,675

 

 

$

(25,536

)

 

$

2,581

 

$

 

 

$

272,720

 

 

 

Three Months Ended September 30, 2021

(In thousands)

 

Mortgage

 

homegenius

 

All Other (1)

 

Inter-

segment (2)

 

Total

Net premiums written (3)

 

$

228,116

 

$

12,251

 

 

$

 

$

 

 

$

240,367

Decrease in unearned premiums

 

 

8,751

 

 

 

 

 

 

 

 

 

 

8,751

Net premiums earned

 

 

236,867

 

 

12,251

 

 

 

 

 

 

 

 

249,118

Services revenue

 

 

5,027

 

 

32,805

 

 

 

27

 

 

(86

)

 

 

37,773

Net investment income

 

 

32,158

 

 

35

 

 

 

3,767

 

 

 

 

 

35,960

Other income

 

 

607

 

 

 

 

 

202

 

 

 

 

 

809

Total

 

 

274,659

 

 

45,091

 

 

 

3,996

 

 

(86

)

 

 

323,660

Provision for losses

 

 

16,794

 

 

540

 

 

 

 

 

(29

)

 

 

17,305

Policy acquisition costs

 

 

7,924

 

 

 

 

 

 

 

 

 

 

7,924

Cost of services

 

 

3,865

 

 

26,646

 

 

 

9

 

 

 

 

 

30,520

Other operating expenses before allocated corporate operating expenses (4)

 

 

25,866

 

 

18,544

 

 

 

2,623

 

 

(57

)

 

 

46,976

Interest expense (5)

 

 

21,027

 

 

 

 

 

 

 

 

 

 

21,027

Total

 

 

75,476

 

 

45,730

 

 

 

2,632

 

 

(86

)

 

 

123,752

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

 

 

199,183

 

 

(639

)

 

 

1,364

 

 

 

 

 

199,908

Allocation of corporate operating expenses

 

 

33,963

 

 

4,918

 

 

 

378

 

 

 

 

 

39,259

Adjusted pretax operating income (loss)

 

$

165,220

 

$

(5,557

)

 

$

986

 

$

 

 

$

160,649

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 2 of 6)

(1)

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; and (iii) certain investments in new business opportunities, including activities and investments associated with Radian Mortgage Capital, and other immaterial activities.

(2)

Includes immaterial inter-segment services revenue for our homegenius segment and immaterial inter-segment provision for losses and other operating expenses for our Mortgage segment.

(3)

Net of ceded premiums written under under our quota share and excess-of-loss reinsurance agreements. See Exhibit K for additional information.

(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.

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 3 of 6)

 

 

 

Mortgage

 

 

2022

 

2021

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Net premiums written (1)

 

$

235,076

 

 

$

248,645

 

 

$

248,360

 

 

$

238,529

 

 

$

228,116

(Increase) decrease in unearned premiums

 

 

121

 

 

 

(1,736

)

 

 

(3,186

)

 

 

11,136

 

 

 

8,751

Net premiums earned

 

 

235,197

 

 

 

246,909

 

 

 

245,174

 

 

 

249,665

 

 

 

236,867

Services revenue

 

 

405

 

 

 

2,105

 

 

 

4,552

 

 

 

4,560

 

 

 

5,027

Net investment income

 

 

44,842

 

 

 

40,197

 

 

 

34,017

 

 

 

33,916

 

 

 

32,158

Other income

 

 

589

 

 

 

572

 

 

 

703

 

 

 

661

 

 

 

607

Total

 

 

281,033

 

 

 

289,783

 

 

 

284,446

 

 

 

288,802

 

 

 

274,659

 

 

 

 

 

 

 

 

 

 

 

Provision for losses (2)

 

 

(97,493

)

 

 

(114,179

)

 

 

(84,193

)

 

 

(46,560

)

 

 

16,794

Policy acquisition costs

 

 

5,442

 

 

 

5,940

 

 

 

6,605

 

 

 

7,271

 

 

 

7,924

Cost of services

 

 

373

 

 

 

1,960

 

 

 

3,383

 

 

 

3,710

 

 

 

3,865

Other operating expenses before allocated corporate operating expenses (2) (3)

 

 

23,396

 

 

 

25,474

 

 

 

23,755

 

 

 

23,365

 

 

 

25,866

Interest expense (4)

 

 

21,183

 

 

 

20,831

 

 

 

20,846

 

 

 

21,137

 

 

 

21,027

Total (2)

 

 

(47,099

)

 

 

(59,974

)

 

 

(29,604

)

 

 

8,923

 

 

 

75,476

Adjusted pretax operating income before allocated corporate operating expenses

 

 

328,132

 

 

 

349,757

 

 

 

314,050

 

 

 

279,879

 

 

 

199,183

Allocation of corporate operating expenses

 

 

32,457

 

 

 

33,237

 

 

 

36,209

 

 

 

33,305

 

 

 

33,963

Adjusted pretax operating income

 

$

295,675

 

 

$

316,520

 

 

$

277,841

 

 

$

246,574

 

 

$

165,220

 

 

homegenius

 

 

2022

 

2021

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Net premiums earned

 

$

5,025

 

 

$

6,983

 

 

$

9,016

 

 

$

11,772

 

 

$

12,251

 

Services revenue (2)

 

 

19,812

 

 

 

25,261

 

 

 

24,878

 

 

 

31,177

 

 

 

32,805

 

Net investment income

 

 

246

 

 

 

99

 

 

 

18

 

 

 

255

 

 

 

35

 

Net gains (losses) on investments

 

 

 

 

 

 

 

 

 

 

 

1,509

 

 

 

 

Total (2)

 

 

25,083

 

 

 

32,343

 

 

 

33,912

 

 

 

44,713

 

 

 

45,091

 

 

 

 

 

 

 

 

 

 

 

 

Provision for losses

 

 

435

 

 

 

309

 

 

 

481

 

 

 

369

 

 

 

540

 

Cost of services

 

 

18,344

 

 

 

20,800

 

 

 

21,370

 

 

 

24,615

 

 

 

26,646

 

Other operating expenses before allocated corporate operating expenses (3)

 

 

26,285

 

 

 

23,205

 

 

 

20,287

 

 

 

16,998

 

 

 

18,544

 

Total

 

 

45,064

 

 

 

44,314

 

 

 

42,138

 

 

 

41,982

 

 

 

45,730

 

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

 

 

(19,981

)

 

 

(11,971

)

 

 

(8,226

)

 

 

2,731

 

 

 

(639

)

Allocation of corporate operating expenses

 

 

5,555

 

 

 

5,719

 

 

 

5,280

 

 

 

4,847

 

 

 

4,918

 

Adjusted pretax operating income (loss)

 

$

(25,536

)

 

$

(17,690

)

 

$

(13,506

)

 

$

(2,116

)

 

$

(5,557

)

 

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 4 of 6)

 

 

 

All Other (5)

 

 

2022

 

2021

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Services revenue

 

$

 

$

 

$

 

$

30

 

$

27

Net investment income

 

 

6,326

 

 

6,661

 

 

4,161

 

 

3,236

 

 

3,767

Other income

 

 

70

 

 

 

 

 

 

144

 

 

202

Total

 

 

6,396

 

 

6,661

 

 

4,161

 

 

3,410

 

 

3,996

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

 

 

 

 

 

 

 

8

 

 

9

Other operating expenses before allocated corporate operating expenses (3)

 

 

3,444

 

 

3,077

 

 

3,142

 

 

2,422

 

 

2,623

Total

 

 

3,444

 

 

3,077

 

 

3,142

 

 

2,430

 

 

2,632

Adjusted pretax operating income before allocated corporate operating expenses

 

 

2,952

 

 

3,584

 

 

1,019

 

 

980

 

 

1,364

Allocation of corporate operating expenses

 

 

371

 

 

381

 

 

406

 

 

373

 

 

378

Adjusted pretax operating income (loss)

 

$

2,581

 

$

3,203

 

$

613

 

$

607

 

$

986

(1)

Net of ceded premiums written under under our quota share and excess-of-loss reinsurance agreements. See Exhibit K for additional information.

(2)

Includes immaterial inter-segment services revenue for our homegenius segment and immaterial inter-segment provision for losses and other operating expenses for our Mortgage segment.

(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)

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; and (iii) certain investments in new business opportunities, including activities and investments associated with Radian Mortgage Capital, and other immaterial activities.

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 5 of 6)

Supplemental Other Operating Expense Information by Segment

 

 

 

Mortgage

 

 

2022

 

2021

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Other operating expenses by type

 

 

 

 

 

 

 

 

 

 

Salaries and other base employee expenses

 

$

23,824

 

 

$

24,420

 

 

$

22,189

 

 

$

23,610

 

 

$

22,685

 

Variable and share-based incentive compensation

 

 

10,186

 

 

 

11,524

 

 

 

16,697

 

 

 

12,649

 

 

 

17,143

 

Other general operating expenses

 

 

26,116

 

 

 

25,611

 

 

 

25,027

 

 

 

25,290

 

 

 

25,639

 

Ceding commissions

 

 

(4,273

)

 

 

(2,844

)

 

 

(3,949

)

 

 

(4,879

)

 

 

(5,638

)

Total

 

$

55,853

 

 

$

58,711

 

 

$

59,964

 

 

$

56,670

 

 

$

59,829

 

 

 

homegenius

 

 

2022

 

2021

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Other operating expenses by type

 

 

 

 

 

 

 

 

 

 

Salaries and other base employee expenses

 

$

14,079

 

$

12,187

 

$

10,375

 

$

7,993

 

$

6,975

Variable and share-based incentive compensation

 

 

3,753

 

 

4,776

 

 

5,522

 

 

4,678

 

 

6,238

Other general operating expenses

 

 

12,158

 

 

10,162

 

 

8,571

 

 

7,851

 

 

7,982

Title agent commissions

 

 

1,850

 

 

1,799

 

 

1,099

 

 

1,323

 

 

2,267

Total

 

$

31,840

 

$

28,924

 

$

25,567

 

$

21,845

 

$

23,462

 

 

All Other

 

 

2022

 

2021

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Other operating expenses by type

 

 

 

 

 

 

 

 

 

 

Salaries and other base employee expenses

 

$

753

 

$

1,726

 

$

1,613

 

$

1,001

 

$

1,158

Variable and share-based incentive compensation

 

 

1,427

 

 

709

 

 

953

 

 

874

 

 

1,144

Other general operating expenses

 

 

1,635

 

 

1,023

 

 

982

 

 

920

 

 

699

Total

 

$

3,815

 

$

3,458

 

$

3,548

 

$

2,795

 

$

3,001

 

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 6 of 6)

 

 

 

Inter-segment

 

 

2022

 

2021

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Other operating expenses by type

 

 

 

 

 

 

 

 

 

 

Other general operating expenses

 

$

(165

)

 

$

(33

)

 

$

(40

)

 

$

(46

)

 

$

(57

)

Total

 

$

(165

)

 

$

(33

)

 

$

(40

)

 

$

(46

)

 

$

(57

)

 

 

Total

 

 

2022

 

2021

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Other operating expenses by type

 

 

 

 

 

 

 

 

 

 

Salaries and other base employee expenses

 

$

38,656

 

 

$

38,333

 

 

$

34,177

 

 

$

32,604

 

 

$

30,818

 

Variable and share-based incentive compensation

 

 

15,366

 

 

 

17,009

 

 

 

23,172

 

 

 

18,201

 

 

 

24,525

 

Other general operating expenses

 

 

39,744

 

 

 

36,763

 

 

 

34,540

 

 

 

34,015

 

 

 

34,263

 

Ceding commissions

 

 

(4,273

)

 

 

(2,844

)

 

 

(3,949

)

 

 

(4,879

)

 

 

(5,638

)

Title agent commissions

 

 

1,850

 

 

 

1,799

 

 

 

1,099

 

 

 

1,323

 

 

 

2,267

 

Total

 

$

91,343

 

 

$

91,060

 

 

$

89,039

 

 

$

81,264

 

 

$

86,235

 

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, except for certain investments attributable to our reportable segments; (ii) gains (losses) 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. Except for certain investments attributable to our reportable segments, 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 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 to Adjusted Pretax Operating Income

 

 

 

2022

 

2021

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Consolidated pretax income

 

$

255,461

 

 

$

259,880

 

 

$

234,140

 

 

$

246,506

 

 

$

161,641

 

Less reconciling income (expense) items

 

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments (1)

 

 

(16,252

)

 

 

(41,869

)

 

 

(29,457

)

 

 

1,516

 

 

 

2,098

 

Amortization of other acquired intangible assets

 

 

(1,023

)

 

 

(849

)

 

 

(849

)

 

 

(863

)

 

 

(862

)

Impairment of other long-lived assets and other non-operating items (2)

 

 

16

 

 

 

565

 

 

 

(502

)

 

 

788

 

 

 

(244

)

Total adjusted pretax operating income (3)

 

$

272,720

 

 

$

302,033

 

 

$

264,948

 

 

$

245,065

 

 

$

160,649

 

(1)

For the fourth quarter of 2021, excludes $1.5 million in net gains on investments attributable to our homegenius segment and included in adjusted pretax operating income (loss) for that reportable segment.

(2)

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.

(3)

Total adjusted pretax operating income consists of adjusted pretax operating income (loss) for each reportable segment and All Other activities as follows.

 

 

2022

 

2021

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Adjusted pretax operating income (loss)

 

 

 

 

 

 

 

 

 

 

Mortgage segment

 

$

295,675

 

 

$

316,520

 

 

$

277,841

 

 

$

246,574

 

 

$

165,220

 

homegenius segment

 

 

(25,536

)

 

 

(17,690

)

 

 

(13,506

)

 

 

(2,116

)

 

 

(5,557

)

All Other activities

 

 

2,581

 

 

 

3,203

 

 

 

613

 

 

 

607

 

 

 

986

 

Total adjusted pretax operating income

 

$

272,720

 

 

$

302,033

 

 

$

264,948

 

 

$

245,065

 

 

$

160,649

 

Radian Group Inc. and Subsidiaries

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit G (page 2 of 3)

Reconciliation of Diluted Net Income Per Share to Adjusted Diluted Net Operating Income Per Share

 

 

 

2022

 

2021

 

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Diluted net income per share

 

$

1.20

 

 

$

1.15

 

 

$

1.01

 

 

$

1.07

 

 

$

0.67

 

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

 

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

 

 

(0.10

)

 

 

(0.24

)

 

 

(0.16

)

 

 

0.01

 

 

 

0.01

 

Amortization of other acquired intangible assets

 

 

(0.01

)

 

 

 

 

 

(0.01

)

 

 

 

 

 

 

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

 

 

0.02

 

 

 

0.05

 

 

 

0.03

 

 

 

 

 

 

 

Difference between statutory and effective tax rates

 

 

(0.02

)

 

 

(0.02

)

 

 

(0.02

)

 

 

(0.01

)

 

 

(0.01

)

Per-share impact of reconciling income (expense) items

 

 

(0.11

)

 

 

(0.21

)

 

 

(0.16

)

 

 

 

 

 

 

Adjusted diluted net operating income per share (1)

 

$

1.31

 

 

$

1.36

 

 

$

1.17

 

 

$

1.07

 

 

$

0.67

 

(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)

 

 

 

2022

 

2021

 

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Return on equity (1)

 

20.7

%

 

19.9

%

 

17.2

%

 

18.2

%

 

11.8

%

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

 

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

 

(1.7

)

 

(4.1

)

 

(2.8

)

 

0.1

 

 

0.2

 

Amortization of other acquired intangible assets

 

(0.1

)

 

(0.1

)

 

(0.1

)

 

(0.1

)

 

(0.1

)

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

 

 

 

0.1

 

 

 

 

0.1

 

 

 

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

 

0.4

 

 

0.9

 

 

0.6

 

 

 

 

 

Difference between statutory and effective tax rates

 

(0.4

)

 

(0.5

)

 

(0.4

)

 

(0.1

)

 

(0.1

)

Impact of reconciling income (expense) items

 

(1.8

)

 

(3.7

)

 

(2.7

)

 

 

 

 

Adjusted net operating return on equity (3)

 

22.5

%

 

23.6

%

 

19.9

%

 

18.2

%

 

11.8

%

(1)

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

(2)

Annualized, as a percentage of average stockholders’ equity.

(3)

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

Radian Group Inc. and Subsidiaries

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit G (page 3 of 3)

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

 

 

 

2022

 

2021

(In thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

homegenius adjusted pretax operating income (loss)

 

$

(25,536

)

 

$

(17,690

)

 

$

(13,506

)

 

$

(2,116

)

 

$

(5,557

)

Less reconciling income (expense) items

 

 

 

 

 

 

 

 

 

 

Allocation of corporate operating expenses

 

 

(5,555

)

 

 

(5,719

)

 

 

(5,280

)

 

 

(4,847

)

 

 

(4,918

)

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

 

 

(19,981

)

 

 

(11,971

)

 

 

(8,226

)

 

 

2,731

 

 

 

(639

)

Less reconciling income (expense) items

 

 

 

 

 

 

 

 

 

 

Other operating expenses before allocated corporate operating expenses

 

 

(26,285

)

 

 

(23,205

)

 

 

(20,287

)

 

 

(16,998

)

 

 

(18,544

)

homegenius adjusted gross profit

 

$

6,304

 

 

$

11,234

 

 

$

12,061

 

 

$

19,729

 

 

$

17,905

 

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

 

 

 

2022

 

2021

($ in millions)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

New insurance written ("NIW")

 

$

17,616

 

 

$

18,935

 

 

$

18,655

 

 

$

23,710

 

 

$

26,558

 

Total borrower-paid NIW

 

 

99.1

%

 

 

99.2

%

 

 

99.2

%

 

 

99.4

%

 

 

99.2

%

NIW by premium type

 

 

 

 

 

 

 

 

 

 

Direct monthly and other recurring premiums

 

 

95.5

%

 

 

95.4

%

 

 

94.5

%

 

 

93.5

%

 

 

93.8

%

Borrower-paid

 

 

4.3

 

 

 

4.4

 

 

 

5.3

 

 

 

6.3

 

 

 

6.0

 

Lender-paid

 

 

0.2

 

 

 

0.2

 

 

 

0.2

 

 

 

0.2

 

 

 

0.2

 

Direct single premiums

 

 

4.5

 

 

 

4.6

 

 

 

5.5

 

 

 

6.5

 

 

 

6.2

 

Total NIW

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

NIW for purchases

 

 

98.4

%

 

 

97.1

%

 

 

91.4

%

 

 

91.1

%

 

 

89.8

%

NIW for refinances

 

 

1.6

%

 

 

2.9

%

 

 

8.6

%

 

 

8.9

%

 

 

10.2

%

NIW by FICO score (1)

 

 

 

 

 

 

 

 

 

 

>=740

 

 

63.3

%

 

 

59.6

%

 

 

57.1

%

 

 

53.8

%

 

 

56.0

%

680-739

 

 

28.5

 

 

 

32.3

 

 

 

35.7

 

 

 

36.9

 

 

 

34.9

 

620-679

 

 

8.2

 

 

 

8.1

 

 

 

7.2

 

 

 

9.3

 

 

 

9.1

 

Total NIW

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

NIW by LTV

 

 

 

 

 

 

 

 

 

 

95.01% and above

 

 

18.3

%

 

 

17.7

%

 

 

14.6

%

 

 

16.3

%

 

 

12.1

%

90.01% to 95.00%

 

 

37.1

 

 

 

39.9

 

 

 

42.0

 

 

 

41.9

 

 

 

46.7

 

85.01% to 90.00%

 

 

28.0

 

 

 

26.7

 

 

 

29.4

 

 

 

28.4

 

 

 

26.5

 

85.00% and below

 

 

16.6

 

 

 

15.7

 

 

 

14.0

 

 

 

13.4

 

 

 

14.7

 

Total NIW

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

(1)

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

Radian Group Inc. and Subsidiaries

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

Exhibit I

 

 

 

September 30,

 

June 30

 

March 31,

 

December 31,

 

September 30,

($ in millions)

 

2022

 

2022

 

2022

 

2021

 

2021

 

 

 

 

 

 

 

 

 

 

 

Primary insurance in force

 

$

259,121

 

 

$

254,226

 

 

$

248,951

 

 

$

245,972

 

 

$

241,575

 

Primary risk in force ("RIF")

 

$

65,288

 

 

$

63,770

 

 

$

62,036

 

 

$

60,913

 

 

$

59,421

 

Primary RIF by premium type

 

 

 

 

 

 

 

 

 

 

Direct monthly and other recurring premiums

 

 

86.4

%

 

 

85.6

%

 

 

84.9

%

 

 

83.9

%

 

 

82.7

%

Direct single premiums (1)

 

 

13.6

%

 

 

14.4

%

 

 

15.1

%

 

 

16.1

%

 

 

17.3

%

Primary RIF by FICO score (2)

 

 

 

 

 

 

 

 

 

 

>=740

 

 

57.5

%

 

 

57.2

%

 

 

56.9

%

 

 

56.9

%

 

 

57.3

%

680-739

 

 

34.5

 

 

 

34.9

 

 

 

35.1

 

 

 

35.0

 

 

 

34.8

 

620-679

 

 

7.6

 

 

 

7.5

 

 

 

7.5

 

 

 

7.6

 

 

 

7.4

 

<=619

 

 

0.4

 

 

 

0.4

 

 

 

0.5

 

 

 

0.5

 

 

 

0.5

 

Total Primary

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Primary RIF by LTV

 

 

 

 

 

 

 

 

 

 

95.01% and above

 

 

16.8

%

 

 

16.1

%

 

 

15.5

%

 

 

15.1

%

 

 

14.6

%

90.01% to 95.00%

 

 

48.4

 

 

 

48.7

 

 

 

48.9

 

 

 

48.9

 

 

 

48.9

 

85.01% to 90.00%

 

 

27.2

 

 

 

27.4

 

 

 

27.6

 

 

 

27.7

 

 

 

27.8

 

85.00% and below

 

 

7.6

 

 

 

7.8

 

 

 

8.0

 

 

 

8.3

 

 

 

8.7

 

Total

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

Primary RIF by policy year

 

 

 

 

 

 

 

 

 

 

2008 and prior

 

 

3.7

%

 

 

4.0

%

 

 

4.3

%

 

 

4.7

%

 

 

5.2

%

2009 - 2016

 

 

7.4

 

 

 

8.3

 

 

 

9.3

 

 

 

10.8

 

 

 

12.5

 

2017

 

 

3.5

 

 

 

3.9

 

 

 

4.3

 

 

 

4.9

 

 

 

5.7

 

2018

 

 

3.7

 

 

 

4.1

 

 

 

4.6

 

 

 

5.2

 

 

 

6.1

 

2019

 

 

7.1

 

 

 

7.7

 

 

 

8.6

 

 

 

9.7

 

 

 

11.4

 

2020

 

 

23.0

 

 

 

25.0

 

 

 

27.2

 

 

 

29.2

 

 

 

32.1

 

2021

 

 

30.6

 

 

 

32.1

 

 

 

34.0

 

 

 

35.5

 

 

 

27.0

 

2022

 

 

21.0

 

 

 

14.9

 

 

 

7.7

 

 

 

 

 

 

 

Total

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

Persistency Rate (12 months ended)

 

 

75.9

%

 

 

71.7

%

 

 

68.0

%

 

 

64.3

%

 

 

60.8

%

Persistency Rate (quarterly, annualized) (3)

 

 

81.6

%

(4)

 

79.8

%

 

 

76.9

%

(4)

 

71.7

%

 

 

67.5

%

(1)

Borrower-paid Single Premium Policies were 7.9%, 8.1%, 8.4%, 8.5% and 8.8% of primary RIF for the periods indicated, respectively.

(2)

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

(3)

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.

(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.

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - Claims and Reserves, Default Statistics

Exhibit J

 

 

 

2022

 

2021

($ in thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

Net claims paid (1)

 

 

 

 

 

 

 

 

 

 

Primary claims paid

 

$

3,606

 

 

$

3,659

 

 

$

5,153

 

 

$

4,300

 

 

$

5,330

Pool and other

 

 

(420

)

 

 

(396

)

 

 

(415

)

 

 

(462

)

 

 

991

Subtotal

 

 

3,186

 

 

 

3,263

 

 

 

4,738

 

 

 

3,838

 

 

 

6,321

Impact of commutations and settlements (2)

 

 

1,317

 

 

 

 

 

 

 

 

 

6,549

 

 

 

3,915

Total net claims paid

 

$

4,503

 

 

$

3,263

 

 

$

4,738

 

 

$

10,387

 

 

$

10,236

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

 

$

45.1

 

 

$

41.6

 

 

$

41.6

 

 

$

47.8

 

 

$

42.0

Average direct primary claims paid (3) (4)

 

$

45.2

 

 

$

41.9

 

 

$

42.1

 

 

$

49.1

 

 

$

43.2

(1)

Includes the impact of reinsurance recoveries and LAE.

(2)

Includes payments to commute mortgage insurance coverage on certain performing and non-performing loans.

(3)

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

(4)

Before reinsurance recoveries.

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

($ in thousands, except per default amounts)

 

2022

 

2022

 

2022

 

2021

 

2021

Reserve for losses by category (1)

 

 

 

 

 

 

 

 

 

 

Mortgage reserves

 

 

 

 

 

 

 

 

 

 

Primary case reserves

 

$

454,726

 

$

562,436

 

$

691,090

 

$

790,380

 

$

851,151

LAE

 

 

11,443

 

 

14,147

 

 

17,367

 

 

19,859

 

 

21,400

IBNR

 

 

2,229

 

 

2,424

 

 

2,539

 

 

2,886

 

 

3,788

Total primary reserves

 

 

468,398

 

 

579,007

 

 

710,996

 

 

813,125

 

 

876,339

Total pool reserves

 

 

9,175

 

 

9,756

 

 

10,330

 

 

9,826

 

 

11,413

Total 1st lien reserves

 

 

477,573

 

 

588,763

 

 

721,326

 

 

822,951

 

 

887,752

Other

 

 

174

 

 

184

 

 

184

 

 

185

 

 

269

Total Mortgage reserves

 

 

477,747

 

 

588,947

 

 

721,510

 

 

823,136

 

 

888,021

homegenius reserves

 

 

5,917

 

 

5,861

 

 

5,737

 

 

5,506

 

 

5,134

Total reserves

 

$

483,664

 

$

594,808

 

$

727,247

 

$

828,642

 

$

893,155

Primary reserve per primary default excluding IBNR and other

 

$

22,122

 

$

26,380

 

$

27,776

 

$

27,884

 

$

25,822

(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.

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

 

2022

 

2022

 

2022

 

2021

 

2021

Default Statistics

 

 

 

 

 

 

 

 

 

 

Primary Insurance

 

 

 

 

 

 

 

 

 

 

Number of insured loans

 

1,004,305

 

 

998,520

 

 

994,721

 

 

999,203

 

 

998,408

 

Number of loans in default

 

21,077

 

 

21,861

 

 

25,510

 

 

29,061

 

 

33,795

 

Percentage of loans in default

 

2.10

%

 

2.19

%

 

2.56

%

 

2.91

%

 

3.38

%

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - Reinsurance Programs

Exhibit K

 

 

 

 

 

2022

 

2021

($ in thousands)

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

2022 and 2012 QSR Agreements (1)

 

 

 

 

 

 

 

 

 

 

Ceded premiums written (2)

 

$

10,363

 

 

$

253

 

 

$

306

 

 

$

381

 

 

$

491

 

% of premiums written

 

 

4.2

%

 

 

0.1

%

 

 

0.1

%

 

 

0.1

%

 

 

0.2

%

Ceded premiums earned

 

$

4,036

 

 

$

360

 

 

$

491

 

 

$

584

 

 

$

753

 

% of premiums earned

 

 

1.5

%

 

 

0.1

%

 

 

0.2

%

 

 

0.2

%

 

 

0.3

%

Ceding commissions written

 

$

1,359

 

 

$

80

 

 

$

96

 

 

$

119

 

 

$

152

 

Ceding commissions earned (3)

 

$

1,609

 

 

$

127

 

 

$

537

 

 

$

582

 

 

$

492

 

Profit commission

 

$

4,008

 

 

$

 

 

$

 

 

$

 

 

$

 

Ceded losses

 

$

(235

)

 

$

(917

)

 

$

(720

)

 

$

(358

)

 

$

(170

)

Single Premium QSR Program

 

 

 

 

 

 

 

 

 

 

Ceded premiums written (2)

 

$

(19,303

)

 

$

(21,806

)

 

$

(22,386

)

 

$

(8,051

)

 

$

(1,795

)

% of premiums written

 

 

(7.7

)%

 

 

(8.6

)%

 

 

(8.9

)%

 

 

(3.1

)%

 

 

(0.7

)%

Ceded premiums earned

 

$

(3,465

)

 

$

(8,297

)

 

$

(3,731

)

 

$

2,532

 

 

$

12,752

 

% of premiums earned

 

 

(1.3

)%

 

 

(3.1

)%

 

 

(1.4

)%

 

 

0.9

%

 

 

4.6

%

Ceding commissions written

 

$

(6,400

)

 

$

(6,664

)

 

$

(9,250

)

 

$

(8,351

)

 

$

(8,013

)

Ceding commissions earned (3)

 

$

3,153

 

 

$

3,287

 

 

$

4,586

 

 

$

5,706

 

 

$

6,595

 

Profit commission

 

$

16,074

 

 

$

21,447

 

 

$

22,075

 

 

$

20,290

 

 

$

13,630

 

Ceded losses

 

$

(9,049

)

 

$

(14,120

)

 

$

(11,868

)

 

$

(7,582

)

 

$

1,053

 

Excess-of-Loss Program

 

 

 

 

 

 

 

 

 

 

Ceded premiums written

 

$

18,114

 

 

$

18,151

 

 

$

16,164

 

 

$

20,508

 

 

$

15,434

 

% of premiums written

 

 

7.3

%

 

 

7.2

%

 

 

6.4

%

 

 

7.9

%

 

 

6.1

%

Ceded premiums earned

 

$

22,184

 

 

$

19,292

 

 

$

17,588

 

 

$

17,817

 

 

$

16,581

 

% of premiums earned

 

 

8.4

%

 

 

7.3

%

 

 

6.5

%

 

 

6.3

%

 

 

5.9

%

Ceded RIF (4)

 

 

 

 

 

 

 

 

 

 

Single Premium QSR Program

 

$

4,273,500

 

 

$

4,665,020

 

 

$

4,855,228

 

 

$

5,228,037

 

 

$

5,439,056

 

Excess-of-Loss Program

 

 

1,940,126

 

 

 

2,076,121

 

 

 

2,199,919

 

 

 

2,295,954

 

 

 

1,873,426

 

2022 QSR Agreement

 

 

2,710,247

 

 

 

 

 

 

 

 

 

 

 

 

 

2012 QSR Agreements

 

 

160,106

 

 

 

175,046

 

 

 

186,930

 

 

 

207,106

 

 

 

232,539

 

Total Ceded RIF

 

$

9,083,979

 

 

$

6,916,187

 

 

$

7,242,077

 

 

$

7,731,097

 

 

$

7,545,021

 

PMIERs impact - reduction in Minimum Required Assets

 

 

 

 

 

 

 

 

 

 

Excess-of-Loss Program

 

$

732,895

 

 

$

785,705

 

 

$

881,917

 

 

$

995,171

 

 

$

659,151

 

Single Premium QSR Program

 

 

243,911

 

 

 

268,847

 

 

 

286,706

 

 

 

314,183

 

 

 

328,339

 

2022 QSR Agreement

 

 

189,408

 

 

 

 

 

 

 

 

 

 

 

 

 

2012 QSR Agreements

 

 

9,310

 

 

 

10,226

 

 

 

11,214

 

 

 

12,541

 

 

 

14,116

 

Total PMIERs impact

 

$

1,175,524

 

 

$

1,064,778

 

 

$

1,179,837

 

 

$

1,321,895

 

 

$

1,001,606

 

(1)

Beginning with the third quarter of 2022, includes the impact of the 2022 QSR Agreement.

(2)

Net of profit commission.

(3)

Includes amounts reported in policy acquisition costs and other operating expenses. See Exhibit E for details.

(4)

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. These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment where new risks emerge from time to time and it is not possible for us to predict all risks that may affect us. The forward-looking statements 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 health of the U.S. housing market generally and changes in economic conditions that impact the size of the insurable mortgage market, the credit performance of our insured mortgage portfolio and our business prospects, including more recently, changes resulting from inflationary pressures, the rising interest rate environment and the risk of a recession and higher unemployment rates, as well as other macroeconomic stresses such as those that may arise from the Russia-Ukraine conflict or other geopolitical events or as a result of the COVID-19 pandemic;
  • 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 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 current and future regulatory requirements;
  • changes in the charters or business practices of, or rules or regulations imposed by or applicable to, the GSEs or loans purchased by the GSEs, which may include changes in furtherance of housing policy objectives such as the accessibility and affordability of homeownership for low-and moderate-income borrowers and underrepresented communities, or changes in the requirements for Radian Guaranty to remain an approved insurer to the GSEs, such as changes in the PMIERs or the GSEs’ interpretation and application of the PMIERs or other applicable requirements;
  • the effects of the Enterprise Capital Framework, which establishes a new regulatory capital framework for the GSEs, and which, as finalized, increases the capital requirements for the GSEs, and among other things, could impact the GSEs' operations and pricing as well as the size of the insurable mortgage market, and which may form the basis for future changes to 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 traditional 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 may require GSE and/or regulatory approvals and licenses, that 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 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;
  • risks related to the quality of third-party mortgage underwriting and mortgage servicing;
  • 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 the prevalence of formulaic, granular risk-based pricing methodologies that are less transparent than historical rate-card-based 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;
  • U.S. political conditions and 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;
  • 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 mortgage forbearance, a repayment plan or a loan modification trial period), 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;
  • risks associated with investments to grow our existing businesses, or to pursue new lines of business or new products and services, including our ability and related costs to develop, launch and implement new and innovative technologies and digital products and services, whether these products and services will receive broad customer acceptance or will disrupt existing customer relations, and additional financial risks related to these investments, including required changes in our investment, financing and hedging strategies, risks associated with our increased use of financial leverage, which could expose us to liquidity risks resulting from changes in the fair values of assets, and the risk that we may fail to achieve forecasted results which could result in lower or negative earnings contribution and/or impairment charges associated with intangible assets;
  • the 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 malware, unauthorized access, cyber-attack, ransomware 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, 2021, 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.

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