Radian Announces First Quarter 2020 Financial Results

-- GAAP net income of $140.5 million, or $0.70 per diluted share --

-- Adjusted diluted net operating income per share increases 10% year-over-year to $0.80 --

-- Book value per share grows 16% year-over-year to $20.30 --

-- PMIERs Available Assets increases to $4.1 billion, or $1.1 billion in excess of Minimum Required Assets --

PHILADELPHIA--()--Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended March 31, 2020, of $140.5 million, or $0.70 per diluted share. This compares to net income for the quarter ended March 31, 2019, of $171.0 million, or $0.78 per diluted share.

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

 

 

Quarter Ended

March 31, 2020

 

Quarter Ended

March 31, 2019

 

Percent

Change

Net income (1)

 

$140.5

 

$171.0

 

(18)%

Diluted net income per share

 

$0.70

 

$0.78

 

(10)%

Consolidated pretax income

 

$181.3

 

$216.1

 

(16)%

Adjusted pretax operating income (2)

 

$204.6

 

$202.1

 

1%

Adjusted diluted net operating income per share (2)

 

$0.80

 

$0.73

 

10%

Return on equity (1)(3)

 

14.2%

 

19.0%

 

(25)%

Adjusted net operating return on equity (2)

 

16.3%

 

17.7%

 

(8)%

Book value per share (4)

 

$20.30

 

$17.49

 

16%

PMIERs excess Available Assets (5)

 

$1,128.6

 

$487.6

 

131%

Available holding company liquidity (6)

 

$648.2

 

$723.4

 

(10)%

Total Investments

 

$5,608.6

 

$5,475.8

 

2%

New Insurance Written (NIW) - mortgage insurance

 

$16,706

 

$10,900

 

53%

Primary mortgage insurance in force

 

$241,586

 

$223,734

 

8%

Net premiums earned - mortgage insurance

 

$275.0

 

$261.8

 

5%

New defaults (7)

 

9,960

 

10,216

 

(3)%

Provision for losses - mortgage insurance

 

$35.2

 

$20.8

 

69%

Mortgage insurance loss reserves

 

$414.7

 

$385.4

 

8%

 

(1) 

 

Net income for the first quarter of 2020 includes a $43.9 million increase in net losses on investments and other financial instruments as compared to the first quarter of 2019.

(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 a reconciliation of these measures to the comparable GAAP measures, see Exhibits F and G.

(3)

 

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

(4)

 

Accumulated other comprehensive income (loss) impacted book value per share by $0.16 per share as of March 31, 2020, and $0.08 per share as of March 31, 2019.

(5)

 

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

(6)

 

Radian's existing credit facility requires that the Company maintain a minimum of $35 million in liquidity.

(7)

 

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

Adjusted pretax operating income for the quarter ended March 31, 2020, was $204.6 million, compared to $202.1 million for the quarter ended March 31, 2019. Adjusted diluted net operating income per share for the quarter ended March 31, 2020, was $0.80, an increase of 10 percent compared to $0.73 for the quarter ended March 31, 2019.

Book value as of March 31, 2020, was $3.9 billion, an increase of 5 percent compared to $3.7 billion as of March 31, 2019. Book value per share as of March 31, 2020 was $20.30, an increase of 16 percent compared to $17.49 as of March 31, 2019.

“I am pleased to report another quarter of strong operating results for Radian, with net income of $140.5 million, adjusted pretax operating income of $204.6 million and 16% year-over-year growth in book value. These results are a testament to the strength of our business model and the power of our One Radian unified team,” said Radian’s Chief Executive Officer Rick Thornberry. “As the COVID-19 pandemic began to impact both the macroeconomic and business environment toward the end of the first quarter, this same team demonstrated incredible resilience and commitment. Our business continuity plans were in place, our technology infrastructure was ready, and our employees migrated to a virtual work environment seamlessly, with minimal disruption to our customers and businesses.”

Thornberry added, “I believe we are well prepared for this economic environment with a strong capital position and significant holding company resources, and I am very proud of how our entire team at Radian has responded to this challenge.”

FIRST QUARTER HIGHLIGHTS

  • NIW was $16.7 billion for the quarter, representing a decrease of 17 percent compared to $20.0 billion in the fourth quarter of 2019 and an increase of 53 percent compared to $10.9 billion in the prior-year quarter.
    • Of the $16.7 billion in NIW in the first quarter of 2020, 81 percent was written with monthly and other recurring premiums, compared to 82 percent in the fourth quarter of 2019, and 83 percent in the first quarter of 2019.
    • Refinances accounted for 34 percent of total NIW in the first quarter of 2020, compared to 33 percent in the fourth quarter of 2019 and 8 percent in the first quarter of 2019.
  • Total primary mortgage insurance in force increased to $241.6 billion as of March 31, 2020, compared to $240.6 billion as of December 31, 2019, and an increase of 8 percent compared to $223.7 billion as of March 31, 2019.
    • Persistency, which is the percentage of mortgage insurance that remains in force after a 12-month period, was 75.4 percent as of March 31, 2020, compared to 78.2 percent as of December 31, 2019, and 83.4 percent as of March 31, 2019.
    • Annualized persistency for the three months ended March 31, 2020, was 76.5 percent, compared to 75.0 percent for the three months ended December 31, 2019, and 85.4 percent for the three months ended March 31, 2019.
  • Net mortgage insurance premiums earned were $275.0 million for the quarter ended March 31, 2020, compared to $298.5 million for the quarter ended December 31, 2019, and $261.8 million for the quarter ended March 31, 2019.
    • Mortgage insurance in force premium yield was 46.1 basis points in the first quarter of 2020, compared to 50.0 basis points in the fourth quarter of 2019 and 48.6 basis points in the first quarter of 2019. Net mortgage insurance premiums earned in the fourth quarter of 2019 included an increase of $17.4 million for the cumulative recognition of deferred initial premiums on monthly policies. Excluding the impact of this adjustment, in force premium yield was 47.1 basis points in the fourth quarter of 2019.
    • The impact of single premium cancellations before consideration of reinsurance represented 4.0 basis points in the first quarter of 2020, compared to 4.4 basis points in the fourth quarter of 2019, and 1.8 basis points in the first quarter of 2019.
    • Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 45.6 basis points in the first quarter of 2020. This compares to 50.0 basis points in the fourth quarter of 2019, or 47.1 basis points excluding the impact of the premium adjustment described above, and 47.0 basis points in the first quarter of 2019.
    • Additional details regarding premiums earned may be found in Exhibit D.
  • The mortgage insurance provision for losses was $35.2 million in the first quarter of 2020, compared to $34.4 million in the fourth quarter of 2019, and $20.8 million in the prior-year quarter.
    • The number of primary delinquent loans was 19,781 as of March 31, 2020, a decrease of 7 percent compared to 21,266 as of December 31, 2019 and a decrease of 2 percent compared to 20,122 as of March 31, 2019.
    • The primary mortgage insurance delinquency rate was 1.8 percent in the first quarter of 2020, compared to 2.0 percent in the fourth quarter of 2019, and 2.0 percent in the first quarter of 2019.
    • The loss ratio in the first quarter of 2020 was 12.8 percent, compared to 11.5 percent in the fourth quarter of 2019, and 8.0 percent in the first quarter of 2019.
    • Mortgage insurance loss reserves were $414.7 million as of March 31, 2020, compared to $401.3 million as of December 31, 2019, and $385.4 million as of March 31, 2019.
    • Total mortgage insurance claims paid were $23.4 million in the first quarter of 2020, compared to $28.5 million in the fourth quarter of 2019, and $34.6 million in the first quarter of 2019.
  • Radian's Real Estate segment offers a broad array of title, valuation, asset management and other real estate services to market participants across the real estate value chain.
    • Total Real Estate segment revenues for the first quarter of 2020 were $28.6 million, compared to $27.0 million for the fourth quarter of 2019, and $23.0 million for the first quarter of 2019.
    • Adjusted earnings before interest, income taxes, depreciation and amortization and corporate allocations (Real Estate adjusted EBITDA) for the quarter ended March 31, 2020 was a loss of $(0.4) million, compared to $(1.0) million for the quarter ended December 31, 2019, and a loss of $(0.5) million for the quarter ended March 31, 2019. Additional details regarding the non-GAAP measure Real Estate adjusted EBITDA may be found in Exhibits F and G.
  • Other operating expenses were $69.1 million in the first quarter of 2020, compared to $80.9 million in the fourth quarter of 2019, and $78.8 million in the first quarter of 2019.
    • The decrease in the first quarter of 2020, compared to the fourth quarter of 2019, was driven primarily by lower incentive compensation expense compared to the fourth quarter of 2019. The decrease in the first quarter of 2020, compared to the first quarter of 2019, is due to lower legal and other professional services expense as well as higher ceding commissions.

CAPITAL AND LIQUIDITY UPDATE

Radian Group

  • As of March 31, 2020, Radian Group maintained $648.2 million of available liquidity. Total liquidity, which includes the company’s existing $267.5 million unsecured revolving credit facility, was $915.7 million as of March 31, 2020. The minimum liquidity requirement under the Company's unsecured revolving credit facility is $35 million. On May 6, 2020, Radian Group entered into an amendment to its $267.5 million unsecured revolving credit facility which extended the maturity date of the credit facility to January 18, 2022.
  • On February 13, 2020, Radian Group’s board of directors authorized an increase to the Company’s quarterly cash dividend to $0.125 per share and paid the dividend on March 6, 2020.
  • During the first quarter of 2020, Radian repurchased approximately 11.0 million shares of Radian Group common stock, or approximately $226.3 million, including commissions. On March 25, 2020, the Company announced the suspension of its share repurchase program and cancelled its current 10b5-1 plan effective March 19, 2020. Radian may initiate a new 10b5-1 plan at its discretion in the future, during an open trading window and in accordance with SEC rules. Purchase authority of up to $198.9 million remains available under the existing program. The current share repurchase authorization expires on August 31, 2021.

Radian Guaranty

  • At March 31, 2020, Radian Guaranty’s Available Assets under the Private Mortgage Insurer Eligibility Requirements (PMIERs) totaled approximately $4.1 billion, resulting in an excess or “cushion” of approximately $1.1 billion, or 38 percent above its Minimum Required Assets of approximately $2.9 billion. During the three months ended March 31, 2020, Radian Guaranty's PMIERs cushion increased by $324.5 million.
  • During the first quarter of 2020, the company continued to use risk distribution as a capital and risk management tool to lower the risk profile and financial volatility of our mortgage insurance portfolio through economic cycles.
    • As previously announced, in January 2020, Radian Guaranty entered into a new quota share reinsurance arrangement for single-premium mortgage insurance business (Single Premium QSR) with a panel of eight third-party reinsurance providers in order to cede 65% of new single-premium mortgage insurance business. The 2020 Single Premium QSR Agreement is ceding NIW for policies issued between January 1, 2020 and December 31, 2021.
    • As previously announced, in February 2020, Radian Guaranty entered into its third fully collateralized mortgage insurance-linked note (ILN) transaction, in which the company obtained $488.4 million of credit risk protection from Eagle Re 2020-1 Ltd. (Eagle Re) through the issuance by Eagle Re of ILNs to eligible third-party capital markets investors in an unregistered private offering. Eagle Re is a special purpose insurer domiciled in Bermuda and is not a subsidiary or affiliate of Radian Guaranty.
    • As of March 31, 2020, 68.0% of Radian Guaranty's primary mortgage insurance risk in force is subject to some form of risk distribution, providing a $1.6 billion reduction of Minimum Required Assets under PMIERs.
  • As previously announced, in connection with the company’s plan to streamline operations and reposition capital by eliminating the intercompany reinsurance agreement between Radian Guaranty and Radian Reinsurance, another MI subsidiary of Radian Group, the Pennsylvania Insurance Department approved the following actions during the first quarter of 2020:
    • The termination of the intercompany reinsurance agreement, resulted in the transfer of $6.0 billion in risk in force from Radian Reinsurance to Radian Guaranty;
    • A $465.0 million return of capital from Radian Reinsurance to Radian Group, which was paid on January 31, 2020, from Radian Reinsurance’s gross paid in and contributed surplus; and
    • The transfer of $200 million of cash and marketable securities from Radian Group to Radian Guaranty in exchange for a surplus note.

OTHER MATTERS

Impact of COVID-19

  • While the company reported favorable results for the first quarter of 2020, Radian expects that the unprecedented and rapidly changing social and economic impacts associated with the COVID-19 pandemic will negatively impact its business and financial results in the second quarter of 2020 and in future periods. The company has taken a number of actions to support its people, customers and communities, including successfully activating business continuity plans to transition to a virtual work environment; connecting with employees and customers through phone and web-based meetings versus in-person; increasing the company’s risk-based pricing and making adjustments to underwriting guidelines to account for the increased risk and uncertainty in the market while supporting customers with competitive rates; aligning its businesses with the temporary underwriting and servicing guidelines announced by the GSEs; and supporting Radian’s communities through increased matching gift levels and charitable contributions focused on first responders and healthcare workers. Further actions to respond to the COVID-19 pandemic and comply with governmental regulations and government and GSE programs adopted in response to the pandemic may be necessary as conditions continue to evolve.
  • Despite the risks and uncertainties posed by the COVID-19 pandemic, the company believes that it is well positioned to manage through potential challenges posed by the pandemic based on the steps it has taken to prepare for an economic downturn, such as improving its debt maturity profile and enhancing financial flexibility, implementing greater risk-based granularity into pricing, increasing the use of risk distribution strategies to lower the risk profile and financial volatility of the company’s mortgage insurance portfolio and transforming our digital culture and capabilities. For more information regarding risks that we face associated with COVID-19, see ”The COVID-19 pandemic has adversely impacted our business, and its ultimate impact on our business and financial results will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.” and the other risk factors in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May 6, 2020.

Segment Reporting

  • Subsequent to the sale of Clayton in January 2020, the company made certain changes in organizational structure that caused the composition of its reportable segments to change. This realignment resulted in a change in the determination of the company’s two reportable segments from Mortgage Insurance and Services, to Mortgage and Real Estate. As part of this change, in addition to the Mortgage segment's prior components, the segment now includes contract underwriting services. In addition, the company now reports as “All Other” activities income (losses) from assets held by our holding company, related general corporate operating expenses not attributable or allocated to our reportable segments and, for all periods through the first quarter of 2020, income and expenses related to Clayton prior to its sale in January 2020.
  • These segment reporting changes align with the recent changes in personnel reporting lines, management oversight and branding following the sale of Clayton, and are consistent with the way the performance of the company’s two reportable segments and all other business activities are evaluated beginning in the first quarter of 2020. See Exhibit E for additional information on the Company’s segments. These changes to reportable segments have been reflected in the segment operating results for all periods presented.

     

CONFERENCE CALL

Radian will discuss first quarter financial results in a conference call tomorrow, Thursday, May 7, 2020, at 10:00 a.m. Eastern time. The conference call will be broadcast live over the Internet at http://www.radian.biz/page?name=Webcasts or at www.radian.biz. The call may also be accessed by dialing 866.638.3013 inside the U.S., or 630.691.2761 for international callers, using passcode 49616201 or by referencing Radian.

A replay of the webcast will be available on the Radian website approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available approximately two and a half hours after the call ends for a period of two weeks, using the following dial-in numbers and passcode: 888.843.7419 inside the U.S., or 630.652.3042 for international callers, passcode 49616201#.

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 under Investors>Quarterly Results, or by clicking on http://www.radian.biz/page?name=QuarterlyResults.

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 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 losses from the sale of lines of business and acquisition-related expenses. Adjusted diluted net operating income per share is calculated by dividing (i) adjusted pretax operating income 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, 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 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, real estate, and title services. We are powered by technology, informed by data and driven to deliver new and better ways to transact and manage risk. Learn more about Radian’s financial strength and flexibility at www.radian.biz and visit www.radian.com to see how Radian is shaping the future of mortgage and real estate services.

FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS (Unaudited)

For historical trend information, refer to Radian’s quarterly financial statistics at http://www.radian.biz/page?name=FinancialReportsCorporate.

     

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 - Insurance

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

 

 

2020

 

2019

(In thousands, except per-share amounts)

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Net premiums earned - insurance

$

277,415

 

 

$

301,486

 

 

$

281,185

 

 

$

299,166

 

 

$

263,512

 

Services revenue

31,927

 

 

40,031

 

 

42,509

 

 

39,303

 

 

32,753

 

Net investment income

40,944

 

 

41,432

 

 

42,756

 

 

43,761

 

 

43,847

 

Net gains (losses) on investments and other financial instruments

(22,027

)

 

4,257

 

 

13,009

 

 

12,540

 

 

21,913

 

Other income

822

 

 

818

 

 

879

 

 

194

 

 

1,604

 

Total revenues

329,081

 

 

388,024

 

 

380,338

 

 

394,964

 

 

363,629

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Provision for losses

35,951

 

 

34,619

 

 

29,231

 

 

47,427

 

 

20,754

 

Policy acquisition costs

7,413

 

 

6,783

 

 

6,435

 

 

6,203

 

 

5,893

 

Cost of services

22,141

 

 

27,278

 

 

29,044

 

 

27,845

 

 

24,157

 

Other operating expenses

69,110

 

 

80,894

 

 

76,384

 

 

70,046

 

 

78,805

 

Interest expense

12,194

 

 

12,160

 

 

13,492

 

 

14,961

 

 

15,697

 

Loss on extinguishment of debt

 

 

 

 

5,940

 

 

16,798

 

 

 

Impairment of goodwill

 

 

4,828

 

 

 

 

 

 

 

Amortization and impairment of other acquired intangible assets

979

 

 

15,823

 

 

2,139

 

 

2,139

 

 

2,187

 

Total expenses

147,788

 

 

182,385

 

 

162,665

 

 

185,419

 

 

147,493

 

 

 

 

 

 

 

 

 

 

 

Pretax income

181,293

 

 

205,639

 

 

217,673

 

 

209,545

 

 

216,136

 

Income tax provision

40,832

 

 

44,455

 

 

44,235

 

 

42,815

 

 

45,179

 

Net income

$

140,461

 

 

$

161,184

 

 

$

173,438

 

 

$

166,730

 

 

$

170,957

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per share

$

0.70

 

 

$

0.79

 

 

$

0.83

 

 

$

0.78

 

 

$

0.78

 

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:
 

 

2020

 

2019

(In thousands, except per-share amounts)

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

Net income—basic and diluted

$

140,461

 

 

$

161,184

 

 

$

173,438

 

 

$

166,730

 

 

$

170,957

 

 

 

 

 

 

 

 

 

 

 

Average common shares outstanding—basic (1)

200,161

 

 

203,431

 

 

203,107

 

 

208,097

 

 

213,537

 

Dilutive effect of share-based compensation arrangements (2)

1,658

 

 

1,734

 

 

5,584

 

 

5,506

 

 

4,806

 

Adjusted average common shares outstanding—diluted

201,819

 

 

205,165

 

 

208,691

 

 

213,603

 

 

218,343

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share

$

0.70

 

 

$

0.79

 

 

$

0.85

 

 

$

0.80

 

 

$

0.80

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per share

$

0.70

 

 

$

0.79

 

 

$

0.83

 

 

$

0.78

 

 

$

0.78

 

(1)

Includes the impact of fully vested shares under our share-based compensation programs.

(2)

The following number of shares of our common stock equivalents issued under our share-based compensation arrangements were not included in the calculation of diluted net income per share because they were anti-dilutive:

 

2020

 

2019

(In thousands)

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

Shares of common stock equivalents

132

 

 

 

 

 

 

168

 

 

169

 

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)

2020

 

2019

 

2019

 

2019

 

2019

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

Investments

$

5,608,627

 

 

$

5,658,747

 

 

$

5,533,724

 

 

$

5,513,319

 

 

$

5,475,770

 

Cash

54,108

 

 

92,729

 

 

49,393

 

 

74,111

 

 

118,668

 

Restricted cash

7,817

 

 

3,545

 

 

2,853

 

 

5,007

 

 

9,086

 

Accounts and notes receivable

123,381

 

 

93,630

 

 

144,113

 

 

122,104

 

 

89,237

 

Deferred income taxes, net

 

 

 

 

 

 

6,872

 

 

67,697

 

Goodwill and other acquired intangible assets, net

27,208

 

 

28,187

 

 

52,533

 

 

54,672

 

 

56,811

 

Prepaid reinsurance premium

356,104

 

 

363,856

 

 

374,339

 

 

385,805

 

 

408,622

 

Other assets

513,187

 

 

567,619

 

 

513,647

 

 

430,236

 

 

373,678

 

Total assets

$

6,690,432

 

 

$

6,808,313

 

 

$

6,670,602

 

 

$

6,592,126

 

 

$

6,599,569

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity:

 

 

 

 

 

 

 

 

 

Unearned premiums

$

605,045

 

 

$

626,822

 

 

$

647,856

 

 

$

666,354

 

 

$

720,159

 

Reserve for losses and loss adjustment expense

418,202

 

 

404,765

 

 

398,141

 

 

405,278

 

 

388,784

 

Senior notes

887,584

 

 

887,110

 

 

886,643

 

 

982,890

 

 

1,031,197

 

FHLB advances

173,760

 

 

134,875

 

 

104,492

 

 

106,382

 

 

108,532

 

Reinsurance funds withheld

302,551

 

 

291,829

 

 

352,532

 

 

339,641

 

 

329,868

 

Other liabilities

438,782

 

 

414,189

 

 

358,431

 

 

308,337

 

 

310,938

 

Total liabilities

2,825,924

 

 

2,759,590

 

 

2,748,095

 

 

2,808,882

 

 

2,889,478

 

 

 

 

 

 

 

 

 

 

 

Common stock

208

 

 

219

 

 

220

 

 

223

 

 

230

 

Treasury stock

(902,024

)

 

(901,657

)

 

(901,556

)

 

(901,419

)

 

(895,321

)

Additional paid-in capital

2,231,670

 

 

2,449,884

 

 

2,469,097

 

 

2,539,803

 

 

2,697,724

 

Retained earnings

2,504,853

 

 

2,389,789

 

 

2,229,107

 

 

2,056,175

 

 

1,889,964

 

Accumulated other comprehensive income (loss)

29,801

 

 

110,488

 

 

125,639

 

 

88,462

 

 

17,494

 

Total stockholders’ equity

3,864,508

 

 

4,048,723

 

 

3,922,507

 

 

3,783,244

 

 

3,710,091

 

Total liabilities and stockholders’ equity

$

6,690,432

 

 

$

6,808,313

 

 

$

6,670,602

 

 

$

6,592,126

 

 

$

6,599,569

 

 

 

 

 

 

 

 

 

 

 

Shares outstanding

190,387

 

 

201,164

 

 

202,219

 

 

205,399

 

 

212,136

 

 

 

 

 

 

 

 

 

 

 

Book value per share

$

20.30

 

 

$

20.13

 

 

$

19.40

 

 

$

18.42

 

 

$

17.49

 

 

 

 

 

 

 

 

 

 

 

Debt to capital ratio (1)

18.7

%

 

18.0

%

 

18.4

%

 

20.6

%

 

21.7

%

Risk to capital ratio-Radian Guaranty only

13.8

:1

 

13.6:1

 

14.2

:1

 

14.6

:1

 

13.4

:1

Risk to capital ratio-Mortgage Insurance combined

12.4

:1

 

12.3:1

 

12.9

:1

 

13.3

:1

 

12.4

:1

(1)

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

Radian Group Inc. and Subsidiaries

Net Premiums Earned - Insurance

Exhibit D

 

 

2020

 

2019

(In thousands)

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

 

 

 

 

 

 

 

 

 

Premiums earned - insurance:

 

 

 

 

 

 

 

 

 

Direct - Mortgage:

 

 

 

 

 

 

 

 

 

Premiums earned, excluding revenue from cancellations

$

274,647

 

 

$

295,845

 

(1)

$

274,595

 

 

$

315,109

 

(2)

$

268,496

 

Single Premium Policy cancellations

24,133

 

 

26,479

 

 

27,254

 

 

15,793

 

 

9,957

 

Total direct - Mortgage

298,780

 

 

322,324

 

(1)

301,849

 

 

330,902

 

(2)

278,453

 

 

 

 

 

 

 

 

 

 

 

Assumed - Mortgage: (1) (3)

3,456

 

 

2,837

 

 

2,614

 

 

2,481

 

 

2,450

 

 

 

 

 

 

 

 

 

 

 

Ceded - Mortgage:

 

 

 

 

 

 

 

 

 

Premiums earned, excluding revenue from cancellations

(28,609

)

 

(28,055

)

 

(28,457

)

 

(53,948

)

(2)

(24,486

)

Single Premium Policy cancellations (4)

(7,183

)

 

(7,843

)

 

(8,137

)

 

(4,833

)

 

(2,953

)

Profit commission - other (5)

8,555

 

 

9,241

 

 

9,729

 

 

21,732

 

(2)

8,314

 

Total ceded premiums, net of profit commission - Mortgage (6)

(27,237

)

 

(26,657

)

 

(26,865

)

 

(37,049

)

(2)

(19,125

)

Net premiums earned - insurance - Mortgage

274,999

 

 

298,504

 

(1)

277,598

 

 

296,334

 

(2)

261,778

 

Net premiums earned - insurance - Real Estate

2,416

 

 

2,982

 

 

3,587

 

 

2,832

 

 

1,734

 

Net premiums earned - insurance

$

277,415

 

 

$

301,486

 

(1)

$

281,185

 

 

$

299,166

 

(2)

$

263,512

 

(1)

Includes a cumulative impact related to the recognition of deferred initial premiums on monthly policies.

(2)

Includes a cumulative adjustment to unearned premiums related to an update to the amortization rates used to recognize revenue for Single Premium Policies.

(3)

Includes premiums earned from our participation in certain credit risk transfer programs.

(4)

Includes the impact of related profit commissions.

(5)

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

(6)

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

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 1 of 3)

Summarized financial information concerning our reportable operating segments and all other activities as of and for the periods indicated is as follows. For a definition of adjusted pretax operating income and Real Estate adjusted EBITDA, along with reconciliations to consolidated GAAP measures, see Exhibits F and G.

 

Mortgage

 

2020

 

2019

(In thousands)

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

Net premiums written - insurance (1)

$

260,974

 

 

$

287,952

 

(2)

$

270,567

 

 

$

265,345

 

 

$

251,586

 

(Increase) decrease in unearned premiums

14,025

 

 

10,552

 

 

7,031

 

 

30,989

 

(3)

10,192

 

Net premiums earned - insurance

274,999

 

 

298,504

 

 

277,598

 

 

296,334

 

 

261,778

 

Services revenue (4)

3,216

 

 

2,936

 

 

2,375

 

 

1,895

 

 

928

 

Net investment income (4)

36,198

 

 

37,818

 

 

37,032

 

 

37,871

 

 

38,770

 

Other income (4)

671

 

 

719

 

 

641

 

 

544

 

 

894

 

Total (4)

315,084

 

 

339,977

 

 

317,646

 

 

336,644

 

 

302,370

 

 

 

 

 

 

 

 

 

 

 

Provision for losses

35,246

 

 

34,411

 

 

29,053

 

 

47,165

 

 

20,844

 

Policy acquisition costs

7,413

 

 

6,783

 

 

6,435

 

 

6,203

 

 

5,893

 

Cost of services (4)

1,757

 

 

1,713

 

 

1,621

 

 

1,128

 

 

499

 

Other operating expenses before corporate allocations (4) (5)

23,733

 

 

32,604

 

 

30,773

 

 

28,089

 

 

30,181

 

Interest expense before corporate allocations (6)

680

 

 

688

 

 

682

 

 

625

 

 

621

 

Total (4) (7)

68,829

 

 

76,199

 

 

68,564

 

 

83,210

 

 

58,038

 

Adjusted pretax operating income before corporate allocations (4)

246,255

 

 

263,778

 

 

249,082

 

 

253,434

 

 

244,332

 

Allocation of corporate operating expenses

29,074

 

 

27,394

 

 

26,671

 

 

24,388

 

 

25,625

 

Allocation of corporate interest expense

11,514

 

 

11,472

 

 

12,810

 

 

14,336

 

 

15,076

 

Adjusted pretax operating income (4)

$

205,667

 

 

$

224,912

 

 

$

209,601

 

 

$

214,710

 

 

$

203,631

 

 

Real Estate

 

2020

 

2019

(In thousands)

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

Net premiums earned - insurance

$

2,416

 

 

$

2,982

 

 

$

3,587

 

 

$

2,832

 

 

$

1,734

 

Services revenue (4) (7)

26,042

 

 

23,826

 

 

26,375

 

 

25,026

 

 

20,699

 

Net investment income

125

 

 

144

 

 

177

 

 

177

 

 

182

 

Other income

 

 

 

 

 

 

(408

)

 

408

 

Total (4)

28,583

 

 

26,952

 

 

30,139

 

 

27,627

 

 

23,023

 

 

 

 

 

 

 

 

 

 

 

Provision for losses

743

 

 

238

 

 

211

 

 

318

 

 

(18

)

Cost of services (4)

17,933

 

 

16,275

 

 

18,155

 

 

17,773

 

 

14,316

 

Other operating expenses before corporate allocations (4) (5)

10,938

 

 

11,972

 

 

11,404

 

 

10,649

 

 

9,855

 

Total (4)

29,614

 

 

28,485

 

 

29,770

 

 

28,740

 

 

24,153

 

Adjusted pretax operating income (loss) before corporate allocations (4) (8)

(1,031

)

 

(1,533

)

 

369

 

 

(1,113

)

 

(1,130

)

Allocation of corporate operating expenses (4)

3,836

 

 

2,987

 

 

2,910

 

 

2,659

 

 

2,795

 

Adjusted pretax operating income (loss) (4)

$

(4,867

)

 

$

(4,520

)

 

$

(2,541

)

 

$

(3,772

)

 

$

(3,925

)

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 2 of 3)

 

 

All Other (4) (9)

 

2020

 

2019

(In thousands)

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

Services revenue (7)

$

2,861

 

 

$

13,559

 

 

$

14,027

 

 

$

12,748

 

 

$

11,642

 

Net investment income

 

4,621

 

 

 

3,470

 

 

 

5,547

 

 

 

5,713

 

 

 

4,895

 

Other income

 

151

 

 

 

99

 

 

 

238

 

 

 

58

 

 

 

302

 

Total

 

7,633

 

 

 

17,128

 

 

 

19,812

 

 

 

18,519

 

 

 

16,839

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

2,556

 

 

 

9,500

 

 

 

9,387

 

 

 

9,113

 

 

 

9,744

 

Other operating expenses

 

1,278

 

 

 

4,037

 

 

 

4,742

 

 

 

4,505

 

 

 

4,731

 

Adjusted pretax operating income (loss)

$

3,799

 

 

$

3,591

 

 

$

5,683

 

 

$

4,901

 

 

$

2,364

 

(1)

Net of ceded premiums written under the QSR Programs and the Excess-of-Loss Program. See Exhibit L for additional information.

(2)

Includes a cumulative impact related to the recognition of deferred initial premiums on monthly policies.

(3)

Includes a cumulative adjustment to unearned premiums related to an update to the amortization rates used to recognize revenue for Single Premium Policies.

(4)

Certain organizational changes implemented in the first quarter of 2020 caused the composition of our reportable segments to change. These changes to our reportable segments have been reflected in our segment operating results for all periods presented.

(5)

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

(6)

Primarily relates to FHLB borrowings made by our mortgage insurance subsidiaries. Prior to March 31, 2020, this amount had been presented in allocation of corporate interest expense. All prior periods have been restated to reflect the current presentation.

(7)

Inter-segment information:

2020

 

2019

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

Inter-segment revenue included in:

 

 

 

 

 

 

 

 

 

Mortgage

$

83

 

 

$

160

 

 

$

35

 

 

$

23

 

 

$

284

 

Real Estate

109

 

 

88

 

 

111

 

 

133

 

 

121

 

All Other

 

 

42

 

 

122

 

 

210

 

 

111

 

Total inter-segment revenue

$

192

 

 

$

290

 

 

$

268

 

 

$

366

 

 

$

516

 

 

 

 

 

 

 

 

 

 

 

Inter-segment expense included in:

 

 

 

 

 

 

 

 

 

Mortgage

$

87

 

 

$

79

 

 

$

150

 

 

$

196

 

 

$

114

 

Real Estate

22

 

 

16

 

 

(1

)

 

(18

)

 

38

 

All Other

83

 

 

195

 

 

119

 

 

188

 

 

364

 

Total inter-segment expense

$

192

 

 

$

290

 

 

$

268

 

 

$

366

 

 

$

516

 

(8)

Supplemental information for Real Estate adjusted EBITDA (see definition in Exhibit F):

 

2020

 

2019

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

Adjusted pretax operating income (loss) before corporate allocations

$

(1,031

)

 

$

(1,533

)

 

$

369

 

 

$

(1,113

)

 

$

(1,130

)

Depreciation and amortization

666

 

 

553

 

 

560

 

 

616

 

 

593

 

Real Estate adjusted EBITDA

$

(365

)

 

$

(980

)

 

$

929

 

 

$

(497

)

 

$

(537

)

(9)

All Other activities include income (losses) from assets held by our holding company, related general corporate operating expenses not attributable or allocated to our reportable segments and, for all periods through the first quarter of 2020, income and expenses related to Clayton prior to its sale on January 21, 2020.

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 3 of 3)

Selected Mortgage Key Ratios

 

 

2020

 

2019

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

 

 

 

 

 

 

 

 

 

Loss ratio (1)

12.8

%

 

11.5

%

 

10.5

%

 

15.9

%

 

8.0

%

Expense ratio (1)

21.9

%

 

22.4

%

 

23.0

%

 

19.8

%

 

23.6

%

(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,” “adjusted diluted net operating income 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,” “adjusted diluted net operating income 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 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 losses from the sale of lines of business and acquisition-related expenses. Adjusted diluted net operating income per share is calculated by dividing (i) adjusted pretax operating income 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, 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 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. 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) gains (losses) from the sale of lines of business and (ii) 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 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, diluted net income per share, return on equity and book value per share, to our non-GAAP financial measures for the consolidated company, adjusted pretax operating income, adjusted diluted net operating income per share and adjusted net operating return on equity, respectively. Exhibit G also contains the reconciliation of the most comparable GAAP measure, net income, to Real Estate adjusted EBITDA.

Total adjusted pretax operating income, adjusted diluted net operating income 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, diluted net income per share, return on equity, book value per share or net income. Our definitions of adjusted pretax operating income, adjusted diluted net operating income 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 to Adjusted Pretax Operating Income

 

 

 

 

 

 

 

 

 

 

 

2020

 

2019

(In thousands)

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

Consolidated pretax income

$

181,293

 

 

$

205,639

 

 

$

217,673

 

 

$

209,545

 

 

$

216,136

 

Less reconciling income (expense) items:

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

(22,027

)

 

4,257

 

 

13,009

 

 

12,540

 

 

21,913

 

Loss on extinguishment of debt

 

 

 

 

(5,940

)

 

(16,798

)

 

 

Impairment of goodwill

 

 

(4,828

)

 

 

 

 

 

 

Amortization and impairment of other acquired intangible assets

(979

)

 

(15,823

)

 

(2,139

)

 

(2,139

)

 

(2,187

)

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

(300

)

 

(1,950

)

 

 

 

103

 

 

(5,660

)

Total adjusted pretax operating income (2)

$

204,599

 

 

$

223,983

 

 

$

212,743

 

 

$

215,839

 

 

$

202,070

 

(1)

The amounts for all the periods are included in other operating expenses on the Condensed Consolidated Statement of Operations in Exhibit A and primarily relate to impairments of other long-lived assets.

(2)

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

 

2020

 

2019

(In thousands)

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

Adjusted pretax operating income (loss):

 

 

 

 

 

 

 

 

 

Mortgage segment

$

205,667

 

 

$

224,912

 

 

$

209,601

 

 

$

214,710

 

 

$

203,631

 

Real Estate segment

(4,867

)

 

(4,520

)

 

(2,541

)

 

(3,772

)

 

(3,925

)

All Other activities

3,799

 

 

3,591

 

 

5,683

 

 

4,901

 

 

2,364

 

Total adjusted pretax operating income

$

204,599

 

 

$

223,983

 

 

$

212,743

 

 

$

215,839

 

 

$

202,070

 

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

 

 

2020

 

2019

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

Diluted net income per share

$

0.70

 

 

$

0.79

 

 

$

0.83

 

 

$

0.78

 

 

$

0.78

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

(0.11

)

 

0.02

 

 

0.06

 

 

0.06

 

 

0.10

 

Loss on extinguishment of debt

 

 

 

 

(0.03

)

 

(0.08

)

 

 

Impairment of goodwill

 

 

(0.02

)

 

 

 

 

 

 

Amortization and impairment of other acquired intangible assets

 

 

(0.08

)

 

(0.01

)

 

(0.01

)

 

(0.01

)

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

 

 

(0.01

)

 

 

 

 

 

(0.02

)

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

0.02

 

 

0.02

 

 

 

 

0.01

 

 

(0.01

)

Difference between statutory and effective tax rates

(0.01

)

 

 

 

 

 

 

 

(0.01

)

Per-share impact of reconciling income (expense) items

(0.10

)

 

(0.07

)

 

0.02

 

 

(0.02

)

 

0.05

 

Adjusted diluted net operating income per share (1)

$

0.80

 

 

$

0.86

 

 

$

0.81

 

 

$

0.80

 

 

$

0.73

 

(1)

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

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

 

 

 

 

 

 

 

 

 

 

 

2020

 

2019

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

Return on equity (1)

14.2

%

 

16.2

%

 

18.0

%

 

17.8

%

 

19.0

%

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

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

(2.2

)

 

0.4

 

 

1.4

 

 

1.3

 

 

2.4

 

Loss on extinguishment of debt

 

 

 

 

(0.6

)

 

(1.8

)

 

 

Impairment of goodwill

 

 

(0.5

)

 

 

 

 

 

 

Amortization and impairment of other acquired intangible assets

(0.1

)

 

(1.6

)

 

(0.2

)

 

(0.2

)

 

(0.2

)

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

 

 

(0.2

)

 

 

 

 

 

(0.6

)

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

0.5

 

 

0.4

 

 

(0.1

)

 

0.1

 

 

(0.3

)

Difference between statutory and effective tax rates

(0.3

)

 

(0.1

)

 

0.1

 

 

0.2

 

 

 

Impact of reconciling income (expense) items

(2.1

)

 

(1.6

)

 

0.6

 

 

(0.4

)

 

1.3

 

Adjusted net operating return on equity

16.3

%

 

17.8

%

 

17.4

%

 

18.2

%

 

17.7

%

(1)

Calculated by dividing annualized net income 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 companys 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 to Real Estate Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

2020

 

2019

(In thousands)

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

 

 

 

 

 

 

 

 

 

Net income

$

140,461

 

 

$

161,184

 

 

$

173,438

 

 

$

166,730

 

 

$

170,957

 

Less reconciling income (expense) items:

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

(22,027

)

 

4,257

 

 

13,009

 

 

12,540

 

 

21,913

 

Loss on extinguishment of debt

 

 

 

 

(5,940

)

 

(16,798

)

 

 

Impairment of goodwill

 

 

(4,828

)

 

 

 

 

 

 

Amortization and impairment of other acquired intangible assets

(979

)

 

(15,823

)

 

(2,139

)

 

(2,139

)

 

(2,187

)

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

(300

)

 

(1,950

)

 

 

 

103

 

 

(5,660

)

Income tax provision

(40,832

)

 

(44,455

)

 

(44,235

)

 

(42,815

)

 

(45,179

)

Mortgage adjusted pretax operating income

205,667

 

 

224,912

 

 

209,601

 

 

214,710

 

 

203,631

 

All other adjusted pretax operating income

3,799

 

 

3,591

 

 

5,683

 

 

4,901

 

 

2,364

 

Real Estate adjusted pretax operating income (loss)

(4,867

)

 

(4,520

)

 

(2,541

)

 

(3,772

)

 

(3,925

)

 

 

 

 

 

 

 

 

 

 

Less reconciling income (expense) items:

 

 

 

 

 

 

 

 

 

Allocation of corporate operating expenses to Real Estate

(3,836

)

 

(2,987

)

 

(2,910

)

 

(2,659

)

 

(2,795

)

Real Estate depreciation and amortization

(666

)

 

(848

)

 

(865

)

 

(976

)

 

(995

)

Real Estate adjusted EBITDA

$

(365

)

 

$

(685

)

 

$

1,234

 

 

$

(137

)

 

$

(135

)

On a consolidated basis, “adjusted pretax operating income,” “adjusted diluted net operating income 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, diluted net income per share, return on equity, book value per share or net income. Our definitions of adjusted pretax operating income, adjusted diluted net operating income per share, adjusted net operating return on equity, Real Estate adjusted EBITDA or Real Estate adjusted EBITDA margin may not be comparable to similarly-named measures reported by other companies. See Exhibit F for additional information on our consolidated non-GAAP financial measures.

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - New Insurance Written

Exhibit H

 

 

2020

 

2019

($ in millions)

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

 

 

 

 

 

 

 

 

 

Total primary new insurance written

$

16,706

 

 

$

19,953

 

 

$

22,037

 

 

$

18,539

 

 

$

10,900

 

 

 

 

 

 

 

 

 

 

 

Percentage of primary new insurance written by FICO score (1)

 

 

 

 

 

 

 

 

 

>=740

65.7

%

 

66.3

%

 

64.1

%

 

62.2

%

 

57.6

%

680-739

31.1

 

 

30.5

 

 

31.5

 

 

32.5

 

 

34.7

 

620-679

3.2

 

 

3.2

 

 

4.4

 

 

5.3

 

 

7.7

 

Total primary new insurance written

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Percentage of primary new insurance written

 

 

 

 

 

 

 

 

 

Borrower-paid

96.7

%

 

97.4

%

 

97.1

%

 

96.5

%

 

95.1

%

 

 

 

 

 

 

 

 

 

 

Percentage by premium type

 

 

 

 

 

 

 

 

 

Direct monthly and other recurring premiums

81.1

%

 

82.1

%

 

85.0

%

 

83.3

%

 

83.4

%

Direct single premiums (2):

 

 

 

 

 

 

 

 

 

Borrower-paid (3)

16.5

 

 

16.0

 

 

13.1

 

 

14.2

 

 

12.7

 

Lender-paid

2.4

 

 

1.9

 

 

1.9

 

 

2.5

 

 

3.9

 

Total primary new insurance written

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Primary new insurance written for purchases

66.2

%

 

67.5

%

 

80.7

%

 

89.8

%

 

92.2

%

Primary new insurance written for refinances

33.8

%

 

32.5

%

 

19.3

%

 

10.2

%

 

7.8

%

 

 

 

 

 

 

 

 

 

 

Percentage by LTV

 

 

 

 

 

 

 

 

 

95.01% and above

9.9

%

 

11.5

%

 

16.8

%

 

20.5

%

 

19.7

%

90.01% to 95.00%

37.6

 

 

35.8

 

 

37.4

 

 

38.1

 

 

40.9

 

85.01% to 90.00%

30.3

 

 

30.0

 

 

27.4

 

 

26.9

 

 

27.3

 

85.00% and below

22.2

 

 

22.7

 

 

18.4

 

 

14.5

 

 

12.1

 

Total primary new insurance written

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

(1)

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

(2)

Percentages exclude the impact of reinsurance.

(3)

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

Radian Group Inc. and Subsidiaries

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

Exhibit I (page 1 of 2)

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

($ in millions)

2020

 

2019

 

2019

 

2019

 

2019

Primary insurance in force (1)

 

 

 

 

 

 

 

 

 

Prime

$

236,958

 

 

$

235,742

 

 

$

232,086

 

 

$

225,443

 

 

$

218,227

 

Alt-A and A minus and below

4,628

 

 

4,816

 

 

5,072

 

 

5,313

 

 

5,507

 

Total Primary

$

241,586

 

 

$

240,558

 

 

$

237,158

 

 

$

230,756

 

 

$

223,734

 

 

 

 

 

 

 

 

 

 

 

Primary risk in force (1) (2)

 

 

 

 

 

 

 

 

 

Prime

$

59,827

 

 

$

59,780

 

 

$

59,217

 

 

$

57,795

 

 

$

56,054

 

Alt-A and A minus and below

1,096

 

 

1,141

 

 

1,203

 

 

1,262

 

 

1,307

 

Total Primary

$

60,923

 

 

$

60,921

 

 

$

60,420

 

 

$

59,057

 

 

$

57,361

 

 

 

 

 

 

 

 

 

 

 

Percentage of primary risk in force

 

 

 

 

 

 

 

 

 

Direct monthly and other recurring premiums

72.6

%

 

72.4

%

 

72.0

%

 

71.2

%

 

70.6

%

Direct single premiums

27.4

%

 

27.6

%

 

28.0

%

 

28.8

%

 

29.4

%

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

>=740

57.2

%

 

56.9

%

 

56.2

%

 

55.7

%

 

55.2

%

680-739

34.2

 

 

34.2

 

 

34.5

 

 

34.6

 

 

34.8

 

620-679

8.0

 

 

8.2

 

 

8.6

 

 

8.9

 

 

9.2

 

<=619

0.6

 

 

0.7

 

 

0.7

 

 

0.8

 

 

0.8

 

Total Primary

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Percentage of primary risk in force by LTV

 

 

 

 

 

 

 

 

 

95.01% and above

14.3

%

 

14.2

%

 

13.9

%

 

13.2

%

 

12.2

%

90.01% to 95.00%

51.0

 

 

51.3

 

 

51.9

 

 

52.5

 

 

53.0

 

85.01% to 90.00%

27.9

 

 

27.9

 

 

27.9

 

 

28.2

 

 

28.6

 

85.00% and below

6.8

 

 

6.6

 

 

6.3

 

 

6.1

 

 

6.2

 

Total

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Percentage of primary risk in force by policy year

 

 

 

 

 

 

 

 

 

2008 and prior

7.5

%

 

7.8

%

 

8.4

%

 

8.9

%

 

9.6

%

2009 - 2012

3.0

 

 

3.3

 

 

3.5

 

 

4.1

 

 

4.6

 

2013

3.9

 

 

4.2

 

 

4.6

 

 

5.2

 

 

5.8

 

2014

4.0

 

 

4.3

 

 

4.8

 

 

5.3

 

 

5.8

 

2015

6.9

 

 

7.4

 

 

8.1

 

 

8.9

 

 

9.7

 

2016

11.7

 

 

12.5

 

 

13.5

 

 

14.8

 

 

16.0

 

2017

14.8

 

 

16.0

 

 

17.4

 

 

18.9

 

 

20.3

 

2018

16.4

 

 

17.9

 

 

19.7

 

 

21.8

 

 

23.5

 

2019

25.4

 

 

26.6

 

 

20.0

 

 

12.1

 

 

4.7

 

2020

6.4

 

 

 

 

 

 

 

 

 

Total

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Primary risk in force on defaulted loans

$

1,001

 

 

$

1,061

 

 

$

1,012

 

 

$

986

 

 

$

1,002

 

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,

 

2020

 

2019

 

2019

 

2019

 

2019

Persistency Rate (12 months ended)

75.4

%

 

78.2

%

 

81.5

%

 

83.4

%

 

83.4

%

Persistency Rate (quarterly, annualized) (4)

76.5

%

 

75.0

%

 

75.5

%

 

80.8

%

 

85.4

%

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

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - Claims and Reserves

Exhibit J

 

 

2020

 

2019

($ in thousands)

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

 

 

 

 

 

 

 

 

 

Net claims paid: (1)

 

 

 

 

 

 

 

 

 

Total primary claims paid

$

24,358

 

 

$

24,267

 

 

$

28,981

 

 

$

31,940

 

 

$

33,360

 

Total pool and other

(911

)

 

559

 

 

901

 

 

472

 

 

1,230

 

Subtotal

23,447

 

 

24,826

 

 

29,882

 

 

32,412

 

 

34,590

 

Impact of commutations and settlements (2)

(56

)

 

3,691

 

 

6,812

 

 

15

 

 

 

Total net claims paid

$

23,391

 

 

$

28,517

 

 

$

36,694

 

 

$

32,427

 

 

$

34,590

 

 

 

 

 

 

 

 

 

 

 

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

$

50.3

 

 

$

50.9

 

 

$

47.0

 

 

$

50.1

 

 

$

48.6

 

 

 

 

 

 

 

 

 

 

 

Average direct primary claim paid (3) (4)

$

51.4

 

 

$

52.1

 

 

$

48.1

 

 

$

51.1

 

 

$

49.2

 

(1)

Net of reinsurance recoveries.

(2)

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

(3)

Calculated without giving effect to the impact of captive reinsurance terminations and other commutations.

(4)

Before reinsurance recoveries.

($ in thousands, except primary reserve

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

per primary default amounts)

2020

 

2019

 

2019

 

2019

 

2019

 

 

 

 

 

 

 

 

 

 

Reserve for losses by category (1)

 

 

 

 

 

 

 

 

 

Mortgage reserves

 

 

 

 

 

 

 

 

 

Prime

$

264,694

 

 

$

248,727

 

 

$

236,382

 

 

$

242,378

 

 

$

240,489

 

Alt-A and A minus and below

88,481

 

 

91,093

 

 

95,723

 

 

104,863

 

 

111,955

 

IBNR and other (2)

40,583

 

 

40,920

 

 

42,117

 

 

33,888

 

 

13,008

 

LAE

9,216

 

 

8,918

 

 

9,000

 

 

9,070

 

 

8,994

 

Total primary reserves

402,974

 

 

389,658

 

 

383,222

 

 

390,199

 

 

374,446

 

Total pool reserves

11,297

 

 

11,322

 

 

10,605

 

 

10,816

 

 

10,621

 

Total 1st lien reserves

414,271

 

 

400,980

 

 

393,827

 

 

401,015

 

 

385,067

 

Other

407

 

 

293

 

 

260

 

 

279

 

 

294

 

Total Mortgage reserves

414,678

 

 

401,273

 

 

394,087

 

 

401,294

 

 

385,361

 

Real Estate reserves

3,524

 

 

3,492

 

 

4,054

 

 

3,984

 

 

3,423

 

Total reserves

$

418,202

 

 

$

404,765

 

 

$

398,141

 

 

$

405,278

 

 

$

388,784

 

 

 

 

 

 

 

 

 

 

 

1st lien reserve per default

 

 

 

 

 

 

 

 

 

Primary reserve per primary default excluding IBNR and other

$

18,320

 

 

$

16,399

 

 

$

16,900

 

 

$

18,139

 

 

$

17,962

 

(1)

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

(2)

For the quarters ended September 30, 2019 and June 30, 2019, includes increases of $11.8 million and $19.4 million, respectively, in the Company’s IBNR reserve estimate related to previously disclosed legal proceedings involving challenges from certain servicers regarding loss mitigation activities.

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - Default Statistics

Exhibit K

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

2020

 

2019

 

2019

 

2019

 

2019

Default Statistics

 

 

 

 

 

 

 

 

 

Primary Insurance:

 

 

 

 

 

 

 

 

 

Prime

 

 

 

 

 

 

 

 

 

Number of insured loans

1,049,974

 

 

1,049,954

 

 

1,040,520

 

 

1,018,715

 

 

994,865

 

Number of loans in default

15,497

 

 

16,532

 

 

15,345

 

 

14,521

 

 

14,831

 

Percentage of loans in default

1.48

%

 

1.57

%

 

1.47

%

 

1.43

%

 

1.49

%

 

 

 

 

 

 

 

 

 

 

Alt-A and A minus and below

 

 

 

 

 

 

 

 

 

Number of insured loans

29,375

 

 

30,439

 

 

32,163

 

 

33,609

 

 

34,763

 

Number of loans in default

4,284

 

 

4,734

 

 

4,839

 

 

5,122

 

 

5,291

 

Percentage of loans in default

14.58

%

 

15.55

%

 

15.05

%

 

15.24

%

 

15.22

%

 

 

 

 

 

 

 

 

 

 

Total Primary

 

 

 

 

 

 

 

 

 

Number of insured loans

1,079,349

 

 

1,080,393

 

 

1,072,683

 

 

1,052,324

 

 

1,029,628

 

Number of loans in default

19,781

 

 

21,266

 

 

20,184

 

 

19,643

 

 

20,122

 

Percentage of loans in default

1.83

%

 

1.97

%

 

1.88

%

 

1.87

%

 

1.95

%

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - Reinsurance Programs

Exhibit L

 

 

2020

 

2019

($ 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)

$

6,687

 

 

$

9,217

 

 

$

8,408

 

 

$

588

 

 

$

7,017

 

% of premiums written

2.4

%

 

3.0

%

 

2.9

%

 

2.2

%

 

2.7

%

Ceded premiums earned

$

18,712

 

 

$

19,428

 

 

$

19,295

 

 

$

29,212

 

(2)

$

15,676

 

% of premiums earned

6.2

%

 

6.1

%

 

6.3

%

 

8.7

%

 

5.5

%

Ceding commissions written

$

8,413

 

 

$

6,836

 

 

$

6,778

 

 

$

6,861

 

 

$

4,695

 

Ceding commissions earned (3)

$

9,966

 

 

$

12,055

 

 

$

12,153

 

 

$

16,353

 

(2)

$

8,685

 

Profit commission

$

16,405

 

 

$

17,792

 

 

$

18,346

 

 

$

26,476

 

(2)

$

11,318

 

Ceded losses

$

1,962

 

 

$

1,533

 

 

$

771

 

 

$

1,868

 

 

$

1,687

 

 

 

 

 

 

 

 

 

 

 

Excess-of-Loss Program

 

 

 

 

 

 

 

 

 

Ceded premiums written

$

12,678

 

 

$

6,834

 

 

$

6,878

 

 

$

13,468

 

 

$

2,919

 

% of premiums written

4.5

%

 

2.2

%

 

2.4

%

 

4.8

%

 

1.1

%

Ceded premiums earned

$

8,405

 

 

$

7,104

 

 

$

7,452

 

 

$

7,662

 

 

$

3,265

 

% of premiums earned

2.8

%

 

2.2

%

 

2.4

%

 

2.3

%

 

1.2

%

 

 

 

 

 

 

 

 

 

 

Ceded RIF (4)

 

 

 

 

 

 

 

 

 

QSR Program

$

596,166

 

 

$

644,512

 

 

$

702,201

 

 

$

768,554

 

 

$

840,621

 

Single Premium QSR Program

8,580,047

 

 

8,582,067

 

 

8,538,363

 

 

8,495,651

 

 

8,267,506

 

Excess-of-Loss Program

1,230,000

 

 

850,800

 

 

974,800

 

 

1,017,440

 

 

454,641

 

Total Ceded RIF

$

10,406,213

 

 

$

10,077,379

 

 

$

10,215,364

 

 

$

10,281,645

 

 

$

9,562,768

 

 

 

 

 

 

 

 

 

 

 

PMIERs impact - reduction in Minimum Required Assets (5)

 

 

 

 

 

 

 

 

 

QSR Program

$

31,638

 

 

$

35,382

 

 

$

38,227

 

 

$

41,873

 

 

$

45,477

 

Single Premium QSR Program

501,668

 

 

511,695

 

 

513,832

 

 

516,468

 

 

507,656

 

Excess-of-Loss Program

1,066,464

 

 

738,386

 

 

834,072

 

 

926,640

 

 

454,641

 

Total PMIERs impact

$

1,599,770

 

 

$

1,285,463

 

 

$

1,386,131

 

 

$

1,484,981

 

 

$

1,007,774

 

(1)

Net of profit commission, where applicable.

(2)

Includes a cumulative adjustment to unearned premiums related to an update to the amortization rates used to recognize revenue for Single Premium Policies.

(3)

Includes amounts reported in policy acquisition costs and other operating expenses. Operating expenses include the following ceding commissions, net of deferred policy acquisition costs, for the periods indicated:

 

2020

 

2019

($ in thousands)

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

 

 

 

 

 

 

 

 

 

Ceding commissions

$

(9,966

)

 

$

(7,973

)

 

$

(8,160

)

 

$

(12,408

)

 

$

(5,643

)

(4)

Included in primary RIF.

(5)

Excludes the impact of intercompany reinsurance.

FORWARD-LOOKING STATEMENTS

All statements in this press release that address events, developments or results that we expect or anticipate may occur in the future are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as “anticipate,” “may,” “will,” “could,” “should,” “would,” “expect,” “intend,” “plan,” “goal,” “contemplate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “seek,” “strategy,” “future,” “likely” or the negative or other variations on these words and other similar expressions. These statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management’s current views and assumptions with respect to future events, including management’s current views regarding the likely impacts of the COVID-19 pandemic. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking statement. These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment where new risks emerge from time to time and it is not possible for us to predict all risks that may affect us, particularly those associated with the COVID 19 pandemic, which has had wide-ranging and rapidly changing 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 has significantly impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, disrupted the housing finance system and real estate markets and increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in most states and communities in the United States. As a result, the demand for certain of our products and services has been impacted, and this impact may continue for an unknown period and could expand in scope. We expect that the COVID-19 pandemic and measures taken to reduce its spread will pervasively impact our business and subject us to certain risks, including those discussed in “Item 1A. Risk Factors-The COVID-19 pandemic has adversely impacted our business, and its ultimate impact on our business and financial results will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.” and the other risk factors in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
  • further changes in economic and political conditions, including those resulting from COVID-19, 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”), including potential future changes to the PMIERs, and other applicable requirements imposed by the Federal Housing Finance Agency (the "FHFA") and by Fannie Mae and Freddie Mac (collectively, the “GSEs”) to insure loans purchased by the GSEs;
  • the proposed Conservatorship Capital Framework (”CCF”) that would establish capital requirements for the GSEs once finalized, which could form the basis for future versions of the PMIERs;
  • our ability to successfully execute and implement our capital plans, including our risk distribution strategy through the capital markets and reinsurance markets, and to maintain sufficient holding company liquidity to meet our liquidity needs;
  • our ability to successfully execute and implement our business plans and strategies, including plans and strategies that require GSE and/or regulatory approvals and various licenses and complex compliance requirements;
  • our ability to maintain an adequate level of capital in our insurance subsidiaries to satisfy existing and future regulatory requirements, including the PMIERs and any changes thereto, as discussed above, and potential changes to the Mortgage Guaranty Insurance Model Act currently under consideration;
  • changes in the charters or business practices of, or rules or regulations imposed by or applicable to, the GSEs, which may include changes in the requirements to remain an approved insurer to the GSEs, the GSEs’ interpretation and application of the PMIERs, as well as changes impacting loans purchased by the GSEs, including changes to the GSEs’ business practices in response to the COVID-19 pandemic;
  • changes in the current housing finance system in the United States, including the role of the Federal Housing Administration (the "FHA"), the GSEs and private mortgage insurers in this system;
  • uncertainty from the expected discontinuance of LIBOR and transition to one or more alternative benchmarks that could cause interest rate volatility and, among other things, impact our investment portfolio, cost of debt and cost of reinsurance through mortgage insurance-linked notes transactions;
  • any disruption in the servicing of mortgages covered by our insurance policies, as well as poor servicer performance, which could result from the significant financial and operational challenges many servicers are facing due to the impact of the COVID-19 pandemic;
  • a decrease in the “Persistency Rates” (the percentage of insurance in force that remains in force over a period of time) of our mortgage insurance on monthly premium products;
  • competition in our mortgage insurance business, including price competition and competition from the FHA and U.S. Department of Veterans Affairs as well as from other forms of credit enhancement, including 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 future changes to the "qualified mortgages" (QM) loan requirements which currently are being considered by the Consumer Financial Protection Bureau;
  • 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 the enactment of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and the adoption, interpretation or application of laws and regulations in response to COVID-19;
  • legal and regulatory claims, assertions, actions, reviews, audits, inquiries and investigations that could result in adverse judgments, settlements, fines, injunctions, restitutions or other relief that could require significant expenditures, new or increased reserves or have other effects on our business;
  • the amount and timing of potential settlements, payments or adjustments associated with federal or other tax examinations;
  • the possibility that we may fail to estimate accurately, especially in the event of an extended economic downturn or a period of extreme market volatility and uncertainty such as we are currently experiencing due to the COVID-19 pandemic, the likelihood, magnitude and timing of losses in establishing loss reserves for our mortgage insurance business or to accurately calculate and/or project our Available Assets and Minimum Required Assets under the PMIERs, which will be impacted by, among other things, the size and mix of our insurance in force, the level of defaults in our portfolio, the 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;
  • potential future impairment charges related to our goodwill and other acquired intangible assets;
  • changes in “GAAP” (accounting principles generally accepted in the U.S.) or “SAPP” (statutory accounting principles and practices including those required or permitted, if applicable, by the insurance departments of the respective states of domicile of our insurance subsidiaries) rules and guidance, or their interpretation;
  • our ability to attract and retain key employees; and
  • legal and other limitations on amounts we may receive from our subsidiaries, including dividends or ordinary course distributions under our internal tax- and expense-sharing arrangements.

For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, and to subsequent reports and registration statements filed from time to time with the U.S. Securities and Exchange Commission. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which we issued this press release. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements to reflect new information or future events or for any other reason.

Contacts

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

Contacts

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