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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Radian Group Inc | NYSE:RDN | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.43 | -1.37% | 30.89 | 31.80 | 30.78 | 31.76 | 1,472,971 | 23:00:02 |
— Primary mortgage insurance in force increases 4% year-over-year to $269.5 billion —
— Net income of $157 million, or $0.98 per diluted share —
— Return on equity of 15.0% —
— Book value per share grew 12% year-over-year to $26.69 —
— Company purchased 1.9 million shares or $50 million of Radian Group common stock during the three months ended September 30th —
— In October 2023, Radian Guaranty improved its capital position and enhanced its risk distribution program with the closing of the $353 million ILN and the $246 million excess-of-loss reinsurance agreements —
Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended September 30, 2023, of $157 million, or $0.98 per diluted share. This compares with net income for the quarter ended September 30, 2022, of $198 million, or $1.20 per diluted share.
Key Financial Highlights
Quarter ended
($ in millions, except per-share amounts)
September 30, 2023
June 30, 2023
September 30, 2022
Total revenues (1)
$314
$290
$296
Net income
$157
$146
$198
Diluted net income per share
$0.98
$0.91
$1.20
Consolidated pretax income
$201
$183
$255
Adjusted pretax operating income (2)
$210
$184
$273
Adjusted diluted net operating income per share (2) (3)
$1.04
$0.91
$1.31
Return on equity (4)
15.0%
14.1%
20.7%
Adjusted net operating return on equity (2) (3)
16.0%
14.1%
22.5%
Primary mortgage insurance in force
$269,511
$266,859
$259,121
New Insurance Written (NIW) - mortgage insurance
$13,922
$16,946
$17,616
Net premiums earned - mortgage insurance (1)
$237
$211
$235
New defaults
11,156
9,775
9,601
Provision for losses - mortgage insurance
($8)
($22)
($97)
Book value per share
$26.69
$26.51
$23.80
Accumulated other comprehensive income (loss) value per share (5)
($3.35)
($2.69)
($3.20)
PMIERs Available Assets (6)
$5,758
$5,689
$5,358
PMIERs excess Available Assets (7)
$1,670
$1,662
$1,628
Total Holding Company Liquidity (8)
$1,279
$1,285
$848
Total investments
$5,886
$5,896
$5,592
Percentage of primary loans in default (9)
2.0%
2.0%
2.1%
Mortgage insurance loss reserves
$362
$374
$478
(1)
Total revenue and net premiums earned during the second quarter of 2023 reflect an increase in ceded premiums incurred, primarily due to costs associated with the successful completion of tender offers by Eagle Re 2019-1 Ltd. and Eagle Re 2020-1 Ltd. for the mortgage insurance-linked notes that supported their reinsurance agreement with Radian Guaranty.
(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)
Included in book value per share for each period presented.
(6)
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.
(7)
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.
(8)
Represents Radian Group’s total liquidity, including available capacity under its $275 million unsecured revolving credit facility.
(9)
Represents the number of primary loans in default as a percentage of the total number of insured primary loans.
Net income for the quarter ended September 30, 2023, was $157 million, or $0.98 per diluted share. This compares with net income for the quarter ended September 30, 2022, of $198 million, or $1.20 per diluted share.
Adjusted pretax operating income for the quarter ended September 30, 2023, was $210 million, or $1.04 per diluted share. This compares with adjusted pretax operating income for the quarter ended September 30, 2022, of $273 million, or $1.31 per diluted share.
Book value per share at September 30, 2023, was $26.69, compared to $26.51 at June 30, 2023, and $23.80 at September 30, 2022. This represents a 12% growth in book value per share at September 30, 2023, as compared to September 30, 2022, and includes accumulated other comprehensive income (loss) of $(3.35) per share as of September 30, 2023, and $(3.20) per share as of September 30, 2022. Beginning in the first quarter of 2022, the change in accumulated other comprehensive income (loss) is primarily from net unrealized losses on investments as a result of an increase in market interest rates.
“We reported another quarter of excellent financial results for Radian, increasing book value per share by 12% year-over-year, generating net income of $157 million, and delivering return on equity of 15%. Our primary mortgage insurance in force, which is the main driver of future earnings for our company, grew 4% year-over-year to $270 billion, and, in October, we improved our capital position as well as enhanced our risk distribution program with the closing of two new reinsurance agreements,” said Radian’s Chief Executive Officer Rick Thornberry. “We continue to strategically manage capital and opportunistically repurchase shares, including $50 million of common stock purchased in the quarter. Our overall performance reflects the strength of our business model and our growing insured portfolio, as well as the depth of our customer relationships and dedication of our team.”
THIRD QUARTER HIGHLIGHTS
CAPITAL AND LIQUIDITY UPDATE
Radian Group
Radian Guaranty
RECENT EVENTS
CONFERENCE CALL
Radian will discuss third quarter 2023 financial results in a conference call tomorrow, Thursday, November 2, 2023, 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.
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 and other financial instruments attributable to our reportable segments and All Other activities; (ii) amortization and impairment of goodwill and other acquired intangible assets; and (iii) impairment of other long-lived assets and other non-operating items, if any, such as gains (losses) from the sale of lines of business, acquisition-related income and expenses and gains (losses) on extinguishment of debt. Adjusted diluted net operating income (loss) per share is calculated by dividing adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the company’s statutory tax rate, by 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.
See Exhibit F or Radian’s website for a description of these items, as well as Exhibit G for reconciliations to the most comparable consolidated GAAP measures.
ABOUT RADIAN
Radian Group Inc. (NYSE: RDN) is ensuring the American dream of homeownership responsibly and sustainably through products and services that include industry-leading mortgage insurance and a comprehensive suite of mortgage, risk, title, valuation, asset management and other real estate services. We are powered by technology, informed by data and driven to deliver new and better ways to transact and manage risk. Visit www.radian.com and homegenius.com to learn more about how Radian and its pioneering homegenius platform are building a smarter future for mortgage and real estate services.
FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS (Unaudited)
Exhibit A:
Condensed Consolidated Statements of Operations
Exhibit B:
Net Income Per Share
Exhibit C:
Condensed Consolidated Balance Sheets
Exhibit D:
Net Premiums Earned and Other Operating Expenses
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
Radian Group Inc. and Subsidiaries Condensed Consolidated Statements of Operations Exhibit A
2023
2022
(In thousands, except per-share amounts)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Revenues
Net premiums earned
$
240,262
$
213,429
$
233,238
$
232,827
$
240,222
Services revenue
10,892
11,797
10,984
15,441
20,146
Net investment income
68,825
64,182
59,221
59,091
51,414
Net gains (losses) on investments and other financial instruments
(8,555
)
(236
)
5,585
6,845
(16,252
)
Other income
2,109
1,241
1,592
520
659
Total revenues
313,533
290,413
310,620
314,724
296,189
Expenses
Provision for losses
(8,135
)
(21,632
)
(16,929
)
(43,599
)
(96,964
)
Policy acquisition costs
6,920
5,218
6,293
5,931
5,442
Cost of services
8,886
10,257
10,398
16,128
18,717
Other operating expenses
79,206
89,885
83,269
109,785
91,327
Interest expense
24,302
22,639
22,207
21,594
21,183
Amortization of other acquired intangible assets
1,371
1,370
1,371
1,587
1,023
Total expenses
112,550
107,737
106,609
111,426
40,728
Pretax income
200,983
182,676
204,011
203,298
255,461
Income tax provision
44,401
36,589
46,254
40,968
57,181
Net income
$
156,582
$
146,087
$
157,757
$
162,330
$
198,280
Diluted net income per share
$
0.98
$
0.91
$
0.98
$
1.01
$
1.20
Radian Group Inc. and Subsidiaries Net Income Per Share Exhibit B
The calculation of basic and diluted net income per share is as follows.
2023
2022
(In thousands, except per-share amounts)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net income—basic and diluted
$
156,582
$
146,087
$
157,757
$
162,330
$
198,280
Average common shares outstanding—basic
158,461
159,010
158,304
158,357
162,506
Dilutive effect of share-based compensation arrangements (1)
1,686
1,734
3,045
2,450
2,232
Adjusted average common shares outstanding—diluted
160,147
160,744
161,349
160,807
164,738
Basic net income per share
$
0.99
$
0.92
$
1.00
$
1.03
$
1.22
Diluted net income per share
$
0.98
$
0.91
$
0.98
$
1.01
$
1.20
(1)The following number of shares of our common stock equivalents issued under our share-based compensation arrangements are not included in the calculation of diluted net income per share because their effect would be anti-dilutive.
2023
2022
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Shares of common stock equivalents
—
112
25
—
—
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)
2023
2023
2023
2022
2022
Assets
Investments
$
5,885,652
$
5,895,871
$
5,837,892
$
5,693,491
$
5,591,881
Cash
55,489
61,142
50,167
56,183
54,701
Restricted cash
1,305
1,317
577
377
1,107
Accrued investment income
45,623
42,650
42,567
40,093
38,596
Accounts and notes receivable
144,614
138,432
129,565
119,834
174,041
Reinsurance recoverable
24,148
22,979
24,396
25,633
30,569
Deferred policy acquisition costs
18,817
19,272
18,236
18,460
17,920
Property and equipment, net
74,558
73,885
72,111
70,981
75,740
Goodwill and other acquired intangible assets, net
11,173
12,543
13,914
15,285
16,873
Prepaid federal income taxes
696,820
663,320
596,368
596,368
526,123
Other assets
420,483
375,132
418,609
427,024
458,292
Total assets
$
7,378,682
$
7,306,543
$
7,204,402
$
7,063,729
$
6,985,843
Liabilities and stockholders’ equity
Unearned premiums
$
236,400
$
246,666
$
257,735
$
271,479
$
285,290
Reserve for losses and loss adjustment expense
367,568
379,434
405,651
426,843
483,664
Senior notes
1,416,687
1,415,610
1,414,549
1,413,504
1,412,473
Secured borrowings
241,753
178,762
121,642
155,822
153,550
Reinsurance funds withheld
156,114
154,354
153,099
152,067
218,777
Net deferred tax liability
497,560
479,754
455,517
391,083
335,374
Other liabilities
309,701
281,127
289,731
333,604
358,665
Total liabilities
3,225,783
3,135,707
3,097,924
3,144,402
3,247,793
Common stock
175
177
176
176
176
Treasury stock
(945,504
)
(945,032
)
(931,313
)
(930,643
)
(930,396
)
Additional paid-in capital
1,482,712
1,522,895
1,515,852
1,519,641
1,513,615
Retained earnings
4,136,598
4,016,482
3,908,396
3,786,952
3,656,870
Accumulated other comprehensive income (loss)
(521,082
)
(423,686
)
(386,633
)
(456,799
)
(502,215
)
Total stockholders’ equity
4,152,899
4,170,836
4,106,478
3,919,327
3,738,050
Total liabilities and stockholders’ equity
$
7,378,682
$
7,306,543
$
7,204,402
$
7,063,729
$
6,985,843
Shares outstanding
155,582
157,350
156,547
157,056
157,058
Book value per share
$
26.69
$
26.51
$
26.23
$
24.95
$
23.80
Holding company debt-to-capital ratio (1)
25.4
%
25.3
%
25.6
%
26.5
%
27.4
%
(1)
Calculated as carrying value of senior notes, which were issued and are owed by our holding company, divided by carrying value of senior notes and stockholders’ equity. This holding company ratio does not include the effects of amounts owed by our subsidiaries related to secured borrowings.
Radian Group Inc. and Subsidiaries Net Premiums Earned and Other Operating Expenses Exhibit D
Net Premiums Earned
2023
2022
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Premiums earned
Direct - Mortgage
Premiums earned, excluding revenue from cancellations
$
254,903
$
252,537
$
251,166
$
247,880
$
250,140
Single Premium Policy cancellations
3,304
3,980
5,361
5,756
6,705
Total direct - Mortgage
258,207
256,517
256,527
253,636
256,845
Assumed - Mortgage (1)
—
—
—
(56
)
1,211
Ceded - Mortgage
Premiums earned, excluding revenue from cancellations (2)
(32,363
)
(57,916
)
(35,526
)
(35,773
)
(38,879
)
Single Premium Policy cancellations (3)
(873
)
(1,114
)
(1,472
)
(1,676
)
(1,844
)
Profit commission - other (4)
11,830
13,245
11,921
13,802
17,864
Total ceded premiums - Mortgage
(21,406
)
(45,785
)
(25,077
)
(23,647
)
(22,859
)
Net premiums earned - Mortgage
236,801
210,732
231,450
229,933
235,197
Net premiums earned - homegenius
3,461
2,697
1,788
2,894
5,025
Net premiums earned
$
240,262
$
213,429
$
233,238
$
232,827
$
240,222
(1)
Represents premiums from our participation in certain credit risk transfer programs. We discontinued our participation in these programs in December 2022 by novating these insurance policies to an unrelated third-party reinsurer.
(2)The second quarter of 2023 includes the result of the tender offers by Eagle Re 2019-1 Ltd. and Eagle Re 2020-1 Ltd. to purchase the mortgage insurance-linked notes that supported their reinsurance agreements with Radian Guaranty. As a result, Radian Guaranty incurred additional ceded premiums earned during the second quarter of 2023 of $21 million, consisting of $16 million related to the cost of tender premiums and associated expenses and $5 million related to the acceleration of deferred costs from the original executions of these transactions.
(3)Includes the impact of related profit commissions.
(4)The amounts represent the profit commission under our QSR Program, excluding the impact of Single Premium Policy cancellations.
Other Operating Expenses
Total
2023
2022
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Other operating expenses by type
Salaries and other base employee expenses
$
33,272
$
39,032
$
35,064
$
47,995
$
38,656
Variable and share-based incentive compensation
19,546
18,908
18,273
15,321
15,366
Other general operating expenses
29,812
35,655
33,863
50,488
39,728
Ceding commissions
(5,153
)
(4,824
)
(4,628
)
(5,098
)
(4,273
)
Title agent commissions
1,729
1,114
697
1,079
1,850
Total
$
79,206
$
89,885
$
83,269
$
109,785
(1)
$
91,327
(1)
Includes $12 million of severance and related expenses, primarily in salaries and other base employee expenses and $15 million of impairment of long-lived assets, primarily in other general operating expenses.
Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 1 of 4)
Summarized financial information concerning our operating segments as of and for the periods indicated is as follows. For a definition of adjusted pretax operating income (loss), along with a reconciliation to its consolidated GAAP measure, see Exhibits F and G.
Three Months Ended September 30, 2023
(In thousands)
Mortgage
homegenius
All Other (1)
Inter segment (2)
Total
Net premiums written (3)
$
235,169
$
3,461
$
—
$
—
$
238,630
(Increase) decrease in unearned premiums
1,632
—
—
—
1,632
Net premiums earned
236,801
3,461
—
—
240,262
Services revenue
266
10,723
—
(97
)
10,892
Net investment income
50,345
523
17,957
—
68,825
Net gains (losses) on investments and other financial instruments
—
—
283
—
283
Other income
1,237
—
9
(5
)
1,241
Total
288,649
14,707
18,249
(102
)
321,503
Provision for losses
(8,257
)
122
—
—
(8,135
)
Policy acquisition costs
6,920
—
—
—
6,920
Cost of services
172
8,714
—
—
8,886
Other operating expenses before allocated corporate operating expenses (4)
16,776
22,562
3,500
(102
)
42,736
Interest expense
22,693
—
1,609
—
24,302
Total
38,304
31,398
5,109
(102
)
74,709
Adjusted pretax operating income (loss) before allocated corporate operating expenses
250,345
(16,691
)
13,140
—
246,794
Allocation of corporate operating expenses
31,744
4,241
354
—
36,339
Adjusted pretax operating income (loss)
$
218,601
$
(20,932
)
$
12,786
$
—
$
210,455
Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 2 of 4)
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
(Increase) 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
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
(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 revenue for our homegenius segment and immaterial inter-segment expenses for our Mortgage segment and All Other activities.
(3)Net of ceded premiums written under our quota share and excess-of-loss reinsurance agreements.
(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).
Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 3 of 4)
Mortgage
2023
2022
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net premiums written (1)
$
235,169
$
214,540
$
229,419
$
227,791
$
235,076
(Increase) decrease in unearned premiums
1,632
(3,808
)
2,031
2,142
121
Net premiums earned
236,801
210,732
231,450
229,933
235,197
Services revenue
266
284
336
328
405
Net investment income
50,345
48,555
46,497
52,165
44,842
Other income
1,237
1,246
1,587
512
589
Total
288,649
260,817
279,870
282,938
281,033
Provision for losses (2)
(8,257
)
(21,623
)
(16,864
)
(43,509
)
(97,493
)
Policy acquisition costs
6,920
5,218
6,293
5,931
5,442
Cost of services
172
143
241
235
373
Other operating expenses before allocated corporate operating expenses (2) (3)
16,776
20,009
18,806
20,131
23,396
Interest expense
22,693
22,239
22,130
21,580
21,183
Total (2)
38,304
25,986
30,606
4,368
(47,099
)
Adjusted pretax operating income before allocated corporate operating expenses
250,345
234,831
249,264
278,570
328,132
Allocation of corporate operating expenses
31,744
37,081
34,829
36,663
32,457
Adjusted pretax operating income
$
218,601
$
197,750
$
214,435
$
241,907
$
295,675
homegenius
2023
2022
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net premiums earned
$
3,461
$
2,697
$
1,788
$
2,894
$
5,025
Services revenue (2)
10,723
11,617
10,743
15,207
19,812
Net investment income
523
492
430
366
246
Other income (2)
—
—
—
170
—
Total (2)
14,707
14,806
12,961
18,637
25,083
Provision for losses
122
(9
)
(65
)
(90
)
435
Cost of services
8,714
10,114
10,157
15,893
18,344
Other operating expenses before allocated corporate operating expenses (3)
22,562
24,168
21,252
27,998
26,285
Total
31,398
34,273
31,344
43,801
45,064
Adjusted pretax operating income (loss) before allocated corporate operating expenses
(16,691
)
(19,467
)
(18,383
)
(25,164
)
(19,981
)
Allocation of corporate operating expenses
4,241
4,954
4,658
6,302
5,555
Adjusted pretax operating income (loss)
$
(20,932
)
$
(24,421
)
$
(23,041
)
$
(31,466
)
$
(25,536
)
Radian Group Inc. and Subsidiaries Segment Information Exhibit E (page 4 of 4)
All Other (4)
2023
2022
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net investment income
$
17,957
$
15,135
$
12,294
$
6,560
$
6,326
Net gains (losses) on investments and other financial instruments
283
95
80
47
—
Other income
9
(1
)
5
8
70
Total
18,249
15,229
12,379
6,615
6,396
Other operating expenses before allocated corporate operating expenses (2) (3)
3,500
3,370
518
(5)
3,606
3,444
Interest expense
1,609
400
77
14
—
Total (2)
5,109
3,770
595
3,620
3,444
Adjusted pretax operating income before allocated corporate operating expenses
13,140
11,459
11,784
2,995
2,952
Allocation of corporate operating expenses
354
413
3,315
(5)
420
371
Adjusted pretax operating income (loss)
$
12,786
$
11,046
$
8,469
$
2,575
$
2,581
(1)Net of ceded premiums written under our quota share and excess-of-loss reinsurance agreements.
(2)Includes immaterial inter-segment revenue for our homegenius segment and immaterial inter-segment expenses for our Mortgage segment and All Other activities.
(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)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.
(5)In the first quarter of 2023, as a one-time adjustment, we reclassified $2.9 million in cumulative expenses previously reflected in the All Other results as direct other operating expenses to allocated corporate operating expenses.
Selected Mortgage Key Ratios
2023
2022
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Loss ratio (1)
(3.5
)%
(10.3
)%
(7.3
)%
(18.9
)%
(41.5
)%
Expense ratio (2)
23.4
%
29.6
%
25.9
%
27.3
%
26.1
%
(1)For our Mortgage segment, calculated as provision for losses expressed as a percentage of net premiums earned.
(2)For our Mortgage segment, calculated as operating expenses, (which consist of policy acquisition costs and other operating expenses, as well as allocated corporate operating expenses), expressed as a percentage of net premiums earned.
Radian Group Inc. and Subsidiaries Definition of Consolidated Non-GAAP Financial Measures Exhibit F (page 1 of 2) Use of Non-GAAP Financial Measures
In addition to the traditional GAAP financial measures, we have presented “adjusted pretax operating income (loss),” “adjusted diluted net operating income (loss) per share” and “adjusted net operating return on equity,” which are non-GAAP financial measures for the consolidated company, among our key performance indicators to evaluate our fundamental financial performance. These non-GAAP financial measures align with the way our business performance is evaluated by both management and by our 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 our 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 and other financial instruments attributable to our reportable segments and All Other activities; (ii) amortization and impairment of goodwill and other acquired intangible assets; and (iii) impairment of other long-lived assets and other non-operating items, if any, such as gains (losses) from the sale of lines of business, acquisition-related income and expenses and gains (losses) on extinguishment of debt. Adjusted diluted net operating income (loss) per share is calculated by dividing adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the company’s statutory tax rate, by 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 and other financial instruments attributable to our reportable segments and All Other activities, we do not view them to be indicative of our fundamental operating activities.
(2)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.
(3)Impairment of other long-lived assets and other non-operating items, if any. 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; (iii) acquisition-related income and expenses; and (iv) gains (losses) on extinguishment of debt.
Radian Group Inc. and Subsidiaries Definition of Consolidated Non-GAAP Financial Measures Exhibit F (page 2 of 2)
See Exhibit G for the reconciliations 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.
Total adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity should not be considered in isolation or viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share, return on equity or net income (loss). Our definitions of adjusted pretax operating income (loss) and adjusted diluted net operating income (loss) per share 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 2)
Reconciliation of Consolidated Pretax Income to Adjusted Pretax Operating Income
2023
2022
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Consolidated pretax income
$
200,983
$
182,676
$
204,011
$
203,298
$
255,461
Less reconciling income (expense) items
Net gains (losses) on investments and other financial instruments (1)
(8,838
)
(331
)
5,505
6,798
(16,252
)
Amortization of other acquired intangible assets
(1,371
)
(1,370
)
(1,371
)
(1,587
)
(1,023
)
Impairment of other long-lived assets and other non-operating items
737
2
14
(14,929
) (2)
16
Total adjusted pretax operating income (3)
$
210,455
$
184,375
$
199,863
$
213,016
$
272,720
(1)
Excludes certain net gains (losses), if any, on investments and other financial instruments that are attributable to specific operating segments and therefore included in adjusted pretax operating income (loss).
(2)The amount is included in other operating expenses on the Condensed Consolidated Statement of Operations in Exhibit A and primarily relates to impairment 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.
2023
2022
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Adjusted pretax operating income (loss)
Mortgage segment
$
218,601
$
197,750
$
214,435
$
241,907
$
295,675
homegenius segment
(20,932
)
(24,421
)
(23,041
)
(31,466
)
(25,536
)
All Other activities
12,786
11,046
8,469
2,575
2,581
Total adjusted pretax operating income
$
210,455
$
184,375
$
199,863
$
213,016
$
272,720
Radian Group Inc. and Subsidiaries Consolidated Non-GAAP Financial Measure Reconciliations Exhibit G (page 2 of 2)
Reconciliation of Diluted Net Income Per Share to Adjusted Diluted Net Operating Income Per Share
2023
2022
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Diluted net income per share
$
0.98
$
0.91
$
0.98
$
1.01
$
1.20
Less per-share impact of reconciling income (expense) items
Net gains (losses) on investments and other financial instruments
(0.06
)
—
0.03
0.04
(0.10
)
Amortization of other acquired intangible assets
(0.01
)
(0.01
)
(0.01
)
(0.01
)
(0.01
)
Impairment of other long-lived assets and other non-operating items
0.01
—
—
(0.09
)
—
Income tax (provision) benefit on reconciling income (expense) items (1)
0.01
—
(0.01
)
0.01
0.02
Difference between statutory and effective tax rates
(0.01
)
0.01
(0.01
)
0.01
(0.02
)
Per-share impact of reconciling income (expense) items
(0.06
)
—
—
(0.04
)
(0.11
)
Adjusted diluted net operating income per share (1)
$
1.04
$
0.91
$
0.98
$
1.05
$
1.31
(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)
2023
2022
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Return on equity (1)
15.0
%
14.1
%
15.7
%
17.0
%
20.7
%
Less impact of reconciling income (expense) items (2)
Net gains (losses) on investments and other financial instruments
(0.9
)
—
0.5
0.7
(1.7
)
Amortization of other acquired intangible assets
(0.2
)
(0.1
)
(0.1
)
(0.2
)
(0.1
)
Impairment of other long-lived assets and other non-operating items
0.1
—
—
(1.6
)
—
Income tax (provision) benefit on reconciling income (expense) items (3)
0.2
(0.1
)
(0.1
)
0.2
0.4
Difference between statutory and effective tax rates
(0.2
)
0.2
(0.3
)
0.3
(0.4
)
Impact of reconciling income (expense) items
(1.0
)
—
—
(0.6
)
(1.8
)
Adjusted net operating return on equity (3)
16.0
%
14.1
%
15.7
%
17.6
%
22.5
%
(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 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.
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. These measures should not be considered in isolation or viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share, return on equity or net income (loss).
Our definitions of adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity 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
2023
2022
($ in millions)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
NIW
$
13,922
$
16,946
$
11,261
$
12,859
$
17,616
NIW by premium type
Direct monthly and other recurring premiums
96.0
%
96.5
%
94.9
%
94.8
%
95.5
%
Direct single premiums
4.0
%
3.5
%
5.1
%
5.2
%
4.5
%
NIW for purchases
98.7
%
98.6
%
97.6
%
98.3
%
98.4
%
NIW for refinances
1.3
%
1.4
%
2.4
%
1.7
%
1.6
%
NIW by FICO score (1)
>=740
67.3
%
66.1
%
60.7
%
59.4
%
63.3
%
680-739
27.4
28.4
32.8
33.1
28.5
620-679
5.3
5.5
6.5
7.5
8.2
<=619
—
—
—
—
—
Total NIW
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
NIW by LTV
95.01% and above
16.5
%
17.9
%
17.7
%
15.5
%
18.3
%
90.01% to 95.00%
38.6
39.1
40.2
40.8
37.1
85.01% to 90.00%
30.2
29.5
28.7
29.7
28.0
85.00% and below
14.7
13.5
13.4
14.0
16.6
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)
2023
2023
2023
2022
2022
Primary insurance in force
$
269,511
$
266,859
$
261,450
$
260,994
$
259,121
Primary risk in force (“RIF”)
$
69,298
$
68,323
$
66,580
$
66,094
$
65,288
Primary RIF by premium type
Direct monthly and other recurring premiums
88.6
%
88.2
%
87.6
%
87.1
%
86.4
%
Direct single premiums
11.4
%
11.8
%
12.4
%
12.9
%
13.6
%
Primary RIF by FICO score (1)
>=740
58.2
%
57.8
%
57.4
%
57.4
%
57.5
%
680-739
34.0
34.3
34.6
34.6
34.5
620-679
7.4
7.5
7.6
7.6
7.6
<=619
0.4
0.4
0.4
0.4
0.4
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Primary RIF by LTV
95.01% and above
18.4
%
18.0
%
17.5
%
17.1
%
16.8
%
90.01% to 95.00%
48.2
48.4
48.5
48.4
48.4
85.01% to 90.00%
27.0
26.9
27.0
27.2
27.2
85.00% and below
6.4
6.7
7.0
7.3
7.6
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Primary RIF by policy year
2008 and prior
2.9
%
3.1
%
3.3
%
3.5
%
3.7
%
2009 - 2017
7.5
8.2
9.1
10.0
10.9
2018
2.9
3.1
3.3
3.5
3.7
2019
5.6
5.9
6.4
6.7
7.1
2020
17.5
18.7
20.3
21.6
23.0
2021
25.6
26.9
28.6
29.5
30.6
2022
22.8
23.6
24.7
25.2
21.0
2023
15.2
10.5
4.3
—
—
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Persistency Rate (12 months ended)
83.6
%
82.8
%
81.6
%
79.6
%
75.9
%
Persistency Rate (quarterly, annualized) (2)
84.2
%
83.5
%
84.4
%
84.1
%
81.6
%
(1)For loans with multiple borrowers, the percentage of primary RIF by FICO score represents the lowest of the borrowers’ FICO scores.
(2)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.
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:
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, 2022, and to subsequent reports and registration statements filed from time to time with the U.S. Securities and Exchange Commission. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which we issued this press release. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements to reflect new information or future events or for any other reason.
View source version on businesswire.com: https://www.businesswire.com/news/home/20231027030896/en/
For Investors John Damian - Phone: 215.231.1383 email: john.damian@radian.com For Media Rashi Iyer - Phone: 215.231.1167 email: rashi.iyer@radian.com
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