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Form 8-K RADIAN GROUP INC For: Aug 01

August 2, 2022 7:03 AM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549


FORM 8-K


 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): August 1, 2022
 

 
Radian Group Inc.
(Exact Name of Registrant as Specified in its Charter)


 
Delaware
 
001-11356
 
23-2691170
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)

 
 
550 East Swedesford Road, Suite 350
Wayne, Pennsylvania, 19087
(Address of Principal Executive Offices, and Zip Code)

(215) 231-1000
(Registrant’s Telephone Number, Including Area Code)
 


(Former Name or Former Address, if Changed Since Last Report)


 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 


Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 


Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.001 par value per share
  RDN
  New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐





Item 2.02.       Results of Operations and Financial Condition.
 
On August 1, 2022, Radian Group Inc. (“Radian”) issued a news release announcing its financial results for the quarter ended June 30, 2022. A copy of this news release is furnished as Exhibit 99.1 to this report.
 
The information included in this Item 2.02 of, or furnished with, this report shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.


Item 9.01.       Financial Statements and Exhibits.

(d) Exhibits.

  99.1*
Radian Group Inc. News Release dated August 1, 2022.
 
Exhibit 104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
 

_____________________
* Furnished herewith.
 


SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 



 
RADIAN GROUP INC.
 
(Registrant)
 
   
Date:  August 2, 2022
   
  By:
/s/ J. Franklin Hall
    J. Franklin Hall
    Senior Executive Vice President and Chief Financial Officer

Exhibit 99.1

Radian Announces Second Quarter 2022 Financial Results

— GAAP net income of $201 million, or $1.15 per diluted share —

— Adjusted diluted net operating income of $1.36 per diluted share —

— Provision for losses of $(114) million in the second quarter of 2022 favorably impacted by positive development on prior period defaults —

— Primary mortgage insurance in force increases 7.1% year-over-year to $254 billion —

— Return on equity of 19.9% and adjusted net operating return on equity of 23.6% —

— Purchased $183.8 million in the second quarter, or 5.2% of total shares outstanding of Radian Group common stock —

— PMIERs excess Available Assets of $1.4 billion (or 38% over the Minimum Required Assets) —

WAYNE, Pa.--(BUSINESS WIRE)--August 1, 2022--Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended June 30, 2022, of $201.2 million, or $1.15 per diluted share. This compares with net income for the quarter ended June 30, 2021, of $155.2 million, or $0.80 per diluted share.

Key Financial Highlights

 

Quarter ended

($ in millions, except per-share amounts)

 

June 30, 2022

 

March 31, 2022

 

June 30, 2021

Net income (1)

 

$201.2

 

$181.1

 

$155.2

Diluted net income per share

 

$1.15

 

$1.01

 

$0.80

Consolidated pretax income

 

$259.9

 

$234.1

 

$195.5

Adjusted pretax operating income (2)

 

$302.0

 

$264.9

 

$184.7

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

 

$1.36

 

$1.17

 

$0.75

Return on equity (1)(4)

 

19.9 %

 

17.2 %

 

14.5 %

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

 

23.6 %

 

19.9 %

 

13.6 %

New Insurance Written (NIW) - mortgage insurance

 

$18,935

 

$18,655

 

$21,662

Net premiums earned - mortgage insurance

 

$246.9

 

$245.2

 

$247.1

New defaults (5)

 

8,009

 

9,393

 

8,145

Provision for losses - mortgage insurance

 

($114.2)

 

($84.2)

 

$3.3

homegenius revenues

 

$32.3

 

$33.9

 

$33.5

Book value per share

 

$23.63

 

$23.75

 

$23.02

Accumulated other comprehensive income

(loss) value per share (6)

 

($1.98)

 

($0.74)

 

$0.95

PMIERs Available Assets (7)

 

$5,175

 

$5,102

 

$5,042

PMIERs excess Available Assets (8)

 

$1,424

 

$1,560

 

$1,857

Total Holding Company Liquidity (9)

 

$1,048

 

$1,282

 

$1,191

Total investments

 

$5,906

 

$6,335

 

$6,682

Primary mortgage insurance in force

 

$254,226

 

$248,951

 

$237,302

Percentage of primary loans in default (10)

 

2.2 %

 

2.6 %

 

4.0 %

Mortgage insurance loss reserves

 

$589

 

$722

 

$881


(1)

  Net income for the second quarter of 2022 includes a pretax net loss on investments and other financial instruments of $41.9 million, compared with a $29.5 million pretax net loss on investments and other financial instruments in the first quarter of 2022 and a pretax net gain on investments and other financial instruments of $15.7 million for the second quarter of 2021.

(2)

  Adjusted results, including adjusted pretax operating income, adjusted diluted net operating income per share and adjusted net operating return on equity, are non-GAAP financial measures. For definitions and reconciliations of these measures to the comparable GAAP measures, see Exhibits F and G.

(3)

  Calculated using the company’s statutory tax rate of 21 percent.

(4)

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

(5)

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

(6)

  Included in book value per share for each period presented.

(7)

  Represents Radian Guaranty’s Available Assets, calculated in accordance with the Private Mortgage Insurer Eligibility Requirements (PMIERs) financial requirements in effect for each date shown.

(8)

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

(9)

  Represents Radian Group's total liquidity, including available capacity under its unsecured revolving credit facility.

(10)

  Represents the number of primary loans in default as a percentage of the total number of insured primary loans.

Adjusted pretax operating income for the quarter ended June 30, 2022, was $302.0 million, or $1.36 per diluted share. This compares with adjusted pretax operating income for the quarter ended June 30, 2021, of $184.7 million, or $0.75 per diluted share.

Book value per share at June 30, 2022, was $23.63, compared to $23.75 at March 31, 2022, and $23.02 at June 30, 2021. This represents a 2.6 percent growth in book value per share at June 30, 2022, as compared to June 30, 2021, and includes accumulated other comprehensive income (loss) of $(1.98) per share as of June 30, 2022 and $0.95 per share as of June 30, 2021, which, if excluded as of both dates, would represent 16.0 percent growth for the period. Changes in accumulated other comprehensive income (loss) for the period are primarily from net unrealized losses on investments as a result of an increase in market interest rates during the period. We do not expect to realize these losses given that we have the ability and the expectation to hold these securities until recovery.

“We are pleased with our excellent results in the second quarter with net income of $201 million, return on equity of 19.9 percent and total holding company liquidity of $1 billion. Our primary mortgage insurance in force, which is the main driver of future earnings for our company, grew 7 percent year-over-year, and the number of new defaults in the quarter was the lowest we’ve seen in more than 20 years,” said Radian’s Chief Executive Officer Rick Thornberry. “Moody’s recently upgraded our company, reflecting our improved capital adequacy through risk distribution, our improving profitability metrics, our strong market position and our financial flexibility with strong liquidity. We continue to strategically manage capital, repurchase shares opportunistically and pay regular dividends to stockholders and believe we are well positioned to continue our mission of ensuring affordable, sustainable and equitable homeownership for many years ahead.”


SECOND QUARTER HIGHLIGHTS

  • NIW was $18.9 billion in the second quarter of 2022, compared to $18.7 billion in the first quarter of 2022, and $21.7 billion in the second quarter of 2021.
    • Purchase NIW increased 7.8 percent in the second quarter of 2022 compared to the first quarter of 2022 and increased 10.0 percent compared to the second quarter of 2021.
    • Refinances accounted for 2.9 percent of total NIW in the second quarter of 2022, compared to 8.6 percent in the first quarter of 2022, and 22.9 percent in the second quarter of 2021.
    • Of the $18.9 billion in NIW in the second quarter of 2022, 95.4 percent was written with monthly and other recurring premiums, compared to 94.5 percent in the first quarter of 2022, and 93.1 percent in the second quarter of 2021.
  • Total primary mortgage insurance in force as of June 30, 2022, increased to $254.2 billion, an increase of 2.1 percent compared to $249.0 billion as of March 31, 2022, and an increase of 7.1 percent compared to $237.3 billion as of June 30, 2021. The year-over-year change reflects a 12.6 percent increase in monthly premium policy insurance in force and a 15.1 percent decline in single premium policy insurance in force.
    • Persistency, which is the percentage of mortgage insurance that remains in force after a twelve-month period, was 71.7 percent for the twelve months ended June 30, 2022, compared to 68.0 percent for the twelve months ended March 31, 2022, and 57.7 percent for the twelve months ended June 30, 2021.
    • Annualized persistency for the three months ended June 30, 2022, was 79.8 percent, compared to 76.9 percent for the three months ended March 31, 2022, and 66.3 percent for the three months ended June 30, 2021.
  • Net mortgage insurance premiums earned were $246.9 million for the quarter ended June 30, 2022, compared to $245.2 million for the quarter ended March 31, 2022, and $247.1 million for the quarter ended June 30, 2021.
    • Mortgage insurance in force portfolio premium yield was 40.0 basis points in the second quarter of 2022. This compares to 39.6 basis points in the first quarter of 2022, and 41.1 basis points in the second quarter of 2021.
    • The impact of single premium policy cancellations before consideration of reinsurance represented 1.1 basis points of direct premium yield in the second quarter of 2022, 2.4 basis points in the first quarter of 2022, and 5.3 basis points in the second quarter of 2021.
    • Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 39.3 basis points in the second quarter of 2022. This compares to 39.6 basis points in the first quarter of 2022, and 41.5 basis points in the second quarter of 2021.
    • Additional details regarding premiums earned may be found in Exhibit D.
  • The mortgage insurance provision for losses was a benefit of $114.2 million in the second quarter of 2022, compared to a benefit of $84.2 million in the first quarter of 2022, and a provision of $3.3 million in the second quarter of 2021.
    • The decrease in the second quarter of 2022 compared to both the first quarter of 2022 and the second quarter of 2021 was primarily related to more favorable development on prior period reserves, as compared to the first quarter of 2022 and second quarter of 2021. All periods were impacted by more favorable trends in cures than originally estimated.
    • The number of primary delinquent loans was 21,861 as of June 30, 2022, compared to 25,510 as of March 31, 2022, and 40,464 as of June 30, 2021.
    • The loss ratio in the second quarter of 2022 was (46.2) percent, compared to (34.3) percent in the first quarter of 2022, and 1.3 percent in the second quarter of 2021.
    • Total mortgage insurance claims paid were $3.3 million in the second quarter of 2022, compared to $4.7 million in the first quarter of 2022, and $4.2 million in the second quarter of 2021.
  • Radian's homegenius segment offers an array of title, real estate and technology products and services to consumers, mortgage lenders, mortgage and real estate investors, GSEs, real estate brokers and agents.
    • Total homegenius segment revenues for the second quarter of 2022 were $32.3 million, compared to $33.9 million for the first quarter of 2022, and $33.5 million for the second quarter of 2021.
    • Adjusted pretax operating loss, our primary segment measure of profitability for the homegenius segment, for the quarter ended June 30, 2022 was $17.7 million, compared to $13.5 million for the quarter ended March 31, 2022, and $9.2 million for the quarter ended June 30, 2021.
    • homegenius non-GAAP performance measures:
      • Adjusted pretax operating loss before allocated corporate operating expenses for the homegenius segment for the quarter ended June 30, 2022 was $12.0 million, compared to $8.2 million for the quarter ended March 31, 2022, and $4.5 million for the quarter ended June 30, 2021.
      • Adjusted gross profit for the homegenius segment for the quarter ended June 30, 2022 was $11.2 million, compared to $12.1 million for the quarter ended March 31, 2022, and $11.7 million for the quarter ended June 30, 2021.
      • Additional details regarding these and other related non-GAAP measures may be found in Exhibits F and G.
  • Other operating expenses were $90.5 million in the second quarter of 2022, compared to $89.5 million in the first quarter of 2022, and $86.5 million in the second quarter of 2021.
    • The increase in the second quarter of 2022 compared to the second quarter of 2021 was driven primarily by a decrease in ceding commissions and an increase in compensation expense. Additional details regarding other operating expenses by segment may be found in Exhibit E.

CAPITAL AND LIQUIDITY UPDATE

Radian Group

  • As of June 30, 2022, Radian Group maintained $772.5 million of available liquidity. Total Holding Company Liquidity, which includes the company’s $275.0 million unsecured revolving credit facility, was $1.0 billion as of June 30, 2022.
  • During the second quarter of 2022, the company repurchased 9.1 million shares of Radian Group common stock at a total cost of $183.8 million, including commissions.
  • In addition, in July 2022 the Company purchased an additional 4.8 million shares of Radian Group common stock at a total cost of approximately $97.5 million, including commissions. After the repurchases in July, purchase authority of up to approximately $97.6 million remained available under the existing program.
  • The Company purchased $281.3 million of Radian Group common stock, including commissions, during the period April 1, 2022 to July 31, 2022. This represented 7.9 percent in the aggregate of total shares outstanding as of the end of the first quarter.
  • On May 11, 2022, Radian Group’s board of directors authorized a regular quarterly dividend on its common stock in the amount of $0.20 per share and the dividend was paid on June 3, 2022.

Radian Guaranty

  • At June 30, 2022, Radian Guaranty’s Available Assets under PMIERs totaled approximately $5.2 billion, resulting in excess available resources or a “cushion” of $1.4 billion, or 38 percent, over its Minimum Required Assets.
  • As of June 30, 2022, 62 percent of Radian Guaranty's primary mortgage insurance risk in force is subject to some form of risk distribution, providing a $1.1 billion reduction of Minimum Required Assets under PMIERs.

RECENT EVENTS

  • Consistent with our use of risk distribution strategies to effectively manage capital and proactively mitigate risk, Radian Guaranty agreed to principal terms in July 2022 on a quota share reinsurance arrangement ("2022 QSR Agreement") with a panel of third-party reinsurance providers. Under the 2022 QSR Agreement, which remains subject to final documentation, starting July 1, 2022, we expect to cede 20 percent of policies issued between January 1, 2022, and June 30, 2023, subject to certain conditions. As of June 30, 2022, assuming the 2022 QSR Agreement had been in place:
    • Radian Guaranty's Minimum Required Assets would have decreased by approximately $132 million, which would have resulted in an increase in PMIERs excess Available Assets or "cushion" to $1.5 billion, or 43 percent.
    • Radian Guaranty's primary mortgage insurance risk in force that is subject to some form of risk distribution would have increased to 76 percent, providing a $1.2 billion reduction of Minimum Required Assets under PMIERs.
  • On July 21, 2022, Moody's Investors Service ("Moody's") upgraded the insurance financial strength (IFS) rating of Radian Guaranty to A3 from Baa1. In the same rating action, Moody's also upgraded the senior unsecured debt rating of Radian Group Inc. to Baa3 from Ba1. The outlook for the ratings is stable.

CONFERENCE CALL

Radian will discuss second quarter 2022 financial results in a conference call tomorrow, Tuesday, August 2, 2022, at 10:00 a.m. Eastern time. The conference call will be webcast live on the company’s website at https://radian.com/who-we-are/for-investors/webcasts or at www.radian.com. The webcast is listen-only. Those interested in participating in the question-and-answer session should follow the conference call dial-in instructions below.

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

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

In addition to the information provided in the company's earnings news release, other statistical and financial information, which is expected to be referred to during the conference call, will be available on Radian's website at www.radian.com, under Investors.


NON-GAAP FINANCIAL MEASURES

Radian believes that adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity (non-GAAP measures) facilitate evaluation of the company’s fundamental financial performance and provide relevant and meaningful information to investors about the ongoing operating results of the company. On a consolidated basis, these measures are not recognized in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be considered in isolation or viewed as substitutes for GAAP measures of performance. The measures described below have been established in order to increase transparency for the purpose of evaluating the company’s operating trends and enabling more meaningful comparisons with Radian’s competitors.

Adjusted pretax operating income (loss) is defined as GAAP consolidated pretax income (loss) excluding the effects of: (i) net gains (losses) on investments and other financial instruments, except for certain investments attributable to our reportable segments; (ii) gains (losses) on extinguishment of debt; (iii) amortization and impairment of goodwill and other acquired intangible assets; and (iv) impairment of other long-lived assets and other non-operating items, such as impairment of internal-use software, gains (losses) from the sale of lines of business and acquisition-related income and expenses. Adjusted diluted net operating income (loss) per share is calculated by dividing (i) adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the company’s statutory tax rate, by (ii) the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Adjusted net operating return on equity is calculated by dividing annualized adjusted pretax operating income (loss), net of taxes computed using the company’s statutory tax rate, by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.

In addition to the above non-GAAP measures for the consolidated company, we also have presented as supplemental information non-GAAP measures for our homegenius segment of adjusted pretax operating income (loss) before allocated corporate operating expenses and adjusted gross profit. Adjusted pretax operating income (loss) before allocated corporate operating expenses is calculated as adjusted pretax operating income (loss) as described above (which is the segment's ASC 280 GAAP measure of operating performance), adjusted to remove the impact of corporate allocations of other operating expenses for the homegenius segment. Adjusted gross profit is further adjusted to remove other operating expenses. In addition, homegenius adjusted pretax operating margin before allocated corporate operating expenses and adjusted gross profit margin are calculated by dividing homegenius adjusted pretax operating margin before allocated corporate operating expenses and adjusted gross profit, respectively, by GAAP total revenue for the homegenius segment. For the homegenius segment, adjusted pretax operating income (loss) before allocated corporate operating expenses, adjusted gross profit, and the related profit margins are used to facilitate comparisons with other services companies, since they are widely accepted measures of performance in the services industry and are used internally as supplemental measures to evaluate the performance of our homegenius segment.

See Exhibit F or Radian’s website for a description of these items, as well as Exhibit G for reconciliations to the most comparable consolidated GAAP measures.

ABOUT RADIAN

Radian Group Inc. (NYSE: RDN) is ensuring the American dream of homeownership responsibly and sustainably through products and services that include industry-leading mortgage insurance and a comprehensive suite of mortgage, risk, title, real estate and technology products and services. We are powered by technology, informed by data and driven to deliver new and better ways to transact and manage risk. Visit www.radian.com to learn more about how Radian is shaping the future of mortgage and real estate services.


FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS (Unaudited)

Exhibit A:   Condensed Consolidated Statements of Operations Trend Schedule
Exhibit B:   Net Income Per Share Trend Schedule
Exhibit C:   Condensed Consolidated Balance Sheets
Exhibit D:   Net Premiums Earned
Exhibit E:   Segment Information
Exhibit F:   Definition of Consolidated Non-GAAP Financial Measures
Exhibit G:   Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit H:   Mortgage Supplemental Information

  New Insurance Written
Exhibit I:   Mortgage Supplemental Information

  Primary Insurance in Force and Risk in Force
Exhibit J:   Mortgage Supplemental Information

  Claims and Reserves, Default Statistics
Exhibit K:   Mortgage Supplemental Information

  Reinsurance Programs

Radian Group Inc. and Subsidiaries

Condensed Consolidated Statements of Operations Trend Schedule

Exhibit A





 

 

 

2022

 

2021

(In thousands, except per-share amounts)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Revenues

 

 

 

 

 

 

 

 

 

 

Net premiums earned

 

$

253,892

 

 

$

254,190

 

 

$

261,437

 

 

$

249,118

 

$

254,756

Services revenue

 

 

27,281

 

 

 

29,348

 

 

 

35,693

 

 

 

37,773

 

 

29,464

Net investment income

 

 

46,957

 

 

 

38,196

 

 

 

37,407

 

 

 

35,960

 

 

36,291

Net gains (losses) on investments and other financial instruments

 

 

(41,869

)

 

 

(29,457

)

 

 

3,025

 

 

 

2,098

 

 

15,661

Other income

 

 

572

 

 

 

703

 

 

 

805

 

 

 

809

 

 

822

Total revenues

 

 

286,833

 

 

 

292,980

 

 

 

338,367

 

 

 

325,758

 

 

336,994

Expenses

 

 

 

 

 

 

 

 

 

 

Provision for losses

 

 

(113,922

)

 

 

(83,754

)

 

 

(46,219

)

 

 

17,305

 

 

3,648

Policy acquisition costs

 

 

5,940

 

 

 

6,605

 

 

 

7,271

 

 

 

7,924

 

 

4,838

Cost of services

 

 

22,760

 

 

 

24,753

 

 

 

28,333

 

 

 

30,520

 

 

24,615

Other operating expenses

 

 

90,495

 

 

 

89,541

 

 

 

80,476

 

 

 

86,479

 

 

86,469

Interest expense

 

 

20,831

 

 

 

20,846

 

 

 

21,137

 

 

 

21,027

 

 

21,065

Amortization of other acquired intangible assets

 

 

849

 

 

 

849

 

 

 

863

 

 

 

862

 

 

863

Total expenses

 

 

26,953

 

 

 

58,840

 

 

 

91,861

 

 

 

164,117

 

 

141,498

Pretax income

 

 

259,880

 

 

 

234,140

 

 

 

246,506

 

 

 

161,641

 

 

195,496

Income tax provision

 

 

58,687

 

 

 

53,009

 

 

 

53,061

 

 

 

35,229

 

 

40,290

Net income

 

$

201,193

 

 

$

181,131

 

 

$

193,445

 

 

$

126,412

 

$

155,206

Diluted net income per share

 

$

1.15

 

 

$

1.01

 

 

$

1.07

 

 

$

0.67

 

$

0.80

Selected Mortgage Key Ratios





 

 

 

2022

 

2021

 

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Loss ratio (1)

 

(46.2

)%

 

(34.3

)%

 

(18.6

)%

 

7.1

%

 

1.3

%

Expense ratio (2)

 

26.2

%

 

27.2

%

 

25.6

%

 

28.6

%

 

25.4

%

(1)


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

(2)


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

Radian Group Inc. and Subsidiaries

Net Income Per Share Trend Schedule

Exhibit B


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





 

 

 

2022

 

2021

(In thousands, except per-share amounts)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Net income—basic and diluted

 

$

201,193

 

$

181,131


$

193,445


$

126,412


$

155,206

Average common shares outstanding—basic

 

 

173,705

 

 

176,816


 

179,500


 

186,741


 

193,436

Dilutive effect of stock-based compensation arrangements (1)

 

 

1,714

 

 

2,263

 

 

1,628

 

 

1,301


 

1,202

Adjusted average common shares outstanding—diluted

 

 

175,419

 

 

179,079

 

 

181,128

 

 

188,042

 

 

194,638

Basic net income per share

 

$

1.16

 

$

1.02

 

$

1.08

 

$

0.68


$

0.80

Diluted net income per share

 

$

1.15

 

$

1.01


$

1.07


$

0.67


$

0.80

(1)


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

 

 

2022

 

2021

(In thousands)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Shares of common stock equivalents

 

189

 

 

35

 

 


Radian Group Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

Exhibit C











 

 

 

June 30

 

March 31,

 

December 31,

 

September 30,

 

June 30,

(In thousands, except per-share amounts)

 

 

2022

 

 

 

2022

 

 

 

2021

 

 

 

2021

 

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

 

 

Investments

 

$

5,906,147

 

 

$

6,334,950

 

 

$

6,513,542

 

 

$

6,658,487

 

 

$

6,681,659

 

Cash

 

 

135,262

 

 

 

131,853

 

 

 

151,145

 

 

 

154,709

 

 

 

134,939

 

Restricted cash

 

 

561

 

 

 

1,651

 

 

 

1,475

 

 

 

1,866

 

 

 

2,968

 

Accrued investment income

 

 

35,774

 

 

 

35,531

 

 

 

32,812

 

 

 

33,258

 

 

 

32,223

 

Accounts and notes receivable

 

 

166,380

 

 

 

142,579

 

 

 

124,016

 

 

 

166,730

 

 

 

153,128

 

Reinsurance recoverables

 

 

39,876

 

 

 

55,015

 

 

 

67,896

 

 

 

76,048

 

 

 

75,411

 

Deferred policy acquisition costs

 

 

16,983

 

 

 

16,383

 

 

 

16,317

 

 

 

16,823

 

 

 

17,873

 

Property and equipment, net

 

 

74,874

 

 

 

75,275

 

 

 

75,086

 

 

 

74,170

 

 

 

74,288

 

Goodwill and other acquired intangible assets, net

 

 

17,895

 

 

 

18,744

 

 

 

19,593

 

 

 

20,456

 

 

 

21,318

 

Prepaid federal income taxes

 

 

466,123

 

 

 

354,123

 

 

 

354,123

 

 

 

313,123

 

 

 

275,623

 

Other assets

 

 

414,412

 

 

 

449,642

 

 

 

483,180

 

 

 

525,938

 

 

 

539,638

 

Total assets

 

$

7,274,287

 

 

$

7,615,746

 

 

$

7,839,185

 

 

$

8,041,608

 

 

$

8,009,068

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

Unearned premiums

 

$

298,991

 

 

$

312,013

 

 

$

329,090

 

 

$

348,322

 

 

$

373,031

 

Reserve for losses and loss adjustment expense

 

 

594,808

 

 

 

727,247

 

 

 

828,642

 

 

 

893,155

 

 

 

885,498

 

Senior notes

 

 

1,411,458

 

 

 

1,410,458

 

 

 

1,409,473

 

 

 

1,408,502

 

 

 

1,407,545

 

FHLB advances

 

 

184,284

 

 

 

148,983

 

 

 

150,983

 

 

 

172,649

 

 

 

153,983

 

Reinsurance funds withheld

 

 

223,649

 

 

 

225,363

 

 

 

228,078

 

 

 

290,502

 

 

 

285,406

 

Net deferred tax liability

 

 

324,866

 

 

 

324,004

 

 

 

337,509

 

 

 

286,957

 

 

 

266,330

 

Other liabilities

 

 

305,269

 

 

 

320,114

 

 

 

296,614

 

 

 

383,585

 

 

 

303,442

 

Total liabilities

 

 

3,343,325

 

 

 

3,468,182

 

 

 

3,580,389

 

 

 

3,783,672

 

 

 

3,675,235

 

Common stock

 

 

186

 

 

 

193

 

 

 

194

 

 

 

200

 

 

 

207

 

Treasury stock

 

 

(930,284

)

 

 

(920,958

)

 

 

(920,798

)

 

 

(920,355

)

 

 

(920,225

)

Additional paid-in capital

 

 

1,698,490

 

 

 

1,871,763

 

 

 

1,878,372

 

 

 

2,012,870

 

 

 

2,161,857

 

Retained earnings

 

 

3,491,675

 

 

 

3,326,119

 

 

 

3,180,935

 

 

 

3,012,997

 

 

 

2,913,138

 

Accumulated other comprehensive income (loss)

 

 

(329,105

)

 

 

(129,553

)

 

 

120,093

 

 

 

152,224

 

 

 

178,856

 

Total stockholders’ equity

 

 

3,930,962

 

 

 

4,147,564

 

 

 

4,258,796

 

 

 

4,257,936

 

 

 

4,333,833

 

Total liabilities and stockholders’ equity

 

$

7,274,287

 

 

$

7,615,746

 

 

$

7,839,185

 

 

$

8,041,608

 

 

$

8,009,068

 

Shares outstanding

 

 

166,388

 

 

 

174,648

 

 

 

175,421

 

 

 

181,336

 

 

 

188,290

 

Book value per share

 

$

23.63

 

 

$

23.75

 

 

$

24.28

 

 

$

23.48

 

 

$

23.02

 

Debt to capital ratio (1)

 

26.4

%

 

25.4

%

 

24.9

%

 

24.9

%

 

24.5

%

Risk to capital ratio-Radian Guaranty only

 

11.9:1

 

12.1:1

 

11.1:1

 

11.4:1

 

11.4:1

(1)


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

Radian Group Inc. and Subsidiaries

Net Premiums Earned

Exhibit D





 

 

 

2022

 

2021

(In thousands)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Premiums earned

 

 

 

 

 

 

 

 

 

 

Direct - Mortgage

 

 

 

 

 

 

 

 

 

 

Premiums earned, excluding revenue from cancellations

 

$

249,937

 

 

$

243,599

 

 

$

248,704

 

 

$

239,786

 

 

$

243,077

 

Single Premium Policy cancellations

 

 

6,894

 

 

 

14,696

 

 

 

20,530

 

 

 

25,592

 

 

 

31,592

 

Total direct - Mortgage

 

 

256,831

 

 

 

258,295

 

 

 

269,234

 

 

 

265,378

 

 

 

274,669

 

Assumed - Mortgage (1)

 

 

1,538

 

 

 

1,332

 

 

 

1,470

 

 

 

1,683

 

 

 

1,615

 

Ceded - Mortgage

 

 

 

 

 

 

 

 

 

 

Premiums earned, excluding revenue from cancellations

 

 

(28,565

)

 

 

(27,339

)

 

 

(28,333

)

 

 

(27,662

)

 

 

(27,324

)

Single Premium Policy cancellations (2)

 

 

(1,965

)

 

 

(4,192

)

 

 

(5,905

)

 

 

(7,338

)

 

 

(9,036

)

Profit commission - other (3)

 

 

19,070

 

 

 

17,078

 

 

 

13,199

 

 

 

4,806

 

 

 

7,162

 

Total ceded premiums - Mortgage (4)

 

 

(11,460

)

 

 

(14,453

)

 

 

(21,039

)

 

 

(30,194

)

 

 

(29,198

)

Net premiums earned - Mortgage

 

 

246,909

 

 

 

245,174

 

 

 

249,665

 

 

 

236,867

 

 

 

247,086

 

Net premiums earned - homegenius

 

 

6,983

 

 

 

9,016

 

 

 

11,772

 

 

 

12,251

 

 

 

7,670

 

Net premiums earned

 

$

253,892

 

 

$

254,190

 

 

$

261,437

 

 

$

249,118

 

 

$

254,756

 

(1)


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

(2)


Includes the impact of related profit commissions.

(3)


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

(4)


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

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 1 of 6)


Summarized financial information concerning our operating segments as of and for the periods indicated is as follows. For a definition of adjusted pretax operating income (loss), homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses and homegenius adjusted gross profit, along with reconciliations to consolidated GAAP measures, see Exhibits F and G.



 

 

 

Three Months Ended June 30, 2022

(In thousands)

 

Mortgage

 

homegenius

 

All Other (1)

 

Inter-
segment (2)

 

Total

Net premiums written (3)

 

$

248,645

 

 

$

6,983

 

 

$

 

$

 

 

$

255,628

 

Increase in unearned premiums

 

 

(1,736

)

 

 

 

 

 

 

 

 

 

 

(1,736

)

Net premiums earned

 

 

246,909

 

 

 

6,983

 

 

 

 

 

 

 

 

253,892

 

Services revenue

 

 

2,105

 

 

 

25,261

 

 

 

 

 

(85

)

 

 

27,281

 

Net investment income

 

 

40,197

 

 

 

99

 

 

 

6,661

 

 

 

 

 

46,957

 

Other income

 

 

572

 

 

 

 

 

 

 

 

 

 

 

572

 

Total

 

 

289,783

 

 

 

32,343

 

 

 

6,661

 

 

(85

)

 

 

328,702

 

Provision for losses

 

 

(114,179

)

 

 

309

 

 

 

 

 

(52

)

 

 

(113,922

)

Policy acquisition costs

 

 

5,940

 

 

 

 

 

 

 

 

 

 

 

5,940

 

Cost of services

 

 

1,960

 

 

 

20,800

 

 

 

 

 

 

 

 

22,760

 

Other operating expenses before allocated corporate operating expenses (4)

 

 

25,474

 

 

 

23,205

 

 

 

3,077

 

 

(33

)

 

 

51,723

 

Interest expense (5)

 

 

20,831

 

 

 

 

 

 

 

 

 

 

 

20,831

 

Total

 

 

(59,974

)

 

 

44,314

 

 

 

3,077

 

 

(85

)

 

 

(12,668

)

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

 

 

349,757

 

 

 

(11,971

)

 

 

3,584

 

 

 

 

 

341,370

 

Allocation of corporate operating expenses

 

 

33,237

 

 

 

5,719

 

 

 

381

 

 

 

 

 

39,337

 

Adjusted pretax operating income (loss)

 

$

316,520

 

 

$

(17,690

)

 

$

3,203

 

$

 

 

$

302,033

 

 

 

Three Months Ended June 30, 2021

(In thousands)

 

Mortgage

 

homegenius

 

All Other (1)

 

Inter-
segment (2)

 

Total

Net premiums written (3)

 

$

231,027

 

$

7,670

 

 

$

 

 

$

 

 

$

238,697

Decrease in unearned premiums

 

 

16,059

 

 

 

 

 

 

 

 

 

 

 

16,059

Net premiums earned

 

 

247,086

 

 

7,670

 

 

 

 

 

 

 

 

 

254,756

Services revenue

 

 

3,732

 

 

25,750

 

 

 

44

 

 

 

(62

)

 

 

29,464

Net investment income

 

 

32,842

 

 

31

 

 

 

3,418

 

 

 

 

 

 

36,291

Other income

 

 

641

 

 

 

 

 

181

 

 

 

 

 

 

822

Total

 

 

284,301

 

 

33,451

 

 

 

3,643

 

 

 

(62

)

 

 

321,333

Provision for losses

 

 

3,334

 

 

335

 

 

 

 

 

 

(21

)

 

 

3,648

Policy acquisition costs

 

 

4,838

 

 

 

 

 

 

 

 

 

 

 

4,838

Cost of services

 

 

3,161

 

 

21,433

 

 

 

19

 

 

 

2

 

 

 

24,615

Other operating expenses before allocated corporate operating expenses (4)

 

 

25,222

 

 

16,160

 

 

 

3,387

 

 

 

(43

)

 

 

44,726

Interest expense (5)

 

 

21,065

 

 

 

 

 

 

 

 

 

 

 

21,065

Total

 

 

57,620

 

 

37,928

 

 

 

3,406

 

 

 

(62

)

 

 

98,892

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

 

 

226,681

 

 

(4,477

)

 

 

237

 

 

 

 

 

 

222,441

Allocation of corporate operating expenses

 

 

32,638

 

 

4,721

 

 

 

363

 

 

 

 

 

 

37,722

Adjusted pretax operating income (loss)

 

$

194,043

 

$

(9,198

)

 

$

(126

)

 

$

 

 

$

184,719


Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 2 of 6)



 

(1)


All Other activities include: (i) income (losses) from assets held by our holding company; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; and (iii) certain investments in new business opportunities, including activities and investments associated with Radian Mortgage Capital LLC, and other immaterial activities.

(2)


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

(3)


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

(4)


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

(5)


Relates to interest on our borrowing and financing activities including our Senior Notes issued by our holding company and FHLB borrowings made by our mortgage insurance subsidiaries.

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 3 of 6)



 

 

 

Mortgage

 

 

2022

 

2021

(In thousands)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Net premiums written (1)

 

$

248,645

 

 

$

248,360

 

 

$

238,529

 

 

$

228,116

 

$

231,027

(Increase) decrease in unearned premiums

 

 

(1,736

)

 

 

(3,186

)

 

 

11,136

 

 

 

8,751

 

 

16,059

Net premiums earned

 

 

246,909

 

 

 

245,174

 

 

 

249,665

 

 

 

236,867

 

 

247,086

Services revenue

 

 

2,105

 

 

 

4,552

 

 

 

4,560

 

 

 

5,027

 

 

3,732

Net investment income

 

 

40,197

 

 

 

34,017

 

 

 

33,916

 

 

 

32,158

 

 

32,842

Other income

 

 

572

 

 

 

703

 

 

 

661

 

 

 

607

 

 

641

Total

 

 

289,783

 

 

 

284,446

 

 

 

288,802

 

 

 

274,659

 

 

284,301

 

 

 

 

 

 

 

 

 

 

 

Provision for losses (2)

 

 

(114,179

)

 

 

(84,193

)

 

 

(46,560

)

 

 

16,794

 

 

3,334

Policy acquisition costs

 

 

5,940

 

 

 

6,605

 

 

 

7,271

 

 

 

7,924

 

 

4,838

Cost of services (2)

 

 

1,960

 

 

 

3,383

 

 

 

3,710

 

 

 

3,865

 

 

3,161

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

 

 

25,474

 

 

 

23,755

 

 

 

23,365

 

 

 

25,866

 

 

25,222

Interest expense (4)

 

 

20,831

 

 

 

20,846

 

 

 

21,137

 

 

 

21,027

 

 

21,065

Total (2)

 

 

(59,974

)

 

 

(29,604

)

 

 

8,923

 

 

 

75,476

 

 

57,620

Adjusted pretax operating income before allocated corporate operating expenses

 

 

349,757

 

 

 

314,050

 

 

 

279,879

 

 

 

199,183

 

 

226,681

Allocation of corporate operating expenses

 

 

33,237

 

 

 

36,209

 

 

 

33,305

 

 

 

33,963

 

 

32,638

Adjusted pretax operating income

 

$

316,520

 

 

$

277,841

 

 

$

246,574

 

 

$

165,220

 

$

194,043

 

 

homegenius

 

 

2022

 

2021

(In thousands)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Net premiums earned

 

$

6,983

 

 

$

9,016

 

 

$

11,772

 

 

$

12,251

 

 

$

7,670

 

Services revenue (2)

 

 

25,261

 

 

 

24,878

 

 

 

31,177

 

 

 

32,805

 

 

 

25,750

 

Net investment income

 

 

99

 

 

 

18

 

 

 

255

 

 

 

35

 

 

 

31

 

Net gains (losses) on investments

 

 

 

 

 

 

 

 

1,509

 

 

 

 

 

 

 

Total (2)

 

 

32,343

 

 

 

33,912

 

 

 

44,713

 

 

 

45,091

 

 

 

33,451

 

 

 

 

 

 

 

 

 

 

 

 

Provision for losses

 

 

309

 

 

 

481

 

 

 

369

 

 

 

540

 

 

 

335

 

Cost of services

 

 

20,800

 

 

 

21,370

 

 

 

24,615

 

 

 

26,646

 

 

 

21,433

 

Other operating expenses before allocated corporate operating expenses (3)

 

 

23,205

 

 

 

20,287

 

 

 

16,998

 

 

 

18,544

 

 

 

16,160

 

Total

 

 

44,314

 

 

 

42,138

 

 

 

41,982

 

 

 

45,730

 

 

 

37,928

 

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

 

 

(11,971

)

 

 

(8,226

)

 

 

2,731

 

 

 

(639

)

 

 

(4,477

)

Allocation of corporate operating expenses

 

 

5,719

 

 

 

5,280

 

 

 

4,847

 

 

 

4,918

 

 

 

4,721

 

Adjusted pretax operating income (loss)

 

$

(17,690

)

 

$

(13,506

)

 

$

(2,116

)

 

$

(5,557

)

 

$

(9,198

)


Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 4 of 6)



 

 

 

All Other (5)

 

 

2022

 

2021

(In thousands)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Services revenue

 

$

 

$

 

$

30

 

$

27

 

$

44

 

Net investment income

 

 

6,661

 

 

4,161

 

 

3,236

 

 

3,767

 

 

3,418

 

Other income

 

 

 

 

 

 

144

 

 

202

 

 

181

 

Total

 

 

6,661

 

 

4,161

 

 

3,410

 

 

3,996

 

 

3,643

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

 

 

 

 

 

8

 

 

9

 

 

19

 

Other operating expenses before allocated corporate operating expenses (3)

 

 

3,077

 

 

3,142

 

 

2,422

 

 

2,623

 

 

3,387

 

Total

 

 

3,077

 

 

3,142

 

 

2,430

 

 

2,632

 

 

3,406

 

Adjusted pretax operating income before allocated corporate operating expenses

 

 

3,584

 

 

1,019

 

 

980

 

 

1,364

 

 

237

 

Allocation of corporate operating expenses

 

 

381

 

 

406

 

 

373

 

 

378

 

 

363

 

Adjusted pretax operating income (loss)

 

$

3,203

 

$

613

 

$

607

 

$

986

 

$

(126

)

(1)


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

(2)


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

(3)


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

(4)


Relates to interest on our borrowing and financing activities including our Senior Notes issued by our holding company and FHLB borrowings made by our mortgage insurance subsidiaries.

(5)


All Other activities include: (i) income (losses) from assets held by our holding company; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; and (iii) certain investments in new business opportunities, including activities and investments associated with Radian Mortgage Capital LLC, and other immaterial activities.

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 5 of 6)


Supplemental Other Operating Expense Information by Segment



 

 

 

Mortgage

 

 

2022

 

2021

(In thousands)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Other operating expenses by type

 

 

 

 

 

 

 

 

 

 

Salaries and other base employee expenses

 

$

24,420

 

 

$

22,189

 

 

$

23,610

 

 

$

22,685

 

 

$

22,542

 

Variable and share-based incentive compensation

 

 

11,524

 

 

 

16,697

 

 

 

12,649

 

 

 

17,143

 

 

 

15,236

 

Other general operating expenses

 

 

25,611

 

 

 

25,027

 

 

 

25,290

 

 

 

25,639

 

 

 

26,583

 

Ceding commissions

 

 

(2,844

)

 

 

(3,949

)

 

 

(4,879

)

 

 

(5,638

)

 

 

(6,501

)

Total

 

$

58,711

 

 

$

59,964

 

 

$

56,670

 

 

$

59,829

 

 

$

57,860

 

 

 

homegenius

 

 

2022

 

2021

(In thousands)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Other operating expenses by type

 

 

 

 

 

 

 

 

 

 

Salaries and other base employee expenses

 

$

12,187

 

$

10,375

 

$

7,993

 

$

6,975

 

$

6,701

Variable and share-based incentive compensation

 

 

4,776

 

 

5,522

 

 

4,678

 

 

6,238

 

 

5,896

Other general operating expenses

 

 

10,162

 

 

8,571

 

 

7,851

 

 

7,982

 

 

6,525

Title agent commissions

 

 

1,799

 

 

1,099

 

 

1,323

 

 

2,267

 

 

1,759

Total

 

$

28,924

 

$

25,567

 

$

21,845

 

$

23,462

 

$

20,881

 

 

All Other

 

 

2022

 

2021

(In thousands)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Other operating expenses by type

 

 

 

 

 

 

 

 

 

 

Salaries and other base employee expenses

 

$

1,726

 

$

1,613

 

$

1,001

 

$

1,158

 

$

1,187

Variable and share-based incentive compensation

 

 

709

 

 

953

 

 

874

 

 

1,144

 

 

958

Other general operating expenses

 

 

1,023

 

 

982

 

 

920

 

 

699

 

 

1,605

Total

 

$

3,458

 

$

3,548

 

$

2,795

 

$

3,001

 

$

3,750


Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 6 of 6)



 

 

 

Inter-segment

 

 

2022

 

2021

(In thousands)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Other operating expenses by type

 

 

 

 

 

 

 

 

 

 

Other general operating expenses

 

$

(33

)

 

$

(40

)

 

$

(46

)

 

$

(57

)

 

$

(43

)

Total

 

$

(33

)

 

$

(40

)

 

$

(46

)

 

$

(57

)

 

$

(43

)

 

 

Total

 

 

2022

 

2021

(In thousands)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Other operating expenses by type

 

 

 

 

 

 

 

 

 

 

Salaries and other base employee expenses

 

$

38,333

 

 

$

34,177

 

 

$

32,604

 

 

$

30,818

 

 

$

30,430

 

Variable and share-based incentive compensation

 

 

17,009

 

 

 

23,172

 

 

 

18,201

 

 

 

24,525

 

 

 

22,090

 

Other general operating expenses

 

 

36,763

 

 

 

34,540

 

 

 

34,015

 

 

 

34,263

 

 

 

34,670

 

Ceding commissions

 

 

(2,844

)

 

 

(3,949

)

 

 

(4,879

)

 

 

(5,638

)

 

 

(6,501

)

Title agent commissions

 

 

1,799

 

 

 

1,099

 

 

 

1,323

 

 

 

2,267

 

 

 

1,759

 

Total

 

$

91,060

 

 

$

89,039

 

 

$

81,264

 

 

$

86,235

 

 

$

82,448

 


Radian Group Inc. and Subsidiaries

Definition of Consolidated Non-GAAP Financial Measures

Exhibit F (page 1 of 2)



 
Use of Non-GAAP Financial Measures


 
In addition to the traditional GAAP financial measures, we have presented “adjusted pretax operating income (loss),” “adjusted diluted net operating income (loss) per share” and “adjusted net operating return on equity,” which are non-GAAP financial measures for the consolidated company, among our key performance indicators to evaluate our fundamental financial performance. These non-GAAP financial measures align with the way the Company’s business performance is evaluated by both management and the board of directors. These measures have been established in order to increase transparency for the purposes of evaluating our operating trends and enabling more meaningful comparisons with our peers. Although on a consolidated basis “adjusted pretax operating income (loss),” “adjusted diluted net operating income (loss) per share” and “adjusted net operating return on equity” are non-GAAP financial measures, we believe these measures aid in understanding the underlying performance of our operations. Our senior management, including our Chief Executive Officer (Radian’s chief operating decision maker), uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of the Company’s business segments and to allocate resources to the segments.


 
Adjusted pretax operating income (loss) is defined as GAAP consolidated pretax income (loss) excluding the effects of: (i) net gains (losses) on investments and other financial instruments, except for certain investments attributable to our reportable segments; (ii) gains (losses) on extinguishment of debt; (iii) amortization and impairment of goodwill and other acquired intangible assets; and (iv) impairment of other long-lived assets and other non-operating items, such as impairment of internal-use software, gains (losses) from the sale of lines of business and acquisition-related income and expenses. Adjusted diluted net operating income (loss) per share is calculated by dividing (i) adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the company’s statutory tax rate, by (ii) the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Adjusted net operating return on equity is calculated by dividing annualized adjusted pretax operating income (loss), net of taxes computed using the company’s statutory tax rate, by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.


 
Although adjusted pretax operating income (loss) excludes certain items that have occurred in the past and are expected to occur in the future, the excluded items represent those that are: (i) not viewed as part of the operating performance of our primary activities or (ii) not expected to result in an economic impact equal to the amount reflected in pretax income (loss). These adjustments, along with the reasons for their treatment, are described below.

(1)

 

Net gains (losses) on investments and other financial instruments. The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities, our tax and capital profile and overall market cycles. Unrealized gains and losses arise primarily from changes in the market value of our investments that are classified as trading or equity securities. These valuation adjustments may not necessarily result in realized economic gains or losses.




 

 

 

Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these realized and unrealized gains or losses and changes in fair value of other financial instruments. Except for certain investments attributable to our reportable segments, we do not view them to be indicative of our fundamental operating activities.




 

(2)

 

Loss on extinguishment of debt. Gains or losses on early extinguishment of debt and losses incurred to purchase our debt prior to maturity are discretionary activities that are undertaken in order to take advantage of market opportunities to strengthen our financial and capital positions; therefore, we do not view these activities as part of our operating performance. Such transactions do not reflect expected future operations and do not provide meaningful insight regarding our current or past operating trends.




 

(3)

 

Amortization and impairment of goodwill and other acquired intangible assets. Amortization of acquired intangible assets represents the periodic expense required to amortize the cost of acquired intangible assets over their estimated useful lives. Acquired intangible assets are also periodically reviewed for potential impairment, and impairment adjustments are made whenever appropriate. We do not view these charges as part of the operating performance of our primary activities.




 

(4)

 

Impairment of other long-lived assets and other non-operating items. Includes activities that we do not view to be indicative of our fundamental operating activities, such as: (i) impairment of internal-use software and other long-lived assets; (ii) gains (losses) from the sale of lines of business; and (iii) acquisition-related income and expenses.


Radian Group Inc. and Subsidiaries

Definition of Consolidated Non-GAAP Financial Measures

Exhibit F (page 2 of 2)


In addition to the above non-GAAP measures for the consolidated company, we also have presented as supplemental information non-GAAP measures for our homegenius segment of adjusted pretax operating income (loss) before allocated corporate operating expenses and adjusted gross profit. Adjusted pretax operating income (loss) before allocated corporate operating expenses is calculated as adjusted pretax operating income (loss) as described above (which is the segment's ASC 280 GAAP measure of operating performance), adjusted to remove the impact of corporate allocations of other operating expenses for the homegenius segment. Adjusted gross profit is further adjusted to remove other operating expenses. In addition, homegenius adjusted pretax operating margin before allocated corporate operating expenses and adjusted gross profit margin are calculated by dividing homegenius adjusted pretax operating margin before allocated corporate operating expenses and adjusted gross profit, respectively, by GAAP total revenue for the homegenius segment. For the homegenius segment, adjusted pretax operating income (loss) before allocated corporate operating expenses, adjusted gross profit, and the related profit margins are used to facilitate comparisons with other services companies, since they are widely accepted measures of performance in the services industry and are used internally as supplemental measures to evaluate the performance of our homegenius segment.


See Exhibit G for the reconciliation of the most comparable GAAP measures, consolidated pretax income (loss), diluted net income (loss) per share and return on equity to our non-GAAP financial measures for the consolidated company, adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity, respectively. Exhibit G also contains the reconciliation of adjusted pretax operating income (loss) to adjusted pretax operating income (loss) before allocated corporate operating expenses and adjusted gross profit for the homegenius segment.


Total adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share, adjusted net operating return on equity, homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses and homegenius adjusted gross profit should not be considered in isolation or viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share, return on equity or net income (loss), or in the case of the homegenius non-GAAP measures, for homegenius adjusted pretax operating income (loss). Our definitions of adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share, adjusted net operating return on equity and homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses, homegenius adjusted gross profit, homegenius adjusted pretax operating margin before allocated corporate operating expenses or homegenius adjusted gross profit margin may not be comparable to similarly-named measures reported by other companies.


Radian Group Inc. and Subsidiaries

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit G (page 1 of 3)


Reconciliation of Consolidated Pretax Income to Adjusted Pretax Operating Income





 

 

 

2022

 

2021

(In thousands)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Consolidated pretax income

 

$

259,880

 

 

$

234,140

 

 

$

246,506

 

 

$

161,641

 

 

$

195,496

 

Less reconciling income (expense) items

 

 

 

 

 

 

 

 

 

 

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

 

 

(41,869

)

 

 

(29,457

)

 

 

1,516

 

 

 

2,098

 

 

 

15,661

 

Amortization of other acquired intangible assets

 

 

(849

)

 

 

(849

)

 

 

(863

)

 

 

(862

)

 

 

(863

)

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

 

 

565

 

 

 

(502

)

 

 

788

 

 

 

(244

)

 

 

(4,021

)

Total adjusted pretax operating income (3)

 

$

302,033

 

 

$

264,948

 

 

$

245,065

 

 

$

160,649

 

 

$

184,719

 

(1)


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

(2)


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

(3)


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

 

 

2022

 

2021

(In thousands)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Adjusted pretax operating income (loss)

 

 

 

 

 

 

 

 

 

 

Mortgage segment

 

$

316,520

 

 

$

277,841

 

 

$

246,574

 

 

$

165,220

 

 

$

194,043

 

homegenius segment

 

 

(17,690

)

 

 

(13,506

)

 

 

(2,116

)

 

 

(5,557

)

 

 

(9,198

)

All Other activities

 

 

3,203

 

 

 

613

 

 

 

607

 

 

 

986

 

 

 

(126

)

Total adjusted pretax operating income

 

$

302,033

 

 

$

264,948

 

 

$

245,065

 

 

$

160,649

 

 

$

184,719

 


Radian Group Inc. and Subsidiaries

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit G (page 2 of 3)


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





 

 

 

2022

 

2021

 

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Diluted net income per share

 

$

1.15

 

 

$

1.01

 

 

$

1.07

 

 

$

0.67

 

 

$

0.80

 

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

 

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

 

 

(0.24

)

 

 

(0.16

)

 

 

0.01

 

 

 

0.01

 

 

 

0.08

 

Amortization of other acquired intangible assets

 

 

 

 

 

(0.01

)

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.02

)

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

 

 

0.05

 

 

 

0.03

 

 

 

 

 

 

 

 

 

(0.01

)

Difference between statutory and effective tax rate

 

 

(0.02

)

 

 

(0.02

)

 

 

(0.01

)

 

 

(0.01

)

 

 

 

Per-share impact of reconciling income (expense) items

 

 

(0.21

)

 

 

(0.16

)

 

 

 

 

 

 

 

 

0.05

 

Adjusted diluted net operating income per share (1)

 

$

1.36

 

 

$

1.17

 

 

$

1.07

 

 

$

0.67

 

 

$

0.75

 

(1)


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

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





 

 

 

2022

 

2021

 

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

Return on equity (1)

 

19.9

%

 

17.2

%

 

18.2

%

 

11.8

%

 

14.5

%

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

 

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

 

(4.1

)

 

(2.8

)

 

0.1

 

 

0.2

 

 

1.5

 

Amortization of other acquired intangible assets

 

(0.1

)

 

(0.1

)

 

(0.1

)

 

(0.1

)

 

(0.1

)

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

 

0.1

 

 

 

 

0.1

 

 

 

 

(0.4

)

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

 

0.9

 

 

0.6

 

 

 

 

 

 

(0.2

)

Difference between statutory and effective tax rate

 

(0.5

)

 

(0.4

)

 

(0.1

)

 

(0.1

)

 

0.1

 

Impact of reconciling income (expense) items

 

(3.7

)

 

(2.7

)

 

 

 

 

 

0.9

 

Adjusted net operating return on equity (3)

 

23.6

%

 

19.9

%

 

18.2

%

 

11.8

%

 

13.6

%

(1)


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

(2)


Annualized, as a percentage of average stockholders’ equity.

(3)


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

Radian Group Inc. and Subsidiaries

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit G (page 3 of 3)


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





 

 

 

2022

 

2021

(In thousands)

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

Qtr 3

 

Qtr 2

homegenius adjusted pretax operating income (loss)

 

$

(17,690

)

 

$

(13,506

)

 

$

(2,116

)

 

$

(5,557

)

 

$

(9,198

)

Less reconciling income (expense) items

 

 

 

 

 

 

 

 

 

 

Allocation of corporate operating expenses

 

 

(5,719

)

 

 

(5,280

)

 

 

(4,847

)

 

 

(4,918

)

 

 

(4,721

)

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