Radian Announces Third Quarter 2019 Financial Results
-- GAAP net income of $173 million, or $0.83 per diluted share --
-- Adjusted diluted net operating income per share increases 14% year-over-year to $0.81 --
-- Writes $22.0 billion in new MI business, sets company record for quarterly flow MI;
MI in force increases 9% year-over-year to $237 billion --
-- Book value per share grows 24% year-over-year to $19.40 --
-- Company purchases $78 million or 3.3 million shares of Radian Group common stock during the quarter --
PHILADELPHIA--(BUSINESS WIRE)-- Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended September 30, 2019, of $173.4 million, or $0.83 per diluted share. This compares to net income for the quarter ended September 30, 2018, of $142.8 million, or $0.66 per diluted share.
Key Financial Highlights (dollars in millions, except per-share data)
|
Quarter Ended September
|
Quarter Ended September
|
Percent
|
|
Net income (1) |
$173.4 |
$142.8 |
21 |
% |
Diluted net income per share |
$0.83 |
$0.66 |
26 |
% |
Consolidated pretax income |
$217.7 |
$184.7 |
18 |
% |
Adjusted pretax operating income (2) |
$212.7 |
$196.7 |
8 |
% |
Adjusted diluted net operating income per share (2) |
$0.81 |
$0.71 |
14 |
% |
Net premiums earned - mortgage insurance |
$277.6 |
$255.5 |
9 |
% |
MI New Insurance Written (NIW) |
$22,037 |
$15,764 |
40 |
% |
MI primary insurance in force |
$237,158 |
$217,096 |
9 |
% |
Book value per share (3) |
$19.40 |
$15.69 |
24 |
% |
Available holding company liquidity |
$730.7 |
$246.0 |
197 |
% |
Return on equity (1)(4) |
18.0% |
17.4% |
3 |
% |
Adjusted net operating return on equity (2) |
17.4% |
19.0% |
(8 |
)% |
(1) |
Net income for the third quarter of 2019 includes: (i) a $5.9 million pretax loss on extinguishment of debt and (ii) $13.0 million pretax net gain on investments and other financial instruments. Net income for the third quarter of 2018 includes: (i) $4.5 million pretax net loss on investments and other financial instruments; and (ii) $4.5 million of pretax restructuring and other exit costs. |
(2) |
Adjusted results, including adjusted pretax operating income, adjusted diluted net operating income per share, and adjusted net operating return on equity, are non-GAAP financial measures. For definitions and a reconciliation of these measures to the comparable GAAP measures, see Exhibits F and G. |
(3) |
Accumulated other comprehensive income (loss) impacted book value per share by $0.62 per share as of September 30, 2019, and $(0.28) per share as of September 30, 2018. |
(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. |
Adjusted pretax operating income for the quarter ended September 30, 2019, was $212.7 million, compared to $196.7 million for the quarter ended September 30, 2018. Adjusted diluted net operating income per share for the quarter ended September 30, 2019, was $0.81, an increase of 14 percent compared to $0.71 for the quarter ended September 30, 2018.
Book value per share at September 30, 2019, was $19.40, an increase of 5 percent compared to $18.42 at June 30, 2019, and an increase of 24 percent compared to $15.69 at September 30, 2018.
“I am pleased to report another excellent quarter for Radian, with net income of $173 million, a 24% increase in book value per share to $19.40, and return on equity of 18%. We broke another company record in the third quarter for volume of new mortgage insurance business, which drove a 9% year-over-year increase in our high-quality insurance in force portfolio to $237 billion," said Radian’s Chief Executive Officer Rick Thornberry. "These results reflect the fundamental strength of our business model, the value of our customer partnerships and the talent of our entire Radian team."
THIRD QUARTER HIGHLIGHTS
-
Mortgage insurance NIW was $22.0 billion for the quarter, representing an increase of 19 percent compared to $18.5 billion in the second quarter of 2019 and an increase of 40 percent compared to $15.8 billion in the prior-year quarter.
- NIW for the quarter represented record volume written on a flow basis for the company.
- Of the $22.0 billion in NIW in the third quarter of 2019, 85 percent was written with monthly and other recurring premiums, compared to 83 percent in the second quarter of 2019, and 78 percent in the third quarter of 2018.
- Borrower-paid originations accounted for 97 percent of total NIW in the third quarter of 2019, compared to 97 percent in the second quarter of 2019, and 91 percent in the third quarter of 2018.
- Refinances accounted for 19 percent of total NIW in the third quarter of 2019, compared to 10 percent in the second quarter of 2019, and 5 percent in the third quarter of 2018.
-
Total primary mortgage insurance in force as of September 30, 2019, grew to $237.2 billion, an increase of 3 percent compared to $230.8 billion as of June 30, 2019, and an increase of 9 percent compared to $217.1 billion as of September 30, 2018.
- Radian’s mortgage insurance portfolio consists of 95 percent of new business written after 2008, including those loans that successfully completed the Home Affordable Refinance Program (HARP).
- Persistency, which is the percentage of mortgage insurance that remains in force after a 12-month period, was 81.5 percent as of September 30, 2019, compared to 83.4 percent as of June 30, 2019, and 81.4 percent as of September 30, 2018.
- Annualized persistency for the three months ended September 30, 2019, was 75.5 percent, reflecting increased refinance activity in the market, compared to 80.8 percent for the three months ended June 30, 2019, and 83.4 percent for the three months ended September 30, 2018.
-
Net mortgage insurance premiums earned were $277.6 million for the quarter ended September 30, 2019, compared to $296.3 million for the quarter ended June 30, 2019, and $255.5 million for the quarter ended September 30, 2018.
- Mortgage insurance in force premium yield was 47.4 basis points in the third quarter of 2019, compared to 55.9 basis points in the second quarter of 2019 and 48.6 basis points in the third quarter of 2018. Net mortgage insurance premiums earned for the second quarter of 2019 included an increase of $32.9 million as a result of a cumulative adjustment to unearned premiums related to an update to the amortization rates used to recognize revenue for single premium policies. Excluding the impact of this adjustment, in force premium yield was 47.9 basis points in the second quarter of 2019.
- The impact of single premium cancellations before consideration of reinsurance represented 4.6 basis points in the third quarter of 2019, 2.8 basis points in the second quarter of 2019, and 2.1 basis points in the third quarter of 2018.
- Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 47.5 basis points in the third quarter of 2019. This compares to 52.2 basis points in the second quarter of 2019, or 46.4 basis points excluding the impact of the updates to single premium policy amortization rates described above, and 47.8 basis points in the third quarter of 2018.
- Additional details regarding premiums earned may be found in Exhibit D.
-
The mortgage insurance provision for losses was $29.1 million in the third quarter of 2019, compared to $47.2 million in the second quarter of 2019, and $20.7 million in the prior-year quarter.
- The number of primary delinquent loans was 20,184 as of September 30, 2019, an increase of 3 percent compared to 19,643 as of June 30, 2019 and a decrease of 3 percent compared to 20,770 as of September 30, 2018.
- The primary mortgage insurance delinquency rate was 1.9 percent in the third quarter of 2019, compared to 1.9 percent in the second quarter of 2019, and 2.1 percent in the third quarter of 2018.
- The loss ratio in the third quarter of 2019 was 10.5 percent, compared to 15.9 percent in the second quarter of 2019, and 8.1 percent in the third quarter of 2018.
- Mortgage insurance loss reserves were $394.1 million as of September 30, 2019, compared to $401.3 million as of June 30, 2019, and $409.0 million as of September 30, 2018.
- Total mortgage insurance claims paid were $36.7 million in the third quarter of 2019, compared to $32.4 million in the second quarter of 2019, and $59.8 million in the third quarter of 2018. In addition, the company’s pending claim inventory declined 10 percent from September 30, 2018.
- Total Services Segment revenues for the third quarter of 2019 were $47.4 million, compared to $43.0 million for the second quarter of 2019, and $40.9 million for the third quarter of 2018. Adjusted earnings before interest, income taxes, depreciation and amortization (Services adjusted EBITDA) for the quarter ended September 30, 2019 was $3.7 million, compared to $1.4 million for the quarter ended June 30, 2019, and $0.6 million for the quarter ended September 30, 2018. Additional details regarding the non-GAAP measure Services adjusted EBITDA may be found in Exhibits F and G.
- Other operating expenses were $76.4 million in the third quarter of 2019, compared to $70.0 million in the second quarter of 2019, and $70.1 million in the third quarter of 2018. Compared to the second quarter of 2019, the increase in operating expenses was driven by a reduction in ceding commissions as well as increased incentive compensation based on year-to-date performance.
CAPITAL AND LIQUIDITY UPDATE
The company remains focused on optimizing its capital position, enhancing its return on capital, and increasing its financial flexibility.
Radian Group
- As of September 30, 2019, Radian Group maintained $731 million of available liquidity. Total liquidity, which includes the company’s $268 million unsecured revolving credit facility entered into in October 2017, was approximately $1.0 billion as of September 30, 2019.
- During the third quarter of 2019, Radian redeemed the remaining $27 million aggregate principal amount of Senior Notes due 2020 and the remaining $70 million aggregate principal amount of Senior Notes due 2021.
- Also during the third quarter of 2019, Radian repurchased approximately 3.3 million shares, or approximately $77.5 million of Radian Group common stock, including commissions. This repurchase activity completed the company's $250 million share repurchase program initiated in August 2018 and also included shares purchased under the company's new $200 million program authorized in August 2019.
- In addition, in October 2019, the Company purchased an additional 1.1 million shares, or approximately $25 million of Radian Group common stock, including commissions. At October 30, 2019, purchase authority of up to approximately $150 million remained available under the existing program, which expires on July 31, 2020.
- On October 17, 2019, Moody’s Investors Service upgraded the senior unsecured debt rating of Radian Group to Ba1 from Ba2. The outlook for the ratings is stable. Moody's rationale in support of the rating includes expectations for continued strong profitability due to favorable U.S. housing market and economic fundamentals, as well as the company's recent actions to reduce its financial leverage, extend its debt maturity profile and increase liquidity at the holding company.
Radian Guaranty
- At September 30, 2019, Radian Guaranty’s Available Assets under the Private Mortgage Insurer Eligibility Requirements (PMIERs) totaled approximately $3.4 billion, resulting in an excess or “cushion” of approximately $652 million, or 24 percent over its Minimum Required Assets of approximately $2.7 billion.
- On October 17, 2019, Moody’s Investors Service upgraded the insurance financial strength rating of Radian Guaranty to Baa1 from Baa2. The outlook for the ratings is stable. Moody’s rationale in support of the rating includes Radian's strong position in the market, its increased risk distribution through insurance-linked notes and traditional reinsurance, and its significant capital resources to absorb losses during periods of elevated mortgage credit losses, as well as the company's diverse customer base and comfortable PMIERs cushion.
CONFERENCE CALL
Radian will discuss third quarter financial results in a conference call tomorrow, Thursday, October 31, 2019, at 10:00 a.m. Eastern time. The conference call will be broadcast live over the Internet at http://www.radian.biz/page?name=Webcasts or at www.radian.biz. The call may also be accessed by dialing 844.767.5679 inside the U.S., or 409.207.6967 for international callers, using passcode 4017930 or by referencing Radian.
A replay of the webcast will be available on the Radian website approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available approximately two and a half hours after the call ends for a period of two weeks, using the following dial-in numbers and passcode: 866.207.1041 inside the U.S., or 402.970.0847 for international callers, passcode 2166484.
In addition to the information provided in the company's earnings news release, other statistical and financial information, which is expected to be referred to during the conference call, will be available on Radian's website under Investors>Quarterly Results, or by clicking on http://www.radian.biz/page?name=QuarterlyResults.
NON-GAAP FINANCIAL MEASURES
Radian believes that adjusted pretax operating income, adjusted diluted net operating income per share and adjusted net operating return on equity (non-GAAP measures) facilitate evaluation of the company’s fundamental financial performance and provide relevant and meaningful information to investors about the ongoing operating results of the company. On a consolidated basis, these measures are not recognized in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be considered in isolation or viewed as substitutes for GAAP measures of performance. The measures described below have been established in order to increase transparency for the purpose of evaluating the company’s operating trends and enabling more meaningful comparisons with Radian’s competitors.
Adjusted pretax operating income is defined as earnings excluding the impact of certain items that are not viewed as part of the operating performance of the company’s primary activities, or not expected to result in an economic impact equal to the amount reflected in pretax income. Adjusted pretax operating income adjusts GAAP pretax income to remove the effects of: (i) net gains (losses) on investments and other financial instruments; (ii) loss on extinguishment of debt; (iii) amortization and impairment of goodwill and other acquired intangible assets; and (iv) impairment of other long-lived assets and other non-operating items, such as losses from the sale of lines of business and acquisition-related expenses. Adjusted diluted net operating income per share represents a diluted net income per share calculation using as its basis adjusted pretax operating income, net of taxes at the company’s statutory tax rate for the period. Adjusted net operating return on equity is calculated by dividing annualized adjusted pretax operating income, net of taxes computed using the company's statutory tax rate, by average stockholders' equity, based on the average of the beginning and ending balances for each period presented.
The company has also presented a non-GAAP measure for tangible book value per share, which represents book value per share less the per-share impact of goodwill and other acquired intangible assets, net. The company uses this measure to assess the quality and growth of its capital. Because tangible book value per share is a widely used financial measure which focuses on the underlying fundamentals of the company’s financial position and operating trends without the impact of goodwill and other acquired intangible assets, the company believes that current and prospective investors may find it useful in their analysis.
In addition to the above non-GAAP measures for the consolidated company, the company also presents as supplemental information a non-GAAP measure for the Services segment, representing earnings before interest, income tax provision (benefit), depreciation and amortization (EBITDA). Services adjusted EBITDA is calculated by using the Services segment’s adjusted pretax operating income as described above, further adjusted to remove the impact of depreciation and corporate allocations for interest and operating expenses. In addition, Services adjusted EBITDA margin is calculated by dividing Services adjusted EBITDA by GAAP total revenue for the Services segment. Services adjusted EBITDA and Services adjusted EBITDA margin are used to facilitate comparisons with other services companies, since they are widely accepted measures of performance in the services industry and are used internally as supplemental measures to evaluate the performance of our Services segment.
See Exhibit F or Radian’s website for a description of these items, as well as Exhibit G for reconciliations to the most comparable consolidated GAAP measures.
ABOUT RADIAN
Radian is ensuring the American dream of homeownership responsibly and sustainably through products and services that include industry-leading mortgage insurance and a comprehensive suite of mortgage, risk, real estate, and title services. We are powered by technology, informed by data and driven to deliver new and better ways to transact and manage risk. Learn more about Radian’s financial strength and flexibility at www.radian.biz and visit www.radian.com to see how Radian is shaping the future of mortgage and real estate services.
FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS (Unaudited)
For historical trend information, refer to Radian’s quarterly financial statistics at http://www.radian.biz/page?name=FinancialReportsCorporate.
Exhibit A: |
Condensed Consolidated Statements of Operations Trend Schedule |
Exhibit B: |
Net Income Per Share Trend Schedule |
Exhibit C: |
Condensed Consolidated Balance Sheets |
Exhibit D: |
Net Premiums Earned - Insurance |
Exhibit E: |
Segment Information |
Exhibit F: |
Definition of Consolidated Non-GAAP Financial Measures |
Exhibit G: |
Consolidated Non-GAAP Financial Measure Reconciliations |
Exhibit H: |
Mortgage Insurance Supplemental Information |
|
New Insurance Written |
Exhibit I: |
Mortgage Insurance Supplemental Information |
|
Primary Insurance in Force and Risk in Force |
Exhibit J: |
Mortgage Insurance Supplemental Information |
|
Claims and Reserves |
Exhibit K: |
Mortgage Insurance Supplemental Information |
|
Default Statistics |
Exhibit L: |
Mortgage Insurance Supplemental Information |
|
Reinsurance Programs |
Radian Group Inc. and Subsidiaries |
|||||||||||||||||||
Condensed Consolidated Statements of Operations Trend Schedule |
|||||||||||||||||||
Exhibit A |
|||||||||||||||||||
|
2019 |
|
2018 |
||||||||||||||||
(In thousands, except per-share amounts) |
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums earned - insurance |
$ |
281,185 |
|
$ |
299,166 |
|
$ |
263,512 |
|
$ |
261,682 |
|
|
$ |
258,431 |
|
|||
Services revenue |
|
42,509 |
|
|
39,303 |
|
|
32,753 |
|
|
38,414 |
|
|
|
36,566 |
|
|||
Net investment income |
|
42,756 |
|
|
43,761 |
|
|
43,847 |
|
|
42,051 |
|
|
|
38,995 |
|
|||
Net gains (losses) on investments and other financial instruments |
|
13,009 |
|
|
12,540 |
|
|
21,913 |
|
|
(11,705 |
) |
|
|
(4,480 |
) |
|||
Other income |
|
879 |
|
|
194 |
|
|
1,604 |
|
|
1,031 |
|
|
|
1,174 |
|
|||
Total revenues |
|
380,338 |
|
|
394,964 |
|
|
363,629 |
|
|
331,473 |
|
|
|
330,686 |
|
|||
|
|
|
|
|
|
|
|
|
|
||||||||||
Expenses: |
|
|
|
|
|
|
|
|
|
||||||||||
Provision for losses |
|
29,231 |
|
|
47,427 |
|
|
20,754 |
|
|
27,140 |
|
|
|
20,881 |
|
|||
Policy acquisition costs |
|
6,435 |
|
|
6,203 |
|
|
5,893 |
|
|
6,485 |
|
|
|
5,667 |
|
|||
Cost of services |
|
29,044 |
|
|
27,845 |
|
|
24,157 |
|
|
24,939 |
|
|
|
25,854 |
|
|||
Other operating expenses |
|
76,384 |
|
|
70,046 |
|
|
78,805 |
|
|
77,266 |
|
|
|
70,125 |
|
|||
Restructuring and other exit costs |
— |
|
— |
|
— |
|
|
113 |
|
|
|
4,464 |
|
||||||
Interest expense |
|
13,492 |
|
|
14,961 |
|
|
15,697 |
|
|
15,584 |
|
|
|
15,535 |
|
|||
Loss on extinguishment of debt |
|
5,940 |
|
|
16,798 |
|
— |
|
— |
|
— |
||||||||
Amortization and impairment of other acquired intangible assets |
|
2,139 |
|
|
2,139 |
|
|
2,187 |
|
|
3,461 |
|
|
|
3,472 |
|
|||
Total expenses |
|
162,665 |
|
|
185,419 |
|
|
147,493 |
|
|
154,988 |
|
|
|
145,998 |
|
|||
|
|
|
|
|
|
|
|
|
|
||||||||||
Pretax income |
|
217,673 |
|
|
209,545 |
|
|
216,136 |
|
|
176,485 |
|
|
|
184,688 |
|
|||
Income tax provision |
|
44,235 |
|
|
42,815 |
|
|
45,179 |
|
|
36,706 |
|
|
|
41,891 |
|
|||
Net income |
$ |
173,438 |
|
$ |
166,730 |
|
$ |
170,957 |
|
$ |
139,779 |
|
|
$ |
142,797 |
|
|||
Diluted net income per share |
$ |
0.83 |
|
$ |
0.78 |
|
$ |
0.78 |
|
$ |
0.64 |
|
|
$ |
0.66 |
|
|||
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: |
||||||||||||||||||||
|
2019 |
|
2018 |
|||||||||||||||||
(In thousands, except per-share amounts) |
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
|||||||||||
Net income —basic and diluted |
$ |
173,438 |
|
|
$ |
166,730 |
|
|
$ |
170,957 |
|
|
$ |
139,779 |
|
|
$ |
142,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Average common shares outstanding—basic |
203,107 |
|
|
208,097 |
|
|
213,537 |
|
|
213,435 |
|
|
213,309 |
|
||||||
Dilutive effect of share-based compensation arrangements (1) |
5,584 |
|
|
5,506 |
|
|
4,806 |
|
|
4,448 |
|
|
4,593 |
|
||||||
Adjusted average common shares outstanding—diluted |
208,691 |
|
|
213,603 |
|
|
218,343 |
|
|
217,883 |
|
|
217,902 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Basic net income per share |
$ |
0.85 |
|
|
$ |
0.80 |
|
|
$ |
0.80 |
|
|
$ |
0.65 |
|
|
$ |
0.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Diluted net income per share |
$ |
0.83 |
|
|
$ |
0.78 |
|
|
$ |
0.78 |
|
|
$ |
0.64 |
|
|
$ |
0.66 |
|
|
(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 per share because they were anti-dilutive: |
|
2019 |
|
2018 |
||||||||||
(In thousands) |
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
||||
Shares of common stock equivalents |
— |
|
168 |
|
169 |
|
337 |
|
338 |
||||
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) |
2019 |
|
2019 |
|
2019 |
|
2018 |
|
2018 |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|||||||||||
Investments |
$ |
5,533,724 |
|
|
$ |
5,513,319 |
|
|
$ |
5,475,770 |
|
|
$ |
5,153,029 |
|
|
$ |
5,028,235 |
|
|
Cash |
49,393 |
|
|
74,111 |
|
|
118,668 |
|
|
95,393 |
|
|
104,413 |
|
||||||
Restricted cash |
2,853 |
|
|
5,007 |
|
|
9,086 |
|
|
11,609 |
|
|
9,925 |
|
||||||
Accounts and notes receivable |
144,113 |
|
|
122,104 |
|
|
89,237 |
|
|
78,652 |
|
|
108,003 |
|
||||||
Deferred income taxes, net |
— |
|
|
6,872 |
|
|
67,697 |
|
|
131,643 |
|
|
134,201 |
|
||||||
Goodwill and other acquired intangible assets, net |
52,533 |
|
|
54,672 |
|
|
56,811 |
|
|
58,998 |
|
|
55,707 |
|
||||||
Prepaid reinsurance premium |
374,339 |
|
|
385,805 |
|
|
408,622 |
|
|
417,628 |
|
|
413,728 |
|
||||||
Other assets |
513,647 |
|
|
430,236 |
|
|
373,678 |
|
|
367,700 |
|
|
415,272 |
|
||||||
Total assets |
$ |
6,670,602 |
|
|
$ |
6,592,126 |
|
|
$ |
6,599,569 |
|
|
$ |
6,314,652 |
|
|
$ |
6,269,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|||||||||||
Unearned premiums |
$ |
647,856 |
|
|
$ |
666,354 |
|
|
$ |
720,159 |
|
|
$ |
739,357 |
|
|
$ |
747,921 |
|
|
Reserve for losses and loss adjustment expense |
398,141 |
|
|
405,278 |
|
|
388,784 |
|
|
401,361 |
|
|
412,460 |
|
||||||
Senior notes |
886,643 |
|
|
982,890 |
|
|
1,031,197 |
|
|
1,030,348 |
|
|
1,029,511 |
|
||||||
FHLB advances |
104,492 |
|
|
106,382 |
|
|
108,532 |
|
|
82,532 |
|
|
71,430 |
|
||||||
Reinsurance funds withheld |
352,532 |
|
|
339,641 |
|
|
329,868 |
|
|
321,212 |
|
|
352,952 |
|
||||||
Other liabilities |
358,431 |
|
|
308,337 |
|
|
310,938 |
|
|
251,127 |
|
|
307,932 |
|
||||||
Total liabilities |
2,748,095 |
|
|
2,808,882 |
|
|
2,889,478 |
|
|
2,825,937 |
|
|
2,922,206 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common stock |
220 |
|
|
223 |
|
|
230 |
|
|
231 |
|
|
231 |
|
||||||
Treasury stock |
(901,556 |
) |
|
(901,419 |
) |
|
(895,321 |
) |
|
(894,870 |
) |
|
(894,635 |
) |
||||||
Additional paid-in capital |
2,469,097 |
|
|
2,539,803 |
|
|
2,697,724 |
|
|
2,724,733 |
|
|
2,720,626 |
|
||||||
Retained earnings |
2,229,107 |
|
|
2,056,175 |
|
|
1,889,964 |
|
|
1,719,541 |
|
|
1,580,296 |
|
||||||
Accumulated other comprehensive income (loss) |
125,639 |
|
|
88,462 |
|
|
17,494 |
|
|
(60,920 |
) |
|
(59,240 |
) |
||||||
Total stockholders’ equity |
3,922,507 |
|
|
3,783,244 |
|
|
3,710,091 |
|
|
3,488,715 |
|
|
3,347,278 |
|
||||||
Total liabilities and stockholders’ equity |
$ |
6,670,602 |
|
|
$ |
6,592,126 |
|
|
$ |
6,599,569 |
|
|
$ |
6,314,652 |
|
|
$ |
6,269,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Shares outstanding |
202,219 |
|
|
205,399 |
|
|
212,136 |
|
|
213,473 |
|
|
213,333 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Book value per share |
$ |
19.40 |
|
|
$ |
18.42 |
|
|
$ |
17.49 |
|
|
$ |
16.34 |
|
|
$ |
15.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Tangible book value per share (See Exhibit G) |
$ |
19.14 |
|
|
$ |
18.15 |
|
|
$ |
17.22 |
|
|
$ |
16.06 |
|
|
$ |
15.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Debt to capital ratio (1) |
18.4 |
% |
|
20.6 |
% |
|
21.7 |
% |
|
22.8 |
% |
|
23.5 |
% |
||||||
Risk to capital ratio-Radian Guaranty only |
14.2 |
:1 |
|
14.6 |
:1 |
|
13.4 |
:1 |
|
13.9 |
:1 |
|
12.4 |
:1 |
||||||
Risk to capital ratio-Mortgage Insurance combined |
12.9 |
:1 |
|
13.3 |
:1 |
|
12.4 |
:1 |
|
12.8 |
:1 |
|
11.7 |
:1 |
||||||
(1) |
Calculated as senior notes divided by senior notes and stockholders' equity. |
Radian Group Inc. and Subsidiaries |
||||||||||||||||||||||
Net Premiums Earned - Insurance |
||||||||||||||||||||||
Exhibit D |
||||||||||||||||||||||
|
2019 |
|
2018 |
|||||||||||||||||||
(In thousands) |
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Premiums earned - insurance: |
|
|
|
|
|
|
|
|
|
|||||||||||||
Direct - Mortgage Insurance: |
|
|
|
|
|
|
|
|
|
|||||||||||||
Premiums earned, excluding revenue from cancellations (1) |
$ |
274,595 |
|
|
$ |
315,109 |
|
(2) |
$ |
268,496 |
|
|
$ |
266,536 |
|
|
$ |
257,940 |
|
|||
Single Premium Policy cancellations |
27,254 |
|
|
15,793 |
|
|
9,957 |
|
|
9,320 |
|
|
11,559 |
|
||||||||
Total direct - Mortgage Insurance |
301,849 |
|
|
330,902 |
|
(2) |
278,453 |
|
|
275,856 |
|
|
269,499 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Assumed - Mortgage Insurance: (1) (3) |
2,614 |
|
|
2,481 |
|
|
2,450 |
|
|
2,082 |
|
|
1,994 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ceded - Mortgage Insurance: |
|
|
|
|
|
|
|
|
|
|||||||||||||
Premiums earned, excluding revenue from cancellations |
(28,457 |
) |
|
(53,948 |
) |
(2) |
(24,486 |
) |
|
(23,573 |
) |
|
(20,990 |
) |
||||||||
Single Premium Policy cancellations (4) |
(8,137 |
) |
|
(4,833 |
) |
|
(2,953 |
) |
|
(3,091 |
) |
|
(3,288 |
) |
||||||||
Profit commission - other (5) |
9,729 |
|
|
21,732 |
|
(2) |
8,314 |
|
|
8,447 |
|
|
8,267 |
|
||||||||
Total ceded premiums, net of profit commission - Mortgage Insurance (6) |
(26,865 |
) |
|
(37,049 |
) |
(2) |
(19,125 |
) |
|
(18,217 |
) |
|
(16,011 |
) |
||||||||
Net premiums earned - insurance - Mortgage Insurance |
277,598 |
|
|
296,334 |
|
(2) |
261,778 |
|
|
259,721 |
|
|
255,482 |
|
||||||||
Net premiums earned - insurance - Services |
3,587 |
|
|
2,832 |
|
|
1,734 |
|
|
1,961 |
|
|
2,949 |
|
||||||||
Net premiums earned - insurance |
$ |
281,185 |
|
|
$ |
299,166 |
|
(2) |
$ |
263,512 |
|
|
$ |
261,682 |
|
|
$ |
258,431 |
|
|||
(1) |
Certain prior period amounts in 2018 have been reclassified to conform to current period presentation. |
|
(2) |
Includes a cumulative adjustment to unearned premiums related to an update to the amortization rates used to recognize revenue for Single Premium Policies. |
|
(3) |
Includes premiums earned from our participation in certain credit risk transfer programs. |
|
(4) |
Includes the impact of related profit commissions. |
|
(5) |
The amounts represent the profit commission on the Single Premium QSR Program, excluding the impact of Single Premium Policy cancellations. |
|
(6) |
See Exhibit L for additional information on ceded premiums for our various reinsurance programs. |
Radian Group Inc. and Subsidiaries |
Segment Information |
Exhibit E (page 1 of 2) |
|
Summarized financial information concerning our operating segments as of and for the periods indicated is as follows. For a definition of adjusted pretax operating income and Services adjusted EBITDA, along with reconciliations to consolidated GAAP measures, see Exhibits F and G. |
|
Mortgage Insurance |
|||||||||||||||||||||
|
2019 |
|
2018 |
|||||||||||||||||||
(In thousands) |
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
|||||||||||||
Net premiums written - insurance (1) |
$ |
270,567 |
|
|
$ |
265,345 |
|
|
$ |
251,586 |
|
|
$ |
247,256 |
|
|
$ |
253,827 |
|
|||
(Increase) decrease in unearned premiums |
7,031 |
|
|
30,989 |
|
(2) |
10,192 |
|
|
12,465 |
|
|
1,655 |
|
||||||||
Net premiums earned - insurance |
277,598 |
|
|
296,334 |
|
|
261,778 |
|
|
259,721 |
|
|
255,482 |
|
||||||||
Net investment income |
42,579 |
|
|
43,584 |
|
|
43,665 |
|
|
41,875 |
|
|
38,824 |
|
||||||||
Other income |
879 |
|
|
602 |
|
|
1,196 |
|
|
641 |
|
|
725 |
|
||||||||
Total |
321,056 |
|
|
340,520 |
|
|
306,639 |
|
|
302,237 |
|
|
295,031 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Provision for losses |
29,053 |
|
|
47,165 |
|
|
20,844 |
|
|
27,079 |
|
|
20,715 |
|
||||||||
Policy acquisition costs |
6,435 |
|
|
6,203 |
|
|
5,893 |
|
|
6,485 |
|
|
5,667 |
|
||||||||
Other operating expenses before corporate allocations (3) |
31,149 |
|
|
28,438 |
|
|
30,410 |
|
|
37,070 |
|
|
33,152 |
|
||||||||
Total (4) |
66,637 |
|
|
81,806 |
|
|
57,147 |
|
|
70,634 |
|
|
59,534 |
|
||||||||
Adjusted pretax operating income before corporate allocations |
254,419 |
|
|
258,714 |
|
|
249,492 |
|
|
231,603 |
|
|
235,497 |
|
||||||||
Allocation of corporate operating expenses |
26,671 |
|
|
24,388 |
|
|
25,625 |
|
|
21,627 |
|
|
19,794 |
|
||||||||
Allocation of interest expense |
13,492 |
|
|
14,961 |
|
|
15,697 |
|
|
11,133 |
|
|
11,083 |
|
||||||||
Adjusted pretax operating income |
$ |
214,256 |
|
|
$ |
219,365 |
|
|
$ |
208,170 |
|
|
$ |
198,843 |
|
|
$ |
204,620 |
|
|||
|
Services |
|||||||||||||||||||
|
2019 |
|
2018 |
|||||||||||||||||
(In thousands) |
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
|||||||||||
Net premiums earned - insurance |
$ |
3,587 |
|
|
$ |
2,832 |
|
|
$ |
1,734 |
|
|
$ |
1,961 |
|
|
$ |
2,949 |
|
|
Services revenue (4) |
43,614 |
|
|
40,380 |
|
|
33,723 |
|
|
39,006 |
|
|
37,332 |
|
||||||
Net investment income |
177 |
|
|
177 |
|
|
182 |
|
|
176 |
|
|
171 |
|
||||||
Other income |
— |
|
|
(408 |
) |
|
408 |
|
|
390 |
|
|
449 |
|
||||||
Total |
47,378 |
|
|
42,981 |
|
|
36,047 |
|
|
41,533 |
|
|
40,901 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Provision for losses |
211 |
|
|
318 |
|
|
(18 |
) |
|
113 |
|
|
242 |
|
||||||
Cost of services |
29,162 |
|
|
28,015 |
|
|
24,559 |
|
|
25,064 |
|
|
26,001 |
|
||||||
Other operating expenses before corporate allocations (3) |
15,176 |
|
|
14,204 |
|
|
13,435 |
|
|
13,719 |
|
|
14,772 |
|
||||||
Restructuring and other exit costs (3) |
— |
|
|
— |
|
|
— |
|
|
113 |
|
|
407 |
|
||||||
Total |
44,549 |
|
|
42,537 |
|
|
37,976 |
|
|
39,009 |
|
|
41,422 |
|
||||||
Adjusted pretax operating income (loss) before corporate allocations (5) |
2,829 |
|
|
444 |
|
|
(1,929 |
) |
|
2,524 |
|
|
(521 |
) |
||||||
Allocation of corporate operating expenses |
4,342 |
|
|
3,970 |
|
|
4,171 |
|
|
3,232 |
|
|
2,948 |
|
||||||
Allocation of interest expense |
— |
|
|
— |
|
|
— |
|
(6) |
4,451 |
|
|
4,452 |
|
||||||
Adjusted pretax operating income (loss) |
$ |
(1,513 |
) |
|
$ |
(3,526 |
) |
|
$ |
(6,100 |
) |
|
$ |
(5,159 |
) |
|
$ |
(7,921 |
) |
|
(1) |
Net of ceded premiums written under the QSR Programs and the Excess-of-Loss Program. See Exhibit L for additional information. |
|
See notes continued on next page. |
||
Radian Group Inc. and Subsidiaries |
||
Segment Information |
||
Exhibit E (page 2 of 2) |
||
|
|
|
Notes continued from prior page. |
||
|
|
|
(2) |
|
Includes a cumulative adjustment to unearned premiums related to an update to the amortization rates used to recognize revenue for Single Premium Policies. |
(3) |
|
Does not include impairment of other long-lived assets and other non-operating items, which are not considered components of adjusted pretax operating income (loss). |
(4) |
Inter-segment information: |
|
|
2019 |
|
2018 |
|||||||||||||||||||
|
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
|||||||||||||
Inter-segment expense included in Mortgage Insurance segment |
$ |
1,105 |
|
|
$ |
1,077 |
|
|
$ |
970 |
|
|
$ |
592 |
|
|
$ |
766 |
|
|||
Inter-segment revenue included in Services segment |
1,105 |
|
|
1,077 |
|
|
970 |
|
|
592 |
|
|
766 |
|
||||||||
(5) |
Supplemental information for Services adjusted EBITDA (see definition in Exhibit F): |
|
2019 |
|
2018 |
|||||||||||||||||||
|
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
|||||||||||||
Adjusted pretax operating income (loss) before corporate allocations |
$ |
2,829 |
|
|
$ |
444 |
|
|
$ |
(1,929 |
) |
|
$ |
2,524 |
|
|
$ |
(521 |
) |
|||
Depreciation and amortization |
865 |
|
|
976 |
|
|
995 |
|
|
700 |
|
|
1,077 |
|
||||||||
Services adjusted EBITDA |
$ |
3,694 |
|
|
$ |
1,420 |
|
|
$ |
(934 |
) |
|
$ |
3,224 |
|
|
$ |
556 |
|
|||
(6) |
Effective January 1, 2019, Clayton's holding company repaid to Radian Group the intercompany note (with terms consistent with the original issued amount of $300 million from the Senior Notes due 2019 that were used to fund our purchase of Clayton), using proceeds from an additional capital contribution from Radian Group. As a result of the intercompany note repayment, the Services segment no longer incurs interest expense on the intercompany note. |
Selected Mortgage Insurance Key Ratios |
|||||||||||||||
|
2019 |
|
2018 |
||||||||||||
|
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
||||||
|
|
|
|
|
|
|
|
|
|
||||||
Loss ratio (1) |
10.5 |
% |
|
15.9 |
% |
|
8.0 |
% |
|
10.4 |
% |
|
8.1 |
% |
|
Expense ratio (1) |
23.1 |
% |
|
19.9 |
% |
|
23.7 |
% |
|
25.1 |
% |
|
22.9 |
% |
|
(1) |
Calculated on a GAAP basis using net premiums earned. |
Radian Group Inc. and Subsidiaries |
Definition of Consolidated Non-GAAP Financial Measures |
Exhibit F (page 1 of 2) |
Use of Non-GAAP Financial Measures
In addition to the traditional GAAP financial measures, we have presented “adjusted pretax operating income,” “adjusted diluted net operating income per share” and “adjusted net operating return on equity,” which are non-GAAP financial measures for the consolidated company, among our key performance indicators to evaluate our fundamental financial performance. These non-GAAP financial measures align with the way the Company’s business performance is evaluated by both management and the board of directors. These measures have been established in order to increase transparency for the purposes of evaluating our operating trends and enabling more meaningful comparisons with our peers. Although on a consolidated basis “adjusted pretax operating income,” “adjusted diluted net operating income per share” and “adjusted net operating return on equity” are non-GAAP financial measures, we believe these measures aid in understanding the underlying performance of our operations. Our senior management, including our Chief Executive Officer (Radian’s chief operating decision maker), uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of the Company’s business segments and to allocate resources to the segments.
Adjusted pretax operating income is defined as GAAP consolidated pretax income (loss) excluding the effects of: (i) net gains (losses) on investments and other financial instruments; (ii) loss on extinguishment of debt; (iii) amortization and impairment of goodwill and other acquired intangible assets; and (iv) impairment of other long-lived assets and other non-operating items, such as losses from the sale of lines of business and acquisition-related expenses. Adjusted diluted net operating income per share is calculated by dividing (i) adjusted pretax operating income attributable to common stockholders, net of taxes computed using the Company’s statutory tax rate, by (ii) the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Adjusted net operating return on equity is calculated by dividing annualized adjusted pretax operating income, net of taxes computed using the Company’s statutory tax rate, by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.
Although adjusted pretax operating income excludes certain items that have occurred in the past and are expected to occur in the future, the excluded items represent those that are: (i) not viewed as part of the operating performance of our primary activities or (ii) not expected to result in an economic impact equal to the amount reflected in pretax income. These adjustments, along with the reasons for their treatment, are described below.
(1) |
Net gains (losses) on investments and other financial instruments. The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities, our tax and capital profile and overall market cycles. Unrealized gains and losses arise primarily from changes in the market value of our investments that are classified as trading or equity securities. These valuation adjustments may not necessarily result in realized economic gains or losses. |
|
Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these realized and unrealized gains or losses and changes in fair value of other financial instruments. We do not view them to be indicative of our fundamental operating activities. |
||
(2) |
Loss on extinguishment of debt. Gains or losses on early extinguishment of debt and losses incurred to purchase our debt prior to maturity are discretionary activities that are undertaken in order to take advantage of market opportunities to strengthen our financial and capital positions; therefore, we do not view these activities as part of our operating performance. Such transactions do not reflect expected future operations and do not provide meaningful insight regarding our current or past operating trends. Therefore, these items are excluded from our calculation of adjusted pretax operating income (loss). |
|
(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) losses from the sale of lines of business and (ii) acquisition-related expenses. |
Radian Group Inc. and Subsidiaries |
Definition of Consolidated Non-GAAP Financial Measures |
Exhibit F (page 2 of 2) |
We have also presented a non-GAAP measure for tangible book value per share, which represents book value per share less the per-share impact of goodwill and other acquired intangible assets, net. We use this measure to assess the quality and growth of our capital. Because tangible book value per share is a widely-used financial measure which focuses on the underlying fundamentals of our financial position and operating trends without the impact of goodwill and other acquired intangible assets, we believe that current and prospective investors may find it useful in their analysis of the Company.
In addition to the above non-GAAP measures for the consolidated company, we also have presented as supplemental information a non-GAAP measure for our Services segment, representing a measure of earnings before interest, income tax provision (benefit), depreciation and amortization (“EBITDA”). We calculate Services adjusted EBITDA by using adjusted pretax operating income as described above, further adjusted to remove the impact of depreciation and corporate allocations for interest and operating expenses. In addition, Services adjusted EBITDA margin is calculated by dividing Services adjusted EBITDA by GAAP total revenue for the Services segment. Services adjusted EBITDA and Services adjusted EBITDA margin are used to facilitate comparisons with other services companies, since they are widely accepted measures of performance in the services industry and are used internally as supplemental measures to evaluate the performance of our Services segment.
See Exhibit G for the reconciliation of the most comparable GAAP measures, consolidated pretax income, diluted net income per share, return on equity and book value per share, to our non-GAAP financial measures for the consolidated company, adjusted pretax operating income, adjusted diluted net operating income per share, adjusted net operating return on equity, and tangible book value per share, respectively. Exhibit G also contains the reconciliation of the most comparable GAAP measure, net income, to Services adjusted EBITDA.
Total adjusted pretax operating income, adjusted diluted net operating income per share, adjusted net operating return on equity, tangible book value per share, Services adjusted EBITDA and Services adjusted EBITDA margin should not be considered in isolation or viewed as substitutes for GAAP pretax income, diluted net income per share, return on equity, book value per share or net income. Our definitions of adjusted pretax operating income, adjusted diluted net operating income per share, adjusted net operating return on equity, tangible book value per share, Services adjusted EBITDA or Services adjusted EBITDA margin may not be comparable to similarly-named measures reported by other companies.
Radian Group Inc. and Subsidiaries |
||||||||||||||||||||
Consolidated Non-GAAP Financial Measure Reconciliations |
||||||||||||||||||||
Exhibit G (page 1 of 3) |
||||||||||||||||||||
Reconciliation of Consolidated Pretax Income to Adjusted Pretax Operating Income |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2019 |
|
2018 |
|||||||||||||||||
(In thousands) |
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
|||||||||||
Consolidated pretax income |
$ |
217,673 |
|
|
$ |
209,545 |
|
|
$ |
216,136 |
|
|
$ |
176,485 |
|
|
$ |
184,688 |
|
|
Less reconciling income (expense) items: |
|
|
|
|
|
|
|
|
|
|||||||||||
Net gains (losses) on investments and other financial instruments |
13,009 |
|
|
12,540 |
|
|
21,913 |
|
|
(11,705 |
) |
|
(4,480 |
) |
||||||
Loss on extinguishment of debt |
(5,940 |
) |
|
(16,798 |
) |
|
— |
|
|
— |
|
|
— |
|
||||||
Amortization and impairment of other acquired intangible assets |
(2,139 |
) |
|
(2,139 |
) |
|
(2,187 |
) |
|
(3,461 |
) |
|
(3,472 |
) |
||||||
Impairment of other long-lived assets and other non-operating items (1) |
— |
|
|
103 |
|
|
(5,660 |
) |
|
(2,033 |
) |
|
(4,059 |
) |
||||||
Total adjusted pretax operating income (2) |
$ |
212,743 |
|
|
$ |
215,839 |
|
|
$ |
202,070 |
|
|
$ |
193,684 |
|
|
$ |
196,699 |
|
|
(1) |
The amount for the three months ended September 31, 2018 includes $3.6 million of other exit costs associated with impairment of internal-use software included within restructuring and other exit costs on the Condensed Consolidated Statement of Operations in Exhibit A. The amounts for all other periods are included in other operating expenses on the Condensed Consolidated Statement of Operations in Exhibit A and primarily relate to impairments of other long-lived assets. |
|
(2) |
Total adjusted pretax operating income on a consolidated basis consists of adjusted pretax operating income (loss) for our Mortgage Insurance segment and our Services segment, as further detailed in Exhibit E. |
Reconciliation of Diluted Net Income Per Share to Adjusted Diluted Net Operating Income Per Share |
||||||||||||||||||||
|
2019 |
|
2018 |
|||||||||||||||||
|
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
|||||||||||
Diluted net income per share |
$ |
0.83 |
|
|
$ |
0.78 |
|
|
$ |
0.78 |
|
|
$ |
0.64 |
|
|
$ |
0.66 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Less per-share impact of reconciling income (expense) items: |
|
|
|
|
|
|
|
|
|
|||||||||||
Net gains (losses) on investments and other financial instruments |
0.06 |
|
|
0.06 |
|
|
0.10 |
|
|
(0.05 |
) |
|
(0.02 |
) |
||||||
Loss on extinguishment of debt |
(0.03 |
) |
|
(0.08 |
) |
|
— |
|
|
— |
|
|
— |
|
||||||
Amortization and impairment of other acquired intangible assets |
(0.01 |
) |
|
(0.01 |
) |
|
(0.01 |
) |
|
(0.02 |
) |
|
(0.02 |
) |
||||||
Impairment of other long-lived assets and other non-operating items |
— |
|
|
— |
|
|
(0.02 |
) |
|
(0.01 |
) |
|
(0.02 |
) |
||||||
Income tax (provision) benefit on reconciling income (expense) items (1) |
— |
|
|
0.01 |
|
|
(0.01 |
) |
|
0.02 |
|
|
0.01 |
|
||||||
Difference between statutory and effective tax rates |
— |
|
|
— |
|
|
(0.01 |
) |
|
— |
|
|
— |
|
||||||
Per-share impact of reconciling income (expense) items |
0.02 |
|
|
(0.02 |
) |
|
0.05 |
|
|
(0.06 |
) |
|
(0.05 |
) |
||||||
Adjusted diluted net operating income per share (1) |
$ |
0.81 |
|
|
$ |
0.80 |
|
|
$ |
0.73 |
|
|
$ |
0.70 |
|
|
$ |
0.71 |
|
|
(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. |
Radian Group Inc. and Subsidiaries |
|||||||||||||||
Consolidated Non-GAAP Financial Measure Reconciliations |
|||||||||||||||
Exhibit G (page 2 of 3) |
|||||||||||||||
Reconciliation of Return on Equity to Adjusted Net Operating Return on Equity (1) |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||
|
2019 |
|
2018 |
||||||||||||
|
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
||||||
Return on equity (1) |
18.0 |
% |
|
17.8 |
% |
|
19.0 |
% |
|
16.4 |
% |
|
17.4 |
% |
|
Less impact of reconciling income (expense) items: (2) |
|
|
|
|
|
|
|
|
|
||||||
Net gains (losses) on investments and other financial instruments |
1.4 |
|
|
1.3 |
|
|
2.4 |
|
|
(1.4 |
) |
|
(0.5 |
) |
|
Loss on extinguishment of debt |
(0.6 |
) |
|
(1.8 |
) |
|
— |
|
|
— |
|
|
— |
|
|
Amortization and impairment of other acquired intangible assets |
(0.2 |
) |
|
(0.2 |
) |
|
(0.2 |
) |
|
(0.4 |
) |
|
(0.4 |
) |
|
Impairment of other long-lived assets and other non-operating items |
— |
|
|
— |
|
|
(0.6 |
) |
|
(0.3 |
) |
|
(0.5 |
) |
|
Income tax (provision) benefit on reconciling income (expense) items (3) |
(0.1 |
) |
|
0.1 |
|
|
(0.3 |
) |
|
0.4 |
|
|
0.3 |
|
|
Difference between statutory and effective tax rates |
0.1 |
|
|
0.2 |
|
|
— |
|
|
0.2 |
|
|
(0.5 |
) |
|
Impact of reconciling income (expense) items |
0.6 |
|
|
(0.4 |
) |
|
1.3 |
|
|
(1.5 |
) |
|
(1.6 |
) |
|
Adjusted net operating return on equity |
17.4 |
% |
|
18.2 |
% |
|
17.7 |
% |
|
17.9 |
% |
|
19.0 |
% |
|
(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. |
Reconciliation of Book Value Per Share to Tangible Book Value Per Share (1) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2019 |
|
2018 |
|||||||||||||||||
|
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
|||||||||||
Book value per share |
$ |
19.40 |
|
|
$ |
18.42 |
|
|
$ |
17.49 |
|
|
$ |
16.34 |
|
|
$ |
15.69 |
|
|
Less: Goodwill and other acquired intangible assets, net per share |
0.26 |
|
|
0.27 |
|
|
0.27 |
|
|
0.28 |
|
|
0.26 |
|
||||||
Tangible book value per share |
$ |
19.14 |
|
|
$ |
18.15 |
|
|
$ |
17.22 |
|
|
$ |
16.06 |
|
|
$ |
15.43 |
|
|
(1) |
All book value per share items are calculated based on the number of shares outstanding at the end of each respective period. |
Radian Group Inc. and Subsidiaries |
||||||||||||||||||||
Consolidated Non-GAAP Financial Measure Reconciliations |
||||||||||||||||||||
Exhibit G (page 3 of 3) |
||||||||||||||||||||
Reconciliation of Net Income to Services Adjusted EBITDA |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2019 |
|
2018 |
|||||||||||||||||
(In thousands) |
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income |
$ |
173,438 |
|
|
$ |
166,730 |
|
|
$ |
170,957 |
|
|
$ |
139,779 |
|
|
$ |
142,797 |
|
|
Less reconciling income (expense) items: |
|
|
|
|
|
|
|
|
|
|||||||||||
Net gains (losses) on investments and other financial instruments |
13,009 |
|
|
12,540 |
|
|
21,913 |
|
|
(11,705 |
) |
|
(4,480 |
) |
||||||
Loss on extinguishment of debt |
(5,940 |
) |
|
(16,798 |
) |
|
— |
|
|
— |
|
|
— |
|
||||||
Amortization and impairment of other acquired intangible assets |
(2,139 |
) |
|
(2,139 |
) |
|
(2,187 |
) |
|
(3,461 |
) |
|
(3,472 |
) |
||||||
Impairment of other long-lived assets and other non-operating items |
— |
|
|
103 |
|
|
(5,660 |
) |
|
(2,033 |
) |
|
(4,059 |
) |
||||||
Income tax provision |
44,235 |
|
|
42,815 |
|
|
45,179 |
|
|
36,706 |
|
|
41,891 |
|
||||||
Mortgage Insurance adjusted pretax operating income |
214,256 |
|
|
219,365 |
|
|
208,170 |
|
|
198,843 |
|
|
204,620 |
|
||||||
Services adjusted pretax operating income (loss) |
(1,513 |
) |
|
(3,526 |
) |
|
(6,100 |
) |
|
(5,159 |
) |
|
(7,921 |
) |
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Less reconciling income (expense) items: |
|
|
|
|
|
|
|
|
|
|||||||||||
Allocation of corporate operating expenses to Services |
(4,342 |
) |
|
(3,970 |
) |
|
(4,171 |
) |
|
(3,232 |
) |
|
(2,948 |
) |
||||||
Allocation of corporate interest expense to Services |
— |
|
|
— |
|
|
— |
|
|
(4,451 |
) |
|
(4,452 |
) |
||||||
Services depreciation and amortization |
(865 |
) |
|
(976 |
) |
|
(995 |
) |
|
(700 |
) |
|
(1,077 |
) |
||||||
Services adjusted EBITDA |
$ |
3,694 |
|
|
$ |
1,420 |
|
|
$ |
(934 |
) |
|
$ |
3,224 |
|
|
$ |
556 |
|
|
On a consolidated basis, “adjusted pretax operating income,” “adjusted diluted net operating income per share,” “adjusted net operating return on equity” and “tangible book value per share” are measures not determined in accordance with GAAP. “Services adjusted EBITDA” and “Services adjusted EBITDA margin” are also non-GAAP measures. These measures should not be considered in isolation or viewed as substitutes for GAAP pretax income, diluted net income per share, return on equity, book value per share or net income. Our definitions of adjusted pretax operating income, adjusted diluted net operating income per share, adjusted net operating return on equity, tangible book value per share, Services adjusted EBITDA or Services adjusted EBITDA margin may not be comparable to similarly-named measures reported by other companies. See Exhibit F for additional information on our consolidated non-GAAP financial measures. |
Radian Group Inc. and Subsidiaries |
||||||||||||||||||||
Mortgage Insurance Supplemental Information - New Insurance Written |
||||||||||||||||||||
Exhibit H |
||||||||||||||||||||
|
2019 |
|
2018 |
|||||||||||||||||
($ in millions) |
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total primary new insurance written |
$ |
22,037 |
|
|
$ |
18,539 |
|
|
$ |
10,900 |
|
|
$ |
12,737 |
|
|
$ |
15,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Percentage of primary new insurance written by FICO score (1) |
|
|
|
|
|
|
|
|
|
|||||||||||
>=740 |
64.1 |
% |
|
62.2 |
% |
|
57.6 |
% |
|
54.6 |
% |
|
55.5 |
% |
||||||
680-739 |
31.5 |
|
|
32.5 |
|
|
34.7 |
|
|
35.8 |
|
|
34.7 |
|
||||||
620-679 |
4.4 |
|
|
5.3 |
|
|
7.7 |
|
|
9.6 |
|
|
9.8 |
|
||||||
Total primary new insurance written |
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Percentage of primary new insurance written |
|
|
|
|
|
|
|
|
|
|||||||||||
Borrower-paid |
97.1 |
% |
|
96.5 |
% |
|
95.1 |
% |
|
94.0 |
% |
|
91.4 |
% |
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Percentage by premium type |
|
|
|
|
|
|
|
|
|
|||||||||||
Direct monthly and other recurring premiums |
85.0 |
% |
|
83.3 |
% |
|
83.4 |
% |
|
82.8 |
% |
|
78.4 |
% |
||||||
Direct single premiums (2): |
|
|
|
|
|
|
|
|
|
|||||||||||
Lender-paid |
1.9 |
|
|
2.5 |
|
|
3.9 |
|
|
5.0 |
|
|
7.4 |
|
||||||
Borrower-paid (3) |
13.1 |
|
|
14.2 |
|
|
12.7 |
|
|
12.2 |
|
|
14.2 |
|
||||||
Total primary new insurance written |
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Primary new insurance written for purchases |
80.7 |
% |
|
89.8 |
% |
|
92.2 |
% |
|
94.9 |
% |
|
95.5 |
% |
||||||
Primary new insurance written for refinances |
19.3 |
% |
|
10.2 |
% |
|
7.8 |
% |
|
5.1 |
% |
|
4.5 |
% |
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Percentage by LTV |
|
|
|
|
|
|
|
|
|
|||||||||||
95.01% and above |
16.8 |
% |
|
20.5 |
% |
|
19.7 |
% |
|
18.3 |
% |
|
16.9 |
% |
||||||
90.01% to 95.00% |
37.4 |
|
|
38.1 |
|
|
40.9 |
|
|
43.1 |
|
|
44.3 |
|
||||||
85.01% to 90.00% |
27.4 |
|
|
26.9 |
|
|
27.3 |
|
|
27.5 |
|
|
27.9 |
|
||||||
85.00% and below |
18.4 |
|
|
14.5 |
|
|
12.1 |
|
|
11.1 |
|
|
10.9 |
|
||||||
Total primary new insurance written |
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
||||||
(1) |
For loans with multiple borrowers, the percentage of primary new insurance written by FICO score represents the lowest of the borrowers’ FICO scores. All periods prior to March 31, 2019 had previously been presented based on the FICO score of the primary borrower and have been restated to reflect the lowest of the borrowers’ FICO scores. |
|
(2) |
Percentages exclude the impact of reinsurance. |
|
(3) |
Borrower-paid Single Premium Policies have lower Minimum Required Assets under PMIERs as compared to lender-paid Single Premium Policies. |
Radian Group Inc. and Subsidiaries |
||||||||||||||||||||
Mortgage Insurance Supplemental Information - Primary Insurance in Force and Risk in Force |
||||||||||||||||||||
Exhibit I (page 1 of 2) |
||||||||||||||||||||
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|||||||||||
($ in millions) |
2019 |
|
2019 |
|
2019 |
|
2018 |
|
2018 |
|||||||||||
Primary insurance in force (1) |
|
|
|
|
|
|
|
|
|
|||||||||||
Prime |
$ |
232,086 |
|
|
$ |
225,443 |
|
|
$ |
218,227 |
|
|
$ |
215,739 |
|
|
$ |
211,168 |
|
|
Alt-A and A minus and below |
5,072 |
|
|
5,313 |
|
|
5,507 |
|
|
5,704 |
|
|
5,928 |
|
||||||
Total Primary |
$ |
237,158 |
|
|
$ |
230,756 |
|
|
$ |
223,734 |
|
|
$ |
221,443 |
|
|
$ |
217,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Primary risk in force (1) (2) |
|
|
|
|
|
|
|
|
|
|||||||||||
Prime |
$ |
59,217 |
|
|
$ |
57,795 |
|
|
$ |
56,054 |
|
|
$ |
55,374 |
|
|
$ |
54,168 |
|
|
Alt-A and A minus and below |
1,203 |
|
|
1,262 |
|
|
1,307 |
|
|
1,354 |
|
|
1,409 |
|
||||||
Total Primary |
$ |
60,420 |
|
|
$ |
59,057 |
|
|
$ |
57,361 |
|
|
$ |
56,728 |
|
|
$ |
55,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Percentage of primary risk in force |
|
|
|
|
|
|
|
|
|
|||||||||||
Direct monthly and other recurring premiums |
72.0 |
% |
|
71.2 |
% |
|
70.6 |
% |
|
70.3 |
% |
|
69.9 |
% |
||||||
Direct single premiums |
28.0 |
% |
|
28.8 |
% |
|
29.4 |
% |
|
29.7 |
% |
|
30.1 |
% |
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Percentage of primary risk in force by FICO score (3) |
|
|
|
|
|
|
|
|
|
|||||||||||
>=740 |
56.2 |
% |
|
55.7 |
% |
|
55.2 |
% |
|
55.1 |
% |
|
55.1 |
% |
||||||
680-739 |
34.5 |
|
|
34.6 |
|
|
34.8 |
|
|
34.8 |
|
|
34.7 |
|
||||||
620-679 |
8.6 |
|
|
8.9 |
|
|
9.2 |
|
|
9.3 |
|
|
9.3 |
|
||||||
<=619 |
0.7 |
|
|
0.8 |
|
|
0.8 |
|
|
0.8 |
|
|
0.9 |
|
||||||
Total Primary |
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Percentage of primary risk in force by LTV |
|
|
|
|
|
|
|
|
|
|||||||||||
95.01% and above |
13.9 |
% |
|
13.2 |
% |
|
12.2 |
% |
|
11.6 |
% |
|
11.0 |
% |
||||||
90.01% to 95.00% |
51.9 |
|
|
52.5 |
|
|
53.0 |
|
|
53.1 |
|
|
53.1 |
|
||||||
85.01% to 90.00% |
27.9 |
|
|
28.2 |
|
|
28.6 |
|
|
29.0 |
|
|
29.4 |
|
||||||
85.00% and below |
6.3 |
|
|
6.1 |
|
|
6.2 |
|
|
6.3 |
|
|
6.5 |
|
||||||
Total |
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Percentage of primary risk in force by policy year |
|
|
|
|
|
|
|
|
|
|||||||||||
2008 and prior |
8.4 |
% |
|
8.9 |
% |
|
9.6 |
% |
|
10.1 |
% |
|
10.9 |
% |
||||||
2009 |
0.2 |
|
|
0.3 |
|
|
0.3 |
|
|
0.4 |
|
|
0.4 |
|
||||||
2010 |
0.2 |
|
|
0.2 |
|
|
0.3 |
|
|
0.3 |
|
|
0.3 |
|
||||||
2011 |
0.6 |
|
|
0.7 |
|
|
0.7 |
|
|
0.8 |
|
|
0.9 |
|
||||||
2012 |
2.5 |
|
|
2.9 |
|
|
3.3 |
|
|
3.7 |
|
|
4.1 |
|
||||||
2013 |
4.6 |
|
|
5.2 |
|
|
5.8 |
|
|
6.2 |
|
|
6.7 |
|
||||||
2014 |
4.8 |
|
|
5.3 |
|
|
5.8 |
|
|
6.1 |
|
|
6.5 |
|
||||||
2015 |
8.1 |
|
|
8.9 |
|
|
9.7 |
|
|
10.2 |
|
|
10.9 |
|
||||||
2016 |
13.5 |
|
|
14.8 |
|
|
16.0 |
|
|
16.8 |
|
|
17.9 |
|
||||||
2017 |
17.4 |
|
|
18.9 |
|
|
20.3 |
|
|
21.1 |
|
|
22.0 |
|
||||||
2018 |
19.7 |
|
|
21.8 |
|
|
23.5 |
|
|
24.3 |
|
|
19.4 |
|
||||||
2019 |
20.0 |
|
|
12.1 |
|
|
4.7 |
|
|
— |
|
|
— |
|
||||||
Total |
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Primary risk in force on defaulted loans |
$ |
1,012 |
|
|
$ |
986 |
|
|
$ |
1,002 |
|
|
$ |
1,032 |
|
|
$ |
1,019 |
|
|
Table continued on next page. |
Radian Group Inc. and Subsidiaries |
|||||||||||||||
Mortgage Insurance Supplemental Information - Primary Insurance in Force and Risk in Force |
|||||||||||||||
Exhibit I (page 2 of 2) |
|||||||||||||||
|
|||||||||||||||
Table continued from prior page. |
|||||||||||||||
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
||||||
|
2019 |
|
2019 |
|
2019 |
|
2018 |
|
2018 |
||||||
Persistency Rate (12 months ended) |
81.5 |
% |
|
83.4 |
% |
|
83.4 |
% |
|
83.1 |
% |
|
81.4 |
% |
|
Persistency Rate (quarterly, annualized) (4) |
75.5 |
% |
|
80.8 |
% |
|
85.4 |
% |
|
85.5 |
% |
|
83.4 |
% |
|
(1) |
Excludes the impact of premiums ceded under our reinsurance agreements. |
|
(2) |
Does not include pool risk in force or other risk in force, which combined represent approximately 1.0% of our total risk in force for all periods presented. |
|
(3) |
For loans with multiple borrowers, the percentage of primary risk in force by FICO score represents the lowest of the borrowers’ FICO scores. All periods prior to March 31, 2019 had previously been presented based on the FICO score of the primary borrower and have been restated to reflect the lowest of the borrowers’ FICO scores. |
|
(4) |
The Persistency Rate on a quarterly, annualized basis may be impacted by seasonality or other factors, and may not be indicative of full-year trends. |
Radian Group Inc. and Subsidiaries |
||||||||||||||||||||
Mortgage Insurance (“MI”) Supplemental Information - Claims and Reserves |
||||||||||||||||||||
Exhibit J |
||||||||||||||||||||
|
2019 |
|
2018 |
|||||||||||||||||
($ in thousands) |
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net claims paid: (1) |
|
|
|
|
|
|
|
|
|
|||||||||||
Total primary claims paid |
$ |
28,981 |
|
|
$ |
31,940 |
|
|
$ |
33,360 |
|
|
$ |
35,175 |
|
|
$ |
45,814 |
|
|
Total pool and other |
901 |
|
|
472 |
|
|
1,230 |
|
|
190 |
|
|
1,241 |
|
||||||
Subtotal |
29,882 |
|
|
32,412 |
|
|
34,590 |
|
|
35,365 |
|
|
47,055 |
|
||||||
Impact of commutations (2) |
6,812 |
|
|
15 |
|
|
— |
|
|
4,356 |
|
|
12,712 |
|
||||||
Total net claims paid |
$ |
36,694 |
|
|
$ |
32,427 |
|
|
$ |
34,590 |
|
|
$ |
39,721 |
|
|
$ |
59,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total average net primary claim paid (1) (3) |
$ |
47.0 |
|
|
$ |
50.1 |
|
|
$ |
48.6 |
|
|
$ |
52.0 |
|
|
$ |
53.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Average direct primary claim paid (3) (4) |
$ |
48.1 |
|
|
$ |
51.1 |
|
|
$ |
49.2 |
|
|
$ |
52.9 |
|
|
$ |
54.2 |
|
|
(1) |
Net of reinsurance recoveries. |
|
(2) |
Includes payments to commute mortgage insurance coverage on certain performing and non-performing loans. |
|
(3) |
Calculated without giving effect to the impact of commutations. |
|
(4) |
Before reinsurance recoveries. |
($ in thousands, except primary reserve |
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|||||||||||
per primary default amounts) |
2019 |
|
2019 |
|
2019 |
|
2018 |
|
2018 |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reserve for losses by category (1) |
|
|
|
|
|
|
|
|
|
|||||||||||
Mortgage insurance (“MI”) reserves |
|
|
|
|
|
|
|
|
|
|||||||||||
Prime |
$ |
236,382 |
|
|
$ |
242,378 |
|
|
$ |
240,489 |
|
|
$ |
242,135 |
|
|
$ |
241,858 |
|
|
Alt-A and A minus and below |
95,723 |
|
|
104,863 |
|
|
111,955 |
|
|
119,553 |
|
|
129,297 |
|
||||||
IBNR and other (2) |
42,117 |
|
|
33,888 |
|
|
13,008 |
|
|
13,864 |
|
|
14,505 |
|
||||||
LAE |
9,000 |
|
|
9,070 |
|
|
8,994 |
|
|
10,271 |
|
|
11,203 |
|
||||||
Total primary reserves |
383,222 |
|
|
390,199 |
|
|
374,446 |
|
|
385,823 |
|
|
396,863 |
|
||||||
Total pool reserves |
10,605 |
|
|
10,816 |
|
|
10,621 |
|
|
11,640 |
|
|
11,705 |
|
||||||
Total 1st lien reserves |
393,827 |
|
|
401,015 |
|
|
385,067 |
|
|
397,463 |
|
|
408,568 |
|
||||||
Other |
260 |
|
|
279 |
|
|
294 |
|
|
428 |
|
|
412 |
|
||||||
Total MI reserves |
394,087 |
|
|
401,294 |
|
|
385,361 |
|
|
397,891 |
|
|
408,980 |
|
||||||
Services reserves |
4,054 |
|
|
3,984 |
|
|
3,423 |
|
|
3,470 |
|
|
3,480 |
|
||||||
Total reserves |
$ |
398,141 |
|
|
$ |
405,278 |
|
|
$ |
388,784 |
|
|
$ |
401,361 |
|
|
$ |
412,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
1st lien reserve per default |
|
|
|
|
|
|
|
|
|
|||||||||||
Primary reserve per primary default excluding IBNR and other |
$ |
16,900 |
|
|
$ |
18,139 |
|
|
$ |
17,962 |
|
|
$ |
17,634 |
|
|
$ |
18,409 |
|
|
(1) |
Includes ceded losses on reinsurance transactions, which are expected to be recovered and are included in the reinsurance recoverables reported in other assets in our condensed consolidated balance sheets. |
|
(2) |
For the quarters ended September 30, 2019 and June 30, 2019, includes increases of $11.8 million and $19.4 million, respectively, in the Company's IBNR reserve estimate related to previously disclosed legal proceedings involving challenges from certain servicers regarding loss mitigation activities. |
Radian Group Inc. and Subsidiaries |
|||||||||||||||
Mortgage Insurance Supplemental Information - Default Statistics |
|||||||||||||||
Exhibit K |
|||||||||||||||
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
||||||
|
2019 |
|
2019 |
|
2019 |
|
2018 |
|
2018 |
||||||
Default Statistics |
|
|
|
|
|
|
|
|
|
||||||
Primary Insurance: |
|
|
|
|
|
|
|
|
|
||||||
Prime |
|
|
|
|
|
|
|
|
|
||||||
Number of insured loans |
1,040,520 |
|
|
1,018,715 |
|
|
994,865 |
|
|
986,704 |
|
|
969,994 |
|
|
Number of loans in default |
15,345 |
|
|
14,521 |
|
|
14,831 |
|
|
15,402 |
|
|
14,916 |
|
|
Percentage of loans in default |
1.47 |
% |
|
1.43 |
% |
|
1.49 |
% |
|
1.56 |
% |
|
1.54 |
% |
|
|
|
|
|
|
|
|
|
|
|
||||||
Alt-A and A minus and below |
|
|
|
|
|
|
|
|
|
||||||
Number of insured loans |
32,163 |
|
|
33,609 |
|
|
34,763 |
|
|
35,906 |
|
|
37,268 |
|
|
Number of loans in default |
4,839 |
|
|
5,122 |
|
|
5,291 |
|
|
5,691 |
|
|
5,854 |
|
|
Percentage of loans in default |
15.05 |
% |
|
15.24 |
% |
|
15.22 |
% |
|
15.85 |
% |
|
15.71 |
% |
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Primary |
|
|
|
|
|
|
|
|
|
||||||
Number of insured loans |
1,072,683 |
|
|
1,052,324 |
|
|
1,029,628 |
|
|
1,022,610 |
|
|
1,007,262 |
|
|
Number of loans in default |
20,184 |
|
|
19,643 |
|
|
20,122 |
|
|
21,093 |
|
|
20,770 |
|
|
Percentage of loans in default |
1.88 |
% |
|
1.87 |
% |
|
1.95 |
% |
|
2.06 |
% |
|
2.06 |
% |
|
Radian Group Inc. and Subsidiaries |
||||||||||||||||||||||
Mortgage Insurance Supplemental Information - Reinsurance Programs |
||||||||||||||||||||||
Exhibit L |
||||||||||||||||||||||
|
2019 |
|
2018 |
|||||||||||||||||||
($ in thousands) |
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Quota Share Reinsurance (“QSR”) and Single Premium QSR Programs |
|
|
|
|
|
|
|
|
|
|||||||||||||
Ceded premiums written (1) |
$ |
8,408 |
|
|
$ |
588 |
|
|
$ |
7,017 |
|
|
$ |
12,923 |
|
|
$ |
24,094 |
|
|||
% of premiums written |
2.9 |
% |
|
2.2 |
% |
|
2.7 |
% |
|
4.8 |
% |
|
8.5 |
% |
||||||||
Ceded premiums earned |
$ |
19,295 |
|
|
$ |
29,212 |
|
(2) |
$ |
15,676 |
|
|
$ |
15,726 |
|
|
$ |
15,813 |
|
|||
% of premiums earned |
6.3 |
% |
|
8.7 |
% |
|
5.5 |
% |
|
5.6 |
% |
|
5.7 |
% |
||||||||
Ceding commissions written |
$ |
6,778 |
|
|
$ |
6,861 |
|
|
$ |
4,695 |
|
|
$ |
6,006 |
|
|
$ |
8,988 |
|
|||
Ceding commissions earned (3) |
$ |
12,153 |
|
|
$ |
16,353 |
|
(2) |
$ |
8,685 |
|
|
$ |
7,718 |
|
|
$ |
8,373 |
|
|||
Profit commission |
$ |
18,346 |
|
|
$ |
26,476 |
|
(2) |
$ |
11,318 |
|
|
$ |
10,638 |
|
|
$ |
11,358 |
|
|||
Ceded losses |
$ |
771 |
|
|
$ |
1,868 |
|
|
$ |
1,687 |
|
|
$ |
1,730 |
|
|
$ |
1,191 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Excess-of-Loss Program |
|
|
|
|
|
|
|
|
|
|||||||||||||
Ceded premiums written |
$ |
6,878 |
|
|
$ |
13,468 |
|
|
$ |
2,919 |
|
|
$ |
9,009 |
|
|
$ |
— |
|
|||
% of premiums written |
2.4 |
% |
|
4.8 |
% |
|
1.1 |
% |
|
3.3 |
% |
|
— |
% |
||||||||
Ceded premiums earned |
$ |
7,452 |
|
|
$ |
7,662 |
|
|
$ |
3,265 |
|
|
$ |
2,305 |
|
|
$ |
— |
|
|||
% of premiums earned |
2.4 |
% |
|
2.3 |
% |
|
1.2 |
% |
|
0.8 |
% |
|
— |
% |
||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ceded RIF (4) |
|
|
|
|
|
|
|
|
|
|||||||||||||
QSR Program |
$ |
702,201 |
|
|
$ |
768,554 |
|
|
$ |
840,621 |
|
|
$ |
910,862 |
|
|
$ |
974,359 |
|
|||
Single Premium QSR Program |
8,538,363 |
|
|
8,495,651 |
|
|
8,267,506 |
|
|
8,168,939 |
|
|
7,984,178 |
|
||||||||
Excess-of-Loss Program |
974,800 |
|
|
1,017,440 |
|
|
454,641 |
|
|
455,440 |
|
|
— |
|
||||||||
Total Ceded RIF |
$ |
10,215,364 |
|
|
$ |
10,281,645 |
|
|
$ |
9,562,768 |
|
|
$ |
9,535,241 |
|
|
$ |
8,958,537 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
PMIERs impact - reduction in Minimum Required Assets (5) |
|
|
|
|
|
|
|
|
|
|||||||||||||
QSR Program |
$ |
38,227 |
|
|
$ |
41,873 |
|
|
$ |
45,477 |
|
|
$ |
48,734 |
|
|
$ |
51,883 |
|
|||
Single Premium QSR Program |
513,832 |
|
|
516,468 |
|
|
507,656 |
|
|
522,318 |
|
|
511,052 |
|
||||||||
Excess-of-Loss Program |
834,072 |
|
|
926,640 |
|
|
454,641 |
|
|
455,440 |
|
|
— |
|
||||||||
Total PMIERs impact |
$ |
1,386,131 |
|
|
$ |
1,484,981 |
|
|
$ |
1,007,774 |
|
|
$ |
1,026,492 |
|
|
$ |
562,935 |
|
|||
(1) |
Net of profit commission, where applicable. |
|
(2) |
Includes a cumulative adjustment to unearned premiums related to an update to the amortization rates used to recognize revenue for Single Premium Policies. |
|
(3) |
Includes amounts reported in policy acquisition costs and other operating expenses. Operating expenses include the following ceding commissions, net of deferred policy acquisition costs, for the periods indicated: |
|
|
2019 |
|
2018 |
||||||||||||||||||
|
($ in thousands) |
Qtr 3 |
|
Qtr 2 |
|
Qtr 1 |
|
Qtr 4 |
|
Qtr 3 |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
Ceding commissions |
$ |
(8,160 |
) |
|
$ |
(12,408 |
) |
|
$ |
(5,643 |
) |
|
$ |
(5,837 |
) |
|
$ |
(5,988 |
) |
|
(4) |
|
Included in primary RIF. |
||||||||||||||||||||
(5) |
|
Excludes the impact of intercompany reinsurance. |
||||||||||||||||||||
FORWARD-LOOKING STATEMENTS
All statements in this report 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. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking statement. These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment where new risks emerge from time to time and it is not possible for us to predict all risks that may affect us. 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:
- changes in economic and political conditions that impact the size of the insurable market, the credit performance of our insured portfolio, and our business prospects;
- changes in the way customers, investors, ratings agencies, regulators or legislators perceive our performance, financial strength and future prospects;
- Radian Guaranty Inc.’s (“Radian Guaranty”) ability to remain eligible under the Private Mortgage Insurer Eligibility Requirements (the “PMIERs”) and other applicable requirements imposed by the Federal Housing Finance Agency (“FHFA”) and by Fannie Mae and Freddie Mac (collectively, the “GSEs”) to insure loans purchased by the GSEs, including potential future changes to the PMIERs which, among other things, may be impacted by the general economic environment and housing market, as well as the proposed Conservatorship Capital Framework ("CCF") that would establish capital requirements for the GSEs, if the CCF is finalized;
- our ability to successfully execute and implement our capital plans, including our risk distribution strategy through the capital markets and reinsurance markets, and to maintain sufficient holding company liquidity to meet our liquidity needs;
- our ability to successfully execute and implement our business plans and strategies, including plans and strategies that require GSE and/or regulatory approvals and licenses;
- our ability to maintain an adequate level of capital in our insurance subsidiaries to satisfy existing and future regulatory requirements;
- changes in the charters or business practices of, or rules or regulations imposed by or applicable to, the GSEs, which may include changes in the requirements to remain an approved insurer to the GSEs, the GSEs’ interpretation and application of the PMIERs, as well as changes impacting loans purchased by the GSEs, such as whether GSE eligible loans meet the "qualified mortgages" (QM) loan requirements under applicable law, requirements regarding mortgage credit and loan size and the GSEs' pricing;
- changes in the current housing finance system in the U.S., including the role of the Federal Housing Administration (the “FHA”), the GSEs and private mortgage insurers in this system;
- any disruption in the servicing of mortgages covered by our insurance policies, as well as poor servicer performance;
- a decrease in the “Persistency Rates” (the percentage of insurance in force that remains in force over a period of time) of our mortgage insurance on monthly premium products;
- competition in our mortgage insurance business, including price competition and competition from the FHA and U.S. Department of Veterans Affairs as well as from other forms of credit enhancement, including GSE sponsored alternatives to traditional mortgage insurance;
- the effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the financial services industry in general, and on our businesses in particular, including future changes to the QM loan requirements, which currently are subject to an Advanced Notice of Proposed Rulemaking (ANPR) issued by the Consumer Financial Protection Bureau;
- legislative and regulatory activity (or inactivity), including the adoption of (or failure to adopt) new laws and regulations, or changes in existing laws and regulations, or the way they are interpreted or applied;
- legal and regulatory claims, assertions, actions, reviews, audits, inquiries and investigations that could result in adverse judgments, settlements, fines, injunctions, restitutions or other relief that could require significant expenditures, new or increased reserves or have other effects on our business;
- the amount and timing of potential settlements, payments or adjustments associated with federal or other tax examinations;
- the possibility that we may fail to estimate accurately the likelihood, magnitude and timing of losses in establishing loss reserves for our mortgage insurance business or to accurately calculate and/or project our "Available Assets" and "Minimum Required Assets" under the PMIERs, which will be impacted by, among other things, the size and mix of our insurance in force, the level of defaults in our portfolio, the level of cash flow generated by our insurance operations and our risk distribution strategies;
- volatility in our financial results caused by changes in the fair value of our assets and liabilities, including our investment portfolio;
- potential future impairment charges related to our goodwill and other acquired intangible assets;
- changes in “GAAP” (accounting principles generally accepted in the U.S.) or “SAPP” (statutory accounting principles and practices including those required or permitted, if applicable, by the insurance departments of the respective states of domicile of our insurance subsidiaries) rules and guidance, or their interpretation;
- our ability to attract and retain key employees; and
- legal and other limitations on amounts we may receive from our subsidiaries, including dividends or ordinary course distributions under our internal tax- and expense- sharing arrangements.
For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018, 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 report. 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/20191030005914/en/
Emily Riley - Phone: 215.231.1035
email: [email protected]
Source: Radian Group Inc.