Financial Results Q3 2023
NYSE: RDN
www.radian.com
Safe Harbor Statements
All statements in this presentation that address events, developments or results that we expect or anticipate may occur in the future are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as "anticipate," "may," "will," "could," "should," "would," "expect," "intend," "plan," "goal," "contemplate," "believe," "estimate," "predict," "project," "potential," "continue," "seek," "strategy," "future," "likely" or the negative or other variations on these words and other similar expressions. These statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management's current views and assumptions with respect to future events. These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment where new risks emerge from time to time and it is not possible for us to predict all risks that may affect us. The forward-looking statements are not guarantees of future performance, and the forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward- looking statements. These risks and uncertainties include, without limitation:
- the health of the U.S. housing market generally and changes in economic conditions that impact the size of the insurable mortgage market, the credit performance of our insured mortgage portfolio and our business prospects, including more recently, changes resulting from inflationary pressures, the higher interest rate environment and the risks of a recession and of higher unemployment rates, as well as other macroeconomic stresses and uncertainties, including potential impacts resulting from geopolitical events;
- 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") to insure loans purchased by Fannie Mae and Freddie Mac (collectively, the "GSEs");
- our ability to maintain an adequate level of capital in our insurance subsidiaries to satisfy current and future regulatory requirements;
- changes in the charters or business practices of, or rules or regulations imposed by or applicable to, the GSEs or loans purchased by the GSEs, or changes in the requirements for Radian Guaranty to remain an approved insurer to the GSEs, such as changes in the PMIERs or the GSEs' interpretation and application of the PMIERs or other applicable requirements;
- the effects of the Enterprise Regulatory Capital Framework, which establishes a new regulatory capital framework for the GSEs, and which, as finalized, increases the capital requirements for the GSEs, and among other things, could impact the GSEs' operations and pricing as well as the size of the insurable mortgage market, and which may form the basis for future changes to the PMIERs to better align with the Enterprise Regulatory Capital Framework;
- changes in the current housing finance system in the United States, including the roles of the Federal Housing Administration (the "FHA"), the GSEs and private mortgage insurers in this system;
- our ability to successfully execute and implement our capital plans, including our risk distribution strategy through the capital markets and traditional reinsurance markets, and to maintain sufficient holding company liquidity to meet our liquidity needs;
- our ability to successfully execute and implement our business plans and strategies, including plans and strategies that may require GSE and/or regulatory approvals and licenses, that are subject to complex compliance requirements that we may be unable to satisfy, or that may expose us to new risks, including those that could impact our capital and liquidity positions;
- risks related to the quality of third-party mortgage underwriting and mortgage servicing;
- a decrease in the "Persistency Rates" (the percentage of insurance in force that remains in force over a period of time) of our mortgage insurance on monthly premium products;
- competition in the private mortgage insurance industry generally, and more specifically: price competition in our mortgage insurance business, including the prevalence of formulaic, granular risk-based pricing methodologies that are less transparent than historical rate-card-based pricing practices; and competition from the FHA and the U.S. Department of Veterans Affairs as well as from other forms of credit enhancement, such as any potential GSE-sponsored alternatives to traditional mortgage insurance;
- U.S. political conditions and legislative and regulatory activity (or inactivity), including adoption of (or failure to adopt) new laws and regulations, or changes in existing laws and regulations, or the way they are interpreted or applied;
- legal and regulatory claims, assertions, actions, reviews, audits, inquiries and investigations that could result in adverse judgments, settlements, fines, injunctions, restitutions or other relief that could require significant expenditures, new or increased reserves or have other effects on our business;
- the amount and timing of potential payments or adjustments associated with federal or other tax examinations;
- the possibility that we may fail to estimate accurately, especially in the event of an extended economic downturn or a period of extreme market volatility and economic uncertainty, the likelihood, magnitude and timing of losses in establishing loss reserves for our mortgage insurance business or to accurately calculate and/or project our Available Assets and Minimum Required Assets under the PMIERs, which could be impacted by, among other things, the size and mix of our insurance in force, future changes to the PMIERs, the level of defaults in our portfolio, the reported status of defaults in our portfolio (including whether they are subject to mortgage forbearance, a repayment plan or a loan modification trial period), the level of cash flow generated by our insurance operations and our risk distribution strategies;
- volatility in our financial results caused by changes in the fair value of our assets and liabilities, including with respect to our use of derivatives and within our investment portfolio;
- changes in "GAAP" (accounting principles generally accepted in the U.S.) or "SAP" (statutory accounting principles and practices including those required or permitted, if applicable, by the insurance departments of the respective states of domicile of our insurance subsidiaries) rules and guidance, or their interpretation;
- risks associated with investments to grow our existing businesses, or to pursue new lines of business or new products and services, including our ability and related costs to develop, launch and implement new and innovative technologies and digital products and services, whether these products and services receive broad customer acceptance or disrupt existing customer relationships, and additional financial risks related to these investments, including required changes in our investment, financing and hedging strategies, risks associated with our increased use of financial leverage, which could expose us to liquidity risks resulting from changes in the fair values of assets, and the risk that we may fail to achieve forecasted results, which could result in lower or negative earnings contribution and/or impairment charges associated with intangible assets;
- the effectiveness and security of our information technology systems and digital products and services, including the risk that these systems, products or services fail to operate as expected or planned or expose us to cybersecurity or third-party risks, including due to malware, unauthorized access, cyberattack, ransomware or other similar events;
- our ability to attract and retain key employees;
- the amount of dividends, if any, that our insurance subsidiaries may distribute to us, which under applicable regulatory requirements is based primarily on the financial performance of our insurance subsidiaries, and therefore, may be impacted by general economic, competitive and other factors, many of which are beyond our control; and
- the ability of our operating subsidiaries to distribute amounts to us under our internal tax- and expense-sharing arrangements, which for our insurance subsidiaries are subject to regulatory review and could be terminated at the discretion of such regulators.
For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022, and to subsequent reports and registration statements filed from time to time with the U.S. Securities and Exchange Commission. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which we issued this presentation. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements to reflect new information or future events or for any other reason.
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About Us
Radian Group Inc. is a diversified mortgage and real estate business that maintains two reportable segments: mortgage and homegenius
Our mortgage segment provides credit-relatedinsurance coverage, principally through private mortgage insurance on residential first-lienmortgage loans, as well as contract underwriting and other credit risk management solutions, to mortgage lending institutions and mortgage credit investors.
Our homegenius segment offers an array of title, real estate and real estate technology products and services to consumers, mortgage lenders, mortgage and real estate investors, GSEs, real estate brokers and agents.
Our culture is built around a set of core organizational values that we live by, and define who we are as an enterprise:
Innovate for the Future
Deliver the Brand Promise
Our People are the Difference
Create Shareholder Value
Partner to Win
Do What's Right
NYSE: RDN | www.radian.com
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Q3 2023 Summary Financial Metrics
$157 million | Compared to $146 million in Q2 2023 and |
$198 million in Q3 2022 | |
Net Income | |
$0.98 | Compared to $0.91 in Q2 2023 and $1.20 |
Diluted Net Income Per Share | in Q3 2022 |
15.0% | 20.7% in Q3 2022 |
Compared to 14.1% in Q2 2023 and | |
Return on Average Equity | |
16.0% | Compared to 14.1% in Q2 2023 and |
Adjusted Net Operating Return | 22.5% in Q3 2022 (1) |
on Average Equity (1) |
$1.04 | Compared to $0.91 in Q2 2023 and $1.31 |
Adjusted Diluted Net Operating | in Q3 2022 (1) |
Income Per Share (1) | |
$1.0 billion
Available Holding Company Liquidity
Compared to $1.0 billion as of June 30, 2023 and $573 million as of September 30, 2022
$26.69 | Compared to $23.80 as of September 30, |
2022. This represents a 12% growth year- | |
Book Value Per Share | over-year.(2) |
$1.7 billion
PMIERs Excess Available Assets (3)
Compared to $1.7 billion as of June 30, 2023 and $1.6 billion as of September 30, 2022
- Adjusted results, including adjusted diluted net operating income (loss) per share and adjusted net operating return on equity, as used in this presentation, are non-GAAP financial measures. For a reconciliation of the adjusted results to the comparable GAAP measures and the definitions of adjusted diluted net operating income (loss) per share and adjusted net operating return on equity, see Appendix, Slides 26-28.
- Includes accumulated other comprehensive income (loss) ("AOCI") of $(3.35) per share as of September 30, 2023 and $(3.20) per share as of September 30, 2022.
- Represents Radian Guaranty's excess or "cushion" of Available Assets over its Minimum Required Assets (MRA), calculated in accordance with the PMIERs financial requirements in effect for each date shown.
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Q3 2023 Summary Financial Metrics
$269.5 billion
Primary Insurance In Force
Compared to $266.9 billion as of June 30, 2023 and $259.1 billion as of September 30, 2022, reflecting a year- over-year 7% increase in monthly premium policies in force, partially offset by a 12% decline in Single Premium Policies in force
$314 million | and $296 million in Q3 2022 | 2023 |
Compared to $290 million in Q2 | ||
Total Revenues | ||
$237 million | Compared to $211 million in Q2 | 2023 |
Net Mortgage Premiums Earned | and $235 million in Q3 2022 | |
$13.9 billion | Compared to $16.9 billion in Q2 2023 |
New Insurance Written | and $17.6 billion in Q3 2022 |
$5.9 billion | Compared to $5.9 billion as of June 30, |
$69 million
Net Investment Income
Compared to $64 million in Q2 2023 and $51 million in Q3 2022. The investment yield on our investment portfolio was 4.2% at the end of Q3 2023.
Total Investments | 2023 and $5.6 billion as of |
September 30, 2022 |
$(8) million
Provision for Losses
Compared to $(22) million in Q2 2023 and $(97) million in Q3 2022
$368 million
Reserve for Losses and Loss Adjustment Expense
Compared to $379 million as of June 30, 2023 and $484 million as of September 30, 2022
$79 million
Other Operating Expenses
Compared to $90 million in Q2 2023 and $91 million in Q3 2022
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Financial Highlights
Radian Group Inc. Consolidated | September 30, | June 30, | March 31, | December 31, | September 30, |
(In millions, except per-share amounts) | 2023 | 2023 | 2023 | 2022 | 2022 |
Primary Insurance In Force | $269,511 | $266,859 | $261,450 | $260,994 | $259,121 |
Total Assets | $7,379 | $7,307 | $7,204 | $7,064 | $6,986 |
Total Investments | $5,886 | $5,896 | $5,838 | $5,693 | $5,592 |
Loss Reserves | $368 | $379 | $406 | $427 | $484 |
Holding Company Debt-to-Capital(1) | 25.4 % | 25.3 % | 25.6 % | 26.5 % | 27.4 % |
Stockholders' Equity (2) | $4,153 | $4,171 | $4,106 | $3,919 | $3,738 |
Shares Outstanding | 156 | 157 | 157 | 157 | 157 |
Book Value Per Share (3) | $26.69 | $26.51 | $26.23 | $24.95 | $23.80 |
Available / Total Holding Company Liquidity (4) | $1,004 / $1,279 | $1,010 / $1,285 | $956 / $1,231 | $903 / $1,178 | $573 / $848 |
PMIERs Excess Available Assets (or "Cushion") (5) | $1,670 / 41 % | $1,662 / 41 % | $1,740 / 44 % | $1,727 / 45 % | $1,628 / 44 % |
- See slide 20 for further detail on the components and calculation of the holding company debt-to-capital ratio as of September 30, 2023.
- Includes accumulated other comprehensive income (loss) of $(521) million, $(424) million, $(387) million, $(457) million and $(502) million as of September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, respectively.
- Book value per share includes accumulated other comprehensive income (loss) of $(3.35) per share, $(2.69) per share, $(2.47) per share, $(2.91) per share and $(3.20) per share as of September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, respectively.
- Total holding company liquidity includes the Company's unsecured revolving credit facility of $275 million for all periods presented.
- Radian Guaranty currently is an approved mortgage insurer under the PMIERs, and is in compliance with the PMIERs financial requirements. PMIERs Cushion represents Radian Guaranty's excess of Available Assets over its Minimum Required Assets, calculated in accordance with the PMIERs financial requirements in effect for each date shown.
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GAAP Diluted Net Income Per Share | |||
Q2 2023 to Q3 2023 (1) | |||
$1.25 | |||
$0.05 | $0.02 | (1) | All diluted net income (loss) per share |
$0.13 | $0.98 | items are calculated based on 160.7 | |
$1.00 | $(0.07) | million weighted-average diluted shares | |
outstanding for the quarter ended | |||
$0.91 | $(0.04) | $(0.02) | June 30, 2023, except for the |
September 30, 2023 diluted net income | |||
(loss) per share, which was calculated | |||
$0.75 | based on 160.1 million weighted- | ||
average diluted shares outstanding for | |||
the quarter ended September 30, 2023 | |||
(2) | Increase primarily due to $21 million of | ||
$0.50 | additional ceded premium reflected in | ||
Q2 2023 as a result of the completion of | |||
tender offers by Eagle Re 2019-1 Ltd. | |||
and Eagle Re 2020-1 Ltd. that did not | |||
recur during Q3 2023. | |||
$0.25 | |||
$- |
Q2 2023 | Net premiums | Other operating | Net investment | Provision for | Net gains | Other | Q3 2023 |
earned (2) | expenses | income | losses | (losses) on |
investments
and other
financial
instruments
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AOCI Impact to Book Value Per Share
GAAP Book Value Per Share
$24.28 | $24.95 | $26.23 | $26.51 | $26.69 | ||||||||
$21.52 | $22.36 | $22.14 | $23.02 | $23.48 | $23.75 | $23.63 | $23.80 | |||||
$1.21 | $1.38 | $0.61 | $0.95 | $0.84 | $0.68 | |||||||
$(0.74) | ||||||||||||
$(1.98) | $(3.20) | $(2.91) | $(2.47) | $(2.69) | ||||||||
Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | $(3.35) | ||||
Q3 | Q4 | Q1 | Q2 | Q3 | ||||||||
'20 | '20 | '21 | '21 | '21 | '21 | '22 | '22 | '22 | '22 | '23 | '23 | '23 |
Book value per share
AOCI per share (1)
Contractual Maturities of Fixed-Maturities Available for Sale
As of September 30, 2023
Unrealized | |||
gain (loss) | |||
Amortized | recorded in | ||
$ in millions | Cost | Fair Value | AOCI |
Due in one year or less | $108 | $106 | $(2) |
Due after one year through five | 1,296 | 1,209 | (87) |
years (2) | |||
Due after five years through 10 | 918 | 783 | (135) |
years (2) | |||
Due after 10 years (2) | 867 | 635 | (232) |
Asset-backed and mortgage- | 2,588 | 2,384 | (204) |
backed securities (3) | |||
Total (4) | $5,777 | $5,117 | (660) |
Tax effect | (139) | ||
Accumulated other comprehensive | $(521) | ||
income (loss) | |||
- AOCI per share, a component of book value per share, is calculated by dividing (i) accumulated other comprehensive income (loss), by (ii) shares outstanding as of the end of each period shown. Beginning in the first quarter of 2022, the change in accumulated other comprehensive income (loss) is primarily from net unrealized losses on investments as a result of an increase in market interest rates. We do not expect to realize these losses given that, as of September 30, 2023, we have the ability and intent to hold these securities until recovery.
- Actual maturities may differ as a result of calls before scheduled maturity.
- Includes residential mortgage-backed securities, commercial mortgage-backed securities, collateralized loan obligations, other asset-backed securities and mortgage insurance-linked notes, which are not due at a single maturity date. The average duration for these investments is three years.
- Total amortized cost and total fair value include $93 million and $79 million, respectively, of securities loaned to third-party borrowers under securities lending agreements.
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Revenue and Related Drivers
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Primary Insurance In Force Rollforward and Persistency Rates
Primary IIF | Q3 2023 | Q2 2023 | Q1 2023 | Q4 2022 | Q3 2022 | |||||
(In billions) | ||||||||||
Beginning Primary IIF | $ | 266.9 | $ | 261.5 | $ | 261.0 | $ | 259.1 | $ | 254.2 |
New Insurance Written | 13.9 | 16.9 | 11.3 | 12.9 | 17.6 | |||||
Cancellations and | (11.3) | (11.5) | (10.8) | (11.0) | (12.7) | |||||
Amortization | ||||||||||
Ending Primary IIF | $ | 269.5 | $ | 266.9 | $ | 261.5 | $ | 261.0 | $ | 259.1 |
While increases in mortgage rates have reduced originations and NIW, high Persistency Rates has supported growth in IIF.
Persistency Rates
- Quarterly, Annualized (1)
- 12 Months Ended
90.0%
85.0% | 84.1% | 84.4% | 83.5% | 84.2% | |
81.6% | 83.6% | ||||
82.8% | |||||
81.6% | |||||
80.0% | |||||
79.6% | |||||
75.0% | |||||
75.9% | |||||
70.0% | |||||
Q3 2022 | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | |
- The Persistency Rate on a quarterly, annualized basis is calculated based on loan-level detail for the quarter ending as of the date shown. It may be impacted by seasonality or other factors, including the level of refinance activity during the applicable periods and may not be indicative of full-year trends.
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Radian Group Inc. published this content on 01 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 November 2023 21:05:10 UTC.