Financial Results Q1 2024
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 changes resulting from inflationary pressures, the higher interest rate environment and the risk of higher unemployment rates, as well as other macroeconomic stresses and uncertainties, including potential impacts resulting from political and geopolitical events;
- changes in the way customers, investors, ratings agencies, regulators or legislators perceive our performance, financial strength and future prospects;
- Radian Guaranty's ability to remain eligible under the PMIERs to insure loans purchased by 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 ERCF, 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;
- changes in the current housing finance system in the United States, including the roles of the FHA, the VA, 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 loan servicing;
- a decrease in the Persistency Rates of our mortgage insurance on Monthly Premium Policies;
- competition in the private mortgage insurance industry generally, and more specifically: price competition in our mortgage insurance business and competition from the FHA and the VA as well as from other forms of credit enhancement, such as any potential GSE- sponsored alternatives to traditional mortgage insurance;
- U.S. political conditions, which may be more volatile and present a heightened risk in Presidential election years, 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 IIF, 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 or SAP 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;
- 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, 2023, 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 mortgage and real estate company, providing mortgage insurance and other products and services:
- Mortgage Insurance is our one reportable segment. This business provides credit-related insurance coverage for the benefit of mortgage lending institutions and mortgage credit investors, principally through private mortgage insurance on residential first-lien mortgage loans, and also offers other credit risk management solutions to our customers.
- All other activities are presented collectively and include our Mortgage Conduit, Title, Real Estate Services and Real Estate Technology businesses, which provide existing and new customers with an array of products and services across the residential real estate and mortgage finance industries.
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 | Our People are the Difference | Partner to Win |
Deliver the Brand Promise | Create Shareholder Value | Do What's Right |
NYSE: RDN | www.radian.com | ||
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Q1 2024 Summary Financial Metrics
$152 million | Compared to $143 million in Q4 2023 and |
Net Income | $158 million in Q1 2023 |
$0.98 | Compared to $0.91 in Q4 2023 and $0.98 |
Diluted Net Income Per Share | |
in Q1 2023 | |
$1.03 |
13.8% | Compared to 13.4% in Q4 2023 and |
Return on Average Equity | 15.7% in Q1 2023 |
14.5% | Compared to 14.2% in Q4 2023 and |
Adjusted Net Operating Return | |
15.7% in Q1 2023 (1) | |
on Average Equity (1) |
Compared to $0.96 in Q4 2023 and $0.98 |
Adjusted Diluted Net Operating in Q1 2023 (1) |
Income Per Share (1) |
$29.30 |
$1.1 billion
Available Holding Company Liquidity
Compared to $992 million as of December 31, 2023 and $956 million as of March 31, 2023
Book Value Per Share | Compared to $26.23 as of March 31, |
2023 | |
12% | |
Book Value Per Share Growth |
$2.3 billion
PMIERs Excess Available Assets (2)
Compared to $2.3 billion as of December 31, 2023 and $1.7 billion as of March 31, 2023
- 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 25-28.
- 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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Q1 2024 Summary Financial Metrics
$271.0 billion | December 31, 2023 and $261.5 billion |
Compared to $270.0 billion as of | |
Primary Insurance In Force | as of March 31, 2023 |
$11.5 billion | Compared to $10.6 billion in Q4 2023 |
New Insurance Written | and $11.3 billion in Q1 2023 |
$319 million | Compared to $329 million in Q4 2023 |
Total Revenues | and $310 million in Q1 2023 |
$234 million | Compared to $230 million in Q4 2023 |
Net Mortgage Insurance | and $231 million in Q1 2023 |
Premiums Earned | |
$69 million | Compared to $69 million in Q4 2023 |
Net Investment Income | and $58 million in Q1 2023 |
$6.3 billion | Compared to $6.1 billion as of |
Total Investments | December 31, 2023 and $5.8 billion as |
of March 31, 2023 |
$(7) million
Provision for Losses
Compared to $4 million in Q4 2023 and $(17) million in Q1 2023
$362 million
Reserve for Losses and Loss Adjustment Expense
Compared to $370 million as of December 31, 2023 and $406 million as of March 31, 2023
$83 million
Other Operating Expenses
Compared to $95 million in Q4 2023 and $83 million in Q1 2023
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Financial Highlights
Radian Group Inc. Consolidated | March 31, | December 31, | September 30, | June 30, | March 31, |
(In millions, except per-share amounts) | 2024 | 2023 | 2023 | 2023 | 2023 |
Primary IIF | $270,986 | $269,979 | $269,511 | $266,859 | $261,450 |
Total assets | $7,760 | $7,594 | $7,379 | $7,307 | $7,204 |
Total investments | $6,327 | $6,086 | $5,886 | $5,896 | $5,838 |
Reserve for losses and LAE | $362 | $370 | $368 | $379 | $406 |
Holding company debt-to-capital(1) | 25.4 % | 24.4 % | 25.4 % | 25.3 % | 25.6 % |
Stockholders' equity (2) | $4,440 | $4,398 | $4,153 | $4,171 | $4,106 |
Shares outstanding | 152 | 153 | 156 | 157 | 157 |
Book value per share (3) | $29.30 | $28.71 | $26.69 | $26.51 | $26.23 |
Available / total holding company liquidity (4) | $1,094 / $1,369 | $992 / $1,267 | $1,004 / $1,279 | $1,010 / $1,285 | $956 / $1,231 |
PMIERs excess available assets (or "Cushion") (5) | $2,282 / 62 % | $2,260 / 62 % | $1,670 / 41 % | $1,662 / 41 % | $1,740 / 44 % |
- See slide 20 for further detail on the components and calculation of the holding company debt-to-capital ratio as of March 31, 2024.
- Includes accumulated other comprehensive income (loss) of $(362) million, $(331) million, $(521) million, $(424) million and $(387) million as of March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023 and March 31, 2023, respectively.
- Book value per share includes accumulated other comprehensive income (loss) of $(2.39) per share, $(2.16) per share, $(3.35) per share, $(2.69) per share and $(2.47) per share as of March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023 and March 31, 2023, 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
Q4 2023 to Q1 2024 (1)
$1.25
$1.00 | $0.05 | $0.98 | ||
$0.91 | $0.06 | |||
$0.06 | ||||
$0.75 | $(0.07) | $(0.03) | ||
$0.50
$0.25
$-
Q4 2023 | Net gains (losses) | Interest | Provision for | Other operating | Impairment of | Q1 2024 |
on investments | expense (2) | losses | expenses | goodwill |
and other financial
instruments
- All diluted net income (loss) per share items are calculated based on 157.2 million weighted-average diluted shares outstanding for the quarter ended December 31, 2023, except for the March 31, 2024 diluted net income (loss) per share, which was calculated based on 156.0 million weighted- average diluted shares outstanding for the quarter ended March 31, 2024.
- Impacted by the redemption in March 2024 of our Senior Notes due 2025, which resulted in a loss on extinguishment of debt of $4 million, primarily as a result of the acceleration of the remaining unamortized issuance costs on these notes, for the quarter ended March 31, 2024.
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AOCI Impact to Book Value Per Share
GAAP Book Value Per Share
$28.71 $29.30
$24.28 | $23.75 | $23.63 | $23.80 | $24.95 | $26.23 | $26.51 | $26.69 | |||
$22.14 | $23.02 | $23.48 | ||||||||
Book value per share
$0.61 | $0.95 | $0.84 | $0.68 | AOCI per share (1) | |||||||||
$(0.74) | |||||||||||||
$(1.98) | $(3.20) | $(2.91) | $(2.47) | $(2.69) | $(2.16) | $(2.39) | |||||||
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | $(3.35) | |||||||
Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | |||||||
'21 | '21 | '21 | '21 | '22 | '22 | '22 | '22 | '23 | '23 | '23 | '23 | '24 |
Contractual Maturities of Fixed-Maturities Available for Sale
As of March 31, 2024
Unrealized | |||
gain (loss) | |||
Amortized | recorded in | ||
$ in millions | Cost | Fair Value | AOCI |
Due in one year or less | $107 | $106 | $(1) |
Due after one year through five | 1,244 | 1,187 | (57) |
years (2) | |||
Due after five years through 10 | 994 | 908 | (86) |
years (2) | |||
Due after 10 years (2) | 881 | 703 | (178) |
Asset-backed and mortgage- | 2,548 | 2,411 | (137) |
backed securities (3) | |||
Total (4) | $5,774 | $5,315 | (459) |
Tax effect | (97) | ||
Accumulated other comprehensive | $(362) | ||
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. Changes in accumulated other comprehensive income (loss) are primarily from net unrealized gains or losses on investments as a result of decreases or increases, respectively, in market interest rates. We do not expect to realize these losses given that, as of March 31, 2024, 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 2.9 years.
- Total amortized cost and total fair value include $117 million and $106 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 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | Q1 2023 |
(In billions) | |||||
Beginning primary IIF | $ 270.0 | $ 269.5 | $ 266.9 | $ 261.5 | $ 261.0 |
NIW | 11.5 | 10.6 | 13.9 | 16.9 | 11.3 |
Cancellations and | (10.5) | (10.1) | (11.3) | (11.5) | (10.8) |
amortization | |||||
Persistency Rates
- Quarterly, Annualized (1)
- 12 Months Ended
90.0%
85.8%
85.0% | 84.4% | 84.2% |
83.5% |
85.3%
Ending primary IIF | $ 271.0 | $ 270.0 | $ 269.5 | $ 266.9 | $ 261.5 |
While increases in mortgage rates have generally reduced originations and NIW, high Persistency Rates have supported growth in IIF.
83.6% | 84.0% | 84.3% |
82.8%
81.6%
80.0%
75.0%
Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 |
- 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 02 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 May 2024 11:52:39 UTC.