Skip to main content

Radian Announces Fourth Quarter and Full Year 2020 Financial Results

Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended December 31, 2020, of $148.0 million, or $0.76 per diluted share. This compares with net income for the quarter ended December 31, 2019, of $161.2 million, or $0.79 per diluted share.

Net income for the full year 2020 was $393.6 million, or $2.00 per diluted share. This compares to net income for the full year 2019 of $672.3 million, or $3.20 per diluted share.

Key Financial Highlights (dollars in millions, except per-share amounts)

Quarter ended

Year ended

December 31,
2020

September 30,
2020

December 31,
2019

December 31,
2020

December 31,
2019

Net income (1)

$148.0

$135.1$161.2

$393.6$672.3

Diluted net income per share

$0.76$0.70$0.79

$2.00$3.20

Consolidated pretax income

$179.2$161.2$205.6

$479.4$849.0

Adjusted pretax operating income (2)

$171.0$145.0$224.0

$432.1$854.6

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

$0.69$0.59$0.86

$1.74$3.21

Return on equity(1)(4)

14.1%13.3%16.2%

9.4%17.8%

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

12.9%11.3%17.8%

8.2%17.9%

New Insurance Written (NIW) -
mortgage insurance

$29,781$33,320$19,953

$105,024$71,327

Net premiums earned - mortgage
insurance (5)

$286.8$283.4$298.5

$1,092.8$1,134.2

New defaults (6)

14,55220,50810,869

108,02540,985

Provision for losses - mortgage
insurance

$56.3$87.8$34.4

$483.3$131.5

Quarter ended

December 31,
2020

September 30,
2020

December 31,
2019

Book value per share (7)

$22.36

$21.52

$20.13

PMIERs Available Assets (8)

$4,700

$4,469

$3,630

PMIERs excess Available Assets (9)

$1,338

$970

$804

Total Holding Company Liquidity (10)

$1,371

$1,376

$921

Excess Available Resources to

Support PMIERs (11)

$2,674

$2,311

$1,690

Total investments

$6,788

$6,585

$5,659

Primary mortgage insurance in force

$246,144

$245,467

$240,558

Percentage of primary loans in

default (12)

5.2 %

5.9 %

2.0 %

Mortgage insurance loss reserves

$844

$822

$401

(1)

Net income for the fourth quarter and full year 2020 includes a pretax net gain on investments and other financial instruments of $17.4 million and $60.3 million, respectively, compared to net gain on investments and other financial instruments for the fourth quarter and full year 2019 of $4.3 million and $51.7 million, respectively. Net income for the fourth quarter and full year 2019 also includes a pre-tax, non-cash impairment of goodwill and other acquired intangible assets of $18.5 million related to the company's sale of Clayton Services in January 2020.

(2)

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

(3)

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

(4)

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

(5)

The fourth quarters of 2020 and 2019 include increases to premiums earned of $11.3 million and $17.4 million, respectively, related to changes in present value estimates for initial premiums on monthly policies that are deferred and not collected until cancellation. The impact of changes in this estimate in other periods is not material.

(6)

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

(7)

Accumulated other comprehensive income (loss) impacted book value per share by $1.38 per share as of December 31, 2020, and $0.55 per share as of December 31, 2019.

(8)

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

(9)

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

(10)

Represents Radian Group's total liquidity, including the $35 million minimum liquidity requirement and available capacity under its unsecured revolving credit facility.

(11)

Represents the sum of: (1) PMIERs excess Available Assets and (2) Total Holding Company Liquidity, net of the $35 million minimum liquidity requirement under the unsecured revolving credit facility.

(12)

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

Adjusted pretax operating income for the quarter ended December 31, 2020, was $171.0 million, or $0.69 per diluted share. This compares with adjusted pretax operating income for the quarter ended December 31, 2019 of $224.0 million, or $0.86 per diluted share.

Adjusted pretax operating income for the full year 2020, was $432.1 million, or $1.74 per diluted share. This compares to adjusted pretax operating income for the full year 2019 of $854.6 million, or $3.21 per diluted share.

Book value as of December 31, 2020 was $4.3 billion, an increase of 6 percent compared to $4.0 billion as of December 31, 2019. Book value per share at December 31, 2020, was $22.36, an increase of 11 percent compared to $20.13 at December 31, 2019.

“While our quarterly and full-year results for 2020 were impacted by the pandemic environment, during the year we successfully increased book value per share by 11%, wrote record-breaking levels of new mortgage insurance business and grew revenues in our real estate segment,” said Radian’s Chief Executive Officer Rick Thornberry. “I’m proud to say that our business model weathered the storm as designed, demonstrating the strength and resilience we and the mortgage industry have been building since the last financial crisis in 2009. In 2020, we also took steps to fortify our capital position and increase our financial flexibility, with a focus on lowering the risk profile and through-the-cycle volatility of the business.”

Thornberry added, “Our solid results reflect the dedication of our outstanding team, who continue to support our customers and each other in a demanding, high-volume market. I’m pleased with our ability to operate well with strong momentum throughout a challenging year.”

FOURTH QUARTER AND FULL YEAR HIGHLIGHTS

  • NIW was $29.8 billion for the fourth quarter of 2020, compared to $33.3 billion in the third quarter of 2020 and $20.0 billion in the prior-year quarter. NIW was $105.0 billion for the full year 2020, an increase of 47.2 percent compared to $71.3 billion for the prior year.
    • NIW for the full year 2020 represented record volume written on a flow basis for the company.
    • Of the $29.8 billion in NIW in the fourth quarter of 2020, 91 percent was written with monthly and other recurring premiums, compared to 90 percent in the third quarter of 2020, and 82 percent in the fourth quarter of 2019.
    • Refinances accounted for 35 percent of total NIW in the fourth quarter of 2020, compared to 30 percent in the third quarter of 2020, and 33 percent in the fourth quarter of 2019.
  • Total primary mortgage insurance in force as of December 31, 2020, grew to $246.1 billion, an increase of 0.3 percent compared to $245.5 billion as of September 30, 2020, and an increase of 2.3 percent compared to $240.6 billion as of December 31, 2019. The year over year increase included a 11.4 percent increase in monthly premium insurance in force and a 20.9 percent decline in single premium insurance in force.
    • Persistency, which is the percentage of mortgage insurance that remains in force after a twelve- month period, was 61.2 percent for the twelve months ended December 31, 2020, compared to 65.6 percent for the twelve months ended September 30, 2020 and 78.2 percent for the twelve months ended December 31, 2019.
    • Annualized persistency for the three months ended December 31, 2020, was 60.4 percent, compared to 60.0 percent for the three months ended September 30, 2020, and 75.0 percent for the three months ended December 31, 2019.
  • Net mortgage insurance premiums earned were $286.8 million for the quarter ended December 31, 2020, compared to $283.4 million for the quarter ended September 30, 2020, and $298.5 million for the quarter ended December 31, 2019. Net mortgage insurance premiums earned were $1.1 billion for the year ended December 31, 2020, compared to $1.1 billion for the year ended December 31, 2019.
    • The fourth quarters of 2020 and 2019, include increases to premiums earned of $11.3 million and $17.4 million, respectively, related to changes in present value estimates for initial premiums on monthly policies that are deferred and not collected until cancellation.
    • Mortgage insurance in force portfolio premium yield was 44.6 basis points in the fourth quarter of 2020, or 42.8 basis points excluding the impact of the fourth quarter 2020 premium adjustment described above. This compares to 43.2 basis points in the third quarter of 2020 and 50.0 basis points in the fourth quarter of 2019, or 47.1 basis points excluding the impact of the fourth quarter 2019 premium adjustment described above.
    • The impact of single premium cancellations before consideration of reinsurance represented 8.7 basis points of direct premium yield in the fourth quarter of 2020, 10.7 basis points in the third quarter of 2020, and 4.4 basis points in the fourth quarter of 2019.
    • Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 46.7 basis points in the fourth quarter of 2020, or 44.8 basis points excluding the impact of the fourth quarter 2020 premium adjustment described above. This compares to 46.6 basis points in the third quarter of 2020, and 50.0 basis points in the fourth quarter of 2019 or 47.1 basis points excluding the impact of the fourth quarter 2019 premium adjustment described above.
    • Additional details regarding premiums earned may be found in Exhibit D.
  • The mortgage insurance provision for losses was $56.3 million in the fourth quarter of 2020, compared to $87.8 million in the third quarter of 2020, and $34.4 million in the fourth quarter of 2019. The mortgage insurance provision for losses was $483.3 million for the year ended December 31, 2020, compared to $131.5 million for the year ended December 31, 2019. The increase for the full year 2020 primarily relates to a significant increase in the number of new default notices as a result of the effects of the COVID-19 pandemic, substantially all due to borrowers in forbearance programs. The number of new defaults increased significantly during the second quarter of 2020, and while new defaults during the fourth quarter remained elevated compared to levels before the pandemic, they decreased 76.9 percent from the second quarter of 2020 and 29.0 percent from the third quarter of 2020.
    • The number of primary delinquent loans was 55,537 as of December 31, 2020, compared to 62,737 as of September 30, 2020 and 21,266 as of December 31, 2019.
    • The primary mortgage insurance delinquency rate was 5.2 percent in the fourth quarter of 2020, compared to 5.9 percent in the third quarter of 2020, and 2.0 percent in the fourth quarter of 2019.
    • The loss ratio in the fourth quarter of 2020 was 19.6 percent, compared to 31.0 percent in the third quarter of 2020 and 11.5 percent in the fourth quarter of 2019.
    • Mortgage insurance loss reserves were $844.1 million as of December 31, 2020, compared to $821.7 million as of September 30, 2020, and $401.3 million as of December 31, 2019.
    • Total mortgage insurance claims paid were $40.6 million in the fourth quarter of 2020, compared to $10.8 million in the third quarter of 2020, and $28.5 million in the fourth quarter of 2019. Excluding the impact of commutations and settlements, claims paid were $8.4 million in the fourth quarter of 2020, compared to $11.1 million in the third quarter of 2020 and $24.8 million in the fourth quarter of 2019. For the full year 2020, total net claims paid were $97.6 million, compared to $132.2 million for the full year 2019.
  • Radian's Real Estate segment offers a broad array of title, valuation, asset management and other real estate services to market participants across the real estate value chain.
    • Total Real Estate segment revenues for the fourth quarter of 2020 were $23.6 million, compared to $29.8 million for the third quarter of 2020, and $22.0 million for the fourth quarter of 2019. Total revenues for the full year 2020 were $102.4 million, compared to $89.6 million for the same period of 2019.
    • Adjusted earnings before interest, income taxes, depreciation and amortization (Real Estate adjusted EBITDA) for the quarter ended December 31, 2020 was a loss of $7.0 million, compared to a loss of $1.1 million for the quarter ended September 30, 2020, and a loss of $2.4 million for the quarter ended December 31, 2019. Real Estate adjusted EBITDA for the full year 2020 was a loss of $7.6 million, compared to a loss of $5.5 million for the prior year period. Additional details regarding the non-GAAP measure Real Estate adjusted EBITDA may be found in Exhibits F and G.
    • The decrease in Real Estate adjusted EBITDA in the fourth quarter and full year 2020, compared to the fourth quarter and full year 2019, was primarily related to the negative impact of the COVID-19 pandemic on the operating environment for certain business lines and the continued strategic investment focused on our title and digital real estate businesses.
    • Due to certain changes in the composition of our reportable segments made in the fourth quarter of 2020, our results for Real Estate and All Other have been restated for all prior periods to reflect these changes. See Exhibit E for more details on these reclassifications.
  • Other operating expenses were $81.6 million in the fourth quarter of 2020, compared to $69.4 million in the third quarter of 2020, and $80.9 million in the fourth quarter of 2019. Other operating expenses were $280.7 million for the year ended December 31, 2020, compared to $306.1 million for the year ended December 31, 2019.
    • The increase in the fourth quarter of 2020 compared to the third quarter of 2020 was primarily related to a $6.5 million increase in non-operating items and adjustments to share-based incentive compensation. The increase in the fourth quarter of 2020 compared to the fourth quarter of 2019 was driven primarily by an increase in non-operating items, which was partially offset by lower incentive compensation expense.
    • The decrease for the full year 2020, compared to the full year 2019, was driven primarily by an increase in ceding commissions, lower professional services costs, and lower incentive compensation expense.

CAPITAL AND LIQUIDITY UPDATE

  • At December 31, 2020, Excess Available Resources to Support Private Mortgage Insurer Eligibility Requirements (PMIERs)were $2.7 billion or 80 percent above Radian Guaranty's Minimum Required Assets of $3.4 billion.

Radian Group

  • As of December 31, 2020, Radian Group maintained $1.1 billion of available liquidity. Total liquidity, which includes the company’s $267.5 million unsecured revolving credit facility, was $1.4 billion as of December 31, 2020.
  • For the full year 2020, the company repurchased 11.0 million shares of Radian Group common stock at a total cost of $226.3 million, including commissions. In March 2020, the company temporarily suspended purchases under its share repurchase program by canceling its then current 10b5-1 plan. The company may initiate a new 10b5-1 plan at its discretion in the future, during an open trading window and in accordance with SEC rules. As of December 31, 2020, purchase authority of up to $198.9 million remained available under this program. The current share repurchase authorization expires on August 31, 2021.
  • On November 11, 2020, Radian Group's board of directors authorized a regular quarterly dividend on its common stock in the amount of $0.125 per share and the dividend was paid on December 4, 2020. On February 10, 2021 Radian Group's board of directors authorized a regular quarterly dividend on its common stock in the amount of $0.125 per share and the dividend will be paid on March 4, 2021.
  • For the full year 2020, Radian paid $97.5 million in dividends on its common stock.

Radian Guaranty

  • As previously announced, in October 2020, Radian Guaranty entered into its fourth fully collateralized mortgage insurance-linked-note (ILN) reinsurance transaction, in which the company obtained $390.3 million of credit risk protection from Eagle Re 2020-2 Ltd. (Eagle Re) through the issuance by Eagle Re of ILNs to eligible third-party capital markets investors in an unregistered private offering. Eagle Re is a special purpose insurer domiciled in Bermuda and is not a subsidiary or affiliate of Radian Guaranty. Radian Guaranty's related PMIERs credit under this ILN transaction remains subject to GSE approval.
  • At December 31, 2020, Radian Guaranty’s Available Assets under PMIERs totaled approximately $4.7 billion, resulting in excess available resources or a “cushion” of $1.3 billion, or 40 percent, over its Minimum Required Assets of $3.4 billion.
  • As of December 31, 2020, 66 percent of Radian Guaranty's primary mortgage insurance risk in force is subject to some form of risk distribution, providing a $1.4 billion reduction of Minimum Required Assets under PMIERs.

CONFERENCE CALL

Radian will discuss fourth quarter and year-end 2020 financial results in a conference call tomorrow, Thursday, February 25, 2021, at 10:00 a.m. Eastern standard time. The conference call will be broadcast live over the Internet at https://radian.com/who-we-are/for-investors/webcasts or at www.radian.com. The call may also be accessed by dialing 888.771.4371 inside the U.S., or 847.585.4405 for international callers, using passcode 50081023 by referencing Radian.

A digital replay of the webcast will be available on the Radian website approximately two hours after the live broadcast ends for a period of two weeks at https://radian.com/who-we-are/for-investors/webcasts using passcode 50081023.

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

NON-GAAP FINANCIAL MEASURES

Radian believes that adjusted pretax operating income, 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 (loss) 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 gains (losses) from the sale of lines of business and acquisition-related income and expenses. Adjusted diluted net operating income (loss) per share is calculated by dividing (i) adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the Company’s statutory tax rate, by (ii) the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Adjusted net operating return on equity is calculated by dividing annualized adjusted pretax operating income (loss), net of taxes computed using the Company's statutory tax rate, by average stockholders' equity, based on the average of the beginning and ending balances for each period presented.

In addition to the above non-GAAP measures for the consolidated company, we also have presented as supplemental information a non-GAAP measure for our Real Estate segment, representing a measure of earnings before interest, income tax provision (benefit), depreciation and amortization ("EBITDA"). We calculate Real Estate 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, Real Estate adjusted EBITDA margin is calculated by dividing Real Estate adjusted EBITDA by GAAP total revenue for the Real Estate segment. Real Estate adjusted EBITDA and Real Estate 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 Real Estate segment.

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

ABOUT RADIAN

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

FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS (Unaudited)

Exhibit A:Condensed Consolidated Statements of Operations Trend Schedule
Exhibit B:Net Income Per Share Trend Schedule
Exhibit C:Condensed Consolidated Balance Sheets
Exhibit D:Net Premiums Earned
Exhibit E:Segment Information
Exhibit F:Definition of Consolidated Non-GAAP Financial Measures
Exhibit G:Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit H:Mortgage Supplemental Information
New Insurance Written
Exhibit I:Mortgage Supplemental Information
Primary Insurance in Force and Risk in Force
Exhibit J:Mortgage Supplemental Information
Claims and Reserves
Exhibit K:Mortgage Supplemental Information
Default Statistics
Exhibit L:Mortgage Supplemental Information
Reinsurance Programs

Radian Group Inc. and Subsidiaries

Condensed Consolidated Statements of Operations Trend Schedule

Exhibit A (page 1 of 2)

2020

2019

(In thousands, except per-share amounts)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Revenues:

Net premiums earned

$

302,140

(1

)

$

286,471

$

249,295

$

277,415

$

301,486

Services revenue

11,440

(1

)

33,943

28,075

31,927

40,031

Net investment income

38,115

36,255

38,723

40,944

41,432

Net gains (losses) on investments and other financial instruments

17,376

17,652

47,276

(22,027

)

4,257

Other income

790

913

1,072

822

818

Total revenues

369,861

375,234

364,441

329,081

388,024

Expenses:

Provision for losses

56,664

88,084

304,418

35,951

34,619

Policy acquisition costs

7,395

10,166

6,015

7,413

6,783

Cost of services

21,600

24,353

17,972

22,141

27,278

Other operating expenses

81,641

69,377

60,582

69,110

80,894

Interest expense

21,169

21,088

16,699

12,194

12,160

Impairment of goodwill

4,828

Amortization and impairment of other acquired intangible assets

2,225

961

979

979

15,823

Total expenses

190,694

214,029

406,665

147,788

182,385

Pretax income (loss)

179,167

161,205

(42,224

)

181,293

205,639

Income tax provision (benefit)

31,154

26,102

(12,273

)

40,832

44,455

Net income (loss)

$

148,013

$

135,103

$

(29,951

)

$

140,461

$

161,184

Diluted net income (loss) per share

$

0.76

$

0.70

$

(0.15

)

$

0.70

$

0.79

(1)

Includes the impact of a line item reclassification recorded in the fourth quarter to correct earlier periods in 2020, which increased net premiums earned and decreased services revenue by $7.8 million each. See Exhibit E for additional detail by period related to this out-of-period adjustment reflected in our All Other results.

Radian Group Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

Exhibit A (page 2 of 2)

 

Year Ended
December 31,

(In thousands, except per-share amounts)

2020

2019

Revenues:

Net premiums earned - insurance

$

1,115,321

$

1,145,349

Services revenue

105,385

154,596

Net investment income

154,037

171,796

Net gains (losses) on investments and other financial instruments

60,277

51,719

Other income

3,597

3,495

Total revenues

1,438,617

1,526,955

Expenses:

Provision for losses

485,117

132,031

Policy acquisition costs

30,989

25,314

Cost of services

86,066

108,324

Other operating expenses

280,710

306,129

Interest expense

71,150

56,310

Loss on extinguishment of debt

22,738

Impairment of goodwill

4,828

Amortization and impairment of other intangible assets

5,144

22,288

Total expenses

959,176

677,962

Pretax income

479,441

848,993

Income tax provision

85,815

176,684

Net income

$

393,626

$

672,309

Diluted net income per share

$

2.00

$

3.20

Radian Group Inc. and Subsidiaries

Net Income Per Share Trend Schedule

Exhibit B

 

The calculation of basic and diluted net income (loss) per share was as follows:

2020

2019

(In thousands, except per-share amounts)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Net income (loss) —basic and diluted

$

148,013

$

135,103

$

(29,951

)

$

140,461

$

161,184

Average common shares outstanding—basic (1)

193,248

193,176

193,299

200,161

203,431

Dilutive effect of stock-based compensation arrangements (2)

1,415

980

1,658

1,734

Adjusted average common shares outstanding—diluted

194,663

194,156

193,299

201,819

205,165

Basic net income (loss) per share

$

0.77

$

0.70

$

(0.15

)

$

0.70

$

0.79

Diluted net income (loss) per share

$

0.76

$

0.70

$

(0.15

)

$

0.70

$

0.79

(1)

Includes the impact of fully vested shares under our share-based compensation arrangements.

(2)

There were no dilutive shares for the three months ended June 30, 2020, as a result of our net loss for the period. The following number of shares of our common stock equivalents issued under our share-based compensation arrangements were not included in the calculation of diluted net income (loss) per share because they were anti-dilutive:

2020

2019

(In thousands)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Shares of common stock equivalents

324

710

2,295

132

Year Ended December 31,

(In thousands, except per-share amounts)

2020

2019

Net income - basic and diluted

$

393,626

$

672,309

Average common shares outstanding—basic (1)

195,443

208,773

Dilutive effect of stock-based compensation arrangements (2)

1,199

1,567

Adjusted average common shares outstanding—diluted

196,642

210,340

Basic net income per share

$

2.01

$

3.22

Diluted net income per share

$

2.00

$

3.20

(1)

Includes the impact of fully vested shares under our share-based compensation arrangements.

(2)

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:

Year Ended December 31,

(In thousands)

2020

2019

Shares of common stock equivalents

865

221

Radian Group Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

Exhibit C

 

December 31,

September 30,

June 30,

March 31,

December 31,

(In thousands, except per-share amounts)

2020

2020

2020

2020

2019

Assets:

Investments

$

6,788,442

$

6,584,577

$

6,431,350

$

5,608,627

$

5,658,747

Cash

87,915

82,020

68,387

54,108

92,729

Restricted cash

6,231

4,424

16,279

7,817

3,545

Accrued investment income

34,047

36,093

34,179

32,559

32,333

Accounts and notes receivable

121,294

145,164

110,722

123,381

93,630

Reinsurance recoverables

73,202

66,515

56,852

17,722

16,976

Deferred policy acquisition costs

18,305

17,926

21,774

20,855

20,759

Property and equipment, net

80,457

88,717

89,143

87,915

87,879

Prepaid reinsurance premium

267,638

295,062

330,476

356,104

363,856

Goodwill and other acquired intangible assets, net

23,043

25,268

26,229

27,208

28,187

Other assets

447,447

431,579

383,918

354,136

409,672

Total assets

$

7,948,021

$

7,777,345

$

7,569,309

$

6,690,432

$

6,808,313

Liabilities and stockholders’ equity:

Unearned premiums

$

448,791

$

501,787

$

561,280

$

605,045

$

626,822

Reserve for losses and loss adjustment expense

848,413

825,792

738,885

418,202

404,765

Senior notes

1,405,674

1,404,759

1,403,857

887,584

887,110

FHLB advances

176,483

141,058

175,122

173,760

134,875

Reinsurance funds withheld

278,555

318,773

312,350

302,551

291,829

Net deferred tax liability

213,897

166,136

126,883

90,500

71,084

Other liabilities

291,855

296,661

264,927

348,282

343,105

Total liabilities

3,663,668

3,654,966

3,583,304

2,825,924

2,759,590

Common stock

210

210

210

208

219

Treasury stock

(910,115

)

(909,745

)

(909,738

)

(902,024

)

(901,657

)

Additional paid-in capital

2,245,897

2,238,869

2,232,949

2,231,670

2,449,884

Retained earnings

2,684,636

2,561,076

2,450,423

2,504,853

2,389,789

Accumulated other comprehensive income

263,725

231,969

212,161

29,801

110,488

Total stockholders’ equity

4,284,353

4,122,379

3,986,005

3,864,508

4,048,723

Total liabilities and stockholders’ equity

$

7,948,021

$

7,777,345

$

7,569,309

$

6,690,432

$

6,808,313

Shares outstanding

191,606

191,556

191,492

190,387

201,164

Book value per share

$

22.36

$

21.52

$

20.82

$

20.30

$

20.13

Debt to capital ratio (1)

24.7

%

25.4

%

26.0

%

18.7

%

18.0

%

Risk to capital ratio-Radian Guaranty only

12.7:1

13.2:1

13.3:1

13.8:1

13.6:1

(1)

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

Radian Group Inc. and Subsidiaries

Net Premiums Earned

Exhibit D (page 1 of 2)

 

2020

2019

(In thousands)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Premiums earned:

Direct - Mortgage:

Premiums earned, excluding revenue from cancellations (1)

$

272,331

$

259,889

$

263,468

$

274,647

$

295,845

Single Premium Policy cancellations

53,526

65,667

50,023

24,133

26,479

Total direct - Mortgage (1)

325,857

325,556

313,491

298,780

322,324

Assumed - Mortgage: (2)

2,615

2,946

3,197

3,456

2,837

Ceded - Mortgage:

Premiums earned, excluding revenue from cancellations

(27,229

)

(25,120

)

(26,493

)

(28,609

)

(28,055

)

Single Premium Policy cancellations (3)

(15,197

)

(18,679

)

(14,424

)

(7,183

)

(7,843

)

Profit commission - other (4)

770

(1,347

)

(28,175

)

8,555

9,241

Total ceded premiums, net of profit commission - Mortgage (5)

(41,656

)

(45,146

)

(69,092

)

(27,237

)

(26,657

)

Net premiums earned - Mortgage (1)

286,816

283,356

247,596

274,999

298,504

Net premiums earned - Real Estate (6)

7,572

7,099

4,734

3,149

3,343

Net premiums earned - All Other (6)

7,752

(3,984

)

(3,035

)

(733

)

(361

)

Net premiums earned (1)

$

302,140

$

286,471

$

249,295

$

277,415

$

301,486

(1)

The fourth quarters of 2020 and 2019 include increases to premiums earned of $11.3 million and $17.4 million, respectively, related to changes in present value estimates for initial premiums on monthly policies that are deferred and not collected until cancellation. The impact of changes in this estimate in other periods is not material.

(2)

Relates primarily to premiums earned from our participation in certain credit risk transfer programs.

(3)

Includes the impact of related profit commissions.

(4)

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

(5)

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

(6)

See Exhibit E for additional information on changes that impacted our reported segment results for all periods.

Radian Group Inc. and Subsidiaries

Net Premiums Earned - Insurance

Exhibit D (page 2 of 2)

 

Year Ended
December 31,

(In thousands)

2020

2019

Premiums earned:

Direct - Mortgage:

Premiums earned, excluding revenue from cancellations

$

1,070,335

$

1,154,045

(1

)

Single Premium Policy cancellations

193,349

79,483

Total direct - Mortgage

1,263,684

1,233,528

Assumed - Mortgage: (2)

12,214

10,382

Ceded - Mortgage:

Premiums earned, excluding revenue from cancellations

(107,451

)

(134,946

)

(1

)

Single Premium Policy cancellations (3)

(55,483

)

(23,766

)

Profit commission - other (4)

(20,197

)

49,016

(1

)

Total ceded premiums, net of profit commission - Mortgage (5)

(183,131

)

(109,696

)

Net premiums earned - Mortgage

1,092,767

1,134,214

Net premiums earned - Real Estate (6)

22,554

11,976

Net premiums earned - All Other (6)

(841

)

Net premiums earned

$

1,115,321

$

1,145,349

(1)

Includes a cumulative adjustment to unearned premiums related to an update to the amortization rates used to recognize revenue for Single Premium Policies.

(2)

Relates primarily to premiums earned from our participation in certain credit risk transfer programs.

(3)

Includes the impact of related profit commissions.

(4)

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

(5)

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

(6)

See Exhibit E for additional information on changes that impacted our reported segment results for all periods.

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 1 of 6)

Summarized financial information concerning our operating segments as of and for the periods indicated is as follows. For a definition of adjusted pretax operating income and Services adjusted EBITDA, along with reconciliations to consolidated GAAP measures, see Exhibits F and G.

Mortgage (1)

2020

2019

(In thousands)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Net premiums written (2) (3)

$

261,244

$

259,278

$

229,458

$

260,974

$

287,952

(Increase) decrease in unearned premiums

25,572

24,078

18,138

14,025

10,552

Net premiums earned

286,816

283,356

247,596

274,999

298,504

Services revenue

3,717

3,914

3,918

3,216

2,936

Net investment income

34,235

32,054

34,708

36,198

37,818

Other income

735

689

721

671

719

Total

325,503

320,013

286,943

315,084

339,977

Provision for losses

56,312

87,753

304,021

35,246

34,411

Policy acquisition costs

7,395

10,166

6,015

7,413

6,783

Cost of services

3,245

2,908

2,133

1,757

1,713

Other operating expenses before allocated corporate operating expenses (4)

21,974

21,635

18,537

23,593

32,604

Interest expense (5) (7)

21,169

21,088

16,699

12,194

12,160

Total (6)

110,095

143,550

347,405

80,203

87,671

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

215,408

176,463

(60,462

)

234,881

252,306

Allocation of corporate operating expenses

31,102

29,127

25,359

29,214

27,394

Adjusted pretax operating income (loss)

$

184,306

$

147,336

$

(85,821

)

$

205,667

$

224,912

Real Estate (1) (7)

2020

2019

(In thousands)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Net premiums earned (8)

$

7,572

$

7,099

$

4,734

$

3,149

$

3,343

Services revenue (6) (8)

15,958

22,627

17,688

23,251

18,511

Net investment income

43

67

126

125

144

Total

23,573

29,793

22,548

26,525

21,998

Provision for losses

392

370

426

743

238

Cost of services

15,706

18,085

12,681

14,989

13,904

Other operating expenses before allocated corporate operating expenses (4)

15,238

13,136

10,527

10,579

10,803

Total

31,336

31,591

23,634

26,311

24,945

Adjusted pretax operating income before allocated corporate operating expenses (9)

(7,763

)

(1,798

)

(1,086

)

214

(2,947

)

Allocation of corporate operating expenses

3,369

3,248

2,823

3,367

2,675

Adjusted pretax operating income (loss)

$

(11,132

)

$

(5,046

)

$

(3,909

)

$

(3,153

)

$

(5,622

)

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 2 of 6)

 

All Other (1) (7) (10)

2020

2019

(In thousands)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Net premiums earned (8)

$

7,752

$

(3,984

)

$

(3,035

)

$

(733

)

$

(361

)

Services revenue (6) (8)

(7,963

)

8,267

6,579

5,652

18,874

Net investment income

3,837

4,134

3,889

4,621

3,470

Other income

55

224

104

151

99

Total

3,681

8,641

7,537

9,691

22,082

Cost of services

2,835

4,127

3,177

5,500

11,871

Other operating expenses (4)

3,033

1,824

3,129

2,106

5,518

Total

5,868

5,951

6,306

7,606

17,389

Adjusted pretax operating income (loss)

$

(2,187

)

$

2,690

$

1,231

$

2,085

$

4,693

(1)

Certain organizational changes implemented in the first quarter of 2020 following the sale of Clayton caused the composition of our reportable segments to change, including all activity related to Clayton prior to the sale and certain other impacts now being reflected in All Other activities. These changes to our reportable segments have been reflected in our segment operating results for all periods presented.

(2)

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

(3)

The fourth quarters of 2020 and 2019 include increases to premiums earned of $11.3 million and $17.4 million, respectively, related to changes in present value estimates for initial premiums on monthly policies that are deferred and not collected until cancellation. The impact of changes in this estimate in other periods is not material.

(4)

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

(5)

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

(6)

Inter-segment information:

2020

2019

(In thousands)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Inter-segment revenue included in:

Mortgage

$

$

$

$

83

$

160

Real Estate

86

98

91

87

87

All Other

186

767

19

22

43

Total inter-segment revenue

$

272

$

865

$

110

$

192

$

290

Inter-segment expense included in:

Mortgage

$

86

$

98

$

91

$

87

$

79

Real Estate

186

767

19

22

16

All Other

83

195

Total inter-segment expense

$

272

$

865

$

110

$

192

$

290

See notes continued on next page.

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 3 of 6)

 

Notes continued from prior page.

 

(7)

The wind-down of our traditional appraisal business announced in the fourth quarter of 2020 caused the composition of our reportable segments to change, including all activity related to that business and certain other adjustments to services revenue now being reflected in All Other activities. In addition, there were certain other immaterial reclassifications to net investment income and interest expense. These changes to our reportable segments have been reflected in our segment operating results for all periods presented.

(8)

In the fourth quarter of 2020, we reclassified certain revenue previously reflected in the Real Estate segment results as services revenue to net premiums earned. As a result, for all periods presented, on the Real Estate segment, net premiums earned has been increased and services revenue has been decreased, with offsetting adjustments reflected in All Other activities.

(9)

Supplemental information for Real Estate adjusted EBITDA (see definition in Exhibit F):

2020

2019

(In thousands)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Adjusted pretax operating income (loss) before corporate allocations

$

(7,763

)

$

(1,798

)

$

(1,086

)

$

214

$

(2,947

)

Depreciation and amortization

744

679

771

663

552

Real Estate adjusted EBITDA

$

(7,019

)

$

(1,119

)

$

(315

)

$

877

$

(2,395

)

(10)

All Other activities include: (i) income (losses) from assets held by our holding company; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; (iii) for all periods prior to it's sale in the first quarter of 2020, revenue and expenses related to Clayton; (iv) revenue and expenses from our traditional appraisal business; and (v) other immaterial revenue and expense items.

Selected Mortgage Key Ratios

2020

2019

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Loss ratio (1)

19.6

%

31.0

%

122.8

%

12.8

%

11.5

%

Expense ratio (1)

21.1

%

21.5

%

20.2

%

21.9

%

22.4

%

(1)

Calculated on a GAAP basis using net premiums earned.

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 4 of 6)

 

Mortgage (1)

Year Ended
December 31,

(In thousands)

2020

2019

Net premiums written (2)

$

1,010,954

$

1,075,450

Decrease in unearned premiums

81,813

58,764

(3

)

Net premiums earned

1,092,767

1,134,214

Services revenue

14,765

8,134

Net investment income

137,195

151,491

Other income

2,816

2,798

Total

1,247,543

1,296,637

Provision for losses

483,332

131,473

Policy acquisition costs

30,989

25,314

Cost of services

10,043

4,961

Other operating expenses before allocated corporate operating expenses (4)

85,739

121,647

Interest expense (5)

71,150

56,310

Total (6)

681,253

339,705

Adjusted pretax operating income before allocated corporate operating expenses

566,290

956,932

Allocation of corporate operating expenses

114,802

104,078

Adjusted pretax operating income

$

451,488

$

852,854

Real Estate (1) (7)

Year Ended
December 31,

(In thousands)

2020

2019

Net premiums earned (8)

$

22,554

$

11,976

Services revenue (6) (8)

79,524

76,941

Net investment income

361

680

Total

102,439

89,597

Provision for losses

1,931

749

Cost of services

61,461

56,638

Other operating expenses before allocated corporate operating expenses (4)

49,480

40,032

Total

112,872

97,419

Adjusted pretax operating income (loss) before allocated corporate operating expenses (9)

(10,433

)

(7,822

)

Allocation of corporate operating expenses

12,807

10,165

Adjusted pretax operating income (loss)

$

(23,240

)

$

(17,987

)

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 5 of 6)

 

All Other (1) (7) (10)

Year Ended
December 31,

(In thousands)

2020

2019

Net premiums earned (8)

$

$

(841

)

Services revenue (6) (8)

12,535

70,961

Net investment income

16,481

19,625

Other income

534

697

Total

29,550

90,442

Cost of services

15,639

47,625

Other operating expenses (4)

10,092

23,049

Total

25,731

70,674

Adjusted pretax operating income

$

3,819

$

19,768

(1)

Certain organizational changes implemented in the first quarter of 2020 following the sale of Clayton caused the composition of our reportable segments to change, including all activity related to Clayton prior to the sale and certain other impacts now being reflected in All Other activities. These changes to our reportable segments have been reflected in our segment operating results for all periods presented.

(2)

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

(3)

Includes a cumulative adjustment to unearned premiums related to an update to the amortization rates used to recognize revenue for Single Premium Policies.

(4)

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

(5)

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

(6)

Inter-segment information:

Year Ended
December 31,

(In thousands)

2020

2019

Inter-segment revenue included in:

Mortgage

$

83

$

502

Real Estate

362

87

All Other

994

851

Total inter-segment revenue

$

1,439

$

1,440

Inter-segment expense included in:

Mortgage

$

362

$

539

Real Estate

994

16

All Other

83

885

Total inter-segment expense

$

1,439

$

1,440

See notes continued on next page.

Radian Group Inc. and Subsidiaries
Segment Information
Exhibit E (page 6 of 6)

Notes continued from prior page.

(7)

The wind-down of our traditional appraisal business announced in the fourth quarter of 2020 caused the composition of our reportable segments to change, including all activity related to that business and certain other adjustments to services revenue now being reflected in All Other activities. These changes to our reportable segments have been reflected in our segment operating results for all periods presented.

(8)

In the fourth quarter of 2020, we reclassified certain revenue previously reflected in the Real Estate segment results as services revenue to net premiums earned. As a result, for all periods presented, on the Real Estate segment, net premiums earned has been increased and services revenue has been decreased, with offsetting adjustments reflected in All Other activities.

(9)

Supplemental information for Real Estate adjusted EBITDA (see definition in Exhibit F):

Year Ended
December 31,

(In thousands)

2020

2019

Adjusted pretax operating income (loss) before corporate allocations

$

(10,433

)

$

(7,822

)

Depreciation and amortization

2,857

2,321

Real Estate adjusted EBITDA

$

(7,576

)

$

(5,501

)

(10)

All Other activities include: (i) income (losses) from assets held by our holding company; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; (iii) for all periods prior to it's sale in the first quarter of 2020, revenue and expenses related to Clayton; (iv) revenue and expenses from our traditional appraisal business; and (v) other immaterial revenue and expense items.

Selected Mortgage Key Ratios

Year Ended
December 31,

2020

2019

Loss ratio (1)

44.2

%

11.6

%

Expense ratio (1)

21.2

%

22.1

%

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

 

Adjusted pretax operating income (loss) is defined as GAAP consolidated pretax income (loss) excluding the effects of: (i) net gains (losses) on investments and other financial instruments; (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 gains (losses) from the sale of lines of business and acquisition-related income and expenses. Adjusted diluted net operating income (loss) per share is calculated by dividing (i) adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the Company’s statutory tax rate, by (ii) the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Adjusted net operating return on equity is calculated by dividing annualized adjusted pretax operating income (loss), net of taxes computed using the Company’s statutory tax rate, by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.

 

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

 

(1)

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

 

Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these realized and unrealized gains or losses and changes in fair value of other financial instruments. We do not view them to be indicative of our fundamental operating activities.

 

(2)

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

 

(3)

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

 

(4)

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

Radian Group Inc. and Subsidiaries
Definition of Consolidated Non-GAAP Financial Measures
Exhibit F (page 2 of 2)

In addition to the above non-GAAP measures for the consolidated company, we also have presented as supplemental information a non-GAAP measure for our Real Estate segment, representing a measure of earnings before interest, income tax provision (benefit), depreciation and amortization (“EBITDA”). We calculate Real Estate adjusted EBITDA by using adjusted pretax operating income (loss) as described above, further adjusted to remove the impact of depreciation and corporate allocations for interest and operating expenses. In addition, Real Estate adjusted EBITDA margin is calculated by dividing Real Estate adjusted EBITDA by GAAP total revenue for the Real Estate segment. Real Estate adjusted EBITDA and Real Estate 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 Real Estate segment.

 

See Exhibit G for the reconciliation of the most comparable GAAP measures, consolidated pretax income (loss), diluted net income (loss) per share and return on equity to our non-GAAP financial measures for the consolidated company, adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity, respectively. Exhibit G also contains the reconciliation of the most comparable GAAP measure, net income (loss), to Real Estate adjusted EBITDA.

 

Total adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share, adjusted net operating return on equity, Real Estate adjusted EBITDA and Real Estate adjusted EBITDA margin should not be considered in isolation or viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share, return on equity or net income (loss). Our definitions of adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share, adjusted net operating return on equity, Real Estate adjusted EBITDA or Real Estate 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 6)

 

Reconciliation of Consolidated Pretax Income to Adjusted Pretax Operating Income

 

2020

2019

(In thousands)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Consolidated pretax income (loss)

$

179,167

$

161,205

$

(42,224

)

$

181,293

$

205,639

Less reconciling income (expense) items:

Net gains (losses) on investments and other financial instruments

17,376

17,652

47,276

(22,027

)

4,257

Impairment of goodwill

(4,828

)

Amortization and impairment of other acquired intangible assets

(2,225

)

(961

)

(979

)

(979

)

(15,823

)

Impairment of other long-lived assets and other non-operating items (1)

(6,971

)

(466

)

(22

)

(300

)

(1,950

)

Total adjusted pretax operating income (loss) (2)

$

170,987

$

144,980

$

(88,499

)

$

204,599

$

223,983

(1)

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

(2)

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

2020

2019

(In thousands)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Adjusted pretax operating income (loss):

Mortgage segment

$

184,306

$

147,336

$

(85,821

)

$

205,667

$

224,912

Real Estate segment

(11,132

)

(5,046

)

(3,909

)

(3,153

)

(5,622

)

All Other activities

(2,187

)

2,690

1,231

2,085

4,693

Total adjusted pretax operating income (loss)

$

170,987

$

144,980

$

(88,499

)

$

204,599

$

223,983

Radian Group Inc. and Subsidiaries

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit G (page 2 of 6)

 

Reconciliation of Diluted Net Income (Loss) Per Share to Adjusted Diluted Net Operating Income (Loss) Per Share

2020

2019

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Diluted net income (loss) per share

$

0.76

$

0.70

$

(0.15

)

$

0.70

$

0.79

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

Net gains (losses) on investments and other financial instruments

0.09

0.09

0.24

(0.11

)

0.02

Impairment of goodwill

(0.02

)

Amortization and impairment of other acquired intangible assets

(0.01

)

(0.01

)

(0.08

)

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

(0.04

)

(0.01

)

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

(0.01

)

(0.02

)

(0.05

)

0.02

0.02

Difference between statutory and effective tax rate

0.04

0.04

0.03

(0.01

)

Per-share impact of reconciling income (expense) items

0.07

0.11

0.21

(0.10

)

(0.07

)

Adjusted diluted net operating income (loss) per share (1)

$

0.69

$

0.59

$

(0.36

)

$

0.80

$

0.86

(1)

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

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

2020

2019

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Return on equity (1)

14.1

%

13.3

%

(3.1

)%

14.2

%

16.2

%

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

Net gains (losses) on investments and other financial instruments

1.7

1.7

4.8

(2.2

)

0.4

Impairment of goodwill

(0.5

)

Amortization and impairment of other acquired intangible assets

(0.2

)

(0.1

)

(0.1

)

(0.1

)

(1.6

)

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

(0.7

)

(0.2

)

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

(0.2

)

(0.3

)

(1.0

)

0.5

0.4

Difference between statutory and effective tax rate

0.6

0.7

0.3

(0.3

)

(0.1

)

Impact of reconciling income (expense) items

1.2

2.0

4.0

(2.1

)

(1.6

)

Adjusted net operating return on equity

12.9

%

11.3

%

(7.1

)%

16.3

%

17.8

%

(1)

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

(2)

Annualized, as a percentage of average stockholders’ equity.

(3)

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

Radian Group Inc. and Subsidiaries

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit G (page 3 of 6)

 

Reconciliation of Net Income (Loss) to Real Estate Adjusted EBITDA

 

2020

2019

(In thousands)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Net income (loss)

$

148,013

$

135,103

$

(29,951

)

$

140,461

$

161,184

Less reconciling income (expense) items:

Net gains (losses) on investments and other financial instruments

17,376

17,652

47,276

(22,027

)

4,257

Impairment of goodwill

(4,828

)

Amortization and impairment of other acquired intangible assets

(2,225

)

(961

)

(979

)

(979

)

(15,823

)

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

(6,971

)

(466

)

(22

)

(300

)

(1,950

)

Income tax (provision) benefit

(31,154

)

(26,102

)

12,273

(40,832

)

(44,455

)

Mortgage adjusted pretax operating income (loss)

184,306

147,336

(85,821

)

205,667

224,912

All Other adjusted pretax operating income

(2,187

)

2,690

1,231

2,085

4,693

Real Estate adjusted pretax operating income (loss)

(11,132

)

(5,046

)

(3,909

)

(3,153

)

(5,622

)

Less reconciling income (expense) items:

Allocation of corporate operating expenses to Real Estate

(3,369

)

(3,248

)

(2,823

)

(3,367

)

(2,675

)

Real Estate depreciation and amortization

(744

)

(679

)

(771

)

(663

)

(552

)

Real Estate adjusted EBITDA

$

(7,019

)

$

(1,119

)

$

(315

)

$

877

$

(2,395

)

Radian Group Inc. and Subsidiaries

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit G (page 4 of 6)

 

Reconciliation of Consolidated Pretax Income to Adjusted Pretax Operating Income

 

Year Ended
December 31,

(In thousands)

2020

2019

Consolidated pretax income

$

479,441

$

848,993

Less reconciling income (expense) items:

Net gains (losses) on investments and other financial instruments

60,277

51,719

Loss on extinguishment of debt

(22,738

)

Impairment of goodwill

(4,828

)

Amortization and impairment of other acquired intangible assets

(5,144

)

(22,288

)

Impairment of other long-lived assets and other non-operating items (1)

(7,759

)

(7,507

)

Total adjusted pretax operating income (2)

$

432,067

$

854,635

(1)

The amounts for both 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 consists of adjusted pretax operating income (loss) for each reportable segment and All Other activities as follows:

Year Ended
December 31,

(In thousands)

2020

2019

Adjusted pretax operating income (loss):

Mortgage segment

$

451,488

$

852,854

Real Estate segment

(23,240

)

(17,987

)

All Other activities

3,819

19,768

Total adjusted pretax operating income

$

432,067

$

854,635

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

 

Year Ended
December 31,

2020

2019

Diluted net income per share

$

2.00

$

3.20

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

Net gains (losses) on investments and other financial instruments

0.31

0.25

Loss on extinguishment of debt

(0.11

)

Impairment of goodwill

(0.02

)

Amortization and impairment of other acquired intangible assets

(0.03

)

(0.11

)

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

(0.04

)

(0.04

)

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

(0.05

)

0.01

Difference between statutory and effective tax rate

0.07

0.01

Per-share impact of other income (expense) items

0.26

(0.01

)

Adjusted diluted net operating income per share (1)

$

1.74

$

3.21

(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 5 of 6)

 

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

 

Year Ended
December 31,

2020

2019

Return on equity (1)

9.4

%

17.8

%

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

Net gains (losses) on investments and other financial instruments

1.4

1.4

Loss on extinguishment of debt

(0.6

)

Impairment of goodwill

(0.1

)

Amortization and impairment of other acquired intangible assets

(0.1

)

(0.6

)

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

(0.2

)

(0.2

)

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

(0.2

)

Difference between statutory and effective tax rate (3)

0.3

Impact of reconciling income (expense) items

1.2

(0.1

)

Adjusted net operating return on equity

8.2

%

17.9

%

(1)

Calculated by dividing net income by average stockholders’ equity.

(2)

As a percentage of average stockholders’ equity.

(3)

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

Radian Group Inc. and Subsidiaries

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit G (page 6 of 6)

 

Reconciliation of Net Income to Real Estate Adjusted EBITDA

 

Year Ended
December 31,

(In thousands)

2020

2019

Net income

$

393,626

$

672,309

Less reconciling income (expense) items:

Net gains (losses) on investments and other financial instruments

60,277

51,719

Loss on extinguishment of debt

(22,738

)

Impairment of goodwill

(4,828

)

Amortization and impairment of other acquired intangible assets

(5,144

)

(22,288

)

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

(7,759

)

(7,507

)

Income tax (provision) benefit

(85,815

)

(176,684

)

Mortgage adjusted pretax operating income

451,488

852,854

All Other adjusted pretax operating income

3,819

19,768

Real Estate adjusted pretax operating income (loss)

(23,240

)

(17,987

)

Less reconciling income (expense) items:

Allocation of corporate operating expenses to Real Estate

(12,807

)

(10,165

)

Real Estate depreciation and amortization

(2,857

)

(2,321

)

Real Estate adjusted EBITDA

$

(7,576

)

$

(5,501

)

On a consolidated basis, “adjusted pretax operating income (loss),” “adjusted diluted net operating income (loss) per share” and “adjusted net operating return on equity” are measures not determined in accordance with GAAP. “Real Estate adjusted EBITDA” and “Real Estate adjusted EBITDA margin” are also non-GAAP measures. These measures should not be considered in isolation or viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share, return on equity or net income (loss). Our definitions of adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share, adjusted net operating return on equity, Real Estate adjusted EBITDA or Real Estate 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 Supplemental Information - New Insurance Written

Exhibit H

 

2020

2019

($ in millions)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

New insurance written ("NIW")

$

29,781

$

33,320

$

25,459

$

16,706

$

19,953

Percentage of NIW by FICO score (1)

>=740

64.7

%

66.2

%

67.3

%

65.7

%

66.3

%

680-739

31.5

30.7

30.1

31.1

30.5

620-679

3.8

3.1

2.6

3.2

3.2

Total NIW

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

Percentage of NIW

Borrower-paid

99.2

%

98.5

%

97.8

%

96.7

%

97.4

%

Percentage by premium type

Direct monthly and other recurring premiums

91.4

%

90.0

%

84.7

%

81.1

%

82.1

%

Borrower-paid (2) (3)

8.3

9.0

13.6

16.5

16.0

Lender-paid (2)

0.3

1.0

1.7

2.4

1.9

Direct single premiums (2)

8.6

10.0

15.3

18.9

17.9

Total NIW

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

NIW for purchases

64.6

%

70.5

%

56.4

%

66.2

%

67.5

%

NIW for refinances

35.4

%

29.5

%

43.6

%

33.8

%

32.5

%

Percentage by LTV

95.01% and above

8.9

%

9.7

%

8.3

%

9.9

%

11.5

%

90.01% to 95.00%

34.7

39.6

36.4

37.6

35.8

85.01% to 90.00%

29.8

28.3

29.8

30.3

30.0

85.00% and below

26.6

22.4

25.5

22.2

22.7

Total NIW

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

(1)

For loans with multiple borrowers, the percentage of NIW by FICO score represents the lowest of the borrowers’ FICO scores.

(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 Supplemental Information - Primary Insurance in Force and Risk in Force

Exhibit I (page 1 of 2)

 

December 31,

September 30,

June 30,

March 31,

December 31,

($ in millions)

2020

2020

2020

2020

2019

Primary insurance in force (1)

Prime

$

242,044

$

241,166

$

236,835

$

236,958

$

235,742

Alt-A and A minus and below

4,100

4,301

4,471

4,628

4,816

Primary

$

246,144

$

245,467

$

241,306

$

241,586

$

240,558

Primary risk in force (1) (2)

Prime

$

59,689

$

59,972

$

59,253

$

59,827

$

59,780

Alt-A and A minus and below

967

1,017

1,058

1,096

1,141

Primary

$

60,656

$

60,989

$

60,311

$

60,923

$

60,921

Percentage of primary risk in force

Direct monthly and other recurring premiums

79.1

%

76.8

%

73.8

%

72.6

%

72.4

%

Direct single premiums

20.9

%

23.2

%

26.2

%

27.4

%

27.6

%

Percentage of primary risk in force by FICO score (3)

>=740

57.5

%

57.6

%

57.4

%

57.2

%

56.9

%

680-739

34.6

34.3

34.3

34.2

34.2

620-679

7.3

7.5

7.7

8.0

8.2

<=619

0.6

0.6

0.6

0.6

0.7

Total Primary

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

Percentage of primary risk in force by LTV

95.01% and above

14.4

%

14.3

%

14.2

%

14.3

%

14.2

%

90.01% to 95.00%

49.3

50.1

50.4

51.0

51.3

85.01% to 90.00%

28.0

27.9

28.1

27.9

27.9

85.00% and below

8.3

7.7

7.3

6.8

6.6

Total

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

Percentage of primary risk in force by policy year

2008 and prior

6.2

%

6.6

%

7.2

%

7.5

%

7.8

%

2009 - 2013

4.4

5.2

6.3

6.9

7.5

2014

2.6

3.0

3.6

4.0

4.3

2015

4.3

5.1

6.1

6.9

7.4

2016

7.6

8.9

10.6

11.7

12.5

2017

9.1

10.7

13.0

14.8

16.0

2018

9.8

11.7

14.0

16.4

17.9

2019

17.8

20.6

23.3

25.4

26.6

2020

38.2

28.2

15.9

6.4

Total

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

Primary risk in force on defaulted loans

$

3,250

$

3,747

$

4,263

$

1,001

$

1,061

Table continued on next page.

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - Primary Insurance in Force and Risk in Force

Exhibit I (page 2 of 2)

 

Table continued from prior page.

 

December 31,

September 30,

June 30,

March 31,

December 31,

2020

2020

2020

2020

2019

Persistency Rate (12 months ended) (4)

61.2

%

65.6

%

70.2

%

75.4

%

78.2

%

Persistency Rate (quarterly, annualized) (4) (5)

60.4

%

60.0

%

63.8

%

76.5

%

75.0

%

(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 less than 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.

(4)

For the quarters ended December 31, 2020 and September 30, 2020, the Persistency Rate was reduced by an increase in cancellations of Single Premium Policies due to increased cancellations identified by our ongoing servicer monitoring process for Single Premium Policies.

(5)

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.

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - Claims and Reserves

Exhibit J

 

2020

2019

($ in thousands)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Net claims paid: (1)

Total primary claims paid

$

8,353

$

11,331

$

22,144

$

24,358

$

24,267

Total pool and other

70

(230

)

639

(911

)

559

Subtotal

8,423

11,101

22,783

23,447

24,826

Impact of commutations and settlements (2)

32,170

(267

)

(56

)

3,691

Total net claims paid

$

40,593

$

10,834

$

22,783

$

23,391

$

28,517

Total average net primary claims paid (1) (3)

$

46.9

$

46.4

$

47.9

$

50.3

$

50.9

Average direct primary claims paid (3) (4)

$

48.5

$

47.8

$

49.0

$

51.4

$

52.1

(1)

Net of reinsurance recoveries.

(2)

Includes payments to commute mortgage insurance coverage on certain performing and non-performing loans. For the fourth quarter of 2020, primarily includes payments made to settle certain previously disclosed legal proceedings.

(3)

Calculated without giving effect to the impact of commutations and settlements.

(4)

Before reinsurance recoveries.

December 31,

September 30,

June 30,

March 31,

December 31,

($ in thousands, except per default amounts)

2020

2020

2020

2020

2019

Reserve for losses by category (1)

Mortgage reserves

Prime

$

711,245

$

655,754

$

573,463

$

264,694

$

248,727

Alt-A and A minus and below

88,269

88,879

86,646

88,481

91,093

IBNR and other

9,966

43,153

43,342

40,583

40,920

LAE

20,172

18,745

16,807

9,216

8,918

Total primary reserves

829,652

806,531

720,258

402,974

389,658

Total pool reserves

14,163

14,779

14,398

11,297

11,322

Total 1st lien reserves

843,815

821,310

734,656

414,271

400,980

Other

292

398

335

407

293

Total Mortgage reserves

844,107

821,708

734,991

414,678

401,273

Real Estate reserves

4,306

4,084

3,894

3,524

3,492

Total reserves

$

848,413

$

825,792

$

738,885

$

418,202

$

404,765

1st lien reserve per default

Primary reserve per primary default excluding IBNR and other

$

14,759

$

12,168

$

9,706

$

18,320

$

16,399

(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.

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - Default Statistics

Exhibit K

 

December 31,

September 30,

June 30,

March 31,

December 31,

2020

2020

2020

2020

2019

Default Statistics

Primary Insurance:

Prime

Number of insured loans

1,031,736

1,043,450

1,040,964

1,049,974

1,049,954

Number of loans in default

51,032

58,057

64,648

15,497

16,532

Percentage of loans in default

4.95

%

5.56

%

6.21

%

1.48

%

1.57

%

Alt-A and A minus and below

Number of insured loans

26,208

27,310

28,357

29,375

30,439

Number of loans in default

4,505

4,680

5,094

4,284

4,734

Percentage of loans in default

17.19

%

17.14

%

17.96

%

14.58

%

15.55

%

Total Primary

Number of insured loans

1,057,944

1,070,760

1,069,321

1,079,349

1,080,393

Number of loans in default

55,537

62,737

69,742

19,781

21,266

Percentage of loans in default

5.25

%

5.86

%

6.52

%

1.83

%

1.97

%

Radian Group Inc. and Subsidiaries

Mortgage Supplemental Information - Reinsurance Programs

Exhibit L

 

2020

2019

($ in thousands)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Quota Share Reinsurance (“QSR”) and Single Premium QSR Programs

Ceded premiums written (1)

$

(1,117

)

$

2,119

$

35,821

$

6,687

$

9,217

% of premiums written

(0.4

)%

0.8

%

13.0

%

2.4

%

3.0

%

Ceded premiums earned

$

29,510

$

36,742

$

60,652

$

18,712

$

19,428

% of premiums earned

8.6

%

11.2

%

19.2

%

6.2

%

6.1

%

Ceding commissions written

$

(3,847

)

$

(4,984

)

$

(5,304

)

$

8,413

$

6,836

Ceding commissions earned (2)

$

13,197

$

17,038

$

13,453

$

9,966

$

12,055

Profit commission

$

18,406

$

20,425

$

(10,649

)

$

16,405

$

17,792

Ceded losses

$

7,106

$

10,189

$

39,635

$

1,962

$

1,533

Excess-of-Loss Program

Ceded premiums written

$

15,240

$

7,499

$

7,525

$

12,678

$

6,834

% of premiums written

5.2

%

2.8

%

2.7

%

4.5

%

2.2

%

Ceded premiums earned

$

12,037

$

8,290

$

8,321

$

8,405

$

7,104

% of premiums earned

3.7

%

2.5

%

2.6

%

2.8

%

2.2

%

Ceded RIF (3)

QSR Program

$

381,787

$

454,585

$

532,743

$

596,166

$

644,512

Single Premium QSR Program

6,646,812

7,358,932

8,173,756

8,580,047

8,582,067

Excess-of-Loss Program

1,560,600

1,170,200

1,170,200

1,230,000

850,800

Total Ceded RIF

$

8,589,199

$

8,983,717

$

9,876,699

$

10,406,213

$

10,077,379

PMIERs impact - reduction in Minimum Required Assets (4)

QSR Program

$

22,712

$

26,213

$

30,837

$

31,638

$

35,382

Single Premium QSR Program

423,712

469,625

517,028

501,668

511,695

Excess-of-Loss Program

912,734

783,842

970,294

1,066,464

738,386

Total PMIERs impact

$

1,359,158

$

1,279,680

$

1,518,159

$

1,599,770

$

1,285,463

(1)

Net of profit commission.

(2)

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:

2020

2019

($ in thousands)

Qtr 4

Qtr 3

Qtr 2

Qtr 1

Qtr 4

Ceding commissions

$

(10,436

)

$

(12,337

)

$

(10,406

)

$

(7,967

)

$

(7,973

)

(3)

Included in primary RIF.

(4)

Excludes the impact of intercompany reinsurance.

FORWARD-LOOKING STATEMENTS

All statements in this press release that address events, developments or results that we expect or anticipate may occur in the future are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as “anticipate,” “may,” “will,” “could,” “should,” “would,” “expect,” “intend,” “plan,” “goal,” “contemplate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “seek,” “strategy,” “future,” “likely” or the negative or other variations on these words and other similar expressions. These statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management’s current views and assumptions with respect to future events, including management’s current views regarding the likely impacts of the COVID-19 pandemic. 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, particularly those associated with the COVID-19 pandemic, which has had wide-ranging and continually evolving effects. 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 COVID-19 pandemic, which has caused significant economic disruption, high unemployment, periods of volatility and disruption in financial markets, and required adjustments in the housing finance system and real estate markets. The COVID-19 pandemic has adversely impacted our businesses, and this impact may continue for an unknown period and could expand in scope. We expect that the COVID-19 pandemic and measures taken to reduce its spread could further impact our business and subject us to certain risks, including those discussed in “Item 1A. Risk Factors-The COVID-19 pandemic has adversely impacted our business, and its ultimate impact on our business and financial results will depend on future developments, which are highly uncertain and cannot be predicted, including the scope, severity and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.” and the other risk factors in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 and in our subsequent reports and registration statements filed from time to time with the U.S. Securities and Exchange Commission;
  • further 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 (the "FHFA") and by Fannie Mae and Freddie Mac (collectively, the “GSEs”) to insure loans purchased by the GSEs;
  • the Enterprise Regulatory Capital Framework that was finalized by the FHFA in December 2020 and, among other items, increases the capital requirements for the GSEs and reduces their credit for risk transfer, which could impact the GSEs' operations, pricing and the size of the insurable mortgage insurance market, and which may form the basis for future versions of the PMIERs;
  • 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 various licenses and complex compliance requirements;
  • our ability to maintain an adequate level of capital in our insurance subsidiaries to satisfy existing and future regulatory requirements, including the PMIERs and any changes thereto, such as the application of the recent and temporary amendment that applies a reduced capital charge nationwide for certain COVID-19-related nonperforming loans, and potential changes to the Mortgage Guaranty Insurance Model Act currently under consideration;
  • 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, changes in the GSEs’ interpretation and application of the PMIERs, as well as changes impacting loans purchased by the GSEs, including changes to the GSEs’ business practices in response to the COVID-19 pandemic;
  • 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;
  • uncertainty from the expected discontinuance of LIBOR and transition to one or more alternative benchmarks that could cause interest rate volatility and, among other things, impact our investment portfolio, cost of debt and cost of reinsurance through mortgage insurance-linked notes transactions;
  • any disruption in the servicing of mortgages covered by our insurance policies, as well as poor servicer performance, which could be impacted by the burdens placed on many servicers due to the impact of the COVID-19 pandemic;
  • 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, such as 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 the recently finalized changes to the "qualified mortgages" (QM) loan requirements;
  • 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, including potential changes in tax law under the newly elected Biden Administration;
  • 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, especially in the event of an extended economic downturn or a period of extreme market volatility and economic uncertainty such as we are currently experiencing due to the COVID-19 pandemic, 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 reported status of defaults in our portfolio, including whether they are subject to forbearance, a repayment plan or a loan modification trial period under a loan modification in response to COVID-19, 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;
  • 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;
  • effectiveness and security of our information technology systems and solutions, including our ability to successfully develop, launch and implement new and innovative technologies and digital solutions and the potential disruption in, or failure of, our information technology systems due to computer viruses, unauthorized access, cyber-attack, natural disasters or other similar events;
  • 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 “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 and “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, and to subsequent reports and registration statements filed from time to time with the U.S. Securities and Exchange Commission. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which we issued this press release. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements to reflect new information or future events or for any other reason.

Contacts:

For Investors:
John Damian - Phone: 215.231.1383 email: john.damian@radian.com

For Media:
Rashi Iyer - Phone 215.231.1167 email: rashi.iyer@radian.com

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.