— Fourth quarter GAAP net income of $162 million, or $1.01 per diluted share, and full year GAAP net income of $743 million, or $4.35 per diluted share —
— Full year return on equity of 18.2% and full year adjusted net operating return on equity of 20.3% —
— Primary mortgage insurance in force increases 6.1% year-over-year to $261 billion —
— Purchased $400 million, or 11.1% of total shares outstanding of Radian Group common stock in 2022 —
— Paid $135 million of dividends to stockholders during the year —
— Completed a series of capital actions in the fourth quarter that resulted in a $382 million distribution from Radian Guaranty to Radian Group and positioned Radian Guaranty to resume paying recurring ordinary dividends to Radian Group starting in the first quarter of 2023 —
WAYNE, Pa.–(BUSINESS WIRE)–Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended December 31, 2022, of $162.3 million, or $1.01 per diluted share. This compares with net income for the quarter ended December 31, 2021, of $193.4 million, or $1.07 per diluted share.
Net income for the full year 2022 was $742.9 million, or $4.35 per diluted share. This compares with net income for the full year 2021 of $600.7 million, or $3.16 per diluted share.
Key Financial Highlights
Quarter ended
Year ended
($ in millions, except per-share amounts)
December 31,
2022
September 30,
2022
December 31,
2021
December 31,
2022
December 31,
2021
Net income (1)
$162.3
$198.3
$193.4
$742.9
$600.7
Diluted net income per share
$1.01
$1.20
$1.07
$4.35
$3.16
Consolidated pretax income
$203.3
$255.5
$246.5
$952.8
$764.8
Adjusted pretax operating income (2)
$213.0
$272.7
$245.1
$1,052.7
$757.7
Adjusted diluted net operating income per share (2)(3)
$1.05
$1.31
$1.07
$4.87
$3.15
Return on equity (1)(4)
17.0%
20.7%
18.2%
18.2%
14.1%
Adjusted net operating return on equity (2)(3)
17.6%
22.5%
18.2%
20.3%
14.0%
New Insurance Written (NIW) – mortgage insurance
$12,859
$17,616
$23,710
$67,954
$91,830
Net premiums earned – mortgage insurance
$229.9
$235.2
$249.7
$957.2
$998.3
New defaults (5)
10,735
9,601
9,342
37,738
37,470
Provision for losses – mortgage insurance
($43.5)
($97.5)
($46.6)
($339.4)
$19.4
homegenius revenues
$18.6
$25.1
$44.7
$110.0
$149.1
Quarter ended
($ in millions, except per-share amounts)
December 31,
2022
September 30,
2022
December 31,
2021
Book value per share
$24.95
$23.80
$24.28
Accumulated other comprehensive income (loss) value per share (6)
($2.91)
($3.20)
$0.68
PMIERs Available Assets (7)
$5,553
$5,358
$5,406
PMIERs excess Available Assets (8)
$1,727
$1,628
$2,077
Total Holding Company Liquidity (9)
$1,178
$848
$880
Total investments
$5,693
$5,592
$6,514
Primary mortgage insurance in force
$260,994
$259,121
$245,972
Percentage of primary loans in default (5)(10)
2.2%
2.1%
2.9%
Mortgage insurance loss reserves
$421
$478
$823
(1)
Net income for the fourth quarter of 2022 includes a pretax net gain of $6.8 million on investments and other financial instruments. Net income for the third quarter and full year of 2022 includes a pretax net loss on investments and other financial instruments of $16.3 million and $80.7 million, respectively. This compares with a pretax net gain on investments and other financial instruments of $3.0 million and $15.6 million for the fourth quarter and full year of 2021, respectively.
(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%.
(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)
Defaults for the fourth quarter of 2022 were impacted by two items: (i) approximately 300 incremental new defaults from areas impacted by Hurricane Ian and (ii) approximately 700 incremental total defaults (comprised of approximately 500 incremental new defaults and 200 fewer cures) due to a timing change in when Radian receives servicer default reporting. Since these incremental defaults are expected to be temporary in nature, there is no material impact expected to our provision for losses, loss reserves or claims paid from either of these items. See “Fourth Quarter Highlights” below for additional information.
(6)
Included in book value per share for each period presented.
(7)
Represents Radian Guaranty’s Available Assets, calculated in accordance with the Private Mortgage Insurer Eligibility Requirements (PMIERs) financial requirements in effect for each date shown.
(8)
Represents Radian Guaranty’s excess or “cushion” of Available Assets over its Minimum Required Assets, calculated in accordance with the PMIERs financial requirements in effect for each date shown.
(9)
Represents Radian Group’s total liquidity, including available capacity under its $275 million unsecured revolving credit facility.
(10)
Represents the number of primary loans in default as a percentage of the total number of insured primary loans.
Adjusted pretax operating income for the quarter ended December 31, 2022, was $213.0 million, or $1.05 per diluted share. This compares with adjusted pretax operating income for the quarter ended December 31, 2021, of $245.1 million, or $1.07 per diluted share.
Adjusted pretax operating income for the full year 2022 was $1.1 billion, or $4.87 per diluted share. This compares with adjusted pretax operating income for the full year 2021, of $757.7 million, or $3.15 per diluted share.
Book value per share at December 31, 2022, was $24.95, compared to $23.80 at September 30, 2022, and $24.28 at December 31, 2021. This represents a 2.8% growth in book value per share at December 31, 2022, as compared to December 31, 2021, and includes accumulated other comprehensive income (loss) of $(2.91) per share as of December 31, 2022, and $0.68 per share as of December 31, 2021, which, if excluded as of both dates, would represent 18.1% growth for the period. Changes in accumulated other comprehensive income (loss) for 2022 are primarily from net unrealized losses on investments as a result of an increase in market interest rates during 2022. We do not expect to realize these losses given that we have the ability and the expectation to hold these securities until recovery.
“We reported another solid quarter for Radian, capping off an excellent year for our company. For the full year 2022, despite headwinds in the macroeconomic environment and continued cooling of the mortgage and real estate markets, we reported net income of $743 million and return on equity of 18.2%, while maintaining total holding company liquidity of $1.2 billion as of year end. Our primary mortgage in force portfolio grew more than 6% year-over-year to $261 billion and credit performance remained strong,” said Radian’s Chief Executive Officer Rick Thornberry. “And we returned significant capital to our stockholders during the year, paying $135 million of dividends and purchasing $400 million, or 11.1% of total shares outstanding, of Radian Group common stock.”
Thornberry added, “We are pleased to start the new year in a strong position, following the transformative year-end transactions that further enhance our capital strength and financial flexibility. We believe we are well positioned to serve our customers, provide value to our stockholders and continue our mission of ensuring affordable, sustainable and equitable homeownership.”
FOURTH QUARTER AND FULL YEAR HIGHLIGHTS
NIW was $12.9 billion in the fourth quarter of 2022, compared to $17.6 billion in the third quarter of 2022, and $23.7 billion in the fourth quarter of 2021. NIW was $68.0 billion for the full year 2022, compared to $91.8 billion for the prior year.
Purchase NIW decreased 27.1% in the fourth quarter of 2022 compared to the third quarter of 2022 and decreased 41.4% compared to the fourth quarter of 2021.
Refinances accounted for 1.7% of total NIW in the fourth quarter of 2022, compared to 1.6% in the third quarter of 2022, and 8.9% in the fourth quarter of 2021.
Of the $12.9 billion in NIW in the fourth quarter of 2022, 94.8% was written with monthly and other recurring premiums, compared to 95.5% in the third quarter of 2022, and 93.5% in the fourth quarter of 2021.
Total primary mortgage insurance in force as of December 31, 2022, increased to $261.0 billion, an increase of 0.7% compared to $259.1 billion as of September 30, 2022, and an increase of 6.1% compared to $246.0 billion as of December 31, 2021. The year-over-year change reflects a 10.0% increase in monthly premium policy insurance in force and a 12.6% decline in single premium policy insurance in force.
Persistency, which is the percentage of mortgage insurance that remains in force after a twelve-month period, was 79.6% for the twelve months ended December 31, 2022, compared to 75.9% for the twelve months ended September 30, 2022, and 64.3% for the twelve months ended December 31, 2021.
Annualized persistency for the three months ended December 31, 2022, was 84.1%, compared to 81.6% for the three months ended September 30, 2022, and 71.7% for the three months ended December 31, 2021.
Net mortgage insurance premiums earned were $229.9 million for the quarter ended December 31, 2022, compared to $235.2 million for the quarter ended September 30, 2022, and $249.7 million for the quarter ended December 31, 2021. Net mortgage insurance premiums earned were $957.2 million for the year ended December 31, 2022, compared to $998.3 million for the year ended December 31, 2021.
Mortgage insurance in force portfolio premium yield was 38.1 basis points in the fourth quarter of 2022. This compares to 39.2 basis points in the third quarter of 2022, and 41.0 basis points in the fourth quarter of 2021.
The impact of single premium policy cancellations before consideration of reinsurance represented 0.9 basis points of direct premium yield in the fourth quarter of 2022, 1.0 basis points in the third quarter of 2022, and 3.4 basis points in the fourth quarter of 2021.
Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 35.4 basis points in the fourth quarter of 2022. This compares to 36.7 basis points in the third quarter of 2022, and 41.0 basis points in the fourth quarter of 2021.
Details regarding premiums earned may be found in Exhibit D.
The mortgage insurance provision for losses was a benefit of $43.5 million in the fourth quarter of 2022, compared to benefits of $97.5 million and $46.6 million in the third quarter of 2022 and fourth quarter of 2021, respectively. The mortgage insurance provision for losses was a benefit of $339.4 million for the year ended December 31, 2022, compared to a loss of $19.4 million for the year ended December 31, 2021.
All periods benefited from significant favorable reserve development on prior period defaults, particularly in 2022, due to more favorable trends in cures than originally estimated. The decreased benefit in the fourth quarter of 2022 compared to the third quarter of 2022 was primarily related to less favorable development on prior period reserves, as the remaining loss reserve balance continues to decline.
The number of primary delinquent loans was 21,913 as of December 31, 2022, compared to 21,077 as of September 30, 2022, and 29,061 as of December 31, 2021. As noted above, defaults for the fourth quarter of 2022 included the impact of a timing change in when Radian receives servicer default reporting, which realigned certain servicers that had previously reported near the end of each month to the mid-month reporting convention that is standard for the industry and for the rest of the servicers for our insured portfolio. As a result, cure activity occurring toward the end of the month associated with those servicers will now be captured in the subsequent month, with no material impact expected to our provision for losses, loss reserves or claims paid as a result of this operational change.
The loss ratio in the fourth quarter of 2022 was (18.9)% compared to (41.5)% in the third quarter of 2022, and (18.6)% in the fourth quarter of 2021.
Total mortgage insurance claims paid were $8.4 million in the fourth quarter of 2022, compared to $4.5 million in the third quarter of 2022, and $10.4 million in the fourth quarter of 2021. Excluding the impact of commutations and settlements in each period, claims paid were $3.8 million in the fourth quarter of 2022, compared to $3.2 million in the third quarter of 2022, and $3.8 million in the fourth quarter of 2021. For the full year 2022, total net claims paid, which includes the impact of settlements and commutations, were $20.9 million, compared to $35.3 million for the full year 2021.
Radian’s homegenius segment offers an array of title, real estate and technology products and services to consumers, mortgage lenders, mortgage and real estate investors, GSEs, real estate brokers and agents.
Total homegenius segment revenues for the fourth quarter of 2022 were $18.6 million, compared to $25.1 million for the third quarter of 2022, and $44.7 million for the fourth quarter of 2021. Total homegenius segment revenues for the full year of 2022 were $110.0 million, compared to $149.1 million for the full year of 2021.
Adjusted pretax operating loss, our primary segment measure of profitability for the homegenius segment, was $31.5 million for the quarter ended December 31, 2022, compared to $25.5 million for the quarter ended September 30, 2022, and $2.1 million for the quarter ended December 31, 2021. Adjusted pretax operating loss for the full year 2022 was $88.2 million, compared to $27.3 million for the full year 2021.
Other operating expenses were $109.8 million in the fourth quarter of 2022, compared to $91.3 million in the third quarter of 2022, and $80.5 million in the fourth quarter of 2021. Other operating expenses were $381.1 million for the full year 2022, compared to $323.7 million for the full year 2021.
Other operating expenses were elevated for the full year 2022 primarily due to: (i) $14.9 million in impairment of long-lived assets and other non-operating items recognized in the fourth quarter of 2022, primarily from impairments to our lease-related assets and (ii) severance and related expenses totaling $16.4 million, including $11.7 million recognized in the fourth quarter of 2022. Additional details regarding other operating expenses by segment may be found in Exhibit E.
CAPITAL AND LIQUIDITY UPDATE
Radian Group
As of December 31, 2022, Radian Group maintained $902.8 million of available liquidity. Total Holding Company Liquidity, which includes the company’s $275.0 million unsecured revolving credit facility, was $1.2 billion as of December 31, 2022.
As previously announced, in the fourth quarter of 2022 the Company purchased an additional 49 thousand shares of Radian Group common stock at a total cost of approximately $1.0 million, including commissions. After these repurchases, no purchase authority remained available under our February 2022 repurchase authorization. For the full year 2022, the company repurchased 19.5 million shares of Radian Group common stock at a total cost of $400.2 million, including commissions.
As previously announced, in January 2023, Radian Group’s board of directors has approved a new share repurchase program that enables the company to repurchase its common stock. The shares may be purchased in the open market or in privately negotiated transactions. The new authorization provides Radian Group the flexibility to repurchase shares opportunistically from time to time and spend up to $300 million, based on market and business conditions, stock price and other factors. Radian Group plans to utilize a Rule 10b5-1 plan, which would permit the company to purchase shares, at pre-determined price targets, when it may otherwise be precluded from doing so. The authorization will expire on January 31, 2025.
On November 9, 2022, Radian Group’s board of directors authorized a regular quarterly dividend on its common stock in the amount of $0.20 per share and the dividend was paid on December 2, 2022.
Radian Guaranty
As previously announced, as part of the company’s efforts to enhance financial flexibility, the company completed a series of capital actions during the fourth quarter of 2022 affecting the company’s mortgage insurance subsidiaries.
Effective December 1, 2022, the company novated the entire insured portfolio of its Radian Reinsurance Inc. subsidiary to an unrelated third-party insurer. Following the novation, the company completed the merger of Radian Reinsurance into Radian Guaranty in December 2022.
Following completion of this merger, the Pennsylvania Insurance Department approved a $282 million return of capital and a $100 million early repayment of an outstanding surplus note from Radian Guaranty to Radian Group, both of which were paid on December 30, 2022.
As a result of the favorable impact of these recent capital actions, we expect Radian Guaranty to have the ability to pay ordinary dividends to Radian Group, without the need for prior regulatory approval, beginning in the first quarter of 2023.
At December 31, 2022, Radian Guaranty’s Available Assets under PMIERs totaled approximately $5.6 billion, resulting in excess available resources or a “cushion” of $1.7 billion, or 45%, over its Minimum Required Assets under PMIERs.
As of December 31, 2022, 70% of Radian Guaranty’s primary mortgage insurance risk in force is subject to some form of risk distribution, providing a $1.1 billion reduction of Minimum Required Assets under PMIERs.
CONFERENCE CALL
Radian will discuss fourth quarter and year-end 2022 financial results in a conference call tomorrow, Thursday, February 9, 2023, at 12:00 p.m. Eastern time. The conference call will be webcast live on the company’s website at https://radian.com/who-we-are/for-investors/webcasts or at www.radian.com. The webcast is listen-only. Those interested in participating in the question-and-answer session should follow the conference call dial-in instructions below.
The call may be accessed via telephone by registering for the call here to receive the dial-in numbers and unique PIN. It is recommended that you join 10 minutes prior to the event start (although you may register and dial in at any time during the call).
A digital replay of the webcast will be available on Radian’s website approximately two hours after the live broadcast ends for a period of one year at https://radian.com/who-we-are/for-investors/webcasts.
In addition to the information provided in the company’s earnings news release, other statistical and financial information, which is expected to be referred to during the conference call, will be available on Radian’s website at www.radian.com, under Investors.
NON-GAAP FINANCIAL MEASURES
Radian believes that adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity (non-GAAP measures) facilitate evaluation of the company’s fundamental financial performance and provide relevant and meaningful information to investors about the ongoing operating results of the company. On a consolidated basis, these measures are not recognized in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be considered in isolation or viewed as substitutes for GAAP measures of performance. The measures described below have been established in order to increase transparency for the purpose of evaluating the company’s operating trends and enabling more meaningful comparisons with Radian’s competitors.
Adjusted pretax operating income (loss) is defined as GAAP consolidated pretax income (loss) excluding the effects of: (i) net gains (losses) on investments and other financial instruments, except for certain investments attributable to our segments; (ii) gains (losses) on extinguishment of debt; (iii) amortization and impairment of goodwill and other acquired intangible assets; (iv) and impairment of other long-lived assets and other non-operating items, such as impairment of internal-use software, gains (losses) from the sale of lines of business and acquisition-related income and expenses. Adjusted diluted net operating income (loss) per share is calculated by dividing (i) adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the company’s statutory tax rate, by (ii) the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Adjusted net operating return on equity is calculated by dividing annualized adjusted pretax operating income (loss), net of taxes computed using the company’s statutory tax rate, by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.
In addition to the above non-GAAP measures for the consolidated company, we also have presented as supplemental information non-GAAP measures for our homegenius segment of adjusted pretax operating income (loss) before allocated corporate operating expenses and adjusted gross profit. Adjusted pretax operating income (loss) before allocated corporate operating expenses is calculated as adjusted pretax operating income (loss) as described above (which is the segment’s ASC 280 GAAP measure of operating performance), adjusted to remove the impact of corporate allocations of other operating expenses for the homegenius segment. Adjusted gross profit is further adjusted to remove other operating expenses. For the homegenius segment, adjusted pretax operating income (loss) before allocated corporate operating expenses and adjusted gross profit are used to facilitate comparisons with other services companies, since they are widely accepted measures of performance in the services industry and are used internally as supplemental measures to evaluate the performance of our homegenius segment.
See Exhibit F or Radian’s website for a description of these items, as well as Exhibit G for reconciliations to the most comparable consolidated GAAP measures.
ABOUT RADIAN
Radian Group Inc. (NYSE: RDN) is ensuring the American dream of homeownership responsibly and sustainably through products and services that include industry-leading mortgage insurance and a comprehensive suite of mortgage, risk, title, real estate and technology products and services. We are powered by technology, informed by data and driven to deliver new and better ways to transact and manage risk. Visit www.radian.com to learn more about how Radian is shaping the future of mortgage and real estate services.
FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS (Unaudited)
Exhibit A:
Condensed Consolidated Statements of Operations Trend Schedule
Exhibit B:
Net Income Per Share Trend Schedule
Exhibit C:
Condensed Consolidated Balance Sheets
Exhibit D:
Net Premiums Earned
Exhibit E:
Segment Information
Exhibit F:
Definition of Consolidated Non-GAAP Financial Measures
Exhibit G:
Consolidated Non-GAAP Financial Measure Reconciliations
Exhibit H:
Mortgage Supplemental Information
New Insurance Written
Exhibit I:
Mortgage Supplemental Information
Primary Insurance in Force and Risk in Force
Exhibit J:
Mortgage Supplemental Information
Claims and Reserves, Default Statistics
Exhibit K:
Mortgage Supplemental Information
Reinsurance Programs
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