— GAAP net income of $198 million, or $1.20 per diluted share —
— Adjusted diluted net operating income of $1.31 per diluted share —
— Return on equity of 20.7% and adjusted net operating return on equity of 22.5% —
— Purchased 19.5 million shares, or 11.1% of total shares outstanding of Radian Group common stock year-to-date through October 31st —
— Primary mortgage insurance in force increases 7.3% year-over-year to $259 billion —
WAYNE, Pa.–(BUSINESS WIRE)–Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended September 30, 2022, of $198.3 million, or $1.20 per diluted share. This compares with net income for the quarter ended September 30, 2021, of $126.4 million, or $0.67 per diluted share.
Key Financial Highlights
Quarter ended
($ in millions, except per-share amounts)
September 30, 2022
June 30, 2022
September 30, 2021
Net income (1)
$198.3
$201.2
$126.4
Diluted net income per share
$1.20
$1.15
$0.67
Consolidated pretax income
$255.5
$259.9
$161.6
Adjusted pretax operating income (2)
$272.7
$302.0
$160.6
Adjusted diluted net operating income per share (2)(3)
$1.31
$1.36
$0.67
Return on equity (1)(4)
20.7 %
19.9 %
11.8 %
Adjusted net operating return on equity (2)(3)
22.5 %
23.6 %
11.8 %
New Insurance Written (NIW) – mortgage insurance
$17,616
$18,935
$26,558
Net premiums earned – mortgage insurance
$235.2
$246.9
$236.9
New defaults (5)
9,601
8,009
8,132
Provision for losses – mortgage insurance
($97.5)
($114.2)
$16.8
homegenius revenues
$25.1
$32.3
$45.1
Book value per share
$23.80
$23.63
$23.48
Accumulated other comprehensive income
(loss) value per share (6)
($3.20)
($1.98)
$0.84
PMIERs Available Assets (7)
$5,358
$5,175
$5,262
PMIERs excess Available Assets (8)
$1,628
$1,424
$1,741
Total Holding Company Liquidity (9)
$848
$1,048
$1,036
Total investments
$5,592
$5,906
$6,658
Primary mortgage insurance in force
$259,121
$254,226
$241,575
Percentage of primary loans in default (10)
2.1 %
2.2 %
3.4 %
Mortgage insurance loss reserves
$478
$589
$888
(1)
Net income for the third quarter of 2022 includes a pretax net loss on investments and other financial instruments of $16.3 million, compared with a $41.9 million pretax net loss on investments and other financial instruments in the second quarter of 2022 and a pretax net gain on investments and other financial instruments of $2.1 million for the third quarter of 2021.
(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)
Represents the number of new defaults reported during the period on loans related to primary mortgage insurance policies.
(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 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 September 30, 2022, was $272.7 million, or $1.31 per diluted share. This compares with adjusted pretax operating income for the quarter ended September 30, 2021, of $160.6 million, or $0.67 per diluted share.
Book value per share at September 30, 2022, was $23.80, compared to $23.63 at June 30, 2022, and $23.48 at September 30, 2021. This represents a 1.4% growth in book value per share at September 30, 2022, as compared to September 30, 2021, and includes accumulated other comprehensive income (loss) of $(3.20) per share as of September 30, 2022 and $0.84 per share as of September 30, 2021, which, if excluded as of both dates, would represent 19.3% growth for the period. Changes in accumulated other comprehensive income (loss) for the period are primarily from net unrealized losses on investments as a result of an increase in market interest rates during the period. We do not expect to realize these losses given that we have the ability and the expectation to hold these securities until recovery.
“Despite a challenging macroeconomic environment and cooling of the mortgage and real estate markets, we are pleased to report on another excellent quarter for Radian with net income of $198 million, return on equity of 20.7% and total holding company liquidity of $848 million. Our primary mortgage insurance in force portfolio, which is the main driver of future earnings for our company, grew more than 7% year-over-year to $259 billion and credit performance remained strong,” said Radian’s Chief Executive Officer Rick Thornberry. “We are managing our expense structure to align to today’s operating environment and strategically managing our capital. We believe we are well positioned to continue our mission of ensuring affordable, sustainable and equitable homeownership.”
THIRD QUARTER HIGHLIGHTS
NIW was $17.6 billion in the third quarter of 2022, compared to $18.9 billion in the second quarter of 2022, and $26.6 billion in the third quarter of 2021.
Purchase NIW decreased 5.7% in the third quarter of 2022 compared to the second quarter of 2022 and decreased 27.3% compared to the third quarter of 2021.
Refinances accounted for 1.6% of total NIW in the third quarter of 2022, compared to 2.9% in the second quarter of 2022, and 10.2% in the third quarter of 2021.
Of the $17.6 billion in NIW in the third quarter of 2022, 95.5% was written with monthly and other recurring premiums, compared to 95.4% in the second quarter of 2022, and 93.8% in the third quarter of 2021.
Total primary mortgage insurance in force as of September 30, 2022, increased to $259.1 billion, an increase of 1.9% compared to $254.2 billion as of June 30, 2022, and an increase of 7.3% compared to $241.6 billion as of September 30, 2021. The year-over-year change reflects an 11.8% increase in monthly premium policy insurance in force and a 13.2% 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 75.9% for the twelve months ended September 30, 2022, compared to 71.7% for the twelve months ended June 30, 2022, and 60.8% for the twelve months ended September 30, 2021.
Annualized persistency for the three months ended September 30, 2022, was 81.6%, compared to 79.8% for the three months ended June 30, 2022, and 67.5% for the three months ended September 30, 2021.
Net mortgage insurance premiums earned were $235.2 million for the quarter ended September 30, 2022, compared to $246.9 million for the quarter ended June 30, 2022, and $236.9 million for the quarter ended September 30, 2021.
Mortgage insurance in force portfolio premium yield was 39.2 basis points in the third quarter of 2022. This compares to 40.0 basis points in the second quarter of 2022, and 40.3 basis points in the third quarter of 2021.
The impact of single premium policy cancellations before consideration of reinsurance represented 1.0 basis points of direct premium yield in the third quarter of 2022, 1.1 basis points in the second quarter of 2022, and 4.3 basis points in the third quarter of 2021.
Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 36.7 basis points in the third quarter of 2022. This compares to 39.3 basis points in the second quarter of 2022, and 39.6 basis points in the third quarter of 2021.
Details regarding premiums earned may be found in Exhibit D.
The mortgage insurance provision for losses was a benefit of $97.5 million in the third quarter of 2022, compared to a benefit of $114.2 million in the second quarter of 2022, and a provision of $16.8 million in the third quarter of 2021.
The decreased benefit in the third quarter of 2022 compared to the second quarter of 2022 was primarily related to less favorable development on prior period reserves, as compared to the second quarter of 2022. The benefit compared to the provision recorded in the same quarter prior year is primarily related to more favorable development on prior period reserves, as compared to the third quarter of 2021. All periods were impacted by more favorable trends in cures than originally estimated.
The number of primary delinquent loans was 21,077 as of September 30, 2022, compared to 21,861 as of June 30, 2022, and 33,795 as of September 30, 2021.
The loss ratio in the third quarter of 2022 was (41.5)% compared to (46.2)% in the second quarter of 2022, and 7.1% in the third quarter of 2021.
Total mortgage insurance claims paid were $4.5 million in the third quarter of 2022, compared to $3.3 million in the second quarter of 2022, and $10.2 million in the third quarter of 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 third quarter of 2022 were $25.1 million, compared to $32.3 million for the second quarter of 2022, and $45.1 million for the third quarter of 2021.
Adjusted pretax operating loss, our primary segment measure of profitability for the homegenius segment, was $25.5 million for the quarter ended September 30, 2022, compared to $17.7 million for the quarter ended June 30, 2022, and $5.6 million for the quarter ended September 30, 2021.
Additional details regarding related non-GAAP measures may be found in Exhibits F and G.
Other operating expenses were $91.3 million in the third quarter of 2022, compared to $90.5 million in the second quarter of 2022, and $86.5 million in the third quarter of 2021.
The increase in the third quarter of 2022 compared to the third quarter of 2021 was driven primarily by an increase in other general operating expenses and a decrease in ceding commissions. Additional details regarding other operating expenses by segment may be found in Exhibit E.
CAPITAL AND LIQUIDITY UPDATE
Radian Group
As of September 30, 2022, Radian Group maintained $572.6 million of available liquidity. Total Holding Company Liquidity, which includes the company’s $275.0 million unsecured revolving credit facility, was $847.6 million as of September 30, 2022.
During the third quarter of 2022, the company repurchased 9.5 million shares of Radian Group common stock at a total cost of $194.1 million, including commissions. This represented 5.7% in the aggregate of total shares outstanding as of the end of the second quarter.
In addition, in October 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 the repurchases in October, no purchase authority remained available under our most recent repurchase authorization.
On August 10, 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 September 1, 2022.
Radian Reinsurance paid an ordinary dividend of $32.5 million to Radian Group in September 2022.
Radian Guaranty
At September 30, 2022, Radian Guaranty’s Available Assets under PMIERs totaled approximately $5.4 billion, resulting in excess available resources or a “cushion” of $1.6 billion, or 44%, over its Minimum Required Assets.
As of September 30, 2022, 68% of Radian Guaranty’s primary mortgage insurance risk in force is subject to some form of risk distribution, providing a $1.2 billion reduction of Minimum Required Assets under PMIERs.
As previously announced, consistent with our use of risk distribution strategies to effectively manage capital and proactively mitigate risk, Radian Guaranty entered into a quota share reinsurance arrangement (“2022 QSR Agreement”) with a panel of third-party reinsurance providers in the third quarter of 2022. Under the 2022 QSR Agreement, starting July 1, 2022, we began to cede 20% of policies issued between January 1, 2022, and June 30, 2023, subject to certain conditions.
CONFERENCE CALL
Radian will discuss third quarter 2022 financial results in a conference call tomorrow, Thursday, November 3, 2022, 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.
Please note that there is a new process to access the call via telephone. 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 reportable segments; (ii) gains (losses) 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 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. In addition, homegenius adjusted pretax operating margin before allocated corporate operating expenses and adjusted gross profit margin are calculated by dividing homegenius adjusted pretax operating margin before allocated corporate operating expenses and adjusted gross profit, respectively, by GAAP total revenue for the homegenius segment. For the homegenius segment, adjusted pretax operating income (loss) before allocated corporate operating expenses, adjusted gross profit, and the related profit margins 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
Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations Trend Schedule
Exhibit A
2022
2021
(In thousands, except per-share amounts)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Revenues
Net premiums earned
$
240,222
$
253,892
$
254,190
$
261,437
$
249,118
Services revenue
20,146
27,281
29,348
35,693
37,773
Net investment income
51,414
46,957
38,196
37,407
35,960
Net gains (losses) on investments and other financial instruments
(16,252
)
(41,869
)
(29,457
)
3,025
2,098
Other income
659
572
703
805
809
Total revenues
296,189
286,833
292,980
338,367
325,758
Expenses
Provision for losses
(96,964
)
(113,922
)
(83,754
)
(46,219
)
17,305
Policy acquisition costs
5,442
5,940
6,605
7,271
7,924
Cost of services
18,717
22,760
24,753
28,333
30,520
Other operating expenses
91,327
90,495
89,541
80,476
86,479
Interest expense
21,183
20,831
20,846
21,137
21,027
Amortization of other acquired intangible assets
1,023
849
849
863
862
Total expenses
40,728
26,953
58,840
91,861
164,117
Pretax income
255,461
259,880
234,140
246,506
161,641
Income tax provision
57,181
58,687
53,009
53,061
35,229
Net income
$
198,280
$
201,193
$
181,131
$
193,445
$
126,412
Diluted net income per share
$
1.20
$
1.15
$
1.01
$
1.07
$
0.67
Selected Mortgage Key Ratios
2022
2021
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Loss ratio (1)
(41.5
)%
(46.2
)%
(34.3
)%
(18.6
)%
7.1
%
Expense ratio (2)
26.1
%
26.2
%
27.2
%
25.6
%
28.6
%
(1)
Calculated as provision for losses on a GAAP basis expressed as a percentage of net premiums earned.
(2)
Calculated as operating expenses (which include policy acquisition costs and other operating expenses, as well as allocated corporate operating expenses) on a GAAP basis expressed as a percentage of net premiums earned.
Radian Group Inc. and Subsidiaries
Net Income Per Share Trend Schedule
Exhibit B
The calculation of basic and diluted net income per share was as follows.
2022
2021
(In thousands, except per-share amounts)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Net income—basic and diluted
$
198,280
$
201,193
$
181,131
$
193,445
$
126,412
Average common shares outstanding—basic
162,506
173,705
176,816
179,500
186,741
Dilutive effect of stock-based compensation arrangements (1)
2,232
1,714
2,263
1,628
1,301
Adjusted average common shares outstanding—diluted
164,738
175,419
179,079
181,128
188,042
Basic net income per share
$
1.22
$
1.16
$
1.02
$
1.08
$
0.68
Diluted net income per share
$
1.20
$
1.15
$
1.01
$
1.07
$
0.67
(1)
The following number of shares of our common stock equivalents issued under our share-based compensation arrangements were not included in the calculation of diluted net income (loss) per share because they would be anti-dilutive.
2022
2021
(In thousands)
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Qtr 3
Shares of common stock equivalents
—
189
—
35
—
Radian Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Exhibit C
September 30,
June 30
March 31,
December 31,
September 30,
(In thousands, except per-share amounts)
2022
2022
2022
2021
2021
Assets
Investments
$
5,591,881
$
5,906,147
$
6,334,950
$
6,513,542
$
6,658,487
Cash
54,701
135,262
131,853
151,145
154,709
Restricted cash
1,107
561
1,651
1,475
1,866
Accrued investment income
38,596
35,774
35,531
32,812
33,258
Accounts and notes receivable
174,041
166,380
142,579
124,016
166,730
Reinsurance recoverables
30,569
39,876
55,015
67,896
76,048
Deferred policy acquisition costs
17,920
16,983
16,383
16,317
16,823
Property and equipment, net
75,740
74,874
75,275
75,086
74,170
Goodwill and other acquired intangible assets, net
16,873
17,895
18,744
19,593
20,456
Prepaid federal income taxes
526,123
466,123
354,123
354,123
313,123
Other assets
458,292
414,412
449,642
483,180
525,938
Total assets
$
6,985,843
$
7,274,287
$
7,615,746
$
7,839,185
$
8,041,608
Liabilities and stockholders’ equity
Unearned premiums
$
285,290
$
298,991
$
312,013
$
329,090
$
348,322
Reserve for losses and loss adjustment expense
483,664
594,808
727,247
828,642
893,155
Senior notes
1,412,473
1,411,458
1,410,458
1,409,473
1,408,502
FHLB advances
153,550
184,284
148,983
150,983
172,649
Reinsurance funds withheld
218,777
223,649
225,363
228,078
290,502
Net deferred tax liability
335,374
324,866
324,004
337,509
286,957
Other liabilities
358,665
305,269
320,114
296,614
383,585
Total liabilities
3,247,793
3,343,325
3,468,182
3,580,389
3,783,672
Common stock
176
186
193
194
200
Treasury stock
(930,396
)
(930,284
)
(920,958
)
(920,798
)
(920,355
)
Additional paid-in capital
1,513,615
1,698,490
1,871,763
1,878,372
2,012,870
Retained earnings
3,656,870
3,491,675
3,326,119
3,180,935
3,012,997
Accumulated other comprehensive income (loss)
(502,215
)
(329,105
)
(129,553
)
120,093
152,224
Total stockholders’ equity
3,738,050
3,930,962
4,147,564
4,258,796
4,257,936
Total liabilities and stockholders’ equity
$
6,985,843
$
7,274,287
$
7,615,746
$
7,839,185
$
8,041,608
Shares outstanding
157,058
166,388
174,648
175,421
181,336
Book value per share
$
23.80
$
23.63
$
23.75
$
24.28
$
23.48
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