Radian Announces Fourth Quarter and Full Year 2021 Financial Results

-- Fourth quarter GAAP net income of $193 million, or $1.07 per diluted share, and full year GAAP net income of $601 million, or $3.16 per diluted share --

-- MI New Insurance Written of $92 billion for 2021; second highest annual volume in Company's history --

-- homegenius revenues increase 45% in 2021 to $149 million --

-- Provision for losses of $(46.2) million in the fourth quarter of 2021 favorably impacted by positive development on prior period defaults --

-- Book value per share grows 9% year-over-year to $24.28 --

-- Company purchases 17.8 million shares or $399.1 million of Radian Group common stock during 2021 --

Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended December 31, 2021, of $193.4 million, or $1.07 per diluted share. This compares with net income for the quarter ended December 31, 2020, of $148.0 million, or $0.76 per diluted share.

Net income for the full year 2021 was $600.7 million, or $3.16 per diluted share. This compares with net income for the full year 2020 of $393.6 million, or $2.00 per diluted share.

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

 

Quarter ended

 

Year ended

 

December 31,

2021

September 30,

2021

December 31,

2020

 

December 31,

2021

December 31,

2020

Net income (1)

$193.4

$126.4

$148.0

 

$600.7

$393.6

Diluted net income per share

$1.07

$0.67

$0.76

 

$3.16

$2.00

Consolidated pretax income

$246.5

$161.6

$179.2

 

$764.8

$479.4

Adjusted pretax operating income (2)

$245.1

$160.6

$171.0

 

$757.7

$432.1

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

$1.07

$0.67

$0.69

 

$3.15

$1.74

Return on equity (1)(4)

18.2 %

11.8 %

14.1 %

 

14.1 %

9.4 %

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

18.2 %

11.8 %

12.9 %

 

14.0 %

8.2 %

New Insurance Written (NIW) - mortgage insurance

$23,710

$26,558

$29,781

 

$91,830

$105,024

Net premiums earned - mortgage insurance (5)

$249.7

$236.9

$286.8

 

$998.3

$1,092.8

New defaults (6)

9,342

8,132

14,552

 

37,470

108,025

Provision for losses - mortgage insurance

($46.6)

$16.8

$56.3

 

$19.4

$483.3

homegenius revenues

$44.7

$45.1

$23.6

 

$149.1

$102.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended

 

 

 

 

December 31,

2021

September 30,

2021

December 31,

2020

 

 

 

Book value per share (7)

$24.28

$23.48

$22.36

 

 

 

PMIERs Available Assets (8)

$5,406

$5,262

$4,700

 

 

 

PMIERs excess Available Assets (9)

$2,077

$1,741

$1,338

 

 

 

Total Holding Company Liquidity (10)

$880

$1,036

$1,371

 

 

 

Total investments

$6,514

$6,658

$6,788

 

 

 

Primary mortgage insurance in force

$245,972

$241,575

$246,144

 

 

 

Percentage of primary loans in default (11)

2.9 %

3.4 %

5.2 %

 

 

 

Mortgage insurance loss reserves

$823

$888

$844

 

 

 

(1)  

Net income for the fourth quarter, third quarter and full year of 2021 includes a pretax net gain on investments and other financial instruments of $3.0 million, $2.1 million and $15.6 million, respectively, compared with a pretax net gain on investments and other financial instruments of $17.4 million and $60.3 million for the fourth quarter and full year of 2020, 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 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 quarter of 2020 includes an increase to premiums earned of $11.3 million, 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 these estimates in other periods is not material.

(6)  

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

(7)   

Book value per share includes accumulated other comprehensive income (loss) of $0.68 as of December 31, 2021, $0.84 as of September 30, 2021 and $1.38 as of December 31, 2020.

(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 available capacity under its unsecured revolving credit facility.

(11)  

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, 2021, was $245.1 million, or $1.07 per diluted share. This compares with adjusted pretax operating income for the quarter ended December 31, 2020, of $171.0 million, or $0.69 per diluted share.

Adjusted pretax operating income for the full year 2021 was $757.7 million, or $3.15 per diluted share. This compares to adjusted pretax operating income for the full year 2020 of $432.1 million, or $1.74 per diluted share.

Book value as of December 31, 2021 was $4.3 billion, relatively flat compared to December 31, 2020. Book value per share at December 31, 2021, was $24.28, an increase of 9 percent compared to $22.36 at December 31, 2020. Partially offsetting the increase in book value per share in 2021 is: (i) a decrease of $0.75 per share due to unrealized losses in our available for sale securities, recorded in accumulated other comprehensive income and (ii) a $0.54 per share impact of dividends and dividend equivalents.

“Our excellent results for 2021 reflect strong growth in the housing and real estate markets; continued demand for our products and services; and the commitment of our talented team,” said Radian’s Chief Executive Officer Rick Thornberry. “For the full year, we reported net income of more than $600 million; grew book value per share by 9%; wrote the second-highest level of new mortgage insurance business in Radian’s history; and increased homegenius revenue by 45%. Also in 2021, we continued to prudently manage our capital and returned more than $500 million to stockholders through a combination of dividends and stock repurchases.”

Thornberry added, “We are pleased with our business momentum in 2022. We increased our quarterly dividend this month, which provides the highest dividend yield in the private MI industry, and we announced a new $400 million share repurchase authorization. Our team is focused on our mission of ensuring affordable, sustainable and equitable homeownership; and utilizing data, analytics and technology to help our customers succeed in a fast-moving, digital market.”

FOURTH QUARTER HIGHLIGHTS

  • NIW was $23.7 billion in the fourth quarter of 2021, compared to $26.6 billion in the third quarter of 2021, and $29.8 billion in the fourth quarter of 2020. NIW was $91.8 billion for the full year 2021, compared to $105.0 billion for the prior year.
    • Of the $23.7 billion in NIW in the fourth quarter of 2021, 93.5 percent was written with monthly and other recurring premiums, compared to 93.8 percent in the third quarter of 2021, and 91.4 percent in the fourth quarter of 2020.
    • Refinances accounted for 8.9 percent of total NIW in the fourth quarter of 2021, compared to 10.2 percent in the third quarter of 2021, and 35.4 percent in the fourth quarter of 2020.
  • Total primary mortgage insurance in force as of December 31, 2021, increased to $246.0 billion, an increase of 1.8 percent compared to $241.6 billion as of September 30, 2021, and a decrease of 0.1 percent compared to $246.1 billion as of December 31, 2020. The year-over-year change reflects a 5.8 percent increase in monthly premium policy insurance in force and a 21.1 percent 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 64.3 percent for the twelve months ended December 31, 2021, compared to 60.8 percent for the twelve months ended September 30, 2021, and 61.2 percent for the twelve months ended December 31, 2020.
    • Annualized persistency for the three months ended December 31, 2021, was 71.7 percent, compared to 67.5 percent for the three months ended September 30, 2021, and 60.4 percent for the three months ended December 31, 2020.
  • Net mortgage insurance premiums earned were $249.7 million for the quarter ended December 31, 2021, compared to $236.9 million for the quarter ended September 30, 2021, and $286.8 million for the quarter ended December 31, 2020. Net mortgage insurance premiums earned were $998.3 million for the year ended December 31, 2021, compared to $1.1 billion for the year ended December 31, 2020.
    • Mortgage insurance in force portfolio premium yield was 41.0 basis points in the fourth quarter of 2021. This compares to 40.3 basis points in the third quarter of 2021, and 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 below
    • The impact of single premium policy cancellations before consideration of reinsurance represented 3.4 basis points of direct premium yield in the fourth quarter of 2021, 4.3 basis points in the third quarter of 2021, and 8.7 basis points in the fourth quarter of 2020.
    • Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 41.0 basis points in the fourth quarter of 2021. This compares to 39.6 basis points in the third quarter of 2021, and 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 below.
    • The fourth quarter of 2020 includes an increase to premiums earned of $11.3 million related to changes in present value estimates for initial premiums on monthly policies that are deferred and not collected until cancellation.
    • Additional details regarding premiums earned may be found in Exhibit D.
  • The mortgage insurance provision for losses was a benefit of $46.6 million in the fourth quarter of 2021, compared to provisions of $16.8 million in the third quarter of 2021, and $56.3 million in the fourth quarter of 2020. The mortgage insurance provision for losses was $19.4 million for the year ended December 31, 2021, compared to $483.3 million for the year ended December 31, 2020.
    • The decrease in the fourth quarter of 2021 compared to both the third quarter of 2021 and the fourth quarter of 2020 was primarily related to more favorable development on prior period reserves, as compared to the third quarter of 2021 and fourth quarter of 2020. All periods were impacted by more favorable trends in cures than originally estimated. The decrease for the full year 2021 compared to the full year 2020 was driven primarily by a significant decrease in primary new default notices related to the effects of the COVID-19 pandemic, as well as a decrease in the default to claim rate applied to those defaults.
    • The number of primary delinquent loans was 29,061 as of December 31, 2021, compared to 33,795 as of September 30, 2021, and 55,537 as of December 31, 2020.
    • The loss ratio in the fourth quarter of 2021 was (18.6) percent, compared to 7.1 percent in the third quarter of 2021, and 19.6 percent in the fourth quarter of 2020.
    • Total mortgage insurance claims paid were $10.4 million in the fourth quarter of 2021, compared to $10.2 million in the third quarter of 2021, and $40.6 million in the fourth quarter of 2020. Excluding the impact of commutations and settlements, claims paid were $3.8 million in the fourth quarter of 2021, compared to $6.3 million in the third quarter of 2021, and $8.4 million in the fourth quarter of 2020. For the full year 2021, total net claims paid were $35.3 million, compared to $97.6 million for the full year 2020.
  • 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 2021 were $44.7 million, compared to $45.1 million for the third quarter of 2021, and $23.6 million for the fourth quarter of 2020. Total homegenius segment revenues for the full year of 2021 were $149.1 million, compared to $102.4 million for the full year of 2020.
    • The 45.5 percent increase in revenues in the year 2021 compared to the year 2020 was primarily driven by a 72.6 percent increase in our title business and a 26.1 percent increase in our real estate services businesses.
  • homegenius Profitability Metrics
    • Adjusted pretax operating loss, our primary segment measure of profitability for the homegenius segment, for the quarter ended December 31, 2021 was $2.1 million, compared to $5.6 million for the quarter ended September 30, 2021, and $11.1 million for the quarter ended December 31, 2020. Adjusted pretax operating loss for the full year 2021 was $27.3 million, compared to $23.2 million for the full year 2020.
    • Adjusted pretax operating income before allocated corporate operating expenses for the homegenius segment for the quarter ended December 31, 2021 was $2.7 million, compared to a loss of $0.6 million for the quarter ended September 30, 2021, and a loss of $7.8 million for the quarter ended December 31, 2020. Adjusted pretax operating loss before allocated corporate operating expenses for the homegenius segment for the full year 2021 was $8.8 million, compared to $10.4 million for the full year 2020.
    • Adjusted gross profit for the homegenius segment for the quarter ended December 31, 2021 was $19.7 million, compared to $17.9 million for the quarter ended September 30, 2021, and $7.5 million for the quarter ended December 31, 2020. Adjusted gross profit for the homegenius segment for the full year 2021 was $57.8 million, compared to $39.0 million for the full year 2020. Additional details regarding the homegenius results and related non-GAAP measures may be found in Exhibits F and G.
  • Other operating expenses were $80.5 million in the fourth quarter of 2021, compared to $86.5 million in the third quarter of 2021, and $81.6 million in the fourth quarter of 2020. Other operating expenses were $323.7 million for the full year 2021, compared to $280.7 million for the full year 2020.
    • The increase for the full year of 2021 compared to the full year of 2020 was driven primarily by an increase in incentive compensation expense 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 December 31, 2021, Radian Group maintained $604.9 million of available liquidity. Total liquidity, which includes the company’s $275.0 million unsecured revolving credit facility, was $879.9 million as of December 31, 2021.
  • During the fourth quarter of 2021, the company repurchased 6.4 million shares of Radian Group common stock at a total cost of $142.1 million, including commissions. For the full year 2021, the company repurchased 17.8 million shares of Radian Group common stock at a total cost of $399.1 million, including commissions.
  • On November 10, 2021, Radian Group’s board of directors authorized a regular quarterly dividend on its common stock in the amount of $0.14 per share and the dividend was paid on December 3, 2021.

Radian Guaranty

  • As previously announced, in November 2021, Radian Guaranty entered into its sixth fully collateralized mortgage insurance-linked note (ILN) reinsurance transaction in which the company obtained $484.1 million of credit-risk protection from Eagle Re 2021-2 Ltd. (Eagle Re), covering an existing portfolio of mortgage insurance policies written predominantly from January 1, 2021 through and including July 31, 2021. Eagle Re financed the coverage through the issuance of ILNs to eligible capital markets investors of $484.1 million aggregate principal amount of 12.5-year mortgage insurance-linked notes, 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 is determined by the GSE's.
  • At December 31, 2021, Radian Guaranty’s Available Assets under PMIERs totaled approximately $5.4 billion, resulting in excess available resources or a “cushion” of $2.1 billion, or 62 percent, over its Minimum Required Assets.
  • As of December 31, 2021, 73 percent of Radian Guaranty's primary mortgage insurance risk in force is subject to some form of risk distribution, providing a $1.3 billion reduction of Minimum Required Assets under PMIERs.

RECENT EVENTS

  • As previously announced on February 9, 2022, Radian Group’s Board of Directors authorized the following strategic capital actions based on the company's strong financial position and capital flexibility:
    • A quarterly dividend of $0.20 per share, representing an increase of 43 percent from the previous quarterly dividend of $0.14 per share paid on December 3, 2021. The dividend is payable on March 3, 2022, to stockholders of record as of February 21, 2022.
    • A new $400 million share repurchase authorization. The shares may be purchased in the open market or in privately negotiated transactions. Radian plans to utilize a value-based Rule 10b5-1 plan to execute the new authorization which, once implemented, 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 in February 2024.

CONFERENCE CALL

Radian will discuss fourth quarter and year-end 2021 financial results in a conference call tomorrow, Wednesday, February 23, 2022, 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 800.447.0521 inside the U.S., or 847.413.3238 for international callers, using passcode 50275325 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 50275325.

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) 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 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 homegenius adjusted gross profit margin are calculated by dividing homegenius adjusted pretax operating margin before allocated corporate operating expenses and homegenius 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 homegenius 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

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)

 

 

2021

 

2020

 

(In thousands, except per-share amounts)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Net premiums earned

$

261,437

 

 

$

249,118

 

$

254,756

 

$

271,872

 

 

$

302,140

(1)

Services revenue

 

35,693

 

 

 

37,773

 

 

29,464

 

 

22,895

 

 

 

11,440

(1)

Net investment income

 

37,407

 

 

 

35,960

 

 

36,291

 

 

38,251

 

 

 

38,115

 

Net gains (losses) on investments and other financial instruments

 

3,025

 

 

 

2,098

 

 

15,661

 

 

(5,181

)

 

 

17,376

 

Other income

 

805

 

 

 

809

 

 

822

 

 

976

 

 

 

790

 

Total revenues

 

338,367

 

 

 

325,758

 

 

336,994

 

 

328,813

 

 

 

369,861

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

Provision for losses

 

(46,219

)

 

 

17,305

 

 

3,648

 

 

46,143

 

 

 

56,664

 

Policy acquisition costs

 

7,271

 

 

 

7,924

 

 

4,838

 

 

8,996

 

 

 

7,395

 

Cost of services

 

28,333

 

 

 

30,520

 

 

24,615

 

 

20,246

 

 

 

21,600

 

Other operating expenses

 

80,476

 

 

 

86,479

 

 

86,469

 

 

70,262

 

 

 

81,641

 

Interest expense

 

21,137

 

 

 

21,027

 

 

21,065

 

 

21,115

 

 

 

21,169

 

Amortization and impairment of other acquired intangible assets

 

863

 

 

 

862

 

 

863

 

 

862

 

 

 

2,225

 

Total expenses

 

91,861

 

 

 

164,117

 

 

141,498

 

 

167,624

 

 

 

190,694

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income

 

246,506

 

 

 

161,641

 

 

195,496

 

 

161,189

 

 

 

179,167

 

Income tax provision

 

53,061

 

 

 

35,229

 

 

40,290

 

 

35,581

 

 

 

31,154

 

Net income

$

193,445

 

 

$

126,412

 

$

155,206

 

$

125,608

 

 

$

148,013

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per share

$

1.07

 

 

$

0.67

 

$

0.80

 

$

0.64

 

 

$

0.76

 

(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.

Selected Mortgage Key Ratios
 

 

2021

 

2020

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Loss ratio (1)

(18.6

) %

 

7.1

%

 

1.3

%

 

17.3

%

 

19.6

%

Expense ratio (2)

25.6

%

 

28.6

%

 

25.4

%

 

21.9

%

 

20.6

%

(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

Condensed Consolidated Statements of Operations

Exhibit A (page 2 of 2)

 

 

Year Ended

December 31,

(In thousands, except per-share amounts)

2021

 

2020

 

 

 

 

Revenues:

 

 

 

Net premiums earned

$

1,037,183

 

$

1,115,321

Services revenue

 

125,825

 

 

105,385

Net investment income

 

147,909

 

 

154,037

Net gains (losses) on investments and other financial instruments

 

15,603

 

 

60,277

Other income

 

3,412

 

 

3,597

Total revenues

 

1,329,932

 

 

1,438,617

 

 

 

 

Expenses:

 

 

 

Provision for losses

 

20,877

 

 

485,117

Policy acquisition costs

 

29,029

 

 

30,989

Cost of services

 

103,714

 

 

86,066

Other operating expenses

 

323,686

 

 

280,710

Interest expense

 

84,344

 

 

71,150

Amortization and impairment of other acquired intangible assets

 

3,450

 

 

5,144

Total expenses

 

565,100

 

 

959,176

 

 

 

 

Pretax income

 

764,832

 

 

479,441

Income tax provision

 

164,161

 

 

85,815

Net income

$

600,671

 

$

393,626

 

 

 

 

Diluted net income per share

$

3.16

 

$

2.00

Selected Mortgage Key Ratios

 

 

Year Ended

December 31,

 

2021

 

2020

Loss ratio (1)

1.9

%

 

44.2

%

Expense ratio (2)

25.3

%

 

21.0

%

(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:

 

 

2021

 

2020

(In thousands, except per-share amounts)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Net income —basic and diluted

$

193,445

 

$

126,412

 

$

155,206

 

$

125,608

 

$

148,013

 

 

 

 

 

 

 

 

 

 

Average common shares outstanding—basic

 

179,500

 

 

186,741

 

 

193,436

 

 

193,439

 

 

193,248

Dilutive effect of stock-based compensation arrangements (1)

 

1,628

 

 

1,301

 

 

1,202

 

 

1,764

 

 

1,415

Adjusted average common shares outstanding—diluted

 

181,128

 

 

188,042

 

 

194,638

 

 

195,203

 

 

194,663

 

 

 

 

 

 

 

 

 

 

Basic net income per share

$

1.08

 

$

0.68

 

$

0.80

 

$

0.65

 

$

0.77

 

 

 

 

 

 

 

 

 

 

Diluted net income per share

$

1.07

 

$

0.67

 

$

0.80

 

$

0.64

 

$

0.76

(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 were anti-dilutive:

 

2021

 

2020

(In thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Shares of common stock equivalents

35

 

 

 

 

324

 

 

Year Ended December 31,

(In thousands, except per-share amounts)

2021

 

2020

Net income - basic and diluted

$

600,671

 

$

393,626

 

 

 

 

Average common shares outstanding—basic

 

188,370

 

 

195,443

Dilutive effect of stock-based compensation arrangements (1)

 

1,893

 

 

1,199

Adjusted average common shares outstanding—diluted

 

190,263

 

 

196,642

 

 

 

 

Basic net income per share

$

3.19

 

$

2.01

 

 

 

 

Diluted net income per share

$

3.16

 

$

2.00

(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 per share because they were anti-dilutive:

 

Year Ended December 31,

(In thousands)

2021

 

2020

Shares of common stock equivalents

28

 

865

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)

2021

 

2021

 

2021

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

Investments

$

6,513,542

 

 

$

6,658,487

 

 

$

6,681,659

 

 

$

6,671,874

 

 

$

6,788,442

 

Cash

 

151,145

 

 

 

154,709

 

 

 

134,939

 

 

 

102,776

 

 

 

87,915

 

Restricted cash

 

1,475

 

 

 

1,866

 

 

 

2,968

 

 

 

20,987

 

 

 

6,231

 

Accrued investment income

 

32,812

 

 

 

33,258

 

 

 

32,223

 

 

 

34,841

 

 

 

34,047

 

Accounts and notes receivable

 

124,016

 

 

 

166,730

 

 

 

153,128

 

 

 

134,075

 

 

 

121,294

 

Reinsurance recoverables

 

67,896

 

 

 

76,048

 

 

 

75,411

 

 

 

76,664

 

 

 

73,202

 

Deferred policy acquisition costs

 

16,317

 

 

 

16,823

 

 

 

17,873

 

 

 

15,652

 

 

 

18,305

 

Property and equipment, net

 

75,086

 

 

 

74,170

 

 

 

74,288

 

 

 

78,309

 

 

 

80,457

 

Goodwill and other acquired intangible assets, net

 

19,593

 

 

 

20,456

 

 

 

21,318

 

 

 

22,181

 

 

 

23,043

 

Other assets

 

837,303

 

 

 

839,061

 

 

 

815,261

 

 

 

763,502

 

 

 

715,085

 

Total assets

$

7,839,185

 

 

$

8,041,608

 

 

$

8,009,068

 

 

$

7,920,861

 

 

$

7,948,021

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity:

 

 

 

 

 

 

 

 

 

Unearned premiums

$

329,090

 

 

$

348,322

 

 

$

373,031

 

 

$

406,689

 

 

$

448,791

 

Reserve for losses and loss adjustment expense

 

828,642

 

 

 

893,155

 

 

 

885,498

 

 

 

887,355

 

 

 

848,413

 

Senior notes

 

1,409,473

 

 

 

1,408,502

 

 

 

1,407,545

 

 

 

1,406,603

 

 

 

1,405,674

 

FHLB advances

 

150,983

 

 

 

172,649

 

 

 

153,983

 

 

 

138,833

 

 

 

176,483

 

Reinsurance funds withheld

 

228,078

 

 

 

290,502

 

 

 

285,406

 

 

 

282,345

 

 

 

278,555

 

Net deferred tax liability

 

337,509

 

 

 

286,957

 

 

 

266,330

 

 

 

210,571

 

 

 

213,897

 

Other liabilities

 

296,614

 

 

 

383,585

 

 

 

303,442

 

 

 

353,173

 

 

 

291,855

 

Total liabilities

 

3,580,389

 

 

 

3,783,672

 

 

 

3,675,235

 

 

 

3,685,569

 

 

 

3,663,668

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

194

 

 

 

200

 

 

 

207

 

 

 

210

 

 

 

210

 

Treasury stock

 

(920,798

)

 

 

(920,355

)

 

 

(920,225

)

 

 

(910,347

)

 

 

(910,115

)

Additional paid-in capital

 

1,878,372

 

 

 

2,012,870

 

 

 

2,161,857

 

 

 

2,242,950

 

 

 

2,245,897

 

Retained earnings

 

3,180,935

 

 

 

3,012,997

 

 

 

2,913,138

 

 

 

2,785,744

 

 

 

2,684,636

 

Accumulated other comprehensive income

 

120,093

 

 

 

152,224

 

 

 

178,856

 

 

 

116,735

 

 

 

263,725

 

Total stockholders’ equity

 

4,258,796

 

 

 

4,257,936

 

 

 

4,333,833

 

 

 

4,235,292

 

 

 

4,284,353

 

Total liabilities and stockholders’ equity

$

7,839,185

 

 

$

8,041,608

 

 

$

8,009,068

 

 

$

7,920,861

 

 

$

7,948,021

 

 

 

 

 

 

 

 

 

 

 

Shares outstanding

 

175,421

 

 

 

181,336

 

 

 

188,290

 

 

 

191,311

 

 

 

191,606

 

 

 

 

 

 

 

 

 

 

 

Book value per share

$

24.28

 

 

$

23.48

 

 

$

23.02

 

 

$

22.14

 

 

$

22.36

 

 

Debt to capital ratio (1)

 

24.9

%

 

 

24.9

%

 

 

24.5

%

 

 

24.9

%

 

 

24.7

%

Risk to capital ratio-Radian Guaranty only

11.1:1

 

11.4:1

 

11.4:1

 

11.9:1

 

12.7:1

(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)

 

 

2021

 

2020

(In thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

 

 

 

 

 

 

 

 

 

Premiums earned:

 

 

 

 

 

 

 

 

 

Direct - Mortgage:

 

 

 

 

 

 

 

 

 

Premiums earned, excluding revenue from cancellations (1)

$

248,704

 

 

$

239,786

 

 

$

243,077

 

 

$

256,905

 

 

$

272,331

 

Single Premium Policy cancellations

 

20,530

 

 

 

25,592

 

 

 

31,592

 

 

 

38,510

 

 

 

53,526

 

Total direct - Mortgage (1)

 

269,234

 

 

 

265,378

 

 

 

274,669

 

 

 

295,415

 

 

 

325,857

 

 

 

 

 

 

 

 

 

 

 

Assumed - Mortgage: (2)

 

1,470

 

 

 

1,683

 

 

 

1,615

 

 

 

2,298

 

 

 

2,615

 

 

 

 

 

 

 

 

 

 

 

Ceded - Mortgage:

 

 

 

 

 

 

 

 

 

Premiums earned, excluding revenue from cancellations

 

(28,333

)

 

 

(27,662

)

 

 

(27,324

)

 

 

(25,373

)

 

 

(27,229

)

Single Premium Policy cancellations (3)

 

(5,905

)

 

 

(7,338

)

 

 

(9,036

)

 

 

(11,109

)

 

 

(15,197

)

Profit commission - other (4)

 

13,199

 

 

 

4,806

 

 

 

7,162

 

 

 

3,433

 

 

 

770

 

Total ceded premiums - Mortgage (5)

 

(21,039

)

 

 

(30,194

)

 

 

(29,198

)

 

 

(33,049

)

 

 

(41,656

)

Net premiums earned - Mortgage (1)

 

249,665

 

 

 

236,867

 

 

 

247,086

 

 

 

264,664

 

 

 

286,816

 

Net premiums earned - homegenius (6)

 

11,772

 

 

 

12,251

 

 

 

7,670

 

 

 

7,208

 

 

 

7,572

 

Net premiums earned - All Other (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

7,752

 

Net premiums earned (1)

$

261,437

 

 

$

249,118

 

 

$

254,756

 

 

$

271,872

 

 

$

302,140

 

(1)

The fourth quarter of 2020 includes an increase to premiums earned of $11.3 million 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 the fourth quarter of 2020.

Radian Group Inc. and Subsidiaries

Net Premiums Earned

Exhibit D (page 2 of 2)

 

 

Year Ended

December 31,

(In thousands)

2021

 

2020

 

 

 

 

Premiums earned:

 

 

 

Direct - Mortgage:

 

 

 

Premiums earned, excluding revenue from cancellations (1)

$

988,472

 

 

$

1,070,335

 

Single Premium Policy cancellations

 

116,224

 

 

 

193,349

 

Total direct - Mortgage (1)

 

1,104,696

 

 

 

1,263,684

 

 

 

 

 

Assumed - Mortgage: (2)

 

7,066

 

 

 

12,214

 

 

 

 

 

Ceded - Mortgage:

 

 

 

Premiums earned, excluding revenue from cancellations

 

(108,692

)

 

 

(107,451

)

Single Premium Policy cancellations (3)

 

(33,388

)

 

 

(55,483

)

Profit commission - other (4)

 

28,600

 

 

 

(20,197

)

Total ceded premiums - Mortgage (5)

 

(113,480

)

 

 

(183,131

)

Net premiums earned - Mortgage

 

998,282

 

 

 

1,092,767

 

Net premiums earned - homegenius (6)

 

38,901

 

 

 

22,554

 

Net premiums earned

$

1,037,183

 

 

$

1,115,321

 

(1)

The fourth quarter of 2020 includes an increase to premiums earned of $11.3 million 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 the fourth quarter of 2020.

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 1 of 8)

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 (loss), homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses and homegenius adjusted gross profit, along with reconciliations to consolidated GAAP measures, see Exhibits F and G.

 

Three Months Ended December 31, 2021

(In thousands)

Mortgage

 

homegenius

 

All Other

 

Inter-segment (1)

 

Total

Net premiums written (2)

$

238,529

 

 

$

11,772

 

 

$

 

$

 

$

250,301

Decrease in unearned premiums

 

11,136

 

 

 

 

 

 

 

11,136

Net premiums earned

 

249,665

 

 

 

11,772

 

 

 

 

261,437

Services revenue

 

4,560

 

 

 

31,177

 

 

30

 

(74

)

 

35,693

Net investment income

 

33,916

 

 

 

255

 

 

3,236

 

 

37,407

Net gains (losses) on investments

 

 

 

 

1,509

 

 

 

 

1,509

Other income

 

661

 

 

 

 

 

144

 

 

805

Total

 

288,802

 

 

 

44,713

 

 

3,410

 

(74

)

 

336,851

Provision for losses

 

(46,560

)

 

 

369

 

 

 

(28

)

 

(46,219

)

Policy acquisition costs

 

7,271

 

 

 

 

 

 

 

7,271

Cost of services

 

3,710

 

 

 

24,615

 

 

8

 

 

28,333

Other operating expenses before allocated corporate operating expenses (3)

 

23,365

 

 

 

16,998

 

 

2,795

 

(46

)

 

43,112

Interest expense (4)

 

21,137

 

 

 

 

 

 

 

21,137

Total

 

8,923

 

 

 

41,982

 

 

2,803

 

(74

)

 

53,634

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

 

279,879

 

 

 

2,731

 

 

607

 

 

283,217

Allocation of corporate operating expenses

 

33,305

 

 

 

4,847

 

 

 

 

38,152

Adjusted pretax operating income (loss)

$

246,574

 

 

$

(2,116

)

 

$

607

 

$

 

$

245,065

 

 

Three Months Ended December 31, 2020

(In thousands)

Mortgage

 

homegenius

All Other

Inter-segment (1)

Total

Net premiums written (2) (5)

$

261,244

 

 

$

7,572

 

$

7,752

 

$

 

$

276,568

 

Decrease in unearned premiums

 

25,572

 

 

 

 

 

 

 

 

 

25,572

 

Net premiums earned

 

286,816

 

 

 

7,572

 

 

7,752

 

 

 

 

302,140

 

Services revenue

 

3,717

 

 

 

15,958

 

 

(7,963

)

 

(272

)

 

11,440

 

Net investment income

 

34,235

 

 

 

43

 

 

3,837

 

 

 

 

38,115

 

Other income

 

735

 

 

 

 

 

55

 

 

 

 

790

 

Total

 

325,503

 

 

 

23,573

 

 

3,681

 

 

(272

)

 

352,485

 

Provision for losses

 

56,312

 

 

 

392

 

 

 

 

(40

)

 

56,664

 

Policy acquisition costs

 

7,395

 

 

 

 

 

 

 

 

 

7,395

 

Cost of services

 

3,245

 

 

 

15,706

 

 

2,835

 

 

(186

)

 

21,600

 

Other operating expenses before allocated corporate operating expenses (3) (6)

 

20,569

 

 

 

15,238

 

 

4,438

 

 

(46

)

 

40,199

 

Interest expense (4)

 

21,169

 

 

 

 

 

 

 

 

 

21,169

 

Total

 

108,690

 

 

 

31,336

 

 

7,273

 

 

(272

)

 

147,027

 

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

 

216,813

 

 

 

(7,763

)

 

(3,592

)

 

 

 

205,458

 

Allocation of corporate operating expenses (6)

 

31,102

 

 

 

3,369

 

 

 

 

 

 

34,471

 

Adjusted pretax operating income (loss)

$

185,711

 

 

$

(11,132

)

$

(3,592

)

$

 

$

170,987

 

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 2 of 8)

 

 

Year Ended December 31, 2021

(In thousands)

Mortgage

homegenius

 

All Other

 

Inter-segment (1)

 

Total

Net premiums written (2)

$

944,546

$

38,901

 

 

$

 

$

 

 

$

983,447

Decrease in unearned premiums

 

53,736

 

 

 

 

 

 

 

 

 

53,736

Net premiums earned

 

998,282

 

38,901

 

 

 

 

 

 

 

 

1,037,183

Services revenue

 

17,670

 

108,282

 

 

 

154

 

 

(281

)

 

 

125,825

Net investment income

 

132,929

 

358

 

 

 

14,622

 

 

 

 

 

147,909

Net gains (losses) on investments

 

 

1,509

 

 

 

 

 

 

 

 

1,509

Other income

 

2,678

 

 

 

 

734

 

 

 

 

 

3,412

Total

 

1,151,559

 

149,050

 

 

 

15,510

 

 

(281

)

 

 

1,315,838

Provision for losses

 

19,437

 

1,540

 

 

 

 

 

(100

)

 

 

20,877

Policy acquisition costs

 

29,029

 

 

 

 

 

 

 

 

 

29,029

Cost of services

 

13,928

 

89,722

 

 

 

64

 

 

 

 

 

103,714

Other operating expenses before allocated corporate operating expenses (3)

 

95,793

 

66,630

 

 

 

11,919

 

 

(181

)

 

 

174,161

Interest expense (4)

 

84,344

 

 

 

 

 

 

 

 

 

84,344

Total

 

242,531

 

157,892

 

 

 

11,983

 

 

(281

)

 

 

412,125

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

 

909,028

 

(8,842

)

 

 

3,527

 

 

 

 

 

903,713

Allocation of corporate operating expenses

 

127,482

 

18,482

 

 

 

 

 

 

 

 

145,964

Adjusted pretax operating income (loss)

$

781,546

$

(27,324

)

 

$

3,527

 

$

 

 

$

757,749

 

 

Year Ended December 31, 2020

(In thousands)

Mortgage

 

homegenius

All Other

Inter-segment (1)

Total

Net premiums written (2) (5)

$

1,010,954

 

$

22,554

 

$

$

 

$

1,033,508

Decrease in unearned premiums

 

81,813

 

 

 

 

 

 

 

81,813

Net premiums earned

 

1,092,767

 

 

22,554

 

 

 

 

 

1,115,321

Services revenue

 

14,765

 

 

79,524

 

 

12,535

 

(1,439

)

 

105,385

Net investment income

 

137,195

 

 

361

 

 

16,481

 

 

 

154,037

Other income

 

2,816

 

 

 

 

534

 

 

 

3,350

Total

 

1,247,543

 

 

102,439

 

 

29,550

 

(1,439

)

 

1,378,093

Provision for losses

 

483,332

 

 

1,931

 

 

 

(146

)

 

485,117

Policy acquisition costs

 

30,989

 

 

 

 

 

 

 

30,989

Cost of services (1)

 

10,043

 

 

61,461

 

 

15,639

 

(1,077

)

 

86,066

Other operating expenses before allocated corporate operating expenses (3) (6)

 

83,933

 

 

49,480

 

 

11,898

 

(216

)

 

145,095

Interest expense (4)

 

71,150

 

 

 

 

 

 

 

71,150

Total

 

679,447

 

 

112,872

 

 

27,537

 

(1,439

)

 

818,417

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

 

568,096

 

 

(10,433

)

 

2,013

 

 

 

559,676

Allocation of corporate operating expenses

 

114,802

 

 

12,807

 

 

 

 

 

127,609

Adjusted pretax operating income (loss)

$

453,294

 

$

(23,240

)

$

2,013

$

 

$

432,067

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 3 of 8)

 

(1)

Inter-segment information:

 

Three Months Ended

December 31,

 

Year Ended

December 31,

(In thousands)

2021

 

2020

 

2021

 

2020

Inter-segment revenue included in:

 

 

 

 

 

 

 

Mortgage

$

 

$

 

$

 

$

83

homegenius

 

74

 

 

86

 

 

281

 

 

362

All Other

 

 

 

186

 

 

 

 

994

Total inter-segment revenue

$

74

 

$

272

 

$

281

 

$

1,439

 

 

 

 

 

 

 

 

Inter-segment expense included in:

 

 

 

 

 

 

 

Mortgage

$

74

 

$

86

 

$

281

 

$

362

homegenius

 

 

 

186

 

 

 

 

994

All Other

 

 

 

 

 

 

 

83

Total inter-segment expense

$

74

 

$

272

 

$

281

 

$

1,439

(2)

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

(3)

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

(4)

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.

(5)

The fourth quarter of 2020 includes an increase to premiums earned of $11.3 million 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)

Includes a change in the composition of our reportable segments, effective in the fourth quarter of 2021, that has been reflected in our segment operating results for all periods presented, resulting in certain expenses being reclassified from Mortgage to All Other.

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 4 of 8)

 

 

Mortgage

 

2021

 

2020

(In thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Net premiums written (1) (2)

$

238,529

 

 

$

228,116

 

 

$

231,027

 

 

$

246,874

 

 

$

261,244

 

Decrease in unearned premiums

 

11,136

 

 

 

8,751

 

 

 

16,059

 

 

 

17,790

 

 

 

25,572

 

Net premiums earned

 

249,665

 

 

 

236,867

 

 

 

247,086

 

 

 

264,664

 

 

 

286,816

 

Services revenue

 

4,560

 

 

 

5,027

 

 

 

3,732

 

 

 

4,351

 

 

 

3,717

 

Net investment income

 

33,916

 

 

 

32,158

 

 

 

32,842

 

 

 

34,013

 

 

 

34,235

 

Other income

 

661

 

 

 

607

 

 

 

641

 

 

 

769

 

 

 

735

 

Total

 

288,802

 

 

 

274,659

 

 

 

284,301

 

 

 

303,797

 

 

 

325,503

 

Provision for losses (3)

 

(46,560

)

 

 

16,794

 

 

 

3,334

 

 

 

45,869

 

 

 

56,312

 

Policy acquisition costs

 

7,271

 

 

 

7,924

 

 

 

4,838

 

 

 

8,996

 

 

 

7,395

 

Cost of services

 

3,710

 

 

 

3,865

 

 

 

3,161

 

 

 

3,192

 

 

 

3,245

 

Other operating expenses before allocated corporate operating expenses (3) (4) (5)

 

23,365

 

 

 

25,866

 

 

 

25,222

 

 

 

21,340

 

 

 

20,569

 

Interest expense (6)

 

21,137

 

 

 

21,027

 

 

 

21,065

 

 

 

21,115

 

 

 

21,169

 

Total (3)

 

8,923

 

 

 

75,476

 

 

 

57,620

 

 

 

100,512

 

 

 

108,690

 

Adjusted pretax operating income before allocated corporate operating expenses

 

279,879

 

 

 

199,183

 

 

 

226,681

 

 

 

203,285

 

 

 

216,813

 

Allocation of corporate operating expenses (5)

 

33,305

 

 

 

33,963

 

 

 

32,638

 

 

 

27,576

 

 

 

31,102

 

Adjusted pretax operating income

$

246,574

 

 

$

165,220

 

 

$

194,043

 

 

$

175,709

 

 

$

185,711

 

 

 

homegenius

 

2021

 

2020

(In thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Net premiums earned (7)

$

11,772

 

 

$

12,251

 

 

$

7,670

 

 

$

7,208

 

 

$

7,572

 

Services revenue (3) (7)

 

31,177

 

 

 

32,805

 

 

 

25,750

 

 

 

18,550

 

 

 

15,958

 

Net investment income

 

255

 

 

 

35

 

 

 

31

 

 

 

37

 

 

 

43

 

Net gains (losses) on investments

 

1,509

 

 

 

 

 

 

 

 

 

 

 

 

 

Total (3)

 

44,713

 

 

 

45,091

 

 

 

33,451

 

 

 

25,795

 

 

 

23,573

 

Provision for losses

 

369

 

 

 

540

 

 

 

335

 

 

 

296

 

 

 

392

 

Cost of services (3)

 

24,615

 

 

 

26,646

 

 

 

21,433

 

 

 

17,028

 

 

 

15,706

 

Other operating expenses before allocated corporate operating expenses (4)

 

16,998

 

 

 

18,544

 

 

 

16,160

 

 

 

14,928

 

 

 

15,238

 

Total (3)

 

41,982

 

 

 

45,730

 

 

 

37,928

 

 

 

32,252

 

 

 

31,336

 

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

 

2,731

 

 

 

(639

)

 

 

(4,477

)

 

 

(6,457

)

 

 

(7,763

)

Allocation of corporate operating expenses

 

4,847

 

 

 

4,918

 

 

 

4,721

 

 

 

3,996

 

 

 

3,369

 

Adjusted pretax operating income (loss)

$

(2,116

)

 

$

(5,557

)

 

$

(9,198

)

 

$

(10,453

)

 

$

(11,132

)

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 5 of 8)

 

 

All Other (8)

 

2021

 

2020

(In thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Net premiums earned (7)

$

 

$

 

$

 

 

$

 

$

7,752

 

Services revenue (3) (7)

 

30

 

 

27

 

 

44

 

 

 

53

 

 

(7,963

)

Net investment income

 

3,236

 

 

3,767

 

 

3,418

 

 

 

4,201

 

 

3,837

 

Other income

 

144

 

 

202

 

 

181

 

 

 

207

 

 

55

 

Total (3)

 

3,410

 

 

3,996

 

 

3,643

 

 

 

4,461

 

 

3,681

 

Cost of services

 

8

 

 

9

 

 

19

 

 

 

28

 

 

2,835

 

Other operating expenses (4) (5)

 

2,795

 

 

3,001

 

 

3,750

 

 

 

2,373

 

 

4,438

 

Total

 

2,803

 

 

3,010

 

 

3,769

 

 

 

2,401

 

 

7,273

 

Adjusted pretax operating income (loss)

$

607

 

$

986

 

$

(126

)

 

$

2,060

 

$

(3,592

)

(1)

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

(2)

The fourth quarter of 2020 includes an increase to premiums earned of $11.3 million 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.

(3)

Inter-segment information:

 

2021

 

2020

(In thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Inter-segment revenue included in:

 

 

 

 

 

 

 

 

 

homegenius

$

74

 

$

86

 

$

62

 

$

59

 

$

86

All Other

 

 

 

 

 

 

 

 

 

186

Total inter-segment revenue

$

74

 

$

86

 

$

62

 

$

59

 

$

272

 

 

 

 

 

 

 

 

 

 

Inter-segment expense included in:

 

 

 

 

 

 

 

 

 

Mortgage

$

74

 

$

86

 

$

62

 

$

59

 

$

86

homegenius

 

 

 

 

 

 

 

 

 

186

Total inter-segment expense

$

74

 

$

86

 

$

62

 

$

59

 

$

272

(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)

Includes a change in the composition of our reportable segments, effective in the fourth quarter of 2021, that has been reflected in our segment operating results for all periods presented, resulting in certain expenses being reclassified from Mortgage to All Other.

(6)

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.

 

See notes continued on next page.

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 6 of 8)

 

Notes continued from prior page.

 

(7)

In the fourth quarter of 2020, we reclassified certain revenue previously reflected in the homegenius segment results as services revenue to net premiums earned.

(8)

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 presented, the income and expenses related to our traditional appraisal services, which we wound down beginning in the fourth quarter of 2020; and (iv) certain other immaterial activities, including investments in new business opportunities.

Supplemental Other Operating Expense Information by Segment
 

 

Mortgage

 

2021

 

2020

(In thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Other operating expenses by type

 

 

 

 

 

 

 

 

 

Salaries and other base employee expenses

$

24,377

 

 

$

23,541

 

 

$

23,546

 

 

$

23,533

 

 

$

23,945

 

Variable and share-based incentive compensation

 

11,882

 

 

 

16,287

 

 

 

14,232

 

 

 

8,734

 

 

 

11,737

 

Other general operating expenses

 

25,290

 

 

 

25,639

 

 

 

26,583

 

 

 

24,338

 

 

 

26,425

 

Ceding commissions

 

(4,879

)

 

 

(5,638

)

 

 

(6,501

)

 

 

(7,689

)

 

 

(10,436

)

Total

$

56,670

 

 

$

59,829

 

 

$

57,860

 

 

$

48,916

 

 

$

51,671

 

 

 

homegenius

 

2021

 

2020

(In thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Other operating expenses by type

 

 

 

 

 

 

 

 

 

Salaries and other base employee expenses

$

8,073

 

 

$

7,061

 

 

$

6,759

 

 

$

8,315

 

 

$

7,305

 

Variable and share-based incentive compensation

 

4,598

 

 

 

6,152

 

 

 

5,838

 

 

 

2,949

 

 

 

3,476

 

Other general operating expenses

 

7,851

 

 

 

7,982

 

 

 

6,525

 

 

 

6,253

 

 

 

6,059

 

Title agent commissions

 

1,323

 

 

 

2,267

 

 

 

1,759

 

 

 

1,407

 

 

 

1,767

 

Total

$

21,845

 

 

$

23,462

 

 

$

20,881

 

 

$

18,924

 

 

$

18,607

 

 

 

All Other

 

2021

 

2020

(In thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Other operating expenses by type

 

 

 

 

 

 

 

 

 

Salaries and other base employee expenses

$

1,004

 

 

$

1,164

 

 

$

1,192

 

 

$

997

 

 

$

2,011

 

Variable and share-based incentive compensation

 

871

 

 

 

1,138

 

 

 

953

 

 

 

399

 

 

 

452

 

Other general operating expenses

 

920

 

 

 

699

 

 

 

1,605

 

 

 

977

 

 

 

1,975

 

Total

$

2,795

 

 

$

3,001

 

 

$

3,750

 

 

$

2,373

 

 

$

4,438

 

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 7 of 8)

 

 

Inter-segment

 

2021

 

2020

(In thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Other operating expenses by type

 

 

 

 

 

 

 

 

 

Other general operating expenses

$

(46

)

 

$

(57

)

 

$

(43

)

 

$

(35

)

 

$

(46

)

Total

$

(46

)

 

$

(57

)

 

$

(43

)

 

$

(35

)

 

$

(46

)

 

 

Total

 

2021

 

2020

(In thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Other operating expenses by type

 

 

 

 

 

 

 

 

 

Salaries and other base employee expenses

$

33,454

 

 

$

31,766

 

 

$

31,497

 

 

$

32,845

 

 

$

33,261

 

Variable and share-based incentive compensation

 

17,351

 

 

 

23,577

 

 

 

21,023

 

 

 

12,082

 

 

 

15,665

 

Other general operating expenses

 

34,015

 

 

 

34,263

 

 

 

34,670

 

 

 

31,533

 

 

 

34,413

 

Ceding commissions

 

(4,879

)

 

 

(5,638

)

 

 

(6,501

)

 

 

(7,689

)

 

 

(10,436

)

Title agent commissions

 

1,323

 

 

 

2,267

 

 

 

1,759

 

 

 

1,407

 

 

 

1,767

 

Total

$

81,264

 

 

$

86,235

 

 

$

82,448

 

 

$

70,178

 

 

$

74,670

 

 

Mortgage

 

Year Ended December 31,

(In thousands)

2021

 

2020

Other operating expenses by type

 

 

 

Salaries and other base employee expenses

$

94,997

 

 

$

95,121

 

Variable and share-based incentive compensation

 

51,135

 

 

 

37,458

 

Other general operating expenses

 

101,850

 

 

 

107,302

 

Ceding commissions

 

(24,707

)

 

 

(41,146

)

Total

$

223,275

 

 

$

198,735

 

 

 

homegenius

 

Year Ended December 31,

(In thousands)

2021

 

2020

Other operating expenses by type

 

 

 

Salaries and other base employee expenses

$

30,208

 

 

$

24,878

 

Variable and share-based incentive compensation

 

19,537

 

 

 

10,254

 

Other general operating expenses

 

28,611

 

 

 

21,975

 

Title agent commissions

 

6,756

 

 

 

5,180

 

Total

$

85,112

 

 

$

62,287

 

Radian Group Inc. and Subsidiaries

Segment Information

Exhibit E (page 8 of 8)

 

 

All Other

 

Year Ended December 31,

(In thousands)

2021

 

2020

Other operating expenses by type

 

 

 

Salaries and other base employee expenses

$

4,357

 

 

$

5,446

 

Variable and share-based incentive compensation

 

3,361

 

 

 

1,241

 

Other general operating expenses

 

4,201

 

 

 

5,211

 

Total

$

11,919

 

 

$

11,898

 

 

 

Inter-segment

 

Year Ended December 31,

(In thousands)

2021

 

2020

Other operating expenses by type

 

 

 

Other general operating expenses

$

(181

)

 

$

(216

)

Total

$

(181

)

 

$

(216

)

 

 

Total

 

Year Ended December 31,

(In thousands)

2021

 

2020

Other operating expenses by type

 

 

 

Salaries and other base employee expenses

$

129,562

 

 

$

125,445

 

Variable and share-based incentive compensation

 

74,033

 

 

 

48,953

 

Other general operating expenses

 

134,481

 

 

 

134,272

 

Ceding commissions

 

(24,707

)

 

 

(41,146

)

Title agent commissions

 

6,756

 

 

 

5,180

 

Total

$

320,125

 

 

$

272,704

 

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, except for certain investments attributable to our reportable segments; (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 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.

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. Except for certain investments attributable to our reportable segments, 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 income and 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 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 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 adjusted pretax operating income (loss) to adjusted pretax operating income (loss) before allocated corporate operating expenses and adjusted gross profit for the homegenius segment.

Total adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share, adjusted net operating return on equity, homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses and homegenius adjusted gross profit 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), or in the case of the homegenius non-GAAP measures, for homegenius adjusted pretax operating income (loss). Our definitions of adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share, adjusted net operating return on equity and homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses, homegenius adjusted gross profit, homegenius adjusted pretax operating margin before allocated corporate operating expenses or homegenius adjusted gross profit 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 5)

 

Reconciliation of Consolidated Pretax Income to Adjusted Pretax Operating Income

 

 

2021

 

2020

(In thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Consolidated pretax income

$

246,506

 

 

$

161,641

 

 

$

195,496

 

 

$

161,189

 

 

$

179,167

 

Less reconciling income (expense) items:

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments (1)

 

1,516

 

 

 

2,098

 

 

 

15,661

 

 

 

(5,181

)

 

 

17,376

 

Amortization and impairment of other acquired intangible assets

 

(863

)

 

 

(862

)

 

 

(863

)

 

 

(862

)

 

 

(2,225

)

Impairment of other long-lived assets and other non-operating items (2)

 

788

 

 

 

(244

)

 

 

(4,021

)

 

 

(84

)

 

 

(6,971

)

Total adjusted pretax operating income (3)

$

245,065

 

 

$

160,649

 

 

$

184,719

 

 

$

167,316

 

 

$

170,987

 

(1)

For the fourth quarter of 2021, excludes $1.5 million in net gains on investments attributable to our homegenius segment and included in adjusted pretax operating income (loss) for that reportable segment.

(2)

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.

(3)

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

 

2021

 

2020

(In thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Adjusted pretax operating income (loss):

 

 

 

 

 

 

 

 

 

Mortgage segment

$

246,574

 

 

$

165,220

 

 

$

194,043

 

 

$

175,709

 

 

$

185,711

 

homegenius segment

 

(2,116

)

 

 

(5,557

)

 

 

(9,198

)

 

 

(10,453

)

 

 

(11,132

)

All Other activities

 

607

 

 

 

986

 

 

 

(126

)

 

 

2,060

 

 

 

(3,592

)

Total adjusted pretax operating income

$

245,065

 

 

$

160,649

 

 

$

184,719

 

 

$

167,316

 

 

$

170,987

 

Radian Group Inc. and Subsidiaries

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit G (page 2 of 5)

 

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

 

 

2021

 

2020

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Diluted net income per share

$

1.07

 

 

$

0.67

 

 

$

0.80

 

 

$

0.64

 

 

$

0.76

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

 

0.01

 

 

 

0.01

 

 

 

0.08

 

 

 

(0.03

)

 

 

0.09

 

Amortization and impairment of other acquired intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.01

)

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

 

 

 

 

 

 

 

(0.02

)

 

 

 

 

 

(0.04

)

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

 

 

 

 

 

 

 

(0.01

)

 

 

0.01

 

 

 

(0.01

)

Difference between statutory and effective tax rate

 

(0.01

)

 

 

(0.01

)

 

 

 

 

 

(0.02

)

 

 

0.04

 

Per-share impact of reconciling income (expense) items

 

 

 

 

 

 

 

0.05

 

 

 

(0.04

)

 

 

0.07

 

Adjusted diluted net operating income per share (1)

$

1.07

 

 

$

0.67

 

 

$

0.75

 

 

$

0.68

 

 

$

0.69

(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)

 

 

 

 

 

 

 

 

 

 

 

2021

 

2020

 

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

Return on equity (1)

18.2

%

 

11.8

%

 

14.5

%

 

11.8

%

 

14.1

%

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

 

 

 

 

 

 

 

 

 

Net gains (losses) on investments and other financial instruments

0.1

 

 

0.2

 

 

1.5

 

 

(0.5

)

 

1.7

 

Amortization and impairment of other acquired intangible assets

(0.1

)

 

(0.1

)

 

(0.1

)

 

(0.1

)

 

(0.2

)

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

0.1

 

 

 

 

(0.4

)

 

 

 

(0.7

)

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

 

 

 

 

(0.2

)

 

0.1

 

 

(0.2

)

Difference between statutory and effective tax rate

(0.1

)

 

(0.1

)

 

0.1

 

 

(0.1

)

 

0.6

 

Impact of reconciling income (expense) items

 

 

 

 

0.9

 

 

(0.6

)

 

1.2

 

Adjusted net operating return on equity

18.2

%

 

11.8

%

 

13.6

%

 

12.4

%

 

12.9

%

(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 5)

 

Reconciliation of homegenius Adjusted Pretax Operating Income (Loss) to homegenius Adjusted Gross Profit

 

 

2021

 

2020

(In thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

homegenius adjusted pretax operating income (loss)

$

(2,116

)

 

$

(5,557

)

 

$

(9,198

)

 

$

(10,453

)

 

$

(11,132

)

Less reconciling income (expense) items:

 

 

 

 

 

 

 

 

 

Allocation of corporate operating expenses

 

(4,847

)

 

 

(4,918

)

 

 

(4,721

)

 

 

(3,996

)

 

 

(3,369

)

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

 

2,731

 

 

 

(639

)

 

 

(4,477

)

 

 

(6,457

)

 

 

(7,763

)

Less reconciling income (expense) items:

 

 

 

 

 

 

 

 

 

Other operating expenses before allocated corporate operating expenses

 

(16,998

)

 

 

(18,544

)

 

 

(16,160

)

 

 

(14,928

)

 

 

(15,238

)

homegenius adjusted gross profit

$

19,729

 

 

$

17,905

 

 

$

11,683

 

 

$

8,471

 

 

$

7,475

 

Radian Group Inc. and Subsidiaries

Consolidated Non-GAAP Financial Measure Reconciliations

Exhibit G (page 4 of 5)

 

Reconciliation of Consolidated Pretax Income to Adjusted Pretax Operating Income

 

 

Year Ended

December 31,

(In thousands)

2021

 

2020

Consolidated pretax income

$

764,832

 

 

$

479,441

 

Less reconciling income (expense) items:

 

 

 

Net gains (losses) on investments and other financial instruments (1)

 

14,094

 

 

 

60,277

 

Amortization and impairment of other acquired intangible assets

 

(3,450

)

 

 

(5,144

)

Impairment of other long-lived assets and other non-operating items (2)

 

(3,561

)

 

 

(7,759

)

Total adjusted pretax operating income (3)

$

757,749

 

 

$

432,067

 

(1)

For 2021, excludes $1.5 million in net gains on investments attributable to our homegenius segment and included in adjusted pretax operating income (loss) for that reportable segment.

(2)

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.

(3)

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)

2021

 

2020

Adjusted pretax operating income (loss):

 

 

 

Mortgage segment

$

781,546

 

 

$

453,294

 

homegenius segment

 

(27,324

)

 

 

(23,240

)

All Other activities

 

3,527

 

 

 

2,013

 

Total adjusted pretax operating income

$

757,749

 

 

$

432,067

 

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

 

 

Year Ended

December 31,

 

2021

 

2020

Diluted net income per share

$

3.16

 

 

$

2.00

 

 

 

 

 

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

 

 

 

Net gains (losses) on investments and other financial instruments

 

0.08

 

 

 

0.31

 

Amortization and impairment of other acquired intangible assets

 

(0.02

)

 

 

(0.03

)

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

 

(0.02

)

 

 

(0.04

)

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

 

(0.01

)

 

 

(0.05

)

Difference between statutory and effective tax rate

 

(0.02

)

 

 

0.07

 

Per-share impact of other income (expense) items

 

0.01

 

 

 

0.26

 

Adjusted diluted net operating income per share (1)

$

3.15

 

 

$

1.74

 

(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 5)

 

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

 

 

Year Ended

December 31,

 

2021

 

2020

Return on equity (1)

14.1

%

 

9.4

%

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

 

 

 

Net gains (losses) on investments and other financial instruments

0.4

 

 

1.4

 

Amortization and impairment of other acquired intangible assets

(0.1

)

 

(0.1

)

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

(0.1

)

 

(0.2

)

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

 

 

(0.2

)

Difference between statutory and effective tax rate

(0.1

)

 

0.3

 

Impact of reconciling income (expense) items

0.1

 

 

1.2

 

Adjusted net operating return on equity

14.0

%

 

8.2

%

(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.

Reconciliation of homegenius Adjusted Pretax Operating Income (Loss) to homegenius Adjusted Gross Profit

 

 

Year Ended

December 31,

(In thousands)

2021

 

2020

homegenius adjusted pretax operating income (loss)

$

(27,324

)

 

$

(23,240

)

Less reconciling income (expense) items:

 

 

 

Allocation of corporate operating expenses

 

(18,482

)

 

 

(12,807

)

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

 

(8,842

)

 

 

(10,433

)

Less reconciling income (expense) items:

 

 

 

Other operating expenses before allocated corporate operating expenses

 

(66,630

)

 

 

(49,480

)

homegenius adjusted gross profit

$

57,788

 

 

$

39,047

 

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. In addition, “homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses", "homegenius adjusted gross profit," “homegenius adjusted pretax operating margin before allocated corporate operating expenses” and “homegenius adjusted pretax operating 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), or in the case of the homegenius non-GAAP measures, for homegenius adjusted pretax operating income (loss).

Our definitions of adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share, adjusted net operating return on equity, homegenius adjusted pretax operating income (loss) before allocated corporate operating expenses, homegenius adjusted gross profit, homegenius adjusted pretax operating margin before allocated corporate operating expenses or homegenius adjusted gross profit 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

 

 

2021

 

2020

($ in millions)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

 

 

 

 

 

 

 

 

 

New insurance written ("NIW")

$

23,710

 

 

$

26,558

 

 

$

21,662

 

 

$

20,161

 

 

$

29,781

 

 

 

 

 

 

 

 

 

 

 

Percentage of NIW

 

 

 

 

 

 

 

 

 

Borrower-paid

 

99.4

%

 

 

99.2

%

 

 

99.1

%

 

 

99.2

%

 

 

99.2

%

 

 

 

 

 

 

 

 

 

 

Percentage by premium type

 

 

 

 

 

 

 

 

 

Direct monthly and other recurring premiums

 

93.5

%

 

 

93.8

%

 

 

93.1

%

 

 

90.2

%

 

 

91.4

%

Borrower-paid (1) (2)

 

6.3

 

 

 

6.0

 

 

 

6.6

 

 

 

9.4

 

 

 

8.3

 

Lender-paid (1)

 

0.2

 

 

 

0.2

 

 

 

0.3

 

 

 

0.4

 

 

 

0.3

 

Direct single premiums (1)

 

6.5

 

 

 

6.2

 

 

 

6.9

 

 

 

9.8

 

 

 

8.6

 

Total NIW

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

NIW for purchases

 

91.1

%

 

 

89.8

%

 

 

77.1

%

 

 

59.1

%

 

 

64.6

%

NIW for refinances

 

8.9

%

 

 

10.2

%

 

 

22.9

%

 

 

40.9

%

 

 

35.4

%

 

 

 

 

 

 

 

 

 

 

Percentage of NIW by FICO score (3)

 

 

 

 

 

 

 

 

 

>=740

 

53.8

%

 

 

56.0

%

 

 

61.4

%

 

 

64.3

%

 

 

64.7

%

680-739

 

36.9

 

 

 

34.9

 

 

 

33.1

 

 

 

31.5

 

 

 

31.5

 

620-679

 

9.3

 

 

 

9.1

 

 

 

5.5

 

 

 

4.2

 

 

 

3.8

 

Total NIW

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Percentage by LTV

 

 

 

 

 

 

 

 

 

95.01% and above

 

16.3

%

 

 

12.1

%

 

 

10.9

%

 

 

8.0

%

 

 

8.9

%

90.01% to 95.00%

 

41.9

 

 

 

46.7

 

 

 

40.4

 

 

 

31.6

 

 

 

34.7

 

85.01% to 90.00%

 

28.4

 

 

 

26.5

 

 

 

27.6

 

 

 

31.3

 

 

 

29.8

 

85.00% and below

 

13.4

 

 

 

14.7

 

 

 

21.1

 

 

 

29.1

 

 

 

26.6

 

Total NIW

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

(1)

Percentages exclude the impact of reinsurance.

(2)

Borrower-paid Single Premium Policies have lower Minimum Required Assets under PMIERs as compared to lender-paid Single Premium Policies.

(3)

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

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)

2021

 

2021

 

2021

 

2021

 

2020

Primary insurance in force (1)

 

 

 

 

 

 

 

 

 

Prime

$

242,635

 

 

$

238,047

 

 

$

233,543

 

 

$

234,980

 

 

$

242,044

 

Alt-A and A minus and below

 

3,337

 

 

 

3,528

 

 

 

3,759

 

 

 

3,941

 

 

 

4,100

 

Primary

$

245,972

 

 

$

241,575

 

 

$

237,302

 

 

$

238,921

 

 

$

246,144

 

 

 

 

 

 

 

 

 

 

 

Primary risk in force (1) (2)

 

 

 

 

 

 

 

 

 

Prime

$

60,121

 

 

$

58,585

 

 

$

57,155

 

 

$

57,579

 

 

$

59,689

 

Alt-A and A minus and below

 

792

 

 

 

836

 

 

 

885

 

 

 

929

 

 

 

967

 

Primary

$

60,913

 

 

$

59,421

 

 

$

58,040

 

 

$

58,508

 

 

$

60,656

 

 

 

 

 

 

 

 

 

 

 

Percentage of primary risk in force

 

 

 

 

 

 

 

 

 

Direct monthly and other recurring premiums

 

83.9

%

 

 

82.7

%

 

 

81.2

%

 

 

80.0

%

 

 

79.1

%

Direct single premiums

 

16.1

%

 

 

17.3

%

 

 

18.8

%

 

 

20.0

%

 

 

20.9

%

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

>=740

 

56.9

%

 

 

57.3

%

 

 

57.5

%

 

 

57.2

%

 

 

57.5

%

680-739

 

35.0

 

 

 

34.8

 

 

 

34.8

 

 

 

34.9

 

 

 

34.6

 

620-679

 

7.6

 

 

 

7.4

 

 

 

7.2

 

 

 

7.3

 

 

 

7.3

 

<=619

 

0.5

 

 

 

0.5

 

 

 

0.5

 

 

 

0.6

 

 

 

0.6

 

Total Primary

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Percentage of primary risk in force by LTV

 

 

 

 

 

 

 

 

 

95.01% and above

 

15.1

%

 

 

14.6

%

 

 

14.5

%

 

 

14.4

%

 

 

14.4

%

90.01% to 95.00%

 

48.9

 

 

 

48.9

 

 

 

48.5

 

 

 

48.6

 

 

 

49.3

 

85.01% to 90.00%

 

27.7

 

 

 

27.8

 

 

 

28.1

 

 

 

28.2

 

 

 

28.0

 

85.00% and below

 

8.3

 

 

 

8.7

 

 

 

8.9

 

 

 

8.8

 

 

 

8.3

 

Total

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Percentage of primary risk in force by policy year

 

 

 

 

 

 

 

 

 

2008 and prior

 

4.7

%

 

 

5.2

%

 

 

5.7

%

 

 

6.1

%

 

 

6.2

%

2009 - 2015

 

6.4

 

 

 

7.4

 

 

 

8.7

 

 

 

9.9

 

 

 

11.3

 

2016

 

4.4

 

 

 

5.1

 

 

 

6.0

 

 

 

6.8

 

 

 

7.6

 

2017

 

4.9

 

 

 

5.7

 

 

 

6.8

 

 

 

8.0

 

 

 

9.1

 

2018

 

5.2

 

 

 

6.1

 

 

 

7.3

 

 

 

8.7

 

 

 

9.8

 

2019

 

9.7

 

 

 

11.4

 

 

 

13.6

 

 

 

15.6

 

 

 

17.8

 

2020

 

29.2

 

 

 

32.1

 

 

 

35.4

 

 

 

37.2

 

 

 

38.2

 

2021

 

35.5

 

 

 

27.0

 

 

 

16.5

 

 

 

7.7

 

 

 

 

Total

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

2021

 

2021

 

2021

 

2021

 

2020

 

Persistency Rate (12 months ended)

64.3

%

 

60.8

%

 

57.7

%

(4)

57.2

%

(4)

61.2

%

(4)

Persistency Rate (quarterly, annualized) (5)

71.7

%

 

67.5

%

 

66.3

%

 

62.5

%

 

60.4

%

(4)

(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 approximately 1% 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)

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

 

 

2021

 

2020

($ in thousands)

Qtr 4

 

Qtr 3

 

Qtr 2

 

Qtr 1

 

Qtr 4

 

 

 

 

 

 

 

 

 

 

Net claims paid: (1)

 

 

 

 

 

 

 

 

 

Total primary claims paid

$

4,300

 

 

$

5,330

 

$

4,870

 

 

$

6,611

 

 

$

8,353

Total pool and other

 

(462

)

 

 

991

 

 

(649

)

 

 

(138

)

 

 

70

Subtotal

 

3,838

 

 

 

6,321

 

 

4,221

 

 

 

6,473

 

 

 

8,423

Impact of commutations and settlements (2)

 

6,549

 

 

 

3,915

 

 

 

 

 

4,000

 

 

 

32,170

Total net claims paid

$

10,387

 

 

$

10,236

 

$

4,221

 

 

$

10,473

 

 

$

40,593

 

 

 

 

 

 

 

 

 

 

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

$

47.8

 

 

$

42.0

 

$

46.8

 

 

$

43.8

 

 

$

46.9

 

 

 

 

 

 

 

 

 

 

Average direct primary claims paid (3) (4)

$

49.1

 

 

$

43.2

 

$

48.4

 

 

$

45.5

 

 

$

48.5

(1)

Includes the impact of reinsurance recoveries and LAE.

(2)

Includes payments to commute mortgage insurance coverage on certain performing and non-performing loans. For the first quarter of 2021 and 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)

2021

 

2021

 

2021

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

Reserve for losses by category (1)

 

 

 

 

 

 

 

 

 

Mortgage reserves

 

 

 

 

 

 

 

 

 

Prime

$

704,665

 

$

763,071

 

$

750,699

 

$

751,100

 

$

711,245

Alt-A and A minus and below

 

85,715

 

 

88,080

 

 

90,065

 

 

90,455

 

 

88,269

IBNR and other

 

2,886

 

 

3,788

 

 

5,464

 

 

6,626

 

 

9,966

LAE

 

19,859

 

 

21,400

 

 

21,180

 

 

21,212

 

 

20,172

Total primary reserves

 

813,125

 

 

876,339

 

 

867,408

 

 

869,393

 

 

829,652

Total pool reserves

 

9,826

 

 

11,413

 

 

13,085

 

 

13,175

 

 

14,163

Total 1st lien reserves

 

822,951

 

 

887,752

 

 

880,493

 

 

882,568

 

 

843,815

Other

 

185

 

 

269

 

 

270

 

 

270

 

 

292

Total Mortgage reserves

 

823,136

 

 

888,021

 

 

880,763

 

 

882,838

 

 

844,107

homegenius reserves

 

5,506

 

 

5,134

 

 

4,735

 

 

4,517

 

 

4,306

Total reserves

$

828,642

 

$

893,155

 

$

885,498

 

$

887,355

 

$

848,413

 

 

 

 

 

 

 

 

 

 

Primary reserve per primary default excluding IBNR and other

$

27,884

 

$

25,822

 

$

21,304

 

$

17,219

 

$

14,759

(1)

Includes ceded losses on reinsurance transactions, which are expected to be recovered and are included in the reinsurance recoverables reported 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,

 

2021

 

2021

 

2021

 

2021

 

2020

Default Statistics