Radian Announces Third Quarter 2021 Financial Results

— GAAP net income of $126 million, or $0.67 per diluted share —

— Adjusted diluted net operating income of $0.67 per diluted share —

— New Insurance Written of $26.6 billion, grows 23% quarter-over-quarter —

— Primary mortgage insurance in force grows $4.3 billion to $241.6 billion quarter-over-quarter —

— Book value per share grows 9% year-over-year to $23.48 —

— homegenius revenues grow 51% year-over-year to $45.1 million —

— Company purchases 7.1 million shares or $158.3 million of Radian Group common stock during the three months ended September 30th —

WAYNE, Pa.–(BUSINESS WIRE)–Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended September 30, 2021, of $126.4 million, or $0.67 per diluted share. This compares with net income for the quarter ended September 30, 2020, of $135.1 million, or $0.70 per diluted share.

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

	Quarter ended
	September 30, 2021	June 30, 2021	September 30, 2020
Net income ⁽¹⁾	$126.4	$155.2	$135.1
Diluted net income per share	$0.67	$0.80	$0.70
Consolidated pretax income	$161.6	$195.5	$161.2
Adjusted pretax operating income ⁽²⁾	$160.6	$184.7	$145.0
Adjusted diluted net operating income per share ⁽²⁾⁽³⁾	$0.67	$0.75	$0.59
Return on equity ⁽¹⁾⁽⁴⁾	11.8%	14.5%	13.3%
Adjusted net operating return on equity ⁽²⁾⁽³⁾	11.8%	13.6%	11.3%
New Insurance Written (NIW) – mortgage insurance	$26,558	$21,662	$33,320
Net premiums earned – mortgage insurance	$236.9	$247.1	$283.4
New defaults ⁽⁵⁾	8,132	8,145	20,508
Provision for losses – mortgage insurance	$16.8	$3.3	$87.8
Book value per share ⁽⁶⁾	$23.48	$23.02	$21.52
PMIERs Available Assets ⁽⁷⁾	$5,262	$5,042	$4,469
PMIERs excess Available Assets ⁽⁸⁾	$1,741	$1,857	$970
Total Holding Company Liquidity ⁽⁹⁾	$1,036	$1,191	$1,376
Total investments	$6,658	$6,682	$6,585
Primary mortgage insurance in force	$241,575	$237,302	$245,467
Percentage of primary loans in default ⁽¹⁰⁾	3.4%	4.0%	5.9%
Mortgage insurance loss reserves	$888	$881	$822
homegenius revenues	$45.1	$33.5	$29.8

(1)	Net income for the third quarter of 2021 includes a pretax net gain on investments and other financial instruments of $2.1 million, compared to a pretax net gain on investments and other financial instruments of $15.7 million in the second quarter of 2021 and a pretax net gain on investments and other financial instruments for the third quarter of 2020 of $17.7 million.
(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)	Represents the number of new defaults reported during the period on loans related to primary mortgage insurance policies.
(6)	Book value per share includes accumulated other comprehensive income (loss) of $0.84 as of September 30, 2021, $0.95 as of June 30, 2021 and $1.21 as of September 30, 2020.
(7)	Represents Radian Guaranty’s Available Assets, calculated in accordance with the Private Mortgage Insurer Eligibility Requirements (PMIERs) financial requirements in effect for each date shown.
(8)	Represents Radian Guaranty’s excess or “cushion” of Available Assets over its Minimum Required Assets, calculated in accordance with the PMIERs financial requirements in effect for each date shown.
(9)	Represents Radian Group’s total liquidity, including the $35 million minimum liquidity requirement and available capacity under its unsecured revolving credit facility.
(10)	Represents the number of primary loans in default as a percentage of the total number of insured primary loans.

Adjusted pretax operating income for the quarter ended September 30, 2021, was $160.6 million, or $0.67 per diluted share. This compares with adjusted pretax operating income for the quarter ended September 30, 2020, of $145.0 million, or $0.59 per diluted share.

Book value as of September 30, 2021, was $4.3 billion, an increase of 3 percent compared to $4.1 billion as of September 30, 2020. Book value per share at September 30, 2021, was $23.48, an increase of 9 percent compared to $21.52 at September 30, 2020.

“We continue to see strong growth in the housing and real estate markets, driven by historically low interest rates and robust demand. And while we continue to closely monitor the pandemic and the economic environment, we are encouraged by the favorable credit trends within our insured portfolio,” said Radian’s Chief Executive Officer Rick Thornberry. “We reported net income of $126 million, increased book value per share by 9% year-over-year, grew our primary mortgage insurance in-force portfolio to $241.6 billion and reported a year-over-year increase in homegenius revenue of 51%. These results reflect the momentum of our businesses, the strength of our products and customer relationships, and the dedication of our team.”

THIRD QUARTER HIGHLIGHTS

NIW was $26.6 billion in the third quarter of 2021, compared to $21.7 billion in the second quarter of 2021, and $33.3 billion in the third quarter of 2020.
- Of the $26.6 billion in NIW in the third quarter of 2021, 93.8 percent was written with monthly and other recurring premiums, compared to 93.1 percent in the second quarter of 2021, and 90.0 percent in the third quarter of 2020.
- Refinances accounted for 10.2 percent of total NIW in the third quarter of 2021, compared to 22.9 percent in the second quarter of 2021, and 29.5 percent in the third quarter of 2020.

Total primary mortgage insurance in force as of September 30, 2021, increased to $241.6 billion, an increase of 1.8 percent compared to $237.3 billion as of June 30, 2021, and a decrease of 1.6 percent compared to $245.5 billion as of September 30, 2020. The year-over-year decrease included a 25.1 percent decline in single premium policy insurance in force, partially offset by a 5.8 percent increase in monthly premium policy insurance in force.
- Persistency, which is the percentage of mortgage insurance that remains in force after a twelve-month period, was 60.8 percent for the twelve months ended September 30, 2021, compared to 57.7 percent for the twelve months ended June 30, 2021, and 65.6 percent for the twelve months ended September 30, 2020.
- Annualized persistency for the three months ended September 30, 2021, was 67.5 percent, compared to 66.3 percent for the three months ended June 30, 2021, and 60.0 percent for the three months ended September 30, 2020.

Net mortgage insurance premiums earned were $236.9 million for the quarter ended September 30, 2021, compared to $247.1 million for the quarter ended June 30, 2021, and $283.4 million for the quarter ended September 30, 2020.
- Mortgage insurance in force portfolio premium yield was 40.3 basis points in the third quarter of 2021, compared to 41.1 basis points in the second quarter of 2021, and 43.2 basis points in the third quarter of 2020.
- The impact of single premium policy cancellations before consideration of reinsurance represented 4.3 basis points of direct premium yield in the third quarter of 2021, 5.3 basis points in the second quarter of 2021, and 10.7 basis points in the third quarter of 2020.
- Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 39.6 basis points in the third quarter of 2021, 41.5 basis points in the second quarter of 2021, and 46.6 basis points in the third quarter of 2020.
- Additional details regarding premiums earned may be found in Exhibit D.

The mortgage insurance provision for losses was $16.8 million in the third quarter of 2021, compared to $3.3 million in the second quarter of 2021, and $87.8 million in the third quarter of 2020.
- The increase in the third quarter of 2021 compared to the second quarter of 2021 was primarily related to less favorable development on prior period reserves, as compared to the second quarter of 2021. Both periods were impacted by more favorable trends in cures than originally estimated. The decrease in the third quarter of 2021 compared to the third quarter of 2020 was driven primarily by a significant decrease in primary new default notices related to the effects of the COVID-19 pandemic.
- The number of primary delinquent loans was 33,795 as of September 30, 2021, compared to 40,464 as of June 30, 2021, and 62,737 as of September 30, 2020.
- The loss ratio in the third quarter of 2021 was 7.1 percent, compared to 1.3 percent in the second quarter of 2021, and 31.0 percent in the third quarter of 2020.
- Total mortgage insurance claims paid were $10.2 million in the third quarter of 2021, compared to $4.2 million in the second quarter of 2021, and $10.8 million in the third quarter of 2020. Excluding the impact of commutations and settlements, claims paid were $6.3 million in the third quarter of 2021, compared to $4.2 million in the second quarter of 2021, and $11.1 million in the third quarter of 2020.

Radian’s homegenius segment offers a broad array of title, valuation, asset management, software-as-a-service and other real estate services to mortgage lenders, mortgage and real estate investors, GSEs, real estate brokers and agents.
- Total homegenius segment revenues for the third quarter of 2021 were $45.1 million, compared to $33.5 million for the second quarter of 2021, and $29.8 million for the third quarter of 2020.
- The increase in revenues for the homegenius segment in the third quarter of 2021 compared to the second quarter of 2021 and the third quarter of 2020 was primarily driven by increases in net title premiums earned and services revenue attributable to our title and asset management businesses.
  
  homegenius Profitability Metrics
- Adjusted pretax operating loss, our primary segment measure of profitability for the homegenius segment, for the quarter ended September 30, 2021 was $5.6 million, compared to $9.2 million for the quarter ended June 30, 2021, and $5.0 million for the quarter ended September 30, 2020.
- Adjusted pretax operating loss before allocated corporate operating expenses for the homegenius segment for the quarter ended September 30, 2021 was $0.6 million, compared to $4.5 million for the quarter ended June 30, 2021, and $1.8 million for the quarter ended September 30, 2020. Additional details regarding the homegenius results and related non-GAAP measures may be found in Exhibits F and G.
- Adjusted gross profit for the homegenius segment for the quarter ended September 30, 2021 was $17.9 million, compared to $11.7 million for the quarter ended June 30, 2021, and $11.3 million for the quarter ended September 30, 2020. Additional details regarding the homegenius results and related non-GAAP measures may be found in Exhibits F and G.

Other operating expenses were $86.5 million in the third quarter of 2021, compared to $86.5 million in the second quarter of 2021, and $69.4 million in the third quarter of 2020.
- The increase in the third quarter of 2021 compared to the third quarter of 2020 was driven primarily by an increase in incentive compensation expense and a decrease in ceding commissions.

CAPITAL AND LIQUIDITY UPDATE

Radian Group

As of September 30, 2021, Radian Group maintained $768.4 million of available liquidity. Total liquidity, which includes the company’s $267.5 million unsecured revolving credit facility, was $1.0 billion as of September 30, 2021.
During the quarter ended September 30, 2021, the company repurchased 7.1 million shares of Radian Group common stock at a total cost of $158.3 million, including commissions. As of September 30, 2021, purchase authority of up to $142.0 million remained available under this program. The current share repurchase authorization expires on August 31, 2022.
In addition, in October the Company purchased an additional 2.0 million shares, or approximately $46.5 million of Radian Group common stock, including commissions. After the repurchases in October, purchase authority of up to approximately $95.5 million remained available under the existing program.
On August 11, 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 September 2, 2021.

Radian Guaranty

At September 30, 2021, Radian Guaranty’s Available Assets under PMIERs totaled approximately $5.3 billion, resulting in excess available resources or a “cushion” of $1.7 billion, or 49 percent, over its Minimum Required Assets.
As of September 30, 2021, 63 percent of Radian Guaranty’s primary mortgage insurance risk in force is subject to some form of risk distribution, providing a $1.0 billion reduction of Minimum Required Assets under PMIERs.

RECENT EVENTS

Insurance-Linked Note

As previously announced, Radian Guaranty expects to obtain up to $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 will finance the coverage through the issuance of ILNs to capital markets investors of $484.1 million aggregate principal amount of 12.5-year mortgage insurance-linked notes, in an unregistered private offering that priced on October 29, 2021. The offering is expected to close on or about November 9, 2021. 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 will be subject to GSE approval. As of September 30, 2021, assuming the November ILN transaction described above closes on or about November 9, 2021, as expected:

Radian Guaranty’s Minimum Required Assets would have decreased by approximately $480 million, which would have resulted in an increase in PMIERs excess Available Assets or “cushion” to $2.2 billion, or 73 percent over the Minimum Required Assets.
Radian Guaranty’s primary mortgage insurance risk in force that is subject to some form of risk distribution would have increased to 80 percent, providing a $1.5 billion reduction of Minimum Required Assets under PMIERs.

CONFERENCE CALL

Radian will discuss third quarter 2021 financial results in a conference call tomorrow, Wednesday, November 3, 2021, at 11:00 a.m. Eastern daylight 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 50246248 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 50246248.

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

NON-GAAP FINANCIAL MEASURES

Radian believes that adjusted pretax operating income, adjusted diluted net operating income per share and adjusted net operating return on equity (non-GAAP measures) facilitate evaluation of the company’s fundamental financial performance and provide relevant and meaningful information to investors about the ongoing operating results of the company. On a consolidated basis, these measures are not recognized in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be considered in isolation or viewed as substitutes for GAAP measures of performance. The measures described below have been established in order to increase transparency for the purpose of evaluating the company’s operating trends and enabling more meaningful comparisons with Radian’s competitors.

Adjusted pretax operating income (loss) is defined as GAAP consolidated pretax income (loss) excluding the effects of: (i) net gains (losses) on investments and other financial instruments; (ii) loss on extinguishment of debt; (iii) amortization and impairment of goodwill and other acquired intangible assets; and (iv) impairment of other long-lived assets and other non-operating items, such as 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, valuation, asset management, software-as-a service and other real estate services. We are powered by technology, informed by data and driven to deliver new and better ways to transact and manage risk. Visit www.radian.com to learn more about how Radian is shaping the future of mortgage and real estate services.


FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS (Unaudited)

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


Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations Trend Schedule
Exhibit A

	2021						2020
(In thousands, except per-share amounts)	Qtr 3		Qtr 2		Qtr 1		Qtr 4			Qtr 3

Revenues:
Net premiums earned	$	249,118	$	254,756	$	271,872	$	302,140	(1)	$	286,471
Services revenue	37,773		29,464		22,895		11,440		(1)	33,943
Net investment income	35,960		36,291		38,251		38,115			36,255
Net gains (losses) on investments and other financial instruments	2,098		15,661		(5,181)		17,376			17,652
Other income	809		822		976		790			913
Total revenues	325,758		336,994		328,813		369,861			375,234

Expenses:
Provision for losses	17,305		3,648		46,143		56,664			88,084
Policy acquisition costs	7,924		4,838		8,996		7,395			10,166
Cost of services	30,520		24,615		20,246		21,600			24,353
Other operating expenses	86,479		86,469		70,262		81,641			69,377
Interest expense	21,027		21,065		21,115		21,169			21,088
Amortization and impairment of other acquired intangible assets	862		863		862		2,225			961
Total expenses	164,117		141,498		167,624		190,694			214,029

Pretax income	161,641		195,496		161,189		179,167			161,205
Income tax provision	35,229		40,290		35,581		31,154			26,102
Net income	$	126,412	$	155,206	$	125,608	$	148,013		$	135,103

Diluted net income per share	$	0.67	$	0.80	$	0.64	$	0.76		$	0.70

(1)

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


Radian Group Inc. and Subsidiaries
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 3		Qtr 2		Qtr 1		Qtr 4			Qtr 3
Net income —basic and diluted	$	126,412	$	155,206	$	125,608	$	148,013		$	135,103

Average common shares outstanding—basic	186,741		193,436		193,439		193,248			193,176
Dilutive effect of stock-based compensation arrangements ⁽¹⁾	1,301		1,202		1,764		1,415			980
Adjusted average common shares outstanding—diluted	188,042		194,638		195,203		194,663			194,156

Basic net income per share	$	0.68	$	0.80	$	0.65	$	0.77	.	$	0.70

Diluted net income per share	$	0.67	$	0.80	$	0.64	$	0.76		$	0.70

(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 3	Qtr 2	Qtr 1	Qtr 4	Qtr 3
Shares of common stock equivalents	—	—	—	324	710


Radian Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Exhibit C

	September 30,				June 30,				March 31,				December 31,			September 30,
(In thousands, except per-share amounts)	2021				2021				2021				2020			2020

Assets:
Investments	$	6,658,487			$	6,681,659			$	6,671,874			$	6,788,442		$	6,584,577
Cash	154,709				134,939				102,776				87,915			82,020
Restricted cash	1,866				2,968				20,987				6,231			4,424
Accrued investment income	33,258				32,223				34,841				34,047			36,093
Accounts and notes receivable	166,730				153,128				134,075				121,294			145,164
Reinsurance recoverables	76,048				75,411				76,664				73,202			66,515
Deferred policy acquisition costs	16,823				17,873				15,652				18,305			17,926
Property and equipment, net	74,170				74,288				78,309				80,457			88,717
Goodwill and other acquired intangible assets, net	20,456				21,318				22,181				23,043			25,268
Other assets	839,061				815,261				763,502				715,085			726,641
Total assets	$	8,041,608			$	8,009,068			$	7,920,861			$	7,948,021		$	7,777,345

Liabilities and stockholders’ equity:
Unearned premiums	$	348,322			$	373,031			$	406,689			$	448,791		$	501,787
Reserve for losses and loss adjustment expense	893,155				885,498				887,355				848,413			825,792
Senior notes	1,408,502				1,407,545				1,406,603				1,405,674			1,404,759
FHLB advances	172,649				153,983				138,833				176,483			141,058
Reinsurance funds withheld	290,502				285,406				282,345				278,555			318,773
Net deferred tax liability	286,957				266,330				210,571				213,897			166,136
Other liabilities	383,585				303,442				353,173				291,855			296,661
Total liabilities	3,783,672				3,675,235				3,685,569				3,663,668			3,654,966

Common stock	200				207				210				210			210
Treasury stock	(920,355		)		(920,225		)		(910,347		)		(910,115		)	(909,745		)
Additional paid-in capital	2,012,870				2,161,857				2,242,950				2,245,897			2,238,869
Retained earnings	3,012,997				2,913,138				2,785,744				2,684,636			2,561,076
Accumulated other comprehensive income	152,224				178,856				116,735				263,725			231,969
Total stockholders’ equity	4,257,936				4,333,833				4,235,292				4,284,353			4,122,379
Total liabilities and stockholders’ equity	$	8,041,608			$	8,009,068			$	7,920,861			$	7,948,021		$	7,777,345

Shares outstanding	181,336				188,290				191,311				191,606			191,556

Book value per share	$	23.48			$	23.02			$	22.14			$	22.36		$	21.52
Debt to capital ratio ⁽¹⁾	24.9		%	24.5			%	24.9			%	24.7			%	25.4		%
Risk to capital ratio-Radian Guaranty only	11.4:1			11.4:1				11.9:1				12.7:1				13.2:1