WAYNE, PA —Radian Group Inc. (NYSE: RDN) recently reported net income for the quarter ended March 31, 2023, of $158 million, or $0.98 per diluted share. This compares with net income for the quarter ended March 31, 2022, of $181 million, or $1.01 per diluted share.
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Key Financial Highlights |
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Quarter ended |
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($ in millions, except per-share amounts) |
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March 31, 2023 |
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December 31, 2022 |
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March 31, 2022 |
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Total revenues (1) |
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$311 |
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$315 |
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$293 |
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Net income (1) |
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$158 |
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$162 |
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$181 |
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Diluted net income per share |
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$0.98 |
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$1.01 |
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$1.01 |
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Consolidated pretax income |
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$204 |
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$203 |
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$234 |
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Adjusted pretax operating income (2) |
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$200 |
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$213 |
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$265 |
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Adjusted diluted net operating income per share (2) (3) |
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$0.98 |
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$1.05 |
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$1.17 |
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Return on equity (1) (4) |
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15.7% |
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17.0% |
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17.2% |
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Adjusted net operating return on equity (2) (3) |
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15.7% |
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17.6% |
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19.9% |
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New Insurance Written (NIW) – mortgage insurance |
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$11,261 |
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$12,859 |
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$18,655 |
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Net premiums earned – mortgage insurance |
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$231 |
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$230 |
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$245 |
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New defaults |
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10,624 |
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10,735 |
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9,393 |
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Provision for losses – mortgage insurance |
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($17) |
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($44) |
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($84) |
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homegenius revenues |
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$13 |
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$19 |
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$34 |
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Book value per share |
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$26.23 |
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$24.95 |
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$23.75 |
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Accumulated other comprehensive income (loss) value per share (5) |
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($2.47) |
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($2.91) |
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($0.74) |
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PMIERs Available Assets (6) |
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$5,651 |
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$5,553 |
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$5,102 |
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PMIERs excess Available Assets (7) |
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$1,740 |
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$1,727 |
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$1,560 |
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Total Holding Company Liquidity (8) |
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$1,231 |
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$1,178 |
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$1,282 |
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Total investments |
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$5,838 |
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$5,693 |
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$6,335 |
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Primary mortgage insurance in force |
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$261,450 |
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$260,994 |
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$248,951 |
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Percentage of primary loans in default (9) |
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2.1% |
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2.2% |
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2.6% |
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Mortgage insurance loss reserves |
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$400 |
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$421 |
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$722 |
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(1) |
Total revenues and net income for the first quarter of 2023 includes a pretax net gain of $6 million on investments and other financial instruments compared with a pretax net gain on investments and other financial instruments of $7 million in the fourth quarter of 2022 and a pretax net loss on investments and other financial instruments of $29 million for the first quarter of 2022. |
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(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. |
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(3) |
Calculated using the company’s statutory tax rate of 21%. |
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(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. |
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(5) |
Included in book value per share for each period presented. |
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(6) |
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. |
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(7) |
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. |
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(8) |
Represents Radian Group’s total liquidity, including available capacity under its $275 million unsecured revolving credit facility. |
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(9) |
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 March 31, 2023, was $200 million, or $0.98 per diluted share. This compares with adjusted pretax operating income for the quarter ended March 31, 2022, of $265 million, or $1.17 per diluted share.
Book value per share at March 31, 2023, was $26.23, compared to $24.95 at December 31, 2022, and $23.75 at March 31, 2022. This represents a 10% growth in book value per share at March 31, 2023, as compared to March 31, 2022, and includes accumulated other comprehensive income (loss) of $(2.47) per share as of March 31, 2023, and $(0.74) per share as of March 31, 2022, which, if excluded as of both dates, would represent 17% growth for the period. The change in accumulated other comprehensive income (loss) since March 31, 2022, is primarily from net unrealized losses on investments as a result of an increase in market interest rates.
“We kicked off the year with another solid quarter for Radian, increasing book value per share by 10% year-over-year to $26.23, generating net income of $158 million and delivering return on equity of 15.7%. Our primary mortgage insurance in force, which is the main driver of future earnings for our company, grew 5% year-over-year and our cure rate on defaulted loans reached the second highest level in 15 years during the first quarter of 2023,” said Radian’s Chief Executive Officer Rick Thornberry. “We continue to strategically manage capital by maintaining strong holding company liquidity and PMIERs cushion, repurchasing shares opportunistically and paying the highest yielding dividend in the industry.”
FIRST QUARTER HIGHLIGHTS
- NIW was $11.3 billion in the first quarter of 2023, compared to $12.9 billion in the fourth quarter of 2022, and $18.7 billion in the first quarter of 2022.
- Purchase NIW decreased 13% in the first quarter of 2023 compared to the fourth quarter of 2022 and decreased 36% compared to the first quarter of 2022.
- Refinances accounted for 2% of total NIW in the first quarter of 2023, compared to 2% in the fourth quarter of 2022, and 9% in the first quarter of 2022.
- Of the $11.3 billion in NIW in the first quarter of 2023, 95% was written with monthly and other recurring premiums, which was the same percentage as in the fourth quarter of 2022 and the first quarter of 2022.
- Total primary mortgage insurance in force as of March 31, 2023, increased to $261.5 billion, relatively flat as compared to $261.0 billion as of December 31, 2022, and an increase of 5% compared to $249.0 billion as of March 31, 2022. The year-over-year change reflects an 8% increase in monthly premium policy insurance in force and a 12% 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 82% for the twelve months ended March 31, 2023, compared to 80% for the twelve months ended December 31, 2022, and 68% for the twelve months ended March 31, 2022.
- Annualized persistency for the three months ended March 31, 2023, was 84%, compared to 84% for the three months ended December 31, 2022, and 77% for the three months ended March 31, 2022.
- Net mortgage insurance premiums earned were $231 million for the first quarter of 2023, compared to $230 million for the fourth quarter of 2022, and $245 million for the first quarter of 2022.
- Mortgage insurance in force portfolio premium yield was 38.5 basis points in the first quarter of 2023. This compares to 38.1 basis points in the fourth quarter of 2022, and 39.6 basis points in the first quarter of 2022.
- The impact of single premium policy cancellations before consideration of reinsurance represented 0.8 basis points of direct premium yield in the first quarter of 2023, 0.9 basis points in the fourth quarter of 2022, and 2.4 basis points in the first quarter of 2022.
- Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 35.4 basis points in the first quarter of 2023. This compares to 35.4 basis points in the fourth quarter of 2022, and 39.6 basis points in the first quarter of 2022.
- Details regarding premiums earned may be found in Exhibit D.
- The mortgage insurance provision for losses was a benefit of $17 million in the first quarter of 2023, compared to benefits of $44 million and $84 million in the fourth quarter of 2022 and first quarter of 2022, respectively.
- All periods benefited from significant favorable reserve development on prior period defaults, particularly in 2022, due to more favorable trends in cures than originally estimated. The decreased benefit in the first quarter of 2023 compared to the fourth quarter of 2022 and the first quarter of 2022 was primarily related to less favorable development on prior period reserves, as the remaining number of defaults and loss reserve balance continues to decline.
- The number of primary delinquent loans was 20,748 as of March 31, 2023, compared to 21,913 as of December 31, 2022, and 25,510 as of March 31, 2022.
- The loss ratio in the first quarter of 2023 was (7.3)% compared to (18.9)% in the fourth quarter of 2022, and (34.3)% in the first quarter of 2022.
- Total mortgage insurance claims paid were $3 million in the first quarter of 2023, compared to $8 million in the fourth quarter of 2022, and $5 million in the first quarter of 2022.
- 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 first quarter of 2023 were $13 million, compared to $19 million for the fourth quarter of 2022, and $34 million for the first quarter of 2022.
- Adjusted pretax operating loss, the Company’s primary segment measure of profitability for the homegenius segment, was $23 million for the first quarter of 2023, compared to $31 million for the fourth quarter of 2022, and $14 million for the first quarter of 2022.
- Other operating expenses were $83 million in the first quarter of 2023, compared to $110 million in the fourth quarter of 2022, and $90 million in the first quarter of 2022.
- Other operating expenses decreased in the first quarter of 2023 as compared to expenses in the fourth quarter of 2022, which were elevated primarily due to impairments to the Company’s lease-related assets and severance and related expenses previously reported and recognized in that quarter. the Company’s expense reduction actions taken during 2022 helped to lower the level of its expenses in the first quarter of 2023. Additional details regarding other operating expenses by segment may be found in Exhibit E.
CAPITAL AND LIQUIDITY UPDATE
Radian Group
- As of March 31, 2023, Radian Group maintained $956 million of available liquidity. Total holding company liquidity, which includes the company’s $275 million unsecured revolving credit facility, was $1.2 billion as of March 31, 2023.
- During the first quarter of 2023, the company repurchased 716 thousand shares of Radian Group common stock at a total cost of $15 million, including commissions.
- In addition, in April 2023 the company purchased an additional 229 thousand shares of Radian Group common stock at a total cost of $5 million, including commissions. After the repurchases in April, purchase authority of up to $280 million remained available under this program.
- As previously announced, on February 15, 2023, Radian Group’s board of directors authorized a regular quarterly dividend on its common stock in the amount of $0.225 per share, an increase of 12.5% from the previous quarterly dividend. The dividend was paid on March 15, 2023.
Radian Guaranty
- In March 2023, Radian Guaranty paid an ordinary dividend to Radian Group of $100 million. Radian Guaranty expects to pay between $200 million to $300 million of additional ordinary dividends to Radian Group during the remainder of 2023, based on current performance expectations.
- At March 31, 2023, Radian Guaranty’s Available Assets under PMIERs totaled approximately $5.7 billion, resulting in excess available resources or a “cushion” of $1.7 billion, or 44%, over its Minimum Required Assets under PMIERs.
Other statistical and financial information is available on Radian’s website at www.radian.com.
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