Radian Announces First Quarter 2021 Financial Results
— GAAP net income of $126 million, or $0.64 per diluted share —
— Adjusted diluted net operating income of $0.68 per diluted share —
— PMIERs excess Available Assets grows to $1.5 billion (or 42% over the Minimum Required Assets) —
–Total Holding Company Liquidity of $1.3 billion —
— Book value per share grows 9% year-over-year to $22.14 —
— Resumed share repurchase program after temporarily suspending it beginning March 2020 in response to the COVID 19 pandemic —
— In April 2021, Radian Guaranty enhanced its risk profile and improved its capital position with closing of $498 million ILN transaction —
PHILADELPHIA–(BUSINESS WIRE)–Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended March 31, 2021, of $125.6 million, or $0.64 per diluted share. This compares with net income for the quarter ended March 31, 2020, of $140.5 million, or $0.70 per diluted share.
Key Financial Highlights (dollars in millions, except per-share amounts)
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| Quarter ended | ||||||||||
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| March 31, 2021 | December 31, 2020 | March 31, 2020 | ||||||||
| Net income (1) | $125.6 | $148.0 | $140.5 | ||||||||
| Diluted net income per share | $0.64 | $0.76 | $0.70 | ||||||||
| Consolidated pretax income | $161.2 | $179.2 | $181.3 | ||||||||
| Adjusted pretax operating income (2) | $167.3 | $171.0 | $204.6 | ||||||||
| Adjusted diluted net operating income per share (2)(3) | $0.68 | $0.69 | $0.80 | ||||||||
| Return on equity(1)(4) | 11.8% | 14.1% | 14.2% | ||||||||
| Adjusted net operating return on equity (2)(3) | 12.4% | 12.9% | 16.3% | ||||||||
| New Insurance Written (NIW) – mortgage insurance | $20,161 | $29,781 | $16,706 | ||||||||
| Net premiums earned – mortgage insurance (5) | $264.7 | $286.8 | $275.0 | ||||||||
| New defaults (6) | 11,851 | 14,552 | 9,960 | ||||||||
| Provision for losses – mortgage insurance | $45.9 | $56.3 | $35.2 | ||||||||
| Book value per share (7) | $22.14 | $22.36 | $20.30 | ||||||||
| PMIERs Available Assets (8) | $4,909 | $4,700 | $4,061 | ||||||||
| PMIERs excess Available Assets (9) | $1,451 | $1,338 | $1,129 | ||||||||
| Total Holding Company Liquidity (10) | $1,292 | $1,371 | $916 | ||||||||
| Excess Available Resources to Support PMIERs (11) | $2,708 | $2,674 | $2,010 | ||||||||
| Total investments | $6,672 | $6,788 | $5,609 | ||||||||
| Primary mortgage insurance in force | $238,921 | $246,144 | $241,586 | ||||||||
| Percentage of primary loans in default (12) | 4.9% | 5.2% | 1.8% | ||||||||
| Mortgage insurance loss reserves | $883 | $844 | $415 | ||||||||
| (1) | Net income for the first quarter of 2021 includes a pretax net loss on investments and other financial instruments of $5.2 million, compared to a net gain on investments and other financial instruments of $17.4 million in the fourth quarter of 2020 and a net loss on investments and other financial instruments for the first quarter of 2020 of $22.0 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) | 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) | 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 $0.61 as of March 31, 2021, $1.38 as of December 31, 2020 and $0.16 as of March 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 the $35 million minimum liquidity requirement and available capacity under its unsecured revolving credit facility. | |
| (11) | Represents the sum of: (1) PMIERs excess Available Assets and (2) Total Holding Company Liquidity, net of the $35 million minimum liquidity requirement under the unsecured revolving credit facility. | |
| (12) | 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, 2021, was $167.3 million, or $0.68 per diluted share. This compares with adjusted pretax operating income for the quarter ended March 31, 2020 of $204.6 million, or $0.80 per diluted share.
Book value as of March 31, 2021 was $4.2 billion, an increase of 10 percent compared to $3.9 billion as of March 31, 2020. Book value per share at March 31, 2021, was $22.14, an increase of 9 percent compared to $20.30 at March 31, 2020.
“While the unprecedented pandemic environment continued in the first quarter of 2021, year-over-year we successfully increased book value per share by 9%, grew PMIERs excess available assets to $1.5 billion, increased monthly premium mortgage insurance in force by 9% and increased our title revenues by 56%,” said Radian’s Chief Executive Officer Rick Thornberry. “We are encouraged by the continued signs of improvement in the overall economy, the positive momentum in the housing market and the favorable credit trends within our portfolio. Our results are a testament to the strength of our business model and the dedication of our team, who has shown commitment to our customers, our company and to each other as we have worked together to successfully navigate this challenging environment.”
FIRST QUARTER HIGHLIGHTS
- NIW was $20.2 billion in the first quarter of 2021, compared to $29.8 billion in the fourth quarter of 2020 and $16.7 billion in the first quarter of 2020.
- Of the $20.2 billion in NIW in the first quarter of 2021, 90.2 percent was written with monthly and other recurring premiums, compared to 91.4 percent in the fourth quarter of 2020, and 81.1 percent in the first quarter of 2020.
- Refinances accounted for 41 percent of total NIW in the first quarter of 2021, compared to 35 percent in the fourth quarter of 2020, and 34 percent in the first quarter of 2020.
- Total primary mortgage insurance in force as of March 31, 2021, declined to $238.9 billion, a decrease of 2.9 percent compared to $246.1 billion as of December 31, 2020, and a decrease of 1.1 percent compared to $241.6 billion as of March 31, 2020. The year over year decrease included a 26.3 percent decline in single premium policy insurance in force, partially offset by a 8.7 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 57.2 percent for the twelve months ended March 31, 2021, compared to 61.2 percent for the twelve months ended December 31, 2020 and 75.4 percent for the twelve months ended March 31, 2020.
- Annualized persistency for the three months ended March 31, 2021, was 62.5 percent, compared to 60.4 percent for the three months ended December 31, 2020, and 76.5 percent for the three months ended March 31, 2020.
- Net mortgage insurance premiums earned were $264.7 million for the quarter ended March 31, 2021, compared to $286.8 million for the quarter ended December 31, 2020, and $275.0 million for the quarter ended March 31, 2020.
- Mortgage insurance in force portfolio premium yield was 42.7 basis points in the first quarter of 2021, compared to 44.6 basis points in the fourth quarter of 2020 and 46.1 basis points in the first quarter of 2020. Net mortgage insurance premiums earned in the fourth quarter of 2020 included an increase of $11.3 million for the cumulative recognition of deferred initial premiums on monthly premium policies. Excluding the impact of this adjustment, in force premium yield was 42.8 basis points in the fourth quarter of 2020.
- The impact of single premium policy cancellations before consideration of reinsurance represented 6.4 basis points of direct premium yield in the first quarter of 2021, 8.7 basis points in the fourth quarter of 2020, and 4.0 basis points in the first quarter of 2020.
- Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 43.7 basis points in the first quarter of 2021, 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, and 45.6 basis points in the first quarter of 2020.
- Additional details regarding premiums earned may be found in Exhibit D.
- The mortgage insurance provision for losses was $45.9 million in the first quarter of 2021, compared to $56.3 million in the fourth quarter of 2020, and $35.2 million in the first quarter of 2020.
- The number of primary delinquent loans was 50,106 as of March 31, 2021, compared to 55,537 as of December 31, 2020 and 19,781 as of March 31, 2020.
- The loss ratio in the first quarter of 2021 was 17.3 percent, compared to 19.6 percent in the fourth quarter of 2020 and 12.8 percent in the first quarter of 2020.
- Total mortgage insurance claims paid were $10.5 million in the first quarter of 2021, compared to $40.6 million in the fourth quarter of 2020, and $23.4 million in the first quarter of 2020. Excluding the impact of commutations and settlements, claims paid were $6.5 million in the first quarter of 2021, compared to $8.4 million in the fourth quarter of 2020 and $23.4 million in the first quarter of 2020.
- Radian’s Real Estate segment offers a broad array of title, valuation, asset management and other real estate services to market participants across the real estate value chain.
- Total Real Estate segment revenues for the first quarter of 2021 were $25.8 million, compared to $23.6 million for the fourth quarter of 2020, and $26.5 million for the first quarter of 2020.
- Adjusted earnings before interest, income taxes, depreciation and amortization (Real Estate adjusted EBITDA) for the quarter ended March 31, 2021 was a loss of $5.9 million, compared to a loss of $7.0 million for the quarter ended December 31, 2020, and income of $0.9 million for the quarter ended March 31, 2020. Additional details regarding the non-GAAP measure Real Estate adjusted EBITDA may be found in Exhibits F and G.
- The decrease in Real Estate adjusted EBITDA in the first quarter of 2021 compared to the first quarter of 2020 was primarily driven by declines in services revenue related to our asset management services and valuation services due to the continued negative impact of the COVID-19 pandemic on the operating environment and continued strategic investments focused on our title and digital real estate businesses. Such investments contributed to an increase in total expenses, which was partially offset by increases in net premiums earned and services revenue attributable to our title services business.
- Other operating expenses were $70.3 million in the first quarter of 2021, compared to $81.6 million in the fourth quarter of 2020, and $69.1 million in the first quarter of 2020.
- The decrease in the first quarter of 2021 compared to the fourth quarter of 2020 was primarily related to a $6.9 million decrease in non-operating items as well as a decrease in share-based compensation expense, which was partially offset by a decrease in ceding commissions. The increase in the first quarter of 2021 compared to the first quarter of 2020 was driven primarily by an increase in compensation expense, which was partially offset by a decrease in travel and entertainment expense.
CAPITAL AND LIQUIDITY UPDATE
- At March 31, 2021, Excess Available Resources to Support Private Mortgage Insurer Eligibility Requirements (PMIERs) were $2.7 billion, or 79 percent, above Radian Guaranty’s Minimum Required Assets.
Radian Group
- As of March 31, 2021, Radian Group maintained $1.0 billion of available liquidity. Total liquidity, which includes the company’s $267.5 million unsecured revolving credit facility, was $1.3 billion as of March 31, 2021.
- For the quarter ended March 31, 2021, the company repurchased 413 thousand shares of Radian Group common stock at a total cost of $8.6 million, including commissions. As of March 31, 2021, purchase authority of up to $190.2 million remained available under this program. The current share repurchase authorization expires on August 31, 2021.
- On February 10, 2021, Radian Group’s Board of Directors authorized a regular quarterly dividend on its common stock in the amount of $0.125 per share and paid the dividend on March 4, 2021.
- On May 4, 2021, Radian Group’s Board of Directors authorized an increase to the Company’s quarterly dividend from $0.125 to $0.14 per share. The dividend is payable on June 4, 2021, to stockholders of record as of May 24, 2021.
Radian Guaranty
- At March 31, 2021, Radian Guaranty’s Available Assets under PMIERs totaled approximately $4.9 billion, resulting in excess available resources or a “cushion” of $1.5 billion, or 42 percent, over its Minimum Required Assets.
- As of March 31, 2021, 60 percent of Radian Guaranty’s primary mortgage insurance risk in force is subject to some form of risk distribution, providing a $1.1 billion reduction of Minimum Required Assets under PMIERs.
Thornberry added, “We recently increased our quarterly dividend by 12% and resumed our share repurchase program based on continued signs of improvement in the overall economy, the positive momentum in the housing market and the favorable credit trends within our portfolio.”
RECENT EVENTS
Insurance-Linked-Note
As previously announced, in April 2021, Radian Guaranty entered into its fifth fully collateralized mortgage insurance-linked-note (ILN) reinsurance transaction, in which the company obtained $497.7 million of credit-risk protection from Eagle Re 2021-1 Ltd. (Eagle Re) through the issuance by Eagle Re of ILNs to capital markets investors and Radian Group in the amounts of $452.3 million and $45.4 million, respectively, 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 remains subject to GSE approval. As of March 31, 2021, after consideration of the April ILN transaction described above:
- 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 $1.9 billion, or 64 percent.
- Radian Guaranty’s primary mortgage insurance risk in force that is subject to some form of risk distribution would have increased to 78 percent, providing a $1.6 billion reduction of Minimum Required Assets under PMIERs.
Radian Guaranty Operating Statistics for April 2021
The information below includes total new primary defaults, which include defaults under forbearance programs in response to the COVID-19 pandemic, as well as cures, claims paid and rescissions/denials. The information regarding new defaults and cures is reported to Radian Guaranty from loan servicers. We consider a loan to be in default for financial statement and internal tracking purposes upon receipt of notification by servicers that a borrower has missed two monthly payments. Default reporting, particularly on a monthly basis, may be affected by several factors, including the date on which the loan servicer’s report is generated and transmitted to Radian Guaranty, the impact of updated information submitted by servicers and the timing of servicing transfers.
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| April | March | February | January | ||||||||||||
| Beginning primary default inventory (# of loans) | 50,106 |
| 52,882 | 54,488 |
| 55,537 | ||||||||||
| New defaults | 2,751 |
|
| 3,314 |
|
| 3,873 |
|
| 4,664 |
|
| ||||
| Cures | (7,128 | ) |
| (6,043 | ) |
| (5,420 | ) |
| (5,674 | ) |
| ||||
| Claims paid | (37 | ) |
| (45 | ) |
| (57 | ) |
| (41 | ) |
| ||||
| Rescissions and Claim Denials, net (1) | (3 | ) |
| (2 | ) |
| (2 | ) |
| 2 |
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| ||||
| Ending primary default inventory | 45,689 |
|
| 50,106 |
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| 52,882 |
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| 54,488 |
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| ||||
| (1) | Net of any previous Rescissions and Claim Denials that were reinstated during the period. Such reinstated Rescissions and Claim Denials may ultimately result in a paid claim. |
CONFERENCE CALL
Radian will discuss first quarter 2021 financial results in a conference call tomorrow, Wednesday, May 5, 2021, at 10:00 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 50147770 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 50147770.
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 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 a non-GAAP measure for our Real Estate segment, representing a measure of earnings before interest, income tax provision (benefit), depreciation and amortization (“EBITDA”). We calculate Real Estate adjusted EBITDA by using adjusted pretax operating income as described above, further adjusted to remove the impact of depreciation and corporate allocations for interest and operating expenses. In addition, Real Estate adjusted EBITDA margin is calculated by dividing Real Estate adjusted EBITDA by GAAP total revenue for the Real Estate segment. Real Estate adjusted EBITDA and Real Estate adjusted EBITDA margin 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 Real Estate 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 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 (Loss) 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 | ||||||||||||||||||||||||
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| 2021 |
| 2020 | |||||||||||||||||||||
| (In thousands, except per-share amounts) | Qtr 1 |
| Qtr 4 |
| Qtr 3 |
| Qtr 2 |
| Qtr 1 | |||||||||||||||
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|
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|
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| |||||||||||||||
| Revenues: |
|
|
|
|
|
|
|
|
| |||||||||||||||
| Net premiums earned | $ | 271,872 |
|
|
| $ | 302,140 |
| (1 | ) | $ | 286,471 |
|
| $ | 249,295 |
|
|
| $ | 277,415 |
|
| |
| Services revenue | 22,895 |
|
|
| 11,440 |
| (1 | ) | 33,943 |
|
| 28,075 |
|
|
| 31,927 |
|
| ||||||
| Net investment income | 38,251 |
|
|
| 38,115 |
|
| 36,255 |
|
| 38,723 |
|
|
| 40,944 |
|
| |||||||
| Net gains (losses) on investments and other financial instruments | (5,181 | ) |
|
| 17,376 |
|
| 17,652 |
|
| 47,276 |
|
|
| (22,027 | ) |
| |||||||
| Other income | 976 |
|
|
| 790 |
|
| 913 |
|
| 1,072 |
|
|
| 822 |
|
| |||||||
| Total revenues | 328,813 |
|
|
| 369,861 |
|
| 375,234 |
|
| 364,441 |
|
|
| 329,081 |
|
| |||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| Expenses: |
|
|
|
|
|
|
|
|
| |||||||||||||||
| Provision for losses | 46,143 |
|
|
| 56,664 |
|
| 88,084 |
|
| 304,418 |
|
|
| 35,951 |
|
| |||||||
| Policy acquisition costs | 8,996 |
|
|
| 7,395 |
|
| 10,166 |
|
| 6,015 |
|
|
| 7,413 |
|
| |||||||
| Cost of services | 20,246 |
|
|
| 21,600 |
|
| 24,353 |
|
| 17,972 |
|
|
| 22,141 |
|
| |||||||
| Other operating expenses | 70,262 |
|
|
| 81,641 |
|
| 69,377 |
|
| 60,582 |
|
|
| 69,110 |
|
| |||||||
| Interest expense | 21,115 |
|
|
| 21,169 |
|
| 21,088 |
|
| 16,699 |
|
|
| 12,194 |
|
| |||||||
| Amortization and impairment of other acquired intangible assets | 862 |
|
|
| 2,225 |
|
| 961 |
|
| 979 |
|
|
| 979 |
|
| |||||||
| Total expenses | 167,624 |
|
|
| 190,694 |
|
| 214,029 |
|
| 406,665 |
|
|
| 147,788 |
|
| |||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| Pretax income (loss) | 161,189 |
|
|
| 179,167 |
|
| 161,205 |
|
| (42,224 | ) |
|
| 181,293 |
|
| |||||||
| Income tax provision (benefit) | 35,581 |
|
|
| 31,154 |
|
| 26,102 |
|
| (12,273 | ) |
|
| 40,832 |
|
| |||||||
| Net income (loss) | $ | 125,608 |
|
|
| $ | 148,013 |
|
| $ | 135,103 |
|
| $ | (29,951 | ) |
|
| $ | 140,461 |
|
| ||
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| Diluted net income (loss) per share | $ | 0.64 |
|
|
| $ | 0.76 |
|
| $ | 0.70 |
|
| $ | (0.15 | ) |
|
| $ | 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. |
Contacts
For Investors:
John Damian – Phone: 215.231.1383
email: [email protected]
For Media:
Rashi Iyer – Phone 215.231.1167
email: [email protected]
