PART I [Business](index=12&type=section&id=Item%201%2E%20Business) Radian Group Inc. provides mortgage insurance and real estate services, strategically growing its businesses, diversifying revenue, and optimizing capital across the U.S. housing market - Radian operates through two main business segments: **Mortgage Insurance**, which manages and distributes U.S. mortgage credit risk, and **homegenius**, which provides title, real estate, and technology products and services[32](index=32&type=chunk)[33](index=33&type=chunk) - The company's business strategy is centered on supporting homeownership by **growing its businesses**, **diversifying revenue streams**, **optimizing capital**, and **leveraging data and technology** as a key differentiator[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) 2023 Financial and Operational Highlights | Metric | 2023 | 2022 | | :--- | :--- | :--- | | **Consolidated Pretax Income** | $767 million | $953 million | | **Net Income** | $603 million | $743 million | | **Net Income per Diluted Share** | $3.77 | $4.35 | | **New Insurance Written (NIW)** | $52.7 billion | $68.0 billion | | **Insurance in Force (IIF)** | $270.0 billion | $261.0 billion | | **PMIERs Cushion** | $2.3 billion | $1.7 billion | | **Holding Company Liquidity** | $992 million | $903 million | | **Shares Repurchased** | 5.3 million | - | | **Quarterly Dividend Increase** | 13% (to $0.225/share) | - | [Mortgage Insurance](index=15&type=section&id=Mortgage%20Insurance) The Mortgage Insurance segment provides primary mortgage insurance for residential first-lien loans, protecting lenders from default-related losses, with performance influenced by macroeconomic factors and managed through risk-based pricing and reinsurance strategies - The company's primary product is first-lien Primary Mortgage Insurance, with **$52.7 billion of NIW in 2023**, resulting in a total **Insurance in Force (IIF) of $270.0 billion** at year-end[53](index=53&type=chunk) - Pricing has shifted from standard rate-cards to more granular, risk-based "black box" frameworks, making **price the predominant competitive factor** in the industry[63](index=63&type=chunk)[64](index=64&type=chunk) Underwriting Methods by IIF (as of Dec 31, 2023) | Underwriting Method | Percentage of IIF | | :--- | :--- | | Delegated Underwriting | 71% | | Non-Delegated Underwriting | 25% | | Contract Underwriting | 4% | - The company utilizes reinsurance as a key capital and risk management tool to lower the risk profile and financial volatility of its mortgage insurance portfolio, distributing risk through quota share and excess-of-loss arrangements[159](index=159&type=chunk) [homegenius](index=22&type=section&id=homegenius) The homegenius segment offers title, real estate, and technology services, with transactional revenues highly dependent on mortgage and real estate market activity, which has been negatively impacted by higher interest rates - The homegenius segment offers **title insurance, real estate asset management, valuation products, and a proprietary real estate technology platform**[102](index=102&type=chunk)[104](index=104&type=chunk)[107](index=107&type=chunk)[109](index=109&type=chunk) - Revenues are primarily transactional and are subject to fluctuations based on overall activity in the mortgage and real estate markets. The higher interest rate environment led to a **significant decrease in new title policies**, particularly from refinance transactions[104](index=104&type=chunk)[111](index=111&type=chunk) [Competition](index=24&type=section&id=Competition) Radian faces intense competition in the mortgage insurance industry from private insurers and government agencies, with price being the primary competitive factor and the FHA's market share increasing - The company competes with **five other active private mortgage insurers**: Arch, Enact, Essent, MGIC, and NMI Holdings[118](index=118&type=chunk)[124](index=124&type=chunk) - Radian's estimated market share of new insurance written (NIW) in the private mortgage insurance market was approximately **19% for 2023**[121](index=121&type=chunk) - Competition also comes from government entities. The FHA's share of the total insured mortgage market grew to **34% in 2023** from 27% in 2022, while the VA's share was **22% in 2023**[124](index=124&type=chunk)[126](index=126&type=chunk) [Regulation](index=32&type=section&id=Regulation) Radian is subject to comprehensive state and federal regulations, including state capital requirements and the critical PMIERs set by GSEs, along with other consumer protection laws - Radian Guaranty must comply with state-level statutory capital requirements. As of December 31, 2023, its **Risk-to-capital ratio was 10.4 to 1**, compliant with the common maximum of 25 to 1[198](index=198&type=chunk) - The ability of insurance subsidiaries to pay dividends to the holding company is restricted. Radian Guaranty paid **$400 million in ordinary dividends** to Radian Group in 2023 after its unassigned surplus became positive[200](index=200&type=chunk) - Compliance with the GSEs' **Private Mortgage Insurer Eligibility Requirements (PMIERs) is crucial**. The PMIERs set extensive financial and operational standards that Radian Guaranty must meet to insure loans purchased by the GSEs[219](index=219&type=chunk) - The Dodd-Frank Act's Qualified Mortgage (QM) Rule impacts the mortgage market. The rule provides a safe harbor for lenders originating low-risk mortgages, and most loans insured by Radian are expected to meet QM standards[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A%2E%20Risk%20Factors) The company faces material risks from regulatory compliance, intense market competition, macroeconomic conditions impacting its portfolio, liquidity constraints, and cybersecurity threats - A primary regulatory risk is Radian Guaranty's ability to remain eligible under the **PMIERs** to insure loans for the GSEs, as failure to do so would have a **material adverse impact** on the business[285](index=285&type=chunk)[292](index=292&type=chunk) - The mortgage insurance business faces **intense competition**, primarily on price, from other private insurers and government entities like the FHA and VA, which could negatively impact NIW and profitability[327](index=327&type=chunk)[329](index=329&type=chunk) - The credit performance of the mortgage insurance portfolio is highly sensitive to **macroeconomic conditions**, including home prices, interest rates, and unemployment levels, which are beyond the company's control[356](index=356&type=chunk) - The company's holding company liquidity could be insufficient to fund obligations, which include debt service, dividends, share repurchases, and potential capital contributions to subsidiaries to maintain PMIERs compliance[367](index=367&type=chunk)[369](index=369&type=chunk) - Cybersecurity threats pose a significant risk. A breach of the company's or its vendors' IT systems could result in **significant liability, reputational harm, and the loss of confidential information**[382](index=382&type=chunk)[388](index=388&type=chunk) [Cybersecurity](index=62&type=section&id=Item%201C%2E%20Cybersecurity) Radian maintains a comprehensive Information Security Program based on the NIST Cybersecurity Framework, with no material cybersecurity incidents reported during the period - The company's Information Security Program is managed by a **Chief Information Security Officer**, with oversight from the Board of Directors' Risk Committee[400](index=400&type=chunk)[403](index=403&type=chunk) - Radian uses the **National Institute of Standards and Technology (NIST) Cybersecurity Framework** as a guideline for managing its cybersecurity-related risks[401](index=401&type=chunk) - During the reporting period, the company was **not impacted by any cybersecurity incidents** deemed reasonably likely to have a material effect on its business strategy, results of operations, or financial condition[405](index=405&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=64&type=section&id=Item%205%2E%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Radian Group Inc.'s common stock trades on the NYSE, with the company increasing its quarterly dividend and repurchasing shares under its authorization program - The company's common stock is listed on the NYSE under the ticker symbol **RDN**[414](index=414&type=chunk) - In February 2024, the quarterly cash dividend was increased from **$0.225 to $0.245 per share**[415](index=415&type=chunk) Share Repurchase Activity (Q4 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining Under Program | | :--- | :--- | :--- | :--- | | Oct 2023 | 2,447,222 | $25.86 | $166,739,000 | | Nov 2023 | 0 | - | $166,739,000 | | Dec 2023 | 0 | - | $166,739,000 | | **Total Q4** | **2,447,222** | **$25.86** | **$166,739,000** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=65&type=section&id=Item%207%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the impact of macroeconomic conditions on its segments, highlighting growth in Mortgage Insurance IIF, a benefit from loss provision, homegenius revenue declines, and strong liquidity and capital positions - The current operating environment is characterized by **inflationary pressures and elevated interest rates**, which have reduced mortgage transaction volumes but increased persistency rates for existing mortgage insurance policies[429](index=429&type=chunk)[430](index=430&type=chunk) - Strong home price appreciation and a favorable credit environment have positively impacted default and cure trends, with an estimated **82% of defaulted loans having at least 20% embedded equity** as of year-end 2023[431](index=431&type=chunk)[432](index=432&type=chunk) Consolidated Results of Operations Summary | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Total Revenues | $1,240.6M | $1,190.7M | | Provision for Losses (Benefit) | $(42.5)M | $(338.2)M | | Pretax Income | $767.5M | $952.8M | | Net Income | $603.1M | $742.9M | | Diluted Net Income per Share | $3.77 | $4.35 | - The company uses non-GAAP measures like 'adjusted pretax operating income' to evaluate performance, which excludes items like net gains/losses on investments and goodwill impairment. For 2023, adjusted pretax operating income was **$786.4 million**[510](index=510&type=chunk)[513](index=513&type=chunk)[516](index=516&type=chunk) [Mortgage Insurance Portfolio](index=70&type=section&id=Mortgage%20Insurance%20Portfolio) The mortgage insurance portfolio grew in 2023, driven by high persistency and strong credit quality, despite lower new insurance written, with risk actively managed through reinsurance programs New Insurance Written (NIW) Summary | Metric | 2023 | 2022 | | :--- | :--- | :--- | | **NIW** | $52.7B | $68.0B | | **NIW by Loan Purpose (Purchases)** | 98.5% | 96.1% | | **NIW by FICO >=740** | 65.4% | 59.8% | | **NIW by LTV >95%** | 16.9% | 16.6% | Insurance in Force (IIF) and Risk in Force (RIF) Summary | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Primary IIF** | $270.0B | $261.0B | | **Primary RIF** | $69.7B | $66.1B | | **12-month Persistency Rate** | 84.0% | 79.6% | | **Primary RIF by FICO >=740** | 58.5% | 57.4% | - The **12-month persistency rate increased to 84.0%** at year-end 2023 from 79.6% in 2022, primarily due to decreased refinance activity in the higher mortgage interest rate environment[478](index=478&type=chunk) - Risk distribution programs, including XOL and QSR reinsurance, provided a total PMIERs benefit by reducing Minimum Required Assets by **$1.60 billion** as of December 31, 2023[498](index=498&type=chunk) [Results of Operations—Mortgage Insurance](index=81&type=section&id=Results%20of%20Operations%E2%80%94Mortgage%20Insurance) The Mortgage Insurance segment's adjusted pretax operating income decreased in 2023 due to a smaller benefit from the provision for losses and lower net premiums earned, while primary loans in default remained stable Mortgage Insurance Segment Financial Summary | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | **Net Premiums Earned** | $909,363 | $957,213 | | **Provision for Losses (Benefit)** | $(42,136) | $(339,374) | | **Adjusted Pretax Operating Income** | $829,824 | $1,131,943 | - The provision for losses was a benefit of **$42.1 million in 2023**, a significant reduction from the $339.4 million benefit in 2022. This was driven by a smaller favorable development on prior year defaults (**$220.8 million in 2023** vs. $499.4 million in 2022)[543](index=543&type=chunk) Primary Loans in Default Rollforward | (Number of loans) | 2023 | 2022 | | :--- | :--- | :--- | | Beginning Inventory | 21,913 | 29,061 | | New Defaults | 44,007 | 37,738 | | Cures | (43,354) | (44,136) | | **Ending Inventory** | **22,021** | **21,913** | [Results of Operations—homegenius](index=87&type=section&id=Results%20of%20Operations%E2%80%94homegenius) The homegenius segment reported an adjusted pretax operating loss in 2023, with significant revenue declines due to reduced mortgage transaction volumes, partially offset by cost management efforts homegenius Segment Financial Summary | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | **Net Premiums Earned (Title)** | $10,215 | $23,918 | | **Services Revenue** | $45,394 | $85,158 | | **Total Revenues** | $57,640 | $109,975 | | **Total Expenses** | $143,910 | $198,173 | | **Adjusted Pretax Operating Loss** | $(86,270) | $(88,198) | - The significant decline in revenues was primarily caused by a **decrease in new title policies** and lower real estate and title services volume, resulting from the macroeconomic environment and reduced mortgage originations[566](index=566&type=chunk)[567](index=567&type=chunk) - Operating expenses decreased due to cost-saving measures, including reductions in headcount, to better align the workforce with business needs. Severance expenses of **$2 million** were recorded in 2023, compared to $6 million in 2022[569](index=569&type=chunk) [Liquidity and Capital Resources](index=89&type=section&id=Liquidity%20and%20Capital%20Resources) Radian maintained strong liquidity and capital in 2023, with increased holding company liquidity and a robust PMIERs cushion, while returning capital to shareholders and managing a high-quality investment portfolio - Radian Group (holding company) had available liquidity of **$992 million** as of December 31, 2023, an increase from $903 million at year-end 2022[589](index=589&type=chunk)[590](index=590&type=chunk) - Radian Guaranty's **PMIERs cushion increased to $2.3 billion** (62% over minimum required assets) at year-end 2023, up from $1.7 billion at year-end 2022[614](index=614&type=chunk) - The investment portfolio had a fair value of **$6.3 billion** as of December 31, 2023, with **95% rated investment grade** and a weighted-average duration of **4.1 years**[583](index=583&type=chunk)[646](index=646&type=chunk)[649](index=649&type=chunk) Holding Company Capital Structure | (In thousands, except ratios) | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Debt** | $1,417,781 | $1,413,504 | | **Stockholders' Equity** | $4,397,805 | $3,919,327 | | **Total Capitalization** | $5,815,586 | $5,332,831 | | **Debt-to-Capital Ratio** | 24.4% | 26.5% | [Quantitative and Qualitative Disclosures About Market Risk](index=97&type=section&id=Item%207A%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest-rate and credit-spread risks within its fixed income investment portfolio, with sensitivity analysis indicating potential fair value decreases from hypothetical market changes - The primary market risks are **interest-rate risk and credit-spread risk** for the company's fixed income securities portfolio[645](index=645&type=chunk) - The average duration of the total fixed income portfolio was **4.1 years** as of December 31, 2023[646](index=646&type=chunk) Market Risk Sensitivity Analysis (as of Dec 31, 2023) | Risk Factor | Hypothetical Change | Estimated Decrease in Fair Value | | :--- | :--- | :--- | | Interest Rates | +100 basis points | $244 million | | Credit Spreads | +100 basis points | $205 million | [Financial Statements and Supplementary Data](index=99&type=section&id=Item%208%2E%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Radian's audited consolidated financial statements for 2023, including balance sheets, income statements, and cash flows, with an unqualified opinion from PricewaterhouseCoopers LLP - The independent auditor, PricewaterhouseCoopers LLP, issued an **unqualified opinion** on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2023[657](index=657&type=chunk)[658](index=658&type=chunk) - The critical audit matter identified was the **valuation of first-lien primary case reserves** for mortgage insurance policies, due to the significant management judgment involved in estimating Default to Claim Rates and Claim Severity[665](index=665&type=chunk) [Consolidated Financial Statements](index=102&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements detail Radian's financial position with total assets of $7.6 billion and stockholders' equity of $4.4 billion, reporting $1.24 billion in revenues and $603.1 million in net income for 2023 Key Balance Sheet Items (as of Dec 31, 2023) | Account | Amount (in thousands) | | :--- | :--- | | Total Investments | $6,085,654 | | **Total Assets** | **$7,593,933** | | Total Liabilities | $3,196,128 | | **Total Stockholders' Equity** | **$4,397,805** | Key Income Statement Items (Year Ended Dec 31, 2023) | Account | Amount (in thousands) | | :--- | :--- | | Total Revenues | $1,240,588 | | Pretax Income | $767,487 | | **Net Income** | **$603,119** | [Notes to Consolidated Financial Statements](index=108&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on segment reporting, fair value measurements, investment portfolio, reinsurance programs, loss reserves, debt, and statutory capital for insurance subsidiaries - The company's reinsurance programs include Quota Share (QSR) and Excess-of-Loss (XOL) arrangements. The **2023 QSR agreement cedes 22.5% of NIW** from July 2023 to June 2024. The XOL program utilizes mortgage insurance-linked notes issued by Eagle Re entities[841](index=841&type=chunk)[847](index=847&type=chunk)[856](index=856&type=chunk) - The reserve for mortgage insurance losses and LAE was **$364.9 million** at year-end 2023, down from $421.0 million at year-end 2022. The decrease was driven by favorable development on prior-year defaults[897](index=897&type=chunk)[899](index=899&type=chunk) - Radian Guaranty's statutory policyholders' surplus was **$619.6 million** as of December 31, 2023. It maintained a **positive unassigned surplus of $120 million**, enabling it to pay ordinary dividends[977](index=977&type=chunk)[986](index=986&type=chunk) - The company's outstanding senior notes total **$1.42 billion** in carrying value, with maturities in 2024 ($450M), 2025 ($525M), and 2027 ($450M)[920](index=920&type=chunk)

Radian Group Inc. (NYSE:RDN) Q4 2023 Earnings Conference Call February 8, 2024 12:00 PM ET Company Participants John Damian - SVP of Corporate Development and IR Rick Thornberry - CEO and Director Sumita Pandit - CFO and SEVP Derek Brummer - President of Mortgage Conference Call Participants Bose George - KBW Doug Harter - UBS Mihir Bhatia - Bank of America Merrill Lynch Scott Heleniak - RBC Capital Markets Eric Hagen - BTIG Operator Ladies and gentlemen, thank you for standing by. Welcome to the Fourth ...

PART I—FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=10&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Radian Group Inc. as of September 30, 2023, and for the three and nine-month periods then ended [Condensed Consolidated Balance Sheets](index=11&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2023, Radian Group's total assets increased to $7.38 billion from $7.06 billion at year-end 2022, primarily driven by growth in investments and mortgage loans held for sale Condensed Consolidated Balance Sheet Highlights (Unaudited) | (In thousands) | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$7,378,682** | **$7,063,729** | | Total Investments | $5,885,652 | $5,693,491 | | Mortgage loans held for sale | $138,289 | $3,549 | | **Total Liabilities** | **$3,225,783** | **$3,144,402** | | Senior notes | $1,416,687 | $1,413,504 | | **Total Stockholders' Equity** | **$4,152,899** | **$3,919,327** | [Condensed Consolidated Statements of Operations](index=13&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the third quarter of 2023, Radian reported net income of $156.6 million, a decrease from $198.3 million in Q3 2022, primarily due to a smaller benefit from the provision for losses Consolidated Statements of Operations Highlights (Unaudited) | (In thousands, except per-share amounts) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$313,533** | **$296,189** | **$914,566** | **$876,002** | | Net Premiums Earned | $240,262 | $240,222 | $686,929 | $748,304 | | Net Investment Income | $68,825 | $51,414 | $192,228 | $136,567 | | **Provision for Losses** | **($8,135)** | **($96,964)** | **($46,696)** | **($294,640)** | | **Net Income** | **$156,582** | **$198,280** | **$460,426** | **$580,604** | | **Diluted EPS** | **$0.98** | **$1.20** | **$2.86** | **$3.34** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=17&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's business segments, accounting policies, and financial statement line items, including segment performance and investment portfolio composition - The company operates through two reportable business segments: Mortgage (private mortgage insurance and credit risk management) and homegenius (title, real estate, and technology services) - Total direct primary mortgage insurance in force (IIF) was **$269.5 billion** as of September 30, 2023, up from **$261.0 billion** at December 31, 2022[31](index=31&type=chunk) - The company uses adjusted pretax operating income as its primary measure to evaluate segment performance, which excludes items like certain investment gains/losses and amortization of acquired intangibles[53](index=53&type=chunk)[54](index=54&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, detailing the impact of the macroeconomic environment on its segments [Overview](index=43&type=section&id=Overview) Management discusses the current operating environment, characterized by high inflation and interest rates, which has negatively impacted the housing market but benefited persistency rates and net investment income - The high interest rate environment has reduced housing market activity and refinance demand, leading to a **24%** decrease in NIW for the first nine months of 2023 compared to 2022[195](index=195&type=chunk)[196](index=196&type=chunk) - Higher interest rates have increased policy persistency, contributing to growth in Insurance in Force (IIF) and favorably impacting future premium earnings[196](index=196&type=chunk) - The homegenius segment has experienced ongoing losses due to declining revenues caused by the sharp drop in mortgage purchase and refinance volumes[199](index=199&type=chunk) - In October 2023, Radian entered into two new excess-of-loss (XOL) reinsurance agreements, providing an additional **$599 million** in combined coverage (**$353 million** with Eagle Re 2023-1 Ltd. and **$246 million** with a panel of reinsurers)[208](index=208&type=chunk)[209](index=209&type=chunk) [Mortgage Insurance Portfolio](index=46&type=section&id=Mortgage%20Insurance%20Portfolio) New Insurance Written (NIW) declined due to higher mortgage rates, but Insurance-in-Force (IIF) grew to $269.5 billion, driven by a significant increase in the 12-month persistency rate to 83.6% New Insurance Written (NIW) | ($ in millions) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | NIW | $13,922 | $17,616 | $42,076 | $55,134 | Insurance in Force (IIF) and Persistency | ($ in millions, except rates) | September 30, 2023 | December 31, 2022 | September 30, 2022 | | :--- | :--- | :--- | :--- | | Primary IIF | $269,511 | $260,994 | $259,121 | | Primary RIF | $69,298 | $66,094 | $65,288 | | Persistency Rate (12 months) | 83.6% | 79.6% | 75.9% | - As of September 30, 2023, **72%** of the company's primary Risk in Force (RIF) is subject to some form of risk distribution[198](index=198&type=chunk) - This figure increases to **79%** when including the October 2023 transactions[198](index=198&type=chunk) [Results of Operations—Consolidated](index=50&type=section&id=Results%20of%20Operations%E2%80%94Consolidated) Consolidated net income for Q3 2023 was $156.6 million, down from $198.3 million in Q3 2022, primarily due to a smaller benefit from the provision for losses Reconciliation to Adjusted Pretax Operating Income | (In thousands) | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | **Consolidated pretax income (GAAP)** | **$200,983** | **$587,670** | | Less: Net gains on investments | ($8,838) | ($3,664) | | Less: Amortization of intangibles | ($1,371) | ($4,112) | | Less: Other non-operating items | $737 | $753 | | **Total adjusted pretax operating income (Non-GAAP)** | **$210,455** | **$594,693** | - The provision for losses decreased from a **$97.0 million** benefit in Q3 2022 to an **$8.1 million** benefit in Q3 2023, primarily due to a reduction in favorable development on prior period defaults[235](index=235&type=chunk)[240](index=240&type=chunk) - Net investment income increased to **$68.8 million** in Q3 2023 from **$51.4 million** in Q3 2022, driven by higher market interest rates[235](index=235&type=chunk)[238](index=238&type=chunk) [Results of Operations—Mortgage](index=56&type=section&id=Results%20of%20Operations%E2%80%94Mortgage) The Mortgage segment reported adjusted pretax operating income of $218.6 million for Q3 2023, down from $295.7 million in Q3 2022, mainly due to a smaller benefit from the provision for losses Mortgage Segment - Summary Results of Operations | (In thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | **Total Revenues** | **$288,649** | **$281,033** | | Net Premiums Earned | $236,801 | $235,197 | | **Total Expenses** | **$70,048** | **($14,642)** | | Provision for Losses | ($8,257) | ($97,493) | | **Adjusted Pretax Operating Income** | **$218,601** | **$295,675** | - Favorable reserve development on prior period defaults was **$54.9 million** in Q3 2023, significantly lower than the **$136.7 million** benefit in Q3 2022, driving the change in the provision for losses[278](index=278&type=chunk) - New primary defaults increased by **16%** in Q3 2023 compared to Q3 2022, rising from **9,601** to **11,156**, consistent with portfolio seasoning and growth[280](index=280&type=chunk)[284](index=284&type=chunk) [Results of Operations—homegenius](index=63&type=section&id=Results%20of%20Operations%E2%80%94homegenius) The homegenius segment reported an adjusted pretax operating loss of ($20.9) million in Q3 2023, an improvement from a ($25.5) million loss in Q3 2022, driven by lower operating expenses despite declining revenues homegenius Segment - Summary Results of Operations | (In thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | **Total Revenues** | **$14,707** | **$25,083** | | Services Revenue | $10,723 | $19,812 | | **Total Expenses** | **$35,639** | **$50,619** | | Cost of Services | $8,714 | $18,344 | | Other Operating Expenses | $26,803 | $31,840 | | **Adjusted Pretax Operating Loss** | **($20,932)** | **($25,536)** | - The decrease in the operating loss was primarily due to a reduction in total expenses to **$35.6 million** from **$50.6 million**, reflecting cost management actions[302](index=302&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) [Results of Operations—All Other](index=65&type=section&id=Results%20of%20Operations%E2%80%94All%20Other) The 'All Other' category reported adjusted pretax operating income of $12.8 million in Q3 2023, up from $2.6 million in Q3 2022, primarily due to higher net investment income at the holding company - Adjusted pretax operating income for All Other increased to **$12.8 million** in Q3 2023 from **$2.6 million** in Q3 2022[312](index=312&type=chunk) - The improvement was mainly due to a rise in net investment income to **$18.0 million** from **$6.3 million**, reflecting higher interest rates and increased investment balances at the holding company[312](index=312&type=chunk)[313](index=313&type=chunk) [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) Radian Group maintained a strong liquidity position with $1.0 billion in available cash and liquid investments, and Radian Guaranty remained compliant with all regulatory capital requirements - Radian Group (holding company) had **$1.0 billion** in available, unrestricted cash and liquid investments as of September 30, 2023[321](index=321&type=chunk) - Radian Guaranty's Available Assets under PMIERs were **$5.8 billion**, resulting in a PMIERs Cushion of **$1.7 billion**, or **41%** over its Minimum Required Assets[345](index=345&type=chunk) - Radian Guaranty paid **$300 million** in ordinary dividends (**$100 million** per quarter) to Radian Group in the first nine months of 2023[322](index=322&type=chunk)[349](index=349&type=chunk) - The company repurchased **2.8 million shares** for **$70 million** and paid **$111 million** in dividends to common stockholders during the first nine months of 2023[330](index=330&type=chunk)[331](index=331&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=71&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that its market risk exposures, primarily related to interest rate and credit spread risk in its investment portfolio, have not materially changed from those disclosed in its 2022 Form 10-K - The company's market risk exposures as of September 30, 2023, have not materially changed from those identified in the 2022 Form 10-K[359](index=359&type=chunk) [Item 4. Controls and Procedures](index=71&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2023, with no material changes in internal control over financial reporting - The CEO and CFO concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective[361](index=361&type=chunk) - No changes in internal control over financial reporting occurred during Q3 2023 that materially affected, or are reasonably likely to materially affect, internal controls[362](index=362&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=71&type=section&id=Item%201.%20Legal%20Proceedings) The company is routinely involved in various legal actions and regulatory proceedings in the ordinary course of business, with management not expecting a material adverse effect on financial condition or results of operations - Management does not expect currently pending or threatened legal actions to have a material adverse effect on the company's consolidated financial condition or results of operations[161](index=161&type=chunk)[363](index=363&type=chunk) [Item 1A. Risk Factors](index=71&type=page&id=Item%201A.%20Risk%20Factors) The company reports that there have been no material changes to its risk factors from those previously disclosed in its 2022 Form 10-K - There have been no material changes to the risk factors from those disclosed in the 2022 Form 10-K[364](index=364&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=72&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) During Q3 2023, the company did not sell any unregistered equity securities, but purchased 1.9 million shares for approximately $50 million under its repurchase program, with $230 million remaining available Issuer Purchases of Equity Securities (Q3 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | Jul 2023 | 3,630 | $24.88 | $280,000,000 | | Aug 2023 | 1,882,874 | $26.71 | $230,000,000 | | Sep 2023 | 4,142 | $27.23 | $230,000,000 | | **Total Q3** | **1,890,646** | - | **$230,000,000** | - In January 2023, the board approved a **$300 million** share repurchase program, which expires in January 2025[368](index=368&type=chunk) - During Q3 2023, **1.9 million shares** were purchased under this program[368](index=368&type=chunk) [Item 5. Other Information](index=72&type=section&id=Item%205.%20Other%20Information) The company reports that none of its directors or officers adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the third quarter of 2023 - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the reporting period[370](index=370&type=chunk) [Item 6. Exhibits](index=73&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including amendments to master repurchase agreements, an amended employment agreement for the CEO, and required certifications

Financial Data and Key Metrics Changes - The company reported GAAP revenues of $314 million for Q3 2023, an increase from $290 million in Q2 2023 [26][33] - Net income for the quarter was $157 million, or $0.98 per diluted share, compared to $0.91 per diluted share in the previous quarter [26][85] - Annualized return on equity was 15%, with adjusted net operating return on equity at 16% [26][32] - Book value per share increased by 12% year-over-year to $26.69 [26][32] Business Line Data and Key Metrics Changes - The primary insurance in force grew by 4% year-over-year to $270 billion, generating $237 million in net premiums earned for the mortgage segment in Q3 [14][28] - New insurance written for the quarter was $13.9 billion, down from $16.9 billion in Q2 [28][34] - The persistency rate for insurance in force remained high at 84%, up from 76% a year ago [34] Market Data and Key Metrics Changes - The total mortgage originations for 2023 are projected to be approximately $1.6 trillion, with the private mortgage insurance market expected to be around $300 billion [10] - The investment income grew by 34% year-over-year to $69 million, benefiting from higher yields in a rising interest rate environment [16] Company Strategy and Development Direction - The company continues to focus on capital optimization, balancing organic growth with capital returns to stockholders [12][29] - The mortgage insurance business is expected to benefit from increasing demand, home prices, and purchase volume, maintaining a generally positive outlook [11] - The company is strategically managing capital and liquidity, with a focus on maintaining strong holding company liquidity of $1.3 billion [29][40] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges in the mortgage and real estate markets due to higher interest rates and limited inventory but noted positive credit performance in the mortgage insurance portfolio [8][9] - The company expects the persistency rate to remain strong due to a significant portion of its insurance in force having mortgage rates of 6% or less [35] - Management expressed confidence in the company's ability to navigate the current economic environment while positioning for future opportunities [11][59] Other Important Information - The company paid a $35 million dividend to stockholders, reflecting the highest yielding dividend in the industry [27] - Radian Guaranty paid a $100 million ordinary dividend to the holding company in Q3, with expectations for additional dividends in Q4 [19] Q&A Session Summary Question: What is the outlook for expense reductions? - Management reiterated guidance for full-year expenses between $380 million and $400 million, expecting to be at the top end of that range [63] Question: How is the pricing environment in the mortgage insurance market? - The pricing environment remains rational and disciplined, with normal fluctuations observed throughout the quarter [75] Question: Are lenders maintaining discipline in underwriting? - Management noted that lenders remain disciplined in underwriting, despite some market pressures [67][69]

PART I—FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=10&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Radian Group Inc.'s unaudited condensed consolidated financial statements and accompanying notes [Condensed Consolidated Financial Statements](index=11&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section provides a snapshot of the company's financial health, detailing assets, liabilities, equity, and net income Condensed Consolidated Balance Sheet Highlights (As of June 30, 2023) | Metric | Amount (in thousands) | | :--- | :--- | | Total Investments | $5,895,871 | | Total Assets | $7,306,543 | | Total Liabilities | $3,135,707 | | Total Stockholders' Equity | $4,170,836 | Condensed Consolidated Statement of Operations Highlights | Metric (in thousands, except per-share) | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $290,413 | $286,833 | $601,033 | $579,813 | | Pretax Income | $182,676 | $259,880 | $386,687 | $494,020 | | Net Income | $146,087 | $201,193 | $303,844 | $382,324 | | Diluted EPS | $0.91 | $1.15 | $1.89 | $2.16 | - Net cash provided by operating activities for the six months ended June 30, 2023 was **$189.2 million**, compared to **$176.9 million** for the same period in 2022[27](index=27&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=17&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of financial statements, covering segments, accounting, investments, reinsurance, and capital - The company operates through two reportable business segments: **Mortgage** (private mortgage insurance and credit risk management) and **homegenius** (title, real estate, and technology services)[28](index=28&type=chunk)[29](index=29&type=chunk)[33](index=33&type=chunk) - The Mortgage segment's adjusted pretax operating income was **$197.8 million** in Q2 2023, down from **$316.5 million** in Q2 2022. The homegenius segment reported an adjusted pretax operating loss of **$24.4 million** in Q2 2023, compared to a loss of **$17.7 million** in Q2 2022[57](index=57&type=chunk) - In Q2 2023, the company incurred **$21 million** in additional ceded premiums related to tender offers by Eagle Re 2019-1 Ltd. and Eagle Re 2020-1 Ltd. to terminate portions of their reinsurance agreements[96](index=96&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) - As of June 30, 2023, Radian Guaranty was in compliance with all PMIERs financial requirements, with a PMIERs cushion of **$1.7 billion**, or **41%** over its Minimum Required Assets[179](index=179&type=chunk)[332](index=332&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and operating results, highlighting economic impacts on key metrics and capital - The current economic environment of high inflation and interest rates has negatively impacted **NIW** and **homegenius revenues**, but positively impacted **persistency rates** and **net investment income**[191](index=191&type=chunk) - New Insurance Written (NIW) for the first half of 2023 was **$28.2 billion**, a **25% decrease** from the first half of 2022, due to reduced housing market activity[192](index=192&type=chunk)[204](index=204&type=chunk) - As of June 30, 2023, **71%** of the company's primary risk in force (RIF) is subject to some form of risk distribution, enhancing financial strength and flexibility[196](index=196&type=chunk) - Radian Group (holding company) had available liquidity of **$1.0 billion** in unrestricted cash and liquid investments as of June 30, 2023[309](index=309&type=chunk) [Mortgage Insurance Portfolio](index=43&type=section&id=Mortgage%20Insurance%20Portfolio) This section details the mortgage insurance portfolio, including NIW, IIF, persistency rates, and risk distribution strategies New Insurance Written (NIW) | Period | NIW ($ in millions) | YoY Change | | :--- | :--- | :--- | | Q2 2023 | $16,946 | -11% | | H1 2023 | $28,191 | -25% | Insurance in Force (IIF) and Persistency | Metric | June 30, 2023 | Dec 31, 2022 | June 30, 2022 | | :--- | :--- | :--- | :--- | | Primary IIF ($ in billions) | $266.9 | $261.0 | $254.2 | | 12-month Persistency Rate | 82.8% | 79.6% | 71.7% | - Risk distribution programs reduced the company's PMIERs Minimum Required Assets by **$1.08 billion** as of June 30, 2023, representing **21.1%** of the gross requirement[224](index=224&type=chunk) [Results of Operations—Consolidated](index=47&type=section&id=Results%20of%20Operations%E2%80%94Consolidated) Consolidated net income decreased in Q2 2023 due to lower premiums and services revenue, partially offset by investment income Consolidated Results of Operations (Q2 2023 vs Q2 2022) | Metric (in thousands) | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Net Premiums Earned | $213,429 | $253,892 | | Services Revenue | $11,797 | $27,281 | | Net Investment Income | $64,182 | $46,957 | | Provision for Losses | $(21,632) | $(113,922) | | Net Income | $146,087 | $201,193 | - The decrease in net premiums earned was primarily due to **higher ceded premiums** related to **reinsurance tender offers** in the mortgage segment[231](index=231&type=chunk) - The provision for losses provided a **smaller benefit** compared to the prior year, driven by a **reduction in favorable reserve development** on prior period defaults[236](index=236&type=chunk) [Results of Operations—Mortgage](index=52&type=section&id=Results%20of%20Operations%E2%80%94Mortgage) The Mortgage segment's adjusted pretax operating income declined due to lower net premiums earned and a reduced loss provision Mortgage Segment Results (Q2 2023 vs Q2 2022) | Metric (in thousands) | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Net Premiums Earned | $210,732 | $246,909 | | Provision for Losses | $(21,623) | $(114,179) | | Adjusted Pretax Operating Income | $197,750 | $316,520 | - Ceded premiums earned increased significantly, driven by a **$21 million** cost related to tender offers for mortgage insurance-linked notes under the Excess-of-Loss Program[257](index=257&type=chunk)[260](index=260&type=chunk)[265](index=265&type=chunk) - The number of primary loans in default at quarter-end was **19,880**, down from **21,913** at the end of 2022, with new defaults in H1 2023 totaling **20,399**[277](index=277&type=chunk)[278](index=278&type=chunk) [Results of Operations—homegenius](index=58&type=section&id=Results%20of%20Operations%E2%80%94homegenius) The homegenius segment's adjusted pretax operating loss widened due to sharp revenue declines from reduced title and real estate services homegenius Segment Results (Q2 2023 vs Q2 2022) | Metric (in thousands) | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Total Revenues | $14,806 | $32,343 | | Cost of Services | $10,114 | $20,800 | | Adjusted Pretax Operating Loss | $(24,421) | $(17,690) | - The decline in revenue was primarily due to a **decrease in new title policies** and **lower real estate services revenue**, reflecting the **sharp drop in industry-wide refinance volumes**[291](index=291&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk) - The segment incurred **$2.0 million** in severance expenses during Q2 2023 due to further headcount reductions in response to the challenging macroeconomic environment[297](index=297&type=chunk) [Liquidity and Capital Resources](index=61&type=section&id=Liquidity%20and%20Capital%20Resources) This section details the company's strong liquidity, capital resources, debt-to-capital ratio, and book value per share - The holding company, Radian Group, had **$1.0 billion** in available liquidity as of June 30, 2023, and total liquidity of **$1.3 billion** including its undrawn credit facility[309](index=309&type=chunk) - Radian Guaranty paid two ordinary dividends of **$100 million** each to Radian Group in March and May 2023[310](index=310&type=chunk)[335](index=335&type=chunk) Capitalization and Key Ratios | Metric | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Debt (in thousands) | $1,415,610 | $1,413,504 | | Stockholders' Equity (in thousands) | $4,170,836 | $3,919,327 | | Debt-to-Capital Ratio | 25.3% | 26.5% | | Book Value Per Share | $26.51 | $24.95 | - Radian Guaranty's PMIERs cushion was **$1.7 billion** (**41%** over minimum required) as of June 30, 2023[332](index=332&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk exposures, primarily interest rate and credit spread risk, remain materially unchanged from 2022 - The company's primary market risks are changes in **interest rates** and **credit spreads**, which affect the fair value of its **investment portfolio**[344](index=344&type=chunk) - There were **no material changes** to the company's market risk exposures at June 30, 2023, compared to those identified in the 2022 Form 10-K[345](index=345&type=chunk) [Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2023, with no material changes to internal controls - The CEO and CFO concluded that as of June 30, 2023, the company's disclosure controls and procedures were **effective**[347](index=347&type=chunk) - **No changes** occurred during Q2 2023 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[348](index=348&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=66&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal and regulatory matters, with no expected material adverse effect on financial condition - The company is **routinely involved** in legal actions and regulatory matters arising in the ordinary course of business[349](index=349&type=chunk) - Management believes the outcome of currently pending legal proceedings will **not have a material adverse effect** on the company's financial condition[158](index=158&type=chunk) [Risk Factors](index=66&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have occurred since the filing of the 2022 Form 10-K - **No material changes** to risk factors have occurred since the filing of the 2022 Form 10-K[350](index=350&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=67&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased shares in Q2 2023, with $280 million remaining available under the repurchase program Share Repurchase Activity (Q2 2023) | Month | Total Shares Purchased | Avg. Price Paid | Shares Purchased Under Program | | :--- | :--- | :--- | :--- | | April 2023 | 239,496 | $21.93 | 228,586 | | May 2023 | 525,773 | $24.95 | — | | June 2023 | 2,216 | $25.96 | — | | **Total** | **767,485** | | **228,586** | - The total number of shares purchased includes **538,899 shares** tendered by employees for tax withholding on vested restricted stock awards[354](index=354&type=chunk) - As of June 30, 2023, **$280 million** remained available under the share repurchase program authorized in January 2023, which expires in January 2025[355](index=355&type=chunk) [Other Information](index=67&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - **No directors or officers** adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the reporting period[357](index=357&type=chunk) [Exhibits](index=68&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including compensation agreements, credit amendments, and certifications - Exhibits filed include **executive officer restricted stock unit grant agreements**, **amendments to credit and master repurchase agreements**, and **CEO/CFO certifications**[360](index=360&type=chunk)

Radian Group Inc. (NYSE:RDN) Q2 2023 Earnings Call Transcript August 3, 2023 12:00 PM ET Company Participants John Damian - Senior Vice President of Corporate Development and Investor Relations Rick Thornberry - CEO and Director Sumita Pandit - CFO and Senior EVP Derek Brummer - President of Mortgage Conference Call Participants Bose George - KBW Doug Harter - Credit Suisse Mihir Bhatia - Bank of America Operator Good day, and thank you for standing by. Welcome to Radian Group's Second Quarter 2023 Earnings ...

PART I—FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=9&type=section&id=Item%201%20Financial%20Statements%20(Unaudited)) Radian Group's unaudited condensed consolidated financial statements for Q1 2023 detail financial position, performance, and cash flows, supported by explanatory notes [Condensed Consolidated Financial Statements](index=10&type=section&id=Condensed%20Consolidated%20Financial%20Statements) Radian Group's Q1 2023 net income was **$157.8 million**, with **total assets at $7.20 billion** and **stockholders' equity at $4.11 billion**, supported by operating cash flow Key Financial Highlights (Q1 2023 vs Q1 2022) | Metric | Q1 2023 (Millions) | Q1 2022 (Millions) | | :--- | :--- | :--- | | **Total Revenues** | $310.62 | $292.98 | | **Net Income** | $157.76 | $181.13 | | **Diluted EPS** | $0.98 | $1.01 | Condensed Balance Sheet Data (As of March 31, 2023) | Account | March 31, 2023 (Billions) | December 31, 2022 (Billions) | | :--- | :--- | :--- | | **Total Assets** | $7.20 | $7.06 | | **Total Liabilities** | $3.10 | $3.14 | | **Total Stockholders' Equity** | $4.11 | $3.92 | - **Net cash provided by operating activities** was **$116.8 million** for Q1 2023, nearly identical to **$116.7 million** in Q1 2022[26](index=26&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the company's business segments, accounting policies, segment performance, reinsurance, loss reserves, and statutory capital, emphasizing risk distribution and PMIERs compliance - The company operates two segments: **Mortgage**, providing private mortgage insurance, and **homegenius**, offering title, real estate, and technology services[27](index=27&type=chunk)[28](index=28&type=chunk)[32](index=32&type=chunk) Adjusted Pretax Operating Income by Segment (Q1 2023 vs Q1 2022) | Segment | Q1 2023 (Millions) | Q1 2022 (Millions) | | :--- | :--- | :--- | | **Mortgage** | $214.44 | $277.84 | | **homegenius** | ($23.04) | ($13.51) | | **All Other** | $8.47 | $0.61 | - Radian Guaranty uses reinsurance, including the **Quota Share Reinsurance (QSR) Program** and **Excess-of-Loss Program**, to manage capital and risk[94](index=94&type=chunk) - As of March 31, 2023, Radian Guaranty complied with **Statutory Risk-Based Capital (RBC) requirements**, maintaining a **Risk-to-capital ratio of 10.6:1**[170](index=170&type=chunk) - In March 2023, Radian Guaranty paid a **$100 million ordinary dividend** to Radian Group, supported by its positive unassigned surplus[173](index=173&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=38&type=section&id=Item%202%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and results, focusing on macroeconomic impacts, **NIW** decline, **IIF** growth, segment performance, liquidity, and a strong capital position with a **PMIERs cushion** [Overview](index=38&type=section&id=Overview) Macroeconomic conditions led to a **40% decrease in NIW** but increased **IIF** persistency, impacting **homegenius** negatively, though the company maintains a strong capital position and risk distribution - High inflation and rising interest rates negatively impacted the U.S. housing market, reducing refinance and purchase activity[183](index=183&type=chunk) - **New Insurance Written (NIW)** was **$11.3 billion** in Q1 2023, a **40% decrease** from Q1 2022, due to reduced housing market activity[184](index=184&type=chunk) - Higher interest rates increased **Persistency Rates**, contributing to **Insurance in Force (IIF)** growth[184](index=184&type=chunk) - As of March 31, 2023, **71%** of primary **Risk in Force (RIF)** is subject to risk distribution, mitigating credit risk and financial volatility[188](index=188&type=chunk) [Mortgage Insurance Portfolio](index=40&type=section&id=Mortgage%20Insurance%20Portfolio) The mortgage insurance portfolio grew to **$261.5 billion IIF**, despite a **40% decrease in NIW** to **$11.3 billion**, driven by an **81.6% persistency rate** and **$1.11 billion PMIERs reduction** Insurance in Force (IIF) by Vintage | Vintage | March 31, 2023 (Billions) | % of Total | | :--- | :--- | :--- | | 2023 | $11.2 | 4.3% | | 2022 | $64.1 | 24.5% | | 2021 | $75.0 | 28.7% | | 2020 | $54.2 | 20.7% | | Prior | $48.4 | 18.5% | | **Total** | **$261.5** | **100.0%** | Key Portfolio Metrics | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | **New Insurance Written (NIW)** | $11.3 billion | $18.7 billion | | **12-Month Persistency Rate** | 81.6% | 68.0% | | **Primary Insurance in Force (IIF)** | $261.5 billion | $249.0 billion | - Risk distribution programs reduced Radian Guaranty's **Minimum Required Assets under PMIERs** by **$1.11 billion** as of March 31, 2023[213](index=213&type=chunk) [Results of Operations—Consolidated](index=43&type=section&id=Results%20of%20Operations%E2%80%94Consolidated) Consolidated **net income for Q1 2023 was $157.8 million**, a decrease from **$181.1 million** in Q1 2022, primarily due to a smaller provision for losses benefit and lower services revenue Consolidated Results of Operations Summary | Metric (Millions) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | **Total Revenues** | $310.62 | $292.98 | | **Provision for Losses** | ($16.93) | ($83.75) | | **Total Expenses** | $106.61 | $58.84 | | **Pretax Income** | $204.01 | $234.14 | | **Net Income** | $157.76 | $181.13 | - The effective tax rate was **22.7%** for Q1 2023, slightly up from **22.6%** in Q1 2022, due to state income taxes and deduction limitations[227](index=227&type=chunk) Reconciliation to Adjusted Pretax Operating Income (Non-GAAP) | Metric (Millions) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | **Consolidated Pretax Income** | $204.01 | $234.14 | | Less: Net gains on investments | $5.51 | ($29.46) | | Less: Amortization of intangibles | ($1.37) | ($0.85) | | **Adjusted Pretax Operating Income** | **$199.86** | **$264.95** | [Results of Operations—Mortgage](index=48&type=section&id=Results%20of%20Operations%E2%80%94Mortgage) The Mortgage segment's adjusted pretax operating income decreased to **$214.4 million** in Q1 2023 from **$277.8 million** in Q1 2022, driven by lower net premiums and a smaller provision for losses benefit Mortgage Segment Results Summary | Metric (Millions) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | **Net Premiums Earned** | $231.45 | $245.17 | | **Total Revenues** | $279.87 | $284.45 | | **Provision for Losses** | ($16.86) | ($84.19) | | **Adjusted Pretax Operating Income** | $214.44 | $277.84 | - The provision for losses included a **$67.4 million benefit** from favorable development on prior period defaults, down from **$124.9 million** in Q1 2022[261](index=261&type=chunk) - The number of primary loans in default decreased to **20,748** at the end of Q1 2023 from **25,510** a year earlier[266](index=266&type=chunk) [Results of Operations—homegenius](index=54&type=section&id=Results%20of%20Operations%E2%80%94homegenius) The **homegenius** segment reported an adjusted pretax operating loss of **$23.0 million** in Q1 2023, an increase from **$13.5 million** in Q1 2022, driven by a sharp decline in total revenues to **$13.0 million** homegenius Segment Results Summary | Metric (Millions) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | **Net Premiums Earned** | $1.79 | $9.02 | | **Services Revenue** | $10.74 | $24.88 | | **Total Revenues** | $12.96 | $33.91 | | **Adjusted Pretax Operating Loss** | ($23.04) | ($13.51) | - Revenue decrease was primarily due to declining new title policies and lower real estate and title services, reflecting the mortgage market slowdown[281](index=281&type=chunk)[282](index=282&type=chunk) [Liquidity and Capital Resources](index=56&type=section&id=Liquidity%20and%20Capital%20Resources) Radian Group maintained strong liquidity with **$956 million** cash and **$1.2 billion** total liquidity, while Radian Guaranty reported a **$1.7 billion PMIERs cushion** and paid a **$100 million dividend** - At March 31, 2023, Radian Group held **$956 million** in available unrestricted cash and liquid investments[294](index=294&type=chunk) - Radian Guaranty's **PMIERs Cushion** was **$1.7 billion**, or **44%** over its Minimum Required Assets, with Available Assets totaling approximately **$5.7 billion**[316](index=316&type=chunk) - In March 2023, Radian Guaranty paid a **$100 million ordinary dividend** to Radian Group, with capacity for additional dividends in 2023[319](index=319&type=chunk) Holding Company Capital Structure | Metric | March 31, 2023 (Billions) | December 31, 2022 (Billions) | | :--- | :--- | :--- | | **Total Debt** | $1.41 | $1.41 | | **Total Stockholders' Equity** | $4.11 | $3.92 | | **Debt-to-capital ratio** | 25.6% | 26.5% | | **Book value per share** | $26.23 | $24.95 | [Quantitative and Qualitative Disclosures About Market Risk](index=61&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk exposures, primarily interest rate and credit spread risk, remain materially unchanged from its 2022 Form 10-K disclosures - Market risk exposures as of March 31, 2023, remain materially unchanged from the 2022 Form 10-K disclosures[330](index=330&type=chunk) [Controls and Procedures](index=61&type=section&id=Item%204%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were deemed effective by the CEO and Principal Financial Officer as of March 31, 2023[332](index=332&type=chunk) - No material changes in internal control over financial reporting occurred during Q1 2023[333](index=333&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=62&type=section&id=Item%201%20Legal%20Proceedings) The company is involved in routine legal actions and regulatory inquiries, with management not expecting a material adverse effect on financial condition - The company is routinely involved in legal actions, but management does not expect a material adverse effect on its financial condition[151](index=151&type=chunk)[335](index=335&type=chunk) [Risk Factors](index=62&type=section&id=Item%201A%20Risk%20Factors) No material changes to the company's risk factors have occurred since those disclosed in its 2022 Annual Report on Form 10-K - No material changes to the company's risk factors have occurred since the 2022 Form 10-K disclosures[336](index=336&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=62&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2023, the company repurchased **715,643 shares** at **$20.97 per share**, with **$285.0 million** remaining under the repurchase program expiring January 2025 Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining in Program (Millions) | | :--- | :--- | :--- | :--- | | Jan 2023 | 9,542 | $19.07 | $300.0 | | Feb 2023 | 39,050 | $21.66 | $299.16 | | Mar 2023 | 699,516 | $20.94 | $285.0 | - A new **$300 million share repurchase program** was approved in January 2023, expiring in January 2025[340](index=340&type=chunk) [Exhibits](index=63&type=section&id=Item%206%20Exhibits) This section lists exhibits filed with the Form 10-Q, including amendments to agreements and required certifications

Radian Group Inc. (NYSE:RDN) Q1 2023 Earnings Conference Call May 4, 2023 ET Company Participants John Damian - SVP, Corporate Development and IR Rick Thornberry - CEO Rob Quigley - Controller and Chief Accounting Officer Derek Brummer - President of Radian Mortgage Conference Call Participants Bose George - KBW Mark DeVries - Barclays Douglas Harter - Credit Suisse Eric Hagen - BTIG Operator Good day, and thank you for standing by. Welcome to the First Quarter 2023 Radian Group Earnings Conference Call. At ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________ FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-11356 ____________________________ RADIAN GROUP INC. (Exact name of registrant as specified in its char ...

Financial Data and Key Metrics Changes - In Q4 2022, the company reported GAAP net income of $162 million or $1.01 per diluted share, compared to $1.07 per diluted share in the same quarter of the previous year [5] - For the full year 2022, net income was $743 million or $4.35 per diluted share, an increase from $3.16 per diluted share in 2021, resulting in an 18.2% return on equity compared to 14.1% in 2021 [5][6] - The company returned $135 million in dividends and repurchased $400 million of common stock, representing 11% of total shares outstanding [4] Business Line Data and Key Metrics Changes - Total net premiums earned in Q4 2022 were $233 million, reflecting a decline due to fewer single premium policy cancellations and lower title insurance volume [6] - The primary insurance in force grew 6% year-over-year to $261 billion as of December 31, 2022, with a 10% year-over-year growth in monthly premium in force [6][8] - Monthly and other recurring premiums accounted for 95% of new volume in both Q4 and full year 2022 [7] Market Data and Key Metrics Changes - The persistency rate increased to 84% on a quarterly annualized basis in Q4 2022, up from 72% a year ago, driven by a significant portion of the insurance in force having mortgage rates of 5% or less [8] - The investment income increased to $59 million in Q4 2022 compared to $37 million in Q4 2021, with the book yield on the investment portfolio rising to 3.5% [60] Company Strategy and Development Direction - The company remains focused on three strategic areas: enhancing the economic value of the Mortgage Insurance portfolio, growing the Homegenius business, and managing capital resources [14] - The company has increased pricing in 2022 and continues to do so in 2023, aiming to leverage dynamic risk-based pricing strategies [14] - The company is positioned to pay recurring ordinary dividends from Radian Guaranty, projected to be between $300 million and $400 million in 2023 [9][63] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the housing market, noting a strong labor market and a supply-demand imbalance that supports home price stability [28] - The company anticipates a decline in mortgage origination volumes in 2023, followed by a return to growth in 2024, driven by first-time homebuyers [50] - Management highlighted the importance of maintaining strong credit quality and underwriting standards, with new defaults expected to increase as the portfolio seasons [52] Other Important Information - The company completed a series of capital actions that resulted in a $382 million distribution from Radian Guaranty to Radian Group [4] - The company has made adjustments to its Homegenius cost structure in response to declining revenues, with a focus on operational efficiency [59] Q&A Session Summary Question: How to think about the loss provision on current period defaults going forward? - Management indicated that defaults will be concentrated in certain loan cohorts, with FICO and LTV being key variables in determining defaults [20][32] Question: How is the competitive environment viewed? - Management noted that there have been no significant market share shifts, but pricing dynamics have been increasing, with a focus on geographic pricing [24][64] Question: Can Homegenius reach breakeven in a sub $2 trillion mortgage market? - Management acknowledged the challenges but expressed optimism about positioning Homegenius for profitability despite market conditions [26][66] Question: What are the constraints around capital return? - Management highlighted the importance of regulatory requirements and PMIERs, indicating a strong capital position to support future distributions [67]