Radian(US:RDN)2023-05-05 20:16PART I—FINANCIAL INFORMATION Financial Statements (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 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 202226 Notes to Unaudited Condensed Consolidated Financial Statements 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 services272832 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 risk94 - As of March 31, 2023, Radian Guaranty complied with Statutory Risk-Based Capital (RBC) requirements, maintaining a Risk-to-capital ratio of 10.6:1170 - In March 2023, Radian Guaranty paid a $100 million ordinary dividend to Radian Group, supported by its positive unassigned surplus173 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) 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 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 activity183 - New Insurance Written (NIW) was $11.3 billion in Q1 2023, a 40% decrease from Q1 2022, due to reduced housing market activity184 - Higher interest rates increased Persistency Rates, contributing to Insurance in Force (IIF) growth184 - As of March 31, 2023, 71% of primary Risk in Force (RIF) is subject to risk distribution, mitigating credit risk and financial volatility188 Mortgage Insurance Portfolio 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, 2023213 Results of Operations—Consolidated 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 limitations227 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 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 2022261 - The number of primary loans in default decreased to 20,748 at the end of Q1 2023 from 25,510 a year earlier266 Results of Operations—homegenius 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 slowdown281282 Liquidity and Capital Resources 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 investments294 - Radian Guaranty's PMIERs Cushion was $1.7 billion, or 44% over its Minimum Required Assets, with Available Assets totaling approximately $5.7 billion316 - In March 2023, Radian Guaranty paid a $100 million ordinary dividend to Radian Group, with capacity for additional dividends in 2023319 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 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 disclosures330 Controls and Procedures 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, 2023332 - No material changes in internal control over financial reporting occurred during Q1 2023333 PART II—OTHER INFORMATION Legal Proceedings 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 condition151335 Risk Factors 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 disclosures336 Unregistered Sales of Equity Securities and Use of Proceeds 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 2025340 Exhibits This section lists exhibits filed with the Form 10-Q, including amendments to agreements and required certifications