Radian Group Inc. · NYSE:RDN
Radian — Investor Presentation (December 2015)
34 slides from Radian's investor presentation, December 2015
Slide 1: Investor Presentation
Investor Presentation S.A. Ibrahim, Chief Executive Officer Frank Hall, Chief Financial Officer December 2015 NYSE: RDN
Slide 2: Safe Harbor Statements
Safe Harbor Statements All statements made in this presentation that address events, developments or results that we expect or anticipate may occur in the future are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Exchange Act and the
Slide 3: Safe Harbor Statements (Continued)
Safe Harbor Statements (Continued) • changes in the charters or business practices of, or rules or regulations imposed by or applicable to the GSEs, including: (1) the implementation of the final PMIERs (including as updated on June 30, 2015 to increase the amount of Available Assets that must be he
Slide 4: Safe Harbor Statements (Continued)
Safe Harbor Statements (Continued) • the amount and timing of potential payments or adjustments associated with federal or other tax examinations, including deficiencies assessed by the Internal Revenue Service (“IRS”) resulting from the examination of our 2000 through 2007 tax years, which we are c
Slide 5: Agenda
Agenda 1 Company Overview 2 Financial Highlights 3 Mortgage Insurance 4 s Mortgage and Real Estate Services 5 Balance Sheet Review
Slide 6: Who Is Radian?
Who Is Radian? Radian Group Inc., headquartered in Philadelphia, provides private mortgage insurance, risk management products and real estate services to financial institutions through two business segments: Revenue By Business Segment (3Q 2015) - Mortgage Insurance, through its principal mortgage
Slide 7: Radian Team
Radian Team • Chief Executive Officer and Director of Radian since 2005 • Formerly served as CEO of GreenPoint Mortgage Funding, Inc. • Past experience includes Head of International Operations Reengineering at American Express and CEO & COO of Chemical Banking Corp’s mortgage lending unit S.A. Ibra
Slide 8: Our History
Our History 2010 2013 Radian Radian ranked 2002 raises as the Principal 2008 $1 billion largest MI operating Radian in new company 1999 entities discontinues capital to and 1977 CMAC unite writing new support achieves CMAC and under the financial new net is Amerin Radian guaranty business operating
Slide 9: Radian Business Model
Radian Business Model Two Distinct, Yet Complementary Business Segments NYSE: RDN www.radian.biz MI = Mortgage Insurance 9
Slide 10: Financial Highlights
Financial Highlights Radian Group Inc. Consolidated ($ in millions, except per share amounts) September 30, 2015 December 31, 2014 September 30, 2014 Total assets $ 5,760.9 $ 6,842.3 $ 5,940.9 Loss reserves $ 1,098.6 $ 1,560.0 $ 1,591.2 Unearned premiums $ 676.9 $ 644.5 $ 625.3 Long-term debt $ 1,23
Slide 11: Mortgage Insurance
MORTGAGE INSURANCE RADIAN
Slide 12: What is Private Mortgage Insurance?
What is Private Mortgage Insurance? GSE charters require private mortgage insurance on all conforming loans with LTV ratios above 80% The Private MI industry provides credit protection to the GSEs, transferring first-loss credit risk from the US taxpayer to private capital. Required Coverage - % of
Slide 13: The Role of Private Mortgage Insurance
The Role of Private Mortgage Insurance Allows for broader access to sustainable homeownership with least amount of taxpayer exposure and expense. Enables families with less than a 20% down payment to purchase homes while providing loss protection to lenders, GSEs, investors and taxpayers. Insured
Slide 14: Mortgage Origination and Mortgage Insurance Market
Mortgage Origination and Mortgage Insurance Market MI penetration remains strong, positioning the MI industry to write new insurance on a high volume of originations in 2015 and in the future, particularly as the purchase origination market recovers. Sources: MI market is based on publicly reported
Slide 15: Radian Has Established itself as a Leading MI Player
Radian Has Established itself as a Leading MI Player Market Rank by Primary Insurance in Force Third Quarter 2015 Market Share of New Insurance Written ($ billions, as of September 30, 2015) United Guaranty $184 NMI 6% Essent Radian $175 12% United Guaranty 24% Arch - 5% MGIC $173 Genworth 15% Radia
Slide 16: Radian Mortgage Insurance in Force Growth Drives Expected Future Profitability
Radian Mortgage Insurance in Force Growth Drives Expected Future Profitability $200 $180 $160 $140 $120 $100 $80 $175 billion $60 $126 billion $40 $20 $0 2011 2012 2013 2014 Sept 30 2015 16
Slide 17: Radian High Quality Mortgage Insurance Portfolio
Radian High Quality Mortgage Insurance Portfolio Total MI Primary Risk in Force (as of September 30, 2015): $44.4 billion MI Portfolio by Vintage MI Portfolio by FICO Score 2006 - 2007 (HARP) <=619 2006 - 2007 (Non-HARP) 620 -679 4.8% 1.9% 8.2% 10.9 Other Vintages (Non-HARP) 8.7% 4.7% 680 - 739 30.2
Slide 18: Profitability of Newer Vintages Improving Performance of MI Portfolio
Profitability of Newer Vintages Improving Performance of MI Portfolio Gross Primary Risk in Force Earned Premiums Less Incurred Losses ($ in billions) ($ in millions)(1) $33 $492 $30 $472 $24 $337 $15 2009 and $210 $8 Later $135 27.6% 44.6% 60.1% 68.7% 73.6% Vintages Dec-31-11 Dec-31-12 Dec-31-13 De
Slide 19: Improved Composition of MI Portfolio
(1) Improved Composition of MI Portfolio NIW since 2009 and HARP volume combined now represents 83% of Radian’s mortgage insurance primary risk in force as of Q3 2015 2006-2007 (HARP) 2006-2007 (Non-HARP) 4.8% 8.2% Other Vintages (Non-HARP) 8.7% 2009-2015 4.7% 73.6% Other Vintages (HARP) (1) Include
Slide 20: Primary Default Count by Vintages 2001 - 2015
Primary Default Count by Vintages 2001 - 2015 60,000 2007 50,000 40,000 2006 30,000 2005 20,000 2001 - 2004 10,000 2008 1H 2015 2013 2012 2011 2010 2014 2008 2H 2009 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 # of quarters since origination • Second half of 2008 was a tu
Slide 21: Opportunities for Future Growth
Opportunities for Future Growth Renters Have Minimal Savings/Wealth—Need Low Downpayment Loans Cash Savings (Thousands of dollars) Total Net Wealth (Thousands of dollars) Notes: Data for Renters only. Cash savings includes checking, saving, CD and money market accounts. Source: JCHS tabulations of 2
Slide 22: Opportunities for Future Growth: New Household Formation
Opportunities for Future Growth New Household Formation Driven by Diverse Markets 13 million of the 17 million projected between 2010 and 2025 % of Projected New Households 2010-2025 African-American* – 18.2% Hispanic – 40.5% Asian/Other* 15.5% White* – 25.8% SOURCE: Updated 2010-2020 Household and
Slide 23: Mortgage and Real Estate Services
MORTGAGE AND REAL ESTATE SERVICES 23
Slide 24: What is Mortgage and Real Estate Services?
What is Mortgage and Real Estate Services? Clayton provides risk-based analytics, residential loan due diligence, consulting, surveillance and staffing solutions. The company also provides: Advanced AVMs, BPOs and Valuation, Title, Closing and Customized REO asset technology solutions to monitor loa
Slide 25: Mortgage and Real Estate Services Revenue Drivers
Mortgage and Real Estate Services Revenue Drivers % of Potential Future Market Segments/Clients Current Revenue Drivers Revenue (1) Revenue Drivers • Mortgage Origination (Banks, REITs, Mortgage Originators) Non-Agency RMBS • Performing & Non-Performing Securitization Due Diligence Loan Trades (Bank
Slide 26: Mortgage and Real Estate Services Revenue Drivers
Mortgage and Real Estate Services Revenue Drivers % of Potential Future Market Segments/Clients Current Revenue Drivers Revenue (1) Revenue Drivers • Single Family Rental (SFR) Securitization (Banks, Investment Banks) SFR Securitizations by and Debt SFR Securitizations by and • SFR Debt Facilities (
Slide 27: Mortgage and Real Estate Services Revenue
Mortgage and Real Estate Services Revenue ($ in thousands) 50,000 $44,595 Eurorisk 45,000 $43,114 $42,243 $39,115 40,000 $37,041 Surveillance $36,347 $34,466 35,000 $32,718 $31,532 REO management 30,000 $28,043 $25,593 25,000 Valuation and component services (2) 20,000 Loan review and due diligence
Slide 28: Opportunities for Future Growth
Opportunities for Future Growth Non-Agency RMBS Due Diligence and Surveillance Non-Agency RMBS Due Diligence Despite a relatively small market for non-agency RMBS today versus pre-crisis levels, the economics of the business are favorable to the Services segment. Regulatory changes and ratings agenc
Slide 29: Opportunities for Future Growth
Opportunities for Future Growth Private-Label Residential Mortgage-Backed Securities Issuance, 2001-2015 SOURCES: Inside Mortgage Finance and The Urban Institute NOTE: REMIC = real estate mortgage investment conduit 29
Slide 30: Balance Sheet Review
BALANCE SHEET REVIEW RADIAN 0
Slide 31: Capital Structure
Capital Structure Total capitalization (as of September 30, 2015) Carrying value Principal % of total Coupon ($'000) ($'000) capitalization(3) 9.00% Senior Notes due 2017 $191,752 $195,500 5.50% Senior Notes due 2019 $295,472 $300,000 5.25% Senior Notes due 2020 $343,825 $350,000 Total Senior Notes
Slide 32: Private Mortgage Insurer Eligibility Requirements
Private Mortgage Insurer Eligibility Requirements Private Mortgage Insurer Eligibility Requirements (PMIERs) were developed by Fannie Mae and Freddie Mac and come into effect on December 31, 2015. Lenders, investors and other mortgage market participants can now have even more confidence in the valu
Slide 33: Conservative Investment Portfolio
Conservative Investment Portfolio Total investments of $4.4 billion as of September 30, 2015 Invested Assets by Type Investment Portfolio Credit Quality U.S. Govt. / Agencies AA ABS 10% 12% 19% State & Municipal 8% A U.S. Govt. / 24% AAA 53% Corporate Short Term 28% 33% BBB 10% Equity / BIG / Other
Slide 34: Radian
RADIAN Ensuring the American Dream®