Radian Group Inc. · NYSE:RDN
Radian — Q3 2020 Earnings Presentation
27 slides from Radian's earnings presentation, Nov 7, 2020
Slide 1: Financial Results Q3 2020
Financial Results Q3 2020 NYSE: RDN www.radian.com
Slide 2: Safe Harbor Statements
Safe Harbor Statements All statements in this presentation that address events, developments or results that we ▪ Radian Guaranty Inc.’s (“Radian Guaranty”) ability to remain eligible under the Private ▪ the effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the financial exp
Slide 3: About Us
About Us Radian maintains two strategic business units: At Radian, our culture is built around a set of Mortgage and Real Estate. core organizational values that we live by, and define who we are as an enterprise: Our Mortgage business derives its revenue from mortgage insurance and other mortgage a
Slide 4: Q3 2020 Summary Financial Metrics
Q3 2020 Summary Financial Metrics $135.1 million Compared to $30.0 million of net loss in Q2 2020 and $173.4 million of net income in $88.1 million Compared to $304.4 million in Q2 2020 and $29.2 million in Q3 2019. The increase in 2020 is primarily Net Income Q3 2019 Provision for Losses related to
Slide 5: Q3 2020 Summary Financial Metrics
Q3 2020 Summary Financial Metrics $245.5 billion Compared to $241.3 billion in Q2 2020 and $237.2 billion in Q3 2019 $6.6 billion Compared to $6.4 billion in Q2 2020 and $5.5 billion in Q3 2019 Primary Insurance In Force Investment Portfolio $283.4 million Compared to $247.6 million in Q2 2020 and $
Slide 6: GAAP Diluted Net Income (Loss) Per Share
GAAP Diluted Net Income (Loss) Per Share (1) Q2 2020 to Q3 2020 1) All diluted net income (loss) per share $1.00 items are calculated based on 193.3 $0.15 million weighted-average diluted shares outstanding for the three months ended June 30, 2020, except for the $0.75 $0.88 $0.70 September 30, 2020
Slide 7: GAAP Book Value Per Share
GAAP Book Value Per Share (1) June 30, 2020 to September 30, 2020 1) All book value per share items are calculated based on 191.5 million shares outstanding as of June 30, 2020 $22.00 $0.71 $0.10 $0.02 $21.52 except for the September 30, 2020 book value per share, which was calculated $20.82 $(0.13)
Slide 8: Financial Highlights
Financial Highlights Radian Group Inc. Consolidated September 30, June 30, March 31, December 31, September 30, ($ in millions, except per-share amounts) 2020 2020 2020 2019 2019 Primary Insurance In Force $245,467 $241,306 $241,586 $240,558 $237,158 Total Assets $7,777 $7,569 $6,690 $6,808 $6,671 T
Slide 9: Primary Insurance In Force
Primary Insurance In Force (1) Insurance in Force as of: $300 Vintage written in: ($ in billions) September 30, 2020 September 30, 2019 2020 $73 29.8 % $— —% $250 $245 2019 $52 21.1 % $49 20.9 % Primary Insurance in Force ($ in billions) $237 2018 $28 11.4 % $47 19.8 % 2017 $25 10.3 % $41 17.3 % $20
Slide 10: In Force Portfolio Premium Yield
In Force Portfolio Premium Yield (in basis points) Q3 2020 Q2 2020 Q1 2020 Q4 2019 (1) Q3 2019 (2) In Force Portfolio Premium Yield 43.2 44.3 46.1 47.1 47.4 (3) Single Premium Cancellations 10.7 8.2 4.0 4.4 4.6 Total Direct Yield 53.9 52.5 50.1 51.5 52.0 Ceded Earned Premiums, Net of Profit Commissi
Slide 11: First-lien Mortgage Insurance
First-lien Mortgage Insurance 2020 Performance by Vintage ($ in millions) Three Months Ended September 30, 2020 (1) Vintage Premiums Earned Incurred Losses (1) Net 2008 & Prior $18.8 $14.0 $4.8 2009 $0.4 $1.0 ($0.6) 2010 $0.1 $0.1 $0.0 2011 $0.7 $0.3 $0.4 2012 $2.9 $0.5 $2.4 2013 $7.7 $1.5 $6.2 2014
Slide 12: Primary Mortgage Insurance
Primary Mortgage Insurance Cumulative Incurred Loss Ratio by Development Year (1) Vintage Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Sep-20 2010 1.2 % 3.3 % 6.5 % 7.7 % 7.5 % 7.2 % 7.2 % 7.2 % 7.0 % 7.0 % 7.2% 2011 1.7 % 4.4 % 5.5 % 5.6 % 5.0 % 4.9 % 5.0 % 4.9 % 5.0 % 5.2%
Slide 13: Components of Mortgage Provision for Losses
Components of Mortgage Provision for Losses Three Months Ended ($ in millions) Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 (1) Current period defaults $96.0 $309.2 $41.2 $42.9 $42.0 Prior period defaults (2) (8.2) (5.3) (5.9) (8.2) (12.6) (3) Second-lien premium deficiency reser
Slide 14: Default Rollforward
Default Rollforward Primary Insurance in Force Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 (number of loans) Beginning Default Inventory 69,742 19,781 21,266 20,184 19,643 Total New Defaults (1) 20,508 63,005 9,960 10,869 10,562 (1) Cures (27,283) (12,588) (10,966) (9,119) (9,215) (2) Claims Paid (240)
Slide 15: Primary Loans In Default
Primary Loans In Default September 30, 2020 Foreclosure Stage Total Cure % During Q3 Reserve for Losses % Of Reserve ($ in thousands) Defaulted Loans Missed Payments # % # % $ % 3 Payments or Fewer 16,942 27.0 % 74 35.4 % $133,583 17.9 % 4 to 11 Payments 41,110 65.5 % 210 16.7 % $443,867 59.6 % 12 P
Slide 16: COVID-19 Forbearance Program Summary
COVID-19 Forbearance Program Summary The FHFA, in coordination with the GSEs, have enacted a payment forbearance program with broad availability ▪ Borrowers experiencing a financial hardship relating to COVID-19 may request a forbearance to suspend or reduce their mortgage payments for up to 12 mont
Slide 17: Capital and Debt Structure
Capital and Debt Structure 17
Slide 18: Capital Structure
Capital Structure Total Capitalization as of September 30, 2020 Stockholders’ Equity Carrying Value Principal % of Total ($ in billions) Coupon Description $4.1 ($’000) ($’000) Capitalization (1) 4.500 % Senior Notes due October 2024 $445,241 $450,000 8.1 % $4.0 $3.9 6.625 % Senior Notes due March 2
Slide 19: Excess Available Resources to Support PMIERs
Excess Available Resources to Support PMIERs $2,500 $2,311 September 30, December 31, September 30, (1) $ in millions 2020 2019 2019 Credit $268 8% $268 9% $268 10 % Facility $2,000 Radian Group $1,073 31 % $618 22 % $696 25 % $1,690 Liquidity, Net (2) $1,616 Value ($ in millions) PMIERs $970 28 % $
Slide 20: Eagle Re Mortgage Insurance-Linked Notes Reinsurance Key Metrics
Eagle Re Mortgage Insurance-Linked Notes Reinsurance Key Metrics (1) Eagle Re Eagle Re Eagle Re Eagle Re 1) Through September 30, 2020, Radian Guaranty has entered into three fully ($ in millions) 2020-2 (2) 2020-1 2019-1 2018-1 (3) Total collateralized reinsurance arrangements with the Eagle Re Iss
Slide 21: Quota Share Reinsurance (QSR) Key Summary Metrics
Quota Share Reinsurance (QSR) Key Summary Metrics (1) ($ in millions) Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 2016 Single Premium QSR Agreement NIW Policy Dates 2012 – 2017 Quota Share — 20% - 65% (2) Ceded Risk in Force $3,676 $4,533 $5,080 $5,351 $5,651 (3) Ceding / Profit Commission — 25% / Up to
Slide 22: Consolidated Non-GAAP Financial Measures Reconciliations
Consolidated Non-GAAP Financial Measures Reconciliations 22
Slide 23: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures In addition to the traditional GAAP financial measures, we have presented Although adjusted pretax operating income (loss) excludes certain items that 3) Amortization and impairment of goodwill and other acquired intangible “adjusted pretax operating income (loss),
Slide 24: Reconciliation of Consolidated Pretax Income (Loss) to Adjusted Pretax Operating Income (Loss)
Reconciliation of Consolidated Pretax Income (Loss) to Adjusted Pretax Operating Income (Loss) 2020 2019 ($ in thousands) Q3 Q2 Q1 Q4 Q3 Consolidated pretax income (loss) $161,205 $(42,224) $181,293 $205,639 $217,673 Less reconciling income (expense) items: Net gains (losses) on investments and othe
Slide 25: Reconciliation of Diluted Net Income (Loss) Per Share to Adjusted Diluted Net Operating Income
Reconciliation of Diluted Net Income (Loss) Per Share to Adjusted Diluted Net Operating Income (Loss) Per Share 2020 2019 Q3 Q2 Q1 Q4 Q3 Diluted net income (loss) per share $0.70 $(0.15) $0.70 $0.79 $0.83 Less per-share impact of reconciling income (expense) items: Net gains (losses) on investments
Slide 26: Reconciliation of Return on Equity to Adjusted Net Operating Return on Equity
Reconciliation of Return on Equity to Adjusted Net Operating Return on Equity 2020 2019 Q3 Q2 Q1 Q4 Q3 (1) Return on equity 13.3 % (3.1)% 14.2 % 16.2 % 18.0 % (2) Less impact of reconciling income (expense) items: Net gains (losses) on investments and other financial instruments 1.7 4.8 (2.2) 0.4 1.
Slide 27: Radian
radian ensuring the American dream