Radian Group Inc. · NYSE:RDN
Radian — Q2 2020 Earnings Presentation
27 slides from Radian's earnings presentation, 2020
Slide 1: Financial Results Q2 2020
Financial Results Q2 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 ∙ legislative and regulatory activity (or inactivity), including the adoption of (or failure to ad
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
Slide 4: Q2 2020 Summary Financial Metrics
Q2 2020 Summary Financial Metrics $30.0 million Compared to $166.7 million of net income in Q2 2019. Net loss primarily due to $304.4 million Compared to $47.4 million in Q2 2019. Increase in Q2 2020 is primarily related to Net Loss $304.4 million provision for losses to Provision for Losses the inc
Slide 5: Q2 2020 Summary Financial Metrics
Q2 2020 Summary Financial Metrics $241.3 billion 5% increase compared to $230.8 $6.4 billion 16% increase as compared to $5.5 billion in Q2 2019 billion in Q2 2019 Primary Insurance In Force Investment Portfolio $247.6 million 16% decrease compared to $296.3 $1.0 billion $342.9 million increase as c
Slide 6: GAAP Diluted Net Income (Loss) Per Share
GAAP Diluted Net Income (Loss) Per Share (1) Q1 2020 to Q2 2020 1) All diluted net income (loss) per share $0.75 $0.70 items are calculated based on 201.8 million weighted-average diluted shares outstanding for the three months ended March 31, 2020, except for the June 30, 2020 diluted net income (l
Slide 7: GAAP Book Value Per Share
GAAP Book Value Per Share (1) March 31, 2020 to June 30, 2020 1) All book value per share items are $22.00 calculated based on 190.4 million $0.96 shares outstanding as of March 31, $20.82 2020 except for the June 30, 2020 book value per share, which was calculated $20.30 $(0.13) $(0.12) $(0.03) bas
Slide 8: Financial Highlights
Financial Highlights Radian Group Inc. Consolidated June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 ($ in millions, except per-share amounts) Primary Insurance In Force $241,306 $241,586 $240,558 $237,158 $230,756 Total Assets $7,569 $6,690 $6,808 $6,671 $6,592 Total
Slide 9: Primary Insurance in Force
Primary Insurance In Force (1) $300 1) Policy years represent the original policy years, and have not been adjusted to reflect subsequent refinancing activity under HARP. 2) Adjusted to reflect subsequent refinancing activity under HARP, these percentages would decrease to $250 $241.3 Primary Insura
Slide 10: In Force Portfolio Premium Yield
In Force Portfolio Premium Yield (in basis points) Q2 2020 Q1 2020 Q4 2019 (1) Q3 2019 Q2 2019 (2) In Force Portfolio Premium Yield (3) 44.3 46.1 47.1 47.4 47.9 Single Premium Cancellations (4) 8.2 4.0 4.4 4.6 2.8 Total Direct Yield 52.5 50.1 51.5 52.0 50.7 Ceded Earned Premiums, Net of Profit Commi
Slide 11: First-lien Mortgage Insurance
First-lien Mortgage Insurance 2020 Performance by Vintage Three Months Ended June 30, 2020 ($ in millions) Vintage Premiums Earned (1) Incurred Losses (1) Net 2008 & Prior $20.1 $30.1 ($10.0) 2009 $0.4 ($0.1) $0.5 2010 $0.1 $0.1 $0.0 2011 $0.7 $0.4 $0.3 2012 $2.9 $2.1 $0.8 2013 $7.4 $6.3 $1.1 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 Jun-20 2010 1.2 % 3.3 % 6.5 % 7.7 % 7.5 % 7.2 % 7.2 % 7.2 % 7.0 % 7.0 % 7.1% 2011 1.7 % 4.4 % 5.5 % 5.6 % 5.0 % 4.9 % 5.0 % 4.9 % 5.0 % 5.1%
Slide 13: Components of Mortgage Provision for Losses
Components of Mortgage Provision for Losses ($ in millions) Three Months Ended Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Jun 30, 2019 Current period defaults (1) $309.2 $41.2 $42.9 $42.0 $40.7 Prior period defaults (2) (5.3) (5.9) (8.2) (12.6) (3) 6.5 (4) Second-lien premium deficiency res
Slide 14: Default Rollforward
Default Rollforward Primary Insurance in Force Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 (number of loans) Beginning Default Inventory 19,781 21,266 20,184 19,643 20,122 Total New Defaults (1) 63,005 9,960 10,869 10,562 9,338 Cures (1) (12,588) (10,966) (9,119) (9,215) (9,192) Claims Paid (2) (443) (4
Slide 15: Primary Loans In Default
Primary Loans In Default June 30, 2020 Foreclosure Stage Total Cure % During Q2 Reserve for Losses % Of Reserve ($ in thousands) Defaulted Loans Missed Payments # % # % $ % 3 Payments or Fewer 56,179 80.5 % 108 37.6 % $374,165 56.7 % 4 to 11 Payments 9,251 13.3 % 265 20.0 % $134,417 20.4 % 12 Paymen
Slide 16: COVID-19 Forbearance Program Summary
COVID-19 Forbearance Program Summary The FHFA, in coordination with the GSEs, have enacted a payment forbearance program with broad availability ▪ Borrowers experiencing a financial hardship relating to COVID-19 may request a forbearance to suspend or reduce their mortgage payments for up to 12 mont
Slide 17: Capital and Debt Structure
Capital and Debt Structure 17
Slide 18: Capital Structure
Capital Structure Total Capitalization as of June 30, 2020 Stockholders’ Equity Carrying Value Principal % of Total ($ in billions) Coupon Description $4.0 $4.0 ($’000) ($’000) Capitalization (1) 4.500 % Senior Notes due October 2024 $444,972 $450,000 8.2 % $3.8 6.625 % Senior Notes due March 2025 $
Slide 19: Excess Available Resources to Support PMIERs
Excess Available Resources to Support PMIERs $2,500 $2,371 / 73% 1) Represents Radian Group’s Liquidity, net of the $35 million minimum liquidity requirement under $268 / 8% the unsecured revolving credit facility. On May 6, 2020, Radian Group entered into an amendment to its $267.5 million unsecure
Slide 20: Eagle Re Mortgage Insurance-Linked Notes Reinsurance Key Metrics
Eagle Re Mortgage Insurance-Linked Notes Reinsurance Key Metrics (1) ($ in millions) Q2 2020 (7) Q1 2020 Q4 2019 Q3 2019 Q2 2019 (2) Eagle Re 2018-1 NIW Policy Dates January 1, 2017 - December 31, 2017 Risk In Force $5,598 $6,482 $7,026 $7,629 $8,156 Note Balance $297 $320 $364 $413 $455 PMIERs MRA
Slide 21: Quota Share Reinsurance (QSR) Key Summary Metrics
Quota Share Reinsurance (QSR) Key Summary Metrics (1) ($ in millions) Q2 2020 Q1 2020 Q4 2019 Q3 2019 Q2 2019 2016 Single Premium QSR Agreement NIW Policy Dates 2012 – 2017 Quota Share — 20% - 65% (2) Ceded Risk in Force $4,533 $5,080 $5,351 $5,651 $5,941 Ceding / Profit Commission — 25% / Up to 55%
Slide 22: Consolidated Non-GAAP Financial Measures Reconciliations
Consolidated Non-GAAP Financial Measures Reconciliations 22
Slide 23: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures In addition to the traditional GAAP financial measures, we have presented Although adjusted pretax operating income (loss) excludes certain items that 3) Amortization and impairment of goodwill and other acquired intangible “adjusted pretax operating income (loss),
Slide 24: Reconciliation of Consolidated Pretax Income (Loss) to Adjusted Pretax Operating Income (Loss)
Reconciliation of Consolidated Pretax Income (Loss) to Adjusted Pretax Operating Income (Loss) 1) The amounts for all the 2020 2019 periods are included in other operating expenses and Q2 Q1 Q4 Q3 Q2 primarily relate to impairments ($ in thousands) of other long-lived assets. 2) Please see slide 23
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 1) Calculated using the 2020 2019 company’s federal statutory tax rate of 21%. Any Q2 Q1 Q4 Q3 Q2 permanent tax adjustments and state income taxes on these items have been Diluted net inco
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 1) Calculated by dividing annualized 2020 2019 net income by average stockholders’ equity, based on the Q2 Q1 Q4 Q3 Q2 average of the beginning and ending balances for each period presented. Return on equity (1) (3.1)% 14.
Slide 27: radian
radian ensuring the American dream