Radian Group Inc. · NYSE:RDN
Radian — Q4 2014 Earnings Presentation
29 slides from Radian's earnings presentation, February 2015
Slide 1: Financial Results Fourth Quarter 2014
Financial Results Fourth Quarter 2014
Slide 2: Safe Harbor Statements
Safe Harbor Statements All statements in this report 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 U.S. Privat
Slide 3: Safe Harbor Statements (Continued)
Safe Harbor Statements (Continued) • the possibility that we have not accurately projected our net shortfall under the PMIERs which may be impacted by, among other things: our understanding and interpretation of the PMIERs financial requirements which may differ from the interpretation that the Gove
Slide 4: Safe Harbor Statements (Continued)
Safe Harbor Statements (Continued) • changes in GAAP or SAP, rules and guidance, or their interpretation; • legal and other limitations on amounts we may receive from our subsidiaries as dividends or through our tax- and expense-sharing arrangements with our subsidiaries; • the possibility that we m
Slide 5: 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. For more than 35 years, our services have helped promote and preserve homeownership opportunities for NYSE: RDN homebuyer
Slide 6: Q4 Highlights
Q4 Highlights Net income of $428 Adjusted pretax Approximately $670 Strong share of Clayton total million or $1.78 net operating income million of currently high-quality new service revenues income per diluted from continuing available holding mortgage insurance of $34 million share operations compa
Slide 7: Q4 Highlights
Q4 Highlights Improved Industry-leading Continued decline Mortgage insurance Total mortgage composition of MI mortgage insurance in number of loss provision of insurance net portfolio in force grows to mortgage insurance $84 million claims paid of $172 billion defaults $117 million New business writ
Slide 8: Q3 to Q4 2014 GAAP Earnings Per Share
Q3 to Q4 2014 GAAP Earnings Per Share $4.5 $0.10 $0.04 $3.36 $4.0 $3.5 $3.0 $2.5 $2.0 $1.93 $0.15 $1.78 $1.5 $0.32 $1.0 $0.67 $0.5 $- 3Q 2014 DTA Valuation Change in Reinsurance Loss on Sale of Other Operating Other 4Q 2014 Allowance Investment Profit Radian Asset Expense Reversal Gains Commission 8
Slide 9: Q3 to Q4 2014 GAAP Book Value per Share
Q3 to Q4 2014 GAAP Book Value per Share $16.0 $14.0 $0.47 $4.27 $12.0 $10.98 $2.45 $0.39 $10.0 $9.08 $8.0 $6.0 $4.0 $2.0 $- 3Q 2014 DTA Valuation Other Loss on Sale of Equity Component of 4Q 2014 Allowance Reversal Radian Asset Convertible Senior Notes 9
Slide 10: Financial Highlights
Financial Highlights Radian Group Inc. Consolidated ($ in millions, except per share amounts) December 31, 2014 December 31, 2013 (1) December 31, 2012 (1) Total assets $ 6,860.0 $ 5,621.7 $ 5,903.2 Loss reserves $ 1,560.0 $ 2,164.4 $ 3,087.3 Unearned premiums $ 644.5 $ 567.1 $ 382.4 Long-term debt
Slide 11: Mortgage Insurance
MORTGAGE INSURANCE RADIAN
Slide 12: Improved Composition of MI Portfolio
(1) Improved Composition of MI Portfolio NIW since 2009 and HARP volume combined now represents 79% of Radian’s mortgage insurance primary risk in force as of Q4 2014 2006-2007 (HARP) 2006-2007 (Non-HARP) 5.1% 10.1% Other Vintages (Non-HARP) 2009-2014 10.8% 68.7% 5.3% Other Vintages (HARP) Approxima
Slide 13: 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) $30 $492 $24 $337 $15 2009 and $8 Later $210 $6 Vintages $135 17.8% 27.6% 44.6% 60.1% 66.9% $103 Dec-31-10 Dec-31-11 Dec-31-12 Dec
Slide 14: First-Lien Mortgage Insurance: 2014 Performance by Vintage
First-Lien Mortgage Insurance: 2014 Performance by Vintage ($ in millions) Year Ended December 31, 2014 Three Months Ended December 31, 2014 Vintage Premiums Earned(1) Incurred Losses(1) Net Net 2005 and Prior $ 101.8 $ 13.9 $ 87.9 $ (0.4) 2006 61.3 58.0 3.3 (0.7) 2007 110.0 121.7 (11.7) (5.3) 2008
Slide 15: Total Mortgage Insurance Loss Reserves
Total Mortgage Insurance Loss Reserves $4,000 ($ in millions) $3,500 $3,000 $2,500 $2,000 3,450.5 3,525.0 3,247.9 3,083.6 $1,500 2,990.0 $1,000 2,164.3 1,560.0 $500 $0 2008 2009 2010 2011 2012 2013 2014 15
Slide 16: Components of Provision for Losses
Components of Provision for Losses ($ in millions) Three Months Ended December 31, 2014 December 31, 2013 New defaults $ 77.5 $ 111.7 (1) Existing defaults, Second-lien, LAE and Other 6.1 32.4 Provision for Losses $83.6 $144.1 (1) Represents the provision for losses attributable to loans that were i
Slide 17: Primary Loans in Default
Primary Loans in Default December 31, 2014 ($ in thousands) Foreclosure Cure % During Stage Reserve for Total the 4th % of Reserve Defaulted Losses Quarter Loans Missed payments # % # % $ % 3 payments or fewer 11,192 24.7% 174 30.6% $142,503 11.9% 4-11 payments 10,413 23.0 695 15.8 195,439 16.3 12 p
Slide 18: Primary Loans in Default: Payments Made in Quarter
Primary Loans in Default: Payments Made in Quarter 41% made at least one monthly payment in Q4 2014 but remained in default Defaults that Made at Least One Payment in Q4 2014 87.7% 73.9% 59.8% 51.4% 44.1% 39.7% 36.2% 37.4% 29.1% 29.3% 11.6% D60 D90 D120 D150 D180 D210 D240 D270 D300 D330 D360+ Statu
Slide 19: Primary Loans in Default: Frequency of Re-default Activity
Primary Loans in Default: Frequency of Re-default Activity Nearly 77% of New Defaults in Q4 2014 Were Previously Delinquent New Defaults by Number of Times Previously in Default (%) Total # of new defaults 18,204 14,846 14,646 15,330 13,755 12,113 11,454 12,339 12,070 27% 28% 32% 27% 32% 34% 35% 34%
Slide 20: Primary Loans in Default: Aging Breakdown of 12M+ Bucket
Primary Loans in Default: Aging Breakdown of 12 Months (1) and Greater (12M+) Bucket 53% of 12M+ Defaults Are Greater Than Three Years Old 48M+ 29.7% 39.9% 12-23M Missed Payments 3 payments or fewer 4-11 payments 12+ 12 payments or more (1) Payments 17.4% 13.0% 24-35M 36-47M (1) Includes pending cla
Slide 21: Direct Primary Risk in Force and Reserves by Vintage
Direct Primary Risk in Force and Reserves by Vintage December 31, 2014 December 31, 2013 December 31, 2012 Reserve for Reserve for Reserve for Risk in Force Risk in Force Risk in Force Losses Losses Losses 2005 and prior 8.2% 34.0% 11.1% 32.9% 16.5% 31.9% 2006 4.6 18.0 5.8 18.0 8.0 17.9 2007 10.6 33
Slide 22: Primary Insurance in Force: Default Rollforward
Primary Insurance in Force: Default Rollforward Q4 14 Q3 14 Q2 14 Q1 14 Q4 13 Beginning Default Inventory 46,843 48,904 53,119 60,909 65,239 New Defaults (1) 12,070 12,339 11,454 12,113 13,755 Cures (1) (10,739) (10,777) (10,930) (13,645) (12,440) Claims Paid (2) (3) (2,235) (3,067) (4,698) (6,049)
Slide 23: Primary Mortgage Insurance Default Rates
Primary Mortgage Insurance Default Rates 18.0% 16.5% 15.2% 12.0% 12.1% 10.9% 9.7% 7.8% 6.8% 7.3% 6.3% 5.8% 5.6% 5.4% 5.4% 5.2% 4.8% Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Q1 13 Q2 13 Q3 13 Q4 13 (1) Q1 14 (1) Q2 14(1) Q3 14(1) Q4 14 (1) (1) Insured loans subject to the Freddi
Slide 24: Primary Default Count by Vintages 2001 - 2014
Primary Default Count by Vintages 2001 - 2014 60,000 2007 50,000 40,000 2006 30,000 20,000 2001 - 2004 2005 10,000 2008 1H 2014 2012 2011 2010 2013 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 turning
Slide 25: Primary New Claims Submitted by Quarter
Primary New Claims Submitted by Quarter Number of Claims Submitted by Quarter(1) 11,000 9,000 8,548 8,059 8,090 7,655 7,726 7,786 7,577 7,000 6,786 5,858 5,752 5,000 4,776 4,074 3,628 3,382 3,030 3,000 2,739 1,000 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3
Slide 26: Mortgage and Real Estate Services
MORTGAGE AND REAL ESTATE SERVICES 26
Slide 27: Clayton Expands Radian's Participation in Mortgage Value Chain
Clayton Expands Radian’s Participation in Mortgage Value Chain Surveillance/ Asset Monetization/ Origination Securitization Monitoring Valuation Mortgage insurance Servicer surveillance credit products Contract underwriting Internal surveillance function Radian Solutions Quality control
Slide 28: Revenues by Line of Business
Revenues by Line of Business ($ in thousands) Three Months Ended December 31, 2014 September 30, 2014 Services revenue: Loan review and due diligence $11,189 $16,671 Component services 7,672 9,790 REO management 5,670 6,614 Surveillance 6,876 6,400 EuroRisk 3,059 2,768 Total 34,466 42,243 Direct cos
Slide 29: Radian
RADIAN Ensuring the American Dream®