Radian Group Inc. · NYSE:RDN
Radian — Investor Day (June 2023)
111 slides from Radian's investor day presentation, Jun 20, 2023
Slide 1: 2023 Investor Day
2023 Investor Day New York Stock Exchange Tuesday, June 20, 2023 New York Stock Exchange 18 Broad Street, New York, NY
Slide 2: Agenda
Agenda Event Approximate Event Approximate Time Time John Damian Dan Kobell 09:00 AM Significant Earnings Power Through the 11:00 AM Welcome Cycle Rick Thornberry 09:05 AM Sumita Pandit Opening Remarks 11:10 AM Capital Management Derek Brummer Rick Thornberry 09:25 AM 11:45 AM MI Business Overview W
Slide 3: Opening Remarks
Opening Remarks Rick Thornberry Chief Executive Officer 3
Slide 4: Mission: Ensuring the American dream of homeownership
Mission: Ensuring the American dream of 1.1 Since 2018, we have helped 1.1 million families Million achieve the dream of homeownership homeownership affordably, responsibly and sustainably More than 60% of customers benefitting from ✓ Promote wealth creation through 60% private mortgage insurance ar
Slide 5: The drive to innovate is in our DNA
The drive to Longstanding and productive B2B relationships innovate is in our DNA Superior risk and capital management Investment in digital capabilities Strong organizational culture and sense of purpose 5
Slide 6: Multi-Year Tailwinds that are Expected to Drive Our Business
Multi-Year Tailwinds that are Expected to Drive Our Business National Population by Age Strong Homebuyer Demographics as younger US Census Bureau 2022 Estimate populations enter homebuying years 334M ▪ Millennials are in their prime years for buying Gen Alpha 39M, (12%) their first home Gen Z poised
Slide 7: Housing Has Become Less Affordable Over the Last Few Decades
Housing Has Become Less Affordable Over the Last Few Decades US home prices and household income Affordability headwinds underscore Source: US Census the importance of Private Mortgage $400,000 Insurance in helping homebuyers Home price to income Median Home ratio increased from Sales Price purchase
Slide 8: Industry Fundamentals Today are Significantly Improved From the Great Financial Crisis
Industry Fundamentals Today are Significantly Improved From the Great Financial Crisis ▪ High quality borrowers with strong credit profiles ▪ Stringent underwriting and product standards ▪ Enhanced capital and operating framework (PMIERs) has strengthened industry ▪ Extensive utilization of risk dis
Slide 9: Despite Lower Mortgage Volume, Industry Continues to Grow Insurance In Force
Despite Lower Mortgage Volume, Industry Continues to Grow Insurance In Force Primary Insurance In Force Total New Insurance Written Market Size and Growth Our insurance in Amounts in millions. Remaining industry data sourced from public filings. Amounts in millions. Remaining industry data sourced f
Slide 10: We Have Consistently Grown Book Value Per Share
We Have Consistently Grown Book Value Per Share… Radian Book Value Per Share $26.23 $24.28 $24.95 $22.36 $20.13 $16.34 $13.39 $13.90 $12.07 $10.98 $5.43 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Q1 2023 10
Slide 11: …While Generating Total Stockholder Return Outperformance
…While Generating Total Stockholder Return Outperformance Total Stockholder Return YTD 1 Year 3 Year 5 Year Radian 40% 30% 61% 71% Mortgage 20% 21% 52% 43% Insurance Peers 13% 9% 41% 69% S&P 500 S&P -3% 0% 35% 32% Financials Mortgage Insurance Peers consist of Enact, Essent, MGIC and NMIH. Enact exc
Slide 12: Compelling Relative Valuation Opportunity
Compelling Relative Valuation Opportunity Price / BV Price / Next Twelve Months EPS 1.9x 14.6x 13.1x 1.7x 14% 11% 10% 1.0x 7.5x P&C Financial P&C Financial Institutions Institutions 3-year average ROE Market data as of 6/12/2023. Data from S&P Capital IQ. P&C consists of ACGL, AXS, RNR, RE, CINF, SI
Slide 13: Trading Below 10-Year Historical Book Value Multiple
Trading Below 10-Year Historical Book Value Multiple 4.00x Pre-COVID Post-COVID Average Price / Book Average Price / Book ~1.55x ~ 0.90x 3.00x 2.00x 10 Year Average Price / Book ~ 1.35x 1.00x Current Price / Book ~ 0.96x 0.00x Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan
Slide 14: Why we are excited about our future
Key Takeaways From What You Will Hear Today 1 Trusted, long-term customer relationships 2 Favorable multi-year industry tailwinds Why we are 3 Embedded future earnings of our large high quality insured portfolio excited about our future 4 Differentiated economic value model leads to outsized portfol
Slide 15: Mortgage Insurance
Mortgage Insurance Derek Brummer President, Mortgage 15
Slide 16: MI Business Fundamentals
MI Business Fundamentals radian
Slide 17: Key Takeaways
Key Takeaways Committed to mission of ensuring the Continuing to grow our large, high quality American dream of affordable, insured portfolio responsible, and sustainable homeownership Delivering exceptional financial results, driven by strong insured portfolio Focused on building the long-term perf
Slide 18: Strong Demand: First-Time Homebuyers Demographics
Strong Demand: First-Time Homebuyers Demographics Average age for a first-time homebuyer National Population by Age was 36 years in 2022(1) US Census Bureau 2022 Estimate ▪ Made up 26% of home sales Entering peak first home buying age (31 – 35) ▪ Typical down payment of 6% 5.0M ▪ Continue to view pu
Slide 19: Limited Inventory: Low Building Activity and Increasing Demand
Limited Inventory: Low Building Activity and Increasing Demand Following the Great Financial New Privately-Owned Single-Family Housing Units Completed US Census Bureau 2022 Estimate, units in thousands Crisis 2000 ▪ New home building declined dramatically and hasn’t fully recovered 1500 ▪ Number of
Slide 20: Limited Inventory: Available Homes near Historical Lows
Limited Inventory: Available Homes near Historical Lows Existing and New Single Family Home Inventory Units in thousands, not seasonally adjusted, National Association of Realtors and US Census Bureau 2020-2023 4,000 2010 – 2019 Average 1990 – 2009 Average Inventory Average Inventory 2.5M units Inve
Slide 21: Limited Inventory: Available Homes near Historical Lows
Limited Inventory: Available Homes near Historical Lows Months Supply of Existing Single-Family Homes Units in thousands, not seasonally adjusted, National Association of Realtors 12 2.8 10 8 6 Months Supply, April 2023 4 2 Homes in Low and Low- Medium range price points more constrained, with only
Slide 22: Limited Inventory: Homeowner Vacancy Rate at Historical Lows
Limited Inventory: Homeowner Vacancy Rate at Historical Lows Homeowner Vacancy Rate Units in thousands, not seasonally adjusted, National Association of Realtors and US Census Bureau 3.0% 2.5% 0.8% 2.0% 1.5% 1.0% Q1 2023 0.5% 0.0% 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 22
Slide 23: Home Price Trends More Sustainable
Home Price Trends More Sustainable FHFA House Price Index, Year-over-Year Change Nationally, the U.S. housing market has Purchase Only, Seasonally Adjusted experienced positive annual appreciation each Positive annual 25% appreciation since 2012 quarter since the start of 2012 20% While home prices
Slide 24: Declining Inflation and Robust Wage Growth
Declining Inflation and Robust Wage Growth Inflation decreasing while wage growth remains strong Hourly Wage Growth and the Consumer Price Index Source: Federal Reserve Bank of Atlanta, Bureau of Labor Statistics 9% 8% 7% Avg. Hourly 6% Wage Growth YoY 5% Consumer Price 4% Index Increase 3% YoY 2% 1
Slide 25: Low Unemployment
Low Unemployment US Unemployment Rate MBA Economic 3.7% Bureau of Labor Statistics Forecast (May 2023) 16% 14% 12% 10% Unemployment Rate May 2023 (3.1% for workers aged 25-54) 8% 6% 4% 2% 5.0% 0% MBA Projected Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Unemployment Rate Peak 2012 2013 2
Slide 26: Strong Employment Demand
26 0 1 2 3 2000 2001 2002 2003 2004 2005 2006 Bureau of Labor Statistics 2007 2008 2009 Pre-pandemic Average of 0.6 2010 2011 2012 2013 2014 2015 2016 Job Openings / Unemployed Worker 2017 2018 2019 2020 2021 2022 Apr-22 May-22 Strong Employment Demand Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-2
Slide 27: Household Debt Payments as a Percentage of Income at Low Levels
Household Debt Payments as a Percentage of Income at Low Levels Household Debt Service Payments as a Percent of Disposable Personal Income and its Components The decrease in Household Debt Service Source: Federal Reserve Bank of St. Louis Payments is mainly due to a decrease in Mortgage Debt Service
Slide 28: Steady Growth Expected in Purchase Originations
Steady Growth Expected in Purchase Originations ▪ Strong, pent-up demand and Purchase Mortgage Originations MBA, Fannie Mae limited inventory expected to lead to slow but steady growth in purchase $1,925B originations $1,783B $1,621B ▪ Approximately 45% of $1,547B $1,541B purchase mortgages currentl
Slide 29: Strong NIW and Persistency Grows Insured Portfolio
Strong NIW and Persistency Grows Insured Portfolio Lower refinances drive higher portfolio …which allows us to grow our portfolio despite persistency… lower NIW 84% NIW ≈ Cancellations (High turnover, little portfolio growth) 63% Portfolio Persistency (3-month annualized) NIW > Cancellations (Portfo
Slide 30: Insurance In Force (IIF) Continues to Grow
Insurance In Force (IIF) Continues to Grow Even as NIW has declined… …our IIF continues to grow! $ in billions $ in billions $105 $261.0 $261.5 $240.6 $246.1 $246.0 Single $92 $221.4 Premium $200.7 $71 $68 $175.5 $183.5 Monthly Premium $54 $57 $51 $41 2015 2016 2017 2018 2019 2020 2021 2022 2015 201
Slide 31: Strong New Business and Portfolio Fundamentals
Strong New Business and Portfolio Fundamentals New Business Portfolio Strict Credit Standards and Underwriting Risk-based Capital Standards (PMIERs) Guidelines Robust Regulatory Environment and Quality Borrowers benefiting from Significant Home Control Standards Equity and Manageable Debt Service Le
Slide 32: Credit Conditions Remain Tight
Credit Conditions Remain Tight Default Risk Taken by the Government- MBA Mortgage Credit Availability Index Sponsored Enterprises Channel Courtesy of Mortgage Bankers Association; Powered by ICE Mortgage Technology, May 2023 Urban Institute, Q1 1998 – Q4 2022 (Sources: eMBS, CoreLogic, HMDA, IMF, an
Slide 33: Improved Portfolio Composition with Less Layered Risk
Improved Portfolio Composition with Less Layered Risk Primary Risk In Force Distribution The high-quality NIW we have written since By Original FICO Score 2008 has favorably reshaped our Portfolio. Q1 2023 57% 35% 8% 2018 55% 36% 10% 1% Select Portfolio Characteristics at Q1 23: 2013 52% 31% 14% 3%
Slide 34: Improved Portfolio Composition with Less Layered Risk
Improved Portfolio Composition with Less Layered Risk Primary Risk In Force Distribution Exposure to certain higher-risk By Purpose products and features continue Q1 2023 2018 89% 11% 1% to run off as policies cancel 86% 12% 2% AS of 2013 71% 23% 7% 2008 70% 15% 15% ▪ ~3% written prior to 2009 2003
Slide 35: Limited Refinance Incentive for Insured Portfolio
Limited Refinance Incentive for Insured Portfolio Distribution of Insurance In Force by Note Rate March 31, 2023 In-the-money with a In-the-money with a 200bps decline in rates 100bps decline in rates 62% Even if rates were to decline 200bps, only 12% of our portfolio would have an incentive to refi
Slide 36: Significant Borrower Equity Protects Our Insured Portfolio
Significant Borrower Equity Protects Our Insured Portfolio Distribution of Insurance In Force by Mark-to-Market Equity ▪ 83% of our Insurance In Force has 10%+ equity 17% <10% equity ▪ 95% of our defaulted loans have 10%+ equity and 84% have 20%+ equity 23% 66% 10-20% equity ▪ 91% of our Q1 23 new d
Slide 37: Strong Default and Cure Trends
Strong Default and Cure Trends Trend of New Defaults and Cures Pre-Pandemic Today Cures have consistently outpaced New Defaults, which are back to pre-COVID levels, reducing the Default inventory to pre-COVID levels as well Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 19 19 19 19 20 20 20 20 2
Slide 38: Cure Rates Continue to Increase
Cure Rates Continue to Increase Quarterly Cure Rates ▪ While seasonal variations exists, overall cure rates 45% have been gradually increasing since 2009 and are at some of the highest levels ever observed 40% 35% ▪ Cure activity for defaults that are 12 or more 30% payments behind surged in Q2 21 a
Slide 39: Radian Competitive Differentiation
Radian Competitive Differentiation 39
Slide 40: Economic Value
Economic Value ▪ Our focus is on maximizing long-term Economic Value (EV), not on NIW market share ▪ EV is simply the amount of future earnings on deployed capital less the cost of holding required capital, discounted to present value ▪ EV provides a consistent value-based framework to evaluate the
Slide 41: Our Analytics Align with Today’s Drivers of Success
Our Analytics Align with Today’s Drivers of Success Projecting loan performance Predicting local economics Outperforming in a fast-paced, Applying analytics to segment sealed-bid auction environment lenders and servicers 41
Slide 42: Proprietary Models Leveraging AI and Machine Learning
Proprietary Models Leveraging AI and Machine Learning RADAR (Radian Default and Risk) assesses SONAR (Surveillance and Optimization of the risk and projects performance, including New-business Acquisition Rates) analyzes and premiums, losses, required capital, EV, etc. optimizes pricing, leveraging
Slide 43: Our Modeling Schematic
Our Modeling Schematic ▪ Data: proprietary, Recent MI Clearing Rate Data SONAR ® SONAR ® Reporting ▪ EV and Returns procured, and curated Noise Filters & Calibration Clearing Rates Estimator Radian MI Rates Optimizer ▪ Risk Measures ▪ Forecasts ▪ Visualization ▪ 100% in-house Historic Economic devel
Slide 44: RADAR – Loan Performance Predictor
RADAR ® Loan Performance Predictor RADAR – Loan Performance Predictor ▪ Every new version of RADAR is Claim Rates: RADAR Projected vs. Actual subjected to granular testing along GSE Data: Full Doc, Fixed Rate, Prime many dimensions of loan attributes Actual Projected and “layered risk” 8% 0.3% Claim
Slide 45: RADAR – Economic Scenario Generator
RADAR ® Economic Scenario Generator RADAR – Economic Scenario Generator DETROIT DENVER MIAMI Accurate and Granular Economic Forecasting Ability NEW YORK CITY ▪ The RADAR Economic Scenario Generator uses economic and PHOENIX housing value measures specific to each MSA, including HOUSE PRICE UNEMPLOYM
Slide 46: RADAR – Economic Scenario Generator
RADAR ® Economic Scenario Generator RADAR – Economic Scenario Generator ▪ Forecast back testing is performed Phoenix (AZ) HPA: RADAR Projected vs. Actual individually on all ~450 MSAs Actual HPA ▪ Forecasting accuracy is demonstrated by 60% back testing 50% 2005: Projected ▪ For example, in Phoenix,
Slide 47: SONAR – Clearing Rate Estimator
SONAR ® Clearing Rates Estimator SONAR – Clearing Rate Estimator ▪ Estimates competitor pricing and Price Probability Distribution (Illustrative) market clearing levels for each Probability of Bid of the millions of Loan Types 1 SONAR estimates competitors’ likely Price ▪ Employs a probabilistic bid
Slide 48: SONAR – Radian MI Rates Optimizer
SONAR ® Radian MI Rates Optimizer SONAR – Radian MI Rates Optimizer ▪ Objective function in setting prices is Demand Curve and EV (Illustrative) to maximize EV Probability of Radian Winning the Sealed-Bid Auction vs. Bid Price and EV for each price 100% SONAR overlays EV ▪ Millions of bid prices are
Slide 49: Generating Alpha via Geographic Pricing
Generating Alpha via Geographic Pricing ▪ Our MSA economic forecasts have a Actual Returns for MSAs vs. Projections significant dispersion around the mean - Return as a percent deviation from vintage average Our projected top performing MSAs consistently supporting the importance of Radian’s 8% outp
Slide 50: Geographic Pricing Strategy in Action
Geographic Pricing Strategy in Action ▪ Our geographic MI pricing purposely NIW Concentration among Radian Projection Cohorts steers our new business toward our RDN NIW Concentration: Q2 22 MI Market NIW Concentration: Q2 22 favored MSAs 75% ▪ For example, for Q2 2022 50% ▪ Our most-favored MSAs com
Slide 51: Lender Segmentation: Data and Analytics Driven
Lender Segmentation: Data and Analytics Driven Consolidates hundreds of credit, performance, operational, risk/return, and EV metrics, providing Radian with a common view of its lenders’ business performance and relative value, which supports pricing, portfolio, operational, and strategic decisions.
Slide 52: Servicer Segmentation: Data and Analytics Driven
Servicer Segmentation: Data and Analytics Driven Utilizes a robust set of servicer-level metrics to evaluate our servicers and generate internal and external servicer-specific dashboards, providing a common view of servicer performance. Servicers are evaluated on a variety of operations, credit-adju
Slide 53: Sales Strategy Changed with the Market
Sales Strategy Changed with the Market Landscape Changed… …and Radian Repositioned ▪ MI decision methods/selections ▪ Radian’s sales headcount is now more generally shifted to best-ex pricing than 50% lower than in 2019 and the smallest in the industry at 39, including ▪ Pandemic changed lender work
Slide 54: Leveraging Pricing for Relative Value
Leveraging Pricing for Relative Value Robust Risk Assessment Monitoring the Competitive Landscape ▪ Leverage RADAR to project performance ▪ Monitor market-clearing levels at a granular level ▪ Stochastic simulation as well as deterministic paths ▪ Account Management team takes data-driven approach ▪
Slide 55: Approach to Capital Deployment
Approach to Capital Deployment Radian’s EV-driven strategy guides where we over/under allocate our capital relative to our competitors and the overall market via the following steps: Identify capital deployment Sort Loan Types by Deploy our capital to the 1 2 3 opportunities by Loan Type attractiven
Slide 56: We could identify opportunities by the level of Risk (Step 1)
We could identify opportunities by the level of Risk (Step 1) Lower Loan Type 5 Risk Loan Type 3 Loan Type 1 Loan Type 2 Loan Type 6 Higher Loan Type 7 Risk Loan Type 4 56-a
Slide 57: And sort by the level of Risk (Step 2)
And sort by the level of Risk (Step 2) Loan Type 7 Loan Type 3 Loan Type 4 Loan Type 2 Loan Type 6 Loan Type 1 Loan Type 5 Less More Risk Risk 56-b
Slide 58: Instead, we identify (Step 1) and sort (Step 2) opportunities by EV
Instead, we identify (Step 1) and sort (Step 2) opportunities by EV Loan Type 7 Loan Type 3 Loan Type 4 Loan Type 6 Loan Type 1 Loan Type 2 Loan Type 5 Higher Lower EV EV More Less Economic Economic Value Value 57
Slide 59: Then deploy capital starting with highest EV opportunities (Step 3)
Then deploy capital starting with highest EV opportunities (Step 3) START Loan Type 7 Deploy Capital Loan Type 3 Loan Type 4 Loan Type 6 Loan Type 1 Loan Type 2 Loan Type 5 More Less EV EV 58
Slide 60: Illustrative Loan Selection
Illustrative Loan Selection A B C LTV 85% 90% 95% FICO 770 750 730 Assuming all else equal and only one loan could be selected, which loan would we target? 59
Slide 61: Illustrative Loan Selection
Illustrative Loan Selection A B C LTV 85% 90% 95% FICO 770 750 730 Loan A is the lower risk option, but our goal is value maximization, not risk minimization. Value cannot be assessed without additional information. 60
Slide 62: Illustrative Loan Selection
Illustrative Loan Selection A B C LTV 85% 90% 95% FICO 770 750 730 Loss Ratio 25% 20% 22% While Loan A has less risk, Loan B is more favorable when factoring in price… 61
Slide 63: Illustrative Loan Selection
Illustrative Loan Selection A B C LTV 85% 90% 95% FICO 770 750 730 Loss Ratio 25% 20% 22% Return on Capital 12% 13% 14% …but Loan C is preferable in terms of Return on Capital 62
Slide 64: Illustrative Loan Selection
Illustrative Loan Selection A B C LTV 85% 90% 95% FICO 770 750 730 Loss Ratio 25% 20% 22% Return on Capital 12% 13% 14% Lifetime Capital(1) 0.7% 4.1% 9.3% Loan C also provides the greatest capital deployment opportunity… (1) Lifetime Capital represents required capital as a percentage of loan balanc
Slide 65: Illustrative Loan Selection
Illustrative Loan Selection A B C LTV 85% 90% 95% FICO 770 750 730 Loss Ratio 25% 20% 22% Return on Capital 12% 13% 14% Lifetime Capital(1) 0.7% 4.1% 9.3% EV $100 $500 $1,600 …and therefore generates the highest Economic Value (1) Lifetime Capital represents required capital as a percentage of loan
Slide 66: Value Creation that Rises Above
Value Creation that Rises Above We are generating Alpha and creating value for stockholders by leveraging our differentiated risk, modeling, pricing, and customer analytics to acquire an outsized share of EV Generating Alpha available in the MI market Outperforming in a fast- paced, sealed-bid aucti
Slide 67: Audience Q&A
Audience Q&A Derek Brummer Ted Cubbin Steve Keleher President, EVP, Chief EVP, Portfolio Mortgage Analytics Officer Management and Pricing Meghan Marshall Gayden Bartholomew EVP, MI and EVP, Credit and National Account Counterparty Risk Sales Management 66
Slide 68: homegenius Update
homegenius Update Rick Thornberry Chief Executive Officer 67
Slide 69: Real Estate Services, Title Services, Real Estate Technology Services
Real Estate Title Services Services Real Estate Technology Services 68
Slide 70: Real Estate Services
Real Estate Services Revenue(1) Q1 Why we Strong relationships with institutional residential real 2021 2022 2023 are well estate and mortgage investors, servicers and GSEs $70M $66M $8M positioned Track record and reputation for delivering exceptional customer service Description Residential real e
Slide 71: Title Services
Title Services Revenue Q1 Why we Broad set of existing relationships 2021 2022 2023 are well National title and settlement services footprint $79M $44M $5M positioned Title underwriter vehicle provides control over product and price structures Description National title insurance underwriter Innovat
Slide 72: Real Estate Technology Services
Real Estate Technology Services Revenue New to market Why we National real estate brokerage and agent network are well Strong market relationships across the mortgage and positioned real estate ecosystem Extensive real estate data and proprietary analytics Description Early-stage digital residential
Slide 73: Our homegenius businesses have the right to win
Depth of our market relationships Our National footprint homegenius businesses Unique real estate data and proprietary analytics have the right to win Innovative digital platforms Talented team 72
Slide 74: Financial Snapshot
Financial Snapshot Sumita Pandit Chief Financial Officer 73
Slide 75: Financial Strength and Flexibility
Financial Strength and Flexibility Consolidated Radian Guaranty - Operating Company As of Q1 2023 As of Q1 2023 $7.2 billion $1.7 billion Total Assets PMIERs Excess Available Assets(4) $6.0 billion 44% Total Investments(1) PMIERs Excess Available Assets % $4.1 billion / $26.23 $5.3 billion Book Valu
Slide 76: Consistently Strong Operating Performance
Consistently Strong Operating Performance $ in millions COVID Stress 20.3% $1,053 17.9% 14.0% Adjusted Operating 18.2% $855 Return on Equity(1) 13.7% $745 $758 Total Adjusted 14.5% 13.1% Pretax Operating $617 Income(1) $542 8.2% $511 14.7% $432 $342 15.7% $200 2014 2015 2016 2017 2018 2019 2020
Slide 77: Broadly Diversified, High Quality $6.0B Investment Portfolio
Broadly Diversified, High Quality $6.0B Investment Portfolio(1) Highlights: $6.0B Investment Portfolio by Rating As of March 31, 2023 ▪ 95.8% of total portfolio(2) are rated fixed income securities BB and below Not rated(4) 1.3% 4.2% ▪ 98.7% of fixed income securities are rated investment grade BBB
Slide 78: Investment Income Has Increased by 55% Over the Past Two Years
Investment Income Has Increased by 55% Over the Past Two Years Investment Income $ in millions $59.1 $59.2 $51.4 $47.0 $38.3 $37.4 $38.2 Average $36.3 $36.0 Investment Yield of 3.8% on our $6.0B Portfolio as of March 31, 2023 Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 77
Slide 79: Strong Balance Sheet
Strong Balance Sheet ▪ Excess regulatory capital Radian’s Capital Structure Select Key Balance Sheet Metrics $ in billions ▪ Strong liquidity at holdco Debt(1) $ in millions 3/31/2023 $1.4B Holdco Available Liquidity $956 ▪ High quality and diversified Total Holdco Liquidity $1,231 investment portfo
Slide 80: Significant Earnings Power Through the Cycle
Significant Earnings Power Through the Cycle Dan Kobell Executive Vice President, Finance 79
Slide 81: Scenario Analysis and Stress Testing
Scenario Analysis and Stress Testing ▪ We consistently evaluate different macroeconomic scenarios, including internal and third-party views ▪ We use RADAR to estimate the performance of our existing MI portfolio as well as new business through a variety of scenarios ▪ For illustration purposes today
Slide 82: Embedded Future Earnings From Existing Insurance In Force
Embedded Future Earnings From Existing Insurance In Force Embedded Future Earnings Radian has significant expected embedded earnings within its existing $261B Insurance Investment In Force portfolio Income The estimated earnings anticipated to be recognized from the existing in-force portfolio inclu
Slide 83: Embedded Future Earnings Illustration
Embedded Future Earnings Illustration Base Scenario & MI Portfolio as of Q1 2023(1) MI Portfolio with the following illustration inputs: $261B Beginning Insurance In Force 34 bps Premium yield 79% Avg. Persistency = 4.2 year average life Insurance In Force Portfolio Premiums x Net Premium Yield Earn
Slide 84: Embedded Future Earnings Illustration
Embedded Future Earnings Illustration Base Scenario & MI Portfolio as of Q1 2023(1) MI Portfolio with the following illustration inputs: $261B Beginning Insurance In Force Investment Portfolio Investment 34 bps Premium yield x Net investment yield Income x Average capital life $0.8B 79% Avg. Persist
Slide 85: Embedded Future Earnings Illustration
Embedded Future Earnings Illustration Base Scenario & MI Portfolio as of Q1 2023(1) MI Portfolio with the following illustration inputs: $261B Beginning 15% Expense ratio Insurance In Force Investment Portfolio Investment 34 bps Premium yield x Net investment yield Income x Average capital life $0.8
Slide 86: Embedded Future Earnings Illustration
Embedded Future Earnings Illustration Base Scenario & MI Portfolio as of Q1 2023(1) MI Portfolio with the following illustration inputs: $261B Beginning 15% Expense ratio Insurance In Force Investment Portfolio Investment Loss Frequency = 34 bps Premium yield x Net investment yield Income ~20,000 Cl
Slide 87: Embedded Future Earnings Illustration
Embedded Future Earnings Illustration Base Scenario & MI Portfolio as of Q1 2023(1) MI Portfolio with the following illustration inputs: $261B Beginning 15% Expense ratio Insurance In Force Investment Portfolio Investment Loss Frequency = Income 34 bps Premium yield x Net investment yield ~20,000 Cl
Slide 88: Embedded Future Earnings Illustration
Embedded Future Earnings Illustration Base Scenario & MI Portfolio as of Q1 2023(1) MI Portfolio with the following illustration inputs: $261B Beginning 15% Expense ratio Insurance In Force Investment Portfolio Investment Loss Frequency = 34 bps Premium yield x Net investment yield Income ~20,000 Cl
Slide 89: Embedded Future Earnings Illustration
Embedded Future Earnings Illustration Base vs Stress Economic Scenario - MI Portfolio as of Q1 2023(1) Embedded earnings are over $1B even in a severe downside scenario: Base Scenario Stress Scenario Embedded Embedded Future Earnings: Future Earnings: $2.6 $1.3 billion billion (1) Hypothetical scena
Slide 90: Book Value and Embedded Future Earnings
Book Value and Embedded Future Earnings Book Value Plus Embedded Future Earnings(1) $42.55 $39.75 $34.82 $16.32 $13.52 Radian’s stock $8.59 price as of June 16, 2023 - $25.13 Q1 23 BVPS: Q1 23 BVPS: Q1 23 BVPS: $26.23 $26.23 $26.23 Base Scenario (Nominal) Base Scenario (Discounted) Stress Scenario (
Slide 91: Incorporating NIW Adds Incremental Earnings and Financial Strength
Incorporating NIW Adds Incremental Earnings and Financial Strength Mortgage Insurance Earnings(1) In addition to the existing portfolio, our Existing Portfolio and New Insurance Written Mortgage Insurance earnings will include the contribution from future New Insurance Written Earnings from NIW from
Slide 92: Insurance In Force plus New Insurance Written
Insurance In Force plus New Insurance Written Illustrative PMIERs Cushion and Return on Equity in a Stress Scenario(1) PMIERs Cushion Base Stress Positive Earnings Each Year Book Value Growth Adequate PMIERs cushion Base Year Year 1 Year 2 Year 3 Year 4 Year 5 Ordinary Dividend Capacity
Slide 93: Capital Management
Capital Management Sumita Pandit Chief Financial Officer 92
Slide 94: Radian Book Value Per Share Growth
Radian Book Value Per Share Growth Radian Book Value Per Share $26.23 $24.28 $24.95 $22.36 $20.13 $16.34 $13.39 $13.90 $12.07 $10.98 $5.43 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Q1 2023 93
Slide 95: Capital Strength of Radian Guaranty
Capital Strength of Radian Guaranty PMIERs Available Assets at year-end Radian Guaranty’s PMIERs $ in billions $5.6 Available Assets have $5.4 $4.7 grown 60% over the past 4 60% years $3.5 $3.6 growth 2018 2019 2020 2021 2022 During this time, Radian Net Capital Returned to Radian Group has also ret
Slide 96: Positive Unassigned Funds Surplus Allows for Ordinary Dividend
Positive Unassigned Funds Surplus Allows for Ordinary Dividend ▪ In Q4 2022, the Unassigned Funds Surplus $258 $221 unassigned funds became positive, allowing Radian Guaranty to pay ordinary dividends ($169) ($503) ($563) ($685) ($623) ($716) ($680) ($691) ($768) ($765) ($702) ($859) Unassigned Fund
Slide 97: Balanced Approach to Capital Allocation
Balanced Approach to Capital Allocation ▪ Strong capital position Share Repurchases and Dividends $ in millions $1,716 ▪ Organic growth ▪ Sustainable dividends $1,181 ▪ Opportunistic share $678 repurchases $354 ▪ Optimizing capital structure $52 ▪ Investing in non-organic 2018 2019 2020 2021 2022 gr
Slide 98: Dividend Growth Supported by Strong Earnings and Cash Flows
Dividend Growth Supported by Strong Earnings and Cash Flows Quarterly Dividends Per Share Source: S&P Capital IQ Pro. Market data as of 6/14/23. $0.200 $0.200 $0.200 $0.200 $0.225 3.6% Current Dividend Yield is the Highest in MI Peer Group Three consecutive years of $0.140 $0.140 $0.140 dividend inc
Slide 99: Radian Returned 2.3x Capital Compared to Pureplay MI Peers
Radian Returned 2.3x Capital Compared to Pureplay MI Peers $ in millions Total 2021 & 2022 Capital Returned $1,038 $536 Peer $882 $502 $497 2.3x the amount of capital Peer $453 that peers returned in 2021 Peer $432 & 2022 $385 Peer $57 Peer Average(1) $456 $242 $253 $200 $190 Shares Repurchased
Slide 100: Audience Q&A
Audience Q&A Rick Thornberry Sumita Pandit Chief Executive Senior EVP, Chief Officer Financial Officer Dan Kobell Rob Quigley EVP, Finance EVP, Controller and Chief Accounting Officer 99
Slide 101: Wrap-Up
Wrap-Up Rick Thornberry Chief Executive Officer 100
Slide 102: Why we are excited about our future
1 Trusted, long-term customer relationships 2 Favorable multi-year industry tailwinds Why we are 3 Embedded future earnings of our large high quality insured portfolio excited about our future 4 Differentiated economic value model leads to outsized portfolio alpha 5 Financial strength and flexibilit
Slide 103: Panel Discussions
Panel Discussions 102 radian
Slide 104: Data and Analytics Panel & Questions
Data and Analytics Panel & Questions Steve Keleher Ted Cubbin Steve Gaenzler EVP, Portfolio EVP, Chief SVP, homegenius Management and Analytics Officer Data and Pricing Analytics Meghan Elizabeth Bartholomew Emmons EVP, Credit and SVP, homegenius Counterparty Risk Marketing Management 103
Slide 105: Technology Panel & Questions
Technology Panel & Questions Eric Ray Suzanne Powell Mark Wai Senior EVP, Chief EVP, Mortgage EVP, Chief Digital Officer and Underwriting and Technology Co-Head of Loan Services Officer homegenius Jeff Berg Jim Tighe SVP, EVP, Mortgage homegenius.com Operations and Product Owner Technology 104
Slide 106: Contacts
Contacts John Damian Rashi Iyer SVP, Corporate SVP, Corporate Development and Investor Communications Relations 215.231.1167 215.231.1383 rashi.iyer@radian.com john.damian@radian.com 105
Slide 107: Appendix
Appendix radian
Slide 108: Reconciliation of Consolidated Pretax Income to Adjusted Pretax Operating Income
Reconciliation of Consolidated Pretax Income to Adjusted Pretax Operating Income ($ in millions) Q1 2023 2022 2021 2020 2019 2018 2017 2016 2015 (1) 2014 (1) Consolidated pretax income from continuing operations $204 $953 $765 $479 $849 $684 $347 $484 $438 $407 Less income (expense) items: Net gains
Slide 109: Reconciliation of Return on Equity to Adjusted Operating Return on Equity
Reconciliation of Return on Equity to Adjusted Operating Return on Equity Q1 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Return on equity (1) 15.7 % 18.2 % 14.1 % 9.4 % 17.8 % 18.7 % 4.1 % 11.5 % 12.3 % 83.0 % Less impact of reconciling income (expense) items (2) Net gains (losses) on investme
Slide 110: Safe Harbor Statements
Safe Harbor Statements All statements in this presentation that address events, developments or results that we ▪ changes in the current housing finance system in the United States, including the roles of the ▪ volatility in our financial results caused by changes in the fair value of our assets and
Slide 111: radian
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