Radian Group Inc. · NYSE:RDN
Radian — Q1 2020 Earnings Presentation
27 slides from Radian's earnings presentation, May 8, 2020
Slide 1: Financial Results Q1 2020
Financial Results Q1 2020 NYSE: RDN www.radian.biz
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: Q1 2020 Highlights
Q1 2020 Highlights $140.5 million 18% decrease compared to $171.0 14.2% Compared to 19.0% return on equity in Net Income Return on Equity Q1 2019. Q1 2019 included $21.9 million in Q1 2019, due primarily to a million of net gains on investments and change in net gains on investments other financial
Slide 5: Q1 2020 Highlights
Q1 2020 Highlights $241.6 billion 8% increase compared to $223.7 $5.6 billion 2% increase as compared to $5.5 Primary Insurance In Force Investment Portfolio billion in Q1 2019 billion in Q1 2019 $275.0 million $1.1 billion 5% increase compared to $261.8 $324.5 million increase in Q1 2020, Net Mortg
Slide 6: COVID Response: Supporting our People, Customers & Communities
COVID Response: Supporting our People, Customers & Communities Our People Successfully activated business continuity efforts to ensure Updated medical plans to eliminate coinsurance to fully cover the safety of employees across all locations costs related to medically necessary COVID screening and t
Slide 7: GAAP Diluted Net Income Per Share
GAAP Diluted Net Income Per Share (1) Q4 2019 to Q1 2020 1) All diluted net income per share items are calculated based on 205.2 million $1.00 weighted-average diluted shares outstanding for the three months ended December 31, 2019 except for the $0.79 March 31, 2020 diluted net income per $0.80 $0.
Slide 8: GAAP Book Value Per Share
GAAP Book Value Per Share (1) December 31, 2019 to March 31, 2020 1) All book value per share items are calculated based on 201.2 million $22.00 shares outstanding as of December 31, $0.70 2019 except for the March 31, 2020 $20.13 $20.30 book value per share, which was calculated based on 190.4 mill
Slide 9: Financial Highlights
Financial Highlights Radian Group Inc. Consolidated March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 ($ in millions, except per-share amounts) Primary Insurance In Force $241,586 $240,558 $237,158 $230,756 $223,734 Total Assets $6,690 $6,808 $6,671 $6,592 $6,600 Total
Slide 10: Primary Insurance in Force
Primary Insurance In Force (1) 1) Policy years represent the original policy years, and have not been adjusted to reflect subsequent $300 refinancing activity under HARP. 2) If adjusted to reflect refinancing activity under HARP, these percentages would decrease to 4.5% 4.8% Primary Insurance in For
Slide 11: In Force Portfolio Premium Yield
In Force Portfolio Premium Yield (in basis points) Q1 2020 Q4 2019 (1) Q3 2019 Q2 2019 (2) Q1 2019 (3) In Force Portfolio Premium Yield 46.1 47.1 47.4 47.9 48.6 (4) Single Premium Cancellations 4.0 4.4 4.6 2.8 1.8 Total Direct Yield 50.1 51.5 52.0 50.7 50.4 Ceded Earned Premiums, Net of Profit Commi
Slide 12: First-lien Mortgage Insurance: 2020 Performance by Vintage
First-lien Mortgage Insurance 2020 Performance by Vintage Three Months Ended March 31, 2020 ($ in millions) Vintage Premiums Earned (1) Incurred Losses (1) Net 2008 & Prior $20.7 $14.1 $6.6 2009 $0.5 $0.0 $0.5 2010 $0.2 $0.1 $0.1 2011 $0.7 $0.0 $0.7 2012 $3.2 $0.1 $3.1 2013 $9.0 $0.5 $8.5 2014 $11.9
Slide 13: Primary Mortgage Insurance Cumulative Incurred Loss Ratio
Primary Mortgage Insurance Cumulative Incurred Loss Ratio by Development Year (1) Vintage Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Mar-20 2010 1.2% 3.3% 6.5% 7.7% 7.5% 7.2% 7.2% 7.2% 7.0% 7.0% 7.1% 2011 1.7% 4.4% 5.5% 5.6% 5.0% 4.9% 5.0% 4.9% 5.0% 5.0% 2012 2.0% 3.2% 3.6
Slide 14: Components of Mortgage Provision for Losses
Components of Mortgage Provision for Losses ($ in millions) Three Months Ended Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Jun 30, 2019 Mar 31, 2019 Current period defaults (1) $41.2 $42.9 $42.0 $40.7 $38.9 Prior period defaults (2) (5.9) (8.2) (12.6) (3) 6.5 (4) (18.2) Second-lien premium deficiency res
Slide 15: Default Rollforward
Default Rollforward Primary Insurance in Force Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019 (number of loans) Beginning Default Inventory 21,266 20,184 19,643 20,122 21,093 Pre-2009 New Defaults 3,752 4,386 4,413 4,174 4,548 2009+ New Defaults 6,208 6,483 6,149 5,164 5,668 Total New Defaults (1) 9,960 10
Slide 16: Primary Loans In Default
Primary Loans In Default March 31, 2020 Foreclosure Stage Total Cure % During Q1 Reserve for Losses % Of Reserve ($ in thousands) Defaulted Loans Missed Payments # % # % $ % 3 Payments or Fewer 9,450 47.8% 105 41.0% $92,572 26.2% 4 to 11 Payments 6,114 30.9% 458 23.7% $99,388 28.2% 12 Payments or Mo
Slide 17: Capital and Debt Structure
Capital and Debt Structure 17
Slide 18: Capital Structure
Capital Structure Total Capitalization as of March 31, 2020 Stockholders’ Equity Carrying Value Principal % of Total ($ in billions) Coupon Description ($’000) ($’000) Capitalization (1) $4.0 4.500% Senior Notes due October 2024 $444,707 $450,000 9.4% $3.9 4.875% Senior Notes due March 2027 $442,877
Slide 19: PMIERs Excess Available Resources
PMIERs Excess Available Resources $2,500 1) Represents Radian Group’s Liquidity, net of the $35 million minimum liquidity requirement $2,010 / 68% under the unsecured revolving credit facility. $2,000 On May 6, 2020, Radian Group entered into an amendment to its $267.5 million unsecured $268 / 9% re
Slide 20: Eagle Re Mortgage Insurance-Linked Notes Reinsurance Key Metrics
Eagle Re Mortgage Insurance-Linked Notes Reinsurance Key Metrics (1) ($ in millions) Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019 (2) Eagle Re 2018-1 Policy In Force Dates January 1, 2017 - December 31, 2017 Risk In Force $6,482 $7,026 $7,629 $8,156 $8,575 Note Balance $320 $364 $413 $455 $455 PMIERs MRA
Slide 21: Quota Share Reinsurance (QSR) Key Summary Metrics
Quota Share Reinsurance (QSR) Key Summary Metrics (1) ($ in millions) Q1 2020 Q4 2019 Q3 2019 Q2 2019 Q1 2019 2016 Single Premium QSR Agreement Policy In Force Years 2012 – 2017 Quota Share — 20% - 65% (2) Ceded Risk in Force $5,080 $5,351 $5,651 $5,941 $6,118 Ceding / Profit Commission — 25% / Up t
Slide 22: Consolidated Non-GAAP Financial Measures Reconciliations
Consolidated Non-GAAP Financial Measures Reconciliations 22
Slide 23: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures In addition to the traditional GAAP financial measures, we have presented Although adjusted pretax operating income excludes certain items that have 3) Amortization and impairment of goodwill and other acquired intangible “adjusted pretax operating income,” “adjust
Slide 24: Reconciliation of Consolidated Pretax Income to Adjusted Pretax Operating Income
Reconciliation of Consolidated Pretax Income to Adjusted Pretax Operating Income 1) The amounts for all the 2020 2019 periods are included in other operating expenses and Q1 Q4 Q3 Q2 Q1 primarily relate to impairments ($ in thousands) of other long-lived assets. 2) Please see slide 23 for the Consol
Slide 25: Reconciliation of Diluted Net Income Per Share to Adjusted Diluted Net Operating Income Per Share
Reconciliation of Diluted Net Income Per Share to Adjusted Diluted Net Operating Income Per Share 1) Calculated using the 2020 2019 company’s federal statutory tax rate of 21%. Any Q1 Q4 Q3 Q2 Q1 permanent tax adjustments and state income taxes on these items have been Diluted net income per share $
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 Q1 Q4 Q3 Q2 Q1 average of the beginning and ending balances for each period presented. Return on equity (1) 14.2% 16.2
Slide 27: Radian
radian ensuring the American dream