Radian Group Inc. · NYSE:RDN
Radian — Q4 2015 Earnings Presentation
31 slides from Radian's earnings presentation, 2016
Slide 1: Financial Results Fourth Quarter 2015
Financial Results Fourth Quarter 2015
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) • volatility in our results of operations caused by changes in the fair value of our assets and liabilities, including a significant portion of our investment portfolio; • changes in “GAAP” (accounting principles generally accepted in the U.S.) or “SAP” (statutory
Slide 4: 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 through two business segments: Revenue By Business Segment (4Q 2015) - Mortgage Insurance, through its principal mortgage
Slide 5: Q4 Highlights
Q4 Highlights Net income from Adjusted pretax Approximately $340 Strong share of Services segment continuing operating income million of currently high-quality new total revenue of $38 operations of $75 of $124 million(1) available holding mortgage insurance million million or $0.32 company liquidit
Slide 6: Q4 Highlights
Q4 Highlights Improved Mortgage insurance Continued decline Mortgage insurance Total mortgage composition of MI in force of in number of loss provision of insurance net portfolio $176 billion mortgage insurance $57 million claims paid of defaults $176 million, including claims paid related to the Ne
Slide 7: Q3 2015 to Q4 2015 GAAP Earnings Per Share
Q3 2015 to Q4 2015 GAAP Earnings Per Share $0.5 $0.03 $0.03 $0.32 $0.02 $0.04 $0.29 $0.01 $- Q3 2015 Compensation (1) Change in Loss (2) Loss on Induced (3) Change in Gains on Other Q4 2015 Expense Provision Conversion and Debt Investments Assumptions, net Extinguishment (1) Includes a benefit of $5
Slide 8: Q3 2015 to Q4 2015 GAAP Book Value Per Share
(1) Q3 2015 to Q4 2015 GAAP Book Value Per Share $12.5 $0.04 $0.39 $0.05 $12.07 $0.05 $0.03 $12.0 $11.77 $11.5 (4) Q3 2015 Adjusted Net Loss on Induced (2) Other Items not (3) Change in Unrealized Other Q4 2015 Operating Income Conversion and Debt included in Adjusted Gains in Other Extinguishment N
Slide 9: Financial Highlights
Financial Highlights Radian Group Inc. Consolidated ($ in millions, except per share amounts) December 31, 2015 December 31, 2014 December 31, 2013 Total assets $ 5,651.8 $ 6,842.3 $ 5,606.0 Loss reserves $ 976.4 $ 1,560.0 $ 2,164.4 Unearned premiums $ 680.3 $ 644.5 $ 567.1 Long-term debt $ 1,219.5
Slide 10: Mortgage Insurance
MORTGAGE INSURANCE RADIAN
Slide 11: Improved Composition of MI Portfolio
(1) Improved Composition of MI Portfolio NIW since 2009 and HARP volume combined now represents 84% of Radian’s mortgage insurance primary risk in force as of Q4 2015 2006-2007 (HARP) 2006-2007 (Non-HARP) 4.6% 7.8% Other Vintages (Non-HARP) 8.1% 2009-2015 Other Vintages (HARP) 4.5% 75.0% Approximate
Slide 12: Improved Composition of MI Portfolio: Risk in Force by FICO and LTV
Improved Composition of MI Portfolio: Risk in Force by FICO and LTV Primary RIF Distribution by FICO score Primary RIF Distribution by LTV 100% 2% 100% 5% 7% 8% 13% 11% 11% 90% 90% 17% 24% 20% 80% 80% 30% 32% 30% 70% 70% 38% 51% 35% 60% 60% 31% 33% 50% 50% 36% 40% 40% 33% 37% 30% 30% 33% 57% 39% 34%
Slide 13: Improved Composition of MI Portfolio: Other Risk in Force Characteristics
Improved Composition of MI Portfolio: Other Risk in Force Characteristics Primary RIF Distribution by Loan Grade Primary RIF Distribution by Occupancy Status 100% 100% 1% 13% 10% 6% 3% 4% 4% 2% 2% 90% 9% 3% 95% 2% 4% 80% 19% 18% 70% 90% 60% 50% 95% 85% 85% 97% 40% 94% 92% 95% 68% 72% 80% 30% 20% 75%
Slide 14: 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) $33 $630 $30 $492 $24 $337 $15 2009 and $210 $8 Later $135 27.6% 44.6% 60.1% 68.7% 75.0% Vintages Dec-31-11 Dec-31-12 Dec-31-13 De
Slide 15: First-Lien Mortgage Insurance: 2015 Performance by Vintage
First-Lien Mortgage Insurance: 2015 Performance by Vintage ($ in millions) Year Ended December 31, 2015 Three Months Ended December 31, 2015 Vintage Premiums Earned(1) Incurred Losses(1) Net Net 2005 and Prior $ 75.0 $ 17.6 $ 57.4 $ 3.8 2006 52.7 44.5 8.2 0.4 2007 94.4 92.6 1.8 2.0 2008 54.3 26.6 27
Slide 16: Primary Mortgage Insurance: Cumulative Incurred Loss Ratio by Development Year
Primary Mortgage Insurance: Cumulative Incurred Loss Ratio by Development Year (1) 20% Incurred Loss Ratio 18% Vintage Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 2009 6.1% 7.0% 13.7% 17.4% 19.0% 18.3% 17.6% 16% 2010 1.2% 3.3% 6.5% 7.7% 7.5% 7.2% 2011 1.7% 4.4% 5.5% 5.6% 5.0% 14% 2012 2.0% 3.2%
Slide 17: Total Mortgage Insurance Loss Reserves
Total Mortgage Insurance Loss Reserves $4,000 ($ in millions) $3,500 $3,000 $2,500 $2,000 3,525.0 $1,500 3,247.9 3,083.6 $1,000 2,164.3 1,560.0 1,384.7 1,204.8 1,098.6 $500 976.4 $0 2010 2011 2012 2013 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 17
Slide 18: Components of Provision for Losses
Components of Provision for Losses ($ in millions) Three Months Ended December 31, September 30, June 30, March 31, December 31, 2015 2015 2015 2015 2014 New defaults $59.0 $60.3 $59.8 $ 64.9 $ 77.5 (1) Existing defaults, Second-lien, LAE and Other (2.2) 3.8 (28.2) (19.0) 6.1 Provision for Losses $5
Slide 19: Primary Loans in Default
Primary Loans in Default December 31, 2015 ($ in thousands) Foreclosure Stage Cure % During Reserve for Total % of Reserve Defaulted the 4th Quarter Losses Loans Missed payments # % # % $ % 3 payments or fewer 10,742 30.4% 187 29.0% $107,632 13.1% 4-11 payments 8,481 24.0 541 16.2 127,183 15.5 12 pa
Slide 20: Direct Primary Risk in Force and Reserves by Vintage
Direct Primary Risk in Force and Reserves by Vintage December 31, 2015 December 31, 2014 December 31, 2013 Reserve for Reserve for Reserve for Risk in Force Risk in Force Risk in Force Losses Losses Losses 2005 and prior 6.3% 34.7% 8.2% 34.0% 11.1% 32.9% 2006 3.7 16.7 4.6 18.0 5.8 18.0 2007 8.7 31.8
Slide 21: Primary Insurance in Force: Default Rollforward
Primary Insurance in Force: Default Rollforward Q4 15 Q3 15 Q2 15 Q1 15 Q4 14 Beginning Default Inventory 35,875 37,676 40,440 45,319 46,843 New Defaults (1) 11,650 10,698 10,006 10,253 12,070 Cures (1) (9,751) (9,676) (9,591) (11,589) (10,739) Claims Paid (2) (3) (2,686) (4) (2,983) (4) (3,891)(4)
Slide 22: Primary Mortgage Insurance Default Rates
Primary Mortgage Insurance Default Rates 18.0% 16.5% 15.2% 12.0% 12.1% 6.8% 7.3% 6.3% 5.8% 5.4% 5.4% 5.2% 4.6% 4.3% 4.1% 4.0% (1) (1) (1) (1) (1) (1) (1) (1) Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 (1) Insured loans subject to the Fredd
Slide 23: Primary Default Count by Vintages 2001 - 2015
Primary Default Count by Vintages 2001 - 2015 60,000 2007 50,000 40,000 2006 30,000 2005 20,000 2001 - 2004 10,000 2008 1H 2015 2013 2012 2011 2010 2014 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 tu
Slide 24: Primary New Claims Submitted by Quarter
Primary New Claims Submitted by Quarter Number of Claims Submitted by Quarter(1) 11,000 9,000 6,786 7,000 5,858 5,752 5,000 4,776 4,074 3,628 3,382 3,030 3,000 2,739 2,586 2,492 2,104 1,913 1,000 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 (1) Excludes claims submit
Slide 25: Mortgage and Real Estate Services
MORTGAGE AND REAL ESTATE SERVICES 25
Slide 26: What is Mortgage and Real Estate Services?
What is Mortgage and Real Estate Services? Clayton provides risk-based analytics, residential loan due diligence, consulting, surveillance and staffing solutions. The company also provides: Advanced AVMs, BPOs and Valuation, Title, Closing and Customized REO asset technology solutions to monitor loa
Slide 27: Mortgage and Real Estate Services Revenue Drivers
Mortgage and Real Estate Services Revenue Drivers % of Potential Future Market Segments/Clients Current Revenue Drivers Revenue (1) Revenue Drivers • Mortgage Origination (Banks, REITs, Mortgage Originators) Non-Agency RMBS • Performing & Non-Performing Securitization Due Diligence Loan Trades (Bank
Slide 28: Mortgage and Real Estate Services Revenue Drivers
Mortgage and Real Estate Services Revenue Drivers % of Potential Future Market Segments/Clients Current Revenue Drivers Revenue (1) Revenue Drivers • Single Family Rental (SFR) Securitization (Banks, Investment Banks) SFR Securitizations by and Debt SFR Securitizations by and • SFR Debt Facilities (
Slide 29: Mortgage and Real Estate Services Revenue
Mortgage and Real Estate Services Revenue ($ in thousands) 50,000 $44,595 Eurorisk 45,000 $43,114 $42,243 $39,115 40,000 $38,175 Surveillance $37,041 $36,347 $34,466 35,000 $32,718 $31,532 REO management 30,000 $28,043 $25,593 25,000 Valuation and component services (2) 20,000 Loan review and due di
Slide 30: Opportunities for Future Growth: Broaden Existing Capabilities within Residential Real Estate
Opportunities for Future Growth Broaden Existing Capabilities within Residential Real Estate MI = Mortgage Insurance 30
Slide 31: Radian
RADIAN Ensuring the American Dream®