RADIAN GROUP INC Management's Discussion and Analysis of … – Marketscreener.com

Overview
We are a diversified mortgage and real estate business with two reportable business segments-Mortgage and homegenius.
Current Operating Environment
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macroeconomic stresses discussed above, including those resulting from the high rate of inflation and higher interest rates discussed above.
Legislative and Regulatory Developments
Key Factors Affecting Our Results
The key factors affecting our results are discussed in our 2022 Form 10-K. There have been no material changes to these key factors.
Mortgage Insurance Portfolio
Insurance in Force
IIF by origination vintage (1)
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Insurance in Force as of:
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(1)Borrower-paid Single Premium Policies were 4.9% of NIW for the three months ended March 31, 2023, compared to 5.3% for the same period in 2022. (2)For loans with multiple borrowers, the percentage of NIW by FICO score represents the lowest of the borrowers’ FICO scores.
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The following table provides selected information as of and for the periods indicated related to mortgage insurance IIF and RIF.
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The table below provides information about the amounts by which Radian Guaranty’s reinsurance programs reduced its Minimum Required Assets as of the dates indicated.
PMIERs benefit from risk distribution
Results of Operations-Consolidated
Three Months Ended March 31, 2023, Compared to Three Months Ended March 31, 2022
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The following table summarizes our consolidated results of operations for the three months ended March 31, 2023 and 2022.
Summary results of operations – Consolidated
(1)See “Use of Non-GAAP Financial Measures” below.
Revenues
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Revenue” and “Results of Operations-homegenius-Three Months Ended March 31, 2023, Compared to Three Months Ended March 31, 2022-Revenues-Services Revenue” for more information.
Expenses
Use of Non-GAAP Financial Measures
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Impairment of other long-lived assets and other non-operating items
199,863 $ 264,948
Reconciliation of diluted net income per share to adjusted diluted net operating income per share
Less: per-share impact of reconciling income (expense) items Net gains (losses) on investments and other financial instruments
Impairment of other long-lived assets and other non-operating items
Income tax (provision) benefit on reconciling income (expense) items (1)
(1)Calculated using the Company’s federal statutory tax rate of 21%. Any permanent tax adjustments and state income taxes on these items have been deemed immaterial and are not included.
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Less: impact of reconciling income (expense) items (2) Net gains (losses) on investments and other financial instruments
Impairment of other long-lived assets and other non-operating items
Income tax (provision) benefit on reconciling income (expense) items (3)
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Results of Operations-Mortgage
Three Months Ended March 31, 2023, Compared to Three Months Ended March 31, 2022
The following table summarizes our Mortgage segment’s results of operations for the three months ended March 31, 2023 and 2022.
Summary results of operations – Mortgage
229,419 $ 248,360 $ (18,941) (Increase) decrease in unearned premiums
214,435 $ 277,841 $ (63,406)
(1)Our senior management uses adjusted pretax operating income as our primary measure to evaluate the fundamental financial performance of our business segments. See Note 4 of Notes to Unaudited Condensed Consolidated Financial Statements for more information.
Revenues
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Direct
$ 245,174 $ (13,724)
$ 247.5 $ 13.7
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25,077 $ 14,453
The following table provides information related to our Mortgage subsidiaries’ investment balances and investment yields.
Investment balances and yields
(1) The average of the beginning and ending amortized cost, for each period presented, of investments held by our Mortgage subsidiaries. (2) Calculated by dividing annualized net investment income by average investments balance.
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Rollforward of primary loans in default
2022
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The following tables show additional information about our primary loans in default as of the dates indicated.
Primary loans in default – additional information
N/A – Not applicable (1) Excludes pool and other reserves. See Note 11 of Notes to Unaudited Condensed Consolidated Financial Statements for additional information.
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The following table shows net claims paid by product and the average claim paid by product for the periods indicated.
Total average net primary claim paid (1) $ 35.5 $ 41.6 Average direct primary claim paid (2)
For additional information about our reserve for losses, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates” in our 2022 Form 10-K.
Other Operating Expenses. The decrease in other operating expenses for the three months ended March 31, 2023, as compared to the same period in 2022, is primarily related to a decrease in variable and share-based incentive compensation expense, including as part of allocated corporate operating expenses.
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Results of Operations-homegenius
Three Months Ended March 31, 2023, Compared to Three Months Ended March 31, 2022
Summary results of operations – homegenius
$ (13,506) $ (9,535)
Revenues
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Other Operating Expenses. The following table shows additional information about homegenius other operating expenses.
$ 25,567 $ (343)
(1)See Note 4 of Notes to Unaudited Condensed Consolidated Financial Statements for more information about our allocation of corporate operating expenses.
Results of Operations-All Other
Three Months Ended March 31, 2023, Compared to Three Months Ended March 31, 2022
The following table summarizes our All Other results of operations for the three months ended March 31, 2023 and 2022.
Summary results of operations – All Other
8,469 $ 613 $ 7,856
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Liquidity and Capital Resources
Consolidated Cash Flows
The following table summarizes our consolidated cash flows from operating, investing and financing activities.
Summary cash flows – Consolidated
Increase (decrease) in cash and restricted cash $ (5,816) $ (19,116)
See “Item 1. Financial Statements (Unaudited)-Condensed Consolidated Statements of Cash Flows (Unaudited)” for additional information.
Liquidity Analysis-Holding Company
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the full $275 million remains undrawn and available under the facility. See Note 12 of Notes to Consolidated Financial Statements in our 2022 Form 10-K for additional information on the unsecured revolving credit facility.
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Capitalization-Holding Company
The following table presents our holding company capital structure.
Capital structure
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future could include, distributions from Radian Guaranty to Radian Group, including returns of capital or recurring ordinary dividends, as discussed below.
homegenius
As of March 31, 2023, our homegenius segment maintained cash and liquid investments totaling $65 million, including $48 million held by Radian Title Insurance.
Title insurance companies, including Radian Title Insurance, are subject to comprehensive state regulations, including minimum net worth requirements. Radian Title Insurance was in compliance with all of its minimum net worth requirements at March 31, 2023. In the event the cash flows from operations of the homegenius segment are not adequate to fund all of its
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Ratings
(1)Moody’s, S&P and Fitch each currently rate the outlook for both Radian Group and Radian Guaranty as Stable.
Critical Accounting Estimates
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