RADIAN GROUP INC [RDN] Filings

10-Q 1 rdn-20220930.htm 10-Q rdn-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________

FORM 10-Q

_____________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-11356

_______________________________

Radian Group Inc.

(Exact name of registrant as specified in its charter)

_______________________________

Delaware

23-2691170

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

550 East Swedesford Road, Suite 350, Wayne, PA 19087

(Address of principal executive offices) (Zip Code)

(215) 231-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	RDN	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 157,025,431 shares of common stock, $0.001 par value per share, outstanding on November 2, 2022.

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		Page
Glossary of Abbreviations and Acronyms		3
Cautionary Note Regarding Forward-Looking Statements—Safe Harbor Provisions		7

PART I—FINANCIAL INFORMATION
Item 1	Financial Statements (Unaudited)	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3	Quantitative and Qualitative Disclosures About Market Risk	66
Item 4	Controls and Procedures	66

PART II—OTHER INFORMATION
Item 1	Legal Proceedings	67
Item 1A	Risk Factors	67
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 6	Exhibits	68

Signatures		69


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Glossary of Abbreviations and Acronyms

The following list defines various abbreviations and acronyms used throughout this report, including the Condensed Consolidated Financial Statements, the Notes to Unaudited Condensed Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.


Term			Definition
2021 Form 10-K			Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022
2014 Master Policy			Radian Guaranty’s master insurance policy, setting forth the terms and conditions of our mortgage insurance coverage, which became effective October 1, 2014
2020 Master Policy			Radian Guaranty’s master insurance policy, setting forth the terms and conditions of our mortgage insurance coverage, which became effective March 1, 2020
2012 QSR Agreements			The quota share reinsurance agreements entered into with a third-party reinsurance provider in the second and fourth quarters of 2012, collectively
2022 QSR Agreement			Quota share reinsurance arrangement entered into with a panel of third-party reinsurance providers to cede, starting July 1, 2022, a portion of NIW, which includes both Recurring Premium Policies and Single Premium Policies, originated between January 1, 2022, and June 30, 2023
2016 Single Premium QSR Agreement			Quota share reinsurance agreement entered into with a panel of third-party reinsurance providers in the first quarter of 2016 and subsequently amended in the fourth quarter of 2017
2018 Single Premium QSR Agreement			Quota share reinsurance agreement entered into with a panel of third-party reinsurance providers in October 2017 to cede a portion of Single Premium NIW beginning January 1, 2018
2020 Single Premium QSR Agreement			Quota share reinsurance agreement entered into with a panel of third-party reinsurance providers in January 2020 to cede a portion of Single Premium NIW beginning January 1, 2020
ABS			Asset-backed securities
All Other			Radian’s non-reportable operating segments and other business activities, including: (i) income (losses) from assets held by Radian Group; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; and (iii) certain investments in new business opportunities, including activities and investments associated with Radian Mortgage Capital, and other immaterial activities
ASU			Accounting Standards Update, issued by the FASB to communicate changes to GAAP
Available Assets			As defined in the PMIERs, assets primarily including the most liquid assets of a mortgage insurer, and reduced by, among other items, premiums received but not yet earned and reinsurance funds withheld
BMO			Bank of Montreal, a Canadian Chartered bank acting through its Chicago Branch
Claim Denial			Our legal right, under certain conditions, to deny a claim
Claim Severity			The total claim amount paid divided by the original coverage amount
CLO			Collateralized loan obligations
CMBS			Commercial mortgage-backed securities
COVID-19			The coronavirus disease declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention in March 2020
Cures			Loans that were in default as of the beginning of a period and are no longer in default because payments were received such that the loan is no longer 60 or more days past due
Default to Claim Rate			The percentage of defaulted loans that are assumed to result in a claim
Demotech			Demotech, Inc.
Disaster Related Capital Charge			Under the PMIERs, multiplier of 0.30 applied to the required asset amount factor for each non-performing loan: (i) backed by a property located in a FEMA Designated Area and (ii) either subject to a certain forbearance plan or with an initial default date occurring within a certain timeframe
Eagle Re Issuer(s)			A group of unaffiliated special purpose insurers (VIEs) domiciled in Bermuda, comprising Eagle Re 2018-1 Ltd., Eagle Re 2019-1 Ltd., Eagle Re 2020-1 Ltd., Eagle Re 2021-1 Ltd. and/or Eagle Re 2021-2 Ltd., which provide reinsurance coverage under Radian Guaranty’s Excess-of-Loss Program. The issuers also included Eagle Re 2020-2 Ltd. prior to its termination in September 2022.


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Term			Definition
Excess-of-Loss Program			The credit risk protection obtained by Radian Guaranty in the form of excess-of-loss reinsurance, which indemnifies the ceding company against loss in excess of a specific agreed limit, up to a specified sum. The program includes reinsurance agreements with the Eagle Re Issuers in connection with various issuances of mortgage insurance-linked notes. The program also included a separate agreement with a third-party reinsurer, prior to its termination in December 2021, representing a pro rata share of the credit risk alongside the risk assumed by Eagle Re 2018-1 Ltd., an Eagle Re Issuer.
Exchange Act			Securities Exchange Act of 1934, as amended
Extraordinary Distribution			A dividend or distribution of capital that is required to be approved by an insurance company’s primary regulator that is greater than would be permitted as an ordinary distribution (which does not require regulatory approval)
Fannie Mae			Federal National Mortgage Association
FASB			Financial Accounting Standards Board
FEMA			Federal Emergency Management Agency, an agency of the U.S. Department of Homeland Security
FEMA Designated Area			Generally, an area that has been subject to a disaster, designated by FEMA as an individual assistance disaster area for the purpose of determining eligibility for various forms of federal assistance
FHA			Federal Housing Administration
FHFA			Federal Housing Finance Agency
FHLB			Federal Home Loan Bank of Pittsburgh
FICO			Fair Isaac Corporation (“FICO”) credit scores, for Radian’s portfolio statistics, represent the borrower’s credit score at origination and, in circumstances where there are multiple borrowers, the lowest of the borrowers’ FICO scores is utilized
Fitch			Fitch Ratings, Inc.
Foreclosure Stage Defaulted Loans			Loans in the stage of default in which a foreclosure sale has been scheduled or held
Freddie Mac			Federal Home Loan Mortgage Corporation
GAAP			Generally accepted accounting principles in the U.S., as amended from time to time
Goldman Sachs			Goldman Sachs Bank USA
GSE(s)			Government-Sponsored Enterprises (Fannie Mae and Freddie Mac)
HARP			Home Affordable Refinance Program
homegenius			Radian’s business segment that offers an array of title, real estate and technology products and services to consumers, mortgage lenders, mortgage and real estate investors, GSEs, real estate brokers and agents
IBNR			Losses incurred but not reported
IIF			Insurance in force, equal to the aggregate unpaid principal balances of the underlying loans
LAE			Loss adjustment expenses, which include the cost of investigating and adjusting losses and paying claims
LIBOR			London Inter-bank Offered Rate
LTV			Loan-to-value ratio, calculated as the ratio of the original loan amount to the original value of the property, expressed as a percentage
Minimum Required Asset(s)			A risk-based minimum required asset amount, as defined in the PMIERs, calculated based on net RIF (RIF, net of credits permitted for reinsurance) and a variety of measures related to expected credit performance and other factors, including the impact of the Disaster Related Capital Charge
Model Act			Mortgage Guaranty Insurance Model Act, as issued by the National Association of Insurance Commissioners to establish minimum capital and surplus requirements for mortgage insurers
Monthly and Other Recurring Premiums (or Recurring Premium Policies)			Insurance premiums or policies, respectively, where premiums are paid on a monthly or other installment basis, in contrast to Single Premium Policies


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Term			Definition
Monthly Premium Policies			Insurance policies where premiums are paid on a monthly installment basis
Moody’s			Moody’s Investors Service
Mortgage			Radian’s mortgage insurance and risk services business segment, which provides credit-related insurance coverage, principally through private mortgage insurance on residential first-lien mortgage loans, as well as contract underwriting and other credit risk management solutions, to mortgage lending institutions and mortgage credit investors
MPP Requirement			Certain states’ statutory or regulatory risk-based capital requirement that the mortgage insurer must maintain a minimum policyholder position, which is calculated based on both risk and surplus levels
NIW			New insurance written, representing the aggregate original principal amount of the mortgages underlying the Primary Mortgage Insurance
NOL			Net operating loss; for tax purposes, accumulated during years a company reported more tax deductions than taxable income. NOLs may be carried back or carried forward a certain number of years, depending on various factors which can reduce a company’s tax liability.
Persistency Rate			The percentage of IIF that remains in force over a period of time
PMIERs			Private Mortgage Insurer Eligibility Requirements issued by the GSEs under oversight of the FHFA to set forth requirements an approved insurer must meet and maintain to provide mortgage guaranty insurance on loans acquired by the GSEs. The current PMIERs requirements, sometimes referred to as PMIERs 2.0, incorporate the most recent revisions to the PMIERs that became effective on March 31, 2019, as amended.
PMIERs Cushion			Under PMIERs, Radian Guaranty’s excess of Available Assets over Minimum Required Assets
Pool Mortgage Insurance			Insurance that provides a lender or investor protection against default on a group or “pool” of mortgages, rather than on an individual mortgage loan basis, generally subject to an aggregate exposure limit, or “stop loss,” and/or deductible applied to the initial aggregate loan balance of the entire pool, pursuant to the terms of the applicable insurance agreement
Primary Mortgage Insurance			Insurance that provides a lender or investor protection against default on an individual mortgage loan basis, at a specified coverage percentage for each loan, pursuant to the terms of the applicable Master Policy
QSR Program			The Single Premium QSR Program, the 2012 QSR Agreements and the 2022 QSR Agreement, collectively
Radian			Radian Group Inc. together with its consolidated subsidiaries
Radian Group			Radian Group Inc., our insurance holding company
Radian Guaranty			Radian Guaranty Inc., a Pennsylvania domiciled insurance subsidiary of Radian Group and our approved insurer under the PMIERs, through which we provide mortgage insurance products and services
Radian Mortgage Capital			Radian Mortgage Capital LLC, a Delaware limited liability company, and an indirect wholly-owned subsidiary of Radian Group, is a mortgage conduit formed to aggregate and then distribute residential mortgage loans into the capital markets through private label securitizations or sell directly to mortgage investors
Radian Reinsurance			Radian Reinsurance Inc., a Pennsylvania domiciled insurance subsidiary of Radian Group, through which we provide mortgage credit risk insurance and reinsurance, including through participation in credit risk transactions issued by the GSEs
Radian Title Insurance			Radian Title Insurance Inc., an Ohio domiciled insurance company and an indirect subsidiary of Radian Group, through which we offer title insurance
RBC States			Risk-based capital states, which are those states that currently impose a statutory or regulatory risk-based capital requirement
Rescission			Our legal right, under certain conditions, to unilaterally rescind coverage on our mortgage insurance policies if we determine that a loan did not qualify for insurance
RIF			Risk in force; for Primary Mortgage Insurance, RIF is equal to the underlying loan unpaid principal balance multiplied by the insurance coverage percentage, whereas for Pool Mortgage Insurance, it represents the remaining exposure under the agreements
Risk-to-capital			Under certain state regulations, a maximum ratio of net RIF calculated relative to the level of statutory capital


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Term			Definition
RMBS			Residential mortgage-backed securities
RSU			Restricted stock unit
S&P			Standard & Poor’s Financial Services LLC
SaaS			Software-as-a-Service
SAP			Statutory accounting principles and practices, including those required or permitted, if applicable, by the insurance departments of the respective states of domicile of our insurance subsidiaries
SEC			United States Securities and Exchange Commission
Securities Act			Securities Act of 1933, as amended
Senior Notes due 2024			Our 4.500% unsecured senior notes due October 2024 ($450 million original principal amount)
Senior Notes due 2025			Our 6.625% unsecured senior notes due March 2025 ($525 million original principal amount)
Senior Notes due 2027			Our 4.875% unsecured senior notes due March 2027 ($450 million original principal amount)
Single Premium NIW / IIF			NIW or IIF, respectively, on Single Premium Policies
Single Premium Policy / Policies			Insurance policies where premiums are paid in a single payment, which includes policies written on an individual basis (as each loan is originated) and on an aggregated basis (in which each individual loan in a group of loans is insured in a single transaction, typically shortly after the loans have been originated)
Single Premium QSR Program			The 2016 Single Premium QSR Agreement, the 2018 Single Premium QSR Agreement and the 2020 Single Premium QSR Agreement, collectively
SOFR			Secured Overnight Financing Rate
Statutory RBC Requirement			Risk-based capital requirement imposed by the RBC States, requiring a minimum surplus level and, in certain states, a minimum ratio of statutory capital relative to the level of risk
Surplus Note due 2027			The $100 million 0.0% intercompany surplus note issued by Radian Guaranty to Radian Group, due December 31, 2027
VIE			Variable interest entity


Table of Contents Glossary

Cautionary Note Regarding Forward-Looking Statements
—Safe Harbor Provisions

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, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as “anticipate,” “may,” “will,” “could,” “should,” “would,” “expect,” “intend,” “plan,” “goal,” “contemplate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “seek,” “strategy,” “future,” “likely” or the negative or other variations on these words and other similar expressions. These statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management’s current views and assumptions with respect to future events. These statements speak only as of the date they were made, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We operate in a changing environment where new risks emerge from time to time and it is not possible for us to predict all risks that may affect us. The forward-looking statements are not guarantees of future performance, and the forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. These risks and uncertainties include, without limitation:

■the health of the U.S. housing market generally and changes in economic conditions that impact the size of the insurable mortgage market, the credit performance of our insured mortgage portfolio and our business prospects, including more recently, changes resulting from inflationary pressures, the rising interest rate environment and the risk of a recession and higher unemployment rates, as well as other macroeconomic stresses such as those that may arise from the Russia-Ukraine conflict or other geopolitical events or as a result of the COVID-19 pandemic;

■changes in the way customers, investors, ratings agencies, regulators or legislators perceive our performance, financial strength and future prospects;

■Radian Guaranty’s ability to remain eligible under the PMIERs to insure loans purchased by the GSEs;

■our ability to maintain an adequate level of capital in our insurance subsidiaries to satisfy current and future regulatory requirements;

■changes in the charters or business practices of, or rules or regulations imposed by or applicable to, the GSEs or loans purchased by the GSEs, which may include changes in furtherance of housing policy objectives such as the accessibility and affordability of homeownership for low- and moderate-income borrowers and underrepresented communities, or changes in the requirements for Radian Guaranty to remain an approved insurer to the GSEs, such as changes in the PMIERs or the GSEs’ interpretation and application of the PMIERs or other applicable requirements;

■the effects of the Enterprise Capital Framework, which establishes a new regulatory capital framework for the GSEs, and which, as finalized, increases the capital requirements for the GSEs, and among other things, could impact the GSEs’ operations and pricing as well as the size of the insurable mortgage market, and which may form the basis for future changes to the PMIERs;

■changes in the current housing finance system in the United States, including the roles of the FHA, the GSEs and private mortgage insurers in this system;

■our ability to successfully execute and implement our capital plans, including our risk distribution strategy through the capital markets and traditional reinsurance markets, and to maintain sufficient holding company liquidity to meet our liquidity needs;

■our ability to successfully execute and implement our business plans and strategies, including plans and strategies that may require GSE and/or regulatory approvals and licenses, that are subject to complex compliance requirements that we may be unable to satisfy, or that may expose us to new risks, including those that could impact our capital and liquidity positions;

■uncertainty from the discontinuance of LIBOR and transition to one or more alternative benchmarks that could cause interest rate volatility and, among other things, impact our investment portfolio, cost of debt and cost of reinsurance through mortgage insurance-linked notes transactions;

■risks related to the quality of third-party mortgage underwriting and mortgage servicing;

■a decrease in the Persistency Rates of our mortgage insurance on Monthly Premium Policies;

■competition in the private mortgage insurance industry generally, and more specifically: price competition in our mortgage insurance business, including the prevalence of formulaic, granular risk-based pricing methodologies that are less transparent than historical rate-card-based pricing practices; and competition from the FHA and the U.S. Department of Veterans Affairs as well as from other forms of credit enhancement, such as GSE-sponsored alternatives to traditional mortgage insurance;


Table of Contents Glossary

■U.S. political conditions and legislative and regulatory activity (or inactivity), including the adoption of (or failure to adopt) new laws and regulations, or changes in existing laws and regulations, or the way they are interpreted or applied;

■legal and regulatory claims, assertions, actions, reviews, audits, inquiries and investigations that could result in adverse judgments, settlements, fines, injunctions, restitutions or other relief that could require significant expenditures, new or increased reserves or have other effects on our business;

■the amount and timing of potential payments or adjustments associated with federal or other tax examinations;

■the possibility that we may fail to estimate accurately, especially in the event of an extended economic downturn or a period of extreme market volatility and economic uncertainty, the likelihood, magnitude and timing of losses in establishing loss reserves for our mortgage insurance business or to accurately calculate and/or project our Available Assets and Minimum Required Assets under the PMIERs, which will be impacted by, among other things, the size and mix of our IIF, the level of defaults in our portfolio, the reported status of defaults in our portfolio (including whether they are subject to mortgage forbearance, a repayment plan or a loan modification trial period), the level of cash flow generated by our insurance operations and our risk distribution strategies;

■volatility in our financial results caused by changes in the fair value of our assets and liabilities, including with respect to our use of derivatives and within our investment portfolio;

■changes in GAAP or SAP rules and guidance, or their interpretation;

■risks associated with investments to grow our existing businesses, or to pursue new lines of business or new products and services, including our ability and related costs to develop, launch and implement new and innovative technologies and digital products and services, whether these products and services will receive broad customer acceptance or will disrupt existing customer relations, and additional financial risks related to these investments, including required changes in our investment, financing and hedging strategies, risks associated with our increased use of financial leverage, which could expose us to liquidity risks resulting from changes in the fair values of assets, and the risk that we may fail to achieve forecasted results which could result in lower or negative earnings contribution and/or impairment charges associated with intangible assets;

■the effectiveness and security of our information technology systems and digital products and services, including the risk that these systems, products or services fail to operate as expected or planned or expose us to cybersecurity or third-party risks, including due to malware, unauthorized access, cyber-attack, ransomware or other similar events;

■our ability to attract and retain key employees; and

■legal and other limitations on amounts we may receive from our subsidiaries, including dividends or ordinary course distributions under our internal tax- and expense-sharing arrangements.

For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to “Item 1A. Risk Factors” in this report and “Item 1A. Risk Factors” in our 2021 Form 10-K, and to subsequent reports and registration statements filed from time to time with the SEC. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which we issued this report. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements to reflect new information or future events or for any other reason.


Table of Contents Glossary

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Index to Condensed Consolidated Financial Statements


			Page
Quarterly Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)			10
Condensed Consolidated Statements of Operations (Unaudited)			11
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)			12
Condensed Consolidated Statements of Changes in Common Stockholders’ Equity (Unaudited)			13
Condensed Consolidated Statements of Cash Flows (Unaudited)			14

Notes to Unaudited Condensed Consolidated Financial Statements
Note 1 - Description of Business			15
Note 2 - Significant Accounting Policies			16
Note 3 - Net Income Per Share			17
Note 4 - Segment Reporting			17
Note 5 - Fair Value of Financial Instruments			19
Note 6 - Investments			23
Note 7 - Goodwill and Other Acquired Intangible Assets, Net			27
Note 8 - Reinsurance			27
Note 9 - Other Assets			32
Note 10 - Income Taxes			32
Note 11 - Losses and LAE			33
Note 12 - Borrowings and Financing Activities			34
Note 13 - Commitments and Contingencies			35
Note 14 - Capital Stock			36
Note 15 - Accumulated Other Comprehensive Income (Loss)			38
Note 16 - Statutory Information			39


Table of Contents Glossary

Radian Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)


(In thousands, except per-share amounts)	September 30, 2022		December 31, 2021
Assets
Investments (Notes 5 and 6)
Fixed-maturities available for sale—at fair value (amortized cost of $5,535,532 and $5,367,729)	$	4,909,232	$	5,517,078
Trading securities—at fair value (amortized cost of $146,446 and $234,382)	139,901		256,546
Equity securities—at fair value (cost of $162,320 and $176,229)	145,155		184,245
Short-term investments—at fair value (includes $85,777 and $48,652 of reinvested cash collateral held under securities lending agreements)	392,514		551,508
Other invested assets—at fair value	5,079		4,165
Total investments	5,591,881		6,513,542
Cash	54,701		151,145
Restricted cash	1,107		1,475
Accrued investment income	38,596		32,812
Accounts and notes receivable	174,041		124,016
Reinsurance recoverables (includes $12 and $51 for paid losses)	30,569		67,896
Deferred policy acquisition costs	17,920		16,317
Property and equipment, net	75,740		75,086
Goodwill and other acquired intangible assets, net (Note 7)	16,873		19,593
Prepaid federal income taxes (Note 10)	526,123		354,123
Other assets (Note 9)	458,292		483,180
Total assets	$	6,985,843	$	7,839,185

Liabilities and stockholders’ equity
Liabilities
Unearned premiums	$	285,290	$	329,090
Reserve for losses and LAE (Note 11)	483,664		828,642
Senior notes (Note 12)	1,412,473		1,409,473
FHLB advances (Note 12)	153,550		150,983
Reinsurance funds withheld	218,777		228,078
Net deferred tax liability (Note 10)	335,374		337,509
Other liabilities	358,665		296,614
Total liabilities	3,247,793		3,580,389
Commitments and contingencies (Note 13)
Stockholders’ equity
Common stock ($0.001 par value; 485,000 shares authorized; 2022: 176,497 and 157,058 shares issued and outstanding, respectively; 2021: 194,408 and 175,421 shares issued and outstanding, respectively)	176		194
Treasury stock, at cost (2022: 19,440 shares; 2021: 18,987 shares)	(930,396)		(920,798)
Additional paid-in capital	1,513,615		1,878,372
Retained earnings	3,656,870		3,180,935
Accumulated other comprehensive income (loss) (Note 15)	(502,215)		120,093
Total stockholders’ equity	3,738,050		4,258,796
Total liabilities and stockholders’ equity	$	6,985,843	$	7,839,185

See Notes to Unaudited Condensed Consolidated Financial Statements.


Table of Contents Glossary

Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per-share amounts)	2022		2021		2022		2021
Revenues
Net premiums earned (Note 8)	$	240,222	$	249,118	$	748,304	$	775,746
Services revenue (Note 4)	20,146		37,773		76,775		90,132
Net investment income	51,414		35,960		136,567		110,502
Net gains (losses) on investments and other financial instruments (includes net realized gains (losses) on investments of $(4,139), $14,246, $(8,454) and $18,330) (Note 6)	(16,252)		2,098		(87,578)		12,578
Other income	659		809		1,934		2,607
Total revenues	296,189		325,758		876,002		991,565

Expenses
Provision for losses	(96,964)		17,305		(294,640)		67,096
Policy acquisition costs	5,442		7,924		17,987		21,758
Cost of services	18,717		30,520		66,230		75,381
Other operating expenses	91,327		86,479		271,363		243,210
Interest expense	21,183		21,027		62,860		63,207
Amortization of other acquired intangible assets	1,023		862		2,721		2,587
Total expenses	40,728		164,117		126,521		473,239

Pretax income	255,461		161,641		749,481		518,326
Income tax provision	57,181		35,229		168,877		111,100
Net income	$	198,280	$	126,412	$	580,604	$	407,226

Net income per share
Basic	$	1.22	$	0.68	$	3.39	$	2.13
Diluted	$	1.20	$	0.67	$	3.34	$	2.11

Weighted-average number of common shares outstanding—basic	162,506		186,741		171,116		191,357
Weighted-average number of common and common equivalent shares outstanding—diluted	164,738		188,042		173,618		192,902

See Notes to Unaudited Condensed Consolidated Financial Statements.


Table of Contents Glossary

Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2022		2021		2022		2021
Net income	$	198,280	$	126,412	$	580,604	$	407,226
Other comprehensive income (loss), net of tax (Note 15)
Unrealized holding gains (losses) on investments arising during the period for which an allowance for expected losses has not been recognized	(176,391)		(23,394)		(630,348)		(106,286)
Less: Reclassification adjustment for net gains (losses) on investments included in net income
Net realized gains (losses) on disposals and non-credit related impairment losses	(3,281)		3,238		(7,956)		4,490
Net decrease (increase) in expected credit losses	—		—		—		725
Net unrealized gains (losses) on investments	(173,110)		(26,632)		(622,392)		(111,501)
Other adjustments to comprehensive income (loss), net	—		—		84		—
Other comprehensive income (loss), net of tax	(173,110)		(26,632)		(622,308)		(111,501)
Comprehensive income (loss)	$	25,170	$	99,780	$	(41,704)	$	295,725

See Notes to Unaudited Condensed Consolidated Financial Statements.


Table of Contents Glossary

Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Common Stockholders’ Equity (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2022		2021		2022		2021
Common stock
Balance, beginning of period	$	186	$	207	$	194	$	210
Issuance of common stock under incentive and benefit plans	—		—		2		1
Shares repurchased under share repurchase program (Note 14)	(10)		(7)		(20)		(11)
Balance, end of period	176		200		176		200

Treasury stock
Balance, beginning of period	(930,284)		(920,225)		(920,798)		(910,115)
Repurchases of common stock under incentive plans	(112)		(130)		(9,598)		(10,240)
Balance, end of period	(930,396)		(920,355)		(930,396)		(920,355)

Additional paid-in capital
Balance, beginning of period	1,698,490		2,161,857		1,878,372		2,245,897
Issuance of common stock under incentive and benefit plans	1,525		1,007		3,163		2,944
Share-based compensation	7,714		8,282		31,280		20,996
Shares repurchased under share repurchase program (Note 14)	(194,114)		(158,276)		(399,200)		(256,967)
Balance, end of period	1,513,615		2,012,870		1,513,615		2,012,870

Retained earnings
Balance, beginning of period	3,491,675		2,913,138		3,180,935		2,684,636
Net income	198,280		126,412		580,604		407,226
Dividends and dividend equivalents declared	(33,085)		(26,553)		(104,669)		(78,865)
Balance, end of period	3,656,870		3,012,997		3,656,870		3,012,997

Accumulated other comprehensive income (loss)
Balance, beginning of period	(329,105)		178,856		120,093		263,725
Net unrealized gains (losses) on investments, net of tax	(173,110)		(26,632)		(622,392)		(111,501)
Other adjustments to other comprehensive income (loss)	—		—		84		—

Balance, end of period	(502,215)		152,224		(502,215)		152,224

Total stockholders’ equity	$	3,738,050	$	4,257,936	$	3,738,050	$	4,257,936

See Notes to Unaudited Condensed Consolidated Financial Statements.


Table of Contents Glossary

Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended September 30,
(In thousands)	2022		2021
Cash flows from operating activities
Net cash provided by (used in) operating activities	$	282,148	$	403,304

Cash flows from investing activities
Proceeds from sales of:
Fixed-maturities available for sale	395,976		536,387
Trading securities	8,829		7,952
Equity securities	7,645		29,289
Proceeds from redemptions of:
Fixed-maturities available for sale	663,255		917,027
Trading securities	78,462		11,703
Purchases of:
Fixed-maturities available for sale	(1,238,636)		(1,413,445)

Equity securities	(23,225)		(102,956)
Sales, redemptions and (purchases) of:
Short-term investments, net	168,933		(17,474)
Other assets and other invested assets, net	(534)		6,253

Additions to property and equipment	(12,149)		(8,720)

Net cash provided by (used in) investing activities	48,556		(33,984)

Cash flows from financing activities
Dividends and dividend equivalents paid	(103,721)		(78,165)


Issuance of common stock	1,118		1,225
Repurchases of common stock	(387,111)		(251,482)
Credit facility commitment fees paid	(574)		(710)
Change in secured borrowings, net (with terms three months or less)	60,204		38,241
Proceeds from secured borrowings (with terms greater than three months)	26,568		32,000
Repayments of secured borrowings (with terms greater than three months)	(24,000)		(48,000)

Net cash provided by (used in) financing activities	(427,516)		(306,891)


Increase (decrease) in cash and restricted cash	(96,812)		62,429
Cash and restricted cash, beginning of period	152,620		94,146
Cash and restricted cash, end of period	$	55,808	$	156,575

See Notes to Unaudited Condensed Consolidated Financial Statements.


Table of Contents Glossary			Radian Group Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of Business

We are a diversified mortgage and real estate business, providing both credit-related mortgage insurance coverage and an array of other mortgage, risk, title, real estate and technology products and services. We have two reportable business segments—Mortgage and homegenius.

Mortgage

Our Mortgage segment provides credit-related insurance coverage, principally through private mortgage insurance on residential first-lien mortgage loans, as well as contract underwriting and other credit risk management solutions, to mortgage lending institutions and mortgage credit investors. We provide our mortgage insurance products and services mainly through our wholly-owned subsidiary, Radian Guaranty.

Private mortgage insurance plays an important role in the U.S. housing finance system because it promotes affordable home ownership and helps protect mortgage lenders and mortgage investors, as well as other beneficiaries such as the GSEs, by mitigating default-related losses on residential mortgage loans. Generally, these loans are made to homebuyers who make down payments of less than 20% of the purchase price for their home or, in the case of refinancings, have less than 20% equity in their home. Private mortgage insurance also facilitates the sale of these low down payment loans in the secondary mortgage market, almost all of which are currently sold to the GSEs.

Our total direct primary mortgage IIF and RIF were $259.1 billion and $65.3 billion, respectively, as of September 30, 2022, compared to $246.0 billion and $60.9 billion, respectively, as of December 31, 2021. In addition to providing private mortgage insurance, we have participated in credit risk transfer programs developed by the GSEs as part of their initiative to distribute mortgage credit risk and increase the role of private capital in the mortgage market. Our additional RIF under credit risk transfer transactions, resulting from our participation in these programs with the GSEs, totaled $276.2 million as of September 30, 2022, compared to $417.7 million as of December 31, 2021.

The GSEs and state insurance regulators impose various capital and financial requirements on our mortgage insurance subsidiaries. These include the PMIERs financial requirements as well as risk-to-capital and other risk-based capital measures and surplus requirements. Failure to comply with these capital and financial requirements may limit the amount of insurance that our mortgage insurance subsidiaries write, or may prohibit them from writing insurance altogether. The GSEs and state insurance regulators possess significant discretion with respect to our mortgage insurance subsidiaries and most aspects of their business. See Note 16 for additional information on PMIERs and other regulatory information.

homegenius

Our homegenius segment is primarily a fee-for-service business that offers an array of products and services to market participants across the real estate value chain. Our homegenius products and services include title, real estate and technology products and services offered primarily to consumers, mortgage lenders, mortgage and real estate investors, GSEs, real estate brokers and agents. These products and services help lenders, investors, consumers and real estate agents evaluate, manage, monitor, acquire and sell properties. They include SaaS solutions and platforms, as well as managed services, such as real estate owned asset management, single family rental services and real estate valuation services. In addition, we provide title insurance and non-insurance title, closing and settlement services to mortgage lenders, GSEs and mortgage investors, as well as directly to consumers for residential mortgage loans.

See Note 4 for additional information about our reportable segments and All Other business activities.

Risks and Uncertainties

In assessing the Company’s current financial condition and developing forecasts of future operations, management has made significant judgments and estimates with respect to potential factors impacting our financial and liquidity position. These judgments and estimates are subject to risks and uncertainties that could affect amounts reported in our financial statements in future periods and that could cause actual results to be materially different from our estimates, including as a result of macroeconomic stresses such as inflation, slower economic growth and higher levels of unemployment.

The U.S. economy is currently experiencing a high rate of inflation and slower economic growth, with annual inflation reaching a 40-year high in September 2022. Recent actions taken by the U.S. Federal Reserve to increase interest rates in response to these inflationary pressures led to a sharp and significant increase in mortgage interest rates during the first nine months of 2022. The U.S. Federal Reserve raised rates further in the fourth quarter of 2022 and has signaled that it expects to continue to increase rates in future periods. While we expect these interest rate increases to continue to negatively impact certain aspects of our results, including through lower NIW, lower homegenius revenues and lower investment fair values, we also expect to benefit from the rate increases due to higher Persistency Rates that will favorably impact our IIF, as well as through the recognition of higher net investment income. The current economic conditions have negatively impacted the U.S. housing market, which has experienced decreasing home prices in recent months in many markets, significantly reduced


Table of Contents Glossary			Radian Group Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements

refinance activity and a reduced amount of new purchase transactions. Further, risk of a recession and the likelihood of an increase in unemployment rates increase the likelihood that we will experience greater default activity and lower levels of Cures in our mortgage insurance portfolio.

2. Significant Accounting Policies

Basis of Presentation

Our condensed consolidated financial statements are prepared in accordance with GAAP and include the accounts of Radian Group Inc. and its subsidiaries. All intercompany accounts and transactions, and intercompany profits and losses, have been eliminated. We have condensed or omitted certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP pursuant to the instructions set forth in Article 10 of Regulation S-X of the SEC.

We refer to Radian Group Inc. together with its consolidated subsidiaries as “Radian,” the “Company,” “we,” “us” or “our,” unless the context requires otherwise. We generally refer to Radian Group Inc. alone, without its consolidated subsidiaries, as “Radian Group.” Unless otherwise defined in this report, certain terms and acronyms used throughout this report are defined in the Glossary of Abbreviations and Acronyms included as part of this report.

The financial information presented for interim periods is unaudited; however, such information reflects all adjustments that are, in the opinion of management, necessary for the fair statement of the financial position, results of operations, comprehensive income (loss) and cash flows for the interim periods presented. Such adjustments are of a normal recurring nature. The year-end condensed consolidated balance sheet data was derived from our audited financial statements, but does not include all disclosures required by GAAP.

To fully understand the basis of presentation, these interim financial statements and related notes contained herein should be read in conjunction with the audited financial statements and notes thereto included in our 2021 Form 10-K. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or for any other period.

Certain prior period amounts have been reclassified to conform to current period presentation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of our contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. While the amounts included in our condensed consolidated financial statements include our best estimates and assumptions, actual results may vary materially.

Other Significant Accounting Policies

See Note 2 of Notes to Consolidated Financial Statements in our 2021 Form 10-K for information regarding other significant accounting policies. There have been no significant changes in our significant accounting policies from those discussed in our 2021 Form 10-K.

Recent Accounting Pronouncements

Accounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU 2018-12, Financial Services—Insurance—Targeted Improvements to the Accounting for Long-Duration Contracts. The new standard: (i) requires that assumptions used to measure the liability for future policy benefits be reviewed at least annually; (ii) defines and simplifies the measurement of market risk benefits; (iii) simplifies the amortization of deferred acquisition costs; and (iv) enhances the required disclosures about long-duration contracts. This update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. We continue to evaluate the impact the new accounting guidance will have on our financial statements and disclosures but do not expect the adoption of these amendments to have a material impact on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform—Facilitation of the Effects of Reference Reform on Financial Reporting. This new guidance provides optional expedients and exceptions for applying GAAP requirements to investments, derivatives, or other transactions affected by reference rate reform such as those that impact the assessment of contract modifications. The amendments in this update are optional and may be elected from the date of issuance through December 31, 2022, as reference rate reform activities occur. We continue to monitor the impact the discontinuance of LIBOR


Table of Contents Glossary			Radian Group Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements

and the new accounting guidance will have on our financial statements and disclosures but do not expect the adoption of these amendments to have a material impact on our consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. In addition, this update introduces new disclosure requirements for equity securities subject to contractual sale restrictions measured at fair value. The amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of this ASU to have a material effect on our consolidated operating results or financial position.

3. Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding, while diluted net income per share is computed by dividing net income attributable to common stockholders by the sum of the weighted-average number of common shares outstanding and the weighted-average number of dilutive potential common shares. Dilutive potential common shares relate to our share-based compensation arrangements.

The calculation of basic and diluted net income per share is as follows.


Net income per share

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per-share amounts)	2022		2021		2022		2021
Net income—basic and diluted	$	198,280	$	126,412	$	580,604	$	407,226

Average common shares outstanding—basic	162,506		186,741		171,116		191,357
Dilutive effect of share-based compensation arrangements	2,232		1,301		2,502		1,545
Adjusted average common shares outstanding—diluted	164,738		188,042		173,618		192,902

Net income per share
Basic	$	1.22	$	0.68	$	3.39	$	2.13
Diluted	$	1.20	$	0.67	$	3.34	$	2.11

4. Segment Reporting

We have two strategic business units that we manage separately—Mortgage and homegenius. Our Mortgage segment derives its revenue from mortgage insurance and other mortgage and risk services, including contract underwriting solutions provided to mortgage lending institutions and mortgage credit investors. Our homegenius segment offers an array of title, real estate and technology products and services to consumers, mortgage lenders, mortgage and real estate investors, GSEs, real estate brokers and agents.

In addition, we report as All Other activities that include: (i) income (losses) from assets held by Radian Group, our holding company; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; and (iii) certain investments in new business opportunities, including activities and investments associated with Radian Mortgage Capital, and other immaterial activities.

We allocate corporate operating expenses to both reportable segments based primarily on each segment’s forecasted annual percentage of total revenue, which approximates the estimated percentage of management time spent on each segment. In addition, we allocate all corporate interest expense to our Mortgage segment, due to the capital-intensive nature of our mortgage insurance business.

With the primary exception of goodwill and other acquired intangible assets, which all relate to our homegenius segment, and are reviewed as part of our annual goodwill impairment assessment, we do not manage assets by segment.

See Note 1 for additional details about our Mortgage and homegenius businesses.


Table of Contents Glossary			Radian Group Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements

Adjusted Pretax Operating Income (Loss)

Our senior management, including our Chief Executive Officer (Radian’s chief operating decision maker), uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of each of Radian’s business segments and to allocate resources to the segments.

Adjusted pretax operating income (loss) is defined as pretax income (loss) excluding the effects of: (i) net gains (losses) on investments and other financial instruments, except for certain investments attributable to our reportable segments; (ii) gains (losses) on extinguishment of debt; (iii) amortization and impairment of goodwill and other acquired intangible assets; and (iv) impairment of other long-lived assets and other non-operating items, such as impairment of internal-use software, gains (losses) from the sale of lines of business and acquisition-related income and expenses. See Note 4 of Notes to Consolidated Financial Statements in our 2021 Form 10-K for detailed information regarding items excluded from adjusted pretax operating income (loss), including the reasons for their treatment.

Although adjusted pretax operating income (loss) excludes certain items that have occurred in the past and are expected to occur in the future, the excluded items represent those that are: (i) not viewed as part of the operating performance of our primary activities or (ii) not expected to result in an economic impact equal to the amount reflected in pretax income (loss).

The reconciliation of adjusted pretax operating income (loss) for our reportable segments to consolidated pretax income (loss) is as follows.