RADIAN GROUP INC [RDN] Filings

10-Q 1 rdn-20210930.htm 10-Q rdn-20210930

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, 2021


☐			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)

1500 Market Street, Philadelphia, PA 19102

(Former name, former address and former fiscal year, if changed since last report)

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: 179,333,136 shares of common stock, $0.001 par value per share, outstanding on November 3, 2021.

Table of Contents


		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	65
Item 4	Controls and Procedures	65

PART II—OTHER INFORMATION
Item 1	Legal Proceedings	66
Item 1A	Risk Factors	66
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 6	Exhibits	69

Signatures		70


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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
2020 Form 10-K			Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021
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
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
2017 Surplus Note			The $100 million 0.0% intercompany surplus note issued by Radian Guaranty to Radian Group, due December 31, 2027
2020 Surplus Note			The $200 million 3.0% intercompany surplus note issued by Radian Guaranty to Radian Group, which was initially due January 31, 2030 but was converted to contributed surplus effective April 1, 2021
ABS			Asset-backed securities
All Other			Radian’s non-reportable operating segments and other business activities, including: (i) income (losses) from assets held by our holding company; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; (iii) for all periods prior to its sale in the first quarter of 2020, income and expenses related to Clayton; (iv) for all periods presented, the income and expenses related to our traditional appraisal services; and (v) certain other immaterial revenue and expense items
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
CARES Act			Coronavirus Aid, Relief, and Economic Security Act signed into law on March 27, 2020
Claim Curtailment			Our legal right, under certain conditions, to reduce the amount of a claim, including due to servicer negligence
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
Clayton			Clayton Services LLC, a former indirect subsidiary of Radian Group that was sold on January 21, 2020, through which we provided services related to loan acquisition, RMBS securitization and distressed asset reviews and servicer and loan surveillance
CLO			Collateralized loan obligations
CMBS			Commercial mortgage-backed securities
COVID-19			The novel coronavirus disease declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention in March 2020
COVID-19 Amendment			Amendment to the PMIERs effective June 30, 2020, primarily to recognize the COVID-19 pandemic as a nationwide “FEMA Declared Major Disaster” and to set forth guidelines on the application of the Disaster Related Capital Charge to COVID-19 Defaulted Loans
COVID-19 Crisis Period			Time period extending from March 1, 2020 to March 31, 2021


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Term			Definition
COVID-19 Defaulted Loans			All non-performing loans that either: (i) have an Initial Missed Payment occurring during the COVID-19 Crisis Period or (ii) are subject to a forbearance plan granted in response to a financial hardship related to COVID-19 (which is assumed under the COVID-19 Amendment to be the case for any loan that has an Initial Missed Payment occurring during the COVID-19 Crisis Period and is subject to a forbearance plan), the terms of which are materially consistent with the terms of forbearance plans offered by the GSEs
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
Dodd-Frank Act			Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended
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 2020-2 Ltd., and/or Eagle Re 2021-1 Ltd., which provide reinsurance coverage under Radian Guaranty’s Excess-of-Loss Program.
ERCF			Enterprise Regulatory Capital Framework, which was finalized by the FHFA in December 2020 and established a new regulatory capital framework for the GSEs
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 includes a separate agreement with a third-party reinsurer, 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.
Freddie Mac			Federal Home Loan Mortgage Corporation
GAAP			Generally accepted accounting principles in the U.S., as amended from time to time
GSE(s)			Government-Sponsored Enterprises (Fannie Mae and Freddie Mac)
HARP			Home Affordable Refinance Program
homegenius			Radian’s business segment (formerly known as “Real Estate”) that offers a broad array of title, valuation, asset management, SaaS and other real estate services to 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


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Term			Definition
Initial Missed Payment			The first missed monthly payment, which would be reported to us as delinquent as of the last day of the month for which it was due. (For example, for a loan first reported to the approved insurer in May as having missed its payments due on April 1 and May 1, the Initial Missed Payment shall be deemed to have occurred on April 30. In this example, the loan would become a non-performing primary mortgage guaranty insurance loan in May and, if applicable, the Disaster Related Capital Charge would be applied for May, June, and July.)
LAE			Loss adjustment expenses, which include the cost of investigating and adjusting losses and paying claims
LIBOR			London Inter-bank Offered Rate
Loss Mitigation Activity/Activities			Activities such as Rescissions, Claim Denials, Claim Curtailments and cancellations
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
Master Policies			The Prior Master Policy, the 2014 Master Policy, and the 2020 Master Policy, together
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
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 other credit risk management, contract underwriting and fulfillment 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.
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
Prior Master Policy			Radian Guaranty’s master insurance policy, setting forth the terms and conditions of our mortgage insurance coverage, which was in effect prior to the effective date of the 2014 Master Policy


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Term			Definition
QM			Qualified mortgage; a mortgage that possesses certain low-risk characteristics that enable it to qualify for lender protection under the ability to repay rule instituted by the Dodd-Frank Act
QSR Program			The quota share reinsurance agreements entered into with a third-party reinsurance provider in the second and fourth quarters of 2012, 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 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
RMBS			Residential mortgage-backed securities
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			NIW 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
Stage of Default			The stage a loan is in relative to the foreclosure process, based on whether a foreclosure sale has been scheduled or held
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
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, including management’s current views regarding the likely impacts of the COVID-19 pandemic. 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, particularly those associated with the COVID-19 pandemic, which has had wide-ranging and continually evolving effects. 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 COVID-19 pandemic, which has caused significant economic disruption, high unemployment, periods of volatility and disruption in financial markets, and required adjustments in the housing finance system and real estate markets. The COVID-19 pandemic has adversely impacted our businesses, and the COVID-19 pandemic could further impact our business and subject us to certain risks, including those discussed in “Item 1A. Risk Factors—The COVID-19 pandemic has adversely impacted us, and its ultimate impact on our business and financial results will depend on future developments, which are highly uncertain and cannot be predicted, including the scope, severity and duration of the pandemic and actions taken by governmental authorities in response to the pandemic” and the other risk factors in our 2020 Form 10-K;

■changes in economic conditions that impact the size of the insurable market, the credit performance of our insured portfolio, and our business prospects;

■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 and other applicable requirements imposed by the FHFA and by the GSEs to insure loans purchased by the GSEs;

■our ability to maintain an adequate level of capital in our insurance subsidiaries to satisfy existing and future regulatory requirements, including the PMIERs and any changes thereto and potential changes to the Model Act currently under consideration;

■changes in the charters or business practices of, or rules or regulations imposed by or applicable to, the GSEs, which may include further changes in response to the COVID-19 pandemic, changes in furtherance of housing policy objectives such as the current FHFA focus on increasing the accessibility and affordability of homeownership for low-and-moderate income borrowers and minority communities, changes in the requirements for Radian Guaranty to remain an approved insurer to the GSEs, changes in the GSEs’ interpretation and application of the PMIERs, or changes impacting loans purchased by the GSEs;

■the effects of the ERCF which, among other things, increases the capital requirements for the GSEs and reduces the credit they receive for risk transfer, which could impact their operations and pricing as well as the size of the insurable mortgage insurance market, and which may form the basis for future versions of 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 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 require GSE and/or regulatory approvals and licenses or 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 upcoming 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;

■any disruption in the servicing of mortgages covered by our insurance policies, as well as poor servicer performance, which could be impacted by the burdens placed on many servicers due to the COVID-19 pandemic;


Table of Contents Glossary

■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 as a result of the increased use of loan-level pricing delivery methodologies that are less transparent than historical 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;

■the effect of the Dodd-Frank Act on the financial services industry in general, and on our businesses in particular;

■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, including potential changes in tax law and other matters currently under consideration in the U.S. Congress;

■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 forbearance, a repayment plan or a loan modification trial period granted in response to a financial hardship related to COVID-19, 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;

■our ability and related costs to develop, launch and implement new and innovative technologies and digital products and services, and whether we will have broad customer acceptance of these products and services;

■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 computer viruses, unauthorized access, cyber-attack, natural disasters 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 2020 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			10
Condensed Consolidated Statements of Operations			11
Condensed Consolidated Statements of Comprehensive Income (Loss )			12
Condensed Consolidated Statements of Changes in Common Stockholders’ Equity			13
Condensed Consolidated Statements of Cash Flows			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			18
Note 4 - Segment Reporting			18
Note 5 - Fair Value of Financial Instruments			20
Note 6 - Investments			23
Note 7 - Goodwill and Other Acquired Intangible Assets, Net			27
Note 8 - Reinsurance			28
Note 9 - Other Assets			31
Note 10 - Income Taxes			32
Note 11 - Losses and LAE			32
Note 12 - Borrowings and Financing Activities			34
Note 13 - Commitments and Contingencies			35
Note 14 - Capital Stock			35
Note 15 - Accumulated Other Comprehensive Income (Loss)			37
Note 16 - Statutory Information			38


Table of Contents Glossary

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


(In thousands, except per-share amounts)	September 30, 2021		December 31, 2020
Assets
Investments (Notes 5 and 6)
Fixed-maturities available for sale—at fair value, net of allowance for credit losses of $0 and $948 (amortized cost of $5,391,584 and $5,393,623)	$	5,580,212	$	5,723,340
Trading securities—at fair value (amortized cost of $239,709 and $260,773)	263,363		290,885
Equity securities—at fair value (cost of $188,501 and $145,501)	193,498		151,240
Short-term investments—at fair value (includes $41,661 and $15,587 of reinvested cash collateral held under securities lending agreements)	617,515		618,004
Other invested assets—at fair value	3,899		4,973
Total investments	6,658,487		6,788,442
Cash	154,709		87,915
Restricted cash	1,866		6,231
Accrued investment income	33,258		34,047
Accounts and notes receivable	166,730		121,294
Reinsurance recoverables (includes $12 and $32 for paid losses)	76,048		73,202
Deferred policy acquisition costs	16,823		18,305
Property and equipment, net	74,170		80,457
Goodwill and other acquired intangible assets, net (Note 7)	20,456		23,043
Other assets (Note 9)	839,061		715,085
Total assets	$	8,041,608	$	7,948,021

Liabilities and Stockholders’ Equity
Liabilities
Unearned premiums	$	348,322	$	448,791
Reserve for losses and LAE (Note 11)	893,155		848,413
Senior notes (Note 12)	1,408,502		1,405,674
FHLB advances (Note 12)	172,649		176,483
Reinsurance funds withheld	290,502		278,555
Net deferred tax liability (Note 10)	286,957		213,897
Other liabilities	383,585		291,855
Total liabilities	3,783,672		3,663,668
Commitments and contingencies (Note 13)
Stockholders’ equity
Common stock: par value $0.001 per share; 485,000 shares authorized at September 30, 2021 and December 31, 2020; 200,302 and 210,130 shares issued at September 30, 2021 and December 31, 2020, respectively; 181,336 and 191,606 shares outstanding at September 30, 2021 and December 31, 2020, respectively	200		210
Treasury stock, at cost: 18,966 and 18,524 shares at September 30, 2021 and December 31, 2020, respectively	(920,355)		(910,115)
Additional paid-in capital	2,012,870		2,245,897
Retained earnings	3,012,997		2,684,636
Accumulated other comprehensive income (loss) (Note 15)	152,224		263,725
Total stockholders’ equity	4,257,936		4,284,353
Total liabilities and stockholders’ equity	$	8,041,608	$	7,948,021

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)	2021		2020		2021		2020
Revenues
Net premiums earned (Note 8)	$	249,118	$	286,471	$	775,746	$	813,181
Services revenue (Note 4)	37,773		33,943		90,132		93,945
Net investment income	35,960		36,255		110,502		115,922
Net gains (losses) on investments and other financial instruments	2,098		17,652		12,578		42,901
Other income	809		913		2,607		2,807
Total revenues	325,758		375,234		991,565		1,068,756

Expenses
Provision for losses	17,305		88,084		67,096		428,453
Policy acquisition costs	7,924		10,166		21,758		23,594
Cost of services	30,520		24,353		75,381		64,466
Other operating expenses	86,479		69,377		243,210		199,069
Interest expense	21,027		21,088		63,207		49,981
Amortization and impairment of other acquired intangible assets	862		961		2,587		2,919
Total expenses	164,117		214,029		473,239		768,482

Pretax income	161,641		161,205		518,326		300,274
Income tax provision	35,229		26,102		111,100		54,661
Net income	$	126,412	$	135,103	$	407,226	$	245,613

Net Income Per Share
Basic	$	0.68	$	0.70	$	2.13	$	1.25
Diluted	$	0.67	$	0.70	$	2.11	$	1.25

Weighted-average number of common shares outstanding—basic	186,741		193,176		191,357		196,120
Weighted-average number of common and common equivalent shares outstanding—diluted	188,042		194,156		192,902		197,247

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)	2021		2020		2021		2020
Net income	$	126,412	$	135,103	$	407,226	$	245,613
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	(23,394)		30,839		(106,286)		143,602
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	3,238		10,884		4,490		24,172
Net decrease (increase) in expected credit losses	—		147		725		(2,051)


Other comprehensive income (loss), net of tax	(26,632)		19,808		(111,501)		121,481
Comprehensive income	$	99,780	$	154,911	$	295,725	$	367,094

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)	2021		2020		2021		2020
Common Stock
Balance, beginning of period	$	207	$	210	$	210	$	219
Issuance of common stock under incentive and benefit plans	—		—		1		2
Shares repurchased under share repurchase program (Note 14)	(7)		—		(11)		(11)
Balance, end of period	200		210		200		210

Treasury Stock
Balance, beginning of period	(920,225)		(909,738)		(910,115)		(901,657)
Repurchases of common stock under incentive plans	(130)		(7)		(10,240)		(8,088)
Balance, end of period	(920,355)		(909,745)		(920,355)		(909,745)

Additional Paid-in Capital
Balance, beginning of period	2,161,857		2,232,949		2,245,897		2,449,884
Issuance of common stock under incentive and benefit plans	1,007		825		2,944		3,096
Share-based compensation	8,282		5,095		20,996		12,183
Shares repurchased under share repurchase program (Note 14)	(158,276)		—		(256,967)		(226,294)
Balance, end of period	2,012,870		2,238,869		2,012,870		2,238,869

Retained Earnings
Balance, beginning of period	2,913,138		2,450,423		2,684,636		2,389,789
Net income	126,412		135,103		407,226		245,613
Dividends and dividend equivalents declared	(26,553)		(24,450)		(78,865)		(74,326)
Balance, end of period	3,012,997		2,561,076		3,012,997		2,561,076

Accumulated Other Comprehensive Income (Loss)
Balance, beginning of period	178,856		212,161		263,725		110,488
Net unrealized gains (losses) on investments, net of tax	(26,632)		19,808		(111,501)		121,481

Balance, end of period	152,224		231,969		152,224		231,969

Total Stockholders’ Equity	$	4,257,936	$	4,122,379	$	4,257,936	$	4,122,379

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)	2021		2020
Cash Flows from Operating Activities
Net cash provided by (used in) operating activities	$	403,304	$	498,756

Cash Flows from Investing Activities
Proceeds from sales of:
Fixed-maturities available for sale	536,387		894,998
Trading securities	7,952		11,602
Equity securities	29,289		77,445
Proceeds from redemptions of:
Fixed-maturities available for sale	917,027		443,723
Trading securities	11,703		22,112
Purchases of:
Fixed-maturities available for sale	(1,413,445)		(2,099,281)

Equity securities	(102,956)		(69,206)
Sales, redemptions and (purchases) of:
Short-term investments, net	(17,474)		(21,797)
Other assets and other invested assets, net	6,253		989
Proceeds from sale of subsidiary, net of cash sold	—		16,481
Purchases of property and equipment	(8,720)		(14,723)

Net cash provided by (used in) investing activities	(33,984)		(737,657)

Cash Flows from Financing Activities
Dividends and dividend equivalents paid	(78,165)		(73,365)
Issuance of senior notes, net	—		515,567

Issuance of common stock	1,225		1,505
Repurchases of common stock	(251,482)		(226,305)
Credit facility commitment fees paid	(710)		(1,993)
Change in secured borrowings, net (with terms three months or less)	38,241		(19,191)
Proceeds from secured borrowings (with terms greater than three months)	32,000		138,909
Repayments of secured borrowings (with terms greater than three months)	(48,000)		(105,977)
Repayments of other borrowings	—		(79)
Net cash provided by (used in) financing activities	(306,891)		229,071

Increase (decrease) in cash and restricted cash	62,429		(9,830)
Cash and restricted cash, beginning of period	94,146		96,274
Cash and restricted cash, end of period	$	156,575	$	86,444

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 a broad array of other mortgage, risk, title, valuation, asset management, SaaS and other real estate services. We have two reportable business segments—Mortgage and homegenius. Our homegenius segment was previously named “Real Estate” and during the second quarter of 2021 we renamed it “homegenius” to align with updates to our branding strategy for the segment’s products and services.

Mortgage

Our Mortgage segment provides credit-related insurance coverage, principally through private mortgage insurance on residential first-lien mortgage loans, as well as other credit risk management, contract underwriting and fulfillment 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 investors, as well as other beneficiaries, 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, most of which are currently sold to the GSEs.

Our total direct primary mortgage IIF and RIF were $241.6 billion and $59.4 billion, respectively, as of September 30, 2021, compared to $246.1 billion and $60.7 billion, respectively, as of December 31, 2020. In addition to providing private mortgage insurance, we participate 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 $429.3 million as of September 30, 2021 compared to $392.0 million as of December 31, 2020.

The GSEs and state insurance regulators impose various capital and financial requirements on our mortgage insurance subsidiaries. These include Risk-to-capital, other risk-based capital measures and surplus requirements, as well as the PMIERs financial 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 all aspects of their business. See Note 16 for additional information on PMIERs and other regulatory information, and “—Recent Developments” below for a discussion of the elevated risks posed by the COVID-19 pandemic, which has led to an increase in mortgage defaults in our insured portfolio and a resulting increase in our Minimum Required Assets.

homegenius

Our homegenius segment is primarily a fee-for-service business that offers a broad array of products and services to market participants across the real estate value chain. Our homegenius products and services include title, valuation, asset management, SaaS and other real estate services offered primarily to 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. These products and services 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.

COVID-19 Developments

As a seller of mortgage credit protection, our results are subject to macroeconomic conditions and specific events that impact the housing finance and real estate markets, including events that impact mortgage originations and the credit performance of our RIF. Many of these conditions are beyond our control, including housing prices, unemployment, interest rate changes, the availability of credit and other factors that may be derived from national and regional economic conditions.

In general, a deterioration in economic conditions increases the likelihood that borrowers will be unable to satisfy their mortgage obligations. A deteriorating economy can adversely affect housing values, which in turn can influence the willingness of borrowers to continue to make mortgage payments regardless of whether they have the financial resources to do so. Mortgage defaults can also occur due to a variety of specific events affecting borrowers, including death or illness, divorce or other family problems, unemployment, or other events. In addition, factors impacting regional economic conditions, acts of terrorism, war or other severe conflicts, event-specific economic depressions or other catastrophic events, such as natural


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

disasters and pandemics, could result in increased defaults due to the impact of such events on the ability of borrowers to satisfy their mortgage obligations and on the value of affected homes.

The unprecedented and continually evolving social and economic impacts associated with the COVID-19 pandemic on the U.S. and global economies that began in early 2020 had a negative effect on our business and our financial results for the second quarter of 2020, and since then to a lesser extent, as further discussed below. Specifically, and primarily as a result of a sharp increase in the number of new defaults during the second quarter of 2020, our financial results in 2020 included: (i) an increase in both provision for losses and reserve for losses and (ii) an increase in our Minimum Required Assets under the PMIERs.

However, beginning in the third quarter of 2020 and continuing throughout 2021, the number of new defaults has decreased significantly and has now returned to levels experienced prior to the start of the pandemic. These trends, combined with strong home price appreciation and favorable outcomes from mortgage forbearance programs implemented during the pandemic to assist homeowners, have led to favorable reserve development during 2021 on prior year defaults. See Note 11 for additional information on our reserve for losses.

In addition, in response to the threat posed to the economy from the COVID-19 pandemic, in early 2020 the Federal Reserve enacted certain protective measures, to support the economy that resulted in a drop in interest rates generally, and in mortgage rates specifically, resulting in increased mortgage refinance activity. While these developments have benefited our NIW volumes, the low interest rate environment in recent periods has resulted in a high level of refinance activity and associated increase in policy cancellations, which has reduced our Persistency Rate, and in turn contributed to a reduction in our IIF, particularly as a result of a decline in our Single Premium Policies. In the second quarter of 2021 this refinance activity began to moderate, and this trend has continued in the three months ended September 30, 2021.

While recent trends have been favorable, the long-term impact of the COVID-19 pandemic on our businesses will depend on, among other things: the extent and duration of the pandemic, the severity of illness and number of people infected with the virus and the acceptance and long-term effectiveness of anti-viral treatments and vaccines, especially as new strains of COVID-19 have emerged; the wider economic effects of the pandemic and the scope and duration of governmental and other third-party measures restricting day-to-day life and business operations; the impact of economic stimulus efforts to support the economy through the pandemic; and governmental and GSE programs implemented to assist borrowers experiencing a COVID-19-related hardship, including forbearance programs and forbearance exit programs, as well as suspensions of foreclosures and evictions.

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 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 2020 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, including: (i) certain balance sheet line items now reported in other assets and (ii) certain segment reporting balances due to changes in the composition of our segments during 2020.


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

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 2020 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 2020 Form 10-K, other than described below in “—Recent Accounting Pronouncements—Accounting Standards Adopted During 2021.”

Recent Accounting Pronouncements

Accounting Standards Adopted During 2021

In December 2019, the FASB issued ASU 2019-12, Income Taxes—Simplifying the Accounting for Income Taxes. This update simplifies the accounting for income taxes by removing certain exceptions to the general principles of ASC Topic 740 in GAAP and clarifies certain aspects to promote consistency among reporting entities. We adopted this update effective January 1, 2021. The adoption of this update did not have an impact on our financial statements and disclosures.

In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs. This update clarifies that, for each reporting period, to the extent the amortized cost basis of an individual callable debt security exceeds the amount repayable by the issuer at the next call date, the excess (i.e., the premium) should be amortized to the next call date. We adopted ASU 2020-08 on January 1, 2021 on a prospective basis. The adoption of this update did not have a material impact on our financial statements and disclosures.

Accounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU 2018-12, Financial Services—Insurance. 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 are currently evaluating the impact on our financial statements and future disclosures as a result of this update.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform—Facilitation of the Effects of Reference Reform on Financial Reporting. This update provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. 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 are currently evaluating the impact of the guidance and our options related to the practical expedients.


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

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)	2021		2020		2021		2020
Net income—basic and diluted	$	126,412	$	135,103	$	407,226	$	245,613

Average common shares outstanding—basic	186,741		193,176		191,357		196,120
Dilutive effect of share-based compensation arrangements (1)	1,301		980		1,545		1,127
Adjusted average common shares outstanding—diluted	188,042		194,156		192,902		197,247

Net income per share:
Basic	$	0.68	$	0.70	$	2.13	$	1.25
Diluted	$	0.67	$	0.70	$	2.11	$	1.25

(1)The following number of shares of our common stock equivalents issued under our share-based compensation arrangements are not included in the calculation of diluted net income per share because they are anti-dilutive.


	Three Months Ended September 30,		Nine Months Ended September 30,
(In thousands)	2021	2020	2021	2020
Shares of common stock equivalents	—	710	—	1,046

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 and fulfillment solutions provided to mortgage lending institutions and mortgage credit investors. Our homegenius segment offers a broad array of title, valuation, asset management, SaaS and other real estate services to 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 our holding company; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; (iii) for all periods through its sale in January 2020, income and expenses related to Clayton; (iv) for all periods presented, the income and expenses related to our traditional appraisal services, which we wound down beginning in the fourth quarter of 2020; and (v) certain other immaterial revenue and expense items.

As described in Note 4 of Notes to Consolidated Financial Statements in our 2020 Form 10-K, we implemented several changes to our segment reporting in 2020, including related to the wind down of our traditional appraisal business announced in the fourth quarter of 2020. All changes to the composition of our segment reporting have been reflected in our segment operating results for all periods presented.

During the second quarter of 2021, our Real Estate segment was renamed “homegenius” to align with updates to our branding strategy for the segment’s products and services. The homegenius segment name change had no impact on the composition of our segments or on our previously reported historical financial position, results of operations, cash flow or segment level results.

We allocate corporate operating expenses to both reportable segments based 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.


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

With the exception of goodwill and other acquired intangible assets that relate to our homegenius segment, which 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.

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; (ii) loss 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 2020 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.


Reconciliation of adjusted pretax operating income (loss) by segment

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021		2020
Adjusted pretax operating income (loss)
Mortgage	$	163,124	$	147,336	$	528,873	$	267,182
homegenius	(5,557)		(5,046)		(25,208)