-- GAAP net loss of $30.0 million, or $0.15 per diluted share, driven by $304.4 million provision expense to increase reserves --

-- New Insurance Written of $25.5 billion, setting company record for quarterly flow mortgage insurance --

-- PMIERs Available Assets of $4.2 billion, or $1.0 billion (or 31% ) in excess of Minimum Required Assets --

-- Total Holding Company Liquidity increases to $1.4 billion --

-- Book value per share grows 13% year-over-year to $20.82 --

PHILADELPHIA--(BUSINESS WIRE)--Radian Group Inc. (NYSE: RDN) today reported a net loss for the quarter ended June 30, 2020, of $30.0 million, or $0.15 per diluted share. This compares to net income for the quarter ended June 30, 2019, of $166.7 million, or $0.78 per diluted share. The net loss was driven by an elevated loss provision in response to the increase in the number of new defaults, which include defaults of loans subject to forbearance programs implemented in response to the COVID-19 pandemic.

Key Financial Highlights (dollars in millions, except per-share data)

Adjusted pretax operating loss for the quarter ended June 30, 2020, was $88.5 million, compared to $215.8 million adjusted pretax operating income for the quarter ended June 30, 2019. Adjusted diluted net operating loss per share for the quarter ended June 30, 2020, was $0.36, compared to adjusted diluted net operating income per share of $0.80 for the quarter ended June 30, 2019.

Book value as of June 30, 2020, was $4.0 billion, an increase of 5 percent compared to $3.8 billion as of June 30, 2019. Book value per share as of June 30, 2020 was $20.82, an increase of 13 percent compared to $18.42 as of June 30, 2019.

"Our results for the second quarter reflect the challenging COVID-19 pandemic environment we are operating in today and the resulting impact on our mortgage insurance portfolio," said Radian’s Chief Executive Officer Rick Thornberry. "We continue to be encouraged by the impact of the programs put in place to help ease the burden of the crisis on homeowners, including mortgage forbearance programs and loss mitigation workout options. We are also pleased with the rebound in the housing market, which helped us to write record volume of new primary mortgage insurance business of $25.5 billion dollars in the second quarter."

Thornberry added, "While the ultimate financial impact to our company will depend upon the depth and duration of this economic cycle, we believe we are well prepared with a strong capital position, significant holding company resources, a solid business model, deep customer relationships and a dedicated and talented team. I am very proud of the resilience of our businesses and the strength and commitment of our One Radian unified team."

SECOND QUARTER HIGHLIGHTS

• NIW was $25.5 billion for the quarter, representing an increase of 53 percent compared to $16.7 billion in the first quarter of 2020 and an increase of 37 percent compared to $18.5 billion in the second quarter of 2019.
  • Of the $25.5 billion in NIW in the second quarter of 2020, 85 percent was written with monthly and other recurring premiums, compared to 81 percent in the first quarter of 2020, and 83 percent in the second quarter of 2019.
  • Refinances accounted for 44 percent of total NIW in the second quarter of 2020, compared to 34 percent in the first quarter of 2020 and 10 percent in the second quarter of 2019.

• Total primary mortgage insurance in force decreased slightly to $241.3 billion as of June 30, 2020, compared to $241.6 billion as of March 31, 2020, and increased 5 percent compared to $230.8 billion as of June 30, 2019.
  • Persistency, which is the percentage of mortgage insurance that remains in force after a 12-month period, was 70.2 percent as of June 30, 2020, compared to 75.4 percent as of March 31, 2020, and 83.4 percent as of June 30, 2019.
  • Annualized persistency for the three months ended June 30, 2020 was 63.8 percent, compared to 76.5 percent for the three months ended March 31, 2020, and 80.8 percent for the three months ended June 30, 2019.

• Net mortgage insurance premiums earned were $247.6 million for the quarter ended June 30, 2020, compared to $275.0 million for the quarter ended March 31, 2020, and $296.3 million for the quarter ended June 30, 2019. Net mortgage insurance premiums earned for the second quarter of 2020 were reduced by $28.2 million related to an adjustment to accrued profit commission due to increased losses, compared to profit commission increases of $8.6 million for the first quarter of 2020 and $21.7 million for the second quarter of 2019.
  • Mortgage insurance in force premium yield was 44.3 basis points in the second quarter of 2020, compared to 46.1 basis points in the first quarter of 2020 and 55.9 basis points in the second quarter of 2019. Net mortgage insurance premiums earned for the second quarter of 2019 included an increase of $32.9 million as a result of a cumulative adjustment to unearned premiums related to an update to the amortization rates used to recognize revenue for single premium policies. Excluding the impact of this adjustment, in force premium yield was 47.9 basis points in the second quarter of 2019.
  • The impact of single premium cancellations on premium yield before consideration of reinsurance represented 8.2 basis points in the second quarter of 2020, compared to 4.0 basis points in the first quarter of 2020, and 2.8 basis points in the second quarter of 2019.
  • Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 41.0 basis points in the second quarter of 2020. This compares to 45.6 basis points in the first quarter of 2020, and 52.2 basis points in the second quarter of 2019, or 46.4 basis points excluding the impact of the updates to single premium policy amortization rates described above.
  • Additional details regarding premiums earned may be found in Exhibit D.

• The mortgage insurance provision for losses was $304.0 million in the second quarter of 2020, compared to $35.2 million in the first quarter of 2020 and $47.2 million in the second quarter of 2019. The increase in the second quarter of 2020 is primarily related to the increase in the number of new defaults, which include defaults of loans subject to forbearance programs implemented in response to the COVID-19 pandemic.
  • The number of primary delinquent loans was 69,742 as of June 30, 2020, compared to 19,781 as of March 31, 2020 and 19,643 as of June 30, 2019.
  • The primary default rate was 6.5 percent in the second quarter of 2020, compared to 1.8 percent in the first quarter of 2020, and 1.9 percent in the second quarter of 2019.
  • The gross default to claim rate assumption for new primary defaults was 8.5 percent at June 30, 2020, compared to 7.5 percent in the first quarter of 2020, and 8.0 percent in the second quarter of 2019.
  • The loss ratio in the second quarter of 2020 was 122.8 percent, compared to 12.8 percent in the first quarter of 2020, and 15.9 percent in the second quarter of 2019.
  • Mortgage insurance loss reserves were $735.0 million as of June 30, 2020, compared to $414.7 million as of March 31, 2020, and $401.3 million as of June 30, 2019.
  • Total mortgage insurance claims paid were $22.8 million in the second quarter of 2020, compared to $23.4 million in the first quarter of 2020, and $32.4 million in the second quarter of 2019.

• Radian's Real Estate segment offers a broad array of title, valuation, asset management and other real estate services to market participants across the real estate value chain.
  • Total Real Estate segment revenues for the second quarter of 2020 were $26.1 million, compared to $28.6 million for the first quarter of 2020, and $27.6 million for the second quarter of 2019.
  • Adjusted earnings before interest, income taxes, depreciation and amortization and corporate allocations (Real Estate adjusted EBITDA) for the quarter ended June 30, 2020 was a loss of $0.7 million, compared to a loss of $0.4 million for the quarter ended March 31, 2020, and a loss of $0.5 million for the quarter ended June 30, 2019. Additional details regarding the non-GAAP measure Real Estate adjusted EBITDA may be found in Exhibits F and G.

• Other operating expenses were $60.6 million in the second quarter of 2020, compared to $69.1 million in the first quarter of 2020, and $70.0 million in the second quarter of 2019.
  • The decrease in operating expenses in the second quarter of 2020, compared to the first quarter of 2020, was driven primarily by lower share-based incentive compensation expense as well as higher ceding commissions. The decrease in operating expenses in the second quarter of 2020, compared to the second quarter of 2019, was driven primarily by lower share-based compensation expense as well as lower technology related expense.

CAPITAL AND LIQUIDITY UPDATE

• At June 30, 2020, Excess Available Resources to Support PMIERs were $2.4 billion, or 73 percent above Radian Guaranty's Minimum Required Assets of approximately $3.2 billion. During the three months ended June 30, 2020, Excess Available Resources to Support PMIERs increased by $361 million.

Radian Group

• As of June 30, 2020, Radian Group maintained $1.1 billion of available liquidity. Total liquidity, which includes the company’s existing $267.5 million unsecured revolving credit facility, was $1.4 billion as of June 30, 2020. Both available liquidity and total liquidity include the minimum liquidity requirement under the Company's unsecured revolving credit facility of $35 million. On May 6, 2020, Radian Group entered into an amendment to its $267.5 million unsecured revolving credit facility which extended the maturity date of the credit facility to January 18, 2022.
• In May 2020, Radian Group issued $525 million aggregate principal amount of Senior Notes due 2025 and received net proceeds after expenses of $515.6 million. These notes mature on March 15, 2025 and bear interest at a rate of 6.625% per annum, payable semi-annually on March 15 and September 15 of each year, with interest payments commencing on September 15, 2020.
• On May 13, 2020, Radian Group’s board of directors authorized a regular quarterly dividend on its common stock in the amount of $0.125 per share and the dividend was paid on June 5, 2020.

Radian Guaranty

• At June 30, 2020, Radian Guaranty’s Available Assets under the Private Mortgage Insurer Eligibility Requirements (PMIERs) totaled approximately $4.2 billion, resulting in an excess or “cushion” of approximately $1.0 billion, or 31 percent above its Minimum Required Assets of approximately $3.2 billion. During the three months ended June 30, 2020, Radian Guaranty's PMIERs cushion decreased by $127 million.

• As of June 30, 2020, 61.0% of Radian Guaranty's primary mortgage insurance risk in force is subject to some form of risk distribution, providing a $1.5 billion reduction of Minimum Required Assets under PMIERs.

RECENT EVENTS

Radian Guaranty Operating Statistics for July 2020

The information includes total new primary defaults, which include defaults under forbearance programs in response to the COVID-19 pandemic, as well as cures, claims paid and rescissions/denials. The information regarding new defaults and cures is reported to Radian Guaranty from loan servicers. We consider a loan to be in default for financial statement and internal tracking purposes upon receipt of notification by servicers that a borrower has missed two monthly payments. Default reporting, particularly on a monthly basis, may be affected by several factors, including the date on which the loan servicer’s report is generated and transmitted to Radian Guaranty, the impact of updated information submitted by servicers and the timing of servicing transfers.

CONFERENCE CALL

Radian will discuss second quarter financial results in a conference call on Monday, August 10, 2020, at 10:00 a.m. Eastern time. The conference call will be broadcast live over the Internet at https://radian.com/who-we-are/for-investors/webcasts or at www.radian.com. The call may also be accessed by dialing 866.436.9172 inside the U.S., or 630.691.2760 for international callers, using passcode 49847107.

A digital replay of the webcast will be available on Radian’s website approximately two hours after the live broadcast ends for a period of two weeks at https://radian.com/who-we-are/for-investors/webcasts, using passcode 49847107.

In addition to the information provided in the company's earnings news release, other statistical and financial information, which is expected to be referred to during the conference call, will be available on Radian's website at www.radian.com, under Investors.

NON-GAAP FINANCIAL MEASURES

Radian believes that adjusted pretax operating income, adjusted diluted net operating income per share and adjusted net operating return on equity (non-GAAP measures) facilitate evaluation of the company’s fundamental financial performance and provide relevant and meaningful information to investors about the ongoing operating results of the company. On a consolidated basis, these measures are not recognized in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be considered in isolation or viewed as substitutes for GAAP measures of performance. The measures described below have been established in order to increase transparency for the purpose of evaluating the company’s operating trends and enabling more meaningful comparisons with Radian’s competitors.

Adjusted pretax operating income (loss) is defined as GAAP consolidated 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 gains (losses) from the sale of lines of business and acquisition-related income and expenses. Adjusted diluted net operating income (loss) per share is calculated by dividing (i) adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the Company’s statutory tax rate, by (ii) the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Adjusted net operating return on equity is calculated by dividing annualized adjusted pretax operating income (loss), net of taxes computed using the Company’s statutory tax rate, by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.

In addition to the above non-GAAP measures for the consolidated company, we also have presented as supplemental information a non-GAAP measure for our Real Estate segment, representing a measure of earnings before interest, income tax provision (benefit), depreciation and amortization (“EBITDA”). We calculate Real Estate adjusted EBITDA by using adjusted pretax operating income as described above, further adjusted to remove the impact of depreciation and corporate allocations for interest and operating expenses. In addition, Real Estate adjusted EBITDA margin is calculated by dividing Real Estate adjusted EBITDA by GAAP total revenue for the Real Estate segment. Real Estate adjusted EBITDA and Real Estate adjusted EBITDA margin are used to facilitate comparisons with other services companies, since they are widely accepted measures of performance in the services industry and are used internally as supplemental measures to evaluate the performance of our Real Estate segment.

See Exhibit F or Radian’s website for a description of these items, as well as Exhibit G for reconciliations to the most comparable consolidated GAAP measures.

ABOUT RADIAN

Radian Group Inc. (NYSE: RDN) is ensuring the American dream of homeownership responsibly and sustainably through products and services that include industry-leading mortgage insurance and a comprehensive suite of mortgage, risk, title, valuation, asset management and other real estate services. We are powered by technology, informed by data and driven to deliver new and better ways to transact and manage risk. Visit www.radian.com to learn more about how Radian is shaping the future of mortgage and real estate services.