PHILADELPHIA--(BUSINESS WIRE)--Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended September 30, 2020, of $135.1 million, or $0.70 per diluted share. This compares to net income for the quarter ended September 30, 2019, of $173.4 million, or $0.83 per diluted share.

Adjusted pretax operating income for the quarter ended September 30, 2020, was $145.0 million, compared to $212.7 million adjusted pretax operating income for the quarter ended September 30, 2019. Adjusted diluted net operating income per share for the quarter ended September 30, 2020, was $0.59, compared to adjusted diluted net operating income per share of $0.81 for the quarter ended September 30, 2019.

Book value as of September 30, 2020, was $4.1 billion, an increase of 5 percent compared to $3.9 billion as of September 30, 2019. Book value per share as of September 30, 2020 was $21.52, an increase of 11 percent compared to $19.40 as of September 30, 2019.

“Our results for the third quarter were again impacted by the challenging COVID-19 pandemic environment, however we are encouraged by signs of improvement in the economy, the strength of the overall housing market and continued positive default trends within our mortgage insurance portfolio," said Radian’s Chief Executive Officer Rick Thornberry. "We reported net income of $135 million, wrote record volume of new primary mortgage insurance business of $33 billion and grew book value per share by 11% year-over-year, which reflects the strength and momentum of our businesses as well as the commitment of our team during this unprecedented time.”

Thornberry added, "While we expect the timeline for the ultimate resolution of pandemic-related defaults to span multiple years, we believe that our current capital resources combined with the continued future financial contribution from our valuable insurance portfolio positions us well both today and in the future. At Radian we are proud of being able to support the real estate and mortgage markets as the pandemic has not eased the need for affordable mortgage options or the desire for many Americans to realize the dream of homeownership.”

THIRD QUARTER HIGHLIGHTS

• NIW was $33.3 billion for the quarter, representing an increase of 31 percent compared to $25.5 billion in the second quarter of 2020 and an increase of 51 percent compared to $22.0 billion in the third quarter of 2019.
  • Of the $33.3 billion in NIW in the third quarter of 2020, 90 percent was written with monthly and other recurring premiums, compared to 85 percent in the second quarter of 2020, and 85 percent in the third quarter of 2019.
  • Refinances accounted for 30 percent of total NIW in the third quarter of 2020, compared to 44 percent in the second quarter of 2020 and 19 percent in the third quarter of 2019.

• Primary mortgage insurance in force increased 1.7 percent to $245.5 billion as of September 30, 2020, compared to $241.3 billion as of June 30, 2020, and increased 3.5 percent compared to $237.2 billion as of September 30, 2019. The year over year increase included a 10.0 percent increase in monthly premium insurance in force and a 12.7 percent decline in single premium insurance in force.
  • Persistency, which is the percentage of mortgage insurance that remains in force after a 12-month period, was 65.6 percent as of September 30, 2020, compared to 70.2 percent as of June 30, 2020, and 81.5 percent as of September 30, 2019.
  • Annualized persistency for the three months ended September 30, 2020 was 60.0 percent, compared to 63.8 percent for the three months ended June 30, 2020, and 75.5 percent for the three months ended September 30, 2019.

• Net mortgage insurance premiums earned were $283.4 million for the quarter ended September 30, 2020, compared to $247.6 million for the quarter ended June 30, 2020, and $277.6 million for the quarter ended September 30, 2019. Net mortgage insurance premiums earned for the third quarter of 2020 increased as compared to the second quarter primarily due to a decrease in ceded premiums, net of profit commissions, of $23.9 million. This decrease in ceded premiums was primarily related to an adjustment to accrued profit commissions due to increased losses in the second quarter of 2020, as well as an increase in single premium policy cancellations of $15.6 million.
  • Mortgage insurance in force premium yield was 43.2 basis points in the third quarter of 2020, compared to 44.3 basis points in the second quarter of 2020 and 47.4 basis points in the third quarter of 2019.
  • The impact of single premium cancellations on premium yield before consideration of reinsurance represented 10.7 basis points in the third quarter of 2020, compared to 8.2 basis points in the second quarter of 2020, and 4.6 basis points in the third quarter of 2019.
  • Total net mortgage insurance premium yield, which includes the impact of ceded premiums and accrued profit commission, was 46.6 basis points in the third quarter of 2020. This compares to 41.0 basis points in the second quarter of 2020, and 47.5 basis points in the third quarter of 2019.
  • Additional details regarding premiums earned may be found in Exhibit D.

• Mortgage insurance provision for losses was $87.8 million in the third quarter of 2020, compared to $304.0 million in the second quarter of 2020 and $29.1 million in the third quarter of 2019. The increase in the third quarter of 2020, compared to the third quarter of 2019, was 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 new defaults increased significantly during the second quarter of 2020, and while the new defaults during the third quarter remained elevated compared to levels before the pandemic, they decreased 67.5 percent from the prior quarter.
  • The number of primary delinquent loans was 62,737 as of September 30, 2020, compared to 69,742 as of June 30, 2020 and 20,184 as of September 30, 2019.
  • The primary default rate was 5.9 percent in the third quarter of 2020, compared to 6.5 percent in the second quarter of 2020, and 1.9 percent in the third quarter of 2019.
  • The gross default to claim rate assumption for new primary defaults was 8.5 percent at September 30, 2020, compared to 8.5 percent in the second quarter of 2020, and 7.5 percent in the third quarter of 2019.
  • The loss ratio in the third quarter of 2020 was 31.0 percent, compared to 122.8 percent in the second quarter of 2020, and 10.5 percent in the third quarter of 2019.
  • Mortgage insurance loss reserves were $821.7 million as of September 30, 2020, compared to $735.0 million as of June 30, 2020, and $394.1 million as of September 30, 2019.
  • Total mortgage insurance claims paid were $10.8 million in the third quarter of 2020, compared to $22.8 million in the second quarter of 2020, and $36.7 million in the third 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 third quarter of 2020 were $33.3 million, compared to $26.1 million for the second quarter of 2020, and $30.1 million for the third quarter of 2019.
  • Adjusted earnings before interest, income taxes, depreciation and amortization and corporate allocations (Real Estate adjusted EBITDA) for the quarter ended September 30, 2020 was a loss of $1.4 million, compared to a loss of $0.7 million for the quarter ended June 30, 2020, and income of $0.9 million for the quarter ended September 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 $69.4 million in the third quarter of 2020, compared to $60.6 million in the second quarter of 2020, and $76.4 million in the third quarter of 2019.
  • The increase in operating expenses in the third quarter of 2020, compared to the second quarter of 2020, was driven primarily by an adjustment in the second quarter which reduced share-based incentive compensation expense for that period. The decrease in operating expenses in the third quarter of 2020, compared to the third quarter of 2019, was driven primarily by an increase in ceding commissions as well as lower incentive compensation expense.

CAPITAL AND LIQUIDITY UPDATE

• At September 30, 2020, Excess Available Resources to Support PMIERs were $2.3 billion, or 67 percent above Radian Guaranty's Minimum Required Assets of approximately $3.5 billion.

Radian Group

• As of September 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 September 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 August 12, 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 September 4, 2020.

Radian Guaranty

• At September 30, 2020, Radian Guaranty’s Available Assets under the Private Mortgage Insurer Eligibility Requirements (PMIERs) totaled approximately $4.5 billion, resulting in an excess or “cushion” of approximately $970.3 million, or 28 percent above its Minimum Required Assets of approximately $3.5 billion.
• As of September 30, 2020, 53 percent of Radian Guaranty's primary mortgage insurance risk in force is subject to some form of risk distribution, providing a $1.3 billion reduction of Minimum Required Assets under PMIERs.

RECENT EVENTS

Insurance-Linked-Note

As previously announced, in October 2020, Radian Guaranty entered into its fourth fully collateralized mortgage insurance-linked-note (ILN) reinsurance transaction, in which the company obtained $390.3 million of credit risk protection from Eagle Re 2020-2 Ltd. (Eagle Re) through the issuance by Eagle Re of ILNs to eligible third-party capital markets investors in an unregistered private offering. Eagle Re is a special purpose insurer domiciled in Bermuda and is not a subsidiary or affiliate of Radian Guaranty. Radian Guaranty's related PMIERs credit under this ILN transaction remains subject to GSE approval. As of September 30, 2020, after consideration of the October ILN transaction described above:

• Radian Guaranty's Minimum Required Assets would have decreased to approximately $3.1 billion, which would have resulted in an increase in PMIERs excess Available Assets or "cushion" to $1.3 billion, or 42 percent.
• Radian Guaranty's primary mortgage insurance risk in force that is subject to some form of risk distribution would have increased to 74 percent, providing a $1.7 billion reduction of Minimum Required Assets under PMIERs.

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.