Radian Group Inc. · NYSE:RDN
Radian — Q1 2018 Earnings Presentation
29 slides from Radian's earnings presentation, 2018
Slide 1: Financial Results Q1 2018
Financial Results Q1 2018 NYSE: RDN www.radian.biz 1 1
Slide 2: Safe Harbor Statements
SAFE HARBOR STATEMENTS All statements in this presentation that address events, • our ability to successfully execute and implement our capital plans and settlements, fines, injunctions, restitutions or other relief that could developments or results that we expect or anticipate may occur to maintai
Slide 3: Who Is Radian?
WHO IS RADIAN? Q1 2018 REVENUE Radian Group Inc., headquartered in Philadelphia, is a Services diversified mortgage and real estate services business. Fee-Based Radian provides private mortgage insurance and 12% products and services to the real estate and mortgage finance industries through two bus
Slide 4: Q1 Highlights
Q1 HIGHLIGHTS $114.5 million Includes $18.9 million of net losses on $11.7 billion of new insurance written, Net Income investments and other financial instruments 16% increase compared to $10.1 billion in Q1 2017 In New Insurance Written $0.52 50% increase in net income compared to 19% decrease com
Slide 5: Net Income
NET INCOME Q4 2017 to Q1 2018 GAAP Diluted Net Income Per Share $0.60 $0.10 $0.52 $0.47 $0.06 $0.50 $0.02 $0.40 $0.30 $0.20 $0.10 $0.03 $- Q4 2017 2017 Impact of the 2018 Tax Rate Changes in gains Services gross profit (2) Q1 2018 Tax Cuts and Jobs (losses) on Act (1) investments 1) Represents the i
Slide 6: Book Value
BOOK VALUE Q4 2017 to Q1 2018 GAAP Book Value Per Share (1) $15 $0.53 $14.16 $13.90 $0.05 $14 $0.27 $0.23 $0.25 $0.05 $13 Goodwill $12 Intangible Assets $13.88 $13.60 $11 Tangible Book Value (2) $10 $0 Dec 31, 2017 Net Income Unrealized Gains (Losses) in Mar 31, 2018 $9 Other Comprehensive Income 1)
Slide 7: Book Value
BOOK VALUE Comparison of Book Value Per Share (1) $15 $14.16 $0.05 $13.90 $0.05 $14 $0.23 $13.58 $0.25 $13 $0.91 Goodwill $0.36 $12 Intangible Assets $13.88 Tangible Book Value (2) $13.60 $11 $12.31 $10 $0 $9 March 31, 2017 December 31, 2017 March 31, 2018 1) All book value per share items are calcu
Slide 8: Financial Highlights
FINANCIAL HIGHLIGHTS Radian Group Inc. Consolidated ($ in millions, except per-share amounts) March 31, 2018 December 31, 2017 March 31, 2017 Total Assets $6,010 $5,901 $5,828 Loss Reserves $489 $508 $726 Unearned Premiums $723 $724 $685 Senior Notes $1,028 $1,027 $1,009 Stockholders' Equity $3,052
Slide 9: MI Portfolio Composition
MI PORTFOLIO COMPOSITION 2006-2007 (HARP) Other Vintages 2006-2007 2.8% (HARP) (Non-HARP) 2.4% As of March 31, 2018, 92% of 4.0% mortgage insurance primary risk in Other Vintages force consists of new business written (Non-HARP) after 2008, including HARP volume 3.8% $52.2 Billion Risk in Force 2009
Slide 10: MI Portfolio Characteristics
MI PORTFOLIO CHARACTERISTICS Primary RIF Distribution by FICO SCORE Primary RIF Distribution by LTV 100% 100% 11% 17% 10% 22% 26% 24% 42% 59% 38% 35% 53% 33% ≥740 31% 95.01%+ 36% 680-739 90.01-95.00% 33% 620-679 85.01-90.00% 32% 37% 31% ≤619 33% 39% 30% 30% < 85.00% 20% 13% 8% 9% 14% 12% 9% 7% 0% 5%
Slide 11: Premium Yields
PREMIUM YIELDS (in basis points) Mortgage Insurance Premium Yield Trends Q1 2018 Q4 2017 Q3 2017 Q2 2017 Q1 2017 In Force Portfolio Yield (1) 48.7 48.1 48.4 48.7 48.9 Single Premium Cancellations (2) 2.4 4.3 3.2 2.8 2.2 Total Direct Yield 51.1 52.4 51.6 51.5 51.1 Ceded Earned Premiums, Incl. Profit
Slide 12: First-Lien Mortgage Insurance
FIRST-LIEN MORTGAGE INSURANCE 2018 Performance by Vintage ($ in millions) THREE MONTHS ENDED MARCH 31, 2018 Vintage Premiums Earned (1) Incurred Losses (1) Net 2008 & Prior $31.3 $27.2 $4.1 Pre-2009 portfolio is contributing to 2009 $1.5 $0.4 $1.1 earnings. 2010 $1.0 $0.2 $0.8 2011 $2.7 $0.3 $2.4 20
Slide 13: Primary Insurance in Force
PRIMARY INSURANCE IN FORCE $204.0 $200 5.7% $185.9 Primary Insurance in Force ($ in billions) 5.4% 24.8% $150 25.6% Written in 2018 20.8% Written in 2017 $100 Written in 2016 50.3% Written 2009 - 2015 35.5% Written 2008 and prior $50 18.7% 13.2% $0 March 31, 2017 March 31, 2018 13
Slide 14: Primary Mortgage Insurance
PRIMARY MORTGAGE INSURANCE Cumulative Incurred Loss Ratio by Development Year Radian’s stochastic modeling indicates an approximate 20% through-the- CUMULATIVE INCURRED LOSS RATIO (1) cycle loss ratio on newly originated MI business. Vintage Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 De
Slide 15: Components of MI Provision for Losses
COMPONENTS OF MI PROVISION FOR LOSSES ($ in millions) THREE MONTHS ENDED Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Current period defaults (1) $36.5 $55.8 $50.3 $45.3 $51.4 Prior period defaults (2) 0.4 (20.1) (14.0) (28.2) (4.3) Second-lien premium deficiency reserve & other
Slide 16: Primary Loans in Default
PRIMARY LOANS IN DEFAULT FORECLOSURE March 31, 2018 RESERVE FOR TOTAL STAGE DEFAULTED CURE % DURING Q1 % OF RESERVE ($ in thousands) LOSSES LOANS MISSED PAYMENTS # % # % $ % 3 Payments or Fewer 9,268 37.7% 144 37.6% $80,213 18.1% 4 to 11 Payments 8,523 34.7 479 21.4 103,283 23.4 12 Payments or More
Slide 17: Default Rollforward
DEFAULT ROLLFORWARD Primary Insurance in Force Q1 2018 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Beginning Default Inventory 27,922 23,826 23,755 25,793 29,105 Pre-2009 New Defaults 5,013 7,076 6,331 5,714 6,179 2009+ New Defaults 4,076 7,971 3,752 2,856 3,009 Total New Defaults (1) (2) 9,089 15,047 10,083 8,
Slide 18: Capital and Debt Structure
CAPITAL AND DEBT STRUCTURE 18
Slide 19: Capital Structure
CAPITAL STRUCTURE Total Capitalization as of March 31, 2018 % of Total Share Repurchase Program: Coupon Description Carrying Value Principal ($’000) ($’000) Capitalization (1) During the first quarter, Radian repurchased 531,013 shares, or approximately $10 million, 5.50% Senior Notes due 2019 $157,
Slide 20: Capital Structure
CAPITAL STRUCTURE Debt Maturity Profile: Principal by Year of Maturity Stockholders’ Equity & Debt to Capital Ratio Senior Notes As of March 31, 2018 As of March 31, 2018 ($ in millions) Debt to Capital Ratio 27% $500 25.7% 26% 25.5% 25.2% $400 25% 24% $300 Stockholders’ Equity ($ in billions) $3.0
Slide 21: PMIERs Excess Available Resources
PMIERS EXCESS AVAILABLE RESOURCES Represents 29% of $1,000 Minimum Required $919 Assets of $3.2 billion $869 $800 $225 $225 Credit Facility $680 Radian Group $168 Value ($ in millions) $600 Liquidity, net (1) $194 $360 PMIERS Cushion $400 $526 $200 $450 $320 $- March 31, 2017 December 31, 2017 (2) M
Slide 22: Consolidated Non-GAAP Financial Measures Reconciliations
Consolidated Non-GAAP Financial Measures Reconciliations 22
Slide 23: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures In addition to the traditional GAAP financial measures, we have presented across periods as the activity is highly discretionary based on the timing frequency, depending on market credit cycles and other factors. Losses “adjusted pretax operating income”, “adjusted
Slide 24: Reconciliation of Consolidated Pretax Income to Adjusted Pretax Operating Income
Reconciliation of Consolidated Pretax Income (Loss) to Adjusted Pretax Operating Income 2018 2017 ($ in thousands) Q1 Q4 Q3 Q2 Q1 Consolidated pretax income (loss) $142,442 $164,727 $102,814 $(35,474) $114,670 Less reconciling income (expense) items: Net gains (losses) on investments and other (18,8
Slide 25: Reconciliation of Diluted Net Income Per Share to Adjusted Net Operating Income
Reconciliation of Diluted Net Income (Loss) Per Share to Adjusted Diluted Net Operating Income Per Share 2018 2017 Q1 Q4 Q3 Q2 Q1 Diluted net income (loss) per share $0.52 $0.03 $0.30 $(0.13) $0.34 Less per-share impact of reconciling income (expense) items: Net gains (losses) on investments and oth
Slide 26: Reconciliation of Return on Equity to Adjusted Net Operating ROE
Reconciliation of Return on Equity to Adjusted Net Operating Return on Equity 2018 2017 Q1 Q1 Return on equity (1) 15.1% 10.6% Less impact of reconciling income (expense) items: (2) Net gains (losses) on investments and other financial instruments (2.5) (0.4) Loss on induced conversion and debt exti
Slide 27: Reconciliation of Book Value Per Share to Tangible Book Value
Reconciliation of Book Value Per Share to Tangible Book Value Per Share (1) 2018 2017 Q1 Q4 Q3 Q2 Q1 Book value per share $14.16 $13.90 $13.88 $13.54 $13.58 Less: Goodwill and other intangible assets, net per share 0.28 0.30 0.31 0.32 1.27 Tangible book value per share $13.88 $13.60 $13.57 $13.22 $1
Slide 28: Reconciliation of Net Income to Services Adjusted EBITDA
Reconciliation of Net Income (Loss) to Services Adjusted EBITDA 2018 2017 ($ in thousands) Q1 Q4 Q3 Q2 Q1 Net income (loss) $114,486 $6,816 $65,142 $(27,342) $76,472 Less reconciling income (expense) items: Net gains (losses) on investments and other financial instruments (18,887) (1,339) 2,480 5,33
Slide 29: Radian
RADIAN Ensuring the American Dream®