# RADIAN GROUP INC (RDN) FY 2023 MD&A Verbatim Item 7 Management's Discussion and Analysis from RADIAN GROUP INC's 10-K for fiscal year 2023. SEC filing source: https://www.sec.gov/Archives/edgar/data/890926/000089092624000006/rdn-20231231.htm Accession: 0000890926-24-000006 Filing date: 2024-02-23 Report date: 2023-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high Company profile: /company/RDN/ All MD&A years: /company/RDN/mda/ Previous year: /company/RDN/mda/fy2022/ (FY 2022) Next year: /company/RDN/mda/fy2024/ (FY 2024) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report on Form 10-K. Certain terms and acronyms used throughout this report are defined in the Glossary of Abbreviations and Acronyms included as part of this report. Some of the information in this discussion and analysis or included elsewhere in this report, including information with respect to our projections, plans and strategy for our business, are forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and the timing of events could differ materially from those anticipated by these forward-looking statements as a result of many factors, including those discussed under “Cautionary Note Regarding Forward-Looking Statements—Safe Harbor Provisions” and in the Risk Factors detailed in Item 1A of this Annual Report on Form 10-K. [[GREPCENT_TABLE]] [["INDEX TO ITEM 7","Page"],["Overview","65"],["Key Factors Affecting Our Results","67"],["Mortgage Insurance Portfolio","70"],["Results of Operations\u2014Consolidated","76"],["Results of Operations\u2014Mortgage Insurance","81"],["Results of Operations\u2014homegenius","87"],["Results of Operations\u2014All Other","88"],["Liquidity and Capital Resources","89"],["Critical Accounting Estimates","95"]] [[/GREPCENT_TABLE]] Overview We are a mortgage and real estate company with two reportable business segments—Mortgage Insurance and homegenius. Our Mortgage Insurance segment aggregates, manages and distributes U.S. mortgage credit risk for the benefit of mortgage lending institutions and mortgage credit investors, principally through private mortgage insurance on residential first-lien mortgage loans, and also offers other credit risk management solutions, including contract underwriting, to our customers. Our homegenius segment offers an array of title, real estate and real estate technology products and services primarily to consumers, mortgage lenders, mortgage and real estate investors, the GSEs, real estate brokers and agents, and corporations for their employees. See Note 4 of Notes to Consolidated Financial Statements for additional information about our businesses. See “Key Factors Affecting Our Results” below for information about the key drivers that affect our performance. Current Operating Environment As a mortgage and real estate company, our business results are subject to macroeconomic conditions and specific events that impact the housing, housing finance and residential real estate markets and the credit performance of our mortgage insurance portfolio, as well as seasonal fluctuations impacting mortgage and real estate markets. Among others, these factors may include home prices and housing supply, inflationary pressures, interest rate changes, unemployment levels, the volume of mortgage originations and the availability of credit, national and regional economic conditions, legislative and regulatory developments and other events, including macroeconomic stresses and uncertainties resulting from global conflicts and other geopolitical events. See “Item 1A. Risk Factors” for a discussion of material risks that could impact our business results. As further discussed below, the following economic and market conditions represent the primary factors affecting the current operating environment for our businesses. Inflationary Pressures and Elevated Interest Rates. Annual inflation in the U.S. reached a 40-year high in 2022. To reduce inflation, the U.S. Federal Reserve has increased interest rates significantly since 2021, resulting in a sharp and 65 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations significant increase in mortgage interest rates. Among other negative impacts on our business, these macroeconomic conditions have reduced the overall volume of mortgage transactions taking place, which in turn, has reduced the amount of NIW we are writing. Conversely, the higher interest rate environment also has benefited our financial performance through higher Persistency Rates, which has resulted in continued growth in our IIF despite lower NIW, as well as through the recognition of higher net investment income. More recently, mortgage rates have decreased from their peak in the third quarter of 2023, and with inflation beginning to moderate, the U.S. Federal Reserve has indicated that it could begin to reduce interest rates in 2024. Although in recent years the inflationary pressures and higher interest rate environment discussed above have negatively impacted the U.S. housing market, including broadly reducing refinance activity, longer-term, we continue to believe that the housing market fundamentals and outlook remain favorable, including demographics supporting growth in the population of first-time homebuyers and a constrained supply of homes available for sale with available homes near historical lows. See “Mortgage Insurance Portfolio” for additional details on our NIW and IIF. The same inflationary pressures and interest rate environment discussed above have also negatively impacted our homegenius businesses, due primarily to the rapid decline in industry-wide purchase and refinance volumes, which has resulted in a continued decline in homegenius revenues since the beginning of 2022 and ongoing losses for that business segment. Home Price Appreciation and Limited Housing Supply. Our mortgage insurance business generally benefits from increases in housing demand, home prices and the volume of home purchases, all of which are influenced by the current market imbalance between a constrained housing supply and strong market demand. While the housing shortage combined with strong market demand has created affordability challenges for many first-time homebuyers, the same dynamic benefits our existing insurance written by mitigating against the risks of loss to us associated with a decrease in home values. As a result, paid claim volumes and severity in our mortgage insurance business have been positively affected by the current environment. Further, as discussed below, we believe the embedded equity borrowers have in their homes as a result of strong home price appreciation in recent years is a factor that is positively impacting our loan default and Cure trends, and importantly, the strong demographics supporting continued demand from first-time homebuyers are likely to continue to support home prices and drive further growth in purchase originations that is expected to grow our IIF. See “Mortgage Insurance Portfolio—New Insurance Written” for expectations on mortgage origination volumes. Strong Credit Environment, Positively Impacting Default and Cure Trends. In 2020, the onset of the COVID-19 pandemic resulted in a significant increase in unemployment and had a negative impact on the economy. As a result, we experienced a material increase in new defaults beginning in the second quarter of 2020, substantially all of which related to loans subject to mortgage forbearance programs implemented in response to the COVID-19 pandemic. This increase in new defaults resulted in an increase in our reserve for losses and had a negative effect on our results of operations for that year. Since 2020 and continuing through December 31, 2023, subsequent trends in Cures have been more favorable than original expectations, resulting in favorable loss reserve development in 2022 and 2023 on prior period defaults due to stable and low levels of unemployment and the strong home price appreciation in recent years. As of December 31, 2023, based on a home price index-based approach using industry averages, we estimate that 86% of our total IIF had at least 10% embedded equity and 82% of defaulted loans had at least 20% embedded equity. The significant embedded equity that borrowers in our insured portfolio have in their homes has helped to mitigate our risk of loss by decreasing both the frequency and severity of our paid claims. These positive trends have also contributed to a higher rate of claims that result in no ultimate loss and that are withdrawn by servicers as a result. While the recent credit and housing trends have been favorable, the number of defaults that ultimately result in claims in the future is difficult to predict and will depend on a variety of factors, including the overall economic environment and the natural seasoning of our growing IIF portfolio. See Note 11 of Notes to Consolidated Financial Statements for additional information on our reserve for losses. Improvements in Mortgage Finance System and Mortgage Insurance Fundamentals. Despite risks and uncertainties, we believe that mortgage industry fundamentals remain strong and have benefited from improvements to the mortgage and real estate ecosystem since the great financial crisis in 2008, including more stringent underwriting and product standards, higher-quality borrowers with strong credit profiles and strengthened servicing standards and government support to help borrowers stay in their homes. In addition, enhancements in the mortgage insurance industry since the great financial crisis in 2008, including the implementation of strong capital and operating standards under the PMIERs, the implementation of greater risk-based granularity into our pricing methodologies and the increased use of risk distribution strategies to lower the risk profile and financial volatility of our mortgage insurance portfolio, have increased returns on our NIW, provided capital relief under the PMIERs and have helped position our mortgage insurance business to better withstand the negative effects from macroeconomic stresses discussed above, including those resulting from the higher rates of inflation and higher interest rates, as well as the other risks described in “Item 1A. Risk Factors.” Our current business structure is highly dependent on the GSEs, as the GSEs are the primary beneficiaries of most of our mortgage insurance policies, and mortgage insurers such as Radian Guaranty must meet the GSEs’ eligibility requirements to be eligible to insure loans purchased by the GSEs. The FHFA and GSEs have significant discretion under the PMIERs and may amend the PMIERs at any time. Changes in the PMIERs or business practices of the GSEs can significantly impact our business. In addition, our businesses operate within the housing finance system and a change in government administrations can significantly alter the strategic direction of housing finance in the U.S. and impact our businesses and financial performance. Our businesses are subject to and may be impacted by many federal and state lending, insurance and consumer laws and regulations. See “Item 1. Business—Regulation.” 66 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Key Factors Affecting Our Results The following sections discuss certain key drivers affecting our Mortgage Insurance and homegenius businesses, as well as other key factors affecting our results. Mortgage Insurance NIW and Related Drivers NIW increases our IIF and our premiums written and earned. NIW is affected by the overall size of the mortgage origination market, the penetration percentage of private mortgage insurance into the overall mortgage origination market and our market share of the private mortgage insurance market. The overall mortgage origination market is influenced by macroeconomic factors such as household formation, household composition, home affordability, interest rates, housing markets in general (which are subject to seasonality), credit availability and the impact of various legislative and regulatory actions that may influence the housing and mortgage finance industries. The penetration percentage of private mortgage insurance is mainly influenced by: (i) the competitiveness of private mortgage insurance for GSE conforming loans compared to FHA and VA insured loans and (ii) the relative percentage of mortgage originations that are for purchased homes versus refinances. We believe, for example, that given current pricing levels, which are subject to change, the generally better execution available through the GSEs for borrowers with higher FICO scores and lender preferences are factors that currently provide a competitive advantage for private mortgage insurers. See “Mortgage Insurance Portfolio—New Insurance Written.” Private mortgage insurance penetration in the insurable market has generally been higher on new mortgages for purchased homes than on the refinance of existing mortgages, because average LTVs are typically higher on home purchases, and therefore, these lower down payment loans are more likely to require mortgage insurance. Radian Guaranty’s share of the private mortgage insurance market is influenced by competition in that market. See “Item 1. Business—Competition.” For a historical perspective on key market drivers, see the charts entitled “Mortgage origination market” and “Private mortgage insurance penetration of mortgage origination market” in “Mortgage Insurance Portfolio—New Insurance Written.” IIF and Related Drivers Our IIF is one of the primary drivers of our future premiums that we expect to earn over time. Although not reflected in the current period financial statements, nor in our reported book value, we expect our IIF to generate substantial earnings in future periods due to the high credit quality of our current mortgage insurance portfolio and our expectations for future Persistency Rates. The ultimate profitability of our mortgage insurance business is affected by the impact of mortgage prepayment speeds on the mix of business we write. The measure for assessing the impact of policy cancellations on our IIF is our Persistency Rate, defined as the percentage of IIF that remains in force over a period of time. Assuming all other factors remain constant, over the life of the policies, prepayment speeds have an inverse impact on IIF and the expected revenue from our Monthly Premium Policies. Slower loan prepayment speeds, demonstrated by a higher Persistency Rate, result in more IIF remaining in place, providing increased revenue from Monthly Premium Policies over time as premium payments continue. Earlier than anticipated loan prepayments, demonstrated by a lower Persistency Rate, reduce IIF and the revenue from our Monthly Premium Policies. Among other factors, prepayment speeds may be affected by changes in interest rates and other macroeconomic factors. A rising interest rate environment generally will reduce refinancing activity and result in lower prepayments, whereas a declining interest rate environment generally will increase the level of refinancing activity and therefore increase prepayments. In contrast to Monthly Premium Policies, when Single Premium Policies are canceled by the insured because the loan has been paid off or otherwise, we accelerate the recognition of any remaining unearned premiums, net of any refunds that may be owed to the borrower. Although these cancellations reduce IIF, assuming all other factors remain constant, the profitability of our Single Premium business increases when Persistency Rates are lower. As a result, we believe that writing a mix of Single Premium Policies and Monthly Premium Policies has the potential to moderate the overall impact on our results if actual prepayment speeds are significantly different from expectations. However, the impact of this moderating effect may be affected by the amount of reinsurance we obtain on portions of our portfolio, with the Single Premium QSR Program currently reducing the proportion of retained Single Premium Policies in our portfolio. At December 31, 2023, approximately 89% of our total Primary Mortgage RIF are Monthly and Other Recurring Premium Policies. Based on the current composition of our mortgage insurance portfolio, with Monthly Premium Policies comprising a larger proportion of our total portfolio than Single Premium Policies, an increase in IIF generally has a corresponding positive impact on premiums earned, while a decrease in IIF generally has a corresponding negative impact on premiums earned. 67 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Cancellations of our insurance policies as a result of prepayments and other reductions of IIF, such as Rescissions of coverage and claims paid, generally have a negative effect on premiums earned over time. See “Mortgage Insurance Portfolio—Insurance and Risk in Force” for more information about the levels and characteristics of our IIF. Premiums The premium rates we charge for our insurance are based on a number of borrower, loan and property characteristics. The mortgage insurance industry is highly competitive and private mortgage insurers compete with each other and with the FHA and VA with respect to price and other factors. Our pricing is risk-based and is intended to generally align with the capital requirements under the PMIERs, while also considering pricing trends within the private mortgage insurance industry among other factors. As a result, our pricing is expected to generate relatively consistent returns across the credit spectrum. In developing our pricing strategies, we monitor various competitive and economic factors while seeking to maximize the long-term economic value of our portfolio by balancing credit risk, lender and geographic concentration risk, profitability and volume considerations, and aim to achieve an overall risk-adjusted rate of return on capital given our modeled performance expectations. Our actual portfolio returns will depend on a number of factors, including economic conditions, the mix of NIW that we are able to write, our pricing, the amount of reinsurance we use and the level of capital we hold, including amounts that may be in excess of minimum PMIERs financial and statutory capital requirements. Our pricing actions gradually affect our results over time, as existing IIF cancels and is replaced with NIW at current pricing. See “Mortgage Insurance Portfolio—New Insurance Written” and “Liquidity and Capital Resources—Mortgage Insurance” for additional information. As described above, premiums on our mortgage insurance products are generally paid either on an installment basis, pursuant to Monthly Premium Policies, or in a single payment at the time of loan origination, pursuant to Single Premium Policies. See “Item 1. Business—Mortgage Insurance—Pricing—Primary Mortgage Insurance Premiums.” As discussed above, the ultimate profitability of Single Premium Policies may be higher or lower than expected due to the impact of prepayment speeds. See “IIF and Related Drivers” above. Monthly Premium Policies typically provide a level monthly premium for the first 10 years of the policy, followed by a lower level monthly premium thereafter. Generally, a borrower is able to cancel the policy when the LTV reaches 80% of the original value, and the servicer is required to review the policy for automatic cancellation on the date the LTV is scheduled to reach 78% of the original value. As a result, the volume of loans that remain insured after 10 years and would be subject to the premium reset is generally not material in relation to the total loans originated. However, to the extent the volume of loans resetting from year to year varies significantly, the trend in earned premiums may also vary. Losses Incurred losses represent the estimated future claim payments on newly defaulted insured loans as well as any change in our claim estimates for existing defaults, including changes in our estimates with respect to the frequency, magnitude and timing of anticipated losses on defaulted loans. Other factors influencing incurred losses include: ■The mix of credit characteristics in our total direct RIF (e.g., loans with higher risk characteristics, or loans with layered risk that combine multiple higher-risk attributes within the same loan, generally result in more delinquencies and claims). See “Mortgage Insurance Portfolio—Insurance and Risk in Force;” ■The average loan size (relatively higher priced properties with larger average loan amounts may result in higher incurred losses); ■The percentage of coverage on insured loans (higher percentages of insurance coverage generally correlate with higher incurred losses) and the presence of structural mitigants such as deductibles or stop losses; ■Changes in housing values (declines in housing values generally make it more difficult for borrowers to sell a home to avoid default or for the property to be sold to mitigate a claim, and also may negatively affect a borrower’s willingness to continue to make mortgage payments when the home value is less than the mortgage balance; conversely, increases in housing values tend to reduce the level of defaults as well as make it more likely that foreclosures will result in the loan being satisfied); ■The distribution of claims over the life cycle of a portfolio (historically, claims are relatively low during the first two years after a loan is originated and then increase over a period of several years before declining; however, several factors can impact and change this cycle, including the economic environment, the quality of the underwriting of the loan, characteristics of the mortgage loan, the credit profile of the borrower, housing prices and unemployment rates); and ■Our ability to mitigate potential losses through Rescissions, Claim Denials, cancellations and Claim Curtailments on claims submitted to us. In “Item 1A. Risk Factors,” see “Our Loss Mitigation Activity could negatively impact our customer relationships.” 68 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Risk Distribution We use third-party reinsurance in our mortgage insurance business to manage capital and risk in an effort to optimize the amounts and types of capital and risk distribution deployed against insured risk. We have distributed risk through traditional quota share and excess-of-loss reinsurance arrangements, as well as to investors through the capital markets using mortgage insurance-linked notes transactions. See “IIF and Related Drivers” above. When we enter into a quota share reinsurance agreement, the reinsurer receives a premium and, in exchange, agrees to insure an agreed upon portion of incurred losses. These arrangements reduce our earned premiums but also reduce our net RIF, which provides capital relief, including under the PMIERs financial requirements. In addition, our incurred losses are reduced by any incurred losses ceded in accordance with the reinsurance agreement, which reduces the volatility of our provision for losses in certain stressed economic environments, and we often receive ceding commissions from the reinsurer as part of the transaction, which, in turn, reduce our reported operating expenses and policy acquisition costs. Our XOL Program accesses reinsurance coverage through traditional excess-of-loss reinsurance arrangements, as well as through the capital markets through the Eagle Re Issuers’ mortgage insurance-linked notes transactions. Our XOL Program reduces our earned premiums, but also reduces our net RIF and PMIERs financial requirements, and potentially our incurred losses, which are allocated in accordance with the structure of the transaction. The Eagle Re Issuers are special purpose VIEs that are not consolidated in our consolidated financial statements because we do not have the unilateral power to direct those activities that are significant to their economic performance. See Note 8 of Notes to Consolidated Financial Statements for more information about our reinsurance arrangements, including the total assets and liabilities of the Eagle Re Issuers. Investment Income Investment income is determined primarily by the investment balances held and the average yield on our overall investment portfolio. Other Operating Expenses Our other operating expenses include salaries and other base employee costs, variable and share-based incentive compensation and other general operating expenses, such as fees for professional and consulting services, software, rent and depreciation, among other costs. Employee related expenses are driven by our headcount, which can fluctuate due to the amount of our NIW and IIF, as well as our plans for other business initiatives. Our other operating expenses may also fluctuate due to the impact of performance on our incentive compensation programs, as a result of our pay-for-performance approach to compensation that is based on the level of achievement of both short-term and long-term goals. These operating expenses are reported net of ceding commissions associated with our QSR Program. As a result, changes to our QSR Program and the amount of our ceded premiums earned also can impact our other operating expenses. homegenius Premiums We earn net premiums on title insurance through Radian Title Insurance. Demand for title insurance may be impacted by general marketplace competition in the real estate title industry, coupled with housing market related conditions such as new home sales, the sizes of the real estate purchase and refinance markets and interest rate fluctuations. Services Revenue Our homegenius segment is dependent upon overall activity in the mortgage finance and real estate markets, as well as market receptivity to the products we offer. Due, in part, to the transactional nature of the business, revenues for our homegenius segment are subject to fluctuations from period to period, including seasonal fluctuations that reflect the activities in these markets. Sales volume is also affected by the number of competing companies and alternative products offered in the market. We believe the diversity of services we offer has the potential to produce fee income from the homegenius segment throughout various mortgage finance environments and economic cycles, although market conditions can significantly impact the mix and amount of fee income we generate in any particular period. See “Item 1. Business—homegenius—Overview” for more information on our homegenius services. The homegenius segment is dependent on a limited number of large customers that represent a significant portion of its revenues. Generally, our contracts do not contain volume commitments and may be terminated by clients at any time. While access to Radian Guaranty’s mortgage insurance customer base provides additional opportunities to expand the homegenius segment’s existing customers, an unexpected loss of a major customer could significantly impact the level of homegenius revenue. 69 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Our homegenius revenue is primarily generated under fixed-price contracts. Under fixed-price contracts, we agree to perform the specified services and deliverables for a predetermined per-unit price. To the extent our actual direct and allocated indirect costs decrease or increase from the estimates upon which the price was negotiated, we will generate more or less profit, respectively, or could incur a loss. See Note 2 of Notes to Consolidated Financial Statements for more information on revenue recognition policies for our homegenius segment. Cost of Services Our cost of services is primarily affected by our level of services revenue and the number of employees providing products and services for our homegenius businesses. Our cost of services primarily consists of employee compensation and related payroll benefits, and to a lesser extent, other costs of providing services such as travel and related expenses incurred in providing client services, costs paid to outside vendors, data acquisition costs and other costs to maintain software platforms that directly support our businesses. The level of these costs may fluctuate as market rates of compensation change, or if there is decreased availability or a loss of qualified employees. Operating Expenses Our operating expenses primarily consist of salaries and benefits not classified as cost of services because they are related to employees, such as sales and corporate employees, who are not directly involved in providing client services. Operating expenses also include other selling, general and administrative expenses, depreciation and allocations of corporate general and administrative expenses. See “Item 1. Business—homegenius—Overview” and Note 1 of Notes to Consolidated Financial Statements for additional information regarding the homegenius segment. Net Gains (Losses) on Investments and Other Financial Instruments In addition, net gains (losses) on investments and other financial instruments also may impact our consolidated results in the ordinary course. The recognition of realized investment gains or losses can vary significantly across periods, as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities, our tax and capital profile and overall market cycles. Unrealized gains and losses arise primarily from changes in the market value of our investments that are classified as trading or equity securities, as well as changes in the value of mortgage loans held by Radian Mortgage Capital. These valuation adjustments may not necessarily result in realized economic gains or losses. Mortgage Insurance Portfolio New Insurance Written A key component of our current business strategy is to write NIW that we believe will generate future earnings and economic value while effectively maintaining the portfolio’s health, balance and profitability. Consistent with this objective, we wrote $52.7 billion of primary new mortgage insurance in 2023, compared to $68.0 billion of NIW in 2022. Our NIW decreased by 22% in 2023 as compared to 2022, due to a broad decline in U.S. housing market activity primarily resulting from higher mortgage interest rates, partially offset by an increase in our market share in 2023. Among other factors, private mortgage insurance industry volumes are impacted by total mortgage origination volumes and the mix between mortgage originations that are for home purchases versus refinancings of existing mortgages. Historically, the penetration rate for private mortgage insurance generally has been three to five times higher for purchase transactions than for refinancings. However, with significant home price appreciation in recent years, penetration on purchase transactions has increased while penetration on refinancings has decreased, and the penetration rate for private mortgage insurance has shifted to 10 to 14 times higher for purchase transactions than for refinancings. The following charts provide a historical perspective on certain key market drivers, including: ■the mortgage origination volume from home purchases and refinancings; and ■private mortgage insurance penetration as a percentage of the mortgage origination market. 70 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Mortgage origination market (1) [[GREPCENT_TABLE]] [["","Origination Market (In billions)","Q1 2021","Q2 2021","Q3 2021","Q4 2021","Q1 2022","Q2 2022","Q3 2022","Q4 2022","Q1 2023","Q2 2023","Q3 2023","Q4 2023"],["\u00a2","Refinance","$","896","","$","650","","$","606","","$","539","","$","347","","$","195","","$","100","","$","67","","$","63","","$","82","","$","73","","$","63"],["\u00a2","Purchase","377","","531","","526","","489","","384","","487","","419","","341","","273","","364","","350","","301"],["","Total","$","1,273","","$","1,181","","$","1,132","","$","1,028","","$","731","","$","682","","$","519","","$","408","","$","336","","$","446","","$","423","","$","364"]] [[/GREPCENT_TABLE]] Private mortgage insurance penetration of mortgage origination market (1) [[GREPCENT_TABLE]] [["","Market Penetration (%)","Q1 2021","Q2 2021","Q3 2021","Q4 2021","Q1 2022","Q2 2022","Q3 2022","Q4 2022","Q1 2023","Q2 2023","Q3 2023","Q4 2023"],["\u00f2","Purchase (2)","25.5%","24.3%","25.5%","24.4%","25.3%","24.2%","24.4%","21.9%","23.1%","22.0%","22.0%","19.3%"],["\u00f2","Overall (2)","11.7%","13.4%","13.1%","12.6%","14.2%","17.7%","20.1%","18.6%","19.2%","18.3%","18.5%","16.2%"],["\u00f2","Refinance (2)","5.8%","4.5%","2.4%","1.9%","1.9%","1.5%","1.7%","2.1%","2.3%","1.8%","1.5%","1.8%"]] [[/GREPCENT_TABLE]] (1)Based on actual dollars generated in the credit enhanced market as reported by HUD and publicly reported industry information. Mortgage originations are based upon the average of originations reported by the Mortgage Bankers Association, Freddie Mac and Fannie Mae in their most recent published industry reports. (2)Excluding originations under HARP. According to industry estimates, total mortgage origination volume was significantly lower in 2023 as compared to 2022 due to a significant decline in mortgage refinance activity and a smaller decline in home purchases. Although it is difficult to project future volumes, recent industry projections for 2024 estimate total mortgage originations of approximately $2.0 trillion, which would represent an increase in the total annual mortgage origination market of approximately 27% as compared to 2023. Factoring in our projections of private mortgage insurance penetration in the overall insurable mortgage market, we estimate that the private mortgage insurance market will be between $300 billion and $350 billion in 2024 as compared to a reported market of approximately $285 billion in 2023. There is an industry-wide consensus that we should expect a healthy purchase market in 2024 driven by ongoing homebuyer demand and an expected decline in interest rates, which is a positive for mortgage insurers given the higher likelihood that purchase loans will utilize private mortgage insurance as compared to refinance loans. This outlook also anticipates an increase in refinance originations in 2024 resulting from reduced interest rates. 71 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following table provides selected information for the periods indicated related to our mortgage insurance NIW. For direct Single Premium Policies, NIW includes policies written on an individual basis (as each loan is originated) and on an aggregated basis (in which each individual loan in a group of loans is insured in a single transaction, typically after the loans have been originated). [[GREPCENT_TABLE]] [["NIW"],["","","Years Ended December 31,"],["($ in millions)","","2023","","2022","","2021"],["NIW","","$","52,670","","","$","67,954","","","$","91,830"],["Primary risk written","","$","13,533","","","$","17,368","","","$","22,591"],["Average coverage percentage","","25.7","%","","25.6","%","","24.6","%"],["NIW by loan purpose"],["Purchases","","98.5","%","","96.1","%","","80.5","%"],["Refinances","","1.5","%","","3.9","%","","19.5","%"],["NIW by premium type"],["Direct Monthly and Other Recurring Premiums","","96.0","%","","95.1","%","","92.8","%"],["Direct single premiums","","4.0","%","","4.9","%","","7.2","%"],["NIW by FICO score (1)"],["=740","","65.4","%","","59.8","%","","58.6","%"],["680-739","","28.9","%","","32.4","%","","34.2","%"],["620-679","","5.7","%","","7.8","%","","7.2","%"],["=619","","0.0","%","","0.0","%","","0.0","%"],["NIW by LTV"],["95.01% and above","","16.9","%","","16.6","%","","12.0","%"],["90.01% to 95.00%","","39.4","%","","39.9","%","","40.7","%"],["85.01% to 90.00%","","29.9","%","","28.4","%","","28.3","%"],["85.00% and below","","13.8","%","","15.1","%","","19.0","%"]] [[/GREPCENT_TABLE]] (1)For loans with multiple borrowers, the percentage of NIW by FICO score represents the lowest of the borrowers’ FICO scores. Insurance and Risk in Force [[GREPCENT_TABLE]] [["Year of origination - IIF (1)"],["($ in billions)","","IIF as of:"],["By vintage:","","December 31, 2023","","December 31, 2022","","December 31, 2021"],["2023","","$","50.6","","","18.7","%","","$","\u2014","","","\u2014","%","","$","\u2014","","","\u2014","%"],["2022","","60.5","","","22.4","","","65.2","","","25.0","","","\u2014","","","\u2014"],["2021","","65.7","","","24.3","","","77.3","","","29.6","","","87.4","","","35.5"],["2020","","45.1","","","16.7","","","57.7","","","22.1","","","74.3","","","30.2"],["2019","","14.7","","","5.4","","","17.9","","","6.8","","","24.0","","","9.8"],["2018","","7.4","","","2.8","","","9.0","","","3.5","","","12.4","","","5.0"],["2009 - 2017","","18.3","","","6.8","","","24.9","","","9.5","","","36.5","","","14.9"],["2008 & Prior (2)","","7.7","","","2.9","","","9.0","","","3.5","","","11.4","","","4.6"],["Total","","$","270.0","","","100.0","%","","$","261.0","","","100.0","%","","$","246.0","","","100.0","%"]] [[/GREPCENT_TABLE]] (1)Policy years represent the original policy years and have not been adjusted to reflect subsequent refinancing activity under HARP. (2)Includes loans that were subsequently refinanced under HARP. 72 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Our IIF is the primary driver of the future premiums that we expect to earn over time. IIF increased to $270.0 billion at December 31, 2023, from $261.0 billion at December 31, 2022, reflecting the impact of our NIW offset by policy cancellations and amortization. Our IIF at December 31, 2023, increased 3% as compared to the same period last year, reflecting a 6% increase in Monthly Premium Policies in force partially offset by a 10% decline in Single Premium Policies in force. Historically, there is a close correlation between interest rates and Persistency Rates. Higher interest rate environments generally decrease refinancings, which decrease the cancellation rate of our insurance and positively affect our Persistency Rates. As shown in the table below, our 12-month Persistency Rate at December 31, 2023, increased as compared to the same period in 2022. The increase in our Persistency Rate in 2023 was primarily attributable to decreased refinance activity due to increases in mortgage interest rates, as compared to the prior year. As of December 31, 2023, 81% of our IIF had a mortgage note interest rate of 6.0% or less and 69% of our IIF had a mortgage note rate of 5.0% or less. Given the increase in market mortgage interest rates, which, based on reported industry averages, now exceed these levels, we would expect a continued positive impact on our Persistency Rates. If refinance volume increases, we would expect the Persistency Rate for our portfolio to decrease, reducing the size of our IIF portfolio. See “Item 1A. Risk Factors” for more information. As discussed above, our earnings in future periods are subject to elevated risks and uncertainties related to macroeconomic conditions and specific events that impact the housing finance and real estate markets, including housing prices, inflationary pressures, unemployment levels, interest rate changes and the availability of credit. For additional information, in “Item 1A. Risk Factors,” see “The credit performance of our mortgage insurance portfolio is impacted by macroeconomic conditions and specific events that affect the ability of borrowers to pay their mortgages.” While these risks and uncertainties are elevated in the near-term, we continue to believe that the long-term housing market fundamentals and outlook remain positive, including demographics supporting growth in the population of first-time homebuyers and a relatively constrained supply of homes available for sale. In addition, historical loan performance data indicates that credit scores and underwriting quality are key drivers of credit performance, and loan originations after 2008 have consisted primarily of high credit quality loans with significantly better credit performance than loans originated during 2008 and prior periods. The following table illustrates the trends of our cumulative incurred loss ratios by year of origination and development year. [[GREPCENT_TABLE]] [["Cumulative incurred loss ratio by vintage (1)"],["Vintage","Dec 2014","Dec 2015","Dec 2016","Dec 2017","Dec 2018","Dec 2019","Dec2020 (2)","Dec2021 (2)","Dec 2022","Dec 2023"],["2014","2.7%","4.1%","4.9%","5.0%","5.1%","5.2%","6.9%","6.8%","4.5%","3.9%"],["2015","","2.1%","4.8%","5.2%","5.0%","4.7%","7.4%","6.8%","3.8%","2.9%"],["2016","","","2.9%","5.0%","4.8%","4.7%","9.7%","8.0%","3.7%","2.7%"],["2017","","","","4.7%","5.1%","6.1%","14.3%","11.9%","5.1%","3.7%"],["2018","","","","","3.0%","6.4%","22.8%","19.0%","7.2%","4.9%"],["2019","","","","","","2.8%","35.6%","23.5%","6.8%","4.6%"],["2020","","","","","","","25.6%","14.9%","6.0%","3.8%"],["2021","","","","","","","","7.9%","10.9%","9.1%"],["2022","","","","","","","","","9.4%","15.2%"],["2023","","","","","","","","","","7.1%"]] [[/GREPCENT_TABLE]] (1)Represents inception-to-date losses incurred as a percentage of net premiums earned. (2)Losses incurred in 2021 and 2020 across all vintages were elevated due to the impact of the COVID-19 pandemic. Throughout this report, unless otherwise noted, RIF is presented on a gross basis and includes the amount ceded under reinsurance. RIF and IIF for direct Single Premium Policies include 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 after the loans have been originated). 73 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following table provides selected information as of and for the periods indicated related to mortgage insurance IIF and RIF. [[GREPCENT_TABLE]] [["IIF and RIF"],["","","Years Ended December 31,"],["($ in millions)","","2023","","2022","","2021"],["Primary IIF","","$","269,979","","","$","260,994","","","$","245,972"],["Primary RIF","","$","69,710","","","$","66,094","","","$","60,913"],["Average coverage percentage","","25.8","%","","25.3","%","","24.8","%"],["Persistency Rate (12 months ended)","","84.0","%","","79.6","%","","64.3","%"],["Persistency Rate (quarterly, annualized) (1)","","85.8","%","","84.1","%","","71.7","%"],["Primary RIF by premium type"],["Direct Monthly and Other Recurring Premiums","","88.9","%","","87.1","%","","83.9","%"],["Direct single premiums","","11.1","%","","12.9","%","","16.1","%"],["Primary RIF by FICO score (2)"],["=740","","58.5","%","","57.4","%","","56.9","%"],["680-739","","33.9","%","","34.6","%","","35.0","%"],["620-679","","7.3","%","","7.6","%","","7.6","%"],["=619","","0.3","%","","0.4","%","","0.5","%"],["Primary RIF by LTV"],["95.01% and above","","18.6","%","","17.1","%","","15.1","%"],["90.01% to 95.00%","","48.2","%","","48.4","%","","48.9","%"],["85.01% to 90.00%","","27.1","%","","27.2","%","","27.7","%"],["85.00% and below","","6.1","%","","7.3","%","","8.3","%"]] [[/GREPCENT_TABLE]] (1)The Persistency Rate on a quarterly, annualized basis is calculated based on loan-level detail for the quarter ending as of the date shown. It may be impacted by seasonality or other factors, including the level of refinance activity during the applicable periods and may not be indicative of full-year trends. (2)For loans with multiple borrowers, the percentage of primary RIF by FICO score represents the lowest of the borrowers’ FICO scores. 74 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following table shows our direct Primary Mortgage Insurance RIF by year of origination and selected information related to that risk as of the dates indicated. [[GREPCENT_TABLE]] [["Year of origination - RIF"],["","","December 31,"],["","","2023","","2022"],["($ in millions)","","RIF","","Number of Defaults","","Delinquency Rate","","Percentage of Reserve for Losses","","RIF","","Number of Defaults","","Delinquency Rate","","Percentage of Reserve for Losses"],["2023","","$","13,008","","","584","","","0.4","%","","1.6","%","","$","\u2014","","","\u2014","","","\u2014","%","","\u2014","%"],["2022","","15,589","","","2,899","","","1.6","","","13.9","","","16,697","","","965","","","0.5","","","2.5"],["2021","","17,065","","","3,630","","","1.6","","","17.0","","","19,528","","","2,865","","","1.1","","","11.3"],["2020","","11,596","","","2,111","","","1.2","","","9.2","","","14,255","","","2,292","","","1.1","","","10.1"],["2019","","3,740","","","1,904","","","2.7","","","7.9","","","4,439","","","2,279","","","2.7","","","9.7"],["2018","","1,939","","","2,076","","","5.1","","","8.5","","","2,319","","","2,512","","","5.2","","","11.7"],["2009 - 2017","","4,836","","","4,082","","","3.9","","","18.0","","","6,579","","","5,308","","","7.9","","","25.5"],["2008 and prior","","1,937","","","4,735","","","8.7","","","23.9","","","2,277","","","5,692","","","9.0","","","29.2"],["Total","","$","69,710","","","22,021","","","","","100.0","%","","$","66,094","","","21,913","","","","","100.0","%"]] [[/GREPCENT_TABLE]] Geographic Dispersion The following table shows, as of the dates indicated, the percentage of our direct Primary Mortgage Insurance RIF and the associated percentage of our mortgage insurance reserve for losses (by location of property) for the top 10 states in the U.S. (as measured by our direct Primary Mortgage Insurance RIF as of December 31, 2023). [[GREPCENT_TABLE]] [["Top 10 U.S. states - RIF"],["","","December 31,"],["","","2023","","2022"],["Top 10 States","","RIF","","Reserve for Losses","","RIF","","Reserve for Losses"],["Texas","","10.0","%","","9.5","%","","9.4","%","","8.4","%"],["California","","8.5","","","9.3","","","8.7","","","9.3"],["Florida","","5.8","","","8.5","","","6.3","","","9.1"],["Illinois","","5.0","","","6.0","","","4.7","","","6.0"],["New York","","4.2","","","9.4","","","4.5","","","10.0"],["Virginia","","4.2","","","2.2","","","3.9","","","2.3"],["Pennsylvania","","3.8","","","3.5","","","3.8","","","3.3"],["New Jersey","","3.7","","","4.7","","","3.8","","","5.3"],["Maryland","","3.7","","","3.5","","","3.5","","","3.6"],["Washington","","3.6","","","2.2","","","3.6","","","1.7"],["Total","","52.5","%","","58.8","%","","52.2","%","","59.0","%"]] [[/GREPCENT_TABLE]] The following table shows, as of the dates indicated, the percentage of our direct Primary Mortgage Insurance RIF and the associated percentage of our mortgage insurance reserve for losses (by location of property) for the top 10 Core Based Statistical Areas, referred to as “CBSAs,” in the U.S. (as measured by our direct Primary Mortgage Insurance RIF as of December 31, 2023). 75 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations [[GREPCENT_TABLE]] [["Top 10 Core Based Statistical Areas - RIF"],["","","December 31,"],["","","2023","","2022"],["Top 10 CBSAs (1)","","RIF","","Reserve for Losses","","RIF","","Reserve for Losses"],["New York-Newark-Jersey City, NY-NJ-PA","","5.3","%","","10.7","%","","5.5","%","","12.2","%"],["Chicago-Naperville-Elgin, IL-IN-WI","","4.6","","","5.6","","","4.3","","","5.7"],["Washington-Arlington-Alexandria, DC-VA-MD-WV","","4.3","","","3.1","","","4.0","","","3.4"],["Dallas-Fort Worth-Arlington, TX","","3.4","","","3.0","","","3.1","","","2.7"],["Houston-The Woodlands-Sugar Land, TX","","2.9","","","3.2","","","2.7","","","3.0"],["Philadelphia-Camden-Wilmington, PA-NJ-DE-MD","","2.7","","","2.6","","","2.7","","","2.5"],["Los Angeles-Long Beach-Anaheim, CA","","2.3","","","2.5","","","2.4","","","2.6"],["Denver-Aurora-Lakewood, CO","","2.2","","","1.0","","","1.9","","","0.9"],["Minneapolis-St. Paul-Bloomington, MN-WI","","2.2","","","1.5","","","2.3","","","1.5"],["Seattle-Tacoma-Bellevue, WA","","2.1","","","1.1","","","2.1","","","0.9"],["Total","","32.0","%","","34.3","%","","31.0","%","","35.4","%"]] [[/GREPCENT_TABLE]] (1)CBSAs are metropolitan areas and may include a portion of adjoining states as noted above. Risk Distribution We use third-party reinsurance in our mortgage insurance business as part of our risk distribution strategy, including to manage our capital position and risk profile. When we enter into a reinsurance agreement, the reinsurer receives a premium and, in exchange, insures an agreed upon portion of incurred losses. While these arrangements reduce our earned premiums, they also reduce our required capital and are expected to increase our return on required capital for the related policies. The impact of these programs on our financial results will vary depending on the level of ceded RIF, as well as the levels of prepayments and incurred losses on the reinsured portfolios, among other factors. See “Key Factors Affecting Our Results—Mortgage Insurance—Risk Distribution” and Note 8 of Notes to Consolidated Financial Statements for more information about our reinsurance transactions. The table below provides information about the amounts by which Radian Guaranty’s reinsurance programs reduced its Minimum Required Assets as of the dates indicated. [[GREPCENT_TABLE]] [["PMIERs benefit from risk distribution"],["","","December 31,"],["($ in thousands)","","2023","","2022","","2021"],["PMIERs impact - reduction in Minimum Required Assets"],["XOL Program (1)","","$","988,629","","","$","665,617","","","$","995,171"],["Other QSR Agreements (2)","","420,989","","","241,889","","","12,541"],["Single Premium QSR Program","","193,807","","","231,339","","","314,183"],["Total PMIERs impact","","$","1,603,425","","","$","1,138,845","","","$","1,321,895"],["Percentage of gross Minimum Required Assets","","30.6","%","","22.9","%","","28.4","%"]] [[/GREPCENT_TABLE]] (1)The tender offers in the second quarter of 2023 conducted by Eagle Re 2019-1 Ltd. and Eagle Re 2020-1 Ltd. had no effect on the benefit to Minimum Required Assets. See Note 8 of Notes to Consolidated Financial Statements for more information on these tender offers and related impacts. (2)Consists primarily of 2022 and 2023 QSR Agreements, which include both single and monthly premium policies. Results of Operations—Consolidated Radian Group serves as the holding company for our operating subsidiaries and does not have any operations of its own. Our consolidated operating results for 2023 primarily reflect the financial results and performance of our two reportable segments—Mortgage Insurance and homegenius. See “Results of Operations—Mortgage Insurance,” and “Results of Operations—homegenius” for the operating results of these business segments. 76 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations In addition to the results of our operating segments, pretax income (loss) is also affected by other factors. See “Use of Non-GAAP Financial Measures” below and “Key Factors Affecting Our Results—Net Gains (Losses) on Investments and Other Financial Instruments” for more information regarding items that are excluded from the operating results of our operating segments. The following table highlights selected information related to our consolidated results of operations for the periods indicated. [[GREPCENT_TABLE]] [["Summary results of operations - Consolidated"],["","","","","","","","","Change"],["","","Years Ended December 31,","","Favorable (Unfavorable)"],["($ in thousands, except per-share amounts)","","2023","","2022","","2021","","2023 vs. 2022","","2022 vs. 2021"],["Revenues"],["Net premiums earned","","$","919,578","","","$","981,131","","","$","1,037,183","","","$","(61,553)","","","$","(56,052)"],["Services revenue","","46,092","","","92,216","","","125,825","","","(46,124)","","","(33,609)"],["Net investment income","","258,430","","","195,658","","","147,909","","","62,772","","","47,749"],["Net gains (losses) on investments and other financial instruments","","10,241","","","(80,733)","","","15,603","","","90,974","","","(96,336)"],["Other income","","6,247","","","2,454","","","3,412","","","3,793","","","(958)"],["Total revenues","","1,240,588","","","1,190,726","","","1,329,932","","","49,862","","","(139,206)"],["Expenses"],["Provision for losses","","(42,526)","","","(338,239)","","","20,877","","","(295,713)","","","359,116"],["Policy acquisition costs","","24,578","","","23,918","","","29,029","","","(660)","","","5,111"],["Cost of services","","38,491","","","82,358","","","103,714","","","43,867","","","21,356"],["Other operating expenses","","347,578","","","381,148","","","323,686","","","33,570","","","(57,462)"],["Interest expense","","89,695","","","84,454","","","84,344","","","(5,241)","","","(110)"],["Impairment of goodwill","","9,802","","","\u2014","","","\u2014","","","(9,802)","","","\u2014"],["Amortization of other acquired intangible assets","","5,483","","","4,308","","","3,450","","","(1,175)","","","(858)"],["Total expenses","","473,101","","","237,947","","","565,100","","","(235,154)","","","327,153"],["Pretax income","","767,487","","","952,779","","","764,832","","","(185,292)","","","187,947"],["Income tax provision","","164,368","","","209,845","","","164,161","","","45,477","","","(45,684)"],["Net income","","$","603,119","","","$","742,934","","","$","600,671","","","$","(139,815)","","","$","142,263"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["Diluted net income per share","","$","3.77","","","$","4.35","","","$","3.16","","","$","(0.58)","","","$","1.19"],["Return on equity","","14.5","%","","18.2","%","","14.1","%","","(3.7)","%","","4.1","%"],["Non-GAAP Financial Measures (1)"],["Adjusted pretax operating income","","$","786,427","","","$","1,052,717","","","$","757,749","","","$","(266,290)","","","$","294,968"],["Adjusted diluted net operating income per share","","$","3.88","","","$","4.87","","","$","3.15","","","$","(0.99)","","","$","1.72"],["Adjusted net operating return on equity","","14.9","%","","20.3","%","","14.0","%","","(5.4)","%","","6.3","%"]] [[/GREPCENT_TABLE]] (1)See “Use of Non-GAAP Financial Measures” below. This section of our Annual Report on Form 10-K generally discusses our consolidated results of operations for the years ended December 31, 2023 and 2022, and a year-over-year comparison between 2023 and 2022. Detailed discussions of our consolidated results of operations for the year ended December 31, 2022, including the year-over-year comparisons between 2022 and 2021, that are not included in this Annual Report on Form 10-K can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023. 77 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Revenues Net Premiums Earned. The decrease in net premiums earned for 2023 compared to 2022 is primarily driven by decreases in net premiums earned in both our mortgage insurance and title insurance businesses in 2023. For more information, see “Year Ended December 31, 2023, Compared to Year Ended December 31, 2022—Revenues—Net Premiums Earned” under both “Results of Operations—Mortgage Insurance” and “Results of Operations—homegenius.” Services Revenue. Services revenue for 2023 decreased compared to 2022, primarily driven by the general market decline in mortgage origination volume as well as other market and macroeconomic conditions, as further described above in “Overview—Current Operating Environment.” For more information, see “Year Ended December 31, 2023, Compared to Year Ended December 31, 2022—Revenues—Services Revenue” under both ““Results of Operations—Mortgage Insurance” and “Results of Operations—homegenius.” Net Investment Income. The increase in net investment income for 2023 compared to 2022 is primarily attributable to higher yields in 2023 driven by increased market interest rates on new purchases. See “Overview—Current Operating Environment” and “Results of Operations—Mortgage Insurance—Year Ended December 31, 2023, Compared to Year Ended December 31, 2022—Revenues—Net Investment Income” for more information. Net Gains (Losses) on Investments and Other Financial Instruments. The favorable change in net gains (losses) on investments and other financial instruments for 2023, as compared to 2022, is primarily due to: (i) the general positive movement in equity markets in 2023, compared to 2022, and (ii) moderately lower market interest rates in 2023, compared to the sharp rise in market interest rates in 2022, as further discussed above in “Overview—Current Operating Environment.” See Note 6 of Notes to Consolidated Financial Statements for additional information about net gains (losses) on investments and other financial instruments by investment category. Expenses Provision for Losses. The reduced benefit of the provision for losses for 2023 compared to 2022 is primarily driven by a reduction in favorable development on prior year defaults, which impacted our mortgage insurance reserves. See “Results of Operations—Mortgage Insurance—Year Ended December 31, 2023, Compared to Year Ended December 31, 2022—Expenses—Provision for Losses” for more information. Cost of Services. Cost of services for 2023 decreased as compared to 2022, primarily driven by the decrease in services revenue as discussed above. For more information, see “Year Ended December 31, 2023, Compared to Year Ended December 31, 2022—Expenses—Cost of Services” under both “Results of Operations—Mortgage Insurance” and “Results of Operations—homegenius.” Other Operating Expenses. The decrease in other operating expenses for 2023 compared to 2022 is primarily due to: (i) a decrease in salaries and other base employee expenses and (ii) a decrease in other general operating expenses. These decreases were partially offset by a net increase in variable and share-based compensation expense. Our other operating expenses include impairments of other long-lived assets and other non-operating expenses of $13 million in 2023, primarily related to our lease agreements and impairment of internal-use software, and $15 million in 2022, primarily related to our lease agreements. For more information, see “Year Ended December 31, 2023, Compared to Year Ended December 31, 2022—Expenses—Other Operating Expenses” under both ““Results of Operations—Mortgage Insurance” and “Results of Operations—homegenius.” Interest Expense. The following table shows additional information about interest expense for the periods indicated. [[GREPCENT_TABLE]] [["Interest expense"],["","","December 31,"],["(In thousands)","","2023","","2022","","2021"],["Senior notes","","$","81,246","","","$","80,999","","","$","80,767"],["Mortgage loan financing facilities","","3,507","","","14","","","\u2014"],["FHLB advances","","3,454","","","1,923","","","1,622"],["Revolving credit facility","","1,374","","","1,282","","","2,067"],["Other","","114","","","236","","","(112)"],["Total","","$","89,695","","","$","84,454","","","$","84,344"]] [[/GREPCENT_TABLE]] Impairment of Goodwill. As part of our annual goodwill impairment testing in 2023, we fully impaired our remaining goodwill balance. See Note 2 of Notes to Consolidated Financial Statements for additional detail. 78 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Income Tax Provision Our 2023 effective tax rate was 21.4%, generally consistent with the federal statutory rate of 21%. State income taxes and certain permanent book-to-tax adjustments were the primary drivers of minor differences in the effective tax rate compared to the federal statutory rate. See Note 10 of Notes to Consolidated Financial Statements for a reconciliation of our provision for income taxes. Use of Non-GAAP Financial Measures In addition to the traditional GAAP financial measures, we have presented “adjusted pretax operating income (loss),” “adjusted diluted net operating income (loss) per share” and “adjusted net operating return on equity,” which are non-GAAP financial measures for the consolidated company, among our key performance indicators to evaluate our fundamental financial performance. These non-GAAP financial measures align with the way our business performance is evaluated by both management and by our board of directors. These measures have been established in order to increase transparency for the purposes of evaluating our operating trends and enabling more meaningful comparisons with our peers. Although on a consolidated basis, adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity are non-GAAP financial measures, for the reasons discussed above we believe these measures aid in understanding the underlying performance of our operations. Total adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity are not measures of overall profitability, and therefore should not be considered in isolation or viewed as substitutes for GAAP pretax income (loss), diluted net income (loss) per share or return on equity. Our definitions of adjusted pretax operating income (loss), adjusted diluted net operating income (loss) per share and adjusted net operating return on equity, as discussed and reconciled below to the most comparable respective GAAP measures, may not be comparable to similarly named measures reported by other companies. 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 our business segments and to allocate resources to the segments. 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, except for certain investments and other financial instruments attributable to our reportable segments and All Other activities; (ii) amortization and impairment of goodwill and other acquired intangible assets; and (iii) impairment of other long-lived assets and other non-operating items, if any, such as gains (losses) from the sale of lines of business, acquisition-related income and expenses and gains (losses) on extinguishment of debt. 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). These adjustments, along with the reasons for their treatment, are described in Note 4 of Notes to Consolidated Financial Statements. The following table provides a reconciliation of consolidated pretax income to our non-GAAP financial measure for the consolidated Company of adjusted pretax operating income. [[GREPCENT_TABLE]] [["Reconciliation of consolidated pretax income to adjusted pretax operating income"],["","","Years Ended December 31,"],["(In thousands)","","2023","","2022","","2021"],["Consolidated pretax income","","$","767,487","","","$","952,779","","","$","764,832"],["Less: income (expense) items"],["Net gains (losses) on investments and other financial instruments (1)","","9,427","","","(80,780)","","","14,094"],["Impairment of goodwill","","(9,802)","","","\u2014","","","\u2014"],["Amortization of other acquired intangible assets","","(5,483)","","","(4,308)","","","(3,450)"],["Impairment of other long-lived assets and other non-operating items (2)","","(13,082)","","","(14,850)","","","(3,561)"],["Total adjusted pretax operating income (3)","","$","786,427","","","$","1,052,717","","","$","757,749"]] [[/GREPCENT_TABLE]] (1)Excludes certain net gains (losses), if any, on investments and other financial instruments that are attributable to specific operating segments and therefore included in adjusted pretax operating income (loss). (2)Amounts primarily relate to impairments of other long-lived assets that are included in other operating expenses on the consolidated statements of operations. See Note 9 of Notes to Consolidated Financial Statements. (3)Total adjusted pretax operating income on a consolidated basis consists of adjusted pretax operating income (loss) for our Mortgage Insurance segment, homegenius segment and All Other activities, as further detailed in Note 4 of Notes to Consolidated Financial Statements. 79 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Adjusted diluted net operating income (loss) per share is calculated by dividing adjusted pretax operating income (loss) attributable to common stockholders, net of taxes computed using the Company’s statutory tax rate, by the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. The following table provides a reconciliation of diluted net income (loss) per share to our non-GAAP financial measure for the consolidated Company of adjusted diluted net operating income (loss) per share. [[GREPCENT_TABLE]] [["Reconciliation of diluted net income per share to adjusted diluted net operating income per share"],["","","Years Ended December 31,"],["","","2023","","2022","","2021"],["Diluted net income per share","","$","3.77","","","$","4.35","","","$","3.16"],["Less: per-share impact of reconciling income (expense) items"],["Net gains (losses) on investments and other financial instruments","","0.06","","","(0.47)","","","0.08"],["Impairment of goodwill","","(0.06)","","","\u2014","","","\u2014"],["Amortization of other acquired intangible assets","","(0.03)","","","(0.03)","","","(0.02)"],["Impairment of other long-lived assets and other non-operating items","","(0.08)","","","(0.09)","","","(0.02)"],["Income tax (provision) benefit on other income (expense) items (1)","","0.02","","","0.12","","","(0.01)"],["Difference between statutory and effective tax rate","","(0.02)","","","(0.05)","","","(0.02)"],["Per-share impact of reconciling income (expense) items","","(0.11)","","","(0.52)","","","0.01"],["Adjusted diluted net operating income per share (1)","","$","3.88","","","$","4.87","","","$","3.15"]] [[/GREPCENT_TABLE]] (1)Calculated using the Company’s federal statutory tax rate of 21%. Any permanent tax adjustments and state income taxes on these items have been deemed immaterial and are not included. 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. The following table provides a reconciliation of return on equity to our non-GAAP financial measure for the consolidated Company of adjusted net operating return on equity. [[GREPCENT_TABLE]] [["Reconciliation of return on equity to adjusted net operating return on equity"],["","","Years Ended December 31,"],["","","2023","","2022","","2021"],["Return on equity (1)","","14.5","%","","18.2","%","","14.1","%"],["Less: impact of reconciling income (expense) items (2)"],["Net gains (losses) on investments and other financial instruments","","0.2","","","(2.0)","","","0.4"],["Impairment of goodwill","","(0.2)","","","\u2014","","","\u2014"],["Amortization of other acquired intangible assets","","(0.1)","","","(0.1)","","","(0.1)"],["Impairment of other long-lived assets and other non-operating items","","(0.3)","","","(0.4)","","","(0.1)"],["Income tax (provision) benefit on reconciling income (expense) items (3)","","0.1","","","0.5","","","\u2014"],["Difference between statutory and effective tax rate","","(0.1)","","","(0.1)","","","(0.1)"],["Impact of reconciling income (expense) items","","(0.4)","","","(2.1)","","","0.1"],["Adjusted net operating return on equity (3)","","14.9","%","","20.3","%","","14.0","%"]] [[/GREPCENT_TABLE]] (1)Calculated by dividing net income by average stockholders’ equity. (2)As a percentage of average stockholders’ equity. (3)Calculated using the Company’s federal statutory tax rates of 21%. Any permanent tax adjustments and state income taxes on these items have been deemed immaterial and are not included. 80 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations—Mortgage Insurance The following table summarizes our Mortgage Insurance segment’s results of operations for the periods indicated. [[GREPCENT_TABLE]] [["Summary results of operations - Mortgage Insurance"],["","","","","","","","","Change"],["","","Years Ended December 31,","","Favorable (Unfavorable)"],["(In thousands)","","2023","","2022","","2021","","2023 vs. 2022","","2022 vs. 2021"],["Revenues"],["Net premiums written","","$","904,240","","","$","959,872","","","$","944,546","","","$","(55,632)","","","$","15,326"],["(Increase) decrease in unearned premiums","","5,123","","","(2,659)","","","53,736","","","7,782","","","(56,395)"],["Net premiums earned","","909,363","","","957,213","","","998,282","","","(47,850)","","","(41,069)"],["Services revenue","","1,088","","","7,390","","","17,670","","","(6,302)","","","(10,280)"],["Net investment income","","195,077","","","171,221","","","132,929","","","23,856","","","38,292"],["Other income","","5,372","","","2,376","","","2,678","","","2,996","","","(302)"],["Total revenues","","1,110,900","","","1,138,200","","","1,151,559","","","(27,300)","","","(13,359)"],["Expenses"],["Provision for losses","","(42,136)","","","(339,374)","","","19,437","","","(297,238)","","","358,811"],["Policy acquisition costs","","24,578","","","23,918","","","29,029","","","(660)","","","5,111"],["Cost of services","","713","","","5,951","","","13,928","","","5,238","","","7,977"],["Other operating expenses","","211,733","","","231,322","","","223,275","","","19,589","","","(8,047)"],["Interest expense","","86,188","","","84,440","","","84,344","","","(1,748)","","","(96)"],["Total expenses","","281,076","","","6,257","","","370,013","","","(274,819)","","","363,756"],["Adjusted pretax operating income (1)","","$","829,824","","","$","1,131,943","","","$","781,546","","","$","(302,119)","","","$","350,397"]] [[/GREPCENT_TABLE]] (1)Our senior management uses adjusted pretax operating income as our primary measure to evaluate the fundamental financial performance of our business segments. See Note 4 of Notes to Consolidated Financial Statements for more information. Year Ended December 31, 2023, Compared to Year Ended December 31, 2022 Revenues Net Premiums Earned. Net premiums earned decreased for 2023 compared to 2022, primarily due to: (i) a decrease in the profit commission retained by the Company under our reinsurance programs, due to less favorable reserve development in 2023; (ii) an increase in ceded premiums earned under the 2022 QSR Agreement, which began ceding a portion of NIW in the third quarter of 2022, as well as the 2023 QSR Agreement, which began ceding a portion of NIW in the third quarter of 2023; and (iii) a decrease in the benefit, net of reinsurance, from Single Premium Policy cancellations due to lower refinance activity. These impacts were partially offset by an increase in direct premiums earned excluding revenue from cancellations, which benefited 2023 as compared to 2022 due primarily to higher IIF. 81 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The table below provides additional information about the components of mortgage insurance net premiums earned for the periods indicated, including the effects of our reinsurance programs. [[GREPCENT_TABLE]] [["Net premiums earned"],["","","","","","","","","Change"],["","","Years Ended December 31,","","Favorable (Unfavorable)"],["($ in thousands, except as otherwise indicated)","","2023","","2022","","2021","","2023 vs. 2022","","2022 vs. 2021"],["Direct"],["Premiums earned, excluding revenue from cancellations","","$","1,015,238","","","$","991,556","","","$","988,472","","","$","23,682","","","$","3,084"],["Single Premium Policy cancellations","","14,703","","","34,051","","","116,224","","","(19,348)","","","(82,173)"],["Direct","","1,029,941","","","1,025,607","","","1,104,696","","","4,334","","","(79,089)"],["Assumed (1)","","\u2014","","","4,025","","","7,066","","","(4,025)","","","(3,041)"],["Ceded"],["Premiums earned, excluding revenue from cancellations","","(165,870)","","","(130,556)","","","(108,692)","","","(35,314)","","","(21,864)"],["Single Premium Policy cancellations (2)","","(3,903)","","","(9,677)","","","(33,388)","","","5,774","","","23,711"],["Profit commission\u2014other (3)","","49,195","","","67,814","","","28,600","","","(18,619)","","","39,214"],["Ceded premiums, net of profit commission","","(120,578)","","","(72,419)","","","(113,480)","","","(48,159)","","","41,061"],["Total net premiums earned","","$","909,363","","","$","957,213","","","$","998,282","","","$","(47,850)","","","$","(41,069)"],["In force portfolio premium yield (in basis points) (4)","","38.2","","39.3","","40.5","","(1.1)","","","(1.2)"],["Direct premium yield (in basis points) (5)","","38.8","","40.6","","45.2","","(1.8)","","","(4.6)"],["Net premium yield (in basis points) (6)","","34.3","","37.8","","40.6","","(3.5)","","","(2.8)"],["Average primary IIF (in billions) (7)","","$","265.5","","","$","253.5","","","$","246.1","","","$","12.0","","","$","7.4"]] [[/GREPCENT_TABLE]] (1)Includes premiums earned primarily from our participation in certain credit risk transfer programs. In December 2022, we novated this insured risk to an unrelated third-party reinsurer, which assumed all rights, interests, liabilities and obligations related to our participation in these programs on a prospective basis. (2)Includes the impact of related profit commissions. (3)Represents the profit commission on the Single Premium QSR Program and 2022 and 2023 QSR Agreements, excluding the impact of Single Premium Policy cancellations. (4)Calculated by dividing direct premiums earned, including assumed revenue and excluding revenue from cancellations, by average primary IIF. (5)Calculated by dividing direct premiums earned, including assumed revenue, by average primary IIF. (6)Calculated by dividing net premiums earned by average primary IIF. The calculation for all periods presented incorporates the impact of profit commission adjustments related to our reinsurance programs. See Note 8 of Notes to Consolidated Financial Statements for further information. (7)The average of beginning and ending balances of primary IIF, for each period presented. Our in force portfolio premium yield was relatively stable for 2023, as compared to 2022. Based on current NIW pricing and the impact of higher Persistency Rates we have been experiencing, we currently expect our in force portfolio premium yield in 2024 to remain stable; however, due to the potential impacts of Single Premium Policy cancellations and reinsurance, among other things, the net premium yield may continue to fluctuate from period to period. The level of mortgage prepayments affects the revenue ultimately produced by our mortgage insurance business and is influenced by the mix of business we write. See “Key Factors Affecting Our Results—Mortgage Insurance—IIF and Related Drivers” for more information. 82 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following table provides information related to the impact of our reinsurance transactions on premiums earned. See Note 8 of Notes to Consolidated Financial Statements for more information about our reinsurance programs. [[GREPCENT_TABLE]] [["Ceded premiums earned"],["","","Years Ended December 31,"],["($ in thousands)","","2023","","2022","","2021"],["XOL Program","","$","76,926","","","$","76,988","","","$","62,153"],["Other QSR Agreements (1)","","34,410","","","10,810","","","4,101"],["Single Premium QSR Program (2)","","9,242","","","(15,379)","","","47,226"],["Total ceded premiums earned (3)","","$","120,578","","","$","72,419","","","$","113,480"],["Percentage of total direct and assumed premiums earned","","11.7","%","","6.8","%","","9.9","%"]] [[/GREPCENT_TABLE]] (1)Consists primarily of 2022 and 2023 QSR Agreements. (2)Includes the impact of changes in the profit commission retained by the Company due to changes in loss reserves. See “Expenses—Provision for Losses” below for additional information on the favorable reserve development, particularly in 2022. (3)Does not include the benefit from ceding commissions from the reinsurance agreements in our QSR Program, which is primarily included in other operating expenses on the consolidated statements of operations. See Note 8 of Notes to Consolidated Financial Statements for additional information. Services Revenue. Services revenue for 2023 decreased as compared to 2022, primarily driven by the termination of a large mortgage fulfillment services contract with a customer in the second quarter of 2022, as well as a decrease in demand for our contract underwriting services as a result of the general market decline in mortgage origination volume. Net Investment Income. Increasing yields from higher interest rates were the primary driver of the increases in net investment income for 2023 compared to 2022. The following table provides information related to our Mortgage Insurance subsidiaries’ investment balances and investment yields for the periods indicated. [[GREPCENT_TABLE]] [["Investment balances and yields"],["","","","","","","","","Change"],["","","Years Ended December 31,","","Favorable (Unfavorable)"],["($ in thousands)","","2023","","2022","","2021","","2023 vs. 2022","","2022 vs. 2021"],["Investment income","","$","202,219","","","$","177,478","","","$","139,208","","","$","24,741","","","$","38,270"],["Investment expenses","","(7,142)","","","(6,257)","","","(6,279)","","","(885)","","","22"],["Net investment income","","$","195,077","","","$","171,221","","","$","132,929","","","$","23,856","","","$","38,292"],["Average investments (1)","","$","5,358,882","","","$","5,546,198","","","$","5,595,270","","","$","(187,316)","","","$","(49,072)"],["Average investment yield (2)","","3.6","%","","3.1","%","","2.4","%","","0.5","%","","0.7","%"]] [[/GREPCENT_TABLE]] (1)    The average of the beginning and ending amortized cost, for each period presented, of investments held by our Mortgage Insurance subsidiaries. (2)    Calculated by dividing net investment income by average investments balance. Expenses Provision for Losses. The following table details the financial impact of the significant components of our provision for losses for the periods indicated. 83 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations [[GREPCENT_TABLE]] [["Provision for losses"],["","","","","","","","","Change"],["","","Years Ended December 31,","","Favorable (Unfavorable)"],["($ in thousands, except reserve per new default)","","2023","","2022","","2021","","2023 vs. 2022","","2022 vs. 2021"],["Current year defaults (1)","","$","178,664","","","$","160,049","","","$","160,565","","","$","(18,615)","","","$","516"],["Prior year defaults (2)","","(220,800)","","","(499,423)","","","(141,128)","","","(278,623)","","","358,295"],["Total provision for losses","","$","(42,136)","","","$","(339,374)","","","$","19,437","","","$","(297,238)","","","$","358,811"],["Loss ratio (3)","","(4.6)","%","","(35.5)","%","","1.9","%","","(30.9)","%","","37.4","%"],["Reserve per new default (4)","","$","4,060","","","$","4,241","","","$","4,285","","","$","181","","","$","44"]] [[/GREPCENT_TABLE]] (1)Related to defaulted loans with a most recent default notice dated in the year indicated. For example, if a loan had defaulted in a prior year, but then subsequently cured and later re-defaulted in the current year, that default would be considered a current year default. (2)Related to defaulted loans with a default notice dated in a year earlier than the year indicated, which have been continuously in default since that time. (3)Provision for losses as a percentage of net premiums earned. See “Revenues—Net Premiums Earned” above for additional information on the changes in net premiums earned. (4)Calculated by dividing provision for losses for new defaults, net of reinsurance, by the number of new primary defaults for each period. Current year new primary defaults increased by 17% for 2023, as compared to 2022, consistent with our expectations regarding the natural seasoning of the portfolio given the increase in our IIF in recent years. Our gross Default to Claim Rate assumption for new primary defaults was 8.0% at both December 31, 2023 and 2022. We continue to closely monitor the trends in Cures and claims paid for our default inventory, while also weighing the risks and uncertainties associated with the current economic environment. Our provision for losses during 2023 and 2022 was positively impacted by favorable reserve development on prior year defaults, primarily as a result of more favorable trends in Cures than originally estimated. These Cures have been due primarily to favorable outcomes resulting from mortgage forbearance programs implemented in response to the COVID-19 pandemic as well as positive trends in home price appreciation, which has also contributed to a higher rate of claims that result in no ultimate loss and that are withdrawn by servicers as a result. These favorable observed trends resulted in reductions in our Default to Claim Rate and other reserve adjustments for prior year default notices. See Notes 1 and 11 of Notes to Consolidated Financial Statements and “Item 1A. Risk Factors” for additional information. Our primary default rate at both December 31, 2023 and 2022, was 2.2%. The following table shows a rollforward of the number of our primary loans in default. [[GREPCENT_TABLE]] [["Rollforward of primary loans in default"],["","","Years Ended December 31,"],["","","2023","","2022","","2021"],["Beginning default inventory","","21,913","","","29,061","","","55,537"],["New defaults","","44,007","","","37,738","","","37,470"],["Cures (1)","","(43,354)","","","(44,136)","","","(62,970)"],["Claims paid","","(419)","","","(659)","","","(937)"],["Rescissions and Claim Denials (2)","","(126)","","","(91)","","","(39)"],["Ending default inventory","","22,021","","","21,913","","","29,061"]] [[/GREPCENT_TABLE]] (1)Includes submitted claims that resolved without a claim payment. (2)Net of any previous Rescission and Claim Denials that were reinstated during the period. Such reinstated Rescissions and Claim Denials may ultimately result in a paid claim. 84 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following tables show additional information about our primary loans in default as of the dates indicated. [[GREPCENT_TABLE]] [["Primary loans in default - additional information"],["","","December 31, 2023"],["","","Total","","Foreclosure Stage Defaulted Loans","","Cure % During the 4th Quarter","","Reserve for Losses","","% of Reserve"],["($ in thousands)","","#","","%","","#","","%","","$","","%"],["Missed payments"],["Three payments or less","","11,054","","","50.2","%","","25","","","36.2","%","","$","94,856","","","27.5","%"],["Four to eleven payments","","7,147","","","32.5","","","298","","","27.2","","","119,330","","","34.7"],["Twelve payments or more","","3,438","","","15.6","","","699","","","17.3","","","111,141","","","32.3"],["Pending claims","","382","","","1.7","","","N/A","","30.6","","","18,908","","","5.5"],["Total","","22,021","","","100.0","%","","1,022","","","","","344,235","","","100.0","%"],["LAE","","","","","","","","","","10,397"],["IBNR","","","","","","","","","","1,780"],["Total primary reserve (1)","","","","","","","","","","$","356,412"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","","December 31, 2022"],["","","Total","","Foreclosure Stage Defaulted Loans","","Cure % During the 4th Quarter","","Reserve for Losses","","% of Reserve"],["($ in thousands)","","#","","%","","#","","%","","$","","%"],["Missed payments"],["Three payments or less","","9,584","","","43.7","%","","8","","","35.5","%","","$","77,987","","","19.6","%"],["Four to eleven payments","","6,842","","","31.2","","","189","","","27.4","","","114,537","","","28.7"],["Twelve payments or more","","5,158","","","23.6","","","750","","","22.9","","","190,148","","","47.7"],["Pending claims","","329","","","1.5","","","N/A","","23.5","","","16,202","","","4.0"],["Total","","21,913","","","100.0","%","","947","","","","","398,874","","","100.0","%"],["LAE","","","","","","","","","","10,041"],["IBNR","","","","","","","","","","2,128"],["Total primary reserve (1)","","","","","","","","","","$","411,043"]] [[/GREPCENT_TABLE]] N/A – Not applicable (1)    Excludes pool and other reserves. See Note 11 of Notes to Consolidated Financial Statements for additional information. We develop our Default to Claim Rate estimates on defaulted loans based on models that use a variety of loan characteristics to determine the likelihood that a default will reach claim status. See Note 11 of Notes to Consolidated Financial Statements for additional details about our Default to Claim Rate assumptions. Our aggregate weighted-average net Default to Claim Rate assumption for our primary defaulted loans used in estimating our reserve for losses, which is net of estimated Claim Denials and Rescissions, was 25% and 30%, at December 31, 2023 and 2022, respectively. This decrease was primarily due to a shift in the mix of defaults as of December 31, 2023, given the larger proportion of loans with fewer missed payments, as well as reduced claim rate assumptions for prior period defaults due to more favorable trends in Cures than originally estimated. See Note 11 of Notes to Consolidated Financial Statements for information regarding our reserve for losses and a reconciliation of our Mortgage Insurance segment’s beginning and ending reserves for losses and LAE. Although expected claims are included in our reserve for losses, the timing of claims paid is subject to fluctuation from quarter to quarter, based on the rate that defaults cure and other factors, including the impact of foreclosure moratoriums (as further described in “Item 1. Business—Mortgage Insurance—Defaults and Claims”), which make the timing of paid claims difficult to predict. 85 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following table shows net claims paid by product and the average claim paid by product for the periods indicated. [[GREPCENT_TABLE]] [["Claims paid"],["","","Years Ended December 31,"],["(In thousands)","","2023","","2022","","2021"],["Net claims paid (1)"],["Primary","","$","9,301","","","$","12,012","","","$","16,630"],["Pool and other","","(925)","","","(1,453)","","","(612)"],["Subtotal","","8,376","","","10,559","","","16,018"],["LAE","","4,535","","","4,400","","","4,835"],["Commutations and settlements (2)","","1,332","","","5,899","","","14,464"],["Total net claims paid","","$","14,243","","","$","20,858","","","$","35,317"],["Average net primary claim paid (1) (3)","","$","22.5","","","$","27.4","","","$","32.8"],["Average direct primary claim paid (3) (4)","","$","27.2","","","$","33.4","","","$","36.7"]] [[/GREPCENT_TABLE]] (1)Net of reinsurance recoveries. (2)Includes payments to commute mortgage insurance coverage on certain performing and non-performing loans. (3)Calculated excluding the impact of: (i) LAE; (ii) commutations and settlements; and (iii) claims resolved without payment, including claims subsequently withdrawn by the servicer. (4)Before reinsurance recoveries. Cost of Services. Cost of services for 2023 decreased compared to 2022, primarily due to the decrease in services revenue, as discussed above. Our cost of services is primarily affected by our level of services revenue. Other Operating Expenses. The decrease in other operating expenses for 2023, as compared to 2022, is primarily related to reductions in headcount and other expense savings actions implemented for the segment during the past year. These items were partially offset by an increase in performance-based variable and share-based compensation expense in 2023, primarily as a part of allocated corporate operating expenses. The following tables show additional information about other operating expenses for our Mortgage Insurance segment for the periods indicated. [[GREPCENT_TABLE]] [["Other operating expenses"],["","","","","","","","","Change"],["","","Years Ended December 31,","","Favorable (Unfavorable)"],["($ in thousands)","","2023","","2022","","2021","","2023 vs. 2022","","2022 vs. 2021"],["Direct"],["Salaries and other base employee expenses","","$","41,534","","","$","51,537","","","$","50,076","","","$","10,003","","","$","(1,461)"],["Variable and share-based incentive compensation","","17,294","","","16,937","","","19,672","","","(357)","","","2,735"],["Other general operating expenses","","32,255","","","40,446","","","50,752","","","8,191","","","10,306"],["Ceding commissions","","(19,933)","","","(16,164)","","","(24,707)","","","3,769","","","(8,543)"],["Total direct","","71,150","","","92,756","","","95,793","","","21,606","","","3,037"],["Allocated (1)"],["Salaries and other base employee expenses","","46,060","","","46,955","","","42,081","","","895","","","(4,874)"],["Variable and share-based incentive compensation","","37,758","","","31,889","","","34,303","","","(5,869)","","","2,414"],["Other general operating expenses","","56,765","","","59,722","","","51,098","","","2,957","","","(8,624)"],["Total allocated","","140,583","","","138,566","","","127,482","","","(2,017)","","","(11,084)"],["Total other operating expenses","","$","211,733","","","$","231,322","","","$","223,275","","","$","19,589","","","$","(8,047)"],["Expense ratio (2)","","26.0","%","","26.7","%","","25.3","%","","0.7","%","","(1.4)","%"]] [[/GREPCENT_TABLE]] (1)See Note 4 of Notes to Consolidated Financial Statements for more information about our allocation of corporate operating expenses. (2)Operating expenses (which consist of policy acquisition costs and other operating expenses), expressed as a percentage of net premiums earned. See “Revenues—Net Premiums Earned” above for additional information on the changes in net premiums earned. 86 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations—homegenius The following table summarizes our homegenius segment’s results of operations for the periods indicated. As discussed in “Overview—Current Operating Environment,” the macroeconomic stresses beginning in the second quarter of 2022 have continued to impact our homegenius businesses, including in particular a decrease in our title revenues due to the rapid decline in industrywide refinance volumes. We expect this trend to continue to impact the results of our homegenius segment in at least the near-term based on current market conditions and our expectation that overall refinance volumes will remain low. [[GREPCENT_TABLE]] [["Summary results of operations - homegenius"],["","","","","","","","","$ Change"],["","","Years Ended December 31,","","Favorable (Unfavorable)"],["(In thousands)","","2023","","2022","","2021","","2023 vs. 2022","","2022 vs. 2021"],["Revenues"],["Net premiums earned","","$","10,215","","","$","23,918","","","$","38,901","","","$","(13,703)","","","$","(14,983)"],["Services revenue","","45,394","","","85,158","","","108,282","","","(39,764)","","","(23,124)"],["Net investment income","","2,031","","","729","","","358","","","1,302","","","371"],["Net gains (losses) on investments","","\u2014","","","\u2014","","","1,509","","","\u2014","","","(1,509)"],["Other income","","\u2014","","","170","","","\u2014","","","(170)","","","170"],["Total revenues","","57,640","","","109,975","","","149,050","","","(52,335)","","","(39,075)"],["Expenses"],["Provision for losses","","(390)","","","1,135","","","1,540","","","1,525","","","405"],["Cost of services","","37,778","","","76,407","","","89,722","","","38,629","","","13,315"],["Other operating expenses","","106,522","","","120,631","","","85,112","","","14,109","","","(35,519)"],["Total expenses","","143,910","","","198,173","","","176,374","","","54,263","","","(21,799)"],["Adjusted pretax operating income (loss) (1)","","$","(86,270)","","","$","(88,198)","","","$","(27,324)","","","$","1,928","","","$","(60,874)"]] [[/GREPCENT_TABLE]] (1)Our senior management uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of each of our business segments. See Note 4 of Notes to Consolidated Financial Statements. Year Ended December 31, 2023, Compared to Year Ended December 31, 2022 Revenues Net Premiums Earned. Net premiums earned for 2023 decreased compared to 2022, primarily due to a decrease in new title policies written in our title insurance business given the decline in industrywide refinance volumes. Services Revenue. Services revenue for 2023 decreased compared to 2022, primarily due to a decrease in real estate and title services revenues resulting from macroeconomic stresses, as described above. See Note 4 of Notes to Consolidated Financial Statements for the disaggregation of services revenue by revenue type. Expenses Cost of Services. Cost of services for 2023 decreased compared to 2022, primarily due to the decrease in services revenue. Our cost of services is primarily affected by our level of services revenue and the number of employees providing those services. The number of employees was reduced in 2023 as compared to 2022, as a result of steps taken primarily in 2022 to better align our workforce with the current and expected needs of our business. Other Operating Expenses. The following tables show additional information about homegenius’s other operating expenses for the periods indicated. The decrease in other operating expenses for 2023 as compared to 2022 reflects: (i) a decrease in salaries and other base employee expenses, driven primarily by steps taken to align our workforce to the current and expected needs of this business and (ii) a decrease in other general operating expenses in 2023, as a result of additional expense saving actions implemented in 2023. Included in the results for 2023 are severance expenses of $2 million related to additional reductions in headcount in response to the ongoing challenging macroeconomic environment for the homegenius segment’s products and services, as compared to $6 million of severance expense in 2022. 87 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following tables show additional information about homegenius’s other operating expenses for the periods indicated. [[GREPCENT_TABLE]] [["Other operating expenses"],["","","","","","","","","Change"],["","","Years Ended December 31,","","Favorable (Unfavorable)"],["(In thousands)","","2023","","2022","","2021","","2023 vs. 2022","","2022 vs. 2021"],["Direct"],["Salaries and other base employee expenses","","$","41,072","","","$","45,504","","","$","23,783","","","$","4,432","","","$","(21,721)"],["Variable and share-based incentive compensation","","13,344","","","13,727","","","14,790","","","383","","","1,063"],["Other general operating expenses","","28,868","","","32,717","","","21,301","","","3,849","","","(11,416)"],["Title agent commissions","","4,455","","","5,827","","","6,756","","","1,372","","","929"],["Total direct","","87,739","","","97,775","","","66,630","","","10,036","","","(31,145)"],["Allocated (1)"],["Salaries and other base employee expenses","","6,200","","","7,864","","","6,176","","","1,664","","","(1,688)"],["Variable and share-based incentive compensation","","5,142","","","5,148","","","4,996","","","6","","","(152)"],["Other general operating expenses","","7,441","","","9,844","","","7,310","","","2,403","","","(2,534)"],["Total allocated","","18,783","","","22,856","","","18,482","","","4,073","","","(4,374)"],["Total other operating expenses","","$","106,522","","","$","120,631","","","$","85,112","","","$","14,109","","","$","(35,519)"]] [[/GREPCENT_TABLE]] (1)See Note 4 of Notes to Consolidated Financial Statements for more information about our allocation of corporate operating expenses. Results of Operations—All Other The following table summarizes our results of operations for our All Other activities for the periods indicated. [[GREPCENT_TABLE]] [["Summary results of operations - All Other"],["","","","","","","","","$ Change"],["","","Years Ended December 31,","","Favorable (Unfavorable)"],["(In thousands)","","2023","","2022","","2021","","2023 vs. 2022","","2022 vs. 2021"],["Revenues"],["Services revenue","","$","\u2014","","","$","\u2014","","","$","154","","","$","\u2014","","","$","(154)"],["Net investment income","","61,322","","","23,708","","","14,622","","","37,614","","","9,086"],["Net gains (losses) on investments and other financial instruments","","814","","","47","","","\u2014","","","767","","","47"],["Other income","","27","","","78","","","734","","","(51)","","","(656)"],["Total revenues","","62,163","","","23,833","","","15,510","","","38,330","","","8,323"],["Expenses"],["Cost of services","","\u2014","","","\u2014","","","64","","","\u2014","","","64"],["Other operating expenses","","15,783","","","14,847","","","11,919","","","(936)","","","(2,928)"],["Interest expense","","3,507","","","14","","","\u2014","","","(3,493)","","","(14)"],["Total expenses","","19,290","","","14,861","","","11,983","","","(4,429)","","","(2,878)"],["Adjusted pretax operating income (1)","","$","42,873","","","$","8,972","","","$","3,527","","","$","33,901","","","$","5,445"]] [[/GREPCENT_TABLE]] (1)Our senior management uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of each of our business segments. See Note 4 of Notes to Consolidated Financial Statements. Our All Other results include income from investments held at Radian Group, which have benefited from rising interest rates over the past year as well as from rising balances resulting from distributions by Radian Guaranty. 88 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations All Other also includes the financial results of Radian Mortgage Capital. In light of current market conditions, we have been measured in our approach with our mortgage conduit. Radian Mortgage Capital purchased $221 million and $4 million of mortgage loans during 2023 and 2022, respectively, and, to date, has executed the distribution of loans through whole loan sales. As of December 31, 2023, Radian Mortgage Capital had $33 million of mortgage loans held for sale. See Note 7 of Notes to Consolidated Financial Statements for additional information on our mortgage loans held for sale. Liquidity and Capital Resources Consolidated Cash Flows The following table summarizes our consolidated cash flows from operating, investing and financing activities. [[GREPCENT_TABLE]] [["Summary cash flows - Consolidated"],["","","Years Ended December 31,"],["(In thousands)","","2023","","2022","","2021"],["Net cash provided by (used in):"],["Operating activities","","$","529,434","","","$","388,298","","","$","557,112"],["Investing activities","","(300,842)","","","(5,175)","","","(1,862)"],["Financing activities","","(265,087)","","","(479,183)","","","(496,776)"],["Increase (decrease) in cash and restricted cash","","$","(36,495)","","","$","(96,060)","","","$","58,474"]] [[/GREPCENT_TABLE]] Operating Activities. Our most significant source of operating cash flows is from premiums received from our mortgage insurance policies, while our most significant uses of operating cash flows are typically for our operating expenses, claims paid on our mortgage insurance policies and taxes. In addition, beginning with the launch of Radian Mortgage Capital in 2022, our operating activities also include purchases, sales and repayments of mortgage loans held for sale, which can fluctuate from period to period. The $141 million increase in cash provided by operating activities for 2023, as compared to 2022, was principally due to lower purchases of U.S. Mortgage Guaranty Tax and Loss Bonds and lower other operating expenses, partially offset by increases in net purchases of mortgage loans held for sale. Investing Activities. Net cash used in investing activities increased in 2023, compared to 2022, primarily as a result of the combination of increased cash provided by operating activities and reduced cash used in financing activities, resulting in more cash available to invest. This increase in available cash to invest was primarily deployed in 2023 for purchases, net of sales and redemptions, of short-term investments. Financing Activities. For 2023 and 2022, our primary financing activities included: (i) payments of dividends and (ii) repurchases of our common shares. The $214 million decrease in cash used in financing activities in 2023, as compared to 2022, was primarily due to lower share repurchases, partially offset by an increase in secured borrowings, primarily to help fund the increase in net purchases of mortgage loans held for sale. See Notes 12 and 14 of Notes to Consolidated Financial Statements for additional information regarding our borrowings and share repurchases, respectively. See “Item 8. Financial Statements and Supplementary Data—Consolidated Statements of Cash Flows” for additional information. Investment Portfolio At December 31, 2023 and 2022, the following tables include $204 million and $112 million, respectively, of securities loaned to third-party borrowers under securities lending agreements, which are classified as other assets in our consolidated balance sheets. See Note 6 of Notes to Consolidated Financial Statements for more information about our investment portfolio, including our securities lending agreements. 89 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The composition of our investment portfolio, presented as a percentage of overall fair value as of the dates indicated was as follows. [[GREPCENT_TABLE]] [["Investment portfolio diversification"],["","","December 31,"],["","","2023","","2022"],["($ in millions)","","Fair Value","","Percent","","Fair Value","","Percent"],["Corporate bonds and commercial paper","","$","2,938","","","46.8","%","","$","2,728","","","47.0","%"],["RMBS","","1,020","","","16.2","","","935","","","16.1"],["CMBS","","564","","","9.0","","","599","","","10.3"],["CLO","","488","","","7.8","","","498","","","8.6"],["Money market instruments and certificates of deposit","","377","","","6.0","","","242","","","4.1"],["Other ABS","","286","","","4.5","","","161","","","2.8"],["State and municipal obligations (1)","","216","","","3.4","","","216","","","3.7"],["Equity securities","","165","","","2.6","","","214","","","3.7"],["U.S. government and agency securities","","144","","","2.3","","","145","","","2.5"],["Mortgage insurance-linked notes (2)","","49","","","0.8","","","53","","","0.9"],["Mortgage loans held for sale","","33","","","0.5","","","4","","","0.1"],["Other investments","","9","","","0.1","","","11","","","0.2"],["Total","","$","6,289","","","100.0","%","","$","5,806","","","100.0","%"]] [[/GREPCENT_TABLE]] (1)Primarily consists of taxable state and municipal investments. (2)Consists of mortgage insurance-linked notes purchased by Radian Group in connection with the XOL Program. See Note 8 of Notes to Consolidated Financial Statements for more information. The following table shows the scheduled maturities of the securities held in our investment portfolio as of the dates indicated. [[GREPCENT_TABLE]] [["Investment portfolio scheduled maturity"],["","","December 31,"],["","","2023","","2022"],["($ in millions)","","Fair Value","","Percent","","Fair Value","","Percent"],["Short-term investments","","$","661","","","10.5","%","","$","403","","","6.9","%"],["Due in one year or less (1)","","119","","","1.9","","","110","","","1.9"],["Due after one year through five years (1)","","1,248","","","19.9","","","1,211","","","20.8"],["Due after five years through 10 years (1)","","876","","","13.9","","","872","","","15.0"],["Due after 10 years (1)","","774","","","12.3","","","741","","","12.8"],["Asset-backed securities and mortgage-related assets (2)","","2,437","","","38.8","","","2,250","","","38.8"],["Equity securities (3)","","165","","","2.6","","","214","","","3.7"],["Other invested assets (3)","","9","","","0.1","","","5","","","0.1"],["Total","","$","6,289","","","100.0","%","","$","5,806","","","100.0","%"]] [[/GREPCENT_TABLE]] (1)Actual maturities may differ as a result of calls before scheduled maturity. (2)Includes RMBS, CMBS, CLO, Other ABS, mortgage insurance-linked notes and mortgage loans, which are not due at a single maturity date. (3)No stated maturity date. 90 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following table provides the ratings of our investment portfolio, from a nationally recognized statistical ratings organization, presented as a percentage of overall fair value, as of the dates indicated. [[GREPCENT_TABLE]] [["Investment portfolio by rating"],["","","December 31,"],["","","2023","","2022"],["($ in millions)","","Fair Value","","Percent","","Fair Value","","Percent"],["U.S. government / AAA","","$","2,456","","","39.0","%","","$","2,208","","","38.0","%"],["AA","","905","","","14.4","","","885","","","15.2"],["A","","1,795","","","28.6","","","1,609","","","27.7"],["BBB","","842","","","13.4","","","807","","","13.9"],["BB and below","","75","","","1.2","","","65","","","1.1"],["Not rated (1)","","216","","","3.4","","","232","","","4.1"],["Total","","$","6,289","","","100.0","%","","$","5,806","","","100.0","%"]] [[/GREPCENT_TABLE]] (1)Primarily consists of equity securities. Liquidity Analysis—Holding Company Radian Group serves as the holding company for our operating subsidiaries and does not have any operations of its own. At December 31, 2023, Radian Group had available, either directly or through unregulated subsidiaries, unrestricted cash and liquid investments of $992 million. Available liquidity at December 31, 2023, excludes certain additional cash and liquid investments that have been advanced to Radian Group from our subsidiaries to pay for corporate expenses and interest payments. Total liquidity, which includes our undrawn $275 million unsecured revolving credit facility, as described below, was $1.3 billion as of December 31, 2023. During 2023, Radian Group’s available liquidity increased by $90 million, due primarily to $400 million of ordinary dividends received from Radian Guaranty during the year, partially offset primarily by payments for dividends and share repurchases, as described below. In addition to available cash and marketable securities, Radian Group’s principal sources of cash to fund future liquidity needs include: (i) payments made to Radian Group by its subsidiaries under expense- and tax-sharing arrangements; (ii) net investment income earned on its cash and marketable securities; and (iii) to the extent available, dividends or other distributions from its subsidiaries. Radian Group has in place a $275 million unsecured revolving credit facility with a syndicate of bank lenders. The revolving credit facility matures in December 2026, although under certain conditions Radian Group may be required to offer to repay any outstanding amounts and terminate lender commitments earlier than the maturity date. Subject to certain limitations, borrowings under the credit facility may be used for working capital and general corporate purposes, including, without limitation, capital contributions to our insurance and other subsidiaries as well as growth initiatives. At December 31, 2023, the full $275 million remains undrawn and available under the facility. See Note 12 of Notes to Consolidated Financial Statements for additional information on the unsecured revolving credit facility. In connection with our mortgage conduit, Radian Mortgage Capital has entered into the BMO Master Repurchase Agreement and the Goldman Sachs Master Repurchase Agreement, which, as of December 31, 2023, provide a combined uncommitted $250 million in mortgage loan repurchase facilities to finance the acquisition of residential mortgage loans and related mortgage loan assets. Most recently, in January 2024, Radian Mortgage Capital entered into the Flagstar Master Repurchase Agreement, increasing the uncommitted loan repurchase facilities to a combined $400 million through the Master Repurchase Agreements. Radian Group has entered into three separate Parent Guarantees to guaranty the obligations under the Master Repurchase Agreements. Under these Parent Guarantees, Radian Group is subject to negative and affirmative covenants customary for this type of financing transaction, including compliance with financial covenants that are generally consistent with the comparable covenants in the Company’s revolving credit facility. See Note 12 of Notes to Consolidated Financial Statements for additional information. In addition to financing the acquisition of mortgage loan assets under the Master Repurchase Agreements, Radian Mortgage Capital may fund such purchases directly using capital contributed from Radian Group. We expect Radian Group’s principal liquidity demands for the next 12 months to be: (i) the payment of corporate expenses, including taxes; (ii) the payment of $450 million principal amount of our outstanding Senior Notes due 2024; (iii) interest payments on our outstanding debt obligations; (iv) the payment of quarterly dividends on our common stock, which were $0.225 per share in 2023 and subsequently increased to $0.245 for the first quarterly dividend in 2024, and which remain subject to approval by our board of directors and our ongoing assessment of our financial condition and potential needs related 91 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations to the execution and implementation of our business plans and strategies; (v) the potential continued repurchases of shares of our common stock pursuant to share repurchase authorizations, as described below; and (vi) investments to support our business strategy, including capital contributions to our subsidiaries. Liquidity demands may also include potential payments pursuant to the Parent Guarantees. In addition to our ongoing short-term liquidity needs discussed above, our most significant need for liquidity beyond the next 12 months is the repayment of $975 million aggregate principal amount of our senior debt due in future years, including $525 million principal amount due in March 2025. See “Capitalization—Holding Company” below for details of our debt maturity profile. Radian Group’s liquidity demands for the next 12 months or in future periods could also include: (i) early repurchases or redemptions of portions of our debt obligations and (ii) additional investments to support our business strategy, including additional capital contributions to Radian Group’s subsidiaries. For additional information about related risks and uncertainties, see “Item 1A. Risk Factors,” including “Our sources of liquidity may be insufficient to fund our obligations.” and “Radian Guaranty may fail to maintain its eligibility status with the GSEs, and the additional capital required to support Radian Guaranty’s eligibility could reduce our available liquidity.” See also “Overview—Current Operating Environment” and Note 1 of Notes to Consolidated Financial Statements for further information. In addition to Radian Group’s existing sources of liquidity to fund its obligations, we may decide to seek additional capital, including by incurring additional debt, issuing additional equity, or selling assets, which we may not be able to do on favorable terms, if at all. Share Repurchases. During 2023 and 2022, the Company repurchased 5.3 million shares and 19.5 million shares of Radian Group common stock, respectively, under programs authorized by Radian Group’s board of directors, at a total cost of $133 million and $400 million, respectively, including commissions. See Note 14 of Notes to Consolidated Financial Statements for additional details on our share repurchase programs. Dividends and Dividend Equivalents. Throughout 2023 and 2022, our quarterly dividend was $0.225 and $0.20 per share, respectively. In February 2024, Radian Group’s board of directors authorized an increase to our quarterly dividend from $0.225 to $0.245 per share. Based on our outstanding shares of common stock and RSUs, as of December 31, 2023, we expect to require approximately $150 million in the aggregate to pay dividends and dividend equivalents for the next 12 months. So long as no default or event of default exists under our revolving credit facility or the Parent Guarantees, Radian Group is not subject to any legal or contractual limitations on its ability to pay dividends except those generally applicable to corporations that are incorporated in Delaware. Delaware corporation law provides that dividends are only payable out of a corporation’s capital surplus or (subject to certain limitations) recent net profits. As of December 31, 2023, our capital surplus was $4.3 billion, representing our dividend limitation under Delaware law. The declaration and payment of future quarterly dividends remains subject to the board of directors’ discretion and determination. Corporate Expenses and Interest Expense. Radian Group has expense-sharing arrangements in place with its principal operating subsidiaries that require those subsidiaries to pay their allocated share of certain holding-company-level expenses, including interest payments on Radian Group’s outstanding debt obligations. Corporate expenses and interest expense on Radian Group’s debt obligations allocated under these arrangements during 2023 of $164 million and $83 million, respectively, were substantially all reimbursed by its subsidiaries. We expect substantially all of our holding company expenses to continue to be reimbursed by our subsidiaries under our expense-sharing arrangements. The expense-sharing arrangements between Radian Group and its mortgage insurance subsidiaries, as amended, have been approved by the Pennsylvania Insurance Department, but such approval may be modified or revoked at any time. Taxes. Pursuant to our tax-sharing agreements, our operating subsidiaries pay Radian Group an amount equal to any federal income tax the subsidiary would have paid on a standalone basis if they were not part of our consolidated tax return. As a result, from time to time, under the provisions of our tax-sharing agreements, Radian Group may pay to or receive from its operating subsidiaries amounts that differ from Radian Group’s consolidated federal tax payment obligation. During 2023, Radian Group received $16 million of tax-sharing agreement payments from its operating subsidiaries. 92 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Capitalization—Holding Company The following table presents our holding company capital structure. [[GREPCENT_TABLE]] [["Capital structure"],["","","December 31,"],["(In thousands, except per-share amounts and ratios)","","2023","","2022"],["Debt"],["Senior Notes due 2024","","$","450,000","","","$","450,000"],["Senior Notes due 2025","","525,000","","","525,000"],["Senior Notes due 2027","","450,000","","","450,000"],["Deferred debt costs on senior notes","","(7,219)","","","(11,496)"],["Revolving credit facility","","\u2014","","","\u2014"],["Total","","1,417,781","","","1,413,504"],["Stockholders\u2019 equity","","4,397,805","","","3,919,327"],["Total capitalization","","$","5,815,586","","","$","5,332,831"],["Holding company debt-to-capital ratio (1)","","24.4","%","","26.5","%"],["Shares outstanding","","153,179","","","157,056"],["Book value per share","","$","28.71","","","$","24.95"]] [[/GREPCENT_TABLE]] (1)Calculated as carrying value of senior notes, which were issued and are owed by our holding company, divided by carrying value of senior notes and stockholders’ equity. This holding company ratio does not include the effects of amounts owed by our subsidiaries related to secured borrowings. Stockholders’ equity increased by $478 million from December 31, 2022, to December 31, 2023. The net increase in stockholders’ equity resulted primarily from: (i) our net income of $603 million and (ii) net unrealized gains on investments of $126 million. These items were partially offset by: (i) dividends of $146 million and (ii) share repurchases of $133 million, excluding related excise taxes due. The increase in book value per share from $24.95 at December 31, 2022, to $28.71 at December 31, 2023, is primarily due to: (i) an increase of $3.84 per share attributable to our net income for 2023 and (ii) an increase of $0.80 per share due to an increase in unrealized gains in our available for sale securities, recorded in accumulated other comprehensive income. These increases were partially offset by a decrease of $0.93 per share attributable to dividends and dividend equivalents. We regularly evaluate opportunities, based on market conditions, to finance our operations by accessing the capital markets or entering into other types of financing arrangements with institutional and other lenders. We also regularly consider various measures to improve our capital and liquidity positions, as well as to strengthen our balance sheet, improve Radian Group’s debt maturity profile and maintain adequate liquidity for our operations. Among other things, these measures may include borrowing agreements or arrangements, such as securities or other master repurchase agreements and revolving credit facilities. In the past we have repurchased or exchanged, prior to maturity, some of our outstanding debt, and in the future, we may from time to time seek to redeem, repurchase or exchange for other securities, or otherwise restructure or refinance some or all of our outstanding debt prior to maturity in the open market through other public or private transactions, including pursuant to one or more tender offers or through any combination of the foregoing, as circumstances may allow. The timing or amount of any potential transactions will depend on a number of factors, including market opportunities and our views regarding our capital and liquidity positions and potential future needs. There can be no assurance that any such transactions will be completed on favorable terms, or at all. Mortgage Insurance Historically, one of the primary demands for liquidity in our Mortgage Insurance business is the payment of claims, net of reinsurance, including from commutations and settlements. See Note 11 of Notes to Consolidated Financial Statements for information on our mortgage insurance reserve for losses and LAE, which represents our best estimate for the costs of settling future claims on currently defaulted mortgage loans. Other principal demands for liquidity in our Mortgage Insurance business include: (i) expenses (including those allocated from Radian Group); (ii) repayments of FHLB advances; and (iii) taxes, including potential additional purchases of U.S. Mortgage Guaranty Tax and Loss Bonds. See Notes 10 and 16 of Notes to Consolidated Financial Statements for information related to these non-interest-bearing instruments. In addition to the foregoing liquidity demands, other payments have 93 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included, and in the future could include, distributions from Radian Guaranty to Radian Group, including returns of capital or recurring ordinary dividends, as discussed below. The principal sources of liquidity in our Mortgage Insurance business currently include insurance premiums, net investment income and cash flows from: (i) investment sales and maturities; (ii) FHLB advances; and (iii) if necessary, capital contributions from Radian Group. We believe that the operating cash flows generated by each of our mortgage insurance subsidiaries will provide these subsidiaries with the funds necessary to satisfy their needs for the foreseeable future. As of December 31, 2023, Radian Guaranty maintained claims paying resources of $6.1 billion on a statutory basis, which consist of contingency reserves, statutory policyholders’ surplus, premiums received but not yet earned and loss reserves. In addition, our reinsurance programs are designed to provide additional claims-paying resources during times of economic stress and elevated losses. See Note 8 of Notes to Consolidated Financial Statements for additional information. Radian Guaranty’s Risk-to-capital as of December 31, 2023, was 10.4 to 1. Radian Guaranty is not expected to need additional capital to satisfy state insurance regulatory requirements in their current form. At December 31, 2023, Radian Guaranty had statutory policyholders’ surplus of $620 million. This balance includes a $750 million benefit from U.S. Mortgage Guaranty Tax and Loss Bonds issued by the U.S. Department of the Treasury, which mortgage guaranty insurers such as Radian Guaranty may purchase in order to be eligible for a tax deduction, subject to certain limitations, related to amounts required to be set aside in statutory contingency reserves. See Note 16 of Notes to Consolidated Financial Statements and “Item 1A. Risk Factors” for more information. Radian Guaranty currently is an approved mortgage insurer under the PMIERs. Private mortgage insurers, including Radian Guaranty, are required to comply with the PMIERs to remain approved insurers of loans purchased by the GSEs. At December 31, 2023, Radian Guaranty’s Available Assets under the PMIERs financial requirements totaled $5.9 billion, resulting in a PMIERs Cushion of $2.3 billion, or 62%, over its Minimum Required Assets. Those amounts compare to Available Assets and a PMIERs cushion of $5.6 billion and $1.7 billion, respectively, at December 31, 2022. Our PMIERs Cushion as of December 31, 2023, includes the benefit from our reinsurance agreements through that date. Our PMIERs Cushion at December 31, 2023, also includes a benefit from the current broad-based application of the Disaster Related Capital Charge that has reduced the total amount of Minimum Required Assets that Radian Guaranty otherwise would have been required to hold against pandemic-related defaults by approximately $85 million and $200 million as of December 31, 2023 and 2022, respectively, taking into consideration our risk distribution structures in effect as of those dates. The application of the Disaster Related Capital Charge has reduced Radian Guaranty’s PMIERs Minimum Required Assets, but we expect this benefit will continue to diminish over time. See “Item 1. Business—Regulation—Federal Regulation—GSE Requirements for Mortgage Insurance Eligibility” and “Radian Guaranty may fail to maintain its eligibility status with the GSEs, and the additional capital required to support Radian Guaranty’s eligibility could reduce our available liquidity” under “Item 1A. Risk Factors” for more information about the Disaster Related Capital Charge. Despite holding assets above the minimum statutory capital thresholds and PMIERs financial requirements, the ability of Radian’s mortgage insurance subsidiaries to pay dividends on their common stock is restricted by certain provisions of the insurance laws of Pennsylvania, their state of domicile. Under Pennsylvania’s insurance laws, ordinary dividends and other distributions may only be paid out of an insurer’s positive unassigned surplus unless the Pennsylvania Insurance Department approves the payment of dividends or other distributions from another source. Aided by the positive impacts of its merger with Radian Reinsurance in December 2022, Radian Guaranty had positive unassigned surplus of $258 million as of December 31, 2022, and continued to maintain positive unassigned surplus throughout 2023. As a result, beginning with the first quarter of 2023, Radian Guaranty had the ability to pay ordinary dividends, and paid total ordinary dividends of $400 million in cash and marketable securities in 2023. Subsequent to the payment of these dividends, as of December 31, 2023, Radian Guaranty had positive unassigned surplus of $120 million, and in February 2024, Radian Guaranty paid an ordinary dividend of $100 million in cash and marketable securities to Radian Group. Radian Guaranty expects to have the ability to continue paying ordinary dividends in 2024. See Note 16 of Notes to Consolidated Financial Statements for additional information on our statutory dividend restrictions and contingency reserve requirements. Radian Guaranty is a member of the FHLB. As a member, it may borrow from the FHLB, subject to certain conditions, which include requirements to post collateral and to maintain a minimum investment in FHLB stock. Advances from the FHLB may be used to provide low-cost, supplemental liquidity for various purposes, including to fund incremental investments. Radian’s current strategy includes using FHLB advances as financing for general cash management and liquidity purposes. As of December 31, 2023, there were $95 million of FHLB advances outstanding. See Note 12 of Notes to Consolidated Financial Statements for additional information. homegenius As of December 31, 2023, our homegenius segment maintained cash and liquid investments totaling $64 million, including $46 million held by Radian Title Insurance. 94 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Title insurance companies, including Radian Title Insurance, are subject to comprehensive state regulations, including minimum net worth requirements. Radian Title Insurance was in compliance with all of its minimum net worth requirements at December 31, 2023. In the event the cash flows from operations of the homegenius segment are not adequate to fund all of its needs, including the regulatory capital needs of Radian Title Insurance, Radian Group may provide additional funds to the homegenius segment in the form of an intercompany note or other capital contribution, and if needed for Radian Title Insurance, subject to the approval of the Ohio Department of Insurance. Additional capital support may also be required for potential investments in new business initiatives to support our strategy of growing our businesses. During 2023 and 2022, Radian Group made $100 million and $65 million, respectively, of additional equity contributions to support its homegenius subsidiaries. Liquidity levels may fluctuate depending on the levels and contractual timing of our invoicing and the payment practices of our homegenius clients, in combination with the timing of our homegenius segment’s payments for expenses. The amount, if any, and timing of the homegenius segment’s dividend paying capacity will depend primarily on the amount of excess cash flow generated by the segment. Ratings We believe that ratings independently assigned by third-party statistical rating organizations often are considered by others in assessing our credit strength and the financial strength of our primary insurance subsidiaries. Radian Group, Radian Guaranty and Radian Title Insurance are currently assigned the financial strength ratings set forth in the chart below, which are provided for informational purposes only and are subject to change. In “Item 1A. Risk Factors,” see “The current financial strength ratings assigned to our mortgage insurance subsidiaries could weaken our competitive position and potential downgrades by rating agencies to these ratings and the ratings assigned to Radian Group could adversely affect the Company.” [[GREPCENT_TABLE]] [["Ratings"],["Subsidiary","","Demotech, Inc.","","Fitch (1)","","Moody\u2019s (1)","","S&P (1)"],["Radian Group","","N/A","","BBB-","","Baa3","","BBB-"],["Radian Guaranty","","N/A","","A-","","A3","","A-"],["Radian Title Insurance","","A","","N/A","","N/A","","N/A"]] [[/GREPCENT_TABLE]] (1)Fitch Ratings (“Fitch”), Moody’s Investors Service (“Moody’s”) and S&P Global Ratings (“S&P”) each currently rate the outlook for both Radian Group and Radian Guaranty as Stable. Critical Accounting Estimates SEC guidance defines Critical Accounting Estimates as those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant. These items require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing our consolidated financial statements in accordance with GAAP, management has made estimates, assumptions and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing these financial statements, management has utilized available information, including our past history, industry standards and the current and projected economic and housing environments, among other factors, in forming its estimates, assumptions and judgments, giving due consideration to materiality. Because the use of estimates is inherent in GAAP, actual results could differ from those estimates. In addition, other companies may utilize different estimates, which may impact comparability of our results of operations to those of companies in similar businesses. A summary of the accounting estimates that management believes are critical to the preparation of our consolidated financial statements is set forth below. See Note 2 of Notes to Consolidated Financial Statements for additional disclosures regarding our significant accounting policies. Mortgage Insurance Portfolio Reserve for Losses and LAE We establish reserves to provide for losses and LAE, which include the estimated costs of settling claims in our mortgage insurance portfolio, in accordance with the accounting standard regarding accounting and reporting by insurance enterprises. In our mortgage insurance business, the default and claim cycle begins with the receipt of a default notice from the loan servicer that a borrower has missed two consecutive monthly mortgage payments. We maintain an extensive 95 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations database of default and claim payment history, and use models based on a variety of loan characteristics to determine the likelihood that a default will reach claim status. With respect to loans that are in default, considerable judgment is exercised as to the adequacy of reserve levels. We use an actuarial projection methodology referred to as a “roll rate” analysis that uses historical claim frequency information to determine the projected ultimate Default to Claim Rates based on the Stage of Default and Time in Default as well as the date that a loan goes into default. The Default to Claim Rate also includes our estimates with respect to expected Rescissions and Claim Denials, which have the effect of reducing our Default to Claim Rates. See Note 11 of Notes to Consolidated Financial Statements for the table detailing our Default to Claim Rate assumptions. After estimating the Default to Claim Rate, we estimate Claim Severity based on recently observed severity rates within product type, type of insurance and Time in Default cohorts, as adjusted to account for anticipated differences in future results compared to recent trends. These severity estimates are then applied to individual loan coverage amounts to determine reserves. Similar to the Default to Claim Rate, Claim Severity also is impacted by the length of time that loans are in default and by our Loss Mitigation Activity. For claims under our Primary Mortgage Insurance, the coverage percentage is applied to the claim amount, which consists of the unpaid loan principal, plus past due interest (for which our liability is contractually capped in accordance with the terms of our Master Policies) and certain expenses associated with the default, to determine our maximum liability. Therefore, Claim Severity generally increases the longer that a loan is in default. We considered the sensitivity of first-lien loss reserve estimates at December 31, 2023, by assessing the potential changes resulting from a parallel shift in Claim Severity and Default to Claim Rate estimates for primary loans, excluding any potential benefits from reinsurance. For example, assuming all other factors remain constant, for every one percentage point change in primary Claim Severity (which we estimate to be 98% of defaulted risk exposure at December 31, 2023), we estimated that our loss reserves would change by approximately $4 million at December 31, 2023. Assuming all other factors remain constant, for every one percentage point change in our overall primary net Default to Claim Rate (which we estimate to be 25% at December 31, 2023, including our assumptions related to Loss Mitigation Activities), we estimated a $14 million change in our loss reserves at December 31, 2023. Senior management regularly reviews the modeled frequency, Claim Severity and Loss Mitigation Activity estimates, which are based on historical trends, as described above. If recent emerging or projected trends, including related to current and future macroeconomic conditions, differ significantly from the historical trends used to develop the modeled estimates, management evaluates these trends and determines how they should be considered in its reserve estimates. Estimating our case reserve for losses involves significant reliance upon assumptions and estimates with regard to the likelihood, magnitude and timing of each potential loss. The models, assumptions and estimates we use to establish loss reserves may prove to be inaccurate, especially during an extended economic downturn or a period of market volatility and economic uncertainty. These assumptions require management to use considerable judgment in estimating the rate at which these loans will result in claims and the amount of such claims. As such, there is uncertainty around our reserve estimate. Premium Revenue Recognition Premiums on mortgage insurance products are written on a recurring basis, either as monthly or annual premiums, or on a multi-year basis as a single premium. Monthly premiums written are earned as coverage is provided each month. For certain monthly policies where the billing is deferred for the first month’s coverage period, currently to the end of the policy, we record a net premium receivable representing the present value of such deferred premiums that we estimate will be collected at that future date. We recognize changes in this receivable based on changes in the estimated amount and timing of such collections, including as a result of changes in observed trends as well as our periodic review of our servicing guide and our operations and collections practices. Key assumptions supporting our estimate of this net premium receivable, which equaled $36 million and $32 million as of December 31, 2023 and 2022, respectively, include a collection rate and average life. During both 2023 and 2022, we made no changes to these assumptions. Single premiums written are initially recorded as unearned premiums and earned over time based on the anticipated loss pattern and the estimated period of risk exposure, which is primarily derived from historical experience and other factors such as projected losses, premium type and projected contractual periods of risk based on original LTV. Our estimate for the single premium earnings pattern is updated periodically and subject to change given uncertainty as to the underlying loss development and duration of risk. There were no significant changes to our single premium earnings pattern estimate in 2023 and 2022. Actual future experience that is different than expected loss development or policy cancellations could result in further material increases or decreases in the recognition of net premiums earned. Based on historical experience, losses are relatively low during the first two years after a loan is originated and then increase over a period of several years before declining; however, several factors can impact and change this cycle, including the economic environment, the quality of the underwriting of the loan, characteristics of the mortgage loan, the credit profile of the borrower, housing prices and unemployment rates. If the timing of losses were to shift, it could accelerate or decelerate our recognition of net premiums earned and could have a material impact on our results of operations. 96 Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Financial Instruments Fair Value Our estimated fair value measurements are intended to reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and the risks inherent in the inputs to the model. Changes in economic conditions and capital market conditions, including but not limited to, benchmark interest rate changes, credit spread changes, market volatility and changes in the value of underlying collateral, could cause actual results to differ materially from our estimated fair value measurements. Nearly all of our financial instruments recorded at fair value relate to our investment portfolio which, including securities loaned to third-party borrowers under securities lending agreements, totaled $6.3 billion as of December 31, 2023. The primary risks in our investment portfolio are interest-rate risk and credit-spread risk, namely the fair value sensitivity of our fixed income securities to changes in interest rates and credit spreads, respectively. We regularly analyze our exposure to interest-rate risk and credit-spread risk and have determined that the fair value of our investments is materially exposed to changes in both interest rates and credit spreads. For additional information regarding the sensitivity of our investment portfolio to these inputs, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk.” See also Note 5 of Notes to Consolidated Financial Statements for additional information pertaining to financial instruments at fair value and our valuation methodologies. Credit Losses and Other Impairments We perform an evaluation of fixed-maturity securities available for sale each quarter to assess whether any decline in their fair value below cost is deemed to be a credit impairment recognized in earnings. Factors considered in our assessment for impairment include the extent to which the amortized cost basis is greater than fair value and the reasons for the decline in value. As of December 31, 2023, our gross unrealized losses on available for sale securities were $444 million, which can fluctuate materially over time based on changes in market conditions. See Note 6 of Notes to Consolidated Financial Statements for additional information regarding impairments related to investments. Income Taxes We are required to establish a valuation allowance against our deferred tax assets when it is more likely than not that all or some portion of our deferred tax assets will not be realized. At each balance sheet date, we assess our need for a valuation allowance and this assessment is based on all available evidence, both positive and negative, and requires management to exercise judgment and make assumptions regarding whether such deferred tax assets will be realized in future periods. Future realization of our deferred tax assets will ultimately depend on the existence of sufficient taxable income of the appropriate character (ordinary income or capital gains) within the applicable carryback and carryforward periods provided under the tax law. In making our assessment of the more likely than not standard, the weight assigned to the effect of both positive and negative evidence is commensurate with the extent to which such evidence can be objectively verified. We have determined that certain non-insurance entities within Radian may continue to generate taxable losses on a separate company basis in the near term and may not be able to fully utilize certain state and local NOLs on their state and local tax returns. Therefore, with respect to deferred tax assets relating to these state and local NOLs and other state timing adjustments, we retained a valuation allowance of $63 million and $70 million at December 31, 2023 and 2022, respectively. Estimated factors in this assessment include, but are not limited to, forecasts of future income and actual and planned business and operational changes. An amount up to the total valuation allowance currently recorded could be recognized if our assessment of realizability changes. Our assumptions around these items and the weight assigned to them have remained consistent in recent periods. See Note 10 of Notes to Consolidated Financial Statements for additional information.