RADIAN GROUP INC

Consolidated Cash Flows

The following table summarizes our consolidated cash flows from operating, investing and financing activities.

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.

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.

(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.

(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.

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.

(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

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.

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.

(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.

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

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.

As of December 31, 2023, our homegenius segment maintained cash and liquid investments totaling $64 million, including $46 million held by Radian Title Insurance.

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.”

(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.