RADIAN GROUP INC

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.

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.

(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.

Table of ContentsGlossaryPart II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

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.

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.

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.

(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.

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.

(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.

(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.