RADIAN GROUP INC

We are a mortgage and real estate company with one reportable business segment—Mortgage Insurance.

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 other immaterial businesses are reported collectively as All Other and include our Mortgage Conduit, Title, Real Estate Services and Real Estate Technology businesses, which provide our existing and new customers with an array of products and services across the residential real estate and mortgage finance industries.

Current Operating Environment

As a mortgage and real estate company, our business results are subject to seasonal fluctuations impacting mortgage and real estate markets as well as 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. 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 political and geopolitical events.

Consistent with the trends observed in recent periods, the economic and market conditions impacting our results for the first nine months of 2024 remained generally favorable. The current interest rate environment has benefited our Persistency Rates and net investment income yields, however, it has also contributed to reduced refinance volumes and NIW in our Mortgage Insurance business and lower transaction volumes for certain of our other businesses.

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. Although it is difficult to project future volumes, recent industry forecasts project a total mortgage origination market for 2024 of approximately $1.7 trillion, which would represent an increase of approximately 17% compared to 2023, but a reduction compared to projections at the beginning of 2024. This decrease in projections for 2024 primarily relates to a change in the timing of interest rate decreases compared to expectations at the beginning of the year. The U.S. Federal Reserve reduced benchmark interest rates for the first time in approximately three years in September 2024, which was later than originally anticipated. The timing and magnitude of changes in the benchmark interest rate can affect mortgage interest rates and the overall size of the mortgage market. In light of updated projections, we now estimate that the private mortgage insurance market will be approximately $300 billion in 2024, which is the lower end of our expectations at the beginning of the year. In “Item 1A. Risk Factors” in our 2023 Form 10-K, see “A decrease in the volume of mortgage originations could result in fewer opportunities for us to write new mortgage insurance business and conduct our homegenius businesses” for more information.

While these macroeconomic conditions are expected to negatively impact the overall volume of mortgage transactions taking place, the higher interest rate environment is expected to continue to benefit our financial performance through elevated Persistency Rates, which is expected to benefit our level of IIF despite lower NIW, as well as through the recognition of higher net investment income. Further, the housing supply continues to be constrained, which we believe will continue to support home values and the high level of home price appreciation currently embedded in our insured portfolio of mortgages. We expect this will continue to benefit the credit performance of our mortgage insurance portfolio as a result of the increased level of embedded equity borrowers have in their homes, which has positively impacted our default and cure trends. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Current Operating Environment” in our 2023 Form 10-K for additional discussion of the primary factors affecting the current operating environment for our businesses.

Despite risks and uncertainties, we believe that mortgage industry fundamentals remain strong, including as a result of the improvements to the mortgage and real estate ecosystem since the great financial crisis in 2008, such as more stringent underwriting and product standards, higher-quality borrowers with strong credit profiles and strengthened mortgage loan servicing and government support to help borrowers stay in their homes.

Legislative and Regulatory Developments

We are subject to comprehensive regulation by both federal and state regulatory authorities. For a description of significant state and federal regulations and other requirements of the GSEs that are applicable to our businesses, as well as legislative and regulatory developments affecting the housing finance industry, see “Item 1. Business—Regulation” in our 2023 Form 10-K. Except as discussed below, there were no significant regulatory developments impacting our businesses from those discussed in our 2023 Form 10-K.

On August 21, 2024, the GSEs issued updates to the PMIERs (“PMIERs Updates”) that refine the standards for Available Assets under the PMIERs, which include the most liquid assets of a mortgage insurer available to pay claims. While the PMIERs do not prohibit a mortgage insurer from holding any type of assets, the PMIERs Updates further limit the Available Asset credit that mortgage insurers receive under the PMIERs for certain asset types based on several factors, including, among others, asset class and credit rating. Under the PMIERs Updates, the impact of reductions in Available Asset credit resulting from the changes is being phased-in over a two-year period, with 25% of the calculated adjustment to be implemented as of March 31, 2025, 50% as of September 30, 2025, 75% as of March 31, 2026, and 100% as of September 30, 2026. We do not expect the PMIERs Updates to have a material impact on Radian Guaranty’s capital position, its PMIERs cushion or its investment portfolio asset allocation strategy.

As part of the PMIERs Updates, the GSEs also announced that because the COVID-19 national emergency has ended, it would be eliminating the allowance for a reduction of the Minimum Required Asset factor under the PMIERs for COVID-19 Defaulted Loans. Effective March 31, 2025, COVID-19 Defaulted Loans will no longer qualify for the Disaster Related Capital Charge and will instead revert to the standard non-performing loan requirements of PMIERs. Although the Disaster Related Capital Charge is being eliminated for COVID-19 Defaulted Loans, it will continue to be available and apply to non-performing loans backed by a property located in a FEMA Designated Area, subject to certain conditions, including FEMA Designated Areas associated with the recent hurricanes Beryl, Helene and Milton. As of the effective date of March 31, 2025, we expect the elimination of the Disaster Related Capital Charge for COVID-19 Defaulted Loans to increase Radian Guaranty’s Minimum Required Assets by an immaterial amount.

See “Management’s Discussion and Analysis—Liquidity and Capital Resources—Mortgage Insurance” for more information.