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 2024 primarily reflect the financial results and performance of our one reportable segment—Mortgage Insurance. See “Results of Operations—Mortgage Insurance” for the operating results of this business segment.

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” for more information regarding items that are not included in 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, 2024 and 2023, and a year-over-year comparison between 2024 and 2023. Detailed discussions of our consolidated results of operations for the year ended December 31, 2023, as well as the results of operations for our one reportable segment, Mortgage Insurance, for the year ended December 31, 2023, including the year-over-year comparisons between 2023 and 2022, 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, 2023, filed with the SEC on February 23, 2024.

In the first quarter of 2024, our Chief Executive Officer (Radian’s chief operating decision maker) made certain changes to the way that he organizes and assesses the performance of our operating segments, which resulted in updates to our quantitative and aggregation analyses in accordance with the accounting standard regarding segment reporting. Whereas previously we aggregated our Title, Real Estate Services and Real Estate Technology businesses and reported them as a single reportable segment named homegenius, effective for the year ended December 31, 2024, the individual results of operations for these immaterial businesses, as well as the results of our Mortgage Conduit business (our other operating segment that does not meet the reportable quantitative thresholds) is presented in the All Other category, along with certain corporate and other activities. We have not presented separate year-over-year comparisons between 2023 and 2022 for these immaterial businesses in the All Other category because, in management’s judgment, they are not necessary to an understanding of the business.

Revenues

Net Premiums Earned. The increase in net premiums earned for 2024 compared to 2023 is primarily due to growth in IIF and a corresponding increase in direct premiums earned in 2024. For more information, see “Revenues—Net Premiums Earned” under “Results of Operations—Mortgage Insurance.”

Net Investment Income. The increase in net investment income for 2024 compared to 2023 is primarily attributable to higher balances of residential mortgage loans held for sale and short-term investments. See Note 6 of Notes to Consolidated Financial Statements for comparative detail about net investment income. See “Results of Operations—Mortgage Insurance—Revenues—Net Investment Income” and “Results of Operations—All Other” for more information.

Net Gains (Losses) on Investments and Other Financial Instruments. See Note 6 of Notes to Consolidated Financial Statements for additional detail about our net gains (losses) on investments and other financial instruments by investment category.

Expenses

Provision for Losses. The change in the provision for losses for 2024 compared to 2023 is primarily driven by a reduction in favorable development on prior year defaults and an increase in current year new primary defaults, which impacted our mortgage insurance reserves. See “Results of Operations—Mortgage Insurance—Expenses—Provision for Losses” for more information.

Other Operating Expenses. The slight increase in other operating expenses for 2024 compared to 2023 is primarily due to impairments of other long-lived assets and other non-operating expenses of $23 million in 2024 as compared to $13 million in 2023. These items were mostly offset by: (i) a decrease in other general operating expenses and (ii) an increase in ceding commissions. For more information, see “Results of Operations—Mortgage Insurance—Expenses—Other Operating Expenses” and “Results of Operations—All Other.”

Interest Expense. The increase in interest expense for 2024, as compared to 2023, is primarily due to: (i) an increase in secured borrowings under our mortgage loan financing facilities and (ii) the net impact of the March 2024 issuance and redemption of the Senior Notes due 2029 and Senior Notes due 2025, respectively, including the impact of a $4 million loss on extinguishment of debt related to the redemption of the Senior Notes due 2025. See Note 12 of Notes to Consolidated Financial Statements for additional detail about our interest expense.

Income Tax Provision

Our 2024 effective tax rate was 21.6%, 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 those investments and other financial instruments attributable to our Mortgage Conduit business; (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 net gains (losses) on investments and other financial instruments that are attributable to our Mortgage Conduit business, which are included in adjusted pretax operating income (loss).

(2)

Related primarily to impairments of other long-lived assets that are included in other operating expenses on the consolidated statements of operations. See Note 4 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 and All Other activities, as further detailed in Note 4 of Notes to Consolidated Financial Statements.

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%.

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%.