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 the three and six months ended June 30, 2025 and 2024, primarily reflect the financial results and performance of our Mortgage Insurance business. See “Results of Operations—Mortgage Insurance” for the operating results of this business segment for the three and six months ended June 30, 2025, compared to the same periods in 2024.

In addition to the results of our operating segments, pretax income (loss) is also affected by those factors described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Results” in our 2024 Form 10-K.

The following table summarizes our consolidated results of operations for the periods indicated.

(1)

See “Use of Non-GAAP Financial Measures” below.

Revenues

Net Premiums Earned. See “Results of Operations—Mortgage Insurance—Revenues—Net Premiums Earned” for more information.

Services Revenue. See Note 4 of Notes to Unaudited Condensed Consolidated Financial Statements for a disaggregation of services revenue by revenue type.

Net Investment Income. See Note 6 of Notes to Unaudited Condensed 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 Unaudited Condensed Consolidated Financial Statements for comparative detail about net gains (losses) on investments and other financial instruments by investment category.

Expenses

Provision for Losses. The change in the provision for losses for the three and six months ended June 30, 2025, as compared to the same periods in 2024, is primarily driven by a reduction in favorable development on prior period defaults, which impacted our mortgage insurance reserves. See “Results of Operations—Mortgage Insurance—Expenses—Provision for Losses” for more information.

Other Operating Expenses. Other operating expenses decreased for the three and six months ended June 30, 2025, as compared to the same periods in 2024, primarily driven by the impact of expense reduction initiatives for certain of the businesses that comprise All Other activities. For additional information, see “Results of Operations—Mortgage Insurance—Expenses—Other Operating Expenses” and “Results of Operations—All Other.”

Interest Expense. The decrease in interest expense for the three and six months ended June 30, 2025, as compared to the same periods in 2024, is primarily due to a decline in senior notes outstanding. This decrease in both periods was partially offset by an increase in secured borrowings under our mortgage loan financing facilities. The six months ended June 30, 2024, also included a $4 million loss on extinguishment of debt related to the redemption of senior notes in March of 2024. See Note 12 of Notes to Unaudited Condensed Consolidated Financial Statements for additional detail about our interest expense.

Income Tax Provision

Our provision for income taxes for interim periods is established based on our estimated annual effective tax rate for a given year and reflects the impact of discrete tax effects in the period in which they occur.

Our effective tax rate for the three and six months ended June 30, 2025, was 19.0% and 21.2%, respectively, as compared to 19.3% and 21.3% for the three and six months ended June 30, 2024, respectively. For the three and six months ended June 30, 2025 and 2024, the effects of non-deductible executive compensation expense, state income taxes and the vesting of RSUs were the primary drivers of the difference in our effective tax rate compared to the federal statutory rate.

Use of Non-GAAP Financial Measures

In addition to 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.

Beginning with the first quarter of 2025, when calculating adjusted diluted net operating income per share and adjusted net operating return on equity, the Company no longer adjusts for the difference between the Company’s statutory and effective tax rates to calculate those non-GAAP financial measures using the Company’s federal statutory tax rate of 21%. The impact of this incremental adjustment for the difference between the Company’s statutory and effective tax rates has been immaterial in recent periods because the number and magnitude of non-recurring fluctuations in the Company’s effective tax rate have declined in recent years. As such, the Company believes that this incremental adjustment for the difference between the two rates is no longer meaningful to users of our financial statements. We have reflected this change in our calculations of adjusted diluted net operating income per share and adjusted net operating return on equity for all periods presented herein. As it relates to the impact of reconciling income (expense) items included in these non-GAAP financial measures, the Company continues to reflect these items on a gross basis and calculates the income tax provision (benefit) on these items using the Company’s federal statutory tax rate of 21%.

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 the Company’s business segments and to allocate resources to the segments. For detailed information regarding items excluded from adjusted pretax operating income (loss) and the reasons for their treatment, see Note 4 of Notes to Consolidated Financial Statements and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Consolidated—Use of Non-GAAP Financial Measures,” each in our 2024 Form 10-K.

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 and (ii) 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 (expenses) and gains (losses) on extinguishment of debt, among others.

The following table provides a reconciliation of pretax income to our non-GAAP financial measure of adjusted pretax operating income, both calculated on a consolidated Company basis.

(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)

The non-operating item for the six months ended June 30, 2024, primarily relates to a loss on extinguishment of debt.

(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 Unaudited Condensed Consolidated Financial Statements.

Adjusted diluted net operating income (loss) per share is calculated by dividing adjusted pretax operating income (loss), net of taxes computed using the Company’s effective tax rate, by the sum of the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. As discussed above, for purposes of this non-GAAP financial measure, the income tax provision (benefit) on the reconciling income (expense) items is calculated using the Company’s federal statutory tax rate. The following table provides a reconciliation of diluted net income (loss) per share to our non-GAAP financial measure of adjusted diluted net operating income (loss) per share, both calculated on a consolidated Company basis.

(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 effective tax rate, by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented. As discussed above, for purposes of this non-GAAP financial measure, the income tax provision (benefit) on the reconciling income (expense) items is calculated using the Company’s federal statutory tax rate. The following table provides a reconciliation of return on equity to our non-GAAP financial measure of adjusted net operating return on equity, both calculated on a consolidated Company basis.

(1)

Calculated by dividing annualized net income by average stockholders’ equity, based on the average of the beginning and ending balances for each period presented.

(2)

Annualized, as a percentage of average stockholders’ equity.

(3)

Calculated using the Company’s federal statutory tax rate of 21%.