Back to top

Image: Bigstock

Radian Group (RDN) Q3 Earnings Beat Estimates, Tumble Y/Y

Read MoreHide Full Article

Radian Group Inc. (RDN - Free Report) reported third-quarter 2020 adjusted operating income of 59 cents per share, which outpaced the Zacks Consensus Estimate by 22.9%. However, the bottom line declined 27.2% year over year.

The company’s results benefited from growth in the housing market and consistent positive default trends across its mortgage insurance portfolio. A strong housing market has led to an uptick in new primary mortgage insurance business written.

However, the benefits were partially offset by lower revenues and elevated loss provision stemming from rise in number of new defaults, which encompass loans subject to forbearance programs executed as a result of the COVID-19 pandemic.

Quarter in Details

Operating revenues decreased 0.3% year over year to $324 million, attributable to lower services revenue and net investment income. Nonetheless, the results partly benefited from higher net premiums earned and other income.

Net premiums earned was $286.5 million, which inched up 1.9% year over year. However, net investment income slumped 15.2% year over year to $36.3 million.

MI New Insurance Written surged 51.2% year over year to $33.3 billion backed by a strong housing market.

Primary mortgage insurance in force was $245.5 billion as on Sep 30, 2020, up 3.5% year over year. The growth can be primarily attributed to higher monthly premium insurance in force, partially offset by reduced single premium insurance in force.

Persistency — percentage of mortgage insurance in force that remains in the company’s books after a 12-month period — was 65.6% as of Sep 30, 2020, down 1590 basis points (bps) year over year.

Primary delinquent loans were 62,737 as of Sep 30, 2020, up more than three-fold year over year.

Total expenses increased 31.6% year over year to $214 million on account of higher provision for losses, policy acquisition costs and interest expense.

Radian Group Inc. Price, Consensus and EPS Surprise

Radian Group Inc. Price, Consensus and EPS Surprise

Radian Group Inc. price-consensus-eps-surprise-chart | Radian Group Inc. Quote

Segmental Update

The Mortgage segment reported year-over-year increase of 0.7% in total revenues to $320 million. Net premiums earned by the segment were $283.4 million, up 2.1% year over year. Claims paid were $10.8 million in the quarter under review, down 70.5% year over year. Loss ratio deteriorated 2050 bps year over year to 31%.

The Real Estate segment reported a year-over-year rise of 10.6% in total revenues to $33.3 million. Net premiums earned by the segment were $3.1 million, down 13.2% year over year.  Adjusted earnings before interest, income taxes, depreciation and amortization (Real Estate adjusted EBITDA) was ($1.4) million against income of $0.9 million in the year-ago quarter.

Financial Update

As of Sep 30, 2020, Radian Group had solid cash balance of $82 million, down 11.5% from 2019-end level.  Debt to capital ratio deteriorated 740 bps to 25.4% from 2019 end level.

Book value per share, a measure of net worth, climbed 11% year over year to $21.52 as of Sep 30, 2020.

In the third quarter, adjusted net operating return on equity was 11.3% compared with 17.4% in the year-ago quarter.

Risk-to-capital ratio of Radian Guaranty as of third-quarter end was 13.2:1, lower than 13.6:1 from 2019 end level.

Excess available resources to support PMIERs came in at $2.3 billion as of Sep 30, 2020, which stands 67% above Radian Guaranty's minimum required assets of about $3.5 billion.

Zacks Rank

Radian Group currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers in the Same Space

Of the multi line insurance industry players, which have reported third-quarter results so far, earnings of Old Republic International Corporation (ORI - Free Report) , CNO Financial Group, Inc. (CNO - Free Report) and James River Group Holdings, Ltd. (JRVR - Free Report) beat the respective Zacks Consensus Estimate.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>