A month has gone by since the last earnings report for Radian (RDN Quick QuoteRDN - Free Report) . Shares have added about 6.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Radian due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Radian Group Q2 Earnings Beat, Revenues Lag Estimates

Radian Group Inc. reported second-quarter 2021 adjusted operating income of 75 cents per share, which surpassed the Zacks Consensus Estimate by 7.1%. The bottom line compared favorably with the prior-year quarter’s adjusted operating loss of 36 cents per share.

The company’s results reflect favorable momentum in the housing market and positive credit trends across its insured portfolio. There has been an uptick in net premiums earned, monthly premium mortgage insurance in force and homegenius revenues along with reduced costs and higher persistency. However, the improvement has been partly offset by drop in new insurance written and net investment income.

Quarter in Details

Operating revenues of $292 million inched up 1% year over year on account of higher net premiums earned and improved services revenue, partly offset by decline in net investment income. However, the top line missed the consensus mark by 6.8%.

Net premiums earned rose 2.2% year over year to $254.8 million. Meanwhile, net investment income of $36.3 million fell 6.3% year over year in the second quarter. MI new insurance written declined 14.9% year over year to $21.7 billion.

As of Jun 30, 2021, primary mortgage insurance in force totaled $237.3 billion, which dipped 1.7% year over year. The decline was due to 28.2% plunge in single premium policy insurance in force, partly mitigated by rise of 8.1% in monthly premium policy insurance in force.

Persistency — percentage of mortgage insurance in force that remains in the company’s books after a 12-month period — came in at 66.3% for the quarter, up 250 basis points (bps) year over year. As of Jun 30, 2021, primary delinquent loans of 40,464 plunged 42% year over year.

Total expenses declined nearly three-fold year over year to $141.5 million in the quarter under review mainly due to lower provision for losses and policy acquisition costs.

Segmental Update

Mortgage

The segment reported revenues of $284.3 million, which dipped 0.9% year over year. Net premiums earned of $247.1 million declined 0.2% year over year. Net claims paid totaled $4.2 million, which plunged 81.5% year over year. Loss ratio of 1.3 in the quarter under review compared favorably with the prior-year quarter's figure of 122.8.

homegenius

The homegenius segment’s revenues of $33.5 million climbed 48% year over year. Net premiums earned by the segment were $7.7 million, which surged 62% year over year. The segment reported adjusted pretax operating loss before allocated corporate operating expenses of $4.5 million, which came in wider than the prior-year quarter loss of $1.1 million.

Financial Update

Radian Group exited the second quarter with cash balance of $134.9 million, which soared 53.5% from the level at 2020 end. Debt to capital ratio improved 150 bps year over year to 24.5 at June-end. As of Jun 30, 2021, book value per share, a measure of net worth, advanced 10.6% year over year to $23.02.

Adjusted net operating return for the second quarter was 13.6%, against the prior-year quarter’s negative figure of 7.1%. Risk-to-capital ratio of Radian Guaranty as of second-quarter end came in at 11.4:1, lower than 12.7:1 reported as of Dec 31, 2020.

Excess available resources to support PMIERs of $1.9 billion was 58% higher than Radian Guaranty's minimum required assets.

Share Repurchase and Dividend Update

Radian bought back 3.9 million shares worth $90.1 million in the second quarter. The company had $100.2 million remaining under its share repurchase authorization as of Jun 30, 2021. The board of directors approved a 12% increase in its quarterly dividend to 14 cents per share. The dividend has been paid on Jun 4, 2021.

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months. The consensus estimate has shifted 6.35% due to these changes.

VGM Scores

At this time, Radian has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Radian has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.