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Radian's (RDN) Q1 Earnings Beat Estimates, Improve Y/Y

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Radian Group Inc.’s (RDN - Free Report) first-quarter 2020 operating income of 80 cents per share beat the Zacks Consensus Estimate by 14.3%. Further, the bottom line improved 10% year over year. The company benefited from improved premiums earned from its Mortgage segment.

Volume of new mortgage insurance business was high in the first quarter, which led toyear-over-year increase of 8% in high-quality insurance in force portfolio.

Quarter in Details

Operating revenues grew 13.6% year over year to $351 million, courtesy of higher net premiums. Net premiums earned improved 5.3% year over year to $277.4 million. However, total revenues (including services revenues, and net gain on investments and other financial instruments) were $329.1 million, down 9.5% year over year. Also, net investment income declined 6.6% year over year to $40.9 million.

As of Mar 31, 2020, total primary mortgage insurance in force was $241.6 billion, up 8% year over year.

MI New Insurance Written grew 53% year over year to $16.7 billion.

Persistency — percentage of mortgage insurance in force that remains in the company’s books after a 12-month period — was 75.4% as of Mar 31, 2020, down 800 basis points year over year.

Primary delinquent loans were 19,781 as of Mar 31, 2020, down 2% year over year.

Total expenses increased marginally year over year to $147.8 million on account of higher provision for losses and policy acquisition costs.

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

Segment Update

Earlier, the company reported results under two segments – Mortgage Insurance and Services. This year in January, Radian decided to divest Clayton Services LLC to Covius Holdings. Apart from reorganizing its Services segment, the deal highlighted the company’s focus to grow its core mortgage and real estate businesses. Hence, the company reported results under Mortgage and Real Estate segments from first quarter of 2020.

Net premiums earned by the Mortgage segment were $275 million, up 5.1% year over year. Claims paid were $23.4 million in the quarter under review, down 32.4% year over year. Loss ratio deteriorated 480 basis points to 12.8%.

The Real Estate segment reported a 24.3% year-over-year increase in total revenues to $28.6 million. Adjusted earnings before interest, income taxes, depreciation and amortization (Real Estate adjusted EBITDA) came in at a loss of $0.4 million,narrower than the loss of $0.5 million in the year-ago quarter.

Financial Update

As of Mar 31, 2020, Radian Group had solid cash balance of $54.1 million, down 41.6% from 2019-end level.

Book value per share, a measure of net worth, grew 16.1% year over year to $20.30 as of Mar 31,2020.

In the first quarter, Radian Group bought back 11 million shares for $226.3 million. At Mar 31, 2020, the company had $198.9 million available under the existing program, which expires on Aug 31, 2021. However, the company had announced waiver ofits share repurchase program on Mar 25 of this year.

Adjusted net operating return on equity contracted 140 basis points year over year to 16.3% in the quarter.

Risk-to-capital ratio-Mortgage Insurance as of first-quarter end was 12.4:1, which remained flat with the year-ago quarter.

Adverse Effect of COVID-19 

The COVID-19 pandemic has induced volatility in the financial markets. Consequently, Radian apprehends the pandemic to negatively impact second-quarter 2020financial results. It also expects the future quarters to get affected by the pandemic.

Zacks Rank & Performance of Other Insurers

Radian has a Zacks Rank #4 (Sell).

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

Among other insurance industry players, which have reported first-quarter earnings so far, the bottom lines of Assurant, Inc. (AIZ - Free Report) , Voya Financial, Inc. (VOYA - Free Report) and Sun Life Financial Inc. (SLF - Free Report) outpaced the Zacks Consensus Estimate.

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