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RADIAN GROUP INC (RDN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 EPS modestly beat consensus while revenue was slightly below: Adjusted diluted EPS was $0.99 vs S&P Global consensus $0.97; total revenues were $318.1M vs $321.6M consensus, driven by stable net premiums and lower net investment income from mortgage loans held for sale; credit trends improved with lower defaults and strong cures . EPS and revenue estimates from S&P Global.*
  • Capital return accelerated: Radian repurchased $207M (~6.5M shares, >4% of shares outstanding) and paid $37M in dividends; management expects a similar repurchase pace in Q2, supported by $834M Holdco liquidity and an additional $750M authorization announced post-quarter .
  • Portfolio strength and credit performance: MI in force remained robust at $274.2B; default rate fell to 2.33% with favorable reserve development ($38M) and low claims paid ($4M), underpinning ROE of 12.6% .
  • Strategic risk distribution: Radian Guaranty agreed to multi-year quota share terms to cede 30%/30%/15% of future NIW across successive annual windows through mid-2028, enhancing PMIERs capital efficiency at low cost of capital .

What Went Well and What Went Wrong

What Went Well

  • Capital return and authorization: “We repurchased $207 million of shares… with a total return of capital including dividends to stockholders of $244 million,” and a new $750M authorization post-quarter brings total authority to ~$863M .
  • Credit trends strengthened: Default rate declined to 2.33% QoQ; cures outpaced new defaults with very strong cure rates among the highest in a decade, supporting a low loss ratio and $38M favorable prior-period reserve development .
  • Operational efficiency: Other operating expenses fell to $77M, down 12% QoQ and 7% YoY; management reiterated a 2025 OpEx plan averaging ~$80M per quarter ($320M for the year) .

What Went Wrong

  • Revenue softness vs consensus: Total revenues of $318.1M came in slightly below S&P Global consensus ($321.6M), primarily due to lower net investment income from mortgage loans held for sale vs Q4 . Revenue consensus from S&P Global.*
  • NIW down sequentially: New Insurance Written decreased to $9.5B vs $13.2B in Q4 due to a smaller origination market, although persistency improved to 86% annualized .
  • Loss provision uptick: Mortgage insurance provision for losses was $15.2M vs de minimis in Q4, reflecting $53.7M provision for new defaults partly offset by $38.4M favorable prior-period development; loss ratio rose to 7% vs 0% in Q4 .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($USD Thousands)$333,857 $315,861 $318,114
Net Income ($USD Thousands)$151,892 $148,291 $144,558
Diluted EPS ($)$0.99 $0.98 $0.98
Adjusted Diluted Net Operating EPS ($)$1.03 $1.09 $0.99
Return on Equity (%)13.2% 12.7% 12.6%

Segment breakdown (summarized key items):

Segment Metric ($USD Thousands)Q3 2024Q4 2024Q1 2025
MI Net Premiums Earned$235,144 $235,276 $234,044
All Other Net Premiums Earned$3,989 $3,286 $2,635
MI Net Investment Income$50,236 $51,541 $48,451
All Other Net Investment Income$28,160 $19,769 $20,123
MI Provision for Losses$6,346 $61 $15,340
All Other Provision for Losses$543 $(685) $(173)
MI Adjusted Pretax Operating Income$203,543 $215,207 $194,293
All Other Adjusted Pretax Operating Income (Loss)$(4,875) $(6,370) $(3,459)

KPIs and portfolio metrics:

KPIQ3 2024Q4 2024Q1 2025
New Insurance Written (NIW, $USD Millions)$13,493 $13,186 $9,489
MI In Force ($USD Millions)$274,721 $275,126 $274,159
Annualized Persistency (Quarter) (%)84.1% 82.7% 85.7%
% Primary Loans in Default2.25% 2.44% 2.33%
Net Premiums Earned – MI ($USD Thousands)$235,144 $235,276 $234,044
MI Portfolio Premium Yield (bps)38.2 38.0 38.0
Total Net MI Premium Yield (bps)34.4 34.2 34.1
New Defaults (Count)13,708 13,967 12,505
Favorable Reserve Development ($USD Millions)$51 $56 $38
MI Loss Ratio (%)3% 0% 7%
Primary Delinquent Loans (Count)22,350 24,055 22,758
MI Claims Paid ($USD Millions)$3 $5 $4

Estimate vs Actual (Q1 2025):

MetricConsensusActualDelta
Revenue ($USD)$321,592,830*$318,114,000 (1.1%) miss
Primary EPS ($)$0.9703*$0.99 +1.9% beat

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operating ExpensesFY 2025$320M ($80M/quarter) $320M ($80M/quarter) Maintained
Share RepurchasesQ2 2025Not specified“We expect to buy a similar amount back” (~Q1 pace of $207M) Updated/Higher pace
Distributions from Radian Guaranty to Radian GroupFY 2025Not specifiedUp to $795M total distributions in 2025 New
Quota Share Reinsurance on Future NIW7/1/25–6/30/26; 7/1/26–6/30/27; 7/1/27–6/30/28Not specifiedCede 30%, 30%, and 15% respectively (subject to final documentation) New
DividendQ2 2025$0.255/share in Q1 $0.255/share declared for June 17, 2025 Maintained
MI In-Force Premium YieldFY 2025Stable“Expected to remain generally stable” Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current Period (Q1’25)Trend
Capital return (buybacks & dividends)Ongoing repurchases; Q3 buyback $49M; Q4 buyback $75M; strong liquidity $207M buybacks; expect similar Q2 pace; new $750M authorization Accelerating
Credit/defaults and curesSeasonal uptick in delinquencies; favorable reserve development; low claims Default rate down to 2.33%; cures > new defaults; very strong cure rates Improving
Macro/tariff/mkt uncertaintyElection-year volatility noted Monitoring tariff/trade policy uncertainty; watch unemployment Cautious stance
PMIERs & regulatory actionsPMIERs cushion ~$2.1–$2.2B PMIERs excess ~$2.1B; PA Insurance Dept approval for capital return classification Stable/Proactive
Operating efficiencyQ3/Q4 impairments; cost focus OpEx down to $77M; 2025 OpEx plan reiterated [$320M] Improving
Investment portfolio & AOCIBook value growth; AOCI impact from rates Unrealized losses ($295M) expected to accrete back to BV over time Supportive with rates
Risk distribution (reinsurance)Conduit/securitization VIE Multi-year QSR cessions to 2028 at low capital cost Strategic expansion

Management Commentary

  • CEO: “We increased book value per share by 11% year-over-year, generated net income of $145 million, and delivered a return on equity of 12.6%… we repurchased $207 million of shares… with a total return of capital including dividends to stockholders of $244 million” .
  • CFO: “We generated $318 million of total revenues… $234 million in net premiums earned… our persistency rate increased to 86% this quarter, the second highest rate we observed in over 10 years” .
  • CFO on credit: “Total defaults decreased… default rate of 2.33%… cures grew 13% QoQ… among the five highest months we have observed in at least 10 years” .
  • CFO on capital returns: “We repurchased 6.5 million shares… $207 million… expect to buy back shares at a similar pace at least for second quarter” .
  • CEO on macro: “We continue to closely monitor… uncertainties from tariff and global trade policies… Overall, our outlook… remained positive” .

Q&A Highlights

  • Credit/default expectations: Management continues to model through-the-cycle default rates in the sub-3% range; default rate fell QoQ; cure trends remain stronger than initial reserves .
  • Default-to-claim rate assumption: Rolled down from 8% to 7.5% in Q4’24 and maintained in Q1; could adjust if macro changes materially .
  • Buyback cadence and mechanics: Q1 buybacks accelerated; plan to maintain similar Q2 pace; executed via an adjusted Rule 10b5-1 grid to be opportunistic .
  • Embedded equity and cures: ~75% of new defaults have >20% equity, supporting high cure rates and lower severity .
  • Holdco liquidity framework: $834M Holdco liquidity exceeds needs; no near-term debt maturities; continued flexibility for capital return .

Estimates Context

  • Results vs consensus: EPS beat (+1.9%) at $0.99 vs $0.9703*, driven by stable premiums and expense control; revenue missed (-1.1%) at $318.1M vs $321.6M*, as mortgage loans held for sale income declined vs Q4 . Consensus from S&P Global.*
  • Potential estimate revisions: Strong cures and lower default rate support lower loss expectations; OpEx tracking to plan could support slight upward EPS revisions; NIW softness may temper revenue expectations near-term .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Capital return is a core catalyst: Accelerated Q1 buybacks ($207M) with management signaling similar Q2 pace and a new $750M authorization post-quarter .
  • Portfolio quality supports earnings durability: MI in force ~$274.2B, high persistency (85.7% annualized), and strong cure dynamics reduce severity and support low claims .
  • Credit conditions remain favorable: Default rate fell QoQ to 2.33%; favorable prior-period development continued ($38M), underpinning ROE of 12.6% .
  • Strategic reinsurance enhances capital efficiency: Multi-year QSR cessions (30%/30%/15%) provide PMIERs relief at low cost, mitigating tail risk on new production .
  • Expense discipline intact: OpEx declined to $77M; management reaffirmed FY2025 OpEx target of ~$320M, aiding margin stability .
  • Watch NIW trajectory: Q1 NIW fell to $9.5B vs Q4’s $13.2B on market softness; persistency and stable premium yields offset near-term origination declines .
  • Macro watchpoints: Management is monitoring tariff/trade policy and unemployment; continued rate environment benefits persistency and investment income .

Notes and sources: All quantitative and qualitative statements cited from Radian’s Q1 2025 8-K and earnings press release and call transcript, plus prior quarters’ 8-Ks and relevant press releases: ; ; ; ; ; new authorization/dividend release . EPS and revenue estimates sourced from S&P Global via GetEstimates.*