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RADIAN GROUP INC (RDN)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered solid results: total revenues $316M, diluted EPS $0.98, adjusted diluted net operating EPS $1.09, ROE 12.7% .
  • Mortgage insurance KPIs remained resilient: NIW $13.19B, primary IIF a record $275.13B; loss ratio 0%, premium yields stable (MI portfolio 38.0 bps; total net MI 34.2 bps) .
  • Capital returns and balance sheet strength continued: $75M buybacks in Q4; $675M ordinary dividends from Radian Guaranty in FY24; PMIERs excess assets $2.16B; available holdco liquidity $885M; Fitch upgraded Radian Guaranty IFS to A and Radian Group debt to BBB (stable outlook) .
  • Operating expense trajectory: Q4 included $13M impairment (software/leases); excluding impairments, OpEx ~$75M with management reiterating 2025 run-rate OpEx reduction of $20–$25M vs 2023 .
  • Estimates context: S&P Global consensus data was unavailable; therefore, we cannot provide vs-consensus comparisons for Q4 (Wall Street consensus retrieval failed).

What Went Well and What Went Wrong

What Went Well

  • Record primary insurance in force ($275.13B) and strong persistency (84% TTM); NIW up 24% YoY in Q4 (to $13.19B) supported by stable pricing and high-quality originations .
  • Credit trends favorable: loss ratio 0% with $56M favorable reserve development on prior-period defaults; cure rates remain robust, leading management to lower default-to-claim roll rate assumption to 7.5% for new defaults .
  • Capital strength and shareholder returns: $111M returned in Q4 via dividends ($0.245/share) and buybacks ($75M); PMIERs excess $2.16B; Fitch upgrades underscore balance sheet quality and liquidity .

Management quote: “Our primary mortgage insurance in force… reached a record level of $275 billion dollars.” — CEO Rick Thornberry .

What Went Wrong

  • Sequential revenue and investment income softness vs Q3: total revenues down to $316M (from $334M) and net investment income declined to $71M, partly reflecting lower cash after debt redemption .
  • Seasonal uptick in delinquencies: primary delinquent loans rose to 24,055, default rate to 2.44%, including hurricane-related areas (though management expects elevated cures) .
  • Impairments weighed on OpEx: $13M impairment (software/leases) in Q4; All Other segment continued to post an adjusted operating loss of ~$6M in Q4 .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Total Revenues ($USD Millions)$328.6 $321.1 $333.9 $315.9
Diluted EPS ($)$0.91 $0.98 $0.99 $0.98
Adjusted Diluted Net Operating EPS ($)$0.96 $0.99 $1.03 $1.09
Return on Equity (%)13.4% 13.6% 13.2% 12.7%
Net Investment Income ($USD Millions)$68.8 $73.8 $78.4 $71.3
Net Premiums Earned – Mortgage Insurance ($USD Millions)$230.4 $234.8 $235.1 $235.3

Segment breakdown (selected line items):

Segment Metric ($USD Thousands unless noted)Q4 2023Q4 2024
Mortgage Insurance: Net Premiums Earned$230,380 $235,276
Mortgage Insurance: Net Investment Income$51,061 $51,541
Mortgage Insurance: Adjusted Pretax Operating Income$197,797 $215,207
All Other: Net Premiums Earned$2,269 $3,286
All Other: Net Investment Income$17,763 $19,769
All Other: Adjusted Pretax Operating Income (Loss)$(6,063) $(6,370)
MI Loss Ratio (%)2.0% 0.0%
MI Expense Ratio (%)25.5% 24.2%

Key KPIs

KPIQ2 2024Q3 2024Q4 2024
New Insurance Written (NIW) ($USD Millions)$13,902 $13,493 $13,186
Primary Mortgage IIF ($USD Millions)$272,827 $274,721 $275,126
% Primary Loans in Default2.0% 2.25% 2.44%
PMIERs Excess Available Assets ($USD Millions)$2,206 $2,122 $2,158
Book Value per Share ($)$29.66 $31.37 $31.33
MI Portfolio Premium Yield (bps)38.2 38.2 38.0
Total Net MI Premium Yield (bps)34.5 34.4 34.2
MI Loss Ratio (%)(0.8)% 2.7% 0.0%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/ActualChange
Operating Expenses (run-rate vs 2023)FY 2025Reduction of $20–$25M vs 2023 Reiterated target for 2025 Maintained
Default-to-Claim Roll Rate AssumptionQ4 20248% (prior quarters) 7.5% applied to new defaults in Q4 Lowered
Radian Guaranty Dividends to HoldcoFY 2024$400–$500M (initial 2024 guide) $675M actual for FY 2024 Raised (actual exceeded)
Quarterly Dividend per ShareQ1 2025$0.245/share (Q4 2024) $0.255/share (approved 2/12/2025) Raised
Interest Expense OutlookFY 2025N/A~$20M annual reduction expected post debt redemption (announced Q3) Lowered (structural)

Earnings Call Themes & Trends

TopicQ2 2024 (Prior)Q3 2024 (Prior)Q4 2024 (Current)Trend
Housing market & MI market sizeStable HPA; MI market ~flat; strong persistency; IIF growth 2025 MI market expected ~10% larger; positive outlook Slightly larger 2025 market; positive housing/MI outlook Improving demand/steady HPA
Pricing environmentMI portfolio yield stable; disciplined market Pricing rational/discipline; stability aids value selection MI in-force yield stable; expect stability in 2025 Stable/rational
Persistency/refi mixTTM persistency ~84%; refis ~2% of NIW TTM persistency 84.4%; refis ~4% TTM persistency 83.6%; refis 9.6% of NIW (Q4) High persistency; refis uptick
Credit/cures & loss ratioNet benefit in provisions; cures strong; loss ratio (0.8)% Cures ~90% by 4 quarters; modest provision; loss ratio 2.7% Cures strong; roll-rate cut to 7.5%; loss ratio 0% Favorable credit
Capital return/leverage & ratingsBuyback program expanded; liquidity $1.2B $450M notes redeemed; ROE 13.2%; PMIERs cushion $2.1B $75M buybacks; Fitch upgrades (IFS A; debt BBB); liquidity $885M Strengthening
Mortgage conduit (RMC)Inaugural securitization $348.9M First deal in Q3; second in Q4; aim to be regular issuer KBRA prelim ratings for 2025-J1; plan to increase issuance cadence Scaling

Management Commentary

  • CEO Rick Thornberry: “We reported another successful year… net income of $604 million, and delivering a return on equity of 13.4%. Our primary mortgage insurance in force… reached a record level of $275 billion” .
  • CFO Sumita Pandit: “Total revenues during the quarter [were] $316 million… net premiums earned $235 million… investment portfolio yield was 3.9% in the fourth quarter… lowering both investment income and interest expense by ~$7 million q/q following our note redemption” .
  • On credit: “Our loss ratio was 0% this quarter… incurred loss for new defaults [was] $56 million, fully offset by positive reserve development… we reduced the initial default-to-claim roll rate assumptions for new defaults in the fourth quarter to 7.5%” .
  • On expenses: “Q4 operating expenses included $13 million related to impairments… excluding impairments, remaining operating expenses totaled $75 million… positioned to achieve [a] reduction in run-rate operating expenses in 2025 by $20–$25 million vs 2023” .

Q&A Highlights

  • Credit/default outlook: Management expects default rate to remain “sub 3%” absent macro dislocation; hurricane-related defaults expected to cure at higher rates; embedded equity remains strong .
  • Reserving assumption: 7.5% default-to-claim roll rate applied across new defaults in Q4; not split between hurricane/non-hurricane areas .
  • Leverage and capital allocation: Comfortable with current leverage after $350M net debt reduction; capital returns ($376M in 2024) likely to continue with significant liquidity and authorization remaining .
  • Regulatory/GSE reform: Expect administrative actions over comprehensive legislation; core MI role viewed favorably across parties; charter MI requirements unchanged in potential FHFA-led paths .
  • “All Other” segment and Homegenius: Restructuring largely done; expense base significantly reduced with enterprise FTE down ~30% since 2023; aim to improve margins in 2025 .
  • Mortgage conduit scaling: Plan to increase regularity of issuance; medium-term opportunity for measurable impact on the group .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 EPS and revenue were unavailable due to SPGI API limits at the time of retrieval. As a result, we cannot provide vs-consensus comparisons for this quarter.
  • Given favorable credit trends (0% loss ratio; lower roll-rate), stable premium yields, and strong capital returns, sell-side models may need to reflect: sustained low claims, steady MI yields, slightly lower investment income vs Q3 due to reduced holdco cash, and expense run-rate reductions in 2025 .

Key Takeaways for Investors

  • MI franchise durability: Stable premium yields, record IIF, and high persistency underpin earnings visibility despite seasonal delinquency upticks; 0% loss ratio with lowered roll-rate suggests benign credit normalization .
  • Expense discipline is a tangible 2025 catalyst: With impairments behind and an $80M quarterly OpEx run-rate target, the $20–$25M 2025 OpEx reduction vs 2023 should support margins and ROE .
  • Capital return capacity intact: PMIERs excess of $2.16B and ~$885M holdco liquidity provide ample flexibility for continued buybacks/dividends; dividend per share raised to $0.255 in Feb 2025 .
  • Rate/share dynamics: Reduced leverage and Fitch upgrades may broaden investor appeal and lower funding costs; monitor investment income normalization post debt redemption .
  • Conduit optionality: RMC is scaling with rated deals (KBRA prelim on 2025-J1); near-term earnings impact modest, but medium-term potential adds diversification and fee/investment income streams .
  • Macro sensitivities: Watch refinance activity (refi NIW rose to ~10%) and unemployment trends; management sees positive housing backdrop but acknowledges seasonal/market variability .
  • Trading implications: Near-term narrative favors stability and capital returns; absence of claims pressure and expense cuts could support multiple expansion; monitor any consensus revisions once sell-side updates models.
Note: S&P Global consensus estimates for Q4 2024 were unavailable at time of analysis; vs-consensus comparisons are therefore omitted.