Radian (RDN) Q1 Earnings Beat Estimates, Revenues Rise Y/Y

Radian Group Inc.’s RDN first-quarter 2019 operating income of 73 cents per share beat the Zacks Consensus Estimate by 7.4%. The bottom line also improved 23.7% year over year. The company benefited from solid performance of the Mortgage Insurance segment. It continued to grow the insurance in force portfolio, a major catalyst for future earnings.

The quarter proved to be excellent for the company as it witnessed growth in net income, mortgage insurance in force and net operating return on equity as well as book value per share.

Behind the Headlines

Operating revenues grew 11.6% year over year to $309 million, courtesy of higher net premiums, investment income and other income. Total revenues (including services revenues, and net loss on investments and other financial instruments) were $363.6 million, up nearly 24.7% year over year.

New mortgage insurance written declined 7% year over year to $10.9 billion (on a flow basis) in the quarter under review. As of Mar 31, 2019, total primary mortgage insurance in force was $224 billion, up 10% year over year.

The company expects to write new MI business of about $50 billion in 2019.

Persistency — percentage of mortgage insurance in force that remains in the company’s books after a 12-month period — was 83.4% as of Mar 31, 2019, up 240 basis points year over year.

Primary delinquent loans were 20,122 as of Mar 31, 2019, down 18% year over year.

Total expenses decreased 1.1% year over year to $147.5 million, primarily on the back of lower policy acquisition costs and cost of services.

Radian Group Inc. Price, Consensus and EPS Surprise

 

Radian Group Inc. Price, Consensus and EPS Surprise | Radian Group Inc. Quote

Segment Update

Net premiums earned by the Mortgage Insurance segment were $261.8 million, up 8% year over year. Claims paid were $34.6 million in the quarter under review, down 42% year over year. Loss ratio improved 740 basis points to 8%.

The Mortgage and Real Estate Services segment reported a 5.3% year-over-year increase in total revenues to $36 million. Adjusted loss before interest, income taxes, depreciation and amortization (Services adjusted EBITDA) was $0.9 million against income of $0.5 million in the year-ago quarter.

Financial Update

As of Mar 31, 2019, Radian Group had solid cash balance of $118.7 million, down from $122.5 million on Mar 31, 2018.

Long-term debt was $1 billion, up 0.3% year over year.

Book value per share, a measure of net worth, grew 24% year over year to $17.49 as of Mar 31, 2019.

Adjusted net operating return on equity expanded 600 basis points year over year to 17.7% in the quarter.

Risk-to-capital ratio-Mortgage Insurance as of the quarter end was 12.4:1 versus 11.9:1 at the end of the year-ago quarter.

Radian Group enhanced risk profile and improved capital position by closing $562-million ILN transaction and improved financial flexibility, with additional $375 million return of capital from Radian Guaranty to Radian Group.

Zacks Rank

Radian Group currently carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among the other players from the insurance industry, which have reported first-quarter earnings so far, MGIC Investment Corporation MTG, The Progressive Corporation PGR and RLI Corp. RLI outpaced the respective Zacks Consensus Estimate for earnings.

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