RDN Shareholder/Stockholder Letter Transcript:
Annual Report
2023
OUR CORE VALUES
Deliver the Brand Promise
Our People are the Difference
We are a customer-centric
enterprise striving to be the
market leading brand as
defined by our customers.
We recognize that our people make
the difference in our franchise.
Innovate for the Future
Do What s Right
We embrace innovative
technologies to strategically
differentiate the delivery of our
products and services.
We will always do the right thing,
without compromise.
Create Shareholder Value
Partner to Win
We build long-term shareholder
value through sustainable growth
and profitability.
We recognize that we cannot reach
our goals alone, so we will develop
intelligent strategic alliances with
best in class partners.
Radian Group Inc. is a mortgage and real estate services company. We provide mortgage insurance and other
products and services to the real estate and mortgage finance industries. The company is listed on the New
York Stock Exchange under the symbol RDN. Learn more about Radian at www.radian.com.
Cautionary Note Regarding Forward-Looking Statements Safe Harbor Provisions
This Annual Report to Stockholders contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
Section 21E of the Securities and Exchange Act of 1934 and the United States Private Securities Litigation Reform Act of 1995. Forwardlooking statements may be identified by the use of words such as anticipate, may, will, could, should, would, expect, intend, plan,
goal, believe, estimate, predict, project, potential, continue, seek, strategy, future, likely or the negative or other variations
on these words. These forward-looking statements, which may include without limitation, projections regarding our future performance and
financial condition, are made on the basis of management s current views and assumptions with respect to future events, and are subject to
certain risks, uncertainties, and other factors that could cause actual results to differ materially from those anticipated. For more information
regarding the factors that could cause actual results and the timing of events to differ materially from our forward-looking statements and the
risks and uncertainties that we face, you should refer to Cautionary Note Regarding Forward-Looking Statements Safe Harbor Provisions
and the Risk Factors detailed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023 that is part of this
Annual Report to Stockholders.
Chief Executive Officer s
LETTER TO OUR
STOCKHOLDERS
For more than 45 years, Radian has
successfully managed mortgage credit
risk through economic cycles and interest
rate fluctuations. We are proud of the
role we play in the housing market in
helping more mortgage-ready borrowers,
including historically underserved
households, obtain access to affordable
mortgage credit, typically for homes
in the $300,000 - $400,000 range. I am
pleased to share that since 2018, Radian
has helped more than one million families
achieve their dream of owning a home.
Our mission of expanding access to
affordable, responsible and sustainable
homeownership, as well as reducing
the friction of homebuying through
technology, drives our team to succeed
each day and 2023 was no exception.
Despite a challenging macroeconomic environment
and mortgage market, in 2023, we wrote $53 billion
of new mortgage insurance and grew our insurance
in-force to an all-time high of $270 billion. Revenues
reached $1.2 billion and, at year-end 2023, our holding
company available liquidity was approximately $1.0
billion. We also increased book value per share by 15%
year over year, generating net income of $603 million,
and delivering a return on equity of approximately 15%.
Reflecting our strong financial performance and
capital position, in January 2024, S&P Global Ratings
upgraded the insurance financial strength rating of
Radian Guaranty to A- from BBB+, and the senior
unsecured debt rating of Radian Group to BBB- from
BB+. We are now rated investment grade by all three
primary ratings agencies and believe we are well
positioned to maintain these ratings.
While the operating environment remains challenging
for the markets we serve, our long-term outlook for
housing remains positive and there are continued
tailwinds that are expected to benefit our mortgage
business going forward.
In terms of home buyer demographics*
More than 60% of customers benefitting from
private mortgage insurance are first-time
home buyers.
Millennials are the largest generation in the U.S.
today and are in their prime years for buying homes.
In fact, it is estimated that 67% of Millennials are
likely to purchase a home in the next two years.
Millennials, in combination with Gen Z, represent
43% of the population, with many either ready to
own a home or will be soon.
This high demand, combined with limited supply,
is contributing to ongoing home price appreciation
and support for home prices, even in high interest
rate environments.
*Source: 2022 NAR Home Buyers and Sellers Generational Trends
In terms of the housing market
Recent industry forecasts for 2024 project
total mortgage originations of approximately
$2 trillion, which would represent an increase
compared to 2023.
This outlook projects a continued decline in
mortgage interest rates during 2024.
These lower mortgage rates coupled with
continued strong home purchase demand are
expected to drive an approximate 15% increase
in purchase originations and an increase in
refinance originations as well.
Increased purchase volume is a benefit for
our mortgage insurance business, given that
mortgage insurance penetration on purchase
transactions is currently 10 to 14 times higher
than for refinances.
Based on the origination forecast, we estimate
that the private mortgage insurance market
will be between $300 and $350 billion in 2024,
compared to a smaller reported market of
approximately $285 billion in 2023.
The impact on our portfolio
We expect persistency, which is the percentage
of insurance in force that remains on our books
after a twelve-month period, to remain strong.
While declining interest rates are projected
to increase refinance volume, as of the end of
2023, 81% of our in-force portfolio consisted
of loans with interest rates of 6% or less and
approximately 69% consisted of loans with
interest rates of 5% or less -- therefore those
borrowers would have little to no refinance
incentive in the near-term.
It is also worth mentioning that while low
inventory and strong market demand continue
to create challenges for first-time home buyers,
these dynamics help to mitigate downside
risk in home values, which is positive for our
insured portfolio.
Home price appreciation experienced over the
past several years has also created significant
embedded homeowner equity in our insured
portfolio, which has helped to drive our favorable
loss experience. We estimate that, based on
a home price index-based approach using
industry averages, as of the end of 2023, 86% of
our insurance in force had 10% or more equity,
and this equity position is even stronger in our
defaulted loan inventory where 82% of our
defaulted loans had at least 20% equity.
Given that our mortgage insurance business
benefits from increases in demand, home prices,
and purchase volume, our overall outlook for the
business remains positive.
A focus on economic value, proprietary data
and analytics
We benefit from extensive data and sophisticated
credit analytics from our more than 45 years in
business. In turn, we leverage our proprietary data
and analytics, powered by AI and machine learning,
to generate economic value and protect our insured
portfolio. Specifically, our proprietary analytics
help us to project loan performance, predict local
economics, deliver granular risk-based pricing
and, as a result, generate alpha throughout various
economic cycles.
We believe our data and analytics that power our
predictive models and pricing in our RADAR Rates
platform, combined with our culture of disciplined
and informed risk management, are the best in the
industry. We continue to leverage this competitive
advantage to build long-term economic value and
to be selective in the business we write, which
protects our insured portfolio.
Positioning our homegenius businesses for an
improved market
Throughout 2023, our team navigated the impact
of higher interest rates and limited inventory, which
constrained mortgage and real estate activity.
For our homegenius businesses, we focused
on deepening and expanding our customer
relationships, managing expenses to improve
operational efficiency, and making strategic
investments in data, analytics and technology. In
particular, our homegenius real estate technology
platform uses proprietary AI and computer visionpowered tools that leverage our data and analytics
capabilities, helping home buyers and sellers make
smarter decisions for finding, evaluating, buying and
owning their homes.
We believe the businesses that are part of
homegenius are well positioned to benefit from a
declining interest rate environment as refinance and
home purchase activity rebounds. We will continue
to manage our cost structure and align our strategy
and investments to the market environment.
A strong track record of managing our
capital resources
We believe the strength of our capital position
significantly enhances our financial flexibility
now and going forward. We have a robust risk
distribution strategy; ample holding company
liquidity with strong expected ordinary dividend
flows from Radian Guaranty to Radian Group; a
high-quality investment portfolio and significant
excess PMIERs capital in Radian Guaranty. We have
consistently demonstrated a strategic focus on
capital optimization over the past several years, and
that focus continued in 2023:
Radian Guaranty paid $100 million of ordinary
dividends to Radian Group each quarter in 2023,
bringing total dividends to $400 million. We estimate
the ordinary dividends paid from Radian Guaranty
to Radian Group in 2024 will increase and be in the
range of $400 to $500 million, inclusive of the $100
million paid in the first quarter of 2024.
Radian Guaranty s excess PMIERs available assets
over minimum required assets increased during
the fourth quarter from $1.7 billion to $2.3 billion,
primarily resulting from the capital relief provided
by the two excess-of-loss reinsurance agreements
executed in October 2023.
As I mentioned earlier, our available holding company
liquidity remained stable at approximately $1 billion
at the end of 2023. We also have a $275 million
undrawn credit facility providing us with significant
financial flexibility.
We returned $279 million of capital to stockholders
in 2023 through share repurchases and dividends.
We increased our regular quarterly dividend in
February 2024 by 9%, and our quarterly dividend
yield continues to be the highest in the mortgage
insurance industry.
In March 2024, we successfully closed a public
offering of $625 million of senior unsecured notes
due 2029 and used a portion of the proceeds to
redeem all of our $525 million of senior unsecured
notes due 2025. In addition, we intend to retire
our $450 million of senior unsecured notes due
2024 at or prior to maturity without incurring any
additional indebtedness. This is another example
of our financial strength and flexibility, which helps
us to meet our financial obligations, more efficiently
utilize our existing capital and reduce our total debt
outstanding. Proforma for these actions, we expect
our holding company debt-to-capital ratio to be
approximately 20% or lower by year end.
In keeping with our strategic focus on operational
efficiency, we reduced our combined consolidated cost
of services and other operating expenses by 17% or $77
million in 2023 as compared to 2022, which was at the
higher end of our targeted range for reductions. While
this effort has involved very difficult decisions related
to our people, I believe we are better positioned as a
stronger and more agile competitor, while continuing to
deliver exceptional service to our customers.
While we are extremely proud of our success
over the years in ensuring the American dream of
homeownership, we know we are in a unique position
to do even more. As a cornerstone partner of the MBA s
CONVERGENCE Philadelphia initiative, we are working
together with the MBA and other local partners to help
address homeownership barriers in the city, including
those for people and communities of color. Specifically
in 2023, the Radian team has actively participated in
the housing supply workstream, conducting outreach
to local stakeholders to understand and help address
the funding needs of affordable housing projects
within the city.
Throughout the year, we also made progress executing
our Corporate Responsibility program, which supports
our commitment to: corporate social responsibility;
environmental health and safety; employee engagement
and inclusion; talent development; and corporate
governance. I am proud of our program as well as the
external recognition of our efforts:
We issued our Corporate Responsibility and DEI
Reports detailing our progress and published our
second Task Force on Climate-Related Disclosures
(TCFD) Report disclosing our greenhouse gas
emissions data for Scopes 1 and 2.
We expanded our Employee Resource Groups
(ERGs) by launching our fifth ERG, Without Limits,
which represents our commitment to neurodiversity
inclusion and understanding.
We were recognized in the 2023 Bloomberg GenderEquality Index; by the Human Rights Campaign
focused on equality in the workplace for the LGBTQ+
community; for the gender balance of our Board
of Directors by 50/50 Women on Boards; by the
Mortgage Bankers Association (MBA) as a recipient
of its 2023 Diversity and Inclusion Residential
Leadership Award and as a 2023 VETS Indexes
Recognized Employer.
Finally, in 2023, we welcomed two new members to
our Board of Directors. In February, we added Fawad
Ahmad, whose experience leading innovative digital,
data and analytical organizations adds an important
perspective on the digital transformation occurring
across the financial and consumer markets. In August,
Anne Leyden joined our Board, bringing executive
level experience in human capital management
that includes succession planning, integration
of strategic acquisitions and the development of
operating models. We were delighted that these two
exceptional leaders were able to add to the expertise
and talent of our Board.
I am pleased with our success in 2023 and we remain
focused in 2024 on executing our strategic plans. Our
results were driven by the hard work of our talented
team who support our customers, manage our capital,
create new technologies to make doing business
with us faster and easier, and ultimately deliver on our
mission of expanding access to affordable, responsible
and sustainable homeownership. I would like to also
thank our customers, investors and business partners
for their continued support and confidence.
Rick Thornberry
Chief Executive Officer
March 29, 2024
4/4/2024 Letter Continued (Full PDF)