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Radian Group (RDN) Q1 Earnings, Revenues Beat Estimates

Radian Group Inc. RDN reported first-quarter 2016 operating income of 37 cents per share, beating the Zacks Consensus Estimate by 23% and improving 5.7% year over year. Higher revenues aided the improvement. The quarter witnessed outstanding credit trends.

Behind the Headlines

Total revenue of Radian came in at $281.7 million, up 2.8% year over year on higher premiums earned and net investment income. Revenues surpassed the Zacks Consensus Estimate of $272 million.

New mortgage insurance written (NIW) was $8.1 billion in the quarter, down 13.8% year over year. Notably, the quarter’s NIW consisted of loans with excellent risk characteristics. Total primary mortgage insurance in force was $175.4 billion as of Mar 31, 2016 against $172.1 million as of Dec 31, 2015.

Persistency, which is the percentage of mortgage insurance in force that remains on the company’s books after a 12-month period, was 79.4% as of Mar 31, 2016 compared with 82.6% as of Mar 31, 2015.

Primary delinquent loans decreased 24% year over year in the quarter.

Total expenses increased 37.5% year over year to $210.6 million, primarily due to higher direct cost services and loss on induced conversion and debt extinguishment.

Segment Update

Net premiums earned in the company’s Mortgage Insurance segment were $221 million, down 1.6% year over year. Claims paid were $127.7 million in the quarter, down 38% year over year. Loss ratio improved 80 basis points to 19.6%. For 2016, claims paid amount is expected within $400–$450 million. The company also got back its investment grade rating in the quarter.

In the Mortgage and Real Estate Services segment – formed after the acquisition of Clayton Holdings in Jun 2014 – total revenue was $32.2 million, up 2.2% year over year. Pretax operating loss was $3.7 million against income of $3.4 million in the year-ago quarter.

Financial Update

Radian Group ended the quarter with a cash balance of $74.8 million, up 4.8% year over year.

Long-term debt was $1.3 billion, up 8.3% year over year.

As of Mar 31, 2016, Radian Guaranty’s risk-to-capital ratio was 12.5:1.

Book value per share, a measure of net worth, was $12.42 as of Mar 31, 2016, up 7.7% year over year.

The company completed its share repurchase program by buying back $100 million worth shares.

Zacks Rank and Other Insurers

Radian Group carries a Zacks Rank #3 (Hold). Among the other multiline insurers that reported their first-quarter results, Assurant Inc. AIZ beat the Zacks Consensus Estimate. However, MGIC Investment Corp MTG and CNO Financial Group, Inc. CNO missed the same.

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RADIAN GRP INC (RDN): Free Stock Analysis Report
ASSURANT INC (AIZ): Free Stock Analysis Report
MGIC INVSTMT CP (MTG): Free Stock Analysis Report
CNO FINL GRP (CNO): Free Stock Analysis Report
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