Radian Group (RDN) Q2 Earnings Top, Revenues Miss Estimates
Radian Group Inc. RDN reported second-quarter 2023 adjusted operating income of 91 cents per share, which beat the Zacks Consensus Estimate by 19.7%. However, the bottom line decreased 33.3% year over year.
Operating revenues decreased 7.5% year over year to $279 million due to lower net premiums earned and services revenues. The metric missed the Zacks Consensus Estimate by 3.6%.
The results reflected higher monthly premium policy insurance in force and a decline in single premium policy insurance in force, partially offset by higher expenses.
Radian Group Inc. Price, Consensus and EPS Surprise
Radian Group Inc. price-consensus-eps-surprise-chart | Radian Group Inc. Quote
Quarter in Details
Net premiums earned were $213.4 million, down 15.9% year over year. Net investment income increased 36.7% year over year to $64.2 million.
MI New Insurance Written decreased 10.6% year over year to $16.9 billion.
Primary mortgage insurance in force in force increased 5% year over year to $266.9 billion, reflecting 8% increase in monthly premium policy insurance in force and a 12% decline in single premium policy insurance in force.
Persistency — the percentage of mortgage insurance in force that remains in the company’s books after a 12-month period — was 83% as of Jun 30, 2023, up 1100 basis points (bps) year over year.
Primary delinquent loans were 19,880 as of Jun 30, 2023, down 9.1% year over year.
Total expenses increased nearly fourfold year over year to $107.7 million. The expense ratio was 29.6, down 340 bps from the year-ago quarter.
Segmental Update
The Mortgage segment reported a year-over-year decrease of 10% in total revenues to $260.8 million. Net premiums earned by the segment were $210.7 million, down 14.7% year over year. Claims paid were $3 million, flat year over year. The loss ratio was negative 10.3 compared with negative 46.2 in the year-ago quarter.
The homegenius segment’s revenues of $14.8 million decreased 54.2% year over year. Net premiums earned by the segment were $2.7 million, which decreased 61.3% year over year. Adjusted pre-tax operating loss was $24.4 million, wider than the prior-year quarter loss of $17.7 million.
Financial Update
As of Jun 30, 2023, Radian Group had a solid cash balance of $1.3 billion. The debt-to-capital ratio improved 120 bps to 25.3 from the 2022-end level. Book value per share, a measure of net worth, climbed 12% year over year to $26.51 as of Jun 30, 2023.
In the second quarter, adjusted net operating return on equity was 14.1%, which deteriorated 950 bps year over year.
The risk-to-capital ratio of Radian Guaranty as of the second-quarter end was 10.8:1, versus 10.7:1 from the 2022-end level. Excess available resources to support PMIERs of $5.7 billion were 41% higher than Radian Guaranty's minimum required assets.
Share Repurchase and Dividend Update
Radian bought back 0.2 million shares worth $5 million, including commissions, in the second quarter. The remaining repurchase capacity was $280 million as of Jun 30, 2023. The board of directors paid a quarterly dividend of 22.5 cents per share.
Zacks Rank
Radian currently has 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
The Travelers Companies TRV reported second-quarter 2023 core income of 6 cents per share, which missed the Zacks Consensus Estimate of $2.27. The bottom line decreased 97.7% year over year, primarily attributable to higher-than-expected catastrophe loss.
Travelers’ total revenues increased 9.8% from the year-ago quarter to $10.1 billion, primarily driven by higher premiums. The top-line figure was almost in line with the Zacks Consensus Estimate.
Net written premiums increased 14% year over year to a record $10.3 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $9.1 billion.
Travelers witnessed an underwriting gain of $781 million, up 38% year over year, driven by record net earned premiums of $9.2 billion and a consolidated underlying combined ratio, which improved 170 basis points. The combined ratio deteriorated 820 basis points year over year to 106.5 due to higher catastrophe losses and lower net favorable prior-year reserve development, partially offset by a lower underlying combined ratio.
The Progressive Corporation’s PGR second-quarter 2023 earnings per share of 50 cents missed the Zacks Consensus Estimate of 88 cents. The bottom line declined 47.4% year over year.
Net premiums earned grew 19% to $14.5 billion and beat our estimate of $12.9 billion as well as the Zacks Consensus Estimate of $14.3 billion. The combined ratio deteriorated 480 bps from the prior-year quarter’s level to 104.
Policies in force were solid in the Personal Auto segment, increasing 17% from the year-ago month’s figure to 19.7 million. Special Lines improved 7% to 5.8 million.
W.R. Berkley Corporation’s WRB second-quarter 2023 operating income of $1.14 per share beat the Zacks Consensus Estimate by 6.5%. The bottom line increased 1.8% year over year.
Operating revenues came in at $2.9 billion, down 57.4% year over year, on the back of higher net premiums earned as well as higher net investment income. The top line missed the consensus estimate by 1.2%.
W.R. Berkley’s net premiums written were a record $2.8 billion, up 8.7% year over year, as market conditions remained favorable for most lines of business. Our estimate for the same was $2.7 billion.
Catastrophe losses totaled $53.5 million in the quarter. The consolidated combined ratio (a measure of underwriting profitability) deteriorated 100 basis points to 89.6, in line with the Zacks Consensus Estimate. Our estimate for the combined ratio was 91.3.
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