A month has gone by since the last earnings report for Radian (RDN). Shares have added about 8.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Radian due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Radian Group Q4 Earnings Top, Revenues Rise Y/Y
Radian Group Inc. reported fourth-quarter 2023 adjusted operating income of 96 cents per share, which beat the Zacks Consensus Estimate by 15.6%. The bottom line decreased 8.5% year over year. The results reflected higher monthly premium policy insurance in force and a decline in single premium policy insurance in force, offset by higher expenses.
Quarter in Details
Operating revenues increased 4.4% year over year to $329 million due to higher services revenues and net investment income. Net premiums earned were $232.6 million, which decreased 0.07% year over year. Net investment income jumped 16.5% year over year to $68.8 million. MI New Insurance Written declined 17.3% year over year to $10.6 billion.
Primary mortgage insurance in force totaled $270 billion as of Dec 31, 2023, up 3% year over year. The year-over-year rise reflects a 6% increase in monthly premium policy insurance in force and a 10% 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 84% as of Dec 31, 2023, up 400 basis points (bps) year over year.
Primary delinquent loans were 22,021 as of Dec 31, 2023, up 0.5% year over year. Total expenses increased 33.5% year over year to $148.8 million on account of higher policy acquisition costs and interest expenses. The expense ratio was 25.5, which improved 180 bps from the year-ago quarter's level.
Segmental Update
The Mortgage segment’s total revenues of $282.9 million remained almost unchanged year over year. Net premiums earned by the segment were $230.3 million, up 0.2% year over year. Claims paid totaled $3 million, which plunged 62.5% year over year. The loss ratio was 2% compared with (18.9) % in the year-ago quarter.
The homegenius segment’s revenues of $15 million decreased 21% year over year. Net premiums earned by the segment were $2.3 million, which decreased 21.5% year over year. Adjusted pre-tax operating loss was $17.8 million, narrower than the prior-year quarter’s loss of $31.5 million.
Full-Year Highlights
Adjusted operating income of $3.88 per share beat the Zacks Consensus Estimate by 3.5%. The bottom line decreased 20.3% year over year. Total revenues came in at $1.2 billion, up 4.2% year over year.
New insurance written of $52.7 billion declined 22.5% from the 2022 level. The loss ratio was negative 4.6 compared with negative 35.5 in 2022, while the expense ratio was 26, which improved from 70 bps in 2022.
Financial Update
As of Dec 31, 2023, Radian Group had a solid cash balance of $18.9 million, which declined 66.2% from the 2022-end level. The debt-to-capital ratio improved 210 bps to 24.4 from the 2022-end level. Book value per share, a measure of net worth, climbed 15.1% year over year to $28.71 as of Dec 31, 2023.
In the fourth quarter, adjusted net operating return on equity was 14.2%, which contracted 340 bps year over year. As of Dec 31, 2023, Radian Guaranty’s Available Assets under PMIERs totaled approximately $5.9 billion, resulting in PMIERs excess Available Assets of $2.3 billion.
Share Repurchase and Dividend Update
Radian bought back 2.4 million shares worth $63 million, including commissions, in the fourth quarter of 2023. The board of directors paid a quarterly dividend of 22 cents per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Radian has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Radian has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Radian belongs to the Zacks Insurance - Multi line industry. Another stock from the same industry, MGIC Investment (MTG), has gained 4.3% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
MGIC reported revenues of $284.72 million in the last reported quarter, representing a year-over-year change of -2.1%. EPS of $0.67 for the same period compares with $0.64 a year ago.
For the current quarter, MGIC is expected to post earnings of $0.60 per share, indicating a change of +11.1% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for MGIC. Also, the stock has a VGM Score of D.
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