Radian Group Inc. reported net income for the fourth quarter of 2016 of $61.1 million, or $0.27 per diluted share, which included a net loss of investments and other financial instruments of $38.8 million, the company recently announced. Net income for the full year 2016 was $308.8 million, or $1.37 per diluted share, which included net gains on investments and other financial instruments of $30.8 million.
“Our strong fourth quarter performance contributed to a solid 2016 for Radian,” says Radian CEO S.A. Ibrahim. “In 2016, we successfully grew book value by 11 percent, improved our capital structure and achieved our targeted expense goals, while setting new records for writing our highest volume of high-quality and profitable flow MI business in Radian’s history.”
Book value per share at December 31, 2016, was $13.39, compared to $13.47 at September 30, 2016, an increase of 11 percent from $12.07 at December 31, 2015. Adjusted pretax operating income for the quarter ending December 31, 2016, was $140.2 million, compared to $124.1 million for the same period of 2015. Adjusted diluted net operating income per share for the quarter ending December 31, 2016, was $0.41, compared to $0.34 for the same period of 2015, an increase of 21 percent. Adjusted pretax operating income for the year ending December 31, 2016, was $541.8 million, compared to $510.9 million for the same period of 2015. Adjusted diluted net operating income per share for the year ending December 31, 2016, was $1.56, compared to $1.40 for the same period of 2015, an increase of 11 percent.
Q4 and FY 2016 Highlights
New mortgage insurance written (NIW) grew to $50.5 billion for the full year 2016, compared to $41.4 billion for the prior year. NIW was $13.9 billion for the quarter, compared to $15.7 billion in the third quarter of 2016 and $9.1 billion in the prior-year quarter.
NIW for the full year 2016 represented record volume written on a flow basis for the company, and an increase of 22 percent compared to the NIW written for the full year 2015. For the fourth quarter of 2016, NIW grew 53 percent compared to the fourth quarter of 2015.
Of the $13.9 billion in new business written in the fourth quarter of 2016, 27 percent was written with single premiums. Net single premiums written, after consideration of the 35 percent ceded under the company’s Single Premium Quota Share Reinsurance Agreement, was 17 percent in the fourth quarter of 2016. Refinances accounted for 27 percent of total NIW in the fourth quarter of 2016, compared to 22 percent in the third quarter of 2016, and 17 percent a year ago. NIW continued to consist of loans with excellent risk characteristics.
Total primary mortgage insurance in force as of December 31, 2016 grew to $183.5 billion, compared to $181.2 billion as of September 30, 2016, and $175.6 billion as of December 31, 2015.
The composition of Radian’s mortgage insurance portfolio has significantly improved over the past several years:
- Eighty-eight percent of primary mortgage insurance risk in force at December 31, 2016 consisted of new business written after 2008, including those loans that successfully completed the Home Affordable Refinance Program (HARP).
- Fifty-eight percent of primary mortgage insurance risk in force at December 31, 2016 consisted of loans with FICO scores greater than or equal to 740, compared to 26 percent of loans at December 31, 2007.
- Seven percent of primary mortgage insurance risk in force at December 31, 2016 consisted of loans with a loan-to-value (LTV) greater than 95 percent, compared to 24 percent of loans at December 31, 2007.
Persistency, which is the percentage of mortgage insurance in force that remains on the company’s books after a twelve-month period, was 76.7 percent as of December 31, 2016, compared to 78.4 percent as of September 30, 2016, and 78.8 percent as of December 31, 2015. Annualized persistency for the three-months ending December 31, 2016 was 76.8 percent, compared to 75.3 percent for the three-months ending September 30, 2016, and 81.8 percent for the three-months ending December 31, 2015.
Total net premiums earned were $233.6 million for the quarter ending December 31, 2016, compared to $238.1 million for the quarter ended September 30, 2016, and $226.4 million for the quarter ending December 31, 2015.
The mortgage insurance provision for losses was $54.7 million in the fourth quarter of 2016, compared to $56.2 million in the third quarter of 2016, and $56.8 million in the fourth quarter of 2015. The loss ratio in the fourth quarter of 2016 was 23.4 percent, compared to 23.6 percent in the third quarter of 2016 and 25.1 percent in the fourth quarter of 2015. Mortgage insurance loss reserves were $760.3 million as of December 31, 2016, compared to $821.9 million as of September 30, 2016, and $976.4 million as of December 31, 2015. Primary reserve per primary default (excluding IBNR and other reserves) was $22,503 as of December 31, 2016. This compares to primary reserve per primary default of $24,049 as of September 30, 2016, and $24,019 as of December 31, 2015.
The total number of primary delinquent loans decreased by 1 percent in the fourth quarter from the third quarter of 2016, and by 18 percent from the fourth quarter of 2015. The primary mortgage insurance delinquency rate decreased to 3.2 percent in the fourth quarter of 2016, compared to 3.3 percent in the third quarter of 2016, and 4.0 percent in the fourth quarter of 2015.
Total mortgage insurance net claims paid were $116.5 million in the fourth quarter, compared to $82.7 million in the third quarter, and $176.5 million in the fourth quarter of 2015. For the full-year 2016, total net claims paid were $417.6 million, compared to $764.7 million for the full-year 2015.
Claims paid in the fourth quarter of 2016 were elevated due to increased efficiencies in the company’s claims processing, which resulted in an acceleration of paid claims and contributed to a 38 percent decline in the pending claim inventory from the third quarter of 2016.
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