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RADIAN GROUP INC – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations
The disclosures in this quarterly report are complementary to those made in our 2021 Form 10-K and should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this report, as well as our audited financial statements, notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our 2021 Form 10-K. The following analysis of our financial condition and results of operations for the three and six months endedJune 30, 2022 , provides information that evaluates our financial condition as ofJune 30, 2022 , compared withDecember 31, 2021 , and our results of operations for the three and six months endedJune 30, 2022 , compared to the same periods last year. Certain terms and acronyms used throughout this report are defined in the Glossary of Abbreviations and Acronyms included as part of this report. In addition, investors should review the "Cautionary Note Regarding Forward-Looking Statements-Safe Harbor Provisions" herein, and "Item 1A. Risk Factors" in our 2021 Form 10-K for a discussion of those risks and uncertainties that have the potential to adversely affect our business, financial condition, results of operations, cash flows or prospects. Our results of operations for interim periods are not necessarily indicative of results to be expected for the full year or for any other period. See "Overview" and Note 1 of Notes to Unaudited Condensed Consolidated Financial Statements for additional information.
Index to Item 2
Item Page Overview 39 Key Factors Affecting Our Results 41 Mortgage Insurance Portfolio 42 Results of Operations-Consolidated 45 Results of Operations-Mortgage 50 Results of Operations-homegenius 55 Results of Operations-All Other 58 Liquidity and Capital Resources 58 Critical Accounting Estimates 63
Overview
We are a diversified mortgage and real estate business with two reportable
business segments-Mortgage and homegenius.
Our Mortgage segment aggregates, manages and distributesU.S. mortgage credit risk on behalf of mortgage lending institutions and mortgage credit investors, principally through private mortgage insurance on residential first-lien mortgage loans, and also provides contract underwriting and other credit risk management solutions to our customers. Our homegenius segment offers an array of title, real estate and technology products and services to consumers, mortgage lenders, mortgage and real estate investors, GSEs, real estate brokers and agents.
Current Operating Environment
As a seller of mortgage credit protection and other mortgage and credit risk management solutions and real estate products and services, our business results are subject to macroeconomic conditions and other events that impact the housing, housing finance and related real estate markets, the credit performance of our underlying insured assets and our future business opportunities, as well as seasonal fluctuations that specifically affect the mortgage origination environment. The performance of our Mortgage business is particularly influenced by macroeconomic conditions and specific events that impact the housing finance and real estate markets, including housing prices, inflationary pressures, interest rate changes, unemployment levels, the availability of credit, national and regional economic conditions and other events that impact mortgage originations and the credit performance of our mortgage insurance portfolio, most of which are beyond our control. TheU.S. economy is currently experiencing a high rate of inflation and slower economic growth. The inflationary trends in the current economic environment have been exacerbated by strong consumer demand and pervasive supply chain 39
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disruptions, including as a result of the effects of the COVID-19 pandemic and
related government responses, as well as the Russia -Ukraine conflict. Recent
actions taken by the U.S. Federal Reserve to increase interest rates in response
to these inflationary pressures led to a sharp and significant increase in
mortgage interest rates during the first half of 2022. The U.S. Federal Reserve
raised rates further in July 2022 and has signaled that it expects to continue
to increase rates throughout the year. While we expect these interest rate
increases to continue to negatively impact certain aspects of our results,
including through lower NIW, lower homegenius revenues and lower investment fair
values, we also expect to benefit from the rate increases due to higher
Persistency Rates that will favorably impact our IIF, as well as through the
recognition of higher net investment income, as discussed below.
We wrote NIW of $37.6 billion in the first half of 2022, a decrease of 10.1%
compared to our NIW in the first half of 2021. Despite current inflationary
pressures and rising interest rates, which among other things, are slowing the
rate of home appreciation in the U.S. , we continue to believe that the long-term
housing market fundamentals and outlook remain positive, including demographics
supporting growth in the population of first-time homebuyers and a constrained
supply of homes available for sale. While the recent increases in mortgage
interest rates have reduced refinance demand, they have also resulted in a
decrease in policy cancellations, which has increased our Persistency Rate, and
in turn contributed to growth in our IIF. See "Mortgage Insurance Portfolio" for
additional details on our NIW and IIF.
The same inflationary pressures and rising interest rate environment that are
impacting mortgage refinance demand and our NIW are also impacting our
homegenius business, including a decrease in our title revenues in the second
quarter of 2022 as compared to the first quarter of 2022, due to the rapid
decline in industrywide refinance volumes. The current macroeconomic trends, and
the corresponding softening in demand for home sales and mortgage refinancings,
are expected to also impact the market demand for our proprietary digital real
estate products and services. In addition, the market readiness of these digital
products and services has been negatively impacted by longer than anticipated
launch timelines.
The recent sharp increases in interest rates also materially affected the fair
value of our investment portfolio in the first half of 2022, resulting in
significant unrealized losses on investments. Given our intent and ability as of
June 30, 2022 , to hold these securities until recovery of their amortized cost
basis, we do not expect to realize a loss on any of our investments in an
unrealized loss position. The recent decrease in the fair value of our
investments due to higher market interest rates negatively affected our net
income and stockholders' equity during the three and six months ended June 30,
2022 . Conversely, this higher interest rate environment resulted in the
recognition of higher net investment income in the second quarter of 2022, which
is expected to continue in future periods. See Note 6 of Notes to Unaudited
Condensed Consolidated Financial Statements for additional information about our
investments.
The onset of the COVID-19 pandemic resulted in a significant increase in
unemployment which had a negative impact on the economy and, as a result, we
experienced a material increase in new defaults in 2020, substantially all of
which related to defaults of loans subject to mortgage forbearance programs
implemented in response to the COVID-19 pandemic. Beginning in the second
quarter of 2020, the increase in the number of new mortgage defaults resulting
from the COVID-19 pandemic had a negative effect on our results of operations
and our reserve for losses. However, subsequent trends in Cures have been more
favorable than original expectations, resulting in favorable loss reserve
development in 2021 and in the three and six months ended June 30, 2022 . See
Note 11 of Notes to Unaudited Condensed Consolidated Financial Statements for
additional information on our reserve for losses.
As noted above, following the start of the pandemic, we experienced a material
increase in new defaults and our primary default rate increased sharply to 6.5%
at June 30, 2020 . Since then, favorable trends in the number of new defaults and
Cures have led to a decline in our default inventory and default rate, resulting
in a primary default rate of 2.2% at June 30, 2022 .
The number, timing and duration of new defaults and, in turn, the number of
defaults that ultimately result in claims will depend on a variety of factors,
including the number and timing of Cures and claims paid and the net impact on
IIF from our Persistency Rate and future NIW. See "Item 1A. Risk Factors" in our
2021 Form 10-K for additional discussion of these factors and other risks and
uncertainties.
Despite risks and uncertainties, we believe that the steps we have taken in
recent years, including by improving our capital and liquidity positions,
enhancing our financial flexibility, implementing greater risk-based granularity
into our pricing methodologies and increasing our use of risk distribution
strategies to lower the risk profile and financial volatility of our mortgage
insurance portfolio, has helped position the Company to better withstand the
negative effects from macroeconomic stresses discussed above, including those
resulting from the high rate of inflation and rising interest rates, the
Russia -Ukraine conflict and the other risks described in "Item 1A. Risk Factors"
in our 2021 Form 10-K.
In particular, we believe that the range of risk distribution transactions and
strategies that Radian and other private mortgage insurance participants have
engaged in have helped increase the financial strength and flexibility of the
private mortgage insurance industry by mitigating credit risk and financial
volatility through varying economic cycles. As of June 30, 2022 , 62% of our
primary RIF is subject to a form of risk distribution and our estimated
reinsurance recoverables related to our mortgage insurance portfolio were $39.0
million . After consideration of the 2022 QSR Agreement, 76% of our primary RIF
as of June 30, 2022 , is subject to a form of risk distribution. Our use of risk
distribution structures has reduced our required capital and enhanced our
projected return on capital, and we expect these structures to provide a level
of credit protection in periods of economic stress.
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Legislative and Regulatory Developments
We are subject to comprehensive regulation by both federal and state regulatory authorities. For a description of significant state and federal regulations and other requirements of the GSEs that are applicable to our businesses, as well as legislative and regulatory developments affecting the housing finance industry, see "Item 1. Business-Regulation" in our 2021 Form 10-K. Except as discussed below, there were no significant regulatory developments impacting our businesses from those discussed in our 2021 Form 10-K. InJune 2022 , FHFA announced the release of the GSEs' Equitable Housing Finance Plans, providing a framework for planned initiatives to address access to homeownership for minority and underserved communities. The plans include a particular focus on Special Purpose Credit Programs ("SPCPs") and note that these programs could consider modifications to mortgage insurance requirements. While both Fannie Mae and Freddie Mac's plans note this potential change as part of these programs, details on any future changes remain uncertain. Both GSEs expect to launch SPCPs by the end of 2022. The plans also include expected activity to address credit and alternative data in underwriting, valuations and appraisals, title insurance, among others. The GSEs are expected to update these plans annually. In order to be eligible to insure loans purchased by the GSEs, mortgage insurers such as Radian Guaranty must meet the GSEs' eligibility requirements, or PMIERs. OnJuly 29, 2022 , the GSEs issued guidance supplementing and modifying certain operational provisions of the PMIERs effective as ofJune 30, 2022 . The new guidance applies to all private mortgage insurers and among other items, specifically amends certain provisions of the PMIERs relating to corporate governance, the foreclosure bidding process and certain calculations included in each mortgage insurer's operational scorecard. Radian Guaranty expects to be able to comply with the new requirements. The new guidance does not impact or change the PMIERs Financial Requirements.
Recent Company Developments
InJuly 2022 , we announced the launch ofRadian Mortgage Capital , a mortgage conduit formed to provide residential mortgage lenders with an additional secondary-market option to sell eligible loans to us and to provide mortgage investors with another known sponsor.Radian Mortgage Capital plans to leverage our lender relationships to aggregate residential mortgage loans, whichRadian Mortgage Capital expects to then distribute into the capital markets through private label securitizations or sell directly to mortgage investors, with the option to retain and manage structured components of the underlying credit risk where we see value. Consistent with our stated strategy,Radian Mortgage Capital expands our capabilities to participate in the mortgage market to aggregate, manage and distribute residential mortgage credit risk. Consistent with our use of risk distribution strategies to effectively manage capital and proactively mitigate risk, Radian Guaranty agreed to the principal terms of the 2022 QSR Agreement inJuly 2022 with a panel of third-party reinsurance providers. Under the 2022 QSR Agreement, which remains subject to final documentation, startingJuly 1, 2022 , we expect to cede 20% of policies issued betweenJanuary 1, 2022 , andJune 30, 2023 , subject to certain conditions. See Note 8 of Notes to Unaudited Condensed Consolidated Financial Statements in this report for more information about the 2022 QSR Agreement and our other reinsurance transactions.
Key Factors Affecting Our Results
The key factors affecting our results are discussed in our 2021 Form 10-K. There
have been no material changes to these key factors.
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Mortgage Insurance Portfolio
IIF by origination vintage (1)
[[Image Removed: rdn-20220630_g2.jpg]]
Insurance in Force as of:
Vintage written in: June 30, December 31, 2021 June 30,
($ in billions) 2022 2021
¢ 2022 $36.9 14.5 % $- - % $- - %
¢ 2021 82.0 32.3 87.4 35.5 41.0 17.3
¢ 2020 65.5 25.7 74.3 30.2 86.9 36.6
¢ 2019 20.0 7.8 24.0 9.8 32.3 13.6
¢ 2018 10.1 4.0 12.4 5.0 16.7 7.1
¢ 2017 9.3 3.7 11.5 4.7 15.2 6.4
¢ 2009 - 2016 20.3 8.0 25.0 10.2 32.1 13.5
¢ 2008 & Prior (2) 10.1 4.0 11.4 4.6 13.1 5.5
Total $254.2 100.0 % $246.0 100.0 % $237.3 100.0 %
(1)Policy years represent the original policy years and have not been adjusted
to reflect subsequent refinancing activity under HARP.
(2)Includes loans that were subsequently refinanced under HARP.
New Insurance Written
We wrote$18.9 billion and$37.6 billion of primary new mortgage insurance in the three and six months endedJune 30, 2022 , respectively, compared to$21.7 billion and$41.8 billion of NIW in the three and six months endedJune 30, 2021 , respectively. As shown in the chart above, IIF increased to$254.2 billion atJune 30, 2022 , from$246.0 billion atDecember 31, 2021 , driven by a higher Persistency Rate and our NIW for the first six months of 2022. Our NIW decreased by 12.6% and 10.1% for the three and six months endedJune 30, 2022 , respectively, compared to the same periods in 2021 due to reduced refinance originations and lower utilization of mortgage insurance, partially offset by an increase in our market share and a slight increase in purchase mortgage originations. According to industry estimates, total mortgage origination volume was lower for the three and six months endedJune 30, 2022 , as compared to the comparable periods in 2021 due to a decline in refinance activity. Although it is difficult to project future volumes, recent market projections for 2022 estimate total mortgage originations of approximately$2.6 trillion , which would represent a decline in the total annual mortgage origination market of approximately 42% as compared to 2021, with a private mortgage insurance market of$400 to$450 billion . This outlook anticipates a significant decrease in refinance originations in 2022 resulting from expected continued increases in interest rates. While expectations for refinance volume vary, there is general consensus that the home purchase mortgage market in 2022 will be comparable in size to 2021 driven by strong home sales and increased loan balances due to home price appreciation, which is a positive for mortgage insurers given the higher likelihood that purchase loans will utilize private mortgage insurance as compared to refinance loans. Typically, as refinance volume declines, we would expect the Persistency Rate for our portfolio to increase, benefiting the size of our IIF portfolio. See "Item 1A. Risk Factors" in our 2021 Form 10-K for more information. The following table provides selected information as of and for the periods indicated related to our mortgage insurance NIW. For direct Single Premium Policies, NIW includes policies written on an individual basis (as each loan is originated) and on an aggregated basis (in which each individual loan in a group of loans is insured in a single transaction, typically after the loans have been originated). 42
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NIW
Three Months Ended Six Months Ended
June 30, June 30,
($ in millions) 2022 2021 2022 2021
NIW $ 18,935 $ 21,662 $ 37,551 $ 41,761
Primary risk written $ 4,848 $ 5,236 $ 9,642 $ 9,747
Average coverage percentage 25.6 % 24.2 % 25.7 % 23.3 %
NIW by loan purpose
Purchases 97.1 % 77.1 % 94.3 % 68.5 %
Refinances 2.9 % 22.9 % 5.7 % 31.5 %
Total borrower-paid NIW 99.2 % 99.1 % 99.2 % 99.2 %
NIW by premium type
Direct Monthly and Other Recurring Premiums 95.4 % 93.1 % 94.9 % 91.7 %
Direct single premiums (1) 4.6 % 6.9 % 5.1 % 8.3 %
NIW by FICO Score (2)
>=740 59.6 % 61.4 % 58.3 % 62.9 %
680-739 32.3 % 33.1 % 34.0 % 32.3 %
620-679 8.1 % 5.5 % 7.7 % 4.8 %
NIW by LTV
95.01% and above 17.7 % 10.9 % 16.2 % 9.5 %
90.01% to 95.00% 39.9 % 40.4 % 40.9 % 36.2 %
85.01% to 90.00% 26.7 % 27.6 % 28.1 % 29.4 %
85.00% and below 15.7 % 21.1 % 14.8 % 24.9 %
(1)Borrower-paid Single Premium Policies were 4.4% and 4.9% of NIW for the three
and six months ended June 30, 2022 , respectively, compared to 6.6% and 8.0% for
the same periods in 2021, respectively.
(2)For loans with multiple borrowers, the percentage of NIW by FICO score
represents the lowest of the borrowers' FICO scores.
Insurance and Risk in Force
Our IIF is the primary driver of the future premiums that we expect to earn over time. IIF atJune 30, 2022 , increased 7.1% as compared to the same period last year, reflecting a 12.6% increase in Monthly Premium Policies in force partially offset by a 15.1% decline in Single Premium Policies in force. Single Premium Policy cancellations were the primary driver of the decrease in unearned premiums on our condensed consolidated balance sheet atJune 30, 2022 , as compared toDecember 31, 2021 . Historically, there is a close correlation between interest rates and Persistency Rates. Higher interest rate environments generally decrease refinancings, which decrease the cancellation rate of our insurance and positively affect our Persistency Rates. As shown in the table below, our 12-month Persistency Rate atJune 30, 2022 , increased as compared to the same period in 2021. The increase in our Persistency Rate atJune 30, 2022 , was primarily attributable to decreased refinance activity due to increases in mortgage interest rates, as compared to the same period in the prior year. As ofJune 30, 2022 , 5.7% of our IIF had a mortgage note interest rate greater than 5.0%. Excluding the 2022 vintage, only 3.4% of our IIF had a mortgage note interest rate greater than 5.0%. Given the recent increase in market mortgage interest rates, which now exceed that level based on reported industry averages, we would expect that the increase in interest rates and related decline in refinance volume would continue to have a positive impact on our Persistency Rates. Historical loan performance data indicates that credit scores and underwriting quality are key drivers of credit performance. As ofJune 30, 2022 , our portfolio of business written subsequent to 2008, including refinancings under HARP, represented approximately 97.4% of our total primary RIF. Loan originations after 2008 have consisted primarily of high credit quality loans with significantly better credit performance than loans originated during 2008 and prior periods. However, the 43
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impact to our future losses remains uncertain due to risks associated with the
macroeconomic environment. For additional information, see our 2021 Form 10-K,
"Item 1A. Risk Factors-The credit performance of our mortgage insurance
portfolio is impacted by macroeconomic conditions and specific events that
affect the ability of borrowers to pay their mortgages."
Throughout this report, unless otherwise noted, RIF is presented on a gross
basis and includes the amount ceded under reinsurance. RIF and IIF for direct
Single Premium Policies include policies written on an individual basis (as each
loan is originated) and on an aggregated basis (in which each individual loan in
a group of loans is insured in a single transaction, typically after the loans
have been originated).
The following table provides selected information as of and for the periods
indicated related to mortgage insurance IIF and RIF.
IIF and RIF ($ in millions) June 30, 2022 December 31, 2021 June 30, 2021 Primary IIF$ 254,226 $ 245,972 $ 237,302 Primary RIF$ 63,770 $ 60,913$ 58,040 Average coverage percentage 25.1 % 24.8 % 24.5 % Persistency Rate (12 months ended) 71.7 % 64.3 % 57.7 % Persistency Rate (quarterly, annualized) (1) 79.8 % 71.7 % 66.3 % Total borrower-paid RIF 92.1 % 90.6 % 88.4 % Primary RIF by premium type Direct Monthly and Other Recurring Premiums 85.6 % 83.9 % 81.2 % Direct single premiums (2) 14.4 % 16.1 % 18.8 % Primary RIF by FICO score (3) >=740 57.2 % 56.9 % 57.5 % 680-739 34.9 % 35.0 % 34.8 % 620-679 7.5 % 7.6 % 7.2 % <=619 0.4 % 0.5 % 0.5 % Primary RIF by LTV 95.01% and above 16.1 % 15.1 % 14.5 % 90.01% to 95.00% 48.7 % 48.9 % 48.5 % 85.01% to 90.00% 27.4 % 27.7 % 28.1 % 85.00% and below 7.8 % 8.3 % 8.9 % (1)The Persistency Rate on a quarterly, annualized basis is calculated based on loan-level detail for the quarter ending as of the date shown. It may be impacted by seasonality or other factors, including the level of refinance activity during the applicable periods, and may not be indicative of full-year trends. (2)Borrower-paid Single Premium Policies were 8.1%, 8.5% and 9.2% of primary RIF for the periods indicated, respectively. (3)For loans with multiple borrowers, the percentage of primary RIF by FICO score represents the lowest of the borrowers' FICO scores.
Risk Distribution
We use third-party reinsurance in our mortgage insurance business as part of our
risk distribution strategy, including to manage our capital position and risk
profile. When we enter into a reinsurance agreement, the reinsurer receives a
premium and, in exchange, insures an agreed-upon portion of incurred losses.
While these arrangements have the impact of reducing our earned premiums, they
also reduce our required capital and are expected to increase our return on
required capital for the related policies.
The impact of these programs on our financial results will vary depending on the
level of ceded RIF, as well as the levels of prepayments and incurred losses on
the reinsured portfolios, among other factors. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations-Key
Factors Affecting Our Results-Mortgage-Risk
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Distribution" in our 2021 Form 10-K and Note 8 of Notes to Unaudited Condensed
Consolidated Financial Statements in this report for more information about our
reinsurance transactions.
The table below provides information about the amounts by which Radian
Guaranty's reinsurance programs reduced its Minimum Required Assets as of the
dates indicated.
PMIERs benefit from risk distribution
($ in thousands) June 30, 2022 December 31, 2021 June 30, 2021 PMIERs impact - reduction in Minimum Required Assets Excess-of-Loss Program$ 785,705 $ 995,171$ 907,112 Single Premium QSR Program 268,847 314,183 355,115 QSR Program 10,226 12,541 16,545 Total PMIERs impact$ 1,064,778 $ 1,321,895 $ 1,278,772 Percentage of gross Minimum Required Assets 22.1 % 28.4 % 28.7 %
Results of Operations-Consolidated
Three and Six Months Ended
Radian Group serves as the holding company for our operating subsidiaries and does not have any operations of its own. Our consolidated operating results for the three and six months endedJune 30, 2022 , andJune 30, 2021 , primarily reflect the financial results and performance of our two reportable business segments-Mortgage and homegenius. See "Results of Operations-Mortgage" and "Results of Operations-homegenius" for the operating results of these business segments for the three and six months endedJune 30, 2022 , compared to the same period in 2021. In addition to the results of our operating segments, pretax income (loss) is also affected by those factors described in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Key Factors Affecting Our Results" in our 2021 Form 10-K. 45
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The following table summarizes our consolidated results of operations for the
three and six months ended
Summary results of operations - Consolidated
Change Change
Three Months Ended Favorable Six Months Ended Favorable
June 30, (Unfavorable) June 30, (Unfavorable)
($ in thousands, except
per-share amounts) 2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021
Revenues
Net premiums earned $ 253,892 $ 254,756 $ (864) $ 508,082 $ 526,628 $ (18,546)
Services revenue 27,281 29,464 (2,183) 56,629 52,359 4,270
Net investment income 46,957 36,291 10,666 85,153 74,542 10,611
Net gains (losses) on
investments and other
financial instruments (41,869) 15,661 (57,530) (71,326) 10,480 (81,806)
Other income 572 822 (250) 1,275 1,798 (523)
Total revenues 286,833 336,994 (50,161) 579,813 665,807 (85,994)
Expenses
Provision for losses (113,922) 3,648 117,570 (197,676) 49,791 247,467
Policy acquisition costs 5,940 4,838 (1,102) 12,545 13,834 1,289
Cost of services 22,760 24,615 1,855 47,513 44,861
(2,652)
Other operating expenses 90,495 86,469 (4,026) 180,036 156,731 (23,305) Interest expense 20,831 21,065 234 41,677 42,180 503 Amortization of other acquired intangible assets 849 863 14 1,698 1,725 27 Total expenses 26,953 141,498 114,545 85,793 309,122 223,329 Pretax income 259,880 195,496 64,384 494,020 356,685 137,335 Income tax provision 58,687 40,290 (18,397) 111,696 75,871 (35,825) Net income$ 201,193 $ 155,206 $ 45,987 $ 382,324 $ 280,814 $ 101,510 Diluted net income per share$ 1.15 $ 0.80 $ 0.35$ 2.16 $ 1.44 $ 0.72 Return on equity 19.9 % 14.5 % 5.4 % 18.7 % 14.1 % 4.6 % Non-GAAP Financial Measures (1) Adjusted pretax operating income$ 302,033 $ 184,719 $ 117,314 $ 566,981 $ 352,035 $ 214,946 Adjusted diluted net operating income per share$ 1.36 $ 0.75 $ 0.61$ 2.53 $ 1.43 $ 1.10 Adjusted net operating return on equity 23.6 % 13.6 % 10.0 % 21.9 % 14.0 % 7.9 %
(1)See "-Use of Non-GAAP Financial Measures" below.
Revenues
Net Premiums Earned. The decrease in net premiums earned for the six months endedJune 30, 2022 , as compared to the same period in 2021, is primarily driven by a decrease in net premiums earned in our Mortgage segment. See "Results of Operations-Mortgage-Three and Six Months EndedJune 30, 2022 , Compared to Three and Six Months EndedJune 30 , 2021-Revenues-Net Premiums Earned," for more information. 46
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Net Investment Income. The increase in net investment income for the three and
six months ended June 30, 2022 , as compared to the same periods in 2021, is
primarily attributable to higher market interest rates. See "Overview-Current
Operating Environment," and "Results of Operations-Mortgage-Three and Six Months
Ended June 30, 2022 , Compared to Three and Six Months Ended June 30 ,
2021-Revenues-Net Investment Income," for more information.
Net Gains (Losses) on Investments and Other Financial Instruments. The increase
in net losses on investments and other financial instruments for the three and
six months ended June 30, 2022 , as compared to the same periods in 2021, is
primarily due to an increase in net unrealized losses on our equity and trading
securities and, to a lesser extent, an increase in losses on other financial
instruments. The primary driver of the increase in losses on our equity and
trading securities for the three and six months ended June 30, 2022 , was the
impact of rising interest rates as well as other market and macroeconomic
conditions, as further discussed in "Overview-Current Operating Environment."
See Note 6 of Notes to Unaudited Condensed Consolidated Financial Statements for
additional information about net gains (losses) on investments and other
financial instruments.
Expenses
Provision for Losses. The decrease in provision for losses for the three and six months endedJune 30, 2022 , as compared to the same periods in 2021, is primarily driven by favorable development on prior period defaults, which impacted our mortgage insurance reserves. See "Results of Operations-Mortgage-Three and Six Months EndedJune 30, 2022 , Compared to Three and Six Months EndedJune 30 , 2021-Expenses-Provision for Losses," for more information. Other Operating Expenses. The increase in other operating expenses for the three months and six months endedJune 30, 2022 , as compared to the same periods in 2021 is primarily due to an increase in compensation expense and a decrease in ceding commissions. See "Results of Operations-Mortgage-Three and Six Months EndedJune 30, 2022 , Compared to Three and Six Months EndedJune 30 , 2021-Expenses-Other Operating Expenses," and "Results of Operations-homegenius-Three and Six Months EndedJune 30, 2022 , Compared to Three and Six Months EndedJune 30 , 2021-Expenses-Other Operating Expenses," for more information on other operating expenses.
Income Tax Provision
Variations in our effective tax rates, combined with differences in pretax income, were the drivers of the changes in our income tax provision between periods. Our effective tax rate for each of the three and six months endedJune 30, 2022 , was 22.6%, as compared to 20.6% and 21.3% for the same periods in 2021, respectively. Our effective tax rate for the three and six months endedJune 30, 2022 , was higher than the statutory rate of 21% primarily due to the impact of state income taxes and certain permanent book-to-tax adjustments.
Use of Non-GAAP Financial Measures
In addition to the traditional GAAP financial measures, we have presented
"adjusted pretax operating income (loss)," "adjusted diluted net operating
income (loss) per share" and "adjusted net operating return on equity," which
are non-GAAP financial measures for the consolidated company, among our key
performance indicators to evaluate our fundamental financial performance. These
non-GAAP financial measures align with the way our business performance is
evaluated by both management and by our board of directors. These measures have
been established in order to increase transparency for the purposes of
evaluating our operating trends and enabling more meaningful comparisons with
our peers. Although on a consolidated basis "adjusted pretax operating income
(loss)," "adjusted diluted net operating income (loss) per share" and "adjusted
net operating return on equity" are non-GAAP financial measures, for the reasons
discussed above we believe these measures aid in understanding the underlying
performance of our operations.
Total adjusted pretax operating income (loss), adjusted diluted net operating
income (loss) per share and adjusted net operating return on equity are not
measures of overall profitability, and therefore should not be considered in
isolation or viewed as substitutes for GAAP pretax income (loss), diluted net
income (loss) per share or return on equity. Our definitions of adjusted pretax
operating income (loss), adjusted diluted net operating income (loss) per share
and adjusted net operating return on equity, as discussed and reconciled below
to the most comparable respective GAAP measures, may not be comparable to
similarly-named measures reported by other companies.
Our senior management, including our Chief Executive Officer (Radian's chief
operating decision maker), uses adjusted pretax operating income (loss) as our
primary measure to evaluate the fundamental financial performance of the
Company's business segments and to allocate resources to the segments. See Note
4 of Notes to Consolidated Financial Statements and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations-Results
of Operations-Consolidated-Use of Non-GAAP Financial Measures," each in our 2021
Form 10-K for detailed information regarding items excluded from adjusted pretax
operating income (loss) and the reasons for their treatment.
Adjusted pretax operating income (loss) is defined as GAAP consolidated pretax
income (loss) excluding the effects of: (i) net gains (losses) on investments
and other financial instruments, except for certain investments attributable to
our reportable segments; (ii) gains (losses) on extinguishment of debt; (iii)
amortization and impairment of goodwill and other
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acquired intangible assets; and (iv) impairment of other long-lived assets and
other non-operating items, such as impairment of internal-use software, gains
(losses) from the sale of lines of business and acquisition-related income and
expenses.
The following table provides a reconciliation of consolidated pretax income to
our non-GAAP financial measure for the consolidated Company of adjusted pretax
operating income.
Reconciliation of consolidated pretax income to consolidated adjusted pretax operating income
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands) 2022 2021 2022 2021
Consolidated pretax income $ 259,880 $ 195,496 $ 494,020 $ 356,685
Less income (expense) items
Net gains (losses) on investments and other
financial instruments (41,869) 15,661 (71,326) 10,480
Amortization of other acquired intangible assets (849) (863) (1,698) (1,725)
Impairment of other long-lived assets and other
non-operating items 565 (4,021) 63 (4,105)
Total adjusted pretax operating income (1) $ 302,033 $
184,719
(1)Total adjusted pretax operating income on a consolidated basis consists of
adjusted pretax operating income (loss) for our Mortgage segment, homegenius
segment and All Other activities, as further detailed in Note 4 of Notes to
Unaudited Condensed Consolidated Financial Statements.
Adjusted diluted net operating income (loss) per share is calculated by dividing
(i) adjusted pretax operating income (loss) attributable to common stockholders,
net of taxes computed using the Company's statutory tax rate, by (ii) the sum of
the weighted average number of common shares outstanding and all dilutive
potential common shares outstanding. The following table provides a
reconciliation of diluted net income (loss) per share to our non-GAAP financial
measure for the consolidated Company of adjusted diluted net operating income
(loss) per share.
Reconciliation of diluted net income per share to adjusted diluted net operating income per share
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Diluted net income per share $ 1.15 $ 0.80 $ 2.16 $ 1.44
Less per-share impact of reconciling income
(expense) items
Net gains (losses) on investments and other
financial instruments (0.24) 0.08 (0.40) 0.05
Amortization of other acquired intangible assets - - (0.01) (0.01)
Impairment of other long-lived assets and other
non-operating items - (0.02) - (0.02)
Income tax (provision) benefit on reconciling
income (expense) items (1) 0.05 (0.01) 0.09 (0.01)
Difference between statutory and effective tax
rates (0.02) - (0.05) -
Per-share impact of reconciling income (expense)
items (0.21) 0.05 (0.37) 0.01
Adjusted diluted net operating income per share
(1) $ 1.36 $ 0.75 $ 2.53 $ 1.43
(1)Calculated using the Company's federal statutory tax rate of 21%. Any
permanent tax adjustments and state income taxes on these items have been deemed
immaterial and are not included.
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Adjusted net operating return on equity is calculated by dividing annualized
adjusted pretax operating income (loss), net of taxes computed using the
Company's statutory tax rate, by average stockholders' equity, based on the
average of the beginning and ending balances for each period presented. The
following table provides a reconciliation of return on equity to our non-GAAP
financial measure for the consolidated Company of adjusted net operating return
on equity.
Reconciliation of return on equity to adjusted net operating return on equity
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Return on equity (1) 19.9 % 14.5 % 18.7 % 13.0 %
Less impact of reconciling income (expense) items (2)
Net gains (losses) on investments and other financial
instruments
(4.1) 1.5 (3.5) 0.5 Amortization of other acquired intangible assets (0.1) (0.1) (0.1) (0.1) Impairment of other long-lived assets and other non-operating items 0.1 (0.4) - (0.2)
Income tax (provision) benefit on reconciling income
(expense) items (3)
0.9 (0.2) 0.7 -
Difference between statutory and effective tax rates (0.5) 0.1 (0.3) (0.1)
Impact of reconciling income (expense) items (3.7) 0.9 (3.2) 0.1
Adjusted net operating return on equity (3) 23.6 % 13.6 % 21.9 % 12.9 %
(1)Calculated by dividing annualized net income (loss) by average stockholders'
equity, based on the average of the beginning and ending balances for each
period presented.
(2)Annualized, as a percentage of average stockholders' equity.
(3)Calculated using the Company's federal statutory tax rate of 21%. Any
permanent tax adjustments and state income taxes on these items have been deemed
immaterial and are not included.
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Results of Operations-Mortgage
Three and Six Months Ended
The following table summarizes our Mortgage segment's results of operations for
the three and six months ended
Summary results of operations - Mortgage
Change Change
Three Months Ended Favorable Six Months Ended Favorable
June 30, (Unfavorable) June 30, (Unfavorable)
(In thousands) 2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021
Revenues
Net premiums written $ 248,645 $ 231,027 $ 17,618 $ 497,005 $ 477,901 $ 19,104
(Increase) decrease in unearned
premiums (1,736) 16,059 (17,795) (4,922) 33,849 (38,771)
Net premiums earned 246,909 247,086 (177) 492,083 511,750 (19,667)
Services revenue 2,105 3,732 (1,627) 6,657 8,083 (1,426)
Net investment income 40,197 32,842 7,355 74,214 66,855 7,359
Other income 572 641 (69) 1,275 1,410 (135)
Total revenues 289,783 284,301 5,482 574,229 588,098 (13,869)
Expenses
Provision for losses (114,179) 3,334 117,513 (198,372) 49,203 247,575
Policy acquisition costs 5,940 4,838 (1,102) 12,545 13,834 1,289
Cost of services 1,960 3,161 1,201 5,343 6,353 1,010
Other operating expenses 58,711 57,860 (851) 118,675 106,776 (11,899)
Interest expense 20,831 21,065 234 41,677 42,180 503
Total expenses (26,737) 90,258 116,995 (20,132) 218,346 238,478
Adjusted pretax operating income
(1) $ 316,520 $ 194,043 $ 122,477 $ 594,361 $ 369,752 $ 224,609
(1)Our senior management uses adjusted pretax operating income as our primary
measure to evaluate the fundamental financial performance of our business
segments. See Note 4 of Notes to Unaudited Condensed Consolidated Financial
Statements for more information.
Revenues
Net Premiums Earned. Net premiums earned decreased for the six months endedJune 30, 2022 , compared to the same period in 2021, primarily due to: (i) a decrease in the impact, net of reinsurance, from Single Premium Policy cancellations due to lower refinance activity and (ii) a decrease in premiums earned on our Monthly Premium Policies due to lower average premium yields. These decreases were partially offset by an increase in the profit commission retained by the Company, due to favorable reserve development in the six months endedJune 30, 2022 . 50
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The table below provides additional information about the components of mortgage
insurance net premiums earned for the periods indicated, including the effects
of our reinsurance programs.
Net premiums earned
Change Change
Three Months Ended Favorable Six Months Ended Favorable
June 30, (Unfavorable) June 30, (Unfavorable)
($ in thousands, except as
otherwise indicated) 2022 2021 2022 vs. 2021 2022 2021 2022 vs.
2021
Direct
Premiums earned, excluding revenue from cancellations$ 249,936 $ 243,076 $ 6,860$ 493,536 $ 499,982 $ (6,446) Single Premium Policy cancellations 6,894 31,592 (24,698) 21,590 70,102 (48,512) Direct 256,830 274,668 (17,838) 515,126 570,084 (54,958) Assumed (1) 1,539 1,615 (76) 2,870 3,913 (1,043) Ceded Premiums earned, excluding revenue from cancellations (28,565) (27,324) (1,241) (55,904) (52,697) (3,207) Single Premium Policy cancellations (2) (1,965) (9,036) 7,071 (6,157) (20,145) 13,988 Profit commission-other (3) 19,070 7,162 11,908 36,148 10,595
25,553
Ceded premiums, net of profit commission (11,460) (29,198) 17,738 (25,913) (62,247)
36,334
Total net premiums earned$ 246,909 $ 247,085 $ (176)$ 492,083 $ 511,750 $ (19,667) In force portfolio premium yield (in basis points) (4) 40.0 41.1 (1.1) 39.7 41.7 (2.0) Direct premium yield (in basis points) (5) 41.1 46.4 (5.3) 41.4 47.5 (6.1) Net premium yield (in basis points) (6) 39.3 41.5 (2.2) 39.4 42.3 (2.9) Average primary IIF (in billions)$ 251.6 $ 238.1 $ 13.5$ 250.1 $ 241.7 $ 8.4 (1)Includes premiums earned from our participation in certain credit risk transfer programs. (2)Includes the impact of related profit commissions. (3)Represents the profit commission on the Single Premium QSR Program, excluding the impact of Single Premium Policy cancellations. (4)Calculated by dividing annualized direct premiums earned, including assumed revenue and excluding revenue from cancellations, by average primary IIF. (5)Calculated by dividing annualized direct premiums earned, including assumed revenue, by average primary IIF. (6)Calculated by dividing annualized net premiums earned by average primary IIF. The level of mortgage prepayments affects the revenue ultimately produced by our mortgage insurance business and is influenced by the mix of business we write. We believe that writing a mix of Single Premium Policies and Monthly Premium Policies has the potential to moderate the overall impact on our results if actual prepayments are significantly different from expectations. However, the impact of this moderating effect is affected by the amount of reinsurance we obtain on portions of our portfolio, with the Single Premium QSR Program currently reducing the proportion of retained Single Premium Policies in our portfolio. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Key Factors Affecting Our Results-Mortgage-IIF and Related Drivers" in our 2021 Form 10-K for more information. 51
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The following table provides information related to the impact of our
reinsurance transactions on premiums earned. See Note 8 of Notes to Unaudited
Condensed Consolidated Financial Statements for more information about our
reinsurance programs.
Ceded premiums earned
Three Months Ended Six Months Ended
June 30, June 30,
($ in thousands) 2022 2021 2022 2021
Single Premium QSR Program $ (8,297) (1)
$ 12,473 $ (12,028) (1)$ 31,942 Excess-of-Loss Program 19,292 15,601 36,880 27,755 QSR Program 360 1,018 851 2,337 Other 105 106 210 213 Total ceded premiums earned (2)$ 11,460 $ 29,198 $ 25,913 $ 62,247 Percentage of total direct and assumed premiums earned 4.3 % 10.3 % 4.8 % 10.5 % (1)Includes the increase in the profit commission retained by the Company due to favorable reserve development in 2022 periods. See "-Expenses-Provision for Losses" below for additional information on the favorable reserve development. (2)Does not include the benefit from ceding commissions on our Single Premium QSR Programs, which are included in other operating expenses on the condensed consolidated statements of operations. See Note 8 of Notes to Unaudited Condensed Consolidated Financial Statements for additional information. Net Investment Income. Increasing yields from higher interest rates, partially offset by lower average investment balances, resulted in increases in net investment income for the three and six months endedJune 30, 2022 , compared to the same periods in 2021. Expenses Provision for Losses. The following table details the financial impact of the significant components of our provision for losses for the periods indicated. Provision for losses Change Change Three Months Ended Favorable Six Months Ended Favorable June 30, (Unfavorable) June 30, (Unfavorable) ($ in thousands, except reserve per new default) 2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021 Current period defaults (1)$ 33,919 $ 34,317 $
398
Prior period defaults (2) (148,098) (30,984)
117,114 (274,303) (36,604) 237,699 Total provision for losses$ (114,179) $ 3,333 $ 117,512 $ (198,372) $ 49,203 $ 247,575 Loss ratio (3) (46.2) % 1.3 % 47.5 % (40.3) % 9.6 % 49.9 % Reserve per new default (4)$ 4,235 $ 4,213 $
(22)
(1)Related to defaulted loans with a most recent default notice dated in the period indicated. For example, if a loan had defaulted in a prior period, but then subsequently cured and later re-defaulted in the current period, the default would be considered a current period default. (2)Related to defaulted loans with a default notice dated in a period earlier than the period indicated, which have been continuously in default since that time. (3)Provision for losses as a percentage of net premiums earned. See "-Revenues-Net Premiums Earned" above for additional information on the changes in net premiums earned. (4)Calculated by dividing provision for losses for new defaults, net of reinsurance, by new primary defaults for each period. Our mortgage insurance provision for losses for the three and six months endedJune 30, 2022 , decreased by$117.5 million and$247.6 million , respectively, as compared to the same periods in 2021. Current period new primary defaults decreased by 1.7% and 13.0% for the three and six months endedJune 30, 2022 , respectively, compared to the same periods in 2021, as shown below. Our gross Default to Claim Rate assumption for new primary defaults was 8.0% at bothJune 30, 2022 , andJune 30, 2021 . Our provision for losses during the three and six months endedJune 30, 2022 , benefited from favorable reserve development on prior period defaults, primarily as a result of more favorable trends in Cures than originally estimated due to favorable outcomes resulting from mortgage forbearance programs implemented in response to the COVID-19 pandemic as 52
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well as positive trends in home price appreciation. These favorable observed
trends resulted in reductions in our Default to Claim Rate assumptions for prior
year default notices, particularly for those defaults first reported in 2020
following the start of the COVID-19 pandemic. See Note 11 herein for additional
information, as well as Notes 1 and 11 of Notes to Consolidated Financial
Statements and "Item 1A. Risk Factors" in our 2021 Form 10-K.
Our primary default rate as a percentage of total insured loans at
2022
a rollforward of our primary loans in default.
Rollforward of primary loans in default
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Beginning default inventory 25,510 50,106 29,061 55,537
New defaults 8,009 8,145 17,402 19,996
Cures (11,552) (17,681) (24,341) (34,818)
Claims paid (86) (98) (211) (241)
Rescissions and Claim Denials (1) (20) (8) (50) (10)
Ending default inventory 21,861 40,464 21,861 40,464
(1)Net of any previous Rescissions and Claim Denials that were reinstated during
the period. Such reinstated Rescissions and Claim Denials may ultimately result
in a paid claim.
The following tables show additional information about our primary loans in
default as of the dates indicated.
Primary loans in default - additional information
June 30, 2022
Foreclosure Stage Cure % During Reserve for
Total Defaulted Loans the 2nd Quarter Losses % of Reserve
($ in thousands) # % # % $ %
Missed payments
Three payments or less 6,769 31.0 % 20 42.4 % $ 62,685 11.1 %
Four to eleven payments 6,842 31.3 142 31.5 134,303 23.9
Twelve payments or more 7,943 36.3 737 29.9 348,846 62.0
Pending claims 307 1.4 N/A 25.1 16,602 3.0
Total 21,861 100.0 % 899 562,436 100.0 %
LAE 14,147
IBNR 2,424
Total primary reserve $ 579,007
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December 31, 2021
Foreclosure Stage Cure % During Reserve for
Total Defaulted Loans the 4th Quarter Losses % of Reserve
($ in thousands) # % # % $ %
Missed payments
Three payments or less 7,267 25.0 % 47 39.4 % $ 62,103 7.9 %
Four to eleven payments 8,088 27.8 84 27.6 146,872 18.6
Twelve payments or more 13,389 46.1 784 29.0 565,192 71.5
Pending claims 317 1.1 N/A 10.4 16,213 2.0
Total 29,061 100.0 % 915 790,380 100.0 %
LAE 19,859
IBNR 2,886
Total primary reserve $ 813,125
N/A - Not applicable
We develop our Default to Claim Rate estimates based primarily on models that
use a variety of loan characteristics to determine the likelihood that a default
will reach claim status. See Note 11 of Notes to Consolidated Financial
Statements in our 2021 Form 10-K for additional details about our Default to
Claim Rate assumptions.
Our aggregate weighted average net Default to Claim Rate assumption for our
primary loans used in estimating our reserve for losses, which is net of
estimated Claim Denials and Rescissions, was approximately 44% at June 30, 2022 ,
compared to 46% at December 31, 2021 . See Note 11 of Notes to Unaudited
Condensed Consolidated Financial Statements for information regarding our
reserves for losses and a reconciliation of our Mortgage segment's beginning and
ending reserves for losses and LAE.
We considered the sensitivity of our loss reserve estimates at June 30, 2022 , by
assessing the potential changes resulting from a parallel shift in Claim
Severity and Default to Claim Rate for primary loans. For example, assuming all
other factors remain constant, for every one percentage point absolute change in
primary Claim Severity for our primary insurance risk exposure (which we
estimated to be 99% of our risk exposure at each of June 30, 2022 , and
December 31, 2021 ), we estimated that our total loss reserve at June 30, 2022 ,
would change by approximately $5.7 million . Assuming the portfolio mix and all
other factors remain constant, for every one percentage point absolute change in
our primary net Default to Claim Rate, we estimated a $12.7 million change in
our primary loss reserve at June 30, 2022 .
Although expected claims are included in our reserve for losses, the timing of
claims paid is subject to fluctuation from quarter to quarter based on the rate
that defaults cure and other factors, including the impact of foreclosure
moratoriums (as described in "Item 1. Business-Mortgage-Defaults and Claims" in
our 2021 Form 10-K) that make the timing of paid claims difficult to predict.
The following table shows net claims paid by product and the average claim paid
by product for the periods indicated.
Claims paid
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands) 2022 2021 2022 2021
Net claims paid (1)
Total primary claims paid $ 3,659 $ 4,870 $ 8,812 $ 11,481
Total pool and other (396) (649) (811) (787)
Subtotal 3,263 4,221 8,001 10,694
Impact of commutations and settlements - - - 4,000
Total net claims paid $ 3,263
Total average net primary claim paid (1) (2)$ 41.6 $ 46.8 $ 41.6 $ 45.2 Average direct primary claim paid (2) (3)$ 41.9
(1)Net of reinsurance recoveries.
(2)Calculated without giving effect to the impact of commutations and
settlements.
(3)Before reinsurance recoveries.
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Other Operating Expenses. The increase in other operating expenses for the six
months ended June 30, 2022 , as compared to the same period in 2021, primarily
reflects: (i) a decrease in ceding commissions, due primarily to a decline in
Single Premium Policy cancellations covered by our Single Premium QSR Program,
and (ii) an increase in variable incentive compensation expense, including as
part of allocated corporate operating expenses. The increase in variable
compensation expense is primarily due to increases in the projected payouts
associated with our performance-based RSUs, driven primarily by the impact of
the favorable loss reserve development recorded in the first half of 2022. See
Note 17 of Notes to Consolidated Financial Statements in our 2021 Form 10-K for
additional information on our performance-based RSUs.
The following table shows additional information about Mortgage other operating
expenses.
Other operating expenses
Change Change
Three Months Ended Favorable Six Months Ended Favorable
June 30, (Unfavorable) June 30, (Unfavorable)
(In thousands) 2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021
Direct
Salaries and other base
employee expenses $ 12,925 $ 12,367 $ (558) $ 23,784 $ 25,329 $ 1,545
Variable and share-based
incentive compensation 4,026 5,701 1,675 9,670 8,961 (709)
Other general operating
expenses 11,367 13,656 2,289 22,568 26,462 3,894
Ceding commissions (2,844) (6,501) (3,657) (6,793) (14,190) (7,397)
Total direct 25,474 25,223 (251) 49,229 46,562 (2,667)
Allocated (1)
Salaries and other base
employee expenses 11,495 10,175 (1,320) 22,825 $ 20,533 (2,292)
Variable and share-based
incentive compensation 7,498 9,535 2,037 18,551 15,222 (3,329)
Other general operating
expenses 14,244 12,927 (1,317) 28,070 24,459 (3,611)
Total allocated 33,237 32,637 (600) 69,446 60,214 (9,232)
Total other operating
expenses $ 58,711 $ 57,860 $ (851) $ 118,675 $ 106,776 $ (11,899)
Expense ratio (2) 26.2 % 25.4 % (0.8) % 26.7 % 23.6 % (3.1) %
(1)See Note 4 of Notes to Unaudited Condensed Consolidated Financial Statements
for more information about our allocation of corporate operating expenses.
(2)Operating expenses (which include policy acquisition costs and other
operating expenses, as well as allocated corporate operating expenses),
expressed as a percentage of net premiums earned. See "-Revenues-Net Premiums
Earned" above for additional information on the changes in net premiums earned.
Results of Operations-homegenius
Three and Six Months Ended
The following table summarizes our homegenius segment's results of operations for the three and six months endedJune 30, 2022 and 2021. As discussed in "Overview-Current Operating Environment," the macroeconomic stresses in the second quarter of 2022 impacted our homegenius business, including in particular a decrease in our title revenues due to the rapid decline in industrywide refinance volumes. We expect this trend to continue to impact the results of our homegenius segment in the near-term based on current market conditions and our expectation that overall refinance volumes will remain low. 55
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Summary results of operations - homegenius
Change Change
Three Months Ended Favorable Six Months Ended Favorable
June 30, (Unfavorable) June 30, (Unfavorable)
(In thousands) 2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021
Revenues
Net premiums earned $ 6,983 $ 7,670 $ (687) $ 15,999 $ 14,878 $ 1,121
Services revenue 25,261 25,750 (489) 50,139 44,300 5,839
Net investment income 99 31 68 117 68 49
Total revenues 32,343 33,451 (1,108) 66,255 59,246 7,009
Expenses
Provision for losses 309 335 26 790 631 (159)
Cost of services 20,800 21,433 633 42,170 38,461
(3,709)
Other operating expenses 28,924 20,881 (8,043) 54,491 39,805 (14,686) Total expenses 50,033 42,649 (7,384) 97,451 78,897 (18,554) Adjusted pretax operating income (loss) (1)$ (17,690) $ (9,198) $ (8,492) $ (31,196) $ (19,651) $ (11,545) (1)Our senior management uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of each of our business segments. See Note 4 of Notes to Unaudited Condensed Consolidated Financial Statements.
Revenues
Net Premiums Earned. Net premiums earned for the six months endedJune 30, 2022 , increased compared to the same period in 2021, primarily due to an increase in new title policies written and closed orders in our title insurance business, which was concentrated in the first quarter of 2022. Services Revenue. Services revenue for the six months endedJune 30, 2022 , increased compared to the same period in 2021, primarily due to increased revenue in our real estate services, including increases from valuation and single family rental products and services, partially offset by a decrease in title services. In particular, title services revenue declined during the three months endedJune 30, 2022 , as compared to the same period in 2021, due to the recent macroeconomic stresses described above. See Note 4 of Notes to Unaudited Condensed Consolidated Financial Statements for the disaggregation of services revenue by revenue type. Expenses
Cost of Services. Cost of services for the six months ended
increased compared to the same period in 2021, primarily due to incremental
expenses incurred to support the increase in services revenue. Our cost of
services is primarily affected by our level of services revenue and the number
of employees providing those services.
Other Operating Expenses. The increase in other operating expenses for the three and six months endedJune 30, 2022 , as compared to the same periods in 2021, primarily reflects continued strategic investments focused on our title and digital real estate businesses, including an increase in staffing levels resulting in higher salaries and other base employee expenses. 56
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The following table shows additional information about homegenius other
operating expenses.
Other operating expenses
Change Change
Three Months Ended Favorable Six Months Ended Favorable
June 30, (Unfavorable) June 30, (Unfavorable)
(In thousands) 2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021
Direct
Salaries and other base
employee expenses $ 10,182 $ 5,211 $
(4,971)
Variable and share-based
incentive compensation
3,493 4,501 1,008 7,409 6,650 (759) Other general operating expenses 7,732 4,689 (3,043) 14,297 9,292 (5,005) Title agent commissions 1,799 1,759 (40) 2,898 3,166 268 Total direct 23,206 16,160 (7,046) 43,493 31,088 (12,405) Allocated (1) Salaries and other base employee expenses 2,005 1,490 (515) 3,673 3,011 (662) Variable and share-based incentive compensation 1,283 1,395 112 2,889 2,220 (669) Other general operating expenses 2,430 1,836 (594) 4,436 3,486 (950) Total allocated 5,718 4,721 (997) 10,998 8,717 (2,281) Total other operating expenses$ 28,924 $ 20,881 $ (8,043) $ 54,491 $ 39,805 $ (14,686)
(1)See Note 4 of Notes to Unaudited Condensed Consolidated Financial Statements
for more information about our allocation of corporate operating expenses.
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Results of Operations-All Other
Three and Six Months Ended
The following table summarizes our All Other results of operations for the three
and six months ended
Summary results of operations - All Other
Change Change
Three Months Ended Favorable Six Months Ended Favorable
June 30, (Unfavorable) June 30, (Unfavorable)
(In thousands) 2022 2021 2022 vs. 2021 2022 2021 2022 vs. 2021
Revenues
Services revenue $ - $ 44 $ (44) $ - $ 97 $ (97)
Net investment income 6,661 3,418 3,243 10,822 7,619 3,203
Other income - 181 (181) - 388 (388)
Total revenues 6,661 3,643 3,018 10,822 8,104 2,718
Expenses
Cost of services - 19 19 - 47 47
Other operating expenses 3,458 3,750 292 7,006 6,123 (883)
Total expenses 3,458 3,769 311 7,006 6,170 (836)
Adjusted pretax operating income
(loss) (1) $ 3,203 $ (126) $ 3,329 $ 3,816 $ 1,934 $ 1,882
(1)Our senior management uses adjusted pretax operating income (loss) as our
primary measure to evaluate the fundamental financial performance of each of our
business segments. See Note 4 of Notes to Unaudited Condensed Consolidated
Financial Statements.
Liquidity and Capital Resources
Consolidated Cash Flows
The following table summarizes our consolidated cash flows from operating,
investing and financing activities.
Summary cash flows - Consolidated
Six Months Ended
June 30,
(In thousands) 2022 2021
Net cash provided by (used in):
Operating activities $ 176,850 $ 275,896
Investing activities 12,604 (76,393)
Financing activities (206,251) (155,742)
Increase (decrease) in cash and restricted cash
Operating Activities. Our most significant source of operating cash flows is from premiums received from our mortgage insurance policies, while our most significant uses of operating cash flows are typically for our operating expenses and claims paid on our mortgage insurance policies. The$99.0 million decline in cash provided by operating activities for the six months endedJune 30, 2022 , compared to the same period in 2021, was principally due to: (i) higher purchases ofU.S. Mortgage Guaranty Tax and Loss Bonds; (ii) higher payments for other operating expenses, primarily related to incentive compensation; and (iii) lower direct premiums written, due to reduced refinancing activity. Investing Activities. Net cash provided by investing activities was$12.6 million for the six months endedJune 30, 2022 , as compared to net cash used in investing activities of$76.4 million for the same period in 2021. This change was primarily the 58
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result of an increase in sales and redemptions, net of purchases, on short-term
investments, and a decrease in purchases of equity securities, partially offset
by a decrease in proceeds and redemptions, net of purchases on fixed-maturity
investments available for sale.
Financing Activities. For the six months ended June 30, 2022 , our primary
financing activities included: (i) repurchases of our common stock; (ii) payment
of dividends; and (iii) net changes in secured borrowings. See Notes 12 and 14
of Notes to Unaudited Condensed Consolidated Financial Statements for additional
information regarding our borrowings and share repurchases, respectively.
See "Item 1. Financial Statements (Unaudited)-Condensed Consolidated Statements
of Cash Flows (Unaudited)" for additional information.
Radian Group serves as the holding company for our operating subsidiaries and does not have any operations of its own. AtJune 30, 2022 ,Radian Group had available, either directly or through unregulated subsidiaries, unrestricted cash and liquid investments of$772.5 million . Available liquidity atJune 30, 2022 , excludes certain additional cash and liquid investments that have been advanced toRadian Group from its subsidiaries to pay for corporate expenses and interest payments. In addition, this amount does not take into consideration transactions subsequent toJune 30, 2022 , including$97.5 million in repurchases ofRadian Group common stock, including commissions, pursuant to the share repurchase authorization discussed below. Total liquidity, which includes our undrawn$275.0 million unsecured revolving credit facility, as described below, was$1.0 billion as ofJune 30, 2022 . During the six months endedJune 30, 2022 ,Radian Group's available liquidity increased by$167.6 million , due primarily to a$500 million return of capital from Radian Guaranty toRadian Group paid inFebruary 2022 , partially offset by other items such as share repurchases and payments for dividends, as described below. In addition to available cash and marketable securities,Radian Group's principal sources of cash to fund future liquidity needs include: (i) payments made toRadian Group by its subsidiaries under expense- and tax-sharing arrangements; (ii) net investment income earned on its cash and marketable securities; (iii) to the extent available, dividends or other distributions from its subsidiaries; and (iv) amounts, if any, that Radian Guaranty is able to repay under the Surplus Note due 2027.Radian Group also has in place a$275.0 million unsecured revolving credit facility with a syndicate of bank lenders. Subject to certain limitations, borrowings under the revolving credit facility may be used for working capital and general corporate purposes, including, without limitation, capital contributions to our insurance subsidiaries as well as growth initiatives. AtJune 30, 2022 , the full$275.0 million remains undrawn and available under the facility. See Note 12 of Notes to Consolidated Financial Statements in our 2021 Form 10-K for additional information on the unsecured revolving credit facility. OnJuly 15, 2022 ,Radian Group entered into the Parent Guaranty in favor of Goldman, pursuant to whichRadian Group agreed to guaranty the obligations of its subsidiariesRadian Mortgage Capital and Liberty in connection with a$300 million mortgage loan repurchase facility.Radian Mortgage Capital and Liberty entered into this facility with Goldman pursuant to the Master Repurchase Agreement. Under the Parent Guaranty,Radian Group is subject to negative and affirmative covenants customary for this type of financing transaction, including compliance with financial covenants that are generally consistent with the comparable covenants in the Company's revolving credit facility. See Note 12 of Notes to Unaudited Condensed Consolidated Financial Statements for additional information. We expectRadian Group's principal liquidity demands for the next 12 months to be: (i) the payment of corporate expenses, including taxes; (ii) interest payments on our outstanding debt obligations; (iii) the payment of quarterly dividends on our common stock, which we increased inFebruary 2022 from$0.14 to$0.20 per share and which remains subject to approval by our board of directors and our ongoing assessment of our financial condition and potential needs related to the execution and implementation of our business plans and strategies; (iv) the potential continued repurchases of shares of our common stock pursuant to share repurchase authorizations, as described below; (v) investments to support our business strategy, including capital contributions to our subsidiaries; and (vi) potential payments pursuant to the Parent Guaranty. In addition to our ongoing short-term liquidity needs discussed above, our most significant need for liquidity beyond the next 12 months is the repayment of$1.4 billion aggregate principal amount of our senior debt due in future years. See "-Capitalization-Holding Company " below for details of our debt maturity profile.Radian Group's liquidity demands for the next 12 months or in future periods could also include: (i) early repurchases or redemptions of portions of our debt obligations and (ii) additional investments to support our business strategy, including additional capital contributions to our subsidiaries. For additional information about related risks and uncertainties, see "Item 1A. Risk Factors," including "-Radian Group's sources of liquidity may be insufficient to fund its obligations" and "-Radian Guaranty may fail to maintain its eligibility status with the GSEs, and the additional capital required to support Radian Guaranty's eligibility could reduce our available liquidity" in our 2021 Form 10-K. We believe thatRadian Group has sufficient current sources of liquidity to fund its obligations. If we otherwise decide to increase our liquidity position,Radian Group may seek additional capital, including by incurring additional debt, issuing additional equity, or selling assets, which we may not be able to do on favorable terms, if at all. 59
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Share Repurchases. During the six months ended
repurchased 10.0 million shares of
authorized by
million
Consolidated Financial Statements for additional details on our share repurchase
program.
Dividends and Dividend Equivalents. OnFebruary 9, 2022 ,Radian Group's board of directors authorized an increase to the Company's quarterly dividend from$0.14 to$0.20 per share. Based on our current outstanding shares of common stock and RSUs, we expect to require approximately$133 million in the aggregate to pay dividends and dividend equivalents for the next 12 months. So long as no default or event of default exists under its revolving credit facility or the Parent Guaranty,Radian Group is not subject to any limitations on its ability to pay dividends except those generally applicable to corporations that are incorporated inDelaware . See Note 12 of Notes to Unaudited Condensed Consolidated Financial Statements for additional details. The declaration and payment of future quarterly dividends remains subject to the board of directors' determination. Corporate Expenses and Interest Expense.Radian Group has expense-sharing arrangements in place with its principal operating subsidiaries that require those subsidiaries to pay their allocated share of certain holding-company-level expenses, including interest payments onRadian Group's outstanding debt obligations. Corporate expenses and interest expense onRadian Group's debt obligations allocated under these arrangements during the six months endedJune 30, 2022 , of$81.2 million and$41.1 million , respectively, were substantially all reimbursed by its subsidiaries. We expect substantially all of our holding company expenses to continue to be reimbursed by our subsidiaries under our expense-sharing arrangements. The expense-sharing arrangements betweenRadian Group and its mortgage insurance subsidiaries, as amended, have been approved by thePennsylvania Insurance Department , but such approval may be modified or revoked at any time. Taxes. Pursuant to our tax-sharing agreements, our operating subsidiaries payRadian Group an amount equal to any federal income tax the subsidiary would have paid on a standalone basis if they were not part of our consolidated tax return. As a result, from time to time, under the provisions of our tax-sharing agreements,Radian Group may pay to or receive from its operating subsidiaries amounts that differ fromRadian Group's consolidated federal tax payment obligation. During the six months endedJune 30, 2022 ,Radian Group received$17.2 million of tax-sharing agreement payments from its operating subsidiaries.
The following table presents our holding company capital structure.
Capital structure
June 30, December 31,
(In thousands, except per-share amounts and ratios) 2022 2021
Debt
Senior Notes due 2024 $ 450,000 $ 450,000
Senior Notes due 2025 525,000 525,000
Senior Notes due 2027 450,000 450,000
Deferred debt costs on senior notes (13,542) (15,527)
Revolving credit facility - -
Total 1,411,458 1,409,473
Stockholders' equity 3,930,962 4,258,796
Total capitalization $ 5,342,420 $ 5,668,269
Debt-to-capital ratio 26.4 % 24.9 %
Shares outstanding 166,388 175,421
Book value per share $ 23.63 $ 24.28
Stockholders' equity decreased by $327.8 million from December 31, 2021 , to
June 30, 2022 . The net decrease in stockholders' equity for the six months ended
June 30, 2022 , resulted primarily from net unrealized losses in available for
sale securities of $449.3 million as a result of an increase in market interest
rates during the period, share repurchases of $205.1 million and dividends of
$71.6 million , partially offset by our net income of $382.3 million . Given our
intent and ability as of June 30, 2022 , to hold these securities until recovery
of their amortized cost basis, we do not expect to realize a loss on any of our
investments in an unrealized loss position.
The decrease in book value per share from $24.28 at December 31, 2021 , to $23.63
at June 30, 2022 , is primarily due to: (i) a decrease of $2.56 per share due to
unrealized losses in our available for sale securities, recorded in accumulated
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other comprehensive income and (ii) a decrease of $0.41 per share attributable
to dividends and dividend equivalents. Partially offsetting these items was an
increase of $2.18 per share attributable to our net income for the six months
ended June 30, 2022 .
We regularly evaluate opportunities, based on market conditions, to finance our
operations by accessing the capital markets or entering into other types of
financing arrangements with institutional and other lenders and financing
sources, and consider various measures to improve our capital and liquidity
positions, as well as to strengthen our balance sheet, improve Radian Group's
debt maturity profile and maintain adequate liquidity for our operations. In the
past we have repurchased and exchanged, prior to maturity, some of our
outstanding debt, and in the future, we may from time to time seek to redeem,
repurchase or exchange for other securities, or otherwise restructure or
refinance some or all of our outstanding debt prior to maturity in the open
market through other public or private transactions, including pursuant to one
or more tender offers or through any combination of the foregoing, as
circumstances may allow. The timing or amount of any potential transactions will
depend on a number of factors, including market opportunities and our views
regarding our capital and liquidity positions and potential future needs. There
can be no assurance that any such transactions will be completed on favorable
terms, or at all.
Mortgage
The principal demands for liquidity in our Mortgage business currently include:
(i) the payment of claims and potential claim settlement transactions, net of
reinsurance; (ii) expenses (including those allocated from Radian Group ); (iii)
repayments of FHLB advances; (iv) repayments, if any, associated with the
Surplus Note due 2027; and (v) taxes, including potential additional purchases
of U.S. Mortgage Guaranty Tax and Loss Bonds. See Notes 10 and 16 of Notes to
Consolidated Financial Statements in our 2021 Form 10-K for additional
information related to these non-interest bearing instruments. In addition to
the foregoing liquidity demands, other payments have included, and in the future
could include, distributions from Radian Guaranty to Radian Group , including
returns of capital subject to approval by the Pennsylvania Insurance Department ,
as discussed below.
The principal sources of liquidity in our mortgage insurance business currently
include insurance premiums, net investment income and cash flows from: (i)
investment sales and maturities; (ii) FHLB advances; and (iii) capital
contributions from Radian Group . We believe that the operating cash flows
generated by each of our mortgage insurance subsidiaries will provide these
subsidiaries with a substantial portion of the funds necessary to satisfy their
needs for the foreseeable future.
As of June 30, 2022 , our mortgage insurance subsidiaries maintained claims
paying resources of $5.7 billion on a statutory basis, which consist of
contingency reserves, statutory policyholders' surplus, premiums received but
not yet earned and loss reserves. In addition, our reinsurance programs are
designed to provide additional claims-paying resources during times of economic
stress and elevated losses. See Note 8 of Notes to Unaudited Condensed
Consolidated Financial Statements for additional information.
Radian Guaranty's Risk-to-capital as of June 30, 2022 , was 11.9 to 1. Radian
Guaranty is not expected to need additional capital to satisfy state insurance
regulatory requirements in their current form. At June 30, 2022 , Radian Guaranty
had statutory policyholders' surplus of $572.3 million . This balance includes a
$466.1 million benefit from U.S. Mortgage Guaranty Tax and Loss Bonds issued by
the U.S. Department of the Treasury , which mortgage guaranty insurers such as
Radian Guaranty may purchase in order to be eligible for a tax deduction,
subject to certain limitations, related to amounts required to be set aside in
statutory contingency reserves. See Note 16 of Notes to Consolidated Financial
Statements and "Item 1A. Risk Factors" in our 2021 Form 10-K for more
information.
Radian Guaranty currently is an approved mortgage insurer under the PMIERs.
Private mortgage insurers, including Radian Guaranty, are required to comply
with the PMIERs to remain approved insurers of loans purchased by the GSEs. At
June 30, 2022 , Radian Guaranty's Available Assets under the PMIERs financial
requirements totaled approximately $5.2 billion , resulting in a PMIERs Cushion
of $1.4 billion , or 38%, over its Minimum Required Assets. Those amounts compare
to Available Assets of $5.4 billion and a PMIERs cushion of $2.1 billion , or
62%, at December 31, 2021 .
The primary driver of the decrease in Radian Guaranty's PMIERs Cushion during
the six months ended June 30, 2022 , was a decrease in Available Assets,
primarily due to the $500 million return of capital from Radian Guaranty to
Radian Group , as discussed above, partially offset by positive cash flows from
operating activities, combined with an increase in Minimum Required Assets.
Our PMIERs Cushion at June 30, 2022 , also includes a benefit from the current
broad-based application of the Disaster Related Capital Charge that has reduced
the total amount of Minimum Required Assets that Radian Guaranty otherwise would
have been required to hold against pandemic-related defaults by approximately
$200 million and $300 million as of June 30, 2022 , and December 31, 2021 ,
respectively, taking into consideration our risk distribution structures in
effect as of that date. The application of the Disaster Related Capital Charge
has reduced Radian Guaranty's PMIERs Minimum Required Assets, but we expect this
impact will diminish over time. See "Item 1. Business-Regulation-Federal
Regulation-GSE Requirements for Mortgage Insurance Eligibility" in our 2021 Form
10-K for more information about the Disaster Related Capital Charge, and for
further information, including on the expiration of the COVID-19 Crisis Period.
Even though they hold assets in excess of the minimum statutory capital
thresholds and PMIERs financial requirements, the ability of Radian's mortgage
insurance subsidiaries to pay dividends on their common stock is restricted by
certain
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provisions of the insurance laws of Pennsylvania , their state of domicile. Under
Pennsylvania's insurance laws, ordinary dividends and other distributions may
only be paid out of an insurer's positive unassigned surplus unless the
Pennsylvania Insurance Department approves the payment of dividends or other
distributions from another source.
In light of Radian Guaranty's negative unassigned surplus related to operating
losses in prior periods and the ongoing need to set aside contingency reserves,
Radian Guaranty is not currently permitted under applicable insurance laws to
pay dividends or other distributions without prior approval from the
Pennsylvania Insurance Department . Under Pennsylvania's insurance laws, an
insurer must obtain the Pennsylvania Insurance Department's approval to pay an
Extraordinary Distribution. Radian Guaranty sought and received such approval to
return capital by paying Extraordinary Distributions to Radian Group , most
recently in February 2022 . Based on the current strong performance and assuming
the continuation of favorable credit performance in our mortgage insurance
business, we expect that Radian Guaranty could potentially have positive
unassigned surplus by 2023. See Note 16 of Notes to Consolidated Financial
Statements in our 2021 Form 10-K for additional information on our Extraordinary
Distributions, statutory dividend restrictions and contingency reserve
requirements.
Radian Guaranty and Radian Reinsurance are both members of the FHLB. As members,
they may borrow from the FHLB, subject to certain conditions, which include
requirements to post collateral and to maintain a minimum investment in FHLB
stock. Advances from the FHLB may be used to provide low-cost, supplemental
liquidity for various purposes, including to fund incremental investments.
Radian's current strategy includes using FHLB advances as financing for general
cash management purposes and for purchases of additional investment securities
that have similar durations, for the purpose of generating additional earnings
from our investment securities portfolio with limited incremental risk. As of
June 30, 2022 , there were $184.3 million of FHLB advances outstanding. See Note
12 of Notes to Unaudited Condensed Consolidated Financial Statements for
additional information.
homegenius
As of
investments totaling
Insurance
Title insurance companies, includingRadian Title Insurance , are subject to comprehensive state regulations, including minimum net worth requirements.Radian Title Insurance was in compliance with all of its minimum net worth requirements atJune 30, 2022 . In the event the cash flows from operations of the homegenius segment are not adequate to fund all of its needs, including the regulatory capital needs ofRadian Title Insurance ,Radian Group may provide additional funds to the homegenius segment in the form of an intercompany note or other capital contribution. Amounts provided toRadian Title Insurance are subject to the approval of theOhio Department of Insurance . Additional capital support may also be required for potential investments in new business initiatives to support our strategy of growing our businesses. Liquidity levels may fluctuate depending on the levels and contractual timing of our invoicing and the payment practices of our homegenius clients, in combination with the timing of our homegenius segment's payments for employee compensation and to external vendors. The amount, if any, and timing of the homegenius segment's dividend paying capacity will depend primarily on the amount of excess cash flow generated by the segment.
Ratings
Radian Group , Radian Guaranty,Radian Reinsurance and Radian Title Insurance have been assigned the financial strength ratings set forth in the chart below. We believe that ratings often are considered by others in assessing our credit strength and the financial strength of our primary insurance subsidiaries. The following ratings have been independently assigned by third-party statistical rating organizations, are for informational purposes only and are subject to change. See "Item 1A. Risk Factors-The current financial strength ratings assigned to our mortgage insurance subsidiaries could weaken our competitive position and potential downgrades by rating agencies to these ratings and the ratings assigned toRadian Group could adversely affect the Company" in our 2021 Form 10-K. Ratings Subsidiary Moody's (1) S&P (2) Fitch (3) Demotech (4) Radian Group Baa3 BB+ BBB- N/A Radian Guaranty A3 BBB+ A- N/A Radian Reinsurance N/A BBB+ N/A N/A Radian Title Insurance N/A N/A N/A A (1)Based on theJuly 21, 2022 , update, Moody's outlook forRadian Group and Radian Guaranty is currently Stable. (2)Based on theMay 21, 2021 , update, S&P's outlook forRadian Group , Radian Guaranty and Radian Reinsurance is currently Stable. (3)Based on theApril 27, 2022 , release, Fitch's outlook forRadian Group and Radian Guaranty is currently Stable. (4)Based on theMarch 15, 2022 , release. 62
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Critical Accounting Estimates
As of the filing date of this report, there were no significant changes in our critical accounting estimates from those discussed in our 2021 Form 10-K. See Note 2 of Notes to Unaudited Condensed Consolidated Financial Statements for accounting pronouncements issued but not yet adopted that may impact the Company's consolidated financial position, earnings, cash flows or disclosures.
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