Yahoo Finance Radian Group (RDN) Q2 Earnings, Revenues Miss Estimates
Radian Group Inc. RDN reported second-quarter 2016 operating income of 38 cents per share that missed the Zacks Consensus Estimate by 5% and also declined 5% year over year. Lower revenues resulted in the downside.
Behind the Headlines
Total revenue of Radian came in at $330.2 million, down 0.06% year over year, primarily due to lower premiums earned and net investment income. Operating revenue stood at $261.3 million which misses Zacks Consensus Estimates of $278 million.
New mortgage insurance written (NIW) was $12.9 billion in the quarter, up 10% year over year. Notably, the quarter’s NIW consisted of loans with excellent risk characteristics. Total primary mortgage insurance in force was $177.7 billion as of Jun 30, 2016 compared with $175.4 million as of Mar 31, 2016.
Persistency, which is the percentage of mortgage insurance in force that remains on the company’s books after a 12-month period, was 79.9% as of Jun 30, 2016 compared with 80.1% as of Jun 30, 2015.
Primary delinquent loans decreased 21% year over year in the quarter.
Total expenses were down 30.7% year over year to $173.6 million, primarily due to lower loss on induced conversion and debt extinguishment. Also, decline in policy acquisition costs, other operating expenses and interest expenses led to the overall expense reduction.
RADIAN GRP INC Price, Consensus and EPS Surprise
RADIAN GRP INC Price, Consensus and EPS Surprise | RADIAN GRP INC Quote
Segment Update
Net premiums earned in the company’s Mortgage Insurance segment were $229.1 million, down 3.5% year over year. Claims paid were $90.7 million in the quarter, down 57.2% year over year. Loss ratio increased 860 basis points to 21.9%. For 2016, claims paid amount is expected to be $400 million. The company also announced its intention to utilize a portion of its liquidity in order to accelerate its capital plan for a return to investment grade ratings in the future.
In the Mortgage and Real Estate Services segment – formed after the acquisition of Clayton Holdings in Jun 2014 – total revenue was $39 million, down 12.6% year over year. Pre-tax operating income was $1.2 million as against $7.6 million in the year-ago quarter.
Financial Update
Radian Group ended the quarter with a cash balance of $55.1 million, up 7.6% year over year.
Long-term debt was $1.3 billion, up 8.3% year over year.
Book value per share, a measure of net worth, grew 16% year over year to $13.09 as of Jun 30, 2016.
Share Repurchase
The board of directors authorized an additional share repurchase of up to $125 million of the company’s common stock.
Zacks Rank and Performance of Other Insurers
Radian Group carries a Zacks Rank #3 (Hold). Among the other players in the insurance industry that have reported their earnings so far, the bottom line at Brown & Brown Inc. BRO and MGIC Investment Corp. MTG beat their respective Zacks Consensus Estimate, while Progressive Corp.'s PGR earnings missed the same.
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