Radian Group (RDN) Q3 Earnings Miss, Revenues Beat

Radian Group Inc .'s RDN third-quarter 2016 operating income of 41 cents per share missed the Zacks Consensus Estimate by 5.1%. Earnings, however, increased by a dime on a year-over-year basis.

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In the third quarter, the company witnessed the highest volume of new flow mortgage insurance business written. Radian Group continues to benefit from positive credit trends including decline in total number of delinquent loans, high quarterly cure rates and continued outstanding performance from newest books of mortgage insurance business.

Behind the Headlines

Operating revenues increased 4.5% year over year to $313.2 million on higher net premiums earned and service revenues. Revenues outpaced the Zacks Consensus Estimates of $285 million.

New mortgage insurance written (NIW) was $15.6 billion in the quarter, up 40% year over year. Notably, the quarter's NIW consisted of loans with excellent risk-return characteristics. As of Sep 30, 2016, total primary mortgage insurance in force was $181.2 billion, up 3.6% from $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 78.4% as of Sep 30, 2016. The company had reported persistency of 79.2% as of Sep 30, 2015.

Primary delinquent loans decreased 18% year over year in the quarter.

Total expenses were up 11.7% year over year to $193.9 million, primarily due to increase in provision for losses, policy acquisition costs, direct cost of services, and loss on induced conversion and debt extinguishment.

Segment Update

Net premiums earned in the company's Mortgage Insurance segment was $238.1 million, up 4.7% year over year. Claims paid were $82.7 million in the quarter, down 51% year over year. Loss ratio decreased 460 basis points to 23.6%. For 2016, claims paid amount is expected to be $375 million.

In the Mortgage and Real Estate Services segment - formed after the acquisition of Clayton Holdings in Jun 2014 - total revenue was $43.8 million, up 1.6% year over year. Pre-tax operating loss of $2.5 million was wider than a loss $0.3 million of incurred in the year-ago quarter.

Financial Update

Radian Group ended the quarter with a cash balance of $56.6 million, down 29% year over year.

Long-term debt was $1.1 billion, down 8.3% year over year.

Book value per share, a measure of net worth, grew 14% year over year to $13.47 as of Sep 30, 2016.

Radian Group purchased about $21.2 million of its outstanding 2.25% Convertible Senior Notes due 2019. It also redeemed the remaining $196 million aggregate principal amount outstanding of its 9.000% Senior Notes due 2017.

RADIAN GRP INC Price, Consensus and EPS Surprise

RADIAN GRP INC Price, Consensus and EPS Surprise | RADIAN GRP INC Quote

Zacks Rank and Performance of Other Insurers

Radian Group carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Among other players in the insurance industry that have reported their third-quarter earnings so far, earnings at Progressive Corp. PGR and MGIC Investment Corp. MTG beat their respective Zacks Consensus Estimate, while the bottom line of RLI Corp. RLI missed the same.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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