Why is the radian (RDN) up 0.7% since the last earnings report?

A month has passed since Radian’s (RDN) last earnings report. Shares rose about 0.7% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or should Radian pull back? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to better understand the important catalysts.

Radian Group’s first-quarter earnings outweigh higher premiums

Radian Group Inc. reported first-quarter 2024 adjusted operating income of $1.03 per share, which beat the Zacks Consensus Estimate by 24%. The financial result increased by 5.1% year on year. Results reflected improved sustainability and an increase in premiums and insurance written, partially offset by higher expenses.

The quarter in detail

Operating revenues increased 4.8% year-over-year to $318.9 million, primarily driven by higher net premiums earned, service revenues and net investment income. Net premiums earned were $235.8 million, up 1.1% year-over-year. Net investment income increased 18.4% year-over-year to $69.2 million.

MI New Insurance Written increased 2.4% year-over-year to $11.5 billion. Primary mortgage insurance had an outstanding value of $271 billion as of March 31, 2024, up 4% year-over-year.

Persistence – the percentage of mortgage insurance in force that remains on the company’s books after 12 months – was 84% ​​as of March 31, 2024, an increase of 200 basis points (bps) year-over-year. The number of primary delinquent loans was 20,850 as of March 31, 2024, an increase of 0.5% year-over-year.

Total expenses increased 14% year-over-year to $120.8 million due to higher policy acquisition costs and interest costs. The expense ratio was 25, an improvement of 90 basis points from the prior-year quarter.

Segment update

The mortgage segment saw total revenue increase 2% year-over-year to $285 million. Net premiums earned by this segment were $233 million, up 1.1% year-over-year. Compensations paid amounted to $3 million and remained unchanged year over year. The loss ratio was (2.9) compared to (7.3) in the prior year quarter.

The All Other segment saw total revenues increase 37.2% year-over-year to $34.4 million. Net premiums earned by this segment were $1.8 million, up 3.9% year-over-year. Net investment income increased 57.6% year-over-year to $19.6 million. Adjusted pre-tax operating loss was $7 million, narrower than the year-ago loss of $14.8 million.

Financial update

As of March 31, 2024, Radian Group had a healthy cash balance of $26.9 million, an increase of 42% compared to the end of 2023. The debt-to-capital ratio deteriorated by 100 basis points to 25.4 in compared to the level at the end of 2023.

Book value per share, a measure of net worth, increased 11.7% year over year to $29.30 as of March 31, 2024. In the first quarter, adjusted operating return on net equity was 14.5%, down 120 basis points year over year.

As of March 31, 2024, PMIER’s available assets were nearly $6 billion, exceeding PMIER’s available assets by $2.3 billion.

The story continues

Share buyback and dividend update

Radian Group repurchased 1.8 million shares worth $50 million in the first quarter, including commissions. The remaining redemption capacity as of March 31, 2024 was USD 117 million. Management raised the quarterly dividend by 9% to 24.5 cents per share. The total dividend paid to shareholders as of March 12, 2024 was $37 million.

How have estimates changed since then?

Over the last month, investors have seen a downward trend in estimate revisions.

Due to these changes, the consensus estimate moved -5.88%.

VGM results

At this point, Radian has a weak Growth Score of D, but its Momentum Score is doing much better at B. Following the exact same trajectory, the stock was given a B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has a Total VGM Score of B. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company generally show a downward trend, and the scale of this correction indicates a downward shift. Notably, Radian carries a Zacks Rank #2 (Buy). We expect an above-average rate of return on shares in the coming months.

Industry player performance

Radian is part of the Zacks Insurance – Multi line industry. Over the past month, shares in the same industry Prudential (PRU) have gained 6.5%. More than a month ago, the company published its results for the quarter ended March 2024.

Prudential saw revenues of $21.7 billion in the most recent quarter, representing a year-over-year change of +43.7%. EPS of $3.12 in the same period compared to $2.66 a year ago.

For the current quarter, Prudential is expected to report earnings per share of $3.44, representing a +17% change from the prior-year quarter. The Zacks Consensus Estimate has changed +1.2% over the past 30 days.

The overall direction and magnitude of estimate revisions translates into a Zacks Rank #3 (Hold) for Prudential. The stock also has a VGM Rating of A.

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