Radian Group Navigates Mixed Q1 Results Amid Persistent Sector Challenges

Radian Group (RDN) delivered a cautiously optimistic Q1 2025 earnings report, balancing record mortgage insurance in-force (MIF) growth and strong book value expansion against operational headwinds including revenue misses and rising loss ratios. The results underscore the dual-edged nature of the mortgage insurance sector: while demand for Radian’s core product remains robust, cost pressures and shifting credit dynamics are testing the company’s margins.

Financial Performance: A Beat with Strings Attached

Radian’s adjusted operating income of 99 cents per share beat estimates by 4.2%, though this represented a 3.9% year-over-year decline. The miss on total operating revenues—$306 million versus a 6.4% deficit relative to expectations—highlighted execution challenges. Lower premiums, weaker persistency, and higher default-related expenses were cited as key drags.

The mortgage segment, which accounts for 93% of total revenues, saw net premiums earned flat at $234 million despite a 17.7% year-over-year drop in new insurance written (NIW) to $9.5 billion. This points to a slowdown in originations, likely tied to elevated mortgage rates and weaker housing demand.

Operational Metrics: Strengths and Weaknesses

• Record MIF Growth: Radian’s mortgage insurance in-force hit an all-time high of $274.2 billion, up 1.2% year-over-year, signaling sustained demand for its product.
• Persistency Decline: The retention rate fell 60 basis points (bps) to 83.7%, a worrying trend that could pressure long-term revenue stability.
• Credit Trends: While delinquent loans rose 9.2% year-over-year, the default rate improved to 2.3%, suggesting underlying credit conditions may be stabilizing.

Strategic Priorities: Capital Returns and Liquidity

Radian reaffirmed its commitment to shareholder returns, repurchasing $207 million in shares during the quarter and maintaining a $0.255 per share dividend. With $336 million remaining under its buyback program and $795 million in dividend capacity, the company signals confidence in its capital resilience. However, the 41% sequential drop in cash to $28.2 million raises liquidity concerns, particularly if loss ratios continue to climb.

Key Risks on the Horizon

1. Elevated Loss Ratios: The mortgage segment’s loss ratio surged to 7%, up from 3% a year ago, driven by higher provisions. This could signal deteriorating credit quality or increased claims activity.
2. Sector Volatility: Peer comparisons paint a mixed picture. While MGIC (MTG) beat estimates, Everest Group (EG) reported a 60.5% income decline, underscoring sector-wide uncertainty.
3. Persistency Challenges: Radian’s persistency now trails MGIC’s 84.7%, a gap that could widen if retention efforts fail to improve.

Conclusion: A Stock for Patient Investors

Radian’s Q1 results reflect a company navigating a complex landscape: its $274 billion MIF and 11% year-over-year rise in book value per share (to $32.48) highlight structural strengths, while declining persistency and rising loss ratios pose near-term risks.

Investors should weigh Radian’s $6 billion in PMIERs-compliant assets and $795 million dividend capacity against its 7% loss ratio and weakening cash position. The stock’s valuation—trading at 1.2x book value, below its five-year average—suggests some pessimism is already priced in.

While Radian’s dividend and buyback discipline provide a floor, meaningful upside hinges on stabilizing loss ratios and improving persistency. For now, the stock remains a hold for those willing to bet on a recovery in mortgage demand and better cost controls.

In summary, RDN’s Q1 results are a reminder that mortgage insurers operate in a high-margin, high-volatility space. The path to outperformance requires navigating credit cycles with precision—a challenge Radian is proving it can meet, but not without bumps along the way.