Segment Reporting

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

We have two strategic business units that we manage separately—Mortgage and homegenius. Our Mortgage segment derives its revenue from mortgage insurance and other mortgage and risk services, including contract underwriting solutions provided to mortgage lending institutions and mortgage credit investors. 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.

In addition, we report as All Other activities that include: (i) income (losses) from assets held by Radian Group, our holding company; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; and (iii) certain investments in new business opportunities, including activities and investments associated with Radian Mortgage Capital, and other immaterial activities.

We allocate corporate operating expenses to both reportable segments based on each segment’s forecasted annual percentage of total revenue, which approximates the estimated percentage of management time spent on each segment. In addition, we allocate all corporate interest expense to our Mortgage segment, due to the capital-intensive nature of our mortgage insurance business.

With the primary exception of goodwill and other acquired intangible assets, which all relate to our homegenius segment, and are reviewed as part of our annual goodwill impairment assessment, we do not manage assets by segment.

See Note 1 for additional details about our Mortgage and homegenius businesses.

Adjusted Pretax Operating Income (Loss)

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 each of Radian’s business segments and to allocate resources to the segments.

Adjusted pretax operating income (loss) is defined as 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 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. See Note 4 of Notes to Consolidated Financial Statements in our 2021 Form 10-K for detailed information regarding items excluded from adjusted pretax operating income (loss), including the reasons for their treatment.

Although adjusted pretax operating income (loss) excludes certain items that have occurred in the past and are expected to occur in the future, the excluded items represent those that are: (i) not viewed as part of the operating performance of our primary activities or (ii) not expected to result in an economic impact equal to the amount reflected in pretax income (loss).

The reconciliation of adjusted pretax operating income (loss) for our reportable segments to consolidated pretax income (loss) is as follows.

Reconciliation of adjusted pretax operating income (loss) by segment
	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2022		2021		2022		2021
Adjusted pretax operating income (loss)
Mortgage	$	316,520	$	194,043	$	594,361	$	369,752
homegenius	(17,690)		(9,198)		(31,196)		(19,651)
Total adjusted pretax operating income for reportable segments (1)	298,830		184,845		563,165		350,101
All Other adjusted pretax operating income	3,203		(126)		3,816		1,934
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)
Consolidated pretax income	$	259,880	$	195,496	$	494,020	$	356,685

(1)Includes allocated corporate operating expenses and depreciation expense as follows.

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2022		2021		2022		2021
Mortgage
Allocated corporate operating expenses (a)	$	33,237	$	32,638	$	69,446	$	60,214
Direct depreciation expense	2,241		2,460		4,569		5,102
homegenius
Allocated corporate operating expenses (b)	$	5,719	$	4,721	$	10,999	$	8,717
Direct depreciation expense	642		611		1,286		1,189

(a)Includes allocated depreciation expense of $0.7 million and $1.5 million for the three and six months ended June 30, 2022, respectively, and $0.8 million and $1.6 million for the three and six months ended June 30, 2021, respectively.

(b)Includes allocated depreciation expense of $0.2 million and $0.3 million for the three and six months ended June 30, 2022, respectively, and $0.1 million and $0.2 million for the three and six months ended June 30, 2021, respectively.

Revenues

The reconciliation of revenues for our reportable segments to consolidated revenues is as follows.

Reconciliation of revenues by segment
	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2022		2021		2022		2021
Revenues
Mortgage	$	289,783	$	284,301	$	574,229	$	588,098
homegenius (1)	32,343		33,451		66,255		59,246
Total revenues for reportable segments	322,126		317,752		640,484		647,344
All Other revenues	6,661		3,643		10,822		8,104
Net gains (losses) on investments and other financial instruments	(41,869)		15,661		(71,326)		10,480
Elimination of inter-segment revenues	(85)		(62)		(167)		(121)
Total revenues	$	286,833	$	336,994	$	579,813	$	665,807

(1)Includes immaterial inter-segment revenues for the three and six months ended June 30, 2022 and 2021.

The table below, which represents total services revenue on our condensed consolidated statements of operations for the periods indicated, represents the disaggregation of services revenue by revenue type.

Services revenue
	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2022		2021		2022		2021
homegenius
Title	$	4,895	$	9,399	$	11,298	$	17,456
Real estate
Valuation	9,032		7,478		17,001		11,400
Single family rental	8,227		5,622		15,457		9,071
REO asset management	739		587		1,552		1,167
Other real estate services	4		63		5		76
Technology
Asset management technology platform	1,274		1,520		2,606		3,026
Other technology services	1,004		1,019		2,052		1,983
Mortgage	2,106		3,732		6,658		8,083
All Other	—		44		—		97
Total services revenue	$	27,281	$	29,464	$	56,629	$	52,359

Revenue recognized related to services made available to customers and billed is reflected in accounts and notes receivable. Accounts and notes receivable include $17.3 million and $20.0 million as of June 30, 2022, and December 31, 2021, respectively, related to services revenue contracts. Revenue recognized related to services performed and not yet billed is recorded in unbilled receivables and reflected in other assets. See Note 2 of Notes to Consolidated Financial Statements in our 2021 Form 10-K for information regarding our accounting policies and the services we offer.