Radian Group serves as the holding company for our insurance subsidiaries, through which we conduct our mortgage insurance and title insurance businesses. These insurance subsidiaries are subject to comprehensive, detailed regulation by the insurance departments in the various states where our insurance subsidiaries are domiciled or licensed to transact business. Insurance laws vary from state to state, but generally grant broad supervisory powers to state agencies or officials to examine insurance companies and enforce rules or exercise discretion affecting almost every significant aspect of the insurance business, including the power to revoke or restrict an insurance company’s ability to write new business.

All of our mortgage insurance subsidiaries are domiciled in Pennsylvania and, following the series of capital actions in the fourth quarter of 2022 as described below, we currently write new mortgage insurance business using only one principal subsidiary, Radian Guaranty. Radian Guaranty is authorized as a monoline insurer to write mortgage guaranty insurance (or in states where there is no specific authorization for mortgage guaranty insurance, the applicable line of insurance under which mortgage guaranty insurance is regulated) in all 50 states, the District of Columbia and Guam.

In addition to complying with state insurance regulations, in order to be eligible to insure loans purchased by the GSEs, mortgage insurers such as Radian Guaranty must meet the GSEs’ eligibility requirements, or PMIERs. The PMIERs are comprehensive, covering virtually all aspects of the business and operations of a private mortgage insurer, including internal risk management and quality controls, the relationship between the GSEs and the approved insurer, as well as the approved insurer’s financial condition. See “—PMIERs” below for additional information.

The PMIERs and state insurance regulations include various capital requirements and dividend restrictions based on our insurance subsidiaries’ statutory financial position and results of operations, as described below. Our failure to maintain adequate levels of capital could lead to intervention by the various insurance regulatory authorities, which could materially and adversely affect our business, business prospects and financial condition.

■Effective December 1, 2022, Radian Reinsurance completed the novation to an unrelated third-party insurer of its entire insured portfolio of credit risk transfer transactions with the GSEs. Under the terms of the novation agreements, which were approved by the GSEs, the third-party insurer assumed all rights, interests, liabilities and obligations under the credit risk transfer transactions originally insured by Radian Reinsurance, which totaled $276 million of risk in force as of September 30, 2022.

■Following the novation of Radian Reinsurance’s entire insured portfolio, Radian Group completed the merger of Radian Reinsurance into Radian Guaranty, effective December 28, 2022. As of September 30, 2022, Radian Reinsurance had statutory admitted assets of $325 million that were merged into Radian Guaranty effective for the fourth quarter of 2022.

■Following completion of the merger of Radian Reinsurance into Radian Guaranty, the Pennsylvania Insurance Department approved a $282 million return of capital from Radian Guaranty to Radian Group, which was paid from Radian Guaranty’s gross paid in and contributed statutory surplus on December 30, 2022. In addition, the Pennsylvania Insurance Department also approved the early repayment from Radian Guaranty to Radian Group of the Surplus Note due 2027, which was also repaid on December 30, 2022.

We prepare our statutory financial statements in accordance with the accounting practices required or permitted, if applicable, by the insurance departments of the respective states of domicile of our insurance subsidiaries. Required SAP are established by the NAIC, as well as state laws, regulations and general administrative rules. In addition, insurance departments have the right to permit other specific practices that may deviate from prescribed practices. As of December 31, 2022, we did not have any prescribed or permitted SAP that resulted in reported statutory surplus or risk-based capital being materially different from what would have been reported had NAIC statutory accounting practices been followed.

Reflecting the principal differences between SAP and GAAP, statutory financial statements typically do not include unrealized gains or losses on fixed-maturity securities, deferred policy acquisition costs, certain net deferred tax assets and certain other less readily marketable assets that are designated as non-admitted assets. In addition to these general differences, SAP also requires that mortgage insurance companies establish a special contingency reserve equal to 50% of premiums earned in each year, generally to be maintained for 10 years, to protect policyholders against loss during adverse economic cycles.

As a result of the requirement to establish and maintain this statutory liability, contingency reserves affect the ability of a mortgage insurer to pay dividends, as described below. With regulatory approval, a mortgage insurance company may make early withdrawals from this contingency reserve when incurred losses exceed 35% of net premiums in a calendar year. Radian Guaranty did not release any amounts from its contingency reserves in 2022 or 2021. Based on the typical 10-year holding requirement, Radian Guaranty is scheduled to release contingency reserves to unassigned surplus in material amounts beginning in 2024. See “—Statutory Dividend Restrictions” below for additional information.

As a mortgage guaranty insurer, we are eligible for a tax deduction, subject to certain limitations, related to amounts required to be set aside in statutory contingency reserves to the extent we purchase U.S. Mortgage Guaranty Tax and Loss Bonds issued by the U.S. Department of the Treasury. Under SAP, this deduction reduces the tax provision reflected in the statutory financial statements, which in turn increases statutory net income and surplus as well as Available Assets under the PMIERs. As of December 31, 2022, Radian Guaranty held $596.4 million of these bonds, which have a 10-year original maturity but may generally be redeemed in any tax year prior to maturity.


Statutory net income

	Years Ended December 31,
(In thousands)	2022		2021		2020
Radian Guaranty (1)	$	1,091,946	$	762,609	$	474,431
Other mortgage subsidiaries	1,957		1,669		1,086
Radian Title Insurance	2,589		6,862		2,126

Statutory policyholders’ surplus (2)

	December 31,
(In thousands)	2022		2021		2020
Radian Guaranty (1)	$	758,467	$	1,105,266	$	842,188
Other mortgage subsidiaries	17,086		14,524		41,327		(3)
Radian Title Insurance	39,285		36,599		28,849

Under state insurance regulations, Radian Guaranty is required to maintain minimum surplus levels and, in certain states, a maximum ratio of net RIF relative to statutory capital, or Risk-to-capital. There are 16 RBC States that currently impose a Statutory RBC Requirement. The most common Statutory RBC Requirement is that a mortgage insurer’s Risk-to-capital may not exceed 25 to 1. In certain of the RBC States, a mortgage insurer must satisfy an MPP Requirement. Unless an RBC State grants a waiver or other form of relief, if a mortgage insurer, such as Radian Guaranty, is not in compliance with the Statutory RBC Requirement of that state, the mortgage insurer may be prohibited from writing new mortgage insurance business in that state.

The statutory capital requirements for the non-RBC States are de minimis (ranging from $1 million to $5 million); however, the insurance laws of these states generally grant broad supervisory powers to state agencies or officials to enforce rules or exercise discretion affecting almost every significant aspect of the insurance business, including the power to revoke or restrict an insurance company’s ability to write new business. Radian Guaranty’s domiciliary state, Pennsylvania, is not one of the RBC States.

Radian Guaranty was in compliance with all applicable Statutory RBC Requirements and MPP Requirements in each of the RBC States as of December 31, 2022. Radian Guaranty’s Risk-to-capital was 10.7:1 and 11.1:1 as of December 31, 2022 and 2021, respectively. For purposes of the Risk-to-capital requirements imposed by certain states, statutory capital is defined as the sum of statutory policyholders’ surplus plus statutory contingency reserves.

For many years, the NAIC has been considering changes to the Model Act and has been reviewing the minimum capital and surplus requirements for mortgage insurers. In 2021, the NAIC developed a new, legally non-binding capital monitoring framework that regulators could use as an alternative for assessing the capital adequacy of a mortgage insurer and added a new mortgage guaranty supplemental filing for companies to annually report related information. This monitoring framework, which is separate from the Model Act, is intended to be reactive to, among other things, changes in the economic and housing environment, including changes in home prices and incomes. In October 2022, the NAIC publicly released a new exposure draft of a revised Model Act (the “2022 Exposure Draft”) for comment. With respect to minimum capital and surplus requirements for mortgage insurers, the 2022 Exposure Draft largely preserves the same requirements as exist in the current Model Act. The outcome of the new Model Act process remains subject to change, and therefore, the potential impact on the Company cannot be determined and, among other things, will depend on whether the NAIC adopts final changes to the Model Act and which states, if any, ultimately adopt the new Model Act.

The PMIERs financial requirements require that a mortgage insurer’s Available Assets meet or exceed its Minimum Required Assets. At December 31, 2022, Radian Guaranty is an approved mortgage insurer under the PMIERs and is in compliance with the current PMIERs financial requirements.

The GSEs may amend the PMIERs at any time, and they have broad discretion to interpret the requirements, which could impact the calculation of Radian Guaranty’s Available Assets and/or Minimum Required Assets. In addition, the GSEs have a broad range of consent rights under the PMIERs and require private mortgage insurers to obtain the prior consent of the GSEs before taking certain actions. If Radian Guaranty is unable to satisfy the requirements set forth in the PMIERs, the GSEs could restrict it from conducting certain types of business with them or take actions that may include not purchasing loans insured by Radian Guaranty.

As of December 31, 2022, the amount of restricted net assets held by our consolidated insurance subsidiaries (which represents our equity investment in those insurance subsidiaries) totaled $4.3 billion of our consolidated net assets. Despite holding assets above the minimum statutory capital thresholds and PMIERs financial requirements, the ability of Radian’s mortgage insurance subsidiaries to pay dividends on their common stock has been restricted by certain provisions of the insurance laws of Pennsylvania, their state of domicile.

Under Pennsylvania’s insurance laws, ordinary dividends and distributions may only be paid out of an insurer’s positive unassigned surplus unless the Pennsylvania Insurance Department approves the payment of extraordinary dividends or other distributions from another source. Prior to the beneficial impact to unassigned surplus from the merger with Radian Reinsurance discussed above, Radian Guaranty had negative unassigned surplus of $562.8 million as of December 31, 2021.

In light of Radian Guaranty’s negative unassigned surplus position in recent years, any distributions to Radian Group required the prior approval of the Pennsylvania Insurance Department. Radian Guaranty sought and received such approval during 2022 to return capital by paying Extraordinary Distributions to Radian Group, including a $500 million distribution in February 2022 and a $282 million distribution in December 2022, which were paid in cash and marketable securities in the form of returns of paid-in capital.

While all proposed dividends and distributions to stockholders must be filed with the Pennsylvania Insurance Department prior to payment, if a Pennsylvania domiciled insurer has positive unassigned surplus, such insurer can pay dividends or other distributions during any 12-month period in an aggregate amount less than or equal to the greater of: (i) 10% of the preceding year-end statutory policyholders’ surplus or (ii) the preceding year’s statutory net income, in each case without the prior approval of the Pennsylvania Insurance Department. Aided by the positive impacts of the merger with Radian Reinsurance in December 2022, Radian Guaranty had positive unassigned surplus of $258.5 million as of December 31, 2022. As a result, Radian Guaranty now has the ability to pay ordinary dividends beginning in the first quarter of 2023.

As of December 31, 2022 and 2021, Radian Guaranty had contingency reserves of $4.4 billion and $3.9 billion, respectively. As discussed above, absent early releases related to elevated incurred losses, Radian Guaranty is scheduled to release contingency reserves to unassigned surplus in material amounts beginning in 2024, which should enhance Radian Guaranty’s ability to maintain a positive unassigned surplus position and to continue to pay ordinary dividends to Radian Group in future periods.


Surplus additions (distributions)

	Years Ended December 31,
(In thousands)	2022		2021		2020
Additions to Radian Guaranty surplus	$	—	$	—	$	200,000
Distributions from Radian Guaranty surplus (1)	(881,979)		—		—
Additions to other insurance subsidiaries’ surplus	—		250		—
Distributions from other insurance subsidiaries’ surplus (2)	(32,500)		(40,000)		(465,000)