Segment Reporting

3 Months Ended

Mar. 31, 2023

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 primarily 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. 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 and other financial instruments attributable to our reportable segments and All Other activities; (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 2022 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 is as follows.

Reconciliation of adjusted pretax operating income (loss) by segment
	Three Months Ended March 31,
(In thousands)	2023		2022
Adjusted pretax operating income (loss)
Mortgage	$	214,435	$	277,841
homegenius	(23,041)		(13,506)
Total adjusted pretax operating income for reportable segments (1)	191,394		264,335
All Other adjusted pretax operating income	8,469		613
Net gains (losses) on investments and other financial instruments (2)	5,505		(29,457)
Amortization of other acquired intangible assets	(1,371)		(849)
Impairment of other long-lived assets and other non-operating items	14		(502)
Consolidated pretax income	$	204,011	$	234,140

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

	Three Months Ended March 31,
(In thousands)	2023		2022
Mortgage
Allocated corporate operating expenses (a)	$	34,829	$	36,209
Direct depreciation expense	2,124		2,328
homegenius
Allocated corporate operating expenses (b)	$	4,658	$	5,280
Direct depreciation expense	580		644

(a)Includes allocated depreciation expense of $0.8 million for each of the three months ended March 31, 2023 and 2022.

(b)Includes allocated depreciation expense of $0.1 million for each of the three months ended March 31, 2023 and 2022.

(2)Excludes certain net gains (losses), if any, on investments and other financial instruments that are attributable to specific operating segments and therefore included in adjusted pretax operating income (loss).

Revenues

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

Reconciliation of revenues by segment
	Three Months Ended March 31,
(In thousands)	2023		2022
Revenues
Mortgage	$	279,870	$	284,446
homegenius (1)	12,961		33,912
Total revenues for reportable segments	292,831		318,358
All Other revenues	12,379		4,161
Net gains (losses) on investments and other financial instruments	5,505		(29,457)
Elimination of inter-segment revenues	(95)		(82)
Total revenues	$	310,620	$	292,980

(1)Includes immaterial inter-segment revenues for the three months ended March 31, 2023 and 2022.

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 March 31,
(In thousands)	2023		2022
homegenius
Title	$	2,554	$	6,403
Real estate
Valuation	2,881		7,969
Single family rental	2,435		7,230
Real estate owned asset management	912		813
Other real estate services	1		1
Technology
Asset management technology platform	1,166		1,332
Other technology services	699		1,048
Mortgage	336		4,552
Total services revenue	$	10,984	$	29,348

Revenue recognized related to services made available to customers and billed is reflected in accounts and notes receivable. Accounts and notes receivable include $6.2 million and $11.8 million as of March 31, 2023, and December 31, 2022, respectively, related to services revenue contracts. See Note 2 of Notes to Consolidated Financial Statements in our 2022 Form 10-K for information regarding our accounting policies and the services we offer.