Segment Reporting

6 Months Ended

Jun. 30, 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 real estate 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) amortization and impairment of goodwill and other acquired intangible assets; and (iii) impairment of other long-lived assets and other non-operating items, if any, such as gains (losses) from the

sale of lines of business, acquisition-related income and expenses and gains (losses) on extinguishment of debt. 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 June 30,				Six Months Ended June 30,
(In thousands)	2023		2022		2023		2022
Adjusted pretax operating income (loss)
Mortgage	$	197,750	$	316,520	$	412,185	$	594,361
homegenius	(24,421)		(17,690)		(47,462)		(31,196)
Total adjusted pretax operating income for reportable segments (1)	173,329		298,830		364,723		563,165
All Other adjusted pretax operating income	11,046		3,203		19,515		3,816
Net gains (losses) on investments and other financial instruments (2)	(331)		(41,869)		5,174		(71,326)
Amortization of other acquired intangible assets	(1,370)		(849)		(2,741)		(1,698)
Impairment of other long-lived assets and other non-operating items	2		565		16		63
Consolidated pretax income	$	182,676	$	259,880	$	386,687	$	494,020

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

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2023		2022		2023		2022
Mortgage
Allocated corporate operating expenses (a)	$	37,081	$	33,237	$	71,910	$	69,446
Direct depreciation expense	2,045		2,241		4,169		4,569
homegenius
Allocated corporate operating expenses (b)	$	4,954	$	5,719	$	9,612	$	10,999
Direct depreciation expense	628		642		1,208		1,286

(a)Includes allocated depreciation expense of $0.7 million and $1.5 million for the three and six months ended June 30, 2023, respectively, and $0.7 million and $1.5 million for the three and six months ended June 30, 2022, respectively.

(b)Includes allocated depreciation expense of $0.1 million and $0.2 million for the three and six months ended June 30, 2023, respectively, and $0.2 million and $0.3 million for the three and six months ended June 30, 2022, respectively.

(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 June 30,				Six Months Ended June 30,
(In thousands)	2023		2022		2023		2022
Revenues
Mortgage	$	260,817	$	289,783	$	540,687	$	574,229
homegenius (1)	14,806		32,343		27,767		66,255
Total revenues for reportable segments	275,623		322,126		568,454		640,484
All Other revenues	15,229		6,661		27,608		10,822
Net gains (losses) on investments and other financial instruments	(331)		(41,869)		5,174		(71,326)
Elimination of inter-segment revenues	(108)		(85)		(203)		(167)
Total revenues	$	290,413	$	286,833	$	601,033	$	579,813

(1)Includes immaterial inter-segment revenues for the three and six months ended June 30, 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 June 30,				Six Months Ended June 30,
(In thousands)	2023		2022		2023		2022
homegenius
Title	$	3,233	$	4,895	$	5,787	$	11,298
Real estate
Valuation	4,544		10,036		8,117		19,053
Single family rental	1,619		8,227		4,054		15,457
Asset management technology platform	1,209		1,274		2,375		2,606
Real estate owned asset management	888		739		1,800		1,552
Other real estate services	—		4		1		5
Real estate technology
Real estate technology services	20		—		27		—
Mortgage	284		2,106		620		6,658
Total services revenue	$	11,797	$	27,281	$	22,781	$	56,629

Revenue recognized related to services made available to customers and billed is reflected in accounts and notes receivable. Accounts and notes receivable include $8 million and $12 million as of June 30, 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.