Executive Summary / Key Takeaways

• Radian Group Inc. is undergoing a transformative strategic shift, evolving from a leading U.S. mortgage insurer to a global multi-line specialty insurer through the $1.7 billion acquisition of Inigo, expected to close in Q1 2026.
• The core Mortgage Insurance business continues to demonstrate robust performance, driven by a high-quality, growing in-force portfolio, strong persistency (84% in Q3 2025), and favorable credit trends, with a maintained 7.5% initial default-to-claim rate.
• The Inigo acquisition is projected to deliver mid-teen operating earnings per share accretion and approximately 200 basis points of Return on Equity (ROE) accretion starting in year one, significantly expanding Radian's addressable market by a factor of 12.
• Radian maintains a strong capital and liquidity position, with holding company liquidity projected at $1.8 billion by early 2026, enabling the Inigo funding and supporting ongoing shareholder returns, despite a temporary pause in share repurchases.
• The company leverages its proprietary RADAR Rates platform for dynamic, risk-based pricing, a key technological differentiator that underpins its disciplined underwriting and contributes to superior portfolio credit performance.

Radian's Strategic Transformation: A New Chapter in Global Insurance

Radian Group Inc., established in 1977 as CMAC Investment Corp., has long been a cornerstone of the U.S. housing finance system, primarily through its private mortgage insurance offerings. The company's foundational strength lies in its ability to expand access to affordable homeownership and protect mortgage lenders and investors by mitigating default-related losses. This enduring role has been significantly bolstered by the PMIERs capital framework, dynamic risk-based pricing, and a robust risk distribution strategy involving various quota share and excess-of-loss reinsurance programs.

A pivotal strategic transformation is now underway, repositioning Radian from a leading U.S. mortgage insurer to a global multi-line specialty insurer. This ambitious shift is anchored by the planned $1.7 billion acquisition of Inigo, a highly profitable Lloyd's specialty insurer, expected to close in the first quarter of 2026. Concurrently, Radian is divesting its Mortgage Conduit, Title, and Real Estate Services businesses, reclassifying them as discontinued operations, with the divestiture process anticipated to conclude by the third quarter of 2026. This strategic reorientation is designed to significantly broaden Radian's addressable market and enhance capital deployment flexibility across diverse insurance lines.

Technological Edge: RADAR Rates and Data-Driven Underwriting

Radian's competitive advantage in its core Mortgage Insurance business is significantly amplified by its proprietary RADAR Rates platform. This advanced technology enables dynamic, risk-based pricing, allowing the company to precisely assess and price mortgage credit risk. The platform integrates extensive data analytics to inform strategic pricing decisions, dynamically adjusting market and credit segment exposure based on national and regional housing trends. This granular approach ensures that new business written generates optimal future earnings and economic value while maintaining portfolio health.

The tangible benefits of RADAR Rates are evident in Radian's consistently strong portfolio credit performance, characterized by high persistency and low claim levels. The platform's ability to accurately segment risk contributes directly to a disciplined underwriting process, which has resulted in a high-quality in-force portfolio. Furthermore, the strategic acquisition of Inigo aligns with Radian's data-first mindset, as Inigo itself is driven by data science in its underwriting and risk assessment. This shared technological philosophy is expected to foster meaningful capital synergies and enhance the combined entity's competitive moat through superior risk selection and pricing capabilities across a broader range of insurance products.

Competitive Landscape and Market Positioning

Radian operates in a competitive environment within the U.S. mortgage insurance and broader real estate services sectors. Its direct competitors in private mortgage insurance include MGIC Investment Corporation (MTG), Essent Group Ltd. (ESNT), and NMI Holdings, Inc. (NMIH). Radian differentiates itself through its integrated, technology-enhanced service offerings, which historically included title and real estate services, providing a more holistic solution for mortgage originators and real estate investors. While competitors like MTG and NMIH may have a more focused expertise in pure mortgage insurance, Radian's broader service ecosystem, particularly with its technology-driven approach, offers a qualitative advantage in cross-selling opportunities and operational efficiency.

The company's strategic shift to acquire Inigo further diversifies its competitive positioning beyond the U.S. mortgage market. Inigo's expertise as a global specialty insurer underwriting through Lloyd's Syndicate 1301 will allow Radian to compete in a much larger and uncorrelated market. This move is expected to enhance Radian's resilience across various business cycles by allocating capital across strong and uncorrelated businesses. The divestiture of its non-core businesses will streamline operations, allowing for a sharper focus on the high-margin mortgage insurance and the newly acquired specialty insurance segments, potentially improving overall profitability and market share in its continuing operations.

Financial Performance and Operational Strength

Radian's financial performance in 2025 reflects the underlying strength of its Mortgage Insurance business and the initial impacts of its strategic transformation. For the third quarter of 2025, net income from continuing operations stood at $153 million, or $1.11 per diluted share, consistent with the prior quarter. Total revenues for continuing operations were $303 million, contributing to net premiums earned of $237 million, the highest level in over three years.

The company's primary mortgage insurance in-force portfolio reached an all-time high of $281 billion as of September 30, 2025, driven by $15.5 billion in new insurance written (NIW) during the quarter, a 15% increase year-over-year.

Profitability metrics remain robust, with a Return on Equity (ROE) for continuing operations of 13.4% in Q3 2025, and an operating ROE of 13.9%. Book value per share grew 9% year-over-year to $34.34. The in-force premium yield has remained stable at 38 basis points, supported by a strong persistency rate of 84%, as approximately half of the in-force portfolio holds mortgage rates of 5% or lower, reducing refinancing risk in the current interest rate environment. Credit performance continues to be a highlight, with a portfolio default rate of 2.42% and new defaults in Q3 2025 declining 2% year-over-year to approximately 13,400. The initial default-to-claim rate assumption is maintained at a conservative 7.5%, reflecting strong cure activity and significant embedded equity in new defaults.

Operating expenses for continuing operations are being actively managed, with Q3 2025 expenses totaling $62 million, including $9 million in Inigo acquisition-related costs. Excluding these, operating expenses were $54 million, a $16 million decline from the prior quarter. This reflects ongoing efforts to reduce the expense structure, with full-year 2025 operating expenses for continuing operations anticipated to be approximately $250 million, a figure expected to carry into 2026. The discontinued operations, including Mortgage Conduit, Title, and Real Estate Services, reported a net loss of $11.3 million in Q3 2025, including $7 million in estimated costs related to their sale. The Mortgage Conduit business experienced some revenue volatility due to mark-to-market changes on residential mortgage loans held for sale, with a $9 million impact in Q2 2025.

Capital Strength and Shareholder Returns

Radian maintains a robust capital and liquidity position, a testament to its disciplined financial management. As of September 30, 2025, Radian Group held $995 million in unrestricted cash and liquid investments, with total liquidity reaching $1.30 billion, including an undrawn $500 million unsecured revolving credit facility. This facility was expanded in November 2025 and matures in November 2030, providing significant financial flexibility.

Radian Guaranty, the mortgage insurance subsidiary, boasts a strong PMIERs cushion of $1.9 billion and statutory claims paying resources of $6.10 billion.

The company has a strong track record of returning capital to shareholders, having distributed nearly $3 billion through dividends and share repurchases since 2017. While share repurchases have been temporarily paused to conserve capital for the Inigo acquisition, management expects to revisit this strategy once holding company liquidity returns to an excess position, likely within a few quarters post-acquisition. Radian Guaranty is expected to pay $795 million in total distributions to Radian Group in 2025, including a $200 million return of capital in Q1 2025 and an anticipated $195 million dividend in Q4 2025.

Holding company liquidity is projected to reach approximately $1.8 billion by early 2026, ensuring ample resources for the Inigo acquisition and future capital deployment. The company's leverage ratio has declined to 18.7% and is expected to remain below 20% by year-end 2026.

Outlook and Key Risks

The outlook for Radian is positive, driven by the strategic transformation and the continued strength of its core Mortgage Insurance business. The Inigo acquisition is expected to be significantly accretive, delivering mid-teen operating EPS accretion and approximately 200 basis points of ROE accretion in its first year. This expansion into global specialty insurance, coupled with the streamlined focus from divesting non-core assets, positions Radian for diversified and profitable growth. Management anticipates stable in-force premium yields and a portfolio default rate remaining below 3% in the absence of significant macroeconomic dislocation.

However, this transformative period is not without risks. The successful integration of Inigo and the realization of anticipated synergies are subject to execution risks, including managing new regulatory requirements and international operations. The funding of the Inigo acquisition will immediately reduce Radian's liquidity and Radian Guaranty's PMIERs cushion, and the associated intercompany borrowing agreement includes conditions that could impact future dividends from Radian Guaranty. Furthermore, the divestiture of the Mortgage Conduit, Title, and Real Estate Services businesses carries risks related to transaction completion, potential liabilities, and operational disruptions. While the housing market remains supported by demand and embedded home equity, macroeconomic uncertainties, including interest rate fluctuations and potential impacts from global trade policies, could affect credit performance and market conditions.

Conclusion

Radian Group Inc. stands at a pivotal juncture, strategically transforming its business model to unlock new avenues for growth and value creation. By leveraging its robust U.S. mortgage insurance foundation, characterized by a high-quality portfolio and technologically advanced underwriting, Radian is expanding into the global specialty insurance market through the acquisition of Inigo. This strategic evolution is poised to significantly enhance earnings and ROE, while diversifying risk across uncorrelated business lines.

The company's disciplined capital management and strong liquidity position provide a solid financial bedrock for this transformation, ensuring the funding of the Inigo acquisition and supporting continued shareholder returns. While risks associated with integration, divestiture, and macroeconomic factors warrant careful monitoring, Radian's proactive strategic initiatives, coupled with its technological leadership in risk assessment, position it favorably to capitalize on expanded market opportunities and deliver compelling long-term value to investors.