Radian Group (RDN)

Mortgage insurance provider Radian Group (NYSE:RDN) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 9.2% year on year to $303.2 million. Its non-GAAP profit of $1.15 per share was 14.1% above analysts’ consensus estimates.

Company Overview

Founded during the housing boom of 1977 and weathering multiple real estate cycles since, Radian Group (NYSE:RDN) provides mortgage insurance and real estate services, helping lenders manage risk and homebuyers achieve affordable homeownership.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

Radian Group's primary competitors include other private mortgage insurers such as MGIC Investment Corporation (NYSE:MTG), Essent Group (NYSE:ESNT), and NMI Holdings (NASDAQ:NMIH), as well as government agencies like the Federal Housing Administration (FHA) and Veterans Administration (VA). In its homegenius segment, Radian competes with major title insurance companies including Fidelity National Financial (NYSE:FNF) and First American Financial (NYSE:FAF).

Insurance companies generate revenue three ways. The first is the core insurance business itself, represented in the income statement as premiums earned. The second source is investment income from investing the “float” (premiums collected but not yet paid out as claims) in assets such as fixed-income assets and equities. The third is fees from policy administration, annuities, and other value-added services. Over the last five years, Radian Group’s demand was weak and its revenue declined by 2.9% per year. This wasn’t a great result and is a sign of lacking business quality.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Radian Group’s annualized revenue growth of 1.2% over the last two years is above its five-year trend, but we were still disappointed by the results. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Radian Group missed Wall Street’s estimates and reported a rather uninspiring 9.2% year-on-year revenue decline, generating $303.2 million of revenue.

Net premiums earned made up 77% of the company’s total revenue during the last five years, meaning insurance operations are Radian Group’s largest source of revenue.

Net premiums earned commands greater market attention due to its reliability and consistency, whereas investment and fee income are often seen as more volatile revenue streams that fluctuate with market conditions.

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.

Radian Group’s net premiums earned has declined by 3.1% annually over the last five years, much worse than the broader insurance industry and in line with its total revenue.

When analyzing Radian Group’s net premiums earned over the last two years, we can see that growth accelerated to 1.6% annually. This performance was similar to its total revenue.

Radian Group produced $237.1 million of net premiums earned in Q3, flat year on year. But this was still enough to meet Wall Street Consensus estimates.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

The economics of insurers are driven by their balance sheets, where assets (investing the float + premiums receivable) and liabilities (claims to pay) define the fundamentals. Interest income and expense should therefore be factored into the definition of profit but taxes - which are largely out of a company’s control - should not.

Over the last four years, Radian Group’s pre-tax profit margin has fallen by 8.6 percentage points, going from 51.2% to 59.9%. However, the company gave back some of its expense savings as its pre-tax profit margin declined by 4.6 percentage points on a two-year basis.

Radian Group’s pre-tax profit margin came in at 65.5% this quarter. This result was 7 percentage points better than the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Radian Group’s EPS grew at a remarkable 17.5% compounded annual growth rate over the last five years, higher than its 2.9% annualized revenue declines. This tells us management adapted its cost structure in response to a challenging demand environment.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Radian Group, its two-year annual EPS growth of 3.2% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Radian Group reported adjusted EPS of $1.15, up from $1.03 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Radian Group’s full-year EPS of $4.24 to stay about the same.

Insurers are balance sheet businesses, collecting premiums upfront and paying out claims over time. Premiums collected but not yet paid out, often referred to as the float, are invested and create an asset base supported by a liability structure. Book value per share (BVPS) captures this dynamic by measuring these assets (investment portfolio, cash, reinsurance recoverables) less liabilities (claim reserves, debt, future policy benefits). BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality because it reflects long-term capital growth and is harder to manipulate than more commonly-used metrics like EPS.

Radian Group’s BVPS grew at a solid 9.8% annual clip over the last five years. BVPS growth has also accelerated recently, growing by 13.4% annually over the last two years from $26.69 to $34.34 per share.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Radian Group currently has $1.13 billion of debt and $4.65 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.3×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for an insurance business. Anything below 0.5× is a bonus.

Return on equity (ROE) serves as a comprehensive measure of an insurer's performance, showing how efficiently it converts shareholder capital into profits. Strong ROE performance typically translates to better returns for investors through a combination of earnings retention, share repurchases, and dividend distributions.

Over the last five years, Radian Group has averaged an ROE of 14.8%, healthy for a company operating in a sector where the average shakes out around 12.5% and those putting up 20%+ are greatly admired. This is a bright spot for Radian Group.

It was good to see Radian Group beat analysts’ EPS expectations this quarter. On the other hand, its revenue missed. Zooming out, we think this was a mixed quarter. The stock traded up 1.4% to $34.80 immediately after reporting.

Updated: December 4, 2025 at 11:41 PM EST

Are you wondering whether to buy Radian Group or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Radian Group isn’t a terrible business, but it doesn’t pass our bar. For starters, its revenue has declined over the last five years. And while its improving combined ratio shows the business has become more productive, the downside is its net premiums earned has declined over the last five years. On top of that, its projected EPS for the next year is lacking.

Radian Group’s P/B ratio based on the next 12 months is 1x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $39 on the company (compared to the current share price of $34.73).