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Note 4 - Segment Reporting - Level 1 (Notes)
 12 Months Ended
Dec. 31, 2020
Segment Reporting [Abstract]  
Segment Reporting Disclosure [Text Block] Segment Reporting
We have two strategic business segments that we manage separately—Mortgage and Real Estate. Our Mortgage segment derives its revenue from mortgage insurance and other mortgage and risk services, including contract underwriting services provided to lenders. Our Real Estate segment offers a broad array of title, valuation, asset management and other real estate services to market participants across the real estate value chain. In addition, we report as All Other activities that include: (i) income (losses) from assets held by our holding company; (ii) related general corporate operating expenses not attributable or allocated to our reportable segments; (iii) for all periods through its sale in January 2020, income and expenses related to Clayton; (iv) for all periods presented, the income and expenses related to our traditional appraisal services, which in October 2020 we announced we were winding down; and (v) other immaterial revenue and expense items, including entries to correct for certain immaterial adjustments.
Subsequent to the sale of Clayton, our Chief Executive Officer (Radian’s chief operating decision maker) implemented certain organizational changes that caused the composition of our reportable segments to change. As revised, the Company’s Mortgage and Real Estate segments are managed by our President of Mortgage and Co-Heads of Real Estate, respectively, who are responsible for the overall profitability of their respective segments and who are directly accountable to our chief operating decision maker.
These segment reporting changes align with the changes in personnel reporting lines, management oversight and branding following the sale of Clayton, and are consistent with the way our chief operating decision maker began assessing the performance of our reportable segments and other business activities effective in the first quarter of 2020. All changes in 2020 to the composition of our reportable segments have been reflected in our segment operating results for all periods presented. See Note 1 for additional details about our Mortgage and Real Estate businesses.
We allocate corporate operating expenses to both reportable segments based 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.
With the exception of goodwill and other acquired intangible assets that relate to our Real Estate segment, which are reviewed as part of our annual goodwill impairment assessment, we do not manage assets by segment.
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) from continuing operations excluding the effects of: (i) net gains (losses) on investments and other financial instruments; (ii) loss 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 gains (losses) from the sale of lines of business and acquisition-related expenses.
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). These adjustments, along with the reasons for their treatment, are described below.
(1) Net gains (losses) on investments and other financial instruments. The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities, our tax and capital profile and overall market cycles. Unrealized gains and losses arise primarily from changes in the market value of our investments that are classified as trading or equity securities. These valuation adjustments may not necessarily result in realized economic gains or losses.
Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these realized and unrealized gains or losses and changes in fair value of other financial instruments. We do not view them to be indicative of our fundamental operating activities.
(2)Loss on extinguishment of debt. Gains or losses on early extinguishment of debt and losses incurred to purchase our debt prior to maturity are discretionary activities that are undertaken in order to take advantage of market opportunities to strengthen our financial and capital positions; therefore, we do not view these activities as part of our operating performance. Such transactions do not reflect expected future operations and do not provide meaningful insight regarding our current or past operating trends.
(3)Amortization and impairment of goodwill and other acquired intangible assets. Amortization of acquired intangible assets represents the periodic expense required to amortize the cost of acquired intangible assets over their estimated useful lives. Acquired intangible assets are also periodically reviewed for potential impairment, and impairment adjustments are made whenever appropriate. We do not view these charges as part of the operating performance of our primary activities.
(4)Impairment of other long-lived assets and other non-operating items. Includes activities that we do not view to be indicative of our fundamental operating activities, such as: (i) impairment of internal-use software and other long-lived assets; (ii) gains (losses) from the sale of lines of business; and (iii) acquisition-related expenses.
The reconciliation of adjusted pretax operating income (loss) for our reportable segments to consolidated pretax income is as follows.
December 31,
(In thousands)202020192018
Adjusted pretax operating income (loss):
Mortgage$451,488 $852,854 $770,714 
Real Estate(23,240)(17,987)(4,005)
Total adjusted pretax operating income (loss) for reportable
segments		428,248 834,867 766,709 
All Other adjusted pretax operating income (loss)3,819 19,768 (21,214)
Net gains (losses) on investments and other financial instruments60,277 51,719 (42,476)
Loss on extinguishment of debt— (22,738)— 
Impairment of goodwill— (4,828)— 
Amortization and impairment of other acquired intangible assets(5,144)(22,288)(12,429)
Impairment of other long-lived assets and other non-operating items (7,759)(7,507)(6,404)
Consolidated pretax income $479,441 $848,993 $684,186 
Revenue and Other Segment Information
The following tables reconcile reportable segment revenues to consolidated revenues and summarize interest expense, depreciation expense, allocation of corporate operating expenses and adjusted pretax operating income for our reportable segments as follows.
December 31, 2020
(In thousands)MortgageReal EstateReportable Segment TotalAll OtherInter-segmentAdjustmentsConsolidated Total
Net premiums earned$1,092,767 $22,554 $1,115,321 $— $— $— $1,115,321 
Services revenue14,765 79,524 94,289 12,535 (1,439)— 105,385 
Net investment income 137,195 361 137,556 16,481 — — 154,037 
Other income 2,816 — 2,816 534 — 247 3,597 
Add: Net gains (losses) on investments and other financial instruments— — — — — 60,277 60,277 
Total revenues$1,247,543 $102,439 $1,349,982 $29,550 $(1,439)$60,524 $1,438,617 
Other segment information:
Interest expense$71,150 $— $71,150 
Depreciation9,815 2,559 12,374 
Allocation of corporate operating expenses (1)
114,802 12,807 127,609 
(1)Includes additional depreciation expense of $2.6 million, $0.3 million and $2.9 million allocated to Mortgage, Real Estate and Reportable Segment Total, respectively.
December 31, 2019
(In thousands)MortgageReal EstateReportable Segment TotalAll OtherInter-segmentAdjustmentsConsolidated Total
Net premiums earned$1,134,214 $11,976 $1,146,190 $(841)$— $— $1,145,349 
Services revenue8,134 76,941 85,075 70,961 (1,440)— 154,596 
Net investment income 151,491 680 152,171 19,625 — — 171,796 
Other income 2,798 — 2,798 697 — — 3,495 
Add: Net gains (losses) on investments and other financial instruments— — — — — 51,719 51,719 
Total revenues$1,296,637 $89,597 $1,386,234 $90,442 $(1,440)$51,719 $1,526,955 
Other segment information:
Interest expense$56,310 $— $56,310 
Depreciation13,770 2,169 15,939 
Allocation of corporate operating expenses (1)
104,078 10,165 114,243 
(1)Includes additional depreciation expense of $1.6 million, $0.1 million and $1.7 million allocated to Mortgage, Real Estate and Reportable Segment Total, respectively.
December 31, 2018
(In thousands)MortgageReal EstateReportable Segment TotalAll OtherInter-segmentAdjustmentsConsolidated Total
Net premiums earned$1,006,721$7,286 $1,014,007 $— $— $— $1,014,007 
Services revenue4,968 79,080 84,048 62,574 (1,650)— 144,972 
Net investment income 148,274 373 148,647 3,828 — — 152,475 
Other income 2,214 1,234 3,448 580 — — 4,028 
Add: Net gains (losses) on investments and other financial instruments— — — — — (42,476)(42,476)
Total revenues$1,162,177 $87,973 $1,250,150 $66,982 $(1,650)$(42,476)$1,273,006 
Other segment information:
Interest expense$43,685 $— $43,685 
Depreciation14,714 1,395 16,109 
Allocation of corporate operating expenses (1)
80,135 8,382 88,517 
(1)Includes additional depreciation expense of $0.5 million, $0.1 million and $0.6 million allocated to Mortgage, Real Estate and Reportable Segment Total, respectively.
The table below represents the disaggregation of services revenues by revenue type.
Year Ended December 31,
(In thousands)202020192018
Real Estate services:
Asset management services$29,841 $30,846 $42,839 
Title services23,266 14,185 5,512 
Valuation services22,582 29,026 30,269 
Other real estate services2,479 2,431 — 
Mortgage services14,682 7,632 4,307 
All Other services (1)
12,535 70,476 62,045 
Total services revenue$105,385 $154,596 $144,972 
(1)Includes services revenue from Clayton prior to its sale in January 2020 and amounts related to our traditional appraisal business, which we wound down beginning in the fourth quarter of 2020.
Revenue recognized related to services made available to customers and billed is reflected in accounts and notes receivable. Accounts and notes receivable included $18.8 million and $10.8 million as of December 31, 2020 and 2019, respectively, related to services revenue contracts. Revenue recognized related to services performed and not yet billed is recorded in unbilled receivables and reflected in other assets. Deferred revenue, which represents advance payments received from customers in advance of revenue recognition, is immaterial for all periods presented. We have no material bad-debt expense.
There was one single customer that accounted for more than 10% of NIW in 2020, as compared to none in 2019 or 2018. There was no single customer that accounted for more than 10% of our consolidated revenues (excluding net gains (losses) on investments and other financial instruments) in 2020, 2019 or 2018.