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Note 4 - Segment Reporting (Notes)
 3 Months Ended
Mar. 31, 2021
Segment Reporting [Abstract]  
Segment Reporting Segment Reporting
We have two strategic business units 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 we wound down beginning in the fourth quarter of 2020; and (v) certain other immaterial revenue and expense items.
As described in Note 4 of Notes to Consolidated Financial Statements in our 2020 Form 10-K, we implemented several changes to our segment reporting in 2020, including related to the wind down of our traditional appraisal business announced in the fourth quarter of 2020. All changes to the composition of our segment reporting 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) 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 income and expenses. See Note 4 of Notes to Consolidated Financial Statements in our 2020 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.
Three Months Ended
March 31,
(In thousands)20212020
Adjusted pretax operating income (loss):
Mortgage$174,287 $205,667 
Real Estate(10,453)(3,153)
Total adjusted pretax operating income (loss) for reportable segments (1)
163,834 202,514 
All Other adjusted pretax operating income (loss)3,482 2,085 
Net gains (losses) on investments and other financial instruments(5,181)(22,027)
Amortization and impairment of other acquired intangible assets(862)(979)
Impairment of other long-lived assets and other non-operating items (84)(300)
Consolidated pretax income$161,189 $181,293 
(1)Includes allocated corporate operating expenses and depreciation expense as follows.
Three Months Ended
March 31,
(In thousands)20212020
Mortgage:
Allocated corporate operating expenses$27,884 $29,214 
Depreciation expense1,810 3,270 
Real Estate:
Allocated corporate operating expenses$3,996 $3,367 
Depreciation expense454 610 
Revenue
The reconciliation of revenue for our reportable segments to consolidated revenues is as follows.
Three Months Ended
March 31,
(In thousands)20212020
Revenues:
Mortgage (1)
$303,797 $315,084 
Real Estate (2)
25,795 26,525 
Total revenues for reportable segments329,592 341,609 
All Other revenues (1)
4,461 9,691 
Net gains (losses) on investments and other financial instruments(5,181)(22,027)
Elimination of inter-segment revenues(59)(192)
Total revenues$328,813 $329,081 
(1)Includes immaterial inter-segment revenues for the three months ended March 31, 2020.
(2)Includes immaterial inter-segment revenues for the three months ended March 31, 2021 and 2020.
The table below, which represents total services revenue on our condensed consolidated statements of operations for the periods indicated, represents the disaggregation of services revenues from external customers, by type.
Three Months Ended
March 31,
(In thousands)20212020
Real Estate services:
Title services$8,057 $6,565 
Asset management services5,534 8,690 
Valuation services 4,886 7,233 
Other real estate services14 653 
Mortgage services 4,351 3,133 
All Other services (1)
53 5,653 
Total services revenue $22,895 $31,927 
(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 includes $15.1 million and $18.8 million as of March 31, 2021 and December 31, 2020, 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. See Note 2 of Notes to Consolidated Financial Statements in our 2020 Form 10-K for information regarding our accounting policies and the services we offer.