M.D.C. Holdings Stock

M.D.C. Holdings, Inc. (MDC) provides homebuilding and financial services.

The company’s homebuilding operations consist of wholly-owned subsidiary companies that generally purchase finished lots or develop lots to the extent necessary for the construction and sale primarily of single-family detached homes to first-time and first-time move-up homebuyers under the name ‘Richmond American Homes’. The company’s homebuilding operations are consisted of various homebuilding divisions that it considers to be its operating segments. For financial reporting purposes, the company’s homebuilding operations are aggregated into reportable segments as follows: West (includes operations in Arizona, California, Nevada, New Mexico, Oregon, Texas and Washington); Mountain (includes operations in Colorado, Idaho and Utah); and East (includes operations in Alabama, Florida, Maryland, Pennsylvania, Tennessee and Virginia).

The company’s financial services operations consist of HomeAmerican Mortgage Corporation (HomeAmerican), which originates mortgage loans primarily for its homebuyers; Allegiant Insurance Company, Inc., A Risk Retention Group (Allegiant), which provides insurance coverage primarily to its homebuilding subsidiaries on homes that have been delivered and most of the company’s subcontractors for completed work on those delivered homes; StarAmerican Insurance Ltd. (StarAmerican), which is a re-insurer of Allegiant claims; American Home Insurance Agency, Inc., which offers third-party insurance products to the company’s homebuyers; and American Home Title and Escrow Company, which provides title agency services to the company’s homebuilding subsidiaries and its customers in certain states. For financial reporting, the company has aggregated its financial services operating segments into reportable segments as follows: mortgage operations (represents HomeAmerican only) and other (all remaining operating segments).

The company’s financial services operations include subsidiaries that provide mortgage financing, place title insurance and homeowner insurance for its homebuyers, and provide general liability insurance for the company’s subsidiaries and most of its subcontractors.

Homebuilding Operations

Operating Divisions: The primary functions of the company’s homebuilding segments include land acquisition and development, home construction, sales and marketing, and customer service. Operating decisions are made by the company’s local management teams under the oversight of its Chief Operating Decision Maker (CODM), or decision-making group. The company had 19 active homebuilding operating divisions as of December 31, 2023.

Corporate Management: The company’s homebuilding business is managed primarily through members of senior management in its Corporate segment and its four Asset Management Committees (AMCs), three for reviewing real estate transactions and one for reviewing corporate transactions.

Housing: The company’s homebuilding subsidiaries build single-family detached homes in a number of standardized series, designed to provide variety in the size and style of homes for its potential homebuyers. In certain markets, the company’s homebuilding subsidiaries build and sell duplexes. Within each series of its single-family detached homes, the company’s homebuilding subsidiaries build several different floor plans offering standard and optional features (such as upgraded appliances, cabinetry, flooring, etc.).

Land Acquisition and Development: The company’s homebuilding subsidiaries acquire lots with the intention of constructing and selling homes on the acquired land.

The company’s homebuilding subsidiaries may own or have the right under option contracts to acquire undeveloped parcels of real estate that they intend to develop into finished lots. They generally develop land in phases in order to limit its risk in a particular subdivision and to efficiently employ available capital resources.

Customer Service and Quality Control: The company’s homebuilding divisions are responsible for pre-closing quality control inspections and responding to customers’ post-closing needs. The company has a product service and quality control program, focused on improving and/or maintaining the quality of its customers’ complete home buying and homeownership experience.

Sales and Marketing: The company’s sales and marketing programs are designed to attract homebuyers. The company has a centralized in-house advertising and marketing department, including digital marketing, that oversees its efforts to communicate the inherent value of its homes to its prospective homebuyers and distinguish its Richmond American Homes brand from its competitors and other home buying opportunities. The company’s HBRC team consists of new home specialists local to each market it builds in, who are dedicated to supporting its digital and phone leads and set appointments for them to meet at one of its sales centers with a community sales associate. The company’s centralized in-house merchandising team furnishes its model homes and sales centers.

Another part of the company’s marketing presentation takes place in its design centers (also known as Home Galleries). Here, homebuyers are able to personalize their homes with a variety of options and upgrades. Additionally, these locations often serve as an information center for prospective homebuyers and real estate agents who may opt to receive personalized attention from one of the company’s new home specialists, resulting in a more focused and efficient home search across all of its Richmond American communities in a given market place.

Financial Services Operations

Mortgage Lending Operations

HomeAmerican is a full-service mortgage lender and the principal originator of mortgage loans for the company’s homebuyers. HomeAmerican has a centralized loan processing center where it originates mortgage loans, primarily for the company’s homebuyers.

HomeAmerican is authorized to originate Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) (together ‘the government-sponsored enterprises’), Federal Housing Administration-insured (FHA), and Department of Veterans Affairs-guaranteed (VA) mortgages and is an authorized issuer of Government National Mortgage Association (Ginnie Mae) mortgage-backed securities. Furthermore, HomeAmerican also is an authorized loan servicer for Fannie Mae, Freddie Mac and Ginnie Mae and, as such, is subject to the rules and regulations of these entities.

HomeAmerican uses a mortgage repurchase facility, internally generated funds, and temporary financing provided by its parent to finance the origination of mortgage loans until they are sold. HomeAmerican sells originated mortgage loans to third-party purchasers on either a bulk or flow basis. Mortgage loans sold on a bulk basis include the sale of a package of substantially similar originated mortgage loans, while sales of mortgage loans on a flow basis are completed as HomeAmerican originates each loan. Mortgage loans sold to third-party purchasers include HomeAmerican’s representations and warranties with respect to certain borrower payment defaults, credit quality issues and/or misstatements made by HomeAmerican or misrepresentations by the company’s homebuyers. Substantially all of the mortgage loans originated by HomeAmerican are sold to third-party purchasers, generally between 5 to 35 days of origination.

Insurance Operations

Allegiant and StarAmerican were formed to provide insurance coverage of homebuilding risks for the company’s homebuilding subsidiaries and most of its homebuilding subcontractors. Allegiant was organized as a risk retention group under the Federal Liability Risk Retention Act of 1981. Allegiant, which began operations in June of 2004, is licensed as a Class 3 Stock Insurance Company by the Division of Insurance of the State of Hawaii and is subject primarily to the regulations of its state of incorporation. StarAmerican is a single parent captive insurance company licensed by the Division of Insurance of the state of Hawaii.

Allegiant generates premium revenue by providing to its customers, consisted of the company’s homebuilding subsidiaries and most subcontractors of the company’s homebuilding subsidiaries, general liability insurance on homes sold by its homebuilding subsidiaries and for work performed in completed subdivisions. Allegiant seeks to provide to its customers coverage and insurance rates that are competitive with other insurers. StarAmerican generates premium revenue by providing re-insurance coverage to Allegiant. Allegiant and StarAmerican incur expenses for actual losses and loss adjustment expenses and for reserves established based on actuarial studies, including known facts, such as the company’s experience with similar insurance cases and historical trends involving insurance claim payment patterns, pending levels of unpaid insurance claims, claim severity, claim frequency patterns and interpretations of circumstances, including changing regulatory and legal environments.

Regulation: Allegiant and StarAmerican are licensed in the state of Hawaii and, therefore, are subject to regulation by the Hawaii Insurance Division. This regulation includes restrictions and oversight regarding: types of insurance provided; investment options; required capital and surplus; financial and information reporting; use of auditors, actuaries and other service providers; periodic examinations; and other operational items. Additionally, as a risk retention group, Allegiant is also registered in other states where certain MDC homebuilding subsidiaries do business.

Insurance Agency Operations

American Home Insurance is an insurance agency that sells primarily homeowners, personal property and casualty insurance products in the same markets where the company’s homebuilding subsidiaries operate and primarily to its homebuyers.

Title Operations

American Home Title provides title agency services to the company and its homebuyers in Colorado, Florida, Maryland, Nevada, Pennsylvania and Virginia.

History

M.D.C. Holdings, Inc. was founded in 1972. The company was incorporated in 1985.