Radian (RDN) 2 Nov 232023 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to Radian's Third Quarter 2023 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to John Damian, Senior Vice President, Investor Relations and Corporate Development. Please go ahead.

Thank you, and welcome to Radian's Third Quarter 2023 Conference Call.

www.radian.com. contains evening results the and of website which was the Investors release, our yesterday issued is at press Radian's for financial quarter, section Our posted to the our that This equity. A press of may including press complete pretax all of adjusted share income release income, net non-GAAP operating certain operating comparable to and release these release F, non-GAAP adjusted adjusted be of during net today's be includes discussed press call, operating in per measures diluted may description found measures measures reconciliations return Exhibit and measures in be most GAAP may found G. Exhibit on These exhibits our of the website. section are on Investors

Financial hear Today, for from of call Q&A hand Rick the you portion Pandit, the Officer; Derek Radian will Mortgage. Chief of Also Brummer, Officer. President is Chief on Radian's Executive Thornberry, and Sumita

based will projections actual to this we uncertainties, cause statements. results These would made Before I which materially. risks begin, to are during current to remind comments are include may subject forward-looking assumptions that that on you expectations, call and like differ statements and estimates,

For release in of the the our forward-looking in statements factors these earnings are also reports These statements SEC. website. review XX-K risks, included cautionary our discussion the including and Form our regarding with XXXX risk subsequent and please filed on available

over Rick. the to Now I'd to call turn like

to report net or $XXX quarter million thank all to income diluted today. excellent you am for another and per share. $XXX afternoon, pleased Radian. us $X.XX of Good generated grew GAAP joining for We million. year-over-year revenues I

Book per to in net equity share the increased on and third $XX.XX. return adjusted annualized year-over-year operating ROE Our XX%, XX% was XX% value quarter. was

to shares overall portfolio power mortgage our and liquidity the $XX quarter. highly quality a yielding very earnings reflect insurance paid our strong. reflecting And managing combined the the successful million our of of industry. track positions results Radian $XX highest dividend We million record with resources. or and of common effectively remained capital Group in X.X repurchased our stock the million valuable dividend in These capital stockholders,

to We risks. geopolitical macroeconomic trends, heightened continue monitor including

we real market insurance interest for estate reinsurance risk terms constraints and increasing housing higher and in and conditions positive, of rates, inflation While challenges, stability, including improved business employment supply for our an experience to market affordability home remained continue mortgage headwinds distribution. market decreased mortgage prices,

In and terms successfully and we insurance mortgage of our to analytics market. value to business, Rates capture leverage identify proprietary platform continue economic the our in RADAR

billion contributed for in $XX.X mortgage of force the growth XXXX. is insurance business in our of driver which our year-over-year company. future quarter earnings primary wrote we high-quality of result, mortgage insurance portfolio, a main third This As to the X% in

our From the portfolio has directly well rates and credit continue billion It's our to We portfolio in overall our higher and flows our on persistency income has credit positive a a see incremental higher to repeating higher during our mortgage yields been perspective, generates billion underwritten rate that $XXX This worth quarter, remains quality line. strong strong. insurance returns supports performance mortgage insurance resulted interest $X investment also in bottom that portfolio. and profile.

based now be sized approximately for housing projections, MI in expect the to mortgage we billion. XXXX on XXXX. private a projections of of based industry in on expect market the trillion, $X.X industry early similarly insurance total market, originations terms mortgage we $XXX In And market the

valuable strong demand future drives growth insurance mitigate dynamics the low resulting help in continue support to our While large the which And create and portfolio. downside first-time which purchase strong for for positive to believe insured for demand provides homebuyers, also market portfolio. inventory is home these in values, pent-up and risk our force in challenges volume, we

demand, in homegenius increases navigate from overall estate benefits business we With market business, insurance to for mortgage and the positive. business continue home mortgage purchase is which constrained limited of generally regards real volume, activity. outlook and challenge our remains our prices interest and our rates inventory, to the that Given higher

structure to We market, for the align our the and continue improved current adjust and will our strategy to opportunities cost an positioning investments ahead. market while

X effectively continue agreements. execute on and capital continuing $X.X with we And mortgage to to to on for credit insurance discuss important our to Sumita including continue strong manage our an model. company we risk capital in that strong risk note managing capital position structures at strategies record more track aggregate, our detail, leverage holding and billion. business our liquidity expertise remain It's our of will build resources, distribution distribute new manage our reinsurance order using managing in array and to

believe capital We and position significantly our now flexibility our enhances of financial the forward. going strength

we've a Over optimization. capital the focus on years, consistently demonstrated strategic

other noted carefully we've we to opportunities. and between growth, previously, As the accretive capital allocation capital balance consider stockholders organic return of the

from our return our Many unlocking the in differentiation terms as peers highlighted capital of feasible. in well wherever you of as capital effectiveness trapped have

company withstand say dynamic PMIERs you've economic pricing the and into risk-based As significantly the strengthen to framework, me our is capital of distribution capital before, markets. built reinsurance the cycles, and heard risk by

financial our now the will Sumita cover details position. of

in strength third provide all. mortgage results, of management. details demonstrated the to Rick, you capital high-quality portfolio quarter focus our good additional Thank continued you, and about our I'm ongoing on force strategic insurance our and afternoon pleased to which

second share of quarter equity in of equity diluted of the return quarter income strong XXXX, generated XX% $X.XX annualized per at for the diluted GAAP $X.XX $X.XX a in $X.XX quarter. higher was share net per and return quarter. earning results another per the second third slightly in net net to adjusted operating third on Adjusted to million We quarter for or diluted compared operating $XXX operating quarter. compared share the produced income XX% share the We on per

revenues generated continued XX. Despite macroeconomic in during million in as third we $XXX Our September book second the the to year-over-year the quarter compared total XX% grew challenges of environment, value per quarter. of million share $XX.XX to $XXX

premiums As the onetime Re a capital increase of revenues retirement subsequent in offers were earned in to insurance reduced $XX that agreements our tender Eagle and and total certain the by and due corresponding portion a net Guaranty. linked longer earned of the any ceded the seasoned million reminder, of to quarter reinsurance benefit notes premiums second provided no Radian

as ceded presentation details total benefit on successful premiums from the quarter, revenue, to Slides premium net premiums Eagle resulting our savings net our the our XX well earned, key Re drivers of premiums ceded premiums began XX earned. tender our In include the third yield and net from in in ongoing offers. all other through as

mortgage in XX, insurance in quarter. billion XXXX, force primary $XXX as net earned to X% million Our $XXX year-over-year for third grew our of premiums generating the segment September in

second Contributing $XX.X our quarter of the billion third the in the compared force to in was insurance $XX.X growth for to written of billion insurance quarter. new

our the ago. We trailing provided XX. significantly While the on originations provide persistency on at XX% rate the mortgage remained of industry-wide our new insurance to in XX% persistency on which Slide trends based months headwinds decrease written, force, past more it in the over third has year the has XX our year a detail quarter compared benefited insurance for in high

insurance exceptionally near the refinancing. strong, in of X% a period XX% and rate of end and to low persistency of continuing Greater our the force less mortgage of to mortgage following in the term than an in rise sharp third therefore less the due rates. rates rate to given remain likely or our had expect of We extended quarter as is cancel

insurance the by provided hedge sustain earnings our new written relationship has power natural The rates and and insurance between interest in environments. force varied in growth persistency helped rate to our

As portfolio remained yield quarter our stable consistent year-end shown at in the insurance basis compared at portfolio the on mortgage with the level our prior in Slide XXXX. XX force XX points for and reported to premium expectations, third

expect current the portfolio industry $XX in also investment environment year-over-year our over persistency force strong remain With higher to million income, the XX% The to in which rates has term. environment, benefited rate to continue the quarter. flat this we yield relatively near grew premium interest pricing and

investment our highly $X securities. portfolio billion Slide of XX, on consists shown As of rated total well-diversified,

The rate and Slide quarter, investment for revenues. the to our positive and be to of yield during shown X.X% higher continue income XX, continued on should on investment increase portfolio environment our the third as

totaled In million second for homegenius third $XX addition, the segment revenues quarter quarter. with the our consistent of 'XX

provision provision the of benefit for million to on our we a credit move into trends losses. million continued compared our to in recognized third most $XX for The benefit that the in a have now quarter. second quarter. recent in the I mortgage of $X losses positive net been experiencing quarter We net

default period in inventory, results. On at the greater rates than continue strong previous of for our continues trends trends. defaults primary we cure benefit expectations, releases to XX, provide cure Slide prior from Our to which resulting our

rate inventory default X% consistent approximately by of increased of as XX,XXX third quarter, new XX portfolio loans, Our to with us number insurance the the strong September force the expected X,XXX representing second in XX,XXX, services quarter default remained to 'XX. of was of primary The last our quarters. the approximately reported from at of consistent ending quarter in few the trends defaults second with in the seasonal of with XXXX and consistent growing XX,XXX seasoning approximately portfolio in quarter. Cures a

significant provision new on $XX price claim clean greater defaults to recent home appreciation for during frequency in have development reserve We an trends resulting the favorable to of to primarily our our cure embedded quarter. defaults by prior due existing provision the defaults XX% strong loss estimated was positive equity This continue approach. homeowner of experienced reported trends assumption $XX by the for index-based or and period new defaults by XX% offset million defaults for equity favorable from new the are resulting rate X%, default services. These maintain in home at of withdrawals using million years. higher driven embedded of

expenses. other our to Turning

this operating $XX actions in second compared the third lower The to quarter $XX expectations expenses and other quarter, savings the from our million, our the recognized decrease date. to consistent our million a reflect expense expenses quarter. with For benefit were totaled

Our to $XX September cost the same operating decreased X-month combined XX% and expenses year-to-date have by year. or other consolidated compared million period through of services last XX

we year Assuming continue the the XXXX, to manage savings expenses. our previous of million and continue, will $XX on XX% we million achieve remain these our XX-month for trends positive guidance XX% pace actively end to higher full for to to or $XX of

Moving performance on in million increasing another finally company Radian operating Guaranty strategic bringing dividend million holding Guaranty $XXX Radian the another available and of in first Radian are the expect Guaranty, Consistent full related low $XXX company, dividends our of our the $XXX and now XXXX this of $XX $XXX strong. the to quarters actions. quarter, third with to ordinary pay Guaranty quarter. Based X total the remains the and we current guidance our position The fourth Radian Group, million. capital financial year, holding to Radian year between previous million expected primary subsidiary, liquidity to the million expectations, from between end of dividend to to paid

to Radian Guaranty from Our assets our required statutory remain future to Radian PMIERs billion minimum Guaranty's continues of capital binding stable excess over dividends $X.X pay available framework at XX. to assets Radian ordinary remained as constraint September Group.

our to We as diversify we and proactively effectively of manage to continue strategies range a risk use mitigate sources of broad risk. capital distribution capital

X distribute reinsurance demand which to new excess of agreement with in us and quarter to at approximately pleased agreements end, October, attractive million are $XXX We existing covering under an the a reinsurance finalized Subsequent of attractive terms. cost loss risk. ILN of reinsurance capital. allow the across closed radian traditional increasing We markets, Guaranty risk

million entered $XXX approximately new We transaction existing into ILN of covering also risk. a

cushion billion. the Pro forma for transactions, third to quarter increased $X.X PMIERs the would of Guaranty's at end have these Radian

Our quarter. at the available repurchases quarter, stable holding share $X of company over at the net slightly of liquidity the end dividends remains and third billion for

$XX X.X the quarter, $X.XXX Radian total dividend we Group paid stockholders shares cost third $XX to per million, a million. and share, of totaling of million During purchased a at

our the share in current quarter, that end the of authorization had expires $XXX XXXX million of January repurchase remaining. third As

and strength despite the in highlight macroeconomic again economy. of the our once company, the current quarter resiliency this for results Our uncertainties

the turn Rick. to now back call will I over

Thank you, Sumita.

we remain the want I to Before that open strategic on we to plans. and highlight executing are call our pleased our results questions, focused your with

to operational and businesses driving expense overall resources environment. are market our across the We structure excellence and aligning reflect our

is valuable Our portfolio deliver going expected growing insurance highly to billion $XXX earnings and significant mortgage forward. is

strong Radian in maintaining common to PMIERs holding to We million stock continue pay continue by strategically capital dividends of and manage cushion, to the quarter. repurchasing liquidity Group Radian opportunistically shares, ordinary from Guaranty company and $XX including expecting to

our to with affordable incredible mission familiar families many of shares homeownership fundraiser injured children Doors you of that helping ill by know I an or Opens annual Foundation, remain Philadelphia. for year's are Annual with all children this to critically their have our The MBA our MBA in in treatment. We I during launched their are Convention outstanding thank wanted this contributed The to homes while campaign in who cause. hometown of organization

will We be through fundraising November XX.

you drive for work radianopensdoors.com our if and day. our more. to want finally, to to visit would So every I outstanding learn recognize helping the team they for results And do strong like

And now operator, happy would be take questions. to we

Instructions] first KBW. comes question with [Operator The Bose George from

I wanted expense reductions. to the ask about

the As you moving guys well. right direction in really noted, it's

bounce this on the think quarter? a you you know going OpEx year. it when about that around still? could closer what kind for full Or of quarterly reiterated we I remain to Just bit the did guidance you see But forward, the will guys little a basis,

thanks, question. the both, for Yes,

had year. think guidance our I for we given full

traditionally We guidance. given a quarterly have not

I think at last expenses, we at operating which if expenses, you $XXX cost look year, about were and total XXXX services of our So other includes million.

range I that year million I the we expense was end is be to think the reiterating expect we $XXX at of an we XXXX. perspective. the the that of $XXX for at what had to million savings And think top beginning guidance are given from

each continue rate given I a we've quarter, of think, have guidance similar not for specific would to run we as going forward, a now. quarterly but

thoughts That's that the now, of about then just the Great. actually, gets updated breakeven? switching they're Okay. To when in that to closer in rates And kind homegenius. any to range extent remain helpful.

business, of not challenging, be but challenging. Bose, I been the our environment, Look, for businesses, as I homegenius, industry just team certain continues the mortgage And question. discussed the and real we've as addressing entire both valuation capacity of industry appreciate which has down kind think the services is to the profitable the of our cycle, has is been decline of estate on I the year. I it's title leverage volumes, I some REO, think and of we since that gone has closer the expenses. real it, it. walk with we've capacity through business our addressing expenses business little challenging the to profitability. Actually, business estate kind -- that year estate if -- think more been real throughout good just about SFR to title through And through operating components has helpful services, in focusing drive our that very great to done a significant our a the -- a bit And in job you and sometimes of different when

think great I made we've progress that. on

made to other our our and part really way is estate and how thoughtful if you the opportunity platform. investment technology around real really and that see platform. investment platform the And expense our through of will, data of has terms that The a create analytics in been from spend, in value digital we considered

that platform and with where other estate value. estate discussing platform digital rolled for corporations we're a the highly focused manage continue our go summarize comment of great moving journey kind towards technology business And Conference, we kind is our and that types as to our literally our a services profitability. continue team we out the towards customer And to estate feedback so We're on real business to their to and on that kind of contribution of digital see lenders, because XXXX, in experience. invest real going recent of today into the managing of just profitable as quick digital tens lenders real and to platform going positioning would we is MBA we're I title where getting expenses

feedback we're is so -- good. And

I served. our be going is to well investment think

-- And about to other the we current but want being -- investment say of just balanced will and this I very so against kind we're highlight just thing. opportunity see. one I

industry be I to volume you're real industry, anticipating to of our to And going customers the we're market challenges think, close those are because that of quarters very next both going challenging a you mortgage as point the as for estate understand and X have. kind from view. know, anybody, that this as are

are just the be we to think well businesses of title a starts positioned manage business And But business volumes and environment, low. degree. this through are this going bounce seasonally our market our estate as real to -- kind as our both services I back to even as small

but through as we -- be very very we environment. expenses, of we're So focused conscious to about very on creating and navigate value this trying the thoughtful believe

[Operator question Instructions] America. from of The next Mihir Bhatia comes Bank with

in, seeing? we've environment have any What check this with just updates quarter? Any Maybe pricing of you're between the the competition the to Maybe question. wanted you signs start side? I'll like pricing -- what's the doing just see price on just increased been pricing there? you Did been MIs that

it's Derek. Mihir,

in So we And normal levels what to saw in the the of environment, that's in what be fluctuations really pricing clearing important was within call in This small included environment. decrease to the of estimate really of bounds quarter. we disciplined. a kind the latter terms I'd a continues quarter. a normalized that, half But market pricing throughout of the it fairly competitive rational mind keep and

XXXX. spectrum. terms value across substantially deploy to And where continue a capital. strong remained In see it we environment, one above view the to Pricing the it current really we as from was of credit in good

we competitive of Investor So portion talked focus, the very of the the long-term strategic it, and focus economic to generate MI finding that at and with order. we to market alpha our to long-term highest result, generating we on analytics the value leveraging focuses which what with be the our on estimate value economic Day a really as remains about way our really, landscape at look pricing and a the favorable lot a

really on. that's we've been what been So focused

And strategy today's think so really a environment that ability we successfully and implement deploy good offers that capital. to

that persistency, stay this peak what I But you? expect it Got it. pretty is mentioned to question cyclical increase it you Or is, or is? to high. any the where have or And much guess, is on from it more there peak room historic you think I for a

great kind very mortgage in of Historically, I stick lot of was the really rapid rates, to end mid at of we're would of borrowers low rates. very kind unusual mean it's kind we've kind times, normalized bought question, I in high curve. tend range, of a there. Yes, a mid-XXs Mihir. -- of the rise

different there's think I a variety of factors.

I duration think is of of the of extends in question duration a view. potential earnings really also kind our kind how right, question, point and from portfolio an

persists, to you that comment And our economic earnings, remember illustration long-term an if Day, comes we of Derek's kind about earnings of is we Investor earnings about gave and portfolio. think longer kind the future as our persistency kind And positive the towards back profile how right, those of of of of of value the future portfolio. kind from

wouldn't I think, lot I Sumita, -- there's But it of -- that higher. commented go -- of a prepared I I not confidence remarks in So below do the above our percent her could portfolio necessarily you would kind give X%. think of about

mortgage level before a So rates pretty incentive. of significant you see movement there's refinance any in required

volume, business on challenging start couple I have right? from then the in or And on to evidence be might Rick, just quarters. business? and Any to stretch typically, backdrop, that, last any these a trying best X question, originations credit Are relatedly, Got I of think Radian MI update it. is, the what's that there even next One as you a you seeing from expecting questions just the seeing the the that your the it Obviously, related originators uptick [indiscernible]? And that perspective. that in things times opportunity of be from they're Capital? are in mentioned from not my something credit right? And maybe Mortgage from doing tougher then any drive to perspective, you

from to you the thank what Derek, come But And this. I -- through Yes, -- add that in question. we've would for on to jump feel to Mihir, free the given remain extremely Obviously, of point nature all view. disciplined purchase-driven crisis of from today, today I the underwriting financial through a the way is an say great would market lenders market. the

see because very of homebuyers; market the point disciplined. underwriting lenders tend we general from first-time we DTIs, kind But credit generally LTVs of certain attributes. of say increase attributes a view, to I'd remaining So purchase see

a and we trends what know, Derek detailed really you servicing from a would his process in view. of other would of not those quality I type expect say monitoring market seeing today, attributes the our and anything do of have of originators a we're today. different well as As very purchase the team from number given And than of point thorough as

quality of would The add dispersion, see performance lot we kind in is lenders. of other don't the a terms think, I thing across of I from manufacturing

we in other as we or is from that to of Rates The in given pricing see any the sort upon thing a of performance where keep of manufacturing exercise based we quality terms kind perspective, have well. to RADAR platform, do and and mind price just performance ability, differentiate deterioration

Capital, Yes. question. regulatory To are that part and post-financial Mortgage I as It's Radian it's do -- on of we of meaningful of markets And that went question really operate products keep your question. restrictions the great constraints a from types crisis about think put a place certain the in. kind in the timely

over Basel we funds. the banking opening, today, cost have the of exploring the was that with of measured to about, less the approach the team, should put have the thought taken higher we've I highly country gated opportunity, through As a mean and of I years would kept that -- see experienced together opportunity gotten on very platform, generally they're across we've team, taken last really, market an it primarily as of very lean of we're related kind a or because the and changes and we've built say, folks. Derek the license we the and was gone but the not challenging. talked obviously, couple talented talented system kind it more kind III, extremely I say, the

are around and some a banking kind there are ] I mortgage the obviously, the all business, portfolio of most large their other taking product bid other in challenges, to that think, then regulations, of some banks rethink but mortgage the production. proposed [ causing presence part to CRA things the away for of And of impacting non-agency

rationalize and seen we we become begin just the attractive, that we the interesting to risk-adjusted opportunity would and to market and continue the business. that explore So create and to from platform expect for we the we've this capabilities appropriate returns have see

At back to I time, this show turn for remarks. no further the questions. like closing I would Thornberry Rick call to

thank with the enjoy each Radian. our a you. as about about do, And customers the find say, Thank the with over time, business. I everyone, spending to try always find and interest interacting and and we many in help business time forward also our environment great coming for through discussions customers as of to take want team further just life. look weeks, navigate ways our of just I you reiterate to kind serve and you, all in your also through ourselves challenges is challenging help We to is different quarter other of days work to talking we our you, doing each kind and

the we of the want to thank talk I and opportunity come forward as along. you So look team, ahead to all our to days to

So care, time your and that you appreciate us stay take today. I with

participating. This you concludes for today's conference Thank call.

disconnect. now may You