RDN - Earnings call transcript Q2 2024

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Operator

Good day, and thank you for standing by. Welcome to the Second Quarter 2024 Radian Group Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Dan Kobell, Head of Investor Relations and Capital Management. Please go ahead.

Dan Kobell

to Quarter welcome Conference and you, Radian's XXXX Second Call. Thank

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

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

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

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

to would like I to Now over the call Rick. turn

Richard Thornberry

excellent Last us all for quarter reported Thanks, Radian. Dan, and for results another joining evening, today. financial we you thank of

and portfolio, ongoing and reflect to strength on our resiliency strategic of rate of managing insurance operating our strong liquidity and the results our positions our our expenses. Our and mortgage capital environments, portfolio, the varied economic the interest quality investment and company of growing high-quality value continue focus

highlights. during We XX% $XX.XX. net the will sharing I million today value by by We million. begin book to to increased financial and $XXX grew $XXX revenues quarter, generating per business of income share a few year-over-year

main force, mortgage company grow primary insurance is in $XXX earnings the our which billion. of to continued for future driver to Our

We portfolio, the insurance and this a at and continue market, proprietary economic to leverage analytics quarter new rate resulting Rates $XX.X decline in RADAR our high-quality second credit our to our in benefited, in We billion XX. resulted the quarter. in June insurance again, performance written in platform from mortgage of in mortgage to which insurance identify value X% capture positive default

update operating an discussed the other terms operating improve expenses quarter, provide as broad across operating and we've Radian. our on expected actions forward. benefit expense savings leverage Sumita going In how last we efforts are will significant efficiency of to operating taking and to been expenses, our

quarters. to double Radian operating primary Our paid which in X the of the paid dividend of subsidiary, each amount amount million, sixth $XXX consecutive Group ordinary Radian in quarterly was previous its the Guaranty

capital $X.X positions $X.X and Guaranty liquidity we Radian strong. billion, for cushion We of overall to billion. available Our our remain PMIERs liquidity company increased holding and maintained

mitigate written attractive at agreement in use to between reinsurance for manage share distribution June a XXXX of XX, effectively cost capital entered business capital. of through proactively our with XXXX, risk July Consistent into quota X, strategies and we new June risk, new

including credit part our on equity was continuing Our financial which XX.X%, position. current in results, offset quarter strong by return our performance, second positive excess the in reflects capital

repurchase to period program existing the million to XX, of authorized share Directors in our increase previously time XXXX. May June and announced, Board As $XXX XXXX, to our an extended

financial excellent and position pleased to stockholders. customers deliver are businesses serve while our opportunistically and strong financial our value our We returning that flexibility to results, capital grow us our allow

Radian of to conduit delighted that mortgage our $XXX Capital, Mortgage mortgage share brought transaction approximately securitization am market to million. label its I also business, prime inaugural jumbo private

discussed as distributing of known extension business the business a from mortgage a also capital previously, of natural and Strategically, opportunity leverage aggregating, managing our we opportunity lender risk model successful for credit we view small benefit large mortgage I've with for underwriting been As to our originators. strategic our customers, investors. by by this expanding growth and quality for which markets and brand our relationships strong this believe response provides deepening and has a demonstrated the

regular a become securitization to mortgage market. non-agency expect we ahead, issuer in the Looking

in the a represent to an private we insurance project origination expect we billion compared $XXX would the environment force. it's rate $X.X maintaining our interest Turning continuing XXXX, market increase consistent housing and approximately which year. to in origination mortgage of XXXX benefiting XXXX. forecasts our now estimate will persistency, to XX% impact positive that the total increasing forecast, approximately on in the trillion, Based market the be from investment prior returns I noting mortgage market. worth terms for strong of with portfolio continue Recent higher that the insurance of industry believe

to value helps which both Overall, cure homes, important It's Additionally, our portfolio impact and to business of continue mitigate in significant in the borrowers positively constrained, default for severity to the will remains loss the here stable outlook which equity to market frequency positive. also has are of insurance most the expected trends. our from claims, which risk our paid decreasing housing mortgage and remains we by perspective. keep supply an note home embedded insured that expect our overall HPA

in our both housing is capital distribution our proven significantly the into withstand been model the of to and pricing Finally, built role the political on risk system. reinsurance to This you've and cycles. are recognized important PMIERs this believe and We we is positioned risk-based of that capital business well has is aisle before, finance economic markets. sides and fulfill say the by me dynamic our strengthened the heard as company framework,

cover will capital our the of Sumita now financial positions. details and

Sumita Pandit

about provide and in income prior the to income second reflect $X.XX Thank or higher you, $XXX quarter our with you results, quarter. diluted strong of metric good share million net for the at details pleased all. of share, $X.XX quarter. $X.XX GAAP I Rick, compared operating was the afternoon producing which quarter diluted am slightly to the performance, additional another per quarter, line per Adjusted than net for previous second to

book equity dividends, million which reflecting on a is the XX.X% the $XX per quarter, to during regular per return our helped XX% in This second of addition generated per share were quarterly book stockholder dividend share We annualized grow growth $XX.XX. our our which quarter, value to to share. year-over-year $X.XXX value in

$XX We second million during quarter. the also repurchased of shares

our of now the Turning drivers to detailed results.

'XX. be and the strong million generated $XXX quarter. to total in first continue impacting We as of revenues our earned. quarter XX million in second million well in of quarter key net our in second as details $XXX revenues quarter include during the other the Slides our on in force factors Our to presentation XX through premiums $XXX compared portfolio the mortgage insurance

persistency growth XX% earned also compared our of prior in of reaching from in the new in of generating billion written million of to insurance net a and We quarter insurance in in of This Our premiums year the the the second insurance the billion an the to grow, continued as on The our $XX.X force the $XXX positively in quarter high trailing at ago. the quarter. wrote contributed to quarter billion written primary second increase rate XX end in force. XX% mortgage quarter. second of insurance remained $XXX in $XX.X existing force based months XXXX,

second or As of end mortgage our XX% the force quarter, a insurance of of had of rate the X% less. in

levels, policies due which to are less interest exceed in meaningfully mortgage current refinancing near cancel likely term. these these Given rates, the to

given overall rates expect rates We to economic strong mortgage the remain continue to outlook. persistency current our and

due in-force shown and yield environment, basis for for Slide stable profit yield year. of changes earned. remainder total premium in fluctuate insured net current the yield persistency and XX, as, industry our in positive period the in-force the portfolio our our rates commissions stable distribution other the such our portfolio mortgage to continue As remained to With portfolio The at premium to XX.X we risk the insurance strong to can on quarter from programs period pricing remain of points. expect factors, portfolio

second related our for $XX Mortgage of million as investment mortgage $X Capital. sale Mortgage an income includes and as loans Capital. quarter sale well Radian in to The this Our the net in net was in has been quarter. $XX of increase investment both the The income the our investment increases by income from past Radian mortgage year over million loans within portfolio for average increase net yield held investment within our million income driven in size held

X% Excluding that investment net impact, year-over-year. grew income

current cash increase. our investment rate continue environment, we the to we flows continue As reinvest to yield expect average to in portfolio

in loss net end. million on equity at quarter $XXX unrealized Our reflected investments was stockholders'

We losses, is unrealized our share equate to the and into our which flow per $X.XX would position time. these of over the will to provide expected back strong with expect ability us cash to that securities liquidity book recovery to that hold accrete value

for continue previous quarters, have our results releases to cure prior on at years in period continue new our expectations, Credit losses. defaults greater in recent than for I to now offset resulting to defaults. extremely will established reserves our positive. trends provision rates move previous Similar significantly to of be that

favorable the experience in home be primarily equity loss by experienced strong Our price from continues driven the homeowner significant years. to appreciation resulting embedded recent

to a Slide of prior portfolio we provide decline from resulting On default end, a primary loans default Total XX,XXX our for the trends in X.X% quarter defaults at declined rate quarter. in inventory. X%, XX, approximately

with trends second and by defaults in rates on in approximately initial of Slide meaningfully curing XX, quarters core within XX% expectations. recent X As periods, consistent Cure our the X and quarters, quarter and X% decline periods very been positive XX% have the The number the exceeding exhibited within curing our shown XXXX, previous reported of services from a quarter to typical years. seasonal defaults new us quarter. similar approximately prior second of compare in to of XX,XXX from favorably was trends

losses rate our roll defaults million million which on default-to-claim $XX new a mortgage reserve the defaults for for insurance new provision provision the of resulting assumption offset net $XX Positive than prior quarter. development X%, for this maintain for new more loss provision to period million in quarter. reported $X our resulted defaults, defaults continue benefit second in of in of at We during in

lines. other Moving on to business our

in $X corporate was million for other increase The this adjusted pretax allocations. to quarter, or all expense in the million loss reporting As prior implemented $XX quarter. for other. all revenues several segment activity in streamline lines business million last Other were change summarize the to our all we a into Total reminder, a our million quarter, and the quarter second before of an $XX compared $X.X operating

expenses. Now other turning on to our

For the as the our second related totaled million annual quarter, our expenses quarter share-based incentive of increase grants first severance in million, compared well Expenses in an $XX the quarter. to recognized and expenses. $XX included other operating in increase the an as second impact

our Radian. across As actions Rick significant and have noted, to leverage efficiency we taken operating improve

of to of result current XXXX these which and in million the $XX XXXX run $XXX expense we in on full improvement was reduction to annual $XX a full compared benefit based year rate an operating As in to million actions, operations. beginning for million expense a our run expect of rate, XXXX, the see

due expenses for quarter can to it to initiatives. items our note While such growth manage in efficiencies, expenses strategic variable investments is and line to fluctuate and in actively incentive that operating additional continue changes seek quarter from opportunities important to compensation as we

million our strong. $X.X cushion to dividends at for that provided ordinary Radian Moving to PMIERs pay remained expected Guaranty of The $XXX dividend the Radian full of dividend. XXXX. this actions. higher guidance strategic available year increase million dividend Group even Group ordinary ordinary Radian of $XXX quarter, primary after the Guaranty billion of last the The quarters. financial year, Guaranty Radian million million on we we At related the the X subsidiary, operating has capital for beginning remained an to to each paid and stable our that Guaranty $XXX Radian liquidity a Radian paid from $XXX to this position

Radian Guaranty contingency and continues in release to material earnings amounts. reserves generate strong

million of in As of a result, just $XXX dividends Radian the first year. already Guaranty paid the ordinary half has

paid capacity mechanics Guaranty, Radian in ordinary XX at Slide I you statutory the dividend unassigned are Ordinary the from through Radian investor will presentation. dividends our also of is briefly walk highlighted its which Guaranty from of funds.

other PMIERs subject Guaranty's to to ordinary position, quarter's been able recent statutory we've mirroring in funds balance Given Radian the closely maximize ending dividends unassigned strong our limitations. paid previous quarters,

distributions from ordinary We maximize Guaranty well. to expect Radian as in continue to our future periods

Radian to the approximately million, of providing future the in for capacity quarter. XX. $XXX For Guaranty expected pay ongoing dividend contingency the will this unassigned $XXX in balance fourth was release reserve Slide million us ending be to with year, funds second quarter, a Statutory earnings unassigned another funds the quarter on dividend ordinary by of to the Radian third Radian schedule as well driven and distributions continue Guaranty's therefore, Group as shown

certain mitigate July this XX% expect As X, into a XXXX, and XXXX we Guaranty a Radian entered strategies agreement, quota our of of consistent with Rick reinsurance mentioned earlier, to Under of third-party subject risk. June XX, QSR manage written reinsurance with capital conditions. in between to XXXX risk and agreement insurance providers, see XXXX, effectively June to share panel use proactively distribution new

we XXXX redemption Yesterday, notes in Moving Group. amount of September to company senior payable XXXX. Radian the in the announced $XXX our our of holding million

earlier interest this expect action our ratio maturities will $XX ongoing approximately senior annually have no below until due Radian expense our and to debt-to-capital Once this debt described complete, will reduce XXXX. year, by million reduce we As XX%.

$XXX increased quarter, million we share program $XXX June to XX, extended to the in XXXX. program repurchase and our million the Additionally, second from

shares Within share. X.X quarter, at price average total the for million we an of $XX.XX of cost $XX per million repurchased a

attractive of by deploy repurchase we repurchase end and option repurchase prior recent of the as share excess current provides track our As our share to remaining $XXX the years, million quarter's an capital. authorization that quarter, our in second activity record believe had this demonstrated

the Our holding company $X.X of increased the end second liquidity to at available billion quarter. approximately

an providing facility capacity have also flexibility. $XXX credit us undrawn of We with borrowing significant million with financial

back call to the turn over now will Rick. I

Richard Thornberry

Sumita. Thank you,

balance open your strength of second to company questions, the the the the quarter to our of as we and as and to Before reflect and continue highlight resiliency results I want positions. for our our capital well call liquidity flexibility that

dividends. strength from the mortgage allow our to cash and of investment operating us generated We delivering to a form insurance during value the customers, stockholders and flows of over million earnings approximately past from million expect portfolios of the We stockholders. in the quarter large to policyholders year and $XX our continue and and to position in-force share $XXX returned second capital and repurchases

MBA's underserved progress and its partner for on I local anniversary. sustainable Convergence also to homeownership that want recently specifically make a recognized to highlight in opportunities Radian Philadelphia efforts, our Philadelphia. bringing continues is housing the team cornerstone to housing X-year together initiative, for help the affordable communities and historically this stakeholders enable affordable

want And I they thank do team work dedicated our recognize the for outstanding day. to every and experienced and

responsibilities Radian responsibility a As treasury been and know, leader and management many management, Dan portfolio financial the Investor in X Kobell, functions. to past we the you quarter, our and at Relations analysis investment transitioned who has for this has also capital planning of who years for

done over function, financial work Damian Relations he takes to and he on to the corporate while has as efforts. John our the leadership lead great development planning years leading for Investor want of analysis past personally the I continuing thank several

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

Operator

[Operator from first Instructions] George KBW. Bose our comes of And question

Bose George

about I forward ask share count? wanted count. less down employees? grant than roll first share of to is difference the one went the just the share to the Or the It the buybacks. the by Is just

Richard Thornberry

Rick. is this Bose,

I can and one. Sumita think this I tag team

that's all offset I by the the to think it's LTI buybacks. related probably program share

Bose George

-- Is in count haven't right? no prior and go last that buybacks, that the I that when like year share then occurred didn't that... as there well And down. noticed because is quarters, were So

Richard Thornberry

quarter. be should second It a

Sumita Pandit

Yes.

you that the in the second see think most the impact quarter. it usually, of I

prepared in quarter. expense that see referenced in every higher we in that QX. the you I you our second And In remarks think impact that almost see fact, year the

Bose George

Okay, just great. switching conduit. over actually then And to the

sort Or going need standpoint accounting securitize I will as balance see going an vehicle consolidate your this from is it, actually, to don't sheet? these? to are about on that Just, separate and forward, worry mean, we you a we it? of you

Sumita Pandit

Yes.

a really good it's think I question.

business. looking I accounting our look at at all options we as we the think are of

you starting disclosure quarter, on be Bose. I more think giving this we'll next

think the are on that retained of the on how treatment depends accounting driven is structure. in that lot securities I how depending a much

So starting providing will disclosure you process we and in we quarter. it, be more are evaluating from the to of next

Operator

Our Harter . next comes UBS. of Doug from question

Douglas Harter

Given parent kind of your company? liquidity comments about you operating around at liquidity? thinking holding company, you right the the what are dividend how about from thinking is capacity the be of the how of that are kind to of uses And amount

Sumita Pandit

to about dividends year. the we Radian at mentioned, gave Guaranty So to I million to you this to to as million guidance have initial which already paid been off we expect year, million, $XXX that It was Radian Group was that the significant Radian and the think exceed from from there $XXX beginning $XXX of we amounted Guaranty Group.

billion company million at holding down look to we pay you to $XXX our our of about liquidity about If XXXX have of that liquidity, we going today, use are holdco $X.X maturities.

our obviously expect $XXX also We pay to million which year. each is dividends, about

-- make quarters So of capital ongoing, that we have I continue some another we should there will investments are that in X of And will that, pay would we businesses. our then that to out. say,

example mentioned as that. I an of RMC think Rick

have It is of should So to really the need year, we of what at expect our to million the than billion think the about run to end more $X still I you business. $XXX holdco liquidity.

shares we returned disciplined Having continue capital through in even million that the said continued share this that, We We really returning excess to back are some repurchases back. quarter. holdco. we $XX have to holding about about will in said liquidity buy be QX. We've

dividends. that the year, I be share both the in in of capital would at about to the range you of end billion that and disciplined holdco will that giving you walked be I should $XXX to we say continue through the share repurchases liquidity repurchases should form back But so now. $X that before million expect And right

Operator

Bhonsle comes Our Soham BTIG. next of question from

Soham Bhonsle

Derek, seem consumer. remains to be overall, credit. maybe environment for first mortgage an slowing I constructive X for in Look, you does think the but there U.S. overall on the

So position If seeing signs ticking talk more if recently, any you're way reflecting and yellow slightly consumer portfolio? that look you of if sort you been unemployment has of just in just right? you're and about at any the up just the spend maybe

Derek Brummer

Sure.

much terms end in I of on credit the initially in. we're think the of the we kind of outside signs, really, lower is, yellow what seeing space play

I so some, of of And credit quality. pressure terms you see of kind would kind say, in lower

we're So like XXXs. talking lower the FICOs XXXs in below and

that rate So watch do to a of into to factored down. the it's space our we that come in. pricing in. bit unemployment That's expect home up for a We're We prices, closely. not all scenarios. play We and tick of appreciation

than So a I playing what rate scenario. as I now year would from expected have right say, of ago better given where we hiking would and kind out were interest thought an

a So would I how in into translated credit, been it's ago. macro terms say, a of I than positive have year out would expected it's and more from playing

Soham Bhonsle

of Okay. of And run sort we bonuses rate should $XX million Great. And where and then how mentioned? think items? quarter, the But we that. about year, like that on ex increase, the expenses, should sort Sumita, of of we that think then you including about the then the of of saw the sort think And normalizing? the LTI, back So as half you from course, things this

Sumita Pandit

Yes.

$XX base we out been think just expense at our other of million to and avenues operating cost I back initiatives, we going And we to where looking have to you bring We've I if disciplined. remind started, be last services. year to I from down about So further. our cost mean continued taken that expenses expenses had of of really were

out think take QX item as my mentioned we've I remarks, prepared I think severance. expenses some that I and in in of our continued flowing through to is line

run $XX I really, rate about is XXXX. reduction I that million rate spoke million from is $XX to $XX million would The run say, --

as to may year. bit come you this $XX that come million by the so see million expense of this that to $XXX next of year year, we Some little and line half $XX had down item the down year the operating about a last in by back million expect to

you the that of second make second so specific year, for number, like not think the be would I the half of half and given an And a can the probably but what it year. for have assumption estimate we of

Operator

this I'm time. for showing like back Rick no . further at to it to I'd questions Thornberry turn closing remarks.

Richard Thornberry

participating over you But want interest everybody and marketplace the appreciate today. our and I a navigate Radian, and last reemphasize to continue appreciate continuing employees we just they've and years all to and And thanks as to few to you, that in been forward job. the soon. everybody's us joining Thank to talking do great meeting to I look

So day. thank you, and great have a

Operator

for This conference and . you now disconnect. Thank concludes today's may you call. participating,

Radian (RDN) 1 Aug 242024 Q2 Earnings call transcript