RADIAN GROUP INC Q1 FY2025 earnings call

• Financial Highlights: Book value per share up 11% YOY, net income $145 million, ROE 12.6%
• Capital Management: Repurchased $207 million of shares (over 4% of shares outstanding), paid $37 million in dividends; strong holding company liquidity ($834 million) and PMIERs cushion ($2.1 billion) for Radian Guaranty
• Risk Distribution: Radian Guaranty agreed to an innovative multiyear quota share reinsurance structure with third-party providers, mitigating tail risk and providing capital relief
• Operational Efficiency: Other operating expenses reduced 7% YOY and 12% QOQ, on track to achieve targeted reduction in run rate operating expenses

Mortgage Insurance

• In-force at quarter end: $274 billion
• Net premiums earned: $234 million in the quarter, consistent with prior quarter
• Persistency rate: 86% (second highest in over 10 years)
• Default rate: 2.33% (down from 2.44% in previous quarter); new defaults declined 10% YOY, with cures exceeding new defaults

Investment Portfolio

• Total value: $6.3 billion
• Net investment income: $69 million, driven by highly rated securities; decline in net investment income due to lower mortgage loans held for sale
• Unrealized net loss on investments: $295 million at quarter end, but strong liquidity expected to hold for recovery

Other Business Lines

• Total revenue: $36 million (increase from $34 million in prior quarter)
• Adjusted pretax operating loss: approximately $3.5 million

• Expect earnings and cash flows from in-force Mortgage Insurance and investment portfolios to continue delivering value
• On track to achieve targeted reduction in run rate operating expenses this year
• Anticipate 2025 mortgage insurance market to be in line with recent years

• Volatility in financial markets due to tariff and global trade policies, which may impact unemployment and credit environment, affecting the business

Q: Update on credit loss expectations and pricing/underwriting in case of macro weakening A: Sumita states strong cure trends, sub-3% default rate expectation, conservative through-the-cycle modeling; will adjust pricing/underwriting if macro scenario changes drastically

Q: Buyback details, payout ratio philosophy A: Sumita mentions accelerated buybacks due to stock trading opportunity, using excess liquidity; payout ratio tied to statutory net income constraint from Radian Guaranty, returning capital to shareholders when value is seen

Q: Holdco liquidity level A: $834 million liquidity in holding company, which is much higher than needed; will return capital to shareholders when share price is seen as valuable

Q: Buyback mechanics, 10b5 plan A: Still a 10b5 plan, adjusted grid to increase buyback pace; value-based with opportunity seen in share price due to AOCI and embedded value of MI business not reflected in book value

Q: Cure rates drivers A: Richard mentions embedded equity in homes, learnings from recent crises, and employment cycle as drivers of strong cure rates