Radian Group Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 1, 2025
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Operator

Good day and thank you for standing by. Welcome to the First Quarter twenty twenty five Radian Group Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

Operator

You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Kobel, Head of Investor Relations and Capital Management. Please go ahead.

Dan Kobell
Dan Kobell
Executive Vice President of Finance, Financial Planning & Analysis at Radian Group

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

Dan Kobell
Dan Kobell
Executive Vice President of Finance, Financial Planning & Analysis at Radian Group

Today, you will hear from Rick Thornberry, Radian's Chief Executive Officer and Submit a Pandit, President and Chief Financial Officer. Before we begin, I would like to remind you that comments made during this call will include forward looking statements. These statements are based on current expectations, estimates, projections and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially. For a discussion of these risks, please review the cautionary statements regarding forward looking statements included in our earnings release and the risk factors included in our 2024 Form 10 ks and subsequent reports filed with the SEC. These are also available on our website.

Dan Kobell
Dan Kobell
Executive Vice President of Finance, Financial Planning & Analysis at Radian Group

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

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

Good morning and thank you all for joining us today. I am pleased to report a strong start to the year for Radiant. Our results demonstrate the continued strength of our high quality mortgage insurance in force portfolio, as well as our ongoing strategic focus on capital and expense management. I will start by sharing a few financial and business highlights. We increased book value per share by 11% year over year generating net income of $145,000,000 in the first quarter and delivering a return on equity of 12.6.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

Our primary mortgage insurance in force, which is the main driver of future earnings for our company ended the quarter at $274,000,000,000 Our insurance in force benefited from the 86% persistency rate in the first quarter driven by continued elevated interest rates, which remains significantly higher than the majority of the prevailing mortgage rates in our insured portfolio. Our portfolio continued to show positive trends in terms of new defaults and cures consistent with our expectations for seasonality and resulting in a decline in our default rate. We continue to strategically manage capital by maintaining strong holding company liquidity of $834,000,000 and a PMIERs cushion for rating guarantee of $2,100,000,000 as of the end of the quarter. While expecting to continue to pay distributions from rating guarantee to rating group and paying the highest yielding dividend in the industry to stockholders. During the quarter, we took advantage of market volatility, repurchasing $2.00 $7,000,000 of shares representing more than 4% of shares outstanding with a total return of capital to stockholders, including dividends of $244,000,000 Consistent with our strong track record of capital return at Radian, we continue to view share repurchases as an attractive use of capital, further enhanced by our continued positive outlook for our business.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

Samita will provide additional detail on our repurchase activity and plans. Consistent with our use of risk distribution strategies to effectively manage capital and proactively mitigate risk, In April, Rating Guaranty agreed to very attractive terms on an innovative multi year quota share reinsurance structure with a large and diversified panel of third party reinsurance providers. We appreciate the support and commitment that our growing group of reinsurance partners demonstrated to achieve this market leading structure. We believe the results reflect the quality of our mortgage insurance business, leveraging our proprietary data and analytics combined with our talented and experienced team and high quality customer relationships. Samita will provide more details in a few minutes.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

We continued our focus on managing operational efficiency, reducing our other operating expense by 7% year over year and 12% from the fourth quarter of twenty twenty four. We remain positioned to achieve our targeted reduction in run rate operating expenses this year. We are pleased that our strong financial position and capital flexibility allow us to deliver excellent financial results and help our customers transform risk into opportunity, while also returning value to our stockholders. In terms of the housing and mortgage market, we expect that the ongoing supply shortage combined with pent up demand from first time homebuyers will continue to provide support for home values. The private mortgage insurance market has been relatively flat over the past two years at approximately $300,000,000,000 Looking ahead, based on recent industry forecasts, we expect a market in 2025 that is in line with recent years.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

I believe it's also worth noting the continuing positive impact that we're experiencing from the current interest rate environment in terms of supporting our investment portfolio income and a higher persistency rate for our insurance in force. As I mentioned, the credit performance of our portfolios continue to be strong and in April, our default inventory continued to decline with cures exceeding new defaults. However, given the recent volatility in the financial markets resulting specifically from the uncertainties from tariff and global trade policies, we continue to closely monitor the impact on our business, including any changes to unemployment or other trends that may impact the credit environment. Overall, our outlook for the housing market and our mortgage insurance business remain positive. Finally, as we work with the new administration, we continue to be encouraged by the bipartisan support on Capitol Hill for our industry as the only source of permanent private capital in front of US taxpayers, consistently underwriting mortgage credit risk through the market cycles.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

Our private mortgage insurance products helps to alleviate one of the largest hurdles to home ownership, overcoming the financial burden of a down payment. In fact, our industry has helped millions of homeowners to purchase their home or refinance their mortgage and is well positioned to continue promoting affordable, sustainable homeownership through various economic cycles. We believe this is well understood by and in alignment with the FHFA GSEs and legislators. As you've heard me say before, our mortgage insurance business model has been significantly strengthened by the PMIERs capital framework, dynamic risk based pricing, and the distribution of risk, allowing our industry to continuously serve our important role in the housing finance system. Sumitha will now cover the details of our financial and capital positions.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Thank you, Rick, and good morning to you all. We started the year with another strong quarter of operating results producing net income of $145,000,000 or $0.98 per diluted share, consistent with the $0.98 per diluted share reported in the fourth quarter twenty twenty four. Adjusted diluted net operating income per share was slightly higher at $0.99 for the first quarter compared to $1.08 in the previous quarter. We generated a return on equity of 12.6%, reflecting the strong fundamentals of our business, and grew book value per share 11% year over year to $32.48 This book value per share growth is in addition to our regular stockholder dividends, which were $37,000,000 during the quarter. We also repurchased $2.00 $7,000,000 of shares during the first quarter, demonstrating our commitment to returning excess capital.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Turning now to the detailed drivers of our results. Our revenues continued to be strong in the first quarter. We generated $318,000,000 of total revenues during the quarter, a slight increase from the fourth quarter of last year. Slides 10 through 12 in our presentation include details on our mortgage insurance in force portfolio, as well as other key factors impacting our net premiums earned. We generated $234,000,000 in net premiums earned in the quarter, consistent with the prior quarter.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Our large, high quality primary mortgage insurance in force portfolio grew year over year to $274,000,000,000 as of the end of the first quarter. We wrote $9,500,000,000 of new insurance written in the first quarter of twenty twenty five, which was lower compared to the fourth quarter of twenty twenty four, primarily due to a smaller origination market. As interest rates remain elevated, they also continue to benefit the persistency rate of our existing insurance in force, which highlights the balance and resiliency of our business model. As shown on slide 10, our persistency rate increased to 86% this quarter, which was the second highest rate we observed in over ten years. We remain focused on writing NIW that we believe will generate future earnings and economic value while effectively maintaining the portfolio's health, balance, and profitability.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

As of the end of the first quarter, approximately two thirds of our insurance in force had a mortgage rate of 6% or less. Given current mortgage interest rates, these policies are less likely to cancel due to refinancing in the near term, and we therefore continue to expect our persistency rate to remain strong. As shown on slide 12, the in force premium yield for our mortgage insurance portfolio remains stable as expected at 38 basis points, and we expect the in force premium yield to remain generally stable for the remainder of the year as well. As shown on Slide 13, our investment portfolio of $6,300,000,000 consists of well diversified, highly rated securities and other high quality assets. We generated net investment income of $69,000,000 in the first quarter.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Included in this net investment income was $6,000,000 of income related to residential mortgage loans held for sale within Radian Mortgage Capital. Compared to prior quarter, the decline in net investment income is primarily driven by lower mortgage loans held for sale. Our unrealized net loss on investments reflected in stockholders' equity was $295,000,000 at quarter end. We continue to expect that our strong liquidity and cash flow position will provide us with the ability to hold these securities to recovery of the remaining unrealized losses, which would equate to $2.9 that is expected to accrete back into our book value per share over time. I will now move on to our provision for losses and related credit trends, which continue to be positive with strong cure activity and very low claim levels.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

On slide 16, we provide trends for our primary default inventory. Total defaults decreased to approximately 23,000 loans at quarter end, resulting in a portfolio default rate of 2.33% compared to 2.44% in the previous quarter. The number of new defaults reported to us by servicers declined to approximately 12,500 in the first quarter compared to approximately 14,000 reported in the fourth quarter, a decline of 10%. This quarterly decline in new defaults reflects typical seasonal trends as well as lower defaults in areas associated with Hurricane Saline and Milton. Excluding those hurricane impacted areas, new defaults still declined by 7% in the first quarter compared to prior quarter.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

It is important to note that our new defaults continue to contain significant embedded equity, which has been a key driver of recent favorable trends, including higher cure rates and reduced severity for policies that result in claim submission. In addition, the total number of cures in the first quarter grew 13% compared to the fourth quarter. Cure rates continue to be really strong, with cure rates for February and March 2025 among the five highest months we have observed in at least ten years. Our loss ratio remained low with a net expense of $15,000,000 in our mortgage insurance provision for losses in the first quarter compared to a de minimis amount in the fourth quarter. Let's turn to slide 18.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

As mentioned last quarter, we reduced our initial default to claim rate to seven point five percent and maintained that rate in the first quarter, which resulted in $54,000,000 of loss provision for new defaults. Positive reserve development on prior period defaults of $39,000,000 partially offset this provision for new defaults. As shown on slide 17, our cure trends have been very consistent and positive in recent periods, with approximately ninety percent of defaults curing within four quarters and ninety eight percent curing within twelve quarters, meaningfully exceeding our initial default to claim expectation, which anticipated approximately a ninety two percent cure rate. Cure rates in the first quarter exhibited typical seasonal trends and compared favorably to similar periods for prior years. Moving to our other business lines.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Total revenue in our all other category were $36,000,000 in the first quarter, an increase compared to $34,000,000 in the fourth quarter. The adjusted pre tax operating loss for all other was approximately 3,500,000 in the first quarter. Now, turning to our other expenses. For the first quarter, our other operating expenses totaled $77,000,000 a 12% decrease from prior quarter. Operating expenses were in line with our expectations as communicated last quarter.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

As a reminder, for 2025, we expect operating expenses of $320,000,000 or to average $80,000,000 per quarter. While we continue to actively manage our operating expenses and seek opportunities for additional efficiencies, it is important to note that expenses can fluctuate from quarter to quarter due to changes in items such as variable incentive compensation and investments in strategic growth initiatives. Moving to our capital, available liquidity and related strategic actions. Radian Guaranty's financial position remains strong. We paid a $200,000,000 distribution to Radian Group in the first quarter while maintaining a stable PMIERs cushion of $2,100,000,000 As highlighted on slide 21, Radian sought and received approval from the Pennsylvania Insurance Department to treat the $200,000,000 distribution paid in the first quarter as a return of capital rather than an ordinary dividend.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

As a result, Radian Guaranty's common stock and paid in surplus balance reduced from $500,000,000 to $300,000,000 during the quarter, while its positive unassigned surplus grew to $4.00 8,000,000 strengthening Radian Guaranty's ability to pay additional ordinary dividends in the future. We expect that Radian Guaranty will pay up to $795,000,000 of total distributions to Radian Group in 2025, in line with its 2024 statutory net income. This $795,000,000 of total capital return includes both this first quarter distribution and expected future ordinary dividends over the remainder of the year. Moving to our holding company Radian Group Within the quarter, we repurchased 6,500,000.0 shares of our common stock at a total cost of $2.00 $7,000,000 for an average price paid of $32.07 In addition, we returned $37,000,000 in shareholder dividends for a total of $244,000,000 of capital returned in the quarter. As of the end of the first quarter, we had $336,000,000 remaining on our current share repurchase authorization.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

As demonstrated by repurchase activity in the quarter, our expectation for a similar level of repurchase volume in the second quarter and our track record in recent years, we continue to believe that share repurchase provides an attractive option to deploy our excess capital. Our available holding company liquidity was eight thirty four million dollars at the end of the first quarter. The decline in liquidity this quarter of approximately $50,000,000 was due to higher share repurchases, which we believe was an attractive use of a portion of our excess liquidity. We also have a credit facility with borrowing capacity of $275,000,000 providing us with additional financial flexibility for short term cash management, including activity in support of our capital return opportunities. In April 2025, consistent with our use of risk distribution strategies to effectively manage capital and proactively mitigate risk, Radian Guaranty agreed to a multi year quota share reinsurance arrangement with a panel of third party reinsurance providers.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

We are very pleased with these transactions, which further mitigate the tail risk of our portfolio and provide efficient PMIERs capital relief at a low cost of capital. The market demand for mortgage insurance risk is strong, as evidenced by the attractive terms we secured, and the expansive group of over 20 highly rated reinsurers that are party to the arrangement, nine of which are new to Radian. Further, securing quota share coverage on our new production through 06/30/2028 provides us with both a high certainty of coverage as well as significant flexibility. We believe we are very well positioned to continue effectively managing our PMIERs position at Radian Guaranty from a position of strength. I will now turn the call back over to Rick.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

Thank you, Samitha. Our results in the quarter continue to reflect the balance and resiliency of our company, as well as the strength and flexibility of our capital and liquidity positions. We expect the earnings and cash flows generated from our large in force mortgage insurance and investment portfolios to allow us to continue operating from a position of strength and delivering value to our customers, policyholders and stockholders. We believe our active management of capital through our share repurchases and dividends, as well as our overall leverage reflects the strength and health of our financial position. We continue our focus on managing operational efficiency and remain on track to achieve our targeted reduction in run rate operating expenses this year.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

And finally, I want to recognize and thank our dedicated and experienced team at Radian for the outstanding work they do every day. And now operator, we would be happy to take questions.

Operator

Thank you. And our first question comes from Terry Ma of Barclays. Your line is open.

Terry Ma
Terry Ma
Analyst at Barclays Capital

Hi, thank you. Good morning. Maybe just to start off with credit. Last quarter, you indicated you're nearing a peak for some of the larger vintages seasoning and expect the default rate to kind of shake out in the sub-three percent range unless the macro changes. So, just given all the uncertainty we have, I'm just curious, what are your kind of updated thoughts on kind of credit loss expectations and anything you can kind of do on the pricing or underwriting side should the macro weaken?

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Yeah, thanks for the question, Terry. So, think as we've given you prior guidance, I would say where we are today, we continue to see really strong performance in terms of our QR trends. If you look at our default rate this quarter, it was actually a little lower than the fourth quarter of last year. We went down from 2.44 to about 2.33% as our default rate. In fact, for this quarter, our cures actually were higher than our new defaults.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

And so, we continue to see really strong, I would say, both default and cure trend performance and in line with our expectations. I think as far as our expectation for through the cycle default rates is concerned, I think we still remain in that sub 3% range. We don't expect to be really too different from that level. And in terms of modeling our expectations, we always take a through the cycle view. We want to be conservative.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

We want to make sure we track different macroeconomic outcomes given the uncertainty externally. And so, we remain conservative, but our data continues to be extremely strong and our cure trends continue to be much better than what we initially reserved for.

Terry Ma
Terry Ma
Analyst at Barclays Capital

Got it. That's helpful. Then the claims rate at seven point five percent. You guys took that down from eight percent. I think it was like two quarters ago.

Terry Ma
Terry Ma
Analyst at Barclays Capital

Just kind of remind me what the drivers there are. And then looking forward, how should we kind of think about that claims rate through a variety of economic scenarios, is there some sort of implied unemployment rate that contemplates? Thank you.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

So, I think when we look at our default to claim rate assumption, we really want to do that through We obviously look at current unemployment trends. We look at other macroeconomic indicators, but the reserving assumption is really through the cycle. And when we chose to bring that down from 8% to 7.5% in the fourth quarter of last year, we took into account cure trends, and we took into account what we were seeing clear positive trends, primarily driven from home price appreciation, and we felt comfortable reserving less for new defaults. We've continued to keep that assumption for this quarter.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Also, keep in mind last quarter, we did not make a different assumption for hurricane related defaults. We blended it together and we reduced our overall roll rate from 8% to 7.5%. We feel comfortable with that assumption, and we didn't make a change this quarter. Having said that, we would change that if we see the macroeconomic scenario change drastically from where we are today.

Operator

Thank you. And our next question comes from Bose George of KBW. Your line is open.

Bose George
Managing Director at Keefe, Bruyette & Woods (KBW)

Hey, everyone. Good morning. Actually, in terms of buybacks, think, Smita, could you repeat what you said about buybacks in the second quarter? And then just in general, is there a good way to think about payout ratios or just broadly just philosophy on capital return?

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Yes, sure. I'll start and Rick jump in with other thoughts as we go through this. So I would say what I mentioned in my prepared remarks, Bose, was that we really accelerated our share buyback this quarter. You saw us almost go out and buy back four times the shares that we were buying in prior quarters. We did that because, one, we saw great opportunity in terms of where our stock was trading this quarter.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Second, we also continue to use our excess liquidity in our holding company. If you remember last year, we used some of our holding company liquidity to actually pay down our debt. Right now, we have no debt maturities over the next two years, so we used our holding company liquidity to really take advantage of where our stock was trading, and we increased our share buyback amount this quarter. And I think we will continue to buy back shares at a similar pace, at least for second quarter, given where we are trading today. So, we plan to keep using our liquidity from our holding company to make sure that we are buying back shares and capturing value.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Rick, would you add anything else?

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

Yeah, I would also say, you've seen us over the last five years buyback, dollars 1,400,000,000.0 worth of shares, 30% of our shares outstanding, go back seven years, we bought back $1,900,000,000 or 39% of our shares. So we've been very active in the market. Think, we always have kind of a baseline view of share buybacks kind of on a quarter to quarter basis. But we're also always well armed with an authorization in place to be able to lean not just any time, but at the right time to really kind of find value for shareholders and return capital. So I think this last quarter and the second quarter, as Samantha said, we're in the second quarter, we expect to buy a similar amount back.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

We're going to buy back in the first half of this year over approximately double what we bought back all of last year. And I think the opportunity presented itself and we executed on it. So I'm proud of the team. I think when you look at the value of our stock, we think it trades below intrinsic value. You think about the embedded value of our future earnings on the portfolio, which we went through on our Investor Day a couple of years ago, you look at AOCI, which discounts book value, you look at the overall economics of our business and the clarity we have around kind of future cash flow up to the holdco from RGI.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

I think we're in a really positive position. So you saw us kind of act in reaction and response to a market opportunity. And through the second quarter, if we buy back over $400,000,000 I think that'll be a pretty significant positive impact for Radian overall.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Yeah, I think you also had a question on payout ratio. So, we haven't really given guidance on a payout ratio in the past. All I would say is that if you look at what we expect to be the dividends from our GI to group, we mentioned that we are expected to pay up to $795,000,000 That's our statutory net income constraint, because that was our stat net income in 2024. So, that's the max ordinary dividend or return of capital that we can do from our GI to group. So, you can see how much what's the pace at which we are returning that capital back to our shareholders.

Bose George
Managing Director at Keefe, Bruyette & Woods (KBW)

Okay, great. Thanks. And great to And the pace of the buybacks. And then just in terms of the delinquencies, can you just talk about the level of embedded equity in the new delinquencies? And is that kind of similar to what you've seen, say, over the last year?

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Yeah. I think it continues to be really strong. I think if you look at our new defaults, about 75% of our new defaults continues to have more than 20% equity. So, it's still a very, very consistent trend, and we continue to see a very strong cure performance as a result.

Bose George
Managing Director at Keefe, Bruyette & Woods (KBW)

Okay, great. Thanks. Thank you.

Operator

Our next question comes from Doug Harter of UBS. Your line is open.

Douglas Harter
Douglas Harter
Equity Research Analyst at UBS Group

Thanks. Just how are you thinking about what is the right level of Holdco liquidity kind of over time, especially kind of given the work you've already done on bringing down debt and no near term debt maturities?

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Yeah, I mean, I think thanks for the question. We are in a great position. So, you can see that we are using the flexibility we have in our holding company and continuing to really think about the use of that liquidity. So, we started the quarter with about $885,000,000 of liquidity in our holding company. As mentioned, we returned $244,000,000 back to shareholders.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

We got another $200,000,000 from RGI as a return of capital in this quarter instead of a dividend. And so, we are currently sitting at about $834,000,000 of liquidity in our holding company, as well as a credit facility. We've not given a specific guidance as to what is that threshold number that we need to keep in our holding company. We obviously look at what our fixed charges are, how much do we really need to keep aside from an interest coverage perspective, as well as the dividends that we pay to our shareholders. We do look at all of that and think of our fixed charge from our holding company.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

But what I will say is that right now, the liquidity we have in our holding company is much, much higher than where we need to be to really run our business. And we will continue to do the right thing and make sure that we're returning that capital back to shareholders as and when we see value in our share price.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

Yeah, and I would just add to that, kind of echoing your point, the transparency we have of cash flow from RGI up to Radian Group kind of for the foreseeable future, as we've talked about, really puts us in a position of strength to be very kind of agile and flexible when it comes to capital management.

Douglas Harter
Douglas Harter
Equity Research Analyst at UBS Group

Great. Appreciate the answer. Thank you.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Thank you.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

Thank you.

Operator

And our next question comes from Maher Bhatia of Bank of America. Your line is open.

Mihir Bhatia
Mihir Bhatia
Analyst at Bank of America

Hi, good morning and thank you for taking my question. I wanted to go back to the buyback discussion. I believe your buyback used to be a value based 10b5 plan. Has that changed? And just can you talk a little bit about the mechanics of how the buyback work?

Mihir Bhatia
Mihir Bhatia
Analyst at Bank of America

Is it just a matter of you putting more money towards it and it's still executing on that value based plan or like, I'm just trying to understand the, how you're being opportunistic and the flex in it in terms of moving up or down quickly.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

Yeah. I mean, is still a 10b5 plan. I I think we do have to make sure that we keep that grid active. So we have a grid, and we execute based on that grid. We have continued to make changes to that grid as we have seen opportunity.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

And I think that's what you're seeing as a result of how we are now buying back much more shares. So, yes, while it is executed to a 10b5 plan, we've increased the pace and the amount of capital that we are putting aside to execute the share repurchase program. I'll also say that as we was a moment maybe two years back when we were being a little more conservative and it was much more of a value based plan. At this point, I would say we just see tremendous opportunity in our share price. I think Rick talked about where we see value from.

Sumita Pandit
Sumita Pandit
CFO & President at Radian Group

It's from EOCI, it's from the embedded value of our MI business that's not reflected in our book value today. And I think we gave some indications of that two years back now in our Investor Day. So, I would say, yes, it is value based, but we are also being a little bit more optimistic about where we are headed as a business, and we will continue to buy back those shares based on a 10b5 grid.

Mihir Bhatia
Mihir Bhatia
Analyst at Bank of America

Got it. That makes sense. And then in terms of the claim rate, cure rate type balance, if you will, cure rates have been very strong, I you know, I think you have the slide then, everything you can see is like ninety seven percent, ninety eight percent, you mentioned cure rates are, like you had the two highest months over the last ten years recently. Is that all just HPA driven, like are there other factors driving it? Has something is there something other than HPA that is driving such strong cure rates?

Mihir Bhatia
Mihir Bhatia
Analyst at Bank of America

And can you talk about that a little bit?

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

Mihir, thank you for that question. I'll take that and Samitra can add to it as well. But I think, look, embedded equity in the home is certainly a good incentive for a home buyer to make sure they find a way to protect that equity. But I would say combined with that, there's a tremendous amount of muscle memory that we all came through kind of from the great financial crisis, but then COVID where we as an industry and as a government and a regulator, and we learned that keeping the borrower in their home to allow them to get their feet back on the ground and kind of move forward has proven to be a really positive factor. So I would put that And I would just emphasize that some of learnings from COVID have translated into even a better structure that avoids kind of, I guess abuses of that kind of forbearance.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

So it's the structure for helping people, I think has been improved. You also look at kind of the employment cycle that continues today, even with all the headline news around tariffs and global trade and so forth. Employment continues to be a factor in enabling people to get reemployed if they become unemployed. And so those are factors we watch as Samantha went through a few minutes ago, talking about how we set reserve policy. We really look at kind of a number of different factors kind of going through.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

I think there's a number of factors today that are enabling people to cure better than we've expected to date. We're going to continue to monitor it and continue to watch it and continue to express our opinion through our reserves.

Mihir Bhatia
Mihir Bhatia
Analyst at Bank of America

Thank you for taking my questions.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

Thank you.

Operator

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

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

I appreciate that. Thank you all for joining the call today. We always appreciate your time and interest in Radian and our ability to kind of update you on the current state of our business, which we're very proud of. We look forward to the opportunity to meet and talk to many of you over the coming weeks and answer your questions. It's always one of the highlights of the job I have here is the opportunity to meet with you also.

Rick Thornberry
Rick Thornberry
CEO and Director at Radian Group

Have a great day and thank you for your time.

Operator

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

Executives
    • Dan Kobell
      Dan Kobell
      Executive Vice President of Finance, Financial Planning & Analysis
    • Rick Thornberry
      Rick Thornberry
      CEO and Director
    • Sumita Pandit
      Sumita Pandit
      CFO & President
Analysts
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Key Takeaways

  • Strong Q1 financials: Net income of $145 million with a 12.6% return on equity and 11% year-over-year book value per share growth, driven by a $274 billion primary mortgage insurance in force and 86% persistency rate.
  • Robust capital management: Maintained $834 million holding company liquidity and a $2.1 billion PMIERs cushion, repurchased $207 million of shares (over 4% of shares) and paid $244 million in dividends, with up to $795 million planned distributions in 2025.
  • Resilient credit trends: Default rate declined to 2.33% while cures outpaced new defaults, 75% of new defaults carry over 20% embedded equity, and the loss provision remained low at $15 million.
  • Operational efficiency: Other operating expenses fell 7% year-over-year and 12% sequentially, with management on track to meet the $320 million full-year expense target.
  • Positive market outlook: Anticipates continued home value support from supply shortages and first-time buyer demand, stable MI market size near $300 billion, and beneficial high interest rates boosting investment income and persistency.
AI Generated. May Contain Errors.
Earnings Conference Call
Radian Group Q1 2025
00:00 / 00:00

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