RADIAN GROUP INC Q3 FY2024 earnings call

• Strong financial results: Book value per share increased 18% year-over-year to $31.37, revenues grew to $334 million, net income was $152 million. Annualized return on equity was 13.2%, adjusted net operating return on equity was 13.7%.
• Investment portfolio: $6.6 billion portfolio with net investment income of $78 million in Q3, yield of 4.3%. Unrealized net loss on investments improved by $144 million from prior quarter.
• Dividends and debt: Radian Guaranty paid $185 million dividend in Q3, year-to-date total $485 million. Paid off $450 million senior debt, reducing leverage ratio to 18.5%. Available holding company liquidity was $844 million at quarter end.
• Insurance in force: Primary mortgage insurance in force grew to $275 billion, $13.5 billion of new insurance written in Q3. Persistency rate of existing insurance in force was 84.4% in Q3.
• Expenses: Other operating expenses decreased to $86 million in Q3, partially offset by a $10 million nonoperating impairment on internal use software in the all other category.

Mortgage Insurance: Generated $235 million in net premiums earned during the quarter, with primary mortgage insurance in force reaching $275 billion. All Other: Total revenues were $40 million in the third quarter, consistent with the second quarter.

• Private mortgage insurance market: Expected to be approximately $300 billion in 2024, consistent with 2023.
• 2025 outlook: Expect the MI market to be approximately 10% larger in 2025 than in 2024 based on current market projections.

• Impact of hurricanes: Hurricanes Milton and Helene expected to impact new defaults in Q4; historically, storm-related defaults cure at higher rates but could affect results.
• Market volatility: Interest rate changes and market fluctuations could impact investment portfolio returns and insurance in force persistency.
• Seasonal and natural disaster effects: Normal seasonal trends and natural disasters can affect new defaults and cure rates, though historically storms have cured at higher rates.

Q: About Radian Mortgage Capital's issuance cadence.

A: Rick said they did the first deal in Q3 and the second in Q4, expect to be a regular issuer next year but haven't given forward guidance, with issuance frequency driven by business scaling.

Q: About the $10 million software impairment in the quarter.

A: Sumita said the $10 million impairment was on software in the all other category, a one-time item, and all other revenues are expected to be around $40 million.

Q: About the pricing backdrop and competitive environment.

A: Derek said the pricing environment is stable, rational, and disciplined, with Radian leveraging analytics to find value across the risk spectrum.

Q: About defaults, cures, and reserves.

A: Rick and Sumita discussed default trends, with new defaults increasing due to seasonal trends and seasoning, cure rates remaining high (90% cured within four quarters), and reserve assumptions based on through-the-cycle prudence.

Q: About MI market growth and participation.

A: Rick said MI market growth is fueled by purchase market growth, and Radian is well-positioned to leverage data and analytics to capture economic value within that growth.

Q: About persistency and excess capital use.

A: Sumita said persistency is stable around 84% on a 12-month basis, and Radian will continue to repurchase shares and return capital to shareholders, with flexibility for potential M&A based on disciplined capital allocation.