Radian Group Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Performance: Net income was $142 million ($1.02 per diluted share) in Q2, up from $0.98 per diluted share in Q1. Return on equity was 12.5%, and book value per share grew 12% year-over-year to $33.18. Primary mortgage insurance in force reached an all-time high of $277 billion.
• Market Trends: Housing market faces challenges like supply constraints and elevated prices, but strong housing demand, especially from first-time homebuyers. Radian leverages proprietary data and analytics for strategic pricing decisions.
• Capital and Liquidity: Radian Guaranty paid a $200 million dividend to Radian Group in Q2 and expects up to $795 million of total distributions in 2025 (including $400 million paid in H1). Radian Group repurchased ~13.5 million shares in H1 2025, with available liquidity at end of Q2 being $784 million.
• Operational Efficiencies: Seeking additional operating efficiencies, with full-year 2025 operating expenses expected to be $320 million (8% decrease from 2024).

Segment Performance

• Mortgage Insurance: Generated net income of $142 million in Q2, with return on equity of 12.5%. Book value per share grew 12% year-over-year to $33.18. Primary mortgage insurance in force was an all-time high of $277 billion. Net premiums earned were $234 million, new insurance written was $14.3 billion (3% increase y-o-y), persistency rate was 84%, in-force premium yield was 38 basis points. Default rate was 2.27% (down 6 basis points from prior quarter), with cures outpacing new defaults.
• All Other: Adjusted pretax operating loss was approximately $16.4 million in Q2 compared to $3.5 million in Q1. The increase was primarily due to lower revenue in the Mortgage Conduit business from mark-to-market changes on residential mortgage loans held for sale, with an approximate $9 million impact.

Guidance

• Radian Guaranty expects to pay up to $795 million of total distributions to Radian Group in 2025, including $400 million already paid in the first half of the year.
• Radian Group repurchased ~13.5 million shares in the first half of 2025, taking advantage of market opportunities to be accretive to book value.

Risks

• Mark-to-market changes on residential mortgage loans held for sale impacting the Mortgage Conduit segment.
• Volatility in valuations of hedged positions in the Conduit business.

Question and Answer

• Q: Doug Harter of UBS asks about liquidity at the holding company and sustainability of the $795 million dividend.

A: Sumita Pandit discusses liquidity, share repurchases, and notes the dividend from Radian Guaranty is driven by its statutory net income. Rick Thornberry adds Radian Guaranty has good visibility to cash flow from its operations.

• Q: Bose George of KBW asks about marks on loans held for sale in the All Other segment.

A: Rick Thornberry discusses the Conduit business, noting mark-to-market impact of ~$9 million due to spread volatility on interest-only instruments, discontinuing investment in Real Estate Tech, and the consistency of Title/Real Estate businesses.