Radian Group Inc. Q3 FY2025 earnings call

• Mortgage Insurance business continues strong performance with large high-quality in-force portfolio, strong persistency and credit performance. - Deploying capital with discipline, maintaining strong holding company liquidity, distributing capital and returning value to stockholders. -推进分拆计划，房贷管道、产权和房地产服务业务的分拆过程正在推进，已聘请银行领导分拆，预计2026年第三季度完成。- 收购Inigo，价格17亿美元，现金 funded，包括Radian Guaranty向Radian Group提供的6亿美元10年期内部票据融资，估值有吸引力。- 第三季度持续运营净收入1.53亿美元，每股1.11美元，ROE包括持续运营为13.4%，含终止运营为12.4%，账面价值每股增长9%至34.34美元，季度股息3500万美元。- 房贷保险在保组合创新高，新业务量增长，持续率稳定，投资组合表现良好，损失准备金情况良好，其他运营费用寻求效率提升。

The primary segment is the Mortgage Insurance business. In the third quarter, net income from continuing operations was $153 million or $1.11 per diluted share. Total revenues were $303 million, with net premiums earned at $237 million, the highest in over 3 years. The large high-quality mortgage insurance in-force portfolio grew to $281 billion. New insurance written was $15.5 billion, a 15% increase. Persistency rate was 84%. Net investment income was $63 million from a $6 billion investment portfolio. Loss provision for new defaults was $53 million, with positive reserve development of $35 million offsetting partially, resulting in a net expense of $18 million. Other operating expenses were $62 million, with $9 million related to the Inigo acquisition; excluding that, total operating expense was $54 million, a $16 million decline from prior quarter. Projected annual operating expenses for continuing operations in 2025 are approximately $250 million.

• 预计2026年第一季度完成Inigo交易，分拆计划预计2026年第三季度完成。- 预计2026年从Radian Guaranty向Radian Group至少支付6亿美元股息。- 暂停股票回购，未来Inigo收购后有多余流动性时重新考虑回购计划。- 预计Inigo交易将带来中期十几%的运营每股收益增值和200个基点的ROE增值从2026年开始。

• 分拆过程中的不确定性，包括潜在买家的不确定性及分拆时间的不确定性。- Inigo收购的整合风险，包括文化整合、业务整合等方面的风险。- 市场利率变化对房贷保险业务定价的影响风险。- 信用资产类别如信用卡、次级汽车贷款等的波动对投资组合的影响风险。

Q: When you talk about the mid-teens accretion for 2026, should we add that 200 basis points to current run rate ROE?

A: Thanks for the question, Bose. So I think if you look at our ROE this quarter, on an operating basis, our ROE was 13.9%. That excludes the impact of some onetime items related to the Inigo transaction where we paid and will be paying advisory fees. I think from an accretion perspective, I think assuming a 200 basis points increase on top of that would be fair. I mean, I think the 13.9% is comparable to also what we had last year and is a good run rate for us to think about for our stand-alone MI business. Keep in mind also that because we are currently -- we paused our share repurchases. So our denominator is a little bit more bloated as we accrue capital to pay for Inigo. I think the 13.9% ROE is probably a little lower than where we may be once that excess capital gets paid out to purchase Inigo. And so the 200 basis points increase can be added to the 13.9% on operating ROE that we have presented in this quarter.

Q: As you look at divesting the noncore businesses, is there -- how should we think about capital that could be freed up from those businesses in addition to kind of the cost saves that you've already kind of highlighted in discontinued operations?

A: Yes. So I think as I mentioned, as of now, as of Q3, what we have done is we've reclassified discontinued operations as held for sale. If you look at our balance sheet and the carrying values for these 3 businesses, we carry these businesses at about $170 million or so as of the third quarter. We do not expect to have either like a huge gain or a huge loss versus those levels. I think the held for sale number is based on our best accounting estimate today of the true value of those businesses. I think we have given some indications to you in terms of what could be additional expenses that we incur in selling the businesses. I think Rick mentioned we've hired 2 banks. We've estimated a $7 million expense in selling the businesses today. There could be more or less going forward. But we think that the carrying value of $170 million is our best estimate as of today of the true value of those 3 businesses.

Q: Maybe just one quick one. Just any update on the timing of the divestitures and where you are with that process? I think you had said Q3 2026 earlier?

A: Yes. Mihir, this is Rick. Yes, we're -- I think we're still sticking to the -- to be completed by third quarter of next year. But just to give you an update on the process, as we mentioned, we've hired the 2 banks to kind of facilitate the process. I actually had a tremendous amount of inbound interest expressed across all 3 businesses, and that process is initiating as we speak, both in kind of sharing information with a broad group of potential interested parties. So we expect the process to move quickly over the coming months and look forward to keeping you up to date as we go through this process. As we get into early next year, I think we'll have more of an update. But one of the things that I -- as we watch this process go, the one thing I'm proud of is our teams have stayed laser-focused on running the business and continuing to serve our customers. And I think that positions each of those businesses well for the outcome that we're working towards. So -- but yes, we'll keep you posted as we go quarter-to-quarter. But right now, it's a fully engaged process with the bankers and the teams, and I think working very well.