Q4 2023 Radian Group Inc Earnings Call

Ladies and gentlemen, thank you for standing by walking through the fourth quarter 2023, Radian Group earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the fourth quarter 2023 Radian Group earnings conference call. At this time, all participants are in the listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to John Damian, Senior Vice President, Investor Relations and Corporate Development. Please go ahead.

To ask a question. During this session you would need to press star one on your telephone you will then hear an automated message. It bites in your hand, just raised to withdraw your question. Please press star one again.

Be advised that today's conference is being recorded I.

I would like now to turn the conference over to John Damian Senior Vice President Investor Relations and corporate development. Please go ahead.

Speaker Change: Thank you and welcome to Radians fourth quarter and year end 2023 conference call. Our press release, which contains radians financial results for the quarter and full year was issued yesterday evening and is posted to the investor section of our website at Www Dot Radian Dot com.

John Damian: Thank you, and welcome to Radian's fourth quarter and year-end 2023 conference call. Our press release, which contains Radian's financial results for the quarter and full year, was issued yesterday evening and is posted on the investor section of our website at www.radian.com. This press release includes certain non-GATT measures that may be discussed during today's call, including adjusted pre-tax operating income, adjusted diluted net operating income per share, and adjusted net operating return on equity. A complete description of all of our non-GATT measures may be found in press release Exhibit F, and reconciliations of these measures to the most comparable GATT measures may be found in press release Exhibit G. These exhibits are available in the investor section of our website.

John Damian: 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.

Speaker Change: <unk> 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 maybe found in press release exhibit G. These exhibits are available on the investor section of our website.

John Damian: Today, you will hear from Rick Thornberry, Radian's Chief Executive Officer, and Sumit Pandan, Chief Financial Officer. Also on hand for the Q&A portion of the call is Derek Brummer, president of Radian Mortgage. 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 2022 Form 10-K and subsequent reports filed with the SEC. These are also available on our website. Now, I'd like to turn the call over to Rick. Good afternoon, and thank you all for joining us today.

Today, you will hear from Rick Thornberry, Radians, Chief Executive Officer, and submit dependent Chief Financial Officer also on hand for the Q&A portion of the call is Derek Brummer President of Radian mortgage.

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.

Speaker Change: <unk> regarding forward looking statements included in our earnings release and the risk factors included in our 2020 to Form 10-K, and subsequent reports filed with the SEC. These are also available on our website now I would like to turn the call over to Rick.

Richard G. Thornberry: Good afternoon, and thank you all for joining US today I am pleased to report another excellent quarter in the wrap up a successful year for Radian for 2023, we increased book value per share by 15% year over year generating net income of $603 million and delivering a return on equity of 15%.

Richard G. Thornberry: I am pleased to report another excellent quarter in the wrap-up of a successful year for Radian. For 2023, we increased book value per share by 15% year over year, generating net income of $603 million and delivering a return on equity of 15%. Despite a challenging macroeconomic environment, GAAP revenues grew to $1.2 billion in 2023.

Despite a challenging macroeconomic environment GAAP revenues grew to $1 2 billion in.

In 2023, our primary mortgage insurance in force, which is the main driver of future earnings for our company reached an all time high of 271 billion.

Richard G. Thornberry: Our primary mortgage insurance and force, which is the main driver of future earnings for our company, reached an all-time high of $270 billion. Rating Guarantee paid a total of $400 billion in Ordinary Dividends Rating Group during the year. We return $279 million of capital to stockholders through share repurchases and dividends. Our regular dividend yield continues to be the highest in the industry.

Radian Guaranty paid a total of $400 billion.

And ordinary dividends Radian group during the year, we returned $279 million of capital to stockholders through share repurchases and dividends.

Rick Thornberry: Our regular dividend yield continues to be the highest in the industry.

Richard G. Thornberry: Our overall capital and liquidity positions remain very strong. Available holding company liquidity at year-end was approximately $1 billion, and our PMIR's cushion was $2.3 billion, an increase of $533 million from the prior year. Reflecting our strong financial performance and capital position, we received a ratings upgrade from S&P in January to A- for Rating Guarantee and BBB- for Radian Group. Radian Group is now rated as investment grade by all three primary rating agencies.

Rick Thornberry: Our overall capital and liquidity positions remain very strong available holding company liquidity at year end was approximately $1 billion at our Pmiers cushion was $2 3 billion, an increase of $533 million from the prior year.

Rick Thornberry: Reflecting our strong financial performance and capital position, we received a ratings upgrade from S&P in January to <unk>.

Rick Thornberry: For Radian Guaranty and Triple B minus for Radian Group Radian Group is now rated as investment grade by all three primary rating agencies I would also like to highlight that as a result of our team's disciplined focus on managing costs.

Richard G. Thornberry: I would also like to highlight that as a result of our team's disciplined focus on managing costs, during a challenging business environment, we reduced our combined consolidated cost of services and other operating expenses by 17% or $77 million in 2023 as compared to 2022, which was at the higher end of our target range for reduction. These results demonstrate the continued strength of our high quality and growing mortgage insurance portfolio and our capital position, as well as our ongoing strategic focus on managing operating expenses. In terms of our mortgage insurance business, we continue to leverage our proprietary analytics and radar rates platform to successfully identify and capture economic value in the market. As a result, we wrote $10.6 billion of high-quality new insurance in the fourth quarter and $52.7 billion for the year.

Rick Thornberry: During a challenging business environment, we reduced our combined consolidated cost of services and other operating expenses by 17%.

Rick Thornberry: Our $77 million in 2023 as compared to 2022, which was at the higher end of our targeted range for reductions.

Rick Thornberry: These results demonstrate the continued strength of our high quality and growing mortgage insurance portfolio and our capital position as well as our ongoing strategic focus on managing operating expenses.

Rick Thornberry: In terms of our mortgage insurance business, we continue to leverage our proprietary analytics and radar rates platform to successfully identify and capture economic value of the market. As a result, we wrote $10 $6 billion of high quality, New insurance written in the fourth quarter and 52.

Rick Thornberry: $7 billion for the year.

Richard G. Thornberry: We continue to see positive credit performance in our mortgage insurance portfolio during the year, and our persistency rate remains strong. It is important to note here that borrowers in our insured portfolio have significant equity in their homes, which helps to mitigate the risk of loss by decreasing both the frequency and severity of paid claims. In fact, we estimate that as of year-end 2023, 86% of our total insurance-in-force had at least 10% embedded equity, and 82% of our defaulted loans had at least 20% embedded equity. It is also worth repeating that higher interest rates result in higher yields on our $6.3 billion investment portfolio. The increased investment yield supports higher returns and generates incremental income that flows directly to our bottom line. In terms of the housing market, recent industry forecasts for 2024 project total mortgage originations of approximately $2 trillion, which would represent an increase compared to 2023. This outlook projects a decline in mortgage interest rates in 2024 to approximately 6% by the fourth quarter.

We continued to see positive credit performance in our mortgage insurance portfolio during the year and our persistency rate remains strong.

It is important to note here that borrowers in our insured portfolio has significant equity in their homes, which helps to mitigate the risk of loss by decreasing both the frequency and severity of paid claims.

Rick Thornberry: In fact, we estimate that as of year end 2023, 86% of our total insurance in force at it.

Rick Thornberry: At least 10% embedded equity and 82% of our defaulted loans have at least 20% embedded equity.

It is also worth repeating that higher interest rates result of higher yields on our $6 $3 billion investment portfolio.

The increased investment yield supports higher returns and generates incremental income that flows directly to our bottom line.

In terms of the housing market recent industry forecast for 2024 project total mortgage originations of approximately two trillion dollars.

Rick Thornberry: Which would represent an increase compared to 2023.

This outlook projected decline in mortgage interest rates in 2020 forward to approximately 6% by the fourth quarter.

Richard G. Thornberry: These lower mortgage rates coupled with continued strong home purchase demand is expected to drive a 15 to 20% increase in purchase originations and an increase in refinance originations as well. While declining interest rates are projected to increase refinance volume, we expect persistency to remain strong given that approximately 80% of our inforced portfolio consists of loans with interest rates below 6%. Therefore, those borrowers would have little to no refinance in Sutter.

And these lower mortgage rates, coupled with continued strong home purchase demand is expected to drive a 15% to 20% increase in purchase originations and an increase in refinance originations as well.

While declining interest rates are projected to increase refinance volume, we expect persistency to remain strong given that approximately 80% of our in force portfolio consists of loans with interest rates below 6%.

Rick Thornberry: And therefore, those borrowers would have little to no refinance incentives.

Richard G. Thornberry: And as we've said before, the increased purchase volume is a positive for our mortgage insurance business, given that M.I. penetration on purchase transactions is currently 10 to 14 times higher than for refinancing. Based on the origination forecast, we estimate that the private mortgage insurance market will be between $300 and $350 billion in 2024. It is also worth mentioning that while low inventory and strong market demand continue to create challenges for first-time homebuyers, these dynamics help to mitigate downside risk and home values, which is a positive for our insured portfolio. Given that our mortgage insurance business benefits from increases in demand, home prices, and purchase volume, our overall outlook for the business remains positive. With regard to our HomeGenius business, throughout 2023, our team navigated the impact of higher interest rates and limited inventory, which constrained mortgage and real estate activity. Our team focused on deepening and expanding our customer relationships, managing expenses to improve operational efficiency across our businesses, and making strategic investments in data, analytics, and technology.

Rick Thornberry: And as we've said before the increased purchase volume is a positive for our mortgage insurance business given the MA penetration of purchase transactions is currently 10 to 14 times higher than for refinances.

Rick Thornberry: Based on the origination forecasts, we estimate that the private mortgage insurance market will be between 300 $350 billion in 2024.

Rick Thornberry: It is also worth mentioning that while low inventory and strong market demand continue to create challenges for first time homebuyers. These dynamics helped to mitigate downside risk in home values, which is a positive for our insured portfolio.

Given that our mortgage insurance business benefits from increases in demand home prices and purchase volume our overall outlook for the business remains positive.

With regard to our home genius business throughout 2023, our team navigated the impact of higher interest rates and limited inventory, which constrained mortgage and real estate activity.

Our team focused on deepening and expanding our customer relationships managing expenses to improve operational efficiency across our businesses and making strategic investments in data analytics and technology.

Richard G. Thornberry: We believe this business is well positioned to benefit from a declining interest rate environment as refinance and home purchase activity rebound. We will continue to manage our cost structure and align our strategy and investments to the market environment. And we will continue to build on our strong track record for managing our capital resources. We have consistently demonstrated a strategic focus on capital optimization over the past several years.

Rick Thornberry: We believe this business is well positioned to benefit from a declining interest rate environment as refinance and home purchase activity rebounds, we will continue to manage our cost structure to align with our strategy and investments to the market environment.

And we continue to build on our strong track record for managing our capital resources, we have consistently demonstrated our strategic focus on capital optimization over the past several years, we believe the strength of our capital position significantly enhances our financial flexibility now and going forward.

Richard G. Thornberry: We believe the strength of our capital position significantly enhances our financial flexibility now and going forward. I submit that we'll discuss our capital actions during the quarter and during the year, including the details of our current position. And as you've heard me say before, our company is built to withstand economic cycles, significantly strengthened by the P Myers Capital Framework, dynamic risk-based pricing, and the distribution of risk into the capital and reinsurance market. The attached documents cover the details of our financial position. Thank you, Rick, and good afternoon to you all.

Rick Thornberry: Tim will discuss our capital actions during the quarter and during the year, including the details of our current position.

And as you've heard me say before our company is built to withstand economic cycles significantly strengthened by the P. Myers capital framework dynamic risk based pricing and the distribution of risk into the capital and reinsurance markets.

Submit to: Submit to will now cover the details of our financial position.

Tim: Thank you Rick and good afternoon to you all we produced another strong quarter of operating results in the fourth quarter of 2020 see on a net income of $143 million or 91 cents diluted earnings per share.

Sumit Pandan: We produced another strong quarter of operating results in the fourth quarter of 2023, earning net income of $143 million on $0.91 diluted earnings per share. For the full year, we earned net income of $603 million, or $3.77 diluted earnings per share. Adjusted Diluted Net Operating Income per share was slightly higher than the gap metrics, at $0.96 for the quarter and $3.88 for the full year.

Submit: Full year net income of $603 million or $3 77 diluted earnings per share.

Submit: Adjusted diluted net operating income per share it looks slightly higher than the GAAP metrics at 96% for the quarter and $3 88.

Submit: For the full year.

Tim: We generated a return on equity of 15% in 2020 and grew our book value per share 15%.

Sumit Pandan: We generated a return on equity of 15% in 2023 and grew our book value per share by 15% year over year to $28.71. This book value per share growth was in addition to $146 million of dividends paid to our stockholders during 2020. We also repurchased $133 million of our shares during the year.

Tim: To $28 71.

Tim: This book value per share growth was in addition to $146 million of dividends paid to our stockholders during <unk> <unk>.

Tim: <unk> had $18 million of questions during the.

Tim: And then when you see these are proud to deliver an industry, leading total shareholder return of 55%.

Sumit Pandan: And in 2023, we were proud to deliver an industry-leading total shareholder return of 55%. Our revenues were strong in both the fourth quarter and full year 2022. Despite reduced mortgage and real estate transaction volumes during 2023, resulting from higher interest rates and limited housing inventory, we generated over $1.2 billion of total revenues during the year, a 4% increase compared to our total revenues in 2022. Slides 11-13 in our presentation include details on our mortgage insurance portfolio, as well as other key factors impacting our net premium earnings. Our primary mortgage insurance inflows grew 3% year-over-year to an all-time high of $270 billion as of year-end, generating $230 million in net premiums earned in the quarter and $909 million for the full year.

Tim: Our revenue has been strong in both the fourth quarter and full year 2020.

Tim: Despite reduced mortgage and real estate transaction volumes during pregnancy is that going from higher interest rates and limited housing inventory, we generated over $1 2 billion.

Tim: <unk> revenues during the year of.

Tim: A 4% increase compared to our poker revenues in 2022.

Tim: Slide 11 through 13 in our presentation includes details on our mortgage insurance in force portfolio as well as other key factors impacting our net <unk> impact.

Tim: Primary mortgage insurance import duty percentage to lead to an all time high of $270 billion.

Tim: Yes.

Tim: Generating $230 million and net premiums earned in the quarter and $909 million for the full year.

Tim: As previously announced Radian guaranty entered into two new excess of loss reinsurance agreement in the fourth quarter.

Tim: To provide additional protection in stress loss scenarios.

Tim: These agreements are consistent with our strategy to effectively manage catheters and to help mitigate the overall risk profile and potential volatility Johan mortgage insurance business.

Sumit Pandan: As previously announced, Radian Guarantee entered into two new excess of loss reinsurance agreements in the fourth quarter that are expected to provide additional protection in stress loss scenarios. These agreements are consistent with our strategy to effectively manage capital and to help mitigate the overall risk profile and potential volatility of our mortgage insurance business. The resulting increase in our CDF premiums from these transactions is reflected in our fourth-quarter results on slide 13 of our quarterly presentation. Contributing to the growth of our insurance imports was $52.7 billion of new insurance written for 2023, including $10.6 billion written during the fourth quarter.

Tim: The resulting increase in our ceded premiums from these transactions is reflected in our fourth quarter results on slide 13 of our quarterly presentation.

Tim: Contributing to the growth of our insurance inputs was $52 7 billion.

Tim: Of new insurance written for <unk>, including $10 6 billion during the fourth quarter.

Tim: <unk> in our volumes reflects the industry wide decline in mortgage origination.

Tim: Industrial declined primarily due to increased rates provided headwinds for our new business. It has also significantly benefited the persistency rate our insurance in force, which remained high at 84% in the fourth quarter based on the trailing 12 months compared to 80% a year ago.

Tim: We provide more detail on our persistency trends on slide 11.

Tim: We expect our persistency ratio remains strong even after consideration of the recent pullback in the market shape as Vic mentioned more than 80% are part of insurance in force kind of market stage of 6% or less as of the end of the fourth quarter and is therefore less likely to cancel in the near term due to refinancing in addition, 69 person.

Sumit Pandan: The reduction in our volumes reflects the industry-wide decline in mortgage or... While the industry-wide decline, primarily due to increased rates, provided headwinds for our new business, it has also significantly benefited the persistency rate of our insurance imports, which remained high at 84% in the fourth quarter, based on the trailing 12 months, compared to 80% a year ago. We provide more detail on our persistency trends on slide 11. We expect our persistency rate to remain strong, even after consideration of the recent pullback in mortgage rates. As Rick mentioned, more than 80% of our insurance imports had a mortgage rate of 6% or less as of the end of the fourth quarter, and they are therefore less likely to cancel in the near term due to refinancing. In addition, 69% of our insurance imports had a mortgage rate of 5% or less at year-end.

Tim: <unk> provided sort of painful and a market change of 5% or less.

Tim: While increases in market rates have reduced originations and in IW high persistency rates have supported growth in insurance in force and earnings demonstrating the durability of our business model in <unk> interest rate environment.

Tim: Shown on slide putting the in force portfolio premium means for our mortgage insurance portfolio remained stable during 2020 as expected ending at 38, one basis points consistent with two.

Tim: 2022.

Tim: With strong persistency rate and the current positive industry pricing environment, we expect the important portfolio premium NIM to remain generally stable for the upcoming year is that.

Tim: The higher interest rate environment has also benefited our net investment income, which grew 32% to two.

Tim: $158 million in 2020, including $69 million in the fourth quarter.

Sumit Pandan: While increases in mortgage rates have reduced originations in NIW, high persistency rates have supported growth in insurance-enforced and earnings power, demonstrating the durability of our business model in varied interest rate environments. As shown on slide 13, the imports portfolio premium yield for our mortgage insurance portfolio remains stable during 2023, as expected, ending at 38.1 basis points consistent with year-end 2022. With strong persistency rates and the current positive industry pricing environment, we expect Infor's portfolio premium yield to remain generally stable for the upcoming year as well. The higher interest rate environment has also benefited our investment income, which grew 32% year-over-year to $258 million in 2023, including $69 million in the fourth quarter. As shown on slide 16, the rise in our net investment income was driven by increases during the year in both the size and average yield of our investment portfolio. Our unrealized net loss on investments reflected in stockholders' equity improved by $190 million in the fourth quarter, improving our book value per share.

Tim: As shown on slide 16 that our even our net investment income was driven by increases during the year in both the size and average yield of our investment portfolio.

Tim: Our unrealized loss on investments reflected in stockholders equity improved in the fourth quarter by $190 million at the end of the NDA.

Tim: Improving our book value per share.

Tim: Expect that our strong liquidity and cash flow position will provide us with the ability to hold these securities to maturity and recover the remaining unrealized losses.

Tim: So this is not going to you, which is derived primarily from our homogeneous segment totaled $46 million liquidity, including $12 million in the fourth quarter.

Tim: As Rick mentioned, we believe this business has been positioned to benefit from a declining interest rate environment as refinance and home purchase activity rebounds, and we will continue to manage our cost structure and align our strategy and investments to the market environment I will now move on to our provision for losses.

Tim: Credit trends continue to be positive.

Tim: When you're trying to see <unk> continue to correctly. Peter then updated expectation, resulting in releases of prior period reserve that has significantly offset reserves established for new depot.

Tim: These releases are frankly due to the continuing to trend down over the past several quarters as the amount of five broker reserve balance net of reinsurance has declined from $756 million as of January one 2022.

Tim: $140 million as of December 31, 2023 does that opinion net reserves available for potential future releases if conditions warranted.

Sumit Pandan: We expect that our strong liquidity and cash flow position will provide us with the ability to hold these securities to maturity and recover the remaining unrealized loss. Our services revenue, which is derived primarily from our HomeGenius segment, totals $46 million in 2023, including $12 million earned in the fourth quarter. As Rick mentioned, we believe this business is well positioned to benefit from a declining interest rate environment as refinance and home purchase activity rebounds, and we will continue to manage our cost structure and align our strategy and investments to the market environment. I will now move on to our probation follow-up.

Tim: As Rick mentioned, our favorable loss experience continues to be driven primarily by the significant embedded homeowner equity, resulting from this strong home price appreciation experience in recent years.

Tim: On slide 18, we provide transport our primary deport inventory.

Tim: <unk> <unk> for 2023 was flat to prior year end at approximately $22000.

Tim: It hasn't been a portfolio default rate or two 2% at full speed at.

Tim: The number of new defaults reported to us by.

Tim: Approximately 12500 in the fourth quarter of 2000 <unk> consistent.

Tim: Consistent with the expected seasoning of our insured portfolio and seasonal trends, we continue to maintain our deepwater capability to assumption on new defaults at 8%, resulting in $54 million of loss provision for new defaults reported during the quarter.

Sumit Pandan: Credit trends continue to be positive. Throughout 2023, our defaults will continue to cure at rates greater than our previous expectations, resulting in releases of prior period reserves that have significantly offset reserves established for new defaults. These releases of prior period reserves have continued to trend down over the past several quarters as the amount of our total reserve balance net of reinsurance has declined from $756 million as of January 1, 2022 to $340 million as of December 31, 2023, resulting in less reserves available for potential future releases if conditions are warranted. As Rick mentioned, our favorable loss experience continues to be driven primarily by the significant embedded homeowner equity resulting from the strong home price appreciation experienced On slide 18, we provide trends for our primary default inventory. Our ending primary default inventory for 2023 was flat to the prior end at approximately 22,000 loans, representing a portfolio default rate of 2.2% for both periods.

Tim: Positive reserve development on prior period defaults of $49 million, partially offset this provision for newly pause due to the favorable CEO, Ken just discussed and higher clean withdrawals by services.

Tim: As a result, we recognized a net loss of $5 million of non mortgage insurance provision for losses in the fourth quarter following eight consecutive quarters of net provision benefit.

Tim: Turning to our other expenses.

Tim: As a result of our significant expense savings efforts are combined consolidated cost of services and other operating expenses were reduced to $386 million in 2023, a decrease of $77 million or 17% compared to 22.

Tim: This result was at the higher end of the expense savings range of 60 to 80 million via deemed for at the beginning of 2023.

Tim: Our results for the fourth quarter include the impact of certain impairment.

Tim: Our operating expenses included $14 million in impairments of other long lived assets in the fourth quarter, primarily related to lease related assets as we continue to right size, our office footprint to maximize efficiency and cost savings.

Sumit Pandan: The number of new defaults reported to us by services was approximately 12,500 in the fourth quarter of 2023, consistent with the expected seasoning of our insured portfolio and seasonal trends. We continue to maintain our default-to-claim roll rate assumption for new defaults at 8%, resulting in $54 million of loss provision for new defaults reported during the quarter. Negative reserve development on prior period defaults of $49 million partially offset this provision for new defaults due to the favorable cure trends just discussed and higher claim withdrawals by services. As a result, we recognize a net loss of $5 million in our mortgage insurance provision for losses in the fourth quarter following eight consecutive quarters of net provision benefits.

Tim: In addition, we wrote off as a non operating expense on the remaining $10 million in goodwill related to the whole GBS segment as of yet and trying to see we have no goodwill and other acquired intangible assets remaining on our balance sheet.

Tim: We continue to actively manage our operating expenses and seek opportunities for additional efficiencies.

Tim: Moving finally to our capital available liquidity and related strategic action.

Tim: The financial position of our primary operating subsidiary Radian Guaranty remains strong at the beginning of 2020, we provided guidance that we expect it to dividends $300 million to $400 million from Radian Guaranty to a holding company. We are pleased that radian guaranty $800 million ordinary dividend each quarter in 2020, bringing.

Tim: Total dividends of $100 million consistent with the high end of our previously provided guidance.

Tim: Estimates are really dividends based on radian guaranty to lead in group in 2024 will increase and be in the range of $400 million to $500 million.

Sumit Pandan: Turning to our other experts, as a result of our significant expense savings efforts, our combined consolidated cost of services and other operating expenses were reduced to $386 million in 2023, a decrease of $77 million, or 17% compared to 22. This result was at the higher end of the expense savings range of $60-80 million we had aimed for at the beginning of 2023. Our results for the fourth quarter include the impact of certain impairments. Our operating expenses included $14 million in impairments of other long-lived assets in the fourth quarter, primarily related to lease-related assets, as we continue to right-size our office footprint to maximize efficiency and cost savings.

Tim: We expect that you didn't get Andy to be $100 million ordinary dividend in the first quarter of this year, followed by larger quarterly dividend payments to Radian group later in the year.

Tim: Radian guaranty's excess available assets over the minimum required assets increased during the fourth quarter from $1 7 billion to $2 3 billion, primarily as a result of the capital relief provided by the two new excess of loss insurance agreements executed in October.

Tim: Our available holding company liquidity remains stable at approximately $1 billion at the end of the fourth quarter.

Tim: Also have a $75 million drawn and undrawn credit facility, providing us with significant financial flexibility.

Tim: During 2020, <unk> five 3 million shares at a total cost of $133 million, including $63 million of share repurchases during the first quarter.

Sumit Pandan: In addition, we wrote off, as a non-operating expense, our remaining $10 million in goodwill related to the HomeGenius. As of year 2023, we have no goodwill or other acquired intangible assets remaining on our balance. We continue to actively manage our operating expenses and seek opportunities for additional efforts. Moving finally to our Capital, Available Liquidity, and Related Strategic Actions. The financial position of our primary operating subsidiary, Radian Guarantee, remains strong. At the beginning of 2023, we provided guidance that we expected to dividend $300 to $400 million from Radian Guarantee to our holding companies. We are pleased that Radian Guarantee paid $100 million of ordinary dividends each quarter in 2023, bringing total dividends to $400 million, consistent with the high end of our previously provided guidance.

Tim: The endocrine you're going to see our current share repurchase authorization had $167 million remaining and expires in January of 2025.

Tim: Looking ahead, we have $450 million of senior debt that comes due in October of this year and $595 million of senior debt coming due in March of 2025.

Tim: As we seek to optimize our capital structure. Our recent ratings upgrade from S&P and our current strong liquidity position provides us with flexibility. We are evaluating options to address these debt maturities and may seek to reduce our debt outstanding during 2024.

Tim: Our results for the fourth quarter and full year 2020 key highlight the strength and resiliency of our company in contrast to the challenges many other markets market participants faced over the past year as a result of the overall macroeconomic environment.

Tim: I will now turn the call back over to Vic.

Vic: Thank you submit that before we open the call to your questions I want to highlight that we are pleased with our results and remain focused on executing our strategic plans. We are driving operational excellence across our businesses and then 2023, we successfully reduced our combined consolidated cost of services and other <unk>.

Sumit Pandan: We estimate the ordinary dividends paid from Radian Guarantee to Radian Group in 2024 will increase and be in the range of $400 to $500 million. We expect Radian Guarantee to pay a $100 million ordinary dividend in the first quarter of this year, followed by larger quarterly dividend payments to Radian Group later in the year. Radian guarantees excess FEMAR's available assets over minimum required assets increased during the fourth quarter from $1.7 billion to $2.3 billion, primarily as a result of the capital relief provided by the two new excess of loss reinsurance agreements executed in October. Our available holding company liquidity remains stable at approximately $1 billion at the end of the fourth quarter.

Vic: Operating expenses by 17% or $77 million.

Vic: Our growing mortgage insurance portfolio, which reached an all time high of 271 billion.

Vic: Is highly valuable and expected to deliver significant earnings going forward.

Vic: We continue to strategically manage capital in 2023, we increased our pmiers cushion by $533 million paid $400 million of ordinary dividends from Radian Guaranty to Radian group and returned $279 million of capital to stockholders through dividends and share repurchases.

Vic: Most importantly, we accomplished all of this working together as a one radian team I'd like to recognize and thank the dedicated and experienced team iridium for the outstanding work. They do every day.

Sumit Pandan: We also have a $275 million undrawn credit facility providing us with significant financial flexibility. During 2023, we repurchased 5.3 million shares at a total cost of $133 million, including $63 million of shares repurchased during the fourth quarter. As of the end of 2023, our current share repurchase authorization had $167 million remaining and expires in January of 2025.

Vic: And thank you to our customers and investors for their continued support and confidence.

Speaker Change: And now operator, we would be happy to take questions.

Speaker Change: Thank you as a reminder, in order to ask a question. Please press star one on your telephone and wait for your name to be announced.

Speaker Change: To withdraw your question. Please press star one one again, please standby, while we compile the Q&A roster.

Sumit Pandan: Looking ahead, we have $450 million of senior debt that comes due in October of this year and $525 million of senior debt coming due in March of 2025. As we seek to optimize our capital structure, our recent ratings upgrade from S&P and our current strong liquidity position provide us with flexibility. We are evaluating options to address these debt maturities and may seek to reduce our debt outstanding during 2024. Our results for the fourth quarter and full year 2023 highlight the strength and resiliency of our company in contrast to the challenges many other mortgage market participants faced over the past year as a result of the overall macroeconomic environment. I will now turn the call back over to Rick. Thank you, Samantha.

Speaker Change: The first question comes from Bose, George with <unk>. Your line is open.

Bose George: Hi, everyone. Good afternoon.

Bose George: Actually I wanted to ask first just about.

Bose George: Notices.

Bose George: Book season, the 'twenty, one 'twenty two 'twenty three books.

George: Do you think that you noticed this number continues to grow and just what are your expectations there.

Derek Brummer: Hey, Bose it's Derek.

Derek Brummer: Yes in terms of the development of the book, it's kind of playing out as expected and pretty favorably. So if you look at the new notice development in Q4, if you look at that quarter over quarter and year over year increase very similar to what we saw in 2022 Q4 also we saw which unlike Q4 'twenty two.

Derek Brummer: We actually saw cures increase and the most recent quarter. The other thing I would point to focus on just not new defaults looking at the default rate. So the default rate continues to be at low levels at around two 2% that was actually flat last quarter I think some of our competitors may have seen a bit of an increase so thats been.

Richard G. Thornberry: Before we open the call to your questions, I want to highlight that we are pleased with our results and remain focused on executing our strategic plans. We are driving operational excellence across our businesses, and in 2023, we successfully reduced our combined consolidated cost of services and other operating expenses by 17 percent, or $77 million. Our growing mortgage insurance portfolio, which reached an all-time high of $270 billion, is highly valuable and expected to deliver significant earnings going forward. We continue to manage capital strategically. In 2023, we increased our PMIRS cushion by $533 million, paid $400 million of ordinary dividends from Radian Guarantee to Radian Group, and returned $279 million of capital to stockholders through dividends and share repurchase. Most importantly, we accomplished all of this working together as one Radian team.

Derek Brummer: Positive development. The other thing we are saying that new notices as significant embedded equity I'm, Rick alluded to 82% of our defaults, having at least 20% equity and we continue to see that with new default. So in Q4.

Derek Brummer: Little less than 80% I think it was 78% of new defaults at at least 20% equity as well. So when you look at the book.

Derek Brummer: Developing as expected.

Derek Brummer: And very favorably.

Speaker Change: Okay. Great. That's helpful. Thanks, and then just wanted to switch over to capital you noted that dividends coming up to the holding company. This year how are you balancing.

Speaker Change: Return of capital versus what you might do in terms of in terms of your debt.

Speaker Change: Yeah, and I think I gave some indication of what we are planning for bullets in my prepared remarks, but maybe just like breaking that down a little bit. So we are increasing guidance of how much dividends. These should be able to be from dividend from radian guaranty to radian group. So instead of the 300 $400 million that we paid.

Speaker Change: Last year, the increasing that guidance to 400 to 500.

Operator: I'd like to recognize and thank the dedicated and experienced team at Radian for the outstanding work they do every day. And thank you to our customers and investors for their continued support and confidence. And now, operator, we would be happy to take questions. Thank you. As a reminder, in order to ask a question, please press star 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: Still early in the year. So we're being conservative that I think there is probably some upside to that number but given that we had early in the year, we felt that our conservative guidance would be appropriate at this stage.

Speaker Change: In terms of balancing that with our debt.

Speaker Change: Again, I think I indicated in my prepared remarks that we are looking at Opportunistically thinking about our options. This year, given our S&P ratings upgrade the overall credit market. The fact that there are many other issuers looking to access the market. This year given the constructive credit environment, we would look to evaluate our <unk>.

Operator: Stand by while we compile the Q&A roster. The first question comes from Bo George with KBW. Your line is open. Hey, everyone. Good afternoon.

Speaker Change: <unk> be made considered using our debt. This year. So I think all of that is on the table, but I think.

Speaker Change: We don't have to make a choice between.

Bose George: If you wanted to ask first just about new notices, as in your book season, the 21, 22, 23 books, do you think the number of new notices will continue to grow? And just what are your expectations? Hey, Boaz. It's Derek.

Speaker Change: Really thinking about our debt as well as thinking about capital return beyond in the fortunate position that we have significant excess capital and liquidity in our holding company I think Rick mentioned, it's a it's a little less than $1 billion.

Speaker Change: So I think we're in a really good place in terms of what we may want to do this year.

Derek Brummer: Thanks. Yeah, in terms of the development of the book, it's kind of playing out as expected and pretty favorably. So if you look at the new notice development in Q4, if you look at that quarter over a quarter and year over year increase, very similar to what we saw in 2022 Q4. Also, we saw, which unlike Q4 22, we actually saw cures increase in the most recent quarter. The other thing I would – important to focus on, just not new defaults, looking at the default rate. So the default rate continues to be at low levels, at around 2.2%. That was actually flat last quarter.

Speaker Change: Okay, great. Thanks.

Speaker Change: One moment for our next question.

Speaker Change: The next question comes from Doug Harter with UBS. Your line is open.

Doug Harter: Thanks can you talk about the increase in ceded premiums this quarter were there any kind of one time costs in there or is that a.

Doug Harter: Reasonable run rate as we think about that heading into 2024.

Doug Harter: Yeah, I think maybe if you want to just take a look at slide 13. It gives you a little bit more detail on what is our ceded premiums by quarter.

Speaker Change: And I would say that there is no one time expense that it is really driven by some of the.

Speaker Change: Distribution deals that we put in place in the last two quarters and I think it's really a result of those.

Derek Brummer: I think some of our competitors may have seen a bit of an increase, so that's been a positive development. The other thing we're seeing in new notices is significant embedded equity. Rick alluded to 82% of our defaults having at least 20% equity, and we continue to see that with new defaults. So in Q4, a little less than 80%, I think it was 78%, of new defaults had at least 20% equity as well. So when we look at the book, it's kind of developing as expected and very favorably. Okay, great. That's helpful. Thanks.

Speaker Change: This distribution deal still lot ceded premium went up.

Speaker Change: Just given the reinsurance deals that we put in place I would also point to the positive of that you saw that.

Speaker Change: P. Myers buffer did go up it does again attributed to the reinsurance deals that we put in place. So our buffer did go up by about $532 million and Thats, the pros and cons of thinking about this distribution. We've always said that we want to access with distribution at the right cost of capital and at the right time, but it also comes with the.

Speaker Change: But the prospect that are ceded premiums starting to go up when we have more insurance.

Sumit Pandan: And I just wanted to switch over to capital. You noted that dividends were coming to the holding company this year. How are you balancing return on capital versus what you might do in terms of your debt? Yeah, and I think I gave some indication of what we are planning for both in my prepared remarks, but maybe just like breaking that down a little bit. So, we are increasing our guidance of how much dividends we should be able to pay from the dividend from Radian Guarantee to Radian Group. So, instead of the 300 and 400 million that we paid last year, we're increasing that guidance to 400 to 500. We're still early in the year, so we are being conservative there.

Speaker Change: I guess along those lines is is the execution of those deals one of the factors that allows you.

Speaker Change: Allowed you to increase your guidance on the dividends up to the holding company for the year.

Speaker Change: Sure.

Speaker Change: Not at all in fact, I would say that we kind of think about this distribution could be distinctly from how we manage our business day to day, when we underwrite new business. We are really doing that on the basis of the strength of our own capital we don't need to do this distribution, we do it because it is appropriate and it gives us even more flexibility.

Speaker Change: But we do not think about our day to day pricing on the premise that just distribution would be available to us.

Speaker Change: We have said that we try to access the markets.

Speaker Change: I guess distribution perspective, Opportunistically, we do it when we like the cost of capital. So I think we've indicated last year that we've done reinsurance typically at the cost of capital of about three and a half to four and 5% and that cost of capital will be like distribution of that risk, but we do not really depend on distribution to think about our day.

Sumit Pandan: I think there's probably some upside to that number, but given that we are early in the year, we felt that a conservative guidance would be appropriate at this stage in terms of balancing that with our debt. So, again, I think I indicated in my prepared remarks that we are looking at opportunistically thinking about our options this year, given our S&P ratings upgrade and the overall credit market. The fact that there are many other issuers looking to access the market this year, given the constructive credit environment, we would look to evaluate our options. We may consider reducing our debt this year.

Speaker Change: Two day underwriting and also just to add to that so the the dividend from Radian Guaranty. The Radian group is really largely driven through statutory earnings on our annual earnings.

Speaker Change: So at this point, we looked at risk distribution.

Speaker Change: Those perspectives, but the radian guarantee dividend to Radian group truly driven by the strength of our earnings overall.

Speaker Change: Release of contingency reserves from prior period, as we've talked about providing positive unassigned surplus to create an ordinary dividend and so one of the reasons why last year. When we first started to pay the ordinary dividend first time, but I think 15 years something like that.

Sumit Pandan: So, I think all of that is on the table, but I think we don't have to make a choice between really thinking about our debt as well as thinking about our capital return. We are in that fortunate position where we have significant excess capital and liquidity in our holding company. I think Rick mentioned it's a little less than a billion dollars, so I think we are in a really good place in terms of what we may want to do this year. Okay, great. Thanks.

Speaker Change: That's no a recurring part of our capital structure based upon what we expect earnings.

Speaker Change: Kind of develop as we go forward here, so pretty powerful piece, but the capital arbitrage and the opportunity through risk distribution is really something we take advantage of when we see value of it from a capital trade in a risk trade.

Speaker Change: Okay.

Speaker Change: Great. Thank you.

Speaker Change: Thank you Doug.

Operator: One moment for our next question. The next question comes from Doug Harter with UBS. Your line is up.

Speaker Change: One moment for our next question.

Speaker Change: The next question comes from Mihir Bhatia with Bank of America. Your line is open.

Doug Harter: Thanks. Can you talk about the increase in seeded premiums this quarter? Were there any kind of one-time costs in there? Or is that a reasonable run rate as we think about heading into 2025? Yeah, I think, you know, maybe if you want to just take a look at slide 13, it gives you a little bit more detail on what our CDS premiums are by quarter. And I would say that, you know, there is no real one-time expense there.

Mihir Bhatia: Alright. Thank you for taking my question I wanted to start on Slide 18, I think you have a new disclosure in the about the claims resolved without payment.

Mihir Bhatia: That'll be intuitive skills.

Mihir Bhatia: And I was curious I guess.

Mihir Bhatia: Two part question on that one as well.

Mihir Bhatia: Why.

Speaker Change: What are you trying to signal something with this do you expect this to increase obviously in your prepared remarks, you talked about how much equity they isn't built in a lot of the new delinquency notices you are receiving so let me put this in a little bit of historical context for us like just never you would not use will happen at any meaningful level of the numbers.

Sumit Pandan: It is really driven by some of the risk distribution deals that we put in place in the last two quarters. And I think, you know, it's really a result of those distribution deals. So our CDS premium went up just given the reinsurance deals that we put in place. But I would also point to the positive side of that. You saw that, you know, our RP Myers buffer did go up.

Mihir Bhatia: The numbers are increasing given all the home price appreciation, except but but but okay.

Speaker Change: Yes.

Speaker Change: Derek I mean, the thing we've been in it has been a bit atypical really for the last probably year and a half to two years in terms of the claim withdrawals. So if you look at it for instance, our pending claim inventory I think thats. The most recent quarter the cure rate was.

Speaker Change: Around 30% so it's at the highest level, it's been at ever and that is driven in large part by continued strong macroeconomic environment. So employment reemployment, but most importantly, the embedded equity REIT, so rick referring to that embedded equity in the portfolio. So it is a resulting in a large number of claim withdrawals and thats been.

Sumit Pandan: It is, again, attributed to the reinsurance deals that we put in place. So our buffer did go up by about $533 million. And that's the pros and cons of thinking about this distribution.

Sumit Pandan: We've always said that we want to access risk distribution at the right cost of capital and at the right time. But it also comes with the prospect that our CDS premiums do go up when we have more reinsurance. I guess along those lines, is the execution of those deals one of the factors that allowed you to increase your guidance on the dividends up to the holding company for the year? Not at all.

Speaker Change: Pretty consistent with the trend we've seen for some time now.

Speaker Change: But do you think these numbers like keep increasing the claims resolved without payment.

Speaker Change: Well in terms of the person.

Speaker Change: It depends I mean, the base of defaults are going down so that's going to kind of move that around in terms of percentage. It is going to depend upon just the new defaults coming in the portfolio to date, they've been coming in in terms of embedded equity pretty close to the same levels. We've had so I don't see on the horizon and moving down.

Sumit Pandan: In fact, I would say that, you know, we kind of think about risk distribution pretty distinctly from how we manage our business day-to-day. When we underwrite new business, we are really doing that on the basis of the strength of our own capital. We don't need to do risk distribution.

Speaker Change: Lee I think you'd probably need to see some home prices come down significantly, but where we are now is in a really good spot because if you look at home price appreciation some of that embedded equity was driven by double digit home price growth, which is good for the existing portfolio, but it puts a little pressure on the new business, where we are right now, where we're seeing 5% to 6% home price.

Sumit Pandan: We do it because it is appropriate and it gives us even more flexibility, but we do not think about our day-to-day pricing on the premise that risk distribution would be available to us. We've always said that we try to access the markets from a risk distribution perspective opportunistically. We do it when we like the cost of capital. So, you know, I think we indicated last year that we've done reinsurance typically at a cost of capital of about three and a half to four and a half percent. At that cost of capital, we like the distribution of that risk, but we do not really depend on risk distribution to think about our day-to-day underwriting.

Speaker Change: <unk>, that's a pretty good spot so that should continue to be positive in terms of new vintages as they move through default seasoning peak, they should be coming into default with some embedded equity unlike past years, where years ago, where maybe you've seen 1% to 2% home price appreciation.

Speaker Change: Got it and then I wanted to maybe just talk a little bit about you know though.

Speaker Change: Good to hear about the upsides of capital.

Speaker Change: But you will get that you expect to be able to get out of the insurance subsidiaries.

Speaker Change: But what is the impact of that from like I mean, I guess what is the plan for use of that is it scanned shareholders reasonably expect that a bulk of that capital distribution. That's coming up is going to get return to shareholders or is the thought that there are expansion opportunities to go invest all that.

Richard G. Thornberry: And also, just to add to that, the dividend from Radian Guarantee, the Radian Group, is really largely driven by statutory earnings and our annual earnings. So, to make this point, you know, we look at risk distribution from those perspectives, but the Radian Guarantee dividend to Radian Group is really driven by the strength of our earnings overall, the release of contingency reserves from the prior period, as we've talked about, providing positive unassigned surplus to create an ordinary dividend. And so, you know, one of the reasons why last year when we first started to pay the ordinary dividend for the first time in 15 years, something like that; that's now a recurring part of our capital structure based upon what we expect earnings to, you know, kind of develop as we go forward here. So, pretty powerful piece, but capital arbitrage and the opportunity to risk distribution is really something we take advantage of when we see value in it from a capital trade and a risk trade. www.globalonenessproject.org. Great, thank you. Thank you, Doug.

Speaker Change: Whether it's M&A, whether it's in reps more and hold genius things like that.

Speaker Change: What is how should we be thinking about the upside of the dividends.

Speaker Change: Yeah, I think maybe just some context. So if you just think about 2023 right. We had said we paid 300 to 400 of dividends.

Speaker Change: <unk> $279 million of that so at $279 million of debt 400 went out as dividends and share repurchases last year. In fact, just in the fourth quarter, we bought back about $63 million of shares.

Speaker Change: I would say that you know we want to continue to be disciplined about it but yes, a big part of that would probably go back to shareholders.

Speaker Change: Portion of that could be used towards debt and I would say, we would also evaluate other strategic opportunities and maybe that you want to add a few comments here.

Speaker Change: You just saw our history and our track record speak for itself in terms of how disciplined we are about thinking about.

Speaker Change: Return to shareholders along with capital.

Speaker Change: Capital return in general So I'll, just kind of look at our track record of one $9 billion over the last several years returned through dividends and share buybacks.

Doug Harter: One moment for our next question. The next question comes from Mihir Bhatia with Bank of America. Your line is open. Hi, thank you for taking my questions. I wanted to start on slide 18.

Speaker Change: I think we have the luxury of capital today, it's a good problem to have and we have excess capital when you look at Pmiers cushion within radiant.

Speaker Change: Radian Guaranty, you look at the capital to flow up to Radian group from Radian Guaranty of excess capital sits there somebody here to your question, we're going to continue to be good stewards of capital, we're going to focus on opportunities to return capital to shareholders. We always talk about it in hindsight.

Mihir Bhatia: I think you have a new disclosure in there about the claims resolved without a payment that are being included as KEOs. And I was curious, I guess. A two-part question on that. One is... Why?

Speaker Change: We're always aware and alert to other strategic opportunities and thinking through a waterfall of capital allocation.

Derek Brummer: What are you trying to signal with this? Do you expect this to increase? Obviously, in your prepared remarks, you talked about how much equity there is built into a lot of the new delinquency notices you are receiving. So maybe you could put this in a little bit of historical context for us.

Speaker Change: And I think we've been really very disciplined about evaluating those opportunities and I am.

John C: John C.

Derek Brummer: Did this just never used to happen at any meaningful level in the numbers? Presume the numbers are increasing given all the home price appreciation, et cetera, that we've... Yeah, Mihir, it's Derek. I mean, the state we've been in has been a bit atypical really for the last probably year and a half to two years in terms of the claim withdrawals. So if you look at it, for instance, our pending claim inventory, I think this most recent quarter, the cure rate was around 30%. So it's at the highest level it's been at ever.

Speaker Change: Dozens of them throughout the year, and we're really very quick detail, but there are opportunities.

Speaker Change: Could arise.

Speaker Change: We're in a great situation with our excess capital situation that consider those should they.

Speaker Change: Should they warrant consideration so that's what I would say.

Speaker Change: Okay and then just my last question just to touch with regulatory developments.

Speaker Change: There anything that you're seeing that's coming down the pipeline, but can maybe have a larger impact on your business something that investors should be aware off I know that the regulations are always changing but I'm talking about like big things.

Speaker Change: That could be coming down that.

Derek Brummer: And that is driven in large part by the continued strong macroeconomic environment, so employment, reemployment, but most importantly, the embedded equity, right? So Rick is referring to that embedded equity in the portfolio. So it is resulting in a large number of claim withdrawals. And that's been pretty consistent with the trend we've seen for some time now. Do you think these numbers will keep increasing, the claims resolved without payment? Well, it kind of depends

Speaker Change: <unk>, probably worth paying attention to it just feels like the regulatory discussion around semi has been a little bit quiet. The last few quarters. So just wanted to touch base Seaway, we I'll add on that thank you.

Speaker Change: Yes.

Speaker Change: Eric and I can kind of tag team on this one a little bit, but I would say look.

Seaway: The good news is as you say it has been relatively quiet I think in terms of many different respects as it directly impacts us by the snap inquired as it relates to the kind of the broader mortgage market do you think about things like Basel III and the impact on banks from a participation of mortgage and all the discussion around that.

Derek Brummer: I mean, the base of defaults is going down, so that's going to kind of move that around. In terms of percentage, it is going to depend upon just the new defaults coming in the portfolio. To date, they've been coming in, in terms of embedded equity, pretty close to the same levels we've had. So I don't see on the horizon it moving down substantially. I think you'd probably need to see some home prices come down significantly.

Seaway: Other capital rules for independent mortgage banks.

Seaway: There's a number of regulatory matters that are out there that don't directly impact us.

Seaway: In fact.

Seaway: The Basel III changes have actually created an opportunity for us from a conduit perspective.

Seaway: We just continue to kind of.

Seaway: Evaluate and kind of watch and participate in where appropriate but I would say, we're very close to it there was a lot of chatter around FHA and different activities around that I would say right now we are at a little bit of a.

Derek Brummer: But where we are now is in a really good spot, because if you look at home price appreciation, some of that embedded equity was driven by double-digit home price growth, which is good for the existing portfolio, but it puts a little pressure on the new business. Where we are right now, where we're seeing five to six percent home price appreciation, is a pretty good spot. So that should continue to be positive in terms of new vintages. As they move through the default seasoning peak, they should be coming into default with some embedded equity, unlike, you know, past years where, you know, years ago, where maybe you've seen, you know, one to two percent home price appreciation. And then I wanted to maybe just talk a little bit about, you know, the good news about the increase in capital that you expect to be able to get out of the insurance subsidy regime. But what is the impact of that from a, like, I mean, I guess, what is the plan for the use of that?

Seaway: Of acquire period is directly rates relates semi with degree there yeah I would just add on the policy side is just the strength in the industry and I think that's well recognized in terms of the financial strength, which <unk> seen kind of our most recent ratings upgrade and just how the industry has transformed from an industry that is really about aggregating and distributing risk so much more.

Seaway: Resilience through the cycle also when you look at it I mean, we are private capital that helps an affordable and first time homebuyer segment. So from that perspective, we're in a really good spot kind of looking on both sides of the political aisle. So if you have changes kind of in terms of regulatory leadership I think the industry is well placed.

Speaker Change: Thank you for taking my questions.

Speaker Change: Yes, Thank you bahir.

Speaker Change: One moment for the next question.

Speaker Change: The next question comes from Scott <unk> with RBC capital markets. Your line is open.

Sumit Pandan: Is it, can shareholders reasonably expect that a bulk of that capital distribution that's coming up is going to get returned to shareholders? Or is the thought that there are expansion opportunities to go invest in, or like, you know, whether it's M&A, whether it's investing more in HomeGenius, things like that. What is, how should we be thinking about these upsides? Yeah, I think maybe just some context.

Speaker Change: Yeah.

Scott: Yes Hello.

Scott: First question I had was just on the expense ratio you've made good progress on bringing that down for the year.

Scott: And so you did it took a lot of costs out right size is the expectation that you could see further improvement in 2024 or is it or the expense run rate kind of going to be stable.

Richard G. Thornberry: If you just think about 2023, right, we had said we'd pay 300 to 400 million in dividends. We returned $279 million of that. So $279 million of that 400 went out as dividends and share repurchases last year. In fact, just in the fourth quarter, we bought back about $63 million of shares. So I would say that, you know, we want to continue to be disciplined about it. But yes, a big part of that would probably go back to shareholders. You know, a portion of that could be used towards debt, and I would say we would also evaluate other strategic opportunities. And maybe, Rick, you want to add a few comments?

Scott: The run rate right now.

Speaker Change: Yeah. Thanks, Scott for that question. So I think as you saw in 2023, we had given the initial guidance of $60 million to $80 million of cost savings and we were able to achieve $77 million of cost savings in 'twenty, three which is about a 17% reduction in our cost of services and other operating expenses.

Scott: You also heard us talk about.

Scott: Some of the cleanup activity that we completed in Q4, including writing off acquired intangibles. So I think from a balance sheet perspective, we really feel good about where we are starting this year from I think the fourth quarter is a good indicator of the run rate going forward, excluding some of those onetime items.

Scott: We're not giving specific expense guidance. This year, yet I think they are still early in the yard and we took out about 17% of our expenses last year. So I would say that you know you're not giving a specific dollar guidance yet, but we are always looking to make sure that we are continuing to remain efficient and we're looking at our expenses across our business.

Richard G. Thornberry: Yeah, I mean, our history and our track record speak for themselves in terms of how disciplined we are about thinking about return to shareholders along with capital return in general. So I just kind of look at our track record of $1.9 billion over the last several years returned through dividends and share buybacks. And I think we have the luxury of capital today. It's a good problem to have.

Scott: So I think that's an ongoing initiative, but we are not giving a specific dollar guidance of what that may look like for this year.

Speaker Change: Okay, That's fair and just switching gears to pricing can you just talk a little bit about what you've been seeing in the last few months, whether youre seeing any any kind of major shifts at all.

Richard G. Thornberry: And we have excess capital. When you look at P. Myers Cushion within Radian Guarantee, you look at the capital flow up to Radian Group from Radian Guarantee, and excess capital sits there. So I'm here to answer your question. We're going to continue to be good stewards of capital. We're going to focus on opportunities to return capital to shareholders. We always talk about it in hindsight.

Scott: Third quarter versus fourth quarter into the year and any thoughts on how you see that playing out in 2024.

Scott: Hey, Scott this is Derrick yeah in terms of pricing pretty quiet, which is a positive. So when we look at pricing in the industry I would say fairly flat really since our last call, which we view as a positive in the sense that.

Richard G. Thornberry: We're always aware and alert to other strategic opportunities and thinking through a waterfall of capital allocation. And I think we've been really very disciplined about evaluating those opportunities. Simita and I and John see, you know, dozens of them throughout the year, and we're really very quick to kill.

Derrick: The macroeconomic outlook has significantly improved youre seeing home prices go up I think theres, a decrease probability of a soft landing so to see price stayed flat is very positive, but the other thing I'd point out is that when you look at pricing, it's substantially above where it was in 2022. So when you go back a year and a half to two years are pricing.

Richard G. Thornberry: But there are opportunities that could arise, and we're in a great situation with our excess capital situation. So I'm here to answer your question.

Richard G. Thornberry: We're going to continue to be good stewards of capital. We're going to continue to be good stewards of capital. Okay, and then just my last question, just to touch base on regulatory developments. Is there anything that you're seeing that's coming down the pipeline that can maybe have a larger impact on your business, something that investors should be aware of? I know that there's, you know, regulations are always changing, but I'm talking more about big things that could be coming down that, you know, investors are probably worth paying attention to. It just feels like the regulatory discussion around MI has been a little bit quiet the last few quarters. So just wanted to touch base and see where we are at on that. Thank you. Yeah, Mihir, Derek, and I can kind of tag team on this a little bit.

Scott: Is that higher levels, which we think is appropriate looking at the risk through the cycle. So overall, I would say pretty quiet quarter over quarter in terms of development.

Speaker Change: Okay, Great and then last one just on the average investment yield.

Scott: For one 5% was similar to Q3.

Speaker Change: Is there any opportunity to get some higher yield and you expect to.

Scott: To get that in the coming quarters or is it kind of.

Scott: We feel like it's kind of stabilized where it is right now the yield.

Speaker Change: Yeah, I think we mentioned Scott.

Speaker Change: Quarterly call last quarter that we do see new money reinvestment rates are higher than our current deal I think it takes a little while for it to actually come into our portfolio just given the size of our overall portfolio. So I would say, maybe some upside but not a meaningful one from current levels given the overall interest rate backdrop.

Richard G. Thornberry: But I would say, look, the good news is, as you say, it has been relatively quiet, I think, in terms of many different respects as it directly impacts us. But it's not been quiet as it relates to the broader mortgage market. You think about things like Basel III and the impact on banks from participation in mortgage lending and all the discussion around that, other capital rules for independent mortgage banks. And just there's a number of regulatory matters that are out there that don't directly impact us.

Speaker Change: That we have for 2024.

Speaker Change: Okay I appreciate it.

Speaker Change: One moment for our next question.

Speaker Change: The next question comes from Eric Hagen with <unk>. Your line is now open.

Eric Hagen: Hi, how are you guys.

Eric Hagen: Within your outlook for I think I heard you say $300 billion to $350 billion of Niwa. This year for the market do you feel like there's any catalysts other than maybe lower interest rates, which could take it above that level.

Eric Hagen: So this is Rick thanks for your question, Eric I think.

Richard G. Thornberry: And in fact, you know, the Basel III changes have actually created an opportunity for us from a conduit perspective that, you know, we just continue to kind of evaluate and kind of watch and participate in where appropriate. But I would say we're very close to it. You know, there was a lot of chatter around FHA and different activities around that. I would say right now we are in a little bit of a quiet period as it directly relates to Michigan. Would you agree with me there?

Richard G. Thornberry: That range is based upon kind of an increase in purchase the purchase origination market. That's expected with kind of a declining rates, obviously with refinance was picking up a little bit.

Speaker Change: But I think the catalysts as is.

Speaker Change: Demand being met by supply and Thats, So I think right now.

Speaker Change: We saw supply become available because people began to list their home and start start to re trade homes, you could see the purchase market expand and because.

Derek Brummer: Yeah, I would just add on the policy side is just the strength of the industry. And I think that's well recognized in terms of the financial strength, which you've seen kind of a recent rating upgrade and just how the industry has transformed for an industry that's really about aggregating and distributing risk. So much more resilient through the cycle.

Speaker Change: Especially for first time homebuyers.

Speaker Change: Second and third time homebuyers.

Speaker Change: <unk> more likely to be part of the transaction.

Speaker Change: That would be the other catalyst so interest rates are going to provide a little bit but right now were supply limited and so to the extent supply could expand.

Derek Brummer: Also, when you look at it, I mean, we are private capital that helps an affordable and first-time homebuyer segment. So, from that perspective, we're in a really good spot kind of looking on both sides of the political aisle. So, if you have changes in terms of regulatory leadership, I think the industry is well placed. Yeah. Thank you for taking my question.

Speaker Change: Based on a variety of different factors catalysts.

Speaker Change: Restructuring building those would be things that I think would enable.

Speaker Change: Market to expand.

Speaker Change: Kind of similarly.

Speaker Change: Maybe I can add a little bit also here in terms of consumer behavior. I do think that people are getting just more used to a higher interest rate environment and I think for a lot of potential homebuyers, who were waiting for the interest rate curve to change I think it's a good confluence of slightly lower interest rates, maybe not as great as what.

Operator: One moment for the next question. The next question comes from Scott Hillionac with RBC Capital Markets. Your line is open.

Scott Hillionac: Yes, well, the first question I had was just on the expense ratio. You've made good progress on bringing that down for the year. And so you did, you took a lot of costs. What is the expectation that you could see further improvement in 2024? Or is it, or the expense run rate is kind of going to be stable from, you know, the run rate we are right now? Yeah, thanks, Scott, for that question. So I think, you know, as you saw in 2023, we had given initial guidance of 60 to 80 million in cost savings, and we were able to achieve 77 million in cost savings in fiscal 23, which is about a 17% reduction in our cost of services and other operating expenses. You also heard us talk about some of the cleanup activity that we completed in Q4, including writing off acquired intangibles.

Speaker Change: They had a few years back but at some point people need to go ahead and live their lives. So I do think that there is a consumer behavioral aspect to it as people get used to the current interest rates.

Speaker Change: Yes.

Speaker Change: Good perspective I appreciate that.

Speaker Change: We got prepayment speeds from the GSE is this week any perspective, you can share there on the high LTV loans out there and even what your persistency rate.

Speaker Change: It looked like if mortgage rates were to drop.

Speaker Change: From here.

Speaker Change: Yes, it's Darren because all in terms of looking at the outlook for our persistency, which Rick kind of touched upon earlier.

Speaker Change: Most of the portfolio is significantly out of the money from a refinance perspective, so when you kind of look at it.

Speaker Change: Terms of that interest rate movement, and I think regen <unk> alluding to the fact, having rates go down could be a positive in terms of kind of the origination side also we're having a situation where youre persistency still stays elevated because we have so much of the portfolio out of the money versus the typical situation, where you have a bit of an interest rate that you might pick up originations, but then you have it.

Sumit Pandan: So I think from a balance sheet perspective, we really feel good about where we are starting this year. I think the fourth quarter is a good indicator of the run rate going forward, excluding some of those one-time items. We are not giving specific expense guidance for this year yet.

Speaker Change: To refi out of your portfolio. So it might be in a good spot if kind of rates kind of stay within.

Sumit Pandan: I think we are still early in the year, and we took out about 17% of our expenses last year. So I would say that, you know, we're not giving specific dollar guidance yet, but we are always looking to make sure that we are continuing to remain efficient, and we are looking at our expenses across our business lines. So I think that's an ongoing initiative, but we are not giving specific dollar guidance on what that may look like for this year. Okay, that's fair.

Speaker Change: Kind of a certain corridor lets say within 100 150 basis points down. So I would say that I think theres a lot of stickiness to the portfolio and it would take significant decreases in interest rates, which I don't think we're projecting our most third parties are projecting to see a significant pickup in prepayments.

Speaker Change: Yes is it a fair assumption that most of the borrowers with them I know if they were to refi that or acquire them I again or is there more flexibility for some folks who feel like.

Derek Brummer: And just switching gears to pricing, can you just talk a little bit about what you've been seeing in the last few months, whether you've seen any, any kind of major shifts at all, you know, in third quarter versus fourth quarter of the year? And any thoughts on how you see that playing out in 2024? Hi Scott, this is Derek.

Speaker Change: Well there is more flexibility it just depends on the portfolio.

Speaker Change: And I think that has been you've seen that a little bit and kind of the penetration rate on the refinance side the more recent vintages.

Speaker Change: To be less embedded equity. So if you look at those who are closer to being in the money are going to be recent vintages like last year and theyre going to have less embedded equity so with respect to that versus the overall portfolio there might be a higher probability that would have need mortgage insurance versus kind of some of the older vintages, but the <unk>.

Derek Brummer: Yeah, in terms of pricing, pretty quiet, which is positive. So when we look at pricing in the industry, I would say fairly flat, really, since our last call, which we view as a positive in the sense that I think the macroeconomic outlook has significantly improved, you're seeing home prices go up, and I think there's a decreased probability of a soft landing. So to see prices stay flat is very positive. The other thing I'd point out is that when you look at pricing, it's substantially above where it was in 2022. So when you go back a year and a half to two years, our pricing is at higher levels, which we think is appropriate, looking at the risk through the cycle. So overall, I would say it's pretty quiet quarter over quarter in terms of development. Okay, great.

Speaker Change: The vintages are so far out of the money and so you have to put that in perspective.

Speaker Change: Sure I appreciate it guys. Thank you.

Speaker Change: Thank you.

Speaker Change: I show no further questions at this time I would now like to turn the call back to Rick Thornberry for closing remarks.

Richard G. Thornberry: Thank you.

Richard G. Thornberry: Thank everybody for their participation and they are really excellent questions.

Richard G. Thornberry: We appreciate the support that we received from all of you as our as our investors and we look forward to meeting with you.

Sumit Pandan: And then the last one just on the average investment yield, 4.15, was similar to Q3. Is there any opportunity to get some higher yield, and do you expect to get that in the coming quarters? Or is it kind of, you know, you feel like it's kind of stabilized where it is right now, the yield? Yeah, I think we mentioned, Scott, in our quarterly call last quarter that, you know, we do see new money reinvestment rates that are higher than our current yield. I think it takes a little while for it to actually come into our portfolio, just given, you know, the size of our overall portfolio. So I would say maybe some upside, but not a meaningful one from our current levels, given, you know, the overall interest rate backdrop that we have for 2020. Okay, I appreciate it.

Speaker Change: And for those of you who are also chiefs fans for the Super Bowl This weekend and I hope that.

Speaker Change: You have a good weekend and for Forty-niner, France. Good luck as well. So that's all I got to look forward to seeing you all on the road take care.

Speaker Change: Thank you for participating this concludes today's conference call you may now disconnect.

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Operator: One moment for our next question. The next question comes from Eric Hagan. P-I-G, your line is now open. Hi, how are you guys?

Okay.

Speaker Change: Okay.

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Eric Hagan: You know, within your outlook for the market, I think I heard you say 300 to 350 billion NIW this year for the market. Do you feel like there's any catalysts other than maybe lower interest rates, which could take it above that level? So, this is Rick.

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Richard G. Thornberry: Thanks for your question, Eric. I think, you know, that range is based upon kind of an increase in the purchase origination market that's expected with kind of declining rates, obviously, with refinances picking up a little bit. But I think, you know, the catalyst is demand being met by supply. And that's why I think right now, to the extent we saw supply become available because people began to list their homes and start, you know, start to retrade homes, you could see that purchase market expand. And because MI, especially for first-time home buyers, you know, second, third-time homebuyers, you know, MI is more likely to be part of that transaction. That would be the other catalyst.

Speaker Change: Okay.

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Richard G. Thornberry: So interest rates are going to provide a little bit, but right now, we're supply limited. And so to the extent supply could expand based on a variety of different factors, catalysts, you know, construction, building, those would be things that I think would enable the MI market to expand, you know, kind of similarly. And maybe I can add a little bit also here in terms of consumer behavior. I do think that people are just getting more used to a higher interest rate environment. And I think for a lot of potential homebuyers who were waiting for the interest rate curve to change, I think it's a good confluence of slightly lower interest rates, maybe not as great as what they had a few years back, but at some point, people need to go ahead and live their lives. So I do think that there is a consumer behavior aspect to it as people get used to the current interest rates. Yep. That's a good perspective.

Speaker Change: Yes.

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Derek Brummer: I appreciate that. We got prepayment speeds from the GSEs this week. Any perspective you can share on the high LTV loans out there?

Speaker Change: Yes.

Derek Brummer: And even what your persistency rate might look like if mortgage rates were to drop? Well, I mean, Derek, so in terms of looking at the outlook for persistency, which Rick kind of touched upon earlier, you know, most of the portfolio is significantly out of the money from a refinance perspective. So when you kind of look at it, you know, in terms of that interest rate movement, I think Rick and Sumedha were alluding to the fact that having rates go down could be positive in terms of kind of the origination side. Also, we're in a situation where, you know, your persistency still stays elevated because we have so much of the portfolio out of the money versus a typical situation where you have a bit of an interest rate dip.

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Derek Brummer: You might pick up originations, but then you have a lot of refi out of your portfolio. So we might be in a good spot if rates kind of stay within kind of, you know, kind of a certain corridor, let's say, you know, within 100 to 150 basis points down. So I would say that I think there's a lot of stickiness to the portfolio, and it would take significant decreases in interest rates, which I don't think we're projecting or most third parties are projecting to see a significant pickup in prepayment. Is it a fair assumption that most of the borrowers with MI now, if they were to refi, they'd require MI again? Or is there more flexibility for some folks you feel like? Well, there's more flexibility. It just depends on the portfolio.

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Derek Brummer: So and I think that has been you've seen that a little bit in kind of the penetration rate on the refinance side. The more recent vintages, there's going to be less embedded equity. So if you look at, you know, those who are closer to being in the money are going to be recent vintages like the last year, and they're going to have less embedded equity. So with respect to that, you know, versus the overall portfolio, there might be a higher probability that they would have, you know, needed mortgage insurance versus some of the older vintages.

Speaker Change: Okay.

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Derek Brummer: But the older vintages are so far out of the money. And so you have to put that in perspective. I appreciate you guys. Thank you. Thank you. I have no further questions at this time. I would now like to turn the call back to Rick Thornberry for his closing remarks. Thank you. And I want to thank everybody for their participation and the really excellent questions. We appreciate the support that we receive from all of you as our investors, and we look forward to meeting with you soon. And for those of you who are also Chiefs fans for the Super Bowl this weekend, I hope that you have a good weekend. And for our 49er fans, good luck as well. So that's it.

Speaker Change: Okay.

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Derek Brummer: That's all I got. Look forward to seeing you all on the road. Take care. Thank you for participating. This concludes today's conference call. You may now disconnect. © The Ultimate Parody Site! ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ??

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