Radian Group Inc. (RDN) Q1 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to Radian's First Quarter 2013 Earnings Call. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Ms. Emily Riley, Senior Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you and welcome to Radian's first quarter 2013 conference call. Our press release, which contains Radian's financial results for the quarter, was issued earlier today and is posted to the Investors section of our website at www.radian.biz. During today's call, you will hear from S.A. Ibrahim, Radian's Chief Executive Officer; and Bob Quint, Chief Financial Officer. Also on hand for the Q&A portion of the call are Teresa Bryce Bazemore, President of Radian Guaranty; David Beidler, President of Radian Asset Assurance; Scott Theobald, Executive Vice President and Chief Risk Officer of Radian Guaranty; and Derek Brummer, Chief Risk Officer and General Counsel of Radian Asset. 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 2012 Form 10-K. These are also available on our website. Now I would like to turn the call over to S.A.

Thank you, Emily. Thank you, all, for joining us and for your interest in Radian. It is a pleasure to share with you today the details of our strong capital and liquidity positions, as well as the opportunity before us as we write a leading share of new mortgage insurance business in an extremely attractive market. I will also provide highlights from our first quarter and a few insights into what we believe the year holds for our company and our industry. Bob will then cover the details of our financial position. In March, we successfully improved Radian's capital and liquidity position through a capital raise, which provided net proceeds of $689 million. The capital raise translated into many immediate benefits, including our strong holding company liquidity position with more than $800 million currently available after making a $115 million capital contribution to Radian Guaranty in the first quarter. Combined with the contingency reserve release in the quarter from Radian Asset of $68 million, Radian Guaranty's risk-to-capital ratio improved significantly to 18.6:1 at March 31, 2013. We expect to maintain a risk-to-capital ratio for Radian Guaranty of 20:1 or below for the foreseeable future, while also preserving a strong level of holding company liquidity. Our goal for raising capital was to provide Radian with the competitive edge in the near-term while positioning our company as the leader in the future housing finance system in the long-term. Today, our immediate priority is to write as much new, high-quality business as possible as the FHA pulls back and as the housing market recovers, fueling our growth over the next couple of years and enabling us to return to normalized earnings. New insurance written, or NIW, is particularly attractive in today's environment, with high credit quality and home prices rebounding from their downturn lows and our new business is expected to produce attractive returns. From 2009 through the end of April, we wrote a total of $96 billion of new business, creating an impressive earnings ramp that we expect to fuel our return to profitability. Slide 18 in our webcast presentation depicts the impact and profitability of these newer vintages on our total mortgage insurance portfolio at the end of last year. And Slide 19 breaks out the performance by vintage in 2013. These slides clearly show that the profit from our new business is beginning to overbound the legacy book losses. Earlier today, we reported a net loss for the first quarter 2013 of $188 million, or $1.30 per diluted share. This includes the impact of fair value and other financial instrument losses of $173 million, primarily resulting from the significant narrowing of our credit spread during the quarter. It also includes compensation expenses of $38 million related to the estimated future value of performance awards which were impacted by the significant increase in our stock price in the first quarter. It is important to note that we do not factor stock price changes in our annual financial projections. Therefore, our guidance for a return to marginal level of MI operating profitability this year does not incorporate the impact of stock price changes. While the impact of fair value and other financial instrument losses was primarily concentrated in our Financial Guaranty business, compensation expenses mostly impacted our mortgage insurance business results. Absent this related compensation expense, all other components of our MI operating results were equal to or better than our expectations. Now I'd like to highlight the progress made against 3 important priorities for Radian. Writing new mortgage insurance business, mitigating losses in our financial insurance portfolio and reducing our Financial Guaranty exposure. First, focusing on new mortgage insurance business, we started the year strong, with NIW of $10.9 billion in the first quarter, an increase of 69% over the first quarter of last year. And we continued our momentum in April with a record NIW of $4.1 billion, which compares to only $2.5 billion written in April last year, and represents a new 5-year monthly record. Based on our steady pipeline of business and prospective new customers, we look forward to strong volume this year and we expect our total NIW this year to meaningfully surpass our 2012 volume. As I mentioned last quarter, mortgage originations over the past 2 years have been driven by high volumes of refinance activity. At some point soon, and we are beginning to see early signs, the market is expected to transition from refi to purchase. While this is expected to reduce overall originations, the MI penetration for purchased loans is significantly higher than it is for refi loans. In addition, purchases tend to be more skewed towards monthly versus single premium MI. As we look back at our single premium business activity, it is important to note that we believe our single premium business written since 2009 has produced attractive returns and represents a meaningful incremental contribution. This means we expect our overall financial results to benefit from using single premiums as a competing product against our industry's largest competitor, the FHA. Bob will discuss the profitability of this business in more detail. Turning to the progress we've made in improving the composition of our mortgage insurance portfolio, as you can see on Slide 20, on our webcast presentation, as of the first quarter, the 2009 through 2013 books grew to more than 48% of our primary risk in force, and the most problematic 2006 and 2007 books are now down to 24%. During the second quarter, we expect our book of business written after 2008 will be larger than the book written in 2008 and prior. Also on this slide, you can see the success of the HARP program, which improves the credit profile of our legacy book. More than 10% of our risk in force has completed a HARP refinance. And this, combined with our newer high-quality book of business, represents a strong portfolio that is now larger than our legacy book, representing nearly 60% of our total primary mortgage insurance risk in force. We are pleased with the recent extension of HARP through 2015, which should allow more borrowers to take advantage of the program. Finally, we continue to grow and diversify our customer base. NIW has benefited both from the solid incremental volume generated by new customers, as well as impressive increases in volume from existing customers. 26% or $2.8 billion of our NIW in the first quarter came from mortgage lenders new to Radian within the last 2 years. At the same time, NIW coming from lenders we've worked with for more than 2 years grew 50% to $8.1 billion in the first quarter this year compared to $5.4 billion in the first quarter of last year. Next, focusing on our continued efforts to mitigate losses in our mortgage insurance portfolio, the total number of primary delinquent loans declined by 9% from the fourth quarter of last year, and 17% year-over-year, as shown on Slide 23. And the default rate on our primary book fell further in the first quarter to 10.9% from 12.1% in the fourth quarter of last year. We maintain $2.9 billion in loss reserves, and our primary reserve for default was $30,426 in the first quarter, up from $29,510 at the end of last year, and $27,833 at March 31, 2012. We continue to see steady modification activity from HAMP and other modification efforts. We are encouraged by these reports, as well as by the payments made by borrowers even in late stages of default. We believe this indicates an ultimate commitment to the home and to the mortgage, despite the inability to make all of the payments needed to cure the loan. As shown on Slide 13, 33% of borrowers whose loans were in default made at least 1 monthly payment in the first quarter, compared to 31% in the fourth quarter of 2012, and 28% in the second quarter of last year, when we first reported this statistic. We believe that many of these payments reflect borrowers and modification programs. Yet, there are clearly others that may be trying to qualify for a mod or otherwise working with their servicer to award foreclosure. While we cannot predict borrowers' behavior or the success of any 1 program, we are encouraged by the steady pace of existing modification programs, as well as by the FHFA's recently announced streamline modification program. We estimate that approximately 1/3 of our delinquent loans are eligible for this new program. We are also encouraged by data and news headlines touting rising home prices. In April, CoreLogic cited a 10% increase in home prices across the country over the past year, with an additional 10% rise expected in the year ahead. Finally, our Financial Guaranty business continues to serve as an important and unique source of capital for Radian Guaranty. We have successfully reduced exposure in that business from a peak of $115 billion in June 2008, when Radian Asset stopped writing new business, to $28 billion in the first quarter of this year. This represents a decline of our total Financial Guaranty risk exposure by 76%. In January, we completed the commutation of our remaining reinsurance risk from FGIC, which resulted in a contingency release -- the reserve release of $7 million. And in February, we released $61 million of contingency reserves that combine to support our strong risk-to-capital for Radian Guaranty this quarter. The next dividend payment to Radian Guaranty of approximately $37 million is expected this year. As of March 31, 2013, Radian Asset maintains a statutory surplus of $1.2 billion. Our industry continues to slowly but steadily regain share from the FHA. The FHA's latest price increase in April, its third in a year, coupled with the elimination in June of FHA mortgage insurance premium cancellation, should help further that trajectory. Turning to the legislation affecting our industry, we continue to actively engage with legislators and other decision-makers in Washington. In February, we sponsored our fourth Housing Finance Discussion Panel on Capitol Hill, where a group of mortgage industry experts unanimously supported a healthier balance between the public and private sectors in today's mortgage market. We continue to hear this sentiment as a consistent theme. What continues to excite us at Radian and represents our most important going-forward priority is moving closer to achieving normalized earnings. This will be driven by 3 important factors. First, the size and potential earnings power of the high-quality MI business we have already written since 2008. Second, the continued management of our legacy mortgage insurance book which is slowly but steadily becoming a smaller piece of our total MI portfolio. Third, our success in writing even more new high-quality future business, driven by our strong customer relationships and a highly skilled and dedicated Radian team. Now I would like to turn the call over to Bob for details of our financial position.

Thanks, S.A. I'll be updating you on our P&L activity and trends for the first quarter of 2013, our improved capital and liquidity positions as of quarter end and some updated expectations regarding 2013. The MI provision for losses was $132 million this quarter, compared to $307 million last quarter and $235 million a year ago. The significant improvement in incurred losses compared to prior quarters reflects a much improved delinquency trend. You'll see on Slide 11 that a relatively large component of incurred losses this quarter was from the new default line. However, there was a modest level of existing reserve development, primarily from a small reduction in our estimated benefit for future rescissions and denial. The amounts in our quarter end balance sheet representing future denials and rescissions was down to $392 million, compared to the yearend total of $455 million. For the balance of 2013, we expect a much reduced incurred loss line from the comparable 2012 quarters, driven by a relative decline in new defaults and no material changes to default composition or net roll rate expectation. Paid claims in 2013 are now estimated to be between $1.3 billion and $1.4 billion. While this represents a substantial increase from our previous guidance, it is solely a matter of accelerated timing. While newly submitted claims were stable in 2012 and are down for the first quarter, which is positive, our claims resolution process has become more efficient, which will allow us to clear some of our pending claim inventory and pay valid claims more quickly. This updated claims paid forecast does not change our incurred loss expectation at all. As S.A. mentioned, Radian has written a meaningful volume of single premium business over the past few years, as we have successfully marketed singles as a competitive product to FHA. While singles are a discounted product, such business written since the beginning of 2009 has been very profitable, with loss ratios in 2012 and '13 that are similar to those of monthly premium and other business written during the same time period. In addition, the singles product helps manage our duration risk. The projected ROEs of the MI business are based on certain important assumption, ones being mortgage duration. The duration of the 2009 and subsequent books is developing at a shorter average life than was expected when the business was written which, all else equal, benefits singles relative to monthlies. This unexpected trend is a reminder that it is very hard to predict the future, so we believe a balanced strategy of hedging against faster-than-expected prepays with some proportion of single premium business makes sense. Beginning April 1, we have prospectively reduced the quarter share percentage for new business going into our external reinsurance deal from 20% down to 5%, and we have -- as we have acted quickly to deploy some of the new capital we've raised. We will also have the ability to recapture a portion of the quarter share risk ceded at yearend 2014 and 2015. We view this reinsurance as a valuable capital management tool that we use in 2012 to help solidify our market position. We are happy to continue using reinsurance in 2013, albeit at a reduced level that allows us to capture more of the exceptional current business profitability. Fair value losses for the quarter were caused by the significant tightening [indiscernible] fair value results [indiscernible]. The deal is a $393 million CLO Financial Guaranty exposure. We understand that the downgrade of the transaction was based primarily on a downgrade of MBIA and we currently do not expect underlying losses on the transaction. However, if there are eventual losses, we believe MBIA will pay such losses. Slide 9 depicts our current balance sheet fair value positions, along with the expected net credit losses or recoveries and fair value exposures. Based on our projections regarding future credit loss payments and recoveries, we expect to add approximately $423 million or $2.45 to pre-tax fair value over time, as the exposures mature or are otherwise eliminated. That number is derived by taking the net balance sheet liability of $361 million and adding the present value of expected credit loss recovery of $62 million. Both of these numbers are shown on Slide 9. Of course, in quarters like this one, the liability could grow even further in the short term before it eventually comes down. Operating expenses this quarter were impacted significantly by $38 million of variable compensation expenses for the quarter compared to $13.5 million in the fourth quarter of 2012, and $8 million in the first quarter of 2012. Of the $38 million, approximately $33 million is contained in the MI segment. The fair value calculation that is the basis for this GAAP expense estimates the future value of performance awards. The calculation takes actual stock price into account, but also includes volatility and relative performance, both of which were impacted by the steep increase in Radian's stock price we saw in the first quarter. While the fair value calculations determines the period expenses, the actual payouts to the recipients under these award plans will be made over the next several years and will be based on stock price and performance results at the time of payout. Such expense in future quarters will be determined primarily by Radian's stock price changes. Policy acquisition cost in MI were affected this quarter by an acceleration of amortization, resulting from a lower-than-expected persistency level we've been experiencing on our recently written books. Because of the GAAP net loss for the quarter caused mainly by fair value changes, as of March 31, 2013, the valuation allowance against our deferred tax asset is up to a little over $1 billion or $5.90 per share. We continue to believe that our full DTA will be realized in the future, with the full recovery still expected to occur sometime in 2015. Our holding company liquidity stands at approximately $815 million after taking into account a $115 million contribution to rating guaranty made in March. We plan to make additional necessary contributions from the holding company in order to keep our risk-to-capital ratio below 20:1, and we do not believe that such contributions will materially reduce our current holding company liquidity. We have $55 million of remaining par maturing in June 2015, with the balance of our outstanding debt due in 2017 or later. As a reminder about our convertible debt accounting, we currently carry $339 million of the $450 million convert issued in 2010 as debt on our balance sheet, and $322 million of the recently issued $400 million convert as debt. The $189 million combined difference between the face amount of convertible debt and the amount currently carried as debt on the balance sheet is currently in additional paid-in capital. This amount will be accreted into debt over time, and will thus reduce our book value as we record interest expense for GAAP purposes that is higher than the actual cash payment of interest. Our book value per share ended the quarter at $5.39, and was impacted during the quarter primarily by the various components of our capital raise and by the significant change in fair value derivative. I'd now like to turn the call back to the operator for questions.

[Operator Instructions] Our first question, from the line of Mark DeVries with Barclays.

My first question is a 2-part question around capital. Bob, is it fair to say that -- let's pick some point out in the future where you're at normalized earnings, normalized ROE of 15%, that at that point, you'll actually be accumulating capital faster than that because you're not actually paying any taxes. And therefore, probably realistically growing capital faster than you can actually grow risk?

I think that's a good assumption, Mark. Now the tax part might come back in chunks. So that might be a little bit lumpy as you recover some of the DTA, but I think that's a fair statement. And I think, at the point when we recover to normalized earnings, we will be accreting capital and absent an even more growth in the insurance we're writing, we could be accreting capital faster than we needed essentially to support the risk that we're writing.

Okay. And so the follow-up to that is, given that in your very significant excess capital position now at the holding company, can you tell me about kind of the intermediate longer-term plans for that capital that's sitting there?

Mark, at this point -- this is S.A. It is premature for us to think ahead. At this point, our focus is to first return to profitability and to write as much good business as we can. And capital is a very strong indicator of strength and the liquidity we have, while -- in addition to the strong ratio we have, the amount of liquidity and flexibility that we have in terms of our holding company liquidity, we believe, are strong points in projecting a strong image to our counterparties and to our customers.

Okay. That's helpful. Next one is can you give us a sense for kind of what your longer-term expectations for the direction of kind of your average premium? Do you still have kind of higher premium stuff running off that's putting some pressure on that? And will you actually get a little bit of a central offset as you reduce the amount that you're -- of risk that you're reinsuring?

No, Mark. I mean, I think, it's fair to assume that the run rate of the earn premium rate will be similar to what it is. We're still writing a little bit less 95 LTV business than is normal. So the normal mix historically was 50-50, and we're writing more 90 LTV, which has a lower premium rate. So I think there's a little bit of upside there. But I think the run rate is pretty fair at this point.

Mark, to the extent that the persistency is down and the short life of the single is shortened, we collect all that premium upfront.

Yes, the single premium loan pays off early, then we're going to recognize all the UPR at once. And that's going to -- that will make earn premium a little bit bumpy from quarter-to-quarter, depending -- but I think in terms of average rate, I think it's fair to assume it's going to be pretty steady.

Okay. Great. And then just one last one. Were there any changes to your assumption in the quarter on denial reinstatement rate that's built into your IBNR reserve?

No material ones. We always update based on what we're seeing, but there was nothing substantial this quarter.

We have a question from the line of Bose George with KBW. Bose T. George - Keefe, Bruyette, & Woods, Inc., Research Division: First, just wanted to follow up on your comment on the stock comp. So if your share price is flat this quarter, does that stock comp number go to 0?

It does not. There would be a base significantly lower. So think about the numbers that I put out there for fourth quarter of '12 was 12.5. First quarter of '12 was 8. Those are more of the base expenses that will be really in any given quarter, absent a downtick to the stock price. But then the amount above those numbers was really generated by the increase in stock price. And then this quarter, we also had some volatility increases and relative performance increases. So all of those kind of hit this quarter. Bose T. George - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. Great. That's helpful. And then just to confirm, on Slide 9, if I look at that, I mean, what you're basically saying, the book value is essentially understated by that $2.45? And as the Financial Guaranty business runs off as expected, that kind of comes back into GAAP book value?

Right. It's -- book value is obviously fairly stated. But what we -- we point that out because these are fair value exposures for which we pretty much don't expect credit losses. So if that's the case, then they are going to turn around. And when the exposure goes away, then whatever fair value liability is going to turn around, usually it's going to happen over time. But yes, that's why we point that out. And this is a fairly substantial number. Grew this quarter because of the spread tightening which impacted the change in fair value this quarter. Bose T. George - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. Great. That makes sense. And then just in terms of your provision for new loans, if I just look at the number this quarter, divided by new notices, it looks like it works either around 7,300 a loan. And it's down a little bit from last quarter. Is there something seasonal in the first quarter where your provision per loan is a little lower?

It wouldn't be seasonal. So seasonal would impact a number of loans. So any of the reserves that we're going to put up, I would say, has been consistent. It's consistent with what we've done for the past several years. Nothing really changed. So any difference in that number you're calculating may be just the size or the coverage or something that wouldn't be related to a change we've made. Bose T. George - Keefe, Bruyette, & Woods, Inc., Research Division: So just in terms of thinking about that number going forward, it will really be driven by this -- by new notices that are coming in?

Yes. Typically, that's what we expect. Now we're always going to have some existing development. It's been slower to materialize over the last, say, 1.5 years or so. And we're hoping that continues and eventually gets to something that's negligible.

Our next question, from the line of Douglas Harter with Crédit Suisse. Douglas Harter - Crédit Suisse AG, Research Division: I was hoping you could walk through your thought process around arriving at the 5%, the reinsurance level that you guys are going to use going forward?

Well, Doug, I mean, we've said we've used reinsurance and we value it. So we value the use that we had, we value our partner in this transaction. However, we're in a much better capital position. We're writing very high-quality new business, so it clearly made sense to us to reduce the amount of go-forward share of business with the quota share. But to remain in a relationship is important as well.

Doug, it becomes more strategic than necessary going forward. In the past, it was important for us or we felt it was important for us to manage our risk-to-capital ratio. Now we could take it all back if we wanted to. But we believe a 5% reinsurance protects -- allows us to preserve our strategic relationship and gives us flexibility, if we should need it in the future.

Our next question, from the line of Jack Micenko with SIG.

Looking at Slide 12, this quarter versus last quarter, it looks like the projected default-to-claim rates are coming down modestly. Is that just sort of the aging in the rolling and the higher claims in the quarter or is there a change in your assumptions on the lower default-to-claim rates?

Jack, I think they went up a little bit from last quarter due...

Oh, right, right, right. They went up. Right. That's right. I'm looking at the wrong...

And that's a mix shift more than anything, Jack. So if you think about just the percentage of loans in 3 payments or fewer is down because the cure percentage there was very, very high. So that's really what's going on. It's a mix shift. We haven't changed our default-to-claim rate expectations within the bucket.

Okay. Great. And then following on Bose's question on the stock comp expense. Obviously, you mentioned sort of an 8 to 12, 8, 10, 12 base. Above that, sort of, I guess, the $30 million or $25 million this quarter, is there a way to think about stock price movements translating into a certain expense there that we can model in?

Yes. We thought a lot about that. It's difficult to do, Jack, because you've got these other components. You've got the volatility component that goes into this fair value model, and you also have this relative performance component. So -- but I would say that most of the future changes are going to be driven by the stock price, and I think you can get relatively close, if you look at what the stock price change this quarter and the amount above sort of that base, you can get fairly close to expectations with the caveat that you've got these other things happening that could impact the number as well.

Okay. Great. And then more big picture-wise, curious to get thoughts of the team there on the nomination of Representative Watt, does this perhaps signal a shift in GSE reform? Curious as to your thoughts this morning.

It's Teresa. I think that it's -- clearly, the administration has been focused on trying to get a permanent director into that role, rather than having someone in the role who's acting. So we think that means that, potentially, there could be some shift in. But overall, there doesn't seem to be any interest in having some major shift in direction there. Clearly, Congressman Watt has a lot of experience on house financial services, which is a good thing. So I think we'll see how that sort of evolves in terms of Senate confirmation and going forward.

And we have a question from the line of Sean Dargan with Macquarie.

As we think about the progression of your earnings over the course of the year, I think you said that your expectation that you're profitable excludes the impact of additional comp-related expense. So does that imply that you could essentially break even on a quarter basis the rest of the year and meet that goal?

I think it means exactly what we said. So we didn't project these kinds of stock price changes in the statement about a return to MI profitability. So we're still on course to achieve that, as long as you understand that the component for the stock price changes was not really incorporated there. I think that's what we still believe.

Okay. Great. And when we think about the fair value of derivatives, was there an element of nonperformance risk in there? So in other words, your own credit spreads came in, so there's a negative impact in the quarter?

Yes. That was -- think about that number, the change of fair value for the quarter, about half of it was due to that credit spread tightening for Radian, and the other half was this Financial Guaranty exposure that I talked about with regard to the downgrade of that transaction.

Right. Is there any way to think of this -- I know it's noneconomic, but it does impact book value. So is there any way to think about what further tightening in your credit spreads would mean to fair value of these derivatives?

Yes. We provide sensitivities in our quarterly filings. So if you look at the sensitivities, you can kind of follow in it. And it comes relatively close in terms of x percent tightening of our spread would mean x to the nonperformance risk.

And our final question will come from the line of Geoffrey Dunn with Dowling & Partners. Geoffrey M. Dunn - Dowling & Partners Securities, LLC: Bob, can you provide an idea of the unit paid pattern as you go about cleaning up the pending inventory? How are we going to see it develop over the next 3 quarters? I assume there's going to be kind of a spiked bell curve?

Yes, I think, I would say, for 2013, I think, you'll see a ramp up, because this is about getting these claims out and the process. So I think you'll see the second quarter may be a little bit higher than the third quarter, a little bit higher because we're still improving the process. So it's not going to -- I wouldn't say we're going to have this huge spike 1 quarter and then come down kind of thing. It's really -- we're really getting as many out the door as we can, and I think that's kind of the pattern. Geoffrey M. Dunn - Dowling & Partners Securities, LLC: Okay. In terms of this comp expense, it's a shame to see good stock performance weren't on your results. Is there any cost-effective way to hedge this out and negate it?

Geoff, that's an interesting question. And the most important thing is, as you said, in one sense, it's a good problem to have and everybody should be happy that our stock went up as much as it did. And it was driven in part by -- this was driven in part by the fact that, for the years in which where this award was given out, we did not have enough equity to give out equity-settled awards. And we will consider equity-settled awards as opposed to cash-settled awards in the future. Geoffrey M. Dunn - Dowling & Partners Securities, LLC: And then, Bob, last question is more of a product question. Given your current assumption in pricing, can you tell us what the ROE expectation is on your single versus your monthly?

We've said a number of times that the expectation on the singles, when we write it using the model, is about 10% all-in, which compares to the mid-teens on the monthlies. However, it looks like the persistency on the more recent books is a little bit lower, and a couple of the vintages a lot lower than expectations, so that could bring the actuals closer or more in line. The other thing we've seen is that the single premium business we've written has been extremely high credit quality. And in fact, a little bit better from a measurable standpoint like a FICO standpoint and the loss performance has been exceptional. So I think we can say that we expect the business that we've written over the past few years to be profitable and to have attractive returns that we would be very happy to achieve on any business we wrote. Geoffrey M. Dunn - Dowling & Partners Securities, LLC: Okay. And I'm sorry, 1 last follow-up for Teresa. Is there any traction in the discussions in terms of what future capital rules are for a risk-adjusted type of capital leverage role? Are the GSEs and FHFA entertaining such a thought or is it still kind of deaf ears?

There's still sort of discussion about a number of different options. But at this point, it's still unclear when they're going to come out with something. A number of years ago, both Freddie and Fannie had sort of proposals around this. And the industry has asked the FHFA to sort of help kind of have more of a uniform view going forward. So we're hopeful that, that will be the case. But we don't know -- we know they're thinking about this, but we don't know when to expect something. We do expect that when they do publish something, it will be more likely a proposal for comment.

And I'll now turn it back to our speakers for closing remarks.

Well, thank you, operator, and thank you all for participating on our call and look forward to seeing you on the next call. Thank you.

Ladies and gentlemen, this will conclude our conference call for today. Thank you for your participation and for using AT&T Executive TeleConference Service. You may now disconnect.