Ladies and gentlemen, thank you for standing by and welcome to Radian’s Third Quarter 2014 Conference Call. At this time, all participants are in listen-only mode. Later we will conduct question-and-answer session and the instructions will be given at that time. (Operator Instructions). As a reminder, today’s conference is being recorded. And I would now like to turn the conference over to our host Emily, Director of Investor Relations.

Thank you, and welcome to Radian’s third quarter 2014 conference call. Our press release, which contains Radian’s financial results for the quarter was issued earlier this morning and is posted to the Investors section of our website at www.radian.biz. This press release contains a non-GAAP measures that will be discuss during today’s call. The complete description of this measures and the reconciliation to GAAP, may be found in press release Exhibit E and on the Investors section of our website. During the call, you will hear from S.A. Ibrahim, Radian’s, 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; and Derek Brummer, Executive Vice President and Chief Risk Officer of Radian Group and Joseph D’Urso, President of Clayton. 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 2013 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 S.A.

Thank you, Emily. Thank you all for joining us today and for your interest in Radian. Our third quarter financial results were outstanding and I’m delighted to share the highlights with you today. The primary drivers of our results were the strong credit performance of both our legacy mortgage insurance and financial guarantee books and growing positive impact of our large and profitable MI book of business written after 2008. Our strong quarter included Clayton’s excellent results, illustrating the important benefit of our diversification strategy. Following my comments today, Bob will cover the details of our financial position and then we’ll open the call to your questions. In the third quarter, Radian increased its profits with net income of $154 million or $0.67 per diluted share. This compares favorably to a net loss for the third quarter of last year of $13 million or $0.07 per diluted share. Book value per share at September 30, 2014 was $9.08. Adjusted pretax operating income was $147 million for the third quarter of 2014 compared to an operating loss for the third quarter of last year of $12 million. Now, I’d like to review several highlights from the quarter. First, we continued to grow and improve a high quality and industry leading mortgage insurance enforce, which is a primary driver of future earnings. We wrote more than $11 billion of new MI business in the third quarter, an increase of 20% from last year. While overall, the national mortgage origination volume has declined from the same period last year, we have seen business shift during that period from the FHA and purchase volume has outplayed refinance volume, which is positive for our business since purchase transactions are more likely to use mortgage insurance than refis. At the recent Mortgage Bankers’ Association Annual Convention,…

Thank you, S.A. I will be covering our P&L activity and trends for the third quarter of 2014, some updated expectations regarding the balance of 2014 into 2015. Our financial results this quarter were excellent, led by continued strong credit performance in both Mortgage Insurance and Financial Guaranty, top-line growth in MI driven by growth in insurance enforced which is up 2.6% for the quarter and 5% year-to-date and expenses that were in line with expectations. As we utilize our deferred tax asset, our effective tax rate remains negligible. There were a few favorable non-recurring items this quarter that impacted both premiums earned and incurred losses that I will describe in detail later. In addition to our Mortgage Insurance and Financial Guaranty segments, our P&L this quarter includes the third business segment Mortgage & Real Estate Services, which represents the results of Clayton. Our EPS calculation for the third quarter includes both the dilutive impact of our 2019 convertible debt, which adds 37.7 million shares to our share count and adds back $5.5 million of interest expense to income for EPS calculation purposes and additional EPS dilution relating to our 2017 convertible debt of approximately 6.3 million shares. A table of our fully diluted share count is presented in Exhibit B. The MI provision for losses was $49 million this quarter, compared to $65 million last quarter and $150 million a year ago. Lower incurred losses have become a trend and continue to reflect improving default experience as new primary default totals were 20% better than third quarter of last year and cure rates have gone up. As S.A. mentioned, we entered into a settlement with Bank of America in September, which is expected to provide resolution on a substantial portion of our legacy loss mitigation activity and exposure. There…

Thanks, Bob. Once again, we are pleased to share with you our outstanding financial performance in the third quarter. We believe that, there is continued growth and opportunity ahead for Radian through continued success in our mortgage insurance business, further leveraging our risk management expertise, and through Clayton’s industry-leading mortgage and real estate services. Together, we have a strong foundation that should drive Radian’s success to the next space in the evolution of the U.S. housing finance markets. In closing, I would like to once again remind you that, as we face the opportunities and challenges that lie ahead with we do so with the benefit of the growing positive impact from our large profitable post-downturn MI book, continued credit improvement in our legacy MI book, a strongly capitalized Financial Guaranty business and greater strategic opportunities from the Clayton acquisition. Now operator, we’d like to open the call to questions.

Of course. (Operator Instructions) Our first question today comes from the line of Eric Beardsley with Goldman Sachs. Please go ahead. Eric Beardsley – Goldman Sachs: Hi. Thank you. Just wonder if you could update us any progress you’ve made on strategic alternatives for the Financial Guaranty business and if you were to seek reinsurance on that, would that hypothetically free-up capital that you regulate upstream?

Yes. First again, as we said we believe Radian Asset is solid over to capitalize company with strong economic value and as we’ve said before we are working with an advisor to monetize or otherwise utilize Radian Asset in a way that will maximize its value consistent with PMIERs. So in addition to a potential sale of the business, we’re considering a variety of other options, including continuing to take dividends and combining that with the reinsurance or surplus notes and I’ll ask Bob will comment on your reinsurance part of the question in a minute. All I can say in addition to that is that, we’re pleased with the progress in exploring all the alternatives with the help of our advisor.

Yes. So Eric with regard to reinsurance, it is a possibility so it’s one of the alternatives we are exploring. I think that, it would need to be a substantial of all of the book reinsurance in order to be able to take substantial dividends in the near future. Eric Beardsley – Goldman Sachs: Got it. Is there any possibility that you could dividend up the entire amount of capital if you reinsure the whole business?

I think it’s conceivable with the reinsurer have creditability and the stability. It’s still something, we would need to get approval from New York from, but it’s a possibility certainly. Eric Beardsley – Goldman Sachs: Okay. And then just on the updated claim rate expectation just wondering if you could walk us through I guess how that can progress from here and what drove you to do it in this quarter?

Claim rate expectations?

Yeah. The changes in estimates that we make, we always look at historical experience, we try to do things that are consistent with trends, and the change in estimate this quarter related impart to using this early-stage, late-stage as a significant roadway predictor and that’s something we’ve been looking at for quite some time and we think it is a very valid roadway predictor. You saw the change in the brand new delinquencies to 17% that’s something that Derek has mentioned previously has been something we’ve been observing and we made that change and then some of the later stage where foreclosure sale has been scheduled or held, there were also changes in those buckets. So, we always update based on historical experience we said in the past and we really like to see trends we don’t like to do things immediately. We like to see things develop overtime and it was time to make these changes and we think there are better estimates with regard to roadways. Eric Beardsley – Goldman Sachs: Okay, great. Thank you.

And we do have a question from the line of Mark DeVries with Barclays. Please go ahead. Mark DeVries – Barclays: Yeah. First I have just a follow up question on the reserves. I was just trying to figure out whether there is actually an impact on the provision in the quarter, while the reserve for delinquent loan actually went up if you actually included it went down affirm out in the quarter. I assume it’s related to the changes you’re just discussing, the factors, but is there any kind of one-time impact that flow through the provision?

Mark, the one thing that I mentioned with the $15 million which was current period benefit with regard to the BOA settlement and it pertained to performing loan. So the intrinsic can requires if you take that as a current period benefit. So, that would be the one thing to highlight as a non-recurring item. The other thing I think, you’re right had offsetting impacts and were immaterial to the overall. Mark DeVries – Barclays: Okay. And then just to make sure I’ve got it right. In addition to that $15 million, you also said there are $10 million non-recurring benefits of premiums as well from that BOA settlement?

That’s right. Yes, that we mentioned and that is related to refunds of premium. As recession rates go up then we get refunded in premiums so it has opposite effect. If future recession rates go down then we refund less premium, so yes that was an impact from the settlement and it was non-recurring. Mark DeVries – Barclays: Okay, and are those the only two non-recurring items you was calling out in the quarter?

Yes. Those were the ones that we mentioned, yes. Mark DeVries – Barclays: Okay, great. And then just one other question is there any color you can provide on the synergies between EMI and Clayton that you’re planning?

Sure, Mark. That’s a very good question. When we made the Clayton acquisition, we did so for the following reasons. First on the standalone basis, we believe Clayton is a very strong company, which as you saw continues to perform profitability and in addition to profitability, gives us an opportunity to take advantage of the private label securitization market whenever it comes back strongly. Second on top of that, we believe that with the large customer footprint that Radian MI now had in dealing with 80% of all the lenders have been including any independent mid-size and small lenders, they have the opportunity to use Clayton services as well as some of the large lenders in terms of contract underwriting, some of the other kinds of operational services they need particularly in a highly important compliance environment where they need to be on top of the loans they originate and the servicing of those loans. Third, we believe there is opportunities that Bob talked about as we thoughtfully look at to take some of the services we utilize from other third-party vendors and transfer that business in a systematic manner equate on an absolute basis and we’ve just received the approval from our insurance department in terms of master services agreements to do that. And fourth, beyond that, there is opportunities to look at how to optimize our operation’s platform more efficiently, utilize technology more efficiently across the broader operating footprint in multiple locations that Clayton and Radian have. And fifth finally, there is an opportunity to launch new products and services directed at our customers and deal with the quite opportunities in the changing housing finance environment that leverage Radian’s risk management and insurance taking capabilities with Clayton’s operational and due diligence capabilities. I hope that addresses your questions. Mark DeVries – Barclays: Yeah, absolutely. Are you in a position to give us a sense of what you think the revenue opportunity is here and kind what the incremental margins there is might be?

Look. All I can say is we are excited about those opportunities, but as you can imagine some of these will take time to execute, which is great. Mark DeVries – Barclays: Okay. Fair enough. And then just one last question, it sounds like there is some lumpiness to the earnings that I think Bob have referenced, there was kind of big project this quarter. Is there any kind of seasonality to that and maybe you can help us to think through as we try and model those earnings? Joseph D’Urso: Yes. Hi this is Joseph D’Urso, President of Clayton. There is definitely some seasonality when it comes to the REO portion of the business. With rest of the business, there not so much seasonality as much there is activity in the marketplace for loans and securitizations. So there is definitely lumpiness, we’ve had that throughout our history and it is based on the levels of activity that you see in the asset markets. Mark DeVries – Barclays: Okay. And for the REO portion how does the seasonality were? Joseph D’Urso: So, we will slow down as we come into the fourth quarter marginally as fewer people go out and buy homes and that starts to pick up slowly throughout the first quarter and then into the spring in the second quarter where it really starts to pick up significantly. Mark DeVries – Barclays: Great. Thank you.

And we do have a question from the line of Jack Micenko with SIG. Please go ahead. Jack Micenko – SIG: Hey, good morning. Looking at the role the claim assumptions, I think your old slide 15 is now gone with the new slide deck. The Bob you talked about the 17 on the early stage 81 on the late, I’m just trying to reconcile because I got 53 net full claim rate on this book. Last quarter it was 47, so did the middle buckets go up on the assumptions and what are those numbers, they were 43 and 50 last quarter for the full ‘11 and ‘12, just trying to reconcile the sequential change.

Yeah. I think Jack what you’ve seen is that, we’ve made changes in a variety of buckets. The early one going down some of the later one is going up and overall I did go up, I think offset to that is severity where we have been seeing for quite some time the severity has been less than we have previously estimated. So, that was kind of an offsetting factor, but I mean in terms of just those rats, overall they went up but in the early stage they went down and this foreclosure stage which is really driver of all rates went up. Jack Micenko – SIG: Okay. And then one of things we’ve been seeing from the banking industry for probably the better part of the year plus is actually negative reserving and when I look at the 78%, 79% HARP plus post ‘08 these changes being made, severity coming down, I mean is it foreseeable at some point that we actually see a negative loss incurred numbers is that possible and will that require a regulatory power that will play out if is it all possible?

Yeah. I mean what you would have to have, so we break up our incurred loss into two components, one into new defaults. So, there going be new defaults in any given quarter and there is going be an incurred loss associated with that new default. That’s going be a positive incurred loss. Any negative would be in the second line which is the existing default. So full over reserved on the existing defaults and there is a reason to make an adjustment than that could go the other way. Now, you’ve seen to the first three quarters of 2014 that incurred loss has been negative now it hasn’t been negative enough to drive an overall negative number, it would have to negative to be that way conceivable, but that’s the way you will get there. Prior to this year, we had upward adjustments in that existing defaults because estimating reserves is very difficult and as you’ve seen we always try to use the information to get it right. So, that’s what it would take in an improving environment you’re more likely to see those negative adjustments. But, we think every quarter the reserve that we have is the best estimate and ideally if that’s the case you would have a zero in that line next quarter. Jack Micenko – SIG: Okay, great. And then just sort of bigger picture. I mean how much your business historically in a normal, I guess defining normal is sort of a 2000, 2003 kind a window is 95 plus with the talk about coming back to doing more 97 out at state authorities. How should we think about that as a future opportunity?

So this is Teresa and it about 50% of the business. When you back to that time frame it would been in that category. So, obviously the other thing I would just add is that up until last November, we saw some activity in that 95% to 97% plus LTB but get pullback from that. And so, we saw that decline and is very negligible at this point. So, we are looking forward to seeing the GSPs come back with 97 product. Jack Micenko – SIG: Alright, great. Thank you.

And we do have a question from the line of Bose George with KBW. Please go ahead. Bose George – KBW: Yeah. Thanks guys, good morning. Just a follow up on the Jack’s question on the 97s. Just with PMIERs the way it’s written, it looks to more challenging in terms of the capital requirement of the 97s. So, if the 97s are rolled that, does it have to be in conjunction with some adjustment to PMIERs?

This is Derek. It obviously would be intensive from a capitalization perspective looking at the current grid. But in terms of its exact impact, we’ll have to wait and see what the final PMIERs grids will look like. Bose George – KBW: Okay. Fair enough. Actually just switching to the Financial Guaranty piece, you noted the benefit from that on the losses incurred, but if the expenses were lower as well. Is there anything one-time there or it just start of expenses coming down?

No. This is Dave. We obviously have a continued close scrutiny on our expenses and our operating expenses have been trending lower. Bose George – KBW: Okay, great. And then actually just going back to the question about the $15 million benefit from the BSE settlement. Is that going through the reserve release for this quarter I just I didn’t fully understand that?

It ran through incurred losses, so it doesn’t impact incurred losses this quarter. So, yes. Bose George – KBW: So, that $70 million number just would have been $15 million higher?

Yeah. We had not recognized that. We essentially deferred it, because remember we haven’t reserved for loans that are performing. So some of these performing loans will delinquent in the future and we will reserve against them and we will have already taken the rescission denial benefit related to those loans. Bose George – KBW: Okay. Okay. That makes sense. And then just in terms of the timing on doing anything on Radian and Financial Guaranty, will that be only after you get the final PMIERs or could you take some actions before that?

Bose, we are continuing to evaluate our alternatives and I can’t answer whether we would do something before or after clearly the more inside to get into PMIERs the better of there, but there are actions possible that would give us the PMIERs benefit in any scenario. Bose George – KBW: Okay. That’s great. Thank you.

And our next question comes from the line of Douglas Harter with Credit Suisse. Please go ahead. Douglas Harter – Credit Suisse: Thanks. You mentioned that you’re upstreaming some cash from Clayton in the fourth quarter, is that something that you expect to be regular and is that $5 million in expected size?

We’ll size it each quarter, but yes the expectation is that if Clayton continues to earn money and generate positive cash flow. We would regularly upstream to the holding company. Douglas Harter – Credit Suisse: Got it. Is there any cash or capital needs that Clayton or it’s pretty much all sort of cash generation be available to sort of to bring up to the parent?

Generally it’s a very low capital intensive business. However, there could be capital expenditures, there could be other needs for the cash at Clayton. So, I wouldn’t say always, but generally the positive cash flow generated can be used by the Holding Company. Douglas Harter – Credit Suisse: Alright. And then just to clarify on Bose’s question, the $15 million benefit, is that coming on the new default line or kind of the prior period adjustment line?

It’s on the second. It’s on the existing default line. It’s not on the new default line because new default are just new defaults during the quarter. Douglas Harter – Credit Suisse: Got it. So out of $24 million, $15 million of that was from the settlement.

That’s correct. Douglas Harter – Credit Suisse: Great. Thank you.

And we do have a question from the line of Chris Gamaitoni with Autonomous. Please go ahead. Chris Gamaitoni – Autonomous: Good morning. Thanks for taking my call. There was pretty good improvement in the operating cost for the MI side, was there anything one-time in that or how should we think about the go forward cost structure for MI business?

Yeah. We tried in the press release and you can see we tried to reconcile because there are some moving pieces there. I think you’ll see that if you normalized that it was essentially down just a little bit and in line with expectation. So, this quarter we had the Clayton operating expenses which drew some of the number. The long-term comp is always something we use to disclose because it has gone up and down with the start price. So if you normalize it, I would say the MI expenses are down just slight little from last quarter. Chris Gamaitoni – Autonomous: Okay, perfect. And then I’m just trying to reconcile the existing defaults. They had a benefit of $25 million off which you disclosed $15 million that was huge settlement. So, the $7 million benefit how does that kind of jive with the increase in later stage claim rates?

It’s going to be in there, so the increase in later stage it’s going to be a positive number in EBITDA, other things in there. That’s where we put loans that are aging and IBNR changes. So, there are lots of things that are going through that line and all-in-all the net impact other than the $15 million was still a little bit negative but there were some positive items in there as well such as the claim rates that you are talking about. Chris Gamaitoni – Autonomous: Okay. And then are there any thoughts around the news that the housing asking MI to do more DA loans and what kind of the opportunity structure would look like market size, how you kind of price that second loan charge would be?

We’re are having conversations about this and really the conversation is more with DA and the idea is really for us to potentially come in and ensure the lender beyond 25% that is DA in short. And so, we’re taking a look at that really trying to understand what the vendors are interested in and how much of a market there is for that so that we can then figure out what the right structure would be on a go forward basis. Chris Gamaitoni – Autonomous: Okay, perfect. And what are the kind of thoughts around the opportunity for 97s assuming the PIMERs don’t change, just the 97 seem to be most penalizing bucket from the available asset ratio size?

Yeah, and Derek can add to that, obviously depending on where the PIMERs are will depend on sort of what amount of 97s will willing to have overall portfolio as well as kind of what the pricing would need to be on a go forward basis to have an appropriate return. So we would be evaluating that. The other critical piece of them for connection we need is what the parameters are going to be that the GSE establish and they are still working through what those going to be. Chris Gamaitoni – Autonomous: Okay, perfect. Thank you so much.

Sure.

And we do have a question from the line of Geoffrey Dunn with Dowling & Partners. Please go ahead. Geoffrey Dunn – Dowling & Partners: Thanks. Teresa, I’ll actually follow up on that question. There’s a lot of redirect about expanding the mortgage market talking 97s, talking MI participating in VA, but at the same time you have to consider the lender side of it and there has also been a lot of articles talking about the lenders not necessarily buying into this because there is still lot of lenders law risk out there. What’s the risk at all? Just talk about expanding the market and potentially the private MI world ends up just being that, but as just talking you can’t reach in appropriate product at the appropriate pricing?

Yes. So I mean that’s a great question and on the 97s I think a lot of that also connected to the changes in sort of how the GSPs are going to approach lender warranty and I think as you know from the reporting out there and the comments from Director Rob at the MBA, there’s a lot of focus MBA has been very involved and working through sort of tightening up lender warranty so that lenders still feel comfortable with the risk that they have on an ongoing basis. But I’d say, that’s going to be critical to how they view their willingness to do 97s. Having said that, they will willing to do them at least at a small percentage until Fannie stop buying them last year, so that was state indeed there is going appetite to that on a go forward basis. With respect to the VAPs, that’s a little bit more difficult because I think when it first came out, it was sort of characterized more something that, the government will be buying, but it’s really something more that they’re saying there might be interest in lenders getting the coverage. And so, I think that’s a tougher one to answer, because I think it really depends on how the lenders are sort of reserving for that and sort of whether there’s an opportunity to help them kind of in terms of the risk that they feel like they have currently, and that’s something that’s going to take a little bit of time to get it on to them. Geoffrey Dunn – Dowling & Partners: Okay. And then probably for Bob, do you have piece of reinsurance you can [recall] back as of the December 31st who knows that PMIERs will be finalized by then. How are you approaching that? Do you have an option that you can wait for PMIERs till January, February or do you have to make a decision before year end?

We would likely make a decision before year end Jeff, at this point I’m inclined to potentially claw some or all what we’re allowed to but we’ll make that decision prior to year end. Geoffrey Dunn – Dowling & Partners: Okay, great. Thank you.

And we do have a question from the line of Sean Dargan with Macquarie. Please go ahead. Sean Dargan – Macquarie: Yes. Thank you. Bob, you mentioned that there is a possibility that be NOL evaluation allowance might be reverse in the fourth quarter. Can you just remind us using the expenditure count with the impact of book value per share would be?

Today it’s $4.37 per share, the valuation allowance per share and that was changed based on the fourth quarter. Sean Dargan – Macquarie: Right, okay. That’s a determination that your auditors have come to?

It’s our determination based on analysis that obviously we’ve already started and we would get buying from the orders they would do it alongside but it’s our decision. Sean Dargan – Macquarie: Okay, great and at that point your GAAP results would show you paying the statutory tax rate?

At the point in time when we get the valuation allowance reversed and the DTA comes back on the book then we’d be booking taxes as per normal. Sean Dargan – Macquarie: Okay great. And then just as we model out Clayton, you’ve given us some historical gross profit on services, which before I though was going to be the operating earnings metric, but should we think that the interest expense and operating expenses that you reported this quarter will more or less be steady state going forward?

Yeah. I think certainly interest expense is $300 million so that’s not going to change. But in terms of operating expenses I think it’s going to be less sort of directly variable with revenues but it’s if the business grows a lot you might see that grow and but I would say generally in a range. Sean Dargan – Macquarie: Great, thank you.

Sure.

And our last question comes from the line of Bose George with KBW. Please go ahead. Bose George – KBW: Yeah. Just one follow-up on that the BSE settlement so you can just remind us what did you say about the impact next quarter around the loss provisions?

There wouldn’t be any impact next quarter. Bose George – KBW: Surely, just what happened this quarter and that’s the impact is over?

Yeah, we called out it. A lot of it was done prior over this quarter and there wouldn’t be any impact unless we see some sort of change in anything or it’s still subject to approval and things like that. Bose George – KBW: Okay. Perfect. Thank you.

Sure.

And I guess our last question then is from the line of Steve Stimac with FBR. Please go ahead. Steve Stimac – FBR Capital Markets: Hey Bob, just to clarify the tax issue oppose to NOL recovery. You talked about tax is going back to normal. It’s been a while since we’ve seen normal so what’s a good normal is it sort of high 20s or low 30s for tax rate?

Yeah. I mean it’s close to 35%. At this point our portfolio is taxable and in the past, way back when the earnings were very consistent, we had a big unique portfolio so that changes down the road that could impact our effective rate but right off of that pretty much the statutory rate. Steve Stimac – FBR Capital Markets: Great. Thanks guys.

Sure.

And at this time, there are no further questions. So, I’d like to turn the conference call back to S.A. Ibrahim. Please go ahead.

Thank you operator. Thank you all for participating in our third quarter earnings call. I look forward to seeing you again for our full year year-end operating call next quarter.