Ladies and gentlemen, thank you for standing by and welcome to the Radian Second Quarter 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we'll conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions] I would now like to turn the conference over to your host, Senior Vice President of Investor Relations, Ms. Emily Riley. Please go ahead.

Thank you and welcome to Radian's Second Quarter 2019 Conference Call. Our press release, which contains Radian's financial results for the quarter was issued last evening and is posted to the Investors section of our website at www.radian.biz. This press release includes certain non-GAAP measures, which will be discussed during today's call, including adjusted pre-tax operating income, adjusted diluted net operating income per share, adjusted net operating return on equity and services adjusted EBITDA. A complete description of these measures and the reconciliation to GAAP may be found in press release exhibits F and G, and on the Investors section of our website. In addition, we have also presented non-GAAP measures for tangible book value and services, adjusted EBITDA margin. This morning, you will hear from Rick Thornberry, Radian's Chief Executive Officer; and Frank Hall, Chief Financial Officer. Also on hand for the Q&A portion of the call is Derek Brummer, Senior Executive Vice President of Mortgage Insurance and Risk Services. 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 2018 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.

Thank you, Emily, and good morning. Thank you all for joining us today and for your interest in Radian. I am pleased to report another quarter of excellent financial results for our Company. Net income for the second quarter was $167 million and diluted net income per share was $0.78. Adjusted pretax operating income grew $216 million and adjusted diluted net operating income per share increased to $0.80. Book value per share grew 23% year-over-year to $18.42 and return on equity was 17.8% with an adjusted net operating return on equity of 18.2%. These results reflect the fundamental strength of our business model, the value of our customer relationships and the dedication of our team. With regard to our Mortgage Insurance business, we grew our primary insurance in force more than 9% year-over-year to $231 billion. Our mortgage insurance portfolio, which is one of the largest in our industry, is the primary driver of future earnings for our company. It is important to note that the projected economic value of this portfolio is not reflected in the current period financial statements nor is it reflected in our reported book value, but it is expected to be recognized over time. As we discussed at our Investor Day in May, we believe the projected future earnings for this portfolio represents significant unrecognized economic value for shareholders. The economic value of this portfolio provides us with significant strategic financial flexibility. We wrote a record $18.5 billion of NIW in the second quarter, which is a 13% increase over our previous record volume written in the second quarter of 2018. This new business volume was driven by the continued demand for our Private Mortgage Insurance products based on the strength of our current business environment, the depth of our customer relationships and our excellent…

Thank you, Rick and good morning everyone. To recap our financial results reported yesterday evening, we reported net income of $166.7 million or $0.78 per diluted share for the second quarter of 2019 as compared to $0.78 per diluted share in the first quarter of 2019 and $0.96 per diluted share in the second quarter of 2018. As a reminder, results a year ago included $74 million in tax benefits relating to final settlements with the IRS for the longstanding tax matter. Adjusted diluted net operating income was $0.80 per share in the second quarter of 2019, an increase of 10% from the first quarter of 2019 and an increase of 16% over the same quarter last year. Before I get into the details of the quarter, I will note some significant changes in accounting estimates made during the quarter that impacted our reported results. First, is the earned premium acceleration of $32.9 million that was related to the cumulative effect of updated amortization rates used in calculating our unearned premium reserve, which impacts the revenue recognition of single premium policies. As our mix of single premium policies has skewed more heavily to borrower paid policies than lender paid, the expected lives of the policies have shortened and therefore has increased the speed of amortization of the single premium policies. This change also creates a $6.2 million decrease in other operating expenses as we accelerated a related portion of the ceding commissions for policies covered under the single premium quota share reinsurance program. Second, is the change in accounting estimate related to our loss reserves and specifically the IBNR increase of $19.4 million related to previously disclosed legal proceedings regarding loss mitigation activities largely on pre-2009 vintages. The combined impact of these significant items was positive to our GAAP and…

Thank you, Frank. Before we open the call to your questions, let me remind you that net income was $167 million and diluted net income per share was $0.78. Adjusted diluted net operating income per share grew to $0.80. Book value per share increased 23% year-over-year to $18.42. Return on equity was 18%. Our $231 billion mortgage insurance portfolio grew more than 9% year-over-year and is the primary driver of future earnings for Radian. Our services segment revenues grew 19% from the prior quarter and 6% from a year ago to $43 million and we made progress against our capital strategy completing our $250 million share repurchase program and extending our debt maturity profile while reducing overall interest costs. Now, operator, I would like to open the call to questions.

Certainly, sir. [Operator Instructions] Our first question will come from the line of Jack Micenko with SIG. Please go ahead.

Hi, good morning. Wanted to ask a little bit about the ILN, obviously. You completed the second in April. Should we think about that going forward as an annual sort of accrual, so that maybe mid 2020 or early 2020, we get the 2019 covered? And then one of your peers has gone backward and done some work on the back book, any thoughts from you on that on as a possible strategy?

Sure. Jack, this is Frank. I appreciate the question. We have said historically that we’re a fan of the risk distribution and we’re certainly pleased with the pricing in the market conditions to issue ILNs into. So we do see risk distribution as a permanent part of our capital management and risk management exercise. So as we’re evaluating different opportunities, I think as long as market conditions permit, it is something that you would expect to see on an ongoing basis. As it relates to the back book, I think conditions and the profile of that particular set of vintages is a little bit different than the on the runs. So it’s something we want to be thoughtful about and is certainly under consideration, but wouldn’t want to set expectations around timing or frequency, but as far as it being a part of our risk and capital management programs, definitely.

Okay. And then on the services, I’m hoping for a update on the guidance there. I think you’d – from the $175 million to $200 million. I guess, first is that a segment or a consolidated number and where are we on that guide? It seems like we’re a little bit off the pace for maybe where we should be 50% of the way through the year.

Yes. So thank you, this is Rick, Jack. I appreciate the question. And our services segment revenues were $43 million in the quarter. As we said, that was a growth over the first quarter, which we expected. Our guidance is to achieve an annualized run rate of $175 million to $200 million of revenue and 10% to 15% EBITDA margin. So if you look at this quarter, our annualized revenue run rate was $172 million, so very close to the bottom end of our guidance. Our EBITDA margin was 3.3%, but excluding some things that we did from an investment point of view, closer to 7%. So we expect – as we look forward, we expect to achieve the lower end of our revenue guidance as we go through the year. So I think, the $175 million plus kind of range we should achieve and I think we’re on track to do that as the year progresses. And the EBITDA, it’s a little bit more volatile just because of a lot of small numbers both plus and minus, right? And it can be driven by mix somewhat. So that’s our focus. But we also make investments in those businesses from time to time that create volatility around that one metric. So we’re staying with our guidance of a run rate – on a run rate basis. I think as I said in Investor Day, these businesses are driving strong value to our MI customer relationships and the real estate data we get from our real estate businesses is extremely valuable to our mortgage credit risk business. So today, we believe as these businesses are developing and evolving towards creating a financial contribution to our overall company, they are adding value to us across our MI business and we see that…

Okay. It sounds like we step up consistently back half of the annualized segment number when we exit 2019 is where the focus should be.

I think from a pure financial contribution, we’re going to see that occur and I think as I mentioned the strategic aspect of the business, so I think is playing out well across our MI customer base as well.

All right. Thanks for taking the questions guys.

Okay. Thank you.

Next in queue, we’ll go to the line of Geoffrey Dunn, Dowling & Partners. Please go ahead.

Thanks, good morning. Frank, you outlined to capital strategy last quarter that had to do with finishing your authorization, taking carrier debt, et cetera, and you managed to take care of all that inside of the three month period here. Can you give us an update? You got a lot of cash at the holdco. You’ve really addressed all the things you highlighted you wanted to address last quarter. What’s the plan for the remaining cash?

Sure, great question, Geoff. Thank you. I think the best way to describe it and this is consistent with how we’ve described it in the past is we’re going to continue to look at uses of capital in the prioritization that we outlined at our Investor Day, which is make sure we have sufficient capital for organic growth, make sure we have an adequate risk buffer, make sure that we’re considering any strategic opportunities that may exist and then we’ll look at returns to shareholders either through just the theoretical possibilities there, our share repurchases and dividends. Historically, we’ve utilize the share repurchase method and over the past four years, we’ve repurchased through our share repurchase programs over $400 million of shares. So as we contemplate future actions and we don’t – as you know, we announced those actions as they occur, so we don’t preview them. I think certainly, we’re in a position where we believe that we do have excess capital and will contemplate returns to shareholders in the broader context of the capital planning activities that we do. This share authorization, the $250 million one which was completed, I’m very pleased about that. So that exhausts this authorization. The next opportunity for an authorization will be at our upcoming August board meeting and that will be a topic of discussion within the broader capital planning that we do.

And am I correct that I think you indicated last quarter that the Board has actively discussed common dividend as well?

The Board discusses the full range of capital options also in the context of that capital usage prioritization that I went through as well, so it is a comprehensive discussion that incorporates all aspects of our business.

All right. What’s the date of the Board meeting?

August 14, I think, so that Wednesday of that week.

All right.

Actually, by the way, Geoff, this is Rick. I just want to add to Frank’s comment. I think between management and board, we have a very thoughtful and considered capital planning processes as I think, Frank went through at Investor Day. As you can see from what we’ve done, as Frank mentioned, our actions over the past 12 months have been indicative I think of a very thoughtful process around how we manage the capital sources of this company and how we’ve accessed sources of capital and how we’ve use that capital to improve, I think shareholders position. I think if past performance is any indication of how we manage our capital, I think we’ve got a pretty good track record. As you said, Frank and many others in this company have been very busy over the last few months knocking a few things down here.

Okay. And then just on a different topic. You indicated before most of the business or majority the business going through radar rates, but you do have different pricing channels available for lenders or customers’ needs. Does Radian participate in the bid rate sheet business, and if you do, can you talk about how you think about the returns in that segment?

Sure. This is Derek and I’ll take that one Geoff. As we talked at Investor Day, some of the bulk bid process, we traditionally have not been a big player there. And so generally, what we’re looking at, anytime we’re looking at any sort of forward commitment our customized pricing solution is making sure that it fits our risk return appetite. Really what we’re trying to do is focus the book of business where we find the most economic value at a loan level, a product level and at the lender level and making sure we’re doing business with the right customers. So traditionally, we haven’t played I would say a significant part in that bulk bid process. And I would say that the other thing, although that’s received a lot of news lately, we really haven’t seen any changes I would say in a material way in terms of the number of lenders that are doing bulk bids and also just the scale of that I’d say overall in terms of discounting either.

Okay, thanks.

Next in queue, we’ll go to line of Mark DeVries with Barclays. Please go ahead.

Thank you. I had a couple of follow-ups on potential capital returns. Frank, how should we think about how much of the cash at the holdco is available for returns? And then also how should we think about the capacity to seek dividends up to the holdco over the next 12 months?

Sure, great question. I appreciate that. I think the way to think about sizing our holding company cash previously, we have used metrics of $300 million or sufficient forward debt service for a number of years. I think the reality of it is that we’re trying to be opportunistic about the capital that we’re freeing up at an operating company basis through risk distribution and then being mindful of where that capital resides from a legal entity standpoint. Over the last 12 months you’ve seen us upstream about $825 million, primarily driven by the excess PMIERs cushion that we have and getting comfortable with making that request of the Pennsylvania regulators. So as I went through it in our Investor Day, as we look at sort of our binding constraints as we manage our capital and liquidity position, PMIERs cushion is one of those constraints holding company liquidity and then our staff capital. And so right now, our statutory capital is really the binding constraint that we’re operating under. And so the Holdco cash is in a level that I would say certainly exceeds any level of previous guidance that we gave. We’re comfortable with that level. Also, as I went through with Jeff, the priorities of excess capital, we just want to make sure that we have balanced our cash needs at the Holdco relative to all of those priorities that I listed organic growth risk buffer strategic opportunities, et cetera. I won’t guide to a specific number, but I would just say that we do feel that we do have an excess position there I think in the landscape of all of that. Then also keep in mind too, as we think about the holding company cash position, I always like to remind folks that we do have an expense and interest-sharing agreement in place, which as I mentioned in the prepared remarks contributes about $145 million over the last 12 months to our holding company cash position.

Okay, got it. I had a question about the accounting around the unearned premiums, the adjustment that you made $32.9 million. Is that meant to reflect all your expectations for accelerated amortization on singles based on the rate move in the quarter? In other words, if rates don’t do anything, there’s no additional benefit in subsequent quarters even if the realization is happening and getting those prepayments. Is this like a pull forward of all of that and so we would expect the average premium to drop back down to the level it was at in the prior quarter?

Absent of the adjustment, it should be relatively consistent, similar to what we’ve got in the slide deck, but maybe let me explain it perhaps a different way to help you conceptualize it. As we look at our single premium production overall, which creates that unearned premium reserve, historically, we have had a majority of our single premium business be lender paid versus borrower paid. Lender paid coverage is life of loan coverage, whereas borrower paid is subject to the hope of cancellation, which is about a 10-ish or so year time horizon. So what that means is that the in force period if you will on borrower paid policies to significantly shorter than it is on lender paid policies. When you look at the accounting literature and the recognition curves that we have for the revenue and-or the amortization rates that we used for the UPR, which is the other side of that equation, the time horizon over which the revenue recognition occurs has shortened by about one to two years. So If you have the same fixed amount of premium upfront previously under a lender paid policy, it’s in force longer, so the revenue recognition curve would be longer. Whereas, with the borrower paid policy, it would be that same fixed amount of premium will be recognized over a shorter time horizon. What you’ve seen is the roughly 14% of our NIW of this quarter is borrower paid singles, which is significantly higher than it was years ago when it was about 2%. It’s the mix of the single premium production shifting to a shorter life profile, which is causing the significant change in our update on estimates around the UPR.

Okay, got it. Thank you.

Next in queue, we’ll go to line of Bose George with KBW. Please go ahead, sir.

Hey, good morning. Actually, I wanted to ask question but the debt to capital, I guess is around 20% now. Can you remind us what you’re targeting there and how you’re thinking about the need for an investment grade rating?

Sure. Bose. This is Frank. It’s 20.6% reported at the end of the quarter. It’s 20.4% now after we took out the rest of the finished off a repurchase program. Historically, we’ve said low 20s is typically what we were thinking about from a rating agency perspective. I think as I mentioned a few times recently, the rating agencies don’t give us a hard and fast number to manage to, so this is our expectation of what we think it should be viewed favorably by the rating agencies. Obviously, we’re at a very low level now, certainly relative to our history and we think that this should be viewed favorably by the rating agencies, but that really is their determination to make.

Okay, thanks. And then I am sorry I if I missed this, but what was the default to claim rate in the quarter?

Sorry, Bose, you’re talking about on the new business?

On the new business…

On the new business. 8%.

8%.

What’s the expectation going forward? Do you think any room to move that further down or is this the run rate?

Sure. I think as we’ve consistently said there even though we didn’t see a change on the new defaults, quarter over quarter, we do think that the overall economic landscape is favorable. We adjusted – make adjustments to it in the context – Mr. George, does that answer your question?

Yes. That last bit faded out a little bit, actually. I don’t know if that was just my phone or…

Sure. I’m sorry. The default to claim rate assumption is viewed in the context of the current information that we have each quarter and certainly the landscape – the economic landscape is positive and strong. I would say if that continues, there could be an opportunity to move that lower. What we did do is move the default to claim rate down on our age defaults, so it really just depends on the performance of the portfolio and the economic landscape at the time we make that assessment.

Okay, thanks. Thanks you. Just one more from me. Can you just talk about the sensitivity of your investment income to lower Fed funds?

Sure. The lower Fed funds rate obviously is that the short end of the curve, so it really depends on what the rest of the curve does. Our duration is a 3.6 years and I think – excuse me, 3.7 and that is shorter than our target in the shorter because of some of the capital actions that we took in the quarter. We would expect to see that extended a little bit, so it really does depend on, I would say, just the timing of the reinvestment opportunities that particular point in the curve, and of course, spreads what they’re doing. Hard to calibrate to a Fed rate cut, so it really does depend on market conditions.

Okay, great, thanks.

Next in queue, we’ll go to line of Sam Choe with our Credit Suisse. Please go ahead.

Hi. I’m filling in for Doug Harter today. All my question regarding capital return has been answered, so I just wanted to shift focus to NIW production. I mean, it was great this quarter. I was just wondering if there was anything in the competitive landscape that you saw that you took advantage of, and how much of that is replicable going forward?

Thank you for the question, Sam. You’re doing a great job filling in today, so we appreciate it. I think, look, from a competition point of view, we really didn’t see many changes from the prior quarter from a market perspective, but I think our growth quarter-over-quarter is reflective on the relationships in our sales team in the marketplace and the service we deliver. I think also driven by our risk analytics, which we do at a loan level the originator level and servicer level and how we drive our return focus around from a pricing point of view to produce economic value for our portfolio. Derek and Frank and I and others have spent a lot of time talking about this, we really feel like we are well positioned with our customers to be in a strong position to help them compete. The environment plays well to our strength. I think really it’s reflective of – the second quarter results are really reflective a very strong competitive position. We like the environment and we’re very pleased with how our team is adjusted to, I really think kind of a new competitive world, if you will, where pricing is less transparent and who you do business with matters a great deal. So, I think this is where, as we’ve been saying for the last couple of years, we are portfolio managers in the world focus on aggregating the managing U.S. mortgage credit risk and I think we have to be nimble and flexible through this environment and leverage our core expertise and identify market segments where it makes sense from a loan attribute or customer point of view to drive the targeted risk returns. When I kind of look at our strengths in terms of our market presence, our risk analytics, our ability to leverage data and analytics to drive pricing to the right customers and do the right business at the right risk adjusted returns. I truly believe plays to our strength. I think you’ve seen that reflected and in our results.. I don’t know Derek ,if you’d...

Yes. I would just add, I don’t think we’ve seen any material changes from a competitive perspective, I think in terms of the exact volumes is going to be, again, very dependent upon the competitive environment in our ability, which we’ve had success this quarter. We continue to target mid-teen returns and so to the extent that we can find loans that kind of fit that profile and we’re comfortable from a risk return perspective and it’s with lenders, we feel comfortable with and that’s going to be really driving the volume. I think also in this new environment where you have more of these so-called black box pricing engines, I think there is a chance of more volatility also from a market share and volume perspective and also from a credit mix perspective, so we could see a little bit more volatility around that as well.

Yes. Okay, thank you. You guys always based production up the quality of the product, not market share, but this just was still pretty good quarter. I was just wondering strategically, how do you maintain that because it is a positive momentum going forward?

Actually, I appreciate you making the point, because I don’t think you’ve heard market share mentioned and anything we talk about because we consider our role is really building economic value in our portfolio as opposed to pursuing volume for volume sake. I think what the combination of our relationships in the marketplace along with the risk pricing analytics that we do, I think is working well. I think, to Derek’s point, this world has changed a bit from kind of how people compete and I truly believe this plays to our strength, both our presence in the marketplace and our ability to assessed and evaluate risk and determine how best to price for that risk. We do – I think it’s important noise the highlight. We do value the insights we have around origination, quality that we have with our customers and how they service our risk and I think that served us well to grow our business this quarter to drive returns that are mid teens and I think really put us in a position to exceed last year’s and NIW record – NIW year of $56.5 billion. We’re growing a strong portfolio, remember it’s 231 billion and we think it’s got significant earnings for the future.

Very helpful. Thank you so much.

You’re welcome. Thank you.

Next in queue. Go to the line of Chris Gamaitoni with Compass Point. Please go ahead.

Good morning, everyone.

Good morning, Chris.

I wanted to follow up on the $2 billion of future embedded value discussion. Is that a pretax or post-tax number that you disclosed?

That’s after tax. Actually in the Investor Day materials, we went through all of the components of that, if you want to take a look at that, but that is after tax earnings.

Remind me, was there any conversation on the weighted average life of that expected recognition period?

I’m sorry. Say it again.

Just $2 billion, what’s the weighted average life of receiving that?

I’m sorry. No, it conforms with all of the other modeling that we used throughout the company, so there are different life assumptions across different products.

We did gave it two numbers on Investor Day, one was the undiscounted future earnings and then also the economic value of the portfolio. I think they come from two different perspectives.

And then I just wanted to follow up, one thing on the capital priorities. You mentioned before shareholder returns a strategic alternatives. What would be interesting to you right now from a strategic standpoint?

This is Rick, Chris. Thanks for your question. Look, I think we’ve been incredibly disciplined about what we think fits in what we think it doesn’t fit and I think most of the things we’ve done to date from a strategic point of view, have been really very small bolt on in material acquisitions. Today we get flooded with opportunities and Frank and I and his team have a very quick review process. I don’t think we will comment on specific areas of interest, but something that we think would fit strategically, be accretive, meet our return hurdles, likely something that if it were material with bring scale with it, but these are –we are not on the hunt for something that’s going to fix a problem we don’t have. It would be more opportunistic and have to fit into our strategy and fit into our customer needs. We’re in the U.S. mortgage and real estate markets today, and that’s our focus and I think we have pretty good positions with the properties we have.

Perfect, thank you so much.

Next in queue, we’ll go to line of Mihir Bhatia [Bank of America Merrill Lynch]. Please go ahead.

Hi, thanks for taking my questions. Just a couple of quick follow-ups really. First, I just wanted to follow-up on the default to claim question in close off. Just want to make sure I understand. If the economy keeps chugging along, as it is, would that be enough to drive improvements in that assumption, or do you need to see a leg up in the economy or housing fundamentals or something to improve the assumptions there?

I think that’s hard to estimate and so far as it were really evaluating the performance of the portfolio in addition to the economic landscape, so it is a multi-factor analysis. Chugging along, the quality of the portfolio that we produce post-crisis has been absolutely outstanding, so that’s certainly bodes well for us. Obviously, help from the economy would be helpful overall as well, but it really is hard to give the attribution analysis to a single variable.

Okay, that’s fair enough. I understand. And then on the unearned premium reserve, the release that you had this quarter on the single premium amortization. If the Fed was to cut rates again, would that also lead and it leads to – it lower mortgage rates and that flows through. Does that mean that that would – there is potential for more on that wave or would be all of this capture the forward view off the rate COGS and the Fed expectations, et cetera?

Sure, great question. The analysis goes beyond just a single input and certainly an input that would have the volatility of Fed rate changes there. We try to look beyond interest rate moves and the volatility associated with the refinance activity. It is an inputs in the analysis that we use, especially as we look at the historical performance, but it’s not so sensitive that it would move with each Fed rate cut.

Got it. Thank you. And then just finally, coming back to capital returns. Can you help us just frame the I mean – I don’t know if quarterly is the right time frame, but just trying to understand – I understand that you’re generating a lot of capital. There are some constraints on the amount of capital you can distribute up given the surplus constraints of the statutory surplus and it’s not just PMIERs based, but maybe help us just frame that what that kind of constraint is. I understand it ends in 2023, but how much like, do you expect to build that up to?

Sure. What we said, and actually on Investor Day, we went through I think a fairly detailed example of it, but the statutory capital levels right now are 500-ish or so million and we’ve indicated that that is going to be our binding constraint for a while until we see some of those contingency reserves free up in the 2023, 2024 timeframe, and then the amount that gets freed up is about anywhere from $300 million to $400 million a year after that. If you think about the building statutory capital organically, it is not entirely flat, but a very slow rate of change from now until that time horizon. That doesn’t mean that we might not see some other ways to position things as we look at organizing our legal entities and our risk, etc, but I would just say on a static go-forward basis, that would be our expectation.

Got it. Thank you. Those are all my questions. Thanks.

Thank you.

Thank you. We’ll go to the line of a Mackenzie Aron with Zelman & Associates. Please go ahead.

Thanks, good morning. Just a quick one.

Good morning.

Wasn’t sure if there was yield guidance that you could provide for the back half of the year.

Mackenzie, this is Frank. Yield guidance is certainly difficult to do. I think I missed it pretty badly a couple of years ago, so I’ll shy away from it. I think the reality is it depends upon the business that’s coming in and the mix of that business and the mix of the business that’s coming out as well. I think the guidance that I gave several years ago was that you should expect to see it come down modestly over time. Our mix over the last two years has shifted such that it did not come down, but I think it’s certainly something that we’re sensitive too, but keep in mind too that the yield guidance that we give us on the portfolio and the NIW that we’re writing is – it takes a while to actually have an impact on the portfolio overall. There are a lot of dependencies there, but – I hope that’s helpful.

It is. Just on the ILN on the most recent transaction, is that fully reflected in this quarter’s yield?

It is and that’s the 0.8 basis points. The total ILN both for the 2018 and 2017 vintage, the total of those two is about 1.4 basis points.

Great, thank you.

Thank you.

[Operator Instructions] We have a question from the line of Phil Stefano, Deutsche Bank. Please go ahead.

Yes. Thanks and good morning.

Hi, good morning.

On an earnings call earlier this week, one of the reinsurers, who has been active in MI said they noticed other reinsurers seem to be bumping up against either regulatory or rating agency thresholds for the amount of MI business that they could do. Are your brokers flagging this to you or any comments you can provide about maybe the sustainability of the singles quota share?

Sure. this is Derek. So, in terms of sustainability, I think we’ve heard similar things. I don’t think we have reason to believe that the markets backing up from our ability to distribute risk at this point. We haven’t heard anything to give us that indication. Again, when you look at the returns from a reinsurance perspective, the credit quality is very good that we’re bringing in the portfolio, it’s outperforming our through the cycle expectations, so when you look at it from that perspective, it is still a strong business. There’s also I think untapped reinsurers, who haven’t gotten into the market yet as well, which gets opportunities.

Okay. The comment wasn’t from a performance perspective, so apologies if it came across. Maybe switching gears and a quick one on services. I guess I was under the impression that the guidance at least for a margin at the Investor Day, the comments this year and it feels like we’re this year means an exit run rate. So, do we feel like 2020 we’ll be able to have tangible evidence that the turnaround is working and it has been completed or how should we think about what 2020 looks like if we’re confident that leaving 2019 all cylinders will be firing?

Thank you, Phil. this is Rick. I don’t think that we’re giving any guidance for 2020, but we do see progress across our businesses that we feel very positive about both in term. Specifically, we can see each of the activities across our mortgage and real estate and title business is growing. Keep in mind each of each of these activities are all at a different level of maturity and require different types of investments. We use of example; our title business was essentially a start-up, if you will. We bought a couple of properties put them together in Radian title, insurance and Radian settlement services and we’re starting to see significant momentum on that business from a customer point of view and feel very good, same thing around the real estate side. Obviously, on the due diligence business, the securitization market has been expanding. So, I think overall, we feel good about the businesses and how they’re positioned to go forward. I think as I mentioned, I believe the real estate and title businesses – probably, I think I talked about at Investor Day, given the data and analytics and technology, focus around those businesses, I think we are really truly building value in those businesses for our shareholders even ahead of earnings, but earnings continue to develop and we remain positive about the development of those businesses. I think we’re not here to give guidance today on 2020, but we do feel that our run rate guidance that we’ve given – I think last fall was when we stated it, probably in October and November, we continue to stand by that guidance.

Okay, thanks. One quick numbers question, sorry, the amortization of single premiums that changed and caused the couple of one-timers. those were one-timers for second quarter. There’s no reasons at third quarter would be impacted by any of that change in the amortization schedule. Is that right?

I’ll answer it technically. Technically, it’s an accounting estimate that gets reviewed from time to time. So, I’d hate to say, it won’t be adjusted again, but yes. An adjustment of this magnitude, I think reflects the current landscape and our analysis of the portfolio. I would expect any adjustments to that to be infrequent.

Infrequent and immaterial at least the next couple of quarters. Perfect, thank you.

Thank you.

Thank you.

Because currently, we have no additional questions in queue at this time, please do continue.

Okay. First off, I want to thank our team on an excellent quarter and the great momentum that the company is experiencing today. I appreciate everybody taking time for our call today and your continued interest in Radian and I look forward to seeing in each of you very soon. Take care.

And that does conclude our conference for today. We thank you for your participation and for using the AT&T Teleconferencing Center. You may now disconnect.