Good day and thank you for standing by. Welcome to the Second Quarter 2024 Radian Group Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Kobell, Head of Investor Relations and Capital Management. Please go ahead.

Thank you and welcome to Radian's Second Quarter 2024 Conference Call. Our press release which contains Radian's financial results for the quarter was issued yesterday evening and is posted to the Investors section of our website at radian.com. This press release includes certain non-GAAP measures that may be discussed during today's call, including adjusted pretax operating income, adjusted diluted net operating income per share and adjusted net operating return on equity. A complete description of all of our non-GAAP measures may be found in press release Exhibit F and reconciliations of these measures to the most comparable GAAP measures may be found in press release Exhibit G. These exhibits are on the Investors section of our website. Today, you will hear from Rick Thornberry, Radian's Chief Executive Officer; and Sumita Pandit, Chief Financial Officer. Also on hand for the Q&A portion of the call is Derek Brummer, President of Radian Mortgage Insurance. 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 2024 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.

Thanks, Dan, and thank you all for joining us today. Last evening, we reported another quarter of excellent financial results for Radian. Our results continue to reflect the economic value of our high-quality and growing mortgage insurance portfolio, the resiliency of our company and varied interest rate environments, the strength and quality of our investment portfolio, our strong capital and liquidity positions and our ongoing strategic focus on managing operating expenses. I will begin today by sharing a few financial and business highlights. We increased book value per share by 12% year-over-year to $29.66. We grew revenues to $321 million during the quarter generating net income of $152 million. Our primary mortgage insurance in force which is the main driver of future earnings for our company, continued to grow to $273 billion. We continue to leverage our proprietary analytics and RADAR Rates platform to identify and capture economic value in the mortgage insurance market, which resulted in $13.9 billion of high-quality new insurance written in the second quarter. We benefited again this quarter from positive credit performance in our mortgage insurance portfolio, resulting in a decline in our default rate to 2% at June 30. In terms of operating expenses as we discussed last quarter, we've been taking broad and significant actions to improve the operating efficiency and operating leverage across Radian. Sumita will provide an update on how our expense savings efforts are expected to benefit our other operating expenses going forward. Our primary operating subsidiary Radian Guaranty paid its sixth consecutive quarterly ordinary dividend to Radian Group in the amount of $200 million, which was double the amount paid in each of the previous five quarters. Our overall capital and liquidity positions remain strong. We maintained PMIERs cushion for Radian Guaranty of $2.2 billion and we increased our…

Thank you, Rick, and good afternoon to you all. I am pleased to provide additional details about our second quarter results, which reflect another strong quarter of performance, producing net income of $152 million or $0.98 per diluted share, in line with the prior quarter. Adjusted diluted net operating income per share was slightly higher than the GAAP metric at $0.99 for the second quarter, compared to $1.03 for the previous quarter. We generated a 13.6% annualized return on equity in the second quarter, which helped to grow our book value per share 12% year-over-year to $29.66. This book value per share growth is in addition to our regular stockholder dividends, which were $37 million during the quarter, reflecting our quarterly dividend of $0.245 per share. We also repurchased $50 million of shares during the second quarter. Turning now to the detailed drivers of our results. Our revenues continue to be strong in the second quarter. We generated $321 million of total revenues during the quarter compared to $319 million in the first quarter and $290 million in the second quarter of 2023. Slides 10 through 12 in our presentation include details on our mortgage insurance in force portfolio as well as other key factors impacting our net premiums earned. Our primary mortgage insurance in force continued to grow, reaching $273 billion as of the end of the second quarter and generating $235 million in net premiums earned in the quarter. We wrote $13.9 billion of new insurance written in the second quarter of 2024, an increase from $11.5 billion written in the prior quarter. This contributed positively to the growth of our insurance in force. The persistency rate of our existing insurance in-force also remained high at 84% in the second quarter based on the trailing 12 months, compared…

Thank you Sumita. Before we open the call to your questions, I want to highlight that our results for the second quarter continue to reflect the balance and resiliency of our company, as well as the strength and flexibility of our capital and liquidity positions. We expect the earnings and cash flows generated from our large in-force mortgage insurance and investment portfolios to allow us to continue operating from a position of strength, and delivering value to our customers policyholders and stockholders. We returned $87 million of capital to stockholders during the second quarter, and approximately $360 million over the past year in the form of share repurchases and dividends. I also want to highlight our affordable housing efforts, specifically the MBA's Convergence Philadelphia that recently recognized its one-year anniversary. Radian is a cornerstone partner for this initiative and the team continues to make progress on bringing together local housing stakeholders to help enable affordable and sustainable homeownership opportunities for historically underserved communities in Philadelphia. And I want to recognize and thank our dedicated and experienced team for the outstanding work they do every day. As many of you know, this quarter we transitioned the Investor Relations responsibilities to Dan Kobell, who has been a leader in financial planning and analysis at Radian for the past nine years, and who also has responsibility for our investment portfolio management treasury and capital management functions. I want to personally thank John Damian for the great work he has done over the past several years leading Investor Relations, as he takes on leadership of the financial planning and analysis function, while continuing to lead our corporate development efforts. And now, operator, we would be happy to take questions.

Thank you. [Operator Instructions] And our first question comes from Bose George of KBW. Your line is open.

Hi, everyone. Good afternoon. I wanted to ask first just about the share count. It went down by less than the buybacks. Is the difference the share grant to the employees? Or just one is the roll forward of the share count?

Yes. Hi, Bose. This is Rick. I think Sumita and I can tag team this one. I think it's all related to probably the LTI program that's offset by the share buybacks.

And then like in prior quarters I haven't noticed that is that because that occurred last year as well when there were no buybacks right? So -- and the share count didn't go down. Is that...

It should be a second quarter.

Yes. I think it usually you see the impact of that the most in the second quarter. In fact we referenced that in our prepared remarks that you see the expense higher in Q2. And I think you see that impact almost every year in the second quarter.

Okay, great. Thanks. And then actually switching over just to the conduit. Just actually from an accounting standpoint going forward, as you securitize it are you going to consolidate these? I mean, will we see this on your balance sheet? Or is that sort of a separate vehicle and we don't need to worry about it?

Yes. I think it's a really good question. I think, we are looking at all of our accounting options as we look at the business. I think, we'll be giving you more disclosure on this starting next quarter, Bose. I think that a lot of that depends on how the accounting treatment is driven depending on how much securities are retained in the structure. So we are in the process of evaluating it, and we will be providing more disclosure to you starting from next quarter.

Okay. Great. Thanks.

Thank you. Our next question comes from Doug Harter of UBS. Your line is open.

Thanks. Given your comments around the dividend capacity from the operating company, how are you thinking about what is the right amount of liquidity to be holding at the parent company? And kind of how are you thinking about kind of uses of that liquidity?

Yes. So, I think as we mentioned there was significant dividends that have been paid off from Radian Guaranty to Group already this year. It amounted to about $300 million and we expect to exceed the initial guidance that we gave you at the beginning of the year, which was $400 million to $500 million from Radian Guaranty to Radian Group. If you look at our holding company today we have about $1.2 billion of holdco liquidity we are going to use about $450 million of that liquidity to pay down our 2024 maturities. We also expect to obviously pay our dividends, which is about $150 million each year. So that should -- we have another two quarters of that that we will pay out. And then there are ongoing I would say capital investments that we will continue to make in some of our businesses. I think Rick mentioned, RMC as an example of that. So I think at the end of the year you should expect our holdco to still have about $950 million to $1 billion of liquidity. It is more than what we really need to run the business. We have said that we are holding some excess liquidity in the holdco. Having said that we will continue to be really disciplined about returning capital back. We returned about $50 million through share repurchases this quarter. We've continued to buy back shares even in Q3. And so you should expect that we will continue to be disciplined about giving back that capital both in the form of share repurchases and dividends. But at the end of the year, I would say holdco liquidity should be in that $950 million to $1 billion range before the share repurchases that I walked you through right now.

Okay. Thank you very much.

Thank you. Our next question comes from Soham Bhonsle of BTIG. Your line is open.

Hey good afternoon. Soham Bhonsle here. Hope you’re all doing well. Derek maybe first one for you on credit. Look I think the environment remains constructive for mortgage overall but there does seem to be an overall slowing in the U.S. consumer. If you just look at consumer spend and unemployment has been ticking up just slightly more recently, right? So maybe just talk about if you're seeing any yellow signs and if you're reflecting any of that in the way you sort of position the portfolio?

Sure. I think in terms of yellow signs what we're seeing initially is really on the much lower end of the credit kind of outside the space we play in. And so you kind of see some, I would say, pressure in terms of kind of lower credit quality. So, we're talking lower FICOs like in the 500s and below 600s. So, it's not a space we play in. We watch that closely. We do expect unemployment to tick up a bit and for home prices the rate of appreciation to come down. We're pricing that in. That's factored into all of our scenarios. So, I would say right now playing out as expected and better than what I would have thought a year ago kind of given where we were from an interest rate hiking scenario. So in terms of playing out from a macro and how it's translated into credit I would say it's been more positive than I would have expected a year ago.

Okay, great. And then on expenses Sumita, is -- so this quarter you saw the increase of course from the LTI the bonuses and things like that. But as we sort of think of the back half of the year where should we think about that normalizing? And then ex items? And then how should we think about sort of including the $20 million run rate that you sort of mentioned? Thank you.

Yes. So, I think just going back to where we started. I mean if I were to remind you of our last year expense initiatives, we had taken out about $77 million of expenses from our operating expenses and cost of services. We've continued to be really disciplined. And we have been looking at other avenues to bring down that cost base further. I think as I mentioned in my prepared remarks I think we've continued to take out expenses and some of that is flowing through our Q2 line item in severance. The $20 million is $20 million to $25 million run rate reduction that I spoke about is really I would say run rate from 2025. Some of that you may see in the back half of this year, so expect the $348 million that we had as the operating expense line item last year to come down a little bit this year and to come down by about $20 million to $25 million by next year. And so for the second half of the year we have not given a specific number, but I think you can probably estimate it and make an assumption of what that would be like for the second half of the year.

Okay, perfect. Thank you.

Thank you. I'm showing no further questions at this time. I'd like to turn it back to Rick Thornberry for closing remarks.

Thank you and I appreciate everybody participating and joining us today. And I want to just reemphasize that thanks to our employees as they've been continuing to navigate the marketplace over the last few years and continue to do a great job. But appreciate everybody's interest in Radian and we look forward to meeting and talking to you all soon. So, thank you and have a great day.

This concludes today's conference call. Thank you for participating and you may now disconnect.