Good day, and thank you for standing by. Welcome to the First Quarter 2025 Radian Group 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 First Quarter 2025 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, President and Chief Financial Officer. 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.

Good morning, and thank you all for joining us today. I am pleased to report a strong start to the year for Radiant. Our results demonstrate the continued strength of our high-quality mortgage insurance in-force portfolio as well as our ongoing strategic focus on capital and expense management. I will start by sharing a few financial and business highlights. We increased book value per share by 11% year-over-year, generating net income of $145 million in the first quarter and delivering a return on equity of 12.6%. Our primary Mortgage Insurance in force, which is the main driver of future earnings for our company ended the quarter at $274 million. Our insurance in force benefited from the 86% persistency rate in the first quarter, driven by continued elevated interest rates, which remains significantly higher than the majority of the prevailing mortgage rates in our insured portfolio. Our portfolio continued to show positive trends in terms of new defaults and cures consistent with our expectations for seasonality and resulting in a decline in our default rate. We continue to strategically manage capital by maintaining strong holding company liquidity of $834 million and a PMIERs cushion for Radian Guaranty of $2.1 billion as of the end of the quarter, while expecting to continue to pay distributions from Radian Guaranty to Radian Group and paying the highest yielding dividend in the industry to stockholders. During the quarter, we took advantage of market volatility, repurchasing $207 million of shares, representing more than 4% of shares outstanding. With a total return of capital to stockholders, including dividends, up $244 million. Consistent with our strong track record of capital return at Radian, we continue to view share repurchases as an attractive use of capital, further enhanced by our continued positive outlook for our business. Sumita will provide…

Thank you, Rick, and good morning to you all. We started the year with another strong quarter of operating results, producing net income of $145 million or $0.98 per diluted share, consistent with the $0.98 per diluted share reported in the fourth quarter 2024. Adjusted diluted net operating income per share was slightly higher at $0.99 for the first quarter compared to $1.08 in the previous quarter. We generated a return on equity of 12.6%, reflecting the strong fundamentals of our business and grew book value per share 11% year-over-year to $32.48. This book value per share growth is in addition to our regular stockholder dividends, which were $37 million during the quarter. We also repurchased $207 million of shares during the first quarter, demonstrating our commitment to returning excess capital. Turning now to the detailed drivers of our results. Our revenues continued to be strong in the first quarter. We generated $318 million of total revenues during the quarter, a slight increase from the fourth quarter of last year. 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. We generated $234 million in net premiums earned in the quarter, consistent with the prior quarter. Our large high-quality primary mortgage insurance in-force portfolio grew year-over-year to $274 billion as of the end of the first quarter. We wrote $9.5 billion of new insurance written in the first quarter of 2025, which was lower compared to the fourth quarter of 2024, primarily due to a smaller origination market. As interest rates remain elevated, they also continue to benefit the persistency rate of our existing insurance in force, which highlights the balance and resiliency of our business model. As shown on Slide 10, our persistency…

Thank you, Sumita. Our results in the 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 believe our active management of capital through our share repurchases and dividends as well as our overall leverage reflects the strength and health of our financial position. We continue our focus on managing operational efficiency and remain on track to achieve our targeted reduction in run rate operating expenses this year. And finally, I want to recognize and thank our dedicated and experienced team at Radian for the outstanding work they do every day. And now operator, we would be happy to take questions.

[Operator Instructions] And our first question comes from Terry Ma of Barclays.

Maybe just to start off with credit. Last quarter, you indicated you're nearing a peak for some of the larger vintages seasoning. And expect default rate to kind of shake out in the sub-3% range unless the macro changes. So just given all the uncertainty we have, I'm just curious, what are your kind of updated thoughts on kind of credit loss expectations and anything you can kind of do on the pricing or underwriting side should the macro weaken?

Yes. Thanks for the question, Terry. So I think as we have given you prior guidance, I would say where we are today, we continue to see really strong performance in terms of our cure trends. If you look at our default rate this quarter, it was actually a little lower than the fourth quarter of last year. We went down from 2.44% to about 2.33% as our default rate. In fact, for this quarter, our cures actually were higher than our new defaults. And so we continue to see really strong, I would say, both default and cure trend performance and in line with our expectations. I think as far as our expectation for through-the-cycle default rates is concerned, I think we still remain in that sub-3% range. We don't expect to be really too different from that level. And in terms of modeling our expectations, we always take a through-the-cycle view. We want to be conservative. We want to make sure we track different macroeconomic outcomes given the uncertainty externally. And so we remain conservative, but our data continues to be extremely strong, and our cure trends continue to be much better than what we initially reserved for.

Got it. That's helpful. And then the claims rate at 7.5%, you guys took that down from 8%. I think it was like 2 quarters ago. Just kind of remind me what the drivers there are? And then like looking forward, how should we kind of think about that claims rate through a variety of kind of economic scenarios? Is there some sort of kind of implied unemployment rate that contemplates?

So I think when we look at our default to claim rate assumption, we really want to do that through the cycle. We obviously look at current unemployment trends. We look at other macroeconomic indicators, but the reserving assumption is really through the cycle. And when we chose to bring that down from 8% to 7.5% in the fourth quarter of last year, we took into account cure trends, and we took into account what we were seeing clear positive trends, primarily driven from home price appreciation, and we felt comfortable reserving less for new defaults. We've continued to keep that assumption for this quarter. Also, keep in mind, last quarter, we did not make a different assumption for hurricane-related defaults. We blended it together and we reduced our overall roll rate from 8% to 7.5%. We feel comfortable with that assumption, and we didn't make a change this quarter. Having said that, we would change that if we see the macroeconomic scenario change drastically from where we are today.

And our next question comes from Bose George of KBW.

Actually, in terms of buybacks, I think, Sumita, could you repeat what you said about buybacks in the second quarter? And then just in general, is there a good way to think about payout ratios or just broadly, just philosophy on capital return?

Yes, sure. I'll start, and Rick jump in with other thoughts as we go through this. So I would say what I mentioned in my prepared remarks, Bose, was that we really accelerated our share buyback this quarter. You saw us almost go out and buy back 4x the shares that we were buying in prior quarters. We did that because, one, we saw great opportunity in terms of where our stock was trading this quarter. Second, we also continue to use our excess liquidity in our holding company. If you remember last year, we used some of our holding company liquidity to actually pay down our debt. Right now, we have no debt maturities over the next 2 years. So we used our holding company liquidity to really take advantage of where our stock was trading, and we increased our share buyback amount this quarter. And I think we will continue to buy back shares at a similar pace, at least for second quarter, given where we are trading today. So yes, I mean, we plan to keep using our liquidity from our holding company to make sure that we are buying back shares and capturing value. Rick, would you add anything else?

Yes. I would also say you've seen us over the last 5 years, buy back $1.4 billion worth of shares, 30% of our shares outstanding. Go back 7 years, we bought back $1.9 billion or 39% of our shares. So we've been very active in the market. I think we always have kind of a baseline view of share buybacks kind of on a quarter-to-quarter basis. But we're also always well armed with an authorization in place to be able to lean in, not just any time, but at the right time to really kind of find value for shareholders and return capital. So I think this last quarter and the second quarter. As Sumita said, where in the second quarter, we expect to buy a similar amount back. We're going to buy back in the first half of this year over -- approximately double what we bought back all of last year. And I think the opportunity presented itself, and we executed on it. So I'm proud of the team. I think when you look at our -- the value of our stock, we think it trades below intrinsic value. You think about the embedded value of our future earnings on the portfolio, which we went through on our Investor Day a couple of years ago, you look at AOCI, which discounts book value, you look at the overall economics of our business and the clarity we have around kind of future cash flow up to the Holdco from RGI, I think we're in a really positive position. So you saw us kind of act in reaction and response to a market opportunity. And through the second quarter, if we buy back over $400 million, I think that will be a pretty significant positive impact for Radian overall.

Yes. I think you also had a question on payout ratio. So we haven't really given guidance on a payout ratio in the past. All I would say is that if you look at what we expect to be the dividends from RGI to Group, we mentioned that we are expected to pay up to $795 million. That's our statutory net income constraint because that was our stat net income in 2024. So that's the max ordinary dividend or return of capital that we can do from RGI to Group. So you can see how much, what's the pace at which we are returning that capital back to our shareholders.

Okay. Great to see the pace of the buybacks. And then just in terms of the delinquencies, can you just talk about the level of embedded equity in the new delinquencies? And is that kind of similar to what you've seen, say, over the last year?

Yes. I think it continues to be really strong. I think if you look at our new defaults, about 75% of our new defaults continues to have more than 20% equity. So it's still a very, very consistent trend, and we continue to see a very strong cure performance as a result.

Our next question comes from Doug Harter of UBS.

Just how are you thinking about what is the right level of Holdco liquidity kind of over time, especially kind of given the work you've already done on bringing down debt and no near-term debt maturities.

Yes. I mean I think -- thanks for the question. It's -- we are in a great position. So you can see that we are using the flexibility we have in our holding company and continuing to really think about the use of that liquidity. So we started the quarter with about $885 million of liquidity in our holding company. As mentioned, we returned $244 million back to shareholders. We got another $200 million from RGI as a return of capital in this quarter instead of a dividend. And so we are currently sitting at about $834 million of liquidity in our holding company as well as a credit facility. We've not given a specific guidance as to what is that threshold number that we need to keep in our holding company. We obviously look at what our fixed charges are, how much do we really need to keep aside from an interest coverage perspective as well as the dividends that we pay to our shareholders. We do look at all of that and think of our fixed charge from our holding company. But what I will say is that right now, the liquidity we have in our holding company is much, much higher than where we need to be to really run our business. And we will continue to do the right thing and make sure that we're returning that capital back to shareholders as and when we see value in our share price.

Yes. And I would just add to that, kind of echoing your point. The transparency we have of cash flow from RGI up to Radian Group kind of for the foreseeable future, as we've talked about, is really puts us in a position of strength to be very kind of agile and flexible when it comes to capital management.

And our next question comes from Mihir Bhatia of Bank of America Merrill Lynch.

I wanted to go back to the buyback discussion. I believe your buyback used to be a value-based 10b5 plan. Has that changed? And just can you talk a little bit about the mechanics of how the buyback work? Is it just a matter of you putting more money towards it and still executing on that value-based plan? Or like -- I'm just trying to understand the -- like how you're being opportunistic and the flex in it in terms of moving up or down quickly.

Yes. I mean it is still a 10b5 plan. I mean I think we do have to make sure that we keep that grid active. So we have a grid, and we execute based on that grid. We have continued to make changes to that grid as we have seen opportunity. And I think that's what you're seeing as a result of how we are now buying back much more shares. So yes, while it is executed through a 10b5 plan, we've increased the pace and the amount of capital that we are putting aside to execute the share repurchase program. I'll also say that as we -- there was a moment maybe 2 years back when we were being a little more conservative, and it was much more of a value-based plan. At this point, I would say we just see tremendous opportunity in our share price. I think Rick talked about where we see value from. It's from AOCI, it's from the embedded value of our MI business that's not reflected in our book value today. And I think we gave some indications of that 2 years back now in our Investor Day. So I would say, yes, it is value-based, but we are also being a little bit more optimistic about where we are headed as a business, and we will continue to buy back those shares based on a 10b5 grid.

Got it. That makes sense. And then in terms of the claim rate, cure rate type balance, if you will, the cure rates have been very strong. I mean I think you have the slide and everything you can see is like 97%, 98%. You mentioned cure rates are like you had the 2 highest months over the last 10 years recently. Is that all just HPA driven? Like are there other factors driving it? Has something -- is there something other than HPA that is driving such strong cure rates? And can you talk about that a little bit?

Mihir, thank you for that question. I'll take that, and Sumita can add to it as well. But I think, look, embedded equity in the home is certainly a good incentive for a homebuyer to make sure they find a way to protect that equity. But I would say, combined with that, there's a tremendous amount of muscle memory that we all came through kind of from the great financial crisis, but then COVID where we, as an industry and as a government and a regulator and we learned that keeping the borrower in their home to allow them to get their feet back on the ground and kind of move forward has proven to be a really positive factor. So I would put that, and I would just emphasize that some of the learnings from COVID have translated into even a better structure that avoids kind of, I guess, abuses of that kind of forbearance. So it's -- the structure for helping people, I think, has been improved. You also look at kind of the employment cycle that continues today even with all the headline news around tariffs and global trade and so forth. Employment continues to be a factor in enabling people to get reemployed if they become unemployed. And so those are factors we watch as Sumita went through a few minutes ago talking about how we set reserve policy. We really look at kind of a number of different factors kind of going through. I think there's a number of factors today that are enabling people to cure better than we've expected to date, right? But we're going to continue to monitor it and continue to watch it and continue to express our opinion through our reserves.

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

I appreciate that. Thank you all for joining the call today. We always appreciate your time and interest in Radian and our ability to kind of update you on the current state of our business, which we're very proud of. We look forward to the opportunity to meet and talk to many of you over the coming weeks and answer your questions. As always, one of the highlights of the job I have here is the opportunity to meet with you all. So have a great day, and thank you for your time.

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