Radian Group Inc.

Welcome to the Rating Third Quarter 2020 Earnings Call. My name is Jenny. I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press star then 1 on your touch-tone phone. Please note that this conference is being recorded. I will now turn the call over to John Damian, Senior Vice President of Investor Relations. Mr. Damian, you may begin.

Thank you. and welcome to Radian's third quarter 2020 conference call. Our press release which contains Radian's financial results for the quarter was issued yesterday evening and is posted to the investor section of our website at www.radian.com. 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 real estate adjusted EBITDA. A complete description of these measures and the reconciliation to GAAP may be found in press release exhibits F&G and on the investor section of our website. In addition, we have also included a related non-GAAP measure, real estate adjusted EBITDA margin, This afternoon, 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, President of Radian Mortgage. Due to the current environment, all of our speakers this afternoon are remote. I would ask that you please excuse any sound quality or technical issues that may arise during the call. 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 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 2019 Form 10-K as updated in our quarterly report on Form 10-Q for the second quarter of 2020 and subsequent reports filed with the SEC. These reports are also available on our website. Now, I would like to turn the call over to Rick.

Thank you, John, and good afternoon. Thank you all for joining us today and for your interest in Radian. Our quarterly results were again impacted by the pandemic economic environment. However, we're encouraged by signs of improvement in the economy, the strength of the overall housing market, and continued positive default trends within our portfolio. I'm proud to say that our team and our businesses continue to operate well with strong momentum during this unprecedented time. Let me provide a few highlights of our financial results for the third quarter. We reported net income of $135 million or 70 cents per diluted share and adjusted diluted net operating income per share of 59 cents. Book value grew 11% year-over-year to $21.52 per share. We wrote record volume of new primary mortgage insurance business of $33 billion. We saw a 67.5% decline in our number of new defaults quarter over quarter and a decline in the default rate to 5.9%. Revenues in our real estate segment increased 28% from the second quarter of 2020 to $33 million. Turning to a couple of highlights for October, we executed our fourth mortgage insurance linked notes reinsurance transaction for $390 million, which further enhanced Our capital efficiency has strengthened our risk profile, resulting in 74% of our risk enforced being subject to some form of risk distribution. In terms of default trends, while economic uncertainty continues to persist, I'm pleased to report that we saw a decline in the number of new defaults and an increase in the number of cures reported to us in October, resulting in a net decline of outstanding defaults of 5%. ending with 59,604 total defaults at October 31st. Moving now to the broader mortgage and real estate market, during last quarter's earnings call, we had noted some rebound in the U.S. housing market following the slowdown in purchase loan volume due to the economic strain of COVID-19. Positive momentum continued in the third quarter with September existing home sales increasing 9% from the prior month, representing the fourth consecutive month of growth. and based on the latest data from our own radiant home price index, over the last 12 months, there's been a strong housing demand and relatively limited supply in the market which has helped lead to an increase, an 8% increase in home prices across the country. The increased purchase loan demand combined with the strong refinance volume from continued low interest rates drove our record volume of new primary mortgage insurance business in the third quarter. While the high volume of refinances during the quarter did drive persistency lower, it is important to note that our high-quality $245 billion insurance portfolio grew approximately 4% year-over-year and 2% quarter-over-quarter, and our monthly premium insurance and force grew 10% year-over-year. It's also worth noting that in September we set another monthly NIW record, the fifth of the year, with nearly 70% of our volume coming from purchase loans. In fact, the $23 billion of new purchase loan business we wrote in the quarter represented a 32% increase from our previous quarterly purchase loan record set in the third quarter of last year. Given the current environment, the strong NIW during the third quarter and a significant Commitment Pipeline heading into the fourth quarter. We now expect to write new MI business in 2020 of more than $100 billion. In our real estate businesses, we reported segment revenues of $33 million compared to $26 million for the second quarter of 2020 and $30 million for the third quarter of 2019. We continue to see growth in our title business with a strong sales pipeline of large customers However, as I mentioned last quarter, our traditional appraisal and REO businesses are experiencing slowdowns as a result of the COVID-19 environment. Despite the growth in our real estate segment revenues, we experienced an operating loss, which is the result of staffing up for our growing title business where we have 157% increase year-over-year in open orders and our continued investment in data, analytics, and technology across our real estate businesses. Strategically, we see growing market demand for technology-driven solutions, and we believe we are well-positioned to participate and lead the market's digital transformation. Turning to our capital position, there continues to be a level of uncertainty in the overall economic recovery path. With $1.1 billion of available liquidity at rating group and a strong PMIRES position, we believe we are well-positioned well prepared to leverage our strong capital position and navigate this environment through the cycle. Frank will provide more details on capital, including our PMIRES position. As part of our overall capital management process, we continue to monitor and access the reinsurance and capital markets when economically attractive to our company. The strength of our capital position combined with our ability to effectively aggregate, manage, and distribute risk has enabled us to continue writing significant levels of high-quality mortgage insurance business through the cycle. As we've said in the past, we remain focused on leveraging our strong risk management discipline at a loan and customer level to deploy our capital on business that we believe will generate the most economic value for our shareholders and achieve our targeted risk-adjusted returns in the mid-teens. Now I would like to turn the call over to Frank for details of our financial position. Following Frank's remarks, I will provide a regulatory and legislative update.