Radian Group Inc.

good day and thank you for standing by welcome to the first quarter 2023 radian group earnings conference call at this time all participants are in a listen-only mode after the speaker's presentation there will be a question and answer session to ask a question during the session you'll need to press star 1 1 on your telephone you will then hear an automated message advising your hand is raised to withdraw your question please press star 1 1 again please be advised that today's conference is being recorded I would now like to hand the conference over to your speaker today, John Damian, Senior Vice President, Head of Corporate Development and Investor Relations. Please go ahead.

Thank you, and welcome to Radian's first quarter 2023 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-GAT measures that may be discussed during today's call, including adjusted pre-tax operating income, adjusted diluted net operating income per share, and adjusted net operating return on equity. In addition, specifically for our home genius segment, other non-GAT measures in our press release that may be discussed today include adjusted gross profit and adjusted pre-tax operating income or loss before allocated corporate operating expenses. 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 investor section of our website. Today, you will hear from Rick Thornberry, Radian's Chief Executive Officer, and Rob Quigley, Controller and Chief Accounting Officer. Also on hand for the Q&A portion of the call is Derek Brummer, President of Radian Mortgage. 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 2022 Form 10-K and subsequent reports filed with the SEC. These are also available on our website. Now, I'd like to turn the call over to Rick.

Good afternoon and thank you all for joining us today. Today I'm pleased to report another solid quarter for Radian. GAAP revenues grew by 6% year-over-year to $311 million. Book value per share increased 10% year-over-year to $26.23. We generated net income of $158 million and our return on equity was 15.7% in the first quarter. Our overall liquidity and capital positions remained very strong, which I'll cover in a few minutes. Our primary mortgage insurance and force, which is the main driver of future earnings for our company, grew 5% year over year to $261.5 billion, including 8% year over year growth in our more profitable monthly premium insurance and force. Our persistency rate, which represents the percentage of mortgage insurance and force that remains on our books over a period of time increased to 84% on a quarterly annualized basis compared to 77% a year ago. Given the current interest rate environment and the comparatively low mortgage rates across our portfolio, we expect our persistency rate to remain strong, which we believe is positive for the future insurance and force growth. We continue to see positive credit performance in our mortgage insurance portfolio during the quarter, with our cure rate reaching the second highest level in 15 years. And although we generally expect new notices of defaults to increase in the future as the portfolio naturally seasons and the economic environment potentially becomes a bit more challenging for certain borrowers, in the first quarter, cures outpaced new defaults by 10%. and our new default counts are in line with pre-pandemic levels. It is worth noting that the increase in interest rates has also resulted in higher yields across our $6 billion investment portfolio. The higher yields support higher returns on our mortgage insurance business and generate incremental income that flows directly to our bottom line. Despite continued headwinds in the mortgage and real estate markets and continuing macroeconomic uncertainty, Our overall performance in the first quarter reflects the resilience of our business model, the strength of our insured portfolio, the depth of our customer relationships, and the commitment of our team. Let me share a few thoughts on the mortgage and housing markets and how we are executing on our strategic priorities. In terms of the mortgage market, for 2023, recent industry mortgage origination forecast call for a bottoming out of the origination market with a decline of approximately 26% compared to last year, followed by a return to growth in 2024. Based on a total mortgage origination market of $1.7 trillion, we expect the private mortgage insurance market in 2023 to be approximately $300 to $325 billion. Despite a smaller overall market, origination volume is projected to be driven primarily by purchase loans, which are estimated to reach $1.4 trillion. This would represent the largest purchase market in the past 16 years, excluding the pandemic years of 2020 through 2022. We view these collective factors as a positive sign of a strong and more stable mortgage market for the mortgage insurance industry and specifically for our business. In terms of the housing market, we saw home prices coming off their record highs last year, largely driven by higher mortgage rates. But more recently, we've seen home prices begin to stabilize and rebound according to industry data. This was largely driven by the imbalance in housing supply and demand. And while the inventory challenges and strong market demand continue to create challenges for first-time homebuyers, these dynamics help to mitigate downside risk in terms of home values, which is positive for our insured portfolio. And we believe the resulting pent-up demand provides strong support for continuing purchase market growth in 2024 and beyond. As such, our overall outlook for the housing market remains generally positive over the near and long term. Our team remains focused across our three areas of strategic value creation, growing the economic value and the future earnings of our mortgage insurance portfolio, growing our home genius business and managing our capital resources. In terms of growing the economic value of our mortgage insurance portfolio, we wrote $11.3 billion of high quality mortgage insurance business in the first quarter of 2023, which combined with the strong portfolio persistency, contributed to the growth of our large and valuable insurance and force portfolio. We continue to leverage our proprietary analytics and radar rates platform focused on driving economic value while calibrating our dynamic risk-based pricing to address the risk and opportunities that we see in the current market. We increased our prices in 2022 and continue to increase pricing in 2023, and we've seen evidence of the same among our mortgage insurance peers, while maintaining an attractive share of the market. We expect to see continued opportunity to put our capital to work and attractive risk-adjusted returns. From a mortgage insurance portfolio perspective, as I mentioned earlier, we expect the persistency rate to remain strong based on the higher interest rate environment and greater concentration of purchase versus refinance loans. From a quality perspective, our mortgage insurance portfolio has been well underwritten and has a strong overall credit profile. And the quality of the mortgage industry's loan manufacturing and servicing processes remain strong, including exhaustive efforts to support borrowers experiencing hardship. One recent example is the GSE's new enhancement to their payment deferral policies that was announced in March. The policy is similar to the solution offered during the pandemic, to borrowers with COVID-19 hardships, and based on its success, the GSEs are now making this a part of their standard loss mitigation efforts. This heightened focus on home retention on top of already strong underwriting and servicing is another example of how the mortgage industry has been transformed to the benefit of all participants, including private mortgage insurers. With regard to our home genius business, during 2022 and continuing into 2023, we experienced a decline in home genius revenues due to the rapid decrease in industry-wide mortgage and real estate transaction volume. We are managing the home genius business through this challenging environment by continuing to focus on discipline cost management. In addition, our team is focused on our strategic investments in data and analytics and technology, including the application of artificial intelligence and computer vision across our innovative real estate platforms. The team is also focused on growing revenue by building awareness of our suite of digital real estate products and services, including several new and recently launched offerings, including our highly innovative HomeGenius IQ technology, which combines artificial intelligence and computer vision to power many of our products. Our HomeGenius Digital Toolkit, a customizable platform as a service for lenders and other companies to provide their customers with a unique home buying, selling, and ownership experience, and a refreshed HomeGenius.com website that delivers a highly personalized search to close experience for home buyers. Although I'm proud of how our HomeGenius team continues to serve our customers and navigate the challenging market environment, we know that we still have work to do as the current business results are not where we want to be. Our issue today is primarily revenue growth, which is largely driven by two challenges. First, the decline in real estate and mortgage volumes across the market. And second, adoption curves and customer sales cycles given the macroeconomic backdrop. We are sharply focused on managing our cost structure, investing strategically, and growing our customer base in order to place HomeGenius on a path to profitability. And in terms of our available liquidity and managing our capital resources, total holding company liquidity increased to $1.2 billion, including the benefit from a $100 million ordinary dividend paid by rating guarantee. This was the first ordinary dividend paid by Radian Guarantee, the rating group, since the beginning of the great financial crisis 15 years ago. And we expect Radian Guarantee to pay between approximately $200 to $300 million of additional ordinary dividends during the remainder of 2023 based on current performance expectations and consistent with our prior guidance. Beyond 2023, future dividends from rating guarantee are expected to approximate rating guarantee statutory income. Rating guarantee maintains a strong PMIRES position with excess available assets of $1.7 billion or 44% over its minimum required assets. And we continue to execute on our aggregate manage and distribute mortgage insurance business model focus on lowering the risk profile, tail risk, and the through the cycle volatility of the business by utilizing risk distribution structures optimized between the capital and reinsurance markets based on availability and strength of execution. I also want to highlight the strength of our liquidity position given recent depository related market events. It is important to recognize that beyond our ongoing operating expense, dividends, and debt service requirements, Our primary liquidity needs relate to mortgage insurance claims management. Given the normal course of mortgage defaults and the structure of our mortgage insurance policies, our defaulted claim cycle typically ranges between two to four years. Over the course of this claims-paying cycle, in addition to our current $6 billion investment portfolio, we also continue to generate significant cash flows from premiums and investment portfolio earnings, which provides significant liquidity and a strong source of claims-paying resources through the claim cycle. As a result, as compared to deposit-based financial institutions, our business is not subject to similar accelerated liquidity demands in the ordinary course, and we have good visibility into the potential future cash flows to allow for effective liquidity management. We believe the strength of our liquidity and capital position significantly enhances our financial flexibility now and going forward. As you've heard me say before, our company is built to withstand economic cycles, significantly strengthened by the PMIRES capital framework, dynamic risk-based pricing, and the distribution of risk into the capital and reinsurance markets. Now, I'd like to turn the call over to Rob for details of our financial position.