Radian Group Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the fourth quarter 2023 Radian Group Earnings Conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to John Damien, Senior Vice President, Investor Relations and Corporate Development. Please go ahead.

Thank you. And welcome to Radian's fourth quarter and year-end 2023 conference call. Our press release, which contains Radian's financial results for the quarter and full year, 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 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. 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 available in the Investor 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. 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 would like to turn the call over to Rick.

Good afternoon, and thank you all for joining us today. I am pleased to report another excellent quarter and to wrap up a successful year for Radian. For 2023, we increased book value per share by 15% year-over-year, generating net income of $603 million and delivering a return on equity of 15%. Despite a challenging macroeconomic environment, GAAP revenues grew to $1.2 billion in 2023. Our primary mortgage insurance and force, which is the main driver of future earnings for our company, reached an all-time high of $270 billion. Rating Guarantee paid a total of $400 billion in ordinary dividends rating group during the year. We returned $279 million of capital to stockholders through share repurchases and dividends. Our regular dividend yield continues to be the highest in the industry. Our overall capital and liquidity positions remain very strong. Available holding company liquidity year-end was approximately $1 billion, and our PMIRES cushion was $2.3 billion, an increase of $533 million from the prior year. Reflecting our strong financial performance and capital position, we received a ratings upgrade from S&P in January to A- for rating guarantee and BBB- for rating group. Rating group is now rated as investment grade by all three primary rating agencies. I would also like to highlight that as a result of our team's disciplined focus on managing costs, During a challenging business environment, we reduced our combined consolidated cost of services and other operating expenses by 17% or $77 million in 2023 as compared to 2022, which was at the higher end of our target range for reductions. These results demonstrate the continued strength of our high quality and growing mortgage insurance portfolio and our capital position as well as our ongoing strategic focus on managing operating expenses. In terms of our mortgage insurance business, we continue to leverage our proprietary analytics and radar rates platform to successfully identify and capture economic value in the market. As a result, we wrote $10.6 billion of high-quality new insurance written in the fourth quarter and $52.7 billion for the year. We continue to see positive credit performance in our mortgage insurance portfolio during the year, and our persistency rate remains strong. It is important to note here that borrowers in our insured portfolio have significant equity in their homes, which helps to mitigate the risk of loss by decreasing both the frequency and severity of paid claims. In fact, we estimate that as of year-end 2023, 86% of our total insurance and force had at least 10% embedded equity, and 82% of our defaulted loans had at least 20% embedded equity. It is also worth repeating that higher interest rates result in higher yields on our $6.3 billion investment portfolio. The increased investment yield supports higher returns and generates incremental income that flows directly to our bottom line. In terms of the housing market, recent industry forecasts for 2024 project total mortgage originations of approximately $2 trillion, which would represent an increase compared to 2023. This outlook projects a decline in mortgage interest rates in 2024 to approximately 6% by the fourth quarter. And these lower mortgage rates coupled with continued strong home purchase demand is expected to drive a 15% to 20% increase in purchase originations, and an increase in refinance originations as well. While declining interest rates are projected to increase refinance volume, we expect persistency to remain strong given that approximately 80% of our enforced portfolio consists of loans with interest rates below 6%. Therefore, those borrowers would have little to no refinance incentive. And as we've said before, the increased purchase volume is a positive for our mortgage insurance business, given that MI penetration on purchase transactions is currently 10 to 14 times higher than for refinances. Based on the origination forecast, we estimate that the private mortgage insurance market will be between $300 and $350 billion in 2024. It is also worth mentioning that while low inventory and strong market demand continue to create challenges for first-time homebuyers, these dynamics help to mitigate downside risk in home values, which is a positive for our insured portfolio. Given that our mortgage insurance business benefits from increases in demand, home prices, and purchase volume, our overall outlook for the business remains positive. With regard to our home genius business, throughout 2023, our team navigated the impact of higher interest rates and limited inventory, which constrain mortgage and real estate activity. Our team focused on deepening and expanding our customer relationships, managing expenses to improve operational efficiency across our businesses, and making strategic investments in data, analytics, and technology. We believe this business is well positioned to benefit from a declining interest rate environment as refinance and home purchase activity rebounds. We will continue to manage our cost structure and align our strategy and investments to the market environment. And we continue to build on our strong track record for managing our capital resources. We have consistently demonstrated a strategic focus on capital optimization over the past several years. we believe the strength of our capital position significantly enhances our financial flexibility now and going forward. Sumitta will discuss our capital actions during the quarter and during the year, including the details of our current position. And 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. Sumitta will now cover the details of our financial position.