Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Radian Group Inc (RDN, Financial) reported a 12% year-over-year increase in book value per share to $29.66.
- The company generated $321 million in revenue for the quarter, with a net income of $152 million.
- Primary mortgage insurance in-force grew to $273 billion, with $13.9 billion of new high-quality insurance written in the second quarter.
- Radian Guaranty paid a $200 million ordinary dividend to Radian Group Inc (RDN), doubling the amount paid in each of the previous five quarters.
- The company maintained a strong PMIERs cushion of $2.2 billion and increased holding company liquidity to $1.2 billion.
Negative Points
- Operating expenses increased to $92 million in the second quarter, up from $83 million in the first quarter.
- The company experienced a net benefit of only $2 million in its mortgage insurance provision for losses, indicating minimal net positive impact.
- Unrealized net loss on investments was $377 million at quarter-end, impacting stockholders' equity.
- The persistency rate of existing insurance-in-force remained high at 84%, which could limit new business opportunities.
- The company faces potential challenges from a slowing U.S. consumer market and slight increases in unemployment.
Q & A Highlights
Q: The share count went down by less than the buybacks. Is the difference due to share grants to employees?
A: Yes, the difference is related to the Long-Term Incentive (LTI) program, which offsets the share buyback. This impact is most noticeable in the second quarter each year. (Richard Thornberry, CEO; Sumita Pandit, CFO)
Q: Regarding the conduit, from an accounting standpoint, will you consolidate these securitizations on your balance sheet?
A: We are evaluating our accounting options and will provide more disclosure starting next quarter. The accounting treatment will depend on how much of the securities are retained in the structure. (Sumita Pandit, CFO)
Q: Given your comments around the dividend capacity from the operating company, what is the right amount of liquidity to hold at the parent company, and how do you plan to use it?
A: We expect to hold about $950 million to $1 billion of liquidity at the holding company by year-end, which is more than needed to run the business. We will continue to return excess capital through share repurchases and dividends. (Sumita Pandit, CFO)
Q: Are you seeing any yellow signs in the credit environment, given the overall slowing of the US consumer and slight uptick in unemployment?
A: We are seeing pressure in lower credit quality segments, which we do not play in. We expect unemployment to tick up and home price appreciation to slow, but this is already factored into our scenarios. Overall, the credit environment is more positive than expected. (Derek Brummer, President - Mortgage)
Q: How should we think about operating expenses for the back half of the year, considering the $20 million run rate reduction you mentioned?
A: Expect the $348 million operating expense from last year to come down slightly this year and by $20 million to $25 million by next year. Some of the reduction will be seen in the back half of this year. (Sumita Pandit, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
