Radian(US:RDN)2019-10-31 22:52Financial Data and Key Metrics Changes - Net income for Q3 2019 was $173 million, or $0.83 per diluted share, compared to $0.78 in Q2 2019 and $0.66 in Q3 2018 [30] - Adjusted diluted net operating income was $0.81 per share, a 1% increase from Q2 2019 and a 14% increase from Q3 2018 [31] - Book value per share grew 24% year-over-year to $19.14, with a return on equity of 18% and an adjusted net operating return on equity of 17.4% [13][68] Business Line Data and Key Metrics Changes - Primary insurance in force increased by 9% year-over-year to $237 billion, with a 12% year-over-year growth in monthly premium insurance in force [14][36] - New insurance written (NIW) was $22 billion, a 19% increase from the previous quarter and a 40% increase from Q3 2018 [17][32] - The services segment reported revenues of $47 million, a 10% increase from the prior quarter and a 16% increase year-over-year [22][45] Market Data and Key Metrics Changes - The mortgage origination market was strong, driven by low interest rates and increased refinance activity, with first-time home buyers representing one-third of home sales [15][14] - The Radian home price index indicated a 7.9% year-over-year increase in median home values, up from a 5.8% growth rate in Q2 2019 [16] Company Strategy and Development Direction - The company is focused on providing customized pricing options and excellent customer service, which has resulted in record levels of new mortgage insurance business [18] - Radian aims to leverage its proprietary data and analytics platform to manage mortgage credit risk effectively and drive economic value [19] - The company expects to write new mortgage insurance business in the range of $65 billion to $70 billion for 2019, representing a 20% increase over the previous year [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong fundamentals of the mortgage insurance business, citing favorable economic conditions and regulatory frameworks [20][25] - The credit quality of the existing portfolio is excellent, with default rates at historically low levels [21][50] - Management believes that the regulatory landscape will encourage the use of private capital, which will benefit the mortgage insurance industry [26][28] Other Important Information - The company completed a share repurchase program, repurchasing over 13 million shares valued at approximately $300 million [23][60] - Moody's upgraded Radian's senior unsecured debt rating to A1, reflecting expectations for continued strong profitability [62][63] - The company has a P Myers cushion of $652 million, representing a 24% excess over minimum required assets [57] Q&A Session Summary Question: Impact of FHA adopting risk-based pricing on MI industry - Management indicated that the FHA is focused on rebuilding capital levels rather than cutting prices, and does not foresee a significant risk from lower premium pricing [72] Question: Expected expense ratio and leveraging opportunities - Management acknowledged that expenses were higher this quarter but suggested a normalized expense level of around $72 million going forward [76] Question: Outlook for the services segment - Management expressed optimism about the services segment, highlighting growth opportunities in title and real estate services [90][92] Question: Changes in market share dynamics - Management noted that market share shifts are primarily due to larger competitors entering the market, but emphasized a focus on quality business rather than market share [106] Question: Benefits of Moody's upgrades - Management stated that while the upgrade to investment grade is desirable for strategic reasons, it does not significantly impact core business operations [111]