Radian(RDN) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2025, the company reported net income from continuing operations of $159 million, or $1.15 per share, and for the full year, net income was $618 million, or $4.39 per share, reflecting strong earnings and an 8% reduction in share count [11][12] - Total revenues for Q4 were $301 million and $1.2 billion for the full year, with net premiums earned reaching $237 million in Q4, the highest level in over three years [12][13] - The return on equity was 13.5% in Q4 and 13.1% for the full year, with book value per share growing 13% year-over-year to $35.29 [12][13] Business Line Data and Key Metrics Changes - The mortgage insurance business saw growth in insurance in force and new insurance written (NIW), with NIW increasing 6% year-over-year [12][13] - The in-force premium yield for the mortgage insurance portfolio remained stable at 38 basis points, expected to remain stable in 2026 [15][36] Market Data and Key Metrics Changes - The company maintained a strong persistency rate of 82% in Q4, with approximately half of the insurance in force portfolio having a mortgage rate of 5.5% or lower, indicating less likelihood of cancellation due to refinancing [14] - The total number of defaults increased to approximately 25,000 loans at quarter end, resulting in a portfolio default rate of 2.56%, reflecting normal seasonal trends [16] Company Strategy and Development Direction - The acquisition of Inigo marks a strategic transformation for the company, positioning it to expand into a global multi-line specialty insurer, expected to double annual revenues and provide greater strategic flexibility [5][6] - The divestiture plan for mortgage, conduit, title, and real estate services businesses is on track for completion by Q3 2026, aligning leadership with strategic focus [8][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong performance of the mortgage insurance business and the positive credit trends, with no significant concerns noted across different credit segments [32] - The company anticipates continued strong capital returns and liquidity, with expected dividends of at least $600 million from Radian Guaranty in 2026 [21][22] Other Important Information - The company distributed $795 million from Radian Guaranty to the holding company and returned $576 million to stockholders through dividends and share repurchases in 2025 [4][18] - The holding company liquidity was expanded to $1.8 billion at year-end, supporting the Inigo acquisition [20] Q&A Session Summary Question: Any updated thoughts on financial metrics for Inigo? - Management confirmed no changes from previous guidance, expecting a mid-teens return through the cycle from the Inigo acquisition, translating to approximately $170 million of incremental net income [27][28] Question: How sticky can the 90% cure rate be for recent vintages? - Management noted that while recent vintages are being monitored, strong cure activity continues, and no significant concerns have been observed in credit trends [31][32] Question: How does the current pricing environment compare to a year ago? - The in-force premium yield has remained stable at 38 basis points, indicating a balanced pricing perspective, with management focusing on economic value rather than market share [35][36] Question: What is the expected combined ratio for Inigo? - Management indicated that while no forward guidance has been provided, a mid- to high-80% combined ratio is a reasonable trend based on Inigo's historical performance [40] Question: Will there be intangibles that need to be amortized from the acquisition? - Management confirmed that there will be intangibles, and details will be provided in future reports as purchase accounting is completed [50]