RDN - NYSE

Good day, and thank you for standing by. Welcome to the Fourth Quarter 2024 Radian Group Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Kobell, Head of Investor Relations and Capital Management. Please go ahead.

Thank you, and welcome to Radian's fourth quarter and year-end 2024 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 radian.com. This press release includes certain non-GAAP measures that may be discussed during today's call, including adjusted pretax 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 on the Investors 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 Insurance. 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 and are subject to risks and uncertainties which may cause actual results to differ materially. For a 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 2023 Form 10-Ks 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 morning, and thank you all for joining us today.

I'm pleased to report another excellent quarter and year. Our results continue to reflect the economic value of our high-quality mortgage insurance portfolio, the strength and quality of our investment portfolio, our strong capital and liquidity positions, and our ongoing strategic focus on managing expenses. Turning to a few highlights for 2024, we increased book value per share by 9% year over year, generating net income of $604 million and delivering a return on equity of 13.4%. During the year, we returned $376 million of capital to stockholders through share repurchases and dividends. Our primary mortgage insurance in force, which is the main driver of future earnings for our company, reached an all-time high of $275 billion. We continued our focus on managing operational efficiency and significantly reducing our recurring expense structure. For 2025, we are positioned to achieve our targeted reduction in run-rate operating expenses. Sumita will provide more details on our expense management progress. Radian Guarantee paid a total of ordinary dividends to Radian Group during the year, meaningfully exceeding our initial guidance of $400 million to $500 million at the start of the year. Our overall capital liquidity positions remain strong with a PMIERs cushion for Radian Guarantee of $2.2 billion and available holding company liquidity of $885 million at the end of 2024. We are pleased with our strong financial position and capital flexibility, excellent financial results focused on growing our business, helping our customers transform risk into opportunity, while also returning value to our stockholders. In terms of the housing mortgage market, the supply of existing homes remains constrained, which we expect will continue to provide support for home values from an HPA perspective. While the private mortgage insurance market has been relatively flat over the past two years at approximately $300 billion, based on industry forecasts, we expect a slightly larger market. I believe it's also worth noting the continuing positive impact that we are experiencing from the current interest rate environment in terms of increasing our investment portfolio income and supporting strong persistency benefiting our insurance in force. Overall, our outlook for the housing market and our mortgage insurance business remains positive. Finally, as we work with the new administration, we continue to be encouraged by the bipartisan support on Capitol Hill for our industry, as the only source of permanent private capital in front of US taxpayers consistently underwriting mortgage credit risk through the market cycles. The private mortgage insurance industry is well-positioned to continue promoting affordable, sustainable home ownership through economic cycles, which we believe is well understood and highly regarded by the FHFA, the GSEs, and legislators. As you've heard me say before, our mortgage insurance business model has been significantly strengthened by the PMIERs Capital framework, dynamic risk-based pricing, and the distribution of risk, allowing our industry to continuously serve an important role in the housing finance system. Sumita will now cover the details of our financial and capital position.

Thank you, Rick, and good morning to you all. I'm pleased to provide additional details about our fourth quarter results, which reflect another strong quarter of performance, producing net income of $148 million or $0.98 per diluted share. For the full year, we earned net income of $604 million or $3.92 diluted earnings per share. Adjusted diluted net operating income per share was higher than the GAAP net metric at $1.09 for the fourth quarter and $4.11 for the full year. We generated a return on equity of 13.4% and grew book value per share 9% year over year to $31.33. This book value per share growth is in addition to regular stockholder dividends, which totaled $152 million during 2024, reflecting our quarterly dividend of $0.245 per share. We also repurchased $75 million of shares during the fourth quarter for a total of $224 million in share repurchase for the full year. Turning now to the detailed drivers of our results, our revenues continued to be strong in the fourth quarter. We generated $316 million of total revenues during the quarter and $1.3 billion of total revenues for the full year, a 4% increase compared to our full-year revenue in 2023. Slides 11 through 13 in our presentation include details on our mortgage insurance in-force portfolio, as well as other key factors impacting our net premiums earned. Our primary mortgage insurance in force grew 2% year over year to an all-time high of $275 billion as of the end of 2024. We generated $235 million in net premiums earned in the quarter and $939 million for the full year, a 3% increase from the prior year. Contributing to the growth of our insurance in force was $2 billion of new insurance written for 2024, including $13.2 billion of NIW in the fourth quarter, an increase of 24% compared to the fourth quarter of 2023. The persistency rate of our existing insurance in force also remained high at 83.6% in the fourth quarter based on the trailing twelve months compared to 84% a year ago. As of the end of the fourth quarter, more than two-thirds of our insurance in force had a mortgage rate of 6% or less. Given current mortgage interest rates, these policies are less likely to cancel due to refinancing in the near term, and we therefore continue to expect our persistency rate to remain strong. As shown on slide 13, the in-force premium yield for our mortgage insurance portfolio remains stable throughout 2024, as expected, ending at 38 basis points. And we expect the in-force premium yield to remain generally stable for the year. As shown on slide 14, our investment portfolio of $6.5 billion consists of well-diversified, highly-rated securities and other high-quality assets. We generated net investment income of $71 million in the fourth quarter. The decrease in net investment income from the prior quarter was driven by the use of $450 million in cash at the end of Q3 to redeem our senior notes and reduce our financial leverage. As a result, both investment income and interest expense declined by approximately $7 million quarter over quarter. Net investment income of $71 million includes $8 million of income in the fourth quarter related to mortgage loans held for sale within Radian Mortgage Capital. Excluding mortgage loans held for sale, net investment income grew 6% year over year to $270 million in 2024. We have continued to reinvest cash flows in the current rate environment, benefiting our investment portfolio yield, which was 3.9% in the fourth quarter. Our unrealized net loss on investments reflected in stockholders' equity was $350 million at the end of 2024, compared to $331 million at the end of 2023. We continue to expect that our strong liquidity and cash flow position will provide us with the ability to hold these securities to recovery of the remaining unrealized losses, which would equate to $2.37 that is expected to accrete back into our book value per share over time. I will now move on to our provision for losses and related credit trends, which continue to be positive with continued strong cure activity and very low claim levels. Throughout 2024, our defaults continue to cure at rates greater than our previous expectations, resulting in releases of prior period results that have offset reserves established for new defaults. As shown on slide 17, our ending default inventory for 2024 increased from the prior year to approximately 24,000 loans, resulting in a portfolio default rate of 2.44% compared to 2.20% at year-end 2023. The number of new defaults reported to us by servicers increased slightly in the fourth quarter to approximately 14,000 compared to 13,700 reported in the third quarter. This increase in new defaults reflects normal seasonal trends and the expected continued seasoning of our large insurance in-force portfolio. In addition, there were approximately 1,700 new defaults reported in areas associated with Hurricane Helene and Milton in the fourth quarter, an increase of approximately 600 compared to the number of new defaults reported in the third quarter for the same areas. Excluding those hurricane-impacted areas, new defaults declined by 3% in the fourth quarter compared to the prior quarter. In addition, the total number of cures in the fourth quarter grew 5% compared to the third quarter. Historically, defaults associated with storms and other natural disasters have cured at higher rates. This past performance is also recognized within PMIERs, which provides for a lower capital requirement for deep defaulted loans in FEMA-designated areas. Although the primary mortgage insurance we write protects the insured parties from a portion of losses resulting from related mortgage insurance claims, it generally does not provide protection against property loss or physical damage, including damage caused by hurricanes or other severe weather events or natural disasters. New defaults continue to contain significant embedded equity, which has been a key driver of recent favorable credit trends. Our loss ratio was 0% this quarter and remained low throughout 2024. We recorded a net benefit of $2.2 million in our insurance provision for losses for the full year. The incurred loss for new defaults this quarter was $56 million, which was fully offset by positive reserve development. As shown on slide 18, our cure trends have been very consistent and positive in recent periods, with approximately 90% of these defaults curing within four quarters and 96% curing within eight quarters, meaningfully exceeding our initial expectations. Cure rates in the fourth quarter exhibited typical seasonal trends and compared favorably to similar periods from prior years. We reduced the initial default-to-claim roll rate assumption for new defaults in the fourth quarter to 7.5% compared to the 8% assumption that we maintained in prior quarters. The default-to-claim rate reduction reflects continued strong cure trends as well as our historical experience with defaults related to hurricanes and other natural disasters, which accounted for a portion of the new defaults reported in the fourth quarter and have historically cured at higher rates. We will continue to evaluate our assumption for initial defaults to claim roll rates in future quarters as circumstances evolve. Moving to our other business lines, total revenues in our all other category were $34 million in the fourth quarter and $148 million for the full year, a 23% increase compared to the prior year. The adjusted pretax operating loss for all other was $6 million in the fourth quarter, in line with the same period in 2023. Turning to our other expenses, for the fourth quarter, our other operating expenses totaled $88 million, an increase compared to $86 million recognized in the third quarter. Fourth quarter operating expenses included $13 million related to impairment to our internal-use software, of which $9 million was primarily related to our HomeGenius business as we've continued to restructure that business, and $4 million of lease-related assets related to the rightsizing of our overall office footprint for the post-COVID work environment. Other than these impairments, the remaining operating expenses totaled $75 million for the quarter, in line with our prior guidance and an 8% reduction year over year. For the full year, other operating expenses totaled $348 million, in line with 2023. Not including impairments, we've reduced our full-year 2024 combined cost of services and other operating expenses by approximately $85 million or 19% from our 2022 level. For 2025, as previously communicated, we are positioned to achieve the reduction in run-rate operating expenses that we began to implement last year. As compared to our 2023 expenses, these reductions are expected to reduce operating expenses in 2025 by $20 to $25 million. Moving to our capital, available liquidity, and related strategic actions, Radian Guaranty's financial position remains strong. At the beginning of 2024, we provided guidance that we expected to pay $400 to $500 million from Radian Guaranty to our holding company. We are pleased that for 2024, we exceeded that guidance and paid $675 million in ordinary dividends to Radian Group, including $190 million in the fourth quarter, while maintaining a stable PMIER cushion of $2.2 billion. As highlighted on slide 22, dividends paid from Radian Guaranty to Radian Group will continue to be driven by unassigned funds and the ongoing statutory earnings within Radian Guaranty. Moving to our holding company, Radian Group, for the year, we repurchased 7 million shares of our common stock at a total cost of $224 million for an average price paid of $31.80. In the fourth quarter, we repurchased $75 million of our common stock and paid a quarterly dividend of $36 million for a total of $111 million of capital return in the quarter. In 2024, we have returned $376 million in the form of share repurchases and dividends to shareholders. As of year-end 2024, we had $543 million remaining on our current share repurchase authorization, which expires June 30, 2026. As demonstrated by this past quarter's repurchase activity and our track record in recent years, we believe that share repurchase provides an attractive option to deploy our excess capital. Our available holding company liquidity was $885 million at the end of 2024. We also have an undrawn credit facility with borrowing capacity of $275 million, providing us with significant financial flexibility. And finally, reflecting on our outstanding financial performance and strong capital position, we received a ratings upgrade from Fitch in January to an A financial strength rating for Radian Guaranty and a BBB credit rating for Radian Group, both with a stable outlook. I will now turn the call back over to Rick.

Thank you, Sumita. Before we open the call to your questions, I want to take a moment to address a recent leadership announcement at Radian. After 23 years of distinguished leadership at Radian, Derek Brummer, President of our Mortgage Insurance business, will be retiring in July of this year. Derek has been a key member of our executive team, and we are extremely grateful for his countless contributions over the years. Sumita Pandit, that you all know as our Chief Financial Officer, will assume the expanded role of President and Chief Financial Officer for Radian when Derek retires. In her two years at Radian, Sumita has proven to be a passionate and experienced leader with a strong understanding of our business. Together with our highly experienced and talented mortgage insurance team, Derek and Sumita will work on a seamless transition over the coming months. Our results for 2024 continue to reflect the balance and resiliency of our company, as well as the strength and flexibility of our capital and liquidity positions. We expect the earnings and cash flows generated from our large in-force mortgage insurance and investment portfolios to allow us to continue operating from a position of strength and delivering value to our customers, policyholders, and stockholders. And finally, I want to recognize and thank our dedicated and experienced team at Radian for the outstanding work they do every day. And now, operator, we would be happy to take your questions.

Thank you. To withdraw your question, please press star one one again. And our first question comes from Terry Ma of Barclays. Your line is open.

Hey. Thank you. Good morning. Maybe just starting with credit. You know, the default rate excluding the estimated hurricane impact in the fourth quarter was actually quite good. Pretty much flat quarter over quarter and just up modestly year over year. I'm just curious what your outlook for kind of credit and the default rate is for 2025. Do you kind of still expect that as some of the larger vintages season, that would kind of more bias the default rate kind of meaningfully higher going forward?

Hi. This is Derek. I think in terms of default rate, in terms of those vintages moving through, what you'd expect to see is kind of typical, I think, seasonal impact. So we'd expect to see kind of positive seasonal impact in Q1 and Q2. We're probably, I think, getting perhaps near the peak in terms of those vintages moving through. And so I would expect the default rate, unless something changes in the macroeconomic environment, to see that, you know, sub-3%. So you could see that move up, but I wouldn't see a significant move up, barring some dislocation in the economy.

And I would just also highlight that excluding the hurricane areas, new defaults declined by about 3% quarter over quarter. And I think we mentioned that in our prepared remarks.

Got it. That's helpful. And I may have missed it. But any more color or detail you can give on kind of the cure activity within the quarter, kind of what vintages that came from? Thank you.

In terms of the cure activity, I mean, in terms of whether you're looking at accident or origination vintages, I think it's probably kind of recent accident vintages where we've probably seen the most cures. But really, whether you look at it in terms of the different missed payment buckets, pending claims, all of the cure rates have been pretty strong across the board.

Thank you. And our next question comes from Doug Harter of UBS. Your line is open.

Thanks. Just hoping to get a little more detail on the assumed claim rate in the quarter. Did I hear you correctly that, you know, kind of excluding the impact of the hurricanes that you still took down the assumed claim rate a little bit?

Yeah. Thanks for the question, Doug. I think the 7.5% that we applied was the roll rate to all new defaults. We did not actually split our reserving processes this quarter just given the fact that we did not see the new defaults in the hurricane areas to really have a material impact on our results. So the 7.5% roll rate that you see is applied to all our defaults. And as we go forward, we will continue to monitor that, but that's a blended amount and it's not separated.

I appreciate the clarification there. And then wondering if you're seeing any kind of change in the vintage or the characteristics of the loans that entered default, anything that we can read into that?

And this is Derek. No. We're not seeing any material changes. The other thing that has held up well is just the embedded equity in terms of new defaults. So when we that's something we track closely. So when we look at the embedded equity, in terms of new defaults coming into the default portfolio, pretty similar to the embedded equity in the default portfolio. And then when we look at credit characteristics, no significant changes.

And when you look at the cure rate analysis that we provide on slides 18, you see that consistency and actually can, you know, continues to be very, very strong in terms of, you know, kind of each vintage migrating through from a cure point of view. So to Derek's point, things remaining fairly consistent but looking very positive.

Great. Thank you all for the answer.

Thank you. Our next question comes from Bose George of KBW. Your line is open.

Everyone, good morning. And Sumita, congratulations on your new role, and Derek, good luck in your retirement. Actually, the first question I have is just on leverage. Your leverage obviously came down quite a bit with the debt redemption. When you think about uses of capital, do you think leverage stays here, or do you feel like it needs to trend down further, or do you want to take it down further?

Thanks, Bose, and thank you for your kind remarks. We will, of course, miss Derek a lot, and we are working towards the transition. On your question on leverage, I think that what we have stated in the past is that our decision to bring down leverage was really to use some of our excess liquidity in our holding company. We did not do it with a ratings trigger, so it was a condition precedent to maintain our improved ratings. At this stage, we think we are good at where we are from a leverage perspective. And as you know, our business does organically delever. So, you know, if you look at our projections, that number does come down over the next few quarters and years. But again, we've not set that as a target. That's a comfortable spot for us today. And, again, goes back to the fact that this year, we paid down net debt by about $350 million. We also returned about $376 million in share repurchase as part of a broader capital plan that we were working towards.

Okay. Great. Thanks. And then, actually, just to follow-up on that. In terms of capital return, you know, Rick commented about looking at the contingency reserve release, is that kind of a good way to think about it? I guess you guys have $466 million being released this year. Should that roughly tie to the total capital return, dividends plus buybacks?

Again, I don't think we have given an indication of how much we would really return as capital to shareholders as a direct percentage of what's coming out of our GI. If you look at our trajectory in terms of how we have managed capital, we have been very disciplined. Last year, we paid back $376 million. If you look at the amount that came from our GI to group, it was again a really, really healthy number of $675 million. I think going forward, we expect that we will continue to take out dividends from RGI. On slide 22, we give you the workings of how we think about that dividend capacity. It is really driven by the unassigned funds balance number, which as of Q4 was $223 million. I think we also highlight on that slide that if you look at how much we can pay as the maximum amount of dividends from RGI to group without Pennsylvania approval, it could be as high as $795 million. Again, like a very, very strong position. We will continue to manage that capital effectively from our GI to group and then, of course, you know, returning that capital back to our shareholders. We've typically stayed away from a percentage amount or a clear target of how much of that our GI capital that we are debiting up we will give back to shareholders. But you can see it from our track record and the consistency with which we've continued to do that every quarter.

Okay. Great. That's helpful. Thank you.

Thank you. Our next question comes from Scott Heleniak of RBC Capital Markets. Your line is open.

Yeah. Good morning. Rick, you touched on this a little bit. Just the new administration, how they it seemed like they're gonna appreciate the private MI industry, which I think we saw that last time. But any updated thoughts there? And then just same thing goes for GSE reform, how you think any of those might impact just the private MI market?

Yes. Scott, thanks for the question. Certainly, an active dialogue all around this particular topic. So I appreciate the question. You know, I think as we look at the path forward, you know, we've existed in this market through multiple administrations. Actually, even before and after the financial crisis through a number of different cycles. I think as we look today and we think about kind of our relationship and importance in the housing finance system, that really hasn't changed from the role we play and the importance that we play towards creating responsible, sustainable, affordable housing kind of solutions. As it relates to GSE reform, I do think it's going to continue to get dialogue. I think, given all the other issues that Congress has to deal with, specifically related to the tax law change or tax law expiration this year, it's unlikely that Congress is gonna advance comprehensive housing finance legislation that would be our view. I think certainly not in the near term. There's a tremendous amount of complexity involved. And there's potential financial and housing impacts that all have to be thought through. It is possible. And it may be a more likely path that FHFA, kind of like the previous Trump administration, kind of works towards some form of administrative recap and release, you know, from conservatorship without legislation. Which would not change the charter requirements for MI. I think that's an important thing to remember. But both paths have impediments, right, and significant hurdles to overcome and complexity. You know, so I think the dialogue's gonna be out there and, you know, certainly, we look forward to working with the new administration to secure the future of housing finance in a responsible and sustainable way. I think we're well-positioned to continue to be a central partner of the GSEs. We support low down payment financing, which aligns well with FHFA's overall core mission for ensuring safety and soundness of the GSE. So I think as I said in my prepared remarks, I think the private MI industry is really well supported by both sides of the aisle. When you think about the Republicans, private capital in front of taxpayers is a really important issue. We're the only source of permanent private capital that sits in front of taxpayers, allowing mortgage credit taken on by the US. From a Democrat side, providing access and affordability opportunities for people on low down payment loans, and housing is a key issue. I happen to think it's one of the great catalysts in our economy that we need to address. I think we're focused on helping address a key challenge for first-time home buyers and low to moderate-income borrowers and helping them think through how to attain the dream of homeownership, you know, with lower down payment. So I think we're well-positioned. I think we have great relationships, you know, kind of throughout the whole kind of decision framework. And we look forward to working with the new administration to kind of help pursue continuing to find ways to make this kind of a better housing market.

Great. That's really helpful detail. And then just switching gears just on HomeGenius, you talked about restructuring that. There was an impairment there in the quarter. Do you feel like most of the restructuring is done and you kind of feel like you're happy with where it is now? And the other is just related to the it's HomeGenius and other, but do you expect to see any improvement in margins for 2025? I'm assuming some of the expense reductions would probably help that segment but anything on either one of those?

Yes, Scott. Thanks for that question. I think your the answer to your question is exactly as you kind of discussed, which is, you know, we've been working this year really with the team to kind of get it positioned as we described, I think, back in earlier this year, I think probably in May. And I think, you know, the businesses that comprise all other are really four different things. One is our conduit business, which we have continued to grow, continue to expand. As you know, we did two securitizations last year and expect to be a regular issuer this year. Our real estate services business remained a profitable contributor throughout the cycle, including last year in our title business. Really kind of got reset back to a point where we look for that business to kind of maintain its path towards profitability. So but significantly significant reduction in terms of any kind of financial impact. Then our HomeGenius platform, which is our real estate tech and brokerage platform, as I mentioned, earlier this year earlier last year, I should say. Sorry. We've been in having discussions kind of evaluating strategic options and partnerships for that business and we continue to work towards that goal. After having really significantly reduced the expenses. So I think as we roll into 2025, we do expect to see those that all other continue to improve. And make progress as we go into the year.

Yeah. And maybe if I can just add a couple of other quick thoughts on that. So if you just think about the amount of, I would say, changes that we've made, just to give you some in 2023, our headcount used to be 1,400 FTEs. Today, we are closer to about 1,000 FTEs or a 30% reduction. We've had to make some pretty, I would say, difficult and hard decisions over the last few quarters. I think on an enterprise-wide basis, I think I did mention in my prepared remarks that we've taken out about 19% of our expenses down from the 2022 levels. If you look at OpEx plus cost of sales. And I think that we will continue to be on that path. And I think that on an enterprise-wide basis, we are very focused on making sure that we continue to take out expenses as needed. I think from an FTE perspective, we feel we are right-sized at this point. I think we are looking for expense savings, you know, in our vendors, in our outside services. And very focused on making sure that we continue to work towards our expense targets. I think for next year, in Q4, I think our OpEx number was about $75 million. I think what we've guided excluding the impairments. That's right. Excluding the impairments that we walked you through. I think that, you know, for the next few quarters, an $80 million run rate number, because I think there's some variation between the quarters, I think an $80 million run rate number for OpEx is a good estimate. But, again, we are very focused on making sure that we are taking expenses out of our overall enterprise.

Alright. Perfect. Appreciate all the answers.

Thank you. Our next question comes from Mihir Bhatia of Bank of America. Your line is open.

Good afternoon. Thank you or morning. Thank you for taking my questions. Firstly, wanted to just echo the congratulations on the new role for you, Sumita, and wishing you well in retirement, Derek, thanks for all the help over the years. But in terms of my questions, my first question, just wanted to clarify. Sumita, did you say the portfolio yield was 3.9%? Is that the new money yield or just the total portfolio yield?

Yeah. First of all, thanks a lot, Mihir, for your kind remarks. Yes, that was 3.9% for our overall portfolio yield. I think our new money rate is somewhere in the 4.75% to 5.25% level. And that's been relatively at that level for the last few quarters.

Got it. Then that makes sense. And then I think you mentioned for the NIW outlook, a little higher in 2025. You're also enjoying high persistency. So maybe putting those together, what are you planning for from an insurance in force growth perspective? Are we looking at mid-single? Could it get to high single digits in 2025?

I think we historically as much as I'd like to give you that answer, historically, we've not provided that forward guidance here. But I think, you know, the one great thing about this business, the combination of a solid purchase market going into next year. And I wouldn't say we expect large increases year over year. I think they're fairly modest and moderate increases in the mortgage market, and depending upon rates a little bit. But the purchase market, I think, is fairly predictable. I think for us, you know, the combination of continuing relatively high persistency along with a strong purchase market is really good for us to build overall economic value in our portfolio and Derek and the MI team have done a really good job of being highly selective about the economic value we originate through that portfolio, which we think kind of embeds value going forward from an earnings point of view. So we feel very good about the way the market is kind of evolving. Persistency is well balanced today. And that's where we're positioned.

Got it. Maybe on that point about, you know, just the quality of originations, one of the questions we hear from investors a lot is, well, the mortgage origination standards weakened in 2023 versus, you know, what you had in 2021, and I guess my question for you is, like, I mean, understand there's some mix shift between, you know, you just had more purchase originations and things like that. But if you were to compare, like, like-for-like policies, or like-for-like, you know, originations in 2023 versus, call it, 2021 or 2022. Are you seeing any deterioration in credit standards in your data and in early portfolio performance? Thank you.

Yeah. This is Derek. No. We haven't. And if you look at credit quality, I think the 2023 book relative to 2022 was just higher quality when you look at different credit conditions, whether it's credit score, LTV. The other thing is just from a performance perspective, I think early on, we've seen the 2023 origination vintage outperform 2022. You'd expect some of that 2022 had, I think, a quarter of negative home price appreciation. And then also, it was just a little bit from a riskier from a risk characteristic perspective. But I think that when you look at those vintages, when you look at the credit characteristics, I think they've all played out, you know, pretty similarly and very positive. And really kind of exceeding expectations in terms of where we were kind of pricing them.

And is that just because of home price appreciation, or is there something else you think also driving that? Like, even you're not even seeing delinquencies?

No. I think the home price appreciation is part of it. I think just generally, solid employment picture, quality underwriting. Right? So manufacturing quality is very good. And then just the nature of their credit characteristics, high-quality borrowers. So I think it's a combination of things. So I think you put all of those together, and those have been pretty steady for a number of years now. So we've seen that really haven't seen any deterioration with respect to any of those characteristics.

Alright. And then just switching to, you know, Radian Mortgage Capital for a second. Any color on just the issuance cadence what you're looking to do there in 2025. Is there a lot of opportunity to scale that up? How are you thinking about that business for 2025?

Thanks for the question. We so we've not provided any forward guidance on kind of our issuance pace, but I will say that we continue to focus on growing that business. We've had great receptivity from our customers. It's one of the great finds that we've had in terms of the receptivity of our mortgage insurance customers to actually want to be part of our conduit customer base. It's actually worked very well. And so our focus this year is on growing that business and increasing the regularity of our issuance from a securitization point of view, but we also sell loans to private investors, the GSEs. So, you know, but from a securitization point of view, we would expect to kind of increase our pace, but, you know, more to come on that as we kind of get into the year and continue to kind of grow that business. But overall, I would say from a demand perspective and a receptivity and feedback perspective, it's been very positive, and we're really just focused on scaling that business in a safe and sound way from a risk perspective and, you know, kind of addressing the needs we're hearing from customers.

Alright. And just one last follow-up for me on that topic, actually. When does that business become material? Right, durian overall. Like, when do we start seeing a little bit more disclosures around that? Is it really an excellent question, and I can't you know, that's a hard question for me to answer. Well, are we talking three years, five years? Like, medium, film, short term? Figure that.

Yeah. I would I would say, you know, this is a medium-term kind of answer is the way I would do it, you know, given the choices you gave me. But I would say don't want to provide specific guidance on timing. But I do think it's kind of a medium-term kind of opportunity for it to have a measurable impact.

Okay. Thank you. Thank you for taking my questions.

Thank you. Yes. Thank you. I'm showing no further questions at this time. I'd like to turn it back to Rick Thornberry for closing remarks.

Well, thank you all for joining us today. You know, 2024 was another excellent year for Radian where we grew our insurance in force and book value, returned $376 million in capital to stockholders, and reduced our debt, as Sumita said, by $350 million and the resulting lower leverage. We look forward to the opportunities in 2025 in terms of, you know, the market opportunities and the value of our portfolio, and we continue to have a positive outlook on the housing market and for our business as well. As we continue to kind of help people responsibly achieve the dream of homeownership. Thank you for your questions, and we look forward to seeing everybody soon as we find opportunities to meet either virtually or in person. Take care. That's all we got.