Radian Group Inc. (RDN) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Stockholders of Radian Group Inc. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Herb Wender, Chairman of Radian Group's Board of Directors. Mr. Wender, the floor is yours.

Good morning. My name is Herb Wender. I'm the Non-executive Chairman of the Board of Directors of Radian. I'd like to welcome all of you to Radian Group's 2020 Annual Meeting of Stockholders, which is being held via live video webcast. I'd like to call each stockholders' attention to the agenda that outlines the order of business of today's meeting. I will act as Chairman of the meeting; and Ted Hoffman, who is General Counsel and Corporate Secretary of the company, will act as Secretary of the meeting. It is now just after 9 a.m., and in accordance with the notice of the 2020 Annual Meeting of Stockholders, which was sent to you with the proxy statement, I call the 2020 Annual Meeting of Stockholders to order. If any stockholder would like a copy of the annual report or proxy statement, links to those documents are located in the meeting documents section, 3. Before we proceed, it's my pleasure to introduce Rick Thornberry, Radian's Chief Executive Officer; Frank Hall, Radian's Chief Financial Officer; and Derek Brummer, president of our mortgage business. Also in attendance today are all of the members of our Board and several other members of senior management. John Fosbenner, representing PricewaterhouseCoopers LLP, the company's independent registered public accounting firm, is also present this morning. Mr. Fosbenner will be available during the question period to answer any appropriate questions you may have. Before we begin the proceedings, I'd like to take a moment to recognize David C. Carney, who is attending his last annual meeting as a director of Radian. Dave has been a dedicated director of Radian since our initial public offering in 1992 and will be retiring from the Board following completion of his current term at this annual meeting. He has served as the Chairman of Radian's Audit Committee since our IPO and also has been serving as a member of our Board's Governance Committee and the Credit Management Committee. Radian has been extremely fortunate to have benefited from Dave's service for nearly 3 decades. His financial expertise, management and consulting experience and knowledge of the financial services and insurance industries have been invaluable. And on behalf of the company, I wish him well in his retirement. And now on to the business of the meeting. In fairness to all stockholders in attendance and in the interest of an orderly meeting, we ask that stockholders limit questions to those pertaining to the current order of business. [Operator Instructions] Will Mr. Hoffman now report on the status of the meeting?

Mr. Chairman, this meeting has been called by notice dated April 13, 2020, and the company has received proof that the notice of the 2020 Annual Meeting of Stockholders, the company's 2019 annual report, the proxy statement and the proxy card soliciting proxies on behalf of the Board of Directors were mailed on or about April 15, 2020, to each stockholder of record as of the close of business on March 16, 2020, which was the record date for this meeting. A representative from Computershare Shareowner Services has been appointed as inspector of election to conduct the vote at this meeting and any adjournment or postponement. Mr. Chairman, an alphabetical list showing all holders of record of the company's common stock as of the close of business on the record date is available for inspection by any stockholder upon request. The inspector of election has advised us that a quorum exists for each matter. Throughout this meeting, we may make forward-looking statements, which 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 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 2019 Form 10-K as updated and our quarterly report on Form 10-Q for the quarter of 2020 -- first quarter of 2020 and subsequent reports filed with the SEC. These are also available on our website. Also, during this meeting, we may refer to certain non-GAAP financial measures, which may include adjusted pretax operating income, adjusted diluted net operating income per share and adjusted net operating return on equity and real estate adjusted EBITDA. A complete description of these measures and their reconciliation to GAAP may be found on the Investors section of our website.

Thank you, Ted. On this basis, I declare a quorum present and this meeting duly convened and confidence to proceed with the transaction of business. I now declare the polls open. All stockholders who have not voted or who wish to change their vote may do so now by clicking the link provided on your screen to cast your vote. If you have already submitted your proxy, your shares will automatically be voted in accordance with your instructions on the proxy card, and you do not need to take any further action unless you wish to change your vote. There are 3 proposals to come before the meeting for stockholder approval. The Board of Directors has recommended that stockholders vote in favor of each of the 3 proposals. The reasons for the Board's recommendations are set forth in the company's proxy statement. The first order of business is the election of directors. Is there a motion to elect each of the 10 nominees for director?

Mr. Chairman, my name is Greg Serio, and I am Chair of the Governance Committee of the company's Board of Directors. On behalf of the Board of Directors, I nominate for election as director each of the nominees set forth in the proxy statement.

The second order of business is to approve by an advisory nonbinding vote the overall compensation of the company's named executive officers. Is there a motion to approve this proposal?

Mr. Chairman, I move that the overall compensation of the company's named executive officers be approved.

The third order of business is the proposal to ratify the appointment of PricewaterhouseCoopers as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020. Is there a motion to ratify the appointment of PricewaterhouseCoopers?

Mr. Chairman, I also move that the appointment of PricewaterhouseCoopers LLP be ratified.

The online voting for each matter voted upon in the meeting is now closed. Will the inspector of elections please tabulate the votes? Will the inspector of election please report the results of the vote?

Mr. Chairman, having conducted the election and vote at the 2020 Annual Meeting of Stockholders of Radian Group Inc., I can report based on my preliminary tally that the stockholders have voted for the election of each nominees -- the nominees for the director, for the approval of the overall compensation of the company's named executive officers and for the ratification of the appointment of PricewaterhouseCoopers LLP as the company's independent registered public accounting firm for the year ending December 31, 2020.

Based on the report of the inspector of elections, I hereby declare that each of the nominees for director has been duly elected, and proposals 2 and 3 have been approved. The inspector of election will execute a certificate as to the final results of the voting. While this concludes the formal business of the meeting, at this time, I'd like to introduce our CEO, Rick Thornberry, to give a brief report on the company. Following Rick's remarks, we will address questions submitted during the meeting that relate to the business of the meeting.

Thank you, Herb, and thank you all for joining us today. Before we close the meeting, I'd like to provide a few comments on 2019 and our current environment and our future. As a diversified mortgage and real estate services business, our products and services have responsibly helped millions of families achieve their dream of homeownership in a sustainable way for nearly 45 years. Today, we are powered by technology informed by data driven to deliver new and better ways to manage mortgage risk and execute mortgage and real estate transactions. During our first full year of operating under our One Radian brand in 2019, we continued the strategic transformation [ of our ] real estate businesses and our capital structure. Our excellent results were driven by the hard work of the entire Radian team across the company as well as the support of our customers, investors, business partners and Board of Directors. Let me provide a few highlights of the year. We wrote $71 billion of flow new mortgage insurance written, which set a company record for the highest annual flow volume in our company's history. We grew our primary insurance in force by 9% year-over-year to $241 billion. We strategically transformed our mortgage insurance pricing approach through the rollout of RADAR Rates combined with our innovative pricing structures. As part of our strategy to lower the risk profile and potential through-the-cycle volatility of the business, we continued to transform our Mortgage Insurance business from a buy-and-hold model to an aggregate, manage and distribute model through the use of mortgage insurance linked notes and quota share reinsurance. Consistent with the strategic positioning of our real estate businesses and our focus on our core products and capabilities, which include title, valuation and asset management and other digital real estate services, we sold Clayton Services in early 2020. For the second consecutive year, we earned a position on the Bloomberg Gender-Equality Index for our commitment to supporting gender equality across the organization. And to further underscore our commitment to our stakeholders and employees, we launched formal programs for environmental, social and governance or ESG or inclusion and diversity. I am proud of all we accomplished in 2019. Turning to the business environment. Today, as stakeholders in Radian, you are clearly focused on how the COVID-19 pandemic environment has and will impact our business. So I will share a few thoughts and insights. First, as I mentioned in the first quarter earnings call last week, our entire team at Radian has demonstrated incredible resilience and commitment throughout this time. Our business continuity plans were in place, our technology infrastructure was ready and our employees migrated to a work-from-home model in mid-March seamlessly without missing a beat. During this unexpected and unprecedented environment, our team has continued to operate effectively at a very high level with minimal disruption to our businesses or the services we provide to our customers. From a customer and business partner perspective, we have been focused on staying connected through virtual tools, phone calls and web meetings rather than in person, which has proven to be highly effective and very successful. From an MI pricing and risk management perspective, we have increased our risk-based pricing and have made adjustments to our underwriting guidelines to account for the increased risk and uncertainty in the market today. Based on the dynamic nature of our RADAR pricing model, we were able to move quickly to align our pricing to the new environment and support our customers with competitive rates. We have evaluated and aligned our businesses with the temporary underwriting and servicing guidelines announced by the GSEs and remain highly focused on maintaining our strong relationships with the servicers of our insured loans. In addition to the regular communications and dialogue we maintain with the GSEs and servicers, we are also working on enhanced reporting and benchmarking related to the most recent forbearance programs. Given the current environment, there is clearly uncertainty related to the forecasts for mortgage industry activity and volume. Based on what we know today, including a strong NIW commitment pipeline, we expect to write new MI business in 2020 of more than $60 billion. In our real estate business, we are continually refining our service delivery models to adjust to the social distancing requirements, including how property valuations are completed and how real estate transactions are closed. Our ability to leverage our data, analytics and technology platforms, combined with our team's ability to quickly respond innovatively, have been well received by our customers. Overall, I'm proud to say our business is operating well with strong momentum during this unprecedented and challenging time. Given today's macro environment and the expected increase in defaulted loans as a result of the COVID-19 pandemic, our capital position is an important focus. This is particularly the case with respect to Radian Guaranty's PMIERs position, which we discussed in detail during our earnings call last week. At Radian, for several -- for the past several years, we've been focused on optimizing our capital position, enhancing our return on capital and increasing our financial flexibility in order to position the company for volatility in market and economic cycles. Most recently, this has included suspending our share repurchase program as of March 19; extending the termination date of our $267.5 million credit facility through January 2022; and finally, our announcement yesterday of our senior notes offering. Our financial flexibility during this period of uncertainty will be paramount to our ability to successfully navigate the economic stress associated with the COVID-19 pandemic. Despite the risks and uncertainties posed by the pandemic, we believe that we are well positioned to serve our important role as a private mortgage insurer. Thank you all for your continued support and confidence.

Thank you, Rick. Now we will respond to questions that have been submitted by stockholders during the meeting. [Operator Instructions] I'll turn it back over to Rick now.

Thank you, Herb. Okay. Mr. Chairman, we have no questions at this point. So I will turn the call back over to you.

Well, there being no questions to address at this time and no further business to come before this meeting, the meeting is adjourned. I'd like to express my appreciation to the stockholders who attended the meeting as well as those who submitted their proxies but were not able to attend.

This concludes the meeting. You may now disconnect.