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

Good day, and thank you for standing by. Welcome to the Second Quarter 2026 Radian Group Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bob Lally, VP of Finance. Please go ahead.

Thank you, and welcome to Radian's Second Quarter 2026 Conference Call. Our press release, which contains Radian's financial results for the quarter, was issued yesterday evening and is posted to the Investors 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 our non-GAAP measures may be found in press release Exhibit F and reconciliations to these measures to the most comparable GAAP measures may be found in press release exit. These exhibits are on the Investors section of our website. Today, you will hear from Rick Thornberry, Radian's Chief Executive Officer; Mike Weinbach, Radian's CEO-elect; and Dan Kobell, Senior Executive Vice President and Interim Chief Financial Officer. Before we begin, I'd 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 that are subject to risks and uncertainties, which may cause actual results to differ materially. For more information regarding these risks and uncertainties as well as certain additional risks that Radian faces, you should refer to the risk factors included in our 2025 Form 10-K as well as subsequent reports filed with the SEC. These are also available on our website. Now I would like to turn the call over to Rick.

Thank you all for joining us today. Before discussing our second quarter results, I'd like to highlight another important milestone at Radian's strategic transformation. When we announced our agreement to acquire Intego in September last year, we also outlined a clear strategic path forward, transforming Radian from a leading U.S. mortgage insurer into a global multiline specialty insurer, while divesting non-core businesses and becoming a more focused insurance organization. Since then, we have successfully closed the Intego acquisition and integrated the business into our organization and we have taken definitive action to complete the divestitures, including completing the sale of our real estate services business this week, entering into an agreement to sell our title business, and earlier this year, exiting the mortgage conduit business. Together, these actions have sharpened our focus on insurance, expanded our product set, simplified our portfolio, reduce organizational complexity, and delivered on the key strategic actions we outlined less than a year ago. The Radian we are today is meaningfully different from the company that announced that strategy last year. Our mortgage insurance business, which has been the foundation of our company and a significant driver of value creation for stockholders for nearly 50 years, continues to generate strong earnings and capital. Combined with Intego, we are now a stronger, more diversified and more focused organization with 2 complementary correlated insurance businesses, greater capital allocation flexibility, and access to broader growth opportunities across global insurance markets. Most importantly, our team has executed on the commitments we made and position Radian for its next chapter of growth. The second quarter marked our first full quarter with Inigo and another important step for Radian as a global multiline specialty insurer. The financial benefits of this combination are already evident in our results. Total revenues increased 93% year-over-year to $575 million, while net earned premiums increased 116% to $504 million. Our Mortgage Insurance business once again produced strong underlying performance and remains a powerful source of earnings, capital generation and embedded economic value for our company. New insurance written increased year-over-year, reflecting continued strength in purchase activity, combined with the value of our proprietary data and analytics capabilities and our deep customer relationships. Primary insurance in force reached a record $284 billion with persistency remaining strong, supporting the embedded value of our portfolio and future earnings generation. Credit performance continued to reflect the quality of our insured portfolio and our team's unwavering commitment to disciplined underwriting. We are proud of the important role private mortgage insurance plays in the home finance marketplace by helping borrowers responsibly and sustainably achieve homeownership. Turning to our Specialty Insurance business. As I mentioned, this quarter marks our first full reporting period reflecting Inigo's contribution. The specialty insurance business is already contributing meaningfully to the diversification of our revenue and earnings profile. During the quarter, our Specialty segment represented approximately 50% of total revenues and 53% of total net premiums earned during the quarter highlighting the scale and earnings contribution of our new business mix. The strategic value that the combination with Inigo brings to Radian is clear, reinforcing both the benefits and the opportunity ahead. While the underlying specialty insurance portfolio continues to perform well, it is important to acknowledge that market conditions have become more competitive and rates continue to soften. The current rate environment is consistent with the cyclical dynamics we anticipate when underwriting the acquisition. The Inigo team is maintaining their focus on underwriting discipline and rate adequacy while also allocating capital to the most attractive opportunities. Our priority is profitability, not any particular revenue growth target. We believe Inigo's diversified portfolio, strong analytics capabilities, unwavering commitment to strong underwriting and experienced leadership team, position the business well to navigate market cycles and selectively deploy capital to the highest value opportunities. At the enterprise level, our capital position remains a significant and core strength. The earnings power and capital generation capabilities of our businesses provides us with meaningful financial flexibility. During the quarter, we continued to return capital to stockholders through both dividends and share repurchases, while maintaining the financial strength needed to support growth opportunities across the enterprise. As always, we remain focused on prudent capital management and creating long-term value for stockholders. Before I turn the call over to Dan to review our financial results, I would like to invite Mike Weinbach to share a few thoughts. As many of you know, Mike recently joined Radian as CEO-elect and has already spent considerable time engaging with our employees, customers, investors and business leaders across both the mortgage and specialty segments. And I work closely together to execute a seamless transition of leadership. Mike brings significant industry experience, a strong leadership track record and a deep appreciation for the strengths that make Radian and Inigo unique, including the value of our talented and experienced teams. I'm excited about the future of this company under his leadership. Mike?

Thanks, Rick. First off, I want to share how excited I am to be a part of Radian, and I want to offer 2 things to Rick. One is my congratulations on all you and the team have accomplished under your leadership. Radian is a transformed company due to your vision, leadership, and execution. The second is my thanks. Having the opportunity to come in as CEO elect on June 1, where I could observe and learn before having to make decisions was a true gift. So thank you. Thank you. Thank you to you and your family who has had to wait a little bit longer for Papa to be a primary job and for my fellow investors, I'll expand a little more on why I'm so excited to be here. Radian Group, and I fully include Inigo when I say this, has great people, a great culture and great platforms. We have a leading mortgage insurance business led by a team with decades of experience combined with an excitement about asking how we can make the business even better. We have a leading specialty insurance business, which is stocked with experienced insurance experts who came together to build something new and better than what they had experienced at their prior organizations. We're still early in that journey and the progress the team has made gives me great confidence in what lies ahead. I'm still learning and plan to take advantage of every minute I have with Rick while in this role, and when he continues as a strategic adviser to me and the Board and to the future. But I'll go back to where I started. I'm excited, and you should be too about all the possibilities ahead for Radian and the talent we have to realize them. Rick, back to you.

Thank you, Mike. The team and I are thrilled to have you on board and as my tenure comes to an end, I look forward to what is ahead, and I'm confident in the future of Radian in your hands. With that, I will turn the call over to Dan to review our financial results in more detail.

Thank you, Rick. I'm pleased to provide additional details about our second quarter results. On a GAAP basis, which includes the impact of certain onetime costs related to the Inigo transaction as well as noncash amortization and purchase accounting adjustments, we generated net income from continuing operations of $0.87 per share with a return on equity of 10%. Adjusted net operating earnings per share grew year-over-year to $1.14 and adjusted net operating return on equity was 13% this quarter. Our operating results reflect continued strong underwriting performance across both our Mortgage and Specialty segments, continued growth in investment income and disciplined capital management. The results also include the expected seasonal expense associated with our annual share-based incentive compensation plans as well as the establishment of reserves in our specialty segment to reflect ongoing developments in the Middle East. On a year-to-date basis, our adjusted net operating earnings per share has increased 12% compared to the prior year as we continue to see immediate financial benefits from the Inigo acquisition. We grew book value per share 8.5% year-over-year to $36. We also returned dividends to our stockholders over the past year that were equivalent to an additional 3% of book value. On a consolidated basis, our total revenues grew 93% year-over-year to $575 million, primarily driven by the revenue contribution from our specialty segment. Our net premiums earned are not well balanced across our segments, with our Specialty segment accounting for 53% of second quarter net premiums earned. Our total investment portfolio of $7.1 billion consists of well diversified and highly rated securities. At an enterprise level, we generated $75 million of net investment income this quarter, an increase of 21% from a year ago, primarily driven by growth in balances. Our investment portfolio has continued to be an important contributor to our earnings and the addition of Inigo's investment portfolio further enhances this strength. Turning now to the key drivers of our segment results, beginning with our mortgage segment. New insurance written was $16.3 billion in the quarter, an increase of 14% year-over-year. Persistency also remained strong in the quarter, increasing to 82%. Our large, high-quality mortgage insurance in-force portfolio grew 3% year-over-year to an all-time high of $284 billion. As of the end of the second quarter, approximately half of our insurance in force portfolio at a mortgage rate of 5.5% or lower. Given current mortgage interest rates, these policies are less likely to cancel due to refinancing in the near term. Our in-force premium yield was stable this quarter as we continue to generate consistent premiums from our valuable mortgage insurance portfolio. Our mortgage provision for losses and related credit trends continue to be positive with strong cure activity and low claim levels. We reported approximately 12,400 new defaults in the quarter, a decline of 9% from the prior quarter. Cures once again exceeded new defaults this quarter, reducing our portfolio default rate to 2.47%. Our cure trends have also been consistently positive, meaningfully exceeding our initial default to claim expectations. This quarter, these favorable cure trends drove $20 million of favorable development from prior period defaults. Consistent with prior years, our second quarter operating expenses in both our mortgage segment and corporate area reflect the timing impact of our share-based compensation plans. This expected seasonal item is the primary driver of the increase in expense in these areas compared to the first quarter of 2026. Importantly, underlying expense performance remained strong, with mortgage segment operating expenses declining 7% year-over-year and the mortgage segment expense ratio improving to 23% from 25% a year ago. Now turning to our Specialty segment. Net premiums earned were $267 million, an increase of 9% year-over-year. In our specialty business, we continue to target opportunities to write attractive business across a range of insurance and reinsurance lines. As the environment has become more competitive, particularly in property insurance and reinsurance, the team remains thoughtful and disciplined in its underwriting approach, focusing on maintaining sound underwriting margins to drive profitability. It is important to note that Specialty segment tends to exhibit meaningful seasonality and how premium revenue is recognized during the year. Earned premiums in the second half of the year are typically higher than in the first half. As shown in the Inigo quarterly results for 2025 included in press release Exhibit J. As a result, we anticipate second half earned premiums in 2026 to be approximately 20% higher than in the first half of the year. Operating expenses in our Specialty segment were $39 million this quarter, in line with the full-prior quarter. As noted at our recent Investor Day, Inigo's business was intentionally built with a simple and scalable operating model, supporting our ability to maintain an appropriate expense ratio through a softening market cycle. Total loss provision within the Specialty segment was $169 million, which included $24 million of favorable net development for prior period reserves primarily seen in property lines of business. We are pleased that the acquired reserve portfolio has developed more favorably than expected since the acquisition. Consistent with our thoughtful approach to establishing reserves, particularly in cases with significant uncertainty, we've set reserves this quarter to reflect the ongoing developments in the Middle East. These reserves reflect both the expected and potential claims related to the ongoing conflict as well as updated inflation assumptions across our full insured portfolio given the related macroeconomic uncertainty and potential inflationary pressures associated with the conflict. Our Specialty segment net combined ratio, which includes the impact of these reserves, was 98% for the second quarter. As we noted previously, we expect variability in our Specialty segment combined ratio all time and the impact on second quarter ratios from the Middle East reserving is elevated given the seasonally lower premiums in the first half of the year, as I noted earlier. Over the first half of 2026, the specialty combined ratio was 93%, which is elevated due to the reserving for the Middle East developments as noted. Absent this item, the combined ratio in the first half of the year would be in the high 80s, which is consistent with our expectations heading into the year. As the market continues to soften, we expect to see generally lower underwriting margins in our Specialty business which will gradually earn through to our reported results over time. As a result, a combined ratio in the low 90s is more reflective of the current operating environment. As noted, the reported combined ratio in any specific period will be subject to some volatility due to market events. Additional details regarding our segments are available in press release Exhibit E. Moving to our capital available liquidity and related strategic actions. Rating Guaranty's financial position remains strong. In the second quarter, Rating Guaranty paid a $200 million dividend to Radian Group, our PMIERs cushion was $1.5 billion, significantly above the required PMIERs capital level. This capital buffer, combined with our current reinsurance programs, positions Rating Guarantee well to withstand and remain well capitalized through a potential severe macroeconomic stress. Our Specialty segment also remains well capitalized and continues to maintain a strong position relative to its regulatory capital requirements. During the second quarter, our holding company received $19 million in distributions from our entities that were held for sale. Since we announced our divestiture plan last year, we have returned $127 million of capital from our entities held for sale to our holding company providing immediate liquidity and reducing the carrying value of those entities to $35 million as of the end of the second quarter. As we announced this week, we have completed the sale of our real estate services business in the third quarter and entered into a definitive agreement to sell our title services business. While we have not disclosed terms of the transactions, we do not expect the total net asset value return to our holding company as we complete the divestiture process to be materially different than the carrying value of these businesses as of the second quarter. As we approach the end of our divestiture plan, we are pleased with both the total value realized and the time to complete the process, both of which are in line with our initial expectations. As we move forward and continue to execute on our multiline insurance strategy, our robust capital generation profile and balance sheet strength continue to provide us with significant financial flexibility. Our actions in the second quarter reflect our disciplined approach to capital management as we continue to return significant capital to stockholders while reducing our debt and growing our liquidity position. In the second quarter, we repurchased $76 million of our common stock or 2.2 million shares. In the third quarter to date, we have purchased an additional $50 million shares bringing the total year-to-date purchase amount to $176 million or 5 million shares. We continue to believe that share repurchase provides an efficient and accretive way to return excess capital to stockholders, particularly as the shares trade significantly below our view of their intrinsic value. During the second quarter, Radian Group also paid a quarterly dividend to stockholders totaling $37 million. We also repaid $75 million of the draw on our revolving credit facility, reducing our holding company leverage ratio to 19%. As of quarter end, we had $75 million outstanding on our credit facility draw, which we expect to repay during 2026. Net of these actions, holding company liquidity at quarter end increased to $412 million. We have increased our previous guidance for expected dividends from Rating Guarantee to Radian Group and now expect at least $650 million of total dividends during 2026, including the $340 million paid through the first half of the year. I will now turn the call back over to Rick.

Thank you, Dan. Before we open the line for questions, let me summarize a few key takeaways from the quarter. First, our mortgage insurance business continues to be a source of strength across the enterprise, supported by high-quality risk selection, strong underwriting, favorable portfolio performance and meaningful capital generation. . Second, Inigo completed its first full quarter as part of Radian and continues to reinforce the strategic benefits of our transformation into a global multiline specialty insurer. Third, we remain focused on disciplined execution managing capital thoughtfully by allocating resources to attractive opportunities. And finally, I would like to acknowledge our employees across the company, their dedication, expertise and commitment to our customers are at the heart of our success. While we are still early in the next chapter for Radian, we are encouraged by the momentum across the organization and excited about the opportunities ahead. With that, operator, we are ready to take questions.

[Operator Instructions] And our first question comes from Rowland Mayor of RBC Capital Markets.

I wanted to quickly start on the Middle East loss. I think based on your high 80s combined ratio comment, it was about $20 million. Could you maybe help me understand if that was a few large claims or a higher volume of small medium claims if we should expect ongoing pressures from that work?

Yes. Thanks, Rowland, for the question. So as I noted earlier, the combined ratio was 98% in the second quarter. So that included the reserving related to the Middle East, and that's both for the expected and potential claims related to the conflict itself as well as our updated inflation estimates given the potential for some additional inflationary pressure resulting from the contract. So I'd say the total of all those items in the second quarter was around $30 million, a bit higher than the number you provided. And again, that's inclusive of all of that for the Middle East. Excluding that, the combined ratio would have been generally in the mid- to high 80s. So consistent with where it was in the first quarter and generally, again, consistent with what we would have expected heading into the year. As far as the balance of the year, obviously, we feel like we're very well reserved as we sit here today continue to actively monitor the situation, but feel pretty good about where we sit relative to the reserves and what we know about the conflict at this point.

Okay. That's helpful. And then several P&C insurers are thing a spreading of competition beyond property lines. I was wondering if you could help me with the specialty growth in the quarter and whether you're seeing softening in casualty?

I think Ron, this is Rick. Thank you for the question. We -- I think it's -- clearly, we're seeing the market continue to soften across the specialty and reinsurance business. I think -- and this is all part of what we anticipated as part of the acquisition, so these kind of changing market cycles. For us, the team won't really respond to any kind of specific opportunities that we're seeing. But the teams remain very disciplined in how they go about kind of defining those opportunities. I think the team is well positioned to go through it. And we've been -- continue to be very impressed by the experience and the approach and that discipline that the teams opine across the process. So -- we're here to write profitable business to be selective where we can across the wide range of products that we focus on. And I think when you think about the strategy here, it remains unchanged, and it's pretty straightforward. We won't sacrifice pricing or terms or expected returns to maintain kind of premium volume. So I think when you look year-over-year, the team has seen the opportunity to grow, continues to see attractive rate adequacy across the variety of products, continues to work closely with our customers find those opportunities and kind of right risk where we continue to see value in that. And so I think the summary of all that is that we continue to see opportunities in the market. We're being very selective, leveraging our analytics remaining strongly committed to underwriting this business. One thing I would just highlight because I think it's important to note that I think the market has moved and is going to continue to move to where underwriting discipline matters more than ever. And I think as we worked with the team, one thing that we've seen is the hard market rewarded participation, so you could be in a market and feel good about it because premiums got to such a level. But the next stage of the cycle is going to reward those who remain disciplined and allocate capital selectively and consistently prioritize margin over volume, which is what we plan to do and what the team has done since the beginning -- as the market evolves, I think our underwriting discipline positions us well. And I think that's the strength and kind of opportunities as we go forward. So the team is continuing to find opportunities across variety of classes of products, and we're going to continue to look for those opportunities as we go forward.

Rick, that was super helpful. And just 1 more quick numbers 1 out of me, and I'll jump back in the queue. But you gave a guide on the specialty earned premium for the second half of the year. Does that 20% increase include the January growth that was not part of your consolidated results? .

Good question, Rowland. And the answer is yes, it does. So if you take the full 6 months of the first half of the year, and we provided that in 2 different places in our press release, think that full 6 months as a baseline is 20% on that number is what we'd expect for the second half of the year.

Thank you,[indiscernible] , for that helpful clarification. I appreciate that.

Our next question comes from Terry Ma of Barclays.

Maybe just starting out with specialty. I think I heard you say a combined ratio of low 90s is more reflective of the current environment. Maybe just expand on that. And then longer term, should we expect the combined ratio to migrate back to the high 80s?

Yes. Thanks, Terry, for the question. So in terms of the combined ratio, so I mentioned in my prepared remarks, we'd expect to see kind of the business where we're writing business where we see the market today, kind of expected combined ratios in the [indiscernible] 90's. I think that's coming after several really strong years of performance. And so it's kind of the impact of the expected softening that we've seen across the market. And so we kind of see -- if you look back at the results we provided for Inigo's business over their history, it's kind of been more mid-80s, trended to high 80s, and now you're kind of seeing that into the low 90s. And again, that's just part of the normal cycle that we'd expect and what we anticipated, as Rick mentioned, when we made the acquisition. So I think that's, again, consistent with our expectations as we sit here today. Again, just pairing that guidance with a reminder of the seasonality from a revenue perspective that we'd expect to see the second half of the year premiums, again, 20% higher than the first half of the year. So just want to make sure you kind of take both of those factors into consideration when you think about the near-term kind of underwriting projections for that business. And again, combined ratio, obviously, is going to be subject to some volatility from quarter-to-quarter just based on market effects.

Yes. And I would just -- I think -- as you think about this business going forward across a variety of different cycles, going back to what I kind of said just a few minutes ago, the discipline from an underwriting and value kind of focus from a probability and rate adequacy point of view through those cycles is important. And so over the long -- you can look at this business over the long term in terms of kind of long-term combined ratios with some volatility through it. The one thing that we feel very confident in is our team's ability to kind of navigate those cycles effectively. And again, the fine value kind of from a performance point of view, to kind of navigate through those cycles. So I feel very confident in that. And I think what we're doing is just trying to provide some view of kind of where we are in the cycle at this point and how the team is navigating it.

Got it. That's helpful. And then maybe just switching gears, talking about credit for [indiscernible] just any color on the cure rate trends that you're seeing, Slide 16 that you guys have in your deck still show pretty favorable trends overall like cross vintages. Do you expect that to continue as you get more of the recent vintages start to be?

Yes. Thanks, a for the question. So I think when you look at that slide, again, as you can -- as you noted, you can see that cure development has continued to be very strong and very positive over time. I think when you look at that, that schedule covers multiple years -- and as a result, it kind of already reflects a little bit of newer vintages working their way through in the portfolio. And I think around that, you can probably see on the margins a little bit of a change in terms of some of that care development path from quarter-to-quarter. But broadly, we continue to see that very strong and certainly favorable to our reserving assumptions. So again, we effectively reserving to a 92.5% cure rate and we're getting to that level and beyond pretty consistently across all of those default cohorts. So we continue to see very strong activity even as kind of the newer business kind of works its way into the portfolio. And generally, from a credit perspective, we don't see any pockets of concern when we look at it at a credit metric level, kind of from a geography perspective or across vintages we continue to see everything play out in line with or better than our expectations when we price the business.

And our next question comes from Mihir Bhatia of Bank of America.