And then related – so those two businesses will really operate under the Radian brand as we go forward. The third business, our real estate technology business, which is really the Homegenius brand as we go forward. That business, which leverages really kind of all of our innovative data and analytics and computer vision and AI. We call it Homegenius IQ, has probably been most impacted by the market conditions as any start-up that is trying to find its way into market adoption. I think some of the factors around mortgage lenders and specifically real estate realtors and brokers with all the litigation and changes going on in that market spend challenged. And so what we have done is we have taken the team. The team has done exceptional work.
We believe it is highly unique based upon my own independent kind of feedback I have gotten from other market experts. But we have taken the position that we had to begin to significantly reduce expenses around our investment in that business. And part of that was to also alter our market focus from our go-to-market as to where we focus. So today, we are focused on continuing to invest in the platform, albeit at a lower level team, highly qualified team, highly focused team, very appreciative of their efforts. But we have also turned our market focus towards really identifying partners for that business. And as we go forward, we will report on two things, kind of our progress along that business from a as we explore different partnership opportunities, but also around kind of the impact of our expense savings as we go forward.
So those businesses – your point about the market conditions is, I think, appropriate. And we think each one of them has a different path, and we have focused each of the teams on the opportunity we see for each one of them across what we believe to be the proper expense base.
Unknown Analyst: Awesome. That is super helpful. And then switching gears a little bit. You guys pointed out earlier that care activity has been like pretty strong. I’m just curious if anything that is like structurally changed in terms of borrower behavior or how services are dealing with these defaults and just trying to get a better understanding of like how the use of like modifications or rumination programs are being used to lead to either more cures or a longer term to foreclosure?
Derek Brummer: Yes, this is Derek. It is been pretty consistent with the trend. So I think it is a few things that is driving it. One, the employment market remains strong, so reemployment rates are high. Importantly embedded equity, so if you look at the default inventory, the new defaults that are coming into the portfolio, continue to have a lot of embedded equity. And then a change really that happened post financial crisis and even post COVID pandemic are all the programs put in place to help servicers to make sure that their ability to pay if they have embedded equity to make sure they have sufficient time to recover, which is very important for us. Since we don’t pay claim until there is kind of that transfer of title.
So I don’t think there is been any shift in terms of what we have seen, very consistent in terms of I think the nature of the defaults, the transition of the defaults through the inventory, and that is what we are looking at. So as you kind of think about cure rates, what you are really looking for in terms of trends are the complexion, the type of new defaults that are coming in, we haven’t seen a significant change there. The amount of embedded equity and then the macroeconomic environment. And on all of those dimensions, it is remained remarkably stable over the last several years.
Operator: One moment for our next question. And our next question comes from Soham Bhonsle of BTIG.
Soham Bhonsle: Soham Bhonsle here from BTIG. I hope you are all doing well. Maybe first one on ROE. It looks like the last few quarters, you have been putting up, call it, 14% to 16%. Can you maybe just talk about the sustainability of that ROE over the next year or so? And how should we think about sort of upside, downside ranges going forward?
Sumita Pandit: Yes. Thanks for the question, Soham. So I think if you look at our current quarter, as we mentioned, I think our adjusted net operating ROE was 14.5% for the quarter. Last year, we posted a 15% ROE. So we think that these are really healthy returns that we continue to generate on our business. Now when we look forward, I would say that our loss ratios currently are really low and in fact, negative. And we think that going forward, as we again think about through the cycle performance we don’t plan or expect that the loss ratios will continue to remain where they are today and we do expect loss ratios to begin to return to more normalized levels. Now obviously, when that happens, that would flow through into ROE. But as of now, I think over the last few quarters, we have continued to generate the 14% to 16% ROEs that you are seeing in our business.
Richard Thornberry: One other point just to highlight, too, is that the other side of that numerator denominator question is all the excess capital that we hold, both within Radian Group and Radian Guaranty. And as Sumita went through earlier, and I guess my comments as well, $1.1 billion of liquidity at holdco plus $2.3 billion of excess PMIERs. You got to play through the – what Sumita walked through the example of how the capital flows from Radian Guaranty up Radian Group. But today, part of that ROE is also being reduced by a significant amount of excess capital embedded within the business. And so we will continue to explore that side of the equation as well. So as we — there is kind of some gives and takes right now. But I think we don’t ever like to give forward estimates on ROE. But I think if you look at both parts of that, you will kind of get a sense for what the normalized ROE is for this business through the cycle?
Soham Bhonsle: Yes. No, that is a good point. And then second one on services, it looks like the gross margin has sort of stabilized in the mid-20s here over the past quarter or two. I guess, two questions. Do you view that as sort of a sustainable run rate as we go through the year? And then maybe can you just talk about where margin normalizes once you sort of restructure the segment here?
Richard Thornberry: Actually, I’m trying to reference the numbers that you are speaking to. When you say margins, can you just kind of…
Soham Bhonsle: Gross margins on the business. So services revenue minus direct cost of services.
