Radian Group Inc. (NYSE:RDN) Q2 2023 Earnings Call Transcript

Derek Brummer: Yes, I’ll jump in. So though it’s tough to say. I mean, one of the phenomenons we had in the portfolio is just the embedded equity and so we’ve seen very high cure rates. So particularly in our pending claim kind of bucket, so a very unusually high level with in terms of that cure rate. And so that’s certainly been a positive. If you look at kind of that default portfolio, if you take an index based approach over 80% has 20% or more equity. So until you kind of have a turnover in the portfolio that does put downward pressure in a positive way in terms of potential paid claims. So you probably need to see a significant turnover in the portfolio.

Rick Thornberry: Yes. And we are really is kind of the law of small numbers right now, just kind of watching as this thing kind of evolves through the cycle. So I think as Sumita and Derek said, we’re watching it carefully and I think being appropriately prudent about trying to factor in too much as we go forward.

Mihir Bhatia: And my last question, just — Derek, just to follow up on the — I understand it’s an index-based portfolio approach that the 20% equity stat that you gave, like that 80% have over 20% equity, what would have been the rate like typically in, I don’t know, 2015, 2017 around that pre-pandemic, I guess, what would be the typical equity rate in your pending [Indiscernible] portfolio.

Derek Brummer: Yes. I’m probably not going to — I’m not going to guess on that lower, but I don’t have a percentage off the top of my head in terms of kind of the embedded equity. But if you think about that, just looking at the run-up in home prices, kind of after that period of time, it would be significantly less. And so — I can’t think of any time in history where we would have had this much embedded equity in the default portfolio.

Rick Thornberry: Maybe more of a normal amortization kind of embedded equity over time with small HPA compared to kind of 2021 ramp up in HPA. So I think the comparison is to Derek’s point, probably two different scenarios.

Operator: [Operator Instructions] I’m currently showing no further questions at this time. I’d like to hand the conference back over to Mr. Rick Thornberry for any closing remarks.

Rick Thornberry: Thank you, and thank you all. Appreciate you joining us today. Appreciate the questions and a good discussion. And most of all, appreciate your interest in Radian and the team here. We look forward to talking to each of you as — in the coming months as we have an opportunity to and talk about how we’re executing our business plans as we’ve laid out here. So have a great day, and look forward to talking to you soon. Thank you.

Operator: Thank you. This concludes today’s conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.