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Radian Group Management Discusses Q2 2012 Results - Earnings Call Transcript

Radian Guaranty's risk-to-capital ratio remains steady at 21:1 in the second quarter. The maintenance of our risk-to-capital ratio over time has been achieved by the many actions we have taken to manage our risk-to-capital position, including internal and external reinsurance, reductions in commutations of risk exposure and by realizing investment gains. We believe that Radian is positioned to continue writing new high-quality mortgage insurance business uninterrupted well into the future.

Now let me turn to the topics that we believe are top of mind. First, we continue to write more new mortgage insurance business with outstanding credit quality that can generate strong returns. In recent months, we have been capturing the largest share of new mortgage insurance business than ever before in our history in an exceptionally competitive but high-quality market. In the second quarter, we wrote $8.3 billion of new mortgage insurance business and wrote $14.8 million through the end of the second quarter.

We wrote 3x as much as new business as in the first half of 2012 as we did in the first half of last year, and the momentum continued in July with another $3.4 billion of new business written. The business written in the month of July alone is estimated to generate $20 million in after-tax value over its life after adjusting for reinsurance, and perhaps even more if the credit performance is better than expected, as has been the case with our most recent originations.

There's no denying that our sales and customer service teams have hussled [ph]. Their energy and enthusiasm help to set Radian apart as we continue to increase the amount of business we are writing. We have successfully retained our traditionally strong share of business from the nation's largest lenders while steadily increasing our business volume from credit unions, community banks and independent mortgage lenders. In fact, 18% of our NIW in 2012 came from customers new to Radian since last year, and nearly 40% from the approximately 1,100 customers, new to Radian since 2008. Importantly, as of the second quarter, the 2009 and -- through 2012 books grew to more than 35% of our primary risk in force and the most problematic 2006 and '07 books are now down to just under 30%. If the pace of our new business volume continues, we expect that, by mid-2013, our book of business written after 2008 will be larger than the book written in 2008 and prior. We view this shift as a positive factor that differentiates Radian and view it as one of the primary drivers of our expected return to operating profitability in 2013.

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