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Sumita Pandit

Thank you, Rick, and good morning to you all. We started the year with another strong quarter of operating results, producing net income of $145 million or $0.98 per diluted share, consistent with the $0.98 per diluted share reported in the fourth quarter 2024.
Adjusted diluted net operating income per share was slightly higher at $0.99 for the first quarter compared to $1.08 in the previous quarter. We generated a return on equity of 12.6%, reflecting the strong fundamentals of our business and grew book value per share 11% year over year to $32.48. This book value per share growth is in addition to our regular stockholder dividends, which were $37 million during the quarter. We also repurchased $207 million of shares during the first quarter, demonstrating our commitment to returning excess capital.
Turning now to the detailed drivers of our results. Our revenues continued to be strong in the first quarter. We generated $318 million of total revenues during the quarter, a slight increase from the fourth quarter of last year.
Slides 10 through 12 in our presentation include details on our mortgage insurance in-force portfolio as well as other key factors impacting our net premiums earned. We generated $234 million in net premiums earned in the quarter, consistent with the prior quarter. Our large high-quality primary mortgage insurance in-force portfolio grew year-over-year to $274 billion as of the end of the first quarter.
We wrote $9.5 billion of new insurance written in the first quarter of 2025, which was lower compared to the fourth quarter of 2024, primarily due to a smaller origination market. As interest rates remain elevated, they also continue to benefit the persistency rate of our existing insurance in force, which highlights the balance and resiliency of our business model.
As shown on slide 10, our persistency rate increased to 86% this quarter, which was the second highest rate we observed in over 10 years. We remain focused on writing NIW that we believe will generate future earnings and economic value while effectively maintaining the portfolio's health, balance and profitability.
As of the end of the first quarter, approximately two-thirds of our insurance in force had a mortgage rate of 6% or less. Given current mortgage interest rates, these policies are less likely to cancel due to refinancing in the near term, and we, therefore, continue to expect our persistency rate to remain strong.
As shown on slide 12, the in-force premium yield for our Mortgage Insurance portfolio remained stable as expected at 38 basis points, and we expect the in-force premium yield to remain generally stable for the remainder of the year as well.
As shown on slide 13, our investment portfolio of $6.3 billion consists of well-diversified, highly rated securities and other high-quality assets. We generated net investment income of $69 million in the first quarter. Included in this net investment income was $6 million of income related to residential mortgage loans held for sale within Radian Mortgage Capital. Compared to prior quarter, the decline in net investment income is primarily driven by lower mortgage loans held for sale.
Our unrealized net loss on investments reflected in stockholders' equity was $295 million at quarter end. We continue to expect that our strong liquidity and cash flow position will provide us with the ability to hold these securities to recovery of the remaining unrealized losses, which would equate to $2.09 that is expected to accrete back into our book value per share over time.
I will now move on to our provision for losses and related credit trends, which continue to be positive with strong cure activity and very low claim levels.
On slide 16, we provide trends for our primary default inventory. Total defaults decreased to approximately 23,000 loans at quarter end, resulting in a portfolio default rate of 2.33% compared to 2.44% in the previous quarter. The number of new defaults reported to us by services declined to approximately 12,500 in the first quarter compared to approximately 14,000 reported in the fourth quarter, a decline of 10%. This quarterly decline in new defaults reflects typical seasonal trends as well as lower defaults in areas associated with Hurricane Celine and Milton.
Excluding those hurricane-impacted areas, new defaults still declined by 7% in the first quarter compared to prior quarter. It is important to note that our new defaults continue to contain significant embedded equity, which has been a key driver of recent favorable trends, including higher cure rates and reduced severity for policies that result in claims submission.
In addition, the total number of cures in the first quarter grew 13% compared to the fourth quarter. Cure rates continue to be really strong with cure rates for February and March 2025, among the five highest months we have observed in at least 10 years. Our loss ratio remained low with a net expense of $15 million in our Mortgage Insurance provision for losses in the first quarter compared to a de minimis amount in the fourth quarter.
Let's turn to slide 18. As mentioned last quarter, we reduced our initial default to claim rate to 7.5% and maintained that rate in the first quarter, which resulted in $54 million of loss provision for new defaults. Positive reserve development on prior period defaults of $39 million partially offset this provision for new defaults.
As shown on slide 17, our cure trends have been very consistent and positive in recent periods. With approximately 90% of defaults curing within four quarters and 98% curing within 12 quarters, meaningfully exceeding our initial default to claim expectation, which anticipated approximately a 92% cure rate. Cure rates in the first quarter exhibited typical seasonal trends and compare favorably to similar periods for prior years.
Moving to our other business lines. Total revenue in our all-other category were $36 million in the first quarter, an increase compared to $34 million in the fourth quarter. The adjusted pretax operating loss for all other was approximately $3.5 million in the first quarter. Now turning to our other expenses.
For the first quarter, our other operating expenses totaled $77 million, a 12% decrease from prior quarter. Operating expenses were in line with our expectations as communicated last quarter. As a reminder, for 2025, we expect operating expenses of $320 million or to average $80 million per quarter.
While we continue to actively manage our operating expenses and seek opportunities for additional efficiencies, it is important to note that expenses can fluctuate from quarter-to-quarter due to changes in items such as variable incentive compensation and investments in strategic growth initiatives. Moving to our capital, available liquidity and related strategic actions.
Radian Guaranty's financial position remains strong. We paid a $200 million distribution to Radian Group in the first quarter while maintaining a stable PMIERs cushion of $2.1 billion. As highlighted on slide 21, Radian sought and received approval from the Pennsylvania Insurance Department to treat the $200 million distribution paid in the first quarter as a return of capital rather than an ordinary dividend.
As a result, Radian Guaranty's common stock and paid-in surplus balance reduced from $500 million to $300 million during the quarter, while its positive unassigned surplus grew to $408 million, strengthening Radian Guaranty's ability to pay additional ordinary dividends in the future. We expect that Radian Guaranty will pay up to $795 million of total distributions to Radian Group in 2025, in line with its 2024 statutory net income.
This $795 million of total capital return includes both this first quarter distribution and expected future ordinary dividends over the remainder of the year.
Moving to our holding company, Radian Group. Within the quarter, we repurchased 6.5 million shares of our common stock at a total cost of $207 million for an average price paid of $32.07. In addition, we returned $37 million in shareholder dividends for a total of $244 million of capital returned in the quarter. As of the end of the first quarter, we had $336 million remaining on our current share repurchase authorization.
As demonstrated by repurchase activity in the quarter, our expectation for a similar level of repurchase volume in the second quarter and our track record in recent years, we continue to believe that share repurchase provides an attractive option to deploy our excess capital.
Our available holding company liquidity was $834 million at the end of the first quarter. The decline in liquidity this quarter of approximately $50 million was due to higher share repurchases, which we believe was an attractive use of a portion of our excess liquidity. We also have a credit facility with borrowing capacity of $275 million, providing us with additional financial flexibility for short-term cash management, including activity in support of our capital return opportunities.
In April 2025, consistent with our use of risk distribution strategies to effectively manage capital and proactively mitigate risk, Radian Guaranty agreed to a multiyear quota share reinsurance arrangement with a panel of third-party reinsurance providers.
We are very pleased with these transactions, which further mitigate the tail risk of our portfolio and provide efficient PMIERs capital relief at a low cost of capital. The market demand for mortgage insurance risk is strong as evidenced by the attractive terms we secured and the expansive group of over 20 highly rated reinsurers that are party to the arrangement, 9 of which are new to Radian.
Further, securing quota share coverage on our new production through June 30, 2028, provides us with both a high certainty of coverage as well as significant flexibility. We believe we are very well positioned to continue effectively managing our PMIERs position at Radian Guaranty from a position of strength.
I will now turn the call back over to Rick.

Richard Thornberry

Thank you, Sumita.
Our results in the quarter continue to reflect the balance and resiliency of our company as well as the strength and flexibility of our capital and liquidity positions. We expect the earnings and cash flows generated from our large in-force Mortgage Insurance and investment portfolios to allow us to continue operating from a position of strength and delivering value to our customers, policyholders and stockholders.
We believe our active management of capital through our share repurchases and dividends as well as our overall leverage reflects the strength and health of our financial position. We continue our focus on managing operational efficiency and remain on track to achieve our targeted reduction in run rate operating expenses this year.
And finally, I want to recognize and thank our dedicated and experienced team at Radian for the outstanding work they do every day. And now operator, we would be happy to take questions.

Question and Answer Session

Operator

(Operator Instructions) Terry Ma, Barclays.

Terry Ma

Maybe just to start off with credit. Last quarter, you indicated you're nearing a peak for some of the larger vintages seasoning. And expect default rate to kind of shake out in the sub-3% range unless the macro changes. So just given all the uncertainty we have, I'm just curious, what are your kind of updated thoughts on kind of credit loss expectations and anything you can kind of do on the pricing or underwriting side should the macro weaken?

Sumita Pandit

Yes. Thanks for the question, Terry. So I think as we have given you prior guidance, I would say where we are today, we continue to see really strong performance in terms of our cure trends. If you look at our default rate this quarter, it was actually a little lower than the fourth quarter of last year. We went down from 2.44% to about 2.33% as our default rate.
In fact, for this quarter, our cures actually were higher than our new defaults. And so we continue to see really strong, I would say, both default and cure trend performance and in line with our expectations. I think as far as our expectation for through-the-cycle default rates is concerned, I think we still remain in that sub-3% range. We don't expect to be really too different from that level. And in terms of modeling our expectations, we always take a through-the-cycle view.
We want to be conservative. We want to make sure we track different macroeconomic outcomes given the uncertainty externally. And so we remain conservative, but our data continues to be extremely strong, and our cure trends continue to be much better than what we initially reserved for.

Terry Ma

Got it. That's helpful. And then the claims rate at 7.5%, you guys took that down from 8%. I think it was like 2 quarters ago. Just kind of remind me what the drivers there are? And then like looking forward, how should we kind of think about that claims rate through a variety of kind of economic scenarios? Is there some sort of kind of implied unemployment rate that contemplates?

Sumita Pandit

So I think when we look at our default to claim rate assumption, we really want to do that through the cycle. We obviously look at current unemployment trends. We look at other macroeconomic indicators, but the reserving assumption is really through the cycle.
And when we chose to bring that down from 8% to 7.5% in the fourth quarter of last year, we took into account cure trends, and we took into account what we were seeing clear positive trends, primarily driven from home price appreciation, and we felt comfortable reserving less for new defaults. We've continued to keep that assumption for this quarter.
Also, keep in mind, last quarter, we did not make a different assumption for hurricane-related defaults. We blended it together and we reduced our overall roll rate from 8% to 7.5%. We feel comfortable with that assumption, and we didn't make a change this quarter. Having said that, we would change that if we see the macroeconomic scenario change drastically from where we are today.

Operator

Bose George, KBW.

Bose George

Actually, in terms of buybacks, I think, Sumita, could you repeat what you said about buybacks in the second quarter? And then just in general, is there a good way to think about payout ratios or just broadly, just philosophy on capital return?

Sumita Pandit

Yes, sure. I'll start, and Rick jump in with other thoughts as we go through this. So I would say what I mentioned in my prepared remarks, Bose, was that we really accelerated our share buyback this quarter. You saw us almost go out and buy back 4 times the shares that we were buying in prior quarters. We did that because, one, we saw great opportunity in terms of where our stock was trading this quarter.
Second, we also continue to use our excess liquidity in our holding company. If you remember last year, we used some of our holding company liquidity to actually pay down our debt. Right now, we have no debt maturities over the next two years.
So we used our holding company liquidity to really take advantage of where our stock was trading, and we increased our share buyback amount this quarter. And I think we will continue to buy back shares at a similar pace, at least for second quarter, given where we are trading today.
So yes, I mean, we plan to keep using our liquidity from our holding company to make sure that we are buying back shares and capturing value. Rick, would you add anything else?

Richard Thornberry

Yes. I would also say you've seen us over the last five years, buy back $1.4 billion worth of shares, 30% of our shares outstanding. Go back seven years, we bought back $1.9 billion or 39% of our shares. So we've been very active in the market. I think we always have kind of a baseline view of share buybacks kind of on a quarter-to-quarter basis.
But we're also always well armed with an authorization in place to be able to lean in, not just any time, but at the right time to really kind of find value for shareholders and return capital. So I think this last quarter and the second quarter.
As Sumita said, where in the second quarter, we expect to buy a similar amount back. We're going to buy back in the first half of this year over -- approximately double what we bought back all of last year. And I think the opportunity presented itself, and we executed on it.
So I'm proud of the team. I think when you look at our -- the value of our stock, we think it trades below intrinsic value. You think about the embedded value of our future earnings on the portfolio, which we went through on our Investor Day a couple of years ago, you look at AOCI, which discounts book value, you look at the overall economics of our business and the clarity we have around kind of future cash flow up to the Holdco from RGI, I think we're in a really positive position.
So you saw us kind of act in reaction and response to a market opportunity. And through the second quarter, if we buy back over $400 million, I think that will be a pretty significant positive impact for Radian overall.

Sumita Pandit

Yes. I think you also had a question on payout ratio. So we haven't really given guidance on a payout ratio in the past. All I would say is that if you look at what we expect to be the dividends from RGI to Group, we mentioned that we are expected to pay up to $795 million. That's our statutory net income constraint because that was our stat net income in 2024.
So that's the max ordinary dividend or return of capital that we can do from RGI to Group. So you can see how much, what's the pace at which we are returning that capital back to our shareholders.

Bose George

Okay. Great to see the pace of the buybacks. And then just in terms of the delinquencies, can you just talk about the level of embedded equity in the new delinquencies? And is that kind of similar to what you've seen, say, over the last year?

Sumita Pandit

Yes. I think it continues to be really strong. I think if you look at our new defaults, about 75% of our new defaults continues to have more than 20% equity. So it's still a very, very consistent trend, and we continue to see a very strong cure performance as a result.

Operator

Doug Harter, UBS.

Douglas Harter

Just how are you thinking about what is the right level of Holdco liquidity kind of over time, especially kind of given the work you've already done on bringing down debt and no near-term debt maturities.

Sumita Pandit

Yes. I mean I think -- thanks for the question. It's -- we are in a great position. So you can see that we are using the flexibility we have in our holding company and continuing to really think about the use of that liquidity. So we started the quarter with about $885 million of liquidity in our holding company.
As mentioned, we returned $244 million back to shareholders. We got another $200 million from RGI as a return of capital in this quarter instead of a dividend. And so we are currently sitting at about $834 million of liquidity in our holding company as well as a credit facility. We've not given a specific guidance as to what is that threshold number that we need to keep in our holding company. We obviously look at what our fixed charges are, how much do we really need to keep aside from an interest coverage perspective as well as the dividends that we pay to our shareholders.
We do look at all of that and think of our fixed charge from our holding company. But what I will say is that right now, the liquidity we have in our holding company is much, much higher than where we need to be to really run our business. And we will continue to do the right thing and make sure that we're returning that capital back to shareholders as and when we see value in our share price.

Richard Thornberry

Yes. And I would just add to that, kind of echoing your point. The transparency we have of cash flow from RGI up to Radian Group kind of for the foreseeable future, as we've talked about, is really puts us in a position of strength to be very kind of agile and flexible when it comes to capital management.

Operator

Mihir Bhatia, Bank of America.

Mihir Bhatia

I wanted to go back to the buyback discussion. I believe your buyback used to be a value-based 10b5 plan. Has that changed? And just can you talk a little bit about the mechanics of how the buyback work? Is it just a matter of you putting more money towards it and still executing on that value-based plan? Or like -- I'm just trying to understand the -- like how you're being opportunistic and the flex in it in terms of moving up or down quickly.

Sumita Pandit

Yes. I mean it is still a 10b5 plan. I mean I think we do have to make sure that we keep that grid active. So we have a grid, and we execute based on that grid. We have continued to make changes to that grid as we have seen opportunity.
And I think that's what you're seeing as a result of how we are now buying back much more shares. So yes, while it is executed through a 10b5 plan, we've increased the pace and the amount of capital that we are putting aside to execute the share repurchase program.
I'll also say that as we -- there was a moment maybe two years back when we were being a little more conservative, and it was much more of a value-based plan. At this point, I would say we just see tremendous opportunity in our share price. I think Rick talked about where we see value from.
It's from AOCI, it's from the embedded value of our MI business that's not reflected in our book value today. And I think we gave some indications of that two years back now in our Investor Day. So I would say, yes, it is value-based, but we are also being a little bit more optimistic about where we are headed as a business, and we will continue to buy back those shares based on a 10b5 grid.

Mihir Bhatia

Got it. That makes sense. And then in terms of the claim rate, cure rate type balance, if you will, the cure rates have been very strong. I mean I think you have the slide and everything you can see is like 97%, 98%. You mentioned cure rates are like you had the two highest months over the last 10 years recently. Is that all just HPA driven? Like are there other factors driving it? Has something -- is there something other than HPA that is driving such strong cure rates? And can you talk about that a little bit?

Richard Thornberry

Mihir, thank you for that question. I'll take that, and Sumita can add to it as well. But I think, look, embedded equity in the home is certainly a good incentive for a homebuyer to make sure they find a way to protect that equity.
But I would say, combined with that, there's a tremendous amount of muscle memory that we all came through kind of from the great financial crisis, but then COVID where we, as an industry and as a government and a regulator and we learned that keeping the borrower in their home to allow them to get their feet back on the ground and kind of move forward has proven to be a really positive factor.
So I would put that, and I would just emphasize that some of the learnings from COVID have translated into even a better structure that avoids kind of, I guess, abuses of that kind of forbearance.
So it's -- the structure for helping people, I think, has been improved. You also look at kind of the employment cycle that continues today even with all the headline news around tariffs and global trade and so forth.
Employment continues to be a factor in enabling people to get reemployed if they become unemployed. And so those are factors we watch as Sumita went through a few minutes ago talking about how we set reserve policy. We really look at kind of a number of different factors kind of going through.
I think there's a number of factors today that are enabling people to cure better than we've expected to date, right? But we're going to continue to monitor it and continue to watch it and continue to express our opinion through our reserves.

Operator

I'm showing no further questions at this time. I'd now like to turn it back to Rick Thornberry for closing remarks.

Richard Thornberry

I appreciate that. Thank you all for joining the call today. We always appreciate your time and interest in Radian and our ability to kind of update you on the current state of our business, which we're very proud of. We look forward to the opportunity to meet and talk to many of you over the coming weeks and answer your questions. As always, one of the highlights of the job I have here is the opportunity to meet with you all. So have a great day, and thank you for your time.

Operator

This concludes today's conference call. Thank you for participating, and you may now disconnect.