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Radian Group (RDN) Q1 2019 Earnings Call Transcript

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Radian Group (NYSE: RDN)
Q1 2019 Earnings Call
May. 01, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Radian Group first-quarter 2019 earnings call. [Operator instructions] As a reminder, today's call is being recorded. I'll turn the conference now to Ms.

Emily Riley, senior vice president of investor relations. Please go ahead.

Emily Riley -- Senior Vice President of Investor Relations

Thank you, and welcome to Radian's first-quarter 2019 conference call. Our press release, which contains Radian's financial results for the quarter, was issued last evening and is posted to the Investors section of our website at www.radian.biz. This press release includes certain non-GAAP measures, which will be discussed during today's call, including adjusted pre-tax operating income, adjusted diluted net operating income per share, adjusted net operating return on equity and services adjusted EBITDA. A complete description of these measures and the reconciliation to GAAP may be found in press release Exhibits F and G and on the Investors section of our website.

In addition, we've also presented a related non-GAAP measure, services adjusted EBITDA margin, which we calculate by dividing services adjusted EBITDA by GAAP total revenue for the services segment. This morning, you will hear from Rick Thornberry, Radian's chief executive officer; and Frank Hall, chief financial officer. Also on hand for the Q&A portion of the call is Derek Brummer, senior executive vice president of mortgage insurance and risk services. Before we begin, I would like to remind you that comments made during this call will include forward-looking statements.

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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 a discussion of these risks, please review the cautionary statements regarding forward-looking statements included in our earnings release and the Risk Factors included in our 2018 Form 10-K and subsequent reports filed with the SEC. These are also available on our website. Now I would like to turn the call over to Rick.

Rick Thornberry -- Chief Executive Officer

Thank you, Emily, and good morning. Thank you all for joining us today and for your interest in Radian. I'm pleased to report another excellent quarter for our company. These results are driven by the fundamental strength of our business model, fueled primarily by the outstanding results in our mortgage insurance business.

We look forward to discussing our first-quarter performance during the call today, ensuring a more in-depth overview of our business during our Investor Day here in Philadelphia on May 7 will also be webcast live and available for replay on radian.biz. Now turning to our results and our strong financial performance, net income for the first quarter grew to $171 million and diluted net income per share increased 50% year over year to $0.78. Adjusted pre-tax operating income grew to $202 million and adjusted diluted net operating income per share was $0.73, representing a 24% increase year over year. Book value per share grew 24% year over year and return on equity was 19% while adjusted net operating return on equity was 17.7% for the first quarter.

With regard to our mortgage insurance business, we grew our primary insurance in, of course, 10% year over year to $224 billion. This marks the fifth consecutive quarter of 10% year-over-year growth for our portfolio. Given the size of our portfolio, this level of growth has been a strong statement about the strength and value of our mortgage insurance business. Our mortgage insurance portfolio, which is one of the largest in the industry, is the primary driver of future earnings of our company.

It is important to note that the projected economic value of this portfolio is not reflected in the current period's financial statements nor is it reflected in our reported book value. But it is expected to be recognized over time. Importantly, the value of this portfolio provides us with significant strategic financial flexibility. We'll talk more about economic value during our Investor Day.

The $10.9 billion of NIW we wrote in the first quarter, combined with favorable persistency is what drove the growth in our insurance in force portfolio. And as we look ahead this year, overall housing market trends are positive. Interest rates remain at historically low levels, and employment trends are positive. This, combined with increased housing supply and continued moderation of home price appreciation, is expected to lead to growth in purchase originations, particularly for first-time homebuyers, who represent more than 30% of home sales.

While new business volume for the first quarter of the year was tempered by typical seasonal patterns, we are encouraged by these positive market trends in our strong pipeline for new mortgage insurance business. We expect to write new MI business in 2019, that is in line with the record breaking levels we have achieved over the past few years and in excess of $50 billion. I have said before that this was a great time to be in the mortgage insurance business, the business fundamentals are incredibly strong guardrails in place for mortgage lending and servicing under Dodd-Frank and our mortgage insurance industry is governed by clear consistent and transparent risk-based capital requirements under PMIERs and operating guidelines with uniform master policy. That credit quality of our existing book of business is excellent as is the credit environment we operate in today.

In fact, in the first quarter, the number of defaulted loans in our portfolio dropped to a low we haven't seen in 20 years and a percentage of cures reached 26.7%, the highest level in more than a decade. Demand for our private mortgage insurance products remain strong. Then the origination market continues to be dominated by purchase loans, which is a positive trend for our mortgage insurance industry, given the purchase loans are three to five times more likely to have MI versus a refinance loan. During this past quarter, purchase loans accounted for 92% of our NIW.

Turning to pricing and the competitive environment, in January, we introduced RADAR rates broadly to the market as another MI pricing option available for doing business with Radian. As we expected, the transition for customers has been seamless and today, the majority of our mortgage insurance volume is coming through RADAR rates. The overall increased granularity allows us to more dynamically shape the risk profile of our MI portfolio, and ultimately, the economic value of the business we write. We believe the combination of flexible pricing options, excellent customer service and outstanding relationships is the right market strategy to both address to our customer needs and provide attractive risk-adjusted return for Radian.

Now moving to our services segment, we continue to make progress across our mortgage, real estate and title services business. Consistent with the first quarter of 2018, we expected to see a decline in revenue in the first quarter of 2019. Though services revenues in the first quarter were lower than we expected, the decline from the fourth quarter was largely related to a slow start to the year for the overall mortgage and the real estate market, the timing of onboarding of several new clients and the investment in our core products and services and the integration of recent acquisitions. We remain confident in our strategy, the market opportunity for our services, the value of our customer relationships, and the team we have in place to grow revenues and build value.

We look forward to providing a deeper dive in our Investor Day next week as to why we're excited about the opportunities developing across the segment. In terms of capital management, as I mentioned last quarter, we believe there are a number of strategic benefits from assessing both the capital -- assessing both the capital and reinsurance markets to distribute risk, including increased financial flexibility, the reduction for our all cost of capital, enhanced capital efficiency and most importantly, the opportunity to reduce portfolio and financial volatility through economic cycles. Consistent with this objective, we closed our second mortgage insurance-linked notes transaction in the second quarter in the amount of $562 million related to our 2018 monthly premium book. Combined with our first ILN transaction in the fourth quarter of last year and our existing quota share reinsurance programs, these transactions have significantly reduced the risk profile for our company.

In April, we received approval from the Pennsylvania Insurance Department for another return of capital from Radian Guaranty to Radian Group of $375 million. This, combined with the $450 million return last year has significantly improved our financial flexibility. It's also important to note that we have an interest and operating expense sharing agreement in place for the operating company to reimburse Radian Group, which provides the benefit of minimizing incremental cash needs of the holding company. Frank will provide additional insights into our capital management strategy.

Finally, we also increasingly expanded our share repurchase program in the first quarter. Frank will provide details about our most recent share repurchases. We are pleased that our strong financial position has afforded us the -- an opportunity to return value to stockholders, and we expect to continue to use repurchases within the context of our overall capital strategy in an opportunistic manner. This strategy is designed to enhance an already strong capital structure and further demonstrate our commitment to effectively managing capital for our stockholders.

Turning to the regulatory legislative landscape, we are pleased to see Mark Calabria sworn in as the next director of FHFA. We believe Director Calabria's deep understanding of the mortgage finance system and particularly, support for increasing the role of private capital will be invaluable in promoting a more robust housing market that provides borrowers with access to affordable low down payment mortgage credit by also protecting taxpayers from undue mortgage credit risk. More recently, we were happy to see the employment of Adolfo Marzol as Director Calabria's principal advisor. Marzol has more than 30 years of private sector experience in mortgage finance, including private mortgage insurance.

We look forward to working with Director Calabria in his team. More broadly, the dialogue regarding potential reform of the housing finance system continues, including the President's recent executive memorandum requesting plans for reform, as well as recent legislative proposals and related congressional hearings. While it remains difficult to handicap the likelihood, form and timing of potential reform, there -- then continues to be an overwhelming consensus for an increase role of private capital solutions. Given the reform nature of our industry with strong and consistent capital standards, new master policies and high operational standards, we are confident that private mortgage insurance will remain a critical component of new -- for any new housing finance system.

Turning briefly to the FHA, we believe that our industry continues to gain share from the FHA on higher FICO business and it remains unlikely that FHA will reduce its pricing as their focus appears to be on modernizing their internal systems and increasing their risk oversight in various areas. Now I would like to turn the call over to Frank for details of our financial position.

Frank Hall -- Chief Financial Officer

Thank you, Rick, and good morning, everyone. To recap our financial results reported yesterday evening, we reported net income of $171 million or $0.78 per diluted share for the first quarter of 2019 as compared to $0.64 per diluted share in the fourth quarter of 2018 and $0.52 per diluted share in the first quarter of 2018. A percentage increase of 22% and 50%, respectively. Adjusted diluted net operating income was $0.73 per share in the first quarter of 2019, an increase of 4% from the fourth quarter of 2018 in an increase of 24% over the same quarter last year.

I will now focus on some of the drivers of our results for the quarter. I'll start with the key drivers of our revenue. Our new insurance written was $10.9 billion during the quarter, compared to $12.7 billion last quarter and $11.7 billion in the first quarter of 2018. While total NIW decreased 7% compared to the first quarter of 2018, this decline was primarily in single premium NIW as our monthly premium NIW was down only 1% year over year.

Direct monthly and other recurring premium policies represented 83% of our NIW this quarter. Consistent with the fourth quarter 2018, and an increase from 79% for the same quarter a year ago. Borrower paid single premium policies represented 13% of our NIW this quarter, while lender paid single premium policies declined to 4% of our volume this quarter. This is in contrast to a year ago, when approximately 75% of our single premium NIW was lender paid.

This shift in business mix is expected, intentional and designed to improve the return profile of our single premium business overall as borrower paid singles have higher expected returns relative to lender paid policies. This is because they are subject to automatic cancellation under the Homeowners Protection Act creating shorter expected lives and for this reason, capital requirements for -- borrower paid singles is lower as well. In total, borrower paid policies represented 95% of our new business for the first quarter. The new business we are writing today continues to consist of loans that are expected to produce excellent risk-adjusted returns.

Primary insurance -- and of course increased to $223.7 billion at the end of the quarter, our fifth consecutive quarter with year-over-year insurance in, of course, growth of 10%. It is important to note that monthly insurance in [Inaudible] increased 12% year over year and is grown by over $30 billion over the past two years. As Rick mentioned, the in-force portfolio is the primary source for our future earned premiums and as such, is expected to generate future earnings that are not reflected in the current period financial statements, nor reflected in our reported book value. Persistency trends remain positive and our 12-month persistency rate increased to 83.4% in the first quarter 2019, compared to 83.1% in the fourth quarter of 2018.

Our quarterly annualized persistent fee was 85.4% this quarter, and in line with the prior quarter and an increase from 84.3% in the first quarter of 2018.Our direct in-force premium yield was 48.6 basis points this quarter, compared to 49 basis points last quarter and 48.7 basis points in the first quarter of 2018, as seen on Slide 10. Net premium yields declined slightly from 47.4 basis points in the prior quarter to 47 basis points this quarter, which includes the full impact of ceded premium associated with our 2018 combined insurance-linked note and excess-of-loss reinsurance transaction of approximately 0.5 basis points. The second quarter 2019 insurance-linked note transaction is expected to impact our future net premium yields by approximately 0.8 basis points, with the increase due to the larger amount of risk distributed in the second transaction relative to the first. While this reduction in premium yield of 1.3 basis points is due to the ILN, XOL transactions, is equivalent to approximately 2.7% of the first quarter net premium yield, the ILNs had the effect of reducing PMIERs' minimum required asset by almost 30%, a very favorable trade-off for the risk ceded.

Net mortgage insurance premiums earned were $263.5 million in the first quarter of 2019, compared to $261.7 million in the fourth quarter of 2018 and $242.6 million in the first quarter of 2018. This 9% increase from the first quarter of 2018 was primarily attributable to our insurance in force growth. Total Services segment revenue decreased to $36 million for the first quarter of 2019, compared to $41.5 million for fourth quarter of 2018 and increased from $34.2 million from the first quarter of 2018. The decrease in revenue compared to the prior quarter was due to the factors noted by Rick previously, including typical seasonality of the mortgage in real estate services business.

Our reported services adjusted EBITDA was a loss of approximately $900,000 for the first quarter of 2019. Our investment income this quarter was $44 million, a 4% increase over the prior quarter and a 29% increase over prior year, due to both higher rates and higher balances in our investment portfolio. At quarter end, the investment portfolio duration was shortened from four years to 3.6 years and in anticipation of funding our upcoming 2019 senior debt maturity and potential utilization of the share repurchase authorization. At this time, we have no plans to refinance our 2019 maturity.

It is noteworthy that our investment portfolio has grown approximately 17% or just over $800 million since the first quarter of 2018, a sizable increase in our largest on-balance-sheet earning asset. Moving now to our loss provision and credit quality, as noted on Slide 14, during the first quarter of 2019, we had positive reserve development on prior period defaults of $18.2 million. This positive development was driven primarily by a reduction in assumed claim rate on existing default based on observed trends, including an increase in cure rates on these defaults as Rick previously mentioned. The default-to-claim rate applied on new primary defaults received in the quarter, which reflects recent observed trends was approximately 8% in both the first quarter of 2019 and fourth quarter of 2018 and approximately 9% in the first quarter of 2018.

We believe that if observed trends continue, default-to-claim rates could fall further, although the likelihood and timing of a potential decline is difficult to predict. The total number of new defaults decreased by 1% compared with the fourth quarter of 2018 consistent with typical seasonal patterns and increased by 12.4% compared to the first quarter of 2018. Consistent with typical default seasonal patterns, the shift in our portfolio composition toward more recent vintages is expected to result in slightly increased levels of new defaults in our portfolio for 2019 as compared to 2018 as new defaults per recent vintages will outpace the reduction in pre 2009 defaults. It is noteworthy, however, that total default count has constantly declined to very low levels and currently stands at the 20-year low that Rick mentioned of approximately 20,000 loans with very high cure rates.

As economic indicators have continued their positive trends, cumulative loss ratios our post 2008 business continued to track to historically low levels. Now turning to expenses, other operating expenses were $78.8 million in the first quarter of 2019, compared to $77.3 million in the fourth quarter of 2018 and $63.2 million in the first quarter of 2018. The change in expenses year over year is primarily driven by $5.7 million of nonoperating items, $3.6 million related to businesses acquired in 2018 and an increase of $1.6 million in legal and other professional services. Moving now to taxes, our overall effective tax rate for the first quarter of 2019 was 20.9%, and our expectation for our 2019 annualized effective tax rate before discrete items is approximately the statutory rate of 21%.

Now moving to capital, as Rick mentioned, in April of 2019, we closed on a second insurance-linked note transaction of approximately $562 million. This brings the total ILN issuance by Eagle Re to just under $1 billion and covers origination years of 2017 and 2018 for our monthly premium business. In total, Radian Guaranty has reduced PMIERs' capital requirements by over $1.5 billion by the -- distributing risk through both the capital markets and third-party reinsurance execution. We expect that this prudent risk distribution strategy in our disciplined capital management will continue to enhance our risk profile and improve our financial flexibility.

As a result of further capital enhancement actions and our continued strong financial performance, in April 2019, following the approval of the Pennsylvania Insurance Department, Radian Guaranty returned $375 million of capital to its parent Radian Group. This brings then the total capital return to Radian Group within the past 12 months to $825 million. It is important to also note that this turn of capital is in addition to the funds received regularly by Radian Group thru our long-standing agreements with the operating companies, which provide for the reimbursement of interest and operating expenses of Radian Group. These reimbursements have provided approximately $130 million over the past 12 months.

Utilization of this enhanced capital flexibility is expected to include retirement of next maturity of debt, which occurs in June 2019 of approximately $159 million. And once eliminated, will reduce our debt-to-capital ratio by approximately 3 percentage points, bringing our debt-to-total capital to approximately 19% and would be expected to reduce ongoing interest expense by approximately $9 million annually. Under our expanded share repurchase authorization from January 1, 2019 to April 26, 2019, the company has repurchased approximately 5.7 million shares at a total cost of $122 million and an average share price of approximately $21.56. After this activity, we have approximately $128 million of our total share repurchase authorization remaining.

PMIERs 2.0 was effective from March 31, 2019. Under the PMIERs 2.0, Radian Guaranty had available assets of $3.5 billion and our minimum required assets were $3 billion as of the end of first-quarter 2019. The access to available assets over the minimum required assets of $488 million represent a 16% PMIERs cushion and a $79 million decrease from the prior quarter's $567 million cushion, which was calculated in accordance with PMIERs 1.0. As a reminder, the primary change from PMIERs 1.0 to 2.0 was the change in the available assets definition to exclude the premium benefit of policies written before 2009 of approximately $200 million.

We've also noted on Slide 20, our PMIERs 2.0 excess available resources on a consolidated basis of $1.4 billion, which if fully utilized represents 48% of our minimum required asset. After consideration of the post quarter-end ILN transaction and the $375 million return of capital described above, Radian Guaranty's excess available assets over its minimum required assets under PMIERs 2.0 would have increased by approximately $187 million or an additional 6% on March 31, 2019 minimum required assets. We expect our PMIERs cushion to be sufficient to support projected organic growth, as well as potential volatility, such as a cyclical economic downturn before giving any consideration for the additional benefit of future premium revenue. Holding company liquidity at the end of the first-quarter 2019 was $718 million, compared to $714 million at the end of the fourth quarter of 2018.

The first-quarter end return of capital less the share repurchase activity to date in the second quarter had a net $284 million positive impact on our holding company cash position before consideration of then the upcoming 2019 debt maturity. Considering the net additional $284 million, our holding company cash position is just over $1 billion. We look forward for updating you on our progress as we continue to demonstrate the ability to execute on our capital strategy and we hope to see many of you at our Investor Day next week. I will now turn the call back over to Rick.

Rick Thornberry -- Chief Executive Officer

Thank you, Frank. Before we open the call to your questions, let me remind you that net income grew 49% year over year to $171 million. Book value per share increased 24% year over year to $17.49. Return on equity was 19% and adjusted ROE was 17.7%.

Our $224 billion mortgage insurance portfolio grew 10% year over year and is the primary driver of future earnings for Radian. We remain confident in strategic positioning and the future value of our services segment. And we are enhancing our risk profile while improving our capital position in financial flexibility. We look forward to providing more details on our future prospects and plans during our Investor Day next week, which will also be webcast live and available for replay at www.radian.biz.

Now, operator, we'd like to open up the call to questions.

Questions & Answers:


Operator

[Operator instructions] First from the line of Philip Stefano with Deutsche Bank.

Philip Stefano -- Deutsche Bank -- Analyst

So, now that we have a little bit of time with everyone having a risk-based pricing engine out there, I was hoping you could give us an update on the competitive dynamic. Do you see anyone acting in a surprising fashion or is there probably anybody doing anything you might think is a rationale to try to gain share here?

Derek Brummer -- Senior executive Vice president of Mortgage Insurance and Risk Services

This is Derek. Good question. In terms of that, I think we're in the early innings. In terms of everyone kind of out there with kind of their versions of pricing engines, I think we see competitors taking different views in terms of, I think, the risk appetite -- where they might be relatively overweight in kind of credit segment.

So I think it's kind of early to tell. Again, our focus just continues to be to increase economic value, looking at both on a loan level and also on a customer level. We think that's very important, too, in terms of kind of focusing our volume on customers where we think provide kind of most economic value to our portfolio.

Philip Stefano -- Deutsche Bank -- Analyst

Got it. OK. And looking at new defaults, it was up low double digits. In the 10-K, there was a flag that uses the words slightly.

I think, Frank, in your prepared remarks, you said, slightly as well. It feels like what you saw in the first quarter was a little bit more than what in my mind slightly would be. Is there anything about new defaults in the first quarter that you're thinking about the year over year that was particularly notable or how should we think about expectations for this as it flows through the rest of the year?

Derek Brummer -- Senior executive Vice president of Mortgage Insurance and Risk Services

Yes, this is Derek, again. I think in terms of -- I don't think there was anything notable. I think the biggest thing you got to have to look at is just the change in the book so more new defaults now are actually coming from the 2009 forward portfolio. It's important to note the absolute level of new defaults from that portfolio is extremely low.

But I think it was last quarter where we actually flipped over and the majority of defaults are coming through that, the newer portfolios, and the way to look at that is every year we've written more -- in more business. So as those books of business kind of reach their default seasoning peak, you're going to kind of see kind of a natural push upward in terms of the new defaults. The other positive thing is you see significant credit burnout, no legacy portfolio. So again, you tend to see a big kind of decrease year over year in terms of that legacy portfolio.

So you might see some volatility to quarter to quarter, but again, I think it's kind of playing out as we would expect.

Rick Thornberry -- Chief Executive Officer

Yes, this is Rick. I think it's also important to highlight that the portfolio grew 10% year over year. So the absolute size of the portfolio relative to any kind of default metric, if you will -- I think it's important to look at.

Philip Stefano -- Deutsche Bank -- Analyst

Understood. One last one. Looking at services, it feels like we've talked about an adjusted, adjusted margin recently being the EBITDA margin, and excluding the impact of title was acquired in the restructuring. It feels like that's where the guidance bogey of the 10% to 15% has been.

Do you have a feel of what that adjusted -- adjusted margin looks like in the first quarter?

Rick Thornberry -- Chief Executive Officer

Yes, I don't think we disclosed that particularly -- this is Rick, again, by the way, Phil. So -- and thank you for your question. Just in terms services, as we noted in the first quarter, we had an expected outcome in terms of revenues declining based upon the factors that are highlighted. And I think we, as we stated, I think in the third quarter of last year, we continue to expect to achieve a run rate of revenues this year in $175 million to $200 million with 10% to 15% EBITDA.

And I think, as we go through the course of the year, we'll continue to update you on our progress relative to that but I don't think we -- in the first quarter, we've --

Frank Hall -- Chief Financial Officer

Yes, it's below that range. But yes, we haven't --

Rick Thornberry -- Chief Executive Officer

We didn't call out that number specifically. I think it's important to note first off that this is a business I kind of find it important to highlight. When you set it alongside the mortgage insurance businesses, its relative size is small. And so it's a developing and in some cases, somewhat of a -- some of the businesses are at different levels of development.

But what can see happening across each of the businesses, whether it's mortgage services, whether it's real estate services or title services is each one of them kind of setting their growth pattern from a client and product and services mix. That provides us -- that enables us to see opportunity going forward. So I think the first quarter, although a little bit lower than what we expected, not an unexpected result to see the decline, and we see our pipeline is growing, and we're optimistic about the opportunities we see in the future. Next week at Investor Day, I think we'll go into a little bit deeper dive around this.

Operator

The next question is from Douglas Harter with Credit Suisse.

Sam Choe -- Credit Suisse -- Analyst

This is actually Sam Choe filling in for Doug. Just looking at the prior period reserve, I mean, we've had four quarters off that. Just wondering if you could talk about the philosophy around having the comfort to have those during the quarter? And how we should think about it going forward?

Frank Hall -- Chief Financial Officer

Yes, great question. Sam, this is Frank. I think the way to think about it is when we set our reserves, we view in the context of all available information, and we make our assessment for what's appropriate there. I think what we've said and the good news is that the trends continue.

What we're seeing from a credit standpoint continues to be on a trend basis very positive. We caution to not get too far ahead of ourselves in optimism there because it is viewed, again, each quarter in the context of available information at that time. So that's how we think about it. What we did guide to is the default-to-claim rate for new defaults, relative 8% currently.

We do think if these trends continue, and I put if in capital letters there. If these trends continue, we do see the potential for it coming down more. But again, the timing and magnitude of those steps would be difficult to predict. I don't know if, Derek, do you have anything --

Derek Brummer -- Senior executive Vice president of Mortgage Insurance and Risk Services

I mean, and so I think, as Frank indicated, the positive trends are cure rate very high level, the highest I think we've seen in decades. So as those continue, we'll continue to monitor. That's difficult to say how low the new default-to-claim rate could get to. I think we've a level that we published on in the early 2000s.

So historically, we are at the lowest levels we've, I think, seen.

Sam Choe -- Credit Suisse -- Analyst

Got it. That's really helpful. So we also saw persistency tick up. What drove that uptick and how do you see that trending this year?

Derek Brummer -- Senior executive Vice president of Mortgage Insurance and Risk Services

Sure. In terms of persistency, what's driving that is just the rate environment. So you had rates go up in the second half of '18, now they come back down. So I think in terms of persistency, it's just kind of continuation in terms of where rates are, and also we continue to -- the portfolio continues to grow.

So as you kind of have kind of new or vintage that will go into the portfolio, that also pushes your persistency rate up. One, because usually, people in terms of refinancing, debt refinancing incentives, they don't necessarily refinance right away and then also as we see cancellations due to borrowers canceling because of the Homeowners Protection Act, again, it takes a while for them to -- for their LTVs to drop down to a level in which they can actually order cancel. So kind of all those factors that are kind of driving the persistency.

Operator

Our next question is from Chris Gamaitoni with Compass Point.

Chris Gamaitoni -- Compass Point -- Analyst

I wanted to refocus on capital. And I heard you loud and clear on paying down debt. Where do you think now is kind of the right debt-to-capital ratio to run at long term?

Frank Hall -- Chief Financial Officer

Chris, that's a great question. This is Frank. The long-term debt to capital, we said historically is viewed in the context of our goal to return to investment grade, and we've said historically that we think right around that 20% number is the right place to be. We are saying now as far as potential future plans here would take us down below that number, and we do think there is just additional financial flexibility that we have with an investment-grade rating.

So that is something that is certainly toward the top of the list of considerations when we're doing our capital planning. It's hard to peg a number to it, specifically, but if you just look at the relative contribution of the next 2 debt maturities of the June 2019s and the 2020s, the combined impact of those would be roughly 8% lower from where we are right now, which is pretty low. So again, not to put a fine point on it or peg it to a particular number, but it is viewed in that context of rating agency consideration. And certainly, other factors that play into that relate to just the broader needs for capital in the business overall, other strategic priorities, et cetera.

But it's sort of on a business as usual basis, that's how we're thinking about it.

Chris Gamaitoni -- Compass Point -- Analyst

That kind of gets me to my follow-up of with a $1 billion of excess liquidity, even if you pay down your next three years of debt and then refinance any, you kind of have $400 million left. So I guess, why not a bigger buyback or what else are the plans for capital for the excess liquidity of the parent?

Rick Thornberry -- Chief Executive Officer

Yes, again, great question, and thanks for asking that and I'm sure that will be a popular topic for the rest of the call. But I think it's important to remember that we do have a strong recent history on managing our capital and liquidity both at the operating company and the holding company in a prudent and thoughtful manner and over the past several years, we've completely restructured our debt. We've delevered from a high of 36% in 2014 to potentially below 20%. Increased ratings from rating agency, although not yet our final goal of investment grade.

Repurchased approximately 15% of our outstanding shares over that time horizon, which I think sometimes gets overlooked. We've been very diligent about managing our capital through share repurchase, prudently managed our PMIERs capital position throughout its adoption in more recently -- we've utilized the greater risk distribution facility, our recent request for return of capital from Radian Guaranty to Radian Group. So all that said, we're positioning ourselves for maximum flexibility in the range of options that we have available to us as far as capital management and that we have considered will be focused on creating value to our shareholders. And the form, timing and execution of those actions, while we won't go into specifics today, are available because of the considerable actions we've taken the position -- all of our financial resources for maximum flexibility.

So that capital strength and financial flexibility are absolute key ingredients for our strategy. And as you mentioned, some of the potential uses of the remaining $128 million left in our current share repurchase authorization, $159 million senior debt maturing in '19 to $134 million senior debt maturing in 2020. And so when you add those up, that is over $0.5 billion, and it is -- I'll just remind you, it is our practice to announce the specifics of our capital actions as they occur. But I think, the takeaway here is that we have demonstrated over time these actions will be taken in a thoughtful and prudent manner.

Chris Gamaitoni -- Compass Point -- Analyst

Great. Just a nuance clarification. The disclosure in the press release really that says XOL for the reinsurance agreements. Does that include the cost of the ILN or is the ILN separate from that?

Frank Hall -- Chief Financial Officer

Are you talking about -- the first one is excluded.

Chris Gamaitoni -- Compass Point -- Analyst

It -- so the full cost of both the ILN and the XOL are excluded in that statement.

Frank Hall -- Chief Financial Officer

Yes, that's correct. Yes.

Operator

Next, we'll go to Mackenzie Aron with Zelman & Associates.

Mackenzie Aron -- Zelman and Associates -- Analyst

First question, just to follow up on capital conversation. Can you just talk about how you see the need for reinsurance going forward? Is it something that you still intend to use on a regular kind of consistent basis in the context of risk management? And then kind of weighing that with the strong capital position you have today?

Frank Hall -- Chief Financial Officer

Yes, great question, Mackenzie. This is Frank. Yes, so we've said previously that we think the risk distribution through the capital markets and the reinsurance markets are both very strong right now, and so we would expect to see further utilization of that on a go-forward basis. We do think that from a risk management standpoint, it's a great way to distribute the tail risk in the portfolio.

So yes, we would expect to see that continue in the future. Do you think though it's important to distinguish between the amounts of PMIERs capital that is freed, if you will, from the ILN transactions, the risk distribution transactions, relative to the returns of capital. It's been somewhat coincidental in our first issuance that the two numbers were similar. I think what you saw in our last transaction was that the return of capital request was less than the PMIERs' relief that we received and part of what drives that is the difference between the statutory capital framework and PMIERs, not necessarily being perfectly aligned.

So that's one thing to consider here. So I don't want to mislead anyone to think that dollar worth of PMIERs capital that's liberated through risk distribution will translate into a dollar of capital coming from Radian Guaranty to Radian Group. The other thing to consider there too, Mackenzie, is that as we go forward and we are managing two different levels of risk distribution as when we're looking at -- the numbers that we report are on a net minimum required asset basis in which contemplates the full impact of the risk distribution that we've made. We are also mindful of the gross minimum required asset as well because we do think that's an important metric to not lose sight of as we do this even though we're held to the net minimum required asset under PMIERs.

Mackenzie Aron -- Zelman and Associates -- Analyst

That's helpful. And then, just lastly on the investment portfolio, with it being up so significantly year over year, can we expect to see that type of growth continue?

Frank Hall -- Chief Financial Officer

Mackenzie, I would say probably not, only because of the cash flows that we expect to see on a go-forward basis and also some of the uses of capital that I outlined earlier would be a part of it and also part of that growth had to do with market value adjustments period-over-period, albeit a small amount. But that's a tough amount to predict.

Operator

Our next question is from Jack Micenko with SIG.

Jack Micenko -- Susquehanna International Group -- Analyst

The first one is for Derek. Your -- I understand the directional drivers of persistency, but your persistency rate seems notably higher than some of your peers with maybe similar portfolios. So curious, if you have maybe like a weighted average coupon of the portfolio or is there something structural in some of the legacy vintages that may be you're accounting for that, the differential?

Derek Brummer -- Senior executive Vice president of Mortgage Insurance and Risk Services

Yes, I mean, I do have a weighted average coupon in the portfolio, it's a bit above 4.5%, but I don't think that's really relevant to the question, right? Because you don't really want to look at the weighted average, it's really the distribution of the coupons in the portfolio, right? So when you kind of look at that -- I mean, generally think of borrowers. At least if it's going to be persistency in terms of refi payoff, they need about 75 to 100 basis points incentive to do that. So when you kind of look at the portfolio, for the most part, recent vintages don't have an incentive. You kind of see it in the second half of '18, kind of early '19 where you have an incentive.

So -- and then obviously, some of the earlier vintages you see a refi incentive, but again, a lot of those have kind of gone to burnout. So in terms of that, I do think you need to look at it on a vintage-by-vintage perspective and then look at essentially kind of what the average coupon was for that particular vintage. So if we're heavier weight in certain vantages, but have a lower refi incentive, that might have an impact. Also you have to look at products as well, right? So persistency can be impacted by the relative weight of, for instance, lender paid product versus borrower paid product.

So that's going to be the other thing that's going to potentially drive that as well if you're trying to figure out variation from company to company.

Jack Micenko -- Susquehanna International Group -- Analyst

OK, that's helpful. And then, one for Frank. The buyback cadence was pretty strong in April relative to sort of the historical run rate. Just curious what the strategy was and really stepping on the gas on the buyback.

Frank Hall -- Chief Financial Officer

Yes, great question. And we certainly don't unfortunately offer any details or insights into the specifics of the execution of the program, but you are correct, roughly 12% of the total authorization was repurchased in the first quarter in about 36% in the second quarter. If you think about the variables that are at play there, you certainly have market price has one element of it and then you also have volume limitations at certain points. Well, so all of those factors play into what I would call some unpredictability and volatility around the pace of the repurchase program.

Look at observation.

Operator

Next, we'll go to Mark DeVries with Barclays.

Mark DeVries -- Barclays -- Analyst

I've got more questions on capital for you, Frank.

Rick Thornberry -- Chief Executive Officer

By the way Mark, he is not surprised.

Mark DeVries -- Barclays -- Analyst

If I heard you correctly, I think you indicated that if you retire the debt in June, it takes debt to cap to about 18%, which, I guess, is below where you indicated you think you need to be for an IG rating. I guess, the question is, if that's the case, why would you even consider using in any of the other remaining, let's say, call it $850 million of cash to retire any of the other debt as opposed to just rolling it and saving that cash for alternative uses?

Frank Hall -- Chief Financial Officer

Yes, Mark, great question. And if I made you to believe that it is a foregone conclusion that we're taking that out, I'll correct it. That is something that we are considering and looking at further delevering. So that's one of the options that we're looking at.

But your points are spot on and all of this will be sort of wrapped up in our discussions with rating agencies and doing really what's the best mix of activities for our shareholders.

Mark DeVries -- Barclays -- Analyst

OK. So I'm assuming the only reason you would contemplate that is if they're telling you, no, we've got a new bogey for you to get to IG. And I guess, that would raise the question. What's the benefit to the shareholders of -- when debt is already a pretty marginable part of your capital structure to begin with of getting your costs down.

What if as opposed to being able to use that for which theoretically I think could be much more creative uses, such as buying back stock or even potentially doing some acquisitions?

Frank Hall -- Chief Financial Officer

Yes, great question. And I think that's the hard part. First let me clarify the rating agencies don't give us a hard and fast target to manage to. So that is really what we just infer from looking at a broad range of inputs in deciding what's appropriate for that.

So I just want to be clear on that point. But as it relates to the benefits of returning to investment grade, as we've said, historically, we think it's valuable from a strategic standpoint, primarily as it relates to how counterparties view us or how we're viewed as a counterparty to -- for others. And so it does increase the flexibility that we have both from a strategic standpoint and also from a financial standpoint, longer debt maturities are available to us, et cetera, at a lower cost. So all of those things harmonize well with our goals of capital strength and financial flexibility.

And it does help create an overall profile of Radian that's consistent with strength and flexibility and so we think it's important to continue to march down that path.

Mark DeVries -- Barclays -- Analyst

OK. Great. And then just one last thing, I know you can't be too specific, but the share price is almost 10% higher today than it was. Well, actually more than that.

You will be happy to know now that we have open trading, but more than 10% above where you bought at an average price this past quarter. I guess, I'm trying to get a sense of how price sensitive you're going to be? Do you still find your stock to be attractive for buybacks at these levels?

Frank Hall -- Chief Financial Officer

I can only comment, Mark, on what we have done historically here, and I think, as you know, we don't give a lot of color around the prices at which we would execute. So the share repurchase price that we have executed on certainly represents a value to us and relative to our intrinsic value. So I hope that's helpful.

Operator

Our next question is from Mihir Bhatia with Bank of America Merrill Lynch.

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

First question, just -- actually wanted to just follow up on that same topic that Mark just asked about. I understand you can't comment on what you're going to do, but may be you can comment on just is new authorization, the parameters, if you will, why they -- are there different than the old authorization because the cadence was certainly -- certain acceleration in the cadence of repurchases. So I was curious about that if the authorization changed the parameters?

Frank Hall -- Chief Financial Officer

Yes, Mihir, great question, I appreciate that. It is our historic practice, and I'll continue with it. We don't comment on the specifics of the parameters of – in any authorization or how we execute necessarily on the share repurchase program.

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

Got it. OK. And then just one. Let me ask you one other question maybe for Derek.

We've been seeing a little bit more lately news of just in certain markets, home prices maybe not appreciating as much. Are you -- is there anything like that, that you're seeing or is this mostly more likely maybe at the high end because of [Inaudible] – so in things like that or because I think I have seen headlines now actually talking about home prices coming down and I was just wondering what -- how you guys are looking at thinking about the market as a whole though?

Derek Brummer -- Senior executive Vice president of Mortgage Insurance and Risk Services

Good question. It is I think more concentrated on our higher-end. That being said, I think, we've seen kind of across-the-board moderation in terms of home price appreciation. Generally, we see that as a positive because certainly, one of the issues in the market overall is home price appreciation running at 6% to 7% and wage growth running at less than 3%.

It was starting to get certain market starting to look overvalued. So now we're seeing that moderate kind of more in that 4% range. We're seeing wage growth at 3%. So you're starting to see those converge.

So that's a positive thing because I think it increases the probability of kind of have a moderation where you don't eventually kind of build up a frothy situation where you have more of a hard landing. And the other thing, I would say, with respect to GO, this is certainly a positive aspect in terms of our rollout of RADAR rates. Because it does give us the ability and we use that ability to price GOs on a differentiated basis based upon a relative view of the risk. So that's also an important thing as we move forward in the market as well.

Operator

And we'll go to Geoffrey Dunn with Dowling & Partners.

Geoffrey Dunn -- Dowling and Partners -- Analyst

As you think about the prospect for future returns of capital out of Radian Guaranty, how do you content with the slower growth on surplus, I'm guessing you're down close to $500 million now. So where do you from you here? You've a lot of liquidity at the whole company right now, but how do you think about it between now and '23 or '24, when you start getting accelerated surplus growth, again?

Frank Hall -- Chief Financial Officer

Yes, Geoff, great question, and I think you are hitting on the crux, the constraint or the issue that we are planning around as it relates to future capital returns, which is why I made the point to Mackenzie about trying to disconnect expectations from returns of capital being sized similar to the ILN issuances. So your point is spot on, that is what we are managing to and then the multiple constraints in our planning exercise. So we are down to exactly what you said, approximately $500 million in statutory surplus, and that's down roughly $700 million from a year ago. So due entirely to the returns of capital that we've had there.

We have some decrease in the negative unassigned funds, but to your point, it is exactly right. That that is something that we will be mindful of and be managing to and will actually cause lower future potential returns of capital from Radian Guaranty relative to the risk distribution.

Geoffrey Dunn -- Dowling and Partners -- Analyst

Is $500 million the right minimum for both you as managers as well as the regulators or do you think you can go lower?

Frank Hall -- Chief Financial Officer

Geoff, I would hate to speculate as to a low point there, that's a level that we're comfortable with. And based on our projections and certainly, what we've shared with the regulator, we're comfortable with current levels and what the forward look would present as well?

Geoffrey Dunn -- Dowling and Partners -- Analyst

OK. And then, Derek, there's been questions about the risk of price competition with respect to the new pricing engines. I wanted to kind of approach from a different angle. What is the risk from evaluating what you think are normalized losses? I mean, the pricing out there seems to be based on, call it, 20%, 25% type of loss ratio, but there's been massive outperformance over the last decade.

What's the risk that companies decide it ends up being at 15% to 20% and we just have a revision of the kind of the core assumptions in rates. And I guess, along that vein, what is it about today's environment that you think supports the continued view that we are seeing outperformance versus normalized?

Derek Brummer -- Senior executive Vice president of Mortgage Insurance and Risk Services

Well, kind of taking that number of questions, I will kind of take that backwards, but I mean, the reason of outperformance now is a couple of things. One is you have, I think, historically strong underwriting quality, would expect that to continue. The -- another reason you're seeing outperformance is you're seeing significant home price appreciation and low unemployment. So unemployment rates have been going down, home price appreciation has been growing -- going up.

So in that environment, you would expect to see outperformance, and you should see outperformance in that environment. It's tough to speculate what competitors are going to do in terms of kind of their view from a modeling or projection perspective. I don't think I've heard anything publicly. I think when other competitors talk about what they think kind of through-the-cycle loss ratio, I think everyone's around that 20% range.

I haven't heard anyone take a different view with respect to that. I think I also haven't heard anyone changing kind of their return targets. Our blended return targets remain the same. I think that in terms of the positive environment where we've had kind of I would say low loss ratios, that's been something we've been living with for a number of years, and we haven't seen I would say anyone kind of reset expectations.

It would also be odd for them to do it at this point in the cycle, considering kind of the earlier question, if anything, it -- you'll start to see home price appreciation kind of moderate a bit. So again, that would be speculating. All I can say is, from our perspective, we are not changing our view in terms of that or kind of shifting down our projections from a through-the-cycle loss projection perspective.

Operator

Our final question will come from Bose George with KBW.

Bose George -- KBW -- Analyst

One of your competitors recently did an ILN transaction that covered legacy loans. Do you think that's something that you guys would consider or do you think that the risk there, it is pretty minimal at this point?

Frank Hall -- Chief Financial Officer

Sure. This is Frank. When we do our evaluations of portfolio and our capital planning, we would consider a broad range of things, that's certainly something that we consider. Certainly, we wouldn't want to speculate on what would be – but -- what could be executed in the future, but certainly, we've evaluated the entire portfolio and considered a broad range of options.

Bose George -- KBW -- Analyst

OK. And just as you guys continue to tap the ILN market, is there kind of a goal in mind for what percentage of the portfolio you would eventually like to see reinsured?

Frank Hall -- Chief Financial Officer

Derek, you want to take that?

Derek Brummer -- Senior executive Vice president of Mortgage Insurance and Risk Services

If we look at it as opposed to looking at it just from a size of the portfolio perspective, we're looking at it really on a cost of capital and also kind of a tail volatility perspective, right? So what we really want to do is look at pieces of portfolio. If it makes sense to distribute it, we might not be the optimal kind of holder of that from a risk or capital perspective for we want to essentially, for instance, cut off the tail –volatility. That's the way we'd look at it. And so even if, for instance, your question on the season portfolio, many of those vintages have benefited as I indicated earlier from significant credit burnout.

So a lot of that risk is removed, but again, as you think about the ILN structure, you can set the structure to kind of the risk, right? So we would move up and down kind of the attachment and detachment point of those structures to essentially optimize it from a capital and risk distribution perspective. So simply looking at as one piece being riskier and less risky, it really depends on the way you structure it and the cost of capital in that structure.

Operator

And, Mr. Thornberry, I will turn it back to you for any closing comments.

Rick Thornberry -- Chief Executive Officer

All right. Thank you. I wanted to thank each of you for all your excellent questions, and I appreciate your participation in the call today. Also, I want to thank our employees and board members, and investors for your support of Radian as we continue on our mission here.

We look forward to seeing you in Philadelphia next week for our Investor Day should you be able to come. And again, thank you for your time today and we look forward to talking to you soon. Take care.

Operator

[Operator signoff]

Duration: 68 minutes

Call participants:

Emily Riley -- Senior Vice President of Investor Relations

Rick Thornberry -- Chief Executive Officer

Frank Hall -- Chief Financial Officer

Philip Stefano -- Deutsche Bank -- Analyst

Derek Brummer -- Senior executive Vice president of Mortgage Insurance and Risk Services

Sam Choe -- Credit Suisse -- Analyst

Chris Gamaitoni -- Compass Point -- Analyst

Mackenzie Aron -- Zelman and Associates -- Analyst

Jack Micenko -- Susquehanna International Group -- Analyst

Mark DeVries -- Barclays -- Analyst

Mihir Bhatia -- Bank of America Merrill Lynch -- Analyst

Geoffrey Dunn -- Dowling and Partners -- Analyst

Bose George -- KBW -- Analyst

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