Radian Group Inc (RDN) 2002 Q4 法說會逐字稿

Mr. Filipps, you may be again your conference.

Thank you and welcome everyone to our call. We are pleased to report we had another great quarter. With me today to help us through are Bob quint, roy cast march, and a couple of others. As is our practice, I will be giving a little bit of a strategic overview to tell you a couple of strategic things that will occur or may occur as we look forward and then Bob will be giving you a more complete financial review and, of course, we will have questions. I think the key point that we want to talk about and emphasize to you is the strange this that has developed throughout the quarter as a continued result of our building on our core strength and diversifying our revenue streams into the financial gain as well as mortgage services businesses. This is a, as you will recall, a policy that we set out on a couple of years ago, have been moving down that road. It is clearly our policy and strategic plan to continue down that path and, so, we shall be doing that. Notable for the financial results, I think, is, number 1, for the first time, our revenues have exceeded a billion dollars. I think that is notable for us.

What we would also point out to you is the consistent growth in our net income, which is up about 14% in the quarter and 14% for the full year to $4.41 per share for the full year and 1.14 for the quarter. What I would also call your attention to is the mix of our net income and if you look at the fourth quarter results compared to the fourth quarter of last year, which I believe is slide number 1 on your web cast, you will see that last year, mortgage operations contributed 77% of our net income and this year in the fourth quarter, it contributed 66%. Financial girnt ee is up to 25% and our service businesses are up to 9%. Again, for those of you who may be new to radian, our longer term target, looking out to' 05 is that mortgage insurance will contribute to about 50% of the income of the company. Getting there, if you look at the premium mix for the fourth quarter, you will see, here again, that the financial products business has grown faster than the mortgage insurance business and that now contributes about 30% of our premium written in the fourth quarter. We think that the financial guarantee business will continue to out pace the growth of the mortgage insurance business in' 03. That is clearly our plan and our intention.

Looking at slide 3, you will see that our net income continued to grow, perhaps more important than that, our operating cash flow has tipped to grow as well. Operating cash flow continues to outpace the net income reported for the year and has in every year, at least on this graph, back to 1997 and looking back before that for many years before that as well. We believe that is going to be continuing into 2003 and that clear is part of our strategic financial plan for the year as well. Slide 4 shows you the net income per share growth, no news there. Slide 5 shows the premium earned for the last five years. There, again, no particular news there. What we also want to pont out to you is the fact that, for the year 2002, we have continued to build our loss reserves and you can see that in the next slide where our total paid loss in 2002 were 197 million while our loss provisions total 243 million. For us, that's a sign of strength. It is clearly a part of our strategic financial plan, and we would expect that we will continue to build loss reserves over 2003 as well.

A couple of other highlights for the year, we talk about the strength of the business. What I would also pont out to you is on slide number 8, the diversification of the risk in our portfolio and there you can see that we continue to diversify the risk from a corporate portfolio risk management perspective, we think that this combination of diversifying risk provides an extremely strong business portfolio. It provides for business income from diverse products and streams over the future and we are very pleased with the portfolio risk enforced that you see there. Clearly, 70% of the risk enforced is now from our financial guarantee business and 30% of the risk enforced representing our mortgage business. If we go down further, you can see that we've got about 100 billion dollars of net par enforced for the financial guarantee business. We also have about 110 billion of mortgage insurance in force. So we are continuing along this path of diversifying and we think providing you a stronger company to go forward with. A couple of other highlights. Our structured products group this year continued it participate in the developing markets, had an outstanding quarter, outstanding year for the year closed over 6.5 billion dollars of commitments in 2002. We are looking for that to increase in 2003. We are expecting that market will be very robust and so we would be looking for growth there. The muni business was very robust in 2002. We are expecting that 2003 will be a very active market in the muni business as well, and you know, what we are looking at is our business plan being executed very consistently in the aa sector there. We have no plans to change that at all. What we are finding is that the spreads are very attractive in that sector and we are continuing to allocate resources and capital to developing that business.

On the mortgage side of the business, we had a very, very good quarter writing about 15 billion dollars with about 5 billion in bulk. We had mentioned to you last quarter we thought that the fourth quarter would be very productive for us in the bulk business. We did have a very productive quarter as we are looking to the first quarter of this year, in the structured mortgage business, we are also expecting a very active quarter and we are expecting that our participation in that will be very strong as well. The overall mortgage business, as we look at it, projections for the year 2003 are looking like a total mortgage size of about two trillion dollars again. There is, at this point in time, for the first half of this year, a continued projection of a very high refinance penetration in that market. Interest rates are not looking like they are about to go up and, so, as a result of that, refinance will be very strong. What that will mean for us is that persistency is not likely to turn around until, my projection is, until the third quarter of 03. And unless something were to occur that would turn interest rates up some time, we would not expect a turn around in persistency. What I would say, though, is that, as we are looking out with the extraordinary high level of refinancing activity that occurred last year and this year, my expectation is if interest rates were to turn up, you would see a very Rapid rise in our persistency because I think the refinance market would run out of steam very, very quickly for whatever that is worth. As we look at our delinquency rate, they have gone up pretty much across the board for many reasons, one of which is purely mathematical. The base has not grown while the number of delinquent loan has. The number of delinquent loan is clearly a functional relationship to primarily the unemployment levels, unemployment has increased throughout the third and fourth quarters. We are starting to see signs that perhaps that may have peaked. If, in fact, that has, then the traditional relationship is that our delinquency rate will likely come down some time between 3 and 6 months after the peak in many employment rises.

So as we look forward, that's another thing that we throw into our mix master. People have been asking us about our relationship with major lenders and those lenders and their captive reinsurance companies and the relationship to business in that regard. And what I will tell you is that, quite honestly, we have not changed our policy there. In fact, we have not changed our business policy, business strategy or business philosophy in three or four years with regard to not only the captives but with regard to our relationships with all of our lending partners. We simply have not and will not chase market share. We will not go after what I have referred to as, you know, hollow market share revenues that come into the top line that allow nothing to flow through to the bottom line. Every captive relationship we have is profitable. Everyone meets our portfolio requirement for return on equity and we simply will not do business that does not meet our requirements and, so that is not a change for us. That has been something that we have had in place for years. It's the way we live here every day and I don't expect that that's going to change tomorrow or next week because that has not changed in the last four years. With that, let me turn it over to Bob who will go through the financials.

Thank you and good morning. There are a number of additional web cast slides that you will see and they are for your information and your reading. Feel free to ask us questions about any of those when the time comes. With regard to the fourth quarter financial highlights, certainly,the performance of financial guarantee is the top line. That is very, very strong, continues to be very, very strong. Importantly, on the muni business that we did on the direct side, 50% of the transaction we did was general obligation deals and of the health care we did in the fourth quarter, over 3/4 of that has underlying ratings of at least trip will d plus so the pricing was very attractive. On the structured product side which continues to be very strong, we had a much greater mix of asset back deals in the fourth quarter, about 3/4 of the transactions in the fourth quarter were asset back and that is notable. Again, we built our premium on financial guarantee by 23 million dollars for the quarter and just under 100 million dollars for the year and we billed the installment by 126 million dollars for the year. Both of these items are important components of the feature value business. Note that premiums written have been sequentially higher pretty much every quarter on the financial guarantee side. They still could vary from quarter to quarter. The steady growth is better measured by the consistent earned premium growth and we have certainly seen that as well. That being said, financial guarantee premiums earned in the first quarter were aided by a full millions of items that wop be included.

Losses on the financial guarantee side, again, we are impacted by our typical payments on the trade credit side, trade credit losses paid were 6.9 million dollars for the quarter and 17.3 million dollars for the year. In addition, there were some increases in case reserves on the trade credit side and also significant addition to the non-specific reserves on both trade credit and traditional financial guarantee and that would support the strong business volumes that we really maintained throughout the year. Looking at the CDO portfolio, we currently have 39 deals on the direct side, having a nominal exposure of 4.9 million dollars, most most of that is rated AA or AAA. There are a few deals that are sub performing but at this point, there are no expected claim payments on any of these deals. Expenses on the financial guarantee side continue to be very, very well controlled. You will see our expense ratio in the fourth quarter was down to 26 %. A great number but -- unfortunately not one we will expect in 2003. That level is expected to be closer than 30% range. This quarter we had, as I mentioned a little bit higher premiums earned and a very unusual expense, low expense load for the fourth quarter but a 30% range on expense ratio of financial guarantee is certainly a very, very good number. Moving to the m-i segment, obviously it was a tough operating environment but we think we performed very, very well through that persistency for the quarter hit an absolute absolute all-time low and as Frank mentioned, we are seeing third quarter of 2003 is really when we expect to turn around. We had a great participation in the bulk market during the fourth quarter. This is expected to continue into the first quarter as well. That helped us increase our insurance in force as we told you we would do and we do believe, despite continued low persistency in the first quarter, we will be able to grow into our in force a little bit. If you look at portfolio mix, you can see that we tended to be a little bit lower this year. I can tell you that we are watching these levels very, very carefully. We are comfortable with the existing portfolio mix as well as the pricing. Much of the mix shift has resulted from the persistency levels, being low and much of the time quality book refing away. Obviously, that will be low when the refis die down.

In addition, when we do non-prime product through structure transactions, radian has a very, very rigorous due diligence process before we put those loans in our books and we believe this is unique in the industry. Captive, Frank mentioned one thing I would like to point out with captive, just to give you a little history, if you go back to 2000, we see that 33% of our primary new insurance written for captive in 2000, 33% in 2001, 35% in 2002. If you go to premiums, we see that 7.6% in 2000, 8.7% in 2001, and 8.3% in 2002. We do not expect material changes in 2003 from these numbers. Clearly, there is a slight trend towards higher seeding percentages but if you look at the consistency, the point is that these captives have been around. They are in our results. They have been in our results and they are mature. It is not a new concept. These are a part of our m-i results and they have been. We told you on investor day that our returns that we expect in the a quality business are about 13% overall and we reiterate that those expectations are good those are the ones that we feel we can achieve. Obviously some of the larger volume accounts that might have higher seating percentages might be a little bit below that but on average, the a quality business will that have that kind of a return. This is one Al Capone pt of the profit the of the captives. There are lot of other components. The day ata. Point is very, very important. The lower the attachment point. If they are hid, the captives will come in and pay a significant layer of losses. That's a very important point of profitability.

Turning to m-i had credit, certainly the increase in delinquency in 2001 turned into higher claim payments in 2002. That came as no surprise. Claims are still, for the fourth quarter, less than 30% of premiums earned, still well below the model expectations that helped us arrive at expected returns on equity that are very, very acceptable. If you look at where delinquencies have gone this year, they have really moderated so that continues to happen, increases in claims that we have seen, although certainly they will continue through the first and second quarters, that could level out towards the end of 2003. Delinquency rate as Frank mentioned, this is very important. They are much about the denominator as about the numerator. Certainly for radian, our insurance in force did not grow this year very much. The denominator did not grow but if you look at total delinquent loans, total delinquent loans did not go up that much. Our total delinquent loans, consisting of primary pools for a little over 39,000 at the end of last year, a little over 42,000 over this year. That's an increase of 3,000 defaults. That's not significant. If you compare us to our peers in the industry, it compares incredibly favorably. That's a number that we are very, very proud of.

Our loss reserves have gone up commensurately with this increase. So, again, consistent reserving, consistent strong loss reserves and a paid to credit ratio remains in the range where we told you we would be and that remains consistent with the loss-reserve policy. Turning to mortgage services, again, a very, very strong quarter led by Seabest and Shear man. We expect both of these companies to post very, very strong results in 2003 although the environment in 2002 was very, very favorable for them and it's going to be hard to duplicate such incredible performances like they did have in 2002. Rating express, the quarters pre tax last, as we told you, was down, significantly down to about 1.8 million for the quarter. We expect us to moderate more in the first quarter. Other income from ratings express is 4.3 million for the quarter and 17.4 million for the year. And expenses were 6 million for the quarter and 23.2 million for the year. If you look at the mortgage services segment broken out, you're going to see increases, the side rating express. You can see increases and other income and especially in operating expenses. Those are items related to the ownership in Seabass and should be viewed in conjunction with Seabass's earnings.

Finally, looking at our balance sheet rating, the balance sheet has never been stronger. Our financial strength has never been better. We have very, very strong, well capitalized situation at rating gairpt ee and we have a plan in place to move capital steadily into the financial guarantee business which is op yusly growing very significantly and will need capital to support that. This will be accomplished either by moving amount of capital from the m-i side or from parent contribution or likely a combination thereof. Currently, we have a debt to capitalization ratio of 16.5% and there are certainly some room for us to use moderate additional revrj and stay well within the conservative limit of 20% that we have imposed upon our company. Okay? We would like to now turn the process over for question.

At this time, I would like to remind everyone in order to ask a question, please press star 1 on your telephone keypad. We'll pause for just a moment to compile the Q & A roster. Your first question comes from the line of Robert Ryan.

Good morning. Could you remind us where you are on the allocation of capital or just the emphasis in terms of the effort on the bond reinsurance versus the bond insurance, the primary activities? And what you think about the prospects for bonds reinsurance, number 1, after your down grade but, number 1 number 2, after the planned runoff status of oxa?

Let me say that we have not pulled back any of our efforts, energy or capital that we have devoted to the financial guarantee reinsurance business. To this point in time, that remains a very vibrant business, and a very profitable business. And as such, you know, we have not experienced any significant major negative reaction to the down grade. We have been in constant communication with the primaries. We are working with them to satisfy or to look at and satisfy their needs for 2003 and, to this point in time, we have no reason to believe that we will not be participating in the financial guarantee business with them as we go forward pretty much along the same line that we have worked with them to this point in time. With regard to withdrawal, I can't seem to that other than they have made the decision to get out of business and you have to ask them as to why or for what reasons, but it really is not going to affect our business in any significant way other than the fact that we think it could provide us with greater opportunity and greater business portfolios to look at in 2003 than we had. Oxa was a significant competitor. They got into the business a couple of years ago. They were very aggressive in certain lines of business. It's probably too aggressive and that's probably why they have withdrawn. So, you know, I think our motto in every business we operate in, as I said before, is to be return oriented. We are not going to do business that is not going to generate positive, favorable targeted returns on our allocated equity. And, you know, if business spills out of oxa, we'll look at it on that same about basis. Do you want to add snig?

The only thing I would add, robb, is that oxa refinance going into runoff is not the only change in the competitive environment that has happened contemporaneously with or since the down grade of radian re. We have seen significant ratings down grade in financial guarantee reinsurance and we have seen another competitor recast its world business strategy and, indeed, change its name to reflect that. The facts that financial guarantee reinsurance will be a much lower priority in their role mix of business. How all of this shakes out remains to be seen, but it's clear that a stablely, durablely rated, highly rated wholesale provider of financial guarantee capacity still has a solid franchise in the current market.

Thank you. Just one follow-up along those specific issue of potential recapture of business by primaries, are you entertaining the idea of taking on perhaps some substantial portions of books of business that might be recaptured from oxa sm.

Each of the primary clients of oxa will have to make their decision as to what is the best way to deal with the runoff and down grade situation. All of the primaries know that we are very open to talking to them about facultative opportunities however they may arise.

Very good. Thank you.

Your next question comes from the line of Jeff Dunn.

Hi, good morning. Could you detail a little bit more what sort of expense controls you are putting in place at the financial guarantee operation? Is it more scale being built or are there specific initiatives underway?

No, I think the expense ratio reduction of our financial guarantees are much about the increase of volume as anything. We have built a great team over there that is doing a lot of business and, you know, I think that's -- you know, that's really what is happening there. You know, we will have to, as the business grows, continue to add expenses but, you know, not to the same level that we are increasing our revenue. So I think generally, that is, you know, that is what's happening and, you know, just a great sign that we can -- you know, we can be writing more business and spreading the expenses over a higher premium.

Jeff, I think it's important to note that we are not, in fact, cutting expenses and guarantees. We have substantially invested and continue to substantially invest in that business. What you are seeing is that investment is paying off and paying off pretty quickly.

Okay. And give me your capital needs notice financial guarantee business. Correct to assume there was not any material buyback in the quarter?

There was nothing further than what you saw last quarter. I guess there might have been a little bit at the beginning of the quarter but I think, everyone knew about that on the call.

Bob, you mentioned in the Seabass operation and mortgage services, there is a piece of other income and operating that is related to Seabass. Can you tell us how that works?

It relates to business at Seabass that we participate in which is remick residuals and the buying and selling of those instruments and there are -- you know, there are income, both income and expense items that come out of that business.

Okay. Thanks.

Your next question comes from the line of Howard Shapiro.

Hi, good morning, thank you. A couple of questions on credit quality. Frank and bob, I think you accurately pointed out that some of the increase in delinquencies is really a function of the denominator effect. I'm just wondering if you could tell us if you are seeing any trends in terms of loss severity? Is it about flat? Is in increasing? Is it perhaps declining? If you can at the us what it is right now. Also, you did increase your loss-reserve quite nicely. I think you have been saying that the plan going forward was to increase the loan loss reserve more closely in line with actual chargeoffs and I'm wondering if that is still the plan going forward. Thank you.

Yeah, both things -- on the severity, severity has increased a little bit and I think that's a trend that we have seen. You know, it relates to a couple of things. I think, one, first and forecast, the average loan size has increased over the years so that's going to be natural as the higher loan amounts are the ones that are going to claim now. Even when, you know, we are able to mitigate loss on loans by buying properties and saving some money, it's still a very small percentage of the loan. Most of the claims we pay, we still pay sort of the maximum amount we can pay. So it's not severity, but more related to the loan size than anything else. Certainly, we have seen the trend increase. The -- what was the other question? I forgot. Yeah, we clearly were able to build the reserves significantly this quarter. And, you know, we are going to watch dlin qen cyst as we told you. If delinquencies fall off, you know, our reserves are very, very strong so we may not need to increase our reserves that much. The number of delinquencies is what you need to watch. That's what we use to determine our level of reserves, so, you know, yeah, I think, you know, this quarter was a little bit unusual that we strengthened a little bit more and depending upon what happens to delinquencies, that had level off little bit.

On your comments on the cdo. I'm not sure I heard it. What is your attachment point on cdo? Is it aaa or all senior?

It's typically that. It's not all. When we do the deals, they are almost all aaa and aa as, you know, if there is any deterioration, subordination, they could be sort of re-rated and a little bit lower. But most of that 4.9 billion, certainly well into the 80% range or higher is, you know, AAA and AA. You know, the rest would be, you know, single a or triple A. You know, none tf is equity or anything like that. There is subordination left in all of the deals, even the ones that are sub performing. By sub performing we mean, you know, the development of defaults in the deal has been a little bit faster than what we modeled out.

And on the three deals where there are some issues, your attachment point is at what level? Our attachment point is at -- originally or currently?

Both. Originally, you know, it was the same, you know, aa and aaa levels and currently, there was still, you know, subordination to with stand default, several defaults before we actually pay, but, you know, that subordination has declined.

Thank you very much.

Your next question comes from the line of Fred balls..

Thank you. On your captive deals, can you discuss the trends on the attachment points? Have you seen a trending lower and what's the outlook for 2003?

The -- certainly, when there are higher seated percentages, typically the attachment point comes down, so, yes, you know, to the extent to the higher seating percentages have been the trend, the attachment point in all of those deals is lower and we have, you know, a big effort to, you know, lower the attachment points. We feel that's a very important component of being able to offer higher seeds if, you know, we do that. So, yes, clearly, that is the trend along with a little bit higher seeding, the attachment point are lower, closer to actual expected results and that's where, you know, we talked btd volatility around the expected returns. If, for example, expected losses or claims are 3%, if you have an attachment point of 5%, you can have 60% higher than expected and still absorb the losses if your attachment point is 3 or 4%, the captive is kicking in right away.

And what are your average captive points in the fourth quarter?

The average attachment point?

Yes.

You know, we don't really calculate an average attachment point but some are in the 3, some in the 4 and some in the 5 range.

Thank you.

Your next question comes from the line of Gary Gordon.

Hi had, thanks. A couple of questions. First, definition you talked about this line in here about net, debt service outstanding. What does that mean?

That is going to include the interest, you know. There is par outstanding which is the amount of the bonds and then debt service is going to be a much higher number. It's going to include the interest, especially for a muni which has been there so long. The interest is almost as high as the par.

Okay, thanks. Two on the seabass earnings, you had great year in 2002, presumably because seabass is working out messy mortgage loans or there were more messy mortgage loans last year. Supposedly that should track your claims paid experience. Is that fair to say?

I don't know if it's fair to say that, but we think of it as somewhat of a normal business hedge. As the delinquencies go up, they provide tremendous opportunity for seabass in the mortgage side of the business as well as the consumer death side of the business. We do see that as a very good business fit for us, and as we have said in the pass, it is a strategic fit and will remain one.

Thanks. Finally, on the financial guarantee business, any particular trends and pricing in the business and specifically any trends in pricing on corporate versus consumer credit?

The trends generally in pricing over the year for us was up. Average premium rates were up across the board for us. In terms of the distinctions between asset back and corporate, we have seen corporate credit quality spreads come in recently, but it's part of a pattern of ups and downs so it's hard to discern any meaningful kind of long term trend. And asset backs trend to be less volatile in that regard. But, again, they are going to be a function of general interest rates and comparisons to alternative, you know, investment sectors so it's tough to predict.

Okay, thank you.

Your next question comes from the line of Bruce Harding.

Hi, good morning. The statutory loss ratio on the mortgage business, you know, is 36.5 up to 28.3 and expense ratio up from last year. You know, where did that peak in the last recession? Where do you think those numbers peak this time around, and once we get past this persistency bump in the third quarter, fourth quarter, where could that expense ratio go? Thanks.

Bruce, you know, again, those numbers -- first of all, they are statutory so they don't always reflect everything having to do with the business. Second of all, it is about the denominator as well where premiums earned have been pretty stagnant. So those numbers were impacted a little bit. The fourth quarter specifically, you know, the loss ratios were higher, you know, because we built reserves and premiums earned didn't really move. And expense ratio, I would say, you can expect to go back down to the very low 20s. That's a normalized expense ratio. It was unusual this quarter. And the loss ratio, I think we've said are pretty consistently, overtime, you know, 35 is a normalized rate and despend -- depending on where the market goes, it could be a little lower.

And for denominator purposes, bob, is, you know, the seated portion is not net out of those numbers?

It is, Bruce. It is? Yeah.

So those are...

Net.

Net of the seed. Okay. Thanks.

Your next question comes from the line of Jonathan Gray.

Yes, could you give us an update on express close? I think the last hard data that I recall was, I blof, third quarter 2001. It processed 100,000 applications, produced 4 .7 million in revenue. Can you update us on experience with express close, please?

Jonathan, this is Roy Kasmar. I don't know that I have the exact numbers that you are looking at in front of you. But we saw the -- we have been in the modes of the fourth quarter, now rebuilding our volumes there and you can see that in the performances in the fourth quarter being about, I think, half of the size of the loss in the third quarter. So we have that underway. We still have pressures in rebuilding those revenues because of the stalling of radian protection but we continue to move forward. With regard to lien protection, as I'm sure most of you, if not all of you are aware, the decision of the administrative law judge in California was to sustain the opinion of the insurance department. That was extremely disappointing for us. We are currently trying to appeal back to the insurance -- to the new insurance commissioner to take a fresh look at this. It is purely up to them as the department. We are hopeful that that will occur. It's a long process. Recently, what has occurred has been that consumer groups have finally started to get on this case. Many consumer groups in California have read p the product, have learned about the product and are actually coordinating efforts to abeel to the -- to appeal to the irns rans department to have them make this product available. And, so, we are optimistic that, again, the consumer group pressure will prevail. Ironically, a couple of days before we received the California decision, we received, from the Illinois insurance department a full approval to offer the product in Illinois. However, because of the over-arching purview of the California department, we have still decided not to offer that product. We are looking at alternatives and we have not yet given up this fight. So, you will hear more from us shortly on this subject.

If I could just follow on with that, is express close not a viable operation, even without a lien protection? Express close -- what was express close, which is now radian express --.

Right. It's a business opportunity for us to offer a number of other mortgage services to our mortgage lending clients. What happened last year was that we built up a lot of expense base in anticipation of offering our lien protection product. That expense base was pared back substantially in the third and fourth quarters. We also were not able to get as much market penetration in those other products as we had hoped because of the setback through the lien protection product which really was our leading product offering and one that clearly differentiated us from the marketplace. So that expense base is still in there. It's a question of how much, you know, you leave that expense base in there in order to have the capability to offer the lien protection when it finally becomes available. So in the short term, we are going to continue to fund the operating expenses there as it is our plan to develop an opportunity to deliver lien protection. And so it is likely -- you know, the expense base will get pared down gradually. It will not be totally eliminated. We simply just can't cut it off. It is not a large loss for us. I think as Bob said, it was less than two million dollars in the fourth quarter. It will be less than that in the first quarter. We think that's a great investment in terms of developing the capabilities of delivering mortgage services across a broader platform. So it is part of our plan to go forward.

Thank you.

Your next question comes from the line of Chris Bonafidi.

Just to follow up on that lien protection, what does that do for the case filed by alta in orange county court? Where does that stand or has that been dismissed.

This is Howard Yaruss. The state in orange county has been stayed and will remain stayed until the California insurance commissioner makes his definitive decision as to whether to accept or reject the administrative law judge's findings. The California insurance commissioner has 100 days from the opinion to make that decision and as fraeng mentioned, we are doing everything we can to make that decision favorable to us. But, again, he has almost three months from today with which to decide but during that period, the case in California will be on hold.

Bob, you mentioned that so. How many of the earned premiums from financial guarantee reflected the refundings that will be none recurring?

It's -- we discussed it. I think it's like 3 million. Is it 2.9? Is that what it was? It was 2.9 million.

Okay. Thanks.

Sure.

At this time, there are no further questions.

We, we thank you all and look forward to talking to you again next quarter.

This conclude today's tell conference. You may now discorrect.