Radian Group Inc (RDN) 2010 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Radian's first-quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions). As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Ms. Emily Riley. Please go ahead.

Thank you and welcome to Radian's first-quarter 2010 conference call. Our press release, which contains Radian's financial results for the quarter, was issued earlier today and is now posted to the Investor section of our website at www.radian.biz.

During today's call, you will hear from S.A. Ibrahim, Radian's Chief Executive Officer and Bob Quint, Chief Financial Officer. Also on hand for the Q&A portion of the call are Teresa Bryce, President of Radian Guaranty; Dave Beidler, President of Radian Asset Assurance; and Scott Theobald, Executive Vice President and Chief Risk Officer of Radian Guaranty.

Before we begin, I would like to remind you that comments made during this call will include forward-looking statements. 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 2009 annual report on Form 10-K and first-quarter 2010 Form 10-Q. These are also available on our website.

Finally, before S.A. begins his prepared remarks, I would like to note for participants that due to legal restrictions that apply in the context of the securities offering announced this morning that we will not address any questions regarding the offering during today's call. We ask that all participants limit their questions to our quarterly results and other topics discussed during our presentation today. Now I would like to turn the call over to S.A.

Thank you, Emily and thank you all for joining us today. This morning, I will provide highlights of our first-quarter performance, along with a few perspectives on the trends affecting our business. Bob will then cover the details of our financial position before we open the call to your questions.

At Radian, the strength of our core mortgage insurance company remains our top priority. Earlier today, we reported a first-quarter net loss of $310.4 million, or $3.77 per share compared to a net loss of $217.4 million, or $2.69 per share for the same period last year. These results were primarily driven by an increase in our mortgage insurance loss provision, which includes an increase in reserves due primarily to higher severity estimates and to the continued aging of our default inventory.

Importantly, this reserve increase, combined with the decline in the delinquent loan count, strengthened our reserve per delinquency significantly for both primary and pool loans.

We continue to benefit from the support of our Financial Guaranty and Financial Services businesses that have strengthened our core mortgage insurance franchise. These companies have paid dividends to Radian Guaranty and provided capital support.

We announced today the sale of our remaining equity interest in Sherman Financial for approximately $172 million in cash. This is in addition to the $28 million in dividends paid by Sherman to Radian Guaranty in early April. The sale was completed yesterday and we expect it to produce a pretax gain of approximately $70 million in the second quarter and this will further support our risk to capital ratio going forward. Radian Asset is expected to pay another ordinary dividend of approximately $70 million to Radian Guaranty in June.

The risk-to-capital ratio for Radian Guaranty was 16.9 to 1 on March 31, 2010, which again was among the lowest in the industry. This compares to a ratio of 15.4 to 1 in the fourth quarter of 2009 and 17.6 to 1 a year ago.

We remain focused on our goal of writing high-quality mortgage insurance business and have launched marketing campaigns to promote our mortgage insurance products that are most competitive with the FHA. We continue to believe that private capital is essential to the recovery of success of the housing finance system and we have undertaken efforts to ensure that that sentiment is shared among many policymakers and industry leaders as well.

In fact, in a meeting last week with FHA Commissioner, Dave Stevens, he reiterated to me that we share the very same goal for a more traditional balance in the insured mortgage market between the FHA and the private MI industry for a stronger, more sustainable housing finance system in our country.

We were pleased to report a decline in delinquencies this quarter, which was the first in nearly four years. There was also a drop in the number of new notices, a trend that began late last year and may suggest the beginning of a credit burnout in the most troubled vintages and products. You can see this pattern more clearly in our default roll-forward chart on slide 15 of our webcast presentation.

In addition, the number of primary delinquencies declined slightly in April and we continue to expect a lower number of delinquent loans at the end of 2010 compared to the end of 2009.

We were again successful in meeting our strategic goals of reducing Radian's non-core risk. In the quarter, we terminated a federal structured transaction that eliminated $102 million of our modified pool risk in force and reduced our primary delinquency count. We continue to seek opportunities to actively manage our legacy portfolio and commute non-core risks on favorable economic terms.

New insurance written in the quarter was $1.9 billion and our new business again consisted of loans with excellent credit characteristics. We continue to maintain a strong share of this high-quality business with marketshare greater than 21% in the quarter, which is the highest in the industry. We believe our risk-to-capital ratio, solid customer relationships, NIW and marketshare compare quite favorably to our competitors and help to position Radian for success as markets recover.

Another positive trend for our business is the continued increase in the number of modification notices received. While it remains difficult to gather complete data from various customers and servicers to date, nearly 6000 Radian insured loans have been completed, including 1,769 loans in 2009 and increasing to 4,159 in the first quarter of 2010.

As of March 31 2010, more than 28,000 Radian insured primary loans were pending completion of a modification program, including HAMP, which represents nearly 20% of Radian's primary delinquencies. This compares to more than 22,000 or approximately 15% of primary delinquencies as of December 31, 2009. In addition, we believe that nearly $2 billion of Radian's previously written insurance is included in the HAMP program.

Finally, it is important to recognize four examples of Radian's financial strength. First, Radian's book value at March 31, 2010 was $20.65 per share. Second, we believe that our existing book of business as of March 31, 2010 contains an embedded value of $1.2 billion on our first-lien domestic portfolio as shown on slide 11. Third, our investment portfolio remains strong at $6 billion. And finally, it is important to note that our reserve in fees this quarter, when coupled with the decline in delinquent loans, strengthens Radian's reserve per delinquency for both primary and pool loans. And now I would like to turn the call over to Bob for details of our financial position.

Thank you, S.A. I will be updating you on the P&L activity and trends for the first quarter of 2010 and our financial position as of March 31, 2010. Our MI provision for losses of $529 million this quarter is higher than one may have been expecting considering our improvement in delinquencies.

The provision for losses is impacted positively by the change in delinquencies and a small decline in expected lower (inaudible) to claim. However, that impact is offset by changing the composition of our delinquency inventory, handling a greater percentage of older delinquent loans and larger loan balances, increases in our severity assumptions and incremental second loss deals reaching their subordination level.

In addition this quarter, we refined the component of our loss reserve estimate relating to severity on delinquencies and pending claims using a more specific loan level input rather than averages and this contributed significantly to the severity increase.

The impact of this refinement was greatest on our pool delinquencies and deep coverage delinquencies. Average claim amounts have also risen due to a greater percentage of claims on 2007 vintage loans, Alt-A loans and loans in California, all of which have higher average claim amounts.

Because the reserve increase this quarter had a disproportionate impact on two of our small mortgage insurance subsidiaries that solely reinsure pool and deep cover risks from Radian Guaranty, we needed to provide these companies with additional capital in order to maintain the requisite amount of statutory surplus. Approximately $30 million of this required capital came from Radian Guaranty and $56 million came from Radian Group.

The dollar amount of denials and recissions for the first quarter of 2010 was approximately $277 million compared to $350 million in the fourth quarter of 2009. Our claims paid for the quarter consisted of $258.8 million of first lien and $8 million of second lien. We also made $91 million in termination payments. We still expect that total claims paid will be approximately $1.5 billion for the year 2010.

We continue to execute MI transactions during the quarter that are consistent with the strategy of reducing non-core exposure on favorable economic terms. They are as follows. We terminated another set of structured transactions containing approximately $102 million of modified pool risk in force, which was included within our primary statistics. The detailed impact of the termination is portrayed on Exhibit Q of our earnings release. We also bought approximately $59 million of NIM bonds for a purchase price of approximately $48 million, which produced a small statutory capital benefit and had minimal GAAP impact as the purchase price approximated fair value. We will continue to pursue buying NIM bonds at a discount during the balance of 2010.

Secondly, risk in force has been reduced to $227 million as of March 31, 2010. The loss reserve and premium deficiency reserve for second liens as of March 31 was approximately $55 million, or 24% of the risk. Other mortgage insurance risk in force, which includes seconds, NIMs and international mortgage insurance, has been reduced significantly to $861 million as of March 31, 2010 from $1 billion at year-end 2009.

In Financial Guaranty, there were no material credit changes this quarter. With regard to the one problem CDO of ABS transaction, we continue to believe that we will not be required to pay principal until 2036 or later and that the ultimate principal payment will likely be a significant portion of our total par exposure of approximately $463 million.

Based on updated cash flow projections, which showed some slight improvement, we expect to begin paying claims for interest advances sometime in 2011 and possibly earlier if credit deterioration is worse than projected. At such time, we would be required to put the statutory loss reserve for the present value of future losses, which would be probability-weighted based on a series of potential outcomes and would significantly impact Radian Asset and less Radian Guaranty's statutory capital.

We are still carefully watching our TruPS CDO exposures. In early January, we eliminated the exposure on $96.6 million of the $212 million exposure on the one transaction that went into default. (technical difficulty) deterioration in underlying collateral and the TruPS exposures has not abated, we believe it would take a sustained period of banking failures in order for Radian to suffer material claims on our TruPS deals beyond the two deals that we have disclosed. Updated details of our TruPS exposure is presented on webcast slide number 27.

Change in fair value alignment impacted this quarter by a tightening of Radian's credit spreads, which was the primary driver of our unrealized fair value loss for the quarter of $78 million. Another $105 million of fair value loss is included within the loss on financial instruments line, which also contains other items.

Our NIM exposures were already consolidated on our balance sheet and due to the implementation of FAS 167 this quarter, we are now required for GAAP purposes to consolidate three Financial Guaranty transactions, including our problem CDO of ABS. The consolidation is driven by our control rights in these transactions. The impact of the consolidation is financial statement geography and gross (inaudible), including moving the P&L associated with these transactions to the net loss and other financial instruments and a few other lines. The specific impact of FAS 167 consolidation on both the P&L and balance sheet is presented on webcast slide number 12.

If you look at the sum total of our quarter-end balance sheet (inaudible) relating to Financial Guaranty derivative exposure and consolidated transactions, we have the net GAAP liability of approximately $550 million associated with the exposure, which includes a CDO of ABS, NIMs and TruPS, as well as corporate and other CDO exposure. That is the amount of future losses, which are absorbed in these exposures without impairing our GAAP book value.

If Radian's credit spread continues to tighten as it has so far during the second quarter, we would likely see further significant fair value losses develop as since corresponding tightening (inaudible) collateral spreads.

Expenses this quarter were significantly impacted by an increase in variable compensation expenses resulting from an increase in Radian's stock price during the quarter. The total impact of the stock price increase was approximately $17.5 million for the quarter and represents an increase in expected payout value of employee compensation (inaudible) tied to the Company's stock performance. While we were required to accrue this expense on a periodic basis based on our stock price at the time, the ultimate payout of this compensation is uncertain and in some cases will not be made for a number of years.

Based on our existing holding company liquidity expectation of sources and uses for the next few years, we still believe we will have sufficient liquidity to cover all of our needs through 2012, including the full repayment of our $160 million June 2011 outstanding debt. The next principal maturity we have will be $250 million in February of 2013. We would now like to turn the call over to the operator for questions.

(Operator Instructions). Donna Halverstadt, Goldman Sachs.

Good morning. A couple of questions. You mentioned your 21% marketshare in the first quarter. I am curious where you expect your marketshare to end 2010 and I am also curious what your guidance is for fiscal year 2010 NIW?

First off, while we celebrate our marketshare, we do not run the business based on any marketshare targets. Our goal is to focus on writing high-quality business and the marketshares are a derived outcome of writing all the good high-quality business that we can write. So we hope that we continue to write a lot more of the good-quality business and the marketshare will be whatever it is. Teresa, do you want to add to the --?

No, I think that really says it all. I think it is very difficult to predict where we will end up for the end of the year, but we are very focused on writing high-quality business. We are also very focused on moving share away from the FHA and as part of that, we have really focused on making sure that our customers and particularly their loan officers understand that borrower execution for some of our products is actually better than FHA and try and make sure that they start using those products.

All right. And your expectations for 2010 NIW?

In terms of NIW, basically it depends on what happens in the market in terms of how much share the MI industry can gain back from the FHA. As I mentioned in my opening comments, we are encouraged by the fact that the FHA has been aligned with us in the MI industry in trying to shift the balance to a much better mix between the private MI and the FHA. So it depends on how successful we are in gaining some of that share back.

The industry volume in terms of mortgages originated continues to be relatively modest. Maybe down the road, further down the road, that is going to improve. But again, Donna, as you know, while that is happening, some of the reasons why the industry volume is low is because of low refis and to the extent that we have on our books customers who have been paying for the last three years in spite of the credit downturn and their good credit risk, we have the benefit of retaining them longer.

Okay, thanks. The other thing I wanted to ask about was you talked about the contributions that each of Radian Group and Radian Guaranty needed to make to a couple of the subsidiaries. What is your outlook for the amount of additional contributions those two entities will need to make during the rest of 2010 and during 2011?

There may be additional contributions necessary, but we don't think it will materially impact our liquidity at the holding company or at the operating company.

Okay. And the last thing I wanted to ask about was, as you thought about the Company's needs, as well as conditions in the capital markets and the receptivity that your peers enjoyed, what drove you to decide on $500 million of common, why no convert? Can you just talk about the thought process there?

Donna, as Emily said in the comments preceding our investor call, we cannot comment on anything to do with our capital raise on this call.

Okay, good enough. Good luck. Thank you.

Mike Grasher, Piper Jaffray.

Thank you. A couple questions. First of all, with regard to taking the reserves higher and I think you highlighted severity and longer stage delinquencies. Can you just comment around both of those issues in terms of what is really driving severity higher when we read and hear about recovery in the housing market? And then also in terms of the longer stage delinquencies, what is occurring there? Why is that happening in terms of the delinquencies staying out there farther?

The delinquencies aging has been a continuation of what we have seen over the past year plus, so that is no different. The delinquencies have been getting older and staying in the delinquency buckets pre-foreclosure. The foreclosures have not been coming through and that is due to the moratorium and the attempts to modify. That is just a continuation of the trend that we have seen.

Okay, so nothing new there?

Nothing new. With regards to severity, two components there. The first one is we do a normal update of our severity assumptions based on the experience and that had a small increase this quarter. And as well, we talked about the refinement to the reserving estimate, which looks at a more specific loan level input rather than averages. And that is something that we have been doing over the past couple of years in terms of refinements to our methodology to provide us with a better estimate and that impacted the severity this quarter.

Okay. And so is that sort of the first quarter we have seen where you have actually gotten to that loan level look, if that is the right term to use?

There is a lot of loan level input contained within the reserving estimate and there are some averaging as well, as well as look-backs to history. So it contains a lot of both of those things. But with regard to severity, we felt it was -- it would come up with a better estimate to be looking at a more specific loan level input with regard to that. There are other components as well ahead that have specific loan level and there are averages and historical averages in the estimate as well.

Okay, that's helpful. And then on the modifications, I don't recall hearing you say what the reserve impact was from those modifications. I think it was 41 -- it was -- 6000 were done to date. Maybe in the quarter, do you have a number where the reserves were sort of released against those modifications that were approved?

Mike, we do not explicitly have any reserve adjustments related to modifications. It is only indirectly to the extent as roll rates, but there is no explicit adjustment related to modifications. And another point to keep in mind in terms of reserves this quarter, as well as the contributions to capital trust subsidiaries is, in the last two years, we have gotten ourselves to the point that we could absorb those reserve increases, make those capital contributions and still maintain very strong risk-to-capital ratios in the industry.

Our goal is to each quarter come up with the best reserve estimate we can using the most current information we can. And the way I look at it is however we got to this point this quarter, the fact that, given our reserve increases combined with the improvement we saw in defaults in April, we had a much better, much stronger position in terms of reserves as we look forward.

Okay. And those loans that are going through the modification program, what sort of stage of delinquency are they? Are they earlier, are they longer stage, can you give us an idea around that?

Mike, most of them have been sort of in the middle stages, so it's not super concentrated in the older bucket. Most of the ones we have seen so far have been in the more mid-stage.

And mid-stage being about nine months?

No, it would be earlier than that.

Okay, all right, thanks very much.

Matthew Howlett, Macquarie.

Thanks for taking my question. Bob, could you just go over what you said on the Financial Guaranty business, the credit? I know your own credit spreads tightened and that caused the unrealized loss in the quarter. Can you just sort of elaborate on, going forward, if your credit spreads were to continue to tighten, if they went back to more historic levels versus if you don't have any more impairments on the ABS, CDS, where the book value would shake out to? Is there some sort of adjusted book you could give us or how you look at the $20.65 today?

We disclosed some sensitivities. You can look at our Q and you can see some of the sensitivities around our CDS spread and what it means to the fair value. But I think the point is that if our credit spreads tighten, that is one element of the fair value process. So in a vacuum, if they tightened, that would produce fair value losses.

If the collateral spreads tightened, then those would be offset. So it is always -- it is not just our spread, but it is also in relation to the collateral spread. And what we've said repeatedly is that if the movements are spread-related only that they will zero out over time and it is really the credit-related items that would be more permanent. And if there is ever credit-related items within our derivatives, we always disclose those and point those out.

Great. And then on the CDS that you are sharing that's off balance, the synthetic, we are talking about corporate synthetic CDOs that are investment grade or something. We are not talking about the ABS that are off-balance-sheet?

Right, well, they are both fair valued, but most of our exposure to derivatives is corporate CDOs and you would be looking at the CDX or relevant corporate indices to see how those spreads move and that impacts the fair value as well.

Got you. Great. Okay and then just getting back to the HAMP. I know we have asked you this before about what type of reserves you have set aside for the 20% of HAMP -- delinquencies are in HAMP trials today. Is there any way to quantify that more? There has been some expectations from servicers out there saying they expect to convert 50% of the trials to permanent over the next couple of months. I think Wells Fargo is out there saying that. I mean is there any type of clarity you can give us on type of reserves set aside for those HAMP trials?

Those loans are delinquent loans to us, so those would be reserved just like any other loan. So there is no presumption that some part of them will cure and therefore we take the reserve and change the reserve. So every one of those loans is reserved exactly like every other delinquent loan. When they do complete the process and then a cure is reported to us, then the reserve would come off the books. So that is the way the reserving works.

Okay, great. And the last question, S.A, you had a conversation with the FHA. Just related to their short refinancing program, and there has been a lot of talk that the MIs are going to have to share in, whether it is principal write-downs, but possibly the short refinancing given it is not technically a cramdown, just talked that the GSEs will come and negotiate with the MIs. What have they said to you in regard to that program? Is there any type of conversations?

That was not something that came up in my FHA commissioner meeting, but let me see if Teresa has any information on that.

I think in respect to some of the changes to HAMP related to principal forgiveness, there have been some discussions around how the MIs might participate. Right now, if there is forgiveness, it would be forgiveness on the part of the lender or the servicer who is involved with that and there would be a lower loan amount that would be insured on a go-forward basis.

So more conversation has really been around whether or not if that loan were to default in the future, whether the amount of coverage would be the original amount or the reduced amount. But that has been most of the discussion and that's still being discussed.

Okay, so nothing like sharing on the principal write-downs, but on the short refinancing program, it is my understanding the loans still have to be current to go into the FHA program. So this is not necessarily a write-down, but necessarily -- that loan would be distinguished and your MI policy would go away. So I look at that as being sort of getting you guys off the hook. I don't know if there has been any discussion relative to that specific program.

I am not aware of any.

Great. Thank you.

Chris Owens, (inaudible).

Good morning, everyone. My question is what was the specific impact of the increase in severity on your reserving for the quarter, a number?

We haven't disclosed exactly what it was, but it was a significant portion of the reserve increase.

Is it more than -- was it several hundred million?

It was a significant portion of the reserve increase.

Okay. Do you think that it is sort of a one-time increase based on the change in your reserving model? Or is it -- do you think that is sustainable -- you'll have to kick up reserves by a couple hundred million dollars a quarter to match the new input that you are putting in your model?

Well, we update our assumptions on severity and a whole host of other things every quarter. So that continues every quarter, but this one refinement that we made in terms of a loan level input, that won't be done again.

Okay. So this is sort of a one-time true-up if I am looking -- if I am hearing you correctly.

That specific refinement won't be repeated.

Okay. My second question was you said in the prepared comments and on the press release that your delinquency account was down again in April. Can you give us a number, how much was it down?

We just said it was down a small amount.

A small amount, okay. And then, again, you guys are recording no future benefit for any sort of HAMP modifications?

Not specifically within the reserving process. However, we do have -- within our estimate we project that some of the delinquent loans will cure. So within that expectation of cures, that is where the modifications would fit.

Is your cure assumption higher because there is HAMP, or you're just saying that some HAMP cures will just come out of that sort of regular cure rate that you are using?

The cure assumptions are more historically based than having an expectation around specific HAMP numbers.

Okay. So this will be my final question. So the true-up in your reserves from 22,700 to 25,000 average reserve to loan costs at $330 million this quarter. So I guess my question being if delinquencies decline again in the second quarter and you don't have this one time true-up cost, should we be thinking about breakeven or profitable quarters going forward, or is that -- is there any reason we shouldn't expect that, I should say?

The reserve estimate continues a whole host of assumptions, so we update the assumptions every single quarter. However, you know, over time directionally if delinquencies decline, then you should see a corresponding decrease in reserves subject to all these other components -- severity, size, all the roll rates, the rescission estimates. It is a lot of things that go into it, but the number of delinquencies is a critical component of the reserving estimate.

Also, (inaudible), Chris, we'd rather have delinquencies go down and deposits (inaudible).

Sure. Thank you very much and I'll talk to you soon. Thank you.

(Operator Instructions). Conor Ryan, Deutsche Bank.

Thanks, guys. Actually all my questions have been answered.

Bill Drew, Harbinger Capital.

Hi, could you give us some color as to what you are seeing in the CMBS book given the increasing delinquency trends there?

We have seen increasing delinquency trends, but, at this time, we are not concerned about material losses within our few CMBS exposures and they are disclosed within our 10-Q.

Okay. Do you have an estimate for ultimate delinquencies in that book?

We don't at the time.

Okay. Also, what are you seeing on HAMP nonperformance given the high backend DTI post the HAMP bond? Do you have any redefault data there yet?

We are just starting to really see that data. We are, as I think as expected, seeing some redefault activity, but I don't think we have enough history yet to feel comfortable with where that is going to end up.

Okay. And just given the high amount of rescissions and GSE putbacks in the industry, have you seen any large originators stop using MI?

We haven't -- in terms of the customers we do business with actively, we haven't seen that. Though, at some point, I believe, we all believe that the MI industry is going to have to go out and demonstrate its value proposition to the lenders.

What I would add -- I can only speak to Radian, but we haven't had that occur, but we have been very focused on having, as I have talked about before, a transparent process where we are very clear about the reason for rescission. And we have a rebuttal process where lenders are able to come back and rebut the rescission. And so we believe that that has helped at least in a process that is not a popular process.

And the other point to keep in mind is we, as an industry, and we, at Radian, have been paying significant amounts of claims to the tune of billions of dollars. So it is not like we have not been paying substantial claims.

Okay, great. Thank you.

Steve Wyatt, Morgan Stanley.

Yes, hello, good morning. I just had a quick question. At some point, you guys probably get to a point where you are not stopping the bleeding, so to speak and you are looking at the business longer term. Hey, there is going to be a turnaround. Do you find yourself at the point in this cycle to where you can start looking out into the future and not next quarter? That is my first question. The second question is what do you see pricing on new policies looking like over the next three to five years?

I think we are trying to digest your question.

Well, my question is -- do you -- there are different objectives that you have day to day. I mean there are things that you can try and do to manage this very short term to ensure your success longer term. And do you find yourself -- hey, we are turning the corner here. Let's look out a year or two, three years, to try and build up our marketshare I guess (inaudible). Does that make sense?

I am not sure I follow your question, but let me see if I can answer it with the way I understand it. First, in terms of what we have done, we have focused on dealing with our legacy portfolio in terms of trying to find opportunities to commute and reduce exposure where possible and we have been pretty successful, particularly in the Financial Guaranty side, but also on the MI side.

We also actively manage our legacy portfolio in terms of loss management. We also very importantly and perhaps even more importantly than legacy is the fact that we have demonstrated, based on our '09 book of business, that we can originate very high-quality profitable business. Industry pricing has gone up, credit standards have tightened and the '09 book of business is emerging as the best book we have seen in our 30-year history. And on top of that, we have been able to drive sufficient, good-quality business to show a pickup in our share from our historical levels and I think those factors are all very positive.

I would just add that we have been very focused on maintaining good relationships with our traditional customer base, which includes a lot of the large lenders. But we have also been aggressively, through an increased salesforce presence, increasing the number of lenders that we do business with, particularly in the credit union and community bank segment. So we have increased our share of NIW that is written through credit unions significantly and we have launched a community banking initiative at the end of last year. And so we are focused on building that population of customers as well. So I view that as sort of how we are positioning ourselves to focus on the future and writing business in the future.

And as far as pricing over the last -- I mean the next 35 years is concerned, I think it is a very difficult question to answer. All we can say is, right now, we have priced -- our pricing has gone up at the same time that we have been successful in expanding our share of good-quality business. And that produces a very attractive '09 book of business and '10 book of business.

How much higher are those premiums over last year, let's say, on the high-quality policy? Is it 15%, 10%?

Approximately 20% are a little higher than that.

Okay, thank you.

David Dusenbury, Dalton Greiner.

Good morning. I did miss the beginning of the conference call, so I apologize if you did talk about this, but my question is, on the subject of the possibility of burnout and I don't know if this is -- I'm sure it is not an easy question to answer, but as I look at your slide deck on page 13 and I see -- you can see the vintages in '05, '06, '07 showing a nice flattening out or even the '05s started to come down a little bit. How do you evaluate burnout versus just seasonal trends?

I will ask Scott Theobald, our Chief Risk Officer for our Radian Guaranty business, to answer the question.

Hi, good morning. It's a good question. What we do is, when we look at kind of whether or not we are getting credit for a burnout, is we look at the composition of defaults between kind of first-time defaults and repeat defaults. And as we have said on the previous calls, in the older vintages, we are seeing considerably fewer new defaults and most of the default notices are for loans that have already been in default. In the 2007 and 2008 book, we are still seeing signs of new defaults as opposed to repeat defaults. But in general, the trends are suggesting credit burnout, but it is a little bit early to call a cyclical change here.

Just so I understand, the redefault is literally you get a default notice -- let's say I got a default notice, I become current again, I am back on track and then I redefault and you view that as a sign of what?

When my notices of default consists more of repeat defaults as opposed to brand-new defaults, that is usually a good sign that the book is starting to burn out.

I got it. So the '05-'06, you are seeing more repeat defaults than new defaults. The '07 and '08 is still a healthy amount of first-time defaults?

That's correct.

Okay. Thank you.

Chris Neczypor, Goldman Sachs.

Great, thanks. I had two quick questions. First, I was wondering if you had an estimate for the runoff value of your book, maybe in a similar manner to the way that MGIC and PMI have given. And then the second question is what was the statutory capital level embedded in the 16.9 risk-to-capital as of first quarter?

Bob will answer that, but we have been sharing our PDR information for quite a few quarters and that has similar information in there. I think now it has been shared for several quarters.

Does that -- but I mean if I think about the total book, so including Financial Guaranty, is there a way to think about that as well?

We have just provided it for the mortgage insurance business, which is on slide 11 of the webcast slide. With regard to Financial Guaranty, I think you have seen consistently that the resultant absence of spread changes, which do move the results around, has been close to breakeven pretty consistently.

Okay. And maybe just before we get to the stat capital question, on that topic, the decline in the NPR looks like it was about $300 million to $400 million, if I am reading it correctly, in the quarter. Do you have an update for what that would be through April?

I'm sorry. Say that again, please?

On the nonperformance risk.

In terms of the spread changes? No, we --.

Exactly.

No, we didn't quantify it, but we said that if the spread continues to tighten absence a similar movement in collateral spreads, we would see -- we could see significant fair value (inaudible).

Great, thanks. And then just the question on the stat cap?

I don't have the exact number. We can get that for you off-line.

Okay, great. Thank you.

Thank you. That does conclude our question-and-answer session. I would like to turn the conference over back to S.A. Ibrahim. Please go ahead.

Thank you, operator. And thank you all for joining us on the call today. We will see you next quarter. Thanks.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T executive teleconference service. You may now disconnect.