Good morning, everyone. Welcome to Radian's Investor Day. We have a great audience here today. Thank you very much. We're pleased to have you with us both here in the room and joining via webcast. On behalf of the entire management team, thank you for being here and your interest in Radian. Before we jump in, let me quickly cover a few important items. Some of the statements we make today will be forward-looking. These statements, as well as Radian's prospects, are subject to certain risks and uncertainties. I encourage you to review the safe harbor statement at the end of today's presentation for more detail. We'll also be discussing certain Non-GAAP financial measures. Reconciliation to the most comparable GAAP measures are included at the end of the presentation and also available on the investor relations section of our website.
Finally, for those in the room, I'd appreciate if you'd take a moment and silence those devices. I also have to tell you guys about the Wi-Fi password, because everybody keeps asking. Wi-Fi is the St. Regis Conference. The password is banquets2026. Everybody got that? Low B.
Okay, let's talk about what we have planned for today. We put together a full and engaging agenda for you this morning. You'll hear directly from our Chief Executive Officer, the Co-Heads of our mortgage insurance business, the Inigo team, our Chief Financial Officer, and our Chief Executive Officer Elect. At the end of these presentations, you should understand why we are so excited about our business, the opportunity in front of us, and what truly sets Radian apart. We'll have a dedicated Q&A session specifically for our specialty insurance business following the Inigo presentation. For those here in person, if you have a question, you can raise your hand and we'll bring a microphone to you, or you can submit questions at any time at the iPad at your seat. For those joining virtually, questions can be submitted through the webcast platform throughout the session.
Remember today, guys, we want today to be interactive, so I encourage you to ask the questions on your minds. If we aren't able to get to your question, we will follow up with you after Investor Day. A few more items before we get started. We'll take a short break following the Inigo presentation and prior to Q&A, and then a lunch break at approximately noon. For those here, please enjoy lunch and take the opportunity to mingle with our team. Our program will resume at 12:45 P.M. for a fireside chat between our Chief Executive Officer , Rick Thornberry, and our Chief Executive Officer Elect , Mike Weinbach. Lunch and the fireside chat will wrap up around 1:00 P.M. At that time, we invite our in-person attendees to enjoy coffee and dessert and continue to meet and mingle with members of our Radian's management team. Okay. Let's get started.
Please join me in welcoming Radian's Chief Executive Officer, Rick Thornberry, to the stage.
Wow, great crowd here. Thank you all for joining us today, both in the room and on the webcast. We appreciate you being here as we share how Radian is moving forward as a global multi-line specialty insurer. Today is about giving you a clear view of our strategic focus, our businesses, and how we are positioning the company to generate long-term value. Before we begin, I also want to just take a moment to acknowledge this will be my final Investor Day as Chief Executive Officer Elect , as I recently announced my plans to retire later this year. It's been an honor and a true privilege to lead this company for nearly a decade, and I cannot be more excited about the strength of the team and the strategy and the path ahead.
We believe Radian stands stronger, more resilient, and with a broader opportunity set as compared to any point in our history. We're excited to walk you through that today. Okay. With that, it is my pleasure to welcome Chief Executive Officer Elect Mike Weinbach to Radian. I've known Mike for nearly a decade, and I'm very excited to pass the leadership of Radian and this great team to him in August. Mike joined on Monday, and he and I are focused on a seamless transition over the next couple of months. As the business moves forward, I'm confident that he will continue to shape and execute our strategy as we evolve as a global multi-line specialty insurer. He is a proven leader, brings deep experience and a strong strategic perspective on how we deploy capital and position the business for growth.
I am confident that he is the right person to lead Radian into the future. Now, Mike, over to you. Please join me on stage.
Thanks, Rick. Good morning, everybody. I want to join Rick in welcoming you to the Radian 2026 Investor Day. We're really excited you're here. We're really excited to have the team share the story with you. I'm excited to be joining the company at this transformational time in our history. I've known Rick for a good amount of time, and I've followed Radian from the outside and got to know the board, got to know Richard, other members of the management team. What I saw from the outside was a really good company with a good culture, and importantly, a good platform for growth and capital allocation. Yes, it's day four.
It feels like a lot longer because as soon as the announcement, even before, I've been getting to meet people across the company and dig into the businesses a little bit, and I'm ready to upgrade the company to it is great people, it is a great culture, and it is really a great platform for growth and capital allocation. I'm not going to steal the team's thunder. They're going to share the story with you. I would encourage you, if we haven't met, I would love to meet you. I would love to hear your feedback. Let us know how we can help better tell the Radian story. As Bob mentioned upfront, I'll be back with Rick later to share some more thoughts. I'm going to turn it back to Rick and the team to share our incredible story. Thanks, everyone.
Just so you don't miss it, as we mentioned, we're going to come together again later today after lunch, I think at 12:45 P.M. is the expected time, to do a fireside chat without a fire. All right. Before we get started, I'd like to recognize Herbert Wender. Herbert Wender, who we are fortunate to have here with us today. Herb's decades of leadership, you told me you were coming, Herb. His decades of leadership, including many years as chairman and the person who I think of as the founder of Radian, helped guide the company through multiple cycles and shaped the strong foundation that we continue to build on today. We're honored to have him with us today. Thank you, Herbert.
Thank you.
Today, you're going to hear from several members of our team about how we operate as a global multi-line specialty insurer, deploying capital across a high-performing mortgage insurance business and a specialty business. How we leverage our strengths and core competencies across our multi-line insurance businesses to execute our strategy and serve our customers, and how we approach the execution of that strategy. You will also hear today from our mortgage and specialty insurance businesses, how we are positioned and why we believe Radian Group stands stronger, more resilient and more promising than any point in time in our history. Throughout the day, you'll hear how we believe this combination of skills and capabilities allows us to focus on what we do best, strategically managing capital to generate earnings and build stockholder value. Okay?
For those of you who are new to our story or who may be thinking of Radian six months ago, let me start with who Radian Group is today and why we are built for the future. First, we are built on strength. A solid foundation that has been built over nearly 50 years. Second, we're built with purpose. Two complementary, uncorrelated businesses with a diversified set of products, each executing their own business plans and generating their own earnings. With capital diversification and optimization that we believe allows the combination to be greater than the sum of the parts. Third, we are built for global reach. Our specialty insurance business expands our access to a large and diversified global market. Finally, we're built for value creation, aligned behind one clear strategy, focused on creating long-term value for all our stakeholders.
This slide captures the framework of our business construct and our strategy as a global multi-line specialty insurer. At our core, we are a nearly 50-year-old market-leading mortgage insurance business with a large enforced portfolio that we believe has significant embedded value. Our mortgage insurance business is not just our heritage, it is our strength, our foundation, and the engine that powers everything else we do. The recent addition of Inigo, a six-year-old, highly successful entrepreneurial specialty insurance business with a highly talented team, has catapulted us from a monoline mortgage insurance business company to a global multi-line specialty insurance business. The addition of Inigo significantly expands our addressable market in terms of product lines, geographic markets, and customers, and as such, provides new opportunities for growth and success. Importantly, it provides us with the strategic platform to consider further expansion across the P&C market.
While our mortgage and specialty insurance businesses operate independently, each executing their separate business plans, at the center of our strategy is a shared and aligned operating philosophy related to the use of proprietary data and analytics to develop our independent view of risk and price appropriately, an unwavering commitment to disciplined underwriting, our longstanding track record of strategic capital management, and a deep-rooted and culturally ingrained commitment to serving our customers' needs. I think what I believe ultimately drives our success are world-class teams operating within a value-based culture that fuels innovation and the execution of our strategy. These are core enterprise strengths. They're not specific to the business, and we leverage them to build our business.
Together, the combination of the two complementary businesses executing one strategy is why we believe we are built for the future and positioned to enhance our earnings quality, expand opportunities, and improve flexibility through the cycle. This slide speaks to the foundation of our story. Since 2017, we have consistently grown adjusted book value per share, including accumulated other comprehensive income and dividends, by more than 3x at a 15% compounded annual growth rate. We did this across multiple economic environments, including periods of rising rates, declining rates, economic uncertainty, housing stress, and significant market volatility. The key takeaway here is our track record of growth. This reflects how we have achieved our goal of managing capital to generate earnings and build value over time across market cycles.
This is the foundation that we are building on going forward with the addition of Inigo. Let's look at that track record for growth in book value per share as translated into total stockholder return. We've delivered 241% TSR over the past decade. Despite these attractive results, we believe the value of our business has yet to be fully recognized, creating a compelling valuation starting point. This slide reinforces that point. Over the past three years, we've delivered strong operating performance and attractive returns on equity. When you look at how we are valued today relative to other benchmarks, particularly on a price-to-book basis, we believe it represents an attractive entry point. One that does not fully reflect the quality of earnings, the strength of our MI business, or the value that Inigo adds to Radian Group.
We see a clear opportunity for investors, one that we've been actively utilizing for our own share repurchase activity over time. The path to realizing that opportunity is exactly what you're going to hear about today. A clear and simple to understand strategy. We've always been focused on operating a simple but powerful formula. Serve our customers, underwrite risk well, manage capital carefully, and deliver to stockholders. As you've seen, that discipline has resulted in a track record of success that we're proud of. Along the way, we have focused on the goal of managing capital strategically with financial discipline, focused on generating high-quality earnings and building long-term value. We believe the combination of these two businesses significantly improves Radian's return profile, presenting an attractive value opportunity for stockholders going forward. It is the opportunity for increasing value created by disciplined capital management that we are focused on.
Simply said, at our core, we're focused on managing capital to generate earnings and build value. Execution is where strategies succeed or fail. Let me be specific about how we deliver on ours. We execute our strategy through a simple and straightforward set of focus priorities. Think of it as Radian's strategic value bridge. First, we optimize our MI foundation. Our mortgage insurance business is a proven capital generative business with strong embedded value that provides a solid foundation. We are focused on improving operational efficiency while also leveraging our proprietary analytics to construct a highly valuable insurance portfolio. Meghan and Steve will cover our approach to our MI business in a few minutes. Second, we're focused on profitably scaling our specialty insurance business through effective cycle management.
The business is based in London and operates as a standalone business within Radian, with the team retaining their strategic focus and culture. The addition of Inigo helps us expand our market reach into global uncorrelated markets, where disciplined underwriting and proprietary analytics and assessment of risk are expected to drive attractive returns. Richard and team will cover our approach to our specialty business in a few minutes. Third, we manage capital by deploying it dynamically across our businesses. We do this by directing capital to the highest return opportunities across businesses, across products, across cycles, focused on building value. Dan will cover our disciplined approach to capital management in a few minutes.
Fourth, you're going to see this in the room, we build and invest in the talent and capabilities of our world-class team, because execution ultimately comes down to having the right people with the right expertise making the right decisions. Finally, we do this all to deliver consistent results over the long term. Together, these strategic priorities are designed to reinforce one another. Importantly, they are what position us to deliver both stability and growth, not choose between them. This is how we believe our approach to executing our strategy translates into attractive risk-adjusted returns, enabling us to manage capital to generate earnings and build value over the long term across market cycles. As we sit here today, the setup is strong and the position as a global multiline specialty insurer is in place.
The North Star and the strategy are clear, and you will hear that the team is highly focused and execution is underway. Today is about showing you how this all comes together, and importantly, that we are built for the future, which is bright with possibilities. We're excited about what we are building and we believe the best is still ahead. Let's get started. I'd like to invite Meghan Bartholomew, Senior Executive Vice President, and Co-Head of our Mortgage Insurance business to the stage
Good morning. I'm Meghan Bartholomew, Co-Head of Mortgage Insurance, along with my colleague, Steve Keleher. I've been with Radian for 24 years, starting in capital markets and spending the majority of my career here in risk management. This background gives me a particular lens on how we think about the portfolio we are building and the risk we're managing. Steve and I have collaborated closely for over 15 years, throughout that time, we've been deeply engaged with the teams that we have the privilege of leading. What you'll hear from us today is not a change in direction. It's an acceleration. We're going to walk you through the structural tailwinds behind our business, how we think about building and managing our portfolio for maximum value, and why we believe Radian is uniquely positioned to outperform in this market. First, the fundamentals are in our favor.
Demographic demand and constrained housing supply create a durable backdrop for new insurance generation, even in a higher rate environment. We believe we have a meaningful competitive advantage in how we view and select risk. Differentiated modeling, pricing, and customer analytics mean we're not just writing volume. We're building a portfolio that generates attractive returns over the long term. Technology and AI are sharpening our edge. We're enhancing underwriting, improving cycle times, and deepening customer insights, allowing us to scale intelligently while staying disciplined. Finally, underpinning it all, we are built to perform through market cycles. Our disciplined approach to capital risk and portfolio construction ensures resilience in any environment. Let me spend a moment on the demand backdrop, particularly the role of the first-time homebuyer, which is central to our business.
First-time homebuyers represent about 21% of total home sales. Importantly for us, they account for roughly 60% of purchase loans with mortgage insurance. They are core to our franchise. I can tell you that despite some reports, the American dream of homeownership is alive and well. People want to own a home. What we're seeing, however, is a delay in the age of the first-time homebuyers compared to prior periods. The median age of a first-time homebuyer is now 40, the highest on record. Affordability and supply constraints are pushing buyers to wait longer to enter the market. They are not walking away. The demographics are compelling. Millennials, now in their prime home-buying years, are the largest adult generation in America. That demand isn't going away, it's building. This is exactly where mortgage insurance plays a critical role in preserving the American dream of homeownership.
While the demand to become homeowners is undeniable, affordability challenges make it harder to save for large down payments, MI provides a path for these borrowers to buy a home sooner without waiting years to accumulate additional savings. When you connect the delayed but persistent demand and a product that directly addresses affordability, it reinforces what we expect to be a durable tailwind for our business. The supply picture reinforces that tailwind. Constrained inventory and strong demand during the pandemic helped drive double-digit increases in home prices. During that time, existing and new single-family home inventory for sale declined to an average of 1.3 million units, down from 1.9 million units in 2010- 2019 and 2.3 million from 1990- 2009.
We've started to see some inventory come to market in the past few years. The average of homes available for sale reached 1.9 million in April of 2026. This persistent housing supply shortage promotes strong demand and keeps home prices elevated at a time when saving for a down payment is viewed as the most significant barrier to homeownership. It underscores the importance of mortgage insurance, providing access to mortgage credit for low down payment mortgages. As a refresher on mortgage insurance and our mission in the housing space, I want to ground us in a few metrics that highlight just how critical this industry is, especially for Middle America families facing today's affordability challenges. Since 2018, Radian has helped 1.5 million families achieve homeownership. When we look at who we serve, roughly 60% of our borrowers are first-time homebuyers, and over 1/3 have household incomes below $75,000.
These are families trying to enter the market at a time when affordability is such a challenge. Mortgage insurance plays a pivotal role here by enabling borrowers to purchase a home with less than 20% down, helping them enter the market sooner and begin building equity earlier in their financial journey. Before we go further, it's worth acknowledging how much the mortgage insurance industry has changed since the great financial crisis. We're serving high-quality borrowers under far more stringent underwriting and loan product standards. PMIERs, the private mortgage insurer eligibility requirements, have strengthened our capital and operating framework, and we now actively distribute risk through reinsurance and other credit risk transfer mechanisms. Our pricing is dynamic and much more granular. Servicing standards, they simplify the loss mitigation options and help keep borrowers in their homes. Today's master policy brings greater clarity and consistency.
This is a fundamentally stronger, more resilient industry, and that matters when we talk about performance through the cycle. Mortgage insurance is a critical pillar of the housing finance system, not just for borrowers, but because of the private capital we deploy as first loss protection to lenders, Fannie Mae, Freddie Mac, and ultimately, taxpayers. We are deeply engaged in Washington, D.C., ensuring policymakers understand our products, recognize our value, and represent our voice in policy discussions that shape housing finance. We come to these conversations with credibility as the risk-taker through the cycle with decades of mortgage credit underwriting expertise to promote a safe, sound and resilient system. Radian is viewed as respected and a constructive stakeholder in these conversations with strong channels of communication that ensure our perspectives are part of the discussion.
I'm going to transition here to highlight our focus on our customers and how we deliver value through our technology platforms. Radian does business with over 1,000 lenders. We support lenders, all institution types, and lenders of all sizes. Each is in a different place in terms of their technology journeys, and we have developed our processes to deliver a best-in-class customer experience for all of them through our digital platform. We deliver real-time pricing to lenders every day, an efficient and scalable mortgage risk transfer mechanism for lenders. Radian has been consistently investing in the MI business with a focus on improving how we use our significant data to drive efficiency and improve our credit risk management functions.
We innovate, we're agile, we engage with our lenders, our servicers, and other stakeholders to see where the market, AI, and technology are going so that we meet our customers where they feel most comfortable operating. As with all technology discussions, examples are helpful. An excellent example at Radian of automation and streamlining our processes is our Intelligent Data Platform, or IDP, a proprietary GenAI solution developed internally by Radian. IDP automates document processing end-to-end, including classification, indexing, data extraction, and data validation. It has customizable user interfaces tailored for different workflows and skill-based routing. Because we build it ourselves, we have flexibility to quickly and easily adapt, adjusting the user interface, adjusting the routing logic, or even the underlying large language model. There are night and day differences between building an IDP and prior software development initiatives where we had to rely on and customize third-party technology.
IDP's accuracy in terms of document recognition and data extraction is consistently improving. Adding new documents takes days, not weeks, and our lean business and technology teams are partnering to improve and scale the use cases. IDP feeds directly into our underwriting model. We combine MI application data extracted from documents through IDP and third-party data, and analyze all of it prior to an underwriter picking up a file. Our risk-informed underwriting program automates data comparison, confirms whether application data is supported by the loan file, and uses underwriting rules to assess file complexity and flag exceptions. The result, our underwriters spend their attention and time on high-value activities and not on routine data verification, driving faster underwriting cycle times. Since 2020, our average underwriting time has dropped by 34%, which supports higher throughput and quicker lender response times.
This process automation drives overhead cost reduction and efficiency gains and enables Radian to handle higher volumes without proportional staffing increases. At the same time, risk and quality control validations are embedded throughout our processes. Our quality control team will flag if adjustments or improvements are necessary. We've learned over time that the most common issue is that we didn't automate an activity that could have been automated, and we'll adjust so we don't miss that opportunity on the next file. In closing, I've shared how we modernize underwriting with advanced data extraction and comparison tools, but we apply automation with discipline. Quality controls and expert oversight ensure that we automate the right steps, and our experienced underwriters are inserted precisely where their judgment is essential. Now I'll turn it over to Steve to share how we build and manage our MI portfolio.
I'm Steve Keleher, and I'm a Senior Executive Vice President and Co-Head of Mortgage Insurance. My background has primarily been centered around mortgage credit, and my focus at Radian has been on our portfolio management and pricing and our data strategy and some of our operational functions. Prior to Radian, I worked with Freddie Mac and as a consultant at RiskSpan, both focused on U.S. mortgage credit. I'm happy to be partnering with Meghan as we know the business, we know this team, and we have shared conviction about where we're taking it. You just heard from Meghan how Radian supports the U.S. housing system, some of the tailwinds that are favorable for our business, and how we are leveraging best-in-class technology to efficiently serve our customers.
What I'd like to do is walk you through how we maximize the value of our portfolio, including what we focus on, how our approach works, and the evidence that it is delivering results. For those of you who joined us at our 2023 Investor Day or who have listened to our quarterly earnings calls, some of what I share today will look and sound familiar. That's because although we are agile in how we pursue our strategy, our strategy itself remains quite consistent. I'll start with what we're focused on, and that is maximizing the economic value of our portfolio. What exactly does that mean? What I'm referring to here is the projected amount of future earnings on employed capital, less the cost of holding that capital. With respect to new business, it's determined by the capital required to support the volume we write.
The equations at the bottom, we'll start with the complex ones. That's the new insurance written times capital. Very important, the capital piece, not just the new insurance written. The second piece is how long that capital will be outstanding, so that's that duration piece. The third is the returns we generate in excess of our cost of capital. That's the piece off to the right. Essentially, net income minus cost of capital. That's the simple version. This is the vision for our MI business. We leverage our analytics and our approach to pricing to identify and acquire new business with the highest economic value. We believe our ability to write an outsized share of economic value as compared to our competitor is unique and not easily replicable, and it's ultimately how we generate alpha in the mortgage insurance industry. How do we do this?
We've developed a suite of analytical tools and models, which we leverage when it comes to pricing and portfolio management. This is a process, and it continually adjusts as the market changes and our view evolves. The foundation of our approach is our assessment of risk. We use our proprietary model, RADAR, to project loan performance through a simulation of future economic paths and then calculate the premium rates for each granular market segment that would be required to achieve a risk-neutral return. This, of course, varies by many things. Varies by credit attributes, things like loan-to-value ratios, credit scores, debt-to-income ratios. As an example, a policy with a 90 loan-to-value ratio is projected to generate higher losses as compared to one with an 85 loan-to-value ratio. That 90 LTV is going to require more capital be held for a longer period of time.
The higher risk loan, the 90 LTV, would obviously require a higher premium to generate the same return. This also varies by lender due to performance differences and differences in expenses, and it varies by geographic region, given the differences in economic trends. I'll touch more on that in a moment. Our risk assessment and projected performance is just the start, though. Today's price-driven market requires that we continually monitor the competitive landscape to understand where the market clearing rates are, as this information is a critical input to enable our pricing model, SONAR, to optimize our pricing for maximum value. An example I've used in the past is that fundamental analysis may indicate that a particular stock is worth $100 a share, and that may be the true value. You wouldn't know if you're a buyer or a seller unless you know what the market price is.
We have a very strong focus on this part of this process. Things are constantly changing, whether it be our views on the future economic environment at a local level, our loan performance projections, market pricing. That's why we've built our process to identify these changes and quickly adjust accordingly. Mortgage insurance pricing is primarily done two ways, black box pricing and static rate cards. Everything I've shared with you here is why we lean into the market where we can adjust pricing quickly and granularly, that is through our black box pricing, and why we are strategically underweight in the segment of the market where pricing is offered by cards, which limit our ability to be as selective in the risk that we write.
I mentioned geographic regions being a key consideration in our evaluation of projected performance, this chart provides an excellent example of why that is. The green line here is actual house price appreciation in Phoenix starting in 2005. Above the axis is house price growth. Below the axis is house price decline. What we've overlaid here is five-year projections from our RADAR model at five different points in time, 2005, 2008, 2011, 2015, and 2021. We shared this view at our last Investor Day through 2020, highlighting our model's ability to accurately predict HPA changes at a regional level. In this updated view, which now includes additional years, you can see our models have continued to perform quite well.
This is in part due to the approach that we use that leverages fundamentals, things like wage growth at the local level, population demographic trends, housing stock to estimate over and undervaluedness, as well as more real-time indicators, again, at the local level, like days on the market, shares of distressed sales, listings removed without sale and others. There's a lot of economic value opportunity if you can allocate more capital in the areas that will experience favorable trends in future periods while our policies are active. This is consistent with what we shared at our last Investor Day. It's pretty intuitive. Our approach would require a significantly higher premium for a policy in a market where the outlook is less favorable as compared to that same policy if it were written in a market that is projected to experience more favorable trends.
As an example, in Phoenix, our model would project better performance for a loan originated in Phoenix in 2011 as compared to Phoenix in 2005 through 2007. This is what we've done. Based on internal analysis and using publicly available loan performance data sets from Fannie Mae and Freddie Mac, we estimate our best-in-class MI underwriting and pricing has produced higher returns, and produced a competitive advantage as compared to our peers. I mentioned that our approach is working and that there's proof in the pudding here. I'm going to use 2023 originations as an example, but I want to be clear, the story holds true with other vintages as well. In fact, we used 2022 originations at our last Investor Day to highlight a similar point.
In the chart, what we did is we divided all of the metropolitan statistical areas, or MSAs in the U.S. into three groups. The top 40%, best performing 40% in terms of house price growth, the middle 20%, and the bottom 40%. What you're seeing here is that with three years of development, we can definitively show that our approach has enabled us to over-allocate our market share in the best 40% of markets that have experienced 16% house price growth. We were able to under-allocate in the areas with less home price growth. There's a saying, a rising tide lifts all boats. This chart shows that even the markets we are under-allocated in still experience positive growth. As history has shown, that will not always be the case.
We believe our ability here is unique and positions us favorably vis-a-vis others in our industry. Sticking with the 2023 vintages as an example, you can see how the book is performing for Radian as compared to others in the industry. The chart on the left shows the dispersion in default rates, that range from 1.5%-3.5% as of first quarter 2026. This is primarily due to each mortgage insurer's risk selection. Now we're all in the same industry, so even though there are differences in absolute levels, you can still see similarity in terms of development and seasonality, et cetera. Default rates are a measure of performance with no consideration of value. What's shown in the chart on the right, for those that report it, is cumulative incurred loss ratios. These are calculated by dividing total incurred losses to date by premiums earned.
This starts to bring in value into the equation. Not capital yet, but the value now you can see is showing that Radian is consistently in line or lower than our peers that disclose this metric. This is important because without considering premium, it may appear on the left as if a 1.5% default rate is better than Radian's 2.6% default rate. That's not the case. Our focus on value has led us to deploy capital in segments that could otherwise be viewed as riskier. Importantly, those same segments are priced with higher premium rates, such that they generate loss ratios in line with Peer Four, who wrote lower risk volume that required less capital and was priced at lower premium rates. As the title of the slide states, we're not in the game of minimizing risk. We're focused on maximizing value.
Just as maximizing economic value of new business is important to us, ensuring our portfolio is well-positioned to manage through varying economic conditions is equally important. For over a decade, Radian's been leveraging risk distribution to manage capital and earnings volatility. We have agreements covering a portion of our risk on 99% of our exposure, written from 2022 through today. We have agreements in place that will be covering newly written business for years to come before that business is even written. We are quite selective in our approach. As an example, nearly two-thirds of our pre-2020 exposure is not subject to risk distribution, and that's very intentional. Given the significant embedded equity, we're very comfortable retaining that exposure and the associated premium.
This is true with the cushion we maintain above what is required by PMIERs, which is what Fannie Mae and Freddie Mac require in order to be an eligible insurer. PMIERs is a very strong capital framework. It does not account for certain factors that drive performance. As an example, PMIERs does not consider accumulated borrower equity since time of origination. Which means that the same capital is required on policies written in areas that have recently seen house price declines, as is required in policies or for policies in areas that have seen meaningful growth. As I showed a few minutes ago, we believe we're building a favorable portfolio as compared to the overall industry. Part of that shows up in less projected volatility. This influences the sizing of the cushion we maintain above the required level.
We establish an appropriate PMIERs cushion based on projected performance and stress conditions. Dan will share more on that later. Notably, we do not take a bigger is better approach. We think this is the right approach. To be clear, and you can see on the chart on the right, we cede the least out of any of our peers that report this 32% of our risk we cede. Actually, prior to the Inigo transaction, I believe we were the only MI that had available assets that could fully support our required assets with no use of risk distribution. We could certainly cede additional risk and premium to increase our cushion, but we find more value in keeping both on our balance sheet as we believe it benefits shareholders.
My hope is that you take away from today that we believe we have strong fundamentals in our favor. We believe we have a meaningful competitive advantage in how we view and select risk. We're leaning into technology and to support our customers and drive efficiency. Finally, our business has been built to perform through market cycles. I'd like to thank each of you for your interest in Radian's mortgage insurance business. Meghan and I will continue to work together and with everyone at Radian to position our business for continued success. I look forward to meeting and speaking with most of you, all of you later over lunch. I'd like now to welcome Richard Watson, Chief Executive Officer of Inigo, and members of the executive leadership team to the stage.
I'm turning up in numbers, right?
Okay. Return of the Mack. You know what it is.
Thank you, Steve. Meghan, fantastic. What a great story. Thank you for the introduction. Good morning, everybody. It is an absolute pleasure to be here. I'm joined, as you can see, by a good range of my fabulous team. It is our pleasure and our privilege to introduce you to the story of Inigo. This is the agenda. This is what we're going to take you through. I'm going to start with a little bit of an intro to the company, mostly because I think it helps to set the context for what we do and what we want to do going forward. We'll talk a little bit about that. We'll talk obviously about the Radian deal and why that appeals to us so much.
More importantly, I think, is we'll spend a bit of time talking about what we think sets Inigo apart from the rest of the market. I will close. There is clearly a severe chance that we will bore you to death. At the end of this, Bob, in his absolute wisdom, has put a coffee break in. We're going to wake you up with some highly dosed caffeine and then going to come back for a Q&A. I hope that you have lots of good questions to ask. We are delighted to be joined by a good number of our team. We've flown half a dozen of our team over so that you can have a chance to see them as well. If you wouldn't mind, guys, standing up wherever you are.
At the very least, it will help everybody know who to come and talk to. These are people I would walk over hot coals for. Flavia, we've got underwrites our casualty book, an immense talent. Ludo, I see here, heads up our catastrophe research, which is fundamental to what we do. I know you brought some of that research with you for the geeky people in the audience. Nick Lazarus underwrites our U.S. treaty book and probably underwrites more premium than anybody else individually at Inigo. It's great to see him here. Bea, we have as our Chief Of Staff. Chris underwrites our direct and FAC, which is another word for our big property in all its various forms. That, again, is our biggest single account. George is the backbone of the business because we actually call him, "Hey, George." That was you who pointed out, didn't you?
Because if you've ever been with George Stratts to an industry convention, it's a nightmare. You cannot get from one meeting to another without having to stop and talk to 10 people who go, "Oh, hey, George. Hey, George." He absolutely knows everybody. Look, the team's here. They're here to talk to you. They are very genuinely an awful lot smarter than me, and they're certainly more discreet. If you really want to understand what's going on, take time over coffee or over lunch to have a chat to them. The Inigo story, kind of brief introduction to Inigo. We started it five and a half years ago. I've been very privileged to work in this industry now for over 40 years, and I've had some fantastic colleagues to work with, both as colleagues, but also some wonderful people to work with as customers.
In talking to Stuart, Russ, Craig, George, right at the very beginning of this venture, I think all of us had this kind of itch to see whether we could start a business up, to see whether we could repeat all the really good things that we've seen in our careers. Could we sort of conjure that up and create a company that did that? This was back in 2020. The other thing that was happening in 2020, of course, was COVID. I mean, the market itself had had a couple of really bad years, and then COVID hit, and that completely upended it. For us, that was just this perfect chance to say, "Why don't we get together and do this? This is the perfect opportunity to do so." That's when we started, was 2020. We started trading in 2021. We all agreed.
I would say literally all of us agreed on this really basic approach. On the left-hand side there, you see a number of, I suppose like building blocks, really, as to how we wanted to start the company. The first thing was focus, focus. Can we not try and be all things to all people? Can we just try and focus in on areas where customers really value you, but also areas where typically they've earned good returns over time and just forget the rest? Most insurance companies end up drifting into ever less profitable, less exciting areas where, frankly, they don't bring much unique, compelling proposition. We didn't want to do that. We're just like, "Let's go deep in what we're going to underwrite." The other thing was leadership and expertise. That was fundamental to all of us.
It's fair to say that it's really hard to know with broker facilities, GenAI, sort of clever follow underwriting, the sort of compression of margin. It's hard to know where the market's going to go and what it's going to look like. I could give you four or five different versions. The one thing I feel really certain about is that expertise, deep expertise, will always be needed and will always be rewarded. We're going to focus on a limited number of classes. We're going to bring expertise and leadership. That's the challenge we set ourselves every day. Lastly, can we just keep it really simple? We've probably all worked in companies where they had a level of complexity that brought cost, it brought distraction. It meant you weren't talking about customers or underwriting deals. It just meant you were kind of matrix management hell.
Could we just try and do it in a way that was really simple? In our case, that's one capital base. It's one office. Just everything there, touch it. It's tangible. It's there to control. Look, so far, so simple. This was the kind of building blocks of it. How do you turn that into a compelling proposition for your customers and for your staff? We focused on these three areas on the other side of the graph. First of all was the customer. Could we put the customer at the front? It's quite funny. I would say in the 40+ years, it was very obvious to me that the customer is a bit of an afterthought in the specialty insurance game. It has become very transactional. There is almost literally a gap between client exec and customer and placing broker and insurer.
We wanted to just break that down. We wanted to get close to the customer to understand them and their needs at a really granular level, and to work with some people who are at the top end of the market spending massive sums of money and all they get back is this flimsy bit of paper, and occasionally they get to meet us. It's like, can we do better than that? It's a pretty low bar. I think it's really easy to do better than that. You are pushing on an open door. Customers love talking about their business. Those risk managers, they just want to come into the office and help the business run better, to avoid or to mitigate risk, to try and make it better.
You're pushing on an open door and trying to get close to the customer and understand what they do. Look, you don't have to be a kind of industry savant to look at data analytics and say, "This is going to be critical to the future of the industry." What was very apparent to us was that as a new company, we had an immediate advantage over a lot of the existing companies because we didn't have outdated tech, we didn't have competing priorities, we didn't have all sorts of other things that we'd get distracted by. We could have a really good tech and data stack and really play to that. It also just fundamentally appealed because the sort of people we are are a bit geeky and numerous. We quite like this analytics and try to understand the science behind it.
We knew we were going to double down on the data analytics piece. There's so many examples of where we can do that. I know Erdal will come and take you through it, but I started my career in the property insurance game. We would write big commercial industrial risks. They would come typically with this much paper, would be handed to you normally about a week before renewal. There were engineering reports. Some wonderful surveyor has gone through and looked at every single building, looked at recommendations that they could have, giving you all these details. By and large, as underwriters, we're typically not engineers. You've got this much to go through. What are you going to do? You're going to pull out one or two, have a look at the biggest, maybe. Get a feel for if there's any recommendations.
Then you're just going to bin it, literally bin it. For all those years I've been doing this, you imagine how much information is contained in those reports, right? I mean, it's huge. There may be 50 data fields, there may be only 20 of them are relevant, but all of that has been lost before. Now we can digitize it. We can analyze it. We can now digitize and analyze the claims reports. Now I can start linking claims activity outcomes to reports, recommendations, observations, technical knowledge. I can start to see, is that recommendation a really big deal, or is that only going to drive outcomes a little? That one, oh my god, that is way more important. That's a massive premium credit or debit. We can start tying them together for the first time.
The ability to use what's available now, the technology that's available, is mind-blowing to me and fantastic. Ludo will take you through some of the work we're doing on climate. I mean, imagine using AI to predict the weather, not 24 hours ahead, but how about two weeks ahead? How about a month ahead? Imagine the advantage I can gain in the market by having just more notice of big events and what they're going to look like. The data analytics piece is hugely important. The last one of the three big ones there is culture. I would say in our industry, I think it's fair to say the success of companies in our industry is defined by the talent you have. If you have great people, even if your strategy is a bit up and down, even if you make some mistakes, and we all make mistakes.
If you have really, really good people, any bump in the road, they'll find an answer. They'll find a solution. Even if it's a mediocre strategy, they'll make it work because they're great people. You have to have a culture that attracts great people and retains them. This was a very deliberate part of the design of Inigo, was how do we create a culture? What is the culture? We'll talk about that. Andrew will take us through that, so we'll talk about it in detail. What does that look like? The natural outcome of all of that, if you do those things really well, the natural outcome is that you excel at underwriting. You've got to do all three. You can have two of those. You can have pretty good culture, pretty good customer focus, but if you don't have the data and metrics, you're done.
You need all three. That, to me, is the sort of magic sauce of what it is that we're doing. I'm going to hand over to Stuart now for a couple of minutes to talk about the progress of the company and the financial highlights.
Morning, everybody. Thank you, Richard. I want to give you a very brief history of Inigo and develop a little bit on some of the thoughts that Richard had. The founding idea for the company came just over six years ago in May 2020 from Richard. Having had the founding idea, we then spent the next few months developing a pretty detailed business plan because we knew that was going to be the driver of what we were going to do for the next few years. On the back of that, we then raised $700 million of capital, which we raised in mid-November 2020. We then gained the necessary regulatory consents we had, an important matter of this was we were ready to go on the January 1st, 2021.
A very important date for us because it's probably the largest renewal season for the reinsurance team. To get into the market for that day was pretty critical to our strategy. Richard had commented the fact that 2020 was, of course, the COVID era. We raised all the funds over Zoom, which turned out to be very efficient because the investors can't hide and say they're out and they're away. They're always there. You know where they are. Big plus. The other thing that came out of that to me is Richard's comments on culture, that because we also recruited, of course, the first 60 people, 70 people over Zoom, getting the culture right from the outset was really important because you knew one day a lot of people who didn't know each other, you'd say, "Come into the office, you'll all get on.
It'll be fine. Actually, knowing that there was a structure behind them culture-wise and everybody was very similar in many ways, was just a tremendously important thing to get right at the outset. Over the next few years, we got more teams on board, getting a very focused and very limited number of lines of business that we felt we could write very profitably going forwards. At the same time, kept developing the analytics and the pricing tools, and with Ludo and the team, the catastrophe research. Very much a focused, limited number of lines of business where we can go deep with a deep expertise, which I think is at the core of our business still today. The first five years, we delivered strong, profitable growth. Understand writing for profit is our key aim. We will always continue to focus on that.
Another thing I'd comment about this is it's very critical, given we had quite a strong market when we started, that we keep a focus on our expense ratio, which we did, and I think we've done pretty successfully between 2022- 2025, because as the market softens, you don't want to have a problem caused by the high expense ratio going into a slightly softer market. We spent a lot of time managing that well. I'm going to hand back to Richard with those thoughts.
Sure. Thank you very much indeed. Let me, if I may, look at the Radian deal, because clearly, you will want to know how we feel about it and how we see the future as part of the Radian Group. We always knew that we needed to find permanent capital. From the moment we set the syndicate up, we had private equity behind us. They were great. I mean, they get a bad rap, but actually they were great with us. It's always temporary, right? We want permanent capital. I kind of want capital to be just not the thing we're talking about. I want us to talk about the business and how we underwrite. For me, it was always something that we knew we had to do. We talked about it very openly within the company.
There was no great sort of drama or surprise when this happened. We knew we had to do that. Like any kind of finding a partner, it's a bit of a dating game, right? You have a wish list. We had a wish list. It was sort of classically non-smoker, solvent, good sense of humor. This is what we'd like in the perfect partner. I know this sounds cheap when I say it, but I very genuinely mean it. When we met Rick and the team and we got together with Radian, that was like, oh my God, every single box tick. This is absolutely perfect. Look at it from my point of view and try and sort of see in the next couple slides how I see this combination. There are a couple of what I've described here as structural advantages.
We've got more capital. We've got the ability now to support that growth, and we're very ambitious in the way that we look at the next five, 10 years, 20 years. We've got much greater portfolio diversification. That really helps us manage the volatility that is inherent in businesses like ours. Really critically, no business clash. I haven't suddenly got two departments who do the same thing. There's no tedious sort of, do they report to them? Do they report to them? None of that. It's complete freedom from that. There's no channel conflict. I can be an insurer, I can be a reinsurer, I can be a wholesale market, I can be a retail market. It's all open to us. That is fabulous.
One of the things that is really important to us emotionally was this thing that we keep the brand, was the fact we have that independence. We have that ability to drive this business wherever we see opportunity. That is an extraordinary thing. Think of who else could come to this party and do this and give us that benefit. I'd say pretty much nobody. That's a phenomenal thing for us. We're over the moon. It's a great opportunity for us. The other thing was that, and I loved it when Steve and Meghan talked about their business, because obviously we haven't known each other that long, but it feels like we're blood brothers. I mean, you talk about your business in exactly the same way.
That search for strong underwriting returns, that search for some level of science and analysis behind what you do, the ability that you want to reinvent how you do and what you do through AI. I mean, that's a great match for us. Look, we see here a true partnership. The biggest thing when I think about it, and certainly when we talk about it gives us choices. As a group now, we've got choices. We've got this ability now when we look at the capital that we produce. We've got choices about where we invest it, not just with NMI. We can put more money into NMI, we can do more there, but we now bring the ability to invest and look for opportunities in the insurance market, in the reinsurance market, and in the third of our divisions, partnerships, which George runs.
That's where we're dealing typically with big points of aggregation. That could be MGAs, could be brokers. That can be both an underwriting opportunity, but also an equity opportunity. We are bringing choices here, which I am delighted with. What that means is we have a much greater capability of managing volatility and enhancing the return. That puts us in that bottom right-hand corner of the graph. That's where we think we're going to drive great shareholder value. If we can show you over time that we consistently sit in that bottom right-hand corner of the graph. The other thing it allows us to do with the partnership is invest in all these areas that we think are critical. Customer focus, culture, data and analytics.
We're going to go through each of those, and the team will talk to you about it so that it becomes more tangible. It's not just me saying a word, it's something real. We'll have a chance to do that. You'll recall at the beginning, what I said was, if you do those three things well, one thing will happen. You will have fantastic underwriting results. On that note, Mr. Russell Merrett.
Thank you very much, Richard. All right. Well, my pleasure to give you a brief introduction to Inigo's underwriting portfolio. We're organized into three divisions: insurance, reinsurance, and partnerships, as Richard just cited. The first are pretty self-explanatory. The partnerships division is where we concentrate the small amount of delegated underwriting that we do, partnering with experts for access risk types and classes of business and geographies that we can't efficiently access from London. For example, we support a high-value homeowners MGA here in the U.S., a distressed market that they can access very efficiently. We're also a founding investor in that MGA. All of our divisions have a mix of short tail, longer tail, and specialty lines. As you've heard, we underwrite relatively few lines of business. We target those that have a realistic prospect of good returns over the medium term.
They need to be able to be material in size, and we need to have expertise so we can offer differentiated lead capacity. That's few enough lines that each can have the attention it deserves, but enough that we can build the foundations of a diversified and balanced portfolio. We've actually added roughly one to two lines of new business per year as we've dynamically evolved the Inigo portfolio. Today, the largest lines are our property insurance and reinsurance lines, where rates have been fantastic, but are regrettably becoming a lot more challenging. More on that anon. Followed by our U.S. casualty lines, where more pleasingly rates are generally stable, and in some cases improving. Our aim, as has been stated, is underwriting excellence. That means underwriting for profit rather than for growth as an end in itself.
Beyond that, we do aim to grow over time, but we expect that growth to be jagged, uneven. We may have to hold or even reduce our underwriting, but we will push on with growth decisively when the opportunities are right. What is underwriting excellence? Well, for us, that means really targeting higher than average returns captured in lower net combined ratios and lower than average volatility. I'll tell you a little bit about how we hope to achieve that. On this slide, we see some evidence of cycle management in action. I picked out two lines of business, both D&O and property telling different tales. In the directors and officers insurance line, we were very quickly out of the blocks in 2021, writing more than $120 million of premium.
Rates in that class had sharpened very dramatically after years of underperformance, and we were able to seize that opportunity when we started. Rates, unfortunately, as you'll see from the index, began to fall as soon as 2022 as other capacity entered the market and others realized how attractive they were, and yet they were still at a very fine level. We were able to push on and grow. Since 2023, rates have fallen further, and we've had to reduce the amount of D&O GWP gross premium that we've written. Meanwhile, a different story on the right side of the graph in our property insurance and reinsurance lines, where we were able to treble our premium or more than treble our premium between 2021 and 2025 as rates increased very sharply in 2022 and 2023, in particular, after some very large catastrophe activity, especially Hurricane Ian.
As I've said, rates in some of those lines are now starting to fall off. We do still find opportunities to underwrite profitable business. Risks are not homogeneously priced. We have the technology and the skills to identify the attractively priced risks. It might look like Inigo's growth has just been a story of doing a bit more of everything. Beneath the surface, we have been dynamically evolving the portfolio of Inigo whilst we've grown to try and target an optimal portfolio. Right. Underwriting excellence, we said, has two aspects to it. It's risk selection and managing volatility. This chart gives some evidence that we've had success in managing our volatility. On the left-hand side of the chart, you can see our profitability by quarter, going back to 2022.
I pulled out some of the bigger events of this period on that chart, you can see that those big events, hurricanes and windstorms, and wildfires, have influenced our profit by quarter. On the right-hand side of the chart, you can see that they have not got in the way of us achieving profitability. None of the big events that are identified here was allowed to be so large that they caused our annual result to be negative.
I think a product of a careful growth portfolio construction, but also the judicious use of reinsurance and retrocession protections to protect our net account from the kind of big events that we do expect occasionally to be hit by. We made a profit overall in 2022 in spite of a loss in the third quarter that was caused by Hurricane Ian, itself, the second costliest CAT in modern history, but many other specialty insurers and reinsurers did not. 2025 was something of a rollercoaster ride, I'm sure you remember. The first quarter was dominated by the extraordinary wildfires in California, and we made only a small profit. In the very CAT quiet second and third quarters, we were able to generate substantial profits, also supported by our increasingly diversified portfolio. Ultimately, we made a record profit and achieved a top quartile net combined ratio in Lloyd's in 2025.
I don't want to shy away from the fact that we do take catastrophe risk. We aim to do this within known parameters and tightly, and it always depends on us being well paid for taking that risk. We managed to tight board mandated metrics and also to detailed plans based on our expectations of market conditions. In the future, we plan to disclose our model tail exposures to you in certain lines of business to enhance investor understanding and transparency of how we manage risks and how we might be impacted by large events. To better familiarize you with all of this, and our potential large loss exposures, I'm going to try and explain how we will share those aspects with you through box plot and whiskered diagrams.
An example graphic is found on the left. You may find it easier to look at your iPads. Here we identify the expected impact to Inigo of major CATs of a given size and peril. We start by identifying how big the loss related to significant events like hurricanes and earthquakes might be to the insurance market as a whole, and the probability of events of that size. For example, we estimate that it's about a one in seven probability that this year a windstorm in Florida will generate insured losses of more than $20 billion. Next, we calculate for insured market losses of a given size, for example, the range $20 billion-$50 billion, what might be the final net impact upon Inigo. Final net meaning after reinsurance recoveries and inwards and outwards reinstatement premiums. The blue boxes show the interquartile range.
For Inigo, 50% of the time, our final net loss is expected to fall in those boxes. The whiskers communicate that 90% of the time, Inigo's final net loss is expected to fall in this slightly larger range. If there are 100 model scenarios in the $20 billion-$50 billion insured market loss range, in 50 instances, Inigo's loss would fall in the blue boxes, and 20 would be in each whisker above and below the interquartile range. Five would be above the top whisker and five below the bottom whisker. The actual outcome will depend on the detail. Is it a $50 billion or a $20 billion event? Was there more wind than flood? Was it a slow moving storm or a quick moving storm? The details are important. Our market share will be slightly different, so it depends exactly where the hurricane, for example, made landfall.
We've learned that in big losses, there are always surprises as well. We should remember these are model scenarios. Okay. On the next slide, we're going to give some real examples of our exposures in some of our key peril zones. On the left we have Florida windstorm, which is essentially hurricanes, and on the right for California earthquake. You'll see that generally our expected final net loss increases as the size of industry loss increases, but not surprisingly, for very large events, and on the right-hand side of each chart, we are looking at $200 billion+ market events. There is a greater variability from the much greater complexity of those large loss scenarios. A real example with the Hurricane Ian of 2022, which if we indexed at 6% per annum, would cost the industry today about $60 billion.
It falls squarely into that second column on the left. That indicates that a median loss for Inigo from an event of that size would be about $100 million. Now, that's a number we're comfortable with. In fact, the size of net losses shown here for some really enormous market moving events feel appropriate to us for big infrequent CAT events and of an order of magnitude that we can manage within the significant loss experience that we expect in any given year and in the context of the return that we expect to generate in underwriting this business in the first place. Overall, we believe that the volatility of our net is more controlled than is typical for our industry. Alas, industry disclosure on these exposures is very mixed.
It is often opaque and no two carriers can seem to agree on an identical basis to disclose. Is it the carrier's view or is it the vendor view? Is it a worldwide distribution or a peril zone specific view? Is it the 200 year or the 100 year? Is it AEP or OEP? I'm sure some of you are familiar with these terms. What we say we are going to do is look to be transparent, considered, and appropriately thorough in what we disclose to try and minimize surprises. Thank you for staying with me through that technical journey. You'll see that I love the numbers. Indeed. We are willing to take risks, ideally evidenced over time with net combined ratios that are lower than average and with control of volatility.
To learn more about how we take full advantage of what advances in data and analytics can offer us, I'm pleased to hand over to our Chief Operations and Technology Officer, Erdal Atakan.
I'll start with a question. Why is data so important to us? Well, let me explain. For the love of data is a statement that we use to describe our obsession with searching for, collecting, curating, storing, and analyzing data. Since the inception of Inigo, our ambition has been to marry the science of understanding risk with the art of underwriting. By turning data into insights and actions, we believe we're able to select better risks while providing value back to our customers. One more time. To achieve this, our approach is a simple one. Firstly, data. We utilize our in-house experts, our network of external partners to collect and store both structured and unstructured data in our modern data platform. Secondly, models.
Our analytics team enhance pricing models to incorporate new pricing factors, utilizing the data they would collect to increase our understanding of risk and the quantification of it. Finally, systems. Our technology teams develop modern underwriting and pricing platforms to surface these insights at the point of underwriting. We believe this derives two main outcomes. Firstly, we believe we can select more attractive risk and optimize our portfolio. Secondly, as Craig will highlight shortly, we aim to educate and provide value back to our clients using these insights. Over the last few years, we've developed our own proprietary underwriting workbench. We call this internally Ignite. The platform acts as our underwriter's cockpit, as the image depicts. It guides a submission through the quoting process. It integrates pricing and analytics systems together. It provides management information to monitor the performance of our portfolios.
It also helps collate client insights together in one place. Ultimately, platform supports our underwriting teams with risk selection by surfacing insights and analytics at the point of underwriting. Now, here are a few examples of how we approach this in our business. Russell earlier talked about natural catastrophes. Going a bit into that, we've increased our understanding of hurricanes by utilizing publicly available data and combining that with machine learning techniques to help improve the predictions of these events. I'll touch on this in a little detail shortly. Engineering reports. Now, Richard gave you a good description of this. We require risk assessments when underwriting commercial property risks, which we deem high in value and technical in nature. The data in each report we receive is structured using AI tools, and then the results surface back to underwriting teams.
This saves a significant amount of time when assessing them. We've also collected millions of telematics and GPS data points with larger adjustments to less frequent events. You can see the one in 100. We believe the outcome of doing these adjustments helps us improve how we select risk, how we manage our overall portfolio, how we deploy capital, and the level of reinsurance protection we purchase. Secondly, we also believe this improves the strength of the relationships we have with multiple different parties, be it by providing insight back to our clients, by publishing research articles and insights, and improving the confidence our regulators have in us. Our colleague, Ludo, who's just had a few shout-outs, he manages the CAT research team and will be available to answer any difficult questions you may have on these topics. All right.
As a technologist at heart, I have to mention innovation and AI. Our teams have a culture of continuous learning and exploration. It's actually one of our values. We aim to apply the latest tools and techniques to positively impact the P&L. We're applying a range of AI tools across traditional machine learning, generative AI, and now, I mean, I'm as sure as everyone else is, looking at agentic AI to increase our knowledge to scale efficiently like most others are, and also to shift our teams to becoming AI natives. Our current aim is to apply these into four areas as I've shown on this diagram. Firstly, into underwriting teams by creating tools to augment knowledge and judgment to supporting a human's chain of thought, so they don't have any blind spots or we reduce blind spots.
In the claims team by automating the monitoring and detection of signals that may cause us concern from loss notifications. Hurricane predictions, we're going to continue the work we've been doing with academia to utilize AI and neural networks to increase the accuracy of hurricane forecasting. Finally, pursuing general productivity across all of our company. Equipping and training all of our teams with the skills, confidence, and of course, literacy to utilize AI agents within their day job. We'll shortly explain that the drive for utilizing data analytics is actually enabled by, I believe, our strong culture. One of the ways we achieve this is by generating excitement in collaboration by hosting hackathons. We do this with employees, partners, and actually most recently, customers. In closing, we believe the combination of analytics, data, technology, and culture is a winning one.
I'm going to hand over to Craig to tell you more about our customer focus. Thank you.
Thank you, Erdal. Good morning, everyone. I'm Craig Knightley, I'm the insurance team Chief Executive Officer here at Inigo. I'm going to ask you a question now. I'm going to take a slight risk, given I've got such an illustrious group in front of me. How many of you in this room have ever spent $100 million on a single purchase? Dan Rick had two hands. That was a great purchase. $1.7 billion bargain. Well done. That wasn't rehearsed. I didn't see any hands go up other than those ones. Now let's pretend you're going to spend $100 million on a single purchase. What would you expect for it? Now, some of our customers spend $100 million or more on insurance every year. What do they receive in return? A promise to pay value claims if something goes wrong.
At Inigo, we believe customers, as you've heard, should receive more value than that, given they spend so much. My job over the next few minutes is to explain to you how we've been trying to do this since the company began. Richard and Russell have already explained how we've gone narrow and deep with our product set, and that focus has enabled us to build market leading underwriting teams. The blueprint shown on the right here is how we've set each team up. This isn't rocket science. This is about really focusing on those fundamentals. We've ensured that we've had a really strong claim handling team from day one.
We've had material line sizes such that our capacity is sought after, and we've ensured that we've delivered various product innovations, so we remain relevant with both brokers and customers, whilst also being really easy to deal with and having fast response times. We regularly receive feedback from brokers on these dimensions, and we've been scoring consistently well since we began. It's really important over the coming years we maintain those scores. Who are our customers? Our business is structured around three core customer types, and we've already walked through these divisions. Large corporates, insurance distributors, and reinsurance companies. Sorry, insurance companies. In the insurance team, which I lead, we are typically insuring large public businesses. We currently insure almost half of the S&P 500, so you can imagine that many of the customers that we have are companies that you guys would know well.
As you imagine, these are well risk managed businesses and sophisticated buyers of insurance. Our second division, led by George, is partnerships. This is where we combine with distributors of insurance to create value together. Our customers in this division are those distributors. How can we be a more attractive partner for them than our peers? We've already talked about this example with Motion Specialty, where we have an equity stake in the business. We'll commonly share our CAT research insights, which Erdal walked you through earlier, our Inigo view of risk with them. We're very transparent with our data analytics. We commonly pay this back to all partners that we have. Our third division is the reinsurance division. This is where we partner with small and large insurance companies to help them manage their risk using our balance sheet.
We will commonly share our research insights with these companies so we can provide more value than just a reinsurance policy. I'm now going to jump into insurance division and show you how the book is made up by customer. As you can see, we've got quite a finite number of customers, only 6,000 customers. Beneath this surface, there's another dynamic going on. 250 of our customers account for 40% of our premium. A very finite number of customers account for a significant amount of what we do. The second chart shows you that many of these customers currently only buy one product from us. Many of these businesses will buy D&O, GL, casualty, cyber and D&O. Typically from Inigo, they're only buying one of these products.
Having discussed with these customers what share of their spend we are, it is very rare to be above 1% of their total spend. In that example, if they were spending $100 million-$200 million, we might only have $500,000 or up to maybe $2 million. It's very rare that we'd be over 1%. However, when we look at the biggest insurers on their panel, the biggest ones could be 5%-10% of their spend, and therefore there's a real opportunity for us. If you look at these graphs together, you can see that there is a finite number of customers that drive our premium, that we often currently only sell them one policy, and it is very rare for us to have more than 1% of their total spend.
Therefore, when you add that all up, the opportunity to do more with a finite number of customers is tangible. How are we trying to do this? At the start of 2025, we launched our core customer offering, Horizon. This is focused on a select number of customers. It's grown from 25 customers in 2025 to more than 60 customers in 2026. We plan to scale this again into 2027. Horizon has been designed to offer these customers a program of benefits that goes beyond simply offering them an insurance policy. The program benefits are now listed on screen. As I've said, this program is really about bringing the best of Inigo bear to bear for these customers. Erdal has already talked about data analytics. That's a core part of it.
We're also leveraging our teams and our culture by getting the underwriting and claims teams to spend significant time with these customers. We regularly meet with these customers to share our latest insights with them, as well as host them once a year for our annual Horizon event, which is in our offices in London. Two of the main benefits are our Insight Packs and INFORM, Inigo for Risk Managers, which is our internship program. I'm now going to jump into these two benefits to give you more detail. In early 2024, we decided that we should find an effective way of sharing our insights back with our customers. You've seen already from Erdal that we have this consolidated view of each client in our underwriting cockpit called Ignite.
What we wanted to do was essentially face this and turn it out to customers and package it up so they could view all of our insights about them. For many large corporates, the majority of their insurance spend and exposure is concentrated across four core products, which I've already mentioned, casualty, D&O, property and cyber. This is where we've invested heavily in both underwriting and claims, but also in our data analytics capabilities. What the Insight Pack does is it shares all of our insights about the customer and pays it back to them. For a few examples. For property, we share their natural catastrophe exposure, highlighting which assets are most exposed and why.
We take all the great work that Ludo and his team does, and we basically show how we view their natural catastrophe exposure in terms of how it's evolving and actually overlaying our own Inigo view of risk on that and give it back to them. In casualty, we benchmark their claims experience against their peers. We are capturing all this claims data so we can really understand what's driving the claims. It's fascinating when we hear from our clients how they're then using that in their day-to-day business. In D&O, directors and officers, the main public issue companies is obviously exposure to securities class actions, and that is often driven by certain industry sector trends.
What we try to do is pull out what are those trends, and again, by speaking to defense counsel law firms, we can play it back to our clients in a way that is really tangible. Finally, in cyber, we combine with our own data and expertise with external partners to assess how often some companies are being attacked to their peers. The response from customers has been extremely positive. At last year's Horizon event, we heard that actually what those customers would really like is to make the Insight Pack digital for two main reasons. One, they want you to be able to interact with it and actually dig deeper into the data and understand what the trends were in an interactive way.
Also, they wanted to share it more broadly within their companies and extract some of our graphs and exhibits so they could use it in PowerPoint presentations like the ones you're seeing today. We've taken that feedback on board, and I'm really excited about what's coming in H2 for 2026 because we are going to launch our digital insight portal for our customers. We plan to host 40 customers-50 customers of them in our offices in November when this will hopefully go live. One of the other major benefits of Horizon is our internship program, where risk managers spend a week in our offices with our teams and some of their peers in the market. As I've already mentioned, the risk managers we host are typically the buyers of the insurance for their companies.
They often decide which insurers to trade with and how much to spend with those insurers. There are over 20 sessions per week, including the opportunity to sit down with our underwriting teams and review their core insurance purchase in our underwriting dashboard. We are super transparent with our view on how we price our exposure, and it creates a valuable dialogue and sometimes a heated debate. It's a really fun week and having actual customers in our offices. Our teams really enjoy it. There's a real energy and buzz when customers are in our offices, as you can imagine. It reminds all of us that we only really exist because of our customers. Without them, we don't have a business. We have no premium. We have no need to continue. We've had excellent feedback from our customers on INFORM.
Rather than hearing about it from me, we've compiled a short video where you can hear from our customers directly on their experience of that week.
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Last but not least, culture. Luckily, I've got a bit of the easier job today because I think you've seen our culture in action so far. I'll take you through a bit more of some of the thinking behind it and the ways that we try to bring it to life. Our culture was intentionally designed to differentiate Inigo. You heard Richard and Stuart talk about how this was something they thought about right at the beginning of creating Inigo. The goal was to create something that could attract and retain incredible talent, and also act as an operating system for collaboration, effective decision-making, and ultimately, we believe, superior risk selection. The result is that our culture is distinctive. It's embedded in the day-to-day, and it's going to be difficult for others to replicate.
I'm confident, again, you've seen it, but let's get into a little bit more. The formula. What we set out to do, number one, was to hire incredible talent across underwriting, data and analytics, and enabling functions. You're going to have the chance to talk to a few of them today. I encourage you to do it. Ludo's gotten all the shout-outs so far, but there are also some great underwriters with us, and some analytics individuals too. We brought them together into a single office so that they could work together, collaborate, learn, and the space is encouraging creativity in order to bring people together. We work there face-to-face three days a week. We focused on Inigo's success over the success of individual lines of business, and we united people across four core values.
These values are visible in how we operate day-to-day, in how people interact, how they make decisions, and also how we serve our clients. Let's get into each of those in turn. Get Smart. Get Smart is all about relentless curiosity. Curiosity leads to learning. Learning leads to a sharper expertise as well as innovation. We've got 93% of our employees have attended or participated in some of the learning that we have on offer over the last 12 months. While kind of pulling this stat together, I'm thinking I need to figure out who that 7% is. I'll deal with that when I get home. I think it gives you a good feel for the commitment and the engagement and the learning that we want to do. I think also with Russell, he's used this as a learning opportunity around box and whiskers.
I hope everybody feels more informed as a result. We also encourage people to attend conferences. We support advanced degrees as well as qualifications like actuarial studies because we do believe the world needs far more actuaries. We do secondments across teams. We also do coaching and mentoring, all to support our people. This ensures that our capability continues to grow, and this becomes a source of edge for us. Park the ego. That is the cultural mechanism that makes challenge safe. That's where you get the best ideas to win, not just the loudest voice or the most senior voice in the room. This is something that's not just about being nice. In a regulated market like ours, it's around conduct, risk management, and avoiding some of those blind spots.
Thinking about some of the ways we bring those to life internally, our peer review process is a great example of that, where nearly every risk we receive is peer-reviewed. As part of that, there's challenge and feedback. This makes feedback a real expectation in how we behave and we believe also supports better risk selection. To be honest, we ask for a lot of feedback about a lot of things. It might be about values and culture. It might be about the learning that we share. Even in office design, I think we ask for feedback on what to call our offices or our meeting rooms in the new office space. I think this is to illustrate that we want people to know that they have a voice in our organization. Next up is radical simplicity. It's how we avoid unnecessary bureaucracy.
Fewer barriers is going to mean more time on the work and faster decisions. Richard mentioned at the beginning, having one office is radically simple. I think transparency is also radically simple, and you heard Craig talk about the transparency that we give to our clients. Internally, we also run things called Ask Me Anything, where employees can ask any question that's on their mind, and we aim to get them the answer. These are also good examples of where transparency is important, and recent sessions were on things like compensation. We also ran one around the acquisition by Radian, really trying to encourage the conversations, and we think that this is an advantage because it protects that productivity and responsiveness as our headcount grows. Lastly, there's share the passion. This is our collaboration engine.
I think you've heard some of the words around collaboration frequently so far, we collaborate both internally as well as externally. Greater collaboration across the teams as well as with clients and brokers and our other partners, we think that this leads to better solutions, stronger relationships, and faster execution. The great examples we heard so far externally would be from ERGO. We heard about Samsara. We heard about a partnership with Cambridge. Craig highlighted INFORM, and the Horizon program more generally. He also mentioned about a great internal example as well with our digital client packs. Our clients said they want digital client packs, so we brought together a team. They sit together. They physically move to sit together in the office to enable the teamwork, the feedback, and that ability to deliver at pace.
This shows how agile we can be, and we can bring people together quickly to create solutions. I figured, with you guys as the audience, I needed a chart of some sort. This is my favorite chart. It helps to illustrate where we've come from. I think our culture is one of the few advantages that strengthens with our scale, and our culture has remained strong through rapid growth. Our headcount has gone from these three guys sitting around the dining table in 2020 to over 250 employees today. We set out to be underwriting and data and analytics led, and the majority of our employees are in those roles today. When we ran through this yesterday, Stuart gave me a suggestion because feedback, and I'm open to feedback, that I should also bring this to life with some more stats.
Overnight, I asked my team to give me a few more numbers, and that includes the number of actuaries mentioned, how many we love. We've got 28 actuaries today. We've got two more qualified actuaries joining. We've got eight people seeking to be certified as actuaries. In addition to that, we've got 10 PhDs in our organization. Again, really kind of bringing together some of that analytical mindset. We hire for both capability and cultural fit, so all candidates are assessed not only about their capability to do the job, but also against our values. We want smart people who are going to positively contribute to our culture. As I mentioned before, feedback is one of our favorite things.
We regularly seek it. We ask people about their feedback of Inigo and their experience of Inigo. Our engagement remains strong even as we've grown incredibly quickly. 94% of employees have indicated that they're proud to work for Inigo. 88% are willing to go over and above the day job. I think this is further proven by our attrition in 2024 and 2025, involuntary attrition falling between 5% and 6%. This is a place that people want to stay. I think all of this together gives us the confidence that we can continue to scale our culture without diluting performance. If you don't believe me, check out this external benchmark survey that we participated in. As part of our being in the Lloyd's market, we participate in the Lloyd's Culture Survey each year.
In the most recent survey, we were among the only 18% of firms to be qualified as excellent overall. As you can see, we scored better than the market average in every single category. This is consistent with previous years, where we were top quartile in both 2023 and 2024. I can't go into every single result. I'll be around for coffee if you want to go through more details, but there were a few that I thought I should call out. One is client focus. That was our highest scoring category. You heard Craig talk about our approach to client engagement. You heard about it being core to our strategy, and 97% of our employees have responded positively about their experience with Inigo and our client focus.
These are questions around how Inigo put clients at the center of decision making, how we encourage people to provide clients with the information to make the best decisions, how we take onboard feedback from clients, and how we deliver for our clients. To be honest, when was the last time 97% of people agreed on anything? I think it really shows the strength of that priority. Another couple that actually stand out as well are leadership and shared purpose. 94% of people responded positively on average to questions in both of these categories. In leadership, this includes perceptions of our people on our leadership focus on culture, as well as whether or not our leaders are role models of that culture.
In shared purpose, our people are positive that we have a purpose and values that are meaningful to them, as well as there's alignment between the values and how we do business. I think this level of positive response is going to enable consistency and quality in the delivery of our business. Culture is embedded broadly across the organization and actively maintained as the company has grown. This is because it's embraced and led by employees at every level of the organization. Much of this happens in the day-to-day in terms of how we interact with each other, with our clients, our brokers, our regulators, but also where people go over and above to connect and share experiences outside of the office. The impact of all of this, though, is strength in trust, learning, and collaboration.
It's also importantly that sense of ownership of Inigo's success and the commitment to delivering against the objectives we've set ourselves. This isn't just important to all the people you see up on the stage. I also have a little video to share with all of you, which gives you a few more views from our employees.
Culture at Inigo, for me, is very simple moments, but sitting on the red sofas between the two areas of the building and watching people's funny interactions as they're walking cross paths down there. I think a good culture is one where people smile and talk to each other in that bit and don't just walk bluntly to the conference.
It kind of is the reason why I feel like when given the choice to come to the office or work on your own at home, you want to come in. You want to see the same faces, the same conversations, because they're all welcoming.
I think as we grow bigger, I think just being genuine to who we are, I think it's very important.
Culture is really important to Inigo. It's communicated at every level all the time.
There's a great willingness to let everyone do their own work and take accountability and responsibilities for that. There's no micromanagement.
Keep the small company entrepreneurial startup mindset that we were founded with.
What can we do to keep the values alive going forward? I'd say, well, first of all, the values are really not something that we are. It's really something we do.
I remember telling my wife about this idea for Christmas the first year, and she grimaced slightly because I think she was slightly embarrassed for me. I think once she understood I wanted to do it, I remember her saying, "You've really found your company, haven't you?
Fabulous.
Let me close then with a brief word about this magic combination, and how it opens up a world of possibilities. It does give us the capital to grow. That is fundamental. That is a great place to start. I would emphasize that we could argue the size of markets and our relative market share. In the big scheme of life, we are this big, and the markets that we operate are this big. Whether that's insurance or reinsurance, they are worldwide markets. The opportunities ahead to lean in and find opportunity is huge. It's important that, again, you understand the joy of the Lloyd's model is the worldwide access that it gives us. Not just the U.S., but beyond into markets in almost all countries.
The other thing that I think is really apparent to me when I think about this combination is the point on here about a mindset to seize opportunities. It strikes me when I look at how companies develop over a 20-year period. The ones that succeed are the ones that really lean into an opportunity when they find it. I'd like to think that we can demonstrate to you in the first five years of our operation that we have seen opportunities, and we have leant into it. What I love about it is I think Radian, you can say exactly the same thing. When they saw us, they lent into it. They got ahead of the market, got in quick, and embraced the opportunity. I think both organizations have this sense of, look, we see an opportunity. Go grab it.
Don't waste time talking about it, worrying about it. Just go grab it. This ability for both companies to see an opportunity and grab it, and have the ability to do that is huge. I think you've heard both sides of the house talk about the opportunities and the technology that we enjoy and the advantage that gives us. I think lastly, this held together with a strong culture, which I know everybody talks about culture. I would say, I think if you talk to the team, if you ask them about it, not just us, you ask them about it's tangible. It really is tangible. Quiz them, please. I've shouted out the team. Tanjeet, I think I missed you when I shouted out. Tanjeet is our international treaty reinsurance underwriter. That could be treaty reinsurance in Australia, New Zealand, Europe, Japan.
She is one of our brilliantly qualified actuaries. She also will never tell you that she speaks fluent Japanese, which by the way, opens up over a glass of wine, numerous really, really funny stories. Do please make sure you do a beeline for Tanjeet. We are going to break for coffee now. You've done well. You stayed awake. There was one person back I'm not sure about, but everybody else looks like they're here. We're going to make it, I think 10 minutes, 15 minutes. Let's aim for 15 minutes. If we need to get back sooner, we'll give you a shout. Please come back with some questions. Do ask them in the break, but you can come back, and we'll do a little Q&A for a few minutes here.
You can do it online if you want to, and anybody watching can do that online, or you can just raise your hand and we'll take questions. We look forward to seeing you again in a few minutes. Thank you very much.
Welcome back, everybody. We've got about 20 minutes allocated for this. We're quite happy to cut it short to five if you've got literally zero questions. This is the bit of the presentation that I'm dreading the most. One of the benefits of surrounding yourself with incredibly good people is you can leave them to answer all the questions.
We're going to take questions live in the room. If you're happy to raise your hand, we have a couple of microphones. If you could please do the inevitable thing and wait for the microphone so that anybody who's dialed in can hear the question as well as the answer, that would be grateful. I know, Bob, you're manning an iPad somewhere there with questions which you can submit online if that's preferred, and certainly if anyone's watching. Look, let's kick it off. For our questions, we are delighted to try and answer them.
Michael, you've achieved very impressive combined ratios over the years you've been in existence. Somewhere, say, in the mid-80s. I'm wondering if you'd be willing to share a long-term goal for combined ratio. Obviously, it can be variable. More specifically, how do you view the current rate down cycle? What kind of impact that would have? Secondly, as you grow.
I'm terrible at forgetting questions. Can you keep the microphone and we'll try the first couple?
Well, it's just to say-
Please
it's a related question.
I don't want to let you down.
As you grow, do you think your combined ratio is more likely to go up as you take on maybe different kinds of businesses or go down? Just what I'm really looking for is a long-term combined ratio goal and the impact that the current down cycle is going to have.
Yeah, I wish I could give that to you. I feel like I'd be a lot richer than I am if I could do that. We will try. Stuart, do you want to pick that up and, Russ, talk about what we're trying to do in the market?
I guess I'd pick it up by saying, obviously, we're not allowed to give you any forward guidance. I will leave that all to Dan later. Certainly, in the cycle that we've been through, we knew when we started up that we were going into a very strong cycle, and we had an aim of writing combined ratio in the mid-80s. For me, as the Chief Financial Officer, that meant I needed an expense ratio in the low 30s, which is what you saw, which is why I emphasize that, unless you have a loss ratio that can get you to that level. As the market softens, we know that it will inevitably increase the combined ratio. It's just a function of math.
One thing I think we would emphasize, I think the one thing I would add to my little talk earlier is a sort of heartfelt thank you to Rick and the Radian board and team for saying, "Write for profitability, don't write for growth.
Yeah.
That's the big message I think that they've given us, and that absolutely fits in with our philosophy when I turn to Russell in a minute. That will be our focus. We have a number of lines of business. Not all of them will go down at the same time. Not all of them will go up at the same time. In Russell's illustration of the D&O market versus the property market, we can look at the general liability market, which is probably increasing slightly at the minute. Our aim has got to be to try and write profitably, so less than 100% combined ratio. Plus, of course, you've got investment income. Just as a simple combined ratio, we have to have an aim of being under 100%. Russ?
Yeah. Absolutely. It's important to emphasize that every risk that we price, our aim is price adequacy. For me, I think that's typically that we will be targeting a mid-80s net combined ratio. Not necessarily precisely. It depends slightly on the degree to which that risk correlates with everything else we do and the amount of volatility that's associated with that risk. If that is the long-term goal, there is definitely going to be variability by cycle. Today, we still see lots of adequacy in the business that we write. I'd like to go back to that point about the absence of homogeneity in the pricing that we see. The disparity between a well-paid risk in one class and a less well-paid risk in that same class.
Our approach to understanding that risk better, perhaps through our applications of data and analytics, should allow us to differentiate effectively between the better and less good risks. Even in a tough market where the average price adequacy is impaired, we should still be able to find the best risks that allow us to pursue that attractive net combined ratio over time. It is difficult to give you a forward-looking statement, as much as we would love to, and that's difficult to know because the market is so hard to predict. I find that you want people who react to the opportunities in front of them. It's very hard to say with certainty what 12, 24 months out will look like in this marketplace. I think the point Stuart made was such a defining moment in our conversation with Radian was this. Look, it's about underwriting excellence.
That's what's going to drive shareholder value. It's not about growth and volume for the sake of it. The fact that when Steve and Meghan talk about it's the same grounded view of we have to get an adequate return for risk. Hugely important for us. I think one of the graphs showed, tried to show, this isn't going to be a linear top-line story. That's the only thing I can tell you. It's going to be a jagged story according to where the market opportunity sits and where the cycle sits.
I may have misunderstood this a little bit, but it seems to me that your hookup with Radian could provide some more capital and growth opportunities if you remain independent. I guess the other part of my question really was, as you do grow, potentially, take on new business or whatever, forgetting the time of the cycle we're in, will those businesses be done at roughly the same combined ratio? We should just assume that there would be a deterioration from the kind of businesses that you would be growing?
Do you want to comment on that?
Okay, Russel. I don't think you should make that presumption there. I think our outcomes will be dependent on business mix and the cycle, but there's no inherent reason why we should be less profitable if we're bigger than we are smaller. There will be ups and downs. The key thing for us will be really leaning into those areas where we find adequacy. The joy of being relatively new and relatively small is that there is still this universe of risk for us to grow into. For example, as we enter new lines of business, we're not lowering the hurdle rates that we seek to achieve by entering those new lines.
Right.
For us, it's still a big universe out there.
I'd like to say, I don't know if I'm on the mic or not, but it seems to go on.
I'm just saying Mike, Rick, if you hold on for one minute just in case.
All right. What I was going to say is, I think the other part that Craig made the comments on in terms of being a very small part of your client's business today, and the opportunity where you see that rate adequacy to lean into it and find opportunities within that universe. You're a small player in a big pond. You don't necessarily have to stretch for new risk, new lines of business. You have to leverage your Horizon program, your focus on the customer, find those opportunities to expand your wallet share with them. I think that's where growth and profitability can be identified as you ride through the cycle.
I think the other thing as well is fixing on a particular combined number, for example. It's just one number. That doesn't tell you the risk profile and your up and down side. I'd be happy to write to higher net combined ratios if the risk profile suits that. I think there are lots of things we can consider about what diversity it offers the portfolio, what is the level of risk, and therefore, look at the return as what's an adequate return if you're operating in a narrow corridor. I'm reluctant to try and give you a single defined point.
Hey, Richard, do you want to just talk about cycle management, just kind of in general, the importance of that for the business you're in?
Yeah. From my point of view, this question I'm trying to describe in those slides, that it's not a linear top-line story, really speaks to I think the D&O was such a good example of, look, we rushed at that market when the opportunity was there because it was hard markets. We knew there was value in that marketplace. We were more than happy to pull back when that rate decreased and the margin decreased. The success of our business will be a series of smart decisions, and there'll be times when that's rushed forward, and there'll be time when that rushes back, and we talk about it a lot. I don't mind if we reduce the premium. I take a relax if that's the smart decision. The important thing is that people don't feel under pressure to grow the top line regardless.
It doesn't mean sit back and relax. It means go hunt harder. If we don't find adequate returns, then that's fine. We can live with that. They will come back. Another question there.
Good morning. Roland Mayer, RBC Capital Markets. I was wondering if you could discuss, in the U.S. casualty portfolio, how you set and review reserves, particularly for the lines that have generated charges for new industries that are the general liability, umbrella, excess, and commercial auto.
Well, that's perfect. It's a good question, and it's a perfect one to hand straight to Craig. One is the man in charge of casualty, and two is another qualified actuary. Craig, why don't you have a go at that.
The question is, how do we review reserves to ensure that they're adequate? Obviously, a very topical question in terms of the U.S. casualty market. What I'd say, first of all, is we have a quite finite line size in terms of what our net position is in U.S. casualty. One of the most important things is, if you do have more claims than expected, how do you make sure that your reinsurance kind of kicks in and protects your balance sheet. Fundamentally, we make sure we have sufficient reinsurance. We obviously look a lot at actual versus expected claims. What's our claims frequency and severity of claims to make sure we're closely monitoring that. We look by underwriting year at the adequacy of our reserve relative to the claims made equations.
What we try to Flavia is behind you, so I can see her. She heads up our U.S. casualty team. We make sure that we are focused in some of the more shorter tail industry segments. Sometimes people think about U.S. casualty as one big blob of exposure, when actually, by industry, that exposure can be quite different. A rail company has a very different exposure to a chemical company. Rail company, if there's an incident, you know about it literally in minutes, whereas a chemical company, the exposure can go on for a lot longer. We try to skew the portfolio towards the slightly more shorter tail industry segments, and we are very focused on reserve adequacy in our U.S. casualty book of business. I don't know if there's anything from a reserve position that you want me to.
I think one of the benefits we have is we started writing in 2021. We're actually not sitting on those reserves that look fairly horrible from, what was it, 2016 through 2019 or something.
Yeah.
It also, a lot of our reserving will look at the industry benchmarks that have got that data in it. You would hope that the market had slightly learnt from those bad years by the time we came along. We're in the nice position that we have a relatively short history, so actually, that does make reserving slightly easier.
We have a French actuary as well who heads up our reserving. He's just mean. It's the best thing you can do. Please.
I guess just as a follow-up, can you discuss your view of rate adequacy in property markets and anything you learned at the 6/1 , for you, 1/6 renewals?
It's a big renewal date for the regional, especially the Florida reinsurance purchases. We definitely saw some risk-adjusted rate challenges there. We also have seen some real improvements in the underlying risk courtesy of some legislative changes in recent years. There was some rationale for some of those risk-adjusted or non-risk-adjusted rate returns coming down a bit. We still found good business. It's an area where we're very selective about the entities that we support, and there are some fantastic companies, but we support only a small minority of the companies, for example, that are active in Florida, picking the best of the insurers that are active in that state. Ultimately, we still find lots of opportunities to deploy capacity at decent returns.
I think Florida is always going to be one of the global peak capacity zones, and that does help to ensure that there's still some rational balance between price and risk. Were you thinking primarily of reinsurance or insurance as well?
Both.
Both. Chris, do you want to touch on the insurance?
Yeah, happy to. If you want to chat to Chris, he's here as well, heading up that team. Again, fundamentally, as Russ just described, we have seen rates come down fairly swiftly in that area. As we manage the cycle, we're mindful of that. If we see rates come down more than we were expecting or below the level that they should be at, we fundamentally will shrink our premium base. Now, I'm not saying that's what we've done there aggressively, but there are some risks that have fallen below the level of adequacy that we think gives a good ROE on our capital base. When that happens, as much as we want to partner with customers, we also need to partner with shareholders and give them a good return. We make sure that there is sufficient adequacy risk by risk.
I think it's fair to say that in the U.S. property market, rates have come off fairly swiftly this year. There's still a lot of business that we can write at sufficient margin. When it does fall below the margin that we need, we will not write as much business.
I think one of the advantages of that simple model of one office is it's very easy to stay on top of it, to have the conversation, to review risks, to talk about it. It's very important for the particularly some of the younger underwriters to know that it's okay to step away and that's the right thing to do. I think we enjoy the fact that it's very easy for Chris, I say very easy. It's not easy at all. Chris, at the very least, you feel as though you can see all the decisions, everything that's going on, and have a proper debate about it.
I'd say on the Horizon program, we've obviously seen some of those customers been able to achieve significant rate reductions. The question there is, well, are you able to maneuver and still get good returns for those clients? What's happened in some of those examples is we've had to redeploy our capacity into higher layers on different parts of their program. We think there's still a good return. We don't just continue with them regardless, but what we're able to do is actually redeploy our capital into different parts of their program where we think there's good ROE, and they have kind of looked after us in a way that they probably wouldn't have if we hadn't delivered some of the benefits of the Horizon program. Again, it's still a fairly transactional market, but what we're able to do is navigate that through those relationships.
Absolutely. Thank you.
Thanks. Morning, folks. George from KBW.
Good morning.
Can you talk about capital? Given your growth expectations over the next 12months- 24 months, is that fully supported by internally generated capital? Can you talk about capital benefits from being part of Radian as well?
Yeah, sure.
Dan's going to cover capital later, so I won't steal his thunder. Certainly, I think if we look at the model that we built, the profitability that we've seen over the first five years, and if I give Lloyd's underwriting year over account, we've been profitable from day one. Has generated the capital that you need to sustain the growth going forwards. Obviously, when the market gets tougher and the profitabilities we've just been talking about gets less, the capital in our market will be slightly increased. We do hold a good level of buffer capital. Above that, with Radian, I think there are some other opportunities to get capital used around the group in an efficient way, which Daniel will talk about later.
Just one follow-up on capital. Were there any periods over the last, say, five years where your growth was constrained by a lack of capital?
An odd answer to that is actually, we originally raised $800 million from investors, not the $700 million that we said, and we never managed to use the last $100 million of it just because we had a lack of imagination. I was going to say that we stuck to the mantra writing for profit. Thus, we were always sitting with some additional capital there if we needed it.
All right. Thank you.
Directly behind you.
Thank you. Harry Fong from Roth Capital Partners.
Yes.
I believe you showed a chart that says that you expect roughly 40% of your losses to come from natural catastrophes. I'm wondering how you develop that number one. Number two, what is the high-low range depending on where we are on the cycle from a pricing standpoint, peak versus trough? Thank you.
I can take the first bit of that.
All right.
That 40% is the number that represents our mean expected losses based on our actual or planned, depending on which version of it you saw, portfolios, which integrates the Inigo view of risk. If, for example, we think that it's more likely that there are hurricanes in Florida, that is represented in that calculation. It's a mean number. The one number that you can be pretty sure that it won't end up being is that. It sits within quite a broad range on a gross basis, but a rather narrower range of potential outcomes on a net basis because of the way that we hedge.
Can you provide those numbers?
I don't think we probably can, actually. Much as I'd love to.
We'll mull on it.
Yeah. We certainly look at them, and we try and operate within tight constraints and manage those numbers very carefully.
All right. There was a second part to your question, which I've now stupidly
The cycle top.
The cycle. Why don't you grab that one then?
I think it's a good question. Obviously, if you look at Lloyd's in particular, you can see the combined ratios. If you go back over time, you can obviously see the cycle and how the combined ratios go up and down. I suppose each part of the cycle has different features to it. The first thing is we have obviously higher interest rates than last time. There was a soft market. One could expect that maybe the combined ratio does creep up a bit higher than previously because this time you've got interest rates at a high level, and therefore insurers can supplement their earnings with investment income. That could actually obviously increase the combined ratio up more at a time. The counter to that is that obviously the most important part of the combined ratio is the claims.
Actually, trying to forecast over the next three to five years what events can happen in the tail that we're actually going to experience is a crystal ball type moment. Really, if you look back over time, be it COVID or other events that were in the tail, it's very difficult to forecast them. That said, I think investors and individuals in particular don't enjoy losing money. If you look at Lloyd's combined ratio, if it ever goes above 100, it's unlikely to continue for a prolonged period because eventually you are eroding shareholder value, and you are obviously decreasing your asset base. If it continues to be at high level for a prolonged period, I think quite quickly capital departs, and we enter a new hard market.
If you look at carriers like us that are more mature than, say, Inigo of five years, the carriers that have done really well over a 40-year, 50-year, 60- year period are those that can be considered in a soft market, but very ambitious and entrepreneurial in a hard market. For us, if there is a period where the market is softened, we will be considered, but then also looking around the corner to start to get excited again, because actually what follows a soft market typically is a hard market. A hard market is when actually you can create a compelling shareholder value over the medium to long term. I know it's a long-winded answer to your question. I haven't given you exact ranges, but I think it's the mindset to how to look at the market cycle.
All right. Good answer. Thank you very much indeed. I think we sadly run out of time. We are around. Again, over lunch, if you want to ask any questions, you're very welcome. I would just say at a personal level, I really appreciate the engagement. It's really nice to have questions. I was worried there was going to be a tumbleweed moment here where we were going to be sitting there just staring at each other. That is the end of the Q&A. It is my pleasure to welcome the fantastic Dan Kobell, as Chief Financial Officer of Radian.
Well done. Okay. Good morning. As you've heard today, Radian has two leading insurance businesses. Everything we do ties back to a simple framework.
We manage capital with discipline to generate earnings from our businesses and build value in how we deploy it, which leads to our North Star of delivering attractive returns over the long term across market cycles. This slide shows how our two insurance businesses contributed to this goal in the first quarter of this year. While we typically report our balance sheet on a consolidated basis, this view shows summary balance sheet metrics for our two segments, mortgage and specialty. In the first quarter, our mortgage segment delivered a 15% return on its segment level equity, while our specialty segment return on equity was 15.1%. We are pleased to have two high-quality insurance businesses, both serving attractive markets, accessed through world-class teams, both well-capitalized and resilient, both aligned strategically and culturally, and both positioned to deliver attractive returns. Looking at the capital strength of our two businesses in more detail.
Radian Guaranty, our mortgage subsidiary, is subject to two capital frameworks and continues to be well-capitalized under both of them. Under PMIERs, which you heard Meghan and Steve describe earlier, we maintained a $1.6 billion buffer as of the first quarter, 41% above the required level. Our statutory capital total was $5.7 billion, which has grown by $1 billion over the last five years and is among the highest in the industry. Our statutory risk to capital ratio of just over 10 to one is as low as it has been in 20 years. This strong capital position is foundational. It supports both the resiliency of the business and our ability to generate and deploy capital at the group level. Radian Guaranty has continued to be a powerful capital generator.
Since 2021, it has produced over $4.3 billion of statutory net income. Given the strong capital levels that it continues to hold, most of these earnings have become available to our holding company, Radian Group. Of the $4.3 billion in earnings, $3.5 billion or 80% has become available to Radian Group through a combination of quarterly distributions and the $600 million intercompany note that we executed in 2025. The remaining 20% of earnings has remained within Radian Guaranty to further bolster capital levels in support of our growing mortgage insurance inforce portfolio. This balance between distribution and retention of earnings allows us to both support growth and maintain resilience. The test of any insurance business is how it performs under stress. Our mortgage insurance business is well-positioned to navigate a severe macroeconomic downturn.
This slide illustrates the expected performance of our mortgage business through a severe scenario that includes an increase in unemployment to approximately 10% and a 20% decline in home prices, both consistent with the environment that we saw during the great financial crisis. As shown, we would still expect to maintain positive earnings and grow book value throughout this scenario. In addition, we project that our PMIERs capital position would remain strong, well above the required level, and Radian Guaranty would be positioned to continue paying dividends to our holding company. In this scenario, we would expect return on equity for our mortgage business to recover to pre-stress levels within two or three years. This resilience is critical. It allows us to lean in and continue deploying capital when opportunities are most attractive in the cycle. One too many. Okay. Now turning to Inigo.
Our specialty segment is well capitalized with $3.7 billion of assets. Like Radian Guaranty, Inigo is held to multiple capital frameworks. Both the Solvency II and Lloyd's capital requirements are calibrated to an extreme loss event. Inigo is well capitalized relative to both standards. As a Lloyd's syndicate, it benefits from the Lloyd's market's financial strength ratings and writes business using ratings of AA- for S&P and Fitch and A+ for AM Best. The Lloyd's market offers a unique capital structure that provides both stability for customers and flexibility for carriers. Inigo's capital requirement at Lloyd's is divided into two equal sized tiers, each with their own degree of flexibility. Tier 1 capital is primarily funded through cash and investments. However, there are also Tier 1 capital facilities that are available to financially strong syndicates to use in meeting their capital requirements, subject to Lloyd's approval.
Tier 2 capital has a greater degree of flexibility and can include bank letter of credit facilities, which allow for an increased level of flexibility at an attractive cost. Today, Inigo uses a letter of credit facility for approximately 40% of our total Lloyd's capital requirement. With Radian's financial strength as a parent company, we have the opportunity to explore increasing the letter of credit facility towards the 50% limit, as well as considering potential tier 1 capital facilities, both subject to Lloyd's approval. The availability of these flexible capital structures, combined with the financial strength that Radian already enjoys across the enterprise, offer attractive options to capitalize our specialty business at an attractive cost. We look forward to updating you on our progress as we position the specialty business for even greater capital strength and efficiency in the years ahead.
A key differentiator for Radian is how we assess and manage risk at the enterprise level and how we use nearly 50 years of data to inform our risk decisions. Our enterprise risk and capital management function works across the insurance businesses to set and manage risk tolerances, assess the performance of our business through a variety of scenarios, and evaluate new opportunities in the context of our existing risk exposures. While day-to-day underwriting decisions continue to be made within each business, this enterprise function allows us to take a holistic view of how we deploy capital to drive returns and safeguard the business against evolving risks. Across both businesses, we maintain an extensive outwards reinsurance program to reduce our net exposures and manage our capital positions.
In both mortgage and specialty, we use traditional reinsurance, including quota share and excess of loss programs, to significantly reduce our net exposures, as you heard both Steve and Russell mention earlier. In addition, we access the capital markets for efficient risk transfer through structured transactions, including Radian's Eagle Re mortgage insurance-linked notes program and Inigo's Montoya Re cat bond program. We also maintain a disciplined and thorough counterparty management framework, working with highly rated reinsurers and closely monitoring any concentrated exposure. In addition to expanding our addressable market, Inigo adds meaningful diversification to our earnings profile. As shown here, mortgage insurance loss ratios have shown almost no correlation to Lloyd's loss ratios over the past 15 years.
Although we do prepare for a stress event that would impact both of our businesses simultaneously, this lack of correlation reduces the likelihood of this occurring and provides an additional layer of risk management. In addition, the low correlation of the two underwriting cycles enhances our ability to manage capital across both businesses and lean into market opportunities. Another important pillar of strength for Radian is our investment portfolio. Following the Inigo acquisition, Radian's enterprise investment portfolio stands at $7.1 billion and is comprised of well-diversified, high-quality securities with an average rating of A+. The strength of our investment portfolio and our strong liquidity profile allow us to pursue opportunities to generate incremental value, including by optimizing our strategic asset allocation and total duration profile.
In the first quarter, we generated $70 million of net investment income from our portfolio or an annualized run rate of approximately $280 million in earnings. Okay. As we have discussed before, we have a number of options at Radian for deploying the capital we generate. On this slide, we show the five primary options that we have evaluated over the past several years. Our highest priority is supporting the organic growth of our two insurance businesses and pursuing attractive risk-adjusted returns in both the mortgage and specialty business. In addition, in the ordinary course, we continue to evaluate options for accretive M&A, including potential transactions that offer access to new markets, provide earnings growth, and further increase the diversification of our company. Our return threshold for M&A is high, given the strength of our existing businesses and our overall return targets.
In addition to growth, we are also mindful of our overall financial leverage profile and consider debt reduction as a potential use of excess capital as appropriate. After considering these uses, we have been disciplined about returning excess capital to our stockholders. We have done this in two methods, in a programmatic way through our attractive ongoing quarterly dividend, and opportunistically through share repurchase, which we believe is an effective and efficient way to return excess capital to stockholders. As shown on this slide, we have executed on all of these areas since 2021. Our mortgage insurance in-force portfolio has grown by $36 billion as we continue to write significant levels of high-quality new insurance business priced with insight and discipline, as Steve noted earlier.
We executed the $1.7 billion acquisition of Inigo earlier this year, a transaction that transformed our company and is already providing significant financial benefits as reflected in our first quarter results. We reduced our long-term debt by $350 million, reducing the interest expense that we pay and improving the financial strength of the company. We also returned $710 million in capital to our stockholders through quarterly dividends, paying the highest yielding dividend among our mortgage insurance peers. We purchased $1.6 billion of our shares, reducing our share count and driving $700 million of accretion in book value. In executing on these priorities, we have used our capital to make Radian a stronger and more diversified company, one with double the revenue, higher earnings, lower debt, and a much larger addressable market.
During this time, our financial strength has been recognized by our rating agencies, S&P, Moody's, and Fitch, each of which has upgraded Radian Group to an investment-grade financial strength rating. Taken together, these actions have made Radian a more diversified company with stronger earnings power and a broader opportunity ahead. The timing of how we deploy our capital may not be linear. At Radian, we evaluate the macroeconomic environment around us and are disciplined in the level of liquidity that we maintain. The embedded earnings in our mortgage insurance in-force portfolio and the visibility that we have into the resulting capital flows from Radian Guaranty provide us with a degree of predictability in our capital planning, and that allowed us to restart our share repurchase program in the first quarter of this year, shortly after the Inigo transaction.
This capital strength and flexibility enabled us to take advantage of an opportunity to return capital via share repurchase at an attractive value. Radian has a strong history of returning capital through share repurchase. Since 2018, we have purchased 43% of our shares, using a total of $2.3 billion. The 94 million shares that we purchased would have a book value as of the first quarter of $3.3 billion, demonstrating the significant value that has accrued to our shareholders from this activity. Over this time period, we purchased shares at a range in valuation levels from a discount to book value up to a 40% premium above book value.
In every case, the purchases have been accretive, and we continue to believe that our shares trade meaningfully below their intrinsic value. These repurchases have helped drive significant growth in key metrics, including earnings and book value per share, and the expected financial accretion from the Inigo acquisition further enhances the potential return from share repurchase into the future. At Radian, we have built a model designed to generate capital consistently, manage it with discipline, and build value over time. With two complementary uncorrelated businesses and a flexible capital framework, we are well-positioned to deliver attractive returns over the long term and across market cycles. Now I'll turn it over to Rick for some closing comments.
All right, I'm going to do something that's going to make some people in this room very nervous. Where's Emily at? I'm going to go a little off-script. All right? I want to just kind of step back and reflect upon what you've heard today a little bit. I'm going to go back to the podium and kind of stick my landing. Okay? What a difference four months makes. Think about it. Four months. We took these two individuals, Meghan and Steve. I remember we tapped them on the shoulder and said, "We want you to lead our mortgage insurance business. Work as a team, work as a group." What they've done over the last four months, take our MI team, completely reimagine the business into the future, create excitement about an opportunity to build that business going forward, and bring us today.
It's a great business. The future that they're creating, I couldn't be more excited, more proud of, so thank you. Four months ago, almost four months ago, after spending this past year together, we brought this Inigo team on board the Radian Group. You can kind of see the energy from that group, except for Richard.
All right. You can see that energy that it brings. It brings an entrepreneurial spirit. It brings a growth mindset. It brings a global market, all right, to our business. Expands our opportunities. four months. That's the transformation that Radian has gone through. Along that side, we ask Dan and Rob, wherever Rob is. Rob's hiding somewhere. There he is. To lead our financial functions. Change, yes. Forward-leaning, yes. Opportunity, yes. I couldn't be more proud of Meghan and Steve. Couldn't be more proud to have the Inigo team part of Radian, and Dan and Rob have done a great job. The teams come together, and that energy I hope you feel through today, kind of the teams coming together towards a forward view, and that's what gets me excited.
When I kind of look, and I sit there and listen to this whole story that I hear day after day after day, and maybe sometimes I play into that story, I get excited. I hope that you all got a feel for how this company has really kind of transformed from what it was even six months ago to today in terms of opportunity, in terms of leadership, in terms of team. Obviously, Mike and I are going through our transition, which I couldn't be happier about and more excited for Mike to kind of take that leadership role into the future. This is an exciting time. I just wanted to kind of reflect on what a difference four months can make. Now for those who I've made uncomfortable, I will move back over here and go through.
We've covered a lot today, and I stand between you and lunch. All right. I hope you get to enjoy lunch, but I'm going to close on this. Today, you've heard how Radian has evolved into a global multi-line specialty insurer, built on a strong foundation, strategically advanced by a set of core enterprise competencies. Executing one clear strategy, as we've said throughout the day, through two complementary businesses. I think it's important to mention that we also complement each other through our distinct business models. One more established and scaled, the other earlier in its development and more entrepreneurial. Together, the combination brings out the best of each. This is already having an impact as our teams work together and learn from each other.
We acquired a great company in Inigo with excellent talent, but the combination of these two businesses is what is truly special and why I'm so excited about the future of Radian Group. Importantly, you've heard directly from many members of the exceptional team responsible for executing our plans. All positioning us with the strategic capability to manage capital, to generate earnings, and build value. You heard Dan talk about that. I guess I have to flip slides too, right? There. That was that slide I was just talking about. We'll go to this one. What we believe is equally important is where we are today. We have delivered strong operating performance. We have built a more resilient and diversified earnings profile for the future.
We have meaningfully expanded our opportunity set with the acquisition of Inigo, and as you've heard, that we believe that our valuation represents a compelling investment entry point. Our strategy is clear. Our businesses are strong. Our team is unmatched, in my opinion. We are confident in our direction, we are confident in our team, and we believe we are well-positioned to deliver long-term value for stockholders. Thank you again for being with us today, and we look forward to continuing the conversation. Lunch
is in the pre-function area, which is at the other end of the hall. Join us again back here at 12:45 P.M. for the fireside chat between Mike and I. Thank you very much.
[Break]
Yeah. Thank you for coming back, everybody.
How was lunch? Was it good? Did you get all your questions answered for those of you who had questions? Hopefully. All right. Well, Mike and I are going to do a little back and forth, so you can learn a little bit more about Mike. I feel like I know a lot, but I'm going to try to learn a little bit more right now.
Uh-oh.
Yeah, you're in trouble. Look, as many of you have heard today, we've known each other for a while. We were both a lot younger when we first met. I think it's an exciting time for you to join, and I'm kind of curious as to why are you excited about this opportunity. You've been here all of four days. I felt like after four days I knew everything, Mike. I don't know about you. How are you doing?
No. It's been incredible, and I'm super appreciative of the opportunity to overlap with you, Rick, and to be able to learn from you. It's actually a great way to get to know everybody and ensure that we have a smooth transition. That's been wonderful. I think I'll probably reiterate a couple of things that we saw during the presentation that I'm really excited about, that struck me. I think it starts with a really strong foundation. We've got this, you saw the stats, a mortgage insurance business that just grows year-over-year year-over-year. Steady growth in book value, great consistency. Historically, we've had more capital than we had places to put it. With the acquisition of Inigo and having access to this large specialty insurance market, all of a sudden, it's a whole new world.
Dan showed the slide that showed the way we think about capital allocation. Historically, again, it was mortgage insurance, and if we had excess, maybe we'd buy back stock, maybe we'd pay a dividend, maybe we'd pay down debt. Now we have mortgage insurance, we have specialty insurance. We can still buy back stock, we can still pay dividends, we still pay down debt. By the way, we could also hang on to some of that capital and let the spring coil a little bit and see if there's another platform that we want to add to it. When you put all that together, we've talked about the transformation of Radian. It really does feel like a transformational time, and I think the company's never been better positioned.
One thing just to add to your comment that you're going to learn is that transparency we have to capital flow from Radian Guaranty to Radian Group, that creates kind of this flywheel approach of just kind of managing capital and how we invest it. I think many of our investors have kind of seen that over the years, but it's really a powerful thing. The combination of that with Inigo and other opportunities, I think just creates a great platform going forward. Mike, look, I've followed your career. You don't like to be characterized as a mortgage guy because by background, you've worked at some of the largest financial institutions in the world.
It was by accident, if it happened at all.
Mike and I have talked about that over the years, because before I came to Radian, I would've been that mortgage guy. From your career, you've worked at some of the largest, most sophisticated institutions. You've been part of transforming businesses. I know you're highly interested in technology and how that plays into it. Kind of, how do you think about the opportunity from a Radian perspective, and what do you bring from those experiences to Radian? How do you think about translating that background into what you want to bring to Radian?
Yeah, a few thoughts. For those of you that aren't familiar with my background, I spent most of my career at JPMorgan Chase. It was a wonderful journey. I describe it as pre-crisis, we were a good global bank, and kind of the crisis kind of showed and/or was the catapult to us becoming the biggest and best bank in the industry. I started out, I describe as a happy retail banker, across all of our consumer businesses, other than mortgage. Mortgage was the place where talented people went, and then I never saw them again. I got the call at some point to go lead servicing there and then ultimately lead the business. I went to Wells Fargo, where I led the consumer lending businesses, which included home lending, auto, credit card, personal lending, student lending, a business that we ended up selling.
To Mr. Cooper, where for those who aren't familiar with it, and certainly the non-U.S. crowd probably isn't, we were the largest mortgage servicer in the industry, servicing about $1.5 trillion In mortgages, and ended up selling the company to Rocket last year. Across all of those businesses, it has been about risk-based capital allocation. Mr. Cooper buying, servicing, it was should we do it through our correspondence channel? Should we do it through co-issue markets? Should we acquire in the open market or should we do it directly from customers? Each of those had different return profiles, and we flexed in and out of them as the environment changed. Certainly, the bank lending for your balance sheet, there are better times to be in and out of different markets. It's not mortgage insurance, it's not specialty insurance.
If it's not siblings of those businesses, it's at the very least first cousins that have the same concept. The one other thing I'll say is, it's been interesting even talking to so many people in the insurance industry here who've said, "Oh, wow. The banking industry seems like they're more advanced in using data and technology to enhance the business." I feel like I've been a dissatisfied banker for much of my career, saying, "Can't we do even more with data and technology to make the business better?" I think that'll be an opportunity for Radian, as far as the eye can see, that technology is developing so rapidly. How do we have the ability to deploy data, deploy technology, but do it in practical ways that are going to create real value for our shareholders?
As you heard, I know Richard, what did you refer? Blood brothers or something like that? One of the things that struck me when we first met the Inigo team, which was just over a year ago, Dan, right? On May 7th of last year, I think, is the common language that spoke between the companies around data and analytics and the way pricing, to use a P&C term, rate adequacy, to use the MI term, EV, just thinking about optimizing risk-adjusted returns. When I think about your background from a banking point of view, as you and I have talked about it, that capital allocation framework that you've used there, it does apply to this business. The way we use it and the deep analytics that come along with it is, I think, one of the great complementary aspects of these two businesses.
I think you're going to have some fun with that.
Yeah. Well, I'll put the question back at you. You've led the company for nearly 10 years. What are the accomplishments you're most proud of? What have you seen from Radian over that period?
Look, as you go through this process in life and you think about retiring, at this point in my career, there's a lot that I reflect upon. There's a lot that I think about. There's things you think you might've done differently. There's things you think that you're very proud of. We'll focus on the things I'm proud of. I think, look, every part of the journey is just really interesting. The things that I reflect back over the past 10 years, I think about the team. That may sound just kind of, well, of course, you think about the team. I think about the team that we have in place today, the team, the quality, the people, their character, the values that we live by.
Then we brought this really great team from Inigo alongside a team that had similar values at Radian, and we put these two teams together. I think when I hang up the cleats or whatever it is, put the paddle down or something like that.
I think you leave the shoes in the middle of.
Yeah. Okay.
mat on the court.
There you go. All right. Take the helmet off, whatever it is. I'm going to look back and probably you reflect on things, I'm going to reflect upon the people that I encountered through this process and the team that I think is in place today. I have to say, the ability to watch our MI business and where they're headed. As I mentioned earlier, what Meghan and Steve have done in the last four months, three and a half months, to really reimagine that business with the team, truly excited about it, and I'm proud of them. Then bringing this Inigo team across the finish line and bringing them into the Radian family, I think you kind of go across it. The last thing I would say, and again, I'll probably forget five other things, but I'll tell you about them as we go.
Yeah.
The other thing I'm very proud of is who the company is. We talk about values. Richard and Andrea talked about the values within Inigo. That day when we met in Philadelphia with the Inigo team, we felt a chemistry around culture and around values, around how we want to be recognized and operate as a company. I think we're a highly responsible company. I think we value who we are as a company and our position in our marketplaces, our position in our communities, our position and responsibility we have to investors and our employees alike. I'm proud of the company we are. As I reflect back, that's something.
No, that's awesome. If I were to push you on it, you have a lot of people who backed the company through different cycles, a global pandemic.
Oh, yeah. We had one of those.
moments nobody could have predicted. This, maybe it's selfish for me, so I can speed up my learning and finding things. What did you learn through that you couldn't have known day one coming in?
Yeah. Actually, you bring up the pandemic. Everybody remember that thing called COVID? Remember we all went home and we worked from home? I remember, I think Eric's in the room here. Eric and I flew to Florida that night after, as a team, we made the decision to send everybody home to work, right? You wonder if technology's going to work, you wonder when you're going to see each other next. We barely knew what Zoom was at the time, right? It's a great example because the day after, and we could tell a whole bunch of stories about COVID, but I think the one thing that I learned, at that point I was reminded of, is the resiliency of the team and their ability to overcome pretty much anything.
We know that was a great challenge, the next year and a half was also very challenging. I would say since day one, when I joined Radian, really not knowing anybody at all, I think what I've learned and what you're going to learn is that, and we've seen the same thing with the Inigo team. This is a team that's committed to really figuring out how to work together as a team, highly resilient when things don't go the right way, kind of figuring out how to solve problems, and kind of playing through the ups and downs of a business. So I think we can learn all about capital models, we can learn all about risk parameters, and we can learn about a whole bunch of things about the business.
If you don't have the team in place to manage through that and demonstrate resiliency through good days and bad, companies aren't going to succeed. I've seen our team go through enormous challenges, through cycles, through business challenges, through self-inflicted wounds from time to time, right? Have you ever experienced one of those? They found their way through it. They worked their way through it. I think you're going to learn that the team that you're going to take responsibility for leading is that team that just wants to do things the right way, wants to figure out how to solve problems, and is highly resilient and innovative and thoughtful in terms of their approach.
Yeah. That's awesome.
Yeah. For you, I understand you made a little stock purchase.
Yep.
I'm curious about your perspective of that. I think probably we're all in the public domain, right?
Yeah. Filed that form. We're good.
Yeah, we're good. I'd be curious about your perspective on that?
Yeah. It was very important to me to be an owner of the company from day one. I'm excited to do it. The valuation made it easy and exciting. You saw in the presentations, you've got two businesses that are earning mid-teen ROEs through the cycle. If I had the ability to invest money and know I was going to get 15% a year return, I would do that all day long because I know within five years, I'm going to have more than double my money.
You're good at that. You're good at that.
Thank you. Yeah. It seemed like an important qualification for the job interview. On top of that, there was also the slide that Dan showed that showed our multiple of book. I think it showed one times. We're actually, I think, trading a little bit below one times right now versus the broader insurance industry benchmark, which I think was 1.9x .
Yeah.
In addition to the ability to earn good returns through the cycle, there's also an opportunity to rerate to what we think is a more appropriate recognition of the value we create. It's a little bit of a reiteration of the excitement I have about the platform that we have, and it was fairly easy to be honest. I set a certain amount of money aside.
Beth would say we should always be honest.
That's good. I try to always be honest. I set a certain amount of money aside, and I ended up with a little bit more shares than I thought I was going to, so that was nice.
Yeah. No, it worked out well.
Yeah.
All right, you've been here all of four days.
Yeah.
You talked about this a little bit earlier, but I think it's probably good to kind of go back to it. What's been your impression so far?
Yeah.
What have you learned?
Well, you talked about it. My answer is actually kind of the same, which is the team. I've had an opportunity day one and two, I was in Inigo. I came in yesterday and been here today, and as Richard introduced a lot of the Inigo teams here. I got to meet a lot of people that I hadn't met before, other than to see names on org chart boxes and things like that. You have to be impressed. I'm impressed, and I hope you are impressed. If you're not, then you just need to get to know people better because you've got a team on the mortgage insurance side that I don't know if I've met anyone who's been here less than a decade yet.
There is a deep knowledge and understanding of this business, and when you start to double-click into it and get deeper, the things that Steve and Meghan were showing, there is an analytics capability that is really, really good. I've been at some outstanding organizations in terms of data and analytics, and it is something real that explains the better credit performance that you're seeing in the book. With the Inigo team, I had met Russell and Stuart and Richard, and they were amazing, and I love their story of three guys who retired, learned that retirement didn't totally agree with them and said.
They failed then.
Yeah.
They failed then.
They terribly failed at retirement and said, "What if we can create a company that would be like the dream company that we would've worked at our whole career?" It sounds great. At dinner last night, I was really trying to probe for whether this was real or not, it is. Part of that is the culture, part of that is the people. This mindset, the curiosity, the commitment to analytics, the commitment to having a low ego where you're focused on getting it right versus being right. Getting the right answer versus being the person who has political clout in an organization is real on both sides of the business. It's what gives me confidence, I hope will give all of you confidence that we are going to make good decisions in the way we allocate your capital.
I want to back up a little bit because you and I have talked over a period of time here, even before this process of you joining Radian. We've known each other, as I said, for a while. Give me the elevator pitch of why you came here. I know you've been excited about this.
Well.
Because you and I have talked about it.
Yeah. Well, I said it upfront as well, which is, it is great people, great culture, and a great platform.
You didn't go anywhere. That's how you got here. Other than that.
I said it looked good from the outside. I'm upgrading it to great. I've known you a long time. It gave me a little bit of an idea of what I'm not surprised in terms of what I'm seeing, in terms of the culture of the organization. Yeah. I did get increasingly excited as I spend time with you, as I spend time with the board, as I spend time with the team. Yeah, I couldn't be more excited. I think we have time for one more question. I'm going to ask you so I don't have to answer it.
Oh, gosh. Okay.
Seriously, you've made the comment to me and our team a number of times that a few months from now, you're going to transition to being our biggest cheerleader.
Yep.
We want our cheerleaders to be happy. What does success look like to you five years from now with the foundation you've built? What do you want your legacy to be? How do we help carry that forward?
Well, I appreciate that. I think when you look forward, you take the platform you have today, Mike. I've said this a number of times, couldn't be more excited to pass the baton to you because I think you're the right person at the right time, and I'm excited about that. That, I start excited. I hope I finish excited.
Me too.
You will do a great job. I look at it and I say, Richard and many of us have spent time talking about this, I think the opportunity is that this is a very different business five years from now. I think it's a much more of a global business. I think it's got an opportunity to leverage that great foundation of an MI business today that we've talked about, spent a great deal of time. I think it's going to leverage expanded opportunities and grow on a global scale across a broader insurance market, allocating capital very effectively to drive those risk-adjusted returns. I think when we look at it'll be a track record where not only myself and my grandchildren appreciate what you did.
The second thing is that investors appreciate that this is an opportunity for a story of compounding value, right? Consider through the cycle, there's going to be volatility, and I think volatility creates opportunities. As you go forward and we look out three, five, 10, 20 years from now, right? I think Radian will be a much different business. I think it'll be defined on a global scale. I think the team will continue to be unmatched on a different scale. I think it'll leverage the opportunity that it has today to go forward. Personally, as I sit here today, I couldn't be more excited about, and I said it earlier in the closing comments, about where the MI business stands and the opportunity for it to be able to go forward in a really innovative and transformative way.
The addition of Inigo and the way we manage capital and the team and culture. I think those are all the building blocks to catapult this business forward so five, 10, 20 years ago, it is a global force different than it is today, and I think that opportunity is ahead of it.
I will wrap then by saying, our job as a team is to make you proud.
To make all of our shareholders proud. We're going to get after it. We hope you're as excited about the future of Radian as we are, and we really appreciate you all being here and look forward to interacting with you as we wrap. Thank you.
Thank you very much.