Q2 2023 Enact Holdings Inc Earnings Call

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Yes.

Good day, and thank you for standing by and welcome to the Q2 2023 and that earnings conference call.

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Now that you had the conference over to your Speaker today, Daniel call Vice President of Investor Relations. Please go ahead.

Thank you and good morning, welcome to our second quarter earnings call. Joining me today are Rohit Gupta, President and Chief Executive Officer, Dean Mitchell, Chief Financial Officer and Treasurer.

Rohit will provide an overview of our business our performance.

Progress against our strategy Dean will then discuss the details of our quarterly results before turning the call back to ROE for closing remarks.

He will then take your questions.

The earnings materials, we issued after market close yesterday contain our financial results for the quarter.

Along with a comprehensive set of financial and operational metrics.

These are available on the Investor Relations section of the Companys website at Www Dot IR Dot dot.

Dot com.

Today's call is being recorded and will include the use of forward looking statements. These statements are based on current assumption.

Smith expectation and projections as of today's date.

Additionally, they are subject to risks and uncertainties, which may cause results to be materially different and we undertake no obligation to update or revise such statements as a result of new information.

For a discussion of these risks and uncertainties. Please review the cautionary language regarding forward looking statements in today's press release as well as in our filings with the FCC, which will be available on our website.

Please keep in mind the earnings materials and management's prepared remarks today include certain non-GAAP measures reconciliations of these measures to the most relevant GAAP metrics can be found in the press release, our earnings presentation, and our upcoming SEC filings on our website with that I'll turn the call over to Robert.

Thanks, Daniel Good morning, everyone.

Our team delivered another very strong quarter in a dynamic environment.

We reported adjusted operating income of $178 million or $1.10 per diluted share and delivered 16% adjusted operating return on equity.

Insurance in force grew 9% year over year to a record $258 billion.

Even by new insurance written of $13 billion.

And elevated persistency of 84%.

During the quarter, we delivered solid new business production.

Disciplined growth in our insured portfolio favorable credit performance.

Renewed acceleration in investment income and expense efficiency.

We remain confident in our strategy as well as the strength and stability of the private mortgage insurance business model.

While the macroeconomic environment remains uncertain, but elevated inflation and heightened borrowing costs. The labor market has been resilient and household balance sheets are healthy.

We continue to see evidence that manufacturing quality in the mortgage industry remain strong and that despite ongoing challenges to affordability credit risk remains within our risk appetite.

In addition, looking beyond housing research indicate that previous delinquency rates got Brian borrowers are at or below pre pandemic levels across consumer sectors.

Overall, we remain constructive on the long term outlook for housing as well as the demand for mortgage insurers.

Low housing inventory and first time homebuyer demand are likely to continue to support home prices.

And <unk> will remain an important affordability tool to help buyers qualify for a mortgage.

As higher interest rates have affected mortgage origination.

The weighted persistency as quantity to act as a counterbalance.

Supporting insurance enforced growth.

Pricing on new insurance written remained constructive during the quarter and we observed increased pricing on new insurance written in the market.

We increased our price on NSW in response to continued macro uncertainty while country to onboard the right risk or the right price.

The credit quality of our insured portfolio remains strong.

The weighted average FICO score was 744, the weighted average loan to value ratio was 93% and our layered risk was one 3% of risk in force.

Our delinquency rate was one 9% even with the first quarter of this year and consistent with pre pandemic level.

The loss ratio in the quarter was negative 2%.

Continued strength in the labor market and household balance sheets as well as our loss mitigation efforts helped drive course above our expectation and as a result.

We used $63 million of result.

We continue to take a prudent approach to loss reserves and believe we are well reserved for a range of scenarios.

We continue to operate from a position of financial strength and remain well capitalized relative to our regulatory requirements.

Pmiers sufficiency at the end of the quarter remained robust at 152% or $2 billion of sufficiency.

And 90% of our risk in force was covered by credit risk transfers.

Earlier in July we announced our first quota share reinsurance agreement with a broad panel of highly rated reinsurers.

This agreement builds on the success of our CRT program and reflect our ongoing commitment to pursue high quality, new business, while driving capital efficiency and minimizing credit risk volatility.

We also partnered to allocate capital in keeping with our balanced approach and three pillars.

<unk> of our policyholders.

Investing to enhance and diversify our platform and returning capital to our shareholders.

I'll focus on two of those pillars here.

I'll start with capital returns.

Given the strength of our balance sheet, the stability of our cash flows and our continued confidence in the business. We have increased our capital return guidance for 2023% to $300 million.

From $250 million.

As we announced previously we increase of our quarterly dividend, 14% from 14 to 15 <unk> per share in the first dividend at that level was paid during the quarter.

Additionally, we repurchased $41 million in stock during the second quarter and through July we have substantially completed that original $75 million share repurchase program.

With that said I am pleased to announce that the board has authorized a new $100 million share repurchase program <unk>.

Dean will provide additional detail on our capital return plans shortly.

I will now turn to investment in the business.

We seek opportunities that will create long term value by growing extending and differentiating our platform supported by our deep expertise in mortgage insurance.

I am pleased to note that during the quarter, we successfully launched <unk>, our reinsurers that expand our franchise through access to new business opportunities that are expected to create shareholder value overtime.

And <unk> is a long term growth opportunity that provides us with capital efficient access to the GSE credit risk transfer market.

Having received approval from Bermuda Monetary authority.

The GSP and an a minus rating from am best and accurate has participated in to Fannie Mae CRT transaction and one Freddie Mac transaction since launch.

The attractive risk adjusted return and strong underwriting we have seen from these transaction reinforced our decision to enter this market.

In addition, we executed a quota share arrangement with <unk> to provide scale for an accurate a minus rating.

Importantly, we have intentionally structured and AG re to preserve enact dividend capacity and as you can see from our decision to increase our guidance for total capital return this year to $300 million.

And the authorization of a new share repurchase program, our commitment to returning capital to shareholders remains strong and well balanced with our growth initiatives.

Led by an experienced leadership team and board the launch of an AG re leverages our industry expertise and.

And let it capabilities and operating infrastructure and is aligned with our commitment to drive compelling returns and create value for our shareholders.

I will now turn it over to Dean who will cover our performance in detail and we'll have more to say on and actually in a moment.

Thanks, Ralph Good morning, everyone. We again delivered very strong results in the second quarter of 2023.

GAAP net income for the quarter was $168 million or $1 four per diluted share as compared to $1 25 per diluted share in the same period last year and $1 eight per diluted share in the first quarter of 2023.

Return on equity was 15, 5%.

Adjusted operating income was $178 million or $1 10 per diluted share as compared to $205 million or $1 26 per diluted share in the same period last year and $176 million or $1 eight per diluted share in the first quarter of 2023.

Adjusted operating return on equity was 16, 4%.

Turning to revenue drivers primary insurance in force increased in the second quarter to a new record of 258 billion up 5 billion or 2% sequentially and up 20 billion or 9% year over year.

New insurance written of $15 billion was up $2 billion or 15% sequentially driven in part by higher originations and down $2 billion or 14% year over year, driven by lower mortgage originations, resulting from continued elevated interest rates.

With elevated interest rates persistency remained high at 84% in the second quarter down one percentage point sequentially and up four percentage points year over year.

Given that most of our insured portfolio has mortgage rates at or below 6% and the expectation that interest rates will remain elevated in the short term. We anticipate continued strength in persistency, which is a positive for the future profitability of our insurance in force portfolio.

Yeah.

Our base premium rate was 43 basis points down two basis points sequentially to two basis points year over year, and seven basis points year to date.

The rate of change in our base premium rate continues to narrow and it's in line with our expectations.

As a reminder, based premium rate is impacted by a variety of factors and can deviate from quarter to quarter.

Our net earned premium rate also reflected lower single premium cancellations year over year.

The quarter single premium cancellations were flat sequentially and contributed only 2 million of net earned premium limiting its potential for meaningful future dilution.

Investment income in the second quarter was $51 million up $6 million or 12% sequentially and $15 million or <unk>, 42% year over year.

The rise in interest rates in the current rate environment are favorable for our investment portfolio as our new money yields for the quarter was over 5%.

As of quarter end unrealized losses in our investment portfolio increased by 32 million to $439 million.

As I've mentioned, although we generally do not expect to realize these losses, we will act upon opportunities that are expected to generate the highest value at a given time.

During the quarter, we identified assets that upon selling generated a loss represented an opportunity for higher net investment income going forward, we will continue.

To evaluate similar opportunities to maximize the value of our portfolio.

But this does not change our view that our investment portfolio's unrealized loss position is materially non economic.

Revenues for the quarter were $278 million down $3 million, or 1% sequentially and up $4 million or 1% year over year excluding.

Excluding the opportunistic investment trade, just mentioned, which resulted in a $13 million loss in exchange for higher future investment income.

Revenues in the quarter were up $10 million, or 3% sequentially and $17 million or 6% year over year.

Net premiums earned were $239 million up $3 million or 1% sequentially and relatively flat year over year.

The increase in net premiums earned sequentially was driven by strong F growth, partially offset by the lapse of older higher priced policies as compared to our <unk>.

Turning to credit losses in the quarter were a benefit of $4 million as compared to a benefit of $11 million last quarter and a benefit of $62 million in the second quarter of 2022.

Our loss ratio for the quarter was negative 2% compared to negative 5% last quarter and negative 26% in the second quarter of 2022.

Losses and loss ratio were primarily driven by favorable care performance, which was above our expectations, resulting in a $63 million reserve release in the quarter.

Included in the reserve release, where delinquencies from the first half of 2022, which were reserved at a 10% claim rate.

New delinquencies decreased sequentially to 9200 from 9600.

Our new delinquency rate for the quarter was 1% consistent with pre pandemic levels and reflective of ongoing positive credit trends.

We continue to book, New delinquencies at an approximate 10% claim rate, reflecting our prudent and measured approach to reserving in this dynamic environment.

Total delinquencies in the second quarter decreased by approximately 500 to about 18100 as curious outpaced new delinquencies.

The associated delinquency rates stayed flat at one 9%, which is stabilizing near pre pandemic levels.

Turning to expenses operating expenses in the quarter were $55 million relatively flat sequentially and down $7 million or 11% year over year the.

The expense ratio for the quarter was 23% flat to the first quarter of 2023 and below the 26% we reported a year ago.

Our performance reflected the ongoing benefit of our cost reduction actions we continue.

To expect costs for the full year, the declined 6% year over year to $225 million.

Moving to capital and liquidity, we continue to operate from a position of financial strength and flexibility.

As Rohit referenced this quarter, we executed our first quota share reinsurance transaction as part of our credit risk transfer program.

The transaction secured coverage from a panel of highly rated reinsurers covering approximately 13% of our current and expected new insurance written throughout 2023.

We believe the inclusion of quota share reinsurance coverage into our CRT program provides incremental capacity on attractive terms at a time of volatility in the CRT market and serves as another proof point for the value of diversified capital sources.

As of June 32023, our CRT program provides $1 5 billion reduction to our pmiers minimum required assets.

Before moving onto a discussion of P Myers and capital allocation I wanted to take a minute on enactory as.

As Rohit discussed we are very pleased to have launched <unk> during the quarter.

<unk> is a Bermuda based wholly owned subsidiary of <unk> and is classified as a non exclusive affiliated reinsurer for P Myers purposes.

Amoco has initially contributed $250 million to an accurate which serves as a reallocation of capital to enact rate that will be used to support the initial seven 5% quota share business from Africa, and our participation in transactions with the Gse's.

The strength of our credit ratings is a key factor in our ability to successfully enter and participate in the GSE CRT market.

Our quota share agreement with Amoco has provided the scale and efficiency to support our strong ratings and opportunities to pursue third party risk on attractive terms.

Over the long term, we believe <unk> will contribute to increasing our income and shareholder value, while preserving our dividend capacity.

Additionally, we expect it to have a minimal impact on our expense structure as evidenced by the fact that we have reaffirmed our expense guidance of $225 million for the year.

We have structured enact read to be efficient from a ratings capital and expense perspective, and will take an intentional approach to growing the business that balances scaling it to optimize our return on capital with our disciplined approach to capital allocation and commitment to our core franchise we.

We intend to prudently build scale in this business and we'll continue to keep the market apprised of progress through time.

Let me now shift gears to talk about <unk> and capital allocation.

<unk> sufficiency remains strong at 162% or $2 billion above P Myers requirements compared to 164% or $2 1 billion in the first quarter of 2023.

At quarter end, we had $1 5 billion of <unk> capital credit and $2 $7 billion of ceded risk provided by our third party CRT program, which currently covers 90% of our risk in force.

Turning now to capital allocation, we remain committed to our prioritization framework, which balances prudently investing to strengthen and differentiate our platform maintaining a strong balance sheet and supporting our policyholders and returning capital to shareholders.

Already talked about Enactory, and our strong <unk> position, which touch on the first two pillars. So let me take a moment to speak to capital return.

Yesterday, we announced that our board has approved a new $100 million share repurchase program.

As with our prior program Genworth will participate proportionately to their 81, 6% ownership.

Sharing their proportional ownership of an act remains unchanged.

We returned a total of $67 million to shareholders during the second quarter, consisting of our $26 million or <unk> 16 per share quarterly dividend, which was increased 14% and share repurchases totaling $41 million.

As of July 32023, we have repurchased $71 million in stock and have $4 million remaining on our current $75 million share repurchase authorization.

We are well positioned to return capital to shareholders in 2023, and as Rohit mentioned with a strong first half behind US we are increasing our capital return guidance for the year to $300 million of.

About $50 million from 2022 levels through a combination of our quarterly dividend share repurchases and a potential special dividend in the fourth quarter.

In April <unk>, our primary mortgage insurance operating company completed a distribution of $158 million that will be used to support our ability to return capital to shareholders and bolster our financial flexibility.

We had a strong quarter and an outstanding first half of 2023, we remain focused on prudently managing our risk driving cost efficiencies and maintaining a strong balance sheet, while executing against our capital allocation strategy with that I'll turn it back to Rohit.

We are very pleased with our results for the second quarter delivering continued high quality growth in our insured portfolio and strong return.

Looking forward, we will continue to deploy capital in a manner that balances investment in the business.

Ln's sheet strength and distributions to our shareholders.

Overall, we are well positioned to continue to serve our customers and their borrowers grow our franchise and deliver strong performance and value creation for our shareholders.

Finally, I'd like to thank our talented team for their commitment and for driving us forward.

Operator, we are now ready for Q&A.

As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Please standby welcome by all the Q&A roster.

And our first question comes from the line of Mihir Bhatia with Bank of America.

Your line is now open.

Hey, good morning, and thank you for taking my question.

Wanted to start with.

Competitive intensity.

Okay.

Doug.

Right now when I look at the market share numbers quarter over quarter, and I understand you don't manage the business by market share but.

I guess the question on the competitive intensity is when you look at your market share numbers or the growth youre seeing versus the growth. Some of the competitors are seeing this quarter I think you have.

Of the companies that have reported.

The lowest increase in quarter over quarter.

Origination, suggesting you maybe lost a little bit of market share.

Now like I said I understand you don't manage the business from a market share perspective.

But what does that tell you about the competitive intensity of the pricing that others are doing is it driven by pricing is it better pricing more aggressively maybe just talk about that in general what youre seeing in the pricing environment. How people are responding to changes in pricing is it getting is pricing getting better or getting worse, what's happening. Thank you.

Good morning, and thanks for the question.

As you stated we have said in the past market share is not a strategy for us. It's an outcome of our successful execution of our go to market strategy, where we talk about charging the right price for the right risk. So I would start off just by saying, we like the $15 billion up in a W. That we wrote in the quarter and its profile from both pricing and credit.

Mix perspective.

Also I think important to kind of emphasize especially in this environment that we continue to see strong underwriting quality and credit quality, which is very much within our risk appetite.

Now market share right now is tough to calculate because there are only three semi companies reporting in three to go.

But from our perspective, we think of quarterly market share being volatile and we have seen that over the last I would say three years or so years, especially after all that my company is move too opaque right engines is just the volatility on quarterly market share has been higher and that could be driven by just the <unk>.

<unk> off pricing moves by different companies. It could also be driven by specific lenders that semi companies do business with and who is growing and who is shrinking in the origination market I think our focus continues to be.

That we have a good market position and actually are writing.

Product and new business at very good return as I also said coming back to your question on pricing.

I said in my prepared remarks that we saw pricing being constructive in the marketplace and during the quarter, we saw pricing across the industry move up and.

And we actually moved over pricing up on new insurance written given the economic uncertainty that's in front of us.

That hopefully provide you color on how we think about the intersection of pricing in our market position last thing I would say, obviously market share numbers are not known but our directional centers that if you look at our trailing 12 months of market share last quarter the quarter before while there has been quarterly volatility.

That number is actually relatively stable and within a range that is very much aligned with how we think of our market participation that diversity of our customer base and doing business with close to 800 active lenders.

Got it.

Thanks for that in terms of the origination market in general I guess, particularly on the purchase side.

Where are you seeing particular growth areas of strength I mean, you called out a little bit of economic uncertainty.

So maybe talk about just where you expect things to trend.

Backup for you.

Thank you.

Thank you Matt for the question I would say this is a tough environment to predict mortgage originations I think.

Just given the volatility we have seen in 10 years treasury yield and spread to mortgage rates makes it difficult to predict mortgage rates.

On an ongoing basis and that in turn means that when you think about consumer behavior consumers are very interested in buying homes, but between broader inflation ever to date home price appreciation and then now higher mortgage rates in 2023, I think consumers are just taking that more carefully.

That spring selling season, obviously, we don't have final numbers, but our expectation is purchased market was up maybe 40 ish per cent or first quarter historical seasonality would be about 50 per cent on that number. So the seasonality is a little bit subdued, but borrowers maybe holding back what gives us more optimism.

M. As my point on first time homebuyers will come to market and with the market dynamics. We are talking about M. I being a very strong affordability tool for those borrowers. So we still expect M. I market size. This year to be in the 300 plus billion dollar range, maybe slightly over $300 billion and while it's lower than prior years.

It's mostly purchase driven which means it's not joining the book and still gives us reasonable size scale from a new insurance written perspective.

And my last question for some persistency.

It seems to have leveled off around this 85 per cent area.

I think 84 this call the right number that didn't go through the Rep spoke with your real equal we stopped being raped come down. Thank you.

Came here <unk>. Thanks for the question just for some contacts again this is for the broader market our highest persistence C is really into high 80% that happened for one quarter. So we really think about 84 persistence 84 per cent persistency in the quarter as.

Remaining elevated on a on a historical basis.

I do think you saw the one point decline sequentially or by what <unk> just talked about the seasonality during the spring spring selling season.

You know kind of like we talked about where persistence. He's got a level out it's hard to predict we do have a combination of a large new book with very low interest rate, coupled with a pretty dynamic right environment that wrote it just reference.

You know, it's it's obviously never going to be 100 per cent you got life events job changes health issues divorce and other things that do cause borrowers to pay off their mortgage I guess, what I would say is our view maybe not as proscriptive, but our view is given that are insured portfolio has loans with mortgage rates.

<unk> or below the six per cent level and our expectation that race mortgage rates remain elevated in the short term, we'd expect <unk> to remain elevated in the near term, whether that's 80 480, 583% hard to predict but uhm elevated relative to kind of historical levels Uhm a here.

Okay. Thank you.

Thanks <unk>.

For your next question.

And your next question comes from a line of phones charge with can you. Please tell me your line.

Okay.

Hey, good morning, everyone. This is actually <unk>. Thank you for taking our questions come. Another question on pricing I was wondering if you guys would be would.

Would be willing to discuss your thoughts on the durability surrounding the price increases we've seen across the industry over the past year, and then maybe I'll do a little bit deeper if we were to see the macro outlook potentially improve could the industry potentially give some of that pricing power back.

Good morning, Alex and thank you for the question I would say the way, we think about pricing it's difficult to comment at an industrial level every of my company has their own macroeconomic b U in their view of returns and credit risk I think our perspective is that we are still not past the point of economic uncertainty being gone I think we see the.

The balance in the market kind of the forces are described in my prepared remarks that on one hand, we are talking about cause you must still having held the balance sheets labor market being strong on the other hand, we are talking about broader inflation still being there elevated home prices from the last two two and a half years and at the same time.

Higher rates at this point of time and given what fed has done in terms of increasing rate the effect of that on the economy on consumer is a little bit lag. So we are still kind of expecting some volatility in the market or some uncertainty in the market and as I said earlier and my answer.

Increasing over price for that economic uncertainty, depending on how that uncertainty plays out we will adjust overpricing. So if that leads to a scenario where there is a short mild recession.

Then obviously, we did the right thing in terms of increasing price for those credit losses, and if you look back at Coalbed be kept our prices elevated during the time off the forward unemployment Spike and then as unemployment came down there was adjustment in price. So I would just say that those are kind of the broad boundaries on.

How we think about pricing, but given.

Given kind of we are in a competitive market I'm not gonna describe kind of specific risk actually use our changes that will be might make depending on how the market moves.

Great Yeah that makes sense and then maybe a quick follow up <unk> <unk> would you be willing to walk us through the benefits of seating that I think it's 7.5% of the enforce business and then is there a minimum capital requirement at an actor as well.

Yeah I'll take the the first question as it relates to the benefit of the quota share you know our immediate business objective of Knackery was really to gain access to the G. S. C. C. R. T market on attractive terms longer term you know will will will look for ways to develop the broader.

That form for future growth, but in the immediate term, it's all about GSE CRT market.

To accomplish that we needed and we believe we needed an a minus rating as <unk> as you know.

The G C C. R. T capital standards are predicated on ratings, both capital and Collateralization requirements, but the 7.5% quota share reinsurance allowed us to scale enactory to achieve those a minus ratings and ultimately was an enabler too.

To provide that access to the G. C. C. R T market again on those attractive terms.

So I I really think it's if you kind of work backwards.

We were looking for ratings quit we needed scale for the ratings and ultimately the quota share transaction provided an act re the scale necessary to.

To get an eight am best a minus rating that's really the basis for the the quota share reinsurance transaction.

Alienate quota share reinsurance transaction.

And then from a minimum ratings prospective let me start and then Dean can chime in I think we don't think of <unk>, having like a single dimension of ratings framework, we actually think about four different ratings framework and think of that as Bermuda Monetary authority has been just said amvest framework than we have.

Myers, because we are feeding F. Lee at risk into the entity and we also intend to primarily focused on GSE credit restaurants are market and then our internal view on top of it which would be management capital either from an economic capital solvency capital perspective, So we combine all those views together.

And then think about the capital needed and I think dean summarized it well that as you think about about us launching this entity. We are launching this entity with a significant portion of the capital B contributed supporting the F D a quota share at inception.

But obviously forward funding some of the G. C C. R T market and as we move forward will basically want me to look at that capital in our commercial success and the Gse's CRP market to make sure that that entity is the right amount of capital. It is important to emphasize and reset it in or are prepared remarks that restructured this entity <unk>.

Up it'll efficient way both from P Myers and from statutory policyholder surplus so that allows us to actually achieve scale to Dean's point achieve a minus rating right business on an <unk> basis that attractive risk adjusted returns and then at the same time <unk>.

<unk> focus on return of capital to shareholders, which was evident with announcements we made.

Great that makes sense and thank you so much for taking my questions.

Thanks, Alex things out.

One moment for your next question.

And the next question comes from the line of <unk> J P. Morgan airline is now.

Thanks for taking my questions. Most have been asked and answered, but I'd love to talk a little bit about the <unk>, the second quarter and implications as we move into the third we did hear that as we move to the quarter mortgage originations did slow.

Month after month and I'm curious if that's what you saw and if that's okay. I guess, we are now in August so through July as well.

Good morning, Rick and thanks for the question in terms of this goes back to my point on trying to predict origination market size. This year I think we are seeing consumer behavior being very <unk> with two things one is historical seasonality that consumers buy more home.

During the spring selling season, so we are going to need to see that as I said in a previous response that'd be saw an increase in purchase originations being in the attribute that to see if not at the end that consumer behavior. The second thing is there is an aspect of consumers either coming to market or staying on the sidelines based on their mortgage rates are.

I think this is a little bit of unprecedented time that we see significant volatility month to month third year mortgage rates by the fact that any of treasury yield is moving in a pretty wide band and on top of it we have historically high spread between 10 year Treasury yield and 30 year mortgage Oh.

Standing between 272 300 basis points. So when you combine those two factors and you say like mortgage rates are let's say, 6.8% at that point, we generally see and be here for our customers when I've talked to see use of certain mortgage companies recently, so generally see higher than six and a half per cent 30 year mortgage rate.

It slows down activity between six to six and a half per cent I think activity is a little bit stronger and then anytime we are in the neighborhood of 6% for 30 year mortgage fixed rate or slightly below it I think more and more consumers are coming to market and they see that as a deal. So if you compare that to 2022, that's a net positive <unk>.

Cause I think 20 twenty-two, especially middle of 2022 was a year when people were seeing a sticker shock.

We're used to a three per cent mortgage rate and they started seeing 6% I think right now of six per cent is more well accepted in the market, but then the range around it kind of guides people's participation in the market hope that helps.

No. It's it's very helpful and just dimensionalizing it in that way makes a big difference one other question what was the the.

<unk> credit again, I know you mentioned I think to check 1.5 billion you have it with precision I just wasn't able to find it in the in the disclosures.

<unk>.

<unk>, it's actually in our queue F S.

On H.

14, I think it's 1524 I can read my own handwriting.

And it's this <unk> required asset credit.

Down in the middle of page 14 terrific. Thank you. So much we don't we actually don't stomach you'll have you'll have to do the math I apologize for that but it's the the some of that line.

Hopefully <unk> will be able to pull it together for me. Thanks.

[laughter] Thanks, Rick.

One moment for your next question.

And next question comes from the lineup at <unk>.

Kind of a T T I T. Your lines now.

Hey, Thanks, Good morning, maybe following up on that actually really quickly or would you say that there aren't any thresholds you think about for your capital ratios, which could either lead to higher or lower capital return than what you guys have guided too. Thanks.

Eric I think you know what we've talked about is given the ongoing macroeconomic uncertainty that we expect to hold P. Mar sufficiency is probably a little bit higher than we would under maybe more normal times, we've talked about holding <unk>.

Fishing season, you know add or north of 150 per cent I think you know if we think about <unk> sufficiency over a longer time period, maybe with the abatement of the the macro uncertainty we've talked about P Mars levels pre pandemic, which.

We're closer to 140%. So you know over a longer period of time as macro economic conditions, maybe level off you know that gives you a sense of where we where we might head with P March sufficiency under different under different facts and circumstances different <unk>.

Economic environment.

I would just add to that that I think from a capital return prospective you said what could lead for it to be higher or lower I think all over capital. It on guidance is obviously subject to regulatory approvals and macroeconomic condition. So we feel good about a result, you to date, we've delivered very strong performance as we said no.

Prepared remarks, but at the same time <unk> need to keep an eye on the environment in terms of any regulatory changes if that happens or any change in the economic environment for their housing are broadly, but given the fact that we increase our guidance between very good about the guidance, we have given for the rest of the year.

Yep that's helpful. Thank you.

Following up on the conversation around mortgage rates and such I mean, if if rates are at a rally 50 or 100 basis points from these levels. How much insurance do you think you can put back on your books in that scenario and maybe even more broadly like do you have any perspective on how M M I pricing with potentially behave in response to.

A bigger rallies and interest rates mortgage rates.

<unk>.

Eric just to clarify when you say rates were to rally another 50 to 100 basis points, you're saying rate's actually being higher 30 year mortgage rates being higher.

Mmm no lower.

Lower okay perfect. So I think if you look at recent months and times when we have actually seen mortgage rates come down to that range. So, let's say 606, and a half per cent range I think that does increase market participation I will probably all set that expectation with a little bit of.

Ah housing market dilemma that we have seen over the last year, which is lack of housing inventory. So I think in an environment, where there are more buyers coming to market for sellers are still not willing to sell their homes and this goes back to you love Your mortgage and you hit your house that even if you actually want to upgrade your house, but you are in a three per cent.

Mortgage and you can't find another house on the market that's attractive to you you might not actually sell your house. So I think we have to work on that dynamic I'm not sure. If I can give you a rule of thumb on how much more business could come to market. We would expect purchase originations to be stronger in that scenario that could be driven by a combination of some <unk>.

Units being higher but if the supply market is tight that could also lead to home prices rising again.

Which would essentially give us higher new insurance written in terms of how much more we can write or we're willing to write has been pointed out earlier, we are operating with a very strong balance sheet with a very conservative balance sheet, even at the holding company level. So we feel comfortable that if the market size was to increase we have ample capacity.

<unk> and we have ample ability to source third party capital too reinsurance or insurance link notes market that'd be good support a much higher market size on a much higher than a W. On our books.

Right.

That was helpful. Thank you how did you guys say with a weighted average price was was she bought back stock last corner.

We didn't say it but since inception era, we bought back shares at $24.30 on that $71 million of share repurchases yep.

Great. Thank you guys very much.

Thank you.

Thank you.

Your next question comes from the line of Chocolate then.

<unk> partners. Your line is now.

Hi, Thank you for morning.

It looks like we just got some said yeah.

Given your commentary on pricing and the implication that if we're in a soft landing or normalize it sounds like you might think price comes down.

I'm curious if you think industry pricing was adequate for the environment a year ago and.

So as we think about things going forward, if we're going into something that's more normal.

Do we go back to where we were a year ago or do we only get part of that back because maybe industry was.

On average cheating a little too much for normalized credit.

Good morning, Jeff and thank you for the question. So let me kind of answer your question in two ways first thing and a year ago. When we were writing new business. We did say that'd be found that business to be attractive in terms of returns and we believe that we were writing that business about lower cost of capital I think at that point of time.

<unk> of our view of macroeconomic environment was different than today's macroeconomic environment and let me just separated into two broad buckets first thing would be just risk fee rates recipe rates for a lot lower and I'll. Just point you to early 2022, and then the second thing would be our expectations in terms of unemployment home prices.

And just the uncertainty in that environment. So at that point of time, using those assumptions to be writing business at good returns now as it turns out conditions change a lot in the last 18 months or so I think looking forward you have a very fair question that if you are in an environment, where we do end up with a.

Soft landing, but at the same time market rates risk free rates are still higher I would expect that we will retain some of the price increases are most of the price increases because of our cost of capital would've moved up so even if the economic expectations are coming back to normal I could see scenarios in which of our pricing actually sustain.

At a higher level and that's how we think about it obviously every year my company needs to think of their own frameworks, but we could see that pricing being sustained at a high level.

That's helpful. Thank you.

You're welcome.

And we have no further questions <unk> tried to call back over to <unk>.

Thank you <unk>.

Thank you everyone. We appreciate your interested in an act and I look forward to seeing some of you in New York at the Barclays Global Financial Services Conference in September . Thank you all will wrap up the call here.

Christmas News conference call. Thank you for your participation.

Mmm.

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