Q4 2023 Enact Holdings Inc Earnings Call

February 7, 2024

Operator: Hello, and welcome to your next fourth-quarter earnings call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Daniel Cole, Vice President of Investor Relations. You may begin. Thank you, and good morning.

Hello, and welcome to <unk> fourth quarter earnings call.

Be advised that today's conference is being recorded.

I'd now like to turn the conference over to your first Speaker Danielle call Vice President of Investor Relations you may begin.

Okay.

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

Daniel Cole: Welcome to our fourth quarter earnings call. Joining me today are Rohit Gupta, President and Chief Executive Officer, and Dean Mitchell, Chief Financial Officer and Treasurer. Rohit will provide an overview of our business performance and progress against our strategy. Dean will then discuss the details of our quarterly results before turning the call back to Rohit for closing remarks. We will then take your questions.

Rohit will provide an overview of our business performance and progress against our strategy Dean will then discuss the details of our quarterly results before turning the call back to Rohit for closing remarks.

We'll then take your questions.

Daniel Cole: 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 company's website at www.ir.enactmi.gov. Today's call is being recorded and will include the use of forward-looking statements. These statements are based on current assumptions, estimates, expectations, and projections as of today's date. Additionally, they are subject to risks and uncertainties, which may cause actual results to be materially different, and we undertake no obligation to update or revise such statements as a result of new information.

Earnings materials, we issued after market close yesterday contained our financial results for the quarter, along with a comprehensive set of financial and operational metrics.

Are available on the Investor Relations section of the company's website at Www Dot IR dot enact MRI dot com.

Today's call is being recorded and will include the use of forward looking statements. These statements are based on current assumptions estimates expectations and projections as of today's date.

Additionally, they are subject to risks and uncertainties, which may cause actual results to be materially different and we undertake no obligation to update or revise such statements.

As a result of new information.

Daniel Cole: 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 SEC, which will be available on our website. Please keep in mind that 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 filing on our website. With that, I'll turn the call over to Rohit. Thanks, Daniel. Good morning, everyone.

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 SEC, 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.

<unk> and our upcoming SEC filings on our web site.

With that I'll turn the call over to Rohit.

Thanks, Daniel Good morning, everyone.

Rohit Gupta: We delivered very strong fourth-quarter and full-year 2023 results, including high-quality growth in our insured portfolio, strong credit performance, increasing investment income, expense efficiency, and solid profitability in return, while also returning substantial capital to our shareholders. Driving this performance was a continued execution of our cycle-tested growth and risk management strategy, made possible by the hard work and talent of our employees. I'd like to thank them for their continued focus and commitment and for helping Enact deliver another successful year. Net income for the full year was $666 million, or $4.11 per diluted share, and return on equity was 15%.

We delivered very strong fourth quarter and full year 2023 results, including high quality growth in our insured portfolio strong credit performance, increasing investment income expense efficiency and solid profitability and returns while also returning substantial capital to our shareholders.

Driving this performance was the continued execution of our cycle tested growth and risk management strategy.

Made possible by the hard work and talent of our employees.

Like to thank them for their continued focus and commitment and for helping us deliver another successful year.

Net income for the full year was $666 million or $4 11 per diluted share and return on equity was 15%.

Rohit Gupta: We ended 2023 with record insurance in force of $263 billion, driven by new insurance written of $53 billion for the full year and persistency that reached 86% in the fourth quarter. In addition to our strong financial performance, we achieved several strategic milestones during 2023 that will help position us to perform over the long term and across market cycles. First, we delivered important enhancements to our customer and technology platform. These enhancements have improved the customer experience and are demonstrative of our commitment to deliver a high-caliber, seamless, and efficient experience to our lender partners and have helped us add over 150 new customers in 2023 in a market that saw the number of lenders contract. We also made significant progress in extending our platform into compelling adjacency.

We ended 2023 with record insurance in force of 263 billion.

Driven by new insurance written off $53 billion for the full year and persistent feed that reached 86% in the fourth quarter.

In addition to our strong financial performance, we achieved several strategic milestones during 2023 that will help position us to perform over the long term and across market cycles.

First we delivered important enhancements to our customer and technology platforms. These enhancements have improved the customer experience and our demonstrated our commitment to deliver a high caliber seamless and efficient experience to our lender partners and have helped us add over 150, new customers in 2000.

<unk> 23 in a market that saw the number of lenders contract.

We also made significant progress in extending our platform into compelling adjacencies.

Rohit Gupta: During the second quarter, we launched Enact Re to pursue opportunities in the mortgage reinsurance market, and Actree continues to write high-quality and attractive GSE risk-share business, and we have participated in all seven of the GSE deals that have come to market since its launch. And today, I'm pleased to announce that Enact Re has entered into our first international reinsurance deal with the leading mortgage insurance provider in the Australian market.

During the second quarter, we launched an app re to pursue opportunities in the mortgage reinsurance market.

<unk> continues to write high quality and attractive GSE risk share business and we.

We have participated in all seven of the GSE deals that have come to market since its launch and.

And today I am pleased to announce that <unk> has entered into our first international reinsurance deal with a leading mortgage insurance provider in the Australian market.

Rohit Gupta: We are excited to be participating in a familiar, mature, and scaled mortgage insurance market where we can leverage our previous experience. When we launched Enact Re, I discussed our view of the opportunities for compelling returns, and we continue to be pleased with the strong underwriting and attractive risk-adjusted returns we have seen since its launch. Going forward, we continue to see Enactly as a long-term capital and expense-efficient growth opportunity. Aligned with this view, during the quarter, Emeco contributed an additional $250 million to Anacre, which will support a 12.5% quota share of our in-force business, up from a previously announced quota share of 7.5%, as well as new insurance written and new business opportunities, primarily consisting of GSE credit risk transfer

We're excited to be participating in a familiar mature and scaled mortgage insurance market, where we can leverage our previous experience.

When we launched on AG re I discussed our view of the opportunities for compelling returns and we continue to be pleased with our strong underwriting and attractive risk adjusted returns we have seen since its launch.

Going forward, we continue to see and actually as a long term capital and expense efficient growth opportunity.

With this view during the quarter <unk> contributed an additional $250 million to an accuracy, which will support a 12.5% quota share of our enforced business up from previously announced quota share of seven 5% as well as new insurance written and new business opportunities primarily.

Consisting of GSE credit risk transfer.

Rohit Gupta: Based on our current view, we believe that with this infusion, we have sufficiently funded Enactree to support its growth for the foreseeable future and will continue to keep the market apprised of progress through time. Importantly, we executed on these opportunities while driving expenses below our target for the year and exceeding our target for capital returns to our shareholders. Both Dean and I will have more to say on these topics shortly.

Based on our current view, we believe that with this infusion we have sufficiently funded and actually to support that growth for the foreseeable future and we'll continue to keep the market apprised of progress through time.

Importantly, we executed on these opportunities while driving expenses below our target for the year and exceeding our target for capital return to our shareholders.

Both Dean and I will have more to say on these topics shortly.

Rohit Gupta: I'm very pleased with our operating performance and the strategic progress we achieved in 2023. In 2024, we will continue to maximize value and efficiency in our core MI business while also pursuing disciplined growth. After a strong 2023, I'm confident that we are well positioned for continued success as we enter 2024. I will now turn to the operating environment and our results. The economy remains resilient, supported by a strong labor market and healthy household balance sheet, while macro factors such as geopolitical conflicts, higher interest rates, and continued economic uncertainty pose potential risks. Delinquency rates for prime mortgage borrowers are consistent with pre-pandemic levels, and our manufacturing quality continues to be strong. Even as originations have slowed amid higher borrowing costs, we are encouraged by the pent-up demand amongst first-time homebuyers, the long-term outlook for housing, and the attractive opportunity we see in the private mortgage insurance market. Home prices continue to be supported by low housing inventory and strong demand, and mortgage insurance will remain an important tool to help buyers qualify for a mortgage.

I am very pleased with our operating performance and strategic progress we achieved in 2023 and.

In 2024, we will continue to maximize value and efficiencies in our core semi business. While also pursuing disciplined growth. After a strong 2023 I'm confident that we are well positioned for continued success as we enter 2024.

I will now turn to the operating environment in our results.

The economy remains resilient supported by a strong labor market and healthy household balance sheet.

While macro factors such as geopolitical conflicts higher interest rates and continued economic uncertainty both potential risks.

Delinquency rates for prime mortgage borrowers are consistent with pre pandemic levels in our manufacturing quality continues to be strong.

Even as originations have slowed amid higher borrowing costs. We are encouraged by the pent up demand amongst first time homebuyers. The long term outlook for housing and the attractive opportunity we see in the private mortgage insurance market.

Home prices continue to be supported by low housing inventory and strong demand and mortgage insurance will remain an important tool to help buyers qualify for a mortgage.

Rohit Gupta: While higher interest rates have affected mortgage originations, elevated persistency has continued to support insurance-enforced growth. As of December 31st, only 4% of the mortgages in our portfolio had rates at least 50 basis points above the prevailing market rate. Also, as mortgage rates have come down following a peak of more than 8% in the fourth quarter, recent data has pointed to an uptick in housing activity, which may provide a tailwind heading into the spring selling season.

While higher interest rates have affected mortgage originations elevated persistency has continued to support insurance enforced growth.

As of December 31, only 4% of the mortgages in our portfolio at rates at least 50 basis points above the prevailing market rate.

So as mortgage rates have come down following our peak of more than 8% in the fourth quarter. Recent data has pointed to an uptick in housing activity, which may provide a tailwind heading into the spring selling season.

Rohit Gupta: Our overall expectations, based on current information, are for the 2024 MI market size to be similar to that in 2023. The credit quality of our insured portfolio remains strong, with a weighted average FICO score of 744 and a weighted average loan-to-value ratio of 93% in the fourth quarter, and layered risk in our portfolio was 1.3%. Pricing overall was constructive during the quarter, and underwriting standards remain rigorous.

Our overall expectations based on current information is for 2024 semi market size to be similar to that in 2023.

The credit quality of our insured portfolio remains strong with a weighted average FICO score of 744, and a weighted average loan to value ratio of 93% in the fourth quarter and layered risks in our portfolio was one 3%.

Pricing overall was constructed during the quarter and underwriting standards remain rigorous.

Rohit Gupta: We increased our price on NIW in certain cohorts and geographies in response to potential macroeconomic risk. Our dynamic pricing rate engine enables us to deliver our best price to customers while targeting appropriate risk-adjusted returns in real time, ensuring we onboard a prudent mix of business while managing expected returns. Our delinquency rate in the fourth quarter was 2.1%, up 13 basis points sequentially, relatively flat year-over-year, and consistent with our expectations and pre-pandemic levels. Strong credit performance continued during the quarter, and our loss mitigation efforts have driven strong cure activity. As a result, we released $53 million of reserves, and the loss ratio was 10%.

We increased our price on <unk> in certain cohorts in geographies in response to potential macroeconomic risks.

Our dynamic pricing great engine enables us to deliver our best price to customers, while targeting appropriate risk adjusted returns in real time.

Ensuring we onboard a prudent mix of business, while managing expected returns.

Our delinquency rate in the fourth quarter was two 1% up 13 basis points sequentially relatively flat year over year, and consistent with our expectations and pre pandemic level.

Strong credit performance continued during the quarter and our loss mitigation efforts helped drive strong cure activity.

As a result, we re leased $53 million of reserves and the loss ratio was 10%.

Rohit Gupta: We believe we remain well-reserved for a range of scenarios. We continue to operate from a position of financial strength with strong balance sheet principles and liquidity. At year-end 2023, our PMAR sufficiency was a strong 161 percent, or 1.9 billion of sufficiency, and approximately 90 percent of our risk in force was subject to credit risk transfer. Since last quarter, we have completed an ILN, a quota share, and an excess of loss reinsurance transaction, providing capital efficiency and loss volatility protection that Dean will detail later. As a proof point of our continued financial strength and liquidity, Amacore received multiple upgrades to its insurer financial strength rating by three different rating agencies in 2023. And, as previously announced, S&P upgraded Emicor to A- in January. With that upgrade, Amoco is rated A-minus or equivalent across four different rating agencies, and our holding company is rated investment grade across four different rating agencies as well.

We believe we remain well reserved for a range of scenarios.

We continue to operate from a position of financial strength with strong balance sheet principles and liquidity.

At year end 2023, our Pmiers sufficiency was a strong 161% or $1 9 billion of sufficiency and approximately 90% of our risk in force was subject to credit restaurant scores.

Since last quarter, we have completed in Ireland, our quota share and an excess of loss reinsurance transaction, providing capital efficiency and loss volatility protection that Dean will detail later.

As a proof point to our continued financial strength and liquidity <unk> received multiple upgrades to its insurer financial strength rating by three different rating agencies in 2023.

And as previously announced S&P upgraded <unk> to a minus in January.

With that upgrade <unk> is rated a minus or equivalent across four different rating agency and our holding company is rated investment grade across four different rating agencies also.

Rohit Gupta: Additionally, the upgrades in 2023 drove Enact's senior debt rating to investment grade. The strength and flexibility of our capital position allowed us to deploy capital to support new business and grow our insurance in force, while also meeting our commitment to return capital to our shareholders. In 2023, we returned over $300 million to shareholders in the form of dividends and share repurchases, including a 14% increase in the quarterly dividend beginning in the second quarter and a special dividend of $113 million during the fourth quarter. Additionally, we completed our first share buyback program of $75 million and authorized the second program of $100 million, going forward.

Additionally, the upgrades in 2023% growth in our senior debt rating to investment grade.

The strength and flexibility of our capital position allowed us to deploy capital to support new business and grow our insurance in force. While also meeting our commitment to return capital to our shareholders.

In 2023, we returned over $300 million to shareholders in the form of dividends and share repurchases.

<unk>, a 14% increase in the quarterly dividend beginning in the second quarter and a special dividend of $113 million during the fourth quarter.

Additionally, we completed our first share buyback program of $75 million and authorized a second program of $100 million.

Going forward, we remain committed to maximizing shareholder value through our balanced approach to capital allocation.

Dean Mitchell: We remain committed to maximizing shareholder value through our balanced approach to capital allocation. As we enter 2024, we will continue to prudently invest in the growth opportunities we see for the business, while also maintaining strong liquidity levels and our commitment to return capital to our shareholders. On that front, for 2024, we expect total capital return to be similar to what we delivered in 2023. And given the compelling valuation we have seen in our stock through late 2023 and early 2024, we expect to increase our share repurchase activity. We had a strong quarter, and I'm very pleased with our performance in 2023. We look forward to continuing to serve our customers and their borrowers and delivering on our opportunity to drive value for our shareholders. With that, I will now turn the call over to DG. Thanks, Rohit. Good morning, everyone.

As we enter 2024, we will continue to prudently invest in the growth opportunities, we see for the business.

While also maintaining strong liquidity levels and our commitment to return capital to our shareholders.

On that front for 2024, we expect total capital return will be similar to what we delivered in 2023 and.

And given the compelling valuation we have seen in our stock through late 2023 in early 2024, we expect to increase our share repurchase activity.

We had a strong quarter and I'm very pleased with our performance in 2023.

Look forward to continuing to serve our customers and their borrowers and delivering on our opportunity to drive value for our shareholders.

With that I will now turn the call over to be.

Thanks, Ralph Good morning, everyone. We again delivered strong results for the fourth quarter of 2023, GAAP net income for the fourth quarter was $157 million or <unk> 98 per diluted share as compared to 88 per diluted share in the same period last year and $1 two per diluted share in the third quarter of <unk>.

Dean Mitchell: We again delivered strong results for the fourth quarter of 2020. Gap net income for the fourth quarter was $157 million, or $0.98 per diluted share, as compared to $0.88 per diluted share in the same period last year and $1.02 per diluted share in the third quarter of 2020. Return on equity was $14. Adjusted Operating Income was $158 million, or $0.98 per diluted share, as compared to $0.90 per diluted share in the same period last year and $1.02 per diluted share in the third quarter of 2020. The Adjusted Operating Return on Equity was $14,000. For the full year, Gap Net Income was $666 million, or $4.11 per diluted share, compared to $704 million, or $4.31 per diluted share, in 2022.

'twenty three.

Turn on equity was 14%.

Adjusted operating income was 158 million or <unk> 98 per diluted share as compared to <unk> 90 per diluted share in the same period last year and $1 two per diluted share in the third quarter of 2023.

Adjusted operating return on equity was 14%.

For the full year GAAP net income was $666 million or $4 11 per diluted share compared to $704 million or $4 31 per diluted share in 2022.

Dean Mitchell: Adjusted operating income for 2023 totaled $676 million, or $4.18 per diluted share, compared to $708 million, or $4.34 per diluted share, in 2022. Turning the revenue driver's primary insurance and force increase in the fourth quarter to a new record of $263 billion, up $1 billion sequentially, and up $15 billion, or 6% year over year. New insurance written of $10 billion was down $4 billion, or 27% sequentially, and down $5 billion, or 31% year over year. These declines were primarily driven by a lower estimated private mortgage insurance market in the fourth quarter.

Adjusted operating income for 2023 totaled $676 million or $4 18 per diluted share compared to $708 million or $4 34 per diluted share in 2022.

Turning to revenue drivers primary insurance in force increased in the fourth quarter to a new record of 263 billion up $1 billion sequentially and up $15 billion or 6% year over year.

New insurance written of $10 billion was down $4 billion or 27% sequentially and then down.

<unk> 5 billion or 31% year over year.

These declines were primarily driven by a lower estimated private mortgage insurance market in the fourth quarter.

Dean Mitchell: Persistency was 86% in the fourth quarter, up two percentage points sequentially and flat year over year. As Rohit mentioned, just 4% of the mortgages in our portfolio had rates at least 50 basis points above the prevailing market. While rates remain elevated, we anticipate elevated persistence, which will help offset lower production from the impact of higher mortgages. Net premiums earned were $240 million, or down $3 million, or 1% sequentially, and up $7 million, or 3% year-over-year. The decrease in net premiums earned sequentially was primarily driven by the lapse of older, higher-priced policies and higher seeded premiums driven by the successful execution of our CRT program, and partially offset by insurance-enforced growth. The year-over-year increase was driven by insurance and fourth-party growth, partially offset by higher seeded premiums and the lapse of older, higher-priced policies. Our base premium rate of 40.1 basis points was down 0.1 basis points sequentially and.9 basis points year-to-date.

Persistency was 86% in the fourth quarter up two percentage points sequentially and flat year over year as.

As Rohit mentioned, just 4% of the mortgages in our portfolio had rates at least 50 basis points above the prevailing market rate.

While rates remain elevated we anticipate elevated persistency, which will help offset lower production from the impact of higher mortgage rates.

Net premiums earned were $240 million or down $3 million, or 1% sequentially and up $7 million or 3% year over year.

The decrease in net premiums earned sequentially was primarily driven by the lapse of older higher priced policies and higher seeded premiums driven by the successful execution of our CRT program.

And partially offset by insurance in force growth.

Year over year increase was driven by insurance in force growth.

Partially offset by higher seeded premiums and the lapse of older higher price policies.

Our base premium rate up 41 basis points was down one basis points sequentially and nine basis points year to date.

Dean Mitchell: Remember that our base premium rate is impacted by a variety of factors and tends to modestly fluctuate from quarter to. Premium yields for the full year 2023 were in line with our expectations, and we expect yields to continue to stabilize around current levels in 2024. Our net earned premium rate was 36.4 basis points, down 0.9 basis points sequentially, primarily reflecting higher seeded premiums in the current quarter. Investment income in the fourth quarter was $56 million, up $1 million, or 2% sequentially, and up $11 million, or 25% year-over-year.

Remember that our base premium rate is impacted by a variety of factors intends to modestly fluctuate from quarter to quarter.

Premium yields for the full year 2023 were in line with our expectations and we expect yields to continue to stabilize around current levels in 2024.

Our net earned premium rate was $36 four basis points down nine basis points sequentially, primarily reflecting higher ceded premiums in the current quarter.

Investment income in the fourth quarter was $56 million up $1 million or 2% sequentially and up $11 million or 25% year over year.

Dean Mitchell: Higher interest rates have lifted yields in our investment portfolio, and we expect our book yield will continue to increase overall as our portfolio continues to turnover and higher yielding assets become an increasing proportion of the overall mix. Our new money yield was over 5%, and our portfolio book yield increased to 3.6% for the quarter. Turning to credit, losses in the quarter were $24 million as compared to $18 million last quarter and $18 million in the fourth quarter of 2022. The loss ratio for the quarter was 10% compared to 7% last quarter and 8% in the fourth quarter of 2022.

Higher interest rates have lifted yields in our investment portfolio and we expect our book yield will continue to increase overall as our portfolio continues to turnover and higher yielding assets become an increasing proportion of the overall mix.

Our new money yield was over 5% and our portfolio book yield increased to three 6% for the quarter.

Turning to credit losses in the quarter were $24 million as compared to $18 million last quarter and $18 million in the fourth quarter of 2022.

Our loss ratio for the quarter was 10% compared to 7% last quarter and 8% in the fourth quarter of 2022.

Our losses and loss ratio were driven by higher current quarter delinquencies, primarily driven by seasonal trends sequentially. In addition to the normal loss development of new books.

Dean Mitchell: Our losses and loss ratio were driven by higher current quarter delinquencies, primarily driven by seasonal trends sequentially, in addition to the normal loss development of new books. This was partially offset by favorable cure performance, primarily from 2022 and earlier delinquencies that remained above our expectations, resulting in a $53 million reserve release in the quarter. New delinquencies increased sequentially to 11,700 from 11,100.

This was partially offset by favorable share performance, primarily from 2022 and earlier delinquencies the remained above our expectations, resulting in a $53 million reserve release in the quarter.

New delinquencies increased sequentially to 11700 from 11100.

Our new delinquency rate for the quarter was one 2% compared to one 1% in the fourth quarter of 2022 reflective of ongoing positive credit trends and primarily driven by historical seasonality and the normal loss development of new large books.

Dean Mitchell: Our new delinquency rate for the quarter was 1.2% compared to 1.1% in the fourth quarter of 2022, reflective of ongoing positive credit trends and primarily driven by historical seasonality and the normal loss development of new large books. We continue to book new delinquencies at an approximate 10 percent claim rate, reflecting our prudent approach to reserving in a dynamic macroeconomic environment. Total delinquencies in the fourth quarter increased sequentially to The primary delinquency rate increased 13 basis points sequentially to 2.1%, consistent with our expectations and in line with pre-pandemic levels. We will continue to deliver expense discipline throughout 2023. Operating expenses for the full year of 2023 were $223 million compared to $239 million for the full year 2022, lowered by 7% driven by our commitment to the operational Cost Reduction Initiative. Operating expenses for the fourth quarter were $59 million, up 7% sequentially, driven by the timing of premium tax expense recognition and incentive-based compensation, and down 6% year-over-year.

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

Total delinquencies in the fourth quarter increased sequentially to 2400 from 19200 <unk>.

Primary delinquency rate increased 13 basis points sequentially to two 1% consistent with our expectations and in line with pre pandemic levels.

We continued to deliver expense discipline throughout 2023.

Operating expenses for the full year of 2023 were $223 million compared to $239 million for the full year 2022.

Lower by 7% driven by our commitment to operational excellence and cost reduction initiatives.

Operating expenses for the fourth quarter were $59 million up 7% sequentially driven by the timing of premium tax expense recognition and incentive based compensation and down 6% year over year.

The expense ratio for the quarter was 25% up two percentage points sequentially and down two percentage points year over year.

We remain focused on disciplined expense management and towards that end for 2024, we expect expenses to be in the range of $220 million to $225 million were approximately flat year over year.

Dean Mitchell: The expense ratio for the quarter was 25%, up 2 percentage points sequentially and down 2 percentage points year over year. We remain focused on disciplined expense management, and towards that end, for 2024, we expect expenses to be in the range of 220 million to 225 million or approximately flat year over year. Moving to capital, we continue to operate with a strong capital base and liquidity position. Our PMARS sufficiency was 161%, or $1.9 billion, above PMARS requirements at the end of the fourth quarter.

Moving to capital, we continue to operate with a strong capital base and liquidity position.

<unk> sufficiency was 161% or $1 9 billion above <unk> requirements at the end of the fourth quarter.

Additionally, 90% of our risk in force is subject to credit risk transfers and our third party CRT program provides $1 7 billion of P Myers capital credit.

During the quarter, we completed our sixth <unk> issuance, which saw strong interest from investors and reinforced our ability to access the capital markets.

And subsequent to quarter end, we closed a new quota share and a new excess of loss reinsurance transaction, both with panels of highly rated reinsurers to provide forward protection for our 2020 for business.

Dean Mitchell: Additionally, 90% of our risk enforced is subject to credit risk transfers, and our third-party CRT program provides $1.7 billion of P. Myers capital. During the quarter, we completed our sixth ION issuance, which saw strong interest from investors and reinforced our ability to access the capital market. Subsequent to quarter end, we closed a new quota share and a new excess of loss reinsurance transaction, both with panels of highly rated reinsurers to provide forward protection for our 2024 business. Lastly, during the quarter, we added a strongly rated reinsurer partner to our 2023 quota share transaction, increasing our seed percentage from approximately 13% to approximately 16%. As this level of activity shows, our credit risk transfer program remains a critical component of our enhanced business model, driving capital efficiency and volatility protection for unexpected losses.

Lastly, during the quarter, we added a strongly rated reinsurer partner to our 2023 quota share transaction, increasing our seed percentage from approximately 13% to approximately 16%.

As this level of activity reflects our credit risk transfer program remains a critical component of our enhanced business model driving capital efficiency and volatility protection for unexpected losses.

Turning to capital allocation, we remain committed to our capital prioritization framework, which balances maintaining a strong balance sheet investing in our business and returning capital to shareholders.

We returned just over $300 million to shareholders in 2023 in the form of dividends and share repurchases.

During the quarter, we paid out $26 million through our quarterly dividend and $113 million through our special cash dividend and we bought back 656000 shares for a total of $18 million through our share repurchase program.

During January we repurchased an additional 133000 shares for a total of $4 million.

As of January 31, 2024, there was approximately $82 million remaining on our current share repurchase authorization.

Dean Mitchell: During the capital allocation, we remain committed to our capital prioritization framework, which balances maintaining a strong balance sheet, investing in our business, and returning capital to shareholders. We returned just over $300 million to shareholders in 2023 in the form of dividends and share repurchase. During the quarter, we paid out $26 million through our quarterly dividend and $113 million through our special cash dividend.

As we head into 2024, we will continue to balance investing in growth opportunities across the business with our commitment to return capital to shareholders. We expect total 2020 for capital return to be approximately $300 million similar to what we delivered in 2023.

As in the past the final amount and form of capital return to shareholders will ultimately depend on business performance market conditions and regulatory approvals.

Shifting to Enactory as Rohit mentioned and <unk> has continued to produce solid results since its launch during.

Dean Mitchell: And we bought back 656,000 shares for a total of $18 million through our share repurchase program. In January, we repurchased an additional 133,000 shares for a total of $4 million. As of January 31st, 2024, there was approximately $82 million remaining on our current share repurchase authorization. As we head into 2024, we will continue to balance investing and growth opportunities across the business with our commitment to return capital to shareholders. We expect the total 2024 capital return to be approximately $300 million, similar to what we delivered in 2020. However, as in the past, the final amount and form of capital returned to shareholders will ultimately depend on business performance, market conditions, and regulatory approval. Shifting to Enact Re, as Rohit mentioned, Enact Re has continued to produce solid results since its launch. During the fourth quarter, Emeco contributed an additional $250 million of capital to Enactree, and subsequent two-quarter ends increased the affiliate quota share seed percentage from 7.5% to 12.5%.

During the fourth quarter <unk> contributed an additional $250 million of capital to Enactory and subsequent to quarter end increase the affiliate quota share cede percentage from seven 5% to 12, 5%.

This capital contribution will support the increased quota share and for the foreseeable future. We will provide runway for <unk>, new business opportunities, primarily consisting of GSE credit risk transfer.

We're very pleased with all we accomplished in 2023 and I would like to thank all of our employees for driving this outstanding performance.

We believe we are well positioned heading into 2024 and remain focused on driving solid returns.

Thank you I will now turn the call back over to Robert.

Thanks, Deane as we look ahead, we are encouraged by the significant long term opportunities for our mortgage insurance and believe that our strength and flexibility position us to continue to execute and deliver value for all our stakeholders our.

Our commitment to responsibly helped more people become homeowners motivate everything we do and has never been stronger.

Operator, we are now ready for Q&A.

Thank you.

Ladies and gentlemen to ask a question you will need to press star one one on your telephone Enlink planning to be announced.

To withdraw your question you May press Star one again, please standby, while we compile the Q&A roster.

And our first question coming from the line of.

Dean Mitchell: This capital contribution will support the increased quota share and, for the foreseeable future, will provide runway for Enactree's new business opportunities, primarily consisting of GSE, credit risk-tripping, and other business opportunities. We're very pleased with all we accomplished in 2023, and I would like to thank all of our employees for driving this outstanding performance. We believe we are well positioned heading into 2024 and remain focused on driving solid returns. Thank you. I will now turn the call back over to Roza.

George with <unk> Your line is open.

Hey, good morning, everyone. This is actually Alex on for Bose I just wanted to touch on the recent ratings upgrades first can you discuss how these upgrades could potentially impact the business and then maybe just to go into a little bit more detail what is the benefit of the high ratings for both enact in the semi industry as a whole.

Good morning, Alex This is Robert I'll get started and I'll have dean add color to that so I think from a business perspective, we are very happy with the ratings upgrade.

Rating upgrades, we have received both in 2023 and 2024 as a reminder, in 2023, we received a ratings upgrade from all rating agencies in early part of the year and in addition to that we also got a M best rating at AA minus for our insurance company and then in January we received an upgrade from S&P.

Rohit Gupta: Thanks, Dean. As we look ahead, we are encouraged by the significant long-term opportunities for mortgage insurance and believe that our strength and flexibility position us to continue to execute and deliver value for all our stakeholders. Our commitment to responsibly help more people become homeowners motivates everything we do and has never been stronger, operator. We are now ready for Q&A. Thank you. Ladies and gentlemen, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

That upgraded us to <unk> at the insurance company level and invest.

Investment grade level for our holding company. So as I said in my prepared remarks, I think having a minus ratings one of our insurance companies positions us very strongly in front of all counterparties, whether that's <unk>, whether that's depository institutions, all foreign actually whether it's third parties that we do business with and then from a holding company perspective it.

Also positions us well in terms of holding company being investment grade rated across all rating agencies. So I think both from playing.

Operator: To withdraw your question, you may press star one, one again. Please stand by while we compile the Q&A roster. And our first question comes from the line of Bo St. George with KBW. Hey, good morning, everyone. This is actually Alex on for Buzz.

Participation in the market, that's an upside and at the same time hopefully it helps our cost of capital over a period of time.

Yes, Alex I'll, just pick up on that last point that <unk> made I think with now the holding company being fully investment grade.

Bose George: I just wanted to touch on the recent ratings upgrades first. Can you discuss how these upgrades could potentially impact the business? And then, maybe, just to go into a little bit more detail, what is the benefit of the high ratings for both Enact and the MI industry as a whole?

With the fact that we have.

$750 million of notes outstanding that mature in August of 2025, I really think that sets the table.

For better access to the investment grade market and ultimately.

Tighter spreads when we ultimately do refinance the 2025 notes. So we think it will have a meaningful economic impact as we go forward towards that refinance activity.

Rohit Gupta: So, I think from a business perspective, we are very happy with the ratings upgrade we received both in 2023 and 2024. As a reminder, in 2023, we received ratings upgrades from all rating agencies in the early part of the year. And, in addition to that, we also got an AM Best rating at A- for our insurance company.

Activity.

Great that makes sense and then just one more maybe on the higher ceded premiums in the quarter.

This is the <unk> level, something that we will run rate moving forward.

Yes, Alex.

A good question appreciate that I think.

We were very active recently in the CRT market.

I'll start with that.

Rohit Gupta: And then in January, we received an upgrade from S&P that upgraded us to A- at the insurance company level and at investment grade level for our holding company. So, as I said in my prepared remarks, I think having A- ratings for our insurance companies positions us very strongly in front of all counterparties, whether that's GSEs, whether that's depository institutions, or for an ACRI, whether it's third parties that we do business with. And then from a holding company perspective, it also positions us well, in terms of the holding company being investment grade rated across all rating agencies. So, I think both from participating in the market, that's an upside, and at the same time, hopefully, it helps our cost of capital over a period of time. Yeah, Alex. I'll just pick up on that last point that Rohit made.

Talked about the execution of our first island transaction since 2021.

We also added the highly rated reinsurer to our 2023 quota share.

That transaction, which increased the cede commission from 13% to 16% and then post year end, we added both a forward ex ol.

And our quota share transaction on our 'twenty 'twenty four and IW. So.

That activity.

Is it fully baked into our Q4 run rate so I would say.

The 25 million probably is not the right run rate as we head into Q1.

When we fully bake in a full quarter of the island.

In addition to that start baking in the forward <unk> in forward quota shares I think youre going to see a run rate closer to $28 $29 million.

Dean Mitchell: I think with the holding company now being fully investment grade, coupled with the fact that we have $750 million of notes outstanding to mature in August of 2025, I really think that sets the table for better access to the investment grade market and ultimately tighter spreads when we ultimately do refinance the 2025 notes. So we think it'll have a meaningful economic impact as we go forward toward that refinance activity. Great, that makes sense. And then just one more, maybe on the higher seeded premiums in the quarter. Is the 4Q level something that will affect the run rate moving forward? Yeah, Alex, a good question.

Entering in Q1, just taking into account those transactions I think it's important to remember that those latter two transactions. Those are forward transactions on our 2024 and IW. So those will continue to increase over the course of the year as we continue to produce more <unk> in the coverage continues to expand.

There is some obviously.

<unk> for lapse offset.

In that run rate, but lapsed has been incredibly slow in our CRT program given the high degree of persistency that we've experienced.

In the current quarter. So I think hopefully the 2008 2009 gives you a run rate heading into Q1 and then.

Just consider that that those 24 coverages will continue to increase protection and increased ceded premiums over the course of the remainder of the year. So Alex just one or two things to add to Dean's 0.1st thing from an overall operating leverage prospective we have messaged before that we want our operating leverage to be in <unk>.

Dean Mitchell: Appreciate that. I think we were very active recently in the CRT market. So, to start with that, we talked about the execution of our 1st ILN transaction. Since 2021, we also added a highly rated reinsurer to our 2023 quota share, which increased the seed commission from 13% to 16%.

Curtis and we are building up to that so this is part of the belt and an important aspect of that is our participation in quota share transactions, where our peer group probably has a higher percentage of quota share transactions, where you actually see the high level of premium upfront. So you see an increase in ceded premium but part of that premium comes back.

And your ceding Commission.

Dean Mitchell: And then, post-year end, we added both a forward XOL transaction and a quota share transaction to our 2024 NIW. So, you know, that activity isn't fully baked into our Q4 run rate. So, I would say the 25 million probably is not the right run rate as we head into Q1. When we fully bake in a full quarter of the ILN, in addition to that, start baking in the forward XOL and forward quota shares, I think you're going to see a run rate closer to 28, 29 million in Q1, just taking into account those transactions.

And offsets your expense ratio, so thats new for US. This is our second quota share transactions. It is important to point out.

That balance and P&L and then the last thing I would say just to kind of wrap this up is from a ceded premium perspective, having those forward quota share and excess of loss transactions done on 2024, new originations new insurance written gives us the capital return confidence that indeed and talked about in our prepared remarks.

So being able to give that capital return guidance early in the year and also based on that fourth quarter activity in CRT space.

Got it that makes sense. Thanks, so much for taking the questions.

Dean Mitchell: I think it's important to remember with those latter 2 transactions, those are forward transactions on our 2024 NIW, so those will continue to increase over the course of the year. As we continue to produce more NIW and the coverage continues to expand, you know, there is some obvious potential for lapse offset.

Thank you thanks al.

Thank you next.

Next question coming from the line of Rick Shane with Jpmorgan. Your line is open.

Thanks for taking my questions. This morning, guys.

We're in a unique.

Environment, we're disproportionately.

Volumes are purchased driven versus refi driven.

But we're also in an environment, where purchase activity has quelled by lack of supply.

Rohit Gupta: In that run rate, but lapse has been incredibly slow in our CRT program given the high degree of persistency that we've experienced in the current quarter. So, I think hopefully, the 28, 29 gives you a run rate heading into Q1, and then just consider that those 24 coverages will continue to increase protection and increase seeded premiums over the course of the remainder of the year. So, I just want to do things to add to Dean's point.

I'm curious strategically both tactically and strategically how you approach that market is it are there short term things that you do and then when you think about taking that risk on that may be slightly different between purchase and refi and owning that risk for five years, how do you think.

About the differences there as well.

Yes, good morning, Greg So I will get started and then you can add color on this so.

Rohit Gupta: First thing, from an overall operating leverage perspective, we have communicated before that we want our operating leverage to be in the mid-30s, and we are building up to that. So, this is part of the build, and an important aspect of that is our participation in quota share transactions where our peer group probably has a higher percentage of quota share transactions where you actually see the high level of premium up front. So, you see an increase in seeded premium, but part of that premium comes back as your seating commission and offsets your expense ratio. So that's new for us.

Currently we have been operating in a very dynamic and complex market and I think in recent months, we have even seen more factors in play that being higher mortgage rates that actually went above 8% in second half of 2023, we have seasonality in play and then also some weather events, but I think the combined effect of that has had an impact on purchase origination.

Volume.

In Q4, and as a result on semi market size too I think from a volume perspective. Those are the factors kind of be taken into account in terms of whatever market sizes and the market. We are playing and from a risk perspective as we have stated in the past we have very granular and very deep models that are based on our.

Rohit Gupta: This is our 2nd quota share transaction. So, just important to point out that balance in P&L and then the last thing I would say, just to kind of wrap this up, is from a seated premium perspective, having those forward quota share and excess of lost transactions done on 2024 new originations, new insurance written. It gives us capital return confidence, and Dean talked about it in our prepared remarks. So, being able to give that capital return guidance early in the year is also based on that 4th quarter activity and CRT space. I got it.

Our own data.

That is.

With us for the last 40 years and that gives us a lot of confidence that once we come up with our view of the market and the range of outcomes around that base case, and we can actually pivot our participation based on risk categories based on risk attributes and our risk based pricing engines allow us to deploy that.

Strategy down to MSA level from a geography perspective, and then down to any risk attributes that we choose to so I think that's how I would think about it more broadly and stuff to talk about our commercial strategy in terms of risk attributes that are in play at different cycles, but hopefully that gives you over mindset and the tools that we have at our disposal.

Bose George: That makes sense. Thanks so much for taking the question. Thank you. Thanks, Alex.

To deploy our pricing and risk management mindset.

That has kind of delivered results that you see over the last few years.

Rick Shane: Thank you. And our next question comes from the lineup, Rick Shane with J.P. Morgan. Your line is open.

For us.

Yes.

Two aspects.

Rohit didn't cover that I'll pick up on.

Rohit Gupta: Thanks for taking my questions this morning, guys. Look, we're in a unique environment where disproportionately volumes are purchase-driven versus refi-driven, but we're also in an environment where purchase activity is quelled by a lack of supply. I'm curious both tactically and strategically how you approach that market. Are there short-term things that you do, and then when you think about taking that risk on that may be slightly different between purchase and refi and owning that risk for five years, how do you think about the differences there as well? Yeah, good morning, Rick.

Probably don't change as much to be honest with you. One is expense management, obviously, we're always focused on.

Making sure that our economic footprint is relate.

In relation to our.

And to the market size in the market realities, but I think quite frankly, whether a big market or a small market. We're focused across the business on prudent expense management. So I don't know that anything changes there, but it does high.

Highlight.

Our focus we maybe get more scrutiny on <unk>.

Management.

In a smaller market and then CRT and again not much change here I think our business objectives with our CRT is driving efficiency.

Rohit Gupta: So I will get started, and Dean can add color on this. So definitely, we have been operating in a very dynamic and complex market. And I think in recent months, we have even seen more factors in play between higher mortgage rates that actually went above 8%. In the second half of 2023, we have seasonality in play, and then also some weather events.

Capital is a capital source and traditionally we think about that in the P Myers context.

And then loss volatility protection. So we still want to go out and secure CRT for those two purposes, obviously, the quantum might change given.

The amount of new business, but I think the objectives of the CRT and the use of CRT are programmatic and remain in place.

Rohit Gupta: But I think the combined effect of that has had an impact on purchase originations volume in Q4 and, as a result, on MI market size too. I think from a volume perspective, those are the factors we take into account in terms of what the MI market size is and the market we are playing in. From a risk perspective, as we have stated in the past, we have very granular and very deep models that are based on our own data that has been kind of with us for the last 40 years. And that gives us a lot of confidence that once we come up with our view of the market and the range of outcomes around that base case, then we can actually pivot our participation based on risk categories and risk attributes. And our risk-based pricing engines allow us to deploy that strategy down to an MSA level from a geography perspective and then down to any risk attributes that we choose to.

Got it okay, and if I may ask one follow up.

On the existing book is probably more barbell than at any time in the history of the industry, where you have.

A couple of cohorts that have are benefiting from huge HPA incredibly low.

Underlying rates and so the quality there is going to be extremely high your more recent cohorts less.

Less HPA higher coupon.

<unk> more credit risk when we look to a more dovish fed.

Is the opportunity to modestly Derisk. The book, Yes, Persistency will go down on those more recent cohorts, but presumably that will drive.

Rohit Gupta: So I think that's how I would think about it more broadly. It's tough to talk about our commercial strategy in terms of risk attributes that are in play at different cycles, but hopefully, that gives you our mindset and the tools that we have at our disposal.

Some HPA and borrowers opportunity to step down in rates does that is that how we should look at things is that the favorable opportunity ahead.

Yes, I would say maybe starting back with construction of the books on how we think about Onboarding risk.

So I think your point is right in terms of our book construction that.

When we originated 2020, one I'm not sure. If we knew the SBA that was going to come in subsequent years silver view on pricing and book composition was driven by our risk we whenever environment view at that point.

So we basically price those books were significant.

Pricing in mind, you might remember may of 2020, we started increasing oil price pretty significantly we did three price increases and five weeks as Covid started so there was some good pricing on that 2020 book and it benefited from.

Rohit Gupta: Got it. Okay. And if I may ask one follow-up question. The existing book is probably more barbell than at any time in the history of the industry, where you have, Thank you, a couple of cohorts that are benefiting from huge HPA, incredibly low underlying rates, and so the quality there is going to be extremely high. Your more recent cohorts, less HPA, higher coupons, presumably more credit risk. When we look to a more dovish Fed, there is the opportunity to modestly de-risk the book. Yes, persistency will go down on those more recent cohorts, but presumably that will drive some HPA and borrowers' opportunity to step down in rates. Is that how we should look at things?

<unk> and low interest rates. So a good amount of equity built in but I would also say that as we approached 2022, and we were pretty vocal on this point.

Our calls in middle of 2022, we actually started stabilizing of our price and we started increasing of our price earlier than others.

Third quarter. According to so while 'twenty, two and 'twenty three books have lower HPA embedded HBA than prior books.

Still have overall good returns because thats, how we constructed the bulks.

Rohit Gupta: Is that the favorable opportunity ahead? Yeah, I would say maybe starting back with the construction of the books and how we think about onboarding risk. So, I think your point is right in terms of our book construction that when we originated twenty and twenty one, I'm not sure if we knew the HPA that was going to come in subsequent years.

And just kind of thinking about current construct in the market the SBA right now.

Still in November at six 6%. So those books, depending on where you are in the country are still building code embedded SBA even in the slower.

SBA growth environment, but they're still positive growth now coming to the last part of your question in terms of interest rate decline I agree with your point that Lee.

Rohit Gupta: So, our view on pricing and book composition was driven by our risk view and our environment view at that point. So we basically priced those books with significant price increases in mind. You might remember that, in May of 2020, we started increasing our prices pretty significantly. We did three price increases in five weeks as COVID started.

<unk> 22, and most of 'twenty three bulk has higher rates higher mortgage rates and it and we have a schedule in our earnings presentation that.

Show of interest rates by book year. So, yes, if interest rates do drop those books will have the higher propensity.

Rohit Gupta: So there was some good pricing on that 2020 book, and it benefited from HPA and low interest rates, so a good amount of equity built in. But I would also say that as we approached 2022, and we were pretty vocal about this point in our call, in the middle of 2022, we actually started stabilizing our price, and we started increasing our price earlier than others in the third quarter of 22. So while 22 and 23 books have lower HPA, and embedded HPA, than prior books, they still have overall good returns because that's how we constructed the books.

To refinance I would say from our perspective, persistency and good economic environment and good credit environment is actually something that we look for higher persistency is good for our business. So I wouldn't say, we are looking to refinance that part of the book, but on a relative basis, yes.

A portion of the book that gets refinanced in that interest rate environment. It is that late 'twenty two and.

Most of 'twenty three.

Perfect. Thank you guys very much.

Absolutely. Thank you thanks Rick.

Thank you and our next.

Next question is coming from the line of Mihir Bhatia with Bank of America. Your line is open.

Good morning. Thank you for taking my questions I wanted to start on the claim rate.

Rohit Gupta: And just kind of thinking about the current construct in the market, HPA right now is still in November at 6.6%. So those books, depending on where you are in the country, are still building good embedded HPA, even in the slower HPA growth environment, but there is still positive growth. Now, coming to the last part of your question in terms of interest rate decline, I agree with your point that late 22 and most of 23 book have higher rates, higher mortgage rates in them. And we have a schedule in our earnings presentation that shows interest rates by book year.

Second if that's okay. Just wanted to make sure im understanding the 10% claim rate that you mentioned, that's the initial gross default to.

So just to I guess claim assumption that's right.

Understanding that right.

Yes, you can think about it as a frequency you can think about it as a real right to claim a probability of going to claim for or any delinquency.

So I guess on that 10% rate I mean, you've talked about the strength of the books I think really just talking about.

Rohit Gupta: So, yes, if interest rates do drop, those books will have a higher propensity to refinance. But, from our perspective, persistency in good economic environments and a good credit environment is actually something that we look for. Higher persistency is good for our business, so I wouldn't say we are looking to refinance that part of the book. But on a relative basis, yes, if there was a portion of the book that gets refinanced in that interest rate environment, it would be late 22 and kind of most of 23. Perfect. Thank you guys very much.

Pricing, but also like the tight underwriting.

Credit performance has been quite strong right I mean, you'll be selling some pretty decent sized reserve releases.

Brian can you put that 10% or a little bit of historical context for us is that I mean, I know, it's I know it's above what you had.

Couple of years ago, but like is it.

Is the 10% like I guess why is it 10% coming from is there something in the macro that we're seeing that's making you hesitant because like it's higher than bill is right. So just trying to understand what is driving that.

Rohit Gupta: Absolutely. Thank you. And our next question comes from the line of Mihir Bhatia with Bank of America. You'll have his cell phone. Good morning.

Yes, when we put the 10% claim rate in place we talked about the fact that we hadn't seen any performance deterioration.

Mihir Bhatia: Thank you for taking my questions. I wanted to start on the claim rate for a second, if that's okay. Just wanted to make sure I understood. The 10% claim rate that you mentioned is the initial gross default to claim, to I guess claim assumption. That's right?

That was driving that assumption it was more born out of.

The presence of economic uncertainty.

And we thought that was heightened heading into 2022, and we started increasing the <unk>.

Dean Mitchell: Like I'm not misunderstanding that 10%, right? Yeah, you can think about it as a frequency, you can think about it as a rolling rate to claim, the probability of going to claim for any delinquency. Got it.

Probability of those delinquencies ultimately going to claim now what's happened. Since then is that uncertainty hasnt materialized in any performance deterioration and we started to release.

Dean Mitchell: So, like, I guess, on that 10%, right, I mean, you've talked about the strength of the book, I think we were just talking about, like, fluid pricing, but also, like the tight underwriting. Your actual credit performance has been quite strong, right? I mean, you've been having some pretty decent sized reserve releases. And I'm just trying, can you put that 10% in a little bit of historical context for us? Is that, I mean, it's a little, I know, it's above, like, what you had, you know, a couple of years ago, but like, is it? Yeah. Is the 10%, I mean, I guess, where's the 10% coming from? Is there something in the macro that you're seeing that's making you hesitant?

Some of those reserves on 2022 accident year delinquencies and in fact this quarter out of the $53 million of reserve releases.

Majority of that was on 2022 accident year delinquencies.

We still have a view that there is macroeconomic uncertainty.

Present.

The narrative continues to evolve and I think the probability of a soft landing has become more in line with the consensus view.

And really are thinking about that 10% claim rate really comes down to our forward view of the macroeconomic conditions and whether we.

Dean Mitchell: Because, like, it's higher than peers, right? So I'm just trying to understand what is driving that. Yeah, Mihir, when we put the 10% claim rate in place, we talked about the fact that we hadn't seen any performance deterioration that was driving that assumption. It was more born out of the presence of economic uncertainty. And we thought that was heightened heading into 2022, and we started increasing the probability of those delinquencies ultimately going to claim. Now, what's happened since then is that uncertainty hasn't materialized in any performance deterioration, and we've started to release some of those reserves on 2022 accident-year delinquencies. And in fact, this quarter, out of the $53 million of reserve releases, a majority of that was on 2022 accident year delinquencies. You know, we still have a view that there is macroeconomic uncertainty present. Obviously, the narrative continues to evolve.

Aligned with the soft landing and the elimination of that macroeconomic uncertainty and or just to continue to experience that.

Credit continued to perform well I mean, those will be the triggers for us reevaluating that 10% claim rate, but it's.

Is truly not born out of anything we've seen from an experience perspective and more just a view that there is a presence of heightened economic uncertainty in the market.

It's really in line with our belief in our philosophy on a prudent and measured approach to reserving.

Amir just to add to <unk> point I agree with everything being said I would just say we are operating in.

Uncertain and.

And a different environment. If you think about the presence of Covid forbearance in.

In our data from 2020 onwards, and all of our all of our delinquencies to claim both roll rate and timing. There is a significant influenced by that program, where consumers were not reported delinquent to credit bureaus and that is something that was not normal. So it's difficult for us to just take last few years of low rate and <unk>.

Dean Mitchell: And I think the probability of a soft landing has become more in line with the consensus view. And, you know, really, our thinking about that 10% claim rate really comes down to our forward view of the macroeconomic conditions and whether we align with the soft landing and the elimination of that macroeconomic uncertainty or just the continued experience that, you know, credit continued to perform well. I mean, those will be the triggers for us re-evaluating that 10% claim rate, but it is truly not born out of anything we've seen from an experience perspective and more just a view that there is a presence of heightened economic uncertainty in the market. And it's really in line with our belief and our philosophy of a prudent, measured approach to reserve management. Mihir, just to add to Dean's point, I agree with everything Dean said.

That I think we recognize that at some point of time that will correct to a more historical norm and Thats, how we made the determination that.

In this environment, that's better for us to be prudent.

And actually make those assumptions I believe it January February data when will finally start seeing a transition from COVID-19 forbearance to non Covid forbearance and our delinquency data. So as we actually build confidence in addition to Dean's point on economic environment as we get more data that is normalized run rate, we will use that to actually assess our assumptions.

Yes.

Okay.

Does that make sense.

Maybe just switching gears a little bit.

I wanted to just touch base on this Australia transaction.

Rohit Gupta: I would just say we are operating in an uncertain and kind of different environment. If you think about the presence of COVID forbearance in our data from 2020 onwards, in all our delinquencies to claim both roll rate and timing, there's a significant influence by that program where consumers were not reported delinquent to credit bureaus, and that is something that was not normal.

It's small on the front, it's a proof point, you're leveraging your mortgage credit experience Beth.

But I was curious like.

Slide why Australia, why add that at this time.

Markets Youre looking at right I mean, it does potentially I mean, depending on the size. It gets too it could obviously add a fair amount of complexity to the biz.

Rohit Gupta: So it's difficult for us to just take the last few years of roll rate and extrapolate that. I think we should recognize that at some point in time, that will correct to a more historical norm. And that's why we made the determination that in this environment, it's better for us to be prudent and actually make those assumptions. I believe it will be January and February when we'll finally start seeing a transition from COVID forbearance to non-COVID forbearance in our delinquency data.

So just your thoughts on that.

Transaction Tamara and thanks for the question Tycho I would just say I'll start off by just kind of as a reminder on <unk>.

We've watched the GSE CRT space and launched an accurate to expand our access to new business opportunities and we did that while keeping in mind that <unk> is going to operate in adjacent markets by leveraging our core competencies, which means our technical expertise our knowledge of mortgage credit and obviously disciplined approach to risk management that we have shown for.

Rohit Gupta: So as we actually build confidence, in addition to Dean's point on the economic environment, as we get more data that has a normalized roll rate, we will use that to actually assess our assumption. Okay, that makes sense. Maybe just switching gears a little bit, I wanted to just touch base on this Australia transaction. Look, I understand it's small, I understand it's a proof point, you're leveraging your mortgage credit experience there, but I was curious, like, why Australia? Why AdBat at this time?

A long period of time. In addition to that we were setting up and actually in a very efficient way efficient from a capital perspective efficient from an expense perspective and efficient from a ratings perspective. So when you think about <unk> journey.

Start off with GSE credit restaurants for US we did some transactions back in 2018, we monitor the performance of those transactions monitored the market and then set up an accurate to primarily participate in the GSE CRT transaction.

I said in my prepared remarks, we have participated in every GSE CRT transactions since the entity was set up and we find the returns attractive on a risk adjusted basis.

Mihir Bhatia: Are there other markets you're looking at, right? I mean, it has potential. I mean, depending on the size it gets to, it could obviously add a fair amount of complexity to the business. So, just your thoughts on that transaction. Absolutely, Mehran.

And refined our underwriting guidelines and underwriting construct very good I think Australia is a similar story at this point of time is the proof point for us, but it's a business that we are very familiar with we actually used to reinsure Australian business, a while ago. So we have some experience in our data.

Rohit Gupta: Thank you for the question. So, I would just say, I'll start off by just kind of as a reminder about Anacri. We've watched the GSC CRT space and launched Anacri to expand our access to new business opportunities, and we did that while keeping in mind that Anacri is going to operate in adjacent markets by leveraging our core competencies, which means our technical expertise, our knowledge of mortgage credit, and the obviously disciplined approach to risk management that we have shown for a long period of time. In addition to that, we set up Anacri in a very efficient way, efficient from a capital perspective, efficient from an expense perspective, and efficient from a ratings perspective.

Our entity at the same time, we also have management and employee experience, but the Australian market.

<unk> been monitoring the market for a period of time, and we use that experience to kind of make a call that will use a small proof points, where the risk adjusted returns available in the market are good the market is mature it's scale, it's familiar for us and we use that to basically say, we're getting paid well for it is accretive to our shareholder value.

And the risk in these transactions is very remote so I think thats, how we think about kind of the construct of how we approach opportunities for anatomy and theyre going to be measured and limited in terms of how we actually use the screen. If you will to qualify those opportunities, but that's a construct that would give you and our intent is to use <unk>.

Rohit Gupta: So, when you think about Anacri's journey, I'll start off at GSC credit risk transfers. We did some transactions back in 2018. We monitored the performance of those transactions, monitored the market, and then set up Anacri to primarily participate in the GSC CRT transaction. As I said in my prepared remarks, we have participated in every GSC CRT transaction since the entity was set up, and we find the returns attractive on a risk-adjusted basis, and we find the underwriting guidelines and underwriting construct very good. I think Australia has a similar story.

In that way to actually grow that adjacent opportunity.

But primarily the focus is going to be GSE CRT.

Understood.

Sure.

Okay and then just my last question just real Big picture maybe sticking.

To step back like you mentioned, a little bit of a unique time for BMI business that's <unk>.

Credit has been exceptionally good maybe a little bit of weakness on IW, but that seems to be getting nicely offset persistency. So my question to you is this as good as it gets what are some of them still Blake.

Rohit Gupta: At this point in time, it's a proof point for us, but it's a business that we are very familiar with. We actually used to restore an Australian business a while ago, so we have some experience with our data, in our entity. At the same time, we also have management and employee experience with the Australian market.

Key risks that you're worried about like maybe even just like anything away from the macro specific to enact that.

California too.

Just trying to understand like is this as good as it gets what is what are you most focused on for a while.

Rohit Gupta: So, we have been monitoring the market for a period of time, and we use that experience to kind of make a call that we'll use a small proof point where the risk-adjusted returns available in the market are good, the market is mature, it's scaled, it's familiar to us, and we use that to basically say we're getting paid well for it, it's credible shareholder value, and the risk in these So, I think that's the kind of construct of how we approach opportunities for Anacri, and they're going to be measured and limited in terms of how we actually use those screens, if you will, to qualify those opportunities, but that's the construct I will give you, and our intent is to use Anacri in that way to actually grow that adjacent opportunity sphere, but primarily, the focus is going to be GSE CRT and this one. Okay, and then just my last question, just the real big picture, maybe taking, you know, a step back, like you mentioned, a little bit of a unique time for BMI business. That said, credit has been exceptionally good. Maybe you have a little bit of weakness on NIW, but that seems to be getting nicely offset by persistency.

Risks risk perspective.

Thank you Yeah me.

Here I'll start.

Rohit can add.

It may not be as good as it gets but certainly to your point recent credit performance has definitely been.

Very strong I think there's lots of reasons for that obviously, a quality underwrite we validate that through our QA results.

Got strong credit quality and when we think about that we think about that through low low layered risk, which we published in our earnings presentation. There is a strong consumer a strong labor market home price appreciation has been meaningful and then even for borrowers that have had some financial stress the availability of loss mitigation options in this market has.

Ben.

Significant so all of that really provides a backdrop for strong credit and elevated cure activity that we've seen in I guess implied in your question is the significant release of reserves that we've seen over the last whatever.

Six to eight quarters.

Sure.

Probably not sustainable I think we would expect some reversion.

Through time, however, as you mentioned there are some potential offsets in that you mentioned the smaller mortgage origination market I would also talk about that from a capital perspective.

Mihir Bhatia: So my question to you is, is this as good as it gets? What are some of the like, big key risks that you're worried about? Like, maybe even anything away from the macro specific to Enact that you can point to, but just just try to understand, like, is this as good as it gets?

Given the uncertainty we talked about it.

One of your earlier questions. We are holding what we would consider to be elevated pmiers sufficiency levels, maybe versus what the industry has held a pre pandemic. If you go back to 2019.

So.

Dean Mitchell: What is, what are you most focused on from us? Risk. Thank you. Yeah, Mihir, I'll start, and Rohit can add.

Is that as good as it gets I think much like I said theres, probably some reversion in there on a net basis I think what's possibly missed in that question number here is that you've got a couple that with the changes we've made to the business model.

Dean Mitchell: It may not be as good as it gets, but certainly, to your point, recent credit performance has definitely been very strong. I think there are lots of reasons for that. Obviously, a quality underwrite; we validate that through our QA results. We got strong credit quality, and when we think about that, we think about that through the low-layered risk, which we published in our earnings presentation. There's a strong consumer, a strong labor market, home price depreciation has been meaningful, and then even for borrowers that have had some financial stress, the availability of loss mitigation options in this market is significant. So all of that really provides a backdrop for strong credit and the elevated cure activity that we've seen. And I guess implied in your question is the significant release of reserves that we've seen over the last, you know, whatever, six to eight quarters. You know, probably not sustainable.

Which have really derisked.

The mortgage insurance industry over the last decade, plus those changes or things like QM. The introduction of P. Myers capital standards, the risk based pricing that we've introduced into the market and the ability to very quickly align price with risk and of course, the mature CRT programs that.

<unk> has as well as the rest of the industry all of that positively impacted the volatility profile of the business. So even if this is as good as it gets and Theres some pullback.

In return, we still believe there is significant relative value and enact and really across the industry overall, given the changes we've made to derisk the business model through time.

And I think I agree with everything Dean said, the only thing I'll add is.

Dean Mitchell: I think we would expect some reversion through time. However, as you mentioned, there are some potential offsets to that. You mentioned the smaller mortgage originations market. I would also talk about that from a capital perspective. You know, given the uncertainty we talked about in one of your earlier questions, we are holding what we would consider to be elevated P Myers sufficiency levels, maybe versus what the industry has held pre-pandemic if you go back to 2019. So, you know, is that as good as it gets?

If you think about <unk> there is definitely some upside and market size, we have talked about the pent up first time homebuyer demand that's in the market. The demographics are very supportive of our industry first time homebuyers use private mortgage insurers, 60% of the time to get into homes.

As we think about this big wave of <unk>.

Getting to first time home buying age of 33 years old.

All the way up to 2026 that can actually give us some serious upside on an R. W.

And I think from a expense and CRT prospective which are kind of the cost of the business. We have started giving proof points for the market in terms of how we are showing efficiency in the market. So we reduce our expenses year over year by 7%, we have given expense guidance.

Dean Mitchell: I think, much like I said, there's probably some reversion in there on a net basis. But I think what's possibly missed in that question, though, Mihir, is that, you know, you've got to couple that with the changes we've made to the business model, which have really de-risked the mortgage insurance industry over the last decade plus. Those changes are things like QM, the introduction of PMIRES, capital standards, the risk-based pricing that we've introduced into the market, the ability to very quickly align a price with risk, and, of course, the mature CRT programs that Enact has, as well as the rest of the industry.

For 2024, that's relatively flat so if the revenue line goes up we can keep expenses.

Kind of increasing at a slower pace than revenue then that starts creating more margin in the business and then from a capital perspective, I think back in 2019 pre call where the industry was closer to 145% <unk> ratio given kind of the uncertainty in the market <unk>.

Dean Mitchell: All of that has positively impacted the volatility profile of the business. So even if this is as good as it gets and there's some pullback in returns, we still believe there's significant relative value in Enact and, really, across the MI industry overall, given the changes we've made to de-risk the business model through time. Yeah, and I think I agree with everything Dean said, Mihir.

Industry has operated with higher capital. So at some point of time, there could be kind of some normalizing in that ratio and that could settle at a different level, but completely agree with dean that when you think about that return against mortgage risk as an asset class, which has been significantly derisked after Dodd Frank whether it's a <unk>.

<unk> of qualified mortgage risk based capital risk based pricing as well as CRT, a new master policies I think gets a much better industrial and much more stable industry with very strong returns.

Rohit Gupta: The only thing I'll add is, if you think about NIW, there is definitely some upside in market size. We have talked about the pent-up first-time homebuyer demand that's in the market. The demographics are very supportive of our industry. First-time homebuyers use private mortgage insurance 60% of the time to get into homes.

That makes sense. Thank you for taking my questions.

Absolutely Thanks Bahir.

Thank you.

And our next question coming from the line of.

Geoffrey Dunn with Dowling <unk> partners. Your line is open.

Thanks, Good morning.

Okay, Jeff two questions first.

Rohit Gupta: So, as we think about this big wave of folks getting to the first-time homebuying age of 33 years old, all the way up to 2026, that can actually give us some serious upside on NIW. And I think from an expense and CRT perspective, which are kind of the cost of the business, we have started giving proof points to the market in terms of how we are showing efficiency in the market. So, we reduce our expenses year-over-year by 7%. And we have given expense guidance for 2024 that's relatively flat.

A mechanical question on the excellent forward Nols.

Do you set the.

Quarterly seed or coverage rate.

And at a rate that anticipate hitting your limit.

And if that limit is kind of plus or minus going into the fourth quarter do you have a true up true down to kind of Max out your limit on those.

Yes, so we definitely set.

The limit with our production our view of forward production in mind and then if for whatever reason.

Production comes in.

Lighter it gets absorbed into the transaction heavier we go back and we work with our reinsurers.

Rohit Gupta: So, if the revenue line goes up, we can keep expenses kind of increasing at a slower pace than revenue, then that starts creating more margin in the business. And then, from a capital perspective, I think back in 2019, pre-COVID, the industry was closer to 145% P-minus ratio. Given the kind of uncertainty in the market, the industry has operated with higher capital.

To modify the agreement.

And bring that back in line.

With our original intent George So Jeff excuse me so that is.

It's a more.

Mechanical or amendment type exercise.

If production comes in heavier than expectations.

Rohit Gupta: So, at some point in time, there could be kind of some normalizing in that ratio, and that could settle at a different level. But I completely agree with Dean that when you think about that return against mortgage risk as an asset class, which has been significantly de-risked after Dodd-Frank, whether it's the definition of qualified mortgage, risk-based capital, risk-based pricing, as well as CRT and new master policies, I think it's a much better industry and much more stable industry with very strong returns. That makes sense. Thank you for taking my question. Absolutely not.

It's not built into the contract maybe said differently.

I wanted to ask a little bit more about the expectation for capital return.

With over 1 billion of surplus and a lot of precedence for running that a lot lower than the industry, regardless of your state of domicile that doesn't seem to be the restriction and alone would point to.

A bigger capital return opportunity than the 300 or so million dollars youre talking about.

So where is the read through here that the more constraining factor is where youre trying to target your <unk> ratio.

Yes, I think right now we're early in the year.

Mihir Bhatia: Thanks, Mihir. Thank you. And our next question, coming from the liner, Geoffrey Dunn with Dowling and Partners, Yolanda Sopin.

Sure.

Obviously, a lot of things.

Things that have to take place in terms of business performance in terms of macroeconomic performance over the course of the year I think as we look forward and this is predicated in part what what Rohit said the progress we've made on our CRT program.

Geoffrey Murray Dunn: Thanks, good morning. I have two questions. First, a mechanical question on the forward XOLs.

Dean Mitchell: Do you set the quarterly seed or coverage rate at a rate that anticipates hitting your limit? And if that limit is kinda plus or minus going into the fourth quarter, do you have a true up, true down to kinda max out your limit on those? Yeah, so we definitely set the limit with our production, our view of forward production in mind, and then, if, for whatever reason, production comes in lighter, it gets absorbed into the transaction heavier. We go back, and we work with our reinsurers to modify the agreement and bring that back in line with our original intent, George or Geoff. So that is, it's a more mechanical or amendment type exercise if production comes in heavier than expected. It's not filled into the contract. Maybe it's a different...

The success, we've had not only in covering the back book, but on the forward books, we just talked about with 2024 quota share and ex ol.

That gives us effectively sets the table it gives us the confidence to be able to provide the $300 million return of capital guidance on a full year basis, and then much like I said, it's going to be.

Driven by ultimate.

The ultimate.

Our return of capital will be influenced by.

How the business performs over the course of 2024.

Macroeconomic environment that emerges and will continue to assess that through time and to the extent there is.

More opportunity, we'll take that under advisement and come back in and inform the market at that time, Yes, I think Jeff I would just I think dean laid it out well I would just kind of tied back to the capital prioritization framework, we have talked about so the first priority for capital to support our existing policyholders followed by <unk>.

Dean Mitchell: I wanted to ask a little bit more about the expectation for capital return with over a billion in surplus and a lot of precedent for running that a lot lower in the industry regardless of your state of domicile. That doesn't seem to be the restriction and alone would point to a bigger capital return opportunity than the $300 or so million you're talking about. So, is the read-through here that the more constraining factor is where you're trying to target your PMIRS ratio? Yeah, I think right now that we're early in the year. There are obviously a lot of things that have to take place in terms of business performance and macroeconomic performance over the course of the year. I think as we look forward, and this is predicated in part on what Rohit said, the progress we've made on our CRT program, the success we've had not only in covering the back book but on the forward books we just talked about with 2024 quota share and XOL, that gives us that effectively sets the table, gives us the confidence to be able to provide the $300 million return of capital guidance on a full year basis.

New business opportunity New insurance written and then any other adjacent opportunities and finally capital return I would say from economic perspective, just watching how feds actions finally have an impact on the economy.

We have seen that view change several times over the last two years, so just being mindful that we need to have the right amount of capital.

For that economic uncertainty and as that certainty presents itself.

That will give us more confidence on how much capital we need to support our existing book and then from a new insurance written prospective I think the answer I previously gave that there is a lot of pent up demand in the market at some point of time with the right.

Mortgage rates in the market right affordability equation do we actually get a bigger market size opportunity, we would target that and then I'll just add a consideration that we also keep the other constituents in mind so rating agencies have their views on the right target for P. Myers.

Dean Mitchell: And then, much like I said, it's going to be driven by the ultimate business, you know, the ultimate return of capital will be influenced by how the business performs over the course of 2024, the macroeconomic environment that emerges, and we'll continue to assess that through time. To the extent there is more opportunity, we'll take that under advisement and come back to inform the market at that point. Yeah, I think Geoff, I would just, I think Dean laid it out well.

Just kind of where you started so all of those considerations kind of give us the current level of demos. We are targeting in the current capital return guidance, we gave but to Dean's point as our view continues to evolve through the year. Then we will revisit that as we have done in prior years.

Thank you.

And our next question coming from the line of.

Eric Hagen with <unk>. Your line is now open.

Rohit Gupta: I would just kind of tie it back to the capital prioritization framework we have talked about. So the first priority is for capital to support our existing policyholders, followed by new business opportunities, new insurance written, and then any other adjacent opportunities, and finally capital return. I would say from an economic perspective, just watching how the Fed's actions finally have an impact on the economy, we have seen that view change several times over the last two years.

Hey, Good morning. This is Jake on for Eric. Thank you for taking my questions first one can you share how the premium yield in the 2022 and 2023 vintages compares to the premium yield in the earlier pandemic vintages.

Good morning, Jake So we have not historically shared our premium yield by vintage.

As you can imagine our risk based pricing engines are opaque to the market opaque to our peers and the strategy. We deploy in terms of risk selection and pricing is a competitive differentiator for us. So we generally provide pricing color on pricing action I would simply point you back to the.

Rohit Gupta: So just being mindful that we need to have the right amount of capital for that economic uncertainty, and as that certainty presents itself, that will give us more confidence about how much capital we need to support our existing book. And then from a new insurance written perspective, I think the answer I previously gave that there's a lot of pent-up demand in the market at some point in time. With the right mortgage rate in the market, and the right affordability equation, do we actually get a bigger market size opportunity? So we would target that. And then I would just add a consideration that we should also keep the other constituents in mind.

The disclosures we have made in prior earnings calls, where we talked about stable stabilizing of our price.

In the middle part of 2022, and then starting to increase price in third quarter of 2022.

And then I have since given updates on our pricing actions almost every quarter so outside of providing that qualitative guidance in the direction of price changes.

Rohit Gupta: So rating agencies have their views on the right target for PMIRs, which is kind of where you started. So all those considerations kind of give us the current level of PMIRs we are targeting and the current capital return guidance we gave. But to Dean's point, as our view continues to evolve through the year, we will revisit that, as we have done in prior years. Thank you. And our next question comes from the line of Eric Hagan with BGIT, Elana Saltman.

Say, it's tough to provide any specific comparison between vintages.

Got you appreciate that color and then my second one.

Could you talk about how much P. Myers credit you expect to receive from the two CRT transactions you have in place for your 2024 production. Thanks.

Yes so.

Jay Thanks for the question I think on the ex ol, we've identified that as.

Elana Saltman: Morning, this is Jake on behalf of Eric. Thank you for taking my questions. First one, can you share how the premium yield in the 2022 and 2023 vintages compares to the premium yield in the earlier pandemic vintages? Good morning, Jake.

But approximately $250 million I think was $255 million P. Myers credit and then a little bit to Jeff's point earlier Jeffs question earlier.

Rohit Gupta: So we have not historically shared our premium yield by Vintage. As you can imagine, our risk-based pricing engines are opaque to the market, opaque to our peers, and the strategy we deploy in terms of risk selection and pricing is a competitive differentiator for us. So we generally provide pricing color on pricing action. I would simply point you back to the disclosures we have made in prior earnings calls where we talked about stabilizing our price in the middle part of 2022 and then starting to increase prices in the third quarter of 2022. And then I have since given updates on our pricing action almost every quarter. So outside of providing that qualitative guidance in the direction of price changes, I would say it's tough to provide any specific comparison between Vintage and other brands. Gotcha. I appreciate that color. And then I did my second one.

The quota share will be predicated its a 21%.

Session on our 2024.

<unk>, so it's going to be predicated on the niwa levels that we produce over the course of the coming year. So harder to give you a discrete number at this point in time that will be firmed up as.

As our niwa.

Numbers are at levels crystallize over the course of 'twenty 'twenty four.

Gotcha. Thank you guys.

Thank you. Thank you.

Thank you.

And our next question coming from the line of Erin <unk> with Citi. Your line is now open.

Thanks.

I'm wondering if you could talk a little bit about.

Expectations for insurance in force growth for the year, you mentioned that.

Your your production or the industry production might be kind of flattish year over year, but you saw some pretty nice insurance in force growth. This year, even while your production slowed just wondering if you'll see kind of similar dynamics given the high persistency.

Jake (on behalf of Eric Hagan): Can you talk about how much P Myers credit you expect to receive from the two CRT transactions you have in place for your 2024 production? Yeah, so Jake, thanks for the question. I think on the XOL, we've identified that as, but approximately 250 million dollars. I think it was 255 million dollars of PMIRS credit.

Good morning, Aaron.

I will take an attempt at that I think.

So obviously the piece parts are the amount of anecdotally, we can add in 2024 and what lots do we see in our existing book.

Dean Mitchell: And then a little bit to Jeff's point earlier, Jeff's question earlier, the quota share will be predicated, it's a 21% session on our 2024 NIW, so it's going to be predicated on the NIW levels that we produce over the course of the coming year. So, harder to give you a discrete number at this point in time, but that'll be firmed up as our NIW numbers or levels crystallize over the course of 2024. Gotcha. All right.

Given our guidance on market size, you can actually range bound our new insurance written for 2024 based on that number and obviously 2023 full market size is not yet known because we only two of my companies have reported for Q4, but I think thats a narrow range. So that gives you an idea on insurance enforced growth.

Driven by <unk> I think the big question becomes on labs.

And last is highly dependent on interest rates in the market I think the confidence we have and Dean mentioned this in our prepared remarks.

That as we talk about lots and of our book the fact that only 4% of our bulk for percent of policies.

Jake (on behalf of Eric Hagan): Thank you guys. Thank you. Thank you. Thank you. And our next question comes from the line of Arren Cyganovich with City. Your line is open.

50 basis points.

Threshold for a refinance incentive right now are there within that 50 basis point threshold gives you an idea on the refinance exposure, but as interest rates change in the market, which is both driven by a 10 year treasury yield and the spread I think that can change that number.

Arren Saul Cyganovich: Thanks. I was wondering if you could talk a little bit about the expectations for insurance and forced growth for the year. You mentioned that your production or the industry's production might be kind of flattish year over year. But you saw some pretty nice insurance enforced growth this year, even while your production slowed. Just wondering if you'll see kind of similar dynamics given the high, Good morning, Arren.

<unk> I'm not kind of giving you a straight answer but we can see an increase in our insurance enforced growth based on those dynamics, but I would say if the market size is small that growth is going to be kind of subdued by that fact red cells.

Rohit Gupta: So, I will make an attempt at that. I think, obviously, the piece parts are the amount of NIW we can add in 2024 and what's left to be seen in our existing book. Given our guidance on the MI market size, you can actually range-bound our new insurance written for 2024 based on that number. And obviously, the full 2023 market size is not yet known because only two of my companies have reported for Q4, but I think that's a narrow range.

Okay got it that's helpful.

The follow up to that would be on persistency.

I looked at.

The risk or the insurance in force.

You have laid out with the mortgage Reits and.

Really it's only the 2000.

23, vintage, which is about 20% of the book.

And that's currently kind of at current mortgage rates. So would you have to see mortgage rates kind of fall by.

Rohit Gupta: So, that gives you an idea of insurance and forced growth driven by NIW. I think the big question becomes lapse, and lapse is highly dependent on interest rates in the market. I think the confidence we have, and Dean mentioned this in our prepared remarks that as we talk about lapse in our book, the fact that only 4% of our book, 4% of policies have a 50 basis points threshold for a refinance incentive right now, or they're within the 50 basis point threshold, gives you an idea of the refinance exposure. But as interest rates change in the market, which is both driven by 10-year treasury So, I'm not kind of giving you a straight answer, but we can see an increase in our insurance and forced growth based on those dynamics. But I would say if the market size is small, that growth is going to be kind of subdued by that factor itself.

50 basis points or more to really see a notable decline in persistence.

Yes, I think Thats I think thats right. So.

You lay out on page on page 10 of our earnings presentation, we give.

If by book year and the associated.

Average mortgage rate and Youre exactly correct.

Really the only cohort that is.

Really on average near the near the current.

Prevailing mortgage interest rate is 2023 and that is about 20% of our overall insurance in force portfolio, you need to see a meaningful.

Change in rate to economically and scent.

The 2023 borrowers.

To refinancing quite frankly.

Dean Mitchell: Okay, I got it. That's helpful. And the follow-up to that would be on persistency. You know, I looked at the risk or the insurance in force that you have laid out with the mortgage rates. And really, it's only the 2023 vintage, which is about 20% of the book. And that's currently kind of at current mortgage rates. So, would you have to see mortgage rates kind of fall by, you know, 50 basis points or more to really see a notable decline in persistency? Yeah, I think that's right. So you lay out on page 10 of our earnings presentation, we give the if by book year and the associated average mortgage rate. And you're exactly correct that really the only cohort that is really on average near the current prevailing mortgage interest rate is 2023. And that is about 20% of our overall insurance enforced portfolio; you need to see a meaningful change in rates to economically incentivize 2023 borrowers to refinance. And quite frankly, you know, the earlier vintages; it takes a much bigger change in mortgage rates for that economic incentive to emerge.

The earlier vintages. It takes a much bigger change in mortgage rates for that economic incentive to to emerge.

Okay. Thank you.

Yes.

Hi, Karen.

Thank you and that's all the time, we have for the Q&A session I will now turn the call back over to Mr. Rohit Gupta for any closing remarks.

Thanks, Olivia. Thank you everyone. We appreciate your interest in <unk> and I look forward to seeing some of you in Florida at the Bank of America Financial Services Conference. Thank you.

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.

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Arren Saul Cyganovich: Thank you. I couldn't... Thank you. And that's all the time we have for the Q&A session. I will now turn the call back over to Mr. Rojas Gupta for any closing remarks. Thanks, Livia. Thank you, everyone. We appreciate your interest in Enact, and I look forward to seeing some of you in Florida at the Bank of America Financial Services Conference. Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect. Finding out more about the University at Buffalo's history, enacts, Sam Rosenberger, B ???ou.boa.gov, Thanks for watching!

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Q4 2023 Enact Holdings Inc Earnings Call

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