Q1 2024 Enact Holdings Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to Enact's first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session, and instructions will be given at that time. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Daniel Kohl, Vice President of Investor Relations. Please begin.

Okay.

Speaker Change: Good day, and thank you for standing by and welcome to <unk> first quarter 2024 earnings call. At this time, all participants are in a listen only mode.

Speaker Change: The speaker's presentation, there will be a question and answer session and instructions will be given at that time.

Speaker Change: 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. Please begin.

Daniel Kohl: Thank you and good morning. Welcome to our first 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.

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

Daniel Kohl: Rohit will provide an overview of our business performance and progress against our strategy.

Hardin Dean Mitchell: Dean will then discuss the details of our quarterly results before turning the call back to Robert for closing remarks, We will then take your questions.

Hardin Dean Mitchell: The earnings materials, we issued after market closed yesterday contain our financial results for the quarter, along with a comprehensive set of financial and operational metrics.

Hardin Dean Mitchell: These are available on the Investor Relations section of our website.

Daniel Kohl: The earnings materials we issued after the market closed yesterday contain our financial results for the quarter, along with a comprehensive set of financial and operational metrics. These are available in the Investor Relations section of our website. 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.

Hardin Dean Mitchell: Today's call is being recorded and will include the use of forward looking statements.

Hardin Dean Mitchell: These statements are based on current assumptions estimates expectations.

Hardin Dean Mitchell: And projections as of today's date.

Hardin Dean Mitchell: Additionally.

Hardin Dean Mitchell: They are subject to risks and uncertainties, which may cause actual results to be materially different.

Hardin Dean Mitchell: And we undertake no obligation to update or revise such statements as a result of new information.

Daniel Kohl: For a discussion of these risks and uncertainties, please review the cautionary language regarding forward-looking statements in today's press release, as well as in our filings with the FCC, which will be available on our website. Please keep in mind that the earnings materials and management's prepared remarks today include certain non-GAAP measures. Reconciliations of these measures to the most relevant gap 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.

Hardin Dean Mitchell: 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.

Hardin Dean Mitchell: Please keep in mind the earnings materials and management's prepared remarks today include certain non-GAAP measures.

Reconciliations of these measures to the most relevant GAAP metrics can be found in the press release, our earnings presentation, and our upcoming SEC filing on our website.

Hardin Dean Mitchell: With that I'll turn the call over to Rohit.

Rohit Gupta: Thank you, Daniel. Good morning, everyone.

Rohit Gupta: Thank you Danielle good morning, everyone. Our first quarter results marked a strong start to 2024.

Rohit Gupta: Our insured portfolio continue to grow we operated with expense discipline credit performance remained robust and we distributed more capital to shareholders through dividends and share repurchases than in any prior first quarter.

Rohit Gupta: Our first quarter results marked a strong start to 2024, and our insured portfolio continued to grow. We operated with expense discipline, credit performance remained robust, and we distributed more capital to shareholders through dividends and share repurchases than in any prior first quarter. This strong performance is a result of our commitment to our strategy, our strong position in the market, and our focus on driving long-term value creation for our shareholders. Our execution can be clearly seen in our strong financial performance. Net income for the quarter was $161 million, or $1 per diluted share.

Rohit Gupta: This strong performance is a result of our commitment to our strategy our strong position in the market and our focus on driving long term value creation for our shareholders.

Rohit Gupta: Our accretion can be clearly seen in our strong financial performance.

Rohit Gupta: Return on equity was a solid 14%, and insurance in force increased 4% year over year to a record $264 billion, driven by persistency of 85% and new insurance written of $11 billion. Our business continues to perform well as we navigate through a complex operating environment. The U.S. economy has been resilient with a strong labor market and healthy household balance, while macro factors such as geopolitical conflicts, inflation, and higher interest rates continue to pose potential risks.

Rohit Gupta: Net income for the quarter was $161 million or dollar one per diluted share return on equity was a solid 14% and insurance in force increased 4% year over year to a record 264 billion.

Rohit Gupta: Driven by persistency of 85% and new insurance written of $11 billion.

Rohit Gupta: Our business continues to perform well as we navigate through a complex operating environment.

Rohit Gupta: The U S economy has been resilient with a strong labor market and healthy household balance sheet.

Rohit Gupta: While macro factors, such as geopolitical conflicts inflation and higher interest rates continued to pose potential risks having.

Rohit Gupta: Having said that, delinquency rates for prime mortgage borrowers are consistent with pre-pandemic levels, and our manufacturing quality remains solid. While higher borrowing costs have slowed origination, home prices continue to be supported by structurally lower housing inventory as well as strong demand. We continue to be optimistic about the pent-up demand for first-time homebuyer homes as more Americans reach the average first-time homebuyer age, and we believe that mortgage insurance will remain an important tool to help buyers attain this important milestone.

Rohit Gupta: Having said that delinquency rates, what Brian mortgage borrowers are consistent with pre pandemic level and our manufacturing quality remained solid.

Rohit Gupta: While higher borrowing costs have slowed origination home prices continue to be supported by structurally lower housing inventory as well as strong demand.

Rohit Gupta: We continue to be optimistic about the pent up demand and first time homebuyer population as more Americans reached the average first time homebuyer age and we believe that mortgage insurance will remain an important tool to help buyers in this important milestone.

Rohit Gupta: I'll also note that higher rates continue to benefit persistency, which helps offset the effect of rates on origination volume. The credit quality of our insured portfolio continues to be strong; at quarter end, the risk weighted average FICO score of the portfolio was 744, and the risk weighted average loan to value ratio was 93 percent, and layered risk was 1.3 percent. Pricing remained constructive throughout the quarter, and underwriting standards were rigorous.

Rohit Gupta: I'll also note that higher rates contribute to benefit persistently, which helps offset that backed up rates on origination volumes.

Rohit Gupta: The credit quality of our insured portfolio continues to be strong.

Rohit Gupta: At quarter end, the risk weighted average FICO score of the portfolio was 744 and the risk weighted average loan to value ratio was 93% and layered risk was one 3%.

Rohit Gupta: Our pricing engine allows us to deliver competitive pricing on a risk-adjusted basis, and we continue to underwrite and select risk prudently while managing to attract a return. The delinquency rate in the quarter was 2%, down 9 basis points sequentially and consistent with our expectation.

Rohit Gupta: Pricing remained constructive through up through the quarter and underwriting standards, we are rigorous.

Rohit Gupta: Our pricing engine allows us to deliver competitive pricing on a risk adjusted basis, and we continue to underwrite and select risk prudently, while managing to attractive returns.

Rohit Gupta: The delinquency rate in the quarter was 2% down nine basis points sequentially and consistent with our expectations.

Rohit Gupta: During the quarter, we released $54 million of reserves driven by favorable credit performance and our effective loss mitigation efforts. We remain well-reserved for a range of scenarios. We continue to operate from a position of financial strength and flexibility. At quarter-end, our PMIR sufficiency was 163%, or $1.9 billion in sufficiency, and approximately 90% of our risk in force was subject to credit risk transfer. The strength of our capital position and cash flows allowed us to both reinvest in the business and return capital to our shareholders, aligned with our capital allocation strategy.

Rohit Gupta: During the quarter, we released $54 million of reserves driven by favorable credit performance and our effective loss mitigation efforts.

Rohit Gupta: We remain well reserved for a range of scenarios.

Rohit Gupta: We continue to operate from a position of financial strength and flexibility at.

Rohit Gupta: At quarter end, our Pmiers sufficiency was 163% or $1 $9 billion of sufficiency and approximately 90% of our risk in force was subject to credit risk transfers.

Rohit Gupta: The strength of our capital position and cash flows allowed us to both reinvest in the business and return capital to our shareholders aligned with our capital allocation priority.

Rohit Gupta: We've executed on strategic opportunities to extend our platform into compelling adjacencies while maintaining a sharp focus on our core MI business. Enact Re continues to perform well, and we continue to participate in GSC CRT transactions that came to market during the quarter. We remain pleased with the strong underwriting and attractive return profile of Enactry. We returned $75 million of capital to shareholders in the first quarter. Given the increased liquidity in our stock, we increased share repurchases in the first quarter to $49 million and remain committed to returning capital to shareholders.

Rohit Gupta: We've executed on strategic opportunities to extend our platform into compelling adjacencies, while maintaining a sharp focus on our core semi business.

Rohit Gupta: <unk> continues to perform well and we continue to participate in GSE CRT transactions that came to market during the quarter.

We remain pleased with our strong underwriting and attractive return profile of an accurate.

Rohit Gupta: We returned $75 million of capital to shareholders in the first quarter.

Rohit Gupta: The increased liquidity in our stock we increased share repurchases in the first quarter to $49 million and remain committed to returning capital to shareholders.

Rohit Gupta: This is also reflected in today's announcement that we are increasing our quarterly dividend 16% to $0.185 per share, as well as the board's decision to approve a new share repurchase authorization of $250 million. We continue to expect to deliver capital returns in 2024, similar to the 2023 level. I'm also pleased to note that during the quarter, S&P upgraded Emoco's long-term financial strength and issuer credit rating to A- stable, and EHI's long-term issuer credit rating to BBB-stable.

Rohit Gupta: This is also reflected in today's announcement that we are increasing our quarterly dividend, 16% to $18 <unk> per share as well as our board's decision to approve a new share repurchase authorization of $250 million.

Rohit Gupta: We continue to expect to deliver capital returns in 2024 similar to 2023 level.

Rohit Gupta: I'm also pleased to note that during the quarter S&P upgraded <unk> long term financial strength and issuer credit rating to AA minus stable.

Rohit Gupta: And ehi is long term issuer credit rating to triple B minus stable.

Rohit Gupta: This is the fourth upgrade from S&P since our IPO and demonstrates the strength of our business and execution by our dedicated team. Additionally, both Moody's and Fitch upgraded us to a positive outlook, reflecting our continued strong execution and positive financial results. All in all, our strong quarter is a testament to the dedication and hard work of our team, and I thank them again for their effort. Looking ahead, we remain committed to serving our customers and their borrowers while maximizing value for our shareholders. With that, I will now turn the call over to Dean.

Rohit Gupta: This is the fourth upgrade from S&P since our IPO and demonstrates the strength of our business and execution by our dedicated team.

Rohit Gupta: Additionally, both Moody's and Fitch upgraded us to a positive outlook, reflecting our continued strong execution and positive financial results.

Rohit Gupta: All in our strong quarter is a testament to the dedication and hard work of our team and I. Thank them again for their effort.

Rohit Gupta: Looking ahead, we remain committed to serving our customers and their borrowers while maximizing value for our shareholders.

Rohit Gupta: With that I will now turn the call over to Dean.

Hardin Dean Mitchell: Thanks, Rohit. Good morning, everyone.

Hardin Dean Mitchell: Thanks, Rob good morning, everyone.

Hardin Dean Mitchell: We again delivered strong results in the first quarter of 2024. Gap net income for the first quarter was $161 million, or $1.01 per diluted share, compared to $1.08 per diluted share in the same period last year and $0.98 per diluted share in the fourth quarter of 2020. Return on equity was 14%. Adjusted operating income was $166 million, or $1.04 per diluted share, compared to $1.08 per diluted share in the same period last year and 98 cents per diluted share in the fourth quarter of 2020.

Hardin Dean Mitchell: We again delivered strong results in the first quarter of 2024.

Hardin Dean Mitchell: GAAP net income for the first quarter was $161 million or $1, one per diluted share compared to $1 eight per diluted share in the same period last year and 98 per diluted share in the fourth quarter of 2023.

Hardin Dean Mitchell: Turn on equity was 14%.

Hardin Dean Mitchell: Adjusted operating income was $166 million or $1 four per diluted share compared to $1 <unk> per diluted share in the same period last year and <unk> 98 per diluted share in the fourth quarter of 2023.

Hardin Dean Mitchell: Adjusted operating return on equity was 14%.

Hardin Dean Mitchell: Adjusted operating return on equity was 14%. Turning to revenue drivers, primary insurance increased in the first quarter to a new record of $264 billion, up $1 billion sequentially, and up $11 billion or 4% year over year. New insurance written was $11 billion, up $1 billion sequentially, and down $3 billion, or 20% year-over-year. The year-over-year decline was primarily driven by a lower estimated MI market size and a lower estimated market price.

Hardin Dean Mitchell: Turning to revenue drivers primary insurance in force increased in the first quarter to a new record at 264 billion up $1 billion sequentially and up $11 billion or 4% year over year.

Hardin Dean Mitchell: New insurance written was 11 billion up $1 billion sequentially and down $3 billion or 20% year over year.

Hardin Dean Mitchell: The year over year decline was primarily driven by a lower estimated market size and a lower estimated market share.

Hardin Dean Mitchell: Persistency was 85% in the first quarter, down one percentage point sequentially and flat year-over-year. Only 4% of the mortgages in our portfolio had rates at least 50 basis points above the prevailing market. In contrast, almost 80% of the mortgages in our portfolio had rates at or below 6%, well below the prevailing market.

Hardin Dean Mitchell: Persistency was 85% in the first quarter down one percentage point sequentially and flat year over year.

Only 4% of the mortgages in our portfolio had rates at least 50 basis points above the prevailing market rate.

Hardin Dean Mitchell: In contrast, almost 80% of the mortgages in our portfolio had rates at or below 6% well below prevailing rates.

Hardin Dean Mitchell: While rates remain elevated, we anticipate elevated persistency to continue, which will help offset lower production resulting from higher mortgages. Net premiums earned were $241 million, up $1 million sequentially and up $6 million, or 2% year-over-year. The sequential increase in net premiums earned was primarily driven by the growth in attractive adjacencies, which consists primarily of Enact RE's GSE CRT participants. More broadly, insurance-enforced growth was offset by higher seeded premiums, resulting from the successful execution of our CRT program. The year-over-year increase was driven by insurance-enforced growth and partially offset by higher seeded premiums and the lapse of older, higher-priced policies.

Hardin Dean Mitchell: While rates remain elevated we anticipate elevated persistency to continue which will help offset lower production, resulting from higher mortgage rates.

Hardin Dean Mitchell: Net premiums earned were $241 million up 1 million sequentially and up $6 million or 2% year over year.

Hardin Dean Mitchell: The sequential increase in net premiums earned was primarily driven by the growth in attractive Adjacencies, which consists primarily of enactory GSE CRT participation.

Hardin Dean Mitchell: More broadly insurance enforced growth was offset by higher seeded premiums, resulting from the successful execution of our CRT program.

Hardin Dean Mitchell: The year over year increase was driven by insurance in force growth and partially offset by higher seeded premiums and the lapse of older higher priced policies.

Hardin Dean Mitchell: Our base premium rate of 40.1 basis points was flat sequentially and down 0.4 basis points year over year. However, remember that our base premium rate is impacted by several factors and tends to modestly fluctuate from quarter to quarter. We expect yields to stabilize around current levels in 2024. Our netted premium rate was 36.3 basis points, down 0.1 basis point sequentially, primarily reflecting higher seeded premiums in the current quarter. Investment income in the first quarter was $57 million, up $1 million or 2% sequentially and up $12 million or 26% year-over-year.

Hardin Dean Mitchell: Our base premium rate of 41 basis points was flat sequentially and down four basis points year over year.

Hardin Dean Mitchell: Remember that our base premium rate is impacted by several factors intends to modestly fluctuate from quarter to quarter.

Hardin Dean Mitchell: We expect yields to stabilize around current levels in 2024.

Hardin Dean Mitchell: Our net earned premium rate was $36 three basis points down one basis point sequentially, primarily reflecting higher ceded premiums in the current quarter.

Hardin Dean Mitchell: Investment income in the first quarter was $57 million up $1 million or 2% sequentially and up $12 million or 26% year over year.

Hardin Dean Mitchell: Higher interest rates have increased our investment portfolio yields, and as our portfolio rolls over, we anticipate further yield improvements. During the quarter, our new money investment yield exceeded 5%, contributing to an overall portfolio book yield of 3.7%. Our focus remains on high-quality assets and maintaining a resilient A-rated portfolio. While we typically hold investments until maturity, we selectively pursue income enhancement opportunities.

Hardin Dean Mitchell: Interest rates have increased our investment portfolio yields and as our portfolio grows rolls over we anticipate further yield improvement.

Hardin Dean Mitchell: During the quarter, our new money investment yield exceeded 5% contributing to an overall portfolio book yield of three 7%.

Hardin Dean Mitchell: Our focus remains on high quality assets and maintaining a resilient AA rated portfolio.

Hardin Dean Mitchell: While we typically hold investments until maturity, we selectively pursue income enhancement opportunities.

Hardin Dean Mitchell: During the quarter, we executed a strategy resulting in $7 million of pre-tax losses in exchange for higher future investment income. We'll continue to evaluate similar opportunities, but this does not change our view that our investment portfolio's unrealized loss position is materially non-economic. Turning to credit, losses in the quarter were $20 million compared to $24 million last quarter and negative $11 million in the first quarter of 2023. Our loss ratio for the quarter was 8% compared to 10% last quarter and negative 5% in the first quarter of 2020.

Hardin Dean Mitchell: During the quarter, we executed a strategy, resulting in $7 million of pre tax losses in exchange for higher future investment income.

Hardin Dean Mitchell: We'll continue to evaluate similar opportunities, but this does not change our view that our investment portfolio's unrealized loss position is materially non economic.

Hardin Dean Mitchell: Turning to credit losses in the quarter were $20 million compared to $24 million last quarter and negative $11 million in the first quarter of 2023.

Hardin Dean Mitchell: Our loss ratio for the quarter was 8% compared to 10% last quarter and negative 5% in the force in the first quarter of 2023.

Hardin Dean Mitchell: sequentially, our losses and loss ratio were driven by the current quarter delinquencies that reflect seasonal trends. Year over year, our losses and loss ratio in the current quarter were driven by the normal loss development of new large books and a lower reserve relief. During the quarter, we continued to see favorable cure performance from early 2023 and prior delinquencies above our expectations, which resulted in a $54 million dollar reserve release in the quarter, as compared to reserve releases of $53 million and $70 million in the fourth quarter of 2023 and first quarter of 2023, respectively. New delinquencies decreased sequentially to 11,400 from 11,700.

Hardin Dean Mitchell: Sequentially, our losses and loss ratio were driven by the current quarter delinquencies that reflects seasonal trends.

Hardin Dean Mitchell: Year over year, our losses and loss ratio in the current quarter were driven by the normal loss development of new large books and a lower reserve release.

Hardin Dean Mitchell: During the quarter, we continued to see favorable care performance from early 2023, and prior delinquencies above our expectations, which resulted in a $54 million reserve release in the quarter as compared to reserve releases of $53 million and $70 million in the fourth quarter of 2023 and first quarter of <unk>.

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Hardin Dean Mitchell: New delinquencies decreased sequentially to 11400 from 11700.

Hardin Dean Mitchell: Our new delinquency rate for the quarter was 1.2% compared to 1% in the first quarter of 2023 and flat sequentially. We continue to book new delinquencies at an approximate 10% claim rate, reflecting our prudent approach to reserving in the current macroeconomic environment. Total delinquencies in the first quarter decreased sequentially to 19,500 from 20,400.

Hardin Dean Mitchell: New delinquency rate for the quarter was one 2% compared to 1% in the first quarter of 2023 and flat sequentially.

Hardin Dean Mitchell: We continue to book, New delinquencies at approximately 10% claim rate, reflecting our prudent approach to reserving in the current macroeconomic environment.

Hardin Dean Mitchell: Total delinquencies in the first quarter decreased sequentially to 19500 from 2400.

Hardin Dean Mitchell: The primary delinquency rate decreased nine basis points sequentially to two percent, consistent with our expectations and in line with pre-pandemic levels. Turning to expenses, operating expenses for the first quarter of 2024 were $53 million, down $6 million, or 10% sequentially, and down $1 million, or 2% year-over-year, reflecting our ongoing commitment to expense management. The expense ratio for the quarter was 22%, down 3 percentage points sequentially, and down 1 percentage point year over year.

Hardin Dean Mitchell: Primary delinquency rate decreased nine basis points sequentially to 2% consistent with our expectations and in line with pre pandemic levels.

Hardin Dean Mitchell: Turning to expenses operating expenses for the first quarter of 2024 were $53 million down $6 million or 10% sequentially and down $1 million or 2% year over year, reflecting our ongoing commitment to expense discipline.

Hardin Dean Mitchell: The expense ratio for the quarter was 22% down three percentage points sequentially and down one percentage point year over year. As a reminder, our expenses are weighted towards the second half of the year and thus we will still expect expenses to be in the range of $220 million to $225 million over the course of 2024.

Hardin Dean Mitchell: As a reminder, our expenses are weighted towards the second half of the year, and thus, we will still expect expenses to be in the range of 220 to 225 million over the course of 2024. Moving to capital, we continue to operate with a strong capital base and liquidity position reinforced by our robust PMIRS sufficiency and continued success in the execution of our diversified CRT program. PMAR's sufficiency was 163%, or $1.9 billion above its requirements at the end of the first quarter.

Hardin Dean Mitchell: Moving to capital we continue to operate with a strong capital base and liquidity position reinforced by our robust TMR sufficiency and continued success in the execution of our diversified CRT program.

Hardin Dean Mitchell: Our Pmiers sufficiency was 163% or $1 9 billion above P. Myers requirements at the end of the first quarter.

Hardin Dean Mitchell: Additionally, at the end of the first quarter, 90% of our risk and force was subject to credit risk transfers, and our third-party CRT program provided 1.7 billion of PMARS capital. As previously announced, we closed new quota share and new excess of loss reinsurance transactions during the quarter. Additionally, we increased our affiliate quota share from 7.5% to 12.5% of a portion of our in-force business, along with 12.5% of 2024's new insurance. These affiliate transactions will leverage Enact REIT's existing capital and support new business opportunities primarily consisting of GFC credit risk transactions.

Hardin Dean Mitchell: Additionally, at the end of the first quarter, 90% of our risk in force was subject to credit risk transfers and our third party CRT program provides $1 7 billion of P Myers capital credit.

Hardin Dean Mitchell: As previously announced we closed new inch new quota share and new excess of loss reinsurance transactions during the quarter. Additionally.

Hardin Dean Mitchell: Additionally, we increased our affiliate quota share from seven 5% to 12, 5% of a portion of our enforced business along with 12, 5% of 2020 fours new insurance written.

Hardin Dean Mitchell: These affiliated transactions will leverage <unk> existing capital and support new business opportunities, primarily consisting of GSE credit risk transfer.

Hardin Dean Mitchell: Turning to capital allocation, we continue to execute against our capital prioritization framework, which balances maintaining a strong balance sheet, investing in our business, and returning capital to shareholders. During the quarter, we paid out $26 million in our quarterly dividend, and we repurchased 1.8 million shares at a weighted average share price of $27.51, for a total of $49 million of repurchases through our Share Repurchase Program. In April, we repurchased an additional 0.4 million shares at a weighted average share price of $30.07 for a total of 12 million repurchased, and as of April 30, 2024, there were approximately 24 million remaining on our current share repurchase authorization.

Hardin Dean Mitchell: Turning to capital allocation, we continue to execute against our capital prioritization framework, which balances maintaining a strong balance sheet investing in our business and returning capital to shareholders.

Hardin Dean Mitchell: During the quarter, we paid out $26 million through our quarterly dividend and we repurchased one 8 million shares at a weighted average share price of $20 $27 51.

Hardin Dean Mitchell: For a total of $49 million of repurchases through our share repurchase program.

Hardin Dean Mitchell: In April we repurchased an additional 4 million shares at a weighted average share price of $30 seven.

Hardin Dean Mitchell: For a total of $12 million repurchased and as of April 32024, there was approximately $24 million remaining on our current share repurchase authorization.

Hardin Dean Mitchell: Today, we announce a 16% increase in our quarterly dividend from 16 cents to 18 and a half cents per share, and the board approved a new share repurchase authorization of 250 million dollars. Both actions reflect the continued strength of our financial position and confidence in our business. As with our prior SHARE-BiVAC programs, GenWorx will participate proportionally. As a reminder, we still expect total 2024 capital return levels to be similar to the $300 million we delivered in 2020.

Hardin Dean Mitchell: Today, we announced a 16% increase to our quarterly dividend from 16 to $18 five per share and the board approved a new share repurchase authorization of $250 million.

Hardin Dean Mitchell: Both actions reflect the continued strength of our financial position and confidence in our business.

Hardin Dean Mitchell: As with our prior share buyback programs Genworth will participate proportionately.

Hardin Dean Mitchell: As a reminder, we still expect total 2020 for capital return levels to be similar to the $300 million.

Hardin Dean Mitchell: We delivered in 2023.

Hardin Dean Mitchell: As in the past, the final amount in the form of a capital return to shareholders will ultimately depend on business performance, market conditions, and regulatory approval. Overall, we're pleased with our strong start to 2024 and remain focused on prudently managing risk, maintaining a strong balance sheet, and driving solid returns for our shareholders. With that, I'll turn the call back to Rohit.

Hardin Dean Mitchell: As in the past the final amount and form of capital returned to shareholders will ultimately depend on business performance market conditions and regulatory approvals.

Hardin Dean Mitchell: Overall, we're pleased with our strong start to 2024 and remain focused on prudently managing risk maintaining a strong balance sheet and driving solid returns for our shareholders with that I will turn the call back to Rowan.

Rohit Gupta: Looking ahead, I continue to be encouraged by the long-term dynamics of our market, and I'm confident in our ability to realize the opportunities ahead of us and our team's ability to execute against our strategy and deliver value. 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.

Rowan: Thanks Dean.

Rowan: Looking ahead I continue to be encouraged by the long term dynamics of our market and I am confident in our ability to realize the opportunities ahead of us and our team's ability to execute against our strategy and deliver value.

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

Speaker Change: Operator, we are now ready for Q&A.

Operator: Thank you. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

Speaker Change: Thank you to ask a question. Please press star one on your telephone and wait for your name to be announced Chuck withdraw. Your question. Please press star one again, one moment, while we compile.

Speaker Change: Our Q&A roster.

Operator: One moment while we compile our Q&A roster. And our first question is going to come from the line of Doug Harter with UBS. Your line is open. Please go ahead.

Speaker Change: And our first question is going to come from the line of Doug Harter with UBS. Your line is open. Please go ahead.

Douglas Michael Harter: Thanks. First, I was just hoping you could kind of give us an update as to kind of how you see the total market for NIW progressing, kind of as the year unfolds, you know, kind of what impact the re-increase in rates that you're seeing has on either kind of the underlying quality of applications or the amount of applications.

Speaker Change: Thanks.

Doug Harter: First I was just hoping you could kind of give us an update as to kind of how you see the total market for ni W. Progressing kind of as the year unfolds kind of what impact from the re increase in rates that youre seeing.

Doug Harter: Either kind of the underlying quality of applications or the the amount of applications.

Rohit Gupta: Good morning, Doug. Thank you for the question. So I would say, given the volatility we have seen in rates up to this point in the year, it is difficult to forecast originations within a narrow range. I provided our view last quarter, where we basically said that we expected the MI market to be generally in line with 2023 market size. Just to add some color to that, I would say, going into the spring selling season, we are seeing overall consumer demand, including first-time home buyer demand, continuing to be strong.

Speaker Change: Good morning, Doug. Thank you for the question. So I would say given the volatility we've seen in rates. After this point in the year. It is difficult to forecast originations with a narrow range I.

I provided our view last quarter, where we basically said that we.

Speaker Change: We expect semi market to be generally in line with 2023 market size.

Speaker Change: Just to add some color to that I would say going.

Going into the spring selling season, we are seeing overall consumer demand, including first time homebuyer demand continuing to be strong and the consumers who are coming to the market. At this point are used to 6% to 7% mortgage rates are.

Rohit Gupta: And the consumers who are coming to the market at this point are used to 6 to 7 percent mortgage rates. And now the challenge, basically, that we are facing in the market is the lack of inventory in the market and some of the volatility we have seen in the last month or so in rates.

Speaker Change: Now the challenge basically that we are facing in the market the lack of inventory in the market and some of the volatility we've seen in the last month or so and rate.

Rohit Gupta: So, our view continues to be that MI is a very helpful product for consumers, especially first-time homebuyers, to get into homes. So, as we see that origination volume come through, MI products will continue to get very good penetration in the market. But all that being said, at this point in time, our expectation is for the MI market size to be generally in line with 2023. Just to give you a historical data point, that level of market size is comparable to the 2018 market size within like $5, 6 billion of that. And also, our persistency continues to provide a natural hedge in our business as higher rates are a tailwind for the retention of our existing portfolio.

Speaker Change: So our view continues to be that MRI is a very helpful product for consumers, especially first time homebuyers to get into homes. So as we see that origination volume come through.

Speaker Change: My products and continue to get very good penetration in the market, but all that being said at this point of time, our expectation is the market market size to be generally in line with 2023, just to give you a historical data point that level of market sizes comparable to 2018 market size within like $5 $6 billion of that.

Speaker Change: And.

Speaker Change: Also our <unk> system continues to provide a natural hedge in our business as higher rates are a tailwind for the retention of our existing portfolio.

Douglas Michael Harter: I appreciate that. Thank you.

Rohit Gupta: And Doug, your question on manufacturing quality and credit quality. So we continue to see, as I said in my prepared remarks, we continue to see manufacturing quality and credit quality remain strong. And from a volume perspective, we continue to have both non-delegated and delegated volumes. So either through direct underwriting or through our audits, we continue to monitor that. And as I said in my prepared remarks, we continue to feel good about that. I guess just on that, what are you seeing around affordability on new purchases? You know, kind of how are consumers coping with the higher rates from an affordability perspective? Yes, Doug, a very good question. So

Speaker Change: I appreciate it.

Speaker Change: Question on sorry.

Speaker Change: Sorry.

Speaker Change: I missed your question on the Im sorry in factoring quarter and credit quality. So we continue to see as I said in my prepared remarks, we continue to see manufacturing quality and credit quality remained strong.

Speaker Change: From a volume perspective, we continue to have both non delegated and delegated volume so either through direct underwriting or two hour audits.

Speaker Change: We continue to monitor that and as I said in our prepared remarks, we continue to feel good about that.

Speaker Change: I guess just on that what are you seeing around affordability.

Speaker Change: <unk>.

Speaker Change: Kind of how are consumers copay.

Speaker Change: Coping with the higher rates from an affordability perspective.

Rohit Gupta: Yes, Doug, very good question. So, as I said before in my remarks, I think at this point in time, consumers who are coming to the market are prepared for that 6 to 7% 30-year fixed mortgage rate. So, we are seeing those consumers go through the application process and actually get qualified. And then, given the fact that we have very granular risk-based pricing, we can price those loans aligned with our view of risk and returns, both in the base case and in the stress case.

Speaker Change: Yes, Doug very good question, so as I said.

Doug Harter: Before in my remarks, I think at this point of time consumers, who are coming to market are prepared for that 6% to 7% 30 year fixed mortgage rate. So.

Doug Harter: So we are seeing those consumers go through the application process and actually get qualified and then given the fact that we have very granular risk based pricing, we can price those loans aligned with our view of risk and returns both in base case and stress case.

Rohit Gupta: So, from a consumer qualification perspective, while we have seen certain metrics move up, similar to what we saw in previous purchase markets. For example, if you think about loan-to-values, loan-to-values are back to the 2018 level. If you think about debt-to-income and FICOs, they are very indicative of a purchase market. So, we are seeing those markets where we have traditionally seen those traditionally. But from a consumer qualification perspective, we continue to feel good about the consumers we are putting on our books and continue to feel good about the attractive returns we can generate from those policies. Great, thank you. Thank you, and one moment as we move.

Doug Harter: So from a consumer qualification perspective, while we have seen.

Kind of certain metrics move up similar to what we saw in previous purchase market. So if you think about loan to value loan to values are back to the 2018 level. If you think about debt to income and FICO is theyre very indicative of a purchase market. So we are seeing those markets, where we have seen those traditionally but broad consumer qualification perspective.

Doug Harter: We continue to feel good about the consumers we are putting on our books and continue to feel good about the attractive returns we can generate from those policies.

Speaker Change: Great. Thank you.

Operator: Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Mihir Bhatia with Bank of America. Your line is open. Please go ahead. Hi, this is Caroline on ForMihir. Thanks for taking our questions.

Speaker Change: Okay. Thank you and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Mihir Bhatia with Bank of America. Your line is open. Please go ahead.

Caroline: Yeah. Good morning, Caroline.

Speaker Change: Hi, This is Caroline on for me here, Thanks for taking our question.

Caroline: Interest rate buy down is that product very prevalent in the market and can you provide any comments on how you are underwriting that one if any different than other mortgages.

Rohit Gupta: Thank you for the question. So, as we think about interest rate buydowns, we continue to see interest rate buydowns in the market as a strong product for consumers right now. We talked about this on our earnings call a few quarters ago. And the trend has been very similar.

Caroline: Yes, good morning, Caroline Thank you for the question.

Speaker Change: So as we think about interest rate buy downs, we continue to see interest rate buy downs in the market.

Speaker Change: Strong product for consumers right now we've talked about this on our earnings quality quarters ago. So the trend has been very similar we don't publish.

Rohit Gupta: We don't publish that as an explicit metric in our financials, but we continue to monitor it internally. And I would say there are two flavors of interest rate buydowns. One flavor is temporary interest rate buydowns, where the interest rate on a mortgage is bought down for one to two years by the lender. But there are some limitations on how much money the lender can use to do that. We see that as still a prudent product because the consumer is qualified at the full rate, not at the teaser rate of the mortgage.

Speaker Change: That is our explicit metric in our financials, but we continue to monitor internally.

Speaker Change: And I would say there are two flavors of entrust rate buy downs, one flavor is temporary interest rate buy downs, where the interest rate on the mortgages bought down for one to two years.

Speaker Change: By the lender and there are some limitations on how much money the lender can use to do that.

Speaker Change: We see that as.

Speaker Change: <unk> a proven product because the consumer is qualified at the full rate not at the teaser rate.

Rohit Gupta: So, it's a well-qualified consumer. And then the second flavor is builder commitments, where builder originators specifically buy down the note rate for the life of the mortgage. And we see that also coming through on a consistent basis. In that case, the consumer does not have any kind of interest rate change on their mortgage. And as a result, the consumer is well-qualified for the mortgage. So I would say usage of those products is coming from different channels, different originators, but we continue to see usage being consistent with what we have seen in the past. Awesome, that's super helpful.

Speaker Change: The mortgage so it's a well qualified consumer and then the second flavor is builder commitments, where builder originators, specifically by down but not wait for the life of the mortgage and we see that also coming through on a consistent basis and in that case. The consumer does not have any kind of interest rate change in their mortgage.

Speaker Change: And as a result, the consumer is well qualified for the mortgage.

Speaker Change: So I would say our usage of those products are coming from different channels different originators, but we continue to see the usage being consistent to what we had seen in the past.

Rohit Gupta: And then also, can you talk about embedded equity in the delinquent inventory and any stats you can share on that? Yes, Caroline. In this quarter's earnings presentation, we did actually add that back on page 13 of the presentation, so you can see the delinquent policies, which are around 2% of our portfolio. 94% of those policies actually had marked market equity of greater than 10%, and that's based on home prices at the end of 2023 for policies at the end of the first quarter.

Speaker Change: Awesome. That's Super helpful. And then also can you talk about embedded equity in the delinquent inventory and any thoughts you can share on that.

Speaker Change: Yes, so Caroline in this quarter in our earnings presentation, we did actually add add that back on page 13 of the presentation.

Speaker Change: So you can see on delinquent policies, which are around 2% of our portfolio, 94% of those policies actually had mark to market equity of greater than 10%.

Speaker Change: And Thats based on home prices at the end of 2023 or policies at the end of first quarter, and then 81% of our delinquent policies actually had mark to market equity of more than 20% using the same methodology, which is using home prices for end of year 'twenty three.

Rohit Gupta: And then 81% of our delinquent policies actually had marked market equity of more than 20% using the same methodology, which uses home prices for the end of year 23 and on our portfolio at the end of the first quarter.

Speaker Change: One of our portfolio at the end of first quarter.

Speaker Change: Awesome. Thank you.

Speaker Change: Thank you.

Operator: Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Bose George with KBW. Your line is open. Please go ahead.

Speaker Change: Thank you one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Bose George with <unk>. Your line is open. Please go ahead.

Bose Thomas George: Hey, good morning. Actually, I wanted to ask, your default to claim rate at 10% remains a couple of points above the peers I've reported. I know it all kind of messed up through the recoveries, but what would you need to see to take that down, probably closer to the 7 to 8 than some of the others are using?

Bose Thomas George: Hey, good morning.

Bose Thomas George: I wanted to ask you default to claim rate at 10% remains a couple of points above the peers have reported I know it all kind of nets out through the recoveries, but what would you need to see to take that down probably closer to the 7% to eight some of the others are using.

Hardin Dean Mitchell: Yeah, Bose, thanks for the question. And just, you know, as a reminder, maybe to set the table for this, our reserves and our roll rates that you just referenced on new delinquencies, they're always our best estimate of ultimate claims. But as we determine the best estimate, we consider various economic outcomes to ensure that we're appropriately reserved, even if economic pressures emerge. For example, if we pivot now to the 10% claim rate on new delinquencies, we set that, you know, really not in line with anything that we have seen from a performance perspective. Performance remains very strong.

Bose Thomas George: Yes.

Speaker Change: Thanks for the question and just.

Speaker Change: As a reminder, maybe to set the table for this.

Speaker Change: <unk> and our roll rates that you just referenced on new delinquencies.

As always our best estimate of ultimate claims, but as we determine the best estimate we consider various economic outcomes to ensure that we're at.

Speaker Change: Appropriately reserved even if economic pressures emerge if we pivot now to the 10% claim rate on new delinquencies, we set that.

Speaker Change: Really not in line with anything we had seen from a performance perspective performance remains very strong.

Hardin Dean Mitchell: What we really did was take into account the fact that there was some heightened macroeconomic uncertainty, and we believed that it was really prudent to contemplate that in the establishment of that 10% roll rate. But over time, to your point, we've seen economic resiliency, and as a result, we've seen elevated cures on prior accident year delinquencies, so that heightened view of uncertainty hasn't materialized. You know, if we just kind of rise up, we still believe it's prudent and measured.

Speaker Change: What what we really did was take took into account. The fact that there was some heightened macroeconomic uncertainty and we believed.

But it was really prudent.

Speaker Change: To contemplate that in the establishment of that 10%.

Speaker Change: Right.

Speaker Change: Over time to your point.

Speaker Change: We've seen economic resiliency and as a result, we've seen elevated cures on prior accident year delinquency, so that the heightened view of uncertainty Hasnt materialized.

Speaker Change: If we just kind of lift up we still believe it is prudent and measured.

Hardin Dean Mitchell: The approach is appropriate at this point in time. What would change that approach? I think, you know, if we saw the possibility or the probability of economic pressures decrease materially on a go-forward basis, and or if we gave more reliance on the more recent performance and a little bit less reliance on that judgment that's based on macroeconomic uncertainty, I think if either of those happened, we'd have to take a hard look at the appropriateness of the current 10% claim rate.

Speaker Change: Approach is appropriate at this point in time, what would change that approach I think if.

Speaker Change: If we saw the possibility of the probability of economic pressures decreased materially on a go forward basis at <unk>, If we gave more reliance.

Speaker Change: On the more recent performance and a little bit less reliance on that judgment that's based on.

The macroeconomic uncertainty I think if either one of those.

Speaker Change: Happened, we have to take a hard look at the appropriateness of the current 10% claim rate.

Bose Thomas George: Okay, great. That's helpful. Thanks.

Speaker Change: Okay, Great. That's helpful. Thanks, and then just switching over to capital return.

Speaker Change: The $300 million will be similar to last year is a mix between buybacks and dividends also going to be the same just given the strong start on buybacks. Just curious if there is any change there.

Hardin Dean Mitchell: And then just switching over to capital return, you noted that the $300 million will be similar to last year. Is the mix between buybacks and dividends also going to be the same, just given the strong start on buybacks? Just curious if there's any change there.

Speaker Change: Yes, that's a great question.

Speaker Change: Again as we've discussed in the past, we really have three ways to return capital to shareholders ordinary dividends share repurchases and special dividends.

Hardin Dean Mitchell: Yeah, that's a great question. Again, as we've discussed in the past, we really have three ways to return capital to shareholders, ordinary dividends, share repurchases, and special dividends. You know, we really think about those kind of in a waterfall approach. At the top of the waterfall are quarterly dividends. We sized those to be both competitive and durable, even under stress.

Speaker Change: We really think about those kind of in a waterfall approach at the top of the waterfall its quarterly dividends, we size those to be both competitive and durable even under stress.

Hardin Dean Mitchell: So, you know, the 16% increase in the quarterly dividend this quarter, I think, reflects our confidence and our ability to maintain that 18 and a half cents dividend per share through time and through economic cycles. It's it's really at the top of the waterfall because it increases the certainty of capital return to shareholders. Share repurchases, in contrast, are a little bit more opportunistic. They're based, obviously, on the prevailing market conditions.

Speaker Change: So the 16% increase in the quarterly dividend this quarter I think reflects our confidence in our ability to maintain that $18.05 dividend per share through time and through economic cycles.

Speaker Change: It's really at the top of the waterfall because it increases the certainty of capital returned to shareholders.

Speaker Change: Share repurchases in contrast are a little bit more opportunistic there.

Speaker Change: They are based on obviously, the prevailing market conditions and when I say that it's especially related to our share price and our liquidity given our limited float and then lastly, special dividends are kind of at more blunt instrument that allows us to return the planned capital to shareholders in excess of quarterly dividends and share repurchases.

Hardin Dean Mitchell: And when I say that, it's especially related to our share price and our liquidity, given our limited float. And then lastly, you know, special dividends are kind of that more blunt instrument that allows us to return planned capital to shareholders in excess of quarterly dividends and share repurchases. We typically do that at the end of the year.

Speaker Change: We typically do that at the end of the year.

Hardin Dean Mitchell: I think last quarter we, Bose, emphasized the potential increased reliance on share repurchases given the opportunities we were seeing at the end of last year and at the beginning of this year related to our share price in addition to the improved liquidity in our stock. If you look at our first quarter results, I think they show execution against that expectation, where we repurchased almost $50 million in the quarter. And for comparison purposes, we repurchased about 87 million units across all of 2023.

Speaker Change: Last quarter, we those we emphasize the potential increase reliance on share repurchases given the opportunities we were seeing at the end of last year at the beginning of this year related to our share price.

Speaker Change: In addition to the improved liquidity in our stock.

Speaker Change: If you look at our first quarter results.

Speaker Change: I think they show execution against that expectation, where we repurchased.

Speaker Change: Almost $50 million in the quarter and for comparison purposes, we repurchased about 87 million across all of 2023. So I think you do see us relying more heavily on share repurchases.

Hardin Dean Mitchell: So I think you do see us relying more heavily on share repurchases. I think going forward, the pace of share repurchases is gonna be largely dictated by the market. If we see and continue to see accretive market opportunities, I think you'll see us continue to execute the share repurchase program at that elevated pace. If that doesn't occur, we'll rely more heavily on special dividends at year-end as a way to distribute our planned capital for the full year. Okay, great.

Speaker Change: I think go forward the pace of share repurchases is going to be largely dictated by market opportunities. If we see and continue to see accretive market opportunities I think youll see us continue to.

Speaker Change: Execute the share repurchase program at that elevated pace.

Speaker Change: If that doesn't occur we'll rely more heavily on special dividend at year end as a way to.

Speaker Change: Distribute our planned capital.

Bose Thomas George: Okay, great. That's helpful. Thanks a lot.

Speaker Change: For the full year.

Speaker Change: Okay, Great. That's helpful. Thanks, a lot.

Operator: Thanks, Beth. Thank you, and one moment for our next question. And our next question is going to come from the line of Rick Shane with J.P. Morgan. Your line is open. Please go ahead.

Speaker Change: Thank you. Thanks, guys. Thank you and one moment our next question.

Speaker Change: And our next question is going to come from the line of Rick Shane with JP Morgan. Your line is open. Please go ahead.

Richard Barry Shane: Hey guys, thanks for taking my question, and Bose really touched upon what I want to focus on too, which is... Obviously, the cadence of capital return in the first quarter, given the strength of the buyback, plus increasing the dividend starting in the second, suggests that you are above the run rate of Capital Returns Roughly Comparable to 2023 Levels. And you talked about the dynamics, and I think the clear takeaway is that as you approach the end of the year, the special dividend is sort of the flex to get you there depending upon opportunities for buyback and regular dividend.

Richard Barry Shane: Hey, guys. Thanks for taking my question and bodes really touched upon what.

Richard Barry Shane: I want to focus on <unk>, which is.

Richard Barry Shane: Obviously, the cadence of capital return in the first quarter, given the strength of the buyback plus increasing the dividend.

Speaker Change: Starting in the second.

Speaker Change: Suggests that you are.

Speaker Change: Above the run rate of.

Speaker Change: Capital returns roughly comparable to 2023 levels.

Speaker Change: And I think talked about the dynamics and I think the clear takeaway is that as you approach the end of the year.

Speaker Change: The special dividend is sort of the flex to get you there depending upon opportunities on buyback and regular dividend.

Richard Barry Shane: I am curious, given the strength of earnings and what I think, you know, everybody's going to take away is a pretty favorable outlook, what it would take for you to actually potentially raise the total capital return, whether it's 5% or 10%. Is that something that you could imagine as the year unfolds if the trajectory remains so strong? Yes. Thank you.

Speaker Change: I'm curious given.

Speaker Change: The strength of earnings and what I think.

Speaker Change: Everybody is going to take away is a pretty favorable outlook.

Speaker Change: It would take for you to actually potentially raise the total capital return.

Speaker Change: Whether it's five or 10% is that something that you could envision as the year unfolds, if the trajectory remains strong.

Hardin Dean Mitchell: Yes. So, Rick, I appreciate the questions.

Speaker Change: Yes, so Rick I appreciate the questions I want to start off with the guidance as it relates to capital return for full year 2024 that remains at $300 million really what I think Bose. This question got to is the way in which we're returning that 300 million.

Hardin Dean Mitchell: I want to start off with the guidance as it relates to capital return for full year 2024. That remains at $300 million. Really, what I think Bose's question got to is the way in which we're returning that $300 million and, potentially, even the timing of how that $300 million gets returned to shareholders. And I do think that timing could increase again if we see opportunistic market opportunities to flex our share repurchase program in an accelerated and bigger way, much like we did in Q1.

Speaker Change: And potentially even the timing of how that $300 million gets returned to shareholders and I do think that timing could increase again, if we see.

Speaker Change: Opportunistic market opportunities too.

Speaker Change: To flex our share repurchase program.

Speaker Change: Accelerated in a bigger way much like we've done in Q1 so.

Speaker Change: Much more to do with timing and means then.

Hardin Dean Mitchell: So much more to do with timing and means than quantum or amount of total capital return for full year 2024. That said, what would change, what would cause us to come back and revisit the $300 million? Obviously, business performance is a key driver. If we see business performance above our expectations, if we see continued improvement in the macroeconomic environment, or if we see a regulatory environment that is more accommodative. I think those are all things that we consider as we think about the establishment of the appropriate amount of capital return heading into any year and throughout, throughout the year as we progress.

Speaker Change: Quantum or amount of tow.

Speaker Change: Total capital return for full year, 2024 that said what would change what would cause us to come back and revisit the $300 million. Obviously business performance is a key driver if we see business performance above our expectations. If we see continued improvement in the macroeconomic environment.

Speaker Change: <unk>, we see a regulatory environment that is more accommodative I think those are all things that we can.

Speaker Change: Consider as we think about the establishment of the appropriate amount of capital returned heading into any year end throughout.

Speaker Change: Throughout the year as we progress.

Richard Barry Shane: Got it. And, um, look, you know, the other factor here is that NIW, uh, for the quarter down, there are certainly some headwinds, uh, as well. How much does growth or, you know, accelerated growth or decelerating growth of the portfolio impact that decision as well?

Speaker Change: Got it and.

Speaker Change: Look the.

Speaker Change: The other.

Speaker Change: Factor here is niwa.

Speaker Change: For the quarter down there are certainly some headwinds.

Speaker Change: As well how much does.

Speaker Change: Our growth or accelerated growth or decelerating growth of the portfolio impact that decision as well.

Rohit Gupta: Yeah. So, good morning, Rick.

Speaker Change: Yes. So good morning, Rick that definitely is an input and as Dean said that that would be captured in business performance.

Rohit Gupta: That definitely is an input, and as Dean said, that would be captured in business performance. As you heard me answer a previous question, our guidance right now for the MI market size for 2024 is to be similar to that of 2023. Overall, in 2023, we wrote a good size book. We also printed very good business results in terms of income expression for the entire year. I think in 2024, we will look at very similar metrics, how much new business we are writing in our core MI business, and how much business we are writing in our enact re-business.

Speaker Change: You heard me on therapy cushion our guidance right now for market size for 2020 for us to be similar to that of 2023.

Speaker Change: Overall in 2023 build a good sized book.

Speaker Change: So our printed very good business results in terms of income expression for the entire year I think in 2024, we look at very similar metrics how much new business. We are writing in our core EMI business, how much business are rewriting an hour.

Rohit Gupta: And then, in addition to that, how is the core book performing in terms of loss ratios and income? And then that combined with the regulatory environment, as well as our view looking forward in the economy. I think all these things definitely go into our view of whether or not we should change our capital guidance. In the past, when our view has gotten stronger during the year, we have done that in prior years. So, we'll continue to keep the market updated.

Speaker Change: <unk> business and then in addition to that how is the core book performing in terms of loss ratios and income.

Speaker Change: And then that combined with the regulatory environment as well as our view looking forward in the economy I think all these things.

Speaker Change: Definitely go into our view of do we change our capital guidance in the past when our view has gotten stronger during the year, we have done that in prior years. So we'll continue to keep the market updated.

Richard Barry Shane: Got it. I appreciate that. Thank you, guys. Thank you.

Speaker Change: Got it I appreciate that thank you guys.

Operator: Thank you. One moment for our next question, and our next question comes from the line of Soham Bansal with BTIG. Your line is open. Please go ahead.

Speaker Change: Thanks, Rick.

Speaker Change: Thank you one moment our next question.

Speaker Change: Okay.

Speaker Change: And our next question comes from the line of Soho bundled with <unk>.

Soham Jairaj Bhonsle: Hey guys, good morning. I hope you're all doing well.

Soho: Your line is open. Please go ahead.

Soho: Hey, guys. Good morning, I hope, you're all doing well.

Soho: So I guess first question along the lines of capital return.

Soho: I was interested in terms of the decision to raise the buyback or increase the buyback to 250, and a 16% increase in the dividend, which is which is great but rod could you maybe provide some color on just the framework that maybe you and the board. We used as you were sort of setting that in that range.

Soham Jairaj Bhonsle: So I guess my first question along the lines of capital return, you know, I was interested in sort of the decision to raise the buyback or increase the buyback to 250 and the 16% increase in the dividend, which is great. But Rohit, could you maybe, you know, provide some color on just the framework that maybe you and the board used as you were sort of setting that, you know, that range? You know, I'm particularly curious about sort of the macro or portfolio assumptions that you maybe consider to just get to that 250. Any insight would be great. Thank you.

Soho: Curious on sort of the macro portfolio assumptions that you maybe consider to just get to that $2 50, and in fact with great. Thanks.

Rohit Gupta: Good morning. So, thank you for the questions. So, both on increased share buyback as well as increased dividend, I think the first thing I would start with is just the performance of our portfolio, performance of our business, combined with our view of the strength of our balance sheet. So, I think, as I said in my prepared remarks, we continue to create a stronger balance sheet. You saw that acknowledged by the external market in terms of rating agency upgrades in 2023 and early 2024. And even recently, we saw two outlook changes in addition to that being positive.

Rod: Good morning. Thank you for the question. So both an increased share buyback as well as increased dividend I think the first thing I would start with is just the <unk>.

Speaker Change: Performance of our portfolio performance of our business combined with our view of the strength of our balance sheet. So I think as I've said in my prepared remarks, we continue to.

Rod: Create a stronger balance sheet, you saw that being acknowledged by the external market in terms of rating agency upgrades in 2023 early 2024, and even recently we saw two outlook changes.

Rohit Gupta: So, all of that is a proof point that the board and I feel comfortable about the strength of the balance sheet and business results. So, I would say that just goes into the confidence picture on capital return. Now, within the capital return, as Dean outlined previously, we think about different vehicles of returning capital. From a dividend perspective, we think about the normal considerations that you would expect us to look at, which are earnings, the competitive environment, the resiliency of that dividend, and having that confidence. So, that basically drove the 16% increase to 18.5 cents per share of dividend increase.

Rod: In addition to that being positive so all of that as a proof point that the board and I feel comfortable about the strength of balance sheet and business results. So I would say that just goes into the confidence picture on capital return now within the capital return as Deanne outlined previously we'd think about different vehicles of returning capital.

Rod: From a dividend perspective, you think about the normal considerations that you would expect us to look at which is earning.

Rod: Competitive environment, the resiliency of that dividend and having that confidence so that basically drove a 16% increase to 18 five cents.

Rohit Gupta: And then, in addition to that, when we think about share buybacks, in addition to the considerations I just outlined, we also think about our liquidity in the market. And Dean talked about it because, in our mind, for a share buyback program, our first purpose, in addition to the normal considerations, is to do no harm in the market from a liquidity perspective. Just to give you perspective on our liquidity, from January of 2023 to April of 2024, our liquidity, based on average daily trading volume, increased by 150%.

Rod: Our share of dividend increase and then in addition to that when we think about share buyback. In addition to the considerations I just outlined we also think about our liquidity in the market and Dean talked about it because in our mind for a share buyback program. Our first purpose. In addition to our normal considerations is do no harm.

Rod: The market from a liquidity perspective, just to give you a perspective on our liquidity from January of 2023 to April of 2024 hour liquidity based on average daily trading volume has increased by 150%. So we always think that if the share prices are trading at the right level and <unk>.

Rohit Gupta: So, we always think that if the share prices are trading at the right level, and given our view of intrinsic value, we would want to use that vehicle as long as we think the liquidity is good. The board saw that as constructive and worked with our advisors to put a view together, which gave us confidence to start the next share buyback authorization at a higher size. That being said, we'll always keep looking at that metric on an ongoing basis.

Rod: Our view of intrinsic value, we would want to use that vehicle as long as we think the liquidity is good. So the board saw that as constructive and work with our advisors reportable <unk> together, which gave us confidence to start the next year buyback authorization at a higher site that being said, we'll always keep looking at that metric on an ongoing basis.

Rod: So if we see that we are negatively impacting liquidity in any way, we can change the vehicle and that's where the third vehicle off capital return, which is a special dividend is always available to us. So I think we have exercise that flexibility in the last three years very prudently and we intend to do that moving forward.

Rohit Gupta: So, if we see that we are negatively impacting liquidity in any way, we can change the vehicle. And that's where the third vehicle of capital return, which is a special dividend, is always available to us. So, I think we have exercised that flexibility in the last three years very prudently, and we intend to do that moving forward.

Soham Jairaj Bhonsle: You got it. Okay. Thank you for the color.

Speaker Change: Got it okay. Thank you for the color and then.

Soham Jairaj Bhonsle: And then, you know, on the embedded equity disclosure this quarter, super helpful, you know. I mean, it's remarkable that 70% of the portfolio still has 20 and 20% or more, and even your DQs are sitting on 80% or more at 20%. So I mean, assuming that home prices sort of just remain stable, right? And they don't go up or down.

Rod: On the embedded equity disclosure this quarter Super helpful to remark about 70% of the portfolio sale as 20%, 20% or more than even your DQ as youre sitting on 80% or more at 20%. So I mean, assuming that home prices sort of just remained stable right and they don't go up or down.

Rohit Gupta: And in a scenario where the borrower defaults today, you know, what do you actually think is a realistic scenario for what you could be on the hook for? Because you still have reinsurance that, you know, is sitting on the back end here. And so I think it would be helpful if you could sort of characterize for investors the range of outcomes, you know, in a potential default scenario, assuming that embedded equity just remains stable going forward.

Rod: And in the scenario, where sort of the borrower to give thoughts today.

Rod: When do you actually think is it realistic scenario for.

Rod: What you could be on the hook for because you still have reinsurance that is sitting on the backend here and so I think it will just be helpful. If you could sort of characterize for investors the range of outcomes.

Rod: In a potential default scenario, assuming that embedded equity just remains stable going forward.

Rohit Gupta: Yeah. So, a very good question. So, I would say from an embedded equity perspective, that is a tailwind for our portfolio. I think a good expression of what you see on page 13, the numbers you just mentioned, are driven by some pretty significant increases in 2020 and 2021. So, I do want to acknowledge that because that is not normal in our market. I think the home price appreciation numbers you're seeing right now, including the number that just came out a few days ago, are much more in the range of what we have seen historically. So, you will see that normalize over a period of time.

Speaker Change: Yes, so very good question. So I would say from an embedded equity perspective that is a tailwind for our portfolio.

Speaker Change: A good expression of what you see on page 13. The numbers you just mentioned are driven by some pretty significant increases in 2020 in 2021, So I do want to acknowledge that because that is not normal in our market I think the home price appreciation numbers youre seeing right now, including the number that just came out a few days ago are much more than that.

Rohit Gupta: That being said, home price appreciation is a tailwind for us, both on frequency and severity when it comes to losses. Frequency because consumers, before they actually go into delinquency, if they're able to sell their home because they have enough equity built up, that frequency never happens. And the second thing, even if they go delinquent and they can sell their home using a pre-sale instead of getting foreclosed on, that reduces the frequency and, in some cases, the severity.

Speaker Change: The range of what we have seen historically, so you will see that normalize over a period of time.

Speaker Change: That being said home price appreciation is a tailwind for us both on frequency and severity when it comes to losses frequency because consumers before they actually go into delinquency. If they are able to sell their home because they have enough equity built up that frequency never happened and then second thing even if they go delinquent and they can sell their <unk>.

Rohit Gupta: So, I think those are the mitigants in our market. It's difficult to put that in quantitative terms because consumers who stay delinquent and finally get to claim are typically the consumers where the home price appreciation and embedded equity was not sufficient to completely offset the claim. So, by the time consumers get to claim, those claims do come closer to 100% severity. But along the journey, we see improved cure rates because of the factors you outlined. And if you look at the cure rate performance of our book over the last eight quarters or so, you see that performance coming through driven by those factors.

Speaker Change: Using a pre sale instead of getting foreclosed on that reduces.

Speaker Change: Frequently in some cases severity. So I think those are the mitigate in our market.

Speaker Change: Difficult to put that in quantitative terms, because consumers will stay delinquent and finally get to claim are typically the consumers where that home price appreciation and embedded equity was not sufficient to completely offset the claim but by the time consumers get to claim those plans do come closer to $100.

Speaker Change: Severity, but along the journey, we see improved cure rates because of the factors you outlined and if you look at the cure rate performance of our book over the last eight quarters or so you see that performance coming through driven by those factors.

Soham Jairaj Bhonsle: Got it. And if I could just squeeze one more, you know, NIW results are still coming in for the whole sector, but it does look like your NIW declined a little bit more than peers this quarter. So I'm just wondering, you know, what you were seeing in the market out there, right? Are you taking a different view on certain cohorts? Anything else that's notable would be

Speaker Change: Got it and if I could just squeeze one more.

Speaker Change: The results are still coming in for the whole sector, but it does look like you are in I W declined a little bit more than peers. This quarter. So I'm just wondering what were you seeing in the market out there right. Any are you taking a different view on certain cohorts anything else. That's notable it would be helpful. Thanks.

Soham Jairaj Bhonsle: So thank you for the question. Are you referring to year-over-year decline or quarter-over-quarter? Year-over-year. Yeah.

Speaker Change: So thank you for the question are you referring to year over year decline or water working area year over year, yes. So yes. So when you think about.

Rohit Gupta: So when you think about our market participation, the first thing, as you said, we don't have final market share numbers. So it's still tough to tell where we landed in the overall market. We'll know on Friday.

Speaker Change: Our market participation first thing as you said, we don't have final market share number so still capital where we landed in the overall market will know on Friday.

Rohit Gupta: The second thing I would just emphasize is that when we think about our NIW, we like the profile of the $10.5 billion we wrote. We like the profile from a pricing and mix perspective. I made the point in my prepared remarks that we saw pricing in the market being constructive, and we took several pricing actions in the market to make sure that from a risk selection perspective, we were able to make sure that we were able to. So, that all being said, I would say, from a year-over-year perspective, our market share in the first quarter of 2023 was actually slightly elevated. And that could be driven by certain other players pulling back from the market based on their risk appetite.

Dean Mitchell: Second thing I would just emphasize that when we think about.

Douglas Michael Harter: Our <unk>, we like the profile of the $10 5 billion. We wrote we like the profile from a pricing and mix perspective, I made the point in my prepared remarks that we saw pricing in the market being constructive and we took several pricing actions in the market to make sure that from a risk selection perspective.

Rohit Gupta: One prospect that we are actually driving the right book.

Rohit Gupta: That all being said I would say from a year.

Rohit Gupta: Year over year perspective, our market share in first quarter 2023 was actually slightly elevated.

Rohit Gupta: That could be driven by certain other players pulling back from the market based on their risk appetite our risk appetite has been generally very stable, but right now we believe that our market participation is very much in line with our expectations. We think of our share in that 16% to 18% range and we believe that's where we're kind of landing and.

Rohit Gupta: Our risk appetite has been generally very stable, but right now, we believe that our market participation is very much in line with our expectations. We think of our share in that 16% to 18% range, and we believe that that's where we are kind of landing. And if you look at our participation in the fourth quarter 2023 and first quarter 2024, you'll see those numbers generally being stable. We might have been flat, we might have lost a little bit, but we don't think that that's an issue with our strategy.

Rohit Gupta: If you look at our participation in fourth quarter 2003 in first quarter 'twenty four youll see those numbers generally being stable we might have been flat, we might have lost a little bit, but we don't think that.

Rohit Gupta: And as a reminder, we don't focus on share as a metric. We focus on our right strategy of driving the right price for the right risk and managing our layered risk concentration. And we believe we are doing the right job on that front.

Rohit Gupta: That's an issue with our strategy and as a reminder, we don't focus on share as a metric we focus on kind of a right strategy of driving the right price for the right risk and managing our layered risk concentration and we believe we are doing the right job on that front.

Soham Jairaj Bhonsle: Got it. All right. Thanks a lot for the thoughts, guys.

Speaker Change: Got it alright, thanks, a lot congrats guys.

Rohit Gupta: Thank you. I would now like to turn the conference back to Rohit Gupta for any further remarks.

Speaker Change: Thank you Tom.

Rohit Gupta: Thank you I would now like to turn the conference back to <unk> for any further remarks.

Rohit Gupta: We appreciate everybody's interest in Enact, and I look forward to seeing you in New York at the BTIG Housing Ecosystem Conference next week. Thank you.

Rohit Gupta: Thank you Michelle.

Rohit Gupta: We appreciate everybody's interest in <unk> and I look forward to seeing you in New York at the BTG housing ecosystem Conference next week. Thank you.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Operator: Yes.

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