Q2 2024 NMI Holdings Inc Earnings Call
Good day and welcome to the India by Holdings second quarter 2024 earnings Conference call.
All participants will be listen only mode.
Speaker Change: If you need any assistance please signal a conference specialist by Christian the stocky followed by Gerard.
After today's presentation there'll be an opportunity to ask questions.
My question, you bet Christa they'd one on your telephone keypad.
Joel Your question. Please press Star then two please.
Speaker Change: Please note this call is being recorded.
Speaker Change: I would now like turn the corporate Secretary, Mr. John Swenson of management.
Go ahead.
Thank you operator.
Afternoon, and welcome to the 2024 second quarter conference call for National M. I.
Speaker Change: I'm, John Swenson, Vice President of Investor Relations and Treasury.
Joining us on the call today are Brad Shuster Executive Chairman, Adam Polyps are president and Chief Executive Officer, and Aurora Swiss Bank, our Chief Financial Officer.
Speaker Change: Yeah.
Financial results for the quarter were released after the close today.
Speaker Change: The press release may be accessed in a nice website located at national <unk> Dot com under the investors tab.
During the course of this call we may make comments about our expectations for the future.
Actual results could differ materially from those contained in these forward looking statements additional information about the factors that could cause actual results or trends to differ materially from those discussed on the call can be found on our website or through our regulatory filings with the SEC.
Yeah, so to the extent the company makes forward looking statements, we do not undertake any obligation to update those statements in the future in light of subsequent developments.
Speaker Change: No one should rely on the fact that the guidance of such statements is current at any time other than the time of this call.
Also note that on this call we may refer to certain non-GAAP measures in today's press release and on our website. We've provided a reconciliation of these measures to the most comparable measures under GAAP now I will turn the call over to Brett.
Brett: Thank you John and good afternoon, everyone.
I'm pleased to report that in the second quarter.
So lemme again delivered strong operating performance.
Continued growth in our insured portfolio and record financial results.
We also achieved a notable milestone.
<unk> the second quarter was a record $203 5 billion of high quality high performing insurance enforced.
It's the first quarter, our insured portfolio has surpassed 200 billion.
And the size and strength of our portfolio today serves to highlight the consistent and significant success, we've been liver delivering for so long.
Speaker Change: National M. I was formed with a goal to provide a differentiated commitment and standard of service.
And a clear vision as to how we should engage in the market to drive value for our borrowers our lender customers are.
Speaker Change: Our employees and our shareholders.
Speaker Change: And it's remarkable to reflect on all that we have achieved to date.
Yeah.
We've helped over 1.8 million borrowers gain access to a mortgage and.
And opened the door to affordable and sustainable homeownership and communities across the country.
We've established a broadly diversified national customer franchise.
Moving over 1500 lenders from a foundation of partnership Trust and innovation.
We have attracted a talented dedicated team who drive our success every day.
And cultivated a culture of collaboration and toured integrity and performance.
And we have consistently outperformed delivering exceptionally strong operating and financial results quarter after quarter.
We are leading the private mortgage insurance industry with discipline and distinction.
And I am as excited as I've ever been about the opportunity that we have to continue to outperform as we go forward.
Speaker Change: With that let me turn it over to Adam.
Speaker Change: Thank you Brad and good afternoon, everyone.
I'm delighted to talk to you today as I share brad's excitement about our milestone success and his confidence in the opportunity we have as we look ahead.
I'm also pleased to welcome Aurora with <unk> Bank as our new CFO.
Speaker Change: Aurora brings a wealth of experience and proven track record as a senior finance leader to National EMI.
And you'll have an opportunity to get to know her going forward.
Now to discuss the second quarter, we continued to outperform delivering significant new business production strong growth in our insured portfolio and record financial results.
We generated $12 5 billion of N IW volume and ended the period with a record $203 5 billion of high quality high performing primary insurance in force.
Speaker Change: Total revenue in the second quarter was a record $162 1 million gap.
GAAP net income was a record $92 1 million or $1 13 per diluted share and adjusted net income was a record $97 6 million or $1 20 per diluted share up 11% compared to the first quarter and 26% compared to the second quarter of 2023.
GAAP return on equity was 18, 3% for the quarter and adjusted ROE was 19, 4%.
Overall, we had an exceptionally strong quarter and are confident as we look ahead.
The macro environment and housing market have remained resilient in the face of elevated interest rates, our lender customers and their borrowers continue to rely on us in size for critical Downpayments support and we see an attractive and sustained new business opportunity fueled by long term secular trends.
And exceptionally high quality and short portfolio and our credit performance continues to stand ahead.
Speaker Change: Our persistency remains well above historical trend and when paired with our strong and IW volume has helped to drive consistent growth and embedded value gains in our insured book.
And we continue to manage our expenses and capital position with discipline and efficiency building a robust balance sheet. That's supported by the significant earnings power of our platform.
Notwithstanding these strong positives however, macro risks still remain and we've maintained a proactive stance with respect to our pricing risk selection and reinsurance decisioning. It's an approach that has served us well and continues to be the prudent and appropriate course.
More broadly we've been encouraged by the continued discipline that we see across the private mi market underwriting standards remain rigorous and the pricing environment remains balanced and constructive.
Overall, we had a terrific quarter delivering strong operating performance continued growth in our insured portfolio and record financial results.
Looking ahead, we're well positioned to continue to serve our customers and their borrowers invest in our employees and their success drive growth in our high quality insured portfolio and deliver through the cycle growth returns and value for our shareholders with that I'll turn it over to Aurora.
Aurora: Thank you Adam I'm excited to join National online I am pleased to report that we achieved record financial results in the second quarter with significant new business production strong growth in our high quality insured portfolio record top line performance favorable credit experience.
Expense efficiency and record net income and earnings per share.
Total revenue in the second quarter was a record $162 1 million adjusted net income was a record $97 6 million or $1.20 per diluted share and adjusted return on equity was 19, 4%.
We generated $12 5 billion, then I W and our primary insurance in force grew to 203 5 billion up two 1% from the end of the first quarter and six 4% compared to the second quarter of 2023.
Speaker Change: Hello, everyone Persistency was 85, 4% in the second quarter compared to 85, 8% in the first quarter persistency remains well above historical trend and continues to serve as an important driver of growth in embedded value in our insured portfolio.
Net premiums earned in the second quarter were a record $141 2 million compared to 136 7 million in the first quarter and 126 million in the second quarter of 2023.
Net yield for the quarter was 28 basis points up from 27 six basis points in the first quarter call.
Oreo, which excludes the cost of our reinsurance coverage on the contribution from cancellation earnings was 34 three basis points.
Up from 34.1 basis points in the first quarter.
Investment income was $20 7 million in the second quarter compared to $19 4 million in the first quarter.
We saw continued growth in investment income during the period as we deploy new cash flows and reinvested Worryingly charity favorite Boise money right.
Total revenue was a record $162 1 million in the second quarter up three 8% compared to the first quarter and 13, 6% compared to the second quarter of 'twenty to 'twenty three.
Underwriting and operating expenses were $28 3 million in the second quarter compared to $29 8 million in the first quarter.
Our expense ratio was at a record low 21% in the quarter.
Highlighting the significant operating leverage embedded in our business and the success, we've achieved in efficiently managing our cost base.
We have long signals, our expectation to achieve and sustain a low to mid twenty's an expense ratio and are proud to be delivering on this goal.
Speaker Change: We have a uniquely high quality insured portfolio and our credit performance continues to stand ahead. We had 4904 defaults at June 30, compared to 5109 at March 31.
And our default rate declined to 76 basis points at quarter end.
Claims expense in the second quarter was 276000 compared to $3 7 million in the first quarter.
Interest expense was $14 7 million compared to 8 million in the first quarter interest expense in the second quarter included 17 million of nonrecurring cost incurred in connection with the successful refinancing of our senior notes and revolving credit facility.
Speaker Change: GAAP net income was a record $92 1 million.
Speaker Change: Or one dollar and 13 cents per share per diluted share.
Adjusted net income, which excludes costs incurred in connection with our debt refinancing was a record $97 6 million or $1.20 per diluted share.
Speaker Change: That's up 10.7% compared to the first quarter and 25, 9% compared to the second quarter of 'twenty to 'twenty three.
Speaker Change: Total cash and investments were $2 6 billion at quarter end, including 149 million of cash and investments at the holding company.
Speaker Change: In May we completed the refinancing of our outstanding debt.
Issuing $425 million.
Five year senior unsecured notes and renewing our $250 million five year revolving credit facility on incrementally favorable terms.
Speaker Change: We're pleased with the success that.
We've achieved in the market, our refinancing was leverage neutral and we lowered our cost of debt capital from southern and create on the notes we redeemed two 6% with this issue.
Do you expect to save approximately $3 5 million in interest expense annually with the success of the steel.
Shareholders' equity as of June 30th was 2 billion and book value per share was $25 65.
Book value per share, excluding the impact of net unrealized gains and losses in the investment portfolio was $27 54.
That's up four 2% compared to the first quarter and 17, 1% compared to the second quarter of last year.
In the second quarter, we repurchased $26 $8 million of common stock retiring $844000 a share.
In shares at an average price of $31 79.
As of June 30th we had $124 9 million of repurchase capacity remaining under our existing program.
At quarter end, we reported total available assets under P nearest of $2 8 billion and risk based required assets of 1.17 billion.
Excess available assets were $1 2 billion.
Speaker Change: Overall, we delivered standout financial results during the quarter with strong growth in our high quality insured portfolio and record top line performance favorable credit experience and continued expense efficiency driving bought a record bottom line profitability and strong returns.
With that let me turn it back to Adam.
Thank you Aurora, we had terrific quarter once again, delivering significant new business production strong growth in our insured portfolio and record financial performance. Looking ahead, we're confident we have a strong customer franchise.
The team that's driving us forward everyday and exceptionally high quality book covered by a comprehensive set of risk transfer solutions, a robust balance sheet and the significant earnings power of our platform. We are leading the market with discipline and distinction and are well positioned to continue delivering differentiated.
Growth returns and value for our shareholders.
Before closing I also wanted to note how proud I am for the ninth consecutive year National M. O. I has been recognized as a great place to work great place to work as a global authority on workplace culture employee experience and leadership and partners with Fortune magazine to produce the annual Fortune 100 best companies to work for.
Speaker Change: Lest we believe that the quality of our team and the culture that we've established our key competitive advantages and it's gratifying to again be recognized for these strengths with that I'll ask the operator to come back on so we can take your questions.
Okay.
Thank you we will now begin the question and answer session.
I'll ask you a question you'd like her star then one on your telephone keypad.
If youre using a speakerphone please pick up the handset before pressing the case.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Your first question comes from Doug Harter with UBS. Please go ahead.
Oh, Thanks, you've now seen the the core yield kind of trend up for the past couple of quarters can you just talk about your expectations for that going forward and kind of how that the new premiums you're writing kind of compare it to the enforce shield core yield.
Sure I R R.
Our premium yield has been trending higher for several consecutive quarters and we saw continued strength in the quarter and in terms of driver. It's really two things. It's the continued strength of our persistency experience and it's accumulative gains that we've achieved in the new business pricing over the past year.
Speaker Change: Uh huh.
So our net yield I'm I'm not sure if that was part of your question reflects this core strength and further benefited from a credit performance during the quarter since we had lower losses driving an increase in our profit commission and decline in reinsurance cost.
Yeah, Doug just to layer on to that I'd say broadly speaking what we're achieving now from a new business standpoint is generally accretive to the overall yield profile of the portfolio.
Truckload environment for us.
Yeah.
Great. Thank you both.
Okay.
Your next question comes from my Heart Bhatia with Bank of America.
Speaker Change: Please go ahead.
Good afternoon. Thank you for taking my question, especially at our Aurora Congratulations on the role and welcome look forward to working with you.
Let's see cure activity, obviously, although I just wanted to check is that anything unusual to call out I mean, the kill as well higher than new defaults. This quarter, we've seen kill activity would be particularly strong in the last few quarters how.
How are you guys thinking of the trend and kill activity here and like really the default rate is what I'm trying to get at like do you think it increases as more of the two.
Speaker Change: 'twenty, one 'twenty two portfolio and does it speak loss Yours do you think this is the current rate is stable.
And this market backdrop in these conditions.
Just your outlook on default rate and what's driving material activity to be so strong.
Sure why don't we parsed it in terms of one what are we seeing actually developed in the quarter and is there anything specific underlying the performance that we saw in them too. We can talk about the go forward and how do we think about what I'll call broadly a normalization, maybe unless the war to touch on the care experience that we saw in the quarter and then I can talk about the go forward.
Speaker Change: Yeah, where we're really encouraged by the credit performance obviously.
We're all portfolio, including the trends in our default population in terms of specific ins and outs with a Florida is everything was pretty constructive in our border Army notice rates declined our cure rate improved to the highest level in the past two years and overall this is Paul.
Speaker Change: Population declines.
Now, we do generally expect to see some quarter on quarter improvements in Q1 and Q2. So we typically see worse performance in the fourth quarter around the holidays and people start to catch up in the first quarter around tax refund season, and you do see some of the seasonal benefits leading into the second.
Speaker Change: So we do see that seasonal impact in the quarter that are that we've just discussed.
But overall, Florida words remain well situated with strong credit profile.
Speaker Change: They're in loans that were originated under very rigorous underwriting or with you and used to fund the purchases.
Speaker Change: And many he has as you indicated.
<unk> to benefit from significant embedded equity positions.
Yeah. So in terms of the go forward right. It's it's a really strong quarter for us borrowers are performing when they run into issues, they've generally been able to recover ensure their defaults before we see claims develop looking ahead, let me hear you touch on as we talked about it for quite some time now we do expect that our default count will increase over time, both with the natural gas.
Growth and seasoning of our portfolio and the seasoning really as some of the more recent vintages begin to migrate into sort of typical loss in current periods and with that we do expect that over time, we'll see a a broader normalization of our credit experience. After what's really been an extended record run but one.
Speaker Change: For all our performance continues to be strike quite strong we're really encouraged by obviously what happened and what we saw developed in our portfolio, so far and and we're optimistic as we look forward just really given the strength of our underlying portfolio quality and how well positioned borrowers are today across the board.
Speaker Change: Got it.
Okay, well in terms of the expense outlook.
Sure.
I think your guidance that was reiterated in the prepared remarks was for low to mid twenties expense ratio.
Well like you are basically at the bottom of that range already presumably youre still getting more scale.
Speaker Change: I'm just trying to like that's something that's going to push the expense ratio higher the next couple of quarters.
Speaker Change: <unk>.
Speaker Change: Why do I want to go below the range to me here. So let me also I'm just trying to distinction and it's important one.
What are referred to is that our goals and we've shared that our goals over the long term or it can be delivering low to mid twenty's expense ratio, we're really proud to be achieving that is.
Specifically not guidance right and don't take it please as guidance either for this year or for the longer term. It's really a goal that we have and how we want to manage our business the discipline that we want to maintain.
Speaker Change: From an expense efficiency standpoint, but it's not specific guidance.
Guidance as to the go forward will also not give you guidance that Robert will give you some context at least.
Okay.
So we've always been focused on managing the business with discipline and I'm trying to be efficient and we're really proud of the record low 21% expense ratio in the quarter.
But as we look out we do expect to see some growth in net operating expenses and we continue to want to invest in our people systems risk management strategies and overall growth throughout the year.
Speaker Change: Okay. Thank you for taking my question.
Yes.
Your next question comes from Rick Shane with J P. Morgan. Please go ahead.
Richard Barry Shane: Hey, everybody. Thanks for taking my questions and Aurora Welcome just two things one is sort of a big picture. If we look at the portfolio now from an insurance in force of risk in force perspective about 29% of the portfolio is now 23 24 vintage.
Loans, they are a very different from an affordability perspective than the core of the portfolio.
He is one of the things that we need to think about over time sort of a bifurcation of this portfolio in terms of credit performance.
Yeah, Rick it's a it's a good question what I would say that's certainly the case to a certain extent, but let me parse it right. So.
Richard Barry Shane:
Our most recent vintages and let's put 2022 into the mix there because the note rate underlying our 2022 book.
Really the back end of it is also meaningfully higher than that sort of the historical lows that we saw in the 2020 and 2021 books, but regardless of the vintage.
The approach that we've taken to underwriting to risk selection to managing our mix. It's been the same and so whether it's a first half 'twenty for full year 2023, or 2019 2020 vintage they're all high quality right. We've applied that same rigor in risk selection.
Richard Barry Shane: As we always have we source comprehensive reinsurance protection on all of those vintages and so there's really there's no notable difference in the underlying borrower loan level geographic or product risk attributes that underpin.
Different vintage years of production.
So the real difference is one are the note rate and two are the amounts of embedded equity now the note rate actually which I think is what you were focused on we don't necessarily expect that that will be a core driver of differences in credit performance because remember everything is going through a rigorous underwriting process and so yes the.
Richard Barry Shane: The profile of the loan and the headline affordability on say a early 'twenty four loan versus a 'twenty 'twenty or 2021 mortgage is different but the borrowers who qualified for that loan in 2024 is equally a well qualified with whatever the headline our credit statistics are for that particular loan that particular purchase.
As they were in 2020 or 2021.
There is I'd say, an intangible benefit right and there may be an extra motivation for a borrower in 2020 or 2021 to try to stay current on their loan because the intangible value of having a 3% or sub 3% note rate and we'll have to see how that plays out but the much bigger difference driver of differences that we expect to emerge over time.
It's simply the amount of embedded equity right. The borrowers who took out loans in 2020, 2021 and purchased a home have seen record amounts of home price appreciation significant acquisition of that risk and that provides them with both incentive to stay current and options to cure their default if they ultimately fall behind that may not be avail.
Before more recent borrowers. So we do expect that over time, we'll see differences in the performance of different vintages, but it is not because of the underlying credit profile of the borrower or the underlying note rate, it's really because of the HVA path from origination.
Got it its really helpful distinction Adam. Thank you and then just a small weird question in general persistency seem pretty consistent cross the vintages we.
Speaker Change: We did for some reason at least within our model showing that 2020, persistency tick down more severely than any of the other cohorts.
I'm curious if that's something you guys observed as it is just structural due to the passage of time or is it something we.
We need to think about as we build our models out.
Yeah. It's a good question I can't give you a specific guidance from a modeling standpoint, we'll share with you what we're observing so one remember the a the lower the underlying note rate the more of a monthly payment that goes towards principal pay down. So there is a dynamic where you'll even though you have this remarkably low underlying note rate and that's obviously.
You know largely eliminated refinancing activity you do have this just natural paydown dynamic on the loans that that factors through when it does feed into the persistency calculation itself. The other one though is like the locked in time to lock in effect for existing homeowners because of the the intangible value right the huge benefit of having a 3% or.
Speaker Change: Sub 3% note rate at the same time families do have needs right and over time, you may need more space you may have different financial situation wanted different living experience and a lot of that we think is going towards refinancing remodeling, perhaps I'm, sorry, not refinancing, we modeling, which can be funded with HELOC or some other type of.
Additional leverage on the home when that happens we do see that there is a an appraisal that sourced in that appraisal may give rise to some degree of cancellation activity on the on some of those vintages that still have really low underlying the rates and so there's a degree of that coming through.
Got it really interesting thank you guys.
Your next question comes from Bose, George with K B W. Please go ahead.
Hey, everyone. Good afternoon.
Speaker Change: One more on losses can you just remind us in terms of is there a normalized loss ratio that you know youre underwriting to for your current books of business.
No. So there is no target loss ratio per se right. Our goal ultimately when we're pricing business, we want a price on I'd say, a return neutral basis across the entirety of the risk spectrum and that return that we target is a 15% unlevered return on P mirrors assets across the risk spectrum. Obviously, you know that's what we hope to achieve.
That's our price expectation different a different risk cohorts have meaningfully different.
You know loss expectations embedded in that pricing framework, but theres, no say normalized loss ratio that'd be either price to word that we would necessarily expect on a particular pool of business.
Okay, great. Thank you and then could you just help me with the math on the reserve for the new notices in the quarter I think you do it net of.
Releases in IBM or is there sort of a gross number that you can give.
Yeah, Yeah. So it's a little the other item that just always gets a little bit interesting is the reserve table that occurrence a year. Its current year not current period. So embedded in the number that you see which I believe is around 17 million.
Million or so are actually also releases on the loans that had first immersion defaults in the first quarter that short out and so the the number to focus on though is if.
Speaker Change: If you took away all of the favorable prior period development, what we established for new notices in the quarter was $27 million.
Okay perfect great. Thank you.
Okay.
Speaker Change: Your next question comes from sorry here in Boston with B T. R. J. Please go ahead.
Hey, good afternoon, everyone and welcome to the fold I guess first one you know Adam it looks like purchase in Italy was up nicely. This quarter for both you and your peer that just reported but you know if I sort of look at the industry forecast the range is sort of between negative top modestly.
So I guess any sense for whether the semi product is sort of being able to penetrate the market more at this point you gave in the stretched affordability or is it just a function of where folks are choosing to sort of pick up business in the quarter.
Yeah.
Speaker Change: That's a good question I honestly, but we've only had one other peer reports so we'll see how everything develops through the course of this week and I I can't necessarily speak to where.
Speaker Change: Where are where their focus but I'd say in terms of our broad expectations for <unk> market size through you know for the full year, we still expect that 2024 overall will be very similar to our to the volume at the industry you know.
Delivered in a in 2023, we see still see those long term underlying secular drivers of demand and activity come through we see resiliency in house prices, obviously supports larger loan sizes, even if origination activity by count is lower to a degree I think youre right some of the affordability.
That prevail more broadly across the market you know do you mean that an increasing number of borrowers need support for for their down payment, but last year, our industry and <unk> in 2023 was around $285 billion and we expect that will have a similarly attractive environment. When all is said and done.
This year, you know a little bit of movement up or down through the back half depending on how interest rates trend and you know where the macro goes but the $285 billion market up or down as a really constructive environment new business environment for us.
Yeah makes sense.
I guess on an H P. A you know we've seen a fair bit of inventory growth in some of the large housing markets, Texas, Florida.
But you know home prices still seem to be sort of holding in the states. I think you know, it's just a function of you know where the inventory.
Inventory.
The pricing is but you know in list prices have gone down.
Price cuts have gone up so I'm just wondering how are you assessing sort of the rest of the HPA center in some of these core markets.
Yeah.
Look it's something we need to monitor at all times broadly speaking we've been really encouraged obviously by the resiliency that we've seen on a national basis. I think you know the June data that came out shows broadly speaking, we're still setting a new record highs and that's encouraging.
But.
You you've touched on it exactly right we are seeing I'd say.
Differences emerge in certain local markets and you know what.
We would identify really at the top of the list parts of Florida, and Texas right areas that saw some of the most significant price increases during.
Speaker Change: During the pandemic rally, but that are now facing I'd say more pronounced supply demands and affordability constraints and as a result, we do see that house prices are under pressure in certain local markets.
And one of the keys for US is that rate GPS provides us with the ability to price differently in different geographies to account for risk and so we havent rate GPS the ability to price differently across 950 different msas and we have taken actions in markets, where we see some of those indications really.
Rising inventories a bit of pressure already emerging from our house price standpoint, we want to make sure that we're pricing for that risk appropriately when it's coming into our book and that we're managing the overall flow of that risk onto our balance sheet as well.
Okay, Great and then just a quick one are on the buyback I didn't hear a number for the quarter. If you could just provide that and then just more broadly you know which share sort of trading at one five times book.
Just wondering how sensitive you are to valuation going forward and you know is there a more systematic way to sort of return you know control you're essentially to drive the ultimate return profile that you like thank you.
Sure. So the number was $26 8 million in the quarter and that's a 31 79 average share price.
Adam: So maybe I'll, maybe I'll, let Adam address the second piece of your question, yes. Thanks, Laura I'd look at in terms of how we think about valuation impacting them.
Packing repurchase activity look I think the core our core goal of our reproach purchase program is really to rightsize, our funding profile and optimize our capital position and support our strong mid teen return goals over time we.
We would obviously like to to buy low and see our shares outperformed its it's what we've been doing with great success for the last two years I think we've we've repurchased now a little over $200 million.
Stock at an average price of $24 59, and so that goal of buying low and seeing our stock perform we certainly met but we don't have I'd say brightline valuation thresholds that really will.
Sharply dictate how we are you know.
How we proceed from where we are as we look ahead, we expect that will continue to be in the market executing under our program.
Although it's also likely that we'll we'll naturally.
See the pace of our execution activity fluctuate either up or down depending on where our stock price moves a period to period and you know with with recent rally in our stock price I wouldn't be surprised if we have a a modestly slower pace of repurchase activity in Q3, as we see how valuation develops.
Okay, great. Thanks, a lot for the box.
Okay.
Adam: Yeah.
Once again, if you wish to ask a question. Please press Star then one.
Your next question comes from Mark Hughes of choice.
Go ahead.
Yeah, Thank you and good afternoon.
Or what was the new money yield in the quarter.
So it's come off a little bit quarter over quarter, it's what I'd characterize as the high fours between 475 and 5%.
Hi, I'm sorry, it was the question about the quarter, where our current new money yield.
Adam: Hum.
I'll take both it sounds like.
The number was 75 five was a kind of a high.
Our current new money yield, where we're putting money to work, where we put money to work in the quarter was a little bit north of 5% and so I think on our last quarterly call. We said, we are putting new money to work at five to five and a half percentage it came down a little bit during the second quarter again still averaging about 5%.
And now we're putting money to work in what I'd characterize as the high fours.
And Mark all of which is still valuable for US obviously, the overall book yield on the current portfolio is 3%. So it still provides a nice uplift.
Yeah exactly.
Adam I know you touched on I think a lot of the issues that go into this question, but the.
New pricing being accretive to the yield even as your loss experience continues to be quite good.
Talked about a balanced and constructive competitive environment, one might think under the circumstances.
Yield would be perhaps neutral or maybe even a dilutive to the overall.
Premium yield.
What are the kind of shifting the balance to make it more accretive are in your opinion.
Yeah, I mean, so look I'll say that the March toward right. We're talking about fractions of a basis point of movement right.
It's not as though we went from 34.1 basis points of core yield last quarter to 37 now I think we went from 34.1 to $34 three so.
We put it into context there.
Look I'll touch on both.
A little bit more on yield and also just a little more on the pricing environment I'd say from a pricing standpoint, what's most important right. What's most important is that we find that right point of balance, where we can fully and fairly support our customers and their borrowers but at the same time through all markets, but at the same time make sure that we're charging a price.
In any given market that is.
Appropriate to protect our balance sheet and our ability to deliver the returns and value that we think are necessary and appropriate for shareholders and right now.
We believe that the market and what we're achieving in the market is at that point, the balance which is really constructive as we look forward from a yield standpoint, we've had a nice bit of tailwind over the last several quarters right. As you were mentioning sort of our yield and selecting higher in terms of our outlook I'd say broadly speaking.
King.
I'm going to use 34, 1% to 34, three as generally stable as opposed to necessarily marching dramatically higher we do expect that our core yield.
He's going to remain generally stable through the.
Through the remainder of the year and it's going to be supported by the strong persistency that we see and also the current pricing environment.
Our net yields though it is going to benefit to a degree from that core stability, but its also going to be impacted by two things, it's going to be impacted by anything that happens from a reinsurance standpoint, but much more importantly, it's going to be impacted by our loss experience because you'll recall that.
Our profit commission and ceded losses actually run through to a degree through our premium revenue.
If losses increase in our ceded losses increased it weighs down our profit commission, even though economically we get the same reimbursement coming through as a claims benefit and so that could cause some fluctuation up or down further in our net yield. So that's where we see things. It's a it's a really constructive environment and really at a point of balance for what we're doing.
Wing and leaning into support borrowers and our customers and also what it allows us to deliver from a return standpoint.
Adam:
I appreciate that detail. Thank you.
Scott Gregory Heleniak: Your next question comes from Scott <unk> with RBC capital markets. Please go ahead.
Yes. Good evening, just a question on an idea of maybe for the quarter wondering if you had any sense. Then you could share on what percent. You think are then IW as first time homebuyers and how that might compare with what we're seeing in the marketplace, which is still a still a low number of first time homebuyers, but just wondering how.
Your your book might compare with kind of what's out there.
Broadly speaking I think our product is is primarily geared towards first time homebuyers right, they're the ones, who typically need downpayments support the most.
Speaker Change: They are starting out they don't have the savings and they haven't benefit from equity appreciation on the home that they are selling to get to that 20% down payment I don't have the stats off the top of my head, though as to what portion of the $12 5 billion. We wrote in the in the second quarter.
Speaker Change: Was for first time homebuyers, but we're happy to follow up and share that with you.
Okay great.
Yeah, and the second question I had was just on the footnote you had about.
Related to the reinsurance.
Speaker Change: Termination and.
<unk> previously outstanding excess of loss reinsurance agreement with El Khoury.
On July 22, 2023 in July 25, 2024 is there is there going to be an impact in Q3, then that we should be aware of.
Weighted to that.
Yeah, we're getting we're gonna stay at about $700000 per quarter in terms of just expense associated with that deal and there's no impact to our teen parents available asset. So we're constantly looking at the portfolio, we have outstanding islands, and quota shares and extra wells and thinking about ways.
Speaker Change: To optimize them and make them more efficient.
Okay. Thanks, a lot.
And just.
The team around the table is giving me the stats you could share with you of the $12 5 billion, 52% was was volume in support of first time homebuyers.
Okay. That's great. That's that's that's well above the what the number I keep saying somewhere around a third a third a 30 or 40%. So that seems like it's all about for sure.
This concludes our question and answer session I would now like to turn the conference back over to management for any closing remarks.
Well, thank you again for joining us.
We will be participating in the Jpmorgan feature of financials for them virtually on August 13th and 14th and the Barclays Financial Services Conference in New York on September 19th we look forward to speaking with you again soon.
Yeah.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Yeah.
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