Q2 2024 Enact Holdings Inc Earnings Call

Speaker Change: Good day and thank you for standing by. Welcome to the ENAC's Q2 2024 Earnings Conference Call. At this time, all participants are in listen-only mode.

Operator: for Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask questions during the session, you will need to press Star 11 on your telephone. You will then hear an automated message advising that your hand is raised.

Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. Please be advised that today's conference is being recorded.

Operator: Please be advised that today's conference is being recorded.

Daniel Kohl: I would not like to hand the conference over to Mr. Daniel Kohl, Vice-President of Investor Relations. Please go ahead.

Daniel Kohl: I would now like to hand the conference over to Mr. Daniel Kohl, Vice President of Investor Relations. Please go ahead.

Daniel Kohl: I would now like to hand the conference over to Mr. Daniel Kohl, Vice President of Investor Relations. Please go ahead.

Daniel Kohl: Thank you and good morning. Welcome to our second 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. The earnings materials we issued after market closed yesterday contain our financial results for the quarter, along with the comprehensive set of financial and operational metrics. These are available on the Investor Relations section of our website.

Daniel Kohl: Thank you and good morning. Welcome to our second 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. 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. This call is being recorded and will include the use of forward-looking statements. Additionally, they are subject to risks and uncertainties, which may cause actual results to be materially different.

Speaker Change: Rohit will provide an overview of our business performance and progress against our strategy.

Speaker Change: Dean will then discuss the details of our quarterly results before turning the call back to Rohit for closing remarks.

Speaker Change: We will then take your questions.

Daniel Kohl: 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 risk and uncertainties, which may cause actual results to be materially different. And we undertake no obligation to update or revise such statements as a result of new information.

Daniel 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 SEC, which will be available on our website. Please keep in mind the earnings materials and management's prepared remarks today include certain non-GAAP measures. Reconciliation 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.

Daniel Kohl: With that, I'll turn the call over to Rohit.

Rohit Gupta: Thank you, Daniel.

Rohit Gupta: Good morning, everyone. Our second quarter results concluded an excellent first half of 2024. We remain focused on our priorities of driving profitable growth, maximizing efficiency, and creating value for our shareholders. Our disciplined execution across each of these translated into strong financial performance. During the quarter, we reported adjusted operating income of $201 million, up 21% sequentially and 13% year-over-year. Adjusted EPS was $1.27. Adjusted return on equity was a solid 17%, and insurance in force for the record $266 billion, up 1% sequentially, and up 3% year-over-year. As we mentioned last quarter, we continue to navigate to a complex operating environment.

Rohit Gupta: We remain focused on our priorities of driving profitable growth, maximizing efficiency, and creating value for our shareholders. While macro factors such as inflation, higher interest rates, and geopolitical conflicts remain potential risks, there are a number of positive trends supportive of housing and credit. Over the longer term, the drivers of demand also remain intact as a growing number of people with less than 20% down payment resources reach the typical age for purchasing their first home.

Speaker Change: Adjusted EPS was <unk> 27, adjusted return on equity was a solid 17% and insurance in force was a record 266 billion up 1% sequentially and up 3% year over year.

Speaker Change: As we mentioned last quarter, we continue to navigate through a complex operating environment.

Rohit Gupta: The U.S. economy is holding up well with a strong labour market and household balance sheets that remain healthy overall. while macro factors such as inflation, higher interest rates, and geopolitical conflicts remain potential risks, there are a number of positive trends supportive of housing and credit. The frequency rates for prime mortgage borrowers are consistent with pre-pandemic levels. Our manufacturing quality continues to be strong, and our portfolio continues to retain high embedded equity. Over the longer term, the drivers of demand also remain intact as a growing number of people with less than 20% down payment resources reach the typical age for purchasing their first form.

Speaker Change: U S economy is holding up well with a strong labor market and household balance sheets that remained healthy overall.

Speaker Change: While macro factors such as inflation higher interest rates and geopolitical conflicts remained potential risks there are a number of positive trends supportive of housing and credit.

Speaker Change: Delinquency rates for prime mortgage borrowers are consistent with pre pandemic level.

Speaker Change: Our manufacturing quality continues to be strong.

Speaker Change: Our portfolio continues to retain high embedded equity.

Speaker Change: Over the longer term the drivers of demand also remain intact as a growing number of people with less than 20% down payment resources reached the typical age for purchasing their first phone.

Rohit Gupta: Overall, we are confident that mortgage insurance will continue to be a crucial resource to both buyers and lenders alike. Higher rates continue to benefit persistency, which again offsets the effect of a higher rate environment on origination volumes and helps drive insurance-enforced growth. At quarter end, the risk-weighted average FICO score of the portfolio was 745, the risk-weighted average loan-to-value ratio was 94 percent, and layered risk was 1.3 percent. The delinquency rate in the quarter was 2%, flat as compared to last quarter and consistent with our expectations.

Rohit Gupta: Overall, we are confident that mortgage insurance will continue to be a crucial resource to both buyers and lenders alike. Higher rates continue to benefit persistency, which again offset the effect of a higher rate environment on origination volumes and help drive insurance and post growth. The credit quality of our insured portfolio continues to be strong. At quarter end, the risk weighted average FICO score of the portfolio was 745, the risk weighted average loan-to-value ratio was 94%, and layered risk was 1.3%. Pricing remain constructive in the quarter, and we maintained our commitment to prudent underwriting standards. Our pricing engine allows us to deliver competitive pricing on a risk-adjusted basis, and we continued to underwrite and select risk prudently while generating attractive returns.

Speaker Change: Overall, we are confident that mortgage insurance will continue to be a crucial resource to both buyers and lenders alike.

Speaker Change: Higher rates continued to benefit persistent fee, which again offset the effect of a higher rate environment on origination volumes and helped drive insurance enforced growth.

Speaker Change: The credit quality of our insured portfolio continues to be strong at.

Speaker Change: At quarter end.

Speaker Change: Risk weighted average FICO score of the portfolio was 745 days.

Speaker Change: Risk weighted average loan to value ratio was 94% and layered risk was one 3%.

Speaker Change: Pricing remained constructive in the quarter and we maintained our commitment to prudent underwriting standards.

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

Rohit Gupta: The delinquency rate in the quarter was 2%, flat has compared to last quarter, and consistent with our expectations. During the quarter, we released reserves of $77 million, driven by favorable credit performance and our effective loss mitigation efforts. Based on continued strong cure performance and our current market expectations, we reduced our claim rate on new and existing delinquencies from 10% to 9% during the quarter. This change is aligned with our measured and prudent approach to loss reserves. We believe we remain well-reserved for a range of scenarios. Dean will have more to say on this shortly. We continue to operate from a position of financial strength and flexibility.

The delinquency rate in the quarter was 2% flat as compared to last quarter and consistent with our expectation.

Speaker Change: During the quarter, we release reserves of $77 million, driven by favorable credit performance and our effective loss mitigation efforts.

Speaker Change: Based on continued strong performance and our current market expectations.

Speaker Change: Reduce our claim rate on new and existing delinquencies from 10% to 9% during the quarter.

Speaker Change: This change is aligned with our measured and prudent approach to loss reserves.

Speaker Change: We believe we remain well reserved for a range of scenarios Dean will have more to say on this shortly.

Dean Mitchell: We continue to operate from a position of financial strength and flexibility.

Rohit Gupta: At quarter end, our PMI's sufficiency was 169% or $2.1 billion of sufficiency, and approximately 77% of our risk enforce was subject to credit risk transfers. We continue to execute against our CRT strategy during the quarter with an additional excess of loss transaction for the reducing of our credit risk and enhancing our capital efficiency. During the quarter, we issued $750 million in senior notes for the strengthening of our financial position by allowing us to refinance near-term majorities and saving $2 million annual interest expense. This was our first investment-grade debt issuance as a public company and the largest investment-grade debt issuance in the industry in over a decade.

Dean Mitchell: At quarter end, our Pmiers sufficiency was 169% or $2 $1 billion of sufficiency and approximately 77% of our risk in force was subject to credit risk transfers.

Rohit Gupta: We continue to execute against our CRT strategy during the quarter with an additional excess of loss transaction, further reducing our credit risk and enhancing our capital efficiency. During the quarter, we issued $750 million in senior notes, further strengthening our financial position by allowing us to refinance near-term maturities and saving $2 million in annual interest expense. Investing in attractive new business opportunities and returning excess capital to shareholders. Finally, we have continued to pursue strategic opportunities to extend our platform into compelling adjacencies that enhance our return profile, differentiate our platform, and leverage our core competencies.

Dean Mitchell: We continue to execute against our CRT strategy during the quarter with an additional excess of loss transaction further reducing our credit risk and enhancing our capital efficiency.

Dean Mitchell: During the quarter, we issued $750 million in senior notes further strengthening our financial position by allowing us to refinance near term maturities and saving $2 million in annual interest expense.

Dean Mitchell: This was our first investment grade debt issuance as a public company and the largest investment grade debt issuance in the industry in over a decade.

Rohit Gupta: The strength of our capital position and cash flows have allowed us to continue executing against our capital allocation priority. Party, which are supporting existing policy holders, growing our current business, investing in attractive new business opportunities, and returning excess capital to shareholders. On our last capital allocation priority, we continue to return capital to our shareholders. During the quarter, we repurchased $49 million of shares. As of June 30th, we have completed our $100 million share repurchase program and have $238 million remaining in our recently announced $250 million authorization. We also distributed $29 million for shareholders via our quarterly dividend.

Dean Mitchell: The strength of our capital position and cash flows has allowed us to continue executing against our capital allocation priorities.

Speaker Change: Which are supporting existing policyholders growing our current business <unk>.

Dean Mitchell: Investing in attractive new business opportunities and returning excess capital to shareholders.

Dean Mitchell: On our last capital allocation priority, we continue to return capital to our shareholders.

Dean Mitchell: During the quarter, we repurchased $49 million of shares.

Dean Mitchell: As of June 30, we have completed our $100 million share repurchase program and have $238 million remaining in our recently announced $250 million authorization.

Dean Mitchell: We also distributed $49 million with shareholders via our quarterly dividend.

Rohit Gupta: We now expect our total capital return to be between $300 and $350 million in 2024, reflecting our continued strong performance and balance sheet.

Dean Mitchell: We now expect our total capital return to be between 300 and $350 million in 2024, reflecting our continued strong performance and balance sheet.

Rohit Gupta: Finally, we have continued to pursue strategic opportunities to extend our platform into compelling adjacent fees that enhance our return profile, differentiate our platform, and leverage our core competencies. A year ago, we successfully launched an act re-expanding our platform into the GSE credit response of market. During the quarter, we continue to participate in the GSE CRT transactions that came to market. Since its inception, an act re-has performed well, maintaining a strong underwriting and attractive return profile. An act re-is sufficiently funded to support its growth for the foreseeable future and remains a long-term capital and expense-efficient growth opportunity.

Finally, we have continued to pursue strategic opportunities to extend our platform into compelling adjacencies that enhance our return profile differentiate our platform and leverage our core competencies.

Rohit Gupta: A year ago, we successfully launched Enact Re. Since its inception, Enact Re has performed well, maintaining a strong underwriting and attractive return profile. Enactree is sufficiently funded to support its growth for the foreseeable future and remains a long-term, capital and expense-efficient growth opportunity. Finally, I would like to take a moment to touch on our culture. At Enact, we strive to create a culture that encourages collaboration and is committed to maintaining an engaging work environment where our teams are at their best. With that, I will now turn the call over to D.

Dean Mitchell: Year ago, we successfully launched an accurate expanding our platform into the GSE credit risk transfer market during the quarter. We continue to participate in the GSE CRT transactions that came to market.

Dean Mitchell: Its inception, <unk> has performed well maintaining our strong underwriting and attractive return profile.

Dean Mitchell: And accuracy are sufficiently funded to support its growth for the foreseeable future and remains a long term capital and expense efficient growth opportunity.

Rohit Gupta: Finally, I would like to take a moment to touch on our culture. At an act, we strive to create a culture that encourages collaboration and are committed to maintaining an engaging work environment where our teams are at their best. I'm pleased to announce that during the quarter, an act was recognized as one of the best places to work by the Triangle Business Journal. We appreciate this acknowledgement of our leadership in the workplace and a testament to the strength of our team. Overall, we are pleased with our excellent performance in the first half of 2024. Looking ahead, we are focused on executing against our strategic priorities and are committed to maximizing value for all our shareholders.

Speaker Change: Finally, I would like to take a moment to touch on our culture at an act we strive to create a culture that encourages collaboration and are committed to maintaining an engaging work environment.

Dean Mitchell: Our teams are at their best.

Speaker Change: I am pleased to announce that during the quarter <unk> was recognized as one of the best places to work by the triangle business Journal.

Speaker Change: We appreciate the acknowledgment of our leadership in the workplace and a testament to the strength of our team.

Speaker Change: Overall, we are pleased with our excellent performance in the first half of 2024.

Speaker Change: Looking ahead, we are focused on executing against our strategic priorities and are committed to maximizing value for all of our shareholders.

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

Speaker Change: With that I will now turn the call over to Lee.

Dean Mitchell: Thanks, Rohe.

Dean Mitchell: Good morning, everyone. We delivered another set of strong results in the second quarter of 2024. Gap net income for the second quarter was $184 million for a $1.16 per diluted share compared to a $1.40 per diluted share in the same period last year and a $1.10 per diluted share in the first quarter of 2024. Return on equity was 15%. Adjusted operating income was $201 million for a $1.27 per diluted share compared to last year and a $1.4 per diluted share in the first quarter of 2024. Adjusted operating return on equity was 17%.

Lee: Thanks, Rob Good morning, everyone. We.

Lee: We delivered another set of strong results in the second quarter of 2024.

Dean: Gap net income for the second quarter was $184 million, or $1.16 per diluted share, compared to $1.04 per diluted share in the same period last year and $1.01 per diluted share in the first quarter of 2024. Return on equity was 15%. Adjusted operating income was $201 million, or $1.27 per diluted share, compared to $1.10 per diluted share in the same period last year and $1.04 per diluted share in the first quarter of 2024.

Lee: GAAP net income for the second quarter was 184 million or $1 16 per diluted share compared to a $1 four per diluted share in the same period last year and $1 one per diluted share in the first quarter of 2024.

Lee: Return on equity was 15%.

Lee: Adjusted operating income was $201 million or $1 27 per diluted share compared to $1 10 per diluted share in the same period last year and $1 four per diluted share in the first quarter of 2024.

Dean: The adjusted operating return on equity was 17%. As I explain the drivers of this quarter's performance, I'll highlight the differences between net income and adjusted operating earnings. Given the current level of mortgage rates, persistency remains elevated, and this marks the ninth consecutive quarter of persistency at or above 80%. Net premiums earned were $245 million, up $4 million or 2% sequentially, and up $6 million or 3% year over year. The sequential and year-over-year increases in net premiums were driven by insurance-enforced growth and our growth in attractive adjacencies consisting primarily of Enact REITs, GSE, and CRT participation.

Lee: Adjusted operating return on equity was 17%.

Dean Mitchell: As I explained to drivers of this quarter's performance, I'll highlight the differences between net income and adjusted up. Operating income. Turning to revenue drivers, primary insurance and force increased in the second quarter to a new record of 266 billion, up 2 billion sequentially, and up 8 billion or 3 percent year over year. New insurance written was 14 billion, up 3 billion sequentially, and down 1 billion, or 10 percent, year over year. Persistency was 83 percent in the second quarter, down 2 percentage points sequentially, and down 1 percentage point year over year. The sequential decline in persistency is aligned with historical seasonality as we transition to the spring selling season.

Lee: As I explained the drivers of this quarter's performance I will highlight the differences between net income and adjusted operating income.

Lee: Turning to revenue drivers primary insurance in force increased in the second quarter to a new record of 266 billion up $2 billion sequentially and up 8 billion or 3% year over year.

Lee: New insurance written was 14 billion up $3 billion sequentially and down $1 billion or 10% year over year.

Lee: Persistency was 83% in the second quarter down two percentage points sequentially and down one percentage point year over year.

Lee: The sequential decline in persistency is aligned with historical seasonality as we transition to the spring selling season.

Dean Mitchell: Given the current level of mortgage rates, persistency remains elevated, and this marks the ninth quarter in a row of persistency at or above 80 percent. Only 4 percent of the mortgages in our portfolio had rates at least 50 basis points above the prevailing market rate. We anticipate the elevated persistency will continue to help offset lower production in the current higher rate environment. Net premiums earned were 245 million, up 4 million or 2 percent sequentially, and up 6 million or 3 percent year over year. The sequential and year over year increases in net premiums were driven by insurance and forest growth, and our growth in attractive adjacencies consisting primarily of an axe breeze GSE CRT participation.

Lee: Given the current level of mortgage rates persistency remains elevated and this marks the ninth quarter in a row of persistency at or above 80%.

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

Lee: We anticipate the elevated persistency will continue to help offset lower production in the current higher rate environment.

Lee: Net premiums earned were $245 million up $4 million, or 2% sequentially and up $6 million or 3% year over year.

Lee: The sequential and year over year increases in net premiums were driven by insurance in force growth and our growth in attractive adjacencies, consisting primarily of the <unk> GSC CRT participation.

Dean Mitchell: These increases were partially offset by higher season premiums. Our base premium rate of 40.3 basis points was up 0.2 basis points sequentially and flat year over year. As a reminder, our base premium rate is impacted by several factors and tends to modestly fluctuate from quarter to quarter. Our net earned premium rate was 36.4 basis points, up 0.1 basis points sequentially, as higher seeded premiums partially offset the increase in base rate. Investment income in the second quarter was 60 million, up 3 million or 5 percent sequentially and up 9 million or 17 percent year over year.

Lee: These increases were partially offset by higher seeded premiums.

Lee: Our base premium rate of 43 basis points was up two basis points sequentially and flat year over year.

Lee: As a reminder, our based premium rate is impacted by several factors intends to modestly fluctuate from quarter to quarter.

Lee: Our net earned premium rate was $36 four basis points up one basis point sequentially as higher ceded premiums partially offsets the increase in base rates.

Lee: Investment income in the second quarter was $60 million up $3 million or 5% sequentially and up $9 million or 17% year over year.

Dean Mitchell: Higher interest rates have increased our investment portfolio yields, and as our portfolio rolls over, we anticipate further yield improvement. During the quarter, our new money investment yield continued to exceed 5 percent, contributing to an overall portfolio book yield of 3.8 percent. Our focus remains on high quality assets and maintaining a resilient A rated portfolio. As we previously stated, while we typically hold investments to maturity, we will selectively pursue income enhancement opportunities. During the quarter, we executed a strategy resulting in 8 million of pre-tax losses in exchange for higher future investment income, which is excluded from our adjusted operating income.

Dean: 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 continued to exceed 5%, contributing to an overall portfolio book yield of 3.8%.

Lee: Higher interest rates have increased our investment portfolio yields and as our portfolio rolls rolls over we anticipate further yield improvement.

Lee: During the quarter, our new money investment yield continued to exceed 5% contributing to an overall portfolio book yield of three 8%.

Lee: Our focus remains on high quality assets and maintaining a resilient a rated portfolio.

Dean: As we previously stated, while we typically hold investments to maturity, we will selectively pursue income enhancement opportunities. During the quarter, we executed a strategy resulting in $8 million of pre-tax loss, in exchange for higher future investment, which is excluded from our adjusted operating. While we will continue to evaluate and pursue similar opportunities as appropriate, this does not change our views that our investment portfolio's unrealized loss position is materially non-economic.

Lee: As we previously stated while we typically hold investments to maturity, we will selectively pursue income enhancement opportunities.

Lee: During the quarter, we executed a strategy, resulting in $8 million of pre tax losses in exchange for higher future investment income, which is excluded from our adjusted operating income.

Dean Mitchell: While we will continue to evaluate and pursue similar opportunities as appropriate, this does not change our views that our investment portfolios' unrealized loss decision is materially non-economic.

Lee: While we will continue to evaluate and pursue similar opportunities as appropriate. This does not change our views that our investment portfolio's unrealized loss position is materially non economic.

Dean Mitchell: Turning to credit, losses in the second quarter of 2024 were negative 17 million, and the loss ratio was negative 7 percent compared to 20 million or 8 percent, respectively, in the first quarter of 2024 and negative 4 million and negative 2 percent, respectively, in the second quarter of 2020. Secretary. The sequential and year-over-year decrease in losses in the loss ratio were primarily driven by a reserve release of $77 million, reflecting favorable cure performance and the lowering of our claim rate expectations from 10% to 9%. We not only lowered our claim rate on existing delinquencies, but also new delinquencies as a result of sustained favorable cure performance and our current market expectations.

Dean: Turning to credit, losses in the second quarter of 2024 were negative $17 million, and the loss ratio was negative 7 percent, compared to $20 million, or 8 percent, respectively, in the first quarter of 2024, and negative $4 million, or negative 2 percent, respectively, in the second quarter of 2023. The sequential and year-over-year decrease in losses and the loss ratio were primarily driven by a reserve release of $77 million, reflecting favorable cure performance and the lowering of our claim rate expectations from 10% to 9%. New delinquencies decreased sequentially to 10,500 from 11,400, in line with seasonal expectations.

Lee: Turning to credit losses in the second quarter of 2024 were negative $17 million in the loss ratio was negative 7%.

Lee: Compared to $20 million or 8%, respectively. In the first quarter of 2024 and negative $4 million and negative 2%, respectively. In the second quarter of 2023.

Lee: The sequential and year over year decrease in losses in the loss ratio were primarily driven by a reserve release of $77 million, reflecting favorable care performance and the lowering of our claim rate expectations from 10% to 9%.

Lee: We not only lowered our claim rate on existing delinquencies, but also new delinquencies as a result of a sustained favorable care performance and our current market expectations.

Dean Mitchell: The $77 million reserve release compares to a reserve release of $54 million and $63 million in the first quarter of 2024 and second quarter of 2023, respectively. New delinquencies decrease sequentially to $10,500 from $11,400 in line with seasonal expectations. Our new delinquency rate remain consistent with pre-pandemic levels, and further quarter was 1.1% compared to 1.2% sequentially and 1% in the second quarter of 2023. Total delinquencies in the second quarter decreased sequentially to $19,100 from $19,500. The primary delinquency rate decreased by basis points sequentially to 2% in line with pre-pandemic levels. Turning to expenses, operating expenses in the second quarter of 2024 were $56 million, and the expense ratio was 23%, compared to $53 million and 22%, respectively, in the first quarter of 2024 and $55 million and 23%, respectively, in the second quarter of 2023.

Lee: The $77 million reserve release compares to a reserve release of $54 million at $63 million in the first quarter of 2024 and second quarter of 2023, respectively.

Speaker Change: New delinquencies decreased sequentially to 10500 from 11400 in line with seasonal expectations, our new delinquency rates remained consistent with pre pandemic levels and for the quarter was one 1% compared to one 2% sequentially and 1% in the set.

Dean Mitchell: We also initiated a voluntary separation program during the second quarter that resulted in a restructuring charge of $3 million that is excluded from our adjusted operating income and represents approximately 1% point impact in the expense ratio for the quarter.

Dean: We also initiated a voluntary separation program during the second quarter that resulted in a restructuring charge of $3 million that is excluded from our adjusted operating income and represents approximately one percentage point impact on the expense ratio for the quarter. We remain focused on operating efficiency and still expect our expenses, excluding these restructuring charges, to be in the range of $220 to $225 million for 2024. During the quarter, we secured $90 million of additional excess of loss reinsurance coverage to reduce credit risk and enhance our capital efficiency, and as of June 30, 2024, our third-party CRT program provides $1.8 billion of PMeyers Capital Credit.

Dean Mitchell: We remain focused on operating efficiency and still expect our expenses, excluding these restructuring charges, to be in the range of 220 to 225 million for 2024. Moving to capital, we continue to operate from a strong capital and liquidity position reinforced by our robust PMRS efficiency and continued successful execution of our diversified CRT program. During the quarter, we secured 90 million of additional excessive loss reinsurance coverage to reduce credit risk and enhance our capital efficiency, and as of June 30, 2024, our third-party CRT program provides 1.8 billion of PMRS capital credit. Our PMRS efficiency was 169%, or 2.1 billion, above PMRS requirements at the end of the second quarter.

Speaker Change: $25 million for 2024.

Speaker Change: Moving to capital we continue to operate from a strong capital and liquidity position reinforced by a robust PNR sufficiency and continued successful execution of our diversified CRT program.

Speaker Change: During the quarter, we secured $90 million of additional excess of loss reinsurance coverage to reduce credit risk and enhance our capital efficiency and as of June 32024, Our third party CRT program provides $1 8 billion of P Myers capital credit.

Speaker Change: Our TMR sufficiency was 169% or $2 1 billion above P. Myers requirements at the end of the second quarter.

Dean Mitchell: During the quarter, we also elected to exercise cleanup calls on two CRT transactions covering the 2014 through 2019 books and the 2020 book. These two transactions account for approximately 15% of our risk and force. We exercise these cleanup calls in part because they provided nominal loss coverage and PMRS credit, and the associated loans have high embedded equity, which reduce the probability of loss. As the end of the second quarter, 77% of our risk and force was subject to credit risk transfer, which is down from 90% at the end of the prior quarter.

Speaker Change: During the quarter, we also elected to exercise cleanup calls on to CRT transactions covering the 2014 through 2019 books and the 2020 book.

Dean: These two transactions account for approximately 15% of our risk in force. As a result of these commutations, at the end of the second quarter, 77% of our risk and was subject to credit risk transfer, which is down from 90% at the end of the prior quarter. We further strengthened our balance sheet during the quarter through our $750 million debt offset. We used the proceeds to refinance our 2025 notes, which extends our maturities and will result in $2 million in annual interest expense savings.

Speaker Change: These two transactions account for approximately 15% of our risk in force.

Speaker Change: We exercise these cleanup calls in part because they provided nominal loss coverage and P. Myers credit and the associated loans have high embedded equity, which reduced the probability of loss.

Dean Mitchell: We further strengthened our balance sheet during the quarter through our 750 million debt offering. We used the proceeds to refinance our 2025 notes, which extends our maturities and will result in two million in annual interest expense savings. The transaction resulted in 11 million of debt extinguishment costs, consisting of approximately 8 million in debt redemption cost and approximately three million in accelerated debt issuance cost in the quarter, both of which are excluded from our adjusted operating income. 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.

Dean: The transaction resulted in $11 million of debt extinguishment costs. During the quarter, we paid $29 million, or $0.185 per common share, in our quarterly dividend, reflecting a 16% increase as previously announced. Today, we announce the third quarter dividend of 18.5 cents per common share, payable September 9. Overall, we are incredibly pleased with our performance in the first half of 2024.

Dean Mitchell: During the quarter, we pay 29 million or 18 and a half cents per common share through our quarterly dividend, reflecting a 16 percent increase as previously announced. Today, we announced the third quarter dividend of 18 and a half cents per common share, payable September ninth. Additionally, we continue to focus on accelerating our share buyback participation and repurchase 1.6 million shares at a weighted average share price of $30.43 for a total of $49 million in the quarter. In July, we've repurchased an additional .4 million shares at a weighted average share price of $31.1 for a total of $13 million repurchased.

Dean Mitchell: During the quarter, we completed our $100 million share repurchase authorization, and as of July 26, 2024, there was approximately $226 million remaining on our $250 million repurchased authorization. The strength of our capital position allows us to balance investing in the business with returning capital to shareholders, and as I just detailed, we now expect to return approximately $110 million through our common dividend in 2024. Additionally, we expect to return between $190 million and $240 million through our share buyback program. Collectively, these result in an expected 2024 capital return between $300 and $350 million, reflecting our consistent performance and strong balance sheet.

Speaker Change: In the quarter, we completed our $100 million share repurchase authorization and as of July 26, 2024, there was approximately $226 million remaining on our $250 million repurchase authorization.

I.: The strength of our capital position allows us to balance investing in the business with returning capital to shareholders and as I. Just detailed we now expect to return approximately $110 million to our common dividend in 2024.

Speaker Change: Additionally, we expect to return between $190 million and $240 million through our share buyback program <unk>.

Speaker Change: Collectively these result in an expected 2020 for capital return between 300 and $350 million, reflecting our consistent performance and strong balance sheet.

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

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

Dean Mitchell: Overall, we are incredibly pleased with our performance in the first half of 2024. We believe we are well positioned for the second half of the year and beyond, and will remain focused on prudently managing risk, maintaining a strong balance sheet, and driving solid returns for our shareholders.

Speaker Change: Overall, we are incredibly pleased with our performance in the first half of 2024.

Rohit Gupta: With that, I'll turn the call back to Rev it.

Rohit Gupta: Thanks, Dean. As I reflect on our performance and look to the second half of 2024 and beyond, I continue to be encouraged by the long-term dynamics of our market. Our product continues to help people responsibly achieve the dream of homeownership in a complex environment. Our dedication to this principle underpins all aspects of our business and drives our efforts to deliver exceptional value for all of our stakeholders.

Rohit Gupta: As I reflect on our performance and look to the second half of 2024 and beyond, I continue to be encouraged by the long-term dynamics of our market. Our product continues to help people responsibly achieve the dream of homeownership in a complex environment. Our dedication to this principle underpins all aspects of our business and drives our efforts to deliver exceptional value for all of our stakeholders.

Operator: Operator, we are now ready for Q&A. Thank you. As a reminder to ask a question, you will meet the press star one-one on your telephone. Please stand by; we'll recompile the Q&A roster.

Soham Bhonsle: Your first question comes from the line of Soham Bhonsle from BTIG; your line is now open. Hey guys, good morning. Hope you're doing well. Just the first one on N&W, it looked like it was lower versus some of your peers that reported this quarter. So I was just wondering if there's any errors or factors that maybe you stepped away from, or anything discernible to note there. Thanks.

Operator: Your first question comes from the line of Soham Bhonsle from BTIG. Your line is now open.

Soham Jairaj Bhonsle: Hey, guys. Good morning. Just the first one on NIW, it looked like it was lower versus some of your peers that reported this quarter. So I was just wondering if there were any errors or factors that maybe you stepped away from or anything discernible to note there. Thanks.

Rohit Gupta: Good morning. So thank you for the question. So no, there was nothing different this quarter. There is some level of volatility that happens quarter to quarter, and obviously we still don't have one peer who has reported in the market. So tough to tell where we are on market share. But the way we see the market from a pricing perspective, we saw the pricing being constructive in the market. We think that the four peers out of five who have reported are in a tight range. Four peers actually have a $13 billion handle in terms of N&W.

Rohit Gupta: Good morning, Soham. Thank you for the question. So, no, there was nothing different this quarter. There is some level of volatility that happens quarter to quarter. And obviously, we still don't have one peer who has reported in the market. So it's tough to tell where we are on market share. But the way we see the market from a pricing perspective, we see pricing being constructive in the market. We think that the four peers out of five who have reported are in a tight range.

Rohit Gupta: Four peers actually have a $13 billion handle in terms of NIW. So, it seems like most people were kind of pretty close. And then I think in the past, we talked about the way we think about market participation: you almost have to look at the trailing 12 months of market share and market participation. Not that market share is a goal. It's more of an outcome for us.

Rohit Gupta: So it seems like most people were kind of pretty close. And then I think in the past we have talked about the way we think about market participation is you almost have to look at failing 12 months of market share and market participation. Not that market share is a goal. It's more of an outcome for us. But if you look at the last four quarters, I think we see some volatility in our participation, but generally in a pretty tight range. So we are comfortable with our participation in the market. We like the approximately $14 billion of N&W.

Speaker Change: And then I think in the past we have talked about.

Speaker Change: The way, we think about market participation is you almost have to look at trailing 12 months of market share and market participation.

Speaker Change: That market share as a goal it's more of an outcome for us but.

Rohit Gupta: But if you look at the last four quarters, I think that you see some volatility in our participation, but generally in a pretty tight range. So, we are comfortable with our participation in the market. We like the approximately $14 billion of NIW we wrote in the quarter. And the guidelines, the pricing that we are getting on that, we are very happy with.

Speaker Change: But if you look at the last four quarters, I think youll see some volatility in our participation, but generally in a pretty tight range. So we are comfortable with our participation in the market. We liked the approximately $14 billion of <unk>.

Rohit Gupta: We wrote in the quarter and the guidelines, the pricing that we are getting on that. We are really happy with that.

Speaker Change: W. We wrote in the quarter and the guidelines the pricing that we're getting on that we're really happy with that.

Rohit Gupta: Okay, great. And then on the lower claim rate, you know, I mean, you know, credit is obviously still very good. The consumer seems in a good place. But, you know, it does seem like the consumer is slowing on the edges. And, you know, if you look at just inventory that's potentially building in some of the large markets, Texas, Florida, right, these are some of the sort of risks that we're seeing. But I guess you did take it down. So, wondering how you're looking at this or assessing those risks going forward? And how sustainable do you think, you know, the lower sort of claim rate can be?

Soham Bhonsle: Okay, great.

Soham Bhonsle: And then on the lower claim rate, you know, I mean, credit is obviously still very good. Consumer seems in a good place, but you know, it does seem like the consumer is slowing on the edges. And you know, if you look at just inventory that potentially building in some of the large markets, Texas, Florida, right. These are some of the risks that we're seeing. But I guess you did take it down. So wondering how you're looking at this or assessing those risks going forward. And how sustainable do you think, you know, the lower sort of claim rate can be?

Speaker Change: Okay, Great and then on the lower claim rate.

Speaker Change: I mean credit is obviously still very good consumers teams in a good place but.

Speaker Change: It does seem like the consumer is slowing on the edges and if you look at just inventory potentially building in some large markets, Texas, Florida right. These are some of the sort of the risks that we're seeing but I guess you did take it down. So wondering how you are looking at this are assessing those risks going forward.

And how sustainable do you think the lower sort of claim rates can be thanks.

Rohit Gupta: Thanks.

Rohit Gupta: Yes, so, um, thanks for that question as well. You know, I think we previously discussed there were a couple potential catalysts for the reassessment of claim rate. First, relates to economic uncertainty and a reduction in economic uncertainty. And then second, you know, if we gave more consideration to the state to the sustained delinquency performance and elevated cure cure performance that we've seen over time, those would both be potential catalysts for the reassessment of claim rate. You know, this quarter, we really relied on both of those in making the change from 10 to 9. If we take those kind of in their piece parts, you know, very much in line with the consensus view on that macroeconomic environment, you know, we believe the economic uncertainty is reduced.

Dean: If we take those in their parts, you know, very much in line with the consensus view on that macroeconomic environment, we believe the economic uncertainty is reduced. That doesn't mean that it's completely gone away, and I think our 9% claim rate still reflects the ongoing presence of uncertainty, but that range has certainly narrowed, and that is one of the catalysts for the change this quarter.

Rohit Gupta: That doesn't mean that it's completely gone away. And I think our 9% claim rate still reflects the ongoing presence of uncertainty. But that range has certainly narrowed. And that is one of the catalysts for the change this quarter. And then secondarily, we gave certainly some more weight, and you can think about, you know, consideration or weight to our recent delinquency performance this quarter. So the result is we lower the claim rate both on the most recent delinquency cohorts. So think about that from the second half of 2023 through first quarter 24 and also the claim rate on new delinquencies.

Dean: And then secondarily, we certainly gave more weight, and you can think about, you know, consideration or weight to our recent delinquency performance this quarter. You know, if we think about the future, what would cause us to reevaluate that? I think it's a similar catalyst. If economic uncertainty changed or we gave more weight to ongoing performance, I think either one of those could cause us to come back and evaluate that claim rate over time. And again, we're going to continue to apply what we believe is a prudent and measured approach to loss reserving.

Rohit Gupta: Now, if we think about the go forward, what would cause us to re-evaluate that? I think it's a similar catalyst. If economic uncertainty changed and or we gave more weight to ongoing performance, I think either one of those could cause us to come back and evaluate that claim rate through time. And again, we're going to continue to apply what we believe is an approved and measured approach to loss reserving through time.

Rohit Gupta: Your second question, Soham, in terms of inventory buildup as well as consumer softening, I think we are definitely keeping an eye on it. I think we have seen some volatility. If you think about the second half of 2022 and early 2023, we saw some volatility in the market, but eventually, the trends came back to more fundamental trends, which we believe are driven by several macro factors. On the housing side, there is less inventory in the market than there are people who are interested in buying homes.

Rohit Gupta: Yes, second question: Soham, in terms of inventory build-up as well as consumer softening. I think we are definitely keeping an eye on it. I think we have seen some volatility. If you think about the second half of 2022 or 2023, we saw some volatility in the market, but eventually the trends came back to more fundamental trends, which we believe are driven by several macro factors on the housing side. There is less inventory in the market than there are people who are interested in buying homes. We think that at least the number is somewhere around 2 million homes short in the market compared to people who actually want to buy.

Speaker Change: Some volatility in the market, but eventually the trends came back to more fundamental trends, which we believe are driven by <unk>.

Speaker Change: Several macro factors on the housing side, there is less inventory in the market.

Speaker Change: Then there are people who are interested in buying homes, we think that at least the number is.

Rohit Gupta: We think that at least the number is somewhere around 2 million homes short in the market compared to people who actually want to buy. While the inventory has risen recently in the month of June, and it's kind of closer to four months, it's still below the long-term average. A balanced market is closer to six months. And in markets like Florida, what we are seeing is inventory rising in the smaller markets.

Speaker Change: Somewhere around 2 million homes short in the market compared to people, who actually want to buy.

Rohit Gupta: While the inventory has risen recently in the month of June and it's kind of closer to four months, it's still below the long-term average. A balanced market is closer to six months, and in markets like Florida, what we are seeing is inventory is rising in the smaller markets. So if you look at where the sales happen, more than 80% of sales, markets where more than 80% of sales happen actually still have a very stable and kind of low inventory, and then in the smaller markets, there's been some rise. So we are keeping an eye on it.

Speaker Change: While the inventory has risen recently in the month of June and it's kind of closer to four months, it's still below the long term average of balanced market is closer to six months and in markets like Florida. What we are seeing is inventory is rising in the smaller markets. So if you look at where the sales happen.

Rohit Gupta: So if you look at where the sales happen, more than 80% of sales, markets where more than 80% of sales happen actually still have very stable and kind of low inventory. And then in the smaller markets, there's been some rise, so we are keeping an eye on it. But going back to Dean's point, I think we are keeping an eye on unemployment, which is a big factor in kind of how we think about credit, and then also keeping an eye on the housing market balance.

Speaker Change: More than 80% of sales.

Speaker Change: Markets, where more than 80% of sales happen actually still have very stable and kind of low inventory and then in the smaller market sentiment sunrise. So we're keeping an eye on it but going back to Dean's point I think we are keeping an eye on unemployment, which is a big factor in.

Rohit Gupta: But going back to Dean's point, I think we are keeping an eye on unemployment, which is a big factor in kind of how we think about credit, and then also keeping an eye on the housing market balance.

Dean Mitchell: How we think about credit and then also keeping an eye on the housing market balance.

Soham Bhonsle: Okay, great. Thanks for the color.

Rohit Gupta: Craig, great, thanks for the call. I guess, Rohit, just if I could squeeze one in: I think, you know, as we sort of get in the back half of the year, I think, you know, investors are sort of thinking about, you know, how MI could be viewed in sort of the context of a new administration, potentially, right? And I guess we know how they're viewed in the current administration. But if you could just spend a minute and talk about, you know, potential ramifications, you know, whether that's ending conservatorship or, you know, just going to more of a free market sort of approach, anything there would be great. Thank you.

Speaker Change: Okay, great. Thanks for the color I guess, just if I could squeeze one in I think.

Soham Bhonsle: I guess we're just about to squeeze one in. I think you know, as we sort of get in the back half of the year, I think investors are sort of thinking about, you know, how MI could be viewed in sort of the context of a new administration potentially, right? And I guess we know how they're viewed in the current administration, but if you just spend a minute and talk about, you know, potential ramifications, you know, whether that's ending conservatism or, you know, just going to more of a free market sort of approach, anything there would be great.

Rohit Gupta: Thank you.

Rohit Gupta: Yep. So, a very good question. So, I would say MI is well positioned kind of on both sides of the aisle. I think from a consumer perspective, we are a product that actually helps consumers achieve the dream of home ownership. We actually help consumers get on the path of wealth accumulation through home ownership, which over the last thirty, forty years has been one of the biggest factors driving the build-up of wealth.

Rohit Gupta: Yep, so very good question. So I would say MI is well positioned, kind of on both sides of the aisle. I think from a consumer perspective, we are a product that actually helps consumers achieve the dream of home ownership. We actually help consumers get in the path of get on the path of wealth accumulation through home ownership, which over the last 30, 40 years has been one of the mission of our purpose perspective. If you think about a democratic administration, our priorities are very aligned. If you think of number of first time home buyers, we are putting in homes in a low affordability environment. I think in the most recent quarter, 60 plus percent of our consumers were first time home buyers.

Rohit Gupta: So, I think from our mission and purpose perspective, if you think about a democratic administration, our priorities are very aligned. If you think about the number of first-time homebuyers, we are putting in homes in a low affordability environment. I think in the most recent quarter, sixty plus percent of our consumers were first-time homebuyers.

Soham Jairaj Bhonsle: So, we are very tied to the mission and purpose and very aligned with FHFA and the GSEs in terms of their priorities. If you think about a Republican administration, I think from a product perspective, we are also putting private capital ahead of taxpayer risk. So, whether it comes to us competing with the FHA program in terms of putting private capital ahead of FHA, we are serving a good purpose there. And then, obviously, as you think about GSEs, us getting in the first loss position in front of the GSEs accomplishes that purpose of putting private capital in front of taxpayer capital, which I think has served well in the past.

Rohit Gupta: So we are very tied to the mission and purpose and very aligned with FHFA and the GSEs in terms of their priorities. If you think about a Republican administration, I think from a product perspective, we are also putting private capital ahead of taxpayer risk. So whether it comes to us competing with the FHA program in terms of putting private capital ahead of FHA, we are serving a good purpose there. And then obviously, as you think about GSEs, us getting in first law position in front of the GSEs accomplishes that purpose of putting private capital in front of taxpayer capital, which I think has served well in the past.

Soham Bhonsle: As far as GSE reform is concerned, obviously, that's been a topic of discussion for whatever, 16 years since GSEs went into conservatorship. So the odds of that are difficult to call at this point of time because a lot of things have to line up for those reform to happen, just given the number of considerations in place. Thanks a lot for that, guys. Thank you, Soham. Thank you.

Soham Jairaj Bhonsle: As far as GSE reform is concerned, obviously, that's been a topic of discussion for whatever the sixteen years since GSEs went into conservatorship. So, the odds of that happening are difficult to call at this point in time because a lot of things have to line up for the reform to happen, just given the number of considerations in play.

Operator: All right, thanks a lot for that, guys.

Rick Shane: Your next question is from the line of Rick Shane from JP Morgan. Your line is open. Hey guys, thanks for taking my questions this morning. Look, one of the most interesting evolutions over the last two or three years has been the understanding or the appreciation that a lower volume high persistency environment is actually potentially more favorable than a high volume lower persistency environment.

Operator: Your next question is from the line of Rick Shane from JP Morgan. Your line is open.

Richard Barry Shane: understanding or the appreciation that a lower volume, high persistency environment is actually potentially more favorable than a high volume, lower persistency environment.

Rohit Gupta: As we shift potentially in rates and could see a pickup in mortgage volumes, I'm curious how you guys are thinking about this, especially because at this point portfolios in the industry are so barbelled in a way that we've never seen before, with huge cohorts of very low rate underlying mortgages and a growing cohort of higher rate mortgages that are probably refinanceable. Yeah, right. Thank you for your question. I would say given the composition of our portfolio and we disclose some details from a mortgage rate perspective on slide nine of our earnings presentation. I think the portfolio is very well positioned from consumers who actually are incentive to refinance in this environment or even if rates start falling.

Speaker Change: I'm curious how you guys are thinking about this especially because at this point.

Speaker Change: Portfolios in the industry are so bar belled in a way that we've never seen before with.

Speaker Change: Huge huge cohort has a very low rate.

Speaker Change: Underlying mortgages and a growing cohort of higher rate mortgages that are probably refinance <unk>.

Speaker Change: Yes, Rick Thank you for your question.

Speaker Change: I would say given the composition of our portfolio and we disclose some details from our mortgage rate prospective on slide nine of our earnings presentation. I think the portfolio is very well positioned from consumers, who actually are incentive to refinance in this environment or even if rates start falling.

Rohit Gupta: You can see that only 4% of our book was how we define in the money from a refinance perspective, and then more importantly, 78% of our policies are actually have a mortgage rate of below 6%. So mortgage rates will actually, in our assessment, will have to go closer to five and a half percent for those that populations who start coming into an economic incentive to refinance. Obviously, their life events where people actually simply upgrade their homes or downsize their homes, but in terms of refinance incentive, a good portion of our existing book actually doesn't have refinance incentive. Even if mortgage rates were to fall by, let's say, 150 to 175 basis points from a market perspective and from a potential perspective for our business, I think an ideal scenario is as mortgage rates come down and affordability gets better, we actually start getting a much higher origination market for my industry because a lot of consumers who are on the sidelines are first-time home buyers.

Speaker Change: You can see that only 4% of our book was a redefined in the money from a refinance perspective, and then more importantly, 78% of our policies are actually have a mortgage rate of below 6%. So mortgage rates will actually in our assessment will have to go closer to five 5% for those.

Rick Shane: And as I said earlier, within first-time home buyers, the usage of our product is at a very high level; that ratio sits somewhere closer to 60% of all first-time home buyers use our product to get into homes. So you actually have a growing market, but at the same time, our insurance and force has more stickiness because consumers have a low enough rate that they are not refinancing out of their mortgage from a rate perspective. Got it.

Richard Barry Shane: And could you see a scenario where some of the less affordable, riskier,

Rohit Gupta: And could you see a scenario where some of the less affordable, riskier portions of your portfolio that sort of boils off a little bit faster, and those borrowers actually move into even more affordable mortgages. Absolutely, that is always possible, Rick. So, if you think about consumers who actually have higher rates or are higher LTVs, obviously there's an incentive as they build equity in their homes, whether it's through home price appreciation or amortization. You can see them having a higher refinance incentive. I would say that we have one of the benefits of having been in business for 40 plus years is we actually have a lot of data where we can model those scenarios and actually look at which consumer cohorts based on all risk attributes, including mortgage rates, have a higher propensity to refinance, and that baked into our expectations when we run the business.

Rick Shane: Okay, thank you very much for taking my questions this morning. Thank you, Rick.

Alex: Your next question is from the line of Bose George from KBW; your line is now open. Hey, good morning, everyone. This is Alex on for Bose. Maybe just to start relating to the updated Capital Return guide. I'm just wondering if you can maybe discuss the drivers of the higher guidance and maybe specifically if this is being driven by better return expectations, first, and maybe slower growth expectations. Thanks. Yeah, Alex, thanks for the question.

Operator: Your next question is from the line of Bose George from KBW. Your line is now open.

Alex: Hey, good morning, everyone. This is actually Alex on behalf of Bose. Maybe just to start on the updated capital return guide, just wondering if you could maybe discuss the drivers of the higher guidance and maybe specifically if this is being driven by better return expectations versus maybe slower growth expectations. Thanks.

Dean Mitchell: I really don't think it's the latter, but let me go to let me go to the drivers. I think it's a lot of the considerations we said as it relates to where we'll perform in the range are also the considerations for why we increase from a discrete number to the range of 300 to 350 starts with business performance. I think business performance has been very strong. We don't have a prescribed payout ratio, but certainly business performance is a key consideration as we think about both setting the capital return target at the beginning of the year and then modifying that throughout the year.

Dean Mitchell: I think the economic environment is another key consideration. I talked about some modest improvement from our perspective on the economic environment that led to the reduction in the claim rate. This quarter that carries over into our decisions to what to do about the return of capital for the remainder of the year, and then lastly regulatory. I think the regulatory environment is conducive to increasing from a discrete number to a range. The form excuse me, the form of that is going to be dictated by several factors. We talked about the form in a waterfall type approach.

Dean: dictated by several factors, you know, we've talked about the form in sort of a waterfall type approach, the fact that we have a lot of certainty into our quarterly dividends in the way we establish them. And then share buybacks are kind of that opportunistic tool based on market conditions. And we, I think we mentioned last quarter, we have a preference for share buybacks, all things being equal, market conditions being conducive, and then the special dividend is the plug if we can't return capital based on our objectives if we can't do so versus the other two forms.

Dean Mitchell: The fact that we put a lot of certainty into our quarterly dividends in the way we establish them, and then share buybacks are that opportunistic tool based on market conditions.

Rohit Gupta: I think we mentioned last quarter we have a preference for share buybacks, fall things, market conditions being conducive, and then special dividend is the plug to return capital based on our objectives if we can't do so versus the other two forms. Yeah, Alex, just to completely agree with Dean, just to add one aspect of business performance versus market growth, given the NW numbers we have delivered and obviously need a little bit more information to assess market size, but the guidance we had provided for MI market size is the beginning of the year is actually very much in line with where we believe MI market size is trending at this point in the year.

Rohit Gupta: Yeah, Alex, just to completely agree with Dean, just to add one aspect of business performance versus market growth. Given the NIW numbers we have delivered and, obviously, need a little bit more information to assess market size, but the guidance we had provided for MI market size at the beginning of the year is actually very much in line with where we believe MI market size is trending at this point in the year.

Speaker Change: So completely agree with Dean just to add one aspect of business performance versus market growth.

Speaker Change: Given the NSW numbers, we have delivered and obviously need a little bit more information to assess market size, but the guidance. We had provided for semi market size at the beginning of the year is actually very much in line with where we believe semi market size is trending at this point in the year. So I don't think it's a market slowdown because I think the market is actually trending very much in <unk>.

Alex: So I don't think it's a market slowdown because I think the market is actually trending very much in line with the expectations. We have mentioned before that we launched an act re last year. We continue to grow that business, and we have described that as growing that business in months, quarters, years, not in a very short turn, but that growth continues to go in the right direction. So completely agree that this is given by business performance versus lower growth. Okay, great. That all makes sense.

Rohit Gupta: So I don't think it's a market slowdown because I think the market is actually trending very much in line with expectations. We have mentioned before that we launched Enact RE last year. We continue to grow that business, and we have described that as growing that business in months, quarters, years, not in the very short term, but that growth continues to go in the right direction. So I completely agree that this is driven by business performance versus slower growth.

Speaker Change: And with the expectations.

Speaker Change: We have mentioned before that we launched Knackery last year, we continue to grow that business and we've described that as growing that business in months quarters years.

Speaker Change: Not in a very short term, but that growth continues to go in the right direction. So completely agree that this is driven by business performance.

Speaker Change: Versus slower growth.

Alex: Okay, great, that all makes sense. And then maybe just another follow up on the capital return. I think we just went over a little bit, but just thinking about where shares trade versus peers, they do screen a little cheap at the moment. But is there maybe a price to book level that you think about where we could potentially see maybe more capital return through the special dividend as opposed to repurchases just given where shares currently trade on the recent share performance? Yeah, Alex on.

Speaker Change: Okay, great that all makes sense and then maybe just one another follow up on the capital return.

Alex: And then maybe just one, another follow-up on the capital return. I think we just went a little bit, but just thinking about where shares trade, verse peers, they do screen a little cheap at the moment. But is there maybe a price-to-book level that you think about where we could potentially see maybe more capital return through the special dividend, as opposed to repurchases just given where shares currently trade on the recent shares. Share performance. Yeah, Alex, on our share buyback program, we look at a lot of different factors. Obviously, price to book is one; forward price to book is another.

Think we just went over a little bit, but just thinking about where our shares trade.

Speaker Change: Versus peers.

Speaker Change: They do screen, a little cheap at the moment.

Dean Mitchell: We have our own view of intrinsic values. So we kind of triangulate those views and others as we think about setting the appropriate targets for use of share buyback as a means to return capital. So I wouldn't go into a prescription of a certain current period price to book. There's more considerations, maybe a little bit more complexity to it than that. I will just re-emphasize our; we said it last quarter, I think we still have the perspective that we have a preference for returning capital via share buybacks, assuming market conditions accommodate. And we still retain special dividend as a means if that doesn't hold.

Operator: Okay, great. Thanks so much. Thank you. Thanks, Alex. Once again, to ask a question, please press star one one on your telephone.

Operator: Once again, to ask a question, please press Star 11 on your telephone.

Mihir Bhatia: Your next question is from the line of me here, Badia from Bank of America. Your line is open. Hi, good morning, and thank you for taking my questions. Wanted to start first just on the premium. You mentioned the premium environment is constructive. I guess the question really is, have premium rates are craft for now. Or do you expect the base premium rate to just, you know, kind of maybe slowly grind a little bit higher as the new loans come in, or is there potential still for declines in the premium rate?

Mihir Bhatia: For now, do you expect the base premium rate to just, you know, kind of slowly grind a little bit higher as the new loans come in, or is there potential still for declines in the premium rate?

Dean Mitchell: Yeah, me here. Thanks for the question. I think we've talked about this several times in the past, but just base premium rate is impacted by a number of different variables, as you know, new insurance, written levels, and IW rate, persistency, mix, even premium refund estimates all impact the base premium rate. So that that complexity can cause quarterly variation. I think our view is that base rates are going to continue to stabilize, and we'd expect a flatish base premium rates throughout the year. From my perspective, you know, the two tens of a basis point increase in sequential quarter basis is really in line with that flatish expectations.

Dean: Yeah, Mihir, thanks for the question. I think we've talked about this before.

Dean: Even premium refund estimates all impact the base premium rate, so that that complexity can cause quarterly variation. I think our view is that base rates are going to continue to stabilize, and we'd expect flattish based premium rates throughout the year. From my perspective, the two-tenths of a basis point increase in sequential quarters is really in line with that flattish expectation. So I wouldn't...

Dean Mitchell: So I wouldn't equate that to a bottoming out.

Dean Mitchell: Okay, and then in terms of, sorry, if I missed this, but did you guys give a market size, the NW market size? I think last quarter, you had said similar to last year. Is that still the view? Yes, so we gave a market expectation of full year, and that full year expectation was generally in line with 2023. We gave that guidance, I believe, in February, and I believe 2023 was $200.85 billion dollars. I think as we navigate towards the end of the year and race coming down recently, you could see some upside to that, but right now I think that $200.85 or somewhere close to that sounds pretty good.

Mihir Bhatia: Okay, and then. In terms of, sorry if I missed this, but did you guys give a market size, the NIW market size, I think last quarter you said it was similar to last year, is that still the view?

Mihir Bhatia: Okay, and then I guess the last question is just on the voluntary separation program. I just wanted to understand, is that should we take from that? I guess what is the driver of that? Is it just efficiency improvements, or is it the market has been a little slower to come back than you had maybe anticipated? Thank you.

Dean Mitchell: Yeah, Mihir, so just as a reminder, this is not the first voluntary separation program or the first reduction we have done from an expense perspective. We are very expense conscious and are always working towards making our business efficient through the right processes and the right investments. We announced to the market that in December of 2022, we had done a voluntary separation program, and that was also driven by a very similar investment and outcomes. So we have invested in our business and our technology and processes for the last 10 years. When you think about examples like our underwriting productivity, our underwriting productivity has increased consistently over the last 10 years, and as we achieve new milestones in that journey, it gives us an ability to make our business more efficient.

Rohit Gupta: Yeah, Mihir, so just as a reminder, this is not the first voluntary separation program or the first reduction we have done from an expense perspective. We are very expense conscious and are always working towards making our business efficient through the right processes and the right investments. We announced to the market that, in December of 2022, we had implemented a voluntary separation program, and that was also driven by very similar investments and outcomes.

Rohit Gupta: So, we have invested in our business and our technology and processes for the last 10 years. When you think about examples like underwriting productivity, our underwriting productivity has increased consistently over the last 10 years. And as we achieve new milestones in that journey, it gives us the ability to make our business more efficient. So, think of this as along that journey as we make investments in technology, processes, and data, and we get the benefit of those investments; we use those opportunities to make the business more efficient.

Rohit Gupta: So think of this as along that journey as we make investments and technology processes data and we get the benefit of those investments. We use those opportunities to make the business more efficient. So that was the driver of the recent reduction, and I think, as Dean stated, that it basically equated to about $3 million of separation costs. We'll come back, as we approach the end of the year, to give a new run rate. Obviously, these separations have some kind of working notice. So it's going to have limited impact on 2024 expenses, but as we think about 2025 expenses, we will take a complete and comprehensive look at the business and provide expense guidance as we start 2025.

Rohit Gupta: So, that was the driver of the recent reduction, and I think, as Dean stated, that it basically equated to about $3 million in separation costs. And we'll come back as we approach the end of the year to give a new run rate. Obviously, these separations have some kind of working notice period, so they're going to have a limited impact on 2024 expenses. But as we think about 2025 expenses, we'll take a complete and comprehensive look at the business and provide expense guidance as we start 2025.

Dean: Yeah, the only thing I'd add to that, Mihir, and this picks up right where Rohit left off, is that $3 million restructuring charge obviously isn't in our full-year guidance of 2020 to 2025 for 2024.

Dean Mitchell: The only thing I'd add that may hear that picks up right where Rohit left off is that $3 million restructuring charge. Obviously, isn't in our four-year guidance of 220 to 225 for 2024? Yeah. One thing I should have said, just to round out the answer.

Mihir Bhatia: If you think about our insurance and force, we are now at the highest insurance and force you have ever had, $266 billion, and from an employee count perspective, our business has never been more efficient. So hopefully that kind of connects the dots between our strategy, how do we invest in technology and processes, and then harvest the benefits of that? So that all makes sense. Thank you so much for taking my questions. Thanks, Mayor. Thanks for here.

Geoffrey Dunn: Your next question is from the line if Jaffee done from Dowling. Your line is open. Thanks, good morning. Dean, can you disclose the amount of development that was in the current period provision in this quarter? Yeah, that's Lawses on News were 60 million in the quarter. Yeah, how much of that was developed that related to 10 going to 9? Yeah, yeah, great question, Geoff. Sorry. So if you break out the 77 million into its piece parts, about 56 million of that is related to elevated cure activity, and about 21 million is related to the reduction of the claim rate from 10 to 9.

Operator: Your next question is from the line of Geoffrey Dunn from Dowling. Your line is open.

Geoffrey Murray Dunn: Yeah, that's... Losses on news were $60 million in the quarter.

Dean: Yeah, yeah, great question, Jeff. Sorry. So if you break out the 77 million into its component parts, about 56 million of that is related to elevated cure activity, and about 21 million is related to the reduction of the claim rate from 10 to 9. And as I mentioned in a prior answer, that's really focused on. OK, so in the first quarter, we're

Speaker Change: <unk> million dollars of that is related to elevated cure activity in about 21 million is related to the reduction of the claim rate from 10 to nine and as I mentioned in a prior answer that's really focused on.

Dean Mitchell: And as I mentioned in the prior answer, that's really focused on the second half 2023 through first quarter, 2024 accident quarters. We booked new delinquencies at the 9. So there is no favorable development relative to that 60 million losses on news. Okay, so prior periods.

Speaker Change: The second half 2023 through first quarter 2024 accident quarters.

Speaker Change: We booked new delinquencies at the nine so there is no.

Speaker Change: Favorable development relative to that $60 million losses on news.

Speaker Change: Okay, so the FERC et cetera.

Yes first quarter ramp from prior year.

Speaker Change: Yes.

Speaker Change: Prior periods.

Rohit Gupta: All right, and then more of a macro question. What are some of the softer MSAs you're watching right now? Yeah, Geoff, this is Rohit. It's tough to give guidance on specific geographies. I would just say that that's part of our commercial strategy.

Speaker Change: Got it alright, and then.

Speaker Change: More of a macro question what are some of the softer msas you're watching right now.

Speaker Change: Yes.

Rohit Gupta: So don't want to discuss it on an earnings call. We do deploy our pricing and risk appetite strategy at an MSA level. So rest assured that both from an experienced perspective as well as market data sourcing perspective. We basically are looking at different MSAs and putting that view forward in our risk appetite and pricing. If I was just to use the market, I would say like use a smaller market like Boise where you basically might have seen a run-up during the COVID time period in terms of inflow of population. And then once COVID ended, that population basically went back to where they came from.

Rohit Gupta: And as a result, there's been less activity there. So we use all the way data from that as well as economic activity data at an MSA level to project where markets might be going. Okay.

Rohit Gupta: And last question. Can you talk a little bit about how execution looks between the traditional XOL versus ILN markets? It seems like we're still kind of on the XOL side of things. Just curious how ILNs are matching up. Yeah, I think what we haven't been in the ILN market for a couple of quarters now. But I think both markets are performing very, very well. What I mean by that is there's a little bit of imbalance between supply and demand. Obviously, mortgage insurers and act included have lower NIV over the most recent periods. And so less capacity or less need for coverage, less coverage to acquire.

Dean: And last question, can you talk a little bit about how execution looks between the traditional XOL markets versus the ILN markets? Seems like we're still kind of on the XOL side of things.

Rohit Gupta: And at the same time, you have new investors in the traditional reinsurance market providing additional capacity. And that's driving some favorability in terms, whether that's price or whether that's steps. So I'd say both markets look attractive, very attractive. Right now, our CRT plans for the second half of the year are probably pretty limited. We will reconsider, unless we do something more opportunistically. But I think our base plan is to go into 2025 with forward XOL and forward quota share capacity and bring that to market and hopefully take advantage of those attractive market conditions. Thank you.

Operator: Very no further questions at this time.

Rohit Gupta: I would now like to turn the conference back to our speakers for any closing remarks. Thank you, Mikey. We appreciate everybody's interest in an act. We will be hosting a fireside chat with JP Morgan tomorrow, and we will be attending JP Morgan Future of Financials Forum in mid-August. We look forward to seeing you at one of these events. Thank you.

Operator: This concludes today's conference. All, thank you all for participating. We now disconnect. Thank you.