Q1 2026 Essent Group Ltd. Earnings Call

May 8, 2026

Operator: Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Essent Group Limited First Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Phil Stefano, Investor Relations. You may begin.

Speaker #2: 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. And I would now like to turn the conference over to Phil Stefano, Investor Relations.

Speaker #2: You may begin.

Speaker #3: Thank you, Abby. Good morning, everyone, and welcome to our call. Joining me today are Mark Casale, Chairman and CEO, and David Weinstock, Chief Financial Officer.

Phil Stefano: Thank you, Abby. Good morning, everyone, and welcome to our call. Joining me today are Mark Casale, Chairman and CEO, and David Weinstock, Chief Financial Officer. Also on hand for the Q&A portion of the call is Chris Curran, President of Essent Guaranty. Our press release, which contains Essent's financial results for Q1 2026, was issued earlier today. It is available on our website at essentgroup.com. Prior to getting started, I would like to remind participants that today's discussions are being recorded and will include the use of forward-looking statements. These statements are based on current expectations, estimates, projections, and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially.

Speaker #3: Also on hand for the Q&A portion of the call is Chris Curran, President of Essent Guarantee. Our press release, which contains Essent's financial results for the first quarter of 2026, was issued earlier today and is available on our website at essentgroup.com.

Speaker #3: Prior to getting started, I would like to remind participants that today's discussions are being recorded and will include the use of forward-looking statements. These statements are based on current expectations, estimates, projections, and assumptions that are subject to risks and uncertainties.

Speaker #3: Which may cause actual results to differ materially. For discussion of these risks and uncertainties, please review the cautionary language regarding forward-looking statements in today's press release.

Phil Stefano: For a discussion of these risks and uncertainties, please review the cautionary language regarding forward-looking statements in today's press release, the risk factors included in our Form 10-K filed with the SEC on 18 February 2026, and any other reports and registration statements filed with the SEC, which are also available on our website. Now, let me turn the call over to Mark.

Speaker #3: The risk factors included in our Form 10-K filed with the SEC on February 18th, 2026, and any other reports and registration statements filed with the SEC, which are also available on our website.

Speaker #3: Now let me turn the call over to Mark.

Speaker #4: Thanks, Phil, and good morning, everyone. Earlier today, we released our first quarter 2026 financial results, which continue to benefit from favorable credit performance, and the impact of interest rates on both persistency and investment income.

Mark Casale: Thanks, Phil, and good morning, everyone. Earlier today, we released our Q1 2026 financial results, which continue to benefit from favorable credit performance and the impact of interest rates on both persistency and investment income. Our core MI business continues to generate strong cash flow, supporting a balanced approach to capital allocation that funds growth opportunities across our franchise and returns capital to shareholders. For the Q1 2026, we reported net income of $172 million, or $1.82 per diluted share. On an annualized basis, our return on average equity was 12% year-to-date through the Q1. As of 31 March, our book value per share was $61.20, an increase of 11% from a year ago.

Speaker #4: Our core MI business continues to generate strong cash flow, supporting a balanced approach to capital allocation that funds growth opportunities across our franchise and returns capital to shareholders.

Speaker #4: For the first quarter of 2026, we reported net income of $172 million, or $1.82 per diluted share. On an annualized basis, our return on average equity was 12% year to date through the first quarter.

Speaker #4: As of March 31st, our book value per share was $61.20, an increase of 11% from a year ago. Our outlook on housing is that it remains in a pause as affordability and higher rates continue to temper purchase and refinance originations.

Mark Casale: Our outlook on housing is that it remains in a pause as affordability and higher rates continue to temper purchase and refinance originations. We believe that favorable demographics, supply constraints, and increasing pent-up demand will be positive for housing and our MI business when affordability improves. As of 31 March, our mortgage insurance in force was $248 billion, a 1% increase versus a year ago. Twelve-month persistency was 84.7%, reflecting the ongoing impact of the rate environment. Nearly 50% of our in-force portfolio carries a note rate of 5.5% or lower, a dynamic that we believe will support persistency at elevated levels. The credit quality of our insurance in force remains strong, with a weighted average FICO of 747 and a weighted average original LTV of 93%.

Speaker #4: However, we believe that favorable demographics, supply constraints, and increasing pent-up demand will be positive for housing and our MI business when affordability improves. As of March 31st, our mortgage insurance enforce was $248 billion, a 1% increase versus a year ago.

Speaker #4: 12-month persistency was $84.7%, reflecting the ongoing impact of the rate environment. Nearly 50% of our enforced portfolio carries a note rate of 5.5% or lower, a dynamic that will be, we believe, will support persistency at elevated levels.

Speaker #4: Credit quality of our insurance enforce remains strong, with a weighted average FICO of 747 and a weighted average original LTV of 93%. Our portfolio default rate was effectively flat quarter over quarter, and we continue to believe that the embedded home equity of our enforced book should mitigate ultimate claims.

Mark Casale: Our portfolio default rate was effectively flat quarter-over-quarter, and we continue to believe that the embedded home equity of our in-force book should mitigate ultimate claims. Outward reinsurance in our MI business continues to play an integral role in managing credit risk and capital. During Q1 2026, we entered into an excess of loss transaction with a panel of highly rated reinsurers providing forward protection for our 2027 business. We remain pleased with the execution of our reinsurance strategy, ceding a meaningful portion of our mezzanine credit risk and diversifying our capital sources. On the title front, we continue to transition the business from a standalone operation to an adjacency of our mortgage insurance franchise by leveraging our customer base and providing title solutions.

Speaker #4: Outward reinsurance in our MI business continues to play an integral role in managing credit risk and capital. During the first quarter of 2026, we entered into an excess of loss transaction with a panel of highly rated reinsurers, providing forward protection for our 2027 business.

Speaker #4: We remain pleased with the execution of our reinsurance strategy, seeing a meaningful portion of our mezzanine credit risk and diversifying our capital sources. On the title front, we continue to transition the business from a standalone operation to an adjacency of our mortgage insurance franchise by leveraging our customer base and providing title solutions.

Speaker #4: The coordination between our MI and title teams continues to build momentum in expanding the number of Essent title customers, but we note this business is rate sensitive and results will continue to improve as origination volumes recover.

Mark Casale: The coordination between our MI and title teams continues to build momentum in expanding the number of Essent Title customers. We note this business is rate sensitive and results will continue to improve as origination volumes recover. On the Essent Re front, we expanded our P&C reinsurance platform in Q1. Our Lloyd's program will generate approximately $120 million of written premium in 2026 against a $50 million deposit at returns comparable to our MI business. During Q1, we also executed a whole account quota share covering a cedant's casualty and specialty book, which will generate approximately $200 million of written premium in 2026.

Speaker #4: On the Essent refront, we expanded our P&C reinsurance platform in the first quarter. Our Lloyd's program will generate approximately $120 million of written premium in 2026 against a $50 million deposit at returns comparable to our MI business.

Speaker #4: During the first quarter, we also executed a whole account quota share covering a seed and casualty and specialty book which will generate approximately $200 million of written premium in 2026.

Speaker #4: Combined, we expect that the near-term earnings impact will be immaterial, while over the longer term, growing income and the capital benefits of rating agency diversification will be key drivers in generating shareholder value.

Mark Casale: Combined, we expect that the near-term earnings impact will be immaterial, while over the longer term, growing income and the capital benefits of rating agency diversification will be key drivers in generating shareholder value. Our consolidated cash and investments as of 31 March totaled $6.6 billion, with an annualized aggregate yield for Q1 of 4.2%. New money yields on our core portfolio in Q1 were nearly 5%, holding largely stable over the past several quarters. We continue to operate from a position of strength with $5.7 billion in GAAP equity, access to $1.1 billion in excess of loss reinsurance, and $1.1 billion in cash and investments at the holding companies.

Speaker #4: Our consolidated cash and investments as of March 31st totaled $6.6 billion, with an annualized aggregate yield for the first quarter of 4.2%. New money yields on our core portfolio in the first quarter were nearly 5%, holding largely stable over the past several quarters.

Speaker #4: We continue to operate from a position of strength with $5.7 billion in gap equity access to $1.1 billion in excess of loss reinsurance and $1.1 billion in cash and investments at the holding companies.

Speaker #4: With a trailing 12-month operating cash flow of $827 million, our franchise remains well-positioned from an earnings, cash flow, and balance sheet perspective. We remain committed to a measured and diversified capital strategy that looks to optimize shareholder returns over the long term, while preserving optionality for strategic growth opportunities.

Mark Casale: With a trailing twelve-month operating cash flow of $827 million, our franchise remains well-positioned from an earnings, cash flow, and balance sheet perspective. We remain committed to a measured and diversified capital strategy that looks to optimize shareholder returns over the long term while preserving optionality for strategic growth opportunities. With that in mind, year-to-date through 30 April, we repurchased approximately 3.5 million shares for over $200 million. Furthermore, I'm pleased to announce that our board has approved a common dividend of $0.35 for Q2 2026. Let me turn the call over to Dave.

Speaker #4: With that in mind, year to date through April 30th, we repurchased approximately $3.5 million shares for over $200 million. Furthermore, I'm pleased to announce that our board has approved a common dividend of 35 cents for the second quarter of 2026.

Speaker #4: Now let me turn the call over to Dave.

Speaker #5: Thanks, Mark. And good morning, everyone. Let me review our results for the quarter in a little more detail. For the first quarter, we earned $1.82 per diluted share, compared to $1.60 last quarter, and $1.69 in the first quarter a year ago.

David Weinstock: Thanks, Mark. Good morning, everyone. Let me review our results for the quarter in a little more detail. For Q1, we earned $1.82 per diluted share compared to $1.60 last quarter and $1.69 in Q1 a year ago. Our consolidated net premium earned and operating expenses each increased from Q4 due to our P&C reinsurance activity, which began effective January first. The consolidated provision for losses and loss adjustment expenses also include amounts related to P&C activity. My comments today are gonna focus primarily on our Mortgage Insurance segment results. There's additional information on our Reinsurance segment and Corporate and Other results in Exhibits D, E, and O of the financial supplement.

Speaker #5: Our consolidated net premium earned and operating expenses each increased from last quarter due to our P&C reinsurance activity, which began effective January 1st. The consolidated provision for losses and loss adjustment expenses also include amounts related to P&C activity.

Speaker #5: My comments today are going to focus primarily on our mortgage insurance segment results. There's additional information on our reinsurance segment and corporate and other results in Exhibit D, E, and O of the financial supplement.

Speaker #5: Our mortgage insurance portfolio ended the first quarter with insurance enforce of $247.9 billion. Essentially flat compared to December 31st. And an increase of 3.2 billion or 1.3% compared to $244.7 billion at March 31st, 2025.

David Weinstock: Our mortgage insurance portfolio ended Q1 with insurance in force of $247.9 billion, essentially flat compared to 31 December, and an increase of $3.2 billion or 1.3% compared to $244.7 billion at 31 March 2025. Persistency on 31 March 2026 was 84.7% compared to 85.7% at 31 December 2025. Mortgage insurance net premium earned for Q1 2026 was $216 million. The average base premium rate for the mortgage insurance portfolio for Q1 was 41 basis points, consistent with last quarter. The average net premium rate was 35 basis points, up 1 basis point from last quarter.

Speaker #5: Persistency at March 31st, 2026, was 84.7%. Compared to 85.7% at December 31st, 2025. Mortgage insurance net premium earned for the first quarter of 2026 was $216 million.

Speaker #5: The average base premium rate for the mortgage insurance portfolio for the first quarter was 41 basis points, consistent with last quarter. And the average net premium rate was 35 basis points, up 1 basis point from last quarter.

Speaker #5: Our mortgage insurance provision for losses and loss adjustment expenses was $37.6 million in the first quarter of 2026, compared to $55.2 million in the fourth quarter of 2025, and $30.7 million in the first quarter a year ago.

David Weinstock: Our mortgage insurance provision for losses and loss adjustment expenses was $37.6 million in Q1 2026 compared to $55.2 million in Q4 2025 and $30.7 million in Q1 a year ago. At 31 March, the default rate on the mortgage insurance portfolio was 2.54%, essentially unchanged from 31 December 2025. Mortgage insurance operating expenses in Q1 were $37.6 million, and the expense ratio was 17.4% compared to $34.3 million and 16.1% last quarter, and $40.9 million and 18.8% in Q1 last year.

Speaker #5: At March 31, the default rate on the mortgage insurance portfolio was 2.54%, essentially unchanged from December 31, 2025. Mortgage insurance operating expenses in the first quarter were $37.6 million, and the expense ratio was 17.4%.

Speaker #5: Compared to 34.3 million and 16.1% last quarter, and 40.9 million and 18.8% in the first quarter last year. Consistent with prior years, operating expenses in the first quarter of each year are typically higher due to payroll taxes on incentive compensation as well as higher stock-based compensation expense.

David Weinstock: Consistent with prior years, operating expenses in the Q1 of each year are typically higher due to payroll taxes on incentive compensation as well as higher stock-based compensation expense. At 31 March, Essent Guaranty's PMIER sufficiency ratio was strong at 174% with $1.6 billion in excess available assets. Turning to our reinsurance segment, net premium earned, provision for losses and loss adjustment expenses, and acquisition costs each increase from last quarter due to the P&C reinsurance activity which began effective 1 January. Consistent with Mark's comments, the pre-tax earnings for our P&C activity was immaterial for the quarter, and the pre-tax earnings for the reinsurance segment in the Q1 predominantly reflect the underwriting results for our GSE and other mortgage risk share activity.

Speaker #5: At March 31st, Essent guarantees premier sufficiency ratio was strong, at 174%, with 1.6 billion in excess available assets. Turning to our reinsurance segment, net premium earned provision for losses and loss adjustment expenses and acquisition costs each increased from last quarter due to the P&C reinsurance activity, which began effective January 1st.

Speaker #5: Consistent with Mark's comments, the pre-tax earnings for our P&C activity was immaterial for the quarter. And the pre-tax earnings for the reinsurance segment in the first quarter predominantly reflect the underwriting results for our GSE and other mortgage risk share activity.

Speaker #5: Consolidated net investment income and our average balance of cash and available-for-sale investments in the first quarter were largely unchanged from last quarter due to the use of operating cash flows to repurchase shares.

David Weinstock: Consolidated net investment income and our average balance of cash and available-for-sale investments in Q1 were largely unchanged from last quarter due to the use of operating cash flows to repurchase shares. Income from other invested assets was $10.2 million in Q1 2026 compared to $3.9 million last quarter and $7.4 million in Q1 a year ago. Higher results this quarter are primarily due to increased favorable fair value adjustments in the quarter. As Mark noted, our total holding company liquidity remains strong and includes $500 million of undrawn revolver capacity under our committed credit facility. At 31 March, we had $500 million of senior unsecured notes outstanding, and our debt-to-capital ratio was 8%.

Speaker #5: Income from other invested assets was 10.2 million in the first quarter of 2026, compared to 3.9 million last quarter, and 7.4 million in the first quarter a year ago.

Speaker #5: Higher results this quarter are primarily due to increased favorable fair value adjustments in the quarter. As Mark noted, our total holding company liquidity remained strong, and includes $500 million of undrawn revolver capacity under our committed credit facility.

Speaker #5: At March 31st, we had $500 million of senior unsecured notes outstanding, and our debt-to-capital ratio was 8%. At quarter end, Essent guarantees statutory capital was 3.7 billion, with the risk-to-capital ratio of 8.6 to 1.

David Weinstock: At quarter end, Essent Guaranty's statutory capital was $3.7 billion with a risk-to-capital ratio of 8.6 to 1. Note that statutory capital includes $2.6 billion of contingency reserves at 31 March. As of 1 April, Essent Guaranty can pay ordinary dividends of $330 million until in 2026. In April, Essent Guaranty paid its first dividend of 2026 to its US holding company of $50 million. During Q1, Essent Re paid a dividend of $100 million to Essent Group. Also in the quarter, Essent Group paid cash dividends totaling $32.6 million to shareholders, and we repurchased 2.6 million shares for $157 million. In April 2026, we repurchased 934,000 shares for $57 million.

Speaker #5: Note that statutory capital includes 2.6 billion of contingency reserves at March 31st. As of April 1st, Essent guarantee can pay ordinary dividends of $330 million into 2026.

Speaker #5: In April, Essent guarantee paid its first dividend of 2026 to its US holding company of $50 million. During the first quarter, Essent repaid a dividend of $100 million to Essent Group.

Speaker #5: Also in the quarter, Essent Group paid cash dividends totaling $32.6 million to shareholders, and we repurchased $2.6 million shares for $157 million. In April 2026, we repurchased $934,000 shares for $57 million.

Speaker #5: Now let me turn the call back over to Mark.

David Weinstock: Now let me turn the call back over to Mark.

Speaker #6: Thanks, Dave. In closing, Essent is a well-capitalized, high-quality franchise with strong and consistent cash flow generation. Our core mortgage insurance business remains well-positioned to serve our lender partners throughout this period of housing market transition.

Mark Casale: Thanks, Dave. In closing, Essent is a well-capitalized, high-quality franchise with a strong and consistent cash flow generation. Our core mortgage insurance business remains well-positioned to serve our lender partners throughout this period of housing market transition, and our reinsurance segment continues to create value by deploying capital efficiently across both mortgage and non-mortgage risk. We remain confident in our ability to grow book value per share, return capital to shareholders, and invest in opportunities that build a stronger franchise for the long term. Now let's get to your questions. Operator?

Speaker #6: And our reinsurance segment continues to create value by deploying capital efficiently across both mortgage and non-mortgage risk. We remain confident in our ability to grow book value per share, return capital to shareholders, and invest in opportunities that build a stronger franchise for the long term.

Speaker #6: Now, let's get to your questions. Operator?

Speaker #1: Thank you. And we'll now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad or raise your hand and join the queue.

Operator 2: Thank you. We'll now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, press star 1 again. If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your questions. Again, it is star 1 to join the queue. Our first question comes from the line of Bose George with KBW. Your line is open.

Operator: Thank you. We'll now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, press star 1 again. If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your questions. Again, it is star 1 to join the queue. Our first question comes from the line of Bose George with KBW. Your line is open.

Speaker #1: If you would like to withdraw your question, press star one again. If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your questions.

Speaker #1: Again, it is star one to join the queue. And our first question comes from the line of Bose George with KBW. Your line is open.

Speaker #7: Hey, good morning, everyone. Actually, first, can we just talk about just your updated thoughts on what you're seeing in terms of consumer credit? Any signs of early week early signs of weakness on higher gasoline prices?

David Brown: Hey, good morning, everyone. Actually, first, can we just talk about just your updated thoughts on what you're seeing in terms of consumer credit, you know, any signs of early weakness on higher gasoline prices, or is this things you're keeping an eye on?

Bose George: Hey, good morning, everyone. Actually, first, can we just talk about just your updated thoughts on what you're seeing in terms of consumer credit, you know, any signs of early weakness on higher gasoline prices, or is this things you're keeping an eye on?

Speaker #7: Or are you just things you're keeping an eye on?

Speaker #8: Hey, Bose. It's Mark. I would say right now we are not seeing any real kind of cracks you're seeing it a little bit in the lower end consumer, right?

Mark Casale: Hey, Bose, it's Mark. I would say right now we are not seeing any real kind of cracks. You're seeing it a little bit in the lower-end consumer, right? I mean, take a peek at the FHA delinquencies. You know, keep in mind our book, much higher FICO, so kind of 747 average FICO. Average income, $130,000 per household. These are the consumers that are really driving the economy, the upper-end consumer, along with significant AI spending. We're not seeing it. Clearly we look at it, and when you think about, like, our defaults have gone up, you know, take a step back and really look at, you know, just the seasoning of the book, Bose. 39 months, I believe the book is seasoned. Peak default is 36 to 60.

Speaker #8: I mean, take a peek at the FHA delinquencies, but keep in mind our book, much higher FICO. So kind of 747 average FICO average income, 130,000 per household.

Speaker #8: So these are the consumers that are really driving the economy, the upper end consumer, along with significant AI spending. So we're not seeing it.

Speaker #8: And clearly, we look at it. And when you think about our defaults have gone up, take a step back and really look at just the seasoning of the book, Bose.

Speaker #8: 39 months, I believe the book is seasoned, peak default is 36 to 60. So you're seeing there's really a normalization of the credit. We're not really seeing an acceleration of that.

Mark Casale: You're seeing there is really a normalization of the credit. We're not really seeing an acceleration of that. Again, it's roughly 20,000 defaults. And, you know, the book is not really growing in terms of policy. I would say the consumer's looking really good. And we're not really even seeing anything. If I look at different geographies, if I look at lenders, if you look at servicers, right? That's an important thing to look at when things start to bend a little bit. No, I would say in general, we think the consumer is in good shape. When you mention inflation, again, that's much more likely to hit the lower-end consumer. Certainly something we're watching.

Speaker #8: Again, it's roughly 20,000 defaults. And the book is not really growing in terms of policies. So I would say the consumer's looking really good.

Speaker #8: And we're not really even seeing anything, if I look at different geographies, if I look at lenders, if you look at servicers, right? That's an important thing to look at when things start to bend a little bit.

Speaker #8: So no, I would say in general, we think the consumer is in good shape. You mentioned inflation. Again, that's much more likely to hit the lower end consumer.

Speaker #8: So certainly something we're watching.

Speaker #7: Okay, great. Thanks. And then can you just give us an update on competitive trends in the market?

David Brown: Okay, great. Thanks. Can you just give us an update on competitive trends in the market?

Bose George: Okay, great. Thanks. Can you just give us an update on competitive trends in the market?

Mark Casale: I mean, no real differences in terms of the competitive trends. You're starting to see, you know, just with the lack of affordability, you know, some of the lenders starting to reach a little bit. I think on the MIs, it's a small market, and the books aren't growing. You're starting to see a little reach here and there. You know, there was a card, a bid card that we passed on recently where, you know, we saw a little bit of an extension of credit, and we priced for it, and we didn't get it. You're seeing it a little bit around the edges, but nothing real alarming. You just given the longer this pause is, right?

Speaker #6: I mean, no real differences. In terms of the competitive trends, you're starting to see just with a lack of affordability, some of the lenders starting to reach a little bit.

Speaker #6: I think on the MIs, it's a small market. And the books aren't growing. So you're starting to see a little reach here and there.

Speaker #6: There was a big card that we passed on recently where we saw a little bit of an extension of credit. And we priced for it.

Speaker #6: And we didn't get it. So you're seeing a little bit around the edges, but nothing real alarming. And you just given the longer this pause is, right?

Speaker #6: I mean, this pause started probably back half of '22. So now, '23, '24, '25, and now it's into this year. I think the industry has done a good job, to be quite honest, being patient and thoughtful around this stuff.

Mark Casale: I mean, this pause started probably H2 of 2022, now 2023, 2024, 2025, and now it's into this year. You know, I think the industry has done a good job, to be quite honest, being patient and thoughtful around this stuff. You know, you're always gonna see a crack here and there. I think from our standpoint, Bose, we look at it, you know, we look at it a little bit differently, you know, in terms of really Oops. We're really focused on the unit economics. When you look at where our NIW was for the quarter versus, you know, the number 1, you know, mortgage insurer, the difference is relatively small. You know, our view is that additional NIW is probably at the lower end of our, of our return hurdles.

Speaker #6: But you're always going to see a crack here and there. I think from our standpoint, Bose, we look at it we look at it a little bit differently.

Speaker #6: In terms of really oops. We're really focused on the unit economic. So when you look at where our NIW was for the quarter versus the number one mortgage insurer, the difference is relatively small.

Speaker #6: Our view is that additional NIWs probably at the lower end of our return hurdles. So we look at other options to allocate that capital.

Mark Casale: We look at other options to allocate that capital. Lloyd's was a good example, right? I mean, the Lloyd's leverage and the returns there are comparable. I'll also point you to, you know, our other invested assets. I mean, we were able to put money to work there in the first quarter that we think will be easily mid-teen returns over the next few years. Again, it's a choice. I think from a competitive standpoint, nothing really alarming. It remains a small market, it's difficult, really, to separate much when it's such a small market.

Speaker #6: Lloyd's was a good example, right? I mean, the Lloyd's leverage and the returns there are comparable. And I'll also point you to our other invested assets.

Speaker #6: I mean, we were able to put money to work there in the first quarter that we think will be easily mid-teen returns over the next few years.

Speaker #6: So again, it's a choice. And I think from a competitive standpoint, nothing really alarming. And it remains a small market. So it's difficult really to separate much when it's such a small market.

Speaker #7: Great, great. Thanks for the caller.

David Brown: Great. Great. Thanks for the color.

Bose George: Great. Great. Thanks for the color.

Speaker #1: And our next question comes from the line of Terry Ma with Barclays. Your line is open.

Operator 2: Our next question comes from the line of Terry Ma with Barclays.

Operator: Our next question comes from the line of Terry Ma with Barclays.

Speaker #9: Hey, thank you. Good morning. Just wanted to follow up on credit. As we look at the results of the quarter, anything to kind of call out and you notices were at least sequentially a little bit more muted compared to the seasonality that you saw the last few years?

Terry Ma: Hey, thank you. Good morning. Just wanted to follow up on credit. As we look at, you know, the results of the quarter, like anything to kind of call out new notices were at least sequentially a little bit more muted compared to the seasonality that you saw the last few years. I guess anything to call out there? As we look out to the rest of the year, should we kind of assume normal seasonality holds?

Terry Ma [Director of Equity Research: Hey, thank you. Good morning. Just wanted to follow up on credit. As we look at, you know, the results of the quarter, like anything to kind of call out new notices were at least sequentially a little bit more muted compared to the seasonality that you saw the last few years. I guess anything to call out there? As we look out to the rest of the year, should we kind of assume normal seasonality holds?

Speaker #9: So I guess anything to call out there. And as we look out to the rest of the year, should we kind of assume normal seasonality holds?

Mark Casale: I would expect, again, Terry, as you. This is the thing for investors to focus on, is just, again, back to my earlier point, the seasoning of the portfolio. Given where it is and peak default being 36 to 60, you're gonna see defaults continue to increase. Again, I don't think the rate is accelerating per se, but it is a seasoning aspect of it. The thing to keep in mind, though, at the end of the day, Terry, is I think we paid $13 billion in claims in Q1. Just to try to put this in perspective, roll, you know, going into default doesn't necessarily mean they're gonna roll the claim. I would, again, nothing big picture, 800,000 policies, 20,000 defaults.

Speaker #8: I would. I would. I would expect, again, Terry, as you and this is the thing for investors to focus on is just, again, back to my earlier point, the seasoning of the portfolio.

Speaker #8: Given where it is and peak default being 36 to 60, you're going to see defaults continue to increase and again, I don't think the rate is accelerating per se, but it is a seasoning aspect of it.

Speaker #8: The thing to keep in mind, though, at the end of the day, Terry, is I think we paid 13 million in claims in the first quarter.

Speaker #8: So just to try to put this in perspective, going into the fall doesn't necessarily mean they're going to roll the claim. So I would, again, nothing big picture, 800,000 policies, 20,000 defaults, it's normal.

Mark Casale: You know, it's normal, given the age, for the defaults to season and start to see the kind of the new notices tick up a little bit.

Speaker #8: Given the age, for the defaults to season and start to see the kind of the new notices tick up a little bit.

Speaker #9: Great. And then just a housekeeping question. I think I missed it and prepared remarks, but the provision on the reinsurance segment, that was related to the net premiums written in the quarter, right?

Terry Ma: Great. Then just a housekeeping question. I think I missed it in the prepared remarks, but the provision on the reinsurance segment, that was related to the net premiums written in the quarter, right? As we kind of look forward, that should, you know, kind of in a sense normalize compared to the past few quarters.

Terry Ma [Director of Equity Research: Great. Then just a housekeeping question. I think I missed it in the prepared remarks, but the provision on the reinsurance segment, that was related to the net premiums written in the quarter, right? As we kind of look forward, that should, you know, kind of in a sense normalize compared to the past few quarters.

Speaker #9: As we kind of look forward, that should, in a sense, normalize compared to the past few quarters?

Speaker #8: Yeah, it's a big change this quarter, right? Because we wrote Lloyd's, which hit in the first quarter. We also wrote the retro quarters here, which also was kind of we wrote in the first quarter, but it's back to quarter one.

Mark Casale: Yeah. It's a big change this quarter, right? Because we wrote Lloyd's, which hit in the Q1. We also wrote the retro, the retro quota share, which also was kind of we wrote in the Q1, it's back to Q1. Remember, these are run at more high combined ratios, so you're gonna combining with mortgage, so it's gonna be a little. You know, we can help you offline a little bit on the modeling. I would. You know, the bottom line is it's not gonna drive a lot of income in 2026, it does set the stage for a little bit down the road. The counter to that is just the mortgage book within S&P is not really growing.

Speaker #8: And remember, these are run at more high combined ratios. So you're going to and you're combining with mortgage. So it's going to be a little we can help you offline a little bit on the modeling.

Speaker #8: But I would the bottom line is it's not going to drive a lot of income in 2026, but it does set the stage for a little bit down the road.

Speaker #8: The counter to that is just the mortgage book within S&RE is not really growing. You're seeing kind of we have a pause for growth on the MI side.

Mark Casale: Seeing the kind of we have a pause for growth on the MI side. It's actually the way the GSEs are buying, you know, reinsurance these days. They're moving higher up in the capital structure, that there are in the capital model a bit for sure, so good for them, but they're buying higher in the capital structure. We're getting less rate online, right? Because there's less risk. They're also not reinsuring a lot. I would expect, again, if there's a change around when we think about privatization of GSEs and they become more normal, in terms of risk share back to where they were, we could see that growth resume again. Right now, it's gonna be a little bit of the P&C earnings replacing the mortgage earnings over the next few years.

Speaker #8: It's actually the way the GSEs are buying reinsurance these days. They're moving higher up in the capital structure. They're up in the capital model a bit, for sure.

Speaker #8: So, good for them. But they're buying higher in the capital structure, so we're getting less rate online, right? Because there's less risk. And they're also really not—they're not reinsuring a lot.

Speaker #8: So I would expect, again, if there's a change around when we think about privatization of the GSEs and they become more normal, in terms of risk share, back to where they were, we could see that growth resume again.

Speaker #8: But right now, it's going to be a little bit of the P&C earnings replacing the mortgage earnings over the next few years.

Speaker #9: Okay. Got it. Thank you.

Terry Ma: Okay. Got it. Thank you.

Terry Ma [Director of Equity Research: Okay. Got it. Thank you.

Speaker #8: Yep.

Mark Casale: Yep.

Speaker #1: And as a reminder, it is Star One if you would like to ask a question. And our next question comes from the line of Jeffrey Dunn with Dowling & Partners.

Operator 2: As a reminder, it is star one if you would like to ask a question. Our next question comes from the line of Geoffrey Dunn with Dowling & Partners. Your line is open.

Operator: As a reminder, it is star one if you would like to ask a question. Our next question comes from the line of Geoffrey Dunn with Dowling & Partners. Your line is open.

Speaker #1: Your line is open.

Geoffrey Dunn: Thanks. Unfortunately, I think you just said you'd do it offline. I was gonna ask you if you could break down the loss ratio in the reinsurance business between the P&C and the mortgage business.

Speaker #7: Thanks, unfortunately, I think you just said you do it offline. But I was going to ask you, if you could break down the loss ratio and the reinsurance business between the P&C and the mortgage business.

Speaker #8: Yeah, the loss I mean, we'll break it off offline. But high level, the loss ratio on mortgage is basically zero. So most of the losses are flowing through.

Mark Casale: Yeah, the loss, I mean, we'll break it off offline, high level, the loss ratio on mortgage is basically zero. Most of the losses are flowing through. I think from a modeling perspective, Geoffrey Dunn, I would look at mid to high 90s for the P&C together, right? It's Lloyd's and quota share, to mix it together, it's mostly, I would say the majority of it is specialty and casualty. There's a little property in there from Lloyd's, it's D&F. It's not property cat. The Lloyd's, you know, the Lloyd's combined ratio will probably be, you know, mid-90s, the quota share is probably in the higher 90s. It'll kind of balance out.

Speaker #8: I think from a modeling perspective, Jeff, I would look at mid to high 90s for the P&C together, right? It's Lloyd's and quota share.

Speaker #8: But to mix it together, it's mostly I would say the majority of it is specialty and casualty. There's a little property in there from Lloyd's, but it's D&F.

Speaker #8: It's not property CAT, so the Lloyd's combined ratio will probably be mid-90s, but the quota share is probably in the higher 90s.

Speaker #8: So, it'll kind of balance out. The key there is, and again, for a company that writes at a 35% combined ratio, it was definitely an adjustment for us to write at those higher levels.

Mark Casale: The key there is like, you know, for a company that writes at 35% combined ratio, we were, you know, it was definitely an adjustment for us to write at those higher levels. There's a different leverage, right? There's a lot more premium leverage within P&C. Clearly, you know, when rates went up a couple of years ago, you know, that really the asset leverage in P&C makes a lot more sense. And we're fortunate that we have the franchise in S&P to do it. Just the way the S&P capital model works, Jeff, as you know, I mean, I think our AAA excess, you know, that we write to is, you know, something on the order of $850 million.

Speaker #8: But there's a different leverage, right? So there's a lot more premium leverage within P&C and clearly when rates weren't up a couple of years ago, that really the asset leverage and P&C makes a lot more sense.

Speaker #8: And we're fortunate that we have the franchise in S&RE to do it. And just the way the S&P capital model works, Jeff, as you know, I mean, I think our AAA excess that we write to is something on the order of 800 and 50 million dollars.

Speaker #8: So for us to write 200 million dollars is really no additional capital and probably helps us from a capital diversification rate. So it's not like we're taking capital from repurchases and putting it into P&C.

Mark Casale: For us to write, you know, $200 million is really no additional capital and probably helps us from a capital diversification rate. It's not like we're taking capital from repurchases and putting it into P&C. It's really we're kind of double levering the capital bit within S&P, which will be over time accretive to earnings.

Speaker #8: It's really we're kind of double levering the capital a bit within S&RE, which is which will be over time a creative earnings.

Speaker #7: That's helpful. Thank you.

Geoffrey Dunn: That's helpful. Thank you.

Operator 2: Our next question comes from the line of Mihir Bhatia with Bank of America. Your line is open.

Speaker #1: And our next question comes from the line of Mahir Bhatia with Bank of America. Your line is open.

Operator: Our next question comes from the line of Mihir Bhatia with Bank of America. Your line is open.

Speaker #10: Hi. Good morning. Thank you for taking my question. I wanted to start by just asking on the cure rate. I know the number of defaults is small, but the cure rate really fell off a cliff this quarter.

Mihir Bhatia: Hi. Good morning. Thank you for taking my question. I wanted to start by just asking on the cure rate. I know the number of defaults is small, but the cure rate really fell off a cliff this quarter, and I don't know if, like, I'm just missing something obvious.

Speaker #10: And I don't know if I'm just missing something obvious.

Speaker #9: And Mahir, it's Dave Weinsock. Thanks for your question. I don't know that I would have characterized it that way. I mean, I think if you look and we have some good information in the supplement and you look at our how much of our new defaults are curing it's been pretty consistent quarter after quarter.

David Weinstock: Mihir, it's David Weinstock. Thanks for your question. I don't know that I would have characterized it that way. I mean, I think if you look and we have some good information in the supplement, and you look at our, you know, how much of our, the defaults are curing, you know, it's been pretty consistent quarter after quarter. You know, with one quarter in, we're in that, you know, 30-ish percent range. Actually, it was actually higher. Well, I think it's been very consistent, I guess, is what I would say, you know, quarter over quarter.

Speaker #9: With one quarter in, we're in that 30-ish percent range. And actually, it was actually higher I think well, I think it's been very consistent, I guess, is what I would say, quarter over quarter.

Speaker #10: Okay. Okay. Maybe I'll take that up offline. And then just.

Mihir Bhatia: Okay. Okay. Maybe I'll take that up offline.

Speaker #8: Yeah, I'm in here. I think you may be missing something. So let's take that offline because that's pretty really fall off a cliff. It's actually relatively normal if you go back and look at our past stats.

Mark Casale: Yeah. I mean, Mihir, I think you may be missing something. Let's take that offline because that didn't really fall off a cliff. It's actually relatively normal if you go back and look at our past stats. We're probably going to have to dig in there with you a bit.

Speaker #8: So we're probably going to have to dig in there with you a bit.

Speaker #10: Yeah. No, I appreciate that. Thank you. And then just in terms of the reserve releases, I would ask just given the commentary you've had about it being stable, there being some portfolio seasoning mostly, and the way you reserve your claim rate assumption, what would have to change for the prior period reserve releases to go down?

Mihir Bhatia: Yeah. No, I appreciate that. Thank you. Then just in terms of the reserve releases, I want to ask, just, you know, given the commentary you had about it being stable, there being some portfolio seasoning mostly, and the way you reserve, like, your claim rate assumption. Like, what would have to change for the prior period reserve releases to go down? Like, what are the indicators we should be looking for in the macro that, hey, if these things are changing, we need to start thinking that maybe the reserve releases slow down?

Speaker #10: What are the indicators we should be looking for in the macro that, "Hey, these things are changing. We need to start thinking that maybe the reserve release is slowed down"?

Speaker #8: Yeah. I mean, I would look at unemployment rate. I mean, at the end of the day, if as long as we at a 745 FICO average income, what we said earlier, I mean, it's a strong borrower unless they lose their job.

Mark Casale: Yeah, I mean, I would look at unemployment rate. I mean, at the end of the day, if, you know, as long as we at a 745 FICO average income, what we said earlier, I mean, it's a strong borrower unless they lose their job. You saw that, you saw that in COVID, Mihir. Again, you know, employment is actually is pretty strong, and I think it'll continue to be strong. We'll continue, you know, just from a consumer standpoint, you know, I don't think much changes that. Also again, remember, home prices, home prices are still, there's a lot of embedded equity in the portfolio, especially between, you know, kind of the pre-2022 book.

Speaker #8: So you saw that. You saw that in COVID, Mahir. So again, employment is actually pretty strong. And I think it'll continue to be strong.

Speaker #8: So we'll continue just from a consumer standpoint. I don't think much changes that. And also, again, remember, home prices are still there's a lot of embedded equity in the portfolio.

Speaker #8: So especially between kind of the pre-22 book. So again, or as we said earlier, just because they kind of get to or they go into default doesn't necessarily mean they're going to roll the claim.

Mark Casale: Again, or as we said earlier, just because they kind of get, or they go into default doesn't necessarily mean they're going to roll the claim. Again, back to the $13 million or so that we paid. I would take a step back, and I know you're good at this. I would take a step back and just again look at the longer term implications of what we're doing, right? The cash flow generation of the company, you know, again, last 12 months, $827 million. That's if you look at just a yield basis of where we are from a book value standpoint. The cash flow returns are pretty high.

Speaker #8: Again, back to the 13 million or so that we paid. So I would take a step back. And I know you're good at this.

Speaker #8: I would take a step back and just, again, look at the longer-term implications of what we're doing, right? The cash flow generation at the company.

Speaker #8: Again, last 12 months, 827 million dollars. So that's if you look at just a yield basis of where we are from a book value standpoint.

Speaker #8: The returns, or the cash flow returns, are pretty high. We continue to have a lot of excess cash at the holdco, and that's after buying back the amount of shares that we did.

Mark Casale: We continue to have a lot of excess cash at the whole co, and that's after buying back the amount of shares that we did. We're in a really good position. You know, as we always said, capital, you know, begets opportunities and we feel like we're in a good position. We're starting to allocate that capital a little bit, you know, within S&P, you know, other invested assets. That's another place where we can improve in returns and make it a little bit more accretive to the shareholder. Title, which we don't talk a lot about, is really, as I mentioned in the script, is really starting to come into its own a bit, really almost as an adjacency to the MI business.

Speaker #8: So we're in a really good position. So as we always said, capital begets opportunities. And we feel like we're in a good position. We're starting to allocate that capital a little bit.

Speaker #8: Within S&RE, other invested assets, we continue to that's another place where we can improve and returns and make it a little bit more creative to the shareholder title.

Speaker #8: Which we don't talk a lot about is really, as I mentioned in the script, is really starting to come into its own a bit.

Speaker #8: Really, almost as an adjacency to the MI business. So lots of, I would say, lots of momentum there around the coordination between the MI machine, as I like to call it, and the sales force and the title folks.

Mark Casale: Lots of, I would say, lots of momentum there around the coordination between the MI machine, as I like to call it, and the sales force and the title folks. Really, we've seen some nice customer wins. You know, you gotta stack all that just like we had to do back in the day, when we built the MI business. You clearly need rates to, you know, to come down. We're starting to see some green shoots throughout the organization, and that's in a pause. When you take a step back and just think about where the demographics are in this country in terms of first-time homebuyers, you know, there's 4 to 5 million new homebuyers coming, you know, coming into age every year. That's, that's gonna continue.

Speaker #8: And really, and we've seen some nice customer wins. You got to stack all that just like we had to do back in the day.

Speaker #8: When we built the MI business, and you clearly need rates to come down. But we're starting to start we're starting to see some green shoots throughout the organization.

Speaker #8: And that's in a pause. And so when you take a step back and just think about where the demographics are in this country in terms of first-time home buyers, there's four to five million new home buyers coming into age every year.

Speaker #8: And that's going to continue. Look at the chart in our investor deck. It's just a lot of these guys can't afford it. So there's an affordability issue.

Mark Casale: Look at the chart, in our investor deck. It's just a lot of these guys can't afford it. There's an affordability issue. It's not gonna be solved by the government, to be quite honest. It's gonna be solved when there's continued job growth and income growth, which there is. You know, some form of moderation of rates. And then there could be some changes in HPA, right? There's some pockets where there's some weakness. I've said before, I actually think that's healthy. You know, big picture, I, I think we're in good shape. I would just caution investors to not look at just some of the short-term metrics. They're important. They're always important in terms of defaults and new notices.

Speaker #8: It's not going to be solved by the government, to be quite honest. It's going to be solved when there's continued job growth and income growth, which there is.

Speaker #8: I know some form of moderation of rates and then there could be some changes in HPA, right? There's some pockets where there's some weakness.

Speaker #8: And I said before, I actually think that's healthy. So big picture, I think we're in good shape. So I would just caution investors to not look at just some of the short-term metrics.

Speaker #8: They're important. They're always important in terms of defaults and new notices, but bigger picture, right now, this is a pretty this is a pretty well-oiled cash flow machine.

Mark Casale: Bigger picture, you know, right now this is a pretty well-oiled cash flow machine. We'll see where we go and see how we can allocate that in the future. We're feeling pretty good about, you know, kind of where we're situated today.

Speaker #8: So we'll see where we go. And see how we can allocate that in the future. But we're feeling pretty good about kind of where we're situated today.

Mihir Bhatia: Got it. No, that's helpful, for sure. Maybe 1 just follow-up on something you said about, you know, just the intra-quarter and the benefits from title starting to come through. Obviously we had early in the Q lower rates. Maybe just talk about what you saw on intra-quarter trends, both from a persistency but also from a title perspective. Did you see the benefits from lower rates starting to come through?

Speaker #10: Got it. No, that's helpful, Michelle. And maybe one just follow-up on something you said about just the intra-quarter and the title kind of way.

Speaker #10: The benefits from titles kind of come through. Obviously, we had, early in the quarter, lower rates. Maybe just talk about what you saw on intra-quarter trends, both from a persistency, but also from a title perspective.

Speaker #10: Did you see the benefits of that type of form, lower rates, starting to come through?

Speaker #8: Okay. You broke up a little bit. But yes, we did. We did see we saw a little we saw a spike in the fourth quarter.

Mark Casale: Okay. You broke up a little bit, yes, we did. We saw a little, we saw a spike in Q4. We saw a spike in Q1 for sure, which we took advantage of, and we're better situated to take advantage of. That's another message for investors. As we continue to build scale, we're putting in a new system, very similar to how we did it, you know, back in the MI days. We bought code, now we're implementing it. Again, it's coming in within the information kind of machine, technology machine of Essent. The company we bought outsourced their IT. You know, you don't wave a magic wand and just put something onto your structure overnight.

Speaker #8: We saw a spike in the first quarter for sure, which we took advantage of. And we're better situated to take advantage of. That's another message for investors.

Speaker #8: As we continue to build scale, we're putting in a new system—very similar to how we did it back in the MI days. We bought code.

Speaker #8: And now we're implementing it. So again, it's coming in within the information kind of machine technology machine of Essent, and the company we bought outsourced their IT.

Speaker #8: So that doesn't you don't wave a magic wand and just put something onto your structure overnight. So we're investing in the system. We're patient I think at the capital, the capital we have allows us to do that.

Mark Casale: We're investing in the system. We're patient. You know, I think at the capital, the capital we have allows us to do that. Also, I mean, here, just the efficiencies around our expenses allow us to invest. We're starting to see it. The question is, it's more important from the MI standpoint. If refinances spike up, what we will see, we'll see some of that benefit on the title side. I think MI is a bit more important, though, to understand the rationale. Persistency will decrease, but I think the new originations will overwhelm that or mitigate it. Actually it'll help us. That'll be the signal for renewed growth in the portfolio.

Speaker #8: And also, I mean, here, just the efficiencies around our expenses allow us to invest. So we're starting to see it. The question is, it's more important from the MI standpoint.

Speaker #8: So if refinances spike up, we will see some of that benefit on the title side. I think MI is a bit more important, though, to understand the rationale.

Speaker #8: Persistency will decrease. But I think the new originations will overwhelm that or mitigate it. And actually, it'll help us. That'll be the signal for renewed growth in the portfolio.

Speaker #8: Because what you're going to see and we're actually it's an interesting position to think about, here, is go back and look at our pre-22 book, right?

Mark Casale: What you're gonna see, it's an interesting position to think about, Mihir, is go back and look at our pre-2022 book, right? I said half of the book is like five-and-a-half below. That's not gonna necessarily refinance. It's gonna be all the post-2022 book at the higher rate. We could see this phenomenon where the back book sticks a little bit more and the newer book is the one that starts to refinance. It's kind of a renewed growth. Again, something to watch for. I'm not necessarily seeing rates come down this year given, you know, given what's going on with oil prices and inflation. It is, it's another little tailwind that could happen if there is a movement in rates.

Speaker #8: I said half of the book is like five and a half below. That's not going to necessarily refinance. It's going to be all the post-22 book at the higher rate.

Speaker #8: So we could see this phenomenon where the back book sticks a little bit more and the newer book is the one that starts to refinance, but then is kind of a renewed growth.

Speaker #8: So again, something to watch for. I'm not necessarily seeing rates come down this year given what's going on with oil prices and inflation. But it is it's another little tailwind that could happen if there is a movement in rates.

Speaker #10: Got it. Thank you. Thanks for taking my question.

Mihir Bhatia: Got it. Thank you. Thanks for taking my questions.

Speaker #8: You're welcome.

Mark Casale: You're welcome.

Speaker #11: And with no further questions, I will now turn the conference back over to management for closing remarks.

Operator 2: With no further questions, I will now turn the conference back over to management for closing remarks.

Operator: With no further questions, I will now turn the conference back over to management for closing remarks.

Speaker #8: I'd like to thank everyone for joining us today, and have a great weekend.

Mark Casale: I'd like to thank everyone for joining us today, and have a great weekend.

Speaker #11: And ladies and gentlemen, this concludes today's call. And we thank you for your participation. You may now disconnect.

Operator 2: Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

Operator: Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

Operator 1: Please wait. The conference will begin shortly.

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