Q2 2026 Essent Group Ltd. Earnings Call

August 7, 2026

Operator: Thank you for standing by, and welcome to the Essent Group Ltd. Q2 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'd 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, again, press star one. Thank you. I'd now like to turn the call over to Phil Stefano, investor relations. You may begin.

Speaker #2: any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.

Speaker #2: If you would like to withdraw your question again, press star 1. Thank you. I'd now like to turn the call over to Phil Stefano, investor relations.

Speaker #2: You may begin.

Phil Stefano: Thank you, Rob. 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 the Q2 2026, was issued earlier today and is available on our website at essentgroup.com. Our press release includes non-GAAP financial measures that may be discussed during today's call. A complete description of these measures and the reconciliation to GAAP may be found in Exhibit Q of our press release, and in our Q2 2026 earnings presentation posted on our website. 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.

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

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 second quarter of 2026, was issued earlier today and is available on our website at essentgroup.com.

Speaker #3: Our press release includes non-GAAP financial measures that may be discussed during today's call. A complete description of these measures and the reconciliation to GAAP may be found in Exhibit Q of our press release, and in our second quarter 2026 earnings presentation posted on our website.

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, which may cause actual results to differ materially.

Phil Stefano: 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. 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: For 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 February 18, 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.

Mark A. Casale: Thanks, Phil, and good morning, everyone. Earlier today, we released our Q2 2026 financial results, which again reflect the benign credit environment, along with the effects of current interest rates on persistency and investment income. Cash generation from our core MI business remains strong, giving us the flexibility to allocate capital between investing in growth across the franchise and returning capital to shareholders. Our buy, manage, and distribute operating model remains a distinct advantage, positioning Essent to produce high-quality earnings across a wide range of economic environments. For Q2 2026, we reported net income of $190 million, or $2.08 per diluted share, which translates to an annualized return on average equity of 13.4%.

Mark Casale: Thanks, Phil, and good morning, everyone. Earlier today, we released our Q2 2026 financial results, which again reflect the benign credit environment, along with the effects of current interest rates on persistency and investment income. Cash generation from our core MI business remains strong, giving us the flexibility to allocate capital between investing in growth across the franchise and returning capital to shareholders. Our buy, manage, and distribute operating model remains a distinct advantage, positioning Essent to produce high-quality earnings across a wide range of economic environments. For Q2 2026, we reported net income of $190 million, or $2.08 per diluted share, which translates to an annualized return on average equity of 13.4%.

Speaker #4: Thanks, Phil. And good morning, everyone. Earlier today, we released our second quarter 2026 financial results, which again reflect a benign credit environment, along with the effects of current interest rates on persistency and investment income.

Speaker #4: Cash generation from our core MI business remains strong, giving us the flexibility to allocate capital between investing in growth across the franchise and returning capital to shareholders.

Speaker #4: Our buy manage and distribute operating model remains a distinct advantage positioning Essent to produce high-quality earnings across a wide range of economic environments. For the second quarter of 2026, we've reported net income of $190 million or $2.08 per diluted share, which translates to an annualized return on average equity of 13.4%.

Mark A. Casale: As of 30 June, our book value per share was $63.01. Inclusive of our common dividend, it grew nearly 13% over the past year and has compounded approximately 18% annually since our IPO. As a reminder, we believe that success in our business is best measured by growth in book value per share. In our MI business, as of 30 June, our insurance in force was $250 billion, a 1% increase versus a year ago. 12-month persistency was 84%, reflecting the current rate environment. Nearly half of our in-force portfolio has a mortgage rate of 5.5% or lower. We believe that this rate dynamic will support elevated persistency levels while our portfolio growth will remain in a pause as affordability continues to constrain origination volume.

Mark Casale: As of 30 June, our book value per share was $63.01. Inclusive of our common dividend, it grew nearly 13% over the past year and has compounded approximately 18% annually since our IPO. As a reminder, we believe that success in our business is best measured by growth in book value per share. In our MI business, as of 30 June, our insurance in force was $250 billion, a 1% increase versus a year ago. 12-month persistency was 84%, reflecting the current rate environment. Nearly half of our in-force portfolio has a mortgage rate of 5.5% or lower. We believe that this rate dynamic will support elevated persistency levels while our portfolio growth will remain in a pause as affordability continues to constrain origination volume.

Speaker #4: As of June 30, our book value per share was $63.01 and inclusive of our common dividend, it grew nearly 13% over the past year and has compounded approximately 18% annually since our IPO.

Speaker #4: As a reminder, we believe that success in our business is best measured by growth in book value per share. In our MI business, as of June 30, our insurance enforced was $250 billion a 1% increase versus a year ago.

Speaker #4: Twelve-month persistency was 84%, reflecting the current rate environment and the fact that nearly half of our in-force portfolio has a mortgage rate of 5.5% or lower.

Speaker #4: We believe that this rate dynamic will support elevated persistency levels, while our portfolio growth will remain in a pause as affordability continues to constrain origination volume.

Mark A. Casale: Longer term, we continue to believe that favorable demographics and pent-up demand will be a positive for housing and our MI business when affordability improves. The credit quality of our insurance in force remains strong with a weighted average credit score of 747 and a weighted average original LTV of 93%. Our portfolio default rate was effectively flat quarter-over-quarter. We continue to believe that the embedded home equity of our in-force book should mitigate ultimate claims. In addition, 97% of our insurance in force is subject to reinsurance protection, which provides capital relief and reduces tail risk. On title, we continue investing in technology across our platform while onboarding new partners by leveraging the broad relationships within our MI franchise. High interest rates remain a modest headwind near term. We do not expect title to have any meaningful impact on earnings.

Mark Casale: Longer term, we continue to believe that favorable demographics and pent-up demand will be a positive for housing and our MI business when affordability improves. The credit quality of our insurance in force remains strong with a weighted average credit score of 747 and a weighted average original LTV of 93%. Our portfolio default rate was effectively flat quarter-over-quarter. We continue to believe that the embedded home equity of our in-force book should mitigate ultimate claims. In addition, 97% of our insurance in force is subject to reinsurance protection, which provides capital relief and reduces tail risk. On title, we continue investing in technology across our platform while onboarding new partners by leveraging the broad relationships within our MI franchise. High interest rates remain a modest headwind near term. We do not expect title to have any meaningful impact on earnings.

Speaker #4: Longer term, we continue to believe that favorable demographics and pent-up demand will be a positive for housing and our MI business when affordability improves.

Speaker #4: The credit quality of our insurance enforced remains strong, with the weighted average credit score of 747 and a weighted average original LTV of 93%.

Speaker #4: 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.

Speaker #4: In addition, 97% of our insurance enforced is subject to reinsurance protection, which provides capital relief and reduces tail risk. On title, we continue investing in technology across our platform while onboarding new partners by leveraging the broad relationships within our MI franchise.

Speaker #4: High interest rates remain a modest headwind near term, and we do not expect title to have any meaningful impact on earnings. Longer term, our expectations remain the same.

Mark A. Casale: Longer term, our expectations remain the same. Title provides a capital-light opportunity that generates supplemental earnings for our franchise and deepen our lender relationships. Turning to the Reinsurance Segment, we continue to expect written premium of approximately $320 million for our P&C reinsurance activity in 2026, with roughly half earned this year at a combined ratio in the high 90s. The P&C book is weighted towards casualty and specialty, requiring minimal incremental capital from Essent Re. However, over the near term, mortgage risk and a related MGA business will continue to drive the segment's earnings. Our consolidated cash and investments as of 30 June totaled $6.6 billion, with an annualized aggregate investment yield for Q2 of 4.9%. Our investment yield this quarter includes income from other invested assets, a portfolio of strategic investments in insurance, specialty finance, and housing that we built over several years.

Mark Casale: Longer term, our expectations remain the same. Title provides a capital-light opportunity that generates supplemental earnings for our franchise and deepen our lender relationships. Turning to the Reinsurance Segment, we continue to expect written premium of approximately $320 million for our P&C reinsurance activity in 2026, with roughly half earned this year at a combined ratio in the high 90s. The P&C book is weighted towards casualty and specialty, requiring minimal incremental capital from Essent Re. However, over the near term, mortgage risk and a related MGA business will continue to drive the segment's earnings. Our consolidated cash and investments as of 30 June totaled $6.6 billion, with an annualized aggregate investment yield for Q2 of 4.9%. Our investment yield this quarter includes income from other invested assets, a portfolio of strategic investments in insurance, specialty finance, and housing that we built over several years.

Speaker #4: Title provides a capital-light opportunity to generate supplemental earnings for our franchise and deepen our lender relationships. Turning to the reinsurance segment, we continue to expect written premium of approximately $320 million for our P&C reinsurance activity in 2026, with roughly half earned this year at a combined ratio in the high 90s.

Speaker #4: The P&C book is weighted towards casualty and specialty, requiring minimal incremental capital from Essent Re. However, over the near term, mortgage risk and the related MGA business will continue to drive the segment's earnings.

Speaker #4: Our consolidated cash and investments as of June 30 totaled $6.6 billion with an annualized aggregate investment yield for the second quarter of $4.9%. Our investment yield this quarter includes income from other invested assets of portfolio of strategic investments in insurance, specialty finance, and housing that we built over several years.

Mark A. Casale: It's now approximately $450 million, or 7% of our total portfolio. Although returns will vary period to period, this portfolio gives us another way to deploy capital outside of our core businesses to generate income and increase book value. We continue to operate from a position of strength with $5.7 billion in GAAP equity, access to $1 billion in excess of loss reinsurance, and $1.1 billion in cash and investments at the holding companies. With a trailing 12-month operating cash flow of $834 million, our franchise remains well-positioned from an earnings, cash flow, and balance sheet perspective. Capital strategy remains a balanced approach that optimizes shareholder returns over the long term while preserving optionality for strategic growth.

Mark Casale: It's now approximately $450 million, or 7% of our total portfolio. Although returns will vary period to period, this portfolio gives us another way to deploy capital outside of our core businesses to generate income and increase book value. We continue to operate from a position of strength with $5.7 billion in GAAP equity, access to $1 billion in excess of loss reinsurance, and $1.1 billion in cash and investments at the holding companies. With a trailing 12-month operating cash flow of $834 million, our franchise remains well-positioned from an earnings, cash flow, and balance sheet perspective. Capital strategy remains a balanced approach that optimizes shareholder returns over the long term while preserving optionality for strategic growth.

Speaker #4: It's now approximately $450 million or 7% of our total portfolio. Although returns will vary period to period, this portfolio gives us another way to deploy capital outside of our core businesses to generate income and increase book value.

Speaker #4: We continue to operate from a position of strength, with $5.7 billion in GAAP equity, access to $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 $834 million, our franchise remains well positioned from an earnings, cash flow, and balance sheet perspective. Our capital strategy remains a balanced approach that optimizes shareholder returns over the long term, while preserving optionality for strategic growth.

Mark A. Casale: Year to date through 31 July 2026, we repurchased nearly 6 million shares for approximately $350 million. I'm pleased to announce that our board has approved a common dividend of $0.35 for Q3 2026. Now let me turn the call over to Dave.

Mark Casale: Year to date through 31 July 2026, we repurchased nearly 6 million shares for approximately $350 million. I'm pleased to announce that our board has approved a common dividend of $0.35 for Q3 2026. Now let me turn the call over to Dave.

Speaker #4: Year-to-date through July 31, we repurchased nearly $6 million shares for approximately $350 million and I'm pleased to announce that our board has approved a common dividend of 35 cents for the third quarter of 2026.

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

Phil Stefano: Thanks, Mark, and good morning, everyone. Let me review our results for the quarter in a little more detail. Q2, we earned $2.08 per diluted share, compared to $1.82 last quarter and $1.93 in Q2 a year ago. My comments today are going to focus primarily on the results of our Mortgage Insurance and Reinsurance segments. There's additional information on our corporate and other results in Exhibits D and E of the financial supplement. Our Mortgage Insurance portfolio ended Q2 with insurance in force of $249.7 billion, an increase of $1.8 billion from 31 March 2026, an increase of $2.9 billion, or 1.2%, compared to $246.8 billion at 30 June 2025. Persistency at 30 June 2026, was 84%, compared to 84.7% at 31 March 2026. Mortgage Insurance premium earned for Q2 2026 was $216 million.

David Weinstock: Thanks, Mark, and good morning, everyone. Let me review our results for the quarter in a little more detail. Q2, we earned $2.08 per diluted share, compared to $1.82 last quarter and $1.93 in Q2 a year ago. My comments today are going to focus primarily on the results of our Mortgage Insurance and Reinsurance segments. There's additional information on our corporate and other results in Exhibits D and E of the financial supplement. Our Mortgage Insurance portfolio ended Q2 with insurance in force of $249.7 billion, an increase of $1.8 billion from 31 March 2026, an increase of $2.9 billion, or 1.2%, compared to $246.8 billion at 30 June 2025. Persistency at 30 June 2026, was 84%, compared to 84.7% at 31 March 2026. Mortgage Insurance premium earned for Q2 2026 was $216 million.

Speaker #5: Thanks, Mark. And good morning, everyone. Let me review our results for the quarter in a little more detail. In the second quarter, we earned $2.08 per diluted share, compared to $1.82 last quarter, and $1.93 in the second quarter a year ago.

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

Speaker #5: Our mortgage insurance portfolio ended the second quarter with insurance enforced of $249.7 billion. An increase of 1.8 billion from March 31 and an increase of 2.9 billion or $1.2% compared to $246.8 billion at June 30, 2025.

Speaker #5: Persistency at June 30, 2026 was 84%, compared to 84.7% at March 31, 2026. Mortgage insurance premium earned for the second quarter of 2026 was $216 million.

Phil Stefano: The average base premium rate for the Mortgage Insurance portfolio for Q2 was 40 basis points, down 1 basis point from last quarter. The average net premium rate was 35 basis points, consistent with last quarter. Our Mortgage Insurance provision for losses and loss adjustment expenses was $29.4 million in Q2 2026, compared to $37.6 million in Q1 2026 and $15.3 million in Q2 a year ago. At 30 June 2026, the default rate on the Mortgage Insurance portfolio was 2.53%, essentially unchanged from 31 March 2026. Mortgage Insurance operating expenses in Q2 were $31.9 million. The expense ratio was 14.8%, compared to $37.6 million and 17.4% last quarter, $33.6 million and 15.3% in Q2 last year.

David Weinstock: The average base premium rate for the Mortgage Insurance portfolio for Q2 was 40 basis points, down 1 basis point from last quarter. The average net premium rate was 35 basis points, consistent with last quarter. Our Mortgage Insurance provision for losses and loss adjustment expenses was $29.4 million in Q2 2026, compared to $37.6 million in Q1 2026 and $15.3 million in Q2 a year ago. At 30 June 2026, the default rate on the Mortgage Insurance portfolio was 2.53%, essentially unchanged from 31 March 2026. Mortgage Insurance operating expenses in Q2 were $31.9 million. The expense ratio was 14.8%, compared to $37.6 million and 17.4% last quarter, $33.6 million and 15.3% in Q2 last year.

Speaker #5: The average base premium rate for the mortgage insurance portfolio for the second quarter was 40 basis points, down 1 basis point from last quarter.

Speaker #5: And the average net premium rate was 35 basis points, consistent with last quarter. Our mortgage insurance provision for losses and loss adjustment expenses was $29.4 million in the second quarter of 2026, compared to $37.6 million in the first quarter of 2026 and $15.3 million in the second quarter a year ago.

Speaker #5: At June 30, the default rate on the mortgage insurance portfolio was 2.53%, essentially unchanged from March 31, 2026. Mortgage insurance operating expenses in the second quarter were $31.9 million and the expense ratio was 14.8%, compared to $37.6 million and 17.4% last quarter, and $33.6 million and 15.3% in the second quarter last year.

Phil Stefano: At 30 June, Essent Guaranty's PMIER Sufficiency ratio was strong at 172%, with $1.5 billion in excess available assets. Turning to our reinsurance segment, net premiums written in H1 2026 were $249 million, compared to $31 million in H1 2025. Net premiums earned in H1 2026 were $73 million, compared to $30 million in H1 2025. The increase in premiums reflects the growth in non-mortgage business from our expansion into P&C reinsurance activity. The reinsurance combined ratio was 77.9% in Q2 2026, compared to 69.6% last quarter and 19.4% a year ago. The change in the combined ratio was as expected, reflecting the difference in underwriting performance between the mortgage and non-mortgage lines and the changing business mix of the segment's premiums.

David Weinstock: At 30 June, Essent Guaranty's PMIER Sufficiency ratio was strong at 172%, with $1.5 billion in excess available assets. Turning to our reinsurance segment, net premiums written in H1 2026 were $249 million, compared to $31 million in H1 2025. Net premiums earned in H1 2026 were $73 million, compared to $30 million in H1 2025. The increase in premiums reflects the growth in non-mortgage business from our expansion into P&C reinsurance activity. The reinsurance combined ratio was 77.9% in Q2 2026, compared to 69.6% last quarter and 19.4% a year ago. The change in the combined ratio was as expected, reflecting the difference in underwriting performance between the mortgage and non-mortgage lines and the changing business mix of the segment's premiums.

Speaker #5: At June 30, Essent guarantees premier sufficiency ratio was strong, at 172%, with 1.5 billion in excess available assets. Turning to our reinsurance segment, net premiums written in the first half of 2026 were $249 million, compared to $31 million in the first half of 2025.

Speaker #5: Net premiums earned in the first half of 2026 were $73 million, compared to $30 million in the first half of 2025. The increase in premiums reflects the growth in non-mortgage business from our expansion into P&C reinsurance activity.

Speaker #5: The reinsurance combined ratio was 77.9% in the second quarter of 2026, compared to 69.6% last quarter and 19.4% a year ago. The change in the combined ratio was as expected.

Speaker #5: Reflecting the difference in underwriting performance between the mortgage and non-mortgage lines and the changing business mix of the segment's premiums. The pre-tax underwriting income for the reinsurance segment predominantly reflects the underwriting results of our GSC and other mortgage risk-share business.

Phil Stefano: The pre-tax underwriting income for the reinsurance segment predominantly reflects the underwriting results of our GSE and other mortgage risk share business, the contribution from our P&C activity was not material. Consolidated net investment income increased $2.4 million, or 4%, to $61.6 million in Q2 2026 compared to last quarter, due to an increase in the overall yield of the portfolio. Income from other invested assets was $19.4 million in Q2 2026, compared to $10.2 million last quarter and $4.5 million in Q2 a year ago. The higher results this quarter are primarily due to increased favorable fair value adjustments. Our holding company liquidity remains strong and includes $500 million of undrawn revolver capacity under our committed credit facility. At 30 June, we had $500 million of senior unsecured notes outstanding, and our debt-to-capital ratio was 8%.

David Weinstock: The pre-tax underwriting income for the reinsurance segment predominantly reflects the underwriting results of our GSE and other mortgage risk share business, the contribution from our P&C activity was not material. Consolidated net investment income increased $2.4 million, or 4%, to $61.6 million in Q2 2026 compared to last quarter, due to an increase in the overall yield of the portfolio. Income from other invested assets was $19.4 million in Q2 2026, compared to $10.2 million last quarter and $4.5 million in Q2 a year ago. The higher results this quarter are primarily due to increased favorable fair value adjustments. Our holding company liquidity remains strong and includes $500 million of undrawn revolver capacity under our committed credit facility. At 30 June, we had $500 million of senior unsecured notes outstanding, and our debt-to-capital ratio was 8%.

Speaker #5: While the contribution from our P&C activity was not material. Consolidated net investment income increased 2.4 million or 4% to $61.6 million in the second quarter of 2026, compared to last quarter, due to an increase in the overall yield of the portfolio.

Speaker #5: Income from other invested assets was 19.4 million in the second quarter of 2026, compared to 10.2 million last quarter and 4.5 million in the second quarter a year ago.

Speaker #5: The higher results this quarter are primarily due to increased favorable fair value adjustments. Our holding company liquidity remained strong and includes $500 million of undrawn revolver capacity.

Speaker #5: Under our committed credit facility. At June 30, we had $500 million of senior unsecured notes outstanding and our debt-to-capital ratio was 8%, year-to-date Essent guarantee paid dividends of $115 million to its US holding company.

Phil Stefano: Year to date, Essent Guaranty paid dividends of $115 million to its US holding company. At quarter end, Essent Guaranty's statutory capital was $3.7 billion with a risk-to-capital ratio of 8.5:1. Note that statutory capital includes $2.7 billion of contingency reserves at 30 June. As of 1 July, Essent Guaranty can pay additional ordinary dividends of $302 million in 2026. During Q2, Essent Re paid a dividend of $100 million to Essent Group. Also in the quarter, Essent Group paid cash dividends totaling $31.6 million to shareholders, and we repurchased 3.2 million shares for $191 million. Now, let me turn the call back over to Mark.

David Weinstock: Year to date, Essent Guaranty paid dividends of $115 million to its US holding company. At quarter end, Essent Guaranty's statutory capital was $3.7 billion with a risk-to-capital ratio of 8.5:1. Note that statutory capital includes $2.7 billion of contingency reserves at 30 June. As of 1 July, Essent Guaranty can pay additional ordinary dividends of $302 million in 2026. During Q2, Essent Re paid a dividend of $100 million to Essent Group. Also in the quarter, Essent Group paid cash dividends totaling $31.6 million to shareholders, and we repurchased 3.2 million shares for $191 million. Now, let me turn the call back over to Mark.

Speaker #5: At quarter-end, Essent guarantees statutory capital was $3.7 billion with a risk-to-capital ratio of 8.5 to 1. Note that statutory capital includes $2.7 billion of contingency reserves at June 30.

Speaker #5: As of July 1, Essent Guarantee can pay additional ordinary dividends of $302 million in 2026. During the second quarter, Essent repaid a dividend of $100 million to Essent Group.

Speaker #5: Also in the quarter, Essent Group paid cash dividend totaling $31.6 million to shareholders and we repurchased $3.2 million shares for $191 million. Now let me turn the call back over to Mark.

Mark A. Casale: Thanks, Dave. In closing, Essent is a well-capitalized, high-quality franchise with strong and consistent cash flow generation. We remain confident in our ability to grow book value per share, return capital, and invest in opportunities that build a stronger franchise for the long term. Now let's get to your questions. Operator?

Mark Casale: Thanks, Dave. In closing, Essent is a well-capitalized, high-quality franchise with strong and consistent cash flow generation. We remain confident in our ability to grow book value per share, return capital, and invest in opportunities that build a stronger franchise for the long term. Now let's get to your questions. Operator?

Speaker #4: Thanks, Dave. In closing, Essent is a well-capitalized, high-quality franchise with strong and consistent cash flow generation. We remain confident in our ability to grow book value per share, return capital, and invest in opportunities that build a stronger franchise for the long term.

Speaker #4: Now, let's get to your questions. Operator?

Operator: Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, simply press star one again. Your first question comes from the line of Bose George from KBW. Your line is open.

Speaker #2: Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker #2: To withdraw your question, simply press star 1 again. Your first question comes from a line of Bose George from KBW. Your line is open.

Bose George: Hey, guys. Good morning. Actually, first on the premium yield, can you remind us, do you expect that to be fairly stable? Anything to call out on the slight decline this quarter? Could you just talk about competitive trends?

Speaker #6: Hey, guys. Good morning. Actually, first, on the premium yield, can you remind us—do you expect that to be fairly stable? And is there anything to call out regarding the slight decline this quarter?

Speaker #6: And then could you just talk about competitive trends?

Mark A. Casale: Sure, Bose. Yeah, I think we guided to 40-ish, 40 basis points for the year, so I think we're kind of in line with that. Longer term, it's really just a reflection of new business written, persistency, and all the things that go into the portfolio. In terms of the competitive environment, I think it's pretty much the same, relatively stable. It's been stable for a while. It's a small market, Bose, so there's not a lot to be gotten from a lot of competition. Remember, in this industry, there's no credit competition. I mean, the GSEs, because of the rules and the guardrails they set up, we don't have any real credit competition. If the GSEs don't approve it, generally, we don't insure it. That's actually a positive that I think sometimes can be lost on investors.

Mark Casale: Sure, Bose. Yeah, I think we guided to 40-ish, 40 basis points for the year, so I think we're kind of in line with that. Longer term, it's really just a reflection of new business written, persistency, and all the things that go into the portfolio. In terms of the competitive environment, I think it's pretty much the same, relatively stable. It's been stable for a while. It's a small market, Bose, so there's not a lot to be gotten from a lot of competition. Remember, in this industry, there's no credit competition. I mean, the GSEs, because of the rules and the guardrails they set up, we don't have any real credit competition. If the GSEs don't approve it, generally, we don't insure it. That's actually a positive that I think sometimes can be lost on investors.

Speaker #4: Sure, Bose. Yeah, I think we guide it to 40-ish—40 basis points for the year. So I think we're kind of in line with that.

Speaker #4: Longer term, it's really just a reflection of new business written and persistency, and all the things that go into the portfolio. In terms of the competitive environment, I think it's pretty much the same.

Speaker #4: Relatively stable. And it's been stable for a while. It's a small market, Bose. So there's not a lot to be gotten from a lot of competition.

Speaker #4: And remember, in this industry, there's no credit competition. I mean, the GSEs—because of the rules and the guardrails they set up—we don't have any real credit competition.

Speaker #4: So if the GSCs don't approve it, generally, we don't insure it. So that's actually a positive that I think sometimes can be lost on investors.

Mark A. Casale: In terms of the price competition, again, I think it's fairly stable. If you take a step back and look at really where the different players are participating, everyone kind of has their spots, whether it's particular lenders, sometimes it's geographies, clearly around DTIs, FICOs or credit scores now that we call them. Everyone's picking their spots, but at the end of the day, the economics are fairly similar. For someone like Essent, yeah, we're at the lower end of the market share game. If you look at kind of lifetime premium share, we're probably closer to middle of the pack, if not a little bit above that. That's really for us, as you know, you see our earned premium yield, Bose. We're a bit higher than the industry. Part of that is just, it's our selection technique.

Mark Casale: In terms of the price competition, again, I think it's fairly stable. If you take a step back and look at really where the different players are participating, everyone kind of has their spots, whether it's particular lenders, sometimes it's geographies, clearly around DTIs, FICOs or credit scores now that we call them. Everyone's picking their spots, but at the end of the day, the economics are fairly similar. For someone like Essent, yeah, we're at the lower end of the market share game. If you look at kind of lifetime premium share, we're probably closer to middle of the pack, if not a little bit above that. That's really for us, as you know, you see our earned premium yield, Bose. We're a bit higher than the industry. Part of that is just, it's our selection technique.

Speaker #4: In terms of the price competition, again, I think it's fairly stable. And if you take a step back and look at really where the different players are participating, everyone kind of has their spots—whether it's particular lenders, sometimes it's geographies, clearly around DTIs, FICOs, or credit scores, as we now call them.

Speaker #4: Everyone's picking their spots. But at the end of the day, the economics are fairly similar. So for someone like Essent, yeah, we're at the lower end of the market share game, but if you look at kind of lifetime premium share, we're probably closer to middle of the pack, if not a little bit above that.

Speaker #4: So that's really, for us, as you know, you see our earned premium yield, Bose, we're a bit higher than the industry. And part of that is just it's our selection technique.

Mark A. Casale: I don't think we do anything better. I just think we have a different appetite, and we're more interested in the premium dollars so much more than just market share. If you look at our market share on 85 and below, we're the lowest in the industry. Again, that's market share rich, but premium light. Some folks like that. That's fine. When you add it all up, the economics across the industry are fairly similar, and I think that's a positive for investors.

Mark Casale: I don't think we do anything better. I just think we have a different appetite, and we're more interested in the premium dollars so much more than just market share. If you look at our market share on 85 and below, we're the lowest in the industry. Again, that's market share rich, but premium light. Some folks like that. That's fine. When you add it all up, the economics across the industry are fairly similar, and I think that's a positive for investors.

Speaker #4: I don't think we do anything better. I just think we have a different appetite and we're more interested in the premium dollars so much more than just market share.

Speaker #4: If you look at our market share on 85 and below, we're the lowest in the industry. And again, that's market share rich, but premium light.

Speaker #4: Some folks like that? That's fine. But I think so when you add it all up, the economics across the industry are fairly similar. And I think that's a positive for investors.

Bose George: Okay, great. That's helpful. Thanks. Actually just on that topic of what's happening with the credit scores, I think one concern in the market is that with VantageScore picking up momentum, that lenders could use that to game the system. I mean, do you think there's any credit risk to be worried about as VantageScore becomes a bigger part of the market?

Speaker #6: So, okay, great. That's helpful. Thanks. And then actually, just on that topic of what's happening with the credit scores, I think one concern in the market is that with Vantage Score picking up momentum, that lenders could use that to game the system.

Speaker #6: I mean, do you think there's any credit risk to be worried about as Vantage Score becomes a bigger part of the market?

Mark A. Casale: Yeah. It's a fair question. I would say, again, taking a step back a little bit and looking at VantageScore, it is a little bit more lenient than FICO score to be sure, right? There's a 20 basis points, 20-point gap between FICO and Vantage that GSEs have set up. It's probably a little bit wider. I wouldn't be surprised to see the GSEs tighten that over time. If there's any kind of arbitrage, Bose, I expect that to disappear over time. I really do. I don't think the GSEs are going to leave money on the table. They're just too smart for that. In terms of our market, it's actually a little bit of a benefit. If the scores are a little bit higher, that could bring an FHA borrower into the conventional business.

Mark Casale: Yeah. It's a fair question. I would say, again, taking a step back a little bit and looking at VantageScore, it is a little bit more lenient than FICO score to be sure, right? There's a 20 basis points, 20-point gap between FICO and Vantage that GSEs have set up. It's probably a little bit wider. I wouldn't be surprised to see the GSEs tighten that over time. If there's any kind of arbitrage, Bose, I expect that to disappear over time. I really do. I don't think the GSEs are going to leave money on the table. They're just too smart for that. In terms of our market, it's actually a little bit of a benefit. If the scores are a little bit higher, that could bring an FHA borrower into the conventional business.

Speaker #4: Yeah, it's a fair question. I would say, again, taking a step back a little bit and looking at VantageScore, it is a little bit more lenient than FICO Score, to be sure, right?

Speaker #4: There's a 20 basis point, 20-point gap between FICO and Vantage, the GSCs have set up. It's probably a little bit wider. I wouldn't be surprised to see the GSCs tighten that.

Speaker #4: Over time. So if there is any kind of arbitrage, Bose, I expect that to disappear over time. I really do. I don't think the GSCs are going to leave money on the table.

Speaker #4: They're just too smart for that. In terms of our market, it's actually a little bit of a benefit. So if the scores are a little bit higher, that could bring an FHA borrower into the conventional business.

Mark A. Casale: We have to be careful how we price it, but I think net, it's probably positive for the conventional market. In terms of kind of adverse selection, I think that's going to even itself out. I think for us, clearly, given how our engine works, we're not really reliant on the credit score. We're using over, whatever, 400-plus variables. Credit score is a component of that for sure. We're relatively score agnostic because we come up with our own score. We feel comfortable there. I think with the cards, you're going to have to be a little bit more careful. Again, I think that's really going to come down to the GSEs and how they structure the LLPAs going forward. Again, like I said, I think that'll be squared up in relatively short order should it become bigger.

Mark Casale: We have to be careful how we price it, but I think net, it's probably positive for the conventional market. In terms of kind of adverse selection, I think that's going to even itself out. I think for us, clearly, given how our engine works, we're not really reliant on the credit score. We're using over, whatever, 400-plus variables. Credit score is a component of that for sure. We're relatively score agnostic because we come up with our own score. We feel comfortable there. I think with the cards, you're going to have to be a little bit more careful. Again, I think that's really going to come down to the GSEs and how they structure the LLPAs going forward. Again, like I said, I think that'll be squared up in relatively short order should it become bigger.

Speaker #4: We have to be careful how we price it, but I think net-net it's probably positive for the conventional market and in terms of kind of adverse selection I think that's going to even itself out.

Speaker #4: I think for us, clearly, given how our engine works, we're not really reliant on the credit score. We're using over, whatever, 400-plus variables. The credit score is a component of that for sure, but we're relatively score-agnostic because we come out with our own score.

Speaker #4: So we feel comfortable there. I think with the cards, you're going to have to be a little bit more careful, and again, I think that's really going to come down to the GSEs and how they structure the LLPAs going forward.

Speaker #4: And again, like I said, I think that'll be squared up pretty in relatively short order. Should it become bigger? And it's not very big right now.

Mark A. Casale: It's not very big right now. There's not many lenders using it. Actually, some of our top lenders don't even have it as a kind of a priority item because they don't see the real pickup.

Mark Casale: It's not very big right now. There's not many lenders using it. Actually, some of our top lenders don't even have it as a kind of a priority item because they don't see the real pickup. It remains to be seen. It's a good question. Certainly something in the industry. If it does help certain borrowers get loans that they aren't getting today, I think that's a positive. I just don't think that's the case. I think it may shift again from FHA to conventional. I don't see a lot of borrowers coming off the sidelines because they have a higher score, to be honest.

Speaker #4: There’s not many lenders using it. Actually, some of our top lenders don’t even have it as kind of a priority item, because I don’t see the real pickup.

Mark A. Casale: It remains to be seen. It's a good question. Certainly something in the industry. If it does help certain borrowers get loans that they aren't getting today, I think that's a positive. I just don't think that's the case. I think it may shift again from FHA to conventional. I don't see a lot of borrowers coming off the sidelines because they have a higher score, to be honest.

Speaker #4: So it remains to be seen. It's a good question. Certainly something in the industry and if it does help certain borrowers get loans that they aren't getting today, I think that's a positive.

Speaker #4: I just don't think that's the case. I think it may shift again from FHA to conventional. I don't see a lot of borrowers coming off the sidelines because they have a higher score.

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

Speaker #4: To be honest.

Speaker #6: Okay. Great. That's helpful. Thanks.

Mark A. Casale: Yeah.

Mark Casale: Yeah.

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

Speaker #2: Your next question comes from a line of Meher Bhatia from Bank of America. Your line is open.

Mihir Bhatia: Hi. Thanks for taking my questions. Good morning. I wanted to first just follow up on Bose's question about just premium yield. I hear you about it being dependent on a lot of factors. Maybe just talk to us a little bit about just the new money yield versus what's in the book. I think what we're trying to think about is over the next one or two years as the book churns over a little bit, what that premium yield can look like. Is 40 bps the floor you'd recommend? I know you've guided that for this year, but just as we go look out a little bit further.

Speaker #7: Hi. Thanks. What is my question? Good morning. I wanted to first just follow up on both this question about just premium yields. I hear you about it being dependent on a lot of factors, but maybe just tell us about talk to us a little bit about just the new money yield versus what's in the book.

Speaker #7: I think what we're trying to think about is over the next year or two, as the book turns over a little bit, what that premium yield can look like.

Speaker #7: Is 40 bips like the flaw you'd recommend? I know you've guided that for this year, but just as we go look out a little bit further.

Mark A. Casale: Yeah. I wish it was as simple as I could just tell you what our new premium is, our new insurance written, and you could calculate it. It's just not that simple. It's just because it's so embedded in the years of books. We're at 40-ish. I would expect that if you're modeling it out, Mihir, over the next couple of years. It may go down a little bit. It's not a big move. Just because of the weight and the size of the book. I would say back into the new insurance written, again, that's what it's dependent on. We feel pretty good about that. Again, as I mentioned earlier, we have been looking, we're more a premium seeker so much versus just the best credit quality. Again, that gets to my point that everyone in the industry is picking their spots.

Mark Casale: Yeah. I wish it was as simple as I could just tell you what our new premium is, our new insurance written, and you could calculate it. It's just not that simple. It's just because it's so embedded in the years of books. We're at 40-ish. I would expect that if you're modeling it out, Mihir, over the next couple of years. It may go down a little bit. It's not a big move. Just because of the weight and the size of the book. I would say back into the new insurance written, again, that's what it's dependent on. We feel pretty good about that. Again, as I mentioned earlier, we have been looking, we're more a premium seeker so much versus just the best credit quality. Again, that gets to my point that everyone in the industry is picking their spots.

Speaker #4: Yeah. I wish it was as simple as I could just tell you what our new premium is, our new insurance written, and you could calculate it.

Speaker #4: It's just not that simple. It's just because it's so embedded in the years of books. We're at 40-ish. I would expect that. If you're modeling it out, Meher, over the next couple of years, it may go down a little bit.

Speaker #4: But it's not a big it's not a big move. And just because of the weight and the size of the book, I would say back into the new insurance written, again, that's what it's dependent on.

Speaker #4: We feel pretty good about that. And again, as I mentioned earlier, we have been looking we're more of premium seekers so much versus just the best, the best credit quality.

Speaker #4: And again, that gets to my point that everyone in the industry is picking their spots. But I think for us, in the second quarter, and this is overall premium, we increase premium 10%.

Mark A. Casale: I think for us, in Q2, and this is overall premium, we increased premium 10%. 10% on new insurance written just in the quarter. That's part of we took a little bit more risk. I think that's just a good sign of how the industry picks their spots, and we're able to look for stuff and find value, or at least what we perceive value. Again, I think that's our strategy. It's a little different than others. Again, like I said, everyone's kind of picking their spots, but the economics across the industry are relatively consistent.

Mark Casale: I think for us, in Q2, and this is overall premium, we increased premium 10%. 10% on new insurance written just in the quarter. That's part of we took a little bit more risk. I think that's just a good sign of how the industry picks their spots, and we're able to look for stuff and find value, or at least what we perceive value. Again, I think that's our strategy. It's a little different than others. Again, like I said, everyone's kind of picking their spots, but the economics across the industry are relatively consistent.

Speaker #4: 10% on new insurance written just in the quarter. And that's part of we took a little bit more risk, but I think that is a that's just a good sign of how the industry picks their spots and we're able to look for stuff and find value, or at least what we perceive value.

Speaker #4: But again, I think that's our strategy. It's a little different than others, but again, like I said, everyone's kind of picking their spots, but the economics across the industry are relatively consistent.

Mihir Bhatia: Just actually on that point, I mean, you did grow NIW a little faster than the industry this quarter. Now I know you don't manage for, like we've talked about, I think extensively on these calls about not managing for market share and focusing on returns. I am curious just in terms of, was there anything unusual? Were there certain pockets or segments where you found a little bit more opportunity this quarter? Was it just as you were talking about, like everyone has their pockets and the market just kind of came to where your pockets are more in the quarter?

Speaker #7: And just actually on that point, I mean, you did grow NIW a little faster than the industry this quarter. Now, I know you don't manage for we've talked about, I think, extensively on these calls about not managing for market share and focusing on returns.

Speaker #7: But I am curious just in terms of was there anything unusual? Were there certain pockets or segments where you found a little bit more opportunity this quarter?

Speaker #7: Or was it just, as you were talking about, everyone has their pockets and the market just kind of came to where your pockets are more this quarter?

Mark A. Casale: There's a few specifics, but I think it's really around kind of the makeup of the borrower, whether it's credit score, debt to income, LTV. I would say they stay away from that type of risk. They're probably lower DTI, lower LTV, so they like the 85s, much higher credit score. When we go into those, a little bit more of the other side of that market, say higher DTI or higher LTV, there's just less competition there. Instead of being one of six, we're one of three or one of four. We like our chances there. There's a little bit more pricing power, I would say, in those buckets than they are, everybody wants the 780, right? That's going to be super competitive.

Mark Casale: There's a few specifics, but I think it's really around kind of the makeup of the borrower, whether it's credit score, debt to income, LTV. I would say they stay away from that type of risk. They're probably lower DTI, lower LTV, so they like the 85s, much higher credit score. When we go into those, a little bit more of the other side of that market, say higher DTI or higher LTV, there's just less competition there. Instead of being one of six, we're one of three or one of four. We like our chances there. There's a little bit more pricing power, I would say, in those buckets than they are, everybody wants the 780, right? That's going to be super competitive.

Speaker #4: Yeah. There's a few specifics, but I mean, I think it's really around kind of the makeup of the borrower, whether it's credit score, debt-to-income, LTV.

Speaker #4: There are certain competitors that stay away from, or I would say they stay away from, that type of risk. They're probably much lower DTI, lower LTV.

Speaker #4: So they like the 85s—much higher credit score. So when we go into those, a little bit more of that—the other side of that market, say higher DTI or higher LTV—there's just less competition here.

Speaker #4: So instead of being 106, we're 103 or 104. So we like our chances there. So there's a little bit more pricing power I would say in those buckets than they are everybody wants to 780, right?

Speaker #4: And so that's going to be super competitive but in these other markets and sometimes it's states and geography, certain people like certain parts of the country.

Mark A. Casale: In these other markets and sometimes it's states and geography, certain people like certain parts of the country. There's other areas where, again, there's just a little bit more, I would say a little bit more value is the way we kind of look at it. Again, nothing cutting EssentEDGE per se, but it's just a matter of just kind of piercing through the market and seeing and trying to get those and capitalize on those opportunities.

Mark Casale: In these other markets and sometimes it's states and geography, certain people like certain parts of the country. There's other areas where, again, there's just a little bit more, I would say a little bit more value is the way we kind of look at it. Again, nothing cutting EssentEDGE per se, but it's just a matter of just kind of piercing through the market and seeing and trying to get those and capitalize on those opportunities.

Speaker #4: So, there's other areas where, again, there's just a little bit more—I would say a little bit more value is the way we kind of look at it.

Speaker #4: So nothing again, nothing cutting-edge per se, but it's just a matter of just kind of piercing through the market and seeing and trying to get those and capitalize on those opportunities.

Mihir Bhatia: Thank you. Thank you for taking my question.

Speaker #6: Okay. Thank you. Thank you for taking my question.

Mark A. Casale: You're welcome.

Mark Casale: You're welcome.

Speaker #2: You're welcome. Again, if you'd like to ask a question, press star one in your telephone keypad. Your next question comes from a line of Rick Shane from JP Morgan.

Operator: Again, if you'd like to ask a question, press star one in your telephone keypad. Your next question comes from the line of Rick Shane from JPMorgan. Your line is open.

Speaker #2: Your line is open.

Rick Shane: Hey, guys. Thanks for taking my questions. Look, it's a pretty straightforward quarter, and I'm following two analysts who asked really good questions. I'm going to go a little bit off the beaten path. It's a question we've been asking on some calls and certainly back channel with a lot of the companies we follow. If you could talk a little bit about how you guys are looking at AI and token usage within the organization. I think we're finding a really disparate range of outcomes. Some companies are still saying, "Hey, be aggressive. We want you to figure everything out. Don't worry about token usage." We're starting to now hear some conversations about throttling usage and things like optimizing model selection. Where are you guys, and how do you think this plays out over time?

Speaker #8: Hey, guys. Thanks for taking my questions. And look, it's a pretty straightforward quarter, and I'm following to analysts who ask really good questions. So I'm going to go a little bit off the beaten path.

Speaker #8: It's a question we've been asking on some calls and certainly backchannel with a lot of the companies we follow. If you could talk a little bit about how you guys are looking at AI and token usage within the organization.

Speaker #8: I think we're finding a really disparate range of outcomes. Some companies are still saying, "Hey, be aggressive. We want you to figure everything out.

Speaker #8: Don't worry about token usage." And we're starting to now hear some conversations about throttling usage and things like optimizing model selection. Where are you guys and how do you think this plays out over time?

Mark A. Casale: Yeah. It's certainly a topic amongst companies and at the top of the house here with the board. I would say our token usage is pretty robust. The cost of it's pretty When you look at the cost of tokens relative to our operating expense level, though, Rick, it's pretty small. We're not a tech company. I know we've seen some of the stories of tokens run rampant. We don't really have any of that. I would say out of our roughly 500 people, there's 100 really that are active users. When we think about it clearly, when we think about AI, we kind of break it into buckets. At the top of the house, I would say it's a very strong analytical tool.

Mark Casale: Yeah. It's certainly a topic amongst companies and at the top of the house here with the board. I would say our token usage is pretty robust. The cost of it's pretty When you look at the cost of tokens relative to our operating expense level, though, Rick, it's pretty small. We're not a tech company. I know we've seen some of the stories of tokens run rampant. We don't really have any of that. I would say out of our roughly 500 people, there's 100 really that are active users. When we think about it clearly, when we think about AI, we kind of break it into buckets. At the top of the house, I would say it's a very strong analytical tool.

Speaker #4: Yeah, it's certainly a topic amongst companies and at the top of the house here, with the board. I would say our token usage is pretty robust.

Speaker #4: The cost of it's pretty when you look at the cost of tokens relative to our operating expense level, though, Rick, it's pretty small. So we see we're not a tech company.

Speaker #4: So I know we've seen some of the stories of tokens run rampant. But we don't really have any of that. I would say out of our roughly 500 people, there's 100 really that are active users.

Speaker #4: And when we think about it, clearly, when we think about AI, we kind of break it into buckets. So at the top of the house, I would say it's a very strong analytical tool.

Mark A. Casale: Whether you're using, when we use Copilot, we use Claude, we use Gemini, we use Cursor. It depends on where in the organization. Top of the house, I'm an active user of Claude. It's a great analyst. It's a great way to cut through and analyze lots of data. It's not a replacement for judgment. It's like having another pair of hands. It's really complementary when we look at opportunities, when we're looking through different 10-Ks or Qs and all those sort of things. I find it pretty valuable from that standpoint. It's garbage in, garbage out. If you don't prompt well, you're not going to get super good answers. We think at the top of the house, we have to be active users, so it's hard for us to push down if we're not real familiar with the tools.

Mark Casale: Whether you're using, when we use Copilot, we use Claude, we use Gemini, we use Cursor. It depends on where in the organization. Top of the house, I'm an active user of Claude. It's a great analyst. It's a great way to cut through and analyze lots of data. It's not a replacement for judgment. It's like having another pair of hands. It's really complementary when we look at opportunities, when we're looking through different 10-Ks or Qs and all those sort of things. I find it pretty valuable from that standpoint. It's garbage in, garbage out. If you don't prompt well, you're not going to get super good answers. We think at the top of the house, we have to be active users, so it's hard for us to push down if we're not real familiar with the tools.

Speaker #4: So whether you're using when we use we use Copilot and we use Claude. We use Gemini. We use Kiro. And it depends on where in the organization.

Speaker #4: Top of the house, I'm an active user of Claude. It's a great analyst. It's a great way to cut through and analyze lots of data.

Speaker #4: It's not that it's a replacement for judgment. It's like having another pair of hands. So it's really complementary when we look at opportunities, when we're looking through different 10-Ks or Qs, and all those sorts of things.

Speaker #4: I find it pretty valuable from that standpoint. But it is it's garbage in, garbage out. If you don't prompt well, you're not going to get super good answers.

Speaker #4: And we think at the top of the house, we have to be active users. So it's hard for us to push down if we're not real familiar with the tools.

Mark A. Casale: I would say within the risk group, remember that's kind of what we do for a living. We see opportunities there to improve the analytics around EssentEDGE, both on the frequency side, the severity side, and just improving the cycle times of our ability to make changes. We're making progress there. Just taking a step back, Rick, it's not like you can wave a magic wand and everyone just starts using AI. There's a process. You have to make sure you get the right data in. That's in process within the risk group. Clearly within our IT group, the ability to code faster with Cursor has been a big lift. I think that, so you'll see changes there, and again, it gets back to cycle time. How quickly can you make changes to systems or improve systems?

Mark Casale: I would say within the risk group, remember that's kind of what we do for a living. We see opportunities there to improve the analytics around EssentEDGE, both on the frequency side, the severity side, and just improving the cycle times of our ability to make changes. We're making progress there. Just taking a step back, Rick, it's not like you can wave a magic wand and everyone just starts using AI. There's a process. You have to make sure you get the right data in. That's in process within the risk group. Clearly within our IT group, the ability to code faster with Cursor has been a big lift. I think that, so you'll see changes there, and again, it gets back to cycle time. How quickly can you make changes to systems or improve systems?

Speaker #4: I would say within the risk group, remember, we take that's the kind of what we do for a living. We see opportunities there to improve the analytics around edge, both on the frequency side, the severity side, and just improving the cycle times of our ability to make changes and we're making progress there.

Speaker #4: And just taking a step back, Rick, it's not like you can wave a magic wand and everyone just starts using AI. There's a process.

Speaker #4: You have to make sure you get the right data in. So that's in process within the risk group. Clearly, within our IT group, the ability to code faster with Kiro has been a big lift and I think that so you'll see changes there.

Speaker #4: And again, it gets back to cycle time. So, how quickly can you make changes to systems or improve systems? We have a very modular system platform that's been on the cloud now for close to 10 years.

Mark A. Casale: We have a very modular system platform that's been on the cloud now for close to 10 years. We were early adopters of it, really, Rick, because of cyber. If you remember, 10 years ago, cyber was a significant risk for companies that had kind of localized data centers. For us, it was how do we protect ourselves? The frequency of our data center getting hit was probably pretty low, but the severity could be devastating. We moved up to the cloud where the frequency's really high, but the severity's low. Because if we're on AWS's cloud, we feel like we're pretty well protected. We've been early adopters of the cloud.

Mark Casale: We have a very modular system platform that's been on the cloud now for close to 10 years. We were early adopters of it, really, Rick, because of cyber. If you remember, 10 years ago, cyber was a significant risk for companies that had kind of localized data centers. For us, it was how do we protect ourselves? The frequency of our data center getting hit was probably pretty low, but the severity could be devastating. We moved up to the cloud where the frequency's really high, but the severity's low. Because if we're on AWS's cloud, we feel like we're pretty well protected. We've been early adopters of the cloud.

Speaker #4: So we were early adopters of it, really, Rick, because of cyber. If you remember 10 years ago, cyber was a significant risk for companies that had kind of localized data centers and so for us, it was how do we protect ourselves?

Speaker #4: The frequency of our data center getting hit was probably pretty low, but the severity could be devastating. So we moved up to the cloud where the frequency is really high, but the severity is low.

Speaker #4: So because we're in AWS's cloud, we feel like we're pretty well protected. We've been early adopters of the cloud, and now, as a modular system, we're able to go in now.

Mark A. Casale: Now, so as a modular system, we're able to go in now, and it'll be a process over the next few years to kind of make the system even better and make changes. There's certainly going to be efficiencies within that over time. We look at it more in terms of the ability to price better, pay claims faster, customer response times with premiums and working through issues. That's the heart of our business. We don't talk about it a lot, and neither really do our competitors, just how operationally intensive these businesses are. They're a lot more complicated behind the wall than I think people, and really, it's a credit to the industry. We don't talk about it a lot, but it's a key competitive advantage in terms of how we think about and how complicated some of the complexities businesses are.

Mark Casale: Now, so as a modular system, we're able to go in now, and it'll be a process over the next few years to kind of make the system even better and make changes. There's certainly going to be efficiencies within that over time. We look at it more in terms of the ability to price better, pay claims faster, customer response times with premiums and working through issues. That's the heart of our business. We don't talk about it a lot, and neither really do our competitors, just how operationally intensive these businesses are. They're a lot more complicated behind the wall than I think people, and really, it's a credit to the industry. We don't talk about it a lot, but it's a key competitive advantage in terms of how we think about and how complicated some of the complexities businesses are.

Speaker #4: It’ll be a process over the next few years to further improve the system and implement changes. There are certainly going to be efficiencies gained over time, but we look at it more in terms of our ability to price better, pay claims faster, and improve customer response times with premiums and issue resolution.

Speaker #4: That's the heart of our business. And we don't talk about it a lot. And neither really do our competitors, just how operationally intensive these businesses are.

Speaker #4: And they're a lot more complicated behind the wall than I think people I mean, really, it's a credit to the industry. We don't talk about it a lot, but it's a key competitive advantage in terms of how we think about and how complicated some of the complexities businesses are.

Mark A. Casale: I think from an AI perspective, it's going to help us. On the title side, it's probably even, I would say, a greener pasture just when you think about a lot of processing, whether it's search and exam, all those sort of things, we think we can do better, cheaper, faster with AI. When I mentioned in the script we're investing in technology, when we bought the title company, they outsourced all their IT and they used a third-party provider. For us, so what we did, very similar to what we did on the MI side, we bought the code of an underlying system and now have implemented. It's going live soon. Part of it, we're testing it live. It'll be much easier to embed AI in some of the agents and tools within that.

Mark Casale: I think from an AI perspective, it's going to help us. On the title side, it's probably even, I would say, a greener pasture just when you think about a lot of processing, whether it's search and exam, all those sort of things, we think we can do better, cheaper, faster with AI. When I mentioned in the script we're investing in technology, when we bought the title company, they outsourced all their IT and they used a third-party provider. For us, so what we did, very similar to what we did on the MI side, we bought the code of an underlying system and now have implemented. It's going live soon. Part of it, we're testing it live. It'll be much easier to embed AI in some of the agents and tools within that.

Speaker #4: So I think from an AI perspective, it's going to help us on the title side. It's probably even I would say a greener pasture just when you think about a lot of processing, whether it's search and exam all those sort of things.

Speaker #4: We think we can do better, cheaper, faster. With AI, so when I mentioned in the script, we're investing in technology. When we bought the title company, they outsourced all their IT and they used a third-party provider.

Speaker #4: And for us, what we did very similar to what we did on the MI side, we bought the code of an underlying system and now have implemented it.

Speaker #4: It's going live soon, part of it. We're testing it live, but it'll be much easier to embed AI in some of the agents and tools within that.

Mark A. Casale: We don't look at it as when you get back to your question, the token cost is pretty immaterial relative to the potential. I think it'll play out over the next few years, and I'd be surprised. I think most companies are pretty actively involved. We've talked to some of our top lenders, and it's clear the public ones, which ones are using it and the efficiencies there in terms of mortgage origination. I think it's positive because at the end of the day, big picture, it's probably going to lower the cost to the borrower.

Speaker #4: So I think we're so we don't look at it as the so when you get back to your question, the token cost is pretty immaterial relative to kind of the potential.

Mark Casale: We don't look at it as when you get back to your question, the token cost is pretty immaterial relative to the potential. I think it'll play out over the next few years, and I'd be surprised. I think most companies are pretty actively involved. We've talked to some of our top lenders, and it's clear the public ones, which ones are using it and the efficiencies there in terms of mortgage origination. I think it's positive because at the end of the day, big picture, it's probably going to lower the cost to the borrower.

Speaker #4: I think it'll play out over the next few years. And I would be surprised I think most companies are pretty actively involved. We talked to some of our top lenders and it's clear the public wants which ones are using it and the efficiencies there in terms of mortgage origination.

Speaker #4: So I think it's positive because at the end of the day, big picture, it's probably going to lower the cost of the borrower.

Rick Shane: Yeah. Look, personally, I need to say it's probably the most transformational thing I've seen other than when I used to sit around and wait for faxes for earnings releases.

Speaker #1: Yeah. Look, personally, I can just say it's probably the most it is the most transformational thing I've seen other than when I used to sit around and wait for faxes for earnings releases.

Mark A. Casale: Yeah, you're dating yourself there, Rick. I can say too, as I explained to the team, I used to use spreadsheets, which means we would actually spread the paper out. We look at it that way. We didn't invent Excel, but we certainly leverage it. I think a lot of these is how do you leverage these tools to price loans better, become more efficient from an operating expense basis? To me, that's the exciting part. I think as an entrepreneurial company at the top of the house and within the senior management team, I think we've embraced it pretty good.

Mark Casale: Yeah, you're dating yourself there, Rick. I can say too, as I explained to the team, I used to use spreadsheets, which means we would actually spread the paper out. We look at it that way. We didn't invent Excel, but we certainly leverage it. I think a lot of these is how do you leverage these tools to price loans better, become more efficient from an operating expense basis? To me, that's the exciting part. I think as an entrepreneurial company at the top of the house and within the senior management team, I think we've embraced it pretty good.

Speaker #4: Yeah, you're dating yourself there, Rick. I mean, I can say too as I explained to the team, I used to use spreadsheets, which means we would actually spread the paper out.

Speaker #4: So, and we look at it that way. We didn't invent Excel, but we certainly leverage it. And I think a lot of this is, how do you leverage these tools to price loans better, become more efficient from an operating expense basis?

Speaker #4: And to me, that's the exciting part. And I think as an entrepreneurial company, at the top of the house and within the senior management team, I think we've embraced it pretty good.

Rick Shane: I appreciate that. Thanks, guys.

Speaker #1: I appreciate that. Thanks, guys.

Operator: Your next question comes from the line of Roland Mayer from RBC Capital Markets. Your line is open.

Speaker #2: Your next question comes from a line of Roland Mayer from RBC Capital Markets. Your line is open.

Roland Mayer: Hi, good morning. I wanted to quickly start on the P&C business and just understand if there's any meaningful cat exposure there. Could you help us understand a bit on the underlying risk in the casualty? Is it US or international, are there any notable lines of business that we need to know about?

Roland Meyer: Hi, good morning. I wanted to quickly start on the P&C business and just understand if there's any meaningful cat exposure there. Could you help us understand a bit on the underlying risk in the casualty? Is it US or international, are there any notable lines of business that we need to know about?

Speaker #5: Hi, good morning. I wanted to quickly start on the P&C business and just understand if there's any meaningful cat exposure there. And could you help us understand a bit on the underlying risk and the casualty?

Speaker #5: Is it U.S. or international, or are there any notable lines of business that we need to know about?

Mark A. Casale: No, I would say there's really two books of business, Roland, which is Lloyd's. That's pretty well diversified. I would say that's 85% insurance, 15% reinsurance, mostly specialty and casualty. There is a little bit of property, I would say probably 15%-ish is property, not all cat, so probably more mainstream-type property risk. With Lloyd's, remember, we wrote a check for $50 million. In a way, it's a strategic investment that we're recognizing that as premium and losses, but we're backing 45 plus syndicates. It's pretty well diversified. I think the top 10 syndicates make up 40%-ish percent of the book. There's definitely some exposure there from specialty marine and energy. Remember, we also were the benefit of the hedging that the insurance companies do. We're getting this net.

Mark Casale: No, I would say there's really two books of business, Roland, which is Lloyd's. That's pretty well diversified. I would say that's 85% insurance, 15% reinsurance, mostly specialty and casualty. There is a little bit of property, I would say probably 15%-ish is property, not all cat, so probably more mainstream-type property risk. With Lloyd's, remember, we wrote a check for $50 million. In a way, it's a strategic investment that we're recognizing that as premium and losses, but we're backing 45 plus syndicates. It's pretty well diversified. I think the top 10 syndicates make up 40%-ish percent of the book. There's definitely some exposure there from specialty marine and energy. Remember, we also were the benefit of the hedging that the insurance companies do. We're getting this net.

Speaker #4: No, I would say there are really two books of business, Roland. One is Lloyd's, and that's pretty well diversified. I would say that's 85% insurance and 15% reinsurance, mostly specialty and casualty.

Speaker #4: There is a little bit of property, I would say, probably 15-ish percent is property. Not all cat, so probably more mainstream-type property risk. And with Lloyd's, s, remember, it's we wrote a check for $50 million so it's in a way, it's a strategic investment that's we're recognizing that it's premium and losses, but we're backing 45-plus syndicates.

Speaker #4: So, it's pretty well diversified. I think the top 10 syndicates make up about 40% of the book. There's definitely some exposure there from specialty, marine, and energy.

Speaker #4: But remember, we also we're the benefit of the hedging that the insurance companies do. So we're getting we're getting this net so we don't and we had a pretty I would say conservative loss pick up front for the Lloyd's book.

Mark A. Casale: We had a pretty, I would say, conservative loss pick up front for the Lloyd's book. I think for the quota share, that's spread out under over 400 different cedents. It's 70%-ish percent casualty, 30% specialty, and the casualties is across the board. Whether it's general liability, D&O, workers' comp, all across, we think it's pretty well diversified. There same too, the loss pick there combined ratio was 100%. This year, Roland, we'll earn a few bucks on the P&C business, and we expect that to grow over time. Taking a step back, the way we look at reinsurance segment, right? The P&C part of it is it's an investment. It's another chance for us to allocate capital. We're bringing in obviously we're generating a lot of cash flow, $830-ish million over the last 12 months.

Mark Casale: We had a pretty, I would say, conservative loss pick up front for the Lloyd's book. I think for the quota share, that's spread out under over 400 different cedents. It's 70%-ish percent casualty, 30% specialty, and the casualties is across the board. Whether it's general liability, D&O, workers' comp, all across, we think it's pretty well diversified. There same too, the loss pick there combined ratio was 100%. This year, Roland, we'll earn a few bucks on the P&C business, and we expect that to grow over time. Taking a step back, the way we look at reinsurance segment, right? The P&C part of it is it's an investment. It's another chance for us to allocate capital. We're bringing in obviously we're generating a lot of cash flow, $830-ish million over the last 12 months.

Speaker #4: I think for the quota share, that's spread out under over 400 different seeds. It's 70-ish percent casualty. 30% specialty in the casualties. This is across the board.

Speaker #4: So whether it's general liability, DNO, workers' comp, all across we think it's pretty well diversified. And there are same too. The loss pick there with combined ratio was 100%.

Speaker #4: So this year, Roland will earn a few bucks on the P&C business and we expect that to grow. Over time, but taking a step back, the way we look at reinsurance segment, right, and the P&C part of it is it's an investment.

Speaker #4: It's another chance for us to allocate capital. We're bringing in, obviously, a lot of we're generating a lot of cash flow, 830-ish million over the last 12 months.

Mark A. Casale: We're clearly our first choice always is deploying into the core business. It's such a good business. It's relatively limited, right? In terms of whether it's one of six competitors, the unit economics, all those sort of things. We look for, we call them little call options. What other places can we invest capital, which over time could become something bigger? Title's an example of that, and I think P&C is another example. The third example is our other invested assets, which is really strategic investments. We've built that up over the last probably three, four years. It's probably roughly 7% of the portfolio, roughly maybe a little bit higher percentage of equity. It's strategic, so we work pretty closely with private equity funds is the majority of what we do, and we invest alongside them in direct investments.

Mark Casale: We're clearly our first choice always is deploying into the core business. It's such a good business. It's relatively limited, right? In terms of whether it's one of six competitors, the unit economics, all those sort of things. We look for, we call them little call options. What other places can we invest capital, which over time could become something bigger? Title's an example of that, and I think P&C is another example. The third example is our other invested assets, which is really strategic investments. We've built that up over the last probably three, four years. It's probably roughly 7% of the portfolio, roughly maybe a little bit higher percentage of equity. It's strategic, so we work pretty closely with private equity funds is the majority of what we do, and we invest alongside them in direct investments.

Speaker #4: We're clearly our first choice always is to deploy it into the core business. It's such a good business. But it's relatively limited, right, in terms of whether it's one of six competitors, the unit economics, all those sort of things.

Speaker #4: And then we look for—we call them little call options—other places we can invest capital which, over time, could become something bigger.

Speaker #4: Titles and example of that. And I think P&C is another example. The third example is our other invested assets, which is really strategic investments.

Speaker #4: And we've built that up over the last probably three, four years. It's probably roughly 7% of the portfolio, roughly maybe a little bit higher percentage of equity but it's strategic.

Speaker #4: So we work pretty closely with private equity funds as the majority of what we do. And we invest alongside them in direct investments. So when we went public, Roland, back in the day, we talked about stacking vintages.

Mark A. Casale: When we went public, Roland, back in the day, we talked about stacking vintages. We had our '12 vintage, our '13 vintage, and we would just stack them. Over time, we built that $250 billion book that's generating a lot of cash. It's a very similar philosophy across the board in these other investments. For the strategic investments, we're stacking investments. We're stacking a $25 million investment here, $30 million here, $10 there. This year, we have committed in the H1 of the year, $100 million on strategic investments. We'll fund that over a period of four years, maybe. It takes a while, and it takes a while for them to harvest and have cash flows, and return capital to us. It's always lumpy, but at the end of the day, what's our number one goal?

Mark Casale: When we went public, Roland, back in the day, we talked about stacking vintages. We had our '12 vintage, our '13 vintage, and we would just stack them. Over time, we built that $250 billion book that's generating a lot of cash. It's a very similar philosophy across the board in these other investments. For the strategic investments, we're stacking investments. We're stacking a $25 million investment here, $30 million here, $10 there. This year, we have committed in the H1 of the year, $100 million on strategic investments. We'll fund that over a period of four years, maybe. It takes a while, and it takes a while for them to harvest and have cash flows, and return capital to us. It's always lumpy, but at the end of the day, what's our number one goal?

Speaker #4: So we had our 12 vintage, our 13 vintage, and we would just stack them. And over time, we've built that 250 billion book that's generating a lot of cash.

Speaker #4: It's a very similar philosophy across the board in these other investments. So for the strategic investments, we're stacking investments. So we're stacking at 25 million dollar investment here, 30 million here, 10 there.

Speaker #4: I mean, this year, we have committed, in the first half of the year, $100 million on strategic investments. We'll fund that over a period of four years, maybe.

Speaker #4: It takes a while, and it takes a while for them to harvest and have cash flows and return capital to us. So it's always lumpy, but at the end of the day, what is our common—what's our number one goal?

Mark A. Casale: Grow book value per share. It helps us do that. I think on the P&C side, that's a different business. It's much different than the MI business. In the MI business, we are chartered to make a market every day in high LTV loans, and we do it for first-time home buyers. In the reinsurance business, we're not under no such obligation, I think we can be, I would say a lot more— it's much more like an investment business where you're going to lean in on certain times and back off on others. There, the concept, especially on the casualty side, is how do we stack float, right? If we can write a couple hundred million dollars of gross written and increase that over time in a careful way, certainly you want to have underwriting income, but stacking the float will pay off.

Mark Casale: Grow book value per share. It helps us do that. I think on the P&C side, that's a different business. It's much different than the MI business. In the MI business, we are chartered to make a market every day in high LTV loans, and we do it for first-time home buyers. In the reinsurance business, we're not under no such obligation, I think we can be, I would say a lot more— it's much more like an investment business where you're going to lean in on certain times and back off on others. There, the concept, especially on the casualty side, is how do we stack float, right? If we can write a couple hundred million dollars of gross written and increase that over time in a careful way, certainly you want to have underwriting income, but stacking the float will pay off.

Speaker #4: Grow book value per share, so it helps us do that. I think on the P&C side, that's a different business. It's much different than the MI business.

Speaker #4: I mean, in the MI business, we are chartered to make a market every day in high LTV loans, and we do it for first-time homebuyers.

Speaker #4: In the reinsurance business, we're not under any such obligation. So I think we can be, I would say, a lot more—it’s much more like an investment business where you're going to lean in at certain times and back off at others.

Speaker #4: They're the concept, especially on the casualty side, is how do we stack float? Right? So if we can write a couple hundred million dollars of gross written and increase that over time in a careful way, certainly you want to have underwriting income, but stacking the float will pay off.

Mark A. Casale: It's not going to pay off this year or next year, Roland, but it will pay off down the line. Title, and when you think about what timing of the market on P&C is, given where the market is in terms of probably too much capital, we're probably the new capital guy where there's too much capital. It's not a bad time to build out the infrastructure, right, in this type of market, so you're ready for the next market. We continue to do our work there. On the transaction that we did on the quota share, we have access now to loss triangles from 2005 across both specialty and casualty by line, excess of loss and quota share. That's a treasure trove that we can look to as we make other decisions. We start to build that historical context, which we don't have in that business.

Mark Casale: It's not going to pay off this year or next year, Roland, but it will pay off down the line. Title, and when you think about what timing of the market on P&C is, given where the market is in terms of probably too much capital, we're probably the new capital guy where there's too much capital. It's not a bad time to build out the infrastructure, right, in this type of market, so you're ready for the next market. We continue to do our work there. On the transaction that we did on the quota share, we have access now to loss triangles from 2005 across both specialty and casualty by line, excess of loss and quota share. That's a treasure trove that we can look to as we make other decisions. We start to build that historical context, which we don't have in that business.

Speaker #4: It's not going to pay off this year or next year, Roland, but it will pay off down the line. When you think about the timing of the market on P&C, given where the market is in terms of probably too much capital, we're probably the new capital guy, where there's too much capital.

Speaker #4: But it's not a bad time to build out the infrastructure, right, in this type of market, so you're ready for the next market. So we continue to do our work there.

Speaker #4: I mean, on the transaction that we did on the quota share, we have access now to loss triangles from 2005 across both specialty and casualty, by line, excess of loss, and quota share.

Speaker #4: It's a treasure trove that we can look to as we make other decisions. We start to build that historical context, which we don't have in that business.

Mark A. Casale: We have it in spades in the mortgage business, it's always about data. I think with Lloyd's, the same thing. As we, over time, continue to make the trips there, get the data, how does that make us smarter longer term if we want to get bigger in the business? We may not get bigger. That's why it's kind of a call option. I think on the title side, same thing. It's relatively a soft market in title, especially on the residential side. It's not a bad time to be building out infrastructure, and there the stacking is we stack lenders. We continue to leverage and sign lenders up in slow times, so when the market does come back, which it will.

Mark Casale: We have it in spades in the mortgage business, it's always about data. I think with Lloyd's, the same thing. As we, over time, continue to make the trips there, get the data, how does that make us smarter longer term if we want to get bigger in the business? We may not get bigger. That's why it's kind of a call option. I think on the title side, same thing. It's relatively a soft market in title, especially on the residential side. It's not a bad time to be building out infrastructure, and there the stacking is we stack lenders. We continue to leverage and sign lenders up in slow times, so when the market does come back, which it will.

Speaker #4: And we have it in spades in the mortgage business, but it's always about data. And I think with Lloyd's, the same thing. As we over time continue to make the trips there, get the data, how does that make us smarter longer term if we want to get bigger in the business?

Speaker #4: We may not get bigger. That's why it's kind of a call option. I think on the title side, same thing. It's relatively a soft market in title, especially in the residential side.

Speaker #4: It's not a bad time to be building out infrastructure. And they are the stacking is. We stack lenders. So we continue to leverage and sign lenders up in slow times so when the market does come back, which it will, trust me, a little more the housing market will come back, maybe not in the next six months or 12 months, but housing will grow again in this country.

Mark A. Casale: Trust me, the housing market will come back, maybe not in the next 6 months or 12 months, housing will grow again in this country. I think for title, once most mortgage rates are at 6%, the refinance part of that market will become much more robust. We're clearly levered to that. On the underwriting side, we're stacking title agents. We continue to focus on Florida and Texas, and you kind of prepare yourself when the market comes back. I think from an investor standpoint, it's a good situation to be in, right? Because we're investing in the core business, getting good returns. We're making, I think, smart investments across title P&C and kind of these strategic investments. We had excess of 100% payout ratio in the H1 of the year.

Mark Casale: Trust me, the housing market will come back, maybe not in the next 6 months or 12 months, housing will grow again in this country. I think for title, once most mortgage rates are at 6%, the refinance part of that market will become much more robust. We're clearly levered to that. On the underwriting side, we're stacking title agents. We continue to focus on Florida and Texas, and you kind of prepare yourself when the market comes back. I think from an investor standpoint, it's a good situation to be in, right? Because we're investing in the core business, getting good returns. We're making, I think, smart investments across title P&C and kind of these strategic investments. We had excess of 100% payout ratio in the H1 of the year.

Speaker #4: And I think for title, once most mortgage rates are at 6%, the refinance part of that market will become much more robust. And we're clearly leveraged to that.

Speaker #4: On the underwriting side, we're stacking title agents. So we continue to focus on Florida and Texas, and you kind of prepare yourself when the market comes back.

Speaker #4: I think from an investor standpoint, it's a good situation to be in, right, because we're investing in the core business, getting good returns. We're making I think smart investments across title, P&C, and kind of these strategic investments.

Speaker #4: And we had excess of 100% payout ratio in the first half of the year. So when you combine them all, it's a nice optionality, I think, for our longer-term investors.

Mark A. Casale: When you combine them all, it's nice optionality, I think, for our longer-term investors.

Mark Casale: When you combine them all, it's nice optionality, I think, for our longer-term investors.

Roland Mayer: Well, thank you, Mark. That was far more in-depth of an answer than I could have hoped for. Switching to the core business, I was just wondering if you think we need to see affordability dynamics meaningfully shift for the NIW opportunity to improve, or have there been some signs that housing demand is adjusting to the rate environment?

Roland Meyer: Well, thank you, Mark. That was far more in-depth of an answer than I could have hoped for. Switching to the core business, I was just wondering if you think we need to see affordability dynamics meaningfully shift for the NIW opportunity to improve, or have there been some signs that housing demand is adjusting to the rate environment?

Speaker #1: Oh, thank you, Mark. That was far more in-depth of an answer than I could have hoped for. Switching to the core business, I was just wondering if you think we need to see affordability dynamics meaningfully shift for the NIW opportunity to approve?

Speaker #1: Or have there been some signs that housing demand is adjusting to the rate environment?

Mark A. Casale: I think the answer to your first question is yes. We do need to see affordability improve. Again, Roland, taking a step back, this is just a function of time. When we look at that 2021 period with ultra-low rates, HPA, at the end of the day. When the music stopped in the middle of 2022, HPA had gone up 50%. What you had during that 2021 period was just this rush to buy everything, whether it was bicycles, pools, cars, boats, and houses. What you saw with younger folks leaving the city, they accelerated that. People who wanted that larger house because of low rates, they accelerated that. My favorite is, I am going to be working remote forever, so I need to have a special room just for my Zoom office, so we are going to get that now.

Mark Casale: I think the answer to your first question is yes. We do need to see affordability improve. Again, Roland, taking a step back, this is just a function of time. When we look at that 2021 period with ultra-low rates, HPA, at the end of the day. When the music stopped in the middle of 2022, HPA had gone up 50%. What you had during that 2021 period was just this rush to buy everything, whether it was bicycles, pools, cars, boats, and houses. What you saw with younger folks leaving the city, they accelerated that. People who wanted that larger house because of low rates, they accelerated that. My favorite is, I am going to be working remote forever, so I need to have a special room just for my Zoom office, so we are going to get that now.

Speaker #4: I think the answer to your first question is yes. We do need to see affordability approve. And again, improve. Again, Roland, taking a step back, this is just a function of time.

Speaker #4: When we look at that 2021 period, with ultra-low rates, HPA at the end of the day, so when the music stopped in the middle of '22, HPA had gone up 50%.

Speaker #4: And what you had during that 2021 period was just this rush to buy everything, whether it was bicycles or pools or cars or boats.

Speaker #4: And houses. And what you saw with younger folks leaving the city, they accelerated that. People who wanted that larger house because of low rates, they accelerated that.

Speaker #4: My favorite is, "I'm going to be working remote forever, so I need to have a special room just for my Zoom office." So we're going to get that now.

Mark A. Casale: What we did is we really pulled, it could be close to 5 years of demand forward, if you think about those big years. We are suffering, I would say this is the aftereffect of that. Post H2 2022, 2023, 2024, 2025, 2026, we are still in it, Roland. I do not see it. When you think about affordability, you have to break it into three things. It is the job income growth, it is interest rates, and it is HPA. HPA is still growing, which I think helps us, even in our later book, but it is not really going to help affordability. I think it is going to be for it to happen sooner rather than later, it is going to have to be rates. The math is relatively simple.

Mark Casale: What we did is we really pulled, it could be close to 5 years of demand forward, if you think about those big years. We are suffering, I would say this is the aftereffect of that. Post H2 2022, 2023, 2024, 2025, 2026, we are still in it, Roland. I do not see it. When you think about affordability, you have to break it into three things. It is the job income growth, it is interest rates, and it is HPA. HPA is still growing, which I think helps us, even in our later book, but it is not really going to help affordability. I think it is going to be for it to happen sooner rather than later, it is going to have to be rates. The math is relatively simple.

Speaker #4: So what we did is we really pulled it could be close to five years of demand forward. If you think about those big years, and we're suffering I would say this is the after-effect of that.

Speaker #4: So, post-second half of '22, '23, '24, '25, '26, we're still in it. Roland, I don't see it, and when you think about affordability, you have to break it into three things, right?

Speaker #4: It's the job income growth. It's interest rates. And it's HPA. So HPA is still growing, which I think helps us even in our later book, but it's not really going to help affordability.

Speaker #4: I think it's going to be for it to happen sooner rather than later, it's going to have to be rates. It's the math is relatively simple.

Mark A. Casale: I think from an Essent standpoint, even from an MI perspective, you talk about the industry standpoint, it is just so well-positioned. We said this before. We took a lot of questions pre 2020 like, geez, Mark, what is going to happen when rates go up and originations start to slow down? Our response was, well, our persistency will be higher. It is kind of a natural hedge in the business. Very much like a mortgage servicing book. It has played out that way in spades. I would say the downturn or the slowness is longer than we thought, Roland. Remember, the longer it takes. The demand is almost. Think about the demand queuing up, right? These young home buyers haven't gone anywhere. They just have an affordability issue.

Mark Casale: I think from an Essent standpoint, even from an MI perspective, you talk about the industry standpoint, it is just so well-positioned. We said this before. We took a lot of questions pre 2020 like, geez, Mark, what is going to happen when rates go up and originations start to slow down? Our response was, well, our persistency will be higher. It is kind of a natural hedge in the business. Very much like a mortgage servicing book. It has played out that way in spades. I would say the downturn or the slowness is longer than we thought, Roland. Remember, the longer it takes. The demand is almost. Think about the demand queuing up, right? These young home buyers haven't gone anywhere. They just have an affordability issue.

Speaker #4: I think from an essence standpoint, even from an MI perspective, you talk about the industry standpoint, it's just so well positioned. I mean, we said this before.

Speaker #4: We took a lot of questions, pre-20, like, "Geez, Mark, what's going to happen when rates go up?" And originations start to slow down. And our response was, "Well, our persistency will be higher." And it's kind of a natural hedge in the business.

Speaker #4: Very much like a mortgage servicing book. It's played out that way in spades. So I would say the downturn or the slowness is longer than we thought, Roland.

Speaker #4: But remember, the longer it takes the demand is almost think about the demand queuing up, right? So these young home buyers haven't gone anywhere.

Speaker #4: They just haven't had affordability issues. So I think, and this is a little bit ironic, but the longer this lull lasts, the stronger it will come back.

Mark A. Casale: I think, and this is a little bit ironic, but the longer this lull lasts, the stronger it will come back. I just think it is probably at the tail end of the decade.

Mark Casale: I think, and this is a little bit ironic, but the longer this lull lasts, the stronger it will come back. I just think it is probably at the tail end of the decade.

Speaker #4: I just think it's probably at the tail end of the decade.

Roland Mayer: Thank you. Then if I could just sneak in one more. Is the right way to think about the subsidiary dividend capacity is that it grows largely alongside scheduled contingency reserve releases shown in the slide deck?

Roland Meyer: Thank you. Then if I could just sneak in one more. Is the right way to think about the subsidiary dividend capacity is that it grows largely alongside scheduled contingency reserve releases shown in the slide deck?

Speaker #1: Thank you. And then, if I could just sneak in one more, is the right way to think about the subsidiary dividend capacity that it grows largely alongside scheduled contingency reserve releases?

Speaker #1: Shown in the slide deck.

Mark A. Casale: Yeah, that's a good catch. It is. Obviously, the income coming from the group, given a lot of the business we wrote as we grew, remember, you have to hold 50% of the premium for 10 years. If you look at 2017, 2018, 2019, obviously 2021, there's like a bubble there of, I would say, increased contingency reserves that will come in over the next few years. It's a lot of nice dry powder for us in terms of dividend capacity coming out of Essent Guaranty. Yeah. Good catch.

Mark Casale: Yeah, that's a good catch. It is. Obviously, the income coming from the group, given a lot of the business we wrote as we grew, remember, you have to hold 50% of the premium for 10 years. If you look at 2017, 2018, 2019, obviously 2021, there's like a bubble there of, I would say, increased contingency reserves that will come in over the next few years. It's a lot of nice dry powder for us in terms of dividend capacity coming out of Essent Guaranty. Yeah. Good catch.

Speaker #4: Yeah, it's a good catch. It is. I mean, that obviously the income coming from the group. But given a lot of the business we wrote as we grew, remember we've you have to hold this for 10 you have to hold 50% of the premium for 10 years.

Speaker #4: So if you look at '17, '18, '19, and obviously 2021, there's a bubble there of, I would say, increased contingency reserves that will come in over the next few years.

Speaker #4: So it's a lot of nice dry powder for us in terms of kind of dividend capacity coming out of essence guarantee. Yeah, good catch.

Roland Mayer: All right. Appreciate the answers. Have a great August.

Roland Meyer: All right. Appreciate the answers. Have a great August.

Speaker #1: All right. Appreciate the answers. Have a great August.

Mark A. Casale: Yep.

Mark Casale: Yep.

Speaker #4: Yep.

Operator: There are no further questions. I will now turn the call back over to management for closing remarks.

Speaker #3: And there are no further questions. I will now turn the call back over to management for closing remarks.

Mark A. Casale: Okay. Thanks everyone for your participation, and have a great weekend.

Mark Casale: Okay. Thanks everyone for your participation, and have a great weekend.

Speaker #4: Okay. Thanks, everyone, for your participation. And have a great weekend.

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

Speaker #3: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Rachel Smith: Please wait. The conference will begin shortly.

Operator: Please wait. The conference will begin shortly.

Q2 2026 Essent Group Ltd. Earnings Call

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