Essent Group Ltd. Stock

Thank you for standing by, and welcome to the Essent Group Limited Second Quarter Earnings Call. [Operator Instructions]

I'd now like to turn the call over to Phil Stefano, Investor Relations. You may begin.

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 Karen, President of Essent Guaranty.

Our press release, which contains Essent's financial results for the second quarter of 2026 was issued earlier today, 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 second quarter 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. 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 February 18, 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.

Thanks, Phil, and good morning, everyone. Earlier today, we released our second quarter 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 the shareholders. Our buy, manage and distribute operating model remains a distinct advantage, positioning Essent to reduce high-quality earnings across a wide range of economic environments. For the second quarter of 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%. As of June 30, our book value per share was $63.1 and 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 June 30, our insurance in force was $250 billion, a 1% increase versus a year ago. 12-month persistency was 84%, reflecting the current rate environment and that 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. Longer term, we continue to believe that favorable demographics and pent-up demand will be a positive for housing in 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 of original LTV of 93%. Our portfolio default rate was effectively flat quarter-over-quarter, and we continue to believe that the embedded home equity of our 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, and we do not expect title to have any meaningful impact on earnings. 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 S&R. 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 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, a portfolio of strategic investments in insurance, specialty finance and housing that we built over several years. 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. 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 $0.35 for the third quarter of 2026.

Now let me turn the call over to Dave.

Thanks, Mark, and good morning, everyone. Let me review our results for the quarter in a little more detail. 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. 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 and exclude the D and E of the financial supplement. Our mortgage insurance portfolio ended the second quarter with insurance in force of $249.7 billion, an increase of $1.8 billion from March 31, an increase of $2.9 billion or 1.2% compared to $246.8 billion at June 30, 2025.

Persistency at June 30, 2026, was 84% compared to 84.7% in March 31, 2026. Mortgage insurance premium for the second quarter of 2026 was $216 million. The average base premium for the mortgage insurance portfolio for the second quarter was 40 basis points, down 1 basis point from last quarter, and the average net premium rate was 35 basis points, consistent with last quarter. Our mortgage insurance 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. 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.

At June 30, Essent Guaranty's PMIERs efficiency 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. 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. 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, reflecting the difference in underwriting performance between the mortgage and non-mortgage lines and the changing business mix of the segment's premiums. The pretax underwriting income for the reinsurance segment predominantly reflects the underwriting results of our GSE and other mortgage risk share business, 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. 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. 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 June 30, we had $500 million of senior unsecured notes outstanding and our debt-to-capital ratio was 8%. Year-to-date, Essent Guaranty paid dividends of $115 million to its U.S. 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 June 30. As of July 1, Essent Guaranty can pay additional ordinary dividends of $302 million in 2026. During the second quarter, 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.

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 to build a stronger franchise for the long term.

Now let's get to your questions. Operator?

[Operator Instructions] Your first question comes from the line of Bose George from KBW.

Actually, first, on the premium yield, can you remind us, do you expect that to be fairly stable? And anything to call out on the slight decline this quarter? And then could you just talk about competitive trends?

Sure, Bose. Yes, 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, and it's been stable for a while. It's a small market those. So there's not a lot to be gotten from a lot of competition. 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. So the GSEs don't approve it generally we don't insure it. So that's a positive that I think sometimes can be lost on investors. 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 now that we call them. Everyone's picking their spots. But at the end of the day, the economics are fairly similar. So for someone like Essent, we're at the lower end of the market share gain. 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. So that's really, for us, as you know, you see our earned premium yield goes or a bit higher than the industry. And part of that is just -- it's our selection technique. And I don't think we have 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. And again, that's market share rich, but premium light [Audio gap] some folks like that, that's fine. But I think [Audio gap] so when you add it all up, the economics across the industry are fairly similar. And I think that's a positive for investors.

Okay, great. That's helpful. 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 gain the system. I mean do you think there's any credit risk to be worried about as [Audio gap] this core becomes a bigger part of the market?

Yes, it's a fair question. I would say, again, taking a step back a little bit. and looking at Vantage score, it is a little bit more lenient than FICO score to be sure, right? There's a 20 basis point -- 20-point gap between FICO and Vances the GSEs have set up. It's probably a little bit wider. I wouldn't be surprised to see the GSEs tighten that over time. So if there's any kind of arbitrage, Bose, I expect 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. So if the scores are a little bit higher, that could bring an FHA borrower into the conventional business. 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. I think for us, clearly, given how our engine works, we're not really reliant on the credit score we were using over whatever 400-plus variables. It depends as a component of that, for sure, but we're relatively score agnostic because we come up with our own scores. 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. And again, like I said, I think that will be squared up pretty in relatively short order. Should it become bigger. And 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 I don't see the real pickup. 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 are 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.

Your next question comes from the line of Mihir Bhatia from Bank of America.

I wanted to first just follow up on this question about premium yield. I hear you about it being dependent on a lot of factors. But maybe just talk to us a little bit about like just the new money yield what's in the book? Like I think what we're trying to think about is like over the next year or two as the book turns over a little bit, what that premium yield can look like is 40 bps like the floor you recommend? I know you've guided that for this year. But just like as we go look out a little bit explore further.

Yes. I wish it was as simple as I could just tell you what our new premium is on 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 here over the next couple of years, it may go down a little bit, but 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. We feel pretty good about that. And again, as I mentioned earlier, we have been looking -- we're more a premium seekers so much versus just the best credit quality. 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 increased premium 10% on new insurance written just in the quarter, and that's part of [Audio gap] 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 when we perceive value. But again, I think that's our strategy. It's a little different than others. But again, like I said, everyone is kind of picking their spots, but the economics across the industry are relatively consistent.

And just actually on that point, I mean, you did grow NIW a little faster than the industry this quarter. No, 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. 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? Or is 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?

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, there are certain competitors that stay away from I would say they stay away from that type of risk or much -- they're probably lower DTI, lower LTV, so they like the 85% 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. So instead of being 106 or 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? And so that's going to be super competitive but in these other markets. And sometimes it states in geography, certain people like in parts of the country. 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. 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.

[Operator Instructions] Your next question comes from the line of Rick Shane from JPMorgan.

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. 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," 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?

Yes, 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. So we see -- we're not a tech company. So I know we've seen some of the stories of token tokens are unrated. 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. And when we think about it, clearly, when we think about AI, we kind of break it in the bucket. So at the top of the house, I would say it's a very strong analytical tool. So whether you're using -- when we use -- we use copilot we use Claude, we use Gemini, we use Curo. And it depends on where in the organization is 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 a lot of data. It's not -- 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 sort of things, I find it pretty valuable from that standpoint. But it is it's garbage in, garbage out. You don't prompt well, you're not going to get super good answers. And we think at the top of the house, we have to be active users. So it's hard for us push down if we're not real familiar with the tools. 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. It's -- and just taking a step back, Rick, it's not like you can wave a magic wand and everyone to start using AI. There's a process. 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 Curo has been a big lift. And I think that -- so you'll see changes there. And again, it gets back to cycle time. So how quickly can you make changes to systems or improve systems. So we have a very modular system platform that's been on the cloud now for close to 10 years. 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? 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. So -- because we're an AWS cloud, we feel like we're pretty well protected. So we've been early adopters of the cloud. And now so as a modular system, able to go in now and it will be a process over the next few years to kind of make the system even better and make changes. And there's certainly going to be efficiencies within that over time. But we don't -- 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. And we don't talk about it a lot and neither really to our competitors, just how operationally intensive these businesses are. And they're a lot more complicated behind the wall than I think people. And I mean, really, it's a credit to the industry. I 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 complex these businesses are. 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, we think we can do better, cheaper, faster with AI. So we -- and I mentioned in the script, we're investing in technology, we bought the title company, they outsourced all their IT, and they used a third-party provider. And for us, what we did very similar that we did on the MI side, we bought the code of an underlying system now as implemented it's going live soon, part of it we're testing it live. But it'll be much easier to embed AI and some of the agents and tools within that. So I think we're -- so we don't look at it as -- so when you get back to your question, the token cost, is pretty immaterial relative to kind of the potential I think it will play out over the next few years. And I would be surprised. I think most companies are pretty actively involved. We up some of our top lenders, and it's clear the public with ones are using it and the efficiencies there in terms of mortgage originations. So 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.

Yes. Look, personally, I think to say it's probably the most -- it is the most transformational thing I've seen other than when it needs to sit around and wait for fates for earnings releases.

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. And we look at it that way, we didn't invent Excel, but we certainly leverage it. And I think a lot of these is how do you leverage these tools to price loans that are become more efficient from an operating expense basis. 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.

Your next question comes from the line of Roland Mayer from RBC Capital Markets.

I wanted to quickly start on the P&C business and just to understand if there's any meaningful cat exposure there. And then could you help us understand a bit on the underlying risk in the casualty? Is it U.S. or international? Are there any notable line business that we need to know about?

No. I would say there's really two books of business, Roland, which is Lloyd's. And 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 percent is property, not all cat, so probably more mainstream type property risk. And with Lloyd'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 as premium and losses. But we're backing 45-plus syndicates. So 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. But remember, we also were the benefit of the hedging that the insurance companies do. So we're getting -- that's -- we're getting this net. So we don't -- and we had a pretty, I would say, conservative loss pick upfront for the Lloyd's book. I think for the quota share, that's spread out under over 400 different seasons, it's 7-ish percent casualty, specialty and the casualty is across the board. So whether it's general liability, D&O, workers' comp, all cross, we think it's pretty well diversified. And there seem -- the loss pick there of combined ratio was 100%. So this year, Roland, we'll 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. It's another chance for us to allocated capital. We're bringing in, obviously, a lot of -- or generating a lot of cash flow, $830-ish million over the last 12 months. We're clearly -- our first choice always is deploying into the core business is such a good business. but it's relatively limited, right, in terms of whether it's 1 of 6 competitors, the unit economics, all those sort of things. And then we look for -- we call them like little call options. What other places can we invest capital which over time could become something bigger. Title is an example of that. And I think PNC is another example. The third example is our other invested assets, which is really strategic investments. And we've we've built that up over the last probably 3, 4 years. It's probably roughly 7% of the portfolio, roughly, maybe a little bit higher percentage of equity but it's strategic. So we work pretty closely with private equity funds as the majority of what we do when we invest alongside them in direct investments. So when we went public, Roland, back in the day, we talked about stacking vintages. So we had our 12 vintage or 13 vintage, and we would just stack them. And over time, we've built that $250 billion book. It's generating a lot of cash. So very similar philosophy across the board in these other investments. So for the strategic investments were stacking investments. So we're stacking a $25 million investment here, $30 million here, $10 million there. 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 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 #1 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. 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 home buyers. In the reinsurance business, we're not under no such obligations. 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 on certain times and back off on others. They're the concept, especially on the casualty side, is how do we stack float right? So if we can write a couple of hundred million dollars of gross written and increase that over time in a careful way certainly, we have underwriting income but stacking the float will pay off. It's not going to pay off this year or next year long, but it will pay off down the line. Title, and when you think about what 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 but it's not a bad time to build out the infrastructure, right, in this type of market. So you're ready to the next market. So we continue to do our work there. 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. That's a treasure turtle 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. And we have it in spades in the mortgage business, but about data. And I think with Lloyd is the same thing, as we, over time, continue to make the trips there get to 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 is the same thing. It's a relatively soft market and 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. So we continue to leverage and sign lenders up in slow times. So when the market does come back, which it will, trust me, the housing market will come back, maybe not in the next 6 months or 12 months. but housing will grow again in this country. 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 levered to that. 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. 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 the strategic investments. And we had like excess 100% payout ratio in the first half of the year. So when you combine them all, it's a nice it's nice optionality, I think, for our longer-term investors.

That's far more in-depth of an answer than I could have hoped for. Switching to the core business. I was just wondering do you think we need to see affordability dynamics meaningfully shift for the NIW opportunity to prove? Or have there been some signs that housing demand is adjusting to the rate environment?

I think the answer to your question is yes. We do need to see the affordability approve and again, improve. Again, rolling 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. So when the music stopped in the middle of '22, HPA had gone up 50%. And what you had during that 2021 period was was just as rushed to buy everything, whether it was by cycles or pools or cars or boats and houses. And what you saw with younger folks leaving the city, they accelerated that people who wanted that larger house because low rates accelerate that. 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. So what we did is we really pull it could be close to 5 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. 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 0 things, right? 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. 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. I think from an Essent standpoint, even from an MI perspective, you talked about the industry standpoint, it's just so well positioned. I mean we said this before, 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. Our response was as well. our persistency will be higher. And it's kind of a natural hedge in the business, very much like a mortgage servicing book. It's played out that way in spades. So it's, I would say, the downturn or the slowness is longer than we thought, Roland. But remember, the longer it takes, the demand is almost think about the demand queuing up, right? So these young homebuyers haven't gone anywhere. They just have an affordability issue. So 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's probably at the tail end of the decade.

And 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 the scheduled contingency reserve releases shown in the slide deck?

Yes. It's really -- that's a good catch. It is. I mean, obviously, the income coming from the group given a lot of the business we wrote as we grew, remember, we've -- you have to hold 50% of the premium for 10 years. So if you look at '17, '18, '19, obviously, '20, '21, there's like a bubble there of, I would say, increased contingency reserves that will come in over the next few years. So it's a lot of nice dry powder for us in terms of kind of dividend capacity coming out of Essent Guaranty. Yes, good catch.

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

Thanks, everyone, for your participation, and have a great weekend.

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

Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Essent Group Limited First Quarter Earnings Call. [Operator Instructions]

And I would now like to turn the conference over to Phil Stefano, Investor Relations. You may begin.

Thank you, Abby. Good morning, everyone, and welcome to our call. Joining me today are Mark Casale, Chairman and CEO; and David Weinstock, Chief Financial Officer. Also on hand for the Q&A portion of the call is Chris Curran, President of Essent Guaranty. .

Our press release, which contains Essent's financial results for the first quarter of 2026 was issued earlier today, and is available on our website at essentgroup.com. Prior to getting started, I would like to remind participants that today's discussions are being recorded and will include the use of forward-looking statements. These statements are based on current expectations, estimates, projections and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially.

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 February 18, 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.

Thanks, Phil, and good morning, everyone. Earlier today, we released our first quarter 2026 financial results, which continue to benefit from favorable credit performance and the impact of interest rates on both persistency and investment income. Our core MI business continues to generate strong cash flow, supporting a balanced approach to capital allocation that funds growth opportunities across our franchise and returns capital to shareholders. .

For the first quarter of 2026, we reported net income of $172 million, or $1.82 per diluted share. On an annualized basis, our return on average equity was 12% year-to-date through the first quarter. As of March 31, our book value per share was $61.20, an increase of 11% from a year ago.

Our outlook on housing is that it remains in a pause as affordability and higher rates continue to temper purchase and refinance originations. However, we believe that favorable demographics, supply constraints and increasing pent-up demand will be positive for housing and our MI business when affordability improves. As of March 31, our mortgage insurance in force was $248 billion, a 1% increase versus a year ago.

12-month persistency was 84.7%, reflecting the ongoing impact of the rate environment. Nearly 50% of our in-force portfolio carries a note rate of 5.5% or lower, a dynamic that will be -- we believe, will support persistency at elevated levels. Credit quality of our insurance in force remains strong, with a weighted average FICO of 747 and a weighted average original LTV of 93%.

Our portfolio default rate was effectively flat quarter-over-quarter, and we continue to believe that the embedded home equity of our in-force book should mitigate ultimate claims. Outward reinsurance in our MI business continues to play an integral role in managing credit risk and capital.

During the first quarter of 2026, we entered into an excess of loss transaction with a panel of highly rated reinsurers providing forward protection for our 2027 business. We remain pleased with the execution of our reinsurance strategy, ceding a meaningful portion of our mezzanine credit risk and diversifying our capital sources.

On the Title front, we continue to transition the business from a stand-alone operation to an adjacency of our mortgage insurance franchise by leveraging our customer base and providing Title Solutions. The coordination between our MI and Title teams continues to build momentum in expanding the number of Essent Title customers, but we know this business is rate sensitive and results will continue to improve as origination volumes recover.

On the Essent Re front, we expanded our P&C reinsurance platform in the first quarter. Our Lloyd's program will generate approximately $120 million of written premium in 2026, against a $50 million deposit at returns comparable to our MI business. During the first quarter, we also executed a whole account quota share covering cedent's Casualty and Specialty book, which will generate approximately $200 million of written premium in 2026.

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

Our consolidated cash and investments as of March 31 totaled $6.6 billion with an annualized aggregate yield for the first quarter of 4.2%. New money yields on our core portfolio in the first quarter were nearly 5% holding largely stable over the past several quarters. We continue to operate from a position of strength with $5.7 billion in GAAP equity, access to $1.1 billion in excess of loss reinsurance and $1.1 billion in cash and investments at the holding companies.

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

With that in mind, year-to-date through April 30, we repurchased approximately 3.5 million shares for over $200 million. Furthermore, I'm pleased to announce that our Board has approved a common dividend of $0.35 for the second quarter of 2026.

Now let me turn the call over to Dave.

Thanks, Mark, and good morning, everyone. Let me review our results for the quarter in a little more detail. For the first quarter, we earned $1.82 per diluted share compared to $1.60 last quarter and $1.69 in the first quarter a year ago. Our consolidated net premium earned and operating expenses each increased from last quarter due to our P&C reinsurance activity, which began effective January 1. .

The consolidated provision for losses and loss adjustment expenses also include amounts related to P&C activity. My comments today are going to focus primarily on our mortgage insurance segment results. There's additional information on our Reinsurance segment and Corporate and Other results in Exhibits D, E and O of the financial supplement. Our mortgage insurance portfolio ended the first quarter with insurance in force of $247.9 billion, essentially flat compared to December 31 and an increase of $3.2 billion, or 1.3% compared to $244.7 billion at March 31, 2025.

Persistency on March 31, 2026, was 84.7% compared to 85.7% at December 31, 2025. Mortgage insurance net premium earned for the first quarter of 2026 was $216 million. The average base premium rate for the mortgage insurance portfolio for the first quarter was 41 basis points, consistent with last quarter and the average net premium rate was 35 basis points, up 1 basis point from last quarter.

Our Mortgage insurance provision for losses and loss adjustment expenses was $37.6 million in the first quarter of 2026, compared to $55.2 million in the fourth quarter of 2025 and $30.7 million in the first quarter a year ago. At March 31, the default rate on the mortgage insurance portfolio was 2.54%, essentially unchanged from December 31, 2025.

Mortgage insurance operating expenses in the first quarter were $37.6 million and the expense ratio was 17.4% compared to $34.3 million and 16.1% last quarter, and $40.9 million and 18.8% in the first quarter last year. Consistent with prior years, operating expenses in the first quarter of each year are typically higher due to payroll taxes on incentive compensation as well as higher stock-based compensation expense.

At March 31, Essent Guaranty's PMIERs sufficiency ratio was strong at 174% with $1.6 billion in excess available assets. Turning to our Reinsurance segment. Net premium earned provision for losses and loss adjustment expenses and acquisition costs each increased from last quarter due to the P&C reinsurance activity, which began effective January 1.

Consistent with Mark's comments, the pretax earnings for our P&C activity was immaterial for the quarter, and the pretax earnings for the Reinsurance segment in the first quarter predominantly reflect the underwriting results for our GSE and other mortgage risk share activity. Consolidated net investment income and our average balance of cash and available for sale investments in the first quarter were largely unchanged from last quarter due to the use of operating cash flows to repurchase shares.

Income from other invested assets was $10.2 million in the first quarter of 2026, compared to $3.9 million last quarter and $7.4 million in the first quarter a year ago. Higher results this quarter are primarily due to increased favorable fair value adjustments in the quarter.

As Mark noted, our total holding company liquidity remains strong and includes $500 million of undrawn revolver capacity under our committed credit facility. At March 31, we had $500 million of senior unsecured notes outstanding and our debt-to-capital ratio was 8%.

At quarter end, Essent Guaranty's statutory capital was $3.7 billion with a risk-to-capital ratio of 8.6 to 1. Note that statutory capital includes $2.6 billion of contingency reserves at March 31. As of April 1, Essent Guaranty can pay ordinary dividends of $330 million in 2026. In April, Essent Guaranty paid its first dividend of 2026 to its U.S. holding company of $50 million.

During the first quarter, Essent Re paid a dividend of $100 million to Essent Group. Also in the quarter, Essent Group paid cash dividends totaling $32.6 million to shareholders, and we repurchased 2.6 million shares for $157 million. In April 2026, we repurchased 934,000 shares for $57 million.

Now let me turn the call back over to Mark.

Thanks, Dave. In closing, Essent is a well-capitalized, high-quality franchise with a strong and consistent cash flow generation. Our core mortgage insurance business remains well positioned to serve our lender partners throughout this period of housing market transition, and our Reinsurance segment continues to create value by deploying capital efficiently across both mortgage and non-mortgage risk. .

We remain confident in our ability to grow book value per share, return capital to shareholders and invest in opportunities that build a stronger franchise for the long term. Now, let's get to your questions. Operator?

[Operator Instructions] And our first question comes from the line of Bose George with KBW.

Actually, first, can we just talk about just your updated thoughts on what you're seeing in terms of consumer credit? Any signs of -- early signs of weakness on higher gasoline prices? Or is it things you're keeping an eye on?

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

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

Okay. Great. And then can you just give us an update on competitive trends in the market?

I mean no real differences in terms of the competitive trends. You're starting to see just with the lack of affordability, some of the lenders starting to reach a little bit. I think on the MIs, it's a small market, and the books aren't growing. So you're starting to see a little reach here and there. There was a card -- a bid card that we passed on recently, where we saw a little bit of an extension of credit, and we priced for it and we didn't get it. So you're seeing a little bit around the edges, but nothing real alarming. And you just given the longer this pauses, right? I mean, this pause started probably back half of '22, so now '23, '24, '25 and now it's into this year, I think the industry has done a good job, to be quite honest, being patient and thoughtful around this stuff. But you're always going to see a crack here and there.

I think from our standpoint, Bose, we look at it a little bit differently in terms of really -- we're really focused on the unit economics. So when you look at where our NIW was for the quarter versus the #1 mortgage insurer, the difference is relatively small. Our view is that additional NIW is probably at the lower end of our return hurdles. So we look at other options too to allocate that capital. Lloyd's was a good example, right? I mean the Lloyd's leverage and the returns there are comparable.

And I'll also point you to our other invested assets. I mean, we were able to put money to work there in the first quarter that we think will be easily mid-teen returns over the next few years. So again, it's a choice. And I think from a competitive standpoint, nothing really alarming and it's just -- it remains a small market. So it's difficult really to separate much when it's such a small market.

And our next question comes from the line of Terry Ma with Barclays.

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

I would. I would. I would expect again, Terry, as you -- and this is the thing for investors to focus on is just, again, back to my earlier point, the seasoning of the portfolio given where it is and peak default being 36 to 60, you're going to see defaults continue to increase. And again, I don't think the rate is accelerating per se, but it is a seasoning aspect of it. The thing to keep in mind though, at the end of the day, Terry, is I think we paid $13 million of claims in the first quarter. So just to try to put this in perspective, going into default doesn't necessarily mean they're going to roll the claim.

So I would, again, nothing big picture, 800,000 policies, 20,000 defaults. It's normal given the age for the defaults to season and start to see the kind of the new notices tick up a little bit.

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

Yes. It's a big change this quarter, right, because we wrote Lloyd's, which hit in the first quarter. We also wrote the retro quota share, which also was kind of -- we wrote in the first quarter, but it's back to quarter 1. And remember, these are run at more high combined ratio. So you're going to -- and you're combining with mortgage. So it's going to be a little -- we can help you offline a little bit on the modeling. But I would -- the bottom line is it's not going to drive a lot of income in 2026. But we do -- it does set the stage for a little bit down the road.

The counter to that is just the mortgage book within Essent Re is not really growing. Same kind of, we have a pause for growth on the MI side. It's actually the way the GSEs are buying Reinsurance these days. They're moving higher up in the capital structure. They're in the capital model a bit for sure, so good for them, but they're buying higher in the capital structure. So we're getting less rate online, right, because there's less risk. And they're also really not -- they're not reinsuring a lot. So I would expect, again, if there's a change around when we think about privatization of the GSEs, and they become more normal in terms of risk share back to where they were. We could see that growth resume again. But right now, it's going to be a little bit of the P&C earnings replacing the mortgage earnings over the next few years.

[Operator Instructions] And our next question comes from the line of Geoffrey Dunn with Dowling & Partners.

Unfortunately, I think you just said you do it offline, but I was going to ask you if you could break down the loss ratio in the Reinsurance business between the P&C and the mortgage business?

Yes. The loss, I mean, we'll break it off offline. But high level, the loss ratio on mortgage is basically 0. So most of the losses are flowing through. I think from a modeling perspective, Geoff, I would look at mid- to high 90s for the P&C together, right? It's Lloyd's and quota share, but to mix it together, it's mostly -- I would say the majority of it is Specialty and Casualty. There's a little property in there from Lloyd's, but it's D&F, it's not property cat. So the Lloyd's combined ratio will probably be mid-90s, but the quota share is probably in the higher 90s. So it will kind of balance out.

The key there is like -- and again, for a company that writes a 35% combined ratio, we were -- it's definitely an adjustment for us to write at those higher levels, but there's a different leverage, right? So there's a lot more premium leverage within P&C. And clearly, when rates went up a couple of years ago, that really the asset leverage in P&C makes a lot more sense. And we're fortunate that we have the franchise in Essent Re to do it.

And just the way the S&P capital model works, Geoff, as you know, I mean, I think our AAA excess that we write to is something on the order of $850 million. So for us to write $200 million, there's really no additional capital and probably helps us from a capital diversification rate. So it's not like we're taking capital from repurchases and putting it into P&C. It's really, we're kind of double levering the capital a bit within Essent Re, which is -- which will be over time accretive to earnings.

And our next question comes from the line of Mihir Bhatia with Bank of America.

I wanted to start by just asking on the cure rate. I know the number of defaults is small, but the cure rate really fell off the cliff this quarter? And I don't know if like, I'm just missing something update?

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

Okay. Okay. Maybe I'll take that up offline. And then just...

Here, I think, you may be missing something. So let's take that offline because that's pretty -- didn't really fall off the cliff. It's actually relatively normal if you go back and look at our past Essent. So we're probably going to have to dig in there with you a bit.

Yes. No, I appreciate that. And then just in terms of the reserve releases. I was just -- given the commentary you've had about it being stable, there being some portfolio seasoning mostly and the way you reserve like your claim rate assumption, like what would have to change for the prior period reserve releases to go down? Like what are the indicators we should be looking for in the macro that, hey, these things are changing, we need to start thinking that maybe the reserve releases slow down? .

Yes, I mean I would look at unemployment rate. I mean, at the end of the day, if -- as long as we -- at a 745 FICO average income, what we said earlier. I mean it's a strong borrower unless they lose their job. So you saw that in COVID, Mihir. So again, employment is actually -- is pretty strong. And I think it will continue to be strong. So we'll continue just from a consumer standpoint, I don't think much changes that. And also, again, remember, home prices are still -- there's a lot of embedded equity in the portfolio, so especially between kind of the pre-'22 book. So again, as we said earlier, just because they kind of get to -- or they go into default doesn't necessarily mean they're going to roll the claim again, back to the $13 million-or-so that we paid.

So I would take a step back, and I know you're good at this. I would take a step back and just, again, look at the longer-term implications of what we're doing, right? The cash flow generation of the company again, last 12 months, $827 million. So that's -- if you look at just the yield basis of where we are from a book value standpoint, the returns are -- the cash flow returns are pretty high. We continue to have a lot of excess cash at the Holdco. And that's after buying back the amount of shares that we did.

So we're in a really good position. So as we always said, capital begets opportunities, and we feel like we're in a good position. We're starting to allocate that capital a little bit within Essent Re, other invested assets. We continue to -- that's another place where we can improve returns and make it a little bit more accretive to the shareholder title, which we don't talk a lot about is really, as I mentioned in the script, is really starting to come into its own a bit, really almost as an adjacency to the MI business.

So lots of -- I would say, lots of momentum there around the coordination between the MI machine, as I like to call it, and the sales force and the title folks and really -- and we've seen some nice customer wins. You got to stack all that just like we had to do back in the day when we built the MI business, and you clearly need -- you need rates to come down. But we're starting to start -- we're starting to see some green shoots throughout the organization. And that's in a pause.

And so when you take a step back and just think about where the demographics are in this country in terms of first-time homebuyers, there's 4 million to 5 million new homebuyers coming into age every year, and that's going to continue. Look at the chart in our investor deck, it's just a lot of these guys can't afford it. So there's an affordability issue. It's not going to be solved by the government, to be quite honest. It's going to be solved when there's continued job growth and income growth, which there is some form of moderation of rates.

And then there could be some changes in HPA, right? There are some pockets where there's some weakness. And I've said before, actually, I think that's healthy. So big picture, I think we're in good shape. So I would just caution investors to not look at just some of the short-term metrics. They're important. They're always important in terms of defaults and new notices, a bigger picture. Right now, this is a pretty well-oiled cash flow machine. So we'll see where we go, and see how we can allocate that in the future, but we're feeling pretty good about kind of where we're situated today.

Got it. No, that's helpful, for sure. And maybe 1 just follow-up on something, said about just the intra-quarter and Title, the benefit from Title kind of comes through. Obviously, we had, early in the quarter, lower rate. Maybe just talk about what you saw upon intra-quarter trends, both from a persistency but also from a Title perspective. Did you see the benefits of that type of -- from lower rates China coming through?

Okay. You broke up a little bit. But yes, we did. We did see -- we saw a little -- we saw a spike in the fourth quarter. We saw a spike in the first quarter, for sure, which we took advantage of. And we're better situated to take advantage of it. That's another message for investors as we continue to build scale, we're putting in a new system, very similar to how we did it back in the MI days we bought code and now we're implementing. And so again, it's coming in within the information kind of machine, technology machine of Essent and the company we bought outsourced their IT. So that doesn't -- you don't wave a magic wand and just put something on to your structure overnight.

So we're investing in the system. We're patient I think of the capital -- the capital we have allows us to do that. And also, I mean, here just the efficiencies around our expenses allow us to invest. So we're starting to see it. The question is it's more important from the MI standpoint. So if refinances spike up, we'll see some of that benefit on the title side. I think MI is a bit more important, though, to understand the rationale.

Persistency will decrease I think the new originations will overwhelm that or mitigate it. And actually, it will help us, that will be the signal for renewed growth in the portfolio because what you're going to see -- we're actually -- it's an interesting position to think about, Mihir, is go back and look at our pre-'22 book, right? I said half of the book is like 5.5% below. That's not going to necessarily refinance. It's going to be all the post-'22 book at the higher rate.

So we could see this phenomenon where the back book sticks a little bit more and the newer book is the one that starts to refinance, but then it's kind of a renewed growth. So again, something to watch for. I'm not necessarily seeing rates come down this year, given what's going on with oil prices and inflation, but it is -- it's another little tailwind that could happen if there is a movement in rates.

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

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

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

Hello, and welcome to the Essent Group Limited Annual Meeting of Shareholders. Please note that this meeting is being recorded. The meeting is about to begin.

Now I call the meeting to order. Good morning, ladies and gentlemen. My name is Mark Casale, President and Chief Executive Officer of Essent Group Limited. I will act as Chairman of this meeting, and Bryan MacIntyre will act as Secretary of the meeting and will prepare the minutes regarding the actions today.

On behalf of the directors and officers of the company, it's my pleasure to welcome you to the 2026 Annual General Meeting of Shareholders. The matters on which the shareholders of the company will vote at the meeting are: the election of the 3 Class III directors; the reappointment of PricewaterhouseCoopers LLP as the company's independent registered public accounting firm for the year ending December 31, 2026; and an advisory vote on the 2025 compensation of the company's named executive officers, and we have not received any notice from any shareholders as required under our amended and restated bylaws or the rules of the SEC of any other matters to be considered at today's meeting, and therefore, no other proposals may be properly introduced by shareholders.

On or about March 26, 2026, notice of the meeting together with the company's annual report for the year ended December 31, 2025, and related proxy materials were mailed to all shareholders of record as of close of business on March 6, 2026, the record date for the meeting.

Our first order of business is to determine whether the shares represented at the meeting, either in person or by proxy, are sufficient to constitute a quorum for the purpose of transacting business. As of March 6, 2026, the record date for this meeting, there were 94,009,619 common shares outstanding and entitled to vote at this meeting. Under the amended and restated bylaws of the company, the presence of 2 or more persons representing in person or by proxy, at least 50% of the outstanding voting shares of the company is necessary to constitute a quorum for the transaction of business. Based on the votes submitted by proxy prior to this meeting, a quorum is present and this meeting is properly and legally convened.

The next order of business is the presentation of the company's financial statements for the year ended December 31, 2025, which are contained in the company's annual report previously circulated to all shareholders. The secretary will note that the financial statements for the year ended December 31, 2025, have been received by the shareholders at this meeting.

The next order of business is the election of 3 Class III directors of the company to serve through the 2029 Annual Meeting. The proxy statement sent to you prior to this meeting lists the company's nominees for director, Mark Casale, Douglas Pauls and William Spiegel, each of whom has been nominated by the company's nominating Governance and Corporate Responsibility Committee and Board of Directors.

In accordance with the bylaws of the company, shareholders are required to provide advanced notice of their intent to nominate candidates for directors. No such notice was received.

Based on the votes submitted by proxy prior to this meeting, each of Mark Casale, Douglas Pauls and William Spiegel have been elected to serve as a Class III member of the Board of Directors through the 2029 Annual General Meeting of Shareholders, with each candidate receiving affirmative votes representing more than a majority of the votes cast.

The next item of business is the reappointment of PricewaterhouseCoopers LLP as the company's independent registered public accounting firm for the year ending December 31, 2026, and until the 2027 Annual Meeting, and to refer the determination of the auditor's compensation to the Board of Directors. The reappointment of PricewaterhouseCoopers is discussed in the proxy statement for this meeting. At this time, I would like to recognize James Martin from PricewaterhouseCoopers, who is with us today.

Based on the votes submitted by proxy prior to this meeting, the appointment of PwC as the company's independent registered public accounting firm for the year ending December 31, 2026, and until 2027 Annual Meeting, and the referral of the determination of the auditor's compensation to the Board of Directors have been approved by more than a majority of the votes cast.

The next item of business is to approve the 2025 compensation of the company's named executive officers. This proposal is a nonbinding shareholder advisory vote. The company's executive compensation is discussed in the proxy statement for this meeting.

Based on the votes submitted by proxy prior to this meeting, the compensation of the company's named executive officers as disclosed in the proxy statement pursuant to the compensation disclosure rules of the SEC has been approved by the shareholders by more than a majority of the votes cast.

You have now heard the results of the voting, and this completes the business to be conducted at this meeting. I hereby declare this meeting adjourned. I would like to take this opportunity to thank you for your attendance and interest.

This concludes the meeting. You may now disconnect.

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Essent Group Limited Fourth Quarter Earnings Call. [Operator Instructions]. I would now like to turn the call over to Phil Stefano, Investor Relations. Phil, please go ahead.

Thank you, Tiffany. 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 fourth quarter and full year 2025 was issued earlier today and is available on our website at essentgroup.com. Prior to getting started, I would like to remind participants that today's discussions are being recorded and will include the use of forward-looking statements. These statements are based on current expectations, estimates, projections and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially. 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, which was filed with the SEC on February 19, 2025. And then the 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.

Thanks, Phil, and good morning, everyone. Earlier today, we released our financial results for the fourth quarter and full year of 2025. Our strong performance this year was driven by positive credit trends and the benefit of higher interest rates on both persistency and investment income. These results demonstrate the strength of our buy, manage and distribute operating model and generating high-quality earnings which has enabled us to take a more strategic approach to capital management. For the fourth quarter of 2025, we reported net income of $155 million or $1.60 per diluted share. For the full year, we earned $690 million or $6.90 per diluted share while generating a return on average equity of 12%.

As of December 31, our book value per share was $60.31, and an increase of 13% from a year ago. As of December 31, our mortgage insurance in force was $248 billion, a 2% increase versus a year ago. Our 12-month persistency on December 31 was 86%, with roughly 60% of our in-force portfolio having a note rate of 6% or lower. Over the last several quarters, persistency has been relatively flat, reflecting higher mortgage rates and a smaller origination market. As a result, we believe that over the near term, earned premium and insurance in force growth will be modest. The credit quality of our insurance in force remains strong, with a weighted average FICO of 747 and a weighted average of original LTV of 93%.

Our portfolio default rate increased modestly quarter-over-quarter, reflecting normal seasonality and the continued aging of our insurance in force. Looking forward, we believe that the substantial home equity embedded in our in-force book should mitigate ultimate claims. Outward reinsurance continues to play an integral role in operating our business. At the end of 2025, 98% of our mortgage insurance portfolio was subject to some form of reinsurance. During the fourth quarter of 2025, we entered into a quota share transaction with a panel of highly rated reinsurers providing forward protection for our 2027 business.

We remain pleased with the execution of our reinsurance strategy, seeing a meaningful portion of our mezzanine credit risk and diversifying our capital resources. On the Bermuda front, Essent Re continues to be a very effective platform in deploying capital and generating additional earnings for Essent. For 2025, Essent Re earned nearly $80 million in third-party net income while ending the year with $2.3 billion in risk.

In addition, during the fourth quarter, Essent Re entered into quota share reinsurance agreements backed by funds at Lloyd's to reinsure certain property and casualty risks. These agreements are effective in the first quarter of 2026, and we expect $100 million to $150 million of written premium with approximately 2/3 to be earned in 2026. The at a combined ratio consistent with the diversified P&C reinsurance company. Looking forward, we believe that P&C will be an ongoing opportunity to generate supplemental earnings for Essent Re. On the title front, we remain focused on activations, leveraging our lender network and building out our transaction management system.

However, as a primarily centralized refinance platform, our title operations are unlikely to have a substantial impact on earnings unless there's a material decrease in mortgage rates. Our consolidated cash and investments as of December 31 totaled $6.6 billion with an aggregate yield to the year of 3.9%. The New money yields on our core portfolio in the fourth quarter were nearly 5%, holding largely stable over the past several quarters. We continue to operate from a position of strength with $5.8 billion in GAAP equity access to $1.3 billion in excess of loss reinsurance and $1.3 billion in cash and investments at the holding companies.

With the full year 2025 operating cash flow of $856 million, our franchise remains well positioned from an earnings, cash flow and balance sheet perspective. We remain committed to a measured and diversified capital strategy, which enabled us to return nearly $700 million to shareholders in 2025 between dividends and repurchases. During the year, we repurchased nearly 10% of the shares outstanding at the end of Furthermore, I'm pleased that our Board has approved a 13% increase in our quarterly dividend of $0.35 per share starting in the first quarter of 2026. Now let me turn the call over to Dave.

Thanks, Mark, and good morning, everyone. Let me review our results for the quarter in a little more detail. For the fourth quarter, we are $1.60 per diluted share compared to $1.67 last quarter compared to 86% at September 30, 2025. Mortgage Insurance net premium earned for the fourth quarter of 2025 was $213 million, the average base premium rate for the mortgage insurance portfolio for the fourth quarter was 41 basis points, consistent with last quarter and the average net premium rate was 34 basis points, down 1 basis point from last quarter.

We expect that the average base premium rate for the full year 2026 will be approximately 40 basis points. Our mortgage insurance provision for losses and loss adjustment expenses was $55.2 million in the fourth quarter of 2025 compared to $44.2 million in the third quarter of 2025 and $37.2 million in the fourth quarter a year ago. At December 31, the default rate on the mortgage insurance portfolio was 2.5%, up 21 basis points from 2.29% at September 30, 2025.

For the full year 2025, we recorded a net provision on the mortgage insurance portfolio of approximately $145 million, with higher defaults reflecting the seasoning of the portfolio. Mortgage Insurance operating expenses in the fourth quarter were $34.3 million, and the expense ratio was 16.1% compared to $31.2 million and 14.4% last quarter. For the full year 2025, operating expenses for the Mortgage Insurance segment totaled $140 million, and we expect that operating expenses for the mortgage insurance segment will be approximately $145 million for the full year 2026. At December 31, Essent Guaranty's PMIERs efficiency ratio was strong at 169%, with $1.4 billion in excess available assets.

Consolidated net investment income and our average balance of cash and investments available for sale in the fourth quarter were largely unchanged from last quarter due to our share repurchase activity. The consolidated effective tax rate for the full year 2025 was 16%, including the impact of $2.1 million of favorable discrete tax items. For 2026, we estimate that the annual effective tax rate will be approximately 17%, excluding the impact of any discrete items. As Mark noted, our total holding company liquidity remains strong and includes $500 million of undrawn revolver capacity under our committed credit facility. At December 31, we had $500 million of senior unsecured notes outstanding and our debt-to-capital ratio was 8%.

In the fourth quarter, Essent Guaranty paid a dividend of $280 million to its U.S. holding company. As of January 1, Essent Guaranty can pay ordinary dividends of $246 million in 2026. At quarter end, Essent Guaranty's statutory capital was $3.6 billion with a risk-to-capital ratio of 9.1:1 with a statutory capital includes $2.6 billion of contingency reserves at December 31. During the fourth quarter, Essent Re paid a dividend of $100 million assessing group. Also in the quarter, Essent Group paid cash dividends totaling $29.5 million to shareholders and we repurchased 2 million shares for $125 million.

In January 2026, we repurchased 713,000 shares for $44 million. Now let me turn the call back over to Mark.

Thanks, Dave. In closing, our 2025 results demonstrate Essent's resilient financial performance in a challenging housing market. We delivered a strong return on equity and book value per share growth while retiring nearly 10% of our share count through value-accretive repurchases. The normalization of credit continues, but our high-quality portfolio remains positioned for a range of economic scenarios as we explore new opportunities. We believe this disciplined strategy serves the best interest of our stakeholders and positions Essent to create long-term shareholder value.

Now let's get to your questions. Operator?

[Operator Instructions]. Your first question comes from the line of Mihir Bhatia with Bank of America.

Maybe just -- let's just start with the decision into the Lloyd's market. I guess why now? Maybe talk a little bit about the strategy that you're doing there, what type of assets you're looking to underwrite? Maybe just help us understand what exactly is happening there for both strategically and operationally.

Sure. Thanks for the question. I would say it's been in process for a while. We have been studying ways to expand sender. So think of it here more as Essent Re expansion versus we're jumping in to a new line of business. When you take a look at Essent Re, it's a valuable asset. I mean, over the years, it's done the affiliate quota share, they've written a lot of really high-quality GSE risk your business. They have a nice MGA where we assist 10 other larger insurance companies to write GSE credit share risk.

But because of -- when you combine all three of them, we're sitting there with a $1.7 billion balance sheet, single-A rated from A.M. Best, A minus as S&P. It's one of the larger reinsurance companies in Bermuda. And because of the changes over the past several years, one, just investment yields went up. There's a lot of asset leverage within P&C. On the MI side, we're generally 1:1 in P&C, it could be 2:1, in some cases, 3. So there's nice asset leverage.

Clearly, that's a lot more valuable when yields go up. Second, S&P a couple of years ago now changed their capital rules. So there's a lot more capital, I would say, efficiencies when writing P&C on top of MI kind of get that diversification benefit, right? And third, it's clearly not correlated to the consumer. Those, I would say, attributes probably 18 months ago is when we started to look at it. So we've been looking at various ways. And we thought Lloyd's a very efficient way for us to kind of step into the market. $50 million of Sal, it's [indiscernible] itself is kind of a self-contained market, very, very capital efficient.

The $50 million that we're putting in is actually sitting on S&R's balance sheet. So there's no additional capital required. I think that's important for folks to realize and it's really well diversified. So I would say 87% of the business roughly is insurance versus reinsurance. Our top 40-plus syndicates that we're backing reinsuring and it's across generally well diversified across most lines, less we kind of made a conscious decision to be a little less weighted towards property cat, just because of the volatility there.

And it's -- that's one where we still have more I would say, more work to do. We've hired a small team and they're very experienced in the P&C business, very technical. So they have actuarial backgrounds, which we like. We're very technical, right? We talk a lot about unit economics and balance sheet and all those sort of things. So they kind of fit our style and we'll continue to build that team out. It's not going to be very material. And so I don't want to play this up that we've entered into a new business. It's not transformational. It's very measured because that's how we like to do things. And as we learn over time, remember, One of the advantages we have at Essent because we're kind of a founder-operated company. We all own a lot of shares.

We have a long-term view. And I was in London a few times last year, and I met most of the syndicates that were backing within the top 10. And I looked at them and said, do we want to invest with them because it's essentially what we're doing. I know we'll recognize it as premiums. But think of it also is kind of almost like a big watching line. So we'll certainly update you guys. But the leverage and we may, with that platform, we also have the opportunity to write whole account quota share with larger reinsurance companies, kind of like how we do it on the MI side and the relationships that we have, there may be a way for us to partner with some over time. Again, not really in the 2026 forecast.

We'll see how it goes, but a pretty measured approach. But similar to title, which is still kind of in that incubation phase and starting to do -- we're starting to see some real good signs. They are just nice call options for our investors. So it's not -- it's not like we're going to buy back less shares. It's a way for us to learn the business we'll continue to attract talent to the organization, both in the Bermuda and the U.S. And if there's a time, and we realize where we are in the cycle. And we know it's entering into kind of -- it's getting a little softer in certain segments of the market, that's fine. You're never going to -- we're not trying to time the market. We look at this as an opportunity. Again, longer term, 5, 10 years is successful. It'll generate supplemental earnings for the company and help us. It's like another tool I have to grow book value per share.

Got it. That's helpful. Maybe just switching to the MI business for a second. The right I know you don't manage the market share. So I'm not -- it really -- this really is in a market share question. But you look at it in your -- I think, of MIs that have reported so far, you're the only one that's got NIW lower quarter-over-quarter. So is that just a reflection of you not liking the returns in the market? Is there a conscious decision to pull back in certain parts of the market or risk grades or something like, I guess, help us understand what's happening there?

Yes. I wouldn't read too much into it. You've heard me say before, it kind of ebbs and flows. For the year, we were 15, and we always say we're kind of in 15, 16. We really try to optimize the unit economics. We haven't -- I want to say we backed off a couple of things earlier in the year. You had the tariffs coming we probably cut some of the tails. And that's probably a little bit of that. That's okay. I mean if you look at -- we went back in here, and if we were -- 2 points higher in share for the last 3 years.

It's -- it all comes out in the wash. I mean there's really no the price/volume trade-off, especially the better credits is just not there. it's just not there. We'd rather take that dollar and give it back to shareholders. And I'm telling you, I'm warning investors because, this is just a price game. And if we're like bottom in share and the #1 or 2 guys, $5 billion ahead of us in this market, here, it's price. And we're not -- we don't -- again, that's -- everyone has their own strategy. We think $1 rather than put it into a loan at a super low premium I'll give it back to shareholders. So we're fine. And then we'll -- we've in times of this location like 2020, we wrote most market share. So longer term, it's -- market share is really a result of some of the things you do.

We're very -- I would say when you kind of take a look at us against some of the advantages we have. Look at our gross premium meal. It's the highest in the industry. It's like 3 points higher than the average. It's pretty high and run that over $250 billion book. It's pretty meaningful. So these are real economics to the company. Look at our gross, and this is this all be available, I guess, when all the case come out, but look at our gross operating expenses relative to our peers. Add back the ceding commission, right? Because everyone looks and talks about net expenses. It's really not gross expenses, which is cash going out the door. There's a form of leverage there.

We outperformed the industry. And so when you think about -- and it's a relatively sizable advantage versus a few that expense efficiency allows us to build a team in Bermuda. It allows us to build out a system and title. Those are things, again, since we manage the business so well, these are ways for us to kind of create competitive advantages, clearly, on the technology side with SME, we have been monetizing AI now for 7 years. We haven't done the new AI, but machine learning and what we're doing in the edges artificial intelligence, but we're monetizing. We're not just talking about it. can see that in our premium yield.

That's another good example of how we're thinking about the business. So again, back to market share, it's -- I'd rather have better unit economics at a smaller share than the other way around.

Your next question comes from the line of Bose George with KBW.

Actually, just a follow-up on that last question. Your gross premium yield has been 41 basis points for a few quarters. You guided to 40% next year. Is that just kind of a rounding issue or anything tied to market returns?

It's been -- it's been 41 for a while, those. And if you just think about it, it actually it probably was lower than that, and I was actually looking at it the other day. It was lower than that. in kind of the '21, '22 period. And remember, if you think about the first quarter of '22 when I commented how low pricing was, there was kind of a reversal that and pricing kind of came up in the industry. And in the kind of roll through, remember you're talking about insurance in force.

So it's tough to get a -- it's tough for there's not a lot of transparency for analysts and investors on what the premium yield is upfront. You can kind of sense though, if you guys should look at kind of where gross premium yields were for all the companies -- 2 quarters ago, 4 quarters ago, that will give you a good hint a leading indicator as what people are pricing in on the front end. So I think for us, it actually went up when pricing went up. And clearly, pricing it's been relatively stable. But as that pricing starts to compress, and it has compressed a little bit in 2025. But the compression isn't really competitively oriented.

There's a little bit of that, but it's really driven by credit. When we look at the credit that's coming in, like $757 million we rounded it up, but our LTV in the fourth quarter was like shy of 92%. So that's -- so all of a sudden, if you think about the old-fashioned rate card, you're in that 1 quadrant, where it's super good credit quality but lower premium. So that's driving a little bit of it. So I wouldn't get too -- we're not too fussed about it. I mean once the homeowners that are on the sidelines come back down and we get kind of that 70, $745,93LTV, you'll see that pricing come back up, and that will work its way into the yield. So it's a way for us to kind of just give you guidance to run the models.

Okay. Great. That's helpful. And then you noted that insurance-in-force growth is likely to be modest. I mean, this year was 1.9%, looks like year-over-year, which is kind of already in the modest cap. So is it like going to be -- do you think it's going to be sort of below that level or kind of in that range?

I think within that range, again, I do think longer term -- I hate to say longer term, but it is longer term. That housing will continue to grow. There will be renewed growth, Bose. I mean the demographics $4 million to $5 million in that age grew kind of 28% to 32%. We're coming into that homeownership camp every year. But the lack of -- given where rates are the lack of affordability, a little lack of supply, they're just on the sidelines. And when they come off the sidelines, I don't know.

But when they do, it's going to be -- I think it's going to be a bigger spike than people think. I just -- I don't my crystal ball doesn't work in those type of increments. I think we're well positioned. So again, from an Essent perspective, credit is relatively benign still. And as long as credit stays benign and we can continue to kind of produce the type of cash flow we're producing and really just use the return it to shareholders, we're kind of paid the weight. So we're fine with that. So again, modest growth Again, that's a little bit of us trying to guide investors and analysts to what they expect because the numbers are the numbers, and we don't want to -- we'd rather kind of underpromise and overdeliver than the reverse.

[Operator Instructions]. Your next question comes from the line of Doug Harter with UBS.

Mark, can you talk about what you're seeing in your activity and whether you're seeing any difference across the vintages, especially the vintages that maybe have a little bit less embedded home price appreciation?

Yes. Good question. It's -- not really. I mean, we have 20,000 defaults. If you break it out by vintage, if you break it out by state, if you break it out by lender, if you break it out by servicer. There's nothing really stands out. I mean Florida is a little higher because we have some hurricanes. And I would say that the Florida book is probably our higher premium book, but there's a little bit more risk there. We're fine with that. We love the unit economics in Florida and Texas. But now it's really -- you're always looking for something, but we haven't really seen anything.

And even the pre 22 book, and I always like that, we always call it kind of the 2 books, right? It's the -- halfway through '22 and before is the 1 book and then the kind of the newer book, which was at elevated HPA and higher interest rates. We're not seeing much of a difference there. That's probably a more normal business. That's probably a more normal high LTV MI type portfolio, and we're not seeing anything there, too. I mean, you're going to see noise and we still see it with forbearance, which ultimately is a good answer for borrowers, but it does create it does create some noise in terms of the faults and the ins and outs but again, roughly 800,000 loans.

There's only 200 -- 20,200 defaults, I think it was 18,000 plus 12 months ago. So it's really been maybe too light of a word, but it's not -- we're not really we're not too fussed about where defaults are. It comes down to unemployment, Doug. I mean at some point, if it rains like every blade of grass is going to get wet. We keep our eyes on unemployment. That's where we're always looking for pebbles. It will happen. Something will hit us at some point. We just -- we're not seeing it and obviously, not seeing in fact, the credit coming in has never been better. We're not seeing that. I know you follow a lot of them to -- we don't see it in a lot of the consumer finance. We're not seeing in the cards is pretty elevated.

But other than that, we're not -- we're super , I would say, very, very happy with the portfolio and the performance of the book. And even then if default rates do spike at some point, look at where our claim rate is. So the embedded home equity helps a lot. I think our claim rate probably right around 1% ever to date. So I mean, there's some good protections. And I think it's a little -- again, it's just a little underappreciated from the investor community, which is fine. I mean, again, if you look at just we're at book value. We have -- it's all cash. We don't have a lot of debt, and there's not really a lot of credit given for the future value of the cash flows. And don't forget the future cash flows are pretty well hedged.

I mean we own that first loss piece, but the mess piece is pretty well hedged out. I don't -- so we have a high degree of confidence in the future value or the present value of those future cash flows, hence that's why we're buying back shares. That's why we pay a dividend. If we didn't have that confidence, we certainly we wouldn't be funneling cash outside the company.

Your next question comes from the line of Rick Shane with JPMorgan.

It's interesting. Obviously, I've done this a while and we follow a bunch of different companies. And I'm thinking about comments from two other founder-run businesses that I recall over time. And one is in the middle market lending space, and the comment was basically there's no spread for a bad loan. Conversely, if you're making a massively diversified card-type portfolio you're ultimately sort of seeking an efficient frontier. You accept the fact that you're going to have losses. They're not idiosyncratic.

It strikes me that you guys sort of try to balance both. But ultimately, your business is an actuarial business. Mark, you've sort of provided this cautious outlook. And I'm curious if you think it is because you can't capture price in the context of what you are concerned about in terms of credit? Is that the right way to think about this?

Yes. I mean I think that's -- I don't think you're off. We're never going to be the market leader -- and part of it is we don't have to be our incentives, look at the incentives of -- they're all in the proxy statement. Just read the incentives, people do what their incentive to do. incentive to grow book value per share is 100% of my long-term incentive is growth in book value per share. We're not incentive on market share. We're not incented on NIW. We're not incentive on insurance in for.

So they're not -- we don't come in everyday so we have to grow NIW look at the incentives around the industry. Some do. That's -- so they're going to make different trade-offs. I'm not saying the we're right and they're wrong. It's just different people do what their incentive to do we like over the long term, we'd like to optimize our unit economics. So what yield are we charging what's their loss? What's our capital because over time, if you write good unit economics, that will still see your P&L. And conversely, if you don't, that will also flow through the P&L. And again, bottom line is we want to grow book value per share. That's our incentive. That's why we're doing it.

And as a founder-run company and owning a lot of shares, I don't -- in a very, I would say, very supportive and constructive Board of Directors who a lot of them have been with me from the beginning, we all sing from the same hymn sheet. So it's not like they say you have to grow. They're with us in terms of how well slowly grow. And I think it's a long-term boring story is what we're at Essent. But since we've been public, Rick, we've grown Book value per share 18%. Our total stockholder return is close to 12%, which is equal to the S&P 500. It's more than the S&P 400 mid-cap by like 3 points longer term. Am I going to win in the next 2 weeks or a month or a quarter I don't know. I don't care I want to win long term and the company wants to win long term.

And I think that's -- when we come in every day, and we do come in every day. And we meet and we talk, it's really like where do we want the business to be 5 years from now, 10 years from now, and we like to work backwards as to. And when we look at that in the context of do we invest in title? Do we invest in Essent Re? Do we try to be #1 in market share. We balance a lot of that stuff. So again, it's our way. It's not necessarily the right way. But as a large owner of the company, I feel very comfortable with the direction in how we're managing the company.

Got it. That helps. And just to sort of build on a little bit more pricing hasn't really changed that much, but you're a little bit more cautious. Is there something that you are thinking about specifically in terms of housing credit that shifted. And again, you know our views on the world. So I'm curious sort of how you -- what your credit outlook is here?

I wouldn't -- I wouldn't -- like I said, the market share ebbs and close. Like I said at the beginning, I wouldn't read too much into it. It's not like we made a credit call and we want a 14% market share. It's nothing like that. It's around it's really around kind of on the margin and optimizing unit economics. We still do a lot of testing on pricing elasticity. Our view is, I think what -- you'll know when we're cautious on credit, right, trust me, you'll know. I wouldn't -- it's not a credit call. It's more around what's the best dollar is it used to kind of repurchase shares or look at other opportunities? Or is it to grow NIW. And I think our view is given the strength of our balance sheet, given the kind of, I would say, the liquidity advantage we have with Essent Re we can lean in when things get when the market looks -- when people are a little bit more scared to the market, and we can feel like we can get more pricing right now. given where pricing is.

And like it really hasn't moved. We're just comfortable kind of being at the bottom of the pack. It doesn't really impact we -- like I said earlier, if we were larger, it would just require more capital at those that dollar of capital is probably just better at this point in our life cycle and where the market is not forever, we think returning it to shareholders is really the best investment decision. And the fact that we retired 10% on of the shares. That's a large number. And if that continues, and I would expect it to continue this year, all as being equal, all right? We bought back $45 million or $44 million in January. And if we kind of stay where we're at in terms of the market, it wouldn't surprise me to see that level continue, and that just means a lot of our larger shareholders get to own more of the company and they get them on more of a fantastic business. So I think it's a good thing. So don't read into it in credit. It's not really -- I'm not making a credit call. And I know your views.

Concludes our question-and-answer session. I will now turn the call back over to management for closing remarks.

I'd like to thank everyone for calling in and joining the call and the questions, and have a great weekend.

SP1 Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is Abby, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Essent Group Limited Third Quarter Earnings Call. [Operator Instructions]

And I would now like to turn the conference over to Phil Stefano with Investor Relations. You may begin.

Thank you, Abby. Good morning, everyone, and welcome to our call. Joining me today are Mark Casale, Chairman and CEO; and David Weinstock, Chief Financial Officer. Also on hand for the Q&A portion of the call is Chris Curran, President of Essent Guaranty. Our press release, which contains Essent's financial results for the third quarter of 2025 was issued earlier today and is available on our website at essentgroup.com.

Prior to getting started, I would like to remind participants that today's discussions are being recorded and will include the use of forward-looking statements. These statements are based on current expectations, estimates, projections and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially. 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 February 19, 2025, 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.

Thanks, Phil, and good morning, everyone. Earlier today, we released our third quarter 2025 financial results. Our performance this quarter again underscores the resilience of our business as we continue to benefit from favorable credit trends and the interest rate environment, which remains a tailwind for both persistency and investment income. These results reflect the strength of our buy, manage and distribute operating model, which we believe is well suited to navigate a range of macroeconomic scenarios and generate high-quality earnings.

For the third quarter of 2025, we reported net income of $164 million compared to $176 million a year ago. On a diluted per share basis, we earned $1.67 for the third quarter compared to $1.65 a year ago. On an annualized basis, our year-to-date return on equity was 13% through the third quarter. As of September 30, our U.S. mortgage insurance in-force was $249 billion, a 2% increase versus a year ago. Our 12-month persistency on September 30 was 86% flat from last quarter, while nearly half of our in-force portfolio has a note rate of 5% or lower. We continue to expect that the current level of mortgage rates will support elevated persistency in the near term. The credit quality of our insurance in force remains strong. The weighted average FICO of 746 and a weighted average original LTV of 93%. Our portfolio default rate increased modestly from the second quarter of 2025 reflecting the normal seasonality of the mortgage insurance business. Meanwhile, we continue to believe that the substantial home equity embedded in our in-force book should mitigate ultimate claims.

Our consolidated cash and investments as of September 30 totaled $6.6 billion with an annualized investment yield in the third quarter of 3.9%. Our new money yield in the third quarter was nearly 5%, holding largely stable over the past several quarters. We continue to operate from a position of strength with $5.7 billion in GAAP equity, access to $1.4 billion in excess of loss reinsurance and $1 billion in cash and investments at the holding companies. With a 12-month operating cash flow of $854 million through the third quarter, our franchise remains well positioned from an earnings, cash flow and balance sheet perspective.

We remain committed to a prudent and conservative capital strategy that allows us to maintain a strong balance sheet to navigate market volatility while preserving the flexibility to invest in strategic growth. Thanks to our robust capital position and strength in earnings, we are well positioned to actively return capital to shareholders in a value-accretive fashion.

With that in mind, year-to-date through October 31, we have repurchased nearly 9 million shares for over $500 million. At the same time, I am pleased to announce that our Board has approved a common dividend of $0.31 for the fourth quarter of 2025 and a new $500 million share repurchase authorization that runs through year-end 2027.

Now let me turn the call over to Dave.

Thanks, Mark, and good morning, everyone. Let me review our results for the quarter in a little more detail. For the third quarter, we earned $1.67 per diluted share compared to $1.93 last quarter and $1.65 in the third quarter a year ago. My comments today are going to focus primarily on the results of our Mortgage Insurance segment, which aggregates our U.S. mortgage insurance business and the GSE and other mortgage reinsurance business at our subsidiary, [indiscernible]. There is additional information on corporate and other results an exhibit of the financial supplement.

Our U.S. Mortgage Insurance portfolio ended the third quarter with insurance in force of $248.8 billion, an increase of $2 billion from June 30, and an increase of $5.8 billion or 2.4% compared to $243 billion at September 30, 2024. Persistency at September 30, 2025, was 86% compared to 85.8% at June 30, 2025. Mortgage Insurance net premium earned for the third quarter of 2025 was $232 million and included $15.9 million of premiums earned by Essent Re on our third-party business. The average base premium rate for the U.S. Mortgage Insurance portfolio for the third quarter was 41 basis points, consistent with last quarter and the average net premium rate was 35 basis points, down 1 basis point from last quarter.

Our U.S. Mortgage Insurance provision for losses and loss adjustment expenses was $44.2 million in the third quarter of 2025 compared to $15.4 million in the second quarter of 2025 and $29.8 million in the third quarter a year ago. At September 30, the default rate on the U.S. mortgage insurance portfolio was 2.29%, up 17 basis points from 2.12% at June 30, 2025.

Mortgage Insurance operating expenses in the third quarter were $34.2 million, and the expense ratio was 14.8% compared to $36.3 million and 15.5% last quarter. At September 30, Essent Guaranty's PMIER's sufficiency ratio was strong at 177% with $1.6 billion in excess of apple assets. Consolidated net investment income and our average cash investment portfolio balance in the third quarter were largely unchanged from last quarter due to our share repurchase activity.

In the third quarter of 2025, we increased our 2025 estimated annual effective tax rate, excluding the impact of discrete items from 15.4% to 16.2%. This change was primarily due to withholding taxes incurred on a third quarter dividend from Essent [ SUS ] Holdings to its offshore parent company. As Mark noted, our holding company liquidity remains strong and includes $500 million of undrawn revolver capacity under our committed credit facility. At September 30, we had $500 million of senior notes -- senior unsecured notes outstanding and our debt-to-capital ratio was 8%.

During the third quarter, Essent Guaranty paid a dividend of $85 million to its U.S. holding company. As of October 1, Essent Guaranty can pay additional ordinary dividends of $281 million in 2025. At quarter end, Essent Guaranty's statutory capital was $3.7 billion with a risk-to-capital ratio of 8.9:1. Note that statutory capital includes $2.6 billion of contingency reserves at September 30. During the third quarter, Essent Re paid a dividend of $120 million Essent Group. Also in the third quarter, Essent Group paid cash dividends totaling $30.1 million to shareholders and we repurchased 2.1 million shares for $122 million. In October 2025, we repurchased 837,000 shares for $50 million.

Now let me turn the call back over to Mark.

Thanks, Dave. In closing, we are pleased with our third quarter financial results as Essent continues to generate high-quality earnings, while our balance sheet and liquidity remains strong. Our performance this quarter reflects the strength and resilience of our franchise, while Essent remains well positioned to navigate a range of scenarios given the strength of our buy, manage and distribute operating model.

Our strong earnings and cash flow continue to provide us with an opportunity to balance investing in our business and returning capital. We believe this approach is in the best long-term interest of our stakeholders and that Essent is well positioned to deliver attractive returns for our shareholders.

Now let's get to your questions. Operator?

[Operator Instructions] And our first question comes from the line of Terry Ma with Barclays.

Just wanted to start off with credit. New notices were a bit lower than what we had, but the provision on those notices were higher. So any color on kind of just the makeup from a vintage or even geography perspective this quarter?

Yes. Terry, it's Mark. I wouldn't say there's nothing really to read out in terms of geography or trends. The one thing for you guys as analysts, we're pointing this out a few quarters ago is just our average loan size continues to increase. I mean ever since -- for years, it was like $230,000 when the GSEs started raising their limits and it really kind of picked up post-COVID. So our average loan size, if you just look through the stat supplement for the insurance force -- close to $300,000.

So again, larger loans when they come through kind of into default is going to be a larger provision. So I wouldn't read any more into it than that. I think the -- again, the default rates relatively flattish. And I think from a credit position, there's nothing we're really seeing that concerns us at the current time.

Got it. That's helpful. And then maybe just a follow-up on the claims amount. The number was higher and also the severity. So like anything to call out there, like anything idiosyncratic? Or is there more of a trend?

Terry, it's Dave Weinstock. Yes, there's really nothing to point out there. A lot of that's going to depend on when we get documents in and when the claims are fully adjudicated and ready for payment. And so you're going to see fluctuations based on what the underlying claims are. But at the end of the day, there are not a lot of claims there. And the biggest takeaway really is that the severity continues to be well below what we're reserving at. So we're getting favorable results there.

And our next question comes from the line of Bose George with KBW.

First, just on the ceded premiums, it was kind of the high end of the range. Is that a good level going forward? Or does that just bounce around depending on the timing of when you're doing the reinsurance transactions?

Bose, it's Dave Weinstock. Yes, it's going to bounce around a little bit based on default and provision activity. So it's seasonal. I think you saw the ceded premium being a little bit lower in the first half of the year, similar to where you see our defaults being more favorable and lower. And this is the seasonal second half of the year as we've talked about we definitely -- you generally see an uptick. And so you're going to see a little bit of an uptick in the ceded premium.

And also keep in mind, Bose, we raised the quota share this year to 25%. So that is going to create a little bit more volatility. At the end of the day, it comes through the wash, right? So in terms of the mix between the provision and the expenses and ceding commission, but it will bounce around a little bit more. So I'd be conscious of that in your models.

Okay. Great. And then just in terms of the tax rate, what drove the higher tax rate? And then just can you remind us just based on how much you're cedeng, et cetera, where you think the tax rate is going to be over the next, say, 12 months?

Yes. I mean I think Dave alluded to it in the script, a lot of it is just a little bit of the tax friction moving from kind of guarantee to U.S. up to Bermuda and out to shareholders. So I think 16 and maybe a touch higher going forward. I would think through that with your models, I'd be relatively conservative those. And it really gets back to the fact that we're just distributing a lot more capital back to shareholders. And that's kind of a little bit of a signal that we don't really see it changing much given where sitting with still $1 billion of cash at the holdco and kind of where the stock is right around bookish value.

And I think we pointed this out last time in our investor deck, which will come out kind of post earnings. Like the embedded value of the business, we believe is much higher than kind of where we are today, right? And just again, it's simple math. It's nothing revolutionary. And we have $6 billion of cash, $6 billion of equity. We trade right around [ $6 ] billion, doesn't really give credit for the $250 billion of insurance in force that we have. And that is a significant embedded value. I think we've proven that over the past 10 years in terms of the cash flow.

And just look, again, just we generated $854 million of cash flow after the last 12 months. So based on that and where we're -- just given the capital position, and we're still generating unit economics kind of in that 12-ish to 14-ish range. We think it's the best value. So I think we'll continue to do that. But there, again, just getting the cash out is -- creates a little friction. But I think from a shareholder perspective, we'll pay a couple of extra bucks on the tax rate. But I think from lowering the share count and kind of delivering value to shareholders. It's a little bit of a no-brainer.

And our next question comes from the line of Rick Shane with JPMorgan.

[indiscernible] [ Exhibit K ] and one trend that is pretty consistent is the increase in severity rates, and that makes sense given slowing home price appreciation and vintage mix. It was 78% this quarter. I'm curious, long-term where you think that could go? Are we sort of asymptotically approaching the limit there? Or are we -- should we expect that to continue to rise?

Yes. I mean I wouldn't -- I don't know if you would expect it to rise. Again, we -- the provision is at 100, Rick, to say. The embedded [ HPA ] in the book is still kind of 75-ish. So I mean, in terms of mark-to-market LTV. So some of it is just timing, right? If somebody from the later vintages kind of call it, 23 or 24 goes into default, there's going to be a higher provision or if they go into claim, we're going to pay a higher claim there because they have less embedded value.

But taking a step back just at the portfolio level, we're not going to get too fussed about it, Rick. I mean, again, you're talking about a relatively low losses. And remember, just -- and we point this out every quarter or 2, just what the real risk is in our business, right? Take from my seat, Rick, we own that first loss position, right? So call it 2 to 3 claims out of 100. We hedge out from above that kind of into that 6, 7 range, and we reattach above that. That's the risk in the business, right? We are a specialty insurance type business, almost like a cat or our catastrophe is a severe macroeconomic recession. And that's when we hold capital when we think about PMIER's, we think about the different stress tests that we run, whether it's Moody's Constant severity S4, the GFC, that's when we come in and think about it week-to-week or month-to-month. That's -- we're focused really on making sure we're fine there, and we clearly are given the amount of capital that we're using to repurchase share.

So getting back to this, again, we clearly look at it. I think we're conservative in how we provision just from a severity standpoint because I think that's the severity is an actuary -- I mean, the provisions an actuarial-based model. So we don't really mess with it quarter-to-quarter, even year-to-year that much. So again, I'm just trying to -- from a big picture standpoint, sure, you're going to try to trends. And Terry pointed out the trends around the new notices, those are all good. That's like you guys have to do that for your models. But I think taken like a step back, The biggest metric for the quarter, Rick, is we produced $854 million of cash over the last 12 months. So again, not trying to get too high level. But I mean, I think it's important to kind of put context around some of these numbers.

No. Look, it's a fair point, Mark, given how low losses have been for so long a modest dollar movement looks like a larger -- it looks like a significant percentage movement. And I think we're all sensitive to that and trying to sort of, I think, understand what the normalized returns on the business are? And do you think we are approaching those levels or -- and look, you've enjoyed an extraordinary period for a long time, for a whole host of reasons that we've all talked about. But as the business normalizes and sort of reverts to the return levels that the 2 of us spoke about a decade ago? Or do you think we're getting there now?

No, it's a good question. And Rick we've been studying this so let's go back in time, right? Let's start with '99 which is really the beginning of the modern day [ Fannie and Freddie ]. And let's just go with the last 35 years. if you take away the GFC, which it's hard to do, just to stick with me here for a second, the average loss rate on [ Fannie and Freddie ] back loans is less than 1%. That, I believe, is actually -- so it's not this, oh my goodness, we have such a good run, when is it going to end? This is the business. It's a great business.

You're talking about, and again, and some of the things that caused the great financial crisis because you don't want to ignore that. And the reason we like the business, coming out of the crisis you had that [ Frank ] qualified mortgage rules. So 35% of the loans that were done during the crisis, they no longer qualify. They literally got the RIF wrapped out of the industry. So that is now either going, it's going to either FHA or it's going to kind of non-QM or they're not being originated, which is the most case, a lot of those borrowers are ending up in single-family rental. It's a great outcome for them, right? So then all of a sudden, then you add in the increased, I would say, sophistication of DU and LP at the GSEs, their quality control has gotten significantly better. I mean, over the last 15 years.

So all of a sudden, the credit guardrails around our business are exceptional and we don't see a change. Unless there's something happens with GSE reform, and clearly, we look at that. But as long as the market is where it is today, this is a very narrow fairway. And so we don't see really credit changing that much. It's hard. I mean, actually, our credit for this -- the last 2 quarters, Rick, was the best FICO's we've had since we started the company. So and part of that's affordability -- part of it is affordability, like just folks are having a harder time qualifying but the credit quality in this business is exceptional. And just from a public policy standpoint, 65% of our borrowers are first-time homeowners I mean, I was with a young guy last week who just got mortgage insurance through one of our clients. He's spending like $65 a month, you put 10% down. I mean you can't beat it. It's a great value to the customer, which you always want to have, right? The borrowers are ultimate customer, and then I think the math for us.

So I would say from -- and some of our longer-term investors kind of know this clearly, I would stop in one of our other analysts always ask me, Mark, is this as good as it gets? It's been good for a long time. I mean -- and I don't really -- again, there's going to be some volatility Rick, quarter-to-quarter or year-to-year. If unemployment goes up, we're probably going to pay some losses. But remember, we're kind of capped -- we're kind of capped until we hit until we go through that mezz piece. So it's relatively well boxed. Hence, our confidence in paying the quarterly dividend and right now in terms of where we are returning capital to shareholders has been quite a shift in the past 12 months, but part of it was we've just continued to accumulate cash and we've had this retain and invest mentality. We just haven't invested in anything. And so we look at it now and say the best investment we can make is in the company.

And if we keep this pace up, Rick, every time you repurchase shares our long-term owners, which include the senior management team, we own a little bit more of the company. And if I'm going to own a business, this is my favorite business. So we'll see. So sorry for the long-winded answer, but I want to again try to give some of the investors on the phone some context.

No. Mark, look, I appreciate it, and I suspect there are some folks who are listening to this call imagining the 2 of us on rocking chairs, debating the stuff. And that's okay, too. I appreciate the answer.

[Operator Instructions] And our next question comes from the line of Mihir Bhatia with Bank of America.

I actually want to follow up on Rick's last question there about -- just about the guardrails, around underwriting currently. I think there was news yesterday about [ Fannie ] and removing the minimum credit score requirements. There's been some noise out of Washington about trying to do -- play a more active role in housing or lower increased housing demand, if you will.

And I was just wondering from your seat, are you seeing any signs of that, are originators trying to get more stuff on it. Gets more stuff approved that maybe wouldn't have been -- they wouldn't have tried a couple of years ago. Just wondering what that looks like.

It's a good question. There is a lot of noise around kind of credit scores and [ Vantage and far Isaac ] and Vantage can qualify more borrowers, all those sort of things. The reality is [indiscernible], the GSEs haven't changed their systems yet. So until that happens, there's really not going to be changed. So like a lender would be unable today to kind of "get something past the GSEs." It gets back to my point, the GSE's their systems are fantastic. And in terms of DU and LP, very sophisticated. And if they do get through it, they most likely their QC and repurchase program, they're going to put that back to lenders. So lenders have I think lenders have really understood that the game today, and you're seeing some of the bigger lenders do it.

The game today is all about lowering and being efficient on origination cost. That hasn't always been the case. So if you go for the crisis, what happened is if you get a small or midsized mortgage banker, and all a sudden production is down, they immediately go to credit expansion right? I wouldn't normally do that loan, but I have fixed costs, I'm going to try to get that loan in either through the GSEs or to whole loan buyers. You can't do that today. I mean, whether it's -- you're trying to get it through the GSEs, you're trying to go through some of the larger correspondent purchases like [ PennyMac ] whose systems are also excellent. And it's not going to happen. So you're almost -- you have to either you have to manage costs.

And again, from a credit provider, that's exactly where we want it. So we're not too worried about it. And if it were to go, we mentioned this last call, if it were to change, right? And I'm not saying it's going. If it were to change and you could have like kind of a wider fairway, so to speak. So more things qualify fact that our credit engine doesn't really rely on FICO, and we're really -- we're almost credit score agnostic. We're looking at the 400 kind of variables underneath that along with things in the 10 out of 3, we're not too worried. We can see through that. In fact, our model works better when things are a little bit more disparate, so to speak. It doesn't work as well in a market like this. It kind of works more from a premium standpoint, picking and choosing, but credit, not -- you almost don't really need it from a FICO standpoint.

So again, I think -- I would look at it that way. I think it's something that we're pleased with, but I don't see any kind of chink in the guardrails to date.

[Operator Instructions] And our next question comes from the line of Doug Harter with UBS.

Can you talk about your plans to upstream capital from the [ MI ] subsidiary? It sounds like you have a lot of capacity left for the year. Do you plan to kind of spill that over or do a large dividend in the fourth quarter?

I think it's pretty consistent with the dividends. It might be a little bit larger in the fourth quarter for sure. I think, again, as we look at kind of PMIER's, Doug and credit and where it's going, we feel comfortable continuing to upstream cash from guarantee to U.S. Holdings. And as I said earlier, it has a little bit of friction getting it back to the group level. But that's -- and that's not the worst problem to have.

And also, we have -- the quota share reinsurance. That's one of the reasons we took it up to 50 earlier this year. That's another kind of backdoor way to get cash up to the holdco.

And then thinking, obviously, you bought Title a little while ago. Can you just talk about how you're thinking about the benefit of the great business that is MI versus looking to further diversify and have other avenues of growth?

Yes. I mean I think right now, it's a good question. I think Title has performed pretty much in line with what we thought -- if we would have thought rates would be this high. To try to be honest with you. I think if rates go lower, we're very levered to rates given the lender focus of the business. We have an underwriter. It's really kind of and it's still small stages growing primarily in Texas and Florida in the bit of the Southeast. That's kind of the purchase angle of the business, but it's small. So the real lever is lenders and refinance. And we've continued to add lenders, we're working on developing a new system. We're still building the business out per se, and we're fine with that. So it's kind of in corporate and other Doug. And think of that almost as like an incubator.

So again, if it gets big enough, it will pop up as its own segment. If it stays small, it stays small. And that could happen. And clearly, Essent Re has some opportunities outside of mortgage. We haven't really done anything yet, but there's things that we look at. I would look at that as another incubator. We kind of call them call options. But for the time being, clearly, the focus and where the cash flow is coming in from the MI business. And when we look at investment opportunities whether it's title, other acquisitions that come to us, we still feel at this time, our stock is the best value, and we're kind of voting with our feet there. And I don't really expect it to change absent like some large movement in the stock. And then if there's a large movement in the stock, which it's -- it would be nice per se, but not necessarily. If you're in the business of buying back shares and shrinking ownership, this isn't the worst place to be in.

If the stock were to move outside of our range, we would probably do like a special dividend. We'll continue to look for ways to get capital back to shareholders. But given just how good the MI business is today we would need to -- again, the -- there's going to be a good reason for us to do it. And I look at it, if you're looking at a way to kind of quantify it. And our book value per share today is right around $60. So it's a tad below 58-ish. It will finish -- my guess is it will finish the year around 60 Doug.

So if we look and say, "Hey, we're going to grow it, 10%, 12% a year." which we've been doing. That book value per share over the next 4 or 5 years is going to be $85, $90, right? It's big picture, right? Just looking at the numbers. So as we look at an acquisition, it's going to have to either help us increase that book value per share target or achieve that book value per share target sooner all else being equal or making us a stronger company and things like that. There's other factors in there. That's a pretty high bar. That's a pretty high bar. We kind of know this business well. And like what I've said, just in my response to Rick earlier, this is such a good business. We're a little bit spoiled and in terms of how good the business is, again, there's going to be some bumps along the road. There always are, but that's why you have capital, right? You have capital to withstand those bumps and reinsurance is another form of capital. We expect kind of those expected losses per se.

And then you have capital on reinsurance for unexpected losses will come, but that's what we're prepared for. We don't necessarily try to sit down and say, where is the market going, we try to prepare for every different avenue that the market potentially could go down. I mean, that just comes with experience. We've been doing this for quite a while.

But that being said, so summing up the investment right now continues to be an asset. I don't expect that to change, absent something really special comes along. And there are no additional questions at this time.

There are no additional questions at this time. So I will now turn the conference back over to management for closing remarks.

Thanks, everyone, for their time and questions, and have a great weekend.

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