Essent Group Ltd. Q2 FY2025 earnings call

• Second quarter 2025 financial results benefit from favorable credit performance and higher interest rates on persistency and investment income.
• Business model of buy, manage and distribute positions Essent well in various economic scenarios.
• Outlook on housing is constructive long term with demographics driving demand and home price support.
• U.S. mortgage insurance in force at $247 billion, credit quality strong, 12-month persistency 86%.
• Industry plays vital role in sustainable housing finance system, Essent supportive.
• Essent Re continues writing high-quality GSE risk share business and earning advisory fees.
• Essent Title focused on expanding in key markets but no near-term impact on earnings due to higher rates.
• Consolidated cash and investments totaled $6.4 billion, annualized investment yield 3.9%.
• Moody's upgraded Essent Guaranty's insurance financial strength rating to A2 and Essent Group's senior unsecured debt rating to Baa2.
• Board approved common dividend of $0.31 for third quarter 2025, repurchased nearly 7 million shares for approximately $390 million year-to-date.

For the second quarter of 2025, Essent Group reported net income of $195 million. The U.S. mortgage insurance in force was $247 billion, a 3% increase versus a year ago. The credit quality of the insurance in force remains strong with a weighted average FICO of 746 and a weighted average original LTV of 93%. Essent Re had risk in force of $2.3 billion for GSE and other risk share. Essent Title remains focused on expanding client base and production capabilities but is not expected to have material impact on earnings in the near term due to higher rates. Mortgage Insurance net premium earned for the second quarter was $234 million. Consolidated net investment income increased $1.1 million or 2% to $59.3 million. U.S. mortgage insurance portfolio had an expense ratio of 15.5% in the second quarter.

• Board approved common dividend of $0.31 for third quarter 2025.
• Year-to-date through July 31, repurchased nearly 7 million shares for approximately $390 million.
• Dave mentioned OpEx outlook with 2025 guidance expecting 160 to 165, with quarter-to-quarter fluctuations based on production volumes and staffing levels.

• Macro-economic environment changes may impact business performance.
• Credit risk associated with mortgage insurance portfolio.
• Interest rate fluctuations affecting persistency and investment income.
• Industry regulatory changes that could impact operations.

Q: Terry Ma asked about home prices and recent vintages.

A: Mark noted home price outlook depends on MSA level, recent vintages are pretty normal, not particularly concerned, and new business priced differently with market focus based on income growth and supply.

Q: Bose George asked about buybacks being opportunistic and excess capital.

A: Mark said it's a bit of both, valuation sensitive, and there's embedded value in the portfolio to consider.

Q: Doug Harter asked about sizing buybacks and cash flow limitations.

A: Mark explained about cash flow movement through the system, PMIERs and stress testing, and importance of having enough capital.

Q: Rick Shane asked about persistency by vintage.

A: Mark said some is natural seasoning, higher LTV helps persistency, and it's about pricing and industry factors.

Q: Mihir Bhatia asked about EssentEDGE and AI implications.

A: Mark mentioned EssentEDGE's role in getting extra yield, and AI may impact but not a major concern for MI cancellation by borrowers.