Essent .(ESNT) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 2024, the company reported net income of $182 million, an increase from$171 million a year ago, with diluted earnings per share rising to $1.70 from$1.59 [5][10] - The annualized return on average equity was 14% [5] - The default rate on the U.S. mortgage insurance portfolio decreased to 1.72%, down 8 basis points from 1.80% at the end of Q4 2023 [12] Business Line Data and Key Metrics Changes - Essent Re's third-party risk in force was approximately $2.3 billion, up 10$238.5 billion, a 3% increase year-over-year [10][26] - Net premium earned for Q1 was $246 million, including$17.8 million from Essent Re and $15.3 million from title operations [11] Market Data and Key Metrics Changes - The base average premium rate for the U.S. mortgage insurance portfolio increased to 41 basis points, with the net average premium rate rising to 36 basis points, both up 1 basis point from the previous quarter [11] - The trailing 12-month mortgage insurance underwriting margin was 76$5.8 billion, with a new money yield of approximately 5% [28] - The company paid a dividend of $45 million to its U.S. holding company during Q1 2024, with the potential for additional ordinary dividends of$331 million in 2024 [14] Q&A Session Summary Question: What are the expectations for the cures to new notices ratio for the rest of the year? - Management indicated that they expect a return to normal seasonality patterns, with more cure activity in the first half of the year and a modest increase in defaults in the second half [60] Question: How does the company view the current vintage in terms of risk? - Management is comfortable with the new writings, noting that while the current vintage may carry slightly higher risk, they are being compensated adequately from a pricing standpoint [81] Question: What are the company's thoughts on capital distribution and potential opportunities? - Management emphasized a measured approach to capital distribution, balancing between returning capital to shareholders and investing in growth opportunities [62][64] Question: How does the company view the impact of student loans on credit? - Management has not seen student loans as a headwind, noting that they can differentiate borrowers with student loans from those with personal loans using EssentEDGE [83][95] Question: What are the risks from an external perspective for the company? - Management acknowledged that unemployment is a significant risk factor, but emphasized the company's resilience and ability to manage through economic cycles [99][100]