Enact Holdings, Inc.

Q3 2021 Earnings Conference Call


spk_0: ladies and gentlemen this is the operator today's conference is scheduled to begin momentarily until that time your lines will again be placed on music hold thank you for your patience
spk_1: the earth
spk_2: hello and welcome
spk_3: what are you all these nearby that today's topic is the record it our allies the job market over to your post paper today during a call by side with it other that the elation he may begin
spk_4: thank you and good morning everyone welcome to our first earnings call as a publicly traded company joining me today a row had good to president and chief executive officer and dean mitchell chief financial officer and treasure rohit will provide an overview of our business or performance in a corner and progress against our strata eg dean while then discuss the details of our third quarter performance before turning the call back to rohit are some closing remarks
spk_5: after prepared remarks
spk_4: we will take your questions the press release reissued after close yesterday contains an axe financial results for the third quarter twenty twenty one this release and a comprehensive set of financial an operational metrics are available on the investor relations section of the company's website at www dot i r dot enact emi dot com under this section marked quarterly results before we begin i would like to remind everyone that today's call is being recorded and will include the use of forward looking statements these statements are based on current expectations estimates projections and assumption as of today's date are subject to risk and uncertainty which may cause actual results to differ materially and we undertake no obligation to update or revise any such statements as a result of new information each or events or otherwise for discussion of these risks and uncertainties please review the cautionary language regarding forward looking statements in today's press release as well as and our filings with the fcc which are also available on our website also please keep in mind the press release the quarterly financial settlement in management prepared remarks today includes certain nine gap measures reconciliations of these measures to the most relevant gap metrics can be found in the press release our investor presentation and our upcoming quarterly finally know
spk_6: on our website
spk_4: with that i'll turn the call over to run it
spk_7: and daniel and good morning everyone i'm excited to welcome you to our first earnings call falling over successful like were in september the ip a was a significant milestone for an act that provide the launching boyd as he came to realize the full potential of over business and acts started selling mortgage insurance in nineteen eighty one with a clear mission to help people buy houses and stay in their homes and be have never wavered and that mission to l are strong relationships with mortgage lenders underwriting excellence and commitment to boot and risk and capital management we have grown into one of the leading private mortgage and children's companies in the us are operating in all fifty states and dc following or success will i view in september we are better position than ever given by a number of factors including deep customer relationships we serve over eighteen hundred active customers across the mortgage origination market including all of the top twenty mortgage originators and provide them with a compelling value proposition including competitive pricing guidelines a best and lot and writing platform and other tools and support to help them achieve their growth objectives we have food and manager the risk we utilize a proprietary approach that ensures the underlying credit quality of were insured mortgage portfolio is aligned with our risk and profitable the framework and we have further strengthen our risk management efforts to the actions we have taken to transfer risk from our balance sheet which we believe elon hands of a return profile and reduce one wollaton the in losses at what time today over ninety percent of a risk in force is covered by a lot credit risk transfer program of an executive team is second to none with an average of nearly thirty years of experience and a proven track record of delivering results to the cycle complemented by the right combination of skills to drive over long term success finally and importantly dynamic than our market demand very strong as a combination of low interest rates robust housing prices demand for homeownership and favorable demographics create a favorable environment for purchase origination despite a tight housing market the number of first time homebuyers budgeting homes remained robust in the first half of twenty twenty one and they use hi loan to value products more than eighty percent of the time and becoming homeowners over the next five years and additional one point five million people above the existing grand are expected to reach be first time homebuyer age which we believe will expand the first time homebuyer market even for them these dynamics were evident in the third quarter mortgage origination activity the main robust fueled by strong home sales and refinance activity total unsold inventory of single family homes remains low had a two point six months supply as of august twenty twenty one this continues to drive home prices higher increasing other average loan amount on new insurance written at the same time historically low interest rates continue to serve as an offset to rising prices which allows for continued affordable deeper borrowers finally refinance activity demand robust compared to second quarter of twenty twenty one but degrees compared to the third quarter of twenty twenty as a public company with an improved ratings profile we a better position to both start doing business with new customers and defend and go share with our longstanding customer relationships by leveraging our best and lot and writing platform and customer so it's going forward we will leverage of strands to advocate you'd against a clear growth strategy designed to for the different she had an act generate stronger don't want our shareholders and maximize value creation this strategy is based on an informed cycle tested approach that has allowed an act to outpaced industry average insurance and force growth over time we will have as our principal focus to continue to write profitable new business supported by our differentiated value proposition and the ongoing bother them out market backdrop we remain committed to deepening existing relationships and developing new ones by offering our customers are differentiated value proposition and and expediency led to their needs as part of this we plan to continue to invest in areas such as machine learning modeling and data solutions that will increase our defense the asian drive greater efficiency and and of a decision making we will also continue to focus on protecting other balance sheet and earnings profile by maintaining strong capital level robust underwriting standards and managing risk wire or via our propriety risk assessment and pricing tools and our credit restaurants or program we will also stay dedicated to maximizing value creation to a balanced capital allocation approach that supports our existing policy holders invest to grow the business as i just mentioned and returns capital to shareholders been built up provide more color on our current pause in this area shortly overall our focus remains on balancing growth but generating strong return for our shareholders and we're very pleased with our production and performance shifting now to the quarter been will cover our results in more depth in a few minutes let me start with them highlights this was another very strong quarter and we are proud of our performance which was driven by a combination of our positioning in the market and competitive advantages the successful execution of our strategy and ongoing favorable market dynamics adjusted operating income was hundred thirty seven million dollars or eighty four cents per diluted share compared to hundred thirty eight million dollars or eighty six cents per diluted share a year ago adjusting for twenty twenty debt issuance interest expense this of the highest adjusted operating income give achieve since the beginning of the pandemic reflecting gotten our insurance and force as week on he'd right size of a new books lord delinquencies as a result of the ongoing economic recovery and prudent expense management
spk_8: offset partially by law premium rate
spk_7: insurance and force rose to two hundred twenty two billion dollars in the quarter of while new insurance written remain strong at twenty four billion dollars we are committed to building other book with the right business that properly balances risk and reward and quantity to do so in the third quarter with business priced at low to mid teens returns we continue to manage risk and drive operational excellence resulting in a four hundred basis points reduction he had over year in our loss ratio our risk management efforts have resulted in a high quality credit portfolio with a weighted average vical of seven hundred forty one an average loan to value ratio of ninety three percent the finish the quarter with a very strong balance sheet including a sufficient the to pee myers published standards of two point three billion dollars or hundred eighty one percent this is the highest level of sufficiency bought our business since the inception of the standard and enhances the flexibility be have to pursue lower capital allocation goals including returning capital the shareholders wire dividends as dean will discuss shortly they increased grant of our business falling over i peel was recognized by the credit rating agencies and be deceived upgrades from fitch moody's and snp following the transaction these with meaningfully enhance our ability to pursue your new business from customers sensitive to credit rating and we have already begun to see new traction as a result that we expect expected you to bend over time i'll note on the call over to been to discuss drivers of have a cold water performance in more detail
spk_4: thanks bro hit a good morning everyone let me begin by also taking the opportunity to welcome everyone to our first earnings conference call this is a very exciting time for a nap now look forward to working with are you going forward as rohit mention we delivered another very strong quarter of financial results yeah that income for the third quarter was a hundred thirty seven million or eighty four cents per diluted share as compared to eighty cents per diluted share the second quarter or twenty twenty one and eighty five cents per diluted share the third quarter twenty twenty adjusted operating income was also a hundred thirty seven million or eighty four cents per diluted share in the quarter as compared to eighty two cents per diluted share in the second quarter a twenty twenty one and eighty six cents per diluted share the third quarter of twenty twenty in terms of key revenue drivers new insurance written was twenty four billion during the quarter compared to twenty six point seven billion in the second quarter twenty twenty one twenty six point six billion in the third quarter twenty twenty new insurance written for purchase transactions made up eighty eight percent of our total and i w in the quarter up from seventy nine percent last quarter and seventy five percent in the third quarter twenty twenty in addition monthly payment policies represented ninety percent of our new insurance written in the quarter as compared to ninety three percent last quarter and eighty eight percent
spk_9: the third quarter a twenty twenty
spk_4: insurance and force at two hundred and twenty two billion increase two percent from second quarter levels and ten percent from the third quarter a year ago the year over year increase was primarily driven by new insurance britain partially offset by elevated laps associated with the prevailing low interest rate environment as of the third quarter or twenty twenty and twenty twenty one book years represented approximately two thirds of our total insurance and force indicative of the large market opportunity and commercial success we've had a consecutive years
spk_9: risk force a quarter and was fifty five point nine billion up from fifty four point six billion last quarter and up from fifty one point four billion in the third quarter twenty twenty primarily as a result of growing insurance portfolio
spk_4: persistency for the quarter was sixty five percent increase from fifty seven percent last quarter and fifty nine percent in the third quarter twenty twenty the increase in persistency was primarily driven by a decline in the percentage of our enforce policies with mortgage rates above current rates total revenues for the quarter were two hundred and eighty million compared to two hundred seventy six million last quarter and two hundred eighty four million in the third quarter twenty twenty net premiums earned were two hundred forty three million flat to the prior quarter and down three percent compared to the third quarter twenty twenty or net premium rate of forty four basis points was modestly lower sequentially driven by malley by lower single preening cancellations that was down six basis points year over year due to a combination of lower single premium cancellations i are seated premiums and the last of older higher price policies and pick as compared to our new insurance rate importantly the current market and underwriting conditions including the mortgage insurance pricing environment is well within our risk adjusted return appetite nailing us to write new business and attracted loaded the team returns turning the losses losses were thirty four million in the quarter as compared to thirty million last quarter and forty four million in the third quarter twenty twenty the sequential change losses was driven by seasonally hire new delinquencies by the year of a year the conte losses were driven by lower new delinquencies at academy continues to improve this is
spk_9: partially offset by favorable ib in our development in the third quarter twenty twenty
spk_4: thirty six percent of new delinquencies in the color were subject to a forbearance plant which reflects the lowest concentration of new delinquencies in forbearance plants to start of a nineteen our claim rate a new toy quincy's for the quarter with eight percent consistent with the claim rate for new delinquencies over the first half of twenty twenty one as reflected on slide twelve of our investor presentation we reported approximately seventy four hundred new delinquencies in the quarter which was less than half of the new delinquency level seen a year ago new delinquencies were up approximately eight percent sequentially driven by seasonality for the quarter or new i could see rate of zero point eight percent is consistent with free pandemic levels of development is indicative of the ongoing economic recovery on the same slide we've included a view into the ever to date your performance of cabin nike new delinquencies or those the delinquency since april of last year to date approximately eighty six percent eighty one percent and seventy six percent of delinquencies from the second third and fourth quarter respectably of now cured these came at a cure rates have continued to increase to time and may accelerate as borrowers reach completion of their or barents plan terms or third quarter total doj quincy's of approximately twenty nine thousand and the associated delinquency great a three point one percent reflect the fifth consecutive quarter of improvement in both measures driven by the continuation of cures outpacing the delinquencies we made no changes in the third quarter to aggregate reserves and prior delinquencies we continue assess the resolution of coven nineteen delinquencies with a focus on the approximately fifty six percent of our delinquencies subjective forbearance plans as we consider the appropriateness of our loss reserves everytime at present or loss reserves reflect our best estimate of ultimate claims on our total delinquencies lastly the of that it equity position of are delinquent policies is substantial with approximately ninety seven percent of our delinquencies having an estimated ten percent or more mark to market equity using an index date house price assessment
spk_9: we believe is embedded equity can serve as a potential that to get both to the frequency of claim as well as a potential future loss for delinquencies the ultimately progressed claim
spk_4: turning to expenses operating expenses were fifty nine million and expense ratio twenty four percent in the quarter as compared to sixty seven million and twenty seven percent respectively in the second quarter of twenty twenty one this was driven primarily by lower corporate overhead associated with the execution of the shared services agreement with our parents get our financial and lower strategic transaction preparation cost and restructuring costs in the current quarter compared to the second quarter twenty twenty one operating expenses are materially flat you have a year in addition to operating expenses the third quarter of twenty twenty reflected about half of the approximate thirteen billion quarterly interest expense given the timing of our debt raised in august of last year during the capital and liquidity we are committed to maintaining a strong balance sheet ally with our investment grade rating as rohit mention of humor sufficiency increase to one hundred eighty one percent are practically two point three billion above the publish be marsh requirements baird one hundred sixty five percent in one point nine billion in the second quarter twenty twenty one on the sequential unproven mp marse efficiency was driven in part by the completion of an insurance like know transaction which added approximately three hundred seventy million of the mars capital credit as well as elevated laps from prevailing low interest rates trump is as cashflows and lowered delinquencies these drivers were partially offset by the significant amount of and ideally rather than a quarter and the amortization of existing reinsurance transactions as a quarter and we had approximately one point six billion a p mars capital credit nebraska one point eight billion of last coverage provided by our credit risk transfer program which provides cost efficient be mars capital and reduces future lot of volatility by seating rest to both traditional reinsurers and the capital markets rpm are sufficiency includes the benefit from the thirty percent multiplier for covered nineteen related delinquencies which reduce p mars required assets by approximately five hundred seventy million before getting a factory insurance benefits the benefit from the thirty percent multiplier had declined over the past four quarters as more covert nineteen related delinquencies resolve and years turning more broadly to our balance sheet a quarter and or gap equity was four point two billion best assets totaled approximately five point four billion cash and cash equivalents were parks are approximately four hundred fifty million long term debt with seven hundred forty million in our debt the capital ratio was a conservative fifty
spk_10: nine percent
spk_4: combined with rpm are sufficiency levels these metrics demonstrate why we're confident in the strength of our balance sheet to support our business go forward and deliver value to shareholders or insurance financial strength ratings were recently operate graded as a result of are successful i feel each of smp moody's and fitch upgraded the insurance financial strength rating of gem ago our flagship mortgage ensure by one or two notches in recognition of the enhance governance and access to capital we now possess each rating agencies rating an outlook is reflected on fly fourteen of the investor presentation the regards to our capital allocation strategy we will continue to pursue a balanced approach that maintains a strong balance sheet pursues investments to enhance our business prospects and returns excess capital to shareholders as it relates to a potential twenty twenty one dividend will continue to assess the economic and business conditions including the right solution of forbearance related to a quincy's in support of distributing a fourth quarter dividend shareholders to date this review has been supported if this remains the case we intend to recommend a two hundred million dollar twenty twenty one dividend during the fourth quarter to the board or it's approval oh now turned the call back of the rub hit for closing remarks
spk_7: and the before turning it over for your questions i'd like to provide some thoughts on the current regulatory environment in washington dc be gone he to advocate for they expanded use of private mortgage insurance among policymakers and washington we actively work with capitol hill the administration regulators housing finance grade groups and consumer advocates to develop solutions that achieve the shared goal of increasing the accessibility affordability and sustainability of homeownership we have found a great deal of consensus and on these principles and are encouraged by the recognition of the rule replay particularly for the first time homebuyers and the housing finance economy at an act we are proud of the big will be in helping families achieve their dreams of owning a home and create and creating a bad for them to build belt to homeownership
spk_11: let me leave you with few good key dig of is on flights sixteen
spk_7: we're very pleased with our performance given by were strong execution and against the market backdrop that remains favorable and i produce another very strong quarter the at a market leader with the right solutions and a highly experienced management team and we have successfully executing against a strategy that will drive growth manage risk and generate stronger dance none of this would have been possible without the hard work and dedication up over employees and i want to thank them for their continued commitment working together we believe that we are well positioned for continued growth and value creation as a fulfill our vital role in helping people achieve their homeownership goals a lot on the called back to the operator to take us into q any operator
spk_0: at this time i would like to remind everyone it's not like to ask a question please fresh die than the number one on on the telephone keypad yeah for question comes from a line of rich saying with jp morgan
spk_12: thanks guys for taking my questions that sworn in on look at i think it interesting thing that's occurring right now is the migration through default you ah payment and i'm curious when you look at the metrics and we're sort of in this unprecedented time time and the impact of forbearance it is it do you think at this point that payments are monsters are simply been deferred or is there increasing indication that we're going to see much lower migration and that losses are actually going to be averted
spk_4: yeah rick eight dean town thank you very much for the question good question at let me just start with kind of the trains that we are seeing and dovetail that into a little bit of the forbearance first of all our forebears trans show that newly reported forbearance has continued decline and that's really happening at the economy continues to improve and then to your perspective total delinquencies and and or including delinquencies and forbearance or that are declining as que urs continue to outpace new delinquencies you know argue has been
spk_9: pretty consistent three this that we believe the wake with these and in forbearance and that represents over half of our total a delinquent inventory a date they make your it an elevated rate and they make they may do that for really two reasons i think forbearance gives borrowers a time time to reestablish their financial footing
spk_4: in addition of forget forbearance gives borrowers more options to cure and that includes payment deferral and our experience to date as payment deferral which is really and a new loss mitigation tool as part of the pandemic it's accounted for a most of the forbearance exits that we've we've seen the day it's running at about four x clip relative to a workout but you know i think we continue to kind of that a assess how those remaining forbearance his are gonna play out ah as they progress towards their their torque term completion completion rather as we assess really the most likely of outcomes but the date are assessments been really consistent with our initial assessment when we when we applied a claim rate expectation at the initial delinquency and again much like i said i think that the hey as an important assessment as it relates to for bad because of the the high concentration that they represent our overall delinquent population so i'd i gotta go back that the to the comments we made at the beginning this pandemic that we do expect those two a to resolve at a at an elevated a cure rate and and that remains the case today
spk_12: terrific and if i could just ask one last question on can you to sort of walk through to persist and see on a monthly basis because we've seen a lot of fluctuations in interest rates and it's high you can talk about sort of what you saw during the third quarter perhaps ah even an update as we enter or the fourth quarter and month it
spk_4: yeah i are are persistency at ticked up much like you saw
spk_9: you know as and i think interest rates quite frankly remained pretty depressed throughout out the quarter they only really ticked up above three percent at the end of september so we attribute the uptick in persistency really as a reduction a lowering of
spk_4: the amount of opportunities for ah refinance so fewer and fewer of are in force policies have interest rates that are above the prevailing market rates as come down pretty meaningfully year over year and so i think that's really the driver of persistency changes but the or and year and and quarter over quarter or basis i think what use you saw was a little bit of up a mixed bag throughout the the quarter itself go on you know july persistency was probably at it's highest and it marginally came down or august through september but you're really and pretty small numbers are the range is pretty tight there's about three points of persistency differences within the corridor within the months with in the corridor
spk_13: so
spk_7: you know not a y la there is some variation not a wide variation month a month to month with in the quarter erectus is roid the one thing that i would add to the insert first comment on persistency is that there is a direct correlation with the opportunity in our portfolio going down in terms of number of consumers who still have mortgage oh let's say about fifty basis points lot a prevailing market rate in addition to that the reason interest rate increase at least in the month of october up would lead to a higher persistency also that historical correlation continues to exist
spk_12: great hey guys thank you for taking my questions and i just want to acknowledge there's been a tremendous amount of work ah to get you guys to this point where we're all having this conversation ah and the poor to continually guy floor
spk_14: thanks ray
spk_0: your next question comes on the line of vows do with k kbw
spk_15: he ain't good morning am also my congratulations on your first quarter is a public company am i so wanted to his first as just about am in the dividend just when explore that a little more right out like the end of the second quarter years surplus and looks like it's over two hundred million sell been on it allows for the dividend this year but didn't you but how you think the surplus will trend in twenty twenty two and in are you likely didn't need to request a special dividend to be like you want to keep the didn't disabuse and similar next year you know the plan to try and maintain a similar run rate red assuming in a market conditions permit that
spk_8: i both this is right thanks their gosh and great questions so i'll start up other thing that that it my prepared remarks we look at a balance capita allocation approach that supports our existing policy holder those invest to grow the business and then returns capital the shareholders so capital return to share order is going to be a key aspect of this
spk_7: linda capital i'll get allergy and when asked them to just give you more than are on board the fourth quarter of david and and out the way we think about longer done they done of capital
spk_16: yeah so
spk_4: those percy eight the question i think you know you if you rightly point out or unassigned surplus stands at just over two hundred million dollars at the end of the third quarter are our total policyholder surpluses that and access other a billion and a half so after the two hundred million dollar dividend assuming we
spk_17: we we execute that in the fourth quarter for the moment unassigned surplus does come down i would expect that we would be working collaboratively with ah north carolina department of insurance are domicile or airy a regulator
spk_4: come on any future a capital returns ah and it's you know it's likely after it a two hundred million dollar dividend the unassigned requires us to go back and and seek their approval for dividends beyond twenty twenty one
spk_15: okay great that's helpful but but the at the expectation we would you would like to do sort of maintain at that level going forward assuming you can if that in the market conditions allow and you can work the regulators on that
spk_4: yeah i think it alert near term we're focused on the fourth quarter dividend at our assessment has really focused on the resolution of forbearance is and making sure that they're resolving in line with our original expectations you know that assessment has been supported the date of a fourth quarter dividend at that really
spk_18: means the case
spk_4: in a we would expect that we'd be making a recommendation to the board for a two hundred million dollar twenty twenty one dividend out later this quarter i think really honestly our focus
spk_17: those on the medium term is really around the potential initiation of some dividend policy you know as you know we launched our ip oh without a stated dividend policy but we we gave guidance that you know assuming business and economics
spk_4: conditions remain on the current trajectory that we could initiate a regular common dividend his earliest wait wait to sell were continued to make that assessment on a business trajectory as well as economic recovery
spk_17: and that's been kind of more of our focus in the in the medium term i would say you know the oh it will not going to give a dividend guidance on this call i think a know maybe giving you some historical perspective on what we've done
spk_16: dividend wise could could just let you give you some inform your view on how we thought about this in the past so if you look back to our two thousand and nineteen a dividend which was obviously done on a pre pandemic basis with dividend it about a lot two hundred fifty million dollars and if you look at that on a dividend payout ratio
spk_4: i think that with pride take your upwards that forty five the high forty percent dividend payout ratio i think that just gives you some historical context
spk_13: on how we've thought about dividends in the past if you want to or if that might help dimension
spk_4: you know are are are kind of perspectives are looking backwards
spk_15: okay great that's very helpful thanks and then just one of the quick one just on the operating expenses going forward he should that be more like a low fifty million dollar number three in a pulitzer some unusual items
spk_4: yeah so i think you know we had expenses of fifty nine million and expense ratio twenty four in the quarter i think we talked about the favorable various prior quarter being driven largely by corporate overhead reduction in corporate overhead as result of the excuses shared services agreement and then we called out specifically
spk_17: three million dollars lower of
spk_4: strategic transaction preparation costs as well as restructuring costs so i'd say you know taken a fifty nine million down that gets you to fifty six million if you simply exclude the three million of against rent strategic transaction and and restructuring i think you know as you as you think about that on a on the gulf war were bases we haven't caught provided expensive premium guide it so not going to get into specific pro forma expense dollars or ratios but i do think we can talk in terms of expense drivers to give us a jerk a directional sense first of all with we're not going to have the cost associated with those are two things at the transaction preparation costs as well as restructuring the on twenty twenty one so that's going to decrease the run rate heading in the twenty twenty two but we're also still in the process of standing up other company activities and that is going to have cost associated with it that's going to serve the increase our run rate on expenses really especially in the in the short term and then lastly like we talked about the shared services agreement does cat corporate overhead ah and codified a reduction in that corporate overhead the getting and twenty twenty three about five million dollar reduction annually twenty twenty three to twenty twenty five nazca serve the decrease are you know kind of run rate of expenses over the medium the longer term to i hope i hope that provide some time taxed on expense drivers and and were that might go go forward some okay great that's very helpful thanks mike
spk_0: expos get your next question cause an online of dog harder with credit suisse
spk_19: thanks i was hoping you could talk about that a competitive dynamic and in the industry during a quarter and and kind of how you view ah relative price competition today
spk_7: thanks doug have a good question so we believe overall their my market as competitive yet constructive and our it dawns remain within our risk adjusted it on appetite ah the hell the am i industry dynamics have also enabled us to continue to write new business in a large market at attractive low to mid team returns and third rough twenty one are and a band of the day we had an experience and writing company and we are going to focus on charging the right price for the right ready to drive value for our shareholders input qualified borrows into homes so we find the general narrative constructive as we think about our participation in the market
spk_19: an egg of as as we look forward to that could twenty two and as that the total size of a of the market
spk_12: and would likely to have to be smaller ah yeah i guess how to add you think that that factors in turn it into the the relative competitiveness of the market
spk_20: as so doug very good question that as we think what originations market one thing i would point to just looking back is there has been a transition and the origin asian market this and itself so if you think about market dynamics that and play in low interest rates robust home prices and then obviously ah that driving some by
spk_7: islands and housing affordability ah why we gone he to see a shortage of housing supply but we believe that third quarter origination market was still over one trillion dollars and this was the fifth quarter of far origination market being at that number but within the one trillion dollar up originations we did start seeing a transition to purchase origination in twenty twenty one compared to twenty twenty so that is a good dynamic what our industry that even though origination market might be declining given the penetration private mortgage insurance industry has and watch as market relative to refinance market which is almost four times so out of every hundred bucks
spk_8: once we get four times more private am i loans then hundred refinance loans that is going to be supported even moving forward on so difficult to provide a guidance on origination market size of this point cause that's partially tied to our interest rates interest rate projections and future but i would say given the strand top or
spk_7: originations market and within that purchase market and first time homebuyers fueling that ah increase or the are optimistic about the size off and my market been very strong or in the foreseeable future
spk_19: great thank you
spk_0: if
spk_19: the next question comes on line of jeffrey done with falling and partners
spk_12: thanks the morning get i can you a reference the the relative new notices around eighty base points of quarter
spk_19: i will i wanted to see what are your thoughts on how to think about noticed development going for it as a forbearance on i've noticed basis as increase my behind us
spk_21: but as you noted to thirty or bought is twenty twenty one and you're gonna start hitting that that picks evening maybe feet up and a twenty two twenty three at least on the twenty block are coming into coven it about like something in our into sixty eighty this points
spk_12: you might have been caught a cold normalized but how do you think about development from here given such a young concentration
spk_4: and considering the credit environment that that we've been experiencing that matches your this year but an asshole years yeah yeah thanks for the question good question
spk_17: you know i i would characterize credit performances got really continue into trying favorably lot of the things you just kind of pointed out the less the alicia start with the corridor
spk_4: in a loss is up
spk_17: the thirty four million versus thirty million prior quarter or that was really driven by a seasonal increase in new delinquencies a know we think typically about the transition from the second or third quarter is somewhere in the ten to fifteen percent
spk_9: ah increase in new notices it we saw a percent bbq and so generally and lie maybe modestly favorable to normal seasonality i think it's important as well did you notice to reference that the the that the nude new doubt great is ah at pre pandemic levels you know the point eight percent that you reference i think that does reflect the overall economic recovery that underway in addition to that years continue to outpace new delinquencies this is the fifth quarter in a row where where that's happened and then you know lashley new
spk_4: to wake with the subject of forbearance ah are at their lowest level since the start of the pandemic and again i think it's another side of the ongoing economic recovery the last thing off point to a gap as we just think about the trends and what could impact them go forward is you know given the rise and eight pm ninety seven percent of our delinquencies have an estimated ten percent or more mark to market equity we think that you know is as in terms of the resolution have our existing delinquencies we believe that in hat serve as a potential that the both the frequency and severity a queen
spk_7: i think when you put all that together and i know i combined new notices and and the resolution of existing a delinquencies but i think it all adds up to credit transit are heading in the right direction as we transition into the queue for a timeframe and this one of thing jeff a lot of teams left on new notice events in the current environment as we have seen over the last eighteen months the forbearance program that was designed for this pandemic has been unique and has it has it's own impact on you notice as big i'm from a consumer prospective their the they that they little downside and actually participating in that program for that program comes to an end you will stop seeing a normal behavior from consumers and turns off they go to link when when they are in financial stress of some kind whereas getting the pandemic some of those are numbers have had noise
spk_22: and then because we saw performing consumers going to the forbearance and then keep making payments but that's another dynamic that will be in position as he come out of the pandemic
spk_0: okay thanks
spk_23: ex wife and exercising caution online ryan mess with goldman sachs
spk_24: hegemonic i've done that iraq or the other comments and graduations on a yeah successful ip out
spk_23: am we thought that maybe just cut to start a you know robert you talked and the slides about in their ratings upgrade should continue their an answer add a position he may be just
spk_7: spend on that comments how you think this could potentially support new business when the markets or games over time yes run thank you for your question very good question so ah as we talk about that during our i feel we have operated done on somewhat of a on level playing field in the past especially with customers who are sensitive to credit ratings also think about the customers being depository institutions typically that what portion of their loans and their portfolio fall of a problem national banks regional banks community bank them credit unions are and either for governance reasons or for ratings reason of our share in that segment of the market has been depressed or or the past four years or so so since our ideal and since we got rating upgrades from fetch movie than snp
spk_8: we have had very constructive discussions with that segment of the market of those that's a customers and be gone he to make very good progress and v would anticipate that incoming time in the next down he waters we would stop seeing the benefit of that in our our production run rate so we are seeing a x bomb progress in line with our ex
spk_23: a patient than i would say that i'm heading in the right direction gotta let me a thought that one of the questions about that before
spk_8: you're in a you mentioned several times in the percentage of the for that policies about current rates just a fat fat how that has trended of the last quarter's where it stands m m m lucky that mean for the go forward persistency a particularly if we continue to see in our interest rates rising in the common quarter thanks ah absolutely ryan so ah i think the dynamic that he talked about was simply that in our insurance and force as forces as policies have lots the policies that are now of fill in the money in terms of being able to refinance has gone he to be lore as well as we're writing new books of you notice in today
spk_7: water with interest rates hovering below three percent the that it's just that was less portion of our policies exposed to a higher chances are flat are and i would say add that continues to happen you will just the persistency take up in our portfolio as long as the prevailing interest rate in the market are higher than what
spk_23: our consumers in our portfolio have on their policies so that phenomenal will play out just like it plays out historically
spk_0: gotta pick something microsoft
spk_25: if and give
spk_4: your next question comes on the line of ryan gilbert would be t i d i effects are one the morning my my first crush ashes on a on the payout ratio and and denied a procedure your commentary there on just by you know broadly as it's hard to think about eight i guess it may be a forty to fifty percent payout ratio as the sort of number diet that this business can support in a on an overall i'd good housing housing market
spk_26: yeah right thanks for your question yes so again i wouldn't i didn't give that two thousand and nineteen
spk_4: historical experience as per se guidance i wanted to give a car and can as context or how we previously thought about dividends
spk_11: in a more stable economic environment which differs then how we're thinking about
spk_7: you know dividends in the in the fourth quarter this year so i would just i just want to make you know make that distinction from that perspective down so right one thing allowed to the didn't comment of absolutely agree that we were pointing to do with other nineteen dividends as having mid forties failed ratio if you look at two hundred million dollars potential limited in fourth quarter twenty one compared to our for three quarters of income run rate you would come up with high parties payout ratio which have like kind of where we are in the cycle into and up recovery from the pandemic to considerations that we would give in terms of sizing for future i did a providing a quantitative guidance first thing we would want to make sure that the have a high degree of confidence in the sustainability of regular common dividend of dimension ah we would think about
spk_25: our kind of putting a regular common dividend policy as early as twenty twenty two so think about that aspect of capital read on having a high confidence from a management and board prospective second in addition to that we would look at our industry landscape at that point of time and they appeared beer dividend yields are at the time and that will help us kind of want by what ocean of over dividend the regular common dividend as well as i know special capital on a either and done the special dividend or share buyback
spk_4: okay that's great really helpful thank you on my second question is on on forbearance exits i think we see and some of the the surveys that on there there's some there's some percentage of borrowers who are actually forbearance that a loss mitigation plan in place i'm wondering if you had any insight or or color and to what your seen in your own delinquency on puck is is it a function of at the bar was not qualify and for for forbearance or at the not just to stop and and have to the surface or or on and any insight would be would be really helpful yeah a good question ryan so on from not from a forbearance perspective in a we've had about a hundred thousand
spk_17: forbearance is in are insured portfolio not all those had been delinquent you know about rough and rough estimates that a third of those have remained current through
spk_4: i'm through through time in the and the remaining have gone delinquent we've seen
spk_9: forbearance exits happen in a lot of different ways about well about a third of those forbearance is have cancelled therefore have the ab actually cancelled or their forbearance the others have exited through either a payment deferral which you know again represents the vast majority of our exit today
spk_17: the retention workouts self cures and then to your point there is there are some some level of forbearance is exiting without work out that represents you know a pretty small percentage of our overall ah forbearance exit set about about two and
spk_9: the percentage of total of those total forbearance is i think the causation is we're still doing assessments on causation or whether that's a timing issue or whether that's our lack of an ability to continue to service the alone in that really goes into what we were talking about as the will bear assessment in advance of
spk_25: of supporting of a fourth quarter given added those types of details that we're working with to get under underneath the hood a little bit more working with servicers to understand what is the causation
spk_0: of exiting without workouts and our what is therefore the likelihood of that potentially of those lines potentially going to climb
spk_27: okay great thanks very much
spk_21: ankara
spk_7: your next i think arsenal might of my here by killing bank of america
spk_21: hi good morning and thank you for taking my questions answered with will add michael machinations i'm competing ya was gonna as a public company
spk_16: or maybe to start just up and when i just make sure i understand what the a capital return up on the dividend that it's speaking about you don't know the dividend of two hundred millions gonna go to the whole go right in the does the whole go have any reason to hold on to that are is the idea that that entire two and a million would then get without the shareholders
spk_8: and what i would like love to go bluebird mon as as how you're thinking of how that britain would be is there any kind of corporate imperative to do a little because of you know general it's needs or whatever to do a little bit more weighted towards dividends was as a buyback
spk_4: yeah the here good question
spk_17: yeah so
spk_4: first of all i would say
spk_17: as relates to are just as your first you're last question first as it relates to dividends vs share buybacks i think in the short term i were were predisposed to a dividends over the longer term i think you know will continue to look at
spk_4: analytics like intrinsic value and where we see dislocation between the share price and the prevailing market value you know we could have a transition to a preference for or share buybacks
spk_7: you know noting that will have to be cognizant of the amount of float we have in the market as well
spk_27: i think in terms of
spk_4: of dividend yeah so i think you should expect the dividend is a pass through to shareholders so i'm coming out of our operating theatre subsidiary into the a whole cow and on to shareholders as are clearly align with aren't that and hopefully align with our communication the day and i were whole god has two hundred ninety million dollars of my
spk_21: the of cash so hardcore doesn't have any reason to hold onto additional cash at that point we have sufficient amount of our resources to service our that for the foreseeable future get other a different of a chapter on that great him up in terms of the of play week for the quarter or i was in a near miss it but it's good for to me that you have assumed for the caught yeah the claim ray the here is our eight percent that consistent with the the first half of the year as well
spk_4: group great and then just the last question i had was just on the forbearance is and up in i appreciate that cause are running higher than a new delinquencies obviously heavily impacted by you know the comic forbearance is that are carrying but maybe just talk about your expectations
spk_16: that the start of the pandemic for what the claim raid on those would be just reminded of that and then how does how where there are we in that process
spk_17: you know like is over the only have five percent of your great thank you
spk_4: yes i'm a haircut good question we haven't differentiated the claim rate between a forbearance is a non forbearance as we talked in the aggregate and or through time we've given the claim rate of the at least two twenty twenty one of eight percent
spk_27: if so again that's the claim ray on both forbearance and non forbearance you know through the assessment of
spk_21: the forbearance is that we're doing you know in part to continue to evaluate our loss reserve adequacy and in part in support of a fourth quarter dividend what we've seen to date is that for forbearance performance is consistent with the original claim great expectations that we sat at the time the delinquency so
spk_7: and that's really the assessment to date we continue the next assessments ongoing and of would continue to evaluate but that is the current the current view
spk_21: on sept and then there's the fact that are so many of been i guess maybe expected of us majority of the from errands and sticky are using them and before rose
spk_28: ah
spk_29: that is is that right and and that can't be used for other really good the right it has to be only for according to legal next other sellers are you guys don't have any a you know maybe it's a great performance out of that and you say that's a novel last mitigation to but that's not actually an option right for any non forbearance delinquency
spk_0: it
spk_30: payment of our lives limited to for variances and payment of her was a new are kind of option last mitigation option created during the pandemic itself got it and they expect and the we've been used as the line with expectations
spk_8: that's right
spk_7: other with think you are the thanks
spk_8: like there
spk_7: and next question comes on the line of aaron saigon of it with city
spk_0: and i'm just would would like to hear that from my competitive dynamics around credit underwriting things done that most folks were gonna managing their risk through higher pricing after the pandemic and in your credit stats are from the from new insurance or it look pretty
spk_7: steady over the past two years as is is there any signs of any of your competitors are and credit and heard that all
spk_0: iran very good question so what i would say is that granted box has been pretty tight driven by the implementation of qualified mortgage rule back and not two thousand and thirteen fourteen time frame

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