Enact Holdings, Inc.

Good day and thank you for standing by. Welcome to the Q2 2023 ENAX Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press TAR 1-1 on your telephone. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press TAR 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Daniel Kahl, Vice President of Investment Relations. Please go ahead.

Thank you, and good morning. Welcome to our second quarter earnings call. Joining me today are Rohit Gupta, President and Chief Executive Officer, and Dean Mitchell, Chief Financial Officer and Treasurer. Rohit will provide an overview of our business, our performance, and progress against our strategy. Dean will then discuss the details of our quarterly results before turning the call back to Rohit for closing remarks. We will then take your questions. The earnings materials we issued after market closed yesterday contain our financial results for the quarter, along with a comprehensive set of financial and operational metrics. These are available on the investor relations section of the company's website at www.ir.inexmi.com. Today's call is being recorded and will include the use of forward-looking statements. These statements are based on current assumptions, estimates, expectations, and projections as of today's date. Additionally, they are subject to risks and uncertainties, which may cause results to be materially different, and we undertake no obligation to update or revise such statements as a result of new information. For a discussion of these risks and uncertainties, please review the cautionary language regarding forward-looking statements in today's press release, as well as in our filings with the SEC, which will be available on our website. Please keep in mind the earnings materials and management's prepared remarks today include certain non-GAAP measures. reconciliations of these measures to the most relevant GAAP metrics can be found in the press release, our earnings presentation, and our upcoming SEC filing on our website. With that, I'll turn the call over to Rohit.

Thanks, Daniel. Good morning, everyone. Our team delivered another very strong quarter in a dynamic environment. We reported adjusted operating income of $178 million, or $1.10 per diluted share, and delivered a 16% adjusted operating return on equity. Insurance in force grew 9% year-over-year to a record $258 billion, driven by new insurance return of $15 billion and elevated persistency of 84%. During the quarter, we delivered solid new business production, disciplined growth in our insured portfolio, favorable credit performance, Continued acceleration in investment income and expense efficiency. We remain confident in our strategy as well as the strength and stability of the private mortgage insurance business model. While the macroeconomic environment remains uncertain with elevated inflation and heightened borrowing costs, the labor market has been resilient and household balance sheets are healthy. We continue to see evidence that manufacturing quality in the mortgage industry remains strong and that despite ongoing challenges to affordability, credit risk remains within our risk appetite. In addition, looking beyond housing, research indicates that serious delinquency rates for prime borrowers are at or below pre-pandemic levels across consumer sectors. Overall, we remain constructive on the long-term outlook for housing as well as the demand for mortgage insurance. low housing inventory, and first-time homebuyer demand are likely to continue to support home prices, and MI will remain an important affordability tool to help buyers qualify for a mortgage. As higher interest rates have affected mortgage originations, elevated persistency has continued to act as a counterbalance, supporting insurance-enforced growth. Pricing on new insurance written remained constructive during the quarter, and we observed increased pricing on new insurance written in the market. We increased our price on NIW in response to continued macro uncertainty while continuing to onboard the right risk for the right price. The credit quality of our insured portfolio remains strong. The weighted average FICO score was 744. The weighted average loan-to-value ratio was 93%, and our layered risk was 1.3% of risk in force. Our delinquency rate was 1.9%, even with the first quarter of this year, and consistent with pre-pandemic levels. The loss ratio in the quarter was negative 2%. Continued strength in the labor market and household balance sheets, as well as our loss mitigation efforts, helped drive cures above our expectations. And as a result, we released $63 million of reserves. We continue to take a prudent approach to loss reserves and believe we are well-reserved for a range of scenarios. We continue to operate from a position of financial strength and remain well-capitalized relative to our regulatory requirements. PMIR sufficiency at the end of the quarter remained robust at 162% or $2 billion of sufficiency. and 90 percent of our risk in force was covered by credit risk transfers. Earlier in July, we announced our first quota share reinsurance agreement with a broad panel of highly rated reinsurers. This agreement builds on the success of our CRT program and reflects our ongoing commitment to pursue high-quality new business while driving capital efficiency and minimizing credit risk volatility. We also continue to allocate capital in keeping with our balanced approach and three pillars, supporting our policyholders, investing to enhance and diversify our platform, and returning capital to our shareholders. I'll focus on two of those pillars here. I'll start with capital returns. Given the strength of our balance sheet, the stability of our cash flows, and our continued confidence in the business, we have increased our capital return guidance for 2023 to $300 million from $250 million. As we announced previously, we increased our quarterly dividend 14% from 14 cents to 16 cents per share, and the first dividend at that level was paid during the quarter. Additionally, we repurchased $41 million in stock during the second quarter, and through July, we have substantially completed the original $75 million share repurchase program. With that said, I'm pleased to announce that the Board has authorized a new $100 million share repurchase program. Dean will provide additional detail on our capital return plans shortly. I will now turn to investment in the business. We seek opportunities that will create long-term value by growing, extending, and differentiating our platform, supported by our deep expertise in mortgage insurance. I'm pleased to note that during the quarter, we successfully launched an act re, a reinsurer that expands our franchise to access to new business opportunities that are expected to create shareholder value over time. An ACRE is a long-term growth opportunity that provides us with capital-efficient access to the GFC credit risk transfer market. Having received approval from Bermuda Monetary Authority, the GFCs, and an A-minus rating from AMBEST, an ACRE has participated in two Fannie Mae CRT transactions and one Freddie Mac transaction since launch. The attractive risk-adjusted returns and strong underwriting we have seen from these transactions reinforce our decision to enter this market. In addition, we executed a quota share arrangement with Emoco to provide scale for Anakri's A- rating. Importantly, we have intentionally structured Anakri to preserve Anak's dividend capacity, and as you can see from our decisions to increase our guidance, for total capital returns this year to $300 million and the authorization of a new share repurchase program, our commitment to returning capital to shareholders remains strong and well-balanced with our growth initiatives. Led by an experienced leadership team and board, the launch of an Act Re leverages our industry expertise analytic capabilities, and operating infrastructure, and is aligned with our commitment to drive compelling returns and create value for our shareholders. I will now turn it over to Dean, who will cover our performance in detail and will have more to say on Enact-Re in a moment.