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spk01: Good day and thank you for standing by. Welcome to NX First Quarter 2024 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session and instructions will be given at that time. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Daniel Cole, Vice President of Investor Relations. Please begin.
spk04: Thank you and good morning. Welcome to our first 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 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 our website. 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 actual 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 finalings 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. Reconciliation 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.
spk06: Thank you, Daniel. Good morning, everyone. Our first quarter results marked a strong start to 2024. Our insured portfolio continued to grow. We operated with the expense discipline. Credit performance remained robust and we distributed more capital to shareholders through dividends and share repurchases than in any prior first quarter. The strong performance is a result of our commitment to our strategy, our strong position in the market, and our focus on driving long-term value creation for our shareholders. Our execution can be clearly seen in our strong financial performance. Net income for the quarter was $161 million, or $1 per diluted share. Return on equity was a solid 14%, and insurance in force increased 4% year over year to a record $264 billion, driven by a persistency of 85%, and new insurance returns of $11 billion. Our business continues to perform well as we navigate through a complex operating environment. The US economy has been resilient with a strong labor market and healthy household balance sheets, while macro factors such as geopolitical conflicts, inflation, and higher interest rates continue to pose potential risks. Having said that, delinquency rates for prime mortgage borrowers are consistent with pre-pandemic levels and our manufacturing quality remains the same. The US economy is still in a state of solid. While higher borrowing costs have slowed origination, home prices continue to be supported by structurally lower housing inventory, as well as strong demand. We continue to be optimistic about the pent-up demand in first-time homebuyer population as more Americans reach the average first-time homebuyer age and we believe that mortgage insurance will remain an important tool to help buyers attain this important milestone. I'll also note that higher rates continue to benefit persistency, which helps offset the effect of rates on origination volumes. The credit quality of our insured portfolio continues to be strong. At quarter end, the risk-weighted average FICO score of the portfolio was 744, and the risk-weighted average -to-value ratio was 93%, and layered risk was 1.3%. Pricing remained constructed through the quarter and underwriting standards were rigorous. Our pricing engine allows us to deliver competitive pricing on a risk-adjusted basis, and we continue to underwrite and select risk prudently while managing to attract returns. The delinquency rate in the quarter was 2%, down nine basis points sequentially and consistent with our expectations. During the quarter, we released $54 million of reserves driven by favorable credit performance and our effective loss mitigation efforts. We remain well-reserved for a range of scenarios. We continue to operate from a position of financial strength and flexibility. At quarter end, our P-Mire sufficiency was 163% or $1.9 billion of sufficiency and approximately 90% of our risk in force was subject to credit risk transfers. The strength of our capital position and cash flows allowed us to both reinvest in the business and return capital to our shareholders, aligned with our capital allocation priority. We've executed on strategic opportunities to extend our platform into compelling adjacencies while maintaining a sharp focus on our core MI business. Anacri continues to perform well and we continue to participate in GSC CRT transactions that came to market during the quarter. We remain pleased with the strong underwriting and attractive return profile of Anacri. We returned $75 million of capital to shareholders in the first quarter. Given the increased liquidity in our stock, we increased share repurchases in the first quarter to $49 million and remain committed to returning capital to shareholders. This is also reflected in today's announcement that we are increasing our quarterly dividend 16% to 18.5 cents per share, as well as the board's decision to approve a new share repurchase authorization of $250 million. We continue to expect to deliver capital returns in 2024, similar to 2023 level. I'm also pleased to note that during the quarter, S&P upgraded Emiko's long-term financial strength and issuer credit rating to A-stable, and EHI's long-term issuer credit rating to BBB-stable. This is the fourth upgrade from S&P since our IPO and demonstrates the strength of our business and execution by our dedicated team. Additionally, both Moody's and Fitch upgraded us to a positive outlook, reflecting our continued strong execution and positive financial results. All in, our strong quarter is a testament to the dedication and hard work of our team, and I thank them again for their effort. Looking ahead, we remain committed to serving our customers and their borrowers while maximizing value for our shareholders. With that, I will now turn the call over to Dean.
spk09: Thanks, Rohit. Good morning, everyone. We again delivered strong results in the first quarter of 2024. Gap net income for the first quarter was $161 million, or $1 per diluted share, compared to $1.8 per diluted share in the same period last year, and $0.98 per diluted share in the fourth quarter of 2023. Return on equity was 14%. Adjusted operating income was $166 million, or $1.04 per diluted share, compared to $1.8 per diluted share in the same period last year, and $0.98 per diluted share in the fourth quarter of 2023. Adjusted operating return on equity was 14%. Turning to revenue drivers, primary insurance increase in the first quarter to a new record of $264 billion, up $1 billion sequentially, and up $11 billion, or 4% year over year. New insurance written was $11 billion, up $1 billion sequentially, and down $3 billion, or 20% year over year. The year over year decline was primarily driven by a lower estimated MI market size and a lower estimated market share. Persistency was 85% in the first quarter, down 1 percentage point sequentially, and flat year over year. Only 4% of the mortgages in our portfolio had rates at least 50 basis points above the prevailing market rate. In contrast, almost 80% of the mortgages in our portfolio had rates at or below 6%, well below prevailing rates. While rates remain elevated, we anticipate elevated persistency to continue, which will help offset lower production resulting from higher mortgage rates. Net premiums earned were $241 million, up $1 million sequentially, and up $6 million, or 2% year over year. The sequential increase in net premiums earned was primarily driven by the growth in attractive adjacencies, which consists primarily of a NACRE's GSE CRT participation. More broadly, insurance enforced growth was offset by higher seeded premiums resulting from the successful execution of our CRT program. The year over year increase was driven by insurance enforced growth and partially offset by higher seeded premiums and the lapse of older higher price policies. Our base premium rate of 40.1 basis points was flat sequentially and down .4 basis points year over year. Remember that our base premium rate is impacted by several factors and tends to modestly fluctuate from quarter to quarter. We expect yields to stabilize around current levels in 2024. Our net premium rate was 36.3 basis points, down .1 basis point sequentially, primarily reflecting higher seeded premiums in the current quarter. Investment income in the first quarter was $57 million, up $1 million, or 2% sequentially, and up $12 million, or 26% year over year. Higher interest rates have increased our investment portfolio yields, and as our portfolio rolls over, we anticipate further yield improvement. During the quarter, our new money investment yield exceeded 5%, contributing to an overall portfolio book yield of 3.7%. Our focus remains on high quality assets and maintaining a resilient A-rated portfolio. While we typically hold investments until maturity, we selectively pursue income enhancement opportunities. During the quarter, we executed a strategy resulting in $7 million of pre-tax losses in exchange for higher future investment income. We'll continue to evaluate similar opportunities, but this does not change our view that our investment portfolio's unrealized loss position is materially non-economic. Turning to credit, losses in the quarter were $20 million compared to $24 million last quarter and negative $11 million in the first quarter of 2023. Our loss ratio for the quarter was 8% compared to 10% last quarter and negative 5% in the first quarter of 2023. Sequentially, our losses and loss ratio were driven by the current quarter delinquencies that reflect seasonal trends. Year over year, our losses and loss ratio in the current quarter were driven by the normal loss development of new large books in a lower reserve release. During the quarter, we continue to see favorable cure performance from early 2023 and prior delinquencies above our expectations, which resulted in a $54 million reserve release in the quarter as compared to reserve releases of $53 million and $70 million in the fourth quarter of 2023 and first quarter of 2023 respectively. New delinquencies decreased sequentially to $11,400 from $11,700. Our new delinquency rate for the quarter was .2% compared to 1% in the first quarter of 2023 and flat sequentially. We continue to book new delinquencies and an approximate 10% claim rate reflecting our prudent approach to reserving in the current macroeconomic environment. Total delinquencies in the first quarter decreased sequentially to $19,500 from $20,400. The primary delinquency rate decreased nine basis points sequentially to 2%, consistent with our expectations and in line with pre-pandemic levels. Turning to expenses, operating expenses for the first quarter of 2024 were $53 million, down $6 million or 10% sequentially and down $1 million or 2% year over year reflecting our ongoing commitment to expense discipline. The expense ratio for the quarter was 22%, down 3% point sequentially and down 1% point year over year. As a reminder, our expenses are weighted towards the second half of the year and thus we will still expect expenses to be in the range of $220 to $225 million over the course of 2024. Moving to capital, we continue to operate with a strong capital base and liquidity position reinforced by our robust PMIRES sufficiency and continued success in the execution of our diversified CRT program. Our PMIRES sufficiency was 163%, a $1.9 billion above PMIRES requirements at the end of the first quarter. Additionally, at the end of the first quarter, 90% of our risk enforced was subject to credit risk transfers and our third party CRT program provides $1.7 billion of PMIRES capital credit. As previously announced, we closed new quota share and new excess of loss reinsurance transactions during the quarter. Additionally, we increased our affiliate quota share from .5% to .5% of a portion of our reinforced business along with .5% of 2024's new insurance written. These affiliated transactions will leverage and act reese existing capital and support new business opportunities primarily consisting of GSD credit risk transfer. Turning to capital allocation, we continue to execute against our capital prioritization framework which balances maintaining a strong balance sheet, investing in our business, and returning capital to shareholders. During the quarter, we paid out $26 million through our quarterly dividend and we repurchased 1.8 million shares at a weighted average share price of $27.51 for a total of $49 million of repurchases through our share repurchase program. In April, we repurchase an additional $0.4 million shares at a weighted average share price of $30.07 for a total of $12 million repurchased. And as of April 30, 2024, there was approximately $24 million remaining on our current share repurchase authorization. Today, we announced a 16% increase to our quarterly dividend from $0.16 to .18.5 per share and the board approved a new share repurchase authorization of $250 million. Both actions reflect the continued strength of our financial position and confidence in our business. As with our prior share by VAC programs, Genworth will participate proportionately. As a reminder, we still expect total 2024 capital return levels to be similar to the $300 million we delivered in 2023. As in the past, the final amount and form of capital return to shareholders will ultimately depend on business performance, market conditions, and regulatory approvals. Overall, we're pleased with our strong start to 2024 and remain focused on prudently managing risk, maintaining a strong balance sheet, and driving solid returns for our shareholders. With that, I'll turn the call back to Rohit.
spk06: Thanks, Dean. Looking ahead, I continue to be encouraged by the long-term dynamics of our market, and I'm confident in our ability to realize the opportunities ahead of us and our team's ability to execute against our strategy and deliver value. Our commitment to responsibly help more people become homeowners motivates everything we do and has never been stronger. Operator, we are now ready for Q&A.
spk01: Thank you. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment while we compile our Q&A roster. Our first question is going to come from the line of Doug Harder with UBS. Your line is open. Please go ahead.
spk08: Thanks. First, just hoping you could kind of give us an update as to how you see the total market for NIW progressing as the year unfolds, what impact from the re-increase in rates that you're seeing on either kind of the underlying quality of applications or the amount of applications.
spk06: Good morning, Doug. Thank you for the question. So I would say given the water tilting we have seen in rates up to this point in the year, it is difficult to forecast originations with a narrow range. I provided our view last quarter where we basically said we expect MI market to be generally in line with 2023 market size. Just to add some color to that, I would say going into spring selling season, we are seeing overall consumer demand including first time home buyer demand continuing to be strong. The consumers who are coming to the market at this point are used to 6% to 7% mortgage rate. Now the challenge basically that we are facing in the market is lack of inventory in the market and some of the water we have seen in the last month or so in rates. Our view continues to be that MI is a very helpful product for consumers, especially first time home buyers to get into homes. As we see that origination volume come through, MI products will continue to get very good penetration in the market. But all that being said, at this point of time, our expectation is the MI market size to be generally in line with 2023, just to give you a historical data point, that level of market size is comparable to 2018 market size within like $5, $6 million of that. And also our persistency continues to provide a natural hedge in our business as higher rates are tailwind for the retention of our existing portfolio.
spk04: Appreciate that.
spk06: Thank you. I missed your question on manufacturing quality. And credit quality. So we continue to see, as I said in my prepared remarks, we continue to see manufacturing quality and credit quality remain strong. And from a volume perspective, we continue to have both non-delegated and delegated volumes. So either through direct underwriting or through our audit, we continue to monitor that. And as I said in my prepared remarks, we continue to feel good about that.
spk08: I guess just on that, what are you seeing around affordability on new purchases? How are consumers coping with the higher rates from an affordability perspective?
spk06: Very good question. So as I said before in my remarks, I think at this point of time, consumers who are coming to market are prepared for that 6% to 7% 30-year fixed mortgage rate. So we are seeing those consumers go through the application process and actually get qualified and then given the fact that we have very granular risk-based pricing, we can price those loans aligned with our view of risk and returns both in base case and stress case. So from a consumer qualification perspective, while we have seen kind of certain metrics move up, similar to what we saw in previous purchase market. So if you think about loan to value, loan to values are back to the 2018 level. If you think about debt to income and FICO, they are very indicative of a purchase market. So we are seeing those markets where we have seen those traditionally. But from a consumer qualification perspective, we continue to feel good about the consumers we are putting on our books and continue to feel good about the attractive returns we can generate from those policies.
spk08: Great. Thank you. Thank
spk01: you. One moment as we move on to our next question. And our next question is going to come from the line of Mihir Bhatia with Bank of America. Your line is open. Please go ahead.
spk02: Hi, this is Caroline on for me here. Thanks for taking our question. Can you discuss interest rate buydowns? Is that product very prevalent in the market? And can you provide any comments on how you're underwriting that one, if any different than other mortgages?
spk06: Yeah, good morning, Caroline. Thank you for the question. So as we think about interest rates, we continue to see interest rate buydowns in the market as a strong product for consumers right now. We talked about this on our earnings call a few quarters ago. So the trend has been very similar. We don't publish that as an explicit metric in our financials, but we continue to monitor internally. And I would say there are two flavors of interest rate buydowns. One flavor is temporary interest rate buydowns where the interest rate on the mortgage is brought down for one to two years. By the lender, and there are some limitations on how much money the lender can use to do that. We see that as still a prudent product because the consumer is qualified at the full rate, not at the teaser rate of the mortgage. So it's a well qualified consumer. And then the second flavor is builder commitments where builder originators specifically buy down the note rate for the life of the mortgage. And we see that also coming through on a consistent basis. And in that case, the consumer does not have any kind of interest rate change in their mortgage. And as a result, the consumer is well qualified for the mortgage. So I would say usage of those products are coming from different channels, different originators, but we continue to see the usage being consistent to what we have seen in the past.
spk02: Awesome. That's super helpful. And then also, can you talk about embedded equity in the delinquent inventory and any stats you can share on that?
spk06: Yes. So Caroline, in this quarter, in our earnings presentation, we did actually add that back on page 13 of the presentation. So you can see on delinquent policies, which are around 2% of our portfolio, 94% of those policies actually had -to-market equity of greater than 10%. And that's based on home prices at the end of 2023 for policies at the end of first quarter. And then 81% of our delinquent policies actually had -to-market equity of more than 20% using the same methodology, which is using home prices for end of year 23 and on our portfolio at the end of first quarter.
spk02: Awesome.
spk01: Thank you. Thank you. Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of George with KBW. Your line is open. Please go ahead.
spk07: Hey, good morning. Actually, I wanted to ask your default to claim rate at 10% remains a couple of points above the peers that reported. I know it all kind of mess out through the recoveries, but what would you need to see to take that down probably closer to the 7 to 8 to some of the others are using?
spk09: Yeah, thanks for the question. And just as a reminder, maybe to set the table for this, our reserves and our role rates that you just referenced on new delinquencies, they're always our best estimate of ultimate claims. But as we determine the best estimate, we consider various economic outcomes to ensure that we're appropriately reserved even if economic pressures emerge. If we pivot now to the 10% claim rate on new delinquencies, we set that really not in line with anything that we had seen from a performance perspective. Performance remains very strong. What we really did was took into account the fact that there was some heightened macroeconomic uncertainty, and we believed that it was really prudent to contemplate that in the establishment of that 10% role rate. Over time, to your point, we've seen economic resiliency, and as a result, we've seen elevated cures on prior accident delinquencies so that heightened view of uncertainty hasn't materialized. If we just kind of lift up, we still believe it's prudent and measured approach is appropriate at this point in time. What would change that approach? I think if we saw the possibility or the probability of economic pressures decrease materially on a go-forward basis, and or if we gave more reliance on the more recent performance, and a little bit less reliance on that judgment that's based on the macroeconomic uncertainty, I think if either one of those happened, we'd have to take a hard look at the appropriateness of the current 10% claim rate.
spk07: Okay, great. That's helpful. Thanks. And then just switching over to capital return, you noted the $300 million will be similar to last year. Is the mix between buybacks and dividends also going to be the same, just given the strong start on buybacks? Just curious if there's any change there.
spk09: Yeah, that's a great question. Again, as we've discussed in the past, we really have three ways to return capital to shareholders. Ordinary dividends, share repurchases, and special dividends. We really think about those kind of in a waterfall approach. At the top of the waterfall is quarterly dividends. We size those to be both competitive and durable, even under stress. So the 16% increase in the quarterly dividend this quarter, I think reflects our confidence and our ability to maintain that .5% dividend per share through time and through economic cycles. It's really at the top of the waterfall because it increases the certainty of capital return to shareholders. Share repurchases, in contrast, are a little bit more opportunistic. They're based on, obviously, the prevailing market conditions. When I say that, it's especially related to our share price and our liquidity, given our limited float. And then lastly, special dividends are kind of that more blunt instrument that allows us to return the planned capital to shareholders in excess of quarterly dividends and share repurchases. We typically do that at the end of the year. I think last quarter, as we emphasized the potential increased reliance on share repurchases, given the opportunities we were seeing at the end of last year and the beginning of this year related to our share price, in addition to the improved liquidity in our stock. If you look at our first quarter results, I think they show execution against that expectation, where we repurchased almost $50 million in the quarter. And for comparison purposes, we repurchased about $87 million across all of 2023. So I think you do see us relying more heavily on share repurchases. I think, go forward, the pace of share repurchases is going to be largely dictated by market opportunities. If we see and continue to see accretive market opportunities, I think you'll see us continue to execute the share repurchase program at that elevated pace. If that doesn't occur, we'll rely more heavily on special dividends at year end as a way to distribute our planned capital for the full year.
spk07: Okay, great. That's helpful. Thanks a lot. Thank you. Thanks, Bo.
spk01: Thank you. And one moment for our next question. And our next question is going to come from the line of Rick Shane with JPMorgan. Your line is open. Please go ahead.
spk03: Hey, guys. Thanks for taking my question. And Bo's really touched upon what I want to focus on too, which is obviously the cadence of capital return in the first quarter, given the strength of the buyback plus increasing the dividend starting in the second, suggests that you are above the run rate of capital returns roughly comparable to 2023 levels. And you, I think, talked about the dynamics. And I think the clear takeaway is that as you approach the end of the year, the special dividend is sort of the flex to get you there, depending upon opportunities on buyback and regular dividend. I am curious, given the strength of earnings and what I think, you know, everybody's going to take away as a pretty favorable outlook, what it would take for you to actually potentially raise the total capital return, whether it's 5% or 10%. Is that something that you could envision as the year unfolds if the trajectory remains so strong?
spk09: Yes. So, Rick, appreciate the questions. I want to start off with the guidance as it relates to capital return for full year 2024. That remains at $300 million. Really what I think Bose's question got to is the way in which we're returning that $300 million and potentially even the timing of how that $300 million gets returned to shareholders. And I do think, you know, that timing could increase again if we see opportunistic market opportunities to flex our share repurchase program in an accelerated and bigger way, much like we've done in Q1. So, much more to do with timing and means than quantum or amount of total capital return for full year 2024. That said, what would change, what would cause us to come back and revisit the $300 million? Obviously, business performance is a key driver if we see business performance above our expectations, if we see continued improvement in the macroeconomic environment, and or we see a regulatory environment that is more accommodative. I think those are all things that we consider as we think about the establishment of the appropriate amount of capital return heading into any year and throughout the year as we progress. Got
spk03: it. And look, you know, the other factor here is that NIW for the quarter down, there are certainly some headwinds as well. How much does growth or, you know, accelerated growth or decelerating growth of the portfolio impact that decision as well?
spk06: Yeah, so good morning, Rick. That definitely is an input. And as Dean said, that that would be captured in business performance. As you heard me answer a previous question, our guidance right now for MI market size for 2024 is to be similar to that of 2023. Overall, in 2023, we wrote a good size book. We also printed very good business results in terms of income expression for the entire year. I think in 2024, we look at very similar metrics. How much new business we are writing in our core MI business? How much business are we writing in our ANAC rebusiness? And then in addition to that, how is the core book performing in terms of loss ratios and income? And then that combined with the regulatory environment as well as our view looking forward in the economy. I think all these things definitely go into our view of do we change our capital guidance in the past whenever view has gotten stronger during the year, we have done that in prior years. So we'll continue to keep the market updated. Got it.
spk03: I appreciate that. Thank you guys. Thanks,
spk01: Rick. Thank you. One moment for our next question. And our next question comes from the line of Soham Banzal with DTIG. Your line is open. Please go ahead.
spk05: Hey, guys. Good morning. I hope you're all doing well. So I guess first question along the lines of capital return, I was interested in the decision to raise the buyback or increase the buyback to 250 and the 16% increase in the dividend, which is great. But Rod, could you maybe provide some color on just the framework that maybe you the board used as you were sort of setting that range? I'm particularly curious on sort of the macro portfolio assumptions that you maybe consider to just get to that 250. Any insight would be great.
spk06: Thanks. Good morning, Soham. Thank you for the question. So both on increased share buyback as well as increased dividend, I think the first thing I would start with is just the performance of our portfolio, performance of our business combined with our view of the strength of our balance sheet. So I think, as I said in my prepared remarks, we continue to create a stronger balance sheet. You saw that being acknowledged by the external market in terms of rating agency upgrades in 2023, early 2024. And even recently, we saw two outlook changes, in addition to that being positive. So all of that is a proof point that the board and I feel comfortable about the strength of balance sheet and business results. So I would say that just goes into the confidence picture on capital return. Now within the capital return as Dean outlined previously, we think about different vehicles of returning capital. From a dividend perspective, we think about the normal considerations that you would expect us to look at, which is earnings, competitive environment, the resiliency of that dividend, and having that confidence. So that basically drove the 16% increase to 18.5 cents per share of dividend increase. And then in addition to that, when we think about share buyback, in addition to the considerations I just outlined, we also think about our liquidity in the market, and Dean talked about it, because in our mind for a share buyback program, our first purpose, in addition to the normal considerations is do no harm in the market from a liquidity perspective. Just to give you perspective on our liquidity, from January of 2023 to April of 2024, our liquidity based on average daily trading volume has increased by 150%. So we always think that if the share prices are trading at the right level, and given our view of intrinsic value, we would want to use that vehicle as long as we think the liquidity is good. So the board saw that as constructive and worked with our advisors to put a view together, which gave us confidence to start the next share buyback authorization at a higher size. That being said, we'll always keep looking at that metric on an ongoing basis. So if we see that we are negatively impacting liquidity in any way, we can change the vehicle. And that's where the third vehicle of capital return, which is a special dividend, is always available to us. So I think we have exercised that flexibility in the last three years very prudently, and we intend to do that moving forward.
spk05: Got it. Okay, thank you for the color. And then, you know, on the embedded equity disclosure, this quarter is super helpful. You know, it's remarkable that 70% of the portfolio still has 20% or more, and even your DQs are sitting on 80% or more at 20%. So, I mean, assuming that home prices sort of just remain stable, right, and they don't go up or down. And in a scenario where sort of the borrower defaults today, you know, what do you actually think is a realistic scenario for what you could be on the hook for? Because you still have reinsurance that, you know, is sitting on the back end here. And so I think it'll just be helpful if you could sort of characterize for investors the range of outcomes, you know, in a potential default scenario, assuming that embedded equity just remains stable going forward.
spk06: Yeah, so very good question. So I would say from embedded equity perspective, that is a tailwind for our portfolio. I think a good expression of what you see on page 13, the numbers you just mentioned, are driven by some pretty significant increases in 2020 and 2021. So I do want to acknowledge that because that is not normal in our market. I think the home price appreciation numbers you're seeing right now, including the that just came out a few days ago, are much more in the range of what we have seen historically. So you will see that normalized over a period of time. Now that being said, home price appreciation is a tailwind for us, both on frequency and severity when it comes to losses. Frequency, because consumers, before they actually go into delinquency, if they're able to sell their home, because they have enough equity built up, that frequency never happens. And then second thing, even if they go delinquent, and they can sell their home using a pre-sale, instead of getting foreclosed on, that reduces frequency and some cases severity. So I think those are the mitigants in our market. It's difficult to put that in quantitative terms, because consumers who stay delinquent and finally get to claim are typically the consumers where that home price appreciation and embedded equity was not sufficient to completely offset the claim. So by the time consumers get to claim, those claims do come closer to 100% severity. But along the journey, we see improved cure rates because of the factors you outlined. And if you look at the cure rate performance of our book over the last eight quarters or so, you see that performance coming through driven by those factors.
spk05: Got it. And if I could just squeeze one more, you know, I mean, NW results are still coming in for the whole sector, but it does look like your NW declined a little bit more than peers this quarter. So I'm just wondering, you know, what were you seeing in the market out there? Right? Any are you taking a different view on certain cohorts? Anything else that's notable would be helpful.
spk06: Thanks. So thank you for the question. Are you referring to year over year decline or quarter over quarter? Year over year.
spk05: Year over year.
spk06: Yeah. So yeah, so when you think about our market participation, first thing, as you said, we don't have final market share numbers. So it's tough to tell where we landed in the overall market. We'll know on Friday. Second thing I would just emphasize is when we think about our NW, we like the profile of the $10.5 billion we wrote. We like the profile from a pricing and mix perspective. I made the point in my prepared remarks that we saw pricing in the market being constructive. And we took several pricing actions in the market to make sure that from a risk selection perspective and return perspective, we were actually driving the right book. So that all being said, I would say from a year over year perspective, our market share in first quarter 2023 was actually slightly elevated. And that could be driven by certain other players pulling back from the market based on their risk appetite. Our risk appetite has been generally very stable. But right now, we believe that our market participation is very much in line with our expectations. We think of our share in that 16 to 18% range. And we believe that that's where we are kind of landing. And if you look at our participation in fourth quarter 23 and first quarter 24, you'll see those numbers generally being stable. We might have been flat. We might have lost a little bit. But we don't think that that's an issue with our strategy. And as a reminder, we don't focus on share as a metric. We focus on kind of our right strategy of driving the right price for the right risk and managing our layered risk concentration. And we believe we are doing the right job on that front.
spk05: Got it. All right. Thanks a lot for the thoughts, guys. Thank you, Zoe.
spk01: Thank you. I would now like to turn the conference back to Rohit Gupta for any further remarks.
spk06: Thank you, Michelle. We appreciate everybody's interest in an act. And I look forward to seeing you in New York at the BTIG Housing Ecosystem Conference next week. Thank you.
spk01: This concludes today's conference call. Thank you for participating. You may now disconnect.
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