NMI Holdings Inc

Q1 2023 Earnings Conference Call


spk00: Good day, and welcome to the NMI Holdings, Inc. First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to John Swenson. Please go ahead.
spk12: Thank you. Good afternoon and welcome to the 2023 First Quarter Conference Call for National MI. I'm John Swenson, Vice President of Investor Relations and Treasury. Joining us on the call today are Brad Schuster, Executive Chairman, Adam Pollitzer, President and Chief Executive Officer, Ravi Malela, Chief Financial Officer, and Nick Villamuto, our Controller. National results for the quarter were released after the close today. The press release may be accessed on NMI's website located at nationalmi.com under the Investors tab. During the course of this call, we may make comments about our expectations for the future. Actual results could differ materially from those contained in these forward-looking statements. Additional information about the factors that could cause actual results or trends to differ materially from those discussed on the call can be found on our website or through our regulatory filings with the SEC. If and to the extent the company makes forward-looking statements, we do not undertake any obligation to update those statements in the future in light of subsequent developments. Further, no one should rely on the fact that the guidance of such statements is current at any time other than the time of this call. Also note that on this call, we may refer to certain non-GAAP measures. In today's press release and on our website, We've provided a reconciliation of these measures to the most comparable measures under GAAP. Now, I'll turn the call over to Brad.
spk05: Thank you, John, and good afternoon, everyone. I'm pleased to report that in the first quarter, National MI again delivered strong operating performance, continued growth in our insured portfolio, and standout financial results, and has started the year with tremendous momentum. We generated 8.7 billion of NAW volumes and ended the quarter with a record 186.7 billion of high-quality, high-performing primary insurance and force. We achieved broad success in customer development, continued to innovate in the reinsurance market, and once again delivered industry-leading credit performance. All in, we generated $74.5 million of gap net income and delivered a 17.9% return on equity in the first quarter. At a time when turbulence across the banking sector has raised concerns about the availability of credit and capital, we think the strength of our performance and the broader stability and resiliency of the private mortgage insurance industry stand out. From day one, we have focused on building National MI in a durable and sustainable manner, with discipline and risk responsibility at the core. We're proud to have provided uninterrupted support to over 1.6 million borrowers to date, helping to open the door to affordable and sustainable home ownership in communities across the country. while at the same time providing coverage and counterparty strength to protect against the impact of stress and the risk of loss in the housing finance system. We believe there is broad recognition in Washington of the value that National MI and the broader private mortgage insurance industry provide in this regard. Working to consistently expand access to home ownership and all the benefits it provides, while also placing private capital in front of the taxpayer to ensure the safety and soundness of the conventional mortgage market. Overall, we had a terrific first quarter and are well-positioned to continue to lead with impact and drive value for our people, our customers and their borrowers, and our shareholders. With that, let me turn it over to Adam.
spk09: Thank you, Brad, and good afternoon, everyone. National MI continued to outperform in the first quarter, delivering significant new business production, continued growth in our high-quality insured portfolio, and standout financial success. We generated 8.7 billion of NIW volume and ended the period with a record 186.7 billion of high-quality, high-performing insurance in force. Total revenue in the first quarter was a record 136.8 million, and we delivered gap net income of $74.5 million or $0.88 per diluted share and a 17.9% return on equity. Overall, we had an exceptionally strong quarter and are confident as we look ahead. We have a talented and dedicated team driving us forward every day. Our lenders and their borrowers continue to rely on us for critical down payment support, providing us with an attractive and sustained new business opportunity. We have an exceptionally high quality insured portfolio covered by a comprehensive set of risk transfer solutions, and our credit performance stands ahead. Our existing borrowers are well positioned to weather stress with strong credit profiles, significant embedded equity in their homes, and most benefiting from having locked in record low 30-year fixed rate mortgages with manageable debt service obligations. Persistency remains well above historical trend and has helped to drive continued growth and embedded value in our insured book. And we continue to manage our expenses and capital position with discipline and efficiency, building a robust balance sheet that is supported by the significant earnings power of our platform. We do, however, continue to see risk in the macro environment and housing market. Mortgage rates, despite a modest pullback over the past few months, continue to strain affordability for many prospective borrowers and weigh on origination activity. House prices have trended down from their peaks across most local markets, and recent turbulence in the banking sector further highlights the potential for future macroeconomic volatility. Against this backdrop, we remain proactive, doing even more from a pricing, risk selection, and reinsurance standpoint as the macro environment has continued to evolve. In the first quarter, we again increased policy pricing and made additional changes to further manage our mix of new business by risk cohort and geography. We also continued to innovate and find success in the risk transfer markets, entering into a new excess of loss reinsurance agreement during the period that provides incremental risk protection for policies originated in the fourth quarter of 2022, as well as those originated on a forward flow basis in the first and second quarters of 2023. The deal serves to further extend our credit risk transfer program, and with its success, approximately 99% of our insured portfolio is now covered by a comprehensive reinsurance solution. More broadly, we remain encouraged by the discipline that we see across the private MI market. Underwriting standards remain rigorous, and pricing continues to ladder higher in view of potential macro risks. Overall, we had a terrific quarter. delivering strong operating performance, continued growth in our insured portfolio, and standout financial results. Looking ahead, we're well positioned to continue to serve our customers and their borrowers, invest in our employees and their success, and deliver through the cycle growth, returns, and value for our shareholders. With that, I'll turn it over to Ravi. Thank you, Adam. We delivered standout financial results in the first quarter. with significant new business production, continued growth in our high-quality insured portfolio, strong top-line performance, favorable credit experience, record expense efficiency, and strong bottom-line profitability and returns. Total revenue in the first quarter was $136.8 million. Gap net income was $74.5 million for $0.88 per diluted share. and our return on equity was 17.9%. We generated $8.7 billion of NIW, and our primary insurance and force grew to $186.7 billion, up 1.5% from the end of the fourth quarter, and up 17.5% compared to the first quarter of 2022. Twelve-month persistency in our primary portfolio improved again, reaching 85.1%. compared to 83.5% in the fourth quarter. Persistency continues to serve as an important driver of the growth and embedded value of our insured portfolio. Net premiums earned in the first quarter were $121.8 million, compared to $119.6 million in the fourth quarter. We earned $1.4 million from the cancellation of single premium policies in the first quarter. compared to $1.5 million in the fourth quarter. Net yield for the quarter was 26 basis points, and core yield, which excludes the cost of our reinsurance coverage and the contribution from cancellation earnings, was 34 basis points, both unchanged from the fourth quarter. Investment income was $14.9 million in the first quarter, compared to $13.3 million in the fourth quarter, We saw continued acceleration in investment income during the quarter as we deployed new cash flows and reinvested rolling maturities at favorable new money rates. Underwriting and operating expenses were 25.8 million in the first quarter, compared to 26.7 million in the fourth quarter. Our expense ratio was a record low 21.2%, highlighting the significant operating leverage embedded in our business and the success we have achieved in efficiently managing our cost base as we have scaled our insured portfolio. We had 4,475 defaults in our primary portfolio at March 31st, compared to 4,449 at December 31st, and our default rate held constant at 75 basis points quarter on quarter. Claims expense in the first quarter was $6.7 million, compared to 3.4 million in the fourth quarter. Peer activity remains strong, and we again released a portion of the reserves we previously established for potential claims outcomes in our COVID default population. At the same time, we continue to take a conservative stance when setting reserves across our remaining default population, generally increasing the reserves we established for both new and existing defaults in light of the evolving risk environment.
spk10: Interest expense in the quarter was $8 million.
spk09: Net income was $74.5 million, or $0.88 per diluted share, compared to $0.86 per diluted share in the fourth quarter and $0.77 per diluted share in the first quarter of 2022. Total cash and investments were $2.3 billion at quarter end. Shareholders' equity as of March 31st was $1.7 billion. and book value per share was $20.49. Book value per share, excluding the impact of net unrealized gains and losses in the investment portfolio, was $22.56, up 4% compared to the fourth quarter, and 19% compared to the first quarter of last year. In the first quarter, we repurchased $14.8 million of common stocks. retiring 667,000 shares at an average price of $22.19. To date, we have repurchased a total of $71 million of stock under the original $125 million authorization, retiring 3.6 million shares at an average price of $19.87. We have $54 million of repurchase capacity remaining under our existing program. In the first quarter, we entered into a new excess of loss reinsurance agreement, covering policies originated in the fourth quarter of 2022, as well as those originated on a forward flow basis in the first and second quarters of 2023. The treaty is new for us, providing excess of loss coverage for both an enforced book of business, as well as forward flow capacity for future NIW volumes. and serves to further extend our comprehensive risk transfer program. The new deal provides working layer loss protection from an initial attachment point up to a maximum PMERS detachment and carries an estimated 6.25% weighted average lifetime pre-tax cost. Our continued ability to compress the cycle time between transactions, execute on favorable terms, and secure coverage for both our most recent quarterly and forward flow production is particularly valuable as it serves to minimize our warehouse exposure and limit the credit risk retained in our high-quality insured portfolio during a period of increased macro uncertainty. At quarter end, we reported total available assets under PMIRS of $2.5 billion and risk-based required assets of $1.2 billion. Excess available assets were $1.2 billion. In summary, we delivered standout financial results during the first quarter with continued growth in our high-quality insured portfolio and strong top-line performance, favorable credit experience, and record expense efficiency, driving strong bottom-line profitability and returns. With that, let me turn it back to Adam. Thank you, Ravi. Overall, we had a terrific quarter. once again delivering significant new business production, continued growth in our high quality insured portfolio, and standout financial performance. Looking forward, we're confident. We have a strong customer franchise, a talented team driving us forward every day, an exceptionally high quality book covered by a comprehensive set of risk transfer solutions, and a robust balance sheet supported by the significant earnings power of our platform. Taken together, We are well-positioned to continue to serve our customers and their borrowers, invest in our employees and their success, drive growth in our high-quality insured portfolio, and deliver strong performance for our shareholders. Thank you for joining us today. I'll now ask the operator to come back on so we can take your questions.
spk00: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Aaron Suganovich with Citi. Please go ahead.
spk07: Thanks. I was wondering if you'd talk a little bit about your... The stability of your earned premium rate looked like it was flat with the prior quarter and had been kind of declining along with the other industry participants for a while. What's your outlook there and with the competitive environment for pricing today?
spk09: Aaron, this is Revy. I'll take that question. I think we mentioned on our previous call that we expected that our core yield to be stable. And I think we've seen that quarter over quarter. It remained at 34 basis points. In terms of the trend going forward, I mean, we expect our core yield, you know, which strips away the impact of movements in our reinsurance cost and cancellation earnings, you know, generally to be stable through the rest of the year, you know, with strong persistency in our recent rate actions, really providing valuable support. And I'd say just, you know, balance that somewhat with the exceptionally high quality of our current production, which in a rate risk-based pricing environment just naturally comes with a different rate profile. So we expect core strength. The trend in our net yield will probably depend on our reinsurance activity and also our loss experience because profit commission fluctuates with changes in our seeded claims expense. And that's going to be a function of how the macroeconomic environment develops. But ultimately, we still see stable yields going forward. And then, Aaron, you also asked about the pricing environment. It's an encouraging environment still. We're seeing broad discipline remain across the market, particularly as the risk environment continues to evolve. We've generally observed and have been able to achieve that rates continue to harden and ladder higher with increased macro volatility remaining in focus. So it's an encouraging environment where we're able to capture a price where we believe it's necessary and appropriate, and it's coming through and contributing to some yield stability that we're seeing.
spk07: Great, thanks. And then maybe on the production side, you know, are you expecting kind of the typical seasonal increase in the second and third quarter? And, you know, there's a pretty sharp decline, I guess, year over year because of the rate environment. Would it be a similar level of decline are you expecting, or maybe would that lessen a little bit?
spk09: Yeah, why don't I touch on the market size, and then we'll talk about how we see the pattern developing for us. I think, as you know, the private MI and IW opportunity is driven by the size of the total origination market, particularly purchase origination. On our last call, we shared our expectation that we would see total purchase origination volume this year of roughly 1.2 to 1.3 trillion. and that that would translate to a private MI market size of, I think we said, give or take $300 billion. And our expectation remains the same today. One caveat, that forecasting mortgage origination volume in a period of increased interest rate volatility is always challenging. But we see 2023 developing in line with the expectations that we had shared on our last call that remains our perspective. As for our performance, first and foremost, we're delighted with the results that we achieved in the first quarter, and we do see a sizable and sustained opportunity to continue supporting our customers and their borrowers, and really an opportunity to continue to write a large volume of high-quality, high-return, high-value business going forward. In terms of specific development through the year, we do obviously have seasonal patterns with our second and third quarters typically coming in
spk08: stronger than the the first and the fourth and we expect that to you know remain the case in 2023 great thank you our next question comes from rick shane with jp morgan please go ahead hey guys thanks for taking my question this afternoon sort of a strategic question we in there are a lot of folks on this line who followed you a long time you're watching your company go through sort of the transition on the S-curve and becoming a mature business with market share on the origination side at parity, you're close to parity with your peers, the insurance and force moving in that direction. This is a long-tail business, and I know that you manage it with a long horizon. As you move through that S-curve, what's going to change in terms of how you think about the business? Will you use capital in different ways, either to enhance returns or reduce risk?
spk09: Yeah, Rick, it's a great question, right? It's one we certainly think about with frequency. I'd say at the core, right, our goal has been from day one and remains the case now to manage our business with discipline and risk responsibility. so that we could be a successful, viable, and long-term counterparty for our customers and honor the obligations that we make to them across all market cycles. And so that is goal number one, building a business in the way that we have that's infused with that perspective of discipline and risk responsibility puts us in position today where we have an incredibly strong franchise that's provided us, we translate that franchise into strength of balance sheet built on a platform of significant earnings power and consistency. One of our key goals, particularly as we're in a period of potential volatility, is to make sure that we preserve all that we've achieved so far and that we can deliver similar consistency for customers, for their borrowers, for our shareholders, for our employees going forward. In terms of how our strategy might deviate, boy, I think our strategy is working exceptionally well today. We look at it, and as you said, we've really emerged as a leader from a customer standpoint, a franchise standpoint. We've maintained discipline around risk, expenses, and capital all along the way. And so we're delivering returns, profitability, expense experience, default experience that stands ahead across almost every measure that you can tally. And our goal is to preserve that. That means we're going to stay primarily focused on the strategy that has worked well for us. We'll obviously make changes if the market dictates and demands that we do, and we'll stay nimble. I think we've proven ourselves able to do that, in particular over the last few years as we've dealt with just natural volatility through the pandemic, and then with shifted interest rates and emergence of risk on the horizon. I think your question veers towards M&A and the prospect for capital distribution, so I'll I'll touch on both of them. Look, we're in the enviable position today where we're able to both fund the significant growth opportunity that we're achieving and that we still see on the horizon, and at the same time be able to advance capital distribution opportunities and give our shareholders the ability to directly participate in the value that we're creating. We see that that opportunity, our hope is and our expectation is that that opportunity will continue to emerge for us as we go forward. Beyond that, in terms of taking our focus away from our core franchise, we set a very high mark for what we would say is additive to the MI business and are delighted with our focus and results today.
spk10: Adam, thank you very much.
spk01: The next question comes from Mark Hughes with Truist. Please go ahead.
spk10: Thank you. Good afternoon.
spk11: The expense ratio, was there anything unusual in the quarter? Any one-timers either way? And any guidance you can give about expenses for the full year?
spk09: Yeah, Mark, this is Ravi. Certainly, we were delighted in delivering a record low 21.2% expense ratio in the quarter. You know, I'll harken back to some of the items that we've talked about in the past, which are still true today. You know, we've got the smallest headcount by far in the industry, and we benefit from that. We've talked a little bit about our IT platform, you know, that's scalable, flexible, and efficient, and the TCS contract that's associated with it. We had a step down in expenses last year, and we're seeing that flow through. And certainly our expense footprint is smaller than, you know, most of the industry overall. And we're benefiting from those. In this quarter, we had a little bit of benefit from lower deferred acquisition costs in the quarter, and that's what drove the quarter-over-quarter change. I'd say we're always focused on managing the business efficiently. We'll see modest movement as we continue to invest in systems, risk management strategies throughout the year, but we're happy with the performance this quarter. No one-timers. There's an accounting dynamic, but no one-timers. And as we look out over the remainder of the year, we see strength in our operating expense performance. We'll probably have some modest growth as we progress from Q1 run rate, just as we're making investments in our people, our systems, risk management strategies. But all around, no one-timers and a really strong quarter.
spk11: So modest growth sequentially in the expenses. Is that right, Adam?
spk09: Yeah, that's likely where we'll trend. I mean, we'll do our best to not have that come through, but our expectation is there are certain items we're going to be taking on as we progress through the year that we'll see a little bit of a growth pattern from our Q1 level.
spk11: Yeah. And just looking at the FICO scores, the loan-to-value kind of improvement sequentially in both measures, you're talking about pricing being up. Are you just finding kind of the higher quality risk is the more attractive niche at this point, or is that somehow reflective of the broader market?
spk09: I think it's more reflective of our strategy in general. We have, for a long period of time, consistently focused on managing our mix of business. Historically, we've been probably the most conservative MI provider in terms of the credit risk that we'll allow into our portfolio. And that remains the case now. That said, we're in the market every day offering support and solutions for our customers and their borrowers. It is our job to take risk, but it's also incumbent upon us to do that responsibly. And as the macro environment is evolving, one, it means that we're using price as a means to shape our mix of business. It's something we've always done and we continue to do proactively now. And we're also...
spk10: capturing incremental rate where we believe it's necessary and appropriate, both of those items are coming through.
spk04: Thank you.
spk00: Our next question comes from Bose George with KBW. Please go ahead.
spk02: Yes, good afternoon. A couple of things. Your cures increased during the quarter, and was that just from the COVID vintage loans and then your reserve per loan look like it, you know, you've got whatever more conservative. Can you just talk about the drivers of that?
spk09: You know, Bo, this is Ravi. I'd just say that cures have been sort of a bright spot for us. I'd say that the cures have been sort of, you know, both in our sort of COVID-related default population and across the board. So we're seeing nice cure activity sort of across the board and with respect to what we're seeing quarter over quarter. There hasn't been any major trends, just been really high quality performance. Yeah, but the other thing that comes through, there's also a bit of a seasonal pattern around it. What we typically see is that in Q1, a large number of borrowers who, you know, we see in Q4, I should say, a bit of seasonal deterioration as some borrowers redirect household funds to the holidays, and then we tend to see a rebound in care activity in the first quarter aided by tax refunds. So there's a little bit of seasonal dynamic there, but as Robbie said, most of it really just traces to the quality of our book. We've really focused on building an exceptionally high-quality insured portfolio, and the value of that approach and our portfolio can be seen in the credit performance broadly that's coming through, including in our cure activity. I think you asked a second question about the reserves that we're establishing.
spk02: Yeah, yeah, yes. in color on that.
spk09: Yeah, I can give you sort of a detail here on the reserves we've been establishing. So I'll give you a little bit of background here, Bose, to get to your question here. You know, as you know, we don't apply a blanket homogeneous reserve assumptions from quarter to quarter. So we look at every loan and its own risk characteristics, and we individually evaluate and model all of those defaults that we have in our portfolio. There were 4,475 as of March 31st, including the 1,558 new defaults that came through in the quarter. And while I would say the new defaults that emerged in Q1 just generally have similar attributes to those that have emerged in recent quarters, you know, in terms of, say, weighted average FICO, DTI, and LTV in origination, they have a modestly lower mark-to-market equity position because of the observed path of home price depreciation. So we account for this both as a frequency and severity matter when we're establishing our reserves. And that actually drove a portion of the increase we're seeing quarter over quarter. You know, there's also an issue with the reserve roll forward table itself. So when you're looking at the information, that magnifies this dynamic. And we provide some of the detail in the footnotes. So in the quarter, we established a case reserves of $22.3 million for the 1558 new defaults that came through in Q1. And we established an additional 4.9 million of net IVNR reserves during the period. But this amount is calculated based on the entirety of the default population in case reserve position at March 31st, which includes both the current period and prior period cases. It's not just based on the new defaults in the period. And so this dynamic kind of skews the current and prior period presentation on the face of the reserve roll-forward table, and by extension, the calculation you would run on the average reserve for NOD or new NOD that we're talking about. So you can, once you normalize for that by subtracting the $3.5 million from the $4.9 million net high B&R reserve established in Q1 from the current period, you get to really the true number, which is really roughly about $15,000 reserve for new NOD in Q1. And hopefully that gives you a perspective on sort of reserves and reserves for new NODs in the quarter.
spk02: Okay, great. That's very helpful. Let me just throw in one more follow-up to Rick's question on capital. Is a dividend at some point, you know, something you consider?
spk09: Well, you know, I would say that, you know, we certainly – you know, are thinking very thoughtfully about capital. Capital is a key for us. You know, our philosophy, broadly speaking, and I'll hand it over to Adam to fill in here. Our philosophy is the same. We tend to take a conservative stance. We manage our needs carefully. You know, we're building access to all markets. We're being programmatic in our approach. And we like the fact that we're in a pretty significant excess position. And I say, you know, at this time, holding an additional amount of excess is prudent given sort of the macro environment? Maybe I'll hand it to Adam here to talk about that. Capital distribution is something that is both a near-term opportunity for us and also a long-term opportunity and a long-term expectation. It's also not tied exclusively, I would say, to our current repurchase program, but we think about what the future should look like in terms of additional authorizations if we have excess capital, and other forms of distribution. Right now, we're focused on executing under the repurchase program that we've been under since last February. We see it as a way for shareholders to directly participate in the value that we're creating. But over time, as we continue to perform, deliver consistent operating results, grow the dividend stream from our operating company, our ordinary course dividend stream, you know, we may have an ability to introduce a common dividend, but for now, repurchase is our primary focus. And truth be told, we're really excited with the success that we've achieved under our $125 million program to date.
spk02: Okay, great. Thanks a lot.
spk00: Our next question comes from Jeffrey Dunn with Dowling and Partners. Please go ahead.
spk03: Thanks. Good afternoon. Adam, I wanted to ask about your comment about continuing to shift the cohort and geography mix. As you make these underwriting changes going into more challenged economic periods, is it entirely a credit decision or is part of what you're doing a capital management decision as well or a PMIR's asset management decision?
spk09: No, you know, it's a good question, Jeff. Obviously, there's PMIR's implications for for the decisioning, both in terms of the charge that we're required to hold against the business we're bringing on as it's performing and the risk that it will go into non-performing status and see an increase in the amount of capital we have to hold against it. I'd say all of it, though, comes into the mix. What we're really doing is we're making a decision around, I'd say, risk-adjusted returns and capital allocation in this environment where I think we're all anticipating that there'll be increased risk on horizon, that there's greater potential for a downturn, paired with the ability we've, you know, what we've been able to achieve from a pricing standpoint, it has made the most sense for us to skew towards higher quality risks in this environment. And, you know, we'll need to see what price is available for us in similar risk cohorts in the future, what our view of risk is as well, and where we can find you know, the best opportunity for risk-adjusted returns on deployed capital.
spk04: Okay, thanks.
spk00: Next question comes from Eric Hagan with BTIG. Please go ahead.
spk06: Hey, thanks. Good afternoon. I think it's a follow-up on the last point you just made. Can you talk about your ability in this environment to target the same risk profile and maintain the same kind of ROE that you've been achieving and maybe even like the kinds of limitations that you see around finding that balance just given the environment? Yep, thanks.
spk09: It's a good question. I guess what I would note is that in any particular period and for a long time going forward from where we are today, the overwhelming majority of our financial performance will be driven not by the business we're writing in those particular periods, but by what's already in the portfolio. And so our ability to deliver consistent ROEs. And look, you know, we have a goal of delivering strong mid-teen ROEs through the cycle. It doesn't mean that we will always be in the high teens and it doesn't mean that we'll always be in the high teens at every single quarter. If stress emerges broadly around us, right, there'll be some amount of that that comes through. But from where we are today, right, our ROEs are driven by expense discipline and the existing enforced portfolio, the benefit that we're getting from persistency and the enormous embedded value that that brings from significant credit and claims out performance tied to the quality of the portfolio itself. What we're finding is that we're writing business today that has what we believe to be strong risk adjusted return characteristics that are supportive of our long term return goals. It's paired also, though, with we're writing business today, but we're sitting on a significant amount of excess capital. I think in a period where volatility looms on the horizon, having a balance sheet with the strength that we do is hugely valuable, but we're also mindful that we need to manage the build of excess capital as we think about return potential going forward.
spk06: That's helpful detail. Hey, last question. Just how would you assess the impact of the GFE cuts that were made earlier this year, its impact on the business, anything you see going forward related, you know, tracing back to that?
spk05: So this is Brad. You know, you're referring to the LLPA changes that were announced in January and just became effective. So in terms of the impact on the MI market, we don't expect that to be meaningful There'll be some shuffling of costs and borne by different groups of borrowers, but we expect the overall split between public and private execution will remain the same. And the mix of risk coming through the private MI market will be largely unchanged.
spk10: Yep. Okay. Thank you, guys.
spk00: This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.
spk09: Well, thank you all again for joining us. We'll be participating in the BTIG Housing Conference on May 9th, the Truist Securities Financial Services Conference on May 23rd, and the KBW Real Estate Finance Conference on May 24th.
spk10: We'll look forward to speaking with you again soon.
spk01: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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