Essent Group Ltd.

Ladies and gentlemen, thank you for standing by and welcome to the Essent Limited third quarter 2020 earnings conference call. At this time, all the participant lines are in a listen only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Chris Curran, Senior Vice President of Investor Relations. Thank you. Please go ahead.

Thank you, Whitney. Good morning, everyone, and welcome to our call. Joining me today are Mark Tassale, Chairman and CEO, and Larry McAlee, Chief Financial Officer. Our press release, which contains Essence financial results for the third quarter of 2020, was issued earlier today and is available on our website at Essingroup.com. Our press release also includes non-GAAP financial measures that may be discussed during today's call. The complete description of these measures and the reconciliation to GAAP may be found in Exhibit M of our press release. Prior to getting started, I would like to remind participants that today's discussions are being recorded and will include the use of forward-looking statements. These statements are based on current expectations, estimates, projections, and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially. For a discussion of these risks and uncertainties, please review the cautionary language regarding forward-looking statements in today's press release. The risk factors included in our form 10-K filed with the FCC on February 18th, 2020, as subsequently updated through other reports we file with the SEC, and any other reports and registration statements filed with the SEC, which are also available on our website. Now, let me turn the call over to Mark.

Thanks, Chris. Good morning, everyone, and thank you for joining us. Earlier today, we reported third quarter earnings and our financial results, notwithstanding the COVID-19 operating environment. For the third quarter, we earned $125 million compared to $15 million last quarter and $145 million for the third quarter a year ago. The increase in this quarter's earnings was driven by a decrease in new default notices, which resulted in a lower loss provision of $55 million versus $176 million for the second quarter. Our outlook on the COVID-19 economy remains cautious. However, we are pleased with the resilience and strength that housing has demonstrated throughout the year. Unlike the great financial crisis when housing played a big role in the downturn, during COVID-19, housing has been a bright spot in the economy. Low mortgage rates, affordability, and rising demand for single-family homes have been the primary drivers of strong refi and purchase mortgage volumes. For 2020, total mortgage originations are forecasted to be in excess of $3 trillion, with over $500 billion of industry NIW. During the third quarter, we grew insurance and force 19% to $191 billion, compared to $161 billion at September 30, 2019. Our growth this quarter was driven by $37 billion of NIW, all set by runoff, as our persistency was 64% compared to 68% last quarter and 82% for third quarter a year ago. We continue to be pleased with the high credit quality of our NIW, noting that the last two quarters production is stronger than earlier this year. This is due to the credit tightening by the GSEs and our industry in response to COVID-19, along with increased share of refi mortgages for the third quarter our niw maintained an average fico of 751 compared to 749 last quarter and 744 for the third quarter a year ago since the onset of covet our focus has been on enhancing our balance sheet and further strengthening our capital and liquidity positions most recently we closed on a 399 million dollar iln transaction increased our credit facility to $625 million and generated $385 million in net operating cash flow during the second and third quarters combined. As a result of these actions, and including our $440 million capital raise in May, we now have access to over $1.1 billion of incremental capital versus where we were on March 31st. From a PMAR's perspective, we remain well positioned at September 30th. After applying the 0.3 factor for COVID-19 defaults, Essent guarantees PMAR sufficiency ratio is strong at 156% with $981 million in excess assets. Excluding the 0.3 factor, our PMAR sufficiency ratio remains strong at 132% with $657 million in excess assets. Note that the PMARS excess does not include the $685 million in cash and investments at the holding company, nor the capital credit provided by our October ILN transaction. S&P Guarantee remains the highest rated monoline in our industry at single A by AMVEST and A3 and BBB Plus by Moody's and S&P, respectively. On the Washington front, we continue to believe that Essent and private mortgage insurance are well positioned, regardless of the outcome of the election. As mentioned, housing has been a bright spot in the economy during COVID-19, and private mortgage insurance plays a key role in facilitating homeownership. Certainly, as the political landscape begins to take shape over the coming months, we will focus on any new initiatives pertaining to housing finance and implications on our business. Finally, our buy, manage, and distribute operating model provides us confidence in managing our business through cycles and mitigating franchise volatility. In connection with this confidence, along with our strong capital and liquidity positions, our Board of Directors has approved a quarterly dividend of $0.16 per share to be paid on December 10th. We will evaluate future dividends as we continue to navigate the COVID-19 economic environment. Now let me turn the call over to Larry.