Essent Group Ltd.

Good day and thank you for standing by. Welcome to the Asset Group Limited second quarter 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. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your first speaker today, Chris Curran, Senior Vice President of Investor Relations. You may begin, sir.

Thank you, Brian. Good morning, everyone, and welcome to our call. Joining me today are Mark Cassell, Chairman and CEO, and Larry McAlee, Chief Financial Officer. Our press release, which contains ESSEN's financial results for the second quarter of 2021, was issued earlier today and is available on our website at essengroup.com. 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 SEC on February 26, 2021, 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, and good morning, everyone. Today, we are pleased to report our second quarter earnings, which exhibited both strong performance and capital generation. Our results for the quarter reflect a favorable operating environment as credit continues to normalize and housing demand remains elevated. The economic engine of our business remains firmly in place as our high-quality earnings and cash flow for the quarter demonstrate the strengths of our buy, manage, and distribute operating model. Our outlook on our business remains positive, as the underlying fundamentals of housing are strong and we continue to make solid progress on the next generation of our S&Edge technology. On the housing front, strong millennial demand and historically low rates continue to provide positive underpinnings. As for S&Edge, we continue to enhance its utility by combining increased amounts of data with the use of artificial intelligence-based models. We believe this capability will be a long-term advantage in pricing and managing credit risk. Now let me touch on our results. For the second quarter, we reported net income of $160 million as compared to $136 million last quarter. On a diluted per share basis, we earned $1.42 for the second quarter compared to $1.21 last quarter, and our annualized return on average equity for the second quarter was 16%. At June 30th, our insurance and force was $204 billion, a 17% increase compared to $175 billion as of the second quarter a year ago. The credit quality of our second quarter NIW was strong, with a weighted average FICO of 744 and a loan-to-value ratio of 92%. Also, we continue to be pleased with credit performance. as our default rate at June 30th was 2.96% compared to 3.7% last quarter and 5.19% at the end of the second quarter a year ago. On the business front, we continue to focus on optimizing our unit economics. While the more tangible aspects of this include using ILNs to minimize loss volatility and ceding more business to S&RE, we also continue to invest in technology-related initiatives. A platform like ours is technologically intensive, as we need to seamlessly deliver pricing and services to thousands of customers located throughout the US. For example, we are nearing completion of migrating our platform to the cloud, which provides more data storage, processing, and computing power. This enables us to deliver our edge technology more efficiently, given the need to quickly analyze large amounts of data from a variety of sources and combine with machine learning techniques. We believe that this will benefit our unit economics over time in optimizing premium levels and credit costs. In fact, we also believe that customer efficiencies of using Edge will deliver our best price to borrowers and challenge the industry practice of using negotiated rate cards. On June 30th, our balance sheet and capital are strong. With over $4 billion in gap equity, access to $2.4 billion in excess of loss reinsurance, and over $800 million of available liquidity at the holding company, we are well positioned. Our most recent ION transaction was our largest to date, where we obtained $558 million of reinsurance through the capital markets. Also, S&Garanty 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. We remain pleased with our base business, which is an earnings and cash flow engine during positive economic environments. For example, for the first half of the year, our operating margin was 73%, and we generated $340 million in operating cash flow. Given the use of reinsurance, which enhances the sustainability of our business, there's more certainty in the earnings power and capital generation of our franchise. While our practice has been to retain cash and invest, The strength of our business model enables a measured deployment of excess capital amongst the business, strategic investments, and shareholders. We will continue to be thoughtful in deploying excess capital and doing what we believe is in the best long-term interest of the Essendon franchise and our shareholders. Finally, given our financial performance during the second quarter, I am pleased to announce that our board has approved a one cent per share increase in our dividend to 18 cents. Also, in connection with our $250 million repurchase plan, we have bought back approximately 400,000 shares for a total of $18 million as of June 30th. Similar to dividends, repurchasing shares is a tangible demonstration of the benefits of our model in generating capital. It also provides further balance in deploying excess capital between the businesses and redistribution to the shareholders. Now, let me turn the call over to Larry.