This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Ladies and gentlemen, thank you for standing by and welcome to the Essent Group Limited third quarter 2021 earnings call. All participant lines are in a listen only mode. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, send the number one on your telephone keypad. To withdraw yourself from the queue, simply press star one again. Thank you. I would now like to turn the call over to Chris Kern, Senior Vice President of Investor Relations. Please go ahead, sir.
spk10: Thank you, Paula. 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 Essence financial results for the third quarter of 2021, was issued earlier today and is available on our website at EssenceGroup.com. Prior to getting started, I would like to remind participants that these 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.
spk08: Thanks, Chris, and good morning, everyone. Earlier today, we released our third quarter earnings, which continue to demonstrate the strengths of our buy, manage, and distribute operating model in generating high-quality earnings, robust returns, and excess capital. Combined with investing capital back into the business and redistribution to shareholders through dividends and buybacks, our business is operating on all fronts. For the third quarter, we reported net income of $205 million as compared to $160 million last quarter. Income for the third quarter includes $41 million of earnings associated with some of our strategic investments and limited partnerships. On a diluted per share basis, we earned $1.84 for the third quarter compared to $1.42 last quarter, while our annualized return on average equity for the third quarter was 20%. At September 30th, our insurance and force was $208 billion, a 9% increase compared to $191 billion as of the third quarter a year ago. The credit quality of our insurance and force remains strong. with an average weighted FICO of 745 and an average LTV of 92%. Also, we have reinsurance coverage on 75% of the portfolio as of September 30th. On the business front, we formally rolled out the next generation of S&Edge in October. The latest iteration of our risk-based engine offers more refined pricing as we continue to optimize our unit economics. With edge technology sitting in the cloud, we are able to analyze large amounts of data with machine learning and seamlessly deliver price to customers. Given the commoditized nature of mortgage insurance, we believe that collecting and evaluating more data to price mortgage risk is a long-term competitive advantage. As of September 30th, we are in a position of strength with $4.2 billion in gap equity, access to $2.4 billion in excess of loss reinsurance, and over $800 million of available liquidity. With a year-to-date operating margin of 78% and operating cash flow of $518 million, our operating engine continues to drive our balance sheet strength. As evidence of this, Essent 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. While our preference has been to retain excess capital and reinvest back in the business, the strength of our model enables a measured approach to excess capital as evidenced by our dividend and share repurchase program. However, it's important to remind everyone that a credit event can quickly change the needs of our business, whereby capital distribution can quickly pivot to capital shortage. While reinsurance should help soften headwinds from credit cycles, we remain committed to managing capital for the long term and maintaining a fortress balance sheet. At September 30th, our book value per share was $37.58. We believe that success in our type of business is measured by growth in book value per share. Since going public in 2013, our annualized growth in book value per share is 21%, which we believe is a meaningful demonstration of our ability to invest capital and build long-term shareholder value. Finally, given our financial performance during the third quarter, I am pleased to announce that our board has approved a one cent per share increase in our dividend to 19 cents. This represents a 19% increase from the dividend that we paid in the fourth quarter of 2020. Now, let me turn the call over to Larry.
spk11: Thanks, Mark, and good morning, everyone. I will now discuss the results for the quarter in more detail. For the third quarter, we earned $1.84 per diluted share, including 28 cents per diluted share associated with net unrealized gains on other invested assets, compared to $1.42 last quarter and $1.11 in the third quarter a year ago. As Mark noted, income on other invested assets in the third quarter was $41 million, including $39.5 million of net unrealized gains. Through June 30th, 2021, unrealized gains and losses reported on these investments were recorded in shareholders' equity through other comprehensive income. In the third quarter, management determined that the unrealized gains and losses on these investments should be reflected in earnings rather than other comprehensive income. Net earned premium for the third quarter of 2021 was $219 million and includes $11.6 million of premiums earned by Essent Re on our third-party business. The average net premium rate for just the U.S. mortgage insurance business in the third quarter was 40 basis points down from 41 basis points in the second quarter. Persistency increased during the quarter to 62.2% at September 30, 2021, compared to 58.3% at June 30, 2021, and 56.1% at March 31, 2021. Our provision for losses and loss adjustment expenses was a benefit of $7 million in the third quarter of 2021, compared to a provision of $10 million last quarter. The benefit for losses in the third quarter was impacted by the continued cure activity on existing defaults. The decrease in the provision was due primarily to the makeup of the default portfolio, as older, more seasoned defaults with higher case reserves cured during the current quarter, while new defaults reported with lower case reserves were added. During the third quarter, we received 5,132 new default notices, which is up 4%. compared to 4,934 defaults reported in the second quarter. We had 8,862 defaults cured during the third quarter compared to 10,453 cures in the second quarter of 2021. At September 30th, our default rate decreased to 2.47% from 2.96% at June 30th. Since the fourth quarter of 2020, we have reserved for new defaults using our pre-COVID-19 reserve methodology. As a reminder, for new defaults reported in the second and third quarters of 2020, we provided reserves using a 7% claim rate assumption. This assumption was based on expectation that programs such as the federal stimulus, foreclosure moratoriums, and mortgage forbearance may extend traditional default to claim timelines and result in claim rates lower than our historical experience. We have not adjusted these reserves previously recorded in the second and third quarters of 2020 which total $243 million as they continue to represent our best estimate of the ultimate losses associated with these defaults. Other underwriting and operating expenses in the third quarter were $42 million compared to $41 million in the second quarter. We now estimate that other underwriting and operating expenses for the full year 2021 will be in the range of $170 million. Our updated estimate of the annualized effective tax rate for the full year 2021 is 16% before consideration of discrete items. The tax rate for the third quarter was 16.8%. During the quarter, Essink Group Limited paid a cash dividend totaling $19.9 million to shareholders in September and repurchased $70.9 million of stock during the quarter. As of September 30th, we have bought back approximately 2 million shares for a total of $89 million. During the third quarter, Essink Guaranty completed a dividend of $47 million to its U.S. holding company. From a PMIRES perspective, after applying the 0.3 factor for COVID-19 defaults, Essink Guaranty's PMIRES sufficiency ratio is strong at 162% with $1.2 billion in excess available assets. Excluding the 0.3 factor, our PMIRES sufficiency ratio remains strong at 152% with $1.1 billion in excess available assets. Now, let me turn the call back over to Mark.
spk08: Thanks, Larry. In closing, our third quarter performance was solid as we produced strong earnings and continued to generate excess capital. Our buy, manage, and distribute operating model is driving robust returns, and confidence in our economic engine is high. We remain positive in continuing to leverage S&Edge in optimizing our unit economics in a competitive market as we continue to utilize technology to leverage more predictive pricing variables. We believe that combining AI with large quantities of data is where the financial services industry is moving, and we believe Essent is at the forefront of this. The strength in our MI results affords us flexibility in allocating excess capital across the core business, potential strategic investments, and redistribution to shareholders. While considering and executing on each of these levers, we are taking a measured approach around capital allocation, We believe long-term investors will be rewarded with this patience. Now let's get to your questions. Operator?
spk01: The floor is now open for your questions. To ask a question, please press star 1 on your telephone keypad. Again, that's star 1. Your first question comes from Rick Shane of J.P. Morgan.
spk02: Hey, guys. Good morning, and thank you for taking my question. Mark, one of the big changes that's occurred recently with the amount of refinance activity and the amount of NIW over the last 18 months is a significant shift in vintage of the portfolio. If you could just talk about any difference in characteristic of the new vintage or how we should think about seasoning of that over the next couple of years, that would be really helpful.
spk08: Sure, Rick. You know, the fundamental kind of characteristics of the new business versus the old hasn't really changed that much. We've been, you know, think about an average FICO of 745, kind of an LTV of 92-ish. That's been consistent. What we saw a little bit in 2020 was more refinancing versus purchase this year. But I would say the portfolio continues to be strong. So I wouldn't look at any big differences It's relatively young again versus where it was given the amount of refinancings. But we've also had a lot of the embedded HPA already in that young portfolio. Our mark-to-market LTV on the portfolio, it's right around 80%. So it's a pretty strong portfolio, Rick. So, again, I wouldn't look to see too many differences. And, again, I think we're pretty pleased with the portfolio as it stands today.
spk02: Got it. And on the second part of the question, just how should we think about the seasoning? Because historically, the portfolio has been sort of more homogenized in terms of vintage, and now you have more concentrated vintages. So we probably need to think about seasoning just a little bit more. How should we consider that?
spk08: Yeah, good question. Again, I think if rates go up, which we think they will, right, as given – Given some of the headwinds we're seeing around inflation, I think the persistency could really go back to normal. So you're right. It could be thinking of these vintages. It's not it's you were kind of stuck then almost in these kind of 20 and 21 vintages. I would look at this as actually a good thing, right? So we're locking in kind of the yields that we have on the premiums. We already have the embedded HPA. I would say the wind is at our back in terms of the portfolio. So as it seasons and as we enter into a potential headwind, right, I mean, the industry or the economy is not going to grow forever, it's a pretty good portfolio to go into that type of environment. And remember, most of it's reinsured, 75% at the end of September. but probably will quickly approach 90 as we complete the latest ILN, which we're at the market with now. So, again, I think we're pretty well positioned for the portfolio, probably better maybe than most investors think in terms of, again, locking into those two-year vintages. I think we'll end up performing pretty well. Sounds great. Hey, Mark, thank you very much. Sure.
spk01: Your next question comes from Mark Debris of Barclays.
spk09: Thank you. Mark, I think you get credit for being a little bit more candid about the competitive environment than some of your competitors. We've heard this earnings season that competition has been pretty stable around pricing. Just wanted to get a sanity check to see if that kind of aligns with what you're observing.
spk08: Yeah, I would say from a competitive standpoint, just in general, taking a step back, The business is changing, Mark. It's changing from a rate card only relationship business to fee only. And I think a lot of the companies are struggling with that. I really do. Because a lot of them are still using rate cards and promoting rate cards. We've heard feedback from lenders directly to me that some of our competitors are trying to sell them off the engine versus, you know, trying to use the card versus the engine. In 01, that tells me they're behind on the technology, clearly. So, you know, in terms of using a static card versus an engine, I think they're using the cards as a crutch. I think a lot of the industry, as we said, is commission-based, so people do what they're incented to do. and I think, you know, again, I think the industry's changing. I think we took that challenge head-on. You know, it's going from relationship to fee. We invested in the technology to make sure we could price more accurately, and that's using more information. Again, if it's all about fee, you better have more information than the next guy, and we started that process, you know, three years ago now, and the result is, as an edge, kind of the next generation of it, so I do think they're struggling with that. In terms of Just in terms of kind of premiums, though, from an ESSIM perspective, and I know we've been asked about, you know, I know there's been a lot of questions around premium. They're compressing, but really the majority of that compression is coming from the decline in SEI, right, and also a little bit as the reinsurance ramps up. We see our premium levels, the gross premium levels, stabilizing in 2022. You know, where it goes after that is really a function of kind of – premium on new NIW. And Mark, our premium on new NIW has been relatively flattish for the past eight quarters. I'm not sure everyone can say that. Again, what we see in the industry is a few guys, you know, kind of chasing the market down. They go after the bid cards. And there's two large lenders that bid out their product every four months, six months, And folks gravitate towards that. We have not. It's something, you know, we've been involved in those type of lenders in the past. We just refuse to kind of lower our price every four months like clockwork. We don't think it's prudent in the long term. And again, that's where the engine is going to be more of a long-term advantage. We can pick our spots. And again, it's all about unit economics, right? It's about optimizing the premium level with pricing, which I think we're doing. And, you know, We're also, in terms of investment income, always looking to increase the yield there. And then, Mark, sometimes it gets down to old-fashioned managed expenses. So, again, we took our guidance down on expenses. That's something we can control every day. We don't see that, you know, across the industry. So, yeah, I mean, again, I think competitively, those are the factors really driving it. But I think from an Essent perspective, again, we always feel like we're going to be kind of in the middle of the pack in terms of share. And we're going to use the engine and our analytics to try to optimize the premium for whatever share we do get.
spk09: Okay, that's very helpful context. And then I think you mentioned reinsurance. You're up to like 75% of the portfolio is now reinsured.
spk08: Where do you see that going? Yeah, I mean, generally it's around 90%. And that's kind of a good guide for us to get. We're out in the market now with another ILN. We like 90%. Again, getting back to kind of the premium levels markets, think of about like four or five basis points that we are ceding to reinsurance. It's a meaningful number. I mean, you're looking at close to $100 million, if not more than $100 million, which is, again, significant. But we think, again, from a hedging perspective, and able to hedge out that mezzanine exposure, it is money well spent. And when the COVID winds were blowing, You know, last year, I think investors, maybe not initially, but longer term, and certainly at Essent, we're very glad that we had, you know, that reinsurance. And, again, that's all part of the buy, manage, and distribute operating model. I think it's critical because, again, when you think about housing, right, housing is very good right now, Mark. I mean, you have tailwinds in terms of, you know, excess demand versus supply, right? HPA has grown a lot and we'll, you know, expect it to modify. GDP growth is good. But there's always clouds on the horizon, right? We talked about inflation, you know, given, you know, housing surplus or shortage could turn into a surplus someday. We will enter into another recession, right, at some point. COVID was a scare in my view and it turned out not to be a real credit event, even though we booked a number of reserves around that. And it's almost like the hurricane that didn't quite happen. And people, hopefully from an ESSIM perspective, you have to keep your guard up. Hence my comment in the script around maintaining a fortress balance sheet. What does that mean? That means making sure you have not just excess capital, but low leverage, that we're prepared you know, for every event. So we kind of have a dual approach to this with capital, right? Are we using capital to look for opportunities outside of the core business, which we're doing? We're clearly investing in a lot of those, the venture funds, which turned out to, you know, we had a nice gain on in this quarter and in this year. which I think is good evidence that we're pretty good at allocating capital, but that wasn't even the primary purpose of it. The primary purpose of it was to use things to improve, you know, our core business. And now I think we're going to expand that scope to look outside the core business. Meanwhile, you still want to make sure you have a core balance sheet in case things don't go bad. So you don't want to grow and just try to run into a brick wall. So it's a balance that you have to have when you're managing a risk organization like we are.
spk09: Okay, great. Thank you.
spk01: Your next question comes from Mihir Basha of Bank of America.
spk07: Hi, good morning, and thank you for taking my questions. Maybe we'll start with just the ending of that last answer in terms of investing outside in non-MI businesses. Valuations, have they got more interesting? Are we closer to seeing that investment actually happen?
spk08: Yeah, I mean, I think the valuations have not gotten more interesting as evidenced by the gain in some of our limited partnership interest. I mean, those were comprised of, you know, some of our real estate funds, which have done well because of HPA, but also a number of the underlying companies have gone public or have SPACed at, you know, I would say pretty healthy valuations. So we've been the beneficiary of that, but it's kind of, I think it hurts you on the front end in terms of new businesses. That doesn't stop us from continuing to look and to evaluate here. So we're out. We've really started to build the infrastructure. So we started with the funds a few years ago. We started to bring on folks who are professional investors, who have experience in looking at these types of businesses. I mean, we're operators. We're not professional investors like the folks... in the audience today. But we do understand the business and we're good operators. So we think it's a good, we think a combination of, you know, investors and operators is pretty good. So we'll continue to, you know, look at these venture type funds and the companies, you know, that they invest in. You know, I was out traveling, you know, a few weeks ago for two days visiting a lot of these companies. So I like to kind of, you know, I used to always, you know, pre-COVID go out and visit our customers and get a chance to know them. And I'll continue to do that, but probably not at the pace I did before, again, just because of the changing nature of the business that I spoke to earlier. But I'm out a lot now looking at these young companies, and I like to sit across from them. I like to try to understand their business, see how we can add value to them. You know, what do we bring to the table? Clearly capital. I think we bring infrastructure around managing a business. I think we bring a lot of experience on how to scale a business from start, from scratch. We clearly bring regulatory expertise in terms of how to manage a business. Now we're looking for a good fit. Is it a company that can grow? Do they have the passion that we had when we started the business? I like to see a lot of that. We don't always see it in some of the venture companies. They're more interested sometimes in getting from a series A to series B at a better valuation than building a great business. You know, we want to work with the folks who want to build a great business. And I kind of know it when I see it. So we have a watch list. We'll continue to work with these companies and we'll see, you know, we'll see what happens. But also, Mihir, I'm not against anything big either. You know, so we're open because we're here allocating capital for shareholders. And whatever we can do to continue to grow Essyn or to make Essyn a better company for shareholders, we're going to do it. It's not about what I want to do. It's what we think needs to be done for shareholders. And if we don't find anything, we'll push more money back to the shareholders. It's kind of that simple.
spk07: Thank you for that. That is good to hear and helpful. I did want to go back to your comments on persistency for a second. I mean, I understand. you know, given the rate expectations that persistency moves up. But I was curious that given the high level of home price appreciation, could that have an impact on persistency? I mean, we're hearing more, I know historically it hasn't had a big impact, but we're hearing more and more from originators and services that there's potential for them to mine their portfolios to, you know, generate more refi type activity or cash outs and things like that. So I was curious if that has, Is that something you're seeing or hearing about at all from your customers? Thank you.
spk08: We're not seeing it yet, but, again, that certainly could be, you know, again, a lot of it's going to be dependent on rates. So, I mean, if they're in the money, they probably should be refinancing. You know, whether they can leverage HPA to potentially get out of MI, good for them, good for the borrower. Whatever's good for the borrower is good for us longer term. But, you know, remember, it's correlated. So if their level of refinancing goes up, we certainly will see that in the NIW number. But again, we haven't seen it. I think we're 90-ish plus percent purchase. But again, I think as we go into 2022, depending where rates are, we think purchase market will, we think it'll continue to be strong. I think it's going to take a pretty big spike in rates for it to kind of dampen the demand of new home ownership. I mean, again, the millennials, which we sound like a broken record, but it's know four to five million and new potential homeowners come into that space every year given how they're aging so we feel pretty confident on purchase uh over the next you know couple years and then refinance i still think is just a function of rates got it and then my last question just in terms of opex and we heard a lot this quarter about from the card companies in particular about it getting more expensive to hire technology talent i assume you're seeing that too so my question is just
spk07: Does that in any way slow down your initiatives around ML and AI and just building up that rate card more? And also maybe just comment on the availability of talent affecting that. Thank you.
spk08: Yeah, it's a good question. I would say that, yeah, the technology talent is a little different than other talent that we have in the organization in terms of attracting them. There's a lot of opportunities. We haven't – we're pretty efficient in terms of – of leveraging talent. We haven't had too many issues. One of the initiatives we're doing across the company is bringing in younger folks right out of college. So we've done that. We've done it in our underwriting group where we've had a really successful junior underwriting program. We've done it in the BD group. We've done it within our corporate development area. We're kind of on the hunt for talent, both you know, I would say, you know, right out of college and also 15 years out of school, we've done a really good job building, bringing in some really strong talent, kind of in that mid-30s type range, which we think, again, is kind of building that next core for Essent to grow to the next level. On the IT front, we're, you know, we're bringing folks in out of college through training and obviously across, you know, in another level. So, To answer your question, no, we haven't had met much, but we're not out hiring a lot. We're very, you know, in terms of who we hire, and we also leverage outside resources. So we can also leverage, you know, we're leveraging, you know, AWS, you know, the AWS guys a lot just for our move to the cloud. They're actually bringing in a lot of their engineers to help accelerate our move to the cloud. We thought I think initially our move to the cloud was going to be at the end of what 2023 and now we believe will be fully on the cloud by the middle of next year and AWS has really been really been a good partner in helping us accelerate that. So I want to say we have, you know, 20 plus folks of theirs working with us, you know, on site and remote to make that happen faster. So a lot of it is just making sure You know, you can use either people on site or, I mean, having them work for you here or using contractors or using third-party consultants to kind of accelerate it. So we kind of look at it, you know, faster, cheaper, and who can you use to solve the problem quicker.
spk03: Thank you. Sure.
spk05: Your next question comes from Ryan Gilbert of BTIG.
spk00: Hi, thanks. Morning, guys. Wondering if you had any comments on how Essent might participate as the GSEs ramp up their CRT programs again.
spk08: Yeah, well, remember, we're participating in, obviously, out of Essent Re. So, Freddie was, I think, our sole provider last year. Gaspani kind of pulled out of the market. So, we would expect... you know, we would expect the Fannie guys to, as they're ramping that up, we'll participate in that. And we participate in this twofold, right? Not only of us taking principal risk, but we also do it via our MGA where we get, you know, pretty, you know, it's been a nice fee business for us over the last few years. We also get a profit component of it. And so, you know, we see some nice potential there with Essentery, probably on a smaller scale than Essent. But again, as we think about you know, strategic investments in new businesses and our ability to scale. That's another good example of us starting a business, you know, post IPO from scratch. And it's at the point now where it's, you know, as we said, you know, before, it's very efficient business. I mean, we earn on an annualized basis $50 million in third party premiums. And it's pretty, it's a pretty efficient team over there in Bermuda. So again, It's never going to drive growth at Essendon, but when you think about, again, improving unit economics, it's always the little things that count. And we've been very pleased there. And, again, with Fannie coming into the market, we would expect their potential, you know, maybe to grow a little bit more than they have.
spk03: Thanks very much. That's all I had. Okay.
spk01: Your next question comes from Jeffrey Dunn of Dowling & Partners.
spk12: Thanks. Good morning. Just a couple more number-related questions. First, Larry, can you break down the liquidity between Bermuda and U.S. Holdco and define any of the movements from U.S. to Bermuda this quarter?
spk11: Jeff, we don't break out. We decided to put them together because they're very fungible, the cash balance at U.S. Holdings and at Essendon Group Limited. We did not move any distributions, though, up from the U.S. to Bermuda during the quarter. So we'll be disclosing just the combined cash and investment balances at both holding companies going forward.
spk08: And part of it, Jeff, is, you know, we're moving an added guarantee into U.S. holdings, and it may sit there if we don't need it up at group just because you have the 5%, you know, percent withholding tax. So when you think about movement within U.S. holdings, you know, we did form another unit this year called Essend Ventures. which is where we're holding a lot of the venture funds. We've kind of removed them from guarantee. We've also made small direct investments in ventures, you know, very small. But, you know, we can use the cash for that and any potential other strategic investments, and we can always move it up to group. Also think of S&RE. S&RE is another backdoor way to get cash up to the group level. So, again, we just thought it was simpler to say holding company versus get into – you know, a lot of the ins and the outs. Okay.
spk12: And then if you look at your relative reserving, your early stage delinquency bucket's been running 11%, 12%. This quarter we're down to nine. Is that just a timing mix issue with the inter-quarter cures, or has experience prompted you to carry a lower relative reserve on the earlier delinquencies?
spk11: Yeah, no, Jeff, it's mixed. We made no significant changes in reserve factors, continue to use the same model. And again, just a mix between, you know, between the timing of that. But yeah, no, all mixed.
spk08: And I think to be clear, Jeff, just so everyone, you know, understands kind of the context of it, and I know Larry addressed this in the script, but we haven't touched the second or third quarter cohorts yet. They're trending very well. So we had a 93% kind of cure rate assumption for both of those quarters. You know, we're getting close. I mean, we're 86 on the second quarter cohort, 81 on the third quarter cohort. And I think the second quarter cohort was 88 at the end of October. So we're moving close to that number. We believe, you know, by the end of the fourth quarter, first quarter, you know, we'll be able to make a call. kind of on reserve release. We certainly don't believe we're over-reserved at this point. We think we're adequately reserved, but we'll continue, you know, again, if it trends this way, you know, always things can happen. I think a lot of the, you know, the negative provision this quarter was just a function of the model. We moved back to the model, you know, back in the fourth quarter of last year. So, you know, a COVID default in the fourth quarter got hung up at 9% expected claim rate and kind of ran through you know, the delinquency buckets. So, you know, build up higher reserves and, you know, because it's one all the way to 180, why not if they're in forbearance? And then Acura, there's a big reserve release. So I think it's, from an investor standpoint, I think it bodes well. I think it's something to look at that, you know, the fact that we're running it through kind of mechanically through the model and seeing this type of performance, I think it's actually pretty good.
spk03: All right. Thanks for the comments.
spk05: We have one more question. Your final question comes from Bose George of KBW.
spk06: Hey, guys. Just a couple of little things. Actually, on the expenses, so your guidance now suggests the fourth quarter is close to 45-ish million. So is that a good, you know, run rate for 2022 as well, at least as a starting point?
spk08: I wouldn't say that yet. Some of it is. We always like to give the guidance. We're going to punt that until February, Beau. But again, yeah, I mean, it's not a bad run rate, but we'll firm that up in February.
spk06: Okay. And then, actually, just in terms of the seeding that you do to S&D this year, you know, on NIW, I guess you took it up to 35 from 25. You know, what are the variables you look at in terms of potentially increasing that, either for the back book or, you know, prospectively?
spk08: It's a lot of it. It's a good question. It's a lot of it's capital. A lot of it's making sure we don't trip anything around PFIC or the BTECs. So we're pretty comfortable with 35. No plans right now, to be honest with you, to move it up. Certainly something we'll look at, but, you know, Let's see how all the infrastructure bills go through and see where taxes land. Always a lot of movement there. So, you know, we'll wait to see the dust settles there, and then we'll reevaluate it.
spk06: Okay, great. That's all I had. Thanks.
spk01: This concludes the Q&A portion for today's call. I will now turn the floor back over to management for an additional or closing remarks.
spk08: No additional comments here. Just want to wish everyone a good weekend, and thank you for your participation today. Take care.
spk01: Ladies and gentlemen, this concludes today's event. You may now disconnect.
Disclaimer