Essent Group Ltd.

Ladies and gentlemen, thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Essent Group Limited first quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star 1. Thank you. It's now my pleasure to turn today's call over to Mr. Phil Stefano, Vice President of Investor Relations. Please go ahead.

Thank you, Brent. Good morning, everyone, and welcome to our call. Joining me today are Mark Casale, Chairman and CEO, and Larry McAuley, Chief Financial Officer. Also on hand for the Q&A portion of the call is Chris Curran, President of Essent Guarantee. Our press release, which contains ESSEN's financial results for the first quarter of 2022, was issued earlier today and is available on our website at essengroup.com. Prior to getting started, I'd 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 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 16, 2022, 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, Phil, and good morning, everyone.

Today, we released our quarterly financial results which continue to reflect the favorable credit performance of our portfolio. For the first quarter of 2022, we reported net income of $274 million as compared to $136 million a year ago. Our first quarter results benefited primarily from the release of approximately $100 million of our COVID reserves associated with defaults from the second and third quarters of 2020. On a diluted per share basis, we earned $2.52 for the first quarter, compared to $1.21 a year ago. And our annualized return on average equity was 26%. From a macro standpoint, while rising rates and strong home price appreciation have started to challenge affordability and housing demand, we believe the structural outlook for the housing market is positive. The undersupply of housing should support home prices in the short term, while favorable demographic trends should continue to bolster housing demand in the long term. At March 31st, our insurance and force was $207 billion, a 5% increase compared to $197 billion a year ago. The credit quality of our insurance and force remains strong, with a weighted average FICO of 746 and a weighted average original LTV of 92%. Strong home price appreciation in recent years has enabled the accumulation of embedded home equity for a material portion of our book, While home price growth is likely to moderate going forward, this embedded value should mitigate the risk of future claims. Our 12-month persistency at March 31st was 69%, while three-month annualized persistency was approximately 80%. In addition, 78% of our insurance and force is comprised of 2020 and later vintages with a weighted average note rate in the low 3% range. As a result, our in-force portfolio is well positioned in a rising rate environment, as higher rates should translate to higher persistency. We continue to act upon our diversified and programmatic reinsurance strategy. In the first quarter, we closed a 20% quota share transaction with a panel of highly rated reinsurers to provide forward protection for our 2022 business. Also, we are currently in the market to execute an excess of loss transaction which is expected to provide forward reinsurance coverage on an additional 20% of our current year business. As of March 31st, approximately 90% of our portfolio is reinsured. We operate from a position of strength with $4.2 billion in gap equity, access to $2.6 billion in excess of loss reinsurance, and approximately $1 billion of available liquidity. With trailing 12-month underwriting margin of 93% and operating cash flow of $702 million, our franchise remains well-positioned from an earnings, cash flow, and balance sheet perspective. As evidence of this, Essendon Guarantee remains the highest-rated monoline in our industry at single A by AMBEST, A3 by Moody's, and BBB Plus by S&P. As of March 31st, our book value per share was $38.98. an increase of 12% from $34.75 a year ago. Since going public in 2013, our annualized growth rate in book value per share is 21%. We continue to believe that success in our business is best measured by growth in book value per share. Our reinsurance entity, Essentry, continues to write profitable GSE business supporting our MGA clients and taking advantage of the increased supply and improved pricing in the GSE risk share market. Ever to date, S&RE has earned over $200 million of income from its third-party business. We continue to make investments through Essend Ventures in generating informational and financial returns. The carrying value of other investment assets on our balance sheet is $213 million, of which $187 million relates to ever-to-date investments through the first quarter of 2022. These investments have created $82 million of value, of which $56 million have been returned to us as realized proceeds. We remain committed to managing capital for the long term, taking a measured approach to distribution and exhibiting patience to maintain strength in our balance sheet. In general, we favor attractive investments over share repurchases as the better value creator for shareholders and the company over the long term. However, we also recognize that returning capital to shareholders generates meaningful returns for investors. Finally, given our financial performance during the first quarter, I am pleased to announce that our board has approved a one cent per share increase in our dividend at 21 cents. This is the fifth consecutive quarterly increase and represents a 24% increase from a year ago, which we believe is a meaningful demonstration of stability in our earnings and cash flow. I am also pleased to announce that our board has authorized a new $250 million share repurchase program. Now, let me turn the call over to Mark.