Essent Group Ltd.

Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the SN Group fourth quarter and year-end earnings conference 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 during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again press the star one. Thank you. Phil Stefano, Vice President, Investor Relations. You may begin your conference.

Thank you, Rob. Good morning, everyone, and welcome to our call. Joining me today are Mark Casale, Chairman and CEO, and David Weinstock, Interim 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 Essent's financial results for the fourth quarter and full year 2022, was issued earlier today and is available on our website at EssentGroup.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 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 16th, 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. Earlier today, we released our fourth quarter and full year 2022 financial results. Our strong performance, which reflects the earnings power of our business, benefited from better than expected credit performance, along with increased persistency and investment income as a result of higher rates. These results demonstrate the strength of our economic engine in generating high-quality earnings. Heading into 2023, we remain confident in our buy, manage, and distribute operating model, despite some economic uncertainty. While our franchise is levered to the economy and housing, we continue to manage the business considering a range of scenarios. As for the economy, the consumer has shown resilience and unemployment has been relatively stable. With regards to housing, We remain constructive over the longer term as we continue to believe that low inventory and demographic driven demand should support home prices. And now for our results. For the fourth quarter of 2022, we reported net income of $147 million as compared to $181 million a year ago. On a diluted per share basis, we earned $1.37 for the fourth quarter compared to $1.64 a year ago. For the full year, we earned $831 million, or $7.72 per diluted share, while our return on average equity was 19%. At December 31st, our insurance and force was $227 billion, a 10% increase compared to a year ago. Our 12-month persistency on December 31st was 82%, and the weighted average note rate of our book is approximately 3.8%. While there has been some relief to affordability pressures since rates peaked last November, recent mortgage rates should continue to translate to an elevated level of persistency. At the same time, 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%. On the business front, we activated 150 new customers in 2022 as we continue to drive lender penetration, and growing the Essent franchise. In addition, based on expected credit normalization, we increased rates during the year. Our pricing engine, Essent Edge, enables us to efficiently raise rates in targeting adequate risk-adjusted returns in pricing long-tail mortgage credit risk. And we believe that Edge is mutually beneficial, delivering our best price to borrowers while helping to optimize our unit economics. Our Bermuda-based reinsurance entity, S&RE, had another strong year of performance, writing high-quality and profitable GSC risk share business and continuing to provide fee-based MGA services to our reinsurer clients. As mentioned last quarter, the current environment is providing S&RE with improved pricing and opportunities to move up in the structure to optimize returns. S&RE ended the year with third-party annual revenues of approximately $69 million, and third-party risk and force of approximately $2 billion. Since 2014, Essendree has earned over $275 million of net income from its third-party business. Essend Ventures, our strategic investment unit, was formed to enhance financial returns while gaining insights to improve our core business. Ever to date, these investments have created $85 million of value, of which $64 million have been returned as realized proceeds. As of December 31st, the carrying value of other invested assets is $258 million. It was through these efforts in Essent Ventures that we identified our planned title transaction. Title insurance is a natural complement to our mortgage insurance business with relatively stable underwriting performance and efficient capital requirements. This acquisition adds a team of seasoned title professionals to Essent and provides a platform to leverage our capital position, lender network, and operational expertise in a well-established adjacent sector. Cash and investments as of December 31st were over $5 billion, and the annualized investment yield for the fourth quarter was 3%. For the full year of 2022, our investment yield was 2.6% compared to 2% in 2021. As a reminder, for every one point increase in the investment yield, there is a roughly one point increase in ROE. As of December 31st, we are in a position of strength with $4.5 billion in gap equity, access to $2.5 billion in excessive loss reinsurance, and over $1 billion of available holding company liquidity. With a full year 2022 operating cash flow of $589 million, our franchise remains well positioned from an earnings, cash flow, and balance sheet perspective. At year end 2022, approximately 98% of our portfolio is reinsured. In the fourth quarter, we closed a quota share transaction with a panel of highly rated reinsurers to provide forward protection for our 2023 business. We will look to continue executing upon our diversified and programmatic reinsurance strategy that mitigates earnings volatility from economic cycles and provides capital relief. In 2022, we return nearly one quarter of our earnings to shareholders in the form of dividends and share repurchases. We remain committed to a balanced approach between capital distribution and capital deployment, including investing $100 million for our planned title acquisition that I previously mentioned. Further, given our strong financial performance during the year, I am pleased to announce that our board has approved a 2 cents per share increase in our common dividend of 25 cents. Moving forward, we will review our common dividend annually as we continue to believe that maintaining and steadily increasing dividends is a meaningful demonstration of the confidence we have in the stability of our cash flows and the strength of our operating model. Now, let me turn the call over to Dave.