Essent Group Ltd.

Hello, and welcome to the Essent Group Limited first quarter 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, and instructions will be provided at that time. I will now turn the conference over to Phil Stefano. Please go ahead.

Thank you, Sarah. Good morning, everyone, and welcome to our call. Joining me today are Marc Casale, Chairman and CEO, and David Weinstock, 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 first quarter of 2023, 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 17, 2023, 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 first quarter 2023 financial results, which continue to demonstrate the earnings power of our business. Our financial performance for the first quarter benefited from rising interest rates and favorable credit performance. Higher rates translated to higher investment income, along with higher persistency, which supports the growth of our enforced portfolio despite lower origination volumes. As we continue through 2023, we remain confident in our buy, manage, and distribute operating model, While we recognize the uncertainty surrounding the economy in the near term, we continue to manage the business considering a range of scenarios. We remain constructive on housing over the longer term as we believe that demographic driven demand and low inventory should provide foundational support to home prices. And now for our results. For the first quarter of 2023, we reported net income of $171 million compared to $274 million a year ago. On a diluted per share basis, we earned $1.59 for the first quarter compared to $2.52 a year ago, and our annualized return on average equity was 15%. As of March 31st, our insurance in force was $232 billion, a 12% increase compared to a year ago. Our 12-month persistency on March 31st was 84%, and approximately 80% of our in-force portfolio has a note rate below 5%. Given current rates, we anticipate that persistency could remain elevated in the short term. 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%. While certain MSAs could experience price corrections, we believe home prices nationwide will generally be flat in the coming years. We also anticipate that the embedded home equity within the existing book should continue to mitigate the risk of near-term claims. On the business front, during the quarter, we continued raising rates through our risk-based pricing engine, Essent Edge. We believe that the pricing environment remains constructive and is reflective of ensuring long-tail mortgage credit risks given the macroeconomic backdrop. As of March 31st, Essent Re's third-party annual run rate revenues are approximately $70 million, while our third-party risk-in-force was approximately $2 billion. During the quarter, S&RE continued to capitalize on the current environment to optimize returns and contribute to the profitability of our franchise. Cash and investments as of March 31st were over $5 billion, and the annualized investment yield for the first quarter was 3.4%, up from 2.1% a year ago. Our new money yield in the first quarter approximated 5%, providing continued tailwinds for our investment portfolio. As a reminder, for every one-point increase in the investment yield, there is roughly a one-point increase in ROE. We continue to operate from a position of strength with $4.6 billion in gap equity, access to $2.1 billion in excess of loss reinsurance, and over $1 billion of available holding company liquidity. With a trailing 12-month underwriting margin of 87% and operating cash flow of $595 million, our franchise remains well-positioned from an earnings, cash flow, and balance sheet perspective. We continue to take a measured approach to capital and remain committed to managing it for the long term. Our strong financial performance affords us the ability to take a balanced approach to capital between distribution and deployment, which includes the $100 million for our planned title acquisition announced in February. While we have initiated an integration and transition process for the pending title transaction, the companies will continue to operate independently until we close the deal later in the year. As noted in the past, we believe allocating capital for growth is a better value creator for the shareholders over the long term. However, we also recognize that returning capital to shareholders generates meaningful returns for investors. Year-to-date through April 30th, we repurchased approximately 800,000 shares for $32 million. Further, I'm pleased to announce that our board has approved a common dividend of 25 cents. We continue to see our dividend as a meaningful demonstration of the confidence we have in the stability of our cash flows and the strength in our capital position. Now, let me turn the call over to Dave.