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 Essing Group second quarter 2023 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, Chief Financial Officer. Also on hand for the Q&A portion of the call is Chris Caron, President of Essent Guarantee. Our press release, which contains Essent's financial results for the second 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 with the SEC, filed 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, Bill, and good morning, everyone. Earlier today, we released our second quarter 2023 financial results, which continue to benefit from our high-quality insurance portfolio and favorable credit performance. Also, rising interest rates continue to drive higher investment income and elevated persistency, which supports the growth of our enforced portfolio despite pressure on new business volumes. Our long-term outlook on housing remains constructive, as we believe that demographic-driven demand and low inventory should provide foundational support to home prices. While there is still uncertainty surrounding the U.S. economy, we remain confident in our robust capital position and the strength of our buy, manage, and distribute operating model. And now for our results. For the second quarter of 2023, we reported net income of $172 million compared to $232 million a year ago. As a reminder, our results last year were favorably impacted by the release of certain reserves associated with COVID-related defaults. On a diluted per share basis, we earned $1.61 for the second quarter compared to $2.16 a year ago. And our annualized return on average equity was 15%. As of June 30th, our insurance and force was $236 billion, a 9% increase compared to a year ago. Our 12-month persistency on June 30th was 86%, and approximately 75% of our in-force portfolio has a note rate of 5% or lower. We expect that the current level of rate should support elevated persistency through the back half of this year. 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%. Embedded HPA continues to benefit our business as the mark-to-market on the in-force portfolio mitigates the risk of claims, especially in light of the supply constraints and housing inventory. On the business front, our industry remains competitive while the pricing environment remains constructive. We continue to focus on optimizing our unit economics and leveraging our proprietary scoring engine, S&Edge, and selecting and pricing long-tail mortgage credit risk. Overall, we remain pleased with the business we are writing and the related expected returns. We continue to execute upon our diversified and programmatic reinsurance strategy, while focusing on optimizing our cost of reinsurance. During the quarter, we successfully executed the tender of two seasoned ILN deals, which retired $637 million of bonds that did not provide any regulatory or economic capital credit. Also, last week, we priced our ninth Radnor Re ILN transaction, selling $281 million of bombs, covering production from August of last year through the first half of 2023. Our belief remains that access to multiple sources of capital is a key element of our operating model, and we are pleased with the executions of both the tender and the latest ILN deal. As of June 30th, S&RE's third-party annual rate run revenue are approximately $80 million, while our third-party risk and force is 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 June 30th were $5.4 billion, and the annualized investment yield for the second quarter was 3.5%. up from 2.5% a year ago. Our new money yield in the second quarter approximated 5%, providing continued tail ends for our investment portfolio. As a reminder, for every one-point increase in the investment yield, there is a roughly one-point increase in ROE. We continue to operate from a position of strength with $4.7 billion in GAAP equity, access to $1.4 billion in excess of loss reinsurance, and over $1 billion of available holding company liquidity. With a trailing 12-month underwriting margin of 78% and operating cash flow of $697 million, our franchise remains well positioned from an earnings, cash flow, and balance sheet perspective. Our strong financial performance affords us the ability to take a balanced approach between capital deployment and distribution. This includes the approximately $93 million associated with the title acquisition we completed at the start of the third quarter. Similar to when ESSEN restarted, we view title as a long-term and attractive call option for the future growth of the ESSEN franchise. Year-to-date through July 31st, we repurchased approximately 1.1 million shares for $46 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.