Essent Group Ltd.

At this time, I would like to welcome everyone to the Essent Group Limited fourth quarter 2023 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 during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Phil Stefano, Investor Relations. Please go ahead.

Thank you, Eric. 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 Curran, President of Essent Guarantee. Our press release, which contains Essence financial results for the fourth quarter and full year 2023, was issued earlier today and is available on our website at EssenceGroup.com. Our press release includes non-GAAP financial measures that may be discussed during today's call. A complete description of these measures and the reconciliation to GAAP may be found in Exhibit O of our press release. 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 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 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 fourth quarter and full year 2023 financial results. Strong credit quality and resilience in the housing and labor markets continue to drive favorable credit performance, while higher interest rates drove investment income growth and elevated persistency during the year. Heading into 2024, we remain constructive on a long-term outlook for housing as the supply and demand imbalance and favorable demographic trends should provide foundational support to home prices. Even though sentiment has improved for a soft landing on the back of strong employment and consumer spending, we continue to manage our business for a range of economic scenarios. Given the strength of our balance sheet and our buy, manage, and distribute operating model, we believe Essendon is well-positioned. And now for our results. For the fourth quarter of 2023, we reported net income of $175 million compared to $147 million a year ago. On a diluted per share basis, we earned $1.64 for the fourth quarter compared to $1.37 a year ago. For the full year, we earned $696 million, or $6.50 per diluted share, while our return on average equity was 15%. As of December 31st, our book value per share was $47.87, an increase of 16% from a year ago. As of December 31st, our U.S. mortgage insurance in force was $239 billion, a 5% increase versus a year ago. Our 12-month persistency on December 31st was 87%, and nearly 75% of our in-force portfolio has a note rate of 5.5% or lower. Despite the recent shift lower in rates, we expect persistency will remain elevated in 2024. The credit quality of our insurance and force remains strong with a weighted average FICO of 746 and a weighted average original LTV of 93%. Regulatory guardrails implemented after the global financial crisis have significantly improved industry credit quality and performance, while embedded home equity in our insurance portfolio should mitigate potential claims. During 2023, in light of higher mortgage rates and lower mortgage origination volume, we continued to focus on supporting our customers while expanding our franchise. Despite the challenging environment, we successfully activated 108 new customers and continued to leverage S&Edge to optimize our unit economics and deliver our best rates to borrowers. Our Bermuda-based reinsurance entity, S&RE, had another strong year of performance. writing high-quality GSE risk share business and expanding its fee-based MGA services. SNRE ended the year with annual third-party revenues of approximately $80 million, while our third-party risk and force was $2.2 billion. Our title operations incurred a pre-tax loss of approximately $4 million in the fourth quarter, similar to last quarter. We remained focused on integrating title while implementing risk controls and improving operational efficiency. The Essent Ventures team continues to invest in funds, gaining insights to improve our core business while enhancing financial returns. As of December 31st, the carrying value of other invested assets is $277 million, and ever to date, these investments have created $74 million of value. Cash-in investments as of December 31st were $5.7 billion, and our new money yield in the fourth quarter remained over 5%. For the full year of 2023, our investment yield was 3.5% compared to 2.6% in 2022. Net investment income was $186 million in 2023, up approximately 50% from 2022. New money yields in our investment portfolio continue to run ahead of our book yields, which should contribute to future revenue growth. As of December 31st, we are in a position of strength with $5.1 billion in gap equity, access to $1.4 million in excess of loss reinsurance, and over $1 billion of available holding company liquidity. With a full-year 2023 operating cash flow of $763 million and a mortgage insurance underrating margin of 77%, our franchise remains well-positioned from an earnings, cash flow, and balance sheet perspective. As evidence of this, in January, S&P upgraded the financial strength ratings of our two primary operating entities, EssentGuarantee and EssentRe to single A-minus. With this upgrade, we reached a milestone of single A-minus or higher financial strength ratings by all rating agencies that cover EssentGuarantee and EssentRe. During the year, we continue to execute our diversified and programmatic reinsurance strategy while retiring the majority of two-season Radnor Re ILN deals that no longer provided economic or regulatory capital credit. In the fourth quarter, we closed an excess of loss reinsurance transaction covering our 2023 NIW. At year end 2023, approximately 93% of our portfolio is reinsured. Our strong financial performance and capital position enable us to take a measured approach between capital retention, investment, and distribution. In 2023, we repurchased approximately 1.5 million shares for $66 million. Further, I'm pleased to announce that our board has approved a 12% increase in our quarterly dividend at 28 cents per share. Looking forward, we will continue to review our common dividend annually. We believe paying a dividend 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.