Essent Group Ltd. Common Shares

Thank you for standing by. At this time, I would like to welcome everyone to today's Essent Group Limited Fourth 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. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw your question, simply press star one again. Thank you. I would now like to turn the call over to Phil Stefano with Investor Relations. Phil, please go ahead.

Thank you, Greg. Good morning, everyone, and welcome to our call. Joining me today are Mark Cassel, 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 fourth quarter and full year 2024, was issued earlier today and is available on our website at EssentGroup.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 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, 2024, 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 2024 financial results. Strong credit quality and resilience in the housing and labor markets continue to drive credit performance, while interest rates remain a tailwind for persistency and investment income. Although mortgage origination activity remains below historical levels, we anticipate that home buying demand is merely being postponed given the level of rates and affordability. While there is always uncertainty in the economic environment, given the strength of our balance sheet and our buy, manage, and distribute operating model, we believe ESSEN is well positioned for a range of economic scenarios. And now for our results. For the fourth quarter of 2024, we reported net income of $168 million compared to $175 million a year ago. On a diluted per share basis, we earned $1.58 for the fourth quarter compared to $1.64 a year ago. For the full year, we earned $729 million or $6.85 per diluted share, while our return on average equity was 14%. As of December 31, our book value per share was $53.36, an increase of 11% from a year ago. As of December 31, our US mortgage insurance enforce was $244 billion, a 2% increase versus a year ago. Our 12-month persistency on December 31 was 86%, down about one point from last quarter, while nearly 60% of our enforced portfolio has a note rate of .5% or lower. Although persistency has likely peaked, we continue to expect that the current level of mortgage rates will support elevated persistency in the near term. Credit quality of our insurance enforce remains strong, with a weighted average FICO of 746 and a weighted average original LTV of 93%. Credit performance in the fourth quarter primarily reflected both the aging of our portfolio and the typical seasonality of default behavior. Note however that credit performance for the fourth quarter also impacted by approximately 2,000 defaults in areas affected by hurricanes Helene and Milton. In addition, we are monitoring the potential impact of the faults from the California wildfires. Dave will discuss defaults and reserves in more detail in a few moments. On the mortgage insurance front, our industry remains competitive and strong credit guardrails remain in place, driven by the underpinnings established by the GSEs after the global financial crisis. These guardrails, combined with our SNH credit engine, enable us to selectively grow our high credit quality insurance and force while generating strong returns. We are pleased with our position in the marketplace and the unit economics that we are achieving on new business. As a reminder, we price for new business assuming a combined ratio of roughly 35 to 45%. In the first quarter of 2025, we entered into two quarter share transactions with a panel of highly rated insurers to provide protection for our 2025 and 2026 business. We are pleased with a strong execution and remain committed to a programmatic reinsurance strategy which helps to diversify our capital resources while seeding a meaningful portion of our mezzanine credit risk. At year end 2024, approximately 97% of our portfolio is covered by some form of reinsurance. SNRe had another strong year of performance writing high quality GSE risk share business while leveraging its fee-based MGA services. SNRe ended the year with annual third party revenues of approximately $80 million while our third party risk in force was $2.2 billion. Since 2014, SNRe has earned over $450 million of net income from its third party business and has contributed approximately $800 million to SN's book value. Our title operations incurred a pre-tax loss of approximately $21 million in the prior year prior to corporate allocations. We continue to maintain a long-term view for this business, however, given it is levered to rates, we do not expect title will have any material impact on earnings over the near term. Cash and investments as of December 31st were $6.3 billion and our new money yield in the fourth quarter remained over 5%. For the full year 2024, our investment yield was .7% compared to .5% in 2023. Net investment income was $222 million in 2024, up nearly 20% from 2023. As of December 31st, the carrying value of other invested assets is $304 million and however to date these investments have created $81 million of value. As of December 31st, we are in a position of strength with $5.6 billion in gap equity, access to $1.6 billion in excess of loss reinsurance and a PMIR sufficiency ratio of 178%. With a full year 2024 operating cash flow of $852 million, our franchise remains well positioned from an earnings, cash flow and balance sheet perspective. As a result of our strong financial performance and capital position, I am pleased to announce that our board has improved an 11% increase in our quarterly dividend to 31 cents per share. At the same time, our board also approved a $500 million share repurchase authorization that runs through year end 2026. Now let me turn the call over to Dave.

Thanks, Mark and good morning everyone. Let me review our results for the quarter in a little more detail. For the fourth quarter, we earned $1.58 per diluted share compared to $1.65 last quarter and $1.64 in the fourth quarter a year ago. Our US mortgage insurance portfolio ended 2024 with insurance in force of $243.6 billion, an increase of $669 million from September 30th and an increase of $4.6 billion or 2% compared to $239.1 billion at December 31st, 2023. Persistency at December 31st, 2024 decreased to .7% compared to .6% at the end of the third quarter. Net premium earned for the fourth quarter 2024 was $244 million and includes $16.2 million of premiums earned by Essentria on our third party business and $16.6 million of premiums earned by the title operations. The average base premium rate for the US mortgage insurance portfolio for the fourth quarter was 41 basis points and the average net premium rate was 35 basis points in the fourth quarter of 2024, both consistent with last quarter. We expect that the average base premium rate for the full year 2025 will be largely unchanged from the fourth quarter rate of 41 basis points. Consolidated net investment income for full year 2024 was $222.1 million compared to $186.1 million for the full year 2023 due to growth in the investment portfolio and investing at higher yields than the book yield of our existing portfolio. Net investment income for the fourth quarter was relatively flat to the prior quarter. Credit performance for the fourth quarter was affected by default in areas impacted by hurricanes Helene and Milton. The provision for losses and loss adjustment expense on the US mortgage insurance portfolio was $37.2 million in the fourth quarter of 2024 compared to $29.8 million in the third quarter of 2024 and $19 million in the fourth quarter a year ago. During the fourth quarter, total defaults increased by 2,533, which includes 2,119 defaults that we identified as hurricane related defaults. Based on prior industry experience, we expect the ultimate number of hurricane related defaults that will result in claims will be less than the default to claim experience of non hurricane related defaults. Our provision for losses on these hurricane defaults does reflect a higher cure rate assumption than the estimates used on non hurricane defaults. The provision for losses in the fourth quarter includes $8 million pertaining to the hurricane defaults, representing our best estimate of the ultimate loss to be incurred for claims associated with these defaults. Looking forward, we will continue to gather information on this population of defaults and update our reserves if needed. At December 31st, the default rate on the US mortgage insurance portfolio was 2.27%, up 32 basis points from .95% at September 30th, 2024. For the full year 2024, we recorded a net provision on the US mortgage insurance portfolio of approximately $75 million, with higher defaults reflecting aging of the portfolio and the impact of the hurricanes. Other unwriting and operating expenses in the fourth quarter were $71 million and include $26.7 million of total title expenses, of which $8.5 million are premiums retained by agents. Our consolidated expense ratio was .7% this quarter. Our expense ratio excluding title, which is a non-GAAP measure, was .4% this quarter. The description of our expense ratio excluding title and the reconciliation of GAAP can be found in exhibit O of our press release. The consolidated effective tax rate for full year 2024 was 14.7%, including the impact of $2 million of favorable discrete tax items. For 2025, we estimate that the annual effective tax rate will be approximately 15.5%, excluding the impact of any discrete items. As Mark noted, our holding company liquidity remains strong and includes $500 million of undrawn revolver capacity under our committed credit facility. At December 31st, we had $500 million of senior unsecured notes outstanding and our debt to capital ratio was 8%. At December 31st, Essend Guarantee's P-Mirror sufficiency ratio was strong at 178%, with $1.6 billion in excess available assets. At Quarter N, Essend Guarantee's statutory capital was $3.6 billion, with a risk to capital ratio of 9.8 to 1. Note that statutory capital includes $2.5 billion of contingency reserves at December 31st. During the full year 2024, Essend Guarantee paid dividends of $165 million to its U.S. holding company. As of January 1st, Essend Guarantee conveyed ordinary dividends of $397 million in 2025. At Quarter N, Essend Guarantee of PA, which provided reinsurance to Essend Guarantee on certain policies originated prior to April 1st, 2019, entered into a commutation and release agreement under which all of the outstanding risk and force was commuted back to Essend Guarantee. Essend Guarantee of PA then surrendered its insurance license effective December 31st, 2024, freeing up $93 million of cash and investments at Essend Guarantee of PA as liquidity to the U.S. holding company. As a result, there were no dividends from the insurance subsidiaries to the U.S. holding company during the fourth quarter of 2024. During the fourth quarter, Essend Re paid a dividend of $87.5 million to Essend Group. Also in the quarter, Essend Group paid cash dividends totaling $29.4 million to shareholders and we repurchased 1.2 million shares for $66 million under the authorization approved by our board in October 2023. In January 2025, we repurchased nearly 1 million shares for $52 million, taking advantage of the volatility in Essend's share price. As we have previously discussed, we are patient and value sensitive when it comes to buying back shares, believing this strategy will support our long-term goal of compounding book value per share growth over time. Now let me turn the call back over to Mark.

Thanks, Dave. In closing, we are pleased with our full year 2024 financial results, which continue to reflect the strength of our franchise. Our high quality portfolio combined with resilience in housing and employment continues to translate the strong credit performance while our business continues to benefit from the impact of rates on persistency and investment income. Our strong operating performance continues to generate excess capital, which we will approach in a balanced manner by maintaining balance sheet strength, preserving optionality for strategic growth opportunities, and optimizing shareholder returns over the longer term. Looking forward, we remain committed to our buy, manage, and distribute operating model and believe that Essend remains well positioned to deliver attractive returns for our shareholders. Now let's get to your questions.

Thanks, Mark. And at this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. Once again, star one. And we will pause just a moment to compile the Q&A roster. Okay, it looks like our first question comes from the line of Boz George with KBW. Boz, please go ahead.

Hey, everyone. Good morning. Actually, first on title, is your expectation for 2025 that title results will be similar to 2024 and, you know, was there anything unusual in title this quarter, just, you know, the provision was up and the optics was up?

Hey, Boz. Good morning. Yeah, I would say with title for 25, I would expect more of the same. I think we have a cost structure and we had said earlier, right, it would take 12 to 18 months to stand it up. We're right at 18 months. It's relatively well stood up. It's just a matter of, I kind of look at some of that, you know, partial the cost, you know, the drag is kind of an option cost for refinance to come back. And the rates just haven't come back. As like I said in the script, we're levered to rates. But we did sign up one pretty large lender last year. So we're really carrying capacity for that lender and there's a cost to that. So I would expect it to be kind of more of the same. Again, longer term, it's a call option and we do believe longer term it will be supplemental earnings relative to Essendorf. And I think we're still, you know, but we continue to make progress there. But again, I think when the rates come down, we should see better results. In the fourth quarter, Boz, it was more around the provision, you know, excess provision that we've normally had. And that was really just some of the cleanup from the underwriter that we bought and some of the claims came due. So a little bit of, you know, fourth quarter cleanup there.

OK, great. Thanks. And then actually the hurricane related default count that you gave the two thousand two hundred nineteen, was that the default that's in the inventory, the inventory at quarter end or had some of those cured by quarter end?

They were in their quarter end. So like we said in the script, I think most of most of the increase of defaults were or the hurricane. So if you take out two and a quarter or two point two seven default rate, you take out the defaults is probably closer to two percent.

OK, great.

Thanks. Sure.

All right. Thank you, Boz. And our next question comes from the line of Terry Ma with Barclays. Terry, please go ahead.

Hey, thank you. Good morning, everyone. Maybe just to follow up on the defaults. So I kind of stripped that the two thousand or so out of new notices in the quarter. You know, this is actually down sequentially, which is kind of counter to typical seasonality. So kind of any color on kind of what's going on there?

Hey, Terry, it's Dave Weinstock. Yeah, you know, there are some clearly some ebbs and flows to default patterns. You're right that in general we we do see an uptick in the in the second half of the year for sure and somewhat a little bit in the fourth quarter. Not there wasn't anything that we read into it necessarily. I would say on the whole, as we looked at twenty twenty four in general, twenty twenty four default pattern was a little bit favorable, you know, mostly every quarter to prior historical quarters. So I think what we really saw in the fourth quarter was maybe a little bit more of the same.

Got it. OK. And then if I look at the default rate kind of extra came kind of a two percent, you just quoted the year over year change kind of decelerated compared to last quarter. I'm just curious, have we kind of reached a point with kind of vintage seasoning where you should get start to get more of a steady pace of increase for the default rate or is that kind of too early to call right now?

Yeah, I think it's too early to call. And I think just big picture, Terry, you know, I think given the seasoning of the book and just the average age of the book, looking at, you know, historically pre covid was 18 months, the book kind of continued to turn over because of, you know, kind of post covid this kind of second cycle. Covid was the first cycle, right? Low rates, tons of origination, a lot of refinancing portfolio turning over kind of in the middle of twenty two when rates shot up, we've kind of been frozen. And the book is really like the Alings like thirty three months as of thirty two, thirty three months. So you're starting to really, you know, we're getting that extra year of premiums, which we've enjoyed over the past couple of years. But I think, you know, just think about it, you know, the more borrowers are outstanding for longer periods of time, it's kind of natural that, you know, a few of them that stick around longer will default. So I were pretty it's pretty much in our expectations, but it wouldn't surprise me if the default rate kind of continues to go up somewhat during twenty five. And I think you're starting to I don't I wouldn't be surprised the whole industry season. And, you know, maybe we're, you know, maybe we're different. But I think when we see it kind of to go up to the two or three percent range wouldn't surprise me at all.

Got it. OK, helpful. Thank you.

Yeah,

thank you, Jerry. And our next question comes to the line of Rick Shane with JP Morgan. Rick, please go ahead.

Thanks for taking my questions this morning. Look, there's been some a bunch of questions about hurricanes. I suspect we're probably going to get questions next quarter about errors. And obviously, there are short term implications on the model. But I'm curious, Mark, you know, in many of the high cost regions of the country, insurance is now becoming very expensive or not necessarily even available. Two things. First of all, how do you guys monitor whether or not borrowers are in fact insured? And if insurance really becomes increasingly problematic, how do you think about that in terms of pricing for risk and considering affordability?

Yeah, that's a that's a really good question. And so it's been a topic recently for a while internally. One, I think if they if they have a mortgage, they they're required to have homeowners. So if somehow they're dropped, they'll get forced placed. So we don't so we don't worry about them having the insurance should something happen. So we're pretty well covered there. And remember, you know, this record, I'm sure a lot of others do. We're not really on the hook until the home is repaired. So there's that that kind of layer of protection we have. And that's why we've seen historically a lot of the defaults in the hurricane regions tend to cure at a pretty high rate. And again, past past performance doesn't predict the future, but that's been pretty much the scenario we've had for past hurricanes in terms of the longer term impact of homeowners insurance. Yeah, I think it's going to continue to be an issue in certain parts of the country. Just remember, you know, when some of the real coastal regions or even where the wildfires are, these are high cost areas, Rick. It's not a lot of mortgage insurance. So we don't really we're not that exposed. I think they're the ones that are most susceptible to these significant increases in homeowners. But even even for normal folks, you'll see it go from like six hundred a year to twelve hundred. It's significant. It's significant from a borrower perspective. If you kind of like raise above it, that kind of big picture from an MI perspective, it's like maybe a point in DTI. So it's like we think about it a lot, but I'm trying to put it in perspective for investors that, yes, it's an added it's an added cost. And I think it goes in general, Rick, to kind of our theme that, you know, with affordability, you know, going up and maybe staying up the amount of disposable income that borrowers are going to have to use from allocate for mortgages, I just think is going to increase. I mean, you live in California. It's always been that way in California for 30 years. Borrowers have allocated more of their disposable income to housing. Hasn't really been that that hasn't been that way for the rest of the country. And I just think we're home ownership rates will continue to stay where they are kind of in the mid to upper 60s. I think borrowers are going to allocate more of their disposable income. I don't think they're going to have a choice if they want to be homeowners. So hopefully that gives you a little bit of big picture context.

It does. And again, look, I know you think in five and ten year horizons, are you concerned that it has a chilling effect on HPA, which does and more broadly does impact you guys?

You know, I don't.

HPA has gone up so much in the past five years that I think it's OK for it to pause for a while, to be honest. I think, again, for it to be flattish and allow and this kind of gets allow kind of incomes to catch up, which is kind of part of my longer term scheme for Essen. And I alluded to it earlier, you know, my response to Terry, but there's kind of like three cycles. Right. If you just think about recently, we had the covid cycle, super low rates, lots of origination. And it was an anomaly. Right. You know, we've never really seen rates come down that quickly and stay like and stay that way. Just in that scene, maybe we saw it kind of in 2003 was probably the last time we saw such significant refinance and then kind of rate shot up in mid 22. So it's kind of like the new book started. Right. So we have high rates and HPA is pretty high. So affordability has been an issue. It's clearly been an issue for the past. Up and we're still into it. I think once and that's been an anomaly. Right. We've never seen a housing market. You know, I read last week that, you know, typically four million borrowers or four million people move every year. Last year was two point seven. So we're still kind of in this this housing. I guess it's a lot is a good way to say it, but we're going to come out of it. And when we do, and I think I think how we come out of it is I don't know if rates come down significantly. I think having HPA remain relatively flattish and allow time for incomes to increase, you're just going to see you're going to see it happen naturally. Right. Families continue to form. They need to move into bigger houses. People change jobs more that natural activity is going to come. And I think when we enter in that cycle, I think you're going to see renewed growth in our business. I really do. I can't predict when that's going to happen. You know, I don't know if it happens in twenty twenty five. I think it I think it takes a while for it to play out. But again, when you think bigger picture for the industry right around a trillion and a half of insurance and force, it wouldn't surprise me. And it's really only grown maybe two percent last year, two percent the year before. I think we're in a pause. And I do think when when these forces come together, I think it'll be a bit of a tailwind for the business.

Got it. Hey, Mark, I always appreciate the answers. Thank you so much.

Welcome. Thanks, Rick. And our next question comes from the line of Doug Harder with UBS. Excuse me, Doug, please go ahead.

Thanks,

Mark. You know, you guys increased the dividend, increased the share repurchase, given what you just said that we might be in kind of a pause for for industry insurance and force growth. How are you thinking about the pacing of capital return in the near term versus opportunities either in mortgage insurance or elsewhere to deploy capital?

Now, it's a good question, Doug. And I think there is I think we're entering into this year a decent opportunity for us to return capital and become a little bit more capital efficient. Right. When you when you kind of combine the pause in growth, the buildup of capital, we continue to build capital up over the past few years. So even though rates have been high, you know, credit's been benign, persistence has been good. And we've had this nice tailwind from investment income. And I think mentioned in the script, like eight hundred and fifty million dollars of cash coming in the door. So it's been a strong operating performance. And we've really built up capital level. So add that and put into the fact that we feel pretty confident around credit in the shorter term. And I know I know it's your job. And we have to think through kind of default rates and where they're going. And we do think, again, I've alluded to it earlier for them to continue to move up to three percent if they get to that level. Doesn't it doesn't surprise me. And we won't get super kind of concerned about it. Kind of well within our expectations and add in, you know, kind of our PMAR's cushion, right? And that's that's the that's the thing that always that's our biggest concern. Doug is kind of the event. Right. We are, you know, and I know a lot I know a lot of our analysts are specialty finance analysts. But at the end of the day, we really are more of an insurance company. I know our specialty is mortgage, but you know, the financial performance in terms of premiums, hold up paying claims, much more of an insurance company. They don't have a lot of liquidity risk that a specialty finance company has. You know, liquidity risk, if anything, is kind of in a PMAR's calculation in terms of the prosciplicality. Our business is really a cat business in a way. Our our catastrophe happens to be a macro, a severe macro economic recession. Right. That's what we that that's the thing that we we think about the most. We don't worry about the kind of ins and outs of even of a normal recession or a soft landing. It's really that that big event. They don't happen that often, but when they do, you know, they're they're significant. Right. It happened in the M.I. business back in the early 80s, you know, with some regional events and super high rates. It really crumbled a lot of the M.I. back then. It clearly happened during the great financial crisis. We got a peak at a crisis in covid, but it happened to be, you know, it happened to be relatively short. And we run and we talk about this before we run our test stress test through the GFC stress test. The Moody's S4 is becoming more kind of, I would say, commonly looked at amongst those in the industry. I think when we we kind of go when we run our numbers through that, we feel pretty good. So I feel like and that's kind of when we think about what's the right PMAR's capital sufficiency ratio. A lot of that is running through the stress and making sure we have it. So we feel good there. And then when you add in kind of like the capital, it's at the hold. And, you know, you heard me before, think about, you know, investment opportunities. We just haven't seen anything that we like in terms of the investment. So when you when you put all that together, it is for us to return capital. I think it's it's a time it's a good time for us to do it. We have and we've talked about the numerator and denominator, the numerator again, given that pause and the pauses across the business. It's not just in the core business. Clearly, you know, we alluded to title is more smaller, much smaller, but it's rate sensitive. And we're seeing a little bit of the pause even with an S&R given that kind of the lack of GFC issuance. So when you add all that up for us to and again, taking advantage, really, as Dave alluded to, we're price sensitive on the repurchases. We just it was just a fantastic opportunity, you know, kind of post our November call. So we'll continue, you know, again, to we have like a grid that will continue to execute. And don't forget that we have the special dividend as a tool. We haven't used it yet. But again, I think that's that's always out there. And I think we our goal is to is to grow book value per share. We also want to make sure we have strong RLEs and you don't want the capital to too much capital to create a drag. I mean, I know this is it's a it's a it's a it's a it's a it's a high class problem for us to have. But I do think you'll see a little bit more of that activity in twenty twenty five.

Great. Appreciate it, Mark.

Thank you, Doug. And our next question comes from the line of Jeff Dunn with Dowling and Partners. Jeff, please go ahead.

Thanks.

Come on,

guys. Dave, just confirmed you set a fifteen and a half percent tax rate for this year.

Yes, that was that's our current estimate for twenty five. Yep.

Can you I'm surprised at how low it is with the new minimum tax. Can you walk through the mechanics of that and what kind of credits maybe you're assuming to get to that level?

Yeah, so and actually, Jeff, you know, it's actually up a little bit from what our full year was for twenty twenty four. To the extent that you're thinking about Bermuda tax and, you know, I know there's been a lot of, you know, there's been some developments there that are that are potentially coming. And I know there are those there are definitely some Bermuda based companies that have recorded an economic transition adjustment. And I think that's being looked at and how much of that can be deductible and the like to cut through that. We don't have one of those. We didn't record an economic transition adjustment. We have a very limited international presence and there is an international presence exemption related to the Bermuda income tax that really exempts us from tax until twenty thirty. So, you know, when you look at that, that's why, you know, on the whole, we're we're basically saying for twenty twenty five, we're going to be around the same place we were really in twenty twenty four.

Gotcha. OK. And then do you have the count for the two or three new notices of hurricane affected notices that came in?

Yeah, you know, Jeff, we didn't actually the hurricane hit really late in September and beginning of October. We didn't really think any of those defaults that came in in the third quarter were hurricane related defaults. Really, we really thought everything was really in the fourth quarter.

And then last, could you repeat the buyback for the quarter? I just missed that one.

Yeah, in the quarter, we repurchased. I got it right here. We were purchased 60 one point two million shares for sixty six million dollars in the fourth quarter. And in January, we repurchased nearly one million shares for fifty two million dollars.

OK, thank you.

Sir, great. Thanks, Jeff. Just a reminder, folks, again, if you would like to ask a question, it is star one on your telephone keypad once again, star one. And our next question comes from the line of Eric Hagen with BTIG.

Eric,

please

go

ahead.

Hey, thanks. Good morning. I appreciate you guys taking my question. All right. So it feels like the non-bank lenders are laser focused on bringing down origination and servicing costs, managing their own prepayment risk through strong recapture. And a lot of that improvement in cost and scale already seem to be showing up in the refi behavior when when rates are dropping. Do you guys have any perspective on how further growth of these non-banks and the lower cost of capital could drive prepay behavior specifically for the high LTV cohort of borrowers out there and then how that kind of dynamic maybe traces back to how you guys price risk?

It's a clear clearly it's in kind of our duration assumptions when we think about it. We know when we price risk on the front end. I think it's an interesting point, Eric. It's nice to have you back on the calls. And we you're you're you're you are correct in terms of how efficient the larger originators have become on refinancing. And you can imagine maybe even with some of the potential AI tools out there that they could become even more efficient, but they're brutally efficient. They have been for a while. That's the one thing to keep in mind when you they have been for a while. And and so I think when we think about I think it's still rate dependent. I mean, so if if rates do come down, would we see would we see more kind of MI roll off the books? Absolutely. And again, but I think it'll be as I said earlier be replaced by you know, rates come down, you know, it following up on my answer to Rick, it probably brings in that new cycle a little bit quicker than go unlock a lot of purchase activity to so. I don't know if that you know exactly answer your question, but I do think you know kind of it. It really is rate dependent for these guys. I know they're brutally efficient, but you still need rates. They kind of come down. So and we saw that like I think that was that that was the example. I think we might have talked about it before, but there was kind of that refinance flash. And October and we saw you can see even reflected in our numbers and our refinance percentage was 14 ish in the fourth quarter. So it was relatively higher and we saw we saw a bit on title. We didn't take advantage of it. You know, because it wasn't long enough, but I agree with you when it comes that they they react very quickly.

Great perspectives. I appreciate you guys. Thank you.

Thank you, Eric. And it looks like our final questions today comes from the line of those George with KBW. He's back. Bose, please go ahead.

Great. Thanks. I just had a couple of modeling related questions. Did you guys give guidance for expenses for 2025?

No, we didn't. We didn't. Bose, because we're moving to the segment reporting, which you guys will see, you know, in the K disclosure. So it's going to be more MI and then kind of other other segments. So we didn't. We'll be able to kind of once you see the numbers will be able to potentially give you some MI type guidance, but big picture. If you were to look at last year's numbers will be relatively flattish like when you cut through it, but we didn't. We didn't. We wanted to wait until the K was out and you guys had a good chance to kind of look through it.

Okay, great. And then actually just one more on the investment portfolio. What's the incremental yield versus the current yield and actually just the decline quarter of a quarter. It was a little surprising. So kind of what drove that.

Yeah, it's I know it's a little surprising, but we've really kind of repositioning the book. So we moved and we started that, you know, in the past, I want to say three or four months. So we're moving out of kind of the shorter term cash. Back into kind of more ABS and corporate credit kind of back to where we were before kind of moving back to our normal portfolio. So there's a little bit of that rolling off. It was it was two year treasuries at really high rates kind of rolling off. So I would think. I would think this year, both just in terms of kind of the rate. I think it stays in that that same neighborhood longer term as you know, depending at the yield curve stays where it is. It wouldn't surprise us to see a bill above four, but I don't I don't think that's going to happen in 2025.

Okay, great. Thanks.

Thanks, both. And there are no further questions. So I will now hand it back to management for closing remarks.

I'd like to thank everyone for joining us and again for the second time in seven years. I'd like to congratulate our Philadelphia Eagles for winning the Super Bowl and have a great weekend and go birds.