ESNT

LLM Evaluations

Transcript Summary

Essent Group Ltd. delivered a solid Q1 2026, earning $1.82 per diluted share. Mortgage insurance in force grew to $248 billion, while credit quality remained robust with a 747 average FICO and a 2.54% default rate. Persistency was strong at 84.7%, bolstered by a portfolio where half the loans have interest rates under 5.5%. The quarter marked a strategic pivot in the Reinsurance segment, with new P&C activities via Lloyd’s and a specialty quota share. Although these ventures currently run at higher combined ratios than the MI business, they provide capital diversification and leverage the company’s strong ratings. Management highlighted aggressive capital returns, including $200 million in year-to-date share repurchases and a $0.35 quarterly dividend. Cash flow remains a standout, with $827 million generated over the trailing twelve months. During the Q&A, CEO Mark Casale addressed consumer credit, stating that the borrower base remains resilient despite inflation. He noted Essent is willing to pass on lower-return MI business in favor of alternative investments or reinsurance opportunities. The title insurance business continues to integrate, awaiting a more favorable rate environment to fully scale as an MI adjacency.

5-year share-count history (top 10 holders by peak, incl. exited) + price

Revenue Segments

Filing Risk Scores

Essent Group Ltd.: Standard offshore structural footprint with minimal substantive disclosure in current filing

Full Earnings Call Transcript — Q1 • 2026-05-08

Operator: Ladies and gentlemen, thank you for standing by. My name is Abby, I will be your conference operator today. At this time, I would like to welcome everyone to the Essent Group Ltd. First Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. And I would now like to turn the conference over to Philip Stefano, Investor Relations. You may begin. Thank you, Abby.
Philip Stefano: 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 Guaranty. Our press release, which contains Essent Group Ltd.’s financial results for 2026, was issued earlier today and is available on our website at essentgroup.com.
Operator: [inaudible]
Mark Casale: Supply constraints and increasing pent-up demand will be positive for housing and our MI business when affordability improves. As of March 31, our mortgage insurance in force was $248 billion, a 1% increase versus a year ago. Twelve-month persistency was 84.7% reflecting the ongoing impact of the rate environment. Nearly 50% of our in-force portfolio carries a note rate of 5.5% or lower, a dynamic that we believe will support persistency at elevated levels. Credit quality of our insurance in force remains strong with a weighted average FICO of 747 and a weighted average original LTV of 93%. Our portfolio default rate was effectively flat quarter over quarter, and we continue to believe that the embedded home equity of our in-force book should mitigate ultimate claims. Outward reinsurance in our MI business continues to play an integral role in credit risk and capital. During 2026, we entered into an excess of loss transaction with a panel of highly rated reinsurers, providing forward protection for our 2027 business. We remain pleased with the execution of our reinsurance strategy, ceding a meaningful portion of our mezzanine credit risk and diversifying our capital sources. On the title front, we continue to transition the business from a stand-alone operation to an adjacency of our mortgage insurance franchise by leveraging our customer base and providing title solutions. The coordination between our MI and title teams continues to build momentum in expanding the number of Essent title customers, but we note this business is rate sensitive and results will continue to improve as origination volumes recover. On the Essent Re front, we expanded our P&C reinsurance platform in the first quarter. Our Lloyd’s program will generate approximately $120 million of written premium in 2026 against a $50 million deposit at returns comparable to our MI business. During the first quarter, we also executed a whole-account quota share covering a cedent’s casualty and specialty book, which will generate approximately $200 million of written premium in 2026. Combined, we expect that the near-term earnings impact will be immaterial, while over the longer term, growing income and the capital benefits of rating agency diversification will be key drivers in generating shareholder value. Our consolidated cash and investments as of March 31 totaled $6.6 billion, with an annualized aggregate yield for the first quarter of 4.2%. New money yields on our core portfolio in the first quarter were nearly 5%, holding largely stable over the past several quarters. We continue to operate from a position of strength with $5.7 billion in GAAP equity, access to $1.1 billion in excess of loss reinsurance, and $1.1 billion in cash and investments at the holding companies. With a trailing twelve-month operating cash flow of $827 million, our franchise remains well positioned from an earnings, cash flow, and balance sheet perspective. We remain committed to a measured and diversified capital strategy that looks to optimize shareholder returns over the long term while preserving optionality for strategic growth opportunities. With that in mind, year to date through April 30, we repurchased approximately 3.5 million shares for over $200 million. Furthermore, I am pleased to announce that our board has approved a common dividend of $0.35 for 2026. Now let me turn the call over to Dave.
David Weinstock: Thanks, Mark, and good morning, everyone. Let me review our results for the quarter in a little more detail. For the first quarter, we earned $1.82 per diluted share, compared to $1.60 last quarter and $1.69 in the first quarter a year ago. Our consolidated net premium earned and operating expenses each increased from last quarter due to our P&C reinsurance activity, which began effective January 1. The consolidated provision for losses and loss adjustment expenses also includes amounts related to P&C activity. My comments today are going to focus primarily on our mortgage insurance segment results. There is additional information on our reinsurance segment and corporate and other results in Exhibits D, E, and O of the financial supplement. Our mortgage insurance portfolio ended the first quarter with insurance in force of $247.9 billion, essentially flat compared to December 31, and an increase of $3.2 billion, or 1.3%, compared to $244.7 billion at March 31, 2025. Persistency at March 31, 2026 was 84.7%, compared to 85.7% at December 31, 2025. Mortgage insurance net premium earned for the quarter was $216 million. The average base premium rate for the mortgage insurance portfolio for the first quarter was 41 basis points, consistent with last quarter, and the average net premium rate was 35 basis points, up 1 basis point from last quarter. Our mortgage insurance provision for losses and loss adjustment expenses was $37.6 million in the quarter, compared to $55.2 million in the fourth quarter of 2025 and $30.7 million in the first quarter a year ago. At March 31, the default rate on the mortgage insurance portfolio was 2.54%, essentially unchanged from December 31, 2025. Mortgage insurance operating expenses in the first quarter were $37.6 million and the expense ratio was 17.4%, compared to $34.3 million and 16.1% last quarter, and $40.9 million and 18.8% in the first quarter last year. Consistent with prior years, operating expenses in the first quarter of each year are typically higher due to payroll taxes on incentive compensation, as well as higher stock-based compensation expense. At March 31, Essent Guaranty’s PMIERs sufficiency ratio was strong at 174%, with $1.6 billion in excess available assets. Turning to our Reinsurance segment, net premium earned, provision for losses and loss adjustment expenses, and acquisition costs each increased from last quarter due to the P&C reinsurance activity, which began effective January 1. Consistent with Mark’s comments, the pretax earnings for our P&C activity were immaterial for the quarter, and the pretax earnings for the reinsurance segment in the first quarter predominantly reflect the underwriting results for our GSE and other mortgage risk share activity. Consolidated net investment income and our average balance of cash and available-for-sale investments in the first quarter were largely unchanged from last quarter due to the use of operating cash flows to repurchase shares. Income from other invested assets was $10.2 million in the quarter, compared to $3.9 million last quarter and $7.4 million in the first quarter a year ago. Higher results this quarter are primarily due to increased favorable fair value adjustments in the quarter. As Mark noted, our total holding company liquidity remained strong and includes $500 million of undrawn revolver capacity under our committed credit facility. At March 31, we had $500 million of senior unsecured notes outstanding, and our debt-to-capital ratio was 8%. At quarter end, Essent Guaranty’s statutory capital was $3.7 billion with a risk-to-capital ratio of 8.6 to 1. Note that statutory capital includes $2.6 billion of contingency reserves at March 31. As of April 1, Essent Guaranty can pay ordinary dividends of up to $330 million in 2026. In April, Essent Guaranty paid its first dividend of 2026 to its U.S. holding company of $50 million. During the first quarter, Essent Re paid a dividend of $100 million to Essent Group Ltd. Also in the quarter, Essent Group Ltd. paid cash dividends totaling $32.6 million to shareholders and we repurchased 2.6 million shares for $157 million. In April 2026, we repurchased 934 thousand shares for $57 million. Now let me turn the call back over to Mark.
Mark Casale: Thanks, Dave. In closing, Essent Group Ltd. is a well-capitalized, high-quality franchise with strong and consistent cash flow generation. Our core mortgage insurance business remains well positioned to serve our lenders throughout this period of housing market transition, and our Reinsurance segment continues to create value by deploying capital efficiently across both mortgage and non-mortgage risk. We remain confident in our ability to grow book value per share, return capital to shareholders, and invest in opportunities that build a stronger franchise for the long term. Now let us get to your questions. Operator?
Operator: Thank you. We will now open the call for questions. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your questions. Again, it is 1 to join the queue. Our first question comes from the line of Bose George with KBW. Your line is open.
Bose George: Hey, good morning, everyone. Actually, first, can we just talk about your updated thoughts on what you are seeing in terms of consumer credit? Any early signs of weakness on higher gasoline prices, or just things you are keeping an eye on?
Mark Casale: Hey, Bose. I would say right now, we are not seeing any real cracks. You are seeing it a little bit in the lower-end consumer. If you take a peek at the FHA delinquencies, keep in mind our book has much higher FICO, around a 747 average FICO, and average income of about $130 thousand per household. These are the consumers that are really driving the economy, along with significant AI spending. So we are not seeing it. When you think about our defaults having gone up, take a step back and really look at the seasoning of the book. At roughly 39 months, the book is seasoned; peak default is 36 to 60 months. So there is really a normalization of the credit. We are not seeing an acceleration of that against roughly 20 thousand defaults, and the book is not really growing in terms of policies. I would say the consumer is in good shape. When you mention inflation, again, that is much more likely to hit the lower-end consumer. It is certainly something we are watching.
Bose George: Okay. Great. Thanks. And then, on competitive trends in the market?
Mark Casale: No real differences in terms of competitive trends. You are starting to see, with the lack of affordability, some lenders starting to reach a little bit. On the MIs, it is a small market and the books are not growing, so you are starting to see a little reach here and there. There was a bid card that we passed on recently where we saw a little bit of an extension of credit and we priced for it and did not get it. You are seeing a little around the edges, but nothing alarming. The longer this pause is—this pause started probably back in 2022, then 2023, 2024, 2025, and now into this year—I think the industry has done a good job being patient and thoughtful. You are always going to see a crack here and there. From our standpoint, we look at it a little bit differently in terms of really focusing on the unit economics. When you look at where our NIW was for the quarter versus the number one mortgage insurer, the difference is relatively small. Our view is that additional NIW is probably at the lower end of our return hurdles, so we look at other options to allocate that capital. Lloyd’s is a good example. The Lloyd’s leverage and the returns there are comparable. I will also point you to our other invested assets. We were able to put money to work there in the first quarter that we think will be easily mid-teens returns over the next few years. So it is a choice. From a competitive standpoint, nothing alarming, and it remains a small market, so it is difficult to separate much when it is such a small market.
Bose George: Great. Thanks for the color.
Operator: Our next question comes from the line of Terry Ma with Barclays. Your line is open.
Terry Ma: Just wanted to follow up on credit. As we look at results for the quarter, anything to call out? New notices were at least sequentially a little bit more muted compared to the seasonality that you saw the last few years. Anything to call out there? And as we look out to the rest of the year, should we assume normal seasonality holds?
Mark Casale: I would. I would expect, Terry, as you and investors focus on it, that, given the seasoning of the portfolio and peak default being 36 to 60 months, you are going to see defaults continue to increase. I do not think the rate is accelerating; it is a seasoning aspect. Keep in mind, we paid about $13 million of claims in the first quarter. Going into default does not necessarily mean they are going to roll to claim. Big picture, 800 thousand policies and 20 thousand defaults is normal given the age for defaults to season and new notices to tick up a little bit.
Terry Ma: Great. And then just a housekeeping question. I think I missed it in the prepared remarks, but the provision on the reinsurance segment—that was related to the net premium written in the quarter, right? As we look forward, should that in a sense normalize compared to past few quarters?
Mark Casale: Yes, it is a big change this quarter because we wrote Lloyd’s, which hit in the first quarter. We also wrote the retro quota share, which we wrote in the first quarter but is effective back to January 1. These are run at higher combined ratios, and you are combining with mortgage, so modeling can be a little tricky; we can help you offline. Bottom line, it is not going to drive a lot of income in 2026, but it does set the stage for a little bit down the road. The counter to that is the mortgage book within Essent Re is not really growing. We have a pause for growth on the MI side. The GSEs are buying reinsurance higher up in the capital structure, and they are optimizing their capital model. There is less rate on line because there is less risk, and they are reinsuring less overall. If there is a change—think privatization of the GSEs and a more normal risk-share program—we could see that growth resume. Right now, it is going to be a little bit of P&C earnings replacing mortgage earnings over the next few years.
Terry Ma: Got it. Thank you.
Operator: As a reminder, it is star one if you would like to ask a question. Our next question comes from the line of Geoffrey Dunn with Dowling & Partners. Your line is open.
Geoffrey Dunn: Thanks. Unfortunately, I think you just said you would do this offline, but could you break down the loss ratio in the reinsurance business between the P&C and the mortgage business?
Mark Casale: High level, the loss ratio on mortgage is basically zero, so most of the losses are flowing through P&C. For modeling, I would look at mid- to high-90s for P&C together. It is Lloyd’s and quota share; the majority of it is specialty and casualty. There is a little property in there from Lloyd’s, but it is D&F, not property cat. The Lloyd’s combined ratio will probably be mid-90s, but the quota share is probably in the higher 90s, so it will balance out. For a company that writes at a 35% combined ratio in MI, it is an adjustment to write at those higher P&C levels, but there is different leverage. There is a lot more premium leverage within P&C, and when rates went up a couple of years ago, that leverage made a lot more sense. We are fortunate that we have the franchise in Essent Re to do it. The S&P capital model helps; our AAA access that we write to is on the order of about $850 million. So for us to write $200 million, there is really no additional capital, and it probably helps us from a capital diversification rate. We are not taking capital from repurchases and putting it in P&C; we are effectively double-levering the capital a bit within Essent Re, which over time will be accretive to earnings.
Geoffrey Dunn: That is helpful. Thank you.
Operator: Our next question comes from the line of Mihir Bhatia with Bank of America.
Mihir Bhatia: Hi. Good morning. Thank you for taking my question. I wanted to start by asking about the cure rate. I know the number of new defaults is up, but the cure rate really fell off a cliff this quarter, and I do not know if I am just missing something obvious.
David Weinstock: Hey, Mihir. Thanks for your question. I would not characterize it that way. If you look at the supplement and our data on how much of our new defaults are curing, it has been pretty consistent quarter after quarter, generally in the 30% range. It has been very consistent, I would say, quarter over quarter.
Mihir Bhatia: Okay. Maybe I will take that up offline.
Mark Casale: Mihir, I think you may be missing something there, so let us take that offline because it did not really fall off a cliff. It is actually relatively normal if you go back and look at our past.
Mihir Bhatia: Thank you. And then in terms of the reserve releases, they were close to zero. Given the commentary about stability and portfolio seasoning, what would have to change for the prior-period reserve releases to go down? What indicators should we be looking for that would suggest reserve releases will slow down?
Mark Casale: I would look at the unemployment rate. With an average FICO of about 745–747 and strong average incomes, this is a strong borrower unless they lose their job. You saw that in COVID. Employment is pretty strong, and I think it will continue to be strong. Also remember, home prices still provide a lot of embedded equity in the portfolio, especially in the pre-2022 book. Just because a loan goes into default does not mean it will roll to claim—again, we paid about $13 million of claims in the first quarter. Stepping back, the company’s cash flow generation over the last twelve months was $827 million. On a yield basis versus book value, the cash flow returns are high. We continue to have a lot of excess cash at the holdco, even after the share repurchases. We are in a good position, and capital begets opportunities. We are allocating capital within Essent Re and into other invested assets to improve returns and make it more accretive to shareholders. Title, which we do not talk a lot about, is starting to come into its own as an adjacency to the MI business. We have momentum around coordination between the MI platform and the title team, and we have seen some nice customer wins. You have to stack all that, just like we did when we built the MI business, and you clearly need rates to come down. We are starting to see some green shoots throughout the organization, and that is during a pause. Demographically, you have 4 to 5 million potential first-time homebuyers coming of age every year. Affordability is the issue. It will be solved with continued job and income growth and some moderation of rates, and there could be some changes in HPA. There are pockets of weakness, which I have said before I think are healthy. Big picture, we are in good shape. I would caution investors not to focus only on short-term metrics like defaults and new notices. Right now, this is a well-oiled cash flow machine, and we will look to allocate that capital effectively.
Mihir Bhatia: Got it. That is helpful for sure. And a follow-up on title—did you see intra-quarter benefits from lower rates early in the quarter, from a persistency and title perspective?
Mark Casale: You broke up a bit, but yes, we did. We saw a spike in the fourth quarter and in the first quarter, which we took advantage of, and we are better situated to take advantage as we build scale. We are putting in a new system, very similar to how we did it back in the MI days. The company we bought had outsourced IT, and you do not just drop that into our structure overnight, so we are investing in the system and being patient, and our expense efficiency allows us to invest. We are starting to see it. It is more important for the post-2022 book; I said half the book is at 5.5% and below, which is not likely to refinance. It will be the newer, higher-rate book that starts to refinance, which can drive renewed growth. I am not necessarily seeing rates come down this year given oil prices and inflation, but it is another potential tailwind if rates move.
Mihir Bhatia: Got it. Thank you for taking my question.
Operator: With no further questions, I will now turn the conference back over to management for closing remarks.
Mark Casale: I would like to thank everyone for joining us today, and have a great weekend.
Operator: Ladies and gentlemen, this concludes today’s call, and we thank you for your participation. You may now disconnect.