Essent Group (ESNT) Q4 2025 Earnings Transcript

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DATE

Friday, February 13, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Mark Casale
• Chief Financial Officer — David Weinstock
• Chief Operating Officer — Philip Stefano

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TAKEAWAYS

• Net Income -- $155 million, or $1.60 per diluted share in the fourth quarter, with full-year net income at $690 million, or $6.90 per diluted share.
• Return on Average Equity -- 12% for the full year, as reported by management.
• Book Value Per Share -- $60.31 at December 31, representing 13% growth.
• Mortgage Insurance In Force -- $248 billion at period end, up 2% year over year.
• Persistency -- 86% for twelve months ended December 31; 60% of in-force portfolio has a note rate at or below 6%.
• Mortgage Insurance Portfolio Credit Quality -- Weighted average FICO of 747 and original loan-to-value (LTV) of 93% at year-end.
• Default Rate -- 2.5% at December 31, up from 2.29% at September 30, with management sizing the increase as “modest” and citing seasonality and portfolio aging.
• Reinsurance Penetration -- 98% of the mortgage insurance portfolio subject to reinsurance as of year-end.
• Essent Re Net Income -- Nearly $80 million in 2025 third-party net income; ended year with $2.3 billion of risk in force.
• Property & Casualty Quota Shares -- Essent Re entered quota share reinsurance agreements, effective 2026, with $100 million to $150 million in expected written premium for 2026 and guidance that two-thirds will be earned this year.
• Investment Portfolio -- Consolidated cash and investments totaled $6.6 billion at year-end; aggregate yield for 2025 was 3.9%; new money yields in the fourth quarter approached 5%.
• GAAP Equity -- $5.8 billion at December 31, with holding companies maintaining $1.3 billion in cash and investments.
• Capital Return -- Nearly $700 million was returned to shareholders in 2025 via dividends and repurchases; approximately 10% of shares outstanding at 2024 were retired.
• Dividend Increase -- Board approved a 13% increase to $0.35 per share starting in 2026.
• Mortgage Insurance Premiums -- Fourth quarter net premium earned at $213 million; average base premium rate held at 41 basis points, with net premium rate at 34 basis points, a one-basis-point decrease from the prior quarter.
• Guidance for 2026 -- Full-year average base premium rate guidance at approximately 40 basis points for mortgage insurance; operating expenses targeted at approximately $145 million for the segment.
• Provision for Losses -- $55.2 million provision for the mortgage insurance portfolio in the quarter; $145 million for the full year, reflecting higher defaults due to seasoning.
• Mortgage Insurance Operating Expenses -- $34.3 million for the quarter, with a segment expense ratio of 16.1%.
• PMIERs Efficiency -- Essent Guaranty’s PMIERs ratio was 169% at year-end, with $1.4 billion in excess available assets.
• Effective Tax Rate -- Consolidated effective tax rate for 2025 was 16%, with guidance for 2026 at 17% excluding discrete items.
• Debt -- $500 million in senior unsecured notes outstanding at year-end; debt-to-capital ratio was 8%.
• Statutory Capital -- Essent Guaranty’s statutory capital totaled $3.6 billion at December 31, with a risk-to-capital ratio of 9.1 to one and $2.6 billion in contingency reserves.
• Share Repurchase Update -- 2 million shares repurchased for $125 million in the fourth quarter; 713,000 shares repurchased for $44 million in January 2026.
• Liquidity -- $500 million of undrawn revolver capacity available under the committed credit facility at period end.
• Segment Reporting Change -- From the fourth quarter, all third-party reinsurance activities are disclosed separately as the Reinsurance segment, decoupling from mortgage insurance disclosures.
• Title Operations -- Management stated that, as a primarily centralized refinance platform, the company’s title operations are unlikely to have a substantial impact on earnings unless there is a material decrease in mortgage rates.

SUMMARY

Essent Group Ltd. (NYSE:ESNT) emphasized capital efficiency and shareholder returns, pivoting strategic focus toward maintaining high unit economics and measured reinsurance expansion, particularly through Essent Re's inauguration of Lloyd’s market quota share agreements. Segment reporting changes were instituted to isolate Reinsurance results, reflecting the growing significance and differentiation of this business line. Liquidity was highlighted as robust with excess capital resources, while portfolio credit quality metrics were described as stable and outperforming industry benchmarks. The board sanctioned a 13% dividend increase, underscoring confidence in ongoing earnings power.

• Management confirmed that market share is not a primary incentive, explicitly stating, One hundred percent of my long-term incentive is growth in book value per share.
• Average gross premium yield for mortgage insurance remained higher than industry averages, contributing favorably to unit economics.
• Essent Re's expansion into the Lloyd’s and P&C markets is described as very measured because that is how we like to do things, with no expectation for near-term material earnings but intended to supplement long-term growth.
• Management maintained that insurance in force and earned premium growth will be modest in the near term due to elevated mortgage rates and subdued origination volumes.
• The company’s loss and default rates rose moderately due to normalization and portfolio seasonality, but no adverse geographic or vintage trends were observed.
• Share repurchases are expected to continue if market conditions remain similar, supporting organic book value per share growth.

INDUSTRY GLOSSARY

• Persistency: The percentage of insurance policies remaining active over a defined period, reflecting borrower refinancing or payoff activity.
• PMIERs: Private Mortgage Insurer Eligibility Requirements; regulatory capital and operational standards for U.S. private mortgage insurers.
• Quota Share Reinsurance: A reinsurance agreement under which the reinsurer accepts a fixed percentage of each risk written by the ceding insurer.
• Mezzanine Credit Risk: The tranche of mortgage credit risk that lies between first losses retained by primary insurers and higher-level tranches protected by reinsurance.
• FAL (Funds at Lloyd’s): Capital deposited to support underwriting syndicates at Lloyd’s of London.
• Gross Premium Yield: The total premium income earned per unit of insurance in force, before ceding commissions and reinsurance costs.

Full Conference Call Transcript

Mark. Philip, and good morning, everyone. Earlier today, we released our financial results for the fourth quarter and full year of 2025. Our strong performance this year was driven by positive credit trends, and the benefit of higher interest rates on both persistency and investment income. These results demonstrate the strength of our buy, manage, and distribute operating model in generating high-quality earnings, which has enabled us to take a more strategic approach to capital management. For 2025, we reported net income of $155 million or $1.60 per diluted share. For the full year, we earned $690 million or $6.90 per diluted share while generating a return on average equity of 12%.

As of December 31, our book value per share was $60.31, an increase of 13% from a year ago. As of December 31, our mortgage insurance in force was $248 billion, a 2% increase versus a year ago. Our twelve-month persistency on December 31 was 86%, with roughly 60% of our in-force portfolio having a note rate of 6% or lower. Over the last several quarters, persistency has been relatively flat reflecting higher mortgage rates and a smaller origination market. As a result, we believe that over the near term, earned premium and insurance in force growth will be modest.

The 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 increased modestly quarter over quarter reflecting normal seasonality and the continued aging of our insurance in force. Looking forward, we believe that the substantial home equity embedded in our in-force book should mitigate ultimate claims. Outward reinsurance continues to play an integral role in operating our business. At 2025, 98% of our mortgage insurance portfolio was subject to some form of reinsurance. During 2025, we entered into a quota share 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 resources. On the Bermuda front, Essent Re continues to be a very effective platform in deploying capital and generating additional earnings for Essent. For 2025, Essent Re earned nearly $80 million in third-party net income while ending the year with $2.3 billion in risk. In addition, during the fourth quarter, Essent Re entered into quota share reinsurance agreements backed by funds at Lloyd’s to reinsure certain property and casualty risks.

These agreements are effective in 2026 and we expect $100 million to $150 million written premium with approximately two-thirds to be earned in 2026 at a combined ratio consistent with a diversified P&C reinsurance company. Looking forward, we believe that P&C will be an ongoing opportunity to generate supplemental earnings for Essent Re. On the title front, we remain focused on activations, leveraging our lender network, and building out our transaction management system. However, as a primarily centralized refinance platform, our title operations are unlikely to have a substantial impact on earnings unless there is a material decrease in mortgage rates.

Our consolidated cash and investments as of December 31 totaled $6.6 billion with an aggregate yield for the year of 3.9%. New money yields on our core portfolio in the fourth quarter were nearly 5%, holding largely stable over the past several quarters. We continue to operate from a position of strength with $5.8 billion in GAAP equity, access to $1.3 billion in excess of loss reinsurance, and $1.3 billion in cash and investments at the holding companies. With the full year 2025 operating cash flow of $856 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, which enabled us to return nearly $700 million to shareholders in 2025 between dividends and repurchases. During the year, we repurchased nearly 10% of the shares outstanding at 2024. Furthermore, I am pleased that our board has approved a 13% increase in our quarterly dividend to $0.35 per share starting in 2026. Now let me turn the call over to David. Thanks, Mark, and good morning, everyone.

David Weinstock: Let me review our results for the quarter in a little more detail. For the fourth quarter, we earned $1.60 per diluted share compared to $1.67 last quarter and $1.58 in the fourth quarter a year ago. Considering Essent Re’s expansion into the Lloyd’s market, as Mark noted, we began to assess the performance of all third-party reinsurance as an operating segment in the fourth quarter.

Mark Casale: To reflect this change,

David Weinstock: GSE and other mortgage risk share is no longer aggregated with U.S. mortgage insurance, and all third-party reinsurance is now disclosed as a separate reportable segment called Reinsurance. All prior period segment information has been recast to conform to the new segment presentation. My comments today are going to focus primarily on our results of our Mortgage Insurance segment. There is additional information on Reinsurance and Corporate and Other results in Exhibits D and E of the financial supplement. Our Mortgage Insurance portfolio ended the fourth quarter with insurance in force of $248.4 billion, a decrease of $452 million from September 30, and an increase of $4.7 billion or 1.9% compared to $243.6 billion at 12/31/2024.

Persistency at 12/31/2025 was 85.7%, compared to 86% at 09/30/2025. Mortgage Insurance net premium earned for the fourth quarter 2025 was $213 million. The average base premium rate for the Mortgage Insurance portfolio for the fourth quarter was 41 basis points, consistent with last quarter, and the average net premium rate was 34 basis points, down one basis point from last quarter. We expect that the average base premium rate for the full year 2026 will be approximately 40 basis points. Our Mortgage Insurance provision for losses and loss adjustment expenses was $55.2 million in 2025, compared to $44.2 million in 2025 and $37.2 million in the fourth quarter a year ago.

At December 31, the default rate on the Mortgage Insurance portfolio was 2.5%, up 21 basis points from 2.29% at 09/30/2025. For the full year 2025, we recorded a net provision on the Mortgage Insurance portfolio of approximately $145 million, with higher defaults reflecting the seasoning of the portfolio. Mortgage Insurance operating expenses in the fourth quarter were $34.3 million and the expense ratio was 16.1%, compared to $31.2 million and 14.4% last quarter. For the full year 2025, operating expenses for the Mortgage Insurance segment totaled $140 million, and we expect that operating expenses for the Mortgage Insurance segment will be approximately $145 million for the full year 2026.

At December 31, Essent Guaranty’s PMIERs efficiency ratio was strong at 169% with $1.4 billion in excess available assets. Consolidated net investment income and our average balance of cash and investments available for sale in the fourth quarter were largely unchanged from last quarter due to our share repurchase activity. The consolidated effective tax rate for the full year 2025 was 16%, including the impact of $2.1 million of favorable discrete tax items. For 2026, we estimate that the annual effective rate will be approximately 17% excluding the impact of any discrete items. As Mark noted, our total holding company liquidity remains strong and includes $500 million of undrawn revolver capacity under our committed credit facility.

At December 31, we had $500 million of senior unsecured notes outstanding, and our debt-to-capital ratio was 8%. In the fourth quarter, Essent Guaranty paid a dividend of $280 million to its U.S. holding company. As of January 1, Essent Guaranty can pay ordinary dividends of $246 million in 2026. At quarter-end, Essent Guaranty’s statutory capital was $3.6 billion with a risk-to-capital ratio of 9.1 to one. Statutory capital includes $2.6 billion contingency reserves at December 31. During the fourth quarter, Essent Re paid a dividend of $100 million to Essent Group. Also in the quarter, Essent Group paid cash dividends totaling $29.5 million to shareholders, and we repurchased 2 million shares for $125 million.

In January 2026, we repurchased 713,000 shares for $44 million. Now let me turn the call back over to Mark. Thanks, David. In closing, our 2025 results demonstrate Essent’s resilient financial performance in a challenging housing market.

Mark Casale: We delivered a strong return on equity and book value per share growth while retiring nearly

David Weinstock: 10% of our share count through value-accretive repurchases.

Mark Casale: The normalization of credit continues, but our high-quality portfolio remains positioned for a range of economic scenarios as we explore new opportunities. We believe this disciplined strategy serves the best interest of our stakeholders and positions Essent to create long-term shareholder value.

David Weinstock: We will now open for questions. Operator?

Operator: At this time, if you would like to ask a question, press star and the number one on your telephone keypad. To withdraw your question, simply press star 1 again. Your first question comes from the line of Mihir Bhatia with Bank of America. Please go ahead.

Mihir Bhatia: Good morning. Thanks for taking my question. Maybe just let us start with the decision to enter the Lloyd’s market. I guess, you know, why now? Maybe talk a little bit about the strategy

Mark Casale: That you are doing there, what type of assets you are looking to underwrite, maybe just help us understand what exactly is happening there both strategically and operationally. Thank you.

Mihir Bhatia: Sure. Thanks for the question. I would say it has been in process for a while. We have been studying ways to expand Essent Re. So think of it, Mihir, more Essent Re expansion versus we are jumping into a new line of business. When you take a look at Essent Re, it is a valuable asset. I mean, over the years, it has done the affiliate quota share. They have written a lot of really high-quality GSE risk share business. They have a nice MGA where we assist 10 other

David Weinstock: Larger insurance companies to write GSE credit share risk.

Mihir Bhatia: But because of when you combine all three of them, we are sitting there with a $1.7 billion balance sheet, single A rated from AM Best, A- S&P. It is one of the larger reinsurance companies in Bermuda.

David Weinstock: And because of the changes over the past several years, one,

Mihir Bhatia: Just investment yields went up. A lot of asset leverage within P&C. We are on the MI side, we are generally one to one. In P&C, you could be two to one, in some cases, three to one. So there is nice asset leverage. Clearly, that is a lot more valuable when yields go up. Second, S&P a couple years ago now changed their capital

David Weinstock: Capital rules. So there is a lot more

Mihir Bhatia: Capital, I would say, efficiencies when writing P&C on top of MI to kind of get that diversity benefit. Right? And third, it is clearly not correlated to the consumer. Those, I would say, attributes probably eighteen months ago is when we started to look at it. So, you know, we have been looking at various ways. And we thought Lloyd’s was a very efficient way for us to kind of step into the market. $50 million of FAL. It is Lloyd’s itself. It is kind of a self-contained market, very, very capital efficient. The $50 million that we are putting in is actually sitting on Essent Re’s balance sheet, so there is no additional capital required.

I think that is important for folks to realize. And it is really well diversified. So I would say 87% of the business roughly is in insurance versus reinsurance. Our top, you know, 40-plus syndicates that we are backing and reinsuring, and it is generally well diversified across most lines. Less, you know, we kind of made a conscious decision to be a little less weighted towards property cat just because of the volatility there, and that is one where, you know, we still have more, I would say, more work to do. We hired a small team, and they are very experienced in the P&C business, very technical. So they have actuarial backgrounds, which we like.

We are very technical. Right? We talk a lot about unit economics and balance sheet and all those sort of things. So they kind of fit our style. And we will continue to build that team out. It is not going to be very material, and so I do not want

Mihir Bhatia: To play this up that we have entered into a new business. It is not transformational. It is very measured because that is how we like to do things. And as we learn over time, remember, one of the advantages we have at Essent because we are kind of a founder-operated company, we all own a lot of shares. We have a long-term view. And I was in London a few times last year, and I met most of the syndicates that we are backing within the top 10. And I looked at them and said, you know, do we want to invest with them? Because that is essentially what we are doing.

I know we will recognize it as premiums, but think of it also as kind of almost like a big matching line. So we will certainly update you guys with the leverage, and with that platform, we also have the opportunity to write whole quota share with larger reinsurance companies, kind of like how we do it on the MI side. And the relationships that we have there may be a way for us to partner with some over time. Again, not really in the 2026 forecast. We will see how it goes.

But a pretty measured approach, but, you know, similar to title, which is still kind of in that incubation phase and starting to do, you know, we are starting to see some real good signs. They are just nice call options for our investors. So it is not, you know, it is not like we are going to buy back less shares. It is a way for us to learn the business. We will continue to attract talent to the organization both in Bermuda and the U.S., and if there is a time, and we realize where we are in the cycle. We know entering into, you know, kind of it is a little softer

David Weinstock: In certain segments of the market. That is fine. You are never going to, we are not trying to time the

Mihir Bhatia: Market. We look at this as an opportunity. Again, longer term, five to ten years, if successful, it will generate supplemental earnings for the company and help us. It is like another tool I have to grow book value per share.

Mihir Bhatia: Got it. That is helpful. Thank you. Maybe just switching to the MI business for a second. The

David Weinstock: Right.

Mihir Bhatia: I know you do not manage to market share, so this really is not a

Bose Thomas George: Share question. But, you know, you look at it and you are, I think of those that have reported so far, you are the only

Mark Casale: One that has got NIW lower quarter over quarter. So is that just a reflection of you not liking the returns in the market? Is there a conscious decision to pull back in certain parts of the market or risk grades? Help us understand what is happening there.

Mihir Bhatia: Yeah. I would not read too much into it. You know, you have heard me say before, it kind of ebbs and flows. For the year, we were 15. I always say we are kind of the 15, 16. We really try to optimize the unit economics. We have not, you know, I want to say we backed off a couple things earlier in the year. You know, you had the tariffs coming. You know, we probably cut some of the tails, and that is probably a little bit of that. That is okay.

I mean, you look at, if we went back and if we were two points higher in share for the last three years, it all comes out in a wash. And there is really no price-volume trade, especially the better credits. It is just not there. We would rather take that dollar and give it back to shareholders, and I am telling you, I am warning investors because this is just a price game. And if we are, like, bottom in share and the number one or two guys $5 billion ahead of us in this market, I hear it is price. And we are not, again, everyone has their own strategy.

We think a dollar, rather than put it into a loan at a super low premium, I will give it back to shareholders. So we are fine. And then, you know, we will weave in times of dislocation like 2020. We wrote the most market share. So, you know, longer term, market share is really a result of some of the things you do. We are very, I would say, when you kind of take a look at us, again, some of the advantages we have. Look at our gross premium yield. It is the highest in the industry, like three points higher than the average.

It is pretty high, and run that over a $250 billion, it is pretty meaningful. So those are real economics to the company. Look at our gross, and this will all be available, I guess, when all the Ks come out. But look at our gross operating expenses relative to our peers. Add back the ceding commission. Right? Because everyone looks and talks about net expenses. It is really gross expenses, which is cash going out the door. There is a form of leverage there. We outperform the industry. And so when you think about, and it is a relatively sizable advantage versus a few. That expense efficiency allows us to build a team in Bermuda.

It allows us to build out title. Those are things, again, since we manage the business so well, these are ways for us to kind of create competitive advantages, clearly on the technology side with EssentEDGE. You know, we have been monetizing AI now for, you know, seven years. We have not done the new AI, but the machine learning and what we are doing and the EDGE is flat out artificial intelligence. But we are monetizing. We are not just talking about it. You can see that in our premium yield. That is another good example of how we are thinking about the business.

So, again, back to market share, I would rather have better unit economics at a smaller share than the other way around.

Bose Thomas George: Got it. Thank you for taking my questions.

Operator: Your next question comes from the line of Bose George with KBW. Please go ahead.

Mark Casale: Hey, guys. Good morning. Actually, just a follow-up on that last question.

Bose Thomas George: Your gross premium yield has been 41 basis points for a few quarters. You guided to 40 next year. Is that just kind of a rounding issue or anything tied to market returns?

Mark Casale: It has been, no. It has been 41 for a while, Bose, and just think about it, it actually was lower than that. And I was actually looking at it the other day. It was lower than that in kind of the 2021–2022 period. And remember, if you think about 2022, when I commented how low pricing was, there was kind of a reversal, and pricing kind of came up in the industry and it kind of rolls through, because remember you are talking about insurance in force. So it is tough for, there is not a lot of transparency for analysts and investors on what the premium yield is upfront.

You can kind of sense though, if you look at kind of where gross premium yields were for all the companies two quarters ago, four quarters ago, that will give you a good hint, a leading indicator as to what people are pricing at on the front end. So I think for us, it actually went up when pricing went up. And clearly pricing, it has been relatively stable. But as that pricing starts to, you know, compress, and it has compressed a little bit in 2025. But the compression is not really competitively oriented, you know, there is a little bit of that, but it is really driven by credit.

You know, when we look at the credit that is coming in, like, 757 FICO, you know, we rounded it up, but our LTV in the fourth quarter was shy of 92. So that is, all of a sudden, if you think about the old-fashioned rate card, you are in that one quadrant where it is super good credit quality but lower premium. So that is driving a little bit of it. So I would not get too fussed about it. I mean, once the homeowners that are on the sidelines come back and we get kind of that 740–745, 93 LTV, you will see that pricing come back up. And that will work its way into the yield.

So it is a way for us to give you guidance to run the models.

Bose Thomas George: Okay. Great. That is helpful. Thanks. And then you noted that insurance in force growth is likely to be modest. I mean, this year was 1.9% year over year, which is already in the modest camp. So is it going to be, do you think it is going to be sort of below that level or kind of in that range?

Mark Casale: I think within that range. Again, I do think longer term, I hate to say longer term, but it is longer term that housing will continue to grow. There will be renewed growth, Bose. I mean, the demographics, you know, 4 to 5 million in that age group, kind of 28 to 32, are coming into that homeownership camp every year. But the lack of, you know, given where rates are, the lack of affordability, a little lack of supply, they are just on the sidelines. And when they come off the sidelines, I do not know. But when they do, it is going to be a bigger spike than people think.

I just, my crystal ball does not work in those types of increments. I think we are well positioned. So, again, from an Essent perspective, credit is relatively benign still. And as long as credit stays benign, and we can continue to produce the type of cash flow we are producing and really just use that to return to shareholders, we are kind of paid to wait, so we are fine with that. So, again, modest growth. Again, that is a little bit of us trying to guide investors and analysts to what they should expect because the numbers are the numbers, and we would rather kind of underpromise and overdeliver than the reverse.

Bose Thomas George: Okay. Great. Thank you.

Operator: Again, if you would like to ask a question, press star 1 on your telephone keypad. Your next question comes from the line of Douglas Harter with UBS. Please go ahead.

Bose Thomas George: Thanks, and good morning. Mark, can you talk about what you are seeing in your delinquency activity and whether you are seeing any difference across the vintages, especially the vintages that maybe have a little bit less embedded home price appreciation?

Mark Casale: Yeah. Good question. You know, it is not really. I mean, we have 20,000 defaults. If you break it out by vintage, if you break it out by state, if you break it out by lender, if you break it out by servicer, nothing really stands out. I mean, Florida is a little higher because we had some hurricanes. And I would say that the Florida book is probably our higher premium book, but there is a little bit more risk there. We are fine with that. We love the unit economics in Florida and Texas. But no, it is really, we are always looking for something, but we have not really seen anything.

And even the pre-2022 book, and I always like that. We always call it kind of the two books. Right? It is the pre, you know, it goes halfway through 2022 and before is one book and then the newer book, which was at elevated

Philip Stefano: HPA,

Mark Casale: And higher interest rates. We are not seeing much of a difference there. That is probably a more normal, high LTV MI type portfolio, and we are not seeing anything there too. I mean, you are going to see noise and we still see it with forbearance, which ultimately is a good answer for borrowers, but it does create some noise in terms of the defaults and the ins and outs. Again, roughly 800,000 loans. There are only 20,200 defaults. I think it was 18,000-plus twelve months ago. So it is really, benign is maybe too light of a word, but we are not really too fussed about where defaults are. It comes down to unemployment, Doug.

I mean, at some point, if it rains, like, every blade of grass is going to get wet. So we keep our eyes on unemployment. That is where we are always looking for pebbles. It will happen. Something will hit us at some point. We are just not seeing it in the, obviously not seeing it. In fact, the credit coming in has never been better. We are not seeing it, and I know you follow a lot of them too. We do not see it in a lot of consumer finance. We are not seeing it in the cards. FHA is pretty elevated.

But other than that, we are very, very happy with the portfolio and the performance of the book. And even then, if default rates do spike at some point, look at where our claim rate is. So the embedded home equity helps a lot. I think our claim rate is probably right around 1% ever to date. So, I mean, there are some good protections. And I think it is a little underappreciated by the community, which is fine. I mean, again, if you look at just where we are at book value, it is all cash.

We do not have a lot of debt, and there is not really a lot of credit given for future value of the cash flows. And do not forget, these future cash flows are pretty well hedged. Right? I mean, we own that first loss piece, but the mezz piece is pretty well hedged out. So we have a high degree of confidence in the present value of those future cash flows. Hence, that is why we are buying back shares. That is why we pay a dividend. And if we did not have that confidence, we certainly would not be funneling cash outside the company.

Douglas Michael Harter: Great. I appreciate the answer, Mark. Thank you.

Mark Casale: You are welcome.

Operator: Your next question comes from the line of Richard Shane with JPMorgan. Please go ahead.

David Weinstock: Hey, guys. Thanks for taking my question. So it is interesting. Obviously, I have done this a while and followed a bunch of different companies, and I am thinking about comments from two other founder-run businesses that I recall over time. And one

Douglas Michael Harter: Is in the

David Weinstock: Middle market lending space, and the comment was basically, there is no spread for a bad loan. Conversely, if you are making a massively diversified card-type portfolio, you are ultimately sort of seeking an efficient frontier. You accept the fact that you are going to have losses. They are not idiosyncratic.

Operator: It strikes me

David Weinstock: That you guys sort of try to balance both. But ultimately, your business is an actuarial business. Mark, you have

Operator: Sort of

David Weinstock: Provided this cautious outlook. And I am curious

Operator: If you think it is because you cannot capture price

David Weinstock: In the context of what you are concerned about in terms of credit. Is that the right way to think about this?

Mark Casale: Yeah. I mean, I think that is, I do not think you are off. We are never going to be the market leader, and part of this is we do not have to be. You know, our incentives, go look at the incentives, they are all in the proxy statement. Just read the incentives. People do what they are incented to do. I am incented to grow book value per share. One hundred percent of my long-term incentive is growth in book value per share. We are not incented on market share. We are not incented on NIW. We are not incented on insurance in force. So we do not come in every day saying we have to grow NIW.

Look at the incentives around the industry. Some do. They are going to make different trade-offs. I am not saying we are right and they are wrong. It is just different. People do what they are incented to do. We like, over the long term, to optimize our unit economics. So what yield are we charging, what is our loss, what is our capital? Because over time, if you write good unit economics, that will flow through your P&L. And conversely, if you do not, that will also flow through the P&L. And, again, bottom line is we want to grow book value per share. That is our incentive. That is why we are doing it.

And as a founder-run company and owning a lot of shares, and a very, I would say, very supportive and constructive board of directors, a lot of them have been with me from the beginning, we all sing from the same hymn sheet. So it is not like they say you have to grow, they are with us in terms of how we will slowly grow, and I think it is a long-term boring story with Essent. But since we have been public, Richard, we have grown book value per share 18%. Our total stockholder return is close to 12%, which is equal to the S&P 500. It is more than the S&P 400 mid-cap by, like, three points.

Longer term, am I going to win in the next two weeks, or a month or a quarter?

David Weinstock: I do not know. I do not care.

Mark Casale: I want to win long term, and the company wants to win long term. And I think that is, so when we come in every day, and we do come in every day and we meet and we talk, it is really like where do we want the business to be five years from now, ten years from now. We like to work backwards as to, and when we look at that in the context of do we invest in title, do we invest in Essent Re, do we try to be number one in market share, we balance a lot of that stuff. So, again, it is our way. It is not necessarily the right way.

But, as a large owner of the company, I feel very comfortable with the direction and how we are managing the company. Got it. That helps. And just to sort of delve in a little bit more, pricing has not really changed that much, but you are a little bit more cautious. Is there something that you are thinking about specifically in terms of housing credit that shifted? And, again, you know our views on the world. So I am curious what your credit outlook is here. It is a good question. I would not, like I said, the market share ebbs and flows. Like I said at the beginning, I would not read too much into it.

It is not like we made a credit call and we went to 14% market share. It is nothing like that. It is really around kind of on the margin and optimizing unit economics. You still do a lot of testing and pricing elasticity. Our view is, you know, I think you will know when we are cautious on credit. Trust me, you will know. I would not, it is not a credit call. It is more around what is the best dollar. Is it used to repurchase shares or look at other opportunities, or is it to grow NIW?

And I think our view is, given the strength of our balance sheet, given the liquidity advantage we have with Essent Re, we can lean in when things get, you know, when the market looks, you know, when people are a little bit more scared of the market, and we feel like we can get more pricing. Right now, given where pricing is, it really has not moved. We are just comfortable kind of being at the bottom of the pack. It does not really impact. If we were, like I said earlier, larger, it would just require more capital.

And that dollar of capital is probably just better at this point in our life cycle and where the market is, not forever. We think returning it to shareholders is really the best investment decision. And the fact that we retired 10% of the shares, that is a large number. If that continues, I would expect it to continue this year, all else being equal. We bought back $44 million in January. And if we are kind of where we are at in terms of the market, it would not surprise me to see that level continue.

And that just means a lot of our larger shareholders get to own more of the company, and they get to own more of a fantastic business. So I think it is a good thing. So do not read into it a credit. It is not really, I am not making a credit call, and I know your views.

Richard Barry Shane: Appreciate that, and I really do appreciate the answer and the conversation. Thank you, guys.

David Weinstock: You are welcome.

Operator: That concludes our question-and-answer session. I will now turn the call back over to management for closing remarks.

Mark Casale: I would like to thank everyone for calling in and joining the call and the questions, and have a great weekend.

Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining. You may now disconnect.

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