Essent Group (ESNT) Q3 2026 Earnings Call Transcript

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DATE

Friday, Nov. 6, 2026

CALL PARTICIPANTS

• Investor Relations-Philip Michael Stefano
• Chairman and CEO-Mark Anthony Casale
• Chief Financial Officer-David Bruce Weinstock
• President of Essent Guaranty-Christopher G. Curran

TAKEAWAYS

• Net Income -- $163.4 million, reflecting steady credit performance and the impact of interest rates on portfolio persistency.
• Diluted EPS -- $1.82, representing a slight increase compared to $1.67 in the third quarter of the prior year.
• Book Value Per Share -- $62.58, growing 9% over the past 12 months inclusive of common dividends paid to shareholders.
• Insurance In Force -- $250.1 billion, an increase of 1% from the prior year as affordability constraints muted portfolio growth.
• 12-Month Persistency -- 83.3%, driven by the current interest rate environment where over 50% of the in-force portfolio has mortgage rates at or below 6%.
• Mortgage New Insurance Written -- $12.1 billion, compared to $14.1 billion in the second quarter of 2026 and $12.2 billion in the third quarter of the prior year.
• Portfolio Default Rate -- 2.75%, an increase from 2.53% in the prior quarter due to typical seasonality and the continued aging of the insurance portfolio.
• Weighted Average Credit Score -- 747, indicating a high-quality credit profile for the current insurance in force.
• Weighted Average Original LTV -- 93%, consistent with recent quarters and reflecting management's focus on the purchase origination market.
• Reinsurance Net Premiums Written -- $330.3 million for the first nine months of the year, up from $49.3 million in the same period of 2025.
• Total Cash and Investments -- $6.48 billion, generating an annualized aggregate investment yield of 4.4% for the third quarter.
• Other Invested Assets -- $451.9 million, comprising 7% of the total investment portfolio and providing $10.7 million in quarterly income.
• Share Repurchases -- $474 million, representing 7.7 million shares repurchased year to date through Oct. 31, 2026.
• New Share Repurchase Authorization -- $500 million, approved by the Board of Directors to run through year-end 2028.
• Common Dividend -- $0.35 per share, declared for the fourth quarter of 2026 and payable on Dec. 10, 2026.
• PMIERs Sufficiency Ratio -- 177%, with $1.6 billion in excess available assets as of Sept. 30, 2026.
• Mortgage Insurance Net Premium Rate -- 34 basis points, down 1 basis point from the prior quarter.
• Reinsurance Combined Ratio -- 84.7%, reflecting the growth of non-mortgage business and the impact of the changing business mix in that segment.
• Trailing 12-Month Operating Cash Flow -- $857 million, providing the company with capital for reinvestment and shareholder returns.
• Debt-to-Capital Ratio -- 8.3%, with $500 million in senior unsecured notes outstanding and a debt-to-capital ratio essentially flat versus the prior quarter.

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RISKS

• CFO Weinstock noted that "the loans that we are insuring have grown. I would say, in the past 18 months, they have probably grown from an average of like $300,000 to now to about $400,000," which has increased the dollar amount of the loss provision.
• CEO Casale stated, "portfolio growth stays muted as affordability continues to impact origination volume," highlighting the ongoing pressure of higher interest rates on the mortgage market.
• CEO Casale noted, "the post 2022 book is really the more normal So you are going to see. We are seeing higher severities," compared to the anomaly of the 2021 mortgage vintage.

SUMMARY

Essent Group Ltd. (NYSE:ESNT) reported third-quarter results characterized by stable mortgage insurance performance and continued expansion of its reinsurance operations. Management reported that elevated persistency, driven by low-rate mortgage portfolios, continues to support the insurance in-force base while purchase volumes remain constrained by housing affordability challenges. The company reported a significant increase in reinsurance premiums as it expands into property and casualty lines, seeking to diversify earnings and optimize capital through synergy credits. Management stated it remains focused on a balanced capital strategy, as evidenced by the authorization of a new $500 million share repurchase program and the maintenance of a quarterly dividend.

• The company is expanding its Essent Re property and casualty footprint, with management expecting roughly $320 million in written premiums for 2026 from these activities.
• CEO Casale noted the emergence of VantageScore in the market, stating that it represents less than 5% of originations and is more likely to impact mortgage-backed security buyers than the mortgage insurance industry.
• Management indicated that the 2021 mortgage book will likely reach peak amortization between 2028 and 2029, which will influence future persistency rates and portfolio runoff.
• CEO Casale stated, "housing will come back. It always does. It always resumes. It will grow in line with GDP," expressing long-term optimism regarding demographic demand and purchase origination volume.
• The company maintains high liquidity at the holding company level, reporting $1 billion in cash and investments including an undrawn $500 million committed credit facility.
• Management emphasized that approximately 95% of the insurance in force is covered by reinsurance protection, which is designed to reduce tail risk and provide capital relief.

INDUSTRY GLOSSARY

• PMIERs: Private Mortgage Insurer Eligibility Requirements, the capital standards set by Fannie Mae and Freddie Mac for mortgage insurers.
• Insurance In Force (IIF): The total face amount of primary mortgage insurance policies that are currently active.
• New Insurance Written (NIW): The total dollar amount of insurance policies issued during a specific period.
• Persistency: The percentage of insurance in force that remains on the books from the beginning of a period to the end, reflecting policy retention.
• LTV (Loan-to-Value): The ratio of a loan to the value of the asset purchased, used to assess credit risk in mortgage lending.
• Risk In Force (RIF): The total amount of potential loss exposure an insurer has on its active policies after accounting for coverage percentages.
• Combined Ratio: A measure of profitability for insurance companies, calculated by dividing the sum of incurred losses and expenses by earned premium.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Essent Group Limited Third Quarter 26 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. Would now like to hand the conference over to your speaker today, Philip Michael Stefano, Investor Relations. Please go ahead.

Philip Michael Stefano: Thank you. Daniel. Good morning, everyone, and welcome to our call. Joining me today are Mark Anthony Casale, Chairman and CEO and David Bruce Weinstock, Chief Financial Officer. Also on hand for the Q&A portion of the call is Christopher G. Curran, President of Essent Guaranty. Our press release, which contains Essent's financial results for the third quarter of 26, 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 Q of our press release and in our third quarter 26 earnings presentation posted on our website.

Prior to getting started, I would like to remind participants that today's discussions are being recorded and will include the use of forward looking statements. These statements are based on current expectations, estimates, projections and assumptions that are subject to risks and uncertainties. Which may cause actual results to differ materially. For a discussion of these risks and uncertainties, please review the cautionary language regarding forward looking statements in today's press release, the risk factors included in our Form 10 ks filed with the SEC on 02/18/2026 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.

Mark Anthony Casale: Phil, and good morning, everyone. Earlier today, we released our third quarter 26 financial results, which reflects solid credit performance, and the continued impact of interest rates on persistency and investment income. The cash flow from our core MI business remains strong. And gives us the flexibility to invest in the franchise while also returning capital to shareholders. For the third quarter of 26, we reported net income of $163 million or $1.82 per diluted share. Representing an annualized return on average equity of ~12%. Our book value per share was $62.58 as of September 30, and inclusive of common dividends has increased ~9% from a year ago.

Turning to our MI business, our insurance in force ended September 30 at $250 billion up 1% from a year ago. 12 month persistency was 83%, which reflects the current rate environment with over half of our in force portfolio having a mortgage rate of 6% or lower. We expect this dynamic to continue supporting elevated persistency while portfolio growth stays muted as affordability continues to impact origination volume. Over the long term, we remain constructive on housing as favorable demographics and pent up demand should provide foundational support to home prices and purchase origination volume.

The credit quality of our insurance in force remains strong with a weighted average credit score of 747 and a weighted average original LTV of 93%. Consistent with our expectations, the portfolio default rate increased to 2.75% reflective of seasonality and the aging of our portfolio. We continue to believe that substantial home equity embedded in our in force book should help mitigate ultimate claims. Additionally, 95% of our insurance in force is subject to reinsurance protection which provides capital relief and reduces tail risk. Turning to the Reinsurance segment, we expect written premiums of ~$320 million from our P&C reinsurance activity in 2026. With roughly half earned this year at a combined ratio in the high-90s.

We are currently focused on building Essent Re's P&C and remain disciplined with our underwriting. While mortgage risk and the related MGA business will drive the majority of the segment's earnings in the near term, we expect the P&C business to provide complementary earnings in the long term as well as capital synergy given diversification credit. Our consolidated cash and investments totaled $6.5 billion as of September 30 and are annualized aggregate investment yield for the third quarter was 4.4%. That yield includes income from other invested assets, a portfolio of strategic investments that now totals ~$450 million or 7% of our total portfolio.

While returns will vary from period to period, this portfolio gives us another way to deploy capital outside of our core business to generate income and grow book value. We continue to operate from a position of strength with $5.6 billion of GAAP equity, access to $1 billion of excess loss reinsurance, and $1 billion of cash and investments at the holding companies. With trailing 12 month operating cash flow of $857 million our franchise remains well positioned from an earnings, cash flow and balance sheet perspective. We remain committed to a balanced capital strategy that seeks to optimize shareholder returns over the long term while preserving flexibility for our strategic growth.

Year to date through October 31, we have purchased nearly 8 million shares for ~$475 million In addition, I am pleased to announce that our Board has approved a common dividend of $0.35 per share for the fourth quarter of 26 and has also authorized a new share repurchase plan of $500 million Now let me turn the call over to David.

David Bruce Weinstock: Thanks, Mark, and good morning, everyone. Let me review our results for the quarter in a little more detail. For the third quarter, we earned $1.82 per diluted share, compared to $2.8 last quarter and $1.67 in the third quarter a year ago. My comments today are going to focus primarily on the results of our mortgage insurance, and reinsurance segments. there is additional information on corporate and other results in Exhibits D and E of the financial supplement. Our mortgage insurance portfolio ended the quarter with insurance in force of $250.1 billion an increase of $342 million from June 30 and an increase of $1.3 billion compared to $248.8 billion at 9/30/2025.

Persistency at 09/30/2026 was 83.3% compared to 84% at 06/30/2026. Mortgage insurance net premium earned for the third quarter of 26 was $211 million. The average base premium rate for the mortgage insurance portfolio for the third quarter was 40 basis points. Consistent with last quarter. And the average net premium rate was 34 basis points down 1 basis point from last quarter. Our mortgage insurance provision for loss and loss adjustment expenses was $51.7 million in the third quarter of 26, compared to $29.4 million in the second quarter of 26 and $44.2 million in the third quarter a year ago. At September 30, the default rate on the mortgage insurance portfolio was 2.75%. Up from 2.53% at 06/30/2026.

Mortgage Insurance operating expenses in the third quarter of 26 were $31.9 million and the expense ratio was 15.1%. Compared to $31.9 million and 14.8% last quarter and $31.2 million and 14.4% in the third quarter last year. At September 30 Essent Guaranty's PMIER sufficiency ratio was strong. At 177%. with $1.6 billion in excess available assets. Turning to our reinsurance segment. Net premiums written year to date through September 30, 26 were $330 million, compared with $49 million over the same period of 2025. Net premiums earned year to date 2026 were $137 million compared with $46 million over the same period of 2025.

The increase in premiums reflects the growth in non mortgage business from our expansion in the P&C reinsurance activity. The reinsurance combined ratio was 84.7% in the third quarter of 26. Compared to 77.9% last quarter and 19.2% a year ago. The change in the combined ratio was as expected. Reflecting a difference in underwriting performance between the mortgage and non mortgage lines and the changing business mix of the segment's premiums. The pre-tax underwriting income for the reinsurance segment predominantly reflects the underwriting results of our GSE and other mortgage risk share business. While the contribution from our P&C activity was not material.

Consolidated net investment income was $63 million in the third quarter of 26 up $1.3 million from the prior quarter. Income from other invested assets was $10.7 million in the third quarter 26. Compared to $19.4 million last quarter and $1.8 million in the third quarter a year ago. Results this quarter again reflect the net favorable fair value adjustments on these investments. Investments. Total holding company liquidity remains strong and includes $500 million of undrawn revolver under our committed credit facility. At September 30, we had $500 million of senior unsecured notes outstanding and our debt to capital ratio was 8.3%. Year to date, Essent Guaranty paid $115 million of dividends to its U. S. Holding company.

At quarter end Essen Guaranty's statutory capital was $3.7 billion, a risk to capital ratio of 8.2 to 1. Note that statutory capital includes $2.7 billion of contingency reserves at September 30. As of October 1, Essent Guaranty could pay additional ordinary dividends of $324 million in 2026. On October 2, Essent Guaranty paid a dividend to its US holding company of $85 million. During the third quarter, Essent Group paid cash dividend totaling $31.1 million to shareholders and we repurchased 1.1 million shares for $74.5 million. In October, we repurchased 802 thousand shares for $50.8 million. Now let me turn the call back over to Mark.

Mark Anthony Casale: Thanks, Dave. In closing, Essent remains a well capitalized, high quality franchise with strong and consistent cash flow generation. We are well positioned to keep growing book value per share, returning capital to shareholders and investing in opportunities that strengthen our franchise for the long term. While continuing to support affordable and sustainable homeownership.

Operator: Now let's get to your questions. Please wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from Terry Ma with Barclays. Your line is open.

Terry Ma: Hey, thank you. Good morning. Maybe just to start off with persistency. Can you help us understand what you have been seeing in the mix of MI cancellations scheduled versus borrower initiated And then just looking ahead, how should we think about cancellation activity and the impact on persistency?

Mark Anthony Casale: Yeah. Hey, Terry. It seems to be a popular topic this quarter. Amongst all the MIs not sure why. I would look at I think you are focused on the right Terry, because I do think, you know, there is not that many things that move the business. Persistency is 1 of them. So when you think just bigger picture, I know I-- you know, in terms of cancellation, a lot of it is going to be that 2021 book that just simply amortizes off over it started already, but it is probably going to be peak in, like, 2028, you know, 2029.

And then when you start thinking about growth, normal growth, you know, kind of consistent with this slow market, you know, I would think of persistency kind of in the 80% range. So it is fairly it is fairly muted, clearly lower than we have been. But remember, we have also experienced persistency of 60%, I believe it was, in 2020 and 2020. Parts of 2021. So bigger picture, really do think you have to focus it there. In terms of like MI cancellation, by, you know, actually had to look it up. Right? I mean, it is not something we track day on and day out. But, I mean, they give-- it is probably 37 thousand in the quarter.

15 of those was refinanced and the other 22 was cancellation, about 4 or 5 maybe, it is a little tough with the codes, was borrower initiated. The rest was just amortization. So, I mean, big picture again, Terry, the process works. it is a good. MI is a really good product. And it is been around for a long time, since, you know, really since almost 70 years. it is fairly priced. So on an average $400 thousand loan, it is like $1.2 thousand a year. And down payment, we are saving folks probably anywhere from $40 thousand to $45 thousand.

So and also remember, this is an industry that during the great financial crisis did not take any TARP. Probably 1 of the few financial services that did not. So a lot of credit to some of our peers who managed through that process, and an industry that paid $60-plus billion in claims over the years. So again, good product, I know there is a lot of kind of clearly emphasis on MI cancellation, and clearly, you want to make process. We are always what is best for the borrower.

So if there is ways in the future working with the GSEs and working with FHFA to kind of ease the friction, we are supportive, and we will work with them to do that.

Terry Ma: Got it. that is helpful. Thank you. And then maybe just a quick housekeeping question. Just on the current period provision for the quarter, the $81 million on MI, anything to kind of call out or unpack there? Is quite a bit harder than we were expecting. Thank you.

David Bruce Weinstock: Hey, Terry. it is David Bruce Weinstock. Really, I think when you look at our provision, I think 1 of the things that is really driving is that the average loan size is increasing. So when you look in our supplement, specifically if you look at Exhibit M, which kind of looks at reserves per bucket, We are reserving pretty much the same way we always have. Our reserve methodology has not changed. The loans that we are insuring have grown. I would say, in the past 18 months, they have probably grown from an average of like $300 thousand to now to about $400 thousand.

So that is going to be what is increasing the loan size and the risk in force, and it is going to increase the dollar of our provision. But overall, think that is what you are seeing.

Mark Anthony Casale: Yeah. And I mean, sorry, again, I think it is a good question. And agree with David. The severity just the bigger loans are gonna hike the provision up. At the end of the day, it is really gonna be about unemployment. So, I mean, a lot of these still have to roll the claim. If they do, you know, clearly the pre-22 book has a lot of build in equity. It will be-- it is going to be, I would say, the post 2022 book is really the more normal So you are going to see. We are seeing higher severities. that is really the business.

I would not really look at 2021 as the business that was really an anomaly that is starting to work its way out. And it is, again, thinking longer term or from a modeling perspective, Terry, we have always said kind of we expect a 2% to 3% claim rate. that is what we price for And then in terms of combined ratio, kind of in that 35% to 45% ratio. So this is, you know, I do not wanna say it is always within our expectations, but it does not really surprise us.

And I still think just look at our cash flow over the past 12 months, in excess of $800 million So not a lot of cash is leaving the company yet. I mean, again, we will start paying more claims over time, but I do think what you are seeing is a normal MI business. And based on that, it is still I mean, it is still pretty good.

Terry Ma: Got it. Super helpful. Thank you.

Operator: Thank you. Our next question comes from Douglas Harter with BTIG. Your line is open.

Douglas Harter: Thanks, and good morning. Hoping you could just talk about your view on competition You guys continue to kind of be slightly below pro rata market share. And just kind of how you think or what that tells us about your view of you know, the risk adjusted returns in the market.

Mark Anthony Casale: Hey, Douglas. Welcome back. Nice to have you back on the calls. Would say the competitive market is still pretty similar. We have not seen much of a change. I think for us, we always do. We probably fall back a lot on the unit economics and we tend to, you know, look at our earned premium based premiums a little bit higher than the industry. We focus a little bit on that, and we like to do just-- it is a small market, Douglas, so we do not really look-- you know, we would love to be, you know, 1 of 6, so a little bit higher on the share.

But we are not particularly concerned given the smaller nature of the market. And we are kind of using this opportunity to test a lot of things. We will test pricing. You know, remember, SNEDGE, which, you know, is really our credit engine and does help us. So. And we can get into that a little bit more just in terms of Vantage. But, you know, it really helps us kind of, you know, we are really looking at, you know, kind of our estimated claim rates. So we will look and we will test geographies, we will test lenders, we will test certain tails. So it is working as well as we would like.

I mean, sometimes we know where you may sacrifice a little bit of volume for that. I think longer term, it is. You know, given the small nature of the-- we are not particularly concerned. In terms of the competitive environment, I would look at it as every MI seems to have their own buy box, right? Some like lower LTVs, some like higher credits, some like certain geographies, certain lenders, But I do think it kind of balances out in the end, so I would not read too much into our kind of take on the market because we are a little bit lower.

Douglas Harter: I appreciate that, Mark. Thank you. Yep.

Operator: Thank you. Our next question comes from Mihir Bhatia with Bank of America. Your line is open.

Mihir Bhatia: Hi, good morning. Thank you for taking my questions. Maybe I will just start with something you just mentioned there. Mark, about Vantage and EssentEDGE, Can you talk a little bit more about that?

Mark Anthony Casale: Sure. I mean, I think, you know, Vantage is coming into the market, and it is not very big right now. I mean, here, it is probably less than 5% of our originations. I do not think it is going to affect the MI industry that much. I think it is going to impact the MBS buyers in certain buyers of loans more, because they are so focused on FICO. But I think when we look at it, you know, FICO, FICO 10T, VS4, the GSEs are looking at, like, posting their scores. I think our advantage with Edge is we are looking at the raw credit data. So we are coming up with our own score.

So we are agnostic to kind of-- you know, we use it-- you know, it will impact those scores, but it is not really driving our ultimate claim rate. And anything we are on the card with, you know, clearly that is gonna go Vantage or FICO depending on the lender. We also run that through Edge on the back end. So I. We feel like we have a really good common denominator that we-- And we may start disclosing that over time. We will see we will see how it goes. But it will at least give investors what our view is on and the ups and downs.

I think from a bigger picture, I think with Vantage, you could see, a little bit of pricing compression if they start to pick, like, the best of all. You know? And I would be surprised if the industry does not respond and raise pricing a little bit. I mean, you are talking like a basis point or 2. it is not big dollars, but I would be surprised if the industry does not react. I think on the other hand, I do think you may see a larger market.

You know, I would believe, especially if there is some inflation you could see FHA borrowers migrate to conventional, which I think, again, if that is better for the borrower, that is good. So I think net, it is probably a positive, for the industry, you know, over the next year or 2.

Mihir Bhatia: Got it. The other question I had was just in terms of insurance in force growth at current market size. Right? I mean, if you think about 80% persistency, you have 50%. I guess, ~$50 billion running off each year. And IW is running about that same level. Should we expect insurance in force to be flat or even down next year?

Mark Anthony Casale: Well, it is hard. it is it is tough for me to say right now. I do say that it has been relative flat. I mean, we are entering 2027, kind of the fifth plus year of just a flat market. So-- and I think given where rates were, we were able to grow insurance in force a little bit over the past few years. I would not be surprised if it flattens out a bit. That being said, Mihir, I do think we are levered more for the up when you think about warehousing's been relatively stagnant, and then we can talk all day long about demographics, but I do believe there is a pent up demand for housing.

And kind of the longer this stays, this kind of slowness hangs around, the larger the snapback will be. So look bigger picture, you know, look at a $1.6 trillion of industry, enforced for the, you know, for the whole industry. I would not be surprised to see that grow to $2 trillion. You know, not next year, not but let's say over a certain period of time, again, take our share So I do think growth will resume. And I do not think, you know, and I do not think a lot of investors see that. And that is that is fine. Right? it is hard in this environment.

But I do think we have that kind of growth because housing will come back. It always does. It always resumes. It will grow in line with GDP. You have to think through why it is not growing. And part of it was 2021 was such an anomaly. We literally pulled 5 or 6 years' worth of growth into 1 year. Or 2 years. Home price is up 50% in 2 years. that is just not normal. So now what you are seeing more of the normalization. So we are flattening out.

We are fortunate, as a company that because of the persistent and the benign credit environment, we are still driving a lot of cash flow to the bottom line. But, you know, in some of the other participants, the transaction oriented businesses, it is us. So, but I do think we really. We kind of get-- we kind of look at it internally as we are paid to wait and the way we are kind of managing capital over time. Because remember, insurance in force, it does not grow, the capital needed to support it does not grow.

So that becomes you know, free cash flow, which again, we have used predominantly the last 18-plus months to repurchase shares, which we think that right now is a pretty good use of proceeds, you know, for the Got it.

Mihir Bhatia: Thank you. Yep.

Operator: Thank you. Our next question comes from Rowland Mayor with RBC Capital Markets. Your line is open.

Rowland Mayor: Mark, I think you said in response to a question that you price for a 2% to 3% claims rate. But then you still book new notices in a much higher figure than that. What would it take to close the gap?

Mark Anthony Casale: Well, remember, when we book new notices, that is not what our ultimate these things roll. So that is our initial claim rate, 2% to 3% roll ins at the end. So it is kind of apples and oranges. So think of it again as the ultimate claim rate. So just picture unit economics. Right? So premium rate, net premium rate, kind of loss rate, which is your claim rate. that is kind of your return on asset. Then you have your expenses and your investment income. it is relatively straightforward, but I do think claim rate for historically for us has been, like, less than 1%. That is just and we are pleased with it.

But I think, normally, you are gonna have to look in that 2% to 3% range. Hence, when you kinda run through the math, that gets you to that 35% to 45% combined ratio. And I do think that is a good guide. 35% to 45% combined ratio, kind of 80-ish percent persistency longer term is actually a good guide as you start to model this stuff out.

Rowland Mayor: Thank you. that is helpful. And then I guess from a competitive dynamic, we have seen a lot of multiyear quota share deals announced in the industry at fairly cheap cost of capital. You expect that to drive any change in pricing decisions as a result of the improved reinsurance dynamics?

Mark Anthony Casale: Great question. I do not know. We do not do I mean, we look at it. We price on an unlevered basis. We do not take the reinsurance cost and rotate that back into the front end. And part of it is just how the market works, right? I mean, there is only 6 participants, so if you use that to lower price, it is easily matched. I would be surprised if the other participants use it that way too because it is it is really just reducing premium in the industry.

So I think what we would do, the way we look at it is we will price for kind of an unlevered return and anything that is, you know, cheaper, so to speak, on the reinsurance side really benefits shareholders. And we took that and just lowered price, and shareholders do not really gain from that. And I think for, you know, reinsurance we generally have gone 2 years. We have seen some of the, we have seen a few participants go 3 years, which again speaks to 1, the demand for reinsurance in MI. there is really not a lot of GSE reinsurance, so we are kind of the only game in town. We like it, and we will.

I think we will continue. We think it is a great tool, but I would remind you that we do like capital too. Alright? I mean, I think reinsurance protects you, in the event of an, you know, kind of a lower, you know, call it higher unemployment, more losses, reinsurance clearly protects you. Capital lets you take advantage of those type of situations. And I give you the example. it is dated now, but in 2020, we talked earlier, we were the lowest in market share. You know? But in 2020, we were. We have only been number 1 in market share twice in our history, and both times were in 2020.

The second and third quarter when we had, we went out and had raised capital in May. We had a lot of capital. We wrote and I think we had a 20% handle on 1, and part of it was because some of the you know, there was not, you know, there was not as much capital around the industry, there is a little bit of a shock event. We took advantage of it. So again, I think you have to look at it both ways. Reinsurance is a great tool. it is really part of our, you know, when we think about buy, manage, distribute as a key piece of it.

But when you think about capital longer term, you also have to worry about the tail. Right? So when we think about how do we think about excess capital clearly insurance in force is not growing, we have a lot of excess capital. Could we use it for you opportunities outside of the core? Relatively small. We would love to plow it back into the core business. And then we look and say, how much do we need in an event? So remember, we hold first loss. We really hedge out against a mezz. You know, we reattach at the top.

So for our business role, and I know you cover the PNC market, a cat event for us is a severe macroeconomic recession. You know, what is the probability of that happening in the next 2 to 5 years? Probably pretty low, not zero. So I think we like, we have been through it. I have managed through the GFC. I have been through the subprime crisis of the late nineties. You know, we have seen the movie before, so we like-- you know, we think having dry powder to take advantage of an event And also when you think about just the, you know, kind of the price of the-- it is a call, Right?

I mean, so the price of holding on to that additional capital, we actually think is relatively cheap. Versus returning all of it to shareholders. I think for us, a capital return, we are gonna be in excess of 100% this year. We bought back 10% of the company last year. Would not be surprised if we are close to that this year. Again, I think we are fortunate in terms of how much capital we are generating. I think we are using most of it to buy back capital, so we think that is the best use of funds now. But we are still we are still retaining a little bit for-- we like to have dry powder.

Either for an opportunity that presents itself on the offensive nature or just being defensive.

Analyst: Thank you.

Rowland Mayor: And then if I could just sneak in 1 more. We are coming up on 1/1 here Is there any interest in expanding the P&C appetite And can you discuss your premium expectations there?

Mark Anthony Casale: Yeah. I mean, I think we are clearly in conversations now with Lloyd's around kind of our funds at Lloyd's commitments. I think there is a few where we would like to increase our allocation, and there is 1 or 2 we are gonna decline, because, you know, they are-- it is-- they are using a 100% FAL. there is not a lot of alignment. So, you know, we are not the key there is to continue to-- we have talked about testing, we are continuing to test the market. We like our approach with Lloyd's. it is clearly different than some, but I think it is probably more it suits our style.

So you could see us grow a little bit, I would not expect a lot. And then on the, you know, the quota share that we did last year, that actually renews again for another year. And we will look to do potentially do some other retros or even some direct reinsurance with cedents. But, you know, we will see how it goes. We are seeing a lot of the submissions are coming in, but it is really the same unit economics kind of framework that we have, on the MI side. So we are looking at it.

We are we are building out the infrastructure, but I will give you a lot more color in February. it is a little early to tell because we are just starting to see it. But again, lots of capital floating out there. We do not need to kinda push on growth there for the sake of growth.

Rowland Mayor: All right. Thank you for the answers.

Operator: Thank you. A reminder, to ask a question, please press 11 on your telephone. Again, please press 11 to ask a question. Our next question comes from Bose George with KBW. Your line is open.

Bose George: Hey, everyone. Good morning. Actually, just a couple of bookkeeping questions for me. What was the share repurchase activity just in October?

David Bruce Weinstock: Yeah, Bose, it was about $50 million. Not shares. Let me just pull it back up. Yeah, about 51 million for a little over 800 thousand shares.

Bose George: Okay, great. And then actually, in terms of the tax rate, it was up a little bit.

David Bruce Weinstock: You know what? I got it backwards. Let me correct that. I read it backwards. 802 thousand shares for about $51 million, makes more sense.

Bose George: Yes. Okay. Great. Thanks. And then on the tax rate, yeah, no worries. Thank you. On the tax rate, you know, what is a good number going forward? You know, it is up a little bit. Is it know, more flattish, you know, going forward?

Mark Anthony Casale: Yeah. I would-- Hey. I mean, David can kick in, but I would think kinda I would guide a little higher, Bose, I mean, that is kind of 17-ish, maybe even 18-ish percent. Just remember the friction cost we have from getting it from the U.S. to Bermuda. You know, so there is a 5% withholding tax. So you can kind of do the weightings. But I would be a little conservative there if I were you.

Bose George: Okay, great. And then actually just 1 more. The other income line item, just to confirm that is the GSE CRT business. Right?

David Bruce Weinstock: No. Actually, other income for MI, this quarter, which had a little bit of an increase, that would. You know, we have disclosed, we have. We our ILN transactions, there is a little bit of an accounting nuance there where we have an embedded derivative where the literature says we have an embedded derivative in those ILN transactions. We mark them to market every quarter. We did have a transaction terminate in the third quarter which released the liability and ultimately flowed into income. So that is what you are seeing there. We have that disclosed in the financial supplement. Not something you see every quarter at that magnitude, but that is that is really what you are seeing.

Bose George: Okay, great. And so the CRT stuff goes through the regular premium line?

David Bruce Weinstock: The reinsurance? Yeah, yeah, is correct. that is right. Yep.

Mark Anthony Casale: The CRT business in Mark will go through the premium. that is right. Yeah. Okay.

Bose George: Okay. Great. Thanks a lot.

Operator: Thank you. Our next question comes from Rick Shane with JPMorgan. Your line is open.

Richard Shane: Look, we see defaults picking up, and some of that is seasonality, and some of that is cyclicality. I am curious where you guys sort of think we are from a cyclical perspective. And can you give us any characterization of the defaults that emerged during the third quarter so we can think about tiers or risk associated with them?

Mark Anthony Casale: Yeah. Hey, Rick. I still do not-- we do not see really any trends. I mean, the defaults are up, so they are close to 22 thousand. I do-- and we sound like a broken record here, but when the book's 40 months old, these guys have been around for a while, some of them are gonna default a little bit more. The newer book 2023, 2024, 2025 book, I do-- I just think it is not as good as the earlier book.

So you know, you are going to see, as David said, larger loan sizes, so some of it is coming through that in terms of the provision, but we do not really see it, you know, we look all the time, right, you are looking at defaults, and you are looking at it, there is a couple ways you have to look at it clearly by geography. Right? Given where home prices could be up and down. You are looking at by lender. Also have to look at it by servicer.

And that is something you have to be careful-- you know, I think investors have to be cognizant of If there is a downturn, you know, can the servicer actually collect the payments from the borrower? And that is going to be critical. We are not seeing much, and again, I would always tie it back to unemployment. Unemployment, I think it actually ticked down, so it was 4.1%. So as long as the economy stays strong, I would not be surprised to see the book continue to. Maybe to normalize, but we do not see any kind of skeletons in the closet whatsoever.

Richard Shane: Got it. As always, I appreciate the transparency, Mark. Thank you. You are welcome.

Operator: Thank you. Our next question comes from Geoffrey Dunn with Dowling and Partners. Your line is open.

Geoffrey Dunn: Thanks. Good morning. Unit economics are double digit, but when we consider the necessary capital buffer, Mark, do you think MI is a double digit return business in a normalized market?

Mark Anthony Casale: Yes, firmly. I mean, again, do not confuse unit economics with our balance sheet. I would look-- we firmly think it is 12% to 15%. that is our hurdle. Also the hurdle with strategic investments as we put money to work there. it is clearly the hurdle at Essent Re. it is the hurdle at Title, and quite frankly, Title's not hitting that hurdle. Because of where rates are. I think, again, the lag between our unit economics and the business is really just the capital we are holding on the balance sheet. And again, Jeff, we just think that is a relatively cheap option. To hold.

And you know, so it is probably it is probably a couple of points, in terms of excess that we are holding. But, again, given where we are in the market and just our experience, you know, we are we are perfectly comfortable holding that capital. And meanwhile, we are still returning a lot to shareholders.

Analyst: But Hopefully, that helps you.

Geoffrey Dunn: Thanks. Appreciate it. Then I apologize. I got the October buyback, but missed the quarter's buyback in town.

David Bruce Weinstock: Yeah, Jeff. So for the quarter, we repurchased about 1.1 million shares for $74 million That was for the third quarter.

Mark Anthony Casale: Yeah, pretty light in the quarter, Jeff. Do not read too much into it. I think we kinda look at it more on a yearly basis. I think we bought a lot back in the second quarter. And again, I think it is it is public, but I think we bought back 1 million shares at, like, $56 in June. You know, someone just had to dump the shares I think it was the week that Google was raising, their $84 billion and people were looking. So we like to take we like to take advantage of those things. And, again, if you look at bigger picture, you know, we continue to grow book value per share.

We have grown it, whatever, since the IPO, 17% to 18%. The stock looks like a bad EKG in terms of the performance. It goes up, but it is pretty volatile. And I think our view is we like to continue to buy it when it gets, you know, we think cheaper and then probably lighten up a little bit. You know, on the on the other end. So I would not read too much in quarter to quarter.

Geoffrey Dunn: All right. Thanks.

Analyst: Yep.

Operator: Thank you. I am showing no further questions at this time. I would now like to turn it back to management for closing remarks.

Mark Anthony Casale: I would like to thank everyone for joining today. Excellent questions, and have a great weekend.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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