Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Essent Group Ltd. First Quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question at that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. It's now my pleasure to turn today's call over to Mr. Phil Stefano, Vice President of Investor Relations. Please go ahead. Thank you, Brent. Good morning, everyone, and welcome to our call. Joining me today are Mark Casale, Chairman and CEO, and Larry McAlee, 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's financial results for the first quarter of 2022, was issued earlier today and is available on our website at essentgroup.com. Prior to getting started, I'd like to remind participants that today's discussions are being recorded and will include the use of forward-looking statements. These statements are based on current expectations, estimates, projections, and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially. For a discussion of these risks and uncertainties, please review the cautionary language regarding forward-looking statements in today's press release, the risk factors included in our Form 10-K filed with the SEC on February 16, 2022, and any other reports and registration statements filed with the SEC, which are also available on our website. Now let me turn the call over to Mark. Thanks, Phil, and good morning, everyone. Today we released our quarterly financial results, which continue to reflect the favorable credit performance of our portfolio. For the first quarter of 2022, we reported net income of $274 million as compared to $136 million a year ago. Our first quarter results benefited primarily from the release of approximately $100 million of our COVID reserves associated with defaults from the second and third quarters of 2020. On a diluted per share basis, we earned $2.52 for the first quarter compared to $1.21 a year ago, and our annualized return on average equity was 26%. From a macro standpoint, while rising rates and strong home price appreciation have started to challenge affordability and housing demand, we believe the structural outlook for the housing market is positive. The undersupply of housing should support home prices in the short term, while favorable demographic trends should continue to bolster housing demand in the long term. At March 31st, our insurance in force was $207 billion, a 5% increase compared to $197 billion a year ago. The credit quality of our insurance in force remains strong, with a weighted average FICO of 746 and a weighted average original LTV of 92%. Strong home price appreciation in recent years has enabled the accumulation of embedded home equity for a material portion of our book. While home price growth is likely to moderate going forward, this embedded value should mitigate the risk of future claims. Our 12-month persistency at March 31st was 69%, while 3-month annualized persistency was approximately 80%. In addition, 78% of our insurance in force is comprised of 2020 and later vintages with a weighted average note rate in the low 3% range. As a result, our in-force portfolio is well positioned in a rising rate environment as higher rates should translate to higher persistency. We continue to act upon our diversified and programmatic reinsurance strategy. In the first quarter, we closed a 20% quota share transaction with a panel of highly rated reinsurers to provide forward protection for our 2022 business. We are currently in the market to execute an excess of loss transaction, which is expected to provide forward reinsurance coverage on an additional 20% of our current year business. As of March 31st, approximately 90% of our portfolio is reinsured. We operate from a position of strength with $4.2 billion in GAAP equity, access to $2.6 billion in excess of loss reinsurance, and approximately $1 billion of available liquidity. With trailing 12-month underwriting margin of 93% and operating cash flow of $702 million, our franchise remains well positioned from an earnings, cash flow, and balance sheet perspective. As evidence of this, Essent Guaranty remains the highest rated monoline in our industry at A by AM Best, A3 by Moody's, and BBB+ by S&P. As of March 31, our book value per share was $38.98, an increase of 12% from $34.75 a year ago. Since going public in 2013, our annualized growth rate in book value per share is 21%. We continue to believe that success in our business is best measured by growth in book value per share. Our reinsurance entity, Essent Re, continues to write profitable GSE business, supporting our MGA clients and taking advantage of the increased supply and improved pricing in the GSE risk share market. Year to date, Essent Re has earned over $200 million of income from its third-party business. We continue to make investments through Essent Ventures in generating informational and financial returns. The carrying value of other investment assets on our balance sheet is $213 million, of which $187 million relates to year to date investments through the first quarter of 2022. These investments have created $82 million of value, of which $56 million have been returned to us as realized proceeds. We remain committed to managing capital for the long term, taking a measured approach to distribution and exhibiting patience to maintain strength in our balance sheet. In general, we favor attractive investments over share repurchases as the better value creator for shareholders and the company over the long term. However, we also recognize that returning capital to shareholders generates meaningful returns for investors. Finally, given our financial performance during the first quarter, I am pleased to announce that our board has approved a $0.01 per share increase in our dividend to $0.21. This is the fifth consecutive quarterly increase and represents a 24% increase from a year ago, which we believe is a meaningful demonstration of stability in our earnings and cash flow. I am also pleased to announce that our board has authorized a new $250 million share repurchase program. Now let me turn the call. Thanks, Mark, and good morning, everyone. I will now discuss our results for the quarter in more detail. For the first quarter, we earned $2.52 per diluted share compared to $1.64 last quarter, and $1.21 in the first quarter a year ago. Net premium earned for the first quarter of 2022 was $215 million and included $12 million of premiums earned by Essent Re on our third-party business. The average net premium rate for the U.S. mortgage insurance business in the first quarter was 39 basis points, a decrease of 1 basis point from the fourth quarter. Net investment income increased $1 million or 4% in the first quarter of 2022 compared to the fourth quarter of 2021 due to an increase in the average balance of our investment portfolio and an increase in yield. The net yield on new money invested in the first quarter of 2022 was 2.4% compared to 1.9% in the fourth quarter of 2021. Income from other invested assets in the first quarter was $25 million, including $15 million of net unrealized gains, compared to $15 million, including $12 million of net unrealized gains recorded in the fourth quarter of 2021. The provision for losses and loss adjustment expenses was a benefit of $106.9 million in the first quarter of 2022, compared to a benefit of $3.4 million in the fourth quarter of 2021, and a provision of $32 million in the first quarter a year ago. As a reminder, we provided reserves for the defaults reported to us in the second and third quarters of 2020, using a 7% claim rate assumption. During the first quarter of 2022, as these defaults continued to cure at elevated levels and exceeded the cure rate implied by our 7% claim rate assumption, we revised our estimate of the ultimate claim rate for these defaults from 7% - 4%, which resulted in a benefit being recorded in the provision for losses on the U.S. mortgage insurance portfolio of $101.2 million or $0.78 per diluted share. The provision for losses in the first quarter of 2022 also includes a benefit of $28.9 million associated with prior year favorable development for defaults reported to us principally in 2021 and the fourth quarter of 2020. Other underwriting and operating expenses in the first quarter were $41 million, consistent with the fourth quarter of 2021. The expense ratio was 19% for the first quarter of 2022, roughly in line with both the first quarter of 2021 and the full year 2021. We estimate that other underwriting and operating expenses will be in the range of $170 million-$175 million for the full year of 2022. During the first quarter, Essent Group Ltd. paid a cash dividend totaling $21.6 million to shareholders and repurchased $69.9 million of shares. In April of 2022, we repurchased an additional $22.3 million of shares, completing our $250 million authorization from May of 2021. As a reminder, Essent has a credit facility with committed capacity of $825 million. Borrowings under the credit facility accrue interest at a floating rate tied to a short-term index. As of March 31st, we had $425 million of term loan outstanding with a weighted average interest rate of 1.99%, up from 1.79% at December 31st. Our credit facility also has $400 million of undrawn revolver capacity that provides an additional source of liquidity for the company. At March 31st, our debt to capital ratio was 9%. During the first quarter, Essent Guaranty paid a dividend of $100 million to its U.S. holding company. Based on unassigned surplus at March 31st, the U.S. mortgage insurance companies can pay additional ordinary dividends of $382 million in 2022. As of quarter end, the combined U.S. mortgage insurance business statutory capital was $3.1 billion, with a risk-to-capital ratio of 9.9 to 1. Over the last twelve months, the U.S. mortgage insurance business has grown statutory capital by $281 million, while at the same time paying $347 million of dividends to our U.S. holding company. Note that statutory capital includes $1.9 billion of contingency reserves at March 31, 2022. Now let me turn the call back over to Mark. Thanks, Larry. In closing, our business continued to generate high quality earnings and robust returns while our balance sheet and liquidity remain strong. We believe that our measured approach in deploying excess capital is in the best long-term interest of our franchise and stakeholders. Looking forward, we remain confident in the strength of our operating model and view Essent as well-positioned to play a critical role in affordable and sustainable homeownership. Now let's get to your questions. Operator? At this time, I would like to remind everybody, in order to ask a question, press star followed by the number one on your telephone keypad. We'll pause for just a moment to compile our Q&A roster. Your first question comes from the line of Mark DeVries with Barclays. Your line is open. Yeah, thanks. So Essent was really, I think, the only MI that didn't grow insurance in force this quarter in what looks like an expanding market, which I'm assuming reflects at least a somewhat differentiated view on the risk-adjusted returns available in certain pockets of the market. Is that, you know, a fair interpretation? And is there any color you can provide us on, you know, where you might be a little bit more under indexed to the current market and you know, what it is about these pockets you find maybe a little less attractive than competitors? Hey, Mark. I wouldn't go into any. I don't think there's a particular pocket that we don't like. I would say our pricing has been relatively consistent over the past 12-ish, 15 months, and you've seen our market share kind of steadily decline. I would look at it a little differently. I think we're a little bit of a bellwether for pricing competition in the market, and we've been kind of around that 12% range, you know, the last two quarters. It's kind of bottoming out in my view. As you look forward this year, you know, if our share continues to decrease, that probably is a good indicator that pricing is gonna continue to compress somewhat. If our share increases, you know, maybe folks are increasing pricing, as I've heard from a few other of the competitors. You know, we'll see. It's not you know, we still like credit. I do think that, like I said, we think the pricing's tight, and we're starting to have other areas where we can allocate the capital, right? I mean, I think that's a differentiator for us. You know, we have Essent Re, and we probably allocated $50-60 million to that business in the first quarter, Essent Ventures, and close to $25 million of capital allocation. I wouldn't look at it as, you know, there's pockets of credit. Again, we think credit is relatively strong. I mean, there's less visibility given where the market's going. I mean, you have HPA, so you're putting on new business at, you know, higher HPA, 30% higher. That's always, that provides you a little caution. Then clearly, just in terms of the economy, where we're going. You know, for us, we just didn't feel like it's the market. We felt this way for a while. It's been the last six, nine months. We don't feel like this is the market to lean into, so to speak. I'm not sure we want to be the market share leader. Give you a history, Mark, right? In 2020, when pricing was, you know, I would say materially higher, we led the industry in market share. 20% market share, I believe. I think it's the one and only time we led in market share, but it just shows you that's how we think through it. In terms of insurance in force, you know, again, we do have a lot of a tailwind there, Mark, in terms of persistency. We had said, I think last quarter, we thought it could get mid- to high 70s. It's already a three-month annualized of 80%. I think given where mortgage rates are, you know, it's 5.25%, I believe it is today. You know, we feel pretty good about persistency, probably more of a tailwind than we would've thought, you know, a few months ago. The insurance in force, it'll grow. It'll grow this year. I mean, normally, there's been a number of quarters, first quarters, where we didn't grow. We feel pretty confident it'll grow throughout the year. Like I said, you know, in the script, you know, the duration, the extension of the duration of the portfolio is important for investors to understand. You know, we don't have to work as hard to add on to the portfolio because we have that, you know, kind of embedded, you know, kind of growth just with the increased persistency. Then just from a credit standpoint, Mark, I mean, just with the embedded HPA in that portfolio, you know, we're very comfortable. Remember, this is all about our portfolio. Again, I know we get hung up on share and so forth, but the portfolio is strong and, you know, we're pretty pleased and we're expecting continued performance out of it. Okay, great. Thanks, Mark. Your next question is from the line of Rick Shane with JP Morgan. Your line is open. Hey, guys. Thanks for taking my question this morning. Mark, over the years, we've really come to appreciate your willingness to call balls and strikes. Curious what you're seeing, both by either among mortgage originators or among your competitors in terms of what you consider to be rational or irrational behavior. I would say on the originator front, not too much. I mean, we're well protected here, Rick. I mean, when you think about QM, the strength of kinda DU and LP and just the strength of the QC from the GSEs, and there's some really good guardrails. The fairway is, you know, for most originators, it's in their best interest to keep the ball on the fairway. That's the biggest part of the market, that's has the easiest, you know, from a credit standpoint, from a funding standpoint. If they go off the fairway, which is really kind of, I would say non-GSE, so call it non-QM or jumbo, a much smaller market. It doesn't impact us because we don't insure that. So in this market, we're not seeing. You're always going to see a little bit of reaching, you know, when the market slows down. But again, I just think there's a lot of good controls both at the MIs and at the GSEs to protect us. In terms of our competitors, no, I don't see anything irrational at all. I think it's just a different view, perhaps in terms of where credit is or just in terms of returns. I think for us, we're fortunate, and that's why we've been, you know, making the moves to continue to build and grow other outlets to put our capital. I don't have to sit here every quarter and talk to you about, you know, why share went up or down. I mean, having more capital choices, I just think makes for a better company and better returns for the shareholders long term. I wouldn't read into it. I think the competitors are smart. I think they're rational, and I think they'll be watching, you know, if our share is lower, there's a reason, and people can take that for what they want. I feel the same way about my peers, so I appreciate the comments. Your next question is from the line of Bose George with KBW. Your line is open. Hey, guys. Good morning. Actually, just wanted to ask about the returns in the capital you're allocating to the CRT market. You know, how comparable are they to the returns in the core business? Are you talking about Essent Re, Bose? Essent? Yeah, the GSE, the risk-sharing. The third party. Actually, the returns are better because of the. You know, there's just been an imbalance in the reinsurance market. The ILN, you've seen a lot of issuers, even the GSE switch more business to, you know, to the reinsurer, so the pricing has widened out there. We've seen nice returns. I mean, that's, you know. There's only so much capital we can allocate to it, though, so it's not like we can take all the capital not allocated to Essent Re. We enjoy the returns. I would say it's a material. I think we're a material player in that side of the market, though. I think between what we write and what our MGA clients write, we were in excess of 15% of that market, the GSE risk share market in the first quarter. That's why I just put it into the script too, Bose. When you can see over time, you know, we've earned $200 million. When we hear, you know, Essent can't get into other businesses, I think it's pretty good evidence that we've done it. It's a tangential business to our core franchise. It's mortgage risk, but it's not, you know, primary MI, and I think we've executed upon that pretty well. In addition, obviously, we get the affiliate quota share. I think from that business, it's good, but we're not looking to. You know, I think the market, the kind of the addressable market, so to speak, is somewhat limited. We're pleased with it, but we're not looking to have any outsized growth there. Okay. Great. That makes sense. Thanks. Just actually one on the expenses. I think your earlier guidance was a little higher. It was $175-$180. Is this just an increased focus on costs? Anything to call out there? Yeah, I mean, again, I think we try to give a little bit of a wider range, you know, when we do this in February. I just think, yeah, the first quarter came in a little light, especially compared to last year. As we look forward, just this year, we continue to make investments, really in the core infrastructure of the business. Whether that's, you know, building out, continuing to modernize our tech stack, big initiative around self-service and clearly, you know, the tech stack meaning moving to the cloud. There's a few other initiatives that we're working on around, you know, our pricing engine and extensions of that. In addition, yeah, I think we're, you know, like we said, the best risk managers are the best cost managers. That's of all the things that we talk about on the call today, that's the one thing we can control. We wanna make sure we're obviously continue to invest for the future. You know, I think we certainly look at our expenses pretty closely. Okay, great. Thank you. Your next question is from the line of Mihir Bhatia with Bank of America. Your line is open. Hi. Good morning, and thank you for taking my question. Just maybe to start with just on the new delinquency formation, has that normalized now? Like, what's the driver from here? Is it unemployment rates mostly that we should be looking at? No, I don't think so. I think they're relatively. I mean, they were a little higher this quarter than last quarter. But generally, you know, we haven't seen much difference. I think again, you know, Mihir, you know, you read about it, and you can, and we can see it in our portfolio, but employment remains strong. Wages continue to grow. If anything, again, it's the story really for the quarter. I think for investors is really the, you know, the reduced delinquencies in that COVID cohort, right? That was the one where we estimated, you know, back in, I think we released it in August of 2020, but we had that second and third quarter cohort where we had that 7% estimated claim rate. Over time, as we've seen just kind of a more of a precipitous drop in delinquencies over the last three, four months, you know, our reasonable best estimate to that is four. We're seeing a lot of those borrowers continue to modify. It's important in another event. I mean, in another note, Mihir, just in fact to just how important forbearance is to the MI franchise. I think that's missed a little bit. When you think about the improvements of the MI franchise from a risk perspective, you know, clearly the pricing engines, our ability to price risk on a sharper focus. The reinsurance piece of the business is obviously the biggest transformational change. We've now offloaded that mezz piece of the balance sheet, and we take back, you know, kind of reattach the cat. This business that we're in is a macroeconomic cat business. That's always the concern as you blow through the mezz and to that upper layer where we are unprotected. I would say just with forbearance, it helps a lot, right? Keeping borrowers in their homes and giving them a chance to get back on their feet, it clearly lowers our expected loss, which is less. You know, there's now a less of a probability that it hits the mezz piece, which helps us, helps our reinsurers, helps our ILN investors get more comfortable with the risk. It further protects us from the cat piece. You know, this is great evidence of how it played out. If you think about the Great Recession, you know, a lot of the GSE tools were done kinda after the fact. Here, the GSE has just responded lightning quick. You know, they took the tools out, and they put them to work very quickly, and that kept a lot of borrowers in their homes. I think, you know, when you keep borrowers in their homes, you know, that's the best thing, obviously, for borrowers and for lenders and certainly helps the mortgage insurers. Right. No, absolutely, would agree with that. Just curious on that point, do you know how most of these delinquencies resolve? The forbearance was delinquent? Do you get that information from the servicers? Is it just adding it to the back end of the loan that's what's happening most of the time, or are there some other solutions also? No. I mean, obviously some pay off, but I'm, the majority of the time it's modifications. Okay. Just to, Yeah. Hey, it's Chris. Oh, go ahead. Here, it's Chris. Just real quickly on that. Certainly, as we get to kind of the tail of what's remaining from the two cohorts from 2020, probably the majority of those are going through the modifications. However, prior to that, when you look at the majority of our cures, they're really the updated, they took advantage of the ongoing payment plans. Got it. Okay. No, that makes sense. Just last one, I guess, from me. Just any thoughts on, like, just industry NIW outlook for the year? Obviously, rates have moved a fair amount. Just how are you thinking about that for the rest of the year from here? Yeah. Well, the first quarter came in, you know, $100 billion plus, you know, 104, 105, I think, you know, when I last looked at it. It's gonna be a reach to get to kind of the upper 400s. You know, typically second and third quarter are strong, right? That's our, that's the peak of the mortgage origination market. Given where rates are, kind of the lack of supply, I mean, it could happen for sure, but I don't think it's or my gut is it's not gonna perform like a typical, you know, spring and summer season. I could be wrong for sure, and I, you know, hope I am. You know, I do think it's gonna be, you know. I think it's gonna be a little tighter than maybe some expect. That's all right. We're just coming off, like, two historical years of NIW. Also here, again, go back to, you know, it's correlated to persistency. We've always said, you know, when rates go up, the book will extend. You know, we'll get some lift on the investment portfolio, but NIWs is gonna be reduced. I think that's playing out. It's not like we haven't seen it before. I mean, rates did go to 5% in the fourth quarter of 2018, which, you know, we obviously tend to forget a little bit. It's a little different now, because rates are higher and home prices are significantly higher. I think what we saw in the first quarter, I mean, if you just look at our first quarter, you know, I think we're at 3.6 with the rates on our NIW in the first quarter. It's well below the 5.25 where they are today. A lot of that stuff was locked, you know, in the fourth quarter. I do think it's gonna be tough to get to, like, kind of that upper 400 range. All right. Well, thank you. That's helpful. Thank you. Your next question comes from the line of Douglas Harter with Credit Suisse. Your line is open. Thanks. I was just hoping to understand the current period losses in the quarter. You know, those were up more than $10 million from last quarter on. You know, the NODs didn't move that much. Just wondering if there's anything behind that or any noise in that number. Yeah, Doug, a couple things. One, you might notice. This is Larry. The provision for new default is about $4,000, which is getting to the range that we were in pre-pandemic. The other thing is just sort of the mechanics of how the disclosure works. In the fourth quarter of last year, in the current period, you basically get the benefit of favorable development from the earlier quarters of that year. As you get to the fourth quarter of the next year, you don't get that benefit. It's just really the current quarter provision that's in there. Just sort of the mechanics of the disclosure. We saw no unusual trends from our perspective in terms of the new defaults this quarter. Got it. Appreciate that, Larry. Thank you. Your next question comes from the line of Ryan Gilbert with BTIG. Your line is open. Hi. Thanks. Good morning, everyone. Wanted to go back to, Mark, to your comments on, production and challenge getting to the upper 400s in 2022. I mean, is there anything that you're seeing in your pipeline in April that leads you to reach that conclusion? Is it just a you know a function of looking at you know the speed at which mortgage rates have gone up and you know making an assumption that this has got to lead to some demand destruction? Yeah. I think it's more looking forward. Our April was actually pretty good, you know, in terms of new insurance written. I think it's just kind of putting the pieces together, Ryan. Again, it could be there's such a. You know, you could see a pull forward as everyone looks and says, "Hey, you know, I wanna get that house today at 5.25% 'cause I don't wanna wait till 6%." All right. You may see some of that. Again, I don't have any particular information. I'm just saying, you know, it's. We've heard different guidance, and I think it would just be tougher to get there. If it does, that's good. Again, I think you have to get back to balancing it with, you know, insurance in force. We're so focused on NIW, which is an important metric. At the end of the day, the cash. Remember, Ryan, just take a step back. The cash, you know, we produced $700 million of cash over the last 12 months in the portfolio, and, you know, 93%, you know, underwriting margin. So not too bad, right? You know, the NIW market's a little smaller than it was the last two years. I think we're okay with that. Okay, great. You know, related to Essent Ventures' $25 million of capital allocation, can you talk about how, I guess, you know, pricing in private markets or the opportunity set has changed in 1Q 2022 relative to 2021 or prior years? No. Again, I think a lot of it is being deployed through our funds. So you know, we're allocating capital to the funds. We did make a smaller direct investment in the first quarter. You know, we thought the valuation was actually relatively fair. They haven't really worked their way down though from kind of the public markets to the private markets. There's usually a lag with that, and it's been pretty heated in some of the ventures areas. You know, I can tell you just. Remember, we've been looking at this for a while. We've actually invested in some of our funds three, four years ago. You know, it's picking up more steam this year as we build out the unit. There's some companies that are public today, three or four, that we passed on, you know, at very low valuations, and they went public at very high valuations, and they're working their way back down to low valuations. I think we have a pretty good sense of the intrinsic value and of these businesses just, again, because we understand, I would say, the real estate mortgage ecosystem pretty well. We can assess it. Given that we started up, you know, we started Essent up, I'm pretty good at assessing startups and their ability to kinda execute. Again, it's limited really. My view is just in terms of more financial services. I don't have much of a. I don't have that type of insight into tech companies 'cause that's not really, you know, my background. But I would say anything kind of real estate or consumer oriented, you know, we have a pretty good understanding of it. We'll continue to make those investments both in the funds and companies. What we're seeing is we'll probably see more opportunities. Again, this is over the next three to five years, Ryan. This is, you know, a unit that will continue to invest excess capital into the funds and into the companies. We said before, you know, the informational return is good. In fact, you know, I've said this before, but one of the meetings we've had really helped us develop that next generation of EssentEDGE. I kinda saw it in, you know, with my own eyes. We're also producing pretty good financial returns. When we talk about kind of 12-15-ish returns in the core business, you know, we can say with a straight face that we have those returns both in Essent Re and in the ventures unit. We'll continue to allocate capital to it as long as we, you know, can get those type of returns. Okay, great. Thank you. I appreciate it. There are no further questions at this time. I will turn the call back over to management for closing remarks. Okay. Well, thanks everyone for joining us, and have a great weekend. Ladies and gentlemen, thank you for your participation. This concludes today's conference call. You may now disconnect.