Essent .(US:ESNT)2021-11-05 18:47Financial Data and Key Metrics Changes - For Q3 2021, the company reported net income of $205 million, an increase from $160 million in the previous quarter [7] - Diluted earnings per share were $1.84, up from $1.42 in the last quarter [8] - The annualized return on average equity for Q3 was 20% [8] - Book value per share increased to $37.58, with an annualized growth of 21% since going public in 2013 [11] Business Line Data and Key Metrics Changes - Net premium for Q3 2021 was $219 million, including $11.6 million from Essent Re's third-party business [15] - The average net premium rate for U.S. mortgage insurance decreased to 40 basis points from 41 basis points in the previous quarter [15] - Persistency increased to 62.2% at September 30, 2021, compared to 58.3% at June 30, 2021 [15] Market Data and Key Metrics Changes - As of September 30, 2021, the insurance in force was $208 billion, a 9% increase from $191 billion a year ago [8] - The default rate decreased to 2.47% from 2.96% at June 30, 2021 [16] Company Strategy and Development Direction - The company rolled out the next generation of EssentEDGE, enhancing its risk-based engine for refined pricing [9] - The focus is on leveraging technology and data analytics to optimize unit economics in a competitive mortgage insurance market [21] - The company maintains a strong capital position with $4.2 billion in GAAP equity and $2.4 billion in excess of loss re-insurance [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the portfolio, noting that the average FICO score is 745 and LTV is 92% [8] - The company is prepared for potential economic headwinds, emphasizing the importance of maintaining a fortress balance sheet [34] - Management highlighted the ongoing transition in the industry from rate card to fee-based models, positioning the company favorably due to its technological investments [28] Other Important Information - The Board approved a $0.01 increase in the dividend to $0.19 per share, representing a 19% increase from the previous year [11] - The company repurchased $70.9 million of stock during the quarter, totaling approximately $89 million in buybacks year-to-date [19] Q&A Session Summary Question: Changes in portfolio characteristics due to refinance activity - Management noted that the fundamental characteristics of the new business remain strong, with an average FICO of 745 and LTV of around 92% [23] Question: Competitive environment and pricing stability - Management confirmed that competition remains stable, with a shift from rate card to fee-only models impacting the industry [27][28] Question: Re-insurance levels and future expectations - Management indicated that re-insurance coverage is expected to increase to around 90% as new transactions are completed [32] Question: Impact of home price appreciation on persistency - Management acknowledged that while they have not seen significant changes yet, higher home price appreciation could lead to increased refinancing activity [41] Question: Technology talent acquisition and its impact on initiatives - Management stated that while attracting technology talent is competitive, they have been successful in leveraging both internal and external resources to meet their needs [46][47] Question: Participation in GSEs' CRT programs - Management confirmed participation in GSEs' CRT programs, particularly through Essent Re, and noted the potential for growth as Fannie Mae ramps up its offerings [49]