Essent .(US:ESNT)2026-02-13 16:02Financial Data and Key Metrics Changes - For Q4 2025, the company reported net income of $155 million or $1.60 per diluted share, compared to $1.67 in the previous quarter and $1.58 in Q4 2024 [4][11] - For the full year 2025, net income was $690 million or $6.90 per diluted share, with a return on average equity of 12% [4][5] - Book value per share increased by 13% year-over-year to $60.31 as of December 31 [5] - The mortgage insurance in force was $248 billion, reflecting a 2% increase year-over-year [5] Business Line Data and Key Metrics Changes - The mortgage insurance segment ended Q4 2025 with insurance in force of $248.4 billion, a decrease of $452 million from Q3 2025 but an increase of $4.7 billion or 1.9% year-over-year [12] - Persistency for the mortgage insurance portfolio was 85.7% at the end of Q4 2025, down from 86% in Q3 2025 [12] - The average base premium rate for the mortgage insurance portfolio remained stable at 41 basis points, while the average net premium rate decreased by 1 basis point to 34 basis points [13] Market Data and Key Metrics Changes - The portfolio default rate increased to 2.5%, up 21 basis points from the previous quarter, reflecting normal seasonality and aging of the insurance in force [13] - The weighted average FICO score of the insurance in force was 747, with a weighted average original loan-to-value (LTV) of 93% [5] Company Strategy and Development Direction - The company is focused on a disciplined capital management strategy, returning nearly $700 million to shareholders in 2025 through dividends and share repurchases [10] - A 13% increase in the quarterly dividend to $0.35 per share was approved, effective Q1 2026 [10] - The company is expanding into the Lloyd's market as part of its strategy to diversify and leverage higher investment yields, with a focus on property and casualty (P&C) insurance [21][22] Management's Comments on Operating Environment and Future Outlook - Management noted that the current housing market presents challenges, but the company remains well-positioned for future growth as demographics shift towards homeownership [40] - The credit quality of the portfolio remains strong, and management is optimistic about the potential for supplemental earnings from the P&C segment [27][28] - The company aims to optimize unit economics rather than focus solely on market share, indicating a long-term growth strategy [54][55] Other Important Information - The consolidated cash and investments totaled $6.6 billion, with an aggregate yield of 3.9% for the year [9] - The company has a strong liquidity position, including $1.3 billion in cash and investments at the holding companies [9][16] Q&A Session Summary Question: Why enter the Lloyd's market now? - Management explained that the decision is part of a long-term strategy to expand and leverage higher investment yields, with a focus on diversifying the business [21][22] Question: Is the decrease in insurance in force a strategic decision? - Management clarified that the decrease is not a reflection of a strategic pullback but rather a normal ebb and flow of the market [29] Question: What is the outlook for insurance in force growth? - Management expects modest growth in insurance in force, with potential for a spike when younger demographics enter the housing market [40][41] Question: How does the company view credit quality and defaults? - Management indicated that the current credit quality is strong, and while defaults are monitored, they are not overly concerned at this time [45][47] Question: What is the company's approach to pricing and market share? - Management emphasized a focus on optimizing unit economics rather than pursuing market share aggressively, indicating a preference for returning capital to shareholders [54][58]