Essent .(US:ESNT)2023-11-04 15:35Financial Data and Key Metrics Changes - For Q3 2023, the company reported net income of $178 million, unchanged from the previous year, with diluted earnings per share at $1.66, consistent with the same quarter last year [9][19] - The book value per share increased by 13% year-over-year to $44.98 as of September 30 [10] - The insurance in force reached $239 billion, a 7% increase compared to the previous year [10] - The annualized return on average equity was reported at 15% [9] Business Line Data and Key Metrics Changes - Net premium earned for Q3 2023 was $247 million, which included $16.9 million from Essent Re's third-party business and $20.6 million from title operations [19][20] - The average base premium rate for the U.S. mortgage insurance portfolio remained at 40 basis points, while the net average premium rate increased by 2 basis points to 35 basis points [21] - The provision for loss and loss adjustment expense rose to $10.8 million in Q3 2023, compared to $1.3 million in the previous quarter [23] Market Data and Key Metrics Changes - The default rate on the U.S. mortgage insurance portfolio was 1.62%, up 10 basis points from the previous quarter [23] - Approximately 70% of the in-force portfolio has a note rate of 5% or lower, which is expected to support elevated persistency [10] Company Strategy and Development Direction - The company aims to activate new accounts while supporting existing customers, having activated 95 new customers year-to-date through October 31 [13] - The company is focused on a long-term approach to building its title and settlement services operation, which incurred a pretax loss of approximately $4 million in Q3 [14] - The company has authorized a new $250 million share repurchase program, reflecting confidence in its cash flows and capital position [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the resilience of the housing and labor markets, despite economic uncertainties [7][8] - The company believes that the housing supply and demand imbalance, along with favorable demographic trends, will support home prices in the long term [8] - Management highlighted the importance of maintaining a strong capital position to navigate potential economic scenarios [32] Other Important Information - Cash and investments as of September 30 were $5.4 billion, with a new money yield over 5% and an annualized investment yield of 3.6% [15] - The company paid a cash dividend totaling $26.5 million to shareholders during the quarter [25] Q&A Session Summary Question: Has the view on buybacks changed over the last year? - Management indicated a more dynamic approach to buybacks, considering capital needs and growth opportunities in the core business [29][32] Question: Will proposed changes to the Bermuda tax code impact the company? - Management stated it is too early to determine the impact, but does not expect it to be materially significant in the long term [35] Question: How is the current pricing environment characterized? - Management noted that the pricing environment has been consistent, with good unit economics in the business [38] Question: What is the strategy for the title insurance business? - Management emphasized a long-term build-out strategy for the title business, focusing on risk controls and operational efficiency [43] Question: How does the company approach buydowns in mortgage originations? - Management indicated that buydowns represent a small portion of originations and are underwritten at full rates [49]