Essent Group Ltd. (ESNT) on Q1 2021 Results - Earnings Call Transcript
Operator: Good day and thank you for standing by. Welcome to the Essent Group Ltd First Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. I would now like to hand the conference over to your host Chris Curran, Senior Vice President of Investor Relations. Thank you. Please go ahead, sir. Chris Curran: Thank you, Katrina. Good morning everyone and welcome to our call. Joining me today are Mark Casale, Chairman and CEO, and Larry McAlee, Chief Financial Officer. Our press release, which contains Essent’s financial results for the first quarter of 2021 was issued earlier today and is available on our website at essentgroup.com. 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. Mark Casale: Thanks, Chris, and good morning everyone. Earlier today we reported our first quarter results and are pleased with our financial performance and starting out the year. We believe that these results demonstrate a return to pre-COVID-19 profitability as default trends continue to normalize. As the economy gains momentum coming out of the pandemic combined with an already strong housing environment our outlook is positive. Over the last 12 months or by managing distributed operating model has served as well in navigating a stressed economic environment. The deployment of our pricing engine EssentEDGE and use of reinsurance has been transformational as it allows for better risk selection, and it removes the historical boom and bust nature of a franchise like ours. Our performance during COVID demonstrates the strength of our model and deepens our confidence in the economic engine of our business. It is this confidence that was the primary catalyst in initiating a dividend in 2019 and maintaining one through the pandemic environment. Now, let me touch on our results. For the first quarter of 2021, we reported net income of $136 million as compared to $124 million in the fourth quarter of 2020. Our first quarter results were negatively impacted by a $5.7 million discrete tax item associated with state deferred taxes. On a diluted share basis, we earn $1.21 in the first quarter, compared to $1.10 in the fourth quarter of 2020 and our annualized return on average equity was 14%. During the quarter, we were pleased with our insured portfolios performance. At March 31, our insurance in force was $197 billion and 19% increase compared to $166 billion a year ago. The credit quality of our first quarter NIW was strong with a weighted average FICO of 747 and the loan to value of 91%. As mentioned our default trends continue to normalize as our default rate at March 31 was 3.7%. On the business front, we have rolled out the next iteration of EssentEDGE with success and analyzes more data, specifically we are applying sophisticated machine learning techniques across increased amounts of data. The machine learning algorithms leverage our cloud platform with the resulting models outperforming traditional approaches. This should give us an edge in managing our portfolio through business cycles. Looking forward, we will continue blending artificial intelligence with more consumer data. We believe that EssentEDGE 2.0 will be a key differentiator for us in optimizing our unit economics and risk adjusted returns. Larry McAlee: Thanks, Mark, and good morning, everyone. I will now discuss the results for the quarter in more detail. For the first quarter we earned $1.21 per diluted share, compared to $1.10 last quarter, and $1.52 in the first quarter a year ago. The weighted average diluted shares outstanding for the first quarter of 2021 and fourth quarter of 2020 was $112 million shares up from $98 million shares in the first quarter of 2020 due to the impact of our equity offering in May of 2020. Income tax expense for the first quarter was calculated using an estimated annualized effective tax rate of 15.9% before consideration of discrete tax items. As Mark noted, our first quarter results include a $5.7 million discrete charge to income tax expense to provide deferred taxes for states or Essent pays an income tax in addition to a premium tax. For the balance of 2021, we currently estimate to record income tax expense using a 15.9% effective tax rate. We ended the quarter with insurance in force of $197 billion, a 1% decrease compared to $199 billion at December 31 and a 90% increase compared to $166 billion at March 31, 2020. Mark Casale: Thanks, Larry. In closing, we were pleased with our performance for the first quarter as we produce strong earnings generated excess capital, or by managing distribute models operating on all cylinders and confidence in our economic engine is high. Combined with a strong housing environment and an improving economy post-COVID our outlook on our business is positive. Over the last 12 months, the strengths of our operating model were on display as we remain profitable, raise additional capital and maintain our quarterly dividends from a stressed environment. Now, as we return to strong profitability, we are pleased to augment our capital strategy with a share buyback program. Similar to dividends repurchasing shares is a tangible demonstration of the benefits of our model and generating capital. It also provides further balance in deploying excess capital between the business and redistribution to shareholders. Finally, we are excited about the progress that we were making with EssentEDGE 2.0 and its potential to be a game changer in evaluating a price and credit risk. While we’re in the early stages of its deployment, combining AI with large quantities of data is where the world is moving and we want Essent to be at the forefront of this. Now, let’s get to your questions. Operator? Operator: First question, we have Mark DeVries from Barclays. Your line is open. Mark DeVries: Thanks. There’s been a lot of investor focus this quarter just on share shifts, Mark, and I know you guys know focus on market share at all. But I do think it would be helpful just to get your color on what you think might have impacted share this quarter? Mark Casale: Hey, Mark, again, we’ve talked about this in prior quarters. We didn’t really know what our share was until the last couple days. I would say from an Essent standpoint, we continue to focus on insurance in force, and that was relatively flat in the first quarter, which was relatively flat last year in the first quarter. In fact, I don’t think we grew insurance and forced to May of last year. So given what we expect the right with new insurance, and I think we wrote close to $20 billion in the first quarter. And what we expect to write for the rest of the year, we think we’ll grow insurance in force at a healthy clip. So, we continue to be focused on that. So we’re not, again, the quarterly market share shifts there’s a few reasons to get into them. But it had some flows all the time. We’ve been longer term our goal is really around that 15% to 16% share mark. And one of the things around EssentEDGE 2.0 that we’re really excited about, it gives us the chance to optimize the premium around that share, right. Mark DeVries: Okay, that’s helpful. On the separate note you guys highlighted, you’re in a very strong capital position here. Could you just talk about opportunities you’re seeing to deploy that into the business? And then kind of what the implications are for your new repurchase authorization and how you might expect to use that? Mark Casale: Yes, I mean, again, it was strong capital position with the HoldCo right with over $500 million of cash. And, of course, we have the line of credit. We also are generating a significant amount of cash with guarantee, in fact, we pulled $100 million dividend out of guarantee in over the last couple of weeks. So again that process will start to. So, I think from a cash standpoint, in terms of redistribution, we have the dividend, which we increased and we’ll obviously, continue to look at that each quarter. The repurchase is really through the end of 2022. So, we could obviously increase that if necessary. But that’s really the plan now and it’s kind of think about it Mark in terms of longer term, given the cash generation and the business, dividends and repurchases now, which is new for us, it’s a way for us to maintain ROEs. Mark DeVries: Okay, great. Thanks for the comments. Operator: Next question, we have Doug Harter from Credit Suisse. Your line is open. Doug Harter: Thanks. Just wanted to follow-up on the comment you just made Mark about being able to pull $100 million out of guarantee. Can you just talk about on the approval process and kind of thoughts about kind of how dividend from guarantee in future . Mark Casale: Yes, I mean, the approval processes begin given some of the haircut or the point free multiplier, we require GSE approval, which, we received, and just remember, again, from our capital positions. We’re pretty strong with PMIERs with and without the multiplier, and also just, reflect on our balance sheet. We’re not that lever. So our leverage is below 10%. So we’re in a pretty strong capital position, which, and again, it’s reflective in our ratings, which I think the GSE is recognized. So in terms of going forward, we’re not going to speak to a being a regular occurrence, but you can do the math and when folks think about, in terms of just NIW or insurance in force, we’re in a really good position. So, we think we’ll continue to grow insurance in force. But the day we don’t does, all of a sudden our required assets flattened out. And the available assets will keep growing. So it actually increases kind of cash available for shareholders. So it’s – we’re in a very good position. We’re going to redistribute it into the businesses to grow or will have opportunities to increase distributions to shareholders, and as again, as I noted, increased opportunities to allocate that capital to provide another leg of growth down the road. So, we’re really pleased just again, with the cash flow generation of the business, I believe there’s $180 million in the first quarter operating cash flow. So, I think from that standpoint, I think there’s more good things to come. Doug Harter: Great. And just to clarify that $100 million would be – that would add to the 540 that have HoldCo passed that you recorded that with earnings? Mark Casale: It’s not – remember, it was done in the second quarter. And it’s really going to be a matter of whether we upstream it or not remember Essent Guaranty to several of U.S. holdings. So we may just keep it at U.S. holdings. Larry McAlee: But Doug, we have two holding companies. We have the top tier that Mark referenced earlier, we report that and now we and we also have the U.S. holding companies that between the two holding companies. This will add to cash at the two holding companies. Doug Harter: Understood. Thank you. Operator: Next question we have Rick Shane from JPMorgan. Your line is open. Rick Shane: Hey, guys, thanks for taking my questions this morning. When I look back through our model, and Mark, I suspect you will choose this number off when I throw it out there. But I see over since 2010, $67 million of claims paid, you currently have a $410 million reserve. The home price appreciation story is really strong. And I think that’s a fundamental tailwind, both in terms, I think that will fundamentally continue. Do you think that there is a divergence now between reserves and a realistic economic outlook? And how do you think that that results over time? Mark Casale: Again, it’s hard to say that there’s a divergence. We would just say one where we feel pretty good about the $400 million plus in reserves, because it just adds to our balance sheet strength. And it kind of gets to the point we made last year, which was the reserves we took or 2020 event, it was really an earnings event, which got reflected in the provision. Looking forward is really going to center around the ultimate performance of the second and third quarter cohorts, because remember, in the fourth quarter and the first quarter, we’re now back to the normal reserves. So if you just isolate, let’s just look at the second quarter cohort and with 37,000 defaults in that quarter, in a 70% of them accurate already, however, we assume 93% would cure. So let’s give it a few more quarters, I think it’s going to take two, three plus quarters and also Rick, you got to remember just what’s going on with forbearance, right? They extended forbearance back new loans going into the fall are still eligible for forbearance. So until that kind of cleans up, you could see borrowers stay in forbearance for a longer period of time, which is going to make it hard for us to remove it from the provision. So, I think we’re levered to the upside. But again, I think it’s going to take time for this to play out. Rick Shane: Got it. Yes. Look, I hear you on that. I think that that’s one of the things that’s clear is that with forbearance been extended, but when we draw an analogue, perhaps between what we’ve seen in auto finance, where collateral values have been so robust, I’m assuming that the severity of law, given home price appreciation versus the historical reserves, really create some opportunity as well, is that the way you guys are looking at it? Mark Casale: Well, I mean, that’s what we did when we set the reserve, right. So, we assumed basically 7% would go to claim right now 30% of them are still sitting in default. So overtime, we expect as they clean up, yes, a lot of them could end up selling the house without ever having to be foreclosed upon. So yes, again, I think will favorably lever to that Rick, but again, we get paid to wait. So, we it’s sitting on the balance sheet strength, we don’t feel the need to kind of aggressively kind of forecast that it’s going to be better than we originally thought. Not quite sure we could do it even from an accounting standpoint. We’ll let it play out overtime. Larry McAlee: Yes, and Rick you points a good one, just to clarify the 7% claim rate assumption seems 100% severity. So to the extent that severity is lower than 100%, it would give us the capacity to pay more claims. Rick Shane: Got it. Okay, thank you guys very much. Mark Casale: Sure. Operator: Your next question is from Bose George from KBW. Your line is open Bose George: Hi guys good morning. Can you talk about the factors that went into the decision to see, more premium now to Bermuda, how you set the 35% level? I think your of your peers as Bermuda base they see 50% is that the possibility over time. Mark Casale: Well again, it was a first it was something that we had contemplated last year, Bose to be honest, but given COVID we kind took a backseat. So we think it’s a good first step, it’s again, we’d like to do things in increments. So going from 25% to 35% and focusing just on NIW, I think it helps normalize some of the cash flows throughout the company. While we look at 50% over time, we possibly could, but I would say right now we’re very comfortable with 35% and just on NIW. I think if we did anything going forward, it would be more looking at the backlog and moving in. But that’s down the road. I think right now we’re very comfortable. And again, as we said, over time, it plays into 150 basis points to 200 basis points, it kind of gets back to an earlier point, I made those around unit economics, right. We think a lot about unit economics. And quite frankly, that’s the whole business. So if our new engine or the iteration of it can help us optimize premium, that helps unit economics, both in terms of the premium and in managing the credit losses, we’re already pretty darn good at managing expenses. And that’s another again, driver of unit economics, investment yield, which we spent a lot of time on, and some of the things we look at can clearly help, investment, yield and tax and other tax rates and another lever. And I think when you put it together, so whether it’s a commodity business on the front end, there’s no doubt about it, it’s probably becoming more of a commodity business given, when you see how price can move the needle, so you have to be a lot better than little thing. So, once that loan comes in the door, being able to manage up and down unit economics to optimize returns again, I think that’s what differentiates us. Bose George: Okay, that makes sense. Thanks. And then, actually just one more on the taxes, you’re seeing in the Biden tax plan that impacts in the arrangements with the Bermuda reinsurance structure? Mark Casale: Again, they’ve been after that, that’s been going on. I mean, this is a newer approach to it. But that was a lot during the Obama administration, too. We’ve seen a lot of proposed rules. It’s a wait and see game. So again, it’s tough to comment on a rule that’s just kind of got floated out there. But certainly something we’ll be watching. Bose George: Okay, great. Thanks. Operator: Your next question is from Mihir Bhatia from Bank of America. Your line is open. Mihir Bhatia: Hi, thanks for taking my questions. The first question I actually wanted to ask was just clarify the comments on premium rate. I know you talked about two basis points based on a decline, just sort of see if we can get any more color on the cadence. And really, what I’m trying to understand is, are we talking about the exit being below 40? So like, the 40 for the full year, so the exit will be below or are we paying 40 is where you end up in fourth quarter? Mark Casale: 40 is where we end up in the fourth quarter, however, I mean, it’s going to depend a little bit on the persistency of the book. And clearly how much rewrite in the second half of the year and also the shift between purchase, and refinance. But, I think we’re comfortable with that. But there’s so many moving parts, and I think we’ll leave it at that in here. But there’s definitely a difference in the premium yields amongst the different players. And I think that’s something again, that’s when we talked about the engine and looking for ways to optimize that premium level, it’s very important for investors to understand how, around premium, so it’s easy to give away premium to get NIW however, it’s always going to come home to roost in terms of the top-line revenue so far. That’s why we’re so focused on making sure we can optimize the premium level. And we believe we can do that with our new iteration of the engine, and I can give you an example, right? I mean, 760, and there’s 760 loans out there right now that have been in forbearance for nine months. And guess what? That shows up as a 760. Our model felt that they have payment pattern histories, that they’re probably not representative of 760? Well, we’re not going to give them the same price as we’d give, we would think a more stable 760. And then on the other end, when you go down the credit spectrum, can we pick off the 720 that we think is going to perform better than a 720. Remember, we don’t price off FICO anymore. We price off a custom mortgage score that we’ve developed, it’s very proprietary. But again, it’s something and we’ve that tested over the last several years with different sorts of data. So on that 720, we can price a little bit below the market, however, that’s going to perform better. So again, this is where when we get into the as you think about the next two to three years, five from Mihir, and I remember you and I talking about this out in California a couple of years ago, this is really where the business is going. And again, you can give away premium to get yield. It’s been done. I mean, to get an NIW has been done in this business since we started, but it ebbs and flows, you can always rent share for a quarter or two quarters. But again, we’re focused on, the longer term drivers of the business again, it’s all relative the market levels obviously, have it again, we’re trying to be a little bit better, just around the edges. Mihir Bhatia: That makes sense. Really appreciate those comments. Just one other quick one for me. Just wanted to check if you have any update – is there any update on the NIW? I think it’s, like, $500 billion-ish market at the last quarter. Any update to that view, given a year, quarter into it? Mark Casale: Yes, I mean I think the first quarter was pretty strong. So, yes could it be kind of more in the $550 billion-ish? Yes, certainly, I mean, certainly a strong market, a lot of its going to be dependent on rates in the second half of the year, if they go up. Now, that’ll push refinancings down. But the purchase market, as we all know, is incredibly strong. So, I think it’s a strong, very strong NIW market. But again, just keeping in perspective, the 20 year average is like $250 billion. So this is a nice market, and over the last couple of years, but certainly much higher than it has been previously. Mihir Bhatia: Got it. Thank you. Operator: Your next question is from Ryan Gilbert from BTIG. Your line is open. Ryan Gilbert: Hi, thanks everyone. Good morning. First question is on the favorable development in the losses incurred in the quarter, I think it was $16 million stepping up to $2 million in the fourth quarter of 2020. Is that a $16 million a good run rate going forward? Or was there anything one time in nature in the quarter that how should be thinking about? Larry McAlee: Yes, Ryan its Larry, respond to that question, I don’t think you can assume a run rate as relates to prior period. And prior year development tends to be a little bit more lumpy. But what we saw in the first quarter that contributed to the $16 million was, we had favorable cure activity on both the fourth quarter defaults when we move back to the pre-COVID-19 reserve methodology. And also the defaults that have been reported prior to COVID so the defaults that were recorded in the first quarter of 2020 and prior periods, so we had good cure activity on those cohorts. And then in addition, we’re observing some decline in our reserve factors due to the favorable housing environment, strong credit performance, so little bit of reserve factors and also continued strong activity in the fourth quarter and then pre-COVID default cohorts. Ryan Gilbert: Okay, got it. Thanks for that. And then the April default rate drop into 3.4, 3.7. I think what we’ve noticed from peers is there’s been a really nice pickup in interactivity in April, would you say that’s, that’s the case for you or is it being is that drop in the default rate being driven by both lower new defaults and also a couple of years. Larry McAlee: It’s really both. And we if you look back at the 8-K that we released in early April, that’ll be the last month in, which we’re reporting our default activity on a monthly basis. We’ll just be reporting that quarterly going forward. But we saw an uptick in both the cure activity as well as reduction in the number of new defaults reported. So continue to see favorable trends in that area. I would point out also, though, that April tends to be a reasonably good month in terms of kind of cure and default activity, but we did see a nice decline in default and pickup and cure activity in April. Ryan Gilbert: Okay, great, thank you. Operator: Your next question is from . Your line is open. Unidentified Analyst: Thanks. Good morning. I got a few questions. First Larry, last quarter, when you shifted to the pre-COVID methodology, you have some adverse current period development and inclusion of $18 million because of your solar cures versus historical trend on the early stage bucket. Did you have that same adverse development this quarter? Larry McAlee: No, we did not ingest that adverse development in the fourth quarter was really due principally to the shift from the COVID-19 reserve methodology that sort of picked 7% claim rate on new defaults versus going back to the model. So that was kind of the anomaly of we went really to a different reserve methodology in the fourth quarter, but we didn’t see any significant in fact, we saw some favorable development for the – during the current quarter. Unidentified Analyst: Okay. Then, in terms of moving the $100 million to the U.S. HoldCo, I believe that can help on the debt side, but what other advantages other than avoiding the excise tax to Bermuda do you get or what other options do you have keeping it there is that something where you can do for example acquisitions from or there are other opportunities up outside of getting M&A? Mark Casale: You got to keep on it holdings gives us a lot of flexibility around investments. So it’s not really about avoiding the excise tax, sort to speak, I mean, we’re flush with cash at the wholesale. So there’s no need to do that. Pay the taxes have to kind of downstream it again. So it gives us a lot of flexibility, really around the investments and what we’re looking to do, want to go forward basis. Unidentified Analyst: Okay. Sorry, two more Essent Re, obviously can always use capital, you’re increasing the cede or have increasing the cede? Is there a plan down streaming of capital in the next quarter or two? Mark Casale: No, we’re actually pretty – we’re actually pretty good with capital there has, that and that’s in that we didn’t do the back book there, we would have needed to kind of have some capital around and, we like the idea of just kind of doing the measured approach. But yes, we’re pretty good from a capital standpoint there too. Unidentified Analyst: Okay. And then last question. Obviously, you were currently tapped the Ireland market as your peers. But one of the things that is very clear is that the benefit under PMIERs can disappear very quickly as the risk amortize is down, and the effective cash flow points rise, how do you possibly see the pace of benefit erosion slow as refi is decline? Mark Casale: It’s a good question. We certainly, we look at – that we do so it’s, we generally look at it in matching, the NIW on a regular basis. Yes, it’s certainly something you kind of have to stay in the market on it to maintain the benefit. But there’s a certain benefit that we expect to get. So it’s a good point, but I think we’re long as you’re continuing to issue. You should be in good shape. It’s when you stop is when, and we saw that last year, we’re really created an issue for offer some. Unidentified Analyst: Okay, thanks. Mark Casale: And also Jeff I just finalized that it’s you don’t want to become over reliant on Ireland, just to your point around the nature of so we look a lot at, where we are with and without Ireland just in terms of capital management. Operator: Your next question is from Phil Stefano from Deutsche Bank. Your line is open. Phil Stefano: Yes, thanks. And good morning as Mark, I was hoping you could talk to us about the mix of dividends and repurchases and repurchases is new, so maybe you could talk about your philosophy around valuation based sensitivity and thinking about, is dividends and repurchases the right way to return capital seeing both, as a valve ease the excess capital to maintain returns? Mark Casale: Yes, really a good question, Phil around the pricing, it’s certainly I mean, to take a step back, it is a mix, right? You want to, we think mixing dividends is cash in hand, to investors, and obviously repurchases is a little different way to get cash back and maybe a little bit more kind of tax effective. So we’d like to, and given in terms of our program, it’ll be think of it almost as $1 cost averaging type program. So, we’ll be in the market on a continuous basis. But, when the shares are up, we’ll be buying less than when the shares are down, we’ll be buying more and given the volatility day-to-day and our stock price. So, we think we’ll probably it’s probably a good plan, we’re not going make bets, right? I mean, management teams are very poor, I think in terms of predicting valuations up and down. So it’ll be more of a 10b5 plan. That, will execute off a matrix and we would expect to, we’ll look at it every 90 days. So we always could accelerate it in certain instances, and we could add to it in certain instances. So I would again, it’s going to be a dynamic use of capital management, I don’t think will – the dividend around too much. So repurchases is going to be more of a toggle. And then there’s obviously the estimate investment opportunities, in the core business, which continued to slow, right, because we continue to get the kind of critical mass, and then there’s the investment opportunities outside the core. Once again, we’ve just started with our investments in the fund and that’s something we’ll continue to build and develop over the next several years. Phil Stefano: Okay, maybe I’m parsing words through finally but the reading of the release from mind seat says it’s to be executed by the end of 2022. I feel like that’s in some ways in, an affirmation that we’re going to at least do this. I mean, is that the right way. Mark Casale: Yes, Phil, we’re going to be in the market, probably over the next 30 days, this is not, this isn’t a signal, we’re actually going to be in the market in 30 days repurchasing shares on a continuous basis through the end of 2022. So, you’re building your model, you can almost figure out how many shares we’re going to buy a day, and you can walk that into a repurchase over the next, to the end of next year, that’s why we’re very specific on it, it’s not a signal, it’s going to happen, we’re not going to stop it, if prices get too high per se, that would be – that would be actually a good problem to have. So think of it continue with the change will be a lot that you guys, every quarter will toggle, like we say, oh my god, this is, we have more excess capital. And we want to increase that. And we’ll announce that to the market, but it’s not a signal. So it’s actually it’s appropriate that we intend to execute upon. Again, it’s very, consistent with our approach where we like to do kind of slow and steady. So the dividends was one aspect of it, and we didn’t – we announced it, and then we did it, and now we’re announcing this, we’re going to do it. Phil Stefano: Okay. And then switching gears, I wanted to dig into EssentEDGE 2.0 a little bit more, as you had mentioned that this was a proprietary platform. I tend not to think of insurance companies as tech companies. So maybe you could talk to us about is this being developed in house? Are you leveraging, an external provider? What’s the real differentiator here that this can’t be replicated by the other five? Mark Casale: No, I mean, it can certainly be replicated. It just takes time. Right? So, we started this two years ago, we hired and it came out with one of our larger banks started , I think they had four MIs and they started the machine deciding which MI they were going to pick, it used to be kind of the old allocation method. And as soon as we saw it, we’re like, wow, this is definitely where the business is going. And then in 2019, we were down meeting with the folks at Optimal Blue and they’re a big pricing provider, the MI industry, and prior to that, a loan officer had to decide who are they were going to price, SN or another MI And generally, and a loan officer would have taken say, two or three, MIs right, they’re not going to run all six, it takes a lot of time and also focused on making sure the borrower gets into the right loan. Optimal Blue change that their new system starting, I believe, at the end of 2019, delivered all of the MI pricing back to the loan officer with the two best prices highlighted in green. I mean, it would be pretty difficult to pick your favorite MI rep when, they’re not in green. That just further solidified, our conviction that we needed to get better, at using more information to make a decision. So, we’re giving every lender our best price, not necessarily the lowest price. So the way the model works is yes, we hired folks from the credit card industry. And we got other data sources. And again, we have folks in-house that have had experience in that in developing, LP, and one of the GSEs. So, we use raw credit data, which again, the only folks who use raw data the GSEs. So, we use that to deliver and then run through, I believe it’s over 400 factors now. And that’s really the development of the model that was done in-house, the deployment part of the model is actually interesting, we can now deliver that back to the loan officer and right around three seconds. So again, think of that it’s all on the AWS cloud. So again, this has been the in development and development over the last again, year and a half, probably year and a half, so year and a half, two years is we’ve seriously done and we tested it in the fourth quarter of last year. And we rolled it out to the market in the first quarter of this year.. It’s going to going to take time, it’s actually available today, through Ellie Mae. So if a loan officers pricing through Ellie Mae incompetence, they can access this price. And we have direct integrations with a couple of the larger banks. And we’ll continue to kind of roll that into the market. It’s a difficult market to do, what I mean when some folks are just using bid cards, they’re not – it’s hard for them to say we’re going to use an engine, right. So, we have – so we, 70% of the industry is using engines and that’s really what will morph those into EssentEDGE 2.0 probably over the next 12 months to 15 months. There’s a few bigger ones, again, if more users, I think 50% of our production is through Ellie Mae, but it’s not that simple or to some of the loan officers price to Ellie Mae some use Optimal Blue we’ll eventually work our way into Optimal Blue. So, we’re excited about it. So yes, everything’s, everything can be replicated. So when I say proprietary, it’s mean, we build an in house. We didn’t go hire a consultant to do it. A lot of the skills here, but I do think it is – it’s a clue here, and I’ll give you an example, Phil, we’ve made, again, 10 different fund investments over the last three years, and we have for East Coast funds, three Midwest funds, and three West Coast phones. And like that, you’ve heard me say over the years, I’m out visiting clients, so I’m also out visiting these funds, and some of the companies within the fund. So, we came across a company a couple years ago, that was using, like 1000 vectors. And this was probably – I think it had to be in 2018 or 2019. And I walked out of that meeting with that company going, the technology exists, it never existed in this industry before. Remember, we were just pricing through rate cards, and one provider had an engine and kudos to them for being first to the market on that. But we looked at it saying how can we – do you know exponentially get better than the kind of four, 10 or 12 factors. And there was clear evidence that this company could do it. So we knew the technology existed. So again, a lot of this just spending the time on it continuing to develop that as a proprietary score so it’s an essence risk score, it’s not a FICO score. FICO was developed back in 1989, Phil, it’s never been improved. And it’s just not a great indicator of a person’s ability to pay their mortgage. So again, I would expect the industry’s probably all working on things like this. So again, this is something we’ve gotten and maybe their models already have it for all I know, but I mean, we’re focused on what we can do, and we think we think it’s leverageable. And that’s the thing. We’re learning stuff now around consumers ability to pay and we’re focused right now on deploying it within Essent. But you never know if there’s opportunities down the road for other things. Phil Stefano: Okay, great. Look forward to those things, Mark. Thank you. Operator: There are no further questions at this time. Now, I’ll turn the call back over to management. Mark Casale: Well, thanks, everyone for joining us today, and I hope you have a great weekend. Operator: This concludes today’s conference. Thank you for your participation and have a wonderful day. You may all disconnect.
Essent Group Ltd. (NYSE:ESNT) Surpasses Earnings and Revenue Estimates
- Essent Group Ltd. (NYSE:ESNT) reported an EPS of $1.69, beating the Zacks Consensus Estimate.
- The company's revenue reached approximately $317.6 million, surpassing estimates and indicating a year-over-year increase.
- Essent Group's financial health is highlighted by a low debt-to-equity ratio of 0.088 and a current ratio of 1.06.
Essent Group Ltd. (NYSE:ESNT) is a prominent player in the insurance sector, specifically within the property and casualty industry. The company provides private mortgage insurance and reinsurance for mortgage loans. Essent Group competes with other insurance firms, striving to offer competitive rates and services. The company has recently reported its financial results for the first quarter of 2025, showcasing its performance in the market.
On May 9, 2025, Essent Group reported earnings per share (EPS) of $1.69, surpassing the Zacks Consensus Estimate of $1.66. This earnings surprise of 1.81% highlights the company's ability to exceed market expectations. However, it's worth noting that this figure represents a slight decrease from the $1.70 EPS reported in the same quarter last year. Despite this, Essent Group has managed to exceed consensus EPS estimates twice over the past four quarters.
In terms of revenue, Essent Group generated approximately $317.6 million for the quarter ending March 2025, surpassing the estimated $315.7 million. This revenue figure marks a 2.03% increase over the Zacks Consensus Estimate and a significant rise from the $298.36 million reported in the same period last year. The company has consistently exceeded consensus revenue estimates in three recent quarters, demonstrating its strong market position.
Essent Group's financial metrics provide further insight into its market valuation. The company has a price-to-earnings (P/E) ratio of 8.37, indicating how the market values its earnings. Additionally, the price-to-sales ratio stands at 4.75, reflecting the market's valuation of its revenue. The enterprise value to sales ratio is 5.03, suggesting how the company's total value compares to its sales. These metrics highlight Essent Group's financial health and market standing.
The company's financial stability is further supported by its low debt-to-equity ratio of 0.088, indicating a conservative approach to leveraging. With a current ratio of 1.06, Essent Group demonstrates its ability to cover short-term liabilities with short-term assets. The enterprise value to operating cash flow ratio of 7.40 shows how its cash flow is valued relative to its enterprise value. Additionally, an earnings yield of 11.94% indicates a strong return on investment for shareholders.
Essent Group Ltd. (NYSE:ESNT) Surpasses Earnings and Revenue Estimates
- Essent Group Ltd. (NYSE:ESNT) reported an EPS of $1.69, beating the Zacks Consensus Estimate.
- The company's revenue reached approximately $317.6 million, surpassing estimates and indicating a year-over-year increase.
- Essent Group's financial health is highlighted by a low debt-to-equity ratio of 0.088 and a current ratio of 1.06.
Essent Group Ltd. (NYSE:ESNT) is a prominent player in the insurance sector, specifically within the property and casualty industry. The company provides private mortgage insurance and reinsurance for mortgage loans. Essent Group competes with other insurance firms, striving to offer competitive rates and services. The company has recently reported its financial results for the first quarter of 2025, showcasing its performance in the market.
On May 9, 2025, Essent Group reported earnings per share (EPS) of $1.69, surpassing the Zacks Consensus Estimate of $1.66. This earnings surprise of 1.81% highlights the company's ability to exceed market expectations. However, it's worth noting that this figure represents a slight decrease from the $1.70 EPS reported in the same quarter last year. Despite this, Essent Group has managed to exceed consensus EPS estimates twice over the past four quarters.
In terms of revenue, Essent Group generated approximately $317.6 million for the quarter ending March 2025, surpassing the estimated $315.7 million. This revenue figure marks a 2.03% increase over the Zacks Consensus Estimate and a significant rise from the $298.36 million reported in the same period last year. The company has consistently exceeded consensus revenue estimates in three recent quarters, demonstrating its strong market position.
Essent Group's financial metrics provide further insight into its market valuation. The company has a price-to-earnings (P/E) ratio of 8.37, indicating how the market values its earnings. Additionally, the price-to-sales ratio stands at 4.75, reflecting the market's valuation of its revenue. The enterprise value to sales ratio is 5.03, suggesting how the company's total value compares to its sales. These metrics highlight Essent Group's financial health and market standing.
The company's financial stability is further supported by its low debt-to-equity ratio of 0.088, indicating a conservative approach to leveraging. With a current ratio of 1.06, Essent Group demonstrates its ability to cover short-term liabilities with short-term assets. The enterprise value to operating cash flow ratio of 7.40 shows how its cash flow is valued relative to its enterprise value. Additionally, an earnings yield of 11.94% indicates a strong return on investment for shareholders.
Essent Group Ltd. (NYSE:ESNT) Stock Update and Earnings Forecast
- Essent Group Ltd. (NYSE:ESNT) is anticipated to report first-quarter earnings of $1.65 per share, with revenue projected at $310.79 million.
- The company's stock price stands at $58.72, reflecting investor confidence despite previous weaker-than-expected earnings.
- Essent Group competes in the mortgage insurance industry and is rated "Outperform" by RBC Capital.
Essent Group Ltd. (NYSE:ESNT), headquartered in Hamilton, Bermuda, is a prominent player in the mortgage insurance industry. The company provides private mortgage insurance and reinsurance for mortgages secured by residential properties. Essent Group competes with other industry players like MGIC Investment Corporation and Radian Group. On May 9, 2025, RBC Capital updated its rating for Essent Group to "Outperform," with the stock priced at $58.72.
Essent Group is set to release its first-quarter earnings results on May 9, 2025. Analysts expect earnings of $1.65 per share, slightly down from $1.70 per share in the same period last year. Despite this, the company anticipates an increase in quarterly revenue, projected at $310.79 million, up from $298.36 million a year earlier. This revenue growth indicates a positive outlook for the company's financial health.
Previously, on February 14, Essent Group reported weaker-than-expected earnings for the fourth quarter. Despite this, the stock experienced a modest rise of 0.6%, closing at $58.72. This resilience in stock performance suggests investor confidence in the company's long-term prospects, even amid short-term earnings challenges.
The stock, currently priced at $58.72, reflects a change of $0.33, or an increase of approximately 0.57%. During the trading day, the stock fluctuated between a low of $58.59 and a high of $59.39. Over the past year, the stock has reached a high of $65.33 and a low of $51.61. Essent Group's market capitalization stands at approximately $6.07 billion, with a trading volume of 775,314 shares.
Essent Group Ltd. (NYSE:ESNT) Stock Update and Earnings Forecast
- Essent Group Ltd. (NYSE:ESNT) is anticipated to report first-quarter earnings of $1.65 per share, with revenue projected at $310.79 million.
- The company's stock price stands at $58.72, reflecting investor confidence despite previous weaker-than-expected earnings.
- Essent Group competes in the mortgage insurance industry and is rated "Outperform" by RBC Capital.
Essent Group Ltd. (NYSE:ESNT), headquartered in Hamilton, Bermuda, is a prominent player in the mortgage insurance industry. The company provides private mortgage insurance and reinsurance for mortgages secured by residential properties. Essent Group competes with other industry players like MGIC Investment Corporation and Radian Group. On May 9, 2025, RBC Capital updated its rating for Essent Group to "Outperform," with the stock priced at $58.72.
Essent Group is set to release its first-quarter earnings results on May 9, 2025. Analysts expect earnings of $1.65 per share, slightly down from $1.70 per share in the same period last year. Despite this, the company anticipates an increase in quarterly revenue, projected at $310.79 million, up from $298.36 million a year earlier. This revenue growth indicates a positive outlook for the company's financial health.
Previously, on February 14, Essent Group reported weaker-than-expected earnings for the fourth quarter. Despite this, the stock experienced a modest rise of 0.6%, closing at $58.72. This resilience in stock performance suggests investor confidence in the company's long-term prospects, even amid short-term earnings challenges.
The stock, currently priced at $58.72, reflects a change of $0.33, or an increase of approximately 0.57%. During the trading day, the stock fluctuated between a low of $58.59 and a high of $59.39. Over the past year, the stock has reached a high of $65.33 and a low of $51.61. Essent Group's market capitalization stands at approximately $6.07 billion, with a trading volume of 775,314 shares.
Essent Group Ltd. (NYSE:ESNT) Q1 2024 Earnings Conference Highlights
Essent Group Ltd. (NYSE:ESNT) Q1 2024 Earnings Conference Highlights
Essent Group Ltd. (NYSE:ESNT) recently held its Q1 2024 Earnings Conference Call, drawing significant attention from investors and analysts alike. The call, detailed by Seeking Alpha, featured discussions led by key company figures, aiming to shed light on Essent Group's financial performance and strategic outlook for the first quarter of 2024. This event was particularly noteworthy as it came at a time when Essent Group is showing promising signs of a strong earnings season ahead.
Analysts have adjusted their earnings estimates upwards, with the Most Accurate Estimate for the current quarter now standing at $1.58 per share, surpassing the Zacks Consensus Estimate of $1.56 per share. This positive adjustment has led to a Zacks Earnings ESP of +1.28% for Essent Group, hinting at the company's potential to exceed expectations in its forthcoming earnings report.
The importance of a positive Zacks Earnings ESP cannot be overstated, especially when combined with Essent Group's current Zacks Rank #3 (Hold). Historical data reveals that stocks with a positive Earnings ESP and at least a Zacks Rank #3 have a strong track record of beating earnings estimates nearly 70% of the time, while also delivering impressive average annual returns of over 28%. This statistical backdrop provides a solid foundation for the optimism surrounding Essent Group's performance, suggesting that the company is on a promising trajectory for its earnings announcement.
Adding to the anticipation, Essent Group's stock performance has been noteworthy. The company's shares saw an increase of $0.26, marking a change of approximately 0.48%, with trading activity fluctuating between $53.05 and $55.05 throughout the day. Over the past year, ESNT's stock has experienced a range between $41.38 and $59.9, reflecting the market's varying perceptions of the company's value. Currently, Essent Group boasts a market capitalization of approximately $5.83 billion, with a trading volume of 458,950 shares. This financial profile underscores the company's substantial presence in the market and highlights the keen interest from the investment community.
The recent adjustments in earnings estimates, coupled with Essent Group's solid market performance, paint a picture of a company that is potentially on the cusp of delivering a strong earnings report. Investors and analysts, having witnessed the company's stock price movement and considering the latest, most accurate earnings estimates, are poised with anticipation. The combination of a favorable Zacks Earnings ESP, a Zacks Rank #3, and positive market dynamics suggests that Essent Group Ltd. may indeed surpass expectations, reinforcing the optimism surrounding its financial health and strategic direction as it moves forward into 2024.
Essent Reports Better Than Expected Q1 Earnings Results
Essent Group (NYSE:ESNT) reported its Q1 earnings results on Friday, with EPS coming in at $1.59, above the Street estimate of $1.46. Revenue was $256.25 million, beating the Street estimate of $250.26 million.
The company’s quarterly results built on its 2022 performance as it turned in strong margins, healthy IIF growth, and resumed repurchases. The balance sheet remains robust and industry pricing is continuing to move in the company's favor.
Analysts at RBC Capital reiterated their expectation for premium growth in H2/23. While near-term the analysts expect performance to be bumpy as macro conditions remain volatile, they see the current valuation as an attractive entry point and remain Outperform.
Essent Reports Better Than Expected Q1 Earnings Results
Essent Group (NYSE:ESNT) reported its Q1 earnings results on Friday, with EPS coming in at $1.59, above the Street estimate of $1.46. Revenue was $256.25 million, beating the Street estimate of $250.26 million.
The company’s quarterly results built on its 2022 performance as it turned in strong margins, healthy IIF growth, and resumed repurchases. The balance sheet remains robust and industry pricing is continuing to move in the company's favor.
Analysts at RBC Capital reiterated their expectation for premium growth in H2/23. While near-term the analysts expect performance to be bumpy as macro conditions remain volatile, they see the current valuation as an attractive entry point and remain Outperform.
