Release Date: November 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Essent Group Ltd (ESNT, Financial) reported a strong net income of $176 million for the third quarter of 2024, demonstrating the resilience of its business model.
- The company's US mortgage insurance in force increased by 2% year-over-year to $243 billion, indicating growth in its core business.
- Essent Group Ltd (ESNT) maintained a high persistency rate of approximately 87%, which supports stable revenue streams.
- The credit quality of the insurance portfolio remains robust with a weighted average FICO score of 746 and a low default rate of 1.95%.
- The company successfully executed its 10th Radnor Re ILN transaction, securing $363 million in fully collateralized excess of loss coverage, enhancing its capital resources.
Negative Points
- Net income for the third quarter of 2024 slightly decreased compared to the same period last year, from $178 million to $176 million.
- Higher mortgage and interest rates have reduced overall mortgage originations, impacting potential growth in new business.
- The default rate on the US mortgage insurance portfolio increased to 1.95%, up from 1.71% in the previous quarter.
- Potential impacts from Hurricanes Helene and Milton could lead to an uptick in delinquencies in affected areas, although the ultimate financial impact may be muted.
- The provision for losses and loss adjustment expenses increased significantly to $30.7 million in the third quarter, compared to a benefit in the previous quarter.
Q & A Highlights
Q: Was there any quantifiable impact on the default rate or new notices this quarter from hurricanes?
A: Mark Casale, CEO, mentioned that there was minimal impact, mostly from Hurricane Beryl, and they expect some noise in the fourth quarter.
Q: Are we starting to see the effects of vintage seasoning from post-COVID vintages materialize more?
A: Yes, the portfolio is seasoning with an average age of 32 months. There is some seasonality and noise from forbearance, but the probability of claims remains low due to strong mark-to-market positions.
Q: Did you make any changes in the claim rate assumptions in the quarter?
A: No changes were made in the claim rate assumptions for the quarter, according to Mark Casale, CEO.
Q: Are the loan sizes getting bigger, impacting the provision for new notices?
A: David Weinstock, CFO, confirmed that loan sizes have grown, impacting provision dollar numbers. The average loan size is now around $290,000, up from $226,000 historically.
Q: How might the timing of the forbearance process impact default and cure numbers?
A: Chris Curran, President of Essent Guaranty, explained that COVID forbearance ended last November, leading to less friction in the process. Mark Casale added that this should result in fewer people entering forbearance and more normalization in defaults and cures.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
