Essent Group Ltd (ESNT) 2023 Q3 法說會逐字稿

Thank you for standing by. My name is Adam, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Essent Group Limited Third Quarter Earnings Call. (Operator Instructions). I'd now like to turn the call over to Phil Stefano. Please go ahead.

謝謝你的支持。我叫 Adam，今天我將擔任你們的會議操作員。現在，我謹歡迎大家參加 Essent Group Limited 第三季財報電話會議。 （操作員說明）。我現在想把電話轉給菲爾·斯蒂法諾。請繼續。

Thank you, Adam. Good morning, everyone, and welcome to our call. Joining me today are Mark Casale, Chairman and CEO; and David Weinstock, Chief Financial Officer. Also on hand for the Q&A portion of the call is Chris Curran, President of Essent Guaranty.

謝謝你，亞當。大家早上好，歡迎打電話給我們。今天與我一起出席的還有董事長兼執行長馬克‧卡薩萊 (Mark Casale)；財務長大衛溫斯托克 (David Weinstock)。 Essent Guaranty 總裁 Chris Curran 也出席了電話會議的問答部分。

Our press release, which contains Essent's financial results for the third quarter of 2023 was issued earlier today and is available on our website at essentgroup.com. Our press release this quarter includes non-GAAP financial measures that may be discussed during today's call. A complete description of these measures and the reconciliation to GAAP may be found in Exhibit O of our press release.

我們的新聞稿今天稍早發布，其中包含 Essent 2023 年第三季的財務業績，可在我們的網站 essentgroup.com 上取得。我們本季的新聞稿包括可能在今天的電話會議上討論的非公認會計準則財務指標。這些措施的完整描述以及與 GAAP 的協調可以在我們新聞稿的附件 O 中找到。

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 our actual results to differ materially. For a discussion of these risks and uncertainties, please review the cautionary language regarding forward-looking statements in today's press release, the risk factors that included in Form 10-K filed with the SEC on February 17, 2023, and any other reports and registration statements filed with the SEC, which are also available on our website. Now let me turn the call over to Mark.

在開始之前，我想提醒與會者，今天的討論正在記錄中，並將包括前瞻性陳述的使用。這些陳述是基於目前的預期、估計、預測和假設，存在風險和不確定性，可能導致我們的實際結果有重大差異。有關這些風險和不確定性的討論，請查看今天新聞稿中有關前瞻性陳述的警示性語言、2023 年 2 月 17 日向 SEC 提交的 10-K 表中包含的風險因素以及任何其他報告和註冊向SEC 提交的聲明，也可在我們的網站上取得。現在讓我把電話轉給馬克。

Thanks, Phil, and good morning, everyone. Earlier today, we released our third quarter 2023 financial results, which continue to benefit from both favorable credit performance and the current interest rate environment. As mentioned last quarter, rising interest rates continue to drive higher investment income and elevated persistency, which has supported our revenue growth this year. As we look ahead, we remain encouraged by the resilience of the housing and labor markets.

謝謝菲爾，大家早安。今天早些時候，我們發布了 2023 年第三季財務業績，該業績繼續受益於良好的信貸表現和當前的利率環境。正如上個季度所提到的，利率上升繼續推動投資收益的增加和持久性的提高，這支撐了我們今年的收入成長。展望未來，我們仍然對住房和勞動市場的彈性感到鼓舞。

The housing supply and demand imbalance and favorable demographic trends are expected to provide foundational support to home prices over the longer-term. While economic uncertainty remains, we continue to believe the strength of our balance sheet and our Buy, Manage and Distribute operating model should position us well to be prepared for a range of economic scenarios.

住房供需失衡和有利的人口趨勢預計將為房價提供長期的基礎支撐。儘管經濟不確定性仍然存在，但我們仍然相信，我們的資產負債表實力以及購買、管理和分銷營運模式應該使我們能夠為一系列經濟情境做好準備。

And now for our results. For the third quarter of 2023, we reported net income of $178 million compared to $178 million a year ago. On a diluted per share basis, we earned $1.66 for the third quarter compared to $1.66 a year ago, and our annualized return on average equity was 15%.

現在我們的結果。 2023 年第三季度，我們的淨利潤為 1.78 億美元，而去年同期為 1.78 億美元。以稀釋每股計算，我們第三季的獲利為 1.66 美元，去年同期為 1.66 美元，年化平均股本回報率為 15%。

As of September 30, our book value per share was $44.98, an increase of 13% from a year ago. As of September 30, our insurance in force was $239 billion, a 7% increase versus a year ago. Our 12-month persistency on September 30 was 87%, and approximately 70% of our in-force portfolio has a note rate of 5% or lower. We expect that the current level of rates should support elevated persistency through the end of this year.

截至 9 月 30 日，我們的每股帳面價值為 44.98 美元，比去年同期成長 13%。截至 9 月 30 日，我們的有效保險金額為 2,390 億美元，比一年前成長 7%。截至 9 月 30 日，我們的 12 個月持續性為 87%，我們有效投資組合中約 70% 的票據利率為 5% 或更低。我們預計，目前的利率水準應能支撐今年年底的持續性上升。

As a portfolio business, mortgage insurance is less beholden to transaction activity in other sectors of the housing ecosystem. The credit quality of our insurance in force remains strong, with a weighted average FICO of 746 and a weighted average of original LTV of 93%. Regulatory guardrails, including the qualified mortgage rule and prudential GSE underwriting guidelines has significantly improved industry credit quality and performance since the global financial crisis.

作為一項投資組合業務，抵押貸款保險較少受住房生態系統其他部門交易活動的影響。我們現有保險的信用品質依然強勁，加權平均FICO為746，加權平均原始LTV為93%。自全球金融危機以來，包括合格抵押貸款規則和審慎 GSE 承保指南在內的監管護欄顯著提高了行業信用品質和績效。

In addition, credit performance should continue to be supported by embedded home price appreciation and implied mark-to-market values, particularly for the 2021 and prior vintages, which represent approximately 60% of the overall book.

此外，信貸表現應繼續受到嵌入房價升值和隱含的按市值計算的價值的支持，特別是對於 2021 年及之前的年份，它們約佔總帳面的 60%。

On the business front, while mortgage lenders remain challenged given the interest rate environment, we continue to focus on activating new accounts. We believe it is very important to identify and activate new customers while also continuing to support our current customers. Year-to-date through October 31, we activated 95 new customers. We take a long-term approach in managing Essent and best positioning our franchise, especially during times like now, as the lender landscape continues to shift and evolve.

在業務方面，儘管鑑於利率環境，抵押貸款機構仍然面臨挑戰，但我們繼續專注於啟動新帳戶。我們相信，在繼續支援現有客戶的同時，識別和啟動新客戶非常重要。年初至今，截至 10 月 31 日，我們啟動了 95 位新客戶。我們採取長期方法來管理 Essent 並最好地定位我們的特許經營權，尤其是在像現在這樣的時期，因為貸方格局不斷變化和發展。

As of September 30, Essent Re's [third-party] year-to-date revenues were approximately $60 million, while third-party risk in force was $2.2 billion, Essent Re continues to leverage our expertise in mortgage credit and the Bermuda platform to deliver complementary earnings to the Essent franchise. Our title and settlement services operation incurred a pretax loss of approximately $4 million in the third quarter. As we continue to work through the title integration, we will be taking a long-term approach to building out the business with a focus on risk controls and operational efficiency.

截至 9 月 30 日，Essent Re 的[第三方]年初至今收入約為 6000 萬美元，而有效的第三方風險為 22 億美元，Essent Re 繼續利用我們在抵押信貸方面的專業知識和百慕大平台來交付Essent 特許經營權的補充收入。我們的產權和結算服務業務在第三季產生了約 400 萬美元的稅前虧損。隨著我們繼續進行產權整合，我們將採取長期方法來建立業務，並專注於風險控制和營運效率。

Cash and investments as of September 30 were $5.4 billion. Our new money yield in the third quarter was over 5%, while our annualized investment yield was 3.6% for the third quarter, up from 2.7% a year ago. Net investment income was $47 million in the third quarter, up approximately 44% from the same quarter last year. Higher investment income is another way that our business is levered to higher rates. Our balance sheet remains strong with $4.8 billion in GAAP equity, access to $1.6 billion in excess of loss reinsurance and over $1 billion of available holding company liquidity.

截至 9 月 30 日，現金和投資為 54 億美元。我們第三季的新增資金殖利率超過 5%，而第三季的年化投資報酬率為 3.6%，高於去年同期的 2.7%。第三季淨投資收益為4,700萬美元，較去年同期成長約44%。更高的投資收入是我們的業務獲得更高利率的另一種方式。我們的資產負債表依然強勁，擁有 48 億美元的 GAAP 股本、超過 16 億美元的損失再保險以及超過 10 億美元的可用控股公司流動資金。

During the third quarter, we closed on our ninth Radnor Re ILN transaction. The utilization of programmatic reinsurance helps to diversify our capital resources while seeding a meaningful portion of our mezzanine credit risk. With a trailing 12-month operating cash flow of $720 million and a mortgage insurance underwriting margin of 75%, our franchise remains well positioned from an earnings, cash flow and balance sheet perspective. Our strong financial performance and capital position enable us to take a balanced approach between capital deployment and distribution.

第三季度，我們完成了第九筆 Radnor Re ILN 交易。程序化再保險的利用有助於使我們的資本資源多樣化，同時為我們的夾層信用風險注入有意義的部分。過去 12 個月的營運現金流為 7.2 億美元，抵押貸款保險承保利潤率為 75%，從盈利、現金流和資產負債表的角度來看，我們的特許經營業務仍然處於有利地位。我們強勁的財務表現和資本狀況使我們能夠在資本部署和分配之間採取平衡的方法。

Year-to-date through October 31, we repurchased approximately 1.4 million shares for $57 million. I am pleased to announce that our Board has authorized a new $250 million share repurchase program and has approved a common dividend of $0.25. We continue to see our dividend as a meaningful demonstration of the confidence we have and the stability of our cash flows, the strength of our capital position. Now let me turn the call over to Dave.

年初至今，截至 10 月 31 日，我們以 5,700 萬美元回購了約 140 萬股股票。我很高興地宣布，我們的董事會已批准一項新的 2.5 億美元的股票回購計劃，並批准了 0.25 美元的普通股息。我們仍然認為我們的股利有意義地體現了我們的信心、現金流的穩定性以及我們的資本狀況的實力。現在讓我把電話轉給戴夫。

Thanks, Mark, and good morning, everyone. Let me review our results for the quarter in a little more detail. For the third quarter, we earned $1.66 per diluted share compared to $1.61 last quarter and $1.66 in the third quarter a year ago. Net premium earned for the third quarter of 2023 was $247 million and included $16.9 million of premiums earned by Essent Re on our third-party business, and $20.6 million of premiums earned by the title operations acquired on July 1.

謝謝，馬克，大家早安。讓我更詳細地回顧一下我們本季的業績。第三季度，我們每股攤薄收益為 1.66 美元，而上季為 1.61 美元，去年同期為 1.66 美元。 2023 年第三季賺取的淨保費為2.47 億美元，其中包括Essent Re 在我們的第三方業務上賺取的1,690 萬美元保費，以及7 月1 日收購的產權業務賺取的2,060 萬美元保費。

The average base premium rate for the U.S. mortgage insurance portfolio in the third quarter was 40 basis points, consistent with last quarter. The net average premium rate on the U.S. mortgage insurance portfolio was 35 basis points in the third quarter of 2023, up 2 basis points from last quarter due primarily to the net impact of the successful ILN tender in the second quarter. Ceded premium decreased to $30.3 million in the third quarter compared to $39.5 million in the second quarter due to expenses incurred last quarter related to the tender and lower outstanding insurance-linked notes during the third quarter.

第三季美國抵押貸款保險組合的平均基本保費率為40個基點，與上季一致。 2023年第三季美國抵押貸款保險組合的淨平均保費率為35個基點，較上季上升2個基點，主要是由於第二季ILN成功招標的淨影響。第三季分出保費從第二季的 3,950 萬美元下降至 3,030 萬美元，原因是上季發生的與投標相關的費用以及第三季未償還保險相關票據的減少。

Net investment income increased $1.8 million or 4% in the third quarter of 2023 compared to last quarter, due primarily to higher yields on new investments and floating rate securities resetting to higher rates. Other income in the third quarter was $5.6 million compared to $8.1 million last quarter. The largest component of the decrease was the change in the fair value of embedded derivatives in certain of our third-party reinsurance agreements.

與上一季相比，2023 年第三季的淨投資收入增加了 180 萬美元，即 4%，這主要是由於新投資的收益率上升以及浮動利率證券重置為更高的利率。第三季其他營收為 560 萬美元，上季為 810 萬美元。下降的最大部分是我們某些第三方再保險協議中嵌入衍生性商品公允價值的變化。

In the third quarter, we recorded an $898,000 decrease in the fair value of these embedded derivatives compared to a $2.7 million increase recorded last quarter. The provision for loss and loss adjustment expense was $10.8 million in the third quarter of 2023 compared to $1.3 million in the second quarter of 2023 and $4.3 million in the third quarter a year ago. At September 30, the default rate on the U.S. mortgage insurance portfolio was 1.62%, up 10 basis points from 1.52% at June 30, 2023.

第三季度，這些嵌入式衍生性商品的公允價值下降了 898,000 美元，而上個季度則增加了 270 萬美元。 2023 年第三季的損失和損失調整費用撥備為 1,080 萬美元，而 2023 年第二季為 130 萬美元，一年前第三季為 430 萬美元。截至9月30日，美國抵押貸款保險組合違約率為1.62%，較2023年6月30日的1.52%上升10個基點。

Other underwriting and operating expenses in the third quarter were $54.8 million and include $13.5 million of title expenses. Expenses for the third quarter also includes title premiums retained by agents of $13.2 million, which we are reporting separately in our income statement. Our consolidated expense ratio was 27% this quarter. Our consolidated expense ratio excluding title, which is a non-GAAP measure, was 18% this quarter. A description of our consolidated expense ratio excluding title and the reconciliation to GAAP may be found in Exhibit O of our press release. As a reminder, our consolidated expense ratio was 20% for both the second quarter and third quarter a year ago.

第三季的其他承保和營運費用為 5,480 萬美元，其中包括 1,350 萬美元的產權費用。第三季的費用還包括代理人保留的 1,320 萬美元的產權保費，我們在損益表中單獨報告了這筆費用。本季我們的綜合費用率為 27%。我們本季的綜合費用率為 18%，不包括所有權（這是非 GAAP 衡量標準）。有關我們的綜合費用率（不包括所有權）和 GAAP 調整的說明，請參閱我們新聞稿的附件 O。提醒一下，去年第二季和第三季我們的綜合費用率為 20%。

As Mark noted, our holding company's liquidity remains strong and includes $400 million of undrawn revolver capacity under our committed credit facility. At September 30, we had $425 million of term loan outstanding with a weighted average interest rate of 7.07%, up from 6.87% at June 30. At September 30, 2023, our debt-to-capital ratio was 8%. During the third quarter, Essent Guaranty paid a dividend of $60 million to its U.S. holding company. Based on unassigned surplus at September 30, the U.S. mortgage insurance companies can pay additional ordinary dividends of $290 million in 2023. At quarter end, the combined U.S. mortgage insurance business statutory capital was $3.3 billion, with a risk-to-capital ratio of 10.3:1. Note that statutory capital includes $2.3 billion of contingency reserves at September 30. Over the last 12 months, the U.S. mortgage insurance business has grown statutory capital by $181 million, while at the same time paying $300 million of dividends to its U.S. holding company.

正如馬克所指出的那樣，我們的控股公司的流動性仍然強勁，包括我們承諾的信貸安排下未提取的 4 億美元的左輪手槍容量。截至9 月30 日，我們的未償還定期貸款為4.25 億美元，加權平均利率為7.07%，高於6 月30 日的6.87%。截至2023 年9 月30 日，我們的債務與資本比率為8 %。第三季度，Essent Guaranty 向其美國控股公司支付了 6,000 萬美元的股息。根據截至9月30日的未分配盈餘，美國抵押貸款保險公司可以在2023年額外支付2.9億美元的普通股息。截至季度末，美國抵押貸款保險業務法定資本總額為33億美元，風險資本比為10.3 ：1。請注意，法定資本包括截至9 月30 日的23 億美元應急準備金。在過去12 個月中，美國抵押貸款保險業務的法定資本增加了1.81 億美元，同時向其美國控股公司支付了3 億美元的股息。

During the third quarter, Essent Group paid a cash dividend totaling $26.5 million to shareholders, and we repurchased 102,000 shares for $5 million under the authorization approved by our Board in May 2022. Now let me turn the call back over to Mark.

第三季度，Essent Group 向股東支付了總計2,650 萬美元的現金股息，並根據董事會2022 年5 月批准的授權，以500 萬美元的價格回購了102,000 股股票。現在讓我把電話轉回給Mark。

Thanks, Dave. In closing, Essent continues to generate high-quality earnings, while our balance sheet and liquidity remains strong. Higher interest rates to turnover of our investment portfolio and robust operating cash flows have contributed to strong net investment income growth this year, supporting our revenues and operating returns.

謝謝，戴夫。最後，Essent 繼續產生高品質的收益，而我們的資產負債表和流動性仍然強勁。我們投資組合的較高利率與週轉率以及強勁的營運現金流推動了今年淨投資收入的強勁成長，支撐了我們的收入和營運回報。

Earlier this week, we celebrated the tenth anniversary of Essent's initial public offering on the New York Stock Exchange. Since our IPO, Essent's book value per share has grown at a compound annual growth rate of approximately 19%, and Essent shares have delivered an annualized total return of approximately 12%. I want to thank our team for their dedication and contribution to Essent's achievement and growth over the last decade. I'd also like to thank our customers and shareholders for your continued support, enabling us to fulfill Essent's mission to promote and serve affordable and sustainable homeownership. Now let's get to your questions. Operator?

本週早些時候，我們慶祝了 Essent 在紐約證券交易所首次公開募股十週年。自我們首次公開募股以來，Essent 的每股帳面價值以約 19% 的複合年增長率增長，Essent 股票的年化總回報率約為 12%。我要感謝我們的團隊在過去十年中為 Essent 的成就和發展所做的奉獻和貢獻。我還要感謝我們的客戶和股東的持續支持，使我們能夠履行 Essent 的使命，即促進和服務經濟實惠且可持續的住房所有權。現在讓我們來回答您的問題。操作員？

(Operator Instructions). Your first question comes from the line of Bose George with KBW.

（操作員說明）。你的第一個問題來自 Bose George 和 KBW 的路線。

I wanted to ask just about buybacks. Has your sort of -- tone or view on buybacks changed over the last year? Just -- could we see you being a little more active here? Or just any thoughts there would be great.

我只是想問一下回購的事。去年您對回購的調性或看法有改變嗎？只是——我們能看到你在這裡更活躍一點嗎？或者只是任何想法都會很棒。

Bose, it's Mark. I think you have to think about buybacks within kind of the context of how we manage capital in totality. So generally, you've heard me say this in the past, we're kind of a retain and invest type mentality. So always, we're going to look from our capital position to invest in the core business. We've continued to invest in Re over the years. We've obviously invested in [title] this year. And in terms of also looking to manage ROEs over the longer-term. And the way to do that is obviously increase the numerator. I think given our capital position and growth, there's clearly some excess capital in the system.

博斯，我是馬克。我認為你必須在我們如何整體管理資本的背景下考慮回購。所以一般來說，你過去曾聽過我這樣說過，我們是一種保留和投資類型的心態。因此，我們總是會從我們的資本狀況出發，投資核心業務。多年來，我們持續投資再保險。顯然我們今年已經投資了[title]。並且也尋求長期管理股本報酬率。而做到這一點的方法顯然就是增加分子。我認為考慮到我們的資本狀況和成長，系統中顯然存在一些過剩資本。

And part of that, the way we manage ROE is primarily the dividend, right? And we're pretty committed to the dividend. We think that's a good kind of tangible evidence to our shareholders of the cash generation of the business, which is really strong. And I think on repurchases there, I think we've -- it has become a little bit more dynamic. So I think we've changed a little bit over the past kind of year goes. We bought back $250 million back in 2021 over 11 months. And in my view, that was a little fast. And I think now we're going to a little bit more dynamic. We're going to look at it -- we have a 10b5 plan out there, but we look at it every quarter, and then we're looking and saying, where are the growth opportunities in the core businesses now? What's the outlook for losses, right? Where do we see the portfolio going, right? So you always want to have capital around PMIERs and other potential capital needs.

其中一部分，我們管理股本報酬率的方式主要是股息，對嗎？我們非常致力於派發股息。我們認為，這對我們的股東來說是一種很好的實際證據，表明該業務的現金產生能力非常強大。我認為在回購方面，我認為我們變得更有活力了。所以我認為我們在過去的一年裡發生了一些變化。 2021 年，我們在 11 個月內回購了 2.5 億美元。在我看來，這有點快了。我認為現在我們將變得更有活力。我們會審視它——我們有一個 10b5 計劃，但我們每個季度都會審視它，然後我們會思考，現在核心業務的成長機會在哪裡？損失的前景如何，對嗎？我們認為投資組合將走向何方，對嗎？因此，您始終希望擁有圍繞 PMIER 和其他潛在資本需求的資本。

And then finally, where is the stock trading, right? So I think our view is we're all about growth in book value per share, and if we can buy our shares around book value or below book value, we're probably going to be a little greedy there and probably a little less so when it trades up.

最後，股票交易在哪裡，對吧？因此，我認為我們的觀點是，我們關注的是每股帳面價值的成長，如果我們可以在帳面價值附近或低於帳面價值購買我們的股票，我們可能會有點貪婪，也可能不那麼貪婪。當它上漲時。

So I think that depends. So hopefully, that gives you a little bit more context. So it's not kind of a mechanical, let's just remove share count. I think we're going to be a lot more thoughtful about it. And again, it's just our view capital begets opportunities. And given the world is always uncertain and probably a little bit more uncertain over the next 12 to 18 months with what's going on in the world, where rates are, we have an election coming up in less than 12 months. So it served us well in the past to maintain a strong capital position because you never know where the opportunities are going to come from.

所以我認為這要看情況。希望這能為您提供更多背景資訊。所以這不是一種機械，讓我們刪除份額計數。我認為我們對此會更加深思熟慮。再說一次，這只是我們的觀點，資本產生機會。鑑於世界總是充滿不確定性，而且在未來 12 到 18 個月內，世界上正在發生的事情、利率可能會更加不確定，我們將在不到 12 個月的時間內舉行選舉。因此，過去保持強大的資本狀況對我們很有幫助，因為你永遠不知道機會來自哪裡。

Okay. Great. That's very helpful. And then switching, I wanted to just ask about the proposed changes to the Bermuda tax code. Is that something that could impact you? Just any color there would be great.

好的。偉大的。這非常有幫助。然後切換，我只想詢問百慕達稅法的建議變更。這會影響你嗎？任何顏色都會很棒。

Well, it's pretty early, right? I mean we've seen potential changes come and go over the past 10 years. So it's too early -- I would say it's too early to tell. There could be some impact to us, but I don't think it's really -- it's not really material longer-term to kind of the growth of Essent. But again, stay tuned for more.

嗯，現在還很早，對吧？我的意思是，在過去的十年裡，我們已經看到了潛在的變化。所以現在還太早——我想說現在下結論還太早。這可能會對我們產生一些影響，但我認為這對於 Essent 的成長來說，從長遠來看並不是真正重要的。但同樣，請繼續關注更多資訊。

Your next question comes from the line of Mihir Bhatia with Bank of America.

您的下一個問題來自美國銀行的米希爾·巴蒂亞 (Mihir Bhatia)。

Maybe to start with on pricing. Obviously, always a big topic for investors. Just how would you characterize the current pricing environment? Anything changed quarter-over-quarter there?

也許從定價開始。顯然，這始終是投資人的一大話題。您如何描述目前的定價環境？每個季度都有什麼變化嗎？

No, I think it's been pretty consistent -- really over the last 6 to 12 months in terms of just where it is in terms of where we see it in terms of our earned premium yield. Like we had mentioned a while ago here that we wanted to see new pricing for us get closer to where the base premium yield. And we're there now. And so I think the unit economics of the business are good.

不，我認為在過去 6 到 12 個月裡，就我們所賺取的保費收益率而言，情況非常穩定。就像我們剛才提到的那樣，我們希望看到新的定價更接近基本保費收益率。我們現在就在那裡。因此，我認為該業務的單位經濟效益很好。

In terms of pricing, though, again, I'd like to take a step back and just try to give investors a little bit more context because I'm not sure it's -- the change in pricing has really is appreciated by the investor community. So we always talk about 3 changes to the business model since the GSE, right? You have reinsurance, which has out the mezz risk, which we think is important. There's the regulatory changes that are substantial, right, qualified mortgage, the strength of the GSE systems, forbearance, all those things have helped the business. I think the pricing engines have been a significant change to the industry. And the reason is it's given all the MIs a lot more flexibility and how they can bring price to the consumer. And I think because of that, I think in the past, investors have said, well, there's not a lot of discipline in the industry.

不過，在定價方面，我想再次退後一步，嘗試為投資者提供更多背景信息，因為我不確定——定價的變化是否真的得到了投資者群體的讚賞。 。所以我們總是談論自 GSE 以來商業模式的 3 個變化，對嗎？你有再保險，它消除了夾層風險，我們認為這很重要。監管方面的變化是實質的、正確的、合格的抵押貸款、GSE 系統的強度、寬容，所有這些都對企業有所幫助。我認為定價引擎對行業來說是一個重大變化。原因是它為所有 MI 提供了更大的靈活性以及他們如何為消費者帶來價格。我認為正因為如此，我認為過去投資者曾說過，這個行業沒有太多的紀律。

And I think that, again, it's not appreciated just how the pricing was really brought to the consumer 5 years ago, in order for a price change to be made in the industry, you had to refile in all 50 rates, you had to change your card, one card, you had to usually take it to 2 or 3 of the top banks in the country. And really, they decided where -- because they didn't have this -- there was a system, the inability of their systems to program in like 6 different cards, so they could only program in 1 card. What's going to happen here -- they're going to program in the lowest card. So they're going to get 6 cards. And whoever had the lowest, everyone was forced to that. So you didn't have a lot of flexibility.

我認為，5 年前，人們並沒有意識到定價是如何真正帶給消費者的，為了在行業中進行價格改變，你必須重新提交所有 50 個費率，你必須改變你的卡，一張卡，你通常必須把它帶到該國的2 或3 家頂級銀行。事實上，他們決定在哪裡——因為他們沒有這個——有一個系統，他們的系統無法在 6 張不同的卡中編程，所以他們只能在 1 張卡中編程。這裡將會發生什麼——他們將在最低的卡中進行編程。所以他們將獲得 6 張牌。無論誰的地位最低，每個人都被迫這樣做。所以你沒有太多的彈性。

So people confuse that with a lack of discipline per se, but it's really just kind of -- it's a little bit of game theory, right, in terms of when you put 6 guys up against 1 lender. The lender had the pricing power in the industry. And I think with the engines, that's changed significantly. Now we all file a range of rates, we can change rates much more frequently. It's really become what we said it was going to be, which is a risk management tool. It allows all the MIs to pick their spots, right? People have different geographical preferences, different parts of the capital structure, FICO. I think that's great. The lenders win, and the borrowers win.

因此，人們將其與缺乏紀律本身混為一談，但這實際上只是一種博弈論，對吧，就當你讓 6 個人對抗 1 個貸款人而言。貸方擁有行業定價權。我認為有了引擎，情況發生了顯著變化。現在我們都提交了一系列費率，我們可以更頻繁地更改費率。它真的變成了我們所說的那樣，這是一個風險管理工具。它允許所有的 MI 來選擇自己的位置，對吧？人們有不同的地域偏好、資本結構的不同部分、FICO。我認為那太好了。貸款人獲勝，借款人獲勝。

But just, again, give you more evidence over the last 12 months from here, we must have raised pricing 12x different times, like in different places, maybe a tail here, an MSA there. Once in a while across the board, if that was under the old card system, we would have had 1 shot at raising pricing. And whatever shot we had would have been mitigated by the competitive factors. And again, I think it's underappreciated. I think there's a form of pricing power with the mortgage insurers now. And again, if you just look at our -- and it's still good economics to the borrower. The borrower wins, the lenders win, and I think MIs now have the chance to kind of shape their portfolios and pick the spots where they want to be in much similar to how other insurance companies operate.

但是，再次向您提供過去 12 個月的更多證據，我們一定在不同的時間提高了 12 倍的價格，就像在不同的地方一樣，也許這裡是尾巴，那裡是 MSA。偶爾，如果在舊的卡片系統下，我們會有一次提高定價的機會。無論我們有什麼機會，都會因競爭因素而減弱。再說一次，我認為它被低估了。我認為抵押貸款保險公司現在擁有某種形式的定價權。再說一次，如果你看看我們的——這對借款人來說仍然是良好的經濟效益。借款人獲勝，貸款人獲勝，我認為多邊保險公司現在有機會塑造他們的投資組合，並選擇他們想要的位置，與其他保險公司的運作方式非常相似。

Got it. I really appreciate that answer. So to take a step back. On the -- maybe switching gears a little bit to the title side. And look, I understand you're building that business. It's a long-term play for you. It's not about a quarter or something like that. But as you position that business for long-term success. Is the idea here in the near-term, the focus, hey, we need to build out the infrastructure for the next few quarters, a little bit of an investment period before we start really driving revenue growth. Maybe just talk about what you expect. How you're looking at that business for the next 2, 4 quarters even as you look at the long-term?

知道了。我真的很感激這個答案。所以要退一步。在——也許稍微切換到標題方面。看，我知道你正在建立這項業務。這對你來說是一個長期的遊戲。這不是四分之一或類似的事情。但當您將該業務定位為長期成功時。這是近期的想法，重點是，嘿，我們需要在接下來的幾個季度建立基礎設施，這是我們開始真正推動收入成長之前的一段投資期。也許只是談談你的期望。從長遠來看，您如何看待未來 2、4 個季度的業務？

No, it's fair enough, right? I mean I think that you did hit the nail on the head. It is going to be a longer-term build. Very much like Essent, and I think I alluded to it on maybe the February call. But the acquisition of Title was not dissimilar to us buying the Triad platform back in 2009. It kind of gave us that base to build off. We inherited some exceptional employees. And when you kind of marry the platform and the folks from Triad that came over to Essent with the existing Essent folks, that really laid the foundation for building of Essent. And here, that was in 2009 -- and I was probably 18 -- almost 24 months from starting to raise the money. So -- and that's 2009, we didn't break even in 2012. So when we came public in 2013, we were already fully formed, and that's what investors got to view.

不，這很公平，對吧？我的意思是，我認為你確實擊中了要害。這將是一個更長期的建設。非常像 Essent，我想我可能在二月份的電話會議上提到過它。但收購 Title 與我們在 2009 年購買 Triad 平台沒有什麼不同。它為我們提供了基礎。我們繼承了一些優秀的員工。當你將平台和來自 Triad 的人與現有的 Essent 人結合起來時，這確實為 Essent 的構建奠定了基礎。那是在 2009 年——當時我大概 18 歲——距離開始籌資還有將近 24 個月。那是 2009 年，2012 年我們還沒有達到收支平衡。因此，當我們在 2013 年上市時，我們已經完全成型，這就是投資者必須看到的。

This is going to play out differently, right, because it's going to play out in public. We're going to be very transparent. But in order to build out these type of businesses, it's going to take time. We acquired a platform. We've got some really good folks, right, a really good team. But in order for us to build it and have it to like Essent infrastructure, we're going to have to invest. We're very risk and control oriented. I mean, you're talking -- this is a company where we hired our Head of Internal Audit before we hired our first salesperson. So we're very much control oriented. And there's a lot of risk in Title in terms of the search process, the curative process, the closing and funding. I think from the 30,000 feet people think there's not risk in Title and it's entirely bad premise and so there's risk and we have to understand it.

這將會以不同的方式進行，對吧，因為它將在公共場合上演。我們將非常透明。但要建立此類業務，需要時間。我們獲得了一個平台。我們有一些非常好的人，對吧，一個非常好的團隊。但為了讓我們建造它並讓它像 Essent 基礎設施一樣，我們必須投資。我們非常注重風險和控制。我的意思是，你說的是——在這家公司，我們在聘請第一位銷售人員之前聘請了內部審計主管。所以我們非常注重控制。 Title 在搜尋過程、治療過程、成交和融資方面存在很大的風險。我認為從 30,000 英尺的高度來看，人們認為 Title 沒有風險，這完全是一個糟糕的前提，所以風險是存在的，我們必須理解它。

So we're going to build it from the inside out, and we're going to take our time. It's going to play out. I'm going to be transparent, but we're not going to [skimp] on investments in order to show quarterly results. So we have to report every quarter. We will report every quarter. We'll talk to you about it, but we're not going to change the approach that build us.

因此，我們將從內到外構建它，並且我們將慢慢來。它即將上演。我將保持透明，但我們不會為了顯示季度業績而[吝嗇]投資。所以我們必須每季報告一次。我們將每季報告一次。我們會與您討論這個問題，但我們不會改變建立我們的方法。

And taking a step back to me here again, think about it, right? This is a company $150 million a quarter we're earning cash flows, $600 million, $700 million a year for us to take a few bucks to invest in a business that has the potential of on the title side. I think it's a really good risk return trade-off, risk reward trade-off for shareholders. So again, that's how we'll continue to look at it, and we'll certainly -- we'll let you know how the journey goes every 90 days.

再回到我這裡，想一想，對嗎？這是一家公司，我們每季賺取 1.5 億美元的現金流，6 億美元，每年 7 億美元，我們可以花幾美元投資於一家有潛力的企業。我認為這對股東來說是一個非常好的風險報酬權衡、風險報酬權衡。再說一次，這就是我們將繼續看待它的方式，我們當然會——我們會讓您知道每 90 天的旅程是如何進行的。

(Operator Instructions) Your next question comes from the line of Rick Shane with JPMorgan.

（操作員說明）您的下一個問題來自摩根大通的 Rick Shane。

Two questions on 2 pretty different topics. Mark, one of the things in terms of the Title insurance business, and I'm going to draw an analogy here. 20 years ago when Capital One got into the building depository franchise. One of the things that they emphasized was that scale was not or efficiency was not a function of being on having a national footprint but being concentrated in particular regions where they could generate substantial market share. How do you guys look at the Title expansion? Do you want to be a national Title Insurance company? Or is the plan to be really concentrated regionally as you build the business?

關於兩個截然不同的主題的兩個問題。馬克，產權保險業務方面的一件事，我將在這裡打個比方。 20 年前，第一資本進入建築託管業務。他們強調的一件事是，規模或效率並不取決於全國範圍內的足跡，而是集中在可以產生大量市場份額的特定地區。你們如何看待標題擴充？您想成為全國性產權保險公司嗎？或者當你建立業務時，計劃是否真正集中在區域？

Yes. I think the answer is both. And the reason why, Rick, really it's the business and as we acquired 2 separate businesses. So we're in the process of putting it into 1 kind of functional organization, as in Title. So we'll have the agency services channel, which will service title agents. And that will be focused on large states, right? I mean it's pretty obvious where the premiums are coming from Florida, Texas, within the Southeast, parts of the Southwest and Northeast -- and there are -- and so we'll focus around that and build around that and the agency services has 200 agents that they service today. So it's really tiny. We'll grow that out, and we'll scale that out very similar to how we scale out MI, right? You go and you hire good salespeople, salespeople go and call on title agents. And again, it doesn't happen overnight, right? This took us a long time on the MI side, but we're slow and steady wins the race. So we'll attack it on the agency services that way.

是的。我認為答案是兩者兼具。瑞克，這實際上是業務的原因，因為我們收購了兩個獨立的業務。因此，我們正在將其納入職能組織，如標題所示。因此，我們將擁有代理服務管道，為產權代理提供服務。這將集中在大國，對嗎？我的意思是，很明顯，保費來自佛羅裡達州、德克薩斯州、東南部、西南和東北部的部分地區——而且確實有——所以我們將圍繞這一點並圍繞這一點進行構建，代理服務有200他們今天服務的代理商。所以它真的很小。我們將擴展它，我們將擴展它，就像我們擴展 MI 的方式一樣，對嗎？你去聘請優秀的銷售人員，銷售人員去拜訪產權代理人。再說一次，這不會在一夜之間發生，對吧？ MI方面我們花了很長時間，但我們緩慢而穩定地贏得了比賽。所以我們將以這種方式攻擊代理服務。

The lender services channel is actually more -- it's a lot more geared at centralized refinance. So it's a lot more geared to lenders. So that is national buy. So it's a 50-state title and settlement services business, it's quite a valuable platform. And I think as we continue to invest in the infrastructure there, we will offer that out to our key lenders. We're not at that step -- at that phase right now. I mean they do work with lenders. But I think we really want to make sure it's kind of firing on all cylinders. So we'll have kind of 2 channels, agency services, lender services. It will be supported by an operational group. But you can see there, it's going to be regional. It is almost the agency services will be much more regionally targeted where the lender services will be more of a national footprint.

貸方服務管道實際上更多——它更適合集中再融資。所以它更適合貸方。所以這就是國民購買。所以它是一個涵蓋 50 個州的產權和結算服務業務，它是一個非常有價值的平台。我認為，隨著我們繼續投資那裡的基礎設施，我們將向我們的主要貸方提供這些服務。我們現在還沒有到那個階段。我的意思是他們確實與貸方合作。但我認為我們真的想確保它是全速運轉的。因此，我們將有兩種管道：代理服務、貸方服務。它將得到一個營運小組的支持。但你可以看到，這將是區域性的。幾乎代理服務將更具區域針對性，而貸方服務將更多地覆蓋全國。

Got it. Okay. That's helpful. And then the other question, and we've been asking this in a few different ways, but very unique time volumes, particularly concentrated in purchase given the limited supply of existing home stock for sale, particularly concentrated in new home sales. That drives mortgage originations, particularly through builder channels and there tend to be some subsidies there in terms of buydowns. Curious how you're approaching that, in particular, the risk associated with buydowns, whether they are short-term or permanent?

知道了。好的。這很有幫助。然後是另一個問題，我們一直在以幾種不同的方式提出這個問題，但時間量非常獨特，特別是集中在購買上，因為待售的現有房屋供應有限，特別集中在新房銷售上。這推動了抵押貸款的發放，特別是透過建築商管道，而且在購房方面往往會提供一些補貼。好奇您如何應對這個問題，特別是與減持相關的風險，無論是短期的還是永久性的？

Yes. I mean, I think with buydowns. One, taking a step back, Rick, it's probably 3% or 4% of our originations has buydowns in and so it's not super material. And remember, we underwrite that at full rate. And we've had some more questions around student loans, same thing with student loans, right? We underwrite those assuming they're going to pay back the loan. So there's some concentration, I think, around builders because clearly, they're not building a lot in the Northeast because there's not a lot of land. So it's always going to be more Southwest, Southeast a little bit of on the West. But we don't see any big concentration issues or things like that.

是的。我的意思是，我認為是買。一，瑞克，退後一步，我們的創始產品中可能有 3% 或 4% 被買入，所以這並不是超級重要的。請記住，我們全額承保。我們還有一些關於學生貸款的問題，學生貸款也是如此，對嗎？我們承保那些假設他們將償還貸款的人。因此，我認為建築商有一定程度的集中，因為很明顯，他們在東北部沒有進行大量建設，因為那裡沒有很多土地。所以總是會偏西南、東南，偏西一點。但我們沒有看到任何重大的集中問題或類似的問題。

I think it's really -- 1 of the things we've gotten asked this question too is just there's not enough supply in the country. So the fact that homebuilders are putting supply out, I think longer-term, that's good, very good for the homebuilders. And clearly, in most of these are obviously first-time home buyers. So it's good for MI, but certainly, it's the concentration. It's certainly something you had to look at, but it's not something we're concerned about at this time. And Chris has a few words on this, too.

我認為這確實是——我們也被問到這個問題的原因之一就是該國的供應不足。因此，我認為從長遠來看，房屋建築商正在供應供應，這對房屋建築商來說是件好事。顯然，其中大多數顯然是首次購屋者。所以這對 MI 有好處，但當然是集中度。這當然是您必須關注的問題，但目前我們並不關心它。克里斯對此也有幾句話。

Rick, when you look at the buydown product, that certainly we're ensuring from the builders, the majority of those buydowns are permanent. So in a way, it is beneficial to, I'll call it, the financial makeup of the borrowers, certainly having additional cash flow for them. So that is 1 certainly a benefit of the permanent nature of these buydowns and certainly by extension that will benefit the credit performance as well.

瑞克，當你看到買斷產品時，我們當然向建築商保證，大部分買斷都是永久性的。因此，在某種程度上，這有利於借款人的財務組成，我稱之為，當然可以為他們帶來額外的現金流。因此，這肯定是這些購買的永久性的好處，當然也將有利於信貸表現。

Got it. Okay. And Mark, I think on a personal level, there are some congratulations in order as well. .

知道了。好的。馬克，我認為在個人層面上，也有一些祝賀。 。

Thank you. Yes, that's why we're having the call on Thursday because my daughter is getting married on Saturday. I have the rehearsal there tonight. So I was not allowed to have the call tomorrow. So that's why I appreciate some of our competitors. They were very gracious in moving their times. But yes, thank you Rick.

謝謝。是的，這就是我們週四打電話的原因，因為我女兒週六就要結婚了。今晚我在那裡排練。所以我明天不能接電話。這就是為什麼我欣賞我們的一些競爭對手。他們非常慷慨地移動他們的時代。但是，是的，謝謝里克。

Your next question comes from the line of Eric Hagen with BTIG.

您的下一個問題來自 BTIG 的 Eric Hagen。

Congratulations, Mark. A quick modeling question upfront. You feel like the ceded premium of 5 basis points is a good way to think about modeling that going into next year?

恭喜，馬克。預先提出一個快速建模問題。您認為放棄 5 個基點的溢價是考慮明年建模的好方法嗎？

It's Chris. Yes, I think that's a reasonable range. I mean, really, when you look at certainly our history within in that range, so that's reasonable from a modeling perspective.

是克里斯。是的，我認為這是一個合理的範圍。我的意思是，真的，當你看看我們在這個範圍內的歷史時，所以從建模的角度來看這是合理的。

Okay. Great. There's always kind of 2 dimensions of risk to think about, right? There's the borrower risk and then there's the asset level risk. Like which 1 would you say you're may be more sensitive to right now and whether you think -- like how you adjust for that and how it factors into the risk-adjusted return that you think you're picking up right now?

好的。偉大的。總是需要考慮兩個維度的風險，對嗎？首先是藉款人風險，然後是資產水準風險。例如你認為你現在可能對哪一個更敏感，以及你是否認為——例如你如何對此進行調整，以及它如何影響你認為你現在正在獲得的風險調整回報？

I think it's a good -- it's a really good question. I think on the portfolio, it's clearly around the asset risk, right? It's already you've already underwritten the mortgage home prices can fluctuate, borrowers could not pay and then you have severity issues. So I think we're more focused because you can't control that. So I think we're more focused there on the asset risk. We feel pretty good with that, Mike, because we have 75% mark-to-market, we have a lot of embedded HPA. And clearly, we talked about the persistency angle helping us. And I think also -- so for new originations, clearly, right? I mean it's going to be higher DTI's obvious with 7%, 8% mortgages. So you're much more focused. You're not going to have and certainly not going to have that HPA growth. It's going to be, in our view, probably more flattish over the next 3 to 4 years. So I think it's a little bit more on the borrower risk on that side.

我認為這是一個很好的問題。我認為在投資組合上，它顯然是圍繞資產風險的，對吧？您已經承保了抵押貸款，房價可能會波動，借款人無法付款，然後您就會遇到嚴重的問題。所以我認為我們更專注，因為這是你無法控制的。所以我認為我們更關注資產風險。麥克，我們對此感覺非常好，因為我們有 75% 的按市值計價，我們有很多嵌入式 HPA。顯然，我們談到了持久性角度對我們的幫助。我也認為——對於新的起源來說，顯然，對吧？我的意思是，DTI 的抵押貸款利率明顯會更高，為 7%、8%。所以你更加專注。你不會、也肯定不會有 HPA 的成長。我們認為，未來 3 到 4 年可能會更加平坦。所以我認為這方面借款人的風險更大一些。

I will now turn the call back over to management for closing remarks.

我現在將把電話轉回給管理層以供結束語。

I'd like everyone to thanks. Thanks, everyone, for joining us, and have a great day.

我想向大家致謝。謝謝大家加入我們，祝您有美好的一天。

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

女士們、先生們，今天的電話會議到此結束。感謝大家的加入。您現在可以斷開連線。