Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Essent Group Limited Fourth Quarter Earnings Call. [Operator Instructions]. I would now like to turn the call over to Phil Stefano, Investor Relations. Phil, please go ahead.

Thank you, Tiffany. 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. Our press release, which contains Essent's financial results for the fourth quarter and full year 2025 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. 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 included in our Form 10-K, which was filed with the SEC on February 19, 2025. And then the 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.

Thanks, Phil, and good morning, everyone. Earlier today, we released our financial results for the fourth quarter and full year of 2025. Our strong performance this year was driven by positive credit trends and the benefit of higher interest rates on both persistency and investment income. These results demonstrate the strength of our buy, manage and distribute operating model and generating high-quality earnings which has enabled us to take a more strategic approach to capital management. For the fourth quarter of 2025, we reported net income of $155 million or $1.60 per diluted share. For the full year, we earned $690 million or $6.90 per diluted share while generating a return on average equity of 12%. As of December 31, our book value per share was $60.31, and an increase of 13% from a year ago. As of December 31, our mortgage insurance in force was $248 billion, a 2% increase versus a year ago. Our 12-month persistency on December 31 was 86%, with roughly 60% of our in-force portfolio having a note rate of 6% or lower. Over the last several quarters, persistency has been relatively flat, reflecting higher mortgage rates and a smaller origination market. As a result, we believe that over the near term, earned premium and insurance in force growth will be modest. The credit quality of our insurance in force remains strong, with a weighted average FICO of 747 and a weighted average of original LTV of 93%. Our portfolio default rate increased modestly quarter-over-quarter, reflecting normal seasonality and the continued aging of our insurance in force. Looking forward, we believe that the substantial home equity embedded in our in-force book should mitigate ultimate claims. Outward reinsurance continues to play an integral role in operating our business. At the end of 2025, 98% of our…

Thanks, Mark, and good morning, everyone. Let me review our results for the quarter in a little more detail. For the fourth quarter, we are $1.60 per diluted share compared to $1.67 last quarter and $1.58 in the fourth quarter a year ago. Considering Essent Re's expansion into the Lloyd's market, as Mark noted, we began to assess the performance of all third-party reinsurance as an operating segment in the fourth quarter. To reflect this change, GSE and other mortgage risk share is no longer aggregated with U.S. mortgage insurance, and all third-party reinsurance is now disclosed as a separate reportable segment called reinsurance. All prior period segment information has been recast to conform to the new segment presentation. My comments today are going to focus primarily on our results of our Mortgage Insurance segment. There's additional information on reinsurance and Corporate and Other results in Exhibits D and E of the financial supplement. Our mortgage insurance portfolio ended the fourth quarter with insurance in force of $248.4 billion, a decrease of $452 million from September 30 and an increase of $4.7 billion or 1.9% compared to $243.6 billion at December 31, 2024. Persistency at December 31, 2025, was 85.7% compared to 86% at September 30, 2025. Mortgage Insurance net premium earned for the fourth quarter of 2025 was $213 million, the average base premium rate for the mortgage insurance portfolio for the fourth quarter was 41 basis points, consistent with last quarter and the average net premium rate was 34 basis points, down 1 basis point from last quarter. We expect that the average base premium rate for the full year 2026 will be approximately 40 basis points. Our mortgage insurance provision for losses and loss adjustment expenses was $55.2 million in the fourth quarter of 2025 compared to…

Thanks, Dave. In closing, our 2025 results demonstrate Essent's resilient financial performance in a challenging housing market. We delivered a strong return on equity and book value per share growth while retiring nearly 10% of our share count through value-accretive repurchases. The normalization of credit continues, but our high-quality portfolio remains positioned for a range of economic scenarios as we explore new opportunities. We believe this disciplined strategy serves the best interest of our stakeholders and positions Essent to create long-term shareholder value. Now let's get to your questions. Operator?

[Operator Instructions]. Your first question comes from the line of Mihir Bhatia with Bank of America.

Maybe just -- let's just start with the decision into the Lloyd's market. I guess why now? Maybe talk a little bit about the strategy that you're doing there, what type of assets you're looking to underwrite? Maybe just help us understand what exactly is happening there for both strategically and operationally? Thank you.

Sure. Thanks for the question. I would say it's been in process for a while. We have been studying ways to expand Essent Re. So think of it in here more as Essent Re expansion versus we're jumping in to a new line of business. When you take a look at Essent Re, it's a valuable asset. I mean, over the years, it's done the affiliate quota share, they've written a lot of really high-quality GSE risk share business. They have a nice MGA where we assist 10 other larger insurance companies to write GSE credit share risk. But because of -- when you combine all three of them, we're sitting there with a $1.7 billion balance sheet, single-A rated from A.M. Best, A(-) S&P. It's one of the larger reinsurance companies in Bermuda. And because of the changes over the past several years, one, just investment yields went up. There's a lot of asset leverage within P&C. On the MI side, we're generally 1:1. In P&C, it could be 2:1, in some cases, 3. So there's nice asset leverage. Clearly, that's a lot more valuable when yields go up. Second, S&P, a couple of years ago now changed their capital rules. So there's a lot more capital, I would say, efficiencies when writing P&C on top of MI kind of get that diversification benefit, right? And third, it's clearly not correlated to the consumer. Those, I would say, attributes probably 18 months ago is when we started to look at it. So we've been looking at various ways. And we thought Lloyd's a very efficient way for us to kind of step into the market. $50 million of FAL, it's Lloyd's itself is kind of a self-contained market, very, very capital efficient. The $50 million that we're putting in…

Got it. That's helpful. Maybe just switching to the MI business for a second. The right I know you don't manage the market share. So I'm not -- it really -- this really is in a market share question. But you look at it in your -- I think, of MIs that have reported so far, you're the only one that's got NIW lower quarter-over-quarter. So is that just a reflection of you not liking the returns in the market? Is there a conscious decision to pull back in certain parts of the market or risk grades or something like, I guess, help us understand what's happening there?

Yes. I wouldn't read too much into it. You've heard me say before, it kind of ebbs and flows. For the year, we were 15, and we always say we're kind of in 15, 16. We really try to optimize the unit economics. We haven't -- I want to say we backed off a couple of things earlier in the year. You had the tariffs coming we probably cut some of the tails. And that's probably a little bit of that. That's okay. I mean if you look at -- we went back in here, and if we were -- 2 points higher in share for the last 3 years. It's -- it all comes out in the wash. I mean there's really no -- the price/volume trade-off, especially the better credits is just not there. it's just not there. We'd rather take that dollar and give it back to shareholders. And I'm telling you, I'm warning investors because, this is just a price game. And if we're like bottom in share and the #1 or 2 guys, $5 billion ahead of us in this market, here, it's price. And we're not -- we don't -- again, that's -- everyone has their own strategy. We think $1 rather than put it into a loan at a super low premium I'll give it back to shareholders. So we're fine. And then we'll -- we've in times of this location like 2020, we wrote most market share. So longer term, it's -- market share is really a result of some of the things you do. We're very -- I would say when you kind of take a look at us against some of the advantages we have. Look at our gross premium meal. It's the highest in the industry. It's like 3…

Your next question comes from the line of Bose George with KBW.

Actually, just a follow-up on that last question. Your gross premium yield has been 41 basis points for a few quarters. You guided to 40% next year. Is that just kind of a rounding issue or anything tied to market returns?

It's been -- it's been 41 for a while, Bose. And if you just think about it, it actually it probably was lower than that, and I was actually looking at it the other day. It was lower than that in kind of the '21, '22 period. And remember, if you think about the first quarter of '22 when I commented how low pricing was, there was kind of a reversal that and pricing kind of came up in the industry. And it kind of rolls through, remember you're talking about insurance in force. So it's tough to get a -- it's tough for there's not a lot of transparency for analysts and investors on what the premium yield is upfront. You can kind of sense though, if you guys should look at kind of where gross premium yields were for all the companies -- 2 quarters ago, 4 quarters ago, that will give you a good hint a leading indicator as what people are pricing in on the front end. So I think for us, it actually went up when pricing went up. And clearly, pricing it's been relatively stable. But as that pricing starts to compress, and it has compressed a little bit in 2025. But the compression isn't really competitively oriented. There's a little bit of that, but it's really driven by credit. When we look at the credit that's coming in, like $757 million we rounded it up, but our LTV in the fourth quarter was like shy of 92%. So that's -- so all of a sudden, if you think about the old-fashioned rate card, you're in that 1 quadrant, where it's super good credit quality but lower premium. So that's driving a little bit of it. So I wouldn't get too -- we're not too fussed about it. I mean once the homeowners that are on the sidelines come back down and we get kind of that 740, 745, 93 LTV, you'll see that pricing come back up, and that will work its way into the yield. So it's a way for us to kind of just give you guidance to run the models.

Okay. Great. That's helpful. And then you noted that insurance-in-force growth is likely to be modest. I mean, this year was 1.9%, looks like year-over-year, which is kind of already in the modest cap. So is it like going to be -- do you think it's going to be sort of below that level or kind of in that range?

I think within that range, again, I do think longer term -- I hate to say longer term, but it is longer term. That housing will continue to grow. There will be renewed growth, Bose. I mean the demographics $4 million to $5 million in that age grew kind of 28% to 32%. We're coming into that homeownership camp every year. But the lack of -- given where rates are the lack of affordability, a little lack of supply, they're just on the sidelines. And when they come off the sidelines, I don't know. But when they do, it's going to be -- I think it's going to be a bigger spike than people think. I just -- I don't my crystal ball doesn't work in those type of increments. I think we're well positioned. So again, from an Essent perspective, credit is relatively benign still. And as long as credit stays benign and we can continue to kind of produce the type of cash flow we're producing and really just use the return it to shareholders, we're kind of paid the weight. So we're fine with that. So again, modest growth Again, that's a little bit of us trying to guide investors and analysts to what they expect because the numbers are the numbers, and we don't want to -- we'd rather kind of underpromise and overdeliver than the reverse.

[Operator Instructions]. Your next question comes from the line of Doug Harter with UBS.

Mark, can you talk about what you're seeing in your activity and whether you're seeing any difference across the vintages, especially the vintages that maybe have a little bit less embedded home price appreciation?

Yes. Good question. It's -- not really. I mean, we have 20,000 defaults. If you break it out by vintage, if you break it out by state, if you break it out by lender, if you break it out by servicer. There's nothing really stands out. I mean Florida is a little higher because we have some hurricanes. And I would say that the Florida book is probably our higher premium book, but there's a little bit more risk there. We're fine with that. We love the unit economics in Florida and Texas. But now it's really -- you're always looking for something, but we haven't really seen anything. And even the pre-'22 book, and I always like that, we always call it kind of the 2 books, right? It's the -- halfway through '22 and before is one book and then the kind of the newer book, which was at elevated HPA and higher interest rates. We're not seeing much of a difference there. That's probably a more normal business. That's probably a more normal high LTV MI type portfolio, and we're not seeing anything there, too. I mean, you're going to see noise and we still see it with forbearance, which ultimately is a good answer for borrowers, but it does create it does create some noise in terms of the faults and the ins and outs but again, roughly 800,000 loans. There's only 200 -- 20,200 defaults, I think it was 18,000 plus 12 months ago. So it's really been maybe too light of a word, but it's not -- we're not really we're not too fussed about where defaults are. It comes down to unemployment, Doug. I mean at some point, if it rains like every blade of grass is going to get wet. We keep…

Your next question comes from the line of Rick Shane with JPMorgan.

It's interesting. Obviously, I've done this a while and we follow a bunch of different companies. And I'm thinking about comments from two other founder-run businesses that I recall over time. One is in the middle market lending space, and the comment was basically there's no spread for a bad loan. Conversely, if you're making a massively diversified card-type portfolio you're ultimately sort of seeking an efficient frontier. You accept the fact that you're going to have losses. They're not idiosyncratic. It strikes me that you guys sort of try to balance both. But ultimately, your business is an actuarial business. Mark, you've sort of provided this cautious outlook. And I'm curious if you think it is because you can't capture price in the context of what you are concerned about in terms of credit? Is that the right way to think about this?

Yes. I mean I think that's -- I don't think you're off. We're never going to be the market leader -- and part of it is we don't have to be our incentives, look at the incentives of -- they're all in the proxy statement. Just read the incentives, people do what their incentive to do. incentive to grow book value per share is 100% of my long-term incentive is growth in book value per share. We're not incentive on market share. We're not incented on NIW. We're not incentive on insurance in for. So they're not -- we don't come in everyday so we have to grow NIW look at the incentives around the industry. Some do. That's -- so they're going to make different trade-offs. I'm not saying the we're right and they're wrong. It's just different people do what their incentive to do we like over the long term, we'd like to optimize our unit economics. So what yield are we charging what's their loss? What's our capital because over time, if you write good unit economics, that will still see your P&L. And conversely, if you don't, that will also flow through the P&L. And again, bottom line is we want to grow book value per share. That's our incentive. That's why we're doing it. And as a founder-run company and owning a lot of shares, I don't -- in a very, I would say, very supportive and constructive Board of Directors, who, a lot of them have been with me from the beginning, we all sing from the same hymn sheet. So it's not like they say you have to grow. They're with us in terms of how well slowly grow. And I think it's a long-term boring story is what we're at Essent. But since we've been public, Rick, we've grown Book value per share 18%. Our total stockholder return is close to 12%, which is equal to the S&P 500. It's more than the S&P 400 mid-cap by like 3 points longer term. Am I going to win in the next 2 weeks or a month or a quarter I don't know. I don't care I want to win long term and the company wants to win long term. And I think that's -- when we come in every day, and we do come in every day. And we meet and we talk, it's really like where do we want the business to be 5 years from now, 10 years from now, and we like to work backwards as to. And when we look at that in the context of do we invest in title? Do we invest in Essent Re? Do we try to be #1 in market share. We balance a lot of that stuff. So again, it's our way. It's not necessarily the right way. But as a large owner of the company, I feel very comfortable with the direction in how we're managing the company.

Got it. That helps. And just to sort of build on a little bit more pricing hasn't really changed that much, but you're a little bit more cautious. Is there something that you are thinking about specifically in terms of housing credit that shifted. And again, you know our views on the world. So I'm curious sort of how you -- what your credit outlook is here?

I wouldn't -- I wouldn't -- like I said, the market share ebbs and flows. Like I said at the beginning, I wouldn't read too much into it. It's not like we made a credit call and we want a 14% market share. It's nothing like that. It's around it's really around kind of on the margin and optimizing unit economics. We still do a lot of testing on pricing elasticity. Our view is, I think what -- you'll know when we're cautious on credit, right, trust me, you'll know. I wouldn't -- it's not a credit call. It's more around what's the best dollar is it used to kind of repurchase shares or look at other opportunities? Or is it to grow NIW. And I think our view is given the strength of our balance sheet, given the kind of, I would say, the liquidity advantage we have with Essent Re we can lean in when things get when the market looks -- when people are a little bit more scared to the market, and we can feel like we can get more pricing right now. given where pricing is. And like it really hasn't moved. We're just comfortable kind of being at the bottom of the pack. It doesn't really impact we -- like I said earlier, if we were larger, it would just require more capital at those that dollar of capital is probably just better at this point in our life cycle and where the market is not forever, we think returning it to shareholders is really the best investment decision. And the fact that we retired 10% on of the shares. That's a large number. And if that continues, and I would expect it to continue this year, all as being equal, all right? We bought back $45 million or $44 million in January. And if we kind of stay where we're at in terms of the market, it wouldn't surprise me to see that level continue, and that just means a lot of our larger shareholders get to own more of the company and they get them on more of a fantastic business. So I think it's a good thing. So don't read into it in credit. It's not really -- I'm not making a credit call. And I know your views.

That concludes our question-and-answer session. I will now turn the call back over to management for closing remarks.

I'd like to thank everyone for calling in and joining the call and the questions, and have a great weekend.

SP1 Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.