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    ESNT
    Earnings call· Mar 2026(Q1 FY26)

    Essent Group Q1 FY26 earnings call ESNT

    May 8, 2026 Source

    Executive summary

    Essent Group Q1 FY26 — Strong Capital Position and Reinsurance Expansion Amidst Housing Pause

    Essent Group delivered strong financial results in Q1 FY26, driven by favorable credit performance and investment income, despite a continued pause in the housing market. The company is strategically expanding its P&C reinsurance platform and investing in its Title business, leveraging its robust cash flow and capital position to pursue diversified growth opportunities and return capital to shareholders, while maintaining a disciplined approach to underwriting and capital allocation.

    Highlights

    5

    • Reported net income of $172 million, or $1.82 per diluted share, for Q1 FY26.

    • Annualized return on average equity was 12% year-to-date through Q1 FY26.

    • Book value per share increased 11% year-over-year to $61.20 as of March 31.

    • Mortgage insurance in force grew 1% year-over-year to $248 billion as of March 31.

    • Repurchased approximately 3.5 million shares for over $200 million year-to-date through April 30.

    Concerns

    3

    • Housing market remains in a pause due to affordability and higher interest rates, tempering origination volumes.

    • Mortgage insurance in force growth was essentially flat quarter-over-quarter at $247.9 billion.

    • Competitive market showing some 'reach' for lower-return business, leading Essent to pass on certain deals.

    Guidance & targets

    5
    CategoryTargetConfidence
    Lloyd's program written premium
    approximately $120 million
    medium materiality
    High
    Whole account quota share written premium
    approximately $200 million
    medium materiality
    High
    P&C reinsurance near-term earnings impact
    immaterial
    low materiality
    High
    P&C reinsurance long-term impact
    growing income and capital benefits of rating agency diversification
    medium materiality
    High
    Essent Guaranty ordinary dividends
    $330 million
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Mortgage Insurance
    The core MI business continues to generate strong cash flow. Persistency remains elevated due to the rate environment, with nearly 50% of the in-force portfolio carrying a note rate of 5.5% or lower. Credit quality remains strong, and the default rate is stable. Operating expenses in Q1 are typically higher due to payroll taxes and stock-based compensation.
    Insurance in force: $247.9 billion (March 31, 2026)Insurance in force growth QoQ: essentially flatInsurance in force growth YoY: +$3.2 billion or 1.3% compared to $244.7 billion at March 31, 2025Persistency: 84.7% (March 31, 2026)Persistency QoQ: 85.7% (December 31, 2025)Average base premium rate: 41 basis points (Q1 FY26)Average base premium rate QoQ: consistent with last quarterAverage net premium rate: 35 basis points (Q1 FY26)Average net premium rate QoQ: up 1 basis point from last quarterProvision for losses and loss adjustment expenses: $37.6 million (Q1 FY26)Provision for losses and loss adjustment expenses QoQ: $55.2 million (Q4 FY25)Provision for losses and loss adjustment expenses YoY: $30.7 million (Q1 FY25)Default rate: 2.54% (March 31, 2026)Default rate QoQ: essentially unchanged from December 31, 2025Operating expenses: $37.6 million (Q1 FY26)Operating expenses QoQ: $34.3 million (Q4 FY25)Operating expenses YoY: $40.9 million (Q1 FY25)Expense ratio: 17.4% (Q1 FY26)Expense ratio QoQ: 16.1% (Q4 FY25)Expense ratio YoY: 18.8% (Q1 FY25)PMIERs sufficiency ratio: 174%Excess available assets: $1.6 billionStatutory capital: $3.7 billionRisk-to-capital ratio: 8.6 to 1Contingency reserves: $2.6 billion (March 31)
    		$216 million———
    Reinsurance
    The Reinsurance segment expanded its P&C platform in Q1 FY26 with a new Lloyd's program and a whole account quota share. Near-term earnings impact from P&C activity is immaterial, but it is expected to drive growing income and capital benefits long-term. The mortgage book within Essent Re is not currently growing due to GSE capital structure changes.
    Lloyd's program written premium: approximately $120 million (FY26 target)Whole account quota share written premium: approximately $200 million (FY26 target)Mortgage reinsurance loss ratio: basically 0P&C reinsurance combined ratio: mid-to-high 90s (Lloyd's mid-90s, quota share higher 90s)S&P capital model AAA excess: ~$850 million
    		———immaterial pretax earnings (P&C activity)

    Operational metrics

    28
    Net income
    $172 million
    Q1 FY26

    Reported net income for the first quarter.

    Diluted EPS
    $1.82$1.60 last quarter, $1.69 Q1 FY25
    Q1 FY26

    Diluted earnings per share for the first quarter.

    Return on average equity
    12%
    YTD Q1 FY26

    Annualized return on average equity year-to-date through the first quarter.

    Book value per share
    $61.20+11% YoY
    March 31, 2026

    Book value per share as of March 31, 2026.

    Mortgage insurance in force
    $248 billion+1% YoY
    March 31, 2026

    Total mortgage insurance in force as of March 31, 2026.

    Persistency
    84.7%
    12-month

    12-month persistency reflecting the ongoing impact of the rate environment.

    In-force portfolio note rate
    Nearly 50%
    Q1 FY26

    Percentage of the in-force portfolio carrying a note rate of 5.5% or lower, supporting elevated persistency.

    Weighted average FICO
    747
    Q1 FY26

    Weighted average FICO score of the in-force portfolio.

    Weighted average original LTV
    93%
    Q1 FY26

    Weighted average original loan-to-value of the in-force portfolio.

    Consolidated cash and investments
    $6.6 billion
    March 31, 2026

    Total consolidated cash and investments.

    Annualized aggregate yield
    4.2%
    Q1 FY26

    Annualized aggregate yield for the first quarter.

    New money yields on core portfolio
    nearly 5%largely stable over past several quarters
    Q1 FY26

    New money yields on the core investment portfolio.

    GAAP equity
    $5.7 billion
    Q1 FY26

    Total GAAP equity.

    Excess of loss reinsurance
    $1.1 billion
    Q1 FY26

    Access to excess of loss reinsurance.

    Holding company cash and investments
    $1.1 billion
    Q1 FY26

    Cash and investments held at the holding companies.

    Shares repurchased YTD
    3.5 million sharesfor over $200 million
    YTD April 30, 2026

    Shares repurchased year-to-date through April 30, 2026.

    Common dividend
    $0.35
    Q2 FY26

    Common dividend approved for the second quarter of 2026.

    Undrawn revolver capacity
    $500 million
    Q1 FY26

    Undrawn capacity under committed credit facility.

    Senior unsecured notes outstanding
    $500 million
    March 31, 2026

    Total senior unsecured notes outstanding.

    Debt-to-capital ratio
    8%
    March 31, 2026

    Debt-to-capital ratio at quarter end.

    Essent Guaranty dividend to US holding company
    $50 million
    April 2026

    First dividend of 2026 paid by Essent Guaranty to its U.S. holding company.

    Essent Re dividend to Essent Group
    $100 million
    Q1 FY26

    Dividend paid by Essent Re to Essent Group during the first quarter.

    Cash dividends to shareholders
    $32.6 million
    Q1 FY26

    Total cash dividends paid to shareholders in the first quarter.

    Shares repurchased
    2.6 million sharesfor $157 million
    Q1 FY26

    Shares repurchased during the first quarter.

    Shares repurchased
    934,000 sharesfor $57 million
    April 2026

    Shares repurchased in April 2026.

    Claims paid (MI)
    $13 million
    Q1 FY26

    Total claims paid in the mortgage insurance business during the first quarter.

    Average seasoning of MI book
    39 months
    Q1 FY26

    Average seasoning of the mortgage insurance book, relevant for default trends.

    New homebuyers entering market
    4 million to 5 million
    annually

    Number of new homebuyers entering the market each year, indicating long-term demand.

    Industry KPIs

    1
    MetricValueDetails
    Capital returns3.5 million sharesshares

    Deals & partnerships

    2
    panel of highly rated reinsurersExcess of loss transaction providing forward protection for 2027 business.

    Entered into an excess of loss transaction during Q1 FY26 with a panel of highly rated reinsurers to provide forward protection for the company's 2027 business.

    cedentWhole account quota share covering cedent's Casualty and Specialty book.

    Executed a whole account quota share in Q1 FY26 covering a cedent's Casualty and Specialty book, which is expected to generate approximately $200 million of written premium in 2026.

    Risks & headwinds

    4
    Housing market pause due to affordability and higher ratesOngoing

    Tempering purchase and refinance originations.

    Mitigation: Favorable demographics, supply constraints, and pent-up demand are expected to be positive when affordability improves.

    Competitive market 'reach' for lower returnsCurrent

    Observed some lenders extending credit at lower return hurdles; Essent passed on such deals.

    Mitigation: Essent maintains focus on unit economics and allocates capital to higher-return opportunities like P&C reinsurance and other invested assets.

    Inflation impacting lower-end consumersCurrent

    More likely to hit the lower-end consumer.

    Mitigation: Essent's portfolio has a high average FICO and income, making it less susceptible, but it is being watched.

    Mortgage book within Essent Re not growingOngoing

    Not growing due to GSEs moving higher up in the capital structure and not reinsuring a lot.

    Mitigation: Growth could resume if there are changes around GSE privatization and risk share. P&C earnings are replacing mortgage earnings in the near term.

    What to watch in Q2 FY26

    5

    Consumer credit health (unemployment rate)

    next quarter
    CurrentNo real cracks, strong employment
    TargetContinued stability in unemployment rate, no deterioration in high-FICO borrower performance

    Why it matters

    Unemployment is the primary driver of defaults for Essent's high-quality borrower base; a rise would signal increased credit risk.

    Yes, I mean I would look at unemployment rate. I mean, at the end of the day, if -- as long as we -- at a 745 FICO average income, what we said earlier. I mean it's a strong borrower unless they lose their job.

    Q&A highlights

    7

    Are there any early signs of weakness in consumer credit, especially with higher gasoline prices?

    Mark Casale stated that Essent is not seeing any real cracks in their high-FICO, high-income borrower book. He noted that defaults are a result of portfolio seasoning rather than accelerating credit deterioration, and embedded home equity mitigates claims. Inflation impacts lower-end consumers more, which is not Essent's primary exposure.

    “I would say right now, we are not seeing any real kind of cracks. You're seeing it a little bit in the lower end consumer, right? I mean take a peek at the FHA delinquencies. But keep in mind, our book much higher FICO, so kind of 747 average FICO average income, $130,000 per household.”

    asked by Bose George · answered by Mark Casale

    2 min read6 chapters

    Detailed Narrative

    01

    Housing Market Outlook and MI Business Resilience

    The housing market remains in a pause due to affordability challenges and higher interest rates, impacting purchase and refinance originations. Despite this, Essent's core MI business continues to generate strong cash flow, supported by favorable demographics, supply constraints, and increasing pent-up demand expected to drive future recovery. The company's in-force portfolio demonstrates strong credit quality with a weighted average FICO of 747 and 93% original LTV, and high persistency at 84.7% due to a significant portion of the portfolio carrying note rates of 5.5% or lower.

    02

    Reinsurance Segment Expansion and Strategy

    Essent expanded its P&C reinsurance platform in Q1 FY26, launching a Lloyd's program expected to generate approximately $120 million in written premium and executing a whole account quota share for Casualty and Specialty books, projected to generate around $200 million in written premium for 2026. While the near-term earnings impact is expected to be immaterial, these initiatives aim to grow income and provide capital benefits through rating agency diversification over the longer term, leveraging the Essent Re franchise and S&P capital model efficiencies.

    03

    Capital Allocation and Financial Strength

    The company maintains a strong financial position with $6.6 billion in consolidated cash and investments, $5.7 billion in GAAP equity, and $1.1 billion in holding company cash. Essent repurchased 3.5 million shares for over $200 million year-to-date through April 30 and approved a Q2 FY26 common dividend of $0.35 per share. This balanced capital allocation strategy aims to optimize shareholder returns while preserving optionality for strategic growth, including investments in the Title business.

    04

    Consumer Credit and Default Trends

    Management reports no significant cracks in consumer credit, particularly for its high-FICO, high-income borrower base. The portfolio default rate was effectively flat quarter-over-quarter, with observed increases attributed to the natural seasoning of the book (average 39 months) rather than an acceleration of credit deterioration. Embedded home equity in the in-force book is expected to mitigate ultimate claims, with only $13 million in claims paid during Q1 FY26 despite defaults.

    05

    Competitive Landscape and Underwriting Discipline

    The competitive environment in the MI market remains largely unchanged, though some lenders are showing a slight 'reach' for credit given the prolonged market pause. Essent maintains its focus on unit economics and profitability, passing on deals that do not meet its return hurdles. The company views its P&C reinsurance and other invested assets as alternative avenues for capital allocation that offer comparable or superior returns to lower-quality MI originations.

    06

    Title Business Development

    Essent continues to transition its Title business from a standalone operation to an adjacency of its mortgage insurance franchise, leveraging its customer base and providing integrated solutions. The coordination between MI and Title teams is building momentum, leading to new customer wins. The business is rate-sensitive, and results are expected to improve as origination volumes recover, with ongoing investment in new systems to enhance efficiency and scale.

    AI-generated summary of the company’s earnings call. Not investment advice.