Essent Group Q2 FY26 earnings call ESNT

The MI business reported $250 billion in insurance in force, a 1% increase year-over-year. 12-month persistency stood at 84%, influenced by the current rate environment where nearly half the portfolio has a mortgage rate of 5.5% or lower. The company expects elevated persistency but a pause in portfolio growth due to affordability constraints. Credit quality remains strong with a weighted average credit score of 747 and original LTV of 93%, with 97% of the portfolio reinsured.

Essent maintains a balanced capital strategy, optimizing shareholder returns while preserving optionality for growth. The company repurchased nearly 6 million shares for approximately $350 million year-to-date through July 31 and declared a $0.35 common dividend for Q3 FY26. Consolidated cash and investments totaled $6.6 billion, with $1.1 billion at the holding company, supported by $834 million in trailing 12-month operating cash flow.

The reinsurance segment saw significant growth in net premiums written and earned in H1 FY26, primarily driven by expansion into P&C reinsurance activity. Net premiums written were $249 million in H1 FY26, up from $31 million in H1 FY25. The combined ratio for the segment was 77.9% in Q2 FY26, reflecting the changing business mix. The P&C book is weighted towards casualty and specialty, requiring minimal incremental capital.

Essent continues to invest in technology for its Title platform and onboard new partners, leveraging its MI franchise relationships. While high interest rates present a modest near-term headwind^📎, the company views Title as a capital-light opportunity to generate supplemental earnings and deepen lender relationships, with expectations for long-term growth when affordability improves and the refinance market becomes more robust.

The company is actively exploring and implementing AI across various functions, including analytical tools for senior management, improving analytics in the risk group, and accelerating coding in IT. AI is also seen as a significant opportunity to enhance efficiency in the Title business, particularly in processing tasks like search and exam, with the goal of lowering costs for borrowers and improving cycle times.

Management addressed concerns regarding Vantage score's potential impact on credit risk, noting it is generally more lenient than FICO. While it could shift some FHA borrowers to conventional, they expect GSEs to tighten rules over time^⏳ to prevent arbitrage. Essent's internal risk engine, which uses over 400 variables, makes it relatively score agnostic, providing comfort in managing potential changes.