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Essent Group (ESNT) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Aug 7, 2026

Source: earnings call transcript

Executive summary

Essent Group Ltd. Q2 FY26 — Strong Cash Generation and Capital Returns

Essent Group demonstrated robust financial performance driven by strong cash generation from its core MI business, enabling flexible capital allocation between strategic growth investments and significant shareholder returns. Despite a pause in MI portfolio growth due to affordability constraints and modest headwinds in the Title segment, the company maintains a strong balance sheet and is actively leveraging technology, including AI, to enhance operational efficiency and long-term value.

Highlights

5

  • Reported net income of $190 million or $2.08 per diluted share.

  • Achieved an annualized return on average equity of 13.4%.

  • Book value per share grew nearly 13% over the past year to $63.1.

  • PMIERs efficiency ratio was strong at 172% with $1.5 billion in excess available assets.

  • Generated $834 million in trailing 12-month operating cash flow.

Concerns

3

  • High interest rates remain a modest headwind for the Title business, not expecting meaningful impact on earnings.

  • MI portfolio growth will remain in a pause as affordability continues to constrain origination volume.

  • Reinsurance combined ratio increased to 77.9% in Q2 FY26 from 69.6% in Q1 FY26.

Guidance & targets

CategoryTargetConfidence
P&C reinsurance written premium
approximately $320 million
medium materiality
High
P&C reinsurance earned premium
roughly half earned this year
medium materiality
High
P&C reinsurance combined ratio
high 90s
medium materiality
High
Mortgage insurance average base premium
40-ish basis points
medium materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Mortgage Insurance
The MI business showed stable performance with strong credit quality and high persistency, though portfolio growth is paused due to affordability. PMIERs efficiency remains robust.
Insurance in force: $250B (YoY +1%)Insurance in force: $249.7B (QoQ +$1.8B)12-month persistency: 84%Persistency at June 30, 2026: 84%Persistency at March 31, 2026: 84.7%Average base premium: 40 bps (Q2 FY26)Average base premium change: -1 bp QoQAverage net premium rate: 35 bps (Q2 FY26)Mortgage insurance losses and loss adjustment expenses: $29.4M (Q2 FY26)Mortgage insurance losses and loss adjustment expenses: $37.6M (Q1 FY26)Mortgage insurance losses and loss adjustment expenses: $15.3M (Q2 FY25)Default rate: 2.53% (Q2 FY26)Default rate change: effectively flat QoQOperating expenses: $31.9M (Q2 FY26)Operating expenses: $37.6M (Q1 FY26)Operating expenses: $33.6M (Q2 FY25)Expense ratio: 14.8% (Q2 FY26)Expense ratio: 17.4% (Q1 FY26)Expense ratio: 15.3% (Q2 FY25)PMIERs efficiency ratio: 172%Excess available assets (PMIERs): $1.5BWeighted average credit score: 747Weighted average original LTV: 93%Reinsurance protection: 97% of insurance in force
$216M———
Reinsurance
The reinsurance segment experienced significant growth in premiums due to expansion into P&C reinsurance. The combined ratio increased as expected, reflecting the changing business mix. P&C underwriting income is expected to be positive for the year.
Net premiums written (H1 FY26): $249MNet premiums written (H1 FY25): $31MNet premiums earned (H1 FY26): $73MNet premiums earned (H1 FY25): $30MCombined ratio: 77.9% (Q2 FY26)Combined ratio: 69.6% (Q1 FY26)Combined ratio: 19.4% (Q2 FY25)P&C book weighting: towards casualty and specialtyP&C activity contribution to underwriting income: not material
———Pretax underwriting income predominantly reflects GSE and other mortgage risk share business

ESNT operating KPIs by quarter

ESNT operating KPIs stated on its earnings calls, by fiscal quarter
KPI Mar 2026 Q1 FY26This call Jun 2026 Q2 FY26Change vs prior quarter
Insurance in force
$248B As of March 31, our mortgage insurance in force was $248 billion, a 1% increase versus a year ago. Source: earnings call transcript
$250B In our MI business, as of June 30, our insurance in force was $250 billion, a 1% increase versus a year ago. Source: earnings call transcript
+0.8%
12-month persistency
84.7% 12-month persistency was 84.7%, reflecting the ongoing impact of the rate environment. Source: earnings call transcript
84% 12-month persistency was 84%, reflecting the current rate environment and that nearly half of our in-force portfolio has a mortgage rate of 5.5% or lower. Source: earnings call transcript
-0.7 pt
Weighted average FICO
747 Credit quality of our insurance in force remains strong, with a weighted average FICO of 747 and a weighted average original LTV of 93%. Source: earnings call transcript
747 The credit quality of our insurance in force remains strong with a weighted average credit score of 747 and a weighted average of original LTV of 93%. Source: earnings call transcript
0%
Weighted average original LTV
93% Credit quality of our insurance in force remains strong, with a weighted average FICO of 747 and a weighted average original LTV of 93%. Source: earnings call transcript
93% The credit quality of our insurance in force remains strong with a weighted average credit score of 747 and a weighted average of original LTV of 93%. Source: earnings call transcript
0 pt
Insurance in force Mortgage Insurance
$247.9B Our mortgage insurance portfolio ended the first quarter with insurance in force of $247.9 billion, essentially flat compared to December 31 and an increase of $3.2 billion, or 1.3% compared to $244.7 billion at March 31, 2025. Source: earnings call transcript
$249.7B Our mortgage insurance portfolio ended the second quarter with insurance in force of $249.7 billion, an increase of $1.8 billion from March 31, an increase of $2.9 billion or 1.2% compared to $246.8 billion at June 30, 2025. Source: earnings call transcript
+0.7%
Default rate Mortgage Insurance
2.54% At March 31, the default rate on the mortgage insurance portfolio was 2.54%, essentially unchanged from December 31, 2025. Source: earnings call transcript
2.53% At June 30, the default rate on the mortgage insurance portfolio was 2.53%, essentially unchanged from March 31, 2026. Source: earnings call transcript
0 pt
Risk-to-capital ratio Essent Guaranty
8.6 At quarter end, Essent Guaranty's statutory capital was $3.7 billion with a risk-to-capital ratio of 8.6 to 1. Source: earnings call transcript
8.5 At quarter end, Essent Guaranty's statutory capital was $3.7 billion with a risk-to-capital ratio of 8.5:1. Source: earnings call transcript
-1.2%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Risks & headwinds

High interest rates near term

modest headwind

Mitigation:Investing in technology and onboarding new partners in Title business; MI business has natural hedge with elevated persistency.

Affordability constraints on MI origination volume

portfolio growth will remain in a pause

Mitigation:Longer term, favorable demographics and pent-up demand are expected to be positive when affordability improves.

Potential for Vantage score to be gamed by lenders over time

Vantage score is a little bit more lenient than FICO score

Mitigation:Management expects GSEs to tighten rules over time to eliminate any arbitrage; Essent's internal risk engine is relatively score agnostic.

P&C reinsurance market with too much capital current

probably too much capital

Mitigation:Building out infrastructure in this market to be ready for the next market; stacking float for long-term returns.

What to watch in Q3 FY26

MI portfolio growth

next quarter
Current in a pause
Target signs of improvement

Why it matters

MI portfolio growth is a key driver of future earnings, and its recovery depends on improved housing affordability.

Longer term, we continue to believe that favorable demographics and pent-up demand will be a positive for housing in our MI business when affordability improves.

Find out whether ESNT delivers this. Inve re-checks your case every morning.

Q&A highlights

Asked about the stability of the premium yield, the slight decline this quarter, and competitive dynamics in the MI market.

Management guided to a 40-ish basis point premium yield for the year, noting it's dependent on new business and persistency. The competitive environment is stable, with no credit competition due to GSE guardrails. Essent focuses on premium dollars over market share, picking spots in the market with less competition (e.g., higher DTI/LTV) to achieve better pricing power.

“I think it's pretty much the same, relatively stable, and it's been stable for a while. It's a small market those. So there's not a lot to be gotten from a lot of competition. And remember, in this industry, there's no credit competition.”

asked by Bose George · answered by Mark Casale

2 min read 6 chapters

Detailed narrative

Mortgage Insurance Business Performance

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.

Strategic Investments and Capital Allocation

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.

Reinsurance Segment Expansion

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.

Title Business Development

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.

AI Adoption and Operational Efficiency

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.

Vantage Score and Credit Risk

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.