Essent Group - Earnings Call - Q3 2025

Executive Summary

• Q3 2025 diluted EPS was $1.67 and total revenues were $311.83M; both modestly below Wall Street consensus (EPS $1.77*, revenue $317.1M*) driven by higher loss provision and seasonal default increases, partially offset by strong investment income. Results vs estimates: EPS miss of ~$0.10 and revenue miss of ~$5.3M (S&P Global)*.
• Mortgage Insurance combined ratio rose to 33.9% (loss ratio 19.1%; expense ratio 14.8%) from 22.1% in Q2, reflecting higher provision for losses as defaults increased to 2.29% vs. 2.12% in Q2.
• Capital return accelerated: Board approved a new $500M share repurchase authorization through 2027; YTD through Oct 31, Essent repurchased 8.7M shares for $501M; quarterly dividend of $0.31 maintained.
• Balance sheet/capital remains strong: PMIERs sufficiency ratio 177% (excess available assets ~$1.60B) and GAAP equity ~$5.74B; Moody’s upgraded IFS to A2 and debt to Baa2 in August; AM Best affirmed FSR A with stable outlook in October.
• Management raised 2025 annual effective tax rate (ex-discrete) to ~16.2% from ~15.4% due to withholding taxes; near-term EPS impact likely small but persistent unless capital flows change.

What Went Well and What Went Wrong

What Went Well

• Investment income remained strong: Q3 net investment income of $59.8M (3.89% pre-tax yield), supporting earnings quality amid seasonal loss uptick.
• Insurance in force expanded: IIF reached $248.8B (+2.4% YoY), with persistency steady at 86% and weighted average FICO ~746, indicating durable portfolio quality and tailwind from rates.
• Capital return and ratings momentum: New $500M buyback authorization, $501M YTD repurchases, dividend maintained; Moody’s upgrade and AM Best affirmation enhance funding and investor confidence.

Quotes:

• “Our performance was driven by continued favorable credit trends and the benefits of the current interest rate environment on both portfolio persistency and investment income…” — Mark A. Casale, CEO.
• “Essent continues to generate high quality earnings, while our balance sheet and liquidity remains strong.” — CEO, prepared remarks.
• “PMIERs efficiency ratio was strong at 177% with $1,600,000,000 in excess available assets.” — CFO.

What Went Wrong

• Provision for losses rose: Q3 provision was $44.9M vs $17.1M in Q2 and $30.7M in Q3 2024; default rate increased to 2.29% (seasonal), pressuring combined ratio and driving the modest EPS miss.
• Revenue/earnings vs Street: Revenues $311.83M and EPS $1.67 were below consensus ($317.1M* and $1.77*), mainly from higher losses and slightly lower net premium rate (35 bps vs 36 bps in Q2).
• Effective tax rate step-up: 2025 annual ETR (ex-discrete) raised to ~16.2% from 15.4%, modestly reducing run-rate EPS absent offsetting actions.

Analyst concerns highlighted:

• Severity trend: Q3 severity 78% vs 67% in Q2; management noted variability and that severity remains below reserve assumptions, but investors watch trajectory amid slowing HPA.
• Ceded premiums volatility: Higher quota share (25%) and seasonal default/provision dynamics increase ceded premium variability quarter to quarter.

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by. My name is Abby, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Essent Group Limited third quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you. I would now like to turn the conference over to Phil Stefano with Investor Relations. You may begin.

Phil Stefano (Head of Investor Relations)

Thank you, Abby. 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 Guarantee. Our press release, which contains Essent's financial results for the third quarter of 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 filed with the SEC on February 19, 2025, 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.

Mark Casale (Chairman and CEO)

Thanks, Phil. Good morning, everyone. Earlier today, we released our third quarter 2025 financial results. Our performance this quarter again underscores the resilience of our business as we continue to benefit from favorable credit trends and the interest rate environment, which remains a tailwind for both persistency and investment income. These results reflect the strength of our buy, manage, and distribute operating model, which we believe is well-suited to navigate a range of macroeconomic scenarios and generate high-quality earnings. For the third quarter of 2025, we reported a net income of $164 million compared to $176 million a year ago. On a diluted per share basis, we earned $1.67 for the third quarter compared to $1.65 a year ago. On an annualized basis, our year-to-date return on equity was 13% through the third quarter. As of September 30t, our U.S.

Mortgage insurance in force was $249 billion, a 2% increase versus a year ago. Our 12-month persistency on September 30t was 86%, flat from last quarter, while nearly half of our in force portfolio has a note rate of 5% or lower. We continue to expect that the current level of mortgage rates will support elevated persistency in the near term. The credit quality of our insurance in force remains strong, with a weighted average FICO of 746 and a weighted average original LTV of 93%. Our portfolio default rate increased modestly from the second quarter of 2025, reflecting the normal seasonality of the mortgage insurance business. Meanwhile, we continue to believe that the substantial home equity embedded in our in force book should mitigate ultimate claims. Our consolidated cash and investments as of September 30th totaled $6.6 billion, with an annualized investment yield in the third quarter of 3.9%.

Our new money yield in the third quarter was nearly 5%, holding largely stable over the past several quarters. We continue to operate from a position of strength with $5.7 billion in gap equity, access to $1.4 billion in excess of loss reinsurance, and $1 billion in cash and investments at the holding companies. With a 12-month operating cash flow of $854 million through the third quarter, our franchise remains well-positioned from an earnings, cash flow, and balance sheet perspective. We remain committed to a prudent and conservative capital strategy that allows us to maintain a strong balance sheet to navigate market volatility while preserving the flexibility to invest in strategic growth. Thanks to our robust capital position and strengthened earnings, we are well-positioned to actively return capital to shareholders in a value-accretive fashion.

With that in mind, year-to-date through October 31st, we have repurchased nearly 9 million shares for over $500 million. At the same time, I am pleased to announce that our board has approved a common dividend of $0.31 for the fourth quarter of 2025 and a new $500 million share repurchase authorization that runs through year-end 2027. Now, let me turn the call over to Dave.

David Weinstock (CFO)

Thanks, Mark. Good morning, everyone. Let me review our results for the quarter in a little more detail. For the third quarter, we earned $1.67 per diluted share compared to $1.93 last quarter and $1.65 in the third quarter a year ago. My comments today are going to focus primarily on the results of our mortgage insurance segment, which aggregates our U.S. mortgage insurance business and the GSE and other mortgage reinsurance business at our subsidiary, Essent Re. There is additional information on corporate and other results in Exhibit O of the financial supplement. Our U.S. mortgage insurance portfolio ended the third quarter with insurance in force of $248.8 billion, an increase of $2 billion from June 30th, and an increase of $5.8 billion, or 2.4%, compared to $243 billion at September 30th, 2022. Persistency as of September 30th, 2023, was 86% compared to 85.8% at June 30th, 2023.

Mortgage insurance net premium earned for the third quarter of 2025 was $232 million and included $15.9 million of premiums earned by Essent Re on our third-party business. The average base premium rate for the U.S. mortgage insurance portfolio for the third quarter was 41 basis points, consistent with last quarter, and the average net premium rate was 35 basis points, down one basis point from last quarter. Our U.S. mortgage insurance provision for losses and loss adjustment expenses was $44.2 million in the third quarter of 2025 compared to $15.4 million in the second quarter of 2025 and $29.8 million in the third quarter a year ago. At September 30th, the default rate on the U.S. mortgage insurance portfolio was 2.29%, up 17 basis points from 2.12% at June 30th, 2025.

Mortgage insurance operating expenses in the third quarter were $34.2 million, and the expense ratio was 14.8% compared to $36.3 million and 15.5% last quarter. At September 30th, Essent Guarantee's PMIERs sufficiency ratio was strong at 177%, with $1.6 billion in excess available assets. Consolidated net investment income and our average cash investment portfolio balance in the third quarter were largely unchanged from last quarter due to our share repurchase activity. In the third quarter of 2025, we increased our 2025 estimated annual effective tax rate, excluding the impact of discrete items, from 15.4% to 16.2%. This change was primarily due to withholding taxes incurred on a third-quarter dividend from Essent U.S. Holdings to its offshore parent company. As Mark noted, our holding company liquidity remains strong and includes $500 million of undrawn revolver capacity under our committed credit facility.

At September 30th, we had $500 million of senior unsecured notes outstanding, and our debt-to-capital ratio was 8%. During the third quarter, Essent Guarantee paid a dividend of $85 million to its U.S. holding company. As of October 1st, Essent Guarantee can pay additional ordinary dividends of $281 million in 2025. At quarter end, Essent Guarantee's statutory capital was $3.7 billion, with a risk-to-capital ratio of 8.9 to 1. Note that statutory capital includes $2.6 billion of contingency reserves at September 30th. During the third quarter, Essent Re paid a dividend of $120 million to Essent Group. Also in the third quarter, Essent Group paid cash dividends totaling $30.1 million to shareholders, and we repurchased 2.1 million shares for $122 million. In October 2025, we repurchased 837,000 shares for $50 million. Now, let me turn the call back over to Mark.

Mark Casale (Chairman and CEO)

Thanks, Dave. In closing, we are pleased with our third-quarter financial results. Essent continues to generate high-quality earnings while our balance sheet and liquidity remain strong. Our performance this quarter reflects the strength and resilience of our franchise, while Essent remains well-positioned to navigate a range of scenarios given the strength of our buy, manage, and distribute operating model. Our strong earnings and cash flow continue to provide us with an opportunity to balance investing in our business and returning capital. We believe this approach is in the best long-term interest of our stakeholders and that Essent is well-positioned to deliver attractive returns for our shareholders. Now, let's get to your questions, operator.

Operator (participant)

Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, press star one a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your questions. Again, it is star one if you would like to ask a question. Our first question comes from the line of Terry Ma with Barclays. Your line is open.

Terry Ma (Senior Equity Research Analyst)

Hey, thank you. Good morning. Just wanted to start off with credit. New notices were a bit lower than what we had, but the provision on those notices were higher. Any color on kind of just the makeup from a vintage or even geography perspective this quarter?

Mark Casale (Chairman and CEO)

Yeah. Hey, Terry, it's Mark. I wouldn't say there's nothing really to read out in terms of geography or trends. The one thing for you guys as analysts, we pointed this out a few quarters ago, is just our average loan size continues to increase. I mean, ever since for years, it was like $230,000 when the GSEs started raising their limits, and it really kind of picked up post-COVID. Our average loan size, if you just look through the stats supplement for the insurance in force, is close to $300,000. Again, larger loans, when they come through kind of into default, it's going to be a larger provision. I wouldn't read any more into it than that. I think, again, the default rate's relatively flattish, and I think from a credit position, there's nothing we're really seeing that concerns us at the current time.

Terry Ma (Senior Equity Research Analyst)

Got it. That's helpful. Maybe just to follow up on the claims amount, the number was higher and also the severity. Anything to call out there, like anything idiosyncratic, or is there more of a trend? Thank you.

David Weinstock (CFO)

Hey, Terry. It's Dave Weinstock. Yeah, there's really nothing to point out there. A lot of that's going to depend on when we get documents in and when the claims are fully adjudicated and ready for payment. You can see fluctuations based on what the underlying claims are. At the end of the day, there are not a lot of claims there. The biggest takeaway, really, is that the severity continues to be well below what we're reserving at. We're getting favorable results there.

Terry Ma (Senior Equity Research Analyst)

Okay. Got it. Thank you.

Operator (participant)

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

Bose George (Managing Director and Equity Research Analyst)

Hey, guys. Good morning. First, just on the seeded premiums with kind of the high end of the range, is that a good level going forward, or does that just bounce around depending on the timing of when you're doing the reinsurance transactions?

David Weinstock (CFO)

Yeah. Hey, Bose. It's Dave Weinstock. Yeah, it's going to bounce around a little bit based on default and provision activity. It is seasonal. I think you saw the seeded premium being a little bit lower in the first half of the year, similar to where you see our defaults being more favorable and lower. This is a seasonal second half of the year, as we've talked about. We generally see an uptick, and you are going to see a little bit of an uptick in the seeded premium.

Mark Casale (Chairman and CEO)

Yeah. Also keep in mind, Bose, we raised the quota share this year to 25%, so that is going to create a little bit more volatility. At the end of the day, it comes through the wash, right? In terms of the mix between the provision and the expenses and seeding commission by the end, it'll bounce around a little bit more. I'd be conscious of that in your models.

Bose George (Managing Director and Equity Research Analyst)

Okay. Great. Thanks. In terms of the tax rate, what drove the higher tax rate? Can you remind us, just based on how much you're seeding, etc., where you think the tax rate is going to be over the next, say, 12 months?

Mark Casale (Chairman and CEO)

Yeah. I mean, I think Dave alluded to it in the script. A lot of it is just a little bit of the tax friction moving from kind of Guarantee to U.S. up to Bermuda and out to shareholders. I think 16 and maybe a touch higher going forward. I would think through that with your models, I'd be relatively conservative, Bose. It really gets back to the fact that we're just distributing a lot more capital back to shareholders. That's kind of a little bit of a signal that we don't really see it changing much, given we're sitting with still a billion dollars of cash at the Holdco and kind of where the stock is right around bookish value. I think we pointed this out last time in our investor deck, which will come out kind of post-earnings.

The embedded value of the business, we believe, is much higher than kind of where we are today, right? It is just, again, simple math. It is nothing revolutionary. We have $6 billion of cash, $6 billion of equity. We trade right around $6 billion. It does not really give credit for the $250 billion of insurance in force that we have. There is a significant embedded value. I think we have proven that over the past 10 years in terms of the cash flow. Just look again, we generated $854 million of cash flow over the last 12 months. Based on that and where we are just given the capital position, and we are still generating unit economics kind of in that 12%-14% range, we think it is the best value. I think we will continue to do that.

There, again, it's just getting the cash out creates a little friction. I think from a shareholder perspective, yeah, we'll pay a couple extra bucks on the tax rate. I think from lowering the share count and kind of delivering value to shareholders, it's a little bit of a no-brainer.

Bose George (Managing Director and Equity Research Analyst)

Yep. Okay. Great. Thanks.

Operator (participant)

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

Rick Shane (Managing Director and Senior Equity Research Analyst)

Hey, guys. Thanks for taking my question this morning. I'm looking at Exhibit K, and one trend that is pretty consistent is the increase in severity rates. And that makes sense given slowing home price appreciation and vintage mix. It was 78% this quarter. I'm curious long-term where you think that could go. Are we sort of asymptotically approaching the limit there, or should we expect that to continue to rise?

Mark Casale (Chairman and CEO)

Yeah. I mean, I do not know if you would expect it to rise. Again, the provision's at 100, Rick, just so you know. The embedded HPA on the book is still kind of 75-ish, so I mean, in terms of mark-to-market LTV. Some of it is just timing, right? If somebody from the later vintages, kind of call it 2023 or 2024, goes into default, there is going to be a higher provision. If they go into claim, we are going to pay a higher claim there because they have less embedded value. Taking a step back just at the portfolio level, we are not going to get too fussed about it, Rick. I mean, again, you are talking about relatively low losses. Remember, and we point this out every quarter or two, just what the real risk is in our business, right?

From my seat, Rick, we own that first loss position, right? Call it two to three claims out of 100. We hedge out from above that, kind of into that 6-7 range, and we reattach above that. That is the risk in the business, right? We are a specialty insurance-type business, almost like a cat where our catastrophe is a severe macroeconomic recession. That is when we hold capital. When we think about PMIERs, we think about the different stress tests that we run, whether it is Moody's constant severity, S4, the GFC. That is when we come in and think about it week to week or month to month. We are focused really on making sure we are fine there, and we clearly are given the amount of capital that we are using to repurchase shares. Getting back to this, again, we clearly look at it.

I think we're conservative in how we provision just from a severity standpoint because I think the severity is an actuary—I mean, the provision's an actuarial-based model. We don't really mess with it quarter to quarter, even year to year that much. Again, I'm just trying to, from a big-picture standpoint, sure, you're going to try to point out trends. Terry pointed out the trends around the new notices. Those are all good. You guys have to do that for your models. I think taking a step back, the biggest metric for the quarter, Rick, is we produced $854 million of cash over the last 12 months. Again, I'm not trying to get too high level, but I mean, I think it's important to kind of put context around some of these numbers.

Rick Shane (Managing Director and Senior Equity Research Analyst)

No, look, it's a fair point, Mark. Given how low losses have been for so long, a modest dollar movement looks like a larger, looks like a significant percentage movement. I think we're all sensitive to that and trying to sort of, I think, understand what the normalized returns on the business are. Do you think we are approaching those levels? Look, you've enjoyed an extraordinary period for a long time for a whole host of reasons that we've all talked about. As the business normalizes and sort of reverts to the return levels that the two of us spoke about a decade ago, do you think we're getting there now?

Mark Casale (Chairman and CEO)

Now, it's a good question. Rick, we've been studying this. Let's go back in time, right? Let's start with 1990, which is really the beginning of the modern-day Fannie and Freddie. Let's just go with the last 35 years. If you take away the GFC, which it's hard to do, but just stick with me here for a second, the average loss rate on Fannie and Freddie back loans is less than 1%. That, I believe, is actually—so it's not this, "Oh my goodness, we have such a good run. When is it going to end?" This is it. This is the business. It's a great business. You're talking about—and again, some of the things that caused the great financial crisis because you don't want to ignore that.

The reason we like the business, coming out of the crisis, you had the Dodd-Frank qualified mortgage rule. 35% of the loans that were done during the crisis, they no longer qualified. They literally got the riff raff out of the industry. That is now either going—it's going into either FHA, or it's going to kind of non-QM, or they're not being originated, which is the most case. A lot of those borrowers are ending up in single-family rental. It's a great outcome for them, right? All of a sudden, you add in the increased, I would say, sophistication of DU and LP at the GSEs. Their quality control has gotten significantly better, I mean, over the last 15 years. All of a sudden, the credit guardrails around our business are exceptional.

We do not see a change in it unless there is something that happens with GSC reform. Clearly, we look at that. As long as the market is where it is today, it is a very narrow fairway. We do not see really credit changing that much. It is hard. I mean, actually, our credit for the last two quarters, Rick, was the best FICOs we have had since we started the company. Part of that is affordability. Part of it is just—part of it is affordability. Folks are having a harder time qualifying. The credit quality in this business is exceptional. Just from a public policy standpoint, 65% of our borrowers are first-time homeowners. I mean, I was with a young guy last week who just got mortgage insurance through one of our clients. He is paying like $65 a month. He put 10% down.

I mean, you can't beat it. It's a great value to the customer, which you always want to have, right? The borrowers are the ultimate customer. I think the math for us. I would say from—and some of our longer-term investors kind of know this clearly. I would stop, and one of our other analysts has always asked me, "Mark, is this as good as it gets?" Guys, it's been good for a long time. I mean, I don't really—again, there's going to be some volatility, Rick, quarter to quarter or year to year. Look, if unemployment goes up, we're probably going to pay some losses. Remember, we're kind of capped. We're kind of capped until we hit—until we go through that mess piece. It's really well boxed. Hence, our confidence in paying the quarterly dividend.

Right now, in terms of where we are returning capital to shareholders, it has been quite a shift the past 12 months. Part of it was we have just continued to accumulate cash. We have had this retain-and-invest mentality. We just have not invested in anything. We look at it now and say the best investment we can make is in the company. If we keep this pace up, Rick, every time you repurchase shares, our long-term owners, which include the senior management team, we own a little bit more of the company. If I am going to own a business, this is my favorite business. We will see. Sorry for the long-winded answer, but I wanted to, again, try to give some of the investors on the phone some context.

Rick Shane (Managing Director and Senior Equity Research Analyst)

No, Mark, look, I appreciate it. I suspect there are some folks who are listening to this call imagining the two of us on rocking chairs debating this stuff. That is okay too. I appreciate the answer.

Operator (participant)

As a reminder, it is star one if you would like to ask a question. Our next question comes from the line of Mahir Bhatia with Bank of America. Your line is open.

Mahir Bhatia (Stock Analyst)

Hi, Mark. Good morning. Thank you for taking my question. I actually want to follow up on Rick's last question there about just about the guardrails around underwriting currently. I think there was news yesterday about Fannie removing the minimum credit score requirements. There's been some noises out of Washington about trying to play a more active role in housing or increase housing demand, if you will. I was just wondering, from your seat, are you seeing any signs of that? Are originators trying to get more stuff under the get more stuff approved that maybe they wouldn't have tried a couple of years ago? Just wondering what that looks like. Thank you.

Mark Casale (Chairman and CEO)

It's a good question. There is a lot of noise around kind of credit scores and Vantage and Fair Isaac, and Vantage can qualify more borrowers, all those sort of things. The reality is, Mahir, the GSEs haven't changed their systems yet. Until that happens, there's really not going to be change. A lender would be unable today to kind of "get something past the GSEs." It gets back to my point. The GSEs, their systems are fantastic. In terms of DU and LP, very sophisticated. If they do get through it, most likely their QC and repurchase program, they're going to put that back to lenders. I think lenders have really understood that the game today—and you're seeing some of the bigger lenders do it—the game today is all about lowering and being efficient on origination costs.

That has not always been the case. If you go before the crisis, what would happen is if you get a small or mid-size mortgage banker and all of a sudden production is down, they immediately go to credit expansion, right? "I would not normally do that loan, but I have fixed costs. I am going to try to get that loan in either through the GSEs or to whole loan buyers." You cannot do that today. I mean, whether you are trying to get it through the GSEs, you are trying to go through some of the larger correspondent purchasers like PennyMac, whose systems are also excellent. It is not going to happen. You have to manage costs. Again, from a credit provider, that is exactly where we want it. We are not too worried about it.

If it were to go—we mentioned this last call—if it were to change, right? I am not saying it is going—if it were to change and you could have kind of a wider fairway, so to speak, so more things qualify, the fact that our credit engine does not really rely on FICO, we are almost credit score agnostic. We are looking at the 400 kind of variables underneath that, along with things in the 1003. We are not too worried. We can see through that. In fact, our model works better when things are a little bit more disparate, so to speak. It does not work as well in a market like this. It kind of works more from a premium standpoint, picking and choosing. Credit, you almost do not really need it from a FICO standpoint. I think I would look at it that way.

I think it's something that we're pleased with, but I don't see any kind of chink in the guardrails to date.

Mahir Bhatia (Stock Analyst)

Okay. Thank you for taking my question.

Operator (participant)

It is star one if you would like to ask a question. Our next question comes from the line of Doug Harder with UBS. Your line is open.

Doug Harter (Director and Senior Equity Research Analyst)

Thanks. Can you talk about your plans to upstream capital from the MI subsidiary? Sounds like you have a lot of capacity left for the year. You kind of spill that over or do a large dividend in the fourth quarter?

Mark Casale (Chairman and CEO)

I think it's pretty consistent with the dividends. It might be a little bit larger in the fourth quarter for sure. I think, again, as we look at kind of PMIERs, Doug, and credit and where it's going, we feel comfortable continuing to upstream cash from Guarantee to US Holdings. As I said earlier, there's a little bit of friction getting it back to the group level. That's not the worst problem to have. Also, we have the quota share reinsurance. That's one of the reasons we took it up to 50 earlier this year. That's another kind of backdoor way to get cash up to the hold co.

Doug Harter (Director and Senior Equity Research Analyst)

You bought Title a little while ago. Can you just talk about how you're thinking about the benefits of the great business that is MI versus looking to further diversify and have other avenues of growth?

Mark Casale (Chairman and CEO)

Yeah. I mean, I think right now it's a good question. I think Title has performed pretty much in line with what we thought if we would have thought rates would be this high, to try to be honest with you. I think if rates go lower, we're very levered to rates given the lender focus of the business. We have an underwriter. It's really kind of in its still small stages growing, primarily in Texas and Florida and a bit of the Southeast. That's kind of the purchase angle of the business, but it's small. The real lever is lenders and refinance. We've continued to add lenders. We're working on developing a new system. We're still building the business out per se, and we're fine with that. It's kind of incorporated in other, Doug. Think of that almost as like an incubator.

If it gets big enough, it'll pop up as its own segment. If it stays small, it stays small. That could happen. Clearly, Essent Re has some opportunities outside of mortgage. We haven't really done anything yet, but there are things that we look at. I would look at that as another "incubator." We kind of call them call options. For the time being, clearly, the focus and where the cash flow is coming is from the MI business. When we look at investment opportunities, whether it's Title, other acquisitions that come to us, we still feel at this time our stock's the best value. We're kind of voting with our feet there. I don't really expect it to change absent some large movement in the stock.

If there is a large movement in the stock, which it would be nice per se, but not necessarily. If you are in the business of buying back shares and shrinking ownership, this is not the worst place to be in. If the stock were to move outside of our range, we would probably do a special dividend. We will continue to look for ways to get capital back to shareholders. Given just how good the MI business is today, we would need to, again, there is going to have to be a good reason for us to do it. I look at it as if you are looking at a way to kind of quantify it. Our book value per share today is right around $60. It is a tad below $58. My guess is it will finish the year around $60, Doug.

If we look and say, "Hey, we're going to grow it 10-12% a year," which we've been doing, that book value per share over the next four or five years is going to be $85-$90, right? Big picture, right? Just looking at the numbers. As we look at an acquisition, it's going to have to either help us increase that book value per share target or achieve that book value per share target sooner. All else being equal, or making us a stronger company and things like that. There are other factors in there. That's a pretty high bar. That's a pretty high bar. We kind of know this business well. Like what I've said just in my response to Rick earlier, this is such a good business. We're a little bit spoiled in terms of how good the business is.

Again, there's going to be some bumps along the road. There always are. That is why you have capital, right? You have capital to withstand those bumps. Reinsurance is another form of capital. We expect kind of those expected losses per se. Then you have capital and reinsurance for unexpected losses. They'll come. That is what we're prepared for. We do not necessarily try to sit down and say, "Where's the market going?" We try to prepare for every different avenue that the market potentially could go down. I mean, that just comes with experience. We've been doing this for quite a while. That being said, to sum it up, the investment right now continues to be an asset. I do not expect that to change absent something really special comes along.

Doug Harter (Director and Senior Equity Research Analyst)

Appreciate that, Mark. Thank you.

Mark Casale (Chairman and CEO)

Yep.

Operator (participant)

There are no additional questions at this time. I will now turn the conference back over to management for closing remarks.

Mark Casale (Chairman and CEO)

Thanks, everyone, for their time and questions. Have a great weekend.

Operator (participant)

Ladies and gentlemen, this concludes today's call. We thank you for your participation. You may now disconnect.