NMI - Q2 2023

Transcript

Operator (participant)

Good afternoon. Welcome to the NMI Holdings, Inc. second quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the call over to John Swenson of Management. Please go ahead.

John Swenson (VP of Investor Relations and Treasury)

Thank you, Anthony. Good afternoon, and welcome to the 2023 second quarter conference call for National MI. I'm John Swenson, Vice President of Investor Relations and Treasury. Joining us on the call today are Bradley Shuster, Executive Chairman, Adam Pollitzer, President and Chief Executive Officer, Ravi Mallela, Chief Financial Officer, and Nick Realmuto, our Controller. Financial results for the quarter were released after the close today. The press release may be accessed on NMI's website, located at nationalmi.com, under the Investors tab. During the course of this call, we may make comments about our expectations for the future. Actual results could differ materially from those contained in these forward-looking statements. Additional information about the factors that could cause actual results or trends to differ materially from those discussed on the call can be found on our website or through our regulatory filings with the SEC.

If and to the extent the Company makes forward-looking statements, we do not undertake any obligation to update those statements in the future in light of subsequent developments. Further, no one should rely on the fact that the guidance of such statements is current at any time other than the time of this call. Also note that on this call, we may refer to certain non-GAAP measures. In today's press release and on our website, we have provided a reconciliation of these measures to the most comparable measures under GAAP. Now I'll turn the call over to Brad.

Bradley Shuster (Executive Chairman and Chairman of the Board)

Thank you, John, and good afternoon, everyone. As we talk today, I'm greatly encouraged both by the resiliency of the broader macro environment and housing market, and by the significant and consistent success we're achieving across our business. In the second quarter, National MI again delivered standout operating performance, continued growth in our insured portfolio, and record financial results. Our lenders and their borrowers continued to turn to us for critical down payment support, and in the second quarter, we generated $11.5 billion of NIW volume, ending the period with a record $191.3 billion of high-quality, high-performing insurance in force. In Washington, our conversations remain active and constructive.

Policymakers, regulators, the FHFA, and the GSEs remain highly focused on promoting broader access and affordability to the housing market for all borrowers, and we believe there is broad recognition of the unique and valuable role that the private mortgage insurance industry plays in this regard. At National MI, we recognize the need to provide borrowers with a fair and equitable opportunity to access the housing market, establish a community identity, and build long-term wealth through homeownership. We are actively engaged and committed to equally supporting borrowers from all communities and are proud to have helped over 1.6 million borrowers to date realize their homeownership goals. Overall, we had a terrific second quarter and are well positioned to continue to lead with impact and drive value for our people, our customers and their borrowers, and our shareholders going forward.

With that, let me turn it over to Adam.

Adam Pollitzer (President and CEO)

Thank you, Brad, and good afternoon, everyone. National MI continued to outperform in the second quarter, delivering significant new business production, strong growth in our insured portfolio, and record financial results. We generated $11.5 billion of NIW volume and ended the period with a record $191.3 billion of high quality, high-performing insurance in force. Total revenue in the second quarter was a record $142.7 million, and we delivered record GAAP net income of $80.3 million, or $0.95 per diluted share, and an 18.6% return on equity. Overall, we had an exceptionally strong quarter and are confident as we look ahead. The macro environment and housing market in particular, have proven to be resilient in the face of increased interest rates.

We see an attractive and sustained new business opportunity with our lender, customers, and their borrowers continuing to rely on us in size for critical down payment support. We have an exceptionally high-quality insured portfolio, and our credit performance continues to stand ahead. Our persistency remains well above historical trend and when paired with our strong NIW volume, has helped to drive continued growth and embedded value gains in our insured book. We continue to manage our expenses and capital position with discipline and efficiency. With today's incremental $200 million share repurchase authorization, serving as another important step in our effort to maintain funding balance and progress capital distribution opportunities for our shareholders. Notwithstanding these strong positives, however, macro risks do remain, and we've maintained a proactive stance with respects to our pricing, risk selection, and reinsurance decisioning.

It continues to be the prudent and appropriate course, and we are encouraged by the continued discipline that we see across the broader private MI market. Underwriting standards remain rigorous, and the pricing environment remains balanced and constructive. Overall, we had a terrific quarter, delivering strong operating performance, continued growth in our insured portfolio, and record financial results. I also want to note how proud I am that for the eighth consecutive year, National MI has been recognized as a Great Place to Work. Great Place to Work is a global authority on workplace culture, employee experience, and leadership, and partners with Fortune Magazine to produce the annual Fortune 100 Best Companies to Work For list. We believe that the quality of our team and the culture that we've established are key competitive advantages, and it is gratifying to again be recognized for these strengths.

Looking ahead, we are well-positioned to continue to serve our customers and their borrowers, invest in our employees and their success, and deliver through the cycle growth, returns, and value for our shareholders. With that, I'll turn it over to Ravi.

Ravi Mallela (EVP and CFO)

Thank you, Adam. We delivered record financial results in the second quarter, with significant new business production, strong growth in our high-quality insured portfolio, record top-line performance, favorable credit experience, continued expense efficiency, and record bottom-line profitability. Total revenue in the second quarter was a record $142.7 million. GAAP net income was a record $80.3 million, or $0.95 per diluted share. Our return on equity was 18.6%. We generated $11.5 billion of NIW. Our primary insurance in force grew to $191.3 billion, up 2.5% from the end of the first quarter and 13.4% compared to the second quarter of 2022. Twelve-month persistency in our primary portfolio improved again, reaching 86%, compared to 85.1% in the first quarter.

Persistency continues to serve as an important driver of the growth and embedded value of our insured portfolio. Net premiums earned in the second quarter were a record $126 million, compared to $121.8 million in the first quarter. We earned $1.1 million from the cancellation of single premium policies in the second quarter, compared to $1.4 million in the first quarter. Net yield for the quarter was 26.7 basis points, up from 26.3 basis points in the first quarter. Core yield, which excludes the cost of our reinsurance coverage and the contribution from cancellation earnings, was 33.8 basis points, up from 33.7 basis points in the first quarter. Investment income was $16.5 million in the second quarter, compared to $14.9 million in the first quarter.

Underwriting and operating expenses were $27.5 million in the second quarter, compared to $25.8 million in the first quarter. Our expense ratio was 21.8%, compared to 21.2% in the first quarter. We had 4,349 defaults in our primary portfolio at June 30th, compared to 4,475 at March 31st, and our default rate declined to 71 basis points at quarter end. Claims expense in the second quarter was $2.9 million, compared to $6.7 million in the first quarter, reflecting the broad resiliency of the housing market, the strong position and performance of our existing borrowers, and continued cure activity within our previous default population. Interest expense in the quarter was $8 million.

Net income was a record $80.3 million, or $0.95 per diluted share, compared to $0.88 per diluted share in the first quarter and $0.86 per diluted share in the second quarter of 2022. Total cash and investments were $2.3 billion at quarter end, including $139 million of cash and investments at the holding company. Shareholders' equity as of June 30th was $1.7 billion, and book value per share was $21.25. Book value per share, excluding the impact of net unrealized gains and losses in the investment portfolio, was $23.53, up 4.3% compared to the first quarter and 18.2% compared to the second quarter of last year.

In the second quarter, we repurchased $26 million of common stock, retiring slightly more than 1 million shares at an average price of $24.83. To date, we have repurchased a total of $97 million of stock under the original $125 million authorization, retiring 4.6 million shares at an average price of $20.99. Today's new $200 million authorization provides us with significant incremental repurchase capacity and will run through December 31st, 2025. In July, we entered into a new excess of loss reinsurance agreement that will provide forward flow risk protection for policies originated in the third and fourth quarters of this year. The new deal further extends our comprehensive credit risk transfer program and carries an estimated 6.25% weighted average lifetime pretax cost.

Our continued ability to compress the cycle time between transactions, execute on favorable terms, and secure forward flow coverage for our future production is particularly valuable as it serves to minimize our warehouse exposure and limit the credit risk retained in our high-quality insured portfolio. At quarter end, we reported total available assets under PMIERs of $2.5 billion and risk-based required assets of $1.3 billion. Excess available assets were $1.2 billion. Overall, we delivered standout financial results during the second quarter, with continued growth in our high-quality insured portfolio and record top-line performance, favorable credit experience, and continued expense efficiency, driving record bottom line profitability and strong returns. With that, let me turn it back to Adam.

Adam Pollitzer (President and CEO)

Thank you, Ravi. We had a terrific quarter, once again, delivering significant new business production, continued growth in our insured portfolio, and record financial performance. Looking forward, we're confident. The macro environment and housing market have proven to be resilient in the face of increased interest rates. We have a strong customer franchise, a talented team driving us forward every day, an exceptionally high-quality book covered by a comprehensive set of risk transfer solutions, and a robust balance sheet supported by the significant earnings power of our platform. Taken together, we're well-positioned to continue to serve our customers and their borrowers, invest in our employees and their success, drive growth in our high-quality insured portfolio, and deliver strong performance for our shareholders. Thank you for joining us today. I'll now ask the operator to come back on so we can take your questions.

Operator (participant)

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star, then two. At this time, we'll pause momentarily to assemble our roster. Our first question will come from Doug Harter with Credit Suisse. You may now go ahead.

Doug Harter (Director)

Thanks. Can you talk a little bit about the current environment for premium yields and your outlook? You know, it seems like it's stabilized in the quarter. You know, is that a trend we can expect going forward, and kind of where are new yields being written relative to the in-force book?

Ravi Mallela (EVP and CFO)

Sure. I'll take that. This is Ravi. Net yield in the quarter was 26.7 basis points versus 26.3 basis points in Q1. Both core and net were, you know, slightly up quarter-over-quarter. I would say we benefited from, you know, the increase in persistency, but primarily it came from the cumulative gains we incurred from new business pricing over the last year plus. Certainly, we benefit a little bit from the modest improvement in quota share costs, and that comes through from higher profit commission, from ceded claims expense improvement that we saw in the quarter. You know, what we talked about in the past is just the focus on core yield, which really excludes reinsurance and cancellation earnings.

We, you know, we believe that will remain relatively stable, you know, given that we have strong persistency and the rate actions that we've taken so far have been positive. But, you know, you have to really take into account the fact that that's balanced by the high-quality production, which tends to come on with a different rate profile.

Adam Pollitzer (President and CEO)

Yeah, then, Doug, in terms of, you know, how premium rate on new business written in Q2 stacks up against that, we, we don't provide specifics about our premium rate, but we do continue to see the benefit of those rate increases that Ravi mentioned. We've really worked hard to achieve them over the past year. You know, in the business that we wrote this quarter, the $11.5 billion of high quality, high return volume is most importantly supportive of our strong mid-teen return objectives.

Doug Harter (Director)

Great. Thank you.

Operator (participant)

Our next question will come from Arun Sundaram with Citi. You may now go ahead.

Arun Sundaram (Senior Equity Research Analyst and VP)

Thanks. you know, this environment seems to be almost like a Goldilocks for private mortgage insurance, you know, home price appreciation, low claims experience, still being able to, you know, have a decent amount of new origination and high persistency. What are you worried about? What would be something that you would be, you know, concerned about for this environment to change?

Adam Pollitzer (President and CEO)

Yeah, look, I, I, I think we're Arun, it's a good question. We're, we're encouraged, and I'd say incrementally more optimistic when we look at recent data and headlines. Certainly, I think we can all see that macro risks have been receding, and it's been receding really since our last call in May, right? We've had a resolution of the debt ceiling deadline. We've had stronger than expected growth. Recent inflation data has shown signs of easing. We've seen stabilization of the regional banking sector through this quarter's earnings announcements. So there's reason to be optimistic, in particular, because of how resilient the housing market and, and house prices have been. At the same time, you know, we mentioned in our prepared remarks that risks remain.

We didn't elaborate, but really, there are risks that remain broadly to the economy. It's not a certainty that the Fed is going to be able to engineer a soft landing. When we look at it, right, the Fed just tightened again and still has a hawkish stance from our vantage point. The commercial real estate market's in focus. We've got the pending restart of student loan payments, as something that may impact household finances. Regional banks are now facing increased capital requirements that over time, may curtail lending activity. When we look at it, what we're concerned about is really what happens around us, those items that we can't control. We can control how conservatively and appropriately we're managing our business, how we're managing our capital position, our risk mix, our pricing decisions, but what happens around us is of consequence.

When we look at those items in balance, we do still see the potential for volatility on the horizon from a macroeconomic standpoint, and that's what we're concerned about.

Arun Sundaram (Senior Equity Research Analyst and VP)

That's helpful. Thank you. Then, just secondarily, the, the persistency rate, you know, inched up a bit higher. What do you think that in this kind of rate environment would be like the maximum? Is it getting kind of close to wherever that maximum would be on a persistency level?

Adam Pollitzer (President and CEO)

Arun, that's a good question. I, I think I mentioned during the call that, you know, we reached 86% in Q2, up from 85.1% in Q1. Look, we expect it to remain well above historical trend through year-end. We might see some modest improvement going forward, but I think the way to think about it is that it's probably going to be naturally a little bit more muted over time. We've just seen it increase just so much, and there just is, as we go through our portfolio, a minimum level of turnover that's going to occur. We're going to start to see some of our portfolio, our most recent vintages, hitting points of hitting points of time and cancellation.

As a result, you know, we're probably going to see some modest improvement going forward, but it's going to be muted over the course of the year. It's still well above historical trends, and we're benefiting significantly from the high persistency.

Arun Sundaram (Senior Equity Research Analyst and VP)

Thank you.

Operator (participant)

Our next question will come from Rick Shane with JP Morgan. You may now go ahead.

Rick Shane (Head of Consumer and Specialty Finance)

Thanks for taking my questions this afternoon, everybody. Hey, I'd like to talk a little bit about in the unusual environment that we're in, the puts and takes for MI penetration in the context of overall mortgage volume. You know, on one hand, we're hearing that cash buyers have huge advantages in this market, but that's obviously not normally they would not normally be competition for your customers. I'm wondering if you're seeing any substitution for, in, in that market. At the same time, on the other hand, you know, robust pricing for starter homes presumably is driving increased demand. I'm, I'm kind of curious how you balance that?

Adam Pollitzer (President and CEO)

Yeah, Rick, it's a, it's a great set of questions, and I may actually broaden it to just talk generally about where we see origination activity developing and the opportunity that we have, both in the near term and over the longer term, to support borrowers and help them gain access to their homes. When we spoke last May, we shared our expectation that we would see a total purchase origination market of roughly $1.3 trillion for the year. I think the starting point, right, to preface your question is, we're actually still seeing, notwithstanding the fact that there are headlines around affordability, that rates remain elevated, we're seeing a really constructive purchase environment.

Even though it sits behind the record levels that we saw, what I'll call the pandemic years, by historical standards, it's a very large purchase market. Within that, we're seeing a tremendous opportunity to write new business. You know, we've, we've guided through the course of this year that we expect to see a total private MI market of, give or take, $300 billion, and that remains the case. The first half of the year has come in generally in line with our expectations, and our outlook remains the same today. You know, look, there are, there are buyers out there who will transact. They need MI support.

Over the long term, not just through 2023, but over the long term, there are a number of, of fundamental drivers of both purchase volume as well as MI demand, that we see sustaining our market opportunity. We haven't seen a shift because of, you know, maybe the rise and increasing advantage that cash buyers have, or penetration rates otherwise. It's, it's a very large market that's coming in, in line with our expectations, and it gives us, you know, increased confidence as we think about the long-term opportunity.

Rick Shane (Head of Consumer and Specialty Finance)

Got it. Okay, very helpful. Thank you for reframing my question. I think that's a better way to, to explain it. Thank you.

Operator (participant)

Our next question will come from Mark Hughes with Truist. You may now go ahead.

Mark Hughes (Analyst)

Yeah, thank you. Could you say again, what was the share buyback dollar amount in the 2Q? Any insight on your pacing on the buybacks as you think about the balance of the year and the next year?

Ravi Mallela (EVP and CFO)

Sure, Mark, it's Ravi. In Q2, we did about $26 million in share repurchases, slightly over 1 million of shares. Certainly, we're pleased with the execution. You know, with today's announcement, we have a little bit left in the $125 million share repurchase program. So when you combine that with the $200 million, you get to $228 million in capacity, and we have through the end of 2025 to execute. As you know, we're not on a set schedule. It really depends on, you know, a number of factors, including, you know, market dynamics, how we feel about things in the market, in particular, our stock price relative, relative to the relative value in the shares. So we plan to execute opportunistically.

You know, we think about things going forward. As the market progresses, we adjust accordingly. Yep, Mark, I think, though, as a, as a rough guide, we've got $228 million of capacity to be deployed over the next 10 quarters, and you could think about things on a roughly ratable basis through the end of the authorization period in December of 2025. Although, I think Ravi's caveat that it's, it's not gonna be firmly regimented, is absolutely the case.

Mark Hughes (Analyst)

Right. Maybe similar to Q2. Then on the expense ratio, refresh me, were there any capital markets expenses in that number? Then up a little bit sequentially, anything unusual in there, and how do you think it should trend going forward?

Ravi Mallela (EVP and CFO)

Mark, this is Ravi. Just to answer the two parts to your question there. From the capital market side, the XOLs typically are structured in a way where we don't pay specific fees that we outline, like the way we do with ILNs. It's all rolled into the actual weighted average lifetime pre-tax cost that we quoted. So that's separate. Maybe just to take the second part of your question, just on sort of quarter-over-quarter changes. You know, we're always focused on managing the business with discipline and efficiency. You know, we're pleased with the 21.8% expense ratio in, in Q2. You know, we always try to focus on the ratio and not the dollars. We're really operating with the same footprint. We have the smallest headcount by far in the industry.

What I if you wanna think about this quarter in particular, just to give some color for that, you know, in March, we award salary increases. Those could include, you know, merit, cost of, cost of living adjustments, promotions, and grant equity awards. The Q2 increases and compresses Q1 were one of the components that, that drove the quarter-over-quarter change. Another portion of that is just ordinary course projects. You know, the pickup we saw from Q1 to Q2 were just sort of ordinary course things that we do on a regular basis. We also saw NIW pick up, and NIW volume increased 31% quarter-over-quarter, and that increases our variable costs, and that also contributed to our quarter-over-quarter increases. Take all of that together, that's what drove the increase.

You know, we've said this before in the past about, about, about our OpEx. We don't provide guidance, but, you know, we do expect OpEx from a dollars perspective to grow because we're always investing in people, in systems, in risk management strategies, and we grow. You know, when you put all those together, you could see some uptick in Q4 and Q3 in terms of dollars of expenses.

Mark Hughes (Analyst)

Appreciate that detail. Thank you.

Operator (participant)

Next question will come from Bose George with KBW. You may now go ahead.

Bose George (Managing Director)

Hey, guys. Good afternoon. Just wanted to go back to the discussion on macro, especially in the improved expectations for home prices, you know, I guess over the course of this year. How is that sort of running through your thoughts on, on loss severities?

Ravi Mallela (EVP and CFO)

Look, it's a, I'd, I'd say we're, we're certainly encouraged by the broad resiliency that we've seen in the macro environment, in the housing market. For reserving purposes, though, we've always aimed to take what we would say is an appropriate but also appropriately conservative view. In practice, this means that we generally anchor more to downside scenarios when setting our position, and that remained the case in Q2. We, we did, in fact, though, factor for the resiliency that we've observed in the macro environment and housing market year to date, but we balanced that by the need to still maintain a conservative stance and reflect some of those risks that I talked about that we still see on the horizon.

At June 30th, what that meant is that we moderated our expectations for economic strain and house price declines going forward in our reserving analysis, but we didn't fully remove what I would call a stress bias from our work.

Bose George (Managing Director)

Okay. Yeah, that, that makes sense. Thanks. Then just switching to the ILN market, it looks like one of your peers is in the market with a deal. Is that market starting to look better in terms of, you know, potentially reentering for you guys?

Ravi Mallela (EVP and CFO)

You know, what I would say is that it certainly, you know, we're encouraged by seeing the ILN market rebound, you know, and certainly having one of our folks in the industry, in the market, you know, the first since September, that's very. It's very exciting for us, and certainly, we feel that it's nice to see the market healing a little bit. When we think about the state of the reinsurance markets, you know, and we're happy to do the most recent XOL, you know, we think capacity has been available broadly in the market.

Adam Pollitzer (President and CEO)

... It's been constructive on constructive terms. In particular, our XOL, we had new reinsurers come into this latest XOL. You know, pricing and risk appetite has been wider than points in the past, and, you know, not every reinsurer is sort of back in the market. You know, we were happy to execute the deal. It's a competitive deal on attractive terms, and certainly reflects an efficient form of premier capital. These are all favorable developments, right? Our ability to continue executing on favorable terms, in size and with speed in the traditional reinsurance markets. You know, we've, we've noted a deal as well that you touched on, and that's a constructive one.

To see a market that we have, we have valued and we've accessed meaningfully in the past, rebound constructively, it, it gives us more optionality and gives us additional outlets, which is valuable as we go forward.

Bose George (Managing Director)

Yeah. Okay, great. Thanks a lot.

Operator (participant)

This question will come from Geoffrey Dunn with Dowling & Partners. You may now go ahead.

Geoffrey Dunn (Equity Analyst /Partner)

Thanks. Good afternoon. First question, was there an OpCo dividend up in the quarter?

Adam Pollitzer (President and CEO)

Yeah, there was. We distributed $98 million of ordinary course dividends from NMIH, the lead operating subsidiary, up to the holding company during the quarter.

Geoffrey Dunn (Equity Analyst /Partner)

Okay. Then, with respect to the assumptions in your loss provisioning, I think you were taking a very conservative stance on home prices. What are you now thinking as you look forward in your assumptions?

Adam Pollitzer (President and CEO)

Yeah. Jeff, we've never specifically outlined the underlying assumption, but suffice it to say, you know, while we have moderated our expectations for what strain might look like, we have still, embedded our, you know, maintained our stress bias in, in the analysis.

Geoffrey Dunn (Equity Analyst /Partner)

Okay. Last question, I, I don't know the details on this, Enact just announced the formation of a Bermuda subsidiary to help the CRT business. Is that something that management and the board have ever discussed as a strategy for National, or something that you think could be kind of within a three-year strategic plan for National?

Adam Pollitzer (President and CEO)

You know, we'll, we don't have anything immediately on the horizon. We'll, you know, be curious to learn more about the Enact announcement. It is a path that some others in our sector have pursued. Right now, we find the best value of deploying our capital to be in support of our primary business. We continue to grow our customer franchise. We continue to grow, you know, the opportunity that we're able to to support, and, and that remains our focus for now.

Geoffrey Dunn (Equity Analyst /Partner)

Okay, thank you.

Operator (participant)

Our next question will come from Eric Hagen with BTIG. You may now go ahead.

Eric Hagen (Managing Director and Specialty Finance Analyst)

Hey, thanks. How we doing? First question here. I mean, how do you feel like homeowners are, you know, keeping up with inflation at this point, especially the borrowers with high, you know, DTI to begin with? I realize the macro data may, you know, suggest one thing, but is there anything that maybe you're adjusting for at the portfolio level? How do you, how do you maybe adjust for the risk that inflation stays higher for longer, if you will?

Adam Pollitzer (President and CEO)

Yeah, Eric, it's a good question. Look, I think first and first and foremost, these are, among other items, ones that we account for from the standpoint of both pricing, as well as actively managing the flow of risk and the mix of that risk coming into our portfolio. One of the, the risk markers that we consider, both in on a standalone basis, but also how it, how it interacts with other risk markers, is a borrower's debt-to-income ratio, which is essentially a household, household coverage metric. We price for, for higher DTI borrowers in expectation that we'll see higher claims activity for those borrowers, because their household finances are a bit more stretched. We also actively manage the concentration of, of risk coming through.

So, like all other risk markers, like all other, you know, risk factors that are out there, we manage for it in a few ways. We try to price for it, for the risks that we're comfortable taking. We define what our risk appetite is and try to manage our mix such that we don't exceed that. Then we also pursue reinsurance consistently to make sure we don't have an outsized aggregation in the portfolio.

Eric Hagen (Managing Director and Specialty Finance Analyst)

Yep. That's helpful. You know, what would you maybe identify at this point as a few of the stronger catalysts for first-time home buyers at this point? Like, I think you guys mentioned the expiration of student loan forbearance. Are you thinking that could have a bigger impact on the existing book or the forward opportunity, as some borrowers might not be able to qualify? Just how are you guys thinking about that? Thanks.

Adam Pollitzer (President and CEO)

Yeah, look, I'd say, it's obviously pretty new. What I'd say broadly is we're watching it right now, particularly because we've got an election cycle coming up. I think the Biden administration has a clear vested interest in ensuring a smooth transition for borrowers and is taking steps to ensure that that transition is seamless. To that end, we've seen, you know, several important announcements, both from the administration as well as from the Department of Education, in the month or so since the Supreme Court ruling came out, striking down the original student debt relief program. So we'll see. It is possible that the upcoming resumption of payments will have an impact on certain borrowers in our portfolio who perhaps budgeted expecting more permanent relief.

From an overall credit standpoint, though, we don't expect, at this point, that the restart of student loan payments will have a material impact on the performance of our portfolio. As for the potential impact on new business activity, I'd love to give you a specific answer, but admittedly, it's difficult to tell. On the one hand, you could see an even greater need for private MI support before, with borrowers who now have to make additional monthly payments towards their student debt, not able to save as much for a down payment as previously hoped.

You could also see some pressure the other way with, you know, borrowers who are already stretched by higher rates and house prices now pushed to either look at less expensive homes, and it's the loan size that drives NIW, or perhaps being moved out of the buyer market entirely. It's one, it's one we really need to monitor at this point, before we know, you know, which way it will come out. Overall, though, we don't think it will have a consequential impact either on the credit performance of the portfolio or the new business opportunity.

Eric Hagen (Managing Director and Specialty Finance Analyst)

Appreciate the good color. Thank you.

Operator (participant)

This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Adam Pollitzer (President and CEO)

Well, thank you all again for joining us. We'll be participating in the Barclays Financial Services Conference on September 11th in New York, and the Zelman Virtual Housing Summit on September 19th. We look forward to speaking with you again soon.

Operator (participant)

Conference is now concluded. Thank you for attending today's presentation, you may now-