Essent Group Ltd. (NYSE:ESNT) Q2 2023 Earnings Call Transcript

I would find it hard to believe, in fact. I think it’s — nothing would surprise me. But again, when you’re pricing for a normalized, just do the simple math, 2% to 3% claim rate, the capital that we hold, either economic or PMIERs, that normal-ish expenses and investment income, that NIW should have a fore handle on it. And if it does, you’re probably going to have good economics, you start driving it down to where it was at the end of ’21 and ’22. Just don’t go to economics. And I don’t — we were pretty outspoken about it then. And that’s one of the reasons to the earlier question with Eric. We’re going to continue to look for other places to allocate capital because you don’t want to be in that situation where you have to follow the market down.

And I think that’s what we have to be careful of one of our — one of the six MIs is part of a much larger insurance company, and they do a fantastic job of allocating capital, so they can move in the market and out of the market. And I think that’s when you look at companies that you want to emulate. I think that’s one we can’t emulate their strategy because we don’t have their experience on the P&C side. But creating choices around allocating capital allows you — that also affords you the ability to stay more disciplined.

Geoffrey Dunn: Okay. And then obviously, the risk to your statement is different views of what normalized credit actually is. Is it 2% to 3% cumm or is it 1.5% to 2%. Where is your general sense or confidence that the industry is aligned with your assessment of own less credit?

Mark Casale: I don’t know. I mean, I can’t really speak to them. I don’t — I just think about the big picture two or three loans out of 100 gone bad doesn’t sound like super aggressive, to me it seems pretty normalized. So, I think when you’re saying one-ish, I think that’s where you’re probably moving a little bit. That’s — you only need a small bump before that number is way off. So, I think that’s again, when the pricing drove down to that level, that’s almost — you had to believe that it was probably less than one. So, it was really hard to make the math work in my view. And so, I can’t really comment on what others think. It’s just — I think our view, which has been there for a while, and it’s given the credit criteria of the book, which is a good book, but it’s still a high LTV book. So I think, again, I think it’s a pretty pragmatic assumption on our part.

Operator: There are no further questions at this time. I will now turn the call back over to management for some final closing remarks.

Mark Casale: Thank you, operator, and thanks everyone for participating today, and have a great weekend.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.