Essent Group Q1 Earnings Call Highlights
Essent Group (NYSE:ESNT) reported higher first-quarter earnings as favorable mortgage credit performance, elevated persistency and investment income continued to support results, while management said the housing market remains constrained by affordability and interest rates.
The mortgage insurer said first-quarter 2026 net income was $172 million, or $1.82 per diluted share, compared with $1.60 per diluted share in the prior quarter and $1.69 per diluted share a year earlier. Chairman and Chief Executive Officer Mark Casale said annualized return on average equity was 12% year-to-date through the first quarter, while book value per share rose 11% from a year earlier to $61.20 as of March 31.
Casale said Essent’s core mortgage insurance business continues to generate strong cash flow, allowing the company to fund growth initiatives and return capital to shareholders. The company repurchased approximately 3.5 million shares for more than $200 million through April 30, including 2.6 million shares for $157 million during the first quarter and 934,000 shares for $57 million in April. Essent’s board also approved a second-quarter common dividend of $0.35 per share.
Mortgage Insurance Portfolio Remains Stable
Essent’s mortgage insurance in force was $247.9 billion at March 31, essentially flat with year-end and up 1.3% from $244.7 billion a year earlier. Casale said 12-month persistency was 84.7%, reflecting the impact of higher mortgage rates. He noted that nearly half of Essent’s in-force portfolio carries a note rate of 5.5% or lower, which management believes should support elevated persistency.
Chief Financial Officer David Weinstock said mortgage insurance net premiums earned were $216 million in the quarter. The average base premium rate was 41 basis points, consistent with the prior quarter, while the average net premium rate rose 1 basis point to 35 basis points.
Credit quality remained strong, with a weighted average FICO score of 747 and weighted average original loan-to-value ratio of 93%, according to Casale. The portfolio default rate was 2.54% at quarter-end, essentially unchanged from Dec. 31. Weinstock said the mortgage insurance provision for losses and loss adjustment expenses was $37.6 million, down from $55.2 million in the fourth quarter but up from $30.7 million a year earlier.
During the question-and-answer portion of the call, Casale said the company is not seeing “any real kind of cracks” in its borrower base, while acknowledging pressure on lower-end consumers. He said Essent’s insured borrowers generally have higher credit scores and higher household incomes, with average household income around $130,000. He also said the rise in defaults reflects normal portfolio seasoning, noting that peak default activity typically occurs when loans are 36 to 60 months seasoned.
Housing Market Still in a Pause
Casale described the housing market as remaining “in a pause,” with affordability pressures and higher rates continuing to temper purchase and refinance originations. However, he said favorable demographics, supply constraints and pent-up demand should be positive for housing and for Essent’s mortgage insurance business when affordability improves.
Asked about competitive trends, Casale said there were no major changes but that some lenders were beginning to “reach a little bit” given the lack of affordability and a smaller market. He said Essent recently passed on a bid card where it saw some credit extension and priced accordingly. “Nothing real alarming,” Casale said, adding that the mortgage insurance industry has been patient and thoughtful during the prolonged market pause.
Casale also said lower interest rates could eventually create a tailwind. He said if refinance activity increases, it could benefit Essent’s title business and help renew growth in the mortgage insurance portfolio, though persistency would decline. He added that loans originated after 2022 at higher rates would be more likely to refinance than the lower-rate portion of Essent’s back book.
Reinsurance Platform Expands
Essent continued to expand its reinsurance activities during the quarter. Casale said the company entered into an excess-of-loss reinsurance transaction with highly rated reinsurers to provide forward protection for its 2027 mortgage insurance business. He said outward reinsurance remains an important tool for managing credit risk and capital.
The company also expanded its property and casualty reinsurance platform. Casale said Essent’s Lloyd’s program is expected to generate approximately $120 million of written premium in 2026 against a $50 million deposit, with returns comparable to the mortgage insurance business. The company also executed a whole-account quota share covering a cedent’s casualty and specialty book, expected to generate approximately $200 million of written premium in 2026.
Management said the near-term earnings impact of those P activities is expected to be immaterial. Weinstock said the reinsurance segment’s first-quarter pretax earnings predominantly reflected underwriting results from Essent’s GSE and other mortgage risk-share activity, while P activity had an immaterial pretax earnings contribution. Casale said P earnings could replace some mortgage-related reinsurance earnings over the next few years as the GSEs buy less reinsurance and move higher in the capital structure.
Capital and Liquidity Remain Strong
Essent ended the quarter with consolidated cash and investments of $6.6 billion and an annualized aggregate yield of 4.2%. Casale said new money yields on the core portfolio were nearly 5% in the first quarter and have been largely stable over recent quarters.
The company reported $5.7 billion in GAAP equity, $1.1 billion in excess-of-loss reinsurance access and $1.1 billion in cash and investments at the holding companies. Casale said trailing 12-month operating cash flow was $827 million. Weinstock said holding company liquidity included $500 million of undrawn revolver capacity, while Essent had $500 million of senior unsecured notes outstanding and an 8% debt-to-capital ratio.
At March 31, Essent Guaranty’s PMIERs sufficiency ratio was 174%, with $1.6 billion in excess available assets. Essent Guaranty had statutory capital of $3.7 billion and a risk-to-capital ratio of 8.6-to-1, including $2.6 billion of contingency reserves. Weinstock said Essent Guaranty can pay ordinary dividends of $330 million in 2026 as of April 1, and paid a $50 million dividend to its U.S. holding company in April. Essent Re paid a $100 million dividend to Essent Group during the first quarter.
Casale said the company remains focused on growing book value per share, returning capital to shareholders and investing in opportunities such as reinsurance and title that can strengthen the franchise over the long term.
About Essent Group (NYSE:ESNT)
Essent Group Ltd. (NYSE: ESNT) is a publicly traded insurance holding company specializing in private mortgage insurance and mortgage reinsurance solutions. Through its primary subsidiary, Essent Guaranty, the company provides credit protection to mortgage lenders, helping mitigate the risk of borrower default on residential mortgage loans. Essent's insurance policies enable lenders to offer low-down-payment programs, supporting homebuyers in achieving homeownership with reduced upfront equity requirements.
Beyond traditional mortgage insurance, Essent offers a suite of risk management and analytics services designed to help financial institutions monitor and manage mortgage portfolios.
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