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Date
Aug. 8, 2025 at 2:00 p.m. ET
Call participants
Chairman, President, and Chief Executive Officer — Mark Casale
Senior Vice President, Investor Relations — Phil Stefano
Senior Vice President and Chief Financial Officer — David Weinstock
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Takeaways
Net income-- Net income (GAAP) was $195 million for fiscal Q2 2025 ended June 30, 2025, down from $204 million in fiscal Q2 2024, a decrease of approximately 4.4%.
Return on average equity-- 14% annualized return on average equity.
US mortgage insurance in force-- $246.8 billion at quarter end, representing a sequential increase of $2.1 billion and a 2.5% increase from $240.7 billion a year earlier.
Weighted average FICO-- 746 weighted average FICO for insurance in force.
Weighted average original LTV-- 93% weighted average original LTV for insurance in force.
Persistency-- 85.8%, effectively unchanged from fiscal Q1 2025.
Mortgage insurance net premium earned-- $234 million, including $13.6 million earned by Essent Re on third-party business.
Average base premium rate (US MI portfolio)-- 41 basis points;Net average premium rate-- 36 basis points, both consistent sequentially.
Provision for losses and LAE-- $15 million, sharply lower than $30.7 million for fiscal Q1 2025 and compared to a benefit of $1.2 million in fiscal Q2 2024.
Default rate (US MI portfolio)-- 2.12%, down from 2.19% at March 31, 2025, a seven basis point sequential decline.
Mortgage insurance operating expenses-- $36.3 million with an expense ratio of 15.5%, down from $43.6 million and 18.7% in fiscal Q1 2025.
Investment income-- Consolidated net investment income rose by $1.1 million, or 2%, to $593 million compared to fiscal Q1 2025, with a portfolio yield of 3.9% and new money yield near 5%.
GAAP equity-- $5.7 billion in GAAP equity as of June 30, 2025.
Liquidity position-- $6.4 billion in consolidated cash and investments; $500 million undrawn revolver capacity.
Essent Re risk in force-- $2.3 billion in GSE and other risk share as of June 30, 2025.
Excess of loss reinsurance capacity-- $1.4 billion in excess of loss reinsurance as of June 30, 2025; two new excess of loss transactions effective July 1, 2025, and July 1, 2026, covering new insurance written.
PMIERs sufficiency ratio-- 176% as of June 30, 2025, with $1.6 billion of excess available assets.
Trailing twelve-month operating cash flow-- Trailing twelve-month operating cash flow was $867 million.
Statutory capital (Essent Guaranty)-- Statutory capital was $3.7 billion as of June 30, 2025, with a risk to capital ratio of 9.2:1.
Debt-- $500 million in senior unsecured notes outstanding as of June 30, 2025; debt to capital ratio was 8% as of June 30, 2025.
Moody’s rating actions-- Moody’s upgraded Essent Guaranty’s insurance financial strength rating to A2 during fiscal Q2 2025 and Essent Group’s senior unsecured debt rating was upgraded to Baa2 by Moody’s in August 2025.
Share repurchases-- 3 million shares repurchased for $171 million; an additional 1 million shares bought in July 2025 for $59 million; year-to-date total of nearly 7 million shares, or $390 million, through July 31, 2025.
Common dividend-- The Board approved a $0.31 per share dividend for 2025.
Essent Guaranty dividends-- $65 million paid in fiscal Q2 2025, with $366 million available for payment as of July 1, 2025.
Essent Re dividend-- $120 million paid to Essent Group in fiscal Q2 2025.
Total shareholder dividends paid-- Total shareholder dividends paid were $30.9 million.
Summary
Essent Group(ESNT 5.56%) reported steady insurance portfolio growth and stable credit quality, highlighting elevated persistency supported by higher rates and predictable premium revenue. Management outlined disciplined capital returns, including a $0.31 common dividend for 2025 and nearly 7 million shares repurchased for $390 million year to date through July 31. Strategic capital management updates included new reinsurance transactions and an increased ceding percentage for Essent Re, aimed at enhancing risk transfer and capital efficiency. Moody’s rating upgrades for both Essent Guaranty and Essent Group’s senior unsecured debt reflect external recognition of the company’s financial strength and resilient business fundamentals.
Management expects persistent equity accumulation within the portfolio due to rising home values, which may mitigate claims risk.
Mark Casale said, "We see home prices going up in certain areas still because of the lack of supply. Other areas, we think there's going to be some weakening. And we thought that for a while. And it depends on the extent of it. You know, five-ish, ten-ish percent maybe in certain markets."
Essent’s operating model and proprietary EssentEDGE credit engine are used to price loans granularly, which may improve premium yields relative to industry benchmarks.
Management indicated an active but valuation-sensitive approach to share buybacks, with the pace supported by current excess capital levels.
Essent Guaranty’s ability to pay future dividends is enhanced by the recent unlocking of an additional $366 million in ordinary dividend capacity as of July 1, 2025.
Phil Stefano highlighted capital “sufficiency” under PMIERs and enterprise stress testing as determinants in capital return decisions.
Operational efficiency improvements were explicitly noted, as operating expenses declined both in absolute terms and as a percentage of earned premiums.
Title insurance operations are not expected to contribute materially to near-term earnings due to ongoing market headwinds.
Industry glossary
PMIERs: Private Mortgage Insurer Eligibility Requirements, the regulatory capital framework for U.S. mortgage insurers established by the Federal Housing Finance Agency (FHFA).
EssentEDGE: Essent Group’s proprietary mortgage insurance risk and credit scoring analytical platform used to set loan-level premium pricing.
NIW: New Insurance Written, referencing new mortgage insurance policies issued within a specified period.
GSE risk share: Portfolio of risk transferred by government-sponsored enterprises, such as Fannie Mae and Freddie Mac, to private mortgage insurers or reinsurers.
LAE: Loss adjustment expenses, the costs associated with investigating and settling insurance claims.
Full Conference Call Transcript
Mark Casale: Thanks, Phil, and good morning, everyone. Earlier today, we released our second quarter 2025 financial results, which continue to benefit from favorable credit performance and the impact of higher interest rates on persistency and investment income. Our second quarter performance demonstrates the strength of our business model in the current macroeconomic environment. We believe that our buy, manage, and distribute operating model uniquely positions Essent within a range of economic scenarios to generate high-quality earnings. Our outlook on housing remains constructive over the longer term as we believe that demographics will continue to drive demand and provide home price support. Over the last several years, demand has exceeded supply, resulting in meaningful home price appreciation and affordability challenges.
A byproduct of these affordability issues is that higher creditworthy borrowers are being for mortgages, as evidenced by the weighted average credit score of our new business. Also, the increase in home values has resulted in further embedded equity within our insured portfolio, which provides a level of protection in reducing the probability of loans transitioning from default to claim. And now for our results. For 2025, we reported net income of $195 million compared to $204 million a year ago. On a diluted per share basis, we earned $1.93 for the second quarter, compared to $1.91 a year ago. On an annualized basis, our return on average equity was 14% in the quarter.
As of June 30, our US mortgage insurance in force was $247 billion, a 3% increase versus a year ago. 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 twelve-month persistency on June 30 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. On the Washington front, our industry continues to play a vital role in supporting a well-functioning and sustainable housing finance system.
We believe that access and affordability will continue to be the primary focus in DC. Essent is supportive and believes that our industry is very effective in enabling homeownership for low down payment borrowers while also reducing taxpayer risk. During the quarter, Essent Re continued writing high-quality GSE risk share business and earning advisory fees through its MGA business with a panel of reinsurer clients.
Phil Stefano: As of June 30, Essent Re had risk in force of $2.3 billion for GSE and other risk share. Essent Re achieves both capital and tax efficiencies through its affiliate quota share with Essent Guaranty and allows us to leverage Essent's credit expertise beyond primary MI. It also provides a valuable platform for potential long-term growth in diversification of the Essent franchise. Essent Title remains focused on expanding our client base, footprint, and production capabilities in key markets. We continue to maintain a long-term horizon for this business, and given persistent headwinds of high rates, do not expect title to have any material impact on our earnings over the near term.
Our consolidated cash and investments as of June 30 totaled $6.4 billion with an annualized investment yield on the second quarter of 3.9%. Our new money yield in the second 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 GAAP equity, access to $1.4 billion in excess of loss reinsurance, and a PMIER sufficiency ratio of 176% with a trailing twelve-month operating cash flow of $867 million, our franchise remains well positioned from an earnings, cash flow, and balance sheet perspective.
Earlier this week, we were pleased that Moody's upgraded Essent Guaranty's insurance finance strength rating to A2 and Essent Group senior unsecured debt rating to Baa2. We believe these actions reflect our consistent strong results, high-quality insured portfolio, financial flexibility, and the benefits of our comprehensive reinsurance program. Our capital strategy is to maintain a conservative balance sheet, withstand a severe stress, and preserve optionality for strategic growth opportunities. We continue to believe that success in our business is best measured by growth in book value per share as we look to optimize returns over the long term. In addition, our strong capital position and slowdown in portfolio growth allows us to be active in returning capital to shareholders.
With that in mind, I am pleased to announce that our Board has approved a common dividend of $0.31 for 2025. Further, year to date through July 31, we repurchased nearly 7 million shares for approximately $390 million. Now let me turn the call over to Dave.
David Weinstock: Thanks, Mark, and good morning, everyone. Let me review our results for the quarter in a little more detail. For the second quarter, we earned $1.93 per diluted share compared to $1.69 last quarter and $1.91 in the second quarter a year ago. My comments today are going to focus primarily on the results of our mortgage insurance segment, which aggregates our US mortgage insurance business and the GSE and other mortgage reinsurance business at our subsidiary, Essent Re. There's additional information on corporate and other results in Exhibit O of the financial supplement.
Our US mortgage insurance portfolio ended the second quarter with insurance in force of $246.8 billion, an increase of $2.1 billion from March 31, an increase of $6.1 billion or 2.5% compared to $240.7 billion at June 30, 2024. Persistency at June 30, 2025, was 85.8%, essentially unchanged from 2025. Mortgage insurance net premium earned for 2025 was $234 million and included $13.6 million of premiums earned by Essent Re on our third-party business. The average base premium rate for the US mortgage insurance portfolio for the second quarter was 41 basis points, and the net average premium rate was 36 basis points, both consistent with last quarter.
Our mortgage insurance provision for losses and loss adjustment expenses was $15 million in 2025, compared to $30.7 million in 2025 and a benefit of $1.2 million in the second quarter a year ago. At June 30, the default rate on the US mortgage insurance portfolio was 2.12%, down seven basis points from 2.19% at March 31, 2025. While we continue to observe a decline in the number of defaults associated with Hurricanes Helene and Milton during the second quarter due to cure activity, we made no changes to the reserve for hurricane-related defaults. As this amount continues to be our best estimate of ultimate losses being incurred for claims associated with those defaults.
Mortgage insurance operating expenses in the second quarter were $36.3 million, and the expense ratio was 15.5%, compared to $43.6 million and 18.7% in the first quarter. As a reminder, in April, we entered into two excess of loss transactions covering our 2025 and 2026 new insurance written, effective July 1 of each year with panels of highly rated reinsurers. In addition, in April, the ceding percentage of our affiliate quota share with Essent Re increased from 35% to 50%, retroactive to NIW starting from January 1, 2025. At June 30, Essent Guaranty's PMIERs deficiency rate ratio was strong at 176%, with $1.6 billion in excess available assets.
Consolidated net investment income increased $1.1 million or 2% to $593 million in 2025 compared to last quarter due primarily to a modest increase in the overall yield of the portfolio. As Mark noted, our total holding company liquidity remains strong and includes $500 million of undrawn revolver capacity under our committed credit facility. At June 30, we had $500 million of senior unsecured notes outstanding, and our debt to capital ratio was 8%. During the second quarter, Essent Guaranty paid a dividend of $65 million to its US holding company. As of July 1, Essent Guaranty can pay an additional ordinary dividend of $366 million in 2025. At quarter end, contingency reserves at June 30.
Essent Guaranty's statutory capital was $3.7 billion with the risk to capital ratio of 9.2 to one. Note that statutory capital includes $2.6 billion of During the second quarter, Essent Re paid a dividend of $120 million to Essent Group. Also in the quarter, Essent Group paid cash dividends totaling $30.9 million to shareholders, and we repurchased 3 million shares for $171 million. In July 2025, we repurchased 1 million shares for $59 million. Now let me turn the call back over to Mark.
Mark Casale: Thanks, Dave. In closing, we are pleased with our second quarter financial results as Essent continues to generate high-quality earnings while our balance sheet and liquidity remain strong. Our outlook for housing remains constructive over the long term, and we believe Essent is well positioned to navigate the current environment 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 to shareholders. We believe this approach is in the best long-term interest of Essent and our stakeholders while Essent continues to play an integral role in supporting affordable and sustainable homeownership. Now let's get to your questions.
Operator?
Operator: 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 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, please press 1 again. And your first question comes from the line of Terry Ma with Barclays. Please go ahead.
Terry Ma: Hey, thank you. Good morning. Wanted to ask about home prices and your expectations going forward. To the extent home prices turn negative, how do you think about pricing on a go-forward basis? And then second, how would you feel about the more recent vintages that the industry has underwritten, which has seen just less home price appreciation overall?
Mark Casale: Good morning, Terry. I think on home price appreciation, where do we see home prices going? Well, it really depends down at the MSA level. So, I mean, we have a pretty detailed forward-looking model across all of the MSAs. The driving factors are clearly month supply, recent home price appreciation, and job growth. Those are kind of three factors if you boil it down to a local community. We see home prices going up in certain areas still because of the lack of supply. Other areas, we think there's going to be some weakening. And we thought that for a while. And it depends on the extent of it. You know, five-ish, ten-ish percent maybe in certain markets.
When we take a step back, that's actually pretty good. It's healthy. Some of the markets have really increased rapidly. I think almost a 50% increase over a few year period. Income growth still at three, 4%, and then you had a doubling of rates. So that's why you've seen such a slowdown in housing. We're kind of coming out of that. You've heard me say before, the COVID bubble, so to speak, with low rates and high demand, and we're kind of on the second leg of that.
So I think coming out of that, if you think of just affordability when it becomes kind of normalized again, you're going to need a mix of job growth, HPA kind of flattening out or decreasing in certain areas, and clearly a little bit of relief on rates. And you can almost draw the map up as to depending on where your belief is on rates. So I think, again, in certain markets for home prices to come down, I think that's healthy for borrowers. You heard me say it in the script. There's a big issue. There's a big push in DC around affordability. There's a big push with our lenders as it should be.
It's very difficult to get a mortgage in, especially when you think of the first-time homebuyer is thirty-eight years old and historically, it's in the low thirties. That tells you right there that folks are having trouble getting home. So anything to help affordability, if that means HPA is going down a little bit, that's fine. I look at the embedded equity in our portfolio. I'm not particularly worried. You said the recent vintages I would say, sure. They're we've always said they're probably more exposed. But they're pretty normal. So if you think about, historically, Terry, kind of on average, of, let's say, before COVID and you looked at our portfolio, it was probably 81-ish, 82%. Mark to market.
It's below that today. So assuming it gets back to that level, that's the normal business. So we're not particularly concerned around that. In terms of new business, we always price differently. So we have little add-ons for what we'll call market of focus. And that again has to be it's not just HPA, Rose A Lot Puts The Market Of Focus For Us. If There's Still Underlying Strong Income Growth And Kind Of Lack Of Supply That Kind Of You Know, We'll We'll Probably Like That Market.
And If You Just Think About All Of Our Markets In General, If You Go Down To The MSA Level, And You'll Hear About, You Know, Cape Coral's in the Wall Street Journal, and you should stay away from it. The default rates in that area for us are pretty similar to the rest of our portfolio. Wanna say it's a touch higher. Go to Austin, our default rates actually lower than the overall portfolio. So you have to be careful at trying to look at the industry from a 30,000-foot level. I think when you look at individually at Essent, I continually, the returns are there.
And that you know, obviously, when you think about how what we're doing on the capital side, you know, I think we probably have a pretty good sense of where, you know, our view around credit.
Terry Ma: Got it. Super helpful. And I guess maybe on just credit for the quarter, new defaults, were up 9% year over year. The pace of increase has decelerated markedly the last few quarters. It seems like it's pretty consistent across the MIs that I cover. So, I guess, any color on the makeup of new defaults that you've seen the last quarter or two? And I guess, what's the outlook there? Thank you.
Mark Casale: Yeah. I mean, again, new defaults nothing surprising. I mean, consistent with our other quarters and just again, from an investor standpoint, you just have to understand that's really this, we're starting to get back to probably about normal seasoning pattern. Around the faults where you see it kind of decrease in the first half of the year. And tends to pick up a little bit in the second half of the year. There's kind of a normal seasoning that folks should be aware of. It happened last year.
And it seemed to catch, you know, everyone by surprise that our default season and then, you know, now they're kind of you know, they decrease the first half of the year. But I think you'll see that normal seasoning. Big picture, you know, Terry, again, it's, you know, two-ish, one point was it 2.12% default? You know, out of roughly 811,000 or 12,000 loans that we have.
So you know, again, it ebbs and flows a little bit, but I think big picture given the embedded equity in the portfolio you know, having some of those even if they become the false transitioning, the claim depending on the vintage is know, it's it's it's it's probably in a lower probability side. So I again, I think from a credit standpoint, big picture, you know, we feel pretty good you know, from that first loss perspective.
Terry Ma: Got it. Thank you.
Operator: And your next question comes from the line of Bose George with KBW. Please go ahead.
Bose George: Hey, guys. Good morning. On the buybacks, would you characterize the pace of your buybacks this year as opportunistic, or is there any change in how you're thinking about excess capital, which is, obviously, built quite a bit over the last couple of years?
Mark Casale: It's a little bit of both, Bose. I think we've always I think we kind of have we are valuation sensitive around the buyback. So we have a grid that we execute across. And it changes quarter to quarter depending on where we think credit is. Are there any opportunities to invest the cash? Pretty high bar given the returns in the core business. And to your point, you know, we said before we have a and invest mentality. Well, we haven't really invested in a couple of years, so we've retained a lot. So it's a little bit of we have a lot of buildup of excess capital. We like you know, where, you know, the valuation is.
We think it's really good returns for the shareholders. So it's a good use of proceeds. And given you know, what we did in July, I wouldn't expect that to change for the remainder of the year. I wouldn't be surprised if it doesn't change. Know, given what we're looking at. And we'll have something else. It's probably gonna be in an investor deck we'll put out next week. Around kind of the embedded value of the portfolio. You know, one of our peers did it a couple years ago, and stopped doing it, but it's a really interesting kind of slide that I think it's important for analysts and investors to take a look at.
And if you think about it'll give you some context for how we think about you know, the company, Bose. I mean, we roughly $5.7 billion of capital that we have today. That's roughly where stock trades in terms of a market cap. If you look, it doesn't really give any credit meant for the what $245 billion insurance in force we have in the earns 40 basis points in yield, and you can kind of predict or, you know, you can assume a certain combined ratio over four to five years, discount it back, Take a look at the investment portfolio, $6.5 billion, you know, yielding close to 4.
A lot of embedded value in the investment portfolio of those that frankly wasn't there three, four years ago. So when you look at that number, you can be yeah. And you can pick whatever discount, rate that you like. It's probably $15 to $20 in terms of stock. In terms of the valuation, additional book value. So embedded book value, and that doesn't give us doesn't that ignores any credit for being a platform or franchise that's one of six in the country that all low down payment borrowers to the top lenders, back with the GSEs. So, again, just big picture I don't it's a slide, and I think it's something just for investors to be aware of.
And I think it's something we're gonna start thinking through and discussing with investors. It's a pretty true for all of our competitors too, so it's not just an Essent only thing. And I think it deserves a little bit more of a spotlight. So I think when you put in the context of that, and, again, given where, you know, the valuation is, we feel comfortable buying shares, healthy amount of shares back at these prices.
Bose George: So that's great. Very helpful. Thanks. And then just one follow-up on the buyback. See, what was the dollar amount that was spent just during the second quarter?
David Weinstock: Bose, this is Dave Weinstock. So we repurchased 3 million shares at $171 million in the second quarter.
Bose George: Okay. Great. Thank you.
Operator: And your next question comes from the line of Doug Harter with UBS. Please go ahead.
Doug Harter: Thanks, and good morning. Mark, just, I guess, following up on that embedded value in the buyback, how are you thinking about sizing it? You know, what are the limitations of, you know, kind of cash flow up to the holding company, know, and just how do you think about, you know, holding back for opportunities that you know, may or may not present themselves versus, you know, kind of buying back today?
Mark Casale: No. It's a good question. I think there's clearly a limit. Right? I mean, in and we have, you know, we get cash back to the group two ways. Obviously through US and Holdings, which is the core, so we'll dividend and from guarantee of the holdings, and I have to get it to group. Then we have Essent Re. So as we've tended to use a little bit more Essent Re it's a little bit more tax efficient, Doug. But there is a limit. So when you think about kind of payout type ratios, you know, I think a 100 is probably is kind of a max just from kind of how the cash moves through the system.
Not saying we would do that, but if you're looking at an upper end just over the net you know, where it was kind of in the first half of the year, that's a decent level. In terms of how we calculate excess capital, we've gotten many questions over the years. PMIERs is certainly one. But we also look at it from an enterprise framework. Right? Because we include Essent Re in there. So we kind of look at it like consolidated capital requirements and needs. And we run it through different stress. I would say the Moody's S4 stress is one. And the constant severity model that they use Moody's obviously looked at both of those during the upgrade.
So and I think that's important. Right? So I think you have now another, you know, independent party looking at our balance sheet and our risk and detailed review of the stresses and feels comfortable now that we're at the kind of single A. That's good news for investors and clearly for bondholders. We'll also look at it. We're still running through the great financial crisis. We'll still run that. So we're all you're always looking because remember, we're that upper tier, Doug. Right? We own the first loss. We're very comfortable. That's why I don't get too stressed about default rates and first loss. That's kind of what we signed up for.
And it's much more it's clearly earnings versus capital. And then, you know, we hedge out that whole mezz piece. Know, our exposure is when it comes back to the top. And I think when we think about what comes back to the top, is the probability that low? Sure it is. But, you know, it was low, it's low doesn't mean zero. So I think when we look at that environment, we're looking to make sure we clearly have enough more than enough capital from a PMIER standpoint. And remember how procyclical PMIERs is, Doug. So there's a liquidity component of that to the MIs that I'm not sure all investors appreciate. So we run it through that.
Not just capital, clearly P&L, but PMIERs too. So we want to make sure we have enough capital not to just withstand that, but basically to be maybe use it as an opportunity an opportunistic. So, we had that chance in 2020. If you go back, we raised capital. We had plenty of capital. We wrote a lot more business than some of our competitors back then because we had the capital. We're still enjoying the cash flows of that today. So I think it's making sure we're just well positioned between, we say, like a range of economic scenarios so we really don't get caught on our back foot.
So, again, clearly, you know, with the buybacks in the first half of the year, we feel comfortable around that scenario and still have the capital to return to shareholders. And both Bose alluded to it. Some of it is just a buildup been over the last couple of years, Doug. You know, we have it and we're comfortable and we're fortunate, you know, and I say this in everyone wants their stock price up, but if you're looking to buy shares back, you kind of like the valuation that it's at. So I you know, we're not too we're not too, you know, stressed about that either. So hopefully, gave you a little color.
Doug Harter: Very helpful, Mark. Thank you.
Operator: And your next question comes from the line of Rick Shane with JPMorgan. Please go ahead.
Rick Shane: Good morning, everybody, and thanks for taking my question. Hey. I'd like to dig in a little bit on the persistency. When we look at the persistency by vintage, there is some dispersion. The '23 vintage persistency was a little bit lower. That makes sense. Presumably, that is the cuspius of the slightly seasoned vintages. And so probably have borrowers there who are trying to take advantage of the refi window. The other two vintages that have persistency a little bit lower sequentially are 2020 and 2021. I'd like to delve in a little bit more on that. Is that just natural aging associated with those vintages? Should we expect regardless of rate that the persistency should trend down there?
Or is it exogenous factors like borrowers taking seconds and the brokers you know, getting appraisals and allowing borrowers to rescind the PMI.
Mark Casale: Yeah. I mean, a lot to unpack there, Rick. I would say, which is typical one of your insightful questions, I think when we think about persistency, a little bit of it depends on you didn't bring this up, but, you know, our persistency tends to be a little bit higher because we don't really place a lot in the lower kind of half of the high LTV, like the 80 to 85. If you look at our mark if you kind of break our market share between 80 to 85, we may be the lowest in the industry.
So, you know, having a bit of a higher LTV, which clearly comes with more risk, also helps a bit on the persistency side. I think on the earlier books, 2021, I just think they're seasoning. Right? And all of a sudden, now you're five years into it. You know, especially folks who bought the house then. If their families are bigger, they're again, in rates on all side, you know, they could be looking to move up. So that doesn't that's pretty natural and that's happened over time as the portfolio seasons. I don't think it's seconds, and I know there's a lot of noise around seconds.
I do think seconds in home equities will become you know, continue to increase as they should if someone is kind of locked into the 3% mortgage and they need another bedroom and, you know, they get a home equity loan and in addition makes perfect sense. We haven't done it most recently, but I think the last time we did it, 3% of our portfolio had seconds on it. So I wouldn't, again, back to reading, you know, big picture articles and assigning it into the to the 85 or 90 LTV, even if it has built a, you know, built in market.
It's a lot of that gonna be on the traditional, you know, below 80 business for the GSEs. So, again, I think it is also interesting, Rick, just to point out, again, the strength of the business model. We got questions galore from 2014 to 2020, like, especially '18. Might have been even in '18 when rates went up. Like, jeez, Mark, how's your portfolio been able to perform when rates increase? You know, what's gonna to asset when rates increase? And we would say, hey. You know what? There's a hedge. You know, NIW is gonna go down, but persistency should stay elevated. And then clearly in 2022, I mean, we ran a business where our yields were below.
And every year, we thought the yields would go up and they never did, and then we woke up one day and now they're at, you know, new money yields at five. I do think it's a reminder of the strength of the portfolio. So and kind of the business model. It's a unique business model in that we're we play in a space that we understand very well, we're able to take that in insurance form and premium form. So there's a building kind of cash flow advantage to getting paid first. And now the next question we'll get as we should get is what happens when rates go down. You know, what does that do?
And I think the same thing, Rick. It's gonna be persistency's gonna be lower in certain segments, especially the newer segments, right, where that rate are in the sixes. But the renewed NIW is probably gonna grow the portfolio. So we're I just don't know when that's going to be. I think you had asked me that a couple of years ago and we're still not sure. The timing of it. Lot it gets back to that earlier comment around affordability. It has to reach kind of that medium level. And then I believe you know, I could be wrong. I've been wrong many times before, but I do believe there's a pent-up demand for housing.
And I think it's and I think and it's ironic, but the longer this slowdown lasts, probably the more upside there'll be in housing, in the return to housing and demand. Which I think will bode well for the top line for Essent and the whole industry, to be honest.
Rick Shane: No. It's fair. And there's an interesting comment there, which is you've been wrong many times. And I appreciate the humility of that, and acknowledge the number of times I've been wrong too. But I would argue that you built this too. Portfolio not for being right, but actually for being wrong. And that's part of what you constructed here. Curious and this question's driven by something we saw earlier in the week. We have another company we follow that makes very, very short duration loans. And they are because of that, and the short-term uncertainty, pulling back from originations.
And if they miss a window of six months given the, you know, twelve to eighteen-month duration of their assets, they can recover that very quickly. And it made me think of you guys and how long the duration of your portfolio is. Are you willing to when you see those have those concerns take the risk of pulling back and knowing that for five years, you will have a cohort that is under representative at the risk of being wrong.
Mark Casale: I think it depends. I wouldn't say we wouldn't shy away from lower share, and we've done it in the past. I think we probably you know, there's been records where we've been I think we've been top market share, like, twice in a quarter in our history, but we've been at the bottom more than twice. So we're not afraid to make calls there. A lot of it's around pricing. And it's also an interesting thing in our industry. There's a lot of, as you know and that's really the only competitive to the industry, Rick. We don't really have a lot of credit competition in the industry, and that goes back again to the guardrail setup.
We've always called them the credit guardrails set up with, you know, the qualified mortgage rule. Fannie and Freddie with DUNLP. They do such a good job of segmenting risk, They do a great job around QC. What kind of the beneficiaries of that as is the industry. There's not a lot of credit competition. And I think, you know, we haven't gotten a question. But if you think about GSE reform, like, happens if the GSEs go public? You know, one, I think that helps us a lot more so than people think because I think it'll bring a lot more liquidity into the space. From an investor standpoint. It helped us on the CRT side.
Kinda more visibility, probably more share. Right? Because they're gonna start they're gonna they'll do the buy, manage, and distribute operating model, again, probably in much greater force. And they'll probably expand the market a little bit. And there's good and bad to that. It's good because higher top line. The bad is it could introduce some credit competition to the space, and we haven't had that. And I think that's when that's when you're gonna make more calls on higher or lower share. Right now, you know, yielding, you know, price if, you know, we'll back off a little bit on price with the end of the day that we if the returns are there, we're still there.
There's a lot of volatility around the loss assumptions I think then you're gonna see a lot more disparity in share. And we have an advantage there. I think it's an advantage we've been able to leverage much. But, you know, when you think about our credit scoring at Engine, EssentEDGE, and this comes in with a lot of there's been a lot of banter about with the scores, the Vantage scores, and the new FICO score and all those sort of things. We look at the Royal Credit Bureau. So we're almost agnostic to the score.
And we can and we use two bureaus so we can we don't even need necessarily the third to be able to triangulate and get the right price. If there's a lot of this disparity in the market and let's say I will use the analogy, Rick, of, like, a fairway. If that fairway starts to widen, all of our lenders will increase their volume as they should. I would do the exact same thing. I think then when we look at our ability to discern between kind of a good 700 and a bad 700. And, again, if there's a lot of different scores flying around, I think it's even a bigger advantage for us.
So, again, that may just that advantage may have us decide not to do some of the business. Versus to do the business. So, again, not saying that market gonna happen, but I think that's and so we think about we always think about multiple kind of scenarios and how we would react and position the business, you know, kind of before it happens.
Rick Shane: Okay. I appreciate it very much. Thank you, guys.
Phil Stefano: You're welcome.
Operator: And once again, if you would like to ask a question, simply press star 1 on your telephone keypad. Your next question comes from the line of Mihir Bhatia with Bank of America. Please go ahead.
Mihir Bhatia: Hi. Good morning, and thank you for taking my questions. First, I just wanted to actually follow-up on the EssentEDGE point you just made, Mark. Specifically, I guess, you know, EssentEDGE in the next generation has been out for a couple of years. Can you just talk a little bit about what you've seen so far? I appreciate you saying that, you know, it's you haven't I guess, the outside, we haven't really been able to you know, we can't really tell given how low default rates are. How these engines are different. But maybe just talk a little bit about what you're seeing internally and are you continuing to invest that?
There's adding, you know, or is it more just a matter of now we're getting all this data and it's just waiting for the fairway to widen as you mentioned.
Mark Casale: Yeah. I would say we haven't made a ton of investment on it over the last twelve months once we got we got you know, we did a lot to get that second credit bureau in. So clearly, with some of the noise around the industry with the TriMerge and things like that, we may make the investment to get the third bureau clearly, and I've gone the whole call without saying AI. Which seems to be the banter for most companies, not our industry, but others. The technology there has increased so much just even over the last six months.
So we're seeing more opportunities to use it within our IT group and other areas to speed things up to market. I think that's you know, saw some of the lenders announce some things, which we've been watching. So there's some things there that we potentially could use to improve it over time, which I don't know if I would have said that a year ago. I know we felt pretty comfortable with it a year ago. And you're right. So I think you're gonna need some disparity in credit for it to really shine. The one way for people to look at it today, for investors to look at it today, Mihir, is look at our earned premium yield.
Right? Our earned premium yield's higher than the rest of the industry. And what does that tell you? And our defaults are relatively the same. It says we're able to get a little bit extra yield. Okay? What's a basis point or two? Two basis points on $145 billion adds up. So I think they're if you're from the outside looking in, that's probably the best evidence of kind of the success of how the credit engine works. And, remember, it's just a credit engine. We'll use that then to create price using an old kind of fashion yield analysis.
In there, the price is a little bit you know, you're testing pricing elasticity in certain markets you can get a little bit more price. So think of it more as a, you know, as a way to get value for an individual loan.
Mihir Bhatia: So that is helpful, and it's certainly something we see in the data. You mentioned AI. And my second question actually does relate to AI, but almost like from a little bit of a threat. To your business. And maybe not a threat, actually. I was trying to understand the implications. But, specifically, I'm talking about today, borrowers getting an appraisal and canceling MI. My understanding is that is not super common. As more and more data moves to the crowd, fintechs innovate, trying to build these personal finance recommendations, do you worry about that becoming something that becomes more common where borrowers ask to go get an appraisal and cancel MI from existing policies.
How would that something like that impact your business and returns?
Mark Casale: Yeah. I mean, it's been kind of it's been discussion over the last five years ever since rates went down. It's not very common in the business. And part of it is that there's clearly friction to it for sure, Mihir, but a lot of the major servicers do it. They do notify the borrowers. So the borrowers are aware of it. Or they're notified of it. It's just small dollars. You know? I think it's, you know, again, you're gonna there's work to be done to refinance something that's, you know, 30 to 40 basis points. So I'm not saying it can't be done. We don't lose a lot of sleep over it.
And I do think that we're when in terms of AI, it'll impact it. I'd be surprised if it didn't. It's also gonna make refinancings even, you know and our lenders, I would say, today are brutally efficient in refinancing loans. I think it's gonna be even more frictionless. And if you speak to some of our top lenders and their investments technology, I think what's the common theme of all this, though, is the borrower benefits. So if the borrower right now the borrower, you know, the MI automatically cancels below 80. I think that's a great rule. And I think that benefits the borrower.
So if there's a slowdown in rates and borrowers are locked into their mortgage and their home price appreciates significantly, and they're able to, you know, get the appraisal easier and cancel MI. Good for them. Good for the borrower. And that means it's a good borrower. So, yeah, we don't get too fussed about it. There could be some economic impact to it, but I don't think it's very big. So I wouldn't we're not gonna lose a lot of sleep over it.
Mihir Bhatia: Right. Just if I could squeeze in one question on just OpEx. Any thoughts on outlook for the year? I think there's a little bit of a downtick this quarter. Any callouts there?
David Weinstock: Hey, Mihir. It's Dave Weinstock. We're I think we feel really good about our guidance. If you look at where we are for the six months, I think we're kind of right on track. Our $160 to $165, probably a little bit towards the lower end. But, you know, a quarter to quarter basis, things can fluctuate, you know, based on production volume, staffing levels, things like that. So but overall, we're happy with where we are.
Mihir Bhatia: Got it. Thank you for taking my questions.
Phil Stefano: You're welcome.
Operator: And I'm showing no further questions at this time. I would like to turn it back to the management for any closing remarks.
Mark Casale: I'd like to thank everyone for their time today, and enjoy the rest of your summer.
Operator: Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you for attending. You may now disconnect.