Essent Group Q3 2026 Earnings Call Transcript

Essent Group (NYSE:ESNT) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Essent Group Limited reported a net income of $163 million for Q3 2026, or $1.82 per diluted share, with a 12% annualized return on average equity.

Insurance in force reached $250 billion, up 1% year-over-year, with a persistency rate of 83% due to current interest rate conditions.

The company’s MI business is experiencing increased default rates at 2.75%, but substantial home equity and reinsurance protection are expected to mitigate claims.

Essent’s cash and investments totaled $6.5 billion, with an annualized investment yield of 4.4%.

Shareholder returns include a $0.35 per share dividend and a new $500 million share repurchase plan, with nearly 8 million shares repurchased year-to-date.

The reinsurance segment is expected to write $320 million in premiums in 2026, with a focus on expanding the P&C platform.

Management emphasized strong cash flow generation and a commitment to a balanced capital strategy, aiming for long-term shareholder value and strategic growth.

Discussions on the competitive landscape, persistency, and insurance in force indicate cautious optimism with a focus on long-term growth potential.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to the Essent Group Limited third quarter 2026 earnings conference call. At this time all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Frank Fanto, Investor Relations. Please go ahead.

Frank Fanto (Investor Relations)

Thank you, Daniel. 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 Guaranty. Our press release, which contains Essent’s financial results for the third quarter of 2026, was issued earlier today and is available on our website at essentgroup.com. Our press release includes non-GAAP financial measures that may be discussed during today’s call. A complete description of these measures and the reconciliation to GAAP may be found in Exhibit Q of our press release and in our third quarter 2026 earnings presentation posted on our website.

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 18, 2026; 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, Frank, and good morning everyone. Earlier today we released our third quarter 2026 financial results, which reflect solid credit performance and the continued impact of interest rates on persistency and investment income. The cash flow from our core MI business remains strong and gives us the flexibility to invest in the franchise while also returning capital to shareholders. For the third quarter of 2026, we reported net income of $163 million, or $1.82 per diluted share, representing an annualized return on average equity of approximately 12%. Our book value per share was $62.58 as of September 30th and, inclusive of common dividends, has increased approximately 9% from a year ago.

Turning to our MI business, our insurance in force ended September 30th at $250 billion, up 1% from a year ago. Twelve-month persistency was 83%, which reflects the current rate environment. With over half of our in force portfolio having a mortgage rate of 6% or lower, we expect this dynamic to continue supporting elevated persistency while portfolio growth stays muted as affordability continues to impact origination volume. Over the long term, we remain constructive on housing, as favorable demographics and pent-up demand should provide foundational support to home prices and purchase origination volume.

The credit quality of our insurance in force remains strong, with a weighted average credit score of 747 and a weighted average original LTV of 93%. Consistent with our expectations, the portfolio default rate increased to 2.75%, reflective of seasonality and the aging of our portfolio. We continue to believe that substantial home equity embedded in our in force book should help mitigate ultimate claims. Additionally, 95% of our insurance in force is subject to reinsurance protection, which provides capital relief and reduces tail risk.

Turning to the reinsurance segment, we expect written premiums of approximately $320 million from our P&C reinsurance activity in 2026, with roughly half earned this year at a combined ratio in the high 90s. We are currently focused on building Essent Re’s P&C platform and remain disciplined with our underwriting. While mortgage risk and the related MGA business will drive the majority of the segment’s earnings in the near term, we expect the P&C business to provide complementary earnings in the long term as well as capital synergy given diversification credit.

Our consolidated cash and investments totaled $6.5 billion as of September 30th, and our annualized aggregate investment yield for the third quarter was 4.4%. That yield includes income from other invested assets, a portfolio of strategic investments that now totals approximately $450 million, or 7% of our total portfolio. While returns will vary from period to period, this portfolio gives us another way to deploy capital outside of our core business to generate income and grow book value.

We continue to operate from a position of strength with $5.6 billion of GAAP equity, access to $1 billion of excess-of-loss reinsurance, and $1 billion of cash and investments at the holding companies. With trailing 12-month operating cash flow of $857 million, our franchise remains well positioned from an earnings, cash flow and balance sheet perspective. We remain committed to a balanced capital strategy that seeks to optimize shareholder returns over the long term while preserving flexibility for our strategic growth.

Year to date through October 31, we have purchased nearly 8 million shares for approximately $475 million. In addition, I’m pleased to announce that our board has approved a common dividend of $0.35 per share for the fourth quarter of 2026 and has also authorized a new share repurchase plan of $500 million. Now let me turn the call over to Dave.

David Weinstock (Chief Financial Officer)

Thanks, Mark, and good morning everyone. Let me review our results for the quarter in a little more detail. For the third quarter, we earned $1.82 per diluted share compared to $2.08 last quarter and $1.67 in the third quarter a year ago. My comments today are going to focus primarily on the results of our mortgage insurance and reinsurance segments. There’s additional information on corporate and other results in Exhibits D and E of the Financial Supplement.

Our mortgage insurance portfolio ended the quarter with insurance in force of $250.1 billion, an increase of $342 million from June 30 and an increase of $1.3 billion compared to $248.8 billion at September 30, 2025. Persistency at September 30, 2026 was 83.3% compared to 84% at June 30, 2026. Mortgage insurance net premium earned for the third quarter of 2026 was $211 million. The average base premium rate for the mortgage insurance portfolio for the third quarter was 40 basis points, consistent with last quarter, and the average net premium rate was 34 basis points, down 1 basis point from last quarter.

Our mortgage insurance provision for loss and loss adjustment expenses was $51.7 million in the third quarter of 2026 compared to $29.4 million in the second quarter of 2026 and $44.2 million in the third quarter a year ago. At September 30, the default rate on the mortgage insurance portfolio was 2.75%, up from 2.53% at June 30, 2026. Mortgage insurance operating expenses in the third quarter of 2026 were $31.9 million and the expense ratio was 15.1% compared to $31.9 million and 14.8% last quarter and $31.2 million and 14.4% in the third quarter last year.

At September 30, Essent Guaranty’s PMIERs sufficiency ratio was strong at 177% with $1.6 billion in excess available assets. Turning to our reinsurance segment, net premiums written year to date through September 30, 2026 were $330,000,000 compared with $49,000,000 over the same period of 2025. Net premiums earned year to date 2026 were $137,000,000 compared with $46 million over the same period of 2025. The increase in premiums reflects the growth in non-mortgage business from our expansion in the P&C reinsurance activity. The reinsurance combined ratio was 84.7% in the third quarter of 2026 compared to 77.9% last quarter and 19.2% a year ago.

The change in the combined ratio was as expected, reflecting a difference in underwriting performance between the mortgage and non-mortgage lines and the changing business mix of the segment’s premiums. The pre-tax underwriting income for the reinsurance segment predominantly reflects the underwriting results of our GSE and other mortgage risk share business, while the contribution from our P&C activity was not material. Consolidated net investment income was $63 million in the third quarter of 2026, up $1.3 million from the prior quarter. Income from other invested assets was $10.7 million in the third quarter of 2026 compared to $19.4 million last quarter and $1.8 million in the third quarter a year ago. The results this quarter again reflect the net favorable fair value adjustments on these investments. Total 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 8.3%. Year to date, Essent Guaranty paid $115 million of dividends to its U.S. holding company. At quarter end, Essent Guaranty’s statutory capital was $3.7 billion with a risk-to-capital ratio of 8.2 to 1. Note that statutory capital includes $2.7 billion of contingency reserves at September 30th. As of October 1st, Essent Guaranty could pay additional ordinary dividends of $324 million in 2026. On October 2nd, Essent Guaranty paid a dividend to its U.S. holding company of $85 million.

During the third quarter, Essent Group paid cash dividends totaling $31.1 million to shareholders, and we repurchased 1.1 million shares for $74.5 million. In October, we repurchased 802,000 shares for $50.8 million. Now let me turn the call back over to Mark.

Mark Casale (Chairman and CEO)

Thanks, Dave. In closing, Essent remains a well-capitalized, high-quality franchise with strong and consistent cash flow generation. We are well positioned to keep growing book value per share, returning capital to shareholders and investing in opportunities that strengthen our franchise for the long term while continuing to support affordable and sustainable homeownership. Now let’s get to your questions. Operator.

OPERATOR

As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Terry Ma with Barclays. Your line is open.

Terry Ma (Analyst at Barclays)

Hey, thank you. Good morning. Maybe just to start off with persistency, can you help us understand what you’ve been seeing in the mix of MI cancellations between scheduled versus borrower initiated? And then just looking ahead, how should we think about cancellation activity and the impact on persistency?

Mark Casale (Chairman and CEO)

Yeah, hey Terry, it seems to be a popular topic this quarter amongst all the MIs. Not sure why. I think you’re focused on the right metric, Terry, because I do think there’s not that many things that move the business. Persistency is one of them. So when you think bigger picture, I know in terms of cancellation a lot of it is going to be that 2021 book that just simply amortizes off. It started already but it’s probably going to peak in like 2028, 2029. And then when you start thinking about growth, normal growth kind of consistent with this slow market, I would think of persistency kind of in the 80% range. So it’s fairly muted, clearly lower than we’ve seen. But remember we’ve also experienced persistency of 60%—I believe it was in 2020 and parts of 2021.

So bigger picture, I really do think you have to focus there. In terms of MI cancellation, you know, we actually had to look it up, right. I mean it’s not something we track day in and day out, but I think it’s probably 37,000 in the quarter. Fifteen of those were refinances and the other 22 was cancellation; about four, four or five maybe. It’s real tough with the codes—was borrower-initiated—and the rest was just amortization. So, big picture again, Terry, the process works. MI is a really good product and it’s been around for a long time, for almost 70 years. It’s fairly effectively priced; on an average $400,000 loan it’s like $1,200 a year and, on down payment, we’re saving folks probably anywhere from $40,000 to $45,000.

Also remember, this is an industry that during the great financial crisis didn’t take any TARP—probably one of the few financial services that didn’t. So a lot of credit to some of our peers who managed through that process and an industry that paid 60-plus billion in claims over the years. So again, good product. I know there’s clearly a lot of emphasis on MI cancellation and clearly you want to make the process— we’re always what’s best for the borrower.

So if there’s ways in the future, working with the GSEs and working with FHA to kind of ease the friction, we’re supportive and we’ll work with them to do that.

Terry Ma (Analyst at Barclays)

Got it. That’s helpful, thank you. And then maybe just a quick housekeeping question, just on the current period provision for the quarter, the $81 million on MI—anything to kind of call out or unpack there? It’s quite a bit higher than we were expecting. Thank you.

David Weinstock (Chief Financial Officer)

Hey, Terry, it’s Dave Weinstock. You know, really, I think when you look at our provision, I think one of the things that’s really driving it is that the average loan size is increasing. So when you look in our supplement—specifically if you look at Exhibit M which kind of looks at reserves per bucket—we’re reserving pretty much the same way we always have. Our reserve methodology hasn’t changed. The loans that we’re insuring have grown; I would say in the past 18 months they’ve probably grown from an average of $300,000 to now to about $400,000.

So that’s what’s increasing the loan size, and the risk in force is going to increase the dollar of our provision. But overall I think that’s what you’re seeing.

Mark Casale (Chairman and CEO)

Yeah. And I mean, Terry, again, I think it’s a good question and I agree with Dave, the severity—just of bigger loans—are going to hike the provision up. At the end of the day, it’s really going to be about unemployment. So, I mean, a lot of these still have to roll to claim. If they do, you know, clearly the pre-’22 book has a lot of built-in equity. I would say the post-’22 book is really the more normal. So you’re going to see—we’re seeing—higher severities.

That’s really the business. I wouldn’t really look at 2021 as the business; that was really an anomaly that’s starting to work its way out. And if you’re again thinking longer term or from a modeling perspective, Terry, we’ve always said we expect 2% to 3% claim rate—that’s what we price for. And then in terms of combined ratio, kind of in that 35 to 45 range. So this is—I don’t want to say it’s always within our expectations—but it doesn’t really surprise us. And I still think just look at our cash flow over the past 12 months—still in excess of $800 million. So not a lot of cash is leaving the company yet.

I mean, again, we’ll start paying more claims over time. But I do think what you’re seeing is a normal MI business. And based on that it’s still—I mean it’s still pretty good.

Terry Ma (Analyst at Barclays)

Got it. Super helpful, thank you.

OPERATOR

Thank you. Our next question comes from Doug Harder with BTIG. Your line is open.

Doug Harder (Analyst at BTIG)

Thanks and good morning. Hoping you could just talk about your view on competition. You know, you guys continue to kind of be slightly below pro rata market share and just kind of how you think—what that tells us about your view of the risk-adjusted returns in the market.

Mark Casale (Chairman and CEO)

Hey Doug, welcome back. Nice to have you back on the calls. I would say the competitive market is still pretty similar. We haven’t seen much of a change. I think for us, we always do—we probably fall back a lot on the unit economics and we tend to look at our earned premium base; premiums are a little bit higher than the industry. We focus a little bit on that and we like to do just—it’s a small market, Doug—so we don’t really look. We’d love to be one of six, so a little bit higher on the share, but we’re not particularly concerned given the smaller nature of the market.

And we’re kind of using this opportunity to test a lot of things. We’ll test pricing. Remember Essent Edge, which is really our credit engine and does help us—and we can get into that a little bit more just in terms of Vantage—but it really helps us. You know, we’re really looking at, you know, kind of our estimated claim rate. So we’ll look and we’ll test geographies, we’ll test lenders, we’ll test certain tails. So it’s working as well as we’d like.

I mean, sometimes we know we may sacrifice a little bit of volume for that, but I think longer term, given the small nature of the market, we’re not particularly concerned in terms of the competitive environment. I would look at it as every MI seems to have their own buy box, right? Some like lower LTVs, some like higher credits, some like certain geographies, certain lenders. But I do think it kind of balances out in the end. So I wouldn’t read too much into our kind of take on the market because we’re a little bit lower.

Doug Harder (Analyst at BTIG)

Appreciate that, Mark. Thank you.

OPERATOR

Thank you. Our next question comes from Mahir Bhatia with Bank of America. Your line is open.

Mahir Bhatia (Analyst at Bank of America)

Hi, good morning. Thank you for taking my questions. Maybe I’ll just start with something you just mentioned there, Mark, about Vantage and Essent Edge. Can you talk a little bit more about that?

Mark Casale (Chairman and CEO)

Sure. I mean, I think Vantage is coming into the market and it’s not very big right now here. It’s probably less than 5% of our originations. I don’t think it’s going to impact the MI industry that much. I think it’s going to impact the MBS buyers and certain buyers of loans more because they’re so focused on FICO. But I think when we look at it—FICO 10T vs. Vantage—I think our advantage with Edge is we’re looking at the raw credit data, so we’re coming up with our own score.

So we’re agnostic to, kind of—you know, we use it, you know, it’ll impact those scores, but it’s not really driving our ultimate claim rate. And anything we’re on the card with, you know, clearly that’s going to go Vantage or FICO, depending on the lender. We also run that through Edge on the back end, so we feel like we have a real good common denominator. And we may start disclosing that over time. We’ll see how it goes, but it’ll at least give investors what our view is on credit and the ups and downs.

I think from a bigger picture, with Vantage you could see a little bit of pricing compression if they start to pick like the best of all. And I would be surprised if the industry doesn’t respond and raise pricing a little bit. I mean, you’re talking like a basis point or two; it’s not big dollars. But I’d be surprised if the industry doesn’t react. I think on the other hand, I do think you may see a larger market. I would believe, especially if there’s some inflation, you could see FHA borrowers migrate to conventional which I think, again, if that’s better for the borrower, that’s good.

So I think net-net is probably a positive for the industry over the next year or two.

Mahir Bhatia (Analyst at Bank of America)

Got it. The other question I had was just in terms of insurance in force growth at current market size, right. I mean if you think about 80% persistency, you have, I guess, approximately $50 billion running off each year. NIW is running about that same level. Should we expect insurance in force to be flat or even down next year?

Mark Casale (Chairman and CEO)

Well, it’s tough for me to say right now. I do say that it has been relatively flat. I mean we’re entering 2027—kind of the fifth-plus year of just a flat market. So I think, given where rates were, we were able to grow insurance in force a little bit over the past few years. I wouldn’t be surprised if it flattens out a bit. That being said, Mahir, I do think we’re levered more for the upside. I do think when you think about where housing has been relatively stagnant—and we can talk all day long about demographics—but I do believe there’s a pent-up demand for housing, and kind of the longer this slowness hangs around, the larger the snapback will be. So bigger picture, you know, look at $1.6 trillion of industry insurance in force for the whole industry—I wouldn’t be surprised to see that grow to two—not next year but let’s say over a certain period of time.

Again, take our share. So I do think growth will resume, and I don’t think a lot of investors see that. And that’s fine, right? It’s hard in this environment. But I do think we have that kind of growth because housing will come back. It always does, it always resumes. It’ll grow in line with GDP. You just have to think through why it’s not growing. And part of it was 2021 was such an anomaly. We literally pulled five, six years’ worth of growth into one or two years—home prices up 50% in two years. It’s just not normal. So now you’re seeing more of the normalization. So we’re flattening out. We’re fortunate as a company that because of the persistency and the benign credit environment, we’re still driving a lot of cash flow to the bottom line. But some of the other participants—the transaction-oriented businesses—it’s less so.

But we really look at it internally as we’re paid to wait, and the way we’re kind of managing capital over time—because remember, insurance in force, if it doesn’t grow, the capital needed to support it doesn’t grow. So that becomes free cash flow, which again we’ve used predominantly the last 18-plus months to repurchase shares, which we think right now is a pretty good use of proceeds for the company.

Mahir Bhatia (Analyst at Bank of America)

Got it. Thank you.

OPERATOR

Thank you. Our next question comes from Roland Mayer with RBC Capital Markets. Your line is open.

Roland Mayer (Analyst at RBC Capital Markets)

Hey, good morning and thank you for the time. Mark, I think you said in response to a question that you price for a 2% to 3% claims rate but that you still book new notices in a much higher figure than that. What would it take to close the gap?

Mark Casale (Chairman and CEO)

Well, remember when we book new notices, that’s not what our ultimate—these things roll. So that’s our initial claim rate, 2% to 3% rolling at the end. So it’s kind of apples and oranges. So think of it again as the ultimate claim rate. So just picture unit economics, right? So premium rate, net premium rate, kind of loss rate, which is your claim rate—that’s kind of your return on asset. Then you have your expenses and your investment income. It’s relatively straightforward. But I do think the claim rate historically for us has been less than 1%. That is just—we’re pleased with it. But I think normally you’re going to have to look in that 2% to 3% range. Hence, when you kind of run through the math, that gets you to that 35 to 45 combined ratio.

And I do think that’s a good guide. A 35 to 45 combined ratio, kind of 80-ish persistency longer term, is actually a good guide as you start to model this stuff out.

Roland Mayer (Analyst at RBC Capital Markets)

Thank you, that’s helpful. And then I guess from a competitive dynamic, we’ve seen a lot of multi-year quota share deals announced in the industry at fairly cheap costs of capital. Do you expect that to drive any change in pricing decisions as a result of the improved reinsurance dynamics?

Mark Casale (Chairman and CEO)

Great, great question. I don’t know. We don’t do it. I mean, we look at it, we price on an unlevered basis. We do not take the reinsurance cost and rotate that back into the front end. And part of it is just how the market works, right? I mean, there’s only six participants. So if you use that to lower price, it’s easily matched, and I’d be surprised if the other participants use it that way too because it’s really just reducing premium in the industry.

So I think what we would do, the way we look at it is we’ll price for kind of an unlevered return, and anything that is cheaper, so to speak, on the reinsurance side really benefits our shareholders. If we took that and just lowered price, then shareholders don’t really gain from that. And I think for reinsurance we generally have gone two years. We’ve seen some of the—yeah, we’ve seen a few participants go three years, which again speaks to, one, the demand for reinsurance in MI.

There’s really not a lot of GSE reinsurance, so we’re kind of the only game in town. We like it, and I think we’ll continue. We think it’s a great tool. But I would remind you that we do like capital too. All right? I mean, I think reinsurance protects you in the event of a—call it higher unemployment, more losses. Reinsurance clearly protects you. Capital lets you take advantage of those type of situations. And I give you the example—it’s dated now, but in 2020 we talked earlier—we were the lowest in market share. But in 2020 we’ve only been number one in market share twice in our history, and both times were in 2020, the second and third quarter, when we had raised capital in May. We had a lot of capital. We wrote—I think we had a 20% handle one. And part of it was because there wasn’t as much capital around the industry and there was a little bit of a shock event.

We took advantage of it. Again, I think you have to look at it both ways. Reinsurance is a great tool. It’s really part of our—when we think about buy, manage, and distribute—as a key piece of it. But when you think about capital longer term, you also have to worry about the time tail. So when we think about how do we think about excess capital—clearly, you know, insurance in force isn’t growing. We have a lot of excess capital. Could we use it for opportunities outside of the core? Relatively small. We’d love to plow it back into the core business. And then we look and say how much do we need in an event? So remember, we hold first loss. We really hedge out against a mezzanine; we reattach at the top. So for our business—Roland, I know you cover the P&C market—a cat event for us is a severe macroeconomic recession.

What’s the probability of that happening in the next two to five years? Probably pretty low. Not zero. So I think we’ve been through it. I’ve managed through the GFC. I’ve been through the subprime crisis of the late 90s. We’ve seen the movie before, so we think having dry powder to take advantage of an event—and also when you think about just the, you know, kind of the price of the—it’s a call option. Right. I mean, so the price of holding on that additional capital, we actually think is relatively cheap versus returning all of it to shareholders.

I think for us, from a capital return, we’re going to be in excess of 100% this year. We bought back 10% of the company last year. Wouldn’t be surprised if we’re close to that this year. Again, I think we’re fortunate in terms of how much capital we’re generating. I think we’re using most of it to buy back capital because we think that’s the best use of funds now. But we’re still, you know, we’re still retaining a little bit. We like to have dry powder, you know, either for an opportunity that presents itself on the offensive nature or just being defensive.

Roland Mayer (Analyst at RBC Capital Markets)

Thank you. And then if I could just sneak in one more. We’re coming up on 1/1 renewals here. Is there any interest in expanding the P&C appetite? And can you discuss your premium expectations there?

Mark Casale (Chairman and CEO)

Yeah, I mean, we’re clearly in conversations now with Lloyd’s around, you know, kind of our Funds at Lloyd’s commitments. I think there’s a few where we’d like to increase our allocation. There’s one or two we’re going to decline because, you know, they’re using 100% FAL, there’s not a lot of alignment, so, you know, we’re not. The key there is to continue to—we talked about test—we’re continuing to test the market. We like our approach with Lloyd’s. It’s clearly different than some, but I think it probably more suits our style. So you could see us grow a little bit, but I wouldn’t expect a lot. And then on the quota share that we did last year, that actually renews again for another year. And we’ll look to potentially do some other retros or even some direct reinsurance with cedents, but we’ll see how it goes. A lot of the submissions are coming in, but it’s really the same unit economics kind of framework that we have on the MI side.

So we’re looking at it. We’re building out the infrastructure. But I’ll give you a lot more color in February. It’s a little early to tell because we’re just starting to see it. But again, lots of capital floating out there. We don’t need to push on growth there for the sake of growth.

Roland Mayer (Analyst at RBC Capital Markets)

All right, thank you for the answers.

OPERATOR

Thank you. As a reminder to ask a question, please press 11 on your telephone. Again, please press 11 to ask a question. Our next question comes from Bose George with KBW. Your line is open.

Bose George (Analyst at KBW)

Hey, everyone. Good morning. Actually, just a couple of bookkeeping questions from me. What was the share repurchase activity just in October?

David Weinstock (Chief Financial Officer)

Yeah, Bose, it was about 50 million shares. Let me just pull it back up. Yeah, about 51 million shares for a little over $800,000.

Bose George (Analyst at KBW)

Okay, great. And then actually, in terms of the tax rate, it was up a little bit.

David Weinstock (Chief Financial Officer)

I got it backwards. Let me correct that. I read it backwards. 802,000 shares for about $51 million. Makes more sense.

Bose George (Analyst at KBW)

Yes. Okay, great. Thanks. And then on the tax rate—yeah, no worries, thank you. On the tax rate, you know, what’s a good number going forward? You know, it was up a little bit. Is it, you know, more flattish going forward?

Mark Casale (Chairman and CEO)

Yeah, I would—I would—hey, I mean, Dave can kick in, but I would guide a little higher, Bose. I mean, that’s kind of 17-ish, maybe even 18-ish. Just remember the friction costs we have from getting it from the U.S. to Bermuda, you know, so there’s a 5% withholding tax. So you can kind of do the weightings, but I’d be a little conservative there if I were you.

Bose George (Analyst at KBW)

Okay, great. And then actually, just one more. The other income line item—just to confirm—that’s the GSE CRT business, right?

David Weinstock (Chief Financial Officer)

No, actually, other income for MI this quarter, which had a little bit of an increase—as we’ve disclosed, with our ILN transactions, there’s a little bit of an accounting nuance there where we have an embedded derivative, or the literature says we have an embedded derivative, in those ILN transactions. We mark them to market every quarter. We did have a transaction terminate in the third quarter, which released a liability and ultimately flowed into income.

So that’s what you’re seeing there. We have that disclosed in the financial supplement. Not something you see every quarter at that magnitude, but that’s really what you’re seeing.

Bose George (Analyst at KBW)

Okay, great. And so the CRT stuff goes through the regular premium line for the reinsurance.

David Weinstock (Chief Financial Officer)

That is correct. That’s right. The CRT business and RE will go through the premium. That’s right, yep.

Bose George (Analyst at KBW)

Okay, great. Thanks a lot.

OPERATOR

Thank you. Our next question comes from Rick Shane with JPMorgan. Your line is open.

Rick Shane (Analyst at JPMorgan)

Hey guys, thanks for taking my questions this morning. Look, you know, we see defaults picking up and some of that is seasonality and some of that is cyclicality. I am curious where you guys sort of think we are from a cyclical perspective. And can you give us any characterization of the defaults that emerged during the third quarter so we can think about cures or risk associated with it?

Mark Casale (Chairman and CEO)

Yeah. Hey Rick, we still don’t—we don’t see really any trends. I mean, the defaults are up, so they’re close to 22,000. I do—and we sound like a broken record here—but when the book’s 40 months old and these guys have been around for a while, some of them are going to default a little bit more. The newer book, this ’23, ’24, ’25 book, I just think it’s not as good as the earlier book. So, you know, you’re going to see, as Dave said, larger loan sizes.

So some of it’s coming through that in terms of the provision. But we don’t really see—we look all the time, right—so you’re looking at defaults and you’re looking at it. There’s a couple ways you have to look at it: clearly by geography, right, given where home prices could be up and down; you’re looking at by lender. You also have to look at it by servicer, and that’s something you have to be careful—I think investors have to be cognizant of. If there is a downturn, can the servicer actually collect the payments from the borrower?

And that’s going to be critical. We’re not seeing much. And again, I would always tie it back to unemployment. Unemployment, I think, actually ticked down, so it’s 4.1. So as long as the economy stays strong, I wouldn’t be surprised to see the book continue maybe to normalize, but we don’t see any kind of skeletons in the closet whatsoever.

Rick Shane (Analyst at JPMorgan)

Got it. As always, I appreciate the transparency, Mark. Thank you.

OPERATOR

Thank you. Our next question comes from Jeffrey Dunn with Dowling & Partners. Your line is open.

Jeffrey Dunn (Analyst at Dowling & Partners)

Thanks. Good morning. Unit economics are double digit. But when we consider the necessary capital buffer, Mark, do you think MI is a double-digit return business in a normalized market?

Mark Casale (Chairman and CEO)

Yes, firmly. I mean, again, don’t confuse unit economics with our balance sheet. I would look—we firmly think it’s 12% to 15%. That’s our hurdle. It’s also the hurdle with strategic investments as we put money to work there. It’s clearly the hurdle at S&RE. It’s the hurdle at title, and quite frankly, title is not hitting that hurdle because of where rates are. I think, again, the lag between our unit economics and the business is really just the capital we’re holding on the balance sheet.

And again, Jeff, we just think that’s a relatively cheap option to hold. And so it’s probably a couple points in terms of excess capital that we’re holding. But again, given where we are in the market and just our experience, we’re perfectly comfortable holding that capital. And meanwhile, we’re still returning all that to shareholders, but hopefully that helps you. Thanks very much.

Jeffrey Dunn (Analyst at Dowling & Partners)

Appreciate it. And then I apologize. I got the October buyback, but missed the quarter’s buyback total.

David Weinstock (Chief Financial Officer)

Yes, Jeff, so for the quarter, we repurchased about 1.1 million shares for $74 million. That was for the third quarter.

Mark Casale (Chairman and CEO)

Yeah. Pretty light in the quarter, Jeff. I wouldn’t read too much into it. I think we kind of look at it more on a yearly basis. I think we bought a lot back in the second quarter, and again, I think it’s public, but I think we bought back 1 million shares at like 56 bucks in June. Someone just had to dump the shares. And I think it was the week that Google was raising their $84 billion and people were looking. So we like to take advantage of those things.

And again, if you look at bigger picture, we continue to grow book value per share. We’ve grown it, whatever, since the IPO—17, 18%. The stock looks like a bad EKG. It goes up, but it’s pretty volatile. And I think our view is we like to continue to buy it when it gets, you know, we think, cheaper and then probably lighten up a little bit on the other end. So I wouldn’t read too much into quarter to quarter.

Jeffrey Dunn (Analyst at Dowling & Partners)

All right, thanks.

OPERATOR

Thank you. I’m showing no further questions at this time. I would now like to turn it back to management for closing remarks.

Mark Casale (Chairman and CEO)

I’d like to thank everyone for joining today. Excellent questions, and have a great weekend.

OPERATOR

This concludes today’s conference call. Thank you for participating. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.