Mark Casale - Chairman and Chief Executive Officer Adolfo Marzol - Executive Vice President Larry McAlee - Chief Financial Officer.

Eric Beardsley - Goldman Sachs Mark DeVries - Barclays Jack Micenko - SIG Geoffrey Dunn - Dowling & Partners Sean Dargan - Macquarie Trevor Seibert - KBW Rick Shane - JPMorgan Sam Mitchell - Credit Suisse Amy DeBone - Compass Point.

Ladies and gentlemen, thank you for standing by. Welcome to the Essent Group Limited Third Quarter 2014 Financial Results Conference Call. During the call, all participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session.

(Operator Instructions) Please note that this call is being recorded today, Thursday, November 6, 2014 at 10:00 AM Eastern Time. I would now like to turn the meeting over to our host for today’s call, Chris Curran, Senior Vice President of Investor Relations. Please go ahead..

Thank you, operator. Good morning, everyone and welcome to our call. Joining me today are Mark Casale, Chairman and CEO; Adolfo Marzol, Executive Vice President; and Larry McAlee, Chief Financial Officer.

Our press release, which contains Essent’s financial results for the third quarter of 2014 was issued earlier today and is available on our website at essentgroup.com in the Investor section. Our press release also includes non-GAAP financial measures that may be discussed during today’s call.

The complete description of these measures and the reconciliation to GAAP may be found in our press release in Exhibit M. 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, 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 March 10, 2014 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..

Thanks, Chris. Good morning, everyone and thank you for joining us today. I am pleased to report that Essent had another strong quarter of operating performance as we continue to build a high credit quality and profitable mortgage insurance portfolio.

For the third quarter, we earned $25.1 million or $0.29 per diluted share, while growing our insurance in force to $46.4 billion. Our net income for the quarter increased 28% from $19.6 million earned last quarter, while our insurance in force increased 18% from last quarter and 65% compared to a year ago.

Our increase in insurance in force continues to be driven by our strong market position. During the third quarter, we added $8.8 billion of NIW to our insured portfolio consisting of $7.3 billion of flow NIW and $1.5 billion of bulk NIW.

For the 12-month period ended September 30, 2014, the number of active customers generating NIW was 934 compared to 671 a year go. Our insurance in force growth continues to drive top line revenues and further operating expense leverage.

Earned premium for the quarter was $60.3 million, a 20% increase from the prior quarter and a 76% increase compared to the third quarter of a year ago. Our expense ratio for the quarter was 41% compared to 47% last quarter and 53% a year ago. Finally, our credit quality remains excellent ending the quarter with a default ratio of 15 basis points.

And as a result, our combined ratio for the quarter was 43%. Now, let me turn our attention to our Bermuda reinsurer, Essent Re, which initiated activity during the third quarter.

As previously reported, Essent Re was selected by Freddie Mac in July to participate in a recent ACIS transaction, in which we insured $28.5 million of risk that Freddie Mac had retained as part of its stacker program.

Also during the quarter, Essent Re began reinsuring new business from Essent Guaranty as part of the quota share entered into effective July 1, 2014. We are very excited about this quarter’s activity and continue to view Essent Re as an opportunity to create incremental shareholder value.

On the PMIERs front we submitted our comment letter in September. Our letter reflects our view that strong and transparent standards are in the best long-term interest of our industry, policy holders and shareholders.

We believe that such standards will restore confidence in our industry and can facilitate expansion of private mortgage insurance solutions in the U.S. housing finance system.

Also, while vibrant and reliable private label securitization market has yet to return, strong and transparent MI standards (facilitate) a future PLS market by restoring confidence to both issuers and investors regarding the benefits of private mortgage insurance. Now, let me turn the call over to Larry to cover some of the financials..

Thanks Mark and good morning everyone. In addition to the strong financial results Mark discussed at the beginning of our call, I want to touch on some additional items.

Our provision for losses and loss adjustment expenses for the third quarter was $1.4 million compared to $966,000 in the second quarter of 2014 and $319,000 in the third quarter a year ago.

Our provision for the quarter is in line with the slight increase in our default rate to 15 basis points as of September 30 from 13 basis points last quarter and 9 basis points at the end of the third quarter a year ago. Our expense ratio for the third quarter was 40.6%, a decrease from 47% last quarter and 53.2% for the third quarter a year ago.

Other underwriting and operating expenses for the second quarter were $24.5 million, slightly higher than our expenses in the second quarter of $23.7 million and $6.2 million higher from the third quarter a year ago.

We continue to believe that for the full year 2014, other underwriting and operating expenses will be in the $95 million to $100 million range. The consolidated balance of cash and investments at September 30 was $915 million including cash and investment balances at the holding company of $47 million.

To support the growth of our insurance businesses during the third quarter, Essent Group contributed approximately $100 million to Essent Re and $25 million to Essent Guaranty. The contribution to Essent Re will be used the ongoing affiliate quota share reinsurance transaction and participation in the Freddie Mac ACIS deal.

The combined statutory capital of U.S. mortgage insurance companies was $664 million, reflecting an increase of approximately $64 million compared to the end of the last quarter. This increase was the result of statutory earnings and the previously mentioned capital contribution from the holding company. The combined risk to capital ratio of the U.S.

mortgage insurance business was 16.1 to 1 at the end of the third quarter. As of September 30, 2014, total consolidated GAAP equity was $795 million. Also, as of September 30, Essent Re had GAAP equity of $102 million and total risk in force of $462 million. Now let me turn the call back over to Mark..

Thanks Larry. In closing, we had an excellent quarter in our core business and our strong momentum continues in growing a profitable mortgage insurance portfolio. Our business development team has made great progress in expanding the Essent franchise throughout the U.S.

while the remainder of the Essent team provides the platform to support our growth and deliver best in class service to our customers. Participating in Fannie Mae’s risk share deal and Essent Re executing upon its first transaction with Freddie Mac is exciting for the future investments.

In addition the affiliate reinsurance provides an opportunity to further leverage our Bermuda structure and increase shareholder value. Essent is well positioned within our industry and the evolving U.S. housing finance system. We believe that Essent can play even a larger role facilitating lending by investing in long-term mortgage credit risk.

We remain very optimistic about the future of Essent, our industry and the value of mortgage insurance and housing finance. Now let’s turn the call over to your questions.

Operator?.

(Operator Instructions) Your first question comes from the line of Eric Beardsley with Goldman Sachs. Your line is open..

If you could just talk briefly about what led to the stronger premium rate this quarter, if that was just mix or if there was anything else?.

Hey, Eric, it’s Mark. It’s just mix. There is no real underlying driver to it..

Okay.

And then just on your capital position today just curious how comfortable are you having risky capital go up from here and how much dry powder do you have left at the holding company that pushed down to the MI subsidiary?.

I would say we are comfortable with our capital position, but we continue to evaluate capital needs both within Essent Guaranty and Essent Re and align that to our growth forecast..

Okay.

And I guess on the last call you had said you had been growing a bit faster than you initially anticipated it, is there any thought in terms of what the timelines might look like for you to, I guess, need incremental capital from here?.

Yes. Like I said, we continue to evaluate capital and really align it to our forecasts, so no change from that and how we look at them..

Okay, great. Thank you..

Your next question comes from the line of Mark DeVries with Barclays. Your line is open..

We have not seen much bulk volume in the industry at all since the crisis and you put up a nice $1.5 million of volume this quarter.

I would be interested in just hearing your thoughts kind of qualitatively, Mark, on what kind of opportunities that you are seeing there, what the business looks like? And also if you could comment on whether the $1.5 million you did this quarter was primary MI?.

Yes. I think we have disclosed some pretty good detail on the Fannie Mae transaction or the bulk transaction in Exhibit D. So, we are not going to go into a lot more detail around that, other than to say, we look at it as really another addition to our portfolio. And as you guys know, the portfolio is really what’s driving the revenue growth at Essent.

So, from that standpoint, very pleased on how we added to the portfolio in the third quarter, in terms of the trends on the bulks, really Mark very little visibility to it. So, I mean, they have acted – that was a transaction that we liked and were comfortable with, but don’t have a lot of visibility into the future of those type of deals..

Okay, great.

And then on credit, I mean losses obviously remain extremely low, interested in your thoughts on whether the credit is evolving even better than you would have thought?.

Yes. I mean, I think we are very pleased with the underwriting from our lender partners in the credit that we have seen to-date. I would just caution to investors it’s still very early in the process. Our book is very young.

So, although we are pleased with the early performance in the credit characteristics of our portfolio, it’s too early to call in terms of the ultimate loss rate..

Okay, thank you..

Your next question comes from the line of Jack Micenko with SIG. Your line is open..

Curious as to what kind of business level you think the $100 million operating expense number could kind of carry into either on a 2015 basis or some sort of annualized basis, trying to get that how much more operating leverage you can see coming out of the expense base?.

Yes. Hey, Jack, it’s Mark. I would say with the $100 million remember we really wanted to overcapitalize that subsidiary in the beginning. Just like we did with Essent Guaranty, we believe really in strong capital levels. Essent Re and Essent Guaranty are no different.

We continue to evaluate the capital needs in both and align that with our growth forecast..

Okay.

And then on tax rate, I mean I know you will probably address this later on and it’s dependent on business volume, but can you give us a sense of what the opportunity set is in sort of blended tax rate in 2015 or ‘16 or is it just too hard to guess at this point?.

Hey, Jack, it’s Larry. Let me respond to that question. I think as you know we have talked about this in prior quarters. Substantially, all of our revenues and all of our expenses have been incurred in the U.S. And accordingly, our effective tax rate has been pretty close to the federal and statutory tax rate of 35%.

As a result of the transactions executed in Bermuda, the proportion of our consolidated earnings generated offshore will increase. And as a result of that, you will see a further reduction in our tax rate beginning in 2015..

Okay, but you don’t have a sense of sort of magnitude at this point for modeling purposes?.

No, I think we are seeing it up 25% through the affiliate....

I think the math is pretty clear and Jack I am not sure were you asking an expense question earlier, I think you may have and I answered the wrong question.

In terms of expenses I think the way to look at it is kind of 7% to 10% growth over the next few years kind of still guiding towards 95 to 100 this year and kind of 7% to 10% growth over the next few years..

Okay. Yes. And that’s – but I appreciate the other answer anyway. And then just for a – with your big picture question ‘97, Mark you have been around MI for a long time I mean what percentage of the market had ‘97 been in and I will call it ‘00 to ’04 or ‘98 something normal where credit standards weren’t crazy.

And then on that I mean piggybacks were a big deal then regulatory capital, bank rules probably not this time around did you ever have a sense of what piggyback was doing was taking from MI that may be an opportunity set for the industry NIW numbers prospectively? Thanks..

Hi Jack. On 97s I mean I think you can even look to earlier within Essent when 97s were still outstanding. And it’s still – it’s a pretty small percentage. So and Fannie or Freddie haven’t officially rolled any program out. So I think there is pretty low visibility into it and it’s very incremental as it is.

In terms of piggyback it’s a little difficult to size that. I think it was probably some of the better credits that you saw go towards piggybacks that kind of in the late 90s, early 2000s and that’s in – those are in our originations now, so tough to say what that adds incrementally to the industry..

Alright, fair enough. Thank you..

Your next question comes from the line of Geoffrey Dunn with Dowling & Partners. Your line is open..

Thanks. Good morning. I was hoping to get your thoughts on the singles market through a couple questions. First, I am curious if you guys participated in any of these aggregate single deals.

And then second hearing more and more about negotiated single rate cards, kind of reminding us of the pre-crisis off card rating approach for the industry, is the single a good business or is it kind of emerging as a maybe I am overstating at a necessary evil to get in for borrower paid monthly.

Now I am just curious of your overall thoughts on the singles business and how it’s evolved over last couple of quarters?.

Yes. I mean Geoff, we don’t comment on any particular like lenders or transactions or anything of that sort. I would just really point you to our portfolio and we really look at the portfolio and how we grow the portfolio.

What are the premium characteristics of the portfolio, what are the credit characteristics of the portfolio, our single percentage has been pretty consistent around 20% of our volumes.

So I think you are seeing some industry shift maybe over the past year because of the BPMI singles, have kind of gone away because of the QM and it’s kind of shifted to the LPMI. So you are seeing some geographies switch amongst maybe some of the MIs. But in general we are seeing price competition since the day we started the business.

I mean there was one insurer and in particular they had lower monthly and single prices than everyone else and we continued to grow the business.

So pricing comes and goes, we really focus on how to continue to help our clients grow, how do we manage our portfolio? I mean we don’t get a lot caught up in kind of the quarter to quarter kind of changes or ebbs and flows of the business..

Okay.

How about if asked differently then, how did the returns on your singles business compared to your monthly?.

I would say we are very comfortable with the overall returns on our portfolio. We don’t breakout individual deals or transactions or singles versus monthlies. Overall, I mean I just pointed to the average premium yield in our stat supplement and it’s pretty strong..

Okay. Thanks..

Your next question comes from the line of Sean Dargan with Macquarie. Your line is open..

Thank you and good morning.

I have a question about the discussion around the FHFA providing more clarity around rep and warranty liability, do you think this is really – this is your opinion, do you think this is really holding back banks from lending now and do you think if there is anything on the margin down around rep and warranty liability that would increase lending to first time homebuyers?.

Hi, Sean, it’s Mark. I will start off maybe Adolfo can add. That’s a little bit offside our bailiwick I mean it’s really a lender issue. I would say I think better – the lenders are better quick to answer that question. I do not see a lack of credit availability in the market today both with conventional and FHA.

So, in terms of changing or altering some of the repurchase requirements, I think that helps the liability position of our lenders, which we think will be a very good thing, but I don’t see it as really opening up more credit availability.

I mean, our view in the market is it’s really kind of lack of demand that’s holding back the market, which we think will probably improve over time as the economy improves and so forth, but we don’t see that holding back to market at this time..

Hey, this is Adolfo. I guess the only thing I would add is that I am pleased in the MI industry that as an industry we rolled out new master policies October 1. And I think those master policies at least for our industry are tremendous step forward broadly speaking in terms of fair treatment of claims and handling of rep and warranty issues.

So, I think a big step forward for the MI industry and if there is any lack of confidence to lender was a lack of confidence to lend because of rep and warrant concerns around the MI. I think, certainly Essent had addressed that issue for some years, but a very positive step forward for the industry..

Thanks.

And do you see any opportunity to work with the VA, just wondering what discussions you may have had with them?.

Yes, I mean – hey, Sean, this is Mark. Very early in the process very difficult to dimension kind of the ultimate prospects for that type of business..

Okay, thank you..

Your next question comes from the line of Bose George with KBW. Your line is open..

Actually, Trevor Seibert stepping in for Bose. Just want to ask about your growth prospects, how much of the market do you think is left for you take on? I think you talked about before having turned on about half of your client goal in terms of the number of clients and a little more than that, in terms of volume.

So, can you just give us an update on where those goals stand and what the growth opportunities look like?.

Hey, Trevor, it’s Mark. Not a lot of change in kind of your overall market penetration. We continue to increase kind of the depth and breadth of our customer base. So, it’s grown from 671 this time last year to 934 and we look at it really activating new clients and then utilization of clients.

So, I would say, we are continuing on the path towards that and it’s something we really focus on to continue to kind of build out the business. And we look at it as a way to continue to increase flow into our portfolio, which again is what really is driving the business at Essent..

Great, thanks.

And I think you mentioned earlier on the 25% limit to seeded business to your affiliate, can you – do you need approval from the GSEs to go over that 25% or are you not affected by it?.

In terms of the 25%, we are comfortable with that percentage right now and that percentage could obviously change over time higher or even lower, but I would say right now, we are very comfortable with the percentage..

Great, thanks..

Your next question comes from the line of Rick Shane with JPMorgan. Your line is open..

Hi, guys. Thanks for taking my question. Most of my questions have been asked and answered, but I just wanted to touch on credit a little bit.

Mark, you had sort of declined to answer whether or not you think this is a seasoning issue or just an overall quality issue in terms of why credit is trending better at least at this point, would love to get your thoughts.

Can you delve into it a little bit more in terms of do you think it’s a mix issue? Is the portfolio – is there something in terms of the originations that have been better in terms of FICO score or is this overall macro in terms of price appreciation do you think?.

Well, hey, Rick, I think it’s a combination of factors. I do think the manufacturing quality of the loans by our lender partners has been excellent. They have done a great job.

I think the overall FICO mix is higher than it’s been in the past, which I think also contributes to the performance along with the recovering economy and like slower home price appreciation, which we like.

In terms of the ultimate claim forecast, I would point folks back to the late 90s, which is kind of a comparable period of which we have seen, where the claim rates were probably in that 1.5% to 3% range. I think the lower part of the range, a lot of those folks were refinanced out in the early 2000.

So I would focus in that kind of 2% to 3% range as we think probably mid to upper part of that range is kind of the ultimate claim rate. But I would say generally again it’s early in the process. So we would like to caution folks on that. But we are certainly pleased with the characteristics of what we have originated life to-date..

Great. Thanks for diving into that a little bit, I appreciate it..

Your next question comes from the line of Sam Mitchell with Credit Suisse. Your line is open..

I am filling in for Doug Harter. Thank you for taking my question.

So, I noticed that quarter-over-quarter that the hold cold cash declined significantly, I know you guys typically don’t pin the number but what was the logic behind this?.

Hey Sam, it’s Mark. We – I think the big issue – the driver that was really we – and we announced this last quarter and we put $100 million down from Essent Group into Essent Re. So that’s really driving the number..

Sure, okay, alright. Thank you so much..

You’re welcome..

Your next question comes from the line of Jason Stewart with Compass Point. Your line is open..

Hi, this is Amy sitting in for Jason.

In terms of average paid, the quarter’s increase kind of went against the declining trend for average loan side, was the increase due to maybe one particularly large default and where do you see this trend heading over the next year relative to the first quarter and second quarter?.

Hey, it’s Mark. I will start and then kick it over to Larry. I wouldn’t get into kind of individual claim amounts and therefore our book is so young and the claims are so few that there are no real trends..

I would add to what Mark said, I think it’s really just a lot of small numbers, so one claim can have an impact between quarters. But overall we are not seeing any trends in terms of – that we see are substantial..

Okay.

And so the portfolio is showing a shift towards lower FICO and to a lesser degree higher LTV product, will this trend continue or was the NIW mix this quarter kind of a good proxy to use for the credit profile in your business over the near-term?.

I think the credit profile has shifted a little bit over the past 12 months to slightly lower FICOs and slightly higher LTVs. And we mentioned this a couple of calls ago, it’s really the mix the change in mix from purchase to purchase from refinancing. Purchase tends to have a little bit higher LTV, little bit lower FICO base.

So again nothing substantial in terms of the overall characteristics of the portfolio, but we have seen a slight change over the past 12 months..

And then just real quick going back to the ’97 LTV program, is it fair to say that if it does end up being a bigger market PMIs were maybe not capital constrained due PMIERs (Technical Difficulty) potentially have an advantage to certain peers who are?.

I wouldn’t look at it that way. I think ’97 even in terms of the market is going to be relatively small piece of it. And I would expect all of the MIs to participate in that, so no advantage for one MI over another in that market..

Okay, great. Thank you..

There are no further questions at this time. I will turn the call back over to Mr. Mark Casale..

Thank you, operator and I hope you feel better. We would like to thank everyone for participating in today’s call. And enjoy the rest of your day..

Ladies and gentlemen, this concludes today’s conference call. You may now disconnect..