Essent Group Ltd. Reports Fourth Quarter 2019 Results & Increases Quarterly Dividend
Essent Group Ltd. (NYSE: ESNT) today reported net income for the quarter ended December 31, 2019 of $147.0 million or $1.49 per diluted share, compared to $128.5 million or $1.31 per diluted share for the quarter ended December 31, 2018. For the full year 2019, net income was $555.7 million.
Essent also announced today that its Board of Directors has declared a quarterly cash dividend of $0.16 per common share. The dividend is payable on March 20, 2020, to shareholders of record on March 10, 2020.
“We are pleased with our strong financial results for both the fourth quarter and full year 2019 as the operating environment remains favorable and credit continues to perform well,” said Mark Casale, Chairman and Chief Executive Officer. “Also, during the quarter we were pleased with Moody’s upgrade of our financial strength rating to A3. We believe that this upgrade is a validation of our progress in making Essent a stronger and more sustainable franchise through the programmatic use of reinsurance.”
Financial Highlights:
Insurance in force as of December 31, 2019 was $164.0 billion, compared to $161.0 billion as of September 30, 2019 and $137.7 billion as of December 31, 2018. New insurance written for the fourth quarter was $15.8 billion, compared to $18.7 billion in the third quarter of 2019 and $11.4 billion in the fourth quarter of 2018. Net premiums earned for the fourth quarter were $207.7 million, compared to $203.5 million in the third quarter of 2019 and $173.3 million in the fourth quarter of 2018. The expense ratio for the fourth quarter was 19.9%, compared to 20.4% in the third quarter of 2019 and 22.8% in the fourth quarter of 2018. The provision for losses and LAE for the fourth quarter was $10.9 million, compared to a provision of $10.0 million in the third quarter of 2019 and a benefit of $1.0 million in the fourth quarter of 2018. The provision in the fourth quarter of 2018 included a $9.9 million release of the $11.1 million reserve associated with loans identified as related to Hurricanes Harvey and Irma that was established in the fourth quarter of 2017. The percentage of loans in default as of December 31, 2019 was 0.85%, compared to 0.75% as of September 30, 2019 and 0.66% as of December 31, 2018. The combined ratio for the fourth quarter was 25.1%, compared to 25.3% in the third quarter of 2019 and 22.2% in the fourth quarter of 2018. Other income for the fourth quarter includes a $3.6 million loss for the change in the fair value of embedded derivatives in certain of our third-party reinsurance agreements, compared to a loss of $0.8 million in the third quarter of 2019. There were no changes in fair value of embedded derivatives in the fourth quarter of 2018. The consolidated balance of cash and investments at December 31, 2019 was $3.5 billion, including cash and investment balances at Essent Group Ltd. of $98.4 million. The combined risk-to-capital ratio of the U.S. mortgage insurance business, which includes statutory capital for both Essent Guaranty, Inc. and Essent Guaranty of PA, Inc., was 12.6:1 as of December 31, 2019. On October 17, 2019, Moody’s Investors Service (“Moody’s”) upgraded the financial strength rating of Essent Guaranty, Inc. to A3 from Baa1. On January 31, 2020, Essent announced that its wholly-owned subsidiary, Essent Guaranty, Inc., obtained $495.9 million of fully collateralized excess of loss reinsurance coverage on mortgage insurance policies written by Essent in January through August 2019 from Radnor Re 2020-1 Ltd., a newly formed Bermuda special purpose insurer. Radnor Re 2020-1 Ltd. is not a subsidiary or an affiliate of Essent Group Ltd.Conference Call
Essent management will hold a conference call at 10:00 AM Eastern time today to discuss its results. The conference call will be broadcast live over the Internet at http://ir.essentgroup.com/investors/webcasts-and-presentations/event-calendar/default.aspx. The call may also be accessed by dialing 833-287-0797 inside the U.S., or 647-689-4456 for international callers, using passcode 3788913 or by referencing Essent.
A replay of the webcast will be available on the Essent website approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available approximately two hours after the call ends for a period of two weeks, using the following dial-in numbers and passcode: 800-585-8367 inside the U.S., or 416-621-4642 for international callers, passcode 3788913.
In addition to the information provided in the company's earnings news release, other statistical and financial information, which may be referred to during the conference call, will be available on Essent's website at http://ir.essentgroup.com/investors/financial-information/quarterly-financial-supplements/default.aspx.
Forward-Looking Statements
This press release may include “forward-looking statements” which are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," “should,” “expect,” "plan," "anticipate," "believe," “estimate,” “predict,” or "potential" or the negative thereof or variations thereon or similar terminology. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following: changes in or to Fannie Mae and Freddie Mac (the “GSEs”), whether through Federal legislation, restructurings or a shift in business practices; failure to continue to meet the mortgage insurer eligibility requirements of the GSEs; competition for customers; lenders or investors seeking alternatives to private mortgage insurance; an increase in the number of loans insured through Federal government mortgage insurance programs, including those offered by the Federal Housing Administration; decline in new insurance written and franchise value due to loss of a significant customer; decline in the volume of low down payment mortgage originations; the definition of "Qualified Mortgage" reducing the size of the mortgage origination market or creating incentives to use government mortgage insurance programs; the definition of "Qualified Residential Mortgage" reducing the number of low down payment loans or lenders and investors seeking alternatives to private mortgage insurance; the implementation of the Basel III Capital Accord discouraging the use of private mortgage insurance; a decrease in the length of time that insurance policies are in force; uncertainty of loss reserve estimates; deteriorating economic conditions; our non-U.S. operations becoming subject to U.S. Federal income taxation; becoming considered a passive foreign investment company for U.S. Federal income tax purposes; and other risks and factors described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission on February 19, 2019. Any forward-looking information presented herein is made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
About the Company
Essent Group Ltd. (NYSE: ESNT) is a Bermuda-based holding company (collectively with its subsidiaries, “Essent”) which, through its wholly-owned subsidiary, Essent Guaranty, Inc., offers private mortgage insurance for single-family mortgage loans in the United States. Essent provides private capital to mitigate mortgage credit risk, allowing lenders to make additional mortgage financing available to prospective homeowners. Headquartered in Radnor, Pennsylvania, Essent Guaranty, Inc. is licensed to write mortgage insurance in all 50 states and the District of Columbia, and is approved by Fannie Mae and Freddie Mac. Essent also offers mortgage-related insurance, reinsurance and advisory services through its Bermuda-based subsidiary, Essent Reinsurance Ltd. Essent is committed to supporting environmental, social and governance (ESG) initiatives that are relevant to the company and align with the companywide dedication to responsible corporate citizenship that positively impacts the community and people served. Additional information regarding Essent may be found at www.essentgroup.com and www.essent.us.
Source: Essent Group Ltd.
Essent Group Ltd. and Subsidiaries
Financial Results and Supplemental Information (Unaudited)
Quarter and Year Ended December 31, 2019
Exhibit A
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
Exhibit B
Condensed Consolidated Balance Sheets (Unaudited)
Exhibit C
Historical Quarterly Data
Exhibit D
New Insurance Written
Exhibit E
Insurance in Force and Risk in Force
Exhibit F
Other Risk in Force
Exhibit G
Portfolio Vintage Data
Exhibit H
Reinsurance Vintage Data
Exhibit I
Portfolio Geographic Data
Exhibit J
Defaults, Reserve for Losses and LAE, and Claims
Exhibit K
Investments Available for Sale
Exhibit L
Insurance Company Capital
Exhibit M
Reconciliation of Non-GAAP Financial Measure - Adjusted Book Value per Share
Exhibit A
Essent Group Ltd. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended December 31,
Year Ended December 31,
(In thousands, except per share amounts)
2019
2018
2019
2018
Revenues:
Net premiums written
$
196,493
$
176,437
$
760,845
$
685,287
Decrease (increase) in unearned premiums
11,178
(3,136
)
16,580
(35,795
)
Net premiums earned
207,671
173,301
777,425
649,492
Net investment income
21,977
18,597
83,542
64,091
Realized investment gains, net
833
158
3,229
1,318
Other income (loss)
(1,719
)
1,068
3,371
4,452
Total revenues
228,762
193,124
867,567
719,353
Losses and expenses:
Provision for losses and LAE
10,929
(999
)
32,986
11,575
Other underwriting and operating expenses
41,231
39,449
165,369
150,900
Interest expense
2,218
2,611
10,151
10,179
Total losses and expenses
54,378
41,061
208,506
172,654
Income before income taxes
174,384
152,063
659,061
546,699
Income tax expense
27,426
23,535
103,348
79,336
Net income
$
146,958
$
128,528
$
555,713
$
467,363
Earnings per share:
Basic
$
1.50
$
1.32
$
5.68
$
4.80
Diluted
1.49
1.31
5.66
4.77
Weighted average shares outstanding:
Basic
97,830
97,450
97,762
97,403
Diluted
98,376
98,066
98,227
97,974
Net income
$
146,958
$
128,528
$
555,713
$
467,363
Other comprehensive income (loss):
Change in unrealized appreciation (depreciation) of investments
(6,540
)
18,456
85,180
(25,741
)
Total other comprehensive income (loss)
(6,540
)
18,456
85,180
(25,741
)
Comprehensive income
$
140,418
$
146,984
$
640,893
$
441,622
Loss ratio
5.3
%
(0.6
)%
4.2
%
1.8
%
Expense ratio
19.9
22.8
21.3
23.2
Combined ratio
25.1
%
22.2
%
25.5
%
25.0
%
Exhibit B
Essent Group Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
December 31,
December 31,
(In thousands, except per share amounts)
2019
2018
Assets
Investments
Fixed maturities available for sale, at fair value
$
3,035,385
$
2,605,666
Short-term investments available for sale, at fair value
315,362
154,400
Total investments available for sale
3,350,747
2,760,066
Other invested assets
78,873
30,952
Total investments
3,429,620
2,791,018
Cash
71,350
64,946
Accrued investment income
18,535
17,627
Accounts receivable
40,655
36,881
Deferred policy acquisition costs
15,705
16,049
Property and equipment
17,308
7,629
Prepaid federal income tax
261,885
202,385
Other assets
18,367
13,436
Total assets
$
3,873,425
$
3,149,971
Liabilities and Stockholders' Equity
Liabilities
Reserve for losses and LAE
$
69,362
$
49,464
Unearned premium reserve
278,887
295,467
Net deferred tax liability
249,620
172,642
Credit facility borrowings, net of deferred costs
224,237
223,664
Other accrued liabilities
66,474
43,017
Total liabilities
888,580
784,254
Commitments and contingencies
Stockholders' Equity
Common shares, $0.015 par value:
Authorized - 233,333; issued and outstanding - 98,394 shares in 2019 and 98,139 shares in 2018
1,476
1,472
Additional paid-in capital
1,118,655
1,110,800
Accumulated other comprehensive income (loss)
56,187
(28,993
)
Retained earnings
1,808,527
1,282,438
Total stockholders' equity
2,984,845
2,365,717
Total liabilities and stockholders' equity
$
3,873,425
$
3,149,971
Return on average equity
20.8
%
21.7
%
Exhibit C
Essent Group Ltd. and Subsidiaries
Supplemental Information
Historical Quarterly Data
2019
2018
Selected Income Statement Data
December 31
September 30
June 30
March 31
December 31
September 30
June 30
March 31
(In thousands, except per share amounts)
Revenues:
Net premiums written
$
196,493
$
198,304
$
188,404
$
177,644
$
176,437
$
175,221
$
168,404
$
165,225
Net premiums earned (1)
207,671
203,473
188,490
177,791
173,301
166,675
156,958
152,558
Other revenues (2)
21,091
22,914
23,402
22,735
19,823
18,323
16,810
14,905
Total revenues
228,762
226,387
211,892
200,526
193,124
184,998
173,768
167,463
Losses and expenses:
Provision for losses and LAE (3)
10,929
9,990
4,960
7,107
(999
)
5,452
1,813
5,309
Other underwriting and operating expenses
41,231
41,588
41,520
41,030
39,449
36,899
36,428
38,124
Interest expense
2,218
2,584
2,679
2,670
2,611
2,500
2,618
2,450
Total losses and expenses
54,378
54,162
49,159
50,807
41,061
44,851
40,859
45,883
Income before income taxes
174,384
172,225
162,733
149,719
152,063
140,147
132,909
121,580
Income tax expense (4)
27,426
27,595
26,328
21,999
23,535
24,136
21,154
10,511
Net income
$
146,958
$
144,630
$
136,405
$
127,720
$
128,528
$
116,011
$
111,755
$
111,069
Earnings per share:
Basic
$
1.50
$
1.48
$
1.39
$
1.31
$
1.32
$
1.19
$
1.15
$
1.14
Diluted
1.49
1.47
1.39
1.30
1.31
1.18
1.14
1.13
Weighted average shares outstanding:
Basic
97,830
97,822
97,798
97,595
97,450
97,438
97,426
97,298
Diluted
98,376
98,257
98,170
98,104
98,066
98,013
97,866
97,951
Other Data:
Loss ratio (5)
5.3
%
4.9
%
2.6
%
4.0
%
(0.6
)%
3.3
%
1.2
%
3.5
%
Expense ratio (6)
19.9
20.4
22.0
23.1
22.8
22.1
23.2
25.0
Combined ratio
25.1
%
25.3
%
24.7
%
27.1
%
22.2
%
25.4
%
24.4
%
28.5
%
Return on average equity (annualized)
20.1
%
20.8
%
20.9
%
20.9
%
22.4
%
21.5
%
21.8
%
22.6
%
(1) Net premiums earned also includes premiums earned on GSE and other risk share. See Exhibit F.
(2) Certain of our third-party reinsurance agreements contain an embedded derivative as the premium ceded under those agreements will vary based on changes in interest rates. Other revenues for the three months ended December 31, 2019, September 30, 2019, June 30, 2019 and March 31, 2019 include unfavorable decreases of $3,585 and $760 and favorable increases of $1,160 and $1,424, respectively, in the fair value of these embedded derivatives.
(3) Provision for losses and LAE for the three months ended December 31, 2018 includes a $9,941 reduction associated with previously identified hurricane-related defaults based on the performance to date and our expectations of the amount of ultimate losses on the remaining delinquencies.
(4) Income tax expense for the three months ended March 31, 2019 and 2018 was reduced by $1,956 and $9,549, respectively, of excess tax benefits associated with the vesting of common shares and common share units during each period. Income tax expense for the three months ended September 30, 2018 includes $1,450 of expense associated with accrual to return adjustments associated with the completion of the 2017 U.S. federal income tax return.
(5) Loss ratio is calculated by dividing the provision for losses and LAE by net premiums earned.
(6) Expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned.
Exhibit C, continued
Essent Group Ltd. and Subsidiaries
Supplemental Information
Historical Quarterly Data
2019
2018
Other Data, continued:
December 31
September 30
June 30
March 31
December 31
September 30
June 30
March 31
($ in thousands)
U.S. Mortgage Insurance Portfolio
Flow:
New insurance written
$
15,839,836
$
18,719,876
$
17,973,505
$
10,945,307
$
11,408,542
$
13,913,191
$
12,850,642
$
9,336,150
New risk written
3,966,363
4,695,611
4,485,217
2,713,389
2,838,530
3,430,942
3,201,610
2,295,314
Bulk:
New insurance written
$
—
$
6,133
$
29,524
$
55,002
$
—
$
—
$
—
$
—
New risk written
—
842
2,129
6,542
—
—
—
—
Total:
Average gross premium rate (7)
0.51
%
0.52
%
0.51
%
0.50
%
0.50
%
0.51
%
0.52
%
0.52
%
Average net premium rate (8)
0.49
%
0.49
%
0.49
%
0.48
%
0.49
%
0.50
%
0.51
%
0.52
%
New insurance written
$
15,839,836
$
18,726,009
$
18,003,029
$
11,000,309
$
11,408,542
$
13,913,191
$
12,850,642
$
9,336,150
New risk written
$
3,966,363
$
4,696,453
$
4,487,346
$
2,719,931
$
2,838,530
$
3,430,942
$
3,201,610
$
2,295,314
Insurance in force (end of period)
$
164,005,853
$
160,962,192
$
153,317,157
$
143,181,641
$
137,720,786
$
131,249,957
$
122,501,246
$
115,250,949
Gross risk in force (end of period) (9)
$
41,402,950
$
40,540,289
$
38,531,090
$
35,925,830
$
34,482,448
$
32,786,194
$
30,579,106
$
28,691,561
Risk in force (end of period)
$
38,947,857
$
38,784,584
$
37,034,687
$
34,744,417
$
33,892,869
$
32,361,782
$
30,154,694
$
28,267,149
Policies in force
702,925
693,085
666,705
629,808
608,135
581,570
546,576
517,215
Weighted average coverage (10)
25.2
%
25.2
%
25.1
%
25.1
%
25.0
%
25.0
%
25.0
%
24.9
%
Annual persistency
77.5
%
82.1
%
84.8
%
85.1
%
84.9
%
84.0
%
83.0
%
83.5
%
Loans in default (count)
5,947
5,232
4,405
4,096
4,024
3,538
3,519
4,442
Percentage of loans in default
0.85
%
0.75
%
0.66
%
0.65
%
0.66
%
0.61
%
0.64
%
0.86
%
Other Risk in Force
GSE and other risk share (11)
$
895,374
$
849,184
$
802,530
$
771,175
$
655,384
$
612,750
$
592,493
$
557,692
Credit Facility
Borrowings outstanding
$
225,000
$
225,000
$
225,000
$
225,000
$
225,000
$
225,000
$
225,000
$
265,000
Undrawn committed capacity
$
275,000
$
275,000
$
275,000
$
275,000
$
275,000
$
275,000
$
275,000
$
110,000
Weighted average interest rate (end of period)
3.51
%
(7) Average gross premium rate is calculated by dividing annualized premiums earned for the U.S. mortgage insurance portfolio, before reductions for premiums ceded under third-party reinsurance, by average insurance in force for the period.
(8) Average net premium rate is calculated by dividing annualized net premiums earned for the U.S. mortgage insurance portfolio by average insurance in force for the period.
(9) Gross risk in force includes risk ceded under third-party reinsurance.
(10) Weighted average coverage is calculated by dividing end of period gross risk in force by end of period insurance in force.
(11) GSE and other risk share includes GSE risk share and other reinsurance transactions. Essent Re provides insurance or reinsurance relating to the risk in force on loans in reference pools acquired by Freddie Mac and Fannie Mae.
Exhibit D
Essent Group Ltd. and Subsidiaries
Supplemental Information
New Insurance Written: Flow
NIW by Credit Score
Three Months Ended
Year Ended
December 31, 2019
December 31, 2018
December 31, 2019
December 31, 2018
($ in thousands)
>=760
$
6,486,486
40.9
%
$
4,737,774
41.5
%
$
25,738,423
40.5
%
$
19,903,369
41.9
%
740-759
2,880,429
18.2
1,959,523
17.2
11,152,853
17.6
8,076,182
17.0
720-739
2,401,806
15.2
1,665,931
14.6
9,340,180
14.7
6,875,823
14.5
700-719
1,860,120
11.7
1,349,689
11.8
7,555,687
11.9
5,715,076
12.0
680-699
1,235,223
7.8
875,125
7.7
5,248,330
8.3
3,722,490
7.8
<=679
975,772
6.2
820,500
7.2
4,443,051
7.0
3,215,585
6.8
Total
$
15,839,836
100.0
%
$
11,408,542
100.0
%
$
63,478,524
100.0
%
$
47,508,525
100.0
%
Weighted average credit score
745
745
744
745
NIW by LTV
Three Months Ended
Year Ended
December 31, 2019
December 31, 2018
December 31, 2019
December 31, 2018
($ in thousands)
85.00% and below
$
2,084,932
13.2
%
$
1,384,296
12.1
%
$
7,874,266
12.4
%
$
5,731,894
12.1
%
85.01% to 90.00%
4,757,915
30.0
3,124,625
27.4
17,847,603
28.1
13,227,075
27.8
90.01% to 95.00%
6,771,196
42.7
4,955,729
43.4
26,852,903
42.3
20,579,615
43.3
95.01% and above
2,225,793
14.1
1,943,892
17.1
10,903,752
17.2
7,969,941
16.8
Total
$
15,839,836
100.0
%
$
11,408,542
100.0
%
$
63,478,524
100.0
%
$
47,508,525
100.0
%
Weighted average LTV
92
%
92
%
92
%
92
%
NIW by Product
Three Months Ended
Year Ended
December 31, 2019
December 31, 2018
December 31, 2019
December 31, 2018
Single Premium policies
10.4
%
13.5
%
11.1
%
15.3
%
Monthly Premium policies
89.6
86.5
88.9
84.7
100.0
%
100.0
%
100.0
%
100.0
%
NIW by Purchase vs. Refinance
Three Months Ended
Year Ended
December 31, 2019
December 31, 2018
December 31, 2019
December 31, 2018
Purchase
71.8
%
93.3
%
80.4
%
91.8
%
Refinance
28.2
6.7
19.6
8.2
100.0
%
100.0
%
100.0
%
100.0
%
Exhibit E
Essent Group Ltd. and Subsidiaries
Supplemental Information
Insurance in Force and Risk in Force
Portfolio by Credit Score
IIF by FICO score
December 31, 2019
September 30, 2019
December 31, 2018
($ in thousands)
>=760
$
68,123,523
41.5
%
$
67,408,766
41.9
%
$
59,249,659
43.0
%
740-759
27,886,603
17.0
27,178,330
16.9
22,843,145
16.6
720-739
24,069,139
14.7
23,459,055
14.6
19,898,885
14.5
700-719
19,183,219
11.7
18,728,884
11.6
15,714,206
11.4
680-699
13,713,164
8.4
13,418,919
8.3
11,299,829
8.2
<=679
11,030,205
6.7
10,768,238
6.7
8,715,062
6.3
Total
$
164,005,853
100.0
%
$
160,962,192
100.0
%
$
137,720,786
100.0
%
Weighted average credit score
745
745
746
Gross RIF by FICO score
December 31, 2019
September 30, 2019
December 31, 2018
($ in thousands)
>=760
$
17,082,683
41.3
%
$
16,877,750
41.6
%
$
14,789,783
42.9
%
740-759
7,056,654
17.0
6,857,369
16.9
5,736,432
16.6
720-739
6,150,334
14.9
5,980,949
14.8
5,036,063
14.6
700-719
4,873,597
11.8
4,743,360
11.7
3,943,925
11.4
680-699
3,491,755
8.4
3,406,811
8.4
2,846,297
8.3
<=679
2,747,927
6.6
2,674,050
6.6
2,129,948
6.2
Total
$
41,402,950
100.0
%
$
40,540,289
100.0
%
$
34,482,448
100.0
%
Portfolio by LTV
IIF by LTV
December 31, 2019
September 30, 2019
December 31, 2018
($ in thousands)
85.00% and below
$
17,128,008
10.5
%
$
16,918,870
10.5
%
$
15,123,578
11.0
%
85.01% to 90.00%
46,771,386
28.5
46,021,398
28.6
41,020,839
29.8
90.01% to 95.00%
76,611,494
46.7
75,528,177
46.9
66,028,990
47.9
95.01% and above
23,494,965
14.3
22,493,747
14.0
15,547,379
11.3
Total
$
164,005,853
100.0
%
$
160,962,192
100.0
%
$
137,720,786
100.0
%
Weighted average LTV
92
%
92
%
92
%
Gross RIF by LTV
December 31, 2019
September 30, 2019
December 31, 2018
($ in thousands)
85.00% and below
$
1,977,361
4.8
%
$
1,953,058
4.8
%
$
1,741,823
5.1
%
85.01% to 90.00%
11,249,383
27.2
11,065,886
27.3
9,819,171
28.5
90.01% to 95.00%
21,981,598
53.1
21,633,852
53.4
18,912,421
54.8
95.01% and above
6,194,608
14.9
5,887,493
14.5
4,009,033
11.6
Total
$
41,402,950
100.0
%
$
40,540,289
100.0
%
$
34,482,448
100.0
%
Portfolio by Loan Amortization Period
IIF by Loan Amortization Period
December 31, 2019
September 30, 2019
December 31, 2018
($ in thousands)
FRM 30 years and higher
$
154,905,519
94.5
%
$
151,594,009
94.2
%
$
128,083,429
93.0
%
FRM 20-25 years
2,854,560
1.7
2,872,964
1.8
2,965,782
2.2
FRM 15 years
3,300,715
2.0
3,367,326
2.1
3,445,447
2.5
ARM 5 years and higher
2,945,059
1.8
3,127,893
1.9
3,226,128
2.3
Total
$
164,005,853
100.0
%
$
160,962,192
100.0
%
$
137,720,786
100.0
%
Exhibit F
Essent Group Ltd. and Subsidiaries
Supplemental Information
Other Risk in Force
2019
2018
($ in thousands)
December 31
September 30
June 30
March 31
December 31
September 30
June 30
March 31
GSE and other risk share (1):
Premiums earned
$
9,867
$
9,284
$
8,622
$
7,894
$
7,333
$
6,886
$
6,715
$
6,267
Risk in Force
$
895,374
$
849,184
$
802,530
$
771,175
$
655,384
$
612,750
$
592,493
$
557,692
Weighted average credit score
745
746
748
747
748
749
748
751
Weighted average LTV
85
%
85
%
85
%
85
%
85
%
85
%
85
%
84
%
(1) GSE and other risk share includes GSE risk share and other reinsurance transactions. Essent Reinsurance Ltd. ("Essent Re") provides insurance or reinsurance relating to the risk in force on loans in reference pools acquired by Freddie Mac and Fannie Mae.
Exhibit G
Essent Group Ltd. and Subsidiaries
Supplemental Information
Portfolio Vintage Data
December 31, 2019
Insurance in Force
Year
Original
Insurance
Written
($ in thousands)
Remaining
Insurance
in Force
($ in thousands)
% Remaining of Original
Insurance
Number of Policies in Force
% Purchase
>90% LTV
>95% LTV
FICO < 700
FICO >= 760
% FRM
Incurred LossRatio (Inception to Date) (1)
Number of Loans in Default
2010
$
245,898
$
3,354
1.4
%
25
55.5
%
43.8
%
0.0
%
2.6
%
55.8
%
100.0
%
2.6
%
1
2011
3,229,720
154,793
4.8
902
68.8
58.1
0.4
6.3
52.7
97.9
3.7
18
2012
11,241,161
1,144,794
10.2
6,165
72.2
70.8
0.8
4.9
57.3
99.2
2.1
84
2013
21,152,638
3,411,648
16.1
18,397
78.9
67.4
2.4
7.7
51.2
98.8
2.3
250
2014
24,799,434
5,972,714
24.1
33,081
89.5
67.7
4.9
16.0
41.0
97.4
3.0
535
2015
26,193,656
9,896,050
37.8
48,804
85.1
60.4
2.8
14.7
43.8
98.3
2.7
669
2016
34,949,319
19,022,616
54.4
86,915
84.1
59.0
7.1
13.5
45.7
98.7
2.9
948
2017
43,858,322
29,606,165
67.5
135,204
87.8
60.6
14.6
15.8
41.9
97.3
4.2
1,623
2018
47,508,525
35,318,382
74.3
152,372
92.3
62.4
18.7
15.6
39.9
97.9
6.0
1,398
2019
63,569,183
59,475,337
93.6
221,060
80.4
60.0
17.8
15.6
39.7
98.7
4.2
421
Total
$
276,747,856
$
164,005,853
59.3
702,925
85.2
61.0
14.3
15.1
41.5
98.2
3.3
5,947
(1) Incurred loss ratio is calculated by dividing the sum of case reserves and cumulative amount paid for claims by cumulative net premiums earned.
Exhibit H
Essent Group Ltd. and Subsidiaries
Supplemental Information
Reinsurance Vintage Data
December 31, 2019
($ in thousands)
Excess of Loss Reinsurance
Original
Reinsurance in Force
Remaining
Reinsurance in Force
Earned Premiums Ceded
Year
Remaining
Insurance
in Force
Remaining
Risk
in Force
ILN
Other Reinsurance
Total
ILN
Other Reinsurance
Total
Losses
Ceded
to Date
Original
First Layer
Retention
Remaining
First Layer
Retention
Quarter-to-Date
Year-to-Date
Reduction in PMIERs Minimum Required Assets (8)
2015 & 2016
$
26,837,265
$
7,251,785
$
333,844
(1)
$
—
$
333,844
$
273,773
$
—
$
273,773
$
—
$
208,111
$
208,111
$
1,689
$
4,242
$
221,215
2017
28,700,242
7,249,243
424,412
(2)
165,167
(3)
589,579
319,696
165,167
484,863
—
224,689
222,647
3,149
14,147
283,382
2018
34,615,998
8,719,128
473,184
(4)
118,650
(5)
591,834
426,677
103,147
529,824
—
253,643
253,415
4,660
15,718
428,514
Total
$
90,153,505
$
23,220,156
$
1,231,440
$
283,817
$
1,515,257
$
1,020,146
$
268,314
$
1,288,460
$
—
$
686,443
$
684,173
$
9,498
$
34,107
$
933,111
Quota Share Reinsurance
Ceding Commission
Earned Premiums Ceded
Year
Remaining Insurance in Force
Remaining Risk in Force
Remaining Ceded Insurance in Force
Remaining Ceded Risk in Force
Losses Ceded to Date
Quarter-to-
Date (6)
Year-to-
Date (6)
Quarter-to-
Date (7)
Year-to-
Date (7)
Reduction in PMIERs Minimum Required Assets (8)
2019
$
21,289,799
$
5,349,686
$
4,698,154
$
1,166,633
$
71
$
600
$
650
$
1,272
$
1,392
$
79,554
(1) Reinsurance provided by Radnor Re 2019-2 Ltd., through its issuance of mortgage insurance-linked notes ("ILNs"), effective June 2019.
(2) Reinsurance provided by Radnor Re 2018-1 Ltd., through its issuance of ILNs, effective March 2018.
(3) Reinsurance provided by a panel of reinsurers effective November 2018. Coverage provided immediately above the coverage provided by Radnor Re 2018-1 Ltd.
(4) Reinsurance provided by Radnor Re 2019-1 Ltd., through its issuance of ILNs, effective February 2019.
(5) Reinsurance provided by a panel of reinsurers effective February 2019. Coverage provided pari-passu to the coverage provided by Radnor Re 2019-1 Ltd.
(6) Ceding commission is recorded as a reduction of Other underwriting and operating expenses in the Condensed Consolidated Statements of Comprehensive Income.
(7) Premiums ceded are net of profit commission.
(8) Represents the reduction in Essent Guaranty, Inc.'s Minimum Required Assets based on our interpretation of the PMIERs.
Exhibit I
Essent Group Ltd. and Subsidiaries
Supplemental Information
Portfolio Geographic Data
IIF by State
December 31, 2019
September 30, 2019
December 31, 2018
CA
10.0
%
9.8
%
9.1
%
TX
8.6
8.3
7.9
FL
7.9
7.7
7.4
WA
4.4
4.5
4.7
CO
3.7
3.6
3.4
IL
3.7
3.7
3.8
NJ
3.6
3.6
3.8
OH
3.4
3.4
3.3
NC
3.3
3.3
3.5
AZ
3.3
3.2
3.1
All Others
48.1
48.9
50.0
Total
100.0
%
100.0
%
100.0
%
Gross RIF by State
December 31, 2019
September 30, 2019
December 31, 2018
CA
9.8
%
9.6
%
8.9
%
TX
8.9
8.6
8.1
FL
8.0
7.9
7.5
WA
4.4
4.5
4.7
CO
3.6
3.5
3.3
NJ
3.6
3.6
3.7
IL
3.5
3.6
3.8
OH
3.3
3.4
3.3
NC
3.3
3.3
3.5
GA
3.3
3.3
3.5
All Others
48.3
48.7
49.7
Total
100.0
%
100.0
%
100.0
%
Exhibit J
Essent Group Ltd. and Subsidiaries
Supplemental Information
Defaults, Reserve for Losses and LAE, and Claims
Rollforward of Insured Loans in Default
Three Months Ended
Year Ended
December 31,
December 31,
December 31,
December 31,
2019
2018
2019
2018
Beginning default inventory
5,232
3,538
4,024
4,783
Plus: new defaults
3,826
2,747
13,304
8,727
Less: cures
(3,027
)
(2,183
)
(10,985
)
(9,226
)
Less: claims paid
(80
)
(75
)
(377
)
(254
)
Less: rescissions and denials, net
(4
)
(3
)
(19
)
(6
)
Ending default inventory
5,947
4,024
5,947
4,024
Rollforward of Reserve for Losses and LAE
Three Months Ended
Year Ended
December 31,
December 31,
December 31,
December 31,
($ in thousands)
2019
2018
2019
2018
Reserve for losses and LAE at beginning of period
$
61,436
$
53,355
$
49,464
$
46,850
Less: Reinsurance recoverables
—
—
—
—
Net reserve for losses and LAE at beginning of period
61,436
53,355
49,464
46,850
Add provision for losses and LAE occurring in:
Current year
12,658
11,239
50,562
36,438
Prior years
(1,729
)
(12,238
)
(17,576
)
(24,863
)
Incurred losses and LAE during the period
10,929
(999
)
32,986
11,575
Deduct payments for losses and LAE occurring in:
Current year
631
690
1,288
1,310
Prior years
2,443
2,202
11,871
7,651
Loss and LAE payments during the period
3,074
2,892
13,159
8,961
Net reserve for losses and LAE at end of period
69,291
49,464
69,291
49,464
Plus: Reinsurance recoverables
71
—
71
—
Reserve for losses and LAE at end of period
$
69,362
$
49,464
$
69,362
$
49,464
Claims
Three Months Ended
Year Ended
December 31,
December 31,
December 31,
December 31,
2019
2018
2019
2018
Number of claims paid
80
75
377
254
Total amount paid for claims (in thousands)
$
2,922
$
2,711
$
12,613
$
8,559
Average amount paid per claim (in thousands)
$
37
$
36
$
33
$
34
Severity
76
%
82
%
74
%
73
%
Exhibit J, continued
Essent Group Ltd. and Subsidiaries
Supplemental Information
Defaults, Reserve for Losses and LAE, and Claims
U.S. Mortgage Insurance Portfolio
December 31, 2019
Number of
Policies in
Default
Percentage of
Policies in
Default
Amount of Reserves
Percentage of Reserves
Defaulted RIF
Reserves as a Percentage of
Defaulted RIF
($ in thousands)
Missed Payments:
Three payments or less
3,310
56
%
$
15,793
25
%
$
177,238
9
%
Four to eleven payments
2,035
34
28,006
44
108,743
26
Twelve or more payments
473
8
13,549
22
27,152
50
Pending claims
129
2
5,832
9
6,777
86
Total case reserves (1)
5,947
100
%
63,180
100
%
$
319,910
20
IBNR
4,738
LAE
1,265
Total reserves for losses and LAE (1)
$
69,183
Average reserve per default:
Case
$
10.6
Total
$
11.6
Default Rate
0.85%
(1) The U.S. Mortgage Insurance Portfolio reserves exclude reserves on GSE and other risk share at Essent Re of $179.
December 31, 2018
Number of
Policies in
Default
Percentage of
Policies in
Default
Amount of Reserves
Percentage of Reserves
Defaulted RIF
Reserves as a Percentage of
Defaulted RIF
($ in thousands)
Missed Payments:
Three payments or less
2,254
56
%
$
12,005
27
%
$
119,666
10
%
Four to eleven payments
1,350
33
20,031
44
72,222
28
Twelve or more payments
357
9
10,523
23
20,419
52
Pending claims
63
2
2,749
6
3,182
86
Total case reserves
4,024
100
%
45,308
100
%
$
215,489
21
IBNR
3,398
LAE
758
Total reserves for losses and LAE
$
49,464
Average reserve per default:
Case
$
11.3
Total
$
12.3
Default Rate
0.66%
Exhibit K
Essent Group Ltd. and Subsidiaries
Supplemental Information
Investments Available for Sale
Investments Available for Sale by Asset Class
Asset Class
December 31, 2019
December 31, 2018
($ in thousands)
Fair Value
Percent
Fair Value
Percent
U.S. Treasury securities
$
242,206
7.2
%
$
289,892
10.5
%
U.S. agency securities
33,605
1.0
32,997
1.2
U.S. agency mortgage-backed securities
848,334
25.3
637,178
23.1
Municipal debt securities
361,638
10.8
483,879
17.5
Non-U.S. government securities
54,995
1.7
45,001
1.6
Corporate debt securities
880,301
26.3
725,201
26.3
Residential and commercial mortgage securities
288,281
8.6
121,838
4.4
Asset-backed securities
326,025
9.7
284,997
10.3
Money market funds
315,362
9.4
139,083
5.1
Total investments available for sale
$
3,350,747
100.0
%
$
2,760,066
100.0
%
Investments Available for Sale by Credit Rating
Rating (1)
December 31, 2019
December 31, 2018
($ in thousands)
Fair Value
Percent
Fair Value
Percent
Aaa
$
1,817,905
54.2
%
$
1,362,781
49.4
%
Aa1
109,122
3.3
124,435
4.5
Aa2
145,282
4.3
196,218
7.1
Aa3
159,599
4.8
143,315
5.2
A1
206,643
6.2
222,073
8.0
A2
183,780
5.5
199,238
7.2
A3
191,933
5.7
146,300
5.3
Baa1
232,490
6.9
162,695
5.9
Baa2
179,664
5.4
140,168
5.1
Baa3
65,119
1.9
26,805
1.0
Below Baa3
59,210
1.8
36,038
1.3
Total investments available for sale
$
3,350,747
100.0
%
$
2,760,066
100.0
%
(1) Based on ratings issued by Moody's, if available. S&P or Fitch rating utilized if Moody's not available.
Investments Available for Sale by Duration and Book Yield
Effective Duration
December 31, 2019
December 31, 2018
($ in thousands)
Fair Value
Percent
Fair Value
Percent
< 1 Year
$
1,038,782
31.0
%
$
529,545
19.2
%
1 to < 2 Years
306,148
9.1
285,060
10.3
2 to < 3 Years
348,708
10.4
251,763
9.1
3 to < 4 Years
361,147
10.8
278,804
10.1
4 to < 5 Years
443,382
13.2
429,005
15.6
5 or more Years
852,580
25.5
985,889
35.7
Total investments available for sale
$
3,350,747
100.0
%
$
2,760,066
100.0
%
Pre-tax investment income yield:
Three months ended December 31, 2019
2.79
%
Year ended December 31, 2019
2.82
%
Net cash and investments at holding company, Essent Group Ltd.:
($ in thousands)
As of December 31, 2019
$
98,376
As of December 31, 2018
$
78,405
Exhibit L
Essent Group Ltd. and Subsidiaries
Supplemental Information
Insurance Company Capital
December 31, 2019
December 31, 2018
($ in thousands)
U.S. Mortgage Insurance Subsidiaries:
Combined statutory capital (1)
$
2,335,828
$
1,886,929
Combined net risk in force (2)
$
29,460,191
$
26,233,783
Risk-to-capital ratios: (3)
Essent Guaranty, Inc.
13.1:1
14.4:1
Essent Guaranty of PA, Inc.
2.9:1
4.2:1
Combined (4)
12.6:1
13.9:1
Essent Reinsurance Ltd.:
Stockholder's equity (GAAP basis)
$
939,360
$
798,612
Net risk in force (2)
$
10,314,942
$
8,265,763
(1) Combined statutory capital equals the sum of statutory capital of Essent Guaranty, Inc. plus Essent Guaranty of PA, Inc., after eliminating the impact of intercompany transactions. Statutory capital is computed based on accounting practices prescribed or permitted by the Pennsylvania Insurance Department and the National Association of Insurance Commissioners Accounting Practices and Procedures Manual.
(2) Net risk in force represents total risk in force, net of reinsurance ceded and net of exposures on policies for which loss reserves have been established.
(3) The risk-to-capital ratio is calculated as the ratio of net risk in force to statutory capital.
(4) The combined risk-to-capital ratio equals the sum of the net risk in force of Essent Guaranty, Inc. and Essent Guaranty of PA, Inc. divided by the combined statutory capital.
Exhibit M
Essent Group Ltd. and Subsidiaries
Supplemental Information
Reconciliation of Non-GAAP Financial Measure - Adjusted Book Value per Share
We believe that long-term growth in Adjusted Book Value per Share is an important measure of our financial performance and is the basis for measures used to determine vesting on certain restricted stock granted to senior management under the Company’s long-term incentive plan. Adjusted Book Value per Share is a financial measure that is not calculated under standards or rules that comprise accounting principles generally accepted in the United States (GAAP) and is referred to as a non-GAAP measure. Adjusted Book Value per Share may be defined or calculated differently by other companies. Adjusted Book Value per Share is one measure used to monitor our results and should not be viewed as a substitute for those measures determined in accordance with GAAP.
Adjusted Book Value per Share is calculated by dividing Adjusted Book Value by Common Shares and Share Units Outstanding. Adjusted Book Value is defined as consolidated stockholders’ equity of the Company, excluding accumulated other comprehensive income (loss) plus the proceeds, if any, from the assumed exercise of all "in-the-money" options, warrants and similar instruments. Common Shares and Share Units Outstanding is defined as total common shares outstanding plus all equity instruments (including restricted share units and dividend equivalent units) issued to management and the Board of Directors and any "in-the-money" options, warrants and similar instruments. Accumulated other comprehensive income (loss) includes unrealized gains and losses that arise from changes in the market value of the Company’s investments. The Company does not view these unrealized gains and losses to be indicative of our fundamental operating performance. As of December 31, 2019 and December 31, 2018, the Company does not have any options, warrants and similar instruments outstanding.
The following table sets forth the reconciliation of Adjusted Book Value to the most comparable GAAP amount as of December 31, 2019 and December 31, 2018 in accordance with Regulation G:
(In thousands, except per share amounts)
December 31, 2019
December 31, 2018
Numerator:
Total Stockholders' Equity (Book Value)
$
2,984,845
$
2,365,717
Subtract: Accumulated Other Comprehensive Income (Loss)
56,187
(28,993
)
Adjusted Book Value
$
2,928,658
$
2,394,710
Denominator:
Total Common Shares Outstanding
98,394
98,139
Add: Restricted Share Units and Dividend Equivalent Units Outstanding
356
449
Total Common Shares and Share Units Outstanding
98,750
98,588
Adjusted Book Value per Share
$
29.66
$
24.29
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