Essent Group Ltd. Reports Second Quarter 2020 Results & Declares Quarterly Dividend
Essent Group Ltd. (NYSE: ESNT) today reported net income for the quarter ended June 30, 2020 of $15.4 million or $0.15 per diluted share, compared to $136.4 million or $1.39 per diluted share for the quarter ended June 30, 2019.
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 September 10, 2020, to shareholders of record on August 31, 2020.
"Our financial results for the second quarter reflect the initial impact of the COVID-19 pandemic on our insured portfolio,” said Mark Casale, Chairman and Chief Executive Officer. “Our outlook on the timing and shape of an economic recovery remains cautious. However, we remain confident that with the strength and sustainability of our operating model, in conjunction with our strong balance sheet, capital and liquidity, we are well suited to navigate this challenging operating environment.”
Financial Highlights:
Insurance in force as of June 30, 2020 was $174.6 billion, compared to $165.6 billion as of March 31, 2020 and $153.3 billion as of June 30, 2019. New insurance written for the second quarter was $28.2 billion, compared to $13.5 billion in the first quarter of 2020 and $18.0 billion in the second quarter of 2019. Net premiums earned for the second quarter were $211.5 million, compared to $206.5 million in the first quarter of 2020 and $188.5 million in the second quarter of 2019. The expense ratio for the second quarter was 18.4%, compared to 20.3% in the first quarter of 2020 and 22.0% in the second quarter of 2019. The provision for losses and LAE for the second quarter was $175.9 million, compared to a provision of $8.1 million in the first quarter of 2020 and a provision of $5.0 million in the second quarter of 2019. The percentage of loans in default as of June 30, 2020 was 5.19%, compared to 0.83% as of March 31, 2020 and 0.66% as of June 30, 2019. As of July 31, 2020, the percentage of loans in default was 5.01%. The combined ratio for the second quarter was 101.5%, compared to 24.2% in the first quarter of 2020 and 24.7% in the second quarter of 2019. Other income for the second quarter includes a $2.5 million gain for the change in the fair value of embedded derivatives in certain of our third-party reinsurance agreements, compared to a loss of $4.2 million in the first quarter of 2020 and a gain of $1.2 million in the second quarter of 2019. The consolidated balance of cash and investments at June 30, 2020 was $4.5 billion, including cash and investment balances at Essent Group Ltd. of $702.2 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 11.7:1 as of June 30, 2020. On June 2, 2020, Essent Group Ltd. completed an offering of 13,800,000 common shares at $33.25 per share, generating net proceeds of $440.0 million. During the second quarter, A.M. Best affirmed its “A (Excellent)” financial strength rating of Essent Guaranty, Inc., acknowledging the strength in our business model and capital position. Essent Guaranty, Inc. also has financial strength ratings of “A3” by Moody’s and “BBB+” by S&P.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/events-and-presentations/events/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 5617769 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 5617769.
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/financials/quarterly-results/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: the impact of COVID-19 and related economic conditions; 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, 2019 filed with the Securities and Exchange Commission on February 18, 2020, as subsequently updated through other reports we file with the Securities and Exchange Commission. 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 Ended June 30, 2020
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 June 30,
Six Months Ended June 30,
(In thousands, except per share amounts)
2020
2019
2020
2019
Revenues:
Direct premiums written
$
228,044
$
196,832
$
434,024
$
380,514
Ceded premiums
(22,140
)
(8,428
)
(36,377
)
(14,466
)
Net premiums written
205,904
188,404
397,647
366,048
Decrease in unearned premiums
5,567
86
20,320
233
Net premiums earned
211,471
188,490
417,967
366,281
Net investment income
19,866
20,581
40,499
40,461
Realized investment gains (losses), net
(1,269
)
583
1,866
1,243
Other income
6,009
2,238
4,585
4,433
Total revenues
236,077
211,892
464,917
412,418
Losses and expenses:
Provision for losses and LAE
175,877
4,960
183,940
12,067
Other underwriting and operating expenses
38,819
41,520
80,766
82,550
Interest expense
2,566
2,679
4,698
5,349
Total losses and expenses
217,262
49,159
269,404
99,966
Income before income taxes
18,815
162,733
195,513
312,452
Income tax expense
3,435
26,328
30,610
48,327
Net income
$
15,380
$
136,405
$
164,903
$
264,125
Earnings per share:
Basic
$
0.15
$
1.39
$
1.65
$
2.70
Diluted
0.15
1.39
1.64
2.69
Weighted average shares outstanding:
Basic
102,500
97,798
100,224
97,697
Diluted
102,605
98,170
100,466
98,137
Net income
$
15,380
$
136,405
$
164,903
$
264,125
Other comprehensive income (loss):
Change in unrealized appreciation of investments
74,285
35,987
64,211
74,353
Total other comprehensive income
74,285
35,987
64,211
74,353
Comprehensive income
$
89,665
$
172,392
$
229,114
$
338,478
Loss ratio
83.2
%
2.6
%
44.0
%
3.3
%
Expense ratio
18.4
22.0
19.3
22.5
Combined ratio
101.5
%
24.7
%
63.3
%
25.8
%
Exhibit B
Essent Group Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
June 30,
December 31,
(In thousands, except per share amounts)
2020
2019
Assets
Investments
Fixed maturities available for sale, at fair value
$
3,221,149
$
3,035,385
Short-term investments available for sale, at fair value
1,130,954
315,362
Total investments available for sale
4,352,103
3,350,747
Other invested assets
78,536
78,873
Total investments
4,430,639
3,429,620
Cash
72,787
71,350
Accrued investment income
18,711
18,535
Accounts receivable
39,750
40,655
Deferred policy acquisition costs
15,856
15,705
Property and equipment
15,458
17,308
Prepaid federal income tax
279,136
261,885
Other assets
27,611
18,367
Total assets
$
4,899,948
$
3,873,425
Liabilities and Stockholders' Equity
Liabilities
Reserve for losses and LAE
$
250,890
$
69,362
Unearned premium reserve
258,567
278,887
Net deferred tax liability
272,746
249,620
Credit facility borrowings, net of deferred costs
424,523
224,237
Other accrued liabilities
69,893
66,474
Total liabilities
1,276,619
888,580
Commitments and contingencies
Stockholders' Equity
Common shares, $0.015 par value:
Authorized - 233,333; issued and outstanding - 112,423 shares in 2020 and 98,394 shares in 2019
1,686
1,476
Additional paid-in capital
1,561,737
1,118,655
Accumulated other comprehensive income
120,398
56,187
Retained earnings
1,939,508
1,808,527
Total stockholders' equity
3,623,329
2,984,845
Total liabilities and stockholders' equity
$
4,899,948
$
3,873,425
Return on average equity (1)
10.0
%
20.8
%
(1) The 2020 return on average equity is calculated by dividing annualized year-to-date 2020 net income by average equity. The 2019 return on average equity is calculated by dividing full year 2019 net income by average equity.
Exhibit C
Essent Group Ltd. and Subsidiaries
Supplemental Information
Historical Quarterly Data
2020
2019
Selected Income Statement Data
June 30
March 31
December 31
September 30
June 30
March 31
(In thousands, except per share amounts)
Revenues:
Net premiums written
$
205,904
$
191,743
$
196,493
$
198,304
$
188,404
$
177,644
Net premiums earned (1)
211,471
206,496
207,671
203,473
188,490
177,791
Other revenues (2)
24,606
22,344
21,091
22,914
23,402
22,735
Total revenues
236,077
228,840
228,762
226,387
211,892
200,526
Losses and expenses:
Provision for losses and LAE
175,877
8,063
10,929
9,990
4,960
7,107
Other underwriting and operating expenses
38,819
41,947
41,231
41,588
41,520
41,030
Interest expense
2,566
2,132
2,218
2,584
2,679
2,670
Total losses and expenses
217,262
52,142
54,378
54,162
49,159
50,807
Income before income taxes
18,815
176,698
174,384
172,225
162,733
149,719
Income tax expense (3)
3,435
27,175
27,426
27,595
26,328
21,999
Net income
$
15,380
$
149,523
$
146,958
$
144,630
$
136,405
$
127,720
Earnings per share:
Basic
$
0.15
$
1.53
$
1.50
$
1.48
$
1.39
$
1.31
Diluted
0.15
1.52
1.49
1.47
1.39
1.30
Weighted average shares outstanding:
Basic
102,500
97,949
97,830
97,822
97,798
97,595
Diluted
102,605
98,326
98,376
98,257
98,170
98,104
Other Data:
Loss ratio (4)
83.2
%
3.9
%
5.3
%
4.9
%
2.6
%
4.0
%
Expense ratio (5)
18.4
20.3
19.9
20.4
22.0
23.1
Combined ratio
101.5
%
24.2
%
25.1
%
25.3
%
24.7
%
27.1
%
Return on average equity (annualized)
1.8
%
19.6
%
20.1
%
20.8
%
20.9
%
20.9
%
(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 June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019, June 30, 2019 and March 31, 2019 include net favorable (unfavorable) changes of $2,502, ($4,200), ($3,585), ($760), $1,160 and $1,424, respectively, in the fair value of these embedded derivatives.
(3) Income tax expense for the three months ended March 31, 2020 and 2019 was reduced by $620 and $1,956, respectively, of excess tax benefits associated with the vesting of common shares and common share units during each period.
(4) Loss ratio is calculated by dividing the provision for losses and LAE by net premiums earned.
(5) Expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned.
Exhibit C, continued
Essent Group Ltd. and Subsidiaries
Supplemental Information
Historical Quarterly Data
2020
2019
Other Data, continued:
June 30
March 31
December 31
September 30
June 30
March 31
($ in thousands)
U.S. Mortgage Insurance Portfolio
Flow:
New insurance written
$
28,163,212
$
13,549,299
$
15,839,836
$
18,719,876
$
17,973,505
$
10,945,307
New risk written
6,875,250
3,384,171
3,966,363
4,695,611
4,485,217
2,713,389
Bulk:
New insurance written
$
—
$
151
$
—
$
6,133
$
29,524
$
55,002
New risk written
—
24
—
842
2,129
6,542
Total:
Average gross premium rate (6)
0.53
%
0.51
%
0.51
%
0.52
%
0.51
%
0.50
%
Average net premium rate (7)
0.48
%
0.48
%
0.49
%
0.49
%
0.49
%
0.48
%
New insurance written
$
28,163,212
$
13,549,450
$
15,839,836
$
18,726,009
$
18,003,029
$
11,000,309
New risk written
$
6,875,250
$
3,384,195
$
3,966,363
$
4,696,453
$
4,487,346
$
2,719,931
Insurance in force (end of period)
$
174,646,273
$
165,615,503
$
164,005,853
$
160,962,192
$
153,317,157
$
143,181,641
Gross risk in force (end of period) (8)
$
43,993,989
$
41,865,977
$
41,402,950
$
40,540,289
$
38,531,090
$
35,925,830
Risk in force (end of period)
$
39,113,879
$
38,290,022
$
38,947,857
$
38,784,584
$
37,034,687
$
34,744,417
Policies in force
733,651
706,714
702,925
693,085
666,705
629,808
Weighted average coverage (9)
25.2
%
25.3
%
25.2
%
25.2
%
25.1
%
25.1
%
Annual persistency
67.9
%
73.9
%
77.5
%
82.1
%
84.8
%
85.1
%
Loans in default (count)
38,068
5,841
5,947
5,232
4,405
4,096
Percentage of loans in default
5.19
%
0.83
%
0.85
%
0.75
%
0.66
%
0.65
%
Other Risk in Force
GSE and other risk share (10)
$
1,031,699
$
1,100,966
$
895,374
$
849,184
$
802,530
$
771,175
Credit Facility
Borrowings outstanding
$
425,000
$
425,000
$
225,000
$
225,000
$
225,000
$
225,000
Undrawn committed capacity
$
75,000
$
75,000
$
275,000
$
275,000
$
275,000
$
275,000
Weighted average interest rate (end of period)
1.93
%
(6) 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.
(7) 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.
(8) Gross risk in force includes risk ceded under third-party reinsurance.
(9) Weighted average coverage is calculated by dividing end of period gross risk in force by end of period insurance in force.
(10) 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
Six Months Ended
June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019
($ in thousands)
>=760
$
12,163,927
43.2
%
$
7,313,814
40.7
%
$
17,819,643
42.7
%
$
11,784,317
40.8
%
740-759
5,300,459
18.8
3,073,807
17.1
7,758,491
18.6
4,985,948
17.2
720-739
4,352,367
15.5
2,572,580
14.3
6,371,241
15.3
4,138,193
14.3
700-719
3,278,269
11.6
2,140,363
11.9
4,837,012
11.6
3,492,908
12.1
680-699
1,950,905
6.9
1,534,959
8.5
2,995,823
7.2
2,442,928
8.4
<=679
1,117,285
4.0
1,337,982
7.5
1,930,301
4.6
2,074,518
7.2
Total
$
28,163,212
100.0
%
$
17,973,505
100.0
%
$
41,712,511
100.0
%
$
28,918,812
100.0
%
Weighted average credit score
749
744
748
744
NIW by LTV
Three Months Ended
Six Months Ended
June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019
($ in thousands)
85.00% and below
$
5,028,803
17.9
%
$
2,220,430
12.3
%
$
6,992,279
16.8
%
$
3,663,263
12.7
%
85.01% to 90.00%
9,079,625
32.2
4,851,313
27.0
13,066,899
31.3
7,801,661
27.0
90.01% to 95.00%
10,914,874
38.8
7,525,709
41.9
16,600,754
39.8
12,185,046
42.1
95.01% and above
3,139,910
11.1
3,376,053
18.8
5,052,579
12.1
5,268,842
18.2
Total
$
28,163,212
100.0
%
$
17,973,505
100.0
%
$
41,712,511
100.0
%
$
28,918,812
100.0
%
Weighted average LTV
91
%
92
%
91
%
92
%
NIW by Product
Three Months Ended
Six Months Ended
June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Single Premium policies
10.6
%
11.1
%
10.3
%
11.6
%
Monthly Premium policies
89.4
88.9
89.7
88.4
100.0
%
100.0
%
100.0
%
100.0
%
NIW by Purchase vs. Refinance
Three Months Ended
Six Months Ended
June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Purchase
54.2
%
84.5
%
59.1
%
85.7
%
Refinance
45.8
15.5
40.9
14.3
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
June 30, 2020
March 31, 2020
June 30, 2019
($ in thousands)
>=760
$
71,570,804
41.0
%
$
68,385,363
41.3
%
$
64,977,185
42.4
%
740-759
30,265,718
17.3
28,289,661
17.1
25,747,495
16.8
720-739
26,130,764
15.0
24,441,834
14.7
22,203,764
14.5
700-719
20,721,839
11.9
19,442,133
11.7
17,723,067
11.5
680-699
14,545,011
8.3
13,859,727
8.4
12,697,092
8.3
<=679
11,412,137
6.5
11,196,785
6.8
9,968,554
6.5
Total
$
174,646,273
100.0
%
$
165,615,503
100.0
%
$
153,317,157
100.0
%
Weighted average credit score
745
745
746
Gross RIF by FICO score
June 30, 2020
March 31, 2020
June 30, 2019
($ in thousands)
>=760
$
17,871,881
40.6
%
$
17,138,596
40.9
%
$
16,258,608
42.2
%
740-759
7,672,436
17.4
7,181,181
17.2
6,478,145
16.8
720-739
6,673,863
15.2
6,262,376
15.0
5,643,012
14.6
700-719
5,246,989
11.9
4,950,746
11.8
4,473,871
11.6
680-699
3,693,448
8.4
3,537,973
8.4
3,217,062
8.4
<=679
2,835,372
6.5
2,795,105
6.7
2,460,392
6.4
Total
$
43,993,989
100.0
%
$
41,865,977
100.0
%
$
38,531,090
100.0
%
Portfolio by LTV
IIF by LTV
June 30, 2020
March 31, 2020
June 30, 2019
($ in thousands)
85.00% and below
$
19,874,830
11.4
%
$
17,304,231
10.5
%
$
16,525,093
10.8
%
85.01% to 90.00%
50,446,645
28.9
47,063,180
28.4
44,234,770
28.9
90.01% to 95.00%
79,112,541
45.3
77,059,950
46.5
72,549,888
47.3
95.01% and above
25,212,257
14.4
24,188,142
14.6
20,007,406
13.0
Total
$
174,646,273
100.0
%
$
165,615,503
100.0
%
$
153,317,157
100.0
%
Weighted average LTV
92
%
92
%
92
%
Gross RIF by LTV
June 30, 2020
March 31, 2020
June 30, 2019
($ in thousands)
85.00% and below
$
2,292,935
5.2
%
$
1,997,845
4.8
%
$
1,907,272
5.0
%
85.01% to 90.00%
12,120,308
27.6
11,322,131
27.0
10,625,848
27.6
90.01% to 95.00%
22,760,884
51.7
22,110,369
52.8
20,784,261
53.9
95.01% and above
6,819,862
15.5
6,435,632
15.4
5,213,709
13.5
Total
$
43,993,989
100.0
%
$
41,865,977
100.0
%
$
38,531,090
100.0
%
Portfolio by Loan Amortization Period
IIF by Loan Amortization Period
June 30, 2020
March 31, 2020
June 30, 2019
($ in thousands)
FRM 30 years and higher
$
165,143,246
94.5
%
$
156,741,714
94.6
%
$
143,827,908
93.8
%
FRM 20-25 years
3,277,847
1.9
2,829,876
1.7
2,901,947
1.9
FRM 15 years
3,660,888
2.1
3,230,148
2.0
3,391,072
2.2
ARM 5 years and higher
2,564,292
1.5
2,813,765
1.7
3,196,230
2.1
Total
$
174,646,273
100.0
%
$
165,615,503
100.0
%
$
153,317,157
100.0
%
Exhibit F
Essent Group Ltd. and Subsidiaries
Supplemental Information
Other Risk in Force
2020
2019
($ in thousands)
June 30
March 31
December 31
September 30
June 30
March 31
GSE and other risk share (1):
Premiums earned
$
10,655
$
10,778
$
9,867
$
9,284
$
8,622
$
7,894
Risk in Force
$
1,031,699
$
1,100,966
$
895,374
$
849,184
$
802,530
$
771,175
Weighted average credit score
746
746
745
746
748
747
Weighted average LTV
85
%
85
%
85
%
85
%
85
%
85
%
(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
June 30, 2020
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
Incurred
Loss Ratio
(Inception to
Date) (1)
Number of
Loans in
Default
Percentage of
Loans in
Default
2010 - 2014
$
60,668,851
$
8,530,559
14.1
%
47,938
83.7
%
69.0
%
3.9
%
12.6
%
45.3
%
3.2
%
2,532
5.28
%
2015
26,193,656
7,936,090
30.3
40,235
85.6
61.8
2.9
15.1
43.2
4.2
2,305
5.73
2016
34,949,319
15,675,316
44.9
73,492
85.4
60.2
7.4
13.6
45.5
5.9
4,493
6.11
2017
43,858,322
23,247,877
53.0
110,369
88.6
61.7
15.3
16.5
41.3
8.8
7,354
6.66
2018
47,508,525
26,920,663
56.7
121,708
92.7
63.7
19.8
16.8
38.3
14.0
8,598
7.06
2019
63,569,183
51,138,928
80.4
196,033
81.1
61.0
18.7
16.3
38.5
27.3
11,098
5.66
2020 (through June 30)
41,712,662
41,196,840
98.8
143,876
58.9
51.9
12.2
11.8
42.6
34.5
1,688
1.17
Total
$
318,460,518
$
174,646,273
54.8
733,651
79.3
59.7
14.4
14.9
41.0
7.9
38,068
5.19
(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
June 30, 2020
($ 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 (1)
Other
Reinsurance
(2)
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 (5)
2015 & 2016
$
22,315,283
$
6,025,734
$
333,844
$
—
$
333,844
$
216,480
$
—
$
216,480
$
—
$
208,111
$
207,849
$
1,449
$
3,287
$
174,682
2017
22,597,869
5,742,641
424,412
165,167
589,579
242,123
165,167
407,290
—
224,689
220,308
2,801
6,154
204,148
2018
26,393,162
6,676,437
473,184
118,650
591,834
325,537
76,144
401,681
—
253,643
252,392
3,473
7,578
299,170
2019 (3)
30,475,038
7,724,225
495,889
55,102
550,991
495,889
55,102
550,991
—
215,605
215,605
2,953
5,442
423,843
Total
$
101,781,352
$
26,169,037
$
1,727,329
$
338,919
$
2,066,248
$
1,280,029
$
296,413
$
1,576,442
$
—
$
902,048
$
896,154
$
10,676
$
22,461
$
1,101,843
Quota Share Reinsurance
Losses Ceded
Ceding Commission
Earned Premiums Ceded
Year
Remaining
Insurance
in Force
Remaining
Risk
in Force
Remaining Ceded
Insurance in Force
Remaining Ceded
Risk in Force
Quarter-to-Date
Year-to-Date
Quarter-to-Date
Year-to-Date
Quarter-to-Date
Year-to-Date
Reduction in
PMIERs Minimum
Required
Assets (5)
2019 & 2020
(4)
$
61,036,696
$
15,141,048
$
13,463,715
$
3,303,668
$
7,598
$
7,696
$
1,933
$
3,110
$
11,464
$
13,916
$
223,393
(1) Reinsurance provided by unaffiliated special purpose insurers through the issuance of mortgage insurance-linked notes ("ILNs").
(2) Reinsurance provided by panels of reinsurers.
(3) Reinsurance coverage on new insurance written from January 1, 2019 through August 31, 2019.
(4) Reinsurance coverage on 40% of eligible single premium policies and 20% of all other eligible policies written from September 1, 2019 through December 31, 2020.
(5) 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
June 30, 2020
March 31, 2020
June 30, 2019
CA
10.6
%
10.4
%
9.6
%
TX
9.4
8.9
8.0
FL
8.2
8.0
7.5
WA
4.0
4.2
4.6
CO
3.9
3.8
3.6
IL
3.5
3.6
3.8
NJ
3.5
3.6
3.7
AZ
3.5
3.3
3.2
VA
3.2
3.1
3.2
OH
3.2
3.3
3.4
All Others
47.0
47.8
49.4
Total
100.0
%
100.0
%
100.0
%
Gross RIF by State
June 30, 2020
March 31, 2020
June 30, 2019
CA
10.3
%
10.1
%
9.4
%
TX
9.7
9.2
8.3
FL
8.4
8.2
7.6
WA
4.0
4.2
4.6
CO
3.8
3.7
3.5
NJ
3.4
3.5
3.6
AZ
3.4
3.3
3.1
IL
3.4
3.5
3.7
GA
3.2
3.2
3.4
OH
3.2
3.3
3.4
All Others
47.2
47.8
49.4
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
Six Months Ended
June 30,
June 30,
June 30,
June 30,
2020
2019
2020
2019
Beginning default inventory
5,841
4,096
5,947
4,024
Plus: new defaults
37,357
2,849
41,290
5,767
Less: cures
(4,983
)
(2,433
)
(8,897
)
(5,182
)
Less: claims paid
(144
)
(106
)
(262
)
(194
)
Less: rescissions and denials, net
(3
)
(1
)
(10
)
(10
)
Ending default inventory
38,068
4,405
38,068
4,405
Rollforward of Reserve for Losses and LAE
Three Months Ended
Six Months Ended
June 30,
June 30,
June 30,
June 30,
($ in thousands)
2020
2019
2020
2019
Reserve for losses and LAE at beginning of period
$
73,341
$
53,484
$
69,362
$
49,464
Less: Reinsurance recoverables
98
—
71
—
Net reserve for losses and LAE at beginning of period
73,243
53,484
69,291
49,464
Add provision for losses and LAE occurring in:
Current period
181,776
11,354
197,195
23,182
Prior years
(5,899
)
(6,394
)
(13,255
)
(11,115
)
Incurred losses and LAE during the period
175,877
4,960
183,940
12,067
Deduct payments for losses and LAE occurring in:
Current period
288
230
289
245
Prior years
5,703
3,076
9,813
6,148
Loss and LAE payments during the period
5,991
3,306
10,102
6,393
Net reserve for losses and LAE at end of period
243,129
55,138
243,129
55,138
Plus: Reinsurance recoverables
7,761
—
7,761
—
Reserve for losses and LAE at end of period
$
250,890
$
55,138
$
250,890
$
55,138
Claims
Three Months Ended
Six Months Ended
June 30,
June 30,
June 30,
June 30,
2020
2019
2020
2019
Number of claims paid
144
106
262
194
Total amount paid for claims (in thousands)
$
5,718
$
3,208
$
9,875
$
6,107
Average amount paid per claim (in thousands)
$
40
$
30
$
38
$
31
Severity
78
%
69
%
78
%
74
%
Exhibit J, continued
Essent Group Ltd. and Subsidiaries
Supplemental Information
Defaults, Reserve for Losses and LAE, and Claims
U.S. Mortgage Insurance Portfolio
June 30, 2020
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
33,514
88
%
$
166,897
73
%
$
2,233,678
7
%
Four to eleven payments
3,813
10
39,028
17
234,152
17
Twelve or more payments
664
2
18,590
8
36,694
51
Pending claims
77
—
3,271
2
3,846
85
Total case reserves (1)
38,068
100
%
227,786
100
%
$
2,508,370
9
IBNR
17,084
LAE
5,992
Total reserves for losses and LAE (1)
$
250,862
Average reserve per default:
Case
$
6.0
Total
$
6.6
Default Rate
5.19%
(1) The U.S. Mortgage Insurance Portfolio reserves exclude reserves on GSE and other risk share at Essent Re of $28.
December 31, 2019
Number of
Policies in
Default
Percentage of
Policies in
Default
Amount of
Reserves
Percentage of
Reserves
Defaulted RIF
Reserves as a
Percentage of
Defaulted RIF
($ 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 (2)
5,947
100
%
63,180
100
%
$
319,910
20
IBNR
4,738
LAE
1,265
Total reserves for losses and LAE (2)
$
69,183
Average reserve per default:
Case
$
10.6
Total
$
11.6
Default Rate
0.85%
(2) The U.S. Mortgage Insurance Portfolio reserves exclude reserves on GSE and other risk share at Essent Re of $179.
June 30, 2019
Number of
Policies i n
Default
Percentage of
Policies in
Default
Amount of
Reserves
Percentage of
Reserves
Defaulted RIF
Reserves as a
Percentage of
Defaulted RIF
($ in thousands)
Missed Payments:
Three payments or less
2,511
57
%
$
12,646
25
%
$
133,536
9
%
Four to eleven payments
1,443
33
22,292
44
78,047
29
Twelve or more payments
369
8
11,583
23
22,093
52
Pending claims
82
2
4,055
8
4,657
87
Total case reserves
4,405
100
%
50,576
100
%
$
238,333
21
IBNR
3,792
LAE
770
Total reserves for losses and LAE
$
55,138
Average reserve per default:
Case
$
11.5
Total
$
12.5
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
June 30, 2020
December 31, 2019
($ in thousands)
Fair Value
Percent
Fair Value
Percent
U.S. Treasury securities
$
259,259
5.9
%
$
242,206
7.2
%
U.S. agency securities
14,682
0.3
33,605
1.0
U.S. agency mortgage-backed securities
830,124
19.1
848,334
25.3
Municipal debt securities
465,063
10.7
361,638
10.8
Non-U.S. government securities
54,637
1.2
54,995
1.7
Corporate debt securities
912,137
21.0
880,301
26.3
Residential and commercial mortgage securities
312,511
7.2
288,281
8.6
Asset-backed securities
385,486
8.9
326,025
9.7
Money market funds
1,118,204
25.7
315,362
9.4
Total investments available for sale
$
4,352,103
100.0
%
$
3,350,747
100.0
%
Investments Available for Sale by Credit Rating
Rating (1)
June 30, 2020
December 31, 2019
($ in thousands)
Fair Value
Percent
Fair Value
Percent
Aaa
$
2,642,359
60.7
%
$
1,817,905
54.2
%
Aa1
129,451
3.0
109,122
3.3
Aa2
171,704
3.9
145,282
4.3
Aa3
235,462
5.4
159,599
4.8
A1
213,946
4.9
206,643
6.2
A2
253,507
5.8
183,780
5.5
A3
211,209
4.9
191,933
5.7
Baa1
244,669
5.6
232,490
6.9
Baa2
183,639
4.2
179,664
5.4
Baa3
37,005
0.9
65,119
1.9
Below Baa3
29,152
0.7
59,210
1.8
Total investments available for sale
$
4,352,103
100.0
%
$
3,350,747
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
June 30, 2020
December 31, 2019
($ in thousands)
Fair Value
Percent
Fair Value
Percent
< 1 Year
$
2,140,698
49.2
%
$
1,038,782
31.0
%
1 to < 2 Years
415,342
9.5
306,148
9.1
2 to < 3 Years
369,123
8.5
348,708
10.4
3 to < 4 Years
258,405
5.9
361,147
10.8
4 to < 5 Years
343,687
7.9
443,382
13.2
5 or more Years
824,848
19.0
852,580
25.5
Total investments available for sale
$
4,352,103
100.0
%
$
3,350,747
100.0
%
Pre-tax investment income yield:
Three months ended June 30, 2020
2.16
%
Six months ended June 30, 2020
2.33
%
Net cash and investments at holding company, Essent Group Ltd.:
($ in thousands)
As of June 30, 2020
$
702,225
As of December 31, 2019
$
98,376
Exhibit L
Essent Group Ltd. and Subsidiaries
Supplemental Information
Insurance Company Capital
June 30, 2020
December 31, 2019
($ in thousands)
U.S. Mortgage Insurance Subsidiaries:
Combined statutory capital (1)
$
2,457,368
$
2,335,828
Combined net risk in force (2)
$
28,787,600
$
29,460,191
Risk-to-capital ratios: (3)
Essent Guaranty, Inc.
12.1:1
13.1:1
Essent Guaranty of PA, Inc.
2.3:1
2.9:1
Combined (4)
11.7:1
12.6:1
Essent Guaranty, Inc. PMIERs Data (5):
Available Assets
$
2,586,394
$
2,337,086
Minimum Required Assets
1,458,273
1,499,369
PMIERs excess Available Assets
$
1,128,121
$
837,717
Essent Reinsurance Ltd.:
Stockholder's equity (GAAP basis)
$
1,022,689
$
939,360
Net risk in force (2)
$
11,113,079
$
10,314,942
(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.
(5) PMIERs data is based on our interpretation of PMIERs 2.0 as of the dates indicated.
.
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 June 30, 2020, December 31, 2019 and June 30, 2019, 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 June 30, 2020, December 31, 2019 and June 30, 2019 in accordance with Regulation G:
(In thousands, except per share amounts)
June 30, 2020
December 31, 2019
June 30, 2019
Numerator:
Total Stockholders' Equity (Book Value)
$
3,623,329
$
2,984,845
$
2,704,292
Subtract: Accumulated Other Comprehensive Income
120,398
56,187
45,360
Adjusted Book Value
$
3,502,931
$
2,928,658
$
2,658,932
Denominator:
Total Common Shares Outstanding
112,423
98,394
98,396
Add: Restricted Share Units and Dividend Equivalent Units Outstanding
510
356
365
Total Common Shares and Share Units Outstanding
112,933
98,750
98,761
Adjusted Book Value per Share
$
31.02
$
29.66
$
26.92
View source version on businesswire.com: https://www.businesswire.com/news/home/20200807005058/en/