Essent Group Ltd. Reports Third Quarter 2018 Results

Essent Group Ltd. (NYSE: ESNT) today reported net income for the quarter ended September 30, 2018 of $116.0 million or $1.18 per diluted share, compared to $78.4 million or $0.82 per diluted share for the quarter ended September 30, 2017. As of September 30, 2018, Essent had insurance in force of $131.2 billion and consolidated stockholders’ equity of $2.2 billion.

We are pleased with our strong operating performance for the third quarter as we grew net income 48% compared to the third quarter of 2017, while also generating a 21% annualized return on average equity, said Mark Casale, Chairman and Chief Executive Officer. Our third quarter results were driven by a 26% increase in our insurance in force to $131.2 billion compared to $103.9 billion at the end of the third quarter 2017, as well as another quarter of solid credit performance.

Financial Highlights:

  • Insurance in force as of September 30, 2018 was $131.2 billion, compared to $103.9 billion as of September 30, 2017.
  • New insurance written for the third quarter was $13.9 billion, compared to $13.2 billion in the third quarter of 2017.
  • Net premiums earned for the third quarter were $166.7 million, compared to $137.9 million in the third quarter of 2017.
  • The expense ratio for the third quarter was 22.1%, compared to 26.8% in the third quarter of 2017.
  • The provision for losses and LAE for the third quarter was $5.5 million, compared to $4.3 million in the third quarter of 2017.
  • The percentage of loans in default as of September 30, 2018 was 0.61%, compared to 0.46% as of September 30, 2017.
  • The combined ratio for the third quarter was 25.4%, compared to 30.0% in the third quarter of 2017.
  • The consolidated balance of cash and investments at September 30, 2018 was $2.7 billion, including cash and investment balances at Essent Group Ltd. of $77.2 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 14.1:1 as of September 30, 2018.

Conference Call

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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 866-393-4306 inside the U.S., or 734-385-2616 for international callers, using passcode 6486334 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: 855-859-2056 inside the U.S., or 404-537-3406 for international callers, passcode 6486334.

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, 2017 filed with the Securities and Exchange Commission on February 20, 2018. 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.

Non-GAAP Financial Measures

In presenting Essent Group Ltd.s results, management has included financial measures, including adjusted book value per share, that are not calculated under standards or rules that comprise accounting principles generally accepted in the United States (GAAP). Such measures are referred to as non-GAAP measures. These non-GAAP measures may be defined or calculated differently by other companies. Management believes these measures allow for a more complete understanding of the underlying business. These measures are used to monitor our results and should not be viewed as a substitute for those determined in accordance with GAAP. Reconciliations of such measures to the most comparable GAAP figures are included in the attached financial supplement in accordance with Regulation G.

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. 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 September 30, 2018
 
 
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 Portfolio Geographic Data
Exhibit I Defaults, Reserve for Losses and LAE, and Claims
Exhibit J Investments Available for Sale
Exhibit K Insurance Company Capital
Exhibit L 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 September 30, Nine Months Ended September 30,

(In thousands, except per share amounts)

2018 2017 2018 2017
Revenues:
Net premiums written $ 175,221 $ 155,055 $ 508,850 $ 408,415
Increase in unearned premiums (8,546 ) (17,115 ) (32,659 ) (26,261 )
Net premiums earned 166,675 137,940 476,191 382,154
Net investment income 16,646 10,626 45,494 28,461
Realized investment gains, net 524 564 1,160 1,763
Other income 1,153   1,073   3,384   3,023  
Total revenues 184,998   150,203   526,229   415,401  
 
Losses and expenses:
Provision for losses and LAE 5,452 4,313 12,574 9,776
Other underwriting and operating expenses 36,899 37,035 111,451 109,053
Interest expense 2,500   1,456   7,568   3,361  
Total losses and expenses 44,851   42,804   131,593   122,190  
 
Income before income taxes 140,147 107,399 394,636 293,211
Income tax expense 24,136   29,006   55,801   76,102  
Net income $ 116,011   $ 78,393   $ 338,835   $ 217,109  
 
 
Earnings per share:
Basic $ 1.19 $ 0.83 $ 3.48 $ 2.35
Diluted 1.18 0.82 3.46 2.31
 
Weighted average shares outstanding:
Basic 97,438 94,185 97,388 92,285
Diluted 98,013 96,094 97,944 94,104
 
Net income $ 116,011 $ 78,393 $ 338,835 $ 217,109
 
Other comprehensive income (loss):
Change in unrealized (depreciation) appreciation of investments (8,201 ) 1,978   (44,197 ) 15,298  
Total other comprehensive (loss) income (8,201 ) 1,978   (44,197 ) 15,298  
Comprehensive income $ 107,810   $ 80,371   $ 294,638   $ 232,407  
 
 
Loss ratio 3.3 % 3.1 % 2.6 % 2.6 %
Expense ratio 22.1   26.8   23.4   28.5  
Combined ratio 25.4 % 30.0 % 26.0 % 31.1 %
 
   
Exhibit B
 
Essent Group Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
 
 
September 30, December 31,

(In thousands, except per share amounts)

2018 2017
Assets
Investments
Fixed maturities available for sale, at fair value $ 2,473,840 $ 1,992,371
Short-term investments available for sale, at fair value 191,912   312,694  
Total investments available for sale 2,665,752 2,305,065
Other invested assets 24,865   500  
Total investments 2,690,617 2,305,565
Cash 29,797 43,524
Accrued investment income 17,125 12,807
Accounts receivable 35,597 29,752
Deferred policy acquisition costs 16,159 15,354
Property and equipment 7,387 6,979
Prepaid federal income tax 185,935 252,157
Other assets 10,806   8,230  
 
Total assets $ 2,993,423   $ 2,674,368  
 
Liabilities and Stockholders’ Equity
Liabilities
Reserve for losses and LAE $ 53,355 $ 46,850
Unearned premium reserve 292,331 259,672
Net deferred tax liability 155,349 127,636
Credit facility borrowings, net of deferred costs 223,487 248,591
Securities purchased payable 21,741 14,999
Other accrued liabilities 32,021   36,184  
Total liabilities 778,284   733,932  
 
Commitments and contingencies
 
Stockholders’ Equity
Common shares 1,472 1,476
Additional paid-in capital 1,107,206 1,127,137
Accumulated other comprehensive loss (47,449 ) (3,252 )
Retained earnings 1,153,910   815,075  
Total stockholders’ equity 2,215,139   1,940,436  
 
Total liabilities and stockholders’ equity $ 2,993,423   $ 2,674,368  
 
Return on average equity (1) 21.7 % 23.1 %
 

(1) The 2018 return on average equity is calculated by dividing annualized year-to-date 2018 net income by average equity. The 2017 return on average equity is calculated by dividing full year 2017 net income by average equity.

 
           
Exhibit C
Essent Group Ltd. and Subsidiaries
Supplemental Information
Historical Quarterly Data
 
 
2018 2017
Selected Income Statement Data September 30 June 30 March 31 December 31 September 30 June 30 March 31

(In thousands, except per share amounts)

Revenues:
Net premiums written $ 175,221   $ 168,404   $ 165,225   $ 161,771   $ 155,055   $ 134,063   $ 119,297  
 
Net premiums earned (1) 166,675 156,958 152,558 147,976 137,940 126,563 117,651
Other revenues 18,323   16,810   14,905   13,134   12,263   11,043   9,941  
Total revenues 184,998   173,768   167,463   161,110   150,203   137,606   127,592  
 
Losses and expenses:
Provision for losses and LAE 5,452 1,813 5,309 17,456 4,313 1,770 3,693
Other underwriting and operating expenses 36,899 36,428 38,124 36,480 37,035 35,686 36,332
Interest expense 2,500   2,618   2,450   1,817   1,456   1,189   716  
Total losses and expenses 44,851   40,859   45,883   55,753   42,804   38,645   40,741  
 
Income before income taxes 140,147 132,909 121,580 105,357 107,399 98,961 86,851
Income tax expense (benefit) (2) (3) 24,136   21,154   10,511   (57,281 ) 29,006   26,843   20,253  
Net income $ 116,011   $ 111,755   $ 111,069   $ 162,638   $ 78,393   $ 72,118   $ 66,598  
 
Earnings per share:
Basic $ 1.19 $ 1.15 $ 1.14 $ 1.69 $ 0.83 $ 0.79 $ 0.73
Diluted 1.18 1.14 1.13 1.65 0.82 0.77 0.72
 
Weighted average shares outstanding:
Basic 97,438 97,426 97,298 96,429 94,185 91,381 91,258
Diluted 98,013 97,866 97,951 98,497 96,094 93,162 93,023
 
Other Data:
Loss ratio (4) 3.3 % 1.2 % 3.5 % 11.8 % 3.1 % 1.4 % 3.1 %
Expense ratio (5) 22.1   23.2   25.0   24.7   26.8   28.2   30.9  
Combined ratio 25.4 % 24.4 % 28.5 % 36.4 % 30.0 % 29.6 % 34.0 %
 
Return on average equity (annualized) 21.5 % 21.8 % 22.6 % 35.0 % 19.1 % 19.8 % 19.3 %
 
(1) Net premiums earned are net of premiums ceded to Radnor Re 2018-1 Ltd., an unaffiliated special purpose insurer domiciled in Bermuda, in connection with a fully collateralized reinsurance agreement entered into on March 22, 2018. Premiums ceded to Radnor Re totaled $3,158, $3,585 and $294 in the three months ended September, 30, 2018, June 30, 2018 and March 31, 2018, respectively.
(2) Income tax expense for the quarter 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. Income tax expense for the quarters ended March 31, 2018 and 2017 was reduced by $9,549 and $3,023, respectively, of excess tax benefits associated with the vesting of common shares and common share units during each period.
(3) Income tax expense for the quarter ended December 31, 2017 was reduced by $85,091 of income tax benefit due to the one-time impact of the reduced U.S. corporate income tax rate on the company’s net deferred tax liability position.
(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
 
 
2018 2017
Other Data, continued: 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 $ 13,913,191 $ 12,850,642 $ 9,336,150 $ 11,234,855 $ 13,221,038 $ 11,368,276 $ 8,034,153
New risk written 3,430,942 3,201,610 2,295,314 2,737,008 3,228,603 2,786,501 1,929,832
 
Bulk:
New insurance written $ $ $ $ $ $ $
New risk written
 
Total:
Average gross premium rate (6) 0.51 % 0.52 % 0.52 % 0.53 % 0.53 % 0.53 % 0.53 %
Average net premium rate (7) 0.50 % 0.51 % 0.52 % 0.53 % 0.53 % 0.53 % 0.53 %
New insurance written $ 13,913,191 $ 12,850,642 $ 9,336,150 $ 11,234,855 $ 13,221,038 $ 11,368,276 $ 8,034,153
New risk written $ 3,430,942 $ 3,201,610 $ 2,295,314 $ 2,737,008 $ 3,228,603 $ 2,786,501 $ 1,929,832
Insurance in force (end of period) $ 131,249,957 $ 122,501,246 $ 115,250,949 $ 110,461,950 $ 103,936,307 $ 95,494,390 $ 87,993,227
Gross risk in force (end of period) (8) $ 32,786,194 $ 30,579,106 $ 28,691,561 $ 27,443,985 $ 25,807,358 $ 23,665,045 $ 21,801,667
Risk in force (end of period) $ 32,361,782 $ 30,154,694 $ 28,267,149 $ 27,443,985 $ 25,807,358 $ 23,665,045 $ 21,801,667
Policies in force 581,570 546,576 517,215 496,477 467,483 430,585 397,650
Weighted average coverage (9) 25.0 % 25.0 % 24.9 % 24.8 % 24.8 % 24.8 % 24.8 %
Annual persistency 84.0 % 83.0 % 83.5 % 83.9 % 82.1 % 80.1 % 78.2 %
 
Loans in default (count) 3,538 3,519 4,442 4,783 2,153 1,776 1,777
Percentage of loans in default 0.61 % 0.64 % 0.86 % 0.96 % 0.46 % 0.41 % 0.45 %
 
Other Risk in Force
GSE and other risk share (10) $ 612,750 $ 592,493 $ 557,692 $ 538,944 $ 501,485 $ 479,762 $ 436,991
 
Credit Facility
Borrowings outstanding $ 225,000 $ 225,000 $ 265,000 $ 250,000 $ 175,000 $ 175,000 $ 125,000
Undrawn committed capacity $ 275,000 $ 275,000 $ 110,000 $ 125,000 $ 200,000 $ 200,000 $ 75,000
Weighted average interest rate 4.15 %
 
(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 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, including in connection with Freddie Mac’s Agency Credit Insurance Structure (“ACIS”) and Fannie Mae’s Credit Insurance Risk Transfer (“CIRT”) programs.
 
             
Exhibit D
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
New Insurance Written: Flow
 
 
NIW by Credit Score
Three Months Ended Nine Months Ended
September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017

($ in thousands)

>=760 $ 5,873,337 42.2 % $ 5,590,793 42.3 % $ 15,165,595 42.0 % $ 13,903,707 42.6 %

740-759

2,349,227 16.9 2,028,500 15.3 6,116,659 17.0 5,057,461 15.5

720-739

1,989,413 14.3 1,882,227 14.2 5,209,892 14.4 4,578,846 14.0

700-719

1,676,184 12.0 1,571,170 11.9 4,365,387 12.1 3,850,420 11.8

680-699

1,097,160 7.9 1,160,771 8.8 2,847,365 7.9 2,818,724 8.7
<=679 927,870     6.7   987,577     7.5   2,395,085     6.6   2,414,309     7.4  
Total $ 13,913,191     100.0 % $ 13,221,038     100.0 % $ 36,099,983     100.0 % $ 32,623,467     100.0 %
 
Weighted average credit score 745 745 745 745
 
 
 
NIW by LTV
Three Months Ended Nine Months Ended
September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017

($ in thousands)

85.00% and below $ 1,644,226 11.8 % $ 1,682,491 12.7 % $ 4,347,598 12.0 % $ 4,307,262 13.2 %
85.01% to 90.00% 3,804,681 27.3 3,893,155 29.4 10,102,450 28.0 9,785,966 30.0
90.01% to 95.00% 5,961,310 42.9 5,811,182 44.0 15,623,886 43.3 14,455,640 44.3
95.01% and above 2,502,974     18.0   1,834,210     13.9   6,026,049     16.7   4,074,599     12.5  
Total $ 13,913,191     100.0 % $ 13,221,038     100.0 % $ 36,099,983     100.0 % $ 32,623,467     100.0 %
 
Weighted average LTV 93 % 92 % 92 % 92 %
 
 
 
NIW by Product
Three Months Ended Nine Months Ended
September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017
Single Premium policies 14.2 % 16.8 % 15.9 % 15.4 %
Monthly Premium policies 85.8   83.2   84.1   84.6  
100.0 % 100.0 % 100.0 % 100.0 %
 
 
 
NIW by Purchase vs. Refinance
Three Months Ended Nine Months Ended
September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017
Purchase 93.8 % 87.6 % 91.3 % 85.4 %
Refinance 6.2   12.4   8.7   14.6  
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 September 30, 2018 June 30, 2018 September 30, 2017

($ in thousands)

>=760 $ 56,686,270 43.2 % $ 53,145,884 43.4 % $ 46,220,799 44.5 %

740-759

21,661,445 16.5 20,127,254 16.4 16,890,061 16.2

720-739

18,909,281 14.4 17,605,819 14.4 14,767,164 14.2

700-719

14,928,024 11.4 13,836,837 11.3 11,307,184 10.9

680-699

10,828,068 8.2 10,145,188 8.3 8,523,233 8.2
<=679 8,236,869     6.3   7,640,264     6.2   6,227,866     6.0  
Total $ 131,249,957     100.0 % $ 122,501,246     100.0 % $ 103,936,307     100.0 %
 
Weighted average credit score 746 746 747
 
Gross RIF by FICO score September 30, 2018 June 30, 2018 September 30, 2017

($ in thousands)

>=760 $ 14,119,178 43.1 % $ 13,245,851 43.3 % $ 11,434,540 44.3 %

740-759

5,434,079 16.6 5,052,409 16.5 4,218,828 16.3

720-739

4,773,174 14.5 4,438,671 14.5 3,707,571 14.4

700-719

3,735,034 11.4 3,450,490 11.3 2,805,886 10.9

680-699

2,718,524 8.3 2,540,531 8.3 2,129,638 8.2
<=679 2,006,205     6.1   1,851,154     6.1   1,510,895     5.9  
Total $ 32,786,194     100.0 % $ 30,579,106     100.0 % $ 25,807,358     100.0 %
 
Portfolio by LTV
IIF by LTV September 30, 2018 June 30, 2018 September 30, 2017

($ in thousands)

85.00% and below $ 14,641,309 11.2 % $ 13,868,422 11.3 % $ 12,103,499 11.6 %
85.01% to 90.00% 39,598,332 30.2 37,558,668 30.6 33,129,815 31.9
90.01% to 95.00% 63,167,371 48.1 59,491,807 48.6 51,684,041 49.7
95.01% and above 13,842,945     10.5   11,582,349     9.5   7,018,952     6.8  
Total $ 131,249,957     100.0 % $ 122,501,246     100.0 % $ 103,936,307     100.0 %
 
Weighted average LTV 92 % 92 % 92 %
 
Gross RIF by LTV September 30, 2018 June 30, 2018 September 30, 2017

($ in thousands)

85.00% and below $ 1,680,050 5.1 % $ 1,584,294 5.2 % $ 1,366,982 5.3 %
85.01% to 90.00% 9,458,067 28.8 8,950,145 29.3 7,858,283 30.4
90.01% to 95.00% 18,090,207 55.2 17,068,140 55.8 14,810,490 57.4
95.01% and above 3,557,870     10.9   2,976,527     9.7   1,771,603     6.9  
Total $ 32,786,194     100.0 % $ 30,579,106     100.0 % $ 25,807,358     100.0 %
 
Portfolio by Loan Amortization Period
IIF by Loan Amortization Period September 30, 2018 June 30, 2018 September 30, 2017

($ in thousands)

FRM 30 years and higher $ 121,455,115 92.6 % $ 112,753,292 92.0 % $ 94,299,877 90.7 %
FRM 20-25 years 3,032,593 2.3 3,040,764 2.5 2,695,714 2.6
FRM 15 years 3,571,994 2.7 3,638,461 3.0 3,779,626 3.7
ARM 5 years and higher 3,190,255     2.4   3,068,729     2.5   3,161,090     3.0  
Total $ 131,249,957     100.0 % $ 122,501,246     100.0 % $ 103,936,307     100.0 %
 
     
Exhibit F
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Other Risk in Force
 
 

($ in thousands)

September 30, 2018 June 30, 2018 September 30, 2017
 
GSE and other risk share (1) $ 612,750   $ 592,493   $ 501,485  
 
Weighted average credit score 749 748 749
Weighted average LTV 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, including in connection with Freddie Mac’s Agency Credit Insurance Structure (“ACIS”) and Fannie Mae’s Credit Insurance Risk Transfer (“CIRT”) programs.
 
                       
Exhibit G
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Portfolio Vintage Data
September 30, 2018
 
 
Insurance in Force
Origination 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 Loss Ratio (Inception to Date) (1)

 

Number of Loans in Default

 
2010 $ 245,898 $ 8,615 3.5 % 60 75.3 % 70.2 % 0.0 % 1.1 % 65.1 % 100.0 % 2.6 %
2011 3,229,720 273,058 8.5 1,611 75.1 53.3 0.3 6.3 52.3 98.1 3.7 35
2012 11,241,161 2,057,354 18.3 10,903 76.2 60.7 0.6 5.7 56.1 98.9 2.2 95
2013 21,152,638 5,388,328 25.5 28,088 79.8 60.9 2.1 7.8 51.5 98.4 2.4 283
2014 24,799,434 8,726,281 35.2 46,317 88.5 63.4 4.4 15.6 41.4 96.3 3.3 580
2015 26,193,656 14,202,260 54.2 67,074 84.0 57.7 2.6 14.7 43.7 97.5 3.4 640
2016 34,949,319 26,510,429 75.9 115,759 81.5 56.1 6.5 13.7 45.3 98.3 3.7 809
2017 43,858,322 38,894,605 88.7 169,912 85.8 58.0 13.6 16.2 41.5 97.0 6.2 968
2018 (through September 30) 36,099,983     35,189,027   97.5 141,846   91.3 60.2 16.9 14.6 41.6 97.8 2.2 128
Total $ 201,770,131     $ 131,249,957   65.0 581,570   86.0 58.7 10.5 14.5 43.2 97.6 3.4 3,538
 
(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
Portfolio Geographic Data
 
 
IIF by State
September 30, 2018 June 30, 2018 September 30, 2017
CA 9.1 % 9.2 % 9.4 %
TX 7.9 8.0 8.1
FL 7.3 7.2 7.0
WA 4.8 4.8 4.8
IL 3.9 3.9 4.0
NJ 3.8 3.7 3.6
NC 3.5 3.5 3.6
GA 3.4 3.4 3.4
CO 3.3 3.3 3.0
OH 3.3 3.2 3.2
All Others 49.7   49.8   49.9  
Total 100.0 % 100.0 % 100.0 %
 
 
 
Gross RIF by State
September 30, 2018 June 30, 2018 September 30, 2017
CA 8.9 % 8.9 % 9.1 %
TX 8.1 8.2 8.3
FL 7.4 7.3 7.1
WA 4.8 4.9 4.9
IL 3.8 3.8 3.9
NJ 3.7 3.6 3.6
NC 3.5 3.5 3.6
GA 3.5 3.5 3.5
OH 3.3 3.3 3.2
CO 3.3 3.2 2.9
All Others 49.7   49.8   49.9  
Total 100.0 % 100.0 % 100.0 %
 
       
Exhibit I
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Defaults, Reserve for Losses and LAE, and Claims
 
 
Rollforward of Insured Loans in Default
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2018 2017 2018 2017
Beginning default inventory 3,519 1,776 4,783 1,757
Plus: new defaults 2,285 1,592 5,980 3,897
Less: cures (2,201 ) (1,145 ) (7,043 ) (3,322 )
Less: claims paid (64 ) (68 ) (179 ) (176 )
Less: rescissions and denials, net (1 ) (2 ) (3 ) (3 )
Ending default inventory 3,538   2,153   3,538   2,153  
 
 
 
Rollforward of Reserve for Losses and LAE
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,

($ in thousands)

2018 2017 2018 2017
Reserve for losses and LAE at beginning of period $ 50,016   $ 29,798   $ 46,850   $ 28,142  
Add provision for losses and LAE occurring in:
Current year 8,671 7,150 25,199 19,266
Prior years (3,219 ) (2,837 ) (12,625 ) (9,490 )
Incurred losses and LAE during the period 5,452   4,313   12,574   9,776  
Deduct payments for losses and LAE occurring in:
Current year 409 146 620 243
Prior years 1,704   2,386   5,449   6,096  
Loss and LAE payments during the period 2,113   2,532   6,069   6,339  
Reserve for losses and LAE at end of period $ 53,355   $ 31,579   $ 53,355   $ 31,579  
 
 
 
Claims
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2018 2017 2018 2017
Number of claims paid 64 68 179 176
Total amount paid for claims (in thousands) $ 2,029 $ 2,468 $ 5,848 $ 6,155
Average amount paid per claim (in thousands) $ 32 $ 36 $ 33 $ 35
Severity 69 % 76 % 70 % 81 %
 
         
Exhibit I, continued
Essent Group Ltd. and Subsidiaries
Supplemental Information
Defaults, Reserve for Losses and LAE, and Claims
 
 
September 30, 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 1,886 53 % $ 10,498 22 % $ 101,755 10 %
Four to eleven payments 1,252 36 24,531 50 68,670 36
Twelve or more payments 351 10 11,795 24 20,160 59
Pending claims 49     1     1,941     4     2,212   88
Total case reserves 3,538     100 % 48,765 100 %   $ 192,797   25
IBNR 3,657
LAE 933  
Total reserves for losses and LAE $ 53,355  
 
Average reserve per default:
Case $ 13.8
Total $ 15.1
 
Default Rate 0.61 %
 
December 31, 2017

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 3,243 68 % $ 15,925 37 % $ 187,163 9 %
Four to eleven payments 1,284 27 18,087 42 73,547 25
Twelve or more payments 211 4 6,781 16 11,139 61
Pending claims 45     1     2,075     5     2,355   88
Total case reserves 4,783     100 % 42,868 100 %   $ 274,204   16
IBNR 3,215
LAE 767  
Total reserves for losses and LAE $ 46,850  
 
Average reserve per default:
Case $ 9.0
Total $ 9.8
 
Default Rate 0.96 %
 
September 30, 2017

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 1,228 57 % $ 7,935 27 % $ 68,317 12 %
Four to eleven payments 690 32 12,948 45 38,003 34
Twelve or more payments 195 9 6,105 21 10,087 61
Pending claims 40     2     2,036     7     2,376   86
Total case reserves 2,153     100 % 29,024 100 %   $ 118,783   24
IBNR 2,177
LAE 378  
Total reserves for losses and LAE $ 31,579  
 
Average reserve per default:
Case $ 13.5
Total $ 14.7
 
Default Rate 0.46 %
 
       
Exhibit J
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Investments Available for Sale
 
 
Investments Available for Sale by Asset Class
Asset Class September 30, 2018 December 31, 2017

($ in thousands)

Fair Value Percent Fair Value Percent
U.S. Treasury securities $ 265,233 9.9 % $ 227,805 9.9 %
U.S. agency securities 32,677 1.2 33,114 1.4
U.S. agency mortgage-backed securities 566,626 21.3 456,037 19.8
Municipal debt securities 457,506 17.2 465,255 20.2
Non-U.S. government securities 44,798 1.7
Corporate debt securities 706,330 26.5 611,728 26.5
Residential and commercial mortgage securities 101,649 3.8 79,407 3.5
Asset-backed securities 299,021 11.2 167,922 7.3
Money market funds 191,912   7.2   263,797 11.4  
Total investments available for sale $ 2,665,752   100.0 % $ 2,305,065 100.0 %
 
Investments Available for Sale by Credit Rating
Rating (1) September 30, 2018 December 31, 2017

($ in thousands)

Fair Value Percent Fair Value Percent
Aaa $ 1,314,053 49.3 % $ 1,160,200 50.3 %
Aa1 131,368 4.9 115,237 5.0
Aa2 187,542 7.0 123,551 5.4
Aa3 130,983 4.9 127,785 5.6
A1 223,943 8.4 205,369 8.9
A2 171,217 6.4 157,651 6.8
A3 148,670 5.6 148,246 6.4
Baa1 167,283 6.3 115,178 5.0
Baa2 127,092 4.8 87,869 3.8
Baa3 33,953 1.3 43,024 1.9
Below Baa3 29,648   1.1   20,955 0.9  
Total investments available for sale $ 2,665,752   100.0 % $ 2,305,065 100.0 %
 
(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 September 30, 2018 December 31, 2017

($ in thousands)

Fair Value Percent Fair Value Percent
< 1 Year $ 598,900 22.5 % $ 628,958 27.3 %
1 to < 2 Years 259,820 9.7 164,856 7.2
2 to < 3 Years 250,341 9.4 280,177 12.2
3 to < 4 Years 217,233 8.2 263,799 11.4
4 to < 5 Years 461,890 17.3 263,273 11.4
5 or more Years 877,568   32.9   704,002 30.5  
Total investments available for sale $ 2,665,752   100.0 % $ 2,305,065 100.0 %
 
Pre-tax investment income yield:
Three months ended September 30, 2018 2.60 %
Nine months ended September 30, 2018 2.49 %
 
Net cash and investments at holding company, Essent Group Ltd.:

($ in thousands)

As of September 30, 2018 $ 77,206
As of December 31, 2017 $ 104,167
 
   
Exhibit K
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Insurance Company Capital
 
 
September 30, 2018 December 31, 2017

($ in thousands)

U.S. Mortgage Insurance Subsidiaries:
Combined statutory capital (1) $ 1,781,912 $ 1,528,869
 
Combined net risk in force (2) $ 25,124,809 $ 21,637,409
 
Risk-to-capital ratios: (3)
Essent Guaranty, Inc. 14.7:1 14.7:1
Essent Guaranty of PA, Inc. 4.4:1 5.4:1
Combined (4) 14.1:1 14.2:1
 
Essent Reinsurance Ltd.:
Stockholder’s equity (GAAP basis) $ 749,205 $ 662,819
 
Net risk in force (2) $ 7,797,302 $ 6,299,437
 
(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 L
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 a measure used to determine vesting on certain restricted stock granted to senior management under the Companys 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) 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 Companys investments that are classified as available for sale. The Company does not view these unrealized gains and losses to be indicative of our fundamental operating performance. As of September 30, 2018, December 31, 2017 and September 30, 2017, 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 September 30, 2018, December 31, 2017 and September 30, 2017 in accordance with Regulation G:

     

(In thousands, except per share amounts)

September 30, 2018 December 31, 2017 September 30, 2017
 
Numerator:
Total Stockholders’ Equity (Book Value) $ 2,215,139 $ 1,940,436 $ 1,780,570
 
Subtract: Accumulated Other Comprehensive Income (Loss) (47,449 ) (3,252 ) 3,043
 
Adjusted Book Value $ 2,262,588   $ 1,943,688   $ 1,777,527
 
Denominator:
Total Common Shares Outstanding 98,128 98,434 98,423
 
Add: Restricted Share Units Outstanding 468   536   553
 
Total Common Shares and Share Units Outstanding 98,596   98,970   98,976
 
Adjusted Book Value per Share $ 22.95   $ 19.64   $ 17.96
 

Essent Group Ltd.
Media Contact
610-230-0556
[email protected]
or
Investor
Relations Contact

Christopher G. Curran
Senior Vice
President – Investor Relations
855-809-ESNT
[email protected]

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