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Essent Group Ltd. Reports Second Quarter 2018 Results

August 03, 2018

HAMILTON, Bermuda--(BUSINESS WIRE)-- Essent Group Ltd. (NYSE: ESNT) today reported net income for the quarter ended June 30, 2018 of $111.8 million or $1.14 per diluted share, compared to $72.1 million or $0.77 per diluted share for the quarter ended June 30, 2017. As of June 30, 2018, Essent had insurance in force of $122.5 billion and consolidated stockholders' equity of $2.1 billion.

“During the second quarter we continued to build a high credit quality and profitable mortgage insurance portfolio,” said Mark Casale, Chairman and Chief Executive Officer. “The growth of our insurance in force coupled with our ability to utilize multiple forms of capital to insure risk in both the U.S. and Bermuda demonstrates that the Essent franchise is well positioned to play a significant role in the housing finance system while also producing high quality earnings and strong returns for our shareholders.”

Financial Highlights:

  • Insurance in force as of June 30, 2018 was $122.5 billion, compared to $95.5 billion as of June 30, 2017.
  • New insurance written for the second quarter was $12.9 billion, compared to $11.4 billion in the second quarter of 2017.
  • Net premiums earned for the second quarter were $157.0 million, compared to $126.6 million in the second quarter of 2017.
  • The expense ratio for the second quarter was 23.2%, compared to 28.2% in the second quarter of 2017.
  • The provision for losses and LAE for the second quarter was $1.8 million, consistent with the second quarter of 2017.
  • The percentage of loans in default as of June 30, 2018 was 0.64%, compared to 0.41% as of June 30, 2017.
  • The combined ratio for the second quarter was 24.4%, compared to 29.6% in the second quarter of 2017.
  • The consolidated balance of cash and investments at June 30, 2018 was $2.6 billion, including cash and investment balances at Essent Group Ltd. of $76.0 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 14.0:1 as of June 30, 2018.
  • Essent Reinsurance Ltd. reinsured a total of $45.3 million of risk in the second quarter of 2018.
  • As of June 30, 2018, Essent Guaranty, Inc. had total PMIERs available assets of $1.74 billion, which compares to risk-based required assets under PMIERs of $1.35 billion.

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 866-393-4306 inside the U.S., or 734-385-2616 for international callers, using passcode 1086846 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 1086846.

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 June 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 Investment Portfolio
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 June 30, Six Months Ended June 30,

(In thousands, except per share amounts)

2018 2017 2018 2017
Revenues:
Net premiums written $ 168,404 $ 134,063 $ 333,629 $ 253,360
Increase in unearned premiums (11,446 ) (7,500 ) (24,113 ) (9,146 )
Net premiums earned 156,958 126,563 309,516 244,214
Net investment income 15,134 9,400 28,848 17,835
Realized investment gains, net 439 544 636 1,199
Other income 1,237   1,099   2,231   1,950  
Total revenues 173,768   137,606   341,231   265,198  
 
Losses and expenses:
Provision for losses and LAE 1,813 1,770 7,122 5,463
Other underwriting and operating expenses 36,428 35,686 74,552 72,018
Interest expense 2,618   1,189   5,068   1,905  
Total losses and expenses 40,859   38,645   86,742   79,386  
 
Income before income taxes 132,909 98,961 254,489 185,812
Income tax expense 21,154   26,843   31,665   47,096  
Net income $ 111,755   $ 72,118   $ 222,824   $ 138,716  
 
 
Earnings per share:
Basic $ 1.15 $ 0.79 $ 2.29 $ 1.52
Diluted 1.14 0.77 2.28 1.49
 
Weighted average shares outstanding:
Basic 97,426 91,381 97,362 91,320
Diluted 97,866 93,162 97,908 93,093
 
Net income $ 111,755 $ 72,118 $ 222,824 $ 138,716
 
Other comprehensive income (loss):
Change in unrealized (depreciation) appreciation of investments (7,246 ) 8,470   (35,996 ) 13,320  
Total other comprehensive (loss) income (7,246 ) 8,470   (35,996 ) 13,320  
Comprehensive income $ 104,509   $ 80,588   $ 186,828   $ 152,036  
 
 
Loss ratio 1.2 % 1.4 % 2.3 % 2.2 %
Expense ratio 23.2   28.2   24.1   29.5  
Combined ratio 24.4 % 29.6 % 26.4 % 31.7 %
 
   
Exhibit B
 
Essent Group Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
 
 
June 30, December 31,

(In thousands, except per share amounts)

2018 2017
Assets
Investments available for sale, at fair value
Fixed maturities $ 2,229,002 $ 1,992,371
Short-term investments 327,011   312,694  
Total investments 2,556,013 2,305,065
Cash 24,664 43,524
Accrued investment income 15,655 12,807
Accounts receivable 35,276 29,752
Deferred policy acquisition costs 15,947 15,354
Property and equipment 7,295 6,979
Prepaid federal income tax 174,335 252,157
Other assets 20,246   8,730  
 
Total assets $ 2,849,431   $ 2,674,368  
 
Liabilities and Stockholders' Equity
Liabilities
Reserve for losses and LAE $ 50,016 $ 46,850
Unearned premium reserve 283,785 259,672
Net deferred tax liability 147,808 127,636
Credit facility borrowings, net of deferred costs 223,341 248,591
Securities purchased payable 14,464 14,999
Other accrued liabilities 26,446   36,184  
Total liabilities 745,860   733,932  
 
Commitments and contingencies
 
Stockholders' Equity
Common shares 1,472 1,476
Additional paid-in capital 1,103,448 1,127,137
Accumulated other comprehensive loss (39,248 ) (3,252 )
Retained earnings 1,037,899   815,075  
Total stockholders' equity 2,103,571   1,940,436  
 
Total liabilities and stockholders' equity $ 2,849,431   $ 2,674,368  
 
Return on average equity (1) 22.0 % 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 June 30 March 31 December 31 September 30 June 30 March 31

(In thousands, except per share amounts)

Revenues:
Net premiums written $ 168,404   $ 165,225   $ 161,771   $ 155,055   $ 134,063   $ 119,297  
 
Net premiums earned (1) 156,958 152,558 147,976 137,940 126,563 117,651
Other revenues 16,810   14,905   13,134   12,263   11,043   9,941  
Total revenues 173,768   167,463   161,110   150,203   137,606   127,592  
 
Losses and expenses:
Provision for losses and LAE 1,813 5,309 17,456 4,313 1,770 3,693
Other underwriting and operating expenses 36,428 38,124 36,480 37,035 35,686 36,332
Interest expense 2,618   2,450   1,817   1,456   1,189   716  
Total losses and expenses 40,859   45,883   55,753   42,804   38,645   40,741  
 
Income before income taxes 132,909 121,580 105,357 107,399 98,961 86,851
Income tax expense (benefit) (2) (3) 21,154   10,511   (57,281 ) 29,006   26,843   20,253  
Net income $ 111,755   $ 111,069   $ 162,638   $ 78,393   $ 72,118   $ 66,598  
 
Earnings per share:
Basic $ 1.15 $ 1.14 $ 1.69 $ 0.83 $ 0.79 $ 0.73
Diluted 1.14 1.13 1.65 0.82 0.77 0.72
 
Weighted average shares outstanding:
Basic 97,426 97,298 96,429 94,185 91,381 91,258
Diluted 97,866 97,951 98,497 96,094 93,162 93,023
 
Other Data:
Loss ratio (4) 1.2 % 3.5 % 11.8 % 3.1 % 1.4 % 3.1 %
Expense ratio (5) 23.2   25.0   24.7   26.8   28.2   30.9  
Combined ratio 24.4 % 28.5 % 36.4 % 30.0 % 29.6 % 34.0 %
 
Return on average equity (annualized) 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 $3,585 and $294 in the three months ended June 30, 2018 and March 31, 2018, respectively.
(2) 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: June 30 March 31 December 31 September 30 June 30 March 31

($ in thousands)

 
U.S. Mortgage Insurance Portfolio
Flow:
New insurance written $ 12,850,642 $ 9,336,150 $ 11,234,855 $ 13,221,038 $ 11,368,276 $ 8,034,153
New risk written 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) 0.52 % 0.52 % 0.53 % 0.53 % 0.53 % 0.53 %
Average net premium rate (7) 0.51 % 0.52 % 0.53 % 0.53 % 0.53 % 0.53 %
New insurance written $ 12,850,642 $ 9,336,150 $ 11,234,855 $ 13,221,038 $ 11,368,276 $ 8,034,153
New risk written $ 3,201,610 $ 2,295,314 $ 2,737,008 $ 3,228,603 $ 2,786,501 $ 1,929,832
Insurance in force (end of period) $ 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) $ 30,579,106 $ 28,691,561 $ 27,443,985 $ 25,807,358 $ 23,665,045 $ 21,801,667
Risk in force (end of period) $ 30,154,694 $ 28,267,149 $ 27,443,985 $ 25,807,358 $ 23,665,045 $ 21,801,667
Policies in force 546,576 517,215 496,477 467,483 430,585 397,650
Weighted average coverage (9) 25.0 % 24.9 % 24.8 % 24.8 % 24.8 % 24.8 %
Annual persistency 83.0 % 83.5 % 83.9 % 82.1 % 80.1 % 78.2 %
 
Loans in default (count) 3,519 4,442 4,783 2,153 1,776 1,777
Percentage of loans in default 0.64 % 0.86 % 0.96 % 0.46 % 0.41 % 0.45 %
 
Other Risk in Force
GSE Risk Share (10) $ 592,493 $ 557,692 $ 538,944 $ 501,485 $ 479,762 $ 436,991
 
Credit Facility
Borrowings outstanding $ 225,000 $ 265,000 $ 250,000 $ 175,000 $ 175,000 $ 125,000
Undrawn committed capacity $ 275,000 $ 110,000 $ 125,000 $ 200,000 $ 200,000 $ 75,000
Weighted average interest rate 4.05 %
 
 
(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) 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 Six Months Ended
June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017

($ in thousands)

>=760 $ 5,460,040 42.5 % $ 4,913,160 43.2 % $ 9,292,258 41.9 % $ 8,312,914 42.8 %

740-759

2,217,294 17.3 1,785,683 15.7 3,767,432 17.0 3,028,961 15.6

720-739

1,881,334 14.6 1,547,404 13.6 3,220,479 14.5 2,696,619 13.9

700-719

1,544,303 12.0 1,321,235 11.6 2,689,203 12.1 2,279,250 11.8

680-699

940,587 7.3 963,139 8.5 1,750,205 7.9 1,657,953 8.5
<=679 807,084   6.3   837,655   7.4   1,467,215   6.6   1,426,732   7.4  
Total $ 12,850,642   100.0 % $ 11,368,276   100.0 % $ 22,186,792   100.0 % $ 19,402,429   100.0 %
 
Weighted average credit score 746 745 745 745
 
 
 
NIW by LTV
Three Months Ended Six Months Ended
June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017

($ in thousands)

85.00% and below $ 1,491,036 11.6 % $ 1,405,971 12.4 % $ 2,703,372 12.2 % $ 2,624,771 13.5 %
85.01% to 90.00% 3,589,257 27.9 3,393,904 29.9 6,297,769 28.4 5,892,811 30.4
90.01% to 95.00% 5,584,368 43.5 5,132,855 45.1 9,662,576 43.5 8,644,458 44.6
95.01% and above 2,185,981   17.0   1,435,546   12.6   3,523,075   15.9   2,240,389   11.5  
Total $ 12,850,642   100.0 % $ 11,368,276   100.0 % $ 22,186,792   100.0 % $ 19,402,429   100.0 %
 
Weighted average LTV 92 % 92 % 92 % 92 %
 
 
 
NIW by Product
Three Months Ended Six Months Ended
June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017
Single Premium policies 14.5 % 14.5 % 17.0 % 14.4 %
Monthly Premium policies 85.5   85.5   83.0   85.6  
100.0 % 100.0 % 100.0 % 100.0 %
 
 
 
NIW by Purchase vs. Refinance
Three Months Ended Six Months Ended
June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017
Purchase 93.1 % 87.5 % 89.8 % 83.9 %
Refinance 6.9   12.5   10.2   16.1  
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, 2018 March 31, 2018 June 30, 2017

($ in thousands)

>=760 $ 53,145,884 43.4 % $ 50,359,464 43.7 % $ 42,839,819 44.8 %

740-759

20,127,254 16.4 18,791,203 16.3 15,628,721 16.4

720-739

17,605,819 14.4 16,473,367 14.3 13,568,471 14.2

700-719

13,836,837 11.3 12,857,417 11.2 10,239,343 10.7

680-699

10,145,188 8.3 9,622,067 8.3 7,715,118 8.1
<=679 7,640,264   6.2   7,147,431   6.2   5,502,918   5.8  
Total $ 122,501,246   100.0 % $ 115,250,949   100.0 % $ 95,494,390   100.0 %
 
Weighted average credit score 746 747 748
 
Gross RIF by FICO score June 30, 2018 March 31, 2018 June 30, 2017

($ in thousands)

>=760 $ 13,245,851 43.3 % $ 12,519,237 43.6 % $ 10,565,479 44.6 %

740-759

5,052,409 16.5 4,707,875 16.4 3,900,374 16.5

720-739

4,438,671 14.5 4,142,041 14.5 3,400,897 14.4

700-719

3,450,490 11.3 3,192,804 11.1 2,531,834 10.7

680-699

2,540,531 8.3 2,402,777 8.4 1,928,884 8.1
<=679 1,851,154   6.1   1,726,827   6.0   1,337,577   5.7  
Total $ 30,579,106   100.0 % $ 28,691,561   100.0 % $ 23,665,045   100.0 %
 
Portfolio by LTV
IIF by LTV June 30, 2018 March 31, 2018 June 30, 2017

($ in thousands)

85.00% and below $ 13,868,422 11.3 % $ 13,371,220 11.6 % $ 11,175,433 11.7 %
85.01% to 90.00% 37,558,668 30.6 35,907,759 31.2 30,771,122 32.2
90.01% to 95.00% 59,491,807 48.6 56,367,801 48.9 48,225,083 50.5
95.01% and above 11,582,349   9.5   9,604,169   8.3   5,322,752   5.6  
Total $ 122,501,246   100.0 % $ 115,250,949   100.0 % $ 95,494,390   100.0 %
 
Weighted average LTV 92 % 92 % 92 %
 
Gross RIF by LTV June 30, 2018 March 31, 2018 June 30, 2017

($ in thousands)

85.00% and below $ 1,584,294 5.2 % $ 1,519,929 5.3 % $ 1,261,421 5.3 %
85.01% to 90.00% 8,950,145 29.3 8,543,010 29.8 7,301,776 30.9
90.01% to 95.00% 17,068,140 55.8 16,176,713 56.4 13,776,313 58.2
95.01% and above 2,976,527   9.7   2,451,909   8.5   1,325,535   5.6  
Total $ 30,579,106   100.0 % $ 28,691,561   100.0 % $ 23,665,045   100.0 %
 
Portfolio by Loan Amortization Period
IIF by Loan Amortization Period June 30, 2018 March 31, 2018 June 30, 2017

($ in thousands)

FRM 30 years and higher $ 112,753,292 92.0 % $ 105,438,023 91.5 % $ 86,471,721 90.5 %
FRM 20-25 years 3,040,764 2.5 3,008,292 2.6 2,458,906 2.6
FRM 15 years 3,638,461 3.0 3,746,030 3.2 3,521,645 3.7
ARM 5 years and higher 3,068,729   2.5   3,058,604   2.7   3,042,118   3.2  
Total $ 122,501,246   100.0 % $ 115,250,949   100.0 % $ 95,494,390   100.0 %
 
     
Exhibit F
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Other Risk in Force
 
 

($ in thousands)

June 30, 2018 March 31, 2018 June 30, 2017
 
GSE Risk Share (1) $ 592,493   $ 557,692   $ 479,762  
 
Weighted average credit score 748 751 749
Weighted average LTV 85 % 84 % 83 %
 
 

(1) 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
June 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 $ 9,961 4.1 % 69 75.8 % 72.7 % 0.0 % 3.6 % 62.5 % 100.0 % 2.6 % —
2011 3,229,720 315,032 9.8 1,832 76.8 50.1 0.2 5.9 53.1 98.1 3.6 32
2012 11,241,161 2,239,544 19.9 11,803 76.1 59.8 0.6 5.7 55.8 98.8 2.3 105
2013 21,152,638 5,829,854 27.6 30,180 79.8 60.0 2.0 7.8 51.5 98.3 2.4 309
2014 24,799,434 9,291,291 37.5 48,989 88.3 63.1 4.4 15.7 41.4 96.1 3.3 631
2015 26,193,656 15,117,741 57.7 71,038 83.8 57.4 2.6 14.6 43.7 97.4 3.6 701
2016 34,949,319 27,835,544 79.6 120,734 81.1 55.6 6.4 13.8 45.2 98.3 4.1 843
2017 43,858,322 40,026,987 91.3 173,799 85.5 57.6 13.4 16.3 41.5 96.9 6.0 866
2018 (through June 30) 22,186,792     21,835,292   98.4 88,132   89.8 59.5 16.0 14.6 41.6 97.8 1.4 32
Total $ 187,856,940     $ 122,501,246   65.2 546,576   84.8 58.0 9.5 14.5 43.4 97.5 3.4 3,519
 
 
(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
June 30, 2018 March 31, 2018 June 30, 2017
CA 9.2 % 9.4 % 9.4 %
TX 8.0 8.0 8.2
FL 7.2 7.1 6.9
WA 4.8 4.8 4.8
IL 3.9 3.9 4.0
NJ 3.7 3.7 3.6
NC 3.5 3.5 3.6
GA 3.4 3.4 3.4
CO 3.3 3.1 3.0
OH 3.2 3.2 3.1
All Others 49.8   49.9   50.0  
Total 100.0 % 100.0 % 100.0 %
 
 
 
Gross RIF by State
June 30, 2018 March 31, 2018 June 30, 2017
CA 8.9 % 9.1 % 9.0 %
TX 8.2 8.2 8.4
FL 7.3 7.2 7.1
WA 4.9 4.9 4.9
IL 3.8 3.8 3.9
NJ 3.6 3.7 3.5
NC 3.5 3.5 3.7
GA 3.5 3.5 3.5
OH 3.3 3.3 3.2
CO 3.2 3.1 2.9
All Others 49.8   49.7   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 Six Months Ended
June 30, June 30, June 30, June 30,
2018 2017 2018 2017
Beginning default inventory 4,442 1,777 4,783 1,757
Plus: new defaults 1,701 1,105 3,695 2,305
Less: cures (2,572 ) (1,063 ) (4,842 ) (2,177 )
Less: claims paid (52 ) (43 ) (115 ) (108 )
Less: rescissions and denials, net —   —   (2 ) (1 )
Ending default inventory 3,519   1,776   3,519   1,776  
 
 
 
Rollforward of Reserve for Losses and LAE
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,

($ in thousands)

2018 2017 2018 2017
Reserve for losses and LAE at beginning of period $ 49,966   $ 29,468   $ 46,850   $ 28,142  
Add provision for losses and LAE occurring in:
Current year 6,576 5,026 16,528 12,116
Prior years (4,763 ) (3,256 ) (9,406 ) (6,653 )
Incurred losses and LAE during the period 1,813   1,770   7,122   5,463  
Deduct payments for losses and LAE occurring in:
Current year 211 96 211 97
Prior years 1,552   1,344   3,745   3,710  
Loss and LAE payments during the period 1,763   1,440   3,956   3,807  
Reserve for losses and LAE at end of period $ 50,016   $ 29,798   $ 50,016   $ 29,798  
 
 
 
Claims
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2018 2017 2018 2017
Number of claims paid 52 43 115 108
Total amount paid for claims (in thousands) $ 1,676 $ 1,380 $ 3,819 $ 3,687
Average amount paid per claim (in thousands) $ 32 $ 32 $ 33 $ 34
Severity 64 % 81 % 70 % 85 %
 
         
Exhibit I, continued
Essent Group Ltd. and Subsidiaries
Supplemental Information
Defaults, Reserve for Losses and LAE, and Claims
 
 
June 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 1,543 44 % $ 9,077 20 % $ 84,685 11 %
Four to eleven payments 1,675 47 26,688 58 96,627 28
Twelve or more payments 268 8 8,368 18 14,476 58
Pending claims 33     1     1,640     4     1,946   84
Total case reserves 3,519     100 % 45,773 100 %   $ 197,734   23
IBNR 3,433
LAE 810  
Total reserves for losses and LAE $ 50,016  
 
Average reserve per default:
Case $ 13.0
Total $ 14.2
 
Default Rate 0.64%
 
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%
 
June 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 898 50 % $ 6,101 23 % $ 49,210 12 %
Four to eleven payments 639 36 12,604 46 35,365 36
Twelve or more payments 189 11 6,094 22 10,214 60
Pending claims 50     3     2,469     9     2,842   87
Total case reserves 1,776     100 % 27,268 100 %   $ 97,631   28
IBNR 2,045
LAE 485  
Total reserves for losses and LAE $ 29,798  
 
Average reserve per default:
Case $ 15.4
Total $ 16.8
 
Default Rate 0.41%
 
 
Exhibit J
Essent Group Ltd. and Subsidiaries
Supplemental Information
Investment Portfolio
 
 
Investment Portfolio by Asset Class
Asset Class   June 30, 2018   December 31, 2017

( $ in thousands )

Fair Value   Percent Fair Value   Percent
U.S. Treasury securities $ 246,204 9.6 % $ 227,805 9.9 %
U.S. agency securities 32,755 1.3 33,114 1.4
U.S. agency mortgage-backed securities 493,004 19.3 456,037 19.8
Municipal debt securities 483,697 18.9 465,255 20.2
Non-U.S. government securities 24,703 1.0 — —
Corporate debt securities 653,774 25.6 611,728 26.5
Residential and commercial mortgage securities 87,637 3.4 79,407 3.5
Asset-backed securities 257,205 10.1 167,922 7.3
Money market funds 277,034   10.8   263,797   11.4  
Total Investments $ 2,556,013   100.0 % $ 2,305,065   100.0 %
 
Investment Portfolio by Credit Rating
Rating (1) June 30, 2018 December 31, 2017

( $ in thousands )

Fair Value Percent Fair Value Percent
Aaa $ 1,261,425 49.3 % $ 1,160,200 50.3 %
Aa1 133,062 5.2 115,237 5.0
Aa2 155,552 6.1 123,551 5.4
Aa3 137,257 5.4 127,785 5.6
A1 225,656 8.8 205,369 8.9
A2 162,277 6.3 157,651 6.8
A3 147,648 5.8 148,246 6.4
Baa1 142,040 5.6 115,178 5.0
Baa2 117,464 4.6 87,869 3.8
Baa3 35,452 1.4 43,024 1.9
Below Baa3 38,180   1.5   20,955   0.9  
Total Investments $ 2,556,013   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.
 
Investment Portfolio by Duration and Book Yield
Effective Duration June 30, 2018 December 31, 2017

( $ in thousands )

Fair Value Percent Fair Value Percent
< 1 Year $ 705,739 27.6 % $ 628,958 27.3 %
1 to < 2 Years 230,410 9.0 164,856 7.2
2 to < 3 Years 234,463 9.2 280,177 12.2
3 to < 4 Years 177,606 7.0 263,799 11.4
4 to < 5 Years 361,508 14.1 263,273 11.4
5 or more Years 846,287   33.1   704,002   30.5  
Total Investments $ 2,556,013   100.0 % $ 2,305,065   100.0 %
 
Pre-tax investment income yield:
Three months ended June 30, 2018 2.45 %
Six months ended June 30, 2018 2.43 %
 
Net cash and investments at holding company, Essent Group Ltd.:

( $ in thousands )

As of June 30, 2018 $ 76,012
As of December 31, 2017 $ 104,167
 
 
Exhibit K
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Insurance Company Capital
 
 
  June 30, 2018   December 31, 2017

( $ in thousands )

U.S. Mortgage Insurance Subsidiaries:
Combined statutory capital (1) $ 1,684,545 $ 1,528,869
 
Combined net risk in force (2) $ 23,513,547 $ 21,637,409
 
Risk-to-capital ratios: (3)
Essent Guaranty, Inc. 14.5:1 14.7:1
Essent Guaranty of PA, Inc. 4.6:1 5.4:1
Combined (4) 14.0:1 14.2:1
 
Essent Reinsurance Ltd.:
Stockholder's equity (GAAP basis) $ 716,642 $ 662,819
 
Net risk in force (2) $ 7,184,434 $ 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 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) 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 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 June 30, 2018, December 31, 2017 and June 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 June 30, 2018, December 31, 2017 and June 30, 2017 in accordance with Regulation G:
 
 

( In thousands, except per share amounts )

  June 30, 2018   December 31, 2017   June 30, 2017
 
Numerator:
Total Stockholders' Equity (Book Value) $ 2,103,571 $ 1,940,436 $ 1,497,897
 
Subtract: Accumulated Other Comprehensive Income (Loss) (39,248 ) (3,252 ) 1,065
 
Adjusted Book Value $ 2,142,819   $ 1,943,688   $ 1,496,832
 
Denominator:
Total Common Shares Outstanding 98,128 98,434 93,424
 
Add: Restricted Share Units Outstanding 452   536   559
 
Total Common Shares and Share Units Outstanding 98,580   98,970   93,983
 
Adjusted Book Value per Share $ 21.74   $ 19.64   $ 15.93
 

Essent Group Ltd.
Media Contact
610-230-0556
media@essentgroup.com
or
Investor Relations Contact
Christopher G. Curran
Senior Vice President – Investor Relations
855-809-ESNT
ir@essentgroup.com

Source: Essent Group Ltd.

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