Essent Group Ltd. Reports Third Quarter 2014 Results

HAMILTON, Bermuda--()--Essent Group Ltd. (NYSE: ESNT) today reported net income for the quarter ended September 30, 2014 of $25.1 million or $0.29 per diluted share. As of September 30, 2014, Essent had primary insurance in force of $46.4 billion and consolidated stockholders’ equity of $794.9 million.

For the third quarter of 2014, Essent Guaranty, Inc.’s New Insurance Written (“NIW”) totaled $8.8 billion, which included $1.5 billion of NIW related to a pool of loans on which Essent Guaranty was selected by Fannie Mae to be the sole insurer.

Additionally, Essent’s Bermuda reinsurer, Essent Reinsurance, Ltd. (“Essent Re”), was selected by Freddie Mac to participate in Freddie Mac’s ACIS 2014-2 transaction and insure $28.5 million of risk that Freddie Mac had retained as part of its STACR 2014-DN1 transaction. Also during the quarter, Essent Re began reinsuring new business from Essent Guaranty as part of the affiliate quota share effective July 1, 2014.

“We continue to execute upon our goal of building a high credit quality and profitable mortgage insurance portfolio,” said Mark Casale, Chairman and Chief Executive Officer. “We also are very pleased to have successfully executed upon growth opportunities relating to GSE risk share, as well as reinsurance through Essent Re. Essent is well positioned and we remain very optimistic about the future of our franchise.”

Financial Highlights:

  • Insurance in force as of September 30, 2014 was $46.4 billion, compared to $39.4 billion as of June 30, 2014 and $28.2 billion as of September 30, 2013.
  • Flow new insurance written for the third quarter of 2014 was $7.3 billion, compared to $5.9 billion in the second quarter of 2014 and $6.4 billion in the third quarter of 2013.
  • Net premiums earned for the third quarter of 2014 were $60.3 million, compared to $50.3 million in the second quarter of 2014 and $34.3 million in the third quarter of 2013.
  • Income before taxes for the third quarter of 2014 was $38.8 million, compared to $29.7 million for the second quarter of 2014 and $17.9 million for the third quarter of 2013.
  • The expense ratio for the third quarter of 2014 was 40.6%, compared to 47.0% for the second quarter of 2014 and 53.2% for the third quarter of 2013.
  • The provision for losses and LAE for the third quarter of 2014 was $1.4 million, compared to $1.0 million for the second quarter of 2014 and $0.3 million for the third quarter of 2013.
  • The percentage of loans in default as of September 30, 2014 was 0.15%, compared to 0.13% as of June 30, 2014 and 0.09% as of September 30, 2013.
  • The combined ratio for the third quarter of 2014 was 42.9%, compared to 48.9% for the second quarter of 2014 and 54.1% for the third quarter of 2013.
  • Essent Group Ltd. contributed approximately $100 million of capital to Essent Re in support of the affiliate quota share and current and future reinsurance transactions.
  • The consolidated balance of cash and investments at September 30, 2014 was $914.7 million, including cash and investment balances at the holding company of $47.1 million.
  • The combined risk to capital ratio, which includes statutory capital for both Essent Guaranty, Inc. and Essent Guaranty of PA, Inc., was 16.1:1 as of September 30, 2014.

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 877-201-0168 inside the U.S., or 647-788-4901 for international callers, using passcode 17832737 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 17832737.

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," "plan," "seek," "comfortable with," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" 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; 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, 2013 filed with the Securities and Exchange Commission on March 10, 2014. 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 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. Additional information regarding Essent may be found at www.essentgroup.com.

   
 
Essent Group Ltd. and Subsidiaries
Financial Results and Supplemental Information (Unaudited)
Quarter ended September 30, 2014
 
 
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: Earnings per Share
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 September 30, Nine Months Ended September 30,

(In thousands, except per share amounts)

2014 2013 2014 2013
Revenues:
Net premiums written $ 77,862 $ 55,026 $ 193,559 $ 133,322
Increase in unearned premiums   (17,539 )   (20,744 )   (38,144 )   (50,295 )
Net premiums earned 60,323 34,282 155,415 83,027
Net investment income 3,405 1,138 8,383 2,882
Realized investment gains, net 151 2 619 95
Other income   742     1,033     2,308     3,046  
Total revenues   64,621     36,455     166,725     89,050  
 
Losses and expenses:
Provision for losses and LAE 1,391 319 3,259 1,629
Other underwriting and operating expenses   24,469     18,237     71,576     48,756  
Total losses and expenses   25,860     18,556     74,835     50,385  
 
Income before income taxes 38,761 17,899 91,890 38,665
Income tax expense (benefit)   13,691     2,280     32,259     (7,731 )
Net income $ 25,070   $ 15,619   $ 59,631   $ 46,396  
 
 
Earnings per share:
Basic:
Common Shares $ 0.30 N/A $ 0.72 N/A
Class A common shares N/A $ 0.36 N/A $ 1.22
Class B-2 common shares N/A 0.07 N/A 0.50
Diluted:
Common Shares $ 0.29 N/A $ 0.70 N/A
Class A common shares N/A $ 0.35 N/A $ 1.22
Class B-2 common shares N/A 0.02 N/A 0.11
 
Weighted average common shares outstanding:
Basic:
Common Shares 83,640 N/A 83,263 N/A
Class A common shares N/A 43,616 N/A 37,449
Class B-2 common shares N/A 1,822 N/A 1,340
Diluted:
Common Shares 85,028 N/A 84,811 N/A
Class A common shares N/A 43,788 N/A 37,573
Class B-2 common shares N/A 6,054 N/A 6,033
 
Net income $ 25,070 $ 15,619 $ 59,631 $ 46,396
 

Other comprehensive income (loss):

Change in unrealized appreciation (depreciation) of investments, net of tax expense (benefit) of ($494) and $339 in the three months ended September 30, 2014 and 2013 and $1,970 and ($1,843) in the nine months ended September 30, 2014 and 2013

  (1,405 )   630     3,989     (3,423 )
Total other comprehensive income (loss)   (1,405 )   630     3,989     (3,423 )
Comprehensive income $ 23,665   $ 16,249   $ 63,620   $ 42,973  
 
 
Loss ratio 2.3 % 0.9 % 2.1 % 2.0 %
Expense ratio   40.6 %   53.2 %   46.1 %   58.7 %
Combined ratio   42.9 %   54.1 %   48.2 %   60.7 %
 

 
Exhibit B
       
Essent Group Ltd. and Subsidiaries
 
Condensed Consolidated Balance Sheets (Unaudited)
 
 
September 30, December 31,

(In thousands, except per share amounts)

2014 2013
Assets
Investments available for sale, at fair value
Fixed maturities $ 790,888 $ 318,476
Short-term investments   106,263   14,079  
Total investments 897,151 332,555
Cash 17,574 477,655
Accrued investment income 5,034 1,978
Accounts receivable 13,168 10,006
Deferred policy acquisition costs 8,784 6,173

Property and equipment (at cost, less accumulated depreciation of $38,630 in 2014 and $36,796 in 2013)

5,200 4,411
Prepaid federal income tax 42,673 8,000

Net deferred tax asset

 -

10,346

Other assets   2,016   2,846  

 

Total assets

$ 991,600 $ 853,970  
 
Liabilities and Stockholders' Equity
Liabilities
Reserve for losses and LAE $ 5,682 $ 3,070
Unearned premium reserve 141,544 103,399
Amounts due under Asset Purchase Agreement 2,493 4,949
Accrued payroll and bonuses 11,119 13,076
Net deferred tax liability 22,036 -
Other accrued liabilities   13,833   7,335  
Total liabilities   196,707   131,829  
 
Commitments and contingencies
 
Stockholders' Equity
Common Shares, $0.015 par value:
Authorized - 233,333; issued - 86,524 shares in 2014 and 86,491 shares in 2013 1,298 1,297
Additional paid-in capital 763,521 754,390
Accumulated other comprehensive income (loss) 2,542 (1,447 )
Retained earnings (accumulated deficit)   27,532   (32,099 )
Total stockholders' equity   794,893   722,141  
 
Total liabilities and stockholders' equity $ 991,600 $ 853,970  
 

 
Exhibit C
Essent Group Ltd. and Subsidiaries
Supplemental Information
Historical Quarterly Data
                           
 
2014 2013
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 $ 77,862   $ 63,505   $ 52,192   $ 52,878   $ 55,026   $ 44,923   $ 33,373  
 
Net premiums earned 60,323 50,342 44,750 40,344 34,282 27,481 21,264
Other revenues   4,298     3,941     3,071     2,009     2,173     2,083     1,767  
Total revenues   64,621     54,283     47,821     42,353     36,455     29,564     23,031  
 
Losses and expenses:
Provision for losses and LAE 1,391 966 902 692 319 580 730
Other underwriting and operating expenses   24,469     23,648     23,459     22,299     18,237     15,557     14,962  
Total losses and expenses   25,860     24,614     24,361     22,991     18,556     16,137     15,692  
 
Income before income taxes 38,761 29,669 23,460 19,362 17,899 13,427 7,339
Income tax expense (benefit)   13,691     10,114     8,454     345     2,280     (10,150 )   139  
Net income $ 25,070   $ 19,555   $ 15,006   $ 19,017   $ 15,619   $ 23,577   $ 7,200  
 
Earnings per share:
Basic:
Common Shares $ 0.30 $ 0.23 $ 0.18 $ 0.23 N/A N/A N/A
Class A common shares N/A N/A N/A N/A $ 0.36 $ 0.63 $ 0.23
Class B-2 common shares N/A N/A N/A N/A 0.07 0.40 -
 
Diluted:
Common Shares $ 0.29 $ 0.23 $ 0.18 $ 0.22 N/A N/A N/A
Class A common shares N/A N/A N/A N/A $ 0.35 $ 0.62 $ 0.23
Class B-2 common shares N/A N/A N/A N/A 0.02 0.09 -
 
Weighted average common shares outstanding:
Basic:
Common Shares 83,640 83,276 82,864 51,741 N/A N/A N/A
Class A common shares N/A N/A N/A N/A 43,616 36,793 31,805
Class B-2 common shares N/A N/A N/A N/A 1,822 1,334 853
 
Diluted:
Common Shares 85,028 84,706 84,696 55,130 N/A N/A N/A
Class A common shares N/A N/A N/A N/A 43,788 36,901 31,864
Class B-2 common shares N/A N/A N/A N/A 6,054 5,994 6,009
 
Other Data:

($ in thousands)

 
Loss ratio (1) 2.3 % 1.9 % 2.0 % 1.7 % 0.9 % 2.1 % 3.4 %
Expense ratio (2)   40.6 %   47.0 %   52.4 %   55.3 %   53.2 %   56.6 %   70.4 %
Combined ratio   42.9 %   48.9 %   54.4 %   57.0 %   54.1 %   58.7 %   73.8 %
 
 
(1) Loss ratio is calculated by dividing the provision for loss and loss adjustment expenses by net premiums earned.
(2) 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
                           
2014 2013
Other Data, continued: September 30 June 30 March 31 December 31 September 30 June 30 March 31

($ in thousands)

 
Flow:
New insurance written $ 7,283,169 $ 5,874,334 $ 3,630,573 $ 4,527,900 $ 6,408,055 $ 5,895,127 $ 4,321,556
New risk written 1,802,408 1,477,547 907,257 1,147,560 1,584,267 1,409,905 991,011
 
Bulk:
New insurance written $ 1,506,529 $ - $ - $ - $ - $ - $ -
New risk written 30,131 - - - - - -
 
Consolidated:

Average premium rate (3)

0.55 % 0.54 % 0.54 % 0.54 % 0.54 % 0.55 % 0.55 %
New insurance written $ 8,789,698 $ 5,874,334 $ 3,630,573 $ 4,527,900 $ 6,408,055 $ 5,895,127 $ 4,321,556
New risk written $ 1,832,539 $ 1,477,547 $ 907,257 $ 1,147,560 $ 1,584,267 $ 1,409,905 $ 991,011
Insurance in force (end of period) $ 46,428,526 $ 39,379,879 $ 34,778,057 $ 32,028,196 $ 28,198,722 $ 22,576,300 $ 17,430,810
Risk in Force (end of period) $ 11,152,497 $ 9,700,549 $ 8,493,862 $ 7,768,605 $ 6,764,997 $ 5,348,917 $ 4,100,835
Policies in force 209,841 175,773 154,451 141,417 123,737 98,818 76,455

Weighted-average coverage (4)

24.0 % 24.6 % 24.4 % 24.3 % 24.0 % 23.7 % 23.5 %
Annual persistency 88.5 % 89.1 % 87.9 % 86.1 % 83.1 % 80.1 % 80.9 %
 
Loans in default (count) 312 235 192 159 116 90 75
Percentage of loans in default 0.15 % 0.13 % 0.12 % 0.11 % 0.09 % 0.09 % 0.10 %
 
 
 

(3) Average premium rate is calculated by dividing net premium earned by average insurance in force for the period.

(4) Weighted average coverage is calculated by dividing end of period risk in force by insurance in force.

 

 
    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, 2014

September 30, 2013

September 30, 2014 September 30, 2013

($ in thousands)

>=760 $ 3,161,643 43.4 % $ 3,254,723 50.8 % $ 7,427,303 44.2 % $ 8,853,507 53.3 %
740-759 1,189,598 16.3 1,158,506 18.1 2,790,779 16.6 2,972,846 17.9
720-739 1,051,260 14.4 893,464 13.9 2,446,079 14.6 2,257,930 13.6
700-719 778,524 10.7 589,426 9.2 1,783,235 10.6 1,386,162 8.3
680-699 637,821 8.8 382,771 6.0 1,443,347 8.6 889,329 5.3
<=679   464,323       6.4     129,165       2.0     897,333       5.4     264,964       1.6  
Total $ 7,283,169       100.0 % $ 6,408,055       100.0 % $ 16,788,076       100.0 % $ 16,624,738       100.0 %
 
Weighted-average Credit Score 747 756 748 758
 
 
 
NIW by LTV
Three months ended Nine months ended
September 30, 2014

September 30, 2013

September 30, 2014

September 30, 2013

($ in thousands)

85.00% and below $ 952,873 13.1 % $ 776,563 12.1 % $ 2,060,257 12.3 % $ 2,475,401 14.9 %
85.01% to 90.00% 2,419,571 33.2 2,311,452 36.1 5,636,695 33.6 6,098,476 36.7
90.01% to 95.00% 3,840,911 52.7 3,178,262 49.6 8,971,604 53.4 7,816,748 47.0
95.01% and above   69,814       1.0     141,778       2.2     119,520       0.7     234,113       1.4  
$ 7,283,169       100.0 % $ 6,408,055       100.0 % $ 16,788,076       100.0 % $ 16,624,738       100.0 %
 
Weighted-average LTV 92 % 92 % 92 % 91 %
 
 
 
NIW by Product
Three months ended Nine months ended
September 30, 2014

September 30, 2013

September 30, 2014 September 30, 2013
Single Premium policies 19.9 % 21.0 % 19.1 % 20.2 %
Monthly Premium policies 80.1   79.0   80.9   79.8  
100.0 % 100.0 % 100.0 % 100.0 %
 
 
 
NIW by Purchase vs. Refinance
Three months ended Nine months ended
September 30, 2014

September 30, 2013

September 30, 2014 September 30, 2013
Purchase 83.5 % 78.5 % 84.9 % 68.0 %
Refinance 16.5   21.5   15.1   32.0  
100.0 % 100.0 % 100.0 % 100.0 %
 

 
Exhibit D, continued
                                   
Essent Group Ltd. and Subsidiaries
Supplemental Information
New Insurance Written: Bulk
 
 
NIW by Credit Score
Three months ended Nine months ended
September 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013

($ in thousands)

>=760 $ 490,981 32.6 % $ - 0.0 % $ 490,981 32.6 % $ - 0.0 %
740-759 235,200 15.6 - - 235,200 15.6 - -
720-739 234,988 15.6 - - 234,988 15.6 - -
700-719 233,874 15.5 - - 233,874 15.5 - -
680-699 190,009 12.6 - - 190,009 12.6 - -
<=679   121,477       8.1     -     -     121,477       8.1     -     -  
Total $ 1,506,529       100.0 % $ -     0.0 % $ 1,506,529       100.0 % $ -     100.0 %
 
Weighted-average Credit Score 737 N/A 737 N/A
 
 
 
NIW by LTV
Three months ended Nine months ended
September 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013

($ in thousands)

85.00% and below $ 51,610 3.4 % $ - 0.0 % $ 51,610 3.4 % $ - 0.0 %
85.01% to 90.00% 121,782 8.1 - - 121,782 8.1 - -
90.01% to 95.00% 717,853 47.7 - - 717,853

47.7

- -
95.01% and above   615,284       40.8     -     -     615,284       40.8     -     -  
$ 1,506,529       100.0 % $ -     0.0 % $ 1,506,529       100.0 % $ -     0.0 %
 
Weighted-average LTV 94 % N/A 94 % N/A
 
 
 
NIW by Product
Three months ended Nine months ended
September 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013
Single Premium policies 0.0 % 0.0 % 0.0 % 0.0 %
Monthly Premium policies 100.0   -   100.0   -  
100.0 % 0.0 % 100.0 % 0.0 %
 
 
 
NIW by Purchase vs. Refinance
Three months ended Nine months ended
September 30, 2014 September 30, 2013 September 30, 2014 September 30, 2013
Purchase 85.8 % 0.0 % 85.8 % 0.0 %
Refinance 14.2   -   14.2   -  
100.0 % 0.0 % 100.0 % 0.0 %
 

 
Exhibit E
                           
Essent Group Ltd. and Subsidiaries
Supplemental Information
Insurance in Force and Risk in Force: Consolidated
 
 
Portfolio by Credit Score
Total IIF by FICO score September 30, 2014 June 30, 2014 September 30, 2013

($ in thousands)

>=760 $ 22,859,418 49.2 % $ 20,157,165 51.2 % $ 15,376,726 54.5 %
740-759 8,102,165 17.5 6,963,735 17.7 5,033,831 17.9
720-739 6,561,002 14.1 5,502,718 14.0 3,820,099 13.5
700-719 4,342,161 9.4 3,481,564 8.8 2,233,146 7.9
680-699 3,102,261 6.7 2,368,613 6.0 1,348,761 4.8
<=679   1,461,519       3.1     906,084       2.3     386,159       1.4  
Total $ 46,428,526       100.0 % $ 39,379,879       100.0 % $ 28,198,722       100.0 %
 
Weighted-average Credit Score 754 756 759
 
 
Total RIF by FICO score September 30, 2014 June 30, 2014 September 30, 2013

($ in thousands)

>=760 $ 5,490,591 49.2 % $ 4,913,013 50.6 % $ 3,654,156 54.0 %
740-759 1,960,787 17.6 1,722,247 17.8 1,217,185 18.0
720-739 1,593,492 14.3 1,376,538 14.2 933,041 13.8
700-719 1,019,259 9.1 855,985 8.8 532,016 7.9
680-699 745,744 6.7 601,426 6.2 331,908 4.9
<=679   342,624       3.1     231,340       2.4     96,691       1.4  
Total $ 11,152,497       100.0 % $ 9,700,549       100.0 % $ 6,764,997       100.0 %
 
 
 
 
Portfolio by LTV
Total IIF by LTV September 30, 2014 June 30, 2014 September 30, 2013

($ in thousands)

85.00% and below $ 5,581,330 12.0 % $ 4,928,612 12.5 % $ 3,976,461 14.1 %
85.01% to 90.00% 16,358,760 35.2 % 14,516,271 36.9 10,921,950 38.8
90.01% to 95.00% 23,383,926 50.4 % 19,489,901 49.5 13,011,241 46.1
95.01% and above   1,104,510       2.4 %   445,095       1.1     289,070       1.0  
  46,428,526       100.0 % $ 39,379,879       100.0 % $ 28,198,722       100.0 %
 
Weighted-average LTV 92 % 91 % 91 %
 
 
Total RIF by LTV September 30, 2014 June 30, 2014 September 30, 2013

($ in thousands)

85.00% and below $ 621,083 5.6 % $ 550,950 5.7 % $ 433,962 6.4 %
85.01% to 90.00% 3,859,783 34.6 % 3,434,553 35.4 2,552,587 37.8
90.01% to 95.00% 6,502,875 58.3 % 5,567,538 57.4 3,682,252 54.4
95.01% and above   168,756       1.5 %   147,508       1.5     96,196       1.4  
$ 11,152,497       100.0 % $ 9,700,549       100.0 % $ 6,764,997       100.0 %
 
 
 
 
Portfolio by Loan Amortization Period
Total IIF by Loan Amortization Period September 30, 2014 June 30, 2014 September 30, 2013

($ in thousands)

FRM 30 years and higher $ 40,633,185 87.5 % $ 34,103,315 86.6 % $ 23,853,792 84.6 %
FRM 20-25 years 1,208,777 2.6 1,150,105 2.9 1,048,754 3.7
FRM 15 years 2,555,323 5.5 2,434,151 6.2 2,246,361 8.0
ARM 5 years and higher   2,031,241       4.4     1,692,308       4.3     1,049,815       3.7  
Total $ 46,428,526       100.0 % $ 39,379,879       100.0 % $ 28,198,722       100.0 %
 

 
Exhibit F
                       
Essent Group Ltd. and Subsidiaries
Supplemental Information
Other Risk in Force
 
 

($ in thousands)

September 30, 2014
 
ACIS (A) $

28,398

 
 

(A)

In the third quarter of 2014, Essent Reinsurance, Ltd. issued an insurance policy in connection with Freddie Mac's Agency Credit Insurance Structure ("ACIS") program. This policy covers the risk in force on the loans in the reference pools associated with the STACR 2014 DN-1 notes issued by Freddie Mac in February 2014.
 

                                   
Exhibit G
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Portfolio Vintage Data: Consolidated
 

Original

Insurance

Written

($ in thousands)

Remaining

Insurance

in Force

($ in thousands)

% Remaining of

Original

Insurance

Insurance in Force as of September 30, 2014
Origination year                 % Purchase     >90% LTV     >95% LTV     FICO < 700     FICO >= 760     % FRM
 
2010 $ 245,899 $ 83,810 34.1 % 72.8 % 35.9 % 0.0 % 3.1 % 59.0 % 98.1 %
2011 3,229,492 1,408,705 43.6 71.5 40.0 0.2 4.2 57.7 93.3
2012 11,240,062 8,307,209 73.9 68.8 48.2 0.5 5.2 56.0 96.8
2013 21,146,735 18,781,640 88.8 73.8 51.5 1.8 7.8 51.4 96.5
2014 (through September 30)   18,294,605       17,847,162 97.6 85.1 57.3 4.1 14.6 43.1 94.3
Total $ 54,156,793     $ 46,428,526 85.7 77.2 52.7 2.4 9.8 49.2 95.6
 

 
Exhibit H
           
Essent Group Ltd. and Subsidiaries
Supplemental Information
Portfolio Geographic Data: Consolidated
 
IIF by State
As of September 30, 2014 As of June 30, 2014 As of September 30, 2013
CA 10.4% 11.0% 11.1%
TX 8.3 8.5 8.2
FL 5.1 5.1 4.4
MA 4.1 2.6 2.9
WA 4.1 4.0 3.5
NC 4.0 4.3 4.3
IL 3.8 3.9 4.1
PA 3.5 3.3 3.7
NJ 3.4 3.5 3.8
AZ 3.4 3.5 3.5
All Others 49.9 50.3 50.5
TOTAL 100.0% 100.0% 100.0%
 
 
 
RIF by State
As of September 30, 2014 As of June 30, 2014 As of September 30, 2013
CA 10.0% 10.4% 10.5%
TX 8.4 8.3 7.9
FL 5.4 5.3 4.6
NC 4.3 4.4 4.4
WA 4.2 4.0 3.6
IL 4.0 4.0 4.2
GA 3.6 3.6 3.6
NJ 3.4 3.4 3.7
PA 3.3 3.4 3.7
AZ 3.3 3.3 3.3
All Others 50.1 49.9 50.5
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,
2014     2013 2014     2013
Beginning default inventory 235 90 159 56
Plus: new defaults 237 84 555 219
Less: cures (156 ) (56 ) (382 ) (151 )
Less: claims paid   (4 )       (2 )   (20 )       (8 )
Ending default inventory   312         116     312         116  
 
 
 
Rollforward of Reserve for Losses and LAE
Three months ended Nine months ended
September 30, September 30, September 30, September 30,

($ in thousands)

2014     2013 2014     2013
Reserve for losses and LAE at beginning of period $ 4,506       $ 2,548   $ 3,070       $ 1,499  

Add provision for losses and LAE occurring in:

Current year 1,502 648 3,954 2,083
Prior years   (111 )       (329 )   (695 )       (454 )
Incurred losses during the period   1,391         319     3,259         1,629  

Deduct payments for losses and LAE occurring in:

Current year 1 91 1 95
Prior years   214         49     646         306  
Loss and LAE payments during the period   215         140     647         401  
Reserve for losses and LAE at end of period $ 5,682       $ 2,727   $ 5,682       $ 2,727  
 
 
 
Claims
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2014     2013 2014     2013
Number of claims paid 4 2 20 8
Total amount paid for claims (in thousands) $ 214 $ 128 $ 636 $ 376
Average amount paid per claim (in thousands) $ 54 $ 64 $ 32 $ 47
Severity 108 % 64 % 73 % 77 %
 

                       
Exhibit I, continued
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Defaults, Reserve for Losses and LAE, and Claims
 
 
As of September 30, 2014

Number of

Policies in Default

   

Percentage of

Policies in Default

   

Amount of

Reserves

   

Percentage

of Reserves

    Defaulted RIF    

Reserves as a

Percentage of RIF

($ in thousands)

Missed Payments:
Three payments or less 175 56 % $ 1,773 34 % $ 9,464 19 %
Four to eleven payments 105 34 2,405 46 4,865 49
Twelve or more payments 26 8 788 15 1,042 76
Pending claims 6       2         226     5         223 101
TOTAL 312       100 % 5,192 100 %     $ 15,594 33
IBNR 389
LAE   101
TOTAL $ 5,682
 
Average reserve per default:
Case $ 16.6
Total $ 18.2
 
Default Rate 0.15 %
 
 
 
As of December 31, 2013

Number of

Policies in Default

   

Percentage of

Policies in Default

   

Amount of

Reserves

   

Percentage

of Reserves

    Defaulted RIF    

Reserves as a

Percentage of RIF

($ in thousands)

Missed Payments:
Three payments or less 88 56 % $ 841 30 % $ 3,972 21 %
Four to eleven payments 56 35 1,497 53 2,672 56
Twelve or more payments 10 6 300 11 447 67
Pending claims 5       3         169     6         166 102
TOTAL 159       100 % 2,807 100 %     $ 7,257 39
IBNR 211
LAE   52
TOTAL $ 3,070
 
Average reserve per default:
Case $ 17.7
Total $ 19.3
 
Default Rate 0.11 %
 
 
 
As of September 30, 2013

Number of

Policies in Default

   

Percentage of

Policies in Default

   

Amount of

Reserves

   

Percentage

of Reserves

   

Defaulted RIF

   

Reserves as a

Percentage of RIF

($ in thousands)

Missed Payments:
Three payments or less 57 49 % $ 729 29 % $ 2,874 25 %
Four to eleven payments 43 37 1,086 43 1,949 56
Twelve or more payments 9 8 317 13 441 72
Pending claims 7       6         369     15         376 98
TOTAL 116       100 % 2,501 100 %     $ 5,640 44
IBNR 188
LAE   38
TOTAL $ 2,727
 
Average reserve per default:
Case $ 21.6
Total $ 23.5
 
Default Rate 0.09 %
 

 
Exhibit J
               
Essent Group Ltd. and Subsidiaries
Supplemental Information
Investment Portfolio
 
 
Investment Portfolio by Asset Class
Asset Class September 30, 2014 December 31, 2013

($ in thousands)

Fair Value     Percent Fair Value     Percent
U.S. Treasury securities $ 68,603 7.6 % $ 59,187 17.8 %
U.S. Agency securities 6,140 0.7 14,839 4.5
U.S. Agency Mortgage-backed securities 69,143 7.7 22,241 6.7
Municipal debt securities 190,656 21.3 57,650 17.3
Corporate debt securities 271,988 30.4 125,593 37.8
Mortgage-backed securities 62,276 6.9 18,581 5.6
Asset-backed securities 122,082 13.6 20,385 6.1
Money market investments   106,263         11.8     14,079     4.2  
Total Investments $ 897,151         100.0 % $ 332,555     100.0 %
 
 
 
Investment Portfolio by Credit Rating

Rating (1)

September 30, 2014 December 31, 2013

($ in thousands)

Fair Value     Percent Fair Value     Percent
Aaa $ 430,061 47.9 % $ 147,862 44.5 %
Aa1 37,616 4.2 21,570 6.5
Aa2 47,346 5.3 15,464 4.6
Aa3 45,671 5.1 11,902 3.6
A1 72,101 8.1 26,541 8.0
A2 57,396 6.4 17,045 5.1
A3 64,087 7.1 29,886 9.0
Baa1 59,219 6.6 24,441 7.3
Baa2 71,666 8.0 30,782 9.3
Baa3 11,988 1.3 7,062 2.1
Below Baa3   -         -     -     -  
Total Investments $ 897,151         100.0 % $ 332,555     100.0 %
 

(1) Based on ratings issued by Moody's, if available. S&P rating utilized if Moody's not available.

 
 
 
Portfolio by Duration and Book Yield
Effective Duration September 30, 2014 December 31, 2013

($ in thousands)

Fair Value     Percent Fair Value     Percent
< 1 Year $ 230,179 25.7 % $ 65,092 19.6 %
1 to < 2 Years 70,118 7.8 19,093 5.7
2 to < 3 Years 132,382 14.8 74,335 22.4
3 to < 4 Years 125,722 14.0 63,214 19.0
4 to < 5 Years 67,250 7.5 66,230 19.9
5 or more Years   271,500         30.2     44,591     13.4  
Total Investments $ 897,151         100.0 % $ 332,555     100.0 %
 
Pre-tax investment income yield:
Three months ended September 30, 2014 1.71 %
Nine months ended September 30, 2014 1.44 %
 
 
Net cash and Investments at holding company Essent Group Ltd. ($ in thousands):
As of September 30, 2014 $ 47,100
As of December 31, 2013 $ 246,220
 

 
Exhibit K
       
Essent Group Ltd. and Subsidiaries
Supplemental Information
Insurance Company Capital
 
As of

 

September 30, 2014 December 31, 2013

($ in thousands)

US Mortgage Insurance Business:
Combined statutory capital (A) $ 664,206 $ 469,424
 
Combined net risk in force (B) $ 10,713,036 $ 7,765,586
 
Risk to capital ratios: (C)
Essent Guaranty, Inc. 16.2:1 16.6:1
Essent Guaranty of PA, Inc. 16.2:1 17.1:1
Combined (D) 16.1:1 16.5:1
 
Essent Reinsurance, Ltd. Mortgage Insurance Business:
Stockholders' equity (GAAP basis) $ 102,109 $ 389
 
Net risk in force (B) $ 462,280 N/A
 
 

(A) 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.

 

(B) 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.

 

(C) The risk to capital ratio is calculated as the ratio of net risk in force to statutory capital.

 

(D) 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
Earnings per Share
               
 

Three months ended

September 30,

Nine months ended

September 30,

2014 2013 2014 2013

(In thousands, except per share amounts)

Net income $ 25,070 $ 15,619 $ 59,631 $ 46,396
Less: Class A dividends declared N/A - N/A -
Less: Class B-2 dividends declared   N/A   -   N/A   -
Undistributed net income $ 25,070 $ 15,619 $ 59,631 $ 46,396
Net income allocable to Common Shares $ 25,070 N/A $ 59,631 N/A
Net income allocable to Class A common shares N/A $ 15,490 N/A $ 45,727
Net income allocable to Class B-2 common shares N/A 129 N/A 669
 
Basic earnings per common share:
Common Shares $ 0.30 N/A $ 0.72 N/A
Class A common shares N/A $ 0.36 N/A $ 1.22
Class B-2 common shares N/A 0.07 N/A 0.50
 
Diluted earnings per common share:
Common Shares $ 0.29 N/A $ 0.70 N/A
Class A common shares N/A $ 0.35 N/A $ 1.22
Class B-2 common shares N/A 0.02 N/A 0.11
 
Basic weighted average common shares outstanding:
Common Shares 83,640 N/A 83,263 N/A
Class A common shares N/A 43,616 N/A 37,449
Class B-2 common shares N/A 1,822 N/A 1,340
 
Diluted weighted average common shares outstanding:
Common Shares 85,028 N/A 84,811 N/A
Class A common shares N/A 43,788 N/A 37,573
Class B-2 common shares N/A 6,054 N/A 6,033

 

 

Note:

Prior to the Company’s initial public offering on November 5, 2013 (“IPO”), the Company had two classes of common shares outstanding: Class A common shares and Class B-2 common shares. Upon the completion of the IPO, all of the Class A common shares and the Class B-2 common shares converted into a single class of common shares of the Company (the “Common Shares”), as more fully described in the Company’s prospectus dated October 30, 2013. Earnings Per Share (“EPS”) was calculated and presented prior to the IPO using the “two-class” method which provides that earnings and losses are allocated to each class of common shares according to the dividends declared or unpaid cumulative dividends earned, with the remaining undistributed earnings allocated according to each share’s respective participation rights.
 

 

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 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 Outstanding Restricted Share Units is defined as total common shares outstanding plus all equity instruments (including Restricted Stock 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 September 30, 2014 and December 31, 2013, 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, 2014 and December 31, 2013 in accordance with Regulation G:
 
       

(In thousands, except per share amounts)

September 30, 2014 December 31, 2013
 
Numerator:
Total Stockholders' Equity (Book Value) $ 794,893 $ 722,141
 
Subtract: Accumulated Other Comprehensive Income (Loss)   2,542   (1,447 )
 
Adjusted Book Value $ 792,351 $ 723,588  
 
Denominator:
Total Outstanding Common Shares 86,524 86,491
 
Add: Outstanding Restricted Share Units   665   528  
 
Total Outstanding Common Shares and Restricted Share Units   87,189   87,019  
 
Adjusted Book Value per Share $ 9.09 $ 8.32  
 

Contacts

Essent Group Ltd.
Media Contact
JD Walker Communications, LLC
Janice Daue Walker
610-230-0556
media@essentgroup.com
or
Investor Relations Contact
855-809-ESNT
ir@essentgroup.com

Contacts

Essent Group Ltd.
Media Contact
JD Walker Communications, LLC
Janice Daue Walker
610-230-0556
media@essentgroup.com
or
Investor Relations Contact
855-809-ESNT
ir@essentgroup.com