Essent Group Ltd. Reports Fourth Quarter and Full Year 2013 Results

Business Wire

HAMILTON, Bermuda--(BUSINESS WIRE)--

Essent Group Ltd. ( ESNT ) today reported net income for the fourth quarter ended December 31, 2013 of $19.0 million. Net income for the full year 2013 was $65.4 million, which included a tax benefit of $7.4 million.

Primary insurance in force as of December 31, 2013, was $32.0 billion, representing an increase of 135% compared to $13.6 billion of insurance in force as of December 31, 2012. As of December 31, 2013, consolidated stockholders equity was $722.1 million and combined statutory capital in insurance subsidiaries was $469.4 million.

2013 was a landmark year for Essent. We achieved investment grade ratings from both S&P and Moodys and also successfully completed our initial public offering, giving us greater access to capital to support future growth, said Mark Casale, Chairman and Chief Executive Officer. In addition, our insurance in force growth fueled a significant increase in our top line revenues, resulting in record earnings for the year.

Financial Highlights:

  • New insurance written for the fourth quarter was $4.5 billion, compared to $4.0 billion in the fourth quarter 2012. For the full year 2013, new insurance written was $21.2 billion, compared to $11.2 billion for 2012.
  • Income before taxes for the fourth quarter was $19.4 million compared to $1.4 million for the fourth quarter of 2012. Income before taxes for the full year 2013 was $58.0 million compared to a loss of $13.9 million for 2012.
  • Net premiums earned for the fourth quarter were $40.3 million, compared to $16.5 million in the fourth quarter of 2012. For the full year 2013, net premiums earned were $123.4 million, compared to $41.8 million for 2012.
  • The expense ratio for the fourth quarter was 55.3%, compared to 100.2% for the fourth quarter of 2012. For the full year, the expense ratio was 57.6%, compared to 146.3% for 2012.
  • The provision for losses and LAE for the fourth quarter was $0.7 million, compared to $0.5 million in the fourth quarter of 2012. For the full year 2013, the provision for losses and LAE was $2.3 million, compared to $1.5 million in 2012.
  • The percentage of loans in default as of December 31, 2013 was 0.11%, compared to 0.09% as of December 31, 2012.
  • The combined ratio for the fourth quarter was 57.0%, compared to 103.2% for the fourth quarter of 2012. For the full year, the combined ratio was 59.5%, compared to 149.8% for 2012.

Additionally, the insurance subsidiaries combined risk to capital ratio which includes statutory capital for both Essent Guaranty, Inc. and Essent Guaranty of PA, Inc. was 16.5:1 as of December 31, 2013, compared to 15.8:1 as of December 31, 2012.

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 31467424 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 31467424.

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 listed under "Risk Factors" in the prospectus dated as of October 30, 2013 filed pursuant to Rule 424(b)(4) with the Securities and Exchange Commission on November 1, 2013. 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. ( 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)
 
Exhibit A:       Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
Exhibit B: Condensed Consolidated Balance Sheets (Unaudited)
Exhibit C: New Insurance Written
Exhibit D: Insurance in Force and Risk in Force
Exhibit E: Portfolio Vintage Data
Exhibit F: Portfolio Geographic Data
Exhibit G: Defaults, Reserve for Losses and LAE, and Claims
Exhibit H: Investment Portfolio
Exhibit I: Insurance Company Capital
Exhibit J: Historical Quarterly Data
Exhibit K: Earnings per Share
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 (Loss) (Unaudited)
 
 
  Quarter ended December 31,   Year ended December 31,

(In thousands, except per share amounts)

2013   2012 2013   2012
Revenues:
Net premiums written $ 52,878 $ 28,219 $ 186,200 $ 72,668
Increase in unearned premiums   (12,534 )   (11,721 )   (62,829 )   (30,875 )
Net premiums earned 40,344 16,498 123,371 41,793
Net investment income 1,228 697 4,110 2,269
Realized investment gains, net 21 35 116 143
Other income   760     1,183     3,806     4,511  
Total revenues   42,353     18,413     131,403     48,716  
 
Losses and expenses:
Provision for losses and LAE 692 492 2,321 1,466
Other underwriting and operating expenses  

22,299

    16,535    

71,055

    61,126  
Total losses and expenses  

22,991

    17,027    

73,376

    62,592  
 
Income (loss) before income taxes

19,362

1,386

58,027

(13,876 )
 
Income tax expense (benefit)   345     345     (7,386 )   (333 )
 
Net income (loss) $

19,017

  $ 1,041   $

65,413

  $ (13,543 )
 
Earnings (loss) per share
Basic:
Common Shares $ 0.23 N/A $ 0.90 N/A
Class A common shares N/A $ 0.03 N/A $ (0.49 )
Class B-2 common shares N/A - N/A -
 
Diluted:
Common Shares $ 0.22 N/A $ 0.70 N/A
Class A common shares N/A $ 0.03 N/A $ (0.49 )
Class B-2 common shares N/A - N/A -
 
Weighted average common shares outstanding
Basic:
Common Shares 51,741 N/A 14,044 N/A
Class A common shares N/A 31,123 N/A 27,445
Class B-2 common shares N/A 602 N/A 393
 
Diluted:
Common Shares 55,130 N/A 18,103 N/A
Class A common shares N/A 31,293 N/A 27,445
Class B-2 common shares N/A 5,342 N/A 393
 
 
Net income (loss) $

19,017

$ 1,041 $

65,413

$ (13,543 )
 
Other comprehensive income (loss):

Change in unrealized (depreciation) appreciation of investments, net of tax (benefit) expense of $(236) and $(345) in the quarter ended December 31, 2013 and 2012 $(2,080) and $333 in the year ended December 31, 2013 and 2012

  (439 )   (641 )   (3,861 )   618  
Total other comprehensive income (loss)   (439 )   (641 )   (3,861 )   618  
 
Comprehensive income (loss) $

18,578

  $ 400   $

61,552

  $ (12,925 )
 
 
Loss ratio 1.7 % 3.0 % 1.9 % 3.5 %
Expense ratio   55.3 %   100.2 %   57.6 %   146.3 %
Combined ratio   57.0 %   103.2 %   59.5 %   149.8 %
 
 
Exhibit B
 
Essent Group Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
 
 
 

December 31,

(In thousands, except per share amounts) 2013   2012
Assets
Investments available for sale, at fair value $ 332,555 $ 247,414
Cash 477,655 22,315
Accrued investment income 1,978 1,291
Accounts receivable 10,006 4,894
Deferred policy acquisition costs 6,173 2,203

Property and equipment (at cost, less accumulated depreciation of $36,796 in 2013 and $34,915 in 2012)

4,411 3,626
Prepaid federal income tax 8,000 -
Net deferred tax asset 10,346 -
Other assets   2,846     1,589  
 
Total assets $ 853,970   $ 283,332  
 
Liabilities and Stockholders' Equity
Liabilities
Reserve for losses and LAE $ 3,070 $ 1,499
Unearned premium reserve 103,399 40,570
Amounts due under Asset Purchase Agreement 4,949 9,841
Accrued payroll and bonuses 13,076 8,284
Other accrued liabilities  

7,335

    4,015  
Total liabilities  

131,829

    64,209  
 
Commitments and contingencies
 
Stockholders' Equity
Common stock, $0.015 par value:
Authorized - 233,333 in 2013; issued - 86,491 shares in 2013 1,297 -
Class A common stock, $.01 par value:
Authorized - 75,500 in 2012; issued - 34,817 shares in 2012 - 348
Class B-2 common stock, $.01 par value:
Authorized - 9,270 in 2012; issued - 9,098 shares in 2012 - 91
Additional paid-in capital 754,390 347,924
Accumulated other comprehensive (loss) income (1,447 ) 2,414
Accumulated deficit

(32,099

) (97,512 )
Treasury stock at cost   -     (34,142 )
Total stockholders' equity  

722,141

    219,123  
 
Total liabilities and stockholders' equity $ 853,970   $ 283,332  
 
 
Exhibit C
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
New Insurance Written
 
 
NIW by Credit Score
  Quarter ended December 31,   Year ended December 31,
2013   2012 2013   2012

($ in thousands)

       
>=760 $ 2,135,772 47.2 % $ 2,330,052 57.9 % $ 10,989,279 51.9 % $ 6,388,236 56.8 %

      740-759

802,262 17.7 696,159 17.3 3,775,108 17.8 1,989,383 17.7

      720-739

651,269 14.4 525,245 13.0 2,909,199 13.8 1,493,243 13.3

      700-719

465,611 10.3 279,480 6.9 1,851,773 8.8 801,805 7.1

      680-699

341,968 7.5 153,738 3.8 1,231,297 5.8 446,649 4.0
  131,018   2.9     42,257   1.1     395,982   1.9     121,845   1.1  
Total $ 4,527,900   100.0 % $ 4,026,931   100.0 % $ 21,152,638   100.0 % $ 11,241,161   100.0 %
 
 
 
NIW by LTV
Quarter ended December 31, Year ended December 31,
2013 2012 2013 2012

($ in thousands)

85.00% and below $ 488,218 10.8 % $ 645,332 16.0 % $ 2,963,619 14.0 % $ 1,659,025 14.8 %
85.01% to 90.00% 1,528,857 33.8 1,573,418 39.1 7,627,333 36.1 4,544,256 40.4
90.01% to 95.00% 2,372,909 52.4 1,787,458 44.4 10,189,658 48.1 4,987,088 44.3
95.01% and above   137,916   3.0     20,723   0.5     372,028   1.8     50,792   0.5  
$ 4,527,900   100.0 % $ 4,026,931   100.0 % $ 21,152,638   100.0 % $ 11,241,161   100.0 %
 
 
 
NIW by Product
Quarter ended December 31, Year ended December 31,
2013 2012 2013 2012
Single Premium policies 19.2 % 18.4 % 20.0 % 17.1 %
Monthly Premium policies 80.8   81.6   80.0   82.9  
100.0 % 100.0 % 100.0 % 100.0 %
 
 
 
NIW by Purchase vs. Refinance
Quarter ended December 31, Year ended December 31,
2013 2012 2013 2012
Purchase 86.9 % 60.1 % 72.1 % 64.4 %
Refinance 13.1   39.9   27.9   35.6  
100.0 % 100.0 % 100.0 % 100.0 %
 
 
Exhibit D
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Insurance in Force and Risk in Force
 
 
Portfolio by Credit Score
Total IIF by FICO score   December 31, 2013   December 31, 2012

($ in thousands)

   
>=760 $ 17,102,961 53.3 % $ 7,778,575 57.1 %

      740-759

5,724,933 17.9 2,402,603 17.6

      720-739

4,380,452 13.7 1,801,292 13.2

      700-719

2,646,717 8.3 988,160 7.3

      680-699

1,665,196 5.2 520,496 3.9
  507,937   1.6     137,854   0.9  
Total $ 32,028,196   100.0 % $ 13,628,980   100.0 %
 
 
Total RIF by FICO score December 31, 2013 December 31, 2012

($ in thousands)

>=760 $ 4,106,913 52.9 % $ 1,822,677 56.6 %

      740-759

1,399,308 18.0 572,440 17.8

      720-739

1,081,286 13.9 435,100 13.5

      700-719

637,086 8.2 230,802 7.2

      680-699

415,414 5.3 126,200 4.0
  128,598   1.7     34,412   0.9  
Total $ 7,768,605   100.0 % $ 3,221,631   100.0 %
 
 
 
Portfolio by LTV
Total IIF by LTV December 31, 2013 December 31, 2012

($ in thousands)

85.00% and below $ 4,322,612 13.5 % $ 1,994,994 14.6 %
85.01% to 90.00% 12,171,460 38.0 5,739,703 42.1
90.01% to 95.00% 15,121,279 47.2 5,839,127 42.8
95.01% and above   412,845   1.3     55,156   0.5  
$ 32,028,196   100.0 % $ 13,628,980   100.0 %
 
 
Total RIF by LTV December 31, 2013 December 31, 2012

($ in thousands)

85.00% and below $ 474,763 6.1 % $ 215,739 6.7 %
85.01% to 90.00% 2,858,683 36.8 1,334,525 41.4
90.01% to 95.00% 4,296,135 55.3 1,653,258 51.3
95.01% and above   139,024   1.8     18,109   0.6  
$ 7,768,605   100.0 % $ 3,221,631   100.0 %
 
 
 
Portfolio by Loan Amortization Period
Total IIF by Loan Amortization Period December 31, 2013 December 31, 2012

($ in thousands)

FRM 30 years and higher $ 27,364,633 85.4 % $ 11,211,969 82.3 %
FRM 20-25 years 1,086,120 3.4 585,365 4.3
FRM 15 years 2,354,656 7.4 1,206,579 8.9
ARM 5 years and higher   1,222,787   3.8     625,067   4.5  
Total $ 32,028,196   100.0 % $ 13,628,980   100.0 %
 
                 
Exhibit E
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Portfolio Vintage Data
 

 

 

Original

Remaining

 

 

Insurance

Insurance

% Remaining of

Insurance in Force as of December 31, 2013

Written in Force Original
Origination year   ($ in thousands)   ($ in thousands)   Insurance   % Purchase   >90% LTV   >95% LTV  

FICO

  FICO >= 760   % FRM
 
2010 $ 245,898 $ 109,231 44.4 % 70.6 % 36.9 % 0.0 % 3.2 % 60.5 % 96.9 %
2011 3,229,720 1,766,709 54.7 % 69.4 % 38.7 % 0.3 % 4.2 % 58.0 % 92.3 %
2012 11,241,161 9,628,905 85.7 % 66.7 % 46.5 % 0.4 % 5.2 % 56.1 % 96.5 %
2013   21,152,638     20,523,351 97.0 % 72.5 % 50.3 % 1.8 % 7.8 % 51.7 % 96.3 %
Total $ 35,869,417   $ 32,028,196 89.3 % 70.6 % 48.5 % 1.3 % 6.8 % 53.4 % 96.2 %
 
   
Exhibit F
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Portfolio Geographic Data
 
IIF by State
As of December 31, 2013 As of December 31, 2012
CA 11.1% 10.9%
TX 8.2 7.9
FL 4.6 3.7
NC 4.3 4.3
IL 4.0 4.4
NJ 3.8 4.1
WA 3.6 3.2
PA 3.6 4.1
GA 3.5 3.2
AZ 3.5 3.3
All Others 49.8 50.9
TOTAL 100.0% 100.0%
 
 
 
RIF by State
As of December 31, 2013 As of December 31, 2012
CA 10.5% 10.4%
TX 8.0 7.7
FL 4.8 3.8
NC 4.4 4.4
IL 4.0 4.4
NJ 3.7 4.0
WA 3.6 3.3
PA 3.6 4.2
GA 3.6 3.4
NY 3.3 3.8
All Others 50.5 50.6
TOTAL 100.0% 100.0%
 
       
Exhibit G
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Defaults, Reserve for Losses and LAE, and Claims
 
 
Rollforward of Insured Loans in Default
Quarter ended Year ended
December 31, December 31,
2013

 

2012 2013   2012
Beginning default inventory 116 38 56 3
Plus: new defaults 108 50 327 117
Less: cures (57 ) (31 ) (208 ) (63 )
Less: claims paid   (8 )     (1 )   (16 )     (1 )
Ending default inventory   159       56     159       56  
 
 
 
Rollforward of Reserve for Losses and LAE
Quarter ended Year ended
December 31, December 31,

($ in thousands)

2013   2012 2013   2012
Reserve for losses and LAE at beginning of period $ 2,727     $ 1,027   $ 1,499     $ 57  
Add provision for losses and LAE occurring in:
Current year 903 492 2,986 1,523
Prior years   (211 )     -     (665 )     (57 )
Incurred losses during the period   692       492     2,321       1,466  
Deduct payments for losses and LAE occurring in:
Current year 144 20 239 24
Prior years   205       -     511       -  
Loss and LAE payments during the period   349       20     750       24  
Reserve for losses and LAE at end of period $ 3,070     $ 1,499   $ 3,070     $ 1,499  
 
 
 
Claims
Quarter ended Year ended
December 31, December 31,
2013   2012 2013   2012
Number of claims paid 8 1 16 1
Total amount paid for claims (in thousands) $ 343 $ 18 $ 720 $ 18
Average amount paid per claim (in thousands) $ 43 $ 18 $ 45 $ 18
Severity 87 % 104 % 90 % 104 %
 
           
Exhibit G, continued
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Defaults, Reserve for Losses and LAE, and Claims
 
 
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 $ 17,658
Total $ 19,310
 
Default Rate 0.11 %
 
 
 
As of December 31, 2012

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 30 54 % $ 391 28 % $ 1,335 29 %
Four to eleven payments 19 34 % 689 49 % 948 73 %
Twelve or more payments 4 7 % 132 10 % 184 72 %
Pending claims 3     5 %     181   13 %     168 108 %
TOTAL 56     100 % 1,393 100 %   $ 2,635 53 %
IBNR 70
LAE   36
TOTAL $ 1,499
 
Average reserve per default:
Case $ 24,860
Total $ 26,760
 
Default Rate 0.09 %
 
       
Exhibit H
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Investment Portfolio
 
 
Investment Portfolio by Asset Class
Asset Class December 31, 2013 December 31, 2012

($ in thousands)

Fair Value   Percent Fair Value   Percent
US Treasury securities $ 59,187 17.8 % $ 79,488 32.0 %
US Agency securities 14,839 4.5 19,593 8.0
US Agency Mortgage-backed securities 22,241 6.7 29,640 12.0
Municipal debt securities 57,650 17.3 37,654 15.2
Corporate debt securities 125,593 37.8 63,399 25.6
Mortgage-backed securities 18,581 5.6 5,592 2.3
Asset-backed securities 20,385 6.1 8,951 3.6
Money market investments   14,079     4.2     3,097   1.3  
Total Investments $ 332,555     100.0 % $ 247,414   100.0 %
 
 
 
Investment Portfolio by Credit Rating
Rating (1) December 31, 2013 December 31, 2012

($ in thousands)

Fair Value   Percent Fair Value   Percent
Aaa $ 147,862 44.5 % $ 159,763 64.6 %
Aa1 21,570 6.5 13,317 5.4
Aa2 15,464 4.6 8,144 3.3
Aa3 11,902 3.6 4,031 1.6
A1 26,541 8.0 11,621 4.7
A2 17,045 5.1 16,521 6.7
A3 29,886 9.0 16,401 6.6
Baa1 24,441 7.3 6,321 2.6
Baa2 30,782 9.3 9,753 3.9
Baa3 7,062 2.1 1,542 0.6
Below Baa3   -     -     -   -  
Total Investments $ 332,555     100.0 % $ 247,414   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
December 31, 2013 December 31, 2012
Effective Duration ($ in thousands) Fair Value   Percent Fair Value   Percent
$ 65,092 19.6 % $ 33,345 13.5 %
1 to 19,093 5.7 41,712 16.9
2 to 74,335 22.4 33,475 13.5
3 to 63,214 19.0 42,516 17.1
4 to 66,230 19.9 47,469 19.2
5 or more Years   44,591     13.4     48,897   19.8  
Total Investment Securities $ 332,555     100.0 % $ 247,414   100.0 %
 
Pre-tax investment income yield:
Year ended December 31, 2013 1.1 %
Year ended December 31, 2012 1.2 %
 
 
Cash and Investments at holding company Essent Group Ltd. ($ in thousands):
As of December 31, 2013 $ 246,220
As of December 31, 2012 $ 4,035
 
     
Exhibit I
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Insurance Company Capital
 
As of
December 31, 2013   December 31, 2012
 
Combined statutory capital (A) $ 469,424 $ 203,611
 
Risk to capital ratios: (B)
Essent Guaranty, Inc. 16.6:1 15.8:1
Essent Guaranty of PA, Inc. 17.1:1 16.2:1
Combined (C) 16.5:1 15.8:1
 
(A) Combined statutory capital equals 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) The risk to capital ratio is calculated as the ratio of net risk in force to statutory capital. 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 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 J
Essent Group Ltd. and Subsidiaries
Supplemental Information
Historical Quarterly Data
 
 
2013 2012
Selected Income Statement Data December 31 September 30 June 30 March 31 December 31

(in thousands, except per share amounts)

Revenues:
Net premiums written $ 52,878   $ 55,026   $ 44,923   $ 33,373   $ 28,219  
 
Net premiums earned 40,344 34,282 27,481 21,264 16,498
Other revenues   2,009     2,173     2,083     1,767     1,915  
Total revenues   42,353     36,455     29,564     23,031     18,413  
 
Losses and expenses:
Provision for losses and LAE 692 319 580 730 492
Other underwriting and operating expenses  

22,299

    18,237     15,557     14,962     16,535  
Total losses and expenses  

22,991

    18,556     16,137     15,692     17,027  
 
Income (loss) before income taxes

19,362

17,899 13,427 7,339 1,386
Income tax expense (benefit)   345     2,280     (10,150 )   139     345  
Net income $

19,017

  $ 15,619   $ 23,577   $ 7,200   $ 1,041  
 
Earnings (loss) per share:
Basic:
Common Shares $ 0.23 N/A N/A N/A N/A
Class A common shares N/A $ 0.36 $ 0.63 $ 0.23 $ 0.03
Class B-2 common shares N/A 0.07 0.40 - -
 
Diluted:
Common Shares $ 0.22 N/A N/A N/A N/A
Class A common shares N/A $ 0.35 $ 0.62 $ 0.23 $ 0.03
Class B-2 common shares N/A 0.02 0.09 - -
 
Weighted average common shares outstanding
Basic:
Common Shares 51,741 N/A N/A N/A N/A
Class A common shares N/A 43,616 36,793 31,805 31,123
Class B-2 common shares N/A 1,822 1,334 853 602
 
Diluted:
Common Shares 55,130 N/A N/A N/A N/A
Class A common shares N/A 43,788 36,901 31,864 31,293
Class B-2 common shares N/A 6,054 5,994 6,009 5,342
 
Other Data:

($ in thousands)

 
Loss ratio (1) 1.7 % 0.9 % 2.1 % 3.4 % 3.0 %
Expense ratio (2)  

55.3

%   53.2 %   56.6 %   70.4 %   100.2 %
Combined ratio  

57.0

%   54.1 %   58.7 %   73.8 %   103.2 %
 
New insurance written $ 4,527,900 $ 6,408,055 $ 5,895,127 $ 4,321,556 $ 4,026,931
Average premium rate (3) 0.54 % 0.54 % 0.55 % 0.55 % 0.56 %
Insurance in force (end of period) $ 32,028,196 $ 28,198,722 $ 22,576,300 $ 17,430,810 $ 13,628,980
Policies in force 141,417 123,737 98,818 76,455 59,764
Weighted-average coverage (4) 24.3 % 24.0 % 23.7 % 23.5 % 23.6 %
Annual persistency 86.1 % 83.1 % 80.1 % 80.9 % 82.2 %
 
Loans in default (count) 159 116 90 75 56
Percentage of loans in default 0.11 % 0.09 % 0.09 % 0.10 % 0.09 %
 
(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.
(3) Net premium earned as a percentage of average insurance in force for the period.
(4) End of period risk in force divided by insurance in force.
 
   
Exhibit K
Essent Group Ltd. and Subsidiaries
Supplemental Information
Earnings per Share
 
 
 
Quarter ended Year ended
December 31, 2013 December 31, 2013
 
Net income (loss) $ 19,017 $ 65,413
Less: Class A dividends declared - -
Less: Class B-2 dividends declared   -   -
Undistributed net income (loss) $ 19,017 $ 65,413
Net income (loss) allocable to Common (1) $ 12,037 $ 12,706
Net income (loss) allocable to Class A (2) 6,980 52,707
 
Basic earnings (loss) per Common share: $ 0.23 $ 0.90
 
Diluted earnings (loss) per Common share: $ 0.22 $ 0.70
 
Basic weighted average Common shares outstanding (3): 51,741 14,044
 
Diluted weighted average Common shares outstanding (3): 55,130 18,103
 
 

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.

 

(1)

For purposes of determining EPS in the quarter and the year ended December 31, 2013, the net income allocated to the Class B-2 common shares and all the net income of the Company for the period following the IPO has been allocated to the Common Shares.

 

(2)

The Class A common shares accrued a 10% cumulative dividend and the Class B-2 common shares had no stated dividend rate with any dividends being declared at the discretion of the Company's Board of Directors. Accordingly, substantially all of the net income for the periods prior to the IPO was allocated to the Class A common shares for purposes of determining EPS.

 

(3)

The weighted average basic and diluted Common Shares outstanding for the periods indicated includes: (a) the weighted average Class B-2 common shares outstanding (adjusted for the 2 for 3 share split) for the period from January 1, 2013 until the date of the conversion to Common Shares at the IPO, and (b) the weighted average Common Shares outstanding for the period from November 5, 2013 until December 31, 2013.

 
 

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 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 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 December 31, 2013 in accordance with Regulation G:

   
(in thousands, except per share amounts)
 
December 31, 2013
 
Numerator:
Total Stockholders' Equity (Book Value) $ 722,141
 
Add Back: Accumulated Other Comprehensive Loss   1,447
 
Adjusted Book Value $ 723,588
 
Denominator:
Total Outstanding Common shares 86,491
 
Add: Outstanding Restricted Share Units   528
 
Total outstanding Common shares and share units   87,019
 
Adjusted Book Value per Share $ 8.32
 

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

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