U.S. markets open in 9 hours 1 minute
  • S&P Futures

    4,632.00
    -22.75 (-0.49%)
     
  • Dow Futures

    35,714.00
    -82.00 (-0.23%)
     
  • Nasdaq Futures

    15,436.25
    -159.50 (-1.02%)
     
  • Russell 2000 Futures

    2,149.90
    -7.80 (-0.36%)
     
  • Crude Oil

    84.93
    +1.11 (+1.32%)
     
  • Gold

    1,816.60
    +0.10 (+0.01%)
     
  • Silver

    22.92
    +0.00 (+0.01%)
     
  • EUR/USD

    1.1400
    -0.0010 (-0.09%)
     
  • 10-Yr Bond

    1.7720
    -1.7720 (-100.00%)
     
  • Vix

    19.19
    -20.31 (-100.00%)
     
  • GBP/USD

    1.3634
    -0.0013 (-0.09%)
     
  • USD/JPY

    114.8380
    +0.2580 (+0.23%)
     
  • BTC-USD

    42,130.68
    -417.44 (-0.98%)
     
  • CMC Crypto 200

    1,009.36
    -16.37 (-1.60%)
     
  • FTSE 100

    7,611.23
    +68.28 (+0.91%)
     
  • Nikkei 225

    28,259.49
    -74.03 (-0.26%)
     

Essent Group Ltd. Announces Third Quarter 2021 Results & Increases Quarterly Dividend

  • Oops!
    Something went wrong.
    Please try again later.
·14 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

HAMILTON, Bermuda, November 05, 2021--(BUSINESS WIRE)--Essent Group Ltd. (NYSE: ESNT) today reported net income for the quarter ended September 30, 2021 of $205.4 million or $1.84 per diluted share, compared to $124.5 million or $1.11 per diluted share for the quarter ended September 30, 2020.

Essent also announced today that its Board of Directors has declared a quarterly cash dividend of $0.19 per common share. The dividend is payable on December 10, 2021, to shareholders of record on December 1, 2021.

"We are pleased with our strong financial results which continue to reflect a positive operating environment and ongoing strength in credit performance," said Mark A. Casale, Chairman and Chief Executive Officer. "Our results for the quarter demonstrate the benefits of our economic engine in generating high quality earnings, strong returns and excess capital. In connection with our performance, we are pleased to announce that our Board has approved an increase in our quarterly dividend to $0.19 per share."

Third Quarter 2021 Financial Highlights:

  • Insurance in force as of September 30, 2021 was $208.2 billion, compared to $203.6 billion as of June 30, 2021 and $190.8 billion as of September 30, 2020.

  • New insurance written for the third quarter was $23.6 billion, compared to $25.0 billion in the second quarter of 2021 and $36.7 billion in the third quarter of 2020.

  • Net premiums earned for the third quarter were $218.7 million, compared to $217.4 million in the second quarter of 2021 and $222.3 million in the third quarter of 2020.

  • Income from other invested assets for the third quarter included $39.5 million, or $0.28 per diluted share on an after-tax basis, pertaining to net unrealized gains associated with strategic investments in limited partnerships. Of this amount, $21.1 million represents net unrealized gains that were accumulated in other comprehensive income at June 30, 2021 and prior periods.

  • The expense ratio for the third quarter was 19.3%, compared to 18.9% in the second quarter of 2021 and 16.7% in the third quarter of 2020.

  • The provision for losses and LAE for the third quarter was a benefit of $7.5 million, compared to a provision of $9.7 million in the second quarter of 2021 and a provision of $55.3 million in the third quarter of 2020.

  • The percentage of loans in default as of September 30, 2021 was 2.47%, compared to 2.96% as of June 30, 2021 and 4.54% as of September 30, 2020.

  • The combined ratio for the third quarter was 15.9%, compared to 23.3% in the second quarter of 2021 and 41.6% in the third quarter of 2020.

  • The consolidated balance of cash and investments at September 30, 2021 was $5.1 billion, which includes net cash and investments available for sale at Essent Group Ltd. and Essent US Holdings, Inc. of $513.0 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 10.5:1 as of September 30, 2021.

  • On September 24, 2021, A.M. Best affirmed its "A (Excellent)" financial strength rating of Essent Guaranty, Inc. and a long-term issuer credit rating of "a" of the operating subsidiaries of Essent Group Ltd. Essent Guaranty, Inc. also has financial strength ratings of "A3" by Moody’s and "BBB+" by S&P.

Conference Call:

Essent management will hold a conference call at 10:00 AM Eastern time today to discuss its results. The conference call will be broadcast live over the Internet at http://ir.essentgroup.com/events-and-presentations/events/default.aspx. The call may also be accessed by dialing 888-510-2008 inside the U.S., or 646-960-0306 for international callers, using passcode 9824537 or by referencing Essent.

A replay of the webcast will be available on the Essent website approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available approximately two hours after the call ends for a period of two weeks, using the following dial-in numbers and passcode: 800-770-2030 inside the U.S., or 647-362-9199 for international callers, passcode 9824537.

In addition to the information provided in the Company's earnings news release, other statistical and financial information, which may be referred to during the conference call, will be available on Essent's website at http://ir.essentgroup.com/financials/quarterly-results/default.aspx.

Forward-Looking Statements:

This press release may include "forward-looking statements" which are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," or "potential" or the negative thereof or variations thereon or similar terminology. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following: the impact of COVID-19 and related economic conditions; changes in or to Fannie Mae and Freddie Mac (the "GSEs"), whether through Federal legislation, restructurings or a shift in business practices; failure to continue to meet the mortgage insurer eligibility requirements of the GSEs; competition for customers; lenders or investors seeking alternatives to private mortgage insurance; an increase in the number of loans insured through Federal government mortgage insurance programs, including those offered by the Federal Housing Administration; decline in new insurance written and franchise value due to loss of a significant customer; decline in the volume of low down payment mortgage originations; the definition of "Qualified Mortgage" reducing the size of the mortgage origination market or creating incentives to use government mortgage insurance programs; the definition of "Qualified Residential Mortgage" reducing the number of low down payment loans or lenders and investors seeking alternatives to private mortgage insurance; the implementation of the Basel III Capital Accord discouraging the use of private mortgage insurance; a decrease in the length of time that insurance policies are in force; uncertainty of loss reserve estimates; deteriorating economic conditions; our non-U.S. operations becoming subject to U.S. Federal income taxation; becoming considered a passive foreign investment company for U.S. Federal income tax purposes; and other risks and factors described in Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on February 26, 2021, as subsequently updated through other reports we file with the Securities and Exchange Commission. Any forward-looking information presented herein is made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

About the Company:

Essent Group Ltd. (NYSE: ESNT) is a Bermuda-based holding company (collectively with its subsidiaries, "Essent") which, through its wholly-owned subsidiary, Essent Guaranty, Inc., offers private mortgage insurance for single-family mortgage loans in the United States. Essent provides private capital to mitigate mortgage credit risk, allowing lenders to make additional mortgage financing available to prospective homeowners. Headquartered in Radnor, Pennsylvania, Essent Guaranty, Inc. is licensed to write mortgage insurance in all 50 states and the District of Columbia, and is approved by Fannie Mae and Freddie Mac. Essent also offers mortgage-related insurance, reinsurance and advisory services through its Bermuda-based subsidiary, Essent Reinsurance Ltd. Essent is committed to supporting environmental, social and governance ("ESG") initiatives that are relevant to the company and align with the companywide dedication to responsible corporate citizenship that positively impacts the community and people served. Additional information regarding Essent may be found at www.essentgroup.com and www.essent.us.

Source: Essent Group Ltd.

Essent Group Ltd. and Subsidiaries

Financial Results and Supplemental Information (Unaudited)

Quarter Ended September 30, 2021

Exhibit A

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Exhibit B

Condensed Consolidated Balance Sheets (Unaudited)

Exhibit C

Historical Quarterly Data

Exhibit D

New Insurance Written

Exhibit E

Insurance in Force and Risk in Force

Exhibit F

Other Risk in Force

Exhibit G

Portfolio Vintage Data

Exhibit H

Reinsurance Vintage Data

Exhibit I

Portfolio Geographic Data

Exhibit J

Rollforward of Defaults and Reserve for Losses and LAE

Exhibit K

Detail of Reserves by Default Delinquency

Exhibit L

Investments Available for Sale

Exhibit M

Insurance Company Capital

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)

2021

2020

2021

2020

Revenues:

Direct premiums written

$

229,228

$

243,390

$

693,434

$

677,414

Ceded premiums

(26,880

)

(21,167

)

(84,438

)

(57,544

)

Net premiums written

202,348

222,223

608,996

619,870

Decrease in unearned premiums

16,370

35

46,226

20,355

Net premiums earned

218,718

222,258

655,222

640,225

Net investment income

21,573

18,639

65,104

59,138

Realized investment gains, net

221

267

609

2,133

Income (loss) from other invested assets

40,741

(445

)

41,389

(217

)

Other income

2,283

2,319

9,270

6,676

Total revenues

283,536

243,038

771,594

707,955

Losses and expenses:

(Benefit) provision for losses and LAE

(7,483

)

55,280

34,490

239,220

Other underwriting and operating expenses

42,272

37,100

125,625

117,866

Interest expense

2,063

2,227

6,187

6,925

Total losses and expenses

36,852

94,607

166,302

364,011

Income before income taxes

246,684

148,431

605,292

343,944

Income tax expense

41,331

23,895

104,496

54,505

Net income

$

205,353

$

124,536

$

500,796

$

289,439

Earnings per share:

Basic

$

1.85

$

1.11

$

4.48

$

2.78

Diluted

1.84

1.11

4.47

2.77

Weighted average shares outstanding:

Basic

111,001

111,908

111,708

104,147

Diluted

111,387

112,134

112,070

104,383

Net income

$

205,353

$

124,536

$

500,796

$

289,439

Other comprehensive income (loss):

Change in unrealized (depreciation) appreciation of investments

(36,917

)

12,036

(59,760

)

76,247

Total other comprehensive (loss) income

(36,917

)

12,036

(59,760

)

76,247

Comprehensive income

$

168,436

$

136,572

$

441,036

$

365,686

Loss ratio

(3.4

%)

24.9

%

5.3

%

37.4

%

Expense ratio

19.3

16.7

19.2

18.4

Combined ratio

15.9

%

41.6

%

24.4

%

55.8

%

Exhibit B

Essent Group Ltd. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

September 30,

December 31,

(In thousands, except per share amounts)

2021

2020

Assets

Investments

Fixed maturities available for sale, at fair value

$

4,560,235

$

3,838,513

Short-term investments available for sale, at fair value

309,782

726,860

Total investments available for sale

4,870,017

4,565,373

Other invested assets

161,250

88,904

Total investments

5,031,267

4,654,277

Cash

65,825

102,830

Accrued investment income

24,642

19,948

Accounts receivable

47,760

50,140

Deferred policy acquisition costs

13,307

17,005

Property and equipment

12,485

15,095

Prepaid federal income tax

348,286

302,636

Other assets

45,944

40,793

Total assets

$

5,589,516

$

5,202,724

Liabilities and Stockholders' Equity

Liabilities

Reserve for losses and LAE

$

412,956

$

374,941

Unearned premium reserve

204,210

250,436

Net deferred tax liability

356,835

305,109

Credit facility borrowings, net of deferred costs

322,614

321,720

Other accrued liabilities

124,917

87,885

Total liabilities

1,421,532

1,340,091

Commitments and contingencies

Stockholders' Equity

Common shares, $0.015 par value:

Authorized - 233,333; issued and outstanding - 110,915 shares in 2021 and 112,423 shares in 2020

1,664

1,686

Additional paid-in capital

1,493,005

1,571,163

Accumulated other comprehensive income

78,514

138,274

Retained earnings

2,594,801

2,151,510

Total stockholders' equity

4,167,984

3,862,633

Total liabilities and stockholders' equity

$

5,589,516

$

5,202,724

Return on average equity (1)

16.6

%

12.1

%

(1) The 2021 return on average equity is calculated by dividing annualized year-to-date 2021 net income by average equity. The 2020 return on average equity is calculated by dividing full year 2020 net income by average equity.

Exhibit C

Essent Group Ltd. and Subsidiaries

Supplemental Information

Historical Quarterly Data

2021

2020

Selected Income Statement Data

September 30

June 30

March 31

December 31

September 30

(In thousands, except per share amounts)

Revenues:

Net premiums earned:

U.S. Mortgage Insurance Portfolio

$

207,127

$

204,149

$

207,840

$

208,715

$

211,126

GSE and other risk share

11,591

13,288

11,227

13,624

11,132

Net premiums earned

218,718

217,437

219,067

222,339

222,258

Income (loss) from other invested assets (1)

40,741

122

526

2

(445

)

Other revenues (2)

24,077

25,702

25,204

24,858

21,225

Total revenues

283,536

243,261

244,797

247,199

243,038

Losses and expenses:

(Benefit) provision for losses and LAE

(7,483

)

9,651

32,322

62,073

55,280

Other underwriting and operating expenses

42,272

41,114

42,239

36,825

37,100

Interest expense

2,063

2,073

2,051

2,149

2,227

Total losses and expenses

36,852

52,838

76,612

101,047

94,607

Income before income taxes

246,684

190,423

168,185

146,152

148,431

Income tax expense (3)

41,331

30,628

32,537

22,550

23,895

Net income

$

205,353

$

159,795

$

135,648

$

123,602

$

124,536

Earnings per share:

Basic

$

1.85

$

1.43

$

1.21

$

1.10

$

1.11

Diluted

1.84

1.42

1.21

1.10

1.11

Weighted average shares outstanding:

Basic

111,001

112,118

112,016

111,908

111,908

Diluted

111,387

112,454

112,378

112,310

112,134

Book value per share

$

37.58

$

36.32

$

34.75

$

34.36

$

33.33

Return on average equity (annualized)

19.9

%

16.0

%

13.9

%

13.0

%

13.5

%

Other Data:

Loss ratio (4)

(3.4

%)

4.4

%

14.8

%

27.9

%

24.9

%

Expense ratio (5)

19.3

18.9

19.3

16.6

16.7

Combined ratio

15.9

%

23.3

%

34.0

%

44.5

%

41.6

%

Credit Facility

Borrowings outstanding

$

325,000

$

325,000

$

325,000

$

325,000

$

425,000

Undrawn committed capacity

$

300,000

$

300,000

$

300,000

$

300,000

$

75,000

Weighted average interest rate (end of period)

2.13

%

2.13

%

2.13

%

2.19

%

1.90

%

Debt-to-capital

7.23

%

7.37

%

7.65

%

7.76

%

10.19

%

(1) Income from other invested assets for the three months ended September 30, 2021 includes $39.5 million of net unrealized gains, which includes $21.1 million of net unrealized gains that were accumulated in other comprehensive income at June 30, 2021 and prior periods.

(2) Certain of our third-party reinsurance agreements contain an embedded derivative as the premium ceded under those agreements will vary based on changes in interest rates. For each of the three month periods noted, Other revenues include net favorable (unfavorable) changes in the fair value of these embedded derivatives as follows: September 30, 2021: ($1,493); June 30, 2021: $950; March 31, 2021: ($606); December 31, 2020: ($209); September 30, 2020: ($677).

(3) Income tax expense for the quarter ended September 30, 2021 includes $8,271 of discrete tax expense associated with realized and unrealized gains and losses. Income tax expense for the quarter ended March 31, 2021 includes $5,718 of discrete tax expense associated with an increase in the estimate of our beginning of the year deferred state income tax liability.

(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

2021

2020

Other Data, continued:

September 30

June 30

March 31

December 31

September 30

($ in thousands)

U.S. Mortgage Insurance Portfolio

Flow:

New insurance written

$

23,579,884

$

25,004,854

$

19,254,014

$

29,566,820

$

36,664,583

New risk written

6,273,735

6,445,864

4,616,450

7,051,173

8,938,544

Bulk:

New insurance written

$

$

$

$

$

New risk written

Total:

New insurance written

$

23,579,884

$

25,004,854

$

19,254,014...