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Essent Group's (ESNT) Q1 Earnings Miss, Revenues Improve Y/Y

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Essent Group Ltd. ESNT reported first-quarter 2021 operating net income per share of $1.21, which missed the Zacks Consensus Estimate by 6.9%. Further, the bottom line declined 20.4% year over year.

The quarter witnessed growing revenues and rise in new insurance written, partly offset by elevated losses and expenses. There was an uptick in the company’s percentage of loans in default during the reported quarter.

Operational Update

Essent Group reported total operating revenues of $245 million in the quarter, which improved 7% year over year. The upside came on the back of 6.1% and 5.6% rise in net premiums earned and net investment income, respectively.

As of Mar 31, 2021, insurance in force climbed 19% year over year to $197.1 billion. Annual persistency of 56.1% at first-quarter end contracted 1780 basis points (bps) year over year.

As of Mar 31, 2021, percentage of loans in default came in at 3.70%, which increased from the prior-year quarter’s figure of 0.83%.

During the quarter, new insurance written surged 43% year over year to $19.3 billion.

Total losses and expenses of $76.6 million increased 46.9% year over year due to higher provision for losses and LAE, and other underwriting and operating expenses.

Combined ratio for the quarter came in at 34%, which deteriorated 980 bps year over year. Also, loss ratio deteriorated 1090 bps year over year to 14.8%. Nevertheless, expense ratio improved 100 bps year over year to 19.3% in the quarter under review.

Essent Group Ltd. Price, Consensus and EPS Surprise

Essent Group Ltd. Price, Consensus and EPS Surprise
Essent Group Ltd. Price, Consensus and EPS Surprise

Essent Group Ltd. price-consensus-eps-surprise-chart | Essent Group Ltd. Quote

Financial Update

Essent Group exited the first quarter with cash balance of $81 million, which declined 21.2% from 2020-end level. As of Mar 31, 2021, total stockholders' equity of $3.9 billion inched up 1.5% from the figure at 2020 end.

Book value per share came in at $34.75 as of Mar 31, 2021. The figure improved 10.3% year over year.

During the quarter, annualized return on average equity contracted 570 bps year over year to 13.9%.

Across the U.S. mortgage insurance business encompassing statutory capital for both Essent Guaranty, Inc. and Essent Guaranty of PA, Inc., the combined risk-to-capital ratio came in at 10.6:1 comparing unfavorably with the prior-year quarter’s ratio of 11.7:1.

Share Repurchase & Dividend Hike Update

The board of directors at Essent Group approved a share buyback program worth $250 million, which will run through the end of 2022.

Concurrently, management approved a 6.25% hike in the quarterly dividend based on which the company will now pay out a dividend of 17 cents per share compared with the prior payout of 16 cents. The increased dividend will be paid on Jun 10, 2021 to shareholders of record as on Jun 1.

Zacks Rank

Essent Group currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Finance Sector Releases

Of the finance sector players that have reported first-quarter results so far, the bottom line of American Express Company AXP, Synchrony Financial SYF and Discover Financial Services DFS beat the Zacks Consensus Estimate.

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American Express Company (AXP) : Free Stock Analysis Report

Discover Financial Services (DFS): Free Stock Analysis Report

Essent Group Ltd. (ESNT): Free Stock Analysis Report

Synchrony Financial (SYF) : Free Stock Analysis Report

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