Essent Group Ltd. Reports Second Quarter 2014 Results

By Business Wire,  August 08, 2014, 07:00:00 AM EDT


30% Increase in Net Income versus First Quarter 2014

Essent Reinsurance, Ltd. Executes First Transaction

HAMILTON, Bermuda--(BUSINESS WIRE)-- Essent Group Ltd. (NYSE:ESNT) today reported net income for the quarter ended June 30, 2014 of $19.6 million or $0.23 per diluted share. As of June 30, 2014, Essent had primary insurance in force of $39.4 billion and consolidated stockholders' equity of $768.0 million. Essent's combined risk to capital ratio, which includes statutory capital for both Essent Guaranty, Inc. and Essent Guaranty of PA, Inc., was 16.2:1 as of June 30, 2014.

Essent also reported that subsequent to the end of the second quarter 2014 its Bermuda-based reinsurer, Essent Reinsurance, Ltd. ("Essent Re"), insured a portion of Freddie Mac's most recent Agency Credit Insurance Structure ("ACIS") transaction. Additionally, Essent reported that its domestic flagship mortgage insurer, Essent Guaranty, Inc., entered into a quota-share agreement with Essent Re to prospectively reinsure 25% of its GSE eligible new insurance written effective July 1, 2014. This agreement, which has received approval from both Freddie Mac and Fannie Mae, remains subject to approval from the Pennsylvania Insurance Department. During the third quarter, Essent Group Ltd. plans to contribute $100 million in capital to Essent Re in support of the affiliate quota share and current and future reinsurance transactions.

"Our strong earnings for the quarter reflect our success in increasing the number of customers doing business with Essent and the growth in our high credit quality insurance portfolio," said Mark Casale, Chairman and Chief Executive Officer. "Also, we are pleased to have Essent Re execute its first transaction and we believe the affiliate quota share will improve our capital efficiency and provide incremental shareholder value. We remain very excited about Essent's long term prospects."

Financial Highlights:

  • Insurance in force as of June 30, 2014 was $39.4 billion, compared to $34.8 billion as of March 31, 2014 and $22.6 billion as of June 30, 2013.
  • New insurance written for the second quarter of 2014 was $5.9 billion, compared to $3.6 billion in the first quarter of 2014 and $5.9 billion in the second quarter of 2013.
  • Income before taxes for the second quarter of 2014 was $29.7 million, compared to $23.5 million for the first quarter of 2014 and $13.4 million for the second quarter of 2013.
  • Net premiums earned for the second quarter of 2014 were $50.3 million, compared to $44.8 million in the first quarter of 2014 and $27.5 million in the second quarter of 2013.
  • The expense ratio for the second quarter of 2014 was 47.0%, compared to 52.4% for the first quarter of 2014 and 56.6% for the second quarter of 2013.
  • The provision for losses and LAE for the second quarter of 2014 was $1.0 million, compared to $0.9 million for the first quarter of 2014 and $0.6 million for the second quarter of 2013.
  • The percentage of loans in default as of June 30, 2014 was 0.13%, compared to 0.12% as of March 31, 2014 and 0.09% as of June 30, 2013.
  • The combined ratio for the second quarter of 2014 was 48.9%, compared to 54.4% for the first quarter of 2014 and 58.7% for the second quarter of 2013.
  • In July, through a competitive bidding process, Essent Guaranty, Inc. was selected by Fannie Mae to be the sole insurer on a pool of loans of approximately $1.5 billion.
  • Essent had $171.0 million of net cash and investments at the holding company as of June 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 76436919 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 76436919.

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 June 30, 2014
 
 
Exhibit A: Condensed Consolidated Statements of Comprehensive Income (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 (Unaudited)
 
 

Three Months Ended

June 30,

Six Months Ended

June 30,

(In thousands, except per share amounts)

  2014     2013     2014     2013  
Revenues:
Net premiums written $ 63,505 $ 44,923 $ 115,697 $ 78,296
Increase in unearned premiums   (13,163 )   (17,442 )   (20,605 )   (29,551 )
Net premiums earned 50,342 27,481 95,092 48,745
Net investment income 3,080 1,014 4,978 1,744
Realized investment gains, net 68 83 468 93
Other income   793     986     1,566     2,013  
Total revenues   54,283     29,564     102,104     52,595  
 
Losses and expenses:
Provision for losses and LAE 966 580 1,868 1,310
Other underwriting and operating expenses   23,648     15,557     47,107     30,519  
Total losses and expenses   24,614     16,137     48,975     31,829  
 
Income before income taxes 29,669 13,427 53,129 20,766
Income tax expense (benefit)   10,114     (10,150 )   18,568     (10,011 )
Net income $ 19,555   $ 23,577   $ 34,561   $ 30,777  
 
 
Earnings per share:
Basic:
Common Shares $ 0.23 N/A $ 0.42 N/A
Class A common shares N/A $ 0.63 N/A $ 0.88
Class B-2 common shares N/A 0.40 N/A 0.49
Diluted:
Common Shares $ 0.23 N/A $ 0.41 N/A
Class A common shares N/A $ 0.62 N/A $ 0.88
Class B-2 common shares N/A 0.09 N/A 0.09
 
Weighted average common shares outstanding:
Basic:
Common Shares 83,276 N/A 83,071 N/A
Class A common shares N/A 36,793 N/A 34,313
Class B-2 common shares N/A 1,334 N/A 1,095
Diluted:
Common Shares 84,706 N/A 84,701 N/A
Class A common shares N/A 36,901 N/A 34,408
Class B-2 common shares N/A 5,994 N/A 6,004
 
Net income $ 19,555 $ 23,577 $ 34,561 $ 30,777
 
Other comprehensive income (loss)

Change in unrealized appreciation (depreciation) of investments, net of tax expense (benefit) of $2,095 and $(2,043) in the three months ended June 30, 2014 and 2013 and $2,465 and $(2,182) in the six months ended June 30, 2014 and 2013

  4,915     (3,795 )   5,394     (4,053 )
Total other comprehensive income (loss)   4,915     (3,795 )   5,394     (4,053 )
Comprehensive income $ 24,470   $ 19,782   $ 39,955   $ 26,724  
 
 
Loss ratio 1.9 % 2.1 % 2.0 % 2.7 %
Expense ratio   47.0 %   56.6 %   49.5 %   62.6 %
Combined ratio   48.9 %   58.7 %   51.5 %   65.3 %

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

(In thousands, except per share amounts)

  2014     2013  
Assets
Investments available for sale, at fair value
Fixed maturities $ 672,699 $ 318,476
Short-term investments   173,171     14,079  
Total investments 845,870 332,555
Cash 14,180 477,655
Accrued investment income 4,641 1,978
Accounts receivable 12,249 10,006
Deferred policy acquisition costs 7,539 6,173

Property and equipment (at cost, less accumulated depreciation of $38,013 in 2014 and $36,796 in 2013)

4,865 4,411
Prepaid federal income tax 34,000 8,000
Net deferred tax asset - 10,346
Other assets   2,021     2,846  
 
Total assets $ 925,365   $ 853,970  
 
Liabilities and Stockholders' Equity
Liabilities
Reserve for losses and LAE $ 4,506 $ 3,070
Unearned premium reserve 124,004 103,399
Amounts due under Asset Purchase Agreement 2,483 4,949
Accrued payroll and bonuses 7,957 13,076
Net deferred tax liability 9,430 -
Other accrued liabilities   9,026     7,335  
Total liabilities   157,406     131,829  
 
Commitments and contingencies
 
Stockholders' Equity
Common Shares, $0.015 par value:
Authorized - 233,333; issued - 86,528 shares in 2014 and 86,491 shares in 2013 1,298 1,297
Additional paid-in capital 760,252 754,390

Accumulated other comprehensive income (loss)

3,947 (1,447 )
Retained earnings (accumulated deficit)   2,462     (32,099 )
Total stockholders' equity   767,959     722,141  
 
Total liabilities and stockholders' equity $ 925,365   $ 853,970  

               
Exhibit C
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
New Insurance Written
 
 
NIW by Credit Score
Three months ended Six months ended
June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013

($ in thousands)

>=760 $ 2,651,224 45.1 % $ 3,161,194 53.7 % $ 4,265,660 44.9 % $ 5,598,784 54.7 %

740-759

964,322 16.4 1,038,781 17.6 1,601,181 16.8 1,814,340 17.8

720-739

858,348 14.6 791,569 13.4 1,394,819 14.7 1,364,466 13.4

700-719

629,211 10.7 482,263 8.2 1,004,711 10.6 796,736 7.8

680-699

490,259 8.3 331,699 5.6 805,526 8.5 506,558 5.0
<=679   280,970     4.9     89,621     1.5     433,010     4.5     135,799     1.3  
Total $ 5,874,334     100.0 % $ 5,895,127     100.0 % $ 9,504,907     100.0 % $ 10,216,683     100.0 %
 
Weighted-average Credit Score 749 758 749 759
 
 
 
NIW by LTV
Three months ended Six months ended
June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013

($ in thousands)

85.00% and below $ 671,651 11.4 % $ 879,352 14.9 % $ 1,107,384 11.7 % $ 1,698,838 16.6 %
85.01% to 90.00% 1,976,596 33.6 2,152,742 36.5 3,217,124 33.8 3,787,024 37.1
90.01% to 95.00% 3,204,930 54.6 2,800,064 47.5 5,130,693 54.0 4,638,486 45.4
95.01% and above   21,157     0.4     62,969     1.1     49,706     0.5     92,335     0.9  
$ 5,874,334     100.0 % $ 5,895,127     100.0 % $ 9,504,907     100.0 % $ 10,216,683     100.0 %
 
Weighted-average LTV 92 % 91 % 92 % 91 %
 
 
 
NIW by Product
Three months ended Six months ended
June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013
Single Premium policies 18.6 % 20.4 % 18.5 % 19.7 %
Monthly Premium policies 81.4   79.6   81.5   80.3  
100.0 % 100.0 % 100.0 % 100.0 %
 
 
 
NIW by Purchase vs. Refinance
Three months ended Six months ended
June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013
Purchase 86.6 % 67.5 % 86.0 % 61.5 %
Refinance 13.4   32.5   14.0   38.5  
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 June 30, 2014 March 31, 2014 June 30, 2013

($ in thousands)

>=760 $ 20,157,165 51.2 % $ 18,212,476 52.3 % $ 12,579,842 55.7 %

740-759

6,963,735 17.7 6,218,225 17.9 4,011,141 17.8

720-739

5,502,718 14.0 4,804,322 13.8 3,022,359 13.4

700-719

3,481,564 8.8 2,955,696 8.5 1,704,037 7.5

680-699

2,368,613 6.0 1,940,162 5.6 994,955 4.5
<=679   906,084     2.3     647,176     1.9     263,966     1.1  
Total $ 39,379,879     100.0 % $ 34,778,057     100.0 % $ 22,576,300     100.0 %
 
Weighted-average Credit Score 756 757 760
 
 
Total RIF by FICO score June 30, 2014 March 31, 2014 June 30, 2013

($ in thousands)

>=760 $ 4,913,013 50.6 % $ 4,403,362 51.9 % $ 2,954,484 55.2 %

740-759

1,722,247 17.8 1,527,784 18.0 957,841 17.9

720-739

1,376,538 14.2 1,192,630 14.0 728,822 13.6

700-719

855,985 8.8 717,501 8.4 400,692 7.5

680-699

601,426 6.2 488,405 5.8 241,489 4.6
<=679   231,340     2.4     164,180     1.9     65,589     1.2  
Total $ 9,700,549     100.0 % $ 8,493,862     100.0 % $ 5,348,917     100.0 %
 
 
 
 
Portfolio by LTV
Total IIF by LTV June 30, 2014 March 31, 2014 June 30, 2013

($ in thousands)

85.00% and below $ 4,928,612 12.5 % $ 4,540,795 13.1 % $ 3,392,450 15.0 %
85.01% to 90.00% 14,516,271 36.9 13,054,922 37.5 8,937,420 39.6
90.01% to 95.00% 19,489,901 49.5 16,748,932 48.2 10,097,956 44.7
95.01% and above   445,095     1.1     433,408     1.2     148,474     0.7  
$ 39,379,879     100.0 % $ 34,778,057     100.0 % $ 22,576,300     100.0 %
 
Weighted-average LTV 91 % 91 % 91 %
 
 
Total RIF by LTV June 30, 2014 March 31, 2014 June 30, 2013

($ in thousands)

85.00% and below $ 550,950 5.7 % $ 503,315 5.9 % $ 368,071 6.9 %
85.01% to 90.00% 3,434,553 35.4 3,074,541 36.2 2,080,074 38.9
90.01% to 95.00% 5,567,538 57.4 4,770,413 56.2 2,851,732 53.3
95.01% and above   147,508     1.5     145,593     1.7     49,040     0.9  
$ 9,700,549     100.0 % $ 8,493,862     100.0 % $ 5,348,917     100.0 %
 
 
 
 
Portfolio by Loan Amortization Period
Total IIF by Loan Amortization Period June 30, 2014 March 31, 2014 June 30, 2013

($ in thousands)

FRM 30 years and higher $ 34,103,315 86.6 % $ 29,906,738 85.9 % $ 18,901,211 83.7 %
FRM 20-25 years 1,150,105 2.9 1,105,372 3.2 917,020 4.1
FRM 15 years 2,434,151 6.2 2,383,315 6.9 1,940,110 8.6
ARM 5 years and higher   1,692,308     4.3     1,382,632     4.0     817,959     3.6  
Total $ 39,379,879     100.0 % $ 34,778,057     100.0 % $ 22,576,300     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 June 30, 2014
Origination year  

Written

($ in thousands)

 

in Force

($ in thousands)

 

Original

Insurance

  % Purchase   >90% LTV   >95% LTV   FICO < 700   FICO >= 760   % FRM
 
2010 $ 245,898 $ 91,810 37.3 % 72.4 % 35.1 % 0.0 % 3.0 % 59.6 % 98.0 %
2011 3,229,720 1,527,938 47.3 70.8 40.0 0.3 4.2 57.6 92.8
2012 11,241,161 8,832,491 78.6 68.0 47.6 0.5 5.2 56.1 96.7
2013 21,152,638 19,547,594 92.4 73.2 51.0 1.8 7.8 51.5 96.4
2014 (through June 30)   9,504,907     9,380,046 98.7 86.0 54.6 0.5 13.1 44.8 93.7
Total $ 45,374,324   $ 39,379,879 86.8 75.0 50.6 1.1 8.3 51.2 95.7

     
Exhibit F
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Portfolio Geographic Data
 
IIF by State
As of June 30, 2014 As of March 31, 2014 As of June 30, 2013
CA 11.0% 11.2% 11.2%
TX 8.5 8.3 8.1
FL 5.1 4.9 4.2
NC 4.3 4.3 4.4
WA 4.0 3.7 3.4
IL 3.9 3.9 4.1
NJ 3.5 3.7 3.9
AZ 3.5 3.5 3.5
GA 3.5 3.5 3.5
CO 3.4 3.4 3.4
All Others 49.3 49.6 50.3
TOTAL 100.0% 100.0% 100.0%
 
 
 
RIF by State
As of June 30, 2014 As of March 31, 2014 As of June 30, 2013
CA 10.4% 10.6% 10.6%
TX 8.3 8.1 7.9
FL 5.3 5.0 4.4
NC 4.4 4.4 4.6
WA 4.0 3.8 3.5
IL 4.0 3.9 4.2
GA 3.6 3.7 3.7
NJ 3.4 3.6 3.8
PA 3.4 3.5 3.8
AZ 3.3 3.3 3.2
All Others 49.9 50.1 50.3
TOTAL 100.0% 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
Three months ended Six months ended

 

June 30, June 30, June 30, June 30,
  2014       2013     2014       2013  
Beginning default inventory 192 75 159 56
Plus: new defaults 151 65 318 135
Less: cures (98 ) (46 ) (226 ) (95 )
Less: claims paid   (10 )     (4 )   (16 )     (6 )

Ending default inventory

  235       90     235       90  
 
 
 
Rollforward of Reserve for Losses and LAE
Three months ended Six months ended
June 30, June 30, June 30, June 30,

($ in thousands)

  2014       2013     2014       2013  
Reserve for losses and LAE at beginning of period $ 3,804     $ 2,164   $ 3,070     $ 1,499  
Add provision for losses and LAE occurring in:
Current year 1,166 511 2,452 1,435
Prior years   (200 )     69     (584 )     (125 )
Incurred losses during the period   966       580     1,868       1,310  
Deduct payments for losses and LAE occurring in:
Current year - 3 - 4
Prior years   264       193     432       257  
Loss and LAE payments during the period   264       196     432       261  
Reserve for losses and LAE at end of period $ 4,506     $ 2,548   $ 4,506     $ 2,548  
 
 
 
Claims
Three months ended Six months ended
June 30, June 30, June 30, June 30,
  2014       2013     2014       2013  
Number of claims paid 10 4 16 6
Total amount paid for claims (in thousands) $ 263 $ 191 $ 422 $ 248
Average amount paid per claim (in thousands) $ 26 $ 48 $ 26 $ 41
Severity 54 % 81 % 62 % 86 %

           
Exhibit G, continued
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Defaults, Reserve for Losses and LAE, and Claims
 
 
As of June 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 121 51 % $ 1,266 31 % $ 6,316 20 %
Four to eleven payments 92 39 2,026 48 4,083 50
Twelve or more payments 20 9 724 18 990 73
Pending claims 2     1       105   3       103 102
TOTAL 235     100 % 4,121 100 %   $ 11,492 36
IBNR 309
LAE   76
TOTAL $ 4,506
 
Average reserve per default:
Case $ 17.5
Total $ 19.2
 
Default Rate 0.13 %
 
 
 
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 June 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 49 55 % $ 740 32 % $ 2,559 29 %
Four to eleven payments 34 38 1,154 50 1,762 66
Twelve or more payments 4 4 215 9 287 75
Pending claims 3     3       206   9       196 105
TOTAL 90     100 % 2,315 100 %   $ 4,804 48
IBNR 174
LAE   59
TOTAL $ 2,548
 
Average reserve per default:
Case $ 25.7
Total $ 28.3
 
Default Rate 0.09 %

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

($ in thousands)

Fair Value   Percent Fair Value   Percent
U.S. Treasury securities $ 66,719 7.9 % $ 59,187 17.8 %
U.S. Agency securities 8,165 1.0 14,839 4.5
U.S. Agency Mortgage-backed securities 60,928 7.2 22,241 6.7
Municipal debt securities 170,795 20.2 57,650 17.3
Corporate debt securities 241,874 28.5 125,593 37.8
Mortgage-backed securities 54,207 6.4 18,581 5.6
Asset-backed securities 88,710 10.5 20,385 6.1
Money market investments   154,472       18.3     14,079   4.2  
Total Investments $ 845,870       100.0 % $ 332,555   100.0 %
 
 
 
Investment Portfolio by Credit Rating
Rating (1) June 30, 2014 December 31, 2013

($ in thousands)

Fair Value   Percent Fair Value   Percent
Aaa $ 436,451 51.7 % $ 147,862 44.5 %
Aa1 34,913 4.1 21,570 6.5
Aa2 41,658 4.9 15,464 4.6
Aa3 31,776 3.8 11,902 3.6
A1 67,136 7.9 26,541 8.0
A2 46,785 5.5 17,045 5.1
A3 56,170 6.6 29,886 9.0
Baa1 52,043 6.2 24,441 7.3
Baa2 68,474 8.1 30,782 9.3
Baa3 10,464 1.2 7,062 2.1
Below Baa3   -       -     -   -  
Total Investments $ 845,870       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 June 30, 2014 December 31, 2013

($ in thousands)

Fair Value   Percent Fair Value   Percent
< 1 Year $ 261,123 30.8 % $ 65,092 19.6 %
1 to < 2 Years 64,615 7.6 19,093 5.7
2 to < 3 Years 97,011 11.5 74,335 22.4
3 to < 4 Years 109,829 13.0 63,214 19.0
4 to < 5 Years 62,328 7.4 66,230 19.9
5 or more Years   250,964       29.7     44,591   13.4  
Total Investments $ 845,870       100.0 % $ 332,555   100.0 %
 
Pre-tax investment income yield:
Three months ended June 30, 2014 1.60 %
Six months ended June 30, 2014 1.31 %
 
 
Net cash and Investments at holding company Essent Group Ltd. ($ in thousands):
As of June 30, 2014 $ 170,982
As of December 31, 2013 $ 246,220

   
Exhibit I
 
Essent Group Ltd. and Subsidiaries
Supplemental Information
Insurance Company Capital
 
As of
June 30, 2014 December 31, 2013
 
Combined statutory capital ($ in thousands) (A) $ 599,928 $ 469,424
 
Risk to capital ratios: (B)
Essent Guaranty, Inc. 16.1:1 16.6:1
Essent Guaranty of PA, Inc. 17.6:1 17.1:1
Combined (C) 16.2:1 16.5:1
 
(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) 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
 
 
2014 2013
Selected Income Statement Data June 30 March 31 December 31 September 30 June 30 March 31

(In thousands, except per share amounts)

Revenues:
Net premiums written $ 63,505   $ 52,192   $ 52,878   $ 55,026   $ 44,923   $ 33,373  
 
Net premiums earned 50,342 44,750 40,344 34,282 27,481 21,264
Other revenues   3,941     3,071     2,009     2,173     2,083     1,767  
Total revenues   54,283     47,821     42,353     36,455     29,564     23,031  
 
Losses and expenses:
Provision for losses and LAE 966 902 692 319 580 730
Other underwriting and operating expenses   23,648     23,459     22,299     18,237     15,557     14,962  
Total losses and expenses   24,614     24,361     22,991     18,556     16,137     15,692  
 
Income before income taxes 29,669 23,460 19,362 17,899 13,427 7,339
Income tax expense (benefit)   10,114     8,454     345     2,280     (10,150 )   139  
Net income $ 19,555   $ 15,006   $ 19,017   $ 15,619   $ 23,577   $ 7,200  
 
Earnings per share:
Basic:
Common Shares $ 0.23 $ 0.18 $ 0.23 N/A N/A N/A
Class A common shares N/A N/A N/A $ 0.36 $ 0.63 $ 0.23
Class B-2 common shares N/A N/A N/A 0.07 0.40 -
 
Diluted:
Common Shares $ 0.23 $ 0.18 $ 0.22 N/A N/A N/A
Class A common shares N/A N/A N/A $ 0.35 $ 0.62 $ 0.23
Class B-2 common shares N/A N/A N/A 0.02 0.09 -
 

Weighted average common shares outstanding:

Basic:
Common Shares 83,276 82,864 51,741 N/A N/A N/A
Class A common shares N/A N/A N/A 43,616 36,793 31,805
Class B-2 common shares N/A N/A N/A 1,822 1,334 853
 
Diluted:
Common Shares 84,706 84,696 55,130 N/A N/A N/A
Class A common shares N/A N/A N/A 43,788 36,901 31,864
Class B-2 common shares N/A N/A N/A 6,054 5,994 6,009
 
Other Data:

($ in thousands)

 
Loss ratio (1) 1.9 % 2.0 % 1.7 % 0.9 % 2.1 % 3.4 %
Expense ratio (2)   47.0 %   52.4 %   55.3 %   53.2 %   56.6 %   70.4 %
Combined ratio   48.9 %   54.4 %   57.0 %   54.1 %   58.7 %   73.8 %
 
New insurance written $ 5,874,334 $ 3,630,573 $ 4,527,900 $ 6,408,055 $ 5,895,127 $ 4,321,556
New risk written 1,477,547 907,257 1,147,560 1,584,267 1,409,905 991,011
Average premium rate (3) 0.54 % 0.54 % 0.54 % 0.54 % 0.55 % 0.55 %
Insurance in force (end of period) $ 39,379,879 $ 34,778,057 $ 32,028,196 $ 28,198,722 $ 22,576,300 $ 17,430,810
Policies in force 175,773 154,451 141,417 123,737 98,818 76,455
Weighted-average coverage (4) 24.6 % 24.4 % 24.3 % 24.0 % 23.7 % 23.5 %
Annual persistency 89.1 % 87.9 % 86.1 % 83.1 % 80.1 % 80.9 %
 
Loans in default (count) 235 192 159 116 90 75
Percentage of loans in default 0.13 % 0.12 % 0.11 % 0.09 % 0.09 % 0.10 %
 

(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)

Average premium rate is net premium earned as a percentage of average insurance in force for the period.

(4)

Weighted-average coverage is end of period risk in force divided by insurance in force.

       
Exhibit K
Essent Group Ltd. and Subsidiaries
Supplemental Information
Earnings per Share
 
 
 
Three months ended June 30, Six months ended June 30,
2014 2013 2014 2013

(In thousands, except per share amounts)

Net income $ 19,555 $ 23,577 $ 34,561 $ 30,777
Less: Class A dividends declared N/A - N/A -
Less: Class B-2 dividends declared   N/A   -   N/A   -
Undistributed net income $ 19,555 $ 23,577 $ 34,561 $ 30,777
Net income allocable to Common Shares $ 19,555 N/A $ 34,561 N/A
Net income allocable to Class A common shares N/A $ 23,037 N/A $ 30,237
Net income allocable to Class B-2 common shares N/A 540 N/A 540
 
Basic earnings per common share:
Common Shares $ 0.23 N/A $ 0.42 N/A
Class A common shares N/A $ 0.63 N/A $ 0.88
Class B-2 common shares N/A 0.40 N/A 0.49
 
Diluted earnings per common share:
Common Shares $ 0.23 N/A $ 0.41 N/A
Class A common shares N/A $ 0.62 N/A $ 0.88
Class B-2 common shares N/A 0.09 N/A 0.09
 
Basic weighted average common shares outstanding:
Common Shares 83,276 N/A 83,071 N/A
Class A common shares N/A 36,793 N/A 34,313
Class B-2 common shares N/A 1,334 N/A 1,095
 
Diluted weighted average common shares outstanding:
Common Shares 84,706 N/A 84,701 N/A
Class A common shares N/A 36,901 N/A 34,408
Class B-2 common shares N/A 5,994 N/A 6,004
 

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 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 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 June 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 June 30, 2014 and December 31, 2013 in accordance with Regulation G:

   
(In thousands, except per share amounts) June 30, 2014 December 31, 2013
 
Numerator:
Total Stockholders' Equity (Book Value) $ 767,959 $ 722,141
 

Subtract: Accumulated Other Comprehensive Income (Loss)

  3,947     (1,447 )
 
Adjusted Book Value $ 764,012   $ 723,588  
 
Denominator:
Total Outstanding Common Shares 86,528 86,491
 
Add: Outstanding Restricted Share Units   678     528  
 
Total Outstanding Common Shares and Restricted Share Units   87,206     87,019  
 
Adjusted Book Value per Share $ 8.76   $ 8.32  

Source: Essent Group Ltd.



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