Essent .(ESNT) - 2024 Q2 - Quarterly Results

Second Quarter 2024 Results Overview Essent Group reported $203.6 million net income and $1.91 diluted EPS in Q2 2024, an 18% increase year-over-year, with enhanced liquidity over $1.3 billion Net Income and Diluted EPS Comparison | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net Income | $203.6 million | $172.2 million | | Diluted EPS | $1.91 | $1.61 | - The Board of Directors declared a quarterly cash dividend of $0.28 per common share, payable on September 10, 2024[1] - CEO Mark A Casale attributed strong results to a high-quality portfolio, resilient housing and labor markets, and benefits from the current rate environment on investment income and persistency[2] Operational Metrics: New Insurance Written and Insurance in Force | Operational Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | New Insurance Written | $12.5 billion | $8.3 billion | $13.5 billion | | Insurance in Force | $240.7 billion | $238.5 billion | $235.6 billion | - The company enhanced its liquidity and debt capacity, closing on a $500 million senior unsecured notes offering and a $500 million unsecured revolving credit facility on July 1, 2024[3] Financial Statements Essent's Q2 2024 financial statements show robust growth, with total revenues reaching $312.9 million and total assets growing to $6.69 billion Condensed Consolidated Statements of Comprehensive Income Q2 2024 total revenues increased 20.3% year-over-year to $312.9 million, driven by higher net premiums and investment income, resulting in $203.6 million net income Condensed Consolidated Statements of Comprehensive Income (Thousands) | (In thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net premiums earned | $251,891 | $213,229 | | Net investment income | $56,086 | $45,250 | | Total revenues | $312,942 | $260,128 | | Provision (benefit) for losses | ($334) | $1,260 | | Net income | $203,609 | $172,233 | | Diluted EPS | $1.91 | $1.61 | Condensed Consolidated Balance Sheets As of June 30, 2024, Essent's balance sheet strengthened with total assets increasing to $6.69 billion and stockholders' equity rising to $5.38 billion Condensed Consolidated Balance Sheets (Thousands) | (In thousands) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total investments | $5,737,764 | $5,540,965 | | Total assets | $6,692,745 | $6,426,673 | | Total liabilities | $1,312,955 | $1,324,123 | | Total stockholders' equity | $5,379,790 | $5,102,550 | Consolidated Historical Quarterly Data Quarterly data shows a consistent upward trend, with Q2 2024 net income at $203.6 million and book value per share increasing to $50.58 Consolidated Historical Quarterly Financial Performance | Metric | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Income ($M) | $203.6 | $181.7 | $175.4 | $178.0 | $172.2 | | Diluted EPS | $1.91 | $1.70 | $1.64 | $1.66 | $1.61 | | Book Value per Share | $50.58 | $48.96 | $47.87 | $44.98 | $44.24 | U.S. Mortgage Insurance Portfolio Analysis The U.S. Mortgage Insurance portfolio remains robust, with insurance in force growing to $240.7 billion and a stable default rate of 1.71% U.S. Mortgage Insurance Portfolio Historical Quarterly Data Q2 2024 new insurance written reached $12.5 billion, with insurance in force growing to $240.7 billion and a stable default rate of 1.71% U.S. Mortgage Insurance Portfolio Historical Quarterly Data (Thousands) | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | New insurance written | $12,503,125k | $8,323,544k | $13,498,080k | | Insurance in force | $240,669,165k | $238,477,402k | $235,649,884k | | Percentage of loans in default | 1.71% | 1.72% | 1.52% | New Insurance Written - U.S. Mortgage Insurance Portfolio New insurance written in Q2 2024 maintains a strong credit profile with a weighted average FICO score of 748 and a stable LTV of 93% - The weighted average credit score for new insurance written in Q2 2024 was 748, up from 746 in Q2 2023[13] - The weighted average LTV for new insurance written remained stable at 93% in Q2 2024, the same as in Q2 2023[14] - Purchase mortgages continue to dominate new business, accounting for 97.8% of new insurance written in Q2 2024[15] Insurance in Force and Risk in Force - U.S. Mortgage Insurance Portfolio As of June 30, 2024, total insurance in force reached $240.7 billion and gross risk in force grew to $65.3 billion, maintaining a weighted average credit score of 746 Insurance in Force and Risk in Force (Billions) | Metric | June 30, 2024 | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Total Insurance in Force | $240.7B | $238.5B | $235.6B | | Gross Risk in Force | $65.3B | $64.2B | $62.4B | | Weighted Average Credit Score | 746 | 746 | 746 | | Weighted Average LTV | 93% | 93% | 93% | U.S. Mortgage Insurance Portfolio Vintage Data The portfolio's vintage data as of June 30, 2024, shows strong performance with a low overall incurred loss ratio of 4.3% since inception U.S. Mortgage Insurance Portfolio Vintage Data (Billions) | Metric | Total Portfolio | | :--- | :--- | | Original Insurance Written | $600.5B | | Remaining Insurance in Force | $240.7B | | % Remaining | 40.1% | | Incurred Loss Ratio (Inception to Date) | 4.3% | | Percentage of Loans in Default | 1.71% | U.S. Mortgage Insurance Portfolio Reinsurance Vintage Data Essent manages risk through diversified reinsurance programs, covering over $397 billion in remaining insurance in force and reducing PMIERs Minimum Required Assets by $1.63 billion - The Radnor Re series of insurance-linked notes had a remaining reinsurance in force of $1.04 billion[20] - Excess of Loss (XOL) reinsurance agreements provided $287.5 million in remaining reinsurance coverage[21] - Quota Share reinsurance agreements resulted in $8.42 billion of remaining ceded risk in force[22] U.S. Mortgage Insurance Portfolio Geographic Data The insurance in force portfolio's geographic distribution remains consistent, with California, Florida, and Texas collectively representing 35.1% of the total U.S. Mortgage Insurance Portfolio Geographic Distribution | State | IIF % (June 30, 2024) | Gross RIF % (June 30, 2024) | | :--- | :--- | :--- | | CA | 12.7% | 12.6% | | FL | 11.6% | 11.8% | | TX | 10.8% | 11.1% | | All Others | 41.6% | 41.3% | Rollforward of Defaults and Reserve for Losses and LAE The number of insured loans in default decreased slightly to 13,954 in Q2 2024, with new defaults largely offset by cures, resulting in a $220.1 million net reserve Rollforward of Loans in Default | Rollforward of Loans in Default | Q2 2024 | Q1 2024 | | :--- | :--- | :--- | | Beginning inventory | 13,992 | 14,819 | | New defaults | 8,119 | 8,260 | | Cures | (7,956) | (8,951) | | Ending default inventory | 13,954 | 13,992 | Net Reserve for Losses and LAE (Thousands) | ($ in thousands) | Q2 2024 | Q1 2024 | | :--- | :--- | :--- | | Beginning Net Reserve | $226,995 | $221,397 | | Incurred losses and LAE | ($1,227) | $9,334 | | Loss and LAE payments | ($5,683) | ($3,736) | | Ending Net Reserve | $220,085 | $226,995 | Detail of Reserves by Default Delinquency As of June 30, 2024, total reserves for losses and LAE were $246.1 million, with 41% allocated to loans with four to eleven missed payments Detail of Reserves by Default Delinquency (Thousands) | Missed Payments | Number of Policies | Percentage of Policies | Amount of Reserves ($k) | Percentage of Reserves | | :--- | :--- | :--- | :--- | :--- | | Three or less | 7,024 | 50% | $43,396 | 19% | | Four to eleven | 4,887 | 35% | $93,489 | 41% | | Twelve or more | 1,908 | 14% | $82,529 | 37% | | Pending claims | 135 | 1% | $7,562 | 3% | | Total Case Reserves | 13,954 | 100% | $226,976 | 100% | Other Supplemental Information This section details Essent's financial health, highlighting a strong capital position with a 171% PMIERs sufficiency ratio and a core mortgage insurance combined ratio of 17.8% Other Risk in Force Essent's GSE and other risk-sharing portfolio had $2.3 billion in risk in force as of June 30, 2024, with a minimal reserve for losses of $33 thousand Other Risk in Force (Thousands) | Metric | June 30, 2024 | | :--- | :--- | | Risk in Force | $2,304,885k | | Reserve for losses and LAE | $33k | | Weighted average credit score | 750 | Investments Available for Sale The available-for-sale investment portfolio totaled $5.45 billion at fair value as of June 30, 2024, with 54.1% of fixed maturity securities rated Aaa Investments Available for Sale by Asset Class (Thousands) | Asset Class | Fair Value ($k) | Percent | | :--- | :--- | :--- | | Corporate debt securities | $1,151,976 | 21.1% | | U.S. Treasury securities | $999,176 | 18.3% | | Money market funds | $1,001,374 | 18.4% | | U.S. agency mortgage-backed securities | $757,590 | 13.9% | | Total investments available for sale | $5,454,983 | 100.0% | U.S. Mortgage Insurance Company Capital Essent's U.S. mortgage insurance subsidiaries maintained a strong capital position with $3.53 billion in statutory capital and a 171% PMIERs sufficiency ratio U.S. Mortgage Insurance Company Capital (Thousands) | Metric | June 30, 2024 | | :--- | :--- | | Combined statutory capital | $3,530,462k | | Combined risk-to-capital ratio | 9.9:1 | | PMIERs Available Assets | $3,513,609k | | PMIERs Minimum Required Assets | $2,052,135k | | PMIERs excess Available Assets | $1,461,474k | | PMIERs sufficiency ratio | 171% | Ratios and Reconciliation of Non-GAAP Financial Measures Q2 2024 consolidated combined ratio was 26.0%, with the core mortgage insurance business (excluding Title) achieving an exceptionally strong 17.8% combined ratio Key Ratios (Q2 2024) | Ratio (Q2 2024) | Consolidated | Excluding Title (Non-GAAP) | | :--- | :--- | :--- | | Loss Ratio | (0.1)% | (0.5)% | | Expense Ratio | 26.1% | 18.3% | | Combined Ratio | 26.0% | 17.8% |