Essent .(ESNT) - 2025 Q1 - Quarterly Results

Financial Performance Overview This section details Essent Group's Q1 2025 financial results, capital return initiatives, and key business and operational achievements First Quarter 2025 Results Essent Group reported a net income of $175.4 million for Q1 2025, a slight decrease from $181.7 million in Q1 2024. Diluted earnings per share also saw a minor dip to $1.69 from $1.70 year-over-year. The company's performance was supported by favorable credit performance, high portfolio persistency, and a 12% YoY increase in net investment income Q1 2025 Key Financial Metrics | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $175.4 million | $181.7 million | | Diluted EPS | $1.69 | $1.70 | - The Chairman and CEO, Mark A. Casale, attributed the strong results to favorable credit performance, elevated portfolio persistency, and higher investment income[3] - Net investment income for Q1 2025 was $58.2 million, representing a 12% increase from Q1 2024[10] Capital Returns The Board of Directors declared a quarterly cash dividend of $0.31 per common share. Additionally, through April 30, 2025, the company has repurchased 3.9 million common shares for approximately $218 million, with $429 million remaining under the current repurchase authorization - A quarterly cash dividend of $0.31 per common share was declared, payable on June 10, 2025, to shareholders of record on May 30, 2025[2] - Year-to-date through April 30, 2025, Essent repurchased 3.9 million shares for about $218 million. There is $429 million remaining under the $500 million repurchase plan authorized in February 2025[10] Business and Operational Highlights In Q1 2025, Essent's new insurance written (NIW) was $9.9 billion, an increase from $8.3 billion in Q1 2024 but a decrease from $12.2 billion in Q4 2024. Insurance in force (IIF) grew to $244.7 billion. The company also executed several reinsurance transactions to manage risk, including two forward quota share agreements and two excess of loss transactions Key Operational Metrics | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | New Insurance Written | $9.9 billion | $12.2 billion | $8.3 billion | | Insurance in Force | $244.7 billion | $243.6 billion | $238.5 billion | - During Q1 2025, Essent entered into two forward quota share transactions covering 25% of the risk for eligible policies written in 2025 and 2026[10] - In April, the company entered into two excess of loss transactions covering 20% of eligible policies written in 2025 and 2026[10] Consolidated Financial Statements This section presents Essent Group's Q1 2025 condensed consolidated statements of comprehensive income and balance sheets, highlighting revenue, expenses, net income, assets, and equity Condensed Consolidated Statements of Comprehensive Income For Q1 2025, total revenues increased to $317.6 million from $298.4 million in Q1 2024, driven by higher net investment income. However, a significant rise in the provision for losses and LAE (from $9.9 million to $31.3 million) and increased operating expenses led to a decrease in net income to $175.4 million compared to $181.7 million in the prior-year quarter Q1 2025 Income Statement Highlights (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Premiums Earned | $245,848 | $245,590 | | Net Investment Income | $58,210 | $52,085 | | Total Revenues | $317,558 | $298,357 | | Provision for Losses and LAE | $31,287 | $9,913 | | Other Underwriting & Operating Expenses | $71,124 | $66,840 | | Total Losses and Expenses | $110,559 | $84,615 | | Income Before Income Taxes | $206,999 | $213,742 | | Net Income | $175,433 | $181,719 | | Diluted EPS | $1.69 | $1.70 | Condensed Consolidated Balance Sheets As of March 31, 2025, Essent's total assets grew to $7.20 billion from $7.11 billion at year-end 2024. Total liabilities also increased to $1.55 billion. Total stockholders' equity rose to $5.66 billion, resulting in a book value per share of $55.22, up from $53.36 at the end of 2024 Balance Sheet Highlights (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Investments | $6,204,217 | $6,180,621 | | Total Assets | $7,204,711 | $7,111,649 | | Reserve for Losses and LAE | $356,653 | $328,866 | | Total Liabilities | $1,545,405 | $1,507,991 | | Total Stockholders' Equity | $5,659,306 | $5,603,658 | - Book value per share increased to $55.22 as of March 31, 2025, compared to $53.36 as of December 31, 2024[18] Operational and Portfolio Analysis This section provides an in-depth analysis of Essent's U.S. mortgage insurance portfolio, including new insurance written, in-force quality, and default and loss reserve trends U.S. Mortgage Insurance Portfolio Overview The U.S. Mortgage Insurance portfolio continued to expand, with insurance in force reaching $244.7 billion at the end of Q1 2025. The percentage of loans in default increased to 2.19% from 1.71% in Q1 2024, but decreased from 2.27% in Q4 2024. Annual persistency remained high and stable at 85.7% U.S. Mortgage Insurance Portfolio Metrics | Metric | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :--- | :--- | :--- | :--- | | Insurance in force (end of period) | $244.7B | $243.6B | $238.5B | | Risk in force (end of period) | $56.6B | $56.5B | $54.7B | | Policies in force | 811,342 | 813,013 | 815,000 (approx) | | Percentage of loans in default | 2.19% | 2.27% | 1.71% | | Annual persistency | 85.7% | 85.7% | N/A | New Insurance Written (NIW) In Q1 2025, New Insurance Written (NIW) totaled $9.9 billion. The portfolio composition shows a continued focus on high-quality credit, with a weighted average credit score of 751. Purchase mortgages dominated NIW at 94.3%, and monthly premium policies constituted 98.6% of the new business - Purchase mortgages represented 94.3% of NIW in Q1 2025, up from 88.3% in Q4 2024 but down from 97.4% in Q1 2024[24] - The weighted average credit score for NIW in Q1 2025 was 751, consistent with Q4 2024 and up from 747 in Q1 2024. Borrowers with credit scores of 740 or higher accounted for 65.1% of NIW[25] - The weighted average Loan-to-Value (LTV) ratio for NIW remained stable at 93%[25] Insurance in Force (IIF) and Risk in Force (RIF) Portfolio Quality The credit quality of the in-force portfolio remained strong and stable as of March 31, 2025. The weighted average credit score was 746, and the weighted average LTV was 93%, both unchanged from the previous quarter and year-ago period. The majority of the portfolio (97.8%) consists of 30-year or higher fixed-rate mortgages - The weighted average credit score of the Insurance in Force (IIF) portfolio was 746, consistent across Q1 2025, Q4 2024, and Q1 2024[27] - The weighted average LTV of the IIF portfolio was 93%, also consistent across the same periods[27] - Fixed-rate mortgages with terms of 30 years or more constitute 97.8% of the IIF portfolio[27] Default and Loss Reserve Analysis The number of loans in default decreased to 17,759 in Q1 2025 from 18,439 in Q4 2024, driven by a higher number of cures than new defaults. The total reserve for losses and LAE increased to $338.1 million from $310.2 million in the prior quarter. The average reserve per default also increased to $19.0 thousand Rollforward of Insured Loans in Default | Metric | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Beginning Default Inventory | 18,439 | 15,906 | | New Defaults | 9,664 | 11,136 | | Cures | (10,173) | (8,408) | | Ending Default Inventory | 17,759 | 18,439 | Reserve for Losses and LAE (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Reserve for Losses and LAE | $338,128 | $310,156 | | Average Reserve per Default (Total) | $19.0 | $16.8 | Capital and Risk Management This section outlines Essent's strategies for managing capital and risk, including its reinsurance programs, investment portfolio composition, and capital adequacy metrics Reinsurance Program Essent actively utilizes reinsurance to manage its risk exposure. As of Q1 2025, the company had significant risk ceded through Insurance-Linked Notes (ILN), Excess of Loss (XOL), and Quota Share agreements. These programs provide substantial capital relief, reducing the PMIERs Minimum Required Assets by over $1.8 billion in total - GSE and other risk share programs had $2.22 billion of risk in force as of March 31, 2025[29] Reinsurance Program Highlights (as of March 31, 2025) | Program Type | Remaining Ceded Risk in Force | Reduction in PMIERs Assets | | :--- | :--- | :--- | | Insurance Linked Notes (ILN) | $1.14 billion | $958.7 million | | Excess of Loss (XOL) | $0.34 billion | $229.0 million | | Quota Share | $8.98 billion | $648.3 million | Investment Portfolio The company's investment portfolio, valued at $5.88 billion as of March 31, 2025, is highly rated and diversified. 98.6% of the portfolio is rated Baa3 or higher. The largest allocations are to corporate debt securities (31.7%) and U.S. agency mortgage-backed securities (19.8%). The pre-tax investment income yield for the quarter was 3.77% - Total investments available for sale stood at $5.88 billion, with the largest allocations in Corporate debt (31.7%), U.S. agency MBS (19.8%), and Asset-backed securities (12.7%)[44] - The portfolio maintains high credit quality, with 48.1% rated Aaa and 98.6% rated investment grade (Baa3 or higher)[44] - The pre-tax investment income yield for Q1 2025 was 3.77%[46] Capital Adequacy Essent remains well-capitalized. The combined statutory capital for U.S. Mortgage Insurance Subsidiaries was $3.64 billion. For Essent Guaranty, Inc., the PMIERs sufficiency ratio was 172%, with $1.52 billion in excess available assets over the minimum required, demonstrating a strong capital buffer Essent Guaranty, Inc. PMIERs Data (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Available Assets | $3,628,675 | $3,612,993 | | Minimum Required Assets | $2,107,620 | $2,029,738 | | PMIERs Excess Available Assets | $1,521,055 | $1,583,255 | | PMIERs Sufficiency Ratio | 172% | 178% | - The risk-to-capital ratio for Essent Guaranty, Inc. improved to 9.6:1 from 9.8:1 in the prior quarter[48] Segment Information This section details the financial performance of Essent's Mortgage Insurance segment and the Corporate & Other category, including key revenue, expense, and profitability metrics Mortgage Insurance Segment The Mortgage Insurance segment generated income before tax of $214.5 million in Q1 2025, down from $223.6 million in Q1 2024. Net premiums earned were stable at $233.6 million. The loss ratio increased to 13.1% from 4.1% YoY, while the expense ratio was 18.7%. This resulted in a combined ratio of 31.8% for the quarter Mortgage Insurance Segment Performance (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Premiums Earned | $233,630 | $230,306 | | Total Revenues | $288,869 | $274,748 | | Provision for Losses and LAE | $30,722 | $9,337 | | Income Before Income Tax | $214,540 | $223,566 | Key Ratios | Ratio | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Loss Ratio | 13.1% | 16.3% | 4.1% | | Expense Ratio | 18.7% | 17.5% | 18.2% | | Combined Ratio | 31.8% | 33.8% | 22.3% | Corporate & Other The Corporate & Other category, which includes title insurance operations and holding company activities, reported a loss before income tax of $7.5 million in Q1 2025. This is an improvement from the $9.8 million loss reported in Q1 2024. The improvement was primarily driven by higher net investment income Corporate & Other Performance (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $28,689 | $23,609 | | Total Losses and Expenses | $36,230 | $33,433 | | Loss Before Income Tax | ($7,541) | ($9,824) |