Essent group ltd. reports first quarter 2020 results & declares quarterly dividend
Hamilton, bermuda--(business wire)--essent group ltd. (nyse: esnt) today reported net income for the quarter ended march 31, 2020 of $149.5 million or $1.52 per diluted share, compared to $127.7 million or $1.30 per diluted share for the quarter ended march 31, 2019. essent also announced today that its board of directors has declared a quarterly cash dividend of $0.16 per common share. the dividend is payable on june 12, 2020, to shareholders of record on june 2, 2020. “while we are pleased with our strong financial results for the first quarter, our focus is now on facing a challenging business environment as a result of covid-19,” said mark casale, chairman and chief executive officer. “we believe that the strength and sustainability of our buy, manage, and distribute operating model, as well as our strong balance sheet, capital and liquidity, has allowed us to enter these challenging times in a position of strength.” financial highlights: insurance in force as of march 31, 2020 was $165.6 billion, compared to $164.0 billion as of december 31, 2019 and $143.2 billion as of march 31, 2019. new insurance written for the first quarter was $13.5 billion, compared to $15.8 billion in the fourth quarter of 2019 and $11.0 billion in the first quarter of 2019. net premiums earned for the first quarter were $206.5 million, compared to $207.7 million in the fourth quarter of 2019 and $177.8 million in the first quarter of 2019. the expense ratio for the first quarter was 20.3%, compared to 19.9% in the fourth quarter of 2019 and 23.1% in the first quarter of 2019. the provision for losses and lae for the first quarter was $8.1 million, compared to a provision of $10.9 million in the fourth quarter of 2019 and a provision of $7.1 million in the first quarter of 2019. the percentage of loans in default as of march 31, 2020 was 0.83%, compared to 0.85% as of december 31, 2019 and 0.65% as of march 31, 2019. the combined ratio for the first quarter was 24.2%, compared to 25.1% in the fourth quarter of 2019 and 27.1% in the first quarter of 2019. other income for the first quarter includes a $4.2 million loss for the change in the fair value of embedded derivatives in certain of our third-party reinsurance agreements, compared to a loss of $3.6 million in the fourth quarter of 2019 and a gain of $1.4 million in the first quarter of 2019. the consolidated balance of cash and investments at march 31, 2020 was $3.8 billion, including cash and investment balances at essent group ltd. of $279.8 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 11.7:1 as of march 31, 2020. on january 31, 2020, essent's wholly-owned subsidiary, essent guaranty, inc., announced it had obtained $495.9 million of fully collateralized excess of loss reinsurance coverage on mortgage insurance policies written by essent in january through august 2019 from radnor re 2020-1 ltd., a newly formed bermuda special purpose insurer. radnor re 2020-1 ltd. is not a subsidiary or an affiliate of essent group ltd. subsequent to the closing of the transaction with radnor re 2020-1 ltd., essent guaranty, inc. executed an excess of loss reinsurance transaction with a panel of third-party reinsurers for $55.1 million of reinsurance coverage on mortgage insurance policies written by essent in january through august 2019. on march 27, 2020, essent borrowed $200 million from the revolving component of its credit facility. in addition to this borrowing, essent had $225 million of term debt outstanding at march 31, 2020 and maintained $75 million of undrawn capacity under the revolving component of its credit facility. private mortgage insurer eligibility requirements (pmiers) update: consistent with the pmiers which were effective september 27, 2018, essent will apply a 0.30 multiplier to the risk-based required asset amount factor for each non-performing primary mortgage guaranty insurance loan backed by a property located in a federal emergency management agency (fema) declared major disaster area and that either 1) is subject to a forbearance plan executed in response to a fema declared major disaster area eligible for individual assistance, the terms of which are materially consistent with terms of forbearance plans offered by fannie mae or freddie mac, or 2) has an initial default date occurring up to either (i) 30 days prior to or (ii) 90 days following the covid-19 pandemic event. in the case of the foregoing, the 0.30 multiplier shall be applied to the risk-based required asset amount factor for each non-performing primary mortgage guaranty insurance loan for no longer than 120 days from the initial default date absent a forbearance plan described in 1) above. approximately 97% of essent’s outstanding primary mortgage insurance portfolio, as of march 31, 2020, has underlying properties located in fema declared major disaster areas eligible for individual assistance. accordingly, the company believes that the majority of the non-performing loans that will be reported to the company subsequent to march 31, 2020, will fall into categories 1) and 2) above and receive the 0.30 multiplier in calculating the pmiers required assets. 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 833-287-0797 inside the u.s., or 647-689-4456 for international callers, using passcode 1490696 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: 800-585-8367 inside the u.s., or 416-621-4642 for international callers, passcode 1490696. 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," "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, 2019 filed with the securities and exchange commission on february 18, 2020, 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 march 31, 2020 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 defaults, reserve for losses and lae, and claims exhibit k investments available for sale exhibit l insurance company capital exhibit m 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 march 31, (in thousands, except per share amounts) 2020 2019 revenues: direct premiums written $ 205,980 $ 183,682 ceded premiums (14,237 ) (6,038 ) net premiums written 191,743 177,644 decrease in unearned premiums 14,753 147 net premiums earned 206,496 177,791 net investment income 20,633 19,880 realized investment gains, net 3,135 660 other income (loss) (1,424 ) 2,195 total revenues 228,840 200,526 losses and expenses: provision for losses and lae 8,063 7,107 other underwriting and operating expenses 41,947 41,030 interest expense 2,132 2,670 total losses and expenses 52,142 50,807 income before income taxes 176,698 149,719 income tax expense 27,175 21,999 net income $ 149,523 $ 127,720 earnings per share: basic $ 1.53 $ 1.31 diluted 1.52 1.30 weighted average shares outstanding: basic 97,949 97,595 diluted 98,326 98,104 net income $ 149,523 $ 127,720 other comprehensive income (loss): change in unrealized (depreciation) appreciation of investments (10,074 ) 38,366 total other comprehensive (loss) income (10,074 ) 38,366 comprehensive income $ 139,449 $ 166,086 loss ratio 3.9 % 4.0 % expense ratio 20.3 23.1 combined ratio 24.2 % 27.1 % exhibit b essent group ltd. and subsidiaries condensed consolidated balance sheets (unaudited) march 31, december 31, (in thousands, except per share amounts) 2020 2019 assets investments fixed maturities available for sale, at fair value $ 3,110,362 $ 3,035,385 short-term investments available for sale, at fair value 595,165 315,362 total investments available for sale 3,705,527 3,350,747 other invested assets 75,380 78,873 total investments 3,780,907 3,429,620 cash 31,055 71,350 accrued investment income 18,572 18,535 accounts receivable 41,228 40,655 deferred policy acquisition costs 15,147 15,705 property and equipment 16,325 17,308 prepaid federal income tax 261,885 261,885 other assets 21,815 18,367 total assets $ 4,186,934 $ 3,873,425 liabilities and stockholders' equity liabilities reserve for losses and lae $ 73,341 $ 69,362 unearned premium reserve 264,134 278,887 net deferred tax liability 259,688 249,620 credit facility borrowings, net of deferred costs 424,380 224,237 other accrued liabilities 58,317 66,474 total liabilities 1,079,860 888,580 commitments and contingencies stockholders' equity common shares, $0.015 par value: authorized - 233,333; issued and outstanding - 98,602 shares in 2020 and 98,394 shares in 2019 1,479 1,476 additional paid-in capital 1,117,286 1,118,655 accumulated other comprehensive income 46,113 56,187 retained earnings 1,942,196 1,808,527 total stockholders' equity 3,107,074 2,984,845 total liabilities and stockholders' equity $ 4,186,934 $ 3,873,425 return on average equity (1) 19.6 % 20.8 % (1) the 2019 return on average equity is calculated by dividing annualized year-to-date 2020 net income by average equity. the 2019 return on average equity is calculated by dividing full year 2019 net income by average equity. exhibit c essent group ltd. and subsidiaries supplemental information historical quarterly data 2020 2019 selected income statement data march 31 december 31 september 30 june 30 march 31 (in thousands, except per share amounts) revenues: net premiums written $ 191,743 $ 196,493 $ 198,304 $ 188,404 $ 177,644 net premiums earned (1) 206,496 207,671 203,473 188,490 177,791 other revenues (2) 22,344 21,091 22,914 23,402 22,735 total revenues 228,840 228,762 226,387 211,892 200,526 losses and expenses: provision for losses and lae 8,063 10,929 9,990 4,960 7,107 other underwriting and operating expenses 41,947 41,231 41,588 41,520 41,030 interest expense 2,132 2,218 2,584 2,679 2,670 total losses and expenses 52,142 54,378 54,162 49,159 50,807 income before income taxes 176,698 174,384 172,225 162,733 149,719 income tax expense (3) 27,175 27,426 27,595 26,328 21,999 net income $ 149,523 $ 146,958 $ 144,630 $ 136,405 $ 127,720 earnings per share: basic $ 1.53 $ 1.50 $ 1.48 $ 1.39 $ 1.31 diluted 1.52 1.49 1.47 1.39 1.30 weighted average shares outstanding: basic 97,949 97,830 97,822 97,798 97,595 diluted 98,326 98,376 98,257 98,170 98,104 other data: loss ratio (4) 3.9 % 5.3 % 4.9 % 2.6 % 4.0 % expense ratio (5) 20.3 19.9 20.4 22.0 23.1 combined ratio 24.2 % 25.1 % 25.3 % 24.7 % 27.1 % return on average equity (annualized) 19.6 % 20.1 % 20.8 % 20.9 % 20.9 % (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. other revenues for the three months ended march 31, 2020, december 31, 2019, september 30, 2019, june 30, 2019 and march 31, 2019 include unfavorable decreases of $4,200, $3,585 and $760 and favorable increases of $1,160 and $1,424, respectively, in the fair value of these embedded derivatives. (3) income tax expense for the three months ended march 31, 2020 and 2019 was reduced by $620 and $1,956, respectively, of excess tax benefits associated with the vesting of common shares and common share units during each period. (4) loss ratio is calculated by dividing the provision for losses and lae by net premiums earned. (5) expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned. exhibit c, continued essent group ltd. and subsidiaries supplemental information historical quarterly data 2020 2019 other data, continued: march 31 december 31 september 30 june 30 march 31 ($ in thousands) u.s. mortgage insurance portfolio flow: new insurance written $ 13,549,299 $ 15,839,836 $ 18,719,876 $ 17,973,505 $ 10,945,307 new risk written 3,384,171 3,966,363 4,695,611 4,485,217 2,713,389 bulk: new insurance written $ 151 $ — $ 6,133 $ 29,524 $ 55,002 new risk written 24 — 842 2,129 6,542 total: average gross premium rate (6) 0.51 % 0.51 % 0.52 % 0.51 % 0.50 % average net premium rate (7) 0.48 % 0.49 % 0.49 % 0.49 % 0.48 % new insurance written $ 13,549,450 $ 15,839,836 $ 18,726,009 $ 18,003,029 $ 11,000,309 new risk written $ 3,384,195 $ 3,966,363 $ 4,696,453 $ 4,487,346 $ 2,719,931 insurance in force (end of period) $ 165,615,503 $ 164,005,853 $ 160,962,192 $ 153,317,157 $ 143,181,641 gross risk in force (end of period) (8) $ 41,865,977 $ 41,402,950 $ 40,540,289 $ 38,531,090 $ 35,925,830 risk in force (end of period) $ 38,290,022 $ 38,947,857 $ 38,784,584 $ 37,034,687 $ 34,744,417 policies in force 706,714 702,925 693,085 666,705 629,808 weighted average coverage (9) 25.3 % 25.2 % 25.2 % 25.1 % 25.1 % annual persistency 73.9 % 77.5 % 82.1 % 84.8 % 85.1 % loans in default (count) 5,841 5,947 5,232 4,405 4,096 percentage of loans in default 0.83 % 0.85 % 0.75 % 0.66 % 0.65 % other risk in force gse and other risk share (10) $ 1,100,966 $ 895,374 $ 849,184 $ 802,530 $ 771,175 credit facility borrowings outstanding $ 425,000 $ 225,000 $ 225,000 $ 225,000 $ 225,000 undrawn committed capacity $ 75,000 $ 275,000 $ 275,000 $ 275,000 $ 275,000 weighted average interest rate (end of period) 2.87 % (6) average gross premium rate is calculated by dividing annualized premiums earned for the u.s. mortgage insurance portfolio, before reductions for premiums ceded under third-party reinsurance, by average insurance in force for the period. (7) average net premium rate is calculated by dividing annualized net premiums earned for the u.s. mortgage insurance portfolio by average insurance in force for the period. (8) gross risk in force includes risk ceded under third-party reinsurance. (9) weighted average coverage is calculated by dividing end of period gross risk in force by end of period insurance in force. (10) gse and other risk share includes gse risk share and other reinsurance transactions. essent re provides insurance or reinsurance relating to the risk in force on loans in reference pools acquired by freddie mac and fannie mae. exhibit d essent group ltd. and subsidiaries supplemental information new insurance written: flow niw by credit score three months ended march 31, 2020 december 31, 2019 march 31, 2019 ($ in thousands) >=760 $ 5,655,716 41.8 % $ 6,486,486 40.9 % $ 4,470,503 40.8 % 740-759 2,458,032 18.1 2,880,429 18.2 1,912,141 17.5 720-739 2,018,874 14.9 2,401,806 15.2 1,565,613 14.3 700-719 1,558,743 11.5 1,860,120 11.7 1,352,545 12.4 680-699 1,044,918 7.7 1,235,223 7.8 907,969 8.3 =760 $ 68,385,363 41.3 % $ 68,123,523 41.5 % $ 61,191,185 42.7 % 740-759 28,289,661 17.1 27,886,603 17.0 23,919,745 16.7 720-739 24,441,834 14.7 24,069,139 14.7 20,728,151 14.5 700-719 19,442,133 11.7 19,183,219 11.7 16,454,730 11.5 680-699 13,859,727 8.4 13,713,164 8.4 11,774,884 8.2 =760 $ 17,138,596 40.9 % $ 17,082,683 41.3 % $ 15,303,364 42.6 % 740-759 7,181,181 17.2 7,056,654 17.0 6,012,004 16.7 720-739 6,262,376 15.0 6,150,334 14.9 5,257,051 14.6 700-719 4,950,746 11.8 4,873,597 11.8 4,144,221 11.6 680-699 3,537,973 8.4 3,491,755 8.4 2,974,758 8.3 90% ltv >95% ltv fico = 760 incurred loss ratio (inception to date) (1) number of loans in default percentage of loans in default 2010 - 2014 $ 60,668,851 $ 9,744,199 16.1 % 53,929 83.9 % 68.5 % 3.8 % 12.2 % 45.9 % 2.6 % 815 1.51 % 2015 26,193,656 9,081,764 34.7 45,264 85.2 61.3 2.8 14.8 43.8 2.7 594 1.31 2016 34,949,319 17,593,372 50.3 81,241 84.7 59.6 7.2 13.5 45.7 2.9 890 1.10 2017 43,858,322 27,127,737 61.9 125,541 88.2 61.3 14.8 15.8 41.9 4.2 1,542 1.23 2018 47,508,525 32,032,954 67.4 140,687 92.5 63.0 19.1 15.9 39.5 5.9 1,390 0.99 2019 63,569,183 56,579,438 89.0 212,911 80.6 60.4 18.1 15.8 39.3 4.3 603 0.28 2020 (through march 31) 13,549,450 13,456,039 99.3 47,141 69.1 56.1 14.1 13.7 41.7 1.1 7 0.01 total $ 290,297,306 $ 165,615,503 57.1 706,714 84.1 61.1 14.6 15.1 41.3 3.4 5,841 0.83 (1) incurred loss ratio is calculated by dividing the sum of case reserves and cumulative amount paid for claims by cumulative net premiums earned. exhibit h essent group ltd. and subsidiaries supplemental information reinsurance vintage data march 31, 2020 ($ in thousands) excess of loss reinsurance original reinsurance in force remaining reinsurance in force year-to-date year remaining insurance in force remaining risk in force iln (1) other reinsurance (2) total iln other reinsurance total losses ceded to date original first layer retention remaining first layer retention earned premiums ceded reduction in pmiers minimum required assets (5) 2015 & 2016 $ 25,025,497 $ 6,762,026 $ 333,844 $ — $ 333,844 $ 244,105 $ — $ 244,105 $ — $ 208,111 $ 208,111 $ 1,838 $ 192,485 2017 26,279,318 6,665,183 424,412 165,167 589,579 280,180 165,167 445,347 — 224,689 221,852 3,353 241,513 2018 31,375,687 7,923,964 473,184 118,650 591,834 377,509 87,941 465,450 — 253,643 253,081 4,105 366,199 2019 (3) 34,916,398 8,826,958 495,889 55,102 550,991 495,889 55,102 550,991 — 215,605 215,605 2,489 462,024 total $ 117,596,900 $ 30,178,131 $ 1,727,329 $ 338,919 $ 2,066,248 $ 1,397,683 $ 308,210 $ 1,705,893 $ — $ 902,048 $ 898,649 $ 11,785 $ 1,262,221 quota share reinsurance year-to-date year remaining insurance in force remaining risk in force remaining ceded insurance in force remaining ceded risk in force losses ceded ceding commission earned premiums ceded reduction in pmiers minimum required assets (5) 2019 & 2020 (4) $ 34,268,944 $ 8,598,188 $ 7,542,999 $ 1,870,062 $ 98 $ 1,177 $ 2,452 $ 127,311 (1) reinsurance provided by unaffiliated special purpose insurers through the issuance of mortgage insurance-linked notes ("ilns"). (2) reinsurance provided by panels of reinsurers. (3) reinsurance coverage on new insurance written from january 1, 2019 through august 31, 2019. (4) reinsurance coverage on 40% of eligible single premium policies and 20% of all other eligible policies written from september 1, 2019 through december 31, 2020. (5) represents the reduction in essent guaranty, inc.'s minimum required assets based on our interpretation of the pmiers. exhibit i essent group ltd. and subsidiaries supplemental information portfolio geographic data iif by state march 31, 2020 december 31, 2019 march 31, 2019 ca 10.4 % 10.0 % 9.3 % tx 8.9 8.6 7.9 fl 8.0 7.9 7.4 wa 4.2 4.4 4.7 co 3.8 3.7 3.4 il 3.6 3.7 3.8 nj 3.6 3.6 3.7 az 3.3 3.3 3.1 oh 3.3 3.4 3.3 nc 3.2 3.3 3.5 all others 47.7 48.1 49.9 total 100.0 % 100.0 % 100.0 % gross rif by state march 31, 2020 december 31, 2019 march 31, 2019 ca 10.1 % 9.8 % 9.0 % tx 9.2 8.9 8.1 fl 8.2 8.0 7.6 wa 4.2 4.4 4.7 co 3.7 3.6 3.3 nj 3.5 3.6 3.7 il 3.5 3.5 3.7 az 3.3 3.2 3.1 oh 3.3 3.3 3.4 ga 3.2 3.3 3.5 all others 47.8 48.4 49.9 total 100.0 % 100.0 % 100.0 % exhibit j essent group ltd. and subsidiaries supplemental information defaults, reserve for losses and lae, and claims rollforward of insured loans in default three months ended march 31, december 31, march 31, 2020 2019 2019 beginning default inventory 5,947 5,232 4,024 plus: new defaults 3,933 3,826 2,918 less: cures (3,914 ) (3,027 ) (2,749 ) less: claims paid (118 ) (80 ) (88 ) less: rescissions and denials, net (7 ) (4 ) (9 ) ending default inventory 5,841 5,947 4,096 rollforward of reserve for losses and lae three months ended march 31, december 31, march 31, ($ in thousands) 2020 2019 2019 reserve for losses and lae at beginning of period $ 69,362 $ 61,436 $ 49,464 less: reinsurance recoverables 71 — — net reserve for losses and lae at beginning of period 69,291 61,436 49,464 add provision for losses and lae occurring in: current year 15,419 12,658 11,828 prior years (7,356 ) (1,729 ) (4,721 ) incurred losses and lae during the period 8,063 10,929 7,107 deduct payments for losses and lae occurring in: current year 1 631 15 prior years 4,110 2,443 3,072 loss and lae payments during the period 4,111 3,074 3,087 net reserve for losses and lae at end of period 73,243 69,291 53,484 plus: reinsurance recoverables 98 71 — reserve for losses and lae at end of period $ 73,341 $ 69,362 $ 53,484 claims three months ended march 31, december 31, march 31, 2020 2019 2019 number of claims paid 118 80 88 total amount paid for claims (in thousands) $ 4,157 $ 2,922 $ 2,899 average amount paid per claim (in thousands) $ 35 $ 37 $ 33 severity 77 % 76 % 78 % exhibit j, continued essent group ltd. and subsidiaries supplemental information defaults, reserve for losses and lae, and claims u.s. mortgage insurance portfolio march 31, 2020 number of policies in default percentage of policies in default amount of reserves percentage of reserves defaulted rif reserves as a percentage of defaulted rif ($ in thousands) missed payments: three payments or less 3,043 52 % $ 15,128 23 % $ 170,374 9 % four to eleven payments 2,140 37 30,493 45 114,135 27 twelve or more payments 518 9 15,235 23 29,596 51 pending claims 140 2 6,241 9 7,074 88 total case reserves (1) 5,841 100 % 67,097 100 % $ 321,179 21 ibnr 5,032 lae 1,196 total reserves for losses and lae (1) $ 73,325 average reserve per default: case $ 11.5 total $ 12.6 default rate 0.83% (1) the u.s. mortgage insurance portfolio reserves exclude reserves on gse and other risk share at essent re of $16. december 31, 2019 number of policies in default percentage of policies in default amount of reserves percentage of reserves defaulted rif reserves as a percentage of defaulted rif ($ in thousands) missed payments: three payments or less 3,310 56 % $ 15,793 25 % $ 177,238 9 % four to eleven payments 2,035 34 28,006 44 108,743 26 twelve or more payments 473 8 13,549 22 27,152 50 pending claims 129 2 5,832 9 6,777 86 total case reserves (2) 5,947 100 % 63,180 100 % $ 319,910 20 ibnr 4,738 lae 1,265 total reserves for losses and lae (2) $ 69,183 average reserve per default: case $ 10.6 total $ 11.6 default rate 0.85% (2) the u.s. mortgage insurance portfolio reserves exclude reserves on gse and other risk share at essent re of $179. march 31, 2019 number of policies in default percentage of policies in default amount of reserves percentage of reserves defaulted rif reserves as a percentage of defaulted rif ($ in thousands) missed payments: three payments or less 2,172 53 % $ 11,374 23 % $ 117,607 10 % four to eleven payments 1,492 36 23,599 48 80,842 29 twelve or more payments 361 9 11,105 23 20,526 54 pending claims 71 2 3,015 6 3,517 86 total case reserves 4,096 100 % 49,093 100 % $ 222,492 22 ibnr 3,682 lae 709 total reserves for losses and lae $ 53,484 average reserve per default: case $ 12.0 total $ 13.1 default rate 0.65% exhibit k essent group ltd. and subsidiaries supplemental information investments available for sale investments available for sale by asset class asset class march 31, 2020 december 31, 2019 ($ in thousands) fair value percent fair value percent u.s. treasury securities $ 235,565 6.4 % $ 242,206 7.2 % u.s. agency securities 33,892 0.9 33,605 1.0 u.s. agency mortgage-backed securities 876,298 23.7 848,334 25.3 municipal debt securities 419,688 11.3 361,638 10.8 non-u.s. government securities 52,209 1.4 54,995 1.7 corporate debt securities 879,503 23.7 880,301 26.3 residential and commercial mortgage securities 275,532 7.4 288,281 8.6 asset-backed securities 337,675 9.1 326,025 9.7 money market funds 595,165 16.1 315,362 9.4 total investments available for sale $ 3,705,527 100.0 % $ 3,350,747 100.0 % investments available for sale by credit rating rating (1) march 31, 2020 december 31, 2019 ($ in thousands) fair value percent fair value percent aaa $ 2,177,097 58.7 % $ 1,817,905 54.2 % aa1 109,937 3.0 109,122 3.3 aa2 152,322 4.1 145,282 4.3 aa3 200,368 5.4 159,599 4.8 a1 199,762 5.4 206,643 6.2 a2 199,109 5.4 183,780 5.5 a3 188,393 5.1 191,933 5.7 baa1 227,067 6.1 232,490 6.9 baa2 173,772 4.7 179,664 5.4 baa3 43,374 1.2 65,119 1.9 below baa3 34,326 0.9 59,210 1.8 total investments available for sale $ 3,705,527 100.0 % $ 3,350,747 100.0 % (1) based on ratings issued by moody's, if available. s&p or fitch rating utilized if moody's not available. investments available for sale by duration and book yield effective duration march 31, 2020 december 31, 2019 ($ in thousands) fair value percent fair value percent < 1 year $ 1,372,660 37.0 % $ 1,038,782 31.0 % 1 to < 2 years 508,923 13.7 306,148 9.1 2 to < 3 years 402,111 10.9 348,708 10.4 3 to < 4 years 330,719 8.9 361,147 10.8 4 to < 5 years 298,753 8.1 443,382 13.2 5 or more years 792,361 21.4 852,580 25.5 total investments available for sale $ 3,705,527 100.0 % $ 3,350,747 100.0 % pre-tax investment income yield: three months ended march 31, 2020 2.51 % net cash and investments at holding company, essent group ltd.: ($ in thousands) as of march 31, 2020 $ 279,778 as of december 31, 2019 $ 98,376 exhibit l essent group ltd. and subsidiaries supplemental information insurance company capital march 31, 2020 december 31, 2019 ($ in thousands) u.s. mortgage insurance subsidiaries: combined statutory capital (1) $ 2,452,730 $ 2,335,828 combined net risk in force (2) $ 28,729,105 $ 29,460,191 risk-to-capital ratios: (3) essent guaranty, inc. 12.1:1 13.1:1 essent guaranty of pa, inc. 2.7:1 2.9:1 combined (4) 11.7:1 12.6:1 essent reinsurance ltd.: stockholder's equity (gaap basis) $ 1,005,038 $ 939,360 net risk in force (2) $ 10,589,736 $ 10,314,942 (1) 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 and the national association of insurance commissioners accounting practices and procedures manual. (2) 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. (3) the risk-to-capital ratio is calculated as the ratio of net risk in force to statutory capital. (4) 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 m 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 the basis for measures 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 share units outstanding is defined as total common shares outstanding plus all equity instruments (including restricted share units and dividend equivalent 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. the company does not view these unrealized gains and losses to be indicative of our fundamental operating performance. as of march 31, 2020, december 31, 2019 and march 31, 2019, 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 march 31, 2020, december 31, 2019 and march 31, 2019 in accordance with regulation g: (in thousands, except per share amounts) march 31, 2020 december 31, 2019 march 31, 2019 numerator: total stockholders' equity (book value) $ 3,107,074 $ 2,984,845 $ 2,527,803 subtract: accumulated other comprehensive income 46,113 56,187 9,373 adjusted book value $ 3,060,961 $ 2,928,658 $ 2,518,430 denominator: total common shares outstanding 98,602 98,394 98,364 add: restricted share units and dividend equivalent units outstanding 495 356 374 total common shares and share units outstanding 99,097 98,750 98,738 adjusted book value per share $ 30.89 $ 29.66 $ 25.51
