Essent group ltd. reports fourth quarter 2019 results & increases quarterly dividend
Hamilton, bermuda--(business wire)--essent group ltd. (nyse: esnt) today reported net income for the quarter ended december 31, 2019 of $147.0 million or $1.49 per diluted share, compared to $128.5 million or $1.31 per diluted share for the quarter ended december 31, 2018. for the full year 2019, net income was $555.7 million. 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 march 20, 2020, to shareholders of record on march 10, 2020. “we are pleased with our strong financial results for both the fourth quarter and full year 2019 as the operating environment remains favorable and credit continues to perform well,” said mark casale, chairman and chief executive officer. “also, during the quarter we were pleased with moody’s upgrade of our financial strength rating to a3. we believe that this upgrade is a validation of our progress in making essent a stronger and more sustainable franchise through the programmatic use of reinsurance.” financial highlights: insurance in force as of december 31, 2019 was $164.0 billion, compared to $161.0 billion as of september 30, 2019 and $137.7 billion as of december 31, 2018. new insurance written for the fourth quarter was $15.8 billion, compared to $18.7 billion in the third quarter of 2019 and $11.4 billion in the fourth quarter of 2018. net premiums earned for the fourth quarter were $207.7 million, compared to $203.5 million in the third quarter of 2019 and $173.3 million in the fourth quarter of 2018. the expense ratio for the fourth quarter was 19.9%, compared to 20.4% in the third quarter of 2019 and 22.8% in the fourth quarter of 2018. the provision for losses and lae for the fourth quarter was $10.9 million, compared to a provision of $10.0 million in the third quarter of 2019 and a benefit of $1.0 million in the fourth quarter of 2018. the provision in the fourth quarter of 2018 included a $9.9 million release of the $11.1 million reserve associated with loans identified as related to hurricanes harvey and irma that was established in the fourth quarter of 2017. the percentage of loans in default as of december 31, 2019 was 0.85%, compared to 0.75% as of september 30, 2019 and 0.66% as of december 31, 2018. the combined ratio for the fourth quarter was 25.1%, compared to 25.3% in the third quarter of 2019 and 22.2% in the fourth quarter of 2018. other income for the fourth quarter includes a $3.6 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 $0.8 million in the third quarter of 2019. there were no changes in fair value of embedded derivatives in the fourth quarter of 2018. the consolidated balance of cash and investments at december 31, 2019 was $3.5 billion, including cash and investment balances at essent group ltd. of $98.4 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 12.6:1 as of december 31, 2019. on october 17, 2019, moody’s investors service (“moody’s”) upgraded the financial strength rating of essent guaranty, inc. to a3 from baa1. on january 31, 2020, essent announced that its wholly-owned subsidiary, essent guaranty, inc., 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. 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 3788913 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 3788913. 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: 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, 2018 filed with the securities and exchange commission on february 19, 2019. 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 and year ended december 31, 2019 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 december 31, year ended december 31, (in thousands, except per share amounts) 2019 2018 2019 2018 revenues: net premiums written $ 196,493 $ 176,437 $ 760,845 $ 685,287 decrease (increase) in unearned premiums 11,178 (3,136 ) 16,580 (35,795 ) net premiums earned 207,671 173,301 777,425 649,492 net investment income 21,977 18,597 83,542 64,091 realized investment gains, net 833 158 3,229 1,318 other income (loss) (1,719 ) 1,068 3,371 4,452 total revenues 228,762 193,124 867,567 719,353 losses and expenses: provision for losses and lae 10,929 (999 ) 32,986 11,575 other underwriting and operating expenses 41,231 39,449 165,369 150,900 interest expense 2,218 2,611 10,151 10,179 total losses and expenses 54,378 41,061 208,506 172,654 income before income taxes 174,384 152,063 659,061 546,699 income tax expense 27,426 23,535 103,348 79,336 net income $ 146,958 $ 128,528 $ 555,713 $ 467,363 earnings per share: basic $ 1.50 $ 1.32 $ 5.68 $ 4.80 diluted 1.49 1.31 5.66 4.77 weighted average shares outstanding: basic 97,830 97,450 97,762 97,403 diluted 98,376 98,066 98,227 97,974 net income $ 146,958 $ 128,528 $ 555,713 $ 467,363 other comprehensive income (loss): change in unrealized appreciation (depreciation) of investments (6,540 ) 18,456 85,180 (25,741 ) total other comprehensive income (loss) (6,540 ) 18,456 85,180 (25,741 ) comprehensive income $ 140,418 $ 146,984 $ 640,893 $ 441,622 loss ratio 5.3 % (0.6 )% 4.2 % 1.8 % expense ratio 19.9 22.8 21.3 23.2 combined ratio 25.1 % 22.2 % 25.5 % 25.0 % exhibit b essent group ltd. and subsidiaries condensed consolidated balance sheets (unaudited) december 31, december 31, (in thousands, except per share amounts) 2019 2018 assets investments fixed maturities available for sale, at fair value $ 3,035,385 $ 2,605,666 short-term investments available for sale, at fair value 315,362 154,400 total investments available for sale 3,350,747 2,760,066 other invested assets 78,873 30,952 total investments 3,429,620 2,791,018 cash 71,350 64,946 accrued investment income 18,535 17,627 accounts receivable 40,655 36,881 deferred policy acquisition costs 15,705 16,049 property and equipment 17,308 7,629 prepaid federal income tax 261,885 202,385 other assets 18,367 13,436 total assets $ 3,873,425 $ 3,149,971 liabilities and stockholders' equity liabilities reserve for losses and lae $ 69,362 $ 49,464 unearned premium reserve 278,887 295,467 net deferred tax liability 249,620 172,642 credit facility borrowings, net of deferred costs 224,237 223,664 other accrued liabilities 66,474 43,017 total liabilities 888,580 784,254 commitments and contingencies stockholders' equity common shares, $0.015 par value: authorized - 233,333; issued and outstanding - 98,394 shares in 2019 and 98,139 shares in 2018 1,476 1,472 additional paid-in capital 1,118,655 1,110,800 accumulated other comprehensive income (loss) 56,187 (28,993 ) retained earnings 1,808,527 1,282,438 total stockholders' equity 2,984,845 2,365,717 total liabilities and stockholders' equity $ 3,873,425 $ 3,149,971 return on average equity 20.8 % 21.7 % exhibit c essent group ltd. and subsidiaries supplemental information historical quarterly data 2019 2018 selected income statement data december 31 september 30 june 30 march 31 december 31 september 30 june 30 march 31 (in thousands, except per share amounts) revenues: net premiums written $ 196,493 $ 198,304 $ 188,404 $ 177,644 $ 176,437 $ 175,221 $ 168,404 $ 165,225 net premiums earned (1) 207,671 203,473 188,490 177,791 173,301 166,675 156,958 152,558 other revenues (2) 21,091 22,914 23,402 22,735 19,823 18,323 16,810 14,905 total revenues 228,762 226,387 211,892 200,526 193,124 184,998 173,768 167,463 losses and expenses: provision for losses and lae (3) 10,929 9,990 4,960 7,107 (999 ) 5,452 1,813 5,309 other underwriting and operating expenses 41,231 41,588 41,520 41,030 39,449 36,899 36,428 38,124 interest expense 2,218 2,584 2,679 2,670 2,611 2,500 2,618 2,450 total losses and expenses 54,378 54,162 49,159 50,807 41,061 44,851 40,859 45,883 income before income taxes 174,384 172,225 162,733 149,719 152,063 140,147 132,909 121,580 income tax expense (4) 27,426 27,595 26,328 21,999 23,535 24,136 21,154 10,511 net income $ 146,958 $ 144,630 $ 136,405 $ 127,720 $ 128,528 $ 116,011 $ 111,755 $ 111,069 earnings per share: basic $ 1.50 $ 1.48 $ 1.39 $ 1.31 $ 1.32 $ 1.19 $ 1.15 $ 1.14 diluted 1.49 1.47 1.39 1.30 1.31 1.18 1.14 1.13 weighted average shares outstanding: basic 97,830 97,822 97,798 97,595 97,450 97,438 97,426 97,298 diluted 98,376 98,257 98,170 98,104 98,066 98,013 97,866 97,951 other data: loss ratio (5) 5.3 % 4.9 % 2.6 % 4.0 % (0.6 )% 3.3 % 1.2 % 3.5 % expense ratio (6) 19.9 20.4 22.0 23.1 22.8 22.1 23.2 25.0 combined ratio 25.1 % 25.3 % 24.7 % 27.1 % 22.2 % 25.4 % 24.4 % 28.5 % return on average equity (annualized) 20.1 % 20.8 % 20.9 % 20.9 % 22.4 % 21.5 % 21.8 % 22.6 % (1) net premiums earned also includes premiums earned on gse and other risk share. see exhibit f. (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 december 31, 2019, september 30, 2019, june 30, 2019 and march 31, 2019 include unfavorable decreases of $3,585 and $760 and favorable increases of $1,160 and $1,424, respectively, in the fair value of these embedded derivatives. (3) provision for losses and lae for the three months ended december 31, 2018 includes a $9,941 reduction associated with previously identified hurricane-related defaults based on the performance to date and our expectations of the amount of ultimate losses on the remaining delinquencies. (4) income tax expense for the three months ended march 31, 2019 and 2018 was reduced by $1,956 and $9,549, respectively, of excess tax benefits associated with the vesting of common shares and common share units during each period. income tax expense for the three months ended september 30, 2018 includes $1,450 of expense associated with accrual to return adjustments associated with the completion of the 2017 u.s. federal income tax return. (5) loss ratio is calculated by dividing the provision for losses and lae by net premiums earned. (6) expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned. exhibit c, continued essent group ltd. and subsidiaries supplemental information historical quarterly data 2019 2018 other data, continued: december 31 september 30 june 30 march 31 december 31 september 30 june 30 march 31 ($ in thousands) u.s. mortgage insurance portfolio flow: new insurance written $ 15,839,836 $ 18,719,876 $ 17,973,505 $ 10,945,307 $ 11,408,542 $ 13,913,191 $ 12,850,642 $ 9,336,150 new risk written 3,966,363 4,695,611 4,485,217 2,713,389 2,838,530 3,430,942 3,201,610 2,295,314 bulk: new insurance written $ — $ 6,133 $ 29,524 $ 55,002 $ — $ — $ — $ — new risk written — 842 2,129 6,542 — — — — total: average gross premium rate (7) 0.51 % 0.52 % 0.51 % 0.50 % 0.50 % 0.51 % 0.52 % 0.52 % average net premium rate (8) 0.49 % 0.49 % 0.49 % 0.48 % 0.49 % 0.50 % 0.51 % 0.52 % new insurance written $ 15,839,836 $ 18,726,009 $ 18,003,029 $ 11,000,309 $ 11,408,542 $ 13,913,191 $ 12,850,642 $ 9,336,150 new risk written $ 3,966,363 $ 4,696,453 $ 4,487,346 $ 2,719,931 $ 2,838,530 $ 3,430,942 $ 3,201,610 $ 2,295,314 insurance in force (end of period) $ 164,005,853 $ 160,962,192 $ 153,317,157 $ 143,181,641 $ 137,720,786 $ 131,249,957 $ 122,501,246 $ 115,250,949 gross risk in force (end of period) (9) $ 41,402,950 $ 40,540,289 $ 38,531,090 $ 35,925,830 $ 34,482,448 $ 32,786,194 $ 30,579,106 $ 28,691,561 risk in force (end of period) $ 38,947,857 $ 38,784,584 $ 37,034,687 $ 34,744,417 $ 33,892,869 $ 32,361,782 $ 30,154,694 $ 28,267,149 policies in force 702,925 693,085 666,705 629,808 608,135 581,570 546,576 517,215 weighted average coverage (10) 25.2 % 25.2 % 25.1 % 25.1 % 25.0 % 25.0 % 25.0 % 24.9 % annual persistency 77.5 % 82.1 % 84.8 % 85.1 % 84.9 % 84.0 % 83.0 % 83.5 % loans in default (count) 5,947 5,232 4,405 4,096 4,024 3,538 3,519 4,442 percentage of loans in default 0.85 % 0.75 % 0.66 % 0.65 % 0.66 % 0.61 % 0.64 % 0.86 % other risk in force gse and other risk share (11) $ 895,374 $ 849,184 $ 802,530 $ 771,175 $ 655,384 $ 612,750 $ 592,493 $ 557,692 credit facility borrowings outstanding $ 225,000 $ 225,000 $ 225,000 $ 225,000 $ 225,000 $ 225,000 $ 225,000 $ 265,000 undrawn committed capacity $ 275,000 $ 275,000 $ 275,000 $ 275,000 $ 275,000 $ 275,000 $ 275,000 $ 110,000 weighted average interest rate (end of period) 3.51 % (7) 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. (8) 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. (9) gross risk in force includes risk ceded under third-party reinsurance. (10) weighted average coverage is calculated by dividing end of period gross risk in force by end of period insurance in force. (11) 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 year ended december 31, 2019 december 31, 2018 december 31, 2019 december 31, 2018 ($ in thousands) >=760 $ 6,486,486 40.9 % $ 4,737,774 41.5 % $ 25,738,423 40.5 % $ 19,903,369 41.9 % 740-759 2,880,429 18.2 1,959,523 17.2 11,152,853 17.6 8,076,182 17.0 720-739 2,401,806 15.2 1,665,931 14.6 9,340,180 14.7 6,875,823 14.5 700-719 1,860,120 11.7 1,349,689 11.8 7,555,687 11.9 5,715,076 12.0 680-699 1,235,223 7.8 875,125 7.7 5,248,330 8.3 3,722,490 7.8 =760 $ 68,123,523 41.5 % $ 67,408,766 41.9 % $ 59,249,659 43.0 % 740-759 27,886,603 17.0 27,178,330 16.9 22,843,145 16.6 720-739 24,069,139 14.7 23,459,055 14.6 19,898,885 14.5 700-719 19,183,219 11.7 18,728,884 11.6 15,714,206 11.4 680-699 13,713,164 8.4 13,418,919 8.3 11,299,829 8.2 =760 $ 17,082,683 41.3 % $ 16,877,750 41.6 % $ 14,789,783 42.9 % 740-759 7,056,654 17.0 6,857,369 16.9 5,736,432 16.6 720-739 6,150,334 14.9 5,980,949 14.8 5,036,063 14.6 700-719 4,873,597 11.8 4,743,360 11.7 3,943,925 11.4 680-699 3,491,755 8.4 3,406,811 8.4 2,846,297 8.3 90% ltv >95% ltv fico = 760 % frm incurred lossratio (inception to date) (1) number of loans in default 2010 $ 245,898 $ 3,354 1.4 % 25 55.5 % 43.8 % 0.0 % 2.6 % 55.8 % 100.0 % 2.6 % 1 2011 3,229,720 154,793 4.8 902 68.8 58.1 0.4 6.3 52.7 97.9 3.7 18 2012 11,241,161 1,144,794 10.2 6,165 72.2 70.8 0.8 4.9 57.3 99.2 2.1 84 2013 21,152,638 3,411,648 16.1 18,397 78.9 67.4 2.4 7.7 51.2 98.8 2.3 250 2014 24,799,434 5,972,714 24.1 33,081 89.5 67.7 4.9 16.0 41.0 97.4 3.0 535 2015 26,193,656 9,896,050 37.8 48,804 85.1 60.4 2.8 14.7 43.8 98.3 2.7 669 2016 34,949,319 19,022,616 54.4 86,915 84.1 59.0 7.1 13.5 45.7 98.7 2.9 948 2017 43,858,322 29,606,165 67.5 135,204 87.8 60.6 14.6 15.8 41.9 97.3 4.2 1,623 2018 47,508,525 35,318,382 74.3 152,372 92.3 62.4 18.7 15.6 39.9 97.9 6.0 1,398 2019 63,569,183 59,475,337 93.6 221,060 80.4 60.0 17.8 15.6 39.7 98.7 4.2 421 total $ 276,747,856 $ 164,005,853 59.3 702,925 85.2 61.0 14.3 15.1 41.5 98.2 3.3 5,947 (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 december 31, 2019 ($ in thousands) excess of loss reinsurance original reinsurance in force remaining reinsurance in force earned premiums ceded year remaining insurance in force remaining risk in force iln other reinsurance total iln other reinsurance total losses ceded to date original first layer retention remaining first layer retention quarter-to-date year-to-date reduction in pmiers minimum required assets (8) 2015 & 2016 $ 26,837,265 $ 7,251,785 $ 333,844 (1) $ — $ 333,844 $ 273,773 $ — $ 273,773 $ — $ 208,111 $ 208,111 $ 1,689 $ 4,242 $ 221,215 2017 28,700,242 7,249,243 424,412 (2) 165,167 (3) 589,579 319,696 165,167 484,863 — 224,689 222,647 3,149 14,147 283,382 2018 34,615,998 8,719,128 473,184 (4) 118,650 (5) 591,834 426,677 103,147 529,824 — 253,643 253,415 4,660 15,718 428,514 total $ 90,153,505 $ 23,220,156 $ 1,231,440 $ 283,817 $ 1,515,257 $ 1,020,146 $ 268,314 $ 1,288,460 $ — $ 686,443 $ 684,173 $ 9,498 $ 34,107 $ 933,111 quota share reinsurance ceding commission earned premiums ceded year remaining insurance in force remaining risk in force remaining ceded insurance in force remaining ceded risk in force losses ceded to date quarter-to- date (6) year-to- date (6) quarter-to- date (7) year-to- date (7) reduction in pmiers minimum required assets (8) 2019 $ 21,289,799 $ 5,349,686 $ 4,698,154 $ 1,166,633 $ 71 $ 600 $ 650 $ 1,272 $ 1,392 $ 79,554 (1) reinsurance provided by radnor re 2019-2 ltd., through its issuance of mortgage insurance-linked notes ("ilns"), effective june 2019. (2) reinsurance provided by radnor re 2018-1 ltd., through its issuance of ilns, effective march 2018. (3) reinsurance provided by a panel of reinsurers effective november 2018. coverage provided immediately above the coverage provided by radnor re 2018-1 ltd. (4) reinsurance provided by radnor re 2019-1 ltd., through its issuance of ilns, effective february 2019. (5) reinsurance provided by a panel of reinsurers effective february 2019. coverage provided pari-passu to the coverage provided by radnor re 2019-1 ltd. (6) ceding commission is recorded as a reduction of other underwriting and operating expenses in the condensed consolidated statements of comprehensive income. (7) premiums ceded are net of profit commission. (8) 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 december 31, 2019 september 30, 2019 december 31, 2018 ca 10.0 % 9.8 % 9.1 % tx 8.6 8.3 7.9 fl 7.9 7.7 7.4 wa 4.4 4.5 4.7 co 3.7 3.6 3.4 il 3.7 3.7 3.8 nj 3.6 3.6 3.8 oh 3.4 3.4 3.3 nc 3.3 3.3 3.5 az 3.3 3.2 3.1 all others 48.1 48.9 50.0 total 100.0 % 100.0 % 100.0 % gross rif by state december 31, 2019 september 30, 2019 december 31, 2018 ca 9.8 % 9.6 % 8.9 % tx 8.9 8.6 8.1 fl 8.0 7.9 7.5 wa 4.4 4.5 4.7 co 3.6 3.5 3.3 nj 3.6 3.6 3.7 il 3.5 3.6 3.8 oh 3.3 3.4 3.3 nc 3.3 3.3 3.5 ga 3.3 3.3 3.5 all others 48.3 48.7 49.7 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 year ended december 31, december 31, december 31, december 31, 2019 2018 2019 2018 beginning default inventory 5,232 3,538 4,024 4,783 plus: new defaults 3,826 2,747 13,304 8,727 less: cures (3,027 ) (2,183 ) (10,985 ) (9,226 ) less: claims paid (80 ) (75 ) (377 ) (254 ) less: rescissions and denials, net (4 ) (3 ) (19 ) (6 ) ending default inventory 5,947 4,024 5,947 4,024 rollforward of reserve for losses and lae three months ended year ended december 31, december 31, december 31, december 31, ($ in thousands) 2019 2018 2019 2018 reserve for losses and lae at beginning of period $ 61,436 $ 53,355 $ 49,464 $ 46,850 less: reinsurance recoverables — — — — net reserve for losses and lae at beginning of period 61,436 53,355 49,464 46,850 add provision for losses and lae occurring in: current year 12,658 11,239 50,562 36,438 prior years (1,729 ) (12,238 ) (17,576 ) (24,863 ) incurred losses and lae during the period 10,929 (999 ) 32,986 11,575 deduct payments for losses and lae occurring in: current year 631 690 1,288 1,310 prior years 2,443 2,202 11,871 7,651 loss and lae payments during the period 3,074 2,892 13,159 8,961 net reserve for losses and lae at end of period 69,291 49,464 69,291 49,464 plus: reinsurance recoverables 71 — 71 — reserve for losses and lae at end of period $ 69,362 $ 49,464 $ 69,362 $ 49,464 claims three months ended year ended december 31, december 31, december 31, december 31, 2019 2018 2019 2018 number of claims paid 80 75 377 254 total amount paid for claims (in thousands) $ 2,922 $ 2,711 $ 12,613 $ 8,559 average amount paid per claim (in thousands) $ 37 $ 36 $ 33 $ 34 severity 76 % 82 % 74 % 73 % exhibit j, continued essent group ltd. and subsidiaries supplemental information defaults, reserve for losses and lae, and claims u.s. mortgage insurance portfolio 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 (1) 5,947 100 % 63,180 100 % $ 319,910 20 ibnr 4,738 lae 1,265 total reserves for losses and lae (1) $ 69,183 average reserve per default: case $ 10.6 total $ 11.6 default rate 0.85% (1) the u.s. mortgage insurance portfolio reserves exclude reserves on gse and other risk share at essent re of $179. december 31, 2018 number of policies in default percentage of policies in default amount of reserves percentage of reserves defaulted rif reserves as a percentage of defaulted rif ($ in thousands) missed payments: three payments or less 2,254 56 % $ 12,005 27 % $ 119,666 10 % four to eleven payments 1,350 33 20,031 44 72,222 28 twelve or more payments 357 9 10,523 23 20,419 52 pending claims 63 2 2,749 6 3,182 86 total case reserves 4,024 100 % 45,308 100 % $ 215,489 21 ibnr 3,398 lae 758 total reserves for losses and lae $ 49,464 average reserve per default: case $ 11.3 total $ 12.3 default rate 0.66% exhibit k essent group ltd. and subsidiaries supplemental information investments available for sale investments available for sale by asset class asset class december 31, 2019 december 31, 2018 ($ in thousands) fair value percent fair value percent u.s. treasury securities $ 242,206 7.2 % $ 289,892 10.5 % u.s. agency securities 33,605 1.0 32,997 1.2 u.s. agency mortgage-backed securities 848,334 25.3 637,178 23.1 municipal debt securities 361,638 10.8 483,879 17.5 non-u.s. government securities 54,995 1.7 45,001 1.6 corporate debt securities 880,301 26.3 725,201 26.3 residential and commercial mortgage securities 288,281 8.6 121,838 4.4 asset-backed securities 326,025 9.7 284,997 10.3 money market funds 315,362 9.4 139,083 5.1 total investments available for sale $ 3,350,747 100.0 % $ 2,760,066 100.0 % investments available for sale by credit rating rating (1) december 31, 2019 december 31, 2018 ($ in thousands) fair value percent fair value percent aaa $ 1,817,905 54.2 % $ 1,362,781 49.4 % aa1 109,122 3.3 124,435 4.5 aa2 145,282 4.3 196,218 7.1 aa3 159,599 4.8 143,315 5.2 a1 206,643 6.2 222,073 8.0 a2 183,780 5.5 199,238 7.2 a3 191,933 5.7 146,300 5.3 baa1 232,490 6.9 162,695 5.9 baa2 179,664 5.4 140,168 5.1 baa3 65,119 1.9 26,805 1.0 below baa3 59,210 1.8 36,038 1.3 total investments available for sale $ 3,350,747 100.0 % $ 2,760,066 100.0 % (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 december 31, 2019 december 31, 2018 ($ in thousands) fair value percent fair value percent < 1 year $ 1,038,782 31.0 % $ 529,545 19.2 % 1 to < 2 years 306,148 9.1 285,060 10.3 2 to < 3 years 348,708 10.4 251,763 9.1 3 to < 4 years 361,147 10.8 278,804 10.1 4 to < 5 years 443,382 13.2 429,005 15.6 5 or more years 852,580 25.5 985,889 35.7 total investments available for sale $ 3,350,747 100.0 % $ 2,760,066 100.0 % pre-tax investment income yield: three months ended december 31, 2019 2.79 % year ended december 31, 2019 2.82 % net cash and investments at holding company, essent group ltd.: ($ in thousands) as of december 31, 2019 $ 98,376 as of december 31, 2018 $ 78,405 exhibit l essent group ltd. and subsidiaries supplemental information insurance company capital december 31, 2019 december 31, 2018 ($ in thousands) u.s. mortgage insurance subsidiaries: combined statutory capital (1) $ 2,335,828 $ 1,886,929 combined net risk in force (2) $ 29,460,191 $ 26,233,783 risk-to-capital ratios: (3) essent guaranty, inc. 13.1:1 14.4:1 essent guaranty of pa, inc. 2.9:1 4.2:1 combined (4) 12.6:1 13.9:1 essent reinsurance ltd.: stockholder's equity (gaap basis) $ 939,360 $ 798,612 net risk in force (2) $ 10,314,942 $ 8,265,763 (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 december 31, 2019 and december 31, 2018, 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 december 31, 2019 and december 31, 2018 in accordance with regulation g: (in thousands, except per share amounts) december 31, 2019 december 31, 2018 numerator: total stockholders' equity (book value) $ 2,984,845 $ 2,365,717 subtract: accumulated other comprehensive income (loss) 56,187 (28,993 ) adjusted book value $ 2,928,658 $ 2,394,710 denominator: total common shares outstanding 98,394 98,139 add: restricted share units and dividend equivalent units outstanding 356 449 total common shares and share units outstanding 98,750 98,588 adjusted book value per share $ 29.66 $ 24.29
