Essent group ltd. reports third quarter 2019 results & declares quarterly dividend
Hamilton, bermuda--(business wire)--essent group ltd. (nyse: esnt) today reported net income for the quarter ended september 30, 2019 of $144.6 million or $1.47 per diluted share, compared to $116.0 million or $1.18 per diluted share for the quarter ended september 30, 2018. essent also announced today that its board of directors has declared a quarterly cash dividend of $0.15 per common share. the dividend is payable on december 16, 2019, to shareholders of record on december 4, 2019. “we are pleased with our strong financial results for the third quarter and our continued progress in transitioning our franchise to a buy, manage and distribute model through the utilization of essentedge and reinsurance,” said mark casale, chairman and chief executive officer. “additionally, our recent financial strength rating upgrade by moody’s to a3 was a significant achievement for essent. we believe that this upgrade is further validation of the strength and sustainability that our buy, manage and distribute model provides our franchise.” financial highlights: insurance in force as of september 30, 2019 was $161.0 billion, compared to $153.3 billion as of june 30, 2019 and $131.2 billion as of september 30, 2018. new insurance written for the third quarter was $18.7 billion, compared to $18.0 billion in the second quarter of 2019 and $13.9 billion in the third quarter of 2018. net premiums earned for the third quarter were $203.5 million, compared to $188.5 million in the second quarter of 2019 and $166.7 million in the third quarter of 2018. the expense ratio for the third quarter was 20.4%, compared to 22.0% in the second quarter of 2019 and 22.1% in the third quarter of 2018. the provision for losses and lae for the third quarter was $10.0 million, compared to a provision of $5.0 million in the second quarter of 2019 and a provision of $5.5 million in the third quarter of 2018. the percentage of loans in default as of september 30, 2019 was 0.75%, compared to 0.66% as of june 30, 2019 and 0.61% as of september 30, 2018. the combined ratio for the third quarter was 25.3%, compared to 24.7% in the second quarter of 2019 and 25.4% in the third quarter of 2018. the consolidated balance of cash and investments at september 30, 2019 was $3.4 billion, including cash and investment balances at essent group ltd. of $98.2 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 13.4:1 as of september 30, 2019. during the quarter, we entered into our first quota share reinsurance transaction with a panel of third-party reinsurers. with an effective policy date of september 1, 2019 through december 31, 2020, the quota share agreement covers 20% of monthly niw policies and 40% of single niw policies written by essent guaranty, inc. the transaction includes a 20% ceding commission and a profit commission of up to 60%. on october 17, 2019, moody’s investors service (“moody’s”) upgraded the financial strength rating of essent guaranty, inc. to a3 from baa1. 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 3197255 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 3197255. 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. 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 september 30, 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 a essent group ltd. and subsidiaries condensed consolidated statements of comprehensive income (unaudited) three months ended september 30, nine months ended september 30, (in thousands, except per share amounts) 2019 2018 2019 2018 revenues: net premiums written $ 198,304 $ 175,221 $ 564,352 $ 508,850 decrease (increase) in unearned premiums 5,169 (8,546 ) 5,402 (32,659 ) net premiums earned 203,473 166,675 569,754 476,191 net investment income 21,104 16,646 61,565 45,494 realized investment gains, net 1,153 524 2,396 1,160 other income 657 1,153 5,090 3,384 total revenues 226,387 184,998 638,805 526,229 losses and expenses: provision for losses and lae 9,990 5,452 22,057 12,574 other underwriting and operating expenses 41,588 36,899 124,138 111,451 interest expense 2,584 2,500 7,933 7,568 total losses and expenses 54,162 44,851 154,128 131,593 income before income taxes 172,225 140,147 484,677 394,636 income tax expense 27,595 24,136 75,922 55,801 net income $ 144,630 $ 116,011 $ 408,755 $ 338,835 earnings per share: basic $ 1.48 $ 1.19 $ 4.18 $ 3.48 diluted 1.47 1.18 4.16 3.46 weighted average shares outstanding: basic 97,822 97,438 97,739 97,388 diluted 98,257 98,013 98,178 97,944 net income $ 144,630 $ 116,011 $ 408,755 $ 338,835 other comprehensive income (loss): change in unrealized appreciation (depreciation) of investments 17,367 (8,201 ) 91,720 (44,197 ) total other comprehensive income (loss) 17,367 (8,201 ) 91,720 (44,197 ) comprehensive income $ 161,997 $ 107,810 $ 500,475 $ 294,638 loss ratio 4.9 % 3.3 % 3.9 % 2.6 % expense ratio 20.4 22.1 21.8 23.4 combined ratio 25.3 % 25.4 % 25.7 % 26.0 % exhibit b essent group ltd. and subsidiaries condensed consolidated balance sheets (unaudited) september 30, december 31, ($ in thousands) 2019 2018 assets investments fixed maturities available for sale, at fair value $ 2,982,009 $ 2,605,666 short-term investments available for sale, at fair value 252,604 154,400 total investments available for sale 3,234,613 2,760,066 other invested assets 75,273 30,952 total investments 3,309,886 2,791,018 cash 49,582 64,946 accrued investment income 18,527 17,627 accounts receivable 40,221 36,881 deferred policy acquisition costs 16,003 16,049 property and equipment 16,792 7,629 prepaid federal income tax 246,885 202,385 other assets 24,158 13,436 total assets $ 3,722,054 $ 3,149,971 liabilities and stockholders' equity liabilities reserve for losses and lae $ 61,436 $ 49,464 unearned premium reserve 290,065 295,467 net deferred tax liability 236,644 172,642 credit facility borrowings, net of deferred costs 224,094 223,664 other accrued liabilities 54,645 43,017 total liabilities 866,884 784,254 commitments and contingencies stockholders' equity common shares 1,476 1,472 additional paid-in capital 1,114,586 1,110,800 accumulated other comprehensive income (loss) 62,727 (28,993 ) retained earnings 1,676,381 1,282,438 total stockholders' equity 2,855,170 2,365,717 total liabilities and stockholders' equity $ 3,722,054 $ 3,149,971 return on average equity (1) 20.9 % 21.7 % (1) the 2019 return on average equity is calculated by dividing annualized year-to-date 2019 net income by average equity. the 2018 return on average equity is calculated by dividing full year 2018 net income by average equity. exhibit c essent group ltd. and subsidiaries supplemental information historical quarterly data 2019 2018 selected income statement data september 30 june 30 march 31 december 31 september 30 june 30 march 31 (in thousands, except per share amounts) revenues: net premiums written $ 198,304 $ 188,404 $ 177,644 $ 176,437 $ 175,221 $ 168,404 $ 165,225 net premiums earned (1) 203,473 188,490 177,791 173,301 166,675 156,958 152,558 other revenues (2) 22,914 23,402 22,735 19,823 18,323 16,810 14,905 total revenues 226,387 211,892 200,526 193,124 184,998 173,768 167,463 losses and expenses: provision for losses and lae (3) 9,990 4,960 7,107 (999 ) 5,452 1,813 5,309 other underwriting and operating expenses 41,588 41,520 41,030 39,449 36,899 36,428 38,124 interest expense 2,584 2,679 2,670 2,611 2,500 2,618 2,450 total losses and expenses 54,162 49,159 50,807 41,061 44,851 40,859 45,883 income before income taxes 172,225 162,733 149,719 152,063 140,147 132,909 121,580 income tax expense (4) 27,595 26,328 21,999 23,535 24,136 21,154 10,511 net income $ 144,630 $ 136,405 $ 127,720 $ 128,528 $ 116,011 $ 111,755 $ 111,069 earnings per share: basic $ 1.48 $ 1.39 $ 1.31 $ 1.32 $ 1.19 $ 1.15 $ 1.14 diluted 1.47 1.39 1.30 1.31 1.18 1.14 1.13 weighted average shares outstanding: basic 97,822 97,798 97,595 97,450 97,438 97,426 97,298 diluted 98,257 98,170 98,104 98,066 98,013 97,866 97,951 other data: loss ratio (5) 4.9 % 2.6 % 4.0 % (0.6 )% 3.3 % 1.2 % 3.5 % expense ratio (6) 20.4 22.0 23.1 22.8 22.1 23.2 25.0 combined ratio 25.3 % 24.7 % 27.1 % 22.2 % 25.4 % 24.4 % 28.5 % return on average equity (annualized) 20.8 % 20.9 % 20.9 % 22.4 % 21.5 % 21.8 % 22.6 % (1) net premiums earned are net of premiums ceded to third-party reinsurers. premiums ceded totaled $10,263, $8,428, $6,038, $3,731, $3,158, $3,585 and $294 in the three months ended september 30, 2019, june 30, 2019, march 31, 2019, december 31, 2018, september 30, 2018, june 30, 2018 and march 31, 2018, respectively. (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 september 30, 2019, june 30, 2019 and march 31, 2019 include an unfavorable decrease of $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 $1,450 of expense associated with accrual to return adjustments associated with the completion of the 2017 u.s. federal income tax return. (5) loss ratio is calculated by dividing the provision for losses and lae by net premiums earned. (6) expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned. exhibit c, continued essent group ltd. and subsidiaries supplemental information historical quarterly data 2019 2018 other data, continued: september 30 june 30 march 31 december 31 september 30 june 30 march 31 ($ in thousands) u.s. mortgage insurance portfolio flow: new insurance written $ 18,719,876 $ 17,973,505 $ 10,945,307 $ 11,408,542 $ 13,913,191 $ 12,850,642 $ 9,336,150 new risk written 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) 0.52 % 0.51 % 0.50 % 0.50 % 0.51 % 0.52 % 0.52 % average net premium rate (8) 0.49 % 0.49 % 0.48 % 0.49 % 0.50 % 0.51 % 0.52 % new insurance written $ 18,726,009 $ 18,003,029 $ 11,000,309 $ 11,408,542 $ 13,913,191 $ 12,850,642 $ 9,336,150 new risk written $ 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) $ 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) $ 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) $ 38,784,584 $ 37,034,687 $ 34,744,417 $ 33,892,869 $ 32,361,782 $ 30,154,694 $ 28,267,149 policies in force 693,085 666,705 629,808 608,135 581,570 546,576 517,215 weighted average coverage (10) 25.2 % 25.1 % 25.1 % 25.0 % 25.0 % 25.0 % 24.9 % annual persistency 82.1 % 84.8 % 85.1 % 84.9 % 84.0 % 83.0 % 83.5 % loans in default (count) 5,232 4,405 4,096 4,024 3,538 3,519 4,442 percentage of loans in default 0.75 % 0.66 % 0.65 % 0.66 % 0.61 % 0.64 % 0.86 % other risk in force gse and other risk share (11) $ 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 $ 265,000 undrawn committed capacity $ 275,000 $ 275,000 $ 275,000 $ 275,000 $ 275,000 $ 275,000 $ 110,000 weighted average interest rate (end of period) 4.05 % (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 nine months ended september 30, 2019 september 30, 2018 september 30, 2019 september 30, 2018 ($ in thousands) >=760 $ 7,467,620 39.9 % $ 5,873,337 42.2 % $ 19,251,937 40.4 % $ 15,165,595 42.0 % 740-759 3,286,476 17.5 2,349,227 16.9 8,272,424 17.4 6,116,659 17.0 720-739 2,800,181 15.0 1,989,413 14.3 6,938,374 14.6 5,209,892 14.4 700-719 2,202,659 11.8 1,676,184 12.0 5,695,567 11.9 4,365,387 12.1 680-699 1,570,179 8.4 1,097,160 7.9 4,013,107 8.4 2,847,365 7.9 =760 $ 67,408,766 41.9 % $ 64,977,185 42.4 % $ 56,686,270 43.2 % 740-759 27,178,330 16.9 25,747,495 16.8 21,661,445 16.5 720-739 23,459,055 14.6 22,203,764 14.5 18,909,281 14.4 700-719 18,728,884 11.6 17,723,067 11.5 14,928,024 11.4 680-699 13,418,919 8.3 12,697,092 8.3 10,828,068 8.2 =760 $ 16,877,750 41.6 % $ 16,258,608 42.2 % $ 14,119,178 43.1 % 740-759 6,857,369 16.9 6,478,145 16.8 5,434,079 16.6 720-739 5,980,949 14.8 5,643,012 14.6 4,773,174 14.5 700-719 4,743,360 11.7 4,473,871 11.6 3,735,034 11.4 680-699 3,406,811 8.4 3,217,062 8.4 2,718,524 8.3 90% ltv >95% ltv fico = 760 % frm incurred loss ratio (inception to date) (1) number of loans in default 2010 $ 245,898 $ 4,333 1.8 % 33 62.6 % 47.5 % 0.0 % 2.1 % 65.5 % 100.0 % 2.6 % 1 2011 3,229,720 171,131 5.3 995 70.0 60.5 0.3 6.2 52.7 97.9 3.7 22 2012 11,241,161 1,263,110 11.2 6,766 72.7 71.3 0.8 4.9 57.1 99.1 2.2 77 2013 21,152,638 3,816,366 18.0 20,424 79.5 65.7 2.3 7.8 51.3 98.8 2.3 234 2014 24,799,434 6,568,565 26.5 35,884 89.5 67.0 4.8 15.8 41.1 97.1 3.1 547 2015 26,193,656 10,836,143 41.4 52,727 84.8 59.7 2.7 14.7 43.8 98.1 2.8 659 2016 34,949,319 20,690,611 59.2 93,378 83.5 58.5 7.0 13.5 45.5 98.6 3.1 937 2017 43,858,322 32,393,422 73.9 145,745 87.4 60.0 14.3 15.7 41.9 97.2 4.1 1,500 2018 47,508,525 39,296,715 82.7 165,805 92.1 61.7 18.2 15.2 40.5 97.9 5.5 1,090 2019 (through september 30) 47,729,347 45,921,796 96.2 171,328 83.2 60.7 18.6 15.9 39.8 98.6 2.8 165 total $ 260,908,020 $ 160,962,192 61.7 693,085 86.4 60.9 14.0 15.0 41.9 98.1 3.2 5,232 (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 (1) september 30, 2019 ($ in thousands) original reinsurance in force remaining reinsurance in force 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 premiums ceded year-to date premiums ceded 2015 & 2016 $ 28,837,920 $ 7,792,455 $ 333,844 (2) $ — $ 333,844 $ 310,282 $ — $ 310,282 $ — $ 208,111 $ 208,111 $ 2,213 $ 2,553 2017 31,405,043 7,900,590 424,412 (3) 165,167 (4) 589,579 368,705 165,167 533,872 — 224,689 223,323 3,576 10,999 2018 38,517,421 9,680,628 473,184 (5) 118,650 (6) 591,834 473,184 118,650 591,834 — 253,643 253,521 4,354 11,057 total $ 98,760,384 $ 25,373,673 $ 1,231,440 $ 283,817 $ 1,515,257 $ 1,152,171 $ 283,817 $ 1,435,988 $ — $ 686,443 $ 684,955 $ 10,143 $ 24,609 (1) excludes quota share reinsurance provided by a panel of reinsurers effective september 1, 2019 (the "qsr agreement"). rif ceded under the qsr agreement was $320 million as of september 30, 2019. (2) reinsurance provided by radnor re 2019-2 ltd., through its issuance of mortgage insurance-linked notes ("ilns"), effective june 2019. (3) reinsurance provided by radnor re 2018-1 ltd., through its issuance of ilns, effective march 2018. (4) reinsurance provided by a panel of reinsurers effective november 2018. coverage provided immediately above the coverage provided by radnor re 2018-1 ltd. (5) reinsurance provided by radnor re 2019-1 ltd., through its issuance of ilns, effective february 2019. (6) reinsurance provided by a panel of reinsurers effective february 2019. coverage provided pari-passu to the coverage provided by radnor re 2019-1 ltd. exhibit i essent group ltd. and subsidiaries supplemental information portfolio geographic data iif by state september 30, 2019 june 30, 2019 september 30, 2018 ca 9.8 % 9.6 % 9.1 % tx 8.3 8.0 7.9 fl 7.7 7.5 7.3 wa 4.5 4.6 4.8 il 3.7 3.8 3.9 co 3.6 3.6 3.3 nj 3.6 3.7 3.8 oh 3.4 3.4 3.3 nc 3.3 3.4 3.5 ga 3.3 3.4 3.4 all others 48.8 49.0 49.7 total 100.0 % 100.0 % 100.0 % gross rif by state september 30, 2019 june 30, 2019 september 30, 2018 ca 9.6 % 9.4 % 8.9 % tx 8.6 8.3 8.1 fl 7.9 7.6 7.4 wa 4.5 4.6 4.8 il 3.6 3.7 3.8 nj 3.6 3.6 3.7 co 3.5 3.5 3.3 oh 3.4 3.4 3.3 ga 3.3 3.4 3.5 nc 3.3 3.4 3.5 all others 48.7 49.1 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 nine months ended september 30, september 30, september 30, september 30, 2019 2018 2019 2018 beginning default inventory 4,405 3,519 4,024 4,783 plus: new defaults 3,711 2,285 9,478 5,980 less: cures (2,776 ) (2,201 ) (7,958 ) (7,043 ) less: claims paid (103 ) (64 ) (297 ) (179 ) less: rescissions and denials, net (5 ) (1 ) (15 ) (3 ) ending default inventory 5,232 3,538 5,232 3,538 rollforward of reserve for losses and lae three months ended nine months ended september 30, september 30, september 30, september 30, ($ in thousands) 2019 2018 2019 2018 reserve for losses and lae at beginning of period $ 55,138 $ 50,016 $ 49,464 $ 46,850 add provision for losses and lae occurring in: current year 14,722 8,671 37,904 25,199 prior years (4,732 ) (3,219 ) (15,847 ) (12,625 ) incurred losses and lae during the period 9,990 5,452 22,057 12,574 deduct payments for losses and lae occurring in: current year 412 409 657 620 prior years 3,280 1,704 9,428 5,449 loss and lae payments during the period 3,692 2,113 10,085 6,069 reserve for losses and lae at end of period $ 61,436 $ 53,355 $ 61,436 $ 53,355 claims three months ended nine months ended september 30, september 30, september 30, september 30, 2019 2018 2019 2018 number of claims paid 103 64 297 179 total amount paid for claims (in thousands) $ 3,584 $ 2,029 $ 9,691 $ 5,848 average amount paid per claim (in thousands) $ 35 $ 32 $ 33 $ 33 severity 71 % 69 % 73 % 70 % exhibit j, continued essent group ltd. and subsidiaries supplemental information defaults, reserve for losses and lae, and claims u.s. mortgage insurance portfolio september 30, 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 3,071 59 % $ 15,212 27 % $ 162,459 9 % four to eleven payments 1,665 32 24,588 44 89,965 27 twelve or more payments 416 8 12,600 22 24,503 51 pending claims 80 1 3,723 7 4,227 88 total case reserves (1) 5,232 100 % 56,123 100 % $ 281,154 20 ibnr 4,209 lae 1,014 total reserves for losses and lae (1) $ 61,346 average reserve per default: case $ 10.7 total $ 11.7 default rate 0.75% (1) the u.s. mortgage insurance portfolio reserves exclude reserves on gse and other risk share risk in force at essent re of $90. december 31, 2018 number of policies in default percentage of policies in default amount of reserves percentage of reserves defaulted rif reserves as a percentage of defaulted rif ($ 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% september 30, 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 1,886 53 % $ 10,498 22 % $ 101,755 10 % four to eleven payments 1,252 36 24,531 50 68,670 36 twelve or more payments 351 10 11,795 24 20,160 59 pending claims 49 1 1,941 4 2,212 88 total case reserves 3,538 100 % 48,765 100 % $ 192,797 25 ibnr 3,657 lae 933 total reserves for losses and lae $ 53,355 average reserve per default: case $ 13.8 total $ 15.1 default rate 0.61% exhibit k essent group ltd. and subsidiaries supplemental information investments available for sale investments available for sale by asset class asset class september 30, 2019 december 31, 2018 ($ in thousands) fair value percent fair value percent u.s. treasury securities $ 271,359 8.4 % $ 289,892 10.5 % u.s. agency securities 33,544 1.0 32,997 1.2 u.s. agency mortgage-backed securities 829,748 25.7 637,178 23.1 municipal debt securities 364,140 11.3 483,879 17.5 non-u.s. government securities 49,935 1.5 45,001 1.6 corporate debt securities 824,632 25.5 725,201 26.3 residential and commercial mortgage securities 283,790 8.8 121,838 4.4 asset-backed securities 324,861 10.0 284,997 10.3 money market funds 252,604 7.8 139,083 5.1 total investments available for sale $ 3,234,613 100.0 % $ 2,760,066 100.0 % investments available for sale by credit rating rating (1) september 30, 2019 december 31, 2018 ($ in thousands) fair value percent fair value percent aaa $ 1,749,369 54.1 % $ 1,362,781 49.4 % aa1 105,705 3.3 124,435 4.5 aa2 147,510 4.6 196,218 7.1 aa3 168,089 5.2 143,315 5.2 a1 203,054 6.3 222,073 8.0 a2 192,752 5.9 199,238 7.2 a3 170,128 5.3 146,300 5.3 baa1 195,789 6.0 162,695 5.9 baa2 168,371 5.2 140,168 5.1 baa3 72,529 2.2 26,805 1.0 below baa3 61,317 1.9 36,038 1.3 total investments available for sale $ 3,234,613 100.0 % $ 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 september 30, 2019 december 31, 2018 ($ in thousands) fair value percent fair value percent < 1 year $ 862,760 26.7 % $ 529,545 19.2 % 1 to < 2 years 367,167 11.3 285,060 10.3 2 to < 3 years 276,459 8.5 251,763 9.1 3 to < 4 years 385,312 11.9 278,804 10.1 4 to < 5 years 370,529 11.5 429,005 15.6 5 or more years 972,386 30.1 985,889 35.7 total investments available for sale $ 3,234,613 100.0 % $ 2,760,066 100.0 % pre-tax investment income yield: three months ended september 30, 2019 2.81 % nine months ended september 30, 2019 2.83 % net cash and investments at holding company, essent group ltd.: ($ in thousands) as of september 30, 2019 $ 98,155 as of december 31, 2018 $ 78,405 exhibit l essent group ltd. and subsidiaries supplemental information insurance company capital september 30, 2019 december 31, 2018 ($ in thousands) u.s. mortgage insurance subsidiaries: combined statutory capital (1) $ 2,212,341 $ 1,886,929 combined net risk in force (2) $ 29,622,379 $ 26,233,783 risk-to-capital ratios: (3) essent guaranty, inc. 13.9:1 14.4:1 essent guaranty of pa, inc. 3.3:1 4.2:1 combined (4) 13.4:1 13.9:1 essent reinsurance ltd.: stockholder's equity (gaap basis) $ 908,203 $ 798,612 net risk in force (2) $ 9,950,967 $ 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.
