Essent group ltd. reports second quarter 2019 results & declares inaugural dividend
Hamilton, bermuda--(business wire)--essent group ltd. (nyse: esnt) today reported net income for the quarter ended june 30, 2019 of $136.4 million or $1.39 per diluted share, compared to $111.8 million or $1.14 per diluted share for the quarter ended june 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 september 16, 2019, to shareholders of record on september 4, 2019. “we are pleased with our strong financial results for the second quarter and our continued progress in transitioning our franchise to a buy, manage and distribute model through utilization of essentedge and reinsurance,” said mark casale, chairman and chief executive officer. “our performance, along with the use of reinsurance, continues to generate excess capital. as a result, we are pleased to announce our inaugural dividend and believe that it is a tangible demonstration of the benefits in a buy, manage and distribute operating model.” financial highlights: insurance in force as of june 30, 2019 was $153.3 billion, compared to $143.2 billion as of march 31, 2019 and $122.5 billion as of june 30, 2018. new insurance written for the second quarter was $18.0 billion, compared to $11.0 billion in the first quarter of 2019 and $12.9 billion in the second quarter of 2018. net premiums earned for the second quarter were $188.5 million, compared to $177.8 million in the first quarter of 2019 and $157.0 million in the second quarter of 2018. the expense ratio for the second quarter was 22.0%, compared to 23.1% in the first quarter of 2019 and 23.2% in the second quarter of 2018. the provision for losses and lae for the second quarter was $5.0 million, compared to a provision of $7.1 million in the first quarter of 2019 and a provision of $1.8 million in the second quarter of 2018. the percentage of loans in default as of june 30, 2019 was 0.66%, compared to 0.65% as of march 31, 2019 and 0.64% as of june 30, 2018. the combined ratio for the second quarter was 24.7%, compared to 27.1% in the first quarter of 2019 and 24.4% in the second quarter of 2018. the consolidated balance of cash and investments at june 30, 2019 was $3.2 billion, including cash and investment balances at essent group ltd. of $72.0 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 13.6:1 as of june 30, 2019. in june, essent guaranty, inc. obtained $333.8 million of excess of loss reinsurance coverage on mortgage insurance policies written by essent in 2015 and 2016. the reinsurance is fully collateralized by ten-year mortgage insurance-linked notes (“ilns”) issued by radnor re 2019-2 ltd., an unaffiliated special purpose insurer. 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 7877815 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 7877815. 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. non-gaap financial measures in presenting essent group ltd.’s results, management has included financial measures, including adjusted book value per share, that are not calculated under standards or rules that comprise accounting principles generally accepted in the united states (“gaap”). such measures are referred to as “non-gaap measures.” these non-gaap measures may be defined or calculated differently by other companies. management believes these measures allow for a more complete understanding of the underlying business. these measures are used to monitor our results and should not be viewed as a substitute for those determined in accordance with gaap. reconciliations of such measures to the most comparable gaap figures are included in the attached financial supplement in accordance with regulation g. 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 june 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 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 june 30, six months ended june 30, (in thousands, except per share amounts) 2019 2018 2019 2018 revenues: net premiums written $ 188,404 $ 168,404 $ 366,048 $ 333,629 decrease (increase) in unearned premiums 86 (11,446 ) 233 (24,113 ) net premiums earned 188,490 156,958 366,281 309,516 net investment income 20,581 15,134 40,461 28,848 realized investment gains, net 583 439 1,243 636 other income 2,238 1,237 4,433 2,231 total revenues 211,892 173,768 412,418 341,231 losses and expenses: provision for losses and lae 4,960 1,813 12,067 7,122 other underwriting and operating expenses 41,520 36,428 82,550 74,552 interest expense 2,679 2,618 5,349 5,068 total losses and expenses 49,159 40,859 99,966 86,742 income before income taxes 162,733 132,909 312,452 254,489 income tax expense 26,328 21,154 48,327 31,665 net income $ 136,405 $ 111,755 $ 264,125 $ 222,824 earnings per share: basic $ 1.39 $ 1.15 $ 2.70 $ 2.29 diluted 1.39 1.14 2.69 2.28 weighted average shares outstanding: basic 97,798 97,426 97,697 97,362 diluted 98,170 97,866 98,137 97,908 net income $ 136,405 $ 111,755 $ 264,125 $ 222,824 other comprehensive income (loss): change in unrealized appreciation (depreciation) of investments 35,987 (7,246 ) 74,353 (35,996 ) total other comprehensive income (loss) 35,987 (7,246 ) 74,353 (35,996 ) comprehensive income $ 172,392 $ 104,509 $ 338,478 $ 186,828 loss ratio 2.6 % 1.2 % 3.3 % 2.3 % expense ratio 22.0 23.2 22.5 24.1 combined ratio 24.7 % 24.4 % 25.8 % 26.4 % exhibit b essent group ltd. and subsidiaries condensed consolidated balance sheets (unaudited) june 30, december 31, ($ in thousands) 2019 2018 assets investments fixed maturities available for sale, at fair value $ 2,848,746 $ 2,605,666 short-term investments available for sale, at fair value 251,468 154,400 total investments available for sale 3,100,214 2,760,066 other invested assets 69,853 30,952 total investments 3,170,067 2,791,018 cash 25,255 64,946 accrued investment income 18,387 17,627 accounts receivable 40,395 36,881 deferred policy acquisition costs 15,830 16,049 property and equipment 17,324 7,629 prepaid federal income tax 230,385 202,385 other assets 22,256 13,436 total assets $ 3,539,899 $ 3,149,971 liabilities and stockholders' equity liabilities reserve for losses and lae $ 55,138 $ 49,464 unearned premium reserve 295,234 295,467 net deferred tax liability 216,660 172,642 credit facility borrowings, net of deferred costs 223,950 223,664 securities purchased payable 5,041 2,041 other accrued liabilities 39,584 40,976 total liabilities 835,607 784,254 commitments and contingencies stockholders' equity common shares 1,476 1,472 additional paid-in capital 1,110,893 1,110,800 accumulated other comprehensive income (loss) 45,360 (28,993 ) retained earnings 1,546,563 1,282,438 total stockholders' equity 2,704,292 2,365,717 total liabilities and stockholders' equity $ 3,539,899 $ 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 june 30 march 31 december 31 september 30 june 30 march 31 (in thousands, except per share amounts) revenues: net premiums written $ 188,404 $ 177,644 $ 176,437 $ 175,221 $ 168,404 $ 165,225 net premiums earned (1) 188,490 177,791 173,301 166,675 156,958 152,558 other revenues (2) 23,402 22,735 19,823 18,323 16,810 14,905 total revenues 211,892 200,526 193,124 184,998 173,768 167,463 losses and expenses: provision for losses and lae (3) 4,960 7,107 (999 ) 5,452 1,813 5,309 other underwriting and operating expenses 41,520 41,030 39,449 36,899 36,428 38,124 interest expense 2,679 2,670 2,611 2,500 2,618 2,450 total losses and expenses 49,159 50,807 41,061 44,851 40,859 45,883 income before income taxes 162,733 149,719 152,063 140,147 132,909 121,580 income tax expense (4) 26,328 21,999 23,535 24,136 21,154 10,511 net income $ 136,405 $ 127,720 $ 128,528 $ 116,011 $ 111,755 $ 111,069 earnings per share: basic $ 1.39 $ 1.31 $ 1.32 $ 1.19 $ 1.15 $ 1.14 diluted 1.39 1.30 1.31 1.18 1.14 1.13 weighted average shares outstanding: basic 97,798 97,595 97,450 97,438 97,426 97,298 diluted 98,170 98,104 98,066 98,013 97,866 97,951 other data: loss ratio (5) 2.6 % 4.0 % (0.6 )% 3.3 % 1.2 % 3.5 % expense ratio (6) 22.0 23.1 22.8 22.1 23.2 25.0 combined ratio 24.7 % 27.1 % 22.2 % 25.4 % 24.4 % 28.5 % return on average equity (annualized) 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 $8,428, $6,038, $3,731, $3,158, $3,585 and $294 in the three months ended 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 june 30, 2019 and march 31, 2019 include a $1,160 and $1,424 favorable increase, 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 $1,450 of expense associated with accrual to return adjustments associated with the completion of the 2017 u.s. federal income tax return. (5) loss ratio is calculated by dividing the provision for losses and lae by net premiums earned. (6) expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned. exhibit c, continued essent group ltd. and subsidiaries supplemental information historical quarterly data 2019 2018 other data, continued: june 30 march 31 december 31 september 30 june 30 march 31 ($ in thousands) u.s. mortgage insurance portfolio flow: new insurance written $ 17,973,505 $ 10,945,307 $ 11,408,542 $ 13,913,191 $ 12,850,642 $ 9,336,150 new risk written 4,485,217 2,713,389 2,838,530 3,430,942 3,201,610 2,295,314 bulk: new insurance written $ 29,524 $ 55,002 $ — $ — $ — $ — new risk written 2,129 6,542 — — — — total: average gross premium rate (7) 0.51 % 0.50 % 0.50 % 0.51 % 0.52 % 0.52 % average net premium rate (8) 0.49 % 0.48 % 0.49 % 0.50 % 0.51 % 0.52 % new insurance written $ 18,003,029 $ 11,000,309 $ 11,408,542 $ 13,913,191 $ 12,850,642 $ 9,336,150 new risk written $ 4,487,346 $ 2,719,931 $ 2,838,530 $ 3,430,942 $ 3,201,610 $ 2,295,314 insurance in force (end of period) $ 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) $ 38,531,090 $ 35,925,830 $ 34,482,448 $ 32,786,194 $ 30,579,106 $ 28,691,561 risk in force (end of period) $ 37,034,687 $ 34,744,417 $ 33,892,869 $ 32,361,782 $ 30,154,694 $ 28,267,149 policies in force 666,705 629,808 608,135 581,570 546,576 517,215 weighted average coverage (10) 25.1 % 25.1 % 25.0 % 25.0 % 25.0 % 24.9 % annual persistency 84.8 % 85.1 % 84.9 % 84.0 % 83.0 % 83.5 % loans in default (count) 4,405 4,096 4,024 3,538 3,519 4,442 percentage of loans in default 0.66 % 0.65 % 0.66 % 0.61 % 0.64 % 0.86 % other risk in force gse and other risk share (11) $ 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 $ 265,000 undrawn committed capacity $ 275,000 $ 275,000 $ 275,000 $ 275,000 $ 275,000 $ 110,000 weighted average interest rate 4.41 % (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 six months ended june 30, 2019 june 30, 2018 june 30, 2019 june 30, 2018 ($ in thousands) >=760 $ 7,313,814 40.7 % $ 5,460,040 42.5 % $ 11,784,317 40.8 % $ 9,292,258 41.9 % 740-759 3,073,807 17.1 2,217,294 17.3 4,985,948 17.2 3,767,432 17.0 720-739 2,572,580 14.3 1,881,334 14.6 4,138,193 14.3 3,220,479 14.5 700-719 2,140,363 11.9 1,544,303 12.0 3,492,908 12.1 2,689,203 12.1 680-699 1,534,959 8.5 940,587 7.3 2,442,928 8.4 1,750,205 7.9 =760 $ 64,977,185 42.4 % $ 61,191,185 42.7 % $ 53,145,884 43.4 % 740-759 25,747,495 16.8 23,919,745 16.7 20,127,254 16.4 720-739 22,203,764 14.5 20,728,151 14.5 17,605,819 14.4 700-719 17,723,067 11.5 16,454,730 11.5 13,836,837 11.3 680-699 12,697,092 8.3 11,774,884 8.2 10,145,188 8.3 =760 $ 16,258,608 42.2 % $ 15,303,364 42.6 % $ 13,245,851 43.3 % 740-759 6,478,145 16.8 6,012,004 16.7 5,052,409 16.5 720-739 5,643,012 14.6 5,257,051 14.6 4,438,671 14.5 700-719 4,473,871 11.6 4,144,221 11.6 3,450,490 11.3 680-699 3,217,062 8.4 2,974,758 8.3 2,540,531 8.3 90% ltv >95% ltv fico = 760 % frm incurred loss ratio (inception to date) (1) number of loans in default 2010 $ 245,898 $ 6,255 2.5 % 46 71.1 % 60.6 % 0.0 % 1.5 % 63.4 % 100.0 % 2.6 % — 2011 3,229,720 186,982 5.8 1,091 70.5 61.5 0.3 6.2 52.7 97.8 3.8 24 2012 11,241,161 1,405,500 12.5 7,534 73.1 70.9 0.7 5.4 56.9 99.0 2.3 92 2013 21,152,638 4,237,378 20.0 22,517 79.7 64.3 2.2 7.8 51.4 98.8 2.3 246 2014 24,799,434 7,141,438 28.8 38,770 89.2 66.4 4.7 15.7 41.1 96.9 3.1 508 2015 26,193,656 11,777,504 45.0 56,811 84.7 58.9 2.7 14.7 43.8 98.0 2.8 632 2016 34,949,319 22,423,350 64.2 100,102 83.0 57.9 6.9 13.6 45.5 98.5 3.1 860 2017 43,858,322 34,821,992 79.4 154,934 86.9 59.4 14.1 15.8 41.7 97.1 4.2 1,250 2018 47,508,525 42,790,095 90.1 177,166 92.0 61.0 17.6 14.9 41.0 97.9 4.8 751 2019 (through june 30) 29,003,338 28,526,663 98.4 107,734 85.6 60.5 18.4 15.7 40.5 98.5 1.6 42 total $ 242,182,011 $ 153,317,157 63.3 666,705 87.1 60.4 13.0 14.8 42.4 97.9 3.1 4,405 (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 june 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 $ 30,826,843 $ 8,331,331 $ 333,844 (1) $ — $ 333,844 $ 333,844 $ — $ 333,844 $ — $ 208,111 $ 208,111 $ 340 $ 340 2017 33,789,568 8,468,723 424,412 (2) 165,167 (3) 589,579 405,558 165,167 570,725 — 224,689 224,017 3,692 7,423 2018 41,985,709 10,531,739 473,184 (4) 118,650 (5) 591,834 473,184 118,650 591,834 — 253,643 253,643 4,396 6,703 total $ 106,602,120 $ 27,331,793 $ 1,231,440 $ 283,817 $ 1,515,257 $ 1,212,586 $ 283,817 $ 1,496,403 $ — $ 686,443 $ 685,771 $ 8,428 $ 14,466 (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. exhibit i essent group ltd. and subsidiaries supplemental information portfolio geographic data iif by state june 30, 2019 march 31, 2019 june 30, 2018 ca 9.6 % 9.3 % 9.2 % tx 8.0 7.9 8.0 fl 7.5 7.4 7.2 wa 4.6 4.7 4.8 il 3.8 3.8 3.9 nj 3.7 3.7 3.7 co 3.6 3.4 3.3 nc 3.4 3.5 3.5 oh 3.4 3.3 3.2 ga 3.4 3.4 3.4 all others 49.0 49.6 49.8 total 100.0 % 100.0 % 100.0 % gross rif by state june 30, 2019 march 31, 2019 june 30, 2018 ca 9.4 % 9.0 % 8.9 % tx 8.3 8.1 8.2 fl 7.6 7.6 7.3 wa 4.6 4.7 4.9 il 3.7 3.7 3.8 nj 3.6 3.7 3.6 co 3.5 3.3 3.2 ga 3.4 3.5 3.5 nc 3.4 3.5 3.5 oh 3.4 3.4 3.3 all others 49.1 49.5 49.8 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 six months ended june 30, june 30, june 30, june 30, 2019 2018 2019 2018 beginning default inventory 4,096 4,442 4,024 4,783 plus: new defaults 2,849 1,701 5,767 3,695 less: cures (2,433 ) (2,572 ) (5,182 ) (4,842 ) less: claims paid (106 ) (52 ) (194 ) (115 ) less: rescissions and denials, net (1 ) — (10 ) (2 ) ending default inventory 4,405 3,519 4,405 3,519 rollforward of reserve for losses and lae three months ended six months ended june 30, june 30, june 30, june 30, ($ in thousands) 2019 2018 2019 2018 reserve for losses and lae at beginning of period $ 53,484 $ 49,966 $ 49,464 $ 46,850 add provision for losses and lae occurring in: current year 11,354 6,576 23,182 16,528 prior years (6,394 ) (4,763 ) (11,115 ) (9,406 ) incurred losses and lae during the period 4,960 1,813 12,067 7,122 deduct payments for losses and lae occurring in: current year 230 211 245 211 prior years 3,076 1,552 6,148 3,745 loss and lae payments during the period 3,306 1,763 6,393 3,956 reserve for losses and lae at end of period $ 55,138 $ 50,016 $ 55,138 $ 50,016 claims three months ended six months ended june 30, june 30, june 30, june 30, 2019 2018 2019 2018 number of claims paid 106 52 194 115 total amount paid for claims (in thousands) $ 3,208 $ 1,676 $ 6,107 $ 3,819 average amount paid per claim (in thousands) $ 30 $ 32 $ 31 $ 33 severity 69 % 64 % 74 % 70 % exhibit j, continued essent group ltd. and subsidiaries supplemental information defaults, reserve for losses and lae, and claims june 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 2,511 57 % $ 12,646 25 % $ 133,536 9 % four to eleven payments 1,443 33 22,292 44 78,047 29 twelve or more payments 369 8 11,583 23 22,093 52 pending claims 82 2 4,055 8 4,657 87 total case reserves 4,405 100 % 50,576 100 % $ 238,333 21 ibnr 3,792 lae 770 total reserves for losses and lae $ 55,138 average reserve per default: case $ 11.5 total $ 12.5 default rate 0.66 % 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 % june 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 1,543 44 % $ 9,077 20 % $ 84,685 11 % four to eleven payments 1,675 47 26,688 58 96,627 28 twelve or more payments 268 8 8,368 18 14,476 58 pending claims 33 1 1,640 4 1,946 84 total case reserves 3,519 100 % 45,773 100 % $ 197,734 23 ibnr 3,433 lae 810 total reserves for losses and lae $ 50,016 average reserve per default: case $ 13.0 total $ 14.2 default rate 0.64 % exhibit k essent group ltd. and subsidiaries supplemental information investments available for sale investments available for sale by asset class asset class june 30, 2019 december 31, 2018 ($ in thousands) fair value percent fair value percent u.s. treasury securities $ 305,152 9.8 % $ 289,892 10.5 % u.s. agency securities 33,473 1.1 32,997 1.2 u.s. agency mortgage-backed securities 724,382 23.4 637,178 23.1 municipal debt securities 402,715 13.0 483,879 17.5 non-u.s. government securities 47,670 1.5 45,001 1.6 corporate debt securities 774,506 25.0 725,201 26.3 residential and commercial mortgage securities 250,793 8.1 121,838 4.4 asset-backed securities 352,053 11.3 284,997 10.3 money market funds 209,470 6.8 139,083 5.1 total investments available for sale $ 3,100,214 100.0 % $ 2,760,066 100.0 % investments available for sale by credit rating rating (1) june 30, 2019 december 31, 2018 ($ in thousands) fair value percent fair value percent aaa $ 1,638,005 52.8 % $ 1,362,781 49.4 % aa1 127,936 4.1 124,435 4.5 aa2 159,631 5.2 196,218 7.1 aa3 164,922 5.3 143,315 5.2 a1 216,738 7.0 222,073 8.0 a2 174,426 5.6 199,238 7.2 a3 174,948 5.7 146,300 5.3 baa1 170,537 5.5 162,695 5.9 baa2 161,799 5.2 140,168 5.1 baa3 44,854 1.5 26,805 1.0 below baa3 66,418 2.1 36,038 1.3 total investments available for sale $ 3,100,214 100.0 % $ 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 june 30, 2019 december 31, 2018 ($ in thousands) fair value percent fair value percent < 1 year $ 812,953 26.2 % $ 529,545 19.2 % 1 to < 2 years 401,313 12.9 285,060 10.3 2 to < 3 years 277,580 9.0 251,763 9.1 3 to < 4 years 395,083 12.7 278,804 10.1 4 to < 5 years 303,485 9.8 429,005 15.6 5 or more years 909,800 29.4 985,889 35.7 total investments available for sale $ 3,100,214 100.0 % $ 2,760,066 100.0 % pre-tax investment income yield: three months ended june 30, 2019 2.84 % six months ended june 30, 2019 2.85 % net cash and investments at holding company, essent group ltd.: ($ in thousands) as of june 30, 2019 $ 71,972 as of december 31, 2018 $ 78,405 exhibit l essent group ltd. and subsidiaries supplemental information insurance company capital june 30, 2019 december 31, 2018 ($ in thousands) u.s. mortgage insurance subsidiaries: combined statutory capital (1) $ 2,091,907 $ 1,886,929 combined net risk in force (2) $ 28,459,376 $ 26,233,783 risk-to-capital ratios: (3) essent guaranty, inc. 14.1:1 14.4:1 essent guaranty of pa, inc. 3.8:1 4.2:1 combined (4) 13.6:1 13.9:1 essent reinsurance ltd.: stockholder's equity (gaap basis) $ 899,117 $ 798,612 net risk in force (2) $ 9,323,473 $ 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 a measure 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) 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 june 30, 2019, december 31, 2018 and june 30, 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 june 30, 2019, december 31, 2018 and june 30, 2018 in accordance with regulation g: (in thousands, except per share amounts) june 30, 2019 december 31, 2018 june 30, 2018 numerator: total stockholders' equity (book value) $ 2,704,292 $ 2,365,717 $ 2,103,571 subtract: accumulated other comprehensive income (loss) 45,360 (28,993 ) (39,248 ) adjusted book value $ 2,658,932 $ 2,394,710 $ 2,142,819 denominator: total common shares outstanding 98,396 98,139 98,128 add: restricted share units outstanding 365 449 452 total common shares and share units outstanding 98,761 98,588 98,580 adjusted book value per share $ 26.92 $ 24.29 $ 21.74
