Essent group ltd. reports third quarter 2020 results & declares quarterly dividend
Hamilton, bermuda--(business wire)--essent group ltd. (nyse: esnt) today reported net income for the quarter ended september 30, 2020 of $124.5 million or $1.11 per diluted share, compared to $144.6 million or $1.47 per diluted share for the quarter ended september 30, 2019. essent also announced today that its board of directors has declared a quarterly cash dividend of $0.16 per common share. the dividend is payable on december 10, 2020, to shareholders of record on december 1, 2020. "we are encouraged by the increase in our third quarter earnings as compared to the second quarter due to a lower loss provision driven by a decrease in the number of new covid-19 default notices received on our insured portfolio,” said mark a. casale, chairman and chief executive officer. “although our outlook on the economy remains cautious, we are pleased with the resilience and strength that housing has demonstrated throughout the year which has been a bright spot in the economy and positive for high credit quality growth in our business.” financial highlights: insurance in force as of september 30, 2020 was $190.8 billion, compared to $174.6 billion as of june 30, 2020 and $161.0 billion as of september 30, 2019. new insurance written for the third quarter was $36.7 billion, compared to $28.2 billion in the second quarter of 2020 and $18.7 billion in the third quarter of 2019. net premiums earned for the third quarter were $222.3 million, compared to $211.5 million in the second quarter of 2020 and $203.5 million in the third quarter of 2019. the expense ratio for the third quarter was 16.7%, compared to 18.4% in the second quarter of 2020 and 20.4% in the third quarter of 2019. the provision for losses and lae for the third quarter was $55.3 million, compared to a provision of $175.9 million in the second quarter of 2020 and a provision of $10.0 million in the third quarter of 2019. the percentage of loans in default as of september 30, 2020 was 4.54%, compared to 5.19% as of june 30, 2020 and 0.75% as of september 30, 2019. as of october 31, 2020, the percentage of loans in default was 4.25%. as of october 31, 2020, the percentage of loans in default was 4.25%. the combined ratio for the third quarter was 41.6%, compared to 101.5% in the second quarter of 2020 and 25.3% in the third quarter of 2019. other income for the third quarter includes a $0.7 million loss for the change in the fair value of embedded derivatives in certain of our third-party reinsurance agreements, compared to a gain of $2.5 million in the second quarter of 2020 and a loss of $0.8 million in the third quarter of 2019. the consolidated balance of cash and investments at september 30, 2020 was $4.7 billion, including cash and investment balances at essent group ltd. of $685.0 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 11.6:1 as of september 30, 2020. on october 8, 2020, essent guaranty, inc. obtained $399.2 million of fully collateralized excess of loss reinsurance coverage on mortgage insurance policies written by essent in september 2019 through july 2020 from radnor re 2020-2 ltd., a newly formed bermuda special purpose insurer. radnor re 2020-2 ltd. is not a subsidiary or an affiliate of essent group ltd. during the third quarter, a.m. best affirmed its “a (excellent)” financial strength rating of essent guaranty, inc. and a long-term issuer credit rating of "a" of the operating subsidiaries of essent group ltd. essent guaranty, inc. also has financial strength ratings of “a3” by moody’s and “bbb+” by s&p. on october 14, 2020, essent group ltd. entered into an amended and restated credit facility, increasing to $625 million the committed capacity and extending the contractual maturity to october 16, 2023. 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/events-and-presentations/events/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 3494393 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 3494393. 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/financials/quarterly-results/default.aspx. forward-looking statements: this press release may include “forward-looking statements” which are subject to known and unknown risks and uncertainties, many of which may be beyond our control. forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," “should,” “expect,” "plan," "anticipate," "believe," “estimate,” “predict,” or "potential" or the negative thereof or variations thereon or similar terminology. actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. although it is not possible to identify all of these risks and factors, they include, among others, the following: the impact of covid-19 and related economic conditions; changes in or to fannie mae and freddie mac (the “gses”), whether through federal legislation, restructurings or a shift in business practices; failure to continue to meet the mortgage insurer eligibility requirements of the gses; competition for customers; lenders or investors seeking alternatives to private mortgage insurance; an increase in the number of loans insured through federal government mortgage insurance programs, including those offered by the federal housing administration; decline in new insurance written and franchise value due to loss of a significant customer; decline in the volume of low down payment mortgage originations; the definition of "qualified mortgage" reducing the size of the mortgage origination market or creating incentives to use government mortgage insurance programs; the definition of "qualified residential mortgage" reducing the number of low down payment loans or lenders and investors seeking alternatives to private mortgage insurance; the implementation of the basel iii capital accord discouraging the use of private mortgage insurance; a decrease in the length of time that insurance policies are in force; uncertainty of loss reserve estimates; deteriorating economic conditions; our non-u.s. operations becoming subject to u.s. federal income taxation; becoming considered a passive foreign investment company for u.s. federal income tax purposes; and other risks and factors described in part i, item 1a “risk factors” of our annual report on form 10-k for the year ended december 31, 2019 filed with the securities and exchange commission on february 18, 2020, as subsequently updated through other reports we file with the securities and exchange commission. any forward-looking information presented herein is made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise. about the company: essent group ltd. (nyse: esnt) is a bermuda-based holding company (collectively with its subsidiaries, “essent”) which, through its wholly-owned subsidiary, essent guaranty, inc., offers private mortgage insurance for single-family mortgage loans in the united states. essent provides private capital to mitigate mortgage credit risk, allowing lenders to make additional mortgage financing available to prospective homeowners. headquartered in radnor, pennsylvania, essent guaranty, inc. is licensed to write mortgage insurance in all 50 states and the district of columbia, and is approved by fannie mae and freddie mac. essent also offers mortgage-related insurance, reinsurance and advisory services through its bermuda-based subsidiary, essent reinsurance ltd. essent is committed to supporting environmental, social and governance ("esg") initiatives that are relevant to the company and align with the companywide dedication to responsible corporate citizenship that positively impacts the community and people served. additional information regarding essent may be found at www.essentgroup.com and www.essent.us. source: essent group ltd. essent group ltd. and subsidiaries financial results and supplemental information (unaudited) quarter ended september 30, 2020 exhibit a condensed consolidated statements of comprehensive income (unaudited) exhibit b condensed consolidated balance sheets (unaudited) exhibit c historical quarterly data exhibit d new insurance written exhibit e insurance in force and risk in force exhibit f other risk in force exhibit g portfolio vintage data exhibit h reinsurance vintage data exhibit i portfolio geographic data exhibit j defaults, reserve for losses and lae, and claims exhibit k investments available for sale exhibit l insurance company capital exhibit m reconciliation of non-gaap financial measure - adjusted book value per share exhibit a essent group ltd. and subsidiaries condensed consolidated statements of comprehensive income (unaudited) three months ended september 30, nine months ended september 30, (in thousands, except per share amounts) 2020 2019 2020 2019 revenues: direct premiums written $ 243,390 $ 208,567 $ 677,414 $ 589,081 ceded premiums (21,167) (10,263) (57,544) (24,729) net premiums written 222,223 198,304 619,870 564,352 decrease in unearned premiums 35 5,169 20,355 5,402 net premiums earned 222,258 203,473 640,225 569,754 net investment income 18,639 21,104 59,138 61,565 realized investment gains, net 267 1,153 2,133 2,396 other income 1,874 657 6,459 5,090 total revenues 243,038 226,387 707,955 638,805 losses and expenses: provision for losses and lae 55,280 9,990 239,220 22,057 other underwriting and operating expenses 37,100 41,588 117,866 124,138 interest expense 2,227 2,584 6,925 7,933 total losses and expenses 94,607 54,162 364,011 154,128 income before income taxes 148,431 172,225 343,944 484,677 income tax expense 23,895 27,595 54,505 75,922 net income $ 124,536 $ 144,630 $ 289,439 $ 408,755 earnings per share: basic $ 1.11 $ 1.48 $ 2.78 $ 4.18 diluted 1.11 1.47 2.77 4.16 weighted average shares outstanding: basic 111,908 97,822 104,147 97,739 diluted 112,134 98,257 104,383 98,178 net income $ 124,536 $ 144,630 $ 289,439 $ 408,755 other comprehensive income (loss): change in unrealized appreciation of investments 12,036 17,367 76,247 91,720 total other comprehensive income 12,036 17,367 76,247 91,720 comprehensive income $ 136,572 $ 161,997 $ 365,686 $ 500,475 loss ratio 24.9 % 4.9 % 37.4 % 3.9 % expense ratio 16.7 20.4 18.4 21.8 combined ratio 41.6 % 25.3 % 55.8 % 25.7 % exhibit b essent group ltd. and subsidiaries condensed consolidated balance sheets (unaudited) september 30, december 31, (in thousands, except per share amounts) 2020 2019 assets investments fixed maturities available for sale, at fair value $ 3,549,397 $ 3,035,385 short-term investments available for sale, at fair value 952,952 315,362 total investments available for sale 4,502,349 3,350,747 other invested assets 83,063 78,873 total investments 4,585,412 3,429,620 cash 118,691 71,350 accrued investment income 19,152 18,535 accounts receivable 45,434 40,655 deferred policy acquisition costs 16,704 15,705 property and equipment 14,596 17,308 prepaid federal income tax 279,136 261,885 other assets 27,963 18,367 total assets $ 5,107,088 $ 3,873,425 liabilities and stockholders' equity liabilities reserve for losses and lae $ 307,737 $ 69,362 unearned premium reserve 258,532 278,887 net deferred tax liability 281,506 249,620 credit facility borrowings, net of deferred costs 424,658 224,237 other accrued liabilities 88,111 66,474 total liabilities 1,360,544 888,580 commitments and contingencies stockholders' equity common shares, $0.015 par value: authorized - 233,333; issued and outstanding - 112,423 shares in 2020 and 98,394 shares in 2019 1,686 1,476 additional paid-in capital 1,566,448 1,118,655 accumulated other comprehensive income 132,434 56,187 retained earnings 2,045,976 1,808,527 total stockholders' equity 3,746,544 2,984,845 total liabilities and stockholders' equity $ 5,107,088 $ 3,873,425 return on average equity (1) 11.5 % 20.8 % (1) the 2020 return on average equity is calculated by dividing annualized year-to-date 2020 net income by average equity. the 2019 return on average equity is calculated by dividing full year 2019 net income by average equity. exhibit c essent group ltd. and subsidiaries supplemental information historical quarterly data 2020 2019 selected income statement data september 30 june 30 march 31 december 31 september 30 june 30 march 31 (in thousands, except per share amounts) revenues: net premiums written $ 222,223 $ 205,904 $ 191,743 $ 196,493 $ 198,304 $ 188,404 $ 177,644 net premiums earned (1) 222,258 211,471 206,496 207,671 203,473 188,490 177,791 other revenues (2) 20,780 24,606 22,344 21,091 22,914 23,402 22,735 total revenues 243,038 236,077 228,840 228,762 226,387 211,892 200,526 losses and expenses: provision for losses and lae 55,280 175,877 8,063 10,929 9,990 4,960 7,107 other underwriting and operating expenses 37,100 38,819 41,947 41,231 41,588 41,520 41,030 interest expense 2,227 2,566 2,132 2,218 2,584 2,679 2,670 total losses and expenses 94,607 217,262 52,142 54,378 54,162 49,159 50,807 income before income taxes 148,431 18,815 176,698 174,384 172,225 162,733 149,719 income tax expense (3) 23,895 3,435 27,175 27,426 27,595 26,328 21,999 net income $ 124,536 $ 15,380 $ 149,523 $ 146,958 $ 144,630 $ 136,405 $ 127,720 earnings per share: basic $ 1.11 $ 0.15 $ 1.53 $ 1.50 $ 1.48 $ 1.39 $ 1.31 diluted 1.11 0.15 1.52 1.49 1.47 1.39 1.30 weighted average shares outstanding: basic 111,908 102,500 97,949 97,830 97,822 97,798 97,595 diluted 112,134 102,605 98,326 98,376 98,257 98,170 98,104 other data: loss ratio (4) 24.9 % 83.2 % 3.9 % 5.3 % 4.9 % 2.6 % 4.0 % expense ratio (5) 16.7 18.4 20.3 19.9 20.4 22.0 23.1 combined ratio 41.6 % 101.5 % 24.2 % 25.1 % 25.3 % 24.7 % 27.1 % return on average equity (annualized) 13.5 % 1.8 % 19.6 % 20.1 % 20.8 % 20.9 % 20.9 % (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 september 30, 2020, june 30, 2020, march 31, 2020, december 31, 2019, september 30, 2019, june 30, 2019 and march 31, 2019 include net favorable (unfavorable) changes of ($677), $2,502, ($4,200), ($3,585), ($760), $1,160 and $1,424, respectively, in the fair value of these embedded derivatives. (3) income tax expense for the three months ended march 31, 2020 and 2019 was reduced by $620 and $1,956, respectively, of excess tax benefits associated with the vesting of common shares and common share units during each period. (4) loss ratio is calculated by dividing the provision for losses and lae by net premiums earned. (5) expense ratio is calculated by dividing other underwriting and operating expenses by net premiums earned. exhibit c, continued essent group ltd. and subsidiaries supplemental information historical quarterly data 2020 2019 other data, continued: september 30 june 30 march 31 december 31 september 30 june 30 march 31 ($ in thousands) u.s. mortgage insurance portfolio flow: new insurance written $ 36,664,583 $ 28,163,212 $ 13,549,299 $ 15,839,836 $ 18,719,876 $ 17,973,505 $ 10,945,307 new risk written 8,938,544 6,875,250 3,384,171 3,966,363 4,695,611 4,485,217 2,713,389 bulk: new insurance written $ — $ — $ 151 $ — $ 6,133 $ 29,524 $ 55,002 new risk written — — 24 — 842 2,129 6,542 total: average gross premium rate (6) 0.51 % 0.53 % 0.51 % 0.51 % 0.52 % 0.51 % 0.50 % average net premium rate (7) 0.46 % 0.48 % 0.48 % 0.49 % 0.49 % 0.49 % 0.48 % new insurance written $ 36,664,583 $ 28,163,212 $ 13,549,450 $ 15,839,836 $ 18,726,009 $ 18,003,029 $ 11,000,309 new risk written $ 8,938,544 $ 6,875,250 $ 3,384,195 $ 3,966,363 $ 4,696,453 $ 4,487,346 $ 2,719,931 insurance in force (end of period) $ 190,811,292 $ 174,646,273 $ 165,615,503 $ 164,005,853 $ 160,962,192 $ 153,317,157 $ 143,181,641 gross risk in force (end of period) (8) $ 47,838,668 $ 43,993,989 $ 41,865,977 $ 41,402,950 $ 40,540,289 $ 38,531,090 $ 35,925,830 risk in force (end of period) $ 41,219,216 $ 39,113,879 $ 38,290,022 $ 38,947,857 $ 38,784,584 $ 37,034,687 $ 34,744,417 policies in force 781,836 733,651 706,714 702,925 693,085 666,705 629,808 weighted average coverage (9) 25.1 % 25.2 % 25.3 % 25.2 % 25.2 % 25.1 % 25.1 % annual persistency 64.2 % 67.9 % 73.9 % 77.5 % 82.1 % 84.8 % 85.1 % loans in default (count) 35,464 38,068 5,841 5,947 5,232 4,405 4,096 percentage of loans in default 4.54 % 5.19 % 0.83 % 0.85 % 0.75 % 0.66 % 0.65 % other risk in force gse and other risk share (10) $ 1,216,353 $ 1,031,699 $ 1,100,966 $ 895,374 $ 849,184 $ 802,530 $ 771,175 credit facility borrowings outstanding $ 425,000 $ 425,000 $ 425,000 $ 225,000 $ 225,000 $ 225,000 $ 225,000 undrawn committed capacity $ 75,000 $ 75,000 $ 75,000 $ 275,000 $ 275,000 $ 275,000 $ 275,000 weighted average interest rate (end of period) 1.90 % (6) average gross premium rate is calculated by dividing annualized premiums earned for the u.s. mortgage insurance portfolio, before reductions for premiums ceded under third-party reinsurance, by average insurance in force for the period. (7) average net premium rate is calculated by dividing annualized net premiums earned for the u.s. mortgage insurance portfolio by average insurance in force for the period. (8) gross risk in force includes risk ceded under third-party reinsurance. (9) weighted average coverage is calculated by dividing end of period gross risk in force by end of period insurance in force. (10) gse and other risk share includes gse risk share and other reinsurance transactions. essent re provides insurance or reinsurance relating to the risk in force on loans in reference pools acquired by freddie mac and fannie mae. exhibit d essent group ltd. and subsidiaries supplemental information new insurance written: flow niw by credit score three months ended nine months ended september 30, 2020 september 30, 2019 september 30, 2020 september 30, 2019 ($ in thousands) >=760 $ 16,887,062 46.1 % $ 7,467,620 39.9 % $ 34,706,705 44.3 % $ 19,251,937 40.4 % 740-759 6,557,520 17.9 3,286,476 17.5 14,316,011 18.3 8,272,424 17.4 720-739 5,238,462 14.3 2,800,181 15.0 11,609,703 14.8 6,938,374 14.6 700-719 4,187,254 11.4 2,202,659 11.8 9,024,266 11.5 5,695,567 11.9 680-699 2,131,994 5.8 1,570,179 8.4 5,127,817 6.5 4,013,107 8.4 =760 $ 78,923,142 41.4 % $ 71,570,804 41.0 % $ 67,408,766 41.9 % 740-759 33,229,396 17.4 30,265,718 17.3 27,178,330 16.9 720-739 28,496,228 15.0 26,130,764 15.0 23,459,055 14.6 700-719 22,748,385 11.9 20,721,839 11.9 18,728,884 11.6 680-699 15,302,772 8.0 14,545,011 8.3 13,418,919 8.3 =760 $ 19,606,502 41.0 % $ 17,871,881 40.6 % $ 16,877,750 41.6 % 740-759 8,395,009 17.5 7,672,436 17.4 6,857,369 16.9 720-739 7,251,499 15.2 6,673,863 15.2 5,980,949 14.8 700-719 5,738,412 12.0 5,246,989 11.9 4,743,360 11.7 680-699 3,853,734 8.0 3,693,448 8.4 3,406,811 8.4 90% ltv >95% ltv fico = 760 incurred loss ratio (inception to date) (1) number of loans in default percentage of loans in default 2010 - 2014 $ 60,668,851 $ 7,269,635 12.0 % 41,790 83.4 % 69.3 % 4.0 % 13.0 % 44.8 % 3.3 % 2,213 5.30 % 2015 26,193,656 6,744,380 25.7 35,079 85.8 62.4 3.0 15.7 42.5 4.5 1,940 5.53 2016 34,949,319 13,401,895 38.3 64,585 86.0 61.3 7.6 14.0 45.1 6.2 3,750 5.81 2017 43,858,322 19,575,798 44.6 95,783 88.9 62.3 15.9 17.4 40.3 9.4 6,591 6.88 2018 47,508,525 22,549,067 47.5 105,062 92.8 64.6 20.7 17.7 37.1 15.4 8,054 7.67 2019 63,569,183 45,236,714 71.2 177,594 81.9 62.0 19.6 16.9 37.7 28.7 10,531 5.93 2020 (through september 30) 78,377,245 76,033,803 97.0 261,943 59.9 51.4 11.4 11.2 44.0 23.9 2,385 0.91 total $ 355,125,101 $ 190,811,292 53.7 781,836 75.6 58.4 14.0 14.4 41.4 8.9 35,464 4.54 (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 september 30, 2020 ($ 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 (1) other reinsurance (2) 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 (5) 2015 & 2016 $ 19,182,623 $ 5,179,608 $ 333,844 $ — $ 333,844 $ 216,480 $ — $ 216,480 $ — $ 208,111 $ 207,813 $ 1,245 $ 4,532 $ 133,695 2017 19,040,243 4,851,958 424,412 165,167 589,579 242,123 165,167 407,290 — 224,689 219,220 2,708 8,862 152,007 2018 22,096,001 5,601,015 473,184 118,650 591,834 325,537 76,144 401,681 — 253,643 251,614 3,357 10,935 232,059 2019 (3) 26,346,557 6,698,195 495,889 55,102 550,991 495,889 55,102 550,991 — 215,605 215,509 3,057 8,499 376,386 total $ 86,665,424 $ 22,330,776 $ 1,727,329 $ 338,919 $ 2,066,248 $ 1,280,029 $ 296,413 $ 1,576,442 $ — $ 902,048 $ 894,156 $ 10,367 $ 32,828 $ 894,147 quota share reinsurance losses ceded ceding commission earned premiums ceded year remaining insurance in force remaining risk in force remaining ceded insurance in force remaining ceded risk in force quarter-to-date year-to-date quarter-to-date year-to-date quarter-to-date year-to-date reduction in pmiers minimum required assets (5) 2019 & 2020 (4) $ 94,074,498 $ 23,215,840 $ 20,635,915 $ 5,043,010 $ 4,154 $ 11,850 $ 3,316 $ 6,426 $ 10,800 $ 24,716 $ 336,170 (1) reinsurance provided by unaffiliated special purpose insurers through the issuance of mortgage insurance-linked notes ("ilns"). (2) reinsurance provided by panels of reinsurers. (3) reinsurance coverage on new insurance written from january 1, 2019 through august 31, 2019. (4) reinsurance coverage on 40% of eligible single premium policies and 20% of all other eligible policies written from september 1, 2019 through december 31, 2020. (5) represents the reduction in essent guaranty, inc.'s minimum required assets based on our interpretation of the pmiers. exhibit i essent group ltd. and subsidiaries supplemental information portfolio geographic data iif by state september 30, 2020 june 30, 2020 september 30, 2019 ca 11.2 % 10.6 % 9.8 % tx 9.6 9.4 8.3 fl 8.5 8.2 7.7 co 4.1 3.9 3.6 wa 3.9 4.0 4.5 az 3.5 3.5 3.2 il 3.5 3.5 3.7 nj 3.4 3.5 3.6 va 3.2 3.2 3.2 ga 3.1 3.1 3.3 all others 46.0 47.1 49.1 total 100.0 % 100.0 % 100.0 % gross rif by state september 30, 2020 june 30, 2020 september 30, 2019 ca 11.0 % 10.3 % 9.6 % tx 9.9 9.7 8.6 fl 8.7 8.4 7.9 co 4.0 3.8 3.5 wa 3.9 4.0 4.5 az 3.4 3.4 3.2 il 3.4 3.4 3.6 nj 3.3 3.4 3.6 va 3.1 3.2 3.2 ga 3.1 3.2 3.3 all others 46.2 47.2 49.0 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, 2020 2019 2020 2019 beginning default inventory 38,068 4,405 5,947 4,024 plus: new defaults 12,614 3,711 53,904 9,478 less: cures (15,135) (2,776) (24,032) (7,958) less: claims paid (67) (103) (329) (297) less: rescissions and denials, net (16) (5) (26) (15) ending default inventory 35,464 5,232 35,464 5,232 rollforward of reserve for losses and lae three months ended nine months ended september 30, september 30, september 30, september 30, ($ in thousands) 2020 2019 2020 2019 reserve for losses and lae at beginning of period $ 250,890 $ 55,138 $ 69,362 $ 49,464 less: reinsurance recoverables 7,761 — 71 — net reserve for losses and lae at beginning of period 243,129 55,138 69,291 49,464 add provision for losses and lae occurring in: current period 56,372 14,722 253,567 37,904 prior years (1,092) (4,732) (14,347) (15,847) incurred losses and lae during the period 55,280 9,990 239,220 22,057 deduct payments for losses and lae occurring in: current period 205 412 494 657 prior years 2,365 3,280 12,178 9,428 loss and lae payments during the period 2,570 3,692 12,672 10,085 net reserve for losses and lae at end of period 295,839 61,436 295,839 61,436 plus: reinsurance recoverables 11,898 — 11,898 — reserve for losses and lae at end of period $ 307,737 $ 61,436 $ 307,737 $ 61,436 claims three months ended nine months ended september 30, september 30, september 30, september 30, 2020 2019 2020 2019 number of claims paid 67 103 329 297 total amount paid for claims (in thousands) $ 2,557 $ 3,584 $ 12,432 $ 9,691 average amount paid per claim (in thousands) $ 38 $ 35 $ 38 $ 33 severity 77 % 71 % 78 % 73 % 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, 2020 number of policies in default percentage of policies in default amount of reserves percentage of reserves defaulted rif reserves as a percentage of defaulted rif ($ in thousands) missed payments: three payments or less 9,237 26 % $ 58,296 21 % $ 554,524 11 % four to eleven payments 25,290 71 194,892 69 1,697,419 11 twelve or more payments 891 3 24,842 9 48,612 51 pending claims 46 — 2,417 1 2,840 85 total case reserves (1) 35,464 100 % 280,447 100 % $ 2,303,395 12 ibnr 21,034 lae 5,538 total reserves for losses and lae (1) $ 307,019 average reserve per default: case $ 7.9 total $ 8.7 default rate 4.54% (1) the u.s. mortgage insurance portfolio reserves exclude reserves on gse and other risk share at essent re of $718. december 31, 2019 number of policies in default percentage of policies in default amount of reserves percentage of reserves defaulted rif reserves as a percentage of defaulted rif ($ in thousands) missed payments: three payments or less 3,310 56 % $ 15,793 25 % $ 177,238 9 % four to eleven payments 2,035 34 28,006 44 108,743 26 twelve or more payments 473 8 13,549 22 27,152 50 pending claims 129 2 5,832 9 6,777 86 total case reserves (2) 5,947 100 % 63,180 100 % $ 319,910 20 ibnr 4,738 lae 1,265 total reserves for losses and lae (2) $ 69,183 average reserve per default: case $ 10.6 total $ 11.6 default rate 0.85% (2) the u.s. mortgage insurance portfolio reserves exclude reserves on gse and other risk share at essent re of $179. september 30, 2019 number of policies in default percentage of policies in default amount of reserves percentage of reserves defaulted rif reserves as a percentage of defaulted rif ($ 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 (3) 5,232 100 % 56,123 100 % $ 281,154 20 ibnr 4,209 lae 1,014 total reserves for losses and lae (3) $ 61,346 average reserve per default: case $ 10.7 total $ 11.7 default rate 0.75% (3) the u.s. mortgage insurance portfolio reserves exclude reserves on gse and other risk share at essent re of $90. exhibit k essent group ltd. and subsidiaries supplemental information investments available for sale investments available for sale by asset class asset class september 30, 2020 december 31, 2019 ($ in thousands) fair value percent fair value percent u.s. treasury securities $ 229,417 5.1 % $ 242,206 7.2 % u.s. agency securities 14,640 0.3 33,605 1.0 u.s. agency mortgage-backed securities 956,581 21.2 848,334 25.3 municipal debt securities 493,673 11.0 361,638 10.8 non-u.s. government securities 60,752 1.4 54,995 1.7 corporate debt securities 985,384 21.9 880,301 26.3 residential and commercial mortgage securities 366,227 8.1 288,281 8.6 asset-backed securities 442,723 9.8 326,025 9.7 money market funds 952,952 21.2 315,362 9.4 total investments available for sale $ 4,502,349 100.0 % $ 3,350,747 100.0 % investments available for sale by credit rating rating (1) september 30, 2020 december 31, 2019 ($ in thousands) fair value percent fair value percent aaa $ 2,665,634 59.2 % $ 1,817,905 54.2 % aa1 175,114 3.9 109,122 3.3 aa2 223,475 5.0 145,282 4.3 aa3 213,770 4.7 159,599 4.8 a1 229,925 5.1 206,643 6.2 a2 278,661 6.2 183,780 5.5 a3 213,041 4.7 191,933 5.7 baa1 251,954 5.6 232,490 6.9 baa2 177,633 3.9 179,664 5.4 baa3 43,850 1.0 65,119 1.9 below baa3 29,292 0.7 59,210 1.8 total investments available for sale $ 4,502,349 100.0 % $ 3,350,747 100.0 % (1) based on ratings issued by moody's, if available. s&p or fitch rating utilized if moody's not available. investments available for sale by duration and book yield effective duration september 30, 2020 december 31, 2019 ($ in thousands) fair value percent fair value percent < 1 year $ 2,009,570 44.6 % $ 1,038,782 31.0 % 1 to < 2 years 431,317 9.6 306,148 9.1 2 to < 3 years 377,331 8.4 348,708 10.4 3 to < 4 years 334,656 7.4 361,147 10.8 4 to < 5 years 381,525 8.5 443,382 13.2 5 or more years 967,950 21.5 852,580 25.5 total investments available for sale $ 4,502,349 100.0 % $ 3,350,747 100.0 % pre-tax investment income yield: three months ended september 30, 2020 1.83 % nine months ended september 30, 2020 2.15 % net cash and investments at holding company, essent group ltd.: ($ in thousands) as of september 30, 2020 $ 684,959 as of december 31, 2019 $ 98,376 exhibit l essent group ltd. and subsidiaries supplemental information insurance company capital september 30, 2020 december 31, 2019 ($ in thousands) u.s. mortgage insurance subsidiaries: combined statutory capital (1) $ 2,581,136 $ 2,335,828 combined net risk in force (2) $ 29,821,246 $ 29,460,191 risk-to-capital ratios: (3) essent guaranty, inc. 12.0:1 13.1:1 essent guaranty of pa, inc. 2.0:1 2.9:1 combined (4) 11.6:1 12.6:1 essent guaranty, inc. pmiers data (5): available assets $ 2,720,432 $ 2,337,086 minimum required assets 1,739,479 1,499,369 pmiers excess available assets $ 980,953 $ 837,717 essent reinsurance ltd.: stockholder's equity (gaap basis) $ 1,061,546 $ 939,360 net risk in force (2) $ 12,312,124 $ 10,314,942 (1) combined statutory capital equals the sum of statutory capital of essent guaranty, inc. plus essent guaranty of pa, inc., after eliminating the impact of intercompany transactions. statutory capital is computed based on accounting practices prescribed or permitted by the pennsylvania insurance department and the national association of insurance commissioners accounting practices and procedures manual. (2) net risk in force represents total risk in force, net of reinsurance ceded and net of exposures on policies for which loss reserves have been established. (3) the risk-to-capital ratio is calculated as the ratio of net risk in force to statutory capital. (4) the combined risk-to-capital ratio equals the sum of the net risk in force of essent guaranty, inc. and essent guaranty of pa, inc. divided by the combined statutory capital. (5) data is based on our interpretation of the pmiers as of the dates indicated. 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 september 30, 2020, december 31, 2019 and september 30, 2019, the company does not have any options, warrants and similar instruments outstanding. the following table sets forth the reconciliation of adjusted book value to the most comparable gaap amount as of september 30, 2020, december 31, 2019 and september 30, 2019 in accordance with regulation g: (in thousands, except per share amounts) september 30, 2020 december 31, 2019 september 30, 2019 numerator: total stockholders' equity (book value) $ 3,746,544 $ 2,984,845 $ 2,855,170 subtract: accumulated other comprehensive income 132,434 56,187 62,727 adjusted book value $ 3,614,110 $ 2,928,658 $ 2,792,443 denominator: total common shares outstanding 112,423 98,394 98,385 add: restricted share units and dividend equivalent units outstanding 511 356 366 total common shares and share units outstanding 112,934 98,750 98,751 adjusted book value per share $ 32.00 $ 29.66 $ 28.28
