Essent Group Ltd. [ESNT] Filings

10-Q 1 esnt-20240630.htm 10-Q esnt-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-36157

ESSENT GROUP LTD.

(Exact name of registrant as specified in its charter)


Bermuda						Not Applicable
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

Clarendon House

2 Church Street

Hamilton HM11, Bermuda

(Address of principal executive offices and zip code)

(441) 297-9901

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, $0.015 par value	ESNT	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of the registrant’s common shares outstanding as of August 1, 2024 was 106,248,966.

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Essent Group Ltd. and Subsidiaries

Form 10-Q

Index


PART I.	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1

	Condensed Consolidated Balance Sheets (Unaudited)	1

	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	2

	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)	3

	Condensed Consolidated Statements of Cash Flows (Unaudited)	4

	Notes to Condensed Consolidated Financial Statements (Unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48

Item 4.	Controls and Procedures	48

PART II.	OTHER INFORMATION	50

Item 1.	Legal Proceedings	50

Item 1A.	Risk Factors	50

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50



Item 6.	Exhibits	51

SIGNATURES		52

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Unless the context otherwise indicates or requires, the terms “we,” “our,” “us,” “Essent,” and the “Company,” as used in this Quarterly Report on Form 10-Q, refer to Essent Group Ltd. and its directly and indirectly owned subsidiaries, including our primary operating subsidiaries, Essent Guaranty, Inc. and Essent Reinsurance Ltd., as a combined entity, except where otherwise stated or where it is clear that the terms mean only Essent Group Ltd. exclusive of its subsidiaries.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, includes forward-looking statements pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts or present facts or conditions, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the introduction of new products and services, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or the negative of these terms or other comparable terminology.

The forward-looking statements contained in this Quarterly Report reflect our views as of the date of this Quarterly Report about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, those factors described below, in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report, and in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission. These factors include, without limitation, the following:

•changes in or to Fannie Mae and Freddie Mac, which we refer to collectively as 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 our customers or the loss of a significant customer;

•lenders or investors seeking alternatives to private mortgage insurance;

•increase in the number of loans insured through Federal government mortgage insurance programs, including those offered by the Federal Housing Administration;

•decline in the volume of low down payment mortgage originations;

•uncertainty of loss reserve estimates;

•decrease in the length of time our insurance policies are in force;

•deteriorating economic conditions;

•recently enacted U.S. Federal tax reform and its impact on us, our shareholders and our operations;

•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, which may discourage the use of private mortgage insurance;

•management of risk in our investment portfolio;

•fluctuations in interest rates;

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•inadequacy of the premiums we charge to compensate for our losses incurred;

•dependence on management team and qualified personnel;

•disturbance to our information technology systems;

•change in our customers’ capital requirements discouraging the use of mortgage insurance;

•declines in the value of borrowers’ homes;

•limited availability of capital or reinsurance;

•unanticipated claims arise under and risks associated with our contract underwriting program;

•industry practice that loss reserves are established only upon a loan default;

•disruption in mortgage loan servicing;

•risk of future legal proceedings;

•customers’ technological demands;

•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

•potential restrictions on the ability of our insurance subsidiaries to pay dividends.

Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements. All of the forward-looking statements we have included in this Quarterly Report are based on information available to us on the date of this Quarterly Report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.

iii

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Essent Group Ltd. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)


	June 30,		December 31,
(In thousands, except per share amounts)	2024		2023
Assets
Investments
Fixed maturities available for sale, at fair value (amortized cost: 2024 — $4,286,271; 2023 — $4,658,168)	$	3,931,471	$	4,335,008
Short-term investments available for sale, at fair value (amortized cost: 2024 — $1,523,558; 2023 — $928,562)	1,523,512		928,731
Total investments available for sale	5,454,983		5,263,739
Other invested assets	282,781		277,226
Total investments	5,737,764		5,540,965
Cash	197,402		141,787
Accrued investment income	35,534		35,689
Accounts receivable	56,974		63,266
Deferred policy acquisition costs	9,199		9,139
Property and equipment (at cost, less accumulated depreciation of $72,911 in 2024 and $71,168 in 2023)	42,905		41,304
Prepaid federal income tax	487,456		470,646
Goodwill and intangible assets, net	70,258		72,826
Other assets	55,253		51,051
Total assets	$	6,692,745	$	6,426,673

Liabilities and Stockholders’ Equity
Liabilities
Reserve for losses and LAE	$	260,688	$	260,095
Unearned premium reserve	126,938		140,285
Net deferred tax liability	381,393		362,753
Credit facility borrowings (at carrying value, less unamortized deferred costs of $2,552 in 2024 and $3,080 in 2023)	422,448		421,920
Other accrued liabilities	121,488		139,070
Total liabilities	1,312,955		1,324,123
Commitments and contingencies (see Note 7)
Stockholders’ Equity
Common shares, $0.015 par value:
Authorized - 233,333; issued and outstanding - 106,372 shares in 2024 and 106,597 shares in 2023	1,596		1,599
Additional paid-in capital	1,278,918		1,299,869
Accumulated other comprehensive loss	(307,637)		(280,496)
Retained earnings	4,406,913		4,081,578
Total stockholders’ equity	5,379,790		5,102,550
Total liabilities and stockholders’ equity	$	6,692,745	$	6,426,673

See accompanying notes to condensed consolidated financial statements.

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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)	2024		2023		2024		2023
Revenues:
Net premiums written	$	245,566	$	209,621	$	484,106	$	415,521
Decrease in unearned premiums	6,325		3,608		13,375		8,966
Net premiums earned	251,891		213,229		497,481		424,487
Net investment income	56,086		45,250		108,171		88,486
Realized investment losses, net	(1,164)		(1,589)		(2,304)		(2,077)
(Loss) income from other invested assets	(419)		(4,852)		(2,334)		(7,554)
Other income	6,548		8,090		10,285		13,032
Total revenues	312,942		260,128		611,299		516,374

Losses and expenses:
Provision (benefit) for losses and LAE	(334)		1,260		9,579		1,080
Other underwriting and operating expenses	55,987		42,174		113,336		90,369
Premiums retained by agents	10,215		—		19,706		—
Interest expense	7,849		7,394		15,711		14,330
Total losses and expenses	73,717		50,828		158,332		105,779

Income before income taxes	239,225		209,300		452,967		410,595
Income tax expense	35,616		37,067		67,639		67,535
Net income	$	203,609	$	172,233	$	385,328	$	343,060

Earnings per share:
Basic	$	1.93	$	1.62	$	3.65	$	3.22
Diluted	1.91		1.61		3.61		3.20

Weighted average shares outstanding:
Basic	105,657		106,249		105,677		106,594
Diluted	106,778		107,093		106,774		107,338

Net income	$	203,609	$	172,233	$	385,328	$	343,060

Other comprehensive income loss:
Change in unrealized appreciation (depreciation) of investments, net of tax expense (benefit) of ($1,592) and ($5,046) in the three months ended June 30, 2024 and 2023 and ($4,714) and $4,382 in the six months ended June 30, 2024 and 2023.	(5,375)		(36,098)		(27,141)		22,655
Total other comprehensive income loss	(5,375)		(36,098)		(27,141)		22,655
Comprehensive income	$	198,234	$	136,135	$	358,187	$	365,715

See accompanying notes to condensed consolidated financial statements.

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Essent Group Ltd. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Common Shares
Balance, beginning of period	$	1,601	$	1,615	$	1,599	$	1,615

Issuance of management incentive shares	1		—		8		8
Forfeiture of management incentive shares	—		—		(1)		—
Cancellation of treasury stock	(6)		(10)		(10)		(18)
Balance, end of period	1,596		1,605		1,596		1,605
Additional Paid-In Capital
Balance, beginning of period	1,293,424		1,334,607		1,299,869		1,350,377

Dividends and dividend equivalents declared	514		415		803		818
Issuance of management incentive shares	(1)		—		(8)		(8)
Forfeiture of management incentive shares	—		—		1		—
Stock-based compensation expense	6,972		4,354		13,792		9,460
Cancellation of treasury stock	(21,991)		(29,542)		(35,539)		(50,813)
Balance, end of period	1,278,918		1,309,834		1,278,918		1,309,834
Accumulated Other Comprehensive Loss
Balance, beginning of period	(302,262)		(324,037)		(280,496)		(382,790)
Other comprehensive income (loss)	(5,375)		(36,098)		(27,141)		22,655
Balance, end of period	(307,637)		(360,135)		(307,637)		(360,135)
Retained Earnings
Balance, beginning of period	4,233,391		3,636,756		4,081,578		3,493,107
Net income	203,609		172,233		385,328		343,060
Dividends and dividend equivalents declared	(30,087)		(26,941)		(59,993)		(54,119)
Balance, end of period	4,406,913		3,782,048		4,406,913		3,782,048
Treasury Stock
Balance, beginning of period	—		—		—		—
Treasury stock acquired	(21,997)		(29,552)		(35,549)		(50,831)
Cancellation of treasury stock	21,997		29,552		35,549		50,831
Balance, end of period	—		—		—		—
Total Stockholders' Equity	$	5,379,790	$	4,733,352	$	5,379,790	$	4,733,352

See accompanying notes to condensed consolidated financial statements.

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Essent Group Ltd. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Six Months Ended June 30,
(In thousands)	2024		2023
Operating Activities
Net income	$	385,328	$	343,060
Adjustments to reconcile net income to net cash provided by operating activities:
Realized investment losses, net	2,304		2,077
Loss (income) from other invested assets	2,334		7,554
Distribution of income from other invested assets	3,124		1,715
Depreciation and amortization	2,859		1,439
Stock-based compensation expense	13,792		9,460
Amortization of premium on investment securities	9,675		6,707
Deferred income tax provision	20,623		(32,850)
Change in:
Accrued investment income	155		(2,937)
Accounts receivable	9,992		(5,308)
Deferred policy acquisition costs	(60)		450
Prepaid federal income tax	(16,810)		(28,000)
Other assets	1,513		68,514
Reserve for losses and LAE	593		479
Unearned premium reserve	(13,347)		(8,966)
Other accrued liabilities	(16,449)		(10,894)
Net cash provided by operating activities	405,626		352,500

Investing Activities
Net change in short-term investments	(594,781)		(331,513)
Purchase of investments available for sale	(63,548)		(849,582)
Proceeds from maturity of investments available for sale	245,491		533,563
Proceeds from sales of investments available for sale	174,121		404,708
Purchase of other invested assets	(12,816)		(19,158)
Return of investment from other invested assets	1,803		1,272

Purchase of property and equipment	(5,542)		(797)
Net cash used in investing activities	(255,272)		(261,507)

Financing Activities



Treasury stock acquired	(35,549)		(50,831)

Dividends paid	(59,190)		(53,301)

Net cash used in financing activities	(94,739)		(104,132)

Net increase (decrease) in cash	55,615		(13,139)
Cash at beginning of year	141,787		81,240
Cash at end of period	$	197,402	$	68,101

Supplemental Disclosure of Cash Flow Information
Income tax payments	$	(51,256)	$	(34,671)
Interest payments	(15,444)		(13,520)

Noncash Transactions


Lease liabilities arising from obtaining right-of-use assets	$	—	$	17,293

See accompanying notes to condensed consolidated financial statements.

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Essent Group Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

In these notes to condensed consolidated financial statements, “Essent”, “Company”, “we”, “us”, and “our” refer to Essent Group Ltd. and its subsidiaries, unless the context otherwise requires.

Note 1. Nature of Operations and Basis of Presentation

Essent Group Ltd. (“Essent Group”) is a Bermuda-based holding company, which, through its wholly-owned subsidiaries, offers private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Mortgage insurance facilitates the sale of low down payment (generally less than 20%) mortgage loans into the secondary mortgage market, primarily to two government-sponsored enterprises (“GSEs”), Fannie Mae and Freddie Mac.

The primary mortgage insurance operations are conducted through Essent Guaranty, Inc. (“Essent Guaranty”), which is domiciled in the state of Pennsylvania. Essent Guaranty is headquartered in Radnor, Pennsylvania and maintains an operations center in Winston-Salem, North Carolina. Essent Guaranty is approved as a qualified mortgage insurer by the GSEs and is licensed to write mortgage insurance in all 50 states and the District of Columbia.

Essent Guaranty reinsures new insurance written ("NIW") to Essent Reinsurance Ltd. (“Essent Re”), an affiliated Bermuda domiciled Class 3B Insurer licensed pursuant to Section 4 of the Bermuda Insurance Act 1978 that provides insurance and reinsurance coverage of mortgage credit risk. In April 2021, Essent Guaranty and Essent Re agreed to increase the quota share reinsurance coverage provided by Essent Re from 25% to 35% effective January 1, 2021. The quota share reinsurance coverage provided for Essent Guaranty’s NIW prior to January 1, 2021 will continue to be 25%, the quota share percentage in effect at the time NIW was first ceded. Essent Re also provides insurance and reinsurance to Freddie Mac and Fannie Mae. In 2016, Essent Re formed Essent Agency (Bermuda) Ltd., a wholly-owned subsidiary, which provides underwriting consulting services to third-party reinsurers. In accordance with certain state law requirements, Essent Guaranty also reinsures that portion of the risk that is in excess of 25% of the mortgage balance with respect to any loan insured prior to April 1, 2019, after consideration of other reinsurance, to Essent Guaranty of PA, Inc. (“Essent PA”), an affiliate domiciled in the state of Pennsylvania.

In addition to offering mortgage insurance, we provide contract underwriting services on a limited basis through CUW Solutions, LLC ("CUW Solutions"), a Delaware limited liability company, that provides, among other things, mortgage contract underwriting services to lenders and mortgage insurance underwriting services to affiliates. CUW Solutions is headquartered in Radnor, Pennsylvania and it maintains an operations center in Winston-Salem, North Carolina that is subleased from Essent Guaranty.

As a result of our acquisitions of Agents National Title Insurance Company and Boston National Holdings LLC on July 1, 2023, we now offer title insurance products and title and settlement services. Our title insurance operations are headquartered in Columbia, Missouri, and we operate our title agency operations in Charlotte, North Carolina and Pittsburgh, Pennsylvania.

We have prepared the condensed consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). We have condensed or omitted certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) pursuant to such rules and regulations. In the opinion of management, the statements include all adjustments (which include normal recurring adjustments) required for a fair statement of financial position, results of operations and cash flows for the interim periods presented. These statements should be read in conjunction with the consolidated financial statements and notes thereto, including Note 1 and Note 2 to the consolidated financial statements, included in our Annual Report on Form 10-K for the year ended December 31, 2023, which discloses the principles of consolidation and a summary of significant accounting policies. The results of operations for the interim periods are not necessarily indicative of the results for the full year. We evaluated the need to recognize or disclose events that occurred subsequent to June 30, 2024 prior to the issuance of these condensed consolidated financial statements.

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Essent Group Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 2. Recently Issued Accounting Standards

Accounting Standards Adopted During the Period

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This update clarifies the guidance in ASC 820 on the fair value measurement of an equity security that is subject to a contractual sale restriction and requires specific disclosures related to such an equity security. The update clarifies that a contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security and is not included in the equity security's unit of account. Accordingly, an entity should not consider the contractual sale restriction when measuring the equity security’s fair value. The update also requires specific disclosures related to equity securities that are subject to contractual sale restrictions, including (1) the fair value of such equity securities reflected in the balance sheet, (2) the nature and remaining duration of the corresponding restrictions, and (3) any circumstances that could cause a lapse in the restrictions. The ASU was effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The adoption of this ASU did not have a material effect on the Company's consolidated operating results or financial position.

Accounting Standards Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. The ASU requires that public entities disclose significant expense categories and amounts for each reportable segment, which are derived from expenses that are 1) regularly reported to an entity’s chief operating decision-maker (CODM) and 2) included in a segment’s reported measures of profit or loss. Public entities must also disclose an amount for “other segment items,” representing the difference between 1) segment revenue less significant segment expenses and 2) the reportable segment’s profit or loss measures. A description of the composition of “other segment items” also is required as well as the title and position of the CODM and entities must explain how the CODM uses the reported measures of profit or loss to assess segment performance. The ASU also requires interim disclosure of certain segment-related disclosures that previously were required only on an annual basis and clarifies that entities with a single reportable segment are subject to both new and existing segment reporting requirements under Topic 280. It also clarifies that an entity is permitted to disclose multiple measures of segment profit or loss, provided that certain criteria are met. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Entities must adopt the changes to the segment reporting guidance on a retrospective basis, with early adoption permitted. The Company is currently evaluating the impact that the ASU will have on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid, including taxes paid by jurisdiction. The ASU will be effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively, with early adoption permitted. The Company is currently evaluating the impact that the ASU will have on our consolidated financial statements.

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Essent Group Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 3. Investments

Investments available for sale consist of the following:


June 30, 2024 (In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities	$	1,019,443	$	106	$	(20,373)	$	999,176

U.S. agency mortgage-backed securities	876,049		25		(118,484)		757,590
Municipal debt securities (1)	568,369		2,951		(46,924)		524,396
Non-U.S. government securities	77,370		—		(11,339)		66,031
Corporate debt securities (2)	1,248,288		1,034		(97,346)		1,151,976
Residential and commercial mortgage securities	550,708		248		(51,969)		498,987
Asset-backed securities	468,228		410		(13,185)		455,453
Money market funds	1,001,374		—		—		1,001,374
Total investments available for sale	$	5,809,829	$	4,774	$	(359,620)	$	5,454,983


December 31, 2023 (In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities	$	1,014,076	$	1,434	$	(19,128)	$	996,382
U.S. agency securities	7,199		—		(4)		7,195
U.S. agency mortgage-backed securities	922,907		438		(101,999)		821,346
Municipal debt securities (1)	585,047		6,660		(44,449)		547,258
Non-U.S. government securities	77,516		—		(10,069)		67,447
Corporate debt securities (2)	1,380,533		4,425		(87,903)		1,297,055
Residential and commercial mortgage securities	571,163		286		(53,509)		517,940
Asset-backed securities	584,168		203		(19,376)		564,995
Money market funds	444,121		—		—		444,121
Total investments available for sale	$	5,586,730	$	13,446	$	(336,437)	$	5,263,739


	June 30,		December 31,
(1) The following table summarizes municipal debt securities as of :	2024		2023
Special revenue bonds	83.0	%	81.4	%
General obligation bonds	17.0		18.6



Total	100.0	%	100.0	%


	June 30,		December 31,
(2) The following table summarizes corporate debt securities as of :	2024		2023
Financial	40.7	%	42.0	%
Consumer, non-cyclical	16.5		15.9
Industrial	7.7		8.1
Consumer, cyclical	7.5		7.1
Communications	7.3		7.2
Utilities	6.2		6.3
Technology	6.5		6.2
Energy	5.0		4.7
Basic Materials	2.6		2.5

Total	100.0	%	100.0	%

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Essent Group Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

The amortized cost and fair value of investments available for sale at June 30, 2024, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most U.S. agency mortgage-backed securities, residential and commercial mortgage securities and asset-backed securities provide for periodic payments throughout their lives, they are listed below in separate categories.


(In thousands)	Amortized Cost		Fair Value
U.S. Treasury securities:
Due in 1 year	$	669,532	$	666,822
Due after 1 but within 5 years	296,652		284,595
Due after 5 but within 10 years	38,816		35,074
Due after 10 years	14,443		12,685
Subtotal	1,019,443		999,176




Municipal debt securities:
Due in 1 year	10,148		9,992
Due after 1 but within 5 years	86,662		83,246
Due after 5 but within 10 years	125,670		116,787
Due after 10 years	345,889		314,371
Subtotal	568,369		524,396
Non-U.S. government securities:
Due in 1 year	4,800		4,715
Due after 1 but within 5 years	31,896		30,319
Due after 5 but within 10 years	8,338		6,856
Due after 10 years	32,336		24,141
Subtotal	77,370		66,031
Corporate debt securities:
Due in 1 year	160,824		159,044
Due after 1 but within 5 years	405,414		384,152
Due after 5 but within 10 years	536,015		491,049
Due after 10 years	146,035		117,731
Subtotal	1,248,288		1,151,976
U.S. agency mortgage-backed securities	876,049		757,590
Residential and commercial mortgage securities	550,708		498,987
Asset-backed securities	468,228		455,453
Money market funds	1,001,374		1,001,374
Total investments available for sale	$	5,809,829	$	5,454,983

The components of realized investment (losses) gains, net on the condensed consolidated statements of comprehensive income were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Realized gross gains	$	51	$	23	$	55	$	892
Realized gross losses	(692)		(1,436)		(1,836)		(2,793)
Impairment loss	(523)		(176)		(523)		(176)

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Essent Group Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

The fair value of investments available for sale in an unrealized loss position and the related unrealized losses for which no allowance for credit loss has been recorded were as follows:


	Less than 12 months				12 months or more				Total
June 30, 2024 (In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury securities	$	676,520	$	(10,015)	$	156,302	$	(10,358)	$	832,822	$	(20,373)

U.S. agency mortgage-backed securities	79,991		(2,181)		670,718		(116,303)		750,709		(118,484)
Municipal debt securities	91,994		(2,191)		309,410		(44,733)		401,404		(46,924)
Non-U.S. government securities	2,999		(1,406)		63,032		(9,933)		66,031		(11,339)
Corporate debt securities	256,400		(7,793)		812,456		(89,553)		1,068,856		(97,346)
Residential and commercial mortgage securities	27,485		(1,716)		457,287		(50,253)		484,772		(51,969)
Asset-backed securities	49,201		(1,100)		228,156		(12,085)		277,357		(13,185)

Total	$	1,184,590	$	(26,402)	$	2,697,361	$	(333,218)	$	3,881,951	$	(359,620)


	Less than 12 months				12 months or more				Total
December 31, 2023 (In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury securities	$	139,398	$	(1,075)	$	355,921	$	(18,053)	$	495,319	$	(19,128)
U.S. agency securities	5,572		(2)		1,623		(2)		7,195		(4)
U.S. agency mortgage-backed securities	129,359		(1,616)		654,018		(100,383)		783,377		(101,999)
Municipal debt securities	59,301		(987)		297,039		(43,462)		356,340		(44,449)
Non-U.S. government securities	—		—		67,447		(10,069)		67,447		(10,069)
Corporate debt securities	119,764		(733)		905,606		(87,170)		1,025,370		(87,903)
Residential and commercial mortgage securities	31,936		(999)		459,789		(52,510)		491,725		(53,509)
Asset-backed securities	65,195		(347)		459,324		(19,029)		524,519		(19,376)

Total	$	550,525	$	(5,759)	$	3,200,767	$	(330,678)	$	3,751,292	$	(336,437)

At June 30, 2024 and December 31, 2023, we held 2,117 and 2,256 individual investment securities, respectively, that were in an unrealized loss position. We assess our intent to sell these securities and whether we will be required to sell these securities before the recovery of their amortized cost basis when determining whether to record an impairment on the securities in an unrealized loss position. In assessing whether the decline in the fair value at June 30, 2024 of any of these securities resulted from a credit loss or other factors, we made inquiries of our investment managers to determine that each issuer was current on its scheduled interest and principal payments. We reviewed the credit rating of these securities noting that approximately 98% of the securities at June 30, 2024 had investment-grade ratings. We concluded that gross unrealized losses noted above were primarily associated with the changes in interest rates subsequent to purchase rather than due to credit impairment. We recorded impairments of $0.5 million in the three and six months ended June 30, 2024 and impairments of

$0.2 million in the three and six months ended June 30, 2023 due to our intent to sell securities in an unrealized loss position.

The Company's other invested assets at June 30, 2024 and December 31, 2023 totaled $282.8 million and $277.2 million, respectively. Other invested assets are principally comprised of limited partnership interests which are generally accounted for under the equity method or fair value using net asset value (or its equivalent) as a practical expedient. Our proportionate share of earnings or losses or changes in fair value are reported in income from other invested assets on the condensed consolidated statements of comprehensive income. For entities accounted for under the equity method that follow industry-specific guidance for investment companies, our proportionate share of earnings or losses includes changes in the fair value of the underlying assets of these entities. Due to the timing of receiving financial information from these partnerships, the results are generally reported on a one month or quarter lag.

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Essent Group Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Other invested assets that are accounted for at fair value using the net asset value (or its equivalent) as a practical expedient totaled $138.0 million as of June 30, 2024. The majority of these investments were in limited partnerships invested in real estate or consumer credit. At June 30, 2024, maximum future funding commitments were $44.5 million. For limited partnership investments that have a contractual expiration date, we expect the liquidation of the underlying assets to occur over the next one to nine years. For certain of these investments, the Company does not have the contractual option to redeem but receives distributions based on the liquidation of the underlying assets. In addition, the Company generally does not have the ability to sell or transfer these investments without the consent from the general partner of individual limited partnerships.

The fair value of investments deposited with insurance regulatory authorities to meet statutory requirements was $9.2 million at June 30, 2024 and $9.2 million at December 31, 2023. In connection with its insurance and reinsurance activities, Essent Re is required to maintain assets in trusts for the benefit of its contractual counterparties. The fair value of the investments on deposit in these trusts was $1.0 billion at June 30, 2024 and $1.1 billion at December 31, 2023. Essent Guaranty is also required to maintain assets on deposit for the benefit of the sponsor of a fixed income investment commitment. The fair value of the assets on deposit was $9.7 million at June 30, 2024 and $9.2 million at December 31, 2023.

Net investment income consists of:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Fixed maturities	$	45,368	$	43,775	$	91,656	$	87,251
Short-term investments	11,831		3,298		18,974		5,017
Gross investment income	57,199		47,073		110,630		92,268
Investment expenses	(1,113)		(1,823)		(2,459)		(3,782)
Net investment income	$	56,086	$	45,250	$	108,171	$	88,486

Note 4. Reinsurance

In the ordinary course of business, our insurance subsidiaries may use reinsurance to provide protection against adverse loss experience and to expand our capital sources. Reinsurance recoverables are recorded as assets and included in other assets on our condensed consolidated balance sheets, predicated on a reinsurer's ability to meet their obligations under the reinsurance agreements. If the reinsurers are unable to satisfy their obligations under the agreements, our insurance subsidiaries would be liable for such defaulted amounts.

The effect of reinsurance on net premiums written and earned is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Net premiums written:
Direct	$	272,910	$	249,167	$	541,841	$	488,658
Ceded (1)	(27,344)		(39,546)		(57,735)		(73,137)
Net premiums written	$	245,566	$	209,621	$	484,106	$	415,521

Net premiums earned:
Direct	$	279,235	$	252,775	$	555,216	$	497,624
Ceded (1)	(27,344)		(39,546)		(57,735)		(73,137)
Net premiums earned	$	251,891	$	213,229	$	497,481	$	424,487

(1)Net of profit commission.

Quota Share Reinsurance

Essent Guaranty has entered into quota share reinsurance agreements with a panels of third-party reinsurers ("QSR" agreements). Each of the third-party reinsurers has an insurer financial strength rating of A- or better by S&P Global Ratings,

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Essent Group Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

A.M. Best or both. Under each QSR agreement, Essent Guaranty will cede premiums earned on all eligible policies written during a specified period, in exchange for reimbursement of ceded claims and claims expenses on covered policies, a specified ceding commission, and a profit commission that varies directly and inversely with ceded claims. Essent Guaranty has certain termination rights under each QSR agreement, including the option to terminate each QSR agreement subject to a termination fee.

The following tables summarizes Essent Guaranty's quota share reinsurance agreements as of June 30, 2024:


QSR Agreement	Coverage Period	Ceding Percentage	Ceding Commission	Profit Commission
QSR-2019	September 1, 2019 - December 31, 2020	(1)	20%	63%	(2)
QSR-2022	January 1, 2022 - December 31, 2022	20%	20%	62%
QSR-2023	January 1, 2023 - December 31, 2023	17.5%	20%	58%
QSR-2024	January 1, 2024 - December 31, 2024	15.0%	20%	57%

_______________________________________________________________________________

(1)Under QSR-2019, Essent Guaranty cedes 40% of premiums on singles policies and 20% on all other policies.

(2)The original profit commission on QSR-2019 was up to 60%; however because Essent Guaranty did not exercise its option to terminate the QSR Agreement on December 31, 2021, the maximum profit commission that Essent Guaranty could earn increased to 63% in 2022 and thereafter.

Total RIF ceded under the QSR agreements was $8.4 billion as of June 30, 2024.

Excess of Loss Reinsurance

Essent Guaranty has entered into fully collateralized reinsurance agreements ("Radnor Re Transactions") with unaffiliated special purpose insurers domiciled in Bermuda. For the reinsurance coverage periods, Essent Guaranty and its affiliates retain the first layer of the respective aggregate losses, and a Radnor Re special purpose insurer will then provide second layer coverage up to the outstanding reinsurance coverage amount. Essent Guaranty and its affiliates retain losses in excess of the outstanding reinsurance coverage amount. The reinsurance premium due to each Radnor Re special purpose insurer is calculated by multiplying the outstanding reinsurance coverage amount at the beginning of a period by a coupon rate, which is the sum of one-month SOFR plus a risk margin, and then subtracting actual investment income collected on the assets in the related reinsurance trust during that period. The aggregate excess of loss reinsurance coverage decreases over a ten-year period as the underlying covered mortgages amortize. Essent Guaranty has rights to terminate the Radnor Re Transactions. The Radnor Re entities collateralized the coverage by issuing mortgage insurance-linked notes ("ILNs") in an aggregate amount equal to the initial coverage to unaffiliated investors. The notes have ten-year legal maturities and are non-recourse to any assets of Essent Guaranty or its affiliates. The proceeds of the notes were deposited into reinsurance trusts for the benefit of Essent Guaranty and will be the source of reinsurance claim payments to Essent Guaranty and principal repayments on the ILNs.

Essent Guaranty has also entered into reinsurance agreements with panels of reinsurers that provide aggregate excess of loss coverage immediately above or pari-passu to the coverage provided by the Radnor Re Transactions. The aggregate excess of loss reinsurance coverage decreases over a ten-year period as the underlying covered mortgages amortize. Essent Guaranty has rights to terminate these reinsurance agreements.

Essent Guaranty has entered into reinsurance agreements with panels of reinsurers that provides excess of loss coverage on new insurance written from January 1, 2018 through August 31, 2019 and from October 1, 2021 through December 31, 2023. Effective July 1, 2024, Essent Guaranty has entered into a reinsurance agreement with a panel of reinsurers that provides excess of loss coverage on new insurance written from January 1, 2024 through December 31, 2024. For the reinsurance coverage periods, Essent Guaranty and its affiliates retain the first layer of the respective aggregate losses, and the reinsurance panels will then provide second layer coverage up to the outstanding reinsurance coverage amounts. Essent Guaranty and its affiliates retain losses in excess of the outstanding reinsurance coverage amounts.

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Essent Group Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes Essent Guaranty's excess of loss coverages and retentions provided by insurance linked notes as of June 30, 2024:


(In thousands)
Deal Name	Vintage	Remaining Insurance in Force		Remaining Risk in Force		Remaining Reinsurance in Force		Remaining First Layer Retention		Optional Termination Date
Radnor Re 2021-1	Aug. 2020 - Mar. 2021	$	27,796,132	$	7,390,779	$	250,732	$	278,227	June 26, 2028
Radnor Re 2021-2	Apr. 2021 - Sep. 2021	32,876,424		9,007,485		301,015		277,770		November 25, 2027
Radnor Re 2022-1	Oct. 2021 - Jul. 2022	29,790,115		8,096,398		209,409		302,032		September 25, 2028
Radnor Re 2023-1	Aug. 2022 - Jun. 2023	29,594,148		8,102,672		281,462		281,434		July 25, 2028
Total		$	120,056,819	$	32,597,334	$	1,042,618	$	1,139,463

The following table summarizes Essent Guaranty's excess of loss reinsurance coverages and retentions provided by panels of reinsurers as of June 30, 2024:


(In thousands)
Deal Name	Vintage	Remaining Insurance in Force		Remaining Risk in Force		Remaining Reinsurance in Force		Remaining First Layer Retention		Optional Termination Date
XOL 2019-1	Jan. 2018 - Dec. 2018	$	5,024,587	$	1,321,732	$	76,144	$	244,991	February 25, 2026
XOL 2020-1	Jan. 2019 - Aug. 2019	6,290,687		1,658,671		32,770		212,557		January 25, 2027
XOL 2022-1	Oct. 2021 - Dec. 2022	67,094,902		18,213,963		141,992		502,788		January 1, 2030
XOL 2023-1	Jan. 2023 - Dec. 2023	39,252,349		10,868,626		36,627		366,154		January 1, 2028
Total		$	117,662,525	$	32,062,992	$	287,533	$	1,326,490

The amount of monthly reinsurance premiums ceded to the Radnor Re entities will fluctuate due to changes in one-month SOFR and changes in money market rates that affect investment income collected on the assets in the reinsurance trusts. As the reinsurance premium will vary based on changes in these rates, we concluded that the Radnor Re Transactions contain embedded derivatives that will be accounted for separately like freestanding derivatives. The change in the fair value of the embedded derivatives is reported in earnings and included in other income.

In connection with the Radnor Re Transactions, we concluded that the risk transfer requirements for reinsurance accounting were met as each Radnor Re entity is assuming significant insurance risk and a reasonable possibility of a significant loss. In addition, we assessed whether each Radnor Re entity was a variable interest entity ("VIE") and the appropriate accounting for the Radnor Re entities if they were VIEs. A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not substantively participate in the gains and losses of the entity. A VIE is consolidated by its primary beneficiary. The primary beneficiary is the entity that has both (1) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the breadth of the decision-making ability and ability to influence activities that significantly affect the economic performance of the VIE. We concluded that the Radnor Re entities are VIEs. However, given that Essent Guaranty (1) does not have the unilateral power to direct the activities that most significantly affect their economic performance and (2) does not have the obligation to absorb losses or the right to receive benefits that could be potentially significant to these entities, the Radnor Re entities are not consolidated in these financial statements.

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Essent Group Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents total assets of each Radnor Re special purpose insurer as well as our maximum exposure to loss associated with each Radnor Re entity, representing the fair value of the embedded derivatives, using observable inputs in active markets (Level 2), included in other assets (other accrued liabilities) on our condensed consolidated balance sheet and the estimated net present value of investment earnings on the assets in the reinsurance trusts, each as of June 30, 2024:


			Maximum Exposure to Loss
(In thousands)	Total VIE Assets		On - Balance Sheet		Off - Balance Sheet		Total
Radnor Re 2021-1 Ltd.	$	250,732	$	(5,098)	$	36	$	(5,062)
Radnor Re 2021-2 Ltd.	301,015		(5,561)		63		(5,498)
Radnor Re 2022-1 Ltd.	209,409		74		44		118
Radnor Re 2023-1 Ltd.	281,462		341		76		417
Total	$	1,042,618	$	(10,244)	$	219	$	(10,025)

Note 5. Reserve for Losses and Loss Adjustment Expenses

The following table provides a reconciliation of the beginning and ending reserve balances for losses and loss adjustment expenses (“LAE”) for the six months ended June 30:


(In thousands)	2024		2023
Reserve for losses and LAE at beginning of period	$	260,095	$	216,464
Less: Reinsurance recoverables	24,104		14,618
Net reserve for losses and LAE at beginning of period	235,991		201,846

Add provision for losses and LAE, net of reinsurance, occurring in:
Current period	70,584		64,070
Prior years	(61,005)		(62,990)
Net incurred losses and LAE during the current period	9,579		1,080
Deduct payments for losses and LAE, net of reinsurance, occurring in:
Current period	885		31
Prior years	10,118		3,910
Net loss and LAE payments during the current period	11,003		3,941
Net reserve for losses and LAE at end of period	234,567		198,985
Plus: Reinsurance recoverables	26,121		17,958
Reserve for losses and LAE at end of period	$	260,688	$	216,943

For the six months ended June 30, 2024, $10.1 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There has been a $61.0 million favorable prior year development during the six months ended June 30, 2024. Reserves remaining as of June 30, 2024 for prior years are $164.9 million as a result of re-estimation of unpaid losses and loss adjustment expenses. For the six months ended June 30, 2023, $3.9 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There was a $63.0 million favorable prior year development during the six months ended June 30, 2023. Reserves remaining as of June 30, 2023 for prior years were $134.9 million as a result of re-estimation of unpaid losses and loss adjustment expenses. In both periods, the favorable prior years' loss development was the result of a re-estimation of amounts ultimately to be paid on prior year defaults in the default inventory, including the impact of previously identified defaults that cured. Original estimates are increased or decreased as additional information becomes known regarding individual claims.

The Federal Reserve increased the target federal funds rate several times during 2022 and 2023 in an effort to reduce consumer price inflation. These rate increases have resulted in higher mortgage interest rates which may lower home sale activity and affect the options available to delinquent borrowers. It is reasonably possible that our estimate of losses could change in the near term as a result of changes in the economic environment, the impact of elevated mortgage interest rates on home sale activity, housing inventory and home prices.

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Essent Group Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 6. Debt Obligations

Credit Facility

Through June 30, 2024, Essent Group and its subsidiaries, Essent Irish Intermediate Holdings Limited and Essent US Holdings, Inc. (collectively, the "Borrowers"), were parties to a five-year secured credit facility with a committed capacity of $825 million (the "Existing Credit Facility"). The Existing Credit Facility also provided for up to $175 million aggregate principal amount of uncommitted incremental term loan and/or revolving credit facilities that may be exercised at the Borrowers’ option so long as the Borrowers receive commitments from the lenders. Borrowings under the Existing Credit Facility may have been used for working capital and general corporate purposes, including, without limitation, capital contributions to Essent’s insurance and reinsurance subsidiaries. Borrowings accrued interest at a floating rate tied to a standard short-term borrowing index, selected at the Company’s option, plus an applicable margin. A commitment fee was due quarterly on the average daily amount of the undrawn revolving commitment. The applicable margin and the commitment fee were based on the senior unsecured debt rating or long-term issuer rating of Essent Group to the extent available, or the insurer financial strength rating of Essent Guaranty. The annual commitment fee rate at June 30, 2024 was 0.25%. The obligations under the Exisiting Credit Facility were secured by certain assets of the Borrowers, excluding the stock and assets of its insurance and reinsurance subsidiaries. The Credit Facility contained several covenants, including financial covenants relating to minimum net worth, capital and liquidity levels, maximum debt to capitalization level and Essent Guaranty's compliance with the PMIERs (see Note 14). As of June 30, 2024, the Company was in compliance with the covenants and $425 million had been borrowed under the term loan portion of the Existing Credit Facility with a weighted average interest rate of 7.07%. As of December 31, 2023, $425 million had been borrowed with a weighted average interest rate of 7.11%.

On July 1, 2024, Essent Group completed an underwritten public offering of $500 million principal amount of 6.25% Senior Notes due 2029 (the “Senior Notes" or "Offering"). Interest on the Senior Notes will be payable semi-annually in arrears on January 1 and July 1 of each year, beginning on January 1, 2025. The Senior Notes will mature on July 1, 2029. At any time prior to June 1, 2029 (one month prior to the maturity date), the Company may redeem the Senior Notes, at its option, in whole or in part, at any time and from time to time, at a redemption price described in the Supplemental Indenture plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time and from time to time on or after June 1, 2029, the Company may redeem, at its option, in whole or in part, the Notes at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The net proceeds from the sale of the Senior Notes, after deducting the underwriting discounts and commissions and estimated offering expenses, were approximately $495.3 million. The Company used the net proceeds from the sale of the Senior Notes to repay all of the borrowings outstanding under the term loan portion of the Existing Credit Facility described above, and intends to use the remaining net proceeds for general corporate purposes.

On July 1, 2024, concurrently with the closing of the Offering of the Senior Notes and the repayment of all of the borrowings outstanding under the term loan portion of its Existing Credit Agreement, the Fourth Amended and Restated Credit Agreement (the “Revolving Credit Agreement”) became effective and amends and restates the Existing Credit Facility. Under the Revolving Credit Agreement, the Refinancing Agreement Revolving Lenders (as defined therein) agreed to provide the Company with a five-year unsecured revolving credit facility of up to $500 million of senior unsecured revolving loans (the “Revolving Credit Facility”). The Revolving Credit Facility also provides for an aggregate principal amount of up to $250 million in uncommitted incremental revolving credit facilities that may be exercised at the Company’s option, so long as the Company receives sufficient commitments from the bank lenders.

Note 7. Commitments and Contingencies

Obligations under Guarantees

Under the terms of CUW Solutions' contract underwriting agreements with lenders and subject to contractual limitations on liability, we agree to indemnify certain lenders against losses incurred in the event that we make an error in determining whether loans processed meet specified underwriting criteria, to the extent that such error materially restricts or impairs the salability of such loan, results in a material reduction in the value of such loan or results in the lender repurchasing the loan. The indemnification may be in the form of monetary or other remedies. We paid less than $0.1 million in remedy payments in the six months ended June 30, 2024, and we made no remedy payments in the six months ended June 30, 2023. As

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Essent Group Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

of June 30, 2024, management believes any potential claims for indemnification related to contract underwriting services through June 30, 2024 are not material to our consolidated financial position or results of operations.

In addition to the indemnifications discussed above, in the normal course of business, we enter into agreements or other relationships with third parties pursuant to which we may be obligated under specified circumstances to indemnify the counterparties with respect to certain matters. Our contractual indemnification obligations typically arise in the context of agreements entered into by us to, among other things, purchase or sell services, finance our business and business transactions, lease real property and license intellectual property. The agreements we enter into in the normal course of business generally require us to pay certain amounts to the other party associated with claims or losses if they result from our breach of the agreement, including the inaccuracy of representations or warranties. The agreements we enter into may also contain other indemnification provisions that obligate us to pay amounts upon the occurrence of certain events, such as the negligence or willful misconduct of our employees, infringement of third-party intellectual property rights or claims that performance of the agreement constitutes a violation of law. Generally, payment by us under an indemnification provision is conditioned upon the other party making a claim, and typically we can challenge the other party’s claims. Further, our indemnification obligations may be limited in time and/or amount, and in some instances, we may have recourse against third parties for certain payments made by us under an indemnification agreement or obligation. As of June 30, 2024, contingencies triggering material indemnification obligations or payments have not occurred historically and are not expected to occur. The nature of the indemnification provisions in the various types of agreements and relationships described above are believed to be low risk and pervasive, and we consider them to have a remote risk of loss or payment. We have not recorded any provisions on the condensed consolidated balance sheets related to indemnifications.

Note 8. Capital Stock

Our authorized share capital consists of 233.3 million shares of a single class of common shares. The common shares have no preemptive rights or other rights to subscribe for additional shares, and no rights of redemption, conversion or exchange. Under certain circumstances and subject to the provisions of Bermuda law and our bye-laws, we may be required to make an offer to repurchase shares held by members. The common shares rank pari passu with one another in all respects as to rights of payment and distribution. In general, holders of common shares will have one vote for each common share held by them and will be entitled to vote, on a non-cumulative basis, at all meetings of shareholders. In the event that a shareholder is considered a 9.5% Shareholder under our bye-laws, such shareholder's votes will be reduced by whatever amount is necessary so that after any such reduction the votes of such shareholder will not result in any other person being treated as a 9.5% Shareholder with respect to the vote on such matter. Under these provisions certain shareholders may have their voting rights limited to less than one vote per share, while other shareholders may have voting rights in excess of one vote per share.

Dividends

The following table presents the amounts declared and paid per common share each quarter:


Quarter Ended	2024		2023
March 31	$	0.28	$	0.25
June 30	0.28		0.25
September 30	—		0.25
December 31	—		0.25
Total dividends per common share declared and paid	$	0.56	$	1.00

In August 2024, the Board of Directors declared a quarterly cash dividend of $0.28 per common share payable on September 10, 2024 to shareholders of record on August 30, 2024.

Share Repurchase Plan

In October 2023, the Board of Directors approved a share repurchase plan that authorizes the Company to repurchase $250 million of common shares in the open market between January 1, 2024 and December 31, 2025. Through June 30, 2024, the Company repurchased 492,790 common shares at a cost of $27.1 million under the 2023 plan, leaving $222.9 million remaining unused under the authorized repurchase plan as of June 30, 2024.

Table of Contents

Essent Group Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 9. Stock-Based Compensation

In 2013, Essent Group's Board of Directors adopted, and Essent Group's shareholders approved, the Essent Group Ltd. 2013 Long-Term Incentive Plan (the "2013 Plan"), which was effective upon completion of the initial public offering. The 2013 Plan was most recently amended effective upon shareholder approval in May 2023 to increase the number of shares available for issuance under the 2013 Plan by 2 million shares. The types of awards available under the 2013 Plan include nonvested shares, nonvested share units, non-qualified share options, incentive stock options, share appreciation rights, and other share-based or cash-based awards. Nonvested shares and nonvested share units granted under the 2013 Plan have rights to dividends, which entitle holders to the same dividend value per share as holders of common shares in the form of dividend equivalent units ("DEUs"). DEUs are subject to the same vesting and other terms and conditions as the corresponding nonvested shares and nonvested share units. DEUs vest when the underlying shares or share units vest and are forfeited if the underlying share or share units forfeit prior to vesting. The maximum number of shares and share units available for issuance is 7.5 million under the 2013 Plan, as amended. As of June 30, 2024, there were 3.3 million common shares available for future grant under the 2013 Plan.

The following table summarizes nonvested common share, nonvested common share unit and DEU activity for the six months ended June 30, 2024:

Time and Performance-
Based Share Awards

Time-Based
Share Awards

Share Units

Essent Group Ltd. [ESNT] Filings
10-Q	[2024-08-06]
10-Q	[2024-05-07]
10-K	[2024-02-16]
10-Q	[2023-11-07]
10-Q	[2023-08-08]
10-Q	[2023-05-10]
10-K	[2023-02-17]
10-Q	[2022-11-08]
10-Q	[2022-08-08]
10-Q	[2022-05-06]
10-K	[2022-02-16]
10-Q	[2021-11-08]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-02-26]
10-Q	[2020-11-06]
10-Q	[2020-08-10]
10-Q	[2020-05-08]
10-K	[2020-02-18]
10-Q	[2019-11-08]
10-Q	[2019-08-05]
10-Q	[2019-05-06]
10-K	[2019-02-19]
10-Q	[2018-11-09]
10-Q	[2018-08-06]
10-Q	[2018-05-08]
10-K	[2018-02-20]
10-Q	[2017-11-09]
10-Q	[2017-08-07]
10-Q	[2017-05-09]
10-K	[2017-02-16]
10-Q	[2016-11-04]
10-Q	[2016-08-05]
10-Q	[2016-05-06]
10-K	[2016-02-29]
10-Q	[2015-11-06]
10-Q	[2015-08-10]
10-Q	[2015-05-11]
10-K	[2015-02-27]
10-Q	[2014-11-14]
10-Q	[2014-08-14]
10-Q	[2014-05-15]
10-K	[2014-03-10]
S-1	[2013-09-16]