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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 September 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 classTrading Symbol(s)Name of each exchange on which registered
Common Shares, $0.015 par valueESNTNew 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 October 31, 2024 was 106,213,137.

Essent Group Ltd. and Subsidiaries
 
Form 10-Q
 
Index
 
   
   
 
   
 
   
 
   
 
   
 
   
   
   
   
   
   
   
   
   
 

i
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;
ii

•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
PART I — FINANCIAL INFORMATION
 
Item 1.   Financial Statements (Unaudited)
 
Essent Group Ltd. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)
 
 September 30,December 31,
(In thousands, except per share amounts)20242023
Assets  
Investments  
Fixed maturities available for sale, at fair value (amortized cost: 2024 — $5,137,856;
2023 — $4,658,168)
$4,919,868 $4,335,008 
Short-term investments available for sale, at fair value (amortized cost: 2024 —
$1,030,081; 2023 — $928,562)
1,030,631 928,731 
Total investments available for sale5,950,499 5,263,739 
Other invested assets294,931 277,226 
Total investments6,245,430 5,540,965 
Cash109,306 141,787 
Accrued investment income40,453 35,689 
Accounts receivable54,394 63,266 
Deferred policy acquisition costs9,491 9,139 
Property and equipment (at cost, less accumulated depreciation of $74,054 in 2024 and
$71,168 in 2023)
41,221 41,304 
Prepaid federal income tax494,356 470,646 
Goodwill and acquired intangible assets, net
69,907 72,826 
Other assets61,981 51,051 
Total assets$7,126,539 $6,426,673 
Liabilities and Stockholders’ Equity  
Liabilities  
Reserve for losses and LAE$288,316 $260,095 
Unearned premium reserve120,939 140,285 
Net deferred tax liability410,761 362,753 
Senior Notes due 2029, net
493,673 — 
Credit facility borrowings (at carrying value, less unamortized deferred costs of $3,080 in 2023)
— 421,920 
Other accrued liabilities171,865 139,070 
Total liabilities1,485,554 1,324,123 
Commitments and contingencies (see Note 7)
Stockholders’ Equity  
Common shares, $0.015 par value:
  
Authorized - 233,333; issued and outstanding - 106,204 shares in 2024 and 106,597
shares in 2023
1,593 1,599 
Additional paid-in capital1,276,572 1,299,869 
Accumulated other comprehensive loss(190,279)(280,496)
Retained earnings4,553,099 4,081,578 
Total stockholders’ equity5,640,985 5,102,550 
Total liabilities and stockholders’ equity$7,126,539 $6,426,673 
 
See accompanying notes to condensed consolidated financial statements.
1
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)2024202320242023
Revenues:  
Net premiums written$242,965 $240,574 $727,071 $656,095 
Decrease in unearned premiums5,971 6,231 19,346 15,197 
Net premiums earned248,936 246,805 746,417 671,292 
Net investment income57,340 47,072 165,511 135,558 
Realized investment gains (losses), net
68 (235)(2,236)(2,312)
Income (loss) from other invested assets
2,820 (3,143)486 (10,697)
Other income7,414 5,609 17,699 18,641 
Total revenues316,578 296,108 927,877 812,482 
Losses and expenses:    
Provision (benefit) for losses and LAE30,666 10,822 40,245 11,902 
Other underwriting and operating expenses57,259 54,814 170,595 145,183 
Premiums retained by agents
9,622 13,175 29,328 13,175 
Interest expense11,457 7,854 27,168 22,184 
Total losses and expenses109,004 86,665 267,336 192,444 
Income before income taxes207,574 209,443 660,541 620,038 
Income tax expense31,399 31,484 99,038 99,019 
Net income$176,175 $177,959 $561,503 $521,019 
Earnings per share:    
Basic$1.67 $1.68 $5.32 $4.90 
Diluted1.65 1.66 5.26 4.86 
Weighted average shares outstanding:    
Basic105,266 105,979 105,539 106,387 
Diluted106,554 107,025 106,700 107,232 
Net income$176,175 $177,959 $561,503 $521,019 
Other comprehensive income (loss):
    
     Change in unrealized appreciation (depreciation) of investments, net of tax expense (benefit) of $20,049 and ($12,800) in the three months ended September 30, 2024 and 2023 and $15,335 and $(8,418) in the nine months ended September 30, 2024 and 2023.
117,358 (76,248)90,217 (53,593)
Total other comprehensive income (loss)
117,358 (76,248)90,217 (53,593)
Comprehensive income$293,533 $101,711 $651,720 $467,426 
 
See accompanying notes to condensed consolidated financial statements.

2
Essent Group Ltd. and Subsidiaries
 
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
 
 Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)2024202320242023
Common Shares  
Balance, beginning of period$1,596 $1,605 $1,599 $1,615 
Issuance of management incentive shares— — 8 8 
Forfeiture of management incentive shares— — (1)— 
Cancellation of treasury stock(3)(2)(13)(20)
Balance, end of period1,593 1,603 1,593 1,603 
Additional Paid-In Capital
Balance, beginning of period1,278,918 1,309,834 1,299,869 1,350,377 
Dividends and dividend equivalents declared523 441 1,326 1,259 
Issuance of management incentive shares— — (8)(8)
Forfeiture of management incentive shares— — 1 — 
Stock-based compensation expense6,776 4,479 20,568 13,939 
Cancellation of treasury stock(9,645)(5,037)(45,184)(55,850)
Balance, end of period1,276,572 1,309,717 1,276,572 1,309,717 
Accumulated Other Comprehensive Loss
Balance, beginning of period(307,637)(360,135)(280,496)(382,790)
Other comprehensive income (loss)117,358 (76,248)90,217 (53,593)
Balance, end of period(190,279)(436,383)(190,279)(436,383)
Retained Earnings
Balance, beginning of period4,406,913 3,782,048 4,081,578 3,493,107 
Net income176,175 177,959 561,503 521,019 
Dividends and dividend equivalents declared(29,989)(26,937)(89,982)(81,056)
Balance, end of period4,553,099 3,933,070 4,553,099 3,933,070 
Treasury Stock
Balance, beginning of period— — — — 
Treasury stock acquired(9,648)(5,039)(45,197)(55,870)
Cancellation of treasury stock9,648 5,039 45,197 55,870 
Balance, end of period— — — — 
Total Stockholders' Equity$5,640,985 $4,808,007 $5,640,985 $4,808,007 

See accompanying notes to condensed consolidated financial statements.

3
Essent Group Ltd. and Subsidiaries
 
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
 Nine Months Ended September 30,
(In thousands)20242023
Operating Activities  
Net income$561,503 $521,019 
Adjustments to reconcile net income to net cash provided by operating activities:  
Realized investment losses, net2,236 2,312 
Income (loss) from other invested assets
(486)10,697 
Distribution of income from other invested assets6,404 3,797 
Depreciation and amortization4,352 3,183 
Stock-based compensation expense20,568 13,939 
Amortization of premium on investment securities14,955 10,442 
Deferred income tax provision29,942 (19,583)
Change in:  
Accrued investment income(4,764)(3,489)
Accounts receivable8,659 (6,664)
Deferred policy acquisition costs(352)535 
Prepaid federal income tax(23,710)(42,926)
Other assets(1,185)66,599 
Reserve for losses and LAE28,221 10,256 
Unearned premium reserve(19,346)(15,197)
Other accrued liabilities7,830 (7,372)
Net cash provided by operating activities634,827 547,548 
Investing Activities  
Net change in short-term investments(101,900)(482,796)
Purchase of investments available for sale(1,094,973)(858,678)
Proceeds from maturity of investments available for sale328,950 591,403 
Proceeds from sales of investments available for sale298,571 468,537 
Purchase of other invested assets(27,590)(28,987)
Return of investment from other invested assets3,966 2,783 
Net cash paid for acquisitions
— (86,761)
Purchase of property and equipment(6,045)(1,843)
Net cash used in investing activities(599,021)(396,342)
Financing Activities  
Issuance of senior notes
498,160 — 
Credit facility repayments(425,000)— 
Treasury stock acquired(45,197)(55,870)
Payment of debt issuance costs
(7,594)— 
Dividends paid(88,656)(79,797)
Net cash used in financing activities(68,287)(135,667)
Net increase (decrease) in cash
(32,481)15,539 
Cash at beginning of year141,787 81,240 
Cash at end of period$109,306 $96,779 
Supplemental Disclosure of Cash Flow Information
Income tax payments$(72,338)$(53,337)
Interest payments(17,196)(21,229)
Noncash Transactions
Lease liabilities arising from obtaining right-of-use assets$— $25,117 
 
See accompanying notes to condensed consolidated financial statements.
4
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.

We also offer title insurance products and title and settlement services through our subsidiaries Agents National Title Insurance Company and Boston National Holdings LLC. 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 September 30, 2024 prior to the issuance of these condensed consolidated financial statements.




 
5
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.

6
Essent Group Ltd. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 3. Investments
 
Investments available for sale consist of the following:
September 30, 2024 (In thousands)Amortized
Cost		Unrealized
Gains		Unrealized
Losses		Fair
Value
U.S. Treasury securities$717,926 $2,912 $(11,031)$709,807 
U.S. agency mortgage-backed securities1,131,788 4,215 (84,695)1,051,308 
Municipal debt securities (1)605,126 7,078 (34,557)577,647 
Non-U.S. government securities81,708 — (8,737)72,971 
Corporate debt securities (2)1,752,898 15,601 (64,111)1,704,388 
Residential and commercial mortgage securities539,283 814 (36,117)503,980 
Asset-backed securities556,886 953 (9,763)548,076 
Money market funds782,322 — — 782,322 
Total investments available for sale$6,167,937 $31,573 $(249,011)$5,950,499 
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 securities7,199 — (4)7,195 
U.S. agency mortgage-backed securities922,907 438 (101,999)821,346 
Municipal debt securities (1)585,047 6,660 (44,449)547,258 
Non-U.S. government securities77,516 — (10,069)67,447 
Corporate debt securities (2)1,380,533 4,425 (87,903)1,297,055 
Residential and commercial mortgage securities571,163 286 (53,509)517,940 
Asset-backed securities584,168 203 (19,376)564,995 
Money market funds444,121 — — 444,121 
Total investments available for sale$5,586,730 $13,446 $(336,437)$5,263,739 

 September 30,December 31,
(1) The following table summarizes municipal debt securities as of :20242023
Special revenue bonds83.7 %81.4 %
General obligation bonds16.3 18.6 
Total100.0 %100.0 %

 September 30,December 31,
(2) The following table summarizes corporate debt securities as of :20242023
Financial42.6 %42.0 %
Consumer, non-cyclical15.6 15.9 
Industrial8.2 8.1 
Consumer, cyclical6.2 7.1 
Communications6.1 7.2 
Utilities7.6 6.3 
Technology6.0 6.2 
Energy4.8 4.7 
Basic Materials2.9 2.5 
Total100.0 %100.0 %

7
Essent Group Ltd. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (Unaudited)

The amortized cost and fair value of investments available for sale at September 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$374,834 $374,240 
Due after 1 but within 5 years296,218 291,269 
Due after 5 but within 10 years32,419 30,787 
Due after 10 years14,455 13,511 
Subtotal717,926 709,807 
Municipal debt securities:  
Due in 1 year11,311 11,178 
Due after 1 but within 5 years85,784 84,460 
Due after 5 but within 10 years133,431 128,002 
Due after 10 years374,600 354,007 
Subtotal605,126 577,647 
Non-U.S. government securities:
Due in 1 year5,263 5,211 
Due after 1 but within 5 years32,045 31,271 
Due after 5 but within 10 years7,712 6,649 
Due after 10 years36,688 29,840 
Subtotal81,708 72,971 
Corporate debt securities:  
Due in 1 year165,056 164,117 
Due after 1 but within 5 years480,233 469,192 
Due after 5 but within 10 years897,438 880,803 
Due after 10 years210,171 190,276 
Subtotal1,752,898 1,704,388 
U.S. agency mortgage-backed securities1,131,788 1,051,308 
Residential and commercial mortgage securities539,283 503,980 
Asset-backed securities556,886 548,076 
Money market funds782,322 782,322 
Total investments available for sale$6,167,937 $5,950,499 

The components of realized investment (losses) gains, net on the condensed consolidated statements of comprehensive income were as follows:
 
 Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)2024202320242023
Realized gross gains$360 $113 $415 $1,005 
Realized gross losses(292)(348)(2,128)(3,141)
Impairment loss— — (523)(176)
 
8
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 months12 months or moreTotal
September 30, 2024 (In thousands)Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
U.S. Treasury securities$63,050 $(11)$315,890 $(11,020)$378,940 $(11,031)
U.S. agency mortgage-backed securities98,220 (796)677,515 (83,899)775,735 (84,695)
Municipal debt securities33,660 (224)298,168 (34,333)331,828 (34,557)
Non-U.S. government securities4,383 (29)68,588 (8,708)72,971 (8,737)
Corporate debt securities188,259 (856)768,267 (63,255)956,526 (64,111)
Residential and commercial mortgage securities
3,649 (173)448,587 (35,944)452,236 (36,117)
Asset-backed securities45,495 (236)186,686 (9,527)232,181 (9,763)
Total$436,716 $(2,325)$2,763,701 $(246,686)$3,200,417 $(249,011)
 
 Less than 12 months12 months or moreTotal
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 securities5,572 (2)1,623 (2)7,195 (4)
U.S. agency mortgage-backed securities129,359 (1,616)654,018 (100,383)783,377 (101,999)
Municipal debt securities59,301 (987)297,039 (43,462)356,340 (44,449)
Non-U.S. government securities— — 67,447 (10,069)67,447 (10,069)
Corporate debt securities119,764 (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 securities65,195 (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 September 30, 2024 and December 31, 2023, we held 1,930 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 September 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 99% of the securities at September 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 nine months ended September 30, 2024 and impairments of $0.2 million in the nine months ended September 30, 2023 due to our intent to sell securities in an unrealized loss position.

The Company's other invested assets at September 30, 2024 and December 31, 2023 totaled $294.9 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.

9
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 $137.1 million as of September 30, 2024. The majority of these investments were in limited partnerships invested in real estate or consumer credit. At September 30, 2024, maximum future funding commitments were $43.9 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 $9.4 million at September 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 September 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 $9.8 million at September 30, 2024 and $9.2 million at December 31, 2023.

Net investment income consists of: 
 Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)2024202320242023
Fixed maturities$44,828 $45,373 $136,485 $132,623 
Short-term investments13,786 3,641 32,759 8,660 
Gross investment income58,614 49,014 169,244 141,283 
Investment expenses(1,274)(1,942)(3,733)(5,725)
Net investment income$57,340 $47,072 $165,511 $135,558 
 
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 
September 30,		Nine Months Ended 
September 30,
(In thousands)2024202320242023
Net premiums written:
Direct$277,754 $270,868 $819,595 $759,526 
Ceded (1)(34,789)(30,294)(92,524)(103,431)
Net premiums written$242,965 $240,574 $727,071 $656,095 
Net premiums earned:
Direct$283,725 $277,099 $838,941 $774,723 
Ceded (1)(34,789)(30,294)(92,524)(103,431)
Net premiums earned$248,936 $246,805 $746,417 $671,292 
(1)Net of profit commission.

10
Essent Group Ltd. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (Unaudited)

Quota Share Reinsurance

    Essent Guaranty has entered into quota share reinsurance agreements with 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, A.M. Best Ratings Services, Inc. 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 table summarizes Essent Guaranty's quota share reinsurance agreements as of September 30, 2024:

QSR AgreementCoverage PeriodCeding PercentageCeding CommissionProfit Commission
QSR-2019September 1, 2019 - December 31, 2020(1)26%(2)62.5%(2)
QSR-2022January 1, 2022 - December 31, 202220%20%62%
QSR-2023January 1, 2023 - December 31, 202317.5%20%58%
QSR-2024January 1, 2024 - December 31, 202415.0%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 through June 30, 2024. Effective July 1, 2024, Essent Guaranty renegotiated the terms extending the termination date for QSR-2019 through December 31, 2027. The renegotiated terms increased the ceding commission from 20% to 26% and decreased the maximum profit commission from 63% to 62.5%.
Total RIF ceded under the QSR agreements was $8.6 billion as of September 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, 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 September 30, 2024:

(In thousands)
Deal NameVintageRemaining
Insurance
in Force		Remaining
Risk
in Force		Remaining
Reinsurance in Force		Remaining
First Layer
Retention		Optional Termination Date
Radnor Re 2021-1Aug. 2020 - Mar. 2021$25,750,186 $6,963,249 $220,532 $277,985 June 26, 2028
Radnor Re 2021-2Apr. 2021 - Sep. 202131,287,234 8,616,211 286,439 277,195 November 25, 2027
Radnor Re 2022-1Oct. 2021 - Jul. 202228,815,017 7,856,567 191,938 301,278 September 25, 2028
Radnor Re 2023-1Aug. 2022 - Jun. 202328,989,426 7,941,539 281,462 281,089 July 25, 2028
Radnor Re 2024-1Jul. 2023 - Jul. 202430,359,933 8,387,056 363,366 256,495 September 25, 2029
Total$145,201,796 $39,764,622 $1,343,737 $1,394,042 


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

(In thousands)
Deal NameVintageRemaining
Insurance
in Force		Remaining
Risk
in Force		Remaining
Reinsurance in Force		Remaining
First Layer
Retention		Optional Termination Date
XOL 2019-1Jan. 2018 - Dec. 2018$4,811,623 $1,266,631 $76,144 $244,294 February 25, 2026
XOL 2020-1Jan. 2019 - Aug. 20196,026,073 1,591,126 30,592 212,208 January 25, 2027
XOL 2022-1Oct. 2021 - Dec. 202265,149,106 17,727,315 141,992 500,886 January 1, 2030
XOL 2023-1Jan. 2023 - Dec. 202338,402,550 10,637,649 36,627 366,141 January 1, 2028
XOL 2024-1Jan. 2024 - Dec. 202432,177,995 8,864,366 46,537 265,931 January 1, 2030
Total$146,567,347 $40,087,087 $331,892 $1,589,460 


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 September 30, 2024:
Maximum Exposure to Loss
(In thousands)Total VIE AssetsOn - Balance SheetOff - Balance SheetTotal
Radnor Re 2021-1 Ltd.$220,532 $(5,407)$28 $(5,379)
Radnor Re 2021-2 Ltd.286,439 (5,911)56 (5,855)
Radnor Re 2022-1 Ltd.191,938 (210)37 (173)
Radnor Re 2023-1 Ltd.
281,462 111 73 184 
Radnor Re 2024-1 Ltd.
363,366 — 100 100 
Total$1,343,737 $(11,417)$294 $(11,123)

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 nine months ended September 30:
 
(In thousands)20242023
Reserve for losses and LAE at beginning of period$260,095 $216,464 
Less: Reinsurance recoverables24,104 14,618 
Net reserve for losses and LAE at beginning of period235,991 201,846 
Add provision for losses and LAE, net of reinsurance, occurring in:
Current period124,180 101,547 
Prior years(83,935)(89,645)
Net incurred losses and LAE during the current period40,245 11,902 
Deduct payments for losses and LAE, net of reinsurance, occurring in:
Current period1,824 187 
Prior years17,062 7,496 
Net loss and LAE payments during the current period18,886 7,683 
Net reserve for losses and LAE at end of period257,350 220,578 
Plus: Reinsurance recoverables30,966 20,755 
Reserve for losses and LAE at end of period$288,316 $241,333 
 
For the nine months ended September 30, 2024, $17.1 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There has been $83.9 million of favorable prior year development during the nine months ended September 30, 2024. Reserves remaining as of September 30, 2024 for prior years are $135.0 million as a result of re-estimation of unpaid losses and loss adjustment expenses. For the nine months ended September 30, 2023, $7.5 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There was $89.6 million of favorable prior year development during the nine months ended September 30, 2023. Reserves remaining as of September 30, 2023 for prior years were $104.7 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. As a result of progress on inflation, in September 2024, the Federal Reserve reduced the target federal funds rate by 50 basis points. Mortgage interest rates remain elevated 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
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Essent Group Ltd. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (Unaudited)

of changes in the economic environment, the impact of elevated mortgage interest rates on home sale activity, housing inventory and home prices.

On September 26, 2024, Hurricane Helene made landfall and caused property damage in certain counties in Florida, Georgia, South Carolina, North Carolina, Tennessee and Virginia. On October 9, 2024, Hurricane Milton made landfall causing damage in certain counties in Florida. We believe these hurricanes could have an impact on our insured portfolio’s performance and expect to experience increased defaults in these areas beginning in the fourth quarter of 2024. As of October 31, 2024, our insurance in force in counties with Federal Emergency Management Agency disaster declarations due to hurricanes Helene and Milton is approximately 12.5% of our total insurance in force. It is too early to tell how many claims we ultimately may have to pay associated with any defaults in the hurricane impacted areas. There are many factors contributing to the uncertainty surrounding these insured loans. Under our master policy, loan servicers are not required to notify us of a default until the borrower has missed two consecutive minimum payments. Also, the level of damage being reported in these areas varies significantly from region to region. Further, under our master policy, our exposure may be limited on hurricane-related claims. For example, we are permitted to exclude a claim entirely where damage to the property underlying a mortgage was the proximate cause of the default and adjust a claim where the property underlying a mortgage in default is subject to unrestored physical damage. These events have not materially affected our reserves as of September 30, 2024.


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 obligations under the Existing 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