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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 March 31, 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)
(441297-9901
(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 filerSmaller 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 May 2, 2024 was 106,673,099.


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)
 
 March 31,December 31,
(In thousands, except per share amounts)20242023
Assets  
Investments  
Fixed maturities available for sale, at fair value (amortized cost: 2024 — $4,519,993;
2023 — $4,658,168)
$4,172,237 $4,335,008 
Short-term investments available for sale, at fair value (amortized cost: 2024 —
$1,196,961; 2023 — $928,562)
1,196,837 928,731 
Total investments available for sale5,369,074 5,263,739 
Other invested assets279,625 277,226 
Total investments5,648,699 5,540,965 
Cash164,255 141,787 
Accrued investment income35,817 35,689 
Accounts receivable68,932 63,266 
Deferred policy acquisition costs8,980 9,139 
Property and equipment (at cost, less accumulated depreciation of $72,080 in 2024 and
$71,168 in 2023)
43,751 41,304 
Prepaid federal income tax467,183 470,646 
Goodwill and intangible assets, net
72,271 72,826 
Other assets55,095 51,051 
Total assets$6,564,983 $6,426,673 
Liabilities and Stockholders’ Equity  
Liabilities  
Reserve for losses and LAE$267,324 $260,095 
Unearned premium reserve133,235 140,285 
Net deferred tax liability368,955 362,753 
Credit facility borrowings (at carrying value, less unamortized deferred costs of $2,816 in 2024 and $3,080 in 2023)
422,184 421,920 
Other accrued liabilities147,131 139,070 
Total liabilities1,338,829 1,324,123 
Commitments and contingencies (see Note 7)
Stockholders’ Equity  
Common shares, $0.015 par value:
  
Authorized - 233,333; issued and outstanding - 106,742 shares in 2024 and 106,597
shares in 2023
1,601 1,599 
Additional paid-in capital1,293,424 1,299,869 
Accumulated other comprehensive loss(302,262)(280,496)
Retained earnings4,233,391 4,081,578 
Total stockholders’ equity5,226,154 5,102,550 
Total liabilities and stockholders’ equity$6,564,983 $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 March 31,
(In thousands, except per share amounts)20242023
Revenues:  
Net premiums written$238,540 $205,900 
Decrease in unearned premiums7,050 5,358 
Net premiums earned245,590 211,258 
Net investment income52,085 43,236 
Realized investment losses, net(1,140)(488)
(Loss) income from other invested assets(1,915)(2,702)
Other income3,737 4,942 
Total revenues298,357 256,246 
Losses and expenses:  
Provision (benefit) for losses and LAE9,913 (180)
Other underwriting and operating expenses57,349 48,195 
Premiums retained by agents
9,491  
Interest expense7,862 6,936 
Total losses and expenses84,615 54,951 
Income before income taxes213,742 201,295 
Income tax expense32,023 30,468 
Net income$181,719 $170,827 
Earnings per share:  
Basic$1.72 $1.60 
Diluted1.70 1.59 
Weighted average shares outstanding:  
Basic105,697 106,943 
Diluted106,770 107,585 
Net income$181,719 $170,827 
Other comprehensive income loss:
  
Change in unrealized appreciation (depreciation) of investments, net of tax expense (benefit) of ($3,122) and $9,428 in the three months ended March 31, 2024 and 2023.
(21,766)58,753 
Total other comprehensive income loss
(21,766)58,753 
Comprehensive income$159,953 $229,580 
 
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 March 31,
(In thousands)20242023
Common Shares  
Balance, beginning of period$1,599 $1,615 
Issuance of management incentive shares7 8 
Forfeiture of management incentive shares(1) 
Cancellation of treasury stock(4)(8)
Balance, end of period1,601 1,615 
Additional Paid-In Capital
Balance, beginning of period1,299,869 1,350,377 
Dividends and dividend equivalents declared289 403 
Issuance of management incentive shares(7)(8)
Forfeiture of management incentive shares1  
Stock-based compensation expense6,820 5,106 
Cancellation of treasury stock(13,548)(21,271)
Balance, end of period1,293,424 1,334,607 
Accumulated Other Comprehensive Loss
Balance, beginning of period(280,496)(382,790)
Other comprehensive income (loss)(21,766)58,753 
Balance, end of period(302,262)(324,037)
Retained Earnings
Balance, beginning of period4,081,578 3,493,107 
Net income181,719 170,827 
Dividends and dividend equivalents declared(29,906)(27,178)
Balance, end of period4,233,391 3,636,756 
Treasury Stock
Balance, beginning of period  
Treasury stock acquired(13,552)(21,279)
Cancellation of treasury stock13,552 21,279 
Balance, end of period  
Total Stockholders' Equity$5,226,154 $4,648,941 

See accompanying notes to condensed consolidated financial statements.

3

Essent Group Ltd. and Subsidiaries
 
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
 Three Months Ended March 31,
(In thousands)20242023
Operating Activities  
Net income$181,719 $170,827 
Adjustments to reconcile net income to net cash provided by operating activities:  
Loss on the sale of investments, net1,140 488 
Loss (income) from other invested assets1,915 2,702 
Distribution of income from other invested assets1,806 851 
Depreciation and amortization1,390 698 
Stock-based compensation expense6,820 5,106 
Amortization of premium on investment securities4,544 3,203 
Deferred income tax provision9,324 16,878 
Change in:  
Accrued investment income(128)(3,734)
Accounts receivable(695)(2,602)
Deferred policy acquisition costs159 399 
Prepaid federal income tax3,463  
Other assets(3,882)(4,061)
Reserve for losses and LAE7,229 (442)
Unearned premium reserve(7,050)(5,358)
Other accrued liabilities9,181 (166)
Net cash provided by operating activities216,935 184,789 
Investing Activities  
Net change in short-term investments(268,106)(95,725)
Purchase of investments available for sale(63,092)(798,280)
Proceeds from maturity of investments available for sale113,323 412,441 
Proceeds from sales of investments available for sale77,182 333,513 
Purchase of other invested assets(6,348)(1,945)
Return of investment from other invested assets227 1,044 
Purchase of property and equipment(4,484)(390)
Net cash used in investing activities(151,298)(149,342)
Financing Activities  
Treasury stock acquired(13,552)(21,279)
Dividends paid(29,617)(26,775)
Net cash used in financing activities(43,169)(48,054)
Net increase (decrease) in cash
22,468 (12,607)
Cash at beginning of year141,787 81,240 
Cash at end of period$164,255 $68,633 
Supplemental Disclosure of Cash Flow Information
Income tax payments$621 $ 
Interest payments(7,610)(6,402)
Noncash Transactions
Lease liabilities arising from obtaining right-of-use assets$ $87 
 
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.

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 March 31, 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:
March 31, 2024 (In thousands)Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
U.S. Treasury securities$1,057,616 $187 $(21,016)$1,036,787 
U.S. agency securities1,574  (1)1,573 
U.S. agency mortgage-backed securities901,725 105 (114,545)787,285 
Municipal debt securities (1)581,274 3,595 (45,191)539,678 
Non-U.S. government securities77,443  (11,048)66,395 
Corporate debt securities (2)1,311,746 2,079 (94,665)1,219,160 
Residential and commercial mortgage securities558,754 327 (52,301)506,780 
Asset-backed securities537,758 292 (15,698)522,352 
Money market funds689,064   689,064 
Total investments available for sale$5,716,954 $6,585 $(354,465)$5,369,074 
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 

 March 31,December 31,
(1) The following table summarizes municipal debt securities as of :20242023
Special revenue bonds81.7 %81.4 %
General obligation bonds18.3 18.6 
Total100.0 %100.0 %

 March 31,December 31,
(2) The following table summarizes corporate debt securities as of :20242023
Financial41.8 %42.0 %
Consumer, non-cyclical15.9 15.9 
Industrial8.0 8.1 
Consumer, cyclical7.2 7.1 
Communications7.1 7.2 
Utilities6.4 6.3 
Technology6.2 6.2 
Energy4.9 4.7 
Basic Materials2.5 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 March 31, 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$633,987 $632,624 
Due after 1 but within 5 years370,211 355,791 
Due after 5 but within 10 years38,986 35,391 
Due after 10 years14,432 12,981 
Subtotal1,057,616 1,036,787 
U.S. agency securities:  
Due in 1 year1,574 1,573 
Subtotal1,574 1,573 
Municipal debt securities:  
Due in 1 year6,934 6,852 
Due after 1 but within 5 years87,058 84,352 
Due after 5 but within 10 years133,277 124,643 
Due after 10 years354,005 323,831 
Subtotal581,274 539,678 
Non-U.S. government securities:
Due in 1 year4,797 4,691 
Due after 1 but within 5 years31,909 30,432 
Due after 5 but within 10 years5,789 4,666 
Due after 10 years34,948 26,606 
Subtotal77,443 66,395 
Corporate debt securities:  
Due in 1 year169,890 168,104 
Due after 1 but within 5 years442,671 421,440 
Due after 5 but within 10 years552,880 509,315 
Due after 10 years146,305 120,301 
Subtotal1,311,746 1,219,160 
U.S. agency mortgage-backed securities901,725 787,285 
Residential and commercial mortgage securities558,754 506,780 
Asset-backed securities537,758 522,352 
Money market funds689,064 689,064 
Total investments available for sale$5,716,954 $5,369,074 

The components of realized investment (losses) gains, net on the condensed consolidated statements of comprehensive income were as follows:
 
 Three Months Ended March 31,
(In thousands)20242023
Realized gross gains$3 $869 
Realized gross losses(1,143)(1,357)
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
March 31, 2024 (In thousands)Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
U.S. Treasury securities$516,852 $(2,708)$318,693 $(18,308)$835,545 $(21,016)
U.S. agency securities1,573 (1)  1,573 (1)
U.S. agency mortgage-backed securities92,502 (1,363)683,424 (113,182)775,926 (114,545)
Municipal debt securities62,169 (882)318,055 (44,309)380,224 (45,191)
Non-U.S. government securities  66,395 (11,048)66,395 (11,048)
Corporate debt securities202,873 (2,606)888,500 (92,059)1,091,373 (94,665)
Residential and commercial mortgage securities
20,677 (323)473,205 (51,978)493,882 (52,301)
Asset-backed securities118,848 (511)286,205 (15,187)405,053 (15,698)
Total$1,015,494 $(8,394)$3,034,477 $(346,071)$4,049,971 $(354,465)
 
 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 March 31, 2024 and December 31, 2023, we held 2,216 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 March 31, 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 March 31, 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. There were no impairments recorded in the three months ended March 31, 2024 or 2023.

The Company's other invested assets at March 31, 2024 and December 31, 2023 totaled $279.6 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 $134.7 million as of March 31, 2024. The majority of these investments were in limited partnerships invested in real estate or consumer credit. At March 31, 2024, maximum future funding commitments were $46.4 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 $9.1 million at March 31, 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 March 31, 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 $9.6 million at March 31, 2024 and $9.2 million at December 31, 2023.

Net investment income consists of: 
 Three Months Ended March 31,
(In thousands)20242023
Fixed maturities$46,288 $43,473 
Short-term investments7,143 1,721 
Gross investment income53,431 45,194 
Investment expenses(1,346)(1,958)
Net investment income$52,085 $43,236 
 
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 
March 31,
(In thousands)20242023
Net premiums written:
Direct$268,931 $239,491 
Ceded (1)(30,391)(33,591)
Net premiums written$238,540 $205,900 
Net premiums earned:
Direct$275,981 $244,849 
Ceded (1)(30,391)(33,591)
Net premiums earned$245,590 $211,258 
(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,
10

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 March 31, 2024:

QSR AgreementCoverage PeriodCeding PercentageCeding CommissionProfit Commission
QSR-2019September 1, 2019 - December 31, 2020(1)20%63%(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 and thereafter.

Total RIF ceded under the QSR agreements was $8.2 billion as of March 31, 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 a panels of reinsurers that provides excess of loss coverage on new insurance written from October 1, 2021 through December 31, 2022 and from January 1, 2023 through December 31, 2023. 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.
    
11

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 March 31, 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. 202129,772,296 7,817,502 280,941 278,416 June 26, 2028
Radnor Re 2021-2Apr. 2021 - Sep. 202134,555,672 9,408,534 322,709 278,709 November 25, 2027
Radnor Re 2022-1Oct. 2021 - Jul. 202230,751,105 8,334,892 219,606 302,892 September 25, 2028
Radnor Re 2023-1
Aug. 2022 - Jun. 2023
30,145,794 8,250,148 281,462 281,462 July 25, 2028
Total$125,224,867 $33,811,076 $1,104,718 $1,141,480 


The following table summarizes Essent Guaranty's excess of loss reinsurance coverages and retentions provided by panels of reinsurers as of March 31, 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. 20185,274,449 1,385,510 76,144 245,590 February 25, 2026
XOL 2020-1Jan. 2019 - Dec. 20196,574,279 1,728,344 35,024 212,934 January 25, 2027
XOL 2022-1Oct. 2021 - Dec. 202268,954,857 18,681,548 141,992 504,904 January 1, 2030
XOL 2023-1Jan. 2023 - Dec. 202339,984,013 11,066,581 36,627 366,270 January 1, 2028
Total$120,787,598 $32,861,983 $289,787 $1,329,698 


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.

12

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 March 31, 2024:
Maximum Exposure to Loss
(In thousands)Total VIE AssetsOn - Balance SheetOff - Balance SheetTotal
Radnor Re 2021-1 Ltd.280,941 (5,210)47 (5,163)
Radnor Re 2021-2 Ltd.322,709 (5,743)76 (5,667)
Radnor Re 2022-1 Ltd.219,606 40 56 96 
Radnor Re 2023-1 Ltd.
281,462 (63)84 21 
Total$1,104,718 $(10,976)$263 $(10,713)

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 three months ended March 31:
 
(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 period39,396 32,694 
Prior years(29,483)(32,874)
Net incurred losses and LAE during the current period9,913 (180)
Deduct payments for losses and LAE, net of reinsurance, occurring in:
Current period404  
Prior years4,846 2,001 
Net loss and LAE payments during the current period5,250 2,001 
Net reserve for losses and LAE at end of period240,654 199,665 
Plus: Reinsurance recoverables26,670 16,357 
Reserve for losses and LAE at end of period$267,324 $216,022 
 
For the three months ended March 31, 2024, $4.8 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There has been a $29.5 million favorable prior year development during the three months ended March 31, 2024. Reserves remaining as of March 31, 2024 for prior years are $201.7 million as a result of re-estimation of unpaid losses and loss adjustment expenses. For the three months ended March 31, 2023, $2.0 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There was a $32.9 million favorable prior year development during the three months ended March 31, 2023. Reserves remaining as of March 31, 2023 for prior years were $167.0 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.

13

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


Note 6. Debt Obligations
 
Credit Facility

Essent Group and its subsidiaries, Essent Irish Intermediate Holdings Limited and Essent US Holdings, Inc. (collectively, the "Borrowers"), are parties to a five-year secured credit facility with a committed capacity of $825 million (the Credit Facility"). The Credit Facility also provides 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 Credit Facility may be used for working capital and general corporate purposes, including, without limitation, capital contributions to Essent’s insurance and reinsurance subsidiaries. Borrowings accrue 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 is due quarterly on the average daily amount of the undrawn revolving commitment. The applicable margin and the commitment fee are 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 March 31, 2024 was 0.25%. The obligations under the Credit Facility are secured by certain assets of the Borrowers, excluding the stock and assets of its insurance and reinsurance subsidiaries. The Credit Facility contains 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). The borrowings under the Credit Facility contractually mature on December 10, 2026. As of March 31, 2024, the Company was in compliance with the covenants and $425 million had been borrowed under the term loan portion of the Credit Facility with a weighted average interest rate of 7.06%. As of December 31, 2023, $425 million had been borrowed with a weighted average interest rate of 7.11%.

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 three months ended March 31, 2024, and we made no remedy payments in the three months ended March 31, 2023. As of March 31, 2024, management believes any potential claims for indemnification related to contract underwriting services through March 31, 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 March 31, 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.

14

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

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 Ended20242023
March 31$0.28 $0.25 
June 30— 0.25 
September 30— 0.25 
December 31— 0.25 
Total dividends per common share declared and paid$0.28 $1.00 

In April 2024, the Board of Directors declared a quarterly cash dividend of $0.28 per common share payable on June 10, 2024 to shareholders of record on May 31, 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 March 31, 2024, the Company repurchased 97,111 common shares at a cost of $5.1 million under the 2023 plan, leaving $244.9 million remaining unused under the authorized repurchase plan as of March 31, 2024.

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 March 31, 2024, there were 3.3 million common shares available for future grant under the 2013 Plan.
15

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

The following table summarizes nonvested common share, nonvested common share unit and DEU activity for the three months ended March 31, 2024:
 
 Time and Performance-
Based Share Awards
Time-Based
Share Awards
Share UnitsDEUs
(Shares in thousands)Number of
Shares
Weighted
Average
Grant Date
Fair Value
Number of
Shares
Weighted
Average
Grant Date
Fair Value
Number of
Share Units
Weighted
Average
Grant Date
Fair Value
Dividend Equivalent UnitsWeighted
Average
Grant Date
Fair Value
Outstanding at beginning of year
844 $14.29 149 $44.40 724 $41.49 57 $44.00 
Granted244 21.84 53 53.87 292 49.52 9 57.70 
Vested(167)15.64 (73)44.44 (169)41.06 (18)43.49 
Forfeited(84)15.64   (6)42.66 (5)44.08 
Outstanding at March 31, 2024
837 $16.09 129 $48.26 841 $44.36 43 $47.00 


In February 2024, certain members of senior management were granted nonvested common shares under the 2013 Plan that were subject to time-based and performance-based vesting. The time-based share awards granted in February 2024 vest in three equal installments commencing on March 1 of the year following the grant year. The performance-based share awards granted in February 2024 vest based upon our compounded annual book value per share growth percentage and relative total shareholder return during a three-year performance period that commenced on January 1, 2024 and vest on March 1, 2027. Shares were issued at the maximum 200% of target. The portion of these nonvested performance-based share awards that will be earned is as follows:

Relative Total Shareholder Return
vs. S&P 1500 Financial Services Index
≤25th percentile
50th percentile
≥75th percentile
Three-Year Book
Value Per Share
CAGR
12%
100%150%200%
11%75%125%175%
10%50%100%150%
8%25%75%125%
7%0%50%100%


In the event that the compounded annual book value per share growth or the relative total shareholder return falls between the performance levels shown above, the nonvested common shares earned will be determined on a straight-line basis between the respective levels shown.
 
In February 2024, nonvested common share units were issued to certain vice president and staff level employees and are subject to time-based vesting in two equal installments on January 6, 2025 and 2026. In connection with our incentive program covering bonus awards for performance year 2023, in February 2024, time-based share units were issued to certain employees that vest in three equal installments on March 1, 2025, 2026 and 2027. Also in February 2024, time-based share units were granted to certain vice president and staff level employee that vest in three equal installments on March 1, 2027, 2028 and 2029.

Quoted market prices are used for the valuation of common shares granted that do not contain a market condition under ASC 718. The performance-based share awards granted in February 2022, 2023 and 2024 contain a market condition and were valued based on analysis provided by a third-party valuation firm using a risk neutral simulation taking into effect the vesting conditions of the grant.


16

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

The total fair value on the vesting date of nonvested shares, share units or DEUs that vested was $8.4 million and $13.2 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, there was $42.4 million of total unrecognized compensation expense related to nonvested shares or share units outstanding at March 31, 2024 and we expect to recognize the expense over a weighted average period of 2.6 years.

Employees have the option to tender shares to Essent Group to pay the minimum employee statutory withholding taxes associated with shares upon vesting. Common shares tendered by employees to pay employee withholding taxes totaled 157,273 in the three months ended March 31, 2024. The tendered shares were recorded at cost and included in treasury stock. All treasury stock has been cancelled as of March 31, 2024.
 
Compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares was as follows:
Three Months Ended March 31,
(In thousands)20242023
Compensation expense$6,820 $5,106 
Income tax benefit1,378 1,018 
 
Note 10. Dividends Restrictions

Our U.S. insurance subsidiaries are subject to certain capital and dividend rules and regulations as prescribed by jurisdictions in which they are authorized to operate. Under the insurance laws of the Commonwealth of Pennsylvania, Essent Guaranty and Essent PA may pay dividends during any 12-month period in an amount equal to the greater of (i) 10% of the preceding year-end statutory policyholders' surplus or (ii) the preceding year's statutory net income. The Pennsylvania statute also specifies that dividends and other distributions can be paid out of positive unassigned surplus without prior approval. At March 31, 2024, Essent Guaranty had unassigned surplus of approximately $325.5 million and Essent PA had unassigned surplus of approximately $17.1 million. In three months ended March 31, 2024 and 2023, Essent Guaranty paid dividends of $45 million and $90 million to its parent, Essent US Holdings, Inc. Essent PA did not pay a dividend in the three months ended March 31, 2024 or 2023. As of March 31, 2024, Essent Guaranty and Essent PA could pay additional ordinary dividends in 2023 of $325.5 million and $5.4 million, respectively.

Essent Re is subject to certain dividend restrictions as prescribed by the Bermuda Monetary Authority and under certain agreements with counterparties. In connection with the quota share reinsurance agreement with Essent Guaranty, Essent Re has agreed to maintain a minimum total equity of $100 million. As of March 31, 2024, Essent Re had total equity of $1.8 billion. At March 31, 2024, our insurance subsidiaries were in compliance with these rules, regulations and agreements.

Note 11. Earnings per Share (EPS)
 
The following table reconciles the net income and the weighted average common shares outstanding used in the computations of basic and diluted earnings per common share:
 
Three Months Ended 
March 31,
(In thousands, except per share amounts)20242023
Net income$181,719 $170,827 
Basic weighted average shares outstanding105,697 106,943 
Dilutive effect of nonvested shares1,073 642 
Diluted weighted average shares outstanding106,770 107,585 
Basic earnings per share$1.72 $1.60 
Diluted earnings per share$1.70 $1.59 
 
There were 167,730 and 111,870 antidilutive shares for the three months ended March 31, 2024 and 2023, respectively.
17

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

 
Nonvested performance-based share awards are considered contingently issuable for purposes of the EPS calculation. The 2024, 2023, and 2022 performance-based share awards vest based upon our compounded annual book value per share growth percentage and relative total shareholder return during a three-year performance period. The following table summarizes the performance-based shares issuable if the reporting date was the end of the contingency period.

2024 Performance-Based Grants2023 Performance-Based Grants2022 Performance-Based Grants2021 Performance-Based Grants
Reporting DatePercent Issuable Relative to TargetAs a Percent of Shares IssuedPercent Issuable Relative to TargetAs a Percent of Shares IssuedPercent Issuable Relative to TargetAs a Percent of Shares IssuedPercent Issuable Relative to TargetAs a Percent of Shares Issued
March 31, 2024179%89.5%200%100%200%100%(1)(1)
March 31, 2023200%100%170%85%100%50%
(1) The 2021 performance based awards vested at 133% relative to target on March 1, 2024.

Note 12. Accumulated Other Comprehensive Income (Loss)
 
The following table presents the rollforward of accumulated other comprehensive loss for the three months ended March 31, 2024 and 2023: 
 Three Months Ended March 31,
20242023
(In thousands)Before Tax