Essent Reports Q3 Results & Declares Dividend
Essent Group Ltd. reported net income for the quarter ended September 30, 2020 of $124.5 million or $1.11 per diluted share, compared to $144.6 million or $1.47 per diluted share for the quarter ended September 30, 2019.
Essent also announced that its Board of Directors has declared a quarterly cash dividend of $0.16 per common share. The dividend is payable on December 10, 2020, to shareholders of record on December 1, 2020.
“We are encouraged by the increase in our third quarter earnings as compared to the second quarter due to a lower loss provision driven by a decrease in the number of new COVID-19 default notices received on our insured portfolio,” said Mark A. Casale, Chairman and Chief Executive Officer.
“Although our outlook on the economy remains cautious, we are pleased with the resilience and strength that housing has demonstrated throughout the year which has been a bright spot in the economy and positive for high credit quality growth in our business.”
Financial Highlights:
- Insurance in force as of September 30, 2020 was $190.8 billion, compared to $174.6 billion as of June 30, 2020 and $161.0 billion as of September 30, 2019.
- New insurance written for the third quarter was $36.7 billion, compared to $28.2 billion in the second quarter of 2020 and $18.7 billion in the third quarter of 2019.
- Net premiums earned for the third quarter were $222.3 million, compared to $211.5 million in the second quarter of 2020 and $203.5 million in the third quarter of 2019.
- The expense ratio for the third quarter was 16.7%, compared to 18.4% in the second quarter of 2020 and 20.4% in the third quarter of 2019.
- The provision for losses and LAE for the third quarter was $55.3 million, compared to a provision of $175.9 million in the second quarter of 2020 and a provision of $10.0 million in the third quarter of 2019.
- The percentage of loans in default as of September 30, 2020 was 4.54%, compared to 5.19% as of June 30, 2020 and 0.75% as of September 30, 2019.
- As of October 31, 2020, the percentage of loans in default was 4.25%.
- The combined ratio for the third quarter was 41.6%, compared to 101.5% in the second quarter of 2020 and 25.3% in the third quarter of 2019.
- Other income for the third quarter includes a $0.7 million loss for the change in the fair value of embedded derivatives in certain of our third-party reinsurance agreements, compared to a gain of $2.5 million in the second quarter of 2020 and a loss of $0.8 million in the third quarter of 2019.
- The consolidated balance of cash and investments at September 30, 2020 was $4.7 billion, including cash and investment balances at Essent Group Ltd. of $685.0 million.
- The combined risk-to-capital ratio of the U.S. mortgage insurance business, which includes statutory capital for both Essent Guaranty, Inc. and Essent Guaranty of PA, Inc., was 11.6:1 as of September 30, 2020.
- On October 8, 2020, Essent Guaranty, Inc. obtained $399.2 million of fully collateralized excess of loss reinsurance coverage on mortgage insurance policies written by Essent in September 2019 through July 2020 from Radnor Re 2020-2 Ltd., a newly formed Bermuda special purpose insurer. Radnor Re 2020-2 Ltd. is not a subsidiary or an affiliate of Essent Group Ltd.
- During the third quarter, A.M. Best affirmed its “A [Excellent]” financial strength rating of Essent Guaranty, Inc. and a long-term issuer credit rating of “a” of the operating subsidiaries of Essent Group Ltd. Essent Guaranty, Inc. also has financial strength ratings of “A3” by Moody’s and “BBB+” by S&P.
- On October 14, 2020, Essent Group Ltd. entered into an amended and restated credit facility, increasing to $625 million the committed capacity and extending the contractual maturity to October 16, 2023.
