Essent Group Ltd. · NYSE:ESNT
Essent — Q3 2023 Earnings Presentation
23 slides from Essent's earnings presentation, Nov 2, 2023
Slide 1: Investor Presentation 3Q23
ESSENT GROUP LTD. INVESTOR PRESENTATION 3Q23 NYSE: ESNT November 2, 2023 ESSENT GROUP LTD. | NYSE: ESNT © 2023 Essent Group Ltd. All rights reserved. | essentgroup.com | 1
Slide 2: Disclaimer
Disclaimer This presentation may include “forward-looking statements” which are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," “shou
Slide 3: Essent Is A Leading Mortgage Insurer
Essent Is A Leading Mortgage Insurer 2Q23 3Q23 Company Overview Consolidated Financial Results • Essent Group Ltd. is a Bermuda-based holding company that went Net Income ($M) $172.2 $178.0 public in 2013, and is traded on the New York Stock Exchange (NYSE: ESNT) . Combined Ratio 20.4% 31.7% • Two p
Slide 4: Delivering Shareholder Value
Delivering Shareholder Value BOOK VALUE PER SHARE GROWTH Annualized growth rate of 18.9% since December 31, 2013 $44.98 $41.44 $38.73 $34.36 $30.34 $24.11 $19.71 $14.43 $12.08 $10.33 $8.35 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Sep-23 Strong Cash Flows Programmatic Ste
Slide 5: Key Milestones in Essent's Evolution
Key Milestones in Essent’s Evolution Launch IPO Launch of First CRT EssentEDGE® EssentEDGE® Essent Title of Essent Essent Re Next Generation Guaranty Essent Essent initiates Essent Essent acquires Essent Re its first credit- launches A cloud-based AI title insurance completes Essent completes first
Slide 6: Buy, Manage & Distribute Operating Model
Buy, Manage & Distribute Operating Model EssentEDGE® Enables Rapid Execution Strong Operating Results of Targeted Pricing Strategies ➢ Trailing Twelve Months Operating Cash Flow ➢ Lender utilization continues to increase of $720 million ➢ The latest generation of EssentEDGE® is a ➢ Continue to focus
Slide 7: Credit Risk Transfer
Credit Risk Transfer Since March 2018, Essent has transferred credit risk to: ▪ Capital market investors via nine(1) Radnor Re Insurance-Linked Note (ILN) issuances ▪ Reinsurers via four Excess of Loss (XOL) reinsurance transactions ▪ Reinsurers via three Quota Share (QS) reinsurance programs As of
Slide 8: Essent Re
Essent Re ➢ Essent Reinsurance Ltd. (“Essent Re”) is a Bermuda-based reinsurance company, rated A (Excellent) by A.M. Best and BBB+ by S&P, with $1.7 billion in GAAP equity as of September 30, 2023 ➢ Essent Re primarily focuses on three business lines: ➢ Affiliate quota share (QS) to reinsure Essent
Slide 9: Investment Portfolio
Investment Portfolio As Of September 30, 2023, Essent Has $5.3 Billion Of Total Investments Portfolio by Asset Class Portfolio by Rating1 Non-U.S. Below Baa3 Other Invested Assets Government 1.8% 5.2% 0.9% Money market Baa funds 13.2% 6.8% U.S. RMBS & Government CMBS and Agency 9.4% Debt 31.0% A Aaa
Slide 10: Industry Fundamentals
Industry Fundamentals STABLE DEMAND OF FIRST-TIME HOMEBUYER POPULATION MONTH’S SUPPLY OF HOUSING INVENTORY New Entrants to Domestic First-Time Homebuyer Population (M) 4.7 4.7 4.7 4.6 4.5 4.4 4.4 4.5 4.5 4.4 4.5 4.5 4.5 4.5 4.6 4.0 3.9 4.0 4.1 4.2 Favorable demographic trends should continue to prov
Slide 11: U.S. Mortgage Insurance In Force (IIF) & New Insurance Written (NIW)
U.S. Mortgage Insurance In Force (IIF) & New Insurance Written (NIW) IIF BY VINTAGE YEAR ($B) ($ in billions) DEC. 31, 2021 DEC. 31, 2022 SEPT. 30, 2023 IIF % of Total IIF % of Total IIF % of Total WA Coupon 2023 - - - - $37.6 15.8% 6.5% 2022 - - $60.6 26.7% $57.7 24.2% 5.1% 2021 $79.8 38.5% $71.5 3
Slide 12: A High Credit Quality IIF Portfolio
A High Credit Quality IIF Portfolio IIF BY FICO SCORE ($B) ($ in billions) SEPT. 30, 2022 JUN. 30, 2023 SEPT. 30, 2023 IIF % of Total IIF % of Total IIF % of Total >=760 $92.3 41.5% $95.9 40.8% $97.0 40.7% 740-759 $37.8 17.0% $40.7 17.3% $41.4 17.3% 720-739 $33.9 15.2% $36.8 15.6% $37.3 15.6% 700-71
Slide 13: Financial Highlights
Financial Highlights AS OF END OF PERIOD ($ in millions, except per share amounts) 3Q22 4Q22 1Q23 2Q23 3Q23 KEY METRICS U.S. Mortgage IIF $222,542.6 $227,062.1 $231,537.4 $235,649.9 $238,661.6 Total Assets $5,556.9 $5,723.8 $5,927.5 $5,983.3 $6,094.2 Total Investments $4,848.0 $4,999.6 $5,205.3 $5,2
Slide 14: In Force Portfolio Premium Yield
In Force Portfolio Premium Yield U.S. Mortgage Insurance Portfolio PERIOD ENDING (in basis points) 3Q22 4Q22 1Q23 2Q23 3Q23 Base Premium Earned 40 bps 40 bps 40 bps 40 bps 40 bps Singles Cancellation Premium 1 bps 0 bps 0 bps 0 bps 0 bps Gross Premium Rate 41 bps 40 bps 40 bps 40 bps 40 bps Ceded Pr
Slide 15: Cost of Reinsurance Transactions
Cost of Reinsurance Transactions PERIOD ENDING ($ in millions) 3Q22 4Q22 1Q23 2Q23 3Q23 U.S. Mortgage Insurance Portfolio ILN/XOL Ceded Premium $22.44) $23.85) $22.28) $27.71) $16.59) QSR Ceded Premium $8.10) $10.44) $11.31) $11.83) $13.70) Total Ceded Premium $30.54) $34.29) $33.59) $39.54) $30.29)
Slide 16: Default Rollforward
Default Rollforward U.S. Mortgage Insurance Portfolio PERIOD ENDING (number of loans) 3Q22 4Q22 1Q23 2Q23 3Q23 Beginning Default Inventory 12,707 12,435 13,433 12,773 12,480 Plus: New Defaults (1) 6,448 7,505 7,015 6,575 7,953 Less: Cures (6,642) (6,425) (7,574) (6,761) (6,902) Less: Claims Paid (68
Slide 17: Components Of Provision For Losses & LAE
Components Of Provision For Losses & LAE U.S. Mortgage Insurance Portfolio PERIOD ENDING ($ in millions) 3Q22 4Q22 1Q23 2Q23 3Q23 Provision for Losses & LAE occurring in: Current Period $20.14) $36.14) $32.69) $31.37 $35.61 Prior Year Development ($15.85) ($32.01) ($32.86) ($30.10) ($25.55) Provisio
Slide 18: Cumulative Incurred Loss Ratio By Vintage Year
Cumulative Incurred Loss Ratio By Vintage Year U.S. Mortgage Insurance Portfolio PRE-2015 2015 2016 2017 2018 2019 2020 2021 2022 2023 Pre-2015 2.4% 2.9% 3.1% 3.0% 2.7% 2.6% 3.3% 3.3% 2.6% 2.5% 2015 2.1% 3.3% 4.0% 3.0% 2.7% 4.6% 4.3% 2.7% 2.5% 2016 2.3% 4.6% 3.4% 2.9% 6.4% 5.3% 2.8% 2.3% 2017 7.5% 4
Slide 19: U.S. Mortgage Insurance Subsidiaries
U.S. Mortgage Insurance Subsidiaries As of: ($ in millions) 3Q22 4Q22 1Q23 2Q23 3Q23 Scheduled Contingency Statutory Financial Information Reserve Releases(3) ($ in millions) Risk-to-capital ratio 10.1:1 10.2:1 10.3:1 10.5:1 10.3:1 Oct-Dec 2023 $20 Common stock and paid-in surplus(1) $744 $744 $744
Slide 20: Quarterly Financial Trends
Quarterly Financial Trends U.S. MORTGAGE IIF & NIW NET INCOME Total Insurance In Force ($B) Net Income ($M) Total New Insurance Written ($B) $274.2 $231.5 $235.6 $238.7 $222.5 $227.1 $215.9 $231.8 $207.2 $206.8 $181.0 $178.1 $172.2 $178.0 $170.8 $147.4 $16.4 $12.8 $20.1 $17.1 $13.0 $12.9 $13.5 $12.5
Slide 21: Annual Financial Trends
Annual Financial Trends U.S. MORTGAGE IIF & NIW NET INCOME Total Insurance In Force ($B) Net Income ($M) Total New Insurance Written ($B) $238.7 $227.1 $831.4 $207.2 $198.9 $681.8 $164.0 $555.7 $137.7 $521.0 $467.4 $110.5 $107.9 $413.0 $379.7 $84.2 $63.6 $63.1 $43.9 $47.5 $38.9 2017 2018 2019 2020 2
Slide 22: CRT Summary: As Of 9/30/23
CRT Summary: As Of 9/30/23 1. Insurance Linked Note Transactions (ILN) are with Radnor Re 2. Excess of Loss Agreements (XOL) and Quota Share (QSR) 5. Reduction in PMIERs Minimum Required Assets estimated by (RMIR) entities transactions are with panels of U.S. & global reinsurers the Company ➢ The Ra
Slide 23: ESSENT GROUP LTD. | NYSE: ESNT © 2023 Essent Group Ltd. All rights reserved.
ESSENT GROUP LTD. | NYSE: ESNT © 2023 Essent Group Ltd. All rights reserved. | essentgroup.com | 23