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What changed in Essent Group Ltd.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Essent Group Ltd.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+449 added−455 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-17)

Top changes in Essent Group Ltd.'s 2023 10-K

449 paragraphs added · 455 removed · 337 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

123 edited+55 added−37 removed170 unchanged
Biggest changeTop Ten States December 31, 2022 2021 IIF by State CA 13.2 % 13.1 % TX 10.4 9.9 FL 10.2 9.7 CO 4.2 4.1 AZ 3.5 3.3 WA 3.4 3.7 GA 3.2 3.1 IL 3.1 3.3 VA 3.0 3.1 NJ 3.0 3.1 All Others 42.8 43.6 Total 100.0 % 100.0 % 8 December 31, 2022 2021 Gross RIF by State CA 13.0 % 13.0 % TX 10.7 10.2 FL 10.5 10.0 CO 4.1 4.0 AZ 3.6 3.3 WA 3.3 3.6 GA 3.2 3.1 IL 3.0 3.2 VA 3.0 3.0 NJ 2.9 3.0 All Others 42.7 43.6 Total 100.0 % 100.0 % Top Ten Metropolitan Statistical Areas December 31, 2022 2021 IIF by Metropolitan Statistical Area Houston-The Woodlands-Sugar Land, TX 3.0 % 3.0 % Phoenix-Mesa-Chandler, AZ 3.0 2.8 Denver-Aurora-Lakewood, CO 2.7 2.6 Los Angeles-Long Beach-Glendale, CA 2.7 2.6 Washington-Arlington-Alexandria, DC-VA-MD-WV 2.5 2.6 Riverside-San Bernardino-Ontario, CA 2.5 2.4 Atlanta-Sandy Springs-Alpharetta, GA 2.4 2.3 Dallas-Plano-Irving, TX 2.4 2.3 Chicago-Naperville-Evanston, IL 2.1 2.2 Minneapolis-St.
Biggest changeTop Ten States December 31, 2023 2022 IIF by State CA 13.0 % 13.2 % FL 11.1 10.2 TX 10.5 10.4 CO 4.1 4.2 AZ 3.7 3.5 WA 3.5 3.4 GA 3.4 3.2 NC 2.9 2.7 VA 2.8 3.0 IL 2.8 3.1 All Others 42.2 43.1 Total 100.0 % 100.0 % 9 December 31, 2023 2022 Gross RIF by State CA 12.8 % 13.0 % FL 11.4 10.5 TX 10.9 10.7 CO 4.0 4.1 AZ 3.8 3.6 WA 3.5 3.3 GA 3.4 3.2 NC 2.9 2.7 VA 2.7 3.0 IL 2.7 3.0 All Others 41.9 42.9 Total 100.0 % 100.0 % Top Ten Metropolitan Statistical Areas December 31, 2023 2022 IIF by Metropolitan Statistical Area Phoenix-Mesa-Chandler AZ 3.1 % 3.0 % Houston-Pasadena-The Woodlands TX 3.0 3.0 Denver-Aurora-Centennial CO 2.7 2.7 Dallas-Plano-Irving, TX 2.6 2.4 Los Angeles-Long Beach-Glendale, CA 2.5 2.7 Riverside-San Bernardino-Ontario CA 2.5 2.5 Atlanta-Sandy Springs-Roswell, GA 2.0 2.4 Chicago-Naperville-Schaumburg, IL 1.9 2.1 Minneapolis-St.
Since 2018, we have entered into several types of reinsurance arrangements: • fully collateralized excess of loss reinsurance coverage on mortgage insurance policies that we have already issued with special purpose insurers funding such reinsurance obligations through the issuance of mortgage insurance-linked notes; • excess of loss reinsurance arrangements with third party reinsurers on mortgage insurance policies that we have already issued; and • quota share reinsurance arrangements in which third party reinsurers agree to prospectively reinsure a pro rata portion of the risk on policies that we write.
Since 2018, we have entered into several types of reinsurance arrangements: • fully collateralized excess of loss reinsurance coverage on mortgage insurance policies that we have already issued with special purpose insurers funding such reinsurance obligations through the issuance of mortgage insurance-linked notes; • excess of loss reinsurance arrangements with third party reinsurers on mortgage insurance policies that we have already issued; and • quota share reinsurance arrangements in which third party reinsurers agree to prospectively reinsure a pro rata portion of the risk on mortgage insurance policies that we write.
It shall be the duty of any insurer in relation to whose affairs an inspector has been appointed and of any past or present officer, employee or insurance manager of such insurer, to produce to the inspector on request all books, records and documents relating to the insurer under investigation which are in its or his custody or control and otherwise to give to the inspector all assistance in connection with the investigation which it or he is reasonably able to give. 25 If it appears to the BMA that there is a risk of an insurer becoming insolvent, or that it is in breach of the Insurance Act or any conditions imposed upon its registration, the BMA may, among other things, direct the insurer (1) not to take on any new insurance business, (2) not to vary any insurance contract if the effect would be to increase its liabilities, (3) not to make certain investments, (4) to realize certain investments, (5) to maintain or transfer to the custody of a specified bank, certain assets, (6) not to declare or pay any dividends or other distributions or to restrict the making of such payments, (7) to limit its premium income, (8) not to enter into any specified transaction with any specified persons or persons of a specified class, (9) to provide such written particulars relating to the financial circumstances of the insurer as the BMA thinks fit, (10) to obtain the opinion of a loss reserve specialist and to submit it to the BMA and (11) to remove a controller or officer.
It shall be the duty of any insurer in relation to whose affairs an inspector has been appointed and of any past or present officer, employee or insurance manager of such insurer, to produce to the inspector on request all books, records and documents relating to the insurer under investigation which are in its or his custody or control and otherwise to give to the inspector all assistance in connection with the investigation which it or he is reasonably able to give. 26 If it appears to the BMA that there is a risk of an insurer becoming insolvent, or that it is in breach of the Insurance Act or any conditions imposed upon its registration, the BMA may, among other things, direct the insurer (1) not to take on any new insurance business, (2) not to vary any insurance contract if the effect would be to increase its liabilities, (3) not to make certain investments, (4) to realize certain investments, (5) to maintain or transfer to the custody of a specified bank, certain assets, (6) not to declare or pay any dividends or other distributions or to restrict the making of such payments, (7) to limit its premium income, (8) not to enter into any specified transaction with any specified persons or persons of a specified class, (9) to provide such written particulars relating to the financial circumstances of the insurer as the BMA thinks fit, (10) to obtain the opinion of a loss reserve specialist and to submit it to the BMA and (11) to remove a controller or officer.
See "Risk Factors—Risks Relating to Regulation and Litigation— Legislative or regulatory actions or decisions to change the role of the GSEs in the U.S. housing market generally, or changes to the charters of the GSEs with regard to the use of credit enhancements generally and private mortgage insurance specifically, could reduce our revenues or adversely affect our profitability and returns " and "— Changes in the business practices of the GSEs, including actions or decisions to decrease or discontinue the use of mortgage insurance or changes in the GSEs' eligibility requirements for mortgage insurers, could reduce our revenues or adversely affect our profitability and returns.
See "Risk Factors—Risks Relating to Regulation and Litigation— Legislative or regulatory actions or decisions to change the role of the GSEs in the U.S. housing market generally, or changes to the charters of the GSEs with regard to the use of credit enhancements generally and private mortgage insurance specifically, could reduce our revenues or adversely affect our profitability and returns " and "— Changes in the business practices of the GSEs, including actions or decisions to decrease or discontinue the use of mortgage insurance or changes in the GSEs' eligibility requirements for mortgage insurers, could reduce 23 our revenues or adversely affect our profitability and returns.
We also have a tuition reimbursement program and offer certifications and professional training opportunities, including MBA certifications, Nationwide Multistate Licensing System & Registry (NMLS) continuing education for underwriters and other professional training in areas including but not limited to cybersecurity, risk, accountancy, actuarial sciences, human resources, underwriting, information technology, appraisals, marketing and project management. We value honest and timely feedback.
We also offer a tuition reimbursement program and offer certifications and professional training opportunities, including MBA certifications, Nationwide Multistate Licensing System & Registry (NMLS) continuing education for underwriters and other professional training in areas including but not limited to cybersecurity, risk, accountancy, actuarial sciences, human resources, underwriting, information technology, appraisals, marketing and project management. We value honest and timely feedback.
Public participants include government agencies such as the Federal Housing Administration, or FHA, the Veterans Administration, or VA, the U.S. Department of Agriculture Rural Development program and the Government National Mortgage Association, or Ginnie Mae, as well as government-sponsored enterprises such as Fannie Mae and Freddie Mac. The overall U.S. residential mortgage market encompasses both primary and secondary markets.
Public participants include government agencies such as the Federal Housing Administration, or FHA, the Veterans Administration, or VA, the U.S. Department of Agriculture Rural Development 1 program and the Government National Mortgage Association, or Ginnie Mae, as well as government-sponsored enterprises such as Fannie Mae and Freddie Mac. The overall U.S. residential mortgage market encompasses both primary and secondary markets.
Our industry also competes with products designed to eliminate the need for private mortgage insurance, such as "piggyback loans," which combine a first lien loan with a second lien in order to meet the 80% loan-to-value threshold required for sale to the GSEs without certain credit protections.
The private mortgage insurance industry also competes with products designed to eliminate the need for private mortgage insurance, such as "piggyback loans," which combine a first lien loan with a second lien in order to meet the 80% loan-to-value threshold required for sale to the GSEs without certain credit protections.
We believe that our technology, together with our information technology team, greatly enhances our operating efficiency and creates competitive advantages. Our team is experienced in large-scale project delivery, including mortgage insurance administration systems and the development of web-enabled servicing capabilities.
We believe that our technology, together with our information technology team, greatly enhances our operating efficiency and creates competitive advantages. Our team is experienced in large-scale project delivery, including mortgage insurance 12 administration systems and the development of web-enabled servicing capabilities.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results of Operations—Net Premiums Written and Earned" and "—Key Performance Indicators—Average Net Premium Rate." Premium payments for primary mortgage insurance coverage are typically made by the borrower.
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results of Operations—Net Premiums Written and Earned" and "—Key Performance Indicators—Average Net Premium Rate." 4 Premium payments for primary mortgage insurance coverage are typically made by the borrower.
If mortgage insurance coverage is not cancelled at the borrower's request or by the automatic termination provision, the 20 mortgage servicer must terminate mortgage insurance coverage by the first day of the month following the date that is the midpoint of the loan's amortization, assuming the borrower is current on the required mortgage payments.
If mortgage insurance coverage is not cancelled at the borrower's request or by the automatic termination provision, the mortgage servicer must terminate mortgage insurance coverage by the first day of the month following the date that is the midpoint of the loan's amortization, assuming the borrower is current on the required mortgage payments.
Homeowners Protection Act of 1998 The Homeowners Protection Act of 1998, or HOPA, provides for the automatic termination, or cancellation upon a borrower's request, of private mortgage insurance upon satisfaction of certain conditions. HOPA requires that lenders give borrowers certain notices with regard to the automatic termination or cancellation of mortgage insurance.
Homeowners Protection Act of 1998 21 The Homeowners Protection Act of 1998, or HOPA, provides for the automatic termination, or cancellation upon a borrower's request, of private mortgage insurance upon satisfaction of certain conditions. HOPA requires that lenders give borrowers certain notices with regard to the automatic termination or cancellation of mortgage insurance.
Relative Share of Private and Public Mortgage Insurance _______________________________________________________________________________ Source: Inside Mortgage Finance 3 Private mortgage insurance NIW ($ in billions) ______________________________________________________________________________ Source: Inside Mortgage Finance, except for total originations for the purpose of calculating private mortgage insurance penetration, which is based on Mortgage Bankers Association.
Relative Share of Private and Public Mortgage Insurance _______________________________________________________________________________ Source: Inside Mortgage Finance Private mortgage insurance NIW ($ in billions) ______________________________________________________________________________ Source: Inside Mortgage Finance, except for total originations for the purpose of calculating private mortgage insurance penetration, which is based on Mortgage Bankers Association.
For additional information, please see the section titled “Social Issues and Human Capital” in our 2022 Proxy Statement. Corporate Structure Essent Group Ltd. was organized as a limited liability company under the laws of Bermuda on July 1, 2008. Our registered office is located at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and our telephone number is (441) 297-9901.
For additional information, please see the section titled “Social Issues and Human Capital” in our 2024 Proxy Statement. Corporate Structure Essent Group Ltd. was organized as a limited liability company under the laws of Bermuda on July 1, 2008. Our registered office is located at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and our telephone number is (441) 297-9901.
The NAIC has established a Mortgage Guaranty Insurance Working Group, which we refer to as the "MGIWG," to determine and make recommendations to the NAIC's Financial Condition Committee regarding what, if any, changes to the Mortgage Guaranty Insurance Model Act are deemed necessary to the solvency regulation of mortgage guaranty insurers, including, but not limited to, revisions to Statement of Statutory Accounting Principles (SSAP) No. 58 - Mortgage Guaranty 18 Insurance .
The NAIC has established a Mortgage Guaranty Insurance Working Group, which we refer to as the "MGIWG," to determine and make recommendations to the NAIC's Financial Condition Committee regarding what, if any, changes to the Mortgage Guaranty Insurance Model Act are deemed necessary to the solvency regulation of mortgage guaranty insurers, 19 including, but not limited to, revisions to Statement of Statutory Accounting Principles (SSAP) No. 58 - Mortgage Guaranty Insurance.
Class 3A insurers must obtain the BMA's prior approval for a reduction by 15% or more of the total statutory capital as set forth in its previous year's financial statements. These restrictions on declaring or paying dividends and distributions under the Insurance Act are in addition to those under the Companies Act which apply to all Bermuda companies.
Class 3B insurers must obtain the BMA's prior approval for a reduction by 15% or more of the total statutory capital as set forth in its previous year's financial statements. These restrictions on declaring or paying dividends and distributions under the Insurance Act are in addition to those under the Companies Act which apply to all Bermuda companies.
FCRA has been interpreted by some FTC staff and Federal courts to require mortgage insurance companies to provide "adverse action" notices to consumers in the event an application for mortgage insurance is declined or offered at less than the best available rate for the loan program applied for on the basis of a review of the consumer's credit.
FCRA has been interpreted by some FTC staff and Federal courts to require mortgage insurance companies to provide "adverse action" notices to consumers in the event an application for mortgage insurance is declined or offered at less than the best available rate for the loan program applied for on the basis of a review of the consumer's credit report information.
We use a third-party firm to periodically conduct anonymous employee-wide engagement surveys, as well as targeted “pulse” surveys, to identify areas of strength and opportunities for improvement and to ensure continued engagement and retention of our employees. 26 We believe a diverse and inclusive workforce provides for a broad array of viewpoints, talents and skills and assists in building a sustainable future.
We use a third-party firm to periodically conduct anonymous employee-wide engagement surveys, as well as targeted “pulse” surveys, to identify areas of strength and opportunities for improvement and to ensure continued engagement and retention of our employees. 27 We believe a diverse and inclusive workforce provides for a broad array of viewpoints, talents and skills and assists in building a sustainable future.
Further, the BMA must consider whether cooperation is in the public interest. The grounds for disclosure are limited and the Insurance Act provides for sanctions for breach of the statutory duty of confidentiality. Human Capital Management We believe that attracting, developing and retaining quality employees is imperative to a vibrant, successful and sustainable business model.
Further, the BMA must consider whether cooperation is in the public interest. The grounds for disclosure are limited and the Insurance Act provides for sanctions for breach of the statutory duty of confidentiality. Human Capital Management We believe that attracting, developing and retaining quality employees is imperative to building a successful and sustainable business model.
The following graph provides detail on trends in total residential mortgage originations and the breakdown of the market between purchase and refinancing volume. 2 Residential Purchase vs.
The following graph provides detail on trends in total residential mortgage originations and the breakdown of the market between purchase and refinancing volume. Residential Purchase vs.
As of December 31, 2022, substantially all of our policies are monthly or single premium policies. In general, we may not terminate mortgage insurance coverage except in the event there is non-payment of premiums or certain material violations of our mortgage insurance policies. The insured may cancel mortgage insurance coverage at any time at their option or upon mortgage repayment.
As of December 31, 2023, substantially all of our policies are monthly or single premium policies. In general, we may not terminate mortgage insurance coverage except in the event there is non-payment of premiums or certain material violations of our mortgage insurance policies. The insured may cancel mortgage insurance coverage at any time at their option or upon mortgage repayment.
Independent Approved Auditor A Class 3A insurer must appoint an independent auditor who will annually audit and report on the insurer's financial statements prepared under generally accepted accounting principles or international financial reporting standards, statutory financial statements and statutory financial returns each of which are required to be filed annually with the BMA.
Independent Approved Auditor A Class 3B insurer must appoint an independent auditor who will annually audit and report on the insurer's financial statements prepared under generally accepted accounting principles or international financial reporting standards, statutory financial statements and statutory financial returns each of which are required to be filed annually with the BMA.
The statutory financial statements do not form part of the public records maintained by the BMA but the GAAP financial statements are available for public inspection. 24 Annual Statutory Financial Return An insurer is required to file with the BMA a statutory financial return no later than four months after its financial year end (unless specifically extended).
The statutory financial statements do not form part of the public records maintained by the BMA but the GAAP financial statements are available for public inspection. 25 Annual Statutory Financial Return An insurer is required to file with the BMA a statutory financial return no later than four months after its financial year end (unless specifically extended).
The Insurance Act mandates certain actions and filings with the BMA if a Class 3A insurer fails to meet and/or maintain its enhanced capital requirement or solvency margin including the filing of a written report detailing the circumstances giving rise to the failure and the manner and time within which the insurer intends to rectify the failure.
The Insurance Act mandates certain actions and filings with the BMA if a Class 3B insurer fails to meet and/or maintain its enhanced capital requirement or solvency margin including the filing of a written report detailing the circumstances giving rise to the failure and the manner and time within which the insurer intends to rectify the failure.
As of December 31, 2022, predominantly all of our investment securities were rated investment-grade. We have adopted and our board of directors has approved an investment policy that defines specific limits for asset sectors, single issuer, credit rating, asset duration, industry and geographic concentration and eligible and ineligible investments.
As of December 31, 2023, predominantly all of our investment securities were rated investment-grade. We have adopted and our board of directors has approved an investment policy that defines specific limits for asset sectors, single issuer, credit rating, asset duration, industry and geographic concentration and eligible and ineligible investments.
At present, our underwriting guidelines are broadly consistent with those of the GSEs. Many of our customers use the GSEs' automated loan underwriting systems, Desktop Underwriter® and Loan Prospector®, for making credit determinations. We accept the underwriting decisions made by the GSEs' underwriting systems, subject to certain additional limitations and requirements.
At present, our mortgage insurance underwriting guidelines are broadly consistent with those of the GSEs. Many of our customers use the GSEs' automated loan underwriting systems, Desktop Underwriter® and Loan Prospector®, for making credit determinations. We accept the underwriting decisions made by the GSEs' underwriting systems, subject to certain additional limitations and requirements.
The PMIERs also include enhanced operational performance expectations and define remedial actions that apply should an approved insurer fail to comply with these requirements. As of December 31, 2022, Essent Guaranty, our GSE-approved mortgage insurance company, was in compliance with the PMIERs.
The PMIERs also include enhanced operational performance expectations and define remedial actions that apply should an approved insurer fail to comply with these requirements. As of December 31, 2023, Essent Guaranty, our GSE-approved mortgage insurance company, was in compliance with the PMIERs.
See "Risk Factors—Risks Relating to the Operation of Our Business— We face risks associated with our contract underwriting business." Bermuda-Based Insurance and Reinsurance We offer mortgage-related insurance and reinsurance through Essent Re, a Class 3A insurance company licensed pursuant to Section 4 of the Bermuda Insurance Act 1978.
See "Risk Factors—Risks Relating to the Operation of Our Business— We face risks associated with our contract underwriting business." Bermuda-Based Insurance and Reinsurance We offer mortgage-related insurance and reinsurance through Essent Re, a Class 3B insurance company licensed pursuant to Section 4 of the Bermuda Insurance Act 1978.
Copies are also available, without charge, by writing to Secretary, Essent Group Ltd., Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. The information on our website is not a part of this Annual Report on Form 10-K. 27
Copies are also available, without charge, by writing to Secretary, Essent Group Ltd., Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. The information on our website is not a part of this Annual Report on Form 10-K. 28
We have an experienced team of national and regional account managers strategically deployed nationwide that markets our mortgage insurance products and support services. 10 We assign national account managers to each of the national lenders, providing a point of communication between us and the customer's senior management team.
We have an experienced team of national and regional account managers strategically deployed nationwide that markets our mortgage insurance products and support services. 11 We assign national account managers to each of the national lenders, providing a point of communication between us and the customer's senior management team.
Loss Reserve Specialist A Class 3A insurer is required to submit an opinion of its approved loss reserve specialist with its statutory financial return in respect of its losses and loss expenses provisions. The loss reserve specialist will normally be a qualified casualty actuary and must be approved by the BMA.
Loss Reserve Specialist A Class 3B insurer is required to submit an opinion of its approved loss reserve specialist with its statutory financial return in respect of its losses and loss expenses provisions. The loss reserve specialist will normally be a qualified casualty actuary and must be approved by the BMA.
Annual Financial Statements A Class 3A insurer is required to prepare annual GAAP financial statements and statutory financial statements. The Insurance Act prescribes rules for the preparation and substance of statutory financial statements (which include, in statutory form, a balance sheet, income statement, a statement of capital and surplus, and notes thereto).
Annual Financial Statements A Class 3B insurer is required to prepare annual GAAP financial statements and statutory financial statements. The Insurance Act prescribes rules for the preparation and substance of statutory financial statements (which include, in statutory form, a balance sheet, income statement, a statement of capital and surplus, and notes thereto).
We believe that our risk management framework encompasses all of the major risks we face, including our mortgage insurance portfolio, investment risk, liquidity risk and regulatory compliance risk, among others. The majority of our risk analysis is directed toward the risks embedded in our mortgage insurance portfolio.
We believe that our risk management framework encompasses all of the major risks we face, including our mortgage and title insurance portfolios, investment risk, liquidity risk and regulatory compliance risk, among others. The majority of our risk analysis is directed toward the risks embedded in our mortgage insurance portfolio.
In general, state regulation of our insurance business relates to: • licenses to transact business; • producer licensing; • approval of policy forms; • approval of premium rates; 17 • limits on insurable loans; • quarterly, annual and other reports on our financial condition; • the basis upon which assets and liabilities must be stated; • requirements regarding contingency reserves; • minimum capital levels and adequacy ratios; • credit for reinsurance; • limitations on the types of investment instruments which may be held in our investment portfolio; • special deposits of securities; • limits on dividends payable; • advertising compliance; • establishment of reserves; • claims handling; • cybersecurity; • hazardous financial condition; and • enterprise risk management.
In general, state regulation of our insurance business relates to: • licenses to transact business; • producer licensing; • approval of policy forms; • approval of premium rates; • limits on insurable loans; • quarterly, annual and other reports on our financial condition; 18 • the basis upon which assets and liabilities must be stated; • requirements regarding contingency reserves; • minimum capital levels and adequacy ratios; • credit for reinsurance; • limitations on the types of investment instruments which may be held in our investment portfolio; • special deposits of securities; • limits on dividends payable; • advertising compliance; • establishment of reserves; • claims handling; • privacy, data protection and cybersecurity; • hazardous financial condition; and • enterprise risk management.
A Class 3A insurer is prohibited from declaring or paying a dividend if in breach of its enhanced capital requirement, solvency margin or minimum liquidity ratio or if the declaration or payment of such dividend would cause such a breach.
A Class 3B insurer is prohibited from declaring or paying a dividend if in breach of its enhanced capital requirement, solvency margin or minimum liquidity ratio or if the declaration or payment of such dividend would cause such a breach.
Minimum Solvency Margin, Enhanced Capital Requirement and Restrictions on Dividends and Distributions A Class 3A insurer must maintain at all times a solvency margin and an enhanced capital requirement in accordance with the provisions of the Insurance Act.
Minimum Solvency Margin, Enhanced Capital Requirement and Restrictions on Dividends and Distributions A Class 3B insurer must maintain at all times a solvency margin and an enhanced capital requirement in accordance with the provisions of the Insurance Act.
Following the financial crisis of 2008, the Basel Committee made further revisions that established risk-based capital and leverage capital requirements for most United States banking organizations through further revisions to Basel II, which we refer to as “Basel III” (although banking organizations with less than $10 billion in total assets may now choose to comply with an alternative community bank leverage ratio framework established by the Federal Banking Agencies in 2019).
Following the financial crisis of 2008, the Basel Committee made further revisions that established risk-based capital and leverage capital requirements for most United States banking organizations through further revisions to Basel II (“Basel III”) (although banking organizations with less than $10 billion in total assets may now choose to comply with an alternative community bank leverage ratio framework established by the Federal banking agencies in 2019).
Generally, our risk across all policies written is approximately 26% of the underlying primary insurance in force, but may vary from policy to policy between 6% and 35% coverage. 4 We file our premium rates with the insurance departments of the 50 states and the District of Columbia as required.
Generally, our risk across all policies written is approximately 27% of the underlying primary insurance in force, but may vary from policy to policy between 6% and 35% coverage. We file our premium rates with the insurance departments of the 50 states and the District of Columbia as required.
The following tables provide detail of the IIF and Gross RIF in our top ten most concentrated states and our top ten most concentrated U.S. metropolitan statistical areas as of December 31, 2022 and 2021.
The following tables provide detail of the IIF and Gross RIF in our top ten most concentrated states and our top ten most concentrated U.S. metropolitan statistical areas as of December 31, 2023 and 2022.
In 2005, the Basel Committee issued an update to Basel I, which we refer to as “Basel II”, which, among other things, sets forth capital treatment of mortgage insurance purchased and held on balance sheet by banks in respect of their origination and securitization activities.
In 2005, the Basel Committee issued an update to Basel I (“Basel II”), which, among other things, sets forth capital treatment of mortgage insurance purchased and held on balance sheet by banks in respect of their origination and securitization activities.
Mortgage Market The U.S. residential mortgage market is one of the largest in the world, with over $13.2 trillion of debt outstanding as of September 30, 2022, and includes a range of private and government-sponsored participants. Private industry participants include mortgage banks, mortgage brokers, commercial, regional and investment banks, savings institutions, credit unions, REITs, mortgage insurers and other financial institutions.
Mortgage Market The U.S. residential mortgage market is one of the largest in the world, with over $13.9 trillion of debt outstanding as of September 30, 2023, and includes a range of private and government-sponsored participants. Private industry participants include mortgage banks, mortgage brokers, commercial, regional and investment banks, savings institutions, credit unions, REITs, mortgage insurers and other financial institutions.
Specifically, these laws and regulations require that, before a person can acquire direct or indirect control of an insurer domiciled in the state, prior written approval must be obtained from the Pennsylvania Insurance Department.
Specifically, these laws and regulations require that, before a person can acquire direct or indirect control of an insurer domiciled in the applicable state, prior written approval must be obtained from the Pennsylvania Insurance Department and/or the Missouri Department of Commerce and Insurance.
The insurance holding company laws and regulations of Pennsylvania, the state in which our U.S. insurance subsidiaries are domiciled, regulate, among other things, certain transactions between Essent Group Ltd., our insurance subsidiaries and other parties affiliated with us and certain transactions involving our common shares, including transactions that constitute a change of control of Essent Group Ltd. and, consequently, a change of control of our insurance subsidiaries.
The insurance holding company laws and regulations of Pennsylvania and Missouri, the states in which our U.S. insurance subsidiaries are domiciled, regulate, among other things, certain transactions between Essent Group Ltd., our insurance subsidiaries and/or other parties affiliated with us and certain transactions involving our common shares, including transactions that constitute a change of control of Essent Group Ltd. and, consequently, a change of control of our insurance subsidiaries.
As of December 31, 2022, approximately 71% of our insurance in force had been originated on a delegated basis, compared to 66% as of December 31, 2021. See "Risk Factors—Risks Relating to the Operation of Our Business— Our delegated underwriting program may subject our mortgage insurance business to unanticipated claims ." • Non-Delegated Underwriting.
As of December 31, 2023, approximately 73% of our insurance in force had been originated on a delegated basis, compared to 71% as of December 31, 2022. See "Risk Factors—Risks Relating to the Operation of Our Business— Our delegated underwriting program may subject our mortgage insurance business to unanticipated claims ." • Non-Delegated Underwriting.
Our loss mitigation staff is also actively engaged with servicers and the GSEs with regard to appropriate servicing and loss mitigation practices. Investment Portfolio Our investment portfolio, including cash, comprises the largest single component of our balance sheet, representing 88.8% of our total assets at December 31, 2022.
Our loss mitigation staff is also actively engaged with servicers and the GSEs with regard to appropriate servicing and loss mitigation practices. Investment Portfolio Our investment portfolio, including cash, comprises the largest single component of our balance sheet, representing 88.4% of our total assets at December 31, 2023.
Regulation—GSE Qualified Mortgage Insurer Requirements" below. Contract Underwriting In addition to offering mortgage insurance, we provide contract underwriting services on a limited basis. As a part of these services, we assess whether data provided by the customer relating to a mortgage application complies with the customer's loan underwriting guidelines.
Regulation—GSE Qualified Mortgage Insurer Requirements" below. Contract Underwriting We provide contract underwriting services on a limited basis. As a part of these services, we assess whether data provided by the customer relating to a mortgage application complies with the customer's loan underwriting guidelines.
As depicted below, the severe economic and housing market dislocation experienced as a result of the 2007-2008 financial crisis had a profound impact on our industry. Incumbent insurers experienced record high claims activity and sustained significant financial losses, resulting in depleted capital positions.
As depicted below, the severe economic and housing market dislocation experienced as a result of the 2007-2008 financial crisis had a profound impact on the private 2 mortgage insurance industry. Incumbent insurers experienced record high claims activity and sustained significant financial losses, resulting in depleted capital positions.
The private mortgage insurance industry currently consists of six active private mortgage insurers: Essent Guaranty, Arch Mortgage Insurance Company, Enact Holdings, Inc. (parent company of Genworth Mortgage Insurance Corporation), Mortgage Guaranty Insurance Corporation, National Mortgage Insurance Corporation and Radian Guaranty Inc.
The private mortgage insurance industry currently consists of six active private mortgage insurers: Essent Guaranty, Arch Mortgage Insurance Company, Enact Mortgage Insurance Corporation, Mortgage Guaranty Insurance Corporation, National Mortgage Insurance Corporation and Radian Guaranty Inc.
As of December 31, 2022, only three states accounted for greater than 5% of our portfolio, as measured by either IIF or Gross RIF, and one metropolitan statistical area accounted for greater than 3% of our portfolio, as measured by Gross RIF. No single metropolitan statistical area accounted for greater than 3% of our portfolio, as measured by IIF.
As of December 31, 2023, only three states accounted for greater than 5% of our portfolio, as measured by either IIF or Gross RIF, and one metropolitan statistical area accounted for greater than 3% of our portfolio, as measured by either IIF or Gross RIF.
The weighted average life of our mortgage insurance portfolio was 23.3 months as of December 31, 2022. The COVID-19 pandemic and related economic conditions resulted in a significant increase in the level of our insured loans in default in 2020 and 2021. It is possible, however, that our level of defaults may increase as our portfolio seasons.
The weighted average life of our mortgage insurance portfolio was 28.8 months as of December 31, 2023. The COVID-19 pandemic and related economic conditions resulted in a significant increase in the level of our insured loans in default in 2020 and 2021. It is possible, however, that our level of defaults may increase as our portfolio seasons.
Our Mortgage Insurance Portfolio All of our policies in force were written since May 2010. The following data presents information on our primary mortgage insurance portfolio for policies written by Essent Guaranty. Insurance in Force by Policy Year The following table sets forth our insurance in force, or IIF, as of December 31, 2022, by year of policy origination.
Our Mortgage Insurance Portfolio All of our mortgage insurance policies in force were written since May 2010. The following data presents information on our primary mortgage insurance portfolio. Insurance in Force by Policy Year The following table sets forth our primary mortgage insurance in force, or IIF, as of December 31, 2023, by year of policy origination.
Our top ten customers generated 39.9% of our NIW on a flow basis during the year ended December 31, 2022, compared to 41.6% and 35.8% for the years ended December 31, 2021 and 2020, respectively. For the year ended December 31, 2022, one customer, United Wholesale Mortgage, exceeded 10% of our consolidated revenue.
Our top ten customers generated 48.4% of our NIW on a flow basis during the year ended December 31, 2023, compared to 39.9% and 41.6% for the years ended December 31, 2022 and 2021, respectively. For the year ended December 31, 2023, one customer, United Wholesale Mortgage, exceeded 10% of our consolidated revenue.
We also offer mortgage-related insurance and reinsurance through our wholly-owned Bermuda-based subsidiary, Essent Reinsurance Ltd., which we refer to as "Essent Re." As of December 31, 2022, Essent Re provided insurance or reinsurance relating to GSE risk share and other reinsurance transactions covering approximately $2.0 billion of risk.
We offer mortgage-related insurance and reinsurance and risk-management products through our wholly-owned Bermuda-based subsidiary, Essent Reinsurance Ltd., which we refer to as "Essent Re." As of December 31, 2023, Essent Re provided insurance or reinsurance relating to GSE risk share and other reinsurance transactions covering approximately $2.2 billion of risk.
According to the Federal Reserve, the GSEs held or guaranteed approximately $6.6 trillion, or 49.8%, of total U.S. residential mortgage debt outstanding as of September 30, 2022.
According to the Federal Reserve, the GSEs held or guaranteed approximately $6.6 trillion, or 47.8%, of total U.S. residential mortgage debt outstanding as of September 30, 2023.
In our employee recruitment and selection process and operation of our business, we adhere to equal employment opportunity policies and encourage the participation of our employees in training programs that will enhance their effectiveness in the performance of their duties. As of December 31, 2022, approximately 63% of our workforce was comprised of women and minorities.
In our employee recruitment and selection process and operation of our business, we adhere to equal employment opportunity policies and encourage the participation of our employees in training programs that will enhance their effectiveness in the performance of their duties. As of December 31, 2023, approximately 62% of our workforce, excluding Title operations, was comprised of women and minorities.
Information Technology and Cybersecurity We have a highly automated business that relies on information technology. We accept insurance applications through electronic submission and issue electronic insurance approvals. In order to facilitate this process, we establish direct connections to the origination and servicing systems of our customers and servicers, which may require a significant upfront investment.
Information Technology We operate highly automated businesses that rely on information technology. We accept mortgage insurance applications through electronic submission and issue electronic insurance approvals. In order to facilitate this process, we establish direct connections to the origination and servicing systems of our customers and servicers, which may require a significant upfront investment.
However, if the Federal Banking Agencies decide to implement Basel IV as specifically drafted by the Basel Committee, mortgage insurance would not lower the LTV ratio of residential loans for capital purposes, and therefore may decrease the demand for mortgage insurance.
If the Federal banking agencies decide to implement the Basel III Endgame as specifically drafted, mortgage insurance would not lower the LTV ratio of residential loans for capital purposes, and therefore may decrease the demand for mortgage insurance.
We engage external asset managers to assist with the trading, investment research, investment due diligence and portfolio allocation within the guidelines that we have set. Approximately 97.9% of our investments available for sale were managed by external managers as of December 31, 2022.
We engage external asset managers to assist with the trading, investment research, investment due diligence and portfolio allocation within the guidelines that we have set. Substantially all of our investments available for sale were managed by external managers as of December 31, 2023.
From 2003 through 2022, an average of 27.3% of total annual mortgage origination volume utilized mortgage insurance. Mortgage insurance industry volumes are influenced by total mortgage originations, and the mix between purchase and refinancing originations. Historically, mortgage insurance utilization has been meaningfully higher in purchase originations compared to refinancing originations.
From 2004 through 2023, an average of 28.7% of total annual mortgage origination volume utilized mortgage insurance. Mortgage insurance industry volumes are influenced by total mortgage originations and the mix between purchase and refinancing originations. Historically, mortgage insurance utilization has been meaningfully higher in purchase originations compared to refinancing originations.
Private mortgage insurers are impacted indirectly by Federal laws and regulations affecting mortgage originators and lenders, purchasers of mortgage loans, such as the GSEs, and governmental insurers such as the FHA and the VA.
Federal Mortgage-Related Laws and Regulations Certain Federal laws directly or indirectly affect private mortgage insurers and title insurers. Private mortgage insurers are impacted indirectly by Federal laws and regulations affecting mortgage originators and lenders, purchasers of mortgage loans, such as the GSEs, and governmental insurers such as the FHA and the VA.
In 2022, total U.S. residential mortgage origination volume was estimated at $2.25 trillion, comprised of $1.58 trillion of purchase originations and $0.67 trillion of refinancing originations. The mortgage market in 2022 was substantially and negatively impacted by rising mortgage interest rates precipitated in large part by actions of the Federal Reserve throughout the year intended to combat inflation.
In 2023, total U.S. residential mortgage origination volume was estimated at $1.64 trillion, comprised of $1.33 trillion of purchase originations and $0.31 trillion of refinancing originations. The mortgage market in 2023 continued to be substantially and negatively impacted by rising mortgage interest rates precipitated in large part by actions of the Federal Reserve throughout the year intended to combat inflation.
Primary Mortgage Insurance Primary mortgage insurance provides protection on individual loans at specified coverage percentages. Primary mortgage insurance is typically offered to customers on individual loans at the time of origination on a flow (i.e., loan-by-loan) basis, but can also be written in bulk transactions (in which each loan in a portfolio of loans is insured in a single transaction).
Primary mortgage insurance is typically offered to customers on individual loans at the time of origination on a flow (i.e., loan-by-loan) basis, but can also be written in bulk transactions (in which each loan in a portfolio of loans is insured in a single transaction). A substantial majority of our policies are primary mortgage insurance.
The private mortgage insurance industry, however, has more than doubled its share of the total insured market since 2009, leading to higher private mortgage insurance penetration of the total mortgage origination market. In 2022, private mortgage insurance increased to an estimated 48% of the total insured market and covered 18% of the total mortgage origination volume.
The private mortgage insurance industry, however, has more than doubled its share of the total insured market since 2009, leading to higher private mortgage insurance penetration of the total mortgage origination market. In 2023, private mortgage insurance moved to an estimated 44% of the total insured market and covered 17% of the total mortgage origination volume.
Paul-Bloomington, MN-WI 1.8 1.9 All Others 74.9 75.3 Total 100.0 % 100.0 % Customers, Sales and Marketing Our customers consist of originators of residential mortgage loans, such as regulated depository institutions, mortgage banks, credit unions and other lenders.
Paul-Bloomington MN-WI 1.7 1.8 Orlando-Kissimmee-Sanford FL 1.8 1.7 All Others 76.1 75.7 Total 100.0 % 100.0 % Customers, Sales and Marketing Mortgage Insurance Our mortgage insurance customers consist of originators of residential mortgage loans, such as regulated depository institutions, mortgage banks, credit unions and other lenders.
Claims Defaulted mortgages that are not cured result in claims. The insured customer must acquire title to the property before submitting a claim. The time in which a customer may acquire title to a property through foreclosure varies, depending on the state in which the property is located.
The insured customer must acquire title to the property before submitting a claim. The time in which a customer may acquire title to a property through foreclosure varies, depending on the state in which the property is located.
The Pennsylvania Insurance Department is required to consider various factors, including the financial strength of the acquirer, the integrity and management experience of the acquirer's board of directors and executive officers, and the acquirer's plans for the future operations of the reinsurer or insurer.
Our state regulators are required to consider various factors, including the financial strength of the acquirer, the integrity and management experience of the acquirer's board of directors and executive officers, and the acquirer's plans for the future operations of a reinsurer or insurer.
In 2017, the New York Department of Financial Services, or NYDFS, has adopted a Cybersecurity Regulation that applies to all individuals and entities licensed by the NYDFS, pursuant to which licensees must file for exemption or submit an annual compliance certification. On November 9, 2022, an amendment to the Cybersecurity Regulation was proposed to strengthen data protection requirements.
In 2017, the New York Department of Financial Services, or NYDFS, adopted a Cybersecurity Regulation that applies to all individuals and entities licensed by the NYDFS, pursuant to which licensees must file for exemption or submit an annual compliance certification.
Many states have enacted legislation implementing GLBA and establishing information security regulation and some have enacted privacy and data security laws which impose compliance obligations beyond GLBA, including obligations to protect social security numbers and provide notification in the event that a security breach results in a reasonable belief that unauthorized persons may have obtained access to consumer nonpublic information.
Federal regulatory agencies have issued the Interagency Guidelines Establishing Information Security Standards, or "Security Guidelines," and interagency regulations regarding financial privacy, or "Privacy Rule," implementing sections of GLBA. 22 Many states have enacted legislation implementing GLBA and establishing information security regulation and some have enacted privacy and data security laws which impose compliance obligations beyond GLBA, including obligations to protect social security numbers and provide notification in the event that a security breach results in a reasonable belief that unauthorized persons may have obtained access to consumer nonpublic information.
In 2021, the MGIWG adopted a new annual reporting schedule for mortgage insurers that was first required to be submitted by mortgage insurers to state insurance regulators in WI, NC and PA in 2022. In October 2022, the MGIWG released for public comment a draft revised Model Act.
In 2021, the MGIWG adopted a new annual reporting schedule for mortgage insurers that was first required to be submitted by mortgage insurers to state insurance regulators in WI, NC and PA in 2022. The revised Model Act was approved by MGIWG in 2023 and is awaiting adoption by the NAIC.
As of December 31, 2022, we had a total of 346 employees, including 341 employees based in our Radnor, PA, Winston-Salem, NC, New York, NY and Reston, VA locations, or remotely throughout the United States, and 5 employees located in Hamilton, Bermuda.
As of December 31, 2023, we had a total of 536 employees, including 530 employees based in our Radnor, PA, Winston-Salem, NC, New York, NY, Reston, VA, Pittsburgh, PA, Columbia, MO and Charlotte, NC locations, or remotely throughout the United States, and 6 employees located in Hamilton, Bermuda.
Consistent with the Rescission Relief Principles, our current master policy provides rescission relief for loans that (i) remain current up to 36 months after origination, have not experienced more than two late payments of 30 days or more, and have never been 60 days late, or (ii) are current after 60 payments, and otherwise permits the provision of rescission relief concurrent with independent validation of representations, including validation by use of duly approved automated tools.
Pursuant to the current minimum standards for mortgage insurer master policies enacted by the GSEs and the Federal Housing Finance Agency, or "FHFA", which we refer to as the "Rescission Relief Principles," our current master policy provides rescission relief for loans that (i) remain current up to 36 months after origination, have not experienced more than two late payments of 30 days or more, and have never been 60 days late, or (ii) are current after 60 payments, and otherwise permits the provision of rescission relief 5 concurrent with independent validation of representations, including validation by use of duly approved automated tools.
We so strongly believe that all employees should make good decisions, do the right thing and act like owners that we have made all employees owners through a share grant program. As of December 31, 2022, approximately 90% of our current workforce have been granted awards for equity shares in our company.
We so strongly believe that all employees should make good decisions, do the right thing and act like owners that we have made all employees owners through a share grant program. Nearly every member of our current workforce has outstanding awards for equity shares in our company.
Pursuant to the CFPB's announced final rule regarding QMs, which we refer to as the QM Rule, a loan is deemed to be a QM if it meets certain specified requirements, including if: • the term of the mortgage is less than or equal to 30 years; • there is no negative amortization, interest only or balloon features; • the lender properly documents the loan in accordance with the requirements; • the total "points and fees" do not exceed certain thresholds, generally 3%; and 19 • the total debt-to-income ratio does not exceed 43%.
Furthermore, the borrower may assert this as a defense by recoupment or set off without regard to any statute of limitation in any foreclosure action initiated by or on behalf of the creditor, assignee or any holder of the mortgage. 20 Pursuant to the CFPB's announced final rule regarding QMs, which we refer to as the QM Rule, a loan is deemed to be a QM if it meets certain specified requirements, including if: • the term of the mortgage is less than or equal to 30 years; • there is no negative amortization, interest only or balloon features; • the lender properly documents the loan in accordance with the requirements; • the total "points and fees" do not exceed certain thresholds, generally 3%; and • the total debt-to-income ratio does not exceed 43%.
The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. The address of that site is http://www.sec.gov.
Available Information We file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and other information with the SEC. The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. The address of that site is http://www.sec.gov.
Principal Representative An insurer is required to maintain a principal office in Bermuda and to appoint and maintain a principal representative in Bermuda. For the purpose of the Insurance Act, Essent Reinsurance Ltd.'s principal representative is Artex Risk Solutions and its principal office for these purposes is the offices of Artex.
For the purpose of the Insurance Act, Essent Reinsurance Ltd.'s principal representative is Artex Risk Solutions and its principal office for these purposes is the offices of Artex.
Open positions may be filled internally through our internal posting process or externally through a combination of broadly available Internet job boards as well as college placement services, trade journals, newspapers and professional recruiting firms.
The process through which we recruit employees has an impact on the quality, diversity and timing of filling positions. Open positions may be filled internally through our internal posting process or externally through a combination of broadly available Internet job boards as well as college placement services, trade journals and professional recruiting firms.
State regulations are principally designed for the protection of the public and our insured policyholders, rather than for the benefit of investors. Although their scope varies, state insurance laws generally grant broad supervisory powers to agencies or to officials to examine insurance companies and to enforce rules or to exercise discretion affecting almost every significant aspect of the insurance business.
Although their scope varies, state insurance laws generally grant broad supervisory powers to agencies or to officials to examine insurance companies and to enforce rules or to exercise discretion affecting almost every significant aspect of the insurance business.
A substantial majority of our policies are primary mortgage insurance. Customers that purchase our primary mortgage insurance select a specific coverage level for each insured loan. To be eligible for purchase by a GSE, a low down payment loan must comply with the coverage percentages established by that GSE.
Customers that purchase our primary mortgage insurance select a specific coverage level for each insured loan. To be eligible for purchase by a GSE, a low down payment loan must comply with the coverage percentages established by that GSE. For loans not sold to the GSEs, the customer determines its desired coverage percentage.
Assets not managed by external managers include securities on deposit with state regulatory agencies in connection with the insurance licenses and bonds issued by the U.S. Treasury and U.S. government agencies. To date, we have not used any derivatives to hedge any investment or business risks that we are currently assuming.
Assets not managed by external managers primarily include securities on deposit with state regulatory agencies in connection with the insurance licenses. To date, we have not used any derivatives to hedge any investment or business risks that we are currently assuming. We measure investment performance against market benchmarks on both total return and return volatility dimensions.
The master policy, along with its related endorsements and certificates, sets forth the general terms and conditions of our mortgage insurance coverage, including loan eligibility requirements, coverage terms, policy administration, premium payment obligations, exclusions or reductions in coverage, conditions precedent to payment of a claim, claim payment requirements, subrogation and other matters attendant to our coverage. 5 Mortgage insurance master policies generally protect mortgage insurers from the risk of material misrepresentations and fraud in the origination of an insured loan by establishing the right to rescind coverage in such event.
The master policy, along with its related endorsements and certificates, sets forth the general terms and conditions of our mortgage insurance coverage, including loan eligibility requirements, coverage terms, policy administration, premium payment obligations, exclusions or reductions in coverage, conditions precedent to payment of a claim, claim payment requirements, subrogation and other matters attendant to our coverage.
Paul-Bloomington, MN-WI 1.8 1.9 All Others 74.9 75.3 Total 100.0 % 100.0 % 9 December 31, 2022 2021 Gross RIF by Metropolitan Statistical Area Houston-The Woodlands-Sugar Land, TX 3.1 % 3.1 % Phoenix-Mesa-Chandler, AZ 3.0 2.8 Denver-Aurora-Lakewood, CO 2.6 2.5 Los Angeles-Long Beach-Glendale, CA 2.6 2.6 Washington-Arlington-Alexandria, DC-VA-MD-WV 2.5 2.5 Riverside-San Bernardino-Ontario, CA 2.5 2.4 Atlanta-Sandy Springs-Alpharetta, GA 2.5 2.4 Dallas-Plano-Irving, TX 2.5 2.3 Chicago-Naperville-Evanston, IL 2.0 2.2 Minneapolis-St.
Paul-Bloomington MN-WI 1.8 1.8 Orlando-Kissimmee-Sanford FL 1.7 1.6 All Others 76.2 75.8 Total 100.0 % 100.0 % 10 December 31, 2023 2022 Gross RIF by Metropolitan Statistical Area Phoenix-Mesa-Chandler AZ 3.2 % 3.0 % Houston-Pasadena-The Woodlands TX 3.0 3.1 Denver-Aurora-Centennial CO 2.6 2.6 Dallas-Plano-Irving, TX 2.7 2.5 Los Angeles-Long Beach-Glendale, CA 2.5 2.6 Riverside-San Bernardino-Ontario CA 2.5 2.5 Atlanta-Sandy Springs-Roswell, GA 2.1 2.5 Chicago-Naperville-Schaumburg, IL 1.8 2.0 Minneapolis-St.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs a result, it is uncertain what role the GSEs, the FHFA, the government and private capital, including private mortgage insurance, will play in the U.S. housing finance system in the future or the impact and timing of any such changes on the market and our business.
Biggest changeAs a result, it is uncertain what role the GSEs, the FHFA, the government and private capital, including private mortgage insurance, will play in the U.S. housing finance system in the future or the impact and timing of any such changes on the market and our business. 37 Changes in the business practices of the GSEs, including actions or decisions to decrease or discontinue the use of mortgage insurance or changes in the GSEs' eligibility requirements for mortgage insurers, could reduce our revenues or adversely affect our profitability and returns.
In addition, loans insured under FHA and other Federal government-supported mortgage insurance programs are eligible for securitization in Ginnie Mae securities, which may be viewed by investors as more desirable than Fannie Mae and Freddie Mac securities due to the explicit backing of Ginnie Mae securities by the full faith and credit of the U.S.
In addition, loans insured under FHA and other Federal government-supported mortgage insurance programs are eligible for securitization in Ginnie Mae securities, which may be viewed by investors as more desirable than Fannie Mae and Freddie Mac securities due to the explicit backing of Ginnie Mae securities by the full faith and credit of the U.S. Federal government.
Changes in the business practices of the GSEs, which can be implemented by the GSEs at the FHFA's direction, could negatively impact our operating results and financial performance, including changes to: • the level of coverage when private mortgage insurance is used to satisfy the GSEs' charter requirements on low down payment mortgages; • the overall level of guaranty fees or the amount of loan level delivery fees that the GSEs assess on loans that require mortgage insurance; • the GSEs' influence in the mortgage lender's selection of the mortgage insurer providing coverage and, if so, any transactions that are related to that selection; • the underwriting standards that determine what loans are eligible for purchase by the GSEs, which can affect the volume and quality of the risk insured by the mortgage insurer; 36 • the terms on which mortgage insurance coverage may be cancelled, including GSE requirements and programs that permit cancellation prior to reaching the applicable thresholds and conditions established by HOPA; • programs established by the GSEs intended to avoid or mitigate loss on insured mortgages and the circumstances in which mortgage servicers must implement such programs; • the extent to which the GSEs establish requirements for mortgage insurers' rescission practices or rescission settlement practices with lenders; • the size of loans that are eligible for purchase or guaranty by the GSEs, which if reduced or otherwise limited may reduce the overall level of business and the number of low down payment loans with mortgage insurance that the GSEs purchase or guaranty; and • requirements for a mortgage insurer to become and remain an approved eligible insurer for the GSEs, including, among other items, minimum capital adequacy targets, the credit received against such capital requirements for reinsurance, and the terms that the GSEs require to be included in mortgage insurance master policies for loans that they purchase or guaranty.
Changes in the business practices of the GSEs, which can be implemented by the GSEs at the FHFA's direction, could negatively impact our operating results and financial performance, including changes to: • the level of coverage when private mortgage insurance is used to satisfy the GSEs' charter requirements on low down payment mortgages; • the overall level of guaranty fees or the amount of loan level delivery fees that the GSEs assess on loans that require mortgage insurance; • the GSEs' influence in the mortgage lender's selection of the mortgage insurer providing coverage and, if so, any transactions that are related to that selection; • the underwriting standards that determine what loans are eligible for purchase by the GSEs, which can affect the volume and quality of the risk insured by the mortgage insurer; • the terms on which mortgage insurance coverage may be cancelled, including GSE requirements and programs that permit cancellation prior to reaching the applicable thresholds and conditions established by HOPA; • programs established by the GSEs intended to avoid or mitigate loss on insured mortgages and the circumstances in which mortgage servicers must implement such programs; • the extent to which the GSEs establish requirements for mortgage insurers' rescission practices or rescission settlement practices with lenders; • the size of loans that are eligible for purchase or guaranty by the GSEs, which if reduced or otherwise limited may reduce the overall level of business and the number of low down payment loans with mortgage insurance that the GSEs purchase or guaranty; and • requirements for a mortgage insurer to become and remain an approved eligible insurer for the GSEs, including, among other items, minimum capital adequacy targets, the credit received against such capital requirements for reinsurance, and the terms that the GSEs require to be included in mortgage insurance master policies for loans that they purchase or guaranty.
Factors that affect the volume of low down payment mortgage originations include: • the level of home mortgage interest rates and the deductibility of mortgage interest and mortgage insurance for income tax purposes; 30 • the health of the domestic economy as well as conditions in regional and local economies; • housing affordability; • population trends, including the rate of household formation; • the rate of home price appreciation, which in times of significant refinancing can affect whether refinance loans have loan-to-value ratios that require private mortgage insurance; • government housing policies encouraging loans to borrowers that may need low down payment financing, such as first-time homebuyers; • the extent to which the guaranty fees, loan-level price adjustments, credit underwriting guidelines and other business terms provided by the GSEs affect lenders' willingness to extend credit for low down payment mortgages; • requirements for ability-to-pay determinations prior to extending credit as discussed below; • restrictions on mortgage credit due to more stringent underwriting standards and the risk retention requirements for securitized mortgage loans affecting lenders as discussed below; and • changes in the credit standards, premiums or other terms of obtaining FHA, VA or USDA insurance, which competes directly with private mortgage insurance.
Factors that affect the volume of low down payment mortgage originations include: • the level of home mortgage interest rates and the deductibility of mortgage interest and mortgage insurance for income tax purposes; • the health of the domestic economy as well as conditions in regional and local economies; • housing affordability; • population trends, including the rate of household formation; • the rate of home price appreciation, which in times of significant refinancing can affect whether refinance loans have loan-to-value ratios that require private mortgage insurance; • government housing policies encouraging loans to borrowers that may need low down payment financing, such as first-time homebuyers; • the extent to which the guaranty fees, loan-level price adjustments, credit underwriting guidelines and other business terms provided by the GSEs affect lenders' willingness to extend credit for low down payment mortgages; • requirements for ability-to-pay determinations prior to extending credit as discussed below; • restrictions on mortgage credit due to more stringent underwriting standards and the risk retention requirements for securitized mortgage loans affecting lenders as discussed below; and • changes in the credit standards, premiums or other terms of obtaining FHA, VA or USDA insurance, which competes directly with private mortgage insurance.
Some of the factors that could negatively affect the market price of our common shares include: • actual or anticipated variations in our quarterly operating results; • changes in our earnings estimates or publication of research reports about us or the real estate industry; 48 • changes in market valuations of similar companies; • any indebtedness we incur in the future; • changes in credit markets and interest rates; • changes in government policies, laws and regulations; • changes impacting Fannie Mae, Freddie Mac or Ginnie Mae; • additions to or departures of our key management personnel; • actions by shareholders; • speculation in the press or investment community; • strategic actions by us or our competitors; • changes in our credit ratings; • the availability of third-party reinsurance for the insurance coverage that we write; • general market and economic conditions; • our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts; and • price and volume fluctuations in the stock market generally.
Some of the factors that could negatively affect the market price of our common shares include: • actual or anticipated variations in our quarterly operating results; • changes in our earnings estimates or publication of research reports about us or the real estate industry; • changes in market valuations of similar companies; • any indebtedness we incur in the future; • changes in credit markets and interest rates; • changes in government policies, laws and regulations; • changes impacting Fannie Mae, Freddie Mac or Ginnie Mae; • additions to or departures of our key management personnel; • actions by shareholders; • speculation in the press or investment community; • strategic actions by us or our competitors; • changes in our credit ratings; • the availability of third-party reinsurance for the insurance coverage that we write; • general market and economic conditions; • our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts; and • price and volume fluctuations in the stock market generally.
Factors that could cause the FHA or other government-supported mortgage insurance programs to maintain or increase their share of the mortgage insurance market include: • a reduction in the premiums charged for government mortgage insurance or a loosening of underwriting guidelines; • past and potential future capital constraints in the private mortgage insurance industry; • increases in premium rates or tightening of underwriting guidelines by private mortgage insurers based on past loan performance or other risk concerns; • increased levels of loss mitigation activity by private mortgage insurers on older vintage portfolios when compared to the more limited loss mitigation activities of government insurance programs; • imposition of additional loan level delivery fees by the GSEs on loans that require mortgage insurance; • increases in GSE guaranty fees and the difference in the spread between Fannie Mae mortgage-backed securities and Ginnie Mae mortgage-backed securities; • the perceived operational ease of using government insurance compared to the products of private mortgage insurers; • differences in the enforcement of program requirements by the FHA relative to the enforcement of policy terms by private entities; • the implementation of new or the amendment of current regulations under the Dodd-Frank Act (particularly with respect to the Qualified Mortgage and Qualified Residential Mortgage rules) and the Basel III Rules, which may be more favorable to the FHA than to private mortgage insurers (see "Risks Related to Regulation and Litigation —Our business prospects and operating results could be adversely impacted if, and to the extent that, the Consumer Financial Protection Bureau's ("CFPB") rule defining a qualified mortgage ("QM") reduces the size of the origination market or creates incentives to use government mortgage insurance programs ", "Risks Related to Regulation and Litigation— The amount of insurance we write could be adversely affected by the implementation of the Dodd-Frank Act's risk retention requirements and the definition of Qualified Residential Mortgage ("QRM") " and "Risks Related to Regulation and Litigation— The implementation of the Basel rules discourage the use of mortgage insurance "); and • increases in FHA loan limits above GSE loan limits.
Factors that could cause the FHA or other government-supported mortgage insurance programs to maintain or increase their share of the mortgage insurance market include: • a reduction in the premiums charged for government mortgage insurance or a loosening of underwriting guidelines; • past and potential future capital constraints in the private mortgage insurance industry; • increases in premium rates or tightening of underwriting guidelines by private mortgage insurers based on past loan performance or other risk concerns; • increased levels of loss mitigation activity by private mortgage insurers on older vintage portfolios when compared to the more limited loss mitigation activities of government insurance programs; • imposition of additional loan level delivery fees by the GSEs on loans that require mortgage insurance; • increases in GSE guaranty fees and the difference in the spread between Fannie Mae mortgage-backed securities and Ginnie Mae mortgage-backed securities; • the perceived operational ease of using government insurance compared to the products of private mortgage insurers; • differences in the enforcement of program requirements by the FHA relative to the enforcement of policy terms by private entities; • the implementation of new or the amendment of current regulations under the Dodd-Frank Act (particularly with respect to the Qualified Mortgage and Qualified Residential Mortgage rules) and the Basel III Endgame, which may be more favorable to the FHA than to private mortgage insurers (see "Risks Related to Regulation and Litigation —Our business prospects and operating results could be adversely impacted if, and to the extent that, the Consumer Financial Protection Bureau's ("CFPB") rule defining a qualified mortgage ("QM") reduces the size of the origination market or creates incentives to use government mortgage insurance programs ", "Risks Related to Regulation and Litigation— The amount of insurance we write could be adversely affected by the implementation of the Dodd-Frank 30 Act's risk retention requirements and the definition of Qualified Residential Mortgage ("QRM") " and "Risks Related to Regulation and Litigation— The implementation of the Basel rules discourage the use of mortgage insurance "); and • increases in FHA loan limits above GSE loan limits.
The Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (collectively, the “Federal Banking Agencies”) implemented Basel III through the adoption of revisions to their regulatory capital rules (the “Basel III Rules”), which establish minimum risk-based capital and leverage capital requirements for most United States banking organizations (although banking organizations with less than $10 billion in total assets may now choose to comply with an alternative community bank leverage ratio framework established by the Federal Banking Agencies in 2019).
The Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (collectively, the “Federal Banking Agencies”) implemented Basel III through the adoption of revisions to their regulatory capital rules (the “Basel III Rules”), which establish minimum risk-based capital and leverage capital requirements for most United States banking organizations (although banking organizations with less than $10 billion in total assets may now choose to comply with an alternative community bank leverage ratio framework established by 39 the Federal banking agencies in 2019).
Although we cannot predict whether, when or in what form the proposed regulations might be finalized, the proposed regulations, if finalized in their current form, could limit our ability to execute affiliate reinsurance transactions that would otherwise be undertaken for non-tax business reasons in 41 the future as that could increase the risk that gross RPII could constitute 20% or more of the gross insurance income of Essent Reinsurance Ltd. in a particular taxable year, which could result in such RPII being taxable to U.S. persons that own our shares.
Although we cannot predict whether, when or in what form the proposed regulations might be finalized, the proposed regulations, if finalized in their current form, could limit our ability to execute affiliate reinsurance transactions that would otherwise be undertaken for non-tax business reasons in the future as that could increase the risk that gross RPII could constitute 20% or more of the gross insurance income of Essent Reinsurance Ltd. in a particular taxable year, which could result in such RPII being taxable to U.S. persons that own our shares.
Bermuda insurance statutes and the regulations, and policies of the BMA, require Essent Reinsurance Ltd. to, among other things: 39 • maintain a minimum level of capital and surplus; • maintain an enhanced capital requirement, general business solvency margins and a minimum liquidity ratio; • restrict dividends and distributions; • obtain prior approval regarding the ownership and transfer of shares; • maintain a principal office and appoint and maintain a principal representative in Bermuda; • file annual financial statements, an annual statutory financial return and an annual capital and solvency return; and • allow for the performance of certain periodic examinations of Essent Reinsurance Ltd. and its financial condition.
Bermuda insurance statutes and the regulations, and policies of the BMA, require Essent Reinsurance Ltd. to, among other things: • maintain a minimum level of capital and surplus; • maintain an enhanced capital requirement, general business solvency margins and a minimum liquidity ratio; • restrict dividends and distributions; • obtain prior approval regarding the ownership and transfer of shares; • maintain a principal office and appoint and maintain a principal representative in Bermuda; • file annual financial statements, an annual statutory financial return and an annual capital and solvency return; and • allow for the performance of certain periodic examinations of Essent Reinsurance Ltd. and its financial condition.
Under our bye-laws and subject to Bermuda law, we have the option, but not the obligation, to require a shareholder to sell to us at fair market value the minimum number of common shares which is necessary to avoid or cure any adverse tax consequences or materially adverse legal or regulatory treatment to us, our subsidiaries or our shareholders if our board of directors reasonably determines, in good faith, that failure to exercise our option would result in such adverse consequences or treatment.
Under our bye-laws and subject to Bermuda law, we have the option, but not the obligation, to require a shareholder to sell to us at fair market value the minimum number of common shares which is necessary to avoid or cure any adverse tax 45 consequences or materially adverse legal or regulatory treatment to us, our subsidiaries or our shareholders if our board of directors reasonably determines, in good faith, that failure to exercise our option would result in such adverse consequences or treatment.
We may indemnify our directors or officers or any person appointed to any committee by the board of directors acting in their capacity as such in relation to any of our affairs for any loss arising or liability attaching to them by virtue of any rule of law in respect of any negligence, default, breach of duty or breach of trust of which such person may be guilty in relation to the company other than in respect of his own fraud or dishonesty.
We may indemnify our directors or officers or any person appointed to any committee by the board of directors acting in their capacity as such in relation to any of our affairs for any loss arising or liability attaching to them by virtue of any rule of law in respect of any negligence, default, breach of duty or breach of trust of which such person 47 may be guilty in relation to the company other than in respect of his own fraud or dishonesty.
Although our portfolio consists predominantly of investment-grade fixed income securities and complies with applicable regulatory requirements, the success of our investment activity and the value of our portfolio is affected by general economic conditions, which may adversely affect the markets for credit and interest-rate-sensitive securities, including the extent and timing of investor participation in these markets and the level and volatility of interest rates.
Although our portfolio consists predominantly of investment-grade fixed income securities and complies with applicable regulatory requirements, the success of our investment activity and the value of our portfolio is affected by general economic conditions, which may adversely affect the markets for credit and 34 interest-rate-sensitive securities, including the extent and timing of investor participation in these markets and the level and volatility of interest rates.
As a result, we believe that the QM regulations may cause changes in the lending standards and origination practices of our customers. Under the QM Rule, mortgage insurance premiums that are payable by the consumer at or prior to consummation of the loan may be 37 included in the calculation of points and fees, including our borrower-paid single premium products.
As a result, we believe that the QM regulations may cause changes in the lending standards and origination practices of our customers. Under the QM Rule, mortgage insurance premiums that are payable by the consumer at or prior to consummation of the loan may be included in the calculation of points and fees, including our borrower-paid single premium products.
At the end of the forbearance plan, the homeowner was required to pay back their reduced or suspended mortgage payments in one lump sum, but may have been eligible for a number of different options offered by 28 their mortgage servicer, including repayment plans, resuming normal payments or lowering the monthly loan payment through a modification.
At the end of the forbearance plan, the homeowner was required to pay back their reduced or suspended mortgage payments in one lump sum, but may have been eligible for a number of different options offered by their mortgage servicer, including repayment plans, resuming normal payments or lowering the monthly loan payment through a modification.
If we were unable to meet our obligations, our insurance subsidiaries could lose GSE approval or be required to cease writing business in one or more states, which would adversely impact our business, financial condition and operating results. We are exposed to risks relating to the discontinuation of LIBOR and to other benchmark rates. 47 The U.K.
If we were unable to meet our obligations, our insurance subsidiaries could lose GSE approval or be required to cease writing business in one or more states, which would adversely impact our business, financial condition and operating results. We are exposed to risks relating to the discontinuation of LIBOR and to other benchmark rates. The U.K.
As a result, future losses may have a material impact on future results as defaults occur. 31 A downturn in the U.S. economy, a decline in the value of borrowers' homes from their value at the time their loans close and natural disasters, acts of terrorism or other catastrophic events may result in more homeowners defaulting and could increase our losses.
As a result, future losses may have a material impact on future results as defaults occur. A downturn in the U.S. economy, a decline in the value of borrowers' homes from their value at the time their loans close and natural disasters, acts of terrorism or other catastrophic events may result in more homeowners defaulting and could increase our losses.
If the RPII (determined on a gross basis) of Essent Reinsurance Ltd. were to equal or exceed 20% of Essent Reinsurance Ltd.'s gross insurance income in any taxable year and direct or indirect policyholders (and persons related to those policyholders) own directly or indirectly through entities 20% or more of the voting power or value of the Company, then a U.S.
If the RPII (determined on a gross basis) of Essent Reinsurance Ltd. were to equal or exceed 20% of Essent Reinsurance Ltd.'s gross insurance income in any taxable year and direct or indirect policyholders (and persons related to those 42 policyholders) own directly or indirectly through entities 20% or more of the voting power or value of the Company, then a U.S.
Moreover, risk management is expected to be a new and important focus of regulatory examinations of companies under supervision. There can be no assurance that our risk management framework and documentation will meet the expectations of such regulators. Our share price may be volatile or may decline regardless of operating performance.
Moreover, risk management is expected to be a new and important focus of regulatory examinations of companies under supervision. There can be no assurance that our risk management framework and documentation will meet the expectations of such regulators. 49 Our share price may be volatile or may decline regardless of operating performance.
U.S. persons who own our shares may have more difficulty in protecting their interests than U.S. persons who are shareholders of a U.S. corporation. 45 The Bermuda Companies Act 1981 (the "Companies Act"), which applies to us, differs in certain material respects from laws generally applicable to U.S. corporations and their shareholders.
U.S. persons who own our shares may have more difficulty in protecting their interests than U.S. persons who are shareholders of a U.S. corporation. The Bermuda Companies Act 1981 (the "Companies Act"), which applies to us, differs in certain material respects from laws generally applicable to U.S. corporations and their shareholders.
Accordingly, we have assumed some risk in connection with providing these services. We also face regulatory and litigation risk in providing these services. 34 Our information technology systems may become outmoded, be temporarily interrupted or fail thereby causing us to fail to meet our customers' demands.
Accordingly, we have assumed some risk in connection with providing these services. We also face regulatory and litigation risk in providing these services. Our information technology systems may become outmoded, be temporarily interrupted or fail thereby causing us to fail to meet our customers' demands.
Except in connection with the settlement of trades or transactions entered into through the facilities of the NYSE, our board of directors may generally require any shareholder or any person proposing to acquire our shares to provide the information required under our bye-laws.
Except in connection with the settlement of trades or transactions entered into through the facilities of the NYSE, our board of directors may generally require any shareholder or any person proposing to acquire our shares to provide the 46 information required under our bye-laws.
If the volume of low down payment loan originations declines, then our ability to write new policies may suffer, and our revenue and results of operations may be negatively impacted. We expect our claims to increase as our portfolio matures.
If the volume of low down payment loan originations declines, then our ability to write new policies may suffer, and our revenue and results of operations may be negatively impacted. 31 We expect our claims to increase as our portfolio matures.
Additionally, any equity securities or convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our 49 common shares and may adversely affect the market price of our common shares.
Additionally, any equity securities or convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common shares and may adversely affect the market price of our common shares.
If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, demand for our shares could decrease, which could cause our share price or trading volume to decline.
If one or more of these analysts ceases coverage of our 50 Company or fails to publish reports on us regularly, demand for our shares could decrease, which could cause our share price or trading volume to decline.
Inappropriate delegation protocols or failure of servicers to service in accordance with the protocols may increase the magnitude of our losses and have an adverse effect on our business, financial condition and operating results.
Inappropriate delegation protocols or failure of servicers to service in accordance with the protocols may increase the magnitude of our losses and have an adverse effect on our business, 35 financial condition and operating results.
Violations of the referral fee limitations of RESPA may be enforced by the CFPB, HUD, the Department of Justice, state attorneys general and state insurance commissioners, as well as by private litigants in class actions.
Violations of the referral fee limitations of RESPA may be enforced by the CFPB, HUD, the 41 Department of Justice, state attorneys general and state insurance commissioners, as well as by private litigants in class actions.
Federal income and branch profits taxes (other than U.S. excise taxes on insurance and reinsurance premium and withholding taxes on certain U.S. 40 source investment income, and dividends paid from U.S. subsidiaries) on their income.
Federal income and branch profits taxes (other than U.S. excise taxes on insurance and reinsurance premium and withholding taxes on certain U.S. source investment income, and dividends paid from U.S. subsidiaries) on their income.
However, if, and so long as, the shares of a shareholder are treated as "controlled shares" (as determined pursuant to sections 957 and 958 of 44 the Code) of any U.S.
However, if, and so long as, the shares of a shareholder are treated as "controlled shares" (as determined pursuant to sections 957 and 958 of the Code) of any U.S.
Breaches in security could result in the loss or misuse of this information, which could, in turn, result in potential regulatory actions or litigation, including material claims for damages, interruption to our operations, damage to our reputation or otherwise have a material adverse effect on our business, financial condition and operating results.
Breaches in security, including inadvertent disclosure, could result in the loss or misuse of this information, which could, in turn, result in potential regulatory actions or litigation, including material claims for damages, interruption to our operations, damage to our reputation or otherwise have a material adverse effect on our business, financial condition and operating results.
For the year ended December 31, 2022, one customer represented more than 10% of our consolidated revenues. Maintaining our business relationships and business volumes with our largest lending customers remains critical to the success of our business. Our master policies do not, and by law cannot, require our customers to do business with us.
For the year ended December 31, 2023, one customer represented more than 10% of our consolidated revenues. Maintaining our business relationships and business volumes with our largest lending customers remains critical to the success of our business. Our master policies do not, and by law cannot, require our customers to do business with us.
Financial Conduct Authority (the “FCA”) announced the publication cessation dates for all U.S. Dollar and non-U.S. Dollar LIBOR settings. Most settings ceased at the end of December 2021 and the remaining U.S. Dollar settings (overnight and one-, three-, six- and 12-month U.S. Dollar LIBOR) will cease at the end of June 2023.
Financial Conduct Authority (the “FCA”) announced the publication cessation dates for all U.S. Dollar and non-U.S. Dollar LIBOR settings. Most settings ceased at the end of December 2021 and the remaining U.S. Dollar settings (overnight and one-, three-, six- and 12-month U.S. Dollar LIBOR) ceased at the end of June 2023.
The Department of the Treasury and the FHFA placed the GSEs into conservatorship in September 2008, putting regulatory and operational control of the GSEs under the auspices of the FHFA. Although we believe the FHFA's conservatorship was intended to be temporary, the GSEs have remained in conservatorship for over 14 years.
The Department of the Treasury and the FHFA placed the GSEs into conservatorship in September 2008, putting regulatory and operational control of the GSEs under the auspices of the FHFA. Although we believe the FHFA's conservatorship was intended to be temporary, the GSEs have remained in conservatorship for over 15 years.
Our primary reinsurance subsidiary, Essent Reinsurance Ltd., is a registered Bermuda Class 3A insurer pursuant to Section 4 of the Insurance Act 1978. As such, it is subject to regulation and supervision in Bermuda and is not licensed or admitted to do business in any jurisdiction except Bermuda.
Our primary reinsurance subsidiary, Essent Reinsurance Ltd., is a registered Bermuda Class 3B insurer pursuant to Section 4 of the Insurance Act 1978. As such, it is subject to regulation and supervision in Bermuda and is not licensed or 40 admitted to do business in any jurisdiction except Bermuda.
As a result of the significant decrease in our persistency rate largely as a result of a high level of refinancings in 2020 and 2021 triggered by historically low interest rates precipitated by the economic impacts of the COVID-19 pandemic, approximately 84% of our aggregate insurance in force as of December 31, 2022 corresponds to policies we have written since January 1, 2020.
As a result of the significant decrease in our persistency rate largely as a result of a high level of refinancings in 2020 and 2021 triggered by historically low interest rates precipitated by the economic impacts of the COVID-19 pandemic, approximately 88% of our aggregate insurance in force as of December 31, 2023 corresponds to policies we have written since January 1, 2020.
Federal government. 29 Consequently, if the FHA or other government-supported mortgage insurance programs maintain or increase their share of the mortgage insurance market, our business could be affected.
Consequently, if the FHA or other government-supported mortgage insurance programs maintain or increase their share of the mortgage insurance market, our business could be affected.
The OECD and other government agencies have had an ongoing focus on issues related to the taxation of multinational corporations, such as the comprehensive plan set forth by the OECD to create an agreed-upon set of international rules designed to end so-called “base erosion and profit shifting”.
The OECD and other government agencies have had an ongoing focus on issues related to the taxation of multinational corporations, such as the comprehensive plan set forth by the OECD to create an agreed-upon set of international rules designed to end so-called “base erosion and profit shifting”, commonly referred to as the "Pillar II" rules.
Future revisions to these eligibility requirements could negatively impact our ability to write mortgage insurance at our current levels, generate the returns we anticipate from our business or otherwise participate in the private mortgage insurance market at all. See "Business—Regulation—Direct U.S. Regulation—GSE Qualified Mortgage Insurer Requirements" above.
Future revisions to these eligibility requirements could negatively impact our ability to write mortgage insurance at our current levels, generate the returns we anticipate from our business or otherwise participate in the private mortgage insurance market at all. See "Business—Regulation—Direct U.S.
If Essent Group Ltd. were considered a PFIC, it would have material adverse tax consequences for an investor that is subject to U.S. Federal income taxation.
If Essent Group Ltd. were considered a PFIC, it would have material adverse tax consequences for an investor that is subject to U.S.
U.S. tax-exempt organizations who own our shares may recognize unrelated business taxable income. A U.S. tax-exempt organization may recognize unrelated business taxable income if a portion of the insurance income of any of our non-U.S. insurance subsidiaries is allocated to the organization, which generally would be the case if the tax-exempt shareholder is a 10% U.S.
A U.S. tax-exempt organization may recognize unrelated business taxable income if a portion of the insurance income of any of our non-U.S. insurance subsidiaries is allocated to the organization, which generally would be the case if the tax-exempt shareholder is a 10% U.S.
The insurance holding company laws and regulations of the Commonwealth of Pennsylvania, the state in which our insurance subsidiaries are domiciled, require that, before a person can acquire direct or indirect control of an insurer domiciled in the state, prior written approval must be obtained from the Pennsylvania Insurance Department.
The insurance holding company laws and regulations of the Commonwealth of Pennsylvania and the State of Missouri, the states in which our U.S. insurance subsidiaries are domiciled, require that, before a person can acquire direct or indirect control of an insurer domiciled in the state, prior written approval must be obtained from the Pennsylvania Insurance Department and/or the Missouri Department of Commerce and Insurance.
Our revenues, profitability and returns would decline if we lose a significant customer. Our mortgage insurance business depends on our relationships with our largest lending customers. Our top ten customers generated 39.9% of our NIW during year ended December 31, 2022, compared to 41.6% and 35.8% for the years ended December 31, 2021 and 2020, respectively.
Our revenues, profitability and returns would decline if we lose a significant customer. Our mortgage insurance business depends on our relationships with our largest lending customers. Our top ten customers generated 48.4% of our NIW during year ended December 31, 2023, compared to 39.9% and 41.6% for the years ended December 31, 2022 and 2021, respectively.
Any U.S. Federal income and branch profits taxes levied upon earnings from our Bermuda operations could materially adversely affect our shareholders' equity and earnings. Holders of 10% or more of our common shares may be subject to U.S. income taxation under the "controlled foreign corporation" ("CFC") rules.
Any U.S. Federal income and branch profits taxes levied upon earnings from our Bermuda operations could materially adversely affect our shareholders' equity and earnings. Holders of 10% or more of our common shares may be subject to U.S. income taxation under the "controlled foreign corporation" ("CFC") rules. If you are a "10% U.S. Shareholder" (defined to be a "U.S.
Our business prospects and operating results could be adversely impacted if, and to the extent that, the Consumer Financial Protection Bureau's ("CFPB") rule defining a qualified mortgage ("QM") reduces the size of the origination market or creates incentives to use government mortgage insurance programs.
Regulation—GSE Qualified Mortgage Insurer Requirements" above. 38 Our business prospects and operating results could be adversely impacted if, and to the extent that, the Consumer Financial Protection Bureau's ("CFPB") rule defining a qualified mortgage ("QM") reduces the size of the origination market or creates incentives to use government mortgage insurance programs.
Our business is highly dependent on the effective operation of our information technology systems, which are vulnerable to damage or interruption from power outages, computer and telecommunications failures, computer viruses, cyber-attacks, security breaches, catastrophic events and errors in usage.
Our business is highly dependent on the effective operation of our information technology systems, which are vulnerable to damage or interruption from power outages, computer and telecommunications failures, computer viruses, cyber-attacks, security breaches, catastrophic events, errors in usage, and other incidents which may impact the operation or availability of such systems.
Generally, we cannot cancel mortgage insurance coverage or adjust renewal premiums during the life of a mortgage insurance policy. As a result, higher than anticipated claims generally cannot be offset by premium increases on policies in force or mitigated by our non-renewal or cancellation of insurance coverage.
These expectations may prove to be incorrect. Generally, we cannot cancel mortgage insurance coverage or adjust renewal premiums during the life of a mortgage insurance policy. As a result, higher than anticipated claims generally cannot be offset by premium increases on policies in force or mitigated by our non-renewal or cancellation of insurance coverage.
Moreover, under Pennsylvania law, dividends and other distributions may only be paid out of unassigned surplus unless approved by the Commissioner. Our primary operating subsidiary, Essent Guaranty, Inc., had unassigned surplus of approximately $314.7 million as of December 31, 2022, and paid to its parent, Essent US Holdings, Inc., dividends totaling $315.0 million in 2022.
Moreover, under Pennsylvania law, dividends and other distributions may only be paid out of unassigned surplus unless approved by the Commissioner. Our primary operating subsidiary, Essent Guaranty, Inc., had unassigned surplus of approximately $298.8 million as of December 31, 2023, and paid to its parent, Essent US Holdings, Inc., dividends totaling $295.0 million in 2023.
However, if the Federal Banking Agencies decide to implement Basel IV as specifically drafted by the Basel Committee, mortgage insurance would not lower the LTV ratio of residential loans for capital purposes, and therefore may decrease the demand for mortgage insurance.
If the Federal banking agencies decide to implement the Basel III Endgame as specifically drafted, mortgage insurance would not lower the LTV ratio of residential loans for capital purposes, and therefore may decrease the demand for mortgage insurance.
It is also possible that Treasury Regulations, and/or IRS administrative rulings could be written under the TCJA that could have an adverse impact on the Company or the holders of our common shares.
It is also possible that future Treasury Regulations, and/or IRS administrative rulings could have an adverse impact on the Company or the holders of our common shares.
Our tax liabilities and effective tax rate in the future could be adversely affected by changes in tax laws in countries in which we operate pursuant to ongoing efforts by the Organisation for Economic Co-operation and Development (“OECD”), the U.S. Congress, Ireland Revenue, or the Bermuda Monetary Authority.
Federal income taxation. 43 Our tax liabilities and effective tax rate in the future could be adversely affected by changes in tax laws in countries in which we operate pursuant to ongoing efforts by the Organisation for Economic Co-operation and Development (“OECD”), the U.S. Congress, Ireland Revenue, or the Government of Bermuda.
We have completed, and expect to complete, acquisitions in an effort to achieve profitable growth in our operations and to create additional value, such as the recently announced plans to acquire Agents National Title Holding Company and Boston National Holdings LLC from Incenter LLC.
We have completed, and expect to complete, acquisitions in an effort to achieve profitable growth in our operations and to create additional value, such as our recent acquisitions of Agents National Title Holding Company and Boston National Holdings LLC from Incenter LLC.
Under Delaware law, a corporation may indemnify a director or officer of the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in defense of an action, suit or proceeding by reason of such position if such director or officer acted in good faith and in a manner he or she reasonably believed to be in or not be opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, such director or officer had no reasonable cause to believe his or her conduct was unlawful. 46 General Risk Factors We may face difficulties, unforeseen liabilities or rating actions from acquisitions or the integration of such acquired businesses.
Under Delaware law, a corporation may indemnify a director or officer of the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in defense of an action, suit or proceeding by reason of such position if such director or officer acted in good faith and in a manner he or she reasonably believed to be in or not be opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, such director or officer had no reasonable cause to believe his or her conduct was unlawful.
Accordingly, any shareholder who becomes a “10% U.S. Shareholder” at any time during the calendar year, by either vote or value will be subject to a "Subpart F income" inclusion on a per share per day basis.
Shareholder” at any time during the calendar year, by either vote or value will be subject to a "Subpart F income" inclusion on a per share per day basis.
Should we wish to increase our premium rates, any such change would be prospectively applied to new policies written, and the changes would be subject to approval by state regulatory agencies, which may delay or limit our ability to increase our premium rates. Our success depends, in part, on our ability to manage risks in our investment portfolio.
Should we wish to increase our premium rates, any such change would be prospectively applied to new policies written, and the changes would be subject to approval by state regulatory agencies, which may delay or limit our ability to increase our premium rates.
Federal income tax purposes your pro rata share of the CFC's "subpart F income," even if the subpart F income is not distributed. Also, due to attribution rule changes contained in TCJA, the Company believes that, based upon ownership of its U.S. subsidiaries, its foreign reinsurer (Essent Reinsurance Ltd.) will be deemed a CFC.
Federal income tax purposes your pro rata share of the CFC's "subpart F income," even if the subpart F income is not distributed. Also, due to attribution rules, the Company believes that, based upon ownership of its U.S. subsidiaries, its foreign reinsurer (Essent Reinsurance Ltd.) will be deemed a CFC. Accordingly, any shareholder who becomes a “10% U.S.
We set premiums at the time a policy is issued based on a number of factors, including our expectations regarding likely mortgage performance over the expected life of the coverage as well as competition from other private mortgage insurers, government programs and other products. These 32 expectations may prove to be incorrect.
Our mortgage insurance premium rates may not be adequate to cover future losses. We set premiums at the time a policy is issued based on a number of factors, including our expectations regarding likely mortgage performance over the expected life of the coverage as well as competition from other private mortgage insurers, government programs and other products.
This, in turn, could have a material adverse effect on our financial condition or results of operations. 35 Risks Relating to Regulation and Litigation Legislative or regulatory actions or decisions to change the role of the GSEs in the U.S. housing market generally, or changes to the charters of the GSEs with regard to the use of credit enhancements generally and private mortgage insurance specifically, could reduce our revenues or adversely affect our profitability and returns.
Risks Relating to Regulation and Litigation Legislative or regulatory actions or decisions to change the role of the GSEs in the U.S. housing market generally, or changes to the charters of the GSEs with regard to the use of credit enhancements generally and private mortgage insurance specifically, could reduce our revenues or adversely affect our profitability and returns.
Changes to our estimates could result in a material impact to our results of operations, even in a stable economic environment, and there can be no assurance that actual claims paid by us will not be substantially different than our loss reserves.
Changes to our estimates could result in a material impact to our results of operations, even in a stable economic environment, and there can be no assurance that actual claims paid by us will not be substantially different than our loss reserves. A downgrade in our financial strength ratings may adversely affect the amount of business that we write.
Recently, the GSEs have been focused on, among other things, supporting the housing finance system during times of stress as is currently occurring as a result of the COVID-19 pandemic, as well as equitable and affordable housing initiatives.
Recently, the GSEs have been focused on, among other things, supporting the housing finance system during times of stress, as well as equitable and affordable housing initiatives.
In 2021, the MGIWG adopted a new annual reporting schedule for mortgage insurers that was first required to be submitted by mortgage insurers to state insurance regulators in WI, NC and PA in 2022. In October 2022, the MGIWG released for public comment a draft revised Model Act.
In 2021, the MGIWG adopted a new annual reporting schedule for mortgage insurers that was first required to be submitted by mortgage insurers to state insurance regulators in WI, NC and PA in 2022. The revised Model Act was approved by MGIWG in 2023 and is awaiting adoption by the NAIC.
Person directly owning shares in Essent Reinsurance Ltd. could be subject to adverse tax consequences. However, as 100% of the shares of Essent Reinsurance Ltd. are owned by Essent Group Ltd., based upon the current relative value of its U.S. subsidiaries vs. foreign subsidiaries, management believes that Essent Group Ltd. is not currently a PFIC.
However, as 100% of the shares of Essent Reinsurance Ltd. are owned by Essent Group Ltd., based upon the current relative value of its U.S. subsidiaries vs. foreign subsidiaries, management believes that Essent Group Ltd. is not currently a PFIC.
A downgrade in our financial strength ratings may adversely affect the amount of business that we write. 33 Financial strength ratings, which various ratings organizations publish as a measure of an insurance company's ability to meet contractholder and policyholder obligations, are important to maintain confidence in our products and our competitive position.
Financial strength ratings, which various ratings organizations publish as a measure of an insurance company's ability to meet contractholder and policyholder obligations, are important to maintain confidence in our products and our competitive position.
A substantial majority of our investment portfolio consists of investment-grade debt obligations. Our investments are subject to fluctuations in value as a result of broad changes in market conditions as well as risks inherent in particular securities.
Our investments are subject to fluctuations in value as a result of broad changes in market conditions as well as risks inherent in particular securities.
Sales of substantial amounts of our common shares in the public market, or the perception that these sales could occur, could cause the market price of our common shares to decline. As of February 14, 2023, we had 108,095,924 outstanding common shares.
Sales of substantial amounts of our common shares in the public market, or the perception that these sales could occur, could cause the market price of our common shares to decline. As of February 12, 2024, we had 106,872,556 outstanding common shares.
Although we are not currently impacted by BEAT, there can be no assurance that changes to future taxable income calculations or future changes to BEAT will not have a negative impact on us.
Although we are not currently impacted by BEAT, there can be no assurance that changes to future taxable income calculations or future changes to BEAT will not have a negative impact on us. Future legislation adverse to the Company's effective tax rate may also extend beyond changes to the BEAT.
We cannot assure you that any strategies we may employ to mitigate the impact on us of such events, including limitations under our master policy on the payment of claims in certain circumstances where a property is damaged, the dispersal of our risk by geography and the potential use of third-party reinsurance structures, will be successful.
We cannot assure you that any strategies we may employ to mitigate the impact on us of such events, including limitations under our master policy on the payment of claims in certain circumstances where a property is damaged, the dispersal of our risk by geography and the potential use of third-party reinsurance structures, will be successful. 32 If interest rates decline, house prices appreciate or mortgage insurance cancellation requirements change, the length of time that our policies remain in force could decline and cause a decline in our revenue.
Moreover, the expiration or discontinuation of any governmental or GSE forbearance or foreclosure relief program could further exacerbate the financial condition of borrowers on loans we insure or economic conditions generally, which could have a material adverse effect our financial condition, results of operations or liquidity.
Moreover, the expiration or discontinuation of any governmental or GSE forbearance or foreclosure relief program could further exacerbate the financial condition of borrowers on loans we insure or economic conditions generally, which could have a material adverse effect our financial condition, results of operations or liquidity. 33 The premiums we charge may not be adequate to compensate us for our liabilities for losses and, as a result, any inadequacy could materially affect our financial condition and results of operations.
In addition, Essent Guaranty of PA, Inc. had unassigned surplus of approximately $13.6 million as of December 31, 2022 and paid to its parent, Essent US Holdings, Inc., dividends totaling $5 million in 2022. For further information, see Note 11 to our consolidated financial statements entitled "Dividends Restrictions" included elsewhere in this Annual Report.
In addition, Essent Guaranty of PA, Inc. had unassigned surplus of approximately $15.0 million as of December 31, 2023. Essent Guaranty of PA, Inc. did not pay any dividends in 2023. For further information, see Note 11 to our consolidated financial statements entitled "Dividends Restrictions" included elsewhere in this Annual Report.
Our access to such financing will depend, in part, on: • general market conditions; • the market's perception of our growth potential; • our debt levels, if any; • our expected results of operations; • our cash flow; • the availability of capital to third-party reinsurers to reinsurer our risks; and • the market price of our common shares.
Our access to such financing will depend, in part, on: • general market conditions; • the market's perception of our growth potential; • our debt levels, if any; • our expected results of operations; • our cash flow; • the availability of capital to third-party reinsurers to reinsurer our risks; and • the market price of our common shares. 48 Our principal capital demands include funds for (i) the expansion of our business, (ii) the payment of certain corporate operating expenses, (iii) capital support for our subsidiaries, and (iv) Federal, state and local taxes.
We may not be able to collect all amounts due to us from reinsurers and reinsurance coverage may not be available to us in the future at commercially reasonable rates or at all.
These loss events are unpredictable and may require us to increase our loss reserves and could adversely affect our financial performance. 36 We may not be able to collect all amounts due to us from reinsurers and reinsurance coverage may not be available to us in the future at commercially reasonable rates or at all.
Our insurance and reinsurance subsidiaries are subject to government regulation in each of the jurisdictions in which they are licensed or authorized to do business. Governmental agencies have broad administrative power to regulate many aspects of the insurance business, which may include trade and claim practices, accounting methods, premium rates, marketing practices, advertising, policy forms, and capital adequacy.
Governmental agencies have broad administrative power to regulate many aspects of the insurance business, which may include trade and claim practices, accounting methods, premium rates, marketing practices, advertising, policy forms, and capital adequacy. These agencies are concerned primarily with the protection of policyholders rather than shareholders.
The 2023 Adopted Charge of the MGIWG is to finalize the Model Act by the end of March 2023. We cannot predict the effect that any NAIC recommendations or proposed or future legislation or rule-making in the United States or elsewhere may have on our financial condition or operations.
We cannot predict the effect that any NAIC recommendations or proposed or future legislation or rule-making in the United States or elsewhere may have on our financial condition or operations. State regulation of the rates we charge for title insurance could adversely affect our results of operations.
Government-supported mortgage insurance programs include, but are not limited to federal mortgage insurance programs, including those offered by the FHA and VA, and state-supported mortgage insurance funds, including, but not limited to, those funds supported by the states of California and New York.
We compete for business with alternatives to private mortgage insurance, consisting primarily of government-supported mortgage insurance programs as well as home purchase or refinancing alternatives that do not use any form of mortgage insurance. 29 Government-supported mortgage insurance programs include, but are not limited to federal mortgage insurance programs, including those offered by the FHA and VA, and state-supported mortgage insurance funds, including, but not limited to, those funds supported by the states of California and New York.
Essent Group Ltd. serves as the holding company for our insurance and other subsidiaries and does not have any significant operations of its own.
Our holding company structure and certain regulatory and other constraints, including adverse business performance, could negatively impact our liquidity and potentially require us to raise more capital. Essent Group Ltd. serves as the holding company for our insurance and other subsidiaries and does not have any significant operations of its own.
For example, the TCJA includes a base erosion anti-abuse tax or “BEAT” that could make certain levels of affiliate reinsurance between United States and non-U.S. members of our group economically unfeasible.
Existing U.S. tax law could have an adverse impact on us or holders of our common shares if future changes to the business causes the Company to exceed certain thresholds. The base erosion anti-abuse tax or “BEAT” that could make certain levels of affiliate reinsurance between United States and non-U.S. members of our group economically unfeasible.
We believe that Essent Group Ltd. is not, has not been, and currently does not expect to become, a PFIC for U.S. Federal income tax purposes. New PFIC regulations have been recently made final; however, such regulations do not materially impact the manner in which Essent Group Ltd. conducts its PFIC testing, nor the outcome of such testing.
We believe that Essent Group Ltd. is not, has not been, and currently does not expect to become, a PFIC for U.S. Federal income tax purposes.However, there can be no assurance that new regulations, if made final, will not adversely impact Essent Group Ltd.'s PFIC status or U.S. Persons owning Essent Group Ltd. shares.
The amount of insurance we may be able to write could be adversely affected if lenders and investors select alternatives to private mortgage insurance. We compete for business with alternatives to private mortgage insurance, consisting primarily of government-supported mortgage insurance programs as well as home purchase or refinancing alternatives that do not use any form of mortgage insurance.
The amount of insurance we may be able to write could be adversely affected if lenders and investors select alternatives to private mortgage insurance.
Our principal capital demands include funds for (i) the expansion of our business, (ii) the payment of certain corporate operating expenses, (iii) capital support for our subsidiaries, and (iv) Federal, state and local taxes. We may need to provide additional capital support to our insurance subsidiaries if required pursuant to insurance laws and regulations or by the GSEs.
We may need to provide additional capital support to our insurance subsidiaries if required pursuant to insurance laws and regulations or by the GSEs.
As a result, the length of time insurance remains in force, which is also generally referred to as persistency, is a significant determinant of our revenues. A lower level of persistency could reduce our future revenues. Our annual persistency rate was 82.1%, 65.4% and 60.1% at December 31, 2022, 2021 and 2020, respectively.
Generally, in each year, most of our premiums are from insurance that has been written in prior years. As a result, the length of time insurance remains in force, which is also generally referred to as persistency, is a significant determinant of our revenues. A lower level of persistency could reduce our future revenues.
Such efforts by the OECD could result in legislation in the respective jurisdictions in which we operate, and/or changes to treaties and regulations. Any of these occurrences could materially 42 adversely affect our tax position, which could have a material adverse effect on our results of operations and financial condition.
Any future changes to these rules, and/or new interpretations by relevant jurisdictions of these occurrences could materially adversely affect our tax position, which could have a material adverse effect on our results of operations and financial condition. U.S. tax-exempt organizations who own our shares may recognize unrelated business taxable income.
Federal income tax purposes. The TCJA contains substantial law changes to the PFIC rules, and such changes could impact our shareholders under certain circumstances summarized below. Due to changes to the PFIC rules contained in the TCJA, we believe that Essent Reinsurance Ltd. is a PFIC, and any U.S.
Federal income tax purposes. We believe that Essent Reinsurance Ltd. is a PFIC, and any U.S. Person directly owning shares in Essent Reinsurance Ltd. could be subject to adverse tax consequences.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES We lease office facilities in Radnor, Pennsylvania and additional offices in Winston-Salem, North Carolina, New York, New York, and Reston, Virginia, for our U.S. operations headquarters, and we lease office facilities in Bermuda for our Bermuda-based reinsurance company.
Biggest changeITEM 2. PROPERTIES We lease office facilities in Radnor, Pennsylvania for our U.S. headquarters and additional offices in North Carolina, Pennsylvania, Missouri, New York and Virginia for our mortgage insurance and title insurance and settlement services operations, and we lease office facilities in Bermuda for our Bermuda-based headquarters and reinsurance company.
We believe our current facilities are adequate for our current needs and that suitable additional space will be available as and when needed. ITEM 3. LEGAL PROCEEDINGS We are not currently subject to any material legal proceedings. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 50 PART II
We believe our current facilities are adequate for our current needs and that suitable additional space will be available as and when needed. ITEM 3. LEGAL PROCEEDINGS We are not currently subject to any material legal proceedings. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 52 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod ($ in thousands, except per share amounts) Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) October 1 - October 31, 2022 4,145 $ 34.87 — November 1 - November 30, 2022 — N/A — December 1 - December 31, 2022 — N/A — Total 4,145 — $ 250,000 _______________________________________________________________________________ (1) As of December 31, 2022, the Company was authorized to purchase up to $250 million of its common shares under the share repurchase plan announced in May 2022, of which none had been utilized as of such date.
Biggest changePeriod ($ in thousands, except per share amounts) Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) October 1 - October 31, 2023 128,190 $ 47.49 123,327 November 1 - November 30, 2023 105,861 $ 48.21 105,861 December 1 - December 31, 2023 72,542 $ 49.75 72,542 Total 306,593 301,730 $ — _______________________________________________________________________________ (1) Under the Company's prior repurchase plan announced in May 2022, the Company was authorized to purchase up to $250 million of its common shares, of which $65.6 million was utilized prior to the expiration of that plan on December 31, 2023.
For information on Essent Group's ability to pay dividends, see Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources." Performance Graph The following performance graph compares, for the period from January 1, 2018 through December 31, 2022, the cumulative total shareholder return of an investment in (i) our common shares, (ii) the S&P 500 and (iii) a composite peer group selected by us consisting of Arch Capital Group Ltd., Enact Holdings, Inc.
For information on Essent Group's ability to pay dividends, see Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources." Performance Graph The following performance graph compares, for the period from January 1, 2019 through December 31, 2023, the cumulative total shareholder return of an investment in (i) our common shares, (ii) the S&P 500 and (iii) a composite peer group selected by us consisting of Arch Capital Group Ltd., Enact Holdings, Inc.
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common shares trade on the New York Stock Exchange (NYSE) under the symbol "ESNT." As of February 14, 2023, we had approximately 11 holders of record of our common shares. We have paid a quarterly dividend since September 2019.
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common shares trade on the New York Stock Exchange (NYSE) under the symbol "ESNT." As of February 12, 2024, we had approximately 9 holders of record of our common shares. We have paid a quarterly dividend since September 2019.
A dividend of $0.20 per share, $0.21 per share, $0.22 per share and $0.23 per share for each of the first, second, third and fourth quarters of 2022, respectively, was declared and paid. We presently expect to continue to declare a comparable regular quarterly dividend on our common stock in the future.
A dividend of $0.25 per share for each of the first, second, third and fourth quarters of 2023 was declared and paid. We presently expect to continue to declare a materially comparable regular quarterly dividend on our common stock in the future.
Such returns are based on historical results and are not intended to suggest future performance. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 S&P 500 $93.76 $120.84 $140.49 $178.27 $143.61 Peer Index $85.29 $143.18 $122.95 $152.22 $215.81 ESNT $78.72 $121.92 $106.54 $117.53 $106.45 The performance graph and related information shall not be deemed "soliciting material" or to be "filed" with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference 51 into any future filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
Such returns are based on historical results and are not intended to suggest future performance. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 S&P 500 $128.88 $149.83 $190.13 $153.16 $190.27 Peer Index $167.88 $144.16 $192.59 $273.94 $339.82 ESNT $154.88 $135.35 $149.30 $135.23 $194.59 The performance graph and related information shall not be deemed "soliciting material" or to be "filed" with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing. 53 Issuer Purchase of Equity Securities The table below sets forth information regarding repurchases of our common shares during the three months ended December 31, 2023.
Removed
Issuer Purchase of Equity Securities The table below sets forth information regarding repurchases of our common shares during the three months ended December 31, 2022.
Added
Under the Company's current repurchase plan announced in October 2023, the Company is authorized to purchase up to $250 million of its common shares between January 1, 2024 and December 31, 2025. ITEM 6. [RESERVED] 54

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeTreasury 0.125% 10/15/2023 17,449 Total $ 239,641 Percent of Investments Available for Sale 4.8 % The following tables includes municipal securities for states that represent more than 10% of the total municipal bond position as of December 31, 2022: 74 ($ in thousands) Fair Value Amortized Cost Credit Rating (1), (2) California Bay Area Toll Authority $ 8,785 $ 10,851 A1 State of California $ 8,737 $ 8,989 Aa2 San Joaquin Hills Transportation Corridor Agency $ 5,947 $ 7,725 A1 City of Anaheim CA $ 5,528 $ 7,725 A1 Community Hospitals of Central California Obligated Group $ 5,289 $ 7,725 A1 Golden State Tobacco Securitization Corp $ 4,113 $ 5,019 A3 San Francisco City & County Airport Comm-San Francisco International Airport $ 3,660 $ 3,632 A1 City of Carson CA $ 3,243 $ 4,402 Aa3 City of Long Beach CA Harbor Revenue $ 3,160 $ 3,132 Aa1 San Jose Unified School District $ 3,075 $ 4,090 Aaa Redwoods/The a Community of Seniors $ 2,849 $ 3,740 Aa3 County of Kern CA $ 2,720 $ 2,741 Baa2 City of Los Angeles Department of Airports $ 2,641 $ 2,628 Aa3 Los Angeles Unified School District/CA $ 2,601 $ 3,040 Aa3 Chabot-Las Positas Community College District $ 2,526 $ 2,649 Aa2 University of California $ 2,460 $ 2,512 Aa2 Port of Oakland $ 2,271 $ 2,433 A1 City of Inglewood CA $ 2,243 $ 3,128 Aa2 County of Riverside CA $ 2,081 $ 2,250 Aa2 City of Monterey Park CA $ 2,065 $ 2,967 Aa2 State of California Personal Income Tax Revenue $ 1,943 $ 2,045 Aa3 Foothill-Eastern Transportation Corridor Agency $ 1,608 $ 2,350 A1 Kaiser Foundation Hospitals $ 1,277 $ 1,299 Aa3 Regents of the University of California Medical Center Pooled Revenue $ 1,258 $ 1,361 Aa3 Riverside County Transportation Commission $ 1,217 $ 1,665 A2 City of Torrance CA $ 1,095 $ 1,243 Aa2 City of San Francisco CA Public Utilities Commission Water Revenue $ 1,035 $ 1,362 Aa2 City of El Cajon CA $ 924 $ 1,283 Aa2 County of Sacramento CA $ 886 $ 886 A1 City of El Monte CA $ 816 $ 1,000 Aa2 Alameda Corridor Transportation Authority $ 806 $ 871 A3 Cathedral City Redevelopment Agency Successor Agency $ 725 $ 718 Aa2 Pomona Redevelopment Agency Successor Agency $ 658 $ 700 Aa2 California Independent System Operator Corp $ 493 $ 725 A1 California County Tobacco Securitization Agency $ 409 $ 475 A3 County of San Bernardino CA $ 291 $ 293 Aa1 Oxnard Union High School District $ 205 $ 250 Aa2 City of San Jose CA $ 166 $ 205 Aa2 City of Riverside CA $ 149 $ 155 Aa2 Compton Community College District $ 119 $ 116 Aa3 City of Los Angeles CA $ 89 $ 111 Aa3 $ 92,163 $ 110,491 _______________________________________________________________________________ (1) Certain of the above securities may include financial guaranty insurance or state enhancements.
Biggest changeRank December 31, 2022 ($ in thousands) Security Fair Value 1 US Treasury 2.875% 06/15/2025 $ 39,908 2 US Treasury 1.500% 08/15/2026 31,025 3 Federal Home Loan Banks 0.000% 01/03/2023 27,080 4 US Treasury 0.250% 05/31/2025 23,249 5 US Treasury 2.500% 01/31/2024 19,911 6 US Treasury 0.000% 02/23/2023 19,879 7 US Treasury 2.625% 06/30/2023 19,562 8 US Treasury 2.000% 04/30/2024 19,369 9 US Treasury 0.875% 06/30/2026 17,584 10 US Treasury 0.125% 10/15/2023 17,003 Total $ 234,570 Percent of Investments Available for Sale 4.9 % The following tables includes municipal securities for states that represent more than 10% of the total municipal bond position as of December 31, 2023: 74 ($ in thousands) Fair Value Amortized Cost Credit Rating (1), (2) California Bay Area Toll Authority $ 9,181 $ 10,833 A1 California (State Of) 8,921 8,994 Aa2 Los Angeles Unified School District/CA 6,872 7,271 Aa3 San Joaquin Hills Transportation Corridor Agency 6,529 7,725 A1 Anaheim California Public Filing Authority 5,957 7,725 A1 California State Muni Financial Authority 5,564 7,725 A1 Golden State Tobacco Securitization Corp 3,996 5,030 Aa3 Airport Commission Of The City And County Of San Francisco 3,797 3,619 A1 Carson California 3,471 4,388 Aa3 San Jose Unified School District 3,271 4,090 Aaa California Municipal Financial Authority Environmental Impt 3,098 3,740 Aa3 Tuolumne Wind Project Authority 3,045 3,037 A2 County of Kern CA 2,744 2,743 A1 Chabot-Las Positas Community College District 2,633 2,708 Aa2 Port Oakland California 2,446 2,479 A1 City Of Inglewood CA 2,322 3,113 Aa2 City of Monterey Park CA 2,185 2,969 Aa2 Riverside County California 2,127 2,250 Aa2 California Health Facs Fing Auth 2,039 2,091 Aa3 City of San Francisco CA Public Utilities Commission Water Revenue 2,020 2,330 Aa2 Foothill-Eastern Transportation Corridor Agency 1,758 2,350 A1 Bay Area Water Supply & Conservation Agency 1,667 1,686 Aa3 Riverside County Transportation Commission 1,351 1,665 A2 Regents Of The University Of California 1,304 1,360 Aa3 University Of California 1,257 1,284 Aa2 Torrance California Junction Powers Filing Authority 1,144 1,238 Aa2 El Cajon Calif 985 1,282 Aa2 El Monte Calif 872 1,000 Aa2 Alameda Corridor Transportation Authority California 817 856 A3 Cathedral City Redevelopment Agency Successor Agency 709 707 Aa2 Pomona California Redevelopment Agency 685 700 Aa2 California Statewide Community Cev Authority 538 725 A1 Sacramento County California 490 484 A1 California County California Tobacco Securitization 433 470 A3 California State University 226 250 Aa2 Oxnard Calif Un High Sch Dist 218 250 Aa2 Los Angeles Department Of Airports Los Angeles International Air 208 209 Aa3 San Jose California Filing Authority 173 205 Aa2 Riverside California Pension Obligatory 153 155 Aa2 Compton California 117 114 Aa3 Los Angeles California Municipal Improvement Corp 94 110 Aa3 $ 97,417 $ 111,960 _______________________________________________________________________________ (1) Certain of the above securities may include financial guaranty insurance or state enhancements.
In response to the COVID-19 pandemic, the United States government enacted a number of policies to provide fiscal stimulus to the economy and relief to those affected by this global disaster. Specifically, mortgage forbearance programs and foreclosure moratoriums were instituted by Federal legislation along with actions taken by FHFA and the GSEs.
In response to the COVID-19 pandemic, the United States government enacted a number of policies to provide fiscal stimulus to the economy and relief to those affected by this global disaster. Specifically, mortgage forbearance programs and foreclosure moratoriums were instituted by Federal legislation along with actions taken by the FHFA and the GSEs.
During the three months ended June 30, 2022, Early COVID Defaults cured at levels that exceeded our estimate as of March 31, 2022, and we further lowered our estimate of loss for these defaults as of June 30, 2022 to 2% of the initial risk in force.
During the three months ended June 30, 2022, Early COVID Defaults cured at levels that exceeded our estimate as of March 31, 2022, and we further lowered our estimate of loss for these defaults as of June 30, 2022 to 2% of the initial risk in force.
See Note 5 to our consolidated financial statements. 69 The following tables summarizes Essent Guaranty's QSR agreements as of December 31, 2022: QSR Agreement Eligible Policy Period Ceding Percentage Ceding Commission Profit Commission QSR-2019 September 1, 2019-December 31, 2020 (1) 20% 63% (2) QSR-2022 January 1, 2022-December 31, 2022 20% 20% 62% QSR-2023 January 1, 2023-December 31, 2023 17.5% 20% 58% _______________________________________________________________________________ (1) Under QSR-2019, Essent Guaranty cedes 40% of premiums on singles policies and 20% on all other policies.
See Note 5 to our consolidated financial statements. 69 The following tables summarizes Essent Guaranty's QSR agreements as of December 31, 2023: QSR Agreement Eligible Policy Period Ceding Percentage Ceding Commission Profit Commission QSR-2019 September 1, 2019-December 31, 2020 (1) 20% 63% (2) QSR-2022 January 1, 2022-December 31, 2022 20% 20% 62% QSR-2023 January 1, 2023-December 31, 2023 17.5% 20% 58% _______________________________________________________________________________ (1) Under QSR-2019, Essent Guaranty cedes 40% of premiums on singles policies and 20% on all other policies.
Insurance Premium Revenue Recognition Mortgage guaranty insurance policies are contracts that are generally non-cancelable by the insurer, are renewable at a fixed price, and provide for payment of premium on a monthly, annual or single basis. Upon renewal, we are not able to re-underwrite or re-price our policies.
Mortgage Insurance Premium Revenue Recognition Mortgage guaranty insurance policies are contracts that are generally non-cancelable by the insurer, are renewable at a fixed price, and provide for payment of premium on a monthly, annual or single basis. Upon renewal, we are not able to re-underwrite or re-price our policies.
Losses incurred are generally affected by: • the overall state of the economy, which broadly affects the likelihood that borrowers may default on their loans and have the ability to cure such defaults; • changes in housing values, which affect our ability to mitigate our losses through the sale of properties with loans in default as well as borrower willingness to continue to make mortgage payments when the value of the home is below or perceived to be below the mortgage balance; 57 • the product mix of IIF, with loans having higher risk characteristics generally resulting in higher defaults and claims; • the size of loans insured, with higher average loan amounts tending to increase losses incurred; • the loan-to-value ratio, with higher average loan-to-value ratios tending to increase losses incurred; • the percentage of coverage on insured loans, with deeper average coverage tending to increase losses incurred; • credit quality of borrowers, including higher debt-to-income ratios and lower FICO scores, which tend to increase incurred losses; • the level and amount of reinsurance coverage maintained with third parties; • the rate at which we rescind policies.
Losses incurred are generally affected by: • the overall state of the economy, which broadly affects the likelihood that borrowers may default on their loans and have the ability to cure such defaults; • changes in housing values, which affect our ability to mitigate our losses through the sale of properties with loans in default as well as borrower willingness to continue to make mortgage payments when the value of the home is below or perceived to be below the mortgage balance; • the product mix of IIF, with loans having higher risk characteristics generally resulting in higher defaults and claims; • the size of loans insured, with higher average loan amounts tending to increase losses incurred; • the loan-to-value ratio, with higher average loan-to-value ratios tending to increase losses incurred; • the percentage of coverage on insured loans, with deeper average coverage tending to increase losses incurred; • credit quality of borrowers, including higher debt-to-income ratios and lower FICO scores, which tend to increase incurred losses; • the level and amount of reinsurance coverage maintained with third parties; • the rate at which we rescind policies.
IBNR reserves represent our estimated unpaid losses on loans that are 77 in default, but have not yet been reported to us as delinquent by our customers. We will also establish reserves for associated loss adjustment expenses, consisting of the estimated cost of the claims administration process, including legal and other fees and expenses associated with administering the claims process.
IBNR reserves represent our estimated unpaid losses on loans that are in default, but have not yet been reported to us as delinquent by our customers. We will also establish reserves for associated loss adjustment expenses, consisting of the estimated cost of the claims administration process, including legal and other fees and expenses associated with administering the claims process.
See additional discussion regarding the impact of the persistency rate on our performance in "—Factors Affecting Our Results of Operations—Persistency and Business Mix." Risk-to-Capital The risk-to-capital ratio has historically been used as a measure of capital adequacy in the U.S. mortgage insurance industry and is calculated as a ratio of net risk in force to statutory capital.
See additional discussion regarding the impact of the persistency rate on our performance in "—Factors Affecting Our Results of Operations—Persistency and Business Mix." 61 Risk-to-Capital The risk-to-capital ratio has historically been used as a measure of capital adequacy in the U.S. mortgage insurance industry and is calculated as a ratio of net risk in force to statutory capital.
See "—Results of Operations—Provision for Losses and Loss Adjustment Expenses" for a discussion of this estimate and Note 6 to our consolidated financial statements a sensitivity of the key assumption for this estimate. Income Taxes Deferred income tax assets and liabilities are determined using the asset and liability (or balance sheet) method.
See "—Results of Operations—Provision for Losses and Loss Adjustment Expenses" for a discussion of this estimate and Note 6 to our consolidated financial statements a sensitivity of the key assumption for this estimate. 77 Income Taxes Deferred income tax assets and liabilities are determined using the asset and liability (or balance sheet) method.
Accordingly, we applied a lower reserve rate to 58 the Early COVID Defaults than the rate used for defaults that had missed a comparable number of payments as of March 31, 2020 and in prior periods that did not have access to forbearance plans.
Accordingly, we applied a lower reserve rate to the Early COVID Defaults than the rate used for defaults that had missed a comparable number of payments as of March 31, 2020 and in prior periods that did not have access to forbearance plans.
We regularly review potential 67 investments and acquisitions, some of which may be material, that, if consummated, would expand our existing business or result in new lines of business, and at any given time we may be in discussions concerning possible transactions.
We regularly review potential investments and acquisitions, some of which may be material, that, if consummated, would expand our existing business or result in new lines of business, and at any given time we may be in discussions concerning possible transactions.
By contrast, if monthly premium loans are repaid earlier than 56 anticipated, our premium earned with respect to those loans and therefore our profitability declines. Currently, the expected return on single premium policies is less than the expected return on monthly policies.
By contrast, if monthly premium loans are repaid earlier than anticipated, our premium earned with respect to those loans and therefore our profitability declines. Currently, the expected return on single premium policies is less than the expected return on monthly policies.
As unemployment is one of the most common reasons for borrowers to default on their mortgage, the increase in unemployment has increased the number of delinquencies on the mortgages we insure, and has the potential to increase claim frequencies on defaults.
As unemployment is one of the most common reasons for borrowers to default on their mortgage, the increase in unemployment increased the number of delinquencies on the 58 mortgages we insure, and has the potential to increase claim frequencies on defaults.
Financial Strength Ratings The insurer financial strength ratings of Essent Guaranty, our principal mortgage insurance subsidiary, are A3 with a stable outlook by Moody's, BBB+ with a stable outlook by S&P and A (Excellent) with a stable outlook by A.M. Best.
Financial Strength Ratings The insurer financial strength ratings of Essent Guaranty, our principal mortgage insurance subsidiary, are A3 with a stable outlook by Moody's, A- with a stable outlook by S&P and A (Excellent) with a stable outlook by A.M. Best.
Our U.S. insurance subsidiaries are subject to certain capital and dividend rules and regulations prescribed by jurisdictions in which they are authorized to operate and the GSEs.
Our U.S. mortgage insurance subsidiaries are subject to certain capital and dividend rules and regulations prescribed by jurisdictions in which they are authorized to operate and the GSEs.
While the level of cure activity for the Early COVID Defaults exceeded our initial expectations, the transition of defaults to foreclosure or claim has not returned to pre-pandemic levels as of December 31, 2022. As a result, the level of defaults in the default inventory that have missed twelve or more payments is above pre-pandemic levels.
While the level of cure activity for the Early COVID Defaults exceeded our initial expectations, the transition of defaults to foreclosure or claim has not returned to pre-pandemic levels as of December 31, 2023. As a result, the level of defaults in the default inventory that have missed twelve or more payments is above pre-pandemic levels.
In connection with its insurance and reinsurance activities, Essent Re is required to maintain assets in trusts for the benefit of its contractual counterparties. See Note 3 to our consolidated financial statements. At December 31, 2022, our insurance subsidiaries were in compliance with these rules, regulations and agreements.
In connection with its insurance and reinsurance activities, Essent Re is required to maintain assets in trusts for the benefit of its contractual counterparties. See Note 3 to our consolidated financial statements. At December 31, 2023, our insurance subsidiaries were in compliance with these rules, regulations and agreements.
Premiums collected on annual policies are recognized as net premiums earned on a straight-line basis over the year of coverage. For the years ended December 31, 2022 and 2021, monthly premium policies comprised 94% and 96% of our NIW, respectively.
Premiums collected on annual policies are recognized as net premiums earned on a straight-line basis over the year of coverage. For the years ended December 31, 2023 and 2022, monthly premium policies comprised 96% and 94% of our NIW, respectively.
As a result, we received 36,784 defaults in the three months ended June 30, 2020 and 12,614 defaults in the three months ended September 30, 2020, which resulted in a significant increase in our default rate from 0.83% at March 31, 2020 to 4.54% at September 30, 2020.
We received 36,784 defaults in the three months ended June 30, 2020 and 12,614 defaults in the three months ended September 30, 2020, which resulted in a significant increase in our default rate from 0.83% at March 31, 2020 to 4.54% at September 30, 2020.
The decrease in the average net premium rate during the year ended December 31, 2022 was a primarily due to changes in the mix of the mortgages we insure, changes in our pricing and a decrease in premiums earned on the cancellation of non-refundable single premium policies.
The decrease in the average net premium rate during the year ended December 31, 2023 was a primarily due to changes in the mix of the mortgages we insure, changes in our pricing and a decrease in premiums earned on the cancellation of non-refundable single premium policies.
In addition, Essent Guaranty is a member of the Federal Home Loan Bank of Pittsburgh (the “FHLBank”) and has access to secured borrowing capacity with the FHLBank to provide Essent Guaranty with supplemental liquidity. Essent Guaranty had no outstanding borrowings with the FHLBank at December 31, 2022.
In addition, Essent Guaranty is a member of the Federal Home Loan Bank of Pittsburgh (the “FHLBank”) and has access to secured borrowing capacity with the FHLBank to provide Essent Guaranty with supplemental liquidity. Essent Guaranty had no outstanding borrowings with the FHLBank at December 31, 2023.
Premiums are paid either on a monthly installment basis ("monthly premiums"), in a single payment at origination ("single premiums"), or in some cases as an annual premium. For monthly premiums, we receive a monthly premium payment which is recorded as net premiums earned in the month the coverage is provided.
Mortgage insurance premiums are paid either on a monthly installment basis ("monthly premiums"), in a single payment at origination ("single premiums"), or in some cases as an annual premium. For monthly premiums, we receive a monthly premium payment which is recorded as net premiums earned in the month the coverage is provided.
If single premium policies are cancelled due to repayment of the underlying loan and the premium is non-refundable, the remaining unearned premium balance is immediately recognized as earned premium revenue. Substantially all of our single premium policies in force as of December 31, 2022 were non-refundable.
If single premium policies are cancelled due to repayment of the underlying loan and the premium is non-refundable, the remaining unearned premium balance is immediately recognized as earned premium revenue. Substantially all of our single premium policies in force as of December 31, 2023 were non-refundable.
Net Investment Income Our investment portfolio was predominantly comprised of investment-grade fixed income securities and money market funds as of December 31, 2022. The principal factors that influence investment income are the size of the investment portfolio and the yield on individual securities.
Net Investment Income Our investment portfolio was predominantly comprised of investment-grade fixed income securities and money market funds as of December 31, 2023. The principal factors that influence investment income are the size of the investment portfolio and the yield on individual securities.
Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020 Pursuant to the FAST Act Modernization and Simplification of Regulation S-K, discussions related to the changes in results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 have been omitted.
Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Pursuant to the FAST Act Modernization and Simplification of Regulation S-K, discussions related to the changes in results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 have been omitted.
As of December 31, 2022, our estimated off-balance sheet maximum exposure to loss from the Radnor Re entities was $0.5 million, representing the estimated net present value of investment earnings on the assets in the reinsurance trusts. See Note 5 to our consolidated financial statements for additional information.
As of December 31, 2023, our estimated off-balance sheet maximum exposure to loss from the Radnor Re entities was $0.3 million, representing the estimated net present value of investment earnings on the assets in the reinsurance trusts. See Note 5 to our consolidated financial statements for additional information.
The impact on our reserves in future periods will be dependent upon the amount of delinquent notices received from loan servicers and our expectations for the amount of ultimate losses on these delinquencies.
The impact on our reserves in future periods will be dependent upon the amount of delinquent notices received from loan servicers, the performance of defaults and our expectations for the amount of ultimate losses on these delinquencies.
However, with regulatory approval, a mortgage insurance company may make early withdrawals from the contingency reserve when incurred losses exceed 35% of net premiums earned in a calendar year. During the year ended December 31, 2022, no capital contributions were made to our U.S. insurance subsidiaries and Essent Guaranty paid dividends to Essent US Holdings, Inc. totaling $315.0 million.
However, with regulatory approval, a mortgage insurance company may make early withdrawals from the contingency reserve when incurred losses exceed 35% of net premiums earned in a calendar year. During the year ended December 31, 2023, no capital contributions were made to our U.S. mortgage insurance subsidiaries and Essent Guaranty paid dividends to Essent US Holdings, Inc. totaling $295.0 million.
In evaluating whether a decline in fair value is other-than-temporary, we consider several factors including, but not limited to: • our intent to sell the security or whether it is more likely than not that we will be required to sell the security before recovery; • failure of the issuer to make scheduled interest or principal payments; • credit ratings from third-party rating agencies and changes in these credit ratings below investment-grade; • current credit spreads, downgrade trends, industry and asset sector trends, and issuer disclosures and financial reports to determine if credit ratings from third-party credit agencies are reasonable; and • adverse conditions specifically related to the security, an industry, or a geographic area. 78 An investment security is impaired if the fair value of the security is less than its amortized cost basis.
In evaluating whether a decline in fair value is other-than-temporary, we consider several factors including, but not limited to: • our intent to sell the security or whether it is more likely than not that we will be required to sell the security before recovery; • failure of the issuer to make scheduled interest or principal payments; • credit ratings from third-party rating agencies and changes in these credit ratings below investment-grade; • current credit spreads, downgrade trends, industry and asset sector trends, and issuer disclosures and financial reports to determine if credit ratings from third-party credit agencies are reasonable; and • adverse conditions specifically related to the security, an industry, or a geographic area.
S&P or Fitch Ratings ("Fitch") rating utilized if Moody's not available.
S&P or Fitch rating utilized if Moody’s not available.
Due to business restrictions, stay-at-home orders and travel restrictions initially implemented in March 2020 as a result of COVID-19, unemployment in the United States increased significantly in the second quarter of 2020, declining during the second half of 2020 through 2022.
Due to business restrictions, stay-at-home orders and travel restrictions initially implemented in March 2020 as a result of the novel coronavirus disease 2019 ("COVID-19"), unemployment in the United States increased significantly in the second quarter of 2020, declining during the second half of 2020 through 2022.
At the operating subsidiary level, liquidity could be impacted by any one of the following factors: • significant decline in the value of our investments; • inability to sell investment assets to provide cash to fund operating needs; • decline in expected revenues generated from operations; • increase in expected claim payments related to our IIF; or • increase in operating expenses.
At the operating subsidiary level, liquidity could be impacted by any one of the following factors: • significant decline in the value of our investments; • inability to sell investment assets to provide cash to fund operating needs; • decline in expected revenues generated from operations; • increase in expected claim payments related to our mortgage insurance or title insurance portfolios; or • increase in operating expenses.
Such omitted discussion can be found under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission on February 15th, 2022.
Such omitted discussion can be found under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission on February 17, 2023.
As of December 31, 2022, 84% of our IIF relates to business written since January 1, 2020 and was less than three years old. As a result, based on historical industry performance, we expect the number of defaults and claims we experience, as well as our provision for losses and loss adjustment expenses ("LAE"), to increase as our portfolio seasons.
As of December 31, 2023, 69% of our IIF relates to business written since January 1, 2021 and was less than three years old. As a result, based on historical industry performance, we expect the number of defaults and claims we experience, as well as our provision for losses and loss adjustment expenses ("LAE"), to increase as our portfolio seasons.
In the year ended December 31, 2022, premiums earned on the cancellation of non-refundable single premium policies decreased to $20.8 million from $63.8 million in the year ended December 31, 2021 as a result of a decrease in existing borrowers refinancing their mortgages during 2022 as compared to 2021.
In the year ended December 31, 2023, premiums earned on the cancellation of non-refundable single premium policies decreased to $6.3 million from $20.8 million in the year ended December 31, 2022 as a result of a decrease in existing borrowers refinancing their mortgages during 2023 as compared to 2022.
In connection with a quota share reinsurance agreement with Essent Guaranty, Essent Re has agreed to maintain a minimum total equity of $100 million. As of December 31, 2022, Essent Re had total equity of $1.5 billion.
In connection with a quota share reinsurance agreement with Essent Guaranty, Essent Re has agreed to maintain a minimum total equity of $100 million. As of December 31, 2023, Essent Re had total equity of $1.8 billion.
We also offer mortgage-related insurance and reinsurance through our wholly-owned Bermuda-based subsidiary, Essent Reinsurance Ltd., which we refer to as "Essent Re." As of December 31, 2022, Essent Re provided insurance or reinsurance relating to GSE risk share and other reinsurance transactions covering approximately $2.0 billion of risk.
Best Company ("AM Best"). We also offer mortgage-related insurance and reinsurance through our wholly-owned Bermuda-based subsidiary, Essent Reinsurance Ltd., which we refer to as "Essent Re." As of December 31, 2023, Essent Re provided insurance or reinsurance relating to GSE risk share and other reinsurance transactions covering approximately $2.2 billion of risk.
The following table presents the average net premium rate for our U.S. mortgage insurance portfolio: Year Ended December 31, 2022 2021 2020 Base average premium rate 0.41 % 0.43 % 0.46 % Single premium cancellations 0.01 0.03 0.05 Gross average premium rate 0.42 0.46 0.51 Ceded premiums (0.05) (0.05) (0.05) Net average premium rate 0.37 % 0.41 % 0.46 % We anticipate that the continued use of third-party reinsurance along with changes to the level of future cancellations of non-refundable single premium policies and mix of IIF will reduce our average net premium rate in future periods.
The following table presents the average net premium rate for our U.S. mortgage insurance portfolio: Year Ended December 31, 2023 2022 2021 Base average premium rate 0.40 % 0.41 % 0.43 % Single premium cancellations — 0.01 0.03 Gross average premium rate 0.40 0.42 0.46 Ceded premiums (0.05) (0.05) (0.05) Net average premium rate 0.35 % 0.37 % 0.41 % The continued use of third-party reinsurance along with changes to the level of future cancellations of non-refundable single premium policies and mix of IIF may reduce our average net premium rate in future periods.
These revisions to our estimate of ultimate loss for the Early COVID Defaults resulted in a benefit recorded to the provision for losses of $164.1 million for the year ended December 31, 2022. As of December 31, 2022, approximately 99% of the Early COVID Defaults had cured.
These revisions to our estimate of ultimate loss for the Early COVID Defaults resulted in a benefit recorded to the provision for losses of $164.1 million for the year ended December 31, 2022.
During the years ended December 31, 2022, 2021 and 2020, the unrealized losses recorded in the investment portfolio principally resulted from fluctuations in market interest rates and credit spreads. Each issuer was current on its scheduled interest and principal payments. We recorded impairments of $12.7 million in the year ended December 31, 2022.
During the years ended 78 December 31, 2023, 2022 and 2021, the unrealized losses recorded in the investment portfolio principally resulted from fluctuations in market interest rates and credit spreads. Each issuer was current on its scheduled interest and principal payments. We recorded impairments of $0.2 million and $12.7 million in the years ended December 31, 2023 and 2022, respectively.
Because our insurance premiums are earned over the life of a policy, higher persistency rates can have a significant impact on our profitability. The persistency rate on our portfolio was 82.1% at December 31, 2022. Generally, higher prepayment speeds lead to lower persistency.
Because our insurance premiums are earned over the life of a policy, higher persistency rates can have a significant impact on our profitability. The persistency rate on our portfolio was 86.9% at December 31, 2023. Generally, higher prepayment speeds lead to lower persistency.
The economy in the United States is currently experiencing elevated levels of consumer price inflation. The Federal Reserve has increased the target federal funds rate several times during 2022 in an effort to reduce consumer price inflation.
The economy in the United States has been experiencing elevated levels of consumer price inflation. The Federal Reserve has increased the target federal funds rate several times during 2022 and 2023 in an effort to reduce consumer price inflation.
Interest expense increased due to an increase in the weighted average interest rate on amounts outstanding under the Credit Facility and an increase in the average amounts outstanding under the Credit Facility. For the years ending December 31, 2022 and 2021, the borrowings under the Credit Facility had a weighted average interest rate of 3.42% and 2.07%, respectively.
Interest expense increased due to an increase in the weighted average interest rate on amounts outstanding under the Credit Facility. For the years ending December 31, 2023 and 2022, the borrowings under the Credit Facility had a weighted average interest rate of 6.84% and 3.42%, respectively.
As more fully described in Note 5 to our condensed consolidated financial statements, at December 31,2022, we had approximately $2.5 billion of excess of loss reinsurance covering NIW from January 1, 2015 to December 31, 2022 and quota share reinsurance on portions of our NIW effective September 1, 2019 through December 31, 2020 and January 1, 2022 through December 31, 2022.
As more fully described in Note 5 to our condensed consolidated financial statements, at December 31, 2023, we had approximately $1.4 billion of excess of loss reinsurance covering NIW from January 1, 2018 through December 31, 2019 and August 1, 2020 through June 30, 2023 and quota share reinsurance on portions of our NIW effective September 1, 2019 through December 31, 2020 and January 1, 2022 through December 31, 2023.
See additional discussion in "—Liquidity and Capital Resources—Insurance Company Capital." As of December 31, 2022, our combined net risk in force for our U.S. insurance companies was $32.3 billion and our combined statutory capital was $3.2 billion, resulting in a risk-to-capital ratio of 10.2 to 1.
See additional discussion in "—Liquidity and Capital Resources—Insurance Company Capital." As of December 31, 2023, our combined net risk in force for our U.S. mortgage insurance companies was $34.5 billion and our combined statutory capital was $3.4 billion, resulting in a risk-to-capital ratio of 10.2 to 1.
Investments As of December 31, 2022, investments totaled $5.0 billion compared to $5.1 billion as of December 31, 2021. In addition, our total cash was $81.2 million as of December 31, 2022, compared to $81.5 million as of December 31, 2021.
Investments As of December 31, 2023, investments totaled $5.5 billion compared to $5.0 billion as of December 31, 2022. In addition, our total cash was $141.8 million as of December 31, 2023, compared to $81.2 million as of December 31, 2022.
As of December 31, 2022, Essent Guaranty, our GSE-approved mortgage insurance company, was in compliance with the PMIERs. 70 As of December 31, 2022, Essent Guaranty's Available Assets were $3.19 billion or 174% of its Minimum Required Assets were $1.83 billion based on our interpretation of the PMIERs.
As of December 31, 2023, Essent Guaranty, our GSE-approved mortgage insurance company, was in compliance with the PMIERs. 70 As of December 31, 2023, Essent Guaranty's Available Assets were $3.38 billion or 170% of its Minimum Required Assets were $1.99 billion based on our interpretation of the PMIERs.
Borrowings under the Credit Facility contractually mature on December 10, 2026 . Holding company net cash and investments available for sale totaled $685.2 million at December 31, 2022.
Borrowings under the Credit Facility contractually mature on December 10, 2026. Holding company net cash and investments available for sale totaled $693.5 million at December 31, 2023.
As of January 1, 2023, Essent Guaranty has dividend capacity of $314.7 million and Essent PA has dividend capacity of $5.3 million. Essent Re is subject to certain dividend restrictions as prescribed by the Bermuda Monetary Authority and under certain agreements with counterparties.
As of January 1, 2024, Essent Guaranty has dividend capacity of $298.8 million and Essent PA has dividend capacity of $5.4 million. Essent Re is subject to certain dividend restrictions as prescribed by the Bermuda Monetary Authority and under certain agreements with counterparties.
The decrease in investments was primarily due to an increase in our net unrealized investment losses primarily due to increases in market interest rates in the during the year ended December 31, 2022, partially offset by investing net cash flows from operations during the year ended December 31, 2022. 71 Investments Available for Sale by Asset Class Asset Class December 31, 2022 December 31, 2021 ($ in thousands) Fair Value Percent Fair Value Percent U.S.
The increase in investments was primarily due to investing net cash flows from operations during the year ended December 31, 2023 and a decrease in our net unrealized investment losses. 71 Investments Available for Sale by Asset Class Asset Class December 31, 2023 December 31, 2022 ($ in thousands) Fair Value Percent Fair Value Percent U.S.
We believe that the forbearance process could have a favorable effect on the frequency of claims that we ultimately pay. Based on the forbearance programs in place and the credit characteristics of the Early COVID Defaults, we believe that the ultimate number of Early COVID Defaults that result in claims will be less than our historical default-to-claim experience.
Based on the forbearance programs in place and the credit characteristics of the Early COVID Defaults, we believe that the ultimate number of Early COVID Defaults that result in claims will be less than our historical default-to-claim experience.
Provision for Losses and Loss Adjustment Expenses The provision for losses and loss adjustment expenses reflects the current expense that is recorded within a particular period to reflect actual and estimated loss payments that we believe will ultimately be made as a result of insured loans that are in default.
The change in the fair value of the embedded derivatives is reported in earnings and included in other income. 57 Provision for Losses and Loss Adjustment Expenses The provision for losses and loss adjustment expenses reflects the current expense that is recorded within a particular period to reflect actual and estimated loss payments that we believe will ultimately be made as a result of insured loans that are in default.
Due to the level of Early COVID Defaults remaining in the default inventory, beginning in the third quarter of 2022, we resumed reserving for the Early COVID Defaults using our normal reserve methodology.
Due to the level of Early COVID Defaults remaining in the default inventory, beginning in the third quarter of 2022, we resumed reserving for the Early COVID Defaults using our normal reserve methodology. As of December 31, 2023, approximately 99% of the Early COVID Defaults had cured.
Under a quota share reinsurance agreement, Essent Re reinsures 25% of Essent Guaranty's NIW through December 31, 2020 and 35% of Essent Guaranty’s NIW after December 31, 2020. Essent Re also provides insurance and reinsurance to Freddie Mac and Fannie Mae.
See "—Legislative and Regulatory Developments—Bermuda Corporate Income Tax" above. Under a quota share reinsurance agreement, Essent Re reinsures 25% of Essent Guaranty's NIW through December 31, 2020 and 35% of Essent Guaranty’s NIW after December 31, 2020. Essent Re also provides insurance and reinsurance to Freddie Mac and Fannie Mae.
The Pennsylvania statute also requires that dividends and other distributions be paid out of positive unassigned surplus without prior approval. At December 31, 2022, Essent Guaranty, had unassigned surplus of approximately $314.7 million and Essent Guaranty of PA, Inc. had unassigned surplus of approximately $13.6 million.
The Pennsylvania statute also requires that dividends and other distributions be paid out of positive unassigned surplus without prior approval. At December 31, 2023, Essent Guaranty, had unassigned surplus of approximately $298.8 million and Essent Guaranty of PA, Inc. had unassigned surplus of approximately $15.0 million.
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 levels of consumer price inflation on home sale activity, housing inventory, and home prices. In September 2022, Hurricane Ian made landfall in Florida and caused property damage in certain counties.
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 levels of consumer price inflation on home sale activity, housing inventory, and home prices.
For the year ended December 31, 2022, the average amount outstanding under the Credit Facility was $425.0 million as compared to $331.7 million for the year ended December 31, 2021. Income Taxes Our subsidiaries in the United States file a consolidated U.S. Federal income tax return.
For the years ended December 31, 2023 and 2022, the average amount outstanding under the Credit Facility was $425.0 million. 66 Income Taxes Our subsidiaries in the United States file a consolidated U.S. Federal income tax return.
As of December 31, 2022, we had substantial liquidity with cash of $81.2 million, short-term investments of $252.0 million and fixed maturity investments of $4.5 billion. We also had $400 million of available capacity under the revolving credit component of our Credit Facility, with $425 million of term borrowings outstanding under our Credit Facility.
As of December 31, 2023, we had substantial liquidity with cash of $141.8 million, short-term investments of $928.7 million and fixed maturity investments of $4.3 billion. We also had $400 million of available capacity under the revolving credit component of our Credit Facility, with $425 million of term borrowings outstanding under our Credit Facility.
Financing Activities Cash flow used in financing activities totaled $190.2 million for the year ended December 31, 2022 and primarily related to the repurchases of common shares as part of our share repurchase plan, quarterly cash dividends paid in 2022 and treasury stock acquired from employees to satisfy tax withholding obligations.
In each year, cash flows used in financing activities primarily related to the repurchases of common shares as part of our share repurchase plan, quarterly cash dividends paid and treasury stock acquired from employees to satisfy tax withholding obligations.
Our net risk in force represents risk in force net of reinsurance ceded, if any, and net of exposures on policies for which loss reserves have been established.
The risk-to-capital ratio is our net risk in force divided by our statutory capital. Our net risk in force represents risk in force net of reinsurance ceded, if any, and net of exposures on policies for which loss reserves have been established.
While the Company and all of its subsidiaries are expected to have sufficient liquidity to meet all their expected obligations, additional capital may be required to meet any new capital requirements that are adopted by regulatory authorities or the GSEs, to respond to changes in the business or economic environment, to provide additional capital related to the growth of our risk in force in our mortgage insurance portfolio, or to fund new business initiatives.
Management believes that the Company has sufficient liquidity available both at its holding companies and in its insurance and other operating subsidiaries to meet its operating cash needs and obligations and committed capital expenditures for the next 12 months. 67 While the Company and all of its subsidiaries are expected to have sufficient liquidity to meet all their expected obligations, additional capital may be required to meet any new capital requirements that are adopted by regulatory authorities or the GSEs, to respond to changes in the business or economic environment, to provide additional capital related to the growth of our risk in force in our mortgage insurance portfolio, or to fund new business initiatives.
Based upon our experience and industry data, claims incidence for mortgage insurance is generally highest in the third through sixth years after loan origination. Claims incidence for defaults associated with COVID-19 may not follow this pattern. As of December 31, 2022, 84% of our IIF relates to business written since January 1, 2020 and was less than three years old.
Based upon our experience and industry data, claims incidence for mortgage insurance is generally highest in the third through sixth years after loan origination. As of December 31, 2023, 69% of our IIF relates to business written since January 1, 2021 and was less than three years old.
Under the current guidance we determine whether the impairment has resulted from a credit loss or other factors. We determine whether a credit loss exists by considering information about the collectability of the instrument, current market conditions, and reasonable and supportable forecasts of economic conditions.
We determine whether a credit loss exists by considering information about the collectability of the instrument, current market conditions, and reasonable and supportable forecasts of economic conditions.
During the year ended December 31, 2021, the provision for losses and LAE was $31.1 million, comprised of $97.3 million of current year losses partially offset by $66.2 million of favorable prior years' loss development.
During the year ended December 31, 2023, the provision for losses and LAE was $31.5 million, comprised of $141.2 million for current year losses, partially offset by $109.6 million of favorable prior years' loss development.
Cash Flows The following table summarizes our consolidated cash flows from operating, investing and financing activities: Year Ended December 31, (In thousands) 2022 2021 2020 Net cash provided by operating activities $ 588,817 $ 709,256 $ 727,931 Net cash used in investing activities (398,872) (583,167) (1,154,417) Net cash (used in) provided by financing activities (190,196) (147,428) 457,966 Net (decrease) increase in cash $ (251) $ (21,339) $ 31,480 Operating Activities Cash flow provided by operating activities totaled $588.8 million for the year ended December 31, 2022, as compared to $709.3 million for the year ended December 31, 2021 and $727.9 million for the year ended December 31, 2020.
Cash Flows The following table summarizes our consolidated cash flows from operating, investing and financing activities: Year Ended December 31, (In thousands) 2023 2022 2021 Net cash provided by operating activities $ 763,001 $ 588,817 $ 709,256 Net cash used in investing activities (525,569) (398,872) (583,167) Net cash used in financing activities (176,885) (190,196) (147,428) Net (decrease) increase in cash $ 60,547 $ (251) $ (21,339) 68 Operating Activities Cash flow provided by operating activities totaled $763.0 million for the year ended December 31, 2023, as compared to $588.8 million for the year ended December 31, 2022 and $709.3 million for the year ended December 31, 2021.
In lieu of state income taxes, our insurance subsidiaries pay premium taxes that are recorded in other underwriting and operating expenses. Essent Group Ltd. ("Essent Group") and its wholly-owned subsidiary, Essent Re, are domiciled in Bermuda, which does not have a corporate income tax.
In lieu of state income taxes, our insurance subsidiaries pay premium taxes that are recorded in other underwriting and operating expenses. Essent Group Ltd. ("Essent Group") and its wholly-owned subsidiaries, Essent Re and Essent Agency (Bermuda) Ltd., are domiciled in Bermuda, and their income is not subject to a corporate income tax as of December 31, 2023.
Our most significant expense is compensation and benefits for our employees, which represented 59%, 61% and 60% of other underwriting and operating expenses for the years ended December 31, 2022, 2021 and 2020, respectively.
Our most significant expense is compensation and benefits for our employees, which represented 58%, 59% and 61% of other underwriting and operating expenses for the years ended December 31, 2023, 2022 and 2021, respectively. Compensation and benefits expense includes base and incentive cash compensation, stock compensation expense, benefits and payroll taxes.
Net Premiums Written and Earned Net premiums earned decreased in the year ended December 31, 2022 by three percent compared to the year ended December 31, 2021 due to the decrease in the average net premium rate from 0.41% for the year ended December 31, 2021 to 0.37% for the year ended December 31, 2022 partially offset by the increase in our average IIF from $202.9 billion in 2021 to $215.5 billion in 2022.
The increase in net premiums written and earned was also due to the increase in our average IIF from $215.5 billion in 2022 to $234.5 billion in 2023, partially offset by the decrease in the average net premium rate from 0.37% for the year ended December 31, 2022 to 0.35% for the year ended December 31, 2023.
We segmented these two quarters’ 49,398 defaults as specifically COVID-19 related (“Early COVID Defaults”) and provided losses for these two cohorts differently as compared to our normal loss reserving methodology. The default-to-claim transition patterns of the Early COVID Defaults have been different than our historical defaults.
We segmented these two quarters’ 49,398 defaults as specifically COVID-19 related (“Early COVID Defaults”) and provided losses for these two cohorts differently as compared to our normal loss reserving methodology.
Fluctuations in the fair value of these entities may increase the volatility of the Company’s reported results of operations. Other Income Other income includes revenues associated with contract underwriting services and underwriting consulting services to third-party reinsurers.
Fluctuations in the fair value of these entities may increase the volatility of the Company’s reported results of operations. Other Income Other income includes revenues associated with underwriting consulting services to third-party reinsurers, title settlement services and contract underwriting services. The level of these revenues is dependent upon the number of customers who have engaged us for these services.
Overview We are an established private mortgage insurance company. Essent Guaranty, Inc., our wholly-owned insurance subsidiary which we refer to as "Essent Guaranty," is licensed to write coverage in all 50 states and the District of Columbia.
Essent Guaranty, Inc., our wholly-owned mortgage insurance subsidiary which we refer to as "Essent Guaranty," is approved by Fannie Mae and Freddie Mac and licensed to write coverage in all 50 states and the District of Columbia.
" 55 On August 16, 2022, the “Inflation Reduction Act of 2022” (“IRA”), was enacted, which, among other things, provides for a corporate alternative minimum tax and an excise tax on corporate stock repurchases.
Key regulatory and legislative developments that may affect us include: U.S. Tax Reform On August 16, 2022, the “Inflation Reduction Act of 2022” (“IRA”), was enacted, which, among other things, provides for a corporate alternative minimum tax and an excise tax on corporate stock repurchases.
The average balance of investments at amortized cost increased to $5.1 billion during the year ended December 31, 2022 from $4.7 billion during the year ended December 31, 2021, primarily as a result of investing cash flows generated from operations, partially offset by cash used for share repurchases and dividends.
The average balance of investments at amortized cost increased to $5.5 billion during the year ended December 31, 2023 from $5.1 billion during the year ended December 31, 2022, primarily as a result of investing cash flows generated from operations.
We recorded other-than-temporary impairments of $0.4 million in the year ended December 31, 2020. The impairments resulted from our intent to sell these securities subsequent to the reporting date. There were no impairments in the year ended December 31, 2021.
The impairments resulted from our intent to sell these securities subsequent to the reporting date. There were no impairments in the year ended December 31, 2021.
The increase in our operating results in 2022 over 2021 was primarily due to a decrease in the provision for losses and LAE and an increase in net investment income, partially offset by decreases in net premiums earned, income from other invested assets and realized net investment gains and an increase in income taxes.
The decrease in our operating results in 2023 over 2022 was primarily due to an increase in the provision for losses and LAE, increases in operating expenses, a decrease in income from other invested assets and an increase in interest expense, partially offset by increases in net premiums earned and net investment income and decreases in realized net investment losses and income taxes. 62 Net Premiums Written and Earned Net premiums written and earned increased in the year ended December 31, 2023 by 9% compared to the year ended December 31, 2022.
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 minimum financial strength rating of A- or better by S&P Global Ratings, A.M. Best or both.
Each of the third-party reinsurers has an insurer minimum financial strength rating of A- or better by S&P Global Ratings, A.M. Best or both.
Stockholders' equity increased primarily due to net income generated in 2022, partially offset by a decrease in accumulated other comprehensive income related to an increase in our net unrealized investment losses associated with increases in market interest rates during the year ended December 31, 2022, the repurchase of common shares under our share repurchase plan, and dividends paid.
Stockholders' equity increased primarily due to net income generated in 2023 and a decrease in accumulated other comprehensive loss related to a decrease in our net unrealized investment losses, partially offset by dividends paid and the repurchase of common shares under our share repurchase plan.
Our income tax expense was $156.8 million for the year ended December 31, 2022 compared to $140.5 million for the year ended December 31, 2021. The 66 effective tax rate for the year ended December 31, 2022 was 15.9% compared to 17.1% for the year ended December 31, 2021.
Our income tax expense was $126.6 million for the year ended December 31, 2023 compared to $156.8 million for the year ended December 31, 2022. The effective tax rate for the year ended December 31, 2023 was 15.4% compared to 15.9% for the year ended December 31, 2022.
The insurer financial strength ratings of Essent Re are BBB+ with a stable outlook by S&P and A (Excellent) with a stable outlook by A.M. Best.
The insurer financial strength ratings of Essent Re are A- with a stable outlook by S&P and A (Excellent) with a stable outlook by A.M. Best. On January 8, 2024, S&P upgraded its financial strength ratings of each of Essent Guaranty and Essent Re from BBB+ to A- with a stable outlook.
This pattern generally occurs because relatively few of the claims that a book will ultimately experience typically occur in the first few years of the book, when premium revenue is highest, while subsequent years are affected by declining premium revenues, as the number of insured loans decreases (primarily due to loan prepayments), and by increasing losses.
This pattern generally occurs because relatively few of the claims that a book will ultimately experience typically occur in the first few years of the book, when premium revenue is highest, while subsequent years are affected by declining premium revenues, as the number of insured loans decreases (primarily due to loan prepayments), and by increasing losses. 60 Key Performance Indicators Insurance In Force As discussed above, mortgage insurance premiums we collect and earn are generated based on our IIF, which is a function of our NIW and cancellations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeChanges to how risks are managed will also be identified and described. 79 At December 31, 2022, the effective duration of our investments available for sale was 4.0 years, which means that an instantaneous parallel shift (movement up or down) in the yield curve of 100 basis points would result in a change of 4.0% in fair value of our investments available for sale.
Biggest changeAt December 31, 2023, the effective duration of our investments available for sale was 3.4 years, which means that an instantaneous parallel shift (movement up or down) in the yield curve of 100 basis points would result in a change of 3.4% in fair value of our investments available for sale.
Excluding short-term investments, our investments available for sale effective duration was 4.3 years, which means that an instantaneous parallel shift (movement up or down) in the yield curve of 100 basis points would result in a change of 4.3% in fair value of our investments available for sale. 80
Excluding short-term investments, our investments available for sale effective duration was 4.1 years, which means that an instantaneous parallel shift (movement up or down) in the yield curve of 100 basis points would result in a change of 4.1% in fair value of our investments available for sale. 79
In addition, material market risk changes that occur from the last reporting period to the current are discussed.
In addition, material market risk changes that occur from the last reporting period to the current are discussed. Changes to how risks are managed will also be identified and described.

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