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What changed in Essent Group Ltd.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Essent Group Ltd.'s 2023 and 2024 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 2024 report.

+495 added−461 removedSource: 10-K (2025-02-19) vs 10-K (2024-02-16)

Top changes in Essent Group Ltd.'s 2024 10-K

495 paragraphs added · 461 removed · 377 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

145 edited+39 added−16 removed187 unchanged
Biggest changeIt 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.
Biggest changeIf 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 27 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.
We and other private mortgage insurers compete directly with Federal and state governmental and quasi-governmental agencies that provide mortgage insurance, principally, the FHA and, to a lesser degree, the VA. We and other private mortgage insurers also face limited competition from state-sponsored mortgage insurance funds in several states, including California and New York.
We and the other private mortgage insurers compete directly with Federal and state governmental and quasi-governmental agencies that provide mortgage insurance, principally, the FHA and, to a lesser degree, the VA. Private mortgage insurers also face limited competition from state-sponsored mortgage insurance funds in several states, including California and New York.
Our Products and Services Mortgage Insurance In general, there are two principal types of private mortgage insurance, primary and pool. Primary Mortgage Insurance Primary mortgage insurance provides protection on individual loans at specified coverage percentages.
Our Products and Services In general, there are two principal types of private mortgage insurance, primary and pool. Primary Mortgage Insurance Primary mortgage insurance provides protection on individual loans at specified coverage percentages.
GSE Qualified Mortgage Insurer Requirements Pursuant to their charters, Fannie Mae and Freddie Mac purchase or guaranty low down payment loans insured by entities that they determine to be qualified mortgage insurance companies. Our primary insurance subsidiary, Essent Guaranty, Inc., is currently approved by both Fannie Mae and Freddie Mac as a mortgage insurer.
GSE Qualified Mortgage Insurer Requirements Pursuant to their charters, Fannie Mae and Freddie Mac purchase or guaranty low down payment loans insured by entities that they determine to be qualified mortgage insurance companies. Our primary mortgage insurance subsidiary, Essent Guaranty, Inc., is currently approved by both Fannie Mae and Freddie Mac as a mortgage insurer.
This risk retention requirement does not apply to a mortgage loan that is a "qualified residential mortgage," or a "QRM," or that is insured or guaranteed by the FHA or other specified Federal agencies. The QRM regulations align the definition of a QRM loan with that of a QM loan.
This risk retention requirement does not apply to a mortgage loan that is a "qualified residential mortgage," (QRM), or that is insured or guaranteed by the FHA or other specified Federal agencies. The QRM regulations align the definition of a QRM loan with that of a QM loan.
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.
In 2017, the New York Department of Financial Services (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.
In December 2017, the Basel Committee published final revisions to the Basel III capital framework (“Basel IV”), which were generally targeted for implementation by each participating country by January 1, 2022 but have been delayed. In July 2023, the Federal banking agencies issued a Notice of Public Rulemaking (the "NPR") known as the "Basel III Endgame".
In December 2017, the Basel Committee published final revisions to the Basel III capital framework (“Basel IV”), which were generally targeted for implementation by each participating country by January 1, 2022 but have been delayed. In July 2023, the Federal banking agencies issued a Notice of Public Rulemaking (NPR) known as the "Basel III Endgame".
See "Risk Factors—Risks Relating to Regulation and Litigation— The implementation of the Basel rules may discourage the use of mortgage insurance ." Bermuda Insurance Regulation The Insurance Act 1978 of Bermuda and related regulations, as amended, or the Insurance Act, regulates the insurance business of our Bermuda-based reinsurance subsidiary, Essent Reinsurance Ltd., and provides that no person may carry on any insurance business in or from within Bermuda unless registered as an insurer under the Insurance Act by the Bermuda Monetary Authority, or the BMA.
See "Risk Factors—Risks Relating to Regulation and Litigation— The implementation of the Basel rules may discourage the use of mortgage insurance ." Bermuda Insurance Regulation The Insurance Act 1978 of Bermuda and related regulations, as amended, or the Insurance Act, regulates the insurance business of our Bermuda-based reinsurance subsidiary, Essent Reinsurance Ltd., and provides that no person may carry on any insurance business in or from within Bermuda unless registered as an insurer under the Insurance Act by the Bermuda Monetary Authority (BMA).
See "Risk Factors—Risks Relating 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." Qualified Residential Mortgage Regulations—Risk Retention Requirements The Dodd-Frank Act generally requires an issuer of an asset-backed security or a person who organizes and initiates an asset-backed transaction (a "securitizer") to retain at least 5% of the risk associated with securitized mortgage loans, although in some cases the retained risk may be allocated between the securitizer and the mortgage originator.
See "Risk Factors—Risks Relating to Regulation and Litigation— Our business prospects and operating 22 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." Qualified Residential Mortgage Regulations—Risk Retention Requirements The Dodd-Frank Act generally requires an issuer of an asset-backed security or a person who organizes and initiates an asset-backed transaction (a "securitizer") to retain at least 5% of the risk associated with securitized mortgage loans, although in some cases the retained risk may be allocated between the securitizer and the mortgage originator.
In addition to these private lawsuits, other private mortgage insurance companies have received "Civil Investigative Demands" from, and entered into consent orders with, the CFPB as part of its investigation to determine whether mortgage lenders and mortgage insurance providers engaged in acts or practices in connection with their captive mortgage insurance arrangements in violation of the RESPA, the Consumer Financial Protection Act and the Dodd-Frank Act.
In addition to these private lawsuits, other 23 private mortgage insurance companies have received "Civil Investigative Demands" from, and entered into consent orders with, the CFPB as part of its investigation to determine whether mortgage lenders and mortgage insurance providers engaged in acts or practices in connection with their captive mortgage insurance arrangements in violation of the RESPA, the Consumer Financial Protection Act and the Dodd-Frank Act.
Title insurance policies generally are issued on the basis of a preliminary title report or commitment, which is typically prepared after a search of one or more of public records, maps, documents and prior title policies to ascertain the existence of easements, restrictions, rights of way, conditions, encumbrances or other matters affecting the title to, or use of, real property.
Title insurance policies generally are issued on the basis of a preliminary title report or commitment, which is typically prepared after a search of one or more of public records, maps, documents and prior title policies to ascertain 15 the existence of easements, restrictions, rights of way, conditions, encumbrances or other matters affecting the title to, or use of, real property.
Although our employees conduct the substantial majority of our non-delegated underwriting, we engage underwriters on an outsourced basis from time to time in order to provide temporary underwriting capacity. 13 Risk Management We have established risk management controls throughout our organization and have a risk management framework that we believe reduces the volatility of our financial results and capital position.
Although our employees conduct the substantial majority of our non-delegated underwriting, we engage underwriters on an outsourced basis from time to time in order to provide temporary underwriting capacity. Risk Management We have established risk management controls throughout our organization and have a risk management framework that we believe reduces the volatility of our financial results and capital position.
Title insurance premiums paid in connection with a title insurance policy are 6 based on (and typically are a percentage of) either the amount of the mortgage loan or the purchase price of the property insured. The premium charged by a title insurer or an agent is subject to regulation in most areas. Such regulations vary from jurisdiction to jurisdiction.
Title insurance premiums paid in connection with a title insurance policy are based on (and typically are a percentage of) either the amount of the mortgage loan or the purchase price of the property insured. The premium charged by a title insurer or an agent is subject to regulation in most areas. Such regulations vary from jurisdiction to jurisdiction.
The Dodd-Frank Act provides for a statutory presumption that a borrower will have the ability to repay a loan if the loan has characteristics satisfying the qualified mortgage, or QM, definition. Creditors who violate the ability-to-repay, or ATR, standard can be liable for all interest and fees paid by the borrower as well as actual and statutory damages.
The Dodd-Frank Act provides for a statutory presumption that a borrower will have the ability to repay a loan if the loan has characteristics satisfying the qualified mortgage (QM), definition. Creditors who violate the ability-to-repay (ATR), standard can be liable for all interest and fees paid by the borrower as well as actual and statutory damages.
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.
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 4 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 Homeowners Protection Act of 1998, or HOPA, also requires the automatic termination of BPMI on most loans when the LTV ratio, based upon the original property value and amortized loan balance, reaches 78%, and provides for cancellation of BPMI upon a borrower's request when the LTV ratio, based on the current value of the property, reaches 80%, upon satisfaction of the conditions set forth in HOPA.
The Homeowners Protection Act of 1998 (HOPA), also requires the automatic termination of BPMI on most loans when the LTV ratio, based upon the original property value and amortized loan balance, reaches 78%, and provides for cancellation of BPMI upon a borrower's request when the LTV ratio, based on the current value of the property, reaches 80%, upon satisfaction of the conditions set forth in HOPA.
In addition, under forbearance plans adopted by the GSEs and implemented by their servicers, eligible homeowners who were adversely impacted by COVID-19 were permitted to temporarily reduce or suspend their mortgage payments for up to 18 months for loans in an active COVID-19-related forbearance program as of February 28, 2021.
Under COVID-19 forbearance plans adopted by the GSEs and implemented by their servicers, eligible homeowners who were adversely impacted by COVID-19 were permitted to temporarily reduce or suspend their mortgage payments for up to 18 months for loans in an active COVID-19-related forbearance program as of February 28, 2021.
Title insurance plays a key role in the U.S. economy by insuring the secure transfer of real estate and facilitating the growth of homeownership. Through our title insurance operations, we provide our customers with title insurance and escrow and other title-related services that support their ability to effectively close real estate transactions.
Title Insurance Industry Title insurance plays a key role in the U.S. economy by insuring the secure transfer of real estate and facilitating the growth of homeownership. Through our title insurance operations, we provide our customers with title insurance and escrow and other title-related services that support their ability to effectively close real estate transactions.
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.
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 mortgage insurance industry. Incumbent insurers experienced record high claims activity and sustained significant financial losses, resulting in depleted capital positions.
Underwriting We have established mortgage insurance underwriting guidelines that we believe protect our balance sheet and result in the insurance of high quality business. Most applications for mortgage insurance are submitted to us electronically, and we rely upon the lender's representations and warranties that the data submitted is true and correct when making our insurance decision.
Underwriting We have established mortgage insurance underwriting guidelines that we believe protect our balance sheet and result in the insurance of high quality business. Most applications for mortgage insurance are submitted to us electronically, and we rely upon the lender's representations that the data submitted is true and correct when making our insurance decision.
In addition, mortgage origination and servicing transactions are subject to compliance with various Federal and state laws, including the Real Estate Settlement Procedures Act, or RESPA, the Equal Credit Opportunity Act, the Fair Housing Act, the Truth In Lending Act, or TILA, the Homeowners Protection Act of 1998, or HOPA, and the Fair Credit Reporting Act of 1970.
In addition, mortgage origination and servicing transactions are subject to compliance with various Federal and state laws, including the Real Estate Settlement Procedures Act (RESPA), the Equal Credit Opportunity Act, the Fair Housing Act, the Truth In Lending Act (TILA), the Homeowners Protection Act of 1998 (HOPA), and the Fair Credit Reporting Act of 1970.
We also perform stress tests on our portfolio to analyze how our book of business may perform under adverse 14 scenarios. We believe that our economic capital framework and stress testing analysis helps to inform our optimal capitalization targets, allowing us to prudently manage and protect our balance sheet.
We also perform stress tests on our portfolio to analyze how our book of business may perform under adverse scenarios. We believe that our economic capital framework and stress testing analysis helps to inform our optimal capitalization targets, allowing us to prudently manage and protect our balance sheet.
Their charters generally prohibit the GSEs from purchasing a low down payment loan unless that loan is insured by a GSE-approved mortgage insurer, the mortgage seller retains at least a 10% participation in the loan or the seller agrees to repurchase or replace the loan in the event of a default.
The charters of the GSEs generally prohibit the GSEs from purchasing a low down payment loan unless that loan is insured by a GSE-approved mortgage insurer, the mortgage seller retains at least a 10% participation in the loan or the seller agrees to repurchase or replace the loan in the event of a default.
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.
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.
An owner’s title insurance policy, like those we issue in connection with the closing of a real estate transaction, provides owners with protection from losing their property due to unforeseen or unexpected title claims.
An owner’s title insurance policy, like those that we issue in connection with the closing of a real estate transaction, provides owners with protection from losing their property due to unforeseen or unexpected title claims.
The portfolio management process involves two main functions, quality assurance, or QA, reviews, and a comprehensive surveillance protocol, in order to provide customers timely feedback that fosters high quality loan production.
The portfolio management process involves two main functions, quality assurance (QA), reviews, and a comprehensive surveillance protocol, in order to provide customers timely feedback that fosters high quality loan production.
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.
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.
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.
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 24 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.
The Consumer Financial Protection Bureau, or CFPB, a Federal agency created by the Dodd-Frank Act, is charged with implementation and enforcement of these provisions.
The Consumer Financial Protection Bureau (CFPB), a Federal agency created by the Dodd-Frank Act, is charged with implementation and enforcement of these provisions.
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.
As of December 31, 2024, 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.
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 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. 26 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).
Customer qualification involves a process in which we diligence a potential customer's financial resources, operational practices, management experience and track record of originating quality mortgages prior to formalizing a customer relationship. We leverage the experience of our management team to pre-screen lenders prior to formally engaging and performing a lender qualification review.
Customer qualification involves a process in which we perform diligence over a potential customer's financial resources, operational practices, management experience and track record of originating quality mortgages prior to formalizing a customer relationship. We leverage the experience of our management team to pre-screen lenders prior to formally engaging and performing a lender qualification review.
For a description of limits on dividends payable to Essent Group Ltd. from our insurance subsidiaries, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" and Note 11 to our consolidated financial statements entitled "Dividends Restrictions" included elsewhere in this Annual Report.
For a description of limits on dividends payable to Essent Group Ltd. from our U.S. insurance subsidiaries, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" and Note 11 to our consolidated financial statements entitled "Dividends Restrictions" included elsewhere in this Annual Report.
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.
We believe that all employees should make good decisions, do the right thing and act like owners and 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.
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.
The private mortgage insurance industry additionally 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 actively seek to develop new business relationships with persons in the real estate community, such as real estate sales agents and brokers, financial institutions, independent escrow companies and title agents, real estate developers, mortgage brokers and attorneys who order title insurance policies for their clients.
We actively seek to develop new business relationships with persons in the real estate community, such as real estate sales agents and brokers, financial institutions, independent escrow companies and title agents, real estate developers, mortgage originators and servicers, and attorneys who order title insurance policies for their clients.
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
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. 29
In a typical residential real estate sale transaction where title insurance is issued, a third party, such as a real estate broker or agent, lawyer or closer, orders the title insurance on behalf of an insured or in certain instances, such as with respect to a lender, the insured orders on its own behalf.
In a typical residential real estate sale transaction where title insurance is issued, a third party, such as a real estate broker or agent, lawyer or settlement agent, orders the title insurance on behalf of an insured or in certain instances, such as with respect to a lender, the insured orders on its own behalf.
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.
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 and title insurance administration systems and the development of web-enabled servicing capabilities.
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.
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, 2024.
We are licensed to write mortgage insurance in all 50 states and the District of Columbia. Most states also regulate transactions between insurance companies and their affiliates and have restrictions on transactions that have the effect of inducing lenders to place business with the insurer.
We are licensed to write mortgage insurance in all 50 states and the District of Columbia, and to write title insurance in 45 states and the District of Columbia. Most states also regulate transactions between insurance companies and their affiliates and have restrictions on transactions that have the effect of inducing lenders to place business with the insurer.
Privacy and Information Security The Gramm-Leach-Bliley Act of 1999, or GLBA, imposes privacy requirements on financial institutions with which we transact business, including obligations to protect and safeguard consumers' nonpublic personal information and records, and limitations on the re-use of such information.
Privacy and Information Security The Gramm-Leach-Bliley Act of 1999 (GLBA) imposes privacy and data security requirements on financial institutions with which we transact business, including obligations to protect and safeguard consumers' nonpublic personal information and records, and limitations on the re-use of such information.
Essent Reinsurance Ltd., which is incorporated in Bermuda to carry on general insurance and reinsurance business, is registered as a Class 3B insurer in Bermuda and is regulated as such under the Insurance Act. We are not, however, licensed in Bermuda to carry on long-term business.
Essent Re, which is incorporated in Bermuda to carry on general insurance and reinsurance business, is registered as a Class 3B insurer in Bermuda and is regulated as such under the Insurance Act. We are not, however, licensed in Bermuda to carry on long-term business.
Our surveillance protocol maintains oversight over customer and vendor activities, industry dynamics, production trends and portfolio performance. The portfolio management process also involves loss mitigation aimed to reduce both frequency and severity of non-performing risk. See "—Defaults and Claims" below. Modeling and Analytics Our risk management professionals are supported by substantial data analysis and sophisticated risk models.
Our surveillance protocol maintains oversight over customer and vendor activities, industry dynamics, production trends and portfolio 14 performance. The portfolio management process also involves loss mitigation aimed to reduce both frequency and severity of non-performing risk. See "—Defaults and Claims" above. Modeling and Analytics Our risk management professionals are supported by substantial data analysis and sophisticated risk models.
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.
Public participants include government agencies such as the Federal Housing Administration (FHA), the Veterans Administration (VA), the U.S. Department of Agriculture Rural Development program and the Government National Mortgage Association (Ginnie Mae), as well as government-sponsored enterprises such as Fannie Mae and Freddie Mac. The U.S. residential mortgage market encompasses both primary and secondary markets.
Our primary mortgage insurance policies are issued through one of two programs: • Delegated Underwriting. We delegate to eligible customers the ability to underwrite the loans based on agreed-upon underwriting guidelines. To perform delegated underwriting, customers must be approved by our risk management group. See "—Risk Management—Loan Life Cycle Risk Management" below.
Our U.S. mortgage insurance policies are issued through one of two programs: • Delegated Underwriting. We delegate to eligible customers the ability to underwrite the loans based on agreed-upon underwriting guidelines. To perform delegated underwriting, customers must be approved by our risk management group. See "—Risk Management—Loan Life Cycle Risk Management" below.
Mortgage Insurance Mortgage insurance plays a critical role in the U.S. residential mortgage market by facilitating secondary market sales and by providing lenders and investors a means to diversify their exposures and mitigate mortgage credit risk. Mortgage insurance is provided by both private companies, such as Essent, and government agencies, such as the FHA and the VA.
Mortgage Insurance Mortgage insurance plays a critical role in the U.S. residential mortgage market by facilitating secondary market sales and providing lenders and investors a means to diversify their exposures and mitigate mortgage credit risk. Mortgage insurance is offered by both private companies, such as Essent Guaranty, and government agencies, such as the FHA and the VA.
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.
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, 2024 and 2023.
The substantial majority of the loans that entered into such forbearance plans exited forbearance as of December 31, 2023, largely pursuant to repayment plans or loan modifications that brought those loans into current status.
The substantial majority of the loans that entered into such forbearance plans exited forbearance prior to December 31, 2023, largely pursuant to repayment plans or loan modifications that brought those loans into current status.
There are six classifications of insurers carrying on general business 24 (Classes 1, 2, 3, 3A, 3B, and 4) with Class 1 insurers subject to the lightest regulation and Class 4 insurers subject to the strictest regulation.
There are six classifications of insurers carrying on general business 25 (Classes 1, 2, 3, 3A, 3B, and 4) with Class 1 insurers subject to the lightest regulation and Class 4 insurers subject to the strictest regulation.
See "—Our Products and Services—Mortgage Insurance—Master Policy" above. Fannie Mae and Freddie Mac maintain coordinated Private Mortgage Insurer Eligibility Requirements, which we refer to as the "PMIERs." The PMIERs represent the standards by which private mortgage insurers are eligible to provide mortgage insurance on loans owned or guaranteed by Fannie Mae and Freddie Mac.
See "—Our Products and Services—Mortgage Insurance—Master Policy" above. Fannie Mae and Freddie Mac maintain coordinated Private Mortgage Insurer Eligibility Requirements (PMIERs). The PMIERs represent the standards by which private mortgage insurers are eligible to provide mortgage insurance on loans owned or guaranteed by Fannie Mae and Freddie Mac.
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.
We believe that our risk management framework encompasses 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 U.S. mortgage insurance portfolio.
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.
Pursuant to the current minimum standards for mortgage insurer master policies enacted by the GSEs and the Federal Housing Finance Agency (FHFA), 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.
The loss of any of our larger customers could have a material adverse impact on us and our business. See "Risk Factors—Risks Relating to the Operation of Our Business— Our revenues, profitability and returns would decline if we lose a significant customer ." We seek to maintain strong institutional relationships with all our customers.
The loss of any of our larger customers could have a material adverse impact on us and our business. See "Risk Factors—Risks Relating to the Operation of Our Business— Our revenues, profitability and returns would decline if we lose a significant customer ." We seek to maintain strong institutional relationships with all of our U.S. mortgage insurance customers.
We seek to ensure that our employees properly underwrite our loans through quality assurance sampling, loan performance monitoring and training. As of December 31, 2023, approximately 27% of our insurance in force had been originated on a non-delegated basis, compared to 29% as of December 31, 2022.
We seek to ensure that our employees properly underwrite our loans through quality assurance sampling, loan performance monitoring and training. As of December 31, 2024, approximately 26% of our insurance in force had been originated on a non-delegated basis, compared to 27% as of December 31, 2023.
State Insurance Regulation Our U.S. insurance subsidiaries are required by the insurance regulatory authority of its state of domicile, and the insurance regulatory authority of each other jurisdiction in which they are licensed to transact business, to make various filings with those insurance regulatory authorities and with the National Association of Insurance Commissioners, or NAIC, including quarterly and annual financial statements prepared in accordance with statutory accounting principles.
State Insurance Regulation Each of our U.S. insurance subsidiaries is required by the insurance regulatory authority of its state of domicile, and the insurance regulatory authority of each other jurisdiction in which it is licensed to transact business, to make various filings with those insurance regulatory authorities and with the National Association of Insurance Commissioners (NAIC), including quarterly and annual financial statements prepared in accordance with statutory accounting principles.
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.
In general, state regulation of our U.S. insurance businesses 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; • 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; 19 • special deposits of securities; • limits on dividends payable; • advertising compliance; • establishment of reserves; • claims handling; • privacy, data protection and cybersecurity; • the use of artificial intelligence (AI); • hazardous financial condition; and • enterprise risk management.
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.
Paul-Bloomington MN-WI 1.7 1.8 Chicago-Naperville-Schaumburg, IL 1.7 1.9 All Others 75.9 76.2 Total 100.0 % 100.0 % 9 December 31, 2024 2023 Gross RIF by Metropolitan Statistical Area Phoenix-Mesa-Chandler AZ 3.2 % 3.2 % Houston-Pasadena-The Woodlands TX 3.1 3.0 Denver-Aurora-Centennial CO 3.0 2.7 Dallas-Plano-Irving, TX 2.6 2.6 Los Angeles-Long Beach-Glendale, CA 2.5 2.5 Riverside-San Bernardino-Ontario CA 2.3 2.5 Atlanta-Sandy Springs-Roswell, GA 2.3 2.1 Chicago-Naperville-Schaumburg, IL 1.9 1.8 Minneapolis-St.
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.
As of December 31, 2024, approximately 74% of our insurance in force had been originated on a delegated basis, compared to 73% as of December 31, 2023. See "Risk Factors—Risks Relating to the Operation of Our Business— Our delegated underwriting program may subject our mortgage insurance business to unanticipated claims ." 13 • Non-Delegated Underwriting.
In doing so, we provide private capital to mitigate mortgage credit risk, allowing lenders to make additional mortgage financing available to prospective homeowners. For the years ended December 31, 2023, 2022 and 2021, we generated private mortgage insurance new insurance written, or NIW, of approximately $47.7 billion, $63.1 billion and $84.2 billion, respectively.
In doing so, we provide private capital to mitigate mortgage credit risk, allowing lenders to make additional mortgage financing available to prospective homeowners. For the years ended December 31, 2024, 2023 and 2022, we generated private mortgage insurance new insurance written, or NIW, of approximately $45.6 billion, $47.7 billion and $63.1 billion, respectively.
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.
Mortgage Market The U.S. residential mortgage market is one of the largest in the world, with over $14.2 trillion of debt outstanding as of September 30, 2024, 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.
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.
The following graph provides detail on trends in total residential mortgage originations and the breakdown of the market between purchase and refinancing volume. 2 U.S. Residential Purchase vs.
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.
The private mortgage insurance industry currently consists of six active private mortgage insurers approved by the GSEs: Essent Guaranty, Arch Mortgage Insurance Company, Enact Mortgage Insurance Corporation, Mortgage Guaranty Insurance Corporation, National Mortgage Insurance Corporation and Radian Guaranty Inc.
Pursuant to statutory accounting requirements of the State of Missouri, where our title insurer is domiciled, our title insurer must defer a portion of premiums as an unearned premium reserve for the protection of policyholders (in addition to their reserves for known claims) and must maintain qualified assets in an amount equal to the statutory requirements.
Pursuant to statutory accounting requirements, our title insurer must defer a portion of premiums as an unearned premium reserve for the protection of policyholders (in addition to their reserves for known claims) and must maintain qualified assets in an amount equal to the statutory requirements.
The closer typically records the appropriate title documents and arranges the transfer of funds to pay off prior loans and extinguish the liens securing such loans.
The settlement agent typically records the appropriate title documents and arranges the transfer of funds to pay off prior loans and extinguish the liens securing such loans.
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.
We are parties to several types of reinsurance arrangements: • fully collateralized excess of loss reinsurance coverage on U.S. 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 U.S. 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 U.S. mortgage insurance policies that we write.
We maintain primary mortgage insurance underwriting centers in Radnor, Pennsylvania and Winston-Salem, North Carolina, as well as underwriters who are based remotely throughout the United States. We believe that the geographical distribution of our underwriting staff allows us to make underwriting determinations across different time zones and to best serve customers across the United States.
We maintain U.S. mortgage insurance underwriting centers in Radnor, Pennsylvania and Winston-Salem, North Carolina, and employ additional underwriters who are based remotely throughout the United States. We believe that the geographical distribution of our underwriting staff allows us to make underwriting determinations across different time zones and to best serve customers across the United States.
Private mortgage insurance plays a critical role in the U.S. housing finance system, extending affordable homeownership by facilitating the sale of low down payment loans into the secondary market. Fannie Mae and Freddie Mac, which we refer to collectively as the GSEs, are U.S.
Mortgage Insurance Overview Private mortgage insurance plays a critical role in the U.S. housing finance system, extending affordable homeownership by facilitating the sale of low down payment loans into the secondary market. Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac), which we refer to collectively as the GSEs, are U.S.
Industry revenues are also driven by factors affecting the volume of real estate closings, such as the state of the economy, the availability of mortgage funding, and changes in interest rates, which affect demand for new mortgage loans and refinancing transactions. Competition Mortgage Insurance. The private mortgage insurance industry is highly competitive.
Industry revenues are also driven by factors affecting the volume of real estate closings, such as the state of the economy, the availability of mortgage funding, and changes in interest rates, which affect demand for new mortgage loans and refinancing transactions.
Title Insurance and Settlement Services As a result of our acquisition of Agents National Title Insurance Company, a title insurance underwriter, and Boston National Title, an independent title agency, effective July 1, 2023, we offer title insurance products through a network of title insurance agents and title and settlement services.
As a result of our acquisition of Agents National Title Insurance Company (renamed Essent Title Insurance, Inc. effective January 1, 2025), a title insurance underwriter, and Boston National Title, an independent title agency, effective July 1, 2023, we offer title insurance products through a network of title insurance agents and title and settlement services.
SAFE Act (Mortgage Loan Originator Licensing) The SAFE Act requires mortgage loan originators to be licensed and/or registered with the Nationwide Mortgage Licensing System and Registry, or the NMLS. The NMLS is a database established by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators.
Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) The SAFE Act requires mortgage loan originators to be licensed and/or registered with the Nationwide Mortgage Licensing System and Registry, or the NMLS. The NMLS is a database established by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators.
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.
Our top ten customers generated 50.2% of our NIW on a flow basis during the year ended December 31, 2024, compared to 39.9% and 41.6% for the years ended December 31, 2023 and 2022, respectively. For the years ended December 31, 2024, 2023 and 2022, revenue from one customer, United Wholesale Mortgage, exceeded 10% of our consolidated revenue.
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.
The insurance holding company laws and regulations of Pennsylvania, the state in which both of our U.S. insurance subsidiaries are domiciled as of January 1, 2025, 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, 2023, we had approximately $239.1 billion of private mortgage insurance in force. We are approved by Fannie Mae and Freddie Mac and are licensed to write private mortgage insurance coverage in all 50 states and the District of Columbia.
As of December 31, 2024, we had approximately $243.6 billion of private mortgage insurance in force. We are approved by Fannie Mae and Freddie Mac and are licensed to write private mortgage insurance coverage in all 50 states and the District of Columbia.
The level of unearned premium reserve required to be maintained at any time is determined by a statutory formula based upon either the age, number of policies, and dollar amount of policy liabilities underwritten, or the age and dollar amount of statutory premiums written.
The level of unearned premium reserve required to be maintained at any time is determined by a statutory formula based factors such as age, number of policies, the dollar amount of policy liabilities underwritten, and the age and dollar amount of statutory premiums written.
We continue to upgrade and enhance our systems and technology, including: • investing in new customer-facing technology that enables our customers to transact business faster and easier, whether over an internet browser or through direct system-to-system interfacing with our customers' loan origination and servicing systems; • integrating our platform with third-party technology providers used by our customers in their loan origination process and for ordering mortgage insurance; • supporting a business rules engine that automatically enforces our eligibility guidelines and pricing rules at the time the mortgage insurance application is submitted; and • implementing advanced business process management software that focuses on improving our underwriting productivity and that may also be used to improve our quality assurance and loss management functions.
We continue to upgrade and enhance our systems and technology, including: 17 • investing in new customer-facing technology that enables our customers to transact business faster and easier, whether over an internet browser or through direct system-to-system interfacing with our customers' loan origination and servicing systems; • integrating our platform with third-party technology providers used by our customers in their loan origination process and for ordering mortgage insurance and provide title closing services; • supporting a business rules engine that automatically enforces our eligibility guidelines and pricing rules at the time the mortgage insurance application is submitted; • implementing advanced business process management software that focuses on improving our underwriting productivity and that may also be used to improve our quality assurance and loss management functions; • deploying commercially available software combined with proprietary solutions to support title closing and settlement services; and • development of a title insurance production system.
Top 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.
Top Ten States December 31, 2024 2023 IIF by State CA 12.5 % 13.0 % FL 11.9 11.1 TX 11.1 10.5 CO 4.1 4.1 AZ 3.8 3.7 GA 3.7 3.4 WA 3.4 3.5 NC 3.0 2.9 NY 2.6 2.5 OH 2.6 2.6 All Others 41.3 42.7 Total 100.0 % 100.0 % 8 December 31, 2024 2023 Gross RIF by State CA 12.4 % 12.8 % FL 12.1 11.4 TX 11.4 10.9 CO 4.0 4.0 AZ 3.9 3.8 GA 3.8 3.4 WA 3.4 3.5 NC 3.0 2.9 OH 2.5 2.6 MI 2.5 2.5 All Others 41.0 42.2 Total 100.0 % 100.0 % Top Ten Metropolitan Statistical Areas December 31, 2024 2023 IIF by Metropolitan Statistical Area Phoenix-Mesa-Chandler AZ 3.2 % 3.1 % Houston-Pasadena-The Woodlands TX 3.0 3.0 Dallas-Plano-Irving, TX 3.0 2.6 Denver-Aurora-Centennial CO 2.6 2.7 Riverside-San Bernardino-Ontario CA 2.5 2.5 Los Angeles-Long Beach-Glendale, CA 2.4 2.5 Atlanta-Sandy Springs-Roswell, GA 2.2 2.0 Orlando-Kissimmee-Sanford FL 1.8 1.7 Minneapolis-St.
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.
As of December 31, 2024, only three states accounted for greater than 5% of our portfolio, as measured by either IIF or Gross RIF, and three metropolitan statistical areas accounted for greater than 3% of our portfolio, as measured by either IIF or Gross RIF.
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.
The NAIC established a Mortgage Guaranty Insurance Working Group (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 (the "MGI Model Act") and other NAIC guidance 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 Insurance.
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 Re's principal representative is Artex Risk Solutions and its principal office for these purposes is the offices of Artex.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMoreover, 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.
Biggest changeThe 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. Our mortgage insurance premium rates may not be adequate to cover future losses.
If the volume of low down payment home mortgage originations declines, the amount of insurance that we write could decline, which would reduce our revenues. Our ability to write new business depends, among other things, on the origination volume of low down payment mortgages that require mortgage insurance.
If the volume of low down payment home mortgage originations declines, the amount of mortgage insurance that we write could decline, which would reduce our revenues. Our ability to write new mortgage insurance business depends, among other things, on the origination volume of low down payment mortgages that require 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.
Factors that affect the volume of low down payment mortgage originations include: • the level of home mortgage interest rates; • the health of the domestic economy as well as conditions in regional and local economies; • housing affordability; • the deductibility of mortgage interest and mortgage insurance for income tax purposes; • 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.
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.
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 34 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.
In December 2017, the Basel Committee published final revisions to the Basel III capital framework (“Basel IV”), which were generally targeted for implementation by each participating country by January 1, 2022 but have been delayed. In July 2023, the Federal banking agencies issued a Notice of Public Rulemaking (the "NPR") known as the "Basel III Endgame".
In December 2017, the Basel Committee published final revisions to the Basel III capital framework (“Basel IV”), which were generally targeted for implementation by each participating country by January 1, 2022 but have been delayed. In July 2023, the Federal banking agencies issued a Notice of Public Rulemaking (NPR) known as the "Basel III Endgame".
If our Bermuda principal operating subsidiary becomes subject to insurance statutes and regulations in jurisdictions other than Bermuda or if there is a change in Bermuda law or regulations or the application of Bermuda law or regulations, there could be a significant and negative impact on our business.
If our principal Bermuda operating subsidiary becomes subject to insurance statutes and regulations in jurisdictions other than Bermuda or if there is a change in Bermuda law or regulations or the application of Bermuda law or regulations, there could be a significant and negative impact on our business.
Based on such such calculations, the Company is not currently subject to the CAMT. Management will continue to monitor the applicability of CAMT. Generally, the Excise Tax on certain stock repurchases applies to U.S.-domiciled companies.
Based on such calculations, the Company is not currently subject to the CAMT. Management will continue to monitor the applicability of CAMT. Generally, the Excise Tax on certain stock repurchases applies to U.S.-domiciled companies.
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.
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 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.
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.
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; 49 • 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.
Alternatives to mortgage insurance include, but are not limited to: • lenders and other investors holding mortgages in their portfolios and self-insuring; • investors using other risk mitigation techniques in conjunction with reduced levels of private mortgage insurance coverage, or accepting credit risk without credit enhancement; • mortgage sellers retaining at least a 10% participation in a loan or mortgage sellers agreeing to repurchase or replace a loan upon an event of default; and • lenders originating mortgages using "piggyback structures" which avoid private mortgage insurance, such as a first mortgage with an 80% loan-to-value ratio and a second mortgage with a 10%, 15% or 20% loan-to-value ratio (referred to as 80-10-10, 80-15-5 or 80-20 loans, respectively) rather than a first mortgage with a 90%, 95% or 100% loan-to-value ratio that has private mortgage insurance.
Alternatives to private mortgage insurance include, but are not limited to: 30 • lenders and other investors holding mortgages in their portfolios and self-insuring; • investors using other risk mitigation techniques in conjunction with reduced levels of private mortgage insurance coverage, or accepting credit risk without credit enhancement; • mortgage sellers retaining at least a 10% participation in a loan or mortgage sellers agreeing to repurchase or replace a loan upon an event of default; and • lenders originating mortgages using "piggyback structures" which avoid private mortgage insurance, such as a first mortgage with an 80% loan-to-value ratio and a second mortgage with a 10%, 15% or 20% loan-to-value ratio (referred to as 80-10-10, 80-15-5 or 80-20 loans, respectively) rather than a first mortgage with a 90%, 95% or 100% loan-to-value ratio that has private mortgage insurance.
The CFPB's final rule defining what constitutes a QM, which we refer to as the "QM Rule," a loan is deemed to be a QM if, among other factors: • the term of the loan is less than or equal to 30 years; • there are 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% of the total loan amount; and • the total debt-to-income ratio of the borrower does not exceed 43%.
The CFPB's final rule defining what constitutes a QM, which we refer to as the "QM Rule," a loan is deemed to be a QM if, among other factors: • the term of the loan is less than or equal to 30 years; 39 • there are 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% of the total loan amount; and • the total debt-to-income ratio of the borrower does not exceed 43%.
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).
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).
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.
Bermuda insurance statutes and the regulations, and policies of the BMA, require Essent Re 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 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.
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.
However, the BMA has pursuant to its statement of June 1, 2005 given its general permission under the Exchange Control Act 1972 (and related regulations) for the issue and free transfer of our common shares to and among persons who are non-residents of Bermuda for exchange control purposes as long as the shares are listed on an appointed stock exchange, which includes the New York Stock Exchange.
However, the BMA has pursuant to its statement of June 1, 46 2005 given its general permission under the Exchange Control Act 1972 (and related regulations) for the issue and free transfer of our common shares to and among persons who are non-residents of Bermuda for exchange control purposes as long as the shares are listed on an appointed stock exchange, which includes the New York Stock Exchange.
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.
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.
The growth of these programs and the perception that some of these risk-sharing structures have beneficial features in comparison to private mortgage insurance (e.g. lower costs, reduced counterparty risk due to collateral on hand or more diversified insurance exposures) may create increased competition for mortgage insurance going forward on loans traditionally sold to the GSEs with private mortgage insurance.
The growth of these programs and the perception that some of these risk-sharing structures have beneficial features in comparison to private mortgage insurance (e.g. lower costs, reduced counterparty risk due to collateral on hand or more diversified insurance 31 exposures) may create increased competition for mortgage insurance going forward on loans traditionally sold to the GSEs with private mortgage insurance.
U.S. Persons who dispose of our shares may be subject to U.S. Federal income taxation at the rates applicable to dividends on a portion of such disposition. Section 1248 of the Code in conjunction with the RPII rules provides that if a U.S. Person disposes of shares in a non-U.S. corporation that earns insurance income in which U.S.
U.S. Persons who dispose of our shares may be subject to U.S. Federal income taxation at the rates applicable to dividends on a portion of such disposition. 43 Section 1248 of the Code in conjunction with the RPII rules provides that if a U.S. Person disposes of shares in a non-U.S. corporation that earns insurance income in which U.S.
If in the future Essent Reinsurance Ltd. becomes subject to any insurance laws of the United States or any state thereof or of any other jurisdiction, we cannot assure you that Essent Reinsurance Ltd. would be in compliance with such laws or that complying with such laws would not have a significant and negative effect on our business.
If in the future Essent Reinsurance Ltd. becomes subject to any insurance laws of the United States or any state thereof or of any other jurisdiction, we cannot assure you that Essent Re would be in compliance with such laws or that complying with such laws would not have a significant and negative effect on our business.
We may also seek to reinsure part of our risk in force with third-party reinsurers in order to obtain reinsurance credit and capital relief under insurance laws applicable to us and the regulations of the GSEs. Potential investors, lenders or reinsurers may be unable to provide us with financing or reinsurance that is attractive to us.
We may also seek to reinsure part of our risk in force with third-party reinsurers in order to obtain reinsurance credit and capital 48 relief under insurance laws applicable to us and the regulations of the GSEs. Potential investors, lenders or reinsurers may be unable to provide us with financing or reinsurance that is attractive to us.
However, because there is uncertainty as to the activities which constitute being engaged in a trade or business in the United States, there can be no assurances that the U.S. Internal Revenue Service (the "IRS") will not contend successfully that Essent Group Ltd. or its non-U.S. subsidiaries are engaged in a trade or business in the United States.
Because there is uncertainty as to the activities which constitute being engaged in a trade or business in the United States, there can be no assurances that the U.S. Internal Revenue Service (the "IRS") will not contend successfully that Essent Group Ltd. or its non-U.S. subsidiaries are engaged in a trade or business in the United States.
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.
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.
If we were a Delaware company, we would need prior approval from our board of directors or a supermajority of our shareholders to enter into a business combination with an interested shareholder for a period of three years from the time the person became an interested shareholder, unless we opted out of the relevant Delaware statute.
If we were a Delaware company, we would need prior approval from our board of directors or a supermajority of our shareholders to enter into a 47 business combination with an interested shareholder for a period of three years from the time the person became an interested shareholder, unless we opted out of the relevant Delaware statute.
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.
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 admitted to do business in any jurisdiction except Bermuda.
Our decision to issue such securities will depend on market conditions and other factors beyond our control, and we cannot predict or estimate the amount, timing or nature of our future offerings. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable.
Our decision to issue such securities will depend on market conditions and other factors beyond our control, and we cannot predict or estimate the amount, timing or nature of our future offerings. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. 50
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.
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.
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.
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.
Our delegation of loss mitigation decisions to the GSEs is subject to cancellation but exercise of our cancellation rights may have an adverse impact on our relationship with the GSEs and lenders. Our delegated underwriting program may subject our mortgage insurance business to unanticipated claims.
Our delegation of loss mitigation decisions to the GSEs is subject to cancellation but exercise of our cancellation rights may have an adverse impact on our relationship with the GSEs and lenders. 35 Our delegated underwriting program may subject our mortgage insurance business to unanticipated claims.
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.
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 Re in a particular taxable year, which could result in such RPII being taxable to U.S. persons that own our shares.
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.
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.
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.
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.
As 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.
As 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. 38 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.
Further, at the direction of the FHFA, the GSEs continue to consider new, and to pursue existing, credit risk sharing programs. These programs have included the use of structured finance vehicles and off-shore reinsurance.
Further, at the direction of the FHFA, the GSEs may continue to consider new, and to pursue existing, credit risk sharing programs. These programs have included the use of structured finance vehicles and off-shore reinsurance.
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.
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.
Competition in the title and settlement services industry may adversely affect our business, financial condition, and results of operations. Competition in the title settlement services industry is intense, particularly with respect to price, service, and expertise.
Competition in the title insurance and settlement services industry may adversely affect our business, financial condition, and results of operations. Competition in the title insurance and settlement services industry is intense, particularly with respect to price, service and expertise.
One or more private mortgage insurers may seek increased market share from government-supported insurance programs, such as those sponsored by the FHA, or from other private mortgage insurers by reducing pricing, loosening their underwriting guidelines or relaxing their risk management practices, which could, in turn, improve their competitive position in the industry and negatively impact our level of new insurance written, or NIW.
One or more private mortgage insurers may seek increased market share from government-supported insurance programs, such as those sponsored by the FHA, or from other private mortgage insurers by reducing pricing, loosening their underwriting guidelines or relaxing their risk management practices, which could, in turn, improve their competitive position in the industry and negatively impact our level of NIW.
Further, the integration of the operations and personnel of acquired businesses may prove more difficult than anticipated, which may result in failure to achieve financial objectives associated with the acquisition or a diversion of management attention. Such events may also have unintended consequences on ratings assigned by the rating agencies to the Company.
Further, the integration of the operations and personnel of acquired businesses may prove more difficult than anticipated, which may result in failure to achieve financial objectives associated with the acquisition or a diversion of management attention. Such events may also have unintended consequences on ratings assigned by the rating agencies to us.
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.
These loss events are unpredictable and may require us to increase our loss reserves and could adversely affect our financial performance. 37 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.
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.
For the year ended December 31, 2024, 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.
Further, recently proposed regulations were published which could, if finalized in their current form, substantially expand the definition of RPII to include insurance income of Essent Reinsurance Ltd. related to affiliate reinsurance transactions. These regulations would apply to taxable years beginning after the date the regulations are finalized.
Further, recently proposed regulations were published which could, if finalized in their current form, substantially expand the definition of RPII to include insurance income of Essent Re related to affiliate reinsurance transactions. These regulations would apply to taxable years beginning after the date the regulations are finalized.
The mortgage insurance industry is, and as a participant in that industry we are, subject to litigation and regulatory risk generally. The mortgage insurance industry faces litigation risk in the ordinary course of operations, including the risk of class action lawsuits and administrative enforcement by Federal and state agencies.
The mortgage insurance industry is, and as a participant in that industry we are, subject to litigation and regulatory risk generally. The U.S. mortgage insurance industry faces litigation risk in the ordinary course of operations, including the risk of class action lawsuits and administrative enforcement by Federal and state agencies.
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.
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 16 years.
Risks Relating to the Operation of Our Business Intense competition within the private mortgage insurance industry could result in the loss of customers, lower premiums, wider credit guidelines and other changes which could lower our revenues or raise our costs.
Risks Relating to the Operation of Our Businesses Intense competition within the private mortgage insurance industry could result in the loss of customers, lower premiums, wider credit guidelines and other changes which could lower our revenues or raise our costs.
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 Re 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.
We have ceded to third-party reinsurers and special purpose reinsurers funded through the issuance of insurance-linked notes certain risk that we have insured in order to limit our maximum net loss arising in periods of elevated claims as well as to claim reinsurance credit and capital relief under insurance laws applicable to us and the regulations of the GSEs.
We have ceded to third-party reinsurers and special purpose reinsurers funded through the issuance of insurance-linked notes certain risk that we have insured in order to limit our maximum net loss arising in periods of elevated claims on our mortgage insurance portfolio as well as to claim reinsurance credit and capital relief under insurance laws applicable to us and the regulations of the GSEs.
Reduced tax rates for qualified dividend income may not be available in the future. We believe that the dividends paid on the common shares should qualify as "qualified dividend income" if, as is intended, our common shares remain listed on a national securities exchange and we are not a PFIC. Qualified dividend income received by non-corporate U.S.
Reduced tax rates for qualified dividend income may not be available in the future. We believe that the dividends paid on the common shares should qualify as "qualified dividend income" if, as is intended, our common shares remain listed on a national securities exchange and Essent Group is not a PFIC. Qualified dividend income received by non-corporate U.S.
We do not expect gross RPII of Essent Reinsurance Ltd. to equal or exceed 20% of its gross insurance income in any taxable year for the foreseeable future, but we cannot be certain that this will be the case because some of the factors which determine the extent of RPII may be beyond our control.
We do not expect gross RPII of Essent Re to equal or exceed 20% of its gross insurance income in any taxable year for the foreseeable future, but we cannot be certain that this will be the case because some of the factors which determine the extent of RPII may be beyond our control.
Although the claims experience on new insurance written by us since we began to write coverage in 2010 has been relatively favorable to date, we expect incurred losses and claims to increase as a greater amount of this book of insurance reaches its anticipated period of highest claim frequency.
Although the claims experience on NIW by us since we began to write coverage in 2010 has been relatively favorable to date, we expect incurred losses and claims to increase as a greater amount of this book of insurance reaches its anticipated period of highest claim frequency.
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.
The insurance holding company laws and regulations of the Commonwealth of Pennsylvania, the state 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.
Person who owns any shares of Essent Reinsurance Ltd. (directly or indirectly through non-U.S. entities) on the last day of the taxable year on which it is an RPII CFC would be required to include in its income for U.S.
Person who owns any shares of Essent Re (directly or indirectly through non-U.S. entities) on the last day of the taxable year on which it is an RPII CFC would be required to include in its income for U.S.
Although we believe that we have appropriate information security policies and systems in place in order to prevent unauthorized use or disclosure of confidential information, including non-public personal information, there can be no assurance that such use or disclosure will not occur.
Although we believe that we have appropriate information security policies, safeguards and systems in place in order to prevent unauthorized use or disclosure of confidential information, including non-public personal information, there can be no assurance that such policies, safeguards and systems will prevent all security issues, or that such use or disclosure will not occur.
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.
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 91% of our aggregate insurance in force as of December 31, 2024 corresponds to policies we have written since January 1, 2020.
If real estate transaction volumes decline, as they have in the past several years in large part due to rising interest and mortgage rates, we could experience less demand for our title insurance and settlement services.
If real estate transaction volumes decline, as they have in the past several years in large part due to elevated interest and mortgage rates, we could experience less demand for our title 36 insurance and settlement services.
We cannot assure you that insurance regulators in the United States, the U.K. or elsewhere will not review the activities of Essent Reinsurance Ltd. or its subsidiaries or agents and assert that Essent Reinsurance Ltd. is subject to such jurisdiction's licensing requirements.
We cannot assure you that insurance regulators in the United States, the U.K. or elsewhere will not review the activities of Essent Re or its subsidiaries or agents and assert that Essent Re is subject to such jurisdiction's licensing requirements.
Federal income tax purposes such person's pro rata share of Essent Reinsurance Ltd.'s RPII for the entire taxable year, determined as if such RPII were distributed proportionately only to U.S. Persons at that date regardless of whether such income is distributed, in which case your investment could be materially adversely affected.
Federal income tax purposes such person's pro rata share of Essent Re's RPII for the entire taxable year, determined as if such RPII were distributed proportionately only to U.S. Persons at that date regardless of whether such income is distributed, in which case your investment could be materially adversely affected.
Our title insurance underwriter is subject to extensive rate regulation by the applicable state agencies in the jurisdictions in which they operate. Title insurance rates are regulated differently in various states, with some states requiring the subsidiaries to file and receive approval of rates before such rates become effective and some states promulgating the rates that can be charged.
Our title insurance underwriter is subject to extensive rate regulation by the applicable state agencies in the jurisdictions in which it operates. Title insurance rates are regulated differently in various states, with some states requiring the subsidiaries to file and receive approval of rates before such rates become effective and some states promulgating the rates that can be charged.
These statutes and regulations may restrict Essent Reinsurance Ltd.'s ability to write insurance and reinsurance policies, distribute funds and pursue its investment strategy. In addition, Essent Reinsurance Ltd. is exposed to any changes in the political environment in Bermuda. The Bermuda insurance and reinsurance regulatory framework recently has become subject to increased scrutiny in many jurisdictions, including the U.K.
These statutes and regulations may restrict Essent Re's ability to write insurance and reinsurance policies, distribute funds and pursue its investment strategy. In addition, Essent Re is exposed to any changes in the political environment in Bermuda. The Bermuda insurance and reinsurance regulatory framework recently has become subject to increased scrutiny in many jurisdictions, including the U.K.
Housing values may decline even absent deterioration in economic conditions due to declines in demand for homes, which may result from changes in buyers' perceptions of the potential for future appreciation, restrictions on mortgage credit due to more stringent underwriting standards, liquidity issues affecting lenders or other factors, such as the phase-out of the mortgage interest deduction, reductions or elimination in the deductibility of mortgage insurance premiums or changes in the tax treatment of residential property.
Housing values may decline even absent deterioration in economic conditions due to declines in demand for homes, which may result from changes in buyers' perceptions of the potential for future appreciation, restrictions on mortgage credit due to more stringent underwriting standards, liquidity issues affecting lenders or other factors, such as the phase-out of the mortgage interest deduction or changes in the tax treatment of residential property.
Fannie Mae and Freddie Mac maintain coordinated Private Mortgage Insurer Eligibility Requirements, which we refer to as the "PMIERs". The PMIERs represent the standards by which private mortgage insurers are eligible to provide mortgage insurance on loans owned or guaranteed by Fannie Mae and Freddie Mac.
Fannie Mae and Freddie Mac maintain coordinated Private Mortgage Insurer Eligibility Requirements (PMIERs). The PMIERs represent the standards by which private mortgage insurers are eligible to provide mortgage insurance on loans owned or guaranteed by Fannie Mae and Freddie Mac.
The process of obtaining licenses is very time consuming and costly, and Essent Reinsurance Ltd. may not be able to become licensed in jurisdictions other than Bermuda should we choose to do so.
The process of obtaining licenses is very time consuming and costly, and Essent Re may not be able to become licensed in jurisdictions other than Bermuda should we choose to do so.
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.
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.
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.
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, hardware or software malfunction, defects or degradation, and other incidents which may impact the operation or availability of such systems.
However, recent scrutiny of the insurance and reinsurance industry in the United States and other countries could subject Essent Reinsurance Ltd. to additional regulation in the future that may make it unprofitable or illegal to operate a reinsurance business through our Bermuda subsidiary.
However, recent scrutiny of the insurance and reinsurance industry in the United States and other countries could subject Essent Re to additional regulation in the future that may make it unprofitable or illegal to operate a reinsurance business through our Bermuda subsidiaries.
If Essent Group Ltd. were considered a PFIC, it would have material adverse tax consequences for an investor that is subject to 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.
The state insurance 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 the reinsurer or insurer.
The state insurance regulator 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.
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.
If the RPII (determined on a gross basis) of Essent Re were to equal or exceed 20% of Essent Re'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.
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.
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 Organization for Economic Co-operation and Development (“OECD”), the U.S. Congress, Ireland Revenue, or the Government of Bermuda.
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 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.
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.
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.
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.
Our revenues, profitability and returns would decline if we lose a significant customer. Our U.S. mortgage insurance business depends on our relationships with our largest lending customers. Our top ten customers generated 50.2% of our NIW during year ended December 31, 2024, compared to 39.9% and 41.6% for the years ended December 31, 2023 and 2022, respectively.
The factors affecting the persistency of our insurance portfolio include: • the level of current mortgage interest rates compared to the mortgage interest rates on the insurance in force, which affects the incentives of borrowers we have insured to refinance; • the amount of equity in a home, as homeowners with more equity in their homes can generally more readily move to a new residence or refinance their existing mortgage; • the rate at which homeowners sell their existing homes and move to new locations, generally referred to as housing turnover, with more rapid economic growth and stronger job markets tending to increase housing turnover; • the mortgage insurance cancellation policies of mortgage investors along with the current values of the homes underlying the mortgages in the insurance in force; and • the cancellation of borrower-paid mortgage insurance mandated by law based on the amortization schedule of the loan, which generally occurs sooner the lower the note rate of the insured loan.
The factors affecting the persistency of our mortgage insurance portfolio include: • the level of current mortgage interest rates compared to the mortgage interest rates on the insurance in force, which affects the incentives of borrowers we have insured to refinance; • the amount of equity in a home, as homeowners with more equity in their homes can generally more readily move to a new residence or refinance their existing mortgage; • the rate at which homeowners sell their existing homes and move to new locations, generally referred to as housing turnover, with more rapid economic growth and stronger job markets tending to increase housing turnover; • the mortgage insurance cancellation policies of mortgage investors along with the current values of the homes underlying the mortgages in the insurance in force; and • the cancellation of borrower-paid mortgage insurance mandated by law based on the amortization schedule of the loan, which generally occurs sooner the lower the note rate of the insured loan. 33 If interest rates rise, persistency is likely to increase, which may extend the average life of our insured portfolio and result in higher levels of future claims as more loans remain outstanding.
Shareholder or if there is RPII, and certain exceptions do not apply, and the tax-exempt organization owns any of our shares. Although we do not believe that any U.S. Persons should be allocated such insurance income, we cannot be certain that this will be the case. U.S. tax-exempt investors are advised to consult their own tax advisors.
Shareholder or if there is RPII, and certain exceptions do not apply, and the tax-exempt organization owns any of our shares. Although we do not believe that any U.S. Persons should be allocated such insurance income, we cannot be certain that this will be the case.
In addition, the Inflation Reduction Act of 2022 (“IRA”) introduced, among other tax provisions, the Corporate Alternative Minimum Tax (“CAMT”) and a new excise tax of 1% on certain stock repurchases (“Excise Tax”). In general, a Company is not subject to the CAMT if it does not meet a certain net income threshold on a trailing 3-year average calculation.
In addition, the Inflation Reduction Act of 2022 (“IRA”) introduced, among other tax provisions, the Corporate Alternative Minimum Tax (“CAMT”) and a federal excise tax (“FET”) of 1% on certain stock repurchases. Companies are not subject to the CAMT if it does not meet a certain net income threshold on a trailing 3-year average calculation.
There is the potential foreign bank account reporting and reporting of "Specified Foreign Financial Assets." U.S. Persons holding our common shares should consider their possible obligation to file a FinCEN Form 114, Report of Foreign Bank and Financial Accounts with respect to their shares.
U.S. tax-exempt investors are advised to consult their own tax advisors. 44 There is the potential foreign bank account reporting and reporting of "Specified Foreign Financial Assets." U.S. Persons holding our common shares should consider their possible obligation to file a FinCEN Form 114, Report of Foreign Bank and Financial Accounts with respect to their shares.
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.
Federal income tax purposes. Essent Re is a PFIC, and any U.S. Person directly owning shares in Essent Re could be subject to adverse tax consequences.
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.
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 expectations may prove to be incorrect.
Essent Group Ltd. and Essent Reinsurance Ltd. intend to operate their business in a manner that will not cause them to be treated as engaged in a trade or business in the United States and, thus, will not be required to pay U.S.
Essent Group Ltd. and Essent Re and its subsidiaries intend to operate their business in a manner that will not cause them to be treated as engaged in a trade or business in the United States and, thus, will not be required to pay U.S. Federal income and branch profits taxes.
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.
Moreover, under Pennsylvania law, dividends and other distributions may only be paid out of unassigned surplus unless approved by the Commissioner. Our primary U.S. operating subsidiary, Essent Guaranty, Inc., had unassigned surplus of approximately $396.6 million as of December 31, 2024, and paid to its parent, Essent US Holdings, Inc., dividends totaling $165.5 million in 2024.
Our success will depend on our ability to maintain and enhance effective operating procedures and internal controls. Operational risk and losses can result from, among other things, fraud, errors, failure to document transactions properly or to obtain proper internal authorization, failure to comply with regulatory requirements, information technology failures, failure to appropriately transition new hires or external events.
Operational risk and losses can result from, among other things, fraud, errors, failure to document transactions properly or to obtain proper internal authorization, failure to comply with regulatory requirements, information technology failures, failure to appropriately transition new hires or external events.
During 2012, the NAIC 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 including, but not limited to, revisions to Statement of Statutory Accounting Principles (SSAP) No. 58 - Mortgage Guaranty Insurance .
The NAIC examines existing state insurance laws and regulations in the United States. During 2012, the NAIC established a Mortgage Guaranty Insurance Working Group (MGIWG) to determine and make recommendations to the NAIC's Financial Condition Committee including, but not limited to, revisions to Statement of Statutory Accounting Principles (SSAP) No. 58 - Mortgage Guaranty Insurance .

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAll vendors are risk ranked and reviewed by our TPRM team with results reported to our information security committee, which ultimately approves the use of new and existing vendors.
Biggest changeWe have established a formal third party risk management (TPRM) policy which defines the criteria that a third party service provider must meet in order to be considered by us. All vendors are risk ranked and reviewed by our TPRM team with results reported to our information security committee, which ultimately approves the use of new and existing vendors.
Similarly, our CISO has over 25 years of experience working for financial services companies in information technology, including roles overseeing e-commerce, technical infrastructure management and architecture, and 20 years overseeing information security programs.
Similarly, our CISO has over 25 years of experience working for financial services companies in information technology, including roles overseeing e-commerce, technical infrastructure management and architecture, and over 20 years overseeing information security programs.
Our CIO has over 25 years of experience serving Fortune 500 companies in the area of information technology, including nearly 20 years in mortgage and financial services, with roles ranging from overseeing application development and delivery to enhance risk management capability and improve operational efficiency to information technology strategy, architecture, delivery, and management.
Our CIO has over 25 years of experience serving Fortune 500 companies in the area of information technology, including over 20 years in mortgage and financial services, with roles ranging from overseeing application development and delivery to enhance risk management capability and improve operational efficiency to 51 information technology strategy, architecture, delivery, and management.
See “Risk Factors—Risks Relating to the Operation of Our Business— The security of our information technology systems may be compromised and confidential information, including non-public personal information that we maintain, could be improperly disclosed ." Cybersecurity Governance Our board of directors, led by the board’s technology, innovation and operations committee, actively oversees our information security program, with our management providing that committee with regular updates (including at each of the four meetings held by that committee in 2023) and reporting on our IT strategy, including information security strategies and initiatives, event preparedness and incremental improvement efforts.
See “Risk Factors—Risks Relating to the Operation of Our Business— The security of our information technology systems may be compromised and confidential information, including non-public personal information that we maintain, could be improperly disclosed ." Cybersecurity Governance Our board of directors, led by the board’s technology, innovation and operations committee, actively oversees our information security program, with our management, inlcluding the CIO and CISO, providing the board and that committee with regular updates (including at each of the three meetings held by that committee in 2024) and reporting on our IT strategy, including information security strategies and initiatives, event preparedness and incremental improvement efforts.
ITEM 1C. CYBERSECURITY As with all institutions involved in financial services, information security represents a significant operational risk.
ITEM 1C. CYBERSECURITY Cybersecurity Risk Management and Strategy As with all institutions involved in the provision of financial services, information security represents a significant operational risk.
In addition, we maintain an internal information security committee comprised of cross-departmental company executives and IT leaders to ensure that we maintain strong governance mechanisms and to ensure compliance with our security policies and procedures. 51 During the year ended December 31, 2023, we did not experience any material cybersecurity incidents.
In addition, we maintain an internal information security committee comprised of cross-departmental company executives and IT leaders to ensure that we maintain strong governance mechanisms and to ensure compliance with our security policies and procedures.
The CIO and CISO, who oversee our information security program, are well qualified to oversee and manage risks posed by potential cybersecurity threats.
The CIO and CISO, who are well qualified, oversee our information security program and are responsible for assessing and managing our risks from cybersecurity threats.
Our information security team also performs periodic tabletop exercises to simulate potential incidents in order to identify potential enhancements to monitoring and our incident response process. We have also established a formal third party risk management (TPRM) policy which defines the criteria that a third party service provider must meet in order to be considered by us.
Our information security team also performs periodic tabletop exercises to simulate potential incidents in order to identify potential enhancements to monitoring and our incident response process. We engage third party consultants with respect to cybersecurity, including to conduct vulnerability assessments and penetration testing of its information technology systems.
Removed
Although our information security program is designed to attempt to prevent, detect and respond to unauthorized use or disclosure of confidential information, including non-public personal information, there can be no assurance that such use or disclosure will not occur.
Added
Although we have implemented what we believe to be an appropriate information security program to protect against, detect, mitigate, and respond to cybersecurity risks, there can be no assurance that such risks, including incidents, may be prevented or timely detected.
Added
During the year ended December 31, 2024, we did not experience any material cybersecurity incidents, including cybersecurity incidents that materially affected or are reasonably likely to materially affect the Company, our business strategy, results of operations, or financial condition.

Item 2. Properties

Properties — owned and leased real estate

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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.
Biggest changeITEM 2. PROPERTIES We lease office facilities in Radnor, Pennsylvania for the headquarters of our U.S. mortgage insurance business and title and settlement services operations, with additional offices in North Carolina, Pennsylvania, Missouri, New York and Virginia for our U.S.-based operations, and we lease office facilities in Bermuda for our holding company headquarters and reinsurance company.

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, 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 $65.6 million was utilized prior to the expiration of that plan on December 31, 2023.
Biggest changePeriod ($ 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, 2024 4,579 $ 63.82 — November 1 - November 30, 2024 279,318 $ 55.92 279,318 December 1 - December 31, 2024 918,874 $ 54.89 917,974 Total 1,202,771 1,197,292 $ 147,279 _______________________________________________________________________________ (1) As of December 31, 2024, the Company was authorized to purchase up to $250 million of its common shares, announced in October 2023, of which $102.7 million had been utilized.
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.
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, 2020 through December 31, 2024, 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 12, 2024, we had approximately 9 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 14, 2025, we had approximately 9 holders of record of our common shares. We have paid a quarterly dividend since September 2019.
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.
Such returns are based on historical results and are not intended to suggest future performance. 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 S&P 500 $116.26 $147.52 $118.84 $147.64 $182.05 Peer Index $84.99 $113.20 $162.19 $199.04 $251.24 ESNT $85.81 $93.15 $82.70 $116.74 $124.72 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, 2024.
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.
We presently expect to continue to declare a materially comparable regular quarterly dividend on our common stock in the future.
Removed
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
Added
A dividend of $0.28 per share for each of the first, second, third and fourth quarters of 2024 was declared and paid, and a dividend of $0.31 per share had been declared by our board of directors with a record date of March 14, 2025 and a payment date of March 24, 2025.
Added
The remaining $147.3 million in the table represents the amount available to repurchase shares under the share repurchase plan as of December 31, 2024. In January 2025, we repurchased 918,464 shares for $51.8 million. In February 2025, our Board approved an additional $500 million share repurchase authorization that runs through year-end 2026. ITEM 6. [RESERVED] 54

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe following table presents a rollforward of insured loans in default for our U.S. mortgage insurance portfolio for the periods indicated: Year Ended December 31, 2023 2022 Beginning default inventory 13,433 16,963 Plus: new defaults 30,550 25,636 Less: cures (28,655) (28,873) Less: claims paid (467) (261) Less: rescissions and denials, net (42) (32) Ending default inventory 14,819 13,433 The following table includes additional information about our loans in default as of the dates indicated for our U.S. mortgage insurance portfolio: As of December 31, 2023 2022 Case reserves (in thousands) (1) $ 226,121 $ 199,419 Total reserves (in thousands) (1) $ 245,402 $ 216,390 Ending default inventory 14,819 13,433 Average case reserve per default (in thousands) $ 15.3 $ 14.8 Average total reserve per default (in thousands) $ 16.6 $ 16.1 Default rate 1.80 % 1.66 % Claims received included in ending default inventory 126 121 _______________________________________________________________________________ (1) The U.S. mortgage insurance portfolio reserves exclude reserves on GSE and other risk share risk in force at Essent Re of $29 thousand and $0.1 million as of December 31, 2023 and 2022, respectively, as well as title insurance reserves of $14.7 million as of December 31, 2023.
Biggest changeThe following table presents a rollforward of insured loans in default for our U.S. mortgage insurance portfolio for the periods indicated: Year Ended December 31, 2024 2023 2022 Beginning default inventory 14,819 13,433 16,693 Plus: new defaults 37,499 30,550 25,636 Less: cures (33,134) (28,655) (28,873) Less: claims paid (671) (467) (261) Less: rescissions and denials, net (74) (42) (32) Ending default inventory 18,439 14,819 13,433 The following table includes additional information about our loans in default as of the dates indicated for our U.S. mortgage insurance portfolio: As of December 31, 2024 2023 Case reserves (in thousands) (1) $ 285,944 $ 226,121 Total reserves (in thousands) (1) $ 310,156 $ 245,402 Ending default inventory 18,439 14,819 Average case reserve per default (in thousands) $ 15.5 $ 15.3 Average total reserve per default (in thousands) $ 16.8 $ 16.6 Default rate 2.27 % 1.80 % Claims received included in ending default inventory 164 126 _______________________________________________________________________________ (1) The U.S. mortgage insurance portfolio reserves exclude reserves on GSE and other risk share risk in force at Essent Re of $51 thousand and $29 thousand as of December 31, 2024 and 2023, respectively. 66 The following table provides a reconciliation of the beginning and ending U.S. mortgage insurance reserve balances for losses and LAE: Year Ended December 31, (In thousands) 2024 2023 2022 Reserve for losses and LAE at beginning of year $ 245,402 $ 216,390 $ 406,096 Less: Reinsurance recoverables 24,004 14,618 25,940 Net reserve for losses and LAE at beginning of year 221,398 201,772 380,156 Add provision for losses and LAE occurring in: Current year 171,907 138,601 99,351 Prior years (96,751) (108,437) (272,785) Incurred losses and LAE during the current year 75,156 30,164 (173,434) Deduct payments for losses and LAE occurring in: Current year 2,687 517 224 Prior years 20,366 10,021 4,726 Loss and LAE payments during the current year 23,053 10,538 4,950 Net reserve for losses and LAE at end of period 273,501 221,398 201,772 Plus: Reinsurance recoverables 36,655 24,004 14,618 Reserve for losses and LAE at end of period $ 310,156 $ 245,402 $ 216,390 _______________________________________________________________________ (1) The U.S. mortgage insurance portfolio reserves exclude reserves on GSE and other risk share risk in force at Essent Re of $51 thousand, $29 thousand, and $0.1 million as of December 31, 2024, 2023 and 2022, respectively. 67 The following tables provide a detail of reserves and defaulted RIF by the number of missed payments and pending claims for our U.S. mortgage insurance portfolio: As of December 31, 2024 ($ in thousands) Number of Policies in Default Percentage of Policies in Default Amount of Reserves Percentage of Reserves Defaulted RIF Reserves as a Percentage of Defaulted RIF Missed payments: Two payments 6,691 36 % $ 32,672 11 % $ 522,644 6 % Three payments 3,154 17 26,278 9 250,696 10 Four to eleven payments 6,408 35 122,551 43 515,600 24 Twelve or more payments 2,022 11 93,269 33 153,376 61 Pending claims 164 1 11,174 4 12,478 90 Total case reserves (1) 18,439 100 % 285,944 100 % $ 1,454,794 20 IBNR 21,446 LAE 2,766 Total reserves for losses and LAE (1) $ 310,156 _______________________________________________________________________________ (1) The U.S. mortgage insurance portfolio reserves exclude reserves on GSE and other risk share risk in force at Essent Re of $51 thousand.
The 0.30 multiplier will be applicable for insured loans in default 1) subject to a forbearance plan granted in response to a financial hardship related to COVID-19 (which shall be assumed to be the case for any loan that has an initial missed payment occurring during the COVID-19 Crisis Period and is subject to a forbearance plan, repayment plan or loan modification trial period), the terms of which are materially consistent with terms offered by Fannie Mae or Freddie Mac or 2) for no longer than three calendar months beginning with the month the loan becomes a non-performing primary mortgage guaranty insurance loan by reaching two missed monthly payments.
The 0.30 multiplier will be applicable for insured loans in 74 default (1) subject to a forbearance plan granted in response to a financial hardship related to COVID-19 (which shall be assumed to be the case for any loan that has an initial missed payment occurring during the COVID-19 Crisis Period and is subject to a forbearance plan, repayment plan or loan modification trial period), the terms of which are materially consistent with terms offered by Fannie Mae or Freddie Mac, or (2) for no longer than three calendar months beginning with the month the loan becomes a non-performing primary mortgage guaranty insurance loan by reaching two missed monthly payments.
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 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.
As more fully described in Note 5 to our consolidated financial statements, the premiums ceded under certain reinsurance contracts with unaffiliated third parties varies based on changes in market interest rates. Under GAAP, these contracts contain embedded derivatives that are accounted for separately as freestanding derivatives.
As more fully described in Note 5 to our consolidated financial statements, the premiums ceded under certain reinsurance contracts with unaffiliated third parties varies based on changes in market interest rates. Under GAAP, these contracts contain 57 embedded derivatives that are accounted for separately as freestanding derivatives.
For information on our material holdings in an unrealized loss position, see "—Financial Condition—Investments." Recently Issued Accounting Pronouncements There are no recently issued accounting standards that are expected to have a material effect on our financial condition, results of operations or cash flows. See Note 2 of our consolidated financial statements.
For information on our material holdings in an unrealized loss position, see "—Financial Condition—Investments." Recently Issued Accounting Pronouncements There are no recently issued accounting standards that are expected to have a material effect on our financial condition, results of operations or cash flows. See Note 2 of our consolidated financial statements. 79
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.
The increase in net premiums written and earned was 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.
Under the insurance laws of the Commonwealth of Pennsylvania, the insurance subsidiaries may pay dividends during any twelve-month period in an amount equal to the greater of (i) 10% of the preceding year-end statutory policyholders' surplus or (ii) the preceding year's statutory net income.
Under the insurance laws of the Commonwealth of Pennsylvania, our insurance subsidiaries may pay dividends during any twelve-month period in an amount equal to the greater of (i) 10% of the preceding year-end statutory policyholders' surplus or (ii) the preceding year's statutory net income.
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.
Financial Strength Ratings The insurer financial strength ratings of Essent Guaranty, our principal mortgage insurance subsidiary, are A3 with a positive outlook by Moody's, A- with a stable outlook by S&P and A (Excellent) with a stable outlook by A.M. Best.
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.
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.
Under PMIERs guidance issued by the GSEs effective June 30, 2020, Essent will apply a 0.30 multiplier to the risk-based required asset amount factor for each insured loan in default backed by a property located in a Federal Emergency Management Agency (“FEMA”) Declared Major Disaster Area eligible for Individual Assistance and that either 1) is subject to a forbearance plan granted in response to a FEMA Declared Major Disaster, the terms of which are materially consistent with terms of forbearance plans, repayment plans or loan modification trial period offered by Fannie Mae or Freddie Mac, or 2) has an initial missed payment occurring up to either (i) 30 days prior to the first day of the incident period specified in the FEMA Major Disaster Declaration or (ii) 90 days following the last day of the incident period specified in the FEMA Major Disaster Declaration, not to exceed 180 days from the first day of the incident period specified in the FEMA Major Disaster Declaration.
Under PMIERs guidance issued by the GSEs effective June 30, 2020, Essent will apply a 0.30 multiplier to the risk-based required asset amount factor for each insured loan in default backed by a property located in a FEMA Declared Major Disaster Area eligible for Individual Assistance and that either (1) is subject to a forbearance plan granted in response to a FEMA Declared Major Disaster, the terms of which are materially consistent with terms of forbearance plans, repayment plans or loan modification trial period offered by Fannie Mae or Freddie Mac, or (2) has an initial missed payment occurring up to either (i) 30 days prior to the first day of the incident period specified in the FEMA Major Disaster Declaration or (ii) 90 days following the last day of the incident period specified in the FEMA Major Disaster Declaration, not to exceed 180 days from the first day of the incident period specified in the FEMA Major Disaster Declaration.
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.
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, 2024.
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.
In each year, cash flows used in financing activities primarily related to the repurchases of common shares as part of our share repurchase plans, quarterly cash dividends paid and treasury stock acquired from employees to satisfy tax withholding obligations.
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.
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, 2024 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, 2023. 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, 2024. The principal factors that influence investment income are the size of the investment portfolio and the yield on individual securities.
See Note 12 to our consolidated financial statements. At December 31, 2023 and 2022, we concluded that it was more likely than not that our deferred tax assets would be realized.
See Note 12 to our consolidated financial statements. At December 31, 2024 and 2023, we concluded that it was more likely than not that our deferred tax assets would be realized.
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.
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, 2024, Essent Re had total equity of $1.8 billion.
Liquidity and Capital Resources Overview Our sources of funds consist primarily of: • our investment portfolio and interest income on the portfolio; • net premiums that we will receive from our existing IIF as well as policies that we write in the future; • borrowings under our Credit Facility; and • issuance of capital shares.
Liquidity and Capital Resources Overview Our sources of funds consist primarily of: • our investment portfolio and interest income on the portfolio; • net premiums that we will receive from our existing IIF as well as policies that we write in the future; • borrowings under our Senior Notes and Revolving Credit Facility; and • issuance of capital shares.
Essent Guaranty has entered into reinsurance agreements that provide excess of loss reinsurance coverage for new defaults on portfolios of mortgage insurance policies issued from January 1, 2018 through December 31, 2019 and August 1, 2020 through June 30, 2023. The aggregate excess of loss reinsurance coverages decrease over a ten-year period as the underlying covered mortgages amortize.
Essent Guaranty has entered into reinsurance agreements that provide excess of loss reinsurance coverage for new defaults on portfolios of mortgage insurance policies issued from January 1, 2018 through August 31, 2019 and August 1, 2020 through December 31, 2024. The aggregate excess of loss reinsurance coverages decrease over a ten-year period as the underlying covered mortgages amortize.
Our obligations consist primarily of: • claim payments under our policies; • interest payments and repayment of borrowings under our Credit Facility; • the other costs and operating expenses of our business; • the repurchase of common shares under the share repurchase plan approved by our board of directors; and • the payment of dividends on our common shares.
Our obligations consist primarily of: • claim payments under our policies; • interest payments and repayment of borrowings under our Senior Notes and Revolving Credit Facility; • the other costs and operating expenses of our business; • the repurchase of common shares under the share repurchase plan approved by our board of directors; and • the payment of dividends on our common shares.
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.
As of December 31, 2024, our estimated off-balance sheet maximum exposure to loss from the Radnor Re entities was $0.2 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.
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.
See "Results of Operations: Mortgage Insurance - Provision for Losses and Loss Adjustment Expenses" for a 78 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.
The information above has been derived from the annual and quarterly statements of our insurance subsidiaries, which have been prepared in conformity with accounting practices prescribed or permitted by the Pennsylvania Insurance Department and the National Association of Insurance Commissioners Accounting Practices and Procedures Manual. Such practices vary from accounting principles generally accepted in the United States.
The information above has been derived from the annual and quarterly statements of Essent Guaranty, which have been prepared in conformity with accounting practices prescribed or permitted by the Pennsylvania Insurance Department and the National Association of Insurance Commissioners Accounting Practices and Procedures Manual. Such practices vary from accounting principles generally accepted in the United States.
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.
The average balance of investments at amortized cost increased to $6.1 billion during the year ended December 31, 2024 from $5.5 billion during the year ended December 31, 2023, primarily as a result of investing cash flows generated from operations.
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.
The following table presents the average net premium rate for our U.S. mortgage insurance portfolio: Year Ended December 31, 2024 2023 2022 Base average premium rate 0.41 % 0.40 % 0.41 % Single premium cancellations — — 0.01 Gross average premium rate 0.41 0.40 0.42 Ceded premiums (0.06) (0.05) (0.05) Net average premium rate 0.35 % 0.35 % 0.37 % 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.
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.
Pursuant to the FAST Act Modernization and Simplification of Regulation S-K, discussions related to the changes in the consolidated results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 have been omitted.
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.
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, 2024, no capital contributions were made to our U.S. mortgage insurance subsidiaries and Essent Guaranty paid dividends to Essent US Holdings, Inc. totaling $165.5 million.
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.
Our most significant expense is compensation and benefits for our employees, which represented 60%, 58% and 59% of other underwriting and operating expenses for the years ended December 31, 2024, 2023 and 2022, respectively. Compensation and benefits expense includes base and incentive cash compensation, stock compensation expense, benefits and payroll taxes.
During the year ended December 31, 2022, the provision for losses and LAE was a benefit of $174.7 million, comprised of $99.4 million of current year losses, offset by $274.1 million of favorable prior years' loss development.
During the year ended December 31, 2022, the provision for losses and LAE was a benefit of $174.7 million, comprised of $99.4 million of current year losses, offset by $272.8 million of favorable prior years' loss development.
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.
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, 2024, 56% of our IIF relates to business written since January 1, 2022 and was less than three years old.
The amount of capital required varies in each jurisdiction in which we operate; however, generally, the maximum permitted risk-to-capital ratio is 25.0 to 1. State insurance regulators are currently examining their respective capital rules to determine whether, in light of the financial crisis, changes are needed to more accurately assess mortgage insurers' ability to withstand stressful economic conditions.
The amount of capital required varies in each jurisdiction in which we operate; however, generally, the maximum permitted risk-to-capital ratio is 25.0 to 1. State insurance regulators have continued to examine their respective capital rules to determine whether, in light of the 2007-2008 financial crisis, changes are needed to more accurately assess mortgage insurers' ability to withstand stressful economic conditions.
See "—Liquidity and Capital Resources" for further details of our investment portfolio. Income from Other Invested Assets Income from other invested assets for the year ended December 31, 2023 was a loss of $11.1 million as compared to income of $28.7 million for the year ended December 31, 2022.
See "—Liquidity and Capital Resources" for further details of our investment portfolio. Income (Loss) from Other Invested Assets Income from other invested assets for the year ended December 31, 2024 was a gain of $7.4 million as compared to a loss of $11.1 million for the year ended December 31, 2023.
Persistency Rate The measure for assessing the impact of policy cancellations on IIF is our persistency rate, defined as the percentage of IIF that remains on our books after any twelve-month period.
Persistency Rate The measure for assessing the impact of U.S. mortgage insurance policy cancellations on IIF is our persistency rate, defined as the percentage of IIF that remains on our books after any twelve-month period.
The pre-tax investment income yield increased from 2.6% in the year ended December 31, 2022 to 3.5% in the year ended December 31, 2023 primarily due to a general increase in investment yields due to increasing interest rates. The pre-tax investment income yields are calculated based on amortized cost and exclude investment expenses.
The pre-tax investment income yield increased from 3.5% in the year ended December 31, 2023 to 3.7% in the year ended December 31, 2024 primarily due to a general increase in investment yields due to increasing interest rates. 63 The pre-tax investment income yields are calculated based on amortized cost and exclude investment expenses.
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.
Stockholders' equity increased primarily due to net income generated in 2024, partially offset by an increase in accumulated other comprehensive loss related to an increase in our net unrealized investment losses and by dividends paid and the repurchase of common shares under our share repurchase plan.
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.
As more fully described in Note 5 to our consolidated financial statements, at December 31, 2024, we had approximately $1.6 billion of excess of loss reinsurance covering NIW from January 1, 2018 through August 31, 2019 and August 1, 2020 through December 31, 2024 and quota share reinsurance on portions of our NIW effective September 1, 2019 through 59 December 31, 2020 and January 1, 2022 through December 31, 2024.
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.
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, in the case of Essent Guaranty, the GSEs.
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.
Premiums collected on annual policies are recognized as net premiums 56 earned on a straight-line basis over the year of coverage. For the years ended December 31, 2024 and 2023, monthly premium policies comprised 99% and 97% of our NIW, respectively.
S&P or Fitch Ratings ("Fitch") rating utilized if Moody's not available. (2) Excludes $444,121 and $136,591 of money market funds at December 31, 2023 and December 31, 2022, respectively.
S&P or Fitch Ratings ("Fitch") rating utilized if Moody's not available. (2) Excludes $657,605 and $444,121 of money market funds at December 31, 2024 and December 31, 2023, respectively.
See "—Mortgage Insurance Earnings and Cash Flow Cycle" below. We establish loss reserves for delinquent loans when we are notified that a borrower has missed at least two consecutive monthly payments ("Case Reserves"), as well as estimated reserves for defaults that may have occurred but not yet been reported to us ("IBNR Reserves").
We establish loss reserves for delinquent loans when we are notified that a borrower has missed at least two consecutive monthly payments ("Case Reserves"), as well as estimated reserves for defaults that may have occurred but not yet been reported to us ("IBNR Reserves").
For the years ended December 31, 2023, 2022 and 2021, our mortgage insurance operations generated new insurance written, or NIW, of approximately $47.7 billion, $63.1 billion and $84.2 billion, respectively. As of December 31, 2023, we had approximately $239.1 billion of mortgage insurance in force.
For the years ended December 31, 2024, 2023 and 2022, our mortgage insurance operations generated new insurance written, or NIW, of approximately $45.6 billion, $47.7 billion and $63.1 billion, respectively. As of December 31, 2024, we had approximately $243.6 billion of mortgage insurance in force.
Overview Essent Group Ltd. (collectively with its subsidiaries, “Essent”) serves the housing finance industry by offering private mortgage insurance, reinsurance, risk management products and title insurance and settlement services to mortgage lenders, borrowers, and investors to support homeownership.
Overview Essent Group Ltd. (collectively with its subsidiaries, “Essent”) serves the housing finance industry by offering private mortgage insurance and reinsurance, title insurance and settlement services to mortgage lenders, borrowers and investors to support homeownership. We have one reportable segment: Mortgage Insurance.
The increase in investments was primarily due to investing net cash flows from operations during the year ended December 31, 2023 and a decrease in our net unrealized investment losses. 71 Investments Available for Sale by Asset Class Asset Class December 31, 2023 December 31, 2022 ($ in thousands) Fair Value Percent Fair Value Percent U.S.
The increase in investments was primarily due to investing net cash flows from operations during the year ended December 31, 2024 partially offset by an increase in our net unrealized investment losses. 75 Investments Available for Sale by Asset Class Asset Class December 31, 2024 December 31, 2023 ($ in thousands) Fair Value Percent Fair Value Percent U.S.
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.
Investments As of December 31, 2024, investments totaled $6.2 billion compared to $5.5 billion as of December 31, 2023. In addition, our total cash was $131.5 million as of December 31, 2024, compared to $141.8 million as of December 31, 2023.
The increase in cash flow from operations of $174.2 million in 2023 compared to 2022 was primarily due to an increase in prepayments, a component of other assets, in the year ended December 31, 2022 and increases in net premiums written and investment income partially offset by an increase in operating expenses paid in the year ended December 31, 2023.
The increase in cash flow from operations of $174.2 million in 2023 compared to 2022 was primarily due to an increase in prepayments, a component of other assets, in the year ended December 31, 2022 and increases in net premiums written and investment income partially offset by an increase in operating expenses paid in the year ended December 31, 2023. 72 Investing Activities Cash flow used in investing activities totaled $706.9 million for the year ended December 31, 2024, $525.6 million for the year ended December 31, 2023 and $398.9 million for the year ended December 31, 2022.
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.
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.
During the year ended December 31, 2023, Essent US Holdings made capital contributions totaling $38.1 million to its title insurance subsidiary.
During the years ended December 31, 2024 and 2023, Essent US Holdings made capital contributions totaling $24.5 million and $38.1 million to its title insurance subsidiary, respectively.
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.
Provision for Losses and Loss Adjustment Expenses Mortgage Insurance 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.
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.
As of December 31, 2024, Essent Guaranty, our GSE-approved mortgage insurance company, was in compliance with the PMIERs. As of December 31, 2024, Essent Guaranty's Available Assets were $3.6 billion or 178% of its Minimum Required Assets were $2.0 billion based on our interpretation of the PMIERs.
Each quarter we perform reviews of all of our investments in order to determine whether declines in fair value below amortized cost were considered other-than-temporary in accordance with applicable guidance.
Each quarter we perform reviews of all of our investments in order to determine whether declines in fair value below amortized cost were as a result of credit losses in accordance with applicable guidance.
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.
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.
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.
During the years ended December 31, 2024, 2023 and 2022, 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.
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.
For the years ended December 31, 2024 and 2023, the average amount of borrowings outstanding was $462.5 million and $425.0 million, respectively. Income Taxes Our subsidiaries in the United States file a consolidated U.S. Federal income tax return.
The decrease in income from other invested assets for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily due to lower fair value adjustments recorded during 2023. Other Income Other income for the year ended December 31, 2023 was $25.0 million compared to $18.4 million for the year ended December 31, 2022.
The increase in income from other invested assets for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily due to favorable fair value adjustments recorded during 2024. Other Income Other income was $24.9 million for the year ended December 31, 2024 compared to $25.0 million for the year ended December 31, 2023.
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.
Our income tax expense was $126.1 million for the year ended December 31, 2024 compared to $126.6 million for the year ended December 31, 2023. The effective tax rate for the year ended December 31, 2024 was 14.7% compared to 15.4% for the year ended December 31, 2023.
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.
During the year ended December 31, 2023, the provision for losses and LAE was a benefit of $30.2 million, comprised of $138.6 million of current year losses, offset by $108.4 million of favorable prior years' loss development.
Net Investment Income Our net investment income was derived from the following sources for the periods indicated: Year Ended December 31, (In thousands) 2023 2022 Fixed maturities $ 178,829 $ 129,530 Short-term investments 13,651 2,319 Gross investment income 192,480 131,849 Investment expenses (6,341) (7,440) Net investment income $ 186,139 $ 124,409 The increase in net investment income to $186.1 million for the year ended December 31, 2023 as compared to $124.4 million for the year ended December 31, 2022 was due to the increase in the weighted average balance of our investment portfolio, as well as an increase in the average yield on the investment portfolio.
Net Investment Income Our consolidated net investment income was derived from the following sources for the periods indicated: Year Ended December 31, (In thousands) 2024 2023 Fixed maturities $ 186,345 $ 178,829 Short-term investments 40,856 13,651 Gross investment income 227,201 192,480 Investment expenses (5,131) (6,341) Net investment income $ 222,070 $ 186,139 The increase in our consolidated net investment income to $222.1 million for the year ended December 31, 2024 as compared to $186.1 million for the year ended December 31, 2023 was due to the increase in the weighted average balance of our investment portfolio, as well as an increase in the average yield on the investment portfolio.
For additional information regarding reinsurance, see Note 5 to our consolidated financial statements. 59 Other Underwriting and Operating Expenses Our other underwriting and operating expenses include components that are substantially fixed, as well as expenses that generally increase or decrease in line with the level of mortgage insurance NIW, title insurance policies issued and settlement services provided.
Other Underwriting and Operating Expenses Our other underwriting and operating expenses include components that are substantially fixed, as well as expenses that generally increase or decrease in line with the level of mortgage insurance NIW, title insurance policies issued and settlement services provided.
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.
Cash Flows The following table summarizes our consolidated cash flows from operating, investing and financing activities: Year Ended December 31, (In thousands) 2024 2023 2022 Net cash provided by operating activities $ 861,532 $ 763,001 $ 588,817 Net cash used in investing activities (706,926) (525,569) (398,872) Net cash used in financing activities (164,913) (176,885) (190,196) Net (decrease) increase in cash $ (10,307) $ 60,547 $ (251) Operating Activities Cash flow provided by operating activities totaled $861.5 million for the year ended December 31, 2024, as compared to $763.0 million for the year ended December 31, 2023 and $588.8 million for the year ended December 31, 2022.
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.
While the Company and all of its subsidiaries are expected to have sufficient liquidity to meet all their respective 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 71 of our risk in force in our mortgage insurance portfolio, or to fund new business initiatives.
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 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. 65 In the year ended December 31, 2024, unearned premiums decreased by $24.3 million as a result of $33.3 million of unearned premium that was recognized in earnings during the year partially offset by net premiums written on single premium policies of $9.0 million.
Each of the third-party reinsurers has an insurer minimum financial strength rating of A- or better by S&P Global Ratings, A.M. Best or both.
Essent Guaranty has entered into quota share reinsurance agreements with panels of third-party reinsurers ("QSR" agreements). Each of the third-party reinsurers has an insurer minimum financial strength rating of A- or better by S&P Global Ratings, A.M. Best or both.
This pattern generally occurs because relatively few of the claims that a book will ultimately experience typically occur in the first few years of the book, when premium revenue is highest, while subsequent years are affected by declining premium revenues, as the number of insured loans decreases (primarily due to loan prepayments), and by increasing losses. 60 Key Performance Indicators Insurance In Force As discussed above, mortgage insurance premiums we collect and earn are generated based on our IIF, which is a function of our NIW and cancellations.
This pattern generally occurs because relatively few of the claims that a book will ultimately experience typically occur in the first few years of the book, when premium revenue is highest, while subsequent years are affected by declining premium revenues, as the number of insured loans decreases (primarily due to loan prepayments), and by increasing losses.
Based on our current analysis of the provisions, we do not expect the IRA to have a material impact on our financial position or results of operations.
Based on our current analysis of the provisions, we do not expect the IRA to have a material impact on our financial position or results of operations. As the IRS issues additional guidance related to the IRA, we will evaluate any potential impact to our consolidated financial statements.
Year Ended December 31, ($ in thousands) 2023 2022 2021 IIF, beginning of period $ 227,062,055 $ 207,190,544 $ 198,882,352 NIW 47,666,852 63,061,262 84,218,250 Cancellations (35,650,645) (43,189,751) (75,910,058) IIF, end of period $ 239,078,262 $ 227,062,055 $ 207,190,544 Average IIF during the period $ 234,518,135 $ 215,485,518 $ 202,890,292 RIF, end of period $ 54,591,590 $ 49,903,626 $ 45,273,383 The following is a summary of our IIF at December 31, 2023 by vintage: ($ in thousands) $ % 2023 45,720,492 19.1 % 2022 56,943,590 23.8 2021 61,442,213 25.7 2020 46,454,833 19.4 2019 12,360,264 5.3 2018 and prior 16,156,870 6.7 $ 239,078,262 100.0 % Average Net Premium Rate Our average net premium rate is calculated by dividing net premiums earned for our U.S. mortgage insurance portfolio by average insurance in force for the period and is dependent on a number of factors, including: (1) the risk characteristics and average coverage on the mortgages we insure; (2) the mix of monthly premiums compared to single premiums in our portfolio; (3) cancellations of non-refundable single premiums during the period; (4) changes to our pricing for NIW; and (5) premiums ceded under third-party reinsurance agreements.
Year Ended December 31, ($ in thousands) 2024 2023 2022 IIF, beginning of period $ 239,078,262 $ 227,062,055 $ 207,190,544 NIW 45,561,332 47,666,852 63,061,262 Cancellations (40,994,171) (35,650,645) (43,189,751) IIF, end of period $ 243,645,423 $ 239,078,262 $ 227,062,055 Average IIF during the period $ 241,571,892 $ 234,518,135 $ 215,485,518 RIF, end of period $ 56,477,150 $ 54,591,590 $ 49,903,626 The following is a summary of our IIF at December 31, 2024 by vintage: ($ in thousands) $ % 2024 $ 43,370,993 17.8 % 2023 41,118,618 16.9 2022 51,504,293 21.1 2021 50,162,523 20.6 2020 35,499,947 14.6 2019 and prior 21,989,049 9.0 $ 243,645,423 100.0 % 61 Average Net Premium Rate Our average net premium rate is calculated by dividing net premiums earned for our U.S. mortgage insurance portfolio by average insurance in force for the period and is dependent on a number of factors, including: (1) the risk characteristics and average coverage on the mortgages we insure; (2) the mix of monthly premiums compared to single premiums in our portfolio; (3) cancellations of non-refundable single premiums during the period; (4) changes to our pricing for NIW; and (5) premiums ceded under third-party reinsurance agreements.
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.
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. The transition of defaults to foreclosure or claim has not returned to pre-pandemic levels as of December 31, 2024.
These reinsurance coverages also reduce net risk in force and PMIERs Minimum Required Assets.
These reinsurance coverages also reduce net risk in force and PMIERs Minimum Required Assets. See Note 5 to our consolidated financial statements.
FHFA and the GSEs announced that effective November 1, 2023, defaulted loans will be no longer eligible for COVID forbearance plans and will follow the GSEs standard forbearance plans going forward. Financial Condition Stockholders' Equity As of December 31, 2023, stockholders’ equity was $5.1 billion compared to $4.5 billion as of December 31, 2022.
FHFA and the GSEs announced that effective November 1, 2023, defaulted loans will be no longer eligible for COVID forbearance plans and will follow the GSEs standard forbearance plans going forward.
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.
Essent Re is subject to certain dividend restrictions as prescribed by the Bermuda Monetary Authority and under certain agreements with counterparties.
The financial strength ratings of Essent Guaranty are A3 with a stable outlook by Moody's Investors Service, Inc. ("Moody's"), A- with a stable outlook by S&P Global Ratings ("S&P") (up from BBB+ with a stable outlook as a result of an upgrade by S&P announced on January 8, 2024) and A (Excellent) with a stable outlook by A.M.
The financial strength ratings of Essent Guaranty are A3 with a positive outlook by Moody's Investors Service, Inc. ("Moody's"), A- with a stable outlook by S&P Global Ratings ("S&P") and A (Excellent) with a stable outlook by A.M. Best Company ("AM Best").
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.
The decrease in our operating results in 2023 compared to 2022 was primarily due to an increase in the provision for losses and LAE, partially offset by increases in net premiums earned and net investment income.
Treasury securities $ 996,382 18.9 % $ 556,438 11.7 % U.S. agency securities 7,195 0.1 49,058 1.0 U.S. agency mortgage-backed securities 821,346 15.6 783,743 16.5 Municipal debt securities(1) 547,258 10.5 602,690 12.8 Non-U.S. government securities 67,447 1.3 62,399 1.3 Corporate debt securities(2) 1,297,055 24.7 1,414,321 29.8 Residential and commercial mortgage securities 517,940 9.8 511,824 10.8 Asset-backed securities 564,995 10.7 624,561 13.2 Money market funds 444,121 8.4 136,591 2.9 Total Investments Available for Sale $ 5,263,739 100.0 % $ 4,741,625 100.0 % December 31, December 31, (1) The following table summarizes municipal debt securities as of : 2023 2022 Special revenue bonds 81.4 % 79.0 % General obligation bonds 18.6 20.9 Tax allocation bonds — 0.1 Total 100.0 % 100.0 % December 31, December 31, (2) The following table summarizes corporate debt securities as of : 2023 2022 Financial 42.0 % 40.5 % Consumer, Non-Cyclical 15.9 17.9 Industrial 8.1 6.8 Communications 7.2 8.4 Consumer, Cyclical 7.1 6.8 Utilities 6.3 6.1 Technology 6.2 4.9 Energy 4.7 6.4 Basic Materials 2.5 2.1 Government — 0.1 Total 100.0 % 100.0 % 72 Investments Available for Sale by Rating Rating(1) December 31, 2023 December 31, 2022 ($ in thousands) Fair Value Percent Fair Value Percent Aaa $ 2,561,363 53.2 % $ 2,122,599 46.2 % Aa1 104,474 2.2 111,262 2.4 Aa2 291,501 6.0 325,241 7.1 Aa3 208,882 4.3 232,500 5.0 A1 377,188 7.8 396,095 8.6 A2 329,423 6.8 410,163 8.9 A3 253,081 5.3 268,928 5.8 Baa1 220,901 4.6 236,793 5.1 Baa2 226,449 4.7 221,308 4.8 Baa3 166,121 3.4 187,117 4.1 Below Baa3 80,235 1.7 93,028 2.0 Total (2) $ 4,819,618 100.0 % $ 4,605,034 100.0 % _______________________________________________________________________________ (1) Based on ratings issued by Moody's, if available.
Treasury securities $ 547,290 9.3 % $ 996,382 18.9 % U.S. agency securities — — 7,195 0.1 U.S. agency mortgage-backed securities 1,125,436 19.2 821,346 15.6 Municipal debt securities(1) 583,501 9.9 547,258 10.5 Non-U.S. government securities 69,798 1.2 67,447 1.3 Corporate debt securities(2) 1,783,046 30.3 1,297,055 24.6 Residential and commercial mortgage securities 478,086 8.1 517,940 9.8 Asset-backed securities 631,959 10.8 564,995 10.8 Money market funds 657,605 11.2 444,121 8.4 Total Investments Available for Sale $ 5,876,721 100.0 % $ 5,263,739 100.0 % December 31, December 31, (1) The following table summarizes municipal debt securities as of : 2024 2023 Special revenue bonds 83.3 % 81.4 % General obligation bonds 16.7 18.6 Total 100.0 % 100.0 % December 31, December 31, (2) The following table summarizes corporate debt securities as of : 2024 2023 Financial 41.8 % 42.0 % Consumer, Non-Cyclical 15.1 15.9 Industrial 8.2 8.1 Communications 5.7 7.2 Consumer, Cyclical 6.3 7.1 Utilities 8.7 6.3 Technology 6.4 6.2 Energy 5.1 4.7 Basic Materials 2.7 2.5 Total 100.0 % 100.0 % 76 Investments Available for Sale by Rating Rating(1) December 31, 2024 December 31, 2023 ($ in thousands) Fair Value Percent Fair Value Percent Aaa $ 2,513,014 48.1 % $ 2,561,363 53.2 % Aa1 101,809 2.0 104,474 2.2 % Aa2 301,080 5.8 291,501 6.0 % Aa3 271,069 5.2 208,882 4.3 % A1 511,076 9.8 377,188 7.8 % A2 411,999 7.9 329,423 6.8 % A3 463,616 8.8 253,081 5.3 % Baa1 218,454 4.2 220,901 4.6 % Baa2 198,193 3.8 226,449 4.7 % Baa3 151,729 2.9 166,121 3.4 % Below Baa3 77,077 1.5 80,235 1.7 % Total (2) $ 5,219,116 100.0 % $ 4,819,618 100.0 % _______________________________________________________________________________ (1) Based on ratings issued by Moody's, if available.
Investing Activities Cash flow used in investing activities totaled $525.6 million for the year ended December 31, 2023 and totaled $398.9 million for the year ended December 31, 2022 and primarily related to investing cash flows from the business in both years.
Cash used in investing activities primarily related to investing cash flows from the operations of the business in each of the periods presented. Financing Activities Cash flow used in financing activities totaled $164.9 million, $176.9 million and $190.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.
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.
See additional discussion in "—Liquidity and Capital Resources—Insurance Company Capital." As of December 31, 2024, the net risk in force for Essent Guaranty was $35.2 billion and its statutory capital was $3.6 billion, resulting in a risk-to-capital ratio of 9.8:1.
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.
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. As of January 1, 2025, Essent Re has dividend capacity of $441.9 million.
Income Taxes Income taxes are incurred based on the amount of earnings or losses generated in the jurisdictions in which we operate and the applicable tax rates and regulations in those jurisdictions. Our U.S. insurance subsidiaries are generally not subject to income taxes in most states in which we operate; however, our non-insurance subsidiaries are subject to state income taxes.
See Note 7 to our consolidated financial statements. 60 Income Taxes Income taxes are incurred based on the amount of earnings or losses generated in the jurisdictions in which we operate and the applicable tax rates and regulations in those jurisdictions.
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.
("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, 2024. See "—Legislative and Regulatory Developments—Bermuda Corporate Income Tax" above.
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.
The Pennsylvania statute also requires that, without the prior approval of the Pennsylvania Insurance Department, dividends and other distributions may only be paid out of positive unassigned surplus. At December 31, 2024, Essent Guaranty, had unassigned surplus of approximately $396.6 million. As of January 1, 2025, Essent Guaranty has dividend capacity of $396.6 million.
These arrangements have the impact of reducing our earned premiums, but also reduce our risk in force ("RIF"), which provides capital relief, and may include capital relief under the PMIERs financial strength requirements. Our incurred losses are reduced by any incurred losses ceded in accordance with the reinsurance agreement.
When we enter into a reinsurance agreement, the reinsurer receives a premium and, in exchange, agrees to insure an agreed upon portion of incurred losses. These arrangements have the impact of reducing our earned premiums, but also reduce our mortgage insurance risk in force (RIF), which provides capital relief, and may include capital relief under the PMIERs financial strength requirements.
Compensation and benefits includes salaries, wages and bonus, stock compensation expense, benefits and payroll taxes. • Premium taxes increased primarily due to an increase in premiums written, including title insurance premiums written during the second half of 2023. • Other expenses increased primarily as a result of title and settlement services direct cost incurred and increases in professional fees and software related expenses partially offset by an increase in ceding commission earned under the QSR Agreement.
Compensation and benefits includes salaries, wages and bonus, stock compensation expense, benefits and payroll taxes. • Premium taxes increased from 2022 to 2023 and from 2023 to 2024 primarily due to an increase in premiums written. • The increases in ceding commission from 2022 to 2023 and 2023 to 2024 results from increases in the amount of reinsured insurance in force under our outstanding quota share arrangements. • Other expenses increased in 2023 compared to 2022 primarily as a result of increases in professional fees and software related expenses.
Cash flow used in financing activities for the year ended December 31, 2021 were partially offset by net increased borrowings under the Credit Facility. Insurance Company Capital We compute a risk-to-capital ratio for our U.S. mortgage insurance companies on a separate company statutory basis, as well as for our combined insurance operations.
Insurance Company Capital We compute a risk-to-capital ratio for our U.S. mortgage insurance companies on a separate company statutory basis, as well as for our combined insurance operations. The risk-to-capital ratio is our net risk in force divided by our statutory capital.

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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 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.
Biggest changeAt December 31, 2024, the effective duration of our investments available for sale was 3.9 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 3.9% in fair value of our investments available for sale.
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
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

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