Bermuda | Not Applicable | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
Clarendon House 2 Church Street Hamilton HM11, Bermuda (Address of principal executive offices and zip code) (441) 297-9901 (Registrant’s telephone number, including area code) |
Large accelerated filer | x | Accelerated filer | o | |
Non-accelerated filer | o | (Do not check if a smaller reporting company) | ||
Smaller reporting company | o | |||
Emerging growth company | o |
• | changes in or to Fannie Mae and Freddie Mac, which we refer to collectively as the GSEs, whether through Federal legislation, restructurings or a shift in business practices; |
• | failure to continue to meet the mortgage insurer eligibility requirements of the GSEs; |
• | competition for our customers on the basis of price, terms and conditions or otherwise, or the loss of a significant customer; |
• | lenders or investors seeking alternatives to private mortgage insurance; |
• | increase in the number of loans insured through Federal government mortgage insurance programs, including those offered by the Federal Housing Administration; |
• | decline in the volume of low down payment mortgage originations; |
• | uncertainty of loss reserve estimates; |
• | decrease in the length of time our insurance policies are in force; |
• | deteriorating economic conditions; |
• | the impact of recently enacted U.S. Federal tax reform on us, our shareholders and our operations; |
• | the definition of “Qualified Mortgage” reducing the size of the mortgage origination market or creating incentives to use government mortgage insurance programs; |
• | the definition of “Qualified Residential Mortgage” reducing the number of low down payment loans or lenders and investors seeking alternatives to private mortgage insurance; |
• | the implementation of the Basel III Capital Accord, which may discourage the use of private mortgage insurance; |
• | management of risk in our investment portfolio; |
• | fluctuations in interest rates; |
• | inadequacy of the premiums we charge to compensate for our losses incurred; |
• | dependence on management team and qualified personnel; |
• | disturbance to our information technology systems; |
• | change in our customers’ capital requirements discouraging the use of mortgage insurance; |
• | declines in the value of borrowers’ homes; |
• | limited availability of capital; |
• | unanticipated claims arise under and risks associated with our contract underwriting program; |
• | industry practice that loss reserves are established only upon a loan default; |
• | disruption in mortgage loan servicing; |
• | risk of future legal proceedings; |
• | customers’ technological demands; |
• | our non-U.S. operations becoming subject to U.S. Federal income taxation; |
• | becoming considered a passive foreign investment company for U.S. Federal income tax purposes; and |
• | potential inability of our insurance subsidiaries to pay dividends. |
June 30, | December 31, | |||||||
(In thousands, except per share amounts) | 2018 | 2017 | ||||||
Assets | ||||||||
Investments available for sale, at fair value | ||||||||
Fixed maturities (amortized cost: 2018 — $2,273,485; 2017 — $1,994,200) | $ | 2,229,002 | $ | 1,992,371 | ||||
Short-term investments (amortized cost: 2018 — $326,984; 2017 — $312,714) | 327,011 | 312,694 | ||||||
Total investments | 2,556,013 | 2,305,065 | ||||||
Cash | 24,664 | 43,524 | ||||||
Accrued investment income | 15,655 | 12,807 | ||||||
Accounts receivable | 35,276 | 29,752 | ||||||
Deferred policy acquisition costs | 15,947 | 15,354 | ||||||
Property and equipment (at cost, less accumulated depreciation of $52,200 in 2018 and $50,466 in 2017) | 7,295 | 6,979 | ||||||
Prepaid federal income tax | 174,335 | 252,157 | ||||||
Other assets | 20,246 | 8,730 | ||||||
Total assets | $ | 2,849,431 | $ | 2,674,368 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Reserve for losses and LAE | $ | 50,016 | $ | 46,850 | ||||
Unearned premium reserve | 283,785 | 259,672 | ||||||
Net deferred tax liability | 147,808 | 127,636 | ||||||
Credit facility borrowings (at carrying value, less unamortized deferred costs of $1,659 in 2018 and $1,409 in 2017) | 223,341 | 248,591 | ||||||
Securities purchases payable | 14,464 | 14,999 | ||||||
Other accrued liabilities | 26,446 | 36,184 | ||||||
Total liabilities | 745,860 | 733,932 | ||||||
Commitments and contingencies (see Note 7) | ||||||||
Stockholders’ Equity | ||||||||
Common shares, $0.015 par value: | ||||||||
Authorized - 233,333; issued and outstanding - 98,128 shares in 2018 and 98,434 shares in 2017 | 1,472 | 1,476 | ||||||
Additional paid-in capital | 1,103,448 | 1,127,137 | ||||||
Accumulated other comprehensive loss | (39,248 | ) | (3,252 | ) | ||||
Retained earnings | 1,037,899 | 815,075 | ||||||
Total stockholders’ equity | 2,103,571 | 1,940,436 | ||||||
Total liabilities and stockholders’ equity | $ | 2,849,431 | $ | 2,674,368 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands, except per share amounts) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | ||||||||||||||||
Net premiums written | $ | 168,404 | $ | 134,063 | $ | 333,629 | $ | 253,360 | ||||||||
Increase in unearned premiums | (11,446 | ) | (7,500 | ) | (24,113 | ) | (9,146 | ) | ||||||||
Net premiums earned | 156,958 | 126,563 | 309,516 | 244,214 | ||||||||||||
Net investment income | 15,134 | 9,400 | 28,848 | 17,835 | ||||||||||||
Realized investment gains, net | 439 | 544 | 636 | 1,199 | ||||||||||||
Other income | 1,237 | 1,099 | 2,231 | 1,950 | ||||||||||||
Total revenues | 173,768 | 137,606 | 341,231 | 265,198 | ||||||||||||
Losses and expenses: | ||||||||||||||||
Provision for losses and LAE | 1,813 | 1,770 | 7,122 | 5,463 | ||||||||||||
Other underwriting and operating expenses | 36,428 | 35,686 | 74,552 | 72,018 | ||||||||||||
Interest expense | 2,618 | 1,189 | 5,068 | 1,905 | ||||||||||||
Total losses and expenses | 40,859 | 38,645 | 86,742 | 79,386 | ||||||||||||
Income before income taxes | 132,909 | 98,961 | 254,489 | 185,812 | ||||||||||||
Income tax expense | 21,154 | 26,843 | 31,665 | 47,096 | ||||||||||||
Net income | $ | 111,755 | $ | 72,118 | $ | 222,824 | $ | 138,716 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 1.15 | $ | 0.79 | $ | 2.29 | $ | 1.52 | ||||||||
Diluted | 1.14 | 0.77 | 2.28 | 1.49 | ||||||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 97,426 | 91,381 | 97,362 | 91,320 | ||||||||||||
Diluted | 97,866 | 93,162 | 97,908 | 93,093 | ||||||||||||
Net income | $ | 111,755 | $ | 72,118 | $ | 222,824 | $ | 138,716 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Change in unrealized (depreciation) appreciation of investments, net of tax (benefit) expense of ($1,418) and $3,649 in the three months ended June 30, 2018 and 2017 and ($6,611) and $5,710 in the six months ended June 30, 2018 and 2017 | (7,246 | ) | 8,470 | (35,996 | ) | 13,320 | ||||||||||
Total other comprehensive (loss) income | (7,246 | ) | 8,470 | (35,996 | ) | 13,320 | ||||||||||
Comprehensive income | $ | 104,509 | $ | 80,588 | $ | 186,828 | $ | 152,036 |
(In thousands) | Common Shares | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||||
Balance at January 1, 2017 | $ | 1,397 | $ | 918,296 | $ | (12,255 | ) | $ | 436,335 | $ | — | $ | 1,343,773 | |||||||||||
Net income | 379,747 | 379,747 | ||||||||||||||||||||||
Other comprehensive income | 8,068 | 8,068 | ||||||||||||||||||||||
Issuance of common shares, net of issuance cost of $1,802 | 75 | 197,623 | 197,698 | |||||||||||||||||||||
Issuance of management incentive shares | 8 | (8 | ) | — | ||||||||||||||||||||
Stock-based compensation expense | 18,688 | 18,688 | ||||||||||||||||||||||
Cumulative effect of ASU 2016-09 adoption | 111 | (72 | ) | 39 | ||||||||||||||||||||
Treasury stock acquired | (7,577 | ) | (7,577 | ) | ||||||||||||||||||||
Cancellation of treasury stock | (4 | ) | (7,573 | ) | 7,577 | — | ||||||||||||||||||
Reclassification of certain income tax effects resulting from tax reform | 935 | (935 | ) | — | ||||||||||||||||||||
Balance at December 31, 2017 | $ | 1,476 | $ | 1,127,137 | $ | (3,252 | ) | $ | 815,075 | $ | — | $ | 1,940,436 | |||||||||||
Net income | 222,824 | 222,824 | ||||||||||||||||||||||
Other comprehensive loss | (35,996 | ) | (35,996 | ) | ||||||||||||||||||||
Issuance of management incentive shares | 6 | (6 | ) | — | ||||||||||||||||||||
Stock-based compensation expense | 7,432 | 7,432 | ||||||||||||||||||||||
Treasury stock acquired | (31,125 | ) | (31,125 | ) | ||||||||||||||||||||
Cancellation of treasury stock | (10 | ) | (31,115 | ) | 31,125 | — | ||||||||||||||||||
Balance at June 30, 2018 | $ | 1,472 | $ | 1,103,448 | $ | (39,248 | ) | $ | 1,037,899 | $ | — | $ | 2,103,571 |
Six Months Ended June 30, | ||||||||
(In thousands) | 2018 | 2017 | ||||||
Operating Activities | ||||||||
Net income | $ | 222,824 | $ | 138,716 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Gain on the sale of investments, net | (636 | ) | (1,199 | ) | ||||
Depreciation and amortization | 1,734 | 1,970 | ||||||
Stock-based compensation expense | 7,432 | 9,288 | ||||||
Amortization of premium on investment securities | 7,013 | 5,833 | ||||||
Deferred income tax provision | 26,783 | 32,948 | ||||||
Change in: | ||||||||
Accrued investment income | (2,848 | ) | (1,288 | ) | ||||
Accounts receivable | (3,174 | ) | (4,134 | ) | ||||
Deferred policy acquisition costs | (593 | ) | (637 | ) | ||||
Prepaid federal income tax | 77,822 | (34,085 | ) | |||||
Other assets | (11,379 | ) | (1,877 | ) | ||||
Reserve for losses and LAE | 3,166 | 1,656 | ||||||
Unearned premium reserve | 24,113 | 9,146 | ||||||
Other accrued liabilities | (9,601 | ) | (11,934 | ) | ||||
Net cash provided by operating activities | 342,656 | 144,403 | ||||||
Investing Activities | ||||||||
Net change in short-term investments | (14,317 | ) | 1,364 | |||||
Purchase of investments available for sale | (505,400 | ) | (396,919 | ) | ||||
Proceeds from maturity of investments available for sale | 52,545 | 36,318 | ||||||
Proceeds from sales of investments available for sale | 164,355 | 151,583 | ||||||
Purchase of property and equipment | (2,050 | ) | (1,806 | ) | ||||
Net cash used in investing activities | (304,867 | ) | (209,460 | ) | ||||
Financing Activities | ||||||||
Credit facility borrowings | 15,000 | 75,000 | ||||||
Credit facility repayments | (40,000 | ) | — | |||||
Treasury stock acquired | (31,125 | ) | (7,239 | ) | ||||
Payment of issuance costs for credit facility | (524 | ) | (2,565 | ) | ||||
Net cash (used in) provided by financing activities | (56,649 | ) | 65,196 | |||||
Net (decrease) increase in cash | (18,860 | ) | 139 | |||||
Cash at beginning of year | 43,524 | 27,531 | ||||||
Cash at end of period | $ | 24,664 | $ | 27,670 | ||||
Supplemental Disclosure of Cash Flow Information | ||||||||
Income tax payments | $ | (10,400 | ) | $ | (16,700 | ) | ||
Interest payments | (4,700 | ) | (1,772 | ) | ||||
Noncash Transactions | ||||||||
Repayment of borrowings with term loan proceeds (see Note 6) | $ | (100,000 | ) | $ | (125,000 | ) |
June 30, 2018 (In thousands) | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
U.S. Treasury securities | $ | 254,439 | $ | 9 | $ | (8,244 | ) | $ | 246,204 | |||||||
U.S. agency securities | 33,657 | — | (902 | ) | 32,755 | |||||||||||
U.S. agency mortgage-backed securities | 510,995 | 121 | (18,112 | ) | 493,004 | |||||||||||
Municipal debt securities(1) | 484,996 | 3,653 | (4,952 | ) | 483,697 | |||||||||||
Non-U.S. government securities | 24,984 | 12 | (293 | ) | 24,703 | |||||||||||
Corporate debt securities(2) | 668,379 | 216 | (14,821 | ) | 653,774 | |||||||||||
Residential and commercial mortgage securities | 88,154 | 333 | (850 | ) | 87,637 | |||||||||||
Asset-backed securities | 257,856 | 301 | (952 | ) | 257,205 | |||||||||||
Money market funds | 277,009 | 25 | — | 277,034 | ||||||||||||
Total investments available for sale | $ | 2,600,469 | $ | 4,670 | $ | (49,126 | ) | $ | 2,556,013 |
December 31, 2017 (In thousands) | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
U.S. Treasury securities | $ | 231,905 | $ | 2 | $ | (4,102 | ) | $ | 227,805 | |||||||
U.S. agency securities | 33,669 | — | (555 | ) | 33,114 | |||||||||||
U.S. agency mortgage-backed securities | 462,986 | 567 | (7,516 | ) | 456,037 | |||||||||||
Municipal debt securities(1) | 457,418 | 9,098 | (1,261 | ) | 465,255 | |||||||||||
Corporate debt securities(2) | 610,516 | 4,249 | (3,037 | ) | 611,728 | |||||||||||
Residential and commercial mortgage securities | 78,974 | 791 | (358 | ) | 79,407 | |||||||||||
Asset-backed securities | 167,638 | 467 | (183 | ) | 167,922 | |||||||||||
Money market funds | 263,808 | — | (11 | ) | 263,797 | |||||||||||
Total investments available for sale | $ | 2,306,914 | $ | 15,174 | $ | (17,023 | ) | $ | 2,305,065 |
June 30, | December 31, | |||||
(1) The following table summarizes municipal debt securities as of : | 2018 | 2017 | ||||
Special revenue bonds | 63.8 | % | 63.6 | % | ||
General obligation bonds | 30.9 | 30.7 | ||||
Certificate of participation bonds | 4.0 | 4.4 | ||||
Tax allocation bonds | 0.8 | 0.8 | ||||
Special tax bonds | 0.5 | 0.5 | ||||
Total | 100.0 | % | 100.0 | % |
June 30, | December 31, | |||||
(2) The following table summarizes corporate debt securities as of : | 2018 | 2017 | ||||
Financial | 40.9 | % | 45.9 | % | ||
Consumer, non-cyclical | 19.1 | 16.2 | ||||
Communications | 10.3 | 7.3 | ||||
Energy | 7.7 | 7.8 | ||||
Industrial | 5.7 | 6.3 | ||||
Consumer, cyclical | 5.4 | 5.3 | ||||
Utilities | 4.5 | 5.3 | ||||
Technology | 3.7 | 3.9 | ||||
Basic materials | 2.7 | 2.0 | ||||
Total | 100.0 | % | 100.0 | % |
(In thousands) | Amortized Cost | Fair Value | ||||||
U.S. Treasury securities: | ||||||||
Due in 1 year | $ | 51,968 | $ | 51,950 | ||||
Due after 1 but within 5 years | 96,571 | 94,776 | ||||||
Due after 5 but within 10 years | 76,179 | 71,405 | ||||||
Due after 10 years | 29,721 | 28,073 | ||||||
Subtotal | 254,439 | 246,204 | ||||||
U.S. agency securities: | ||||||||
Due in 1 year | — | — | ||||||
Due after 1 but within 5 years | 33,657 | 32,755 | ||||||
Subtotal | 33,657 | 32,755 | ||||||
Municipal debt securities: | ||||||||
Due in 1 year | 36,266 | 36,248 | ||||||
Due after 1 but within 5 years | 87,971 | 87,632 | ||||||
Due after 5 but within 10 years | 194,975 | 194,611 | ||||||
Due after 10 years | 165,784 | 165,206 | ||||||
Subtotal | 484,996 | 483,697 | ||||||
Non-U.S. government securities: | ||||||||
Due in 1 year | — | — | ||||||
Due after 1 but within 5 years | 4,174 | 4,187 | ||||||
Due after 5 but within 10 years | 20,810 | 20,516 | ||||||
Subtotal | 24,984 | 24,703 | ||||||
Corporate debt securities: | ||||||||
Due in 1 year | 68,461 | 68,122 | ||||||
Due after 1 but within 5 years | 360,593 | 354,309 | ||||||
Due after 5 but within 10 years | 220,975 | 213,211 | ||||||
Due after 10 years | 18,350 | 18,132 | ||||||
Subtotal | 668,379 | 653,774 | ||||||
U.S. agency mortgage-backed securities | 510,995 | 493,004 | ||||||
Residential and commercial mortgage securities | 88,154 | 87,637 | ||||||
Asset-backed securities | 257,856 | 257,205 | ||||||
Money market funds | 277,009 | 277,034 | ||||||
Total investments available for sale | $ | 2,600,469 | $ | 2,556,013 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Realized gross gains | $ | 518 | $ | 749 | $ | 1,309 | $ | 1,430 | ||||||||
Realized gross losses | 79 | 205 | 673 | 231 |
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
June 30, 2018 (In thousands) | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||||||||||
U.S. Treasury securities | $ | 132,201 | $ | (3,722 | ) | $ | 61,975 | $ | (4,522 | ) | $ | 194,176 | $ | (8,244 | ) | |||||||||
U.S. agency securities | 17,097 | (407 | ) | 15,658 | (495 | ) | 32,755 | (902 | ) | |||||||||||||||
U.S. agency mortgage-backed securities | 267,109 | (6,923 | ) | 197,760 | (11,189 | ) | 464,869 | (18,112 | ) | |||||||||||||||
Municipal debt securities | 252,919 | (4,180 | ) | 22,679 | (772 | ) | 275,598 | (4,952 | ) | |||||||||||||||
Non-U.S. government securities | 20,516 | (293 | ) | — | — | 20,516 | (293 | ) | ||||||||||||||||
Corporate debt securities | 517,897 | (11,324 | ) | 88,857 | (3,497 | ) | 606,754 | (14,821 | ) | |||||||||||||||
Residential and commercial mortgage securities | 42,432 | (495 | ) | 5,881 | (355 | ) | 48,313 | (850 | ) | |||||||||||||||
Asset-backed securities | 169,257 | (873 | ) | 8,210 | (79 | ) | 177,467 | (952 | ) | |||||||||||||||
Total | $ | 1,419,428 | $ | (28,217 | ) | $ | 401,020 | $ | (20,909 | ) | $ | 1,820,448 | $ | (49,126 | ) |
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
December 31, 2017 (In thousands) | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||||||||||
U.S. Treasury securities | $ | 151,119 | $ | (1,240 | ) | $ | 69,454 | $ | (2,862 | ) | $ | 220,573 | $ | (4,102 | ) | |||||||||
U.S. agency securities | 17,320 | (190 | ) | 15,794 | (365 | ) | 33,114 | (555 | ) | |||||||||||||||
U.S. agency mortgage-backed securities | 180,443 | (1,394 | ) | 217,944 | (6,122 | ) | 398,387 | (7,516 | ) | |||||||||||||||
Municipal debt securities | 124,171 | (817 | ) | 23,492 | (444 | ) | 147,663 | (1,261 | ) | |||||||||||||||
Corporate debt securities | 214,371 | (1,213 | ) | 94,261 | (1,824 | ) | 308,632 | (3,037 | ) | |||||||||||||||
Residential and commercial mortgage securities | 29,842 | (179 | ) | 5,988 | (179 | ) | 35,830 | (358 | ) | |||||||||||||||
Asset-backed securities | 58,798 | (133 | ) | 5,828 | (50 | ) | 64,626 | (183 | ) | |||||||||||||||
Money market funds | 59,489 | (11 | ) | — | — | 59,489 | (11 | ) | ||||||||||||||||
Total | $ | 835,553 | $ | (5,177 | ) | $ | 432,761 | $ | (11,846 | ) | $ | 1,268,314 | $ | (17,023 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Fixed maturities | $ | 14,496 | $ | 9,963 | $ | 28,139 | $ | 18,982 | ||||||||
Short-term investments | 1,298 | 74 | 2,049 | 133 | ||||||||||||
Gross investment income | 15,794 | 10,037 | 30,188 | 19,115 | ||||||||||||
Investment expenses | (660 | ) | (637 | ) | (1,340 | ) | (1,280 | ) | ||||||||
Net investment income | $ | 15,134 | $ | 9,400 | $ | 28,848 | $ | 17,835 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net premiums written: | ||||||||||||||||
Direct | $ | 171,989 | $ | 134,063 | $ | 337,508 | $ | 253,360 | ||||||||
Ceded | (3,585 | ) | — | (3,879 | ) | — | ||||||||||
Net premiums written | $ | 168,404 | $ | 134,063 | $ | 333,629 | $ | 253,360 | ||||||||
Net premiums earned: | ||||||||||||||||
Direct | $ | 160,543 | $ | 126,563 | $ | 313,395 | $ | 244,214 | ||||||||
Ceded | (3,585 | ) | — | (3,879 | ) | — | ||||||||||
Net premiums earned | $ | 156,958 | $ | 126,563 | $ | 309,516 | $ | 244,214 |
Maximum Exposure to Loss | ||||||||||||||||
(In thousands) | Total VIE Assets | On - Balance Sheet | Off - Balance Sheet | Total | ||||||||||||
Radnor Re 2018-1 Ltd. | $ | 424,412 | $ | — | $ | 18,226 | $ | 18,226 | ||||||||
Total | $ | 424,412 | $ | — | $ | 18,226 | $ | 18,226 |
($ in thousands) | 2018 | 2017 | ||||||
Reserve for losses and LAE at beginning of period | $ | 46,850 | $ | 28,142 | ||||
Less: Reinsurance recoverables | — | — | ||||||
Net reserve for losses and LAE at beginning of period | 46,850 | 28,142 | ||||||
Add provision for losses and LAE, net of reinsurance, occurring in: | ||||||||
Current period | 16,528 | 12,116 | ||||||
Prior years | (9,406 | ) | (6,653 | ) | ||||
Net incurred losses and LAE during the current period | 7,122 | 5,463 | ||||||
Deduct payments for losses and LAE, net of reinsurance, occurring in: | ||||||||
Current period | 211 | 97 | ||||||
Prior years | 3,745 | 3,710 | ||||||
Net loss and LAE payments during the current period | 3,956 | 3,807 | ||||||
Net reserve for losses and LAE at end of period | 50,016 | 29,798 | ||||||
Plus: Reinsurance recoverables | — | — | ||||||
Reserve for losses and LAE at end of period | $ | 50,016 | $ | 29,798 | ||||
Loans in default at end of period | 3,519 | 1,776 |
Time and Performance- Based Share Awards | Time-Based Share Awards | Share Units | |||||||||||||||||||
(Shares in thousands) | Number of Shares | Weighted Average Grant Date Fair Value | Number of Shares | Weighted Average Grant Date Fair Value | Number of Share Units | Weighted Average Grant Date Fair Value | |||||||||||||||
Outstanding at beginning of year | 1,595 | $ | 17.03 | 410 | $ | 21.12 | 536 | $ | 29.13 | ||||||||||||
Granted | 113 | 45.02 | 73 | 45.02 | 141 | 42.37 | |||||||||||||||
Vested | (1,226 | ) | 14.71 | (271 | ) | 18.55 | (220 | ) | 28.32 | ||||||||||||
Forfeited | — | N/A | — | N/A | (5 | ) | 31.95 | ||||||||||||||
Outstanding at June 30, 2018 | 482 | $ | 29.49 | 212 | $ | 32.63 | 452 | $ | 33.62 |
Performance level | Compounded Annual Book Value Per Share Growth | Nonvested Common Shares Earned | |||||
<15 | % | 0 | % | ||||
Threshold | 15 | % | 25 | % | |||
16 | % | 50 | % | ||||
17 | % | 75 | % | ||||
Maximum | ≥18 | % | 100 | % | |||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Compensation expense | $ | 3,827 | $ | 4,669 | $ | 7,432 | $ | 9,288 | ||||||||
Income tax benefit | 713 | 1,502 | 1,385 | 2,985 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands, except per share amounts) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 111,755 | $ | 72,118 | $ | 222,824 | $ | 138,716 | ||||||||
Less: dividends declared | — | — | — | — | ||||||||||||
Net income available to common shareholders | $ | 111,755 | $ | 72,118 | $ | 222,824 | $ | 138,716 | ||||||||
Basic earnings per share | $ | 1.15 | $ | 0.79 | $ | 2.29 | $ | 1.52 | ||||||||
Diluted earnings per share | $ | 1.14 | $ | 0.77 | $ | 2.28 | $ | 1.49 | ||||||||
Basic weighted average shares outstanding | 97,426 | 91,381 | 97,362 | 91,320 | ||||||||||||
Dilutive effect of nonvested shares | 440 | 1,781 | 546 | 1,773 | ||||||||||||
Diluted weighted average shares outstanding | 97,866 | 93,162 | 97,908 | 93,093 |
Three Months Ended June 30, 2018 | ||||||||||||
(In thousands) | Before Tax | Tax Effect | Net of Tax | |||||||||
Balance at beginning of period | $ | (35,792 | ) | $ | 3,790 | $ | (32,002 | ) | ||||
Other comprehensive income (loss): | ||||||||||||
Unrealized holding gains (losses) on investments: | ||||||||||||
Unrealized holding losses arising during the period | (8,225 | ) | 1,325 | (6,900 | ) | |||||||
Less: Reclassification adjustment for gains included in net income (1) | (439 | ) | 93 | (346 | ) | |||||||
Net unrealized losses on investments | (8,664 | ) | 1,418 | (7,246 | ) | |||||||
Other comprehensive loss | (8,664 | ) | 1,418 | (7,246 | ) | |||||||
Balance at end of period | $ | (44,456 | ) | $ | 5,208 | $ | (39,248 | ) | ||||
Six Months Ended June 30, 2018 | ||||||||||||
(In thousands) | Before Tax | Tax Effect | Net of Tax | |||||||||
Balance at beginning of year | $ | (1,849 | ) | $ | (1,403 | ) | $ | (3,252 | ) | |||
Other comprehensive income (loss): | ||||||||||||
Unrealized holding gains (losses) on investments: | ||||||||||||
Unrealized holding losses arising during the period | (41,971 | ) | 6,445 | (35,526 | ) | |||||||
Less: Reclassification adjustment for gains included in net income (1) | (636 | ) | 166 | (470 | ) | |||||||
Net unrealized losses on investments | (42,607 | ) | 6,611 | (35,996 | ) | |||||||
Other comprehensive loss | (42,607 | ) | 6,611 | (35,996 | ) | |||||||
Balance at end of period | $ | (44,456 | ) | $ | 5,208 | $ | (39,248 | ) |
Three Months Ended June 30, 2017 | ||||||||||||
(In thousands) | Before Tax | Tax Effect | Net of Tax | |||||||||
Balance at beginning of period | $ | (7,525 | ) | $ | 120 | $ | (7,405 | ) | ||||
Other comprehensive income (loss): | ||||||||||||
Unrealized holding gains (losses) on investments: | ||||||||||||
Unrealized holding gains arising during the period | 12,663 | (3,833 | ) | 8,830 | ||||||||
Less: Reclassification adjustment for gains included in net income (1) | (544 | ) | 184 | (360 | ) | |||||||
Net unrealized gains on investments | 12,119 | (3,649 | ) | 8,470 | ||||||||
Other comprehensive income | 12,119 | (3,649 | ) | 8,470 | ||||||||
Balance at end of period | $ | 4,594 | $ | (3,529 | ) | $ | 1,065 | |||||
Six Months Ended June 30, 2017 | ||||||||||||
(In thousands) | Before Tax | Tax Effect | Net of Tax | |||||||||
Balance at beginning of year | $ | (14,436 | ) | $ | 2,181 | $ | (12,255 | ) | ||||
Other comprehensive income (loss): | ||||||||||||
Unrealized holding gains (losses) on investments: | ||||||||||||
Unrealized holding gains arising during the period | 20,229 | (6,122 | ) | 14,107 | ||||||||
Less: Reclassification adjustment for gains included in net income (1) | (1,199 | ) | 412 | (787 | ) | |||||||
Net unrealized gains on investments | 19,030 | (5,710 | ) | 13,320 | ||||||||
Other comprehensive income | 19,030 | (5,710 | ) | 13,320 | ||||||||
Balance at end of period | $ | 4,594 | $ | (3,529 | ) | $ | 1,065 |
(1) | Included in net realized investment gains on our condensed consolidated statements of comprehensive income. |
• | Level 1 — Quoted prices for identical instruments in active markets accessible at the measurement date. |
• | Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and valuations in which all significant inputs are observable in active markets. Inputs are observable for substantially the full term of the financial instrument. |
• | Level 3 — Valuations derived from one or more significant inputs that are unobservable. |
• | Investments available for sale — Investments available for sale are valued using quoted market prices in active markets, when available, and those investments are classified as Level 1 of the fair value hierarchy. Level 1 investments available for sale include investments such as U.S. Treasury securities and money market funds. Investments available for sale are classified as Level 2 of the fair value hierarchy if quoted market prices are not available and fair values are estimated using quoted prices of similar securities or recently executed transactions for the securities. U.S. agency securities, U.S. agency mortgage-backed securities, municipal debt securities, non-U.S. government securities, corporate debt securities, residential and commercial mortgage securities and asset-backed securities are classified as Level 2 investments. |
June 30, 2018 (In thousands) | Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Recurring fair value measurements | ||||||||||||||||
Financial Assets: | ||||||||||||||||
U.S. Treasury securities | $ | 246,204 | $ | — | $ | — | $ | 246,204 | ||||||||
U.S. agency securities | — | 32,755 | — | 32,755 | ||||||||||||
U.S. agency mortgage-backed securities | — | 493,004 | — | 493,004 | ||||||||||||
Municipal debt securities | — | 483,697 | — | 483,697 | ||||||||||||
Non-U.S. government securities | — | 24,703 | — | 24,703 | ||||||||||||
Corporate debt securities | — | 653,774 | — | 653,774 | ||||||||||||
Residential and commercial mortgage securities | — | 87,637 | — | 87,637 | ||||||||||||
Asset-backed securities | — | 257,205 | — | 257,205 | ||||||||||||
Money market funds | 277,034 | — | — | 277,034 | ||||||||||||
Total assets at fair value | $ | 523,238 | $ | 2,032,775 | $ | — | $ | 2,556,013 |
December 31, 2017 (In thousands) | Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Recurring fair value measurements | ||||||||||||||||
Financial Assets: | ||||||||||||||||
U.S. Treasury securities | $ | 227,805 | $ | — | $ | — | $ | 227,805 | ||||||||
U.S. agency securities | — | 33,114 | — | 33,114 | ||||||||||||
U.S. agency mortgage-backed securities | — | 456,037 | — | 456,037 | ||||||||||||
Municipal debt securities | — | 465,255 | — | 465,255 | ||||||||||||
Corporate debt securities | — | 611,728 | — | 611,728 | ||||||||||||
Residential and commercial mortgage securities | — | 79,407 | — | 79,407 | ||||||||||||
Asset-backed securities | — | 167,922 | — | 167,922 | ||||||||||||
Money market funds | 263,797 | — | — | 263,797 | ||||||||||||
Total assets at fair value | $ | 491,602 | $ | 1,813,463 | $ | — | $ | 2,305,065 |
(In thousands) | 2018 | 2017 | ||||||
Essent Guaranty | ||||||||
Statutory net income | $ | 182,784 | $ | 124,304 | ||||
Statutory surplus | 798,183 | 613,028 | ||||||
Contingency reserve liability | 792,447 | 572,647 | ||||||
Essent PA | ||||||||
Statutory net income | $ | 4,861 | $ | 5,461 | ||||
Statutory surplus | 47,495 | 44,190 | ||||||
Contingency reserve liability | 45,985 | 39,959 |
• | NIW, which is the aggregate principal amount of the new mortgages that are insured during a period. Many factors affect NIW, including, among others, the volume of low down payment home mortgage originations and the competition to provide credit enhancement on those mortgages; |
• | Cancellations of our insurance policies, which are impacted by payments on mortgages, home price appreciation, or refinancings, which in turn are affected by mortgage interest rates. Cancellations are also impacted by the levels of claim payments and rescissions; |
• | Premium rates, which represent the amount of the premium due as a percentage of IIF. Premium rates are based on the risk characteristics of the loans insured, the percentage of coverage on the loans, competition from other mortgage insurers and general industry conditions; and |
• | Premiums ceded or assumed under reinsurance arrangements. Prior to March 2018, we had not ceded any premiums under third-party reinsurance contracts. In March 2018, Essent Guaranty entered into a third-party reinsurance agreement. See Note 4 to our condensed consolidated financial statements. |
• | the overall state of the economy, which broadly affects the likelihood that borrowers may default on their loans and have the ability to cure such defaults; |
• | changes in housing values, which affect our ability to mitigate our losses through the sale of properties with loans in default as well as borrower willingness to continue to make mortgage payments when the value of the home is below or perceived to be below the mortgage balance; |
• | the product mix of IIF, with loans having higher risk characteristics generally resulting in higher defaults and claims; |
• | the size of loans insured, with higher average loan amounts tending to increase losses incurred; |
• | the loan-to-value ratio, with higher average loan-to-value ratios tending to increase losses incurred; |
• | the percentage of coverage on insured loans, with deeper average coverage tending to increase losses incurred; |
• | credit quality of borrowers, including higher debt-to-income ratios and lower FICO scores, which tend to increase incurred losses; |
• | the level and amount of reinsurance coverage maintained with third parties; |
• | the rate at which we rescind policies. Because of tighter underwriting standards generally in the mortgage lending industry and terms set forth in our master policy, we expect that our level of rescission activity will be lower than rescission activity seen in the mortgage insurance industry for vintages originated prior to the financial crisis; and |
• | the distribution of claims over the life of a book. The average age of our insurance portfolio is young with 73% of our IIF as of June 30, 2018 having been originated since January 1, 2016. As a result, based on historical industry performance, we expect the number of defaults and claims we experience, as well as our provision for losses and loss adjustment expenses, to increase as our portfolio seasons. See “— Mortgage Insurance Earnings and Cash Flow Cycle” below. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
IIF, beginning of period | $ | 115,250,949 | $ | 87,993,227 | $ | 110,461,950 | $ | 83,265,522 | ||||||||
NIW | 12,850,642 | 11,368,276 | 22,186,792 | 19,402,429 | ||||||||||||
Cancellations | (5,600,345 | ) | (3,867,113 | ) | (10,147,496 | ) | (7,173,561 | ) | ||||||||
IIF, end of period | $ | 122,501,246 | $ | 95,494,390 | $ | 122,501,246 | $ | 95,494,390 | ||||||||
Average IIF during the period | $ | 118,658,900 | $ | 91,477,761 | $ | 115,878,005 | $ | 88,552,878 | ||||||||
RIF, end of period | $ | 30,154,694 | $ | 23,665,045 | $ | 30,154,694 | $ | 23,665,045 |
($ in thousands) | $ | % | |||||
2018 (through June 30) | $ | 21,835,292 | 17.8 | % | |||
2017 | 40,026,987 | 32.7 | |||||
2016 | 27,835,544 | 22.7 | |||||
2015 | 15,117,741 | 12.3 | |||||
2014 | 9,291,291 | 7.6 | |||||
2013 and prior | 8,394,391 | 6.9 | |||||
$ | 122,501,246 | 100.0 | % |
Summary of Operations | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(In thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | ||||||||||||||||
Net premiums written | $ | 168,404 | $ | 134,063 | $ | 333,629 | $ | 253,360 | ||||||||
Increase in unearned premiums | (11,446 | ) | (7,500 | ) | (24,113 | ) | (9,146 | ) | ||||||||
Net premiums earned | 156,958 | 126,563 | 309,516 | 244,214 | ||||||||||||
Net investment income | 15,134 | 9,400 | 28,848 | 17,835 | ||||||||||||
Realized investment gains, net | 439 | 544 | 636 | 1,199 | ||||||||||||
Other income | 1,237 | 1,099 | 2,231 | 1,950 | ||||||||||||
Total revenues | 173,768 | 137,606 | 341,231 | 265,198 | ||||||||||||
Losses and expenses: | ||||||||||||||||
Provision for losses and LAE | 1,813 | 1,770 | 7,122 | 5,463 | ||||||||||||
Other underwriting and operating expenses | 36,428 | 35,686 | 74,552 | 72,018 | ||||||||||||
Interest expense | 2,618 | 1,189 | 5,068 | 1,905 | ||||||||||||
Total losses and expenses | 40,859 | 38,645 | 86,742 | 79,386 | ||||||||||||
Income before income taxes | 132,909 | 98,961 | 254,489 | 185,812 | ||||||||||||
Income tax expense | 21,154 | 26,843 | 31,665 | 47,096 | ||||||||||||
Net income | $ | 111,755 | $ | 72,118 | $ | 222,824 | $ | 138,716 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Fixed maturities | $ | 14,496 | $ | 9,963 | $ | 28,139 | $ | 18,982 | ||||||||
Short-term investments | 1,298 | 74 | 2,049 | 133 | ||||||||||||
Gross investment income | 15,794 | 10,037 | 30,188 | 19,115 | ||||||||||||
Investment expenses | (660 | ) | (637 | ) | (1,340 | ) | (1,280 | ) | ||||||||
Net investment income | $ | 15,134 | $ | 9,400 | $ | 28,848 | $ | 17,835 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Beginning default inventory | 4,442 | 1,777 | 4,783 | 1,757 | ||||||||
Plus: new defaults | 1,701 | 1,105 | 3,695 | 2,305 | ||||||||
Less: cures | (2,572 | ) | (1,063 | ) | (4,842 | ) | (2,177 | ) | ||||
Less: claims paid | (52 | ) | (43 | ) | (115 | ) | (108 | ) | ||||
Less: rescissions and denials, net | — | — | (2 | ) | (1 | ) | ||||||
Ending default inventory | 3,519 | 1,776 | 3,519 | 1,776 |
As of June 30, | ||||||||
2018 | 2017 | |||||||
Case reserves (in thousands) | $ | 45,773 | $ | 27,268 | ||||
Total reserves (in thousands) | $ | 50,016 | $ | 29,798 | ||||
Ending default inventory | 3,519 | 1,776 | ||||||
Average case reserve per default (in thousands) | $ | 13.0 | $ | 15.4 | ||||
Average total reserve per default (in thousands) | $ | 14.2 | $ | 16.8 | ||||
Default rate | 0.64 | % | 0.41 | % | ||||
Claims received included in ending default inventory | 33 | 50 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Reserve for losses and LAE at beginning of period | $ | 49,966 | $ | 29,468 | $ | 46,850 | $ | 28,142 | ||||||||
Add provision for losses and LAE occurring in: | ||||||||||||||||
Current period | 6,576 | 5,026 | 16,528 | 12,116 | ||||||||||||
Prior years | (4,763 | ) | (3,256 | ) | (9,406 | ) | (6,653 | ) | ||||||||
Incurred losses and LAE during the current period | 1,813 | 1,770 | 7,122 | 5,463 | ||||||||||||
Deduct payments for losses and LAE occurring in: | ||||||||||||||||
Current period | 211 | 96 | 211 | 97 | ||||||||||||
Prior years | 1,552 | 1,344 | 3,745 | 3,710 | ||||||||||||
Loss and LAE payments during the current period | 1,763 | 1,440 | 3,956 | 3,807 | ||||||||||||
Reserve for losses and LAE at end of period | $ | 50,016 | $ | 29,798 | $ | 50,016 | $ | 29,798 |
As of June 30, 2018 | ||||||||||||||||||||
($ 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: | ||||||||||||||||||||
Three payments or less | 1,543 | 44 | % | $ | 9,077 | 20 | % | $ | 84,685 | 11 | % | |||||||||
Four to eleven payments | 1,675 | 47 | 26,688 | 58 | 96,627 | 28 | ||||||||||||||
Twelve or more payments | 268 | 8 | 8,368 | 18 | 14,476 | 58 | ||||||||||||||
Pending claims | 33 | 1 | 1,640 | 4 | 1,946 | 84 | ||||||||||||||
Total case reserves | 3,519 | 100 | % | 45,773 | 100 | % | $ | 197,734 | 23 | |||||||||||
IBNR | 3,433 | |||||||||||||||||||
LAE and other | 810 | |||||||||||||||||||
Total reserves for losses and LAE | $ | 50,016 |
As of June 30, 2017 | ||||||||||||||||||||
($ 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: | ||||||||||||||||||||
Three payments or less | 898 | 50 | % | $ | 6,101 | 23 | % | $ | 49,210 | 12 | % | |||||||||
Four to eleven payments | 639 | 36 | 12,604 | 46 | 35,365 | 36 | ||||||||||||||
Twelve or more payments | 189 | 11 | 6,094 | 22 | 10,214 | 60 | ||||||||||||||
Pending claims | 50 | 3 | 2,469 | 9 | 2,842 | 87 | ||||||||||||||
Total case reserves | 1,776 | 100 | % | 27,268 | 100 | % | $ | 97,631 | 28 | |||||||||||
IBNR | 2,045 | |||||||||||||||||||
LAE and other | 485 | |||||||||||||||||||
Total reserves for losses and LAE | $ | 29,798 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
($ in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Number of claims paid | 52 | 43 | 115 | 108 | ||||||||||||
Amount of claims paid | $ | 1,676 | $ | 1,380 | $ | 3,819 | $ | 3,687 | ||||||||
Claim severity | 64 | % | 81 | % | 70 | % | 85 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||
($ in thousands) | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||
Compensation and benefits | $ | 22,285 | 61 | % | $ | 22,652 | 63 | % | $ | 45,850 | 62 | % | $ | 45,831 | 64 | % | ||||||||||||
Other | 14,143 | 39 | 13,034 | 37 | 28,702 | 38 | 26,187 | 36 | ||||||||||||||||||||
$ | 36,428 | 100 | % | $ | 35,686 | 100 | % | $ | 74,552 | 100 | % | $ | 72,018 | 100 | % | |||||||||||||
Number of employees at end of period | 392 | 391 |
• | Compensation and benefits in the three and six months ended June 30, 2018 was comparable to the three and six months ended June 30, 2017 as the number of employees at the end of each period was essentially unchanged. In the six months ended June 30, 2018, a decrease in stock compensation expense associated with the full vesting of grants issued in 2013 and 2014 was largely offset by an increase in payroll taxes associated with the vesting of these grants. Compensation and benefits includes salaries, wages and bonus, stock compensation expense, benefits and payroll taxes. |
• | Other expenses increased as a result of the continued expansion of our business. Other expenses include premium taxes, travel, marketing, hardware, software, rent, depreciation and amortization and other facilities expenses. |
• | 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. |
• | claim payments under our policies; |
• | interest payments and repayment of borrowings under our Credit Facility; and |
• | the other costs and operating expenses of our business. |
• | significant decline in the value of our investments; |
• | inability to sell investment assets to provide cash to fund operating needs; |
• | decline in expected revenues generated from operations; |
• | increase in expected claim payments related to our IIF; or |
• | increase in operating expenses. |
Six Months Ended June 30, | ||||||||
(In thousands) | 2018 | 2017 | ||||||
Net cash provided by operating activities | $ | 342,656 | $ | 144,403 | ||||
Net cash used in investing activities | (304,867 | ) | (209,460 | ) | ||||
Net cash (used in) provided by financing activities | (56,649 | ) | 65,196 | |||||
Net (decrease) increase in cash | $ | (18,860 | ) | $ | 139 |
Combined statutory capital: ($ in thousands) | |||
Policyholders’ surplus | $ | 846,113 | |
Contingency reserves | 838,432 | ||
Combined statutory capital | $ | 1,684,545 | |
Combined net risk in force | $ | 23,513,547 | |
Combined risk-to-capital ratio | 14.0:1 |
Asset Class | June 30, 2018 | December 31, 2017 | ||||||||||||
($ in thousands) | Fair Value | Percent | Fair Value | Percent | ||||||||||
U.S. Treasury securities | $ | 246,204 | 9.6 | % | $ | 227,805 | 9.9 | % | ||||||
U.S. agency securities | 32,755 | 1.3 | 33,114 | 1.4 | ||||||||||
U.S. agency mortgage-backed securities | 493,004 | 19.3 | 456,037 | 19.8 | ||||||||||
Municipal debt securities(1) | 483,697 | 18.9 | 465,255 | 20.2 | ||||||||||
Non-U.S. government securities | 24,703 | 1.0 | — | — | ||||||||||
Corporate debt securities(2) | 653,774 | 25.6 | 611,728 | 26.5 | ||||||||||
Residential and commercial mortgage securities | 87,637 | 3.4 | 79,407 | 3.5 | ||||||||||
Asset-backed securities | 257,205 | 10.1 | 167,922 | 7.3 | ||||||||||
Money market funds | 277,034 | 10.8 | 263,797 | 11.4 | ||||||||||
Total Investments | $ | 2,556,013 | 100.0 | % | $ | 2,305,065 | 100.0 | % |
June 30, | December 31, | |||||
(1) The following table summarizes municipal debt securities as of : | 2018 | 2017 | ||||
Special revenue bonds | 63.8 | % | 63.6 | % | ||
General obligation bonds | 30.9 | 30.7 | ||||
Certificate of participation bonds | 4.0 | 4.4 | ||||
Tax allocation bonds | 0.8 | 0.8 | ||||
Special tax bonds | 0.5 | 0.5 | ||||
Total | 100.0 | % | 100.0 | % |
June 30, | December 31, | |||||
(2) The following table summarizes corporate debt securities as of : | 2018 | 2017 | ||||
Financial | 40.9 | % | 45.9 | % | ||
Consumer, non-cyclical | 19.1 | 16.2 | ||||
Communications | 10.3 | 7.3 | ||||
Energy | 7.7 | 7.8 | ||||
Industrial | 5.7 | 6.3 | ||||
Consumer, cyclical | 5.4 | 5.3 | ||||
Utilities | 4.5 | 5.3 | ||||
Technology | 3.7 | 3.9 | ||||
Basic materials | 2.7 | 2.0 | ||||
Total | 100.0 | % | 100.0 | % |
Rating(1) | June 30, 2018 | December 31, 2017 | ||||||||||||
($ in thousands) | Fair Value | Percent | Fair Value | Percent | ||||||||||
Aaa | $ | 1,261,425 | 49.3 | % | $ | 1,160,200 | 50.3 | % | ||||||
Aa1 | 133,062 | 5.2 | 115,237 | 5.0 | ||||||||||
Aa2 | 155,552 | 6.1 | 123,551 | 5.4 | ||||||||||
Aa3 | 137,257 | 5.4 | 127,785 | 5.6 | ||||||||||
A1 | 225,656 | 8.8 | 205,369 | 8.9 | ||||||||||
A2 | 162,277 | 6.3 | 157,651 | 6.8 | ||||||||||
A3 | 147,648 | 5.8 | 148,246 | 6.4 | ||||||||||
Baa1 | 142,040 | 5.6 | 115,178 | 5.0 | ||||||||||
Baa2 | 117,464 | 4.6 | 87,869 | 3.8 | ||||||||||
Baa3 | 35,452 | 1.4 | 43,024 | 1.9 | ||||||||||
Below Baa3 | 38,180 | 1.5 | 20,955 | 0.9 | ||||||||||
Total Investments | $ | 2,556,013 | 100.0 | % | $ | 2,305,065 | 100.0 | % |
(1) | Based on ratings issued by Moody’s, if available. S&P or Fitch Ratings ("Fitch") rating utilized if Moody’s not available. |
Effective Duration | June 30, 2018 | December 31, 2017 | ||||||||||||
($ in thousands) | Fair Value | Percent | Fair Value | Percent | ||||||||||
< 1 Year | $ | 705,739 | 27.6 | % | $ | 628,958 | 27.3 | % | ||||||
1 to < 2 Years | 230,410 | 9.0 | 164,856 | 7.2 | ||||||||||
2 to < 3 Years | 234,463 | 9.2 | 280,177 | 12.2 | ||||||||||
3 to < 4 Years | 177,606 | 7.0 | 263,799 | 11.4 | ||||||||||
4 to < 5 Years | 361,508 | 14.1 | 263,273 | 11.4 | ||||||||||
5 or more Years | 846,287 | 33.1 | 704,002 | 30.5 | ||||||||||
Total Investments | $ | 2,556,013 | 100.0 | % | $ | 2,305,065 | 100.0 | % |
June 30, 2018 | ||||||||||||||||
Rank ($ in thousands) | Security | Fair Value | Amortized Cost | Unrealized Gain (Loss)(1) | Credit Rating(2) | |||||||||||
1 | U.S. Treasury 0.000% 7/12/2018 | $ | 49,977 | $ | 49,974 | $ | 3 | Aaa | ||||||||
2 | U.S. Treasury 5.250% 11/15/2028 | 28,073 | 29,721 | (1,648 | ) | Aaa | ||||||||||
3 | U.S. Treasury 1.500% 8/15/2026 | 18,508 | 20,407 | (1,899 | ) | Aaa | ||||||||||
4 | Freddie Mac 4.000% 7/1/2037 | 11,386 | 11,673 | (287 | ) | Aaa | ||||||||||
5 | U.S. Treasury 2.000% 1/15/2021 | 11,331 | 11,430 | (99 | ) | Aaa | ||||||||||
6 | Fannie Mae 1.500% 6/22/2020 | 11,070 | 11,306 | (236 | ) | Aaa | ||||||||||
7 | Freddie Mac 2.500% 10/1/2030 | 9,729 | 10,226 | (497 | ) | Aaa | ||||||||||
8 | Ginnie Mae 4.000% 7/20/2045 | 9,709 | 10,231 | (522 | ) | Aaa | ||||||||||
9 | U.S. Treasury 2.250% 11/15/2025 | 9,654 | 10,056 | (402 | ) | Aaa | ||||||||||
10 | BP Capital Markets PLC 2.112% 9/16/2021 | 9,488 | 9,721 | (233 | ) | A1 | ||||||||||
Total | $ | 168,925 | $ | 174,745 | $ | (5,820 | ) | |||||||||
Percent of Investment Portfolio | 6.6 | % |
(1) | As of June 30, 2018, for securities in unrealized loss positions, management believes decline in fair values is principally associated with the changes in the interest rate environment subsequent to their purchase. Also, see Note 3 to our condensed consolidated financial statements, which summarizes the aggregate amount of gross unrealized losses by asset class in which the fair value of investments has been less than cost for less than 12 months and for 12 months or more. |
(2) | Based on ratings issued by Moody’s, if available. S&P or Fitch rating utilized if Moody’s not available. |
Rank | December 31, 2017 | |||||
($ in thousands) | Security | Fair Value | ||||
1 | U.S. Treasury 5.250% 11/15/2028 | $ | 29,358 | |||
2 | U.S. Treasury 1.500% 8/15/2026 | 19,067 | ||||
3 | U.S. Treasury 0.000% 1/4/2018 | 14,999 | ||||
4 | Freddie Mac 4.000% 7/1/2037 | 12,639 | ||||
5 | Fannie Mae 1.500% 6/22/2020 | 11,165 | ||||
6 | Ginnie Mae 4.000% 7/20/2045 | 10,964 | ||||
7 | Freddie Mac 2.500% 10/1/2030 | 10,877 | ||||
8 | Ginnie Mae 4.000% 8/20/2045 | 10,666 | ||||
9 | Freddie Mac 3.000% 9/1/2046 | 10,173 | ||||
10 | U.S. Treasury 2.250% 11/15/2025 | 9,949 | ||||
Total | $ | 139,857 | ||||
Percent of Investment Portfolio | 6.1 | % |
($ in thousands) | Fair Value | Amortized Cost | Credit Rating (1), (2) | |||||||
Texas | ||||||||||
State of Texas | $ | 8,784 | $ | 8,859 | Baa1 | |||||
The Texas A&M University System | 5,958 | 6,150 | Aaa | |||||||
City of Houston | 3,310 | 3,278 | Aa3 | |||||||
University of Houston System | 3,250 | 3,300 | Aa2 | |||||||
Dallas/Fort Worth International Airport | 2,863 | 2,715 | A1 | |||||||
La Joya Independent School District | 2,414 | 2,407 | Aaa | |||||||
City of El Paso | 2,400 | 2,404 | Aa2 | |||||||
City of Austin | 2,277 | 2,191 | Aa3 | |||||||
Harris County Cultural Education | 2,005 | 2,000 | A1 | |||||||
North Texas Municipal Water District | 1,948 | 2,031 | Aaa | |||||||
Carrollton-Farmers Branch Independent School District | 1,893 | 1,917 | Aaa | |||||||
City of Dallas | 1,739 | 1,712 | Aa1 | |||||||
Alamo Community College District | 1,589 | 1,589 | Aaa | |||||||
Tarrant Regional Water District | 1,507 | 1,503 | Aaa | |||||||
Fort Worth TX W&S Revenue | 1,506 | 1,541 | Aa1 | |||||||
City of College Station | 1,390 | 1,425 | Aa1 | |||||||
City of Garland | 1,381 | 1,404 | Aa1 | |||||||
Bryan Independent School District | 1,264 | 1,320 | Aaa | |||||||
City of San Antonio | 1,251 | 1,215 | A1 | |||||||
Spring Independent School District | 1,182 | 1,231 | Aaa | |||||||
City of Corpus Christi | 1,127 | 1,103 | A1 | |||||||
Harris County Toll Road Authority | 1,075 | 1,080 | Aa2 | |||||||
Pharr-San Juan-Alamo Independent School District | 1,053 | 1,075 | Aaa | |||||||
Port Arthur Independent School District | 972 | 986 | Aaa | |||||||
Harlandale Independent School District | 870 | 871 | Aaa | |||||||
San Jacinto Community College District | 850 | 842 | Aa3 | |||||||
County of Fort Bend | 815 | 827 | Aa1 | |||||||
Austin-Bergstrom Landhost Enterprises, Inc. | 598 | 605 | A3 | |||||||
$ | 57,271 | $ | 57,581 |
($ in thousands) | Fair Value | Amortized Cost | Credit Rating (1), (2) | |||||||
New York | ||||||||||
City of New York | $ | 7,824 | $ | 7,827 | Aa2 | |||||
The Dormitory Authority of the State of New York | 7,723 | 7,769 | Aa2 | |||||||
The Port Authority of New York and New Jersey | 7,660 | 7,635 | Aa3 | |||||||
Metropolitan Transportation Authority | 7,121 | 7,101 | A1 | |||||||
New York State Urban Development Corporation | 5,909 | 5,923 | Aa1 | |||||||
New York City Transitional Finance Authority | 3,522 | 3,509 | Aa1 | |||||||
TSASC, Inc. | 2,323 | 2,236 | A2 | |||||||
County of Nassau | 2,063 | 2,063 | A2 | |||||||
Public Service Enterprise Group, Inc. | 1,790 | 1,818 | A3 | |||||||
County of Albany | 1,787 | 1,787 | Aa3 | |||||||
Town of Oyster Bay | 1,101 | 1,080 | Aa2 | |||||||
Syracuse Industrial Development Agency | 333 | 345 | Baa1 | |||||||
$ | 49,156 | $ | 49,093 |
(1) | Certain of the above securities may include financial guaranty insurance or state enhancements. The above ratings include the effect of these credit enhancements, if applicable. |
(2) | Based on ratings issued by Moody’s, if available. S&P or Fitch rating utilized if Moody’s not available. |
• | Changes to the level of interest rates. Increasing interest rates may reduce the value of certain fixed-rate bonds held in the investment portfolio. Higher rates may cause variable-rate assets to generate additional income. Decreasing rates will have the reverse impact. Significant changes in interest rates can also affect persistency and claim rates which may in turn require that the investment portfolio be restructured to better align it with future liabilities and claim payments. Such restructuring may cause investments to be liquidated when market conditions are adverse. |
• | Changes to the term structure of interest rates. Rising or falling rates typically change by different amounts along the yield curve. These changes may have unforeseen impacts on the value of certain assets. |
• | Market volatility/changes in the real or perceived credit quality of investments. Deterioration in the quality of investments, identified through changes to our own or third-party (e.g., rating agency) assessments, will reduce the value and potentially the liquidity of investments. |
• | Concentration Risk. If the investment portfolio is highly concentrated in one asset, or in multiple assets whose values are highly correlated, the value of the total portfolio may be greatly affected by the change in value of just one asset or a group of highly correlated assets. |
• | Prepayment Risk. Bonds may have call provisions that permit debtors to repay prior to maturity when it is to their advantage. This typically occurs when rates fall below the interest rate of the debt. |
Exhibit No. | Description | |
Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
101† | The following financial information from this Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Condensed Consolidated Balance Sheets (Unaudited); (ii) the Condensed Consolidated Statements of Comprehensive Income (Unaudited); (iii) the Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited); (iv) the Condensed Consolidated Statements of Cash Flows (Unaudited); and (v) the Notes to Condensed Consolidated Financial Statements (Unaudited), tagged as blocks of text. |
† | Pursuant to applicable securities laws and regulations, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under those sections. |
ESSENT GROUP LTD. | ||
Date: August 6, 2018 | /s/ MARK A. CASALE | |
Mark A. Casale | ||
President, Chief Executive Officer and Chairman (Principal Executive Officer) | ||
Date: August 6, 2018 | /s/ LAWRENCE E. MCALEE | |
Lawrence E. McAlee | ||
Senior Vice President and Chief Financial Officer (Principal Financial Officer) | ||
Date: August 6, 2018 | /s/ DAVID B. WEINSTOCK | |
David B. Weinstock | ||
Vice President and Chief Accounting Officer (Principal Accounting Officer) |
/s/ MARK A. CASALE | ||
Mark A. Casale | ||
President, Chief Executive Officer and Chairman | ||
(Principal Executive Officer) |
/s/ LAWRENCE E. MCALEE | ||
Lawrence E. McAlee | ||
Senior Vice President and Chief Financial Officer | ||
(Principal Financial Officer) |
/s/ MARK A. CASALE | |
Mark A. Casale | |
President, Chief Executive Officer and Chairman | |
/s/ LAWRENCE E. MCALEE | |
Lawrence E. McAlee | |
Senior Vice President and Chief Financial Officer |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Aug. 01, 2018 |
|
Document and Entity Information | ||
Entity Registrant Name | Essent Group Ltd. | |
Entity Central Index Key | 0001448893 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 98,127,712 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) shares in Thousands, $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Investment available for sale | ||
Amortized cost | $ 2,600,469 | $ 2,306,914 |
Property and equipment | ||
Accumulated depreciation | 52,200 | 50,466 |
Credit Facility Borrowings | ||
Unamortized deferred costs | $ 1,659 | $ 1,409 |
Stockholders’ Equity | ||
Common Shares, par value (in dollars per share) | $ 0.015 | $ 0.015 |
Common Shares, authorized (in shares) | 233,333 | 233,333 |
Common Shares, issued (in shares) | 98,128 | 98,434 |
Common Shares, outstanding (in shares) | 98,128 | 98,434 |
Fixed maturities | ||
Investment available for sale | ||
Amortized cost | $ 2,273,485 | $ 1,994,200 |
Short-term investments | ||
Investment available for sale | ||
Amortized cost | $ 326,984 | $ 312,714 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Revenues: | ||||
Net premiums written | $ 168,404 | $ 134,063 | $ 333,629 | $ 253,360 |
Increase in unearned premiums | (11,446) | (7,500) | (24,113) | (9,146) |
Net premiums earned | 156,958 | 126,563 | 309,516 | 244,214 |
Net investment income | 15,134 | 9,400 | 28,848 | 17,835 |
Realized investment gains, net | 439 | 544 | 636 | 1,199 |
Other income | 1,237 | 1,099 | 2,231 | 1,950 |
Total revenues | 173,768 | 137,606 | 341,231 | 265,198 |
Losses and expenses: | ||||
Provision for losses and LAE | 1,813 | 1,770 | 7,122 | 5,463 |
Other underwriting and operating expenses | 36,428 | 35,686 | 74,552 | 72,018 |
Interest expense | 2,618 | 1,189 | 5,068 | 1,905 |
Total losses and expenses | 40,859 | 38,645 | 86,742 | 79,386 |
Income before income taxes | 132,909 | 98,961 | 254,489 | 185,812 |
Income tax expense | 21,154 | 26,843 | 31,665 | 47,096 |
Net income | $ 111,755 | $ 72,118 | $ 222,824 | $ 138,716 |
Earnings per share: | ||||
Basic (in dollars per share) | $ 1.15 | $ 0.79 | $ 2.29 | $ 1.52 |
Diluted (in dollars per share) | $ 1.14 | $ 0.77 | $ 2.28 | $ 1.49 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 97,426 | 91,381 | 97,362 | 91,320 |
Diluted (in shares) | 97,866 | 93,162 | 97,908 | 93,093 |
Net income | $ 111,755 | $ 72,118 | $ 222,824 | $ 138,716 |
Other comprehensive income (loss): | ||||
Change in unrealized (depreciation) appreciation of investments, net of tax (benefit) expense of ($1,418) and $3,649 in the three months ended June 30, 2018 and 2017 and ($6,611) and $5,710 in the six months ended June 30, 2018 and 2017 | (7,246) | 8,470 | (35,996) | 13,320 |
Total other comprehensive (loss) income | (7,246) | 8,470 | (35,996) | 13,320 |
Comprehensive income | $ 104,509 | $ 80,588 | $ 186,828 | $ 152,036 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||||
Change in unrealized appreciation (depreciation) of investments, tax expense (benefit) | $ (1,418) | $ 3,649 | $ (6,611) | $ 5,710 |
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parenthetical) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2017
USD ($)
| |
Public Offering | |
Common stock, issuance cost | $ 1,802 |
Nature of Operations and Basis of Presentation |
6 Months Ended |
---|---|
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations and Basis of Presentation | Nature of Operations and Basis of Presentation Essent Group Ltd. (“Essent Group”) is a Bermuda-based holding company, which, through its wholly-owned subsidiaries, offers private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Mortgage insurance facilitates the sale of low down payment (generally less than 20%) mortgage loans into the secondary mortgage market, primarily to two government-sponsored enterprises (“GSEs”), Fannie Mae and Freddie Mac. The primary mortgage insurance operations are conducted through Essent Guaranty, Inc. (“Essent Guaranty”), a wholly-owned subsidiary approved as a qualified mortgage insurer by the GSEs and is licensed to write mortgage insurance in all 50 states and the District of Columbia. A significant portion of our premium revenue relates to master policies with certain lending institutions. For the six months ended June 30, 2018 one lender represented 10% of our total revenue. The loss of this customer could have a significant impact on our revenues and results of operations. Essent Guaranty reinsures 25% of GSE-eligible new insurance written to Essent Reinsurance Ltd. (“Essent Re”), an affiliated Bermuda domiciled Class 3A Insurer licensed pursuant to Section 4 of the Bermuda Insurance Act 1978 that provides insurance and reinsurance coverage of mortgage credit risk. Essent Re also provides insurance and reinsurance to Freddie Mac and Fannie Mae. In 2016, Essent Re formed Essent Agency (Bermuda) Ltd., a wholly-owned subsidiary, which provides underwriting services to third-party reinsurers. In accordance with certain state law requirements, Essent Guaranty also reinsures that portion of the risk that is in excess of 25% of the mortgage balance with respect to any loan insured, after consideration of other reinsurance, to Essent Guaranty of PA, Inc. (“Essent PA”), an affiliate. In addition to offering mortgage insurance, we provide contract underwriting services on a limited basis through CUW Solutions, LLC ("CUW Solutions"), a Delaware limited liability company, that provides, among other things, mortgage contract underwriting services to lenders and mortgage insurance underwriting services to affiliates. We have prepared the condensed consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). We have condensed or omitted certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) pursuant to such rules and regulations. In the opinion of management, the statements include all adjustments (which include normal recurring adjustments) required for a fair statement of financial position, results of operations and cash flows for the interim periods presented. These statements should be read in conjunction with the consolidated financial statements and notes thereto, including Note 1 and Note 2 to the consolidated financial statements, included in our Annual Report on Form 10-K for the year ended December 31, 2017, which discloses the principles of consolidation and a summary of significant accounting policies. The results of operations for the interim periods are not necessarily indicative of the results for the full year. We evaluated the need to recognize or disclose events that occurred subsequent to June 30, 2018 prior to the issuance of these condensed consolidated financial statements. Within the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2017, the financing activities were revised to reflect the repayment of credit facility borrowings with term loan proceeds of $125 million as a non-cash transaction to be consistent with the December 31, 2017 presentation. The term loan proceeds were directly applied at closing to pay down credit facility borrowings. We will similarly revise our September 30, 2017 presentation by this same amount when we issue our September 30, 2018 Form 10-Q. This revision did not impact net cash provided by financing activities or the net increase in cash or any other financial statements or disclosures for the six months ended June 30, 2017 or for the nine months ended September 30, 2017. |
Recently Issued Accounting Standards |
6 Months Ended |
---|---|
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update is intended to provide a consistent approach in recognizing revenue. In accordance with the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In December 2016, the FASB clarified that all contracts that are within the scope of Topic 944, Financial Services-Insurance, are excluded from the scope of ASU 2014-09. The Company adopted this ASU effective January 1, 2018. The adoption of this ASU did not have a material effect on the Company's consolidated operating results or financial position. In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This update requires certain equity investments (except those accounted for under the equity method of accounting or result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. An entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. A qualitative assessment for impairment is required for equity investments without readily determinable fair values. This update also requires public entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. In addition, an entity is required to evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale investment securities in combination with the entity’s other deferred tax assets. The Company adopted this ASU effective January 1, 2018. The adoption of this ASU did not have a material effect on the Company's consolidated operating results or financial position. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosures about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2018. The Company expects a gross-up of its consolidated balance sheets as a result of recognizing lease liabilities and right of use assets. The Company is still evaluating the impact the adoption of this ASU will have on the consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326). This update is intended to provide financial statement users with more information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new guidance requires financial assets measured at amortized cost to be presented at the net amount expected to be collected through the use of an allowance for credit losses. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance rather than as a write-down of the amortized cost of the securities. The provisions of this update are effective for annual and interim periods beginning after December 15, 2019. While the Company is still evaluating this ASU, we do not expect it to impact our accounting for insurance losses and loss adjustment expenses ("LAE") as these items are not within the scope of this ASU. |
Investments Available for Sale |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments Available for Sale | Investments Available for Sale Investments available for sale consist of the following:
The amortized cost and fair value of investments available for sale at June 30, 2018, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most U.S. agency mortgage-backed securities, residential and commercial mortgage securities and asset-backed securities provide for periodic payments throughout their lives, they are listed below in separate categories.
Gross gains and losses realized on the sale of investments available for sale were as follows:
The fair value of investments in an unrealized loss position and the related unrealized losses were as follows:
The gross unrealized losses on these investment securities are principally associated with the changes in market interest rates and credit spreads subsequent to their purchase. Each issuer is current on its scheduled interest and principal payments. We assess our intent to sell these securities and whether we will be required to sell these securities before the recovery of their amortized cost basis when determining whether an impairment is other-than-temporary. There were no other-than-temporary impairments in each of the three and six months ended June 30, 2018 and 2017. The fair value of investments deposited with insurance regulatory authorities to meet statutory requirements was $8.6 million as of June 30, 2018 and December 31, 2017. In connection with its insurance and reinsurance activities, Essent Re is required to maintain assets in trusts for the benefit of its contractual counterparties. The fair value of the investments on deposit in these trusts was $729.0 million at June 30, 2018 and $615.8 million at December 31, 2017. In connection with an excess-of-loss reinsurance agreement (see Note 4), Essent Guaranty is required to maintain assets on deposit for the benefit of the reinsurer. The fair value of the assets on deposit was $3.3 million at June 30, 2018. Net investment income consists of:
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Reinsurance |
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Reinsurance Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance | Reinsurance In the ordinary course of business, our insurance subsidiaries may use reinsurance to provide protection against adverse loss experience and to expand our capital sources. Reinsurance recoverables are recorded as assets, predicated on a reinsurer's ability to meet their obligations under the reinsurance agreements. If the reinsurers are unable to satisfy their obligations under the agreements, our insurance subsidiaries would be liable for such defaulted amounts. On March 22, 2018, Essent Guaranty entered into a fully collateralized reinsurance agreement with Radnor Re 2018-1 Ltd. ("Radnor Re"), an unaffiliated special purpose insurer domiciled in Bermuda, that provides for up to $424.4 million of aggregate excess-of-loss reinsurance coverage at inception for new defaults on a portfolio of mortgage insurance policies issued between January 1, 2017 and December 31, 2017. For the reinsurance coverage period, Essent Guaranty and its affiliates will retain the first layer of $224.7 million of aggregate losses, and Radnor Re will then provide second layer coverage up to the outstanding reinsurance coverage amount. Essent Guaranty and its affiliates retain losses in excess of the outstanding reinsurance coverage amount. The reinsurance premium due to Radnor Re is calculated by multiplying the outstanding reinsurance coverage amount at the beginning of a period by a coupon rate, which is the sum of one-month LIBOR plus a risk margin, and then subtracting actual investment income collected on the assets in the reinsurance trust during that period. The aggregate excess of loss reinsurance coverage decreases over a ten-year period as the underlying covered mortgages amortize. Essent Guaranty has rights to terminate the reinsurance agreement, which includes an option to terminate after five years from issuance. If the reinsurance agreement is not terminated after five years from issuance, the risk margin component of the reinsurance premium payable to Radnor Re increases by 50%. Radnor Re financed the coverage by issuing mortgage insurance-linked notes in an aggregate amount of $424.4 million to unaffiliated investors. The notes have ten-year legal maturities and are non-recourse to any assets of Essent Guaranty or its affiliates. The proceeds of the notes were deposited into a reinsurance trust for the benefit of Essent Guaranty that will be the source of reinsurance claim payments to Essent Guaranty and principal repayments on the mortgage insurance-linked notes. The effect of reinsurance on net premiums written and earned is as follows:
The amount of monthly reinsurance premium ceded will fluctuate due to changes in one-month LIBOR and changes in money market rates that affect investment income collected on the assets in the reinsurance trust. As the reinsurance premium will vary based on changes in these rates, we concluded that the reinsurance agreement contains an embedded derivative that will be accounted for separately like a freestanding derivative. The fair value of this derivative at June 30, 2018 and the change in its fair value from inception of the reinsurance agreement to June 30, 2018 was not material. In connection with entering the reinsurance agreement with Radnor Re, we concluded that the risk transfer requirements for reinsurance accounting were met as Radnor Re is assuming significant insurance risk and a reasonable possibility of a significant loss. In addition, we assessed whether Radnor Re was a variable interest entity ("VIE") and the appropriate accounting for Radnor Re if it was a VIE. A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not substantively participate in the gains and losses of the entity. A VIE is consolidated by its primary beneficiary. The primary beneficiary is the entity that has both (1) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the breadth of the decision-making ability and ability to influence activities that significantly affect the economic performance of the VIE. We concluded that Radnor Re is a VIE. However, given that Essent Guaranty (1) does not have the unilateral power to direct the activities that most significantly affect Radnor Re’s economic performance and (2) does not have the obligation to absorb losses or the right to receive benefits that could be potentially significant to Radnor Re, Radnor Re is not consolidated in these financial statements. The following table presents total assets of Radnor Re as well as our maximum exposure to loss associated with Radnor Re, representing the estimated net present value of investment earnings on the assets in the reinsurance trust, each as of June 30, 2018:
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Reserve for Losses and Loss Adjustment Expenses |
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Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserve for Losses and Loss Adjustment Expenses | Reserve for Losses and Loss Adjustment Expenses The following table provides a reconciliation of the beginning and ending reserve balances for losses and loss adjustment expenses (“LAE”) for the six months ended June 30:
For the six months ended June 30, 2018, $3.7 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There has been a $9.4 million favorable prior year development during the six months ended June 30, 2018. Reserves remaining as of June 30, 2018 for prior years are $33.7 million as a result of re-estimation of unpaid losses and loss adjustment expenses. For the six months ended June 30, 2017, $3.7 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There was a $6.7 million favorable prior year development during the six months ended June 30, 2017. Reserves remaining as of June 30, 2017 for prior years were $17.8 million as a result of re-estimation of unpaid losses and loss adjustment expenses. In both periods, the favorable prior years' loss development was the result of a re-estimation of amounts ultimately to be paid on prior year defaults in the default inventory, including the impact of previously identified defaults that cured. Original estimates are increased or decreased as additional information becomes known regarding individual claims. During the third quarter of 2017, certain regions of the U.S. experienced hurricanes which have impacted our insured portfolio’s performance. Specifically, on August 26, 2017, Hurricane Harvey made landfall in southeastern Texas and on September 10, 2017, Hurricane Irma made landfall in southern Florida and caused property damage in certain counties. Loans in default identified as hurricane-related defaults totaled 2,288 as of December 31, 2017. During the first half of 2018, the number of hurricane-related defaults declined to 801 as of June 30, 2018 primarily due to hurricane-related loans in default that cured. Based on prior industry experience, we expect the ultimate number of hurricane-related defaults that result in claims will be less than the default-to-claim experience of non-hurricane-related defaults. In addition, under our master policy, our exposure may be limited on hurricane-related claims. For example, we are permitted to exclude a claim entirely where damage to the property underlying a mortgage was the proximate cause of the default and adjust a claim where the property underlying a mortgage in default is subject to unrestored physical damage. Accordingly, when establishing our loss reserves as of June 30, 2018 and December 31, 2017, we applied a lower estimated claim rate to the hurricane-related defaults than the claim rate we apply to other notices in our default inventory. The reserve for losses and LAE on hurricane-related defaults was $11.1 million at June 30, 2018 and December 31, 2017. The impact on our reserves in future periods will be dependent upon the performance of the hurricane-related defaults and our expectations for the amount of ultimate losses on these delinquencies. |
Debt Obligations |
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Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Debt Obligations | Debt Obligations Credit Facility Essent Group and its subsidiaries, Essent Irish Intermediate Holdings Limited and Essent US Holdings, Inc. (collectively, the "Borrowers"), are parties to a secured credit facility (the “Credit Facility”) which provides for a revolving credit facility, term loans and an uncommitted line that may be exercised at the Borrowers’ option so long as the Borrowers receive commitments from the lenders. Borrowings under the Credit Facility may be used for working capital and general corporate purposes, including, without limitation, capital contributions to Essent’s insurance and reinsurance subsidiaries. Borrowings accrue interest at a floating rate tied to a standard short-term borrowing index, selected at the Company’s option, plus an applicable margin. A commitment fee is due quarterly on the average daily amount of the undrawn revolving commitment. The applicable margin and the commitment fee are based on the senior unsecured debt rating or long-term issuer rating of Essent Group to the extent available, or the insurer financial strength rating of Essent Guaranty. The current annual commitment fee rate is 0.35%. The obligations under the Credit Facility are secured by certain assets of the Borrowers, excluding the stock and assets of its insurance and reinsurance subsidiaries. The Credit Facility contains several covenants, including financial covenants relating to minimum net worth, capital and liquidity levels, maximum debt to capitalization level and Essent Guaranty's compliance with the PMIERs (see Note 12). The borrowings under the Credit Facility contractually mature on May 17, 2021. This description is not intended to be complete in all respects and is qualified in its entirety by the terms of the Credit Facility, including its covenants. On May 2, 2018, the Credit Facility was amended to increase the committed capacity by $125 million to $500 million and to increase the uncommitted line by $25 million to $100 million. The revolving component of the Credit Facility was increased from $250 million to $275 million, and the Borrowers issued $100 million of additional term loans, resulting in $225 million of term loans outstanding. The proceeds of $100 million of additional term loans were used to pay down borrowings outstanding under the revolving component of the Credit Facility. The interest rate, contractual maturity and other terms of the Credit Facility are otherwise unchanged from those described above. As of June 30, 2018, the Company was in compliance with the covenants and $225 million had been borrowed under the Credit Facility with a weighted average interest rate of 4.05%. As of December 31, 2017, $250 million had been borrowed with a weighted average interest rate of 3.49%. |
Commitments and Contingencies |
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Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Obligations under Guarantees Under the terms of CUW Solutions' contract underwriting agreements with lenders and subject to contractual limitations on liability, we agree to indemnify certain lenders against losses incurred in the event that we make an error in determining whether loans processed meet specified underwriting criteria, to the extent that such error materially restricts or impairs the salability of such loan, results in a material reduction in the value of such loan or results in the lender repurchasing the loan. The indemnification may be in the form of monetary or other remedies. We paid less than $0.1 million related to remedies for each of the six months ended June 30, 2018 and 2017. As of June 30, 2018, management believes any potential claims for indemnification related to contract underwriting services through June 30, 2018 are not material to our consolidated financial position or results of operations. In addition to the indemnifications discussed above, in the normal course of business, we enter into agreements or other relationships with third parties pursuant to which we may be obligated under specified circumstances to indemnify the counterparties with respect to certain matters. Our contractual indemnification obligations typically arise in the context of agreements entered into by us to, among other things, purchase or sell services, finance our business and business transactions, lease real property and license intellectual property. The agreements we enter into in the normal course of business generally require us to pay certain amounts to the other party associated with claims or losses if they result from our breach of the agreement, including the inaccuracy of representations or warranties. The agreements we enter into may also contain other indemnification provisions that obligate us to pay amounts upon the occurrence of certain events, such as the negligence or willful misconduct of our employees, infringement of third-party intellectual property rights or claims that performance of the agreement constitutes a violation of law. Generally, payment by us under an indemnification provision is conditioned upon the other party making a claim, and typically we can challenge the other party’s claims. Further, our indemnification obligations may be limited in time and/or amount, and in some instances, we may have recourse against third parties for certain payments made by us under an indemnification agreement or obligation. As of June 30, 2018, contingencies triggering material indemnification obligations or payments have not occurred historically and are not expected to occur. The nature of the indemnification provisions in the various types of agreements and relationships described above are believed to be low risk and pervasive, and we consider them to have a remote risk of loss or payment. We have not recorded any provisions on the condensed consolidated balance sheets related to indemnifications. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation The following table summarizes nonvested common share and nonvested common share unit activity for the six months ended June 30, 2018:
In February 2018, certain members of senior management were granted nonvested common shares under the Essent Group Ltd. 2013 Long-Term Incentive Plan ("2013 Plan") that were subject to time-based and performance-based vesting. The time-based share awards granted in February 2018 vest in three equal installments on March 1, 2019, 2020 and 2021. The performance-based share awards granted in February 2018 vest based upon our compounded annual book value per share growth percentage during a three-year performance period that commenced on January 1, 2018 and vest on March 1, 2021. The portion of these nonvested performance-based share awards that will be earned based upon the achievement of compounded annual book value per share growth is as follows:
In the event that the compounded annual book value per share growth falls between the performance levels shown above, the nonvested common shares earned will be determined on a straight-line basis between the respective levels shown. In connection with our incentive program covering bonus awards for performance year 2017, in February 2018, time-based share awards and share units were issued to certain employees that vest in three equal installments on March 1, 2019, 2020 and 2021. In May 2018, time-based share units were granted to non-employee directors that vest one year from the date of grant. The total fair value on the vesting date of nonvested shares or share units that vested was $74.9 million and $21.1 million for the six months ended June 30, 2018 and 2017, respectively. As of June 30, 2018, there was $25.1 million of total unrecognized compensation expense related to nonvested shares or share units outstanding at June 30, 2018 and we expect to recognize the expense over a weighted average period of 2.1 years. Employees have the option to tender shares to Essent Group to pay the minimum employee statutory withholding taxes associated with shares upon vesting. Common shares tendered by employees to pay employee withholding taxes totaled 711,729 in the six months ended June 30, 2018. The tendered shares were recorded at cost and included in treasury stock. All treasury stock has been cancelled as of June 30, 2018. Compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares was as follows:
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Earnings per Share (EPS) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share (EPS) | Earnings per Share (EPS) The following table reconciles the net income and the weighted average common shares outstanding used in the computations of basic and diluted earnings per common share:
There were 318,556 and 16,497 antidilutive shares for the three months ended June 30, 2018 and 2017, respectively and 242,860 and 89,309 antidilutive shares for the six months ended June 30, 2018 and 2017, respectively. The nonvested performance-based share awards are considered contingently issuable for purposes of the EPS calculation. Based on the compounded annual book value per share growth as of June 30, 2018 and 2017, 100% of the dilutive performance-based share awards would be issuable under the terms of the arrangements at each date if June 30 was the end of the contingency period. |
Accumulated Other Comprehensive Income (Loss) |
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss) The following table presents the rollforward of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2018 and 2017:
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments We carry certain of our financial instruments at fair value. We define fair value as the current amount that would be exchanged to sell an asset or transfer a liability, other than in a forced liquidation. Fair Value Hierarchy ASC No. 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. The level within the fair value hierarchy to measure the financial instrument shall be determined based on the lowest level input that is significant to the fair value measurement. The three levels of the fair value hierarchy are as follows:
Determination of Fair Value When available, we generally use quoted market prices to determine fair value and classify the financial instrument in Level 1. In cases where quoted market prices for similar financial instruments are available, we utilize these inputs for valuation techniques and classify the financial instrument in Level 2. In cases where quoted market prices are not available, fair values are based on estimates using discounted cash flows, present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rates and estimates of future cash flows and we classify the financial instrument in Level 3. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. We used the following methods and assumptions in estimating fair values of financial instruments:
We use independent pricing sources to determine the fair value of securities available for sale in Level 1 and Level 2 of the fair value hierarchy. We use one primary pricing service to provide individual security pricing based on observable market data and receive one quote per security. To ensure securities are appropriately classified in the fair value hierarchy, we review the pricing techniques and methodologies of the independent pricing service and believe that their policies adequately consider market activity, either based on specific transactions for the issue valued or based on modeling of securities with similar credit quality, duration, yield and structure that were recently traded. U.S. agency securities, U.S. agency mortgage-backed securities, municipal debt securities, non-U.S. government securities and corporate debt securities are valued by our primary vendor using recently executed transactions and proprietary models based on observable inputs, such as interest rate spreads, yield curves and credit risk. Residential and commercial mortgage securities and asset-backed securities are valued by our primary vendor using proprietary models based on observable inputs, such as interest rate spreads, prepayment speeds and credit risk. As part of our evaluation of investment prices provided by our primary pricing service, we obtained and reviewed their pricing methodologies which include a description of how each security type is evaluated and priced. We review the reasonableness of prices received from our primary pricing service by comparison to prices obtained from additional pricing sources. We have not made any adjustments to the prices obtained from our primary pricing service. Assets and Liabilities Measured at Fair Value All assets measured at fair value are categorized in the table below based upon the lowest level of significant input to the valuations. All fair value measurements at the reporting date were on a recurring basis.
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Statutory Accounting |
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Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Statutory Accounting | Statutory Accounting Our U.S. insurance subsidiaries prepare statutory-basis financial statements in accordance with the accounting practices prescribed or permitted by their respective state’s department of insurance, which is a comprehensive basis of accounting other than GAAP. We did not use any prescribed or permitted statutory accounting practices (individually or in the aggregate) that resulted in reported statutory surplus or capital that was significantly different from the statutory surplus or capital that would have been reported had National Association of Insurance Commissioners’ statutory accounting practices been followed. The following table presents Essent Guaranty’s and Essent PA’s statutory net income, statutory surplus and contingency reserve liability as of and for the six months ended June 30:
Net income determined in accordance with statutory accounting practices differs from GAAP. In 2018 and 2017, the more significant differences between net income determined under statutory accounting practices and GAAP for Essent Guaranty and Essent PA relate to policy acquisition costs and income taxes. Under statutory accounting practices, policy acquisition costs are expensed as incurred while such costs are capitalized and amortized to expense over the life of the policy under GAAP. We are eligible for a tax deduction, subject to certain limitations for amounts required by state law or regulation to be set aside in statutory contingency reserves when we purchase non-interest-bearing United States Mortgage Guaranty Tax and Loss Bonds (“T&L Bonds”) issued by the Treasury Department. Under statutory accounting practices, this deduction reduces the tax provision recorded by Essent Guaranty and Essent PA and, as a result, increases statutory net income and surplus as compared to net income and equity determined in accordance with GAAP. At June 30, 2018 and 2017, the statutory capital of our U.S. insurance subsidiaries, which is defined as the total of statutory surplus and contingency reserves, was in excess of the statutory capital necessary to satisfy their regulatory requirements. Effective December 31, 2015, Fannie Mae and Freddie Mac, at the direction of the Federal Housing Finance Agency, implemented new 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. The PMIERs include financial strength requirements incorporating a risk-based framework that require approved insurers to have a sufficient level of liquid assets from which to pay claims. The PMIERs also include enhanced operational performance expectations and define remedial actions that apply should an approved insurer fail to comply with these requirements. As of June 30, 2018 and December 31, 2017, Essent Guaranty, our GSE-approved mortgage insurance company, was in compliance with the PMIERs. Statement of Statutory Accounting Principles No. 58, Mortgage Guaranty Insurance, requires mortgage insurers to establish a special contingency reserve for statutory accounting purposes included in total liabilities equal to 50% of earned premium for that year. During the six months ended June 30, 2018, Essent Guaranty increased its contingency reserve by $113.7 million and Essent PA increased its contingency reserve by $2.8 million. This reserve is required to be maintained for a period of 120 months to protect against the effects of adverse economic cycles. After 120 months, the reserve is released to unassigned funds. In the event an insurer’s loss ratio in any calendar year exceeds 35%, however, the insurer may, after regulatory approval, release from its contingency reserves an amount equal to the excess portion of such losses. Essent Guaranty and Essent PA did not release any amounts from their contingency reserves in the six months ended June 30, 2018 or 2017. Under The Insurance Act 1978, as amended, and related regulations of Bermuda (the "Insurance Act"), Essent Re is required to annually prepare statutory financial statements and a statutory financial return in accordance with the financial reporting provisions of the Insurance Act, which is a basis other than GAAP. The Insurance Act also requires that Essent Re maintain minimum share capital of $1 million and must ensure that the value of its general business assets exceeds the amount of its general business liabilities by an amount greater than the prescribed minimum solvency margins and enhanced capital requirement pertaining to its general business. At December 31, 2017, all such requirements were met. Essent Re's statutory capital and surplus was $716.4 million as of June 30, 2018 and $662.6 million as of December 31, 2017. Essent Re's statutory net income was $65.0 million and $43.8 million for the six months ended June 30, 2018 and 2017, respectively. Statutory capital and surplus as of June 30, 2018 and December 31, 2017 and statutory net income in the six months ended June 30, 2018 and 2017 determined in accordance with statutory accounting practices were not significantly different than the amounts determined under GAAP. |
Recently Issued Accounting Standards (Policies) |
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Accounting Policies [Abstract] | |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update is intended to provide a consistent approach in recognizing revenue. In accordance with the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In December 2016, the FASB clarified that all contracts that are within the scope of Topic 944, Financial Services-Insurance, are excluded from the scope of ASU 2014-09. The Company adopted this ASU effective January 1, 2018. The adoption of this ASU did not have a material effect on the Company's consolidated operating results or financial position. In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This update requires certain equity investments (except those accounted for under the equity method of accounting or result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. An entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. A qualitative assessment for impairment is required for equity investments without readily determinable fair values. This update also requires public entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. In addition, an entity is required to evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale investment securities in combination with the entity’s other deferred tax assets. The Company adopted this ASU effective January 1, 2018. The adoption of this ASU did not have a material effect on the Company's consolidated operating results or financial position. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosures about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2018. The Company expects a gross-up of its consolidated balance sheets as a result of recognizing lease liabilities and right of use assets. The Company is still evaluating the impact the adoption of this ASU will have on the consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326). This update is intended to provide financial statement users with more information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new guidance requires financial assets measured at amortized cost to be presented at the net amount expected to be collected through the use of an allowance for credit losses. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance rather than as a write-down of the amortized cost of the securities. The provisions of this update are effective for annual and interim periods beginning after December 15, 2019. While the Company is still evaluating this ASU, we do not expect it to impact our accounting for insurance losses and loss adjustment expenses ("LAE") as these items are not within the scope of this ASU. |
Investments Available for Sale (Tables) |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of investments available for sale | Investments available for sale consist of the following:
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Schedule of amortized cost and fair value of investments available for sale by contractual maturity | The amortized cost and fair value of investments available for sale at June 30, 2018, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most U.S. agency mortgage-backed securities, residential and commercial mortgage securities and asset-backed securities provide for periodic payments throughout their lives, they are listed below in separate categories.
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Schedule of realized gross gains and losses on sale of investments available for sale | Gross gains and losses realized on the sale of investments available for sale were as follows:
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Schedule of fair value of investments in an unrealized loss position and related unrealized losses | The fair value of investments in an unrealized loss position and the related unrealized losses were as follows:
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Schedule of net investment income | Net investment income consists of:
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Reinsurance (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effect of reinsurance | The effect of reinsurance on net premiums written and earned is as follows:
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Schedule of VIE assets and maximum exposure | The following table presents total assets of Radnor Re as well as our maximum exposure to loss associated with Radnor Re, representing the estimated net present value of investment earnings on the assets in the reinsurance trust, each as of June 30, 2018:
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Reserve for Losses and Loss Adjustment Expenses (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation of beginning and ending reserve balances for losses and loss adjustment expenses (LAE) | The following table provides a reconciliation of the beginning and ending reserve balances for losses and loss adjustment expenses (“LAE”) for the six months ended June 30:
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Stock-Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of nonvested Common Share and nonvested Common Share unit activity | The following table summarizes nonvested common share and nonvested common share unit activity for the six months ended June 30, 2018:
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Schedule of portion of nonvested Common Shares earned based upon achievement of compounded annual book value per share growth | The portion of these nonvested performance-based share awards that will be earned based upon the achievement of compounded annual book value per share growth is as follows:
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Schedule of compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares | Compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares was as follows:
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Earnings per Share (EPS) (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation of net income and weighted average common shares outstanding used in computations of basic and diluted earnings per common share | The following table reconciles the net income and the weighted average common shares outstanding used in the computations of basic and diluted earnings per common share:
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Accumulated Other Comprehensive Income (Loss) (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rollforward of accumulated other comprehensive income (loss) | The following table presents the rollforward of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2018 and 2017:
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Fair Value of Financial Instruments (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assets and liabilities measured at fair vale on a recurring basis | All assets measured at fair value are categorized in the table below based upon the lowest level of significant input to the valuations. All fair value measurements at the reporting date were on a recurring basis.
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Statutory Accounting (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of statutory net income, statutory surplus and contingency reserve liability | The following table presents Essent Guaranty’s and Essent PA’s statutory net income, statutory surplus and contingency reserve liability as of and for the six months ended June 30:
|
Investments Available for Sale (Details 4) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Investments, Debt and Equity Securities [Abstract] | |||||
Realized gross gains | $ 518,000 | $ 749,000 | $ 1,309,000 | $ 1,430,000 | |
Realized gross losses | 79,000 | 205,000 | 673,000 | 231,000 | |
Fair Value | |||||
Less than 12 months | 1,419,428,000 | 1,419,428,000 | $ 835,553,000 | ||
12 months or more | 401,020,000 | 401,020,000 | 432,761,000 | ||
Total | 1,820,448,000 | 1,820,448,000 | 1,268,314,000 | ||
Gross Unrealized Losses | |||||
Less than 12 months | 28,217,000 | 28,217,000 | 5,177,000 | ||
12 months or more | 20,909,000 | 20,909,000 | 11,846,000 | ||
Total | 49,126,000 | 49,126,000 | 17,023,000 | ||
Other Information | |||||
Other-than-temporary impairments | 0 | $ 0 | 0 | $ 0 | |
Fair value of investments deposited with insurance regularoty authorities | 8,600,000 | 8,600,000 | 8,600,000 | ||
U.S. Treasury securities | |||||
Fair Value | |||||
Less than 12 months | 132,201,000 | 132,201,000 | 151,119,000 | ||
12 months or more | 61,975,000 | 61,975,000 | 69,454,000 | ||
Total | 194,176,000 | 194,176,000 | 220,573,000 | ||
Gross Unrealized Losses | |||||
Less than 12 months | 3,722,000 | 3,722,000 | 1,240,000 | ||
12 months or more | 4,522,000 | 4,522,000 | 2,862,000 | ||
Total | 8,244,000 | 8,244,000 | 4,102,000 | ||
Municipal debt securities | |||||
Fair Value | |||||
Less than 12 months | 252,919,000 | 252,919,000 | 124,171,000 | ||
12 months or more | 22,679,000 | 22,679,000 | 23,492,000 | ||
Total | 275,598,000 | 275,598,000 | 147,663,000 | ||
Gross Unrealized Losses | |||||
Less than 12 months | 4,180,000 | 4,180,000 | 817,000 | ||
12 months or more | 772,000 | 772,000 | 444,000 | ||
Total | 4,952,000 | 4,952,000 | 1,261,000 | ||
Non-U.S. government securities: | |||||
Fair Value | |||||
Less than 12 months | 20,516,000 | 20,516,000 | |||
12 months or more | 0 | 0 | |||
Total | 20,516,000 | 20,516,000 | |||
Gross Unrealized Losses | |||||
Less than 12 months | 293,000 | 293,000 | |||
12 months or more | 0 | 0 | |||
Total | 293,000 | 293,000 | |||
Corporate debt securities | |||||
Fair Value | |||||
Less than 12 months | 517,897,000 | 517,897,000 | 214,371,000 | ||
12 months or more | 88,857,000 | 88,857,000 | 94,261,000 | ||
Total | 606,754,000 | 606,754,000 | 308,632,000 | ||
Gross Unrealized Losses | |||||
Less than 12 months | 11,324,000 | 11,324,000 | 1,213,000 | ||
12 months or more | 3,497,000 | 3,497,000 | 1,824,000 | ||
Total | 14,821,000 | 14,821,000 | 3,037,000 | ||
Residential and commercial mortgage securities | |||||
Fair Value | |||||
Less than 12 months | 42,432,000 | 42,432,000 | 29,842,000 | ||
12 months or more | 5,881,000 | 5,881,000 | 5,988,000 | ||
Total | 48,313,000 | 48,313,000 | 35,830,000 | ||
Gross Unrealized Losses | |||||
Less than 12 months | 495,000 | 495,000 | 179,000 | ||
12 months or more | 355,000 | 355,000 | 179,000 | ||
Total | 850,000 | 850,000 | 358,000 | ||
Asset-backed securities | |||||
Fair Value | |||||
Less than 12 months | 169,257,000 | 169,257,000 | 58,798,000 | ||
12 months or more | 8,210,000 | 8,210,000 | 5,828,000 | ||
Total | 177,467,000 | 177,467,000 | 64,626,000 | ||
Gross Unrealized Losses | |||||
Less than 12 months | 873,000 | 873,000 | 133,000 | ||
12 months or more | 79,000 | 79,000 | 50,000 | ||
Total | 952,000 | 952,000 | 183,000 | ||
Money market funds | |||||
Fair Value | |||||
Less than 12 months | 59,489,000 | ||||
12 months or more | 0 | ||||
Total | 59,489,000 | ||||
Gross Unrealized Losses | |||||
Less than 12 months | 11,000 | ||||
12 months or more | 0 | ||||
Total | 11,000 | ||||
U.S. Agency | U.S. agency securities | |||||
Fair Value | |||||
Less than 12 months | 17,097,000 | 17,097,000 | 17,320,000 | ||
12 months or more | 15,658,000 | 15,658,000 | 15,794,000 | ||
Total | 32,755,000 | 32,755,000 | 33,114,000 | ||
Gross Unrealized Losses | |||||
Less than 12 months | 407,000 | 407,000 | 190,000 | ||
12 months or more | 495,000 | 495,000 | 365,000 | ||
Total | 902,000 | 902,000 | 555,000 | ||
U.S. Agency | U.S. agency mortgage-backed securities | |||||
Fair Value | |||||
Less than 12 months | 267,109,000 | 267,109,000 | 180,443,000 | ||
12 months or more | 197,760,000 | 197,760,000 | 217,944,000 | ||
Total | 464,869,000 | 464,869,000 | 398,387,000 | ||
Gross Unrealized Losses | |||||
Less than 12 months | 6,923,000 | 6,923,000 | 1,394,000 | ||
12 months or more | 11,189,000 | 11,189,000 | 6,122,000 | ||
Total | 18,112,000 | 18,112,000 | 7,516,000 | ||
Essent Re | |||||
Other Information | |||||
Fair value of the required investments on deposit in trusts | 729,000,000 | 729,000,000 | $ 615,800,000 | ||
Essent Guaranty | |||||
Other Information | |||||
Deposit assets | $ 3,300,000 | $ 3,300,000 |
Investments Available for Sale (Details 5) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Components of net investment income | ||||
Gross investment income | $ 15,794 | $ 10,037 | $ 30,188 | $ 19,115 |
Investment expenses | (660) | (637) | (1,340) | (1,280) |
Net investment income | 15,134 | 9,400 | 28,848 | 17,835 |
Fixed maturities | ||||
Components of net investment income | ||||
Gross investment income | 14,496 | 9,963 | 28,139 | 18,982 |
Short-term investments | ||||
Components of net investment income | ||||
Gross investment income | $ 1,298 | $ 74 | $ 2,049 | $ 133 |
Reinsurance (Details 2) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Net premiums written: | ||||
Direct | $ 171,989 | $ 134,063 | $ 337,508 | $ 253,360 |
Ceded | (3,585) | 0 | (3,879) | 0 |
Net premiums written | 168,404 | 134,063 | 333,629 | 253,360 |
Net premiums earned: | ||||
Direct | 160,543 | 126,563 | 313,395 | 244,214 |
Ceded | (3,585) | 0 | (3,879) | 0 |
Net premiums earned | $ 156,958 | $ 126,563 | $ 309,516 | $ 244,214 |
Reinsurance (Details 3) $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Variable Interest Entity [Line Items] | |
Total VIE Assets | $ 424,412 |
Maximum Exposure to Loss, On - Balance Sheet | 0 |
Maximum Exposure to Loss, Off - Balance Sheet | 18,226 |
Maximum Exposure to Loss | 18,226 |
Radnor Re | Variable Interest Entity, Not Primary Beneficiary | |
Variable Interest Entity [Line Items] | |
Total VIE Assets | 424,412 |
Maximum Exposure to Loss, On - Balance Sheet | 0 |
Maximum Exposure to Loss, Off - Balance Sheet | 18,226 |
Maximum Exposure to Loss | $ 18,226 |
Reserve for Losses and Loss Adjustment Expenses (Details 2) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] | ||
Incurred claims and claim adjustment expenses | $ 3,745 | $ 3,710 |
Favorable prior year development | 9,406 | 6,653 |
Reserve for losses and LAE, for prior years | $ 33,700 | $ 17,800 |
Reserve for Losses and Loss Adjustment Expenses (Details 3) $ in Thousands |
Jun. 30, 2018
USD ($)
loan
|
Dec. 31, 2017
USD ($)
loan
|
Jun. 30, 2017
USD ($)
|
Dec. 31, 2016
USD ($)
|
---|---|---|---|---|
Liability for Claims and Claims Adjustment Expense [Line Items] | ||||
Number of loans in hurricane impacted areas in default | loan | 801 | 2,288 | ||
Liability for claims and claims adjustment expense | $ 50,016 | $ 46,850 | $ 29,798 | $ 28,142 |
Hurricane | ||||
Liability for Claims and Claims Adjustment Expense [Line Items] | ||||
Liability for claims and claims adjustment expense | $ 11,100 | $ 11,100 |
Debt Obligations (Details) - USD ($) |
6 Months Ended | |||
---|---|---|---|---|
May 02, 2018 |
Jun. 30, 2018 |
May 01, 2018 |
Dec. 31, 2017 |
|
Credit Facility [Line Items] | ||||
Increase (decrease) in lines of credit | $ 125,000,000 | |||
Credit facility, maximum borrowing capacity | 500,000,000 | |||
Credit facility borrowings | $ 223,341,000 | $ 248,591,000 | ||
Amount outstanding, Gross | $ 225,000,000 | $ 250,000,000 | ||
Weighted average interest during period | 4.05% | 3.49% | ||
Revolving Credit Facility | ||||
Credit Facility [Line Items] | ||||
Credit facility, commitment fee rate | 0.35% | |||
Credit facility, maximum borrowing capacity | 275,000,000 | $ 250,000,000 | ||
Uncommited Line | ||||
Credit Facility [Line Items] | ||||
Increase (decrease) in lines of credit | 25,000,000 | |||
Credit facility, maximum borrowing capacity | 100,000,000 | |||
Term Loan | ||||
Credit Facility [Line Items] | ||||
Proceeds from lines of credit | $ 100,000,000 | |||
Credit facility borrowings | $ 225,000,000 |
Commitments and Contingencies (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Indemnifications related to contract underwriting services | ||
Loss Contingencies [Line Items] | ||
Amount paid for remedies (less than) | $ 0.1 | $ 0.1 |
Stock-Based Compensation (Details 2) - 2013 Plan - Nonvested shares - Certain members of senior management |
1 Months Ended |
---|---|
Feb. 28, 2018 | |
Time-Based | |
Stock-based compensation | |
Performance period | 3 years |
Performance -Based | |
Stock-based compensation | |
Performance period | 3 years |
First Vesting Period | Time-Based | |
Stock-based compensation | |
Vesting (as a percent) | 33.33% |
Second Vesting Period | Time-Based | |
Stock-based compensation | |
Vesting (as a percent) | 33.33% |
Third Vesting Period | Time-Based | |
Stock-based compensation | |
Vesting (as a percent) | 33.33% |
Stock-Based Compensation (Details 5) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Stock-based compensation | ||||
Shares tendered by employees to pay employee withholding taxes (in shares) | 711,729 | |||
Compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares | ||||
Compensation expense | $ 3,827 | $ 4,669 | $ 7,432 | $ 9,288 |
Income tax benefit | 713 | $ 1,502 | 1,385 | 2,985 |
Nonvested shares | ||||
Stock-based compensation | ||||
Total fair value of shares vested | 74,900 | $ 21,100 | ||
Total unrecognized compensation expense | $ 25,100 | $ 25,100 | ||
Expected weighted average period for recognition of expense | 2 years 26 days |
Earnings per Share (EPS) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Earnings Per Share [Abstract] | |||||
Net income | $ 111,755 | $ 72,118 | $ 222,824 | $ 138,716 | |
Less: dividends declared | 0 | 0 | 0 | 0 | |
Net income | $ 111,755 | $ 72,118 | $ 222,824 | $ 138,716 | $ 379,747 |
Basic earnings per share (in dollars per share) | $ 1.15 | $ 0.79 | $ 2.29 | $ 1.52 | |
Diluted earnings per share (in dollars per share) | $ 1.14 | $ 0.77 | $ 2.28 | $ 1.49 | |
Basic weighted average shares outstanding (in shares) | 97,426 | 91,381 | 97,362 | 91,320 | |
Dilutive effect of nonvested shares (in shares) | 440 | 1,781 | 546 | 1,773 | |
Diluted weighted average shares outstanding (in shares) | 97,866 | 93,162 | 97,908 | 93,093 |
Earnings per Share (EPS) (Details 2) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Contingently issuable awards | ||||
Antidilutive nonvested shares (in shares) | 318,556 | 16,497 | 242,860 | 89,309 |
Performance-based share awards | ||||
Contingently issuable awards | ||||
Percentage of award issuable if current period end were end of contingency period | 100.00% | 100.00% | 100.00% | 100.00% |
Statutory Accounting (Details) - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Essent Guaranty | |||
Dividends Restrictions | |||
Statutory net income | $ 182,784 | $ 124,304 | |
Statutory surplus | 798,183 | 613,028 | |
Contingency reserve liability | 792,447 | 572,647 | |
Increase in contingency reserve | 113,700 | ||
Essent PA | |||
Dividends Restrictions | |||
Statutory net income | 4,861 | 5,461 | |
Statutory surplus | 47,495 | 44,190 | |
Contingency reserve liability | 45,985 | 39,959 | |
Increase in contingency reserve | 2,800 | ||
Essent Re | |||
Dividends Restrictions | |||
Statutory net income | 65,000 | $ 43,800 | |
Statutory capital and surplus | $ 716,400 | $ 662,600 |
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