Essent Group Ltd

Previous wording

Essent Group Ltd. (collectively with its subsidiaries, “Essent”) serves the housing finance industry by offering private mortgage insurance, reinsurance, risk management products and title insurance and settlement services to mortgage lenders, borrowers, and investors to support homeownership.

Current wording

Essent Group Ltd. (collectively with its subsidiaries, “Essent”) serves the housing finance industry by offering private mortgage insurance and reinsurance, title insurance and settlement services to mortgage lenders, borrowers and investors to support homeownership. We have one reportable segment: Mortgage Insurance.

Previous wording

Essent Guaranty, Inc., our wholly-owned mortgage insurance subsidiary which we refer to as "Essent Guaranty," is approved by Fannie Mae and Freddie Mac and licensed to write coverage in all 50 states and the District of Columbia. For the years ended December 31, 2023, 2022 and 2021, our mortgage insurance operations generated new insurance written, or NIW, of approximately $47.7 billion, $63.1 billion and $84.2 billion, respectively. As of December 31, 2023, we had approximately $239.1 billion of mortgage insurance in force. The financial strength ratings of Essent Guaranty are A3 with a stable outlook by Moody's Investors Service, Inc. ("Moody's"), A- with a stable outlook by S&P Global Ratings ("S&P") (up from BBB+ with a stable outlook as a result of an upgrade by S&P announced on January 8, 2024) and A (Excellent) with a stable outlook by A.M. Best Company ("AM Best").

Current wording

Essent Guaranty, Inc., our wholly-owned mortgage insurance subsidiary which we refer to as "Essent Guaranty," is approved by Fannie Mae and Freddie Mac and licensed to write coverage in all 50 states and the District of Columbia. For the years ended December 31, 2024, 2023 and 2022, our mortgage insurance operations generated new insurance written, or NIW, of approximately $45.6 billion, $47.7 billion and $63.1 billion, respectively. As of December 31, 2024, we had approximately $243.6 billion of mortgage insurance in force. The financial strength ratings of Essent Guaranty are A3 with a positive outlook by Moody's Investors Service, Inc. ("Moody's"), A- with a stable outlook by S&P Global Ratings ("S&P") and A (Excellent) with a stable outlook by A.M. Best Company ("AM Best").

Previous wording

We also offer mortgage-related insurance and reinsurance through our wholly-owned Bermuda-based subsidiary, Essent Reinsurance Ltd., which we refer to as "Essent Re." As of December 31, 2023, Essent Re provided insurance or reinsurance relating to GSE risk share and other reinsurance transactions covering approximately $2.2 billion of risk. Essent Re also reinsures Essent Guaranty's NIW under a quota share reinsurance agreement. The insurer financial strength ratings of Essent Re are A- with a stable outlook by S&P (up from BBB+ with a stable outlook as a result of an upgrade by S&P announced on January 8, 2024) and A (Excellent) with a stable outlook by A.M. Best.

Current wording

Through our wholly-owned Bermuda-based subsidiary, Essent Reinsurance Ltd., which we refer to as "Essent Re", we reinsure U.S. mortgage risk in the GSE credit risk transfer market and provide underwriting consulting services to third-party reinsurers. As of December 31, 2024, Essent Re provided insurance or reinsurance relating to GSE risk share and other reinsurance transactions covering approximately $2.2 billion of risk. Essent Re also reinsures Essent Guaranty's NIW under a quota share reinsurance agreement. The insurer financial strength ratings of Essent Re are A- with a stable outlook by S&P and A (Excellent) with a stable outlook by A.M. Best.

Previous wording

As a result of our acquisitions of Agents National Title Insurance Company and Boston National Holdings LLC effective July 1, 2023, we also offer title insurance products and title and settlement services.

Current wording

We also offer title insurance products both directly and through a network of title insurance agents, as well as title and settlement services. This operating segment was established upon our acquisitions of Agents National Title Insurance Company (renamed Essent Title Insurance, Inc. effective January 1, 2025), a title insurance underwriter, and Boston National Title, a national title agency, which was effective July 1, 2023. Title insurance operations are included in the Corporate & Other category.

Previous wording

We have a highly experienced, talented team with 536 employees as of December 31, 2023. Our holding company is domiciled in Bermuda and our U.S. mortgage insurance business is headquartered in Radnor, Pennsylvania.

Current wording

We have a highly experienced, talented team with 625 employees as of December 31, 2024. Our holding company and reinsurance business are domiciled in Bermuda. Our U.S. mortgage insurance and title insurance operations are headquartered in Radnor, Pennsylvania.

Previous wording

The Federal Reserve has increased the target federal funds rate several times during 2022 and 2023 in an effort to reduce consumer price inflation. These rate increases have resulted in higher mortgage interest rates which reduced home buying and mortgage refinance activity resulting in lower volumes of mortgage originations, new insurance written and title insurance and settlement service transactions. These rate increases have also resulted in increases in our net investment income generated by our investment portfolio and the persistency of our mortgage insurance in force.

Current wording

The Federal Reserve increased the target federal funds rate several times during 2022 and 2023 in an effort to reduce consumer price inflation. As a result of progress on inflation, the Federal Reserve has reduced the target federal funds rate by 100 basis points since September 2024. Mortgage interest rates, however, remain elevated, which has reduced home buying and mortgage refinance activity resulting in lower volumes of mortgage originations, NIW and title insurance and settlement service transactions. Higher interest rates have also resulted in increases in our net investment income generated by our investment portfolio and the persistency of our mortgage insurance in force.

Previous wording

Mortgage insurance premiums are paid either on a monthly installment basis ("monthly premiums"), in a single payment at origination ("single premiums"), or in some cases as an annual premium. For monthly premiums, we receive a monthly premium payment which is recorded as net premiums earned in the month the coverage is provided. Monthly premium payments are based on the original mortgage amount rather than the amortized loan balance. Net premiums written may be in excess of net premiums earned due to single premium policies. For single premiums, we receive a single premium payment at origination, which is recorded as "unearned premium" and earned over the estimated life of the policy, which ranges from 36 to 156 months depending on the term of the underlying mortgage and loan-to-value ratio at date of origination. If single premium policies are cancelled due to repayment of the underlying loan and the premium is non-refundable, the remaining unearned premium balance is immediately recognized as earned premium revenue. Substantially all of our single premium policies in force as of December 31, 2023 were non-refundable. Premiums collected on annual policies are recognized as net premiums earned on a straight-line basis over the year of coverage. For the years ended December 31, 2023 and 2022, monthly premium policies comprised 96% and 94% of our NIW, respectively.

Current wording

Mortgage insurance premiums are paid either on a monthly installment basis ("monthly premiums"), in a single payment at origination ("single premiums"), or in some cases as an annual premium. For monthly premiums, we receive a monthly premium payment which is recorded as net premiums earned in the month the coverage is provided. Monthly premium payments are based on the original mortgage amount rather than the amortized loan balance. Net premiums written may be in excess of net premiums earned due to single premium policies. For single premiums, we receive a single premium payment at origination, which is recorded as "unearned premium" and earned over the estimated life of the policy, which ranges from 36 to 156 months depending on the term of the underlying mortgage and loan-to-value ratio at date of origination. If single premium policies are cancelled due to repayment of the underlying loan and the premium is non-refundable, the remaining unearned premium balance is immediately recognized as earned premium revenue. Substantially all of our single premium policies in force as of December 31, 2024 were non-refundable. Premiums collected on annual policies are recognized as net premiums earned on a straight-line basis over the year of coverage. For the years ended December 31, 2024 and 2023, monthly premium policies comprised 99% and 97% of our NIW, respectively.

Previous wording

The percentage of IIF that remains on our books after any 12-month period is defined as our persistency rate. Because our insurance premiums are earned over the life of a policy, higher persistency rates can have a significant impact on our profitability. The persistency rate on our portfolio was 86.9% at December 31, 2023. Generally, higher prepayment speeds lead to lower persistency.

Current wording

The percentage of IIF that remains on our books after any 12-month period is defined as our persistency rate. Because our insurance premiums are earned over the life of a policy, higher persistency rates can have a significant impact on our profitability. The persistency rate on our U.S. mortgage insurance portfolio was 85.7% at December 31, 2024. Generally, higher prepayment speeds lead to lower persistency.

Previous wording

•the distribution of claims over the life of a book. As of December 31, 2023, 69% of our IIF relates to business written since January 1, 2021 and was less than three years old. As a result, based on historical industry performance, we expect the number of defaults and claims we experience, as well as our provision for losses and loss adjustment expenses ("LAE"), to increase as our portfolio seasons. See "—Mortgage Insurance Earnings and Cash Flow Cycle" below.

Current wording

•the distribution of claims over the life of a book. As of December 31, 2024, 56% of our IIF relates to mortgage insurance business written since January 1, 2022 and was less than three years old. As a result, based on historical industry performance, we expect the number of defaults and claims we experience, as well as our provision for losses and loss adjustment expenses ("LAE"), to increase as our portfolio seasons. See "—Mortgage Insurance Earnings and Cash Flow Cycle" below.

Previous wording

Based upon our experience and industry data, claims incidence for mortgage insurance is generally highest in the third through sixth years after loan origination. As of December 31, 2023, 69% of our IIF relates to business written since January 1, 2021 and was less than three years old. Although the claims experience on new insurance written by us to date has been favorable, we expect incurred losses and claims to increase as a greater amount of this book of insurance reaches its anticipated period of highest claim frequency. The actual default rate and the average reserve per default that we experience as our portfolio matures is difficult to predict and is dependent on the specific characteristics of our current in-force book (including the credit score of the borrower, the loan-to-value ratio of the mortgage, geographic concentrations, etc.), as well as the profile of new business we write in the future. In addition, the default rate and the average reserve per default will be affected by future macroeconomic factors such as housing prices, interest rates and employment.

Current wording

Based upon our experience and industry data, claims incidence for mortgage insurance is generally highest in the third through sixth years after loan origination. As of December 31, 2024, 56% of our IIF relates to business written since January 1, 2022 and was less than three years old. Although the claims experience on new insurance written by us to date has been favorable, we expect incurred losses and claims to increase as a greater amount of this book of insurance reaches its anticipated period of highest claim frequency. The actual default rate and the average reserve per default that we experience as our portfolio matures is difficult to predict and is dependent on the specific characteristics of our current in-force book (including the credit score of the borrower, the loan-to-value ratio of the mortgage, geographic concentrations, etc.), as well as the profile of new business we write in the future. In addition, the default rate and the average reserve per default will be affected by future macroeconomic factors such as housing prices, interest rates and employment.

Previous wording

The defaulted loans reported to us in the second and third quarters of 2020 had reached the end of their forbearance periods as of March 31, 2022. During the first quarter of 2022, the Early COVID Defaults cured at elevated levels, and the cumulative cure rate for the Early COVID Defaults at March 31, 2022 exceeded our initial estimated cure rate implied by our estimate of ultimate loss for these defaults established at the onset of the pandemic. Based on cure activity through March 31, 2022 and our expectations for future cure activity, as of March 31, 2022, we lowered our estimate of ultimate loss for the Early COVID Defaults. During the three months ended June 30, 2022, Early COVID Defaults cured at levels that exceeded our estimate as of March 31, 2022, and we further lowered our estimate of loss for these defaults as of June 30, 2022 to 2% of the initial risk in force. These revisions to our estimate of ultimate loss for the Early COVID Defaults resulted in a benefit recorded to the provision for losses of $164.1 million for the year ended December 31, 2022. Due to the level of Early COVID Defaults remaining in the default inventory, beginning in the third quarter of 2022, we resumed reserving for the Early COVID Defaults using our normal reserve methodology. As of December 31, 2023, approximately 99% of the Early COVID Defaults had cured. While the level of cure activity for the Early COVID Defaults exceeded our initial expectations, the transition of defaults to foreclosure or claim has not returned to pre-pandemic levels as of December 31, 2023. As a result, the level of defaults in the default inventory that have missed twelve or more payments is above pre-pandemic levels.

Current wording

The defaulted loans reported to us in the second and third quarters of 2020 had reached the end of their forbearance periods as of March 31, 2022. During the first quarter of 2022, the Early COVID Defaults cured at elevated levels, and the cumulative cure rate for the Early COVID Defaults at March 31, 2022 exceeded our initial estimated cure rate implied by our estimate of ultimate loss for these defaults established at the onset of the pandemic. Based on cure activity through March 31, 2022 and our expectations for future cure activity, as of March 31, 2022, we lowered our estimate of ultimate loss for the Early COVID Defaults. During the three months ended June 30, 2022, Early COVID Defaults cured at levels that exceeded our estimate as of March 31, 2022, and we further lowered our estimate of loss for these defaults as of June 30, 2022 to 2% of the initial risk in force. These revisions to our estimate of ultimate loss for the Early COVID Defaults resulted in a benefit recorded to the provision for losses of $164.1 million for the year ended December 31, 2022. Due to the level of Early COVID Defaults remaining in the default inventory, beginning in the third quarter of 2022, we resumed reserving for the Early COVID Defaults using our normal reserve methodology. The transition of defaults to foreclosure or claim has not returned to pre-pandemic levels as of December 31, 2024. As a result, the level of defaults in the default inventory that have missed twelve or more payments is above pre-pandemic levels.

Previous wording

The economy in the United States has been experiencing elevated levels of consumer price inflation. The Federal Reserve has increased the target federal funds rate several times during 2022 and 2023 in an effort to reduce consumer price inflation. These rate increases have resulted in higher mortgage interest rates which may lower home sale activity and affect the options available to delinquent borrowers. It is reasonably possible that our estimate of losses could change in the near term as a result of changes in the economic environment, the impact of elevated levels of consumer price inflation on home sale activity, housing inventory, and home prices.

Current wording

The Federal Reserve increased the target federal funds rate several times during 2022 and 2023 in an effort to reduce consumer price inflation. As a result of subsequent reductions in inflation rates, the Federal Reserve has reduced the target federal funds rate by 100 basis points since September 2024. Mortgage interest rates, however, have remained elevated, which may lower home sale activity and affect the options available to delinquent borrowers. It is reasonably possible that our estimate of losses could change in the near term as a result of changes in the economic environment, the impact of elevated levels of consumer price inflation on home sale activity, housing inventory, and home prices.

Previous wording

As more fully described in Note 5 to our condensed consolidated financial statements, at December 31, 2023, we had approximately $1.4 billion of excess of loss reinsurance covering NIW from January 1, 2018 through December 31, 2019 and August 1, 2020 through June 30, 2023 and quota share reinsurance on portions of our NIW effective September 1, 2019 through December 31, 2020 and January 1, 2022 through December 31, 2023. The impact on our reserves in future periods will be dependent upon the amount of delinquent notices received from loan servicers, the performance of defaults and our expectations for the amount of ultimate losses on these delinquencies.

Current wording

As more fully described in Note 5 to our consolidated financial statements, at December 31, 2024, we had approximately $1.6 billion of excess of loss reinsurance covering NIW from January 1, 2018 through August 31, 2019 and August 1, 2020 through December 31, 2024 and quota share reinsurance on portions of our NIW effective September 1, 2019 through

Previous wording

We use third-party reinsurance to provide protection against adverse loss experience in our mortgage insurance portfolio and to expand our capital sources. When we enter into a reinsurance agreement, the reinsurer receives a premium and, in exchange, agrees to insure an agreed upon portion of incurred losses. These arrangements have the impact of reducing our earned premiums, but also reduce our risk in force ("RIF"), which provides capital relief, and may include capital relief under the PMIERs financial strength requirements. Our incurred losses are reduced by any incurred losses ceded in accordance with the reinsurance agreement. For additional information regarding reinsurance, see Note 5 to our consolidated financial statements.

Current wording

We use reinsurance to provide protection against adverse loss experience in our mortgage insurance and title insurance portfolios and to expand our capital sources. When we enter into a reinsurance agreement, the reinsurer receives a premium and, in exchange, agrees to insure an agreed upon portion of incurred losses. These arrangements have the impact of reducing our earned premiums, but also reduce our mortgage insurance risk in force (RIF), which provides capital relief, and may include capital relief under the PMIERs financial strength requirements. Our incurred losses are reduced by any incurred losses ceded in accordance with the reinsurance agreement. For additional information regarding reinsurance, see Note 5 to our consolidated financial statements.

Previous wording

Our most significant expense is compensation and benefits for our employees, which represented 58%, 59% and 61% of other underwriting and operating expenses for the years ended December 31, 2023, 2022 and 2021, respectively. Compensation and benefits expense includes base and incentive cash compensation, stock compensation expense, benefits and payroll taxes.

Current wording

Our most significant expense is compensation and benefits for our employees, which represented 60%, 58% and 59% of other underwriting and operating expenses for the years ended December 31, 2024, 2023 and 2022, respectively. Compensation and benefits expense includes base and incentive cash compensation, stock compensation expense, benefits and payroll taxes.

Previous wording

Premiums retained by agents represent the portion of title insurance premiums retained by our third-party agents pursuant to the terms of their respective agency contracts. These amounts are recorded as an expense and reported separately on the condensed consolidated statements of comprehensive income, consistent with industry practice. The percentage of premiums retained by agents vary according to regional differences in real estate closing practices and state regulations.

Current wording

Other underwriting and operating expenses also include premiums retained by agents, which represent the portion of title insurance premiums retained by our third-party agents pursuant to the terms of their respective agency contracts and are recorded as an expense. The percentage of premiums retained by agents vary according to regional differences in real estate closing practices and state regulations.

Previous wording

Interest expense is incurred as a result of borrowings under our secured credit facility (the “Credit Facility”). 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.

Current wording

Through June 30, 2024, interest expense was incurred as a result of borrowings under our secured credit facility (the “Existing Credit Facility”). Borrowings accrued interest at a floating rate tied to a standard short-term borrowing index, selected

Previous wording

The measure for assessing the impact of policy cancellations on IIF is our persistency rate, defined as the percentage of IIF that remains on our books after any twelve-month period. See additional discussion regarding the impact of the persistency rate on our performance in "—Factors Affecting Our Results of Operations—Persistency and Business Mix."

Current wording

The measure for assessing the impact of U.S. mortgage insurance policy cancellations on IIF is our persistency rate, defined as the percentage of IIF that remains on our books after any twelve-month period. See additional discussion regarding the impact of the persistency rate on our performance in "—Factors Affecting Our Results of Operations—Persistency and Business Mix."

Previous wording

As of December 31, 2023, our combined net risk in force for our U.S. mortgage insurance companies was $34.5 billion and our combined statutory capital was $3.4 billion, resulting in a risk-to-capital ratio of 10.2 to 1. The amount of capital required varies in each jurisdiction in which we operate; however, generally, the maximum permitted risk-to-capital ratio is 25.0 to 1. State insurance regulators are currently examining their respective capital rules to determine whether, in light of the financial crisis, changes are needed to more accurately assess mortgage insurers' ability to withstand stressful economic conditions. As a result, the capital metrics under which they assess and measure capital adequacy may change in the future. Independent of the state regulator and GSE capital requirements, management continually assesses the risk of our insurance portfolio and current market and economic conditions to determine the appropriate levels of capital to support our business.

Current wording

As of December 31, 2024, the net risk in force for Essent Guaranty was $35.2 billion and its statutory capital was $3.6 billion, resulting in a risk-to-capital ratio of 9.8:1. The amount of capital required varies in each jurisdiction in which we operate; however, generally, the maximum permitted risk-to-capital ratio is 25.0 to 1. State insurance regulators have continued to examine their respective capital rules to determine whether, in light of the 2007-2008 financial crisis, changes are needed to more accurately assess mortgage insurers' ability to withstand stressful economic conditions. As a result, the capital metrics under which they assess and measure capital adequacy may change in the future. Independent of the state regulator and GSE capital requirements, management continually assesses the risk of our insurance portfolio and current market and economic conditions to determine the appropriate levels of capital to support our business.

Previous wording

The following table sets forth our results of operations for the periods indicated:

Current wording

The following table sets forth our consolidated results of operations for the periods indicated:

Previous wording

Our net investment income was derived from the following sources for the periods indicated:

Current wording

Our consolidated net investment income was derived from the following sources for the periods indicated:

Previous wording

The increase in net investment income to $186.1 million for the year ended December 31, 2023 as compared to $124.4 million for the year ended December 31, 2022 was due to the increase in the weighted average balance of our investment portfolio, as well as an increase in the average yield on the investment portfolio. The average balance of investments at amortized cost increased to $5.5 billion during the year ended December 31, 2023 from $5.1 billion during the year ended December 31, 2022, primarily as a result of investing cash flows generated from operations. The pre-tax investment income yield increased from 2.6% in the year ended December 31, 2022 to 3.5% in the year ended December 31, 2023 primarily due to a general increase in investment yields due to increasing interest rates. The pre-tax investment income yields are calculated based on amortized cost and exclude investment expenses. See "—Liquidity and Capital Resources" for further details of our investment portfolio.

Current wording

The increase in our consolidated net investment income to $222.1 million for the year ended December 31, 2024 as compared to $186.1 million for the year ended December 31, 2023 was due to the increase in the weighted average balance of our investment portfolio, as well as an increase in the average yield on the investment portfolio. The average balance of investments at amortized cost increased to $6.1 billion during the year ended December 31, 2024 from $5.5 billion during the year ended December 31, 2023, primarily as a result of investing cash flows generated from operations. The pre-tax investment income yield increased from 3.5% in the year ended December 31, 2023 to 3.7% in the year ended December 31, 2024 primarily due to a general increase in investment yields due to increasing interest rates.

Previous wording

Income from other invested assets for the year ended December 31, 2023 was a loss of $11.1 million as compared to income of $28.7 million for the year ended December 31, 2022. The decrease in income from other invested assets for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily due to lower fair value adjustments recorded during 2023.

Current wording

Income from other invested assets for the year ended December 31, 2024 was a gain of $7.4 million as compared to a loss of $11.1 million for the year ended December 31, 2023. The increase in income from other invested assets for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily due to favorable fair value adjustments recorded during 2024.

Previous wording

Other income for the year ended December 31, 2023 was $25.0 million compared to $18.4 million for the year ended December 31, 2022. The increase in other income for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to changes in the fair value of the embedded derivatives contained in certain of our reinsurance agreements. In the year ended December 31, 2023 we recorded a net favorable increase in the fair value of the embedded derivatives of $1.9 million compared to a net unfavorable decrease of $2.5 million inthe year ended December 31, 2022. Other income also includes underwriting consulting services to third-party reinsurers, Triad service fee income and contract underwriting revenues. In the year ended December 31, 2023, other income also includes settlement services revenues from our title operations.

Current wording

Other income was $24.9 million for the year ended December 31, 2024 compared to $25.0 million for the year ended December 31, 2023. Other income includes fair value adjustments on embedded derivatives contained in certain of our reinsurance agreements. In the year ended December 31, 2024 we recorded a net unfavorable decrease in the fair value of the embedded derivatives of $2.1 million compared to a net favorable increase of $1.9 million in the year ended December 31, 2023.

Previous wording

For the years ended December 31, 2023 and 2022, we incurred interest expense of $30.1 million and $15.6 million, respectively. Interest expense increased due to an increase in the weighted average interest rate on amounts outstanding under the Credit Facility. For the years ending December 31, 2023 and 2022, the borrowings under the Credit Facility had a weighted average interest rate of 6.84% and 3.42%, respectively. For the years ended December 31, 2023 and 2022, the average amount outstanding under the Credit Facility was $425.0 million.

Current wording

For the years ended December 31, 2024 and 2023, we incurred interest expense of $35.3 million and $30.1 million, respectively. Interest expense increased in 2024 compared to 2023 due to an increase in the average outstanding borrowings during the period and a $3.2 million loss on debt extinguishment for the write-off of unamortized debt issuance costs, partially offset by a decrease in the weighted average interest rate. On July 1, 2024, Essent Group issued $500 million of 6.25% senior notes and utilized the proceeds to repay all of the outstanding term loan borrowings under the Credit Facility. For the years ending December 31, 2024 and 2023, our borrowings carried a weighted average interest rate of 6.68% and 6.84%, respectively. For the years ended December 31, 2024 and 2023, the average amount of borrowings outstanding was $462.5 million and $425.0 million, respectively.

Previous wording

Our subsidiaries in the United States file a consolidated U.S. Federal income tax return. Our income tax expense was $126.6 million for the year ended December 31, 2023 compared to $156.8 million for the year ended December 31, 2022. The effective tax rate for the year ended December 31, 2023 was 15.4% compared to 15.9% for the year ended December 31, 2022. Our effective income tax rate reflects the amount of earnings or losses generated in the jurisdictions in which we operate, the applicable tax rates and regulations in those jurisdictions, and the impact of discrete items. For the year ended December 31, 2023, income tax expense includes $5.3 million of net expense associated with prior year tax returns and a $2.7 million net benefit for the deferred tax asset recognized for unrealized losses on the investment portfolios of Essent Group and Essent Re upon the enactment of the Bermuda Corporate Income Tax. See Note 12 to our consolidated financial statements.

Current wording

Our subsidiaries in the United States file a consolidated U.S. Federal income tax return. Our income tax expense was $126.1 million for the year ended December 31, 2024 compared to $126.6 million for the year ended December 31, 2023. The effective tax rate for the year ended December 31, 2024 was 14.7% compared to 15.4% for the year ended December 31, 2023. Our effective income tax rate reflects the amount of earnings or losses generated in the jurisdictions in which we operate, the applicable tax rates and regulations in those jurisdictions, and the impact of discrete items. For the year ended December 31, 2024, income tax expense includes $1.3 million of favorable adjustments related to prior year tax returns and $0.7 million of excess tax benefits associated with the vesting of common shares and common share units. For the year ended December 31, 2023, income tax expense includes $5.3 million of net expense associated with prior year tax returns and a $2.7 million net benefit for the deferred tax asset recognized for unrealized losses on the investment portfolios of Essent Group and Essent Re upon the enactment of the Bermuda Corporate Income Tax. See Note 12 to our consolidated financial statements.

Previous wording

Pursuant to the FAST Act Modernization and Simplification of Regulation S-K, discussions related to the changes in results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 have been omitted. Such omitted discussion can be found under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission on February 17, 2023.

Current wording

Pursuant to the FAST Act Modernization and Simplification of Regulation S-K, discussions related to the changes in the consolidated results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 have been omitted. Such omitted discussion can be found under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on February 16, 2024.

Previous wording

For the year ended December 31, 2023, we reported net income of $696.4 million, compared to net income of $831.4 million for the year ended December 31, 2022. The decrease in our operating results in 2023 over 2022 was primarily due to an increase in the provision for losses and LAE, increases in operating expenses, a decrease in income from other invested assets and an increase in interest expense, partially offset by increases in net premiums earned and net investment income and decreases in realized net investment losses and income taxes.

Current wording

For the year ended December 31, 2024, our Mortgage Insurance segment reported income before income tax expense of $892.3 million, compared to income before income tax expense of $860.0 million for the year ended December 31, 2023. The increase in our operating results in 2024 over 2023 was primarily due to an increase in net premiums earned and investment income, partially offset by an increase in the provision for losses and LAE.

Previous wording

Net premiums written and earned increased in the year ended December 31, 2023 by 9% compared to the year ended December 31, 2022. Net premiums written and earned in the year ended December 31, 2023 include $38.0 million of net premiums written and earned by our title insurance operations. The increase in net premiums written and earned was also due to the increase in our average IIF from $215.5 billion in 2022 to $234.5 billion in 2023, partially offset by the decrease in the average net premium rate from 0.37% for the year ended December 31, 2022 to 0.35% for the year ended December 31, 2023. The decrease in the average net premium rate during the year ended December 31, 2023 was a primarily due to changes in the mix of the mortgages we insure, changes in our pricing and a decrease in premiums earned on the cancellation of non-refundable single premium policies. In the year ended December 31, 2023, premiums earned on the cancellation of non-refundable single premium policies decreased to $6.3 million from $20.8 million in the year ended December 31, 2022 as a result of a decrease in existing borrowers refinancing their mortgages during 2023 as compared to 2022.

Current wording

Mortgage Insurance net premiums earned increased in the year ended December 31, 2023 by 9% compared to the year ended December 31, 2022. The increase in net premiums written and earned was due to the increase in our average IIF from $215.5 billion in 2022 to $234.5 billion in 2023, partially offset by the decrease in the average net premium rate from 0.37% for the year ended December 31, 2022 to 0.35% for the year ended December 31, 2023. The decrease in the average net premium rate during the year ended December 31, 2023 was a primarily due to changes in the mix of the mortgages we insure, changes in our pricing and a decrease in premiums earned on the cancellation of non-refundable single premium policies. In the year ended December 31, 2023, premiums earned on the cancellation of non-refundable single premium policies decreased to $6.3 million from $20.8 million in the year ended December 31, 2022 as a result of a decrease in existing borrowers refinancing their mortgages during 2023 as compared to 2022.

Previous wording

In the year ended December 31, 2023, unearned premiums decreased by $22.6 million as a result of $44.6 million of unearned premium that was recognized in earnings during the year partially offset by net premiums written on single premium policies of $22.0 million. In the year ended December 31, 2022, unearned premiums decreased by $22.5 million as a result of $64.2 million of unearned premium that was recognized in earnings during the year partially offset by net premiums written on single premium policies of $41.7 million.

Current wording

In the year ended December 31, 2024, unearned premiums decreased by $24.3 million as a result of $33.3 million of unearned premium that was recognized in earnings during the year partially offset by net premiums written on single premium policies of $9.0 million. In the year ended December 31, 2023, unearned premiums decreased by $22.6 million as a result of $44.6 million of unearned premium that was recognized in earnings during the year partially offset by net premiums written on single premium policies of $22.0 million. In the year ended December 31, 2022, unearned premiums decreased by $22.5 million as a result of $64.2 million of unearned premium that was recognized in earnings during the year partially offset by net premiums written on single premium policies of $41.7 million.

Previous wording

For the year ended December 31, 2023, we recorded a provision losses of $31.5 million primarily due to a provision for losses recorded for current year mortgage insurance defaults partially offset by cure activity for defaults reported in prior years. For the year ended December 31, 2022, we recorded a benefit to the provision for losses of $174.7 million primarily due to a decrease in the estimate of ultimate loss for Early COVID Defaults as well as cure activity for defaults with reserves using our normal reserve methodology.

Current wording

For the year ended December 31, 2024, the Mortgage Insurance segment recorded a provision losses of $75.2 million compared to a provision of $30.1 million for the year ended December 31, 2023. The increase in the provision for losses in 2024 was primarily due to increases in new defaults reported, resulting in an increase in the provision for losses recorded for current year defaults, partially offset by cure activity for defaults reported in prior years. The increase in defaults was due in part to defaulted loans in the areas impacted by Hurricanes Helene and Milton. In 2024, loans in default increased by a total of 3,620, including 2,119 defaults we identified as hurricane-related defaults. For the year ended December 31, 2022, we recorded a benefit to the provision for losses of $174.7 million primarily due to a decrease in the estimate of ultimate loss for Early COVID Defaults as well as cure activity for defaults with reserves using our normal reserve methodology.

Previous wording

The following table provides a reconciliation of the beginning and ending reserve balances for losses and LAE:

Current wording

The following table provides a reconciliation of the beginning and ending U.S. mortgage insurance reserve balances for losses and LAE:

Previous wording

(1)The U.S. mortgage insurance portfolio reserves exclude reserves on GSE and other risk share risk in force at Essent Re of $29 thousand and $0.1 million as of December 31, 2023 and 2022, respectively, as well as title insurance reserves of $14.7 million as of December 31, 2023.

Current wording

(1) The U.S. mortgage insurance portfolio reserves exclude reserves on GSE and other risk share risk in force at Essent Re of $51 thousand, $29 thousand, and $0.1 million as of December 31, 2024, 2023 and 2022, respectively.

Previous wording

(1)The U.S. mortgage insurance portfolio reserves exclude reserves on GSE and other risk share risk in force at Essent Re of $29 thousand, as well as title insurance reserves of $14.7 million as of December 31, 2023.

Current wording

(2)The U.S. mortgage insurance portfolio reserves exclude reserves on GSE and other risk share risk in force at Essent Re of $29 thousand as of December 31, 2023.

Previous wording

During the year ended December 31, 2023, the provision for losses and LAE was $31.5 million, comprised of $141.2 million for current year losses, partially offset by $109.6 million of favorable prior years' loss development. During the year ended December 31, 2022, the provision for losses and LAE was a benefit of $174.7 million, comprised of $99.4 million of current year losses, offset by $274.1 million of favorable prior years' loss development. 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.

Current wording

During the year ended December 31, 2024, the provision for losses and LAE was $75.2 million, comprised of $171.9 million for current year losses, partially offset by $96.8 million of favorable prior years' loss development. During the year ended December 31, 2023, the provision for losses and LAE was a benefit of $30.2 million, comprised of $138.6 million of current year losses, offset by $108.4 million of favorable prior years' loss development. During the year ended December 31, 2022, the provision for losses and LAE was a benefit of $174.7 million, comprised of $99.4 million of current year losses, offset by $272.8 million of favorable prior years' loss development. In each period, 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.

Previous wording

Following are the components of our other underwriting and operating expenses for the periods indicated:

Current wording

Following are the components of other underwriting and operating expenses for the Mortgage Insurance segment for the periods indicated:

Previous wording

•Other expenses increased primarily as a result of title and settlement services direct cost incurred and increases in professional fees and software related expenses partially offset by an increase in ceding commission earned under the QSR Agreement. In 2023, other expenses included approximately $4.5 million of transaction costs associated with the Company's title business acquisition. Other expenses include professional fees, travel, marketing, hardware, software, rent, depreciation and amortization and other facilities expenses.

Current wording

•Other expenses increased in 2023 compared to 2022 primarily as a result of increases in professional fees and software related expenses. Other expenses include professional fees, travel, marketing, hardware, software, rent, depreciation and amortization and other facilities expenses.

Previous wording

•Compensation and benefits increased primarily due to an increase in the number of employees resulting from the acquisition of the title operations. Compensation and benefits includes salaries, wages and bonus, stock compensation expense, benefits and payroll taxes.

Current wording

•Compensation and benefits increased in 2024 compared to 2023 and in 2023 compared to 2022 primarily due to an increase in the average number of employees, which resulted from the acquisition of the title insurance operations on July 1, 2023. Compensation and benefits includes salaries, wages and bonus, stock compensation expense, benefits and payroll taxes.

Previous wording

•interest payments and repayment of borrowings under our Credit Facility;

Current wording

•interest payments and repayment of borrowings under our Senior Notes and Revolving Credit Facility;

Previous wording

As of December 31, 2023, we had substantial liquidity with cash of $141.8 million, short-term investments of $928.7 million and fixed maturity investments of $4.3 billion. We also had $400 million of available capacity under the revolving credit component of our Credit Facility, with $425 million of term borrowings outstanding under our Credit Facility. Borrowings under the Credit Facility contractually mature on December 10, 2026. Holding company net cash and investments available for sale totaled $693.5 million at December 31, 2023. In addition, Essent Guaranty is a member of the Federal Home Loan Bank of Pittsburgh (the “FHLBank”) and has access to secured borrowing capacity with the FHLBank to provide Essent Guaranty with supplemental liquidity. Essent Guaranty had no outstanding borrowings with the FHLBank at December 31, 2023.

Current wording

As of December 31, 2024, we had substantial liquidity, with cash of $131.5 million, short-term investments of $764.0 million and fixed maturity investments of $5.1 billion. We also had $500 million of available capacity under our Revolving Credit Facility. Holding company net cash and investments available for sale totaled $1.1 billion at December 31, 2024. In addition, Essent Guaranty is a member of the Federal Home Loan Bank of Pittsburgh (the “FHLBank”) and has access to secured borrowing capacity with the FHLBank to provide Essent Guaranty with supplemental liquidity. Essent Guaranty had no outstanding borrowings with the FHLBank at December 31, 2024.