Essent Group Ltd.

Previous wording

The following discussion should be read together with the “Selected Financial Data” and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K as of and for the year ended December 31, 2023 as filed with the Securities and Exchange Commission and referred to herein as the “Annual Report,” and our condensed consolidated financial statements and related notes as of and for the three and nine months ended September 30, 2024 included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which we refer to as the “Quarterly Report.” In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections entitled “Special Note Regarding Forward-Looking Statements” in this Quarterly Report and Part I, Item 1A “Risk Factors” in our Annual Report and Part II, Item 1A “Risk Factors” in this Quarterly Report. We are not undertaking any obligation to update any forward-looking statements or other statements we may make in the following discussion or elsewhere in this document even though these statements may be affected by events or circumstances occurring after the forward-looking statements or other statements were made.

Current wording

The following discussion should be read together with the “Selected Financial Data” and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K as of and for the year ended December 31, 2024 as filed with the Securities and Exchange Commission and referred to herein as the “Annual Report,” and our condensed consolidated financial statements and related notes as of and for the three months ended March 31, 2025 included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which we refer to as the “Quarterly Report.” In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections entitled “Special Note Regarding Forward-Looking Statements” in this Quarterly Report and Part I, Item 1A “Risk Factors” in our Annual Report and Part II, Item 1A “Risk Factors” in this Quarterly Report. We are not undertaking any obligation to update any forward-looking statements or other statements we may make in the following discussion or elsewhere in this document even though these statements may be affected by events or circumstances occurring after the forward-looking statements or other statements were made.

Previous wording

Essent Group Ltd. (collectively with its subsidiaries, “Essent”) serves the housing finance industry by offering private mortgage insurance, reinsurance, 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. Our mortgage insurance operations generated new insurance written, or NIW, of approximately $12.5 billion and $33.3 billion for the three and nine months ended September 30, 2024, respectively, compared to approximately $12.5 billion and $38.9 billion for the three and nine months ended September 30, 2023, respectively. The financial strength ratings of Essent Guaranty are A3 with a positive outlook by Moody’s Investors Service (“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 Ratings Services, Inc. ("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. Our mortgage insurance operations generated new insurance written ("NIW") of approximately $9.9 billion and $8.3 billion for the three months ended March 31, 2025 and 2024, respectively. The financial strength ratings of Essent Guaranty are A3 with a positive outlook by Moody’s Investors Service (“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 Ratings Services, Inc. ("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 September 30, 2024, Essent Re provided insurance or reinsurance relating to GSE risk share and other reinsurance transactions covering approximately $2.3 billion of risk. Essent Re also reinsures Essent Guaranty’s NIW under a quota share reinsurance agreement. In April 2021, Essent Guaranty and Essent Re agreed to increase the quota share reinsurance coverage of Essent Guaranty’s NIW provided by Essent Re from 25% to 35% effective January 1, 2021. The quota share reinsurance coverage provided by Essent Re for Essent Guaranty’s NIW prior to January 1, 2021 will continue to be 25%, the quota share percentage in effect at the time NIW was first ceded. 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 AM 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 March 31, 2025, 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 AM 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 offer title insurance 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 602 employees as of September 30, 2024. 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 555 employees as of March 31, 2025. 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 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, in September 2024, the Federal Reserve reduced the target federal funds rate by 50 basis points. Mortgage interest rates remain elevated which has 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 actions 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 September 30, 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 nine months ended September 30, 2024 and 2023, monthly premium policies comprised 98% and 96% 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 March 31, 2025 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 three months ended March 31, 2025 and 2024, monthly premium policies comprised 99% and 98% 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 86.6% at September 30, 2024. 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 portfolio was 85.7% at March 31, 2025. Generally, higher prepayment speeds lead to lower persistency.

Previous wording

•the distribution of claims over the life of a book. As of September 30, 2024, 53% of our IIF relates to 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.

Current wording

•the distribution of claims over the life of a book. As of March 31, 2025, 38% of our IIF relates to business written since January 1, 2023 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 September 30, 2024, 53% 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.

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 March 31, 2025, 38% of our IIF relates to business written since January 1, 2023 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 economy in the United States has experienced elevated levels of consumer price inflation and 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, in September 2024, the Federal Reserve reduced the target federal funds rate by 50 basis points. Mortgage interest rates remain 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.

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

On September 26, 2024, Hurricane Helene made landfall and caused property damage in certain counties in Florida, Georgia, South Carolina, North Carolina, Tennessee and Virginia. On October 9, 2024, Hurricane Milton made landfall causing damage in certain counties in Florida. We believe these hurricanes could have an impact on our insured portfolio’s performance and expect to experience increased defaults in these areas beginning in the fourth quarter of 2024. As of October 31, 2024, our insurance in force in counties with Federal Emergency Management Agency ("FEMA") disaster declarations due to hurricanes Helene and Milton is approximately 12.5% of our total insurance in force. It is too early to tell how many claims we ultimately may have to pay associated with any defaults in the hurricane impacted areas. There are many factors contributing to the uncertainty surrounding these insured loans. Under our master policy, loan servicers are not required to notify us of a default until the borrower has missed two consecutive minimum payments. Also, the level of damage being reported in these areas varies significantly from region to region. Further, 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. These events have not materially affected our reserves as of September 30, 2024.

Current wording

On September 26, 2024, Hurricane Helene made landfall and caused property damage in certain counties in Florida, Georgia, South Carolina, North Carolina, Tennessee and Virginia. On October 9, 2024, Hurricane Milton made landfall, causing damage in certain counties in Florida. Loans in default at December 31, 2024 included 2,119 defaults that we identified as hurricane-related defaults. 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 December 31, 2024, we applied a lower estimated claim rate to new default notices received in the fourth quarter of 2024 from the affected areas than the claim rate we apply to other notices in our default inventory. 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. As of March 31, 2025, the reserves established for the Hurricane Milton and Helene defaults are materially unchanged from December 31, 2024.

Previous wording

As more fully described in Note 4 to our condensed consolidated financial statements, at September 30, 2024, we had approximately $1.7 billion of excess of loss reinsurance covering NIW from January 1, 2018 through December 31, 2019 and August 1, 2020 through December 31, 2024 and quota share reinsurance on portions of our NIW effective September 1, 2019 through December 31, 2020 and January 1, 2022 through December 31, 2024. 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 4 to our condensed consolidated financial statements, at March 31, 2025, we had approximately $1.5 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 December 31, 2020 and January 1, 2022 through December 31, 2024. 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.

Previous wording

We use third-party reinsurance to provide protection against adverse loss experience 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 4 to our condensed 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 4 to our condensed consolidated financial statements.

Previous wording

Our other underwriting and operating expenses include components that are substantially fixed, as well as expenses that generally increase or decrease in line with the level of NIW.

Current wording

Our other underwriting and operating expenses include components that are substantially fixed, as well as expenses that generally increase or decrease in line with the level of mortgage insurance NIW, title insurance policies issued and settlement services provided.

Previous wording

Our most significant expense is compensation and benefits for our employees, which represented 59% and 60% of other underwriting and operating expenses for the three and nine months ended September 30, 2024, compared to 57% and 57% of other underwriting and operating expenses for the three and nine months ended September 30, 2023, 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 56% of other underwriting and operating expenses for the three months ended March 31, 2025, compared to 52% of other underwriting and operating expenses for the three months ended March 31, 2024. 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

Essent Group Ltd. ("Essent Group") and its wholly-owned subsidiary, Essent Re, are domiciled in Bermuda, and their income is currently not subject to a corporate income tax. See "—Legislative and Regulatory Developments—Bermuda Corporate Income Tax" above. Under a quota share reinsurance agreement, Essent Re reinsures 25% of Essent Guaranty’s NIW through December 31, 2020 and 35% of Essent Guaranty’s NIW after December 31, 2020. Essent Re also provides insurance and reinsurance to Freddie Mac and Fannie Mae.

Current wording

Essent Group Ltd. ("Essent Group") and its wholly-owned subsidiary, Essent Re, are domiciled in Bermuda, and their income is currently not subject to a corporate income tax. See "—Legislative and Regulatory Developments—Bermuda Corporate Income Tax" above. Under a quota share reinsurance agreement, Essent Re reinsures 25% of Essent Guaranty’s NIW through December 31, 2020 and 35% of Essent Guaranty’s NIW after December 31, 2020. In April 2025, Essent Guaranty and Essent Re agreed to increase the quota share reinsurance coverage of Essent Guaranty’s NIW provided by Essent Re to 50% effective January 1, 2025. The quota share reinsurance coverage provided by Essent Re for Essent Guaranty’s NIW prior to January 1, 2025 will continue at the quota share percentage in effect at the time NIW was first ceded. Essent Re also provides insurance and reinsurance to Freddie Mac and Fannie Mae.

Previous wording

As discussed above, mortgage insurance premiums we collect and earn are generated based on our IIF, which is a function of our NIW and cancellations. The following table includes a summary of the change in our IIF for the three and nine months ended September 30, 2024 and 2023 for our U.S. mortgage insurance portfolio. In addition, this table includes our RIF at the end of each period.

Current wording

As discussed above, mortgage insurance premiums we collect and earn are generated based on our IIF, which is a function of our NIW and cancellations. The following table includes a summary of the change in our IIF for the three months ended March 31, 2025 and 2024 for our U.S. mortgage insurance portfolio. In addition, this table includes our RIF at the end of each period.

Previous wording

As of September 30, 2024, our combined net risk in force for our U.S. mortgage insurance companies was $34.9 billion and our combined statutory capital was $3.6 billion, resulting in a risk-to-capital ratio of 9.7:1. 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 March 31, 2025, the net risk in force for Essent Guaranty was $35.0 billion and its statutory capital was $3.6 billion, resulting in a risk-to-capital ratio of 9.6:1. 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

The increases in net investment income for the three and nine months ended September 30, 2024 as compared to the same periods in 2023 was due to an increase in the pre-tax investment income yield as well as an increase in the weighted average balance of our investment portfolio. The pre-tax investment income yield increased from 3.6% and 3.5% in the three and nine months ended September 30, 2023 to 3.8% in both the three and nine months ended September 30, 2024, respectively, primarily due to a general increase in investment yields due to rising interest rates. The average cash and investment portfolio balance increased to $6.2 billion for the three months ended September 30, 2024 from $5.5 billion for the three months ended September 30, 2023. The average cash and investment portfolio balance increased to $6.0 billion for the nine months ended September 30, 2024 from $5.4 billion for the nine months ended September 30, 2023. The increase in the average cash and investment portfolio was primarily due to investing cash flows from operations, See “— Liquidity and Capital Resources” for further details of our investment portfolio.

Current wording

The increase in net investment income for the three months ended March 31, 2025 as compared to the same period in 2024 was due to an increase in the pre-tax investment income yield as well as an increase in the weighted average balance of our investment portfolio. The pre-tax investment income yield increased from 3.7% in the three months ended March 31, 2024 to 3.8% in the three months ended March 31, 2025 primarily due to a general increase in investment yields due to rising interest rates. The average cash and investment portfolio balance increased to $6.4 billion for the three months ended March 31, 2025 from $5.8 billion for the three months ended March 31, 2024. The increase in the average cash and investment portfolio was primarily due to investing cash flows from operations. See “— Liquidity and Capital Resources” for further details of our investment portfolio.

Previous wording

Income (loss) from other invested assets for the three months ended September 30, 2024 was income of $2.8 million as compared to a loss of $3.1 million for the three months ended September 30, 2023. Income (loss) from other invested assets for the nine months ended September 30, 2024 was income of $0.5 million as compared to a loss of $10.7 million for the nine months ended September 30, 2023.The increase in income from other invested assets was primarily due to favorable fair value adjustments recorded during the three and nine months ended September 30, 2024 as compared to the same periods in 2023.

Current wording

Income (loss) from other invested assets for the three months ended March 31, 2025 was income of $7.4 million as compared to a loss of $1.9 million for the three months ended March 31, 2024. The increase in income from other invested assets was primarily due to favorable fair value adjustments recorded during the three months ended March 31, 2025 as compared to the same period in 2024.

Previous wording

6.25% Senior Notes due 2029 (the “Senior Notes"). The Company used the net proceeds from the sale of the Senior Notes to repay all of the borrowings outstanding under the term loan portion of the Existing Credit Facility on July 1, 2024. Interest expense in the three and nine months ended September 30, 2024 includes a loss on debt extinguishment of $3.2 million for the write-off of unamortized debt issuance costs on the borrowings repaid in July. The increases in interest expense were also due to an increase in the average borrowings outstanding during the three and nine months ended September 30, 2024 compared to same periods in 2023. For the three and nine month periods ended September 30, 2024, the average amount of borrowings outstanding were $500 million and $450 million, respectively, compared to $425 million for each of the three and nine months ended September 30, 2023. For the three and nine months ended September 30, 2024, our total borrowings had a weighted average interest rate of 6.32% and 6.84%, respectively, as compared to 7.14% and 6.71% for the three and nine months ended September 30, 2023, respectively.

Current wording

For the three months ended March 31, 2025, we incurred interest expense of $8.1 million as compared to $7.9 million for the three months ended March 31, 2024. On July 1, 2024, Essent Group completed an underwritten public offering of $500 million principal amount of 6.25% Senior Notes due 2029 (the “Senior Notes"). The Company used the net proceeds from the sale of the Senior Notes to repay all of the borrowings outstanding under the term loan portion of the Existing Credit Facility on July 1, 2024. The increase in interest expense was due to an increase in the average borrowings outstanding during the three months ended March 31, 2025 compared to same period in 2024. For the three month periods ended March 31, 2025, the average amount of borrowings outstanding were $500 million compared to $425 million for the three months ended March 31, 2024. For the three months ended March 31, 2025, our total borrowings had a weighted average interest rate of 6.25% as compared to 7.15% for the three months ended March 31, 2024, respectively.

Previous wording

Our subsidiaries in the United States file a consolidated U.S. Federal income tax return. Our income tax expense was $31.4 million and $31.5 million for the three months ended September 30, 2024 and 2023, respectively, and $99.0 million and $99.0 million for the nine months ended September 30, 2024 and 2023, respectively. The provision for income taxes for the nine months ended September 30, 2024 was calculated using an estimated annual effective tax rate of 15.1% as compared to an estimated annual effective tax rate of 15.2% for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, income tax expense includes $0.6 million of discrete tax benefit associated with realized and unrealized losses recognized during the period as well as excess tax benefits associated with the vesting of common shares and common share units. For the nine months ended September 30, 2023, income tax expense includes $2.0 million of discrete tax benefit associated with realized and unrealized losses recognized during the period partially offset by excess tax deficits associated with the vesting of common shares and common share units. For the nine months ended September 30, 2023, income tax expense also includes $5.3 million of net expense associated with prior year tax returns. The tax effects of discrete items are recognized in the reporting period in which they occur and are not considered in determining the annual effective tax rate.

Current wording

Our subsidiaries in the United States file a consolidated U.S. Federal income tax return. Our income tax expense was $31.6 million and $32.0 million for the three months ended March 31, 2025 and 2024, respectively. The provision for income taxes for both the three months ended March 31, 2025 and 2024 was calculated using an estimated annual effective tax rate of 15.4%. For the three months ended March 31, 2025, income tax expense includes $1.6 million of discrete tax expense associated with realized and unrealized losses recognized during the period partially offset by $0.7 million excess tax benefits associated with the vesting of common shares and common share units. For the three months ended March 31, 2024, income tax expense includes $1.7 million of discrete tax benefit associated with realized and unrealized losses recognized during the period as well as excess tax benefits associated with the vesting of common shares and common share units.

Previous wording

For the three months ended September 30, 2024, we reported net income of $176.2 million, compared to net income of $178.0 million for the three months ended September 30, 2023. For the nine months ended September 30, 2024, we reported net income of $561.5 million, compared to net income of $521.0 million for the nine months ended September 30, 2023. The decrease in our operating results during the three months ended September 30, 2024 compared to the same period in 2023 was primarily due to increases in the provision for losses and operating expenses, largely offset by increases in net premiums earned and net investment income, The increase in our operating results during the nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to increases in net premiums earned and net investment income, partially offset by increases in the provision for losses and operating expenses.

Current wording

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Previous wording

Net premiums written and earned increased in the three months ended September 30, 2024 by 1%, compared to the three months ended September 30, 2023. Net premium written and earned increased in the nine months ended September 30, 2024 by 11%, compared to the nine months ended September 30, 2023. Net premiums written and earned in the three and nine months ended September 30, 2024 include $17.7 million and $49.6 million of net premiums written and earned by our title insurance operations, compared to $20.6 million for the three and nine months ended September 30, 2023. The increase in net premiums written and earned was also due to the increase in our average IIF from $237.3 billion for the three months ended September 30, 2023 to $242.1 billion for the three months ended and September 30, 2024, and from $233.1 billion for the nine months ended September 30, 2023 to $240.2 billion for the nine months ended September 30, 2024. The average net premium rate was 0.35% and 0.35% for the three months ended September 30, 2024 and 2023, respectively. The average net premium rate was 0.36% and 0.34% in the nine months ended September 30, 2024 and 2023, respectively. The increase in the average net premium rate in the nine month period ended September 30, 2024 compared to the same period in 2023 was a result of a decrease in ceded premium, changes in the mix of mortgages we insure, higher persistency and changes in our pricing. In the nine months ended September 30, 2024, ceded premiums decreased to $92.5 million from $103.4 million in the nine months ended September 30, 2023 due to a decrease in outstanding excess of loss reinsurance in the nine months ended September 30, 2024 than the comparable period of the prior year, as a result of the retiring of outstanding notes for two of our seasoned ILN transactions in 2023.

Current wording

Net premiums earned increased in the three months ended March 31, 2025 by 1.4% compared to the three months ended March 31, 2024. The increase in net premiums earned was due to the increase in our average IIF from $238.6 billion for the three months ended March 31, 2024 to $244.0 billion for the three months ended and March 31, 2025. The average net premium rate was 0.36% for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

In the three months ended September 30, 2024 and 2023, unearned premiums decreased by $6.0 million and $6.2 million, respectively. The change in unearned premiums was a result of net premiums written on single premium policies of $2.4 million and $4.7 million, respectively, which was offset by $8.4 million and $10.9 million, respectively, of unearned premium that was recognized in earnings during the periods. In the nine months ended September 30, 2024 and 2023, unearned premiums decreased by $19.3 million and $15.2 million, respectively. This was a result of net premiums written on single premium policies of $6.9 million and $18.9 million, respectively, which was offset by $26.2 million and $34.1 million, respectively, of unearned premium that was recognized in earnings during the periods.

Current wording

In the three months ended March 31, 2025 and 2024, unearned premiums decreased by $7.6 million and $7.1 million, respectively. The change in unearned premiums was a result of net premiums written on single premium policies of $1.8 million and $2.9 million, respectively, which was offset by $9.4 million and $10.0 million, respectively, of unearned premium that was recognized in earnings during the periods.

Previous wording

In the three months ended September 30, 2024 we recorded a provision for losses of $30.7 million compared to a provision of $10.8 million for the three months ended September 30, 2023. In the nine months ended September 30, 2024 we recorded a provision for losses of $40.2 million compared to a provision of $11.9 million for the nine months ended September 30, 2023. The increases in the provision for losses in the three and nine months ended September 30, 2024 compared to the comparable periods of the prior year was primarily due to increases in new defaults reported, resulting in increases in the provision for losses recorded for current year defaults, partially offset by cure activity for defaults reported in prior years.

Current wording

In the three months ended March 31, 2025 we recorded a provision for losses of $30.7 million compared to a provision of $9.3 million for the three months ended March 31, 2024. The increase in the provision for losses in the three months ended March 31, 2025 compared to the same period in the prior year was primarily due to an increase in new defaults in the three months ended March 31, 2025, partially offset by an increase in cures, as well as the aging of defaults remaining within the mortgage insurance portfolio as of March 31, 2025, which resulted in an increase in our reserve per default.

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

During the three months ended September 30, 2024, the provision for losses and LAE was a provision of $30.7 million, comprised of $53.6 million of current year losses partially offset by $22.9 million of favorable prior years’ loss development. During the three months ended September 30, 2023, the provision for losses and LAE was $10.8 million, comprised of $37.5 million of current year losses partially offset by $26.7 million of favorable prior years’ loss development. In both periods, the 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 three months ended March 31, 2025, the provision for losses and LAE was a provision of $30.7 million, comprised of $48.9 million of current year losses partially offset by $18.2 million of favorable prior years’ loss development. During the three months ended March 31, 2024, the provision for losses and LAE was $9.3 million, comprised of $39.4 million of current year losses partially offset by $30.1 million of favorable prior years’ loss development. In both periods, the 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

•Compensation and benefits increased in the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023 primarily due to an increase in the average number of employees during the periods, as well as increased stock-based compensation expense. Compensation and benefits includes salaries, wages and bonus, stock-based compensation expense, benefits and payroll taxes.

Current wording

•Compensation and benefits increased during the three months ended March 31, 2025 compared to the same period in 2024 primarily due to an increase in stock based compensation expense. Compensation and benefits includes salaries, wages and bonus, stock compensation expense, benefits and payroll taxes. The first quarter of each year typically has higher compensation and benefits expense than the subsequent quarters due to payroll taxes on annual bonus payouts and vesting of nonvested stock and stock units, as well as higher stock-based compensation expense.

Previous wording

•Other expenses decreased in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 primarily as a result of decreases in professional fees and an increase in ceding commission earned under the QSR Agreements. Other expenses increased for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 primarily as a result of a full year-to-date period of title insurance and settlement services expenses as well as increases in software and occupancy related expenses, partially offset by a decrease in professional fees and an increase in ceding commission earned under the QSR Agreements. In the three and nine months ended September 30, 2023, other expenses included approximately $0.2 million and $4.4 million, respectively, 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 were largely unchanged for the three months ended March 31, 2025 compared to the same period in 2024. Other expenses include professional fees, travel, marketing, hardware, software, rent, depreciation and amortization and other facilities expenses.

Previous wording

As of September 30, 2024, we had substantial liquidity with cash of $109.3 million, short-term investments of $1.0 billion and fixed maturity investments of $4.9 billion. We also had $500 million available capacity under our Revolving Credit Facility. Holding company net cash and investments available for sale totaled $991.2 million at September 30, 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 September 30, 2024.

Current wording

As of March 31, 2025, we had substantial liquidity with cash of $208.1 million, short-term investments of $537.0 million and fixed maturity investments of $5.3 billion. We also had $500 million available capacity under our Revolving Credit Facility. Holding company net cash and investments available for sale totaled $1.0 billion at March 31, 2025. 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 March 31, 2025.

Previous wording

Our U.S. mortgage insurance subsidiaries are subject to certain capital and dividend rules and regulations prescribed by jurisdictions in which they are authorized to operate and the GSEs. Under the insurance laws of the Commonwealth of Pennsylvania, the insurance subsidiaries may pay dividends during any twelve-month period in an amount equal to the greater of (i) 10% of the preceding year-end statutory policyholders' surplus or (ii) the preceding year’s statutory net income. The Pennsylvania statute also requires that dividends and other distributions be paid out of positive unassigned surplus without prior approval. At September 30, 2024, Essent Guaranty had unassigned surplus of approximately $362.8 million and Essent PA had unassigned surplus of approximately $22.2 million. As of September 30, 2024, Essent Guaranty and Essent PA could pay additional ordinary dividends in 2024 of $261.8 million and $5.4 million, respectively.

Current wording

Our U.S. insurance subsidiaries are subject to certain capital and dividend rules and regulations prescribed by jurisdictions in which they are authorized to operate and, in the case of Essent Guaranty, the GSEs. Under the insurance laws of the Commonwealth of Pennsylvania, the insurance subsidiaries may pay dividends during any twelve-month period in an amount equal to the greater of (i) 10% of the preceding year-end statutory policyholders' surplus or (ii) the preceding year’s statutory net income. The Pennsylvania statute also requires that, without the prior approval of the Pennsylvania Insurance Department, dividends and other distributions may only be paid out of positive unassigned surplus. At March 31, 2025, Essent Guaranty had unassigned surplus of approximately $405.4 million. As of March 31, 2025, Essent Guaranty could pay additional ordinary dividends in 2025 of $405.4 million.

Previous wording

Essent Re is subject to certain dividend restrictions as prescribed by the Bermuda Monetary Authority and under certain agreements with counterparties. In connection with a quota share reinsurance agreement with Essent Guaranty, Essent Re has agreed to maintain a minimum total equity of $100 million. As of September 30, 2024, Essent Re had total equity of $1.8 billion. In connection with its insurance and reinsurance activities, Essent Re is required to maintain assets in trusts for the benefit of its contractual counterparties. See Note 3 to our condensed consolidated financial statements. At September 30, 2024, our insurance subsidiaries were in compliance with these rules, regulations and agreements.

Current wording

Essent Re is subject to certain dividend restrictions as prescribed by the Bermuda Monetary Authority and under certain agreements with counterparties. Class 3B insurers must obtain the BMA's prior approval for a reduction by 15% or more of total statutory capital or for a reduction by 25% or more of total statutory capital and surplus as set forth in its previous year's statutory financial statements. In connection with a quota share reinsurance agreement with Essent Guaranty, Essent Re has agreed to maintain a minimum total equity of $100 million. As of March 31, 2025, Essent Re had total equity of $1.8 billion. In connection with its insurance and reinsurance activities, Essent Re is required to maintain assets in trusts for the benefit of its contractual counterparties. See Note 3 to our condensed consolidated financial statements. As of March 31, 2025, Essent Re could pay additional dividends in 2025 of $341.9 million without prior approval from the BMA.

Previous wording

Cash flow provided by operating activities totaled $634.8 million for the nine months ended September 30, 2024, as compared to $547.5 million for the nine months ended September 30, 2023. The increase in cash flow provided by operating activities was primarily due to increases in net premiums written and investment income partially offset by an increase in operating expenses paid in the nine months ended September 30, 2024.

Current wording

Cash flow provided by operating activities totaled $221.6 million for the three months ended March 31, 2025, as compared to $216.9 million for the three months ended March 31, 2024. The increase in cash flow provided by operating activities was primarily due to increases in investment income and other income partially offset by an increase in operating expenses paid in the three months ended March 31, 2025.

Previous wording

Cash flow used in investing activities totaled $599.0 million for nine months ended September 30, 2024 compared to $396.3 million used in investing activities for the nine months ended September 30, 2023. In both periods, cash flow used in investing activities relates primarily to investing cash flows from operations.

Current wording

Cash flows provided by investing activities totaled $55.5 million for the three months ended March 31, 2025 compared to $151.3 million used in investing activities for the three months ended March 31, 2024. Cash flows provided by investing activities in the three months ended March 31, 2025 were the result of maintaining higher cash balances to fund future financing activities. In the three months ended March 31, 2024 cash flow used in investing activities relates primarily to investing cash flows from operations.