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Essent Group Ltd. Announces Fourth Quarter & Full Year 2020 Results; Declares Quarterly Dividend
Friday February 19, 2021. 03:01 PM , from Digital Pro Sound
HAMILTON, Bermuda–(BUSINESS WIRE)–Essent Group Ltd. (NYSE: ESNT) today reported net income for the quarter ended December 31, 2020 of $123.6 million or $1.10 per diluted share, compared to $147.0 million or $1.49 per diluted share for the quarter ended December 31, 2019. For the full year 2020, net income was $413.0 million, or $3.88 per diluted share, compared to $555.7 million, or $5.66 per diluted share for 2019.
Essent also announced today that its Board of Directors has declared a quarterly cash dividend of $0.16 per common share. The dividend is payable on March 19, 2021, to shareholders of record on March 10, 2021. “2020 was a challenging year for our country and economy, however, we were pleased with the confidence that our buy, manage and distribute operating model provides our stakeholders in navigating the COVID-19 environment,” said Mark A. Casale, Chairman and Chief Executive Officer. “During 2020, we were also pleased with housing’s resilience, which remains the bright spot in the economy entering 2021 as supply-demand imbalances and favorable first-time home buying trends persist which are positive for our franchise.” Fourth Quarter & Full Year 2020 Financial Highlights: Insurance in force as of December 31, 2020 was $198.9 billion, compared to $190.8 billion as of September 30, 2020 and $164.0 billion as of December 31, 2019. New insurance written for the fourth quarter was $29.6 billion, compared to $36.7 billion in the third quarter of 2020 and $15.8 billion in the fourth quarter of 2019. Net premiums earned for the fourth quarter were $222.3 million, compared to $222.3 million in the third quarter of 2020 and $207.7 million in the fourth quarter of 2019. The expense ratio for the fourth quarter was 16.6%, compared to 16.7% in the third quarter of 2020 and 19.9% in the fourth quarter of 2019. The provision for losses and LAE for the fourth quarter was $62.1 million, compared to a provision of $55.3 million in the third quarter of 2020 and a provision of $10.9 million in the fourth quarter of 2019. The percentage of loans in default as of December 31, 2020 was 3.93%, compared to 4.54% as of September 30, 2020 and 0.85% as of December 31, 2019. As of January 31, 2021, the percentage of loans in default was 3.89%. The combined ratio for the fourth quarter was 44.5%, compared to 41.6% in the third quarter of 2020 and 25.1% in the fourth quarter of 2019. The consolidated balance of cash and investments at December 31, 2020 was $4.8 billion, including cash and investment balances at Essent Group Ltd. of $562.7 million. The combined risk-to-capital ratio of the U.S. mortgage insurance business, which includes statutory capital for both Essent Guaranty, Inc. and Essent Guaranty of PA, Inc., was 11.1:1 as of December 31, 2020. On October 8, 2020, Essent Guaranty, Inc. obtained $399.2 million of fully collateralized excess of loss reinsurance coverage on mortgage insurance policies written by Essent in September 2019 through July 2020 from Radnor Re 2020-2 Ltd., a newly formed Bermuda special purpose insurer. Radnor Re 2020-2 Ltd. is not a subsidiary or an affiliate of Essent Group Ltd. On October 14, 2020, Essent Group Ltd. entered into an amended and restated credit facility, increasing to $625 million the committed capacity and extending the contractual maturity to October 16, 2023. Conference Call: Essent management will hold a conference call at 10:00 AM Eastern time today to discuss its results. The conference call will be broadcast live over the Internet at The call may also be accessed by dialing 833-287-0797 inside the U.S., or 647-689-4456 for international callers, using passcode 4848097 or by referencing Essent. A replay of the webcast will be available on the Essent website approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available approximately two hours after the call ends for a period of two weeks, using the following dial-in numbers and passcode: 800-585-8367 inside the U.S., or 416-621-4642 for international callers, passcode 4848097. In addition to the information provided in the company’s earnings news release, other statistical and financial information, which may be referred to during the conference call, will be available on Essent’s website at Forward-Looking Statements: This press release may include “forward-looking statements” which are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” or “potential” or the negative thereof or variations thereon or similar terminology. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following: the impact of COVID-19 and related economic conditions; changes in or to Fannie Mae and Freddie Mac (the “GSEs”), whether through Federal legislation, restructurings or a shift in business practices; failure to continue to meet the mortgage insurer eligibility requirements of the GSEs; competition for customers; lenders or investors seeking alternatives to private mortgage insurance; an increase in the number of loans insured through Federal government mortgage insurance programs, including those offered by the Federal Housing Administration; decline in new insurance written and franchise value due to loss of a significant customer; decline in the volume of low down payment mortgage originations; the definition of “Qualified Mortgage” reducing the size of the mortgage origination market or creating incentives to use government mortgage insurance programs; the definition of “Qualified Residential Mortgage” reducing the number of low down payment loans or lenders and investors seeking alternatives to private mortgage insurance; the implementation of the Basel III Capital Accord discouraging the use of private mortgage insurance; a decrease in the length of time that insurance policies are in force; uncertainty of loss reserve estimates; deteriorating economic conditions; our non-U.S. operations becoming subject to U.S. Federal income taxation; becoming considered a passive foreign investment company for U.S. Federal income tax purposes; and other risks and factors described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on February 18, 2020, as subsequently updated through other reports we file with the Securities and Exchange Commission. Any forward-looking information presented herein is made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise. About the Company: Essent Group Ltd. (NYSE: ESNT) is a Bermuda-based holding company (collectively with its subsidiaries, “Essent”) which, through its wholly-owned subsidiary, Essent Guaranty, Inc., offers private mortgage insurance for single-family mortgage loans in the United States. Essent provides private capital to mitigate mortgage credit risk, allowing lenders to make additional mortgage financing available to prospective homeowners. Headquartered in Radnor, Pennsylvania, Essent Guaranty, Inc. is licensed to write mortgage insurance in all 50 states and the District of Columbia, and is approved by Fannie Mae and Freddie Mac. Essent also offers mortgage-related insurance, reinsurance and advisory services through its Bermuda-based subsidiary, Essent Reinsurance Ltd. Essent is committed to supporting environmental, social and governance (“ESG”) initiatives that are relevant to the company and align with the companywide dedication to responsible corporate citizenship that positively impacts the community and people served. Additional information regarding Essent may be found at www.essentgroup.com and www.essent.us. Source: Essent Group Ltd. Essent Group Ltd. and Subsidiaries Financial Results and Supplemental Information (Unaudited) Quarter and Year Ended December 31, 2020 Exhibit A Condensed Consolidated Statements of Comprehensive Income (Unaudited) Exhibit B Condensed Consolidated Balance Sheets (Unaudited) Exhibit C Historical Quarterly Data Exhibit D New Insurance Written Exhibit E Insurance in Force and Risk in Force Exhibit F Other Risk in Force Exhibit G Portfolio Vintage Data Exhibit H Reinsurance Vintage Data Exhibit I Portfolio Geographic Data Exhibit J Defaults, Reserve for Losses and LAE, and Claims Exhibit K Investments Available for Sale Exhibit L Insurance Company Capital Exhibit M Reconciliation of Non-GAAP Financial Measure – Adjusted Book Value per Share Exhibit A Essent Group Ltd. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended December 31, Year Ended December 31, (In thousands, except per share amounts) 2020 2019 2020 2019 Revenues: Direct premiums written $ 245,437 $ 207,263 $ 922,851 $ 796,344 Ceded premiums (31,194 ) (10,770 ) (88,738 ) (35,499 ) Net premiums written 214,243 196,493 834,113 760,845 Decrease in unearned premiums 8,096 11,178 28,451 16,580 Net premiums earned 222,339 207,671 862,564 777,425 Net investment income 20,949 21,977 80,087 83,542 Realized investment gains, net 564 833 2,697 3,229 Other income (loss) 3,347 (1,719 ) 9,806 3,371 Total revenues 247,199 228,762 955,154 867,567 Losses and expenses: Provision for losses and LAE 62,073 10,929 301,293 32,986 Other underwriting and operating expenses 36,825 41,231 154,691 165,369 Interest expense 2,149 2,218 9,074 10,151 Total losses and expenses 101,047 54,378 465,058 208,506 Income before income taxes 146,152 174,384 490,096 659,061 Income tax expense 22,550 27,426 77,055 103,348 Net income $ 123,602 $ 146,958 $ 413,041 $ 555,713 Earnings per share: Basic $ 1.10 $ 1.50 $ 3.89 $ 5.68 Diluted 1.10 1.49 3.88 5.66 Weighted average shares outstanding: Basic 111,908 97,830 106,098 97,762 Diluted 112,310 98,376 106,376 98,227 Net income $ 123,602 $ 146,958 $ 413,041 $ 555,713 Other comprehensive income (loss): Change in unrealized appreciation (depreciation) of investments 5,840 (6,540 ) 82,087 85,180 Total other comprehensive income (loss) 5,840 (6,540 ) 82,087 85,180 Comprehensive income $ 129,442 $ 140,418 $ 495,128 $ 640,893 Loss ratio 27.9 % 5.3 % 34.9 % 4.2 % Expense ratio 16.6 19.9 17.9 21.3 Combined ratio 44.5 % 25.1 % 52.9 % 25.5 % Exhibit B Essent Group Ltd. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) December 31, December 31, (In thousands, except per share amounts) 2020 2019 Assets Investments Fixed maturities available for sale, at fair value $ 3,838,513 $ 3,035,385 Short-term investments available for sale, at fair value 726,860 315,362 Total investments available for sale 4,565,373 3,350,747 Other invested assets 88,904 78,873 Total investments 4,654,277 3,429,620 Cash 102,830 71,350 Accrued investment income 19,948 18,535 Accounts receivable 50,140 40,655 Deferred policy acquisition costs 17,005 15,705 Property and equipment 15,095 17,308 Prepaid federal income tax 302,636 261,885 Other assets 40,793 18,367 Total assets $ 5,202,724 $ 3,873,425 Liabilities and Stockholders’ Equity Liabilities Reserve for losses and LAE $ 374,941 $ 69,362 Unearned premium reserve 250,436 278,887 Net deferred tax liability 305,109 249,620 Credit facility borrowings, net of deferred costs 321,720 224,237 Other accrued liabilities 87,885 66,474 Total liabilities 1,340,091 888,580 Commitments and contingencies Stockholders’ Equity Common shares, $0.015 par value: Authorized – 233,333; issued and outstanding – 112,423 shares in 2020 and 98,394 shares in 2019 1,686 1,476 Additional paid-in capital 1,571,163 1,118,655 Accumulated other comprehensive income 138,274 56,187 Retained earnings 2,151,510 1,808,527 Total stockholders’ equity 3,862,633 2,984,845 Total liabilities and stockholders’ equity $ 5,202,724 $ 3,873,425 Return on average equity 12.1 % 20.8 % Exhibit C Essent Group Ltd. and Subsidiaries Supplemental Information Historical Quarterly Data 2020 2019 Selected Income Statement Data December 31 September 30 June 30 March 31 December 31 September 30 June 30 March 31 (In thousands, except per share amounts) Revenues: Net premiums written $ 214,243 $ 222,223 $ 205,904 $ 191,743 $ 196,493 $ 198,304 $ 188,404 $ 177,644 Net premiums earned
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