Bermuda | Not Applicable | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
Clarendon House 2 Church Street Hamilton HM11, Bermuda (Address of principal executive offices and zip code) (441) 297-9901 (Registrant’s telephone number, including area code) |
Large accelerated filer x | Accelerated filer o | |
Non-accelerated filer o | Smaller reporting company o |
• | changes in or to Fannie Mae and Freddie Mac, which we refer to collectively as the GSEs, whether through Federal legislation, restructurings or a shift in business practices; |
• | failure to continue to meet the mortgage insurer eligibility requirements of the GSEs; |
• | competition for our customers or the loss of a significant customer; |
• | lenders or investors seeking alternatives to private mortgage insurance; |
• | increase in the number of loans insured through Federal government mortgage insurance programs, including those offered by the Federal Housing Administration; |
• | decline in the volume of low down payment mortgage originations; |
• | uncertainty of loss reserve estimates; |
• | decrease in the length of time our insurance policies are in force; |
• | deteriorating economic conditions; |
• | the definition of “Qualified Mortgage” reducing the size of the mortgage origination market or creating incentives to use government mortgage insurance programs; |
• | the definition of “Qualified Residential Mortgage” reducing the number of low down payment loans or lenders and investors seeking alternatives to private mortgage insurance; |
• | the implementation of the Basel III Capital Accord, which may discourage the use of private mortgage insurance; |
• | management of risk in our investment portfolio; |
• | fluctuations in interest rates; |
• | inadequacy of the premiums we charge to compensate for our losses incurred; |
• | dependence on management team and qualified personnel; |
• | disturbance to our information technology systems; |
• | change in our customers’ capital requirements discouraging the use of mortgage insurance; |
• | declines in the value of borrowers’ homes; |
• | limited availability of capital; |
• | unanticipated claims arise under and risks associated with our contract underwriting program; |
• | industry practice that loss reserves are established only upon a loan default; |
• | disruption in mortgage loan servicing; |
• | risk of future legal proceedings; |
• | customers’ technological demands; |
• | our non-U.S. operations becoming subject to U.S. Federal income taxation; |
• | becoming considered a passive foreign investment company for U.S. Federal income tax purposes; and |
• | potential inability of our insurance subsidiaries to pay dividends. |
March 31, | December 31, | |||||||
(In thousands, except per share amounts) | 2016 | 2015 | ||||||
Assets | ||||||||
Investments available for sale, at fair value | ||||||||
Fixed maturities (amortized cost: 2016 — $1,265,279; 2015 — $1,189,978) | $ | 1,285,014 | $ | 1,190,638 | ||||
Short-term investments (amortized cost: 2016 — $83,488; 2015 — $85,994) | 83,488 | 85,996 | ||||||
Total investments | 1,368,502 | 1,276,634 | ||||||
Cash | 28,206 | 24,606 | ||||||
Accrued investment income | 8,431 | 7,768 | ||||||
Accounts receivable | 17,200 | 16,637 | ||||||
Deferred policy acquisition costs | 11,686 | 11,529 | ||||||
Property and equipment (at cost, less accumulated depreciation of $43,479 in 2016 and $42,479 in 2015) | 9,232 | 9,021 | ||||||
Prepaid federal income tax | 119,522 | 119,412 | ||||||
Other assets | 2,953 | 3,492 | ||||||
Total assets | $ | 1,565,732 | $ | 1,469,099 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Reserve for losses and LAE | $ | 20,470 | $ | 17,760 | ||||
Unearned premium reserve | 207,108 | 201,045 | ||||||
Accrued payroll and bonuses | 6,629 | 15,955 | ||||||
Net deferred tax liability | 108,923 | 87,964 | ||||||
Securities purchases payable | 30,157 | 14,996 | ||||||
Other accrued liabilities | 10,950 | 12,138 | ||||||
Total liabilities | 384,237 | 349,858 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ Equity | ||||||||
Common shares, $0.015 par value: | ||||||||
Authorized - 233,333; issued - 93,070 shares in 2016 and 92,650 shares in 2015 | 1,396 | 1,390 | ||||||
Additional paid-in capital | 905,159 | 904,221 | ||||||
Accumulated other comprehensive income (loss) | 13,260 | (99 | ) | |||||
Retained earnings | 261,680 | 213,729 | ||||||
Total stockholders’ equity | 1,181,495 | 1,119,241 | ||||||
Total liabilities and stockholders’ equity | $ | 1,565,732 | $ | 1,469,099 |
Three Months Ended March 31, | ||||||||
(In thousands, except per share amounts) | 2016 | 2015 | ||||||
Revenues: | ||||||||
Net premiums written | $ | 100,466 | $ | 82,257 | ||||
Increase in unearned premiums | (6,063 | ) | (7,219 | ) | ||||
Net premiums earned | 94,403 | 75,038 | ||||||
Net investment income | 6,183 | 4,280 | ||||||
Realized investment gains, net | 471 | 649 | ||||||
Other income | 1,409 | 44 | ||||||
Total revenues | 102,466 | 80,011 | ||||||
Losses and expenses: | ||||||||
Provision for losses and LAE | 3,731 | 1,999 | ||||||
Other underwriting and operating expenses | 31,388 | 27,498 | ||||||
Total losses and expenses | 35,119 | 29,497 | ||||||
Income before income taxes | 67,347 | 50,514 | ||||||
Income tax expense | 19,396 | 15,676 | ||||||
Net income | $ | 47,951 | $ | 34,838 | ||||
Earnings per share: | ||||||||
Basic | $ | 0.53 | $ | 0.39 | ||||
Diluted | 0.52 | 0.38 | ||||||
Weighted average shares outstanding: | ||||||||
Basic | 90,785 | 90,185 | ||||||
Diluted | 91,859 | 91,514 | ||||||
Net income | $ | 47,951 | $ | 34,838 | ||||
Other comprehensive income: | ||||||||
Change in unrealized appreciation of investments, net of tax expense of $5,714 in 2016 and $2,110 in 2015 | 13,359 | 4,889 | ||||||
Total other comprehensive income | 13,359 | 4,889 | ||||||
Comprehensive income | $ | 61,310 | $ | 39,727 |
(In thousands) | Common Shares | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||||
Balance at January 1, 2015 | $ | 1,388 | $ | 893,285 | $ | 4,667 | $ | 56,398 | $ | — | $ | 955,738 | ||||||||||||
Net income | 157,331 | 157,331 | ||||||||||||||||||||||
Other comprehensive loss | (4,766 | ) | (4,766 | ) | ||||||||||||||||||||
Issuance of management incentive shares | 6 | (6 | ) | — | ||||||||||||||||||||
Forfeiture of management incentive shares | (1 | ) | 1 | — | ||||||||||||||||||||
Stock-based compensation expense | 13,633 | 13,633 | ||||||||||||||||||||||
Excess tax benefits from stock-based compensation expense | 2,420 | 2,420 | ||||||||||||||||||||||
Treasury stock acquired | (5,168 | ) | (5,168 | ) | ||||||||||||||||||||
Cancellation of treasury stock | (3 | ) | (5,165 | ) | 5,168 | — | ||||||||||||||||||
Other equity transactions | 53 | 53 | ||||||||||||||||||||||
Balance at December 31, 2015 | $ | 1,390 | $ | 904,221 | $ | (99 | ) | $ | 213,729 | $ | — | $ | 1,119,241 | |||||||||||
Net income | 47,951 | 47,951 | ||||||||||||||||||||||
Other comprehensive income | 13,359 | 13,359 | ||||||||||||||||||||||
Issuance of management incentive shares | 9 | (9 | ) | — | ||||||||||||||||||||
Forfeiture of management incentive shares | — | — | — | |||||||||||||||||||||
Stock-based compensation expense | 3,782 | 3,782 | ||||||||||||||||||||||
Excess tax benefits from stock-based compensation expense | 1,005 | 1,005 | ||||||||||||||||||||||
Treasury stock acquired | (3,843 | ) | (3,843 | ) | ||||||||||||||||||||
Cancellation of treasury stock | (3 | ) | (3,840 | ) | 3,843 | — | ||||||||||||||||||
Balance at March 31, 2016 | $ | 1,396 | $ | 905,159 | $ | 13,260 | $ | 261,680 | $ | — | $ | 1,181,495 |
Three Months Ended March 31, | ||||||||
(In thousands) | 2016 | 2015 | ||||||
Operating Activities | ||||||||
Net income | $ | 47,951 | $ | 34,838 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Gain on the sale of investments, net | (471 | ) | (649 | ) | ||||
Depreciation and amortization | 1,000 | 734 | ||||||
Stock-based compensation expense | 3,782 | 3,261 | ||||||
Amortization of premium on investment securities | 2,680 | 2,360 | ||||||
Deferred income tax provision | 15,245 | 14,280 | ||||||
Excess tax benefits from stock-based compensation | (1,005 | ) | (2,280 | ) | ||||
Change in: | ||||||||
Accrued investment income | (663 | ) | (492 | ) | ||||
Accounts receivable | (563 | ) | (1,151 | ) | ||||
Deferred policy acquisition costs | (157 | ) | (255 | ) | ||||
Prepaid federal income tax | (110 | ) | (4,000 | ) | ||||
Other assets | 539 | (1,584 | ) | |||||
Reserve for losses and LAE | 2,710 | 1,638 | ||||||
Unearned premium reserve | 6,063 | 7,219 | ||||||
Accrued liabilities | (9,509 | ) | (6,739 | ) | ||||
Net cash provided by operating activities | 67,492 | 47,180 | ||||||
Investing Activities | ||||||||
Net change in short-term investments | 2,508 | 98,766 | ||||||
Purchase of investments available for sale | (146,316 | ) | (220,284 | ) | ||||
Proceeds from maturity of investments available for sale | 1,798 | 5,525 | ||||||
Proceeds from sales of investments available for sale | 82,167 | 71,077 | ||||||
Purchase of property and equipment, net | (1,211 | ) | (1,527 | ) | ||||
Net cash used in investing activities | (61,054 | ) | (46,443 | ) | ||||
Financing Activities | ||||||||
Treasury stock acquired | (3,843 | ) | (5,023 | ) | ||||
Excess tax benefits from stock-based compensation | 1,005 | 2,280 | ||||||
Payment of offering costs | — | (537 | ) | |||||
Other financing activities | — | 34 | ||||||
Net cash used in financing activities | (2,838 | ) | (3,246 | ) | ||||
Net increase (decrease) in cash | 3,600 | (2,509 | ) | |||||
Cash at beginning of year | 24,606 | 24,411 | ||||||
Cash at end of period | $ | 28,206 | $ | 21,902 | ||||
Supplemental Disclosure of Cash Flow Information | ||||||||
Income tax payments | $ | (1,800 | ) | $ | — |
March 31, 2016 (In thousands) | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
U.S. Treasury securities | $ | 208,462 | $ | 3,329 | $ | (11 | ) | $ | 211,780 | |||||||
U.S. agency securities | 14,548 | 109 | — | 14,657 | ||||||||||||
U.S. agency mortgage-backed securities | 176,000 | 2,085 | (82 | ) | 178,003 | |||||||||||
Municipal debt securities(1) | 293,448 | 10,853 | (190 | ) | 304,111 | |||||||||||
Corporate debt securities(2) | 411,527 | 6,276 | (1,115 | ) | 416,688 | |||||||||||
Mortgage-backed securities | 53,171 | 633 | (758 | ) | 53,046 | |||||||||||
Asset-backed securities | 123,123 | 203 | (1,597 | ) | 121,729 | |||||||||||
Money market funds | 68,488 | — | — | 68,488 | ||||||||||||
Total investments available for sale | $ | 1,348,767 | $ | 23,488 | $ | (3,753 | ) | $ | 1,368,502 |
December 31, 2015 (In thousands) | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
U.S. Treasury securities | $ | 178,460 | $ | 235 | $ | (1,088 | ) | $ | 177,607 | |||||||
U.S. agency securities | 13,955 | 5 | (178 | ) | 13,782 | |||||||||||
U.S. agency mortgage-backed securities | 160,181 | 474 | (1,053 | ) | 159,602 | |||||||||||
Municipal debt securities(1) | 272,733 | 7,357 | (262 | ) | 279,828 | |||||||||||
Corporate debt securities(2) | 399,246 | 1,338 | (3,852 | ) | 396,732 | |||||||||||
Mortgage-backed securities | 56,380 | 97 | (1,121 | ) | 55,356 | |||||||||||
Asset-backed securities | 127,919 | 29 | (1,319 | ) | 126,629 | |||||||||||
Money market funds | 67,098 | — | — | 67,098 | ||||||||||||
Total investments available for sale | $ | 1,275,972 | $ | 9,535 | $ | (8,873 | ) | $ | 1,276,634 |
March 31, | December 31, | |||||
(1) The following table summarizes municipal debt securities as of : | 2016 | 2015 | ||||
Special revenue bonds | 67.8 | % | 70.4 | % | ||
General obligation bonds | 27.5 | 24.5 | ||||
Certificate of participation bonds | 3.7 | 4.0 | ||||
Tax allocation bonds | 1.0 | 1.1 | ||||
Total | 100.0 | % | 100.0 | % |
March 31, | December 31, | |||||
(2) The following table summarizes corporate debt securities as of : | 2016 | 2015 | ||||
Financial | 42.2 | % | 44.9 | % | ||
Consumer, non-cyclical | 17.4 | 14.8 | ||||
Energy | 7.9 | 9.0 | ||||
Communications | 6.9 | 7.1 | ||||
Industrial | 6.4 | 5.2 | ||||
Consumer, cyclical | 6.0 | 6.2 | ||||
Utilities | 6.0 | 5.0 | ||||
Basic materials | 3.8 | 4.0 | ||||
Technology | 3.4 | 3.8 | ||||
Total | 100.0 | % | 100.0 | % |
(In thousands) | Amortized Cost | Fair Value | ||||||
U.S. Treasury securities: | ||||||||
Due in 1 year | $ | 38,647 | $ | 38,656 | ||||
Due after 1 but within 5 years | 66,474 | 67,147 | ||||||
Due after 5 but within 10 years | 88,230 | 90,652 | ||||||
Due after 10 years | 15,111 | 15,325 | ||||||
Subtotal | 208,462 | 211,780 | ||||||
U.S. agency securities: | ||||||||
Due in 1 year | 2,408 | 2,413 | ||||||
Due after 1 but within 5 years | 12,140 | 12,244 | ||||||
Subtotal | 14,548 | 14,657 | ||||||
Municipal debt securities: | ||||||||
Due in 1 year | 2,043 | 2,044 | ||||||
Due after 1 but within 5 years | 86,093 | 87,061 | ||||||
Due after 5 but within 10 years | 106,907 | 112,055 | ||||||
Due after 10 years | 98,405 | 102,951 | ||||||
Subtotal | 293,448 | 304,111 | ||||||
Corporate debt securities: | ||||||||
Due in 1 year | 20,135 | 20,124 | ||||||
Due after 1 but within 5 years | 265,999 | 267,539 | ||||||
Due after 5 but within 10 years | 124,875 | 128,491 | ||||||
Due after 10 years | 518 | 534 | ||||||
Subtotal | 411,527 | 416,688 | ||||||
U.S. agency mortgage-backed securities | 176,000 | 178,003 | ||||||
Mortgage-backed securities | 53,171 | 53,046 | ||||||
Asset-backed securities | 123,123 | 121,729 | ||||||
Money market funds | 68,488 | 68,488 | ||||||
Total investments available for sale | $ | 1,348,767 | $ | 1,368,502 |
Three Months Ended March 31, | ||||||||
(In thousands) | 2016 | 2015 | ||||||
Realized gross gains | $ | 1,148 | $ | 788 | ||||
Realized gross losses | 670 | 139 |
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
March 31, 2016 (In thousands) | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||||||||||
U.S. Treasury securities | $ | 3,819 | $ | (11 | ) | $ | — | $ | — | $ | 3,819 | $ | (11 | ) | ||||||||||
U.S. agency mortgage-backed securities | 17,479 | (27 | ) | 5,046 | (55 | ) | 22,525 | (82 | ) | |||||||||||||||
Municipal debt securities | 21,414 | (140 | ) | 4,616 | (50 | ) | 26,030 | (190 | ) | |||||||||||||||
Corporate debt securities | 68,697 | (930 | ) | 20,307 | (185 | ) | 89,004 | (1,115 | ) | |||||||||||||||
Mortgage-backed securities | 9,984 | (282 | ) | 23,319 | (476 | ) | 33,303 | (758 | ) | |||||||||||||||
Asset-backed securities | 67,435 | (1,059 | ) | 24,703 | (538 | ) | 92,138 | (1,597 | ) | |||||||||||||||
Total | $ | 188,828 | $ | (2,449 | ) | $ | 77,991 | $ | (1,304 | ) | $ | 266,819 | $ | (3,753 | ) |
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
December 31, 2015 (In thousands) | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | ||||||||||||||||||
U.S. Treasury securities | $ | 110,699 | $ | (1,088 | ) | $ | — | $ | — | $ | 110,699 | $ | (1,088 | ) | ||||||||||
U.S. agency securities | 11,362 | (178 | ) | — | — | 11,362 | (178 | ) | ||||||||||||||||
U.S. agency mortgage-backed securities | 101,465 | (915 | ) | 3,683 | (138 | ) | 105,148 | (1,053 | ) | |||||||||||||||
Municipal debt securities | 47,850 | (255 | ) | 1,254 | (7 | ) | 49,104 | (262 | ) | |||||||||||||||
Corporate debt securities | 252,792 | (3,447 | ) | 9,404 | (405 | ) | 262,196 | (3,852 | ) | |||||||||||||||
Mortgage-backed securities | 23,360 | (458 | ) | 26,075 | (663 | ) | 49,435 | (1,121 | ) | |||||||||||||||
Asset-backed securities | 86,431 | (871 | ) | 26,364 | (448 | ) | 112,795 | (1,319 | ) | |||||||||||||||
Total | $ | 633,959 | $ | (7,212 | ) | $ | 66,780 | $ | (1,661 | ) | $ | 700,739 | $ | (8,873 | ) |
Three Months Ended March 31, | ||||||||
(In thousands) | 2016 | 2015 | ||||||
Fixed maturities | $ | 6,655 | $ | 4,653 | ||||
Short-term investments | 33 | 12 | ||||||
Gross investment income | 6,688 | 4,665 | ||||||
Investment expenses | (505 | ) | (385 | ) | ||||
Net investment income | $ | 6,183 | $ | 4,280 |
March 31, | December 31, | |||||||
(In thousands) | 2016 | 2015 | ||||||
Premiums receivable | $ | 16,784 | $ | 16,034 | ||||
Other receivables | 416 | 603 | ||||||
Total accounts receivable | 17,200 | 16,637 | ||||||
Less: Allowance for doubtful accounts | — | — | ||||||
Accounts receivable, net | $ | 17,200 | $ | 16,637 |
($ in thousands) | 2016 | 2015 | ||||||
Reserve for losses and LAE at beginning of period | $ | 17,760 | $ | 8,427 | ||||
Less: Reinsurance recoverables | — | — | ||||||
Net reserve for losses and LAE at beginning of period | 17,760 | 8,427 | ||||||
Add provision for losses and LAE, net of reinsurance, occurring in: | ||||||||
Current period | 5,080 | 2,705 | ||||||
Prior years | (1,349 | ) | (706 | ) | ||||
Net incurred losses during the current period | 3,731 | 1,999 | ||||||
Deduct payments for losses and LAE, net of reinsurance, occurring in: | ||||||||
Current period | 1 | — | ||||||
Prior years | 1,020 | 361 | ||||||
Net loss and LAE payments during the current period | 1,021 | 361 | ||||||
Net reserve for losses and LAE at end of period | 20,470 | 10,065 | ||||||
Plus: Reinsurance recoverables | — | — | ||||||
Reserve for losses and LAE at end of period | $ | 20,470 | $ | 10,065 | ||||
Loans in default at end of period | 1,060 | 505 |
Time and Performance- Based Share Awards | Time-Based Share Awards | Share Units | |||||||||||||||||||
(Shares in thousands) | Number of Shares | Weighted Average Grant Date Fair Value | Number of Shares | Weighted Average Grant Date Fair Value | Number of Share Units | Weighted Average Grant Date Fair Value | |||||||||||||||
Outstanding at beginning of year | 1,294 | $ | 15.15 | 890 | $ | 12.31 | 544 | $ | 19.84 | ||||||||||||
Granted | 209 | 17.01 | 181 | 17.01 | 154 | 17.01 | |||||||||||||||
Vested | — | N/A | (344 | ) | 11.66 | (210 | ) | 18.71 | |||||||||||||
Forfeited | — | N/A | (3 | ) | 0.27 | (4 | ) | 17.61 | |||||||||||||
Outstanding at March 31, 2016 | 1,503 | $ | 15.41 | 724 | $ | 13.85 | 484 | $ | 19.45 |
Performance level | Compounded Annual Book Value Per Share Growth | Nonvested Common Shares Earned | |||||
<13 | % | 0 | % | ||||
Threshold | 13 | % | 25 | % | |||
14 | % | 50 | % | ||||
15 | % | 75 | % | ||||
Maximum | ≥16 | % | 100 | % | |||
Three Months Ended March 31, | ||||||||
(In thousands) | 2016 | 2015 | ||||||
Compensation expense | $ | 3,782 | $ | 3,261 | ||||
Income tax benefit | 1,212 | 1,141 |
Three Months Ended March 31, | ||||||||
(In thousands, except per share amounts) | 2016 | 2015 | ||||||
Net income | $ | 47,951 | $ | 34,838 | ||||
Less: dividends declared | — | — | ||||||
Net income available to common shareholders | $ | 47,951 | $ | 34,838 | ||||
Basic earnings per share | $ | 0.53 | $ | 0.39 | ||||
Diluted earnings per share | $ | 0.52 | $ | 0.38 | ||||
Basic weighted average shares outstanding | 90,785 | 90,185 | ||||||
Dilutive effect of nonvested shares | 1,074 | 1,329 | ||||||
Diluted weighted average shares outstanding | 91,859 | 91,514 |
Three Months Ended March 31, 2016 | ||||||||||||
(In thousands) | Before Tax | Tax Effect | Net of Tax | |||||||||
Balance at beginning of period | $ | 661 | $ | (760 | ) | $ | (99 | ) | ||||
Other comprehensive income (loss): | ||||||||||||
Unrealized holding gains arising during the period | 19,551 | (5,845 | ) | 13,706 | ||||||||
Less: Reclassification adjustment for gains included in net income (1) | (478 | ) | 131 | (347 | ) | |||||||
Net unrealized gains on investments | 19,073 | (5,714 | ) | 13,359 | ||||||||
Other comprehensive income | 19,073 | (5,714 | ) | 13,359 | ||||||||
Balance at end of period | $ | 19,734 | $ | (6,474 | ) | $ | 13,260 |
Three Months Ended March 31, 2015 | ||||||||||||
(In thousands) | Before Tax | Tax Effect | Net of Tax | |||||||||
Balance at beginning of period | $ | 6,712 | $ | (2,045 | ) | $ | 4,667 | |||||
Other comprehensive income (loss): | ||||||||||||
Unrealized holding gains arising during the period | 7,648 | (2,337 | ) | 5,311 | ||||||||
Less: Reclassification adjustment for gains included in net income (1) | (649 | ) | 227 | (422 | ) | |||||||
Net unrealized gains on investments | 6,999 | (2,110 | ) | 4,889 | ||||||||
Other comprehensive income | 6,999 | (2,110 | ) | 4,889 | ||||||||
Balance at end of period | $ | 13,711 | $ | (4,155 | ) | $ | 9,556 |
(1) | Included in net realized investment gains on our condensed consolidated statements of comprehensive income. |
March 31, 2016 (In thousands) | Carrying Amount | Fair Value | ||||||
Financial Assets: | ||||||||
U.S. Treasury securities | $ | 211,780 | $ | 211,780 | ||||
U.S. agency securities | 14,657 | 14,657 | ||||||
U.S. agency mortgage-backed securities | 178,003 | 178,003 | ||||||
Municipal debt securities | 304,111 | 304,111 | ||||||
Corporate debt securities | 416,688 | 416,688 | ||||||
Mortgage-backed securities | 53,046 | 53,046 | ||||||
Asset-backed securities | 121,729 | 121,729 | ||||||
Money market funds | 68,488 | 68,488 | ||||||
Total investments | $ | 1,368,502 | $ | 1,368,502 | ||||
Financial Liabilities: | ||||||||
Derivative liabilities | $ | 898 | $ | 898 |
December 31, 2015 (In thousands) | Carrying Amount | Fair Value | ||||||
Financial Assets: | ||||||||
U.S. Treasury securities | $ | 177,607 | $ | 177,607 | ||||
U.S. agency securities | 13,782 | 13,782 | ||||||
U.S. agency mortgage-backed securities | 159,602 | 159,602 | ||||||
Municipal debt securities | 279,828 | 279,828 | ||||||
Corporate debt securities | 396,732 | 396,732 | ||||||
Mortgage-backed securities | 55,356 | 55,356 | ||||||
Asset-backed securities | 126,629 | 126,629 | ||||||
Money market funds | 67,098 | 67,098 | ||||||
Total investments | $ | 1,276,634 | $ | 1,276,634 | ||||
Financial Liabilities: | ||||||||
Derivative liabilities | $ | 1,232 | $ | 1,232 |
• | Level 1 — Quoted prices for identical instruments in active markets accessible at the measurement date. |
• | Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and valuations in which all significant inputs are observable in active markets. Inputs are observable for substantially the full term of the financial instrument. |
• | Level 3 — Valuations derived from one or more significant inputs that are unobservable. |
• | Investments available for sale — Investments available for sale are valued using quoted market prices in active markets, when available, and those investments are classified as Level 1 of the fair value hierarchy. Level 1 investments available for sale include investments such as U.S. Treasury securities and money market funds. Investments available for sale are classified as Level 2 of the fair value hierarchy if quoted market prices are not available and fair values are estimated using quoted prices of similar securities or recently executed transactions for the securities. U.S. agency securities, U.S. agency mortgage-backed securities, municipal debt securities, corporate debt securities, mortgage-backed securities and asset-backed securities are classified as Level 2 investments. |
• | Derivative liabilities — We define fair value as the current amount that would be exchanged to sell an asset or transfer a liability, other than in a forced liquidation. Certain of our Freddie Mac Agency Credit Insurance Structure ("ACIS") contracts are accounted for as derivatives. In determining an exit market, we consider the fact that there is not a principal market for these contracts. In the absence of a principal market, we value these ACIS contracts in a |
March 31, 2016 (In thousands) | Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Recurring fair value measurements | ||||||||||||||||
Financial Assets: | ||||||||||||||||
U.S. Treasury securities | $ | 211,780 | $ | — | $ | — | $ | 211,780 | ||||||||
U.S. agency securities | — | 14,657 | — | 14,657 | ||||||||||||
U.S. agency mortgage-backed securities | — | 178,003 | — | 178,003 | ||||||||||||
Municipal debt securities | — | 304,111 | — | 304,111 | ||||||||||||
Corporate debt securities | — | 416,688 | — | 416,688 | ||||||||||||
Mortgage-backed securities | — | 53,046 | — | 53,046 | ||||||||||||
Asset-backed securities | — | 121,729 | — | 121,729 | ||||||||||||
Money market funds | 68,488 | — | — | 68,488 | ||||||||||||
Total assets at fair value | $ | 280,268 | $ | 1,088,234 | $ | — | $ | 1,368,502 | ||||||||
Financial Liabilities: | ||||||||||||||||
Derivative liabilities | $ | — | $ | — | $ | 898 | $ | 898 | ||||||||
Total liabilities at fair value | $ | — | $ | — | $ | 898 | $ | 898 |
December 31, 2015 (In thousands) | Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Recurring fair value measurements | ||||||||||||||||
Financial Assets: | ||||||||||||||||
U.S. Treasury securities | $ | 177,607 | $ | — | $ | — | $ | 177,607 | ||||||||
U.S. agency securities | — | 13,782 | — | 13,782 | ||||||||||||
U.S. agency mortgage-backed securities | — | 159,602 | — | 159,602 | ||||||||||||
Municipal debt securities | — | 279,828 | — | 279,828 | ||||||||||||
Corporate debt securities | — | 396,732 | — | 396,732 | ||||||||||||
Mortgage-backed securities | — | 55,356 | — | 55,356 | ||||||||||||
Asset-backed securities | — | 126,629 | — | 126,629 | ||||||||||||
Money market funds | 67,098 | — | — | 67,098 | ||||||||||||
Total assets at fair value | $ | 244,705 | $ | 1,031,929 | $ | — | $ | 1,276,634 | ||||||||
Financial Liabilities: | ||||||||||||||||
Derivative liabilities | $ | — | $ | — | $ | 1,232 | $ | 1,232 | ||||||||
Total liabilities at fair value | $ | — | $ | — | $ | 1,232 | $ | 1,232 |
Three Months Ended March 31, 2016 (In thousands) | Fair Value Beginning of Period | Net Realized and Unrealized Gains (Losses) Included in Income | Other Comprehensive Income (Loss) | Purchases, Sales, Issues and Settlements, Net | Gross Transfers In | Gross Transfers Out | Fair Value End of Period | Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period | ||||||||||||||||
Derivative Liabilities | $ | 1,232 | $ | 677 | $ | — | $ | 343 | $ | — | $ | — | $ | 898 | $ | 677 | ||||||||
Total Level 3 Liabilities | $ | 1,232 | $ | 677 | $ | — | $ | 343 | $ | — | $ | — | $ | 898 | $ | 677 |
Three Months Ended March 31, 2015 (In thousands) | Fair Value Beginning of Year | Net Realized and Unrealized Gains (Losses) Included in Income | Other Comprehensive Income (Loss) | Purchases, Sales, Issues and Settlements, Net | Gross Transfers In | Gross Transfers Out | Fair Value End of Period | Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period | ||||||||||||||||
Derivative Liabilities | $ | 661 | $ | (749 | ) | $ | — | $ | 549 | $ | — | $ | — | $ | 1,959 | $ | (749 | ) | ||||||
Total Level 3 Liabilities | $ | 661 | $ | (749 | ) | $ | — | $ | 549 | $ | — | $ | — | $ | 1,959 | $ | (749 | ) |
March 31, 2016 | |||||||||||
($ in thousands) | Fair Value | Valuation Technique | Unobservable Input | Weighted Average | |||||||
Derivative Liabilities | $ | 898 | Discounted cash flows | Constant prepayment rate | 9.17 | % | |||||
Default rate | 0.37 | % | |||||||||
Reference STACR credit spread | 4.16 | % |
December 31, 2015 | |||||||||||
($ in thousands) | Fair Value | Valuation Technique | Unobservable Input | Weighted Average | |||||||
Derivative Liabilities | $ | 1,232 | Discounted cash flows | Constant prepayment rate | 10.60 | % | |||||
Default rate | 0.50 | % | |||||||||
Reference STACR credit spread | 3.93 | % |
(In thousands) | 2016 | 2015 | ||||||
Essent Guaranty | ||||||||
Statutory net income | $ | 48,486 | $ | 40,174 | ||||
Statutory surplus | 532,199 | 471,240 | ||||||
Contingency reserve liability | 353,063 | 211,296 | ||||||
Essent PA | ||||||||
Statutory net income | $ | 3,516 | $ | 4,148 | ||||
Statutory surplus | 44,469 | 43,928 | ||||||
Contingency reserve liability | 29,898 | 19,744 |
(In thousands) | Actual | Required | |||||||
Statutory capital and surplus: | $ | 225,949 | $ | 1,000 | |||||
Statutory net income: | $ | 9,437 |
• | NIW, which is the aggregate principal amount of the new mortgages that are insured during a period. Many factors affect NIW, including, among others, the volume of low down payment home mortgage originations and the competition to provide credit enhancement on those mortgages; |
• | Cancellations of our insurance policies, which are impacted by payments on mortgages, home price appreciation, or refinancings, which in turn are affected by mortgage interest rates. Cancellations are also impacted by the levels of claim payments and rescissions; |
• | Premium rates, which represent the amount of the premium due as a percentage of IIF. Premium rates are based on the risk characteristics of the loans insured, the percentage of coverage on the loans, competition from other mortgage insurers and general industry conditions; and |
• | Premiums ceded or assumed under reinsurance arrangements. To date, we have not ceded any premiums under third-party reinsurance contracts. |
• | the overall state of the economy, which broadly affects the likelihood that borrowers may default on their loans and have the ability to cure such defaults; |
• | changes in housing values, which affect our ability to mitigate our losses through the sale of properties with loans in default as well as borrower willingness to continue to make mortgage payments when the value of the home is below or perceived to be below the mortgage balance; |
• | the product mix of IIF, with loans having higher risk characteristics generally resulting in higher defaults and claims; |
• | the size of loans insured, with higher average loan amounts tending to increase losses incurred; |
• | the loan-to-value ratio, with higher average loan-to-value ratios tending to increase losses incurred; |
• | the percentage of coverage on insured loans, with deeper average coverage tending to increase losses incurred; |
• | credit quality of borrowers, including higher debt-to-income ratios and lower FICO scores, which tend to increase incurred losses; |
• | the rate at which we rescind policies. Because of tighter underwriting standards generally in the mortgage lending industry and terms set forth in our master policy, we expect that our level of rescission activity will be lower than rescission activity seen in the mortgage insurance industry for vintages originated prior to the financial crisis; and |
• | the distribution of claims over the life of a book. The average age of our insurance portfolio is young with 72% of our IIF as of March 31, 2016 having been originated since January 1, 2014. As a result, based on historical industry performance, we expect the number of defaults and claims we experience, as well as our provision for losses and loss adjustment expenses, to increase as our portfolio further seasons. See “— Mortgage Insurance Earnings and Cash Flow Cycle” below. |
Three Months Ended March 31, | ||||||||
(In thousands) | 2016 | 2015 | ||||||
IIF, beginning of period | $ | 65,242,453 | $ | 50,762,594 | ||||
NIW - Flow | 5,366,675 | 5,346,820 | ||||||
NIW - Bulk | 93,054 | — | ||||||
Cancellations | (2,985,441 | ) | (2,855,782 | ) | ||||
IIF, end of period | $ | 67,716,741 | $ | 53,253,632 | ||||
Average IIF during the period | $ | 66,437,045 | $ | 51,975,527 | ||||
RIF, end of period | $ | 16,745,819 | $ | 12,891,462 |
($ in thousands) | $ | % | |||||
2016 (through March 31) | $ | 5,429,882 | 8.0 | % | |||
2015 | 24,711,026 | 36.5 | |||||
2014 | 18,901,253 | 27.9 | |||||
2013 | 12,649,996 | 18.7 | |||||
2012 | 5,164,434 | 7.6 | |||||
2011 | 815,747 | 1.2 | |||||
2010 | 44,403 | 0.1 | |||||
$ | 67,716,741 | 100.0 | % |
Summary of Operations | Three Months Ended March 31, | |||||||
(In thousands) | 2016 | 2015 | ||||||
Revenues: | ||||||||
Net premiums written | $ | 100,466 | $ | 82,257 | ||||
Increase in unearned premiums | (6,063 | ) | (7,219 | ) | ||||
Net premiums earned | 94,403 | 75,038 | ||||||
Net investment income | 6,183 | 4,280 | ||||||
Realized investment gains, net | 471 | 649 | ||||||
Other income | 1,409 | 44 | ||||||
Total revenues | 102,466 | 80,011 | ||||||
Losses and expenses: | ||||||||
Provision for losses and LAE | 3,731 | 1,999 | ||||||
Other underwriting and operating expenses | 31,388 | 27,498 | ||||||
Total losses and expenses | 35,119 | 29,497 | ||||||
Income before income taxes | 67,347 | 50,514 | ||||||
Income tax expense | 19,396 | 15,676 | ||||||
Net income | $ | 47,951 | $ | 34,838 |
Three Months Ended March 31, | ||||||||
(In thousands) | 2016 | 2015 | ||||||
Fixed maturities | $ | 6,655 | $ | 4,653 | ||||
Short-term investments | 33 | 12 | ||||||
Gross investment income | 6,688 | 4,665 | ||||||
Investment expenses | (505 | ) | (385 | ) | ||||
Net investment income | $ | 6,183 | $ | 4,280 |
Three Months Ended March 31, | ||||||
2016 | 2015 | |||||
Beginning default inventory | 1,028 | 457 | ||||
Plus: new defaults | 769 | 381 | ||||
Less: cures | (706 | ) | (320 | ) | ||
Less: claims paid | (30 | ) | (13 | ) | ||
Less: rescissions and denials | (1 | ) | — | |||
Ending default inventory | 1,060 | 505 |
As of March 31, | ||||||||
2016 | 2015 | |||||||
Case reserves (in thousands) | $ | 18,795 | $ | 9,210 | ||||
Ending default inventory | 1,060 | 505 | ||||||
Average case reserve per default (in thousands) | $ | 17.7 | $ | 18.2 | ||||
Default rate | 0.34 | % | 0.21 | % | ||||
Claims received included in ending default inventory | 24 | 7 |
Three Months Ended March 31, | ||||||||
(In thousands) | 2016 | 2015 | ||||||
Reserve for losses and LAE at beginning of period | $ | 17,760 | $ | 8,427 | ||||
Add provision for losses and LAE occurring in: | ||||||||
Current period | 5,080 | 2,705 | ||||||
Prior years | (1,349 | ) | (706 | ) | ||||
Incurred losses during the current period | 3,731 | 1,999 | ||||||
Deduct payments for losses and LAE occurring in: | ||||||||
Current period | 1 | — | ||||||
Prior years | 1,020 | 361 | ||||||
Loss and LAE payments during the current period | 1,021 | 361 | ||||||
Reserve for losses and LAE at end of period | $ | 20,470 | $ | 10,065 |
As of March 31, 2016 | ||||||||||||||||||||
($ in thousands) | Number of Policies in Default | Percentage of Policies in Default | Amount of Reserves | Percentage of Reserves | Defaulted RIF | Reserves as a Percentage of Defaulted RIF | ||||||||||||||
Missed payments: | ||||||||||||||||||||
Three payments or less | 505 | 48 | % | $ | 4,639 | 25 | % | $ | 28,519 | 16 | % | |||||||||
Four to eleven payments | 426 | 40 | 9,689 | 52 | 23,147 | 42 | ||||||||||||||
Twelve or more payments | 105 | 10 | 3,438 | 18 | 5,217 | 66 | ||||||||||||||
Pending claims | 24 | 2 | 1,029 | 5 | 1,202 | 86 | ||||||||||||||
Total case reserves | 1,060 | 100 | % | 18,795 | 100 | % | $ | 58,085 | 32 | |||||||||||
IBNR | 1,410 | |||||||||||||||||||
LAE and other | 265 | |||||||||||||||||||
Total reserves for losses and LAE | $ | 20,470 |
As of March 31, 2015 | ||||||||||||||||||||
($ in thousands) | Number of Policies in Default | Percentage of Policies in Default | Amount of Reserves | Percentage of Reserves | Defaulted RIF | Reserves as a Percentage of Defaulted RIF | ||||||||||||||
Missed payments: | ||||||||||||||||||||
Three payments or less | 230 | 46 | % | $ | 2,246 | 24 | % | $ | 12,782 | 18 | % | |||||||||
Four to eleven payments | 216 | 43 | 5,045 | 55 | 11,195 | 45 | ||||||||||||||
Twelve or more payments | 52 | 10 | 1,658 | 18 | 2,241 | 74 | ||||||||||||||
Pending claims | 7 | 1 | 261 | 3 | 257 | 102 | ||||||||||||||
Total case reserves | 505 | 100 | % | 9,210 | 100 | % | $ | 26,475 | 35 | |||||||||||
IBNR | 691 | |||||||||||||||||||
LAE and other | 164 | |||||||||||||||||||
Total reserves for losses and LAE | $ | 10,065 |
Three Months Ended March 31, | |||||||||
($ in thousands) | 2016 | 2015 | |||||||
Number of claims paid | 30 | 13 | |||||||
Amount of claims paid | $ | 998 | $ | 349 | |||||
Claim severity | 93 | % | 72 | % |
Three Months Ended March 31, | ||||||||||||||
2016 | 2015 | |||||||||||||
($ in thousands) | $ | % | $ | % | ||||||||||
Compensation and benefits | $ | 20,306 | 65 | % | $ | 18,186 | 66 | % | ||||||
Other | 11,082 | 35 | 9,312 | 34 | ||||||||||
$ | 31,388 | 100 | % | $ | 27,498 | 100 | % | |||||||
Number of employees at end of period | 357 | 339 |
• | Compensation and benefits increased primarily due to the increase in our workforce to 357 at March 31, 2016 from 332 at January 1, 2015. Additional employees were hired to support the growth in our business, particularly in our sales organization, as well as our underwriting and customer service teams. Compensation and benefits includes salaries, wages and bonus, stock compensation expense, benefits and payroll taxes. |
• | Other expenses increased as a result of the continued expansion of our business. Other expenses include premium taxes, travel, marketing, hardware, software, rent, depreciation and amortization and other facilities expenses. |
• | our investment portfolio and interest income on the portfolio; |
• | net premiums that we will receive from our existing IIF as well as policies that we write in the future; and |
• | issuance of capital shares. |
• | claim payments under our policies; and |
• | the other costs and operating expenses of our business. |
• | significant decline in the value of our investments; |
• | inability to sell investment assets to provide cash to fund operating needs; |
• | decline in expected revenues generated from operations; |
• | increase in expected claim payments related to our IIF; or |
• | increase in operating expenses. |
Three Months Ended March 31, | ||||||||
(In thousands) | 2016 | 2015 | ||||||
Net cash provided by operating activities | $ | 67,492 | $ | 47,180 | ||||
Net cash used in investing activities | (61,054 | ) | (46,443 | ) | ||||
Net cash used in financing activities | (2,838 | ) | (3,246 | ) | ||||
Net increase (decrease) in cash | $ | 3,600 | $ | (2,509 | ) |
Combined statutory capital: ($ in thousands) | |||
Policyholders’ surplus | $ | 577,845 | |
Contingency reserves | 382,961 | ||
Combined statutory capital | $ | 960,806 | |
Combined net risk in force | $ | 14,254,342 | |
Combined risk-to-capital ratio | 14.8:1 |
Asset Class | March 31, 2016 | December 31, 2015 | ||||||||||||
($ in thousands) | Fair Value | Percent | Fair Value | Percent | ||||||||||
U.S. Treasury securities | $ | 211,780 | 15.5 | % | $ | 177,607 | 13.9 | % | ||||||
U.S. agency securities | 14,657 | 1.1 | 13,782 | 1.1 | ||||||||||
U.S. agency mortgage-backed securities | 178,003 | 13.0 | 159,602 | 12.5 | ||||||||||
Municipal debt securities(1) | 304,111 | 22.2 | 279,828 | 21.9 | ||||||||||
Corporate debt securities(2) | 416,688 | 30.4 | 396,732 | 31.1 | ||||||||||
Mortgage-backed securities | 53,046 | 3.9 | 55,356 | 4.3 | ||||||||||
Asset-backed securities | 121,729 | 8.9 | 126,629 | 9.9 | ||||||||||
Money market funds | 68,488 | 5.0 | 67,098 | 5.3 | ||||||||||
Total Investments | $ | 1,368,502 | 100.0 | % | $ | 1,276,634 | 100.0 | % |
March 31, | December 31, | |||||
(1) The following table summarizes municipal debt securities as of : | 2016 | 2015 | ||||
Special revenue bonds | 67.8 | % | 70.4 | % | ||
General obligation bonds | 27.5 | 24.5 | ||||
Certificate of participation bonds | 3.7 | 4.0 | ||||
Tax allocation bonds | 1.0 | 1.1 | ||||
Total | 100.0 | % | 100.0 | % |
March 31, | December 31, | |||||
(2) The following table summarizes corporate debt securities as of : | 2016 | 2015 | ||||
Financial | 42.2 | % | 44.9 | % | ||
Consumer, non-cyclical | 17.4 | 14.8 | ||||
Energy | 7.9 | 9.0 | ||||
Communications | 6.9 | 7.1 | ||||
Industrial | 6.4 | 5.2 | ||||
Consumer, cyclical | 6.0 | 6.2 | ||||
Utilities | 6.0 | 5.0 | ||||
Basic materials | 3.8 | 4.0 | ||||
Technology | 3.4 | 3.8 | ||||
Total | 100.0 | % | 100.0 | % |
Rating(1) | March 31, 2016 | December 31, 2015 | ||||||||||||
($ in thousands) | Fair Value | Percent | Fair Value | Percent | ||||||||||
Aaa | $ | 615,547 | 45.0 | % | $ | 554,789 | 43.5 | % | ||||||
Aa1 | 78,904 | 5.8 | 74,322 | 5.8 | ||||||||||
Aa2 | 89,150 | 6.4 | 89,533 | 7.0 | ||||||||||
Aa3 | 78,764 | 5.8 | 68,587 | 5.4 | ||||||||||
A1 | 128,057 | 9.4 | 126,920 | 9.9 | ||||||||||
A2 | 119,931 | 8.8 | 122,745 | 9.6 | ||||||||||
A3 | 91,674 | 6.7 | 87,781 | 6.9 | ||||||||||
Baa1 | 89,159 | 6.5 | 80,137 | 6.3 | ||||||||||
Baa2 | 59,140 | 4.3 | 51,528 | 4.0 | ||||||||||
Baa3 | 15,112 | 1.1 | 19,662 | 1.5 | ||||||||||
Below Baa3 | 3,064 | 0.2 | 630 | 0.1 | ||||||||||
Total Investments | $ | 1,368,502 | 100.0 | % | $ | 1,276,634 | 100.0 | % |
(1) | Based on ratings issued by Moody’s, if available. S&P rating utilized if Moody’s not available. |
Effective Duration | March 31, 2016 | December 31, 2015 | ||||||||||||
($ in thousands) | Fair Value | Percent | Fair Value | Percent | ||||||||||
< 1 Year | $ | 263,443 | 19.3 | % | $ | 235,001 | 18.4 | % | ||||||
1 to < 2 Years | 186,162 | 13.6 | 141,995 | 11.1 | ||||||||||
2 to < 3 Years | 188,098 | 13.7 | 214,274 | 16.8 | ||||||||||
3 to < 4 Years | 125,607 | 9.2 | 104,772 | 8.2 | ||||||||||
4 to < 5 Years | 138,185 | 10.1 | 141,428 | 11.1 | ||||||||||
5 or more Years | 467,007 | 34.1 | 439,164 | 34.4 | ||||||||||
Total Investments | $ | 1,368,502 | 100.0 | % | $ | 1,276,634 | 100.0 | % |
March 31, 2016 | ||||||||||||||||
Rank ($ in thousands) | Security | Fair Value | Amortized Cost | Unrealized Gain (Loss)(1) | Credit Rating(2) | |||||||||||
1 | U.S. Treasury 1.625% 7/31/2020 | $ | 26,114 | $ | 25,776 | $ | 338 | Aaa | ||||||||
2 | Ginnie Mae 4.000% 8/20/2045 | 20,749 | 20,554 | 195 | Aaa | |||||||||||
3 | U.S. Treasury 2.125% 5/15/2025 | 20,730 | 19,719 | 1,011 | Aaa | |||||||||||
4 | U.S. Treasury 2.250% 11/15/2024 | 17,212 | 16,871 | 341 | Aaa | |||||||||||
5 | Freddie Mac 2.500% 10/1/2030 | 15,542 | 15,465 | 77 | Aaa | |||||||||||
6 | U.S. Treasury 5.250% 11/15/2028 | 15,325 | 15,111 | 214 | Aaa | |||||||||||
7 | U.S. Treasury 0.000% 4/7/2016 | 15,000 | 15,000 | — | Aaa | |||||||||||
8 | U.S. Treasury 1.625% 2/15/2026 | 12,942 | 12,836 | 106 | Aaa | |||||||||||
9 | Fannie Mae 1.500% 6/22/2020 | 12,244 | 12,140 | 104 | Aaa | |||||||||||
10 | U.S. Treasury 1.500% 2/28/2023 | 10,075 | 9,911 | 164 | Aaa | |||||||||||
Total | $ | 165,933 | $ | 163,383 | $ | 2,550 | ||||||||||
Percent of Investment Portfolio | 12.1 | % |
(1) | As of March 31, 2016, for securities in unrealized loss positions, management believes decline in fair values is principally associated with the changes in the interest rate environment subsequent to their purchase and there are no other-than-temporary impairments. Also, see Note 3 to our condensed consolidated financial statements, which summarizes the aggregate amount of gross unrealized losses by asset class in which the fair value of investments has been less than cost for less than 12 months and for 12 months or more. |
(2) | Based on ratings issued by Moody’s, if available. S&P rating utilized if Moody’s not available. |
Rank | December 31, 2015 | |||||
($ in thousands) | Security | Fair Value | ||||
1 | U.S. Treasury 2.125% 5/15/2025 | $ | 24,974 | |||
2 | Ginnie Mae 4.000% 8/20/2045 | 21,711 | ||||
3 | U.S. Treasury 2.250% 11/15/2024 | 16,495 | ||||
4 | Freddie Mac 2.500% 10/1/2030 | 15,697 | ||||
5 | U.S. Treasury 2.125% 6/30/2022 | 15,080 | ||||
6 | U.S. Treasury 0.000% 3/3/2016 | 14,997 | ||||
7 | Fannie Mae 1.500% 6/22/2020 | 11,362 | ||||
8 | U.S. Treasury 2.250% 11/15/2025 | 10,329 | ||||
9 | U.S. Treasury 1.000% 9/30/2016 | 10,020 | ||||
10 | U.S. Treasury 0.750% 3/15/2017 | 9,987 | ||||
Total | $ | 150,652 | ||||
Percent of Investment Portfolio | 11.8 | % |
($ in thousands) | Fair Value | Amortized Cost | Credit Rating (1), (2) | |||||||
Texas | ||||||||||
State of Texas | $ | 8,705 | $ | 8,525 | Baa1 | |||||
City of Houston | 5,808 | 5,651 | Aa3 | |||||||
University of Houston System | 3,403 | 3,392 | Aa2 | |||||||
Dallas/Fort Worth International Airport | 3,045 | 2,770 | A1 | |||||||
City of Austin | 2,384 | 2,240 | A1 | |||||||
Harris County Cultural Education | 1,979 | 2,000 | A1 | |||||||
City of Dallas | 1,865 | 1,769 | Aa1 | |||||||
Alamo Community College District | 1,736 | 1,703 | Aaa | |||||||
Tarrant Regional Water District | 1,621 | 1,563 | Aaa | |||||||
City of San Antonio | 1,328 | 1,241 | A1 | |||||||
Alvin Independent School District | 1,250 | 1,254 | Aaa | |||||||
City of Corpus Christi | 1,189 | 1,131 | A1 | |||||||
Pharr-San Juan-Alamo Independent School District | 1,126 | 1,139 | Aaa | |||||||
Pasadena Independent School District | 1,061 | 1,052 | Aaa | |||||||
Tarrant County Cultural Education | 1,039 | 1,032 | Aa2 | |||||||
San Jacinto Community College District | 915 | 871 | Aa3 | |||||||
Harlandale Independent School District | 888 | 883 | Aaa | |||||||
City of El Paso | 622 | 565 | Aa1 | |||||||
$ | 39,964 | $ | 38,781 |
(1) | None of the above securities include financial guaranty insurance. Certain securities include state enhancements. The above ratings exclude the effect of such state enhancements. |
(2) | Based on ratings issued by Moody’s, if available. S&P rating utilized if Moody’s not available. |
• | Changes to the level of interest rates. Increasing interest rates may reduce the value of certain fixed-rate bonds held in the investment portfolio. Higher rates may cause variable-rate assets to generate additional income. Decreasing rates will have the reverse impact. Significant changes in interest rates can also affect persistency and claim rates which may in turn require that the investment portfolio be restructured to better align it with future liabilities and claim payments. Such restructuring may cause investments to be liquidated when market conditions are adverse. |
• | Changes to the term structure of interest rates. Rising or falling rates typically change by different amounts along the yield curve. These changes may have unforeseen impacts on the value of certain assets. |
• | Market volatility/changes in the real or perceived credit quality of investments. Deterioration in the quality of investments, identified through changes to our own or third-party (e.g., rating agency) assessments, will reduce the value and potentially the liquidity of investments. |
• | Concentration Risk. If the investment portfolio is highly concentrated in one asset, or in multiple assets whose values are highly correlated, the value of the total portfolio may be greatly affected by the change in value of just one asset or a group of highly correlated assets. |
• | Prepayment Risk. Bonds may have call provisions that permit debtors to repay prior to maturity when it is to their advantage. This typically occurs when rates fall below the interest rate of the debt. |
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | |||||||||
January 1 - January 31, 2016 | 87,353 | $ | 21.96 | — | — | ||||||||
February 1 - February 29, 2016 | — | N/A | — | — | |||||||||
March 1 - March 31, 2016 | 11,986 | $ | 19.95 | — | — | ||||||||
Total | 99,339 | — | — |
Votes For | Votes Withheld | Broker Non-Votes | |||||||
Robert Glanville | 70,538,630 | 148,210 | 1,835,069 | ||||||
Allan Levine | 69,599,268 | 1,087,572 | 1,835,069 | ||||||
Adolfo Marzol | 70,538,804 | 148,036 | 1,835,069 |
Votes For | 72,217,571 | ||
Votes Against | 169,874 | ||
Abstentions | 134,464 |
Votes For | 69,701,317 | ||
Votes Against | 704,810 | ||
Abstentions | 280,713 | ||
Broker Non-Votes | 1,835,069 |
1 Year | 55,878,533 | ||
2 Years | 754,697 | ||
3 Years | 13,636,332 | ||
Abstentions | 417,276 | ||
Broker Non-Votes | 1,835,071 |
Exhibit No. | Description | |
10.1 | Credit Agreement, dated as of April 19, 2016, by and among Essent Group Ltd., Essent Irish Intermediate Holdings Limited, and Essent US Holdings, Inc., as borrowers, the several banks and other financial institutions or entities from time to time parties to this agreement, as lenders, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit 1.1 to the Current Report on Form 8-K (File No. 001-36157) filed on April 21, 2016) | |
31.1 | Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101† | The following financial information from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Condensed Consolidated Balance Sheets (Unaudited); (ii) the Condensed Consolidated Statements of Comprehensive Income (Unaudited); (iii) the Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited); (iv) the Condensed Consolidated Statements of Cash Flows (Unaudited); and (v) the Notes to Condensed Consolidated Financial Statements (Unaudited), tagged as blocks of text. |
† | Pursuant to applicable securities laws and regulations, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under those sections. |
ESSENT GROUP LTD. | ||
Date: | May 6, 2016 | /s/ MARK A. CASALE |
Mark A. Casale | ||
President, Chief Executive Officer and Chairman (Principal Executive Officer) | ||
Date: | May 6, 2016 | /s/ LAWRENCE E. MCALEE |
Lawrence E. McAlee | ||
Senior Vice President and Chief Financial Officer (Principal Financial Officer) | ||
Date: | May 6, 2016 | /s/ DAVID B. WEINSTOCK |
David B. Weinstock | ||
Vice President and Chief Accounting Officer (Principal Accounting Officer) |
Exhibit No. | Description | |
10.1 | Credit Agreement, dated as of April 19, 2016, by and among Essent Group Ltd., Essent Irish Intermediate Holdings Limited, and Essent US Holdings, Inc., as borrowers, the several banks and other financial institutions or entities from time to time parties to this agreement, as lenders, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit 1.1 to the Current Report on Form 8-K (File No. 001-36157) filed on April 21, 2016) | |
31.1 | Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101† | The following financial information from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, formatted in XBRL (Extensible Business Reporting Language) and filed electronically herewith: (i) the Condensed Consolidated Balance Sheets (Unaudited); (ii) the Condensed Consolidated Statements of Comprehensive Income (Unaudited); (iii) the Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited); (iv) the Condensed Consolidated Statements of Cash Flows (Unaudited); and (v) the Notes to Condensed Consolidated Financial Statements (Unaudited), tagged as blocks of text. |
† | Pursuant to applicable securities laws and regulations, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under those sections. |
Date: | May 6, 2016 | |
/s/ MARK A. CASALE | ||
Mark A. Casale | ||
President, Chief Executive Officer and Chairman | ||
(Principal Executive Officer) |
Date: | May 6, 2016 | |
/s/ LAWRENCE E. MCALEE | ||
Lawrence E. McAlee | ||
Senior Vice President and Chief Financial Officer | ||
(Principal Financial Officer) |
/s/ MARK A. CASALE | |
Mark A. Casale | |
President, Chief Executive Officer and Chairman | |
/s/ LAWRENCE E. MCALEE | |
Lawrence E. McAlee | |
Senior Vice President and Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2016 |
May. 02, 2016 |
|
Document and Entity Information | ||
Entity Registrant Name | Essent Group Ltd. | |
Entity Central Index Key | 0001448893 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 93,071,500 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Investments available for sale | ||
Amortized cost (in dollars) | $ 1,348,767 | $ 1,275,972 |
Property and equipment | ||
Accumulated depreciation (in dollars) | $ 43,479 | $ 42,479 |
Stockholders’ Equity | ||
Common Shares, par value (in dollars per share) | $ 0.015 | $ 0.015 |
Common Shares, authorized | 233,333,000 | 233,333,000 |
Common Shares, issued | 93,070,000 | 92,650,000 |
Fixed maturities | ||
Investments available for sale | ||
Amortized cost (in dollars) | $ 1,265,279 | $ 1,189,978 |
Short-term investments | ||
Investments available for sale | ||
Amortized cost (in dollars) | $ 83,488 | $ 85,994 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2016 |
Mar. 31, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||
Change in unrealized appreciation of investments, tax expense | $ 5,714 | $ 2,110 |
Nature of Operations and Basis of Presentation |
3 Months Ended |
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Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations and Basis of Presentation | Nature of Operations and Basis of Presentation Essent Group Ltd. (“Essent Group”) is a Bermuda-based holding company, which, through its wholly-owned subsidiaries, offers private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Mortgage insurance facilitates the sale of low down payment (generally less than 20%) mortgage loans into the secondary mortgage market, primarily to two government-sponsored enterprises (“GSEs”), Fannie Mae and Freddie Mac. The primary mortgage insurance operations are conducted through Essent Guaranty, Inc. (“Essent Guaranty”), a wholly-owned subsidiary approved as a qualified mortgage insurer by the GSEs and is licensed to write mortgage insurance in all 50 states and the District of Columbia. Essent Guaranty reinsures 25% of GSE-eligible new insurance written to Essent Reinsurance Ltd. (“Essent Re”), an affiliated Bermuda domiciled Class 3A Insurer licensed pursuant to Section 4 of the Bermuda Insurance Act 1978 that provides insurance and reinsurance coverage of mortgage credit risk. Essent Re also provides insurance and reinsurance to Freddie Mac and Fannie Mae. In accordance with certain state law requirements, Essent Guaranty also reinsures that portion of the risk that is in excess of 25% of the mortgage balance with respect to any loan insured, after consideration of other reinsurance, to Essent Guaranty of PA, Inc. (“Essent PA”), an affiliate. In addition to offering mortgage insurance, we provide contract underwriting services on a limited basis through CUW Solutions, LLC ("CUW Solutions"), a Delaware limited liability company, that provides, among other things, mortgage contract underwriting services to lenders and mortgage insurance underwriting services to affiliates. We have prepared the condensed consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). We have condensed or omitted certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) pursuant to such rules and regulations. In the opinion of management, the statements include all adjustments (which include normal recurring adjustments) required for a fair statement of financial position, results of operations and cash flows for the interim periods presented. These statements should be read in conjunction with the consolidated financial statements and notes thereto, including Note 1 and Note 2 to the consolidated financial statements, included in our Annual Report on Form 10-K for the year ended December 31, 2015, which discloses the principles of consolidation and a summary of significant accounting policies. The results of operations for the interim periods are not necessarily indicative of the results for the full year. We evaluated the need to recognize or disclose events that occurred subsequent to March 31, 2016 prior to the issuance of these condensed consolidated financial statements. |
Recent Issued Accounting Standards |
3 Months Ended |
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Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update is intended to provide a consistent approach in recognizing revenue. In accordance with the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB delayed the effective date for this update to interim and annual periods beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of this ASU will have on the consolidated financial statements. In May 2015, the FASB issued ASU 2015-09, Disclosures about Short-Duration Contracts (Topic 944). The amendments in this update require insurance entities to disclose certain information about the liability for unpaid claims and claim adjustment expenses. The additional information required is focused on improvements in disclosures regarding insurance liabilities, including the nature, amount, timing, and uncertainty of cash flows related to those liabilities and the effect of those cash flows on the statement of comprehensive income. The disclosures required by this update are effective for annual periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016, and is to be applied retrospectively. The Company is currently evaluating the impact, if any, of the new disclosures required by this ASU. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosures about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2018. The Company is evaluating the impact the adoption of this ASU will have on the consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718). This update is intended to simplify several aspects of the accounting for share-based payment award transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new guidance requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement and treated as discrete items in the reporting period. In addition, excess tax benefits are required to be classified along with other income tax cash flows as an operating activity. Further, the new guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The provisions of this update are effective for annual and interim periods beginning after December 15, 2016. The Company is evaluating the impact the adoption of this ASU will have on the consolidated financial statements. |
Investments Available for Sale |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments Available for Sale | Investments Available for Sale Investments available for sale consist of the following:
The amortized cost and fair value of investments available for sale at March 31, 2016, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most mortgage-backed securities and asset-backed securities provide for periodic payments throughout their lives, they are listed below in separate categories.
Gross gains and losses realized on the sale of investments available for sale were as follows:
The fair value of investments in an unrealized loss position and the related unrealized losses were as follows:
The gross unrealized losses on these investment securities are principally associated with the changes in the interest rate environment subsequent to their purchase. Each issuer is current on its scheduled interest and principal payments. We assess our intent to sell these securities and whether we will be required to sell these securities before the recovery of their amortized cost basis when determining whether an impairment is other-than-temporary. We recorded an other-than-temporary impairment of $7 thousand in the three months ended March 31, 2016 for one security in an unrealized loss position that we intend to sell. There were no other-than-temporary impairments of investments in the three months ended March 31, 2015. The fair value of investments deposited with insurance regulatory authorities to meet statutory requirements was $8.6 million as of March 31, 2016 and $8.5 million as of December 31, 2015. In connection with its insurance and reinsurance activities, Essent Re is required to maintain assets in trusts for the benefit of its contractual counterparties. The fair value of the investments required to be on deposit in these trusts was $203.8 million at March 31, 2016 and $171.5 million at December 31, 2015. Net investment income consists of:
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Accounts Receivable |
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Mar. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | Accounts Receivable Accounts receivable consists of the following:
Premiums receivable consists of premiums due on our mortgage insurance policies. If mortgage insurance premiums are unpaid for more than 90 days, the receivable is written off against earned premium and the related insurance policy is cancelled. For all periods presented, no provision or allowance for doubtful accounts was required. |
Reserve for Losses and Loss Adjustment Expenses |
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Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserve for Losses and Loss Adjustment Expenses | Reserve for Losses and Loss Adjustment Expenses The following table provides a reconciliation of the beginning and ending reserve balances for losses and loss adjustment expenses (“LAE”) for the three months ended March 31:
For the three months ended March 31, 2016, $1.0 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There has been a $1.3 million favorable prior year development during the three months ended March 31, 2016. Reserves remaining as of March 31, 2016 for prior years are $15.4 million as a result of re-estimation of unpaid losses and loss adjustment expenses. For the three months ended March 31, 2015, $0.4 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There had been a $0.7 million favorable prior year development during the three months ended March 31, 2015. Reserves remaining as of March 31, 2015 for prior years were $7.4 million as a result of re-estimation of unpaid losses and loss adjustment expenses. In both periods, the favorable prior years' loss development was the result of a re-estimation of amounts ultimately to be paid on prior year defaults in the default inventory, including the impact of previously identified defaults that cured. Original estimates are increased or decreased as additional information becomes known regarding individual claims. |
Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Obligations under Guarantees Under the terms of CUW Solutions' contract underwriting agreements with lenders and subject to contractual limitations on liability, we agree to indemnify certain lenders against losses incurred in the event that we make an error in determining whether loans processed meet specified underwriting criteria, to the extent that such error materially restricts or impairs the salability of such loan, results in a material reduction in the value of such loan or results in the lender repurchasing the loan. The indemnification may be in the form of monetary or other remedies. We have not paid any amounts related to remedies for the three months ended March 31, 2016 and 2015. As of March 31, 2016, management believes any potential claims for indemnification related to contract underwriting services through March 31, 2016 are not material to our financial position or results of operations. In addition to the indemnifications discussed above, in the normal course of business, we enter into agreements or other relationships with third parties pursuant to which we may be obligated under specified circumstances to indemnify the counterparties with respect to certain matters. Our contractual indemnification obligations typically arise in the context of agreements entered into by us to, among other things, purchase or sell services, finance our business and business transactions, lease real property and license intellectual property. The agreements we enter into in the normal course of business generally require us to pay certain amounts to the other party associated with claims or losses if they result from our breach of the agreement, including the inaccuracy of representations or warranties. The agreements we enter into may also contain other indemnification provisions that obligate us to pay amounts upon the occurrence of certain events, such as the negligence or willful misconduct of our employees, infringement of third-party intellectual property rights or claims that performance of the agreement constitutes a violation of law. Generally, payment by us under an indemnification provision is conditioned upon the other party making a claim, and typically we can challenge the other party’s claims. Further, our indemnification obligations may be limited in time and/or amount, and in some instances, we may have recourse against third parties for certain payments made by us under an indemnification agreement or obligation. As of March 31, 2016, contingencies triggering material indemnification obligations or payments have not occurred historically and are not expected to occur. The nature of the indemnification provisions in the various types of agreements and relationships described above are believed to be low risk and pervasive, and we consider them to have a remote risk of loss or payment. We have not recorded any provisions on the condensed consolidated balance sheets related to indemnifications. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation The following table summarizes nonvested common share and nonvested common share unit activity for the three months ended March 31, 2016:
In February 2016, certain members of senior management were granted nonvested common shares under the Essent Group Ltd. 2013 Long-Term Incentive Plan that were subject to time-based and performance-based vesting. The time-based share awards granted in February 2016 vest in three equal installments on March 1, 2017, 2018 and 2019. The performance-based share awards granted in February 2016 vest based upon our compounded annual book value per share growth percentage during a three-year performance period that commenced on January 1, 2016 and vest on March 1, 2019. The portion of the nonvested performance-based share awards that will be earned based upon the achievement of compounded annual book value per share growth is as follows:
In the event that the compounded annual book value per share growth falls between the performance levels shown above, the nonvested common shares earned will be determined on a straight-line basis between the respective levels shown. In connection with our incentive program covering bonus awards for performance year 2015, in February 2016, time-based share awards and share units were issued to certain employees that vest in three equal installments on March 1, 2017, 2018 and 2019. In May 2016, 44,360 time-based share units were granted to non-employee directors that vest one year from the date of grant. The total fair value on the vesting date of nonvested shares or share units that vested was $11.9 million and $16.4 million for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016, there was $26.1 million of total unrecognized compensation expense related to nonvested shares or share units outstanding at March 31, 2016 and we expect to recognize the expense over a weighted average period of 2.1 years. Employees have the option to tender shares to Essent Group to pay the minimum employee statutory withholding taxes associated with shares upon vesting. Common shares tendered by employees to pay employee withholding taxes totaled 177,112 in the three months ended March 31, 2016. The tendered shares were recorded at cost, included in treasury stock and have been cancelled as of March 31, 2016. Compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares were as follows:
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Earnings per Share (EPS) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share (EPS) | Earnings per Share (EPS) The following table reconciles the net income and the weighted average common shares outstanding used in the computations of basic and diluted earnings per common share:
There were 347,611 and 252,180 antidilutive shares for the three months ended March 31, 2016 and 2015, respectively. The nonvested performance-based share awards are considered contingently issuable for purposes of the EPS calculation. Based on the compounded annual book value per share growth as of March 31, 2016, 100% of the performance-based share awards would be issuable under the terms of the arrangements if March 31, 2016 was the end of the performance period. Based on the compounded annual book value per share growth as of March 31, 2015, 100% of the performance-based share awards would have been issuable under the terms of the arrangements if March 31, 2015 was the end of the performance period. |
Accumulated Other Comprehensive Income (Loss) |
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Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss) The following table presents the rollforward of accumulated other comprehensive income (loss) for the three months ended March 31, 2016 and 2015:
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments The estimated fair values and related carrying amounts of our financial instruments were as follows:
Fair Value Hierarchy ASC No. 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. The level within the fair value hierarchy to measure the financial instrument shall be determined based on the lowest level input that is significant to the fair value measurement. The three levels of the fair value hierarchy are as follows:
Determination of Fair Value When available, we generally use quoted market prices to determine fair value and classify the financial instrument in Level 1. In cases where quoted market prices for similar financial instruments are available, we utilize these inputs for valuation techniques and classify the financial instrument in Level 2. In cases where quoted market prices are not available, fair values are based on estimates using discounted cash flows, present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rates and estimates of future cash flows and we classify the financial instrument in Level 3. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. We used the following methods and assumptions in estimating fair values of financial instruments:
We use independent pricing sources to determine the fair value of securities available for sale in Level 1 and Level 2 of the fair value hierarchy. We use one primary pricing service to provide individual security pricing based on observable market data and receive one quote per security. To ensure securities are appropriately classified in the fair value hierarchy, we review the pricing techniques and methodologies of the independent pricing service and believe that their policies adequately consider market activity, either based on specific transactions for the issue valued or based on modeling of securities with similar credit quality, duration, yield and structure that were recently traded. U.S. agency securities, U.S. agency mortgage-backed securities, municipal and corporate debt securities are valued by our primary vendor using recently executed transactions and proprietary models based on observable inputs, such as interest rate spreads, yield curves and credit risk. Mortgage-backed and asset-backed securities are valued by our primary vendor using proprietary models based on observable inputs, such as interest rate spreads, prepayment speeds and credit risk. As part of our evaluation of investment prices provided by our primary pricing service, we obtained and reviewed their pricing methodologies which include a description of how each security type is evaluated and priced. We review the reasonableness of prices received from our primary pricing service by comparison to prices obtained from additional pricing sources. We have not made any adjustments to the prices obtained from our primary pricing service.
We determine the fair value of our derivative instruments primarily using internally-generated models. We utilize market observable inputs, such as the performance of the underlying pool of mortgages, mortgage prepayment speeds and pricing spreads on the reference STACR notes issued by Freddie Mac, whenever they are available. There is a high degree of uncertainty about our fair value estimates since our contracts are not traded or exchanged, which makes external validation and corroboration of our estimates difficult. Considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates may not be indicative of amounts we could realize in a current market exchange or negotiated termination. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts. Assets and Liabilities Measured at Fair Value All assets measured at fair value are categorized in the table below based upon the lowest level of significant input to the valuations. All fair value measurements at the reporting date were on a recurring basis.
Changes in Level 3 Recurring Fair Value Measurements The following tables presents changes during the three months ended March 31, 2016 and 2015 in Level 3 liabilities measured at fair value on a recurring basis, and the realized and unrealized gains (losses) related to the Level 3 liabilities in the condensed consolidated balance sheets at March 31, 2016 and 2015. During the three months ended March 31, 2016, and in the year ended December 31, 2015, we had no Level 3 assets.
The following table summarizes the significant unobservable inputs used in our recurring Level 3 fair value measurements as of March 31, 2016 and December 31, 2015:
The significant unobservable inputs used for derivative liabilities are constant prepayment rates (“CPR”) and default rates on the reference pool of mortgages and the credit spreads on the reference STACR notes. An increase in the CPR, default rate or reference STACR credit spread will increase the fair value of the liability. |
Statutory Accounting |
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Statutory Accounting | Statutory Accounting Our U.S. insurance subsidiaries prepare statutory-basis financial statements in accordance with the accounting practices prescribed or permitted by their respective state’s department of insurance, which is a comprehensive basis of accounting other than GAAP. We did not use any prescribed or permitted statutory accounting practices (individually or in the aggregate) that resulted in reported statutory surplus or capital that was significantly different from the statutory surplus or capital that would have been reported had National Association of Insurance Commissioners’ statutory accounting practices been followed. The following table presents Essent Guaranty’s and Essent PA’s statutory net income, statutory surplus and contingency reserve liability as of and for the three months ended March 31:
Net income determined in accordance with statutory accounting practices differs from GAAP. In 2016 and 2015, the more significant differences between net income determined under statutory accounting practices and GAAP for Essent Guaranty and Essent PA relate to policy acquisition costs and income taxes. Under statutory accounting practices, policy acquisition costs are expensed as incurred while such costs are capitalized and amortized to expense over the life of the policy under GAAP. We are eligible for a tax deduction, subject to certain limitations for amounts required by state law or regulation to be set aside in statutory contingency reserves when we purchase non-interest-bearing United States Mortgage Guaranty Tax and Loss Bonds (“T&L Bonds”) issued by the Treasury Department. Under statutory accounting practices, this deduction reduces the tax provision recorded by Essent Guaranty and Essent PA and, as a result, increases statutory net income and surplus as compared to net income and equity determined in accordance with GAAP. At March 31, 2016 and 2015, the statutory capital of our U.S. insurance subsidiaries, which is defined as the total of statutory surplus and contingency reserves, was in excess of the statutory capital necessary to satisfy their regulatory requirements. Effective December 31, 2015, Fannie Mae and Freddie Mac, at the direction of the Federal Housing Finance Agency ("FHFA"), implemented new coordinated Private Mortgage Insurer Eligibility Requirements, which we refer to as the "PMIERs." The PMIERs represent the standards by which private mortgage insurers are eligible to provide mortgage insurance on loans owned or guaranteed by Fannie Mae and Freddie Mac. The PMIERs include financial strength requirements incorporating a risk-based framework that require approved insurers to have a sufficient level of liquid assets from which to pay claims. The PMIERs also include enhanced operational performance expectations and define remedial actions that apply should an approved insurer fail to comply with these requirements. As of March 31, 2016 and December 31, 2015, Essent Guaranty, our GSE-approved mortgage insurance company, was in compliance with the PMIERs. Statement of Statutory Accounting Principles No. 58, Mortgage Guaranty Insurance, requires mortgage insurers to establish a special contingency reserve for statutory accounting purposes included in total liabilities equal to 50% of earned premium for that year. During the three months ended March 31, 2016, Essent Guaranty increased its contingency reserve by $38.0 million and Essent PA increased its contingency reserve by $2.4 million. This reserve is required to be maintained for a period of 120 months to protect against the effects of adverse economic cycles. After 120 months, the reserve is released to unassigned funds. In the event an insurer’s loss ratio in any calendar year exceeds 35%, however, the insurer may, after regulatory approval, release from its contingency reserves an amount equal to the excess portion of such losses. Essent Guaranty and Essent PA did not release any amounts from their contingency reserves in the three months ended March 31, 2016 or 2015. Under The Insurance Act 1978, as amended, and related regulations of Bermuda (the "Insurance Act"), Essent Re is required to annually prepare statutory financial statements and a statutory financial return in accordance with the financial reporting provisions of the Insurance Act, which is a basis other than GAAP. The Insurance Act also requires that Essent Re maintain minimum share capital and must ensure that the value of its general business assets exceeds the amount of its general business liabilities by an amount greater than the prescribed minimum solvency margins and enhanced capital requirement pertaining to its general business. At December 31, 2015, all such requirements were met. The statutory capital and surplus and statutory income for Essent Re at March 31, 2016 was as follows:
Statutory capital and surplus and net income determined in accordance with statutory accounting practices differs from GAAP. In the three months ended March 31, 2016, the more significant differences from GAAP for Essent Re relate to policy acquisition costs and accounting for insurance and certain reinsurance policies issued in connection with the ACIS program. Under statutory accounting practices, policy acquisition costs are charged to expense when the related premiums are written while such costs are capitalized and amortized to expense over the life of the policy under GAAP. Under statutory accounting practices, the insurance and reinsurance policies issued in connection with the ACIS program are accounted for as insurance with premium received recorded as premiums earned. Under GAAP, the insurance and certain reinsurance policies for the ACIS program are accounted for as derivatives with the fair value of these policies reported as an asset or liability and changes in the fair value of these policies reported in earnings as a component of other income. |
Recent Issued Accounting Standards (Policies) |
3 Months Ended |
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Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
New accounting pronouncements, policy | In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update is intended to provide a consistent approach in recognizing revenue. In accordance with the new standard, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB delayed the effective date for this update to interim and annual periods beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of this ASU will have on the consolidated financial statements. In May 2015, the FASB issued ASU 2015-09, Disclosures about Short-Duration Contracts (Topic 944). The amendments in this update require insurance entities to disclose certain information about the liability for unpaid claims and claim adjustment expenses. The additional information required is focused on improvements in disclosures regarding insurance liabilities, including the nature, amount, timing, and uncertainty of cash flows related to those liabilities and the effect of those cash flows on the statement of comprehensive income. The disclosures required by this update are effective for annual periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016, and is to be applied retrospectively. The Company is currently evaluating the impact, if any, of the new disclosures required by this ASU. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosures about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2018. The Company is evaluating the impact the adoption of this ASU will have on the consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718). This update is intended to simplify several aspects of the accounting for share-based payment award transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new guidance requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement and treated as discrete items in the reporting period. In addition, excess tax benefits are required to be classified along with other income tax cash flows as an operating activity. Further, the new guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The provisions of this update are effective for annual and interim periods beginning after December 15, 2016. The Company is evaluating the impact the adoption of this ASU will have on the consolidated financial statements. |
Investments Available for Sale (Tables) |
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Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of investments available for sale | Investments available for sale consist of the following:
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Schedule of amortized cost and fair value of investments available for sale by contractual maturity | The amortized cost and fair value of investments available for sale at March 31, 2016, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most mortgage-backed securities and asset-backed securities provide for periodic payments throughout their lives, they are listed below in separate categories.
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Schedule of realized gross gains and losses on sale of investments available for sale | Gross gains and losses realized on the sale of investments available for sale were as follows:
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Schedule of fair value of investments in an unrealized loss position and related unrealized losses | The fair value of investments in an unrealized loss position and the related unrealized losses were as follows:
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Schedule of net investment income | Net investment income consists of:
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Accounts Receivable (Tables) |
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Mar. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accounts receivable | Accounts receivable consists of the following:
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Reserve for Losses and Loss Adjustment Expenses (Tables) |
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Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation of beginning and ending reserve balances for losses and loss adjustment expenses (LAE) | The following table provides a reconciliation of the beginning and ending reserve balances for losses and loss adjustment expenses (“LAE”) for the three months ended March 31:
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Stock-Based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of nonvested Common Share and nonvested Common Share unit activity | The following table summarizes nonvested common share and nonvested common share unit activity for the three months ended March 31, 2016:
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Schedule of portion of nonvested Common Shares earned based upon achievement of compounded annual book value per share growth | The portion of the nonvested performance-based share awards that will be earned based upon the achievement of compounded annual book value per share growth is as follows:
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Schedule of compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares | Compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares were as follows:
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Earnings per Share (EPS) (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation of net income and weighted average common shares outstanding used in computations of basic and diluted earnings per common share | The following table reconciles the net income and the weighted average common shares outstanding used in the computations of basic and diluted earnings per common share:
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Accumulated Other Comprehensive Income (Loss) (Tables) |
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rollforward of accumulated other comprehensive income (loss) | The following table presents the rollforward of accumulated other comprehensive income (loss) for the three months ended March 31, 2016 and 2015:
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of estimated fair values and related carrying amounts of financial instruments | The estimated fair values and related carrying amounts of our financial instruments were as follows:
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Schedule of assets and liabilities measured at fair vale on a recurring basis | All assets measured at fair value are categorized in the table below based upon the lowest level of significant input to the valuations. All fair value measurements at the reporting date were on a recurring basis.
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Schedule of changes during period in Level 3 liabilities measured at fair value on a recurring basis, and realized and unrealized gains (losses) related to Level 3 liabilities | The following tables presents changes during the three months ended March 31, 2016 and 2015 in Level 3 liabilities measured at fair value on a recurring basis, and the realized and unrealized gains (losses) related to the Level 3 liabilities in the condensed consolidated balance sheets at March 31, 2016 and 2015. During the three months ended March 31, 2016, and in the year ended December 31, 2015, we had no Level 3 assets.
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Summary of significant unobservable inputs used in recurring Level 3 fair value measurements | The following table summarizes the significant unobservable inputs used in our recurring Level 3 fair value measurements as of March 31, 2016 and December 31, 2015:
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Statutory Accounting (Tables) |
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Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of statutory net income, statutory surplus and contingency reserve liability | The statutory capital and surplus and statutory income for Essent Re at March 31, 2016 was as follows:
The following table presents Essent Guaranty’s and Essent PA’s statutory net income, statutory surplus and contingency reserve liability as of and for the three months ended March 31:
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Investments Available for Sale (Details 5) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Components of net investment income | ||
Gross investment income | $ 6,688 | $ 4,665 |
Investment expenses | (505) | (385) |
Net investment income | 6,183 | 4,280 |
Fixed maturities | ||
Components of net investment income | ||
Gross investment income | 6,655 | 4,653 |
Short-term investments | ||
Components of net investment income | ||
Gross investment income | $ 33 | $ 12 |
Accounts Receivable (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
|
Accounts Receivable | |||
Premiums receivable | $ 16,784,000 | $ 16,034,000 | |
Other receivables | 416,000 | 603,000 | |
Total accounts receivable | 17,200,000 | 16,637,000 | |
Accounts receivable, net | 17,200,000 | $ 16,637,000 | |
Provision for doubtful accounts | $ 0 | $ 0 | |
Premiums receivable | |||
Accounts Receivable | |||
Threshold period unpaid for write-off of mortgage insurance premiums | 90 days |
Reserve for Losses and Loss Adjustment Expenses (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016
USD ($)
loan
|
Mar. 31, 2015
USD ($)
loan
|
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Reconciliation of the beginning and ending reserve balances for losses and loss adjustment expenses (LAE) | ||
Reserve for losses and LAE at beginning of period | $ 17,760 | $ 8,427 |
Net reserve for losses and LAE at beginning of period | 17,760 | 8,427 |
Add provision for losses and LAE, net of reinsurance, occurring in: | ||
Current period | 5,080 | 2,705 |
Prior years | (1,349) | (706) |
Net incurred losses during the current period | 3,731 | 1,999 |
Deduct payments for losses and LAE, net of reinsurance, occurring in: | ||
Current period | 1 | 0 |
Prior years | 1,020 | 361 |
Net loss and LAE payments during the current period | 1,021 | 361 |
Net reserve for losses and LAE at end of period | 20,470 | 10,065 |
Reserve for losses and LAE at end of period | $ 20,470 | $ 10,065 |
Loans in default at end of period | loan | 1,060 | 505 |
Reserve for losses and LAE, for prior years | $ 15,400 | $ 7,400 |
Stock-Based Compensation (Details 2) - 2013 Plan - Nonvested shares - Certain members of senior management |
1 Months Ended |
---|---|
Feb. 29, 2016 | |
Performance-Based | |
Stock-based compensation | |
Performance period | 3 years |
First Vesting Period | Time-Based | |
Stock-based compensation | |
Vesting (as a percent) | 33.00% |
Second Vesting Period | Time-Based | |
Stock-based compensation | |
Vesting (as a percent) | 33.00% |
Third Vesting Period | Time-Based | |
Stock-based compensation | |
Vesting (as a percent) | 33.00% |
Stock-Based Compensation (Details 5) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Stock-based compensation | ||
Shares tendered by employees to pay employee withholding taxes | 177,112 | |
Compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares | ||
Compensation expense | $ 3,782 | $ 3,261 |
Income tax benefit | 1,212 | 1,141 |
Nonvested shares | ||
Stock-based compensation | ||
Total fair value of shares vested | 11,900 | $ 16,400 |
Total unrecognized compensation expense | $ 26,100 | |
Expected weighted average period for recognition of expense | 2 years 22 days |
Earnings per Share (EPS) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
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Earnings Per Share [Abstract] | |||
Net income | $ 47,951 | $ 34,838 | |
Net income available to common shareholders | $ 47,951 | $ 34,838 | $ 157,331 |
Basic earnings per share (in dollars per share) | $ 0.53 | $ 0.39 | |
Diluted earnings per share (in dollars per share) | $ 0.52 | $ 0.38 | |
Basic weighted average shares outstanding (in shares) | 90,785 | 90,185 | |
Dilutive effect of nonvested shares (in shares) | 1,074 | 1,329 | |
Diluted weighted average shares outstanding (in shares) | 91,859 | 91,514 |
Earnings per Share (EPS) (Details 2) - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Contingently issuable awards | ||
Antidilutive nonvested shares | 347,611 | 252,180 |
Performance-based share awards | ||
Contingently issuable awards | ||
Percentage of award issuable if current period end were end of contingency period | 100.00% | 100.00% |
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Financial Assets: | ||
Total investments | $ 1,368,502 | $ 1,276,634 |
U.S. Treasury securities | ||
Financial Assets: | ||
Total investments | 211,780 | 177,607 |
U.S. agency securities | ||
Financial Assets: | ||
Total investments | 14,657 | 13,782 |
Municipal debt securities | ||
Financial Assets: | ||
Total investments | 304,111 | 279,828 |
Corporate debt securities | ||
Financial Assets: | ||
Total investments | 416,688 | 396,732 |
Mortgage-backed securities | ||
Financial Assets: | ||
Total investments | 53,046 | 55,356 |
Asset-backed securities | ||
Financial Assets: | ||
Total investments | 121,729 | 126,629 |
Money market funds | ||
Financial Assets: | ||
Total investments | 68,488 | 67,098 |
U.S. Agency | Mortgage backed securities | ||
Financial Assets: | ||
Total investments | 178,003 | 159,602 |
Carrying Amount | ||
Financial Assets: | ||
Total investments | 1,368,502 | 1,276,634 |
Financial Liabilities: | ||
Derivative liabilities | 898 | 1,232 |
Carrying Amount | U.S. Treasury securities | ||
Financial Assets: | ||
Total investments | 211,780 | 177,607 |
Carrying Amount | U.S. agency securities | ||
Financial Assets: | ||
Total investments | 14,657 | 13,782 |
Carrying Amount | Municipal debt securities | ||
Financial Assets: | ||
Total investments | 304,111 | 279,828 |
Carrying Amount | Corporate debt securities | ||
Financial Assets: | ||
Total investments | 416,688 | 396,732 |
Carrying Amount | Mortgage-backed securities | ||
Financial Assets: | ||
Total investments | 53,046 | 55,356 |
Carrying Amount | Asset-backed securities | ||
Financial Assets: | ||
Total investments | 121,729 | 126,629 |
Carrying Amount | Money market funds | ||
Financial Assets: | ||
Total investments | 68,488 | 67,098 |
Carrying Amount | U.S. Agency | Mortgage backed securities | ||
Financial Assets: | ||
Total investments | $ 178,003 | $ 159,602 |
Fair Value of Financial Instruments (Details 2) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Fair value of financial instruments | ||
Total investments | $ 1,368,502,000 | $ 1,276,634,000 |
U.S. Treasury securities | ||
Fair value of financial instruments | ||
Total investments | 211,780,000 | 177,607,000 |
U.S. agency securities | ||
Fair value of financial instruments | ||
Total investments | 14,657,000 | 13,782,000 |
Municipal debt securities | ||
Fair value of financial instruments | ||
Total investments | 304,111,000 | 279,828,000 |
Corporate debt securities | ||
Fair value of financial instruments | ||
Total investments | 416,688,000 | 396,732,000 |
Mortgage-backed securities | ||
Fair value of financial instruments | ||
Total investments | 53,046,000 | 55,356,000 |
Asset-backed securities | ||
Fair value of financial instruments | ||
Total investments | 121,729,000 | 126,629,000 |
Money market funds | ||
Fair value of financial instruments | ||
Total investments | 68,488,000 | 67,098,000 |
U.S. Agency | Mortgage backed securities | ||
Fair value of financial instruments | ||
Total investments | 178,003,000 | 159,602,000 |
Recurring basis | ||
Fair value of financial instruments | ||
Total assets at fair value | 1,368,502,000 | 1,276,634,000 |
Derivative liabilities | 898,000 | 1,232,000 |
Total liabilities at fair value | 898,000 | 1,232,000 |
Recurring basis | U.S. Treasury securities | ||
Fair value of financial instruments | ||
Total investments | 211,780,000 | 177,607,000 |
Recurring basis | U.S. agency securities | ||
Fair value of financial instruments | ||
Total investments | 14,657,000 | 13,782,000 |
Recurring basis | Municipal debt securities | ||
Fair value of financial instruments | ||
Total investments | 304,111,000 | 279,828,000 |
Recurring basis | Corporate debt securities | ||
Fair value of financial instruments | ||
Total investments | 416,688,000 | 396,732,000 |
Recurring basis | Mortgage-backed securities | ||
Fair value of financial instruments | ||
Total investments | 53,046,000 | 55,356,000 |
Recurring basis | Asset-backed securities | ||
Fair value of financial instruments | ||
Total investments | 121,729,000 | 126,629,000 |
Recurring basis | Money market funds | ||
Fair value of financial instruments | ||
Total investments | 68,488,000 | 67,098,000 |
Recurring basis | U.S. Agency | Mortgage backed securities | ||
Fair value of financial instruments | ||
Total investments | 178,003,000 | 159,602,000 |
Recurring basis | Quoted Prices in Active Markets for Identical Instruments (Level 1) | ||
Fair value of financial instruments | ||
Total assets at fair value | 280,268,000 | 244,705,000 |
Recurring basis | Quoted Prices in Active Markets for Identical Instruments (Level 1) | U.S. Treasury securities | ||
Fair value of financial instruments | ||
Total investments | 211,780,000 | 177,607,000 |
Recurring basis | Quoted Prices in Active Markets for Identical Instruments (Level 1) | Money market funds | ||
Fair value of financial instruments | ||
Total investments | 68,488,000 | 67,098,000 |
Recurring basis | Significant Other Observable Inputs (Level 2) | ||
Fair value of financial instruments | ||
Total assets at fair value | 1,088,234,000 | 1,031,929,000 |
Recurring basis | Significant Other Observable Inputs (Level 2) | U.S. agency securities | ||
Fair value of financial instruments | ||
Total investments | 14,657,000 | 13,782,000 |
Recurring basis | Significant Other Observable Inputs (Level 2) | Municipal debt securities | ||
Fair value of financial instruments | ||
Total investments | 304,111,000 | 279,828,000 |
Recurring basis | Significant Other Observable Inputs (Level 2) | Corporate debt securities | ||
Fair value of financial instruments | ||
Total investments | 416,688,000 | 396,732,000 |
Recurring basis | Significant Other Observable Inputs (Level 2) | Mortgage-backed securities | ||
Fair value of financial instruments | ||
Total investments | 53,046,000 | 55,356,000 |
Recurring basis | Significant Other Observable Inputs (Level 2) | Asset-backed securities | ||
Fair value of financial instruments | ||
Total investments | 121,729,000 | 126,629,000 |
Recurring basis | Significant Other Observable Inputs (Level 2) | U.S. Agency | Mortgage backed securities | ||
Fair value of financial instruments | ||
Total investments | 178,003,000 | 159,602,000 |
Recurring basis | Significant Unobservable Inputs (Level 3) | ||
Fair value of financial instruments | ||
Total assets at fair value | 0 | 0 |
Total liabilities at fair value | $ 898,000 | $ 1,232,000 |
Fair Value of Financial Instruments (Details 3) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Fair Value Beginning of Period | $ 1,232 | $ 661 |
Net Realized and Unrealized Gains (Losses) Included in Income | 677 | (749) |
Purchases, Sales, Issues and Settlements, Net | 343 | 549 |
Fair Value End of Period | 898 | 1,959 |
Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period | 677 | (749) |
Derivative Liabilities | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Fair Value Beginning of Period | 1,232 | 661 |
Net Realized and Unrealized Gains (Losses) Included in Income | 677 | (749) |
Purchases, Sales, Issues and Settlements, Net | 343 | 549 |
Fair Value End of Period | 898 | 1,959 |
Changes in Unrealized Gains (Losses) Included in Income on Instruments Held at End of Period | $ 677 | $ (749) |
Fair Value of Financial Instruments (Details 4) - Recurring basis - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2016 |
Dec. 31, 2015 |
|
Significant unobservable inputs used in our recurring Level 3 fair value measurements | ||
Derivative liabilities | $ 898 | $ 1,232 |
Significant Unobservable Inputs (Level 3) | Derivative Liabilities | ||
Significant unobservable inputs used in our recurring Level 3 fair value measurements | ||
Derivative liabilities | $ 898 | $ 1,232 |
Significant Unobservable Inputs (Level 3) | Derivative Liabilities | Discounted cash flows | Weighted average | ||
Significant unobservable inputs used in our recurring Level 3 fair value measurements | ||
Constant prepayment rate | 9.17% | 10.60% |
Default rate | 0.37% | 0.50% |
Reference STACR credit spread | 4.16% | 3.93% |
Statutory Accounting (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Essent Guaranty | ||
Dividends Restrictions | ||
Statutory net income | $ 48,486,000 | $ 40,174,000 |
Statutory surplus | 532,199,000 | 471,240,000 |
Contingency reserve liability | 353,063,000 | 211,296,000 |
Increase in contingency reserve | 38,000,000 | |
Essent PA | ||
Dividends Restrictions | ||
Statutory net income | 3,516,000 | 4,148,000 |
Statutory surplus | 44,469,000 | 43,928,000 |
Contingency reserve liability | 29,898,000 | $ 19,744,000 |
Increase in contingency reserve | 2,400,000 | |
Essent Re | ||
Dividends Restrictions | ||
Statutory net income | 9,437,000 | |
Statutory capital and surplus | 225,949,000 | |
Required statutory capital and surplus | $ 1,000,000 |
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