Essent Group Limited Delivers Strong Q4 Earnings Amidst Challenging Economic Environment
On February 14th, Essent Group Limited reported strong fourth-quarter earnings despite a challenging economic environment. The company's results were driven by the resilience of credit quality and the housing market, as well as favorable interest rates that have persisted.
The company's Chairman and CEO, Mark Casale, attributed the success to the strength of its balance sheet and operating model. "We believe Essent is well-positioned for a range of economic scenarios," he said during the earnings call.
Essent Group Limited reported net income of $168 million for the fourth quarter, compared to $175 million in the same period last year. On a diluted per-share basis, the company earned $1.58, down from $1.64 a year ago. For the full year, Essent recorded net income of $729 million, with a return on average equity of 14%. The book value per share was $53.36 as of December 31st, an increase of 11% from a year ago.
The company's U.S. mortgage insurance in force stood at $244 billion, a 2% increase from the previous year. However, persistency, which measures the percentage of policies that remain active after one year, slipped to 86%, down about 1 point from last quarter. Despite this, nearly 60% of Essent's in-force portfolio has a note rate of 5.5% or lower.
Credit quality remains strong, with a weighted average FICO score of 746 and a weighted average original LTV (Loan-to-Value) ratio of 93%. The fourth quarter saw approximately 2,000 defaults in areas affected by Hurricanes Helen and Milton, as well as potential impacts from the California wildfires.
On the mortgage insurance front, Essent Group Limited reported that its industry remains competitive but strong credit guardrails are still in place. The company's use of the GSEs' underpinnings established after the global financial crisis allows it to selectively grow high-credit-quality insurance in force while generating strong returns.
Essent Re, the company's reinsurance arm, had another successful year, writing high-quality GSE risk share business and leveraging fee-based MGA services. As of December 31st, nearly 97% of Essent Group Limited's portfolio is covered by some form of reinsurance.
The company entered into two quota share transactions with highly rated reinsurers in the first quarter of 2025 to provide forward protection for its 2025 and 2026 business. These transactions demonstrate Essent Group Limited's commitment to a programmatic reinsurance strategy, which helps diversify capital resources while seeding meaningful mezzanine credit risk.
