2021 Annual Report

TO OUR SHAREHOLDERS:

2021 marked a year of transition for Essent. We introduced the next generation of our risk-based pricing engine, continued building a high-quality and profitable mortgage insurance portfolio and generated robust returns for our shareholders. In 2020, we entered the pandemic from a position of strength as one of the best-capitalized mortgage insurers. During 2021, we exited the pandemic as a stronger and more sustainable franchise as evidenced by higher earnings and a stronger balance sheet.

For the year, we earned $682 million or $6.11 per diluted share, compared to net income of $413 million or $3.88 per diluted share in 2020, while generating a 17% retuon average equity. Insurance in force grew by 4% to $207 billion during the year, compared to $199 billion at the end of 2020, while net premiums earned increased to $873 million from $863 million in 2020. The average net premium rate was 41 basis points, a decrease from 46 basis points in 2020, due to increased utilization of reinsurance, decreased single premium cancellation income, and competitive market dynamics. Our loss ratio of 3.6% in 2021 benefited from a normalization of credit and favorable performance post-COVID, and our expense ratio of 19.1% continued to demonstrate the industry-leading efficiency of our operating platform.

The U.S. housing market has been a bright spot in the current economic cycle, exhibiting resilience and strength. While interest rates have risen from historic lows and there is less visibility into the near-term growth trajectory of our economy due to inflationary pressures and uncertainties from geopolitical risk, our long-term outlook for our business remains positive, supported by favorable housing fundamentals. Demand outweighing supply should continue to support home price appreciation, albeit at a more moderate pace, while low unemployment with rising income should continue to benefit credit. In addition, purchase demand remains elevated as a result of favorable demographic trends with millennials entering their peak home-buying ages, which is positive for our franchise since we are well-positioned to serve first-time homebuyers.

OUR ECONOMIC ENGINES

In October, we successfully rolled out the next generation of our risk-based pricing engine EssentEDGE®. We believe EssentEDGE has a competitive advantage given the large number of data points we analyze when pricing credit risk through machine learning and cloud-based technology. Our pricing engine is a sophisticated risk management tool enabling us to optimize risk-adjusted returns through credit selection and granular pricing while timely responding to perceived changes in credit dynamics. Our team continues to strive for broader adoption of EssentEDGE technology away from static rate cards. We believe this evolution of pricing is mutually beneficial by delivering our best price to borrowers while optimizing our unit economics.

Essent Re, our Bermuda-based reinsurance company, continues to provide another platform to invest in U.S. mortgage credit risk. Essent Re reinsures our U.S. mortgage insurance business through a 35% affiliate quota share arrangement on new insurance written

(up from 25% last year), participates in risk share transactions sponsored by Fannie Mae, Freddie Mac and others, and provides fee-based managing general agent (MGA) services to our reinsurer clients. At year-end 2021, Essent Re had $16.0 billion of net risk in force and GAAP equity of $1.3 billion, compared to $12.9 billion and $1.1 billion, respectively, at the end of 2020.

During the year, we formed our EssentVentures unit to make investments intended to give us access to information, products, services and technologies to improve our core business and generate financial returns. With the ongoing intersection of the housing finance, real estate, insurance and technology sectors, we believe that there will be opportunities to take advantage of this changing landscape by leveraging our operational expertise to make strategic investments to enhance shareholder value.

BUY, MANAGE AND DISTRIBUTE AND PRUDENT CAPITAL MANAGEMENT

Consistent with our long-term view of managing mortgage credit risk, we continue to maintain a fortress balance sheet, ending 2021 with $5.7 billion in total assets, $4.2 billion of GAAP equity, and access to $2.7 billion of excess of loss (XOL) reinsurance protection. We executed two Radnor Re insurance-linked note (ILN) transactions, transferring approximately $1.0 billion of mezzanine risk in 2021, and ended the year with 90% of our portfolio protected by some form of reinsurance coverage. Our financial leverage of 9% at the end of 2021 remained the lowest in the private mortgage insurance industry. Further, our capital position and liquidity remained strong, as we maintained PMIERs sufficiency ratio of 177% with excess assets of $1.4 billion, along with $618 million of net cash and investments available for sale at our holding companies. Our financial flexibility is further enhanced by our $825 million credit facility, amended and extended in 2021 to include a $425 million term loan and an undrawn revolver of $400 million with a December 2026 maturity date.

The strength of our buy, manage, and distribute operating model enables us to take a measured approach to capital distribution. In conjunction with our fourth-quarter earnings release, we announced that our Board of Directors approved a quarterly cash dividend of $0.20 per common share for March 2022. This was our fourth consecutive quarterly dividend increase, representing a 25% increase from a year ago. Additionally, as of year end, we have repurchased 3.5 million ESNT shares, representing $157.8 million of our inaugural $250 million share repurchase authorization announced in May 2021. In the aggregate, we returned over one-third of our 2021 earnings to shareholders in the form of dividends and share repurchases.

BEING A RESPONSIBLE CORPORATE CITIZEN

On the public policy front, during the year, we continued supporting our industry's trade organization, U.S. Mortgage Insurers (USMI), in promoting the benefits of private mortgage insurance to policymakers and other housing constituencies. The current administration and the new Federal Housing Finance Agency leadership have vocalized priorities around the soundness of credit, access, and affordability, with a focus on equitable housing and closing the racial homeownership gap. We believe that Essent and our industry can

play a greater role where more institutional private capital can be deployed to support a strong and robust housing finance system while also mitigating taxpayer risk.

In 2021, we published the second edition of our annual Sustainability Report and continued to explore ways to enhance our overall environmental, social, and governance (ESG) initiatives. The core of our business - providing an opportunity for equitable, aﬀordable and sustainable homeownership to those that do not have the ﬁnancial means for a 20% down-payment - promotes a more inclusive future for all our stakeholders. Since the formation of Essent, we have helped approximately two million homeowners realize the "American Dream" by insuring their mortgages to purchase a home. Our dedication to responsible corporate stewardship through philanthropic, environmental and social initiatives is critical to our long-term success. Reliability, sustainability, and doing the right thing are and will always be at the forefront of our mission.

BUILDING OUR BUSINESS FOR THE LONG-TERM

Entering 2022, we remain focused on optimizing our unit economics to generate high-quality earnings and strong returns while continuing to fortify our balance sheet, hedge our portfolio, reduce earnings volatility, and take a balanced approach to capital management. We will continue to invest in data and technology to improve our risk-based pricing engine while making our infrastructure more reliable and eﬃcient. Further, we will diversify sources of capital by executing a programmatic reinsurance strategy with both capital markets and traditional reinsurers. Our buy, manage and distribute operating model instills conﬁdence in our ability to generate sustainable cash ﬂow and excess capital, while mitigating franchise volatility during times of economic stress. We will continue to evaluate ways to deploy capital, including investing in our core MI and reinsurance businesses, exploring EssentVentures investments, and returning capital to shareholders through dividends and repurchases.

Essent was founded with a mission to serve as a trusted, best-in-class partner to the housing ﬁnance industry, and I am very proud of our accomplishments and progress in 2021. I want to thank all of our stakeholders - from our lender partners to our policyholders, investors and dedicated employee base. Our employees continue to embrace a customer-ﬁrst focus to innovate our technologies, products, and processes to drive long-term franchise value. Our management team and Board of Directors remain committed to prudently and proﬁtably writing high-quality mortgage insurance and reinsurance business, managing risk, deploying capital, and generating strong returns. We believe that the success of our business is measured by the growth in book value per share - since going public in 2013, we have achieved a compound annual growth rate of 21% for this metric.

Thank you for your conﬁdence in us and for investing in Essent.

Mark A. Casale

Chairman and Chief Executive Officer

March 2022

CAPITAL AND EQUITY($ Millions)

11.7:1

11.6:1

11.1:1

10.6:1

10.5:1

10.4:1

(1) Represents combined metrics for the U.S. insurance subsidiaries Essent Guaranty, Inc. and

Essent Guaranty of PA, Inc.

New Insurance Written

NET PREMIUMS EARNED AND NET INCOME($ Millions)

$206.5 $3,107.1

Q1 20

19.6%

$149.5 $2,452.7

$211.5 $3,623.3

Q2 20

1.8%

$15.4$2,457.4

$222.3 $3,746.5

Q3 20

13.5%

$124.5 $2,581.1

$222.3 $3,862.6

Q4 20

Insurance In Force

13.0%

$123.6 $2,659.2

$219.1 $3,920.9

Q1 21

13.9%

$135.6 $2,778.1

$217.4 $4,084.8

Q2 21

16.0%

$159.8 $2,809.1

$218.7 $4,168.0

Q3 21

19.9%

$205.4 $2,916.8

$217.3 $4,236.1

Q4 21

17.2%

$181.0 $2,950.1

Q1 20

Q2 20

Q3 20

Q4 20

Q1 21

Q2 21

Q3 21

Q4 21

Net PremiumsNet Income

RetuOn

Earned

Average Equity (Annualized)

ADDITIONAL FINANCIAL HIGHLIGHTS FOR FULL YEAR 2021

• Net premiums earned were $872.5 million, compared to $862.6

million for 2020.
• An expense ratio of 19.1%, compared to 17.9% for 2020.
• Percentage of loans in default were 2.16%, compared to 3.93% at the

end of 2020.
• A combined ratio of 22.7%, compared to 52.9% for 2020.

Consolidated	Combined Statutory	Combined Risk
GAAP Equity	Capital(1)	to Capital Ratio(1)

INSURANCE IN FORCE AND NEW INSURANCE WRITTEN

($ Billions)

$198.9

$203.6

$208.2

$207.2

$197.1

$190.8

$174.6

$165.6

$36.7

$28.2

$29.6

$25.0$23.6

$19.3

$13.5

$16.4

STRONG BALANCE SHEET

FINANCIAL STRENGTH1

Essent Guaranty, Inc.

EXCEPT WHERE NOTED, DATA AND RATINGS ARE AS OF DECEMBER 31, 2021

Essent Guaranty, Inc. & Essent Reinsurance Ltd.

MOODY'S:

21%

AM BEST:

S&P:

A (Excellent) BBB+

BVPS Compound Annual Growth Rate Since Going Public in 2013

Combined U.S. Risk-to-Capital2

10.4:1

HIGH QUALITY INSURANCE PORTFOLIO

$207.2 BILLION

<680680-699700+

≤90.00%90.01%-95.00%≥95.01%

ROBUST REINSURANCE PROTECTIONINVESTMENTS AVAILABLE FOR SALE

Investment Grade Securities

U.S. Government &

Agency Securities orMoney Market Funds

Credit Rating of

Aaa to Aa33

Cash & Investments at Hold Cos.

STRONG CAPITAL & LIQUIDITY

$1.0 BILLION

Liquidity at Holding Companies & Undrawn Credit Facility Capacity

1For more information, visit "Ratings Definitions" in the Ratings section at moodys.com, the "Rating Methodologies" section at ambest.com and "Understanding Credit Ratings" at spratings.com.

2The combined U.S. risk-to-capital ratio equals the net risk in force of Essent Guaranty, Inc. and Essent Guaranty of PA, Inc. divided by the combined statutory capital of these U.S. insurance companies.
3Based on ratings issued by Moody's, if available. S&P or Fitch rating utilized if Moody's not available.

Mortgage Insurance provided by Essent Guaranty, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the fiscal year ended December 31, 2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-36157

ESSENT GROUP LTD.

(Exact name of registrant as specified in its charter)

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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, $0.015 par value	ESNT	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes☒No☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes☐No☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes☒No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer☒	Accelerated filer	☐
Non-accelerated filer☐	Smaller reporting company	☐
Emerging growth company	☐

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Essent Group Ltd. published this content on 26 March 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 March 2022 17:56:13 UTC.