Credit Risk Transfer Transaction: August 2023
MORTGAGE INSURANCE-LINKEDNOTE
REINSURANCE TRANSACTION
REINSURANCE PROVIDED BY:
RADNOR RE 2023-1 LTD.
AUGUST 2023
DISCLAIMER
This presentation may include "forward-looking statements" which are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," or "potential" or the negative thereof or variations thereon or similar terminology. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following: changes in or to
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TRANSACTION OVERVIEW
CEDING
INSURER:
REINSURER:
ESSENT
BENEFITS:
- On
August 8, 2023 ,Essent Guaranty, Inc. , a wholly owned subsidiary ofEssent Group Ltd. , obtained fully collateralized excess of loss reinsurance coverage on mortgage insurance policies written inAugust 2022 throughJune 2023 . - The total amount of reinsurance was
$281.5 million as of the closing date. - For this transaction, reinsurance is provided by Radnor Re 2023-1 Ltd. ("Radnor Re"), a newly formed
Bermuda based special purpose insurer. Radnor Re is not a subsidiary or an affiliate ofEssent Group Ltd. - Radnor Re has funded its reinsurance obligations by issuing four classes of mortgage insurance-linked notes with 10- year legal maturities in an unregistered private offering. The notes are non-recourse to any assets of
Essent Guaranty, Inc. or its affiliates. - The proceeds of the notes offering were deposited into a reinsurance trust account for the benefit of
Essent Guaranty, Inc. The noteholders have a subordinated interest in the reinsurance trust account, which is the sole source of funds for the repayment of the notes. - This transaction is expected to provide the following benefits to
Essent : -
- Diversified source of capital
- A layer of protection against adverse credit losses
- Enhanced counterparty strength
- PMIERs required asset credit
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MORTGAGE INSURANCE-LINKEDNOTES AT CLOSING
CLASS
BALANCE
- OFRISK IN FORCE
CREDIT
ENHANCEMENT
%
OFFERED
NOTES
(FUNDED)
FUNDED PERCENT
DBRS
RATING
WEIGHTED
AVERAGE
LIFE*
INDEX
SPREAD
A-H |
|
93.50% |
6.50% |
RETAINED BY ESSENT |
||||||
M-1A |
|
1.15% |
5.35% |
|
100.0% |
BB (high) |
1.43 yrs. |
SOFR |
270bps |
|
M-1B |
|
0.95% |
4.40% |
|
100.0% |
BB (low) |
3.02 yrs. |
SOFR |
435bps |
|
M-2 |
|
0.90% |
3.50% |
|
100.0% |
B |
4.56 yrs. |
SOFR |
585bps |
|
B-1 |
|
0.25% |
3.25% |
|
100.0% |
B |
4.96 yrs. |
SOFR |
725bps |
|
B-2/B-3H |
|
3.25% |
- |
RETAINED BY ESSENT |
||||||
OFFERED NOTES |
|
|||||||||
TRANSACTION HIGHLIGHTS
- Radnor Re collateralized and funded the reinsurance coverage by issuing
$281.5 million of mortgage insurance-linked series 2023-1 notes to investors. - The reference pool has an aggregate unpaid principal balance of
$48.5 billion and Aggregate Exposed Principal Balance of$8.7 billion as of theJune 30, 2023 , cut-off date. - The notes provide excess of loss protection to
Essent Guaranty for four coverage levels designated as M-1A,M-1B,M-2, and B-1, with a funded percentage of 100% for all levels. - The notes are SOFR-based floating rate securities with a 10-year legal maturity.
- Radnor Re used the Series 2023-1 note proceeds to purchase investments to fully fund the reinsurance trust post closing on
August 8, 2023 . Essent Guaranty, Inc. , is required to make premium payments to Radnor Re to cover interest payments on the Series 2023-1 notes less investment income from the assets in the reinsurance trust.Essent Guaranty, Inc. has an option to call the transaction on and afterJuly 25, 2028 .
*WALs based on assumptions of 10% CPR, no losses and that
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