ESSENT GROUP LTD. – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read together with the "Selected Financial
Data" and our audited consolidated financial statements and related notes
included in our Annual Report on Form 10-K as of and for the year ended
December 31, 2021 as filed with the Securities and Exchange Commission and
referred to herein as the "Annual Report," and our condensed consolidated
financial statements and related notes as of and for the three months ended
March 31, 2022 included in Part I, Item 1 of this Quarterly Report on Form 10-Q,
which we refer to as the "Quarterly Report." In addition to historical
information, this discussion contains forward-looking statements that involve
risks, uncertainties and assumptions that could cause actual results to differ
materially from management's expectations. Factors that could cause such
differences are discussed in the sections entitled "Special Note Regarding
Forward-Looking Statements" in this Quarterly Report and Part I, Item 1A "Risk
Factors" in our Annual Report and Part II, Item 1A "Risk Factors" in this
Quarterly Report. We are not undertaking any obligation to update any
forward-looking statements or other statements we may make in the following
discussion or elsewhere in this document even though these statements may be
affected by events or circumstances occurring after the forward-looking
statements or other statements were made.

Overview

We are an established private mortgage insurance company. Essent Guaranty, Inc.,
our wholly-owned insurance subsidiary which we refer to as "Essent Guaranty," is
licensed to write coverage in all 50 states and the District of Columbia. The
financial strength ratings of Essent Guaranty are A3 with a stable outlook by
Moody's Investors Service ("Moody's"), BBB+ with a stable outlook by S&P Global
Ratings ("S&P") and A (Excellent) with a stable outlook by A.M. Best.

Our holding company is domiciled in Bermuda and our U.S. insurance business is
headquartered in Radnor, Pennsylvania. We operate additional underwriting and
service centers in Winston-Salem, North Carolina and Irvine, California. We have
a highly experienced, talented team with 347 employees as of March 31, 2022. We
generated new insurance written, or NIW, of approximately $12.8 billion and
$19.3 billion for the three months ended March 31, 2022 and 2021, respectively,
and we had approximately $206.8 billion of insurance in force as of March 31,
2022.

We also offer mortgage-related insurance and reinsurance through our
wholly-owned Bermuda-based subsidiary, Essent Reinsurance Ltd., which we refer
to as "Essent Re." As of March 31, 2022, Essent Re provided insurance or
reinsurance relating to GSE risk share and other reinsurance transactions
covering approximately $1.9 billion of risk. Essent Re also reinsures Essent
Guaranty's NIW under a quota share reinsurance agreement. In April 2021, Essent
Guaranty and Essent Re agreed to increase the quota share reinsurance coverage
of Essent Guaranty's NIW provided by Essent Re from 25% to 35% effective January
1, 2021. The quota share reinsurance coverage provided by Essent Re for Essent
Guaranty's NIW prior to January 1, 2021 will continue to be 25%, the quota share
percentage in effect at the time NIW was first ceded. The insurer financial
strength rating of Essent Re is BBB+ with a stable outlook by S&P and A
(Excellent) with a stable outlook by A.M. Best.

COVID-19

Due to the novel coronavirus disease 2019 ("COVID-19"), we experienced a
significant increase in the amount of new defaults reported in 2020, especially
during the second and third quarters of 2020. We segmented these two quarters'
49,398 defaults as specifically COVID-19 related ("Early COVID Defaults") and
provided losses for these two cohorts differently as compared to our normal loss
reserving methodology. The default-to-claim transition patterns of the Early
COVID Defaults have been different than our historical defaults. We believe that
the borrowers associated with the Early COVID Defaults have been able to take
advantage of foreclosure moratoriums and mortgage forbearance programs
instituted by Federal legislation along with actions taken by the Federal
Housing Finance Agency ("FHFA"), Fannie Mae and Freddie Mac (collectively the
"GSEs") which has extend traditional default-to-claim timelines. As a result of
these programs, along with Federal stimulus, these borrowers associated with the
Early COVID Defaults have had more resources and an extended time period to
address the issues that triggered the default, that we believe will result in a
higher cure rate, and correspondingly lower claim payments than historical
defaults. Beginning in the fourth quarter of 2020, the credit characteristics of
new defaults trended towards those of the pre-pandemic period sand we have
observed the normalization of other default patterns during this period. In
addition, beginning in the fourth quarter of 2020, we observed a normalization
of the proportion of unemployment claims related to permanent layoffs as
compared to a higher proportion of temporary layoffs during the second and third
quarters of 2020. As a result, for new defaults reported after September 30,
2020, we reverted to our normal loss reserving methodology.

Over 90% of loans insured by Essent are federally backed by Fannie Mae or
Freddie Mac. As a mortgage loan in forbearance is considered delinquent, we will
provide loss reserves as loans in forbearance are reported to us as delinquent
once the borrower has missed two consecutive payments. However, we believe
providing borrowers time to recover from the adverse financial impact of the
COVID-19 event may allow some families to be able to remain in their homes and
avoid foreclosure.
                                       25
--------------------------------------------------------------------------------
  Table of Contents
For borrowers that have the ability to begin to pay their mortgage at the end of
the forbearance period, we expect that mortgage servicers will continue to work
with them to modify their loans at which time the mortgage will be removed from
delinquency status.

  As of March 31, 2022, approximately 95% of the Early COVID Defaults had cured.
In the three months ended March 31, 2022, new defaults remained elevated
although at lower levels than those reported in the second through fourth
quarters of 2020 and the first quarter of 2021. The impact on our reserves in
future periods will be dependent upon the amount of delinquent notices received
from loan servicers and our expectations for the amount of ultimate losses on
these delinquencies. As noted in "- Liquidity and Capital Resources," Essent had
substantial liquidity and had Available Assets in excess of Minimum Required
Assets under PMIERs 2.0 as of March 31, 2022. In order to maintain continuous MI
coverage, mortgage servicers are required to advance MI premiums to us even if
borrowers are in a forbearance plan. Future increases in defaults may result in
an increase in our provisions for loss and loss adjustment expenses compared to
prior periods, reduced profit commission under our quota share reinsurance
agreement with a panel of third-party reinsurers ("the QSR Agreement") and an
increase in our Minimum Required Assets.

Legislative and Regulatory Developments

Our results are significantly impacted by, and our future success may be
affected by, legislative and regulatory developments affecting the housing
finance industry. See Part I, Item 1 "Business-Regulation" and Part II, Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Legislative and Regulatory Developments" in our Annual Report for a
discussion of the laws and regulations to which we are subject as well as
legislative and regulatory developments affecting the housing finance industry.

  The U.S. Internal Revenue Service and Department of the Treasury published
both final and newly proposed regulations in January 2021 relating to the tax
treatment of passive foreign investment companies ("PFICs"). The final
regulations provide guidance on various PFIC rules, including changes resulting
from the 2017 Tax Cuts and Jobs Act. In addition, the Company is evaluating the
potential impact of the newly proposed PFIC regulations to its shareholders and
business operations. The newly proposed regulations, among other provisions, set
a limit on the amount of assets that may be deemed "good assets" within the PFIC
asset test of a foreign holding company.

Factors Affecting Our Results of Operations

Net Premiums Written and Earned

Premiums associated with our U.S. mortgage insurance business are based on
insurance in force ("IIF") during all or a portion of a period. A change in the
average IIF during a period causes premiums to increase or decrease as compared
to prior periods. Average net premium rates in effect during a given period will
also cause premiums to differ when compared to earlier periods. IIF at the end
of a reporting period is a function of the IIF at the beginning of such
reporting period plus NIW less policy cancellations (including claims paid)
during the period. As a result, premiums are generally influenced by:

•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, the competition to
provide credit enhancement on those mortgages, the number of customers who have
approved us to provide mortgage insurance and changes in our NIW from certain
customers;

•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. See Note 4 to our
condensed consolidated financial statements.

Premiums are paid either on a monthly installment basis ("monthly premiums"), in
a single payment at origination ("single premiums"), or in some cases as an
annual premium. For monthly premiums, we receive a monthly premium payment which
is recorded as net premiums earned in the month the coverage is provided.
Monthly premium payments are based on the
                                       26
--------------------------------------------------------------------------------
  Table of Contents
original mortgage amount rather than the amortized loan balance. Net premiums
written may be in excess of net premiums earned due to single premium policies.
For single premiums, we receive a single premium payment at origination, which
is recorded as "unearned premium" and earned over the estimated life of the
policy, which ranges from 36 to 156 months depending on the term of the
underlying mortgage and loan-to-value ratio at date of origination. If single
premium policies are cancelled due to repayment of the underlying loan and the
premium is non-refundable, the remaining unearned premium balance is immediately
recognized as earned premium revenue. Substantially all of our single premium
policies in force as of March 31, 2022 were non-refundable. Premiums collected
on annual policies are recognized as net premiums earned on a straight-line
basis over the year of coverage. For the three months ended March 31, 2022 and
2021, monthly premium policies comprised 98% and 93% of our NIW, respectively.

Premiums associated with our GSE and other risk share transactions are based on
the level of risk in force and premium rates on the transactions.

Persistency and Business Mix

The percentage of IIF that remains on our books after any 12-month period is
defined as our persistency rate. Because our insurance premiums are earned over
the life of a policy, higher persistency rates can have a significant impact on
our profitability. The persistency rate on our portfolio was 69.1% at March 31,
2022. Generally, higher prepayment speeds lead to lower persistency.

 Prepayment speeds and the relative mix of business between single premium
policies and monthly premium policies also impact our profitability. Our premium
rates include certain assumptions regarding repayment or prepayment speeds of
the mortgages. Because premiums are paid at origination on single premium
policies, assuming all other factors remain constant, if loans are prepaid
earlier than expected, our profitability on these loans is likely to increase
and, if loans are repaid slower than expected, our profitability on these loans
is likely to decrease. By contrast, if monthly premium loans are repaid earlier
than anticipated, our premium earned with respect to those loans and therefore
our profitability declines. Currently, the expected return on single premium
policies is less than the expected return on monthly policies.

Net Investment Income

Our investment portfolio was predominantly comprised of investment-grade fixed
income securities and money market funds as of March 31, 2022. The principal
factors that influence investment income are the size of the investment
portfolio and the yield on individual securities. As measured by amortized cost
(which excludes changes in fair market value, such as from changes in interest
rates), the size of our investment portfolio is mainly a function of increases
in capital and cash generated from or used in operations which is impacted by
net premiums received, investment earnings, net claim payments and expenses.
Realized gains and losses are a function of the difference between the amount
received on the sale of a security and the security's amortized cost, as well as
any provision for credit losses or impairments recognized in earnings. The
amount received on the sale of fixed income securities is affected by the coupon
rate of the security compared to the yield of comparable securities at the time
of sale.

Income from Other Invested Assets

As part of our overall investment strategy, we also allocate a relatively small
percentage of our portfolio to limited partnership investments in real estate,
financial services and technology funds, and traditional private equity
investments. The results of these investing activities are reported in income
from other invested assets. These investments are generally accounted for under
the equity method or fair value using net asset value (or its equivalent) as a
practical expedient. For entities accounted for under the equity method that
follow industry-specific guidance for investment companies, our proportionate
share of earnings or losses includes changes in the fair value of the underlying
assets of these entities. Fluctuations in the fair value of these entities may
increase the volatility of the Company's reported results of operations.

Through June 30, 2021, unrealized gains and losses reported by these entities
were included in other comprehensive income ("OCI"). Subsequent to June 30,
2021, management concluded that unrealized gains and losses on these investments
should be reflected in earnings rather than OCI.

                                       27
--------------------------------------------------------------------------------
  Table of Contents
Other Income

Other income includes revenues associated with contract underwriting services
and underwriting consulting services to third-party reinsurers. The level of
contract underwriting revenue is dependent upon the number of customers who have
engaged us for this service and the number of loans underwritten for these
customers. Revenue from underwriting consulting services to third-party
reinsurers is dependent upon the number of customers who have engaged us for
this service and the level of premiums associated with the transactions
underwritten for these customers.

In connection with the acquisition of our mortgage insurance platform, we
entered into a services agreement with Triad Guaranty Inc. and its wholly-owned
subsidiary, Triad Guaranty Insurance Corporation, which we refer to collectively
as "Triad," to provide certain information technology maintenance and
development and customer support-related services. In return for these services,
we receive a fee which is recorded in other income. The services agreement
provides for a flat monthly fee through November 30, 2022. The services
agreement provides for one subsequent one-year renewal at Triad's option.

As more fully described in Note 4 to our condensed consolidated financial
statements, the premiums ceded under certain reinsurance contracts with
unaffiliated third parties vary based on changes in market interest rates. Under
GAAP, these contracts contain embedded derivatives that are accounted for
separately as freestanding derivatives. The change in the fair value of the
embedded derivatives is reported in earnings and included in other income.

Provision for Losses and Loss Adjustment Expenses

The provision for losses and loss adjustment expenses reflects the current
expense that is recorded within a particular period to reflect actual and
estimated loss payments that we believe will ultimately be made as a result of
insured loans that are in default.

Losses incurred are generally affected by:

•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 level and amount of reinsurance coverage maintained with third parties;

•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. As of March 31, 2022, 78%
of our IIF relates to business written since January 1, 2020 and was less than
three years old. 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 ("LAE"), to increase as our portfolio
seasons. See "- Mortgage Insurance Earnings and Cash Flow Cycle" below.

We establish loss reserves for delinquent loans when we are notified that a
borrower has missed at least two consecutive monthly payments ("Case Reserves"),
as well as estimated reserves for defaults that may have occurred but not yet

                                       28
--------------------------------------------------------------------------------
  Table of Contents
been reported to us ("IBNR Reserves"). We also establish reserves for the
associated loss adjustment expenses, consisting of the estimated cost of the
claims administration process, including legal and other fees. Using both
internal and external information, we establish our reserves based on the
likelihood that a default will reach claim status and estimated claim severity.
See Part II, Item 7 "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Critical Accounting Policies" included in our Annual
Report for further information.

Based upon our experience and industry data, claims incidence for mortgage
insurance is generally highest in the third through sixth years after loan
origination. Claims incidence for defaults associated with COVID-19 may not
follow this pattern. As of March 31, 2022, 78% of our IIF relates to business
written since January 1, 2020 and was less than three years old. Although the
claims experience on new insurance written by us to date has been favorable, we
expect incurred losses and claims to increase as a greater amount of this book
of insurance reaches its anticipated period of highest claim frequency. The
actual default rate and the average reserve per default that we experience as
our portfolio matures is difficult to predict and is dependent on the specific
characteristics of our current in-force book (including the credit score of the
borrower, the loan-to-value ratio of the mortgage, geographic
concentrations, etc.), as well as the profile of new business we write in the
future. In addition, the default rate and the average reserve per default will
be affected by future macroeconomic factors such as housing prices, interest
rates and employment.

Due to business restrictions, stay-at-home orders and travel restrictions
implemented in March 2020 as a result of COVID-19, unemployment in the United
States increased significantly in the second quarter of 2020, declining during
the second half of 2020 and throughout 2021. As unemployment is one of the most
common reasons for borrowers to default on their mortgage, the increase in
unemployment has increased the number of delinquencies on the mortgages we
insure, and has the potential to increase claim frequencies on defaults. As a
result, we received 36,784 defaults in the three months ended June 30, 2020 and
12,614 defaults in the three months ended September 30, 2020, which resulted in
a significant increase in our default rate from 0.83% at March 31, 2020 to 4.54%
at September 30, 2020.

In response to the COVID-19 pandemic, the United States government enacted a
number of policies to provide fiscal stimulus to the economy and relief to those
affected by this global disaster. Specifically, mortgage forbearance programs
and foreclosure moratoriums were instituted by Federal legislation along with
actions taken by FHFA and the GSEs. The mortgage forbearance plans permit these
borrowers to temporarily reduce or suspend their mortgage payments for up to 18
months for loans in an active COVID-19-related forbearance program as of
February 28, 2021. For borrowers that have the ability to begin to pay their
mortgage at the end of the forbearance period, we expect that mortgage servicers
will continue to work with them to modify their loans at which time the mortgage
will be removed from delinquency status. We believe that the forbearance process
could have a favorable effect on the frequency of claims that we ultimately pay.
Based on the forbearance programs in place and the credit characteristics of the
Early COVID Defaults, we expect the ultimate number of Early COVID Defaults that
result in claims will be less than our historical default-to-claim experience.
Accordingly, we applied a lower reserve rate to the Early COVID Defaults than
the rate used for defaults that had missed a comparable number of payments as of
March 31, 2020 and in prior periods that did not have access to forbearance
plans.

Since June 30, 2020, we have experienced a decline in our default rate. As of
March 31, 2022, insured loans in default totaled 14,923 compared to 16,963
defaults as of December 31, 2021. The credit characteristics of defaults
reported subsequent to September 30, 2020 have trended towards those of the
pre-pandemic periods and we have observed the normalization of other default
patterns during this period. In addition, beginning in the fourth quarter of
2020, the economic conditions have been different than those experienced in the
second and third quarters of 2020. We believe that while defaults subsequent to
September 30, 2020 were impacted by the pandemic's effect on the economy, the
underlying credit performance of these defaults may not be the same as the
expected performance for Early COVID Defaults that occurred following the onset
of the pandemic and these defaults are more likely to transition like
pre-pandemic defaults. Accordingly, beginning in the fourth quarter of 2020, we
resumed establishing reserves for defaults reported after September 30, 2020
using our normal reserve methodology.

As of March 31, 2022, the defaulted loans reported to us in the second and third
quarters of 2020 have reached the end of their forbearance periods. During the
first quarter of 2022, the Early COVID Defaults cured at elevated levels, and
the cumulative cure rate for the Early COVID Default at March 31, 2022 exceeded
our initial estimated cure rate implied by our estimate of ultimate loss for
these defaults established at the onset of the pandemic. Based on cure activity
through March 31, 2022 and our expectations for future cure activity, we lowered
our estimate of ultimate loss for the Early COVID Defaults as of March 31, 2022
which resulted in a benefit recorded to the provision for losses of
$101.2 million. It is reasonably possible that our estimate of the losses for
the Early COVID Defaults could change in the near term as a result of changes in
the economic environment, the continued impact of the pandemic on the economic
environment, and the results of existing and future governmental programs
designed to assist individuals and businesses impacted by the virus. As more
fully described in Note 4 to our condensed consolidated financial statements, at
March 31, 2022, we had approximately $2.6 billion of excess of loss reinsurance
covering NIW from January 1, 2015 to September 30, 2021 and quota share
reinsurance on portions of our NIW
                                       29
--------------------------------------------------------------------------------
  Table of Contents
effective September 1, 2019 through December 31, 2020 and January 1, 2022
through December 31, 2022. The impact on our reserves in future periods will be
dependent upon the amount of delinquent notices received from loan servicers,
the performance of COVID-19 defaults and our expectations for the amount of
ultimate losses on these delinquencies.

Third-Party Reinsurance

We use third-party reinsurance to provide protection against adverse loss
experience and to expand our capital sources. When we enter into a reinsurance
agreement, the reinsurer receives a premium and, in exchange, agrees to insure
an agreed upon portion of incurred losses. These arrangements have the impact of
reducing our earned premiums, but also reduce our risk in force ("RIF"), which
provides capital relief, and may include capital relief under the PMIERs
financial strength requirements. Our incurred losses are reduced by any incurred
losses ceded in accordance with the reinsurance agreement. For additional
information regarding reinsurance, see Note 4 to our condensed consolidated
financial statements.

Other Underwriting and Operating Expenses

Our other underwriting and operating expenses include components that are
substantially fixed, as well as expenses that generally increase or decrease in
line with the level of NIW.

Our most significant expense is compensation and benefits for our employees,
which represented 61% of other underwriting and operating expenses for the three
months ended March 31, 2022, compared to 58% of other underwriting and operating
expenses for the three months ended March 31, 2021. Compensation and benefits
expense includes base and incentive cash compensation, stock compensation
expense, benefits and payroll taxes.

Underwriting and other expenses include legal, consulting, other professional
fees, premium taxes, travel, entertainment, marketing, licensing, supplies,
hardware, software, rent, utilities, depreciation and amortization and other
expenses. We anticipate that as we continue to add new customers and increase
our IIF, our expenses will also continue to increase.

Interest Expense

Interest expense is incurred as a result of borrowings under our secured credit
facility (the "Credit Facility"). Borrowings under the Credit Facility may be
used for working capital and general corporate purposes, including, without
limitation, capital contributions to Essent's insurance and reinsurance
subsidiaries. Borrowings accrue interest at a floating rate tied to a standard
short-term borrowing index, selected at the Company's option, plus an applicable
margin.

Income Taxes

Income taxes are incurred based on the amount of earnings or losses generated in
the jurisdictions in which we operate and the applicable tax rates and
regulations in those jurisdictions. Our U.S. insurance subsidiaries are
generally not subject to income taxes in the states in which we operate;
however, our non-insurance subsidiaries are subject to state income taxes. In
lieu of state income taxes, our insurance subsidiaries pay premium taxes that
are recorded in other underwriting and operating expenses.

Essent Group Ltd. ("Essent Group") and its wholly-owned subsidiary, Essent Re,
are domiciled in Bermuda, which does not have a corporate income tax. Under a
quota share reinsurance agreement, Essent Re reinsures 25% of Essent Guaranty's
NIW through December 31, 2020 and 35% of Essent Guaranty's NIW after December
31, 2020. Essent Re also provides insurance and reinsurance to Freddie Mac and
Fannie Mae.

The amount of income tax expense or benefit recorded in future periods will be
dependent on the jurisdictions in which we operate and the tax laws and
regulations in effect.

Mortgage Insurance Earnings and Cash Flow Cycle

In general, the majority of any underwriting profit (premium revenue minus
losses) that a book generates occurs in the early years of the book, with the
largest portion of any underwriting profit realized in the first year.
Subsequent years of a book generally result in modest underwriting profit or
underwriting losses. This pattern generally occurs because relatively few of the
claims that a book will ultimately experience typically occur in the first few
years of the book, when premium revenue is highest, while subsequent years are
affected by declining premium revenues, as the number of insured loans decreases
(primarily due to loan prepayments), and by increasing losses.
                                       30

--------------------------------------------------------------------------------

  Table of Contents

Key Performance Indicators

Insurance In Force

As discussed above, premiums we collect and earn are generated based on our IIF,
which is a function of our NIW and cancellations. The following table includes a
summary of the change in our IIF for the three months ended March 31, 2022 and
2021 for our U.S. mortgage insurance portfolio. In addition, this table includes
RIF at the end of each period.


                                             Three Months Ended March 31,
(In thousands)                                                     2022               2021
IIF, beginning of period                                      $ 207,190,544      $ 198,882,352
NIW - Flow                                                       12,841,482         19,254,014

Cancellations                                                   (13,189,030)       (21,045,175)
IIF, end of period                                            $ 206,842,996      $ 197,091,191
Average IIF during the period                                 $ 206,631,135      $ 197,749,668
RIF, end of period                                            $  45,261,164      $  41,135,978

The following is a summary of our IIF at March 31, 2022 by vintage:

($ in thousands)                     $               %
2022 (through March 31)       $  12,730,681         6.2  %
2021                             77,556,621        37.5
2020                             71,633,103        34.6
2019                             18,001,459         8.7
2018                              8,357,025         4.1
2017 and prior                   18,564,107         8.9
                              $ 206,842,996       100.0  %



Average Net Premium Rate

Our average net premium rate is calculated by dividing net premiums earned for
the U.S. mortgage insurance portfolio by average insurance in force for the
period and is dependent on a number of factors, including: (1) changes in our
base premium rate due to the risk characteristics and average coverage on the
mortgages we insure, the mix of monthly premiums compared to single premiums in
our portfolio, and changes to our pricing for NIW; (2) cancellations of
non-refundable single premiums during the period; (3) premiums ceded under
third-party reinsurance agreements. The following table presents the average net
premium rate for our U.S. mortgage insurance portfolio:

                                         Three Months Ended March 31,
                                              2022                   2021
Base average premium rate                               0.41  %      0.44  %
Single premium cancellations                            0.02         0.04
Gross average premium rate                              0.43         0.48
Ceded premiums                                         (0.04)       (0.06)
Net average premium rate                                0.39  %      0.42  %

We anticipate that the continued use of third-party reinsurance along with
changes to the level of future cancellations of non-refundable single premium
policies and mix of IIF will reduce our average net premium rate in future
periods.

                                       31
--------------------------------------------------------------------------------
  Table of Contents
Persistency Rate

The measure for assessing the impact of policy cancellations on IIF is our
persistency rate, defined as the percentage of IIF that remains on our books
after any twelve-month period. See additional discussion regarding the impact of
the persistency rate on our performance in "- Factors Affecting Our Results of
Operations - Persistency and Business Mix."

Risk-to-Capital

The risk-to-capital ratio has historically been used as a measure of capital
adequacy in the U.S. mortgage insurance industry and is calculated as a ratio of
net risk in force to statutory capital. Net risk in force represents total risk
in force net of reinsurance ceded and net of exposures on policies for which
loss reserves have been established. Statutory capital for our U.S. insurance
companies is computed based on accounting practices prescribed or permitted by
the Pennsylvania Insurance Department. See additional discussion in "- Liquidity
and Capital Resources - Insurance Company Capital."

As of March 31, 2022, our combined net risk in force for our U.S. insurance
companies was $30.3 billion and our combined statutory capital was $3.1 billion,
resulting in a risk-to-capital ratio of 9.9 to 1. The amount of capital required
varies in each jurisdiction in which we operate; however, generally, the maximum
permitted risk-to-capital ratio is 25.0 to 1. State insurance regulators are
currently examining their respective capital rules to determine whether, in
light of the financial crisis, changes are needed to more accurately assess
mortgage insurers' ability to withstand stressful economic conditions. As a
result, the capital metrics under which they assess and measure capital adequacy
may change in the future. Independent of the state regulator and GSE capital
requirements, management continually assesses the risk of our insurance
portfolio and current market and economic conditions to determine the
appropriate levels of capital to support our business.

Results of Operations

The following table sets forth our results of operations for the periods
indicated:


Summary of Operations                                    Three Months Ended March 31,
(In thousands)                                                                   2022           2021
Revenues:
Net premiums written                                                          $ 199,731      $ 204,361
Decrease in unearned premiums                                                    15,599         14,706
Net premiums earned                                                             215,330        219,067
Net investment income                                                            24,680         21,788
Realized investment (losses) gains, net                                          (7,352)           641
Income from other invested assets                                                24,705            526
Other income                                                                      7,248          2,775
Total revenues                                                                  264,611        244,797

Losses and expenses:
(Benefit) provision for losses and LAE                                         (106,858)        32,322
Other underwriting and operating expenses                                        40,796         42,239
Interest expense                                                                  2,226          2,051
Total losses and expenses                                                       (63,836)        76,612
Income before income taxes                                                      328,447        168,185
Income tax expense                                                               54,280         32,537
Net income                                                                    $ 274,167      $ 135,648

Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31,
2021

For the three months ended March 31, 2022, we reported net income of $274.2
million, compared to net income of $135.6 million for the three months ended
March 31, 2021. The increase in our operating results in three months ended
March 31, 2022 over the same period in 2021 was primarily due to a decrease in
the provision for losses and LAE and an increase in income from other invested
assets, partially offset by an increase in net realized investment losses and an
increase in income tax expense.
                                       32

--------------------------------------------------------------------------------

Table of Contents

Net Premiums Written and Earned

Net premiums earned decreased in the three months ended March 31, 2022 by 2%,
compared to the three months ended March 31, 2021 primarily due a decrease in
our average net premium rate, partially offset by an increase in our average IIF
to $206.6 billion at March 31, 2022 from $197.7 billion at March 31, 2021. The
average net premium rate was 0.39% and 0.42% for the three months ended
March 31, 2022 and 2021, respectively. See "-Key Performance Indicators-Average
Net Premium Rate" above. In the three months ended March 31, 2022, premiums
earned on the cancellation of non-refundable single premium policies decreased
to $9.1 million from $19.8 million in the three months ended March 31, 2021 as a
result of a decrease in existing borrowers refinancing their mortgages during
2022 as compared to 2021. In the three months ended March 31, 2022 ceded
premiums decreased to $20.5 million from $30.9 million for the same period of
2021 primarily due to a reduction in loss reserves ceded under our QSR Agreement
that reduced ceded premium.

Net premiums written decreased in the three months ended March 31, 2022 by 2%,
compared to the three months ended March 31, 2021 primarily due to a decrease in
new single premium policies written, changes in the mix of mortgages we insure
and changes in our pricing, partially offset by a decrease in premiums ceded
under third-party reinsurance agreements and an increase in average IIF in the
respective period.

In the three months ended March 31, 2022 and 2021, unearned premiums decreased
by $15.6 million and $14.7 million, respectively. The change in unearned
premiums was a result of net premiums written on single premium policies of $4.1
million and $18.3 million, respectively, which was offset by $19.7 million and
$33.0 million, respectively, of unearned premium that was recognized in earnings
during the periods.

Net Investment Income and Realized Investment Gains (Losses)

Our net investment income was derived from the following sources for the periods
indicated:


                                       Three Months Ended March 31,
(In thousands)                                                  2022          2021
Fixed maturities                                             $ 26,223      $ 23,024
Short-term investments                                             44            81
Gross investment income                                        26,267        23,105
Investment expenses                                            (1,587)       (1,317)
Net investment income                                        $ 24,680      $ 21,788



The increase in net investment income for the three months ended March 31, 2022
as compared to the same period in 2021 was due to the increase in the weighted
average balance of our investment portfolio. The average cash and investment
portfolio balance increased to $5.0 billion for the three months ended March 31,
2022 from $4.6 billion for the three months ended March 31, 2021. The increase
in the average cash and investment portfolio was primarily due to investing cash
flows from operations. The pre-tax investment income yield increased from 2.0%
in the three months ended March 31, 2021 to 2.1% in the three months ended March
31, 2022 primarily due to an increase in investment yields due to rising
interest rates and a decrease in premium amortization on mortgage-backed and
asset-backed securities. The pre-tax investment income yields are calculated
based on amortized cost and exclude investment expenses. See "- Liquidity and
Capital Resources" for further details of our investment portfolio.

Realized investment gains (losses) for the three months ended March 31, 2022 was
a net loss of $7.4 million as compared to a net gain of $0.6 million for the
three months ended March 31, 2021. Included in the results for the three months
ended March 31, 2022 are impairments of $6.8 million due to our intent to sell
securities in an unrealized loss position.

Income from Other Invested Assets

Income from other invested assets for the three months ended March 31, 2022 was
$24.7 million as compared to $0.5 million for the three months ended March 31,
2021. Through June 30, 2021, unrealized gains and losses reported by these
entities were included in other comprehensive income ("OCI"). Subsequent to June
30, 2021, management concluded that unrealized gains and losses on these
investments should be reflected in earnings rather than OCI. Income from other
invested assets for the quarter ended March 31, 2022, includes $15.0 million of
net unrealized gains.

                                       33
--------------------------------------------------------------------------------
  Table of Contents
Other Income

Other income was $7.2 million and $2.8 million for the three months ended March
31, 2022 and 2021, respectively. The increase in other income for the three
months ended March 31, 2022 as compared to the comparable period of 2021 was
primarily due to changes in the fair value of the embedded derivatives contained
in certain of our reinsurance agreements, partially offset by decreases in Triad
service fee income and contract underwriting revenues. In the three months ended
March 31, 2022 we recorded a net favorable increase in the fair value of the
embedded derivatives of $4.4 million compared to a net unfavorable decrease of
$0.6 million in the three months ended March 31, 2021. Other income also
includes underwriting consulting services to third-party reinsurers.

Provision for Losses and Loss Adjustment Expenses

The decrease in the provision for losses and LAE in the three months ended
March 31, 2022 as compared to the same period in 2021 was primarily due to a
decrease in the estimate of ultimate loss for Early COVID Defaults as well as
cure activity and a decrease in new defaults reported for defaults with reserves
using our normal reserve methodology in the three months ended March 31, 2022 as
compared to the comparable period of 2021.

The following table presents a rollforward of insured loans in default for our
U.S. mortgage insurance portfolio for the periods indicated:

                                                   Three Months Ended March 31,
                                                                              2022          2021
Beginning default inventory                                                  16,963        31,469
Plus: new defaults                                                            6,188         7,422
Less: cures                                                                  (8,167)       (9,737)
Less: claims paid                                                               (55)          (61)
Less: rescissions and denials, net                                               (6)          (13)
Ending default inventory                                                     14,923        29,080

The following table includes additional information about our loans in default
as of the dates indicated for our U.S. mortgage insurance portfolio:

                                                                As of March 

31,

                                                              2022          

2021

Case reserves (in thousands) (1)                          $ 270,292       $ 

377,079

Total reserves (in thousands) (1)                         $ 292,818       $ 

409,811

Ending default inventory                                     14,923         

29,080

Average case reserve per default (in thousands)           $    18.1       $ 

13.0

Average total reserve per default (in thousands) $ 19.6 $

14.1

Default rate                                                   1.93  %         3.70  %
Claims received included in ending default inventory             74              43




(1)The U.S. mortgage insurance portfolio reserves exclude reserves on GSE and
other risk share risk in force at Essent Re of $0.3 million and $1.3 million as
of March 31, 2022 and 2021, respectively.

As of March 31, 2022, the defaulted loans reported to us in the second and third
quarters of 2020 have reached the end of their forbearance periods. During the
first quarter of 2022, the Early COVID Defaults cured at elevated levels, and
the cumulative cure rate for the Early COVID Defaults at March 31, 2022 exceeded
our initial estimated cure rate implied by our 7% estimate of ultimate loss for
these defaults. Based on cure activity through March 31, 2022 and our
expectations for future cure activity, we lowered our estimate of ultimate loss
for the Early COVID Defaults to 4% as of March 31, 2022 which resulted in a
benefit recorded to the provision for losses of $101.2 million. The reserve for
losses and LAE at March 31, 2022 includes $136.9 million of reserves for Early
COVID Defaults. It is reasonably possible that our estimate of the losses for
the Early COVID Defaults could change in the near term as a result of changes in
the economic environment, the continued impact of the pandemic on the economic
environment, and the results of existing and future governmental programs
designed to assist individuals and businesses impacted by the virus. The average
reserve per Early COVID Default was approximately 75% as of March 31, 2022 as
compared to approximately 76% as of December 31, 2021 and approximately 21% as
of March 31, 2021. The increase in the average case reserve per default compared
to the comparable period of 2021 was primarily due to cure
                                       34
--------------------------------------------------------------------------------
  Table of Contents
activity for Early COVID Defaults. The reserve for losses and LAE at March 31,
2022 includes $136.9 million of reserves for Early COVID Defaults.

The credit characteristics of defaults reported subsequent to September 30, 2020
have trended towards those of the pre-pandemic periods and we have observed the
normalization of other default patterns during this period. In addition,
beginning in October 2020, the economic conditions have been different than
those experienced in the second and third quarters of 2020. We believe that
while defaults subsequent to September 30, 2020 were impacted by the pandemic's
effect on the economy, the underlying credit performance of these defaults may
not be the same as the expected performance for the Early COVID Defaults that
occurred following the onset of the pandemic and defaults after September 30,
2020 are more likely to transition consistent with pre-pandemic defaults.
Accordingly, beginning in the fourth quarter of 2020, we resumed establishing
reserves for defaults reported after September 30, 2020 using our normal reserve
methodology.

The following table provides a reconciliation of the beginning and ending
reserve balances for losses and LAE:

                                                                                  Three Months Ended
                                                                                      March 31,
(In thousands)                                                                              2022               2021
Reserve for losses and LAE at beginning of period                                       $ 407,445          $ 374,941
Less: Reinsurance recoverables                                                             25,940             19,061
Net reserve for losses and LAE at beginning of period                                     381,505            355,880
Add provision for losses and LAE occurring in:
Current period                                                                             24,369             47,989
Prior years                                                                              (131,227)           (15,667)
Incurred losses and LAE during the current period                                        (106,858)            32,322
Deduct payments for losses and LAE occurring in:
Current period                                                                                  1                114
Prior years                                                                                   909              1,872
Loss and LAE payments during the current period                                               910              1,986
Net reserve for losses and LAE at end of period                                           273,737            386,216
Plus: Reinsurance recoverables                                                             19,335             24,907
Reserve for losses and LAE at end of period                                             $ 293,072          $ 411,123



The following tables provide a detail of reserves and defaulted RIF by the
number of missed payments and pending claims for our U.S. mortgage insurance
portfolio:

                                                                                                            As of March 31, 2022
                                                   Number of               Percentage of                                                                                   Reserves as a
                                                  Policies in               Policies in              Amount of             Percentage of             Defaulted             Percentage of
($ in thousands)                                    Default                   Default                 Reserves                Reserves                  RIF                Defaulted RIF
Missed payments:
Three payments or less                               4,338                              29  %       $  21,348                            8  %       $ 269,069                            8  %
Four to eleven payments                              4,971                              33             64,332                           24            312,976                           21
Twelve or more payments                              5,540                              37            181,859                           67            347,926                           52
Pending claims                                          74                               1              2,753                            1              3,341                           82
Total case reserves (1)                             14,923                 

           100  %         270,292                          100  %       $ 933,312                           29
IBNR                                                                                                   20,272
LAE                                                                                                     2,254
Total reserves for losses and LAE (1)                                                               $ 292,818

(1)The U.S. mortgage insurance portfolio reserves exclude reserves on GSE and
other risk share risk in force at Essent Re of $0.3 million as of March 31,
2022.

                                       35

--------------------------------------------------------------------------------

  Table of Contents
                                                                                                              As of March 31, 2021
                                                    Number of               Percentage of                                                                                     Reserves as a
                                                   Policies in               Policies in              Amount of             Percentage of              Defaulted              Percentage of
($ in thousands)                                     Default                   Default                 Reserves                Reserves                   RIF                 Defaulted RIF
Missed payments:
Three payments or less                                5,487                              19  %       $  39,244                           10  %       $   329,223                           12  %
Four to eleven payments                              16,157                              56            215,949                           57            1,022,979                           21
Twelve or more payments                               7,393                              25            120,128                           32              500,658                           24
Pending claims                                           43                               -              1,758                            1                2,236                           79
Total case reserves (2)                              29,080                             100  %         377,079                          100  %       $ 1,855,096                           20
IBNR                                                                                                    28,281
LAE                                                                                                      4,451
Total reserves for losses and LAE (2)                                                                $ 409,811

(2)The U.S. mortgage insurance portfolio reserves exclude reserves on GSE and
other risk share risk in force at Essent Re of $1.3 million as of March 31,
2021.

During the three months ended March 31, 2022, the provision for losses and LAE
was a benefit of $106.9 million, comprised of $131.2 million of favorable prior
years' loss development, including $101.2 million related to Early COVID
Defaults, partially offset by a provision of $24.4 million for current year
losses. During the three months ended March 31, 2021, the provision for losses
and LAE was $32.3 million, comprised of $48.0 million of current year losses
partially offset by $15.7 million of favorable prior years' loss development. In
both periods, the 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.

The following table includes additional information about our claims paid and
claim severity for the periods indicated for our U.S. mortgage insurance
portfolio:


                                     Three Months Ended March 31,
($ in thousands)                                               2022         2021
Number of claims paid                                           55            61
Amount of claims paid                                        $ 826       $ 1,989
Claim severity                                                  35  %         70  %

Other Underwriting and Operating Expenses

Following are the components of our other underwriting and operating expenses
for the periods indicated:


                                                                            Three Months Ended March 31,
                                                                                    2022                   2021
($ in thousands)                                                                                     $               %                $               %
Compensation and benefits                                                                       $ 24,830             61  %       $ 24,760             58  %
Premium taxes                                                                                      3,968             10             4,502             11
Other                                                                                             11,998             29            12,977             31
Total other underwriting and operating expenses                                                 $ 40,796            100  %       $ 42,239            

100 %

Number of employees at end of period                                                                                347                              365

The significant factors contributing to the change in other underwriting and
operating expenses are:

•Compensation and benefits increased in the three months ended March 31, 2022 as
compared to the three months ended March 31, 2021 due to increased incentive
compensation, partially offset by decreased salaries and wages as a result of
the decreased headcount. Compensation and benefits includes salaries, wages and
bonus, stock compensation expense, benefits and payroll taxes.
                                       36

--------------------------------------------------------------------------------

Table of Contents

•Premium taxes decreased primarily due to a decrease in our effective premium
tax rate.

•Other expenses decreased primarily as a result of decreases in professional
fees and amortization of net deferred acquisition costs partially offset by
increased travel expenses and a decrease in ceding commission earned under the
QSR Agreement. Other expenses include professional fees, travel, marketing,
hardware, software, rent, depreciation and amortization and other facilities
expenses.

Interest Expense

For the three months ended March 31, 2022, we incurred interest expense of $2.2
million, as compared to $2.1 million for the three months ended March 31, 2021.
In the three months ended March 31, 2022, interest expense increased primarily
due to an increase in the average amounts outstanding under the Credit Facility,
partially offset by a decrease in the weighted average interest rate for
borrowings outstanding. For the three months ended March 31, 2022, the average
amount outstanding under the Credit Facility was $425.0 million as compared to
$325.0 million for the three months ended March 31, 2021. For the three months
ended March 31, 2022, the borrowings under the Credit Facility had a weighted
average interest rate of 1.85% as compared to 2.16% for the three months ended
March 31, 2021.

Income Taxes

Our subsidiaries in the United States file a consolidated U.S. Federal income
tax return. Our income tax expense was $54.3 million and $32.5 million for the
three months ended March 31, 2022 and 2021, respectively. The provision for
income taxes for the three months ended March 31, 2022 was calculated using an
estimated annual effective tax rate of 16.0% as compared to an estimated annual
effective tax rate of 15.9% for the three months ended March 31, 2021. For the
three months ended March 31, 2022, income tax expense includes $7.0 million of
discrete tax expense associated with realized and unrealized gains and losses.
For the three months ended March 31, 2021, income tax expense includes $5.7
million of discrete tax expense associated with an increase in the estimate of
our beginning of the year deferred state income tax liability. The tax effects
associated with realized and unrealized gains and losses and the increase to our
deferred state income tax liability are treated as a discrete items in the
reporting period in which they occur and are not considered in determining the
annual effective tax rate.

Liquidity and Capital Resources

Overview

Our sources of funds consist primarily of:

•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;

•borrowings under our Credit Facility; and

•issuance of capital shares.

Our obligations consist primarily of:

•claim payments under our policies;

•interest payments and repayment of borrowings under our Credit Facility;

•the other costs and operating expenses of our business;

•the repurchase of common shares under the share repurchase plan approved by our
Board of Directors; and

•the payment of dividends on our common shares.

As of March 31, 2022, we had substantial liquidity with cash of $203.8 million,
short-term investments of $517.4 million and fixed maturity investments of $4.1
billion. We also had $400 million available capacity under the revolving credit
                                       37
--------------------------------------------------------------------------------
  Table of Contents
component of our Credit Facility, with $425 million of borrowings outstanding
under our Credit Facility. Borrowings under the Credit Facility contractually
mature on December 10, 2026. Holding company net cash and investments available
for sale totaled $578.6 million at March 31, 2022. In addition, Essent Guaranty
is a member of the Federal Home Loan Bank of Pittsburgh (the "FHLBank") and has
access to secured borrowing capacity with the FHLBank to provide Essent Guaranty
with supplemental liquidity. Essent Guaranty had no outstanding borrowings with
the FHLBank at March 31, 2022.

Management believes that the Company has sufficient liquidity available both at
its holding companies and in its insurance and other operating subsidiaries to
meet its operating cash needs and obligations and committed capital expenditures
for the next 12 months.

While the Company and all of its subsidiaries are expected to have sufficient
liquidity to meet all their expected obligations, additional capital may be
required to meet any new capital requirements that are adopted by regulatory
authorities or the GSEs, to respond to changes in the business or economic
environment related to COVID-19, to provide additional capital related to the
growth of our risk in force in our mortgage insurance portfolio, or to fund new
business initiatives. We regularly review potential investments and
acquisitions, some of which may be material, that, if consummated, would expand
our existing business or result in new lines of business, and at any given time
we may be in discussions concerning possible transactions. We continually
evaluate opportunities based upon market conditions to further increase our
financial flexibility through the issuance of equity or debt, or other options
including reinsurance or credit risk transfer transactions. There can be no
guarantee that any such opportunities will be available on acceptable terms or
at all.

At the operating subsidiary level, liquidity could be impacted by any one of
the following factors:

•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.

Our U.S. insurance subsidiaries are subject to certain capital and dividend
rules and regulations prescribed by jurisdictions in which they are authorized
to operate and the GSEs. Under the insurance laws of the Commonwealth of
Pennsylvania, the insurance subsidiaries may pay ordinary dividends during any
twelve-month period in an amount equal to the greater of (i) 10% of the
preceding year-end statutory policyholders' surplus or (ii) the preceding year's
statutory net income. The Pennsylvania statute also requires that dividends and
other distributions be paid out of positive unassigned surplus without prior
approval. At March 31, 2022, Essent Guaranty had unassigned surplus of
approximately $376.7 million and Essent PA had unassigned surplus of
approximately $17.9 million. As of March 31, 2022, Essent Guaranty and Essent PA
could pay additional ordinary dividends in 2022 of $376.7 million and
$5.6 million, respectively. Essent Re is subject to certain dividend
restrictions as prescribed by the Bermuda Monetary Authority and under certain
agreements with counterparties. In connection with a quota share reinsurance
agreement with Essent Guaranty, Essent Re has agreed to maintain a minimum total
equity of $100 million. As of March 31, 2022, Essent Re had total equity of $1.3
billion. In connection with its insurance and reinsurance activities, Essent Re
is required to maintain assets in trusts for the benefit of its contractual
counterparties. See Note 3 to our condensed consolidated financial statements.
At March 31, 2022, our insurance subsidiaries were in compliance with these
rules, regulations and agreements.

Cash Flows

The following table summarizes our consolidated cash flows from operating,
investing and financing activities:

                                                                             Three Months Ended March 31,
(In thousands)                                                                 2022                   2021
Net cash provided by operating activities                               $       180,629          $   187,771
Net cash provided by (used in) investing activities                              38,893             (186,259)
Net cash used in financing activities                                           (97,168)             (23,320)
Net increase (decrease) in cash                                         $   

122,354 $ (21,808)

                                       38

--------------------------------------------------------------------------------

Table of Contents

Operating Activities

Cash flow provided by operating activities totaled $180.6 million for the three
months ended March 31, 2022, as compared to $187.8 million for the three months
ended March 31, 2021. The decrease in cash flow provided by operating activities
was primarily due to a decrease in premiums collected.

Investing Activities

Cash flow provided by investing activities totaled $38.9 million for the three
months ended March 31, 2022, primarily related to proceeds from the sales of
investments available for sale associated with targeted repositioning of
components of our investment portfolio partially offset by a net increase in
short-term investments and purchases of investments available for sale. Cash
flow used in investing activities totaled $186.3 million for the three months
ended March 31, 2021, related to investing cash flows from operations.

Financing Activities

Cash flow used in financing activities totaled $97.2 million for the three
months ended March 31, 2022, primarily related to the repurchases of common
stock as part of our share repurchase plan and treasury stock acquired from
employees to satisfy tax withholding obligations and quarterly cash dividends
paid in March. Cash flow used in financing activities totaled $23.3 million for
the three months ended March 31, 2021, primarily related to the quarterly cash
dividends paid in March and treasury stock acquired from employees to satisfy
tax withholding obligations.

Insurance Company Capital

We compute a risk-to-capital ratio for our U.S. insurance companies on a
separate company statutory basis, as well as for our combined insurance
operations. The risk-to-capital ratio is our net risk in force divided by our
statutory capital. Our net risk in force represents risk in force net of
reinsurance ceded, if any, and net of exposures on policies for which loss
reserves have been established. Statutory capital consists primarily of
statutory policyholders' surplus (which increases as a result of statutory net
income and decreases as a result of statutory net loss and dividends paid), plus
the statutory contingency reserve. The statutory contingency reserve is reported
as a liability on the statutory balance sheet. A mortgage insurance company is
required to make annual contributions to the contingency reserve of 50% of net
premiums earned. These contributions must generally be maintained for a period
of ten years. However, with regulatory approval, a mortgage insurance company
may make early withdrawals from the contingency reserve when incurred losses
exceed 35% of net premiums earned in a calendar year.

During the three months ended March 31, 2022, no capital contributions were made
to our U.S. insurance subsidiaries and Essent Guaranty paid a dividend to Essent
US Holdings, Inc. of $100 million. During the three months ended March 31, 2021,
no capital contributions were made to our U.S. insurance subsidiaries and our
U.S. insurance subsidiaries did not pay dividends to Essent Group or any
intermediate holding companies.

  Essent Guaranty has entered into reinsurance agreements that provide excess of
loss reinsurance coverage for new defaults on portfolios of mortgage insurance
policies issued in 2015 through September 30, 2021. The aggregate excess of loss
reinsurance coverages decrease over a ten-year period as the underlying covered
mortgages amortize. Based on the level of delinquencies reported to us, the
insurance-linked note transactions (the "ILNs") that Essent Guaranty has entered
into prior to March 31, 2020 became subject to a "trigger event" as of June 25,
2020. The aggregate excess of loss reinsurance coverage will not amortize during
the continuation of a trigger event. As of November 26, 2021, Radnor Re 2019-2
was no longer subject to a trigger event. Effective September 1, 2019, Essent
Guaranty entered into a quota share reinsurance agreement with a panel of
third-party reinsurers ("QSR 2019"). Under QSR 2019, Essent Guaranty will cede
premiums earned related to 40% of risk on eligible single premium policies and
20% of risk on all other eligible policies written September 1, 2019 through
December 31, 2020, in exchange for reimbursement of ceded claims and claims
expenses on covered policies, a 20% ceding commission, and a profit commission
of up to 63% that varies directly and inversely with ceded claims. Effective
January 1, 2022, Essent Guaranty entered into a quota share reinsurance
agreement with a panel of third-party reinsurers ("QSR 2022"). Under QSR 2022,
Essent Guaranty will cede premiums earned related to 20% of risk on all eligible
policies written January 1, 2022 through December 31, 2022, in exchange for
reimbursement of ceded claims and claims expenses on covered policies, a 20%
ceding commission, and a profit commission of up to 62% that varies directly and
inversely with ceded claims. These reinsurance coverages also reduces net risk
in force and PMIERs Minimum Required Assets. See Note 4 to our condensed
consolidated financial statements.

                                       39
--------------------------------------------------------------------------------
  Table of Contents
Our combined risk-to-capital calculation for our U.S. insurance subsidiaries as
of March 31, 2022 was as follows:


Combined statutory capital:
($ in thousands)
Policyholders' surplus           $  1,138,937
Contingency reserves                1,919,943
Combined statutory capital       $  3,058,880
Combined net risk in force       $ 30,331,197
Combined risk-to-capital ratio            9.9:1



For additional information regarding regulatory capital, see Note 14 to our
condensed consolidated financial statements. Our combined statutory capital
equals the sum of statutory capital of Essent Guaranty plus Essent PA, after
eliminating the impact of intercompany transactions. The combined
risk-to-capital ratio equals the sum of the net risk in force of Essent Guaranty
and Essent PA divided by combined statutory capital. The information above has
been derived from the annual and quarterly statements of our insurance
subsidiaries, which have been prepared in conformity with accounting practices
prescribed or permitted by the Pennsylvania Insurance Department and the
National Association of Insurance Commissioners Accounting Practices and
Procedures Manual. Such practices vary from accounting principles generally
accepted in the United States.

Essent Re has entered into GSE and other risk share transactions, including
insurance and reinsurance transactions with Freddie Mac and Fannie Mae. Under a
quota share reinsurance agreement, Essent Re reinsures 25% of Essent Guaranty's
NIW through December 31, 2020 and 35% of Essent Guaranty's NIW after December
31, 2020. During the three months ended March 31, 2022 and 2021, Essent Re paid
no dividends to Essent Group and Essent Group made no capital contributions to
Essent Re. As of March 31, 2022, Essent Re had total stockholders' equity of
$1.3 billion and net risk in force of $16.5 billion.

Financial Strength Ratings

The insurer financial strength rating of Essent Guaranty, our principal mortgage
insurance subsidiary, is rated A3 with a stable outlook by Moody's Investors
Service ("Moody's"), BBB+ with a stable outlook by S&P and A (Excellent) with
stable outlook by A.M. Best. The insurer financial strength rating of Essent Re
is BBB+ with a stable outlook by S&P and A (Excellent) with stable outlook by
A.M. Best.

Private Mortgage Insurer Eligibility Requirements

Effective December 31, 2015, Fannie Mae and Freddie Mac, at the direction of the
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. This risk-based framework provides that an insurer must
hold a substantially higher level of required assets for insured loans that are
in default compared to a performing loan. The PMIERs also include enhanced
operational performance expectations and define remedial actions that apply
should an approved insurer fail to comply with these requirements. In 2018, the
GSEs released revised PMIERs framework ("PMIERs 2.0") which became effective on
March 31, 2019. As of March 31, 2022, Essent Guaranty, our GSE-approved mortgage
insurance company, was in compliance with PMIERs 2.0. As of March 31, 2022,
Essent Guaranty's Available Assets were $3.19 billion or 174% of its Minimum
Required Assets of $1.84 billion based on our interpretation of PMIERs 2.0.

Under PMIERs guidance issued by the GSEs effective June 30, 2020, Essent will
apply a 0.30 multiplier to the risk-based required asset amount factor for each
insured loan in default backed by a property located in a Federal Emergency
Management Agency ("FEMA") Declared Major Disaster Area eligible for Individual
Assistance and that either 1) is subject to a forbearance plan granted in
response to a FEMA Declared Major Disaster, the terms of which are materially
consistent with terms of forbearance plans, repayment plans or loan modification
trial period offered by Fannie Mae or Freddie Mac, or 2) has an initial missed
payment occurring up to either (i) 30 days prior to the first day of the
incident period specified in the FEMA Major Disaster Declaration or (ii) 90 days
following the last day of the incident period specified in the FEMA Major
Disaster Declaration, not to exceed 180 days from the first day of the incident
period specified in the FEMA Major Disaster Declaration. In the case of the
foregoing, the 0.30 multiplier shall be applied to the risk-based required asset
amount factor for a non-performing primary mortgage guaranty insurance loan for
no longer than three calendar months beginning with the month the
                                       40
--------------------------------------------------------------------------------
  Table of Contents
loan becomes a non-performing primary mortgage guaranty insurance loan by
reaching two missed monthly payments absent a forbearance plan described in 1)
above. Further, under temporary provisions provided by the PMIERs guidance,
Essent will apply a 0.30 multiplier to the risk-based required asset amount
factor for each insured loan in default backed by a property that has an initial
missed payment occurring on or after March 1, 2020 and prior to April 1, 2021
(COVID-19 Crisis Period). The 0.30 multiplier will be applicable for insured
loans in default 1) subject to a forbearance plan granted in response to a
financial hardship related to COVID-19 (which shall be assumed to be the case
for any loan that has an initial missed payment occurring during the COVID-19
Crisis Period and is subject to a forbearance plan, repayment plan or loan
modification trial period), the terms of which are materially consistent with
terms offered by Fannie Mae or Freddie Mac or 2) for no longer than three
calendar months beginning with the month the loan becomes a non-performing
primary mortgage guaranty insurance loan by reaching two missed monthly
payments.

Financial Condition

Stockholders' Equity

As of March 31, 2022, stockholders' equity was $4.22 billion, compared to $4.24
billion as of December 31, 2021. Stockholders' equity decreased primarily due to
a decrease in accumulated other comprehensive income related to an increase in
our net unrealized investment losses associated with increases in market
interest rates in the three months ended March 31, 2022, the repurchase of
common shares under our share repurchase plan and dividends paid partially
offset by net income generated in 2022.

Investments

As of March 31, 2022, investments totaled $4.9 billion compared to $5.1 billion
as of December 31, 2021. In addition, our total cash was $203.8 million as of
March 31, 2022, compared to $81.5 million as of December 31, 2021. The decrease
in investments was primarily due to an increase in our net unrealized investment
losses primarily due to increases in market interest rates in the three months
ended March 31, 2022 and the targeted repositioning of components of our
investment portfolio which increased cash, partially offset by investing net
cash flows from operations during the three months ended March 31, 2022.

                                       41

--------------------------------------------------------------------------------

Table of Contents

                 Investments Available for Sale by Asset Class


Asset Class                                                March 31, 2022                                   December 31, 2021
($ in thousands)                                Fair Value                Percent                  Fair Value                 Percent
U.S. Treasury securities                     $      423,640                      9.1  %       $         448,793                      9.1  %
U.S. agency securities                                    -                        -                      5,504                      0.1
U.S. agency mortgage-backed securities              854,775                     18.3                  1,008,863                     20.3
Municipal debt securities(1)                        512,185                     11.0                    627,599                     12.7
Non-U.S. government securities                       71,743                      1.5                     79,743                      1.6
Corporate debt securities(2)                      1,283,644                     27.5                  1,455,247                     29.3
Residential and commercial mortgage
securities                                          538,870                     11.6                    545,423                     11.0
Asset-backed securities                             594,451                     12.8                    581,703                     11.7
Money market funds                                  383,597                      8.2                    210,012                      4.2
Total Investments Available for Sale         $    4,662,905                    100.0  %       $       4,962,887                    100.0  %




                                                                                  March 31,                December 31,

(1) The following table summarizes municipal debt securities as of:

         2022                      2021
Special revenue bonds                                                                    78.1  %                     77.1  %
General obligation bonds                                                                 19.6                        20.5
Certificate of participation bonds                                                        1.9                         1.9
Tax allocation bonds                                                                      0.3                         0.5
Special tax bonds                                                                         0.1                           -
Total                                                                                   100.0  %                    100.0  %


                                                                                   March 31,                December 31,

(2) The following table summarizes corporate debt securities as of:

          2022                      2021
Financial                                                                                 38.4  %                     33.7  %
Consumer, non-cyclical                                                                    18.0                        19.8
Communications                                                                             9.7                        11.4
Industrial                                                                                 6.9                         7.0
Consumer, cyclical                                                                         6.4                         7.0
Energy                                                                                     6.0                         6.0
Technology                                                                                 6.0                         6.8
Utilities                                                                                  5.7                         4.6
Basic materials                                                                            2.5                         3.7
Government                                                                                 0.4                           -
Total                                                                                    100.0  %                    100.0  %



                                       42

--------------------------------------------------------------------------------

Table of Contents

                    Investments Available for Sale by Rating


Rating(1)                                                  March 31, 2022                                   December 31, 2021
($ in thousands)                                Fair Value                Percent                  Fair Value                 Percent
Aaa                                          $    2,372,351                     50.9  %       $       2,412,273                     48.6  %
Aa1                                                  80,491                      1.7                     96,331                      1.9
Aa2                                                 334,764                      7.2                    354,951                      7.2
Aa3                                                 212,344                      4.5                    221,914                      4.5
A1                                                  275,127                      5.9                    263,820                      5.3
A2                                                  413,390                      8.9                    427,282                      8.6
A3                                                  240,922                      5.2                    274,525                      5.5
Baa1                                                226,229                      4.8                    305,204                      6.1
Baa2                                                218,244                      4.7                    274,011                      5.5
Baa3                                                190,644                      4.1                    240,755                      4.9
Below Baa3                                           98,399                      2.1                     91,821                      1.9

Total Investments Available for Sale         $    4,662,905                    100.0  %       $       4,962,887                    100.0  %

(1)Based on ratings issued by Moody's, if available. S&P or Fitch Ratings
("Fitch") rating utilized if Moody's not available.

              Investments Available for Sale by Effective Duration

Effective Duration                                         March 31, 2022                                   December 31, 2021
($ in thousands)                                Fair Value                Percent                  Fair Value                 Percent
< 1 Year                                     $    1,277,568                     27.4  %       $       1,104,397                     22.2  %
1 to < 2 Years                                      398,752                      8.6                    561,297                     11.3
2 to < 3 Years                                      412,012                      8.8                    539,174                     10.9
3 to < 4 Years                                      514,026                     11.0                    593,663                     12.0
4 to < 5 Years                                      615,448                     13.2                    663,127                     13.4
5 or more Years                                   1,445,099                     31.0                  1,501,229                     30.2
Total Investments Available for Sale         $    4,662,905                    100.0  %       $       4,962,887                    100.0  %



                                       43

--------------------------------------------------------------------------------

  Table of Contents
                Top Ten Investments Available for Sale Holdings


                                                                                        March 31, 2022
Rank                                                                                             Amortized             Unrealized              Credit
($ in thousands)                                  Security                    Fair Value            Cost             Gain (Loss)(1)          Rating(2)
1                                      U.S. Treasury 1.500% 8/15/2026        $  32,624          $  34,497          $        (1,873)             Aaa
2                                      U.S. Treasury 0.250% 5/31/2025           23,865             25,578                   (1,713)             Aaa
3                                      U.S. Treasury 2.625% 6/30/2023           19,917             19,717                      200              Aaa
4                                      U.S. Treasury 0.000% 2/23/2023           19,738             19,814                      (76)             Aaa
5                                      Fannie Mae 3.500% 1/1/2058               18,737             19,173                     (436)             Aaa
6                                      U.S. Treasury 0.875% 6/30/2026           18,373             19,638                   (1,265)             Aaa
7                                      U.S. Treasury 5.250% 11/15/2028          17,876             18,070                     (194)             Aaa
8                                      U.S. Treasury 0.125% 10/15/2023          17,091             17,609                     (518)             Aaa
9                                      U.S. Treasury 0.375% 1/31/2026           14,299             15,379                   (1,080)             Aaa
10                                     Fannie Mae 2.000% 8/1/2050               13,762             15,322                   (1,560)             Aaa
Total                                                                      

$ 196,282 $ 204,797 $ (8,515)
Percent of Investments Available for Sale

       4.2  %




(1)As of March 31, 2022, for securities in an unrealized loss position,
management believes the declines in fair value are principally associated with
the changes in the interest rate environment subsequent to its purchase. 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 available for sale 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 or Fitch rating
utilized if Moody's not available.

Rank                                  December 31, 2021
($ in thousands)                  Security                  Fair Value
1                     Fannie Mae 2.000% 10/1/2051          $  34,743
2                     U.S. Treasury 1.500% 8/15/2026          34,404
3                     U.S. Treasury 0.000% 6/30/2022          28,548
4                     U.S. Treasury 0.250% 5/31/2025          24,918
5                     Fannie Mae 3.500% 1/1/2058              21,424
6                     U.S. Treasury 2.625% 6/30/2023          20,348
7                     U.S. Treasury 0.000% 12/29/2022         19,376
8                     U.S. Treasury 0.875% 6/30/2026          19,349
9                     U.S. Treasury 5.250% 11/15/2028         19,082
10                    U.S. Treasury 0.125% 10/15/2023         17,449
Total                                                      $ 239,641
Percent of Investments Available for Sale                        4.8  %



                                       44
--------------------------------------------------------------------------------
  Table of Contents
The following tables include municipal debt securities for states that represent
more than 10% of the total municipal bond position as of March 31, 2022:


                                                                                 Amortized                  Credit
($ in thousands)                                          Fair Value               Cost                Rating (1), (2)
California
Bay Area Toll Authority                                 $      8,391          $      9,113                    A1
San Joaquin Hills Transportation Corridor Agency               7,242                 7,725                    A2
Community Hospitals of Central California
Obligated Group                                                6,812                 7,725                    A2
City of Anaheim CA                                             6,801                 7,725                    A2
State of California                                            4,793                 4,695                   Aa2
City of Carson CA                                              4,139                 4,411                   Aa3
Golden State Tobacco Securitization Corp                       3,788                 4,235                    A3
San Jose Unified School District                               3,485                 4,090                   Aa1
The Redwoods, a Community of Seniors                           3,483                 3,740                   Aa3
City of Long Beach CA Harbor Revenue                           3,235                 3,172                   Aa2
City of Inglewood CA                                           2,927                 3,139                   Aa2
Los Angeles Unified School District/CA                         2,906                 3,088                   Aa3
County of Kern CA                                              2,792                 2,740                   Baa2
City of Los Angeles Department of Airports                     2,693                 2,661                   Aa3
City of Monterey Park CA                                       2,579                 2,966                   Aa2
County of Riverside CA                                         2,190                 2,250                    A2
Foothill-Eastern Transportation Corridor Agency                2,070                 2,350                    A2
Riverside County Transportation Commission                     1,466                 1,665                    A2
Kaiser Foundation Hospitals                                    1,315                 1,321                   Aa3
University of California                                       1,295                 1,281                   Aa2
City of San Francisco CA Public Utilities
Commission Water
Revenue                                                        1,182                 1,365                   Aa2
City of El Cajon CA                                            1,182                 1,284                   Aa2
City of Torrance CA                                            1,170                 1,247                   Aa2
County of Sacramento CA                                          936                   898                    A3
City of El Monte CA                                              877                 1,000                   Aa2
Alameda Corridor Transportation Authority                        868                   881                    A3
Cathedral City Redevelopment Agency Successor
Agency                                                           743                   726                   Aa2
Pomona Redevelopment Agency Successor Agency                     718                   700                   Aa2
California Independent System Operator Corp                      657                   725                    A1
County of San Bernardino CA                                      538                   541                   Aa3
California County Tobacco Securitization Agency                  458                   479                    A3
Oxnard Union High School District                                226                   250                   Aa2
City of San Jose CA                                              184                   205                   Aa2
City of Riverside CA                                             152                   155                   Aa2
Compton Community College District                               124                   117                   Aa3
City of Los Angeles CA                                           100                   111                   Aa3
Port of Oakland                                                   27                    31                    A1
                                                        $     84,544          $     90,807

(1)Certain of the above securities may include financial guaranty insurance or
state enhancements. The above ratings include the effect of these credit
enhancements, if applicable.

(2)Based on ratings issued by Moody's, if available. S&P or Fitch rating
utilized if Moody's not available.

                                       45
--------------------------------------------------------------------------------
  Table of Contents
Off-Balance Sheet Arrangements

  Essent Guaranty has entered into fully collateralized reinsurance agreements
("Radnor Re Transactions") with unaffiliated special purpose insurers domiciled
in Bermuda. The Radnor Re special purpose insurers are special purpose variable
interest entities that are not consolidated in our condensed consolidated
financial statements because we do not have the unilateral power to direct those
activities that are significant to their economic performance. As of March 31,
2022, our estimated off-balance sheet maximum exposure to loss from the Radnor
Re entities was $0.7 million, representing the estimated net present value of
investment earnings on the assets in the reinsurance trusts. See Note 4 to our
condensed consolidated financial statements for additional information.

Critical Accounting Policies

As of the filing date of this report, there were no significant changes in our
critical accounting policies from those discussed in our 2021 Form 10-K. See
Note 2 to our condensed consolidated financial statements for recently issued
accounting standards adopted or under evaluation.
                                       46

--------------------------------------------------------------------------------

Table of Contents