ESSENT GROUP LTD. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

The following discussion should be read together with 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 and nine months ended September 30, 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.

Insight

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. On
September 21, 2022, A.M. Best affirmed Essent Guaranty's financial strength
rating of A (Excellent) with a stable outlook and on November 4, 2022 S&P
affirmed Essent Guaranty's financial strength rating of BBB+ with a stable
outlook.

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 350 employees as of September 30, 2022.
We generated new insurance written, or NIW, of approximately $17.1 billion and
$50.0 billion for the three and nine months ended September 30, 2022,
respectively, compared to approximately $23.6 billion and $67.8 billion for the
three and nine months ended September 30, 2021, respectively. As of
September 30, 2022, we had approximately $222.5 billion of insurance in force.

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 September 30, 2022, Essent Re provided insurance or
reinsurance relating to GSE risk share and other reinsurance transactions
covering approximately $2.0 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. On September 21, 2022, A.M.
Best's affirmed Essent Re's financial strength rating of A (Excellent) with a
stable outlook.

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.

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.
                                       26
--------------------------------------------------------------------------------
  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 September 30, 2022, approximately 98% of the Early COVID Defaults had
cured. While this level of cure activity exceeded our initial expectations for
the Early COVID Defaults, the transition of defaults to foreclosure or claim has
not returned to pre-pandemic levels. As a result, the level of defaults in the
default inventory that have missed twelve or more payments is above pre-pandemic
levels.

Current Economic Developments

The economy in the United States is currently experiencing elevated levels of
consumer price inflation. The Federal Reserve has increased the target federal
funds rate several times during 2022 in an effort to reduce consumer price
inflation. These rate increases have resulted in higher mortgage interest rates
which may lower home sale activity and affect the options available to
delinquent borrowers. 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 September 30, 2022. 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 agreements
with panels of third-party reinsurers ("the QSR Agreements") 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.

On August 16, 2022, the "Inflation Reduction Act of 2022" ("IRA"), was enacted,
which, among other things, provides for a corporate alternative minimum tax and
an excise tax on corporate stock repurchases. Based on our current analysis of
the provisions, we do not expect the IRA to have a material impact on our
financial position or results of operations. As the IRS issues additional
guidance related to the IRA, we will evaluate any potential impact to our
consolidated financial statements.

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;

                                       27
--------------------------------------------------------------------------------
  Table of Contents
•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 agreements. 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 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
September 30, 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 nine months ended September 30, 2022 and 2021, monthly premium
policies comprised 94% and 96% of our NIW, respectively.

The premiums associated with our GSE and other risk sharing transactions are based on the prevailing risk level and transaction premium rates.

Persistence 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 77.9% at
September 30, 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 September 30, 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
                                       28
--------------------------------------------------------------------------------
  Table of Contents
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.

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 further described in Note 4 to our condensed consolidated financial statements, premiums ceded under certain reinsurance contracts with unaffiliated third parties vary with changes in market interest rates. Under GAAP, these contracts contain embedded derivatives which are accounted for separately as stand-alone derivatives. The change in fair value of embedded derivatives is recognized in profit or loss and included in other income.

Provision for claims and claims adjustment expenses

The provision for claims and claims adjustment expenses reflects ongoing expenses that are accrued over a period of time to reflect actual and estimated claims payments that we believe will ultimately be made as a result of insured loans in default.

Losses incurred are generally affected by:

•the general state of the economy, which largely affects the probability that borrowers will default on their loans and have the capacity to remedy these 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 IIF’s product mix, with loans with higher risk characteristics generally resulting in higher defaults and claims;

•the size of the loans insured, the average amounts of the higher loans tending to increase the losses incurred;

• the loan-to-value ratio, higher average loan-to-value ratios tending to increase incurred losses;

•the percentage of coverage of insured loans, with deeper average coverage tending to increase the losses incurred;

• the credit quality of borrowers, including higher debt ratios and lower FICO ratings, which tend to increase incurred losses;

•the level and amount of reinsurance cover held 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
                                       29

————————————————– ——————————

Contents

•the distribution of claims over the life of a book. As of September 30, 2022,
83% 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
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 September 30, 2022, 83% 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 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.

The defaulted loans reported to us in the second and third quarters of 2020 had
reached the end of their forbearance periods as of March 31, 2022. 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 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, as of
March 31, 2022, we lowered our estimate of ultimate loss for the Early COVID
Defaults. During the three months ended June 30, 2022, Early COVID Defaults
cured at levels that exceeded our estimate as of March 31, 2022, and we further
lowered our estimate of loss for these defaults as of June 30, 2022 to 2% of the
initial risk in force. These revisions to our estimate of ultimate loss for the
Early COVID Defaults resulted in a benefit recorded to the provision for losses
of $164.1 million for the nine months ended September 30, 2022. As of September
30, 2022, approximately 98% of the Early COVID Defaults had cured. Due to the
level of Early COVID Defaults remaining in the default inventory, as of
September 30, 2022, we resumed reserving for the Early COVID Defaults using our
normal reserve methodology. While the level of cure activity for the Early COVID
Defaults exceeded our initial expectations, the transition of
                                       30
--------------------------------------------------------------------------------
  Table of Contents
defaults to foreclosure or claim has not returned to pre-pandemic levels as of
September 30, 2022. As a result, the level of defaults in the default inventory
that have missed twelve or more payments is above pre-pandemic levels.

The economy in the United States is currently experiencing elevated levels of
consumer price inflation. The Federal Reserve has increased the target federal
funds rate several times during 2022 in an effort to reduce consumer price
inflation. These rate increases have resulted in higher mortgage interest rates
which may lower home sale activity and affect the options available to
delinquent borrowers. It is reasonably possible that our estimate of losses
could change in the near term as a result of changes in the economic
environment, the impact of elevated levels of consumer price inflation on home
sale activity, housing inventory, and home prices.

In September 2022, Hurricane Ian made landfall in Florida and caused property
damage in certain counties. We expect to experience increased defaults in these
areas beginning in the fourth quarter of 2022. We are currently unable to
estimate how many claims we ultimately may have to pay associated with any
defaults in the hurricane impacted areas. There are many factors contributing to
the uncertainty surrounding these insured loans. Under our master policy, loan
servicers are not required to notify us of a default until the borrower has
missed two consecutive minimum payments. Also, the level of damage being
reported in these areas varies significantly from region to region. Further,
under our master policy, our exposure may be limited on hurricane-related
claims. For example, we are permitted to exclude a claim entirely where damage
to the property underlying a mortgage was the proximate cause of the default and
adjust a claim where the property underlying a mortgage in default is subject to
unrestored physical damage. These events have not materially affected our
reserves as of September 30, 2022.

As more fully described in Note 4 to our condensed consolidated financial
statements, at September 30, 2022, we had approximately $2.6 billion of excess
of loss reinsurance covering NIW from January 1, 2015 to December 31, 2022 and
quota share reinsurance on portions of our NIW 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 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 mostly fixed items, as well as expenses that generally increase or decrease with the level of NIW.

Our most significant expense is compensation and benefits for our employees,
which represented 59% and 60% of other underwriting and operating expenses for
the three and nine months ended September 30, 2022, respectively, compared to
64% and 62% of other underwriting and operating expenses for the three and nine
months ended September 30, 2021, respectively. 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 charges

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.

                                       31
--------------------------------------------------------------------------------
  Table of Contents
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 tax expense or benefit recognized in future periods will depend on the jurisdictions in which we operate and applicable tax laws and regulations.

Mortgage insurance revenue and the cash 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.

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 and nine months ended
September 30, 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 September 30,                       Nine Months Ended September 30,
(In thousands)                                                   2022                        2021                       2022                       2021
IIF, beginning of period                               $     215,896,531               $ 203,559,859          $     207,190,544              $ 198,882,352
NIW - Flow                                                    17,112,017                  23,579,884                 50,049,634                 67,838,752
NIW - Bulk                                                             -                           -                        196                          -
Cancellations                                                (10,465,979)                (18,923,194)               (34,697,805)               (58,504,555)
IIF, end of period                                     $     222,542,569               $ 208,216,549          $     222,542,569              $ 208,216,549
Average IIF during the period                          $     219,280,350               $ 199,739,297          $     212,449,160              $ 198,980,667
RIF, end of period                                     $      48,690,571               $  45,074,159          $      48,690,571              $  45,074,159


Here is a summary of our IIF at September 30, 2022 by vintage:

($ in thousands)                        $               %
2022 (through September 30)      $  48,465,399        21.8  %
2021                                73,219,138        32.9
2020                                63,098,179        28.3
2019                                15,479,873         7.0
2018                                 7,061,896         3.2
2017 and prior                      15,218,084         6.8
                                 $ 222,542,569       100.0  %



                                       32
--------------------------------------------------------------------------------
  Table of Contents
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 September 30,                 Nine Months Ended September 30,
                                                            2022                    2021                     2022                    2021
Base average premium rate                                       0.40  %                 0.42  %                  0.41  %                 0.44  %
Single premium cancellations                                    0.01                    0.03                     0.01                    0.03
Gross average premium rate                                      0.41                    0.45                     0.42                    0.47
Ceded premiums                                                 (0.06)                  (0.05)                   (0.05)                  (0.06)
Net average premium rate                                        0.35  %                 0.40  %                  0.37  %                 0.41  %


We expect that the continued use of third party reinsurance as well as changes in the level of future cancellations of non-refundable single premium policies and the combination of IIF will reduce our average net premium rate in future periods.

Persistence 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 versus 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 September 30, 2022, our combined net risk in force for our U.S. insurance
companies was $31.7 billion and our combined statutory capital was $3.1 billion,
resulting in a risk-to-capital ratio of 10.1 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.

                                       33
--------------------------------------------------------------------------------
  Table of Contents
Results of Operations

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


Summary of Operations                                 Three Months Ended September 30,       Nine Months Ended September 30,
(In thousands)                                            2022                2021               2022                2021
Revenues:
Net premiums written                                  $  209,230          $ 202,348          $  619,303          $ 608,996
Decrease (increase) in unearned premiums                  (1,296)            16,370              15,972             46,226
Net premiums earned                                      207,934            218,718             635,275            655,222
Net investment income                                     32,594             21,573              86,613             65,104
Realized investment (losses) gains, net                      175                221              (7,648)               609
Income from other invested assets                          9,617             40,741              36,275             41,389
Other income                                              11,447              2,283              20,272              9,270
Total revenues                                           261,767            283,536             770,787            771,594

Losses and expenses:
(Benefit) provision for losses and LAE                     4,252             (7,483)           (178,805)            34,490
Other underwriting and operating expenses                 42,144             42,272             124,838            125,625
Interest expense                                           4,450              2,063               9,563              6,187
Total losses and expenses                                 50,846             36,852             (44,404)           166,302
Income before income taxes                               210,921            246,684             815,191            605,292
Income tax expense                                        32,870             41,331             131,204            104,496
Net income                                            $  178,051          $ 205,353          $  683,987          $ 500,796


Three and nine months ended September 30, 2022 Compared to the three and nine month periods ended September 30, 2021

For the three months ended September 30, 2022, we reported net income of $178.1
million, compared to net income of $205.4 million for the three months ended
September 30, 2021. For the nine months ended September 30, 2022, we reported
net income of $684.0 million, compared to net income of $500.8 million for the
nine months ended September 30, 2021. The decrease in our operating results for
the three months ended September 30, 2022 compared to the three months ended
September 30, 2021 is primarily due to a decrease in net premiums earned and
income from other invested assets, an increase in the provision for losses and
LAE and interest expense, partially offset by an increase in net investment
income and a decrease in income tax expense. The increase in our operating
results for the nine months ended September 30, 2022 compared to the nine months
ended September 30, 2021 was primarily due to a decrease in the provision for
losses and LAE, and increases in net investment income and other income
partially offset by a decreases in net premium earned and realized investment
gains and an increase in income tax expense.

Net premiums written and earned

Net premiums earned decreased in the three and nine months ended September 30,
2022 by 5% and 3%, respectively, compared to the three and nine months ended
September 30, 2021 primarily due a decrease in our average net premium rate,
partially offset by an increase in our average IIF. The average net premium rate
was 0.35% and 0.40% for the three months ended September 30, 2022 and 2021,
respectively and 0.37% and 0.41% for the nine months ended September 30, 2022
and 2021, respectively. See "-Key Performance Indicators-Average Net Premium
Rate" above. In the three and nine months ended September 30, 2022, premiums
earned on the cancellation of non-refundable single premium policies decreased
to $4.0 million and $18.3 million, respectively, from $14.0 million and $49.5
million in the three and nine months ended September 30, 2021, respectively, as
a result of a decrease in existing borrowers refinancing their mortgages during
2022 as compared to 2021. In the three months ended September 30, 2022 ceded
premiums increased to $30.5 million from $26.9 million for the same period of
2021 primarily due to new third-party reinsurance agreements entered in 2022 and
an increase in loss reserves ceded under our QSR Agreements that increased ceded
premium. In the nine months ended September 30, 2022 ceded premiums decreased to
$73.4 million from $84.4 million, for the same period of 2021 primarily due to a
reduction in loss reserves ceded under our QSR Agreements that reduced ceded
premium.

                                       34
--------------------------------------------------------------------------------
  Table of Contents
Net premiums written increased by 3% and 2% in the three and nine months ended
September 30, 2022, respectively, compared to the three and nine months ended
September 30, 2021 primarily due to an increase in average IIF in the respective
periods and a decrease in premiums ceded under third-party reinsurance
agreements partially offset by changes in the mix of mortgages we insure and
changes in our pricing.

In the three months ended September 30, 2022 and 2021, unearned premiums
increased by $1.3 million and decreased $16.4 million, respectively. The change
in unearned premiums was a result of net premiums written on single premium
policies of $16.1 million and $8.8 million, respectively, which was offset by
$14.8 million and $25.2 million, respectively, of unearned premium that was
recognized in earnings during the periods. In the nine months ended September
30, 2022 and 2021, unearned premiums decreased by $16.0 million and $46.2
million, respectively. This was a result of net premiums written on single
premium policies of $34.5 million and $39.6 million, respectively, which was
offset by $50.5 million and $85.8 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:


                                       Nine Months Ended September 30,
(In thousands)                                                     2022          2021
Fixed maturities                                                $ 91,245      $ 69,037
Short-term investments                                             1,132           158
Gross investment income                                           92,377        69,195
Investment expenses                                               (5,764)       (4,091)
Net investment income                                           $ 86,613      $ 65,104



The changes in net investment income for the three and nine months ended
September 30, 2022 as compared to the same periods in 2021 was due to an
increase in the pre-tax investment income yield as well as the increase in the
weighted average balance of our investment portfolio. The average cash and
investment portfolio balance increased to $5.1 billion and $5.0 billion for the
three and nine months ended September 30, 2022, respectively, from $4.8 billion
and $4.7 billion for the three and nine months ended September 30, 2021,
respectively. 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 1.9% in the three and nine months ended
September 30, 2021, to 2.7% and 2.5% in the three and nine months ended
September 30, 2022, respectively, primarily due to a general increase in
investment yields due to increasing interest rates partially offset by an
increase 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 each of the three months ended
September 30, 2022 and 2021 was a net gain of $0.2 million. Realized investment
gains (losses) for the nine months ended September 30, 2022 was a net loss of
$7.6 million as compared to a net gain of $0.6 million for the nine months ended
September 30, 2021. Included in the results for the three and nine months ended
September 30, 2022 are impairments of $0.1 million and $7.4 million,
respectively, due to our intent to sell certain securities in an unrealized loss
position.

Income from other invested assets

Income from other invested assets for the three months ended September 30, 2022
was $9.6 million as compared to $40.7 million for the three months ended
September 30, 2021. Income from other invested assets for the nine months ended
September 30, 2022 was $36.3 million as compared to $41.4 million for the nine
months ended September 30, 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 three and nine months ended September 30, 2022, includes $9.9
million and $22.5 million of net unrealized gains, respectively.

                                       35
--------------------------------------------------------------------------------
  Table of Contents
Other Income

Other income for the three and nine months ended September 30, 2022 was $11.4
million and $20.3 million, respectively, as compared to $2.3 million and $9.3
million for the three and nine months ended September 30, 2021, respectively.
The increases in other income for the three and nine months ended September 30,
2022 as compared to the same periods in 2021 were primarily due to favorable
increases in the fair value of the embedded derivatives as well as increases in
underwriting consulting services to third-party reinsurers, partially offset by
lower Triad service fees and contract underwriting revenues. In the three months
ended September 30, 2022, we recorded a favorable increase in the fair value of
these embedded derivatives of $5.2 million compared to an unfavorable decrease
in the fair value of the embedded derivatives of $1.5 million in the three
months ended September 30, 2021. In the nine months ended September 30, 2022 we
recorded a net favorable increase in the fair value of the embedded derivatives
of $4.0 million compared to a net unfavorable decrease of $1.1 million in the
nine months ended September 30, 2021.

Provision for claims and claims adjustment expenses

The provision for losses and LAE in the three months ended September 30, 2022
was $4.3 million primarily due an increase in the average reserve per default
and new default activity in the quarter, partially offset by cure activity in
the quarter. The increase in reserve per default in the three months ended
September 30, 2022 was due to level of defaults that have missed twelve or more
payments, which has remained above pre-pandemic levels as a result of
foreclosure and claim activity that has not returned to pre-pandemic levels, and
the impact of the current economic environment on these defaults. The provision
for losses and LAE in the three months ended September 30, 2021 was a benefit of
$7.5 million primarily due to a decrease in new defaults reported and cure
activity for defaults with reserves using our normal reserve methodology.

The decrease in the provision for losses and LAE in the nine months ended
September 30, 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 for defaults with reserves using our normal reserve methodology in
the nine months ended September 30, 2022 as compared to the comparable period of
2021.

The following table presents a rollover of insured loans in default for our
WE mortgage insurance portfolio for the periods indicated:

                                                             Three Months Ended September 30,                           Nine Months Ended September 30,
                                                           2022                              2021                    2022                              2021
Beginning default inventory                                12,707                             23,504                 16,963                             31,469
Plus: new defaults                                          6,448                              5,132                 18,131                             17,488
Less: cures                                                (6,642)                            (8,862)               (22,448)                           (29,052)
Less: claims paid                                             (68)                               (41)                  (188)                              (148)
Less: rescissions and denials, net                            (10)                               (12)                   (23)                               (36)
Ending default inventory                                   12,435                             19,721                 12,435                             19,721


The following table includes additional information about our loans in default on the dates indicated for our WE mortgage insurance portfolio:

                                                              As of 

September 30,

                                                              2022          

2021

Case reserves (in thousands) (1)                          $ 195,839       $ 

380,036

Total reserves (in thousands) (1)                         $ 212,392       $ 

411 567

Ending default inventory                                     12,435         

19,721

Average case reserve per default (in thousands)           $    15.7       $ 

19.3

Default average total reserve (in thousands) $17.1 $

20.9

Default rate                                                   1.55  %         2.47  %
Claims received included in ending default inventory             98              52




(1)The U.S. mortgage insurance portfolio reserves exclude reserves on GSE and
other risk share risk in force at Essent Re of $0.1 million and $1.4 million as
of September 30, 2022 and 2021, respectively.

                                       36
--------------------------------------------------------------------------------
  Table of Contents
As of March 31, 2022, the defaulted loans reported to us in the second and third
quarters of 2020 had 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 from 7% to 4% of the initial risk in force. During
the three months ended June 30, 2022, Early COVID Defaults cured at levels that
exceeded our estimate as of March 31, 2022, and we further lowered our estimate
of loss for these defaults as of June 30, 2022 to 2% of the initial risk in
force. These revisions to our estimate of ultimate loss for the Early COVID
Defaults resulted in a benefit recorded to the provision for losses of $164.1
million for the nine months ended September 30, 2022. As of September 30, 2022,
approximately 98% of the Early COVID Defaults had cured. Due to the level of
Early COVID Defaults remaining in the default inventory, as of September 30,
2022, we resumed reserving for the Early COVID Defaults using our normal reserve
methodology.

The following table provides a reconciliation of the opening and closing reserves for losses and LAE balances:

                                                     Three Months Ended 

September 30nine months ended September 30(In thousands)

                                           2022                2021                2022                2021
Reserve for losses and LAE at beginning of
period                                              $   209,973          $  421,872          $  407,445          $ 374,941
Less: Reinsurance recoverables                           13,657              27,286              25,940             19,061
Net reserve for losses and LAE at beginning
of period                                               196,316             394,586             381,505            355,880
Add provision for losses and LAE occurring
in:
Current period                                           20,141              11,373              63,236             83,973
Prior years                                             (15,889)            (18,856)           (242,041)           (49,483)
Incurred losses and LAE during the current
period                                                    4,252              (7,483)           (178,805)            34,490
Deduct payments for losses and LAE occurring
in:
Current period                                               30                 103                 111                231
Prior years                                               1,288               1,014               3,339              4,153
Loss and LAE payments during the current
period                                                    1,318               1,117               3,450              4,384
Net reserve for losses and LAE at end of
period                                                  199,250             385,986             199,250            385,986
Plus: Reinsurance recoverables                           13,244              26,970              13,244             26,970

Provision for losses and LAE at the end of the period $212,494 $412,956 $212,494 $412,956



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 September 30, 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                               4,971                              40  %       $  22,279                           12  %       $ 313,531                            7  %
Four to eleven payments                              4,443                              36             55,431                           28            292,644                           19
Twelve or more payments                              2,923                              23            114,250                           58            174,589                           65
Pending claims                                          98                               1              3,879                            2              4,611                           84
Total case reserves (1)                             12,435                 
           100  %         195,839                          100  %       $ 785,375                           25
IBNR                                                                                                   14,688
LAE                                                                                                     1,865
Total reserves for losses and LAE (1)                                                               $ 212,392




(1)The U.S. mortgage insurance portfolio reserves exclude reserves on GSE and
other risk share risk in force at Essent Re of $0.1 million as of September 30,
2022.
                                       37

————————————————– ——————————

  Table of Contents
                                                                                                            As of September 30, 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                                3,823                              20  %       $  20,438                            5  %       $   223,065                            9  %
Four to eleven payments                               6,738                              34            103,062                           27              426,282                           24
Twelve or more payments                               9,108                              46            254,499                           67              595,444                           43
Pending claims                                           52                               -              2,037                            1                2,516                           81
Total case reserves (2)                              19,721                             100  %         380,036                          100  %       $ 1,247,307                           30
IBNR                                                                                                    28,503
LAE                                                                                                      3,028
Total reserves for losses and LAE (2)                                                                $ 411,567




(2)The U.S. mortgage insurance portfolio reserves exclude reserves on GSE and
other risk share risk in force at Essent Re of $1.4 million as of September 30,
2021.

During the three months ended September 30, 2022, the provision for losses and
LAE was $4.3 million, comprised of $20.1 million of current year losses,
partially offset by a benefit of $15.9 million of favorable prior years' loss
development. During the three months ended September 30, 2021, the provision for
losses and LAE was a benefit of $7.5 million, comprised of $18.9 million of
favorable prior years' loss development, partially offset by a provision of
$11.4 million for current year losses. 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.

During the nine months ended September 30, 2022, the provision for losses and
LAE was a benefit of $178.8 million, comprised of $242.0 million of favorable
prior years' loss development, including $164.1 million related to Early COVID
Defaults, partially offset by a provision of $63.2 million for current year
losses. During the nine months ended September 30, 2021, the provision for
losses and LAE was $34.5 million, comprised of $84.0 million of current year
losses partially offset by $49.5 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 paid claims and claims severity for the periods shown:

                                                                Three Months Ended September 30,             Nine Months Ended September 30,
($ in thousands)                                                     2022                  2021                  2022                  2021
Number of claims paid                                                     68                  41                     188                 148
Amount of claims paid                                         $        1,261           $   1,069          $        3,224           $   4,212
Claim severity                                                            47  %               60  %                   44  %               63  %


Other underwriting and operating expenses

The components of our other underwriting and operating expenses for the periods indicated are as follows:

                                                          Three Months Ended September 30,                                       Nine Months Ended September 30,
                                                       2022                              2021                                2022                                 2021
($ in thousands)                                 $                %                $               %                   $                   %                $                %
Compensation and benefits                   $  24,977             59  %       $ 27,236             64  %       $        75,097             60  %       $  77,626             62  %
Premium taxes                                   4,680             11             4,593             11                   13,193             11             13,645             11
Other                                          12,487             30            10,443             25                   36,548             29             34,354             27
Total other underwriting and
operating expenses                          $  42,144            100  %       $ 42,272            100  %       $       124,838            100  %       $ 125,625            100  %

Number of employees at end of period                                                                                                      350                               343


                                       38

————————————————– ——————————

Contents

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

•Compensation and benefits decreased in the three months ended September 30,
2022 as compared to the three months ended September 30, 2021 primarily due to
decreased salaries and overtime as a result of decreased headcount and decreased
stock compensation expense. Compensation and benefits decreased in the nine
months ended September 30, 2022 as compared to the nine months ended September
30, 2021 primarily due to decreased salaries and overtime as a result of
decreased headcount and decreased stock compensation expense, partially offset
by an increase in incentive compensation. Compensation and benefits includes
salaries, wages and bonus, stock compensation expense, benefits and payroll
taxes.

•Premium taxes were largely unchanged in the three months ended September 30,
2022 compared to the three months ended September 30, 2021 primarily due to a
decrease in our effective premium tax rate, partially offset by an increase in
net premiums written. Premium taxes decreased in the nine months ended September
30, 2022 compared to the nine months ended September 30, 2021 primarily due to a
decrease in our effective premium tax rate.

•Other expenses increased during the three and nine months ended September 30,
2022 compared to the three and nine months ended September 30, 2021 primarily as
a result of increased travel and underwriting expenses as well as a decrease in
ceding commission earned under our QSR Agreements, partially offset by decreases
in professional fees and amortization of net deferred acquisition costs. Other
expenses include professional fees, travel, marketing, hardware, software, rent,
depreciation and amortization and other facilities expenses.

Interest charges

For the three and nine months ended September 30, 2022, we incurred interest
expense of $4.5 million and $9.6 million, respectively, as compared to $2.1
million and $6.2 million for the three and nine months ended September 30, 2021,
respectively. The increase during the three months ended September 30, 2022 when
compared to the three months ended September 30, 2021 was primarily due to an
increase in the weighted average interest rate for borrowings outstanding, as
well as an increase in the average amounts outstanding under the Credit
Facility. The increase during the nine months ended September 30, 2022 when
compared to the nine months ended September 30, 2021 was due to an increase in
the average amounts outstanding under the Credit Facility, as well as a higher
weighted average interest rate for the period. For each of the three and nine
months ended September 30, 2022, the average amount outstanding under the Credit
Facility was $425.0 million, as compared to $325.0 million and $325.9 million
for the three and nine months ended September 30, 2021, respectively. For the
three and nine months ended September 30, 2022, the borrowings under the Credit
Facility had a weighted average interest rate of 3.94% and 2.75%, respectively,
as compared to 2.17% and 2.30% for the three and nine months ended September 30,
2021, respectively.

Income Taxes

Our subsidiaries in the United States file a consolidated U.S. Federal income
tax return. Our income tax expense was $32.9 million and $41.3 million for the
three months ended September 30, 2022 and 2021, respectively, and $131.2 million
and $104.5 million for the nine months ended September 30, 2022 and 2021,
respectively. The provision for income taxes for the nine months ended September
30, 2022 was calculated using an estimated annual effective tax rate of 15.8% as
compared to an estimated annual effective tax rate of 15.9% for the nine months
ended September 30, 2021. For the nine months ended September 30, 2022, income
tax expense includes $9.6 million of discrete tax expense associated with
realized and unrealized gains and losses. For the nine months ended September
30, 2021, income tax expense includes $8.3 million of discrete tax expense
associated with realized and unrealized gains and losses and $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.

Cash and capital resources

Insight

Our funding sources mainly consist of:

•our investment portfolio and interest income on the portfolio;

                                       39
--------------------------------------------------------------------------------
  Table of Contents
•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

•issue of capital shares.

Our obligations mainly consist of:

• claim payments under our policies;

•interest payments and repayment of borrowings under our credit facility;

•other costs and expenses of operating 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 September 30, 2022, we had substantial liquidity with cash of $79.5
million, short-term investments of $331.1 million and fixed maturity investments
of $4.3 billion. We also had $400 million available capacity under the revolving
credit 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 $647.9 million at September 30, 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 September 30, 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, 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 level of the operating subsidiaries, liquidity could be impacted by one of the following factors:

•significant decline in the value of our investments;

• the inability to sell investment assets to provide cash to fund operating requirements;

•fall in expected revenue generated by operations;

•increased expected claims payments related to our FII; Where

•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 September 30, 2022, Essent Guaranty had unassigned surplus of
approximately $318.1 million and Essent PA had unassigned surplus of
approximately $18.5 million. As of September 30, 2022, Essent Guaranty and
Essent PA could
                                       40
--------------------------------------------------------------------------------
  Table of Contents
pay additional ordinary dividends in 2022 of $237.7 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 September 30, 2022, Essent Re had total equity of $1.4 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 September 30, 2022, our insurance subsidiaries were in compliance with these
rules, regulations and agreements.

Cash flow

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

                                                      Nine Months Ended September 30,
(In thousands)                                              2022                     2021
Net cash provided by operating activities      $        416,456                   $ 518,167
Net cash used in investing activities                  (253,010)            

(403,412)

Net cash used in financing activities                  (165,470)            

(151,760)

Net (decrease) increase in cash                $         (2,024)                  $ (37,005)



Operating Activities

Cash flow provided by operating activities totaled $416.5 million for the nine
months ended September 30, 2022, as compared to $518.2 million for the nine
months ended September 30, 2021. The decrease in cash flow provided by operating
activities was primarily due to increases in other assets and accounts
receivable, as well as income tax payments.

Investing activities

Cash flows used in investing activities totaled $253.0 million for the nine months ended September 30, 2022 and $403.4 million for the nine months ended
September 30, 2021. During both periods, cash flows used in investing activities related to investing cash flows from operations.

Fundraising activities

Cash flow used in financing activities totaled $165.5 million for the nine
months ended September 30, 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, June and September. Cash flow used in financing activities
totaled $151.8 million for the nine months ended September 30, 2021, primarily
related to the quarterly cash dividends paid in March, June and September and
treasury stock acquired from employees to satisfy tax withholding obligations.

Capital of the insurance company

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 nine months ended September 30, 2022, no capital contributions were
made to our U.S. insurance subsidiaries and Essent Guaranty paid dividends to
Essent US Holdings, Inc. of $260 million. During the nine months ended September
30, 2021, no capital contributions were made to our U.S. insurance subsidiaries
and Essent Guaranty paid dividends to Essent US Holdings, Inc. of $147.2
million.
                                       41

————————————————– ——————————

Contents

  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 December 31, 2022. 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. Radnor Re 2020-1 was no longer subject
to a trigger event as of July 25, 2022. 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.

Our combined risk/capital calculation for our WE insurance subsidiaries from September 30, 2022 was the following:


Combined statutory capital:
($ in thousands)
Policyholders' surplus              1,080,956
Contingency reserves                2,047,725
Combined statutory capital       $  3,128,681
Combined net risk in force       $ 31,736,095
Combined risk-to-capital ratio           10.1:1



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 nine months ended September 30, 2022 and 2021, Essent Re
paid no dividends to Essent Group and Essent Group made no capital contributions
to Essent Re. As of September 30, 2022, Essent Re had total stockholders' equity
of $1.4 billion and net risk in force of $18.7 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. On September 21, 2022, A.M. Best's affirmed Essent Guaranty's
financial strength rating of A (Excellent) with a stable outlook and on November
4, 2022 S&P affirmed Essent Guaranty's financial strength rating of BBB+ with a
stable outlook.

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
                                       42
--------------------------------------------------------------------------------
  Table of Contents
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 September 30,
2022, Essent Guaranty, our GSE-approved mortgage insurance company, was in
compliance with PMIERs 2.0. As of September 30, 2022, Essent Guaranty's
Available Assets were $3.15 billion or 179% of its Minimum Required Assets of
$1.76 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 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

Equity

As of September 30, 2022, stockholders' equity was $4.29 billion, compared to
$4.24 billion as of December 31, 2021. Stockholders' equity increased primarily
due to net income generated in 2022, partially offset by 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 nine months ended September 30, 2022, the repurchase of common shares
under our share repurchase plan and dividends paid.

Investments

As of September 30, 2022, investments totaled $4.8 billion compared to $5.1
billion as of December 31, 2021. In addition, our total cash was $79.5 million
as of September 30, 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
nine months ended September 30, 2022, partially offset by investing net cash
flows from operations during the nine months ended September 30, 2022.

                                       43

————————————————– ——————————

Contents

                 Investments Available for Sale by Asset Class


Asset Class                                               September 30, 2022                                   December 31, 2021
($ in thousands)                                  Fair Value                 Percent                  Fair Value                 Percent
U.S. Treasury securities                     $         535,636                     11.7  %       $         448,793                      9.1  %
U.S. agency securities                                       -                        -                      5,504                      0.1
U.S. agency mortgage-backed securities                 752,236                     16.4                  1,008,863                     20.3
Municipal debt securities(1)                           559,784                     12.2                    627,599                     12.7
Non-U.S. government securities                          60,834                      1.3                     79,743                      1.6
Corporate debt securities(2)                         1,345,269                     29.4                  1,455,247                     29.3
Residential and commercial mortgage
securities                                             523,608                     11.4                    545,423                     11.0
Asset-backed securities                                608,330                     13.3                    581,703                     11.7
Money market funds                                     199,147                      4.3                    210,012                      4.2
Total Investments Available for Sale         $       4,584,844                    100.0  %       $       4,962,887                    100.0  %




                                                                                  September 30,                December 31,

(1) The following table summarizes the municipal debt securities at:

           2022                        2021
Special revenue bonds                                                                        78.5  %                     77.1  %
General obligation bonds                                                                     21.5                        20.5
Certificate of participation bonds                                                              -                         1.9
Tax allocation bonds                                                                            -                         0.5

Total                                                                                       100.0  %                    100.0  %



                                                                                   September 30,                December 31,

(2) The following table summarizes corporate debt securities at:

            2022                        2021
Financial                                                                                     39.4  %                     33.7  %
Consumer, non-cyclical                                                                        17.5                        19.8
Communications                                                                                 8.8                        11.4
Industrial                                                                                     6.8                         7.0
Consumer, cyclical                                                                             7.2                         7.0
Energy                                                                                         6.6                         6.0
Technology                                                                                     5.6                         6.8
Utilities                                                                                      6.1                         4.6
Basic materials                                                                                2.0                         3.7

Total                                                                                        100.0  %                    100.0  %



                                       44

————————————————– ——————————

Contents

                    Investments Available for Sale by Rating


Rating(1)                                                 September 30, 2022                                   December 31, 2021
($ in thousands)                                  Fair Value                 Percent                  Fair Value                 Percent
Aaa                                          $       2,227,988                     48.6  %       $       2,412,273                     48.6  %
Aa1                                                    101,547                      2.2                     96,331                      1.9
Aa2                                                    334,435                      7.3                    354,951                      7.2
Aa3                                                    215,688                      4.7                    221,914                      4.5
A1                                                     375,063                      8.2                    263,820                      5.3
A2                                                     356,469                      7.8                    427,282                      8.6
A3                                                     244,309                      5.3                    274,525                      5.5
Baa1                                                   220,295                      4.8                    305,204                      6.1
Baa2                                                   220,303                      4.8                    274,011                      5.5
Baa3                                                   191,386                      4.2                    240,755                      4.9
Below Baa3                                              97,361                      2.1                     91,821                      1.9

Total Investments Available for Sale         $       4,584,844                    100.0  %       $       4,962,887                    100.0  %



(1) Based on ratings issued by Moody’s, if available. S&P or Fitch Ratings (“Fitch”) rating used if Moody’s is not available.

              Investments Available for Sale by Effective Duration
Effective Duration                                        September 30, 2022                                   December 31, 2021
($ in thousands)                                  Fair Value                 Percent                  Fair Value                 Percent
< 1 Year                                     $       1,222,876                     26.7  %       $       1,104,397                     22.2  %
1 to < 2 Years                                         472,273                     10.3                    561,297                     11.3
2 to < 3 Years                                         501,955                     10.9                    539,174                     10.9
3 to < 4 Years                                         469,386                     10.2                    593,663                     12.0
4 to < 5 Years                                         445,986                      9.7                    663,127                     13.4
5 or more Years                                      1,472,368                     32.2                  1,501,229                     30.2
Total Investments Available for Sale         $       4,584,844                    100.0  %       $       4,962,887                    100.0  %



                                       45

————————————————– ——————————

  Table of Contents
                Top Ten Investments Available for Sale Holdings


                                                                                      September 30, 2022
Rank                                                                                             Amortized             Unrealized              Credit
($ in thousands)                                  Security                    Fair Value            Cost             Gain (Loss)(1)          Rating(2)
1                                      US Treasury 2.875% 06/15/2025         $  39,811          $  40,878          $        (1,067)             Aaa
2                                      US Treasury 1.500% 08/15/2026            30,765             34,441                   (3,676)             Aaa
3                                      US Treasury 0.250% 05/31/2025            23,037             25,583                   (2,546)             Aaa
4                                      US Treasury 2.500% 01/31/2024            19,911             20,388                     (477)             Aaa
5                                      US Treasury 0.000% 02/23/2023            19,719             19,918                     (199)             Aaa
6                                      US Treasury 2.625% 06/30/2023            19,537             19,730                     (193)             Aaa
7                                      US Treasury 0.875% 06/30/2026            17,403             19,639                   (2,236)             Aaa
8                                      US Treasury 0.125% 10/15/2023            16,890             17,614                     (724)             Aaa
9                                      US Treasury 5.250% 11/15/2028            16,203             17,872                   (1,669)             Aaa
10                                     US Treasury 0.000% 01/26/2023            15,529             15,559                      (30)             Aaa
Total                                                                      

$218,805 $231,622 ($12,817)
Percentage of investments available for sale

       4.8  %




(1)As of September 30, 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 used if Moody’s is 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  %












                                       46
--------------------------------------------------------------------------------
  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 September 30, 2022:


                                                                                Amortized                 Credit
($ in thousands)                                          Fair Value               Cost               Rating (1), (2)
California
Bay Area Toll Authority                                        7,027                9,106                   A1
State of California                                            6,469                6,953                   Aa2
San Joaquin Hills Transportation Corridor Agency               6,075                7,725                   A1
City of Anaheim CA                                             5,625                7,725                   A1
Community Hospitals of Central California
Obligated Group                                                5,583                7,725                   A1
Golden State Tobacco Securitization Corp                       3,723                5,016                   A3
City of Carson CA                                              3,321                4,405                   Aa3
City of Long Beach CA Harbor Revenue                           3,124                3,145                   Aa2
San Jose Unified School District                               3,019                4,090                   Aaa
The Redwoods a Community of Seniors                            2,919                3,740                   Aa3
County of Kern CA                                              2,679                2,741                  Baa2
Los Angeles Unified School District/CA                         2,589                3,056                   Aa3
City of Los Angeles Department of Airports                     2,582                2,639                   Aa3
Chabot-Las Positas Community College District                  2,542                2,635                   Aa2
University of California                                       2,450                2,511                   Aa2
City of Inglewood CA                                           2,344                3,132                   Aa2
Port of Oakland                                                2,335                2,422                   A1
City of Monterey Park CA                                       2,173                2,967                   Aa2
San Francisco City & County Airport Comm-San
Francisco International Airport                                2,060                2,119                   A1
County of Riverside CA                                         2,040                2,250                   A1
State of California Personal Income Tax Revenue                1,955                2,033                   Aa3
Foothill-Eastern Transportation Corridor Agency                1,651                2,350                   A1
Kaiser Foundation Hospitals                                    1,250                1,306                   Aa3
Regents of the University of California Medical
Center Pooled Revenue                                          1,249                1,361                   Aa3
Riverside County Transportation Commission                     1,243                1,665                   A2
City of Torrance CA                                            1,077                1,244                   Aa2
City of San Francisco CA Public Utilities
Commission Water Revenue                                       1,042                1,363                   Aa2
City of El Cajon CA                                              909                1,283                   Aa2
County of Sacramento CA                                          893                  890                   A3
City of El Monte CA                                              810                1,000                   Aa2
Alameda Corridor Transportation Authority                        810                  874                   A3
Cathedral City Redevelopment Agency Successor
Agency                                                           720                  721                   Aa2
Pomona Redevelopment Agency Successor Agency                     662                  700                   Aa2
California Independent System Operator Corp                      495                  725                   A1
California County Tobacco Securitization Agency                  423                  477                   A3
County of San Bernardino CA                                      293                  294                   Aa3
Oxnard Union High School District                                204                  250                   Aa2
City of San Jose CA                                              166                  205                   Aa2
City of Riverside CA                                             149                  155                   Aa2
Compton Community College District                               117                  116                   Aa3
City of Los Angeles CA                                            86                  111                   Aa3
                                                        $     86,881          $   105,224


                                       47

————————————————– ——————————

  Table of Contents
                                                                                Amortized                  Credit
($ in thousands)                                         Fair Value               Cost                Rating (1), (2)
New York
City of New York NY                                           8,725                 8,978                   Aa2
Port Authority of New York & New Jersey                       7,461                 8,387                   Aa3
New York City Transitional Finance Authority
Future Tax Secured Revenue                                    7,391                 8,371                   Aa1
State of New York Personal Income Tax Revenue                 7,094                 7,345                   Aa1
Metropolitan Transportation Authority                         6,500                 7,018                    A3
Metropolitan Transportation Authority Payroll
Mobility Tax Revenue                                          4,573                 5,858                   Aa1
University of Rochester                                       3,042                 3,231                   Aa3
New York City Water & Sewer System                            2,723                 2,925                   Aa1
Triborough Bridge & Tunnel Authority                          2,564                 2,646                   Aa3
Research Foundation of State University of New
York/The                                                      2,220                 2,470                    A1
City of Yonkers NY                                            2,110                 2,291                    A3
Rochester Institute of Technology                             2,095                 2,215                    A1
Long Island Power Authority                                   1,647                 1,686                    A2
New York State Dormitory Authority                            1,558                 1,688                   Aa3
New York City Transitional Finance Authority
Building Aid Revenue                                          1,487                 1,496                   Aa2
Trustees of Columbia University in the City of
New York/The                                                  1,226                 1,311                   Aaa
State of New York Sales Tax Revenue                           1,194                 1,489                   Aa1
State University of New York Dormitory
Facilities Revenue                                              846                 1,000                   Aa3
Yankee Stadium LLC                                                 628                794                    A1
County of Nassau NY                                                268                275                    A1

                                                       $     65,351          $     71,475



(1)Some of the above guarantees may include financial guarantee insurance or state improvements. The ratings above include the effect of such credit enhancements, if any.

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

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
September 30, 2022, our estimated off-balance sheet maximum exposure to loss
from the Radnor Re entities was $0.6 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.
                                       48

————————————————– ——————————

Contents

© Edgar Online, source Previews