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Essent Group Ltd. (ESNT)·Q4 2024 Earnings Summary
Executive Summary
- Q4 2024 EPS of $1.58 missed consensus ($1.65*) as loss provision rose on hurricane-related defaults and portfolio seasoning; total revenues were $315.0M, roughly in line with consensus ($315.3M*) .
- Management raised the quarterly dividend 11% to $0.31 and approved a $500M buyback through 2026, signaling confidence in cash flows and capital position—key stock catalysts near term .
- Credit remained solid despite seasonal/default aging; default rate rose to 2.27% (ex-hurricanes ~2%), with ~$8M of loss provision tied to Helene/Milton; investment income stayed strong at $56.6M .
- Persistency remained elevated (85.7%), supporting premiums and investment income; 12-month IIF rose to $243.6B, NIW was $12.2B (down slightly q/q) .
- Programmatic reinsurance continues: two forward quota shares (25% of eligible 2025–2026 policies) were added in Q1’25 to diversify capital and protect new business .
What Went Well and What Went Wrong
What Went Well
- Elevated persistency and resilient housing/labor markets continued to support credit performance and investment income; net investment income reached $56.6M in Q4 and $222.1M for FY 2024 .
- Capital return stepped up: dividend increased to $0.31 and $500M buyback authorization through 2026;
2M shares repurchased in Q4 and January ($118M) . - Strategic risk transfer: management entered two forward quota share deals covering 25% of eligible 2025–2026 policies, reinforcing programmatic reinsurance discipline and capital efficiency .
- “We believe Essent is well positioned to continue producing strong returns and growing book value per share” (CEO) .
- “Our strong operating performance continues to generate excess capital” (CEO), enabling balanced returns and optionality .
What Went Wrong
- EPS declined y/y and q/q (Q4 diluted $1.58 vs. $1.64 y/y, $1.65 q/q) as loss provision increased on hurricane-related and seasonal/default aging dynamics .
- Default rate rose to 2.27% (from 1.95% in Q3) with 2,119 hurricane-related defaults; $8M of provision reflected higher cure-rate assumptions vs non-hurricane defaults .
- Title operations remain a near-term earnings drag; pretax loss of ~$21M in 2024 (before corp allocations) and management expects “more of the same” in 2025 absent rate relief/refi pickup .
Financial Results
Segment net premiums earned:
Key performance indicators:
Guidance Changes
Earnings Call Themes & Trends
Management Commentary
- “We are pleased with our fourth quarter and full year 2024 financial results, which benefited from favorable credit performance given the resilience in consumers and housing.” — Mark A. Casale, CEO .
- “Our strong operating performance continues to generate excess capital…optimizing shareholder returns over the longer term.” — Mark A. Casale, CEO .
- “In the first quarter of 2025, we entered into two quota share transactions…cover 25% of the risk of all eligible policies written…in 2025 and 2026.” — Company press release .
- “For 2025, we estimate that the annual effective tax rate will be approximately 15.5%.” — David Weinstock, CFO .
Q&A Highlights
- Title outlook: Expect 2025 similar to 2024; drag reflects rates/refi dynamics; Q4 had some cleanup from acquired underwriters’ claims .
- Hurricanes/defaults: ~2,119 hurricane-related defaults drove most of the default rate increase; management expects higher cure rates on these vs non-hurricane defaults .
- Default rate trajectory: Due to portfolio seasoning (avg age ~32–33 months), default rate may trend toward the 2–3% range in 2025—still within expectations .
- Capital return pacing: Elevated PMIERs excess and liquidity support buybacks; management remains price-sensitive; special dividend remains a potential tool .
- Tax mechanics: Bermuda exemption through 2030; no economic transition adjustment recorded; ETR ~15.5% in 2025 .
- Investment portfolio: Repositioning from shorter-term cash to ABS/corporates; near-term yields steady, potential to exceed 4% longer term if curve persists .
Estimates Context
Values retrieved from S&P Global.*
Implications: EPS missed modestly in both Q3 and Q4, driven by higher provisions and title drag; revenue was roughly in line/beat by a small margin. Expect analysts to modestly lift loss ratio assumptions and reflect default normalization/hurricane noise while maintaining persistency/investment yield tailwinds .
Key Takeaways for Investors
- Near-term EPS pressure stems from higher loss provision (seasoning and event defaults) and title drag; underlying MI economics remain solid with elevated persistency and strong investment income .
- Capital returns should be a key stock catalyst: dividend lifted to $0.31 and $500M buyback through 2026, with opportunistic repurchases executed in Q4/January .
- Programmatic reinsurance and forward quota share provide capacity and capital efficiency for 2025–2026 vintages, supporting ROE and PMIERs sufficiency .
- Default rate likely normalizes higher (2–3% range) in 2025 given seasoning; ex-hurricane defaults remain the key credit metric to watch alongside cure rates .
- Persistency remains a tailwind; any rate decline could simultaneously pressure persistency but unlock NIW via increased purchase/refi activity (watch nonbanks’ recapture efficiency) .
- Title remains an earnings drag until rates/refi improve; view as a call option on lower rates rather than a near-term profit driver .
- Tax outlook stable with Bermuda exemption; 2025 ETR ~15.5% supports after-tax earnings visibility .
Cross-References and Clarifications
- Non-GAAP: Consolidated ratios excluding Title show materially better underlying MI performance (Q4 combined ratio 35.7% ex-Title vs 45.3% consolidated) .
- PMIERs: Sufficiency ratio remained robust (178% at Q4), with $1.58B excess assets—supports capital returns while maintaining stress resilience .
- Hurricanes: $8M provision reflects higher expected cures; management expects lower ultimate claims vs non-hurricane defaults .