Essent Group's Strategic Victories: A Year of Financial Strength and Expanding Horizons
Outstanding 2025 Financial Performance
Essent Group achieved impressive financial milestones in 2025, reporting a net income of $155 million in the fourth quarter and a full-year net income of $690 million. This translates to an earnings per share of $6.90, alongside a 12% return on average equity. The book value per share saw a notable 13% rise, reaching $60.31, underscoring the company's robust financial position. Moreover, Essent returned nearly $700 million to its shareholders and increased its quarterly dividend by 13% to $0.35.
Resilient Mortgage Insurance Portfolio
The company's mortgage insurance in force stood at approximately $248 billion, with a persistency rate close to 86%. Despite a slight increase in the default rate to 2.5%, management remains confident in the portfolio's resilience, attributing the rise to normal seasonality and an aging book. Essent anticipates modest growth in earned premium and insurance-in-force, prioritizing unit economics over aggressively pursuing market share in a competitive landscape.
Strategic Reinsurance and Capital Deployment
Reinsurance plays a pivotal role in Essent's operations, with roughly 98% of its mortgage insurance portfolio benefiting from reinsurance coverage. Essent Re, the company's reinsurance arm, contributed nearly $80 million in third-party net income from $2.3 billion in risk. Notably, Essent has initiated a strategic expansion into Lloyd's-backed quota share property and casualty (P&C) reinsurance, projecting $100-$150 million in premium from these new agreements, with a significant portion expected to be earned in 2026. This move is designed to leverage higher investment yields, diversify assets, and reduce correlation to consumer credit risk.
Fiscal Prudence and Shareholder Returns
Essent maintains a strong balance sheet, ending 2025 with $6.6 billion in cash and investments, yielding an aggregate of 3.9%. The company's commitment to shareholder value is evident through the repurchase of nearly 10% of outstanding shares in 2025 and a 13% increase in its quarterly dividend. With ample liquidity, including $500 million in undrawn revolver capacity and a low debt-to-capital ratio of 8%, Essent is well-positioned for future growth and continued returns to investors.
Market Outlook and Operational Strategy
Looking ahead, Essent's leadership foresees modest near-term growth in earned premium and insurance in force, a stance influenced by current persistency levels and the interest rate environment. The company's strategic focus remains on optimizing unit economics rather than engaging in aggressive market share battles at potentially unfavorable premium levels. Essent continues to monitor macroeconomic factors like unemployment, while acknowledging that robust home equity within its portfolio acts as a buffer against potential claims.