AM Best Affirms Credit Ratings of Operating Subsidiaries of Essent Group Ltd.
September 19 2024 - 4:52PM
Business Wire
AM Best has affirmed the Financial Strength Rating of A
(Excellent) and the Long-Term Issuer Credit Ratings of “a”
(Excellent) of the operating subsidiaries of Essent Group Ltd.,
which are Essent Guaranty, Inc., Essent Guaranty of PA, Inc. (both
domiciled in Radnor, PA) and Essent Reinsurance Ltd. (Hamilton,
Bermuda) (collectively referred to as Essent). The outlook of these
Credit Ratings (ratings) is stable.
The ratings reflect Essent’s balance sheet strength, which AM
Best assesses as strongest, as well as its strong operating
performance, limited business profile and appropriate enterprise
risk management (ERM).
Essent’s risk-adjusted capitalization, as measured by Best’s
Capital Adequacy Ratio (BCAR), is at the strongest level in base
and stress scenarios, which are analyzed based on the company’s
financial statements as of June 30, 2024. The balance sheet
assessment of strongest is supported by the company’s compliance
with Private Mortgage Insurer Eligibility Requirements (PMIERs
2.0), utilization of traditional reinsurance and mortgage
insurance-linked securities (MILS) to reduce its earnings and
capital volatility against potential unfavorable macroeconomic
conditions, strong liquidity position and conservative investment
portfolio, as well as the financial flexibility to raise
capital.
The operating performance assessment of strong is supported by
low loss and combined ratios recorded over the past five years and
Essent’s private mortgage insurance-only expense ratio has
stabilized. Net income is on pace to exceed 2023 results. The
company’s percentage of loans in default at June 30, 2024, is one
of the lowest in the industry as Essent’s credit profile remains
strong driven by its strict underwriting standards and the effect
of the risk-based capital charges established by PMIERs 2.0.
AM Best assesses Essent’s business profile as limited, as the
company is a monoline (re)insurer. Furthermore, it faces stiff
competition from other private mortgage insurers and governmental
agencies (e.g., Federal Housing Administration and Veterans
Affairs) providing mortgage insurance. In addition, product risk is
considered high because the performance of the mortgage insurance
industry is linked to the macroeconomic environment and the
standards set by the government-sponsored enterprises (i.e., Fannie
Mae and Freddie Mac). The product risk is mitigated somewhat by
continued use of reinsurance protection via the traditional
reinsurance and MILS markets.
Essent’s overall ERM assessment is appropriate, as the company
employs a robust ERM framework and infrastructure that is embedded
across the company. Essent’s ERM framework is commensurate with the
size, nature and complexity of its mortgage insurance business. AM
Best considers Essent’s risk assessment capabilities to be aligned
appropriately with its risk profile.
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual ratings
referenced in this release, please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please
view Guide to Best's Credit Ratings. For information
on the proper use of Best’s Credit Ratings, Best’s Performance
Assessments, Best’s Preliminary Credit Assessments and AM Best
press releases, please view Guide to Proper Use of Best’s
Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance
industry. Headquartered in the United States, the company does
business in over 100 countries with regional offices in
London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For
more information, visit www.ambest.com.
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David Mautone Senior Quantitative Specialist +1 908
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