Essent Group Posts $195 Million Profit

Essent Group(NYSE:ESNT) reported second-quarter 2025 results on Aug. 8, 2025, with GAAP net income of $195 million, diluted EPS of $1.93, and annualized return on average equity of 14%. Insurance in force reached $247 billion (up 3% year over year) as of June 30, 2025, and persistency was 85.8%. The company highlighted disciplined capital deployment, robust portfolio credit quality, and technology-driven credit pricing as key themes for the quarter.

Essent Group accelerates capital return

During the second quarter, Essent Group repurchased $171 million in shares (3 million shares), followed by an additional $59 million in July, and declared a $0.31 per share dividend for 2025. The company maintained a $5.7 billion GAAP equity base and a 176% Private Mortgage Insurer Eligibility Requirements (PMIERs) sufficiency ratio as of June 30, 2025, and referenced a forthcoming investor deck on embedded value calculations.

"We have a lot of buildup of excess capital. We like you know, where, you know, the valuation is. We think it's really good returns for the shareholders. So it's a good use of proceeds. And given you know, what we did in July, I wouldn't expect that to change for the remainder of the year. … It's probably $15 to $20 in terms of stock. In terms of the valuation, additional book value. So embedded book value, and that doesn't give us doesn't that ignores any credit for being a platform or franchise that's one of six in the country that all low down payment borrowers to the top lenders, back with the GSEs. So, again, just big picture … we feel comfortable buying shares, healthy amount of shares back at these prices."
— Mark Casale, Chairman and CEO

This ongoing capital return program, supported by strong capital ratios and embedded value, signals management’s confidence in the long-term franchise value and its commitment to shareholder value creation.

Essent Group leverages technology for pricing

The company’s EssentEDGE credit engine has enabled premium yields above industry peers, with a net average premium rate of 36 basis points and a default rate of 2.12% as of June 30, 2025. Management noted that technology investments have allowed for more granular pricing and segmentation, contributing to stable and superior yields.

"Our earned premium yield's higher than the rest of the industry. And what does that tell you? And our defaults are relatively the same. It says we're able to get a little bit extra yield. Okay? What's a basis point or two? Two basis points on $145 billion adds up. So I think they're if you're from the outside looking in, that's probably the best evidence of kind of the success of how the credit engine works. And, remember, it's just a credit engine. We'll use that then to create price using an old kind of fashion yield analysis. In there, the price is a little bit you know, you're testing pricing elasticity in certain markets you can get a little bit more price."
— Mark Casale, Chairman and CEO

This technology-enabled yield advantage demonstrates Essent Group’s ability to use data and analytics for disciplined risk-based pricing, supporting profitability even in competitive or changing market conditions.

Essent Group maintains strong credit quality

As of June 30, 2025, the insured portfolio’s weighted average FICO score was 746, original loan-to-value averaged 93%, trailing 12-month operating cash flow was $867 million, and net investment yield was 3.9%. Management cited post-COVID housing volatility, affordability constraints, and embedded borrower equity as factors supporting portfolio resilience and measured exposure to potential home price declines.

"So I think, again, in certain markets for home prices to come down, I think that's healthy for borrowers. You heard me say it in the script. There's a big issue. There's a big push in DC around affordability. There's a big push with our lenders as it should be. It's very difficult to get a mortgage in, especially when you think of the first-time homebuyer is thirty-eight years old and historically, it's in the low thirties. That tells you right there that folks are having trouble getting home. So anything to help affordability, if that means HPA is going down a little bit, that's fine. I look at the embedded equity in our portfolio. I'm not particularly worried."
— Mark Casale, Chairman and CEO

Essent Group’s constructive approach to selective home price corrections and focus on embedded equity reflect prudent risk management, reducing the likelihood of outsized losses even if defaults rise modestly or home price appreciation reverses in certain markets.

Looking Ahead

Management reaffirmed a constructive long-term outlook for U.S. housing and maintained operating expense guidance of $160 million to $165 million, likely toward the lower end of the range. Capital return is expected to continue at the current elevated pace for the remainder of 2025. No further explicit forward financial or new insurance written (NIW) volume guidance was provided beyond the stated operating expense range and capital return intentions.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.