Investments

3 Months Ended

Mar. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Investments available for sale consist of the following:


March 31, 2022 (In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities	$	437,450	$	368	$	(14,178)	$	423,640

U.S. agency mortgage-backed securities	902,741		689		(48,655)		854,775
Municipal debt securities (1)	530,839		3,836		(22,490)		512,185
Non-U.S. government securities	73,097		1,411		(2,765)		71,743
Corporate debt securities (2)	1,339,172		2,845		(58,373)		1,283,644
Residential and commercial mortgage securities	565,116		1,168		(27,414)		538,870
Asset-backed securities	604,516		361		(10,426)		594,451
Money market funds	383,597		—		—		383,597
Total investments available for sale	$	4,836,528	$	10,678	$	(184,301)	$	4,662,905


December 31, 2021 (In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities	$	447,926	$	3,833	$	(2,966)	$	448,793
U.S. agency securities	5,501		3		—		5,504
U.S. agency mortgage-backed securities	1,005,611		13,365		(10,113)		1,008,863
Municipal debt securities (1)	598,764		30,122		(1,287)		627,599
Non-U.S. government securities	77,366		3,232		(855)		79,743
Corporate debt securities (2)	1,428,645		36,067		(9,465)		1,455,247
Residential and commercial mortgage securities	541,638		10,452		(6,667)		545,423
Asset-backed securities	582,144		1,673		(2,114)		581,703
Money market funds	210,012		—		—		210,012
Total investments available for sale	$	4,897,607	$	98,747	$	(33,467)	$	4,962,887


	March 31,		December 31,
(1) The following table summarizes municipal debt securities as of:	2022		2021
Special revenue bonds	78.1	%	77.1	%
General obligation bonds	19.6		20.5
Certificate of participation bonds	1.9		1.9
Tax allocation bonds	0.3		0.5
Special tax bonds	0.1		—
Total	100.0	%	100.0	%


	March 31,		December 31,
(2) The following table summarizes corporate debt securities as of:	2022		2021
Financial	38.4	%	33.7	%
Consumer, non-cyclical	18.0		19.8
Communications	9.7		11.4
Industrial	6.9		7.0
Consumer, cyclical	6.4		7.0
Energy	6.0		6.0
Technology	6.0		6.8
Utilities	5.7		4.6
Basic materials	2.5		3.7
Government	0.4		—
Total	100.0	%	100.0	%

The amortized cost and fair value of investments available for sale at March 31, 2022, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Because most U.S. agency mortgage-backed securities, residential and commercial mortgage securities and asset-backed securities provide for periodic payments throughout their lives, they are listed below in separate categories.


(In thousands)	Amortized Cost		Fair Value
U.S. Treasury securities:
Due in 1 year	$	88,143	$	87,953
Due after 1 but within 5 years	302,905		291,389
Due after 5 but within 10 years	42,566		40,826
Due after 10 years	3,836		3,472
Subtotal	437,450		423,640




Municipal debt securities:
Due in 1 year	1,659		1,665
Due after 1 but within 5 years	119,337		119,368
Due after 5 but within 10 years	164,952		162,102
Due after 10 years	244,891		229,050
Subtotal	530,839		512,185
Non-U.S. government securities:
Due in 1 year	427		430
Due after 1 but within 5 years	38,669		39,429
Due after 5 but within 10 years	8,878		9,073
Due after 10 years	25,123		22,811
Subtotal	73,097		71,743
Corporate debt securities:
Due in 1 year	214,080		214,038
Due after 1 but within 5 years	563,001		551,936
Due after 5 but within 10 years	424,445		394,068
Due after 10 years	137,646		123,602
Subtotal	1,339,172		1,283,644
U.S. agency mortgage-backed securities	902,741		854,775
Residential and commercial mortgage securities	565,116		538,870
Asset-backed securities	604,516		594,451
Money market funds	383,597		383,597
Total investments available for sale	$	4,836,528	$	4,662,905

The components of realized investment (losses) gains, net on the condensed consolidated statements of comprehensive income were as follows:


	Three Months Ended March 31,
(In thousands)		2022		2021
Realized gross gains		$	12,576	$	750
Realized gross losses		(13,091)		(109)
Impairment loss		(6,837)		—

The fair value of investments available for sale in an unrealized loss position and the related unrealized losses for which no allowance for credit loss has been recorded were as follows:


	Less than 12 months				12 months or more				Total
March 31, 2022 (In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury securities	$	303,598	$	(10,257)	$	67,009	$	(3,921)	$	370,607	$	(14,178)

U.S. agency mortgage-backed securities	614,532		(31,273)		191,880		(17,382)		806,412		(48,655)
Municipal debt securities	301,894		(21,844)		6,694		(646)		308,588		(22,490)
Non-U.S. government securities	16,001		(915)		14,356		(1,850)		30,357		(2,765)
Corporate debt securities	833,120		(42,805)		125,507		(15,568)		958,627		(58,373)
Residential and commercial mortgage securities	356,130		(18,432)		91,270		(8,982)		447,400		(27,414)
Asset-backed securities	493,873		(9,880)		29,987		(546)		523,860		(10,426)

Total	$	2,919,148	$	(135,406)	$	526,703	$	(48,895)	$	3,445,851	$	(184,301)


	Less than 12 months				12 months or more				Total
December 31, 2021 (In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury securities	$	207,122	$	(2,170)	$	28,012	$	(796)	$	235,134	$	(2,966)

U.S. agency mortgage-backed securities	582,108		(9,414)		26,131		(699)		608,239		(10,113)
Municipal debt securities	91,719		(1,281)		312		(6)		92,031		(1,287)
Non-U.S. government securities	22,986		(855)		—		—		22,986		(855)
Corporate debt securities	522,120		(7,200)		46,875		(2,265)		568,995		(9,465)
Residential and commercial mortgage securities	268,617		(5,200)		38,256		(1,467)		306,873		(6,667)
Asset-backed securities	339,137		(1,954)		13,101		(160)		352,238		(2,114)

Total	$	2,033,809	$	(28,074)	$	152,687	$	(5,393)	$	2,186,496	$	(33,467)

At March 31, 2022 and December 31, 2021, we held 1,994 and 1,180 individual investment securities, respectively, that were in an unrealized loss position. We assess our intent to sell these securities and whether we will be required to sell these securities before the recovery of their amortized cost basis when determining whether to record an impairment on the securities in an unrealized loss position. In assessing whether the decline in the fair value at March 31, 2022 of any of these securities resulted from a credit loss or other factors, we made inquiries of our investment managers to determine that each issuer was current on its scheduled interest and principal payments. We reviewed the credit rating of these securities noting that approximately 98% of the securities at March 31, 2022 had investment-grade ratings. We concluded that gross unrealized losses noted above are principally associated with the changes in interest rates subsequent to purchase rather than due to credit impairment. We recorded impairments of $6.8 million due to our intent to sell securities in an unrealized loss position in the three months ended March 31, 2022. There were no impairments in the three months ended March 31, 2021.

The Company's other invested assets at March 31, 2022 and December 31, 2021 totaled $212.5 million and $170.5 million, respectively. Other invested assets are principally comprised of limited partnership interests which are generally accounted for under the equity method or fair value using net asset value (or its equivalent) as a practical expedient. Our proportionate share of earnings or losses or changes in fair value are reported in income from other invested assets on the condensed consolidated statements of comprehensive income. 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. Due to the timing of receiving financial information from these partnerships, the results are generally reported on a one month or quarter lag.

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 months ended March 31, 2022, includes $15.0 million of net unrealized gains.

Other invested assets that are accounted for at fair value using the net asset value (or its equivalent) as a practical expedient totaled $105.8 million as of March 31, 2022. Approximately 56% of these investments were in limited partnerships invested in real estate, with the remaining limited partnerships invested in financial services, technology, and traditional private equity investments. At March 31, 2022, maximum future funding commitments were $8.3 million. For limited partnership investments that have a contractual expiration date, we expect the liquidation of the underlying assets to occur over the next three to nine years. For certain of these investments, the Company does not have the contractual option to redeem, but receives distributions based on the liquidation of the underlying assets. In addition, the Company generally does not have the ability to sell or transfer these investments without the consent from the general partner of individual limited partnerships.

The fair value of investments deposited with insurance regulatory authorities to meet statutory requirements was $9.3 million at March 31, 2022 and $9.7 million at December 31, 2021. In connection with its insurance and reinsurance activities, Essent Re is required to maintain assets in trusts for the benefit of its contractual counterparties. The fair value of the investments on deposit in these trusts was $985.7 million at March 31, 2022 and $982.6 million at December 31, 2021. Essent Guaranty is required to maintain assets on deposit in connection with its fully collateralized reinsurance agreements (see Note 4). The fair value of the assets on deposit was $8.5 million at March 31, 2022 and $8.5 million at December 31, 2021. Essent Guaranty is also required to maintain assets on deposit for the benefit of the sponsor of a fixed income investment commitment. The fair value of the assets on deposit was $9.0 million at March 31, 2022 and $9.0 million at December 31, 2021.

Net investment income consists of:


	Three Months Ended March 31,
(In thousands)		2022		2021
Fixed maturities		$	26,223	$	23,024
Short-term investments		44		81
Gross investment income		26,267		23,105
Investment expenses		(1,587)		(1,317)
Net investment income		$	24,680	$	21,788