Investments

12 Months Ended

Dec. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Investments available for sale consist of the following:


December 31, 2022 (In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities	$	584,173	$	341	$	(28,076)	$	556,438
U.S. agency securities	49,059		7		(8)		49,058
U.S. agency mortgage-backed securities	898,675		258		(115,190)		783,743
Municipal debt securities (1)	661,934		2,010		(61,254)		602,690
Non-U.S. government securities	69,651		—		(7,252)		62,399
Corporate debt securities (2)	1,546,513		1,195		(133,387)		1,414,321
Residential and commercial mortgage securities	577,915		390		(66,481)		511,824
Asset-backed securities	660,345		72		(35,856)		624,561
Money market funds	136,591		—		—		136,591
Total investments available for sale	$	5,184,856	$	4,273	$	(447,504)	$	4,741,625


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

_______________________________________________________________________________


	December 31,		December 31,
(1) The following table summarizes municipal debt securities as of :	2022		2021
Special revenue bonds	79.0	%	77.1	%
General obligation bonds	20.9		20.5
Certificate of participation bonds	—		1.9
Tax allocation bonds	0.1		0.5

Total	100.0	%	100.0	%


	December 31,		December 31,
(2) The following table summarizes corporate debt securities as of :	2022		2021
Financial	40.5	%	33.7	%
Consumer, non-cyclical	17.9		19.8
Communications	8.4		11.4
Consumer, cyclical	6.8		7.0
Industrial	6.8		7.0
Energy	6.4		6.0
Utilities	6.1		4.6
Technology	4.9		6.8
Basic Materials	2.1		3.7
Government	0.1		—
Total	100.0	%	100.0	%

The amortized cost and fair value of investments available for sale at December 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	$	175,645	$	173,828
Due after 1 but within 5 years	355,565		335,166
Due after 5 but within 10 years	38,584		33,967
Due after 10 years	14,379		13,477
Subtotal	584,173		556,438
U.S. agency securities:
Due in 1 year	47,433		47,434
Due after 1 but within 5 years	1,626		1,624
Subtotal	49,059		49,058
Municipal debt securities:
Due in 1 year	6,974		6,932
Due after 1 but within 5 years	151,110		148,538
Due after 5 but within 10 years	154,029		143,560
Due after 10 years	349,821		303,660
Subtotal	661,934		602,690
Non-U.S. government securities:
Due in 1 year	10,021		9,979
Due after 1 but within 5 years	33,761		32,536
Due after 5 but within 10 years	5,532		4,397
Due after 10 years	20,337		15,487
Subtotal	69,651		62,399
Corporate debt securities:
Due in 1 year	250,596		248,482
Due after 1 but within 5 years	715,711		684,102
Due after 5 but within 10 years	419,632		355,500
Due after 10 years	160,574		126,237
Subtotal	1,546,513		1,414,321
U.S. agency mortgage-backed securities	898,675		783,743
Residential and commercial mortgage securities	577,915		511,824
Asset-backed securities	660,345		624,561
Money market funds	136,591		136,591
Total investments available for sale	$	5,184,856	$	4,741,625

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


	Year Ended December 31,
(In thousands)	2022		2021		2020
Realized gross gains	$	14,420	$	4,044	$	5,608
Realized gross losses	14,864		3,626		2,482
Impairment loss	12,728		—		429

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
December 31, 2022 (In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury securities	$	321,848	$	(12,381)	$	169,795	$	(15,695)	$	491,643	$	(28,076)
U.S. agency securities	7,117		(8)		—		—		7,117		(8)
U.S. agency mortgage-backed securities	351,310		(34,193)		415,743		(80,997)		767,053		(115,190)
Municipal debt securities	335,784		(41,620)		64,766		(19,634)		400,550		(61,254)
Non-U.S. government securities	48,071		(2,914)		14,328		(4,338)		62,399		(7,252)
Corporate debt securities	811,217		(69,415)		421,307		(63,972)		1,232,524		(133,387)
Residential and commercial mortgage securities	265,934		(22,628)		242,366		(43,853)		508,300		(66,481)
Asset-backed securities	333,080		(15,454)		258,572		(20,402)		591,652		(35,856)

Total	$	2,474,361	$	(198,613)	$	1,586,877	$	(248,891)	$	4,061,238	$	(447,504)


	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 December 31, 2022 and 2021, we held 2,578 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 December 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 98% of the securities at December 31, 2022 had investment-grade ratings. We concluded that gross unrealized losses noted above were primarily associated with the changes in interest rates subsequent to purchase rather than due to credit impairment. We recorded impairments of $12.7 million in the year ended December 31, 2022. We recorded other-than-temporary impairments of $0.4 million in the year ended December 31, 2020 for securities in an unrealized loss position. The impairments resulted from our intent to sell these securities subsequent to the reporting date. There were no impairments in the year ended December 31, 2021.

The Company's other invested assets at December 31, 2022 and December 31, 2021 totaled $257.9 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 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 year ended December 31, 2021 includes $7.6 million of net unrealized gains that were accumulated in OCI at December 31, 2020.

Other invested assets that are accounted for at fair value using the net asset value (or its equivalent) as a practical expedient totaled $165.7 million as of December 31, 2022. The majority of these investments were in limited partnerships invested in real estate or consumer credit. At December 31, 2022, maximum future funding commitments were $42.9 million. For limited partnership investments that have a contractual expiration date, we expect the liquidation of the underlying assets to occur over the next two 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 $9.1 million at December 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 $972.4 million at December 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 5). The fair value of the assets on deposit was $8.6 million at December 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 $9.1 million at December 31, 2022 and $9.0 million at December 31, 2021.

Net investment income consists of:


	Year Ended December 31,
(In thousands)	2022		2021		2020
Fixed maturities	$	129,530	$	94,117	$	83,313
Short-term investments	2,319		171		1,669
Gross investment income	131,849		94,288		84,982
Investment expenses	(7,440)		(5,523)		(4,895)
Net investment income	$	124,409	$	88,765	$	80,087