Investments

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Investments available for sale consist of the following:


March 31, 2023 (In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities	$	497,267	$	843	$	(22,326)	$	475,784
U.S. agency securities	12,696		8		(14)		12,690
U.S. agency mortgage-backed securities	950,645		1,286		(101,807)		850,124
Municipal debt securities (1)	650,470		5,489		(46,949)		609,010
Non-U.S. government securities	69,606		—		(6,588)		63,018
Corporate debt securities (2)	1,575,643		3,040		(116,087)		1,462,596
Residential and commercial mortgage securities	601,606		208		(59,801)		542,013
Asset-backed securities	680,460		314		(32,665)		648,109
Money market funds	286,692		—		—		286,692
Total investments available for sale	$	5,325,085	$	11,188	$	(386,237)	$	4,950,036


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


	March 31,		December 31,
(1) The following table summarizes municipal debt securities as of :	2023		2022
Special revenue bonds	81.4	%	79.0	%
General obligation bonds	18.5		20.9
Certificate of participation bonds	—		—
Tax allocation bonds	0.1		0.1

Total	100.0	%	100.0	%


	March 31,		December 31,
(2) The following table summarizes corporate debt securities as of :	2023		2022
Financial	40.8	%	40.5	%
Consumer, non-cyclical	18.5		17.9
Consumer, cyclical	7.2		6.8
Industrial	6.7		6.8
Utilities	5.7		6.1
Communications	8.6		8.4
Technology	4.8		4.9
Energy	5.5		6.4
Basic Materials	2.1		2.1
Government	0.1		0.1
Total	100.0	%	100.0	%

The amortized cost and fair value of investments available for sale at March 31, 2023, 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	$	130,959	$	129,312
Due after 1 but within 5 years	313,584		297,672
Due after 5 but within 10 years	38,335		34,655
Due after 10 years	14,389		14,145
Subtotal	497,267		475,784
U.S. agency securities:
Due in 1 year	11,125		11,111
Due after 1 but within 5 years	1,571		1,579
Subtotal	12,696		12,690
Municipal debt securities:
Due in 1 year	6,006		5,977
Due after 1 but within 5 years	88,888		86,924
Due after 5 but within 10 years	175,352		167,037
Due after 10 years	380,224		349,072
Subtotal	650,470		609,010
Non-U.S. government securities:
Due in 1 year	10,020		10,012
Due after 1 but within 5 years	33,759		32,824
Due after 5 but within 10 years	5,532		4,512
Due after 10 years	20,295		15,670
Subtotal	69,606		63,018
Corporate debt securities:
Due in 1 year	241,103		238,178
Due after 1 but within 5 years	635,267		605,227
Due after 5 but within 10 years	484,388		433,797
Due after 10 years	214,885		185,394
Subtotal	1,575,643		1,462,596
U.S. agency mortgage-backed securities	950,645		850,124
Residential and commercial mortgage securities	601,606		542,013
Asset-backed securities	680,460		648,109
Money market funds	286,692		286,692
Total investments available for sale	$	5,325,085	$	4,950,036

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)		2023		2022
Realized gross gains		$	869	$	12,576
Realized gross losses		1,357		13,091
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, 2023 (In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury securities	$	184,036	$	(2,069)	$	256,893	$	(20,257)	$	440,929	$	(22,326)
U.S. agency securities	11,111		(14)		—		—		11,111		(14)
U.S. agency mortgage-backed securities	144,039		(3,586)		643,734		(98,221)		787,773		(101,807)
Municipal debt securities	150,068		(2,840)		244,856		(44,109)		394,924		(46,949)
Non-U.S. government securities	36,274		(472)		26,744		(6,116)		63,018		(6,588)
Corporate debt securities	467,974		(11,248)		774,083		(104,839)		1,242,057		(116,087)
Residential and commercial mortgage securities	136,012		(7,065)		395,814		(52,736)		531,826		(59,801)
Asset-backed securities	168,303		(4,755)		423,814		(27,910)		592,117		(32,665)

Total	$	1,297,817	$	(32,049)	$	2,765,938	$	(354,188)	$	4,063,755	$	(386,237)


	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)

At March 31, 2023 and December 31, 2022, we held 2,526 and 2,578 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, 2023 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, 2023 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. There were no impairments in the three months ended March 31, 2023. 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.

The Company's other invested assets at March 31, 2023 and December 31, 2022 totaled $255.3 million and $257.9 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.

Other invested assets that are accounted for at fair value using the net asset value (or its equivalent) as a practical expedient totaled $163.1 million as of March 31, 2023. The majority of these investments were in limited partnerships invested in real estate or consumer credit. At March 31, 2023, maximum future funding commitments were $49.0 million. For limited partnership investments that have a contractual expiration date, we expect the liquidation of the underlying assets to occur over the next one to eight 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 $9.2 million at March 31, 2023 and $9.1 million at December 31, 2022. 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 $671.8 million at March 31, 2023 and $972.4 million at December 31, 2022. 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 $8.7 million at March 31, 2023 and $8.6 million at December 31, 2022. 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 March 31, 2023 and $9.1 million at December 31, 2022.

Net investment income consists of:


	Three Months Ended March 31,
(In thousands)		2023		2022
Fixed maturities		$	43,473	$	26,223
Short-term investments		1,721		44
Gross investment income		45,194		26,267
Investment expenses		(1,958)		(1,587)
Net investment income		$	43,236	$	24,680