Reinsurance

3 Months Ended

Mar. 31, 2025

In the ordinary course of business, our insurance subsidiaries may use reinsurance to provide protection against adverse loss experience and to expand our capital sources. Reinsurance recoverables are recorded as assets and included in other assets on our condensed consolidated balance sheets, predicated on a reinsurer's ability to meet their obligations under the reinsurance agreements. If the reinsurers are unable to satisfy their obligations under the agreements, our insurance subsidiaries would be liable for such defaulted amounts.

The effect of reinsurance on net premiums written and earned is as follows:


	Three Months Ended March 31,
(In thousands)	2025		2024
Net premiums written:
Direct	$	272,394	$	268,931
Ceded (1)	(34,123)		(30,391)
Net premiums written	$	238,271	$	238,540

Net premiums earned:
Direct	$	279,971	$	275,981
Ceded (1)	(34,123)		(30,391)
Net premiums earned	$	245,848	$	245,590

(1)Net of profit commission.

Quota Share Reinsurance

Essent Guaranty has entered into quota share reinsurance agreements with panels of third-party reinsurers ("QSR" agreements). Each of the third-party reinsurers has an insurer financial strength rating of A- or better by S&P Global Ratings, A.M. Best Ratings Services, Inc. or both. Under each QSR agreement, Essent Guaranty will cede premiums earned on all eligible policies written during a specified period, in exchange for reimbursement of ceded claims and claims expenses on

covered policies, a specified ceding commission, and a profit commission that varies directly and inversely with ceded claims. Essent Guaranty has certain termination rights under each QSR agreement, including the option to terminate each QSR agreement subject to a termination fee.

The following table summarizes Essent Guaranty's quota share reinsurance agreements as of March 31, 2025:

QSR Agreement

Coverage Period

Ceding Percentage

QSR-2019

September 1, 2019 - December 31, 2020

(1)

QSR-2022

January 1, 2022 - December 31, 2022

20%

QSR-2023

January 1, 2023 - December 31, 2023

17.5%

QSR-2024

January 1, 2024 - December 31, 2024

15%

QSR-2025

January 1, 2025 - December 31, 2025

25%

QSR-2026

January 1, 2026 - December 31, 2026

25%

_______________________________________________________________________________

(1)Under QSR-2019, Essent Guaranty cedes 40% of premiums on singles policies and 20% on all other policies.

Total risk in force (RIF) ceded under the QSR agreements was $9.0 billion as of March 31, 2025.

Excess of Loss Reinsurance

Essent Guaranty has entered into fully collateralized reinsurance agreements ("Radnor Re Transactions") with unaffiliated special purpose insurers domiciled in Bermuda. For the reinsurance coverage periods, Essent Guaranty and its affiliates retain the first layer of the respective aggregate losses, and a Radnor Re special purpose insurer will then provide second layer coverage up to the outstanding reinsurance coverage amount. Essent Guaranty and its affiliates retain losses in excess of the outstanding reinsurance coverage amount. The reinsurance premium due to each Radnor Re special purpose insurer is calculated by multiplying the outstanding reinsurance coverage amount at the beginning of a period by a coupon rate, which is the sum of one-month SOFR plus a risk margin, and then subtracting actual investment income collected on the assets in the related reinsurance trust during that period. The aggregate excess of loss reinsurance coverage decreases over a ten-year period as the underlying covered mortgages amortize. Essent Guaranty has rights to terminate the Radnor Re Transactions. The Radnor Re entities collateralized the coverage by issuing mortgage insurance-linked notes ("ILNs") in an aggregate amount equal to the initial coverage to unaffiliated investors. The notes have ten-year legal maturities and are non-recourse to any assets of Essent Guaranty or its affiliates. The proceeds of the notes were deposited into reinsurance trusts for the benefit of Essent Guaranty and will be the source of reinsurance claim payments to Essent Guaranty and principal repayments on the ILNs.

Essent Guaranty has entered into reinsurance agreements with panels of reinsurers that provide excess of loss coverage on new insurance written from January 1, 2018 through August 31, 2019 and from October 1, 2021 through December 31, 2024. For the reinsurance coverage periods, Essent Guaranty and its affiliates retain the first layer of the respective aggregate losses, and the reinsurance panels will then provide second layer coverage up to the outstanding reinsurance coverage amounts. Essent Guaranty and its affiliates retain losses in excess of the outstanding reinsurance coverage amounts. Essent Guaranty has rights to terminate these reinsurance agreements.

The following table summarizes Essent Guaranty's excess of loss coverages and retentions provided by insurance linked notes as of March 31, 2025:


(In thousands)
Deal Name	Vintage	Remaining Insurance in Force		Remaining Risk in Force		Remaining Reinsurance in Force		Remaining First Layer Retention		Optional Termination Date
Radnor Re 2021-1	Aug. 2020 - Mar. 2021	$	22,498,132	$	6,194,669	$	165,266	$	277,360	June 26, 2028
Radnor Re 2021-2	Apr. 2021 - Sep. 2021	28,457,873		7,936,192		248,077		274,846		November 25, 2027
Radnor Re 2022-1	Oct. 2021 - Jul. 2022	26,997,277		7,409,659		160,941		298,719		September 25, 2028
Radnor Re 2023-1	Aug. 2022 - Jun. 2023	27,368,762		7,507,563		250,291		279,930		July 25, 2028
Radnor Re 2024-1	Jul. 2023 - Jul. 2024	28,317,296		7,832,167		316,494		256,495		September 25, 2029
Total		$	133,639,340	$	36,880,250	$	1,141,069	$	1,387,350

The following table summarizes Essent Guaranty's excess of loss reinsurance coverages and retentions provided by panels of reinsurers as of March 31, 2025:


(In thousands)
Deal Name	Vintage	Remaining Insurance in Force		Remaining Risk in Force		Remaining Reinsurance in Force		Remaining First Layer Retention		Optional Termination Date
XOL 2019-1	Jan. 2018 - Dec. 2018	$	4,334,575	$	1,143,163	$	76,144	$	243,099	February 25, 2026
XOL 2020-1	Jan. 2019 - Aug. 2019	5,525,478		1,461,723		29,152		211,464		January 25, 2027
XOL 2022-1	Oct. 2021 - Dec. 2022	61,141,314		16,718,151		141,992		494,068		January 1, 2030
XOL 2023-1	Jan. 2023 - Dec. 2023	35,938,114		9,967,019		36,627		365,476		January 1, 2028
XOL 2024-1	Jan. 2024 - Dec. 2024	39,383,053		10,817,438		58,005		331,456		January 1, 2030
Total		$	146,322,534	$	40,107,494	$	341,920	$	1,645,563

The amount of monthly reinsurance premiums ceded to the Radnor Re entities will fluctuate due to changes in one-month SOFR and changes in money market rates that affect investment income collected on the assets in the reinsurance trusts. As the reinsurance premium will vary based on changes in these rates, we concluded that the Radnor Re Transactions contain embedded derivatives that will be accounted for separately like freestanding derivatives. The change in the fair value of the embedded derivatives is reported in earnings and included in other income.

In connection with the Radnor Re Transactions, we concluded that the risk transfer requirements for reinsurance accounting were met as each Radnor Re entity is assuming significant insurance risk and a reasonable possibility of a significant loss. In addition, we assessed whether each Radnor Re entity was a variable interest entity ("VIE") and the appropriate accounting for the Radnor Re entities if they were VIEs. A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not substantively participate in the gains and losses of the entity. A VIE is consolidated by its primary beneficiary. The primary beneficiary is the entity that has both (1) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the breadth of the decision-making ability and ability to influence activities that significantly affect the economic performance of the VIE. We concluded that the Radnor Re entities are VIEs. However, given that Essent Guaranty (1) does not have the unilateral power to direct the activities that most significantly affect their economic performance and (2) does not have the obligation to absorb losses or the right to receive benefits that could be potentially significant to these entities, the Radnor Re entities are not consolidated in these financial statements.

The following table presents total assets of each Radnor Re special purpose insurer as well as our maximum exposure to loss associated with each Radnor Re entity, representing the fair value of the embedded derivatives, using observable inputs in active markets (Level 2), included in other assets (other accrued liabilities) on our condensed consolidated balance sheet and the estimated net present value of investment earnings on the assets in the reinsurance trusts, each as of March 31, 2025:


			Maximum Exposure to Loss
(In thousands)	Total VIE Assets		On - Balance Sheet		Off - Balance Sheet		Total
Radnor Re 2021-1 Ltd.	$	165,266	$	(5,453)	$	18	$	(5,435)
Radnor Re 2021-2 Ltd.	248,077		(6,016)		43		(5,973)
Radnor Re 2022-1 Ltd.	160,941		(210)		31		(179)
Radnor Re 2023-1 Ltd.	250,291		145		52		197
Radnor Re 2024-1 Ltd.	316,494		171		82		253
Total	$	1,141,069	$	(11,363)	$	226	$	(11,137)

The assets of the Radnor Re entities are the source of reinsurance claim payments to Essent Guaranty and provide capital relief under the PMIERs financial strength requirements (see Note 14). A decline in the assets available to pay claims would reduce the capital relief available to Essent Guaranty.