Credit risk

Credit Risk Transfer Transaction: September 2022 – InsuranceNewsNet


US Regulated Stock Markets (Alternate Disclosure) via PUBT

MMORTGAGE IINSURANCE-LINKNOTTAKES AWAY

RE-INSURANCE JRANSACTION

RE-INSURANCE PPROVIDED BYes:

RADNOR RE 2022-1LTD.

This presentation may include “forward-looking statements” that are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Forward-looking statements can generally be identified by the use of forward-looking words such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”. , “predict” or “potential” or the negative thereof or variations thereof or similar terminology. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. While it is not possible to identify all of these risks and factors, they include, among others, the following: the impact of COVID-19 and related economic conditions; changes in or to Fannie Mae and Freddie Mac (the “GSEs”), whether through federal legislation, restructurings or a change in business practices; failure to continue to meet GSE mortgage insurer eligibility requirements; competition for customers; lenders or investors seeking alternatives to private mortgage insurance; deterioration in economic conditions (including inflation, rising interest rates and other adverse economic trends); an increase in the number of loans insured through federal government mortgage insurance programs, including those offered by the Federal Housing Administration; decline in new insurance written and in the value of deductibles due to the loss of a major customer; lower volume of low down payment mortgages; the definition of “qualifying mortgage” reducing the size of the mortgage origination market or creating incentives to use government mortgage insurance programs; the definition of “qualifying residential mortgage” reducing the number of low down payment loans or lenders and investors seeking alternatives to private mortgage insurance; the implementation of the Basel III Capital Accord discouraging the use of private mortgage insurance; a reduction in the length of time that insurance policies are in force; the uncertainty of loss reserve estimates; our no-WE transactions subject to WE Federal income tax; become a passive foreign investment company for WE for federal income tax purposes; and other risks and factors described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Security and Exchange Commission on February 16, 2022as subsequently updated through other reports we file with the Security and Exchange Commission. Any forward-looking information presented herein is made only as of the date of this presentation, and we undertake no obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unforeseen events or other.

VSEDITING

IINSURER:

RINSURER:

ESENT

BADVANTAGES:

  • On September 21, 2022, Essent Warranty, Inc.100% subsidiary of Essent Group Ltd.obtained fully guaranteed excess of loss reinsurance coverage on mortgage insurance policies underwritten in October 2021 through July 2022.
  • The total amount of reinsurance was $237.9 million from the closing date.
  • Reinsurance for this transaction is provided by Radnor Re 2022-1 Ltd. (“Radnor Re”), a short story Bermuda specialist insurer based. Radnor Re is not a subsidiary or affiliate of Essent Group Ltd.
  • Radnor Re funded its reinsurance obligations by issuing four classes of mortgages insurance bonds with legal maturities of 10 years in the context of an unregistered private offer. The Notes are without recourse to the assets of Essent Warranty, Inc. or its affiliates.
  • The proceeds of the note offering were deposited in a reinsurance trust account for the benefit of Essent Warranty, Inc. Noteholders have a subordinate interest in the Reinsurance Trust Account, which is the sole source of funds for repayment of the Notes.
  • This transaction is expected to provide the following benefits to Essential:
    • Diversified source of capital
    • A layer of protection against adverse credit losses
    • Strengthening counterpart force
    • Asset credit required by PMIERs

MMORTGAGE IINSURANCE-LINKNOTOTES AJ VSLOSING

% OF RISK

VSREEDIT

OFFERE

FUNDED

MOODYS

DBRS

OEIGHT

TO CLASSIFY

BTHREW

EREINFORCEMENT

NOTOTES

AMEAN

INDEX

SPREREAD

IN FORCE

PERCENT

RATTER

RATTER

%

(FUNDED)

LEFI*

Oh

$8,738,967,000

93.50%

6.50%

ESSENTIALLY RETAINED

M-1A

$84,118,000

0.90%

5.60%

$84,118,000

100.0%

Ba2

BBB (low)

1.21 years old.

SOFR

375bps

M-1B

$126,178,000

1.35%

4.25%

$88,325,000

70.0%

B1

BB (high)

2.75 years.

SOFR

675bps

M-2

$70,099,000

0.75%

3.50%

$49,069,000

70.0%

NR

BB (low)

4.33 years old.

SOFR

850bps

B-1

$23,366,000

0.25%

3.25%

$16,356,000

70.0%

NR

B (high)

4.76 years old.

SOFR

1050bps

B-2/B-3H

$303,761,128

3.25%

ESSENTIALLY RETAINED

OFFERE NOTOTES

$237,868,000

JRANSACTION HSTRONG POINTS

  • Radnor Re guaranteed and financed the reinsurance cover by issuing $237.9 million mortgage Series 2022-1 Insurance Linked Investor Notes.
  • The reference pool has a total outstanding principal balance of $53.0 billion and Total exposed capital balance of $9.3 billion since the July 31, 2022, deadline.
  • The Notes provide stop-loss protection to Essential Guarantee for four levels of coverage designated as M-1A, M-1B, M-2 and B-1, with a funding percentage of 100% for M-1A and 70% for all other levels.
  • The notes are Variable rate securities based on SOFR with a legal maturity of 10 years.
  • Radnor Re used the series 2022-1 note proceeds from the purchase of investments to fully fund the reinsurance trust after closing on September 21, 2022.
  • Essent Warranty, Inc.is required to pay premiums to Radnor Re to cover interest payments on the series 2022-1 note less investment income from reinsurance trust assets.
  • Essent Warranty, Inc. has the option to call the transaction on and after September 25, 2028.

* WAL based on assumptions of 10% CPR, no loss and Essential exercises its option to call the operation on September 25, 2028

Disclaimer

Essent Group Ltd. published this content on September 21, 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unmodified, on September 22, 2022 10:37:03 UTC.