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Essent Group (ESNT)
NYSE:ESNT
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Essent Group
(NYSE:ESNT)
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Rating:76Outperform
Price Target:
$69.00
▲(15.81% Upside)
Action:ReiteratedDate:02/19/26
The score is driven primarily by strong financial performance (high profitability, conservative balance sheet, and strong cash conversion) and supportive valuation (low P/E plus dividend). The earnings call reinforces capital strength and shareholder returns, while the main drag is weaker technical momentum and some credit/expense headwinds highlighted in guidance.
Positive Factors
High-quality cash generation
Free cash flow tracks net income (~0.99) and operating cash flow was $856M in 2025, indicating durable cash conversion. This underpins consistent dividend increases, buybacks and funds underwriting losses, supporting long-term shareholder returns and financial flexibility across cycles.
Conservative balance sheet
Very low leverage and rising equity provide a strong capital buffer versus underwriting volatility. Conservative capital structure preserves capacity to absorb higher loss provisions, maintain ratings, and continue disciplined capital returns without forcing asset sales or equity raises.
Reinsurance strategy and liquidity
Large liquid reserves plus reinsurance access and holding-company liquidity materially strengthen risk-transfer capability. High reinsurance usage and capital resources enable scale, support profitable NIW selectively, and allow ongoing dividends and buybacks while managing tail risk.
Negative Factors
Rising loss provisions
Quarterly and annual increases in loss provisions reflect portfolio seasoning and rising defaults. If defaults continue to drift higher, underwriting margins and return on equity could face sustained pressure, forcing higher reserves and constraining capital available for growth or distributions.
Modest growth outlook
Flat persistency and management's guidance of modest MI growth signal limited near‑term top-line expansion. In a smaller origination market, growth is constrained, reducing the pace at which scale benefits and premium income can compound over the next several quarters.
Rising operating expenses
Higher operating costs and a rising expense ratio compress underwriting economics and overall margins. If expense growth persists, it will erode incremental underwriting profitability and reduce free cash available for capital returns absent offsetting premium yield or scale improvements.
Essent Group (ESNT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$5.63B
Dividend Yield1.88%
Average Volume (3M)636.98K
Price to Earnings (P/E)8.6
Beta (1Y)0.60
Revenue Growth2.78%
EPS Growth-0.50%
CountryUS
Employees555
SectorFinancial
Sector Strength70
IndustryInsurance - Specialty
Share Statistics
EPS (TTM)1.60
Shares Outstanding94,542,850
10 Day Avg. Volume547,682
30 Day Avg. Volume636,983
Financial Highlights & Ratios
PEG Ratio12.91
Price to Book (P/B)1.12
Price to Sales (P/S)5.10
P/FCF Ratio7.58
Enterprise Value/Market Cap1.09
Enterprise Value/Revenue4.79
Enterprise Value/Gross Profit5.42
Enterprise Value/Ebitda7.13
Forecast
1Y Price Target
$69.17Price Target Upside16.10% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering6
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
Essent Group Business Overview & Revenue Model
Company DescriptionEssent Group Ltd., through its subsidiaries, provides private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Its mortgage insurance products include primary, pool, and master policy. The company also provides information technology maintenance and development services; customer support-related services; underwriting consulting; and contract underwriting services. It serves the originators of residential mortgage loans, such as regulated depository institutions, mortgage banks, credit unions, and other lenders. The company was founded in 2008 and is based in Hamilton, Bermuda.
How the Company Makes MoneyEssent Group generates revenue primarily through the sale of private mortgage insurance premiums. When borrowers take out loans with less than a 20% down payment, lenders typically require PMI to protect against potential defaults. Essent collects these premiums from lenders, which constitute a significant portion of its revenue. Additionally, the company earns income through reinsurance arrangements and risk-sharing transactions, where it partners with other insurance companies and investors to manage mortgage credit risk. This diversification in revenue streams, along with partnerships that enhance its market position, contributes to Essent's overall earnings.
Essent Group Earnings Call Summary
Earnings Call Date:Feb 13, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 01, 2026
Earnings Call Sentiment Positive
The call presented a net positive picture: strong earnings, cash flow, book value growth, robust liquidity and disciplined capital returns (dividends + significant share buybacks). Offsetting negatives were modest increases in loss provisions and defaults, slightly higher operating expenses, flat persistency and a cautious outlook for near-term insurance-in-force growth. Management emphasized measured growth, reinsurance strength, and the ability to return capital, suggesting confidence in the franchise despite some credit-seasoning headwinds.Q4-2025 Updates
Positive Updates
Strong Quarterly and Full-Year Earnings
Q4 net income of $155 million ($1.60 diluted EPS) and full-year 2025 net income of $690 million ($6.90 diluted EPS) with a return on average equity of 12%.
Book Value and Shareholder Returns
Book value per share of $60.31, up 13% year-over-year; returned nearly $700 million to shareholders in 2025 via dividends and repurchases, including repurchasing nearly 10% of shares outstanding at 2024.
Strong Liquidity and Capital Position
Consolidated cash and investments of $6.6 billion, $5.8 billion in GAAP equity, access to $1.3 billion of excess-of-loss reinsurance, $1.3 billion in holding company cash/investments, and $500 million undrawn revolver capacity.
Robust Cash Flow and Investment Yields
Full-year 2025 operating cash flow of $856 million; aggregate yield on investments 3.9% for the year and new-money yields in Q4 near 5%.
Mortgage Insurance Scale and Credit Quality
Mortgage insurance in force of $248.4 billion (≈ +1.9% YoY), weighted average FICO of 747 and weighted average original LTV of 93%, and twelve-month persistency around 86%.
Reinsurance Strategy and Essent Re Performance
98% of MI portfolio subject to reinsurance; Essent Re earned nearly $80 million of third-party net income in 2025 and ended the year with $2.3 billion in risk; entered Lloyd’s-backed quota share reinsurance for P&C with expected $100–$150 million written premium.
Disciplined Capital Management and Dividend Increase
Board approved a 13% increase in the quarterly dividend to $0.35 per share starting in 2026 and management emphasized measured, value-accretive share repurchases (repurchased $125 million in Q4 and $44 million in Jan 2026).
Stable Premium Yields
Mortgage Insurance average base premium of 41 basis points (consistent with prior quarter) and average net premium of 34 basis points; management expects average base premium around 40 bps for 2026.
Negative Updates
Rising Loss Provisions and Seasoning-Related Defaults
Mortgage Insurance provision for losses and loss adjustment expenses increased to $55.2 million in Q4 (up from $44.2 million prior quarter and $37.2 million year-ago quarter); full-year net provision on MI was approximately $145 million reflecting higher defaults from portfolio seasoning.
Increasing Default Rate
Portfolio default rate rose to 2.5% at December 31, up 21 basis points from 2.29% at 9/30/2025, reflecting modest deterioration quarter-over-quarter.
Persistency and Modest Growth Outlook
Twelve‑month persistency has been relatively flat (~86%) due to higher mortgage rates and a smaller origination market; management expects near-term earned premium and insurance-in-force growth to be modest.
Rising Operating Expenses and Expense Ratio
Mortgage Insurance operating expenses increased to $34.3 million in Q4 with an expense ratio of 16.1% (versus $31.2 million and 14.4% prior quarter); management expects MI operating expenses of approximately $145 million in 2026 (up from $140 million in 2025).
Lower New Insurance Written (NIW) Quarter-over-Quarter
Management noted NIW was lower quarter-over-quarter (company is not managing to market share and has intentionally moderated growth and pricing exposure), which can limit near-term insurance-in-force expansion.
Title Segment Limited Near-Term Earnings Impact
Title operations remain focused on activations and tech, but as a primarily centralized refinance platform they are unlikely to materially impact earnings unless mortgage rates decline materially.
Company Guidance
Management guided that for 2026 the Mortgage Insurance average base premium rate should be ~40 basis points (vs. ~41 bps recently), Mortgage Insurance operating expenses are expected to be about $145 million (vs. $140M in 2025), and the consolidated effective tax rate is estimated at ~17% (2025: 16%); they expect earned premium and insurance‑in‑force growth to be modest, Essent Re anticipates $100–$150 million of written P&C premium with roughly two‑thirds earned in 2026 at a combined ratio consistent with a diversified P&C reinsurer, Essent Guaranty can pay ordinary dividends of ~$246 million in 2026, the board raised the quarterly dividend 13% to $0.35/share starting in 2026, and management noted Q4 new‑money yields near 5% as well as holding‑company liquidity headroom (a $500M undrawn revolver and access to $1.3B of excess‑of‑loss reinsurance).Essent Group Financial Statement Overview
Summary
Strong profitability, conservative leverage, and high-quality cash generation (FCF closely tracking net income). The main financial watch item is modest top-line softness and some normalization in returns/margins in the most recent year.Income Statement
ESNT shows strong and consistently high profitability, with net profit margins remaining very elevated (roughly mid-40% to 80% across 2020–2025) and solid operating profitability as well. Revenue has generally grown from 2020 to 2024, but 2025 saw a modest decline (about -3.6%), and profits also eased versus the prior year, indicating some near-term growth pressure despite a still-strong earnings base.86
Very Positive
Balance Sheet
The balance sheet looks conservative, with low leverage throughout the period (debt-to-equity staying around ~0.08–0.10) and steadily rising equity and assets over time. Returns on equity are healthy (generally low-teens to high-teens), though they have come down from the 2022 peak, which suggests profitability is normalizing even while the capital position remains strong.90
Very Positive
Cash Flow
Cash generation is strong and high-quality: operating cash flow and free cash flow are consistently robust, and free cash flow tracks net income closely (free cash flow to net income ~0.99 in most years), supporting earnings quality. Free cash flow growth is positive in recent years (including 2025), though it has been somewhat uneven historically, and one year shows an unavailable/zero coverage reading, limiting trend confidence for that specific measure.88
Very Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 1.26B | 1.27B | 1.13B | 1.02B | 1.03B |
| Gross Profit | 1.11B | 1.19B | 1.10B | 1.19B | 997.45M |
| EBITDA | 859.79M | 896.59M | 857.66M | 1.01B | 833.98M |
| Net Income | 689.97M | 729.40M | 696.39M | 831.35M | 681.78M |
Balance Sheet | |||||
| Total Assets | 7.44B | 7.11B | 6.43B | 5.72B | 5.72B |
| Cash, Cash Equivalents and Short-Term Investments | 123.05M | 6.01B | 141.79M | 333.27M | 5.04B |
| Total Debt | 495.30M | 493.96M | 421.92M | 420.86M | 419.82M |
| Total Liabilities | 1.68B | 1.51B | 1.32B | 1.26B | 1.49B |
| Stockholders Equity | 5.76B | 5.60B | 5.10B | 4.46B | 4.24B |
Cash Flow | |||||
| Free Cash Flow | 848.69M | 854.77M | 759.00M | 584.84M | 706.76M |
| Operating Cash Flow | 856.05M | 861.53M | 763.00M | 588.82M | 709.26M |
| Investing Cash Flow | -154.74M | -706.93M | -525.57M | -398.87M | -583.17M |
| Financing Cash Flow | -709.75M | -164.91M | -176.88M | -190.20M | -147.43M |
Essent Group Technical Analysis
Negative
59.58
Price Trends
63.45
Negative
62.15
Negative
60.82
Negative
Market Momentum
-0.81
Positive
38.18
Neutral
9.89
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ESNT, the sentiment is Negative. The current price of 59.58 is below the 20-day moving average (MA) of 62.79, below the 50-day MA of 63.45, and below the 200-day MA of 60.82, indicating a bearish trend. The MACD of -0.81 indicates Positive momentum. The RSI at 38.18 is Neutral, neither overbought nor oversold. The STOCH value of 9.89 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ESNT.
Essent Group Risk Analysis
Essent Group disclosed 51 risk factors in its most recent earnings report. Essent Group reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Essent Group Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
82 Outperform | $2.98B | 7.96 | 16.17% | ― | 8.86% | 9.51% | |
82 Outperform | $5.99B | 9.11 | 12.75% | 2.02% | 2.40% | 1.18% | |
76 Outperform | $5.63B | 8.57 | 12.35% | 1.88% | 2.78% | -0.50% | |
70 Outperform | $4.68B | 8.28 | 12.72% | 2.78% | -3.68% | 3.65% | |
68 Neutral | $5.85B | 8.21 | ― | 1.89% | 2.20% | 9.90% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
66 Neutral | $6.84B | 11.06 | 11.95% | 3.58% | 25.99% | 426.44% |
* Financial Sector Average
ESNT
Essent Group
59.58
3.95
7.10%
FAF
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67.08
4.12
6.54%
MTG
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26.13
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10.83%
RDN
Radian Group
34.34
2.84
9.01%
NMIH
NMI Holdings
39.16
3.20
8.90%
ACT
Enact Holdings
41.46
8.20
24.65%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.