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EX-32.1 - EXHIBIT 32.1 - Essent Group Ltd.a63015ex321.htm
EX-31.2 - EXHIBIT 31.2 - Essent Group Ltd.a63015ex312.htm
EX-31.1 - EXHIBIT 31.1 - Essent Group Ltd.a63015ex311.htm
EX-10.1 - EXHIBIT 10.1 - Essent Group Ltd.a2015leadershipbonusprogra.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 
 
FORM 10-Q
 
 
 
 
(Mark One)
 
ý      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the period ended June 30, 2015
 
o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to             
 
Commission file number 001-36157 
 
  
ESSENT GROUP LTD.
(Exact name of registrant as specified in its charter)
 
  
Bermuda
 
Not Applicable
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
Clarendon House
2 Church Street
Hamilton HM11, Bermuda
(Address of principal executive offices and zip code)
 
(441) 297-9901
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý  No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)  Yes ý  No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer x
 
Accelerated filer o
Non-accelerated filer o
 
Smaller reporting company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No ý
 The number of the registrant’s common shares outstanding as of August 3, 2015 was 92,655,155.



Essent Group Ltd. and Subsidiaries
 
Form 10-Q
 
Index
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


i


Unless the context otherwise indicates or requires, the terms “we,” “our,” “us,” “Essent,” and the “Company,” as used in this Quarterly Report on Form 10-Q, refer to Essent Group Ltd. and its directly and indirectly owned subsidiaries, including our primary operating subsidiary, Essent Guaranty, Inc., as a combined entity, except where otherwise stated or where it is clear that the terms mean only Essent Group Ltd. exclusive of its subsidiaries.
 
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q, or Quarterly Report, includes forward-looking statements pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts or present facts or conditions, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the introduction of new merchandise, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or the negative of these terms or other comparable terminology.
 
The forward-looking statements contained in this Quarterly Report reflect our views as of the date of this Quarterly Report about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, those factors described below, factors described in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report, and factors described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission.  These factors include, without limitation, the following:
 
changes in or to Fannie Mae and Freddie Mac, which we refer to collectively as the GSEs, whether through Federal legislation, restructurings or a shift in business practices;

failure to continue to meet the mortgage insurer eligibility requirements of the GSEs;

competition for our customers;
 
decline in new insurance written, or NIW, and franchise value due to loss of a significant customer;

lenders or investors seeking alternatives to private mortgage insurance;

increase in the number of loans insured through Federal government mortgage insurance programs, including those offered by the Federal Housing Administration;

decline in the volume of low down payment mortgage originations;

uncertainty of loss reserve estimates;

decrease in the length of time our insurance policies are in force;

deteriorating economic conditions;

the definition of “Qualified Mortgage” reducing the size of the mortgage origination market or creating incentives to use government mortgage insurance programs;

the definition of “Qualified 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, which may discourage the use of private mortgage insurance;

management of risk in our investment portfolio;


ii


fluctuations in interest rates;

inadequacy of the premiums we charge to compensate for our losses incurred;

dependence on management team and qualified personnel;

disturbance to our information technology systems;

change in our customers’ capital requirements discouraging the use of mortgage insurance;

declines in the value of borrowers’ homes;

limited availability of capital;

unanticipated claims arise under and risks associated with our contract underwriting program;

industry practice that loss reserves are established only upon a loan default;

disruption in mortgage loan servicing;

risk of future legal proceedings;

customers’ technological demands;

our non-U.S. operations becoming subject to U.S. Federal income taxation;

becoming considered a passive foreign investment company for U.S. Federal income tax purposes;

scope of recently enacted legislation is uncertain; and

potential inability of our insurance subsidiaries to pay dividends.
 
Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements. All of the forward-looking statements we have included in this Quarterly Report are based on information available to us on the date of this Quarterly Report. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.
 


iii


PART I — FINANCIAL INFORMATION
 
Item 1.   Financial Statements (Unaudited)
 
Essent Group Ltd. and Subsidiaries
 
Condensed Consolidated Balance Sheets (Unaudited)
 
 
 
June 30,
 
December 31,
(In thousands, except per share amounts)
 
2015
 
2014
Assets
 
 

 
 

Investments available for sale, at fair value
 
 

 
 

Fixed maturities (amortized cost: 2015 — $1,063,073; 2014 — $840,213)
 
$
1,064,013

 
$
846,925

Short-term investments (amortized cost: 2015 — $95,366; 2014 — $210,688)
 
95,366

 
210,688

Total investments
 
1,159,379

 
1,057,613

Cash
 
25,590

 
24,411

Accrued investment income
 
6,943

 
5,748

Accounts receivable
 
14,972

 
15,810

Deferred policy acquisition costs
 
10,546

 
9,597

Property and equipment (at cost, less accumulated depreciation of $40,841 in 2015 and $39,260 in 2014)
 
8,631

 
5,841

Prepaid federal income tax
 
95,173

 
59,673

Other assets
 
6,254

 
2,768

Total assets
 
$
1,327,488

 
$
1,181,461

 
 
 
 
 
Liabilities and Stockholders’ Equity
 
 

 
 

Liabilities
 
 

 
 

Reserve for losses and LAE
 
$
11,931

 
$
8,427

Unearned premium reserve
 
178,205

 
156,948

Accrued payroll and bonuses
 
8,763

 
14,585

Net deferred tax liability
 
64,161

 
37,092

Securities purchases payable
 
26,897

 
227

Other accrued liabilities
 
9,758

 
8,444

Total liabilities
 
299,715

 
225,723

Commitments and contingencies
 


 


Stockholders’ Equity
 
 

 
 

Common shares, $0.015 par value:
 
 

 
 

Authorized - 233,333; issued — 92,659 shares in 2015 and 92,546 shares in 2014
 
1,390

 
1,388

Additional paid-in capital
 
897,167

 
893,285

Accumulated other comprehensive income
 
787

 
4,667

Retained earnings
 
128,429

 
56,398

Total stockholders’ equity
 
1,027,773

 
955,738

Total liabilities and stockholders’ equity
 
$
1,327,488

 
$
1,181,461

 
See accompanying notes to condensed consolidated financial statements.


1


Essent Group Ltd. and Subsidiaries
 
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands, except per share amounts)
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 

 
 

Net premiums written
 
$
92,399

 
$
63,505

 
$
174,656

 
$
115,697

Increase in unearned premiums
 
(14,038
)
 
(13,163
)
 
(21,257
)
 
(20,605
)
Net premiums earned
 
78,361

 
50,342

 
153,399

 
95,092

Net investment income
 
4,720

 
3,080

 
9,000

 
4,978

Realized investment gains, net
 
568

 
68

 
1,217

 
468

Other income
 
418

 
793

 
462

 
1,566

Total revenues
 
84,067

 
54,283

 
164,078

 
102,104

 
 
 
 
 
 
 
 
 
Losses and expenses:
 
 

 
 

 
 

 
 

Provision for losses and LAE
 
2,314

 
966

 
4,313

 
1,868

Other underwriting and operating expenses
 
27,148

 
23,648

 
54,646

 
47,107

Total losses and expenses
 
29,462

 
24,614

 
58,959

 
48,975

 
 
 
 
 
 
 
 
 
Income before income taxes
 
54,605

 
29,669

 
105,119

 
53,129

Income tax expense
 
17,412

 
10,114

 
33,088

 
18,568

Net income
 
$
37,193

 
$
19,555

 
$
72,031

 
$
34,561

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 

 
 

 
 

 
 

Basic
 
$
0.41

 
$
0.23

 
$
0.80

 
$
0.42

Diluted
 
$
0.41

 
$
0.23

 
$
0.79

 
$
0.41

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 

 
 

 
 

 
 

Basic
 
90,344

 
83,276

 
90,265

 
83,071

Diluted
 
91,674

 
84,706

 
91,594

 
84,701

 
 
 
 
 
 
 
 
 
Net income
 
$
37,193

 
$
19,555

 
$
72,031

 
$
34,561

 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 

 
 

 
 

 
 

Change in unrealized (depreciation) appreciation of investments, net of tax (benefit) expense of ($4,002) and $2,095 in the three months ended June 30, 2015 and 2014 and ($1,892) and $2,465 in the six months ended June 30, 2015 and 2014
 
(8,769
)
 
4,915

 
(3,880
)
 
5,394

Total other comprehensive income (loss)
 
(8,769
)
 
4,915

 
(3,880
)
 
5,394

Comprehensive income
 
$
28,424

 
$
24,470

 
$
68,151

 
$
39,955

 
See accompanying notes to condensed consolidated financial statements.


2


Essent Group Ltd. and Subsidiaries
 
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
 
(In thousands)
 
Common
Shares
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
(Accumulated
Deficit)
 
Treasury
Stock
 
Total
Stockholders’
Equity
Balance at January 1, 2014
 
$
1,297

 
$
754,390

 
$
(1,447
)
 
$
(32,099
)
 
$

 
$
722,141

 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
 

 
 

 
 

 
88,497

 
 

 
88,497

Other comprehensive income (loss)
 
 

 
 

 
6,114

 
 

 
 

 
6,114

Issuance of common shares net of issuance cost of $6,761
 
90

 
126,649

 
 

 
 

 
 

 
126,739

Issuance of management incentive shares
 
2

 
414

 
 

 
 

 
 

 
416

Forfeiture of management incentive shares
 

 

 
 

 
 

 
 

 

Stock-based compensation expense
 
 

 
12,520

 
 

 
 

 
 

 
12,520

Excess tax benefits from stock-based compensation expense
 
 

 
1,809

 
 

 
 

 
 

 
1,809

Treasury stock acquired
 
 

 
 

 
 

 
 

 
(2,498
)
 
(2,498
)
Cancellation of treasury stock
 
(1
)
 
(2,497
)
 
 

 
 

 
2,498

 

Balance at December 31, 2014
 
$
1,388

 
$
893,285

 
$
4,667

 
$
56,398

 
$

 
$
955,738

 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
 

 
 

 
 

 
72,031

 
 

 
72,031

Other comprehensive income (loss)
 
 

 
 

 
(3,880
)
 
 

 
 

 
(3,880
)
Issuance of management incentive shares
 
6

 
(6
)
 
 

 
 

 
 

 

Forfeiture of management incentive shares
 
(1
)
 
1

 
 

 
 

 
 

 

Stock-based compensation expense
 
 

 
6,596

 
 

 
 

 
 

 
6,596

Excess tax benefits from stock-based compensation expense
 
 

 
2,332

 
 

 
 

 
 

 
2,332

Treasury stock acquired
 
 

 
 

 
 

 
 

 
(5,078
)
 
(5,078
)
Cancellation of treasury stock
 
(3
)
 
(5,075
)
 
 

 
 

 
5,078

 

Other equity transactions
 
 

 
34

 
 

 
 

 
 

 
34

Balance at June 30, 2015
 
$
1,390

 
$
897,167

 
$
787

 
$
128,429

 
$

 
$
1,027,773

 
See accompanying notes to condensed consolidated financial statements.


3


Essent Group Ltd. and Subsidiaries
 
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
 
 
Six Months Ended June 30,
(In thousands)
 
2015
 
2014
Operating Activities
 
 

 
 

Net income
 
$
72,031

 
$
34,561

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Gain on the sale of investments, net
 
(1,217
)
 
(468
)
Depreciation and amortization
 
1,581

 
1,217

Amortization of discount on payments due under Asset Purchase Agreement
 

 
34

Stock-based compensation expense
 
6,596

 
6,148

Amortization of premium on investment securities
 
4,835

 
2,835

Deferred income tax provision
 
28,961

 
17,312

Excess tax benefits from stock-based compensation
 
(2,332
)
 
(1,683
)
Change in:
 
 

 
 

Accrued investment income
 
(1,195
)
 
(2,663
)
Accounts receivable
 
(1,162
)
 
(1,743
)
Deferred policy acquisition costs
 
(949
)
 
(1,366
)
Prepaid federal income tax
 
(35,500
)
 
(26,000
)
Other assets
 
(3,486
)
 
825

Reserve for losses and LAE
 
3,504

 
1,436

Unearned premium reserve
 
21,257

 
20,605

Accrued liabilities
 
(3,078
)
 
(5,803
)
Net cash provided by operating activities
 
89,846

 
45,247

 
 
 
 
 
Investing Activities
 
 

 
 

Net change in short-term investments
 
115,322

 
(159,089
)
Purchase of investments available for sale
 
(417,541
)
 
(427,964
)
Proceeds from maturity of investments available for sale
 
7,525

 
16,832

Proceeds from sales of investments available for sale
 
212,208

 
67,209

Purchase of property and equipment, net
 
(2,932
)
 
(1,671
)
Net cash used in investing activities
 
(85,418
)
 
(504,683
)
 
 
 
 
 
Financing Activities
 
 

 
 

Treasury stock acquired
 
(5,078
)
 
(2,385
)
Payment of offering costs
 
(537
)
 
(837
)
Excess tax benefits from stock-based compensation
 
2,332

 
1,683

Payments under Asset Purchase Agreement
 

 
(2,500
)
Other financing activities
 
34

 

Net cash used in financing activities
 
(3,249
)
 
(4,039
)
 
 
 
 
 
Net increase (decrease) in cash
 
1,179

 
(463,475
)
Cash at beginning of year
 
24,411

 
477,655

Cash at end of period
 
$
25,590

 
$
14,180

 
 
 
 
 
Supplemental Disclosure of Cash Flow Information
 
 
 
 
Income tax (payments) refunds
 
$
(5,000
)
 
$

 
 
 
 
 
Noncash Transactions
 
 

 
 

Issuance of management incentive shares
 
$

 
$
416

 
See accompanying notes to condensed consolidated financial statements.

4


Essent Group Ltd. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
In these notes to condensed consolidated financial statements, “Essent”, “Company”, “we”, “us”, and “our” refer to Essent Group Ltd. and its subsidiaries, unless the context otherwise requires.
 
Note 1. Nature of Operations and Basis of Presentation
 
Essent Group Ltd. (“Essent Group”) is a Bermuda-based holding company, which, through its wholly-owned subsidiaries, offers private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Mortgage insurance facilitates the sale of low-down payment (generally less than 20%) mortgage loans into the secondary mortgage market, primarily to two government-sponsored enterprises (“GSEs”), Fannie Mae and Freddie Mac. Essent Group was incorporated in Bermuda in July 2008. In March 2014, Essent Group formed Essent Irish Intermediate Holdings Limited (“Essent Irish Intermediate”) as a wholly-owned subsidiary.  In April 2014, Essent Group contributed all of the outstanding stock of Essent US Holdings, Inc. (“Essent Holdings”) to Essent Irish Intermediate.  The primary mortgage insurance operations are conducted through Essent Holdings’ regulated and licensed wholly-owned subsidiaries, Essent Guaranty, Inc. (“Essent Guaranty”) and Essent Guaranty of PA, Inc. (“Essent PA”).  Essent Group also has a wholly-owned Bermuda domiciled Class 3A Insurer licensed pursuant to Section 4 of the Bermuda Insurance Act 1978, Essent Reinsurance Ltd. (“Essent Re”), which offers mortgage-related insurance and reinsurance.
 
We have prepared the condensed consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). We have condensed or omitted certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) pursuant to such rules and regulations. In the opinion of management, the statements include all adjustments (which include normal recurring adjustments) required for a fair statement of financial position, results of operations and cash flows for the interim periods presented. These statements should be read in conjunction with the consolidated financial statements and notes thereto, including Note 1 and Note 2 to the consolidated financial statements, included in our Annual Report on Form 10-K for the year ended December 31, 2014, which discloses the principles of consolidation and a summary of significant accounting policies. The results of operations for the interim periods are not necessarily indicative of the results for the full year. We evaluated the need to recognize or disclose events that occurred subsequent to June 30, 2015 prior to the issuance of these condensed consolidated financial statements.
 
Certain amounts in prior years have been reclassified to conform to the current year presentation.
 

5

Essent Group Ltd. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (Unaudited)


Note 2. Investments Available for Sale
 
Investments available for sale consist of the following:
 
June 30, 2015 (In thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
U.S. Treasury securities
 
$
166,269

 
$
630

 
$
(718
)
 
$
166,181

U.S. agency securities
 
3,176

 
20

 

 
3,196

U.S. agency mortgage-backed securities
 
103,599

 
1,028

 
(391
)
 
104,236

Municipal debt securities(1)
 
260,051

 
2,816

 
(1,980
)
 
260,887

Corporate debt securities
 
363,658

 
1,361

 
(1,387
)
 
363,632

Mortgage-backed securities
 
51,292

 
252

 
(794
)
 
50,750

Asset-backed securities
 
130,025

 
269

 
(166
)
 
130,128

Money market funds
 
80,369

 

 

 
80,369

Total investments available for sale
 
$
1,158,439

 
$
6,376

 
$
(5,436
)
 
$
1,159,379


December 31, 2014 (In thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
U.S. Treasury securities
 
$
73,432

 
$
927

 
$
(143
)
 
$
74,216

U.S. agency securities
 
4,491

 
29

 

 
4,520

U.S. agency mortgage-backed securities
 
82,190

 
1,564

 
(214
)
 
83,540

Municipal debt securities(1)
 
191,723

 
4,147

 
(324
)
 
195,546

Corporate debt securities
 
295,507

 
2,123

 
(801
)
 
296,829

Mortgage-backed securities
 
66,396

 
574

 
(884
)
 
66,086

Asset-backed securities
 
126,474

 
136

 
(422
)
 
126,188

Money market funds
 
210,688

 

 

 
210,688

Total investments available for sale
 
$
1,050,901

 
$
9,500

 
$
(2,788
)
 
$
1,057,613

 
(1)
At June 30, 2015, approximately 67.6% of municipal debt securities were special revenue bonds, 28.9% were general obligation bonds, 2.4% were certificate of participation bonds and 1.1% were tax allocation bonds. At December 31, 2014, approximately 59.7% of municipal debt securities were special revenue bonds, 37.5% were general obligation bonds, 1.5% were tax allocation bonds, 0.8% were certificate of participation bonds and 0.5% were special assessment bonds.
 

6

Essent Group Ltd. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (Unaudited)


The amortized cost and fair value of investments available for sale at June 30, 2015, 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 mortgage-backed 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
 
$
19,853

 
$
19,879

Due after 1 but within 5 years
 
66,117

 
66,250

Due after 5 but within 10 years
 
80,299

 
80,052

Subtotal
 
166,269

 
166,181

U.S. agency securities:
 
 

 
 

Due in 1 year
 
1,155

 
1,161

Due after 1 but within 5 years
 
2,021

 
2,035

Subtotal
 
3,176

 
3,196

Municipal debt securities:
 
 

 
 

Due in 1 year
 
545

 
544

Due after 1 but within 5 years
 
74,765

 
74,846

Due after 5 but within 10 years
 
91,891

 
92,933

Due after 10 years
 
92,850

 
92,564

Subtotal
 
260,051

 
260,887

Corporate debt securities:
 
 

 
 

Due in 1 year
 
8,851

 
8,874

Due after 1 but within 5 years
 
253,211

 
253,397

Due after 5 but within 10 years
 
101,319

 
101,075

Due after 10 years
 
277

 
286

Subtotal
 
363,658

 
363,632

U.S. agency mortgage-backed securities
 
103,599

 
104,236

Mortgage-backed securities
 
51,292

 
50,750

Asset-backed securities
 
130,025

 
130,128

Money market funds
 
80,369

 
80,369

Total investments available for sale
 
$
1,158,439

 
$
1,159,379


Essent realized gross gains and losses on the sale of investments available for sale as follows:
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands)
 
2015
 
2014
 
2015
 
2014
Realized gross gains
 
$
1,339

 
$
175

 
$
2,127

 
$
840

Realized gross losses
 
771

 
107

 
910

 
372

 

7

Essent Group Ltd. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (Unaudited)


The fair value of investments in an unrealized loss position and the related unrealized losses were as follows:
 
 
 
Less than 12 months
 
12 months or more
 
Total
June 30, 2015 (In thousands)
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
U.S. Treasury securities
 
$
58,869

 
$
(718
)
 
$

 
$

 
$
58,869

 
$
(718
)
U.S. agency mortgage-backed securities
 
28,747

 
(302
)
 
1,800

 
(89
)
 
30,547

 
(391
)
Municipal debt securities
 
130,250

 
(1,924
)
 
5,138

 
(56
)
 
135,388

 
(1,980
)
Corporate debt securities
 
163,172

 
(1,358
)
 
5,083

 
(29
)
 
168,255

 
(1,387
)
Mortgage-backed securities
 
13,600

 
(127
)
 
21,243

 
(667
)
 
34,843

 
(794
)
Asset-backed securities
 
59,760

 
(142
)
 
6,362

 
(24
)
 
66,122

 
(166
)
Total
 
$
454,398

 
$
(4,571
)
 
$
39,626

 
$
(865
)
 
$
494,024

 
$
(5,436
)
 
 
 
Less than 12 months
 
12 months or more
 
Total
December 31, 2014 (In thousands)
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
U.S. Treasury securities
 
$
16,543

 
$
(34
)
 
$
5,155

 
$
(109
)
 
$
21,698

 
$
(143
)
U.S. agency mortgage-backed securities
 
2,334

 

 
8,566

 
(214
)
 
10,900

 
(214
)
Municipal debt securities
 
39,902

 
(229
)
 
8,684

 
(95
)
 
48,586

 
(324
)
Corporate debt securities
 
113,717

 
(701
)
 
12,659

 
(100
)
 
126,376

 
(801
)
Mortgage-backed securities
 
28,091

 
(264
)
 
16,092

 
(620
)
 
44,183

 
(884
)
Asset-backed securities
 
100,248

 
(405
)
 
2,201

 
(17
)
 
102,449

 
(422
)
Total
 
$
300,835

 
$
(1,633
)
 
$
53,357

 
$
(1,155
)
 
$
354,192

 
$
(2,788
)
 
The gross unrealized losses on these investment securities are principally associated with the changes in the interest rate environment subsequent to their purchase. Each issuer is current on its scheduled interest and principal payments. 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 an impairment is other-than-temporary. There were no other-than-temporary impairments of investments in the six months ended June 30, 2015 or year ended December 31, 2014.
 
The fair value of investments deposited with insurance regulatory authorities to meet statutory requirements was $8.5 million as of June 30, 2015 and as of December 31, 2014.  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 required investments on deposit in these trusts were $151.6 million at June 30, 2015 and $66.7 million at December 31, 2014.

Net investment income consists of:
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands)
 
2015
 
2014
 
2015
 
2014
Fixed maturities
 
$
5,115

 
$
3,322

 
$
9,768

 
$
5,378

Short-term investments
 
17

 
19

 
29

 
31

Gross investment income
 
5,132

 
3,341

 
9,797

 
5,409

Investment expenses
 
(412
)
 
(261
)
 
(797
)
 
(431
)
Net investment income
 
$
4,720

 
$
3,080

 
$
9,000

 
$
4,978

 

8

Essent Group Ltd. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (Unaudited)


Note 3. Accounts Receivable
 
Accounts receivable consist of the following:
 
 
 
June 30,
 
December 31,
(In thousands)
 
2015
 
2014
Premiums receivable
 
$
14,278

 
$
13,210

Other receivables
 
694

 
2,600

Total accounts receivable
 
14,972

 
15,810

Less: Allowance for doubtful accounts
 

 

Accounts receivable, net
 
$
14,972

 
$
15,810

 
Premiums receivable consist of premiums due on our mortgage insurance policies. If mortgage insurance premiums are unpaid for more than 90 days, the receivable is written off against earned premium and the related insurance policy is cancelled. For all periods presented, no provision or allowance for doubtful accounts was required.
 
Note 4. Reserve for Losses and Loss Adjustment Expenses
 
The following table provides a reconciliation of the beginning and ending reserve balances for losses and loss adjustment expenses (“LAE”) for the six months ended June 30:
 
($ in thousands)
 
2015
 
2014
Reserve for losses and LAE at beginning of period
 
$
8,427

 
$
3,070

Less: Reinsurance recoverables
 

 

Net reserve for losses and LAE at beginning of period
 
8,427

 
3,070

Add provision for losses and LAE, net of reinsurance, occurring in:
 
 

 
 

Current period
 
6,079

 
2,452

Prior years
 
(1,766
)
 
(584
)
Net incurred losses during the current period
 
4,313

 
1,868

Deduct payments for losses and LAE, net of reinsurance, occurring in:
 
 

 
 

Current period
 
140

 

Prior years
 
669

 
432

Net loss and LAE payments during the current period
 
809

 
432

Net reserve for losses and LAE at end of period
 
11,931

 
4,506

Plus: Reinsurance recoverables
 

 

Reserve for losses and LAE at end of period
 
$
11,931

 
$
4,506

 
 
 
 
 
Loans in default at end of period
 
605

 
235

 
For the six months ended June 30, 2015, $0.7 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There has been a $1.8 million favorable prior-year development during the six months ended June 30, 2015. Reserves remaining as of June 30, 2015 for prior years are $6.0 million as a result of re-estimation of unpaid losses and loss adjustment expenses. For the six months ended June 30, 2014, $0.4 million was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There has been a $0.6 million favorable prior-year development during the six months ended June 30, 2014. Reserves remaining as of June 30, 2014 for prior years were $2.1 million as a result of re-estimation of unpaid losses and loss adjustment expenses. The decreases in both periods are generally the result of ongoing analysis of recent loss development trends. Original estimates are increased or decreased as additional information becomes known regarding individual claims.
 

9

Essent Group Ltd. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (Unaudited)


Note 5. Commitments and Contingencies
 
Obligations under Guarantees
 
Under the terms of CUW Solutions LLC’s contract underwriting agreements with lenders and subject to contractual limitations on liability, we agree to indemnify certain lenders against losses incurred in the event that we make an error in determining whether loans processed meet specified underwriting criteria, to the extent that such error materially restricts or impairs the salability of such loan, results in a material reduction in the value of such loan or results in the lender repurchasing the loan. The indemnification may be in the form of monetary or other remedies. We paid $13,403 and $4,043 related to remedies for the six months ended June 30, 2015 and 2014, respectively. As of June 30, 2015, management believes any potential claims for indemnification related to contract underwriting services through June 30, 2015 are not material to our financial position or results of operations.
 
In addition to the indemnifications discussed above, in the normal course of business, we enter into agreements or other relationships with third parties pursuant to which we may be obligated under specified circumstances to indemnify the counterparties with respect to certain matters. Our contractual indemnification obligations typically arise in the context of agreements entered into by us to, among other things, purchase or sell services, finance our business and business transactions, lease real property and license intellectual property. The agreements we enter into in the normal course of business generally require us to pay certain amounts to the other party associated with claims or losses if they result from our breach of the agreement, including the inaccuracy of representations or warranties. The agreements we enter into may also contain other indemnification provisions that obligate us to pay amounts upon the occurrence of certain events, such as the negligence or willful misconduct of our employees, infringement of third-party intellectual property rights or claims that performance of the agreement constitutes a violation of law. Generally, payment by us under an indemnification provision is conditioned upon the other party making a claim, and typically we can challenge the other party’s claims. Further, our indemnification obligations may be limited in time and/or amount, and in some instances, we may have recourse against third parties for certain payments made by us under an indemnification agreement or obligation. As of June 30, 2015, contingencies triggering material indemnification obligations or payments have not occurred historically and are not expected to occur. The nature of the indemnification provisions in the various types of agreements and relationships described above are believed to be low risk and pervasive, and we consider them to have a remote risk of loss or payment. We have not recorded any provisions on the condensed consolidated balance sheets related to indemnifications.
 
Note 6. Stock-Based Compensation
 
The following table summarizes nonvested common share and nonvested common share unit activity for the six months ended June 30, 2015:
 
 
 
Time and Performance-
Based Share Awards
 
Time-Based Share
Awards
 
Share Units
(Shares in thousands)
 
Number of
Shares
 
Weighted
Average
Grant
Date Fair
Value
 
Number of
Shares
 
Weighted
Average
Grant
Date Fair
Value
 
Number
of
Share
Units
 
Weighted
Average
Grant
Date Fair
Value
Outstanding at beginning of year
 
1,290

 
$
14.83

 
1,472

 
$
9.04

 
664

 
$
18.32

Granted
 
50

 
24.58

 
109

 
24.51

 
117

 
24.45

Vested
 

 
N/A

 
(578
)
 
7.38

 
(238
)
 
18.17

Forfeited
 
(46
)
 
16.40

 
(41
)
 
17.61

 
(3
)
 
17.00

Outstanding at June 30, 2015
 
1,294

 
$
15.15

 
962

 
$
11.43

 
540

 
$
19.72


In February 2015, certain members of senior management were granted nonvested common shares under the Essent Group Ltd. 2013 Long-Term Incentive Plan that were subject to time-based and performance-based vesting.  The time-based share awards granted in February 2015 vest in three equal installments on March 1, 2016, 2017 and 2018.  The performance-based share awards granted in February 2015 vest based upon our compounded annual book value per share growth percentage during a three-year performance period that commenced on January 1, 2015 and vest on March 1, 2018.


10


In May 2015, nonvested common shares were granted to an employee in connection with an employment agreement that are subject to time-based and performance-based vesting. The time-based share award vests in four equal installments on July 1, 2016, 2017, 2018 and 2019. The performance-based share award vests based upon our compounded annual book value per share growth percentage during a three-year performance period that commenced on January 1, 2015 and vests on July 1, 2019.

The portion of the nonvested performance-based share awards that will be earned based upon the achievement of compounded annual book value per share growth is as follows:
 
Performance level
 
Compounded Annual Book Value
Per Share Growth
 
Nonvested Common
Shares Earned
 
 
<11
%
 
0
%
Threshold
 
11
%
 
10
%
 
 
12
%
 
36
%
 
 
13
%
 
61
%
 
 
14
%
 
87
%
Maximum
 
≥15
%
 
100
%
 
 
 
 
 
 
In the event that the compounded annual book value per share growth falls between the performance levels shown above, the nonvested common shares earned will be determined on a straight-line basis between the respective levels shown.
 
In connection with our incentive program covering bonus awards for performance year 2014, in February 2015, time-based share awards and share units were issued to certain employees that vest in three equal installments on March 1, 2016, 2017 and 2018. In May 2015, time-based share units were granted to non-employee directors that vest one year from the date of grant.

The total fair value of nonvested shares that vested was $20.6 million and $28.0 million for the six months ended June 30, 2015 and 2014, respectively.  As of June 30, 2015, there was $27.5 million of total unrecognized compensation expense related to nonvested shares outstanding at June 30, 2015 and we expect to recognize the expense over a weighted average period of 2.3 years.
 
Employees have the option to tender shares to Essent Group to pay the minimum employee statutory withholding taxes associated with shares upon vesting. Common shares tendered by employees to pay employee withholding taxes totaled 198,041 in the six months ended June 30, 2015. The tendered shares were recorded at cost, included in treasury stock and have been cancelled as of June 30, 2015.
 
Compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares were as follows:
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands)
 
2015
 
2014
 
2015
 
2014
Compensation expense
 
$
3,335

 
$
3,365

 
$
6,596

 
$
6,148

Income tax benefit
 
984

 
1,178

 
2,125

 
2,152

 

11

Essent Group Ltd. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (Unaudited)


Note 7. Earnings per Share (EPS)
 
The following table reconciles the net income and the weighted average common shares outstanding used in the computations of basic and diluted earnings per common share:
 
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
(In thousands, except per share amounts)
 
2015
 
2014
 
2015
 
2014
Net income
 
$
37,193

 
$
19,555

 
$
72,031

 
$
34,561

Less: dividends declared
 

 

 

 

Net income available to common shareholders
 
$
37,193


$
19,555


$
72,031


$
34,561

Basic earnings per share
 
$
0.41

 
$
0.23

 
$
0.80

 
$
0.42

Diluted earnings per share
 
$
0.41

 
$
0.23

 
$
0.79

 
$
0.41

Basic weighted average shares outstanding
 
90,344

 
83,276

 
90,265

 
83,071

Dilutive effect of nonvested shares
 
1,330


1,430


1,329


1,630

Diluted weighted average shares outstanding
 
91,674

 
84,706

 
91,594

 
84,701

 
There were 50,372 and 151,857 antidilutive shares for the three months ended June 30, 2015 and 2014, respectively and 150,718 and 108,404 antidilutive shares for the six months ended June 30, 2015 and 2014, respectively.
 
The nonvested performance-based share awards are considered contingently issuable for purposes of the EPS calculation.  Based on the compounded annual book value per share growth as of June 30, 2015, 100% of the performance-based share awards would be issuable under the terms of the arrangements if June 30, 2015 was the end of the performance period.  Based on the compounded annual book value per share growth as of June 30, 2014, 0% of the performance-based share awards would have been issuable under the terms of the arrangements if June 30, 2014 was the end of the performance period.
 
Note 8. Accumulated Other Comprehensive Income (Loss)
 
The following table presents the rollforward of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2015 and 2014:
 
 
 
Three Months Ended June 30, 2015
(In thousands)
 
Before Tax
 
Tax Effect
 
Net of Tax
Balance at beginning of period
 
$
13,711

 
$
(4,155
)
 
$
9,556

Other comprehensive income (loss):
 
 

 
 

 
 

Unrealized holding losses arising during the period
 
(12,203
)
 
3,888

 
(8,315
)
Less: Reclassification adjustment for gains included in net income (1)
 
(568
)
 
114

 
(454
)
Net unrealized losses on investments
 
(12,771
)
 
4,002

 
(8,769
)
Other comprehensive income (loss)
 
(12,771
)
 
4,002

 
(8,769
)
Balance at end of period
 
$
940

 
$
(153
)
 
$
787



12


 
 
Six Months Ended June 30, 2015
(In thousands)
 
Before Tax
 
Tax Effect
 
Net of Tax
Balance at beginning of period
 
$
6,712

 
$
(2,045
)
 
$
4,667

Other comprehensive income (loss):
 
 

 
 

 
 

Unrealized holding losses arising during the period
 
(4,555
)
 
1,551

 
(3,004
)
Less: Reclassification adjustment for gains included in net income (1)
 
(1,217
)
 
341

 
(876
)
Net unrealized losses on investments
 
(5,772
)
 
1,892

 
(3,880
)
Other comprehensive income (loss)
 
(5,772
)
 
1,892

 
(3,880
)
Balance at end of period
 
$
940

 
$
(153
)
 
$
787


 
 
Three Months Ended June 30, 2014
(In thousands)
 
Before Tax
 
Tax Effect
 
Net of Tax
Balance at beginning of period
 
$
(1,378
)
 
$
410

 
$
(968
)
Other comprehensive income (loss):
 
 

 
 

 
 

Unrealized holding gains arising during the period
 
7,078

 
(2,118
)
 
4,960

Less: Reclassification adjustment for gains included in net income (1)
 
(68
)
 
23

 
(45
)
Net unrealized gains on investments
 
7,010

 
(2,095
)
 
4,915

Other comprehensive income (loss)
 
7,010

 
(2,095
)
 
4,915

Balance at end of period
 
$
5,632

 
$
(1,685
)
 
$
3,947

 
 
 
Six Months Ended June 30, 2014
(In thousands)
 
Before Tax
 
Tax Effect
 
Net of Tax
Balance at beginning of period
 
$
(2,227
)
 
$
780

 
$
(1,447
)
Other comprehensive income (loss):
 
 

 
 

 
 

Unrealized holding gains arising during the period
 
8,327

 
(2,627
)
 
5,700

Less: Reclassification adjustment for gains included in net income (1)
 
(468
)
 
162

 
(306
)
Net unrealized gains on investments
 
7,859

 
(2,465
)
 
5,394

Other comprehensive income (loss)
 
7,859

 
(2,465
)
 
5,394

Balance at end of period
 
$
5,632

 
$
(1,685
)
 
$
3,947

 
 
(1)
Included in net realized investment gains on our condensed consolidated statements of comprehensive income.


13

Essent Group Ltd. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (Unaudited)


Note 9. Fair Value of Financial Instruments
 
The estimated fair values and related carrying amounts of our financial instruments were as follows:
 
June 30, 2015 (In thousands)
 
Carrying
Amount
 
Fair Value
Financial Assets:
 
 

 
 

U.S. Treasury securities
 
$
166,181

 
$
166,181

U.S. agency securities
 
3,196

 
3,196

U.S. agency mortgage-backed securities
 
104,236

 
104,236

Municipal debt securities
 
260,887

 
260,887

Corporate debt securities
 
363,632

 
363,632

Mortgage-backed securities
 
50,750

 
50,750

Asset-backed securities
 
130,128

 
130,128

Money market funds
 
80,369

 
80,369

Total investments
 
$
1,159,379

 
$
1,159,379

Financial Liabilities:
 
 

 
 

Derivative liabilities
 
$
2,720

 
$
2,720

 
December 31, 2014 (In thousands)
 
Carrying
Amount
 
Fair Value
Financial Assets:
 
 

 
 

U.S. Treasury securities
 
$
74,216

 
$
74,216

U.S. agency securities
 
4,520

 
4,520

U.S. agency mortgage-backed securities
 
83,540

 
83,540

Municipal debt securities
 
195,546

 
195,546

Corporate debt securities
 
296,829

 
296,829

Mortgage-backed securities
 
66,086

 
66,086

Asset-backed securities
 
126,188

 
126,188

Money market funds
 
210,688

 
210,688

Total investments
 
$
1,057,613

 
$
1,057,613

Financial Liabilities:
 
 

 
 

Derivative liabilities
 
$
661

 
$
661

 
Fair Value Hierarchy
 
ASC No. 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. The level within the fair value hierarchy to measure the financial instrument shall be determined based on the lowest level input that is significant to the fair value measurement. The three levels of the fair value hierarchy are as follows:

Level 1 — Quoted prices for identical instruments in active markets accessible at the measurement date.
 
Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and valuations in which all significant inputs are observable in active markets. Inputs are observable for substantially the full term of the financial instrument.

Level 3 — Valuations derived from one or more significant inputs that are unobservable.
 

14

Essent Group Ltd. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (Unaudited)


Determination of Fair Value
 
When available, we generally use quoted market prices to determine fair value and classify the financial instrument in Level 1. In cases where quoted market prices for similar financial instruments are available, we utilize these inputs for valuation techniques and classify the financial instrument in Level 2. In cases where quoted market prices are not available, fair values are based on estimates using discounted cash flows, present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rates and estimates of future cash flows and we classify the financial instrument in Level 3. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.
 
We used the following methods and assumptions in estimating fair values of financial instruments:

Investments available for sale — Investments available for sale are valued using quoted market prices in active markets, when available, and those investments are classified as Level 1 of the fair value hierarchy. Level 1 investments available for sale include investments such as U.S. Treasury securities, U.S. agency securities, U.S. agency mortgage-backed securities, certain mortgage-backed securities and money market funds. Investments available for sale are classified as Level 2 of the fair value hierarchy if quoted market prices are not available and fair values are estimated using quoted prices of similar securities or recently executed transactions for the securities. Municipal debt securities, corporate debt securities, certain mortgage-backed securities and asset-backed securities are classified as Level 2 investments.
 
We use independent pricing sources to determine the fair value of securities available for sale in Level 1 and Level 2 of the fair value hierarchy. We use one primary pricing service to provide individual security pricing based on observable market data and receive one quote per security. To ensure securities are appropriately classified in the fair value hierarchy, we review the pricing techniques and methodologies of the independent pricing service and believe that their policies adequately consider market activity, either based on specific transactions for the issue valued or based on modeling of securities with similar credit quality, duration, yield and structure that were recently traded. We review the reasonableness of prices received from our primary pricing service by comparison to prices obtained from additional pricing sources. We have not made any adjustments to the prices obtained from our primary pricing service.
 
Derivative liabilities — We define fair value as the current amount that would be exchanged to sell an asset or transfer a liability, other than in a forced liquidation. Certain of our Freddie Mac Agency Credit Insurance Structure ("ACIS") contracts are accounted for as derivatives. In determining an exit market, we consider the fact that there is not a principal market for these contracts. In the absence of a principal market, we value these ACIS contracts in a hypothetical market where market participants, and potential counterparties, include other mortgage guaranty insurers or reinsurers with similar credit quality to us. We believe that in the absence of a principal market, this hypothetical market provides the most relevant information with respect to fair value estimates. These ACIS contracts are classified as Level 3 of the fair value hierarchy.
 
We determine the fair value of our derivative instruments primarily using internally-generated models. We utilize market observable inputs, such as the performance of the underlying pool of mortgages, mortgage prepayment speeds and pricing spreads on the reference STACR notes, whenever they are available. There is a high degree of uncertainty about our fair value estimates since our contracts are not traded or exchanged, which makes external validation and corroboration of our estimates difficult. Considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates may not be indicative of amounts we could realize in a current market exchange or negotiated termination. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts.
 

15

Essent Group Ltd. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (Unaudited)


Assets and Liabilities Measured at Fair Value
 
All assets measured at fair value are categorized in the table below based upon the lowest level of significant input to the valuations. All fair value measurements at the reporting date were on a recurring basis.
 
June 30, 2015 (In thousands)
 
Quoted Prices
in Active 
Markets for
Identical
Instruments
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Recurring fair value measurements
 
 

 
 

 
 

 
 

Financial Assets:
 
 

 
 

 
 

 
 

U.S. Treasury securities
 
$
166,181

 
$

 
$

 
$
166,181

U.S. agency securities
 
3,196

 

 

 
3,196

U.S. agency mortgage-backed securities
 
104,236

 

 

 
104,236

Municipal debt securities
 

 
260,887

 

 
260,887

Corporate debt securities
 

 
363,632

 

 
363,632

Mortgage-backed securities
 
4,649

 
46,101

 

 
50,750

Asset-backed securities
 

 
130,128

 

 
130,128

Money market funds
 
80,369

 

 

 
80,369

Total assets at fair value
 
$
358,631

 
$
800,748

 
$

 
$
1,159,379

Financial Liabilities:
 
 

 
 

 
 

 
 
Derivative liabilities
 
$

 
$

 
$
2,720

 
$
2,720

Total liabilities at fair value
 
$

 
$

 
$
2,720

 
$
2,720

 
December 31, 2014 (In thousands)
 
Quoted Prices
in Active 
Markets for
Identical
Instruments
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Recurring fair value measurements