Essent Group Ltd.ESNT
Essent Group Ltd. Income Taxes Disclosure
Income Taxes
For the year ended December 31, 2025, the statutory income tax rates of the countries where the Company does business are 21% in the United States, 0.0% in Bermuda, and 25% and 12.5% in Ireland for passive income and trading income, respectively. The statutory income tax rate of each country is applied against the taxable income from each country to calculate the income tax expense.
Income tax expense consists of the following components for the years ended December 31:
| (In thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Current | ||||||||||||||||||||
| Federal (U.S.) | $ | 78,986 | $ | 87,429 | $ | 136,199 | ||||||||||||||
| States | 3,822 | 6,485 | 3,660 | |||||||||||||||||
| Foreign (Ireland) | 485 | — | — | |||||||||||||||||
| Current income tax expense | 83,293 | 93,914 | 139,859 | |||||||||||||||||
| Deferred | ||||||||||||||||||||
| Federal (U.S.) | $ | 46,832 | $ | 30,335 | $ | (12,495) | ||||||||||||||
| States | 1,768 | 1,839 | 1,980 | |||||||||||||||||
| Foreign (Bermuda) | — | — | (2,731) | |||||||||||||||||
| Deferred income tax expense (benefit) | 48,600 | 32,174 | (13,246) | |||||||||||||||||
| Total income tax expense | $ | 131,893 | $ | 126,088 | $ | 126,613 | ||||||||||||||
Pre tax income (loss) attributable to U.S. and Foreign (Bermuda and Ireland) operations was as follows for the years ended December 31:
| (In thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| United States | $ | 555,656 | $ | 577,352 | $ | 554,369 | ||||||||||||||
| Bermuda | 264,266 | 278,218 | 268,767 | |||||||||||||||||
| Ireland | 1,940 | (79) | (137) | |||||||||||||||||
| $ | 821,862 | $ | 855,491 | $ | 822,999 | |||||||||||||||
While Essent Group Ltd. is domiciled in Bermuda, as further described below, our limited international presence results in a domiciled statutory income tax rate of 0.0% for the year ended December 31, 2025. For the years ended December 31, 2024 and 2023, Bermuda did not impose an income tax. For clarity, our rate reconciliation disclosures have been prepared with the U.S. statutory tax rate as the rate of domicile.The differences between income taxes expected at the U.S. federal tax rate of 21% applicable for each year, and the actual reported income tax expense are summarized as follows:
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| (In thousands) | $ | % of pretax income | $ | % of pretax income | $ | % of pretax income | ||||||||||||||||||||||||||||||||
| Income before income taxes | $ | 821,862 | $ | 855,491 | $ | 822,999 | ||||||||||||||||||||||||||||||||
| Tax provision at U.S. statutory rate | 172,591 | 21.0 | % | 179,653 | 21.0 | % | 172,830 | 21.0 | % | |||||||||||||||||||||||||||||
| State taxes, net of federal benefit | 4,789 | 0.6 | 4,478 | 0.5 | 4,872 | 0.6 | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||||||||
| U.S. withholding tax on outbound dividend | 10,500 | 1.3 | 6 | — | 7 | — | ||||||||||||||||||||||||||||||||
| Non-taxable or non-deductible items | ||||||||||||||||||||||||||||||||||||||
| Non-deductible expenses | 3,148 | 0.4 | 3,542 | 0.4 | 4,501 | 0.5 | ||||||||||||||||||||||||||||||||
| Tax exempt interest | (1,753) | (0.2) | (1,357) | (0.2) | (1,551) | (0.2) | ||||||||||||||||||||||||||||||||
| Stock based compensation | (814) | (0.1) | (668) | (0.1) | 145 | — | ||||||||||||||||||||||||||||||||
| Research and development tax credits | (316) | — | (827) | (0.1) | (1,841) | (0.2) | ||||||||||||||||||||||||||||||||
| Other | (834) | (0.1) | (310) | — | 4,096 | 0.5 | ||||||||||||||||||||||||||||||||
| Foreign Tax Effect | ||||||||||||||||||||||||||||||||||||||
| Bermuda | ||||||||||||||||||||||||||||||||||||||
| Statutory tax rate difference between Bermuda and U.S | (55,496) | (6.9) | (58,426) | (6.8) | (56,441) | (6.8) | ||||||||||||||||||||||||||||||||
| Ireland | ||||||||||||||||||||||||||||||||||||||
| Statutory tax rate difference between Ireland and U.S. | 78 | — | (3) | — | (5) | — | ||||||||||||||||||||||||||||||||
| Tax on dividend from U.S. subsidiary | 26,250 | 3.2 | 16 | — | 18 | — | ||||||||||||||||||||||||||||||||
| Credit for taxes paid to the U.S. | (26,250) | (3.2) | (16) | — | (18) | — | ||||||||||||||||||||||||||||||||
| Total income tax provision (benefit) | $ | 131,893 | 16.0 | % | $ | 126,088 | 14.7 | % | $ | 126,613 | 15.4 | % | ||||||||||||||||||||||||||
In each of the three years shown in the table above, state income taxes relate primarily to income apportioned to Florida, and the Company incurred no local taxes based on net income.
Income taxes were paid to the following jurisdictions for the years ended December 31:
| (In thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Federal (U.S.) | $ | 87,151 | $ | 88,192 | $ | 135,629 | ||||||||||||||
| States | 4,000 | 4,325 | 4,081 | |||||||||||||||||
| Net income taxes paid | $ | 91,151 | $ | 92,517 | $ | 139,710 | ||||||||||||||
We provide deferred taxes to reflect the estimated future tax effects of the differences between the financial statement and tax bases of assets and liabilities using currently enacted tax laws. Our net deferred tax liability was comprised of the following components at December 31:
| (In thousands) | 2025 | 2024 | ||||||||||||
| U.S. Deferred Tax Assets: | ||||||||||||||
| Unearned premium reserve | $ | 11,979 | $ | 12,318 | ||||||||||
| Accrued expenses | 12,705 | 12,832 | ||||||||||||
| Unearned ceding commissions | 1,243 | 1,610 | ||||||||||||
| Nonvested shares | 2,843 | 2,807 | ||||||||||||
| Fixed assets | — | 5,445 | ||||||||||||
| Capitalized acquisition costs | 623 | 722 | ||||||||||||
| Discounted loss reserves | 2,030 | 1,295 | ||||||||||||
| Change in fair market value of derivatives | 2,777 | 2,436 | ||||||||||||
| Unrealized loss on investments | 23,403 | 47,725 | ||||||||||||
| Gross U.S. Deferred Tax Assets | 57,603 | 87,190 | ||||||||||||
Bermuda Deferred Tax Assets (1) | ||||||||||||||
| Unrealized loss on investments | 2,951 | 5,319 | ||||||||||||
| Total Gross Deferred Tax Assets | 60,554 | 92,509 | ||||||||||||
| U.S. Deferred Tax Liabilities: | ||||||||||||||
| Contingency reserves | 499,744 | 459,555 | ||||||||||||
| Deferred policy acquisition costs | 1,195 | 1,450 | ||||||||||||
| Investments in limited partnerships | 15,356 | 12,918 | ||||||||||||
| Right of use assets | 5,334 | 5,311 | ||||||||||||
| Prepaid Expenses | 271 | 255 | ||||||||||||
| Other | 1,054 | 129 | ||||||||||||
| Gross U.S. Deferred Tax Liabilities | 522,954 | 479,618 | ||||||||||||
| Net U.S. Deferred Tax Liability | 465,351 | 392,428 | ||||||||||||
| Net Deferred Tax Liability | $ | 462,400 | $ | 387,109 | ||||||||||
| (1) Deferred tax assets within the jurisdiction of Bermuda are presented within Other Assets on our condensed consolidated balance sheet | ||||||||||||||
As a mortgage guaranty insurer, we are eligible for a tax deduction, subject to certain limitations, under Section 832(e) of the Internal Revenue Code ("IRC") for amounts required by state law or regulation to be set aside in statutory contingency reserves. The deduction is allowed only to the extent that we purchase T&L Bonds in an amount equal to the tax benefit derived from deducting any portion of our statutory contingency reserves. During the year ended December 31, 2025, we had net purchases of T&L Bonds in the amount of $23.8 million and had net purchases of T&L Bonds in the amount of $19.0 million during the year ended December 31, 2024. As of December 31, 2025 and 2024, we held $513.4 million and $489.6 million of T&L Bonds, respectively.
In evaluating our ability to realize the benefit of our deferred tax assets, we consider the relevant impact of all available positive and negative evidence including our past operating results and our forecasts of future taxable income. For the year ended December 31, 2025, the Company had unrealized losses attributable to its available-for-sale investment securities that if sold would result in capital losses. Accordingly, management considered the ability and intent to hold such available-for-sale securities until recovery. At December 31, 2025 and 2024, after weighing all the evidence, management concluded that it was more likely than not that our ordinary and capital deferred tax assets would be realized.
Under current Bermuda law, our parent company, Essent Group, and its Bermuda subsidiary, Essent Re, are not required to pay any taxes on income and capital gains as of December 31, 2025. On December 27, 2023, the Government of Bermuda enacted the Corporate Income Tax Act 2023 ("CIT"). Starting January 1, 2025, the CIT results in a new 15% corporate income tax on in-scope entities that are resident in Bermuda or that have a Bermuda permanent establishment, without regard to any
assurances that had previously been given pursuant to the Exempted Undertakings Tax Protection Act 1966. Although our annual revenue meets the CIT threshold for "in-scope" (€750M), our Bermuda companies are not "in scope" because of a statutory exception for entities having “limited international presence” or "LIP". We currently meet the criteria for the LIP exception, which is available to our Bermuda companies until December 31, 2029, the fifth anniversary of the inception date of the tax. The LIP exemption criteria are subject to interpretation of existing Bermuda law, as well any related new regulations that may be issued by the Government of Bermuda. Also, future strategic business decisions could impact qualification for the LIP exception. Accordingly, no assurances can be made that we will continue meeting the LIP exception criteria during the four years remaining in our five-year exception period.
Essent Irish Intermediate Holdings Ltd. is subject to a 5% withholding tax on dividends received from its U.S. subsidiary, and as shown in the rate reconciliation above, the Company paid $10.5 million of U.S. withholding tax based on $210 million of dividends paid outside of the U.S. during 2025. However, no withholding taxes are accrued with respect to unremitted U.S. earnings. Management has no intention of remitting prior unremitted earnings, and any future dividends are expected to be made from U.S. earnings and profits in the same calendar year as the dividend paid. An estimate of the cumulative amount of U.S. earnings that would be subject to withholding tax, if distributed outside of the U.S., is approximately $3.8 billion. The associated withholding tax liability under the U.S./Ireland tax treaty would be approximately $189.4 million. Irish tax on dividends received from its U.S. subsidiary are expected to be fully offset by a credit for taxes paid to the U.S.
Essent is not subject to income taxation other than as stated above. There can be no assurance that there will not be changes in applicable laws, regulations, or treaties which might require Essent to change the way it operates or becomes subject to taxation.
At December 31, 2025 and 2024, the Company had no unrecognized tax benefits. As of December 31, 2025, the U.S. federal income tax returns for the tax years 2021 through 2024 remain subject to examination. The Company has not recorded any uncertain tax positions as of December 31, 2025 or December 31, 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 18, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 17, 2023 | |
| 2021 | Feb 16, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 18, 2020 | |
| 2018 | Feb 19, 2019 | |
| 2017 | Feb 20, 2018 | |
| 2016 | Feb 16, 2017 | |
| 2015 | Feb 29, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.