ESNT reported for the 4th qtr 2016 a few weeks back. Here is a brief summary of the financial results using essentially the same format as I did last quarter.

Updated numbers for ESNT through 4th qtr 2016:

```
Qtr 1st 2nd 3rd 4th
Earnings
2013 .22
2014 .18 .23 .29 .33
2015 .38 .41 .44 .48
2016 .52 .57 .65 .68
YoY Earnings Growth
2014 50%
2015 111% 78% 52% 45%
2016 37% 39% 48% 42%
Current 1YPEG = 0.35
Revenue
2013 42
2014 48 54 65 73
2015 80 84 92 97
2016 103 108 121 126
YoY Revenue Growth
2014 74%
2015 67% 56% 42% 33%
2016 29% 29% 32% 30%
Combined Ratio (percent)
2013 73.8 58.7 54.1 57.0
2014 54.4 48.9 42.9 42.3
2015 39.3 37.6 38.4 37.8
2016 37.2 34.1 34.1 33.1
```

Another excellent quarter, though growth has slowed a bit. Combined Ratio has dropped to 33.1 % (incredible – down is good). 1YPEG is at .35 for share price of $34.97 and has been rising with the share price. In other words, Mr. Market is catching on.

As I noted in my previous summaries, these articles explain the metrics I am calculating, and can be used to value insurance companies in general:

http://www.investopedia.com/articles/investing/082813/how-va…

http://seekingalpha.com/article/3280525-how-to-find-a-great-…

Here are updated metrics:

**Metric 1: Price to Book Tangible Book Value**

Rule of thumb is P/B should be less than 2.0. At a share price of $34.97, ESNT has P/B of 2.41 based on 2016 4th qtr numbers. As I say above, Mr. Market is figuring this out. Price has gone from about $27 to $35 in the last quarter

**Metric 2: Premium Growth**

YoY premium growth was 46% for 2015, and is 29.5% for 2016. The rate of growth increase is slowing, but it *has* to at some point. Still impressive.

**Metric 3: Net Income Growth**

YoY net income growth was 78% for 2015 and 42% for 2016 – same pattern as premium growth – growth rate is slowing.

**Metric 4: Combined Ratio**

The lower the better for this metric that measures how well an insurance company turns sold premiums into profit. For all of 2015, the combined ratio was 38.3% and reduced to 34.5% for 2016. Awesome.

**Metric 5: Float Calculations**

Float for 2015 was $219 mil and they had 20 mil return on investment for 9.1%, and $28 mil return on $248 mil float for 2016 for 11.3% – great. (1 – combined ratio) + return on float came in at 78.5% for 2016. Finally, taking the last step suggested in the Rokke article, and dividing by P/B gives 32.6% based on 4th qtr numbers. Still far better than market return.

**Metric 6: Potential Return on Float: Equities / (Fixed Income + Cash)**

For ESNT, this ratio is down to 25.2% for 4th qtr 2016, a level more in line with previous quarters, but still quite aggressive.

**Metric 7: Return on Equity**

ESNT ROE was at 14.1% for 2015 and is 16.6% for 2016. Since an ROE in the mid teens is considered ideal for a well-run insurance company, ESNT still passes this metric easily.

**Summary**

ESNT had a great year, and they are still growing at a respectable pace. Unfortunately (for buyers anyway), the share price has risen from $26 to around $35 over the last quarter. This has driven the YPEG up to .35 – rising but still very reasonable considering the company’s growth. I’m not adding at these prices because I already have a large position, but others may be interested in starting one here.

DT