Essent Group Ltd. (ESNT), the mortgage insurer backed by JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS), raised $335 million in the first initial public offering of a U.S. home-loan guarantor in almost two decades.
Essent and some investors sold 19.7 million shares for $17 apiece, according to data compiled by Bloomberg, above the previously announced range of $13.50 to $15.50. The sale of a 24 percent stake values Bermuda-based Essent at $1.42 billion.
Started during the real-estate bust, Essent is benefiting from a revival of interest in housing-related investments as home prices recover. Almost half the industry was forced out of the business by losses, while survivors Radian Group Inc. (RDN) and MGIC Investment Corp. (MTG) sold stock and debt this year to replace capital lost in the slump.
Essent “is the pure play way to invest in high ROE, low loss-content private mortgage insurance,” Jack Micenko, an analyst at Susquehanna International Group LLP, said in a research note before the offering, using the abbreviation for return on equity. “Since entering the PMI market in mid-2010, ESNT has grown exponentially as others have exited.”
Mortgage insurers cover losses when homeowners default and foreclosures fail to recoup costs. The policies are typically required when buyers pay less than 20 percent of the cost of a home up front. Essent insured $16.6 billion of home loans in the first nine months of this year, generating net income of $46.4 million, compared with a loss in the same period of 2012.
Goldman Sachs will own about 7 percent of the company after the sale if underwriters excercise their overallotment option, the prospectus shows, while JPMorgan’s Aldermanbury Investments Ltd. will own 5.4 percent. George Soros’s Valorina LLC will own an 8.7 percent stake, while Pine Brook Road Partners will be the company’s largest shareholder with 17.5 percent.
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