Essent Group Ltd.'s first-ever dividend is part of the company's transition to a "buy, manage and distribute" model that generates enough cash flow to pay shareholders, President and CEO Mark Casale said.

The company previously indicated a willingness to return capital to stockholders after its insurance book was sufficiently covered by reinsurance, which it recently managed for its 2015 and 2016 originated mortgage insurance business, Casale said during a conference call to discuss earnings.

"A dividend of this size affords us the opportunity to maintain adequate levels of capital, continue investing in the business and take advantage of other potential growth opportunities," the CEO said.

Essent's ability to issue its first dividend speaks more to the company's confidence in its cash flow than to a strategy for deploying excess capital, Casale said. Without the reinsurance cover, which now extends across about 70% of its insurance book, Essent would not be returning capital to shareholders, he said.

"If we had the same amount of excess capital but didn't have any reinsurance, we would not be distributing capital to shareholders," Casale said. The reinsurance strategy reduces volatility in its business, Casale said.

Asked during the call how the mortgage insurer planned to determine future dividends, Casale said they would likely be based more on a payout ratio than a specific dollar amount. In the long term, growth in capital distribution will reflect growth in cash flow, he said.