• Adjusted Operating Income: $201 million, up 21% sequentially and 13% year-over-year.
• Adjusted EPS: $1.27 per diluted share.
• Adjusted Return on Equity: 17%.
• Insurance In-Force: $266 billion, up 1% sequentially and 3% year-over-year.
• GAAP Net Income: $184 million or $1.16 per diluted share.
• Return on Equity: 15%.
• New Insurance Written: $14 billion, up $3 billion sequentially, down 10% year-over-year.
• Persistency: 83%, down 2 percentage points sequentially.
• Net Premiums Earned: $245 million, up 2% sequentially and 3% year-over-year.
• Investment Income: $50 million, up 5% sequentially and 17% year-over-year.
• Loss Ratio: Negative 7%.
• Reserve Release: $77 million.
• Operating Expenses: $56 million with an expense ratio of 23%.
• PMIERs Sufficiency: 169% or $2.1 billion above requirements.
• Share Repurchase: $49 million during the quarter.
• Quarterly Dividend: $29 million distributed.
• Capital Return Expectation for 2024: Between $300 million and $350 million.

• Warning! GuruFocus has detected 8 Warning Signs with BV.

Release Date: August 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Enact Holdings Inc (NASDAQ:ACT) reported a strong financial performance with an adjusted operating income of $201 million, up 21% sequentially and 13% year-over-year.
• The company achieved a record Insurance In-Force of $266 billion, reflecting a 1% sequential and 3% year-over-year increase.
• Enact Holdings Inc (NASDAQ:ACT) successfully issued $750 million in senior notes, marking its first investment-grade debt issuance as a public company, which will save $2 million in annual interest expense.
• The company completed a $100 million share repurchase program and announced a new $250 million authorization, with $238 million remaining.
• Enact Re, the company's platform in the GSE credit risk transfer market, continues to perform well, maintaining a strong underwriting and attractive return profile.

Negative Points

• New insurance written was down 10% year-over-year, indicating a potential slowdown in new business growth.
• Persistency decreased by 2 percentage points sequentially and 1 percentage point year-over-year, which could impact future revenue streams.
• The company faced a restructuring charge of $3 million due to a voluntary separation program, indicating potential challenges in operational efficiency.
• Enact Holdings Inc (NASDAQ:ACT) reduced its claim rate on new and existing delinquencies from 10% to 9%, reflecting ongoing economic uncertainties.
• Approximately 15% of the company's Risk In-Force was removed from credit risk transfer coverage, potentially increasing exposure to credit risk.

Q & A Highlights

Q: Why was the New Insurance Written (NIW) lower compared to peers this quarter? A: Rohit Gupta, President and CEO, explained that there was no significant deviation in strategy this quarter. The market saw some volatility, and while not all peers have reported, the pricing environment was constructive. Enact's market participation should be viewed over a trailing 12-month period rather than quarterly, and they are satisfied with the $14 billion NIW written in the quarter.

Q: How sustainable is the lower claim rate given potential risks like consumer slowdown and inventory build-up? A: Hardin Mitchell, CFO, noted that the claim rate reduction from 10% to 9% was based on reduced economic uncertainty and sustained favorable delinquency performance. They will continue to monitor economic conditions and delinquency trends to reassess the claim rate as needed. Rohit Gupta added that while inventory has risen, it remains below long-term averages, and they are monitoring unemployment and housing market balance.

Q: How might a change in administration affect the mortgage insurance (MI) industry? A: Rohit Gupta stated that MI is well-positioned regardless of political changes. The product supports homeownership and wealth accumulation, aligning with both Democratic and Republican priorities. The MI industry puts private capital ahead of taxpayer risk, which is favorable in discussions about GSE reform, though the likelihood of reform is uncertain.

Q: How does Enact view the current premium rate environment, and are rates expected to increase? A: Hardin Mitchell indicated that the base premium rate is influenced by various factors, including NIW levels and persistency. While there may be quarterly fluctuations, they expect the base premium rate to stabilize and remain relatively flat throughout the year.

Q: What are the drivers behind the updated capital return guidance? A: Hardin Mitchell explained that the increase to a range of $300 million to $350 million is driven by strong business performance and a favorable economic environment. The regulatory environment also supports this increase. They prefer share buybacks, assuming market conditions are conducive, with special dividends as an alternative if necessary.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.