• Adjusted Operating Income: $182 million, up 11% year over year.
• Adjusted EPS: $1.16.
• Adjusted Return on Equity: 15%.
• Adjusted Book Value Per Share: $33.27, up 3% sequentially and 10% year over year.
• Insurance in Force: $268 billion, up $2 billion sequentially and $6 billion year over year.
• Net Premiums Earned: $249 million, up 2% sequentially and year over year.
• Investment Income: $61 million, up 2% sequentially and 11% year over year.
• Reserve Release: $65 million due to favorable credit performance.
• Operating Expenses: $56 million with an expense ratio of 22%.
• Share Buybacks and Dividends: $100 million returned to shareholders in the third quarter.
• PMIER Sufficiency: 173% or $2.2 billion above requirements.

• Warning! GuruFocus has detected 4 Warning Sign with NEMTF.

Release Date: November 07, 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 an adjusted operating income of $182 million, up 11% year over year.
• The company achieved an adjusted return on equity of 15% and an adjusted book value per share of $33.27, up 3% sequentially and 10% year over year.
• Enact Holdings Inc (NASDAQ:ACT) maintained a strong capital position with a PMIER sufficiency of 173% or $2.2 billion above requirements.
• The company successfully returned $100 million to shareholders through share buybacks and dividends in the third quarter.
• Enact Re, a strategic initiative, received an A- rating from S&P, enhancing its capital optimization and commercial opportunities.

Negative Points

• New insurance written was approximately $14 billion, flat sequentially and down 6% year over year, primarily due to lower estimated market share.
• New delinquencies rose in the quarter, driven by seasonality and the aging of newer books.
• The loss ratio increased to 5% from negative 7% in the previous quarter, primarily due to a lower reserve release and higher new delinquencies.
• Operating expenses remained flat at $56 million, with an expense ratio of 22%, indicating challenges in reducing costs.
• The company anticipates a more meaningful impact from Hurricanes Helene and Milton on delinquencies in the fourth quarter.

Q & A Highlights

Q: Can you discuss the competitive dynamics in the industry and the impact on pricing and market share? A: Rohit Gupta, President and CEO, stated that MI pricing remains competitive yet constructive, with attractive risk-adjusted returns. Enact is confident in writing new business that delivers value for shareholders, with $13.5 billion in new insurance written, reflecting strong pricing and underwriting quality.

Q: How will you reserve for hurricane-related delinquencies, and what impact do you expect from recent hurricanes? A: Hardin Mitchell, CFO, explained that while Hurricane Beryl had a modest impact, no adjustments were made to reserves. Future impacts from Hurricanes Helene and Milton will be assessed based on reported delinquencies, with historical data showing high cure rates and limited claims from hurricane-related delinquencies.

Q: What is the growth outlook for Enact Re, and how should it be modeled in terms of premium revenue? A: Rohit Gupta noted that Enact Re, launched six quarters ago, is expected to grow gradually over time, leveraging core competencies and infrastructure. While growth is anticipated, it will be measured over quarters and years, with a focus on prudent growth and attractive returns.

Q: Are there any specific regulatory changes expected with the new administration that could impact Enact Holdings? A: Rohit Gupta mentioned that while it's too early to speculate on specific regulatory changes, Enact has navigated well under both Republican and Democratic administrations. The company maintains strong relationships with regulatory and legislative bodies, ensuring its views are considered.

Q: What are the expected delinquency trends for the portfolio as it seasons, and how does embedded equity affect cure rates? A: Hardin Mitchell explained that delinquency rates typically peak between years three and four, influenced by credit characteristics and macroeconomic conditions. Embedded equity remains high, with 92% of new delinquencies having at least 10% equity, supporting strong cure rates and overall credit performance.

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