Enact Holdings Earnings Call Highlights Capital Strength

Enact Holdings Inc ((ACT)) has held its Q1 earnings call. Read on for the main highlights of the call.

Enact Holdings Inc. struck a largely upbeat tone on its latest earnings call, highlighting solid profitability, strong capital and liquidity, and disciplined risk management. Management acknowledged pockets of pressure, including higher quarterly losses, modest credit softening, and mild premium compression, but stressed that robust reserves, high persistency, and prudent pricing leave the insurer well positioned.

Profitability and Return on Equity Strengthen

Enact reported adjusted operating income of $172 million, or $1.21 per diluted share, improving from $1.10 a year earlier. That performance translated into an adjusted operating return on equity of about 13%, underscoring the franchise’s ability to generate attractive earnings despite a choppy mortgage and housing backdrop.

New Insurance Written Shows Strong Year-Over-Year Momentum

The company wrote $13 billion of new insurance in the first quarter, down 11% from the prior quarter but up 30% from a year ago. This mix of seasonal softness and strong annual growth signals that Enact continues to win business and maintain relevance with lenders across changing rate environments.

Large Insurance-in-Force and Sticky Customer Base

Primary insurance-in-force rose to $272 billion, up roughly $4 billion, or about 2% year-over-year, giving Enact a sizable, fee-generating portfolio. Persistency remained elevated at 80%, with 58% of insured loans carrying mortgage rates below 6%, which should keep refinance-driven runoff subdued and support long-term premium earnings.

Capital Strength and Aggressive Shareholder Returns

The insurer ended the quarter with a PMIERs sufficiency ratio of 162%, or about $1.9 billion above regulatory needs, underscoring a robust capital cushion. Backed by that strength, Enact returned $123 million to shareholders through buybacks and dividends in the quarter, and the board approved a 14% dividend increase as it targets roughly $500 million of capital returns by 2026.

Credit Performance Supports Reserve Release

Credit trends remained favorable overall, with total delinquencies down 1% sequentially and new delinquencies edging down to 13,600. Strong cure activity, including a cure rate of 54% and cures up double digits, enabled a $39 million net reserve release, while management maintained an 8% assumed claim rate on new problem loans.

Investment Income Benefits from Higher Yields

Investment income climbed to $71 million, rising 3% from the prior quarter and 12% year-over-year as higher rates lifted returns on the portfolio. New cash is being invested at roughly a 5% yield, lifting the average portfolio book yield to 4.5% and providing a growing, steady earnings tailwind.

Cost Discipline Enhances Operating Leverage

Operating expenses fell to $49 million in the quarter, pushing the expense ratio down to 20% from 24% in the prior period. Management reaffirmed full-year 2026 operating expense guidance of $215 million to $220 million, excluding reorganization costs, reinforcing Enact’s focus on efficiency and margin preservation.

Sequential Softness in New Insurance Written

Despite strong year-over-year growth, NIW’s 11% sequential decline to $13 billion highlighted the impact of rate volatility and typical first-quarter seasonality. Management framed the slowdown as cyclical rather than structural, pointing to continued customer engagement and a healthy application pipeline as drivers of future volume.

Higher Losses and Loss Ratio Versus Prior Quarter

Quarterly losses rose to $37 million, producing a 15% loss ratio compared with 7% in the fourth quarter and 12% a year earlier. While still manageable, the step-up signals some normalization from unusually benign credit conditions, and investors will be watching whether loss activity stabilizes or continues to trend higher.

Persistency and Delinquencies Show Modest Credit Erosion

Persistency, while high, slipped 4 percentage points year-over-year to 80%, reflecting some increased policy runoff. The new delinquency rate held at 1.5% but was 20 basis points above last year, and the total delinquency rate of 2.6% suggests a modest but noticeable cooling in credit quality as more recent, purchase-heavy vintages season.

Premium Rate Pressure Weighs on Revenue Yield

Enact’s base premium rate dipped to 39.4 basis points, a modest 0.2-basis-point decline sequentially, while the net earned premium rate fell 0.5 basis points to 34.3. The slippage reflects higher ceded premiums and mix shifts between refinance and purchase business, adding a subtle headwind to top-line growth even amid rising volumes.

Macro and Geographic Risks Under Close Watch

Management noted housing market moderation in several Sunbelt regions, including Florida and Texas, which have been key growth engines in recent years. The team also flagged broader macro uncertainties, such as potential inflation pressures and higher gas prices, as factors that could nudge delinquency rates higher from today’s low base.

Guidance and Outlook Emphasize Capital Returns and Discipline

Looking ahead, Enact is doubling down on capital deployment and cost control, guiding to 2026 operating expenses of $215 million to $220 million and aiming for roughly $500 million of total capital returns. Management expects base premium rates to remain broadly flattish, while current metrics—13% adjusted ROE, 80% persistency, a 162% PMIERs buffer, and improving investment yields—frame a steady, if more normalized, earnings path.

Enact’s latest call painted the picture of a mortgage insurer that remains solidly profitable, heavily capitalized, and proactive on shareholder returns, even as credit and premium trends gradually normalize. Investors will be weighing the company’s strong capital position, rising investment income, and disciplined expenses against creeping loss ratios and macro uncertainties as they assess the durability of earnings over the next cycle.