Enact Holdings Signals Confidence With Robust Capital Returns

Enact Holdings Inc ((ACT)) has held its Q4 earnings call. Read on for the main highlights of the call.

Enact Holdings’ latest earnings call carried a clearly upbeat tone as management balanced record insurance-in-force, robust capital returns and healthier credit outcomes against modest pressure from softer persistency, slightly higher delinquencies and a small dip in full-year operating income. Executives emphasized disciplined capital deployment and confidence in sustaining strong shareholder returns despite macro and regulatory crosscurrents.

Strong Q4 and Full-Year Earnings

Enact delivered Q4 adjusted operating income of $179 million, or $1.23 per diluted share, with earnings per share rising both year over year and sequentially. Full-year adjusted operating income reached $688 million, translating to $4.61 per share and a solid 13.5% adjusted operating return on equity in the fourth quarter.

Record Insurance In-Force and New Business

The insurer set a new high with $273 billion of insurance in-force, adding about $1 billion sequentially and roughly $4 billion over the year. New insurance written totaled $52 billion for 2025, including $14 billion in Q4, with fourth-quarter volumes up 2% from Q3 and 8% from the prior year as Enact maintained its foothold in the mortgage insurance market.

Capital Returns and Shareholder Actions

Shareholder payouts remained a central theme, with $503 million returned in 2025 through $382 million of buybacks and $121 million of dividends. In Q4 alone, Enact returned $157 million, and the board’s authorization of a fresh $500 million repurchase program underscores management’s confidence in continued strong capital generation.

Improved Credit Performance and Reserve Release

Credit performance was a key bright spot as favorable cures and loss mitigation enabled a $60 million net reserve release in Q4. Losses were just $18 million for the quarter, driving the loss ratio down to 7%, a sharp improvement from 15% in Q3 and 10% a year earlier, helped by a lower claim rate assumption.

Strong Capital and Liquidity Metrics

Enact’s capital stack remains a competitive advantage, with a PMIERs sufficiency ratio of 162%, or about $1.9 billion above regulatory minimums. A sizeable third-party credit risk transfer program also provides $1.9 billion of PMIERs capital credit, while a new $435 million revolving credit facility adds further financial flexibility.

Balance Sheet and Portfolio Quality

Underlying portfolio metrics point to a conservative risk profile, with a risk-weighted average FICO score of 746 and a risk-weighted average loan-to-value ratio of 93%. Layered risk represents only 1.2% of risk-in-force, and about 59% of loans carry mortgage rates below 6%, supporting persistency and embedded equity in the existing book.

Investment Income and Yield Improvement

Investment income reached $69 million in the fourth quarter, flat sequentially but up $6 million, or 10%, from the prior year. New investments are being deployed at roughly 5%, lifting the portfolio’s weighted average book yield to 4.4% and positioning Enact to benefit if attractive yields persist.

Expense Discipline and Guidance

Operating expenses for 2025 came in at $218 million, or $217 million excluding restructuring, slightly better than the company’s updated guidance. Management reiterated its focus on cost control by projecting 2026 operating expenses of $215 million to $220 million, excluding reorganization, even as it continues to invest in growth and capabilities.

Operational and Strategic Execution

Management highlighted ongoing strategic initiatives, including enhancements to its Rate360 pricing engine and increased participation of Enact Re in attractive GSE single- and multifamily deals. Multiple credit rating upgrades, industry awards and the largest repurchase authorization in the company’s history underscored operational momentum and external validation.

Persistency Decline

One notable headwind was a drop in persistency to 80% in Q4, down three percentage points sequentially and two points year over year. The decline reflects lower prevailing mortgage rates and a pick-up in refinancing, which can translate into faster policy runoff and additional pressure on future earned premiums.

Rising Delinquencies Sequentially

New delinquencies rose to 13,700 in Q4 from 13,000 in Q3, while total delinquencies climbed to 24,900 from 23,400, pushing the delinquency rate up 10 basis points to 2.6%. Management framed the increase as manageable in the context of strong cure performance, but it remains a key metric for investors watching credit quality.

Full-Year Adjusted Operating Income Slightly Lower

Despite strong quarterly results, full-year adjusted operating income slipped to $688 million from $718 million, a decline of about 4.2%. The drop occurred even as earnings per share ticked up, reflecting the impact of share repurchases on per-share metrics and highlighting the role of capital management in offsetting modest profit pressure.

Operating Expense Step-Up in Q4

Fourth-quarter operating expenses rose to $59 million from $53 million in Q3, lifting the reported expense ratio to 24% from 22%. Management portrayed the increase as temporary and consistent with execution on strategic priorities, but investors will watch whether the company can maintain its full-year discipline.

Net Earned Premium Rate and Ceded Premiums

Pricing dynamics were largely stable, with the base premium rate edging down only 0.1 basis point sequentially to 39.6 basis points. The net earned premium rate dipped modestly to 34.8 basis points, a move management tied to higher ceded premiums linked to its capital relief transactions rather than competitive pricing pressure.

Short-Term Investment Actions and Realized Losses

Enact realized losses from selling certain securities in the quarter, which weighed on reported investment results. Management characterized these moves as tactical reallocations designed to capture higher future net investment income, accepting a short-term drag for what it expects will be longer-term yield benefits.

Macroeconomic and Regulatory Uncertainty

The company acknowledged that mortgage rate volatility, affordability challenges and uneven housing supply across regions continue to cloud the outlook for originations. Potential actions by housing agencies and regulators also remain a swing factor for volumes and capital planning, prompting Enact to emphasize flexible strategy and a strong balance sheet.

Forward-Looking Guidance and Outlook

Looking ahead, Enact plans to return about $500 million of capital in 2026, underpinned by its new repurchase authorization, stable dividends and surplus PMIERs capital. Management expects operating expenses in the $215 million to $220 million range, relatively flat base premium rates and a 10% to 15% expansion in the mortgage insurance market, supported by attractive investment yields and a growing insurance-in-force base.

The earnings call painted a picture of a well-capitalized mortgage insurer leaning into share repurchases and dividends while managing manageable credit and expense headwinds. For investors, Enact’s strong capital cushion, stable pricing and disciplined execution provide a constructive backdrop, even as macro and regulatory risks remain key variables to monitor.