Enact Holdings, Inc. Q3 FY2024 earnings call

• Acknowledged the impact of the hurricane in the Southeast and Inapp's efforts to help. - Delivered excellent third - quarter results with adjusted operating income up 11% year over year, adjusted EPS $1.16, etc. - Operated in a dynamic environment with a strong US economy, growing consumer and labor market wages, and slow inflation. - Had strong credit and manufacturing quality, with record insurance in force of $268 billion, 70% of which had mortgage rates lower than 6%, a risk - weighted average FICO score of 745 for the portfolio, a risk - weighted average loan - to - value ratio of 93%, and layered risk at 1.3% of risk in force. - Released $65 million in reserves due to favorable credit performance and proactive loss mitigation efforts. - Carefully managed expenses, with full - year 2024 expenses before nonrecurring restructuring costs on track to be flat to down compared to 2023. - Maintained a robust capital position with PMIER sufficiency at 173% or $2.2 billion of sufficiency, and approximately 79% of risk in force subject to credit risk transfers. - Outlined capital allocation priorities: supporting policyholders, investing in the business, funding new business opportunities, and returning capital to shareholders. InappRe launched over a year ago, performed well, and S&P assigned an A - rating and stable outlook to it. Returned $100 million to shareholders in the third quarter via share buybacks and dividends.

Adjusted operating income was $182 million, up 11% year over year. Adjusted EPS was $1.16. Adjusted return on equity was 15%, and adjusted book value per share was $33.27, up 3% sequentially and 10% year over year. Primary insurance in force increased to $268 billion in the third quarter, up $2 billion sequentially and up $6 billion or 2% year over year. Net premiums earned were $249 million, up $4 million or 2% sequentially and up $6 million or 2% year over year. Investment income in the third quarter was $61 million, up $1 million or 2% sequentially, and up $6 million or 11% year over year. Credit losses in the third quarter of 2024 were $12 million, and the loss ratio was 5%. Operating expenses in the third quarter of 2024 were $56 million, and the expense ratio was 22%.

• Full - year 2024 expenses before nonrecurring restructuring costs were on track to be flat to down compared to 2023. - Total capital return to date in 2024 was $283 million, and it was expected to be in the upper end of the full - year $300 to $350 million guidance. - Anticipated further yield improvement in the investment portfolio as it rolled over.

• There were potential macroeconomic risks. - Hurricanes posed risks, with Hurricanes Helene and Milton expected to have a more meaningful impact starting in the fourth quarter.

Q: Talk about the competitive dynamic in the industry, pricing.

A: MI pricing continues to be competitive, expected pricing returns are attractive within risk - adjusted return appetite, happy with new insurance written at $13.5 billion, see pricing as constructive.

Q: How to reserve for hurricane delinquencies.

A: Modest impact from Hurricane Barrel this quarter, made no adjustments to reserving for it, will wait to see reporting on Helene and Milton, historical experience shows hurricane - related delinquencies cure at elevated rate with limited claim activity.

Q: On InappRe, is it at scale, will it grow.

A: Launched InappRe about six quarters ago, journey is long - term, growth is gradual over time, happy with growth and returns, will provide more visibility in future.

Q: Housing policy, regulatory changes.

A: Still seats remaining on House side, important to see appointments in key regulatory roles, product has appeal on both sides of aisle, industry has good relationships with regulatory and legislative side, too early to speculate on specific regulatory changes.

Q: Normalized delinquency ratios for the portfolio as it seasons.

A: Normal or average delinquency development curves start to increase from origination, peak between years three and four, level off, delinquencies dependent on credit characteristics of insured loans and macroeconomic conditions, new delinquencies in third quarter had high embedded equity, cure activity remains elevated.

Q: Buy - down volume in MI market, credit performance.

A: Majority of volume from permanent buy - down product (forward commitment), historically haven't seen difference in credit performance with buy - downs rolling off, not comfortable commenting on pricing differentiation for temporary buy - down product, principle is right price for right risk, take layered risk into account.