Enact Holdings, Inc. Q3 FY2025 earnings call

• Enact delivered strong third quarter performance, with adjusted operating income of $166 million and $1.12 per diluted share.
• Updated 2025 capital return expectation to approximately $500 million, up from prior $400 million.
• Entered a new $435 million revolving credit facility with favorable terms.
• Insurance in-force stood at $272 billion, up 2% year-over-year, and new insurance written exceeded $14 billion.
• Navigating a dynamic macroeconomic environment with steady consumer spending and moderating inflation.
• Executed against CRT program with new quota share agreement for 2027 and closed new forward excess-of-loss agreement for 2027 book.
• PMIERs sufficiency ratio at 162%, strong credit and investment portfolios, with insurance in-force portfolio resilient.
• Pricing constructive, disciplined underwriting, reserve release of $45 million, loss ratio 15%.
• Expenses down year-over-year, with improved expectations for 2025 expenses excluding reorganization costs.
• Received fourth ratings upgrade from Moody's and A.M. Best outlook moved to positive.
• Investing in core MI business, technology enhancements, customer engagement, and Enact Re performing well in GSE deals.

For the third quarter, Enact reported adjusted operating income of $166 million or $1.12 per diluted share. New insurance written was over $14 billion. Insurance in-force increased 2% year-over-year to $272 billion. Total net premiums earned were $245 million, flat sequentially and down modestly year-over-year. Investment income in the third quarter was $69 million, up $3 million sequentially and $8 million year-over-year. Operating expenses for the third quarter were $53 million, with an expense ratio of 22%, consistent with prior quarters and lower than the third quarter of 2024. The PMIERs sufficiency ratio was 162%, providing significant financial flexibility.

• Updated 2025 capital return expectation to approximately $500 million from prior $400 million.
• Forecast 2025 expenses, excluding reorganization costs, at approximately $219 million, lower than previous range of $220 million to $225 million.
• Confident in strong end to 2025 with robust balance sheet, able to navigate uncertainty and capitalize on long-term opportunities.

• Macro uncertainties affecting consumer behavior and housing supply, leading to increased housing supply in certain geographies.
• Dependence of credit performance on macroeconomic environment.
• Risks associated with forward-looking statements, which may differ materially from actual results, as outlined in press release and SEC filings.

Q: Expectation for delinquency trends. Can you talk about where you think delinquencies will peak on portfolios as they're fully seasoned?

A: From a credit perspective, credit performance remains strong. Vintage analysis shows no variance to expectations across portfolio variables, including book years. Credit performance dependent on macroeconomic environment, and if resiliency continues, expected to stay aligned with strong performance seen to date.

Q: Really a couple of things. One, you've provided favorable guidance on expenses. One of the questions that I think everybody is wrestling with is how technology, particularly AI is transforming different businesses. Can you talk a little bit about what's driving your favorable expense guidance, but also longer term, how you see AI transforming your business?

A: In terms of favorable expense performance, Enact is prudent in expense management, with expenses trending flat despite inflation. Technology investments are made for efficiency, smarter decisions, and customer experience. For AI, Enact invests for efficiency and making smarter, more granular decisions, both for current operations and future growth.

Q: You've increased your return of capital allocation for the year 25%. It's risen steadily throughout the year. This was a strong quarter in line roughly, I think, with at least Street expectations. Is it just that you guys sort of as you move through the year and gather more information, feel more confident in terms of setting your capital return expectations?

A: The increase in capital return guidance reflects favorable business performance year-to-date and current level of mortgage originations. As the year progresses, confidence in drivers increases, leading to upward revision of capital return guidance