Enact Holdings, Inc. (ACT) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents a mixed picture: while there are positive elements like a strong capital position, increased shareholder returns, and prudent expense management, there are also concerns about rising losses and a lack of clear guidance on key metrics. The Q&A section reveals management's cautious stance on macroeconomic factors and reluctance to provide detailed forecasts, which tempers enthusiasm. The market cap suggests a moderate reaction, leading to a neutral sentiment rating.
Key Financial Performance
Adjusted Operating Income $172 million or $1.21 per diluted share, compared to $1.10 per diluted share in the same period last year. This represents an increase due to disciplined execution of strategy and resilient credit performance.
Adjusted Return on Equity 13%, reflecting strong financial performance and strategic execution.
New Insurance Written $13 billion, up 30% year-over-year but down 11% sequentially. The year-over-year increase is attributed to rate trends and seasonal dynamics.
Insurance in Force $272 billion, up $4 billion or approximately 2% year-over-year, but down $1 billion sequentially. This reflects the impact of market conditions.
Persistency 80%, flat sequentially but down 4 points year-over-year due to lower prevailing mortgage rates.
Net Premiums Earned $243 million, down $2 million year-over-year and $3 million sequentially, primarily driven by higher ceded premiums.
Base Premium Rate 39.4 basis points, down 0.2 basis points sequentially, reflecting modest fluctuations.
Net Earned Premium Rate 34.3 basis points, down 0.5 basis points sequentially, driven by higher ceded premiums.
Investment Income $71 million, up $8 million or 12% year-over-year and $2 million or 3% sequentially, driven by a new money investment yield of 5%.
New Delinquencies 13,600, down from 13,700 sequentially, reflecting seasonal trends.
Cure Rate 54%, up 3 percentage points sequentially, driven by favorable credit trends and effective loss mitigation efforts.
Total Delinquencies 24,700, down from 24,900 sequentially, with a flat delinquency rate of 2.6%.
Losses $37 million, with a loss ratio of 15%, compared to $31 million and 12% in the first quarter of 2025. The increase is due to seasonal trends and reserve adjustments.
Reserve Release $39 million, driven by favorable cure performance and loss mitigation activities, compared to $47 million in the first quarter of 2025.
Operating Expenses $49 million, down from $53 million in the first quarter of 2025, reflecting prudent expense management.
PMIERs Sufficiency Ratio 162%, providing significant financial flexibility and supported by a robust CRT program.
Capital Returns $123 million returned to shareholders through share repurchases and dividends, including a 14% increase in the quarterly dividend.
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Operating Highlights
New Insurance Written: $13 billion in the first quarter, down 11% sequentially but up 30% year-over-year.
Primary Insurance-in-Force: $272 billion in the quarter, down $1 billion from the fourth quarter of 2025 but up $4 billion or approximately 2% year-over-year.
Persistency Rate: Remained elevated at 80% in the first quarter, flat sequentially and down 4 points year-over-year.
Expense Management: Operating expenses in the first quarter of 2026 were $49 million, with an expense ratio of 20%. Full-year 2026 operating expenses are anticipated to be in the range of $215 million to $220 million, excluding reorganization costs.
Loss Mitigation: Total delinquencies decreased sequentially to 24,700 from 24,900, with a delinquency rate flat at 2.6%. Cure rate increased sequentially by 3 percentage points to 54%.
Capital Allocation: Returned $123 million to shareholders through share repurchases and dividends in the first quarter. Announced a 14% increase in quarterly dividend from $0.21 to $0.24 per share.
Growth and Diversification: Enact Re continued to deliver consistent and strong performance, generating attractive risk-adjusted returns.
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Risk or Challenges
Mortgage Rate Volatility: The housing market is impacted by mortgage rate volatility, which affects mortgage activity, including purchase and refinance applications. This creates uncertainty in the market and could impact the company's operations.
Inflationary Pressures: Inflationary pressures, including rising gas prices, could affect consumer behavior and economic conditions, potentially impacting the company's financial performance.
Macroeconomic Uncertainty: The macroeconomic environment remains uncertain, which could pose risks to the company's credit portfolio and overall business performance.
Seasonal Trends in Delinquencies: While delinquencies and cures followed seasonal trends, any deviation from these trends could impact the company's loss performance and financial results.
Regulatory Changes: The rollout of VantageScore 4.0 and other housing policy changes require the company to stay operationally aligned, which could pose challenges in adapting to new regulatory requirements.
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Guidance & Outlook
Expense Guidance: Operating expenses for full year 2026 are anticipated to be in the range of $215 million to $220 million, excluding any reorganization costs.
Capital Return Guidance: Total capital returns in 2026 are expected to be approximately $500 million, subject to business performance, market conditions, and regulatory approvals.
Dividend Increase: The quarterly dividend has been increased by 14% from $0.21 to $0.24 per share, reflecting confidence in the business and financial strength.
Housing Market Outlook: The company remains encouraged by the long-term fundamentals of the housing market and expects to navigate a dynamic operating environment effectively.
Growth and Diversification: Enact Re is expected to continue delivering consistent and strong performance, providing a long-term growth and diversification opportunity that is both capital and expense efficient.
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Shareholder Return Plan
Dividend Increase: The Board of Directors approved a 14% increase to the quarterly dividend, raising it from $0.21 to $0.24 per share. This marks the fourth consecutive year of dividend increases.
Dividend Payment: During the first quarter, $30 million was paid out in dividends, equating to $0.21 per share.
2026 Dividend Guidance: The company expects to deliver total capital returns, including dividends, of approximately $500 million in 2026.
Share Repurchase Program: In the first quarter, the company repurchased 2.3 million shares at an average price of $40.66, totaling $93 million. An additional 0.7 million shares were repurchased for $30 million through April 30.
2026 Share Repurchase Guidance: The company plans to return approximately $500 million in total capital to shareholders in 2026, which includes share repurchases.
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Key Q&A
Q:Are there markets where you're keeping an eye on in terms of home prices, and have you adjusted anything in terms of pricing or exposures based on home price expectations?
A:Management stated that overall credit performance remains strong, with no material deviation from pricing expectations. They highlighted geographic differences, such as housing supply increases and price moderation in the Sunbelt (Florida and Texas) versus low supply and price appreciation in the Northeast. They use their Rate360 pricing engine to adjust pricing based on market-specific home price expectations.
Q:Does PMIERs have to be revisited as part of the VantageScore rollout, and how do you adjust for mortgage insurance given FICO's role as a key driver?
A:Management acknowledged that PMIERs, based on classic FICO, is foundational for pricing and returns. They are operationally ready for VantageScore 4.0 but await further guidance from GSEs. Once guidance is available, they will incorporate it into their Rate360 engine to adjust pricing for VantageScore loans. They emphasized their principle of charging the right price for the right risk.
Q:What are your expectations for delinquency rates going forward?
A:Management noted that delinquency rates are hard to project due to macroeconomic factors, NIW levels, and claim timing. They expect a potential slight increase in delinquency rates from Q1 levels (2.6%) due to aging of newer purchase-heavy books with slightly higher risk attributes. However, this is contingent on stable macroeconomic conditions.
Q:What are your premium yield expectations for the rest of the year, and what competitive intensity are you seeing?
A:Management expects a flattish base premium rate for the full year, despite quarter-to-quarter volatility influenced by factors like NIW levels, mix of purchase and refinance, and lapse rates. They found pricing attractive in Q1 and continue to price for economic uncertainty, ensuring adequate compensation for risk across geographies.
Q:Are you seeing any shifts in GSE behavior that could affect MI eligibility or volumes?
A:Management observed no significant changes in GSE behavior that would impact MI volumes or penetration. They noted a slight uptick in MI penetration in Q1 due to better GSE execution compared to FHA. GSEs continue to make minor adjustments to their risk appetite based on loan performance and credit characteristics.
Q:What insights have you gathered from recent windows of lower interest rates, and how might they impact portfolio risk?
A:Management observed that recent refinance windows primarily benefited post-2022 books with higher rates. These books, with slightly higher LTVs and moderate FICOs, saw increased lapse rates. They noted an increase in MI penetration during refinancing, as some borrowers remained above 80 LTV. Lower rates during purchase seasons could drive pent-up demand and benefit MI markets.
Q:What assumptions are embedded in your reserves around unemployment, HPA, and cure rates, and have they changed since Q4?
A:Management stated that their reserving methods are not econometrically driven and did not change assumptions this quarter. They maintained an 8% claim rate and released $39 million in reserves due to better-than-expected cure performance. Conditional pricing incorporates macroeconomic assumptions like unemployment and HPA.
Q:How is Rate360 influencing your NIW mix and pricing outcomes, and what are your plans for its next generation?
A:Management highlighted Rate360's iterative development over seven years, incorporating advanced analytics, machine learning, and AI. They emphasized its role in granular pricing and managing layered risk. They continue to invest in the tool to enhance predictive power and ensure appropriate pricing for risk.
Q:Review of Unclear Management Responses
A:Management avoided providing specific numerical insights or detailed data in response to questions about delinquency rate projections, competitive intensity, and the impact of lower interest rate windows on portfolio risk. They also did not provide explicit macroeconomic assumptions embedded in their reserves.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Directors increase
Finance Vice
Force portfolio
Force premium
GSEs approach
GSEs initiative
Insurance Force
PMIERs sufficiency
President Finance
Primary Insurance
VantageScore effort
access homeownership
activity purchase
activity rate
announcement FHFA
application backdrop
application loan
application volume
approach credit
backdrop persistency
backing undrawn
capital market
capital strength
commitment Executive
credit trend
diversification
dynamic
expense capital
focus
increase dividend
line expectation
opportunity capital
program PMIERs
purchase application
rate refinance
release loss
start
support persistency
ACT Transcript
Enact Holdings, Inc. (ACT) Q1 2026 Earnings Call Transcript
Unknown5-6
The earnings call summary presents a mixed picture: while there are positive elements like a strong capital position, increased shareholder returns, and prudent expense management, there are also concerns about rising losses and a lack of clear guidance on key metrics. The Q&A section reveals management's cautious stance on macroeconomic factors and reluctance to provide detailed forecasts, which tempers enthusiasm. The market cap suggests a moderate reaction, leading to a neutral sentiment rating.
Enact Holdings, Inc. (ACT) Q4 2025 Earnings Call Transcript
Positive2-4
The earnings call reflects strong financial performance with increasing EPS and investment income. The company is optimistic about capital returns and the housing market, despite some concerns in specific geographic areas. The Q&A section shows confidence in managing risks and maintaining expense ratios. The company's strategic actions, including a ratings upgrade and successful reinsurance transactions, bolster its financial health. Considering these factors, alongside a market cap of $4.8 billion, the stock is likely to see a positive movement between 2% to 8%.
Enact Holdings, Inc. (ACT) Q3 2025 Earnings Call Transcript
Positive11-6
The company showcases stable financial performance with increased capital return guidance, steady insurance in-force, and strong investment income growth. Despite some challenges like inflationary pressures and increased delinquencies, the overall sentiment is positive. The Q&A indicates confidence in delinquency trends and expense management, further supported by AI-driven efficiency improvements. The market cap suggests a moderate stock reaction, leading to a 'Positive' prediction for the next two weeks.
Enact Holdings, Inc. (ACT) Q2 2025 Earnings Conference Call Transcript
Unknown7-31
Despite strong shareholder returns and disciplined expense management, financial performance showed mixed results with declining operating income and new insurance written. The Q&A highlighted management's confidence in credit performance but also noted regional market weaknesses and economic uncertainties. Overall, the earnings call presents a balanced outlook, with positive elements like capital returns offset by concerns over financial metrics and market conditions, resulting in a neutral sentiment.
ACT Slides
ACT Report
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