Enact Holdings, Inc. (ACT) Q4 2025 Earnings Call Transcript
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Overview
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%.
Key Financial Performance
Adjusted Operating Income (Q4 2025) $179 million or $1.23 per diluted share, compared to $1.09 per diluted share in the same period last year. This represents an increase due to strong credit risk profile and disciplined cost management.
Adjusted Operating Return on Equity (Q4 2025) 13.5%, reflecting strong financial performance and effective capital allocation.
New Insurance Written (Q4 2025) $14 billion, up 8% year-over-year, driven by an increase in refinance originations as mortgage rates declined.
Persistency Rate (Q4 2025) 80%, down 2 points year-over-year due to lower prevailing mortgage rates.
Primary Insurance In-Force (Q4 2025) $273 billion, up approximately 1% year-over-year, supported by solid new insurance written and elevated persistency.
Total Net Premiums Earned (Q4 2025) $246 million, flat year-over-year, with a base premium rate of 39.6 basis points.
Investment Income (Q4 2025) $69 million, up 10% year-over-year, driven by a new money investment yield of approximately 5%.
New Delinquencies (Q4 2025) 13,700, consistent with pre-pandemic levels, reflecting seasonal trends.
Total Delinquencies (Q4 2025) 24,900, with a delinquency rate of 2.6%, up 10 basis points sequentially.
Losses (Q4 2025) $18 million, with a loss ratio of 7%, compared to $24 million and 10% in the same period last year, driven by favorable cure performance and loss mitigation activities.
Net Reserve Release (Q4 2025) $60 million, driven by favorable cure performance, loss mitigation activities, and a reduction in claim rate assumption from 9% to 8%.
Operating Expenses (Q4 2025) $59 million, with an expense ratio of 24%, consistent with the same period last year, reflecting disciplined cost management.
PMIERs Sufficiency Ratio (Q4 2025) 162%, providing significant financial flexibility and supported by a robust CRT program.
Capital Returns to Shareholders (Q4 2025) $157 million through share repurchases and dividends, reflecting a commitment to shareholder value creation.
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Operating Highlights
Rate360 Pricing Engine: Deployed the latest version leveraging advanced modeling and machine learning.
New Insurance Written: Generated $52 billion in 2025 and $14 billion in Q4 2025.
Market Expansion via Enact Re: Participated in attractive GSE single and multifamily deals, maintaining strong underwriting standards and generating attractive risk-adjusted returns.
Expense Management: Full-year operating expenses were $217 million, excluding restructuring charges, and Q4 expenses were $59 million.
Capital Returns: Returned $503 million to shareholders in 2025, including $382 million in share repurchases.
PMIERs Sufficiency: Maintained a sufficiency ratio of 162%, providing significant financial flexibility.
Capital Allocation Priorities: Focused on supporting policyholders, investing in growth, and returning excess capital to shareholders.
Engagement with Policy Stakeholders: Actively engaged with lending partners, GSEs, FHFA, and the administration to adapt to evolving policy environments.
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Risk or Challenges
Macroeconomic Uncertainty: The company acknowledges the uncertain macroeconomic environment, which could impact its operations and financial performance.
Delinquency Rates: New delinquencies increased sequentially to 13,700 in the quarter, with a delinquency rate of 2.6%, up 10 basis points sequentially. This could indicate potential credit risk.
Claim Rate Assumptions: The claim rate for new and recent delinquencies was reduced from 9% to 8%, but this remains aligned with macroeconomic uncertainties, indicating potential risk in loss assumptions.
Persistency Rates: Persistency was 80% in the fourth quarter, down 3 points sequentially and 2 points year-over-year, which could affect the insurance in-force portfolio.
Housing Affordability and Supply Constraints: Housing affordability and supply constraints are shaping policy discussions, which could impact the company's operations and strategic objectives.
Regulatory and Policy Environment: The company is actively engaging with lending partners, GSEs, FHFA, and the administration to adapt to an evolving policy environment, which could pose regulatory risks.
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Guidance & Outlook
Capital Returns: Enact expects capital returns of approximately $500 million in 2026, subject to business performance, market conditions, and regulatory approvals. The Board has authorized a new $500 million share repurchase program, the largest in the company's history.
Operating Expenses: Operating expenses for 2026 are anticipated to range between $215 million and $220 million, excluding any reorganization costs. The company aims to balance cost efficiencies with investments in growth initiatives.
Base Premium Rate: The base premium rate for 2026 is expected to remain relatively flat compared to 2025, given current expectations for the MI market size and mortgage rates.
Housing Demand and Mortgage Insurance: Long-term drivers of housing demand remain strong, supported by demographic tailwinds, particularly among first-time homebuyers. Mortgage insurance is expected to continue playing an essential role for buyers and lenders.
Capital Position: The company maintains a strong capital position with a PMIERs sufficiency ratio of 162% and $1.9 billion above PMIERs requirements. The third-party CRT program provides $1.9 billion of PMIERs capital credit.
Policy and Market Engagement: Enact plans to actively engage with lending partners, GSEs, FHFA, and the administration to adapt to evolving housing affordability and supply constraints shaping policy discussions.
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Shareholder Return Plan
Capital Returns in 2025: Enact returned $503 million to shareholders in 2025, including $121 million through quarterly dividends and $382 million through share repurchases.
Quarterly Dividend in Q4 2025: Paid out $30 million or $0.21 per share.
2026 Dividend Plan: Declared a quarterly dividend of $0.21 per common share payable on March 19, 2026.
Share Repurchase in Q4 2025: Repurchased 3.4 million shares at an average price of $37.66 for $127 million.
Full Year 2025 Share Repurchase: Repurchased 10.5 million shares at an average price of $36.25 for a total of $382 million.
2026 Share Repurchase Plan: Announced a new $500 million share repurchase program, the largest in Enact's history.
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Key Q&A
Q:How does the company view the sensitivities to their capital return goal for 2026?
A:The company is confident in delivering $500 million back to shareholders in 2026 but will evaluate factors such as business performance, macroeconomic environment, and regulatory changes. They will adjust the plan if necessary based on these dynamics.
Q:What regulatory or government actions is the company monitoring?
A:The company is actively engaged with policymakers and monitoring topics like limited inventory challenges, affordability challenges, credit score ideas, and GSEs buying mortgage-backed securities. They are providing input on these ideas but did not highlight any specific high-priority items.
Q:What type of mortgage market is the company planning for in 2026?
A:The company expects a 10%-15% increase in the mortgage insurance market from 2025 to 2026, based on external forecasts and current expectations of mortgage rates and affordability. However, they acknowledge the environment is dynamic and subject to change.
Q:What are the expectations for default rates moving forward?
A:Default rates are expected to stabilize and follow normal loss development patterns. Year-over-year increases in new delinquencies have been moderating, and this trend is expected to continue into 2026.
Q:How is the credit performance of the company's recent books of business?
A:Recent books (2022-2024) are performing in line with or better than pricing expectations. These books have higher risk attributes like higher LTV and DTI but are priced accordingly. No negative variations have been observed.
Q:Are there any areas where the company is being more cautious about risk?
A:The company is monitoring areas with increased housing supply and declining home prices, such as parts of the Sunbelt (Florida, Texas, California, Arizona). They adjust pricing based on geographic and risk attributes.
Q:What is driving the company's ability to keep expenses flat, and what are the long-term expectations for the expense ratio?
A:The company has kept expenses flat through investments in technology and innovation, which improve productivity and customer experience. While they aim to improve the expense ratio, long-term forecasts beyond 2026 are uncertain.
Q:What are the details of the company's recent reinsurance transactions?
A:The company has secured cost-efficient reinsurance coverage with low to mid-single-digit costs of capital. Attachment points are around 3% of risk in-force, and detachment points are around 7%, aligning with PMIERs requirements.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on high-priority regulatory ideas, stating that the current discussions are a list of ideas without highlighting any particular one. Additionally, they did not provide long-term guidance on the expense ratio beyond 2026, citing uncertainty.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
CRT program
PMIERs sufficiency
accomplishment
basis point
book
borrower home
capital allocation
capital end
capital return
claim rate
credit facility
credit loss
cure
deal
delinquency
dividend share
income share
insurance force
mortgage rate
opportunity capital
premium rate
press release
rate basis
rate mortgage
record
reorganization expense
repurchase program
reserve
result income
share repurchase
support persistency
uncertainty
ACT Transcript
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.
Earnings call transcript: Enact Holdings Q1 2025 earnings meet forecasts, stock rises
Positive5-1
The company's earnings call presents a positive outlook. Despite facing challenges like high mortgage rates and supply chain issues, the company has increased its dividend by 14% and authorized a significant share buyback program, both positive signals for shareholders. Financial performance shows growth in adjusted operating income and EPS, and a strong capital foundation is indicated by the PMIERs Sufficiency Ratio. While new insurance written declined, the company is actively adjusting pricing strategies. The Q&A revealed management's proactive stance, though some responses were unclear. Overall, these factors suggest a positive stock price movement.
ACT Slides
ACT Report
Frequently Asked Questions
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