8-K: Enact Holdings Reports Strong Third Quarter 2024 Results, Announces Dividend

Enact Holdings announced solid financial results for Q3 2024, marked by record insurance in-force and a new quarterly dividend.

Summary

• Enact Holdings reported a net income of $181 million, or $1.15 per diluted share, for the third quarter of 2024.
• Adjusted operating income was $182 million, or $1.16 per diluted share.
• The company's primary insurance in-force reached a record $268 billion, a 2% increase year-over-year.
• New insurance written (NIW) was $14 billion, consistent with the previous quarter but down 6% from the same period last year.
• The persistency rate was 83%, slightly down from 84% in the third quarter of 2023.
• Net premiums earned were $249 million, a 2% increase both sequentially and year-over-year.
• Losses incurred were $12 million, with a loss ratio of 5%, compared to a loss of $17 million and a negative 7% loss ratio in the previous quarter.
• The company's PMIERs sufficiency was 173%, or $2.2 billion above requirements.
• A quarterly cash dividend of $0.185 per common share was declared.
• The company repurchased approximately 2.1 million shares at an average price of $34.04 during the quarter.

Sentiment

Score: 7

Explanation: The sentiment is positive due to strong financial results, record insurance in-force, and shareholder returns, but tempered by a slight decrease in new business and persistency.

Positives

• The company achieved record primary insurance in-force of $268 billion.
• Net premiums earned increased by 2% both sequentially and year-over-year.
• The loss ratio improved significantly to 5% from a negative 7% in the previous quarter.
• PMIERs sufficiency remains strong at 173%, well above requirements.
• The company is returning capital to shareholders through dividends and share repurchases.
• Net investment income increased to $61 million due to elevated interest rates and higher average invested assets.

Negatives

• New insurance written (NIW) was down 6% year-over-year, attributed to lower market share.
• The persistency rate decreased slightly to 83% from 84% in the third quarter of 2023.
• Adjusted operating income decreased from $201 million in the second quarter of 2024 to $182 million in the third quarter of 2024.
• Combined cash and invested assets decreased $83 million from the prior quarter, primarily due to share buybacks and dividends.

Risks

• The company faces risks related to economic downturns and recessions.
• Changes in political, business, regulatory, and economic conditions could impact results.
• Changes to Fannie Mae and Freddie Mac could affect the business.
• Competition from other mortgage insurers and government programs poses a risk.
• The company's results could be impacted by an increase in loans insured through Federal government mortgage insurance programs.

Future Outlook

The company believes it is well-positioned to continue driving value for all stakeholders, with long-term demand drivers remaining intact. They anticipate full-year capital return at the higher end of their previously announced range of between $300 and $350 million, but the final amount and form of capital returned to shareholders will ultimately depend on business performance, market conditions, and regulatory approvals.

Management Comments

• Rohit Gupta, President and CEO of Enact, stated, 'Our strong third-quarter performance underscores the continued successful execution of our strategy.'
• Mr. Gupta also noted, 'Driven by our effective go-to-market strategy, our insurance-in-force reached a new peak during the quarter, while our careful risk and expense management initiatives continued to produce strong bottom-line performance, fueling our ability to deliver for our policyholders, invest in our business, and return capital to our shareholders.'

Industry Context

The results reflect a generally stable mortgage insurance market, with Enact demonstrating its ability to grow its insurance in-force despite some headwinds in new business. The company's focus on risk management and expense control is aligned with industry best practices.

Comparison to Industry Standards

• Enact's 14.7% return on equity is comparable to other established mortgage insurers such as Radian Group (RDN) and MGIC Investment Corporation (MTG), which have also reported ROEs in the mid-teens recently.
• The PMIERs sufficiency ratio of 173% indicates a strong capital position, similar to peers who maintain ratios well above the minimum requirements.
• While NIW was down 6% year-over-year, this is not uncommon in a market with fluctuating interest rates and housing activity, and other insurers have also seen similar trends.
• Enact's persistency rate of 83% is within the typical range for the industry, though some competitors may have slightly higher rates due to different business mixes and customer retention strategies.

Stakeholder Impact

• Shareholders will benefit from the declared dividend and share repurchases.
• Policyholders will continue to be supported by the company's financial strength.
• Employees will be impacted by the company's performance and strategic direction.
• Lenders will continue to partner with Enact for mortgage insurance solutions.

Next Steps

• The company will hold a conference call on November 7, 2024, to discuss the results.
• The company will continue to execute its strategy and focus on driving value for stakeholders.
• The company will pay a quarterly dividend on December 5, 2024.

Key Dates

Keywords

Mortgage Insurance, Financial Results, Earnings, Dividends, Insurance In-Force, PMIERs, Share Repurchase, Net Income, Loss Ratio, Premiums