Enact Holdings, Inc. (ACT) Earnings

Management highlights

- Financial and Credit Performance * The U.S. economy remained resilient, supported by a healthy labor market and stable household balance sheets, with strong underlying housing demand despite elevated mortgage rates suppressing transaction volumes * 57% of loans in ANAC's portfolio carry mortgage rates below 6%, keeping persistency elevated at 80% for the quarter * New delinquencies fell sequentially to 12,300 (1.3% delinquency rate, consistent with pre-pandemic levels), total delinquencies declined 1% sequentially to 24,300 (2.6% rate); 88% of delinquent loans have 10%+ mark-to-market equity, supporting strong cure performance * Expense management delivered year-over-year operating expense declines despite broad inflationary pressures - Strategic and Operational Innovation * Launched Enact Loan Level Assistant (Ella), a generative AI-powered internal underwriting tool that automates repetitive document review, identifies inconsistencies, and surfaces insights to improve underwriting decision speed and quality * Continued execution on growth and diversification strategy, including new business opportunities like ANAC V, while maintaining capital and expense efficiency - Policy and Industry Initiatives * Began limited participation in the market rollout of VantageScore 4 credit scoring, aligned with FHFA/GSE efforts to modernize credit evaluation and expand sustainable homeownership access; the initiative had no material financial impact in Q2 - Capital Allocation and Shareholder Returns * Maintains a strong, resilient balance sheet to support policyholders, fund organic growth and efficiency investments, pursue new opportunities, and return excess capital to shareholders * Returned $127 million to shareholders in Q2 via $34 million in dividends and $93 million in share repurchases; repurchased an additional $30 million in shares through July 31 * ANAC was recognized as one of the best places to work by the Triangle Business Journal for the fourth time since its IPO

Guidance

- Full-year 2026 total capital return guidance increased to $550 million to $600 million, up from the prior guidance of $500 million; the upward revision reflects stronger-than-expected first half performance, excess capital accumulation, and management confidence in the business - 2026 operating expenses (excluding reorganization costs) are now guided to a range of $205 million to $210 million, reflecting ongoing disciplined expense management in a high inflation environment - Base premium rate guidance is maintained: management expects full-year 2026 base premium rates to be relatively flat compared to 2025, with a possible slight downward tilt consistent with prior outlooks - Credit performance: Management expects a seasonal uptick in delinquency rates in the second half of 2026 from first half levels, with newer vintages (originated in a higher-rate, lower home price appreciation environment) likely to contribute a modest uptick in normalized delinquencies as they age, with performance expected to remain in line with original underwriting expectations

Segment performance

ANAC operates as a single primary mortgage insurance segment, with the following Q2 2026 financial performance: - Adjusted operating income: $177 million ($1.26 per diluted share), up from $1.15 per diluted share YoY and $1.21 per diluted share Q1 2026 - Adjusted return on equity: 13.2% - New insurance written (NIW): $15 billion, up 19% sequentially and 15% YoY - Total primary insurance in force: $274 billion, up 1% QoQ and 2% YoY - Total net premiums earned: $245 million, up $2 million sequentially and flat YoY; net earned premium rate 34.1 basis points, down 0.2 basis points QoQ - Investment income: $73 million, up 3% sequentially and 11% YoY; average portfolio book yield 4.6%, new money investment yield over 5% - Total losses: $33 million, with a loss ratio of 14% (driven by a $37 million reserve release from favorable cure performance) - Operating expenses: $52 million, expense ratio 21%, down from $53 million and 22% YoY; included a $1 million reorganization charge excluded from adjusted operating income - Capital position: PMIRES sufficiency ratio of 161%, $1.9 billion above required capital, with $1.9 billion in capital credit from the third-party credit risk transfer (CRT) program

Risks & headwinds

- Elevated interest rates and stretched home prices create ongoing housing affordability pressure that suppresses mortgage transaction volumes - Geopolitical instability and policy uncertainty contribute to market volatility that can impact housing demand and mortgage activity - Newer loan vintages, originated in a purchase-heavy market with modestly higher LTV/DTI ratios and lower embedded home price appreciation, are expected to produce more delinquencies as they age relative to earlier vintages like 2020/2021 - Macroeconomic shifts (such as a downturn in labor markets or declines in home prices) could negatively impact credit performance and delinquency rates - Total annual capital return amounts are subject to business performance, market conditions, and regulatory approval, creating uncertainty around the final full-year payout

Analyst Q&A

• Q: What is the trajectory for base premium rates for the rest of 2026, and how intense is current market competition? /

  A: Management reaffirms prior guidance that full-year base premium rates will be roughly flat versus 2025, with a possible very slight downward tilt, and quarter-over-quarter volatility is normal due to shifts in NIW mix, lapse activity, and accrual dynamics. From a competitive perspective, pricing remains constructive and attractive on a risk-adjusted basis, even amid a dynamic market, with recent $15 billion in Q2 NIW generated at prices that add economic value for shareholders.

• Q: How do you expect credit and delinquency trends to develop in coming quarters, especially with newer vintages having lower home price appreciation? /

  A: Management notes that current strong credit performance is in line with expectations, driven by high levels of embedded equity in most delinquent loans. A seasonal uptick in delinquency rates is expected in the second half of 2026, which is a normal seasonal pattern. It is reasonable to expect newer, purchase-heavy vintages with lower HPA to generate more delinquencies as they age, but all performance has been in line with the risk pricing when the loans were originated.

• Q: What are the key dynamics of current home price appreciation (HPA) and affordability, and how will this trend impact ANAC's business? /

  A: Management frames affordability as a function of three factors: home prices, interest rates, and wage growth. The current combination of elevated home prices and much higher rates than the post-COVID period has created ongoing affordability pressure that has persisted for over three years. If mortgage rates decline into the 6% range for 30-year fixed loans, management expects that enough pent-up demand from first-time homebuyers will come off the sidelines to support purchase activity, even if affordability does not return to 2020 lows.

• Q: What factors drive the $550 million to $600 million capital return range, and why do regulatory approvals impact where you land in the range? /

  A: The primary driver of the upward revision from the prior $500 million guidance is stronger than expected first half business performance, which generated additional excess capital and increased management confidence. The market has been slightly smaller than anticipated at the start of the year, which also supports higher near-term capital returns. The macro environment remains resilient and the regulatory environment is still accommodative, so the range only reflects ongoing evaluation of these three standard factors (performance, macro, regulation) that drive capital return decisions.