Enact Holdings, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 Performance: 2024 was a strong year with adjusted operating income reaching a record $718 million (up 9% year over year), adjusted return on equity 15%, and adjusted book value $34.16 per share (up 12% year over year). Issued $750 million in senior notes, upgraded ratings by S&P (from BBB+ to A-) and Fitch (from A- to A). Returned $354 million to shareholders in 2024.
• Fourth Quarter Results: Adjusted operating income was $169 million, up 7% year over year. Adjusted EPS was $1.09, and adjusted return on equity was 13.5%. Insurance in force was $269 billion. New insurance written was $13 billion (up 27% year over year). Credit quality was strong with a risk-weighted average FICO score of 745 and loan-to-value ratio of 93%. New delinquencies increased 6% due to hurricanes, but excluding impact, up 1%. QA was 52%, with a reserve release of $56 million and loss ratio 10%. Expenses were $58 million, down 2% year over year. PMIERs sufficiency was 167%. Entered quota share and excess of loss reinsurance agreements.
• Capital Allocation: Returned over $102 million to shareholders in the fourth quarter via share buybacks and dividends. Announced Q1 2025 dividend of $0.185 per share. $74 million remaining on a $250 million share repurchase authorization.

Segment Performance

• Primary Insurance: In the fourth quarter, adjusted operating income was $169 million, up 7% year over year. Primary insurance in force reached $269 billion, a year-over-year increase of $66 billion or 2%. New insurance written was $13 billion, up 27% year over year. Total net premiums earned were $246 million, up 2% year over year. Investment income in the fourth quarter was $63 million, up 12% year over year.
• Enact RE: Maintained strong underwriting standards and generated attractive risk-adjusted returns, participating in GSE single and multi-family deals.

Guidance

• 2025 Outlook: Anticipate elevated persistency to offset higher mortgage rates. Expect base premium rate to stabilize around current levels. Anticipate expenses to range from $220 to $225 million in 2025. Announced Q1 2025 dividend of $0.185 per share. Plan to return approximately $350 million to shareholders in 2025, similar to 2024.
• Reinsurance: Quota share reinsurance is expected to make up a larger part of the CRT program. Entered two new excess of loss reinsurance agreements for 2025 and 2026 books.

Risks

• Natural Disasters: Impact of hurricanes on new delinquencies.
• Mortgage Rate Volatility: Effect on persistency and premiums.
• Regulatory Changes: Impact on capital allocation and business operations, especially regarding GSE reform.

Question and Answer

• Q: About capital return guidance and reinsurance potential A: Dean Mitchell stated that capital return guidance is around $350 million similar to 2024, with assessment based on business performance, market conditions, and regulatory approvals. Rohit Gupta mentioned potential for GSE CRT volume to pick up if market conditions change.
• Q: Impact of portfolio seasoning on delinquencies A: Dean Mitchell noted the average age of the portfolio increased to ~3.8 years, and the aging impact on new delinquencies should start to slow. Rohit Gupta added that different vintages have different credit characteristics, with 2022-2024 vintages (more purchase originations) having different trends than prior years.