Enact Holdings Q2 2026 Earnings Call Transcript

Enact Holdings (NASDAQ: ACT ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This content is powered APIs. 15 per share in the same period last year.

The company updated its 2026 capital return expectations to between $550 million and $600 million, reflecting confidence in business performance and a strong financial position. New insurance written was $15 billion, increasing 19% sequentially and 15% year over year, with a persistency rate of 80%. The company's Enact Loan Level Assistant, a generative AI tool for underwriting, was announced to improve risk selection and operational efficiency. Operational highlights include a reserve release of $37 million in the quarter, leading to a 14% loss ratio, and strong credit performance with total delinquencies declining 1%.

Investment income increased to $73 million, up 3% sequentially, driven by a new money investment yield of over 5%. The company maintained a strong PMIERs sufficiency ratio of 161%, providing financial flexibility, and returned $127 million to shareholders through share repurchases and dividends. 0 to expand access to sustainable homeownership. Full Transcript OPERATOR Hello and welcome to Enact Holdings' second quarter earnings call.

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Daniel Kohl, Vice President of Finance. You may begin. Daniel Kohl, Vice President of Finance Thank you and good morning.

Welcome to our second quarter earnings call. Joining me today are Rohit Gupta, President and Chief Executive Officer, and Dean Mitchell, Chief Financial Officer and Treasurer. Rohit will provide an overview of our business performance and progress against our strategy. Dean will then discuss the details of our quarterly results before turning the call back to Rohit for closing remarks.

We will then take your questions. The earnings materials we issued after market close yesterday contain our financial results for the quarter along with a comprehensive set of financial and operational metrics. These are available on the Investor Relations section of our website. Today's call is being recorded and will include the use of forward-looking statements.

These statements are based on current assumptions, estimates, expectations, and projections as of today's date. Additionally, they are subject to risks and uncertainties which may cause actual results to be materially different, and we undertake no obligation to update or revise such statements as a result of new information. For a discussion of these risks and uncertainties, please review the cautionary language regarding forward-looking statements in today's press release as well as in our filings with the SEC, which will be available on our website. Please keep in mind the earnings materials and management's prepared remarks today include certain non-GAAP measures.

Reconciliations of these measures to the most relevant GAAP metrics can be found in the press release, our earnings presentation, and our upcoming SEC filing on our website. With that, I'll turn the call over to Rohit. Rohit Gupta, President and Chief Executive Officer Thank you, Daniel. Good morning, everyone.

Before discussing our second quarter results, I would like to begin by saying that our thoughts are with Tom McInerney, who's a valued member of our board and strong supporter of Enact Holdings. We wish Shyam a full and speedy recovery. I also want to express my support for Jerome Upsin as he steps into the role of Interim President and CEO of Genworth. Jerome has been an important member of Genworth's leadership team as well as Enact Holdings' Board of Directors for many years, and I'm confident he will provide thoughtful and steady leadership during this time, and I look forward to our continued partnership.

Turning to our results, Enact Holdings closed the first half of 2026 with another strong quarter, reflecting the disciplined execution of our strategy, resilient credit performance, and our continued focus on long-term sustainable value creation. As a result of our strong performance, we are updating our 2026 capital return expectations to between 550 million and $600 million, up from our prior guidance of $500 million. I will discuss this in more detail shortly. For the second quarter, we reported adjusted operating income of 177 million, or $26 per diluted share.

Adjusted return on equity was 13%, and we generated strong new insurance written of $15 billion, resulting in total insurance in force of $274 billion. The macro and housing environment remained dynamic as elevated interest rates, geopolitical developments, and policy uncertainty continued to contribute to market volatility. S. economy was resilient, supported by a healthy labor market and generally stable household balance sheets.

Within housing, underlying demand fundamentals are strong, and while higher mortgage rates continue to temper overall transaction volumes, purchase application activity benefited from the spring selling season. From a credit perspective, our portfolio is performing well, with recent books performing in line with our expectations. Persistency remained elevated at 80% during the quarter. This is supported by the rate environment, with approximately 57% of loans in our portfolio carrying mortgage rates below 6%.

Looking ahead, we continue to believe the long-term fundamentals supporting the housing market remain intact, and we are confident that private mortgage insurance will continue to play a critical role in responsibly expanding access to sustainable homeownership while creating attractive opportunities for Enact Holdings. Our insurance in force portfolio remains resilient, with a risk-weighted average credit score of 746 and a risk-weighted average loan-to-value ratio of 93%. 1% of risk in force.

Pricing remained constructive in the quarter while our participation was strong, and our dynamic risk-adjusted pricing engine is enabling us to prudently target the right risk at the right price on a granular level as market conditions evolve. As we continue to leverage technology to enable better risk selection and improve operational efficiency, we are pleased to announce that in addition to our pricing engine, we recently launched our Enact Loan Level Assistant, or ELLA.

This new tool is our internal underwriting innovation that applies generative AI to help underwriters make smarter underwriting decisions by reviewing loan documents, identifying inconsistencies, and surfacing relevant insights more efficiently. ELLA reduces repetitive tasks, improves risk selection, and allows our underwriters to spend more time applying their expertise to making underwriting decisions. While it's still early in its launch, adoption has grown rapidly, and we believe ELLA will create a strong foundation for future efficiency improvements.

Turning to losses, new delinquencies were down 9% and cures were down 9% sequentially, consistent with seasonal trends, and total delinquencies declined 1%. Our strong performance was driven by favorable credit trends and effective loss mitigation efforts. This drove a reserve release of 37 million in the quarter, resulting in a loss ratio of 14%. Credit performance remains strong, and we are well reserved across a range of scenarios.

We delivered another quarter of prudent expense management, with operating expenses down year over year despite the inflationary environment. Dean will discuss the key drivers of this strong performance and our improved expectations for 2026. We continue to execute against our capital allocation priority, maintaining a strong and resilient balance sheet to support existing policyholders, investing to drive organic growth and operating efficiencies, funding attractive new business opportunities such as Enact Holdings, and returning excess capital to shareholders.

At the end of the quarter, our PMIERs sufficiency ratio was 161%, providing significant financial flexibility, and our credit and investment portfolios were in excellent shape. Our strong capital position is further reinforced by our CRT program and the backing of our undrawn credit facility. We also continue to execute on our growth and diversification strategy. Enact Holdings delivered another quarter of strong performance, generating attractive risk-adjusted returns while remaining both capital and expense efficient.

Finally, our strong performance supports continued robust returns to shareholders. During the quarter, we returned 127 million through share repurchases and dividends. As I mentioned, we have now increased our capital return expectations to between 550 to 600 million for 2026. This upward revision reflects our commitment to returning excess capital to shareholders while maintaining a strong balance sheet.

I'd now like to take a moment to recognize our culture and our people. For the fourth time since our IPO, Enact Holdings was recognized as one of the best places to work by the Triangle Business Journal. We have always taken pride in fostering an environment where teams can do their best work for our customers and stakeholders, and are pleased to have received this recognition again. Turning to recent housing policy announcements, as I mentioned last quarter, Enact Holdings supports the FHFA and GSEs' ongoing efforts to modernize credit evaluation in ways that responsibly expand access to sustainable homeownership.

0. Although its financial impact during the quarter was immaterial, we remain committed to supporting our customers and staying operationally aligned as initiatives are implemented and scaled in the market. Overall, we had a great first half of 2026 that positions Enact Holdings for long-term success. With that, I will now hand the call over to Dean.

Dean Mitchell, Chief Financial Officer Thanks, Rohit, and good morning, everyone. We delivered another strong quarter of performance. 21 per diluted share in the first quarter of 2026. 2%.

A detailed reconciliation of GAAP net income to adjusted operating income can be found in our earnings release. Turning to revenue drivers, new insurance written was $15 billion in the quarter, up 19% sequentially and up 15% year over year, as rates remained elevated and seasonal dynamics played out across the period. Persistency was 80% in the quarter, flat sequentially and down 2 points year over year on lower prevailing mortgage rates. 5%.

At the same time, 57% of loans in our portfolio carry rates below 6%. Primary insurance in force was $274 billion in the quarter, up $1 billion, or approximately 1% from the first quarter of 2026 and up $4 billion, or approximately 2% year over year. Total net premiums earned were $245 million, up $2 million sequentially and flat year over year. The sequential increase is primarily driven by premium growth from attractive adjacencies and growth in primary insurance in force.

3 basis points sequentially. As a reminder, our base premium rate is impacted by several factors, including macro factors driving refinancing activity, and tends to modestly fluctuate from quarter to quarter. 2 basis points sequentially and aligned with the decrease in base premium rate. Investment income in the second quarter was $73 million, up $2 million, or 3% sequentially, and up $7 million, or 11% year over year.

6% for the quarter. While we typically hold investments to maturity, we may selectively pursue income enhancement opportunities during the quarter. We sold certain assets that will allow us to recoup realized losses through future higher net investment income during the quarter. We continue to see strong loss performance across our portfolio.

New delinquencies decreased sequentially to 12,300 in the quarter from 13,600 in the first quarter of 2026, in line with expected seasonal trends. 3%, down 20 basis points from the first quarter of 2026 and an increase of 10 basis points from the second quarter of 2025. Our cure rate decreased 4 percentage points sequentially to 50%, in line with seasonal trends, and remains elevated. We maintained our claim rate on new delinquencies at 8%.

6%. Losses in the second quarter of 2026 were $33 million and the loss ratio was 14%, compared to $37 million and 15% in the first quarter of 2026 and $25 million and 10% in the second quarter of 2025. The current quarter reserve release of $37 million from favorable cure performance and loss mitigation activity compares to a reserve release of $39 million in the first quarter of 2026 and $48 million in the second quarter of 2025. Operating expenses in the second quarter of 2026 were $52 million and the expense ratio was 21%, compared to $49 million and 20% in the first quarter of 2026 and $53 million and 22% in the second quarter of 2025.

In the second quarter of 2026, we took actions that resulted in a $1 million reorganization charge that is excluded from our adjusted operating income. Based on first-half performance and full-year 2026 outlook, we now forecast 2026 expenses, excluding reorganization costs, to be in the range of $205 to $210 million. We continue to operate from a strong capital and liquidity position underpinned by our robust PMIERs sufficiency and the successful execution of our diversified CRT program. 9 billion of PMIERs capital credit at the end of the quarter.

58 for $93 million. 7 million shares for $30 million. 24 per common share, payable September 17, 2026. As Rohit mentioned earlier, we're increasing our 2026 total capital return guidance to be in the range of $550 to $600 million, reflecting our continued strong financial position and confidence in our business.

As in the past, the final amount and form of capital return to shareholders will ultimately depend on business performance, market conditions, and regulatory approvals. Overall, we are pleased with our performance through the first half of the year. As we look ahead, our disciplined approach to risk management, strong balance sheet, and financial flexibility position us well to navigate the evolving environment while continuing to deliver value to our shareholders. With that, let me turn the call back to Rohit.

Rohit Gupta, President and Chief Executive Officer Thanks, Dean. Enact is positioned to succeed through market cycles. And by combining disciplined underwriting, a strong balance sheet, thoughtful capital allocation, and continued investment in innovation, we are building an even stronger franchise for the long term. As always, our mission to responsibly help more people achieve the dream of homeownership remains at the center of everything we do.

Operator, we are now ready for Q&A. OPERATOR Thank you. We will now begin the question-and-answer session. To ask a question, you will need to press star, then the number one on your telephone keypad.

If you would like to withdraw your question, press star one again. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Mihir Bathia with Bank of America. Your line is open.

Mihir Bathia, Analyst at Bank of America Hi, good morning. Thanks for taking my questions. Wanted to start by just asking maybe about the base premium yield. I mean, it's relatively steady, but it is, you know, inside, you know, maybe the third decimal coming down a little bit through the, for the last few quarters.

Where do you expect that to settle out and just any expectations you could guide us for, like, you know, the rest of the year? Just, and maybe related to that, if you want to just comment on competitive intensity too, that you're seeing. Dean Mitchell, Chief Financial Officer Yeah, Mihir, it's Dean. I'll start with the answer on base premium rate trajectory, and Rohit will, I'm sure, pick up from a competitive perspective in the market.

You know, I would say despite the modest first-half pressure, our base premium rate outlook really remains consistent with our 2026 guidance that we gave at the beginning of the year, that we expect it to be relatively flat versus 2025. I think, you know, that could have a slight downward tilt, kind of like we saw in 2025.