Q3 2026 Enact Earnings Conference Call - ENACT HOLDINGS INC

Explicit Guidance:

• Capital Returns: Increased 2026 capital return guidance to approximately $600 million.
• Expense Guidance: Forecast full-year 2026 expenses (excluding reorganization costs) to land at the low end of the previously provided $205–$210 million range.

Business-Segment Outlook:

• Portfolio Performance: Expect continued resilience in the insurance-in-force portfolio supported by embedded home equity; anticipate persistency to remain elevated (historically >80%) despite seasonal fluctuations.
• Credit & Delinquencies: Project gradual increases in delinquency rates in 2027 as newer book vintages (2022–2023) age along their normal loss development curve.
• Loss Ratios: Anticipate potential modest increases in loss ratios in 2027 absent a stable macroeconomic environment; acknowledge that reserve release opportunities may diminish as roll-rate assumptions are adjusted based on actual performance, though the baseline for pricing remains ~20%.
• New Business Volume: Expect "New Insurance Written" to face headwinds from higher mortgage rates and reduced refinancing activity, though persistency remains a supporting factor.

Market and Competitive Outlook:

• Pricing & Capital: Demand for mortgage credit default risk in the reinsurance market remains "very strong," enabling forward contracts (e.g., 2-year forward for 2028) at attractive cost-of-capital terms (low-to-mid single digits).
• Productivity: Continued reliance on the "Rate360" dynamic pricing engine to assess risk granularly by geography and borrower characteristics.
• Share Repurchases: Continued belief that share repurchases are a compelling use of capital at current valuations, with activity varying dynamically based on price fluctuations relative to book value.

Macro / Industry Outlook:

• Housing Market: Anticipate long-term housing demand drivers to remain intact; note that while housing supply is normalizing and prices appreciate nationwide, affordability remains a headwind for prospective buyers.
• Regulatory Environment: Support the recent presidential executive order on lowering housing costs; anticipate FHFA to establish a pilot program for prospective loan originations (post-pilot establishment), focusing on automated valuation models (AVMs) or index-based methods.
• Credit Trends: View recent credit performance (even in higher-risk 2020–2021 vintages) as in-line with pricing expectations, driven by strong borrower characteristics and embedded equity.

Strategic Initiatives:

• CRT Program: Executed a new Forward Quota Share Reinsurance Agreement covering ~35% of expected 2028 new insurance written, advancing a programmatic approach to cost-efficient capital and balance sheet protection.
• Vantage Score 4.0: Continuing rollout and support for customers as adoption moves from early stages (concentrated among few originators) to broader implementation.
• M&A/Diversification: Enact division viewed as a long-term growth and diversification opportunity delivering risk-adjusted returns.

Risks and Headwinds to Outlook:

• Macroeconomic Sensitivity: Credit trajectory and loss ratios are predicated on a stable macroeconomic environment; significant changes could accelerate delinquency growth.
• Seasonality: Q4 delinquencies expected to tick up due to unfavorable seasonality, consistent with historical trends.
• Regulatory Uncertainty: Parameters for the FHFA pilot (AVM usage, cost burden, servicer incentives) remain undefined, creating uncertainty around future cancellation activity.
• Interest Rates: Higher mortgage rates continue to suppress refinancing activity, impacting "New Insurance Written" volumes.

Management Tone on the Future:

• Confidence Level: High confidence in the business model's resilience, strong capital position (PMIRE sufficiency at 158%), and ability to deliver shareholder value.
• Strategic Focus: Emphasis on "prudent underwriting," "disciplined capital management," and "operating efficiencies."
• Guidance Change: Shift from maintaining status quo to actively increasing capital return expectations and tightening expense guidance, signaling strong operational momentum.

Miscellaneous:

• Board Changes: Acknowledged the retirement of Tom McInerney (President/CEO of Genworth, Enact Board Member) and transition to Jerome Upton.
• Credit Ratings: AM Best upgraded EMIC and EMIC NC's financial strength ratings to 'A' (from 'A-'); Enact Holdings Inc.'s issuer credit rating upgraded to 'BBB' (from 'BBB-').