Enact Holdings, Inc. (ACT) Earnings & Analysis

Latest quarter

Enact reported third-quarter revenue of $312.9 million, compared with $311.5 million a year earlier. Diluted earnings per share were $1.15, up from $1.10. The company reported adjusted operating income of $164 million, or $1.19 per diluted share.

In its filing, Enact said net earned premiums declined marginally as lower average premium rates and higher premiums ceded to reinsurers were largely offset by assumed premiums and growth in insurance in force. The filing attributed higher net investment income primarily to higher yields and a higher average amortized cost of invested assets.

Enact’s loss ratio rose to 20% from 15% a year earlier. The filing said new delinquencies increased with the expected loss development pattern of newer books; the company released $37 million of reserves, compared with $45 million a year earlier. Operating margin was 64.9%, compared with 67.4%, while free cash flow was $183.9 million, down from $192.0 million.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Rohit Gupta said higher mortgage rates put pressure on housing activity and mortgage demand during the third quarter. He said housing supply continued to normalize and nationwide home prices continued to appreciate, supporting borrower equity. Enact executive Dean Mitchell said new insurance written fell sequentially as higher rates reduced refinancing activity.

Gupta described mortgage insurance pricing as competitive and said Enact uses its pricing engine to assess borrower and loan characteristics alongside its view of housing conditions. He said economic and housing trends vary by geography. On the insured portfolio, Gupta said persistency was 81% in the quarter and approximately 89% of loans carried mortgage rates below 7%.

Analysts pressed executives on newer insurance books and future delinquencies. Mitchell said the newer books are purchase-heavy, with modestly higher loan-to-value and debt-to-income ratios, but were performing in line with pricing expectations. Gupta said recent vintages were performing in line with or better than pricing expectations, supported by cures. Mitchell said the delinquency rate could rise in the fourth quarter because of seasonality and could gradually increase into 2027 as recent books mature, assuming a stable economic environment.

Gupta said prior reductions in the company’s assumed claim rates would mean lower losses on new delinquencies but also less opportunity for reserve releases, all else equal. He said, “your reserve release will be lower because there’s less opportunity.”

On capital, Gupta said Enact entered a quota-share agreement covering approximately 35% of expected 2028 new insurance written. Asked about reinsurance demand, Mitchell said Enact could source its needs through the traditional market. Asked about a proposed mortgage-related pilot, Gupta said Enact had not received guidance on its scope, parameters or valuation method.

Guidance

Enact increased its expected total capital return for FY2026 to approximately $600.0 million, from a previous range of $550.0 million–$600.0 million. The return includes dividends and share repurchases.

The company also expects FY2026 operating expenses excluding reorganization costs to be at the lower end of its $205.0 million to $210.0 million range, rather than within that range as previously guided.