ACT - Earnings call transcript Q4 2024

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Operator

Hello, and welcome to Enact's Fourth 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 Investor Relations.

You may begin.

Daniel Kohl

Thank you, and good morning. quarter fourth our to earnings call. Welcome

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

questions. your take then will We

the section of quarter, earnings of based These website. call date. we for today's are expectations our after on financial of of use and is close being set estimates, market our are include the the Investor metrics. will contain with materials statements Today's statements. Relations yesterday, current along as financial The These issued on projections operational forward-looking assumptions, comprehensive a results recorded and and available

uncertainties, such subject to or no are revise risks be to information. a different, they obligation and materially results Additionally, may undertake statements of result we and cause new actual update as to which

the be Please of risks on filings SEC regarding release on and language today release, and materials review upcoming cautionary the in management's today's can the in our which statements website. certain mind earnings forward-looking our well to the Reconciliations website. earnings a and filing these prepared include press SEC, these will metrics measures. found the as our in be measures as remarks presentation of non-GAAP most For our with GAAP keep relevant uncertainties, our in please discussion available press

Rohit. to I'll that, With over call the turn

Rohit Gupta

Daniel. you, Thank morning, everyone. Good

bravery caused Angeles the affected tireless express the efforts protecting to our and area community. wildfires and thank for by want the in in I the sympathies deepest begin, their Los responders to to first we firefighters acknowledge and all and the those by devastation Before

the entire are efforts. events committed is challenging this time, to community comprehend out Our incredibly to It witnessing. currently the during difficult recovery supporting hearts go we to are and we

Following employees faced rebuilding. we Hurricane caused our will have where catastrophe our borrowers the towards and Both they receive by communities now devastation work as to Helene, reside. support yet another continue

back want year strong the marked to to had I on year on in moment economic was we reflect incredible complex financial This amidst executed performance priorities we by backdrop. to Turning take XXXX. our as our results, a a very strategic

strong deliver for efficiencies value We shareholders. in strong customers, a our to to operational maintain continue deliver our drive capital our balance sheet business, returns and

share, million and by year, credit income a per $X.XX adjusted diluted X% the or of For operating up was was year-over-year $XXX performance. full record driven new high strong our

equity rates high of Additionally, up year wrote book ended billion and billion, value putting adjusted on and XXX,XXX with insurance of in the share, XX% return supporting per written Even was of insurance affordability, an on a in year-over-year. $XX ownership and low and $XX.XX adjusted in families approximately new building environment housing was $XXX them XX% we force record wealth. achieving path home with

capital our balance our enabled pursue These sheet results, management and expense us priorities. allocation with discipline strong our to combined

interest position first issuance allowing decade, During over $XXX to the largest public debt annual Notes, strengthen as us issued in Senior year, further we expense. in a the in $X our in our million industry a also and the company financial saving million investment-grade while

X%, face in pressures, costs. inflationary expenses Additionally, reduced restructuring the year when to excluding by we a our market continued

guidance. our for capital shareholders, $XXX high return returned to future growth, end of was to capital which invest While above continuing the of we million

were the S&P our During to A-. BBB+ year, upgraded from by ratings

past of are delivery it another what sheet. our resilient strength made testament very this strategic in A. possible. thank I'm of business who year from Additionally, our balance XXXX, employees to rating consistent our model, dedicated the accomplished and priorities January talented and Fitch A- upgraded our proud upgrades against our and our to team These

on overall. fourth was market X% specifically the reported of low XX.X% demand year-over-year. The housing long-term drivers growth consistent and continuing quarter. labor continue million, with The U.S. adjusted during support We demographic to the was Adjusted home of housing equity inventory up demonstrating operating earnings adjusted $XXX operating robust resilience prices. with The inflation. be wage income quarter remained $X.XX results. and environment on rate constructive to of to are elevated return surpassing the Moving per share markets

as current view adapt U.S. Overall, economy the and long-term near and evaluate remains of term, In landscape the positive. to housing the our necessary. will continue we

to manufacturing of credit with XX% our fourth considerable the had our strong. force high-quality portfolio end rates equity. in At embedded portfolio resulting remains be NIW and the credit in strong, approximately insurance quarter, Our mortgage quality continues X%, the below of insured quality and and a of

was score average and was average the and risk in Additionally, risk FICO of portfolio constructive maintained loan-to-value commitment underwriting X.X% Pricing remained in the risk the to XX% of standards. risk weighted force. layered XXX, our ratio was quarter, we the weighted prudent

pricing select generating allows risk-adjusted returns. attractive we prudently deliver continue basis risk and on Our to while competitive engine to pricing us a underwrite and

new increased recent delinquencies effects reflecting anticipated, by As of X%, hurricanes. the

rates million with efforts historical reserve hurricane a ratio quarter. Excluding XX% This A was our and the robust consumer, continued strong equity loss trends. which mitigation XX%. to strong loss and delinquencies cure the during the $XX quarter our drive for in cure rose new at seasonal by impact, performance of release embedded is X%, resulting resilient drove line

see and performance continue range We strong to well reserved a remain for credit of scenarios.

investing improve expense customer operations. that our and business a maintained processes experience mentioned the disciplined in I to As earlier, while approach management and technologies we

decrease quarter, same an were a our XXXX in the despite inflationary from $XX period expenses the During X% environment. million,

Moving to position. our robust capital

or requirements. Our PMIER was XXX% sufficiency $X.X above billion

CRT we reinsurance share entering During against the quarter, to X strategy into continue our agreements. execute quota

cost X of optimization capital our and prudent remain attractive we management at capital transactions customers. also reinsurance while XXXX loss to We in book to our risk these favorable supporting of forward January, did ability We terms. and serve our Additionally, and excess transactions covering years. executed committed XXXX

existing allocation which priorities, are to pursue capital and fund enabled and in business our diversify to growth have efficiencies, opportunities excess maintaining platform Our capital shareholders. attractive to capital cash strong position support organic policyholders and a invest business new us flow sheet, return drive balance to our by our to effectively

with about that and this strong remains In leverage momentum. To to continues extend mortgage, the have to excited both deals and capital growth a housing we adjacencies are opportunity upon Enact past, multifamily single continued Enact while capabilities we and GSE are that our to expense our in Re's that generating that Enact has spoken build long-term across Enact risk-adjusted into underwriting Re performance. Re attractive desire and platform credit. standards participate compelling maintained end, Re pleased find returns. attractive we is efficient. our we

million Finally, returned capital in over Since over return to by the $XXX commitment fourth to shareholders to quarter, we delivered shareholders. share and on our we dividend. our returning again $X.X quarterly buybacks billion through our have IPO, our

environment, committed of in on to market new buyback also administration, capital the every shareholders returning to remain approval our GSE reform. to flexible Board and Directors. Shifting continue based conditions discussion our including approach while allocation new our priorities, remaining policy efforts on always and with share programs there capital our subject We the to dividend current of is to expect and regarding

dedicated support aisle on for working sides we the our to responsibly support teams As are for achieving ahead forward franchise to our grateful administration and to of the their homeownership. In capital with our of in on our private the against dollars. industry focus closing, new people past, executing have products both the priorities. of I've We we and taxpayer look stated puts dream strategic relentless

to for and shareholders. With turn strong our the the that, Our XXXX of Dean. over our creating value long-term I effectiveness will customers underscore and call our to results approach commitment now

Hardin Mitchell

million quarter was and million in last Thanks, $X.XX third in equity the of strong of everyone. share another delivered equity GAAP income to period operating Rohit. diluted per XX.X%. in share third the per per return share in XXXX. Return compared diluted last share XX%. was XXXX. diluted $X.XX $X.XX Adjusted Good per the on share and to $X.XX or $XXX morning, in compared quarter diluted set same was same results of year period very or XXXX. operating quarter per on the Adjusted diluted year per $XXX $X.XX diluted net the of $X.XX We income share fourth was

totaled For the or to or compared full $XXX million $X.XX $XXX was $X.XX million to $XXX diluted XXXX share GAAP XXXX. in share net million year, per share diluted operating income $XXX or per share compared million for $X.XX income as $X.XX in diluted per XXXX. Adjusted or diluted per

billion $X fourth sequentially in force increased to billion revenue X% billion year-over-year. or drivers, up insurance to quarter, in up and $X Turning primary the $XXX

originations refinance billion, size. larger due decrease fourth Persistency offset sequentially, $XX an seasonality, XXXX. a September by points was XX% and originations was year-over-year down XX% X year-over-year sequentially up down by year-over-year. The the increase and MI estimated market rates written New insurance to by resulting a in down and driven quarter, driven in in X primarily in primarily higher partially X% was mortgage decline point primarily

our volatility portfolio rates XX of rate rate. mortgage at portfolio, Our basis above remains least the resilient having points mortgages average mortgage December's with in to X%

The we and structures, growth addition a up $X decrease Looking by mortgage ceded reinsurance sequentially million, ceded losses higher impact to million offset XXXX, $X were rates. Total capital in increase perspective include higher ceded the primary driven premium but quota down of insurance higher will commissions, ceded began continue partially profit the are anticipate premiums ceded sequentially was very in premiums. growth, ahead, from or X% earned force primarily commissions and premiums. Starting X% by we leverage efficient primarily premiums. of million to attractive from was net offset share year-over-year elevated and to The by cost year-over-year. persistency which adjacencies help in $XXX driven or

this, for remained and from years, our XXXX and delinquencies our new and, turn, the quarter, covered the commissions in increased our quarter. increased reduced premiums. Despite reinsurance losses cost of This ceded quota profit book flat ceded share net XXXX

X part a of we quota share we going make As new our announced to transactions quota transactions expect forward. recently program up CRT share larger

premiums. primary to Turning

premium of rate base basis our points Our guidance XX that relatively base with aligned rate be in flat is XXXX. would

is modestly to factors our from reminder, impacted rate a and tends base by several fluctuate As premium quarter-to-quarter.

current base our rate to levels. around expect in stabilize We XXXX

basis our Elevated X.X anticipate premiums. Investment improvement. sequentially XX.X ceded up Our have and down points premium increased in yield or portfolio portfolio $XX was sequentially, million points, million basis we over, or was and net XX% rolls investment quarter as year-over-year. up income $X higher yields rates by rate the $X further interest million, driven fourth X% earned our

to investment the contributing exceed of X%. yield book During portfolio X%, new overall money our yield an quarter, continued to

and Our focus maintaining high-quality portfolio. on remains A-rated resilient assets a

pursue selectively may previously we enhancement have stated, income to investments we maturity; we hold As opportunities. typically however,

assets through During the recoup higher identified investment us income. net losses to selling quarter, we allow that upon

still However, as we loss view our materially unrealized noneconomic. portfolio's position investment

new with delinquencies New increased X,XXX hurricanes. XX,XXX to XX,XXX an sequentially XXXX delinquencies from from estimated

remained primary consistent which news X.X% at X.X% Our fourth we our XXXX. fourth quarter is as and claim. maintain requires to in quarter new excludes hurricane-related quarter habitable sequentially fourth was with delinquencies at prior outpaced pre-pandemic with quarter, claim Total of delinquency storms. Historically, rate to sequentially to very in compared of MI delinquencies cures. from damage the our hurricane-related the our increased a the delinquencies high X.X% in as X.X% before be on delinquencies sequentially was for levels to We property cured rate at in from and The X% X.X% the for rate rate historical a recorded compared new the policy and XX,XXX a for X% the and rate, XX,XXX delinquency XXXX. pay fourth homes experience X.X% quarter new line but quarter claim

in of Excluding have million delinquencies, respectively. in our and been $XX the XXXX. X%, quarter quarter credit XXXX from would million to performance. Losses respectively, hurricane-related million of continued favorable in compares in The third of $XX $XX current loss compared quarter primary and delinquency third ratio to XXXX, strong reserve current in a were loss mitigation was new million would X.X% activities quarter, delinquency quarter rate and XX%, XX% reflecting of $XX the XXXX performance quarter fourth the the impact $XX of X.X% release respectively, million the fourth and quarter and fourth the reserve million the rate and have our been $XX of cure of release and XXXX, of and

point expenses discipline losses on by ratio reorganization million expense hurricane-related expense prudent in up increased lower loss lower year sequentially a for quarter management. million approximately of due were XXXX ratio or in represent were in quarter and costs new million, XXXX XXXX. Expenses the to in Our compared reorganization for of of The expense XX%, $XX than million focused the remain full fourth X fourth current the ratio of XX%, reserve the XX% X% release Full expense respectively, and year our the and primarily delinquencies. percentage and to the We XXXX throughout was $XX adjusted XXXX. XXXX delinquencies quarter X%, XX% and driven and $X are excluding reported approximately $XX $XXX costs of respectively, third quarter million XXXX.

million For addition of investing prudently we range and initiatives to the manage base continue in XXXX, our our million we to growth expense a future while inflationary normal modernization as in efficiencies anticipate dynamics. to $XXX $XXX also driving

the reinforced our execution and liquidity capital and to robust our program. of continue CRT diversified We sufficiency strong from successful operate position, PMIERs a by

December capital credit. of program XXXX, XX, CRT our $X.X PMIERs of As third-party billion provides

Our of quarter. at or $X.X PMIERs requirements the fourth billion PMIERs the and was above XXX%, sufficiency end

reinsurers. During entered X which quota highly a panel written the share to reinsurance quarter, rated of broad into agreements cede insurance XX% XXXX our and we XXXX new of approximately

on entered an additional to that reinsurance coverage into $XXX million and books, excess our XXXX respectively. end, we Additionally, million of quarter new loss subsequent $XXX and provide XXXX X agreements of

transactions for XXXX execution and a reinsurance our we we in and continue for programmatic assess its and sheet. the additional execution as market cost-effective agile XXXX. We capacity forward forward on we to secured as CRT year coverage protection to our capital the from follow attractive the committed cost program opportunistically volatility source While remain cadence, and robust balance perspective, normal

common XX. now payable Today, turn Let me we XXXX share first to announced capital per of quarter allocation. the March $X.XXX dividend

over to repurchases. million shareholders share returned in we Additionally, the dividends in XXXX and of $XXX form

million per total of at and the share weighted dividend paid $XX a bought out million. shares share a $XX.XX our quarterly or quarter, X.X price million of $X.XXX average we During $XX through back for

year full we of price repurchased January, $XX.X $XX.XX XXXX, share million For additional shares total million of at a of average the we price share shares for a million. average a million. In of weighted a weighted X.X total $XX.XX for at an repurchased $XXX X.X

$XXX there approximately million authorization. was million repurchase As XXXX, of January XX, share our $XX remaining on

During will aligned to million with capital XXXX, we the to to our XXXX. shareholders balance business and opportunities expect return capital in investing to in with across return to $XXX growth returned continue shareholders be our commitment the

dividend shareholders Our preference our via This activity. to January's remains to seen share share by dividend return repurchases. quarterly be and capital can and our announced buyback quarterly

the ultimately we throughout past, regulatory capital performance, have market the and conditions thus momentum in As incredibly we to will XXXX and pleased and our amount form XXXX are shareholders the return business approvals. Overall, performance with far. on of in final depend

back shareholders. With strong on focused solid prudently risk, the balance turn We maintaining will me delivering sheet a call for remain returns our managing and to let that, Rohit.

Rohit Gupta

Dean. Thanks,

Looking XXXX, about remain ahead the to ahead. opportunities we optimistic

solid evolving landscape. to execution financial foundation strong and navigate approach, provides a strategic disciplined Our position the

homeownership to our this We all to we of Q&A. principle and the business aspects now to responsibly achieve of for efforts of our dedication value exceptional all committed helping rise for are dream and ready people our our stakeholders. Operator, deliver underpins are

Operator

[Operator from Bose with first Instructions] The comes KBW. question George

Bose George

I a ask little capital Actually, about more. wanted return dig to into -- first the

in at continue where see modest, capital suggests capital let level. longer $XXX to happens? to higher this level Your a your mean, strengthen a very a if we Or rates of and growth will greater what keep year, capital would strengthening. And return? market I see already could the guidance remain million of you that attractive say, It's your debt for for very, you're just

Hardin Mitchell

return Yes, to our similar $XXX capital at it's Thanks is guidance for Dean. Bose, million. XXXX the question. Yes,

practice, process as I the progresses. the the of the that to think the at to from kind to going a continue our we're planned year level follow of is perspective, past really amount which beginning that return and then factors year guide to assess influence of capital

I prevailing then in macroeconomic remarks, environment, and think business focused on performance performance, and the generally regulatory to rather, our we landscape. those reference prepared prospective the the but both made

as reconsider here here. assess our But million and February, $XXX positive, as we as more of return from turn XXXX the in we feel confident in said, kind certainly factors we'll did really, those mid-year. if in stand I raised continue capital then, So guidance when guidance we we to

Bose George

sense. Makes then reinsurance Great. that's, over And Okay. just to switching the I GSE business. moment, guess, the all At CRT.

With that the further, -- more has the some issues? up changes D.C., been derisk to about piece potentially that discussions or in GSE leaving just aside GSEs there reform privatization any ramping

Rohit Gupta

thank Yes, question. for you your

under for scenarios. potential is CRT up volume different to GSE there absolutely, So pick

established months and not rating terms Our rating experience of been participating also but transaction have S&P the getting X XX we XXXX. last with in in A- in in entity off only the since positive the then starting

either forward, will of market some or from risk-adjusted from returns if to we start be in risk where move administration, allow regulator GSEs a us ceding we kind gets As that broadly net actually attractive. because the bigger, the derisking area would capital deploy more and find the or positive there initiative an is

Operator

Next from Doug Harter question with UBS. comes

Douglas Harter

You guys you as credit of we kind have impact on seasoning should impacts look talk that have seasoning talked books rates? the about on of forward Can of larger possibly about, the quality. delinquencies XXXX, to and some just the of claim

Hardin Mitchell

Thanks for the question. Doug. Yes. Sure,

years about our continues the development from In we somewhere talked And to of up X terms that X progress in the delinquency portfolio, a about average That's book closer that curve quarter. range, of increased X.X the quarter, aging that age years. of X.X last last plateau about seasoned. of years to normal to

start development should of any think new delinquency about to to we the -- that is recently, on relative begin credit-related slow macroeconomic More subject delinquency to development portfolio. slow, we think constant, year's the increase if that especially I see we I environment. assessment think last disasters and our the increase. Obviously, natural drivers. is impact should hold But what see we other that aging slow those as means in to

Douglas Harter

Dean. at how 'XX vintage, as that the kind of vintage prior characterize of years? of the versus would kind of appreciate performance And the look I you I kind performance guess, of kind that, of you the

Hardin Mitchell

vintage, say you accident year... talking when Doug, And you are

Douglas Harter

Origination.

Hardin Mitchell

Okay.

seen any good we attributes. Sorry. any On emerging early. of I'd we any any year, of emergence We risk the very of Yes. signs for our seen haven't say look across But deterioration and origination haven't performance. of that --

the but are well. signs early say So I'd development, very pointing in

Rohit Gupta

Yes. add said. what agree And I would just I Dean that, to with

have we As said environment 'XX, more result, have purchase the and as the have given in of XXXX, book a years different credit characteristics. past, rate originations, 'XX just

So originations. normal slightly purchase FICO, just loan higher about think lower to for value, is which

point, that, with So trend previous expectations. in But to addition to are tracking also Dean's differently vintages appreciation XXXX those price than in in and XXXX going line embedded the to books home with books.

Operator

This turn for concludes like our to back the remarks. would over question-and-answer conference any to session. I Gupta closing Rohit

Rohit Gupta

joining. Thank Florida on in Bank your Conference Thank you, XX. Enact, in and seeing interest Conference you. and at America's We Financials Megan. forward Financial XX Thank I you of at Services everyone, look UBS' to appreciate many of for you, February on February

Operator

you has today's now concluded. attending The conference for presentation. Thank

disconnect. now may You

Enact (ACT) 5 Feb 252024 Q4 Earnings call transcript