10-Q: Enact Holdings Reports Solid Q2 2026 Results

Enact Holdings, Inc. (ACT) reported its second quarter 2026 financial results, demonstrating steady revenue growth, increased net investment income, and robust capital reserves.

Summary

• Enact Holdings, Inc. reported net income of $174.8 million for the three months ended June 30, 2026, a 4% increase from $167.8 million in the same period last year.
• Total revenues for the quarter were $317.3 million, up 4% year-over-year, driven by a 11% increase in net investment income.
• Losses incurred increased by 32% to $33.3 million, contributing to a higher loss ratio of 14% compared to 10% in the prior year's quarter.
• Acquisition and operating expenses decreased slightly by 2% to $49.5 million.
• As of June 30, 2026, the company maintained a strong risk-to-capital ratio of 9.9:1, well below the regulatory limit.
• New insurance written (NIW) for the quarter was $15.2 billion, a 15% increase year-over-year.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a generally positive report, with solid financial performance and strong capital adequacy, though with some minor headwinds in loss ratios and expense management.

Positives

• Net income increased by 4% to $174.8 million for the three months ended June 30, 2026.
• Total revenues grew by 4% to $317.3 million, primarily due to an 11% increase in net investment income.
• The company's risk-to-capital ratio remained strong at 9.9:1 as of June 30, 2026, indicating robust capital adequacy.
• New insurance written (NIW) saw a significant 15% increase to $15.2 billion for the quarter.
• The company's PMIERs sufficiency ratio was 161%, providing a substantial buffer above regulatory requirements.
• The company announced an increase in its quarterly dividend from $0.21 to $0.24 per common share.

Negatives

• Losses incurred increased by 32% to $33.3 million, leading to a higher loss ratio of 14% compared to 10% in the prior year's quarter.
• Current period primary delinquencies increased, contributing $68 million to loss expense in the second quarter of 2026.
• Net investment gains (losses) were negative at $(2.2) million for the quarter, compared to $(7.3) million in the prior year, indicating realized losses on securities sales.
• The persistency rate slightly decreased to 80% from 82% in the prior year's quarter.

Risks

• Deterioration in economic conditions, decline in home prices, or a severe recession could materially impact the business.
• Uncertainty around loan delinquency duration, forbearance programs, and foreclosure timing poses a risk to loss reserve estimates.
• Changes to the charters or practices of the GSEs (Fannie Mae and Freddie Mac) could impact the use of mortgage insurance.
• Competition for customers and the potential loss of significant customers are ongoing risks.
• Failure to manage the risk in the investment portfolio could lead to adverse financial outcomes.
• Risks related to emerging and changing technologies, including artificial intelligence, are noted.
• Inability to maintain sufficient regulatory capital could pose a challenge.

Future Outlook

The company expects its new insurance written with its strong credit profile and attractive pricing to positively contribute to future profitability and return on equity. Future dividend payments and share repurchases will be opportunistic and depend on various factors including share price, capital availability, business and market conditions, and regulatory requirements.

Management Comments

• We see the market and underwriting conditions, including the pricing environment, as being within our risk-adjusted return appetite enabling us to write new business at attractive returns.
• Ultimately, we expect our new insurance written with its strong credit profile and attractive pricing to positively contribute to our future profitability and return on equity.
• Returning capital to shareholders, balanced with our growth and risk management priorities, remains a priority as we look to drive shareholder value through time.
• We intend to continue to use future EMICO dividends and distributions for purposes of returning capital to shareholders and bolstering financial flexibility.

Industry Context

StockSavvy.ai notes that Enact Holdings operates in the competitive U.S. private mortgage insurance industry. The company's performance is influenced by macroeconomic factors such as inflation, interest rates, and housing market conditions, as well as regulatory developments from entities like the FHFA and GSEs.

Comparison to Industry Standards

• Enact Holdings' loss ratio of 14% for Q2 2026 is higher than the 10% reported in Q2 2025, indicating increased claims activity or less favorable reserve development in the current period.
• The expense ratio remained stable at 21% for both Q2 2026 and Q2 2025, suggesting effective cost management relative to premiums earned.
• The company's risk-to-capital ratio of 9.9:1 is well within the typical regulatory limit of 25:1 for mortgage insurers, indicating a strong capital position compared to industry peers.
• The PMIERs sufficiency ratio of 161% exceeds the typical requirement, demonstrating a strong buffer against potential losses and meeting GSE eligibility standards.

Legal Proceedings

• The company is not subject to any pending material legal proceedings.

Related Party Transactions

• Agreements with Genworth for reimbursement of administrative and operating expenses, including IT, finance, HR, and employee benefits.
• Genworth manages the investment portfolios of Enact's insurance subsidiaries, with Enact charged a fee for this service.
• Employees participate in Genworth-sponsored benefit plans.
• Enact paid cash dividends to Genworth totaling $51.1 million for the six months ended June 30, 2026.
• Enact paid Genworth $150.7 million related to shares repurchased in the six months ended June 30, 2026.
• Enact participates in a single U.S. consolidated income tax return filing with Genworth.

Stakeholder Impact

• Shareholders: Potential for increased returns through dividends and share repurchases, alongside potential stock price appreciation driven by solid financial performance.
• Policyholders: Continued protection against mortgage default losses, supported by strong capital reserves and regulatory compliance.
• Lenders and Investors: Assurance of coverage for mortgage loans, facilitated by Enact's approved insurer status with GSEs.
• Employees: Continued employment and participation in benefit plans, with management focused on attracting and retaining key personnel.
• Regulators: Compliance with PMIERs, risk-to-capital requirements, and other regulatory mandates ensures continued operational eligibility.

Next Steps

• Continue to manage new business through pricing and underwriting guidelines.
• Monitor macroeconomic conditions, regulatory developments, and their impact on the housing market.
• Evaluate opportunities to increase financial flexibility through capital raising, debt restructuring, or risk transfer transactions.
• Continue to return capital to shareholders through dividends and share repurchases, subject to board approval and market conditions.

Key Dates

Recommendation

The company demonstrates solid financial performance with increased net income and revenues, supported by strong capital reserves and a growing NIW. However, the increase in the loss ratio and realized losses on investments suggest some headwinds. The current valuation and outlook warrant a 'hold' position, pending further clarity on the impact of macroeconomic factors and loss trends.

Keywords

Mortgage Insurance, Enact Holdings, PMIERs, GSEs, Financial Statements, Loss Reserves, Investment Portfolio, NIW