8-K: Enact Holdings Reports Strong Fourth Quarter and Full Year 2023 Results, Driven by Record Insurance In-Force

Enact Holdings announced robust financial results for Q4 and full year 2023, highlighted by record primary insurance in-force and significant capital returns to shareholders.

Summary

• Enact Holdings reported a net income of $157 million, or $0.98 per diluted share, for the fourth quarter of 2023.
• The full year GAAP net income reached $666 million, or $4.11 per diluted share.
• Adjusted operating income for the fourth quarter was $158 million, or $0.98 per diluted share, and $676 million, or $4.18 per diluted share, for the full year.
• The company achieved a record primary insurance in-force of $263 billion, a 6% increase from the fourth quarter of 2022.
• Enact returned over $300 million of capital to shareholders in 2023 through dividends and share repurchases.
• The PMIERs sufficiency was 161%, or $1,887 million above requirements.
• New insurance written (NIW) was $10 billion for the quarter, down from $14 billion in the previous quarter and $15 billion in the same quarter of the previous year.
• The persistency rate was 86%, consistent with the fourth quarter of 2022.
• Net premiums earned were $240 million, a slight decrease from $243 million in the third quarter of 2023 but up from $233 million in the fourth quarter of 2022.
• Losses incurred were $24 million with a loss ratio of 10%, compared to $18 million and 7% in the third quarter of 2023.
• Operating expenses were $59 million, with an expense ratio of 25%.

Sentiment

Score: 6

Explanation: The document presents a mixed picture with strong positives like record insurance in-force and capital returns, but also negatives such as decreased new business and increased losses. The overall sentiment is cautiously optimistic.

Positives

• The company achieved record primary insurance in-force, demonstrating strong growth in its core business.
• Enact's commitment to returning capital to shareholders was fulfilled with over $300 million returned in 2023.
• The company's PMIERs sufficiency remains strong, indicating a solid financial position.
• Enact Re's expansion into international markets and new reinsurance deals demonstrate strategic growth initiatives.
• The credit rating upgrades from S&P reflect the company's improved financial strength and stability.

Negatives

• New insurance written (NIW) decreased by 27% sequentially and 31% year-over-year, primarily due to a smaller estimated private mortgage insurance market.
• Net income and adjusted operating income per share decreased sequentially from the third quarter of 2023.
• Losses incurred and the loss ratio increased both sequentially and year-over-year, driven by higher current period delinquencies.
• Operating expenses increased sequentially due to the timing of premium tax expense recognition and incentive-based compensation.

Risks

• The company faces risks related to the private mortgage insurance market, which has seen a decrease in size.
• Increased delinquencies could lead to higher losses and a higher loss ratio.
• The company's performance is subject to changes in interest rates and economic conditions.
• There are risks associated with the company's reinsurance arrangements, including counterparty risk.
• The company's future performance is subject to various factors, including regulatory changes and competition.

Future Outlook

Enact is well-positioned to continue delivering responsible insurance in-force growth, invest in its platform, support policyholders, and generate value for shareholders in 2024.

Management Comments

• Our fourth quarter performance completed a very strong year for Enact, said Rohit Gupta, President and CEO of Enact.
• We ended 2023 with record insurance in-force as we continued to grow our core business, extend our platform, strengthen our balance sheet, and drive expense discipline.
• Further, we delivered on our commitment to return $300 million to shareholders in 2023.
• Looking ahead, we enter 2024 well positioned to continue to deliver responsible insurance in-force growth, invest in our platform, support our policyholders, and continue generating value for our shareholders.

Industry Context

The results reflect the current trends in the mortgage insurance industry, including the impact of interest rate changes and market fluctuations on new insurance written and persistency rates. The company's strategic reinsurance activities are in line with industry practices to manage risk and capital.

Comparison to Industry Standards

• Enact's return on equity of 15.2% for the full year is competitive with other mortgage insurance companies such as Radian Group Inc. which reported a full year ROE of 14.8% in 2023.
• The company's PMIERs sufficiency ratio of 161% is above the minimum requirements, indicating a strong capital position, similar to other major players in the industry.
• The decrease in NIW is a common trend across the industry due to the smaller estimated private mortgage insurance market, with companies like MGIC Investment Corporation also reporting a decrease in new business volume.
• Enact's persistency rate of 86% is relatively high, reflecting the impact of elevated mortgage rates, which is a trend seen across the mortgage insurance sector.

Stakeholder Impact

• Shareholders benefit from the return of capital through dividends and share repurchases.
• Policyholders are supported by the company's strong financial position and commitment to responsible insurance.
• Employees are impacted by the company's performance and strategic initiatives.
• Lenders benefit from Enact's partnership and expertise in the mortgage process.

Next Steps

• Enact will continue to focus on responsible insurance in-force growth.
• The company plans to invest in its platform and support policyholders.
• Enact will continue to generate value for shareholders.
• The company will monitor market conditions and adjust its strategies as needed.

Key Dates

Keywords

mortgage insurance, reinsurance, financial results, insurance in-force, PMIERs, capital return, delinquency rate, net income, operating income, loss ratio