8-K: Enact Reports Q3 2025 Earnings Amid Rising Losses

Enact Holdings, Inc. announced third quarter 2025 financial results, reporting decreased net income and rising loss ratios, while increasing capital return guidance.

Summary

• Net income for Q3 2025 was $163 million, or $1.10 per diluted share, a decrease from $168 million in Q2 2025 and $181 million in Q3 2024.
• Adjusted operating income was $166 million, or $1.12 per diluted share, down from $174 million in Q2 2025 and $182 million in Q3 2024.
• New insurance written (NIW) reached $14 billion, up 6% sequentially and 3% year-over-year.
• Primary insurance in-force (IIF) grew to $272 billion, an increase of 1% from Q2 2025 and 2% from Q3 2024.
• Net premiums earned remained flat at $245 million compared to Q2 2025, but decreased 2% from $249 million in Q3 2024, primarily due to higher ceded premiums.
• Losses incurred significantly increased to $36 million, with a loss ratio of 15%, up from $25 million (10%) in Q2 2025 and $12 million (5%) in Q3 2024.
• Operating expenses were $53 million, maintaining an expense ratio of 22%, reflecting prudent expense management.
• Net investment income rose to $69 million, driven by elevated interest rates and higher average invested assets.
• Annualized return on equity (ROE) was 12.4%, and adjusted operating ROE was 12.6%, both declining from prior periods.
• PMIERs sufficiency decreased to 162%, or approximately $1.9 billion above requirements, from 165% ($2.0 billion) in Q2 2025.
• Book value per share increased to $36.53, and book value per share excluding AOCI rose to $36.82.
• The company repurchased approximately 2.8 million shares for $105 million in the quarter and an additional 1.2 million shares for $42 million through October 31, 2025.
• Full-year 2025 capital return guidance was increased to approximately $500 million.
• A quarterly dividend of $0.21 per share was declared, payable on December 11, 2025.

Sentiment

Score: 4

Explanation: While the company announced increased capital returns and received positive credit rating outlooks, core profitability metrics such as net income, adjusted operating income, and return on equity have declined. More concerning are the significant increases in losses incurred, the loss ratio, and the primary delinquency rate, indicating deteriorating underlying business performance in an 'evolving housing market'.

Positives

• New insurance written (NIW) increased to $14 billion, up 6% from the previous quarter and 3% year-over-year, indicating continued business generation.
• Primary insurance in-force (IIF) grew to $272 billion, a 2% year-over-year increase, demonstrating portfolio expansion.
• Book value per share increased to $36.53, and book value per share excluding AOCI rose to $36.82, indicating growth in shareholder value.
• Net investment income increased to $69 million, driven by elevated interest rates and higher average invested assets.
• Operating expenses remained flat at $53 million, with a consistent expense ratio of 22%, reflecting effective cost control.
• The company increased its full-year 2025 capital return guidance to approximately $500 million, signaling confidence in financial strength and commitment to shareholders.
• Moody's Investor Service upgraded EMICO's insurance financial strength rating to A2 from A3 and its long-term issuer rating to Baa2 from Baa3, with a stable outlook.
• A.M. Best upgraded the financial strength rating outlook for EMICO, EHI, and EMIC-NC to positive.
• A new $435 million five-year senior unsecured revolving credit facility was secured, replacing the previous $200 million facility, enhancing financial flexibility.
• Quota share reinsurance for approximately 34% of expected 2027 new insurance written and an excess of loss reinsurance agreement for $170 million coverage on a portion of 2027 NIW were secured, strengthening risk management.

Negatives

• Net income decreased to $163 million from $168 million in Q2 2025 and $181 million in Q3 2024, indicating a decline in profitability.
• Adjusted operating income also decreased to $166 million from $174 million in Q2 2025 and $182 million in Q3 2024, reflecting a similar trend in core operations.
• Losses incurred significantly increased to $36 million, up from $25 million in Q2 2025 and $12 million in Q3 2024, pointing to higher claims.
• The loss ratio rose to 15% from 10% in Q2 2025 and 5% in Q3 2024, indicating a worsening claims experience.
• Annualized return on equity (ROE) declined to 12.4% from 13.0% in Q2 2025 and 14.7% in Q3 2024.
• Adjusted operating return on equity also decreased to 12.6% from 13.4% in Q2 2025 and 14.8% in Q3 2024.
• PMIERs sufficiency decreased to 162% ($1.9 billion) from 165% ($2.0 billion) in Q2 2025 and 173% ($2.19 billion) in Q3 2024, indicating a reduction in capital buffer relative to requirements.
• The primary delinquency rate increased to 2.45% from 2.32% in Q2 2025 and 2.17% in Q3 2024, suggesting a rise in mortgage defaults.

Risks

• Potential for an economic downturn or recession in the United States and globally.
• Changes in political, business, regulatory, and economic conditions could adversely affect operations.
• Changes in or to Fannie Mae and Freddie Mac (GSEs), including federal legislation, restructurings, or shifts in business practices, could impact the company.
• Failure to continue to meet the mortgage insurer eligibility requirements of the GSEs could restrict business.
• Increased competition for customers from other private mortgage insurers or alternative solutions.
• Lenders or investors seeking alternatives to private mortgage insurance could reduce demand for services.
• An increase in the number of loans insured through Federal government mortgage insurance programs, such as those offered by the Federal Housing Administration, could reduce market share.

Future Outlook

The company anticipates a total 2025 capital return of approximately $500 million, an increase from previous guidance, recognizing strong performance and current mortgage origination levels. The final amount and form of capital returned to shareholders will be contingent on business performance, market conditions, and regulatory approvals.

Management Comments

• "Enact continues to execute with discipline and purpose."
• "We delivered another strong quarter, maintained our prudent approach to risk management and strong expense controls, and our performance positioned us to raise our capital returns target to its highest level since our IPO."
• "Against the backdrop of an evolving housing market, we remain well positioned for success, with the proven strategy, financial flexibility and balance sheet strength to deliver and help more people responsibly achieve the dream of homeownership."

Industry Context

The results reflect an 'evolving housing market' characterized by elevated interest rates, which have contributed to increased net investment income but also appear to be impacting mortgage performance, as evidenced by rising losses incurred and delinquency rates. The company's ability to grow new insurance written and in-force policies, alongside maintaining expense controls, suggests resilience in a challenging environment, while the increased capital return guidance indicates a strong capital position relative to market conditions.

Comparison to Industry Standards

• NA

Stakeholder Impact

• Shareholders: Will receive a quarterly dividend of $0.21 per share and benefit from increased full-year capital return guidance of approximately $500 million, but face declining profitability metrics and increasing loss ratios.
• Investors: Provided with detailed financial results and forward-looking statements to assess company performance and future prospects, with mixed signals from strong capital management versus deteriorating core financial health.
• Lenders: Continue to partner with Enact, benefiting from its leading underwriting expertise and risk/capital management, as indicated by the growth in new insurance written and in-force policies.
• Regulatory Authorities: The company's PMIERs sufficiency remains strong at 162%, indicating compliance with capital requirements, and credit rating upgrades reflect improved financial strength assessments.

Next Steps

• A conference call will be held on November 6, 2025, at 8:00 a.m. (Eastern) to discuss the third quarter financial results.
• The declared quarterly dividend of $0.21 per share will be paid on December 11, 2025, to shareholders of record on November 21, 2025.
• The company will continue to execute its strategy, with the final amount and form of capital returned to shareholders depending on business performance, market conditions, and regulatory approvals.

Key Dates

Recommendation

The filing presents a mixed bag of results. On one hand, Enact is demonstrating strong capital management through increased capital return guidance and share buybacks, alongside positive credit rating upgrades and effective expense control. New insurance written and in-force policies also show growth. However, the significant deterioration in core profitability metrics (net income, adjusted operating income, ROE) and the sharp rise in losses incurred, loss ratio, and delinquency rate are concerning. These negative trends in the underlying business performance, particularly in an 'evolving housing market,' warrant caution. A 'hold' recommendation is appropriate as investors should monitor whether the positive capital actions can offset the worsening operational trends, especially the increasing claims and delinquencies, in future quarters.

Keywords

Mortgage Insurance, Financial Results, Earnings, SEC Filing, Private Mortgage Insurance, Capital Return, Dividends, Share Repurchase, Loss Ratio, PMIERs, Book Value, Credit Ratings, Reinsurance, Housing Market