Enact Holdings, Inc. · NASDAQ:ACT
Enact — Q2 2023 Earnings Presentation
21 slides from Enact's earnings presentation, Aug 2, 2023
Slide 1: Second Quarter 2023 Financial Results
CONFIDENTIAL Second Quarter 2023 Financial Results August 01, 2023
Slide 2: Cautionary Note Regarding Forward-Looking Statements
CONFIDENTIAL Cautionary Note Regarding Forward-Looking Statements This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements may address, among other things, our expected financial and operational resu
Slide 3: Key Takeaways
Key Takeaways CONFIDENTIAL Insurance-in-force reached a new record of $258B, driven by NIW of $15B and elevated persistency of 84%; new delinquency rate continues to stabilize around pre-pandemic levels Continued focus on cost discipline; on track to reduce 2023 operating expenses 6% to $225M in 202
Slide 4: About us
About us CONFIDENTIAL Enact Our Strategy Private mortgage insurance company helping Purposefully invest to differentiate Enact millions of families achieve the dream of » Deliver best-in-class underwriting; expand well-established, deep and sustainable home ownership diversified customer base » Exte
Slide 5: Financial Highlights
Financial Highlights CONFIDENTIAL Primary Insurance in Force Up 2% Q/Q $258 New Insurance Written Up 15% Q/Q $15 Net Premiums Earned Up 1% Q/Q $239 billion billion million Net Income Down 5% Q/Q $168 Adjusted Operating Income1 $178 Net Investment Income Up 12% Q/Q $51 million Up 2% Q/Q million milli
Slide 6: Delivering Shareholder Value
Delivering Shareholder Value CONFIDENTIAL Book value per share excluding AOCI1 + cumulative dividends Adjusted operating ROE2 20% $32.53 19% $31.42 $30.31 17% 16% $29.41 14% $28.23 2Q22 3Q22 4Q22 1Q23 2Q23 3 2Q22 3Q22 4Q22 1Q23 2Q23 Trailing 4Q 16% 17% 17% 17% 16% BVPS Ex-AOCI Dividends Per Share BV
Slide 7: Market and Industry Dynamics
Market and Industry Dynamics CONFIDENTIAL Complex market with favorable underpinnings Industry well positioned to navigate market conditions » Housing market has slowed as elevated interest rates and cumulative home price appreciation » Qualified Mortgage definition and regulators driving continue t
Slide 8: Comprehensive Risk Management
Comprehensive Risk Management CONFIDENTIAL December 31, 2007 June 30, 2023 Significant decrease in layered risk FICO at Origination1 <620 7% <620 2 % RIF % RIF 0% # of High-Risk Layers 740+ 740+ 4Q07 2Q23 25% 58% 0 4.6% 0.6% 620-679 620-679 1 7.9% 0.6% 34% LTV > 95% 8% 2 2.5% 0.1% 680-739 34% FICO <
Slide 9: Consistent Insurance-in-Force Growth
Consistent Insurance-in-Force Growth CONFIDENTIAL Insurance-in-force ($B) and persistency Book year primary insurance-in-force ($B) 96% of Portfolio 86% 85% 84% 80% 82% $76 $61 $253 $258 $242 $248 $50 $238 $28 $15 $5 $6 $6 2Q22 3Q22 4Q22 1Q23 2Q23 2016 2017 2018 2019 2020 2021 2022 2023 IIF Persiste
Slide 10: Portfolio Premium Yield & Premiums
Portfolio Premium Yield & Premiums CONFIDENTIAL In-force primary portfolio premium yield Primary direct & Ceded premiums1 ($M) Base Premiums Single Ceded 2Q22 3Q22 4Q22 1Q23 2Q23 Base Premium Rate (bps) 42.5 41.7 41.0 40.5 40.3 $237 $235 $232 $235 $238 $8 $5 $2 $2 $2 Single Cancellations 1.3 0.9 0.3
Slide 11: Delinquencies and Forbearance
Delinquencies and Forbearance CONFIDENTIAL New delinquencies1 Delinquent policies 76,960 Not In Forbearance In Forbearance Not in Forbearance In Forbearance 73% 44,904 35,996 32,624 21% 71% 24,820 42% 19,943 18,804 18,065 41% 26% 15% 22% 29% 59% 74% 78% 27% 58% 79% 85% 2Q20 - 4Q20 2021 2022 YTD 2023
Slide 12: Losses
Losses CONFIDENTIAL Losses ($M) Highlights 18 » 2Q23 loss performance driven by reserve release of $63 (4) million (11) » Driven by favorable cure performance primarily from (40) 2020 through first-half 2022 delinquencies (62) » Current period decrease in new delinquencies, generally 2Q22 3Q22 4Q22
Slide 13: Enact Re
Enact Re CONFIDENTIAL Launched Enact Re, Ltd. (Enact Re), a subsidiary of EMICO that expands our franchise through access to new business opportunities consisting primarily of GSE credit risk transfer We expect Enact Re to create shareholder value in the long-term while preserving our dividend capac
Slide 14: Strong PMIERs Sufficiency
Strong PMIERs Sufficiency CONFIDENTIAL Sufficiency to PMIERs1 ($M) Highlights 174% » PMIERs sufficiency for the quarter decreased slightly as a 166% 165% 164% 162% result of NIW, partially offset by lapse 2,249 2,047 2,050 2,098 1,958 » Funding of Enact Re materially offset by affiliate quota share
Slide 15: Robust Capital Position
Robust Capital Position CONFIDENTIAL Strong capital position1 ($M) Highlights » Returned a total of $67M to shareholders during the quarter, Equity Debt-to-Capital consisting of $26M quarterly dividend and share repurchases totaling $41M 15% 15% 15% 15% 15% $4,081 $4,117 $4,101 $4,297 $4,376 » Incre
Slide 16: Strong & Diversified Ratings
Strong & Diversified Ratings CONFIDENTIAL Rating Agency Date Updated EMICO1 EHI2 LT Debt3 EMIC-NC1 Enact Re1 Rating / Outlook Rating / Outlook Rating / Outlook Rating / Outlook Rating / Outlook Upgraded Moody’s A3 / Stable Baa3 / Stable Baa3 / Stable - - March 2023 Upgraded S&P BBB+ / Stable BB+ / S
Slide 17: Highly Rated & Diversified Investment Portfolio
Highly Rated & Diversified Investment Portfolio CONFIDENTIAL Composition by asset class1 Composition by rating2 Non-U.S. Government , 2% 2% 0% 9% 13% Residential MBS , 0% 25% U.S. Treasuries AAA Municipals 35% AA Non-U.S. Government 17% Residential MBS A U.S. Corporate BBB Non-U.S. Corporate BB & Be
Slide 18: Our ESG Pillars
Our ESG Pillars CONFIDENTIAL Enact has a strong foundation of corporate sustainability and we are proud of the role we play in the communities we serve and our processes that result in a sustainable business. ESG issues are a key component of our strategy to enhance long-term value creation for our
Slide 19: Appendix
CONFIDENTIAL Appendix “Enact
Slide 20: Non-GAAP Measures
Non-GAAP Measures CONFIDENTIAL Use of Non-GAAP Measures This communication includes the non-GAAP financial measures entitled “adjusted operating income (loss)”, “adjusted operating income (loss) per share", and “adjusted operating return on equity." Adjusted operating income (loss) per share is deri
Slide 21: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 1 CONFIDENTIAL Net Income to Adj Operating Income 1Q22 2Q22 3Q22 4Q22 2022 1Q23 2Q23 Net Income $165 $205 $191 $144 $704 $176 $168 Adjustments to Net Income: Net investment (gains) losses $0 $0 $0 $1 $2 $0 $13 Costs associated with reorganization $0 $0 ($0) $3 $3