Enact Holdings, Inc. · NASDAQ:ACT
Enact — Q4 2023 Earnings Presentation
22 slides from Enact's earnings presentation, Feb 7, 2024
Slide 1: Fourth Quarter 2023 Financial Results
Fourth Quarter 2023 Financial Results February 6, 2023
Slide 2: Cautionary Note Regarding Forward-Looking Statements
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 results, the rela
Slide 3: Key Takeaways
Key Takeaways Insurance in-force reached a new record of $263B, driven by full-year NIW of $53B and elevated persistency Continued focus on cost discipline as full-year 2023 operating expenses were down 7% Y/Y to $223M, ahead of expectations Strong credit performance throughout 2023; new delinquency
Slide 4: Full Year 2023 Financial Results and Highlights
Full Year 2023 Financial Results and Highlights FY 2023 FY 2022 Organic growth and investing with intent: Primary IIF (B) $263 $248 » Expanded platform to pursue opportunities in adjacent markets, including the launch of Enact Re NIW (B) $53 $66 Net Income (M) $666 $704 Strong balance sheet principl
Slide 5: About Us
About Us 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 » Extend competiti
Slide 6: Financial Highlights
Financial Highlights Primary Insurance in-Force Flat Q/Q $263 New Insurance Written Down 27% Q/Q $10.5 Net Premiums Earned Down 1% Q/Q $240 billion billion million Net Income Down 4% Q/Q $157 Adjusted Operating Income1 $158 Net Investment Income Up 2% Q/Q $56 million Down 4% Q/Q million million Dilu
Slide 7: Delivering Shareholder Value
Delivering Shareholder Value Book value per share excluding AOCI1 + cumulative dividends Adjusted operating ROE2 3 Trailing 4Q 17% 17% 16% 15% 15% Adj ROE 1 Book value per share excluding Accumulated Other Comprehensive Income “AOCI” is a non-GAAP measure. Please see appendix for a reconciliation; 2
Slide 8: Market and Industry Dynamics
Market and Industry Dynamics Complex market with favorable underpinnings Industry well positioned to navigate market conditions » Slower housing market with reduced affordability » Qualified Mortgage definition and regulators driving due to higher interest rates and cumulative home higher credit and
Slide 9: Strong & Comprehensive Risk Management
Strong & Comprehensive Risk Management December 31, 2007 December 31, 2023 Significant decrease in layered risk FICO at Origination1 <620 7% <620 2 % RIF % RIF 0% # of High-Risk Layers 740+ 740+ 4Q07 4Q23 25% 59% 0 4.6% 0.6% 620-679 620-679 LTV > 95% 1 7.9% 0.6% 34% 7% 2 2.5% 0.1% 680-739 34% FICO <
Slide 10: Primary Insurance in-Force (IIF) Growth
Primary Insurance in-Force (IIF) Growth Primary IIF ($B) and primary persistency rate Book year primary insurance in-force ($B) 97% of Portfolio NIW ($B) 15.1 13.2 15.1 14.4 10.5 Avg Mtg Rate 3.9% 4.3% 4.8% 4.2% 3.2% 3.1% 4.9% 6.7% » NIW decreased 27% sequentially and 31% versus the » Historically l
Slide 11: Portfolio Premium Yield & Premiums
Portfolio Premium Yield & Premiums In-force primary portfolio premium yield Primary direct & ceded premiums1 ($M) 4Q22 1Q23 2Q23 3Q23 4Q23 Base Premiums Single Ceded Base Premium Rate (bps) 41.0 40.5 40.3 40.2 40.1 $232 $235 $238 $243 $239 $2 $2 $2 $2 $1 Single Cancellations 0.3 0.3 0.3 0.3 0.2 Cede
Slide 12: Delinquencies and Forbearance
Delinquencies and Forbearance New delinquencies1 Delinquent policies 76,960 Not In Forbearance In Forbearance Not in Forbearance In Forbearance 73% 44,904 41,617 35,996 13% 32,624 21% 71% 24,820 42% 19,943 20,342 41% 26% 18% 29% 59% 74% 82% 27% 58% 79% 87% 2Q20 - 4Q20 2021 2022 2023 4Q20 4Q21 4Q22 4
Slide 13: Losses
Losses Losses ($M) Highlights 24 » 4Q23 loss performance driven by new delinquencies partially 18 18 offset by $53 million reserve release » Reserve release driven by favorable cure performance (11) (4) primarily from 2022 and earlier delinquencies 4Q22 1Q23 2Q23 3Q23 4Q23 » Current period increase
Slide 14: Enact Re
Enact Re Enact Re is a subsidiary of EMICO and Bermuda-based entity; fully licensed by Bermuda Monetary Authority and GSE approved as a non-exclusive reinsurer; A- rating from A.M. Best EMICO contributed additional $250 million to Enact Re during the quarter supporting an increase to our affiliate q
Slide 15: Strong PMIERs Sufficiency
Strong PMIERs Sufficiency Sufficiency to PMIERs1, 2 ($M) Highlights » Modest decrease in PMIERs sufficiency for the quarter was 165% 164% 162% 162% 161% driven by distributions from EMICO partially offset by business cash flows and new CRT transactions 2,050 2,098 1,958 2,017 » Obtained $248 million
Slide 16: Robust Capital Position
Robust Capital Position Capital position1 ($M) Highlights » 2023 full year capital return of over $300 million through share buybacks and quarterly and special dividends » Returned a total of $157M to shareholders during the quarter, consisting of $26M quarterly dividend, $113M special dividend, and
Slide 17: Strong & Diversified Ratings
Strong & Diversified Ratings 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 A- / Stable BBB- / Stable - - - Ja
Slide 18: Highly Rated & Diversified Investment Portfolio
Highly Rated & Diversified Investment Portfolio Composition by asset class1 Composition by rating2 » Top 10 issuers comprise ~6% of portfolio » 98% of portfolio is investment grade » Book yield of 3.6% up 0.1 points versus prior quarter » 4Q23 unrealized gain / (loss) position of $(294)M down from $
Slide 19: Our ESG Pillars
Our ESG Pillars 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 stakeholders.
Slide 20: Appendix
Appendix “Enact
Slide 21: Non-GAAP Measures
Non-GAAP Measures 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 derived from adju
Slide 22: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 1 Net Income to Adj Operating Income 1Q22 2Q22 3Q22 4Q22 2022 1Q23 2Q23 3Q23 4Q23 2023 Net Income $165 $205 $191 $144 $704 $176 $168 $164 $157 $666 Adjustments to Net Income : Net investment (gains) losses $0 $0 $0 $1 $2 $0 $13 $0 $1 $14 Costs associated with reor