Enact Holdings, Inc. · NASDAQ:ACT
Enact — Q2 2024 Earnings Presentation
22 slides from Enact's earnings presentation, Aug 1, 2024
Slide 1: Second Quarter 2024 Financial Results
CONFIDENTIAL Second Quarter 2024 Financial Results August 1, 2024
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 $266B, driven by NIW of $14B and persistency of 83% Lowered the expected claim rate on new and existing delinquencies from 10% to 9% as a result of sustained favorable cure performance and our current market expectations Operating
Slide 4: About Us
About Us CONFIDENTIAL Dynamic platform uniquely positioned with innovative approach, strong balance sheet, Leading private mortgage insurance 40+ year track record and cycle-tested company helping millions of families leadership team achieve the dream of sustainable home ownership Drive Profitable G
Slide 5: Financial Highlights
Financial Highlights CONFIDENTIAL Primary Insurance in-Force Up $2B Q/Q $266 New Insurance Written Up 29% Q/Q $13.6 Net Premiums Earned Up $4M Q/Q $245 billion billion million Net Income Up 14% Q/Q $184 Adjusted Operating Income1 $201 Net Investment Income Up 5% Q/Q $60 million Up 21% Q/Q million mi
Slide 6: Driving Continued Book Value Accretion
Driving Continued Book Value Accretion CONFIDENTIAL 1 Book value per share excluding AOCI + cumulative dividends 6 1 Book value per share excluding Accumulated Other Comprehensive Income “AOCI” is a non-GAAP measure. Please see appendix for a reconciliation
Slide 7: Market and Industry Dynamics
Market and Industry Dynamics CONFIDENTIAL Complex market with favorable Industry well positioned to navigate underpinnings market conditions » Housing market remains slow in the near-term » High quality credit portfolio and strong given elevated interest rates and cumulative home manufacturing quali
Slide 8: Strong & Comprehensive Risk Management
Strong & Comprehensive Risk Management CONFIDENTIAL 1 FICO at Origination (Risk in-force “RIF”) Significant decrease in layered risk # of High-Risk 4Q07 2Q23 3Q23 4Q23 1Q24 2Q24 Layers2 LTV > +0 4.6% 0.6% 0.6% 0.6% 0.6% 0.6% 95% +1 7.9% 0.6% 0.6% 0.6% 0.6% 0.6% & +2 2.5% 0.1% 0.1% 0.1% 0.1% 0.1% FIC
Slide 9: Primary Insurance in-Force (IIF) Growth
Primary Insurance in-Force (IIF) Growth CONFIDENTIAL 1, 2 NIW ($B), IIF ($B) and Persistency Rate Mortgage Rate IIF Concentration 4% 18% 10% 78% 16% 51% » NIW increased 29% sequentially primarily driven by » 4% of portfolio had mortgage rates at least 50 basis points higher estimated MI market size
Slide 10: Portfolio Premium Yield & Premiums
Portfolio Premium Yield & Premiums CONFIDENTIAL 1 In-force primary portfolio premium yield Primary direct & ceded premiums ($M) 2Q23 3Q23 4Q23 1Q24 2Q24 Base Premium Rate (bps) 40.3 40.2 40.1 40.1 40.3 Single Cancellations 0.3 0.3 0.2 0.2 0.2 Ceded Premium (3.3) (3.2) (3.9) (4.0) (4.1) Net Premium R
Slide 11: Strong credit performance
Strong credit performance CONFIDENTIAL New delinquencies1 Cure Activity1 2 3 Remaining 959 1,709 2,445 3,479 7,570 Total Delqs 18,065 19,241 20,432 19,492 18,065 Delqs Cumulative 89% 84% 79% 69% 28% Delq Rate 1.9% 2.0% 2.1% 2.0% 2.0% Cure Rate » New delinquency rate consistent with pre-pandemic leve
Slide 12: Losses
Losses CONFIDENTIAL Losses ($M) & Loss Ratio Highlights » Sequential and year-over-year decrease in losses primarily driven by a reserve release of $77 million reflecting favorable cure performance and the lowering of our claim rate expectations from 10% to 9% » Lowered our claim rate on existing an
Slide 13: Embedded Equity
Embedded Equity CONFIDENTIAL 1 Primary Portfolio Delinquent Policies 6% 15% MTM Equity <10% 94% MTM Equity >10% - <20% 87% 79% MTM Equity >20% » Cumulative HPA and continued tight supply supporting housing prices support strong cumulative equity across our portfolio » 87% of all policies and 94% of
Slide 14: Continued Strong Capital Return and Low Leverage
Continued Strong Capital Return and Low Leverage CONFIDENTIAL GAAP Capital position1 ($M) Highlights » Previously announced: new share repurchase program with authorization up to $250 million and a 16% increase to our quarterly dividend from $0.16 to $0.185 per share » Returned $78M to shareholders
Slide 15: Strong PMIERs Sufficiency
Strong PMIERs Sufficiency CONFIDENTIAL Sufficiency to PMIERs1, 2 ($M) PMIERs Credit by CRT Instrument » Operating leverage of 35% reflects successful execution of our well diversified CRT program in a complex market » Secured an XOL providing $90M of reinsurance coverage on NIW written in the second
Slide 16: Robust Statutory Capital
Robust Statutory Capital CONFIDENTIAL EMICO Policyholder Surplus & Statutory Capital Scheduled Contingency Reserve Release1 Year $M 2024 $175 2025 $307 2026 $342 2027 $359 2028 $384 2029 $441 2030 $510 2031 $522 2032 $508 2033 $492 Contingency $3,795 $3,917 $3,953 $4,140 $4,234 Reserve Total $4,040
Slide 17: Strong & Diversified Ratings
Strong & Diversified Ratings CONFIDENTIAL Rating Date Updated EMICO1 EHI2 LT Debt3 EMIC-NC1 Enact Re1 Agency Rating / Outlook Rating / Outlook Rating / Outlook Rating / Outlook Rating / Outlook Outlook Upgraded Moody’s A3 / Positive Baa3 / Positive Baa3 / Stable - - March 2024 Upgraded S&P A- / Stab
Slide 18: Highly Rated & Diversified Investment Portfolio
Highly Rated & Diversified Investment Portfolio CONFIDENTIAL $5.3B Investment Portfolio and $0.7B of Cash Equivalents Composition by asset class1 Composition by rating2 » Top 10 issuers comprise ~6% of portfolio » 99% of portfolio is investment grade » Book yield of 3.8% up 10bps versus prior quarte
Slide 19: 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 20: Appendix
CONFIDENTIAL Appendix
Slide 21: 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 22: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 1 CONFIDENTIAL Net Income to Adj Operating Income 1Q23 2Q23 3Q23 4Q23 2023 1Q24 2Q24 Net Income $176 $168 $164 $157 $666 $161 $184 Adjustments to Net Income: Net investment (gains) losses $0 $13 $0 $1 $14 $7 $8 Costs associated with reorganization ($1) $0 $0 $0 ($