Enact Holdings, Inc. · NASDAQ:ACT
Enact — Q4 2022 Earnings Presentation
21 slides from Enact's earnings presentation, Feb 7, 2023
Slide 1: Fourth Quarter 2022 Financial Results
Fourth Quarter 2022 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: About Us
About Us Experienced, innovative, and well capitalized private mortgage insurance company helping millions of families achieve the dream of home ownership since 1981 Excellence Delivering consistent value and strong capital stewardship for our shareholders, as reflected by our 24% 1 total shareholde
Slide 4: Focused Strategy to Maximize Value Creation
Focused Strategy to Maximize Value Creation − Deliver best-in-class underwriting to well-established, deep and diversified customer base Differentiate Enact from − Invest to increase differentiation, drive efficiencies and enhance decision-making competitors − Outpace industry average insurance-in-f
Slide 5: Near Term Housing & Industry Dynamics
Near Term Housing & Industry Dynamics Complex market with favorable Industry well positioned to navigate underpinnings market conditions • Rising interest rates and cumulative home price • Qualified Mortgage definition and regulators driving appreciation pressuring affordability driving a higher cre
Slide 6: Enact is Well-Positioned for Continued Success
Enact is Well-Positioned for Continued Success Prudent Underwriting and Pricing Risk Management and Distribution Purposeful Innovation Pricing model and best in class underwriting Robust internal risk analytics and capital Investments to deepen and extend capabilities deliver high-quality risk-adjus
Slide 7: 2022: Achieved Significant Milestones
2022: Achieved Significant Milestones FY 2022 FY 2021 Differentiated Enact from competitors: • Improved underwriting efficiency and deepened Primary IIF (B) $248 $227 understanding of layered risks NIW (B) $66 $97 • Activated or increased new business with 80% of Net Income (M) $704 $547 our targete
Slide 8: 4Q 2022 Financial Metrics
4Q 2022 Financial Metrics $144 million $147 million $233 million $45 million (down 25% QoQ) (down 23% QoQ) (down 1% QoQ) (up 14% QoQ) Net Income Adjusted Operating Income1 Net Premiums Earned Net Investment Income $0.90 14.4% $18 million 8% (down 23% QoQ) (down 4.2 Points QoQ) (up QoQ) (up 25 Points
Slide 9: Delivering Shareholder Value
Delivering Shareholder Value Book Value Per Share Adjusted Operating EPS2 Adjusted Operating ROE3 Excluding AOCI1 + Dividends (4)% (40) +17% bps +6% Incl. AOCI $30.31 $29.41 $1.26 $1.17 20% $28.23 19% $1.01 $26.96 $0.94 $0.90 16% 15% 14% $25.93 4Q21 1Q22 2Q22 3Q22 4Q22 4Q21 1Q22 2Q22 3Q22 4Q22 4Q21
Slide 10: Comprehensive Risk Management
Comprehensive Risk Management Strong Underlying Credit Quality of Insurance Portfolio FICO Score at Origination1 LTV at Origination1 620-679 <620 95.01% & 8% 0% Above 18% # of High-Risk Layers2 % RIF 4Q’22 0 0.6% 80.01% - 4Q 2022 RIF 90.00% 1 0.6% 34% LTV > 95% 680-739 2 0.2% 35% 740+ FICO < 680 90.
Slide 11: Primary Insurance In Force (IIF) Continues to Rise
Primary Insurance In Force (IIF) Continues to Rise Primary IIF ($B) & Persistency Book Year Primary IIF ($B) 96% of Portfolio 86% 80% 82% 76% 69% $82 +10% $64 $242 $248 $55 $232 $238 $227 $16 $6 $6 $7 $3 4Q21 1Q22 2Q22 3Q22 4Q22 2015 2016 2017 2018 2019 2020 2021 2022 IIF Persistency Avg Mtg Rate 4.
Slide 12: Portfolio Premium Yield & Premiums
Portfolio Premium Yield & Premiums In Force Portfolio Premium Yield Premiums ($M) Base Premiums Single Ceded 4Q21 1Q21 2Q22 3Q22 4Q22 $237 $234 $237 $235 $233 $12 $10 $8 $5 $2 Base Premium Rate (bps) 43.4 42.3 42.5 41.7 41.0 Single Cancellations 2.1 1.7 1.3 0.9 0.3 $244 $242 $249 $250 $252 Ceded Pre
Slide 13: Delinquencies & Forbearance
Delinquencies & Forbearance Continued Strong Cumulative Cure Rates Across Delinquencies Cures Continue to Outpace New Delinquencies New Delinquencies1 Delinquent Policies Not In Forbearance In Forbearance 76,960 Not in Forbearance In Forbearance 73% 44,904 32,624 42% 71% 24,820 22,571 19,513 18,856
Slide 14: Losses
Losses Losses ($M) Highlights 18 6 Current quarter loss performance driven primarily by higher estimated claim rate on new delinquencies and a net reserve release of $42 million (10) − $63 million release on favorable cure performance from 2021 and prior delinquencies (primarily COVID related) (40)
Slide 15: Strong PMIERs Sufficiency
Strong PMIERs Sufficiency Published PMIERs Required Assets ($M) Sufficiency To Published PMIERs1($M) 176% 174% 165% 166% 165% 1,404 1,622 1,511 1,590 1,578 2,261 2,249 2,003 2,047 2,050 5,077 5,222 5,147 5,292 5,206 (4,478) (4,583) (4,611) (4,633) (4,734) 4Q21 1Q22 2Q22 3Q22 4Q22 4Q21 1Q22 2Q22 3Q22
Slide 16: Robust Capital Position & Ratings
Robust Capital Position & Ratings Strong Capital Position1 ($M) Highlights Equity Debt-to-Capital Disciplined capital allocation strategy aligned to maximize shareholder value through: 15% 15% 15% 15% 15% − Supporting existing policyholders $4,106 $4,049 $4,081 $4,117 $4,101 − Growing core mortgage
Slide 17: Conservative and Highly Rated Investment Portfolio
Conservative and Highly Rated Investment Portfolio Composition by Asset Class1 Composition by Rating2 1% 2% 0% 0% 9% 10% 23% U.S. Treasuries AAA Municipals 16% Non-U.S. Government 38% AA Residential MBS A U.S. Corporate BBB 13% Non-U.S. Corporate BB & Below Other asset-backed 54% 34% Highly diversif
Slide 18: Key Takeaways
Key Takeaways + Strong fourth quarter and full year results driven by record insurance-in-force, increasing persistency, favorable loss development, and robust capital management + Executing against growth strategy focused on strong customer relationships, delivering differentiated solutions, and pr
Slide 19: Appendix
Appendix Enact
Slide 20: 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 21: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 1 Net Income to Adj Operating Income 1Q21 2Q21 3Q21 4Q21 2021 1Q22 2Q22 3Q22 4Q22 2022 Net Income $125 $131 $137 $154 $547 $165 $205 $191 $144 $704 Adjustments to Net Income: Net investment (gains) losses $1 $2 ($1) ($0) $2 $0 $0 $0 $1 $2 Costs associated with reo