Enact Holdings, Inc. (ACT)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 delivered stable results: GAAP diluted EPS $1.08 and adjusted diluted EPS $1.10 on total revenues of $306.8M; net premiums earned were $245M and ROE was 13.1% (adjusted ROE 13.4%) .
• Capital return accelerated: dividend raised 14% to $0.21 and new $350M buyback authorization; PMIERs sufficiency at 165% (~$2.0B above requirements) supports flexibility .
• Credit quality remained sound but reserve releases moderated ($47M vs $56M in Q4), pushing the loss ratio up to 12% (from 10%); delinquency rate improved sequentially to 2.34% .
• NIW of ~$10B fell 26% QoQ on seasonality and was down 7% YoY on lower estimated market share; persistency increased to 84% aiding IIF stability at $268B .
• Management reiterated 2025 expense guidance ($220–$225M) and expects 2025 capital returns similar to 2024 (~$350M), with pricing “constructive” and Rate360 underwriting technology cited as an advantage .

What Went Well and What Went Wrong

What Went Well

• Strong capital actions: new $350M buyback and dividend hike to $0.21 per share underscore confidence and balance sheet strength .
• Pricing/underwriting discipline supported portfolio quality; Rate360 leverages proprietary data and machine learning for competitive, risk‑adjusted pricing .
• Investment income resilient: $63M, supported by rising portfolio book yield (4.1%); management selectively rotated assets to recoup realized losses via higher future income .

Selected quote:

• “We had a strong start to 2025… well positioned to navigate an uncertain economic backdrop…” — Rohit Gupta, CEO .

What Went Wrong

• Reserve releases moderated to $47M (vs $56M in Q4), lifting loss ratio to 12% and losses incurred to $31M; YoY increase driven by lower release and incremental new delinquencies .
• NIW down 26% QoQ due to seasonality and 7% YoY on lower estimated market share; sequential slowdown in origination limited IIF growth .
• Expense ratio improvement, though solid at 21%, reflects ongoing inflationary pressures and reorganization costs (~$1M) noted in the quarter .

Financial Results

Segment/KPI Mix:

Estimate vs Actual (Wall Street consensus – S&P Global):

Values marked with * retrieved from S&P Global. Note: S&P “Primary EPS” conventions may differ from GAAP diluted EPS reported in the 8‑K .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategy and positioning: “We continue to operate from a position of strength… Rate360 enables competitive risk‑adjusted pricing… we are reaffirming our 2025 expense guidance range of $220M–$225M.” — Rohit Gupta; Hardin Mitchell .
• Capital allocation: “Our Board… authorized a new $350M share repurchase program and approved a 14% increase to our dividend…” — Hardin Mitchell ; press release confirmation .
• Credit performance: “This strong cure rate drove a reserve release of $47M… resulting loss ratio was 12%.” — Rohit Gupta .

Q&A Highlights

• Pricing posture under uncertainty: Enact strengthened pricing using Rate360 amid rising macro uncertainty; too early to assess peer actions .
• Policy engagement and loss mitigation: Constructive FHFA dialogue; strong GSE loss mitigation programs continue to support cures post‑COVID .
• Market share dynamics: Market participation stable; share movements can reflect lender mix and segment composition beyond pricing .
• Portfolio seasoning/HPA assumptions: Aging should slow new delinquency increases; forward pricing incorporates a more conservative HPA view relative to prior years .
• Expense/other income: Other income includes contract services; Q1 run‑rate may be inflated by ~$1M related to reinsurance arrangements .

Estimates Context

• Revenue beat: Actual $306.8M vs S&P Global consensus $302.2M — modest top‑line beat $302.2M*.
• EPS: S&P “Primary EPS” consensus $1.090 vs “Primary” actual 1.10*; GAAP diluted EPS reported at $1.08; adjusted diluted EPS $1.10. Expect small model reconciliation given S&P conventions 1.090*.
• Where estimates may adjust: Lower reserve release and higher loss ratio may prompt modest increases to loss expectations; capital return cadence and higher dividend could lift total shareholder yield assumptions .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Capital return is a clear catalyst: $350M new buyback plus 14% dividend increase signal confidence and support total yield; expect continued repurchases alongside dividend flows .
• Core underwriting remains disciplined with technology leverage (Rate360), enabling responsive pricing in a complex macro backdrop; this supports margin stability despite ceded premiums .
• Credit metrics remain strong; delinquency rate improved sequentially and cures remain elevated, but reserve releases are normalizing — watch loss ratio trajectory as book seasons .
• Earnings quality supported by rising investment yields (4.1% book yield) and stable net premiums; incremental upside from income optimization within portfolio .
• NIW softness largely seasonal; persistency strength sustains IIF; monitor market share trends and lender mix impacts on production .
• Regulatory/policy engagement looks constructive; strong PMIERs sufficiency and CRT coverage provide capital resilience across scenarios .
• Near‑term: Favor buyback/dividend themes; Medium‑term: Focus on reserve release normalization, pricing discipline, and macro/tariff developments’ impact on origination and claims .