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EH

Enact Holdings, Inc. (ACT)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 EPS beat while revenue was slightly below consensus: Adjusted diluted EPS was $1.15 vs S&P Global consensus $1.11*, while total revenues were $304.9M vs $308.3M*; loss ratio improved to 10% on $48M reserve release and strong cures (52%).
  • Increased 2025 capital return guidance to approximately $400M; declared a $0.21 quarterly dividend and repurchased $85M in Q2 (2.4M shares), with $262M buyback capacity remaining as of July 25.
  • Credit and capital strength remain key: PMIERs sufficiency at 165% (~$2.0B above requirement), delinquency rate of 2.32%, and CRT program provides ~$1.9B PMIERs credit.
  • Pricing discipline intact; management expects base premium rate to stabilize around 2024 levels; macro watch items include affordability and tariff uncertainty.

What Went Well and What Went Wrong

What Went Well

  • Capital returns: “We are increasing our expected capital returns for 2025 to approximately $400 million,” alongside Q2 returns of $116M (dividends and buybacks).
  • Credit performance: Reserve release of $48M on strong cure performance (cure rate 52%) drove a 10% loss ratio; “credit performance remains strong and we are well reserved for a range of scenarios.”
  • Pricing and underwriting: “Our pricing engine Rate360 allows us to deliver competitive pricing on a risk‑adjusted basis,” with base premium rate stabilization around 2024 levels.

What Went Wrong

  • Modest top-line softness vs Street: Revenues of $304.9M trailed consensus $308.3M*; net income declined YoY (to $168M from $184M) on lower reserve release versus the unusually favorable prior year.
  • Sequential persistency slippage and NIW down YoY: Persistency fell to 82% (from 84% in Q1) and NIW at $13B was modestly below 2Q24 ($14B) amid affordability headwinds.
  • Macro uncertainty: Management flagged tariff uncertainty and regional HPA softness (e.g., Cape Coral) as watch items impacting outlook confidence in certain geographies.

Financial Results

MetricQ2 2024Q1 2025Q2 2025 (Actual)Q2 2025 (Consensus)*
Total Revenues ($M)$298.8 $306.8 $304.9 $308.3*
Diluted EPS (GAAP)$1.16 $1.08 $1.11 $1.11*
Adjusted Diluted Operating EPS$1.27 $1.10 $1.15 N/A
Loss Ratio (%)(7)% 12% 10% N/A
Expense Ratio (%)23% 21% 22% N/A
ROE (%)15.4% 13.1% 13.0% N/A
Adjusted Operating ROE (%)16.9% 13.4% 13.4% N/A

Values marked with * are from S&P Global consensus.

KPIs

KPIQ2 2024Q1 2025Q2 2025
NIW ($B)$14 $10 $13
Primary Persistency Rate (%)83% 84% 82%
Primary IIF ($B)$266 $268 $270
Net Premiums Earned ($M)$245 $245 $245
Losses Incurred ($M)$(17) $31 $25
Net Investment Income ($M)$60 $63 $66
Reserve Release ($M)$77 $47 $48
Primary Delinquency Rate (%)1.96% 2.34% 2.32%
PMIERs Sufficiency (%)169% 165% 165%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Capital ReturnFY 2025Not previously quantified in filings reviewed≈$400MRaised
Operating Expenses (ex-reorg)FY 2025Not disclosed in filings reviewed$220–$225MMaintained (“continue to anticipate”)
Quarterly DividendQ3 2025$0.21 per share (Q1 2025) $0.21 per share (payable Sep 8)Maintained
Pricing (Base Premium Rate)2025N/AStabilize around 2024 levelsMaintained outlook

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Pricing/Tech (Rate360)Filings emphasize disciplined pricing; no explicit Rate360 call-out in 8-Ks Emphasized risk-based pricing via Rate360 and underwriting discipline Stable execution
Macro/Tariffs“Complex economic environment” noted; focus on disciplined ops Cited tariff uncertainty as a watch item; affordability constraints persist Heightened watch
NIW/Market SizeQ4/Q1 growth drivers with seasonality and share dynamics NIW $13B (seasonality), MI TAM similar to 2024 (~$300B) per CEO Steady TAM outlook
Credit PerformanceReserve releases and favorable cures continued Reserve release $48M; delinquency rate 2.32%; 52% cure rate highlighted Strong, steady
Regulatory/PolicyOngoing engagement with GSEs/FHFA MI premiums tax-deductible again; continued policy engagement Constructive
Capital & PMIERs/CRTRobust PMIERs; ongoing CRT actions PMIERs 165%; ~$1.9B PMIERs credit from CRT; capital return raised Supportive of returns

Management Commentary

  • “We are increasing our expected capital returns for 2025 to approximately $400 million.”
  • “Our pricing engine Rate360 allows us to deliver competitive pricing on a risk‑adjusted basis.”
  • “Strong embedded equity combined with our effective loss mitigation efforts helped drive robust cure performance with a cure rate of 52%.”
  • “Our PMIERs sufficiency was 165% or $2 billion above PMIERs requirements at the end of the second quarter.”

Q&A Highlights

  • Regional HPA soft spots and seasoning: Management highlighted isolated softness (e.g., Cape Coral) but noted portfolio exposure is de minimis and pricing adjusts for forward HPA; borrowers still prioritize mortgage payments given resilient labor market and balance sheets.
  • MI TAM and capital planning: CEO expects 2025 MI TAM similar to 2024 (~$300B), with capital returns sized to macro conditions and performance; raised 2025 total capital return to ~$400M.
  • Delinquency outlook and cures: New delinquency rates consistent with pre‑pandemic levels; embedded HPA remains a meaningful mitigant to loss and supports cures; claim rate assumption on new notices remains a prudent 9%.
  • Regulatory updates: Continued active engagement with GSEs/FHFA; MI premiums are tax deductible again.

Estimates Context

  • Q2 2025 vs S&P Global consensus: Adjusted diluted EPS $1.15 vs $1.11*; total revenues $304.9M vs $308.3M*.
  • Estimate dynamics: EPS outperformance was supported by a $48M reserve release and higher NII, while revenue modestly trailed amid stable net premiums; if reserve releases normalize, EPS sensitivity will hinge on delinquency trends and NII trajectory.

Values marked with * are from S&P Global consensus.

MetricQ2 2025 ActualQ2 2025 Consensus*# of Estimates*
Adjusted Diluted EPS$1.15 $1.11*3*
Total Revenues ($M)$304.9 $308.3*4*

Key Takeaways for Investors

  • Quality beat: EPS topped Street despite a modest revenue shortfall, driven by strong cures and NII; reserve releases remain a key swing factor.
  • Credit remains favorable: Delinquency rate at 2.32% with robust cures supports continued low loss ratios; portfolio risk metrics remain strong.
  • Capital return upgraded: New 2025 capital return target of ~$400M, with buybacks and dividends underpinned by 165% PMIERs sufficiency.
  • Pricing steady: Base premium rate expected to stabilize around 2024 levels, suggesting resilient margin framework if credit trends hold.
  • Watch macro/tariffs & affordability: Management highlighted policy uncertainty and affordability as demand headwinds; NIW seasonality helped in Q2 but remains sensitive to rates.
  • Dividend maintained: Quarterly dividend at $0.21 sustained; additional buyback capacity ($262M remaining as of 7/25) provides flexibility.
  • Reinsurance/CRT supports capital: ~$1.9B of PMIERs credit from CRT enhances capital efficiency and cushions stress scenarios.

Additional detail and cross-references:

  • Consolidated Statement of Income and key ratios for Q2 2025, Q1 2025 and Q2 2024.
  • Balance sheet, ROE, adjusted ROE, and PMIERs sufficiency.
  • Operating highlights (NIW, persistency, reserve release) and capital actions.
  • Earnings call prepared remarks and Q&A excerpts informing qualitative assessments.

Values marked with * are from S&P Global consensus.