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EH

Enact Holdings, Inc. (ACT)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered resilient fundamentals: adjusted operating income of $166M and diluted adjusted EPS of $1.12; total revenues were $311.5M with net premiums earned of $245M, while loss ratio rose to 15% on lower reserve release versus prior periods .
  • Capital return guidance was raised to approximately $500M for FY2025 (from $400M in Q2), supported by robust NIW ($14B), elevated persistency (83%), and strong PMIERs sufficiency (162%/$1.9B above requirement) .
  • Credit risk transfer strategy advanced: a forward quota share to cede ~34% of expected 2027 NIW and post-quarter $170M XOL coverage; plus a new $435M five‑year revolver enhanced flexibility .
  • Estimates context: EPS modestly beat consensus and revenue was slightly below; management’s expense outlook was cut to ~$219M for FY2025; these dynamics and the higher capital return outlook are the likely stock narrative catalysts near term .
  • Note: CEO’s prepared remarks referenced $1.20 adjusted diluted EPS; company materials and CFO confirmed $1.12—use $1.12 for analysis .

What Went Well and What Went Wrong

What Went Well

  • Elevated persistency (83%) and strong NIW ($14B) drove IIF up 2% YoY to $272B; management emphasized disciplined underwriting and constructive pricing via Rate 360 .
    “Pricing was constructive again in the quarter, and we maintained our commitment to prudent underwriting standards.”
  • Capital strength and CRT execution: PMIERs sufficiency of 162% ($1.9B buffer); new forward Q/S ceding ~34% of expected 2027 NIW and $170M XOL post‑quarter .
    “These transactions demonstrate our commitment to disciplined risk management while providing certainty of coverage at favorable market terms.”
  • Expense discipline: operating expenses held at $53M and FY2025 expense guidance lowered to ~$219M despite inflation; net investment income rose to $69M on >5% new money yields .

What Went Wrong

  • Loss ratio climbed to 15% vs 10% in Q2 and 5% in Q3’24 as reserve release ($45M) moderated versus prior periods; total delinquencies increased sequentially to 23,382 and delinquency rate to 2.45% .
  • Premium rate pressure: net earned premium rate (34.9 bps) edged down sequentially on higher ceded premiums; base premium rate (39.7 bps) ticked down 0.1 bps .
  • ROE and adjusted operating ROE moderated YoY (12.4%/12.6% vs 14.7%/14.8% in Q3’24), reflecting higher losses and ceded premiums .

Financial Results

Core P&L and Ratios vs prior year, prior quarters, and estimates

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Total Revenues ($USD Millions)$309.6 $306.8 $304.9 $311.5
Diluted EPS (GAAP) ($USD)$1.15 $1.08 $1.11 $1.10
Adjusted Diluted EPS ($USD)$1.16 $1.10 $1.15 $1.12
Net Premiums Earned ($USD Millions)$249.1 $244.8 $245.3 $244.7
Net Investment Income ($USD Millions)$61.1 $63.0 $65.9 $68.6
Loss Ratio (%)5% 12% 10% 15%
Expense Ratio (%)22% 21% 22% 22%
Operating Expenses ($USD Millions)$56 $53 $53 $53

KPIs and Capital

MetricQ3 2024Q1 2025Q2 2025Q3 2025
New Insurance Written (NIW, $USD Billions)$14 $10 $13 $14
Persistency Rate (%)83% 84% 82% 83%
Primary IIF ($USD Billions)$268 $268 $270 $272
PMIERs Sufficiency ($USD Millions)$2,190 $1,966 $1,961 $1,904
PMIERs Sufficiency (%)173% 165% 165% 162%
Reserve Release ($USD Millions)$65 $47 $48 $45
Total Delinquencies (count)21,027 22,349 22,118 23,382
Primary Delinquency Rate (%)2.17% 2.34% 2.32% 2.45%

Premium Rate Detail (Q3 2025)

  • Base premium rate: 39.7 bps (down 0.1 bps q/q); net earned premium rate: 34.9 bps (down slightly q/q on higher ceded premiums) .

Estimates vs Actual (Q3 2025)

MetricConsensus EstimateActualSurprise
Primary EPS Consensus Mean ($USD)$1.1103*$1.12 +$0.0097*
Revenue Consensus Mean ($USD)$312.61M*$311.46M -$1.15M*
Primary EPS - # of Estimates3*——
Revenue - # of Estimates4*——

Values marked with * were retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Capital ReturnFY 2025~$400M (as of Q2’25) ~$500M Raised
Operating Expenses (ex‑reorg)FY 2025$220M–$225M ~$219M Lowered
Quarterly Dividend per ShareOngoing$0.21 (Q2’25) $0.21 (declared for Dec 11, 2025) Maintained
Base Premium Rate outlook2025Approximate 2024 levels (ongoing) Approximate 2024 levels Maintained
Revolving Credit FacilityCurrent$200M (prior facility) $435M, 5‑year Increased capacity

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Capital returnsQ1: New $350M buyback; dividend +14% to $0.21; PMIERs 165% [$2.0B] . Q2: Raised 2025 return to ~$400M; continued buybacks .Raised 2025 capital return target to ~$500M; $105M repurchased in Q3 and $42M through 10/31 .Increasing shareholder returns
CRT programQ1: Announced $225M (2025) and $260M (2026) XOL coverage .New forward Q/S ceding ~34% of 2027 NIW; post‑quarter $170M XOL coverage .Expanding multi‑year CRT
Expense disciplineQ1: OpEx $53M; expense ratio 21% . Q2: OpEx $53M; expense ratio 22% .OpEx $53M; FY2025 expenses cut to ~$219M; note 4Q heavier variable comp .Sustained cost control
Credit performanceQ1: Loss ratio 12% with $47M release . Q2: Loss ratio 10% with $48M release .Loss ratio 15% with $45M release; delinquencies seasonally higher; claims rate 9% maintained .Normalizing losses as seasoning
Pricing/Rate 360Ongoing data/ML investments highlighted .“Pricing was constructive”; Rate 360 delivers granular risk‑adjusted pricing .Tech‑enabled pricing continues
Liquidity & ratingsQ2 PMIERs 165%/$2.0B; strong cash .New $435M revolver; Moody’s upgrades; AM Best outlook positive; PMIERs 162%/$1.9B .Stronger balance sheet and ratings

Management Commentary

  • Strategy and capital returns: “We are pleased to announce our updated 2025 capital return expectation of approximately $500 million, up from prior guidance of $400 million.”
  • Balance sheet and CRT: “Our PMIERs sufficiency ratio was 162%, providing significant financial flexibility... closed on a new forward excess of loss agreement that will provide approximately $170 million of coverage on a portion of our 2027 book.”
  • Pricing and underwriting: “Pricing was constructive again in the quarter, and we maintained our commitment to prudent underwriting standards.”
  • Expense management and technology: “Despite inflationary pressures, we have reduced our expenses close to $25 million since 2021… investments in our Rate 360 engine… data and machine learning… a very granular, risk‑based pricing system.”
  • CFO on reinsurance and liquidity: “We entered into a new forward quota share reinsurance agreement… secured approximately $170 million of additional excess of loss… entered into a new $435 million, five‑year senior unsecured revolving credit facility.”

Q&A Highlights

  • Delinquency seasoning and trajectory: Management expects plateauing of loss development around years 3–4, with 2025 showing slowing YoY increases in new delinquencies vs 2024; credit performance aligned with expectations across vintages .
  • Expense cadence: Variable incentive comp heavier in Q4; year not level-loaded; supports lowered FY expense guidance .
  • Technology/AI impact: Ongoing investments in data, ML, and Rate 360 to improve granular risk‑adjusted pricing, underwriting efficiencies, and customer experience; AI viewed as both efficiency and decision quality enhancer .
  • Capital return uplift rationale: Increased confidence from in‑year performance and mortgage origination levels drove raising the 2025 capital return plan to ~$500M .

Estimates Context

  • Q3 2025 EPS slightly beat consensus ($1.12 actual vs $1.1103 estimate); revenue was modestly below ($311.46M actual vs $312.61M estimate). The magnitude suggests limited estimate revisions, but higher capital return and expense reduction could support upward tweaks to FY25 EPS assumptions despite normalizing loss ratio .
    Values marked with * were retrieved from S&P Global.

Key Takeaways for Investors

  • Strong capital return signal: Raising FY2025 capital returns to ~$500M is a clear positive for capital deployment and shareholder yield .
  • Loss ratio normalization: Higher losses reflect seasonal delinquencies and smaller reserve releases vs 2024; claims rate held at 9% and delinquency seasoning trends are tracking expectations .
  • Premium dynamics: Net earned premium rate dipped on higher cessions; watch CRT mix and ceded premiums into 2026–2027 as CRT program expands .
  • Expense discipline intact: FY2025 expense outlook cut to ~$219M with Q4 heavier variable comp; supports margin resilience amid higher loss ratio .
  • Balance sheet and liquidity: PMIERs 162%/$1.9B buffer and new $435M revolver underpin flexibility; ratings upgrades de‑risk credit profile .
  • Operational KPIs healthy: NIW $14B and persistency 83% sustain IIF growth; constructive pricing supports profitability amid macro shifts .
  • Discrepancy note: Use $1.12 for adjusted diluted EPS per 8‑K; a $1.20 figure in CEO remarks appears to be a transcript misstatement .

Additional References and Cross-Checks

  • Q3 earnings press release and 8‑K: full financial statements, capital and CRT details .
  • Q2 and Q1 press releases for trends in NIW, persistency, loss ratios, and capital returns .
  • Forward XOL reinsurance press release (Oct 30, 2025) .

Notes on anomalies:

  • Adjusted diluted EPS is $1.12 per 8‑K/press release; CEO’s $1.20 remark should be disregarded in favor of filed figures .
  • CFO’s statement referencing “third quarter of 2023” for repurchases appears to be a year typo; press release confirms Q3 2025 repurchases and activity through Oct 31, 2025 .