Enact Holdings, Inc. (Nasdaq: ACT) today announced financial
results for the third quarter of 2023.
“Our team again delivered record insurance in force, higher
investment income, and expense discipline which drove another
strong quarter of performance,” said Rohit Gupta, President and CEO
of Enact. “We continued to execute on our strategy, driving
disciplined growth, investing to enhance our platform, maintaining
strong capital buffers, and pursuing a balanced approach to capital
allocation that includes returning capital to shareholders. We look
forward to continuing to serve our customers and generating value
for our shareholders.”
Key Financial Highlights
|
(In millions, except per share data or otherwise noted) |
3Q23 |
2Q23 |
3Q22 |
|
Net Income (loss) |
$164 |
$168 |
$191 |
|
Diluted Net Income (loss) per share |
$1.02 |
$1.04 |
$1.17 |
|
Adjusted Operating Income (loss) |
$164 |
$178 |
$191 |
|
Adj. Diluted Operating Income (loss) per share |
$1.02 |
$1.10 |
$1.17 |
|
NIW ($B) |
$14 |
$15 |
$15 |
|
Primary IIF ($B) |
$262 |
$258 |
$242 |
|
Persistency |
84% |
84% |
82% |
|
Net Premiums Earned |
$243 |
$239 |
$235 |
|
Losses Incurred |
$18 |
$(4) |
$(40) |
|
Loss Ratio |
7% |
(2)% |
(17)% |
|
Operating Expenses |
$55 |
$55 |
$58 |
|
Expense Ratio |
23% |
23% |
25% |
|
Net Investment Income |
$55 |
$51 |
$39 |
|
Net Investment gains (losses) |
$0 |
$(13) |
$(0) |
|
Return on Equity |
14.9% |
15.5% |
18.6% |
|
Adjusted Operating Return on Equity |
14.9% |
16.4% |
18.6% |
|
PMIERs Sufficiency ($) |
$2,017 |
$1,958 |
$2,249 |
|
PMIERs Sufficiency (%) |
162% |
162% |
174% |
Third Quarter 2023 Financial and Operating
Highlights
- Net income was $164 million, or $1.02 per diluted share,
compared with $168 million, or $1.04 per diluted share, for the
second quarter of 2023 and $191 million, or $1.17 per diluted
share, for the third quarter of 2022.
- Adjusted operating income was $164 million, or $1.02 per
diluted share, compared with $178 million, or $1.10 per diluted
share, for the second quarter of 2023 and $191 million, or $1.17
per diluted share, for the third quarter of 2022.
- New insurance written (NIW) was $14 billion, down 5% from $15
billion in the second quarter of 2023 and down 4% from the prior
year primarily driven by lower mortgage originations. NIW for the
current quarter was comprised of 98% monthly premium policies and
98% purchase originations.
- Primary Insurance-In-Force was a record $262 billion, up 2%
from $258 billion in the second quarter of 2023 and up 8% from $242
billion in the third quarter of 2022.
- Persistency was 84%, flat with the second quarter of 2023 and
up from 82% in the third quarter of 2022. Persistency has remained
elevated, driven by high mortgage rates and approximately 1% of the
mortgages in our portfolio had rates at least 50 basis points above
the prevailing market rate.
- Net premiums earned were $243 million, up 2% from $239 million
in the second quarter of 2023 and up 4% from $235 million in the
third quarter of 2022. Net premiums increased sequentially
primarily as a result of insurance in-force growth and slightly
lower ceded premiums. The year-over-year increase was driven by
insurance in-force growth, partially offset by the lapse of older,
higher priced policies. Net earned premium yield was flat from the
second quarter of 2023 and down from the third quarter of
2022.
- Losses incurred for the third quarter of 2023 were $18 million
and the loss ratio was 7%, compared to $(4) million and (2)%,
respectively, in the second quarter of 2023 and $(40) million and
(17)%, respectively, in the third quarter of 2022. The sequential
increases in losses and loss ratio were driven by higher current
quarter delinquencies, primarily driven by seasonal trends and the
normal loss development of new, large books. The higher new
delinquencies were partially offset by favorable cure performance
from 2022 and earlier delinquencies that remained above our
expectations, which resulted in a $55 million reserve release in
the quarter.
- The delinquency rate at quarter end was 1.97%, compared to
1.86% as of June 30, 2023, and 1.99% as of September 30, 2022.
- Operating expenses in the current quarter were $55 million and
the expense ratio was 23%, compared to $55 million and 23%,
respectively, in the second quarter of 2023 and $58 million and
25%, respectively in the third quarter of 2022. The year-over-year
decrease was driven in part by the impact of our cost reduction
initiatives, including the impact from our previously announced
renegotiated shared services agreement with Genworth and our
voluntary separation program executed in the fourth quarter of
2022.
- Net investment income was $55 million, up from $51 million in
the second quarter of 2023 and $39 million in the third quarter of
2022, driven by rising interest rates and higher average invested
assets.
- Net investment loss was down $13 million from the second
quarter of 2023. In the second quarter of 2023 we identified assets
that upon selling generated an opportunity to recoup losses through
higher net investment income over the next couple of years.
- Annualized return on equity for the third quarter of 2023 was
14.9% and annualized adjusted operating return on equity was 14.9%.
This compares to second quarter 2023 results of 15.5% and 16.4%,
respectively, and to third quarter 2022 results of 18.6% and 18.6%,
respectively.
Capital and Liquidity
- Enact Re has participated in four Fannie Mae and two Freddie
Mac reinsurance transactions.
- In August, the Company’s Board of Directors approved a new
share repurchase program with authorization to purchase up to $100
million of common stock.
- PMIERs sufficiency was 162% and $2,017 million above the PMIERs
requirements, compared to 162% and $1,958 million above the PMIERs
requirements in the second quarter of 2023.
- Enact Holdings, Inc. held $128 million of cash and $285 million
of invested assets as of September 30, 2023. Combined
cash and invested assets decreased $48 million from the prior
quarter, primarily due to our third quarter common dividend and
interest payment on our long-term debt.
Recent Events
- During the quarter, repurchases under our share repurchase
program totaled $6 million. Year to date through October 2023, we
have made $78 million in repurchases authorized under our existing
share repurchase programs.
- Inclusive of quarterly dividends and share repurchases to date,
Enact has returned approximately $150 million to shareholders in
2023.
- Announced separately today that our Board of Directors has
declared a quarterly dividend of approximately $23 million, or
$0.16 per common share, and approved a special cash dividend of
approximately $113 million, or $0.71 per common share.
Both are payable on December 5, 2023, to shareholders of record on
November 16, 2023. Future dividends will be subject to Board
approval.
- We remain committed to returning $300 million to shareholders
by year-end.
Conference Call and Financial Supplement
InformationThis press release, the third quarter 2023
financial supplement and earnings presentation are now posted on
the Company’s website, https://ir.enactmi.com. Investors are
encouraged to review these materials.
Enact will discuss third quarter financial results in a
conference call tomorrow, Thursday, November 2, 2023, at 8:00 a.m.
(Eastern). Participants interested in joining the call’s live
question and answer session are required to pre-register by
clicking here to obtain your dial-in number and
unique PIN. It is recommended to join at least 15 minutes in
advance, although you may register ahead of the call and dial in at
any time during the call. If you wish to join the call
but do not plan to ask questions, a live webcast of the event will
be available on our website,
https://ir.enactmi.com/news-and-events/events.
The webcast also will be archived on the Company’s website for
one year.
About EnactEnact (Nasdaq: ACT), operating
principally through its wholly-owned subsidiary Enact Mortgage
Insurance Corporation since 1981, is a leading U.S. private
mortgage insurance provider committed to helping more people
achieve the dream of homeownership. Building on a deep
understanding of lenders' businesses and a legacy of financial
strength, we partner with lenders to bring best-in class service,
leading underwriting expertise, and extensive risk and capital
management to the mortgage process, helping to put more people in
homes and keep them there. By empowering customers and their
borrowers, Enact seeks to positively impact the lives of those in
the communities in which it serves in a sustainable way. Enact is
headquartered in Raleigh, North Carolina.
Safe Harbor StatementThis 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 related assumptions
underlying our expected results, and the quotations of
management. These forward-looking statements are
distinguished by use of words such as “will,” “may,” “would,”
“anticipate,” “expect,” “believe,” “designed,” “plan,” “predict,”
“project,” “target,” “could,” “should,” or “intend,” the negative
of these terms, and similar references to future
periods. These views involve risks and uncertainties
that are difficult to predict and, accordingly, our actual results
may differ materially from the results discussed in our
forward-looking statements. Our forward-looking
statements contained herein speak only as of the date of this press
release. Factors or events that we cannot predict,
including uncertainty around Covid-19 and the effects of government
and other measures seeking to contain its spread; supply chain
constraints; inflation; increases in interest rates; risks related
to an economic downturn or recession in the United States and in
other countries around the world; changes in political, business,
regulatory, and economic conditions; future adverse rating agency
actions, including with respect to rating downgrades or potential
downgrades or being put on review for potential downgrade, all of
which could have adverse implications; changes in or to
Fannie Mae and Freddie Mac (the “GSEs”), whether through Federal
legislation, restructurings or a shift in business practices;
failure to continue to meet the mortgage insurer eligibility
requirements of the GSEs; competition for customers; lenders or
investors seeking alternatives to private mortgage insurance; an
increase in the number of loans insured through Federal government
mortgage insurance programs, including those offered by the Federal
Housing Administration; and other factors described in the risk
factors contained in our Annual Report on Form 10-K and other
filings with the Securities and Exchange Commission, may cause our
actual results to differ from those expressed in forward-looking
statements. In addition, the potential for future
dividend payments and other forms of returning capital to
shareholders, including share repurchases, will be determined in
consultation with the Board of Directors, and after considering
economic and regulatory factors, current risks to the Company, and
subsidiary performance. Although Enact believes the
expectations reflected in such forward-looking statements are based
on reasonable assumptions, the Company can give no assurance that
its expectations will be achieved and it undertakes no obligation
to update publicly any forward-looking statements as a result of
new information, future events, or otherwise, except as required by
applicable law.
GAAP/Non-GAAP Disclosure DiscussionThis
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 adjusted operating income (loss). The chief operating
decision maker evaluates performance and allocates resources on the
basis of adjusted operating income (loss). The Enact Holdings, Inc.
(the “Company”) defines adjusted operating income (loss) as net
income (loss) excluding the after-tax effects of net investment
gains (losses), restructuring costs and infrequent or unusual
non-operating items. The Company excludes net investment gains
(losses) and infrequent or unusual non-operating items because the
company does not consider them to be related to the operating
performance of the Company and other activities. The recognition of
realized investment gains or losses can vary significantly across
periods as the activity is highly discretionary based on the timing
of individual securities sales due to such factors as market
opportunities or exposure management. Trends in the profitability
of our fundamental operating activities can be more clearly
identified without the fluctuations of these realized gains and
losses. We do not view them to be indicative of our fundamental
operating activities. Therefore, these items are excluded from our
calculation of adjusted operating income. In addition, adjusted
operating income (loss) per share is derived from adjusted
operating income (loss) divided by shares outstanding. Adjusted
operating return on equity is calculated as annualized adjusted
operating income for the period indicated divided by the average of
current period and prior periods’ ending total stockholders’
equity.
While some of these items may be significant components of net
income (loss) in accordance with U.S. GAAP, the Company believes
that adjusted operating income (loss) and measures that are derived
from or incorporate adjusted operating income (loss), including
adjusted operating income (loss) per share on a basic and diluted
basis and adjusted operating return on equity, are appropriate
measures that are useful to investors because they identify the
income (loss) attributable to the ongoing operations of the
business. Management also uses adjusted operating income (loss) as
a basis for determining awards and compensation for senior
management and to evaluate performance on a basis comparable to
that used by analysts. Adjusted operating income (loss) and
adjusted operating income (loss) per share on a basic and diluted
basis are not substitutes for net income (loss) available to the
Company’s common stockholders or net income (loss) available to the
Company’s common stockholders per share on a basic and diluted
basis determined in accordance with U.S. GAAP. In addition, the
company’s definition of adjusted operating income (loss) may differ
from the definitions used by other companies.
Adjustments to reconcile net income (loss) available to the
Company’s common stockholders to adjusted operating income (loss)
assume a 21% tax rate.
The tables at the end of this press release provide a
reconciliation of net income (loss) to adjusted operating income
(loss) and U.S. GAAP return on equity to adjusted operating return
on equity for the three months ended September 30, 2023 and 2022,
as well as for the three months ended June 30, 2023.
Exhibit A: Consolidated Statements of
Income (amounts in thousands, except per share
amounts)
|
|
3Q23 |
2Q23 |
3Q22 |
|
REVENUES: |
|
|
|
|
Premiums |
$243,346 |
|
$238,520 |
|
$235,060 |
|
|
Net investment income |
|
54,952 |
|
|
50,915 |
|
|
39,493 |
|
|
Net investment gains (losses) |
|
(23) |
|
|
(13,001) |
|
|
(42) |
|
|
Other income |
|
760 |
|
|
1,088 |
|
|
564 |
|
|
Total revenues |
|
299,035 |
|
|
277,522 |
|
|
275,075 |
|
|
|
|
|
|
|
LOSSES AND EXPENSES: |
|
|
|
|
Losses incurred |
|
17,847 |
|
|
(4,070) |
|
|
(40,309) |
|
|
Acquisition and operating expenses, net of deferrals |
|
52,339 |
|
|
51,887 |
|
|
54,523 |
|
|
Amortization of deferred acquisition costs and intangibles |
|
2,803 |
|
|
2,645 |
|
|
3,338 |
|
|
Interest expense |
|
12,941 |
|
|
12,913 |
|
|
12,879 |
|
|
Total losses and expenses |
|
85,930 |
|
|
63,375 |
|
|
30,431 |
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
213,105 |
|
|
214,147 |
|
|
244,644 |
|
|
Provision for income taxes(1) |
|
48,910 |
|
|
46,127 |
|
|
53,658 |
|
|
NET INCOME |
$164,195 |
|
$168,020 |
|
$190,986 |
|
|
|
|
|
|
|
Net investment (gains) losses |
|
23 |
|
|
13,001 |
|
|
42 |
|
|
Costs associated with reorganization |
|
3 |
|
|
41 |
|
|
(156) |
|
|
Taxes on adjustments |
|
(5) |
|
|
(2,739) |
|
|
24 |
|
|
Adjusted Operating Income |
$164,216 |
|
$178,323 |
|
$190,896 |
|
|
|
|
|
|
|
Loss ratio(2) |
|
7% |
|
(2)% |
|
(17)% |
|
|
Expense ratio(3) |
|
23% |
|
|
23% |
|
|
25% |
|
|
Earnings Per Share Data: |
|
|
|
| Net
Income per share |
|
|
|
|
Basic |
$1.03 |
|
$1.04 |
|
$1.17 |
|
|
Diluted |
$1.02 |
|
$1.04 |
|
$1.17 |
|
| Adj
operating income per share |
|
|
|
|
Basic |
$1.03 |
|
$1.11 |
|
$1.17 |
|
|
Diluted |
$1.02 |
|
$1.10 |
|
$1.17 |
|
|
Weighted-average common shares outstanding |
|
|
|
|
Basic |
|
160,066 |
|
|
161,318 |
|
|
162,843 |
|
|
Diluted |
|
161,146 |
|
|
162,171 |
|
|
163,376 |
|
(1) Provision for income taxes for the three-month period
ended September 30, 2023, included adjustments of $2.6 million
related to a valuation allowance on deferred tax assets associated
with realized losses on sales of investment securities during
2023.(2) The ratio of losses incurred to net earned
premiums.(3) The ratio of acquisition and operating expenses,
net of deferrals, and amortization of deferred acquisition costs
and intangibles to net earned premiums. Expenses associated with
strategic transaction preparations and restructuring costs did not
impact the expense ratio for the three-month periods ended
September 30, 2023, June 30, 2023, and September 30, 2022.
Exhibit B: Consolidated Balance Sheets
(amounts in thousands, except per share amounts)
|
Assets |
3Q23 |
2Q23 |
3Q22 |
|
Investments: |
|
|
|
|
Fixed maturity securities available-for-sale, at fair value |
$4,990,692 |
|
$4,915,039 |
|
$4,877,902 |
|
|
Short term investments |
|
18,173 |
|
|
10,849 |
|
|
2,434 |
|
|
Total investments |
|
5,008,865 |
|
|
4,925,888 |
|
|
4,880,336 |
|
|
Cash and cash equivalents |
|
677,990 |
|
|
691,416 |
|
|
535,775 |
|
|
Accrued investment income |
|
42,051 |
|
|
37,726 |
|
|
35,896 |
|
|
Deferred acquisition costs |
|
25,572 |
|
|
25,843 |
|
|
26,310 |
|
|
Premiums receivable |
|
44,310 |
|
|
43,525 |
|
|
40,331 |
|
|
Other assets |
|
82,196 |
|
|
80,363 |
|
|
69,040 |
|
|
Deferred tax asset |
|
119,704 |
|
|
119,099 |
|
|
135,152 |
|
|
Total assets |
$6,000,688 |
|
$5,923,860 |
|
$5,722,840 |
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
Liabilities: |
|
|
|
|
Loss reserves |
$501,093 |
|
$490,203 |
|
$510,237 |
|
|
Unearned premiums |
|
161,580 |
|
|
174,561 |
|
|
212,987 |
|
|
Other liabilities |
|
136,057 |
|
|
139,100 |
|
|
140,413 |
|
|
Long-term borrowings |
|
744,752 |
|
|
744,100 |
|
|
742,211 |
|
|
Total liabilities |
|
1,543,482 |
|
|
1,547,964 |
|
|
1,605,848 |
|
|
Equity: |
|
|
|
|
Common stock |
|
1,600 |
|
|
1,602 |
|
|
1,628 |
|
|
Additional paid-in capital |
|
2,322,622 |
|
|
2,324,527 |
|
|
2,379,576 |
|
|
Accumulated other comprehensive income |
|
(400,349) |
|
|
(345,243) |
|
|
(427,085) |
|
|
Retained earnings |
|
2,533,333 |
|
|
2,395,010 |
|
|
2,162,873 |
|
|
Total equity |
|
4,457,206 |
|
|
4,375,896 |
|
|
4,116,992 |
|
|
Total liabilities and equity |
$6,000,688 |
|
$5,923,860 |
|
$5,722,840 |
|
|
|
|
|
|
|
Book value per share |
$27.86 |
|
$27.31 |
|
$25.28 |
|
|
Book value per share excluding AOCI |
$30.36 |
|
$29.46 |
|
$27.90 |
|
|
|
|
|
|
|
U.S. GAAP ROE(1) |
|
14.9% |
|
|
15.5% |
|
|
18.6% |
|
|
Net investment (gains) losses |
|
0.0% |
|
|
1.2% |
|
|
0.0% |
|
|
Costs associated with reorganization |
|
0.0% |
|
|
0.0% |
|
|
0.0% |
|
|
Taxes on adjustments |
|
0.0% |
|
|
-0.3% |
|
|
0.0% |
|
|
Adjusted Operating ROE(2) |
|
14.9% |
|
|
16.4% |
|
|
18.6% |
|
|
|
|
|
|
|
Debt to Capital Ratio |
|
14% |
|
|
15% |
|
|
15% |
|
(1) Calculated as annualized net income for the period indicated
divided by the average of current period and prior periods’ ending
total stockholders’ equity(2) Calculated as annualized adjusted
operating income for the period indicated divided by the average of
current period and prior periods’ ending total stockholders’
equity
Investor ContactDaniel
KohlEnactIR@enactmi.com
Media ContactBrittany
Harris-FlowersBrittany.Harris-Flowers@enactmi.com
Enact (NASDAQ:ACT)
Historical Stock Chart
From Mar 2024 to Apr 2024
Enact (NASDAQ:ACT)
Historical Stock Chart
From Apr 2023 to Apr 2024
