Q1 2025 Enact Holdings Inc Earnings Call
This call. Please be advised that today's conference is being recorded.
I'd now like to hand, the conference over to your first Speaker, Daniel Cole Vice President of Investor Relations you may begin.
Daniel Cole: Thank you and good morning, welcome to our first quarter earnings call joining.
Dean Mitchell: As a reminder, we have executed both forward quota share and forward excess of loss reinsurance transactions on our 2025 and 2026 book years, which we expect will provide meaningful PMARS credit over time and loss protection on these book years as they age through an uncertain macroeconomic period.
Speaker Change: Joining me today are Rohit Gupta, President and Chief Executive Officer, and Dean Mitchell, Chief Financial Officer and Treasurer.
Speaker Change: Rohit will provide an overview of our business performance and progress against our strategy.
Speaker Change: Dean will then discuss the details of our quarterly results before turning the call back to <unk> for closing remarks, we will then take your questions.
Dean Mitchell: Let me now turn to capital allocation. During the quarter, we got $28 million, or 18.5 cents per share, through our quarterly dividend, and bought back 2 million shares at a weighted average share price of $33.38. for a total of approximately $66 million. Through April 25, we repurchased an additional 600,000 shares at a weighted average share price of $34.53 for a total of $21 million.
Speaker Change: The earnings materials, we issued after market closed yesterday containing our financial results for the quarter, along with a comprehensive set of financial and operational metrics.
Speaker Change: These are available on the Investor Relations section of our website.
Speaker Change: Today's call is being recorded and will include the use of forward looking statements.
Speaker Change: Statements are based on current assumptions estimates expectations and projections as of today's date.
Dean Mitchell: Yesterday, we announced a 14% increase to our quarterly dividend from $0.185 per share to $0.21 per share, and the board approved a new share repurchase authorization of $350,000. In support of the new share repurchase authorization, Enact has entered into an agreement with GenWorth to repurchase its Enact shares as part of the program to maintain GenWorth's current ownership interest in Enact. Combining this new authorization with our remaining $6 million capacity under our May 2024 authorization, we have a total buyback authorization of $356 million available as of April 25, 2025. Both the increased dividend and new share repurchase authorization actions reflect the continued strength of our financial position and confidence in our business.
Speaker Change: Additionally, they are subject to risks and uncertainties, which may cause actual results to be materially different and we undertake no obligation to update or revise such statements as a result of new information.
Speaker Change: For a discussion of these risks and uncertainties. Please review the cautionary language regarding forward looking statements in today's press release as well as in our filings with the SEC.
Speaker Change: We will be available on our website.
Speaker Change: Please keep in mind the earnings materials and management's prepared remarks today include certain non-GAAP measures.
Speaker Change: Conciliations of these measures to the most relevant GAAP metrics can be found in the press release, our earnings presentation, and our upcoming SEC filings on our website.
Dean Mitchell: As Rohit mentioned earlier, our 2025 total capital return guidance remains unchanged at $350 million.
Rohit Gupta: With that I'll turn the call over to Rohit.
Rohit Gupta: Thank you Daniel good morning, everyone.
Dean Mitchell: As in the past, the final amount and form of capital return to shareholders will ultimately depend on business performance, market conditions, and regulatory approvals. Overall, we're pleased with our strong start to 2025 and remain focused on prudently managing risk, maintaining a strong balance sheet, and driving solid returns for our shareholders.
Rohit Gupta: <unk> delivered very strong financial and operational results in the fourth quarter of 2025.
Rohit Gupta: This was driven by continued execution against our strategic priorities robust credit performance and our commitment to creating long term value for shareholders.
Rohit Gupta: In addition, we delivered on our capital allocation priorities highlighted by a new share repurchase authorization and a meaningful dividend increase which we will discuss in detail later.
Rohit Gupta: With that, let me turn the call back to Rohit. Thanks, Steve. Looking ahead, we believe our strong balance sheet, food and risk management, and focus on long-term fundamentals position us to navigate this dynamic macro environment.
Rohit Gupta: During the quarter, we reported adjusted operating income of $169 million up 2% year over year.
Rohit Gupta: Adjusted earnings per share was $1 10 up 6% year over year adjusted return on equity was 13, 4% and insurance in force was 268 billion.
Rohit Gupta: Our strategy remains grounded in our mission of helping people responsibly achieve the dream of homeownership, and we remain committed to creating long-term sustainable value for all our stakeholders.
Rohit Gupta: Which was up 2% year over year.
Operator: Operator, we are now ready for Q&A. Thank you. If you'd like to ask a question, please press star 1 1. If your question hasn't been answered and you'd like to remove yourself from the queue, please press star 11 again.
Rohit Gupta: Housing market conditions in the first quarter or similar to prior recent periods and supportive of our strong performance.
Rohit Gupta: Housing inventories stay tight with sustained elevated home prices despite high volt borrowing costs.
Mihir Bhatia: Our first question comes from Mihir Bhatia with Bank of America. Your line is open. Hi. I wanted to just start with something you mentioned, Rohit, about, you know, just being prepared for uncertainty and specifically around maybe underwriting and pricing. I know you reiterated the outlook for base premium rates to be relatively stable, but that's obviously at a portfolio level. I was curious what you're seeing in the market or if you've done taken actions in April, right? Just given all the macro noise, the uncertainty increasing in April, is there, how is the industry or Enact, however you're comfortable answering that, reacted to that?
While affordability remains challenged there is potential for improvement if mortgage rates decline.
Rohit Gupta: Additionally, the consumer and labor market continued to be stable with wage growth moderating slightly and a moderate ryzen inflation.
Rohit Gupta: Looking ahead, we continue to operate in a dynamic and complex environment, driven by shifting economic policies and elevated geopolitical uncertainty.
Rohit Gupta: However over the longer term, we believe the drivers of the housing market are intact, given the pent up demand and first time homebuyer population as more Americans reached the average first time homebuyer age.
Mihir Bhatia: Or have you all, so far, because the data hasn't changed, you've maintained the pricing and underwriting standards, or not really tightened and changed? I'm just curious how you're reacting to that uncertainty increasing from underwriting.
Rohit Gupta: Overall, we believe that mortgage insurance will continue to be a crucial resource to both buyers and lenders alike.
Rohit Gupta: Against this backdrop, our capital position and credit performance remained key strengths.
Rohit Gupta: Yeah, good morning, Mihir. Thank you for your question. So I would say, given the evolving dialogue that we are seeing on tariffs, it's difficult to predict the exact magnitude and breadth of economic impact. But what I can tell you is we are doing diligent monitoring of the economic impact, whether it's across the country or specific economic sectors or specific geography. So that continues to be an ongoing process right now. I would also tell you that we are maintaining food and guidelines and underwriting and are leveraging our strong capital base, as I said in my prepared remarks, to help well-qualified borrowers get into homes.
Rohit Gupta: Our pmiers sufficiency ratio stood at a robust 165% highlighting of a strong capital Foundation.
Rohit Gupta: Our credit and underwriting quality remains strong and is further supported by the significant embedded equity within our portfolio.
Rohit Gupta: At the end of the fourth quarter, approximately 8% of our insurance in force at mortgage rates at least 50 basis points above march's average mortgage rate of six 7% and the credit quality of our insured portfolio remains strong.
Rohit Gupta: Additionally, the risk weighted average FICO score of the portfolio was 745, the risk weighted average loan to value ratio was 93% and layered risks was one 3% of risk in force.
Rohit Gupta: Now, when it comes to April and most recent kind of actions and what we have observed in the market, I would say we continue to find pricing constructive in the marketplace. And we have used our RAID 360 capabilities, especially with the most recent iteration, to adjust our pricing to reflect the current level of uncertainty. It's too early to say what the rest of the market is doing, just because we are just wrapping up the month of April and don't have the indications from the market. But I would say our own posture has been to strengthen our pricing in reaction to that market uncertainty that all of us are observing.
Rohit Gupta: Pricing was again constructive in the quarter and we maintained our commitment to prudent underwriting standards.
Our pricing engine, which we have recently branded as <unk> raised 360, <unk> allows us to deliver competitive pricing on a risk adjusted basis.
Rohit Gupta: And we continue to underwrite and select risk prudently, while generating attractive returns.
Rohit Gupta: We saw favorable delinquency and fuel performance during the quarter that followed typical seasonal sequential trend.
Mihir Bhatia: Thank you.
Mihir Bhatia: And then just one other question, again, on government policy, and I know it's evolving. Has there been any on-the-ground impact of any of the changes we've heard about so far? Any changes in particular I'm curious about, like, on the loss mitigation side, because I know there's been, you know, obviously, post-COVID loss, COVID loss mitigations were... in basically made, you know. were extended and were continuous, and they've been a pretty big beneficiary of Cures. Have you seen any impact from any of those changes? Thank you.
Rohit Gupta: Total delinquencies improved and were down 5% sequentially with new delinquencies also decreasing by 11%.
Rohit Gupta: We are now past the peak of new delinquencies from the recent hurricanes and as expected we are seeing favorable cure trends from those events.
Rohit Gupta: Additionally, a significant portion of our portfolio continues to have a considerable amount of embedded equity and when combined with our loss mitigation efforts drove a cure rate of 56%, which aligns with the strength of cure rate trends in the fourth quarter of each year.
Rohit Gupta: Yeah, thanks, Mihir. So we've had constructive engagement with the new FHFA director and in a market where we have lower affordability, we continue to work very constructively with FHFA and GSTs to make sure that we are serving our role well in putting first-time home buyers in homes and putting our capital in front of taxpayers. As far as loss mitigation changes that we have observed, most of those have been on the FHA and VA side. We actually have seen continued strength in GST loss mitigation, whether we call it waterfalls or consumer loss mitigation options, those continue to stand strong.
Rohit Gupta: This strong cure rate drove a reserve release of $47 million during the quarter and a resulting loss ratio was 12%.
Rohit Gupta: We continue to see strong credit performance and remain well reserved for a range of scenarios.
Rohit Gupta: Dean will have more to say on this shortly.
Rohit Gupta: The strength of our capital position and cash flows enabled us to consistently deliver on our capital allocation priority rich.
Rohit Gupta: Which are to support existing policyholders by maintaining a strong balance sheet.
Mihir Bhatia: And I agree with your point that post-COVID, the best practices from COVID and the best experiences were COVID were carried forward into new loss mitigation programs. So we are actually very optimistic about those loss mitigation programs actually giving us more options for consumers in the event the consumer actually goes delinquent on a loan and helping them get them back on their feet. Thank you for taking my questions. I'll get back. Thanks, Mihir.
Rohit Gupta: Invest in our business to drive organic growth and efficiencies.
Rohit Gupta: Fund attractive new business opportunities to diversify our platform.
Rohit Gupta: And return excess capital to shareholders.
Rohit Gupta: As it relates to diversifying our platform <unk> continues to perform well, maintaining our strong underwriting and attractive return profile.
Rohit Gupta: During the quarter, we continued to participate in GSE CRT transaction that came to market in both the single family and multifamily market.
Doug Harter: Our next question comes from Doug Harter with UBS. Your line is open. Thanks. You know, I guess along the lines of pricing, you know, in the last couple of quarters, we've we've have seen some, you know, some shifts in market share from, you know, from other players, you know, just just hoping you could talk more about, you know, the pricing dynamics, you know, the, and, you know, kind of what you see that that leads to market share changes, and just how sensitive the market is to price Yeah, good morning, Doug, and thank you for your question.
Rohit Gupta: <unk> continues to be a long term growth vehicle for our company.
Rohit Gupta: We continue to maintain a disciplined approach to expense management, while investing in technologies and processes that improve the customer experience and our business operation.
Rohit Gupta: As I mentioned earlier, we deployed our latest generation of our comprehensive rate engine raised 360, which leverages our proprietary data combined with market information advanced analytical models and machine learning capability.
Rohit Gupta: <unk> hundred 60 enables us to deliver competitive risk adjusted pricing to our lender partners and consumers, while enabling prudent risk selection and generating attractive returns.
Rohit Gupta: It's tough for us to comment on other companies, market share and trajectories of volatility. What I would say is our market participation has been relatively stable, I would say, over the last four to five quarters. I would also say that when we think about market share, it's not exactly a target for us. It's much more dependent on our alignment on risk and return in the market, and what we see in terms of the quality of the business and what we are getting paid. So we've been very happy with our market participation. We've been very happy with about 10 billion dollars of NIW we wrote in the first quarter.
Rohit Gupta: <unk> hundred 60 enhances our ability to serve our customers and drive profitable growth by enabling us to adjust pricing more effectively and quickly in a rapidly evolving increasingly complex market and represents our ongoing commitment to innovation and leadership in our industry.
Rohit Gupta: During the quarter, our expenses improved with a 9% reduction sequentially and were down 1% from the same period in 2024, despite the ongoing inflationary environment.
Rohit Gupta: Obviously, market share is not known yet for first quarter completely, because not all companies have reported. But I would say some of the changes can be caused by pricing, but they can also be caused by just the lenders you specifically do business with. So if you do business with a specific lender who has a big quarter in terms of origination activity, or they have a big focus on purchase versus refinance, and the market composition changes between those segments, that can create movements in market share. So those would be just in addition to pricing and guidelines, those could be additional levers, those could be additional movements that cause changes in market share for any company in our industry.
Rohit Gupta: We are pleased with this performance and are reaffirming our 2025 expense guidance range of $220 million to $225 million.
Rohit Gupta: We continue to prioritize maintaining of our strong financial foundation, and flexibility and our robust balance sheet position us to prudently manage risk and generate long term shareholder value.
Rohit Gupta: We again delivered on our commitment to return capital to our shareholders in the first quarter by returning over $94 million through share buybacks and our quarterly dividend.
Rohit Gupta: We issued a press release last night announcing that our board of directors authorized a new $350 million share repurchase program and approved a 14% increase of our dividend from <unk> through 'twenty one per share.
Doug Harter: Hope that helps. It does, thank you. Thank you.
Rick Shane: Our next question comes from Rick Shane with J.P. Morgan. Your line is open. Good morning, guys. Thanks for taking my question. So as we sit today at the end of the first quarter of 25, if we total up the insurance in force from 23, 24 in the first quarter, it represents about 38 percent of your. If we did the same exercise at the end of the first quarter of 22, it would have been 74% of your book. So the book was almost twice as concentrated three years ago in recent cohorts as it is today. Obviously, that's a function of what's happened with rates, with purchase activity.
Rohit Gupta: We continue to expect to deliver capital returns in 2025, similar to recording 24 level.
Rohit Gupta: Before I turn the call over to Dean I would like to comment on how we are positioned for an uncertain macroeconomic backdrop.
Speaker Change: We have had a good start to 2025, and we continue to operate from a position of strength.
Dean Mitchell: We are closely monitoring developments and remain prepared to navigate a range of scenarios.
Dean Mitchell: My industry has fundamentally transformed since the global financial crisis.
Dean Mitchell: Specifically in regards to enact our business fundamentals remain solid.
Dean Mitchell: We are supported by our large diverse pool of insurance enforce our commitment to underwriting and pricing discipline embedded home price appreciation across our book.
Rick Shane: We all understand the dynamic.
Rick Shane: I'm curious as you guys look at a portfolio that was three years ago very unusual in historical context, a portfolio today that's very unusual in historical context, what you think are sort of the best case scenarios of how this evolves and what are the biggest risks? Because this industry is facing a different profile. I wouldn't even say challenges. characterized differently today than it has.
Dean Mitchell: Our prudent approach to reserves and a resilient investment portfolio.
Dean Mitchell: Our insurance in force and our 2025 and 2026 books of meaningful coverage, while our CIP program.
Dean Mitchell: We also maintained strong financial flexibility with our robust EMR sufficiency, well above our regulatory requirements and a very strong statutory capital position.
Dean Mitchell: Overall, we believe we are operating from a point of strength and we remain committed to executing against all aspects of our strategy and creating value for all our stakeholders.
Dean Mitchell: Yeah, Rick Hayes, Dean. Thanks for the question. A couple different ways I think your question can go. The first would be something that we started talking about a couple quarters ago, and it's really the seasoning of the portfolio and the impact that seasoning has on new delinquency development. So, as you mentioned, you go back a couple years, our portfolio was much younger, much less mature, and it was moving up the normal delinquency curve pattern. And I think we saw that, you know, some of that impact last year when you think about year over year increases in new delinquencies coming in, in the kind of mid-teens range over the course of 2024.
Dean Mitchell: In closing I want to thank our entire enact team for their unwavering commitment and outstanding performance.
Dean Mitchell: As we look ahead, we are encouraged by the constructive and collaborative dialogue, we've had to date with the new administration and look forward to continued constructive engagement.
Speaker Change: We remain confident in our strategy and our ability to deliver continued value for our customers employees and shareholders in 2025 and beyond with that I will now turn the call over to <unk>.
Rohit Gupta: Thanks Rohit.
Speaker Change: Good morning, everyone. We.
Speaker Change: We delivered another set of very strong results in the first quarter of 2025.
Speaker Change: GAAP net income was $166 million or $1 eight per diluted share compared to a $1 one per diluted share in the same period last year and $1 five per diluted share in the fourth quarter of 2020 for.
Dean Mitchell: What we've talked about now in 2025 as that book year continues to season, and I think the average age of our book is now 3.9 years seasoned. That's up a tick from last quarter, and it's up meaningfully from, you know, several years ago. It continues to progress towards, you know, closer to the peak of that normal delinquency development curve. You know, that happens around years three and four, and thereafter it plateaus, you know, kind of out 12 to 18 months thereafter. I think what that means is we should see the increase in new delinquency development slow compared to last year's increase.
Speaker Change: Return on equity was 13, 1%.
Speaker Change: Adjusted operating income was $169 million or $1 10 per diluted share compared to $1 four per diluted share in the same period last year.
Speaker Change: And a $1 90 per diluted share in the fourth quarter of 2024.
Speaker Change: Adjusted operating return on equity was 13, 4%.
Speaker Change: Turning to revenue drivers, new insurance, written was $10 billion down, 26% sequentially and down 7% year over year.
Dean Mitchell: And, in fact, when you look at, you know, this Q1 performance, I think it reflects that slowing. So, it was roughly 7% year over year increase relative to last year. At the same time, we saw something akin to a 19% increase, you know. That's obviously the impact on the aging of the portfolio that I think your question gets at, but any discussion on credit performance needs to have the caveat that, you know, delinquency development is certainly going to be subject to the macroeconomic environment that books are aging through. You know, more recently, we've seen some natural disaster impacts and other credit-related drivers.
Speaker Change: Purchase originations were seasonally lower in mortgage activity remained muted as elevated mortgage rates and home prices pressured affordability.
Speaker Change: Persistency was 84% in the first quarter up two points sequentially and down one point.
Speaker Change: Year over year.
Speaker Change: Our portfolio remains resilient to mortgage rate volatility with 8% of the mortgages in our portfolio having rates at least 50 basis points above march's average mortgage rate of six 7%.
Speaker Change: Looking ahead, we anticipate the elevated persistency will continue to help offset any impact of higher mortgage rates that could reduce the size of the origination market.
Dean Mitchell: So that would be the first, I think, pinnacle of your question.
Speaker Change: Given the combination of lower new insurance written and elevated persistency primary insurance in force was 268 billion in the first quarter relatively flat from $2 69 billion in the fourth quarter of 2024, and up $4 billion or 2% year over year.
Dean Mitchell: I think the the second piece of that would be just vintage performance. You know, from first of all, let me start with from a performance perspective. We haven't seen any book year performance very relative to our expectations across any. Now, that doesn't mean that book years don't differ. It just simply means that we're seeing good alignment between our expectations when we onboard that book, at pricing that book, and the actual performance that we've seen to date. You know, book year performance does differ based on a couple of factors. New vintages are certainly being originated in a more purchase heavy market and consequently tend to have higher LTVs, higher DTIs and modestly higher FICOs.
Speaker Change: Total net premiums earned were $245 million down $1 million sequentially, and up $4 million or 2% year over year.
Speaker Change: The decrease sequentially was driven by higher seeded premiums while the year over year increase was primarily driven by premium growth from attractive adjacencies and the growth of our mortgage insurance portfolio, partially offset by higher seeded premiums.
Speaker Change: Turning to primary premiums are based premium rate of 41 basis points was relatively flat sequentially, which aligned with our guidance that we expect our base premium rate in 2025 stabilized around 2024 levels.
Speaker Change: As a reminder, a base premium rate is impacted by several factors intends to modestly fluctuate from quarter to quarter.
Dean Mitchell: The good news there is we assess in price the riskiness across all that attribute. So it's part of the right price for the right risk equation that Rohit referenced in his last answer. The second part, new vintages have lower embedded equity as the pace of home price appreciation has kind of slowed more recently. Again, the good news here is we also price applying the prospective view of the macroeconomic environment, including our view of future home price. So what I would say kind of if I if I boil that up and kind of summarize, we're not seeing any variance to our pricing expectation for any book year.
Speaker Change: Our net earned premium rate was 35 three basis points down two basis points sequentially, driven primarily by higher seeded premiums and lower single premium cancellations.
Speaker Change: Investment income in the first quarter was 63 million flat sequentially and up $6 million or 11% year over year.
Speaker Change: During the quarter, our new money investment yield continued to exceed 5% lifting our overall portfolio book yield by 10 basis points to four 1%.
Dean Mitchell: And our risk-based pricing approach ensures that we have the right price for the right risk for the risk attributes and the economic assumption differences across both years, including future home prices.
Speaker Change: Our focus remains on investing in high quality assets and maintaining a resilient diversified a rated portfolio.
Speaker Change: As we have previously stated while we typically hold investments to maturity, we may selectively pursue income enhancement opportunities.
Rohit Gupta: Yeah, Rick, just to add to Dean's point, I agree with everything Dean said. Just lifting up, I would also say we would love to have a bigger market. I think if mortgage rates were lower and affordability was better, we would have a bigger market size. We've talked about the origination units being significantly down over the last few years, just given lack of affordability. But I would say maybe the silver lining here is if you think about the age of our book, there are more consumers in our book who are more experienced in managing their debt.
During the quarter, we sold certain assets that will allow us to recoup approximately $3 million of realized losses to feature higher net investment income.
Speaker Change: We still view, our investment portfolio's unrealized loss position as materially noneconomic.
Speaker Change: Turning to credit performance, new delinquencies decreased sequentially to 12200 in the quarter from 13700 in the fourth quarter of 2024.
Rohit Gupta: You combine that with the embedded equity aspect that Dean talked about, we have a more resilient book right now than we would have had in 2022. We have a comparison of 38 percent versus 74 percent from the last few book years. And if there is uncertainty in the market or any negative news in the market, we are going into this environment with a more resilient book from a consumer performance perspective and equity, embedded equity perspective. So we see that as also a resilience point and a silver lining in terms of age of our book at this point.
Speaker Change: After adjusting for the estimated 1000 hurricane related new delinquencies reported in the fourth quarter of 2024, 5% sequential decrease in new delinquencies is in line with expected seasonal trends.
Speaker Change: Our new delinquency rate remained consistent with pre pandemic levels for the quarter was one 3% a.
Speaker Change: A decrease of 20 basis points compared to the one 5% in the fourth quarter of 2024, and one 2% in the first quarter of 2024.
Rohit Gupta: I definitely agree with that.
Rick Shane: If I can ask one follow up, when The Older cohorts have benefited immensely from HPA. They were not underwritten with any expectation that that was going to happen. That would have been imprudent. And that was a windfall for the industry. You had alluded to your underlying assumption. Do you, as you're writing policies today, have a more conservative assumption on HPA going forward than you were applying three years ago because of the sharp run-up in home prices or is that do you assume a kind of consistent HPA but now just off a higher base? Yeah. Thanks, Rick.
Speaker Change: We maintained our claim rate on new delinquencies at 9% for the quarter.
Speaker Change: There were no material hurricane related delinquencies reported in the quarter and consequently, we made no adjustments to our claim rates during the quarter.
Speaker Change: Total delinquencies in the first quarter decreased sequentially to 22300 from 23600 as cures outpace news.
Speaker Change: The primary delinquency rate for the quarter was two 3% compared to two 4% in the fourth quarter of 2024 and 2% in the first quarter of 2024.
Speaker Change: Losses in the first quarter of 2025 were $31 million in the loss ratio was 12%.
Speaker Change: Compared to $24 million and 10%, respectively in the fourth quarter of 2024, and $20 million and 8% respectively. In the first quarter of 2024.
Speaker Change: The current quarter reserve release of $47 million from favorable cure performance and loss mitigation activities compares to a reserve release of $56 million and $54 million in the fourth quarter of 2024, and the first quarter of 2024, respectively.
Dean Mitchell: I think that ties into Rohit's response. to a prior question, which is we absolutely take into account the prospective view, our prospective view of the macroeconomic environment. That certainly includes home prices, and yet today we would have, you know, given the slower rate of home price appreciation, we would embed that into our pricing. And that would certainly impact, you know, price up from our perspective, all things held equal in current pricing vis-a-vis prior environments. And I think you saw the example of that back during COVID. Every single MI company in the industry talked about their price increases in second quarter of 2020.
Speaker Change: Our losses and loss ratio increased sequentially and year over year, primarily driven by a lower reserve release in the current quarter.
Speaker Change: The year over year increase was also driven by incremental new delinquencies, partially offset by a lower claim rate assumption.
Speaker Change: Turning to operating expenses operating expenses for the first quarter of 2025 or $53 million and the expense ratio was 21% compared to $58 million and 24% respectively. In the fourth quarter of 2024, and $53 million and 22% respectively. In the first quarter of 2024.
Speaker Change: First quarter operating expenses include approximately $1 million of reorganization costs.
Rick Shane: And all of that happened in a very short time frame. The moment all of us basically saw unemployment rates going up or the possibility of unemployment rates going up, everybody adjusted their conditional scenarios with their internal views and then raised prices. So Rick, that's very aligned with how we run the business. Because our books age based on that prospective view and the loans are going to be with us for four, five years, maybe even longer. And we want to make sure that we are pricing appropriately for that risk. Got it.
Speaker Change: For 2025 operating expenses, we continue to anticipate a range of $2 20 to $2 $25 million, excluding reorganization costs as we continue to prudently manage our expense base, while also investing in growth initiatives and modernization driving future efficiencies. In addition to normal inflationary dynamics.
Speaker Change: We continue to operate from a strong capital and liquidity position reinforced by a robust TMR sufficiency and the successful execution of our diversified CRT program.
Rohit Gupta: Okay. Terrific. Thank you guys. Thank you very much. Thank you. Thanks, Rohit. Thank you.
Speaker Change: Our pmiers sufficiency was 165% or $2 billion above P. Myers requirements at the end of the first quarter.
Operator: As a reminder, to ask a question, please press star 11.
Speaker Change: As of March 31, 2025, our third party CRT program provides $1 9 billion of P Myers capital credit.
Bose George: Our next question comes from Bose George with KBW. Your line is open. Hey, everyone. Good morning. Ashik, have you all seen any signs of cancellation rates increasing? You just, obviously, these books, the persistency rates remains high and, you know, with the higher, for longer, that could continue. So just any thoughts?
Speaker Change: As a reminder, we have executed both forward quota share and forward excess of loss reinsurance transactions on our 2025 and 2026 book years, which we expect will provide meaningful tmr's credit overtime and loss protection on these book years as they age through an uncertain macroeconomic backdrop.
Bose George: Yeah, you know, we've monitored that Bose through time over the last several years, we really haven't seen any change in behavior or the change in the level of activity as it relates to borrow initiated cancellation. The vast majority of our laps or cancellations really occur from refinancing activity, you know, loans that are paid in full and HOPA auto cancellations or loans to amortize down to 78 LTV. That continues to hold true through the first quarter. And again, just borrow initiate cancellation hasn't been that big of a driver for us over time and through today.
Speaker Change: Okay.
Speaker Change: Let me now turn to capital allocation during the quarter without $28 million or 18, five cents per share to our quarterly dividend and bought back 2 million shares at a weighted average share price of $33 38.
Speaker Change: For a total of approximately $66 million.
Speaker Change: Through April 25, we repurchased an additional 600000 shares.
Speaker Change: Weighted average share price of $34 53.
Speaker Change: For a total of $21 million.
Speaker Change: Yesterday, we announced a 14% increase of our quarterly dividend from $18 five per share to 21 per share and the board approved a new share repurchase authorization of 350 million.
Dean Mitchell: Okay, thanks. And then, actually, the other income lines, is that mainly the reinsurance income? And also, is that just premiums? Or is there kind of a mark to market component that goes through there as well? Yeah, the other income line includes our contract services, the fees associated with our contract services underwriting. It has. several components, not just premiums. Okay, but the run rate this quarter is kind of a reasonable number. Yeah, I mean, that number varies, as you can see, in our QFS disclosure, it's still pretty small at 2 million, but you've seen it range from one to one to, I guess, two to three.
Speaker Change: In support of the new share repurchase authorization and <unk> entered into an agreement with Genworth to repurchase its an app shares as part of the program to maintain Genworth current ownership interest in <unk>.
Speaker Change: Combining this new authorization with our remaining 6 million capacity under our May 2024 authorization, we have a total buyback authorization of $356 million available as of April 25 2025.
Speaker Change: Both the increased dividend and new share repurchase authorization actions reflect the continued strength of our financial position and confidence in our business.
Dean Mitchell: Okay.
Dean Mitchell: Okay, great, thanks. The one thing I would say we have some, we do have some arrangements in Q1 related to our reinsurance contract that probably aren't in a normal run rate. So, you know, it might be inflated by a million dollars. I'd probably point you to closer to a million as a normal run rate. But you can see through time that it changes in that general. Okay, great.
Rohit Gupta: As Rohit mentioned earlier, our 2025 total capital return guidance remains unchanged at $350 million.
Rohit Gupta: As in the past the final amount and form of capital return to shareholders will ultimately depend on business performance market conditions and regulatory approvals.
Rohit Gupta: Overall, we're pleased with our strong start to 2025 and remain focused on prudently managing risk maintaining a strong balance sheet and driving solid returns for our shareholders.
Dean Mitchell: Thanks. Thank you.
Speaker Change: With that let me turn the call back to road.
Operator: I'm showing no further questions at this time.
Rohit Gupta: Thanks Dean.
Rohit Gupta: I'd like to turn the call back over to Rohit Gupta for any closing remarks. Thank you, Michelle. And thank you, everyone. We appreciate your interest in Enact, and I look forward to seeing many of you in New York at BTIG's Housing Ecosystem Conference on May 8th. Thank you. Thank you for your participation.
Rohit Gupta: Looking ahead, we believe our strong balance sheet prudent risk management and focus on long term fundamentals position us to navigate this dynamic macro environment.
Rohit Gupta: Our strategy remains grounded in our mission of helping people responsibly achieve the dream of homeownership, and we remain committed to creating long term sustainable value for all of our stakeholders.
Operator: This does conclude the program and you may now disconnect. Everyone, have a great day.
Speaker Change: Operator, we are now ready for Q&A.
Speaker Change: Thank you if you'd like to ask a question. Please press star one one.
Speaker Change: If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Speaker Change: Our first question comes from Mihir Bhatia with Bank of America. Your line is open.
Mihir Bhatia: Hi, Good morning, Thank you for taking my question.
Mihir Bhatia: Just start with something you mentioned earlier about just being prepared for uncertainty and specifically around maybe underwriting and pricing.
Mihir Bhatia: I know you reiterated the outlook for base premium rates to be relatively stable, but that's obviously on a portfolio level I was curious what youre seeing in the market or if you've done taken actions in April right, just given all the macro noise. The uncertainty increasing in April is that how is the industry or enact however, you're comfortable answering that reactor.
Mihir Bhatia: Tibet.
Or have you all so far because the data hasn't changed you've maintained bill pricing and underwriting standards. So not really tightened changed I'm. Just curious how you are reacting to that uncertainty increasing from underwriting perspective.
Yes, good morning here and thank you for your question. So I would say given the evolving dialogue that we are seeing on pattern. So it's difficult to predict the exact magnitude and breadth of economic impact, but what I can tell you is we are doing diligent monitoring of economic impact whether it's across the country or specific economic sectors are spec.
Mihir Bhatia: Geography, so that continues to be an ongoing process right now I would also tell you that we are maintaining current guidelines and underwriting.
Mihir Bhatia: And our leveraging of our strong capital base as I said in my prepared remarks to help well qualified borrowers get into homes.
Mihir Bhatia: When it comes to April and most recent kind of actions and what we have observed in the market I would say, we continue to find pricing constructive in the marketplace and we have used our raised 360 capabilities, especially with the most recent declaration to adjust our pricing to reflect the current level of uncertainty.
Mihir Bhatia: It's too early to say what the rest of the market is doing just because we are just wrapping up the month of April and don't have the indications from the market, but I would say our own posture has been to strengthen of our pricing in reaction to that market uncertainty that all of us are observing.
Speaker Change: Alright. Thank you and then just one other question again on government policy and I know its evolving.
Speaker Change: Is there been any on the ground impact from any of the changes we've heard about so far and.
Speaker Change: Any changes in particular I'm curious about like on the loss mitigation side, because I know theres been obviously post COVID-19 last may the COVID-19 loss mitigation as well.
Speaker Change: Basically made.
Speaker Change: Sure.
Speaker Change: Our extended in what continues and there'll be a pretty big beneficiary of goals have you seen any impact from any of those changes. Thank you.
Yeah. Thanks, Matt.
So we've had construction constructive engagement with a new FHFA director in a market, where we have lower affordability. We continue to work very constructively with FHFA and GSE is to make sure that we are serving up a role well and putting first time homebuyers in homes and putting more capital in front of taxpayers as far as loss mitigation changes that we have.
Most of those have been on the FHA and VA site, we actually have seen continued strength in GSE loss mitigation, whether you call it waterfalls or consumer loss mitigation options those continental stands strong and I agree with your point that.
Speaker Change: Post COVID-19 the best practices from Covid and the best experiences. We're covered were carried forward into new loss mitigation programs. So we are actually very optimistic about those loss mitigation programs actually giving us more options for consumers in the event the consumer actually.
Speaker Change: Cause delinquent on alone and helping them get them back on their feet.
Speaker Change: Okay. Thank you for taking my questions I'll get back in queue.
Speaker Change: Thanks, Matt.
Speaker Change: Thank you. Our next question comes from Doug Harter with UBS. Your line is open.
Speaker Change: Thanks.
Speaker Change: I guess, along the lines of pricing.
Speaker Change: In the last couple of quarters.
Speaker Change: We have seen some some shifts in market share from.
From other players.
Speaker Change: Just hoping you could talk more about the pricing dynamics there.
Speaker Change: And kind.
Speaker Change: Kind of what you see that that leads to market share changes.
Speaker Change: How sensitive.
Speaker Change: The market is to price.
Yes, good morning, Doug and thank you for your question.
Speaker Change: Tough for us to comment on other company's market share and trajectories of volatility.
Speaker Change: I would say as other market participation has been relatively stable I would say over the last four to five quarters. I would also say that when we think about market share it's not exactly a target for us it's much more dependent on our alignment on risk and return in the market and what we see in terms of.
Speaker Change: The quality of the business and what we're getting paid so we have been very happy with our market participation. We have been very happy with about $10 billion of NSW. We wrote in the first quarter, obviously market share is not known yet for first quarter completely because not all companies have reported but I would say some of the things changes can.
Speaker Change: Caused by pricing, but they can also be caused by just <unk>.
Speaker Change: <unk>, specifically do business with so if you do business with a specific lender who has a bad quarter in terms of origination activity or they have a big focus on purchase versus refinance and the market composition changes between those segments that can create movements in market share. So those would be just in addition to pricing.
Speaker Change: Guidelines those could be additional.
Speaker Change: Levers those can be additional movement that cause changes in market share for any company in our industry hope that helps.
It does thank you.
Thank you. Thank you. Our next question comes from Rick Shane with Jpmorgan. Your line is open.
Good morning, guys. Thanks for taking my question so.
We sit today at the end of the first quarter of 'twenty five if we total up.
Speaker Change: The insurance in force from 'twenty, three 'twenty, four and the first quarter. It represents about 38% of your book.
If we did the same exercise at.
At the end of the first quarter of 'twenty two it would have been 74% of your books. So the book was almost twice as concentrated three years ago. When recent cohorts as it is today.
Speaker Change: Obviously, that's a function of what's happened with rates with purchase activity, we all understand the dynamics.
I'm curious as you guys look at a portfolio that was three years ago very unusual in the historical context of portfolio. Today, that's very unusual in historical context. What you think are sort of the best case scenarios of how this evolves and what are the biggest risks.
Speaker Change: Because this.
Speaker Change: This industry is facing a different profile I wouldn't even say challenges it's just.
Speaker Change: Characterized differently today than it has been before.
Speaker Change: Yes, <unk> thanks for the question.
Speaker Change: Couple of different ways I think your question can go the first would be.
Something that we started talking about a couple of quarters ago, and it's really the seasoning of the portfolio.
Speaker Change: And the impact.
Speaker Change: Seasoning has on new delinquency development, so as you mentioned.
Speaker Change: Go back a couple of years, our portfolio, which is much younger.
Much less mature than it was moving up the normal delinquency curve pattern and I think we saw that.
Speaker Change: Some of that impact last year, when you think about year over year increases in new delinquencies coming in and the kind of mid teens range over the course of 2024, what we've talked about now in 2025 at that book year continues to season I think the average age of our.
Speaker Change: Book is now $3 nine years seasoned.
Speaker Change: <unk> from from last quarter, and it's up meaningfully from <unk>.
Speaker Change: Several years ago.
Speaker Change: It continues to progress towards closer to the peak of that normal delinquency development curve that happens around year, three and four and thereafter, it plateaus kind of out 12 to 18 months thereafter, I think what that means is we should see the increase in new delinquency development slow compared to last year's <unk>.
Speaker Change: Increase in in back when you look at.
Speaker Change: This Q1.
Speaker Change: Performance I think it reflects that slowing so it was roughly 7% year over year increase relative to last year. The same time, we saw something akin to a 19% increase.
Speaker Change: Yeah.
Speaker Change: That's obviously the impact on the aging of the portfolio that I think your question gets at but.
Speaker Change: Any discussion on credit performance needs to have that caveat.
Speaker Change: That delinquency development, certainly going to be subject to the macroeconomic environment that books are aging through.
Speaker Change: More recently, we see some natural natural disaster impacts and other credit related drivers so that would be the first I think.
Speaker Change: Tentacle of your <unk>.
Speaker Change: Question I think the.
Speaker Change: The second piece of that would be just vintage performance.
Speaker Change: From first of all let me start with from a performance perspective, we haven't seen any book year performance very relative to our expectations across any book year.
Speaker Change: That doesn't mean that book years don't defer it just simply means that.
Speaker Change: We're seeing good alignment between.
Speaker Change: Our expectations when we onboard that book at pricing that book.
Speaker Change: And the actual performance that we've seen to date.
Speaker Change: Book year performance does differ based on a couple of factors.
Speaker Change: The new vintages are certainly being originated a more purchase heavy market and consequently tend to have higher ltvs higher DTI and modestly higher FICO.
Rohit Gupta: Good news there is we assess and price the riskiness across all of the attributes. So it's part of the right price for the right risk equation that rohit referenced.
Rohit Gupta: In his last answer the second part new vintages have lower embedded equity as the pace of home price appreciation has kind of slowed more recently again. The good news here is we also price applying the prospective view of the macroeconomic environment, including our view of the future home prices. So.
Rohit Gupta: What I would say kind of if I boil that up and kind of summarize we're not seeing any variance.
Rohit Gupta: Our pricing expectations for any book year.
Rohit Gupta: And our risk based pricing approach.
Rohit Gupta: <unk> that we have the right, Chris our right price for the right risk for the risk attributes and the economic assumption differences across both years include.
Rohit Gupta: Including future home prices.
Rick: Rick just to add to this point I agree with everything <unk> said, just lifting I would also say.
Speaker Change: We would love to have a bigger market I think if mortgage rates were lower and affordability was better we would have a bigger market size. We are talking about the origination units being significantly down over the last few years, just given the lack of affordability, but I would say maybe the silver lining here is if you think about the age of our book there are more consumers than our.
Speaker Change: Book, who are more experience in managing their debt.
You combine that with the embedded equity aspect of being talked about we have a more resilient book right now than we would've had in 2022 year comparison up 38% versus 74% from the last.
Speaker Change: A few book years.
Speaker Change: And if there is uncertainty in the market or any negative news in the market, we're going into this environment with a more resilient book from a consumer performance perspective, and equity embedded equity perspective. So we see that as also resilience point on a silver lining.
Speaker Change: In terms of age of our book at this point.
Speaker Change: Got it I definitely agree with that if I can ask one follow up.
Speaker Change: Okay.
Speaker Change: When.
Speaker Change: So.
Speaker Change: The.
Speaker Change: Older cohorts.
Speaker Change: Have benefited immensely from HPA they were not underwritten with any expectation that that was going to happen that would have been imprudent and that was a windfall.
Speaker Change: For the industry.
Speaker Change: You had alluded to your underlying assumptions.
Speaker Change: Do you as you're writing policies today.
Speaker Change: Have a more conservative assumption on HPA going forward.
Speaker Change: Then you were applying three years ago because of the sharp run up in home prices or is that do you assume a.
Speaker Change: Kind of consistent HPA, but now just off a higher base.
Speaker Change: Yes.
Speaker Change: Thanks, Rick I think that ties into Rohit response.
Speaker Change: To a prior question, which is we absolutely take into account the prospective view, our prospective view of the macroeconomic environment that certainly includes.
Speaker Change: Home prices and.
Speaker Change: Today, we would have.
Speaker Change: Given the slower rate of home price appreciation, we would embed that into our pricing.
Speaker Change: And that would certainly impact.
Speaker Change: Price up from from our perspective, all things held equal.
Speaker Change: In current pricing vis vis <unk> <unk>.
Speaker Change: Fire environment, yes.
Speaker Change: I think you saw the example of that back during Covid.
Speaker Change: Every single company in the industrial you talked about their price increases in the second quarter of 2020, and all of that happened in a very short timeframe. The moment all of US basically saw unemployment rates going up or the possibility of unemployment rates going up everybody adjusted there.
Speaker Change: Additional scenarios.
Speaker Change: Our internal views and then raise prices so Rick that's very aligned with how we run the business because our books age based on that prospective view and the loans are going to be with us for four or five years, maybe even longer and we want to make sure that we're pricing appropriately for the risk.
Speaker Change: Got it okay terrific. Thanks, guys. Thank you very much.
Speaker Change: Thank you thanks Rick.
Speaker Change: Thank you as a reminder to ask a question. Please press star one one.
George Bose: Our next question comes from Bose, George with <unk>. Your line is open.
George Bose: Hey, everyone. Good morning.
George Bose: Have you seen any signs of cancellation rates increasing.
George Bose: Obviously these books the persistency rates remains high.
George Bose: But the highest for longer that could continue so just any thoughts there.
George Bose: Yes.
George Bose: Monitored that.
George Bose: Those through time.
George Bose: Over the last several years, we really haven't seen any change in behavior.
George Bose: Or the change in the level of activity as it relates to borrow initiated cancellation. The vast majority of our lapse or cancellations really occur from refinancing activity loans that are paid in full and hope auto cancellations are loans to amortize down to 78.
George Bose: LTV that continues to hold true through the first quarter.
George Bose: Again, just borrow initiate cancellation hasn't been that big of a driver.
George Bose: For us overtime through today.
George Bose: Okay. Thanks, and then actually the other income line I guess is that mainly the reinsurance income and also it's not just premiums or is there a kind of a mark to market component.
George Bose: We are as well.
Speaker Change: Yes. The other income line includes our contract services the fees associated with our contract services underwriting.
George Bose: So it's.
Speaker Change: It.
Speaker Change: Has.
Speaker Change: Several components not just premium status.
Speaker Change: Okay, but the run rate this quarter is kind of a reasonable number.
Speaker Change: Yes, I mean that number varies as you can see in our GFS disclosure.
Speaker Change: Still pretty small it at $2 million, but <unk> seen it range from $1.
Speaker Change: Wanda.
Speaker Change: Yes.
Speaker Change: Two to three.
Speaker Change: Okay.
Speaker Change: Okay, great. Thank you.
Speaker Change: The one thing I would say we have some we do have some arrangements in Q1 related to our reinsurance contract that probably.
Speaker Change: Or in a normal run rate.
Speaker Change: So it might be inflated by $1 million.
Speaker Change: <unk> point, you to closer to $1 billion as a normal run rate vis a vis two but you can see through time that ranges in that general range.
Speaker Change: Okay, great. Thanks.
Speaker Change: Thank you I'm showing no further questions at this time I'd like to turn the call back over to Rohit Gupta for any closing remarks.
Rohit Gupta: Thank you Michelle and thank you everyone. We appreciate your interest in enact and I look forward to seeing many of you in New York at <unk> housing ecosystem conference on May eight thank you.
Speaker Change: Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.