Enact Holdings, Inc. SEC 10-K Report

Enact Holdings, Inc., a leading private mortgage insurance company operating across all 50 states and the District of Columbia, has released its 2024 10-K report. The report details the company's financial performance, business operations, strategic initiatives, and the challenges it faces in the current market environment. Enact Holdings continues to play a critical role in the U.S. housing finance system, providing insurance coverage to over 1,600 customers and facilitating the sale of mortgages to the secondary market.

Financial Highlights

• Total Revenues: $1,201.8 million, increased by 4% from 2023 due to higher average insurance in-force and higher assumed premiums.
• Net Income: $688.1 million, increased by 3% from 2023, driven by higher premiums and net investment income.
• Net Investment Income: $240.6 million, increased by 16% from 2023, primarily due to higher investment yields and higher average invested assets.
• Losses Incurred: $38.7 million, increased by 42% from 2023, impacted by favorable reserve adjustments.
• Diluted EPS: Not explicitly stated in the provided text.

Business Highlights

• Business Overview: Enact Holdings, Inc. is a leading private mortgage insurance company operating in all 50 states and the District of Columbia, providing insurance coverage to over 1,600 customers in 2024.
• Role in Housing Finance: The company plays a critical role in the U.S. housing finance system by facilitating the sale of mortgages to the secondary market, including to private investors and government-sponsored enterprises like Fannie Mae and Freddie Mac.
• Customer Base: Enact maintains a large and diverse customer base, including national banks, non-bank mortgage lenders, local mortgage bankers, community banks, and credit unions.
• Insurance Portfolio: The majority of Enact's insurance portfolio is primary mortgage insurance, with a weighted average loan-to-value (LTV) ratio of 93% and a weighted average FICO score of 745 as of December 31, 2024.
• Geographical Performance: The company's largest state concentration is in California, representing 12% of primary risk in force, with the largest metropolitan statistical area being Phoenix, AZ, representing 3% of primary risk in force.
• Sales and Marketing: Enact's sales and marketing efforts are supported by a dedicated sales force, inside sales representatives, and a digital marketing program to expand reach and establish quality customer relationships.
• Technology Integration: The company emphasizes technology integration with customer systems, providing easy access to mortgage insurance products through web-based portals and direct connections to industry-leading origination and servicing systems.
• Risk Management: Enact employs a comprehensive risk management framework, including a proprietary risk modeling platform to evaluate returns and volatility, and a credit risk transfer program to mitigate future loss volatility.
• Regulatory Compliance: The company is subject to extensive oversight by state insurance regulators and complies with the Private Mortgage Insurer Eligibility Requirements (PMIERs) set by the GSEs.
• Human Capital Management: Enact focuses on attracting and retaining talent with comprehensive benefits, professional development opportunities, and a commitment to diversity and inclusion, with 52% of employees being women and 29% people of color.
• Future Outlook: Enact plans to maintain strong capital levels and optimize cost of capital across credit risk transfer channels to manage volatility and enhance return on equity, while continuing to support first-time homebuyers and expand financing access.

Strategic Initiatives

• Strategic Initiatives: In 2024, the company executed several strategic initiatives to enhance its financial position and operational capabilities. These included the issuance of $750 million in 2029 Notes, which were used to redeem the 2025 Notes, thereby optimizing the debt maturity profile. The company also increased the ceding percentage of its affiliate quota share agreements from 7.5% to 12.5% and entered into new quota share reinsurance agreements to cede 12.5% of 2024 new insurance written. Additionally, the company executed excess-of-loss reinsurance transactions to provide up to $270 million of reinsurance coverage for the 2024 book year.
• Capital Management: The company focused on capital management through a series of actions, including the initiation of a dividend program with quarterly cash dividends, which increased from $0.14 to $0.185 per share by the end of 2024. A share repurchase program was authorized, allowing for the repurchase of up to $250 million of common stock, with an agreement to repurchase shares from Genworth Holdings, Inc. on a pro rata basis. The company maintained a strong capital position with a sufficiency ratio of 167% as of December 31, 2024, and continued to manage its risk-to-capital ratio well below regulatory limits.
• Future Outlook: Looking ahead, the company plans to continue its strategic focus on capital efficiency and risk management. This includes maintaining a strong capital buffer above PMIERs requirements and exploring further opportunities for reinsurance to manage risk and provide capital relief. The company also aims to balance capital returns to shareholders with growth and risk management priorities, ensuring sustainable shareholder value through strategic capital allocation and investment in new business opportunities.

Challenges and Risks

• Regulatory Compliance: The company faces significant risks related to its ability to meet the requirements mandated by PMIERs and any additional restrictions imposed by the GSEs. Failure to comply could result in the inability to write new insurance on loans acquired by the GSEs, materially affecting business operations and financial condition.
• Economic Conditions: Economic conditions, such as a severe recession or decline in home prices, could adversely impact loss experience and increase defaults.
• Model Accuracy: The accuracy of models used in business operations is critical, as inaccuracies could materially affect financial outcomes.
• Competition: Competition within the mortgage insurance industry poses a risk of losing market share and customers, potentially leading to lower premiums and adverse financial impacts.
• GSE Practices: Changes to the charters or practices of the GSEs, including potential reductions in the use of mortgage insurance, could significantly impact business operations.
• Capital Requirements: Management highlights the importance of maintaining sufficient capital to support growth and meet regulatory requirements. The company may face challenges in raising additional capital, which could impact business levels and regulatory compliance.
• CRT Transactions: The availability and cost of CRT transactions are crucial for risk and capital management, and any limitations could adversely affect financial stability.
• Interest Rate Fluctuations: Interest rate fluctuations present a risk, as rising rates could reduce new mortgage originations and increase defaults, while declining rates could lead to increased cancellations of mortgage insurance.
• Market Risks: The company is exposed to market risks, including interest rate fluctuations that could impact investment portfolio valuations and financial results. Rising interest rates have led to unrealized losses in the investment portfolio, and any forced liquidation of investments could result in realized losses. The company must effectively manage these risks to maintain financial stability and meet future liabilities.

SEC Filing: Enact Holdings, Inc. [ ACT ] - 10-K - Feb. 28, 2025