Enact (ACT) 1 Aug 24 2024 Q2 Earnings call transcript

In Enact's latest earnings call for the second quarter of 2024, executives provided insights into the company's financial health and strategic direction, addressing key concerns and opportunities for growth. With a focus on profitability, efficiency, and value creation for shareholders, Enact reported strong results, demonstrating a robust and adaptive business strategy.

Financial Performance and Strategic Priorities

Enact reported a solid financial performance, with adjusted operating income of $201 million, up 21% sequentially and 13% year-over-year. The company's adjusted EPS was $1.27, with a return on equity of 17%, and Insurance In-Force reaching a record high of $266 billion. These results reflect Enact's commitment to executing its strategic priorities and navigating the complex operating environment.

Market Conditions and Outlook

The U.S. economy continues to hold up well, with a strong labor market and healthy household balance sheets. Despite macro challenges such as inflation, higher interest rates, and geopolitical conflicts, Enact remains optimistic about the housing and credit markets. Delinquency rates for prime mortgage borrowers are consistent with pre-pandemic levels, and Enact's manufacturing quality and portfolio retention remain strong.

Strategic Initiatives and Investments

Enact is expanding its platform into compelling adjacencies, such as the GSE credit risk transfer market, through its subsidiary Enact Re. This strategic move enhances the company's return profile and differentiates its platform, while maintaining a strong underwriting and attractive return profile. Enact Re is well-positioned for growth and is sufficiently funded to support its expansion for the foreseeable future.

Financial Strength and Capital Allocation

Enact's financial strength and flexibility are underscored by its robust PMIERs sufficiency and its continued execution of its CRT strategy. The company's debt offering further strengthened its financial position, allowing it to refinance near-term maturities and save $2 million in annual interest expense. Enact remains committed to capital allocation, with a focus on supporting existing policyholders, growing its current business, investing in new opportunities, and returning excess capital to shareholders.

Conclusion

Enact's second quarter earnings call highlighted a strong financial performance and strategic direction, demonstrating the company's ability to navigate complex market conditions and capitalize on opportunities for growth. With a focus on profitability, efficiency, and value creation for shareholders, Enact is well-positioned for the second half of 2024 and beyond. The company's strategic initiatives, financial strength, and commitment to its mission position it for continued success in the evolving financial services landscape.