Enact's Q4 2024 Earnings Call: Unpacking Contradictions in Pricing, Reserves, and Capital Return Strategies

These are the key contradictions discussed in Enact's latest 2024Q4 earnings call, specifically including: Competitive Dynamics and Pricing, Reserves for Hurricane Delinquencies, Capital Return Guidance and Economic Conditions, NIW Market Dynamics, and Credit Performance and Risk Assessment:



Financial Performance and Shareholder Returns:
- Enact reported adjusted operating income of $169 million for Q4, up 7% year-over-year, with an adjusted return on equity of 13.5%.
- The company returned $354 million to shareholders in 2024, exceeding the high end of its capital return guidance.
- This strong financial performance was driven by consistent credit performance, a resilient business model, and effective expense management.

Credit Performance and Risk Management:
- New delinquencies increased by 6%, with an estimated 1,000 new delinquencies attributed to 2024 hurricanes.
- Excluding hurricane-related delinquencies, new delinquencies rose by 1%, in line with historical seasonal trends.
- The company's strong credit performance and loss mitigation efforts resulted in a robust cure rate of 52%.

Reinsurance and CRT Strategy:
- Enact executed two quota share reinsurance agreements, ceding approximately 27% of 2025 and 2026 new insurance written.
- The company also entered into two forward excess of loss reinsurance agreements, securing coverage on 2025 and 2026 books.
- This strategic approach to reinsurance is aimed at optimizing capital and protecting against potential risks.

Capital Allocation and Investments:
- Enact allocated $750 million in Senior Notes, representing its first investment-grade debt issuance, which strengthened its financial position.
- The company's PMIER sufficiency remained at a strong level of 167%, reflecting a robust capital position and liquidity.
- These actions are part of Enact's commitment to maintaining a strong balance sheet, investing in future growth, and returning capital to shareholders.