Enact Holdings Delivers Resilient Q1 Results Amid Mortgage Market Challenges

Enact Holdings (NASDAQ: ACT) reported its first-quarter 2025 financial results, showcasing resilience despite headwinds in the mortgage insurance sector. While the company’s reported revenue of $306.78 million fell short of the $1.79 billion figure cited in some summaries (likely a misinterpretation of annualized estimates), the quarter demonstrated strong operational execution and disciplined capital management. Enact’s results beat analyst expectations, with earnings per share (EPS) outperforming consensus and strategic initiatives reinforcing its financial flexibility.

Key Financial Highlights

• Adjusted Operating EPS: $1.10, exceeding the consensus estimate of $1.09 by 0.9%, and rising 6.7% year-over-year.
• Revenue: $306.78 million, up 5.2% from Q1 2024, reflecting growth in premium income and adjacent markets.
• Book Value Per Share: $33.96 (excluding AOCI), up 13.6% from $29.89 a year ago, signaling robust equity growth.
• PMIERs Sufficiency: 165%, or $2.0 billion above regulatory requirements, underscoring liquidity strength.

Operational Performance

Enact’s core metrics highlighted mixed trends in its mortgage insurance business:
- New Insurance Written (NIW): Declined 26% sequentially to $10 billion, due to seasonal slowdowns and reduced market share. However, NIW remains 9% higher year-over-year, driven by strategic adjacencies like purchase originations and monthly premium policies (which accounted for 94% of new policies).
- Persistency Rate: Held steady at 84%, indicating strong policy retention.
- Loss Ratio: Increased to 12% from 8% in Q1 2024, driven by lower reserve releases as cure performance softened.

Strategic Capital Returns

The company reaffirmed its commitment to shareholders with:
- A 14% dividend hike to $0.21 per share, effective June 2025.
- A newly approved $350 million share repurchase program, in addition to $6 million remaining from a prior $250 million authorization.
- $28 million in dividends paid in Q1, paired with $66 million in share repurchases.

Analyst and Market Reaction

• Earnings Beat: The EPS outperformance, combined with a +2.68% Zacks Earnings ESP prediction, bolstered investor confidence.
• Ratings Upgrade: Fitch’s upgrade of EMICO’s financial strength rating to “A” and Enact’s senior debt to BBB enhanced its credit profile.
• Price Action: Shares rose 0.8% post-earnings, closing at $35.79, with analysts highlighting strong PMIERs sufficiency and liquidity ($648 million in cash/investments).

Challenges and Risks

• NIW Declines: Sequential drops in new business highlight competition from federal programs like FHA and macroeconomic uncertainty.
• Loss Ratio Pressure: The 12% loss ratio suggests potential margin headwinds if cure performance remains weak.
• Economic Outlook: CEO Rohit Gupta noted cautious underwriting amid “uncertain economic conditions,” though long-term housing demand fundamentals remain supportive.

Outlook and Conclusion

Enact’s Q1 results underscore its ability to navigate challenges through disciplined capital allocation and risk management. With a $350 million buyback authorization, a 14% dividend increase, and robust PMIERs metrics, the company is positioned to sustain shareholder returns even as NIW faces headwinds.

The stock’s forward-looking multiple appears reasonable at 8.5x 2025 EPS estimates, and its $34.97 book value per share (excluding AOCI) provides a safety margin. While NIW volatility and elevated loss ratios pose risks, Enact’s focus on adjacent markets and regulatory compliance should buffer its performance.

Final Take: Enact’s Q1 results reflect a solid quarter for a mortgage insurer in a challenging environment. Investors seeking exposure to housing demand trends and consistent dividends may find ACT a compelling option, provided they acknowledge the sector’s cyclical risks.

Data as of April 30, 2025. Always consult a financial advisor before making investment decisions.