Enact Holdings Q1 Results: A Solid Foundation Amid Mixed Expectations

Enact Holdings, Inc. (NASDAQ: ACT) reported its first quarter 2025 financial results, showcasing a blend of steady performance and minor misses against expectations. While the company’s revenue of $306.8 million and EPS of $1.08 fell slightly short of analyst forecasts, its strategic capital returns, robust liquidity, and rating upgrades underscored its resilience in a challenging housing market. Let’s dive into the details.

Key Financial Highlights

Enact’s Q1 2025 results revealed a balanced performance:
- Revenue: $306.8 million, slightly below the $311.55 million estimate, driven by net premiums earned ($245 million) and net investment income ($63 million).
- EPS: $1.08 (GAAP) and $1.10 (Adjusted), both marginally below the $1.12 consensus.
- Primary Insurance in-force (IIF): $268 billion, a 2% year-over-year increase, reflecting growth in premium adjacencies.
- PMIERs Sufficiency: 165%, or $2.0 billion above requirements, highlighting strong capitalization.

The stock rose 0.82% post-earnings, suggesting investors prioritized the company’s long-term fundamentals over the modest misses.

Operational Strengths and Challenges

1. New Insurance Written (NIW): Declined 26% sequentially to $10 billion due to seasonal factors and a 7% year-over-year drop linked to reduced market share. NIW’s composition skewed toward monthly premium policies (94%), indicating a focus on recurring revenue.
2. Persistency Rate: Improved to 84% (from 82% in Q4 2024), signaling strong policy retention.
3. Loss Ratio: Increased to 12% from 8% in Q1 2024 due to fewer reserve releases, though management emphasized disciplined risk management.
4. Expense Control: The expense ratio dipped to 21%, benefiting from lower incentive compensation.

Strategic Moves to Boost Shareholder Value

Enact prioritized capital returns, announcing:
- A 14% dividend hike to $0.21 per share, effective June 2025.
- A $350 million share repurchase program, supplementing Q1’s $66 million buyback.

These actions, alongside Fitch’s upgrade of EMICO’s rating to A, reinforced investor confidence in Enact’s financial health.

Analyst and Market Perspective

Analysts noted mixed signals:
- Revenue and EPS Misses: While the $306.8 million revenue and $1.08 EPS were below estimates, the company’s $200 million dividend from EMICO bolstered liquidity.
- Growth Catalysts: The mortgage insurance market remains resilient, with Enact positioned to benefit from enduring housing demand.

Despite the slight miss, the stock’s positive reaction reflects optimism about the company’s capital discipline and $356 million cash position, which supports future buybacks and dividends.

Risks and Outlook

1. Economic Uncertainty: Rising interest rates and housing market volatility could pressure NIW and persistency.
2. Regulatory Compliance: Maintaining PMIERs sufficiency and GSE eligibility remains critical.
3. Competitive Landscape: Lower market share in NIW underscores the need for strategic differentiation.

Conclusion: A Buy for Patient Investors

Enact’s Q1 results paint a picture of a company navigating challenges while maintaining its financial footing. Key positives include:
- A 165% PMIERs ratio, ensuring regulatory compliance and liquidity.
- A $350 million buyback and 14% dividend hike, signaling confidence in its capital structure.
- A Fitch Ratings upgrade, enhancing credibility with investors.

While the $4.77 million revenue shortfall and $0.04 EPS miss are notable, the company’s focus on shareholder returns and its $34.97 book value per share (excluding AOCI) suggest long-term value. For investors willing to ride out near-term headwinds, Enact’s fundamentals justify a hold to buy rating.

The path forward hinges on Enact’s ability to stabilize NIW and leverage its reinsurance agreements, but its current trajectory aligns with the S&P SmallCap 600 index inclusion, a vote of confidence from institutional investors.